baltic journal of economic studies 184 vol. 2, no. 2, 2016 corresponding author: 1 department of management of organizations and administration, podillia state agricultural and technical university. e-mail: kentos@ua.fm mechanism of financial safety formation of enterprises of agroindustrial complex aleksandr khomenko1 podillia state agricultural and technical university, ukraine abstract. the purpose of work is research of essence of mechanism of forming of financial safety of subjects of agro-industrial complex as to the economic category. basic financial interests of business entity and financial tasks are certain for their achievement. considered organization of forming of financial safety of enterprises of agroindustrial complex and offered the measures of realization of the effective system of defence of subjects. the system of financial safety is directed foremost on providing of the own functioning, however, it is necessary to underline that at the same time it is a component part, both at the level of structural subdivisions of subject and at the level of industry, region, state. financial safety of agrarian sphere is the important constituent of economic security of the state, which acquires an important value for further development of country. methodology. methodological basis of the article are methods of scientific cognition, which enable to expose basic conformities to law of development of the probed phenomena and processes, their key problems and priority ways of decision. such methods are in particular used: analysis and synthesis  – during research of constituents of economic security of agricultural enterprises, in particular such as financial safety, and to their aggregate on the whole; systematizations  – for dismemberment and more rich in content understanding of essence of the separate probed phenomena and processes; to scientific abstraction  – with the purpose of forming of theoretical generalizations and conclusions. a research result is opening of mechanism of financial safety forming of agro-industrial enterprises on the modern stage of socio-economic development of ukraine. the offered model of strategic prognostication has for an object development of strategy of forming of financial safety of enterprises of agro-industrial complex. such strategy must avouch for financial prospects enterprises, to answer their aims. as a result, depending on the worked out strategy of financial safety, it is possible to draw basic directions of guaranteeing his financial safety activity of enterprises of agro-industrial complex. organizational-economic principles of forming of mechanism of financial safety of agricultural enterprises must be built on the basis of realization of its expressly certain strategy. it, in same queue, must go out from present of their production potential. this strategy is the basic internal reference-point of forming of financial safety of agricultural enterprise that sets the parameters of all her development. practical implications. on financial safety of enterprises of agro-industrial complex testifies the conducted analysis of scientific researches, that without regard to the wide list of existing in economic literature researches on the mechanism of forming of enterprises’ financial safety, among scientific circles until now there is not a general idea. it requires forming of new knowledge’s in relation to forming of mechanism of enterprise financial safety, where not only the certain state of subject but also dynamic constituent of development must come forward as a priority lever, what is considered in this article. value/originality. creation of valuable mechanism of forming of financial safety of agro-industrial enterprises foresees formulation of criteria and principles of providing of financial safety of every enterprise, determinations of priority national interests in a financial sphere, realization of the permanent watching of factors, which cause a threat financial safety, and also acceptance of measures in relation to their warning and overcoming. the formed mechanism of financial safety of the agricultural formations is pre-condition of prevention of financial threats and negative financial phenomena in production activity of the agricultural formations, defence of their financial losses, and in future stabilizing of activity of the agricultural formations and development in the conditions of competition economic position. key words: financial safety, economic security, management, mechanism of forming of financial safety, threats, risks. jel classification: g29, а23, q14, g32, l29 baltic journal of economic studies 185 vol. 2, no. 2, 2016 1. introduction substantial influence on efficiency of financial mechanism of financial safety of business entity is caused by rapid changeableness of economic environment that is observed lately. the changes of cooperation’s between business entities, between business entities and state, between business entities and credit establishments or other economic agents determine the redistribution of financial streams, which in turn, stipulates the changes of structure of the economic system of society, and thus, recombination of dangers and threats. in every separate moment every economic agent is subject to influence of individual totality of dangers and threats that change constantly. providing of financial safety of enterprises of agroindustrial complex must be based on the integrated approach, that allows to coordinate and coordinate actions, that is sent to providing of protecting from threats as external and internal environment of enterprises and to provide possibility to warn the threats of financial safety of enterprises with next development of certain recommendations and suggestions sent to the increase of financial strength of enterprises of agro-industrial complex security. financial safety is a universal category that characterizes security of subjects of socio-economic relations on all levels, beginning from the state and ending every its citizen (baranovskiy, 1996). the problem of forming of financial safety of enterprises of agro-industrial complex engaged in baranovskiy  і.о., blank і.о., vitlinskiy v.v., pidkhomniy  о.м., ermoshenko  м.м., kravchuk n.y., mishina i.g. et al (baranovskiy, 1996, blank, 2004, vitlinskiy, 2000, pidkhomniy, 2007, ermoshenko, 1998, kravchuk, 2000, mishina, 2003). however, comprehending their payment in the decision of different theoretical and practical tasks to the mechanism of forming of financial safety of enterprises of agro-industrial complex, it should be noted a shortage of the complex, integrated going is near their lineation. list of tasks, and today, remain debatable and intelligent not enough and worked out, that does not give an opportunity effectively to construct the mechanism of financial safety of enterprises of agro-industrial complex. in particular, rich in content presentation failing in relation to constructing of the stages of mechanism of forming of financial safety of enterprises of agro-industrial complex, that was hidden, as the forgotten area of the integrated diagnostics of processes and phenomena of menage, requirements are not identified to constructing of potential of financial safety of enterprises of agroindustrial complex on the market scenario of menage, not untied methodological tasks of forming of financial safety, methodical approaches are worked not enough out in relation to the quantitative measuring of composition and parameters of mechanism of financial safety and still a discussion lasts in relation to the lineation of maintenance of forming of financial safety of enterprises of agroindustrial complex, events and directions of guaranteeing of them financial safety. constructing of mechanism of financial safety of agro-industrial enterprises is a process of authentication and forming of spectrum of economic feasibilities, its composition and construction of certain organizational forms for permanent financial advancement and effective recreation. will outline more careful stages of forming of financial safety of agro-industrial enterprises having regard to that it is an elaborate economic design with inherent only by certain signs and properties. 2. stages of forming of financial safety for development of mechanism of financial safety it is necessary to untie such tasks as authentication of dangers and threats of enterprises of agro-industrial complex; lineation of indicators of financial safety; development of monitoring indexes is after financial constancy and safety; development of the events orientated on guaranteeing of enterprises financial safety; control is after implementation of events; diagnostics of implementation of events, their change; changes of indicators and indexes are depending on oscillation to the contour of external space, aims and tasks of enterprises of agroindustrial complex (chibisova, & ivashina, 2011). рic. 1. stages of strategy of forming of financial safety of enterprises of agro-industrial complex. strategy of forming of financial safety of enterprises of agro-industrial complex stage 1. analysis and determination of priorities of strategy of forming of financial safety and exposure of predictable risk factors stage 2. development of certain aim and estimation of influence of risks stage 3. adaptation to the environment stage 4. determination of basic directions of forming, accumulation, allocation of resources and search of their new sources stage 5. development of strategy elements of forming of financial safety of enterprises of agro-industrial complex and choice of method of risks minimization stage 6. development of strategy of forming of financial safety and minimization of financial risks stage 7. realization of strategy of financial safety forming and application of methods of risks minimization stage 8. analysis and control of strategy of forming of financial safety and estimation of results of minimization of risks stage 9. drawing on the analysis results, the specification of strategic directions of development of agro-industrial enterprises baltic journal of economic studies 186 vol. 2, no. 2, 2016 leaning on the tasks, it is possible to work out the mechanism of strategy of financial safety of enterprises of agro-industrial complex that must include: it is a lineation of totality of criteria, indexes and parameters (quantitative and quality contours) of potential of financial safety of enterprises of agro-industrial complex; development of events totality of threats authentication of financial safety of agro-industrial enterprises and their transmitters; description of contours of their display and localization; it is a disclosing of basic subjects of threats, charts of their functioning, contours of their influence on financial safety of enterprises of agro-industrial complex; development of methodology of prognostication, disclosure of factors, that outline the threats of financial safety, disclosure of trends and possibilities of advancement of such threats; constructing of mechanisms and events that neutralize or soften influence of unfavourable factors; lineation of objects, objects, parameters of control of financial safety of enterprises of agro-industrial complex. the result of the strategic planning must be the worked out strategy of constructing of financial safety of enterprises of agro-industrial complex (prikazyuk, 2009). such strategy must avouch for financial prospects an enterprise, to answer their task (рicture 1). at development of strategy of financial safety of enterprises of agro-industrial complex, foremost follows to outline such its basic segments as diagnostics, strategic planning and prognostication, control, audit (martyushevа, 2006). 3. strategic aims of financial safety the strategic whole providing of financial safety of enterprise present those desirable parameters her eventual strategic position, that allow to direct the system of events of defence of financial interests from threats in a long-term prospect and to estimate their results. the mechanism of financial safety of enterprise allows: to provide financial firmness, liquidity, solvency; independently to develop and inculcate financial strategy; providing the optimal bringing in and effective use of financial resources of enterprise and providing sufficient financial independence of enterprise. expediency of realization of totality of the marked events depends on the worked out financial strategy of enterprise, it is possible to draw basic directions of guaranteeing of him financial safety (kuzenko, martyushevа, grachov, & litovchenko, 2010). principles of financial safety, such as an equivalence, forecast, equality of rights and stability, are important constituent of mechanism of providing of financial safety on an enterprise, without them it is impossible to consider all structure of mechanism and trace its meaningfulness for providing of financial safety on an enterprise. it follows to admit basic directions of strengthening of financial safety of enterprises of agro-industrial complex : constructing of necessary pre-conditions for a construction, advancement and functioning of permanent mechanism of financial safety; working of strategy of financial safety, prognostication and drawing of certain measures in relation to her effectiveness; foresight, authentication and measuring of latent possible indignations, totality of destabilizing factors and their sources; lineation of parameters safe to the contour of enterprises of agro-industrial complex and lineation of indicators of financial safety. the system of defence of financial secret of enterprises of agro-industrial complex must include such successive events: disguise of list of information that is considered a financial secret; determination of time of existence of varieties of confidential information; claim of list of information and determination of transmitters of information that is confessed by the financial secret of enterprise; selection of methods and charts of defence of financial secret; control after the observance of totality of safety measures. application of the indicated stages in-process enterprises of agro-industrial complex will give an opportunity to decrease crisis processes in enterprises and increase financial strength security due to the increase of their level of development in the conditions of market vibrations. however, the increase of financial strength of enterprises of agro-industrial complex security is done by impossible in default of sponsorship from the side of the state, in particular, the obligatory is confess the grant of state subsidies, especially, purchase by the state after the certain standard of prices of agrarian products and decline of tax pressure (sabluk, 2008). certain determinants of forming of financial safety of enterprises of agro-industrial complex give possibility to take into account the specific of every enterprise and general transformations of financial space of ukraine and must create terms for the financial increase of production, high competitiveness of products, to support scientific and technical potential, shut out the decline of level to the contours of critical zones, to save financial stability of enterprises of agrarian sphere. 4. conclusions forming of financial safety of enterprises of agroindustrial complex is the process of authentication and creation of spectrum of financial possibilities, that are in permanent dynamic transformation under act of external and internal terms, its composition and construction of certain organizational forms for stable financial advancement and effective recreation with an orientation on a teaming-up them financial assets and providing of necessary proportions of functioning through baltic journal of economic studies 187 vol. 2, no. 2, 2016 intercommunication of its subjective and objective component segments. providing of financial safety of enterprises of agroindustrial complex must be the constituent of enterprise strategic management that allows to perfect going near its determination as to the system of economic relations, arising up between the organs of management and different groups of agents, concerning realization of long-term interests and aims of enterprise, including by providing of financial safety. as a result, depending on select strategy of financial management it is possible to draw basic directions of guaranteeing of financial safety of enterprises of agroindustrial complex and their activity. references baranovskiy, о.i. (1996). financial safety of the state. finances of ukraine, 11, 19-34. blank, i.a. (2004). management financial safety of enterprise. kiev: nika-center. chibisova, і. v., & ivashina, e. m. (2011). mechanism of providing of financial safety of enterprise. retrieved from: http://www.nbuv.gov.ua/ portal/soc_gum/ppei/2011_31/chibis.pdf. ermoshenko, m. m. (1998). basic principles of increase of financial safety of the state. тhe strategic panorama, 1-2, 99-114. kravchuk, n. y. (2000). financial safety of the state : reality and expediency in the conditions of globalization. announcer of ternopil academy of national economy. ternopil, 9, 121-126. kuzenko, т. в., martyushevа, l. s., grachov, o. v., & litovchenko o. y. (2010). financial safety of enterprise. kharkiv: the kharkiv national economic university. martyushevа, l. s. (2006). financial safety of enterprise as independent object of management. communal economy of cities, 71, 235-238. mishina, i. g. (2003). financial risks: prognostication of degree of their influence on economic security of enterprise. problems and prospects of steady development of tourism and service business in the world and in ukraine. doneck, 111-114. pidkhomniy, o. m. (2007). typology of threats to financial safety of performers of entrepreneurial activities. management and enterprise in ukraine: stages of becoming and problem of development. lviv: «lviv politekhnika», 119-123. prikazyuk, o. v, (2009). profit in forming of financial safety of agricultural enterprises. вanking, 2, 82-88. sabluk, p. t. (2008). state and prospects of development of agroindustrial complex of ukraine. economy of ukraine, 12, 4-18. vitlinskiy, v. v. (2000). sistemne the use of objective and subjective indexes of risk in a financially economic sphere. finances of ukraine, 12, 16-24. александр хоменко механизм формирования финансовой безопасности предприятий агропромышленного комплекса аннотация. целью работы является исследование сущности механизма формирования финансовой безопасности субъектов агропромышленного комплекса как экономической категории. определены основные финансовые интересы субъекта предпринимательства и финансовые задачи для их достижения. рассмотрены организация формирования финансовой безопасности предприятий агропромышленного комплекса и предложены меры реализации действенной системы защиты субъектов. система финансовой безопасности направлена прежде всего на обеспечение собственного функционирования, однако, следует подчеркнуть, что в то же время она является и составной частью, как на уровне структурных подразделений субъекта, так и на уровне отрасли, региона, государства. финансовая безопасность аграрной сферы является важной составляющей экономической безопасности государства, которая приобретает важное значение для дальнейшего развития страны. методика. методологической основой при написании статьи являются методы научного познания, которые дают возможность выявить основные закономерности развития исследуемых явлений и процессов, их ключевые проблемы и приоритетные пути решения. в частности использованы такие методы: анализ и синтез  – во время исследования составляющих экономической безопасности сельскохозяйственных предприятий, в частности таких как финансовая безопасность, и их совокупности в целом; систематизации  – для расчленения и более содержательного понимания сути отдельных исследуемых явлений и процессов; научной абстракции – с целью формирования теоретических обобщений и выводов. результатом исследования является раскрытие механизма формирования финансовой безопасности предприятий агропромышленного комплекса на современном этапе социальноэкономического развития украины. предложенная модель стратегического прогнозирования имеет целью baltic journal of economic studies 188 vol. 2, no. 2, 2016 разрабатывание стратегии формирования финансовой безопасности предприятий агропромышленного комплекса. такая стратегия должна гарантировать финансовые перспективы предприятиям, отвечать их целям. как следствие, в зависимости от проработанной стратегии финансовой безопасности, можно начертить основные направления гарантирования его финансовой безопасности деятельность самих предприятий агропромышленного комплекса. организационно-экономические принципы формирования механизма финансовой безопасности сельскохозяйственных предприятий должны строиться на основе реализации четко определенной ее стратегии. она, в свою очередь, должна выходить из имеющегося их производственного потенциала. эта стратегия является основным внутренним ориентиром формирования финансовой безопасности сельскохозяйственного предприятия, которое задает параметры всего ее развития. практические значения. проведенным анализом научных исследований по финансовой безопасности предприятий агропромышленного комплекса свидетельствует, что невзирая на широкий перечень существующих в экономической литературе исследований по механизму формирования финансовой безопасности предприятий, среди научных кругов до сих пор нет общей мысли. это требует формирования новых знаний относительно формирования механизма финансовой безопасности предприятия, где в качестве приоритетного рычага должно выступать не только определенное состояние субъекта, но и динамическая составляющая развития, что и рассмотрено в данной статье. значение/оригинальность. создание полноценного механизма формирования финансовой безопасности предприятий агропромышленного комплекса предусматривает формулировку критериев и принципов обеспечения финансовой безопасности каждого предприятия, определения приоритетных национальных интересов в финансовой сфере, осуществление постоянного отслеживания факторов, которые вызывают угрозу финансовой безопасности, а также принятие мер относительно их предупреждения и преодоления. сформированный механизм финансовой безопасности сельскохозяйственных формирований является предпосылкой предотвращения финансовых угроз и негативных финансовых явлений в производственной деятельности сельскохозяйственных формирований, защиты их финансовых потерь, а в дальнейшем стабилизации деятельности сельскохозяйственных формирований и развития в условиях конкурентного экономического положения. baltic journal of economic studies 79 vol. 2, no. 4, 2016 pat tern formation of business conditions in domestic market of crop production svitlana strapchuk1 semen kuznets kharkiv national economic university, ukraine abstract. the purpose of the article is to detect crop production on agricultural enterprises clusters at a price by defining their amplitude of price fluctuations. methodology. the study is based on grouping of statistical data from agricultural enterprises using cluster analysis, followed by reliability evaluation of pre-selected clusters by t-test and charting the scope by the selected index. cluster analysis of agricultural enterprises in ukraine has been conducted using "statistica" program. distance between clusters was calculated as the euclidean distance. the object of the study was data on the prices for agricultural enterprises by regions of ukraine in 2013. as a result, an appropriate number of groups according to the produce types in the regions of ukraine, plane in market prices, have been determined. the process of consistent combination of objects in clusters is shown in the graphs as agglomerative clustering dendrogram of the regions of ukraine for such products as wheat, grain corn and sunflower seeds. in general, there have been examined: 7311 businesses growing wheat, 5034 – growing corn and 6124 companies growing sunflower. results. during a year-long study of price fluctuations in agricultural enterprises within regions of ukraine similarities in nature of absolute and relative changes in the formed clusters were established. four clusters on wheat, five clusters on corn, three clusters on sunflower seeds have been allocated during the study. the study of the selected groups confirms significant differences between them and allows the sectors and enterprises of the cluster with high variability of prices to build their own marketing strategy based on the position of expectations and search for sale options according to the most favorable price. practical value. the established differences on the selected clusters make it possible to forecast the price situation in various regions of ukraine in terms of its differences from average by clusters for each product. accordingly, it will enable specific producers to define the marketing strategy for pricing in the region for each product. value/originality. the data on groups of growing crops permit to select forecast marketing strategies or rapid sale according to the prevailing prices. key words: cluster analysis, agricultural enterprises, crop products, price, the price of clusters, t-criterion, magnitude chart, standard errors, significance level. jel classification: l10, м31, q13 corresponding author: 1 department of business economics and management, semen kuznets kharkiv national economic university. е-mail: baysvetlana@yandex.ru 1. introduction the problem of choice of the most typical objects for study with the purpose of a detailed analysis, which is always urgent, requires the use of modern methods and techniques. one of the most effective and quite popular methods today to search for patterns of market conditions formation is the method of cluster analysis that allows classifying mixed statistical sets. its main advantage is the ability to unite disparate objects on one or more indicators into groups (clusters). cluster analysis is an inductive method of research used to classify objects. as the objects are difficult to distribute into groups, it is appropriate to make calculations by an agglomerative hierarchical clustering method that is a consistent association of closest objects in one cluster. the use of cluster analysis in economics is widely discussed in the works of such scholars as p.l. gordienko (2008), i.m. pistunov (2008), o.m. tyshchenko (2010), and others. based on the above, we can formulate a research problem which is to identify clusters on the crop production market at a price that will allow selecting marketing strategies of expectations or rapid sale at prevailing prices for the period. 2. clustering of agricultural enterprises according to wheat price in 2013, 7311 agricultural enterprises in ukraine received revenue from the sale of wheat; they were divided into 4 clusters by the selling price (figure 1). the selected groups have no territorial binding, and are formed based on the characteristics of the market. it has been found out that despite similar average values baltic journal of economic studies 80 vol. 2, no. 4, 2016 within the clusters themselves, they have different levels of variability and standard deviations from the average value (figure 2). the first of these clusters that includes 3842 economic entities of the corporate sector (52% of the total) from 10 regions -ar crimea, donetsk, luhansk, chernihiv, kharkiv, mykolaiv, dnipropetrovsk, odesa, kherson, kyiv, has average price of 1406.2 uah., and intra group variation was 226.8 uah. in the second of the selected clusters which includes1,489 enterprises in zhytomyr, zaporizhzhia, kirovohrad and cherkasy regions, the average price is the highest1440.8 uah. / t with significant standard deviation at 284.5 uah, that is 20.3% of the average price. on the diagram cluster 1 differs by the hight of the rectangle and the length of straight lines – standard errors. in establishing the difference between the average values of the first and second clusters by t-test we have obtained a significance level less than 0.05. similar low value levels were obtained by comparing the second and third clusters, the second and the fourth one. consequently, the values within the clusters are rather different, that is, the null hypothesis of the average equality and dispersions uniformity is rejected, which means that cluster 2 is substantially different from the selected clusters 1, 3 and 4. the difference between the selected groups is also confirmed by the correlation coefficients and standard deviations. the third cluster of wheat on the market was formed by the fewest number of agricultural enterprises – 560 units from 4 regions of ukraine – ivano-frankivsk, chernivtsi, vinnytsia and transcarpathia. wheat 0 200 400 600 800 1000 1200 1400 euclidean distance ternopil khmelnytskyi sumy poltava rivne lviv volyn transkarpathia vinnytsia chernivtsi ivano-frankivsk cherkasy kirovohrad zaporizhzhia zhytomyr кyiv kherson odesa mykolaiv dnipropetrovsk kharkiv chernihiv luhansk donetsk ar of crimea fig. 1. dendrogram of agglomerative hierarchical clustering for the price of 1 ton of wheat as per agricultural enterprises of ukraine in 2013 source: state statistics committee of ukraine and the author's calculations (by form № 50 agr ) it should be noted that the average price is 1402.9 uah. /t, while the smallest difference in prices is 145.9 usd. (10.4% of average). after the comparison of the third cluster average with other existing ones using t-test, a high level of significance (p <0,02) of cluster 2 and 3 has been found out, which shows heterogeneity of wheat market in the selected groups and high values of pindex in comparison with clusters 1 and 3, 3 and 4, that proves the similarities between them. the last, the fourth cluster includes 1,420 agricultural enterprises of volyn, lviv, rivne, poltava, sumy, khmelny tsky and ternopil regions, the average price there was 1391.3 uah. /t. the obser ved difference between the average of the fourth and the second clusters by t-criterion has a significance level p = 0,005, confirming the differences in market conditions formation according to the price in these groups. close connection between the selected groups has been established by calculating the correlation coefficients for the average values of prices (table. 1). table 1 correlation matrix of interdependencies of average values of wheat prices between different clusters as per agricultural enterprises of ukraine in 2013 cluster 1 cluster 2 cluster 3 cluster 4 cluster 1 1,000 cluster 2 0,953 1,000 cluster 3 0,813 0,779 1,000 cluster 4 0,861 0,825 0,785 1,000 source : the author’s calculations (as to form № 50-agr) the data given in the table indicate a close relationship between the selected clusters, as the lowest value of the correlation coefficient is 0.779 for cluster 3 and cluster 4, while the highest value 0.953 has been received between the first and the second group. this gives grounds to assert the existence of the wheat market with a highly competitive price, the closer the relationship, the higher the competition and the slightest signs of price regulation. fig. 2. diagram of prices per 1 ton of wheat source: the author’s calculations (as to form № 50-agr) wheat mean mean±st.dev meanºº±1,96*st.dev 1406,2 1440,8 1403,0 1391,31406,2 1440,8 1403,0 1391,3 cluster 1 cluster 2 cluster 3 cluster 4 800 1000 1200 1400 1600 1800 2000 2200 baltic journal of economic studies 81 vol. 2, no. 4, 2016 3. clustering of agricultural enterprises according to the price of corn. 5034 enterprises received the revenue from the sales of corn in 2012 in ukraine. based on the market price of corn we have allocated five clusters presented in the dendrogram (fig. 3). thus, the cluster includes 1 690 companies in four regions – ar crimea, transcarpathian, vinnytsia and cherkasy with average price of 1350.7 uah./t. difference in prices within the selected group is about 15.2% of the level, i.e. 206.1 uah. in pair comparison of the first cluster with the second by t-test a value of significance level has been determined which indicates the similarity of the two selected groups. subsequent comparison of the first cluster with the third, fourth and fifth, on the contrary, confirmed the differences between them, as the level of significance of p <0.05. corn 0 200 400 600 800 1000 1200 1400 euclidean distance odesa kharkiv poltava сhernivtsi lviv khmelnytskyi кyiv kherson dnipropetrovsk мykolaiv luhansk zaporizhzhya rivne sumy donetsk khirovograd chernihiv zhytomyr тernopil volyn ivano-frankivsk cherkasy vinnytsia transkarpations ar of crimea fig. 3. dendrogram of hierarchical agglomerative clustering for the price of 1 ton of corn as per agricultural enterprises in ukraine in 2013 source: state statistics committee of ukraine and the author's calculations (as to form № 50-agr) in the second cluster of enterprises of ivanofrankivsk, volyn, ternopil, zhytomyr, chernihiv, kirovograd, donetsk, sumy, rivne, zaporizhzhia, luhansk and mykolaiv regions formed at the price of 2069 uah (41% of total) difference in prices is within 189 uah., which is 14% of the average price level equal to 1339.8 uah. (figure 3). checkup by the t-test to identify differences between the average value of two clusters indicates differences in groups 2 and 3, 2 and 4, and 2 and 5, i.e. the significance level is less 0.05. the third cluster is characterized by the lowest height of the rectangle, which is the smallest divergence in prices. this indicates that the corn market in agricultural enterprises of dnipropetrovsk, kherson, kyiv, khmelnytsky, lviv and chernivtsi regions is more developed with a high level of competition among buyers. it consists of 1,087 agricultural enterprises, i.e. 22% of the total number. therefore, differences in the prices which they offer to producers are minimal. the average level of prices in the cluster is 1399.2 uah and the scale of standard error is average of 155.6 uah (11% of the price). the fourth cluster includes 820 enterprises in poltava and kharkiv regions that sold corn at an average price of 1424.6 uah/t at a standard deviation of 261.3 uah, i.e. 18% of the price level. conducted t-analysis has confirmed the high level of significance, except for links between the third and fourth clusters, where p = 0.09. this is evidence of differences between the groups and it confirms possible overregulation of the market and the state intervention in market mechanisms in the formation of prices on the market of corn grain prices. odessa region was allocated into a separate fifth cluster, which has record highest sale price for sunflower seeds with their average of 1558.1 uah. / t. in this case difference in prices is significant, 27% of the average prices, in absolute terms it is 418.9 uah. сorn mean mean±st.dev meanºº±1,96*st.dev 1350,7 1339,9 1399,8 1424,6 1558,1 1350,7 1339,9 1399,8 1424,6 1558,1 cluster 1 cluster 2 cluster 3 cluster 4 cluster 5 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 fig. 4. diagram of prices per 1 ton of corn source: the author's calculations (as to form № 50-agr) to establish a connection between the selected clusters we have calculated the correlation between their average values (table 2). high values of correlation coefficients ranging from 0.7 to 1.0, observed between clusters 1 and 3, 4 and 3, 3 and 5 and 4 and 5 is evidence of the close relationship between the groups, moreover, a strong link exists between 4 and 3-0.911 and 1 and 3 clusters – 0.822, while groups 1 and 4 are less associated. table 2 correlation matrix of interdependencies of average price values of corn between different clusters as per agricultural enterprises of ukraine in 2013 cluster 1 cluster 2 cluster 3 cluster 4 cluster 5 cluster 1 1,000 cluster 2 0,202 1,000 cluster 3 0,822 0,634 1,000 cluster 4 0,662 0,564 0,911 1,000 cluster 5 0,609 0,465 0,776 0,752 1,000 source: the author's calculations (as to form № 50-agr) baltic journal of economic studies 82 vol. 2, no. 4, 2016 a weak link has been established between cluster 1 and 2, where the correlation coefficient is 0.202. a moderate link can be seen between 1 and 5, 3 and 2, 4 and 2, 5 and 2, indicating the differences in the formation of these groups. 4. clustering of agricultural enterprises according to the price of sunflower seeds similar dendrograms have been constructed for other types of products. let us consider the grouping scheme according to the price of sunflower seeds in detail (figure 5). analyzing the price situation in the market of sunflower seeds in ukraine, 3 clusters have been allocated among 6124 agricultural enterprises that received income from their sale; the first cluster is the largest, comprising 2,446 enterprises from 14 regions of ukraine, while the second includes 3364 enterprises from 10 regions, the third – 314 enterprises of kyiv region only. diagram 6 shows identical in size rectangles of first and second clusters. sunflower 0 1000 2000 3000 4000 5000 euclidean distance kyiv luhansk zaporizhzhya chernivtsi khirovohrad chernihiv khmelnytskyi donetsk poltava mykolaiv dnipropetrovsk cherkasy kharkiv odesa lviv transkarpation rivne volyn kherson sumy zhytomyr ternopil vinnitsia іvano-frankivsk ar crimea fig. 5. dendrogram of agglomerative hierarchical clustering according to the price of 1t of sunflower seeds in ukraine agricultural enterprises of ukraine in 2013 source: state statistics committee of ukraine and the author's calculations (as to form № 50-agr) according to the calculations, the difference in the standard deviation is insignificant – in absolute values standard deviation of 1 cluster is 318.8 uah, the second  – 323.7 uah, whereas in % ratio both calculations show 9.5% of the average price . apart from minor differences in the prices, the first cluster has the lowest average price of 3360.6 uah. / t, which is 2% lower than in the second cluster and 18% lower than in the third. it includes enterprises in crimea, ivano-frankivsk, vinnytsia, ternopil, zhytomyr, sumy, kherson, volyn, rivne, transcarpathian, lviv, odesa, kharkiv and cherkasy regions. in this case the t-criterion in pair comparison reveals a low level of significance between the first and the second, the first and the third clusters, which is evidence of nonuniform price situation in these groups, confirming the validity of this distribution. sunflower mean mean±st.dev meanºº±1,96*st.dev 3360,6 3409,3 3563,2 3360,6 3409,3 3563,2 cluster 1 cluster 2 cluster 3 2600 2800 3000 3200 3400 3600 3800 4000 4200 4400 fig. 6. the scope of prices of 1 ton of sunflower seed source: the author's calculations (as to form № 50-agr) the average price of the second cluster is 3409.2  uah  / t, standard deviation is 9.5% of the average price. according to t-test low significant level between clusters 2 and 3 have been revealed, which also confirms the validity payments in the allocated groups. the third cluster includes only kyiv region, due to the higher limit of the standard error of 11% of the average price value compared with the previous two groups. data verification for the distress correlation between the selected clusters (table. 3) has confirmed the strong link between the second and the third clusters. table 3 correlation matrix of interdependencies of average price values of sunflower seeds between different clusters as per agricultural enterprises of ukraine in 2013 cluster 1 cluster 2 cluster 3 cluster 1,000 cluster 2 0,744 1,000 cluster 3 0,750 0,871 1,000 source: the author's calculations (as to form № 50-agr) the correlation coefficient between them is 0.871, while between the first and the second clusters it is slightly weaker, correlation coefficient is 0.744, and there is a connection between the first and the third cluster – 0.750. thus, the difference between the selected clusters has been confirmed. 5. conclusions w hile studying the price fluctuations in agricultural enterprises of the regions of ukraine during 2013, similar character of absolute and relative changes in the formed clusters is established. research of these clusters in terms of substantial differences between them using a t-test comparing averages in the two groups has shown that the most significant differences in wheat were noted between clusters 2 (zhytomyr, baltic journal of economic studies 83 vol. 2, no. 4, 2016 zaporizhzhia, kirovohrad, cherkasy region) and cluster 3 (ivano-frankivsk, chernivtsi, vinnytsia, transcarpathian), on grain corn – between cluster 3 (dnipropetrovsk, kherson, kyiv, khmelnytsky, lviv and chernivtsi regions) and cluster 5 (odessa region). the established differences on the selected clusters enable us to forecast a price situation in various regions of ukraine in terms of its differences from the average values in clusters for each product. accordingly, it will enable specific producers to determine a pricing marketing strategy in the region for each type of the product. references gordiyenko, p.l. (2008). strategic analysis, к.: alerta, 404 p. pistunov, i.m. (2008). cluster analysis in economics. dnipropetrovsk: national mining university, 84 p. tyshchenko, о.м. (2010). clusters as a vector in economic development: organization, essence and concepts. theoretical and applied issues of economics, 21: 74-80. светлана страпчук выявление закономерностей формирования конъюнктуры внутреннего рынка продукции растениеводства аннотация. целью статьи является выявление на рынке продукции растениеводства сельско хозяйственных предприятий кластеров по цене с определением в них амплитуды ценовых колебаний. методика. исследование основано на группировке статистических данных сельскохозяйственных предприятий с использованием кластерного анализа с последующим оцениванием достоверности значений выделенных кластеров по t-критерию и построением диаграмм размаха по выделенным кластерам. кластерный анализ сельскохозяйственных предприятий украины по цене было осуществлено помощью программы “statistica”. величину расстояния между кластерами рассчитывали как эвклидова расстояние. объектом исследования стали данные по ценам на сельскохозяйственных предприятиях по областям украины за 2013 г. в результате было получено соответствующее количество групп по видам продукции по областям украины в плоскости рыночных цен. процесс последовательного объединения объектов в кластеры показаны на графиках в виде дендрограммы агломеративной кластеризации регионов украины для таких видов продукции как пшеница, кукуруза на зерно и подсолнечник. в целом обследовано по выращиванию пшеницы – 7311 предприятий, по выращиванию кукурузы – 5034 предприятий и по выращиванию подсолнечника – 6124 предприятия. результаты. во время исследования ценовых колебаний по сельскохозяйственных предприятиях областей украины в течение года было установлено сходство характера абсолютных и относительных изменений по сформированным кластерам. было выделено по пшенице четыре кластера, по кукурузе – пять, по подсолнечнику – три кластера. исследование выделенных групп подтверждает наличие существенных различий между ними и позволяет предприятиям кластера, где высокая вариативность цены, строить собственную маркетинговую стратегию на основе позиции ожидания и поиска вариантов реализации по наиболее благоприятной цене. практическое значение. различия по выделенным кластерам дают возможность спрогнозировать ценовую ситуацию в различных регионах украины с точки зрения ее отличий от средних по кластерам по каждому виду продукции. соответственно это даст возможность конкретным производителям определять маркетинговую стратегию относительно формирования цены в данном регионе по каждому виду продукции. значение/оригинальность. полученные данные по группам выращивания культур позволяют выбрать маркетинговые стратегии ожидания или быстрой реализации по сложившимся ценам. baltic journal of economic studies 48 vol. 8 no. 3, 2022 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: 7991960@ukr.net orcid: https://orcid.org/0000-0002-0327-6569 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: nazumuch@ukr.net orcid: https://orcid.org/0000-0003-4949-4155 3 odessa state university of internal affairs, ukraine e-mail: pavlutinyuriy@gmail.com orcid: https://orcid.org/0000-0003-3267-1389 doi: https://doi.org/10.30525/2256-0742/2022-8-3-48-52 criminal procedure law of ukraine in the context of european integration: problematic economic and legal issues, ways of reforming valentyna horoshko1, yehor nazymko2, yurii pavliutin3 abstract. the subject of the study is the coverage of problematic issues and ways of reforming the criminal procedure legislation of ukraine in the context of european integration. methodology. the methodological basis of the study is a dialectical method of scientific knowledge, through the application of this method the legal, functional, organizational and procedural aspects of methodological approaches to the understanding of problematic issues are considered and the ways of reforming the criminal procedure legislation of ukraine in the context of european integration are considered. the results of the article analyze the current criminal procedure legislation of ukraine and the legislation of the countries of the european union. when analyzing the french criminal procedure, two main features can be identified, which distinguish it from the anglo-saxon legal system and are criticized by experts from great britain and the united states. in france judges are vested with considerable powers. the first feature of french criminal procedure is the institution of preliminary interrogation of the accused by the presiding judge. the judge verifies the sufficiency of the evidence for a conviction. conclusion. so, based on the above, it is possible to conclude that the criminal procedure code of ukraine was created in the spirit of democratic values, but some of its norms need to be reformed in order to improve the mechanism of protection of the rights, freedoms and legitimate interests of an individual. the practical experience of france, the federal republic of germany and great britain is relevant. the shortcomings of the criminal procedure code of ukraine are highlighted. the prospects for their reform are outlined and amendments to the current legislation in the context of european integration are proposed. prospects for further research: a) the study of the experience of individual foreign countries in the context of the improvement of criminal procedural norms; b) analysis of the possibility of harmonization of criminal procedural legislation of ukraine with the norms of the european union; c) development of an effective mechanism of relations between the subjects of criminal proceedings. the issue of the relevance and admissibility of evidence is also important. articles 87-89 of the cpc of ukraine establish the grounds and procedure for declaring evidence inadmissible. however, judicial practice shows a large number of criminal proceedings against public persons, which the court had to terminate due to the lack of evidence, due to the inadmissibility or improper nature of the evidence. the authors believe that the legislative regulation of the process of collecting evidence in the uk is a positive experience for ukraine. key words: court, judicial proceedings, criminal procedural legislation, criminal process, european integration, economic and legal issues. jel classification: b22, e22, e24, j24, o15 1. introduction today ukraine is on the way to cardinal changes in the process of european integration. however, rapprochement with the countries of the european union creates the need for harmonization of ukrainian legislation with the legislation of the european union member states, implementation in practice effective protection of the rights and interests of individuals and society as a whole in order to establish a confident position of ukraine on the world stage as a democratic this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 49 vol. 8 no. 3, 2022 and lawful state. judicial practice around the world forms an impression of the level of democratic government in a country and shapes the level of public confidence in it. that is why the quality of criminal proceedings and judicial decisions is of exceptional importance. every person in ukraine has the right to legal, fair, impartial justice, appeal against illegal actions or omissions of state authorities. in article 3 of the constitution of ukraine, the legislator proclaims the status of ukraine as a social state, where the person, his life, health, honor, dignity, inviolability and safety are the highest social value, and therefore the public authorities must provide an effective mechanism for the protection of violated and (or) unrecognized rights and legitimate interests of the individual. criminal offenses constitute a significant public danger (law of ukraine, 1996). it is the norms of criminal procedural legislation that are of particular importance in the process of realization of the human right to a legal, fair, impartial, objective and transparent justice. the european integration vector of ukraine's development determines the need for harmonization of ukrainian criminal procedural legislation with the legislation of the european union. the purpose of the article is to highlight the problematic issues and ways of reforming the criminal procedure legislation of ukraine in the context of european integration. during the soviet period the closest approach to this topic was represented in the fundamental work by l.b. aleksieeva devoted to issues of the effectiveness of the criminal procedural law (aleksieeva, 1979). among modern works, the collective monograph "theoretical foundations of ensuring quality of criminal legislation and law enforcement activities in the sphere of fighting crime in ukraine" should be highlighted (zelenetskyi, 2011). despite the lack of comprehensive developments, almost all works of modern proceduralists devoted to the study of aspects of criminal proceedings also analyze the relevant regulatory framework of their regulation and, consequently, explore certain issues concerning the quality of criminal procedural legislation. in terms of research, the definition of the concept of quality of criminal procedural legislation is a necessary primary theoretical task on the way to the development of the scientific concept of standards of quality of criminal procedural legislation with the prospect of its practical implementation. the authors of the article aim to formulate the main theoretical tasks. however, despite the in-depth research of the above scholars, to date, there is a problem of reforming the norms of the current criminal procedure legislation of ukraine in the context of european integration processes through the positive experience of countries belonging to the european union. in terms of research, the definition of the concept of quality of criminal procedural legislation is a necessary first theoretical task on the way to the development of the scientific concept of quality standards of criminal procedural legislation (cpl) with the prospect of its practical implementation. the authors of the article pursue to formulate the main theoretical provisions related to the definition of the category "quality of criminal procedural legislation," and these provisions will be the methodological basis for further scientific research and formulation of standards of quality of modern criminal procedural legislation in the light of updated national legal doctrine, taking into account european standards in terms of the perception of the fundamental requirement of the rule of law. the high quality of criminal procedural law is a fundamental condition for the effective implementation of the purpose of criminal proceedings. only a high-quality criminal procedure law can organize the activities in criminal cases in such a way that its system is simple, understandable for all subjects of legal proceedings, and that those of them who apply the law can do so quickly and to a high standard. l. loboiko notes that ensuring the effectiveness of criminal procedural activity is one of the elements of the functional purpose of quality of the criminal procedural law (loboiko, 2017). according to o.g. yanovska, the right to appeal the decisions of a judge, an investigating judge, the investigator, the prosecutor is one of the most important guarantees of protection of rights and legitimate interests of a person (yanovska, 2013). the relevance of this topic is the need to form an effective mechanism to protect the rights, freedoms and interests of the individual in criminal proceedings by reforming the norms of existing criminal procedural legislation. 2. criminal and procedural legislation of ukraine in the context of european integration today ukraine is going through a difficult path of european integration, which makes it necessary to study a number of acts of international legislation in order to adapt ukrainian legislation to the legislation of the european union. if to consider the criminal and criminal procedure law of the european union (hereinafter – eu), it should be noted that there is no single normative act that would regulate criminal and criminal procedure relations of the eu member states. scholars note the heterogeneity of eu criminal law and divide it into the following categories: 1) eu administrative and criminal law (norms containing the main eu prohibitions and some baltic journal of economic studies 50 vol. 8 no. 3, 2022 procedural norms, which for formal and political reasons belong to the administrative law norms); 2) rules of eu law defining the specifics of criminal law and criminal procedure, which require eu member states to take certain measures in a certain way; 3) criminal procedure law of the european union, which contains certain standards of criminal procedure, as well as peculiarities of international cooperation, extradition, etc; 4) draft norms of the unified criminal law (pashkovskyi, 2017). despite this, the countries of the european union have experience in effective criminal proceedings, which can serve ukraine in the process of reforming the norms of existing criminal procedure legislation. despite the democratization of the norms of the criminal procedure code of ukraine (hereinafter – cpc of ukraine), practice shows that there are significant shortcomings in the process of implementation of the norms of criminal procedural legislation (law of ukraine, 2013). article 214 of the cpc of ukraine provides for the procedure for filing and registration of a criminal complaint. the legislator has determined that a criminal complaint must be filed by an investigator or prosecutor no later than 24 hours to the unified register of pre-trial investigations. however, such a norm does not eliminate the problem of untimely submission of information about a criminal offense, since investigators and prosecutors have a habit of "sorting" such statements, which leads to a violation of the right of a person to a timely response of state authorities to the committed criminal offense. also, article 284 of the cpc of ukraine provides that one of the grounds for termination of criminal proceedings is a verdict in the criminal proceedings. in the previous criminal procedure code of ukraine (law of ukraine, 2013), the legislator provided that the refusal to initiate criminal proceedings or termination of criminal proceedings in the absence of the elements essential for the corpus delicti (corpus delicti) makes it impossible to initiate similar criminal proceedings. currently, the procedure under the current cpc of ukraine poses the problem of initiating criminal proceedings on the same fact. at the same time, it is enough to submit an application to the register of pre-trial investigations. this practice shows that even in the case of termination of criminal proceedings, it is not excluded to conduct repeated investigative actions in full. scientists note that one of the innovations in the current cpc of ukraine is to strengthen judicial control over the observance of the rights, freedoms and interests of citizens. this control consists in the application by the investigating judge of measures to ensure criminal proceedings. statistical data show that the most frequent applications for securing the rights, freedoms and interests of citizens are in the form of petitions for temporary access to things and documents. such motions are usually filed by persons acting for and on behalf of the accused. access is granted only on the basis of the decision of the investigating judge. to date, in our opinion, the legal gap of the legislator is the lack of an exhaustive list of documents that must be attached to the above petition. this problem is the reason for a large number of court decisions to deny access to these things and documents. sometimes judges themselves are negligent about attaching the necessary documents to the relevant application, which may be of great importance in the figure 1. the number of crimes committed on the territory of ukraine (from 2001 to 2020) baltic journal of economic studies 51 vol. 8 no. 3, 2022 consideration of a criminal case. there is also no clear mechanism for proving the need to seize documents and/or things due to the threat of their destruction. therefore, the authors believe that it is necessary to define in the cpc of ukraine a rule on the procedure and grounds for the seizure of things and documents (leheza et al., 2022). 3. foreign experience criminal and procedural legislation of ukraine in the conditions of euro-integration in the opinion of the authors, one of the short comings of the cpc of ukraine is the possibility to protect the rights, freedoms and interests of an individual exclusively by lawyers. the experience of foreign countries (in particular, germany) provides for the possibility to perform this function not only by a lawyer, but also by other specialists in the field of law. according to paragraph 138 of the cpc of the frg, teachers of law in higher education institutions in germany also have the right to defend the rights, freedoms and interests of individuals. in our opinion, this practice makes sense in the criminal procedural legislation of ukraine, because teachers in the field of jurisprudence constantly improve their scientific level in the process of teaching and can effectively protect the rights and interests of individuals in court (holovnenkov, 2012). lawyers note the shortcomings of articles 220-221 of the cpc of ukraine. article 220 of the cpc of ukraine defines the procedure for consideration of applications for any procedural actions. petitions by the defense, the victim and his or her representative or legal representative, or a representative of a legal entity with respect to which proceedings are being conducted, must be considered within no more than three days from the time of filing and, if there are appropriate grounds, the petition must be granted. the results of the consideration of the respective petition shall be communicated to the person who submitted the petition. if there are grounds provided for by applicable law, a reasoned ruling is issued, a copy of which is served to the person from whom the petition was filed, or, if service is impossible due to objective reasons, is sent to that person. article 221 of the cpc of ukraine stipulates the procedure for familiarization with the materials of the pre-trial investigation before its completion. the investigator and (or) the prosecutor shall be obliged, at the request of the defense, the victim, the representative of the legal entity in respect of which the proceedings are conducted, to provide them for familiarization with the pre-trial investigation materials, except for materials on the application of security measures to persons involved in the relevant criminal proceedings, and also except for materials which, if provided for familiarization at an appropriate stage of the criminal proceedings, may harm the pre-trial investigation. refusal to provide for familiarization a publicly available document, the original of which is in the materials of the pre-trial investigation, shall not be allowed. during familiarization with the materials of the respective pre-trial investigation, the person in respect of whom this pre-trial investigation is conducted, has the right to make the necessary extracts and copies. lawyers emphasize a gap in the legislation in terms of the lack of deadlines for notifying the person of the results of the consideration of his/her application (tymoshyn, 2016). article 303 of the cpc of ukraine significantly narrows the range of persons who have the right to appeal the decisions, actions or inactions of the investigator or prosecutor during the pre-trial investigation, as well as the grounds for such an appeal (law of ukraine, 2013). in particular, there is no norm that would regulate the possibility of appealing the failure to comply with the reasonable time of the investigation, as well as the procedure for filing complaints by persons who do not have the status of a suspect or a victim (leheza et al., 2022). conciliation agreements are also of academic interest. lawyer kyrylo nominas analyzes the expansion of possibilities for conciliation agreements. he notes that such broad possibilities contribute to the spread of corruption offenses and, as a consequence, the failure to fulfill the objectives of criminal proceedings. at the same time, he emphasizes that, despite these circumstances, such situations can be avoided if the court carefully examines the materials of the criminal case (leheza et al., 2020). when analyzing the criminal procedure in france, one can single out two main features that distinguish it from the anglo-saxon legal system and are subject to criticism by experts from great britain and the united states of america (arkusha et al., 2020). in france judges are vested with considerable powers. the first feature of french criminal procedure is the institution of a preliminary examination of the accused by the presiding judge. the judge verifies the sufficiency of the evidence for a conviction. however, if the judge doubts the decision in a criminal case, the judge has the right to conduct an investigation himself, to visit the scene of the crime (leheza et al., 2022). 4. conclusions so, based on the above, it is possible to conclude that the criminal procedure code of ukraine was created in the spirit of democratic values, but some of its norms need to be reformed in order to improve the mechanism of protection of the rights, freedoms and legitimate interests of an individual. the practical experience of france, the federal republic of germany and great britain is relevant. baltic journal of economic studies 52 vol. 8 no. 3, 2022 according to the authors, such practice is appropriate for ukraine as well. an important issue is the relevance and admissibility of evidence. articles 87-89 of the cpc of ukraine establish the grounds and procedure for declaring evidence inadmissible. however, judicial practice shows a large number of criminal proceedings against public persons, which the court had to terminate due to lack of evidence, on the grounds of inadmissibility or improper nature of the evidence. the authors believe that the legislative regulation of the process of evidence collection in great britain is a positive experience for ukraine. under uk criminal procedure law, every private person, including lawyers, has the right to conduct their own investigation and has the right to collect evidence, and this evidence will be taken into account by the court if the court deems it appropriate, even if it was collected in criminal proceedings and would have been declared inadmissible in ukraine (berladin, 2012). prospects for further research are as follows: 1) studying the experience of individual foreign countries in the context of the improvement of criminal procedural norms; 2) analyzing possibilities to harmonize the ukrainian criminal procedural legislation with the norms of the law of the european union; 3) developing an effective mechanism of mutual relations between criminal procedure entities. references: aleksieeva, l. m. (1979). soviet criminal law and problems of its effectiveness. moscow: science. arkusha, l., korniienko, m., & berendieieva, a. (2019). criminal activity in ukraine in the light of current conditions. amazonia investiga, vol. 8(24), pp. 386–391. available at: https://amazoniainvestiga.info/index.php/ amazonia/article/view/998 berladyn, o. (2012). legal aspects of pre-trial counsel participation in the uk criminal trial. bulletin of the academy of advocacy of ukraine. kyiv. holovnenkov, p. (2012). criminal procedure code of the federal republic of germany. scientific and practical commentary and translation of the text of the law with the introductory article by professor uwe hellmann "introduction to criminal procedure law of the federal republic of germany ". berlin. law of ukraine (1996). constitution of ukraine of june 28, 1996. official site of the verkhovna rada of ukraine. law of ukraine (2013). criminal procedure code of ukraine. official site of the verkhovna rada of ukraine. leheza, ye. (2022). illegal influence on the results of sports competitions: comparison with foreign legislation. ratio juris unaula, vol. 17(34), pp. 53–70. available at: https://publicaciones.unaula.edu.co/index.php/ ratiojuris/article/view/1338 leheza, ye., filipenko, t., sokolenko, o., darahan, v., & kucherenko, o. (2020). ensuring human rights in ukraine: problematic issues and ways of their solution in the social and legal sphere. cuestiones políticas, vol. 37, no. 64 (enero-junio), pp. 123–136. doi: https://doi.org/10.46398/cuestpol.3764.10 leheza, ye., shamara, o., & chalavan, v. (2022). principios del poder judicial administrativo en ucrania. dixi, vol. 24(1), pp. 1–11. available at: https://revistas.ucc.edu.co/index.php/di/article/view/4235 kelman, m. s. (2003). general theory of the state and law: textbook. lviv: "new world". leheza, ye., yerko, i., kolomiichuk, v., & lisniak, m. (2022). international legal and administrative criminal regulation of service relations. jurnal cita hukum indonesian law journal, vol. 10, no. 1, pp. 49–60. doi: https://doi.org/10.15408/jch.v10i1.25808 loboiko, l. (2017). the quality of the criminal procedural law – a guarantee of its effective implementation'. actual problems of improving criminal procedural legislation: all-ukrainian scientific and practical conference. national university of odessa academy of law. odesa. pashkovskyi, m. i. (2017). inadmissibility of evidence obtained as a result of a significant violation of human rights and freedoms. international criminal law. kyiv. tymoshyn, v. v. (2016). shortcomings of the criminal procedure code of ukraine (articles 220, 221). kyiv. yanovska, o. h. (2013). application of the practice of the european court of human rights in the exercise of judicial control in criminal proceedings. bulletin of the academy of advocacy of ukraine, no. 2. zelenetskyi, v. (2011). theoretical foundations of ensuring the quality of criminal legislation and law enforcement activities in the field of fighting crime in ukraine law. kyiv. received on: 4th of august, 2022 accepted on: 12th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 78 vol. 8 no. 2, 2022 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 admiral makarov national university of shipbuilding, ukraine e-mail: irinamk86@gmail.com orcid: https://orcid.org/0000-0002-0417-0918 3 admiral makarov national university of shipbuilding, ukraine e-mail: grayplusigor@gmail.com orcid: https://orcid.org/0000-0003-2947-4632 doi: https://doi.org/10.30525/2256-0742/2022-8-2-78-82 the economy of war and post war economic development: world and ukrainian realities inna irtyshcheva1, iryna kramarenko2, ihor sirenko3 abstract. the subject of the research is the study of global economic growth during the war in ukraine, the analysis of the war economy and the postwar economic development in ukraine. methodology. the study used general scientific methods, in particular: theoretical generalization; methods of positive and normative analysis and statistical analysis. the aim of the work is the process of studying the world economic growth during the war in ukraine, the analysis of the war economy and the postwar economic development in ukraine. the conclusion of the study. the forecast for global economic growth during the war in ukraine assumes that the rate in developed economies will reach a 38-year high of 5.7 percent, while price growth in developed and developing countries will accelerate to 8.7 percent, the fastest decline since the global financial crisis of 2008. the acceleration is projected to decline by 2.5 percent and 6.5 percent, respectively, starting in 2023. global socioeconomic development will depend on the most significant factors: energy and food contributed to rising inflation in 2021, when oil and gas supplies were constrained after several years of restrained investment and geopolitical uncertainty; rising food prices will affect every country in the world as extreme weather has reduced crop yields and rising oil and gas prices have increased fertilizer costs; factory closures, port restrictions, ship congestion, container shortages and staff shortages will continue to disrupt some sectors; labor shortages, especially in high-contact industries, are driving up wages, although inflation has caused them to fall. it has been researched that according to estimates of national and other international expert institutions, the reduction of ukraine's gdp in 2022 will be 35%. the analysis showed that in april 2022, regions where significant hostilities are taking place or part of the territory is under occupation account for almost 20 percent of ukraine's gdp, in particular: kharkiv – 6.11 percent, donetsk – 4.89 percent, zaporizhzhia – 3.96 percent, mykolaiv – 2.29 percent, luhansk – 1.02 percent, kherson – 1.62 percent. it is established that during the three months of the war in ukraine there was a deep decline in economic activity, and the introduction of a number of tax changes to mitigate the shock in the economy led to a significant reduction in tax revenues. the directions of post-war economic growth for ukraine are suggested. key words: war economy, world economic growth, post-war economic development, war in ukraine. jel classification: e20, h56, o10 1. introduction for almost three years, the world economy has been recovering from the effects of the coronavirus pandemic, and so has ukraine's economy. suddenly, in the twenty-first century, a neighboring state attacked to seize a large part of the territory, which led to ukraine's defense of its lands. russia's war against ukraine led to a transition to a war economy. developed countries supported ukraine in its fight against the aggressor by imposing a significant number of sanctions, which is a record. the imposition of sanctions has affected both the aggressor's economy and the world economy as a whole. ukraine has experienced significant social, economic, demographic, political, and military imbalances. marshuk l. m., babyuk a. v., strapachuk l. v., they note that "today in ukraine as a result of martial law there is a crisis in the industrial and social spheres, financial and budgetary and banking systems, in particular, the reduction of production, growth baltic journal of economic studies 79 vol. 8 no. 2, 2022 of unemployment, aggravation of social tensions, significant public debt and budget deficit, reduced activity of banking institutions, inflation, etc. to overcome them, as well as to ensure the financial stabilization and economic recovery of the state, the support of international financial institutions is of great importance, which at present is not enough, as it is enough to finance all the necessary expenses in the near future" (marshuk, babyuk, strapachuk, 2022). despite the militarization of ukraine's economy, the government is trying to work out measures for postwar economic development, as the world forecasts that the economy will fall by almost 35 percent and the aggressor country by 8 percent. that is why the program of actions of the government and partner countries must form the levers of support for the post-war economic development of ukraine. accordingly, the study of global economic growth during the war in ukraine, the analysis of the current state of the war economy and the proposal of measures of post-war economic development of ukraine is very relevant and timely. 2. world economic growth during the war in ukraine the war in ukraine has caused a costly humanitarian crisis that requires a peaceful resolution. at the same time, the economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and increase inflation. fuel and food prices are skyrocketing, hitting vulnerable populations in low-income countries the hardest. global economic growth is projected to slow from 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. this is 0.8 and 0.2 percentage points lower than projected in january for 2022 and 2023. after 2023, global growth is projected to decline to about 3.3 percent over the medium term. war-induced increases in commodity prices and heightened price pressures have led to inflation forecasts for 2022 of 5.7 percent in advanced economies and 8.7 percent in emerging and developing economies, 1.8 and 2.8 percentage points higher than forecasts last january. multilateral efforts to respond to the humanitarian crisis, prevent further economic fragmentation, maintain global liquidity, manage the debt crisis, address climate change, and end the pandemic are essential (world economic outlook, 2022). the latest regional economic outlook lowers growth forecasts for europe. for advanced economies, we lowered our growth projections by 1 percentage point to 3 percent in 2022 from the january projections, and for emerging economies, excluding ukraine and russia, we lowered our projected growth by 1.5 percentage points to 2.7 percent. several major economies, such as france, germany, italy and the united kingdom, are projected to grow little or even contract for two consecutive quarters this year. in russia, activity is projected to contract by 8.5 percent and in ukraine by 35 percent (insights & analysis on economics & finance, 2022). war is a supply shock that reduces economic output and raises prices. indeed, we forecast inflation to accelerate to 5.5 percent in advanced economies and to 9.3 percent in european emerging economies, excluding russia, turkey and ukraine. these forecasts are 2.2 and 3.5 percentage points higher, respectively, than our january forecasts. the volatile international situation means that quantitative forecasts are even more uncertain than usual. nevertheless, some channels through which the war and related sanctions will affect the global economy seem relatively clear, even if their magnitude is difficult to estimate (table 1). monetary policy must balance the need to contain inflation with the need to limit output losses. much of the pressure on prices comes from forces outside the control of central banks, such as shocks to energy and food markets and supply chain disruptions. however, monetary policymakers in many countries must continue the course of normalizing credit conditions to help contain inflation expectations and anchor domestic drivers of inflation, such as wages and housing rents. if possible, governments should work with social partners to prevent wage price increases, including by providing sufficient support to households and companies that can hardly afford more expensive goods. to cope with supply shocks, automatic fiscal stabilizers, such as increases in unemployment insurance and tax cuts, should be allowed to operate freely. these measures will widen budget deficits as growth prospects weaken – justifiably so – and increase pressure on public finances in some countries. nonetheless, fiscal policy may require more effort to support the economy if serious risks materialize. fiscal pressures will be more acute in a number of countries that open their borders to refugees, such as poland, which hosts nearly 3 million people, or moldova, where the number of refugees is very high relative to the population. this underlines the need to share the costs of humanitarian relief fairly among eu members. for non-member hosts, assistance by multilateral and regional partners should help manage costs, particularly where public finances are already stretched (insights & analysis on economics & finance, 2022). europe's challenge will be to rebuild an economically strong ukraine that will facilitate the return of refugees. rebuilding the destroyed infrastructure will require extensive funding with a significant element of grants. reconstruction and resettlement will help refugees return and restore economic growth. baltic journal of economic studies 80 vol. 8 no. 2, 2022 reforms to strengthen institutions and public policy will maximize the growth dividend from recovery. 3. the economy of war in ukraine danylyshyn b. notes that "according to the international monetary fund (weo, april 2022) ukraine's gdp reduction in 2022 will be 35%, which corresponds to the estimates of national and other international expert institutes, according to which ukraine's gdp loss in 2022 due to military aggression rf can range from 30% to 50%. it is worth noting that global growth, according to the updated imf forecast, will slow to 3.6% in 2022 (from 6.1% in 2021). the updated forecast of global gdp growth worsened by 0.8 percentage points and 0.2 cents for 2022 and 2023, respectively, compared to january. after 2023, global growth will slow to 3.3 percent over the medium term" (danylyshyn, 2022). data from the state statics service of ukraine (state statistics service of ukraine, 2022) show that in 2021 the largest share of gross value added in gross domestic product by production method is wholesale and retail trade and repair of motor vehicles and motorcycles – 13.8%, rural, forestry and fisheries – 10.6%, processing industry – 10.3%, public administration; compulsory social insurance – 6.2%, mining and quarrying – 6.7%, transport, warehousing, postal and courier activities and real estate activities – 5.6%, education – 4, 3%. taxes on products in the structure of gdp by mode of production are 14.3%. if to consider the types of economic activities, we can predict a significant decline in the production of agriculture, forestry and fishing, mining and quarrying, transportation, warehousing, postal and courier activities, real estate operations due to military operations in and occupation of large parts of the territories. however, if to consider the grp by region, in 2020 the highest percentage is in kyiv – 24.03%, dnipro – 9.44%, kyiv – 5.74%, lviv – 5.60%, odessa – 5.22%. in march, the fighting covered 10 regions and the city of kyiv, which together accounted for more than 55% of gdp in the past. in april 2022, the regions where significant hostilities are taking place or part of the territory is under occupation: kharkiv – 6.11%, donetsk – 4.89%, zaporizhzhia – 3.96%, mykolaiv – 2.29%, luhansk – 1.02 %, kherson – 1.62% (almost 19.89%). that is, it can be predicted that next year ukraine's gdp will decrease by 20-25%. economic activity has also declined in relatively calm areas due to disruptions in supply and production chains, uncertainty and increased risks, labor outflows and additional costs. in addition, the blockade of seaports also results in a significant share of ukraine's gdp loss. according to the national bank of ukraine (national bank of ukraine, 2022), the number of enterprises that completely stopped working has almost halved since the beginning of hostilities (from 32% to 17%). however, 60% of enterprises are operating below their pre-war level of utilization, almost 23% more than halved. at the end of april, most of the agricultural, transport and processing table 1 overview of the world economic outlook projections at market exchange rate weights (percent change) projections difference from january 2022 weo update1 difference from october 2021 weo1 2021 2022 2023 2022 2023 2022 2023 world output 5.8 3.5 3.1 -0.7 -0.3 -1.2 0.0 advanced economies 5.1 3.3 2.3 -0.6 -0.2 -1.2 0.2 emerging market and developing economies 6.8 3.8 4.2 -0.8 -0.3 -1.2 -0.3 emerging and developing asia 7.4 5.0 5.4 -0.5 -0.2 -1.0 -0.1 emerging and developing europe 6.4 -2.1 0.8 -5.6 -2.1 -5.8 -2.1 latin america and the caribbean 6.6 2.4 2.4 0.2 -0.1 -0.6 -0.1 middle east and central asia 5.1 4.6 3.4 0.5 0.2 0.7 0.0 sub-saharan africa 4.5 3.8 3.9 0.2 0.1 0.1 0.0 memorandum european union 5.3 2.8 2.4 -1.1 -0.2 -1.5 0.2 middle east and north africa 5.0 4.8 3.2 0.7 0.2 0.9 0.1 emerging market and middle-income economies 7.0 3.7 4.2 -0.8 -0.3 -1.3 -0.3 low-income developing countries 4.0 4.6 5.3 -0.6 -0.1 -0.6 -0.1 source: imf staff estimates note: the aggregate growth rates are calculated as a weighted average, in which a moving average of nominal gdp in us dollars for the preceding three years is used as the weight. weo = world economic outlook. 1 difference based on rounded figures for the current, january 2022 weo update, and october 2021 weo forecasts baltic journal of economic studies 81 vol. 8 no. 2, 2022 industries resumed work. the most difficult situation is in the construction and mining industries, and the volume of work remains much lower than the prewar level. first of all, the workload in the occupied territories has improved, but in regions with active combat operations / occupied regions the situation is difficult. the second wave of the eba sme survey showed a decrease in the number of unemployed enterprises from 42% to 26%. 17% of smes have already resumed operations, another 23% are preparing for recovery, and the number of full-time entrepreneurs has risen from 13% to 20% (41% among large companies, according to american chamber of commerce). financial strength has also improved, but payroll is almost unchanged: 25% are paid in full (88% among large companies, according to american chamber of commerce), 27% are cutting salaries, 15% are sending employees on unpaid leave, and 9% are laying off staff. according to the national bank of ukraine (national bank of ukraine, 2022), a deep recession in economic activity and the introduction of a number of tax changes to soften the shock in the economy led to a significant reduction in tax revenues in march and april. however, revenues were supported by early dividend transfers by state-owned enterprises (in march), tax advances (both in march and april), and grant funds from international partners. instead, spending increased significantly, mainly on military and social programs, as well as business support and regional reconstruction. significant state budget deficits were financed by debt sources, including international and monetary financing. a new debt instrument, the military iglb, was introduced to the domestic market. in march and april, 135 billion uah were raised, of which 70 billion uah were bought by the nbu. according to the ministry of finance, the budget needs amount to about 5 billion dollars a month. the team of authors notes that wartime unites ukrainian society more and more closely. the division into social strata, political forces, professional associations, and even interest groups has all but disappeared in ukraine today. all, with few exceptions, are working together toward a common goal: to kick the occupant out of our state. at the same time, the patriotic rush and emotional lift that drives ukrainians to victory should not destroy the foundations of sound rationality, which is the key not only to effective management of military logistics, but is also rightly considered one of the cornerstones of future postwar reconstruction and economic recovery (borshchevsky, matveev, kuropas & nikita, 2022). today a number of measures for post-war economic development of ukraine are being developed and are in effect, both by world countries and the government, including: preferential loans, tax vacations, compensation for the employment of idps. despite the achievements in the development of the ukrainian village, the competence of the authorities and self-government is still not clearly defined, there is no effective cooperation between them in the design and implementation of development programs. the concept of sustainable development, encompassing economic, social and environmental trends, needs to be prioritized. strengthening the progress of the priority components of the concept of decentralized sustainable development will enhance the possibilities for the modernization of economic relations based on the harmonization of community interests with the interests of power. it is also necessary to strengthen the development of the concept of a mutually integrated mechanism of accumulation and use of financial resources to provide an economic basis for environmentally-oriented growth (stehnei, at el., 2017). it should be noted the fact that ukraine has a very seriously damaged infrastructure, which is why a favorable investment climate will help attract foreign and capital investment to rebuild it (kramarenko, haustova, & arkhangelskа, 2019). in addition, lunina i. o., bilousova o. s., frolova n. b. believe that "during the recovery period after the end of hostilities, forced lending to high income enterprises may be used to finance the development of enterprises of priority economic activities (in exchange for shares or debt securities of such enterprises), as well as co-financing with the state and international organizations of investment projects on priorities determined with the assessment of damage and losses suffered by ukraine as a result of the armed aggression of the russian federation" (lunina, bilousova & frolova, 2022). 4. conclusions the forecast for global economic growth during the war in ukraine assumes that the rate in developed economies will reach a 38-year high of 5.7 percent, while price growth in developed and developing countries will accelerate to 8.7 percent, the fastest decline since the global financial crisis of 2008. the acceleration is projected to decline by 2.5 percent and 6.5 percent, respectively, starting in 2023. global socioeconomic development will depend on the most significant factors: energy and food contributed to rising inflation in 2021, when oil and gas supplies were constrained after several years of restrained investment and geopolitical uncertainty; the rise in food prices will affect every country in the world, as extreme weather conditions have reduced crop yields and rising oil and gas prices have increased the cost of fertilizers; plant closures, port restrictions, shipping baltic journal of economic studies 82 vol. 8 no. 2, 2022 references: marshuk, l. m., babyuk, a. v., & strapachuk, l. v. (2022). the influence of international institutions on the financial condition of ukraine in wartime. economy and society, іssue 37. doi: https://doi.org/10.32782/25240072/2022-37-23 world economic outlook (2022). war sets back the global recovery, april 2022. available at: https://www.imf.org/en/publications/weo/issues/2022/04/19/world-economic-outlook-april-2022 irtyshcheva, i., sukhostavets, a., falovych, v., at el. (2021). modelling the innovative competitiveness of an enterprise with a change in investment provision. estudios de economía aplicada, vol. 39, no. 5 (2021): special issue: innovation in the economy and society of the digital age. doi: https://doi.org/10.25115/eea.v39i5.5041 insights & analysis on economics & finance (2022). war in ukraine is serious setback to europe’s economic recovery. available at: https://blogs.imf.org/2022/04/22/war-in-ukraine-is-serious-setback-to-europeseconomic-recovery/ danilishin, b. (2022). regarding the situation in the economy and financial markets. available at: https://lb.ua/ blog/bogdan_danylysyn/514088_shchodo_situatsii_ekonomitsi.html state statistics service of ukraine (2022). available at: http://www.ukrstat.gov.ua/ kramarenko, i. s., haustova, k. m., & arkhangelskа, a. m. (2019). the role of investments in the development of the transport and logistics system of ukraine. economy and society, vol. 20, pp. 456–462. national bank of ukraine (2022). monthly macroeconomic and monetary review may 2022. available at: https://bank.gov.ua/admin_uploads/article/mm_2022-05.pdf ?v=4 stehnei, m. i., at el. (2017). formation of financial instrumentation for the sustainable agricultural development: innovative approach. scientific bulletin of polissia, vol. 4(12), р. 1. pryshchepa, o., kardash, o., yakymchuk, a., at el. (2020). optimization of multi-channel queuing systems with a single retail attempt: economic approach. decision science letters, vol. 9(4), pp. 559–564. borshchevsky, v., matveev, e., kuropas, i., & nikita, o. (2022). territorial communities under martial law: how to ensure effective governance in the context of post-war development priorities. available at: https://www.prostir.ua/?news=terytorialni-hromady-v-umovah-vojennoho-stanu-yak-zabezpechyty-efektyvneupravlinnya-v-contexts-priorytetiv-povojennoho-rozvytku congestion, container shortages, and staff shortages will continue to disrupt some sectors; labor shortages, especially in high-contact industries, are driving up wages, although inflation has driven down wages. it has been researched that according to estimates of national and other international expert institutions, the reduction of ukraine's gdp in 2022 will be 35%. the analysis showed that in april 2022 the regions where there are significant hostilities or part of the territory is under occupation account for almost 20 percent of ukraine's gdp, in particular: kharkiv – 6.11 percent, donetsk – 4.89 percent, zaporizhzhia – 3.96 percent, mykolaiv – 2.29 percent, luhansk – 1.02 percent, kherson – 1.62 percent. it is established that during the three months of the war in ukraine there was a deep decline in economic activity, and the introduction of a number of tax changes to mitigate the shock in the economy led to a significant reduction in tax revenues. the directions of post-war economic growth for ukraine are suggested. baltic journal of economic studies 88 vol. 3, no. 1, 2017 corresponding author: 1 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: dtretiak_d@mail.ru areas for innovative products implementation in the insurance market of ukraine diana tretiak1 taras shevchenko national university of kyiv, ukraine abstract. the aim of the article is to assess the prospects for the implementation of the investment life insurance in ukraine. the study analysed the experience of foreign countries in the investment life insurance market development. also, an analysis of existing definitions for the "unit-linked" term is carried out; the result is the conclusion that they are limited to only a descriptive characteristic that relates to a particular aspect of the product. upon that, a comprehensive definition is absent at all now. methods. the study is based on a comparison of "unitlinked" products with the traditional life insurance, which exist in the world practice. practical importance. increase in the inflow of long-term resources in the ukrainian economy through the implementation of an innovative unitlinked product. transformation of the life insurance industry into the high-margin business sphere in ukraine. importance/originality. a technique of constructing an innovative unit-linked product depending on the specifics of the domestic insurance market performance is developed. results. the article considers in depth the specific features of unit-linked products, which distinguish this life insurance type from the classic accumulative insurance. in addition, it highlights other important characteristics such as a high level of flexibility and transparency of all the components. also, the advantages and disadvantages of unit-linked products are considered as compared to alternative products, its classification is held for the selected parameter group. the estimations of the unit-linked product development prospects, as well as its influence on the growth of the insurance market, are made. the study justifies the legislative consolidation of the investment life insurance along with a number of expansionary measures successfully implemented in eastern european countries, which are similar to ukraine. the result within the framework of this direction is the development of steps for the implementation and development of the unitlinked product in ukraine. key words: life insurance, innovative insurance products, unit-linked, investment income, stock market. jel classification: g23, h55 1. introduction the current state of the insurance market requires insurers to increase their performance standards through the introduction of innovative products. now it is impossible to go without innovations because they are always associated with the demand for innovation in a particular situation and the availability of an investment potential. this innovative direction will enhance the scope of insurance activities, whereby there would be a trend towards the introduction of innovative approaches, conditions for attractive insurance products would be created, which, in turn, would improve the economic performance of the insurance companies and the whole insurance market (denisenko, 2015). so, a comprehensive unit-linked product, which is an innovation in the insurance market of ukraine, has been developed by western insurance companies in the process of improvement of accumulative insurance programs and in order to increase their profitability. the orientation of insurance companies’ activities to life insurance is actual in the situation of a slowdown in the growth of the insurance market, and a lot of losses in certain types of insurance activity. despite the crisis and reduced solvency of the population, life insurance is promising due to the uniqueness of its content, providing the state long-term investments and reducing social tension. investment life insurance market development can play an important and multifaceted role in the economic growth of ukraine. we should expect not only changes in the volume and structure of the insurance market but also the impact on other sectors and areas, as well as ukraine's economy as a whole. 2. genesis of unit-linked products. large financial institutions of the world financial market are mainly represented by the insurance companies. the prevailing type of insurance in the baltic journal of economic studies 89 vol. 3, no. 1, 2017 international insurance market is life insurance; it takes up to 70% of the market structure. the main flows of insurance premiums are observed in the united states, japan, britain and france. the experience of these countries shows that life insurance is a highly costeffective type of business (sharyfyanova, 2015). the history of the origin and evolution of funded products is quite long. back in the 1930s, the first ideas for the modification of traditional life insurance products were made. thus, in 1928 h.e. raynes presented the work "the place of ordinary stocks and shares (as distinct from fixed interest bearing securities) in the investment of life assurance funds" which has pointed to the need to find a method that could make it possible to counteract the impairment of the cash flows generated by policies of classical accumulative insurance. as a part of that work, the most suitable means for this purpose was called investment in shares, because the placement of insurance reserves in them was also possible at that time. however, the increase in the equity investment ratio in itself is not a transition to investment products, due to an availability of other, much more important properties of the action (rodger, 2009). only more than 20 years after the publication of the h.e. raynes's work, first unit-linked products began to appear in the insurance markets of developed countries. that is, the first half of the 1950s can be identified as the beginning of the first stage for developing those products. at this time, the investment component of a policy was pointed out for the first time: customers have received an opportunity to choose an object of investment (kutty, 2011). further, during the 1960s and the beginning of the 1970s, other key steps were taken, which led to the formation of a full-fledged unit-linked product, the nature of which corresponded to the modern understanding of this type of products. it was at this time when a course has been held for a unit-linked product transparency for a customer in terms of both investment and insurance components (zevnik, 2010). now unit-linked policies are among the most sold in the investment and insurance markets in the world. in the us, 60% of all accumulative insurance programs represent an investment life insurance. in europe, its share in different countries makes from 30 to 70%, for example, in lithuania  – 80.5%, hungary  – 66%, poland  – 24.6% (european insurance – key facts, cea insurers of europe). 3. the essence of the unit-linked product and its comparison with the traditional policies of accumulative life insurance. at the present stage of development of the insurance market, there is a huge amount of long-term life insurance programs, among which are the following: classical accumulative life insurance when the rate of return is taken into account in the calculation of insurance rates and is constant throughout the term of the contract; life insurance with the accounting of a coverage in the capital reserve (used mainly in europe) when a part of the insurance premium includes a certain standard of savings invested by the insurance company. thus a reserve fund for coverage is formed, but the yield on such contracts is low; table 1 comparison of the main unit-linked parameters and traditional life insurance policies parameters traditional products unit-linked products product goal 1. insurance cover. 2. accumulation of funds for the time left to live without the possibility of their augmenting. 1. full-fledged investment. 2. insurance protection. investments there is no possibility of choosing investments. a minimum guaranteed yield accrual on capital is proposed. a policyholder has the choice of funding for investment. a policyholder assumes full or most part of the risk in return for an increase in investment yield potential. payments a current amount of the policy is usually not known to the policyholder. the price of an investment fund unit and the current value of the policy are known to the client. guarantees availability of guarantees on payments. availability / unavailability of some guarantees of payments depending on customer preferences. transparency 'black box' for a client. elements of the insurance premium (investments, risk premiums and costs) are usually indistinguishable. investments are directed to the general fund of an insurance company. elements of the insurance premium are usually clearly presented to the insurer. investments are strictly personal, customers are able to track the details of their return. flexibility extremely limited flexibility of the product in relation to the product parameters. lack of flexibility concerning the investment component of the product. ability to select the maximum number of product parameters. choice of investments in accordance with a risk profile, and asset growth expectations: the choice from a number of the proposed funds. the possibility of subsequent changes in investment. source: compiled by the author baltic journal of economic studies 90 vol. 3, no. 1, 2017 life insurance with sharing in the company 's profits (with-profits policies) when after the annual assessment of insurance assets and liabilities, the company allocates a share of its profit as a bonus in favour of a policyholder. this bonus is payable only at the end of the contract; investment life insurance (unit-linked) is an investment method registered with the use of a life insurance contract taking into account investment risks. this new investment instrument with the guaranteed safety of invested funds (stability) and the expected high investment income. let us consider the main differences between unitlinked products and traditional life insurance policies (table 1). also, we carry out a comparative analysis of this innovative product with life insurance with a share of company profits (table 2). summing up, we can say that from the point of view of an insurance company, unit-linked products are attractive for several reasons: 1) a higher return on investment compared to investment instruments, which are traditional for insurance companies (deposits, government securities, and so on); 2) a possibility to transfer an investment risk to a policyholder; 3) more soft-shell requirements for coverage of insurance reserves for the companies involved in unitlinked activity compared to traditional insurers of life. in recent decades, this practice is observed in many european countries (kazakova, 2012). there are different options for unit-linked products of the western market; their diversity is composed of various combinations of the parameters presented. in each countr y, there is a certain set of products popular both for insurers and policyholders. for example, in the uk , france and spain, unit-linked market mainly consists of programs, for which an insurance premium is paid as a lump sum (mrochkovskyy, 2008). 4. dependence of the demand for unit-linked products on a situation in the stock market. the sales volume of unit-linked policies significantly depends on a situation in the stock market. the fall of the stock market not only leads to a decrease in investment income but also entails the need to reduce the insurer's cost of doing business. in the long run, the unfavourable current situation in the stock market leads to a decrease in profits of insurance companies what is amplified by the lack of ability to quickly make significant changes in a structure of placement of insurance reserves and assets in connection with the long-term obligations under the contracts. due to the fact that the investment life insurance, as well as accumulative insurance, is a long-term project, it is difficult enough to predict the situation in the stock market for a few decades. from there, a part of the insurers come through the situation as follows: only a portion of the insurance premium is invested in investment instruments selected by the policyholder, the remaining part is invested in other instruments at the discretion of the investment department of insurance company experts (kazakova, 2012). thus, a risk diversification is ensured. in addition, the american version of unit-linked insurance policy assumes that a policyholder may decide to change the set of investment instruments and some other parameters of the insurance contract during the term of the contract (see table 3). for a company, a significant share of which business comprises deals with unit-linked products, the operational risk lies in a potentially higher probability of the insurance contract termination before it expires, compared with products with sharing in the company 's profits. policyholders often consider unit-linked products more as a savings tool. therefore, they want to make a profit in a favourable situation in the stock market, as well as to minimize table 2 comparative analysis of a unit-linked product and a policy with sharing in company's profits comparison criterion a policy with sharing in company 's profits police unit-linked investment risk investment risk is incurred by an insurer in connection with the need to guarantee security for the insurance policy. however, a small portion of investment risk is incurred by a policyholder through variations in the size of the insurance premium. mainly the investment risk is incurred by the policyholder. choosing an investment vehicle insurer policyholder the size of payment in case of death guaranteed payout in the event of death, plus the accumulated bonus (depending on the method of profit distribution). the guaranteed amount of payment in case of death, plus the value of the investment shares. accumulative part the guaranteed yield plus a percentage of the profits of the company (based on investment income). the cost of the investment shares. the amount of payment in a case of early termination of a contract the cost of purchase (is specified in the policy and is calculated using mathematical methods) plus the accumulated bonus (depending on the income distribution system). the cost of investment shares on the date of termination of the contract. source: compiled by the author baltic journal of economic studies 91 vol. 3, no. 1, 2017 their losses when the market declines. upon that, the early termination of the policy with sharing in the company 's profit is unprofitable for a policyholder. 5. the main problems that hinder the investment life insurance implementation in ukraine currently, the ukrainian insurance companies do not offer unit-linked programs. this is related to the laws and regulations in the area of insurance. the fact is that unit-linked policies covering longevity risk do not prescribe an insured amount and do not ensure guaranteed return. also, according to the law, an insurance company cannot pool its risks of investing to its clients. some insurance companies sell insurance policies with an investment component, but these programs are far from what is usually called unit-linked; they are usually invited to peg the yield to quotations of certain assets. w hat is more, the choice is usually limited to two or three types of them. so, it is possible to purchase a fully-fledged policy of investment life insurance only abroad so far. thus, it is possible to specif y the following main issues that do not allow the implementation of the investment life insurance programs in ukraine: 1) slow pace of financial market development; 2) fairly significant fluctuations in the securities market, which make it impossible to predict future volumes of additional revenues as a result of investment in assets; 3) low volume of profitable securities traded in the domestic stock market, which can provide an acceptable return-to-risk level; 4) unstable macroeconomic situation in the country (an instability of the national currency, high inflation level); 5) rather ad hoc and unbalanced state supervision over the activities of financial intermediaries; the lack of an effective long-term strategy of financial market development, and others. 6. advantages of the investment life insurance implementation in ukraine both for insurers and for policyholders the attractiveness of unit-linked products to customers is as follows: possibility of direct participation in the investment, independent choice of investment instruments; psychological protection. care for children and families in difficult life situations; reliability and professionalism about. it requires strict control by the public authorities over the activities of investment funds; lower operating costs due to scale (a large number of shareholders of a fund); additional tax benefits under certain conditions (in particular, the minimum duration of the contract and the availability of insurance cover for the risk of "death"), which are used in unit-linked programs in most countries of the world; professional risk diversification. the professionalism of a management company allows timely to revise the fund's assets and monitor effectiveness of investments; high degree of transparency of revenues under insurance products, particularly in comparison with policies on sharing in the company 's profits. in the latter case, it is often difficult to keep track for a policyholder of how company 's shareholders distribute profits from investment activities; a possibility of additional income (much higher in comparison with other life insurance products). 7. conclusions the analysis of the problems and prospects for the introduction of the innovative unit-linked insurance product in ukraine leads to the following main conclusions. today, the ukrainian insurance market is not ready for the introduction of unit-linked insurance given the insignificant pace of development of life insurance companies and the stock market. but with the solution of these problems and in the longer term, table 3 alternatives for the transition from one type of life insurance contract to another (unit-linked) european alternative (may be implemented only after expiration of a contract) american alternative (may be implemented during the term of a contract) guarantees guaranteed choice of converting the rent: a possibility of payment at the end of the insurance contract or a possibility of its investing in a unitlinked insurance policy. the transition from a policy of sharing in company profits to a unit-linked policy. guaranteed minimum accumulated amount. the guaranteed period of pension payment: monthly payment of pensions regardless of whether the insured person is alive (in the event of his/her death, payment should be made to the heirs up to the end of the contract). rejection of the unit-linked policy. the ability to move away from unit-linked insurance policy conditions for some time (for the unfavourable situation in the stock market). guaranteed minimum amount of refund in case of early termination of the contract. the guaranteed minimum payout for the risk of "death". source: compiled by the author baltic journal of economic studies 92 vol. 3, no. 1, 2017 an introduction of the investment life insurance can be a target for the development of the domestic insurance market. to do this, the following steps should be performed: increase transparency, capacity, and stabilize the stock market; form a preferential tax regime for unit-linked policy incomes; improve the legal framework in the financial market; increase the level of awareness of citizens about the possibilities of investing savings in the financial market; reform the pension system. unit-linked policies will potentially ensure a higher level of return than other products on accumulative life insurance; control the entire production cycle, from product development to its direct sale to customers. also, the development of the investment life insurance in ukraine needs the state support, at which insurers will be able to generate a significant portion of long-term financial resources to address the important problems of economic development of the country. the implementation of all the proposals and the achievement of the goals will contribute to attracting long-term resources in the ukrainian economy, significantly increase the degree of participation of local investors in the stock market transactions, create a new category of institutional investors, ensure the long-term growth of life insurance sector, and increase its importance in the national economy. references: denisenko, m.p. (2015). innovation in the insurance market of ukraine. investment: practice and experience, 21: 79-82. kazakova, a.a. (2012). analysis of factors and prospects of development of investment and insurance products in russia. finance and credit, 26 (506): 72-80. mrochkovskyy, n. (2008). unit-linked – protected investments. financial expert, 1-2: 65-70. sharyfyanova, z.f. (2015). problems and prospects of development of life insurance. scientific review. series 1. economics and law, 3: 165-170. european insurance – key facts [electonics resource]. cea insurers of europe. access mode: http://www.cea.eu/ zevnik, r . (2010). the complete book of insurance. sphinx publishing, p. 134-135. kutty, s. (2011). managing life insurance. phi learning pvt. ltd, p. 24-36. rodger, s. (2009). unit-linked business. life insurance monograph prepared by education service on institute of actuaries, p. 16-18. диана третяк направления внедрения инновационных продуктов на страховой рынок украины аннотация. целью статьи является оценка перспектив внедрения инвестиционного страхования жизни в украине. в ходе исследования был проанализирован опыт зарубежных стран в развитии рынка инвестиционного страхования жизни. также был проведён анализ существующих определений unit-linked, результатом стал вывод о том, что они ограничиваются лишь описательной характеристикой, которая касается того или иного аспекта данного продукта. при этом полноценное определение вовсе отсутствует. методика. исследование основано на сравнении unit-linked с традиционными продуктами страхования жизни, которые существуют в мировой практике. практическое значение. повышение приплыва долгосрочных ресурсов в экономику украины за счет внедрения инновационного страхового продукта unit-linked. преобразование отрасли страхования жизни в высоко рентабельную сферу бизнеса в украине. значение/оригинальность. разработано методику конструирования инновационного продукта unit-linked в зависимости от специфики функционирования отечественного страхового рынка. результаты. в статье были подробно рассмотрены специфические черты unit-linked, отличающие этот вид страхования жизни от классического накопительного страхования. помимо этого выделены иные важные его характеристики, такие как высокий уровень гибкости и прозрачности всех составляющих. также были рассмотрены преимущества и недостатки unit-linked, в сравнении с альтернативными продуктами, проведена его классификация по выделенной группе параметров. сделаны оценки перспектив развития unit-linked продукта, а также влияние его роста на рынок страхования. в исследовании обосновано законодательное закрепление инвестиционного страхования жизни, вместе с рядом стимулирующих мер, успешно реализованных в схожих с украиной стран восточной европы. результатом в рамках данного направления стала выработка шагов, по внедрению и развитию unit-linked продукта в украине. baltic journal of economic studies 4 vol. 3, no. 1, 2017 specifications of the sources of securing insurance company’s financial stability mariia balytska1 taras shevchenko national university of kyiv, ukraine abstract. the purpose is to generalize the methodological concepts of domestic researchers in sources of insurance companies' financial stability provision. the need in developing and deepening both theory and practice upon the issues of improving financial stability of the ukrainian insurance companies facilitated the following tasks: analysis of methodical approaches of native researchers concerning division of financial stability sources; highlighting the most important sources of securing financial stability for insurance companies; feasibility of the role and essence of each factor securing financial stability for insurance companies. methodology. the study is based on the theoretical analysis of scientific works and practical activity of enterprises. methodological basis of the article are methods of scientific cognition, which enable to expose basic conformities to the law of development of the insurance companies, priority ways to ensure their financial sustainability. such methods are in particular used: analysis and synthesis – during research of financial stability of the insurance companies; systematizations – for revealing factors of maintenance of financial stability of insurers, their detailed analysis and definition of their interrelation; scientific abstraction – with the purpose of forming theoretical generalizations and conclusions. results. the insurance sector plays an important role in the provision of critical financial services. but insurers are exposed to a number of risks and can become distressed or fail. the article examines the essence and importance of insurance company’s financial stability as an important factor in the development and functioning of the insurance market. the economic essence of the general theoretical issues about the financial stability of insurance companies is reviewed and analysed. the main features of insurance companies and the factors that affect their financial stability are investigated. value. the economic and social importance of insurance is such that the intervention of public authorities, in the form of prudential supervision, is generally accepted to be necessary. not only do insurers provide protection against future events that may result in a loss, they also channel household savings into the financial markets and into the real economy. the intervention of public authorities has tended to focus on introducing the measures that seek to guarantee the solvency of undertakings or minimise the disruption and loss caused by insolvency. therefore, the study of the legislative regulation of the factors of providing financial stability of insurance companies is of strategic importance towards creating a stable insurance market in ukraine. key words: insurance company, financial stability of insurer, insurance company equity, reserves of insurer, reinsurance, tariff policy of insurance company. jel classification: g200, g220, g280 corresponding author: 1 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: mari12197@yandex.ru 1. introduction insurance and reinsurance companies are an important and growing class of financial market players. they are becoming ever more significant investors and intermediaries in a wide range of financial markets across the globe, bringing innovative approaches to capital markets, providing insurance coverage for financial risks, mediating in the reinsurance market, as well as developing new tools that help bridge the gap between banking and insurance products. in particular, the gradual blending of boundaries between the insurance and other financial institutions, especially in the over-the-counter derivatives market, entails the increasing role of the insurance industry for the systemic financial stability. as a result, a stronger emphasis on the prudential supervision of the financial risks (as opposed to underwriting risks) will be important for ensuring financial stability. under market relationship, the prevailing task of analysing the company status shall be not only accounting monetary flows but also the research of its financial and economic status and financial stability. financial stability is one of the most important features of any company status and behaviour in respect of external and internal changes. baltic journal of economic studies 5 vol. 3, no. 1, 2017 security of the insurance company’s financial stability is quite a complex process related to regular control of all the insurer’s activities and prompt response of the company management to external and internal changes. 2. research analysis and problem statement financial stability of the insurer and impact of various factors on its level have been displayed in numerous scientific researches of national and foreign scientists and practitioners, such as m.m.  aleksandrova, v.d.  bazylevych, v.d.  bigdash, e.n.  bochkaryova, n.m.  vnukova, n.b.  gryshchenko, n.m.  dobosh, m.g.  zhygas, o.m.  zaletov, a.a.  kudryavtseva, s.v.  lukonina, v.v.  maslenikov, o.p.  ovsak, s.s. osadets, a.v. palkina, v.a. sukhova, yu.n. tronina, v.m. filonyuk, o.f. furman and many others. despite a variety of scientific opinions regarding essence, theory and practice of securing financial stability of insurance companies, such issues still remain not enough investigated. 3. sources of the financial stability of the insurance company despite the large essence of financial stability of insurance company, the principal regulatory act upon insurance – the law of ukraine “on insurance” has no definition of the essence of insurers’ financial stability and its security terms; while only section iii of the law of ukraine “on insurance” devoted to securing the insurer’s solvency (in particular, article 30) formulates basic terms to be complied with by the insurance company for the purpose of securing solvency, namely: – paid insurance fund for resident insurers or guarantee deposit for branches of non-resident insurers and the insurer’s guarantee fund; – insurance reserves enough for further insurance payments and insurance reimbursements; – exceeding actual stock of the insurer’s solvency over the estimated standard solvency stock (the law of ukraine “on insurance”, 1996). – meantime the concept of financial stability is quite broader than the concept of solvency; thus, apart from legislative provisions, the economic literature contains the larger list of sources serving as grounds for the financial stability of insurance companies. in practice, apart from compliance with legislation, financial stability of the insurer is grounded on the following sources: – enough scope of the own capital; – grounded tariff policy; – balanced insurance portfolio; – enough scope of insurance reserves; – reinsurance. 4. enough scope of the own capital as the basis of financial stability of the insurers grounds for the insurer’s financial stability are fixed just in the process of its incorporation. at this stage, the essential terms are the amount and structure of share capital required for commencement of its activity, since for the first time insurance company has no funds but share capital for the purpose of fulfilment of its obligations under insurance agreements, while insurance investments at this stage are quite small. both in ukraine and abroad, share capital shall be formed in the manner and under the terms prescribed by the current legislation and constituent documents. the insurer’s own costs shall be formed at the expense of founders’ investments as well as by means of additional share emission. the own capital shall consist of share, additional, reserve capital and undistributed profit (fig. 1). fig. 1. structure of the insurance company own capital source: made by the author based on (bazylevych, 2008; pikus, 2015) baltic journal of economic studies 6 vol. 3, no. 1, 2017 some authors believe that both own capital in general and share capital, in particular, have no essence for an insurance company, since, in order to fulfil obligations against insurants, the target insurance reserves shall be formed. in our opinion, such an approach is not correct enough. in order to secure the insurer’s financial stability both in ukraine and abroad, the law prescribes minimum share capital required for commencement of the business activity. from one hand, it concerns the fact that at the initial stage insurance company has no funds for a fulfilment of its obligations under insurance agreements, but share capital, since insurance investments are insignificant. from the other hand, a large amount of share capital facilitates more confident planning of the entity’s market activity, quite large operations and the opportunity to gain competitiveness. thus, in the process of forming the insurance organization, a principal attention shall be drawn to the amount and structure of share capital, i.e. the insurer’s financial stability shall be based on the process of incorporating the company. the essence of both share capital and free reserves shall not decrease even when the insurer acts in the market for a long time. their role in securing financial stability of the current activity is as much important as the role of insurance reserves since even the most accurate calculation of insurance reserves is a mere presumption, which even under the stable portfolio and reliable statistic grounds preserves a risk of loss fluctuation, which is unfavourable for the insurer. it may result from its unsuccessful tariff policy, undesirable changes in contract structure, devaluation of assets (stocks, real estate etc.) due to deterioration of the general economic situation, insurants’ additional claims upon insurance payment the insurer deemed as settled etc. it may also occur so that the insurer, in order to support its market positions, will have to expand the range of its operation, which may result in additional risks not secured by the current insurance reserves covering obligations solely under the current contract portfolio (slepukhyna, 2006). therefore, the insurer’s own capital amount provides terms for optimal organization of the company’s tariff, investment and reinsurance policy by means of securing the insurer’s financial stability. 5. reinsurance on the way of ensuring the financial stability of the insurance company another term facilitating financial stability of insurance operations and ordinary activity of any insurance company is reinsurance. the law of ukraine “on insurance” determined reinsurance as insurance by one insurer (assignor, reinsurer) under the contractual terms concerning the risk of a partial fulfilment of its obligations against the insurant at the other resident or non-resident (re)insurer having the status of insurer or reinsurer in compliance with legislation of its registration country (the law of ukraine “on insurance”, 1996). authors of the interdisciplinary glossary of insurance and risk management determine reinsurance as financial operation upon assigning the insurer’s risks accepted before the insurance to another competent (re)insurer in order to provide the balanced insurance portfolio as if it secured the insurance company stability and profitability (pikus, 2015). the main function of reinsurance is secondary market redistribution. it means that insurance company is able to provide to the insurant the insurance, which corresponds to its financial capacities. the insurer is unable to achieve such results by itself. the insurance company may fulfil its obligations by means of reinsurance, i.e. share risk between itself and another insurance company. under reinsurance, reinsurer shall assume essential part of risk or guarantee, while the other part of risk imposed on assignor shall be treated as its own retention. each reinsurer usually bears different shares of insurance cover; therefore, the insurer when assigning risks to reinsurer increases tenfold its abilities to accept risks. in view of financial stability, reinsurance has at least two aspects. for the primary insurer, the ability to reinsure accepted risks shall mean strengthening its financial stability. meantime it presumes also reinsurer’s financial stability: being also the insurance organization rendering services to other insurers, reinsurer shall have enough solvency level in order to fulfil its obligations in case of insurance or reinsurance event. thus, reinsurance has a crucial impact on securing the insurer’s financial stability. 1) first, each certain insurance type contains quite many large risks the insurer is unable to bear in full. insurance company probably will defend itself in case of especially large risks by reducing its responsibility level as compared to accepted liabilities. 2) second, the insurer’s financial stability is under the threat of not only large risks but mass small claims. reinsurance agreement concluded in case of catastrophic insurance event allows the insurer to avoid extreme losses. reinsurance provides safe risk level for the company. 3) third, reinsurance may adjust fluctuations in results of insurer’s activity for several years. in particular, results of the insurance company’s activity within one year may be subject to the impact of either essential loss due to numerous insurance payments caused by the single insurance event or negative results upon the whole insurance portfolio within one year. reinsurance adjusts such fluctuations and facilitates stable results of the company’s activity for several years, which is quite important for securing the insurer’s financial stability. therefore, due to reinsurance, the insurer is able to bear most of the insurance risks. on these grounds, we may state that the more agreements the insurance company concludes the more balanced portfolio it baltic journal of economic studies 7 vol. 3, no. 1, 2017 obtains and the fewer fluctuations its financial results face. reinsurance provides an opportunity for the insurer to expand the list of insurance risks it is ready to bear, to cover the greater range of insurance types and to defend its assets. reinsurance allows the insurer to insure such objects whose value or risk level increases significantly its financial resources. today almost all the ukrainian insurance organizations need reinsurance. most of the insurers do not have enough funds and are unable to bear large risks. having assigned partially their responsibility to reinsurers, insurance organization may guarantee fulfilment of its obligations against the insurants even in a case when several large insurance events occur. reinsurer provides economic support to insurer: from one hand, it secures financial stability; from the other hand, it expands the insurer’s scope of activity. 6. enough scope of insurance reserves as the basis of financial stability of insurers to make payments in case of insurance events, insurance organization shall have special monetary funds, i.e. insurance reserves. v.d. bazylevych states that insurance reserves mean monetary assessment of further payments under the current insurance agreement, other than life insurance (bazylevych, 2008). formation and use of insurance reserves, right and obligation whereon is imposed on insurance organizations according to the current legislation, serve as the basis for the insurer’s activity and its financial stability. financial stability, solvency of financial organization and its ability to fulfil insurance payment obligations against insurants under insurance events depend on correct calculation of insurance reserves with regards to non-fulfilled or partially fulfilled obligations. pursuant to article 31 of the law of ukraine “on insurance”, in order to secure fulfilment of its obligations, insurance companies shall, in the manner and under the terms prescribed by the ukrainian legislation, form insurance reserves from their insurance investments required for further insurance payments and insurance reimbursement depending on (re)insurance types. as per the standard scheme of insurance reserve formation, each type of the insurer’s obligations shall be covered by the relevant type of insurance reserve. like in worldwide practice, the current ukrainian classification detaches the following groups of insurance reserves: – under life insurance agreements (for accumulative insurance types); – under other than life insurance agreements (for risk insurance types); – preventive measure reserves (the law of ukraine “on insurance”, 1996) (fig. 2). preventive measure reserves insurance reserves life insurance reserves technical reserves mandatory additional unearned premium reserves accident reserves loss fluctuation reserves other reserves loss reserves reserves of declared but unpaid losses reserves of arisen but undeclared losses fig. 2. classification of the insurance company reserves source: made by the author based on (the law of ukraine “on insurance”, 1996; resolution of the national commission for state regulation of financial services markets of ukraine " on approval of the required criteria and standards of adequacy, diversification and quality assets of the insurer", 2016; resolution of the national commission for state regulation of financial services markets of ukraine "on approval of the methodology of formation of insurance reserves by type of insurance other than life insurance", 2016) baltic journal of economic studies 8 vol. 3, no. 1, 2017 insurance reserve distribution in life insurance and risky types of insurance is facilitated by a different content of insurance indemnity, risk nature, functions, tasks and methods of tariff calculation. insurance reserve amount, provided that they conform to obligations under insurance agreements, as well as their optimal placement and proportion conformity to the scope of own costs may show the insurer’s financial stability. that is why the role of the state in determining methods of insurance reserve formation is a necessary factor for securing the insurers’ financial stability. financial stability, solvency of financial organization and its ability to fulfil insurance payment obligations against insurants depends on the correct calculation of insurance reserves with regards to non-fulfilled or unduly fulfilled obligations. if a (re)insurance company has not enough insurance reserves for insurance reimbursement, it has to make payment at its own expense. such own expenses will form the solvency stock over the solvency provided by the established insurance reserves. eu member states highlight seven principal factors, which impact on the insurance reserve system formation: insurance organization cycle inversion; insurance portfolio stability; insurance portfolio risk structure; insurance company organizational structure; insurance company investment activity; reinsurance development market level; inflation. if the ukrainian (re)insurers comply with such principal factors, they will be able to form insurance reserves, which would facilitate their financial stability in the insurance market and will fulfil promptly their obligations against insurants and other (re)insurance companies. insurance reserves consist of insurance premiums payable by insurants. insurance payment amount shall facilitate not only insurance reserve formation but also the insurer’s opportunity to settle all the insurance events, to cover case proceedings costs and to gain income, as displayed in the insurance tariff structure. under today macroeconomic conditions, insurance organizations face more difficulties in maintaining profitability level and securing financial stability, therefore tariff policy and expense decrease become prevailing management objects for insurers. today the standard insurer performing the large scope of various insurance types with a small portfolio under each one faces problems regarding risk assessment on the grounds of its own experience only. it is necessary to use either valid market rates or information of large insurance companies with a large portfolio under the certain insurance type. 7. grounded tariff policy as the basis of financial stability of insurers the insurer has a lot of risks to break the stable situation caused by errors in tariff application, e.g. tariff decrease under the loss increase under the certain insurance type, or incorrect choice of the insurance portfolio structure for the certain market under other equal conditions may cause decrease or loss of financial stability. today when insurance is performed by different insurance organizations, the rate is one of the elements of competition constantly stimulating insurers to reduce tariffs, grounded with regards to client involvement but groundless with regards to the company’s financial stability. if the insurer performs single agreements under any type of insurance, tariff amount is not essential as for impact of the insurance company’s competitiveness, but in such a case, in order to secure financial stability, tariff shall take into account the market loss level for the purpose of this risk assignment to reinsurance without any problems (sukhov, 1995). therefore, the insurer’s tariff policy optimization is quite essential in the aspect of securing its financial stability. insurance business prosperity is facilitated merely by the quality of calculations regulating financial relationships between the insurance subjects. incorrect tariff calculation causes a decrease of the insurance company’s financial stability. in order to optimize insurance policy, the insurer shall use mathematic and statistic methods for developing algorithms of the insurance portfolio structure formation and modification, which will facilitate a sufficient defence of the insurance company from the threat of bankruptcy. 8. conclusions the financial stability of insurance companies is the main condition, through which the institution of insurance can fully carry out its multifaceted role in the social reproduction process, since it is solvency that acts as one of the main criteria when potential policyholders select an insurer, and as the basis for the successful functioning and development of the said institution. an adequate level of financial stability of insurers is, therefore, the main condition for: – the provision of the insurance coverage for the social reproduction and for the maintenance of the standard of living achieved by the population; – the full and timely compliance with insurance obligations; – the efficient and competitive functioning of an insurer in the future; – the development of the country 's economy as a whole. the economic and social importance of insurance is such that the intervention of public authorities, in the form of prudential supervision, is generally accepted to be necessary. the intervention of public authorities has baltic journal of economic studies 9 vol. 3, no. 1, 2017 tended to focus on introducing the measures that seek to guarantee the solvency of undertakings or minimise the disruption and loss caused by insolvency. thus, on the grounds of the above analysis we may conclude that financial stability of the insurance company depends on many aspects of the insurer’s work organization, while their complex and simultaneous improvement may facilitate effective and stable activity of the company, which will become more confident among competitors and guarantee proper defence for its clients. references: bazylevych, v.d., bazylevych, k.f., pikus, r .v. (2008). insurance, znannia, kyiv, ukraine. lukonin, s.v. the financial stability of insurance companies and the ways of its improvement. insurance business, 5, р. 28-33 pikus, r .v., prykaziuk, n.v., lobova, o.m. ta in. (2015). mizhdystsyplinarnyj slovnyk zi strakhuvannia ta ryzykmenedzhmentu, logos, kyiv, ukraine. slepukhyna, yu.e. (2006). “pryntsypy formyrovanyia sobstvennoho kapytala strakhovoj orhanyzatsyy y eho znachenye dlia rehulyrovanyia urovnia fynansovoj ustojchyvosty”, yzvestyia ural'skoho hosudarstvennoho ekonomycheskoho unyversyteta, vol. № 1 (13). sukhov, v.a. (1995). hosudarstvennoe rehulyrovanye fynansovoj ustojchyvosty strakhovschykov, ankyl, moscow, russian federation. the national commission for state regulation of financial services markets of ukraine (2016). “resolution of the national commission for state regulation of financial services markets of ukraine "on approval of the methodology of formation of insurance reserves by type of insurance other than life insurance" [electronic resource]. – retrieved from: http://zakon0.rada.gov.ua/laws/show/z0019-05 (accessed 6 march 2017). the national commission for state regulation of financial services markets of ukraine (2016). “resolution of the national commission for state regulation of financial services markets of ukraine "on approval of the required criteria and standards of adequacy, diversification and quality assets of the insurer" [electronic resource]. – retrieved from: http://zakon5.rada.gov.ua/laws/show/z0417-16 (accessed 6 march 2017). the verkhovna rada of ukraine (1996). the law of ukraine “on insurance” [electronic resource]. – retrieved from: http://zakon0.rada.gov.ua/laws/show/85/96-%d0%b2%d1%80 (accessed 6 march 2017). мария балицкая характеристика источников обеспечения финансовой устойчивости страховой компании аннотация. целью работы является обобщение методологических концепций отечественных исследователей на пути поиска источников обеспечения финансовой устойчивости страховых компаний. необходимость развития и углубления теоретических разработок и практических наработок по вопросам совершенствования обеспечения финансовой устойчивости страховых компаний украины обусловили постановку следующих задач: анализ методических подходов отечественных исследователей относительно выделения источников обеспечения финансовой устойчивости страховых компаний; выделить важнейшие источники обеспечения финансовой устойчивости страховой компании; обосновать роль и значение страховых резервов в обеспечении финансовой устойчивости страховой организации. методология. исследования проводится на основе теоретического анализа научных трудов и практической деятельности страховых компаний. методологической основой статьи являются методы научного познания, позволяющие выявить основные закономерности развития страховых компаний, приоритетные пути обеспечения их финансовой устойчивости. в частности используются следующие методы: анализ и синтез – в ходе исследования финансовой устойчивости страховых компаний; систематизация – для выявления факторов обеспечения финансовой устойчивости страховщиков, их детального анализа и определение их взаимосвязи; метод научной абстракции – с целью формирования теоретических обобщений и выводов. результаты. страховой сектор играет важную роль в обеспечении критически важных финансовых услуг. но страховщики, в свою очередь, тоже подвержены ряду рисков и могут потерять способность отвечать по своим обязательствам. в статье рассматриваются сущность и значение финансовой устойчивости страховой компании как важного фактора развития и функционирования страхового рынка. экономическая сущность, общие теоретические вопросы о финансовой устойчивости страховых компаний рассмотрены и проанализированы. основные характеристики и факторы, влияющие на финансовую устойчивость страховых компаний исследованы. значение. экономическое и социальное значение страхования такова, что вмешательство органов государственной власти, в форме пруденциального надзора, является общепризнанным необходимым baltic journal of economic studies 10 vol. 3, no. 1, 2017 фактом. роль страховых состоит не только в способности обеспечить защиту от будущих событий, которые могут привести к убыткам, а также перераспределении сбережений населения в финансовые рынки и в реальный сектор экономики. вмешательство органов государственной власти, как правило, сосредоточены на внедрении мер, которые призваны гарантировать платежеспособность предприятия или минимизировать разрушения и потери, вызванные неплатежеспособностью. таким образом, изучение законодательного регулирования факторов обеспечения финансовой устойчивости страховых компаний имеет стратегическое значение на пути к созданию стабильного страхового рынка в украине. baltic journal of economic studies 59 vol. 7 no. 5, 2021 corresponding author: 1 national aviation university, ukraine. e-mail: tan3000@ua.fm orcid: https://orcid.org/0000-0002-2010-307x researcherid: s-3805-2018 2 national aviation university, ukraine. e-mail: lesya.pobochenko50@gmail.com orcid: https://orcid.org/0000-0002-3094-6417 researcherid: g-7894-2019 doi: https://doi.org/10.30525/2256-0742/2021-7-5-59-66 research on transnationalisation of economic activity innovative component influenced by the covid-19 pandemic tetiana gavrilko1, lesya pobochenko2 abstract. the purpose of this article is to examine the innovative component of the transnationalisation of economic activity under the influence of the covid-19 pandemic. statistical and analytical systems analysis methods make it possible to determine the trend of research and development (r&d) expenditures in the world over five years (2017–2021). methodology. research methods: theoretical generalization, analysis and synthesis, logical, system-structural analysis of economic processes and relations, statistical, comparative, sectoral and dialectical approaches. results. in accordance with the theoretical study of the process of investment in innovation by tncs under the influence of the covid-19 pandemic, we conclude that innovation for multinational corporations is the realization of innovative and creative ideas, which are the basis of progress and profit. the balance of power in the global innovation space before and during the covid-19 pandemic is demonstrated by examining the dynamics of innovation in countries and regions. under the covid-19 pandemic, companies' r&d spending has fluctuated slightly, while global r&d spending has increased. according to the global r&d finance forecast 2021, asian countries, including china, will act as the engine of innovation in the coming years. countries in the americas and europe will continue to lose their leadership in r&d, even though their spending will rise as the overall global economy recovers. one of the key indicators of innovation development is the quota of expenditure on research and development in gdp in the world. the leaders in this indicator are south korea, israel, japan, finland, and sweden. practical implications. innovation is recognized as a central factor in economic growth and development. interest not only in the promotion but also in the evaluation of the results of innovation activities is growing not only in developed but also in developing countries. according to the future of post-covid innovation finance gii (global innovation index 2020/2021), the pandemic crisis had a short-term impact on innovation spending. research and development (r&d) spending in connection with the covid-19 pandemic has always been high. in contrast to previous fears, the crisis has had only a minor impact on overall investment in innovation, as well as on the main consumers of innovation. at the company level, the covid-19 pandemic has affected the industry distribution of innovation, but costs and access to innovation financing in developing countries and more volatile companies are at risk. disparities in access to innovation finance are likely to intensify. value/originality. the main international research units of tncs are concentrated mainly in the united states, western europe, and japan. but according to recent global trends, there is a possibility of creating new research units of transnational corporations in china and india, which will allow these two countries to become part of the "innovation core" of the world economy in the future. key words: global economy transnationalisation, global research and development costs, innovations, tncs. jel classification: f02, o32, o31, f21 baltic journal of economic studies 60 vol. 7 no. 5, 2021 1. introduction the covid-19 pandemic has caused numerous problems related to research and development worldwide in early 2020. the pandemic crisis has added several more challenges to the annual research and development budget. the pandemic is not over, and no one knows how long it will last. therefore, its impact on research and development efficiency will persist. in the accelerated transformation of the "new economy " and the modern information society, one of the main competitive strategies of transnational corporations is the use of innovation as the most important intangible asset. consequently, the competitive advantage of multinational companies in today 's environment is the effective use of innovative factors. one of the main sources of innovation possessed by tncs is scientific, technological and human potential, which makes them major players in the formation of a global infrastructure of technological innovation. thus, by carrying out investment activities, transnational corporations have a significant impact on the competitiveness of countries in the global economy, determining the leading positions of some and the dislocation of others. the share of transnational companies in global innovation production is higher than their share in financing research and development, and amounts to about 40-50% of global production. when entering the international innovation market, tncs integrate innovation activities throughout the structure of the main company, with affiliates of transnational corporations specializing in the most competitive innovations. in the context of global transformations and new trends in innovative development, this is a "new world order in innovation," due to the growing role of asian countries, especially china and india, which accumulate the largest corporate spending on research and development. 2. analysis of the innovative activity of modern transnational corporations in the context of the covid-19 pandemic for the past year and a half, the world economy has been struggling with the effects of the covid-19 pandemic. workers are quarantined, research materials and supplies are delayed, transportation systems are cancelled, production lines are slowed, and interpersonal relationships have undergone major changes. the 2021 global r&d funding forecast puts global r&d investment at $2.32 trillion in 2020, down 2.1% from $2.37 trillion in 2019. the think tank forecasts data for 115 countries that invest more than $20 million in research and development at purchasing power parity (ppp). in 2021, this is expected to rise to $2.44 trillion. in 2019, the r&d growth rate was higher by 4.1% compared to 2018 as a result of global economic growth, while the rate of r&d decline in 2020 will be 2.1% due to the covid-19 pandemic. it should be noted that due to the impact of the pandemic, the r&d growth rate in 2021 will be 3.3%. the global funding forecast for multinational companies' r&d investments is an annual report containing exclusive research results and estimates for the previous year, the current year, and the following year. the forecast has been published for 62 consecu tive years since 1959. for forty years, these reports focused only on the united states because of its dominance in this arena. the first january 1959 report analyzed how $12 billion would be spent by the u.s. department of research and development in industry, government, and academia. the 62nd report now estimates where more than $2.44 trillion will be invested in 2021. due to economic fluctuations and cycles, investment in r&d has changed several times over the past six decades. for example, when industrial investment declined during the year, public investment in r&d increased so much that total r&d changed little (and vice versa). last year's 2020 global r&d funding forecast was completed months before the covid-19 pandemic went global. as the pandemic spread around the world in the spring of 2020 and quarantine affected every aspect of global society, the editors of r&d world updated the 2020 r&d funding forecast, which was published in august 2020. as noted, the global r&d outlook changed dramatically during 2020 as the worst economic predictions made at the beginning of the year failed to come true. at least part of this change was the result of vaccines being tested and introduced in many countries by the end of 2020. it is worth analyzing how the covid-19 pandemic has changed r&d funding forecasts in the prepandemic period and during coronavirus infections. for example, the 2019 forecast (as of 01.01.2019) puts r&d investment at $2.37 trillion. the forecast for 2019 (01.01.2019) is $2.37 trillion with a global gdp of $137.8 trillion. according to the covid-19 pandemic 2020 forecast (01.01.2020), total global research and development spending was $2.43 trillion and global gross domestic product reached $141.7 trillion. the updated 2020 forecast (07.12.2020) puts investment at $2.28 trillion, down $0.1528 trillion from the previous forecast. global gdp is $132.5 trillion, down $8.2 trillion from the previous period. according to the actual results of 2020 (by 01.01.2021), the total global expenditure on research and development amounted to baltic journal of economic studies 61 vol. 7 no. 5, 2021 $2.32 trillion. the world's gross domestic product reached $133.6 trillion by the end of 2020. global r&d funding forecasts for 2021 show global r&d spending rising to $2.44 trillion this year, with an increase of about $12 billion. global gdp peaked at $140.5 trillion, up $6.9 billion from the previous period. global research and development prospects depend on the economies of individual countries. this impact tends to vary, especially if there is a pandemic. forecasts of countries' gross r&d expenditures are also based on the historical economic distribution of r&d. for example, china has been consistently investing heavily in r&d for more than 20 years. accordingly, although the country 's economic growth has been limited by the pandemic (as has been seen in all other countries), the people's republic of china's historic investment of about 10% annual growth led to r&d growth in 2020. but almost every other country in the world, including the u.s., showed that their r&d investment in 2020 was down from 2019. in 2021, the u.s. is projected to cut its r&d spending by 0.5% to $598.7 billion. the important point here is that the overall u.s. share of global r&d investment is declining. in contrast, elsewhere in the world, the cost of r&d has begun to rise. the gap between chinese and u.s. investment in r&d is expected to widen over the next few years. for 20 years, the prc has consistently demonstrated long-term growth in r&d investment. the failure of the u.s. to match this growth has led to a projection that china will exceed the u.s. in r&d for the first time in 2021 ($621.5 billion compared to china's $598.7 billion). the 4% difference can be explained in part by the people's republic of china's 2% improvement in annual gdp compared to the u.s.'s 4% decrease in annual gdp in 2020. ten years ago, the united states accounted for 34% of global r&d investment, while the people's republic of china accounted for 12.5%. today, the u.s. share is 24.5% and china's share is 25.5%. while china will overtake the u.s. in research and development spending in 2021, india is projected to invest $93.48 billion, surpass south korea with $91.47 billion in spending and move up one position in the most important consumers ranking (from sixth to fifth place). for years, india's gdp ($10.87 trillion) has been higher than south korea's ($2.103 trillion). in other words, four times larger, primarily due to a larger population (25 times larger), but its r&d investment strategies are oriented toward lower costs than those of other large countries in the world. we can observe a significant improvement in india's investment policy over the last period (table 1). the six countries spending the most on r&d in 2017–2021 are the us, china, japan, germany, india and south korea, which account for almost 70% of all global r&d investment. in 2020, the us and china will invest almost half (48.2%) of all global r&d funds. moreover, the us government (with its $580.2 billion in r&d funding) will spend more on r&d in 2020 than all other countries combined, except china and japan. the leading countries in research and development spending in 2020: the u.s. with a share of 25%, in second place – china at 23.2%, in third place – japan with a share of 7.8%. this is followed by germany with a share of 5.3%, india and south korea with shares of 4% and 3.8%, respectively. investments in research and development in russia account for about 3%, which is also a significant indicator (figure 1). over the past 5 years, the top 10 ranking has not changed significantly. some countries have moved slightly up one position in the ranking, but at the table 1 dynamics of global r&d expenditures by region and leading countries in 2017–2020 and forecast for 2021, % country / region of the world 2017 2018 2019 2020 2021 north america (12 countries) 27,72 26,8 27,2 27 26,4 south america (10 countries) 2,36 2,3 2,2 2,2 2 asia (24 countries) 42,67 43,5 43,9 44,3 46 europe (34 countries) 20,98 21,3 20,8 20,5 19,6 russia / cis (5 countries) 2,87 2,8 2,7 2,7 2,6 middle east (13 countries) 2,5 2,5 2,4 2,4 2,3 africa (18 countries) 0,9 0,9 0,9 0,9 0,8 total (116 countries) 100 100 100 100 100 china 21,16 21,8 22,5 23,2 25,5 the united states 25,57 24,7 25,2 25 24,5 japan 8,82 8,3 8 7,8 7,5 germany 5,46 5,5 5,4 5,3 5,2 india 3,66 3,9 4 4 3,8 south korea 4,06 3.9 3,8 3,8 3,78 total (6 countries) 68,73 68,2 68,9 69,1 70,3 source: global r&d funding forecast 2017–2021 baltic journal of economic studies 62 vol. 7 no. 5, 2021 same time have maintained their relative position. for example, india is slowly moving up in the ranking and ranks 5th in 2020. while china has increased its research activities by almost 10% annually over the past 15 years, japan has increased its r&d investment by less than 2% a year. finland, with a high ratio of researchers/population over 7,000, and israel, with a high level of research as a percentage of gdp (4.0%), are two historically stable representatives that have not changed over the past five years. according to the report, r&d investment is spread around the world, but asian countries continue to grow in the market, mainly thanks to increased investment in china. while us organizations have led the way in global spending for more than 50 years in a row. according to the global r&d funding forecast 2021, among the countries investing the most in r&d in 2021, china will be in first place. in 2017–2020, the us ranked first. china's r&d spending will exceed $621 billion. the share of r&d spending in global investment is 25.5% (table 2). analysis of the above data shows that many countries are characterized by a decrease in r&d spending in 2020: for the united states, r&d spending in 2020 fell by 2.75% compared with the 2019 level. according to expert estimates, in 2021, the us can only return to the level of 2019. as for the uk, france, russia, brazil and japan, these countries are not expected to recover even to 2018 rates in 2021. in 2020, china spent a record 2% of its gross domestic product (gdp) on research and development. the world's second-largest economy spent $574.4 billion on r&d. during the 13th five-year period (2016-2020), china's r&d spending was figure 1. investments of countries in research and development in 2019–2020, (%) source: global r&d funding forecast 2019–2020 table 2 leading countries in global r&d spending in 2017-2020 and forecast data for 2021, usd, billion place country 2017 2018 2019 2020 2021 1 china 444,82 499,63 532,8 574,4 621,5 2 usa 537,59 565,76 596,58 580,2 598,7 3 japan 185,54 189,51 190,65 181,1 182,36 4 germany 114,84 126,55 128,32 121,65 127,25 5 india 76,91 89,23 95,79 85,92 93,48 6 south korea 85,43 89,47 90,27 87,11 91,47 7 france 62,13 68,33 69,08 64,46 67,03 8 russia 57,81 61,58 61,43 58,92 60,57 9 great britain 49,16 52,03 53,17 49,77 51,61 10 brazil 37,14 39,38 39,4 37,11 38,15 top 10 leading countries 1651,37 1781,47 1857,5 1840,6 1932,1 all countries of the world 2103,5 2189,6 2370,8 2325,2 2440,5 source: global r&d funding forecast 2017–2021 baltic journal of economic studies 63 vol. 7 no. 5, 2021 maintained at a constant annualized rate above 10% and exceeded 2,000 billion cny for the first time in 2019. china's investment in r&d has increased its innovative power. in 2020, the country retained its 14th place in the list of the most efficient economies in the un global innovation index. according to the global r&d funding forecast 2021, asian countries, including china, will act as the engine of innovation in the coming years. 3. regional disparities in cost distribution at the ndcd in the context of the covid-19 pandemic the correlation of forces in the global innovation space before and during the covid-19 pandemic demonstrates the dynamics of innovative development indicators of countries and regions. in the face of a pandemic, asia is the largest region for investment in research and development in 2020, with a 44.3% or $1,056 trillion, share of global investment. the asian region is growing by 0.5-2% annually in its total share of r&d, and at this rate of growth, its share by 2030 could amount to more than half of all r&d investments in the world. note that the share of north america (26.9% or $624.9 trillion), including the us, and europe (20.5% or $457.3 trillion) in world r&d expenditure has declined significantly due to the covid-19 pandemic (figure 2). influenced by the pandemic crisis in african countries, r&d spending was $19.5 billion in 2020, which was $1.1 billion less than in 2019. middle eastern countries invested $53.5 billion in r&d in 2020. the middle eastern regions invested $53.5 billion, $2.8 billion less than russia in 2019/ump spending of $61.9 billion. most of these regions will return to 2019 values in 2021. investment in r&d will continue to decline in africa, south america and the middle east. their total r&d spending is only 5.1% of global r&d spending. but note that these three groups of countries account for about 13% of world gdp. third-world countries, including many in south america and africa, continue to lag behind in investment in r&d, resulting in weaker economic growth. overall, south america and africa account for just 2.9% of total r&d spending, even though they are home to more than 20% of the world's population. thus, the ratio of forces in the global innovation space is demonstrated by a study of the dynamics of innovative development of countries and regions. of these, the share of countries in the asian region is 45.4% and will continue to grow thanks to china. but the north american region's share, which is 26.9% in 2020, is significantly lower in global r&d spending, including the us, and europe's share (19.7%). 4. estimation of the share of research and development expenditures in the gdp of countries affected by the coronavirus situation one of the main indicators of innovation develop ment in tncs is the share of r&d expenditures in the gdp of the world. developed countries show high rates of innovation, which is the result of large investments in their r&d. thus, the share of spending on research and development in the leading figure 2. regional distribution of global r&d expenditures in 2020, (%) source: global r&d funding forecast 2020 baltic journal of economic studies 64 vol. 7 no. 5, 2021 countries is 2-3%, in successful countries it is even 3-4% of gdp, and in the most successful it is more than 4% and has been growing exponentially for two decades. large investments in research and development are the basis for the creative knowledge that influences innovative decisions. north america has the highest level of r&d spending as a share of gdp in 2020, at 2.5%. in europe, the share of r&d expenditures in gdp is 1.84%, in some asian countries it is 1.74%, 1.24% in russia/ump, 0.77% in south america, 0.74% in the middle east, and 0.42% in africa (figure 3). under the influence of the covid-19 pandemic, the regional structure of the largest investments in research and development is changing. north america, south america, and europe are predicted to continue losing their r&d leadership in 2021, even though their spending will grow as the overall global economy recovers. but there is an increase in the share of asian countries and, in particular, china in 2021 in global r&d, as well as an increase in research and development spending in these countries. in 2021, the share of china, japan, india, and south korea will reach 20% of global investment in research and development in asia and, consequently, the total gdp growth – up to $4 trillion. according to recent research, the positive outlook for the global economy in 2021 is largely the result of the success of covid-19 vaccination. the vaccination schedule allowed the drugs to be developed, a full series of trials, regulatory approval, production, and worldwide distribution to begin in less than a year. vaccination in the first half of 2021 is projected to set the foundation for a strong rebound in the second half of the year. economists expect a return to the pandemic period by mid-2021 or late summer. emerging markets are expected to benefit more from the recovery in 2021, and their growth rates will be higher than in developed countries. one of the main indicators of the development of innovation activity of tncs is the share of spending on research and development in gdp. some countries may have a lower gdp than others, but spend more on r&d and therefore have a higher percentage of gdp on investment in r&d. as for the types of r&d, historically (before world war ii) they were divided into three sections: basic research, applied research, and development. the fourth aspect, "applied development," which deals with specific efforts to bring products to market, began to be discussed relatively recently. the leader in the share of spending on r&d in global gdp in 2020 is south korea with a share of 4.35% of the country 's gdp, followed by israel (4.04%), japan (3.5%), finland (3.5%), and sweden (3.28%). also among the leaders are denmark (3%), austria (2.98%), switzerland (2.97%), germany, and the united states – 2.84% each. according to the forecast data, the share of spending on research and development in gdp in 2020 will not change (figure 4). thus, one of the main indicators of innovation development and the general characteristic of the national innovation system in the economy of countries is the share of research and development costs in gdp. in 2020, south korea, israel, japan, finland and sweden were the leaders in terms of the share of investment in research and development in gdp. figure 3. regional distribution of r&d expenditures in gdp in 2020, (%) source: global r&d funding forecast 2020 baltic journal of economic studies 65 vol. 7 no. 5, 2021 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5% 4,35% 4,04% 3,50% 3,50% 3,28% 3,00% 2,98% 2,97% 2,84% 2,84% figure 4. share of r&d expenditure in global gdp in 2020, (%) source: global r&d funding forecast 2020 5. findings in times of pandemic, the dynamic development of countries is impossible without the use of one of the most important competitive advantages of tncs and a strategic imperative for the development of the world economy – innovation. their effective use is becoming a top priority for tncs in the xxi century. according to the study, the main international research units of tncs are concentrated mainly in a closed circle of countries, namely the united states, western europe and japan. according to recent global trends, there is a possibility of new research units of multinational corporations in china and india, which will allow these two countries to enter the "innovation core" of the world economy in the future. analyzing the process of investment in innovation of tncs under the influence of the covid pandemic, it is proved that innovation for multinational corporations is the implementation of innovative and creative ideas, which are the basis of progress and aimed at generating profits for companies. innovation is recognized as a central factor in economic growth and development. accordingly, there is growing interest not only in the promotion but also in the evaluation of the results of innovation in both developed and developing countries. it has been noted that access to r&d funding is unequal between countries/regions (the us, china, india, europe, north america, asia). it is necessary to find a balance between underinvestment and overinvestment in r&d. today, innovators use a variety of sources of research and development funding, including from new entities such as non-profit organizations and foundations. traditional mechanisms for financing innovation include state support schemes, firm-specific investments in innovation, and market-based mechanisms that focus specifically on innovation, such as loans, direct investment, and venture capital. new mechanisms include corporate risk, intellectual property markets, microfinance, crowdfunding, and technology solutions. according to the study, the pandemic crisis had only a minor impact on innovation spending, as well as on the main consumers of innovation. at the company level, the covid-19 pandemic has affected the industry distribution of innovation. also at risk are the costs of innovation in developing countries and more unstable companies. an increased imbalance in access to funding for innovation is possible. references: lorena rivera leon, & sacha wunsch-vincent (2021). the future of post-covid innovation finance global innovation index 2020/2021. world intellectual property organization (wipo), 3, 14. available at: https://www.wipo.int/ export/sites/www/econ_stat/en/economics/pdf/2021_un_sti_forum.pdf (accessed 12 september 2021). r&d world (2019). global r&d funding forecast 2019. r&d magazine, р. 36. available at: http://digital.rdmag.com (accessed 10 september 2021). r&d world (2020). global r&d funding forecast 2020. r&d magazine, р. 67. available at: http://digital.rdmag.com (accessed 10 september 2021). baltic journal of economic studies 66 vol. 7 no. 5, 2021 r&d world (2021). global r&d funding forecast released 2021. r&d magazine. available at: https://www.rdworldonline.com/2021-global-rd-funding-forecast-released/ (accessed 10 september 2021). paul heney (2021). pandemic disrupts flow of global r&d. global r&d funding forecast, 2(1), 6−22. available at: https://www.rdworldonline.com/2021-global-rd-funding-forecast-released/ (accessed 12 september 2021). pavlovych, o. r . (2018). osoblyvosti upravlinnya innovatsiyamy v tnk [features of innovation management in tncs]. market economy: modern theory and practice of management, 17(2), 108–118. pobochenko, l. m. (2019). otsinka innovatsiynykh pozytsiy tnk rozvynenykh krayin svitu [evaluation of innovative positions of tncs in developed countries]. international relations: theoretical and practical aspects, 4, 91–103. pobochenko, l. m. (2018). innovatsiina skladova transnatsionalizatsii ekonomichnoi diialnosti v umovakh hlobalizatsiinykh peretvoren [innovative component of transnationalisation of economic activity in the conditions of globalization transformations]. development strategy of ukraine (economics, sociology, law), 2, 71–77. baltic journal of economic studies 48 vol. 2, no. 5, 2016 assessment of the severity of the crisis of the ukrainian companies and the development of measures for its elimination vladimir nusinov1 state higher educational institution «kryvyi rih national university», ukraine abstract. the functioning of the market system everywhere is accompanied by the crisis phenomena. it is impossible to imagine the development of a modern economy without economic ups and downs, which disrupted the economic stability and the economic entities enter into a certain imbalance. not exception-eating is the development of the crisis and companies of ukraine. the origin and course of the crisis in ukrainian companies requires a deep scientific study of modern economic theory and practice, as it can be considered a certain phenomenon, with significant features in comparison with other countries in crises companies. the manifestation of the crisis can be expressed in the decline in production, the deterioration of economic indicators, the financial insolvency of the company, have other symptoms that characterize its presence, as well as evaluate the various degrees of severity. despite the fact that the ukrainian company has led to a crisis, as it was heavy, and what the symptoms manifested, the main aim of the company in a state of crisis of uncertainty is the "survival" of the market and the continuation of further functioning. the issue of assessing the severity of the crisis and to identify measures to eliminate it in ukrainian companies is extremely important and yet insufficiently developed. this is because, firstly, in economic science remains poorly understood the essence of the crisis, its species and assessment methodology taking into account the realities of the modern ukrainian. secondly, the emergence of the crisis in ukraine – a frequent phenomenon, their course is quite difficult and time-consuming, but also has its own characteristics, depending on the formation of the ukrainian political and economic systems, historically developed social and economic development of the country, the impact of external macroeconomic factors. these points need to be considered in the development of evidence-based, effective system of anti-crisis solutions for ukrainian companies. the object of research is process of study of the crisis phenomena and the formation on its basis of anti-crisis measures in the companies. subject of research – a set of theoretical, methodological and practical aspects of improving the assessment of the severity of the crisis of ukrainian companies and the formulation of appropriate anti-crisis solutions. the methodological basis of this research is the dialectical method of cognition, systemic and historical approaches to the study of problematic issues, fundamental principles of the economic theory and the theory of crisis management. applied the following research methods: logical generalization, systemic structural analysis, comparison, statistical, identifying cause-andeffect relationships, matrix, ranking, expert, etc. the purpose of the study is to improve estimates of the severity of the crisis, ukrainian companies and develop appropriate anti-crisis solutions. in connection with this acute problem is to determine the characteristics and strategic respectively tactical crisis management and develop crisis toolstov in the system of corporate governance of ukrainian companies. the obtained results determine the necessary methodological basis for improvement of the assessment of the severity of the crisis of ukrainian companies and the formulation of appropriate anti-crisis solutions. theoretical, methodical and applied results of research used in the process of crisis management of companies mining and metallurgical complex, shipbuilding and engineering industry of ukraine. key words: crisis, causes of the crisis, consequences of the crisis, view of crisis, particularly the flow of the crisis, assessment of the severity of the crisis, crisis management jel classification: h12, o33 corresponding author: 1 department of accounting, taxation, public management and administration, sihe «kryvyi rih national university». e-mail: vladimir.ya15@gmail.com baltic journal of economic studies 49 vol. 2, no. 5, 2016 1. введение несмотря на то, что привело украинскую компанию к кризису, насколько он был тяжелым и какими симптомами проявился, основной целью компании в состоянии полной кризисной неопределённости является «выживание» на рынке и продолжение дальнейшего функционирования. проблематика оценки степени тяжести кризиса и определения мер его устранения в украинских компаниях исключительно важна и еще недостаточно разработана. это обусловлено тем, что, во-первых, в экономической науке еще недостаточно изучена сущность кризиса, его видов и методологии оценки с учетом современных украинских реалий. во-вторых, возникновение кризисов в украине – частое явление, их протекание является достаточно тяжелым и затяжным, а также имеет свои особенности, зависящие от формирования украинской экономической и политической систем, исторически сложившегося социально-экономического развития государства, влияния внешних макроэкономических факторов. эти моменты необходимо учитывать при разработке научно-обоснованной, эффективной системы антикризисных решений для украинских компаний. 2. исследование сущности кризиса и его видов в результате анализа литературных источников установлено, что концепция кризиса является многоаспектной, так как используется в различных областях: медицине, экономике, управлении, истории, психологии, политических науках, международных отношениях и так далее. это объясняется существованием разных научных школ и задач исследования. считаем, что для применения эффективных методов антикризисного управления необходимо четко понимать сущность кризиса, его виды, природу возникновения и возможные последствия. установлено, что на сегодня существует множество подходов к исследованию понятия «кризис», а именно: диалектический, классический, комплексный, нарушенного равновесия, положительный, отрицательный, процессный, развития, синергетический, сбалансированно-пропорциональный, системно-динамический, ситуационный, случайного характера, субъективно-объективный, правовой, факторного влияния, этимологический и др. определено, что по классификационным признакам их можно сгруппировать в три блока: описательный; прескриптивный; правовой (artiukh-pasiuta, 2014; kovalenko, suhaniaka, & fuchedzhy, 2013; pronoza, 2014; tkachenko & kaliuzhna, 2013; topij & kondrat, 2013; vasylenko, 2013; yankovskyj, makohon & riabchyn, 2009). критический анализ существующих научных подходов к исследованию понятия «кризис» подтвердил, что перечень таких подходов с экономической точки зрения можно считать неполным. установлена необходимость исследования кризиса на основе симбиоза прескриптивного и правового подходов, что позволяет учитывать экономические и правовые изменения в компании, а также ее корпоративные конфликты. считаем, что если указанные изменения в компании не произошли на данный момент времени, то тогда должна оцениваться вероятность их наступления. таким образом, предложено в рамках патоэкономики (pronoza, 2014) использовать контаминационный подход к исследованию кризиса, который наибольшей мерой раскрывает видение сущности кризиса и дает возможность максимально формализовать причинно-следственные связи его возникновения, протекания, последствий и ликвидации. обобщение результатов исследования сущности понятия «кризис» как зарубежными учеными, так и авторами постсоветского пространства позволило установить, что на сегодня существует огромное количество дефиниций кризиса, что само по себе уже есть признанием сложности и разночтения в понимании этой категории. подытожено, что литература относительно кризиса фрагментирована, так как авторы пишут о кризисах с различных точек зрения, не обобщая при этом идеи и концепции, разработанные специалистами других областей. вследствие указанного актуализируется необходимость уточнения данной дефиниции. предлагаем определять кризис как явление, которое характеризуется недопустимыми отрицательными отклонениями фактических результатов от желаемых с точки зрения его исследования в рамках контаминационного подхода. обобщение и сравнительный анализ результатов исследования сущности понимания кризиса авторами зарубежных источников и постсоветского пространства позволил определить, что зарубежными учеными при изучении кризиса рассматривается как сама компания, так и ее стейкхолдеры. в работах же авторов постсоветского пространства стейкхолдеры либо вообще не рассматриваются, либо рассматриваются очень усечено. исходя из указанного, актуализируется необходимость рассмотрения не только компании, а и ее стейкхолдеров при изучении кризиса на примере украинских компаний. в настоящее время некоторые ученые постсоветского пространства при классификации кризисов используют понятия – вид и тип (artiukh-pasiuta, 2014; kovalenko, suhaniaka, & fuchedzhy, 2013; pronoza, 2014; tkachenko & kaliuzhna, 2013; topij & kondrat, 2013; vasylenko, 2013; yankovskyj, makohon & riabchyn, 2009). это приводит к обособленному рассмотрению классификации видов кризиса и их типологии. более того, некоторые ученые используют указанные понятия параллельно и, например, baltic journal of economic studies 50 vol. 2, no. 5, 2016 при разработке собственной типизации кризиса в конечном итоге рассматривают его виды (artiukhpasiuta, 2014). поддерживаем точку зрения, согласно которой термины «вид» и «тип» по отношению к кризису целесообразно разделить. считаем необходимым дифференцировать понятия «тип» и «вид» кризиса по критериям характеристики внутренних, и соответственно, внешних последствий. принимаем, что вид кризиса характеризует внутренние последствия, которые определяют, с одной стороны, комплексное изменение результата деятельности компании, а с другой – результаты собственника в части сохранения (потери) его корпоративных прав. в соответствии с этим основными видами кризиса выделяем следующие: финансовый, экономический, социальный, экологический, репутационный и корпоративный. по нашему мнению предложенная классификация позволит разработать иерархию видов кризиса, показателей оценки степени тяжести каждого из видов кризиса и, в конечном итоге, оценить степень тяжести кризиса компании на основе комплексного показателя. все остальные кризисы предлагаем определять как тип кризиса. установлено, что тип кризиса, с одной стороны, характеризуется дополнительными эффектами у внешних стейкхолдеров, а с другой – является описательным. 3. особенности протекания кризиса украинских компаний особое значение приобретают исследования, связанные с изучением циклов кризиса, которые дают возможность определить момент времени возобновления эффективной работы компании. проведены исследования развития украинской экономики. выявлено, что возникновение, протекание и выход из кризиса для многих украинских компаний имеет свои особенности. для всех украинских компаний общей характерной особенностью является одновременное влияние на их развитие мировых и отраслевых кризисов вместе с определенными политическими проблемами различных масштабов. исследованы особенности, а также симптомы, факторы и причины кризисов украинских компаний в 1991-2015 гг. выявлено, что за исследуемый период в украине произошло четыре крупномасштабных кризиса, которые являются антропогенными, а также имеют различную степень тяжести. установлено, что протекающие в украине кризисы можно разделить на две группы: 1. кризисы, вызванные политическими явлениями (1991-1994 гг., 2014-2015 гг.). 2. кризисы, которые протекают по классическому сценарию (1998-1999 гг., 2008-2009 гг.) подытожено, что наиболее тяжелым и затяжным кризисом для украинских компаний, не имеющим ранее аналогов, явился кризис 2014-2015 гг. выявлено, что основной его причиной стал конфликт экономических, политических и гражданских интересов как внутри страны, так и за ее пределами. а  фактором  – отсутствие четкой позиции руководства страны относительно «западного» или «восточного» выбора, диктатура и коррупция власти, а также глубочайший политический кризис страны, в результате которого украина потеряла ар крым, вследствие его аннексии, вошла в военный конфликт на востоке украины (в донецкой и луганской областях), а также понесла существенный экономический урон. кроме того, на существующую нестабильную экономическую ситуацию наслоилась неблагоприятная конъюнктура на внешних рынках и торговые ограничения со стороны российской федерации. выявлено, что наслоение глубокого политического кризиса, приведшего к потере территориальной целостности украины, на не окрепшую от предыдущего кризиса экономику страны, вызвало цепную реакцию дисбаланса всех макроэкономических показателей и привело к затяжному упадку. определено, что в период текущего кризиса особое значение имеют взаимоотношения внутренних стейкхолдеров (собственников, топ-менеджеров и персонала компании). особенность протекания текущего кризиса в украинских компаний состоит в следующем: при наличии политической нестабильности, всевозможных выступлений против власти или отдельных групп политиков наблюдается отсутствие забастовок, направленных против руководства и собственников компании, сплочение работников вокруг мажоритарных собственников для удовлетворения общих интересов – сохранения компании в период кризиса. в связи с эти обосновано, что с точки зрения компании кризис должен оцениваться исходя из интересов мажоритарного собственника, который принимает конечное решение относительно функционирования компании, является гарантом социальной защищенности персонала и сохранения рабочих мест. констатировано, что кризисы в украине характеризуются высокой степенью убыточности компаний, большим количеством обанкротившихся и ликвидированных предприятий. по нашему мнению ликвидация не обязательно должна быть связана с изменением юридического статуса компании. считаем, что отдельно необходимо рассматривать юридическую, регламентированную хозяйственным кодексом украины, и экономическую ликвидации компании. последнюю целесообразно разделять на принудительную ликвидацию бизнеса; снижение результатов работы компании, его собственных активов до нуля. отдельно следует рассматривать квази-ликвидацию baltic journal of economic studies 51 vol. 2, no. 5, 2016 компании, как изменение ее юридического статуса вследствие факта ее ликвидации, после которой интересы главных внутренних стейкхолдеров компании сохранены и не пострадали. 4. оценка степени тяжести кризиса украинских компаний проведенный обзор научной литературы позволил установить отсутствие единого подхода к оценке кризиса компании, так как при этом применяются различные градации: этапы, степени, фазы, масштабы, глубина кризиса и т. д (kovalenko, suhaniaka, & fuchedzhy, 2013; pronoza, 2014; tkachenko & kaliuzhna, 2013; vasylenko, 2013; yankovskyj, makohon & riabchyn, 2009). разделяем мнение тех авторов, которые оценивают степень тяжести кризиса компании. однако при этом авторами таких работ не определяется сущность данного понятия. предлагаем под «степенью тяжести кризиса» понимать сравнительную величину, установленную на основании совокупности симптомов, причин и факторов кризиса, и характеризующую состояние компании на оцениваемый момент времени отсутствием либо наличием кризиса, интенсивностью его протекания и возможными последствиями. считаем целесообразным применение пятиуровневой градации степени тяжести кризиса, а именно: отсутствие кризиса, легкая, средняя, тяжелая, критическая степени тяжести кризиса. полагаем, что предложенная градация интуитивно понятна всем группам стейкхолдеров, вовлеченным в процесс антикризисного менеджмента и наиболее полно характеризует состояние компании с точки зрения возможных антикризисных мероприятий. по нашему мнению критическая степень тяжести кризиса должна диагностироваться в случае банкротства компании с ее последующей ликвидацией, потери бизнеса мажоритарными собственниками, насильственной остановки бизнеса. считаем целесообразным применение трехуровневой иерархической структуры видов кризиса компании. при этом на низшем уровне иерархии располагаются такие виды кризиса как финансовый, экономический, социальный и экологический. на следующем уровне данные виды интегрируются в финансово-экономический и социально-экологический. на первом уровне иерархии финансово-экономический и социально-экологический формируют кризис результатов деятельности. на этом же уровне иерархии расположен и корпоративный кризис, который является автономным от других видов кризиса. предложено степень тяжести видов кризиса низшего уровня иерархии определять по ряду показателей, а высших уровней иерархии – путем последовательной интеграции с превалированием интересов мажоритарных собственников. кроме того, при определении степени тяжести кризиса высшего уровня иерархии считаем целесообразным интегрировать степени тяжести кризиса по каждой его составляющей, основываясь на законах элементарной экономической логики с помощью применения матриц парного сравнения. при этом матрицу сравнения степеней тяжести кризиса предложено формировать путем соединения двух показателей оценки кризиса нижнего уровня иерархии, что позволяет ранжировать сравниваемые объекты в двухмерном пространстве. использование трех и более параметров не исключается, но значительно усложняет процесс оценки. рекомендовано степень тяжести финансового, экономического, социального, экологического кризиса определять путем сопоставления текущих значений оценочных показателей с их базовыми значениями. в качестве базовых необходимо использовать значения докризисного периода. по нашему мнению показатели, характеризующие интересы мажоритарных собственников, являются основополагающими для оценки степени тяжести экономического и финансового кризиса. так, по финансовому кризису это вероятность банкротства; по экономическому – стоимость компании, величина собственного капитала и результирующего денежного потока. с целью прогнозирования банкротства украинских компаний разработана экономико-математическая четырехфакторная модель. преимуществом данной модели, в сравнении с традиционными, является то, что она позволяет определить как вероятность вхождения в процедуру банкротства, так и вероятность ликвидации компании. считаем, что на базе выбранной стратегии и с учетом степени тяжести кризиса компании должен формироваться соответствующий набор тактических мероприятий, определяемых с учетом ограничения на максимально возможный период времени их выполнения. 5. антикризисное управление компанией в результате проведенного исследования определены максимальные периоды времени, в течение которого возможно проводить антикризисные мероприятия. рассмотрено две ситуации: когда компания уже вошла в процедуру банкротства и когда компания еще не вошла в нее, но имеется вероятность такого вхождения. для каждой ситуации предложен алгоритм определения данного периода времени. установлено, что состояние исследуемых компаний характеризуется критической степенью кризиса и максимально возможная величина времени, в течение которого может осуществляться антикризисное управление, составляет не более, чем 3 месяца. baltic journal of economic studies 52 vol. 2, no. 5, 2016 считаем, что управление компанией в кризисе должно основываться на выборе антикризисной стратегии компании с учетом предпосылок цикличности экономической динамики, выраженной эффектом жизненного цикла, и бизнес-циклов рынка/ отрасли. указанное позволяет обосновать наиболее эффективную стратегию компании, использующую потенциал развития рынка, и сформировать на ее основе целесообразный набор альтернатив, который включает следующие варианты: ликвидация компании, выживание с консервацией бизнеса, выживание без консервации, рост. с целью предотвращения негативных действий со стороны кредиторов целесообразно создать из них экспертный комитет при собрании акционеров, и предоставить ему наряду с мажоритарными акционерами полномочия «негатив-контроля» по наиболее значимым операциям хозяйственной деятельности компании. рассмотрены два варианта продажи части доли уставного фонда кредиторов, а именно: когда рыночная стоимость больше стоимости требований, которые должны быть выкуплены акционерами в обмен на акции (доли в корпоративном фонде) предлагаемые кредиторам, и наоборот. для каждого из этих вариантов предложены условия перехода соответствующей величины обязательств к действующим акционерам. с учетом функций экспертного комитета разработана матрица разделения полномочий между ним, акционерами, наблюдательным советом и менеджментом компании. использованы следующие типы управленческих решений: утверждение решений в рамках «негатив-контроля», их принятие и согласование. предлагаем все значимые события в деятельности компании утверждать мажоритарным акционерам и экспертному комитету. разработаны модели оценки целесообразности решений, принимаемых аффилированными кредиторами в процессе банкротства компании относительно ее ликвидации. рассмотрен вариант, когда при выработке критериев принятия решений учитываются только экономические мотивы и, соответственно, вариант, когда им априори необходимо принять решение о покупке целостного имущественного комплекса путем приобретения долгов кредиторов с сохранением компании или путем выкупа активов на открытых торгах при ее ликвидации. предложена методика распределения ресурсов между различными объектами инвестирования, направляемых инвестором на выкуп требований интересующих их компаний в процессе банкротства последних. в качестве целевой функции предложено установить максимум величины z по модели г. спрингейта, которая взвешена по стоимости компании, так как при банкротстве крупных компаний потери существенно выше, чем при банкротстве малых. разработан алгоритм оптимизации при наличии ограничения по величине инвестиционных ресурсов. аналогичным образом может решаться задача, когда установлено ограничение не по величине инвестиционных ресурсов, а по минимально допустимым критическим значениям показателя z по каждой компании – объекту инвестирования. апробация предложенного методического подхода относительно распределения инвестиционных ресурсов осуществлена на примере судостроительных компаний: пао «черноморский судостроительный завод», оао «херсонский судостроительный завод» и пао «николаевский судостроительный завод океан». выявлено, что для достижения пао «черноморский судостроительный завод» легкой степени тяжести кризиса необходимо инвестировать в него 150  млн. грн, а пао «херсонский судостроительный завод» – 350 млн. грн. 6. выводы для более корректного исследования всего комплекса кризисных явлений рассмотрены характеристики уже прошедших в украине кризисов и определены особенности настоящего кризиса по причинам его возникновения, по последствиям, по масштабу проявлений, а также по роли стейкхолдеров в процессе его протекания. проблема отсутствия комплексного исследования оценки степени тяжести кризиса украинский компаний с учетом особенностей ведения хозяйственной деятельности в настоящем периоде, обусловила необходимость определения номенклатуры показателей степени тяжести кризиса, методики их оценки, а также агрегирования. для проведения последнего разработана иерархия показателей оценки степени тяжести кризиса, и на ее основе обеспечено их последовательное агрегирование с использованием матричного метода. украинские компании неоднородны, наряду с компаниями-гигантами существуют относительно крупные, средние и малые компании. вследствие их неоднородности установлено, что оценку степени тяжести кризиса необходимо проводить для каждой из этих групп компаний. конечной целью проводимых в работе исследований являлось определение антикризисных мероприятий в украинских компаниях на современном этапе. в связи с этим острой проблемой является определение особенностей стратегического и, соответственно, тактического антикризисного управления, а также разработка антикризисных инструментов в системе корпоративного управления украинских компаний. основой последнего, по нашему мнению, являться определение условий вовлечения кредиторов в управление компаниями совместно с их собственниками. для этой цели разработана матрица разделения полномочий между кредиторами, собственниками и менеджментом компаний. baltic journal of economic studies 53 vol. 2, no. 5, 2016 references artiukh–pasiuta, o. 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(2009), ynnovatsyonnye y klassycheskye teoryy katastrof y ekonomycheskykh kryzysov [innovative and classical theories of catastrophes and economic crises] donnu, donetsk, ukraine. владимир нусинов оценка степени тяжести кризиса украинских компаний и разработка мероприятий по его устранению аннотация. функционирование рыночной системы повсеместно сопровождается кризисными явлениями. невозможно себе представить развитие современной экономики без экономических подъемов и спадов, в результате которых нарушается экономическая стабильность, а субъекты хозяйствования вступают в определенный дисбаланс. не исключением является развитие кризиса и в компаниях украины. возникновение и протекание кризиса в украинских компаниях требует глубокого научного изучения современной экономической теорией и практикой, поскольку его можно считать определенным феноменом, имеющим существенные отличительные особенности в сравнении с кризисами компаний других стран. проявление кризиса может выражаться в спаде производства, ухудшении экономических показателей, финансовой несостоятельности компании, иметь другие симптомы, характеризующие его наличие, а также оцениваться различной степенью тяжести. несмотря на то, что привело украинскую компанию к кризису, насколько он был тяжелым и какими симптомами проявился, основной целью компании в состоянии полной кризисной неопределённости является «выживание» на рынке и продолжение дальнейшего функционирования. проблематика оценки степени тяжести кризиса и определения мер его устранения в украинских компаниях исключительно важна и еще недостаточно разработана. это обусловлено тем, что, во-первых, в экономической науке еще недостаточно изучена сущность кризиса, его видов и методологии оценки с учетом современных украинских реалий. во-вторых, возникновение кризисов в украине – частое явление, их протекание является достаточно тяжелым и затяжным, а также имеет свои особенности, зависящие от формирования украинской экономической и политической систем, исторически сложившегося социально-экономического развития baltic journal of economic studies 54 vol. 2, no. 5, 2016 государства, влияния внешних макроэкономических факторов. эти моменты необходимо учитывать при разработке научно-обоснованной, эффективной системы антикризисных решений для украинских компаний. объектом исследования является процесс изучения кризисных явлений и формирование на его основе антикризисных мероприятий в украинских компаниях. предмет исследования – совокупность теоретических, методических и практических аспектов усовершенствования оценки степени тяжести кризиса украинских компаний и раз-работки соответствующих антикризисных решений. методологической основой данного исследования является диалектический метод познания, системный и исторический подходы к изучению проблемных вопросов, фундаментальные положения экономической теории и теории антикризисного управления. применены следующие методы исследования: логического обобщения, системно-структурного анализа, сравнения, статистический, выявления причинно-следственных связей, матричный, рейтинговый, экспертный и др. целью исследования является усовершенствование оценки степени тяжести кризиса украинских компаний и разработка соответствующих антикризисных решений. в связи с этим острой проблемой является определение особенностей стратегического и соответственно тактического антикризисного управления, а также разработка антикризисных инструментов в системе корпоративного управления украинских компаний. полученные результаты исследования определяют необходимую методическую основу для усовершенствования оценки степени тяжести кризиса украинских компаний и разработки соответствующих антикризисных решений. теоретические, методические и научноприкладные результаты исследования использованы в процессе антикризисного управления компаний горно-металлургического комплекса, судостроения и машиностроения украины. baltic journal of economic studies 1 vol. 8 no. 3, 2022 doi: https://doi.org/10.30525/2256-0742/2022-8-3-1-6 michał kalecki’s scientific legacy as a model for understanding contemporary crises andrzej pawlik1 abstract. recurring crises slowing down economic activities and the resulting consequences paint the picture of modern economies. therefore, it seems justified to draw on the achievements of economics with a view to explaining the causes of socio-economic crises. the article uses a descriptive method. the objective of the article is to understand the substance of the phenomenon; therefore, the author seeks certain analogies in the past and refers to the work of the polish scholar michał kalecki. the basic conclusion of the article is: j.m. keynes built a new macroeconomic theory based on the fundamental proposition that manufacturers’ supply (the levels of national income and employment) depended on aggregate demand. in the mid-1930s, a similar thought was formulated by poland’s most eminent economist, michał kalecki. he constructed his business cycle model based on the aforementioned fundamental proposition. it meant that profits and national income were determined by effective investor and consumer demand. j.m. keynes’s and m. kalecki’s stressing the pivotal role of aggregate demand was a revolution in economic thinking. it should be noted that the covid-19 pandemic is not merely a short-term change in economic activity. as predicted by various international institutions, it will have a lasting impact on the functioning of the global economy. key words: michał kalecki, demand, crisis, national income, business cycle, pandemic. jel classification: b20, e60 1. introduction an ongoing debate among economists concerns various terms that attempt to capture the essence of a pandemic as an economic problem. the worldwide spread of the new coronavirus fits the definition of an external shock described in the economic literature. as j. hausner notes, the current situation was largely an administrative shock, not a purely economic one (hausner, 2020). this observation is confirmed in the context of data showing that in mid-april 2020, countries that have imposed blockades represented more than 50% of global gdp (the economist, 2020). a. wojtyna (wojtyna, 2020) proposes the following definition of the current crisis: "it is an acute economic slowdown, varying across sectors, in response to a strong and poorly recognised epidemic shock and the administrative decisions resulting therefrom" [rendered into english by the translator]. furthermore, he notes that although the initial shock itself was non-economic in nature, the secondary shocks it caused were "quite typical economic shocks: concerning demand, prices, supply, and financial issues" [translated into english by the translator]. therefore, it seems justified to turn to the achievements of economics to explain the causes of socio-economic crises. the purpose of the article is to understand the essence of the phenomenon, so the author is looking for certain analogies in the past and refers to the works of the polish scientist michael kalecki. 2. the short story of a rich life although he passed away almost 50 years ago, michal kalecki's name is becoming increasingly popular among economists looking for a way out of the crisis caused by the covid-19 pandemic in 2020. michal kalecki was born in łódź on june 22, 1899, and died in warsaw on april 18, 1970. his biography contains a number of important events. in 1910 he began attending the 1st government eighth-grade philological high school in łódź. in 1917, after graduating from ignacy skorupka middle school, he enrolled in the warsaw polytechnic and then transferred to the mathematics department of the university of warsaw. his further studies were interrupted by military service in the polish army as a soldier in the polishsoviet war. in 1921 he transferred to the gdańsk polytechnic. however, since his father lost his this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 jan kochanowski university of kielce, poland (corresponding author) e-mail: andrzej.pawlik@ujk.edu.pl orcid: https://orcid.org/0000-0003-2319-6707 baltic journal of economic studies 2 vol. 8 no. 3, 2022 livelihood in 1925, he was forced to return to łódź to support his family. he made his living by giving private lessons and doing occasional part-time jobs, such as for a business intelligence information provider. he founded the journal koniunktura włókiennicza [‘the textile market situation’, rendered into english by the translator], with only one issue published. in 1927 he moved to warsaw. he performed design calculations for the ceilings of the polish army museum, patented his solution for a reinforced concrete ceiling with two slabs, and was a promising construction specialist. at the same time, he independently studied the works of various economists and began to collaborate with specialized journals: przegląd gospodarczy [‘the economic review’] and przemysł i handel [‘industry and commerce’]. from 1929–1936, he worked as a cartel and concern clerk at the institute for business cycle and price research (instytut badania koniunktur gospodarczych i cen) in warsaw, collaborated with edward lipiński, and worked on national income estimates in poland. in 1930 he married adele sternfeld, an activist of the international red aid. "kalecki was a self-taught economist. he completed no university programme in economics; as a matter of fact, he had no university degree at all. he enrolled in a technological university programme, but he dropped out to support himself and his father, who had lost his small spinning mill" (osiatyński, 2015; osiatyński, 2019) [rendered into english by the translator] in 1936 he received a scholarship from the rockefeller foundation and went to sweden, norway, and england. in 1936–1938 he worked at the london school of economics and as an assistant in the economics department of cambridge university. after the outbreak of world war ii, he worked at the oxford institute of statistics; his research into british war economics paved the way for him to become the intellectual leader of a group of left-wing economists. from 1945–1955 he worked at the ilo in montreal, from 1946 in the department of economic and social affairs of the un secretariat, as deputy director of one of its divisions and an economic expert for the governments of several countries, such as israel (1951), mexico, india (1959–1960), cuba (1961). attempts to restrict and censor his statements forced him to resign. after his return to poland in 1955, he performed the following functions: 1955–1957: economic advisor to the planning committee under the office of the council of ministers; 1955–1961: head of the department of economics of modern capitalism and full professor (1956) at the institute of economics of the polish academy of sciences; 1957–1960: president of the main committee for long-term planning; 1957–1963: deputy chairman of the economic council under the council of ministers; 1958: corresponding member of the polish academy of sciences; 1961–1968: president of the committee for social research in the polish people's republic at the polish academy of sciences; 1961–1969: professor at the central school of planning and statistics (now: warsaw school of economics), department of political economy, faculty of foreign trade; 1962–1968: president of the scientific council of the interuniversity institute for economic problems of underdeveloped countries of the central school of planning and statistics and the university of warsaw; 1964: a doctor honoris causa of the university of warsaw; 1965: a doctor honoris causa of the wrocław university of economics; 1966: the winner of the state prize of the 1st degree, for his work entitled zarys teorii wzrostu gospodarki socjalistycznej (‘introduction to the theory of growth in a socialist economy’); 1967: the winner of the oskar lange prize awarded by the polish economic society. he created a research community called the warsaw school. in 1968, as a result of an anti-semitic, pseudoscientific campaign against this community and against him personally, he left his posts and took early retirement. he left an enormous scientific legacy and many writings; those in the polish language include [the titles in square brackets rendered into english by the translator]: – próba teorii koniunktury (‘an essay on the theory of the business cycle’), 1933; – szacunek dochodu społecznego w roku 1929 [‘an estimate of social income in 1929’], co-authored with ludwik landau, 1934; – dochód społeczny w roku 1933 i podstawy badań periodycznych nad zmianami dochodu [‘social income in 1933 and the basis of periodical studies into income change’], co-authored with landau, 1935; – teoria cyklu koniunkturalnego (‘a theory of the business cycle’), 1935; – płace nominalne i realne [‘nominal and real wages’], 1939; – teoria dynamiki gospodarczej (‘theory of economic dynamics’), 1958; – zagadnienia finansowania rozwoju ekonomicznego [‘the financing of economic development’], in: problemy wzrostu ekonomicznych krajów słabo rozwiniętych [‘the economic growth problems faced by underdeveloped countries’], ignacy sachs, jerzy zdanowicz (eds.), 1959; – uogólnienie wzoru efektywności inwestycji [‘the generalisation of the investment efficiency formula’], co-authored with mieczysław rakowski, 1959; baltic journal of economic studies 3 vol. 8 no. 3, 2022 – polityczne aspekty pełnego zatrudnienia (‘political aspects of full employment’), 1961; – o podstawowych zasadach planowania wieloletniego (osiatyński, 1982) [‘on the main principles of multiannual planning’], 1963; – zarys teorii wzrostu gospodarki socjalistycznej (‘introduction to the theory of growth in a socialist economy’), 1963; – model ekonomiczny a materialistyczne pojmowanie dziejów [‘an economic model and the materialist conception of history’], 1964. he is the author of many articles and papers in english: – mr keynes’s predictions, przegląd socjalistyczny, 1932; – an essay on the theory of the business cycle, 1933; – on foreign trade and domestic exports, ekonomista, 1933; – essai d'une theorie du mouvement cyclique des affaires, revue d’economie politique, 1935; – a macrodynamic theory of business cycles, econometrica, 1935; – the mechanism of business upswing (el mecanismo del auge económico), polska gospodarcza, 1935; – business upswing and the balance of payments (el auge económico y la balanza de pagos), polska gospodarcza, 1935; – some remarks on keynes’s theory, ekonomista, 1936; – a theory of the business cycle, review of economic studies, 1937; – a theory of commodity, income and capital taxation, economic journal, 1937; – the principle of increasing risk, económica, 1937; – the determinants of distribution of the national income, econometrica, 1938; – essays in the theory of economic fluctuations, 1939; – a theory of profits, economic journal, 1942; – economic implications of the beveridge plan (1943); – theory of economic dynamics: an essay on cyclical and long-run changes in capitalist economy, 1954; – studies in the theory of business cycles, 1933–1939, 1966; – trend and the business cycle, economic journal, 1968; – class struggle and the distribution of national income (lucha de clases y distribución del ingreso), kyklos 1971; – selected essays on the dynamics of the capitalist economy, 1933–1970, 1971. michał kalecki took his place in the history of economic theory as the author of the work entitled próba teorii koniunktury (‘an essay on the theory of the business cycle’), published in 1933. m. kalecki was mainly concerned with the study and explanation of the necessary relationships existing between the rate of economic growth, the return on capital and the rate of investment, on the one hand, and between the capital-labor ratio, the productivity of labor and the capital intensity of national income, on the other. combining these two lines of analysis and showing the different trends and types of technological progress, he examined the regularities determining the acceleration of growth under both labor reserves and full employment. very importantly, he distinguished between direct and indirect factors of growth, and – within the framework of the latter – distinguished non-investment factors. m. kalecki also noted the need to distinguish between the means of increasing national income, mainly productive investment, and the purpose of its creation, that is, non-productive investment, together with collective and individual consumption. therefore, he viewed the growth process in terms of the relationship between the level of consumption and the level of investment. for the same reasons, with regard to non-investment factors, he attached great importance to various improvements in the organization of labor, management of material resources, etc. m. kalecki also conceptualised barriers to economic growth and pictured the necessary effects of neglecting them (kalecki, 1963). 3. the effective demand theory michał kalecki was one of the first economists in the world, perhaps even the very first to make a fundamental observation: he noted that wages are a very important component of demand, not just the cost of production (toporowski, 2013; toporowski, 2018). in fact, this is the most important component, because wage earners tend to spend almost all of their income, while entrepreneurs are characterized by a much greater propensity to save. therefore, a decrease in wages will entail a decrease in demand. this, in turn, means that most of the company 's profits will remain only on paper. to make a profit, production alone is not enough – the firm must also sell its products. therefore, lower wages will mean higher inventories, or frozen assets, rather than higher profits. an economy in distress will suffer even greater shocks because it will use less of its potential. according to kalecki's observations, economies grow rapidly and unemployment declines when capitalists invest heavily. they make investments where they see such projects as profitable, or see opportunities to sell their goods. kalecki argued that wage earners spend as much as they earn, while capitalists spend as much as they spend. aggregate demand grows if workers earn and spend more, and capitalists spend more – on consumption and investment. in such a situation, capitalists' profits rise as well. an individual capitalist can also increase his profits by reducing wages, but this is not a recipe for all capitalists. on the contrary, lower wages lead to baltic journal of economic studies 4 vol. 8 no. 3, 2022 lower demand and lower profits. a capitalist can allocate his profits to investment, consumption, or savings if he refrains from investment. the more capitalists save, the deeper the crisis, the sharper the drop in their profits and the rise in unemployment. why aren't they investing? because previous investments have created productive assets that can no longer be fully utilized because there is insufficient demand for the goods in question. returns on investment are declining, and capitalists prefer to save part of their profits rather than spend them. according to kalecki, this is a typical paradox of the capitalist system. the expansion of production capacity, and thus the enrichment of the population, heralds a future crisis. effective demand, or the economy 's ability to sell the goods and services it produces, is limited by savings. kalecki disproves the common notion that people get richer through savings and labor. this is only justified for the individual capitalist, not for the entire social class. he built his model of the business cycle on the fundamental premise that "capitalists earn as much as they spend on investment and luxury consumption, while wage earners spend as much as they earn" (dach, szopa, 2004) [rendered into english by the translator]. it meant that profits and national income were determined by effective investor and consumer demand. this meant that profits and national income were determined by the effective demand of investors and consumers. kalecki's emphasis on the key role of aggregate demand was a revolution in economic thought (kalecki, 1962). according to kalecki, increased profits do not drive investments; instead, they are determined by the demand for products to be produced by such investment projects. enterprises prefer to expand their production capacity where they see adequate market demand among customers with the appropriate purchasing power. therefore, wage cuts will only exacerbate any economic downturn. first, the increase in profits will not be as significant as it may seem, since most of it will remain on paper. second, businesses will not be inclined to invest when faced with a lack of demand for their goods. kalecki rejected the assumption that savings (or accumulated profit) begets investment. in his view, the opposite is true: investment generates savings (or profit). most investments are financed by loans or bonds, not by accumulated profits. savings are not a prerequisite for investment – a prerequisite is demand for the products produced with such investment. therefore, wage cuts in a crisis are a ready recipe for plunging the economy into a prolonged recession. if demand falls, businesses lose motivation to increase production and employment; rather, they may even reduce these parameters, assuming poor prospects for the future (osiatyński, 2013). 4. wages as a share of national income stable economic development requires an appropriate share of wages in national income. kalecki attached great importance to the distribution of national income between wages and profits. he viewed the share of profits in national income as a degree of monopolization. enterprises with a dominant market position can impose higher markups on their products or dictate higher prices. thus, the share of profits in national income increases, but prices rise relative to wages. hence, wage earners can buy less, hence demand declines. since wage earners spend most of their income, while businessmen save most of their income, an increase in business profits will not create enough demand to compensate for the declining purchasing power of wage earners. therefore, an appropriate share of wages in national income is necessary for stable economic development. as kalecki pointed out, an increase in demand leads to an increase in supply, not an increase in prices. critics of this approach often argue that artificially stimulated demand should lead to higher prices. therefore, wage earners would gain nothing from higher wages or from an increase in the share of wages in gdp, since their purchasing power would remain unchanged. because of rising prices, real wages will remain at the same level, even if nominal wages rise. in a competitive economy, businesses will not seek to increase their profits by raising prices, for they will be afraid of losing their customers. if they are faced with price increases, they will respond by expanding production to multiply profits by increasing sales. since an increase in production increases employment, an increase in demand can lead to an increase in employment. as a rule, only primary agricultural products respond to increased demand by increasing prices, because it is impossible to increase their supply in the short term – agricultural production takes time. higher demand can also contribute to higher prices if production capacity is fully utilized or if businesses fail to increase supply. but this can only happen under conditions of full employment, which was not the case in the 1930s, when kalecki presented his theories. michał kalecki's approach to budget deficits was also revolutionary. for classical economists, government spending was a necessary evil, while budget deficits were considered the supreme evil. kalecki viewed deficits as the most important instrument of official power. according to classical theory, government spending can eliminate private investment; according to the polish economist, it can even stimulate it. if the economy faces a demand barrier, it does not necessarily plunge into crisis, but the growth rate is below potential. debt financed government spending could push up baltic journal of economic studies 5 vol. 8 no. 3, 2022 domestic demand by replacing frozen assets (e.g., unused savings). if the government announced a public works program that employed the unemployed, it added the wages of such workers to domestic demand. in addition, when an expansion of government procurement was announced, it encouraged businesses to increase their capacity (investment, employment) in order to be able to fulfill such government contracts. in kalecki's conception, the budget deficit is not a necessary evil; on the contrary, it is a very practical tool for replenishing domestic demand in order to stimulate investment and growth. unfortunately, during the 2008 crisis, european policymakers took a different tack: they imposed strict requirements on southern eu member states to cut government spending and limit social services and benefits to reduce the deficit, which only worsened the situation for these countries suffering from the effects of declining domestic demand. the european debt crisis was undoubtedly a time of triumph for one forgotten man, michał kalecki. during the economic downturn, his work was cited by economists from around the world, including nobel prize laureate paul krugman. julio lópez and michael assous wrote a book about kalecki (lopez, assous, 2010/2011). first of all, however, his thought was confirmed by the events that took place in southern europe after 2008. 5. the theory of the business cycle the theory is primarily the basis for analysing the business cycle and economic dynamics, but it also contains the mechanism of the khan–keynes multiplier and the classical theory of employment known from ‘the general theory of employment, interest and money’ by keynes. it was also the basis for economic intervention and full employment policies, which contributed enormously to the practical application of the theory. in the 1930s it showed the way out of the u.s. crisis of 1929–1933. in germany it served as the basis for policies already pursued by the government. it also helped the united kingdom finance wartime spending with relatively limited inflation during world war ii. after the war it became the basis for nearly 25 years of prosperity in western europe and many other advanced economies. scholars widely discussed and appreciated kalecki’s ‘theory of economic dynamics’ (teoria dynamiki gospodarczej) and ‘political aspects of full employment’ (polityczne aspekty pełnego zatrudnienia), presenting the political mechanism of the business cycle. together with l. landau, kalecki engaged in pioneering work in estimating the levels of investment, consumption and national income in poland, especially in szacunek dochodu społecznego w roku 1929 [‘an estimate of social income in 1929’], probably the world’s first attempt to break down national income by social class. 6. conclusions until the late 1920s, the national economy as a whole was not a subject of scientific research. with the emergence of deep economic crises and mass unemployment in the 1930s, economic theory took up macroeconomic problems in order to explain the causes of such phenomena, mitigate their effects, and develop ways to solve them. however, it required an essential shift in thinking about the functioning of national economies. first of all, scholars needed to reject the thesis prevailing in economic theory from the beginning of the 19th century and stating that producers’ supply determined the level of aggregate demand, thus making general over-production impossible. j.m. keynes built a new macroeconomic theory based on the fundamental proposition that manufacturers’ supply (the levels of national income and employment) depended on aggregate demand. in the mid-1930s, a similar thought was formulated by poland’s most eminent economist, michał kalecki. he built his model of the business cycle on the aforementioned fundamental supply. this meant that profits and national income were determined by the effective demand of investors and consumers. that j.m. keynes and m. kalecki emphasized the key role of aggregate demand was a revolution in economic thinking. although they conducted their research in different countries, after becoming acquainted with each other's work, j.m. keynes and m. kalecki became friends and authored changes in the way national economies functioned. to this day, economists wonder which of them first developed the conceptual model. the distinguishing feature of the current crisis is the special form of the initial shock. the economic history of the world has known several events of similar origin (such as the crisis of 1929–1932, analysed by m. kalecki). the ongoing discussion most frequently refers to the spanish flu pandemic from the early 20th century. the significance of the new coronavirus pandemic for the functioning of the world economy cannot be overstated. discussions have emphasized that the pandemic has led to a decrease in demand and consumption, which constitutes a negative demand shock. since the pandemic shock disrupted business operations, it should also be seen as a negative supply shock. it should be noted that the covid-19 pandemic is not merely a short-term change in economic activity. various international institutions predict that it will have a long-term impact on the functioning of the global economy. there are voices emphasizing baltic journal of economic studies 6 vol. 8 no. 3, 2022 that the coronavirus crisis has been a catalyst for processes such as digitization and robotization. an important development in the labor market has been the spread of remote work. another important aspect may be the long-term change in payment habits in societies around the world, as millions of people have switched from cash to non-cash payments. references: dach, z., & szopa, b. (2004). podstawy makroekonomii (eds.), pte, kraków. hausner, j. (2020). kiedy i jak gospodarka będzie odradzała się po pandemii? an interview for ergohestia in the series entitled w trosce o wspólne bezpieczeństwo. kalecki, m. (1962). prace z teorii koniunktury, warszawa. kalecki, m. (1963). zarys teorii wzrostu gospodarki socjalistycznej, pwn, warszawa. kalecki, m. (1966). tempo wzrostu gospodarki socjalistycznej w warunkach nieograniczonej podaży siły roboczej a kapitałochłonność, ekonomista, no. 6. j.g. lopez, & m. assous (2010/2011). michal kalecki, palgrave, basingstoke 2010; polish translation: michał kalecki – wielcy myśliciele, pte, warszawa, 2011. osiatyński, j. (1982). michała kaleckiego perspektywiczny plan rozwoju gospodarki polski, ekonomista, no. 3–4. osiatyński, j. (2013). michał kalecki podpowiada światu, jak wyjść z kryzysu, rafał woś’s interview with jerzy osiatyński, 28 june. osiatyński, j. (2015). ekonomia michała kaleckiego, in: m. kalecki, kapitalizm – dynamika gospodarcza i pełne zatrudnienie, iton society, warszawa, pp. 7–82. osiatyński, j. (2019). spory o mikroekonomiczne podstawy makroekonomii po kaleckim i keynesie, in: kwarciński t., wincewicz-price a. (eds.), metaekonomia ii. perspektywa makroekonomiczna, copernicus center press, kraków. osiatyński, j. (2019). kazimierz laski’s lectures in macroeconomics under financial capitalism, european journal of economics and economic policies: intervention, no. 16(3), pp. 302–317. the economist (2020). the coronavirus crisis will change the world of commerce, 8 april. toporowski, j. (2013). michał kalecki: an intellectual biography, volume 1: rendezvous in cambridge 1899–1939, palgrave macmillan, houndmills. toporowski, j. (2018). michał kalecki: an intellectual biography, volume 2: by intellect alone 1939–1970, palgrave macmillan, houndmills. wojtyna, a. (2020). o niektórych próbach zrozumienia istoty i skutków obecnego kryzysu, biuletyn pte, no. 3(90), august. received on: 11th of july, 2022 accepted on: 21th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 203 vol. 7 no. 3, 2021 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: v4alaya@gmail.com orcid: https://orcid.org/0000-0002-2233-2335 2 prydniprovska state academy of civil engineering and architecture, ukraine. e-mail: juliaorlov@ukr.net orcid: https://orcid.org/0000-0002-5915-4261 doi: https://doi.org/10.30525/2256-0742/2021-7-3-203-208 green economy development: methodological approach veronika chala1, yuliia orlovska2 abstract. the subject of this study is the principles, factors and features of the green economy as a complex multicomponent system. it was important to clarify the ontology of the term “development” and to propose a methodology for filling the meaning of this term with a specific scientific approach, which consisted in identifying factors that shape directed, natural (regular) and inevitable changes as mandatory elements of development in the philosophical sense of the latter. the article analyzes different approaches to the definition of green economy, which gave the authors a reason to propose their own perception of the green economy as a socio-eco-economic system, which should be simultaneous under directed, natural (regular) and inevitable changes to ensure its development. the authors dwelled on the characteristics of each of the three mandatory changes. directed changes in the green economy as a system were considered through the prism of seventeen goals of sustainable development (defining those for which the green economy “works” directly), which form new requirements for key components of the economic system: production, exchange, distribution and consumption. regular changes are characterized as those that correspond or do not contradict the basic economic laws of the post-industrial era and form the ecological basis for the competitiveness of the economy. irreversibility of change is defined as justified regulatory measures of strict environmental and economic policy, based on the methodological, proven by scientists, the principle of regulation in a mixed economic system and the abandonment of free market mechanisms (which “does not work” to achieve sustainable development). the authors have proposed a system-hierarchical approach to ensuring intermediate principles of green economy development as a system (direction, regularity and irreversibility of changes) and their integral effect on the quality of sustainable development of the social system as a whole. further directions of research of system principles of development of green economy have been defined as well. key words: green economy, sustainability, development, socio-eco-economic system. jel classification: q01, q56 1. introduction economic activity has long caused significant environmental damage to the planet. mankind, in its desire to produce and consume in ever-decreasing volumes, today lives “in the debt” of future generations, which goes completely against the postulates of sustainable development, to which the governments of most countries declared almost 40 years ago at the international summit on environmental protection (known as the 1992 un conference). scientists predicted a significant shortage of key resources, such as oil, in 2011 (global green economy, 2011). and although this forecast for global carbohydrate shortages has not yet come true (as of 2021), we are witnessing constant natural disasters caused by environmental and economic imbalances, and their number and scale are only increasing. the work of scientists of the last two decades within the new economic science – green economy – is aimed at solving both theoretical and practical problems of balancing economic growth (rather, slowing it down) with efficient use of natural resources, reducing emissions and achieving social justice. the theory of the “green” economy is based on the following axioms: all surfaces of the earth are interconnected; it is impossible to demand the satisfaction of infinitely growing needs in conditions of limited resources; it is impossible to infinitely expand the sphere of influence in a limited space. the exacerbation of global environmental problems, which is mainly caused by the so-called “decoupling effect” (anikina i., anikin a.; nozhkina, n., 2017), when natural resources are reduced and consumption increases – has jeopardized the very existence of human civilization and therefore, it intensified the search for baltic journal of economic studies 204 vol. 7, no. 3, 2021 new ways of further development of the world economy as an “environmentally friendly” green economy. the “green” economy, in contrast to the traditional economy, arose not from abstract theories, but from the practical activities of environmentalists and “green” political parties (melnik, 2018). dozens of researchers from different countries (including foreign and domestic scientists allen c., anikina i., anikin a., atkisson a., nozhkina n., pearce d., markandya a., barbier e., galushkina t., kostetska k., chmyr o., zakharkevich n., potapenko v., marchenko o., mamaliga v., garlytska d., berezhna yu., melnik l., vukovic n., pobedinsky v., mityagin s., drozhzhin a., mingaleva zh., burkart k., clift r ., wright l. and others, as well as international institutions (united nations environment program (unep), organization for economic co-operation and development (oecd), ifoam, international federation of organic agriculture movements, etc.)) continue intensive work in various areas of socioeco-economic research of the green economy. at the same time, given the history of the green economy as a science, we should talk about the lack not so much of theoretical approaches to its description, as the methodological basis for ensuring the development of the green economy as a practice needed. the question of what constitutes such a development of the green economy, what are its main features and factors that ensure this development, have formed the main idea and content of this article. 2. aim and tasks of the article the aim of the article is to generalize approaches to defining the key features, advantages of green economy development in a single methodological context of philosophical perception of development as directed, regular and irreversible changes in structural elements of the system and connections between elements of green economy as a system. accordingly, the objectives of the article were a comprehensive methodological approach: characterization of the green economy as a system, as well as the definition of 1) directions and goals of change; 2) features of regularity of changes and 3) criteria of irreversibility of changes as components of green economy development. 3. green economy as a system the plan of the study of the green economy developed was based on the discovery of the ontological meaning of the term “development”, for which the general scientific (philosophical) meaning of this term was studied. the authors of the philosophical encyclopedic dictionary (1983) characterize development as “an inevitable, directed, regular change of material and ideal objects” (p. 561 – hereinafter our translation, v.ch., yu.o.) and emphasize that only the simultaneous presence of all three of these properties distinguish the processes of development among other changes. it is because, for example, the reversibility of changes characterizes the processes of functioning (such as cyclic reproduction of a constant system of functions). in turn, the lack of patterns is characteristic of random processes, and in the absence of direction, changes cannot accumulate, and therefore the process itself loses the unique, internally interconnected line. that is why when studying the development of such a complex system as the green economy, it is necessary to determine both its main structural features and all three characteristics of changes in its elements and the relationships between them. the definition of the structural elements of the green economy should be based on its definition in the scientific literature. in this aspect, it should be noted that today there is a significant range of approaches to the definition of a green economy, and therefore, the definitions themselves. it is believed that the term “green economy” was first used in 1989 in a report by environmental economists (pearce, markandya, barbier, 1989), for the british government. later, d. pearce published reports “greening the world economy” (pearce, 1990) and “measuring sustainable development” (pearce, 1994). if the main idea of the first report was to help the economy implement environmental policy, then further emphasis was placed on global environmental issues (climate change, ozone depletion, deforestation, loss of natural resources in developing countries) and the need to revise the traditional economic model of development (allen, 2012). the most established definitions of the green economy are those that consider it: 1) as a scientific concept aimed (according to the un) at achieving convergence between the three components of sustainable development (noted in: galushkina, kostecka, 2012); 2) the economy, which differs in terms of ensuring economic and social progress on the basis of environmentally friendly activities (chmyr, zakharkevich, 2013); 3) as a way to implement a course for sustainable development (potapenko, 2014); 4) as a process of transformation that eliminates imbalances and dysfunctions of the modern economy (dore, e-source); 5) as a “flexible” economy that provides a better quality of life for all within the existing environmental constraints on the planet (benson e, e-source); 6) as an economy with low greenhouse gas emissions, efficient use of resources and taking into account the interests of society, as well as within which it is believed that the economy is a dependent component of the natural environment (marchenko, mamaliga, 2019). the approach of the international chamber of commerce (icc) to defining this type of economy as one where economic growth and environmental responsibility complement each other, supporting baltic journal of economic studies 205 vol. 7, no. 3, 2021 progress in social development (icc, e-source) is well known. we propose to consider the green economy through the prism of the basic structural and reproductive content of the economy as interconnected processes of production, exchange, distribution and consumption of such products (goods, services), which are characterized by minimal resource intensity (especially non-renewable resources) and reduced negative impact on nature in the form of future waste and (or) emissions in the process of production and consumption. this systemic approach allows us to perceive the green economy as a system that has both internal and external (regulatory) influences that shape its directed, regular and inevitable changes – that is, its development. 4. directed changes of green economy system directed changes in the green economy as a system must coincide with the 17 global goals of sustainable development (“green wave”, 2016). it should be noted that among these goals of sustainable development of the planet, agreed at the summit on sustainable development in 2015 as a continuation of the millennium development program, the majority (namely: 14) are those that should be aimed at the practical implementation of green economy and green growth: a world without poverty; healthy lifestyle; high level education; access to clean water and sewage; alternative energy sources; decent jobs and economic growth; innovation and infrastructure; a world without inequality; urban security and affordable housing; reasonable consumption; combating climate change; conservation of marine resources; conservation of the ecosystem on land. the above goals of sustainable development, achieved through the development of a green economy, contribute to its goal – to create an effective environment for economic and social progress, based on minimizing the negative impact on the environment and efficient use of natural resources while maintaining a decent standard of living. for example, the south african green economy strategy states that its implementation certainly creates such positive effects as increased economic activity and the use of cleaner technologies with low carbon emissions and minimal impact on the environment (south africa’s green economy strategy, e-source). thus, the concept of directed changes of the “green economy” as a system implies a strategic implementation aimed at systemic global challenges – the highest level of implementation of the paradigm and strategy of sustainable development. the traditional, “brown” economy has its main sectors focused on “landscaping” programs and these are also promising directed changes of the green economy system. potapenko v. provides convincing economic and social arguments of un experts in favor of investing 2% of world gdp in “greening” the ten most important sectors of the economy to change the nature of development and direct public and private capital flows to reduce carbon emissions and efficient use of resources (potapenko, 2014). such transformations stimulate economic activity at least in the same way as conventional investment strategies, but with less risk of crises and shocks. it is a way to implement the course of sustainable development at the national, regional and global levels, which is consistent with the “agenda for the xxi century” and simplifies the implementation of its provisions. the transition to a green economy has already begun, it lasts for about two decades, and it is now crucial to maintain this momentum, directing it in the regular changes (regular changes of green economy system), along with the directional changes mentioned above (directed changes of green economy system). 5. regular changes of green economy system it should be noted that modern scientists often equate the concept of “green economy” and “low-carbon economy” (for example, garlytska, 2017). the name “low-carbon economy” directs scientific thought and economic policy to help reduce co2 emissions, and therefore – to reduce carbohydrate consumption, and to replace them with renewable energy resources, and to ensure healthy air and a healthy lifestyle in general. accordingly, processes of production, exchange, consumption have been becoming more “green”. “greening” the process of distribution of wealth is largely the result of strict ecological economic policy (as irreversible changes element for green economy development, which will be discussed below). the transition to a low-carbon economy involves structural and systemic reformatting of national financial and economic systems in response to green regulation. naturally, changes are reflected in the level of competitiveness of the economy. indeed, the quality of life of the population, which largely depends on the quality of the environment and creates conditions for increasing productivity, as well as the obvious growth of population demand for “environmental” goods and services, form the environmental component of economic development and international competitiveness. this in turn, requires the inclusion of the concepts of “green” economy and sustainable development in the concept of international competitiveness. in this context, we consider it appropriate to state that “… there is a need for research initiatives to develop a new concept of sustainable competitiveness in the context of globalization with an emphasis on how sustainable development interacts with competitiveness” (balkyt, tvaronavičien, e-source). it should be noted that among international organizations, the world economic forum pays baltic journal of economic studies 206 vol. 7, no. 3, 2021 most attention to the development of the concept of “sustainable competitiveness”, which defines this concept as a set of institutions, policies and factors that maintain the productivity of the nation's economy over time, ensuring social and environmental sustainability (wef, e-source). in our opinion, this definition is very successful, as it combines the main goal of increasing competitiveness – to achieve a high level and quality of life, as it is possible only in compliance with the principle of the trinity of development: social, economic and environmental. this interpretation also outlines the levers by which this goal can be achieved. the post-industrial factors of the country’s leadership are proposed to be the level and quality of education, spending on science and research, as well as health care, innovation in technological practice, resource conservation, etc., which meets the main goals of sustainable development. given the identified features of the post-industrial economy, the factors of its success in domestic and global markets for new goods and services, orlovska yu., vovk m. propose to define the green competitiveness of the post-industrial economy (international competitiveness) as a category combining traditional approach and position concepts of “sustainable development” and “sustainable competitiveness”, namely as the ability of the economy to develop unique leadership factors in the post-industrial socioeco-economic space in order to ensure a high level and quality of life with relatively higher productivity of innovative production and highly qualified human resources and thanks to environmentally friendly instruments of economic policy of the state (orlovska, vovk, 2014). it should also be noted that the green economy in terms of classical theory and the formation of regular changes of green economy system is a multidisciplinary direction, which consists of social, environmental and economic elements, the balance of which makes the economy sustainable. carl burkart (burkart, 2009) defines the green economy on the basis of 6 main sectors, positive changes in which will naturally lead to the sustainability of the entire green economy as a system. these sectors are: renewable energy; green buildings; ecological transport; water resources management; waste management and land management. we believe that concentrating priority efforts in these areas will provide the greatest economic multiplier effects and a corresponding strengthening of welfare and social justice. 6. irreversible changes of green economy system based on the un’s definition that the “green economy” is a result-oriented concept aimed at achieving convergence between the three components of sustainable development, the strategy of transition to a “green” economy requires more thorough development of economic levers at the level of both national economies and individual sectors. irreversible changes of green economy system must be provided. and here the issues of the best type of regulatory mechanism come to the fore: market or administrative (mixed economic and regulation system). in this context, potapenko v. writes about market liberalization as a negative factor for the formation of a green economy as a system (potapenko, 2014, p. 9): “market self-regulation processes negatively affect social security and the state of the environment. therefore, un experts advise to pay attention to the formation of a new green economy, which provides for the growing role of the state and intergovernmental bodies in economic regulation, creating conditions for business development based on new “green” technologies and greening of industries. moreover, state policy in the field of green economy should be aimed at protecting the environment and the interests of society. scientists believe (vukovic n. etc., 2019) that the most important elements of such public policy are environmental audit, environmental certification and other activities. note that they coincide with the elements of the “rigid environmental policy” that was proposed in the theories of the “porter hypothesis” (porter m., van der linde, 1995), the neoclassical environmental concept of “pollution haven theory” (levinson a., e-sourse), a “resource-based view” theory (clift r ., wright l., 2000). according to foreign experience, economically developed countries have achieved significant ecological and economic efficiency, in which state influence has contributed to the convergence of socioeco-economic goals of economic entities. thus, back in 2008, during the financial crisis and the threat of global recession, the oecd advocated the idea of “green” incentives, especially in areas where large-scale public investment can give impetus to the formation of the green economy (atkisson, 2011), strengthening its competitiveness. income and employment growth have been driven by public and private investment, which reduces carbon emissions and pollution, increases energy and resource efficiency, prevents biodiversity loss, and promotes ecosystem services. such investments need to be supported through targeted public spending, policy reforms and regulatory change. with this in mind, the implementation and development of environmental policy measures must take into account the possibility of anticipating specific impacts on competitiveness, transition periods of adaptation, possible additional transaction costs. it is also important to take steps to support businesses that incur significant costs in implementing environmental policies. baltic journal of economic studies 207 vol. 7 no. 3, 2021 in general, any regulation in theoretical and practical terms is considered in terms of its degree of rigidity and shape. in this case, the rigidity of regulation usually involves such basic elements as standards and the severity of their implementation. environmental standards, according to scientists (brunel c., levinson a., 2013; darnall n., pavlichev a., e-sourse) should reflect the permissible level of pollution and energy consumption, and the degree of compliance with these standards should be checked by environmental inspections (environmental audit, environmental certification mentioned above etc.). governments, businesses and citizens need to move towards balanced development paths, including promoting investment in natural capital (increasing the share of protected areas, strengthening forest protection, etc.), addressing energy and clean food, focusing on land use and land use planning, optimal allocation of limited resources and improved resource management. 7. conclusions as noted in international studies, the concept of “green economy” can solve the current problems of mankind and provide opportunities for economic development strategy of all peoples for the future. the green economy should be seen as one that increases the well-being of the population and ensures social justice, as well as minimizes environmental externalities. the model of green economy provides a harmonious combination of economic needs of society with the need for constant recovery and preservation of the environment. the world is on the verge of important decisions about new ways to generate energy and develop our natural resources. the consequences of this choice will affect many future generations. against the background of growing population in the world and the constant pressure on the natural environment, modern scientists question the need for a technological transition to a greener, cleaner world economy. as the planet’s population is expected to reach 9 billion people by 2050 (marchenko, mamaliga, 2019), countries must accelerate the pace of effective, environmental economic growth. at the same time, this development of the green economy must be balanced taking into account both resource opportunities on the one hand (human and natural capital) and simultaneously ensuring the three main features of development as such: its direction, regularity and irreversibility of changes in the green economy as a system. the content and fundamental differences of each of the mentioned features considered in the article require even more in-depth study of the methods of their measurement and assessment of reachability. additionally, it is necessary to substantiate the system of convenient indicators and/or integrated indices for assessing the development of the green economy; to make attempts to single out groups of countries, regions, etc. at this level in order to determine effective strategies for creating effective conditions for the practical implementation of the principles of green growth and sustainable development. references: allen, c. 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(2014). transformatsiia systemy pryrodokorystuvannia ukrainy na zasadakh “zelenoi” ekonomiky: teoriia, metodolohiia, praktyka [transformation of the ukrainian nature management system on the basis of "green" economy: theory, methodology, practice]. dissertation. kiev. south africa’s green economy strategy. available at: http://www.enviropaedia.com/topic/default.php?topic_ id=342 seventeen goals of sustainable development – the countdown is over (2016). green wave. available at: http://ecoclubua.com/2016/01/17-tsilej-staloho-rozvytku/ vukovic, n., pobedinsky, v., mityagin, s., drozhzhin, a., & mingaleva, zh. (2019). a study on green economy indicators and modeling: russian context. sustainability, 11, 13. weforum. available at: http://www.weforum.org/ baltic journal of economic studies 21 vol. 2, no. 4, 2016 banking investment lending in conditions of imbalances of movements of financial resources alina herasymenko1 higher state educational institution “banking university”, ukraine abstract. the purpose of the paper is to justify theoretically the existence of disparities between the paces of development of the financial and real sectors of the economy of ukraine, and in this regard, to study of the role of the banking investment lending as a credit instrument in managing imbalances of movement of financial resources. the hypothetico-deductive method allows us to investigate the causes of occurrence of disparities between the rates of development of the financial and real sectors of the ukrainian economy. the method of analysis allows us to investigate the penetration rate of bank credit mechanisms in the past five years (2011-2015) in the processes of financing of the needs of the real sector for capital investments. methodology. the survey is based on the theoretical analysis of the scientific literature in order to identify the causes of imbalances of movement of financial resources, the result of their influence on the pace of development of the real and financial sectors of the economy. the work displays the main approaches to the definition of the term of "financialization". different points of view of scientists about the impact of financialization on investment processes and the flow of financial resources are grouped in this article. also, there are presented visions of the major economic schools on the interaction of financial and real sectors of the economy. on the basis of special non-fiction the author of this research worked out the simplified scheme of imbalances of movement of financial resources in the economy. also, in this article are studied the theoretical basis of bank investment lending, and is justified its role in managing the process of convergence of the financial and real sectors of the economy. results of the survey showed that the cause of the imbalances of movement of financial resources is the processes of financialization. this process leads to distortion of the key role of the financial sector, which is to serve the real sector. banking investment lending may be an effective mechanism for the convergence of the financial and the real sector. however, the result of analysis has shown that it does not work in modern conditions. practical implications. the theoretical and practical analysis can be the basis for future research, especially with regards to the reasons of non-usage of banking investment lending as a tool of the control of imbalances of movement of financial resources in terms of prevailing financial sector relative to the real. value/ originality. the results of the study make it possible to provide a better understanding of the role and practical importance of banking lending as a tool of investment in real sector, which is used by banks with the purpose to control the motions of financial resources. key words: economy, financial sector, real sector, imbalances, banking investment lending. jel classification: g21, g24, g31 corresponding author: 1 department of finance and credit, higher state educational institution “banking university”. e-mail: al_gerassi@meta.ua 1. вступление переход украины от централизованной экономики к рыночной модели ведения хозяйства в последние десятилетия породил множество диспропорций между отраслями экономики. финансовому сектору экономики украины удалось приблизиться к рыночным стандартам ведения и организации бизнеса, тогда как реальный сектор так и не смог обеспечить свою конкурентоспособность и эффективность. несбалансированные темпы развития финансового и реального сектора экономики стали одной из основных причин возникновения разрыва между спросом производственных предприятий на инвестиционный капитал и действующего предложения финансового. существенная роль в этих процессах принадлежит финансиализации экономики. дисбаланс движения финансовых, в том числе и инвестиционных, ресурсов в условиях превалирования финансового сектора экономики над реальным сектором, усугубляет ситуацию относительно критично высокой степени износа основных фондов производственных предприятий, их низкого технологического уровня и высокой энергоемкости производства. в свою очередь, эти проблемы также препятствуют эффекbaltic journal of economic studies 22 vol. 2, no. 4, 2016 тивному развитию отраслей переработки и выпуска готовой продукции. украинские предприятия продолжают экспортировать дешевое сырье в страны-производители, вместо того, чтобы экспортировать отечественную продукцию по мировым рыночным ценам. проблемы диспропорций между отраслями экономики украины можно разрешить при условии устранения дисбалансов движения финансовых ресурсов, главным образом, путем более рационального распределения инвестиционного капитала между финансовым сектором экономики и реальным. в связи с этим, целью статьи является теоретическое обоснование диспропорций между темпами развития финансового и реального секторов экономики украины и, в этой связи, исследование роли банковского инвестиционного кредитования как кредитного инструмента управления дисбалансами движения финансовых ресурсов. 2. дисбаланс движения финансовых ресурсов: причины и последствия безусловным катализатором возникновения дисбалансов движения финансовых ресурсов в экономике являются процессы финансиализации, которые характеризируются опережающим развитием финансового сектора в отличие от реального, активным перетеканием капитала в финансовую сферу, распространением деятельности финансовых посредников, увеличением количества финансовых инструментов и спектра операций с их участием. финансиализация – закономерный продукт глобализации. «современная экономика, – отмечают исследователи, – это, прежде всего финансовая рыночная экономика» (byukenen dzh. m., masgreyv r . a ., 2004; raevskiy d.yu., 2012). утверждение и развитие последней имеет своим императивом финансиализацию (financialization). этот термин был впервые официально использован в 2009 г. в докладе юнктад (trade and commodity report), в котором присутствовал специальный раздел – «the financialization of commodity report» (the financialization of commodity report, 2009). анализ основных научных подходов к трактовке понятия «финансиализация» дает возможность выделить их основные группы (табл. 1). по мнению автора, финансиализация – это объективная траектория развития финансовой сферы деятельности, которую определяют конкретные экономические условия, в которых, за счет увеличения количества финансовых инструментов, популяризации операций с фиктивным капиталом и либерализации финансовых отношений, обеспечивается сокращение сроков получения прибыли при вложениях на финансовых рынках по сравнению с инвестициями в реальные активы. процес финансиализации является ведущим фактором, который определяет развитие экономики. особенно, учитывая то, что этот процесс существенно искажает роль финансов, которая, в идеале, должна заключаться в обслуживании реального производства, обеспечивая аккумуляцию, гибкость, эффективное распределение и перераспределение стоимостей в экономике. однако, современное гипертрофированное развитие финансовой сферы, напротив – ведет к росту неравенства населения в доходах, долгосрочного сокращения совокупного спроса, неэффективного распределения финансовых ресурсов, падения реального сектора, неравномерного развития таблица 1 научные подходы к определению сущности понятия «финансиализация» наименование научного подхода суть научного подхода авторы акционерный подход финансиализация как категория которая определяет ориентацию на акционерную стоимость как режим корпоративного управления в. лазоник, м. о`салливан которая определяет повышения роли рантье в экономике дж. смизин, о. орхангази, т. пелли внутрихозяйственный подход финансиализация как процесс влияния на внутренние процессы функционирования субъектов хозяйствования р. бэтт трансформации экономики г. магдоф, п. свизи гегемонистический подход финансиализация как стремительный рост доли финансового сектора в экономике о. орхангази, е. штокхаммер, дж. епштейн, в.с. лукьянов подход накапливания финансиализация как способ получения прибыли и вовлечения инвестиций г. криппнер, в. милберг, дж. арриги, п. дос сантос, с. лапавитсас инновационный подход финансиализация как результат активного развития финансовой торговли и расширения спектра финансовых инструментов к. филипс, ю. осик, н.о. щепочкина источник: составлено автором на основе (lazonick, w., 2000; smithin, j., 1996; orhangazi, o., 2008; palley, t.i., 2007; batt, rosemary, 2012; magdoff, h., 1987; stockhammer, engelbert, 2010; orhangazi, özgür, 2008; epstein, g., 2005; luk’yanov, v.s., 2013; krippner, greta, 2005; milberg , w., 2008; arrighi, g., 1994; dos santos, p., 2009; lapavitsas, c., 2009; phillips, k., 1996; osik, yu.i., 2014; schepochkina, n.a., 2011) baltic journal of economic studies 23 vol. 2, no. 4, 2016 таблица 2 точки зрения разных ученых относительно влияния финансиализации на процессы инвестирования краткое содержание точки зрения автор пока финансовые активы будут предлагать более высокую доходность, нежели реальные инвестиционные проекты, до тех пор будет инвестировано больше именно в них. то есть финансовые инвестиции будут вытеснять реальные. однако все это не может долго продолжатся на макроуровне, поскольку не возможно бесконечно наращивать прибыли и при этом не подкреплять ее производственными мощностями дж. тобин на протяжении периода финансиализации нефинансовые корпорации за счет увеличения своих финансовых инвестиций вынуждены создавать или покупать финансовые дочерние компании в связи с низкими прибылями от реального фактора дж. кротти финансиализация заставила нефинансовые фирмы вести себя как участников финансового рынка. то есть они отошли от своих предыдущих основ функционирования направленных на долгосрочный рост за счет реального накопления капитала. е. штокхаммер несмотря на то, що финансиализация позволяет облегчить нефинансовым корпорациям получение доступа на финансовый рынок, она также может поднять стоимость капитала, делая его более дорогостоящим для привлечения денежных ресурсов с финансового рынка. р. бойэр в развивающихся странах фирмы отдают предпочтение вкладывать в более ликвидные оборотные активы на финансовом рынке, которые способны быстрее принести ожидаемый доход, чем необоротные основные фонды а. торнелл источник: составлено автором на основе (tobin j., 1997; crotty j., 2005; stockhammer e., 2004; boyer r., 2000; tornell a., 1990) таблица 3 взаимодействие финансового и реального секторов (точки зрения основных экономических школ) экономическая школа взаимодействие финансового и реального секторов роль финансового сектора по отношению к реальному ключевые субъекты инструменты взаимодействия мотивы взаимодействия классическая финансовые посредники (банки), фирмы кредитование обеспечение перераспределения уже существующих материальных ценностей в обществе обслуживающепассивная марксизм банки (как торговцы ссудным капиталом) и собственники факторов производства (как представители промышленного капитала) кредитование обеспечение расширенного воспроизводства возможности позитивного влияния неоклассическая финансовые учреждения, фирмы, домохозяйства кредитование и эмиссионное финансирование использование кредитных средств на ведения экономической деятельности возможности минимизации рисков и обеспечение доходности вложенного капитала кейнсианство финансовые посредники (банковские и небанковские учреждения), фирмы, домохозяйства кредитование и участие в капитале обеспечение краткосрочного и долгосрочного инвестирования капитала регулирование экономической динамики при условии соответствующей государственной поддержке институционализм финансовые посредники (банковские и небанковские учреждения), фирмы, домохозяйства кредитование, участие в капитале и инвестициях обеспечение ликвидности, снижения рисков и устранения информационной асимметрии на рынке относительная функциональная самостоятельности и автономность baltic journal of economic studies 24 vol. 2, no. 4, 2016 стран и концентрации капитала в финансовых центрах, повышения рисков банкротства, дестабилизации социально-экономического развития. следует отметить, что среди ученых существуют различные мнения относительно влияния финансиализации на процессы инвестирования (табл. 2). принимая во внимание изложенное выше, процесс возникновения диспропорций между темпами развития финансового и реального секторов экономики возможно представить с помощью упрощенной схемы (рис. 1). исследуя вопрос об инструментах решения проблемы эффективного взаимодействия финансового и реального секторов экономики, обратимся к мнению представителей основных экономических школ относительно взаимодействия финансового и реального секторов (табл. 3) (korneev, 2015). исходя из данных, изложенных в таблице 3, наиболее распространенным инструментом взаимодействия финансового и реального секторов экономики является кредитование. учитывая доминирующие позиции банковского сектора в финансовой системе, как крупнейшего центра аккумуляции денежных ресурсов, ключевого участника в процессах трансформации и перераспределения финансового капитала, эффективным инструментом в решении проблемы конвергенции финансового и реального секторов экономики может выступить банковское инвестиционное кредитование (далее – бик). 3. бик в условиях дисбаланса движения финансовых ресурсов инвестиционное поле деятельности банков играет важнейшую роль в содействии эффективному функционированию экономики, поскольку инвестиции являются основой расширенного воспроизведения экономики, как в целом, так и хозяйственной деятельности любого предприятия, в частности. по мнению lutsiv b.l. (2001) функционирование банков на рынке инвестиций характеризируется тремя основными направлениями деятельности: осваивание инвестиций, участие в инвестировании, инвестирование. в рамках инвестиционного направления банк выполняет посреднические функции, аккумулирует денежные ресурсы, реализовывает функцию сбережения и трансформации их в капитал, обеспечивает концентрацию и накопление капитала, выполняет работу с ценными бумагами, как за свой счет, так и за счет клиента. исходя из этого, банк может быть как инвестором, так и кредитором. следовательно, банковские операции можно сгруппировать следующим образом: – инвестиционные и кредитно-инвестиционные операции (долевое участие в других предприятиях; создание дочерних структур; участие в финансовопромышленных группах; андеррайтинг); – кредитные операции (бик). инвестиционный кредит особенный тем, что такой вид кредита направляется не на удовлетворение текущих потребностей или приобретение уже созданной стоимости, а на обеспечение последующего увеличения стоимости за счет строительства, реконструкции, модернизации, то есть создания новых мощностей сферы производства и оборота. mazurok p.p. (2010) и guzenko o.p. (2010) разработали схематический подход к пониманию категории «инвестиционное кредитование» (рис. 2). объектами инвестиционного кредита выступают товарно-материальные ценности и конкретные затраты, обусловленные расширенным воспроизведением. в частности, такими объектами являются объекты производственного и непроизводственного зна финансовый сектор реальный сектор дисбаланс р о с т с п а д финансовый поток процессы финансиализации процессы финансиализации финансовый поток рис. 1. упрощенная схема дисбалансов движения финансовых ресурсов в экономике источник: составлено автором baltic journal of economic studies 25 vol. 2, no. 4, 2016 чения, очереди строительства, пусковые комплексы, объекты строительства, новое строительство, расширение действующих предприятий, реконструкция действующих предприятий, техническое перевооружение действующих предприятий. субъектами инвестиционного кредита являются кредиторы и заемщики (gritsay, 2011; peresada, mayorova, 2002) . в зависимости от роли в инвестиционном процессе, субъектов инвестиционного кредитования целесообразно разделить следующим образом: – прямые участники: кредиторы, заказчики, инвесторы, страховые компании, гарантийные фонды, инжиниринговые и консалтинговые фирмы; – непрямые участники: центральные банки, органы исполнительной власти, государственные и приватные фонды поддержки инвестиционных проектов, другие отечественные и общественные организации. существует два основных уровня системы принципов бик (gritsay, 2011): общеэкономические принципы (срочности, возвратности, обеспеченности, платности и целевого характера использования) и единичные принципы банковского инвестиционного кредитования, которые исходят от сути инвестиционного кредитования и могут по-разному проявляться в конкретных кредитных операциях. к специфическим принципам бик стоит отнести (gritsay, 2011): – принцип обоснования жизнедеятельности объекта кредитования; – принцип участия в реализации инвестиционного проекта квалифицированных и надежных партнеров; – принцип учета и распределения рисков проекта; – принцип урегулирования правовых аспектов и разработки конкретных скорректированных действий реализации инвестиционного кредитования. рис. 2. расширенное толкование категории «инвестиционное кредитование» во-первых во-вторых в-третьих инвестиционное кредитование это это кредитные процес включает совокупность механизмов реализации кредитных отношений возникают в инвестиционной сфере что которые это кредитования прямых инвестиционных мероприятий или реальных инвестиций процесс предоставления кредита банком для реализации инвестиционных проектов под будущие доходы для должно получить создаваемое (реконструированное) предприятие за счет которых будет обеспечиваться возврат инвестиционного кредита и таблица 4 проникновение бик в экономику украины за последние пять лет показатель 2011 год 2012 год 2013 год 2014 год 2015 год i квартал 2016 года степень износа основных фондов, % 75,9 76,7 77,3 83,5 капитальные инвестиции, млн. грн., в т.ч.: 259 932,3 263 727,7 247 891,6 204 061,7 251 154,3 51 591,7 за счет банковских кредитов и других ссуд, % 16,3 16,1 14,8 8,8 7,3 7,6 за счет собственных средств предприятий и организаций, % 58,6 59,2 63,4 71,5 67,4 73,5 кредиты, выданные банковским сектором украины, млн. грн., в т.ч.: 825 320 815 327 911 402 1 006 358 965 093 983 944 кредиты, выданные на приобретение, строительство и реконструкцию недвижимости (всего), % 1,25 0,92 1,43 1,54 1,35 1,35 кредиты, выданные на приобретение, строительство и реконструкцию недвижимости на срок более 5 лет, % 0,66 0,45 0,60 0,75 0,61 0,54 источник: составлено автором на основе (osnovni pokazniki diyalnosti bankiv ukrayini, 2011-2016rr.; vartist osnovnih zasobiv, 2000-2014rr.; kaptalni investitsiyi za dzherelami finansuvannya, 2011-2016) baltic journal of economic studies 26 vol. 2, no. 4, 2016 соблюдение особенных принципов инвестиционного кредитования позволяет поднять эффективность операции и уменьшить ее риски. по мнению автора, бик – это кредитно-инвестиционная операция банка, которая предусматривает эффективное сотрудничество банка (как кредитора) и клиента (как заемщика), направленное на реализацию конкретного инвестиционного мероприятия, нацеленного на создание (расширение) новых (действующих) источников доходности. при этом очень важным является одновременное достижение экономического, социального и экологического эффекта после реализации кредитуемого инвестиционного проекта. принимая во внимание, изложенное выше, следует отметить, что сама суть операций бик предусматривает все необходимые возможности активного влияния на процессы движения финансовых ресурсов. таким образом, эффективное использование механизма бик путем перераспределения финансовых потоков из финансового сектора в реальный сектор экономики может быть движущей силой в поднятии показателей ее деятельности. исследуем уровень проникновение бик в процессы инвестирования капитальных инвестиций предприятий за последние пять лет путем анализа отдельных показателей экономики украины (табл. 4). на основе данных таблицы 4 можно сделать вывод, что за последние пять лет (2011-2015 гг.) и первый квартал 2016 г. проникновение бик в процессы инвестирования капитальных инвестиций предприятий украины оставалось и остается на низком уровне. увеличение износа основных фондов предприятий украины (на 10% с 2011 г. по 2014 г.) свидетельствует об отсутствии достаточного финансирования капитальных вложений. сегодня, как и в последние года, расходы, связанные с капитальными инвестициями предприятий практически полностью покрываются за счет их собственных ресурсов. однако, этого критически недостаточно для удовлетворения их потребности в модернизации. участие банков в финансировании капитальных инвестиций предприятий за период анализа практически не ощущается. ситуация усугубляется тем, что с 2013 г. по 2015 г. доля банковских кредитов и других ссуд, направленных на финансирование капитальных инвестиций предприятий снизилась более чем наполовину (на 54,65%). доля кредитов, выданных банковским сектором на приобретение, строительство и реконструкцию недвижимости в удельном весе кредитного портфеля банковского сектора остается незначительной – около 1,5% и меньше за период анализа. доля того же вида кредитов, но на срок более пяти лет (оптимальный срок для освоения и обеспечения окупаемости инвестиций предприятиями реального сектора) в удельном весе кредитного портфеля банковского сектора – не превысила 0,75% за период анализа. таким образом, можно сделать вывод, что бик, которое по своей сути имеет все возможности выступить действенным инструментом решения вопроса конвергенции финансового и реального секторов экономики украины – не работает. причины неэффективного использования бик банковским сектором украины как одного из инструментов решения проблем финансовых дисбалансов заслуживают выступить в качестве объекта последующих исследований. 4. выводы проблемы, связанные с возникновением и накапливанием финансовых дисбалансов украины можно минимизировать «изнури», при условии более жесткого регулирования движения финансовых ресурсов, в образовании дисбалансов которых немаловажную роль играют процессы финансиализации. учитывая то, что наиболее очевидным инструментом взаимодействия финансового и реального секторов экономики является кредитование, целесообразно предположить, что именно банковскому сектору предстоит внести свой значительный вклад в разрешения сложившейся ситуации. этому также способствуют превалирующие позиции банковского сектора в финансовой системе украины, а также расширенный инструментарий банковских кредитных операций по сравнению с другими финансовыми институтами. недооцененным инструментом в управлении движением финансовых потоков с целью нивелирования их дисбалансов и, тем самым, запуска конвергенции финансового и реального секторов, по нашему мнению, остается банковское инвестиционное кредитование. на основе результатов анализа относительно доли банковского инвестиционного кредитования в удельном весе инвестирования капитальных инвестиций предприятий украины за последние пять лет, приходиться констатировать, что этот инструмент практически не использовался. таким образом, возникает вопрос о необходимости в дальнейших исследованиях относительно уровня потенциала банковского сектора украины в контексте возможностей кредитования инвестиционных целей предприятий, а также относительно проблем, которые сдерживают активизацию банковского инвестиционного кредитования. baltic journal of economic studies 27 vol. 2, no. 4, 2016 references byukenen, dzh. m., masgreyv, r .a. 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(1990). real vs. financial investment: can tobin taxes eliminate the irreversibility distortion? journal of development economics, № 32, р. 419-444. алина герасименко банковское инвестиционное кредитование в условиях дисбалансов движения финансовых ресурсов аннотация. целью работы является теоретическое обоснование диспропорций между темпами развития финансового и реального секторов экономики украины, и в этой связи исследование роли банковского инвестиционного кредитования как кредитного инструмента при управлении дисбалансами движения финансовых ресурсов. гипотетико-дедуктивный метод позволяет исследовать причины возникновения диспропорций между темпами развития финансового и реального секторов экономики украины. метод анализа позволяет исследовать уровень проникновения кредитных механизмов банка за последние пять лет (2011-2015 гг.) в процессы финансирования потребностей реального сектора в капитальных вложениях. методика. исследование основано на теоретическом анализе научной литературы с целью определения причин дисбалансов движения финансовых ресурсов, результата их влияния на темпы развития реального и финансового секторов экономики. в работе отображены основные подходы к определению сущности термина «финансиализация», сгруппированы точки зрения ученых относительно влияния финансиализации на процессы инвестирования и движения финансовых ресурсов, представлены видения основных экономических школ о взаимодействии финансового и реального секторов экономики. на основе обработанной научной литературы автором исследования была представлена упрощенная схема дисбалансов движения финансовых ресурсов в экономике. исследованы теоретические основы банковского инвестиционного кредитования, а также обоснована его роль в управлении процессами конвергенции финансового и реального секторов экономики. результаты исследования показали, что причиной возникновения дисбалансов движения финансовых ресурсов является процес финансиализации. этот процесс приводит к искажению ключевой роли финансового сектора, которая заключается в обслуживании реального сектора. механизмом конвергенции финансового и реального сектора может выступить кредитование. учитывая доминантную роль банковского сектора в финансовой системе, эффективным инструментом при управлении дисбалансами движения финансовых ресурсов может выступить банковское инвестиционное кредитование. однако результаты анализа относительно уровня проникновения банковского инвестиционного кредитования в процессы финансирования капитальных инвестиций предприятий на примере экономики украины показали, что банковское инвестиционное кредитования не работает должным образом. практическое значение. проведенный теоретический и практический анализ может быть основой для будущих исследований, особенно это касается причин неиспользования банковского инвестиционного кредитования как инструмента управления дисбалансами движения финансовых ресурсов в условиях превалирования финансового сектора относительно реального. значение/оригинальность. полученные результаты исследования дают возможность обеспечить лучшее понимание роли и практического значения банковского инвестиционного кредитования как инструмента, который может использоваться банками в качестве эффективного механизма управления при урегулировании дисбалансов движения финансовых ресурсов в условиях превалирования финансового сектора относительно реального. проведенный анализ уровня проникновения банковского инвестиционного кредитования в процессы финансирования капитальных инвестиций предприятий украины дает основания полагать о существовании множества проблем комплексного характера, которые сдерживают развитие банковского инвестиционного кредитования. baltic journal of economic studies 1 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-1-8 selection and application of appropriate analytical methods needed to assess the risks reducing the security of the protected system josef reitšpís1, martin mašľan2, igor britchenko3 abstract. risk assessment is one of the prerequisites for understanding its causes and possible consequences. we base our risk assessment on the principles described in the european standard en 31000 risk management process. this standard comprehensively describes the continuous activities that are necessary in managing risks and minimizing their possible adverse effects on the operation of the system under investigation. in this activity, it is necessary to first identify the existing risks, then analyze and evaluate the identified risks. in the analysis of existing risks, it is possible to use both qualitative and quantitative analytical methods, or combine them. we use qualitative methods in cases where we do not have a sufficient amount of input information, these are more subjective. quantitative methods are more accurate, but also more demanding on input information and time. the choice of a suitable analytical method is a basic prerequisite for knowledge of risks and their evaluation. the values of individual risks obtained in this way are the basis for determining the measures that are necessary to minimize them, i.e., to adjust them to an acceptable level. the draft measures are always based on the value of the individual components used to calculate the risk number, as well as on the value of the asset , which needs to be protected. appropriately chosen analytical methods are one of the basic prerequisites for the consistent application of the principles of risk management, as a continuous process aimed at increasing the overall security of the system under study. in the article, the author describes the procedures used in risk assessment, as well as specific analytical methods that can be used in working with risks. the aim of identifying risk factors is to create a list of events that could cause undesirable disruption to ongoing processes. at this stage, we define all the risks that will be subsequently analyzed and evaluated. when identifying, we can use methods such as, e.g. swot, pha (preliminary hazard analysis) or ca (checklist analysis). methods suitable for determining the causes and creating scenarios for the course of a risk event are eta (event tree analysis) or fta (fault tree analysis). the basic analysis of the system can be performed using the fmea method (failure mode and effect analysis), which provides a numerical risk assessment. by comparison with the numerical value of the risk that we are willing to accept, we obtain 2 groups of risks. acceptable, which will be given regular attention and unacceptable, which we will focus on in risk management and we will try to minimize its negative affect on the functioning of the system under study. key words: risk management, analysis, risk assessment, preventive and corrective measures, protected asset, value of risk. jel classification: p40, f52 corresponding author: 1 university of security management in košice, slovakia. e-mail: josef.reitspis@vsbm.sk orcid: https://orcid.org/0000-0003-4248-5758 2 university of security management in košice, slovakia. e-mail: martin.maslan@vsbm.sk orcid: https://orcid.org/0000-0003-1913-655x 3 state higher vocational school memorial of prof. stanislaw tarnowski in tarnobrzeg, poland. e-mail: ibritchenko@gmai.com orcid: https://orcid.org/0000-0002-9196-8740 baltic journal of economic studies 2 vol. 7, no. 3, 2021 introduction the security of the systems is constantly increasing thanks to the technical improvement of their elements. however, this is only one of the prerequisites for their safe operation. another is the constant knowledge and research of security risks associated with the possible realization of threats to which the system is constantly exposed. the degree of development of individual threats can lead to the occurrence of extraordinary events (hereinafter referred to as mu). therefore, it is necessary to constantly monitor individual safety aspects by analyzing and evaluating existing safety risks as a function of the probability of the occurrence of adverse events and their consequences (newsome, 2013). every extraordinary event requires a thorough analysis, which examines the causes of its occurrence, course, consequences and measures and recommendations taken. the primary task of the measures is to restore the functionality of the system and try to reduce the risk to an acceptable level. a necessary prerequisite for assessing the security status of the system is therefore knowledge of the safe risks expressed by the interaction of two parameters, which then determine the focus of measures and recommendations in the area of necessary prevention or remediation. the safety of each system and its individual components depends to a large extent on the preparedness for possible risk situations, the adoption of preventive measures, the identification of existing risks, their investigation and knowledge, as well as the ability to respond to situations, i.e., responses. all these activities are subject to risk management, i.e., the management of emergencies and crisis situations, while the basic premise of effective risk management is its analysis, i.e., the source of knowledge of the probability of its occurrence and possible consequences (buzalka, 2012). 1. risk management affecting the organization’s activities risk management is a logical and systematic method of determining the context of activities and processes, identifying the risks existing in them, their analysis, evaluation, reduction and ongoing monitoring in order to minimize losses. risk management is a culture, processes and structures focused on the effective management of opportunities and possible undesirable consequences. it must be part of every managerial activity, regardless of the level of management and risk. by risk management structure we mean a set of components that form the basis and organizational structure for the design, implementation, monitoring, review and continuous improvement of risk management throughout the organization. when applying risk management to the activities of the organization, it is necessary to respect certain principles and sequence of steps: 1. top management shall support and promote the application of risk management principles in the context of the organization. tools can be developed risk philosophy, statutory support, financial support, theoretical training and training of managers at lower levels. 2. the organization shall develop a risk management policy that creates the conditions for risk management in the organization as a whole and in all its activities. the policy should include information on: – policy objectives and their relevance to the organization; – the links between risk management strategy and policy; – defining the level of acceptable risk in individual areas of activity of the organization and procedures for its determination; – delegation of personal responsibility and authority in risk management; – supporting top management and its commitment to make the necessary resources available; -– control mechanisms to monitor and review the organisation’s policy implementation activities; – all managers and employees of the organization must be acquainted with the policy developed in this way. 3. risk management at the level of the organization must be in line with its strategy, it must be implemented in all its activities. 4. the creation of an effective system of monitoring and assessment of risk management processes is also a prerequisite for successful risk management, as risks themselves are not a static quantity. the effectiveness of the risk management process itself is therefore conditioned by factors such as its incorporation into all existing structures of the organization, setting rules for its application, responsibility and motivation of employees, monitoring effectiveness, but also the necessary financial resources in its implementation and implementation of measures necessary to improve the functioning of the system from a risk management perspective. 1.1 procedures used to assess existing risks risk assessment is a complex activity in which we determine the areas that will be subject to assessment, determine their priorities, identify security risks that operate in the system, analyze their possible impacts, determine the level of acceptability of individual risks and then based on their evaluation we will find out accept a certain part of the risks or take measures to reduce them. when assessing risks, environmental security is directly linked to value criteria, which raises the need for an economic analysis that takes into account the possible consequences and impacts on protected assets, the likelihood of their occurrence and the costs associated with security measures, risk baltic journal of economic studies 3 vol. 7 no. 3, 2021 measures. risk management is therefore very closely related to the availability of resources that are needed in the implementation of the proposed security measures. the risk assessment process itself consists of several phases: determining the context within the system under assessment: from a strategic point of view, the strategic objectives, the means to achieve them will be included. from the organizational point of view, we examine the connections between the individual components of the organizational structure, i.e., internal links, processes, activities through which goals are achieved. subsequently, it is necessary to identify the areas that will be subject to risk management assessment, i.e., areas with a higher level of security risks and possible measures that should reduce them. in our assessment, we always take into account, on the one hand, the costs and their effective expenditure in terms of the expected benefits and effects, as well as the resources and activities that need to be maintained. risk identification: the process by which all risks need to be identified, whether they are controllable by the organization or not. the basis for defining risk factors is the knowledge of employees who are familiar with the evaluated processes. with a higher degree of uncertainty, it is necessary to look for analogies in similar processes. gradually, all possible external and internal sources of risks that may affect the operation of the organization are assessed. the output is a list of events that could disrupt existing processes and will be subject to further analysis. risk analysis: the basic prerequisite for effective risk management is its knowledge. the core of research into security risks is their analysis. it is the process of assessing the causes and sources of risks, their positive and negative impacts, the severity of possible impacts and then determining the likelihood that these impacts may occur. the result of the analysis should be the following characteristics of the examined risks: – the likelihood of their occurrence in a specific time, space and conditions of the investigation; – economic characteristics quantifying the present value of the objects and the possible change in their value after disruption or destruction; – exposure to negative risk manifestations; – restore the system to its original state; – possible permanent change of the system; – influencing the connections between the objects of the examined system and the system with its surroundings (hofreiter, 2004). risk evaluation: a complex process in which we determine the amount of risk in terms of the extent of damage and loss that a given crisis phenomenon can cause and the probability that such a phenomenon figure 1. risk management process following en 31000   baltic journal of economic studies 4 vol. 7, no. 3, 2021 will occur, we compare the degree of risk with existing standards, acceptable limits or other predetermined criteria. we determine the significance of individual risk factors, either through expert estimates or sensitivity analysis. expert assessment is a basic tool for determining the overall risk in terms of the probability of occurrence of its factors and the intensity of its negative impact, i.e., consequences. sensitivity analysis is also a tool for determining the significance of risk factors. this explicitly shows the degree of influence of risk factors on the activity and safety of the entity (hopkin, 2013). the basic goal of risk assessment is to determine a certain value (risk level) for each specific risk of the endangered system. based on the degree of risk, we determine the order of risks in terms of their significance, while also taking into account the influence of the probability of occurrence and possible consequences. we then compare the individual risks with the level of acceptability and decide which risks we will address further. risk treatment and reduction: is a diverse process, which depends on the nature of the risk itself, the degree of probability of a crisis phenomenon that may cause the risk and the expected negative consequences. thus, risk reduction can be achieved, for example, through crisis policy, risk diversification (insurance), but also by creating reserves or optimizing processes. when taking measures to reduce risk, we always take into account their economic side. the amount of costs incurred should be proportionate to the possible consequences and importance of the interest protected. with high prevention costs, it is also possible to accept a risk with high negative impacts, but with a low probability of occurrence. risk reduction measures can be aimed at preventing the occurrence of risky events-preventive nature, at managing the course of the risk phenomenon, at mitigating negative consequences and recovery, but also at increasing the level of acceptability of existing unacceptable risks. familiarization of the persons concerned with the residual risks: instruction of competent staff about the risk factors that exist in the individual processes and activities. ongoing monitoring of the level of risks and the implementation and effectiveness of the measures in place. in this process, the existence of feedback and the continuous incorporation of control findings into the system is essential (reitšpís et al., 2004). 2. analytical methods for the examination of security risks the choice of risk analysis method depends on the nature of the system under investigation itself, on the availability and complexity of the input information – this must be reliable, relevant and must carry the required data, from the stage of development of the research. the choice of analytical method is a primary prerequisite for effective risk assessment. when estimating the probability of occurrence of risk phenomena, the information can be drawn e.g. from historical and statistical data, on the basis of which it is possible to approximately extrapolate and quantify future developments. if such data are not available, it is possible to use a prediction with qualitative data, which must then be subjected to further analysis using methods such as eta (event tree analysis) or (fault tree analysis). the selection of an appropriate analytical method is a complex process in which all the above facts must be taken into account (tichý, 2006). the choice of method itself is also influenced by whether an a priori analysis is performed, which is based on a phenomenon that has occurred at least once in the past, or an a posteriori analysis in which the analyst works with phenomena that he only thinks could occur. in this case, the risk is estimated on the basis of the expected behavior of the phenomena. risk assessment is a process consisting of successive steps, in this respect, existing analytical methods can be divided into groups, which are described in more detail in the following sections of chapter 2. 2.1 methods of identifying sources of risk the aim of identifying risk factors is to create a list of events that could cause undesirable disruption to ongoing processes. at this stage, we define all the risks that will be subsequently analyzed and evaluated. when identifying risk factors, we will take into account both the effects of external and internal environments, which can be evaluated using swot analysis. based on it, experts can prepare a general overview of risks that could pose a threat to the entity. one of the oldest methods for identifying sources of risk is safety review – these are routine visual inspections aimed at assessing operational activities and personnel, the introduction of new technologies in the context of existing risks, the level of maintenance work and safety inspections. the result is descriptions of possible problems and suggestions for their correction. other methods used to identify risks are: checklist analysis (ca), which contains a list of items used to verify the status of the system. authors with different backgrounds and perspectives on how the system works should be involved in creating the checklist. the purpose of the checklist is to compare the organization with the practice applied in comparable organizations. based on the checklist, analysts define issues to identify possible system deficiencies. after receiving and evaluating the answers, the next procedure is set. to obtain a comprehensive list of risks, it is necessary to supplement this method with another analytical method. baltic journal of economic studies 5 vol. 7, no. 3, 2021 preliminary hazard analysis (pha), which is used when we lack information. the purpose is to compile a list of sources of risk in which dangerous situations will be arranged depending on the degree of risk. when reducing hazards, it is necessary to focus on the situations listed at the beginning of the list. this analysis serves as a basis for further analyzes such as wi, eta, fta or fmea. the what-if – wi method is based on the discussion of people well acquainted with the research process. the analyst is using the question “what happens if ”? it seeks to identify events that could be a source of risk. the basic precondition for the success of the method is the compilation of questions, the answers to which should analyze the system to the maximum extent. the list of questions and answers points to the possibilities of protection against the consequences of adverse events and contains proposals for measures to reduce the risk. 2.2 methods for determining the causes and creating scenarios for the course of events when creating scenarios of the course of a risk event, a cause-and-effect diagram is often used – the ishikawa diagram, which represents an indicative analysis. displays the analyzed problem in a simple form based on its causes. another suitable method of risk modeling is eta (event tree failure): an event tree analysis, which models the course of an event using a favorable and unfavorable possibility of its further development. the result is a branched graph that represents an accident scenario, i.e., a set of errors and deficiencies with varying degrees of impact on the system under study. this method makes it possible to quantify the investigated event using the probability of its occurrence and possible consequence. fta (fault tree analysis) method: a fault tree analysis, it is a graphical tool for deductive identification of causal faults that can initiate the occurrence of an undesirable peak event. based on the definition of peak events, potential causes that can lead to its occurrence are analyzed and graphically represented here (přibil et al, 2008). 2.3 methods for basic system analysis one of the most commonly used methods is fmea (failure mode and effect analysis): analysis of the causes of failures and their consequences, the task of which is to select significant risks affecting the system under investigation. the first step in creating this analysis is to determine the potential risks that are obtained from previous risk analyzes (the ishikawa diagram, eta ...), individual analyzed risks are assigned numerical values within this analysis, which are the product of the probability of occurrence, detectability and severity of consequences. in this way, the resulting risk measure (risk number) is calculated, which is compared with the determined value of the risk acceptability rate. the result of the analysis is a clear tabular and graphical representation of both acceptable and unacceptable risks. when designing measures for individual risks, it is always necessary to take into account how the individual components contributed to the total amount of the risk number. if there is a possibility of a high severity of consequences but a very low probability of an event, it may not be necessary to take precautionary measures (smejkal, rais, 2006). 2.3.1 analysis of the causes of failures and consequences of fmea fmea (failure mode and effect analysis): failure analysis is an inductive method that has been developed for the analysis of failures in various systems. it is one of the basic methods used in semi-quantitative risk analysis. its origins date back to the 1940s, when it was formulated under us military regulations (mil-p-1629). in the1960s, nasa applied this method as part of the apollo program, where it was to improve and verify the hardware of the space program. at present, it has a wide application, it is an integral part of iso 9000, qs 9000 standards. in slovakia, it was issued in 2006 as a standard stn en 60812 under the name methods of system reliability analysis (stn en 60812:20006). the application of this method itself can be divided into two basic phases: 1. the identification phase, in which experts focus on: – any potential errors that may occur under both normal and extreme operating conditions, regardless of their severity and probability of occurrence; – all possible consequences of errors; – all possible causes of the error, taking into account that one error can have several consequences and one consequence can have several causes. 2. numerical phase in which the risk level in the form of a risk number (rpn-risk priority number) is calculated. risk number, i.e., the risk measure is calculated as the product of the probability of occurrence of the risk (pv), the significance of the error-severity of the consequences (vn) and the probability of detection (po). rpn = pvxvnxpo in the following text, there will be analyzed security risks affecting the functionality of logistics systems. the values of individual parameters are chosen using numerical scales; we have chosen the numerical range 1-5. a value of 1 corresponds to the best evaluation. the individual parameters and their evaluation are clearly shown in the following table. in the risk assessment itself, we also have to take into account the analysis of past security incidents and the analysis of the current situation. baltic journal of economic studies 6 vol. 7 no. 3, 2021 table 1 value parameters for fmea analysis rlr the resulting level of risk vc significance of the error, severity of the consequences 0-5 insignificant risk 1 small injury, tort, pity 6-12 acceptable risk 2 injury – sick leave, more damage 13-50 moderate risk 3 transport to hospital, higher damage 51-100 undesirable risk 4 permanent consequences, high damage 101-125 unacceptable risk 5 death, very high property damage po probability of occurrence pd probability of detection 1 random, unlikely 1 detectability of risk during the offense 2 rather unlikely 2 easily detectable 3 probably-real 3 detectable risk approx. a week 4 very likely 4 hard to detect for more than a week 5 persistent threat 5 undetectable source: own interpretation table 2 risk assessment using the fmea-structural aspect n event rating rlr po vc pd 1 unsuitability of the means of transport for the given material 3 3 2 18 2 material storage 3 2 2 12 3 capacity of means of transport 4 4 3 48 4 technical level of means of transport 5 4 2 40 5 security of transported cargo-theft 2 3 1 6 6 the possibility of a terrorist attack 2 3 4 24 7 insufficient level of used it 4 3 4 48 8 outdated and poorly maintained infrastructure 2 3 3 18 9 open information flows in logistics systems 4 5 5 100 10 using of it systems with various security 3 3 5 45 11 outsourcing of transport services 5 3 3 45 12 service level of equipment used 4 4 4 64 13 interruption of information flows 4 4 4 64 14 leakage of hazardous substances 3 3 2 18 15 traffic accidents 4 3 5 60 σ 610 source: own interpretation table 3 risk assessment using the fmea-process aspect n event rating rlr po vc pd 1 breach of secrecy of transported messages 3 3 3 27 2 unauthorized use of personal data 4 5 3 60 3 hazards under the influence of an addictive substance 3 4 4 48 4 organized crime 3 3 3 27 5 the growing volume of cost theft 2 2 2 8 6 carelessness during transport 3 3 2 18 7 insufficient knowledge of the technologies used 4 4 5 80 8 intentional damage to the device 2 2 4 16 9 open information flows in logistics systems 4 3 4 48 10 motivation of transport staff 4 4 4 64 11 outsourcing of transport services 3 4 4 48 12 participation of civilians 4 3 5 60 13 infiltration by it misinformation 5 5 3 75 14 fastening of material during transport 3 3 2 18 15 traffic accidents 3 3 4 36 σ 633 source: own interpretation baltic journal of economic studies 7 vol. 7 no. 3, 2021 the result of the fmea analysis is a representation of either structural or process risks, which will provide information on their severity and level of acceptability in a clear form. risks exceeding the level of acceptance are those with an rpn> 30, which are marked in red. the risks thus identified will be taken into account in the subsequent design of the measures necessary to increase the security of the system under investigation. conclusion using the fmea method provides the calculated rpn values and possibility to compare risks in terms of their causes and consequences on the basis of a uniform scale. for individual types of risks (structural and procedural), it is necessary to determine the level of acceptability and compare it with the obtained rpn values. as the maximum value of 125 is set, the acceptability rate can be set at 1/4 of the whole, which represents risks with an rpn> 30. based on the results, it is possible to set priorities for corrective and preventive measures, after their implementation to re-assess the values of parameters pv, vn and po. when calculating the rpn, it is necessary to pay increased attention to the value of the severity of the consequences. the total calculated rpn can be low in this case, because the pv and po values can be equal to 1, only the vn value is high. this applies to very serious events, the probability of which is low. in these cases, it will be necessary to assess the possible costs of preventive measures. in the event that these costs would be disproportionately high and the probability of an event low, the existing situation can be accepted (kuracina-ferjenčík, 2006). risk retention, risk sharing and risk prevention are recommended for treatment of risks (milind, 2018). the ability to recognize and manage risks is playing an increasingly important role in the functioning of any organization. it is a continuous process that is a means to effectively identify and assess risks, design and implement the necessary measures (paleček, 2006). the most important activity in recognizing and managing risk is its analysis, which is a basic prerequisite for its overall assessment and proposal of necessary measures. the output of the overall risk assessment may be, if necessary, preventive and corrective measures defined for risks whose value exceeds an acceptable level. when designing them, we always take into account the probability of the event and its possible consequences, as well as the value of the protected asset. the implementation of these measures is often associated with the need to spend certain funds. in practice, we often encounter a reluctance to spend the necessary resources, because they mean an increase in the total cost of running the system. therefore, in order to increase the resistance of the system, it is constantly necessary to innovate existing ones and add new security elements. the problem is the rapid development of information technology and cyber threats. when procuring these funds, we take into consideration their price and functionality from the point of view of system operation, less importance is placed on the integration of modern active and passive safety elements. when procuring devices with a low level of security features, it is then necessary to make changes to the security parameters, their configuration, or the software itself, which may conflict with the licenses and warranties provided by the original suppliers. these changes may also have their limits on the technical level of the innovated devices. when procuring new equipment, it is therefore necessary to take into account the supplied safety and the technical level of the safety elements that are part of the delivery. this will significantly reduce the additional costs incurred during their period of operation. however, account must also be taken of the fact that the funds thus spent represent only a certain percentage of the total value of the asset, which will be protected, if necessary, by the measures taken (hubbard, 2009). references: buzalka, j. (2012). teória bezpečnostných rizík. bratislava: akadémia pz slovensko. hofreiter, l. (2004). bezpečnosť, bezpečnostné riziká a ohrozenia. žilina: edis – vydavateľstvo žilinskej univerzity. slovensko. 146 s. hopkin, p. (2013). risk management. kogan page. 288 s. hubbard, d. (2009). failure of risk management. wiley-blackwell. 304 s. kuracina, r ., & ferjenčík, m. (2006). nástroje pre oceňovanie rizika a vyšetrovanie havárií. recenzovaný zborník. isbn 80-8073-649-9 milind t. phadtare; a. d. gosavi; & t. k. ganguli (2018). risk management in small and micro construction firms undertaking repairs and modernisation of residential houses: a case of india. international journal of risk assessment and management, vol. 21 no. 3. doi: 10.1504/ijram.2018.093742 newsome, b. (2013). practical introduction to security and risk management. sage publications. 408 s. paleček, m. (2006). prevence rizik. praha: vše česká republika. přibil, p., janota, a., & spalek, j. (2008). analýza a řízení rizik v dopravě. praha:ben-technická literatura. česká republika. 526 s. baltic journal of economic studies 8 vol. 7 no. 3, 2021 reitšpís, j., bartlová, i., & hofreiter, l. (2004). manažérstvo bezpečnostných rizík. žilina: edis – vydavateľstvo žilinskej univerzity. slovensko. 296 s. smejkal, v., & rais, k. (2006). řízení rizik ve firmách a jiných organizacích. praha : grada publishing, a.s. 300 s. stn en iso 31000:2011: manažérstvo rizika. stn en 60812:20006: metódy analýzy spoľahlivosti systému. postup analýzy spôsobu a dôsledku porúch (fmea). tichý, m. (2006). ovládání rizika: analýza a management. praha: c.h.beck. česká republika. 396 s. baltic journal of economic studies 176 vol. 7 no. 4, 2021 corresponding author: 1 institute of education content modernization, ukraine. kyiv national economic university named after vadym hetman, ukraine. e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 odessa national medical university, ukraine. e-mail: viktoriyaborshch@gmail.com orcid: https://orcid.org/0000-0001-6400-7840 3 odessa national medical university, ukraine. e-mail: rogachevskiy75@gmail.com orcid: https://orcid.org/0000-0002-8063-258x doi: https://doi.org/10.30525/2256-0742/2021-7-4-176-181 health care as a system-creating element of human capital: strategies of its development by the case of ukraine yurii safonov1, viktoriia borshch2, oleksandr rogachevskyi3 abstract. the main purpose of the paper is to analyze the process of the health care development as the systemcreating factor of human capital. methodology. this study combines economic and managerial analysis of healthcare and human capital. the background for this analysis is the data of the 2020 human capital index in ukraine and other developed and developing countries. the method of historical and logical analysis of the literature was used. the functional and structural analysis was used with purpose to research the main tools of human capital’s development. methods of comparative and statistical analysis and their synthesis were used to study dynamics of human capital. method of summarization was used to make conclusions and recommendations for improving human capital in developing countries. works of scientists in the sphere of human capital were used as the informational basis for the conducted study. findings. in the paper it was analyzed the human capital index in ukraine and its components from the period of 2010–2020. the problems of the development of ukrainian healthcare sector as the system-creating element of human capital are viewed. formation of a new model for organizing medical care based on the development of the four p’s model of medicine (predicting, prevention, personalization, participation) is considered as the main basis for developing effective healthcare sector in ukraine. the authors of the article see the following key areas of necessary actions in ukrainian healthcare sector: technological breakthrough, strengthening a healthy lifestyle, ensuring the availability of high-quality medical services, developing human resources, creating a system of effective drug provision, increasing the efficiency of financing. practical implications. the results of this study form the methodological and practical basis for improvement of the state regulation system of ukrainian healthcare as a system-creating element of human capital. the results of conducted research could be a framework for formation of effective healthcare system in ukraine, ensuring its constant development. the main proposals could be used by the ministry of healthcare of ukraine while working out the concept of national healthcare system development, they should be taken into consideration by state and municipal health departments for implement them during the process of ukrainian healthcare sphere’s reformation. key words: human capital, healthcare system, the human capital project, human capital index (hci). jel classification: i18 1. introduction from the point of view of the modern economic approach to the study of human behavior, human capital is a set of knowledge, skills, abilities used to meet the diverse needs of man and society as a whole. it is a complex productive factor that has a key impact on economic development. therefore, the modern economy is called the economy of efficient human resources, which emphasizes the main, defining role of human capital in the development of the modern state and society. human capital determines how effectively the state develops. competitive human baltic journal of economic studies 177 vol. 7 no. 4, 2021 resources become the most significant in comparison, “raw materials economy” is replaced by “knowledge economy”. therefore, one of the main trends in the modern world is to increase competition for skilled and highly qualified human resources. this competition is taking place not only among developed but also rapidly developing countries, both globally and regionally. as history has shown, any radical economic and social changes (for example, industrial revolution, scientific and technological revolution, etc.) were carried out on the basis of human capital, which was formed at a particular period of history. the accumulated knowledge, the level of development of education and science, the nature of the scientific, technical, managerial elite that exists in the country have always been the drivers of cardinal changes in society leading to a new qualitative level of development. the quality of human capital in any country can change under the influence of both external (migration processes, integration projects, etc.) and internal factors (identification processes, dynamics of economic development, urbanization, the nature of reforms carried out in the country, etc.). in this regard, the issue of effective human resource management is essential and determines the degree of its competitiveness in the modern world for any state. thus, a person and his/her capabilities are of key importance in the management of human capital (nelson & phelps, 1966). moreover, this process has two interrelated directions. on the one hand, human capital management is directly related to the development of the socio-cultural sector, the creation of stable conditions acceptable for the evolution of language, culture, education, healthcare, and national identity (strauss & thomas, 1998). in other words, the state forms an effective living environment and intellectual activity for its citizens, providing conditions for a quality life and effective self-realization. on the other hand, each person, guided by the priorities of personal growth, is aware of the need to invest in the development of its own country, through the selffulfillment of each is the progressive growth of the entire country. thus, human capital management is a self-sustaining and self-reproducing system in which created conditions and investments in human capital have led to the formation of new human qualities, which, in turn, contributes to the development of a new quality of life. the goal of this paper is to analyze the process of the healthcare development as the system-creating factor of human capital. this study combines economic and managerial analysis of healthcare and human capital. complex of the general scientific and special research methods were used to achieve the goal of the study. the method of historical and logical analysis of literature was used. functional and structural analysis was used to investigate the main tools of human capital development. methods of comparative and statistical analysis and their synthesis were used to study the dynamics of human capital. method of generalization was used to make conclusions and recommendations for improving human capital in developing countries. the works of scientists in the field of human capital were used as the information base for the study. 2. discussion and research results today 's world leaders are the countries that have best learned how to shape and use people's knowledge, skills, competencies, their ability to continue learning and complex collaborative activities. those owners of human capital who have the opportunity to apply it effectively to their work activities are the key creators of added value. the market value of the modern corporation is increasingly determined by the ability of its hired "brains" to create new ideas, goods and services. however, there is currently a huge shortage of human capital around the world. despite unseen advances in human development over the past 25 years, serious challenges persist, especially in developing countries: 1. almost a quarter of all children are stunted (being short for their age is an indicator of the risk of developing physical disabilities or cognitive impairment). 2. many countries are experiencing an educational crisis that hinders their economic development. according to available data, schoolchildren in some countries lag behind their peers from other countries for five years. 3. half of the world's population does not have access to basic health care, and many join the ranks of the poor each year, forced to pay for healthcare out of their own pocket. 4. in the world poorest countries, four out of five people living in poverty are not covered by social safety nets, making them highly vulnerable. this deficit in human capital has a dangerous tendency to grow amid rapid global changes in technology, demography, instability, and climate. at the same time, investments in human capital are often neglected. this is unacceptable in a world where there are many examples of rapid transformation of human capital, such as singapore, the republic of korea, and ireland, as well as in some of the world's poorest countries. malawi, for example, has made very rapid progress in closing the growth gap among children. human capital development is essential for countries at all income levels. while the poorest or most unstable countries face serious obstacles to improving education baltic journal of economic studies 178 vol. 7 no. 4, 2021 and healthcare, even the countries with the world's highest levels of human capital development must not relax their efforts to invest in their citizens if they are to remain successful and competitive in the global economy. in modern ukraine, an additional argument in favor of increasing the contribution of human capital to development is the results of research confirming its low capitalization. it is enough to compare data on the quality of human capital and gdp per capita, estimated in terms of purchasing power parity (ppp). below we will analyze the human capital index (hci) data for 2020 in ukraine and some other countries. the human capital index 2020 includes healthcare and education data for 174 countries, covering 98 percent of the world's population as of march 2020. these data are a baseline for comparison with the situation before the pandemic. the study also provides a decade-long update on the evolution of human capital outcomes from 2010 to 2020. in all regions of the world for which relevant data are available, and for people of all income levels, these outcomes are improving. this was mainly due to improved health, reflected in increased child and adult survival and reduced stunting, as well as increased school enrollment. now, with the global pandemic, the preservation of these achievements is in jeopardy. of the 48 countries in europe and central asia included in the human capital index 2020 (hci), 33 are in the top one-third of the world, and almost all are in the top half. however, there are significant differences in the region. among developing and transition countries in the region, a child born in poland can expect to achieve 75 percent of the productivity of a fully educated adult with optimal health. and a child born in tajikistan can expect only 50 percent productivity. in the period from 2010 to 2020, the hci value for ukraine remained approximately at the same level – 0.63 (table 1). this means that greater and more focused investment in education, healthcare and social protection is needed to realize the full human potential of the ukrainian people. thus, the covid-19 pandemic threatens the significant gains made in health and education over the past decade, and especially in developing countries. this is the conclusion of a new world bank group analysis. investment in human capital and its building blocks (e.g., the knowledge, skills, and health that people accumulate throughout their lives) is key to unlocking a child's potential and accelerating economic growth in every country. a review of the main challenges and problems related to human capital led to a number of key conclusions that are fundamental to understanding what needs to be done to improve its quality and promote economic growth and development. firstly, changes in three sectors should provide a breakthrough in development: – education, which is assigned a leading role in the formation of human capital. a modern education system must: create a foundation for technological breakthroughs and economic growth; help overcome demographic challenges; work for social sustainability by reducing inequalities in access to development resources; and teach people to increase the capitalization of their knowledge, skills and competencies; – healthcare: without changes in this area, it is impossible to reach the number of countries with a life expectancy of more than 80 years; – a system of social support, the main objective of which is to reduce poverty (barro, 1997). secondly, these social sectors cannot fulfill their functions of human capital formation unless they themselves undergo serious technological change (edmonson et al., 2020, schultz, 1999). the technological breakthrough must occur in these industries themselves. thirdly, given that in the near future the markets for educational and medical services will become global and increase their contribution to world trade, it is necessary to expand the export potential of these sectors of the economy (bartel et al., 2011). fourthly, it is impossible to increase the capitalization of human capital without changing the model of the ukrainian labor market (bloom, 2003). fifthly, the reduction of not only the share, but even the absolute number of the working-age population makes it necessary to mobilize all the potentials for building up high-quality human capital and increase labor mobility (hirooka, 2006). 3. key projects of healthcare development increasing life expectancy and improving the health of the population of ukraine is the main goal of health care development. this goal can be concretized in three directions: – improving access to high quality medical care for all citizens of the country; – enchancing the scale of public involvement in healthy lifestyle; – increasing the global competitiveness of the ukrainian healthcare industry and becoming one of the leaders in the development of medical and information technology. improving the accessibility and efficiency of healthcare will require the formation of a new model for the organization of medical care, based on the development of medicine of the four p’s (prognosis, prevention, personalization, participation), extensive use of medical information technology and the effective combination of different levels and conditions of different types of medical care (primary, specialized, baltic journal of economic studies 179 vol. 7 no. 4, 2021 emergency, rehabilitation, palliative). to achieve the set goals, it is proposed to implement measures in five priority areas, which are described below. 1. key solutions for a technological breakthrough in healthcare: 1.1. support for the creation of new medical technologies. the main tools for such a solution are three stages: the development and implementation of the state program for the development of biomedicine, including increased funding for basic medical research on a grant basis; the development and implementation of the state program to support start-up projects in the healthcare industry; mass training for the development of medical technology and its operation in medical organizations. 1.2. implementation of innovative models of the organization of medical care. the development of medical information systems and telemedicine as a priority of the government of ukraine, as well as the development of virtual clinics that allow the monitoring of 12 morphological and functional systems of the human body in hospitals, clinics and at home. 1.3. development of export centers for high-tech medical services. ukraine has real potential for a largescale increase in the export of medical services that are competitive in price and quality. to run this project you will need implementation of four key steps. the first is the support, on a competitive basis, of development programs (design and implementation of new medical technologies) of high-tech medical services export centers. the second is the implementation of public-private partnership projects in the development of leading ukrainian clinical centers. the third is the creation of a center for crossborder medical care in ukraine, which provides for the development and implementation of a marketing strategy for the export development of medical and educational services of leading ukrainian clinical centers. fourth, the introduction of new it-technologies for the interaction of clients (patients) and insurance medical organizations with the staff of ukrainian clinical centers, including the training of staff to work with foreign patients. 2. key decisions to promote healthy lifestyles: 2.1. involvement of the population in physical education and sports 2.2. continuation of the anti-alcohol policy 2.3. continued implementation of measures to reduce the prevalence of smoking 2.4. promotion of healthy food. 3. key decisions in ensuring the availability of quality medical services. progress in this direction will require the following measures, first, to change the structure of medical care and the formation of integrated health care; and second, to develop the human resource capacity of the industry:ta bl e 1 h um an c ap it al in de x in u kr ai ne a nd it s c om po ne nt s: c om pa ri so n ov er a d ec ad e in di ca to r h c i 2 01 0 – e st im at e in y ea r 2 01 0 h c i 2 01 0 – so ur ce y ea r h c i 2 02 0 – e st im at e in y ea r 2 02 0 h c i 2 02 0 – so ur ce y ea r m al e + fe m al e m al e o nl y fe m al e o nl y m al e + fe m al e m al e o nl y fe m al e o nl y m al e + fe m al e m al e o nl y fe m al e o nl y m al e + fe m al e m al e o nl y fe m al e o nl y h c i c om po ne nt 1 : s ur vi va l pr ob ab ili ty o f s ur vi va l t o a ge 5 0, 98 8 0, 98 7 0, 99 0 20 10 20 10 20 10 0, 99 1 0, 99 0 0, 99 2 20 18 20 18 20 18 h c i c om po ne nt 2 : s ch oo l e xp ec te d ye ar s o f s ch oo l 13 ,1 13 ,0 13 ,1 20 10 20 10 20 10 12 ,9 12 ,8 13 ,0 20 14 20 14 20 14 h ar m on iz ed t es t s co re s 49 0 49 2 48 8 20 11 20 11 20 11 47 8 47 4 48 2 20 18 20 18 20 18 h c i c om po ne nt 3 : h ea lt h su rv iv al r at e fr om a ge 1 560 0, 77 3 0, 67 1 0, 87 6 20 10 20 10 20 10 0, 81 5 0, 72 9 0, 89 9 20 19 20 19 20 19 fr ac tio n of c hi ld re n u nd er 5 n ot s tu nt ed h um an c ap it al in de x (h c i) 0, 63 0, 59 0, 68 0, 63 0, 59 0, 68 u nc er ta in ty in te rv al [0 .6 2, 0. 64 ] [0 .5 8, 0. 60 ] [0 .6 7, 0. 69 ] [0 .6 2, 0. 64 ] [0 .5 8, 0. 60 ] [0 .6 6, 0. 69 ] so ur ce : th e h um an c ap ita l r ep or t 2 02 0 baltic journal of economic studies 180 vol. 7 no. 4, 2021 3.1. structural changes in the healthcare delivery system and the formation of integrated healthcare. first, it will be necessary to complete the measures already being implemented to form a three-tier system of medical care. second, the following measures are necessary: 1) providing access to pre-hospital care for rural residents living in small and remote settlements by developing a network of obstetric stations and mobile forms of medical care; 2) ensuring access to emergency and specialized care for residents of remote areas with a small number of residents by developing regional air ambulance services to comply with the "golden hour" requirements; 3) increasing the volume of high-tech types of medical care included in the program of state guarantees of free medical care; 4) creation of a modern system of palliative care for seriously ill citizens. however, it is impossible to make significant progress in increasing healthy life expectancy without significantly strengthening primary care and developing areas of health care that improve the quality of life of older people. and to achieve this result, the following changes are needed: 5) overcoming the shortage of general practitioners; 6) implementation of programs for managing patients with chronic diseases, including a set of measures to prevent disease exacerbations (ensuring close interaction between general practitioners and specialists, continuity of treatment in inpatient and outpatient settings, expanding the functional capabilities of nurses, remote health monitoring, drug provision for patients during outpatient treatment, etc.); 7) creation of rehabilitation medical care as a separate structural link in the system of providing and financing medical care. to improve the efficiency and effectiveness of the use of resources available in the health care system, the following steps should be taken; 8) introduce tools for mandatory coordination and continuity in the provision of medical care; 9) change the procedure for the development and revision of clinical guidelines for diagnosis, treatment and prevention of diseases, taking into account economic opportunities for their use, and introduce an international expert review of draft clinical guidelines. 3.2. human resource development. this requires action in three areas: 1) updating the professional competencies of medical workers: by creating a system of independent accreditation of ukrainian doctors; introduction of a new system of continuous additional professional education; introduction of training programs for healthcare managers in the field of economics and management; 2) increasing the labor motivation of medical workers: by continuing the policy of increasing the salaries of medical workers; strengthening the differentiation of official salaries of medical workers depending on the professional category; adopting a housing program health worker in rural areas and small towns; 3) reorganization of medical education. to overcome the structural shortage of personnel, changes in the structure of medical training are necessary. it is necessary to accelerate the processes of updating the programs of medical universities and institutions of additional education in accordance with the achievements of world medical science and medical technologies. this will require the creation of new university clinics and the organization of student internships at their workplaces, and an increase of 3-5 years in the postgraduate training of physicians. the introduction of economic mechanisms that increase the interest of leading medical clinics in providing clinical facilities for the training of students, and the involvement of foreign specialists in the training will significantly improve the quality of medical education. 4. key decisions to create an effective drug supply system. it is necessary to expand the use of evidencebased medicine principles in public administration and in the work of medical institutions, to change the programs of existing drug benefits, to introduce effective tools for regulating prices and the distribution of risks and costs in the procurement of drugs. 5. key solutions in improving the efficiency of healthcare management and financing systems. forms of healthcare financing must change in order to make efficient use of growing financial flows. ukraine needs a transition to an insurance system of financing medical services, which provides health insurance and motivates its participants to improve efficiency. the implementation of key proposals for the development of the healthcare system will lead not only to an increase in human capital and technological modernization, but also to the growth of healthcare as an economic sector with great export potential. the major solutions prioritized above would require an increase in state funding for healthcare in ukraine from 6.7% of gdp in 2018 to 7.21% of gdp in 2025. the increase in spending will be needed: to support technological breakthroughs and renovation of fixed assets of medical institutions – 0.08% of gdp; to improve the quality of primary medical care – 0.12%; to promote a healthy lifestyle – 0.04%; to improve drug provision – 0.15%; to meet the need for high-tech medical care – 0.07%; to ensure payment for medical workers – 0.2% of gdp. baltic journal of economic studies 181 vol. 7 no. 4, 2021 4. conclusions today in ukraine there is a deepening technological gap between the healthcare system and that of developed countries. this situation is dangerous because in today 's world, healthcare is one of the main platforms for technological progress and is becoming a major industry in the most developed economies. the paper looked at healthcare as one of the main systemic elements of national human capital because investing in people through better nutrition, healthcare, quality education, job creation, and skills training contributes to the development of human capital, which is necessary to end extreme poverty and build more socially cohesive societies. today, human capital is the basis for the modernization of the country, which seeks to develop a "smart economy," which in turn requires a new quality of man, his knowledge, competencies and skills. economic growth and development depend on both human capital and tangible assets and factors affecting their productivity. investments in human capital and in tangible assets complement and reinforce each other. human productivity depends on tangible assets such as infrastructure, equipment, and a stable, well-managed economy. in turn, physically fit and educated people can earn more and invest more in tangible economic assets. thus, the above-mentioned priority areas, such as (a) technological breakthrough in health care; (b) strengthening healthy lifestyles at the national level; (c) ensuring the availability of quality health services; (d) development of human resources; (e) creating a system of effective drug provision; (f ) increasing the efficiency of financing to improve the quality of the health care system in ukraine, should be implemented in the near future and should be included in the conceptual framework of the strategic development of human capital of the country and the health care sector. references: averting the old-age crisis: policies to protect the old and promote growth / world bank. n.y.: oxford univ. press, 1994. barro, r . (1997). determinants of economic growth: a cross-country empirical study, lionel robbins lectures. cambridge, ma: mit press. bartel, a., phibbs, c., beaulieu, n., & stone, p. (2011). human capital and organizational performance: evidence from the healthcare sector. available at: https://www.researchgate.net/publication/228303288_ human_capital_and_organizational_performance_evidence_from_the_healthcare_sector bloom, d., & canning, d. (2003). health as human capital and its impact on economic performance. the geneva papers on risk and insurance, vol. 28, no. 2, 304–315. edmonson, c., marshall, j., & gogek, j. (2020). keeping the human in health care human capital: challenges and solutions for rns in the next decade. nurse leader, vol. 18, issue 2, 130-134. hirooka, m. (2006). innovation dynamism and economic growth. a nonlinear perspective. chettenham, uk, northampton, ma, usa, “edwardelgar”. nelson, r . r ., & phelps, e. s. (1966). investment in humans, technological diffusion, and economic growth. american economic review, vol. 56, no. 2, 69–75. schultz, p. (1999b). productive benefits of improving health: evidence from low income countries. yale university. strauss, j., & thomas, d. (1998). health, nutrition and economic development. journal of economic literature, 36(2), 766–817. the human capital report 2020. the world bank. available at: https://www.worldbank.org/en/publication/ human-capital baltic journal of economic studies 128 vol. 3, no. 2, 2017 corresponding author: 1 department of organization and management of enterprise, opole university of technology. e-mail: innasytnik@gmail.com 2 faculty of social sciences and computer science, wyższa szkoła biznesu – national-louis university. e-mail: asfreedom1000@gmail.com 3 cracow university of economics. e-mail: bsytnik@outlook.com the economic factors and consequences of social inequality and poverty inessa sytnik1 opole university of technology, poland artem stopochkin2 wyższa szkoła biznesu – national-louis university, poland bogdan sytnik3 cracow university of economics, poland abstract. the purpose of the study is to determine the main factors and prerequisites for inequality and poverty of the population of ukraine, as well as to identify the main consequences of this phenomenon and finding out of the main directions of the socio-economic policy of the state. methodology. the article considers theoretical approaches to the definition of social inequality and poverty, as well as issues with fair distribution of national wealth. the results of the study confirmed the thesis of the authors that the problems of poverty and social inequality adversely affect the functioning of national socio-economic systems. it is proved that the most effective state is one which has a broad layer of the middle class, which ensures the rationalization of consumption, saving and investment processes. practical significance. based on official statistical data of the main macroeconomic indicators of the state development, this article studies main trends in the development of ukrainian economy and its social component. the coefficients of the correlation dependence between the indicators of development of the social and economic systems of ukraine are calculated and conclusions regarding the absence of a state system of equal distribution of national wealth are drawn. value/originality. the result of the study is a statement about the need to modernize and reform the existing system of redistribution of national wealth in ukraine with a view to reducing poverty and social inequality in the country. key words: poverty, social inequality, national wealth, distribution system, middle class. jel classification: i32, d63, d31 1. вступление в современных научных теориях выделяется два основных типа моделей развития рыночных экономик: либеральная (американская) и скоординированная (скандинавская). для либеральной модели развития рыночной экономки характерно минимальное вмешательство государства в процессы производства и перераспределения национального богатства и как результат более высокие темпы роста национальной экономики. в то время как скоординированная модель рыночной экономики отличается активным вмешательством государства в хозяйственные процессы, большим объемом ввп на душу населения, меньшим уровнем безработицы и более высоким уровнем социальной защищенности граждан. но, ни первая, ни вторая модель не является совершенной в плане обеспечения высокого уровня жизни населения, полного решения проблем социального неравенства и бедности. более того, кризис мировой экономики и неравномерное распределение капитала внутри национальных социально-экономических систем усугубляют проблему социального неравенства и бедности, как в высокоразвитых, так и в менее развитых странах мира. в значительной степени эта проблема касается и украины. отсутствие жизнеспособной стратегии экономического развития и четкой внешней политики государства привели украинскую национальную социально-экономическую систему к структурным диспропорциям в реальном секторе экономики и глубокому финансовому кризису. рост валового внутреннего продукта украины во многом является искусственным и не соответствует реальной ситуации в национальном хозяйстве. прямым следствием чего становится массовое обнищание населения украины, трудовая эмиграция и ухудшение демограbaltic journal of economic studies 129 vol. 3, no. 2, 2017 фической ситуации в стране (а в последнее время и военные действия на территории государства). обозначенные проблемы обуславливают актуальность данного исследования. целью исследования является определение главных факторов и предпосылок неравенства и бедности населения украины, а также выявления основных последствий этого явления и на этой основе формирование основных направлений социально-экономической политики государства. 2. природа социального неравенства и бедности перед тем как говорить об экономических причинах социального расслоения населения и социально-экономических последствиях этого явления, следует дать определения терминов «социальное неравенство» и «бедность», выяснить их природу и влияние на развитие национальной экономики. с экономической точки зрения «социальное неравенство» – это дифференциация (разделение развивающегося целого) общества на отдельные социальные группы, в зависимости от профессиональных, образовательных, имущественных и других признаков. в результате этой дифференциации отдельные члены общества имеют неравный доступ к ограниченным ресурсам и обладают неравными возможностями удовлетворения своих материальных и духовных потребностей (gacalov, 2002: 306; shkaratan, 2012: 40). дифференциация общества является естественным процессом развития социально-экономической системы государства. при этом уровень экономического неравенства колеблется с течением времени около одной постоянной величины. слишком сильное усиление степени неравенства или равенства одинаково чревато национальной катастрофой и потрясениями. (sorokin, 1992: 315-334). в энциклопедических словарях понятие «бедность» связано с определением имущественного положения человека или групп населения с учетом минимального объема доходов. при этом в каждой отдельной стране бедность характеризуется по-разному и имеет свои особенности в зависимости от принятой системы ценностей и общего уровня жизни населения. черта бедности фиксируется на определенный отрезок времени. различают два основных вида бедности: первичную или объективную бедность – жизнь ниже определенного уровня удовлетворения основных потребностей человека; вторичную или субъективную бедность – жизнь с чувством субъективно воспринимаемого недостатка более высоких жизненных благ (gacalov, 2002: 34). в рамках концепции объективной бедности выделяют два вида бедности: абсолютную и относительную бедность. абсолютная бедность определяется на основе сравнения душевых доходов населения и прожиточного минимума – бедный по доходам. относительная бедность определяется на основе сравнения душевых доходов населения и выставленной (относительной) линией бедности – бедный по лишениям. в случае, когда реальные доходы всего населения растут, а их распределение остается постоянным, показатель относительной бедности не изменяется. таким образом, понятие относительной бедности является составляющей концепции социального неравенства (batrakova, 2011: 117-121). для каждой конкретной национальной социально-экономической системы характерна определенная специфика финансово-экономических и социальных отношений. эта специфика во многом определяет участие населения в процессе перераспределения национального богатства. еще древнегреческие ученые задавались вопросами о бедности и справедливом распределении национального богатства. так платон в своей работе «государство» писал: «…при росте и благоустройстве нашего государства надо предоставить всем сословиям возможность иметь свою долю в общем процветании, соответственно их природным данным» (platon, 2015). при этом он говорил о необходимости устранения богатства и бедности, так как «…одно ведет к роскоши, лени, новшествам, другая кроме новшеств – к низостям и злодеяниям» (platon, 2015). тем самым платон утверждал, что идеальное государство должно стремиться к постоянному развитию на основе обеспечения социальной справедливости и равенства своих граждан. ученик платона аристотель в труде «политика» развил идею необходимости социального равенства. он писал, что в любом государстве все население можно разделить на три класса: класс очень богатых, очень бедных людей и средний класс. и соглашался с платоном относительно вредности для развития государства как очень богатого, так и очень бедного населения. аристотель утверждал, что из бедных получаются преступники, из богатых – мошенники, а наилучшим является средний класс. согласно аристотелю, государство, «…где средний слой граждан количественно превосходит богачей и бедняков, вместе взятых, или, но крайней мере, один из этих слоев» является наиболее жизнеспособным, так как именно его представители в соответствии со сложившимися экономическими реалиям наиболее готовы следовать рациональному принципу и тем самым стимулировать устойчивое развитие всей государственной системы (dovatur, 1983: 38-52). исследования современных ученых-экономистов таких как кудуэль а., хендшель й., уодон к. (kudujel', 2002), левис о., ферман л., корнблун и., хабер а. (lewis, 1965), лекарь с., привалов ю., шабанов  в. (lekar', 2011), лощинин м. (loshhinin, 2010), росс д., скотт к., смит п. (ross, 2000), таунсенд п. (townsend, 1979), шевяков а., кирута а. (shevjakov, baltic journal of economic studies 130 vol. 3, no. 2, 2017 2009), хавриш л. (hawrysz, 2016) и других, также подтверждают тезис о том, что проблемы бедности и социального неравенства населения отрицательно сказываются на процессе функционирования национальных социально-экономических систем, а наиболее эффективным государством является такое, в котором имеется широкий слой среднего класса, который и обеспечивает рационализацию процессов потребления, сбережения и инвестирования. 3. экономический рост, социальное неравенство и бедность в украине уровень бедности в государстве во многом определяется величиной получаемого дохода и уровнем потребления населения, что в свою очередь напрямую зависит от объемов ввп и темпов экономического роста. кроме того изменение объемов и темпов роста ввп может влиять на изменения в распределении дохода среди населения, то есть социальное неравенство. поэтому далее проведем анализ динамики ввп украины за 2000-2015 гг. результаты этого анализа можно использовать для моделирования различных вариантов экономической политики государства, направленной на совершенствование системы распределения национального богатства, нивелирования социального неравенства и снижение уровня бедности населения. анализируя базовые темпы прироста реального валового внутреннего продукта (табл. 1), можно сделать следующие выводы. за период с 2000 г. по 2015 г. объем реального ввп украины сократился на 22,4%. при этом, с 2000 по 2007 гг. в украине наблюдался экономический рост, реальный ввп за этот период увеличился на 40,6%. однако уже в 2005 г. были заложены отрицательные тенденции развития национальной экономки (реальный ввп в 2005 г. уменьшился по отношению к 2004 г. на 2,9%), затем 2006-2007 гг. – это период стабилизации и экономического роста (хотя в 2007 г. темпы прироста ввп были в 2 раза ниже, чем в 2006 г. – 2,6% по сравнению с 5,1%). с 2008 г. экономика украины вошла в «штопор» экономического кризиса, в результате чего реальный ввп за период 2008-2015 гг. обвалился на 44,8%. следующим важным индикатором развития национальной социально-экономической системы и соответственно уровня бедности и социального неравенства в стране является физический объем ввп (табл. 2). анализ этого показателя свидетельствует о приросте физического объема ввп украины с 2000 по 2010 гг. в 2012-2013 гг. наблюдается нулевой прирост показателя, а в 2014-2015 гг. – снижение физического объема ввп украины. в 2015 г. произошло значительное снижение объемов ввп украины – ввп 2015 г. на 3,44% меньше ввп 2004 г., а это значит, что по объемам произведенной продукции и услуг на начало 2016 г. экономика страны была отброшена на 12 лет назад. при этом наблюдается низкий уровень зависимости между темпами прироста реального валового внутреннего продукта в денежном эквиваленте и физическом объеме ввп (см. табл. 1 и 2). так в денежном эквиваленте ввп украины начал снижаться уже в 2008 г., в то время как физический объем ввп возрастал вплоть до 2012  г. в  денежном эквиваленте ввп украины в 2015  г. уменьшился по сравнению с 2000 г. на 22,4%, а в физическом объеме вырос на 35,42%. такая ситуация может свидетельствовать с одной стороны о низкой конкурентоспособности национального производителя (за большее количество произведенной продукции получаем меньший доход), а с другой стороны о высоком уровне инфляции (реальный доход значительно ниже номинального – инфляции «съедает» часть дохода, полученного товаропроизводителями) и неразумной валютно-курсовой политики госутаблица 1 реальные цепные и базисные темпы прироста ввп украины с учетом дефлятора ввп год 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2000 0,0 2001 7,7 0,0 2002 13,0 5,0 0,0 2003 22,9 14,2 8,7 0,0 2004 34,2 24,7 18,7 9,2 0,0 2005 30,3 21,0 15,3 6,0 -2,9 0,0 2006 37,0 27,3 21,2 11,5 2,1 5,1 0,0 2007 40,6 30,6 24,4 14,4 4,8 7,9 2,6 0,0 2008 31,7 22,3 16,5 7,1 -1,9 1,1 -3,9 -6,3 0,0 2009 10,0 2,2 -2,7 -10,5 -18,0 -15,6 -19,7 -21,8 -16,5 0,0 2010 8,2 0,5 -4,3 -12,0 -19,4 -17,0 -21,0 -23,0 -17,8 -1,6 0,0 2011 11,8 3,9 -1,1 -9,0 -16,7 -14,2 -18,4 -20,5 -15,1 1,6 3,3 0,0 2012 11,4 3,5 -1,5 -9,4 -17,0 -14,5 -18,7 -20,8 -15,4 1,3 3,0 -0,4 0,0 2013 11,2 3,3 -1,6 -9,5 -17,2 -14,7 -18,8 -20,9 -15,6 1,1 2,8 -0,6 -0,2 0,0 2014 1,3 -5,9 -10,4 -17,6 -24,5 -22,3 -26,1 -28,0 -23,1 -7,9 -6,4 -9,4 -9,1 -8,9 0,0 2015 -22,4 -28,0 -31,4 -36,9 -42,2 -40,5 -43,4 -44,8 -41,1 -29,5 -28,3 -30,6 -30,4 -30,3 -23,4 0,0 источник: рассчитано автором на основе данных (gosudarstvennaja sluzhba statistiki ukrainy, 2017) baltic journal of economic studies 131 vol. 3, no. 2, 2017 дарства. все это факторы, приводящие к снижению уровня реального дохода населения, увеличению бедности и социального неравенства в стране. далее рассмотрим динамику физического объема ввп украины на душу населения за 2000-2015 гг. и сравним ее с двумя предыдущими показателями (рис. 1). следует подчеркнуть, что именно ввп на душу населения более тесно отражает зависимость между уровнем благосостояния населения и ростом национальной экономики. по результатам проведенного анализа можно сделать вывод, что физический объем ввп на душу населения в украине растет на протяжении всего анализируемого периода (2000-2015 гг.). наибольшие темпы его прироста приходятся на 2007-2008 гг. (78,1 и 83,0% к 2000 г. соответственно), с 2009 г. происходит некоторое снижение этого показателя. тем не менее, физический объем ввп на душу населения в 2015 г. увеличился на 47,5% по сравнению с 2000 г. анализируя статистические данные, представленные на рисунке 1, следует отметить, что прирост физического объема ввп на душу населения происходит более интенсивно, чем прирост общей величины ввп (как в физическом, так и в денежном выражении). такая ситуация подтверждает предыдущие выводы о снижении реальных доходов населения и росте бедности в стране, следствием чего становится уменьшении численности населения (отток рабочей силы за границу, ухудшение общей демографической ситуации в стране). таблица 2 цепные и базисные темпы прироста физического объема ввп украины 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2000 0 2001 8,8 0 2002 14,57 5,3 0 2003 25,45 15,3 9,5 0 2004 40,25 28,91 22,42 11,8 0 2005 44,6 32,91 26,22 15,27 3,1 0 2006 55,59 43,01 35,81 24,03 10,94 7,6 0 2007 68,35 54,73 46,94 34,2 20,03 16,42 8,2 0 2008 72,05 58,14 50,18 37,15 22,67 18,98 10,58 2,2 0 2009 46,07 34,26 27,5 16,44 4,149 1,018 -6,12 -13,2 -15,1 0 2010 52,06 39,76 32,73 21,21 8,42 5,16 -2,27 -9,67 -11,6 4,1 0 2011 60,43 47,45 40,03 27,88 14,38 10,94 3,107 -4,71 -6,76 9,825 5,5 0 2012 60,75 47,74 40,31 28,14 14,61 11,17 3,313 -4,52 -6,57 10,05 5,711 0,2 0 2013 60,75 47,74 40,31 28,14 14,61 11,17 3,313 -4,52 -6,57 10,05 5,711 0,2 0 0 2014 50,14 37,99 31,05 19,68 7,047 3,828 -3,51 -10,8 -12,7 2,782 -1,27 -6,41 -6,6 -6,6 0 2015 35,42 24,47 18,21 7,95 -3,44 -6,35 -13 -19,6 -21,3 -7,29 -10,9 -15,6 -15,8 -15,8 -9,8 0 источник: рассчитано автором на основе данных (gosudarstvennaja sluzhba statistiki ukrainy, 2017) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 денежный эквивалент 0,0 7,7 13,0 22,9 34,2 30,3 37,0 40,6 31,7 10,0 8,2 11,8 11,4 11,2 1,3 -22,4 физический объем 0 8,8 14,57 25,45 40,25 44,6 55,59 68,35 72,05 46,07 52,06 60,43 60,75 60,75 50,14 35,42 физический объем на д.н. 0 10 16,93 29,21 45,49 51,02 63,55 78,11 83,09 56 63,02 72,63 73,5 73,84 62,89 47,58 -40,0 -20,0 0,0 20,0 40,0 60,0 80,0 100,0 б аз ис ны е те м пы п ри ро ст а в в п с у че то м ин ф ля ци он ны х пр оц ес со в, % рис. 1. сравнительный анализ базисных темпов прироста ввп украины в денежном эквиваленте, физическом объеме и физическом объеме на душу населения за 2000-2015 гг., в % источник: рассчитано автором на основе данных (gosudarstvennaja sluzhba statistiki ukrainy, 2017) baltic journal of economic studies 132 vol. 3, no. 2, 2017 далее на основе использования корреляционно-регрессионного анализа выявим зависимости между базисными темпами прироста основных показателей развития социально-экономической системы украины за период 2000-2015 гг. (табл. 3). проведенные расчеты подтверждают предыдущие выводы о низкой зависимости между объемом реального ввп в денежном эквиваленте и физическим объемом общего ввп на душу населения (коэффициенты корреляции составляют 0,40 и 0,31). кроме того низкая корреляция реального ввп в денежном эквиваленте наблюдается и со всеми другими анализируемыми показателями, представленными в таблице 3, кроме уровня занятого населения. а это значит, что экономика накачивается «пустыми» эмиссионными деньгами, которые реально не способствуют ее развитию и повышению уровня благосостояния и социальной защищенности населения. наблюдается ситуация, когда на фоне роста ввп в денежном эквиваленте население становится более бедным и социальное неравенство увеличивается. следующие два показателя – физический объем ввп всего и на душу населения. эти показатели имеют тесную корреляционную зависимость как между собой, так в равной степени с такими показателями, как минимальная и реальная заработная плата, фонд заработной платы. с остальными показателями зависимость низкая. такая ситуация свидетельствует о том, что увеличение физического объема ввп украины влияет только на повышение заработной платы, но при этом никак не способствует снижению уровня безработицы и соответственно повышению уровня занятого населения, улучшению демографической ситуации в стране, обновлению основных фондов (что является одним из определяющих факторов обеспечения экономического роста и устойчивого развития любой национальной социально-экономической системы). таким образом, можем сделать вывод о том, что экономика украины на протяжении анализируемого периода (20002015 гг.) функционирует в режиме «проедания» собственных ресурсов. а, как известно, обязательным условием существования какой-либо системы является инвестирование в ее развитие. отсутствие такого инвестирования приводит сначала к застою, а потом к деформациям и полному разрушению всей системы. уровень бедности и социального неравенства в государстве во многом определяется состоянием рынка труда. для анализа рынка труда в украине используем базисные темпы прироста численности населения, занятого населения и штатных сотрудников за период 2001-2015 гг. к 2000 г. (рис. 2). анализируя данные, представленные на рисунке 2, можно выделить следующие тенденции развития рынка труда в украине в 2000-2015 гг. начиная с 2002 г. и до 2008 г. включительно в украине наблюдалась тенденция к незначительному возрастанию численности населения. в итоге численность населения в стране в 2008 г. была на 3,95% больше, чем в 2000 г. однако начиная с 2009 г. численность населения украины неуклонно снижалась и к 2015 г. была на 15% меньше, чем в 2000 г. если сравнить эти данные с данными, представленными на рисунке 1, то можно заметить, что тенденция снижения численности населения в основном совпадает с тенденцией прироста уровня ввп. то есть можем утверждать, что наблюдается прямая зависимость между темпами экономического роста в стране и численностью населения (чем больше проблем в экономке страны, тем больше отток людских ресурсов). анализируя данные относительно занятого населения и количества штатных сотрудников, можем выделить тенденцию постоянного снижения этих таблица 3 коэффициенты корреляционной зависимости между базисными темпами прироста основных показателей развития социально-экономической системы украины (исследуемый период 2000-2015 гг.) № наименование показателя 1 2 3 4 5 6 7 8 9 10 11 1 ввп в денежном эквиваленте 1,00 2 физический объем ввп 0,40 1,00 3 физ. объем ввп на душу населения 0,31 1,00 1,00 4 степень износа основных фондов 0,31 -0,62 -0,68 1,00 5 население всего 0,65 -0,31 -0,39 0,69 1,00 6 уровень занятого населения 0,86 0,02 -0,07 0,56 0,93 1,00 7 уровень безработицы -0,38 -0,93 -0,92 0,48 0,40 0,04 1,00 8 среднее кол-во штатных сотрудников 0,41 -0,56 -0,63 0,76 0,92 0,77 0,61 1,00 9 минимальная зарплата 0,04 0,78 0,81 -0,89 -0,48 -0,26 -0,67 -0,63 1,00 10 реальная средняя зарплата 0,07 0,88 0,91 -0,86 -0,50 -0,25 -0,78 -0,69 0,97 1,00 11 фонд заработной платы* 0,20 0,91 0,93 -0,80 -0,39 -0,11 -0,81 -0,60 0,95 0,99 1,00 *количество занятого населения, умноженное на средний уровень заработной платы по периодам источник: рассчитано автором на основе данных (gosudarstvennaja sluzhba statistiki ukrainy, 2017) baltic journal of economic studies 133 vol. 3, no. 2, 2017 показателей на протяжении всего анализируемого периода. так в 2015 г. занятое население уменьшилось на 17,75% по сравнению с 2000 г., а численность штатных сотрудников на 41,04%. при этом, тенденция на резкое снижение этих показателей наблюдается именно с 2009 г. – года новой волны экономического кризиса в украине. также следует отметить, что количество штатных сотрудников снижается гораздо более высокими темпами, чем общая численность занятого населения. а это значит, что с каждым годом все больший процент от занятого населения украины теряет гарантию таких элементарных составляющих социальной защищенности, как постоянное рабочее место (и соответственно стабильный доход), оплачиваемый отпуск. важнейшим индикатором, характеризующим долю каждого конкретного человека в системе перераспределения национального богатства, является зарплата. именно заработная плата является главным фактором, определяющим уровень социального неравенства и бедности в государстве. потому далее проанализируем отклонение уровня минимальной и средней заработной платы от прожиточного минимума в украине за период 2000-2015 гг. (рис.  3). по этим показателям ситуация в украине выглядит несколько лучше, чем по всем предыдущим. до 2009  г. включительно минимальная заработная плата была ниже официально зарегистрированного прожиточного минимума, а начиная с 2010 г. эти два показателя соответствуют друг другу. средняя зарплата была ниже рис. 2. темпы прироста численности населения, занятого населения и количества штатных сотрудников в украине в 2001-2015 гг., % к 2000 г. источник: рассчитано автором на основе данных (gosudarstvennaja sluzhba statistiki ukrainy, 2017) -1,22 -2,28 -2,52 -2,69 -3,16 -2,86 -2,57 -2,25 -3,92 -9,39 -9,31 -8,67 -8,28 -10,00 -17,75 0,00 -0,36 0,11 0,56 0,94 1,98 2,76 3,61 3,95 -0,84 -5,77 -5,40 -4,28 -3,41 -7,20 -15,00 -5,46 -10,55 -14,38 -17,27 -16,74 -16,41 -16,56 -16,73 -22,12 -24,97 -26,28 -25,99 -28,94 -34,50 -41,04 -45,00 -40,00 -35,00 -30,00 -25,00 -20,00 -15,00 -10,00 -5,00 0,00 5,00 10,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 население занятое население кол-во штатных сотрудников рис. 3. процентное отклонение уровня минимальной и средней заработной платы от прожиточного минимума в украине* *нулевой уровень – прожиточный минимум в соответствующем периоде источник: рассчитано автором на основе данных (gosudarstvennaja sluzhba statistiki ukrainy, 2017) -62,2 -64,4 -58,2 -48,9 -44,2 -34,1 -26,3 -22,3 -18,0 -5,6 0,0 0,0 0,0 0,0 0,0 0,0 -20,0 -6,1 3,0 26,6 52,6 77,9 110,3 144,0 178,1 179,7 153,3 175,0 176,9 184,7 185,7 230,0 -100 -50 0 50 100 150 200 250 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 минимальная зарплата средняя зар плата baltic journal of economic studies 134 vol. 3, no. 2, 2017 прожиточного минимума только до 2001 г. включительно, а начиная с 2002 г. она превышает этот показатель. причем разница между официально зарегистрированным прожиточным минимумом и средней зарплатой постоянно возрастает и в 2015 г. превышение составляет 230%. то есть в первом приближении согласно данным показателям уровень жизни среднестатистического украинца должен расти. однако нельзя делать выводы только по одной группе показателей, необходимо комплексно посмотреть на все составляющие, характеризующие уровень развития национальной социально-экономической системы. и здесь мы можем заметить, что увеличение разрыва между средней зарплатой и прожиточным минимумом в пользу первого показателя идет на фоне падения объема ввп, неэффективной системы инвестирования в национальное хозяйство, высокого уровня инфляции (цены на потребительские товары в украине в 2014 г. увеличились на 24,9%, в 2015 г. – на 43,3%), снижения уровня занятого населения и численности штатных сотрудников, снижения общей численности населения страны. а это означает, что нсэс работает не достаточно эффективно, чтобы произошло реальное повышение уровня жизни населения. подтверждением этого тезиса также являются статистические данные, свидетельствующие о том, что в 2014 г. реальный доход населения украины снизился на 11,5% и составил 88,5% от дохода 2013 г., а в 2015 г. 77,7% от дохода 2014 г. (gosudarstvennaja sluzhba statistiki ukrainy, 2017). прямым следствием снижения реальных доходов населения является увеличение уровня социального неравенства, что в свою очередь является фактором дальнейшей дестабилизации всей национальной социально-экономической системы. таким образом, круг замыкается – государство остается бедным, потому что бедно изначально. более того маховик кризисных явлений в экономике может раскручиваться под влиянием внешних дестабилизирующих факторов. 4. заключение проведенные исследования позволяют сделать следующие выводы. 1. уровень жизни населения является одним из определяющих факторов устойчивого развития национальных социально-экономических систем. это определяется тем, что платежеспособный спрос населения обеспечивает инвестирование процесса расширенного воспроизводства. в связи с этим экономическая политика государства должна быть направлена на снижение уровня бедности и социального неравенства в стране. 2. одним из определяющих факторов бедности и социального неравенства является система распределения национального богатства в государстве. при этом существует четкая зависимость: чем выше уровень развития государства, тем совершеннее система распределения национального богатства и тем выше уровень благосостояния граждан. 3. наличие процессов роста в национальной экономике является неотъемлемым условием высокого уровня благосостояния населения и его социальной защищенности. соответственно, увеличение бедности и социального неравенства является прямым следствием развития кризисных явлений в национальной социально-экономической системе. 4. результаты проведенного анализа основных индикаторов социально-экономического развития в украине за 2000-2015 гг. свидетельствуют о том, что начиная с 2008 г. экономика украины вошла в «штопор» экономического кризиса, в результате чего произошло падение реальных доходов населения, рост бедности и социального неравенства в государстве. 5. для снижения уровня бедности и социального неравенства в стране экономическая политика государства должна быть направлена на достижение полной занятости и высоких доходов населения на основе реструктуризации системы национального хозяйства. создание новых рабочих мест, инвестирование в человеческий капитал на основе совершенствования системы перераспределения национального богатства должно стать приоритетом номер один для национального правительства. в противном случае украине в ближайшей перспективе грозит полный экономический и социальный коллапс. references: batrakova l. g., (2011). osnovnye koncepcii ocenki bednosti naselenija. – jaroslavskij pedagogicheskij vestnik, (3/2011) tom i (gumanitarnye nauki): 117–121 s. detskaja bednost' v razvivajushhihsja stranah. – bristol': policy press 2003 dovatur a.i., (1983). «politika» aristotelja: t. 4. – moskva: mysl', 38–52 s. gacalov m., (2002). sovremennyj jekonomicheskij slovar'-spravochnik. – uhta: ugtu, 371 s. gosudarstvennaja sluzhba statistiki ukrainy (2017). elektronnyj resurs, rezhym dostupu: www.ukrstat.gov.ua. hawrysz l., (2016). social aspects of csr reporting in polish banks listed on the warsaw stock exchange, socialsgem, 3th international multidisciplinary scientific conferences sgem2016, social sciences&arts conference procedings, bulgaria 2016, p. 587-594kudujel' a., hendshel' j., uodon k. 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jekonomiki, 526 s. townsend peter brereton, (1979). poverty in the united kingdom: a survey of household resources and standards of living. – harmondsworth: penguin books, 1214 p. инесса сытник, артем степочкин, богдан сытник экономические факторы и последствия социального неравенства и бедности в украине аннотация. целью исследования является определение главных факторов и предпосылок неравенства и бедности населения украины, а также выявления основных последствий этого явления и на этой основе формирование основных направлений социально-экономической политики государства. методология. в статье рассмотрены теоретические подходы к определению социального неравенства и бедности, а также вопросы справедливого распределения национального богатства. результаты исследования позволили подтвердить тезис авторов о том, что проблемы бедности и социального неравенства отрицательно сказываются на процессе функционирования национальных социально-экономических систем. доказано, что наиболее эффективным государством является такое, в котором имеется широкий слой среднего класса, который и обеспечивает рационализацию процессов потребления, сбережения и инвестирования. практическое значение. на основе официальных статистических данных основных макроэкономических показателей развития государства в статье исследованы тенденции развития экономики украины и ее социальной составляющей. рассчитаны коэффициенты корреляционной зависимости между показателями развития социально-экономической системы украины и сделаны выводы об отсутствии в стране системы справедливого распределения национального богатства. значение/оригинальность. результатом проведенного исследования является вывод о необходимости модернизации и реформирования имеющийся системы перераспределения национального богатства в украине с целью снижения бедности и социального неравенства в стране. baltic journal of economic studies 123 vol. 7 no. 5, 2021 corresponding author: 1 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: sauliak_marina@ukr.net orcid: https://orcid.org/0000-0003-3281-5039 2 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. orcid: https://orcid.org/0000-0003-3361-0625 3 national aviation university, ukraine. e-mail: sergey.yuldashev@gmail.com orcid: https://orcid.org/0000-0002-2033-4820 doi: https://doi.org/10.30525/2256-0742/2021-7-5-123-129 legal peculiarities of "digitalization" of the economy in the context of the development of the information society in ukraine maryna markaryan1, dmytro bilyi2, serghii yuldashev3 abstract. digitalization of the economy is a determining factor in the growth of the economy as a whole, including the digital industry itself, as a producer of technology. digital technologies in many sectors are at the core of production strategies. their transformative power is changing traditional business models, production chains and processes, and driving new products and services, platforms and innovations. digital technologies in ukraine should be available both in terms of organizational and technical access to the relevant digital infrastructures and from the financial and economic point of view, that is, by creating conditions and incentives that will encourage businesses to digitalize. the result of such activities will be the modernization of the economy, its recovery, and increased competitiveness. the digital economy involves the introduction of digital technology in all areas, namely: production, education, medicine, tourism, social sphere. spheres of life that are modernized with the help of "digital" technologies become much more efficient and create new value and quality, which very often leads to a complete transformation of the old system (zhukova). analysis of recent studies and publications. the problems of development of the digital economy and the formation of the information society are actively discussed in the domestic scientific literature, in particular in the works of r. avdeyev, f. gurov, l. kit, s. kolyadenko, d. makovskyi, i. malik, n. meshko, i. melyukhin, v. pylypchuk, a. prokofyev, ye. putilova, o. ryzhenko. the authors substantiate the main conceptual categories and methodological approaches to the definition of the basic components of the modern model of socio-economic development and ways of implementing digital economy tools in the economic environment. at the same time, the theoretical understanding and scientific justification of the issues of informatization of society is the subject of scientific discussion by foreign researchers. r. inclar, r. cleo, a. krimes, t. nibel, j. wright have made significant contributions to the development and implementation of innovative digital strategies. s. haller, m. hague and other scientists. however, many aspects of the impact of the digital economy on the institutional status of the state remain unexplored. that is why it is extremely important for ukraine in such a difficult period of its development to transform the traditional economy into a modern information and digital economy as soon as possible. key words: digital economy, legal regulation, services, "digitalization" of business, industry, digital leadership, digital infrastructure, digital skills, digitalization of the country, public policy, etc. jel classification: h11, h30, h61, i38, r50, d72 introduction "digital" economy is a key driver of competitiveness, productivity, innovation and economic growth of ukraine in the global "digital and economic" environment. "digital" economy is the basis of the strategy of the future, the core of its content is the introduction of digital technologies in this sphere. "digital" technologies are necessary to improve the efficiency of ukrainian industry, and in some industries, they are becoming the basis of production strategies. their transformational power changes traditional business models, production chains, and causes new products and innovations. in turn, the implementation and maintenance of the digital economy is carried out baltic journal of economic studies 124 vol. 7 no. 5, 2021 by the digital industry. the driving force of the digital economy is human capital, i.e., people's knowledge, talents, skills, abilities, experience, and intellect. in this regard, the expansion of "digital" technology makes people's digital competence key among other competences. the international digital economy is developing in such areas as: "an industrial policy for the globalization era"; "digital agenda for europe"; "the entrepreneurship strategy ". today in ukraine an official and objective vision of the development of "intellectually capacious, creative, innovative markets", in particular "digital" is just being formed. therefore, the introduction of digital technologies and global information highways into ukrainian society is a priority of successful public policy. in the long term, it will develop, multiply and use the capabilities of intelligence to create digital added value. "digital" technologies are necessary to improve the efficiency of ukrainian industry, and in some industries, they are becoming the basis of production strategies. their transformative power changes traditional business models, production chains, and brings new products and innovations (zhukova). 1. research methodology 1.1. digital economy as an object of legal research ukraine identifies five basic elements that constitute the essence and direction of the digital economy development: "digital" industry, i.e. the field of ict as a branch of the economy; "digital" infrastructure; "digitalization" of business, industry; "digital" skills, competencies and leadership; "digital" culture (digital agenda of ukraine – 2020). 1. the digital industry program is the realization of the idea of a "smart factory," based on the concept of "digitalization" of industrial production in order to improve their operational and business efficiency. smart factory appeals to technologies such as cloud computing, wireless communication, remote control and maintenance, cybersecurity, control system integration, value chain integration and collaboration improvement, 3d printing, and others. the introduction of this idea provides an opportunity to increase the competitiveness of industries, stimulate the domestic market, and maintain and strengthen its position in high value-added sectors at the national and, in some cases, global level. however, this is only an opportunity to gain relevant knowledge, experience, advice, to learn and see this new field with one' own eyes. in addition to informational and educational work, ukrainian politicians, government agencies and businesses are developing comprehensive initiatives to implement targeted educational initiatives to integrate ict best practices into industrial sectors, involving relevant associations, vendors, international brands, etc. focus groups of experts, knowledge carriers and promoters are formed and linked with industry sectors; digital transformation roadmaps are created for individual enterprises and industries. such roadmaps are a plan of action and initiatives for "digitalization", and for many companies, a plan for reanimation and return to the economic environment. the integration of "digital" technologies into production processes, or the "digitalization" of industry, is gradually becoming a priority of state industrial policy. the crucial role in this today is held by the state, accordingly, it acts in three directions: creating the infrastructure of "industry 4.0" (industrial parks and industry technology centers), access to capital to create new innovative production facilities, and development of "digital" skills to train personnel capable of working with "industry 4.0" technologies. accordingly, industrial parks for ukraine are one of the main factors in accelerating economic development. the most effective strategy is for ukrainian entrepreneurs and enterprises to be willing, able and competitive in the global market. according to a unido (un) study, incentives for industrial parks include: loans at special preferential rates; tax and duty exemptions; rental subsidies; provision of land on favorable terms; subsidized rates for electricity and water; preferential rates for telecommunications services; simplified regulatory procedures / "one window"; collective use of services and assets; creation of housing and communal infrastructure for employees (zhukova). access to capital implies the introduction of state instruments of direct support to innovative enterprises through the introduction of state grants for the implementation of innovative projects; reduced tax rates; tax credits; accelerated depreciation of equipment used in innovative production; tax vacations for newly created innovative industries. thus, state policy on the implementation and development of digitalization of the economy can be divided into direct support for innovative enterprises and support for the development of the venture capital market. moreover, in terms of support of the venture capital market, the following measures are relevant: – elimination of double taxation of investors participating in the formation of venture capital funds; – increasing the liquidity of risky investments based on the development of the capital market, including through the creation of special exchanges for trading securities of new companies that cannot gain access to traditional stock exchanges for lack of financial history and any other formal attributes; baltic journal of economic studies 125 vol. 7 no. 5, 2021 – legislative provision of conditions for entry into venture funds by institutional investors (e.g., pension and insurance funds, banks); – lowering the entry threshold for the private venture capital investor in venture capital funds; – tax cuts on dividends received on the shares of venture capital funds or companies; – exemption from income tax received from the sale of shares in venture capital structures; – state risk insurance; – the creation of venture capital trusts (investment companies that provide tax benefits in exchange for investment commitments) (zhukova). 2. digital skills are designed to help digital economy professionals become more skilled and in demand, and retraining is designed to help people become proficient in other promising professions of the future. the world economic forum's report on the future of jobs predicts that 75 million jobs in the 20 largest countries will be replaced by new technology in the near future. but this does not mean that technology will displace people from the labour market. the same report said that technological advances could create 133 million new jobs. but they will still require the right skills and competencies (digital agenda of ukraine – 2020). defines digital competence as "the confident, critical and creative use of ict to achieve goals related to work, study, leisure and participation in society ". digital competence is a core competence, the presence of which contributes to the formation and development of other key competences. in europe, digital competence was defined by the eu parliament in 2006 as one of the 8 key competences important for everyone's life in the information society (recommendation 2006/962 / ec of the eu parliament and of the council dd. 18.12.2006, official journal 394 dd. 30.12.2006). thus, in the eu recommendations on key competencies for lifelong learning, digital competence "implies confident and critical use of ict for work, leisure and communication." (recommendation of the european parliament, 2006:15–16) this requires basic ict skills, such as using computers and other computer devices to search, evaluate, store, create, present, and share data, as well as the ability to communicate and work with internet services to share information. digital competence is also present in the updated structure of key competences for lifelong learning (council recommendation dd. 22.05.2018 on key competences for lifelong learning, oj c 189, 04.06.2018). appropriate clarifications have been made to account for developments in digital technology (council recommendation, 2018: 9–10) (leadership in the digital age), namely digital competence "provides confident, critical and responsible use of digital technologies for learning, working and living in society." it includes: information literacy, media literacy, data processing using digital technologies (digital data processing), communication and cooperation with the use of digital technologies (digital communication and collaboration), ability to create digital content (including programming), information security (digital well-being and competencies related to cybersecurity), awareness of intellectual property related issues, ability to solve problems with the use of digital technologies (problem solving with digital tools), and critical thinking (what is infrastructure, types of infrastructure, the concept of it infrastructure). at the same time, people should understand the general principles and mechanisms underlying digital technology; know the basic functions and principles of using various devices, software, computer networks for social integration, cooperation with other people, creative development to achieve personal, social or commercial goals; be critical and reasonable about the reliability and impact of various data; be familiar with the legal and ethical principles associated with the use of digital technology. digital leadership defines productivity today. however, the corporate world is still dominated by a hopelessly outdated leadership model. it was created at a time when it was believed that leaders should use their vision and skills solely to create a financially sustainable, results-oriented organization. it almost completely ignored the fact that leaders could be anything but "hyper-rational economists. the emotional components of leadership were considered something not usually talked about out loud (leadership in the digital age). in the cyber age, leaders face the growing pressure of globalization, the rapid development of technology, the virtualization of the work environment (when members of an organization are separated not only by vast distances, but also by cultural barriers), and "chronic" information overload. this is why modernizing a leader that is able to learn how to respond more productively to complex situations and develop emotional skills that will help become a more effective leader is another area of development and improvement in the digital economy. 3. the digital infrastructure, the framework of the digital economy, is a set of interconnected parts of a single process that is provided by several automated information systems that exchange data with each other. low-level systems are mechanisms for implementing the tasks performed by high-level systems. it is a large integrated system that fully supports all the activities of an organization. like any system, it needs to be purposefully designed to function properly (leadership in the digital age). fixed telecommunication infrastructure (trunk, distribution and local networks, traffic exchange points, etc.), mobile telecommunication infrastructure (3g, 4g, radio and satellite technologies, wi-fi, etc.), digital television infrastructure (terrestrial, cable, satellite), baltic journal of economic studies 126 vol. 7 no. 5, 2021 radio infrastructure long range frequency (unlicensed frequencies) for internet of things projects (sensors, controllers, etc.), computing infrastructure – data processing and storage centres (so-called cloud or virtualized infrastructure), cyber security infrastructure, specialized infrastructures (special networks, video surveillance, related engineering systems). soft identification and trust infrastructure (trust services, citizen id, b ankid, mobileid) open data infrastructure, interoperability infrastructure (api, european isa standards). e-commerce infrastructure (digital b2b buying and selling platforms, electronic contracts, electronic invoices, electronic supply chains), transaction processing infrastructure (online payments, cashless instruments, fintech services). public services infrastructure (e-government) life support infrastructure (digital health, education, transportation, logistics and other services, public safety services), geoinformation infrastructure (linking digital data to spatial objects), industrial digital infrastructure (industry 4.0, cyber systems) (what is infrastructure, types of infrastructure, the concept of it infrastructure). 4. digitalization of business, industry opens the way to innovative ways of business and enterprise development, for example, cloud technology allows multiple teams to work simultaneously on one project and efficiently use company resources. using the mobile first strategy, companies get and monetize mobile traffic that has already caught up with traffic from stationary devices. ready-made solutions save time on tasks. various programs, extensions and connectors optimize the company 's work with minimal time spent on implementation and adaptation. all these and other digital transformation technologies have made the entry threshold into many areas lower. it has become easier to start and grow one' s own business thanks to the huge number of tools provided by the digitalization of industries and businesses (ukraine's digital economy: it's time to act). 2. results and discussion 2.1 features of the legal regulation of "digitalization" of the economy it should be noted that "digitalization", "digital agenda" and related components, initiatives and projects significantly "fall out" of the current legislation in ukraine. at the same time, it should be noted that the current legislation of ukraine does not regulate all aspects of digitalization of the economy. today, the legal regulation is slow. the first regulations that introduced the basics of digitalization were the following laws of ukraine: "on access to public information", "on personal data protection", "on the list of licensing documents in the economic sector", "on free legal aid" etc. these regulations defined the legal instruments and introduced the performance of public administration. then there was detailing and highlighting the features of the digitization of the public sphere, respectively, the following regulations were adopted: order of the cabinet of ministers of ukraine "on approval of the concept of development of electronic government in ukraine" from december 13, 2010 № 2250, which was finalized in 2017 and approved in a new version; by the order of the cabinet of ministers of ukraine dated september 20, 2017 № 649-р., which, in turn, became the basis for the adoption of the order "on approval of the information society development strategy in ukraine" of may 15, 2013 № 386, and order of the cabinet of ministers of ukraine "on approval of the concept of development of the digital economy and society of ukraine for 2018-2020 and approval of the plan of measures for its implementation" of january 17, 2018 № 67-p. the most important were such regulatory acts as: order of the cabinet of ministers of ukraine "on approval of the action plan for the implementation of the concept of creation and functioning of the information system of electronic interaction of state electronic information resources" of july 11, 2013 no. 517-р.; order of the cabinet of ministers of ukraine "on approval of the action plan for the implementation of the concept of creation and functioning of the automated system single window for electronic reporting" of october 17, 2013 № 809; order of the cabinet of ministers of ukraine "on approval of the concept of the state targeted program of creation and operation of the information system of administrative services for the period until 2017" of july 24, 2013 № 614-p. as for the legal regulation of digitalization of the economy, the main legal act today is the law of ukraine "on stimulation of digital economy development in ukraine", which defines organizational, legal and financial principles of the legal regime "diia city ", introduced to stimulate the digital economy in ukraine by creating favorable conditions for innovative business, building digital infrastructure, attracting investment, as well as talented professionals. the legal regime of "diia city " applies to a relations involving an "diia city " resident or a participation in the authorized capital of an "diia city " resident during the period of one's residence (as a digital transformation will help the development of your organization?). the next landmark document affecting the development of digitalization of the economy is the resolution of the verkhovna rada of ukraine "on adoption of the draft law of ukraine on amendments to the tax code of ukraine to stimulate the development of the digital economy in ukraine," which baltic journal of economic studies 127 vol. 7 no. 5, 2021 lays the preconditions for increasing the investment attractiveness of ukraine and is expected to strengthen ukraine's competitiveness in the global market of it services (fishchuk). the draft law is aimed at providing tax incentives for the it-industry, together with the draft law of ukraine "on stimulation of digital economy development in ukraine" establishing a comprehensive system of measures necessary for the development of the digital economy in ukraine. the project provides for the introduction of a number of measures to stimulate the development of the it-industry, namely: – special tax regime for residents of diia city, it-companies that will meet the requirements of the law of ukraine "on stimulation of digital economy development in ukraine" and will be included in a special register maintained by the authorized body (the central executive body in the field of digital economy); – special regime of taxation of certain income of employees of "diia city " residents and their attracted gig-specialists (specialists who perform work (provide services) within the economic activity of "diia city " residents on the basis of gig-contracts concluded in accordance with the law of ukraine "on stimulation of digital economy development in ukraine" (on stimulating the development of the digital economy in ukraine). 2.2. public administration as a subject of promotion of the basic principles of "digitalization" of the economy digitalization becomes a priority for state development with consistent and effective steps to implement institutional change. in this regard, the creation of the state agency for e-governance of ukraine was introduced, on the basis of which the ministry of digital transformation was created, the head of which is the vice-prime minister. according to the resolution of the cabinet of ministers of ukraine dd. september 18, 2019 № 856, the ministry becomes the main body for the formation and implementation of state policy in the areas of digitalization, digital development, digital economy, digital innovation, e-government, e-democracy, information society development, informatization; in the field of development of digital skills of citizens and digital rights of citizens; in the field of open data on development of national information resources and interoperability, development of broadband internet and telecommunications, e-commerce and business infrastructure; in the field of electronic and administrative services; in the field of electronic trust services and electronic identification; in the field of it industry development (explanatory note to the draft law of ukraine). thus, the policy of every modern democratic country should be service-oriented in its relations with the citizen. according to the basic international norms of human rights, the human being is a basic value, and respect for human rights should be a task to which all peoples and all states should aspire (universal declaration of human rights, 1948). governments should create and develop a legal framework, promote scientific and technical justification, develop and implement digitization of documents of public authorities. the initiative to create unifying platforms for digital data and registries of government services was implemented in ukraine similar to the results achieved with the support of european and estonian partners. currently, the system of electronic interaction of ukrainian state electronic information resources "trembita", which is implemented and posted on the official website of the ministry of digital transformation of ukraine created the opportunity to use information and communication technologies that will facilitate the effective enforcement of human rights, quick and convenient use of databases of different entities (public authorities) to provide a competitive, fast, and efficient public service. such development of information and communication technologies will allow control over the implementation of decisions and the effectiveness of numerous reforms, which are becoming a ukrainian trend of changing political elites, and will prevent the avoidance of responsibility for lofty rhetoric and populism. conclusions to summarize the above, it is believed that the "digital" economy and the features of its legal regulation need to improve in the following ways: introduction of professional and long-accepted terminology: digital transformation, digital economy, digital industry, digital infrastructure, digital society, digital citizenship, digital identity, digital skills, digital competencies, digital divide, digital dividend, digital leap, digital value added, digital trends, digital critical technologies, digital currency, etc. creation of a national system of digital statistics (the so-called "digital barometer") and the launch of national models for calculating the digital economy (gdp), digital industry, digital value added, etc. definition of digital human rights (equal access to digital infrastructure, digital technology). definition of the principles of digitalization and the formation of the principles of the digital code: digitalization is not an end in itself, it creates advantages, contributes to the development of the information society; a platform for economic growth and global competition; standardization, a priority object of public administration, etc. baltic journal of economic studies 128 vol. 7 no. 5, 2021 harmonization with global digital indices and rankings as benchmarks for achieving national digital development goals – for example, networked readiness index (wef), global innovation index (insead, wipo), broadband penetration index (itu), computer literacy index, e-government development index, digital economy and society index, ict development index (itu). defining the principles of digital dictatorship (the maintenance and development of any analog system is carried out only in the absence of a digital alternative). that is, the physical system becomes the alternative and the digital system becomes the normal state of operation. there are no resources to maintain the two systems at the same time. development of packages of universal (standard) digital services, i.e., standard packages of digital services in education, medicine, ecology, security, social and other areas, which should be available in digital mode for every citizen, and corresponding to certain technological and functional parameters. for example, a digital universal education service might include a student's tablet, digital multimedia content, internet access from the workplace (actually wi-fi in every classroom), a smart board, and so on. development of a system to stimulate industry 4.0, including the adaptation of international standards in this area, mechanisms for creating industry technology transfer centers, engineering clusters, the creation of roadmaps for the digital transformation of individual industries and the creation of digital industrial platforms. development of a national broadband plan, which would define the stages of building telecommunications infrastructures (primarily fixed, since everything can be done with a cell phone), and most importantly, such a plan should harmonize investments by private fixed providers with government plans to meet broadband access needs (education, medicine, tourism, agricultural sector). defining mechanisms for bridging the digital divide. "solid" digital infrastructure, primarily broadband networks, should cover not only cities, but also outlying villages. "bringing the possibilities of the city to rural areas" is the key objective of the project to overcome the digital divide in ukraine. it is also about connecting remote schools, hospitals, etc. to do this, it is advisable to model the mechanisms of public-private partnership, such as the creation of the national solution to the digital divide fund as an infrastructure investment for ukraine, business and citizens. in addition to the national fund, the creation of regional, i.e., actually local community funds is justified. such funding opportunities may be of interest to equipment manufacturers and direct investors. development of a comprehensive educational program for the acquisition of digital competencies and skills. identification of priority "national projects of digital transformation", i.e., critical areas at the national level for the implementation of "digital" transformation initiatives and projects in such priority areas as public safety and security, secondary school, health, e-democracy, digital television, ecology and environmental protection, smart city, smart infrastructure, electronic payments and settlements, "cashless economy ", "digitalization" of the social sphere, e-commerce, etc. defining a governance and implementation model for the "digital agenda," from coordination (e.g., "digital government committee") to national and regional level architecture. it is important to create a mechanism for the preparation and support of digitalization investment projects, including the use of public-private partnership models (aka buildoperate-transfer, etc.) (pechenkin). the development of the "digital" economy contributes to the rise and mobility of this sector, creating a field for large-scale projects and initiatives. when ukraine becomes a testing ground for "digital" transformations, it will attract the attention of investors, step by step it will become an innovative leader. life in the "digital" economy will provide citizens with new opportunities for business and selfrealization, learning, creativity, recreation. references: zhukova, l. m. digital economy as an object of state regulation. available at: http://www.allbest.ru/ digital agenda of ukraine – 2020 ("digital agenda" – 2020). available at: https://compu.fandom.com tatomirovich, t. digital skills: an advantage or a necessity for everyone? available at: https://www. althoughda.com.ua/columns/2021/01/12/669903/ leadership in the digital age. available at: http://www.management.com.ua/notes/leadership-in-the-digital age.html what is infrastructure, types of infrastructure, the concept of it infrastructure. available at: https://ukrguru.ru/ novini-ta-suspilstvo/60530-shho-take-infrastruktura-vidi-infrastrukturi.html ukraine's digital economy: it's time to act. available at: https://en.ppt-online.org/375770 as a digital transformation will help the development of your organization? available at: https://www.terrasoft.ua/ page/digital-transformation on stimulating the development of the digital economy in ukraine. law of ukraine of july 15, 2021 № 1667-ix. available at: https://zakon.rada.gov.ua/laws/show/1667-20#n36 baltic journal of economic studies 129 vol. 7 no. 5, 2021 explanatory note to the draft law of ukraine "on amendments to the tax code of ukraine to stimulate the development of the digital economy in ukraine". available at: http://w1.c1.rada.gov.ua/pls/zweb2/ webproc4_2?pf3516=5376&skl=10 pechenkin, i. digitization of public administration and improvement of legal norms of appeal of service activity of public authorities in ukraine. available at: http://www.allbest.ru/ fishchuk, v. the digital economy is real. available at: https://biz.nv.ua/ukr/experts/tsifrova-ekonomika-tserealno-1001102.html baltic journal of economic studies 204 vol. 7 no. 5, 2021 corresponding author: 1 national university "yuri kondratyuk poltava polytechnic", ukraine. e-mail: irinachernysh@gmail.com orcid: https://orcid.org/0000-0001-6565-5292 researcherid: https://publons.com/researcher/1937618/iryna-chernysh 2 national university "yuri kondratyuk poltava polytechnic", ukraine. e-mail: mila.pesockaya@gmail.com orcid: https://orcid.org/0000-0002-7510-8839 researcherid: https://publons.com/researcher/4695364/mila-kozyk doi: https://doi.org/10.30525/2256-0742/2021-7-5-204-212 improving the process of employee adaptation in hospitality enterprises based on iso 10018:2015 "quality management, guidelines for employee engagement and competencies" iryna chernysh1, mila kozyk2 abstract. the purpose of the article is to study theoretical and practical aspects of the process of adaptation of hospitality workers taking into account the requirements of today, namely, when the external environment is dynamic, difficult to predict, staff turnover is high, multitasking increases, and professional burnout accelerates. the methods of research are analysis and synthesis, induction and deduction, causal link between the process of adaptation of employees and the level of engagement that affects labor productivity, which justified the role and importance of the international quality standard iso 10018: 2015 "quality management, guidelines for employee engagement and competencies". the results of the study have established that with the development of the digital economy, opportunities for self-development are increasing, so modern professional development programs should be supplemented with a section on self-development. and this should be reflected in the employee id card. form a separate program of human capital development, where the adaptation program will be part of, providing a positive attitude to the enterprises of hospitality of the employees themselves, taking into account their competencies. practical results. to improve the efficiency of the process of adaptation of hospitality workers it is necessary to implement the international quality standard iso 10018: 2015 "quality management, guidelines for employee engagement and competencies", which will address the organizational and methodological aspects of this process. strengthen the role and importance of competencies that affect the quality of hospitality workers. the peculiarity of this approach is the use of all these processes on the basis of the quality control cycle. value/originality. the originality lies in the use of the international practice of iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" in the hospitality industry, where the human factor plays a key role and shapes their sustainable development. key words: adaptation, involvement, iso standard, adaptation tools, benefits of adaptation, human capital, hospitality. jel classification: j24 1. introduction relevance of the topic lies in the fact that the process of adaptation is a process that accompanies people' activities throughout their lives, both in everyday life and in professional activities. due to the fact that in recent decades there has been a constant intensification of the processes of stp, globalization, a change in the paradigm of human resource management, the increasing role and importance of information, there is a need to form a permanent adaptation. at the same time, adaptation is a protective reaction to changes, which allows you to assess them and determine the direction of further action. in professional activity to understand the reference points of cooperation with colleagues, acquaintance and acceptance (or rejection) of corporate values. the adaptation process is also important because it not only provides an introduction to the company and its standards of work, but also allows you to shape the behavior and culture of the future employee. it allows to assess strengths and weaknesses. baltic journal of economic studies 205 vol. 7 no. 5, 2021 implementation of adaptation management system at the enterprise is quite a complex task, the solution of which affects: start-up costs, staff turnover, labor productivity, corporate culture. for new employees this aspect is especially important, as it affects their perception of new values, work rules and sense of belonging to a certain social group. for employees who work and move up the career ladder, anxiety, fear of the new team, tasks are reduced. for managers, adaptation allows not only to form a positive attitude to work, but also to save time in organizing their activities. by paying attention to this from the beginning, hotel companies are able to reduce their investment in staff and increase productivity. that is, from the very beginning involve the employee in everything that is going on and thereby form a loyal attitude both to the company as a whole and to its activities by other employees, colleagues, friends, acquaintances. this process is especially important for the hospitality industry, where personnel play a crucial role. the implementation of an adaptation management system in the hospitality industry is quite a complex task, the solution of which affects: start-up costs, staff turnover, productivity, corporate culture. for new employees this aspect is especially important because it affects their perception of new values, work rules and sense of belonging to a certain social group. for employees who work and move up the career ladder, anxiety and fear of the new team and tasks are reduced. for managers, adaptation allows them to form not only a positive attitude to work, but also saves time in organizing their activities. for each category different adaptation tools are supposed to be used, the effectiveness of which will depend on a number of socio-economic factors. therefore, first of all, it is proposed to consider the peculiarities of formation of managers' adaptation program on the basis of adaptation strategies (table 1). these strategies, as a rule, are used by managers and specialists in the process of their professional growth. the peculiarity of their adaptation is that they always feel pressure from above and below. therefore, changes should not be abrupt, threatening to disrupt the work of other units. to do this, they use adaptation, which allows them not only to get acquainted with the new rules of work, but also to feel that their interests will be taken into account. at the same time, there are difficulties, which are associated with the difficulties of employees' perception of the new head. a new leader can only succeed if that leader is well-versed in the existing internal team relationships, relying on key figures, such as the temporary executor of those responsibilities. it is advisable to ask him for advice and discuss with him the possibilities of cooperation. this process will also be easier if the new leader studies the future of his subordinates, their strengths and weaknesses, qualifications, and potential opportunities for cooperation. it is also worth remembering that from day one it is desirable to show yourself as a person decisive, but at the same time cautious, prudent, who does not change everything at once, but immediately removes obstacles in the work. pay attention to the opinions and suggestions of subordinates. avoid criticizing the former supervisor. in this way, adapting the supervisor to the new work environment will reduce stress, tension, but also ensure high productivity. 2. adaptation of the personnel of enterprises in the field of hospitality for this purpose, as the world practice shows, specialized personnel adaptation services can be created. this can be done in different ways, depending on the number of employees at the enterprise, the management structure of the enterprise, the orientation of the administration of the enterprise to solve social problems in the sphere of production and other issues. the employee adaptation service is formed as an independent structural subdivision (department, table 1 strategies for adapting leaders strategy characteristics 1. expectations. it consists of a gradual study of the situation, careful attention to the evaluation of the predecessor's work, familiarity with implemented and unimplemented projects, study of departmental problems and peculiarities of the previous manager's work. the active action period usually begins after 100 days at the earliest. 2. critical. is the fact that the new manager is very critical and negative about the work of the previous manager, employees are considered to be drones. usually, active action begins 3-5 days in advance and assumes that the "new" supervisor will be able to bring everything back to normal. 3. traditional. assumes that the new manager perceives the values and continues the work started. the new manager does not seek to radically change anything, but rather follows the techniques of the previous manager. 4. rational. it is based on the fact that the new manager chooses a few areas of activity to improve them and solve the pressing problems within 4-6 weeks, which will get fast results. this allows the newcomer to succeed, to demonstrate his capabilities. in the process of performing tasks, gradually train subordinates to work according to new rules, in accordance with the set goals and not to "give up" even in the most difficult moment. source: (iso 10018: 2015 quality management; kozak, myronenko, 2019; krushelnytska, melnychuk, 2005) baltic journal of economic studies 206 vol. 7 no. 5, 2021 laboratory) or is part of other functional subdivisions (as a bureau, group and individual employees) – in the personnel department, sociological laboratory, labor and payroll department, etc. (krushelnytska, melnychuk, 2005). sometimes the position of an adaptation specialist is added to the staff schedule. it is important that the adaptation service be an integral part of the overall hr management system at the enterprise. consolidation of adaptation management functions can occur in the following areas: 1. allocation of a separate structural unit, which will deal with the training and adaptation of employees. the adaptation unit should perform the following functions: study and forecasting of the situation on the labor market, implementation of appropriate restructuring of human resources; hiring and selection of personnel using professional profiles and job descriptions, testing and interviewing employees for the purpose of better adaptation; placement of personnel by departments, areas, jobs, formation of a stable workforce; organization of interaction with the regional adaptation management system on mutually beneficial terms. 2. creation of separate positions, where the main task of specialists will deal with issues of adaptation, coordination of the work of production structural units in the process of reorganization, reduction, etc. specialist responsibilities will include: 1) introduction to the organization; characteristics; terms and conditions of employment; remuneration. 2) submission to supervisor, immediate supervisor, training instructor. 3) organization of an excursion to the workplace. 4) explanation of working conditions, familiarization with the functions (together with the head). 5) organization of training (together with the training department). 6) introduction to the team, introduction of employees (together with the manager). 3. the development of mentoring, which allows the process of new employees adapting to the company to be shorter and more painless (krushelnytska, melnychuk, 2005). however, in today 's realities, when changes occur dynamically, a number of tools are used for adaptation, which add up to a whole technology to solve not only the issue of adaptation, but also professional development (table 2), which are used in domestic enterprises. so, for example, in industrial enterprises the tool of adaptation of personnel is mentoring, in the service sector the technology of group coaching is used, namely such tools as, adaptation letter, training " welcome!", corporate brochure and newcomer's kit. they are used to attract highly qualified specialists, develop the company and improve performance. not large companies prefer internships and mentoring systems. analysis of world experience and scientific works of specialists allowed to form a list of modern tools for the adaptation of hospitality workers (table 3). organizational decisions regarding the technology of the adaptation management process also include: – organization of seminars, courses, etc. on various issues of adaptation; table 2 the essence and characteristics of personnel adaptation tools used in domestic enterprises staff adaptation tools essence features mentoring provides on-the-job training by transferring skills, knowledge, and abilities from an experienced professional (colleague) for the purpose of the mentee's personal and professional development. it lies in the fact that the mentoring process involves a close connection (communication) between mentor and subordinate. coaching provides adaptation through the analysis and immobilization of internal capabilities through the cooperation of the coach and the client. development of an individual system of continuous professional improvement, transformation of weaknesses into strengths. a coach is not a leader or advisor, but rather a partner in the professional development process who only nudges rather than makes decisions. adaptation letter an official document drawn up on an employee's first day of work, along with the job description, by the line manager. to be made in writing or electronically. optional. days of beginners team building methods. this event is organized once a month or a quarter. this event consists of two parts: formal and informal. internship provides a developed onboarding program and an understanding of the employee's core business processes. internships may be of varying lengths and involve internships in various departments. team training provides an introduction to the company and colleagues in the form of a game. it allows you not only to get to know your colleagues, but also to form a relationship of trust and partnership. new employee folder provides for the creation of a set of documents just for a newcomer to the department activities, major business processes, software packages (to solve individual tasks). it is made both in paper form and, possibly, in electronic form. it is created at the initiative of the head of the structural unit. it has a recommendatory character. source: summarized by the authors on the basis of (bikova, paranko, 2016; didenko, kozub, 2017; krushelnytska, melnychuk, 2005; karabadzhak, 2013) baltic journal of economic studies 207 vol. 7 no. 5, 2021 – conducting individual conversations of the head, mentor with a new employee; – intensive short-term courses for aspiring executives; – carrying out organizational and preparatory work in the process of innovative activity; – special mentoring courses; – using the method of gradually increasing the complexity of the tasks performed by a new employee. at the same time, it is necessary to take care of control with a constructive analysis of the mistakes that are made in the performance of tasks. it is advisable to think through a system of additional incentives for the employee for the successful solution of tasks; – running one-time public assignments to establish a new employee's contact with the team; – execution of one-time assignments to organize the work of the governing body (production meetings, the board of directors, etc.); – training of personnel to replace employees during their rotation; – conducting special role-playing games in the subdivision team to bring employees together and develop group dynamics (krushelnytska, melnychuk, 2005). the employee receives many advantages (table 3), the main of which are obtaining information necessary for effective work, relieving nervous tension arising in connection with the new job and entry into a new team, development of priority norms of the socio-cultural sphere of the enterprise. for the hotel company there are also many benefits of effective adaptation, among them providing the organization with highly qualified personnel, reducing certain groups of costs, as well as increasing labor discipline and, of course, increasing profits. however, it should be noted that the most important factor of adaptation is motivational. the strength, stability, structure, and hierarchy of motives will determine the success and efficiency of adaptation and, accordingly, the further long-term continuous work of the subordinate. it is important that all adaptation tasks and actions in a hospitality enterprise be comprehensive and focused. the signs of effective, successful adaptation are: conscientious performance of duties by new employees; responsible attitude to the tasks assigned, compliance with norms of behavior in the workplace, contacts with colleagues (joining formal and informal groups). the success of the candidate depends on a pre-designed program, which is not fully universal and must take into account the individuality of the person, allows you to achieve constructive results in a short time, which will increase the competitiveness of the enterprise and its economic security. 3. development of an adaptation based on iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" to improve the effectiveness of adaptation measures at the enterprises of hospitality, where one of the problems of personnel management is a high level of staff turnover and low level of development of table 3 the essence and characteristics of adaptation tools used in foreign practice staff adaptation tools essence features secondment this method assumes that the employee is temporarily transferred to a second department, a department, which allows him to gain new knowledge and skills. after a month, the employee returns to the workplace and to his/ her previous duties. this method is used in flat organizations when professional career development is limited. it allows you to form a team in the company, improve communication between employees and departments. buddying adaptation through a friendly, good relationship with a colleague. this involves providing each other with honest, objective information. forming the necessary skills first of all, and then performing the current tasks. lack of hierarchy, "teacher-student" relations. suggests that relationships are built solely on propriety, advice, and criticism. shadowing provides for the attachment of an experienced professional who follows the student as a "shadow" and supervises him or her as he or she performs professional duties. the result of such training is the formation of a clear and unambiguous understanding of the philosophy, goals and objectives of the activity. learning by doing it involves learning by doing, where adaptation takes place through learning and solving specific tasks. the main purpose of this method is to bridge the gap between "what they say " and "what they do". storytelling provides training to employees through various stories, life situations, and myths. this method is used when a newcomer comes to the company for the first time. it allows the newcomer to get acquainted with the philosophy, values, and culture of the company. source: summarized by the authors on the basis of (didenko, kozub, 2017; iso 10018: 2015 quality management; kozak, myronenko, 2019; krushelnytska, melnychuk, 2005) baltic journal of economic studies 208 vol. 7 no. 5, 2021 adaptation programs, it is proposed to use organizational support, namely a program based on iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" (iso 10018: 2015 quality management, guidelines for employee engagement and competencies, iso 10018: 2012). the traditional adaptation program has traditional sections: about the history of the company; standards and rules of corporate culture; insurance and benefits; compliance with safety rules; career development; working conditions; the first interview; probationary period and individual program (taking into account the activities of each structural unit). given that opportunities for self-development are increasing in the digital economy, modern programs should be supplemented with a section on self-development. and this should be reflected in the employee id card. this will ensure the formation of a talent pool of employees and increase productivity. for this purpose, it is important to create a separate program of human capital development, a part of which will be an adaptation program that will ensure the positive attitude of hospitality enterprises. such a program will focus on the development of competencies (figure 1). the main principles of the proposed human capital development program in the hospitality industry are as follows (figure 2). this program also requires the development of a number of standards that must be considered during the adaptation phase, when developing an individual program, which must take into account the following elements (figure 3). in addition, the implementation of this standard creates a need for other standards (figure 4). when implementing this standard, it will be necessary to harmonize all these standards on the basis of such a concept as "involvement" (interest). because in all of these standards the following elements must be interrelated (figure 5). the peculiarity of this approach is the use of all these processes on the basis of the quality control cycle. this concept is proposed to be used from the perspective of "interaction and contribution to the achievement of common goals". table 4 the advantages of adaptation for employees and the company depending on its type the advantages of effective adaptation. for the employee for the company psychophysiological reducing fatigue levels reducing the cost of providing health care for employees professional formation of employees' professional competencies necessary for effective functioning. the most complete adaptation to the work process. providing the company with highly qualified personnel. reducing staff turnover. reducing the number of errors caused by insufficient knowledge of functional responsibilities. socio-psychological the employee forms an idea of the structure of relations in the work collective. the employee acquires a social circle. favorable socio-psychological climate that ensures the effective operation of the enterprise. no conflicts in the team. observance of production and technical discipline. increase of interest in work (increase in labor productivity). organizational as a result of understanding what place an employee occupies in the structure of the enterprise, an idea of his role in the overall production process is formed. as a result of acquainting the employee with the technology and features of the activity, there is an understanding of what results management expects from him or her. job satisfaction. the company receives an employee who has a clearly defined position regarding his importance in the organizational structure of the company. in this way it is ensured that the goals set for employees are achieved quickly. reducing the costs associated with low efficiency. achievement of set goals in the shortest possible time. primary quick entry into professional activities. formation of professional competencies of employees. the ability to create a well-functioning team under the influence of getting used to existing social relationships. the company will get a confident employee, adapted to the team, clearly aware of the need for his work for the company. secondary facilitate joining the team due to a job change or transition from one department to another. reducing costs associated with high staff turnover. improvement of team cohesion. source: (krushelnytska, melnychuk, 2005) baltic journal of economic studies 209 vol. 7 no. 5, 2021 a human development program in a hospitality enterprise is proposed selfdevelopment the employee's contribution (personal level) mentoring contribution of the working environment (unit level) employee adaptation program contribution of the working environment (unit level) personnel development program enterprise contribution (corporate level) competence development program functional learning program internal training on products and services figure 1. the program of human capital development of enterprises in the field of hospitality source: offered by author 1. customer orientation to coordinate actions and priorities 2. leadership 3. employee engagement 4. a process approach to provide system management 5. a systematic approach to personnel management 6. teamwork 7. mutually beneficial relationships with suppliers 8. continuous improvemen 9. the factual approach to making management decisions 10. quality management figure 3. qualities that should be included in the adaptation program of employees in the hospitality industry source: proposed by the author figure 2. the principles of human capital development program at the hospitality enterprises based on the standard iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" are proposed source: by the author 1. initiative and responsibility 2. ability to self-learning 3. creativity baltic journal of economic studies 210 vol. 7 no. 5, 2021 for this purpose, the standard contains recommendations for assessing employees' "engagement" and their "competencies". the advantage of this standard is that it provides for consideration from the very beginning of the competencies of the employee who will be hired until the moment of dismissal. that is, the process of "engagement" is carried out according to the pdca cycle: – analysis (collecting and analyzing information on shortand long-term goals for employee engagement and competencies); regulations on the system of payments and bonuses regulations on the system of selection of employees regulations on the system of certification of employees regulations on the system of work with the reserve of employees regulations for employee adaptation provisions on material assistance to employees standards for the preparation, approval, revision of regulations on structural units, job descriptions regulations on innovation and innovation activities regulations on material liability of employees regulations on the control of staff morale provisions on personal data occupational health and safety regulations regulations on corporate culture and social responsibility documents on the procedure for reimbursement of expenses for the use of a personal vehicle, mobile communication figure 4. basic standards that interrelate in the implementation of iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" source: proposed by the author internal microclimate in the organization reward for work business reputation of the enterprise quality of work staff training and development quality figure 5. the main categories that relate to the concept of "engagement" in the standard iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" source: proposed by the author – planning (procedures are developed and maintained to engage employees and their compe tencies at various levels (individual, group, organizational)); – implementation (introduction of plans and measures that should ensure the achievement of common goals based on the involvement and competence of employees); – analysis (carrying out analysis and evaluation of plans, actions and obtained results for continuous improvement and involvement of employees). thus, baltic journal of economic studies 211 vol. 7 no. 5, 2021 the standard contains an algorithm of interrelated processes that need to be agreed (figure 6). thus, the implementation of this standard is harmonization of all documents, standards that relate to the process of personnel management in навчання identification of problems at the enterprise in the field of hospitality identify the sources of staffing problems identifying the causes of human resource problems quantity (need for additional personnel) setquality (skill level of personnel) structure and relationships (organizational structure, job descriptions, workplace) review of the organizational structure of the company, job descriptions, regulations on departments effectiveness of the use of internal reserves (motivation system, motivational profiles of employees) development of a system of motivation, adjustment of motivational profiles of employees figure 6. algorithm for creating (adjusting) employee engagement and motivation in hospitality businesses based on iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" source: proposed by the author loyalty satisfaction involvement result figure 7. the main proposed categories to be introduced in the documentation of personnel management in the hospitality sector enterprises the hospitality industry. as a result of the implemen tation of this standard, the main categories that are important for management are implemented in the enterprises of the hospitality sector (figure 7). as a result of the implementation of this standard in the hospitality industry, the adaptation program should provide for the allocation of competencies for different categories of employees (managers, specialists, service personnel, etc.) (table 4). this will allow the adaptation process to be built in such a way that from the very beginning the employee is familiar with corporate values and is involved in organizational development. 4. conclusion thus, there is a need to reflect the process of "engagement" in all the processes in which personnel are involved in the hospitality industry, from recruitment, to hiring, to graduation. of course, in addition to the fact baltic journal of economic studies 212 vol. 7 no. 5, 2021 that this will be reflected in the documents, there will be formed criteria by which candidates will be selected, it will be important to ensure an effective system of adaptation through mentoring and management support. involving employees will motivate them to continuous development, and adaptation will not only ensure professional growth, but also the sustainable development of hospitality enterprises. the use of iso 10018: 2015 "quality management, guidelines for employee engagement and competencies" will allow hospitality businesses to implement a planned and systematic process for the acquisition of employee competencies during their professional activities in the enterprise. to ensure the effectiveness of the management system, senior management should make effective choices about who to hire and under what conditions. to do so, they should also influence people's behavior to motivate them to work productively. table 4 priorities that are determined in the process of selecting employees in hospitality enterprises based on the competency-based approach staff category priorities staff customer orientation (friendly, cultural, attentive attitude); willingness to work in accordance with the standards. department specialists compliance with the corporate culture and values of the company; correspondence to the professional qualities indicated by the applicant. leaders skills in modern strategic management tools; level of development of soft skills i hard skills. source: proposed by the author whether as an individual or a group, the right kind of engagement can help generate ideas, build consensus and smooth the way for action plans. when combined with problem solving, decision making and processes, effective people engagement is a powerful tool for change and continuous improvement. therefore, effective engagement of people requires a systematic approach, which is enshrined in iso 10018: 2015 "quality management, guidelines for employee engagement and competencies". given that the competition among service enterprises is high, there is a need for further research on human capital by improving the organizational support of the personnel management process. implementation of global adaptation experience, which will reduce time losses and increase the productivity of both administrative and service personnel. references: bikova, a., & paranko, d. (2016). components of effective staff adaptation. young scientist, (12): 640–646. brovchenko, n. (2012). staff adaptation: to make the "stars" light up. labor and law, (5): 32–33. didenko, ye., & kozub, o. (2017). science and practice: an innovative approach: collection of scientific articles. les editions l'originаlе, paris, france: 241–246. iso 10018: 2015 quality management. guidelines on staff involvement and competence (iso 10018: 2012, idt). corrected. available at: http://online.budstandart.com/ua/catalog/doc-page?id_doc=66471 kozak, k., & myronenko, b. (2019). the specifics of the use of outsourcing, outstaffing and leasing tools in the personnel management system. economics of the food industry, (1): 73–79. krushelnytska, o., & melnychuk, d. (2005). personnel management: a textbook. 2nd ed., reworked: 38. karabadzhak, k. (2013). methods of staff adaptation. development management, (14): 19–21. moisieieva, n. (2015). human adaptation to the communication space of modernity. bulletin of the book chamber, (6): 38–40. baltic journal of economic studies 101 vol. 7 no. 4, 2021 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: lepel@ukr.net orcid: https://orcid.org/0000-0003-4100-9530 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: zadereikosvitlana@gmail.com orcid: https://orcid.org/0000-0002-0336-0023 3 kyiv national economic university named after vadym hetman, ukraine. e-mail: a.omelchenko.kneu@gmail.com orcid: https://orcid.org/0000-0002-8407-8555 doi: https://doi.org/10.30525/2256-0742/2021-7-4-101-107 system of economic means of state administration of the rights of people with disabilities to healthcare liudmila kozhura1, svitlana zadereiko2, andrii omelchenko3 abstract. at the current stage of the development of society the problem of social protection and state support for people with disabilities is particularly relevant and requires reform and improvement. ukraine, as a country aspiring to join the european union, should take into account the best foreign experience of the leading countries of the world in the field of state policy to support people with disabilities and its implementation. the process of reforming the national healthcare system demonstrated the ineffective policy in this area, the high level of corruption and the inability to transform this system to the level of world standards of medical care, especially for people with disabilities. the problem of disability in ukraine is becoming particularly acute. the goal of this article is to investigate the system of economic means of state administration of the rights of people with disabilities to healthcare, to identify the areas of budgetary management and the formation of a new mechanism of economic administration. scientific analysis was carried out by using the method of systematic approach and analysis, which enabled us to study theoretical aspects of economic methods of state administration of the right of people with disabilities to healthcare, formation of the budget management in ukraine for the economic security of the rights to healthcare, and features of the new mechanism of the economic administration of the right of people with disabilities to health care. it has been researched that along with administrative methods of state management of the right to health protection of people with disabilities the economic group of methods is important. these include programs of economic development of health care, rehabilitation programs for people with disabilities, implementation of pilot projects to change the mechanism of financial support for operative treatment, etc. methods of regulating influence (indirect management) are becoming increasingly important, and economical methods of management belong to them. implementation ensures that the financial and material interests of the management objects are satisfied through the activities of its subjects, which create favorable conditions for achieving the goals and objectives of management. for example, local self-government bodies, within the limits of their competence, can finance local programs for the development and support of community healthcare institutions. in 2019, a new mechanism of rehabilitation support for children with disabilities was introduced based on the principle of "money follows the people", which should ensure targeting, transparency and improve the quality of rehabilitation services. resources are divided vertically among regional bodies, which divide budgetary funds among local bodies in proportion to the number of children who require rehabilitation measures, according to the place of their residence (location). the national legislation also reflects the norms that created the conditions for the implementation of the right to work of people with disabilities, as well as ratified convention on the rights of persons with disabilities and the ilo convention on professional rehabilitation. from the point of view of the ministry of healthcare of ukraine, the funds allocated by the state are extremely insufficient for the uninterrupted functioning of the medical system. in its budget memorandum for 2021 the baltic journal of economic studies 102 vol. 7 no. 4, 2021 ministry has allocated twice as much – 296 billion uah, 225 billion uah of which for the implementation of the medical guarantee program (which is 5% of gdp, as required by the law of ukraine "on state financial guarantees of medical services to population"). but the proposals of the ministry of health both at the time of formation of the state budget and at the time of its approval were not taken into account. the requirement of the law of ukraine "on state financial guarantees of medical services to the population" for the establishment of financing of the program of medical guarantees at the level of 5% of gdp was lengthened for one more year. key words: economical methods, public administration, rights of persons with disabilities, budget management, economic mechanism, social protection, healthcare. jel classification: h11, h30, h61, i38, r50, d72 introduction at the present stage of the development of society the problem of social protection and state support for persons with disabilities is particularly relevant and requires reform and improvement. ukraine, as a country aspiring to join the european union, should take into account the best foreign experience of the leading countries of the world in the sphere of state policy of support for people with disabilities and its implementation. this will enable to solve problems related to education, employment, integration of people with disabilities into the environment and the realization of their abilities and skills. today the world does not have one thorough, stable and efficient system of healthcare administration. every country in the world faces different problems in ensuring the realization of the right to healthcare, in providing access to quality medical care and treatment. ukraine's healthcare system lags behind the world's developed countries by various indicators, including life expectancy, mortality, and the fight against chronic and infectious diseases. despite the low indicators of healthcare provision, ukraine spends a significant part of its gross domestic product on medical services, but in general it has little impact on the healthcare system. the process of reforming the national healthcare system demonstrated the ineffective policy in this area, the high level of corruption and the inability to transform this system to the level of world standards of medical care, especially for people with disabilities. the problem of disability in ukraine is becoming particularly acute. the number of people who were injured or maimed in connection with the recent events in the country is increasing. that is why creation of favorable living conditions for people with disabilities is one of the main priorities of social policy of the state. the goal of this article is to investigate the system of economic means of state administration of the rights of persons with disabilities to healthcare, to identify the areas of budgetary management and the formation of a new mechanism of economic administration. 1. methodology of research 1.1. theoretical aspects of the definition of economic methods of state administration of the right of people with disabilities to health care significant contribution to the development of theoretical and practical foundations for the implementation of the state policy of support for persons with disabilities has been made by such well-known domestic scientists as m. avramenko, s. bohdanova, n. boretska, i. bezsonova, t. voitchak, n. hauzner, i. hryshova, n. dementieva, o. diachenko, k. myched, s. leonova, a. ipatova. however, despite the numerous efforts and achievements of domestic scientists, the study of experience in the sphere of realization of the state policy of support for people with disabilities and its implementation in ukraine requires additional research. in addition to administrative methods of state administration of the right to healthcare for people with disabilities another group of methods is important – the adoption of programs of economic development of healthcare, the acceptance and funding of rehabilitation programs for people with disabilities, ensuring the implementation of medical activities of individual state programs and comprehensive program activities, implementation of pilot projects to change the mechanism of financial support for surgical treatment of organ transplants and other anatomical materials, etc. the main purpose of economic methods of activity of the public administration in ensuring the right to healthcare for people with disabilities is to create such economic conditions, which cause interest in the performance of certain work, in increasing the productivity of work and, accordingly, the provision of financial support. during the application of economic management methods, the subject of control achieves the desired behavior of the managers by influencing their material interests. for this purpose, both the prospects of material benefits and the threat of material sanctions can be used (kolpakov, 1999). these methods baltic journal of economic studies 103 vol. 7 no. 4, 2021 are suitable for regulating the activities of the socalled non-profit organizations, taking into account, for example, how rationally they spend their own material resources received from the provision of paid services, the lease of state property and real estate. it should be noted that in the process of implementing administrative and, in the future, medical reforms, methods of regulatory influence (indirect administration) become very important, among which the leading place is taken by economic methods of management. implementation ensures that the financial and material interests of the management objects are satisfied through the activities of its subjects, which create favorable conditions for achieving the goals and objectives of management. for example, local self-government bodies, within the limits of their competence, can finance local programs of development and support of communal healthcare institutions. in particular, they are responsible for renovation of material and technical basis, major repairs, reconstruction, increasing wages for health workers (local incentives programs), as well as local programs for providing health services to the population, local public health programs and other programs in healthcare. economic methods can also include measures of material incentives through a system of specially created funds that accumulate and distribute budgetary funds for health care together with private capital; identify priority areas of funding and support for the development of medical care for people with disabilities; provide funding for programs to improve the qualifications and retraining of specialists who provide medical care for people with disabilities; carry out redistribution of funds from state, local and other sources for the treatment of certain types of diseases; establish a system of grants and target funds and to use various mechanisms of control over the use of resources, etc. thus, economic methods are manifested in the creation of such conditions for the development of the ordered objects, for which they under the influence of certain material and financial incentives can independently choose a variant of behavior. however, as before, this choice is made on the basis of the traditional "surplus" principle of state funding of healthcare, which, unfortunately, cannot be solved in the near future. economical methods can be used on a limited scale. that is why it is necessary to look for new methods of complex investment in the field of healthcare, including sources of funding of medical care for people with disabilities through the use of the possibilities of different levels of budgets, recruitment of charitable contributions (development of philanthropy and patronage), expansion of the scope and sphere of use of business activities in the surveyed sphere of administration. it is worth noting that the use of economic methods of state administration of the right to health care for persons with disabilities requires the search for specific indicators of activity of the authorized entities, as well as specific criteria for evaluating its effectiveness. therefore, economic methods of public administration of the right of people with disability to healthcare – the totality of means and methods, which are used by the authorized subjects of public administration in order to create such economic conditions, which contribute to improving the health level of individuals with disabilities, ensuring an accessible and safe environment, improving the professional qualities of medical personnel providing medical care for those with disabilities, implementation of rehabilitation measures, as well as the creation of other necessary conditions for the integration of such people. 2. results and discussion 2.1. budgetary management of economic security of healthcare rights economic methods of state management of the right of people with disabilities to healthcare are implemented by: 1. planning in the state and local budgets to allocate funds to ensure the right to healthcare; 2. development, approval of comprehensive social protection and support and rehabilitation programs; 3. elaboration and implementation of rehabilitative measures; 4. development of state-private partnership mechanisms to ensure the right to healthcare for people with disabilities; 5. financing from the state and local budgets for the development of healthcare institutions, as well as for the construction and commissioning of new rehabilitation centers, etc. thus, in the state budget of ukraine for 2018 the expenditures for the functional classification of expenditures and budget crediting for healthcare and social protection, including for people with disabilities, are as follows (law of ukraine of 23.11.2018): – measures for rehabilitation of children with cerebral palsy – 14 154 000,00 uah; – implementation of the pilot project to change the mechanism of financial support for surgical treatment for organ and other anatomical materials transplantation – 112 015 300,00 uah; – providing primary medical care to the population – 8 054 517 600,00 uah; – subventions from the state budget to local budgets for the purchase of expensive materials for health care baltic journal of economic studies 104 vol. 7 no. 4, 2021 institutions and pharmaceutical products for inhalation anesthesia – 18 972 600,00 uah; – subsidy from the state budget to local budgets to cover the cost of medicines for the treatment of certain diseases – 1 000 000 000,00 uah; – specialized prosthetic-orthopedic and medicalrehabilitation assistance to incapacitated person at the clinic of the scientific and research institute of prosthetics, prosthetic construction and rehabilitation – 23 384 300,00 uah; – measures for social protection of children, families, women and other most vulnerable categories of the population – 100 789 900,00 uah; – provision of one-time financial assistance to family members of persons who died (passed away) during the participation in the anti-terrorist operation, and to persons who received a disability during the participation in the specified operation – 48 748 700,00 uah; – providing one-time financial assistance to a member of the volunteer's family who died while providing volunteer assistance in the area of an anti-terrorist operation, and to a volunteer who became disabled as a result of an injury sustained while providing assistance – 815 700,00 uah. in accordance with the law of ukraine "on the state budget for 2019" the following allocations were planned in the field of healthcare as well as indirectly to ensure the implementation of the right to healthcare for people with disabilities (law of ukraine of 14.11.2019): – subventions from the state budget to local budgets for the purchase of medicines and medical products for the provision of emergency medical care – 137 992,3 uah; – appropriation from the state budget to local budgets for the purchase of angiographic equipment – 150 000,0 uah; – subsidium from the state budget to local budgets for the reimbursement of the cost of medicines for the treatment of certain diseases – 250 000,0 uah; – subsidy from the state budget to the district budget of valkivsk district of kharkiv region for the purchase of a computer tomograph for the communal health institution valkivska central district hospital – 12 500,0 uah; – advanced training of social security workers – 644,1 uah; – specialized prosthetic-orthopedic and medicalrehabilitation assistance to persons with disabilities in the hospital of the scientific and research institute of prosthetics, prosthetic construction and restoration of functioning – 26 768,9 uah; – social protection measures for children, families, women and other most vulnerable categories of the population – 95 570,3 uah; – recuperation and recreation of children who require special attention and support in the children's health centers of the international children's center "artek" and children's center "young guard" – 217 192,1 uah; – health resort treatment for war veterans, persons covered by the laws "on the status of war veterans, guarantees of their social protection", "on victims of nazi persecution" and people with disabilities – 193 165,9 uah; – actions for psychological rehabilitation, social and professional adaptation, provision of health resort treatment to victims of the 2013–14 ukrainian revolution, participants of the anti-terrorist operation and persons who carried out measures to ensure national security and defense, repulse and deter armed aggression of the russian federation in donetsk and luhansk regions – 110 905,6 uah; – financial support for public associations of people with disabilities with the status of nationwide – 89 362,4 uah, including the financial support of the national assembly of the disabled of ukraine, enterprises and organizations of the nonprofit sector of the ukrainian association of the disabled and the ukrainian association of the deaf, and the union of organizations of persons with disabilities of ukraine – 76 025,9 uah; – efforts for social, labor and professional rehabi litation of people with disabilities – 1 335 591,0 uah; – maintenance of activities of the social security fund for invalids – 85 678,0 uah; – rehabilitation of children with disabilities as a result of child cerebral palsy – 130 022,6 uah; – subventions from the state budget to local budgets for the payment of cash compensation for the necessary accommodation for the families of persons listed in paragraphs 5-8 of clause 1 of article 10 of the law of ukraine "on the status of veterans of the war, guarantees of their social protection", for people with disability of groups i-ii resulting from injuries, contusions, casualties or illnesses sustained during direct participation in the anti-terrorist operation, implementation of activities aimed at ensuring national security and defense, and the withdrawal and destruction of the military aggression of the russian federation in donetsk and luhansk oblasts, and to ensure that these measures are implemented, in accordance with paragraphs 11-14 of part two of article 7 of the law of ukraine "on the status of veterans of the war, guarantees of their social protection", and which require improvement of living conditions – 305 145,3 uah; – subvention from the state budget to local budgets for the payment of monetary compensation for housing to internally displaced persons who defended the independence, sovereignty and territorial integrity of ukraine and participated directly in the anti-terrorist operation, ensuring its execution, being in the areas of the anti-terrorist operation during its implementation, baltic journal of economic studies 105 vol. 7 no. 4, 2021 in the performance of actions aimed at ensuring national security and defense, fighting and disrupting the military aggression of the russian federation in donetsk and luhansk regions, providing its fulfillment, residing indirectly in the areas and during the period of implementation of the mentioned measures, and recognized as people with disability as a result of the war of the ii group according to paragraphs 11-14 of part two of article 7 or participants in the fighting according to paragraphs 19-20 of part one of article 6 of the law of ukraine "on the status of veterans of the war, guarantees of their social protection," which require improvement of living conditions – 25 000,0 uah (law of ukraine from 23.11. 2018). at the same time, according to the state budget of ukraine for 2020, the cost of healthcare for people with disabilities is as follows:: – public health and fight against epidemics – 2 121 032,8 uah; – creation of a modern clinical base for the treatment of oncological diseases at the national cancer institute – 700 000 uah; – realization of the state investment project "improvement of molecular genetic diagnostics of oncological diseases in ukraine" – 100 000 uah; – health resort treatment for tuberculosis patients and children and adolescents with somatic diseases – 573 390,4 uah; – specialized prosthetic-orthopedic and medicalrehabilitation assistance to people with disabilities at the clinic of the scientific and research institute of prosthetics, prosthetic construction and restoration of employment – 34 500,7 uah; – social protection activities for children, families, women and other most vulnerable categories of the population – 66 019,8 uah; – the annual one-time assistance to war veterans and victims of nazi persecutions and social assistance to persons who have special labor services to ukraine – 1 382 540,6 uah; – social support for people who suffered as a result of the chernobyl disaster – 2 570 195,0 uah (law of ukraine of 14.11. 2019). 2.1. formation of a new mechanism of economic administration of the right of persons with disabilities to healthcare note that in 2019 a new mechanism of providing rehabilitation services for children with disabilities due to cerebral palsy was introduced based on the principle "money follows the people". this mechanism will ensure targeting, oversight and improve the quality of rehabilitation services. for compliance with the law of ukraine "on the state budget of ukraine for 2019," which provides for payments under the budget program 2507100 "rehabilitation of children with disabilities due to cerebral palsy " was approved by the cabinet of ministers of ukraine decree of 27. 03.03.2019 № 309 "on approval of the order of the ministry of social policy (2019) for use in 2019 of the funds provided by the state budget for the rehabilitation of children with disability due to cerebral palsy. the state budget for 2021 provides funds for the ministry of healthcare of ukraine, including the financing of the ministry apparatus (35,2 billion uah), the state service of ukraine for medicines and drugs control (116,2 million uah) and the national health service of ukraine (nhsu) (123,8 billion uah). the lion’s share of funding of the nhsu is directed to the continuation of the implementation of the program of state guarantees of medical care for the population, which was launched in full scope from 1 quarter of 2020. the state budget for 2021 allocated 123.5 billion uah for the program of medical guarantees (pmg) (figure 1). the final edition of law no. 1082-ix increases spending on this budget program (as 123,5 10,3 7,1 2,6 2,6 2 0 20 40 60 80 100 120 140 realization of pmg training of specialists in the field of health and refresher courses centralized purchasing of medicines performing a covid-19 vaccination public health and anti-epidemic measures development of the system of emergency medical aid figure 1. the biggest expenses of the ministry of healthcare of ukraine for 2021 (billion uah) source: health care spending in 2021. health care spending in 2021: when expectations are shattered by a harsh reality. №1 (1272) https://www.apteka.ua/article/579552 baltic journal of economic studies 106 vol. 7 no. 4, 2021 compared to the first edition of the draft budget) by 56 million uah (for treatment of patients in the posttransplantation period) (health care spending in 2021). in 2021 the pmg provides funding for first medical aid (taking into account the number of people who have signed a declaration with a physician); secondary (specialized) and tertiary (highly specialized) outpatient and hospital medical care (based on priority services and conditions); reimbursement; palliative medical care and medical rehabilitation; as well as emergency medical care (according to a new organizational model). it should be noted that according to the cabinet of ministers of ukraine decree of 16.12.2020. no. 1271 "on the standard of arrival of emergency (ambulance) medical aid teams to the site of the event" now the target time of emergency medical aid team travel is determined not by the territorial relevance, but by the priority of the patient's condition. the ministry of social policy is the main holder of the budget funds allocated in the state budget for rehabilitation of children with infant cerebral palsy in 2019. the coordinators of budgetary funds of the lower level are: fund for social protection of invalids – responsible for implementing the budget program; body of legislative power in the autonomous republic of crimea on social care of population, structural divisions on welfare of the regional residents, kyiv city state administration; structural subdivisions on social protection of the district inhabitans in kyiv, as well as state administrations, executive bodies of city, district and city councils (local organizations (if created)). resources are vertically distributed among regional bodies, which, in their turn, allocate budgetary funds among local bodies in proportion to the number of children, who require rehabilitation measures at the place of their residence (staying) in accordance with the individual treatment programs. it should be noted that funds allocated for the implementation of rehabilitation measures may be redistributed on the basis of appeals from these subjects. these program-targeted economic methods of state management of the right of people with disabilities to healthcare are applied to relevant institutions of any form of ownership and organizational-legal form, which provide medical care for people with disabilities and (or) their rehabilitation on the basis of a corresponding license and professional activities of medical (pharmaceutical) workers, who have a license to conduct business activities in the medical practice for the purpose of covering the cost of rehabilitation activities for children in need. therefore, the use by territorial communities of the funds allocated in the state budget for the rehabilitation of children with disabilities due to cerebral palsy is a valid method of public administration of the right to healthcare of people with disabilities. another effective economic method of public administration of the right to healthcare for people with disabilities is the development of a mechanism of using the funds allocated in the state budget by territorial communities to purchase specially equipped vehicles for transportation of people and children with disabilities, who have impairments of the musculoskeletal system. the use of this method will be able to stimulate territorial communities to create transportation services for people with disabilities, especially for people in wheelchairs. the fulfillment of these actions will positively contribute to the elimination of barriers in the life activity of people with disabilities. implementation mechanism of the mentioned economic method of public administration of the right to healthcare for people with disabilities was approved in the decree of the cabinet of ministers of ukraine of 14 february 2018. no. 189 "some issues of using the funds provided in the state budget for the purchase of specially equipped cars for the transportation of people and children with disabilities who have musculoskeletal disorders" (resolution of the cabinet of ministers of ukraine of 14.03.2018 № 189). it should be mentioned that according to the budgetary program 2507030 "social, labor and professional rehabilitation of disabled persons" for 2019, 30 000 uah are allocated for this sphere. we also note that the economic methods of state administration of the right to healthcare for people with disabilities, in our opinion, also include: targeted approach to ensuring technical and other means of rehabilitation of persons with disabilities; providing such persons on the principle of "money follows the person"; payment of cost compensation for self-purchased rehabilitation equipment, etc. conclusions today the world does not have perfect, stable and efficient system of healthcare administration. every country in the world faces different problems in ensuring the realization of the right to healthcare, as well as in providing access to quality medical care and treatment. in addition to the administrative methods of state management of the right to healthcare for people with disabilities, an important group of methods ensures this right. for example, programs of economic development of healthcare, rehabilitation programs for people with disabilities, the implementation of pilot projects to change the mechanism of financial support for operative treatment, etc. it is worth noting that in the process of implementing administrative and, in the future, baltic journal of economic studies 107 vol. 7 no. 4, 2021 medical reforms, methods of regulatory influence (indirect management) become very important, among which the leading place is taken by economic management methods. implementation ensures that the financial and material interests of the administration objects are satisfied through the activities of its subjects, which create favorable conditions for achieving the goals and objectives of management, for example, local self-government bodies, within the limits of their competence, can finance local programs for the development and support of community healthcare institutions. economic methods find their manifestation in the creation of such conditions for the development of dependent entities, for which they can independently choose an individual variant of behavior under the influence of certain material and financial incentives. however, this choice is made on the basis of the traditional "surplus" principle of state funding in the field of healthcare, which cannot be solved in the near future. it is important to point out that in 2019 a new mechanism was introduced to provide rehabilitation measures for children with disabilities due to cerebral palsy on the principle of "money follows people" principle was introduced, which should ensure targeting, oversight and improve the quality of rehabilitation services. the national legislation reflects norms that created conditions for the realization of the right to work of people with disabilities, as well as ratified convention on the rights of persons with disabilities and the ilo convention on vocational rehabilitation. from the point of view of the ministry of healthcare of ukraine, the funds allocated by the state are extremely insufficient for the uninterrupted functioning of the medical system. in its budget memorandum for 2021 the ministry has allocated twice as much – 296 billion uah, 225 billion uah for the implementation of the program of medical guarantees (which is 5% of gdp, as required by the law of ukraine "on state financial guarantees of medical services to the population"). but the suggestions of the ministry of healthcare of ukraine both at the time of formation of the state budget and at the time of its approval were not taken into account. the requirement of the law of ukraine "on state financial guarantees of medical services to the population" for the establishment of financing of the program of medical guarantees at the level of 5% of gdp was suspended for one more year. when formulating policy regarding people with disabilities in ukraine it is necessary to take into account not only the experience of our own country, but also the current trends in international practice, which are more innovative. references: kolpakov, v. k. (1999). administrative law of ukraine. kyiv: yurinkom inter, 732 p. law of ukraine from 23.11.2018. about the state budget of ukraine for 2019. law of ukraine from 23.11.2018 no. 2629-viii. vvr , 2018. no. 50. available at: https://zakon.rada.gov.ua/laws/show/2629-19#text law of ukraine of 14.11.2019 on the state budget of ukraine for 2020: law of ukraine of 14.11.2019 no. 294-ix. information of the verkhovna rada, 2020. no. 5. article 31. available at: https://zakon.rada.gov.ua/ laws/show/294-20#text order of the ministry of social policy (2019). rehabilitation of children with disabilities due to cerebral palsy. available at: https://www.msp.gov.ua/content/reabilitaciya-ditey-z-invalidnistyu-vnaslidok-dityachogocerebralnogo-paralichu.html resolution of the cabinet of ministers of ukraine of 14.03. 2018 no. 189. some issues of using the funds provided in the state budget for the purchase of specially equipped cars for the transportation of persons with disabilities and children with disabilities who have musculoskeletal disorders. available at: https://zakon5.rada.gov.ua/laws/show/189-2018-п law of ukraine of 23.11.2018 on the state budget of ukraine for 2019: law of ukraine of 23.11.2018 no. 2629-viii. information of the verkhovna rada, 2018. no. 50. article 400. available at: https://zakon.rada.gov.ua/laws/show/2629-19#text health care spending in 2021. health care spending in 2021: when expectations are shattered by a harsh reality. no.1 (1272). available at: https://www.apteka.ua/article/579552 broderick, a. (2017). working report on reasonable accommodation under the crpd. hayes, j. (2017). supporting the development of quality day-care centres for children with disabilities in georgia, mac georgia. who global disability action plan 2014–2021. better health for all people with disability. i. world health organization. polata, n., & hermansc, e. (2016). a model proposed for sustainable accessible tourism (sat). available at: https://www.elsevier.es/en-revista-tekhne-review-applied-management-350-articulo-a-model-proposed-forsustainable-s1645991116300081 baltic journal of economic studies 47 vol. 1, 2015 strategic management object as an object of scientific research mykola bondar1, kyiv national economic university named after vadym hetman, ukraine natalia iershova2, national technical university "kharkiv polytechnic institute", ukraine abstract. the purpose of research is to highlight the main areas of the system of strategic management accounting, improvement of the principles on which it operates. subject of research is theoretical and practical aspects of functioning and development of strategic management accounting. subject area is focused on strategic management information support towards the implementation of the principle of balancing of activity of the entities. objectives of the research is to determine the place and role of strategic management accounting in the creation of information infrastructure management in the current economic conditions; disclosure of decomposition problems and improvement of the functioning of the system of strategic management accounting, prioritization of development. hypothesis of the research is based on the assumption that the effectiveness of entities management adapted to the needs of the market environment of complete, accurate and timely information, which is formed in properly organized system of strategic management accounting. methodology is based on analysis of data of respondents from 125  industrial entities of kharkiv region. data was collected through direct surveys and in the preparation of kharkiv oblast development strategy for the period until 2020. respondents were asked a number of questions that determine: results of the system of information support of strategic management in enterprises employing respondents; direction of the system of strategic management accounting in enterprises employing respondents. by means of expert assessments was evaluated important source of information for making strategic management decisions. general system of research methodology is based on a systematic approach. conclusion. during the research was confirmed the role and importance of strategic management accounting information for the purpose of strategic management. according to the results outlined challenges facing the leaders of ukrainian enterprises based on the survey to improve performance. advanced the system of principles that ensures the efficiency of strategic management accounting technologies as information support of strategic management. practical implications. distributions of identifying key areas of the system of strategic management accounting in industry, innovation-active enterprises of the kharkiv region proves that, if necessary, this generation information system for strategic management must take into account the interests of several groups of users. system of principles of strategic management of accounting as an information technology management provides strategic improve of its practical use and determine development priorities. value/originality. coverage of the main directions of the system of strategic management accounting on the basis of survey of respondents and their opinions and studies of their thoughts had the aim to determine the prospects of development of the system as a whole, and industrial, innovation-active enterprises of kharkiv region in particular. key words: strategic management accounting, strategic directions of implementation of management accounting, principles of the strategic management accounting, strategic management phases. jel classification: m41, с13 corresponding author 1 department of accounting of business activities, kyiv national economic university named after vadym hetman. e-mail: nibondar@mail.ru 2 department of economic analysis and accounting, national technical university “kharkiv polytechnic institute”. e-mail: natalia_iershova@mail.ru 1. introduction increased aggressive competitive environment requires rethinking the management of all management functions, including accounting, to provide new features to management accounting, analysis and control planning. one of the strategic management accounting management accounting is focused on strategic decision making (shevchuk, 2011; nikolaeva & alekseeva, 2008; manyaeva, 2010). main objectives and tasks of strategic management accounting are directly derived from the objectives and tasks of strategic management. baltic journal of economic studies 48 vol. 1, 2015 dialectic relationship of strategic management accounting and management problems is seen in outline with information of the last (shevchuk, 2011, golov, 2006). main focus in determining the strategic management accounting is its external orientation (kaplan, 1984; summons, 1982; bromwich, 1990). "strategic management accounting is a means of providing information necessary to support strategic decisions in organizations" (kaplan, 1984, p. 414). at the same time, strategic management accounting is considered in the light of information provision and monitoring development strategy (summons, 1982). no doubt that the strategic management of the company based on inside information relationship with the environment, i.e. on the principle of consistency. thus, for long-term operation and development of the company organization and functioning of strategic management accounting can be decisive. however, analysis of scientific papers reveals that the lack of science-based methodology of strategic management accounting as the accounting and analytical systems management. strategic management accounting system still did not become an integral part of business and management practices, which is one of the causes of low efficiency of business entities. purpose of the research and research tasks. purpose of the research is to highlight the main areas of the system of strategic management accounting, improvement of the principles on which it operates. scientific research task: to determine the place and role of strategic management accounting in the creation of information infrastructure management in the current economic conditions; decomposition reveal problems and to improve the functioning principles of strategic management accounting and prioritize its development. hypothesis of the research. hypothesis of the research is based on the assumption that the effectiveness entities of strategic management adapted to the needs of the market environment of complete, accurate and timely information, which is formed in properly organized system of strategic management accounting. methodology and design of the research. overall research methodology is based on a systematic approach. kharkiv region development strategy for the period up to 2020 includes specific initiative for businesses that are aimed at strengthening the strategic position, information support of strategic management decisions, better managing cash. thus, data was collected through direct survey of 125 respondents from industrial enterprises that implement innovations of the 168 specified in the statistical yearbook of the kharkiv region (48% of the total as of 01.01.2015 year) (statistical yearbook "kharkiv region in 2014", 2014). method of expert evaluations (vasilieva & lialin, 2012) identified the importance of certain sources of information when making management decisions on strategic set of companies selected in the framework of the research. design of the research involves determining the role and importance of strategic management accounting for the management of modern enterprises through the survey. highlighting the main activities for the strategic management accounting. determining the importance of certain areas of the strategic management accounting positions of the two groups of respondents by survey. improvement of the functioning of strategic management accounting entities, decomposition problems and determine the prospects of development. 2. role of strategic management accounting analysis of the literature confirms the existence of various scientific and methodological approaches in the development and implementation of strategies (ansoff, 1979; david a. aaker, 1984; thompson, & strickland, 1997). synthesizing existing methodological approaches allowed to highlight three main stages of strategic management: strategic planning; implementation of the strategy; assessment and control of the strategy. strategic planning provides performance of strategic analysis. role of strategic management accounting  – information support of strategic analysis. for this purpose not only used retrospective data and the current state of the enterprise, but also the prospects for its development. information platform in this case there is evidence of market research, analysis, business environment and external environment to identify external threats and risks; promoting harmonization of interests of the whole enterprise as a legal entity and individual employees as individuals to minimize internal threats. implementation of the strategy involves analysis of the organizational changes that contribute to the preparation of the company to introduce new administrative decisions. role of strategic management accounting  – information support strategy implementation, including: marketing solutions (acquisition of resources, access to new markets), organizational solutions (ability to organizational changes, compensation of employees, managers), innovative solutions (development of new products, introduction of innovative management techniques) and others. evaluation and control strategies provide steady feedback between the implementation of the strategy and goals of the enterprise. role of strategic management accounting – information support for monitoring the implementation of decisions. thus, strategic management accounting information can be used as an information platform to support the implementation of each step of the process of strategic management. in order to obtain results for the practical use of strategic management accounting as information support of strategic management research conducted at the enterprises of the kharkiv region (statistical yearbook "kharkiv region in 2014," 2014). research was conducted on 125 industrial enterprises of kharkiv region that implement innovations (48% of the total as of 01.01.2015). results confirm that the majority of these companies traced the absence or lack of system functioning system of strategic management baltic journal of economic studies 49 vol. 1, 2015 accounting as information support of strategic management. thus, 81% of respondents from among managers of these companies believe that the system of strategic management accounting as information support of strategic management of their enterprises is carried out not in full, 10% – system of strategic management accounting as information support of strategic management is not carried out at all, and only 9% of respondents said that their companies functioning system of strategic management accounting as information support of strategic management (fig. 1). this state of the respondents explain, first of all, different interpretation of the essence of strategic management accounting, lack of theoretical development on the use of analytical accounting and strategic management accounting information system strategic management, insufficient understanding by management of strategic importance and role of management accounting. thus, respondents in answering the question: "do you need for your enterprise system promoted strategic management?" gave affirmative response that confirms the relevance of this area of research. 0% 20% 40% 60% 80% 100% is not in full not implemented done in full 81% 10% 9% fig. 1. results of research on the functioning of information support of strategic management at the industrial enterprises of kharkiv region that implement innovation in determining the views of managers on the importance of strategic management accounting at the enterprises where they work, the answers were distributed as follows (fig. 2). 0% 10% 20% 30% 40% 50% 60% 70% information platform strategic management a tool of strategic control a strategic analysis tool 64% 20% 26% fig. 2. distribution of respondents’ views on the importance of strategic management accounting at the enterprises where they work vast majority of respondents (64%) believe that the system of strategic management accounting information platform of strategic management. almost equally distributed respondents identifying system of strategic management accounting as a tool for strategic control (20%), strategic analysis tool (26%). thus, we can name the following types of strategic management accounting: – accounting activities, which includes the collection, registration management information for strategic purposes; – analytical work, which includes identification and analysis of key indicators for the strategic direction; – control activities that include verification and detection of deviations from plans and rules checking and adjusting implementation of strategic plans. table 1 distribution of identifying key areas of the system of strategic management accounting under groups of respondents, in % and ranked places №  areas of the strategic management accounting status of respondents managers shareholders in % rank in % rank 01 providing strategic management of information about the business environment in order to identify major trends and their potential macro impact on performance and competitive position of the company 24 10 20 10 02 providing strategic information management for planning business strategy in the process of decomposition 16 8 10 7 03 providing strategic control 11 7 8 5 04 providing ongoing monitoring of the state of the microenvironment to study trends, trends and significant changes 22 9 18 8 05 providing the rational and efficient use of resources of the enterprise 5 4 9 6 06 implementation of forecasting performance effectiveness and efficiency of the enterprise as a whole and in the context of the strategic business units for a certain term 7 6 5 4 07 minimize risks related to false accounting information that formed in the accounting system 3 2 4 3 08 information support identification of issues of strategic development of enterprise 4 3 21 9 09 performing analysis of ways to reduce costs or enhance product differentiation production through the use of links in the value chain and optimize cost 6 5 3 2 10 other areas 2 1 2 1 baltic journal of economic studies 50 vol. 1, 2015 separation of analytical and accounting functions, one-sided vision of strategic management accounting methodology only as a set of accounting procedures outside the context of analytic functions, reduces the effectiveness of strategic management accounting and separation from the inner management. 3. areas of the strategic management accounting in support of this conclusion, we have attempted to determine the significance of individual areas of operation of strategic management accounting from the perspective of shareholders (owners of individual shareholders, expected investors) and managers (specialists who are directly related to the process of formation and strategic management decisions) industrial enterprises of kharkiv region, implementing innovations. in this case, the respondents had to rank these areas on value for themselves on a scale of 1 to 10, where 10 is the most significant. results are given in table 1. managers (specialists that are relevant to the process of formation and strategic management decisions), see the main purpose of the strategic management accounting in the information security strategic analysis, planning and control. this ranking is justified and meets the goals and objectives that decide the managers. from the perspective of shareholders of one of the most important areas of the strategic management accounting, too, is the identification information on issues of strategic corporate development. they see a system of strategic management accounting information platform as a strategic management tool development or management decisions concerning the operation and development of the company in a changing external and internal environment. thus, as shareholders and experts are unanimous in their views that the system of strategic management accounting is an information platform for the management decisions of strategic nature. summary results for the two groups of respondents are shown in fig. 3. 24 16 11 22 5 7 3 4 6 2 20 10 8 18 9 5 4 21 3 2 0 5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 10 managers shareholders fig. 3. generalized distribution parameters defining the main directions of the system of strategic management accounting of groups of respondents, % in support of this conclusion, was performed research of the importance of certain sources of information for the main directions of the strategic management accounting in enterprises. on the basis of expert assessments (grabovetsky, 2010), formed an expert group of 12 persons, which included representatives of the top management of the industrial enterprises of kharkiv region implementing innovation among surveyed during the previous study. they were offered a 10-point scale to rank the importance of information sources for strategic management decisions. rank "1" determined the potential significance of the smallest source of information for making strategic management decisions. performed grouping of reviews of information sources that are used in making strategic management decisions. presented statistics examination conducted in two areas of information sources to make strategic management decisions: block 1 external data (co): statistical information (зi1); official financial statements (зi2); information on financial markets (зi3); results of market research (зi4); legislative and regulatory materials (зi5); other external information (зi6). block 2 inside information (bi): scheduled information (bi1); analytical information (bi2); information of management accounting (bi3); accounting information (bi4); statistical information (bi5) (table. 2). in the last column of table 2 is highlighted the most important source of information, the quality of which are most dependent information provision formation and strategic management decisions. results indicate diagnostics that included among the expert professionals who are directly related to the process of formation and strategic management decisions in a certain way to insure the spread of peer reviews of randomness. assessment of consistency of expert opinion is carried out by calculating the coefficient of multiple rank correlation (coefficient of concordance – w) in the presence of bound ranks. as from (vasiliev, 2012), at w> 0,5 according to experts, there is nonrandom consistency. to block 1 w = 0,809; for unit 2 w = 0,845. checking statistical reliability degree of consistency of expert opinion is carried out under χ2 – pearson criterion (vasilieva & lialin, 2012). with appropriate number of degrees of freedom and significance level α=0,005 we have: χ2 (1) = 48,54; χ2 (2) = 40,56, with confidence that the probability of 99.5% confirms the statistical significance of the resulting values of concordance and opinion on the consistency of expert opinion. these results confirm that the data management accounting, analytical, planning information and accounting information, identified as the main domestic sources for making strategic management decisions. official financial statements, market research data are the main external sources when making management decisions of strategic nature. information for strategic management includes: first, going beyond the internal environment and obtain information on the environment (markets, competitors, inventory, etc.), and secondly, the definition of relationship between the selected mission (strategy) and the methodology of calculation of formation credentials. way to build an effective system of strategic management accounting in general and accounting in particular lies in improving its methodologies to clarify the basic information needs and search for the best ways to meet it. baltic journal of economic studies 51 vol. 1, 2015 methodology of strategic management accounting based on the need to develop an integrated approach to the formation of information space, which includes the entire cycle management procedures, taking into account the strategic positioning of the enterprise. in this case, decomposition of tasks of management accounting is conducted in accordance with the management environment specific entity and its needs. in this connection, we offer them to structure the following criteria: in the context of business processes: procurement, production, sales; by type of management of the entity: managing the production cycle, management of commercial transactions; the level in the organizational structure of the entity: responsibility centers, enterprise as a whole; by types of facilities that are managed, media costs, activities, cost centers. 4. principles of functioning of strategic management accounting specificity of strategic management accounting system needs improvement principles of its functioning as an information technology management software relevant information for making strategic management decisions. these principles include the following: 4.1. principle of accounting information according to a strategic level decision-making. strategic management level information responsible, able to provide the fullest information needs of senior management entity in solving strategic goals and objectives. implementation strategy of the entity represented in a set sequence of business processes is one of the main objects of strategic management accounting, control and analysis, as the very strategy of the entity. due to the magnitude of the information base, emerging as a strategic management accounting system, prerequisite for its proper perception is decomposition data centers of responsibility and levels of government. this rational allocation of responsibility for the strategically important objects between the centers of responsibility, including individual officials is a prerequisite for the successful implementation of the strategy of the entity. system of strategic management accounting and reporting should be fully linked with the current system of governance of the entity and focused on its specificity (pankow and nesvetaylov, 2012). decomposition of strategic objectives and tasks levels of government and centers of responsibility determines the format of strategic management accounting, performance reporting structure and methods of grouping and generalization. on the other hand, quality and specificity of strategic management accounting information makes appropriate requirements management structure. as part of this principle is necessary to ensure full compliance with the contents of certain forms of strategic management table 2 statistical valuation of expert review of the use of the type of information sources to make strategic management decisions c od e so ur ce s o f in fo rm at io n (і ) expert score (managers of enterprises *) (j) ∑ 𝑎𝑎𝑖𝑖𝑖𝑖𝑛𝑛𝑖𝑖=1 𝑑𝑑𝑖𝑖 = ��𝑎𝑎𝑖𝑖𝑖𝑖 − 𝑎𝑎𝚤𝚤�� 𝑛𝑛 𝑖𝑖=0 𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑ 𝑎𝑎𝑖𝑖𝑖𝑖𝑛𝑛𝑖𝑖=1 𝑑𝑑𝑖𝑖 = ��𝑎𝑎𝑖𝑖𝑖𝑖 − 𝑎𝑎𝚤𝚤�� 𝑛𝑛 𝑖𝑖=0 𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑ 𝑎𝑎𝑖𝑖𝑖𝑖𝑛𝑛𝑖𝑖=1 𝑑𝑑𝑖𝑖 = ��𝑎𝑎𝑖𝑖𝑖𝑖 − 𝑎𝑎𝚤𝚤�� 𝑛𝑛 𝑖𝑖=0 𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 rank 1 2 3 4 5 6 7 8 9 10 11 12 block 1 external information (зі) зі1 7 7 8 8 9 9 9 8 9 9 8 10 101 6 36 8,4 зі2 10 10 9 9 10 10 10 10 10 10 9 9 116 21 441 9,7 зі3 6 6 6 5 6 7 6 5 6 5 7 4 69 -26 676 5,8 зі4 10 9 10 10 10 10 10 10 10 9 10 9 117 22 484 9,8 зі5 6 5 7 6 7 7 7 6 7 7 7 5 77 -18 324 6,4 зі6 8 8 7 7 8 8 8 7 8 8 6 7 90 -5 25 7,5 tr 2 2 2 2+2 2 2 2 2 2 2 a i =95 s= ∑ 𝑎𝑎𝑖𝑖𝑖𝑖𝑛𝑛𝑖𝑖=1 𝑑𝑑𝑖𝑖 = ��𝑎𝑎𝑖𝑖𝑖𝑖 − 𝑎𝑎𝚤𝚤�� 𝑛𝑛 𝑖𝑖=0 𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 = =1986 тj 6 6 6 12 6 6 6 6 6 6 block 2 inside information (ві) ві1 9 8 8 8 8 7 6 7 7 6 7 6 87 -8 71 7,3 ві2 10 9 9 10 10 9 9 10 9 10 10 10 115 20 384 9,6 ві3 8 10 10 9 9 10 10 9 10 9 9 9 112 17 276 9,3 ві4 7 7 7 8 7 8 7 8 8 8 6 7 88 -7 55 7,3 ві5 8 6 5 5 5 6 5 7 5 7 8 8 75 -20 416 6,3 t r 2 2 2 a i =95,4 s= ∑ 𝑎𝑎𝑖𝑖𝑖𝑖𝑛𝑛𝑖𝑖=1 𝑑𝑑𝑖𝑖 = ��𝑎𝑎𝑖𝑖𝑖𝑖 − 𝑎𝑎𝚤𝚤�� 𝑛𝑛 𝑖𝑖=0 𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 ∑𝑑𝑑𝑖𝑖 2 = =1201 т j 6 6 6 baltic journal of economic studies 52 vol. 1, 2015 accounting duties and information needs representatives of the strategic management. 4.2. principle of flexibility in the method and tools used pursuant key strategic goals and objectives. according to this principle the choice of form and tool of strategic management accounting will be situational, allowing for the external and internal conditions, as well as specific technologies for making strategic management decisions. each strategic management decision and possibly individually unique. as a result, the content of strategic management accounting is not static, and flexibly respond to significant changes in the macroand micro innovations in technology production, marketing, information and management. flexibility of the entire system of strategic management accounting, ultimately, is a prerequisite and guarantee the development and improvement of the information system management technology and, as a result, strategies of the entity. 4.3. principle of matching strategy and organizational structure (principle of strategic units that report). this principle is similar to the accepted principle in international practice units that report (entity). thus between them can be found significant differences. strategic management accounting is conducted in the context of separate structural units that are organizational, economic and, above all, the strategic differences. strategic unit that reports to a separate entity if it implements common to all its subdivisions strategy. however, in practice, the strategic reporting often formed at the respective centers of responsibility. in this case, the choice of such centers, and also for the formation of their strategic reporting strategy will be realized at the corporate level. thus, strategic management accounting clearly implemented the principle of matching strategy and organizational structure (chandler, 1962). 4.4. principle of unity of space accounting and analytical decision-making. infobase strategic management accounting has a wide range and depends on the characteristics of strategic management and strategic goals and objectives. process for identifying relevant strategic management focused on facts directly requests for information specialists. this single information field, on the one hand, be decentralized by centers of responsibility, on the other hand, generalization to higher levels of management. information obtained as a result of strategic management accounting to implement specific strategies that ultimately provides a synthesized assessment of the effectiveness of implementation of basic strategies of the entity and its quality. thus, the principle of unity of accounting and analytical space management decisions ensure full compliance with some basic strategies for key strategic installations entity. tools of strategic management accounting is a combination of traditional methods of accounting and analysis of specific technologies and additional monitoring, identification and data collection; forecasting; analysis; decision making under uncertainty. strategic management accounting method has limitations. in the strategic management accounting can be used all methods and techniques relevant to the training of strategic management accounting. principle of unity accounting and analytical space to significantly expand the range of information that is recorded; methods of accounting and analysis; implement flexible reporting strategy adapted to the characteristics of the current system of strategic management. 4.5. principle of plurality analytical groupings expenses and accounting estimates used indicators. closely with this principle is the requirement "different costs for different purposes." common interpretation of the latter requirement provides its close relationship with the correspondence principle used accounting methods and procedures of key strategic goals and objectives. their combined use makes it possible to achieve in managerial accounting necessary analytical depth and flexibility of approaches used, providing the required range of uses of the same resource costs, but grouped possible for many purposes. thus, the strategic management accounting is possible to access multiple accounting and analytical solutions. 4.6. equal status for the importance of quantitative and qualitative information. extensions and complexity of management problems and complications would expand the ways and means to address them. quantitative information can not give a complete picture, or may present a picture which violates the integrity situation. therefore, in management accounting plays a significant role quality information, reception of which is not due to the stringent regulatory requirements or computational limitations, and delivery speed is very high. 4.7. principle of professional judgment. key management regulations providing high quality, relevant information suggest the implementation of the principle of judgment. specialist who expresses the judgment, must have a sufficient level of professional knowledge, skills, have experience in this area and access to relevant information. 5. conclusions performed studies make it possible to formulate a number of summarizing positions which expose the role and prospects of development of strategic management accounting in the management of modern enterprises. 1. system of strategic management accounting information platform serves to support the implementation of each step of the process of strategic management. moreover, separation of analytical and accounting functions, one-sided vision of strategic management accounting methodology only as a set of accounting procedures outside the context of analytic functions, reduces the effectiveness of strategic management accounting and separation from the inner management. 2. among the problems facing the leaders of ukrainian enterprises a central place occupies a rethinking of all management functions, including account and to provide new features management accounting, planning, analysis and control. baltic journal of economic studies 53 vol. 1, 2015 3. system of principles for the operation of strategic management accounting as an information technology management software ensure that the contents of certain forms of strategic management accounting duties and information needs representatives of strategic management, choice of forms and tools for conducting strategic management accounting, use of multiple performance indicators. 4. prospects for the development of strategic management accounting is the development and implementation of appropriate organizational methods and tools which allow you to generate the information necessary for strategic business development. current system of accounting and analytical support essential needs new content as a set of interrelated and interactive methods, techniques, procedures and models designed to justify making strategic management decisions at the company. it should include all, without exception, accounting and analytical tools to obtain synergies from their complex application while ensuring a stable and sustainable financial condition. references ansoff, і. (1979). strategic management – new york, john wiley, 236 р. bromwich, m. (1990). the case for strategic management accounting: the role of accounting information for strategy in competitive markets. accounting, organization and society, vol. 1, p. 27-46. chandler, a.d. (1962). strategy and structure: chapters in the history of the industrial enterprise – cambridge, mit press, 463 p. david, a. (1984). strategic market management – new york, john wiley, 322 р. kaplan, r .s. (1984). the evolution of management accounting. the accounting review, vol. 59, no. 3. ( jul., 1984), p. 390-418. summons, k. (1982). strategic management accounting for pricing: a case example. accounting and business research. vol. 12 (47), р. 58-66. thompson, а. & strickland, а. (1997). strategic management: concepts and cases published by richard d irwin, 450 р. vasilieva, e. & lialin, v. (2012). statistics – moscow, unity, dana, 398 p. grabovetsky, b. (2010). methods of expert assessments: theory, methodology, application areas – vinnitsa, vntu, 171 p. golov, s. (2006). management accounting – kyiv, libra, 351 c. manyaeva, v. (2010). theoretical fundamentals development of strategic management accounting. vestnik of samara state university, № 1 (63), p. 47-51. nikolaeva, o. & alekseeva, o. (2008). strategic management accounting – moscow, lki, 304 p. pankov, v. & nesvetaylov, v. (2012). basic principles and assumptions of the strategic management accounting. international accounting, № 7, p. 2-7. statistical yearbook "kharkiv region in 2014". electronic resources. http://www.kh.ukrstat.gov.ua/ strategy for the period until 2020. kharkiv oblast development/ electronic resources. http://old.kharkivoda.gov.ua/documents/16203/1088.pdf shevchuk, v. (2012). strategic management accounting information as a basis of strategic management enterprise. vestnik of national university "lviv polytechnic», № 722, p. 281-285. николай бондарь, наталья ершова стратегический управленческий учет как объект научных исследований аннотация. предметом исследования являются теоретические и практические аспекты функционирования и развития системы стратегического управленческого учета. предметная область ориентирована на информационное обеспечения стратегического управления в направлении реализации принципа сбалансированности деятельности субъектов хозяйствования. цель исследования состоит в освещении основных направлений функционирования системы стратегического управленческого учета, совершенствовании системы принципов на которых она функционирует. задача исследования состоит в определении места и роли стратегического управленческого учета в создании информационной инфраструктуры управления в современных условиях хозяйствования; раскрытие декомпозиции задач и усовершенствования системы принципов функционирования системы стратегического управленческого учета. гипотеза исследования основывается на предположении, что эффективность управления субъектами хозяйствования требует приспособленной к рыночной среде полной, достоверной и своевременной информации, которая формируется в надлежащим образом организованной системе стратегического управленческого учета. методология основывается на статистическом анализе данных опроса респондентов со 125 промышленных предприятий харьковского региона. данные были собраны с помощью непосредственного опроса в ходе подготовки стратегии baltic journal of economic studies 54 vol. 1, 2015 развития харьковской области на период до 2020 года. респондентам предлагалось несколько вопросов, которые определяли: результаты функционирования системы информационной поддержки стратегического управления на предприятиях, где работают респонденты; направления функционирования системы стратегического управленческого учета. с помощью метода экспертных оценок была оценена важность источников информации для принятия стратегических управленческих решений. общая система исследование базируется на методологии системного подхода. выводы. в ходе исследования подтверждена роль и значимость информации стратегического управленческого учета для целей стратегического управления. по полученным результатам, очерчены проблемы, стоящие перед руководителями украинских предприятий на основе проведенного опроса с целью повышения эффективности деятельности. усовершенствована система принципов, которые обеспечивает эффективность функционирования стратегического управленческого учета как технологии информационного обеспечения стратегического управления. практическое использование. распределение показателей определение основных направлений функционирования системы стратегического управленческого учета на промышленных, инновационно активных предприятиях харьковской области доказывает, что при необходимости генерирования информации данной системой для стратегического управления необходимо учитывать интересы нескольких групп пользователей. система принципов функционирования стратегического управленческого учета как технологии информационного обеспечения стратегического управления предоставляет возможность улучшить ее практическое использование и определить приоритеты развития. значение. освещение основных направлений функционирования системы стратегического управленческого учета на основе результатов опроса респондентов и исследование полученных результатов имели целью определить перспективы развития данной системы в целом, и на промышленных, инновационно активных предприятиях харьковской области в частности. baltic journal of economic studies 73 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-73-81 the development core of enterprise: theoretical aspect viktoriia hrosul1, serhii zubkov2, tatul mkrtchyan3 abstract. relevance. the result of the effective functioning of the enterprise is its development and growth. modern economic conditions are characterized by high dynamism and uncertainty, tough competition, which requires from trade enterprise to form the development strategy taking into account market environment changes and adaptation of the internal parameters of functioning to them. the practical solution of problems, which are related to the necessity to provide enterprises with efficiency and competitiveness, depends on the methodological principles of elaboration for their development. aim. the aim of the study is to substantiate the concept of development core of the trade enterprise as the new view of its development process. methodology. in the process of substantiating the concept of development core of the enterprise, the historical method and the content analysis method were used to study the enterprise development theory; system analysis method was used for substantiation of the development conceptual vision of the trade enterprise; formalization method was used for creating development core model of the enterprise. results. on the base of the development of the concept of economic core with the aim to take into account the most important determinants of the enterprise development, the concept of development core of the enterprise is elaborated; it provides interaction of three components: the strategic component determines development directions and measures for their achieving; the resource potential component provides the necessary resources mobilization; the business model component promotes the chosen activity effectiveness. support of efficiency of development core of the enterprise is carried out through the supporting and resulting subsystems. the supporting subsystem necessitates the formation of special methodological support for implementation of the key formation processes and interaction of components of development core of the enterprise. the purpose of core resulting subsystem is to summarize the enterprise activity, exchange information with the internal and external environment. practical value. the identified components of development core of the enterprise cover key areas of management at the enterprise; it provides comprehensive coverage of its development determinants and application of the concept of development core in the trade enterprises activity will help create conditions for their harmonious development. value/originality. the concept of development core of the enterprise is elaborated; it is based on the process approach of intra-component functioning of strategic, resource potential and business model components and serves as theoretical and methodological support for the choice of strategic priorities of development of the enterprise. key words: development, development core, trade enterprise, resource potential, business model, strategy. jel classification: l81, o12, m10 corresponding author: 1 kharkiv state university of food technology and trade, ukraine. email: viktoriagrosul@gmail.com orcid: https://orcid.org/0000-0002-2019-3853 researcherid: b-6261-2018 2 kharkiv state university of food technology and trade, ukraine. email: s.zubkov@hduht.edu.ua orcid: http://orcid.org/0000-0002-4892-8284 researcherid: o-8090-2015 3 armenian state university of economics, armenia. email: tmkrtchyan@mail.ru orcid: https://orcid.org/0000-0003-2057-8590 1. introduction the result of effective functioning of the enterprise is its development and growth. modern economic conditions are characterized by high dynamism and uncertainty, presence of fierce competition, which requires from enterprise to form development strategy taking into account market environment changes and adaptation to them of the internal functioning baltic journal of economic studies 74 vol. 7, no. 3, 2021 parameters. the practical solution of problems related to the need of providing efficiency and competitiveness of the enterprises depends on the methodological principles of providing their development. the development of the enterprises is a complex process that requires the coordination at all levels of management. overcoming all existing environmental challenges requires the use of relevant theoretical and methodological support for development management. development theories can be divided into structural and evolutionary ones (nikolayev, 2006). structural theories emphasize organization of dynamics of internal variables, their property as the driving force of change; interaction of internal characteristics with external environment. evolutionary theories focus on organization changes during the time, organization characteristics at various development stages (nikolayev, 2006). the most common evolutionary theories are the life cycle theory of i. azides (azides, 1999); l. greiner’s model of organizational development (greiner, 1998); b. lievegoed’s concept of organic evolutionary development (lievegoed, 1969). modern structural theories of regional development are of particular interest; they are based on the concept of «growth poles» by f. perroux (1970), j.r . boudeville (1992), p. pottier (1963), x. lasuen (1969). these theories are continued at the enterprise level as the concept of economic core (pavlov, 2003), the development core (inshakov, 2003), the business core (zook & allen, 2010). there is a need today for scientific understanding of the latest theoretical and methodological trends of providing development of the enterprises taking into account the existing research value. 2. the concept of development core of the enterprise v. pavlov considers the economic core the whole set of «growth poles» and all basic elements of the economy (pavlov, 2003). everything that contributes to the increase in a significant number of other components of social and economic system is related to the economic core (pavlov, 2006). the most relevant use of the economic core theory provisions during the development of the concept of social and economic policy is in underdeveloped countries and countries with transition economy, where resources and opportunities are usually significantly less than in developed countries, and unresolved problems are much more (pavlov, 2003). thus, v. pavlov concludes that primary reasons for necessity of formation economic core are limited resources and opportunities, as well as the number of unresolved problems and their severity (pavlov, 2003; pavlov, 2006). despite the fact that the economic core concept is initially focused on the industry, it is also advisable to use it during the individual enterprise economic development problems considering (pavlov, 2003). selection of the elements of economic core is based on the use of many parameters (both cost and non-cost) such as profitability level and efficiency, capital turnover rate, increasing employment and aggregate demand (pavlov, 2006). when determining the selecting criteria of the elements of economic core, not only the qualitative aspect, but also the quantitative one should be taken into account (pavlov, 2006). the business core concept, which is proposed by c. zook and j. allen (2010) is based on the idea that enterprise sustainable development basis is for preservation of the company’s own integrity by the most efficient use of the business core. the business core is defined by concept’s authors as activity aspects set under which the company manages to form and maintain stable competitive advantage. thus, the business core is a set of products, abilities, customers, distribution channels and geographical factors that determine what a company is, or what it intends to become for providing its own sustainable development and economic growth (ivanova, 2014). for identifying its business core, the company should focus on the sources of sustainable competitive advantages which constitute the platform for profitable growth (ivanova, 2014). the strategic management target is to form sustainable development strategy, which is based on the business core definition and its strengthening and attracting resources for effective use (ivanova, 2014). the profitability and effectiveness indices are proposed to be considered control indices for determining activity of enterprise core (ivanova, 2014). accordingly, the areas that demonstrate a steady increase of profitability and effectiveness can be attributed to the components of the company’s business core (ivanova, 2014). the concept of «development core» is developed by inshakov o.v. in the context of the new theory of factors of production based on the anthropocentric model of the «nature-human-society» (nhs) supersystem (inshakov, 2003). on the base of above mentioned it is possible to draw the following conclusions: – the core concept can be used at the enterprise level; – the necessity to use the concept is based on limited resources and solving key tasks of the enterprise development, such as long-term growth and competitiveness; – core components are certain key factors of enterprise development. we proposed the «enterprise development core» concept on the base of the main provisions of the considered concepts. with taking into account v.k. pavlov’s economic core concept provisions in terms of limited resources, the enterprise development core source component should be resource potential (resource component), which is the whole set available for use by the enterprise for baltic journal of economic studies 75 vol. 7 no. 3, 2021 development of various groups of resources (intangible, technical, technological, personnel, financial, spatial, informational and others). the enterprise development goals requires enterprise resource potential mobilization, which provides organizational and economic mechanism for the enterprise resource potential mobilizing, which should be understood as a set of processes, techniques, methods and approaches that provide the interaction of components system of organizational and economic effect on the enterprise funds and resources concentration for development strategy supporting and business model efficiency increasing. the core business concept, which provides a set of products, abilities, customers, distribution channels and geographical factors that determine what a company is, or what it intends to become for providing its own sustainable development and economic growth; in our opinion, it mostly decides the enterprise business model. thus, we proposed the enterprise business model (business model component) as the second component of development core of the enterprise. the enterprise business model should be considered as doing business method, which is elaborated for development strategies effectiveness providing in terms of profit generation. thus, the business model is elaborated for enterprise development quality component providing by enterprise key activity efficiency increasing. the third component of the development core is proposed to include strategic component, which means a set of actions and measures of enterprise development goals achieving, which provides the transition from current state of the enterprise to another qualitative or quantitative state. the development strategy purpose is to find and implement new areas of enterprise development. in this case, the development strategy mostly characterizes quantitative aspects of the enterprise development. thus, certain three components of interaction of the enterprise development core provides enterprise development, which in general can be described as follows: the strategic component determines the trends of development and achieving their measures; the resource potential component mobilizes the necessary resources, the business model component provides increasing effectiveness of chosen activity. supporting efficiency of development core of the enterprise is carried out through the supporting and resulting subsystems. the supporting subsystem necessitates the formation of special methodological support for implementation of key formation processes and interaction of components of the enterprise development core. the resulting subsystem purpose is enterprise activity summarizing, information exchange with the internal and external environment. the enterprise development core concept is presented in figure 1. the concept of «development core» in the context of the production factors theory by o. inshakov (inshakov, 2003), allows to present the proposed concept of development core of the enterprise also in the production function form as: q = f (rp, bm, s), (1) where q is resulting guidelines of enterprise development; rp is an enterprise resource potential component; bm is an enterprise business model component; s is an enterprise strategic component. figure 1. the enterprise development core concept: s is a strategic component, bm is a business model component, rp is a resource potential component source: developed by authors supporting subsystem external environment resulting subsystem s bm rp development core baltic journal of economic studies 76 vol. 7, no. 3, 2021 the resource potential component (rp) mobilizes all available resources, which are involved in production processes for meeting consumer needs in goods and services. the business model component (bm) provides business processes implementation in the most efficient way. the strategic component (s) provides target orientation of enterprise activity with taking into account various peculiarities of the external environment. 3. resource potential component of the trade enterprise development core resource potential is the main supporting component of the trade enterprise development core. shtal t. identifies such components of trade enterprises resource potential as fixed assets, commodity, labour and financial resources (shtal, 2005). this list of components does not fully reflect the specifics of trade enterprises; in addition, there is an identification of the potential and resources concepts. in other studies, this specificity is traced more precisely. thus, makovoz o. marks out personnel, technical and technological, commodity resources and financial potentials as a part of potential resource of trade enterprise (makovoz, 2008). virt m. and shynkarenko k . include trade, labour, financial, managerial and marketing potential to the trade enterprise resource potential (virt & shynkarenko, 2009). berezin o. and karpenko yu. propose to distinguish much larger component composition of trade enterprise resource potential, including inventories, trade fixed assets, trade and operational personnel, financial assets, information resources and intangible assets, technical and technological potential (berezin & karpenko, 2012). krasnokutska n. identifies the following components of trade enterprise resources: material (including commodity, technical and spatial), personnel, financial and intangible, which includes technological, informational and reputational components (krasnokutska, 2012). grosul v. and fylypenko o. distinguish such elements that make up the trade enterprise resource potential structure, as: technical, spatial, commodity, human, financial and intangible resources (grosul & fylypenko, 2013). kaliuzhna n. proposes to distinguish such components of trade enterprise resource potential as labour, technical and technological, informational, financial, spatial and labour objects potentials (kaliuzhna, 2016). nikolaeva t. offers to distinguish personnel, information, organizational, financial and investment and technological potentials of trade enterprises (nikolaeva & lykasova, 2011). later she expands the list of resource potential components but distinguishes marketing resources; resources which are involved in gaining competitive advantages; spatial resources and consumer capital; information, financial and investment resources; management competencies (nikolaeva & uryasyeva, 2017). as we can see, scientists’ positions about trade enterprises resource potential structuring are divergent. therefore, on the base of the criteria of compliance with trade enterprises specifics and quantitative and qualitative identification possibility, we consider that it is reasonable to distinguish as changes in objects of resource potential development core of the trade enterprises: – technical resources (opportunities to provide trade and technological processes with advanced equipment, devices, inventory and vehicles); – spatial resources (development opportunities which are grounded by the nature, size and location of the enterprise, retail and storage facilities, communications, network resources); – commodity resources (enterprise functioning and development opportunities which are grounded by provision of trade and technological processes with inventories); – personnel resources (aggregate abilities and competencies of enterprise labour resources for objectives meeting and further development providing); – financial resources (enterprise opportunities to invest the necessary funds in the planned development and provide strengthening market positions); – intangible (enterprise opportunities to receive the necessary information timely, use appropriate methods of management decisions implementing, apply advanced technologies, methods and forms of sales and customer service, information and communication technologies, provide conditions for maintaining and increasing loyalty of all stakeholders) (chorna, 2015). 4. business model component of trade enterprise development the next component of trade enterprise development core is the business model, which is proposed to be considered as doing business method for the development strategy effectiveness providing in terms of profit generation (grosul & zubkov, 2018). the identification of changes in objects of business model of the trade enterprise depends on its components. sorescu a. and others propose trade enterprise business model, which includes three interrelated elements: trade enterprise format, which involves determining the range, prices, number of staff, principles of goods location, advertizing medium choice, etc.; activity, which involves supply chain optimization, branding and communication, new technologies introduction, etc.; and management, which includes key partners, networks and coordination mechanisms (sorescu et. al., 2011). this position was further supported by other researchers, who tried to develop it (yrjölä, 2014; rozman, 2014). baltic journal of economic studies 77 vol. 7, no. 3, 2021 the general business model of trade enterprise which is proposed by cao l. which specifies four main elements, such as a value proposition for consumers, which includes shopping experience that consists of utilitarian and hedonistic value; target customers; value chain, such as retail format, price formation, store location, promotion, purchasing, human resources, accounting, organization, supplier and consumer relations; profit formula, which includes income model, costs structure, margin model and resource utilization rate (cao, 2014). the five-element business model of trade enterprise includes management, financial model or structure, assets and infrastructure, provision of services, clients and their attraction (business models guide). in turn, slawinska m. emphasizes that business model changes of trade enterprises involve the introduction of new solutions in the following five areas: store formats and stores location at different geographic markets; goods and services offers that require new resources and new transactional relations in the supply chain establishment; cooperation forms with other business entities; e-commerce development and mobile technologies use; communication with customers and corporate brand and private labels positioning in relation to goods and services (slawinska, 2016). haas y. distinguishes six elements of trade enterprise business model: value proposition, which involves the supply, for example, range, prices, services; shopping experience, such as atmosphere, events; purchases convenience, in particular, location, availability; relations with customers, which include target customers identification, management mechanisms, such as customer relationship management (crm), customer data management (cdm); partnerships, in particular with suppliers, delivery partners, retail groups, management mechanisms, such as effective customer response (ecr); vertical integration, which involves the selection and integration of value chain stages which are the basis of operation for retailers; horizontal integration, which involves the selection and integration of sales and communication channels; value appropriation, which includes economic mechanisms such as retail margin, franchise fees, leasing options and real estate leasing (haas, 2019). n. viswanadham’s business model includes seven elements: value proposition for consumers, which provides purchase convenience, goods, prices, services, channels; partner network, which includes manufacturers, suppliers, logistics, distributors, etc.; retail service networks, which include purchases, store management, marketing and advertising; delivery technologies and mechanisms, such as retail stores, delivery and service logistics, cash handling; resources (natural, human, financial, digital, industrial); institutional and social management restrictions, such as rules, policy, taxes; profit formula, which includes the income model, costs structure (viswanadham, 2018). esquivias p., souza r . and ramos p. offer a retail business model, divided into two submodels: operating model and customer value proposition. first one, operating model, includes product and service offering, shopping experience, pricing and revenue model. the second submodel mentioned, the operating model, includes organization, sourcing, store operations and value chain (esquivias, ramos & souza, 2010). a review of modern business models of the trade enterprises shows that they are similar according to the constituent elements content; the main difference is aggregation degree of business model fundamental aspects into constituent elements, which determines their number. reducing elements number of trade enterprise business model helps simplify their management. in this regard, the focus on the threeelement business model (sorescu et. al., 2011) in full measure meets the requirements of trade enterprise development core dynamic model and fully reflects the trade specifics. it should be noted that only this model contains trade format element, which is key object of changes in the trade development theories. therefore, it is expedient to determine trade format, trade enterprise activity and trade enterprise management as changes objects, trade enterprise business model components. 5. strategic component of trade enterprise development core during researching the enterprise strategy essence, scientists distinguish three components: the basic concept (essence) or action; strategy implementation tools; implementation result (kukushkin, 2005; kravchenko, 2007; golovinov & litvinov, 2011; denysiuk, 2013; zbarsky, 2013; saukh, 2016). as basic concept or action, the strategy is defined as the process of long-term goals achieving. as implementation tool, the strategy is a set of actions for the location, distribution and coordination of enterprise resources. the component result element is certain target guidelines achievement – strengthening market position and competitive advantages, etc. (kukushkin, 2005). if the strategy is considered as goal-setting process, it is logical to determine the tools for achieving these goals, so the changes objects in dynamic model in the strategic component are the goals and means for their achieving. as for the third element – the result, it acts as activity result, changes result to which they were directed. therefore, within the concept, the obtained result is not current changes subject. it should be noted that the material carrier of certain changes objects are plans and programs of enterprise activity, which are targeted guidelines bearers. baltic journal of economic studies 78 vol. 7 no. 3, 2021 6. discussion our proposed concept of enterprise development core is somewhat static. the enterprise development involves changes, so this concept development should include dynamism elements. in our opinion, the most appropriate for the task implementation is the theory provisions of dynamic abilities use. during this theory developing, d. collis (1994) proposes to consider the organizational abilities hierarchy, which consists of three levels. the first level is functional, which includes the skills that are needed for company surviving and key business processes supporting. the second level is directly related to dynamic abilities, as it reflects the idea of the need for dynamic improvement of organizational business processes. the third level is creative or entrepreneurial, which includes abilities that are associated with developing new strategies faster than competitors by recognizing different resources value (collis, 1994). this approach development is found in the study of t. andreeva and v. chayka (2006), who propose to highlight the functional (operational) abilities that characterize most industry enterprises; «key» abilities which form key competencies and are the basis competitive advantage; dynamic abilities which allow updating the «key» abilities in accordance with changes in the external environment (andreeva & chayka, 2006). malyarchuk o. (2010) identifies slightly different types of abilities: assets (unique technological, financial, reputational resources); coordination (management) structures (provide organizational and specific coordination, training, resources reconfiguration); development trajectories (the evolutionary way which is taken by the organization as opportunities limitation for further development) (malyarchuk, 2010). according to their content, abilities levels correlate with the components of our proposed enterprise development core. this hypothesis corroboration can be found in number of scientists’ research. thus, k. eisenhardt and d. martin (eisenhardt & martin, 2000) emphasize that enterprise dynamic abilities components – organizational and strategic routines – provide the achievement of new resource configurations. d. magretta proves that business model changing is dynamic ability manifestation that provides continuous segmentation of current business for new consumer needs meeting (magretta, 1998). k. eisenhardt and d. martin substantiate that strategic decision-making can be dynamic ability through which managers combine different practical, functional and personal knowledge for choice making that will form enterprise strategic actions basis (eisenhardt & martin, 2000). thus, according to the presented research, it can be argued that enterprise dynamic abilities include changes ability under the enterprise resources external environment effect, its business model and strategy. on this basis, the enterprise development core dynamic model can be proposed (figure 2). the presented dynamic model reflects the aggregate effect of changes of enterprise development core components on its development under the external environment changes influence. the dynamic model is continuous process of interaction of three components that form the enterprise development core: resources, business model and strategy. in figure 2 they are represented in the form of three circles, which are marked respectively rp (resource potential component), bm (business model component), s (strategic component), figure 2. dynamic model of the enterprise development core source: developed by authors business model component resource potential component strategic component external environment effect baltic journal of economic studies 79 vol. 7 no. 3, 2021 the development core forms on their intersection. the circles movement under the external environment changes influence will increase or decrease the area of circles intersection, which will characterize enterprise potential development. 7. conclusions providing development of the enterprise is achieved by modern theoretical and methodological basis use. the elaborated enterprise development core concept involves three components interaction: the strategic component determines development trends and measures for their achieving; the resource potential component provides necessary resources mobilization; the business model component provides chosen activity effectiveness. the supporting subsystem necessitates the special methodological support formation for the key processes implementation of formation and interaction of the components of development core of the enterprise. the resulting core subsystem purpose is summarizing enterprise activities and information exchange between the internal and external environment. the identified components of development core of the enterprise are included in the key areas of enterprise management, and apply the concept of development core to the activity of enterprises will contribute to the formation of conditions for their harmonious development. the dynamic model of the enterprise development core is proposed; it reflects its components cumulative effect of changes on its development under influence of the external environment changes. the dynamic model is three circles that form the components of enterprise development core – resource, business model and strategic. their interaction and influence on the enterprise development is reflected in the circles intersection. the movement of circles under the influence of changes in the external environment will increase or decrease circles interaction area, which will characterize the enterprise potential development. the purpose of the trade enterprise development proposed concept on the base of the development core is effectiveness providing of quantitative and qualitative changes processes in accordance with the internal and external environment for its competitive advantages forming and maintaining. the main concept objectives are: resource potential mobilization providing for enterprise development; 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(2010). profit from the core: a return to growth in turbulent times. harvard business press. baltic journal of economic studies 126 vol. 8 no. 1, 2022 corresponding author: 1 sumy national agrarian university, ukraine e-mail: l.poliatykina@ukr.net orcid: https://orcid.org/0000-0003-1548-934x 2 sumy national agrarian university, ukraine e-mail: ira_samoshkina@ukr.net orcid: https://orcid.org/0000-0002-0468-6834 3 sumy national agrarian university, ukraine e-mail: ira_samoshkina@ukr.net orcid: https://orcid.org/0000-0002-1337-6272 doi: https://doi.org/10.30525/2256-0742/2022-8-1-126-133 accounting and financial problems of bank lending to agro-industrial enterprises in ukraine larysa poliatykina1, iryna samoshkina2, victoria borisova3 abstract. the purpose of the article is to study the problems of implementing the credit mechanism in the agrarian sector, the rationale for the need to increase the amount of lending to the agro-industrial complex and the analysis of existing studies of bank lending to agricultural enterprises. the issue of solving the problems of lending to the agro-industrial sector in the modern scientific literature is not addressed enough. in light of this, the above-mentioned issues require further comprehensive research in order to identify effective ways to solve the existing problems. problem statement. the task of the research is to: study the current state of bank lending in the country, analyze the state of accounting and financial support for lending to agro-industrial enterprises and determine the prospects for the development of agricultural enterprises in ukraine; analyze the shortcomings and formulate the main trends of these enterprises. as a result of the research to investigate the accounting and financial problems of lending to agricultural enterprises, to highlight in detail their main problems and features. methodology. the analysis of the activities of agricultural enterprises and the peculiarities of its management. the issues of formation and functioning of farms, as well as document management and business administration in these farms are debatable. results. according to the research, accounting and financial problems and possible prospects for lending in the agricultural sector of ukraine were analyzed. as a result of the study, we have analyzed the state, problems and possible prospects of lending in the agrarian sphere of ukraine. the features of credit relations of agro-industrial enterprises with commercial banks are revealed, the state and trends of development, as well as the modern conditions of bank lending to agricultural enterprises are analyzed. the need for the state support in providing this industry with affordable long-term lending resources and the introduction of preferential credit mechanisms for agricultural commodity producers is determined. practical implications. peculiarities of credit relations of agro-industrial enterprises with commercial banks are revealed, their state and development tendencies are analyzed, as well as modern conditions of bank crediting of agrarian enterprises. they develop the real economy, expand employment opportunities and promote competition. the necessity of intensifying the development of agro-industrial enterprises, which is an important task of the state, has been proved. the solution of accounting and financial problems of bank lending to agro-industrial enterprises in ukraine should be based on the introduction of european experience, which will contribute to the creation of a modern market economy with social justice. lending to agricultural enterprises by commercial banks is currently quite complicated, and sometimes even impossible. the reasons are low profitability, return on capital employed and liquidity of the property. at present, farmers are considering alternative options for the replenishment of working capital. therefore, the avalisation of bills and agrarian receipts may be used as an alternative to bank lending to meet the needs for the crop protection agents, fertilizers and planting material. these methods make it possible to obtain a delay in payment for the acquired resources or financial resources for the acquisition of working capital in the provision of agricultural enterprises with future harvest. the formation of strategic directions of creditor activity of banking institutions of ukraine is considered on the example of activity of jsb "ukrgasbank". the article pays attention to the issues of credit insurance in order to protect the interests of banking institutions and improve the formation of directions for solving the problems of bank lending to baltic journal of economic studies 127 vol. 8 no. 1, 2022 agricultural enterprises. value/originality. the need for state support in providing agricultural enterprises with affordable long-term loans and the introduction of mechanisms for targeted lending to agricultural producers, which is possible only through a balanced government policy of comprehensive support for this sector of the economy. the directions of the decision of problems of bank crediting of the agricultural enterprises are offered. the improvement of legislation on the agrarian policy, the regulation of lending operations, the rational distribution of funds, their effective use and timely repayment of debt, and the corresponding policy of the state could remedy the situation. key words: agricultural enterprises, bank lending, borrower, credit relations, commodity producer, lender, state support, accounting, finance, problems. jel classification: r51, d01, f34, o11, m41, g18, q14 1. introduction the agro-industrial sector is the base in the structure of the ukrainian economy. significant investment resources, which primarily concern the significant volume of lending, are essential for the effective operation of agricultural enterprises. as a result of market transformations, a significant part of agricultural enterprises has lost their own financial resources, and the conditions of access to external resources have drastically deteriorated. at the present stage of their development agricultural enterprises require increased investment of financial resources, which will contribute to the formation of competitive agricultural production and economic development. unfortunately, lending to agricultural enterprises by commercial banks is currently quite complicated, and sometimes impossible. the reasons are low profitability, return on capital employed and liquidity of the property. the operation of agricultural enterprises is impossible without attracting lending resources, since agriculture is a credit-intensive industry. agricultural enterprises need to attract long-term financial resources for the renovation of equipment, the construction of new facilities and the introduction of innovative technologies. but obtaining these loans is quite problematic due to a high level of riskiness of agribusiness, low creditworthiness of enterprises, low quality and liquidity of collateral, which enterprises are able to provide to banks, the lack of mortgage lending mechanisms in the region, as well as the imperfection of legislative mechanisms. analysis of the research and problem statement. scientists-economists have studied the main part of the theoretical, methodological and applied aspects of the problem of providing agricultural commodity producers with bank financial resources, but the issue of the development of bank lending to agricultural formations still remains unresolved, and continues to grow worse. this range of issues is of a polemical character and requires further development in the direction of improving the mechanism of the arrangement of bank investment lending to agricultural enterprises in the country. the task of our study aims to: investigate the current state of bank lending in the country, analyze the state of accounting and financial support for lending to agro-industrial enterprises and determine the prospects for the development of agricultural enterprises in ukraine; analyze the shortcomings and formulate the main trends of these enterprises. as a result of the research to investigate the accounting and financial problems of lending to agricultural enterprises, to highlight in detail their main problems and features despite significant scientific elaboration, the problem of accounting and financial functioning of agro-industrial enterprises remains open. a significant number of issues related to business lending in ukraine need further research. the problem of providing loans to the national economic complex is one of the most urgent ones at this stage of development of the national economy. the economic complex of the country has the required prerequisites for the wide attraction of foreign investments and lending, namely: fertile black soil, developed transport infrastructure, favorable geographical location, availability of labor force, unsaturation of food and resource markets. but unfortunately, the state of lending to the agro industrial sector is quite challenging. this is due to the unsatisfactory financial condition of banks, low quality of lending resources of banks due to an increase in the number of delinquent loans, investment unattractiveness and increased risk of lending to the agro-industrial sector of the economy. the situation is aggravated by the fact that in recent years there has been a series of bankruptcy of financial institutions that has undermined the confidence of potential investors in banks, which in turn has reduced the liquidity of financial institutions and their ability to lend to the economy. table 1 shows the dynamics of the availability of commercial banks in ukraine for the period 2008–2018. the above table shows that for the period from 2008 to 2020, 101 financial institutions, especially baltic journal of economic studies 128 vol. 8 no. 1, 2022 commercial banks with ukrainian capital, were liquidated, since the number of banks with foreign capital remained virtually constant. this number of the cases when banks go bankrupt has had a significant impact on the credit capacity of existing banks. at present, banks focus on high-yield retail lending, and remain aloof from the processes of solving issues in the economy and its real sector that must be dealt with expeditiously. at the moment, the conditions that have developed in the sphere of interaction of bank institutions with enterprises of the real sector require a set of measures to enhance the participation of banks in the formation of financial resources of enterprises to ensure the essential growth rates of the national economy. one of the effective forms of management in rural areas, the important means of solving the food, economic and social problems of the society and rural areas are farms. these forms of economic activities also need assistance in the form of bank lending (poliatykina, kadatska 2018). under the circumstances, where the main share of bank assets is lending operations, the efficiency of banking business and its profitability are directly related to the performance of borrowers in the market of goods and services. in this regard, it is particularly important to further improve the operation of the banking system, to increase the role and importance of bank lending in the formation of financial resources of enterprises of the real sector of economy, the introduction of advanced lending methods, the study of the impact of lending products and levers on the state of domestic production. lending for agricultural enterprises, along with budget financing, is one of the most important external sources of investment activity of agricultural enterprises. in the agrarian sector, lending resources play a crucial role: a seasonal gap between investment and receipt of funds, the continuity of reproduction processes, a significant need for working capital turn lending into the main source of replenishment of financial resources (ruda, 2013). the congruence of interests of both the lender and the borrower is important in establishing credit relations. only under this condition loans will be provided by the bank and used effectively by the borrower. 2. lending for alternative energy projects on the example of the activity of jsb "ukrgasbank" consider the formation of strategic areas of lending. jsb "ukrgasbank" has established itself in the financial services market of ukraine as a transparent, stable and reliable institution. as of january 1, 2021, 278 operating points of sale of jsb "ukrgasbank" were presented to 162 settlements of ukraine. according to the results of 2020, among 74 banks, jsb "ukrgasbank" occupies the fourth position in terms of assets, amounting to 142.7 million uah. the main strategy of jsb "ukrgasbank" is to provide financial services to clients implementing projects aimed at, firstly, efficient use of resources and, secondly, reduction of harmful effects on the environment. jsb "ukrgasbank" actively implements the concept of "environmental responsibility " of business, applies the principles of "green" financing of the economy. implementing the "green banking" strategy, the bank has chosen to finance projects related to the efficient use of energy resources and the reduction of negative impact on the environment. today, jsb "ukrgasbank" is the only bank in eastern europe that has its own office, which serves for professional expert analysis of alternative energy and energy efficiency projects. the bank finances eco-projects from renewable energy sources, as well as energy efficiency and ecology. in order to achieve the strategic goals of jsb "ukrgasbank", the department of environmental reengineering and implementation of resource conservation projects was established in the bank. this structure is engaged in the development and maintenance of all eco-projects. the eco-projects of jsb "ukrgasbank" include such investment projects as renewable energy projects; resource saving projects, namely: energy saving and energy management; some other sustainable development projects, namely: environmental protection, environmental transport, table 1 number of commercial banks in ukraine from 2008 to 2020 date number of operating banks operating banks with foreign capital including with 100% of foreign capital as of january 01. 2008 175 47 17 as of january 01. 2009 184 53 17 as of january 01. 2010 182 51 18 as of january 01. 2011 176 55 20 as of january 01. 2012 176 53 22 as of january 01. 2013 176 53 22 as of january 01. 2014 180 49 19 as of january 01. 2015 163 51 19 as of january 01. 2016 117 41 17 as of january 01. 2017 96 38 17 as of january 01. 2018 82 38 18 as of january 01. 2020 74 36 16 source: according to the national bank of ukraine, financial portal minfin.ua baltic journal of economic studies 129 vol. 8 no. 1, 2022 public health and pandemic response, organic production, waste management. jsb "ukrgasbank" offers its customers quality service. the bank is also actively implementing new technologies. during 2018–2020, a high-tech, modern, multifunctional system "eco-boom 24/7" for legal entities and individual entrepreneurs was introduced, as well as a mobile application "ekobank" for individuals. these applications have a high level of security and information protection. also, customers have the opportunity not only quickly and securely, but also remotely, to manage their own bank accounts, being in any part of the world, in real time. as a result, the bank's customers can achieve maximum efficiency and mobility in their business activities. the introduction of state-of-the-art customer-oriented digital tools helps jsb "ukrgasbank" to become a leader in the e-commerce market. 3. problems of lending to agricultural enterprises under the market transformation in ukraine, it is of critical importance that a rational proportion be maintained between the financial and real sectors of economy: the development of the financial sector should be consistent with and supported by the development of the real sector of economy. the proportional development of all economic subsystems would provide the best opportunities for restructuring the economy, the intensive development of the institution of entrepreneurship and the improvement of banking business, which in fact should contribute to the proper operation of this institution. unfortunately, this proportion is not tracked. according to various estimates, bank lending accounts for only 20% of the working capital of the agrarian sector, while the share of loans in developed countries amounts to 70%. it has been believed that each business entity may acquire lending resources in the credit market at a market price. price equilibrium should have been achieved through the mechanism of supply and demand. but practice has shown that this approach is not viable. the actual relations in the credit market have turned out to be much more complicated, and such a universal model has not worked. the overwhelming number of agricultural commodity producers is unable to get lending resources even theoretically on such conditions at the credit market. in the context of increasing the volume of agricultural production investment activity in the ukrainian agriculture remains low. among the most influential factors hindering business in ukraine are access to financing for agricultural enterprises (15.3%), corruption (14.0%) and tax regulations (13.6%). the severe political and economic crisis, military actions, unstable, unpredictable and non-transparent state policy, insecurity of the rights of creditors and landowners, inefficiency of reforms related to taxation and land use, insufficient financing of agriculture and other factors objectively do not contribute to external fund raising (world economic forum 2013). according to the official statistics, in 2019 the industry attracted 8.6% of capital investments from total investments in the economy of ukraine. in the context of the export orientation of agriculture, it has lacked financial resources that affects the technical equipment of production, the volume of applied fertilizers, the use of plant protection agents and, in general, the compliance with the standards of the technological process. according to the national bank of ukraine data, loan balances on bank accounts as of the end of february 2020 amounted to almost 842 billion uah, 40.6% of which are loans granted in national currency, 59.4% – in foreign currency. from them only 50.5 billion uah (6.0%) are credit funds provided to the enterprises of agricultural, forest and fish industries (as of the end of december 2019 – 48.4 billion uah, or 6.1%). in the current conditions, only a few banks keep on lending to farmers. despite the fact that banks have liquid funds, they are in no haste to invest in too risky agrarian sector (holovnyy zhurnal z pytan ahrobiznesu, 2016). the analysis of these bank websites and prompt information makes it possible to identify lending programs offered by banks in the field of financing: – to replenish working capital – the program is aimed at financing working capital, namely purchasing fertilizers, repairing equipment and paying wages and salaries (overdraft, credit facility, term loan); – to implement investment projects – the program is aimed at financing investment projects for the construction of fixed assets, such as elevators, warehouses, etc., as well as purchasing equipment for the arrangement of these facilities; – to purchase agricultural machinery – the program is aimed at purchasing agricultural machinery and equipment. banks assess the creditworthiness of borrowers with due diligence. therefore, no lending is provided to agricultural enterprises without collateral. the best collateral for most banks is liquid assets. however, warehouse certificates and other documents of title to agricultural products may be provided as collateral. investment lending to agricultural enterprises is based on the same principles as lending to enterprises of other sectors of economy, but has significant features (aranchiy, 2011): baltic journal of economic studies 130 vol. 8 no. 1, 2022 – clear periodization of the production process that eliminates interruptions in it and causes the need to ensure the provision of loans to the commodity producers of the agrarian sector within clearly defined time limits and in full; – slow capital turnover requires an increase in the terms of attracting lending resources; – non-equivalence of exchange and low level of profitability of agricultural production require a reduction in loan charge; – low level of technical equipment of production at a high level of equipment wear and outdated technology use requires a significant amount of credit security; – increased level of risk in the industry, which requires an adequate level of insurance protection. bank lending in the agro-industrial complex of ukraine is provided mainly in several key areas and extremely unprofitable for domestic farmers. there are several major lending programs: loans to replenish working capital aimed at financing working capital, namely purchasing fertilizers and livestock, repairing equipment and paying wages and salaries, lending for the implementation of investment projects aimed at financing investment projects for the construction of fixed assets, such as elevators, warehouses, etc., as well as purchasing equipment for the arrangement of these assets; leasing loans, or loans for the purchase of agricultural machinery. at the same time, all these lending programs are implemented mainly at 25-30% per annum, if they are introduced at all. since 2014, agricultural producers with loans in foreign currency have had to return any tripled amount in uah equivalent. it is the uah devaluation of 2014 that has had an extremely negative impact on a plenty of ukrainian farmers driven by the state in a very difficult situation. the growth of the official dollar exchange rate has increased the debt burden. while large agricultural holdings are largely exportoriented, other producers have to settle for the remnants of the domestic market. the problem in this case is also that many enterprises are focused on the domestic consumer market. taking into account the reduction in purchasing power of all ukrainians without exception, many producers have actually lost domestic markets. and, as we understand, it is virtually impossible for many small and mediumsized agricultural producers to enter large retail chains (ukrainskiy vybor, 2016). 4. directions for solving the problems of bank lending to agricultural enterprises the analysis of the resource base of many enterprises shows that it is impossible to achieve economic growth without investments, support of financial institutions and the inflow of funds into the economy. having studied the structure of sources of financing of capital investments, it can be noted that enterprises finance their development mainly from their own funds, the share of which for the period 2010–2020 amounts to 56-60 %. bank loans with a share of 14-18 % take second place (rud, 2013). thus, there is some contradiction: on the one hand, there is a positive trend towards an increase in the total volume of lending, and on the other – the majority of enterprises need further attraction of financial resources. special attention should be paid to the issues of state policy in the manufacturing sector of the economy, which is aimed at solving the most pressing problems of commodity producers. in the context of property reforming of crisis state of economic activity one of the main ways to achieve stabilization is the state support with the involvement of non-traditional forms and schemes of lending to production activities (poliatykina, 2018). having considered the process of granting loans to business entities in more detail, it becomes clear that the number of loans provided by banks increases only in absolute terms. in most cases, lending is provided to enterprises in certain sectors, other businesses still need lending resources. insurance of bank lending operations. additional attention should be paid to the issues of scientific research on the development of a methodological table 2 loans granted to non-financial corporations by types of economic activity and maturity (balances as of the end of february 2020) type of economic activity total including by terms by types of currency million uah % up to 1 year up to 5 years over 5 years national foreign total amount provided 841,973 100.0 419, 442 308,405 114,126 341,574 500,399 enterprises of agricultural, forest and fish industries 50,469 6.0 22,658 21,582 6,229 28,814 21,655 total overdue 187, 576 100.0 85,082 76,673 25,821 34,808 152,768 enterprises of agricultural, forest and fish industries 6,675 3,6 4,085 2,270 320 1,933 4,742 source: according to data of the national bank of ukraine baltic journal of economic studies 131 vol. 8 no. 1, 2022 approach to the organization of insurance activities and the development of proposals on ways to improve it. the insurance market of ukraine is characterized by its insufficient development, structure imperfection, a tendency towards the conclusion of short-term contracts, the weak development of reinsurance, the instability of financial condition of many insurance companies that leads to untimely fulfillment of obligations to insurers. this is especially true in the matters of credit risk insurance (poliatykina, 2018). the nbu discount rate or refinancing rate is the interest rate charged by the national bank of ukraine when refinancing commercial banks. it is a monetary instrument, with the help of which the national bank sets a benchmark for entities of the monetary market in terms of the cost of attracted and placed monetary resources. it is obvious that the policy of lending to the agroindustrial complex of ukraine requires a radical revision. but the government is unconscious of this fact and further worsens the situation with the provision of loans to farmers by increasing the nbu discount rate in 2018. however, the next accounting period was favorable for the development of lending to agro-industrial enterprises. the nbu discount rate began to decline. it was happening at a rapid pace, reaching 6.00 percent in the summer of 2021 (borisova, samoshkina, 2010). the growth of credit investments for commercial banks increases the profitability of active operations in the form of interest for the use of loans and enables business entities to finance production costs for the purpose of continuity of the reproduction process, as an incentive for the effective use of bank loans as a source of investment resources (vdovenko, 2011). 5. european experience of bank lending the experience of the european union (eu) shows that concessional lending is one of the priority levers to support agricultural production. thus, soft loans to farms, of which almost 40% need bank lending, are provided by agricultural cooperative banks. to protect the internal agricultural market, eu countries take certain measures aimed at setting protective prices and non-tariff barriers, introducing customs quotas, duties and compensatory levies. an important area of financial regulation of agriculture in eu member states is to determine the size of direct state subsidies to national producers to ensure the greening of agricultural production and sustainable development of rural areas. the experience of eu countries shows that in the first years of the transition from conventional to organic farming, the share in total areas increased to 4% on average, 8% in austria and italy, 10% in switzerland and almost 12% in sweden (mensick, 2011). state support for agricultural production in spain is provided through the mechanism of agricultural risk insurance. according to the law on insurance, the table 3 amount discount rate of the national bank of ukraine period discount rate, % from april 14. 2017 to may 25. 2017 13.00 -1.00 from may 26. 2017 to october 26. 2017 12.50 -0.50 from october 27. 2017 to december 14. 2017 13.50 +1.00 from december 15. 2017 to january 25. 2018 14.50 +1.00 from january 26. 2018 to march 01. 2018 16.00 +1.50 from march 02. 2018 to july 12. 2018 17.00 +1.00 from july 13. 2018 to september 06. 2018 17.50 +0.50 from september 07. 2018 to april 25. 2019 18.00 +0.50 from april 26. 2019 to july 18. 2019 17.50 -0.50 from july 19. 2019 to september 05. 2019 17.00 -0.50 from september 06. 2019 to october 24. 2019 16.50 -0.50 from october 25. 2019 to december 12.2019 15.50 -1.00 from december 13.2019 to january 30.2020 13.50 -2.00 from january 31.2020 to march 12.2020 11.00 -1.50 from march 13.2020 to april 23.2020 10.00 -1.00 from april 24.2020 to june 11.2020 8.00 -2.00 from june 12.2020 to march 04.2021 6.00 -2.00 from march 05.2021 to april 15.2021 6.50 +0.50 from april 16.2021 to july 22.2021 7.50 +1.00 from july 23.2021 to september 09.2021 8.00 +0.50 from september 10.2021 to december 09.2021 8.50 +0.50 from december 10.2021 till now 9.00 +0.50 source: according to the data of the national bank of ukraine baltic journal of economic studies 132 vol. 8 no. 1, 2022 country has a mixed insurance system. this system includes: insurance of winter crops and insurance of crops in case of natural disasters (floods, fires, frosts, droughts, destruction of products by pests, etc.); crop insurance for demanding and unstable to weather conditions crops (poppy, grapes, tobacco) (leone, panetta, porretta, 2013). in italy, the main element of support for agricultural producers is the system of credit cooperation. in greece, tax incentives are applied, according to which agricultural producers are generally exempt from taxation. in denmark, the state provides guarantees to agricultural producers for their loans and soft loans to young farmers who have acquired their own farms. in france, the mechanism of soft loans is based on the principle of bonus – compensation to the creditor from the state budget of the difference between the contractual interest rate and the soft loan rate. the size of the soft loan rate is fixed, legally defined and differentiated depending on the type of loan: for the arrangement of the farm – 2.7-4.0%, modernization – 2.7-5.0%, livestock development – 5-6%, production of some crop products – 6-10%, land loans – 5.2%, financing of cooperatives for the sharing of equipment – 3.7-5.0%. partial compensation was provided to romanian agricultural enterprises after repaying the soft loan within the stipulated period of 70% of the lender's interest rate (balog, 2018). in austria, there is no fixed rate for soft loans for agricultural borrowers. soft investment loans to austrian farmers are differentiated depending on the type of loan on two levels of compensation surcharges – 50 and 36% of the current interest rate of the lending bank. for german farmers, soft loans are provided in the form of loans with the rate of 1% per annum, or by reducing the loan interest rate of existing loans by 4-7%. that is, for german farmers, either the soft loan rate or the amount of partial compensation is fixed. eu countries are constantly working to reduce the tax burden on agricultural producers. yes, eu farmers receive significant tax benefits. in particular, pension contributions, life insurance contributions, and interest on life-building loans are taken into account when calculating income tax (key, litkowski, williamson, 2018). 6. conclusions on the basis of the above, it should be noted that agriculture is a credit-intensive industry, and its proper operation without lending resources, in particular investment, is almost impossible in modern conditions. although investment lending to agricultural enterprises is becoming more popular and spreading significantly, the mechanism for granting loans to such enterprises still requires significant impro vements. therefore, it is important to develop appropriate mechanisms of lending to this industry, taking into account industry specifics. this will make it possible to effectively invest the formed resources both at the macro and bank levels. both the financial and non-financial support of the state is important for the development and provision of lending to agricultural enterprises by commercial banks. the non-financial support is a kind of tool to minimize risks in investment lending by banks to agricultural enterprises, for which the state does not provide loans or other direct assistance on its own. in order to improve the process of investment lending to the agricultural sector, it is important to involve agricultural producers, banks and the state in this process. agricultural producers must do everything possible to ensure that their activities be efficient and profitable. the significant advantages for increasing the availability of investment resources of agricultural commodity producers are the regional and sectoral diversification of activities, the use of crop rotation, powerful agricultural machinery and modern technologies. banks, in turn, should try to expand cooperation with agricultural commodity producers and support them in every possible way, taking into account all aspects of the investment lending process. the necessary conditions for the activation of bank lending to agricultural enterprises is the training of specialists in banking and methodological support for more accurate and effective evaluation of investment projects and potential borrowers. therefore, it is important for ukrainian realities to stimulate the development of rural areas and the operation of agricultural enterprises. the use of the investment lending mechanism makes it possible to develop both agricultural enterprises and the territories, in which they operate. the implementation of the proposed measures in the field of financial and credit policy will result in the improvement in the financial support for agricultural commodity producers, in particular, the level of satisfaction of their needs for lending resources. now, the lack of an effective mechanism of collateral hinders the development of bank lending to agricultural enterprises, but if we consider the prospects of the agro-industrial complex of ukraine, its constant growth and increase the pace of its development, the appropriate lending will attract significant financial resources and become a powerful lever for the development of this sector. at present, farmers are considering alternative options for the replenishment of working capital. baltic journal of economic studies 133 vol. 8 no. 1, 2022 therefore, the avalisation of bills and agrarian receipts may be used as an alternative to bank lending to meet the needs for the crop protection agents, fertilizers and planting material. these methods make it possible to obtain a delay in payment for the acquired resources or financial resources for the acquisition of working capital in the provision of agricultural enterprises with future harvest (the use of financial agricultural receipts). the conducted analysis shows that the investment climate for the agro-industrial complex is favorable, but the risks for investors remain high. the improvement of legislation on the agrarian policy, the regulation of lending operations, the rational distribution of funds, their effective use and timely repayment of debt, and the corresponding policy of the state could remedy the situation. references: poliatykina, l., & kadatska, a. 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(2018). current indicators of farm sector financial health. report of ers usda. baltic journal of economic studies 197 vol. 8 no. 3, 2022 1 verkhovna rada of ukraine, ukraine e-mail: slavka3636@urk.net orcid: https://orcid.org/0000-0001-7321-1763 2 odessa district council; ukraine charitable movement charitable foundation, ukraine (corresponding author) e-mail: natalyodk2016@gmail.com orcid: https://orcid.org/0000-0001-8487-8440 3 kozii and partners law firm, ukraine e-mail: irina_kozii@ukr.net orcid: https://orcid.org/0000-0003-3024-7417 doi: https://doi.org/10.30525/2256-0742/2022-8-3-197-204 civil society institutions: differentiation of profile characteristics antonina slavytska1, nataliia bilak2, iryna kozii3 abstract. the subject of the research is conceptual, theoretical and methodological foundations of formation and development of civil society institutions, paying attention to certain spheres of social relations within the framework of functioning of civil society institutions (for example, anti-corruption, penitentiary). methodology: general and special methods of scientific research were used in this study. the method of comparison was used to summarize the approaches of various researchers on the main dominants of the implementation of the concept of public involvement in solving cases of state and municipal importance. analysis was used to determine quantitative and qualitative parameters that characterize the specifics of the influence of civil society institutions on social relations in the sphere of corruption prevention and ensuring the rights of prisoners. induction and deduction were used to identify approaches to the main dominant legal forms of interaction between civil society institutions, state authorities and local self-government. the results of the study showed that the role of civil society institutions in ukraine has increased due to the institutionalization of public control over the activities of public authorities, the definition of new forms and principles of interaction between the public and public authorities, as well as facilitating the activities of non-governmental organizations. conclusion. it has been established that the forms of interaction between civil society institutions and state and municipal institutions are regulated exclusively at the level of subordinate acts, or are not defined at all. attention is drawn to the expediency: the development by individual charitable organizations of their own charitable programs, which will reflect a set of charitable activities aimed at solving problems, relevant to the statutory objectives of the organization in order to structure and openness of their work; formation of public education in the field of combating corruption through the implementation of educational programs; introduction of an additional public institution aimed at the correction and resocialization of prisoners. key words: civil society institutions, non-governmental organizations, public control, prevention of corruption, penitentiary system, ukraine. jel classification: d73 1. introduction the presence of an extensive and effective system of civil society institutions can only be characteristic of a democratic social state. actualization of the activity of civil society institutions in ukraine began in 2010 and continues to this day, which has a corresponding normative base (on ensuring public participation in the formation and implementation of state policy, 2010; on the approval of the concept of the development of e-democracy in ukraine and the plan of measures for its implementation, 2017; on the approval of the procedure for conducting a survey on initiatives aimed at solving issues of public administration in various spheres of public life, on the unified state web portal of electronic services, 2022) and indicates a gradual reformatting of the concept of public influence on the solution of public affairs in the direction of increasing its importance. at the same time, with the beginning of the ukrainian-russian war, public formations focused their activity on providing diverse assistance to both state institutions (the armed forces of ukraine, this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 198 vol. 8 no. 3, 2022 volunteer organizations, law enforcement agencies) and the civilian population. as for the creation of new associations of citizens during martial law, it is complicated by a complex of derivative factors. for example, it is limitation of work or termination of work of some state information databases, suspension of some registration actions, as well as work of registrars and territorial departments of justice bodies. as a result, citizens who decided to organize charitable activity during the martial law could not officially register a public association, change the head or approve a new version of the constituent document, etc. for a long time. in addition, the active activities of civil society institutions during wartime contributed to the identification of a number of legislative imperfections in the legal regulation of certain forms of interaction between state authorities and civil society institutions, contributing to the reduction of their capacities and other negative consequences. in this context, an important place is occupied by scientific research on the topic of formation and substantiation of the proper administrative and legal support of the implementation of civil society institutions, the establishment of the consequences of failure to consider public opinion when making managerial decisions, the consequences of failing to conduct expert reviews of the activities of state bodies and their official publication, the consequences of failing to consult with the public before the adoption of legal acts defining the rights and obligations of citizens, etc. (bila-tiunova, bilous-osin, kozachuk, vasylkivska, 2019; latkovskyi, 2020; dzatkova, 2016). an additional argument in favor of the relevance of scientific research of the influence of civil society institutions on the relevant instruments of regulation of social relations is the requirement to do so in various international documents. for example, with regard to: partnership of the state and civil society in the formation of anti-corruption policy (public involvement in the process of making socially significant decisions) and prevention of corruption in general (public control over the national agency for the prevention of corruption, anti-corruption expertise); concerning the assistance of civil society institutions in the resocialization of prisoners (the activities of monitoring commissions, social and psychological support for persons released from prison). an important area of corruption prevention and counteraction and the development of the penitentiary system is monitoring and control by civil society over the activities of state executive bodies and local government bodies, information about the powers they exercise. this demonstrates the importance of analyzing the normative and praxeological foundations of the functioning of civil society institutions in general and their specificities in the prevention of corruption and the penitentiary system in particular. 2. general trends in the development of civil society institutions in ukraine the concept of "civil society institutions" has no legal confirmation and does not need it. this is due to the fact that, from the legal point of view, the focus is on: a) forms of interaction of civil society institutions with bodies of state power and local self-government; b) activities of non-governmental organizations and public councils under state bodies of executive power; c) implementation of public control through appeals of citizens, examination of normative legal acts, etc. at the same time, civil society is formed a priori and functions on the basis of transformation of members of civil society from subjects into citizens in the state-legal sphere by ensuring the rule of law, guarantees of constitutional freedoms, real distri bution of branches of power in the state (karas, 2004: 493; solyar, 2013: 275). the current legislation that allows civil society institutions to function in ukraine is based on the constitution of ukraine (1996), which declares the principles of formation of civil society institutions and their influence on social relations: 1) ensuring equal rights of women and men in public and political activity; 2) guaranteeing freedom of association in non-governmental organizations for the protection of individual rights and freedoms, as well as the satisfaction of interests in the political, economic, social, cultural and other spheres, the protection of public health, and the protection of the rights and freedoms of others; 3) assuring the participation of citizens connected by common interests with the nature of professional activity in trade unions, which are non-governmental organizations formed to protect labor and socio-economic rights and interests; 4) equality of all associations of citizens before the law; 5) prohibition of compulsion to join any association of citizens; 6) restrictions of rights on the grounds of membership or non-membership in non-governmental organizations. as for constitutional restrictions, they concern: the impossibility of forming paramilitary formations in the structure of public organizations; exhaustion of conditions under which the formation and activity of public organizations and political parties can be prohibited (for example, the direction of program goals to eliminate the independence of ukraine; change of the constitutional system by force; violation of sovereignty, territorial integrity of the state, undermining its security; illegal seizure of state power, propaganda of war, violence, incitement of ethnic, racial, religious hatred; encroachment on human rights and freedoms and public health). it should be noted that the provisions of the constitution of ukraine use the term "political party " along with the concept of "non-governmental baltic journal of economic studies 199 vol. 8 no. 3, 2022 organizations", which indicate similar but not identical institutions of civil society. the regulation of the general principles of functioning of charitable organizations remains outside the attention of the legislator at the constitutional level. this situation, in our opinion, negatively affects the regulation of the legal status of charitable organizations. in connection with the above, it is proposed to amend the constitution of ukraine by supplementing certain provisions of the basic law with the phrase "charitable organizations and other forms of public formations formed in accordance with the procedure established by legislative acts", which may include, for example, supervisory commissions at penitentiary institutions, public councils, volunteer centers, etc. international standards for public participation in state and local affairs are relatively well-established and are contained in: the international covenant on civil and political rights (1966), which provides, for example, for the right to freedom of expression, which includes the freedom to seek, receive and impart any information and ideas, regardless of frontiers, orally, in writing or in print, in the form of art, or by other means chosen by the individual; the european social charter (1966), which provides for the right to form and join local, national, or international organizations for the protection of human economic and social interests; 3) convention on access to information, public participation in decision-making and access to justice in environmental matters (1998), which highlights principles of public participation in decision-making on specific activities, preparation of regulations of the executive branch and (or) universal regulations; recommendations of the committee of ministers to member states on citizen participation in local public life (2001), which established the need to guarantee the right of citizens to access clear, complete information on public affairs, etc. the legislation of ukraine regarding the partici pation of civil society institutions in the solution of public affairs is limited to the definition of: the organizational and legal bases of the right to freedom of association, the procedure for their formation, registration, operation and termination (on public associations, 2012); principles of charitable activity, ensuring legal regulation of social relations aimed at the development of charitable activity, approval of humanism and charity, providing favorable conditions for the formation and operation of charitable organizations (on charitable activities and charitable organizations, 2012); features of creation, rights and guarantees of activity of trade unions (about trade unions, their rights and guarantees of activity, 1999); principles of creation and activity of employers’ organizations and guarantees of their functioning, as well as interaction with public authorities and local self-government bodies, trade unions (on employers’ organizations, their associations, rights and guarantees of their activities, 2012); principles of activity of creative unions in the field of culture and art (about professional creative workers and creative unions, 1997). as for the powers of non-governmental organi zations, what is interesting from a practical point of view is the right of charitable organizations to join associations, in the absence of procedural details. as a rule, such organizations are established in the usual manner as a public union or non-governmental organizations with the word "association" in the name. in connection with the above, this issue requires legislative revision. at the same time, despite the presence in the law of a reference to the development of a charitable program, which any charitable organization must have, it is no longer required for state registration of the organization, which further contributes to ignoring this provision of the law. in the authors' opinion, each charitable organization should develop its own charitable program, which is a set of charitable activities aimed at solving problems that correspond to the statutory goals of the organization, and publicize it in social networks. this will help structure the work of the charitable organization and make it more open. separately, it is necessary to consider the right of public associations to jointly realize their goal(s) through the conclusion among themselves on a voluntary basis of contracts on cooperation and (or) mutual assistance. indeed, such a right is regulated at the level of a special law. at the same time, in practice, it can be realized either by concluding a memorandum, agreement, or by creating a public association, that is, a new legal entity with a new name. the existing mechanism does not fully meet the need of public associations and their right to joint activities, since a memorandum or agreement in most cases is not enough to regulate relations, and association through the creation of a public union promotes the formation of a new organizational form and the complete loss of self-identity of organizations. normatively, the possibility of joint activities of public associations in other ways not prohibited by law is also provided, but how exactly is not specified. institutional support for the activities of public associations as one of the civil society institutions is demonstrated in the implementation of state supervision and control over the observance of the law by public associations providing by state executive authorities and local self-government bodies (on public associations, 2012). at present, there is no single special body in ukraine that would coordinate activities at the central level and contribute to the protection of the rights of this institution of civil society. baltic journal of economic studies 200 vol. 8 no. 3, 2022 the above-mentioned shows that ukraine has formed the legal basis for the activity of public organizations, but the forms of their interaction with state and municipal institutions are regulated exclusively at the subordinate level (for example, the formation of public councils under state executive bodies) or are not defined at all (for example, public hearings). certain powers of civil society institutions, in particular public associations, also require normative and institutional clarification. 3. civil society institutions as subjects of corruption prevention the principles and forms of participation of civil society in preventing and combating corruption are established in the provisions of the un convention against corruption (2003), in particular, according to article 13, public participation should be strengthened by such measures as: ensuring effective public access to information; conducting public information activities that promote intolerance to corruption, as well as public education programs, including school and university curricula; respecting, promoting and protecting the freedom to seek, receive, publish and disseminate information concerning corruption. the influence of the public on the prevention of corruption at the national level is carried out in various ways, which are enshrined in the relevant legislation (on prevention of corruption, 2014), in particular: a) the possibility of sending reports by individual citizens about the commission of corruption or corruption-related offenses, including through mass media, journalists, public associations, trade unions, etc.; b) ensuring public participation in the formation, implementation and monitoring of anti-corruption policy; c) implementation of a public control over the activities of the national agency on corruption prevention (hereinafter as the napc) through the public council; d) conducting of anti-corruption expertise by the initiative of public associations; e) the possibility of receiving information on corruption prevention activities from public authorities and local self-government bodies; f ) implementation of public control over the implementation of laws in the field of anti-corruption financial control, with forms of control not prohibited by law. it should be noted that in ukraine the practice of formation of public councils under the bodies authorized by law to prevent and combat corruption, in particular the national anti-corruption bureau of ukraine and the national agency of ukraine on the search, search and management of assets derived from corruption and other crimes is quite widespread. as to the functioning of the public council at napc, its composition is determined on a competitive basis by means of open rating online voting of citizens, living on the territory of ukraine. it is noteworthy that a candidate for the public council can only be a person nominated by public associations, which 1) prevention and/or combating corruption is defined as the subject of its activity; 2) carry out such activities for at least two years; 3) have confirmation of implemented projects. in our opinion, the public council under the napc is justifiably so called because it is formed by non-governmental organizations. however, the question of whether the candidates must be members of a public association or not is not regulated in detail. at the same time, the wording "carries out activities in the sphere of prevention and (or) combating corruption" is not identical to the wording "whose statutory activities include the prevention and combating of corruption, other provision of the state anti-corruption policy," which is more correct. the public council is endowed with a number of practically significant powers, such as inclusion in the commission that conducts the competition for positions in the napc, conducting disciplinary proceedings against public employees of the napc or approval of the annual report of the napc, development of an anti-corruption strategy (some issues of the public council under the national agency on corruption prevention, 2019). it should be noted that the public council under the napc is not a usual "public council" under the central bodies of executive power. these central bodies of executive power are formed in accordance with the resolution of the cabinet of ministers of ukraine "on ensuring public participation in the formation and implementation of state policy " (2010), the quantitative composition of which shall not exceed 35 people. it is indicative that the quantitative composition for the public council at the napc is clearly defined as "15 persons" (part 2 of article 14 of the law "on prevention of corruption"), although traditionally such formations are regulated by reference to the maximum number of members: "no more than"; approval of such approach is relevant or the corresponding advisory body at the napc, because in case of public ignoring (which cannot be completely excluded) and failure to elect the required number of persons, the institution will not be formed. in addition, the status of members of the public council is interesting, since they are equated with persons authorized to perform the functions of bodies of state power and bodies of local selfgovernment, which mediates the establishment of the obligation of such representatives of the public to submit anti-corruption declarations. it should be noted that a significant role in the prevention of corruption belongs to the mass media (hereinafter as mm), since an information campaign baltic journal of economic studies 201 vol. 8 no. 3, 2022 forms the appropriate type of thinking and is a preventive measure to prevent corruption. in this direction should act education of the population in the field of anti-corruption. in the opinion of the authors, it is necessary to introduce educational programs with the involvement of non-governmental organizations on a competitive basis in secondary, vocational and higher educational institutions and public administration bodies in order to form a positive attitude to the instruments of corruption prevention and a negative attitude towards corruption as a social and legal phenomenon. 4. the influence of civil society institutions on the penitentiary system in the modern world, there is a tendency to increase the role of the civil society in the activities of penitentiary institutions. retrospective international experience in this matter requires reference to the un standard minimum rules for the treatment of prisoners, adopted by the first un congress on the prevention of crime and the treatment of offenders on 30 august 1955, as follows: (a) in the field of the penitentiary system the rules cover an area in which thought is constantly evolving (paragraph 3), and (b) the treatment of prisoners should emphasize not their exclusion from society, but their continued participation in it, so whenever possible community organizations should be involved to assist the staff of the institution in the task of social rehabilitation of prisoners. there shall be social workers attached to every institution who shall have the duty of maintaining and improving all desirable relations of the prisoner with his family and with valuable social institutions. steps shall be taken to secure, to the fullest extent compatible with the law and the sentence, the rights relating to civil interests, social security rights and other social benefits of prisoners (paragraph 61) (the united nations standard minimum rules for the treatment of prisoners, 1955). in ukraine, the process of humanization of the penal and correctional system was reflected in changes to the criminal executive code of ukraine, which increased the role of public organizations in creating appropriate conditions for serving sentences, ensuring respect for human rights and freedoms, assisting citizens in social adaptation after release from prison, conducting educational activities, and preventing new criminal offenses. in particular, the principle of participation of civil society in the activities of penitentiary bodies and institutions in cases provided for by law was added to the general list of principles of criminal-executive legislation, execution and serving of sentences (art. 5). particular attention should be paid to article 25, which provides that associations of citizens and mass media, religious and charitable organizations, and individual citizens may assist penitentiary bodies and institutions in correcting prisoners and conducting social and educational work. in addition, in order to exercise public control over the observance of prisoners' rights in the enforcement of criminal sentences in correctional colonies, pre-trial detention centers and educational colonies, supervisory commissions are created, and in educational colonies these functions are entrusted to boards of trustees. also, in cases prescribed by law, public monitoring of compliance with the rights of prisoners in the execution of criminal sanctions may be carried out by associations of citizens (criminal executive code of ukraine, 2003). thus, the legislator has given an important place to public participation and public influence as one of the means of correction and re-socialization of prisoners. public influence on the process of correction and resocialization of prisoners is manifested in a variety of effective forms, including: 1) conducting legal advocacy with inmates; 2) organizing custody of pedagogically neglected inmates; 3) involving inmates in mass cultural and sporting events; 4) providing economic assistance to inmates; 5) participating and assisting in educational work with inmates, etc. (the procedure for carrying out patronage (public control) over persons who are registered with criminal enforcement inspectorates). at the same time, it is expedient to separate the main areas of influence of non-governmental organizations on the resocialization of prisoners. reflecting on this issue, o.v. romanenko (2004: 15) singles out the following areas of activity of non-governmental organizations in the work of penitentiary institutions, such as: a) participation in social and educational work; b) promotion of material and technical provision of penitentiary activities; c) education of prisoners; d) public control; e) providing assistance to the staff of penitentiary institutions. according to the authors, the main areas of influence of non-governmental organizations on resocialization and correction of prisoners should be reduced to the following: 1) assistance to penitentiary bodies and institutions in the correction of prisoners; 2) independent social and educational work; 3) public monitoring of the rights of prisoners. the first two areas of influence of public organizations are implemented both through the creation by public representatives of various juvenile services, the formation of collectives and enterprises or educational institutions and other organizational forms of public participation in the correction and resocialization of prisoners, and through direct assistance to penitentiary bodies and institutions in the correction of prisoners. a rather interesting opinion with regard to the role of non-governmental organizations in the resocialization of prisoners is reflected by v.v. proskura (2018: 58), who singles out the functions and, baltic journal of economic studies 202 vol. 8 no. 3, 2022 accordingly, the directions of activities of nongovernmental organizations in the field of correction and resocialization of prisoners, including control, psychological, cooperation, medical, cultural and educational functions, etc. the following functions with appropriate content need to be updated: 1) the legal function, which should be manifested in: participation in the discussion of draft laws relating to penitentiary institutions; providing individual advice to prisoners; conducting legal lectures, etc. (for example, the ngo "penitentiary association of ukraine" and the union "golden age of ukraine" participated in the discussion of draft laws on the disciplinary statute of the penitentiary system and "on the legal status of prisoners who served their sentences in the temporarily occupied territory..."); 2) psychological function, which should be manifested in: the development of psychological skills of inmates; individual psychological consultations; the use of psychodiagnostics, trainings aimed at psychological correction or psychological rehabilitation of the personality, etc. (for example, one of the directions of the training "building the future together", implemented by the allukrainian public center "volunteer", is aimed at the development of psychological skills of prisoners); 3) social function, which should be manifested in: assisting prisoners in their resocialization by forming a more positive social perception of persons who served sentences and overcoming negative stereotypes; conducting classes on solving social and household issues after release from prison; conducting thematic educational and informational hours for prisoners; organization of television projects about the life and correction of prisoners, etc (for example, the project "conversations on the border", in which prisoners tell their own life stories with the aim of dissemination to society the idea of the possibility of positive personal changes in these category of people); 4) professional function, which should be manifested in: facilitating the prisoners to obtain a specialty and their employment; holding courses that will help prisoners find work both as an employee and self-employed; conducting career guidance and motivational classes; issuance of certificates, etc (for example, available information on registration of a prisoned social worker in an hiv-service organization to provide comprehensive services to other prisoners on an "equal-to-equal" principle in the sumy correctional colony); 5) communication function, which should be manifested in: conducting "open door days"; conducting open events; conducting summaries on issues of resocialization of prisoners; conducting scientific and practical online conferences, etc. as for the last area of influence of non-governmental organizations on the re-socialization and rehabi litation of prisoners – public monitoring of prisoners' rights, at present one of the most effective tools of public monitoring of prisoners' rights remains the monitoring commissions. supervisory commissions include representatives of public organizations, executive authorities, local selfgovernment bodies, enterprises, institutions and organizations regardless of ownership, and individual citizens. at the same time, representatives of public organizations and citizens must make up at least half of the commission, which demonstrates the decisive role of the influence of public opinion in the activities of such a state structure formed by local state administrations. the supervisory commissions carry out their activities in accordance with the principles of transparency and openness, which mediates their obligation to inform the public through the media about the results of their activities at least once every six months. the above refers to the main tasks of monitoring commissions, including: 1) organization and implementation of public control over the observance of the rights, fundamental freedoms and legitimate interests of convicts and persons released from serving the sentence; 2) assistance to penitentiary bodies and institutions in the correction and resocialization of convicts, creating appropriate conditions for their detention, the involvement of public organizations, executive authorities, local authorities, enterprises, institutions and organizations, regardless of ownership and citizens in these activities; 3) organization of educational work with persons released on parole, and public control over their behavior during the unexpunged portion of the sentence; 4) assistance in the social adaptation of persons released from serving their sentence (on the approval of the regulations on supervisory commissions, 2004). despite the legislative regulation of the creation and functioning of monitoring commissions, the role of the public in the correction and re-socialization of prisoners is not systematic and effective. according to penitentiary scientists, the activities of the public require rethinking the directions and methods of work with prisoners. first, the public should not only monitor the rights of prisoners, but also identify shortcomings in the organization of the execution of criminal sanctions, contribute to the elimination of deficiencies, provide methodological, financial and other support. second, the administration of the state penitentiary service is often unable to immediately address public comments (bogatyryova, 2013: 132). the solution to this problem requires the formation of the institute of public inspectors (volunteers), which is a fairly common practice in european countries. the draft regulation "on public inspectors (volunteers) of the penitentiary inspection" has not been adopted baltic journal of economic studies 203 vol. 8 no. 3, 2022 since 2009 and still is, although its main goal – to increase the role of the public in the correction and resocialization of prisoners – has not lost its importance (bogatyryov, 2009: 121). according to the authors, the introduction of an additional public institution aimed at the correction and re-socialization of prisoners is a positive development, since the involvement of positive foreign experience will allow to adopt a full understanding of the philosophy of partnership between penitentiary institutions, the public and citizens. 5. conclusions the article covers conceptual, theoretical and methodological bases of formation and development of civil society institutions, attention is paid to certain spheres of public relations within the framework of functioning of civil society institutions. it is established that in ukraine the legal basis for the activity of public organizations is formed, but the forms of their interaction with state and municipal institutions are regulated exclusively at the subordinate level (for example, the formation of public councils under state executive bodies) or are not defined at all (for example, public hearings). certain powers of civil society institutions, in particular public associations, also require normative and institutional clarification. attention is drawn to the expediency of development by individual charitable organizations of their own charitable programs, which will reflect a set of charitable actions aimed at solving problems, corresponding to the statutory goals of the organization in order to be structured and open in their work. identified ways of public influence on the prevention of corruption, in particular: a) the possibility of reporting by individual citizens on the commission of corruption or corruption-related offenses, including through the media, journalists, public associations, trade unions, etc.; b) ensuring public participation in the formation, implementation and monitoring of anti-corruption policy; c) implementation of public control of public control over the activities of the national agency for the prevention of corruption (hereinafter – napc) through the public council; d) anti-corruption expertise at the initiative of public associations; e) possibility of obtaining information on activities to prevent corruption from public authorities and local authorities; f ) implementation of public control over the implementation of laws in the field of anti-corruption financial control, with forms of control not prohibited by law. in the opinion of the authors, it is necessary to introduce educational programs with the involvement of non-governmental organizations on a competitive basis in secondary, vocational and higher educational institutions and public administration bodies in order to form a positive attitude to the instruments of corruption prevention and a negative attitude towards corruption as a social and legal phenomenon. the main forms of public participation and public influence as one of the means of correction and re-socialization of prisoners are distinguished, in particular: 1) assistance to penitentiary bodies and institutions in the correction of prisoners; 2) independent social and educational work; 3) public control over the observance of prisoners' rights. the need for the introduction of an additional public institution aimed at the correction and re-socialization of prisoners is justified. references: on ensuring public participation in the formation and implementation of state policy: resolution of the cabinet of ministers of ukraine dated 08.11.2017 № 797-р. available at: https://zakon.rada.gov.ua/laws/show/797-2017%d1%80#text on the approval of the concept of the development of e-democracy in ukraine and the plan of measures for its implementation: resolution of the cabinet of ministers of ukraine dated 07.02.2022 № 90. available at: https://zakon.rada.gov.ua/laws/show/90-2022-%d0%bf#text on the approval of the procedure for conducting a survey on initiatives aimed at solving issues of public administration in various spheres of public life, on the unified state web portal of electronic services: resolution of the cabinet of ministers of ukraine dated 03.11.2010 № 996. available at: https://zakon.rada.gov.ua/laws/ show/996-2010-%d0%bf#text bila-tiunova, l., bilous-osin, t., kozachuk, d., & vasylkivska, v. 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(2004). the penitentiary function of a democratic legal state and the role of civil society in the mechanisms of its implementation: autoref. thesis for obtaining sciences. candidate degree law sciences: 12.00.08 "criminal law and criminology; criminal executive law". kyiv. proskura, v. v. (2018). the role of public organizations in the resocialization of prisoners. scientific-theoretical almanac "edges", vol. 21, no. 5, pp. 54–65. on the approval of the regulations on supervisory commissions: resolution of the cabinet of ministers of ukraine dated 01.04.2004 № 429. available at: https://zakon.rada.gov.ua/laws/show/429-2004-%d0%bf#text bogatyreva, o. i. (2013). public participation in the process of correction and resocialization of prisoners registered with criminal enforcement inspectorates. law journal of donetsk university, vol. 2, pp. 129–135. bogatyrev, i. g. (2009). the role of public inspectors (volunteers) in the correction and resocialization of prisoners with criminal punishments not related to deprivation of liberty. bulletin of the academy of the customs service of ukraine. ser.: the right, vol. 1, pp. 119–123. received on: 7th of august, 2022 accepted on: 11th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 26 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: ppvr@ukr.net orcid: https://orcid.org/0000-0002-0655-5256 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: kuzyanna@ukr.net orcid: https://orcid.org/0000-0003-3957-7387 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: anastasiyayali1803@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-4-26-33 legal regulation of control and supervision of non-banking financial institutions volodymyr buha1, hanna buha2, anastasiia yali3 abstract. the purpose of the article is to distinguish between the regulatory and legal approaches to the interpretation of the definitions of "supervision" and "control"; to establish the general purpose of control and supervision over the activities of non-bank financial institutions; to consider the methods of regulatory and legal regulation of verification and identification of the client when concluding a loan agreement. the scientific discussion on the problem of legal regulation of control and supervision over the activities of non-banking financial institutions is presented. it is established that the need to form an effective state regulation of the development of the national economy and economic institutions in a market environment leads to the creation of an effective system of financial control. the concepts of "financial control" and "control function of finance" are distinguished. it is determined that the basis of the control function of finance is the movement of financial resources, and through the implementation of financial control the possibility of influencing the process of production, accounting and consumption is realized. the conclusion is made that rating agencies and credit history bureaus should become necessary elements of the system of state regulation and supervision by the national bank of ukraine over the activities of non-state financial institutions, which should occupy a mandatory place in information stories related to the regulation of supervision and the use of other administrative and legal means of control over the activities of non-state financial institutions. results. the concepts of control and supervision over the activities of non-banking financial institutions are distinguished; the peculiarities of the formation of rating agencies and ensuring the effective operation of credit history bureaus are established; indicative criteria for assessing the necessary degree of supervision over the activities of a credit company were determined, which include: the book value of assets; market share of the credit company; the number of previous violations of the law. it is established that the main control and supervisory functions of the national bank of ukraine are: protection of clients' rights, compliance with the standards of service provision and requirements for their advertising; ensuring transparency and disclosure of information; ensuring impeccable business reputation of owners and managers; counteracting anti-competitive activities; combating abuse and illegal activities; control over the exercise of their powers. key words: control, supervision, financial institutions, economy, financial monitoring. jel classification: f38, g20 1. introduction in the context of economic and political changes, the issue of improving the process of legal regulation and supervision of non-banking financial institutions is of particular relevance, which will provide an opportunity to create an effective mechanism for responding to potential risks that may arise in this area. today, control and supervision should be considered in the context of modern economic transformations and the needs of ukrainian society. in the field of domestic scientific research, the issues of improving the regulatory and legal regulation of control and supervision over the activities of financial institutions are devoted to the works of such researchers as: o. lapko, k. maslyaeva, o. melnyk, l. savchenko, m. sayenko, yu. tustanovskyi, i. fedorovych, and others are devoted. baltic journal of economic studies 27 vol. 8 no. 4, 2022 at the same time, the disclosure of a number of problematic issues requires special attention, which emphasizes the relevance of the topic of the article. the purpose of the article is to distinguish between the regulatory and legal approaches to the interpretation of the definitions of "supervision" and "control"; to establish the general purpose of control and supervision over the activities of non-bank financial institutions; to consider the methods of regulatory and legal regulation of verification and identification of the client when concluding a loan agreement. 2. the essence and content of the categories "control" and "supervision" non-banking financial institutions (hereinafter – nbfis) operate in the financial services market, whose activities do not meet the licensing requirements. thus, in 2015–2021, 658 nbfis were excluded from the state register of financial institutions, of which 221 (+9%) were excluded from the state register of financial institutions only in 2021, of which 42 were excluded upon application, and 133 – for systematic violation of the requirements of the legislation in the field of financial services. in turn, in order to prevent violations of the legislation in the financial services market and to protect consumer rights, the national bank of ukraine, based on the results of the control, applied 287 enforcement measures, including: 188 orders to eliminate violations in the provision of financial services and 99 decisions to revoke licenses; uah 1,829,000 of fines were imposed in the credit market (supervision of the market of non-banking financial services. public report on the activities of the national bank of ukraine, 2021). the categories of "supervision" and "control" are used in the legislation that regulates the activities of state bodies that regulate financial services markets, but, according to authors, in the law of ukraine "on financial services and state regulation of financial services markets" the legislator does not distinguish the content of these categories at all. thus, art. 27 of the said law among the main tasks of the national bank of ukraine (hereinafter – the nbu) defines the implementation of state regulation and supervision over the provision of financial services and compliance with the legislation in this area. control and supervision are one of the most important aspects of the management system in general and supervision of the non-state financial system (hereinafter – nfs) in particular. in addition, control and supervision activities provide an opportunity to properly improve the management system, adjust the plan, reduce and prevent offenses in this area. as it is known, the general purpose of control and supervision is to identify the actual state of affairs in any process, compare the compliance of this state with the intended goals and, if necessary, apply corrective measures to bring the controlled object to the proper state. naturally, the most effective is the organization of control and supervision activities, which contributes to the early detection of the causes of a particular offense. of course, one of the main goals of control and supervisory activities is timely detection of various offenses and their perpetrators, but the ultimate goal of both control and supervision is still the correction and elimination of offenses. control as a function of management is the observation and verification of compliance of the object of management with the adopted management decisions (laws, plans, norms, orders, instructions, orders, etc.). the most important task of control is to prevent possible omissions and errors, to stimulate officials to perform their duties in good faith, to promote personal responsibility of each person for the assigned area of work (shestak, 2003). thus, the need for effective state regulation of the development of the national economy and the formation of management institutions in a market environment determines the creation of an effective system of financial control. the strategic goal of which is to ensure the stability of the country 's economic growth by preventing financial crimes and inefficient use of financial resources, in particular in the financial market. in recent years, there have been evolutionary transformations of the financial control system in the financial market. 3. features of financial control financial control consists in checking economic and financial transactions for their reliability, legality, expediency and efficiency. a. i. berlach offers the following definition of financial control – it is the activity of authorized bodies of state and local selfgovernment and non-governmental organizations, regulated by the norms of law, aimed at ensuring legality, financial discipline and rationality in the formation (mobilization), distribution and use of funds and related material assets of the state and local self-government for the most effective socioeconomic development of society (berlach, 2008). close to this is the definition of o. v. brechko: financial control is a purposeful activity of legislative and executive bodies of state power and nongovernmental organizations to ensure legality, financial discipline and rationality in the process of formation, distribution and use of centralized and decentralized monetary funds for the most effective socio-economic development of all subjects of financial relations. along with this, financial control contributes to the increase and accumulation of funds, the growth of profitability, the efficient use baltic journal of economic studies 28 vol. 8 no. 4, 2022 of material and financial resources (brechko, 2002). in turn, yu. v. vashchenko offers the following definition: "financial control is an analysis performed by an authorized subject of the state of the financial system, cash flows and financial results of the object of control and bringing it to the parameters set by the state. the main feature of control is the real possibility of influence of the subject of control on its object, which must be formalized in the norms of law and be a constructive action" (vashchenko, 2005). this definition seems to us quite concise and correct, except that the controlled parameters can be set not only by the state. thus, if to talk about the internal financial control of the enterprise, according to the current legislation, it conducts its business activities at its own discretion, and financial control should analyze not only the compliance of the available indicators with state standards, but also their compliance with the plans approved by the management of the enterprise. in addition, control is not always aimed at bringing the existing state of the controlled object to the proper one. as a rule, the subject of control controls only the process of bringing it to the standard, issuing an order to eliminate violations of the law and other shortcomings, and control over actions cannot be equated with the actions themselves. according to professor o. p. orlyuk, financial control is a purposeful activity of state authorities and local governments, enterprises, institutions and organizations, regardless of the forms of ownership, aimed at compliance with legality, that is, mobilization, distribution and use of centralized and decentralized funds for the purpose of fulfilling the tasks and functions of the state and effective social and economic development of all subjects of financial relations (orlyuk, 2003). according to the authors, this definition overgeneralizes the financial activity of business entities, declaring it the financial activity of the state, while in financial relations the state acts as an independent participant in financial relations and the financial activity of individual business entities may not correspond to the state policy in the field of finance or even contradict it. state financial control is a type of financial control carried out by the relevant state financial control bodies. according to v. p. dudko, it consists in establishing the actual state of affairs regarding compliance with the requirements of the current legislation on the object of control aimed at ensuring legality, financial discipline and rationality during the formation, distribution, possession, use and alienation of assets belonging to the state, as well as the use of funds remaining with the subject of financial relations in connection with the benefits provided for payments to budgets, state extrabudgetary funds and loans received under the guarantees of the cabinet of ministers of ukraine (dudko, 2005). according to the authors, the state financial control is intended to control not the financial funds belonging to the state, but the compliance of the financial activities of business entities operating in the territory of this state with the norms and requirements established by it, that is, first of all, compliance with the current legislation. that is, the authors consider the state financial control as such, which is carried out by specially authorized state authorities over the subject of control over compliance with the rules of financial activity established by the state. researchers confuse the state financial control, which is the control of the state over the financial activities of all economic entities operating in its territory, and the internal financial control of the state over the financial activities of its enterprises and the circulation of cash flows belonging to it. in the latter case, the state acts as the owner of the money it controls, and its control activity is not much different from the control activity of an enterprise that controls its own cash flows, or as an individual who, for example, monitors the spending of his donations to a charitable organization. state financial control is one of the important functions of public administration, which is to facilitate the implementation of the financial policy of the state, to ensure the process of formation and effective use of financial resources to achieve the goals set by the state in the field of finance. thus, the concepts of "financial control" and "control function of finances" are different, since the control function of finances is a manifestation of their social purpose and ensuring economic conditions for exercising control over the formation, distribution and use of funds, and financial control is the activity of relevant state bodies or nongovernmental organizations that practically use the control nature of finances. the basis of the control function of finance is the movement of financial resources, and through financial control the possibility of influencing the process of production, accounting and consumption is realized. financial control is the result of the practical use of the control function of finance, that is, its ability to be a means of controlling the production, distribution and use of the aggregate social product and national income. it permeates all sectors of the economy, covers both production and non-production spheres, as finance performs its control function at all stages of reproduction. 4. formation of rating agencies and ensuring the effective work of credit history bureaus a necessary additional component of state control by the nbu is the formation of rating agencies and ensuring the effective work of credit history bureaus, while these organizations should be under the direct supervision of the nbu and receive and baltic journal of economic studies 29 vol. 8 no. 4, 2022 contain information about both credit institutions and consumers and their services. (savchuk, 2021). the activities of such bodies in the european union (hereinafter – the eu) are regulated by a wide range of legal acts. the main one is regulation (ec) no 1060/2009 "on credit rating agencies", which lays down the conditions for assigning credit ratings, defines the rules of organization and policies of credit rating agencies and establishes a common regulatory approach to enhance the integrity, transparency, responsibility, good governance and reliability of credit rating activities. as for ukraine, the main law regulating the activities of rating agencies is the law of ukraine "on state regulation of capital markets and organized commodity markets" (on state regulation of capital markets and organized commodity markets: law of ukraine dated 30.10.1996 no. 448/ 96-bp). the main set of powers for the implementation of the rating system rests on the national commission for securities and the stock market (hereinafter – the national securities and stock market commission), which is established by the mentioned law and the decree of the president of ukraine "on the national commission for securities and the stock market" (on the national commission for securities and the stock market the decree of the president of ukraine dated november 23, 2011 no. 1063/2011). nkcpfr: issues to authorized rating agencies a certificate of inclusion in the state register of authorized rating agencies,determines the list of international rating agencies that have the right to determine legally binding rating assessments of issuers and securities; establishes the management procedure and maintains the state register of the authorized rating agencies; establishes the procedure for submission of information by the rating agency to the national commission for securities and the stock market, as well as performs other security and control functions. the national rating scale and the division of each group of levels into corresponding levels is approved by the cabinet of ministers of ukraine (national rating scale resolution of the cabinet of ministers of ukraine dated april 26 2007 no. 665), while the rules for determining the rating assessment by the authorized rating agency according to the national rating scale are established by the national commission for securities and the stock market agency. cases in which the establishment of a credit rating or rating assessment is obligatory are provided for in the laws of ukraine "on insurance" (on insurance: law of ukraine dated 03/07/1996 no. 85/96-vr . date of update: 08/03/2022) "on joint investment institutions (equity and corporate investment funds)", (on joint investment institutions: law of ukraine dated 07/05/2012 no. 5080-vi), "on non-state pension insurance" (on mandatory state social insurance: law of ukraine dated september 23, 1999 no. 1105-xiv) and others. for a long time ukraine could not adopt a law that would regulate the rules of credit rating agencies. thus, in 2010 the draft law "on credit ratings and activities of credit rating agencies" (no. 7472) was submitted to the verkhovna rada of ukraine, which was proposed to be adopted in 2013. in addition, in 2018, a draft law "on rating" (no. 8007) was introduced, which has not yet been adopted. regardless of the existence of a legislative definition of terms related to credit rating, they are focused on the assessment of securities market entities. at the same time, the national rating scale is a scale that is divided into certain groups of levels and levels that characterize the ability of the borrower to timely and fully pay the principal and interest on its debt obligations. the national scale is used to assess the credit risk of a borrower – a local government body, a business entity and certain debt instruments – bonds, mortgage securities, loans. it provides for the possibility of assessing not only borrowers but also debt instruments. individual rating agencies develop their own scales based on the one proposed by the cabinet of ministers of ukraine. for example, "rating scale for assessing the level of reliability of bank deposits" and "rating scale for assessing the level of financial reliability (stability) of an insurance company ". at the same time, the creditworthiness of an individual debtor is not assessed. it is worth emphasizing the widespread services of rating agencies and the market of credit services. legal and organizational principles of forming and maintaining credit histories, rights of subjects of credit histories and users of credit history bureaus, requirements for information protection that constitutes a credit history, as well as the procedure for the formation, operation and liquidation of credit history bureaus is established by the law of ukraine "on the organization of the formation and circulation of credit histories" (2005) (on the organization of the formation and circulation of credit histories: law of ukraine dated june 23, 2005 no. 2704-iv). according to article 13 of this law the subject of credit history has the right to get acquainted with the information contained in his credit history, namely with the credit report and information from the register of inquiries. this information is provided to him free of charge once during a calendar year, as well as in case of refusal to conclude a credit transaction. it is important to note that there is no unified information base of credit histories. according to part 1 of article 5 of the law, the sources of credit histories are the information provided by the user of the bureau in accordance with the written consent of the subject of credit history, as well as information from state registers baltic journal of economic studies 30 vol. 8 no. 4, 2022 and other databases open for public use. at the same time, information may be transferred or sold to another bureau only in respect of information from open sources. 5. features of supervision over the activities of financial institutions according to art. 20 of the law of ukraine "on financial services and state regulation of financial services markets" among the forms of state regulation of financial services markets is mentioned supervision over the activities of financial institutions. regarding the definition of the concept of administrative supervision in the legal literature, there are various options, which, as noted by l. v. koval, create certain difficulties of a theoretical and practical nature in connection with the distinction between the concepts of supervision and control (koval, 1996). thus, i. p. golosnichenko believes that aministrative supervision is a systematic observation of the exact and consistent observance by officials and citizens of the rules and application of norms that protect the life, health, rights and freedoms of the citizens, regulate public order and safety with the aim of preventing termination of violations of these rules, identification of violators and bringing them to administrative responsibility, application of public influence measures to them (golosnichenko, 1999). according to a. v. denisova, supervision as a type of state activity can be defined as a set of continuous actions to monitor the observance of the law in relevant social relations, which are carried out by the competent authority using the powers granted to it by law (by-law) and aimed at preventing, detecting and suppressing offenses, as well as bringing offenders to justice (denisova, 2013). according to d. p. tsvigun, administrative supervision is a special type of state management activity carried out by special bodies of the executive power conserning to enterprises, institutions, organizations, officials and citizens that are not subordinated to the organization due to their implementation of special inter-branch norms, rules, requirements, using a complex of administrative means of influence for prevention, detection and termination of offenses, the restoration of the established legal relations and the prosecution of the guilty (tsvihun, 2002). the large explanatory dictionary of the modern ukrainian language gives the following definition of state supervision – it is the activity of special bodies of state adminis tration on systematic control over compliance with the rules established by the state by enterprises, institutions, organizations, officials and individual citizens (busel, 2005). it is an undeniable fact that the definition of supervision as a way to ensure legality in public administration, with further determination of the specifics of supervisory activities depending on the subject, the one who supervises the object, etc. is quite common. the nbu supervises activities in the non-banking financial services market in the form of on-site and off-site supervision (inspections). the key principles of supervision of activities in the market of non-banking financial services are propor tionality and risk-oriented approach. thus, the choice of the intensity of supervision is determined by assigning the activities of nbfis to a certain risk category. also, in supervising the activities in the non-banking financial services market, the nbu is gradually introducing early detection of potential risks and early intervention (before the relevant risks materialize and cause harm to consumers) for timely reporting or taking measures (guide for non-banking financial institutions, 2020). the nbu considers it mandatory to carry out prudential supervision in the insurance segment, for credit unions and other credit institutions, financial institutions that provide money transfer services, as well as to establish a single prudential standard for compliance by financial companies with the minimum level of equity capital. financial companies will maintain capital at the level of uah 3 million in case of providing only lending services, or uah 5 million if the financial company plans to provide two or more financial services. this requirement will ensure the sustainability of companies and help create conditions for them to attract financing. at the same time, it will make it impossible for insolvent companies to operate in the market. 6. risk-oriented approach to supervision of financial institutions another area of supervision is a risk-oriented approach to it, and the new law introduces such approaches. that is, the requirements and rules for supervising financial institutions will depend on their size, type of activity, importance and risks. this will ensure proportionality, when small non risky financial institutions will receive minimal attention from the regulator. the law also introduces a new component – supervision of market behavior of institutions. it will be about strengthening control over the compliance of financial institutions with the requirements for consumer protection, disclosure of sufficient information to consumers, transparent ownership structure, proper business reputation of owners and managers, etc. thus, ensuring public and private interests is to overcome the obstacles caused by the lack of transparency and public awareness of the activities of nbfis, their solvency and liquidity. in paragraph 12 of art. 29 of the law of ukraine "on financial services and state regulation baltic journal of economic studies 31 vol. 8 no. 4, 2022 of financial services markets" (on financial services and state regulation of financial services markets: law of ukraine dated july 12, 2001 no. 2664-iii). it is noted that supervision is based on a risk-oriented approach, taking into account the principles of proportionality, risk assessment and expediency. in modern conditions, credit risk can be considered as a criterion for the convergence of state regulation. historically, the concept of "risk" was studied in the mathematical aspect as certain losses that may be incurred by a business entity in the process of making a decision. later, the understanding of the category of "risk" became more and more widespread not only because of possible negative results, but also because of the probable profit of the entrepreneur in the process of carrying out his business activities. thus, o. v. dzyublyk, l. m. priydun offer a definition of "credit risk" in four meanings: as a consequence of making alternative decisions; as uncertainty regarding the occurrence of an undesirable event; as a risk to income and capital, changes in the counterparty 's credit status; as the probability of deviation from the expected result, decrease in the value of assets, non-fulfillment of obligations, occurrence of losses (dzyublyk, priydun, 2015). taking into account the credit risk, according to the authors, becomes a criterion for the degree of regulation and influence on the activities of nbfis, setting restrictions on their activities, and at the same time is a factor of convergence of all means of influence. the above allows us to note that the strengthening of risk-oriented supervision of financial institutions should be carried out with a comprehensive consideration of public and private interests and the presence of credit and other risks of nbfis. 7. financial monitoring as a means of preventing the use of financial companies aimed at legalization (laundering) of proceeds of crime / financing of terrorism financial companies in accordance with the law "on prevention and counteraction to legalization (laundering) of proceeds of crime, financing of terrorism and financing of proliferation of weapons of mass destruction" (on prevention and counteraction to legalization (laundering) of the proceeds of crime, financing of terrorism and financing of proliferation of weapons of mass destruction: law of ukraine of 06.12.2019 № 361-ix) are subjects of primary financial monitoring, whose activities are regulated and supervised by the nbu in the field of financial monitoring. the main objective of the nbu in the area of financial monitoring is to prevent the use of financial institutions' services for money laundering or terrorist financing. when developing regulatory legal acts in the field of financial monitoring, the nbu establishes requirements and expectations for building an adequate internal system to prevent the use of services of a credit institution aimed at legalization (laundering) of proceeds of crime or terrorist financing. the regulations, in particular, contain risk criteria (areas of increased attention) that a financial company should take into account when building customer due diligence procedures, identifying suspicious transactions, etc. supervision in the area of financial monitoring will be risk-based. the nbu checks whether the system is able to properly detect, monitor and manage money laundering/terrorist financing risks, in particular, to ensure timely detection of suspicious customer transactions (future regulation of the lending market by financial companies, 2020). electronic identification and verification requires special attention. currently, remote verification and identification of a client when concluding a loan agreement is carried out mainly through the bankid system using an electronic signature. as of today, 14 banks (the number of banks is constantly increasing) and many nbfis are connected to the bankid system, which can also use the data obtained through the nbu bankid to verify their clients. in addition to the existing systems, the nbu plans to regulate the issue of remote client identification and verification for nbfis in accordance with the requirements of the law. in particular, the nbu has developed a procedure for video verification, which is currently being discussed with the banking community and will be proposed to nbfis in the future. the main control and supervisory functions of the nbu are: protection of customers' rights, compliance with the standards of service provision and requirements for their advertising; ensuring transparency and disclosure of information; ensuring impeccable business reputation of owners and managers; counteracting anti-competitive activities; counteracting abuses and illegal activities; control over the exercise of its powers. the national bank supervises the activities of non-bank financial institutions in the form of on-site supervision and inspections. to this end, the nbu has developed a procedure for supervising the activities of nbfis, which provides for the procedure of on-site supervision, as well as scheduled and unscheduled inspections based on a risk-based approach. in particular, inspections are carried out on demand (ad hoc) if there are reasonable grounds, taking into account the risk-oriented approach, which takes into account the materiality (importance) and systematic nature of the risk, shortcomings in the company 's activities, corporate governance, risk management and internal control systems. depending baltic journal of economic studies 32 vol. 8 no. 4, 2022 on the degree of risk, the nbu determines the intensity of supervisory measures. indicative criteria for assessing the necessary degree of supervision over the activities of a credit company include, in particular: the book value of assets; the share of the credit company in the market; the number of previous violations of the law. the nbu initiates unscheduled inspections, in particular, based on the results of the analysis of customer complaints about violations of their rights, in case of failure to submit reports in due time, if there are facts indicating an increase in risk from the activities carried out. the category "control" in its content is much broader than the category "supervision", which is a component of control. in the exercise of control between the subject and the object there is a relationship of subordination, the controlling body has the right to interfere in the operational activities of the controlled object, to apply legal sanctions for violations of the law. supervision over the activities of nbfis is a component of public administration, an independent specific type of activity of authorized supervisory entities with a special status to monitor, analyze and verify compliance of the state and activities of nbfis with the requirements of the legislation, compliance with the criteria and standards of activity established by it, compliance with the rules for the provision of financial services in order to prevent, detect or eliminate violations, as a rule, without direct interference in their activities. the main purpose of supervising the activities of nbfis is to ensure the stability and security of their functioning, to protect the interests of consumers of financial services markets, to create favorable conditions for the development and effective functioning of financial services markets. therefore, such supervision is a type of state control over the activities of nbfis and differs directly from it by a smaller amount of management burden in these relations, is determined by the entity that checks the compliance of nbfis, which is not organizationally subordinated to the supervisory authority, with the requirements of legislation, special norms and rules, but does not directly interfere in the administrative, economic, financial or other activities of nbfis, does not apply legal sanctions. this is the main difference between control and supervision. 8. conclusions thus, ukraine currently has a multiple system of supervisory bodies in the financial sector, structured by type of financial institution, such as the national bank of ukraine, the national securities and stock market commission and the antimonopoly committee, which differ significantly in status, level of independence, as well as institutional capacity, rules and procedures applied in the course of their activities. it should be admitted that the nbu is sufficiently resourced to carry out state regulation of non banking financial activities, but the institutional capacity of others does not meet the challenges that exist in the markets under their supervision. therefore, the achievement of the goal of supervision over the activities of nbfis means ensuring stability and safety of their functioning, protecting the interests of the consumers of financial services markets, creating favorable conditions for the development and effective functioning of financial services markets, involving, if necessary, the application of measures of influence on nbfis (paragragh 4 of article 20 of the law of ukraine "on financial services and state regulation of financial services markets"), that violate the legislation on financial services, commit illegal actions that entail legal liability. at the same time, rating agencies and credit bureaus should become necessary elements of the system of state regulation and supervision by the nbu over the activities of nbfis. these organizations should occupy a mandatory place in information stories related to the regulation of supervision and application of 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(2021). ekonomiko-pravove rehulyuvannya diyalnosti nebankivskykh kredytnykh ustanov v ukrayini z urakhuvannyam pytan adaptatsiyi do zakonodavstva yevropeyskoho soyuzu [economic and legal regulation of the activity of non-bank credit institutions in ukraine, accounting for the issues of adaptation to the legislation of the european union]. kharkiv. tsvihun, d. p. (2002). administratyvnyy nahlyad orhaniv vnutrishnikh sprav u sferi zabezpechennya hromadskoho poryadku i hromadskoyi bezpeky [administrative supervision of internal affairs bodies in the sphere of ensuring public order and public security]. kyiv. received on: 12th of september, 2022 accepted on: 19th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 268 vol. 7 no. 5, 2021 corresponding author: 1 national aviation university, ukraine. e-mail: tetiana.kniazieva@npp.nau.edu.ua orcid: https://orcid.org/0000-0002-4972-0055 2 national aviation university, ukraine. e-mail: anna.shevchenko@npp.nau.edu.ua orcid: https://orcid.org/0000-0002-7246-6964 3 national aviation university, ukraine. e-mail: hanna.radchenko@npp.nau.edu.ua orcid: https://orcid.org/0000-0003-4233-2831 4 kyiv national linguistic university, ukraine. e-mail: lesika551@gmail.com orcid: https://orcid.org/0000-0001-6689-5140 5 national university of life and environmental sciences of ukraine, ukraine. e-mail: lirochka@bigmir.net orcid: https://orcid.org/0000-0001-7933-8765 doi: https://doi.org/10.30525/2256-0742/2021-7-5-268-276 the impact of transnationalization on the global consumer market tetiana kniazieva1, anna shevchenko2, hanna radchenko3, olena komova4, liliia pankova5 abstract. the study found that globalization has no effect on the content of monopoly capital, which has changed its form because of the existence of the process of transnationalization. the growth of transnational corporations not only increases the interaction with the state in the modern process of globalization. minimization of negative consequences of transnational corporations in the consumer market, ensuring food security of the country involves the implementation of the strategy of import substitution and reasonable protectionism. this triggers the modernization of foreign economic strategies, improves institutional and organizational and economic efforts of state regulation to ensure protection of the borders of the consumer market. here targets are defined: growth of own production; increase in investment demand; increase in non-resource exports through exports of high-tech, knowledge-intensive goods and services; intensification of measures within the system of comprehensive export support. key words: global economy, international complex, monopoly capital, transnationalization, structural transformation of the economy, globalization. jel classification: a10, d11, d42 1. introduction the influence of the process of transnationalization on the functioning of developing consumer markets is an integral feature of the development of the world economy under conditions of globalization. signs of globalization are manifested in the growing openness of states, liberalization of financial flows and national trade regimes, formation of the world consumer and financial market, international economic institutions, the world information network. transnational corporations (tncs), acting as a essential link in the development of international economic relations exerting a multidirectional influence on the functi oning of the world economy and the state of economic entities, occupy special place in the system of modern globalized market. appearing as a leader in globalization, they have become systemic factors of global development, which have an increasing influence on the functioning of the world economy, specific economic actors (akman et al., 2017; krupiak, 2017). the modern system of the world order is such that the influence of tncs on the evolution of national economies and the security of states has both positive and negative consequences. they provide an increase in growth rates, production efficiency, implementation of the investment regime, a qualitatively new level of security, which affects the degree of economic stability of countries, leveling their technological lag, changing the advanced technology on a global scale (korolova et al., 2020). at the same time, financial power allows tncs to displace national producers baltic journal of economic studies 269 vol. 7 no. 5, 2021 from the most profitable sectors of the economy, occupy significant segments of the consumer market, expand their own presence at the expense of imposed institutionalization, and act as a source of contradictions and negative socio-economic processes. the relevance of the research is due to the fact that tncs are a complex phenomenon, constantly evolving in the system of world economic relations, requiring the study of their essence, identifying the counteraction of significant influence, finding tools, mechanisms of national and international control over the activities of transnational corporations in the emerging consumer markets (momot & avanesova, 2016; bohdan et al., 2019). the studies of economists of different times focus on the theoretical foundations of tnc development without taking into account the influence of contradictions and institutional contradictions related to their functioning. the nature of tnc expansion, changes in the profile of their activities, factors determining these processes in the aspect of national specifics of the countries are poorly studied and presented in the literature. the potentially possible positive and negative aspects of the impact of transnationalization on the ukrainian consumer market as a subsystem of the world market are not fully covered, therefore, there is a need for theoretical studies that analyze its status and prospects of functioning (pelekh, 2018; samilyk et al., 2019). the aim of the study is to identify trends, contradictions and features of tncs expansion, arguments for strengthening their influence on the ukrainian consumer market, to determine the content blocks of directions of its adaptation to the process of transnationalization, taking into account the target indicators of functioning, institutional aspects of regulation, priority areas of state protection, export-oriented activities and import substitution. in accordance with this purpose, one can formulate the following research objectives: – on the basis of the analysis of transnationalization, its essence and forms, to reveal the general laws of the expansion of transnational corporations, to substantiate it as an objective process of development and the factor of globalization; – to determine the reasons, scale and directions of expansion of tncs to emerging markets, considering the essence, dual nature and goals of functioning; – to identify the main contradictions and trends in the introduction of tncs in consumer markets in developing countries; – to argue the significance of foreign economic expansion of tncs as an objective factor of development, to evaluate their influence on the structure and dynamics of the consumer market of ukraine as a subsystem of the world market. the object of research is the modern tncs, trends and indicators of their activities in the world consumer market (huntington, 2011). the methodology of the research includes the results of developments in the works of foreign scientists who studied the phenomenon of transnationalization of emerging markets as subsystems of the world market, the problem of contradictory impact of foreign economic expansion of tncs on the consumer market in a globalized environment. in the process of solving the tasks set, general scientific methods were used: dialectical, system-functional, structural-level, theoretical, monographic, as well as other scientific methods: logical, analytical, comparative, graphic and tabular interpretation of data (baccini, 2012). the working hypothesis of the study is to assume that the consumer market of ukraine, as a subsystem of the world market in terms of its openness, is objectively inclined to influence the process of transnationalization, which manifests itself in the contradictory, dualistic effect of tncs, which determine the structural, volume and sectoral transformation of the market, reproduced in its quantitative and qualitative indicators, uneven functioning, which requires its balance on the basis of institutional regulation and improvement of the state defense system. the degree of certainty and validity of scientific statements, conclusions and recommendations is confirmed by the generalization of the experience of tnc expansion into emerging markets, using modern methods of scientific analysis of world economic processes, testing in scientific discussions and the practice of transnationalization of the consumer market. 2. understanding the manifestations of economic globalization different categorical interpretations of globalization are presented in scientific publications, but the only common interpretation is absent. the most common is the understanding of the manifestations of the globalization of the economy through such processes as: increasing interdependence and the relationship of international economic relations, increasing their scale; the conventionality of borders between national economic relations and international ones; inclusion in the global system of virtually all states. the category of "tnc" is based, first of all, on the wording of international organizations. thus, unctad (the united nations conference on trade and development, 2020), originally from tncs, represented firms consisting of parent companies and their affiliates abroad, provided that the former controlled the activities of established affiliates whose shares were determined at a level not less than 10% in share capital. transnational corporations as a result of scientific and technological revolution baltic journal of economic studies 270 vol. 7 no. 5, 2021 are one of the most interesting phenomenon of modern global economy (šaková, 2004). as a consequence, unctad identified new criteria for the inclusion of a firm in the category of tncs, which resulted in clarification of the wording. thus, tnc is a company with divisions in two or more countries, conducting a coherent policy with one or more decision-making centers. at the same time, the ability to control the assets of other economic entities in the countries of base, remains in the parent company, usually with the participation of capital. new branches and enterprises can be created overseas through direct investments, which turns the company into a transnational one. the lower limit of participation in capital is 10%, which is defined as a sufficient condition for establishing control over the assets of subsidiaries. as a result, the number of tncs increased by an order of magnitude in the global economy (antropova et al., 2015). nowadays, the largest number of multinational corporations is registered in developed countries, for example it is china. also most of the leading tncs are located in north america, then europe and asia and russian tncs occupy only 3% of the list (astrakhantseva et al., 2019). according to forbes, the top ten largest tncs in the world in 2018 included: seven banking institutions, four of which were chinese companies (china construction bank corporation, bank of china, jpmorgan chase, bank of america, agricultural bank of china, icbc wells fargo), an american multi company in the usa. (apple) and other chinese insurance company (the world’s largest public companies, 2020). among modern approaches to tncs, henry dunning’s theory of investment development path (idp) is of particular importance. it argues that the level of economic development of countries is related to the degree of maturity of its enterprises, the volumes of participation in the international flow of capital. in his theory, there are five levels of economic development of countries, which corresponds to the degree of evolution of tncs, the relationship between exports and imports of foreign direct investment. they differ in the following points: 1. at the first level, the economies of countries are underdeveloped, there are no conditions not only for the accumulation and export of investments, but also their imports, except for those who have significant reserves of natural resources. 2. at the second level, the economy of countries is characterized by a tendency of growing gdp – up to 2.5 thousand dollars per capita. due to this expanding domestic demand in the consumer market. by attracting foreign tncs who want to conquer foreign markets, imports of foreign direct investment are increasing. however, the level of development of national enterprises is still low, which does not contribute to the export of investments, and if it exists, it is oriented mainly to regional markets or countries with similar economic development. 3. in countries of the third level, 10 thousand dollars of gdp per capita is provided. import of investments are slowing down against the backdrop of increased exports, as tncs enter into tough competition with national companies, indicating the preconditions for the creation of the first national tncs. however, as before, the amount of accumulated investment with import is more than their export volumes. 4. at the fourth level, gdp is 10-36 thousand dollars per capita. the country shows growth in national tncs, and exports exceed imports of foreign direct investment. 5. at the fifth level, according to some economists, is the us economy, which has the largest number of tncs, and the volume of imports and exports of foreign direct investment is actually balanced (khalatur et al., 2018). thus, this theory argues that the number of tncs created in the country is a kind of indicator of the level of surplus investment in one or another field of production and the overall degree of economic development. by increasing the import of foreign direct investment, the effect of "swelling of investment demand" in various economic sectors is created, which stimulates the growth of national investment exports. 3. the regularity of foreign economic orientations in the process of transnationalization tnc means a large corporation that implements trade, investment, production-technological and integration ties with firms in two or more countries, which significantly affects the performance of a specific industry where tnc operates. it is assumed in some cases the need for their presence in no less than 6 countries. agreeing with this interpretation, we can formulate that the transnational corporation is a form of development of monopolistic capital. in this sense it bears all the features and contradictions of the monopolistic form of capital in general. however, it is obvious that it has a number of new features, that in this form monopoly has undergone a number of modifications, has acquired new features and characteristics (grigoreva & garifova, 2015). thus, modern tncs are gigantic industrial and financial associations that are international in scope based on the principles of centralized planning and corporate governance on a global scale, implementing a policy in international trade aimed at expansion. also, tncs are based on industrial and scientificbaltic journal of economic studies 271 vol. 7 no. 5, 2021 technical cooperation, technology exchange and capital investment, labor force migration, which deepen the process of internationalization, taking into account the objective tendencies of the international division of labor, and determine its new schemes (becker-ritterspach et al., 2017). consequently, tncs are characterized not only by contradictions inherent in monopolistic capital in general, but also by special ones generated by this form of association. the question of the relationship between transnationalization, through the expansion of tncs, and the deepening contradictions of modern capitalism is related to a number of new relations in the world economy, the theoretical understanding of much of which has not given unambiguous estimates in the literature. part of these new ties and trends in the development of tncs were not considered at all. therefore, the specification of the theoretical and methodological position, which is the initial, basic for the analysis and conclusions regarding the transnationalization and deepening of the contradictions of capitalism in the conditions of globalization, becomes of special significance. the essence of all forms of monopolistic unions is always the same, it is a conspiracy for the economic achievement of its dominant position. these forms differ according to the mechanism of economic realization of their monopoly position. in this sense, the concern differs from cartels, syndicates, trusts. therefore, tncs do not differ from the concern as a form of movement of monopoly capital. having entered the international environment, tncs do not lose any features of a concern in the form of a monopoly. moreover, it broadens its reproduction on the path of transnationalization, using the mechanism of the concern – the "system of participation", which allows to establish financial control over huge capital. the predominant way of international expansion of tncs is through mergers and acquisitions through the purchase of controlling stakes. thus, monopolies in the form of the concern and tncs in the way of establishing economic domination are the same type, and, therefore, there are no grounds in considering tncs as a new form of a monopolistic association. at the same time, uniformity does not mean their identity. tnc is a modified form of the concern, it has a number of specific characteristics (koldovskiy & chernega, 2018). although the formation of tnc does not change the fundamentally universal connection in the system of modern capitalism, it nonetheless informs it of new elements, substantially modifying it. this is precisely what it means: – there is a number of new qualities in the movement of corporate property; – there are new qualities in the production and sale of additional value and profit; – the scientific and technical base of the monopoly is growing sharply; – tncs generate new forms in the system of relations between monopolistic industrial associations and banks; – the adaptive properties of the market system are sharply intensifying with the advent of tnc, its adaptation to the new conditions in the world, expanding the possibility of increasing the exploitation and looking for new forms. there are differences and peculiarities between tncs of different states in the intensity of expansion, its scale, due to differences in levels of concentration and centralization of capital in different countries. in particular, western european monopolies inferior to the united states` in terms of concentration of production and capital, in terms of profit. only by the degree of concentration employed in the largest enterprises they surpass them (bazhanov et al., 2019). thus, the clarification of the question of differences between tncs is based on one of the most important principles of materialist dialectics – the principle of the relationship of general, special and individual. relying on this principle allows us to conclude, firstly, that the only essential characteristic of tncs is determined primarily by the socio economic environment in which they are formed and operating and by the system of objective economic laws and regularities inherent to it (unevenness development, fierce competition and so on). secondly, this approach allows us to conclude on a number of specifics of tncs that are determined by the regional, sectoral specificity and country of origin (obolenska et al., 2019). consequently, transnationalization is a process of quantitative and qualitative growth of tncs, expansion and strengthening of their activities in the conditions of globalization. it is a rather controversial phenomenon, since the balance of positive and negative effects, shifts towards the last of them, in the technological, economic, political and social development of countries. the growing openness of the emerging economies, the internationalization of the functioning of national economic entities determines the definition as an independent sphere of theoretical analysis and practical knowledge of the influence of tncs on the dynamics of the consumer market, which represents the organic interaction of the totality of institutions, elements and subjects of the process of commodity exchange (assche, & gangnes, 2019). structural and functional contradictions, crisis and conflict situations, which distort and inhibit the processes of monopolistic capital accumulation, determine and support high rates of tnc penetration baltic journal of economic studies 272 vol. 7 no. 5, 2021 into developing markets. the analysis of sectoral, sectoral and structural transformation of developing economies allowed us to systematize a number of new trends in the expansion of tncs (table 1). thus, the analysis of the historical development of tncs showed that the evolution of tncs is closely linked with a sharp escalation of internal contradictions of capitalism at the end of the xx century. their nature regarding expansion appears both on the national and international levels. all indicators in the statistical reporting of tncs grow, (volume of fdi and retail sales, assets, profit, capitalization). an analysis of the trend of transnationalization shows the extent and directions of the expansion of tncs into the consumer markets of developing countries, the distribution of natural, productive, financial and human resources, which suggests the formation of contradictions and new conflicts in the modern world economy (figure 1). an assessment of the causes, scales and tendencies of tnc expansion shows that under the conditions of globalization, the essence of monopoly capital does not change. tncs expand the boundaries of their domination. their activities, the impact on the development and security of emerging economies table 1 trends due to transnationalization period trends 70-80 years of хх centurty. activation of export of capital from developing countries 80th years of хх century 1. capital outflows from developing countries: the emerging industrialized countries of east and southeast asia (hong kong, singapore, south korea, taiwan) are due, first, to the region's declining attractiveness for mncs due to rising wages and, second, to an increase in their industrial exports. 2. reorientation of the sectoral structure of capital exports, investing in manufacturing, finance, and services. 1983–1986 years the balance of u.s. investment is worsening because of the slowdown in u.s. exports and the growth of imports of foreign capital into the country. 90th years of хх century the regrouping of foreign investment in favor of developed countries, caused by the huge debt of the third world, is complicated by its repayment. end of хх – beginning of ххі century formation and activation of the emerging industrial countries of southeast asia, the latin american countries (argentina, brazil, venezuela, colombia, mexico, chile), the largest countries of south asia (india, pakistan), and a number of middle east countries in the global economy. beginning of ххі century tncs' aggressive policy of increasing assets through acquisitions, changing the structure of their operations due to the volume and scale of transactions, mergers of $1 billion or more, and capitalization growth. source: systematized by the authors figure 1. contradictions in the modern world economy source: systematized by the authors baltic journal of economic studies 273 vol. 7 no. 5, 2021 are heterogeneous, has a dual meaning. on the one hand, tncs are the main structure-creating link of the economy, the leading force in the country’s development and the growth of production efficiency. on the other hand, they are the generator of a number of negative socio-economic processes. however, the general vector is that tncs provide stable economic ties between different subsystems and countries, forming a single global economy. the trend of world development is characterized by increased concentration of production and capital, both at the micro level of enterprises, and on the megalevel of transnational corporations (anderson & cavanagh, 2000). 4. adaptation of the consumer market to the process of transnationalization the transnationalization of the ukrainian consumer market is an objectively necessary and prepared strategic step for globalization, without which it would not be possible to form a developed economic system of the country, to ensure its competitiveness and efficiency. the systematization of trends and features of the consumer market functioning under the influence of foreign economic expansion of tncs indicates the transformation of its volumes, structures and boundaries as a complex mechanism of interaction of social, economic, political, institutional elements and subjects of the process of commodity exchange (table 2). the expansion of tnc, on the one hand, has had a positive impact on consumer preferences and foreign economic activity of enterprises: the pace of "innovative economy "; the emergence of new products and industries (40-60% of turnover of successful companies is due to the goods introduced to the market in the last 5-7 years); use of information technology and e-commerce; reduction in the cost of communications; development of network organizations; eliminating trade barriers; the importance of international and individual marketing. on the other hand, the losses are borne by domestic commodity producers, because the activities of tncs are aimed at improving their own financial condition (production growth, profit capitalization), asset growth, and further expansion. therefore, the strategic direction of development of ukrainian companies should be: concentration and diversification of production activities on the basis of product and geography, expansion of the range of products, continuous development of new products and innovative technologies, considering the priorities of the national producer and consumer, the formation table 2 the main trends in the ukrainian consumer market trends content and features movement towards structural and sectoral stabilization changes in the structure of domestic consumption and production, increasing requirements for the quality of goods and food products, the increase in their volume involves the formation of the boundaries, capacity and scale of the domestic market, taking into account participation in the international division of labor and trade flows of international trade. changing the institutional and organizational structure the formation of a fundamentally new institutional, organizational and legal structure and infrastructure with an orientation on the practices and technologies of developed countries, adequate to the current state of the world market. real transition from raw material export-oriented policy to import substitution the gradual shift away from raw materials policy in the international division of labor is outpacing the growth of international trade in processed and ready-to-consume goods and food rather than in raw materials and products. change of position in global commodity flows and the ranking of world exporters redistribution of volumes and geographical directions of exports and imports of certain food and non-food products to developing countries of east asia and eastern europe overcoming the current distortions of the consumer market in terms of volume and structure creation of a unified and effective mechanism of state and legal regulation of the market, because the integration of firms under the influence of tncs covers all major areas of life: social, economic, innovative, institutional modification of the concept of production and market competitiveness under the influence of transnationalization due to the deterioration of ukraine's position in the ranking of world exporters due to the decline in exports of traditional goods, against the background of a weakened economy and military actions. in this regard, it is necessary to take into account national preferences and development factors, in the context of increased global competition under the influence of tncs, the deterioration of the global food market, the volatility of prices and national currencies. ensuring national economic security through a set of measures implementation of mergers and acquisitions, taking into account national interests, protection of the interests of shareholders and investors, openness and transparency, convergence of business value and value of company assets. development of the domestic light, food, processing industry and agriculture (at the level of organizations, regions and countries); improvement of state regulation of foreign trade in the sphere of supply (at the country level). source: compiled by the authors baltic journal of economic studies 274 vol. 7 no. 5, 2021 of stable market boundaries and the efficiency of its functioning (kaleka & morgan, 2019). embedded in global commodity flows, the consumer market is undergoing a structural transformation under the influence of mncs, geopolitical changes, and the realignment of power between dominant countries and regional groupings. its functioning and growth rates were influenced by the diverse dynamics of the largest economies and the world market – the crisis processes in developed countries in 2013–2017; the trend of a decrease in world prices and value of trade, due to aggravation of the geopolitical situation and the situation of raw commodity markets; institutional barriers in eu countries. the consumer market has lost its leading positions, which is characterized by a decrease in volume and changes in the structure of retail trade, a deterioration in the quality and range of goods and services offered, the departure of a number of manufacturers, well-known brands, a drop in profits and profitability of trade organizations. increased competition and monopolization in the retail market under the influence of the escalation of retail networks, which have large-scale resources and squeeze out weak business participants (grigoreva & garifova, 2015). we suggest to consider the experience of asian countries. for example, vietnam’s enterprises still depend on input sources from china. general department of vietnam customs statistics showed that last year, from the total import value of $ 253.07 billion in 2019, the import value of 7 key commodity groups from china was $56.73 billion, of which import of computers, electronic products and spare parts worth $12.11 billion usd; chemical products – $ 3.23 billion, mobile phones and accessories – $ 7.58 billion, machinery and equipment, – $ 14.9 billion; textile, garment, leather and footwear materials and accessories of all types – $ 11.52 billion; plastic materials and products – $3.99 billion; iron and steel of all kinds – $3.4 billion. unfortunately, covid-19 pandemic has disrupted imports from china and other countries into vietnam (lam et al., 2020). thus, much of what is exported from our country is raw materials and goods with low added value. expansion of tncs without government intervention leads to unstable functioning of the consumer market, loss of state sovereignty. the index of food imports exceeds the permissible values of the country’s economic security. the share of foreign capital in the food industry is 60% and continues to grow. the country does not provide itself with products of its own production. for the development of the economy taking into account internal interests, it is necessary: activation of the introduction of tncs, operating in the sphere of manufacturing industry; creation of joint research enterprises with participation of them, for development and reception of the newest technologies and goods; a reorientation to restructuring and modernization of industries with a long payback period (e.g., machine building), due to the unevenness of investments by industries; the expansion of agricultural co-operation in the country as an instrument for protecting farmers from the expansion of tncs; development of own domestic brand ( jaworek & kuzel, 2015). for this purpose it is practiced to create state corporations capable of competing with foreign mncs, for example, a specialized state corporation in the agricultural sector. through such an institution it is possible to ensure the development of "related clusters", plants for the production of agricultural machinery, fertilizers, etc. the chain will develop production clusters necessary for the functioning of related industries of the second level. in the long term, the economy can be restructured according to the innovation-technological type ( jaworek & kuzel, 2015). 5. conclusions on the basis of the analysis of indicators of activity of ukraine and other countries in the world market and influence on economy expansion of tncs it is possible to draw a number of conclusions. transnationalization is a process of quantitative and qualitative growth of tncs, expansion and strengthening of their activity in the conditions of globalization. this is a contradictory phenomenon, since the balance of positive and negative effects in the technological, economic, political and social development of countries is shifted towards the latter. openness of developing economies, internationalization of national economic entities, deepening of the international division of labor cause increased influence of tncs on the dynamics of the consumer market, which is an organic interaction of a set of institutions, elements and subjects of the exchange of goods. the growing presence, the massive invasion of international business and national markets, like all processes in the global economy, is contradictory and dual in nature. on the one hand, the expansion of tncs provides external impulses and incentives for production in the host countries, contributes to the deepening of the division of labor, specialization and cooperation. on the other hand, the inevitability of numerous negative consequences due to the monopolistic form of these processes. further, on the one hand, external expansion promotes the emergence of large international complexes, the functioning of integrated production systems, but, on the other hand, baltic journal of economic studies 275 vol. 7 no. 5, 2021 the monopolistic form of their organization ensures the creation of an integral system of corporate dominance in the global economy. the largest number of tncs belongs to developed countries. this indicates an overcapacity of domestic inves tment, a surplus of capital flows outside national economies. it is important to note that covid-19 should be seen as a major stagnation of globalization over the decade. no proper lessons have been learned from the previous financial crisis, so perhaps that is why the detrimental effects of covid-19 have been even more pronounced. today, the coronavirus pandemic is having a widespread negative impact on trade and foreign investment, with a consequent reduction in global exports and imports in a number of sectors. in addition, the short-term adaptation to contain and reverse the worst effects of mncs in the current crisis is an opportunity to reflect on international business policies and business models, it has been shown that the pandemic reinforces a type of narrowminded nationalism that seemed to have disappeared. the general vector and direction of evolution is that tncs provide sustainable economic links between different subsystems and countries, thus integrating national economies into a single world economy. the trend of global development is characterized by increasing concentration of production and capital, both at the micro level of enterprises and at the mega level of transnational corporations. the expansionist activities of tncs in the ukrainian consumer market are complex and contradictory. in general, they have a positive impact on economic development, but are focused on improving their own financial condition (increasing production volumes, capitalization of profits) and further development of the company. therefore, without government intervention, tncs' expansion leads to a loss of state sovereignty, which undermines the country 's national security. tncs have transformed the sectoral structure of the market and production, changing the flow of goods from ukraine, which is determined by its place in the modern international division of labor and production specialization. uneven development of the consumer market under the influence of tncs is manifested in regional, structural, sectoral transformations, changes in the competitive environment, through a gradual increase in capital and assets, reunification, achieved through mergers and acquisitions. in the ukrainian consumer sector, retail trade and agriculture there are active transformation processes. therefore, a set of government measures in the field of industrial and structural policy aimed at accelerating the growth of domestic production, the formation of stable boundaries of the ukrainian consumer market and improve the efficiency of its 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(2001). the history of multinational enterpris. oxford: oxford university press. baltic journal of economic studies 1 vol. 8 no. 2, 2022 1 bandırma onyedi eylül university, turkey (corresponding author) e-mail: mkevser@bandirma.edu.tr orcid: https://orcid.org/0000-0003-0586-1662 2 afyon kocatepe university, turkey e-mail: mesutdogan07@gmail.com orcid: https://orcid.org/0000-0001-6879-1361 3 uşak university, turkey e-mail: aysenur.altinay@usak.edu.tr orcid: https://orcid.org/0000-0001-6963-2346 * this research was presented as a paper at the 24th finance symposium held in sakarya/turkey on october 20-23, 2021, and was later developed and expanded. doi: https://doi.org/10.30525/2256-0742/2022-8-2-1-10 the impact of buy – sell recommendations on banks’ stock returns* mustafa kevser1, mesut doğan2, ayşenur tarakçioğlu altinay3 abstract. the aim of this research was to investigate the impact of stock buy-sell recommendations of brokerage houses on the stock returns of banks operating in borsa istanbul (bist ). accordingly, it has been attempted to assess if investors can receive abnormal returns in accordance with the recommendations of brokerage houses using the case study technique. the validity of the semi-strong effective form of investors who made a buyingselling decision based on brokerage house recommendations was investigated. the returns of the banks' stocks were obtained from the data-stream database. the study evaluated buy-sell recommendations for four large brokerage houses and analyzed data from january 2018 through december 2020. the event study method was used, and t-test was performed in order to determine the difference of abnormal returns from zero in the research. as a result of the research, a negative abnormal return was determined on the day of the event and the day after the sell recommendation was given. besides, a positive abnormal return was determined on the day before the announcement and on the day of the event in the bank stocks on which buy recommendation has been given. in this respect, the average abnormal and cumulative abnormal returns indicated that bist was not an efficient market in a semi-strong form for the banking sector. when the sell recommendations and their effects are examined within the scope of the research, it is seen that the day before [-1] p=0.016 value was obtained, on the day, [0] p=0.018 value was obtained, the next day and two days later [+1, +2] p=0.077 and 0.046 values were obtained. on the other hand, when the buy recommendations and their effects are examined, it is seen that the day before [-1] p=0.000 and on the day [0] p=0.098 values were obtained. t-test results and p values show that brokerage house recommendations are effective on stock returns in the bist banking sector, and therefore bist banking sector is effective in a weak form. the obtained results of the study were crucial for investors who invested in short-term stocks. key words: stock markets, bist, event study, efficient market hypothesis. jel classification: c12, g11, g14 1. introduction the "efficient market hypothesis" (emh) developed by fama (1965) states that all participants in the market have the same information and such information is reflected in the stock prices. fama (1965) classified the markets as being efficient in weak-form, semistrong form, and strong-form. in weak-form markets, stock prices reflect all changes such as retrospective price, volume, and interest rate; whereas, besides such information, publicly disclosed financial statement information, dividend policies, and managerial information about the firm indicate stock prices in semi-strong form markets. accordingly, it is not possible to achieve abnormal returns from stock investments in semi-strong-form markets. in strong-form efficient markets, insider information is included in both market forms, and all information, whether publicly available or not, becomes reflected in the stock prices. in this context, according to the efficient market hypothesis, the information that would affect the stock prices baltic journal of economic studies 2 vol. 8 no. 2, 2022 spreads rapidly along with the markets and is quickly reflected on the stock prices by rational investors, in turn, abnormal returns are prevented (karan and ressamoğlu, 1996; malkiel, 2003). the returns of stock investments have been tested many times in terms of developed and developing countries within the framework of the emh. both institutional and individual investors benefit from investment recommendations upon investing in stocks. buy-sell recommendations of financial magazines, websites, financial experts, stock analysts, and brokerage houses, in particular, are utilized by a large number of individuals prior to investment (yazıcı and muradoğlu, 2002; bedelova et al., 2017; chatterjee et al., 2020). although abnormal returns are mainly expected of the stock investments made on the basis of brokerage house recommendations, it should not be expected that those expectations of investors would be fulfilled in semi-strong or strong-form efficient markets. investors who make investments in stocks based on buy-sell recommendations provided by brokerage houses must be inactive or underperforming in order for investors to generate aboveaverage returns (bedelova et al., 2017). in the literature, it is seen that different results have been achieved in studies conducted on developed and developing countries. for instance, murg et al. (2016) concluded that the buy-and-sell recommendations in the austrian market had a significant impact on stock returns in the study conducted employing the case study method, whereas berkman and yang (2019) stated that analyst recommendations provided useful information in estimating market returns. on the other hand, various studies have shown that brokerage houses cannot accurately predict price movements, and investors who follow buy-sell recommendations cannot make the profits they claim (groth et al., 1979; grossman and stiglitz, 1980; metrick, 1999; dewally, 2003). the fact that many studies have confirmed the effectiveness of markets in a weak form has led researchers to test whether markets are effective in a semi-strong form, and the event study method has often been used (mandacı, 2018). according to stickel (1995), although brokerage house buy and sell recommendations affect stock prices, this impact depends on short-term price reaction, strength of recommendation, size of recommendation change, analyst reputation, size of brokerage house, size of firm recommended, and contemporary earnings forecast revisions. there is quite a limited number of research studies regarding the subject conducted in turkey. bedelova et al. (2017) investigated the impact of brokerage firms’ buy-sell recommendations on stock prices employing the case study method, while other studies were conducted by yazıcı and muradoğlu (2002) and karan and ressamoğlu (1996). the objective of this research study is to examine the impacts of brokerage house recommendations on stock returns. turkey is in the category of developing countries and its financial markets are growing and deepening day by day. in this context, investment instruments have been diversified, and the interest of individual and institutional investors in the turkish stock and asset market has been increased. the number of companies offered to the public continues to accelerate. within the course of the first four months of 2021, the public offerings of 13 companies have been completed and the shares of 11 companies started to be traded on the stock exchange. in this regard, brokerage house recommendations are extremely crucial for investors aiming to invest in the stock market and make use of their savings. only a limited number of studies have been conducted regarding the impact of brokerage house recommendations on stock returns in turkey (kaan and ressamoğlu, 1996; yazıcı and muradoğlu, 2002; bedelova, 2017; arısoy, 2020). nonetheless, in these studies, no sector segmentation or firm size classification was initiated. turkey falls into the emerging markets category. the most important motivation underlying the preference for the banking sector when analyzing the impact of buy-sell recommendations on stock returns is that the banking sector is the engine of economic growth and development in emerging markets and differs from other sectors in this respect. in addition, there have been no studies analyzing the impact of buy-sell recommendations on stock returns using the case study method in the banking sector in the context of turkey, and this study fills a gap in the literature. in turkey, çevik and erdoğan (2009) concluded that the banking sector stock market is effective in weak form when structural breaks are not taken into account, but ineffective in weak form when structural breaks are taken into account. according to altunöz (2016), the banking sector is efficient in weak form and stock prices occur randomly. on the other hand, çevik and sezen (2020) pointed out the existence of long-term memory in the volatility of the banking index and concluded that the bist banking sector is not efficient in a weak form. ildırar and dallı (2021) concluded that 11 of the 12 banks in the bist banking sector are efficient in weak form. due to the different results obtained from the studies on the efficiency of the bist banking sector in turkey, it is necessary to retest the efficient market hypothesis in terms of the banking sector. for this reason, the results obtained from the research are also important in terms of providing new evidence for the efficient market hypothesis in the banking sector. when analyzing the brokerage houses operating in turkey, we can see that the share of bank brokerage houses is higher than that of other brokerage houses in terms of volume of transactions. however, bank brokerage houses cannot give buy-sell advice to their members. baltic journal of economic studies 3 vol. 8 no. 2, 2022 for this reason, the buy-sell recommendations of bank brokerage houses apply only to the stocks of other banks, and their impact is seen on the stocks of other banks. the results obtained in the study should be evaluated in this context. in addition, expert anomalies also play an important role in explaining abnormal returns. accordingly, expert comments and market rumors increase the demand for recom mended stocks, so it can be seen that stock returns increase. expert comments create an environment of speculation for stocks and thus affect the recommended stock prices (karan, 2020). according to stickel (1995), a relationship existed between buy-sell recommendations and firm size. in this context, identifying the role of brokerage firm recommendations on the stock returns of banks with the highest brand and market value would make a significant contribution to the literature and investors. this study is important because it is the first study on banking, which is one of the most important sectors in turkey. the study consists of five parts. after the intro duction in the first part, the second part presents a detailed literature review on the topic. the third part presents the methodology of the study. the fourth part includes the results of the study, and the fifth and final part consists of a discussion and conclusion. 2. literature review individual investors scrutinize the buy-sell recommendations of brokerage firms when deciding whether to invest in stocks. thus, investors expect to make supernormal returns using buy or sell recommendations. however, the literature argues that under the efficient markets hypothesis, investment recommendations will be valid in inefficient or underperforming markets. according to this assumption, investment advice should have no economic contribution when markets become semiefficient. the efficient markets hypothesis states that markets are always reasonably efficient. therefore, we should expect stocks to eventually reach their equilibrium price. the concept of market efficiency, which is defined as the reflection of securities (asset) prices to all available information, is categorized into three different market types such as operational efficiency, resource allocative efficiency, and informational efficiency. in operational efficiency, those who supply and demand funds in such markets tend to conduct their transactions at minimum cost. in resource allocative efficiency, the optimal allocation of resources is aimed in such markets. the informational efficiency involves prices that are considered to reflect all available information. the efficiency concept in the efficient market hypothesis refers to informational efficiency. one of the most important assumptions of the hypothesis is based on the notion that no investor can generate abnormal returns by utilizing any information. the reason for this is that prices already contain all the information (karan, 2001: 268). therefore, in the obtained studies as a result of the literature review, it is seen that the brokerage house recommendations have been used to test market efficiency in a semi strong form. studies pertaining to brokerage firm recommendations are discussed in the literature. as a result of the literature review conducted as part of this study, it is noted that most of the available sources consist of f oreign literature. the number of studies conducted on this topic in the domestic literature is quite limited. therefore, it is believed that the study of the recommendations of brokerage houses in turkey within the framework of this study will contribute to the literature. as a result of the literature review examined within the scope of the study, domestic and foreign research studies are compiled and presented. karan and ressamoğlu (1996), in which the impacts of expert opinions published in weekly stock market journals on stock performance were discussed, indicated that investors who invested in stocks individually would have ventured in their investment decisions being influenced by the expert opinions in the weekly stock market journals. the study also discussed the view that investment advice can have a positive impact on higher-than-expected returns on equity investments, even in active markets and developed countries. yazıcı and muradoğlu (2002) investigated the impact of the securities recommendations in the financial press on the common stock prices in the istanbul stock exchange upon examining whether or not the published investment recommendations yielded higher returns for investors. they concluded that the investment recommendation that appeared in the weekly investment magazine did not assist small investors in acquiring excessive returns. bedelova, yıldız, and karan (2017) found that investors responded significantly to positive and negative news as a result of the case study analysis in their study, in which they investigated the impacts of the recommendations made by brokerage houses for companies, whose stocks were traded on the borsa istanbul, on the stock price. in other words, it was concluded that the companies on the list of recommended stocks achieved positive abnormal returns, while the market reacted negatively to the announcement for stocks that were excluded from the list. tinic et al. (2021), as a result of their study in which they examined the absolute magnitude of abnormal returns on the recommendation of foreign investment banks for upgrading and downgrading baltic journal of economic studies 4 vol. 8 no. 2, 2022 regarding borsa istanbul, concluded that the absolute size of abnormal returns on the recommendations of upgrading and downgrading of investment banks was higher than that of local investment banks. another noteworthy situation, which is inconsistent with the literature, indicates that in turkey, as an emerging market country, investors trusted foreign sources of information more than local ones. sharda (2021) aimed at investigating the short-term impacts of brokerage analysts’ recommendations on abnormal returns, using a sample selected from the s&p bse 100 in the indian context, and particularly the semi-strong form of the efficient market hypothesis was tested for the "buy " stock recommendations published in the electronic version of the business standard. the findings indicated the existence of a marginal profit oppor tunity in the short-run, limited to the day of the event, but supported the view that the impact was not permanent, and that investors could not consistently generate abnormal returns by abiding by the recommendation of analysts. kudryavtsev (2021), as a result of the analysis of the correlation between stock returns before and after analyst recommendation revisions for stocks traded on nyse, amex, and nasdaq, found that an advisory revision for a particular stock caused the stock price to move toward the opposite direction and concluded that it might have indicated that the underlying information was not sufficiently included in the stock price if it occurred after a short period. in their study where they examined the impact of brokerage company reputation on the performance of investment strategies following stock recommendation revisions in the uk stock market, su et al. (2020) concluded that the reputation of the brokerage house had a significant impact on the recommendation performance based on the "european research team institutional investor positions" or the past recommendation performance of brokerage houses, however, it was also found that the performance of the investment recommendation given by the brokerage houses in the previous year had a significant positive impact on the recommendation performance of the next year. it concluded that the recommendation performance in the uk stock markets was permanent. moreover, the preload simulations conducted within the scope of the study confirmed that the observed performance persistence might have been due to the skill of the broker rather than the luck of the broker (i.e., random chance). in their study aiming to investigate the price performance of malaysian stocks recommended by the analysts of major stock exchange companies in malaysia, song and chu (2017) sought answers to the questions of whether or not the investors could profit from the malaysian stock market by following the analyst’s recommendations and whether or not the buying (or selling) of the recommended stocks yielded higher returns than of the market within the same period. the study was conducted using information obtained from popular blogs or websites that provide information on market performance and target stock prices in malaysia. as a result of the study, it was determined that even though investment recommendation reports were written by people who were considered experts in their fields, the accuracy of analyst reports was not as praiseworthy as expected. in the study, it was concluded that the recommended "buy " category, which was estimated by the analysts, had the highest uptrend potential ranging from 10% to 20%. in the study, there was no evidence that the price would have gotten closer to the target prices as the time lengthened. in their study examining the cyclical fluctuations that lead to jumps in stock prices and the information content of analyst revisions, jiang and kim (2013) concluded that they contained important information, especially those published before the jumps, although advisory revisions were more likely to cluster around stock price increases. arun et al. (2016), which examined the investment value and market impact of more than 1000 analyst recommendations on the indian stock market, revealed that analysts were more biased in buying rather than selling recommendations. these recommendations have a short-term future investment value of three months starting from the date of the recommendation. in the study, which found that buy recommendations were more valuable than sell recommendations, it was concluded that the forecasting ability of analysts, as measured by hit rate, was not more than 50%. su et al. (2019), using the dataset obtained over the period 1995–2013 on the investment value of sell-side analyst recommendation revisions in the uk, concluded that the upgrades did not generate significant positive anomalies on average. although downgrades might have generated significantly negative abnormal gross returns throughout certain periods, these observed significant returns disappeared after accounting of transaction costs. overall, the bootstrapping simulations conducted in the study confirmed the sell-side analysts’ lack of ability to make valuable up/down revisions to fulfill the magnitude of transaction costs, regardless of whether or not those revisions were made by high-ranking brokerages. nevertheless, an industry-based analysis indicated that in two high-tech industry sectors, namely the healthcare and technology sectors, sell-side analysts had certain skills in making such particular depre ciation during certain periods. skills demonstrate sufficiency in offsetting transaction costs. the findings of the studies in the literature supported the theory that investment recommendations would be valid in inefficient or weakly efficient markets according to the efficient markets hypothesis. baltic journal of economic studies 5 vol. 8 no. 2, 2022 3. methodology the main objective of this research study is to investigate the impact of the buy and sell recommendations of the brokerage houses for the stocks of the banks whose stocks are traded in the borsa istanbul (bist) on the stock prices. with the case study method, it has been tried to determine whether the investors can obtain abnormal returns in line with the recommendations of the intermediary institutions. in other words, the validity of the semistrong effective form of the investors who made a buying-selling decision for the recommendations of the brokerage houses was tested. the study uses data from january 2018 through december 2020, as well as buy and sell recommendations from the top 4 brokerage houses. bank stock returns were obtained from the datastream database. 3 of the 4 brokerage houses are of banking origin. in the empirical analysis, the event study method, using the stata 13.0 software, is employed considering the day on which the brokerage houses announced the recommendation. it is determined whether or not an abnormal return exists by determining the difference between the market returns of the stock returns 15 days before and 15 days after the event day. in other words, following the detection of abnormal returns 31 days (-15, +15) including the day of the event, before and after the event, it is determined with the help of one sample t-test statistics whether or not the abnormal returns are different from zero. the purpose of taking the 31-day time frame is to adopt the same time period in similar studies across the literature. in addition, bank stocks are not chosen too long so that the sensitivity of the returns to the event is not lost. while determining less than 15 days may be short in monitoring the effect for the yield calculation, it is considered that keeping it longer than 15 days may weaken the relationship of the effect with recommendations. in other words, in this method, which has been used for many years and is claimed to be safe, keeping the selected time frame too long may weaken the effect of the event, while keeping it too short may cause the extent of the effect to not be fully reflected (badalova, yıldız, and karan (2017). the abnormal returns of stocks are calculated as follows: arit = rit – rmt (1) arit; the abnormal return of the ith stock on day t. rit; the return of the ith stock on day t. rmt; the market return of the ith stock on day t. the average abnormal return (aar) is calculated as follows: aar n ar it i n it � � � � � � � � �� � � � 1 1 � � (2) afterward, the aars provided by the stocks in the sample in question are added together, respectively, and the formula for obtaining the cumulative abnormal return (car) is as follows: car aar it i n it � � � � � � �� � � � 1 (3) as a result, whether or not the cumulative abnormal returns are different from 0 is tested with the following hypotheses: investors are expected to earn abnormal returns from their investments in stocks of banks included in the recommendation list. investors take the proposed bank stocks into consideration, taking into account the buy and sell recommendations of the said brokerage houses. in this context, according to the h1 hypothesis; positive abnormal returns can be obtained from the stocks of banks added to the brokerage house recommendation list and can be shown as h1=kag>0. h1: positive abnormal returns are obtained from the bank stocks that the brokerage houses give a buy recommendation. this situation could negatively affect investors because brokerage houses recommend selling stocks owned by banks. because financial analysts at the brokerage house have evaluated bank stocks and advised them to sell because of any negativity. it is expected that the price of bank stocks will decrease as investors' interest in the delisted bank stocks decreases, taking into account the recommendations in question, and it will be h2=kag<0. h2: negative abnormal returns are obtained from bank stocks that brokerage houses give advice to sell. as a result, based on the efficient markets hypothesis put forward by eugene fama, the assumption that there is an efficient market in semi-strong form has been tested in line with the recommendations of the banking sector and brokerage house. with the help of these hypotheses the market efficiency is measured. if the market is efficient, it is impossible to get abnormal returns on these buy and sell recommendations. 4. findings in this study, the impacts of the recommendations of the brokerage houses on the stocks of the banks on the stock performance are examined. in the research study, average abnormal returns (aar) and cumulative abnormal returns (car) are calculated over the periods 15 days before and 15 days after the brokerage houses’ recommendations. the obtained findings of the study are presented in this part. table 1 shows the abnormal returns on the stocks for which the brokerage house gave a sell recommendation. in this study, brokerage houses made 31 sell recommendations on bank stocks during the corresponding period, and the total number of observations was 961. according to the results baltic journal of economic studies 6 vol. 8 no. 2, 2022 of the analysis, the highest abnormal yield of bank shares recommended for sale is achieved on the day of the announcement (the day of the event) and the first day after the announcement. when considering the price change after the recommendation to sell the bank shares, we can see that the negative average abnormal return and the cumulative abnormal return take place on the first day after the announcement. investors act on the recommendations of brokerage houses on the event day and the day after. on the other hand, following the day +1, no statistically significant negative abnormal and cumulative abnormal returns are realized. in other words, after day 1 following the event, the market response reaches normal levels and the prices return to the pre-event level within the 15-day event window. figure 1 on the [-15, +15] axis of the event window shows the cumulative abnormal return on bank shares for which a recommendation to sell was given. upon examining the results, the cumulative abnormal table 1 abnormal yield of bank shares, in respect of which the brokerage house gives a recommendation to sell days aar (%) t(aar) p-value car (%) t(car) p-value -15 0.0000805 0.983 0.333 0.0000805 0.983 0.333 -14 -0.0001407 -1.248 0.222 -0.0000602 -0.375 0.710 -13 -0.0000750 -1.214 0.234 -0.0001352 -0.744 0.463 -12 -0.0002062 -3.138 0.004 -0.0003413 -1.795 0.083 -11 0.0000100 0.105 0.917 -0.0003314 -1.487 0.148 -10 0.0002368 1.993 0.055 -0.0000946 -0.387 0.702 -9 -0.0002263 -2.468 0.020 -0.0003209 -1.293 0.206 -8 0.0001320 1.411 0.169 -0.0001889 -0.699 0.490 -7 0.0003290 2.619 0.014 0.0001401 0.533 0.598 -6 -0.0000279 -0.274 0.786 0.0001123 0.436 0.666 -5 -0.0001622 -1.430 0.163 -0.0000499 -0.175 0.862 -4 0.0002866 2.249 0.032 0.0002367 0.779 0.442 -3 -0.0001274 -1.222 0.231 0.0001094 0.338 0.738 -2 0.0001116 1.196 0.241 0.0002209 0.673 0.506 -1 0.0002148 2.564 0.016 0.0004357 1.275 0.212 0 0.0003098 2.507 0.018 0.0007455 2.076 0.047 1 -0.0001630 -1.830 0.077 0.0005825 1.854 0.074 2 -0.0001588 -2.084 0.046 0.0004237 1.326 0.195 3 -0.0000737 -0.594 0.557 0.0003500 1.034 0.310 4 -0.0001237 -1.398 0.172 0.0002263 0.693 0.493 5 0.0001749 1.710 0.098 0.0004012 1.270 0.214 6 0.0000995 0.755 0.456 0.0005007 1.442 0.160 7 -0.0001159 -1.758 0.089 0.0003848 1.093 0.283 8 -0.0001220 -0.877 0.387 0.0002628 0.666 0.511 9 -0.0002768 -1.949 0.061 -0.0000140 -0.029 0.977 10 0.0001535 1.784 0.085 0.0001394 0.289 0.775 11 -0.0000358 -0.332 0.742 0.0001036 0.201 0.842 12 -0.0002069 -1.826 0.078 -0.0001033 -0.179 0.859 13 0.0001649 1.979 0.057 0.0000616 0.100 0.921 14 -0.0001687 -2.602 0.014 -0.0001071 -0.178 0.860 15 -0.0002392 -2.658 0.012 -0.0003463 -0.561 0.579 notes: aar and car denote average abnormal return and cumulative abnormal return, respectively. ‘0’ in the day column denotes the day on which the brokerage firm announces its recommendation returns reach the maximum level on the event day. then, the cumulative abnormal returns of bank stocks decrease regularly along with the sell recommen dation of the brokerage houses. after the bank’s stocks rise significantly, similar cumulative abnormal returns levels are reached on -15 to +15 event days along with the brokerage house’s sell recommendation. in other words, investors believe that companies added to the list of non-recommended stocks would perform adversely in the future and permanently remove these stocks from their portfolios. table 1 shows the abnormal returns on the stocks for which the brokerage house gave a buy recommendation. in this study, brokerage houses make 108 buy recommendations on bank stocks during the corresponding period, and the total number of observations is 3,348. according to the results of the analysis, the highest abnormal returns of the recommended bank shares are achieved before the announcement [-1] and on the day of the event. baltic journal of economic studies 7 vol. 8 no. 2, 2022 -0,0600% -0,0400% -0,0200% 0,0000% 0,0200% 0,0400% 0,0600% 0,0800% 0,1000% -15-14-13-12-11-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 event window cumulative abnormal return of shares, for which recommendations were given to sell [-15, +15] a v e r a g e c u m u l a t iv e a b n o r m a l r e t u r n s figure 1. sell recommendation car table 2 abnormal returns on shares of banks, in respect of which the brokerage house gives a recommendation to buy days aar (%) t(aar) p-value car (%) t(car) p-value -15 -0.000015 -1.356 0.178 -0.000015 -1.356 0.178 -14 0.000004 0.306 0.760 0.000003 0.231 0.818 -13 0.000014 1.158 0.249 0.000014 1.129 0.261 -12 -0.000019 -1.335 0.185 -0.000016 -1.088 0.279 -11 -0.000022 -1.825 0.071 -0.000012 -0.852 0.396 -10 -0.000014 -1.222 0.225 -0.000005 -0.387 0.699 -9 -0.000018 -1.709 0.090 -0.000011 -0.935 0.352 -8 0.000016 1.180 0.241 0.000020 1.329 0.187 -7 0.000021 1.465 0.146 0.000028 1.710 0.090 -6 -0.000018 -1.830 0.070 -0.000011 -0.920 0.360 -5 0.000011 0.902 0.369 0.000017 1.256 0.212 -4 0.000006 0.419 0.676 0.000014 0.840 0.403 -3 -0.000016 -1.317 0.191 -0.000009 -0.633 0.528 -2 -0.000016 -1.317 0.191 -0.000009 -0.633 0.528 -1 0.000060 3.634 0.000 0.000064 3.555 0.001 0 0.000022 1.672 0.098 0.000026 1.716 0.089 1 -0.000005 -0.416 0.678 -0.000002 -0.115 0.909 2 -0.000003 -0.201 0.841 -0.000004 -0.234 0.816 3 -0.000004 -0.304 0.762 -0.000005 -0.291 0.771 4 -0.000021 -1.687 0.094 -0.000020 -1.320 0.190 5 0.000014 1.216 0.227 0.000015 1.117 0.266 6 0.000054 3.295 0.001 0.000056 3.286 0.001 7 -0.000004 -0.222 0.825 0.000004 0.204 0.839 8 0.000006 0.362 0.718 0.000011 0.703 0.484 9 -0.000012 -0.786 0.434 -0.000009 -0.550 0.583 10 0.000010 0.857 0.393 0.000014 1.130 0.261 11 -0.000028 -1.691 0.094 -0.000024 -1.387 0.168 12 -0.000026 -1.364 0.175 -0.000021 -1.051 0.296 13 0.000006 0.542 0.589 0.000008 0.682 0.497 14 0.000002 0.162 0.872 0.000008 0.468 0.641 15 0.000018 1.452 0.149 0.000022 1.587 0.115 notes: aar and car denote average abnormal return and cumulative abnormal return, respectively. ‘0’ in the day column denotes the day on which the brokerage firm announces its recommendation baltic journal of economic studies 8 vol. 8 no. 2, 2022 when considering the price changes before the recommendations to buy bank shares, we can see that the prices of the recommended bank shares begin to rise on the first day before the event. this result may indicate that investors have pre-announcement expectations about bank stocks that brokerage houses recommend buying, and that some investors are taking that stance. moreover, some investors who receive inside information before the reason for this increase has been announced to the public may have made purchases on the day prior to the brokerage houses' recommendations to buy bank stock, whose recommendation to buy will be announced in the market. as a result, a statistically significant change exists in both the average abnormal return and the cumulative abnormal return on the first day prior to the recommendation (p<0.01). moreover, both the average abnormal return and the cumulative abnormal return on the day brokerage houses made buy recommendations on bank stock (p<0.01). this finding indicates that investors are taking into account brokerage houses' "buy " recommendations and investing in bank stocks. figure 2 shows the cumulative abnormal return on the [-15, +15] axis of the event window for bank stocks for which a buy recommendation was given. when studying the results, the cumulative abnormal return reaches the abnormal return on the -1 day and on the event day. the cumulative abnormal return on bank stock then declines regularly along with the brokerage houses recommendation to sell. after a significant increase in bank stock, similar levels of cumulative abnormal returns are reached on event days of -15 to +15 along with a brokerage house recommendation to sell. in other words, investors believe that companies added to the list of unrecommended stocks will perform negatively in the future and seek to permanently exclude these stocks from their portfolios. 5. conclusion the event study analyzes the impact of brokerage house buy-sell recommendations on bist bank stock returns between january 2018 and december 2020. in this context, buy-sell recommendations of the four largest brokerage houses operating in turkey, two of which are banking houses, were included in the study in a 15-day event window. the average abnormal return and cumulative abnormal return formulas were used to determine whether stocks provide abnormal returns other than market returns. the results show that the average abnormal return and cumulative abnormal return are derived from stocks in the periods 15 days before and 15 days after the buysell recommendation, which are treated as events. accordingly, the highest abnormal return among the stocks that were given a sell recommendation 31 times was realized on the day of the announcement and the first day after that. in addition to this, buy recommendation was given 108 times in the analyzed period and it is seen that the highest abnormal return was realized on the day before the event [-1] and on the day of the event. in this context, the abnormal return seen before the buy recommendation leads to the development of the opinion that the investors bought the expectations before the announcement or that there is insider trading. the findings obtained as a result of the study show that the stock returns that are not recommended by the intermediary institutions have decreased. although the findings differ from the findings of karan and ressamoğlu (1996), çevik and erdoğan (2011), çevik and sezer (2020), altunöz (2016), bedelova (2017), arısoy (2020), ildır and dallı (2021) consistent with the findings. when looking at the selling recommendations and their effects within the study, it can be seen that the day before [-1] received a p=0.016 value, the day, [0] received a p=0.018 value, the next day and two days -0,0030% -0,0020% -0,0010% 0,0000% 0,0010% 0,0020% 0,0030% 0,0040% 0,0050% 0,0060% 0,0070% -1 5 -1 4 -1 3 -1 2 -1 1 -1 0 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 event window cumulative abnormal returns of the stock regarding which buy recommendations are made [-15, +15] a v e r a g e c u m u l a t iv e a b n o r m a l r e t u r n s figure 2. buy recommendation car baltic journal of economic studies 9 vol. 8 no. 2, 2022 later [+1, +2] received p=0.077 and 0.046 values. on the other hand, when buying recommendations and their impact are considered, it can be seen that the day before a value of [-1] p=0.000 was obtained and on day [0] p=0.098. according to emh, above-average returns should not be achieved in semi-strong form efficient markets. however, it was concluded that the banking sector was not effective in a semi-strict form with the data set used in the period considered in the study. t-test results and p values show that brokerage house recommendations are effective on stock returns in the bist banking sector, and therefore bist banking sector is effective in a weak form. in the previous studies on the subject, including different sectors, it was observed that abnormal returns were detected in stock returns 15 days after the buy-sell recommendations, while in this study, abnormal returns were detected in the [-1, +2] period. in this context, it can be argued that the banking sector is different from other sectors, and investors pay less attention to recommendations for the banking sector. the results show that brokerage house recommendations to buy and sell banking sector stocks provide [-1, +2] average abnormal returns and cumulative abnormal returns in the short run, and then returns decline rapidly. the future performance of stocks that receive a sell recommendation is expected to be negative, meaning that the stocks will be removed from the recommendation list and investors will remove these stocks from their portfolios. on the other hand, high expectations for the future performance of stocks with a buy recommendation cause investors to invest in these stocks, and there is an increase in their returns on and after recommendation day. developed capital markets and the banking sector are crucial for a country like turkey, which aspires to become one of the world's top 10 economies and join the european union. market inefficiencies are an important obstacle for turkey. to developed market efficiency it is necessary to raise corporate governance, investor awareness and structural reforms for capital markets and banking sector so that more conscious and effective capital market investments can be made in the country. financial statements and important issues that may affect the investment decisions of investors should be disclosed to the public without delay. in addition, making more proactive decisions on public disclosure and transparency by policy makers will help increase efficiency in the markets. the study has limitations. the first limitation is that the study was conducted for the banking sector, and other sectors were not included in the study. the second limitation is that the study covers data from january 2018 to december 2020. when interpreting the results with constraints, we can say that the association of banking sector stocks with buy-sell recommendations is important for period investors. in particular, stock investors making short-term investments in the banking sector should evaluate the impact of brokerage house buy-sell recommendations in detail. in future research, it is important to analyze more than one sector within a broader window of events and over a broader observation period in terms of generalizing the results obtained. in addition, analysis of brokerage house recommendations within a firm size and sector comparison will contribute theoretically to the literature. references: arun, s., shankaran, b., & jayadev, m. 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(2002). dissemination of stock recommendations and small investors: who benefits? multinational finance journal, 6(1), 29–42. baltic journal of economic studies 224 vol. 7 no. 2, 2021 corresponding author: 1 west ukrainian national university, ukraine. e-mail: flissak.k@ukr.net orcid: https://orcid.org/0000-0002-0980-2398 researcherid: p-9986-2018 2 west ukrainian national university, ukraine. e-mail: tanya.drakohrust@gmail.com orcid: https://orcid.org/0000-0002-4761-7943 researcherid: g-7287-2017 doi: https://doi.org/10.30525/2256-0742/2021-7-2-224-232 modern paradigm of national interests promoting in foreign economic activity of slovakia kostyantyn flissak1, tetiana drakokhrust2 abstract. the aggravation of competition processes in international economic relations leads to the fact that individual business entities do not have the opportunity to effectively represent themselves abroad. in such circumstances, the importance of state support and promotion of national interests abroad significantly increases. the purpose of the article is to explore and analyse the practice of economic diplomacy in slovakia from the point of view of an impartial researcher, aimed at improving the national system for promoting national interests abroad. to achieve this goal, the research is focused on following tasks: to consider and analyse the main trends in the formation and development of economic diplomacy in slovakia, to perform a brief analysis of the practice of foreign economic activity in slovakia, highlighting its main positive and negative aspects; to summarize the main strengths of the slovak system of promoting national interests abroad in order to recommend them for use in the practice of other countries, in particular ukraine. methodology. in the process of preparation the article, methods of scientific abstraction, observation, synthesis, generalization, as well as statistical and economic methods were used to determine the effectiveness of slovak foreign economic activity and the influence of the state on it. the information and analytical base for the study includes the regulatory framework of the european union and the slovak republic, materials and analytical reports of international organizations dealing with the considerate issues (unctad, wto, world bank), regulatory and statistical data of slovak state authorities, the results of research by modern scientists from different countries. the results of the study show that the economic diplomacy of the slovak republic within the framework of its eu membership is an important tool for the success of the country’s foreign economic policy, ensuring its export expansion in international markets and intensive investment cooperation with foreign investors. particularly remarkable is the current practice of staffing institutions of economic diplomacy in slovakia, which is based on qualified training of economic diplomats within the framework of a full-fledged university programmes. in the prospect professional support for the structures of slovak economic diplomacy and its personnel, professional, structural and financial support from the ministry of economy becomes a requirement. the practical implications of the scientific research is to find out the current state of economic diplomacy mechanisms in individual european countries, trends in their development and potential consequences for the economic potential of other states (in particular, ukraine) based on the introduction of effective mechanisms for promoting national interests abroad. value/originality. the mechanisms and practices of promoting slovakia’s foreign economic activity in foreign economic relations deserve the attention of the relevant state structures of ukraine regarding the unification of regulatory standards and the formation of appropriate mechanisms for protecting national interests, including in the context of the implementation of the ukraine–european union association agreement. in addition, this study has significant potential for further consideration in subsequent scientific publications. key words: national interests, foreign economic activity, export, investment, diplomacy, slovak republic. jel classification: f13, f23, o24 baltic journal of economic studies 225 vol. 7 no. 2, 2021 1. introduction achieving success in the full integration of ukraine into the world economy system and ensuring the implementation of its european integration aspirations is possible, firstly, due to the necessary development of its own productive forces, achieving the appropriate level of economic development and socio-economic standards, and secondly, to the unification of normative and legal bases and standards of regulating the economy with the norms and mechanisms in force in the eu. the priority here remains protecting and effectively promoting national interests in international relations in such a way as to achieve the most complete consistency between the ukrainian interests and the imperatives of developing the foreign economic activity of the eu member states. substantiation of vectors for solving such problems should be based on maximum consideration of the mentioned activities of partner countries and, above all, ukraine’s neighbours along the eu borders. in this regard, the considerable interest belong to the analysis of the functioning of mechanisms for promoting national interests in the field of foreign economic cooperation by the eu countries close to ukraine in terms of natural resource potential and economic structure. at the same time, the proper level of efficiency of their foreign economic activity should be taken into account. the slovak republic is a partner for ukraine. however, the problem of promoting national interests in foreign economic activity in the context of a globalized world economic system and growing competition in international markets is relevant for other countries, not only in central and eastern europe. the issues of mechanisms and tools for promoting national interests in foreign economic activity in the global level are considered in the scientific publications by a number of foreign authors, in particular n. bayne (2007), s. woolcock (2007, 2016), a.k. rose (2007), s. moons (2009), p.a.g. van bergeijk (2009, 2011), s. bayne (2010), m. okano-heijmans, j. melissen (2011), b. glasser (2012), a.f. cooper, j. heine, r . thakur (2013, 2015). to the problems of direct activity of the state and relevant institutions of slovakia are devoted articles by such authors as l. marchichiakova (2014), r . bohac, l. lipkova (2016), m. fabus (2014), m. kurucz (2018). at the same time, there are currently no publications that would comprehensively demonstrate the functioning of the mechanism for assistance and promoting slovakia’s national interests in its foreign economic activity, its features in the context of the country’s membership in the european union and with taking into account the aggravation of competition in globalized markets. thus there is a need of consideration and systematization of the functioning of mechanisms and instruments of influence and assistance of the state and authorized institutions to improve the efficiency of foreign economic activity in the area of international trade and investment partnership, determination of the modern paradigm of ensuring and promoting slovakia’s national economic interests in international cooperation. on this basis it is possible to attract attention of the relevant state structures of ukraine to unify regulatory standards and form appropriate mechanisms for protecting national interests in the context of the implementation of the eu-ukraine association agreement. given the relevance of the topic for implementation in national practice in the countries concerned, the purpose of this article is also to focus not so much on theoretical discussions on the definitions of elements of foreign economic activity, but on the practical actions of slovakia in ensuring the effective promotion of national interests in foreign markets. 2. foreign economic activity of slovak business and its legal regulation contradictions and the latest challenges of the current stage of world development, the emergence of new centres of economic activity, increased competition between countries and international regional structures force the governments of countries to modernize the system and mechanisms for protecting and promoting of national interests in the area of international economic relations. despite its membership in the eu, for the slovak republic this led to the formation of an appropriate paradigm in ensuring the effectiveness of export-import relations and investment activities in the part of attracting foreign investments, the development of foreign economic relations on a cooperative basis both within the eu and as a part of the visegrad four, as well as with other countries. a specific feature of this paradigm in recent years is a pronounced pro-export policy of the state. its implementation is largely ensured by means of the economic diplomacy. thus, among the four main pillars of foreign and european policy indicated in the report of the ministry of foreign affairs to the national council under the name “goals of foreign and european policy of the slovak republic for 2014”, there were highlighted economic diplomacy and a joint presentation of the country abroad (l. marchichiakova, 2014). the country’s national interests in the foreign economic sphere are primarily provided by export activities. the world bank data is shown in table 1, indicate the level of export orientation of the country’s gross domestic product (gdp). the share of exports in slovakia’s gdp ranged from 73% in 2010 to 88.4% in 2018, and on average over the past decade, exports have generated 84.4% of the baltic journal of economic studies 226 vol. 7 no. 2, 2021 country’s gdp. this is one of the highest rates for both the eu and other eastern european countries. for example, during the reviewed period, the level of export orientation of poland’s gdp averaged 40.6%, and ukraine’s was 38.0%. the high export orientation, and consequently the dependence from export of slovakian gdp, was due to: firstly, the high material content of export items from national producers; secondly, providing of high quality of slovak export products and their compliance with international standards; thirdly, the use of effective mechanisms for supporting and promoting national products in foreign markets. slovakia’s foreign trade is characterized by (with some exceptions) a positive balance; there are germany, the czech republic, poland, hungary, france, italy, the russian federation, china, and the republic of korea among its main trading partners. the dynamics of the geographical structure of the country ’s export-import operations for 2010– 2019 is shown in table 2. the given structure characterizes the geographical vectors of slovakia’s foreign trade over the past decade. the performed research shows that the success of promoting slovakian products in foreign markets and development of its new segments in a large extent is provided exactly by the state support for exports and investments and the full usage of economic diplomacy tools. the implementation of activities of economic diplomacy is provided in the following directions: 1) normative and legislative; 2) functional and institutional; 3) personnel; 4) methodological. as the performed analysis shows, normative and legislative support at the legislative level is the basic and initial position of the success of the slovakian economic diplomacy. thus, the protection of slovakia’s interests in the external sphere is carried out in accordance with the “strategy of foreign economic relations of the slovak republic for 2014–2020” (ministry of economy of the slovak republic, 2014). the core of the strategy is the sphere of export policy as a priority direction of the state’s foreign trade policy. the subject of this strategy is the system of foreign economic relations of the slovak republic, through which the country participates in the international division of labour. taking into account the need to form a significant impact on the international competitiveness of the country, the strategy is aimed primarily at strengthening the table 1 export share of slovakia gdp (in billion usd) export gdp share of export in gdp, % 2010 65.96 90.31 73.0 2011 79.74 99.12 80.5 2012 80.72 94.54 85.4 2013 85.70 98.85 86.7 2014 86.23 101.19 85.2 2015 75.15 88.47 84.9 2016 77.06 89.66 85.9 2017 83.41 95.49 87.4 2018 93.42 105.70 88.4 2019 89.62 105.08 85.3 source: сompiled by the author based on data by the world bank (2020) table 2 dynamics of the structure of exports and imports of the slovak republic, in percent countries export import 2010 2017 2019 2010 2017 2019 total 100 100 100 100 100 100 – including : eu-28 84.4 85.4 84.3 66.0 66.9 67.1 – among them: germany 19.3 20.8 22.3 15.3 16.5 16.2 czech republic 14.0 11.5 11.0 10.4 10.2 10.1 italy 5.6 6.0 4.6 3.2 3.2 3.4 poland 7.3 7.6 7.5 3.9 5.2 5.7 hungary 6.7 6.0 6.3 4.2 4.8 5.2 france 6.9 6.3 7.0 3.5 3.2 3.5 russian federation 3.9 2.0 1.8 9.6 4.7 5.6 ukraine 0.8 0.6 0.9 0.9 0.9 0.8 asia 5.3 4.6 4.9 19.9 23.0 21.3 – including : china 2.0 1.6 2.1 5.9 7.3 6.3 republic of korea 0.2 0.1 0.4 7.8 5.7 5.4 africa 0.5 0.6 0.9 0.5 0.5 0.8 america 2.3 3.7 4.2 1.4 1.7 1.8 source: сompiled by the author based on data by statistical office of the slovak republic (2019) baltic journal of economic studies 227 vol. 7 no. 2, 2021 national system of export support and its alignment with both the trends of the foreign economic conjuncture and the interests of the slovakian business sector. the strategy of foreign economic relations of slovakia is based on the following main principles: 1) compliance with international obligations arising from membership in the european union and international organizations; 2) support of processes of liberalization in international business; 3) fulfilment of principles of the competition; 4) development of support mechanisms within building a transparent business environment; 5) taking into account the need of effective use of limited financial and human resources; 6) avoid of duplication of certain goals, procedures and instruments that are the subject of other strategic documents in the area of support of foreign investments, tourism, innovative cooperation with other countries, energy security and unified joint presentation of the slovak republic; 7) coordination of activities between the ministry of foreign and european affairs of the slovak republic (mfea), the ministry of economy and other organizations that are involved in the formation and implementation of the strategy of foreign economic relations in accordance with the legislation and the memorandum of cooperation between these ministries in the realisation of the goals of economic diplomacy by the slovakian offices abroad. the main goals of the strategy of foreign economic relations are to ensure the stable state of the slovak republic in international economic relations, to promote the economic and social development of the country, to promote economic interests abroad, to ensure the requirements of economic security. according to the main target, the strategy provided the achievement of goals in the following four areas: 1) trade policy; 2) investment activities; 3) scientific and innovative cooperation with foreign countries; 4) unified joint presentation of slovakia abroad. the study confirmed the success of achieving defined goals. in trade policy the strategy defines its general regulations, objectives and directions of increasing both exports and number of exporters, ensuring stable supply of strategic goods. taking into account the existing weaknesses of slovakia, the trade policy section are determined the objectives and directions of territorial diversification of the export structure by increasing its share on markets outside europe. in addition, there are identified the objectives regarding the need of exports diversification by increasing the exports share of electrical machinery, equipment, parts (hs85) and vehicles, other than railway or tramway rolling stock, parts and accessories (hs87). also according to the strategy, the objectives of slovakia’s trade policy are increasing the share of exports of small and medium enterprises and increase the volume of exports of services, including tourism. investment objectives of strategy of foreign economic relations are associated to government programs and are focused on: 1) increasing investment flows to economic spheres with high value-added but located in less developed regions; 2) improving export performance through investments; 3) increasing of investments in industrial research and development; 4) supporting of investors in their activities in slovakia. the strategy envisages that the implementation and verification (checking the status of the implementation of these positions) is performed by the ministry of economy of the slovak republic in close cooperation with the ministry of finance and the ministry of foreign and european affairs (mfea). the strategy refers next goals of innovative cooperation of slovakia with foreign countries: 1) raising the level of involvement of slovakian business and research institutions to international scientific cooperation projects; 2) increasing the internationalization level of the results of domestic research and development; 3) increasing of interest of foreign venture capital sources to projects by slovakian enterprises; 4) increasing the interest from foreign companies to establishing their r&d centres in the slovak republic. particularly importance in promoting the national interests of the country abroad belongs to its qualified and effective representation abroad. therefore, the strategy of foreign economic relations clearly specified the goals in this important segment of foreign economic activity. in particular, it is necessary to ensure: firstly, the creation of a functional model of coordination of actors that take part in the presentation of slovakia abroad; secondly, the establishment of a reliable, specific and attractive presentation of the identity of slovakia. the achievement of the main goal and implementation of the objectives of the strategy of foreign economic relations is ensured, first of all, by the mechanisms and instruments of economic diplomacy of the slovak republic. 3. functional and institutional support of economic diplomacy functional and institutional support of providing of national interests abroad by instruments of economic diplomacy is performed through the baltic journal of economic studies 228 vol. 7 no. 2, 2021 process of coordinated activities of the slovakian government agencies and its special organizations and interdepartmental structures. the primary role here belongs to the ministry of foreign and european affairs (mfea) and the ministry of economy (me sr) of the slovak republic. important places in the promotion of national economic interests of slovakia in foreign markets by means of economic diplomacy belong to the slovak government’s council for export and investments promotion as well as the slovak investment and trade development agency (sario). analysis of the practice of promoting slovakian national interests in foreign trade and investment issues gives reasons to pay special attention to the significant role and its real effectiveness of the ministry of foreign and european affairs of the slovak republic in the functioning of economic diplomacy (this practice is successfully applied in poland (yankiv, flissak, kozłowski, 2020) and we consider that it would be important for ukraine, but, unfortunately, is absent here). in this context, the mfea supports the promotion of exports, investment and research cooperation on the principles of international development, provides assistance to slovakian companies through a network of foreign institutions in establishing contacts with foreign partners, identifies business and investment opportunities in host countries, creates conditions for the successful implementation of economic and trade cooperation at the highest political level, and provides functional support of export through tools of economic diplomacy. in the structure of the mfea the functional support of economic diplomacy is entrusted to the economic cooperation section. it consists of department of global policy, two departments of economic diplomacy, the department of entrepreneurship centre, and the department of international economic organizations (ministry of foreign and european affairs of the slovak republic). formed by the mfea, the foreign network consists of 64 institutions and representative offices with economic orientation. the network includes 49 systematic positions of economic diplomats. in addition, 173 consular offices (including those with the use of the institute of honorary consuls) abroad were actively involved in the performance of the functions of economic diplomacy in the departmental subordination of the mfea (ministry of economy of the slovak republic, 2014). the structures of mfea, according to the competence and functional powers, both in the country and through a network of foreign institutions provides the following support and assistance to participants of foreign economic activity (slovak investment and trade development agency – sario, 2020): – consultations on the political, trade and economic, business environment in the host countries of the slovak missions; – providing on the request from slovakian business structures the basic contact details and other information about foreign business entities which can be potential partners; – providing information and assistance according to the requests and proposals of slovakian exporters; – search for business and investment opportunities in the host countries for slovakian exporters; – search for potential investors and regular dialogue with key partners in investment cooperation in the host countries; – providing foreign companies with necessary information about potential slovakian partners and their proposals for investment partnership; – selection of relevant exhibitions abroad for the participation of slovakian companies, providing consulting and organizational support for their participation in exhibitions; – organization of business missions, intergo vernmental economic commissions for cooperation between the slovak chamber of commerce and industry (sopk), the slovak investment and trade development agency (sario) and relevant ministries; – organization of seminars for exporters jointly with sopk, sario, relevant industry and professional associations; – promoting of international cooperation in science, research and innovation, energy and food security, climate change, consumption of water and raw material resources (identification of the slovak projects, interests and options regarding finding ways to participate in relevant international and regional projects); – support for the participation of slovakian enterprises in regional cooperation (e.g., within the framework of the central european initiative, the european danube strategy, cross-border cooperation, partnership between regions, cities, municipalities etc); – providing information and cooperation in the organization of participation of entrepreneurs and public administration institutions in the eu external assistance projects for third countries, in the organization of public procurement in rest of the world, in the establishing of international cooperation. the ministry of economy of the slovak republic is the central authority of state administration in issues of foreign trade. thus, the ministry of economy functionally ensures the following tasks in this area (ministry of economy of the slovak republic, 2020): 1) develops the main directions and objectives of the foreign trade policy of the slovak republic in the framework of active participation in the committee of permanent representatives of the eu member states and other eu structures, participates in the development of baltic journal of economic studies 229 vol. 7 no. 2, 2021 common foreign trade policy of the european union in relation to the world trade organization and other regional associations; 2) develops the main directions and objectives of the state project policy, ensures its implementation, generate mechanisms for the provision of state assistance for the development of foreign trade; 3) develops a system of measures for stimulation the inflow of foreign direct investments; 4) provides comprehensive international trade and economic cooperation in accordance with the membership of the slovak republic in the organization for economic cooperation and development and other relevant international organizations; 5) develops, coordinates and ensures the implementation of multilateral and bilateral contracts in the sphere of foreign trade cooperation of the slovak republic with foreign countries; 6) vindicates the trade interests of the slovak republic in the use of trade protection instruments in committees and working groups of the european commission and the council of the european union. normatively provided system of coordination of actions in economic diplomacy is a fundamentally important point in the performance of functional duties in the sphere of foreign economic activity of the slovak republic government structures, which ultimately determines its high efficiency. in addition to the foregoing personnel provision of economic diplomacy, the ministry of economy of the slovak republic closely cooperates with other ministries, central and regional entities of state administration. particularly, the ministry of economy cooperates with the ministry of foreign and european affairs on the following issues: – development, implementation and providing of a joint foreign policy in the trade and economic sphere; – public administration of imports, exports and intermediation by military goods and technologies which are subject to inspection; – development of concepts and justification of principles of relations on participation in international economic or trade organizations; – preparation, signing and implementation of international trade agreements; – preparation of intergovernmental agreements in the scope of tourism and implementation of tasks arising from membership in the world tourism organization; – solving specific tasks related to activity of foreign missions of the slovak republic, which provide international trade and economic cooperation and collaboration with economic or trade international organizations; – contacting foreign representative offices of the slovak republic in the host countries and contacting representative offices of foreign states concerned to activities of slovak business entities abroad and foreign entities in slovakia. among the subjects of the national level of economic diplomacy there is the slovak government’s council for export and investments promotion – the advisory, coordinating and initiative entity of the government on the issues of state support of economic and trade cooperation, and presentation of the slovak republic (ministry of foreign affairs and european affairs of the slovak republic, 2020). the council consists of: 1) heads of central executive authorities (minister of foreign and european affairs, minister of economy, minister of finance, secretary of state of the ministry of transport, construction and regional development); 2) state financial institutions (representative of export-import bank of slovakia); 3) organizations of employers and commercial institutions (slovak chamber of commerce and industry, association of trade unions and employers’ associations of the slovak republic, national employers’ union, club 500, slovak association of small and medium enterprises and individual entrepreneurs, association of industry unions). the statutory activities of the government’s council for export and investments promotion are focused on the following main tasks: 1) formation of proposals and conclusions to strategic documents of ministries and other central government entities in the area of support, investments, international presentations and other forms of international economic cooperation of the slovak republic; 2) evaluation of services which are provided by slovak diplomatic missions as support to national business abroad and development of recommendations for their improvement; 3) submission of proposals on territorial priorities for the development of international trade, economic and investment cooperation of the slovak republic with foreign countries and the presentation of slovakia abroad; 4) taking measures for coordinated actions of the business sector for more effective ensuring trade and economic interests of the slovak republic abroad in accordance with the adopted territorial priorities of development of international trade and economic cooperation, including a coordinated presentation of the slovak republic abroad; 5) cooperation with relevant committees of the national council and with advisers of the prime minister of the slovak republic. according to the functional responsibilities and actual needs of the country, the government’s council for export and investments promotion considers the relevant issues and takes the necessary decisions. thus, in december 2016 at the meeting of the council, the ministry of foreign and european affairs was presented a document on the strategy baltic journal of economic studies 230 vol. 7 no. 2, 2021 of economic diplomacy until 2020. its position was conceptually based on the strategy of foreign economic relations of the slovak republic for the period 2014–2020 and the government’s programme declaration. at the first meeting of the council in 2017, one of the key issues was considered the basis of the “ w hite book on pro-export policy 2017”, presented by the ministry of economy of slovakia. the document set new goals to strengthen the country ’s export orientation. at the same time, the ministry of foreign and european affairs presented proposals on innovative forms of strengthening the potential of economic diplomacy. at the first meeting of the council in 2018, one of the main issues for discussion and decision-making were priorities of the slovak republic’s pro-export policy for the period 2018–2020. in addition, it was heard and discussed a report on the state and results of economic diplomacy of slovakia in 2017. an important place among the state subjects of economic diplomacy of the country belongs to the slovak investment and trade development agency (sario), which is the state agency of slovakia established under the ministry of economy of the slovak republic in 2001 with the aim of attracting of investments and promoting of national exporters on the global market. in the scope of foreign trade sario provides the following services to exporters: searches for foreign trade partners in regions of interest; makes analysis of a demand for the products of interest in foreign markets; forms on-line database of business opportunities; provides education and training of specialists in the sphere of foreign trade; assists in search for subcontracting opportunities. in promoting of investment activities, sario provides detailed information on the slovak business environment, conditions for establishing the company, services related to immovable property and a number of others, including advisement on state support. for potential investors, sario offers: overview of the advantages of slovakia as a place for investment, including the provision of key statistical indicators; making of sectoral and regional analyses; assistance in the realization of investment projects; consulting about support of investments; assistance in establishing and registering a company in slovakia; real estate database and help in finding the required area. operating investors can also use sario services, including the following: identification of local suppliers and service providers; consulting on preparation and realisation of the company’s expansion; support in relocation of the company, obtaining work permits or residence permits; support activities in the sphere of innovation, research and design work; networking. the most important trend in the modern economy of the country, sario considers the creation of job positions with high added value. therefore, in the issues of scientific research, sario activity aims to transform slovakia into a technological and innovation centre of central europe. as for the issues support of scientific research, sario offers: supporting activities for the development of the slovak innovation environment and innovative researches; establishing links with existing national and foreign investors; establishing links between the innovative potential of slovak enterprises and the needs of investors in order to transfer advanced technological processes into production; stimulating of foreign investors to invest in slovakia; analysing of local investment opportunities for national and foreign investors in order to establish joint ventures. it is important to emphasize that all services to exporters, current and potential investors are provided by sario free of charge that is in the slovak republic they are one of the active forms of state support for exporters and investment activities. in the modern paradigm of promoting slovakia’s national interests in the area of international economic relations, personnel providing for economic diplomacy are of great importance. it should be noted that the criterion of professional competencies was and in some cases remains the subject of discussion by scientists and representatives of state structures endowed with the functions of economic diplomacy. the need for orientation in economic diplomacy to professionals with proper education, experience and professional qualifications has been repeatedly emphasized by polish scientists and practitioners. the selection of personnel who would ensure the effective implementation of tasks, primarily economists, financiers and lawyers is important for this area of work. this approach is the fundamental basis of effectiveness and efficiency of economic diplomacy and includes two components: the first is the formation of a professional resource at the level of professional training during the educational process in higher education institutions and later at specialized seminars, forums, trainings; the second is the direct formation of the staff of national structures of economic diplomacy both within the country and abroad. a special feature of slovakia is that it is one of the few countries where higher education institutions provide training for specialists in this profession. thus, the faculty of international economic relations in the university of economics in bratislava study professionals in speciality “economic diplomacy” (university of economics in bratislava, 2020). hereby the training programme covers the entire range of academic disciplines required in the practical work of economic diplomats. in ukraine, there is nothing like this in this regard, and the diplomatic academy under the ministry of foreign affairs in recent years baltic journal of economic studies 231 vol. 7 no. 2, 2021 turned from a full-fledged educational institution for training specialists for the diplomatic service into advanced training courses, where at the best one/twoweek seminars or two-day trainings are held (center of professional training, 2020). in terms of direct staffing of economic diplomacy, slovakia also has its own features. thus, among the functional responsibilities of the ministry of economy of the slovak republic, its role and authority in the implementation of professional providing of the structures of slovak economic diplomacy should be emphasized. in particular, the ministry of economy manages and controls the activities of foreign missions, which are an integral part of the slovak embassies, professionally, financially, economically and by personnel. these issues are coordinated with the ministry of foreign and european affairs of the slovak republic. in addition, training of specialists in the field of foreign trade is provided by the slovak investment and trade development agency (sario). the efficiency and effectiveness of the country’s economic diplomacy in issues of protecting national interests requires appropriate methodological reasoning and content. an important element in this segment is the appropriate organization and planning of the main activities of economic diplomacy. thus, at the level of the ministry of economy and the ministry of foreign and european affairs of the slovak republic, a list of the main activities in the country’s foreign and european policy is determined, adopted and accepted for execution annually. these activities consist of four blocks: 1) a safe and democratic world; 2) european politics; 3) economic diplomacy; 4) services for citizens and modern diplomacy. in the part of the economic diplomacies’ events for recent years there were highlighted the following: energy security (ensuring the security of supply of energy raw materials and the continued diversification of routes and sources), creating conditions for establishing partnerships between slovak firms with foreign companies, promoting and establishing contacts of slovak innovative enterprises with foreign partners, developing existing and potential investment and trade relations with the eu and neighbouring countries, additional work on increasing exports and investments from china, india, japan, republic of korea, singapore, brazil. in addition, priority activities on economic diplomacy include: the preservation of security and profitability of way of natural gas transportation to europe, facilitating access of slovak goods and services to international markets, activation of work with international economic organizations according to new trends of development, expansion of investment and trade relations with the eu, increasing export efforts in the markets of named above countries. 4. conclusions the research and analysis of the issues under consideration performed by us give grounds to assert that the economic diplomacy of the slovak republic within the framework of its membership in the eu is an important tool for the success of the country’s foreign economic policy, ensuring its export expansion in international markets and intensive investment cooperation with foreign investors. slovakia’s high level of export orientation of gdp is largely ensured by the use of effective mechanisms for supporting and promoting national products on foreign markets. the country implements the paradigm of ensuring the effectiveness of foreign economic relations within the eu and the visegrad four, as well as within other countries. a characteristic feature of this paradigm in recent years has been a pronounced pro-export policy of the state, the implementation of which is largely ensured by means of economic diplomacy. accordingly, there have been formed mechanisms for promoting slovak national interests and ensuring international economic activity, which include normative and legislative, functional and institutional, personnel and methodological components. in this connection, the role of the state and authorized institutions responsible for organizing and coordinating the use of economic diplomacy tools and full-fledged assistance to foreign economic entities remains decisive. the current practice of staffing institutions of economic diplomacy in slovakia, which is based on qualified training of economic diplomats within the framework of a full-fledged university programme, is particularly notable. in the future, professional support of the structures of slovak economic diplomacy and its personnel, professional, structural and financial support by the ministry of economy are an absolute requirement. the investigated mechanisms and practices of promoting slovakia’s international economic activity in foreign economic relations deserve the attention of the relevant state structures of ukraine regarding the unification of regulatory standards and the formation of appropriate mechanisms for protecting national interests, including in the context of the implementation of the ukraine–european union association agreement. based on the relevance of the considered problems in foreign economic activity in the context of a globalized world economy and growing competition in international markets, there are enough reasonable grounds to propose the imperatives of slovakia implemented in 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(2009). economic diplomacy and the geography of international trade. north hampton: edward elgar publishing. woolcock, s. (2016). european union economic diplomacy. the role of the eu in extarnal economic relations. l.: routledge. yankiv, m., flissak, k., & kozłowski a. r . (2020). dyplomacja w zagranicznej współpracy gospodarczej [diplomacy in foreign economic cooperation]. warszawa: cedewu. baltic journal of economic studies 1 vol. 7 no. 2, 2021 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: andrzej.pawlik@ujk.edu.pl orcid: https://orcid.org/0000-0003-2319-6707 2 jan kochanowski university in kielce, poland. e-mail: pawel.dziekanski@ujk.edu.pl orcid: https://orcid.org/0000-0003-4065-0043 doi: https://doi.org/10.30525/2256-0742/2021-7-2-1-11 entrepreneurship as the basis for the development of rural communes in eastern poland andrzej pawlik1, paweł dziekański2 abstract. reducing development disparities between municipalities requires the development of entrepreneurship, which is an organized process of actions. entrepreneurship is an interdisciplinary concept that is important for social and economic development. the aim of the article is to assess the entrepreneurship in the aspect of rural communes’ development using a synthetic measure. the assessments were carried out in a system of 484 rural communes of voivodships of eastern poland. data from the local data bank of the central statistical office of 2009 and 2018 were used as source material. in 2018, the topsis method for measuring entrepreneurship ranged from 0.07 to 0.63 and the development measure from 0.23 to 0.62. this confirmed the smaller diversity of rural communes in eastern poland in the aspect of development, and greater in the aspect of entrepreneurship. the synthetic measure of entrepreneurship was correlated with the measure of development. key words: entrepreneurship, development, rural communes, synthetic measure. jel classification: p25, r11, r12 1. introduction despite the efforts to reduce development disparities between communes, powiats and voivodships, delays in some communes, especially rural voivodships of eastern poland, are still very visible. overcoming them requires, among others significantly accelerate the development of entrepreneurship. therefore it is necessary to recognize the current situation regarding the level of entrepreneurship development in rural communes and to identify trends and regularities governing changes taking place in this area. entrepreneurship is an organized process of activities focused in given conditions on the use of an idea to achieve benefits on the market. entrepreneurship is a way of acting; it consists in the tendency to take new, risky and unconventional ventures, and showing initiative in their search and implementation (pawlik, 2016). entrepreneurship is an interdisciplinary concept that is important for social and economic development. issues related to entrepreneurship are taken up by representatives of many scientific disciplines, such as economics, management science, sociology, psychology, law, pedagogy, and ethics (samitowska, 2009). they are characterized by multifacetedness and complexity. the variety of research approaches, data sources, methods used and, above all, the complexity and versatility of the topics discussed encourage research in this area. the aim of the article is to assess the spatial diversity of entrepreneurship in the aspect of rural communes’ development. the analysis of spatial diversity of entrepreneurship in rural communes was made using a synthetic measure. they were implemented in a system of 484 rural communes in eastern poland (program operacyjny, polska wschodnia 2014-2020). data from the local data bank of the central statistical office of 2009 and 2018 were used as source material. 2. method and materials used the authors’ interest is rural communes of underdeveloped regions of eastern poland. among the elements conditioning the development of the region, s. korenik identified, among others human capital, innovative facilities, entrepreneurship, transport and communication infrastructure, good living conditions and landscape values, quality of regional administration. s. korenik (2011) also points to the process of thickening economic and social activity around active economic centres and the disappearance of this activity as they move away from them. he also emphasizes that disparities in the level of development are a natural phenomenon and that it is more important to support baltic journal of economic studies 2 vol. 7 no. 2, 2021 the progress of individual regions at their own pace adapted to their capabilities than to level the differences between regions at all costs. a. klasik and f. kuźnik (2001) define regional development as the sustainable growth of three elements: the economic potential of regions, their competitive strength and the level and quality of life of residents. the essence of regional development is to ensure cohesion is understood functionally and occurring in its three dimensions: economic, social, and territorial. the endogenous potential of the individual also has an impact on local development. the diversified economic structure of the individual creates a peculiar development climate in which the conditions for starting business activity (entrepreneurship) arise. endogenous territorial capital reveals the specificity of the place and its elements as well as the strategic value in market competition. according to t. markowski (2011), it is generated external benefits, available as a result of user interaction within the region. it also causes diversity in the level of socio-economic development of local government units (heffner, 2002). e. skawińska (2009) writes that entrepreneurship plays an important role in the efficient allocation of existing resources as well as the creation of new and more perfect ones. a. klasik (2006) indicates that entrepreneurship as a determinant of sustainable development is the basis for the prosperity of regional economies and their communities. entrepreneurshiprelated issues are multi-faceted and complex. in the analysis of spatial diversity of entrepreneurship and development of rural communes in eastern poland, synthetic measure based on the topsis method was used. the synthetic analysis was carried out in the following stages: i. the stimulant and destimulant sets were determined. the description of the set can be presented in the form of an observation matrix xij of the form: x x x x x x x x x x ij m m n n nm = … … … … … … …             � 11 12 1 21 22 2 1 2 (1), where xij denotes the values of the j-th feature for the i-th object (i = 1, 2, ..., n; j = 1, 2, ..., m). from the set of variables, those with low spatial variability (coefficient of variation smaller than 0.10) and high correlation of variables (inverse correlation matrix) were removed. according to a. raspberry, a large value of the correlation coefficient results in the duplication of information about the analysed phenomenon and may lead to incorrect conclusions (malina, 2004). the set of variables selected for analysis is presented in table 1. ii. the destimulant was replaced with a stimulant, counting its inverse by formula x x ij ij = � � 1 (2). table 1 list of variables selected for analysis variables unit s/d entrepreneurial potential entities entered in the regon register per 1000 population person s units newly registered in the regon register per 1000 population person s units removed from the regon register per 1000 population person d natural persons conducting economic activity per 1000 population person s development potential change in population per 1000 inhabitants person s population growth per 1000 inhabitants person s migration rate per 1000 inhabitants person s registered unemployed persons person d employed persons in communes person s demographic dependency ratio for the elderly % d apartments per 1000 inhabitants person s population per 1 library (including library points) person s population using the sewage network person s population using the water supply network (person) person s entities entered in the register per 1000 population; entrepreneurship rate person s natural persons conducting economic activity per 1000 population; entrepreneurial activity rate person s foundations, associations and social organizations per 1,000 inhabitants; social involvement person s own income / total income % s investment expenses / total expenses % s s – stimulant; d – destimulant source: own study based on bdl cso data baltic journal of economic studies 3 vol. 7 no. 2, 2021 iii. the stimulants obtained were subjected to the procedure of zeroed unitarisation using the following formula: for stimulants z x ij ij i ij i ij i ij = − − � x min x max x min when �x si ∈ (3) where s is stimulant, i = 1, 2... n; j = 1, 2... n, xij means the value of the j-th feature for the examined unit, max – the maximum value of the j-th feature, min is the minimum value of the j-th feature (kukuła, 2000). as a result of the transformations, a matrix of uniformized variable values was obtained �zij : z z z z z z z z z z ij m m n n nm = … … … … … … …             � 11 12 1 21 22 2 1 2 (4), where zij is the unified value of xij. iv. then the measures of entrepreneurship and economic development based on the topsis method were counted. as part of the adopted method, euclidean distances of individual objects from the pattern (= 1) and anti-pattern (= 0) were determined according to the following formulas: d n z zi j m ij j + = += −( )∑ 1 1 2 � (5) d n z zi j m ij j − = −= −( )∑ 1 1 2 � (6) where n is the number of variables that make up the pattern or anti-pattern, zij means the unified value of the j-th feature for the unit being tested, z zj j + −, means the pattern or anti-pattern (wójcik-leń, et al., 2019; pietrzak, 2016). the synthetic measure according to the topsis method was determined for individual units on the basis of the formula: q d d d where q i ni i i i i= + ≤ ≤ = − − + � � � � � � � �, , , ,..., ;0 1 1 2 (7) where qi ∈ [0; 1]; maxi {qi} is the best object; mini {qi} is the worst object, di − means the distance of the object from the anti-pattern (from 0), di + means the distance of the object from the pattern (from 1). a higher value of measure indicates a better situation of the individual in the studied area (hwang, yoon, 1981; balli, korukoglu, 2009). v. in the last stage, the examined area of rural communes in eastern poland was divided into 4 quartile groups. the size of the indicator in the first group means a better unit, and in the last one the weakest. the mutual compliance of the results obtained was also verified based on the correlation coefficient. a scatter chart with an adjustment line for synthetic measures is also presented (zeliaś, malina, 1997; dziekański, 2019; pawlik, dziekański, 2020). 3. discussion and research results regions compete by the level of their investment attractiveness in attracting investments, as well as creating opportunities for socio-economic development and an increase in the standard of living of residents (boschma, 2006). disproportions in the development of regions may cause its marginalization. it is manifested in a decrease in entrepreneurship and the concentration of negative socio-economic phenomena, such as unemployment, impoverishment of the population, outflow of population, social pathologies (krajowa strategia rozwoju regionalnego 2010–2020; stawasz 2007). analysing the literature on the subject, we notice problems and difficulties arising in research in the field of identification and measurement of factors affecting the development of entrepreneurship in marginalized areas. entrepreneurship activity varies regionally, which results from the structural features of the regions (location rents) and endogenous factors occurring in their area. the factors that create a kind of field of forces generating or blocking the entrepreneurship of the region include: demographic characteristics of the region, regional labour market, quality of human capital, housing resources and their standard, infrastructure equipment (huczek, 2016). according to the theory of location ( j.h. von tünen, a. weber, w. christaller and a. lösch), the development of the territory is decided by enterprises choosing or not a given region as the place of their functioning (stawasz, 2000). the development of entrepreneurship is one of the tools to eliminate economic and civilization inequalities. enterprises contribute to the economic development of regions, increase the ability to produce goods and services and are one of the pillars of the development of modern economies. they stimulate regional development through a more complete and at the same time comprehensive effective use of regional resources (glinka, gudkova, 2011). entrepreneurship can be recognized as a permanent base of the regional economy. d. valliere and r . peterson (2009) recognized that entrepreneurship influenced the development of regions through the efficient use of available resources, innovative activities as well as growing competition. development is a multidimensional process that involves transforming individuals’ factors and resources into goods and services for the local economy. the multidimensionality of the development process is demonstrated by the directions of municipalities as a local multidimensional system of interdependent and related economic, social, infrastructural and natural baltic journal of economic studies 4 vol. 7 no. 2, 2021 factors, as well as benefits obtained in the spatial, social, economic aspect, etc. these activities are usually focused on goals, among which should there be distinguished long-term development, increase in income of residents and the budget, development of entrepreneurship. development is controlled and modified by local authorities using endogenous factors: finance, labour, technology, information and others (rynio, 2010). the development factors are changing over time, so they need to be analysed continuously (stimson, stough, nijkamp, 2011). development is the entirety of the socio-economic changes taking place in a given territory. it is perceived as an economic process involving the transformation of external and internal factors and regional resources into goods and services (kosiedowski, 2001). it ensures a sustainable increase in the standard of living of the inhabitants and the economic potential. among others, it includes economic potential and structure, natural environment, spatial and infrastructural development, and growth of entrepreneurship (hołuj, korecki, 2008). the enterprise employs people, stimulates the creation of new companies that will be associated with it, which affects the activity of the local population. entrepreneurship is the process of creating something new and valuable, assuming personal financial, mental and social risk, as well as assuming monetary compensation and personal satisfaction (hisrich, pater, 1992). assessment of the operation of municipalities (in terms of development or support for entrepreneurship), in the conditions of network economy, depends on systemic solutions enabling independence in undertaking activities, financial resources, the natural environment, infrastructure, entrepreneurship and cooperation skills. recently, the complexity of phenomena is increasing, as well as their uncertainty, which results in the increasing dependence of the quality of decisions made by human on the quality of information process ( jajuga, 1993). the analysis and assessment of the unit’s endogenous resources not only enables the assessment of the budget structure itself, but also indirectly provides information on the state of the local economy (satoła, 2015). financial resources are an element necessary for the effective execution of the units’ objectives in terms of current or development tasks. there is a feedback between socioeconomic and financial variables (dennis, 2004; standar, 2017). assessment of the financial situation of municipalities allows to determine not only the efficiency of these units, i.e. the ability to meet their obligations, but also the possibility of raising the quality standard of services they provide to local communities (douglas, gaddie, 2002). finances allow for a comprehensive assessment of the operation of a local government unit and its development opportunities. natural conditions (natural environment) are a primary and at the same time passive growth factor. the very fact of the existence of favourable natural conditions in a given area does not prejudge the structure of its economy or the level of its development. the degree and directions of use of natural resources depend on human activities. natural resources include: natural resources, natural forces and environmental qualities that determine the quality of human life (fierla, 1998). in 2018, the topsis measure of entrepreneurship ranged from 0.07 (nowy dwór, podlaskie voivodship, the weakest unit) to 0.63 (cisna, podkarpackie province, the best unit). in 2009, from 0.05 (podlasie, przytuły (2), milejczyce (2), nowy dwór (2)) to 0.57 (podkarpackie, lutowiska (2)). in contrast, the measure of development in 2018 ranged from 0.23 (nozdrzec, podkarpackie voivodship) to 0.62 (stawiguda, warmińsko-mazurskie voivodship), and in 2009 from 0.22 (lubelskie, drelów (2)) to 0.54 (stawiguda (2), warmińsko-mazurskie voivodship). the diversity of values adopted by the measure of entrepreneurship is 0.56 and development 0.39. this indicates a smaller diversity of rural communes in eastern poland in terms of development. in the aspect of entrepreneurship, the following communes were: cisna, stawiguda, konopnica, juchnowiec kościelny, miedziana góra, and in the aspect of development, the following communes were: stawiguda, lutowiska, puchaczów, juchnowiec kościelny, and sitkówka-nowiny. figure 1 presents the spatial diversity of development potential and entrepreneurship of eastern poland communes. in group i (best), according to the measure of entrepreneurship, there were communes from the following voivodships: lubelskie – 43 (26.06% of communes of the voivodship), podkarpackie – 27 (25%), podlasie – 9 (11.54%), świętokrzyskie – 30 (45.45%) and warmińsko-mazurskie – 22 (32.83%). the increase in range indicates an increase in the diversity of units in the area under study. in group i, by measure of development, the following communes were found: lubelskie 27 (15.15%), podkarpackie 36 (33.33%), podlasie 23 (29.49%), świętokrzyskie 23 (34.84%) and warmińsko-mazurskie 28 (41.79%). the reduction in range indicates a decrease in the diversity of units in the area under study (see table 2). an analysis of the dispersion of the measure of synthetic entrepreneurship and the measure of development of rural communes in eastern poland in 2009 and 2018 indicates a slight increase in diversity. outstanding units in all voivodships: świętokrzyskie, podkarpackie, lubelskie, podlasie and warmińskomazurskie voivodship. the measures of diversity in entrepreneurship in 2018 compared to 2009 show an increase in standard deviation (0.06-0.07), a decrease in the classic baltic journal of economic studies 5 vol. 7 no. 2, 2021 coefficient of variation (0.42-0.33) and an increase in the range (0.52-0.56). in the case of development, the measures of differentiation indicate – the standard deviation stability (0.05-0.05), a decrease in the classic coefficient of variation (0.14-0.13), an increase in the range (0.32-0.39). measures of differentiation indicate slight changes in the studied area and a similar response of individuals to processes in the economy (table 3). the pearson correlation coefficient between the values of the synthetic entrepreneurship measure in 2018 compared to 2009 was 0.848; for the synthetic measure of development it was 0.869 and 0.525 and 0.549 respectively. therefore, it can be assumed that the spatial diversity of the studied area was quite stable, and the units responded similarly to changes in the economy (see figure 3). figure 1. groups of synthetic measures of entrepreneurship and development of rural communes in eastern poland in 2009 and 2018 topsis (p) entrepreneurship and topsis (r) development potential; the first, second and third quartiles were used as the thresholds for the groups; white means the urban and urban-rural communes not covered by the survey, black means the best units, light grey presents the weakest units source: own study based on bdl cso data baltic journal of economic studies 6 vol. 7 no. 2, 2021 the correlation coefficient between the values of the measure of synthetic entrepreneurship and development was 0.539, which indicated the stability of spatial diversity in the examined aspect. gunnar myrdal in the theory of cumulative causation referring to the analysis of the interdependence of social, economic and institutional phenomena has proved that every element interacting with another element affects its behaviour, and at the same time is modified by the reaction of that element. the synthetic measure of entrepreneurship is correlated with the measure of development and the measure of other variables affecting the activities of rural communes (see table 4). the correlation between the measures of entrepreneurship and development and the variables of socio-economic conditions are presented in table 5. the coefficients inform about the possibility of generating income from own sources. this can be an indicator of sustainable development and allows for more flexible table 2 quartile groups according to the measure of entrepreneurship and measure of development as well as belonging of communes to voivodships topsis entrepreneurship 2009 2018 voivodship / group i ii iii iv i ii iii iv lubelskie 165 34 39 55 37 43 29 62 31 podkarpackie 108 32 37 32 7 27 41 31 9 podlaskie 78 15 14 20 29 9 13 23 33 świętokrzyskie 66 21 22 15 8 30 16 18 2 warmińsko-mazurskie 67 27 16 16 8 22 16 12 17 number of units 484 129 128 138 89 131 115 146 92 average 0.23 0.15 0.12 0.09 0.31 0.22 0.19 0.14 range 0.14 0.17 topsis development 2009 2018 voivodship / group i ii iii iv i ii iii iv lubelskie 165 23 46 54 42 27 51 29 58 podkarpackie 108 33 33 18 24 36 33 13 26 podlaskie 78 34 20 16 8 23 28 10 17 świętokrzyskie 66 24 14 17 11 23 24 9 10 warmińsko-mazurskie 67 29 22 15 1 28 10 19 10 number of units 484 143 135 120 86 137 146 80 121 average 0.39 0.34 0.31 0.27 0.42 0.37 0.35 0.31 range 0.12 0.11 source: own study based on bdl cso data miara syntetyczna rozwoju mediana 25%-75% zakres nieodstających 2009 2018 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 0,65 głusk (2) lutowiska (2) cisna (2) białowieża (2) sitkówka-nowiny (2) dywity (2) gietrzwałd (2) jonkowo (2) stawiguda (2) mircze (2) głusk (2) lutowiska (2) nozdrzec (2) dynów (2) cisna (2) białowieża (2) sitkówka-nowiny (2) dywity (2) gietrzwałd (2) stawiguda (2) miara syntetyczna przedsiębiorczość mediana 25%-75% zakres nieodstających 2009 2018 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 konopnica (2) płaska (2) juchnowiec kościelny (2) masłów (2) miedziana góra (2) sitkówka-nowiny (2) jonkowo (2) lutowiska (2) cisna (2) solina (2) dywity (2) stawiguda (2) jastków (2) konopnica (2) wólka (2) dobrzyniewo duże (2) juchnowiec kościelny (2) masłów (2) miedziana góra (2) smyków (2) bliżyn (2) giżycko (2) jonkowo (2) lutowiska (2) cisna (2) solina (2) dywity (2) stawiguda (2) figure 2. scattering of synthetic measures of entrepreneurship and development of communes of eastern poland voivodships in 2009 and 2018 source: own study based on bdl cso data baltic journal of economic studies 7 vol. 7 no. 2, 2021 table 3 differentiation of synthetic measures – entrepreneurship and development of rural communes in eastern poland in 2009 and 2018 entrepreneurship measure development measure 2009 2018 2009 2018 average 0.15 0.22 0.33 0.36 median 0.14 0.21 0.33 0.36 standard deviation 0.06 0.07 0.05 0.05 quarter (quartile) deviation 0.15 0.21 0.33 0.36 classic coefficient of variation 0.42 0.33 0.14 0.13 positional coefficient of variation 1.04 1.00 1.00 1.01 min. 0.05 0.07 0.22 0.23 max 0.57 0.63 0.54 0.62 range 0.52 0.56 0.32 0.39 quatrile 1 0.11 0.17 0.30 0.34 quatrile 2 0.14 0.21 0.33 0.36 quatrile 3 0.18 0.25 0.36 0.39 quartile range 0.07 0.08 0.06 0.05 skewness 2.08 1.61 0.58 0.71 source: own study based on bdl cso data miara syntetyczna przedsiębiorczości y = 0,0716 + 0,9691*x; r = 0,8488; p = 0.0000; r2 = 0,7204 0,0 0,1 0,2 0,3 0,4 0,5 0,6 2009 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 20 18 ulhówek (2) lutowiska (2) cisna (2) solina (2) dywity (2) stawiguda (2) 2018; y = -0,0805 + 0,8264*x; r = 0,5250; p = 0.0000; r2 = 0,2756 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 0,65 miara rozwoju 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 m ia ra p rz ed si ęb io rc zo śc i lutowiska (2) cisna (2) solina (2) dywity (2) stawiguda (2) miara syntetyczna rozwoju y = 0,0683 + 0,8847*x; r = 0,8692; p = 0.0000; r2 = 0,7555 puchaczów (2) 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 2009 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 0,65 20 18 drelów (2) biszcza (2) obsza (2) mircze (2) adamów (2) nielisz (2) skierbieszów (2) lutowiska (2) krempna (2) osiek jasielski (2) dubiecko (2) cisna (2) dobrzyniewo duże (2) boćki (2) sitkówka-nowiny (2) dywity (2) stawiguda (2) 2009; y = -0,1044 + 0,7715*x; r = 0,5498; p = 0.0000; r2 = 0,3022 0,20 0,25 0,30 0,35 0,40 0,45 0,50 0,55 0,60 miara rozowju 0,0 0,1 0,2 0,3 0,4 0,5 0,6 m ia ra p rz ed si eb io rc zo śc i terespol (2) lutowiska (2) cisna (2) solina (2) dywity (2) stawiguda (2) figure 3. a scatter chart with an adjustment line of the synthetic measures of entrepreneurship and development of rural communes in the voivodships of eastern poland in 2009 and 2018 (year-to-year measure) source: own study based on bdl cso data baltic journal of economic studies 8 vol. 7 no. 2, 2021 spending. rural communes are dependent on transfer revenues transferred from the state budget. although this situation guarantees financial security for local governments, it may also discourage them from pursuing an active development policy. low financial independence can therefore be a significant barrier to future development. to assess the impact of the areas of operation of rural communes of eastern poland on the spatial diversity of the entrepreneurship measure, a regression model describing the dependence of variables has been estimated taking the form: f (entrepreneurship) = ∑ (topsis development, topsis finance, topsis infrastructure, topsis demographic, topsis environment). the regression analysis of the measure of synthetic entrepreneurship and endogenous potentials of communes indicates that the presented regression model allows to explain r = 0.591 variable variations. the statistics values f (5.4834) 1402.487 and the corresponding probability level p mean that all parameters are statistically significant. further increasing the multidimensionality of the model would cause a slight increase in the value of r2 = 0.591 (see table 6). the model could include statistically insignificant variables. adjusted coefficient of determination did not reach 60%. the optimal value is considered exceeding the 95% determination threshold. the model does not optimally explain the level of entrepreneurship in rural communes. this indicates that the interpretative value of this model turns out to be unsatisfactory. the concept of “potential” is used in various fields of science, and in economic sciences its meaning is very important, because it means the economic category determining the effectiveness and efficiency of any activity. it comes from the latin “potential”, which means possibility, power. it derives from aristotle, who made a distinction between what really is and what has table 4 correlation between measures of entrepreneurship and development and areas of operation of rural communes topsis entrepreneurship topsis development topsis entrepreneurship 1 0.5392 topsis development 0.5392 1 topsis finance 0.298 0.3229 topsis infrastructure 0.0816 0.7636 topsis demographics 0.4731 0.4403 topsis environment -0.2061 -0.1056 topsis budget solvency 0.0651 0.0881 topsis financial independence 0.3205 0.4249 linear correlation coefficients for observations from sample 1-4840; critical value (at a 5% bilateral critical area) = 0.0282 for n = 4840 source: own study based on bdl cso data table 5 correlation between measures of entrepreneurship and development and variables of socio-economic conditions topsis entrepreneurship topsis development own income 0.4486 0.5524 share in pit and cit income 0.5972 0.4151 transfer income from the state budget (subsidies, subventions) -0.4145 -0.5468 income from local taxes 0.2071 0.3602 investment expenditures 0.0599 0.2221 entities entered into regon 0.9424 0.5668 self-employed persons 0.9443 0.5285 entities employing up to 9 employees 0.9421 0.5606 entities employing od 10 do 49 employees 0.3216 0.2591 entities employing from 50 to 249 employees 0.3041 0.3122 migration rate 0.4558 0.3791 employed persons in communes 0.2417 0.3484 unemployed -0.0593 -0.1676 linear correlation coefficients for observations from sample 1-4840; critical value (at a 5% bilateral critical area) = 0.0282 for n = 4840 source: own study based on bdl cso data baltic journal of economic studies 9 vol. 7 no. 2, 2021 not existed yet, but can occur under certain conditions or with some change (pawlik, 2014). the economic potential of the commune is built, among others, by occupational activity of inhabitants, local labour market, entrepreneurship, infrastructure, state of the natural environment. high economic potential increases living standards, production, better social situation, and greater public security (krakowiak-bal, 2006). the commune’s potential, resulting from a combination of local conditions, determines its possibilities and development directions (pomianek, 2016). another regression model describing the relationship between the entrepreneurship measure and the changing socioeconomic conditions takes the form: table 6 regression of synthetic measure of entrepreneurship and areas of operation of rural communes in eastern poland coefficient standard error t-student's p-value constant −0.0425856 0.0114727 −3.712 0.0002 topsis development 2.42872 0.0391340 62.06 <0.0001 topsis finance −0.291085 0.0422895 −6.883 <0.0001 topsis infrastructure −0.814470 0.0159171 −51.17 <0.0001 topsis demographics −0.521290 0.0248633 −20.97 <0.0001 topsis environment −0.0996662 0.0130997 −7.608 <0.0001 arithmetic mean of the dependent variable 0.180864 standard deviation of the dependent variable 0.070946 sum of residual squares 9.938670 residual standard error 0.045343 determining coefficient rsquare 0.591945 corrected r-square 0.591523 f(5.4834) 1402.487 p-value for the f test 0.000000 logarithm of credibility 8107.871 akaike information criteria −16203.74 bayesian, schwarz information criterion −16164.83 hannan-quinn criterion −16190.08 observations 1-4840 used; dependent variable topsis entrepreneurship source: own study based on bdl cso data f (entrepreneurship) = ∑ (own revenue, transfer income from the state budget (subsidies, subventions), entities entered in the regon, natural persons conducting economic activity, balance of migration). the regression analysis of the measure of the synthetic financial situation and endogenous potentials of communes indicates that the presented regression model allows explaining r = 0.899 variations of variables. the statistics values f (5.4834) 8700.485 and the corresponding probability level p mean that all parameters are statistically significant. further increasing the multidimensionality of the model would cause a slight increase in r2 = 0.899 (table 7). table 7 regression of synthetic measure of entrepreneurship and areas of operation of rural communes in eastern poland name coefficient standard error t-student’s p-value constant −0.00541195 0.00467655 −1.157 0.2472 own income −0.0243611 0.00538722 −4.522 <0.0001 transfer income from the state budget (subsidies, subventions) −0.0158850 0.00493422 −3.219 0.0013 entities entered into regon 0.00192312 0.000105776 18.18 <0.0001 self-employed persons 0.00235168 0.000115731 20.32 <0.0001 net migration rate 0.000333932 6.68099e-05 4.998 <0.0001 arithmetic mean of the dependent variable 0.180864 standard deviation of the dependent variable 0.070946 sum of residual squares 2.435799 residual standard error 0.022447 determining coefficient rsquare 0.899993 corrected r-square 0.899889 f(5.4834) 8700.485 p-value for the f test 0.000000 logarithm of credibility 11510.77 akaike information criteria −23009.55 bayesian, schwarz information criterion −22970.64 hannan-quinn criterion −22995.89 observations 1-4840 used; dependent variable topsis entrepreneurship source: own study based on bdl cso data baltic journal of economic studies 10 vol. 7 no. 2, 2021 4. conclusions entrepreneurship, which is one of the most important endogenous resources, becomes the basis for the socio-economic development of rural communes in eastern poland in the conditions of transformation and the adopted market economy. entrepreneurship contributes to the establishment of new business entities, directly affecting the improvement of the level and quality of life in municipalities and the increase in the well-being of society. sources of municipal disproportions result from the spatial diversity of, among others, natural conditions, transport accessibility, location of large settlement centers, close location of enterprises of the same branch, concentration of plants of various industries and services, access to investment capital, equipment with institutional infrastructure, level of entrepreneurship, ability to absorb innovation, access to knowledge and technological development. in 2018, the topsis method for measuring entrepreneurship ranged from 0.07 to 0.63 and the development measure from 0.23 to 0.62. the range of values adopted by the measure of entrepreneurship was 0.56 and development 0.39. this confirms the smaller diversity of rural communes in eastern poland in the aspect of development, and greater in the aspect of entrepreneurship. at the same time, the synthetic measure of entrepreneurship was correlated with the measure of development. the level of entrepreneurial activity is varied. owned structural features of communes and endogenous factors occurring in their area cause that they differ in the scale of entrepreneurial activity. factors generating a kind of field of generating forces or blocking entrepreneurship of communes include: demographics of the region, situation on the regional labor market, vitality of the economic structure of the region, quality of human capital, prestige of entrepreneurs, housing resources and their standard, infrastructure equipment. therefore, rural communes of eastern poland should consider entrepreneurship as the basis for their development. 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(1997), o budowie taksonomicznej miary jakości życia. syntetyczna miara rozwoju jest narzędziem statystycznej analizy porównawczej, taksonomia, z. 4. baltic journal of economic studies 140 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-140-149 the “lower danube” euroregion: development emergence of the environmental management cluster forms sergey kovalenko1, natalia bykovets2, olena kolmykova3 abstract. enlargement of the european union within the context of structural priorities transformation and globalization of the international economy makes it necessary to find the approaches to adapt the “lower danube” euroregion to new challenges, particularly as regards the ecological safety in the danube delta. in the authors’ opinion, it is the trans-border cluster nature that is nowadays one of the most advantageous processes to deliver against goals in regard to restructuring of the danube region environmental complex. in the article, the theoretical approach to the development of the mechanism of environmental management is presented, taking into account the possible clusterization of environmental management system of the “lower danube” euroregion. the essence of the concept “trans-border environmental cluster” is explained. the main directions for the development of the eco-economic management mechanism are singled out with reference to environmental clusters formation, which will make it possible to solve not only economic, but the environmental problems of periphery territories. target setting is determined by the increasing role of the development emergence of transborder cluster systems of environmental management under conditions of the transition of the ukrainian border territories to the integration into the eu common environmental area. the purpose of the study is to investigate the scientific approaches to trans-border clusterization of the environmental management in terms of urgent need to prevent pollution of the danube delta by the sewage waters, by means of self-organization of transborder environmental cluster – institute of network environmental cooperation over administrative boundaries, which will become the point of environmental risks reduction and of industrial disasters prevention in the “lower danube” euroregion. the research methodology is the categorization of the approaches to the implementation of the innovative technologies and to the introduction of the environmental management innovations by means of cluster forms of industrial organization, which explicitly or implicitly facilitate the reduction of ecologically destructive effect of production and consumption on the environment and help solve environmental problems in the euroregion. results. the eventual outcome of the clusterization of environmental activity management in the “lower danube” euroregion is the beneficial socio-ecological and economic effect providing balanced sustainable development of the euroregion and the country in particular. thus, the formation of new forms of trans-border cooperation based on the cluster genesis has become the accelerator of the environmental strategy intensification, encouraged the self-development and restoration of natural resources, innovations generation in the sphere of the lower danube ecology, implementation of eco-technologies providing the balance between economic and ecological potential of the european region. all this determines the direction, key features and emergence of the cluster forms development of the environmental management – the danube synergy. key words: cluster genesis, environmental strategy, danube synergy, trans-border environmental cluster. jel classification: m16, f23 corresponding author: 1 danube institute of national university “odessa maritime academy”, ukraine. e-mail: kovalenko@dinuoma.com.ua orcid: https://orcid.org/0000-0001-7430-9412 2 danube institute of national university “odessa maritime academy”, ukraine. e-mail: bnp.di2017@gmail.com orcid: https://orcid.org/0000-0002-6365-4701 3 danube institute of national university “odessa maritime academy”, ukraine. e-mail: kolmykova@dinuoma.com.ua orcid: https://orcid.org/0000-0001-8462-8783 baltic journal of economic studies 141 vol. 7, no. 3, 2021 1. introduction the aim of the contemporary ecological strategy of the eastern european countries is to search new forms and mechanisms of arrangement of the conditions for mobilizing efforts by the euroregions to effectively use their own ecological potential and protect natural resources. trans-border cooperation of ukrainian and romanian neighboring border territories in the danube delta gives the additional opportunities to get the synergistic effects due to the united efforts while solving common environmental problems. trans-border cooperation is actively evolving in the field of institutional support of environmental cooperation in the form of trans-border environmental clusters. starting from direct contacts and trans-border agreements, the cooperation in the sphere of the lower danube ecology developed into trans-border nature conservancy zones, trans-border cluster systems, “triangles” of reducing ecological risks, trans-border growth poles, “trans-border environmental projects”, etc. enlargement of the european union within the context of structural priorities transformation and globalization of the international economy makes it necessary to find the approaches to adapt the “lower danube” euroregion to new challenges, particularly as regards the enhancement of ecological safety in the danube delta. the trans-border cluster genesis is nowadays one of the most advantageous processes to deliver against goals in regard to restructuring the ukrainian environmental complex. target setting is determined by the growing role of the development emergence of the trans-border cluster systems of environmental management under the conditions of ukrainian trans-border regions integration into the eu common ecological space (cluster policy in europe…, 2008). in that respect, the aim of creating a common ecological infrastructure, providing effective use of the environmental potential of the “lower danube” euroregion, establishing the conditions for modernization and rapid development of its most competitive segment becomes of paramount importance. environmental management of the euroregions has become the sphere of trans-border clusterization. at the same time, the process of transboundary cluster genesis (acquiring many invariant manifestations and forms) is most extensively and dynamically deployed on trans-border territories, fulfilling the mission of the most important geo-economical transport corridors of the country, its leading innovation and communication centers in the field of the environmental protection. the “lower danube” euroregion not only has the most favorable conditions for ecological cluster genesis but it is also particularly “liable” to the localization of trans-border phenomena and contacts, to generation of the multiple transboundary effect, which reduces the level of environmental risks. environmental cluster genesis is the process of concentrating the most effective and interconnected types of environmental activities, i.e., a set of interconnected groups of successfully competing firms, forming the golden section of the entire ecological system of the state and ensuring environmental protection and environmental policy implementation. trans-border environmental clusters are one of the basic forms of organization of the modern economic complex, characterized by such attributive features as a certain degree of homogeneity, single-order basic number of elements, their super-summative emergence and spatial concentration with a high degree of autonomy and intra-systemic balance of competition and cooperation. in the context of the global interdependence strengthening it is through clusterization mechanisms at the regional and local levels that the imperative to increase economic efficiency and competitiveness of companies is realized, combined with the ability of clusters to provide additional resources for information technology, industrial, trade and logistic interaction and personnel exchange in case of activation of transborder contacts between the components of the cluster located on the both sides of the border (state regional policy of ukraine, 2007). trans-border cooperation has become a determining factor in deepening of european integration within the framework when in political and scientific discourse the meaning of the notion “border” is changed from “frontier” to “contact factor”. thus, “border” is no longer “a line, but rather a functional space” where different “societies and communities" come in contact. it can be claimed that now the “second wave” of cluster theory development is being generated. this confirms the topicality of the problem and allows to develop this concept in the field of environmental clusters development (kovalenko, 2019). in economy, the term “cluster” has a broader meaning and is understood as a system of combining production units, unlike the meaning of very word “cluster” as the union of several homogeneous elements each of them being considered as an independent unit with certain properties. “cluster” can also be used while building analytical procedures because as an “accumulation” it can guarantee singling out of distinctive characteristics of the phenomena under investigation with the accepted features, and while generating the approaches of creating management policy. the use of the clusters theory in management is possible not only in the aspects of the production plan discussed above, the aim of which is to unite the territory into a certain effective and competitive structure. taking into consideration baltic journal of economic studies 142 vol. 7, no. 3, 2021 the management goal, managerial influence can be of equal importance for one object or a set of objects of management, which indicates the advisability of combining into a cluster. in this case, it becomes possible to form clusters for any socially useful purpose that is important in a particular territory or as a result of the current situation, as well as in connection with territorial specialization. among such goals, in the first place, the provision of environmental priorities of the territory can be mentioned. compliance with stated and other possible ecologically useful measures demands the complex of specific managerial influence with the use of additional financial resources, technical and technological developments, regulatory and other measures to provide for environmental priorities. the support of the economic entities uniting their activities from the perspective of environmental goals (priorities, tasks, problems) of the territory can refer to such measures. consequently, within the framework of the above stated argumentation, a special type of clusters – an “environmental cluster” (a territorial socio-economic organization of labor, industrial, infrastructural, institutional components, in which the implemented activities are based on the priority of environmental goals while ensuring socio-economic development of the territory) – can be considered. taking into consideration the meaning of the term “environmental cluster”, it should be noted that unlike the theory of clusterization in economy, the functioning of the environmental cluster is connected with the goal of the functioning of this specific entity: the activity of the participants of the cluster is organized taking into account the priority of the environmental goals. in fact, in an ideal scenario, economic purposes (high efficiency and competitiveness) should be provided in the economic management of the environmental clusters’ organizations, but this task is very difficult to solve while achieving the environmental goals of the society, because of the discrepancy between the economy as the process of natural resource consumption and resource conservation. in general, the development of environmental regional clusters is the approach towards the formation of the effective euroregional specialization aiming at social development with regards to environmental condition and problems of periphery territories. environmental clusters may contribute to the implementation of new “clean” methods and technology, development of most advanced energy-saving production ensuring the sustainability of euroregional economy in a dynamic market environment, with the environmental priorities to be restricted. from the analysis of the existing approaches to managing euroregional development in modern conditions of growing environmental problems it should be noted that it is the scientific developments of the theory of clustering in economics that can have a special application, taking into account the essence of the concepts, principles and tools of this branch of the theory of management. in terms of solving a complex of problems of the european regions, the possibility of creating and functioning of transboundary environmental clusters is the way of improving the mechanism of environmental management (european outline convention…, 1980). 2. previously unsolved aspects of the problem nowadays global order is outlined around large power poles. the european union with its growing economic significance becomes a pole that requires the development and realization of the interrelation model of periphery regions of different countries which would correspond to the principles of regional policy of the european union, which would support the formation of new forms of cooperation in the “region – region” format. the formation of network economy generates the need for the european regions’ development together with such new forms of trans-border cooperation as “transborder clusters”, “trans-border industrial areas”, “transborder partnership”, “trans-border innovative projects” etc. as prospective ways of increasing competitiveness of the border regions of ukraine, the creation of innovative trans-border clusters and industrial areas, trade and logistics centers should be considered. for this purpose, there must be the practice of the realization of projects (together with foreign partners) concerning the formation of industrial territorial and sectoral production systems to enhance the competitiveness of the enterprises, effective local production, investment and financial attraction to develop the infrastructure of the region, to enhance the energy efficiency of the economy and to improve quality of the environment (hayek, 1945). usage of the cluster policy as the strategic instrument requires appropriate clarification. in spite of high popularity of cluster approach, there has not been found optimum way to define a cluster which makes it difficult to define the cluster policy. this is why cluster policy is used as generalizing name to define different ways of support and development of network union enterprises. the purpose of the article is to investigate the emergence of the environmental management cluster forms in the frame of the burning need to prevent the sewage pollution of the danube delta by means of selforganizing of trans-border environmental cluster which being the institution of the ecological cooperation over the administrative boundaries will become the pole of reducing the environmental risks and the pole of preventing the technogenic accidents in the “lower danube” euroregion. baltic journal of economic studies 143 vol. 7, no. 3, 2021 3. research methods the research hypothesis is the assumption that the cluster approach is the most effective mechanism for the development of international economic cooperation in modern conditions and, ultimately, is the mesolevel of competitive cross-border integration systems and a necessary condition for the qualitative growth of ukraine’s integration into the european economic area. the articulation of the problem can be described as a meso-economic synthesis of development of innovation clusters and international integration associations’ concepts, and, in our opinion, it allows to develop both the mechanism and the scientific understanding of the development of modern integration systems. in the middle of the twentieth century, the interconnection of regional space, economic agents and innovation was covered in the work of f. perroux “economic space: theory and applications”, in which the author draws attention to regional development with his concept of “growth poles” (perroux, 1950). it is based on the dominance effect, formulated by perroux, which shows that to understand economic growth, it is necessary to focus on the role of “driving industries”, i.e., industries that dominate due to their size, great market power or the role of a leading producer of innovation. driving industries (or even separate firms) are “poles of growth” that attract, focus and direct a variety of economic resources. thus, compactly located and dynamically developing industries or enterprises that generate a chain reaction of the emergence and growth of industrial centers are understood by the poles of growth. the development of the cluster concept is usually associated with the works by m. porter “competitive advantage of nations” and “on competition”, where the author describes the close interconnections between cluster partnerships, competitiveness of firms, industries and national economies (porter, 1990). in his work “competitive advantage of nations” michael porter comes to conclusion that while developing the investment policy of the evolving economy, focus must be given to the developing of interconnected industrial clusters based on the transplantation of economic institutions, the development of cooperation and competition. the approach to assessing the competitiveness of a cross-border region can be defined using the concept of competitive advantage of the country, offered by m. porter (porter, 1990). in his contributions, m. porter, in contrast to the prevailing development goals, the aim of which is to support the diversification of the economy, in the united states of that time, justifies the need for industrial specialization, which is carried out in accordance with historical preconditions. he notes that various factors (external as related to the firm) can improve its functioning. porter defines a cluster as “geographically concentrated groups of interdependent companies, specialized suppliers, service providers, firms in relevant industries, and related organizations (e.g., universities, standardization agencies, trade associations) in certain industries that compete but at the same time work together” (porter, 1998). m. porter investigated the most successful companies on a global scale and found out that, with some regularity, firms from one or more countries achieve much greater results than their competitors. it was the beginning of the theory of industrial clusters. an important distinguishing feature of the development of industrial innovation clusters, from the point of view of m. porter and many other researchers, is the combination of cooperation and competition: firms cooperate and at the same time compete with each other (porter, 1998). this paradoxical effect of the coexistence within the cluster is called coopetition. in this case, clusters of companies compete with each other in the markets of goods and production factors and cooperate to obtain funding from governments while developing new markets and technologies. many researchers have attempted to structure the basic theoretical premises of the cluster concept. for example, m. enright points at the connection of the observed spatial clustering with the theories of business externalities, savings from agglomeration, labor unions and knowledge mobility (enright, 2000). urbanization expert jane jacobs claimed that cities play a crucial role in economic development: new knowledge generated in cities contributes to different economies and human potential development ( jacobs j, 2000). it is especially important that the scale of cities and the diversity of their residents provide many relationships that generate new ideas. the creation and development of new products and new technologies (in jacobs’ terminology, “new work”) is a source of economic development ( jacobs jane, 2009). reducing the importance of the territorial component of the location of production operation with the development of information technology leads to the formation of virtual inter-firm networks and the possibility to create international cluster systems that can evolve rapidly in modern conditions. thus, the cluster approach becomes broader and allows to involve more companies and countries in the information exchange. actual experience and previous scientific research prove that the most effective interaction between organizations is possible in trans-border cluster systems, and this is especially important for the development of regional integration associations. 4. results management of the danube river basin (with the territory of only the danube delta of 6750 sq. km.) is baltic journal of economic studies 144 vol. 7, no. 3, 2021 focused not so much on the amount of water with any restrictions in the water apportioning, as on the problems of water quality and organic pollution, presence of nutrient/biogenic and hazardous substances, as well as on hydromorphological issues, in view of the fact that the corresponding transboundary water resources are used as the source of potable water and for shipping purposes. sewage water coming from urban settlements and industrial plants is a serious pollution factor affecting water quality. as of 2020, about 90 million people in the danube basin produce more than 10 million m3 of sewage water every day. more than 6.5 million tons of hazardous substances are stored at more than 250 large industrial facilities located in the basin. most of the sewage water (80%) is either collected in the sewer network or treated on location. another part of the sewage water undergoes treatment at centralized pollution control facilities. it is necessary to increase the amount of collection and treatment of the remaining part of the sewage water. over the past 12 years, the countries of the danube basin have invested over 200 billion eur in the construction and modernization of sewerage systems and pollution control facilities. more than 400 industrial plants achieved certification to raise the technological standard. the number of settlements and industrial facilities connected to the sewerage network and treatment systems has grown significantly (and now is almost 75% throughout the danube basin). at the same time, the number of sources of pollution with hazardous substances remains unknown, and only limited information, based on the results of an inventory of industrial facilities, is available. the convention on the protection of the danube river emphasizes that the signatory states are responsible for the quality of water resources on their territory. the water quality information and monitoring system is in charge of the following technical instruments: 1. the danube emergency and accident warning system is activated whenever there is a risk of transboundary pollution or an excess of permissible concentrations of hazardous substances. by means of this early warning system, warning messages are sent to the countries in the lower part of the basin, which are located along the presupposed route of the emergency event. 2. transnational monitoring network – collection and analysis of data on concentrations of pollutants to assess the quality of surface and groundwater. 3. flood risk maps containing data on the vulnerability of the basin areas to the risk of natural disasters, visualized on an agreed scale indicating the extensiveness of the relevant emergency events. 4. the moneris model calculates the amount of nitrogen and phosphorus emissions to surface water in different ways, as well as flow retention in the surface water network. the solution of environmental problems in the “lower danube” euroregion presupposes the usage of a wide arsenal of scientific, technical and other methods, in particular, the development of the theory and practice of environmental management. modern environmental management is a set of hypotheses, principles, methods, being a new environmental management philosophy. environmental management is one of the internationally accepted tools for reducing environmental impact. it is a process of internally motivated, proactive activities of economic entities aimed at consistent improvement in achieving their own environmental goals and objectives, implementation of projects and programs developed on the basis of an independently adopted environmental policy. environmental management is applied for modern production. its primary task is to achieve an optimal balance between economic and environmental performance of companies. to ensure sustainable development, in addition to solving the listed problems of the first two levels of the system of goals, it is necessary to achieve the coevolution of man and nature, which, in its turn, requires significant changes in the value orientations of the society itself. at the local level, environmental management is mainly aimed at: – control over the implementation of environmental legislation, ecological standards and quotas; – ensuring the improvement of production technology in terms of reducing its accident rate, the degree of technological risk, energy and material consumption, the amount and toxicity of emissions; – optimization of district planning in order to reduce the harmful influence of production facilities on the population and its rehabilitation from these influences, transport and industrial fatigue; – ecological impacts on nature and public health; – organization of a system of operational information equal to the real environmental situation; – organization of universal continuous environmental education within the framework of currently operating preschool institutions, general education schools, colleges, lyceums, universities and specially created courses for improving environmental literacy. at the regional level, except from using all the above-mentioned opportunities for environmental management at the local level, the following are added: – research and experimental design works aimed at organizing an effective system for monitoring the natural environment and industry-related factors affecting it; – ecological forecasts; – working out and implementation of the mechanism for managing the processes of interaction between society and nature within the boundaries of the region, taking into account the trans-regional processes of pollution transport in air and water mediums; baltic journal of economic studies 145 vol. 7 no. 3, 2021 – development and implementation of regional environmental standards and requirements determined by local natural and social conditions and traditions of nature management; – optimization of the location, functioning and interaction of enterprises exploiting natural resources; – infrastructure optimization, including the road transport scheme, the location of energy facilities, places and operating conditions of all kinds of disposal sites. the aim of the environmental european regional cluster is to create an ecologically reasonable specialization of the euroregion’s economy. the structure does not necessarily presuppose the presence of a leading enterprise – the system of cluster members is formed through production links for ecologically justified types of industries in the euroregion and the scale of business entities across the administrative boundaries. ecological euroregional cluster is a territorial system of economic activity that promotes environmentally reasonable economic activities, taking into account environmental priorities and resources of transboundary territories. such clusters have a significant potential for social capital with the geographic proximity of their location, but there is no close interrelation between firms in comparison with production (traditional) clusters. the difference between ecological clusters is that the priorities of their formation are established and implemented taking into account a special type of goals – the preservation and maintenance of environmental parameters of the environment at the expense and in the conditions of the development of a set of european regional entities. ecological trans-border cluster system is an innovation-oriented structure that integrates production, science and public administration of the euroregion into a single system, and is formed on the basis of information and technological cooperation, pursuing common environmental interests of neighboring countries on both sides of the border, connected by a certain corporate culture of relationships and generating environmental effects. the main advantages provided by the cluster of the euroregion can be described as the possibility of efficient use of water resources, access to advanced technologies of nature management, expansion of instruments for interaction between the state and business in the field of environmental safety. it should be noted that the successful functioning of the ecological cluster requires a supportive and incentive scheme within the framework of the euroregional strategy, and while developing it, it is necessary to take into account the key points of growth of the euroregion as a whole with consideration to the ecological state and the prospects for its change. environmental clusters in the european regional aspect, combining scientific potential, design and engineering development, environmental production and infrastructure elements, can create conditions for higher priority investments and form complex production and technological packages for making profitable investment decisions with the financial support of euroregional management structures. investment promotion into environmental clusters provides a multiplier effect of the development of the euroregion’s economy and the solution of environmental problems, as well as out of the funds received by economic entities of transboundary territories, whose activities do not conflict with the environmental goals of society (mikula, 2004). the “lower danube” euroregion is an international european organization founded on august 14, 1998, in galaţi (galaţi county, romania) by the heads of the border regions of ukraine (odesa region), romania (galaţi, tulcea, brăila counties) and the republic of moldova (vulcăneşti, cahul, cantemir regions) (figure 1). at present, the “lower danube” euroregion includes odesa region (ukraine), galaţi, tulcea, brăila (romania), cahul and cantemir (republic of moldova) districts. the formation of the “lower danube” euroregion has created new opportunities for extention of cooperation in various fields between the border regions of the republic of moldova, romania and ukraine. the “lower danube” euroregion is one of the largest european regions. it covers an area of 53.55 thousand km and has the population of about 4 million people (table 1). the boundary length of odesa region with the “lower danube” euroregion is the following: – with the county of tulcea (romania) – 181 km (along the danube); – with the district of cahul (the republic of moldova) – 26 km. table 1 the administrative and territorial units included in the “lower danube” euroregion administrative and territorial unit territory, thousands of square kilometers population, thousands of people odesa region (ukraine) 33.3 2394.7 galaţi county (romania) 4.6 619.55 tulcea county (romania) 8.49 265.34 brăila county (romania) 4.76 373.17 cahul district (moldova) 1.5 119.2 cantemir district (moldova) 0.9 61.3 total 53.55 3833.260 the “lower danube” euroregion was created to solve the following tasks: – to achieve harmonious and balanced economic development; – to solve a number of issues and problems in the field of environmental protection; – to ensure an appropriate level of employment and social protection of the population; baltic journal of economic studies 146 vol. 7 no. 3, 2021 – to create conditions for improving the level and quality of life in our regions; – to make steps to integrate the transport infrastructure of border regions into a single network of european transport corridors; – to create a common cultural space in the danube. 5. the transboundary ecological cluster “clean danube” this cluster was created in order to prevent and exclude emergencies caused by human-made disasters in the drainage and sewerage system in the border zone of the danube delta by means of: – construction, reconstruction and modernization of the sewerage network and thorough repairs of waterpumping stations in izmail and izmail district; – reconstruction of the sewerage network and wastewater treatment facilities in tulcea; – starting up a quality control system for surface and waste water based on their biochemical analysis. it is a large-scale infrastructure project the beneficiaries of which are: – izmail municipal council (izmail, ukraine); – tulcea district council (romania); – association of the transboundary cooperation “lower danube” euroregion. creating of a transboundary environmental cluster in the danube delta is aimed to achieve the following goals: – to prevent the emergencies caused by human-made disasters by means of improving the infrastructure of the drainage system located near the border area of the danube delta, in the process of construction, reconstruction and modernization of 11,226 km of sewerage network, installation of water-pumping stations in izmail and izmail region and reconstruction of 1,114 km of sewerage network and wastewater treatment plants of tulcea county hospital (romania); – to increase awareness of stakeholders about the prevention, monitoring and control of emergencies caused by human-made disasters in the border area of the danube delta, through the implementation of joint transboundary measures: creation of a common environmental monitoring system, development of a joint transboundary investment strategy of the european region capacity strengthening program. among the problems in the ecology of the danube region the following can be singled out: 1. poor status of the state environmental monitoring system. lack of general environmental programming, prevention and monitoring. 2. uncontrolled process of wastewater discharge, pollution of watercourses and reservoirs with industrial, household and agricultural waste. 3. lack of modern treatment facilities and water treatment technologies. 4. environmentally hazardous facilities. the tasks of the transboundary environmental cluster are the following: figure 1. the “lower danube” euroregion baltic journal of economic studies 147 vol. 7 no. 3, 2021 – international cooperation in the field of environmental protection and environmental safety. – integrated monitoring of the environment, control of the environmental protection, rational use, reproduction and protection of natural resources. – construction, reconstruction and modernization of drainage systems. – building of sewage pumping stations with a system of biological wastewater treatment. – a number of joint activities, including “soft” events, as well as joint infrastructure investments in the field of emergency situations and prevention of human-made disasters. collocated system of monitoring and announcing is a means to monitor and inform about emergency situations that will display the results of studies of waste emissions from the border area of the danube delta – izmail district and tulcea county, collected from households, private companies and government agencies. the key players for obtaining data that will be displayed in the system are organizations with which partners have the necessary agreements (on the exchange of data), namely: research institutes, centers for environmental research, state service of ukraine on food safety and consumer protection, state emergency service of ukraine, ministry of health of romania, state emergency service of romania, water resources management services of romania. the results of the project are the following: 1. reconstructed drainage and sewerage systems in izmail (ukraine) and tulcea (romania). 2. modernized treatment facilities. 3. prevention, monitoring and control of emergency situations caused by human-made disasters in the danube delta. 4. development of cross-border cooperation in the field of emergencies and prevention of human-made disasters in the “lower danube” euroregion. 5. increased awareness of the population of odesa region and tulcea district about the advantages and results of the actions to prevent the pollution of the danube as a result of rain-storm run-offs and reconstruction of sewage disposal plants on the both sides of the danube (figure 2). soft events under the “clean danube” project are the following: 1. development of a joint investment strategy in the field of increasing the capacity of emergency response. 2. development of a joint operating plan. 3. development of a joint monitoring and warning system (online platform). 4. signing by both sides the cooperation agreement in the field of emergency situations between ukraine and romania. one of the largest infrastructure projects in izmail of recent years is the construction of a main sewer, which is first of a kind in ukraine. the facility is being built as a part of a trans-border cooperation project, in which izmail has won participation. the project is being implemented within the framework of joint operational program “ukraine-romania 20142020”. the total budget of the project is 4 million 353 thousand eur , the budget of izmail is 3 million 510 thousand eur . in general, within the framework of the project, 11 kilometers and 226 meters of sewer networks will be changed in the town. nowadays, the drainage of sewage in izmail is carried out along an emergency line, therefore, until 2022, the city will have carried out a complete reconstruction of the sewer system. sewerage pumping stations are being reconstructed, sewer lines are completely changed, a main sewer is figure 2. the territory of the self-organization of transboundary environmental cluster “clean danube” izmail romania ukraine danube river baltic journal of economic studies 148 vol. 7, no. 3, 2021 being built, high-pressure pipes are being laid, pumping equipment, mechanisms for crushing and grinding sewage drains are being replaced, and automation is being changed. the work is being carried out simultaneously in several areas. the main aim of the “clean danube” project is to prevent and eliminate emergencies caused by human-made disasters in the sewage system in the border zone of the danube delta. in case the project is implemented, in spring of 2022 izmail will have a completely reconstructed, and therefore environmental, sewage system. nowadays, there is either no legislation in ukraine that could help launch the active introduction of “green” technologies, or it is ineffective. it is necessary to emphasize the urgency of developing a common conceptual approach to the problems of transboundary ecology for the economic development of the “lower danube” euroregion: – the role of border areas in terms of globalization; – negative impact of the economic development of the european region on the local ecological system of the danube region (high rate of urbanization, civil and road construction, anthropogenic load); – the problem of trans-border transfer of substances taking into account the problems of corporate development in the region; – lack of unitary adopted legislation in the field of ecology and environmental protection, common principles of sustainable environmental development and approaches to environmental risk assessment. the aim of the trans-border strategy is to conceptually proclaim the principles of sustainable environmental development and the approaches to environmental risk assessment for different economic clusters operating in the “lower danube” euroregion, based on the criteria of legal regulation of its participants: romania, ukraine and moldova, within the framework of european environmental legislation, natural complexes, aimed at increasing the prestige and attracting more attention to the region as to a possible area for investment and stimulating economic development of the euroregion with minimal negative natural and anthropogenic impact on the environment. the threat to the natural hydrological regime, habitats, biodiversity, water quality and ecosystem services of the danube delta is posed by anthropogenic changes, including the construction of industrial enterprises, navigable canals, drainage, strengthening of river banks, construction of dams, locks and spillways, and also drainage of swamps along the banks of the entire danube river and its tributaries. the factors of transboundary interaction based on the self-organization of the ecological cluster are the following: 1. integration with neighboring experienced countries concerning water management, taking into consideration the fact that the danube basin has the status of a transboundary watercourse; 2. the activities of working groups are the basis for international cooperation in the field of water resources management; 3. taking the samples of surface waters for hydrochemical analysis together with the representatives of the romanian hydrochemical laboratory; 4. the program for the exchange of monitoring information system is implemented; 5. regulations and plans of practical measures for the protection and joint use of transboundary water bodies are tried and tested. the strategic goal of environmental risk management is to justify practical activities: no activity in the danube region aimed at achieving the goal can be justified if its benefits to society as a whole do not exceed the resulting losses and threats to the danube delta ecosystem. in our opinion, it is important to create information databases for the trans-border cluster in order to manage environmental risks, as well as to create groups of enterprises according to the degree of potential environmental hazard. during the process of risk evaluation, it is important to have access to information about possible environmental risks. it is the responsibility of every company related to environmental risks to get acquainted with all accidents that have occurred at the enterprises using similar processes, materials and chemicals. obtaining relevant information allows to determine whether there is the possibily for one of the incidents that have occurred in the past at a particular enterprise to happen again, and to realize what should be done to prevent this. 6. conclusions the economic development of the “lower danube” euroregion often leads to a deterioration in the quality of the environment and local / regional ecosystems, and to raise of environmental risks. high rate of urbanization, increase of civil and road construction, strengthening of anthropogenic load in general lead to pollution and transformation of existing landscapes and environment of the danube region, which causes urgent need to harmonize environmental standards within the euroregion and form a trans-border monitoring strategy. the republic of moldova, romania and ukraine signed the “joint declaration on the development of a nature management program in the danube delta for sustainable environmental development of the region”, which became the foundation for cooperation of these three countries aimed at ensuring good environmental status of the danube delta. romania and ukraine support regular transboundary cooperation within the transboundary biosphere reserve and the territories covered by the ramsar convention, in particular in the field of cataloguing and quality monitoring of water resources. baltic journal of economic studies 149 vol. 7 no. 3, 2021 prospects for the development of cross-border clusters, taking into account current trends in the use of “green” and resource-saving technologies will become added incentives for reconstruction and restructuring of existing enterprises in the danube region, and for improving production chains as the most effective mechanism for achieving noticeable environmental impact of modernization. usage of “green” technologies is often of cross-cluster character and has a positive effect from implementation not only for one particular company, which reduces the cost of purchasing resources and paying fines, but also for the environment as a whole. active formation of network forms of selforganization in trans-border economic space corresponds to impulse of creating a newer economic reality of the post-modernity, which refuses from “total ideology”, but admits variety and freedom of economic choice. network clusters become a new source of competitive advantages for euroregions involving ukraine and, as such, change not only systems of deployment factors, but even the structure of economic space. implementation of cluster system of business organization in trans-border scale facilitates to a great extent development of network structure of economic space, strengthening its unity and integrity. current situation demands development and implementation of trans-border strategy of euroregional development taking into account european practical experience in transregional strategy aimed at achieving steady social and economic development of euro regional system in unity of its human, natural resource and manufacturing potential and institutional environment. ukraine, making its way to eu should summarize experience of cross-border cooperation as preliminary and supplementing stage of integration in regional scale. ukraine should develop theoretical and methodological principles of quasi-integration of economic entities and find newer forms and mechanisms of its implementation in view of network cluster systems concept. 7. acknowledgements this publication was prepared within the framework of the scientific project “organizational and economic mechanisms of increasing entrepreneurial activity in ukraine” at the expense of the budget program “support of priority areas of scientific research development” (кпквк 6541230). references: cluster policy in europe / a brief summary of cluster policies in 31 european countries (2008). europe innovation cluster mapping project. oxford research as, january. enright, m. j. (2000), survey on the characterization of regional clusters: initial results : [working paper]. university of hong kong, institute of economic policy and business strategy: competitiveness program. european outline convention on transfrontier cooperation between territorial communities or authorities (madrid, 21 may 1980). hayek, f. a. (1945). the use of knowledge in society. american economic review, 35(4), 519–530. jacobs, jane. (2000). the nature of economies. new york: random house, the modern library. jacobs, jane, (2009). cities and wealth of nations: principles of economic life. sciences o. n. lugovoi. transl. from the english. d. a. ananyev. novosibirsk: cultural heritage. kovalenko, s. i. (2019). strategic management of the development of cross-boundary cluster systems: euroregional dimension. monograph. odesa, national university “odessa maritime academy”, llc “courier publishing house”, 681 p. (in ukrainian) mikula, n. a. (2004). interterritorial and cross-border cooperation: monograph. ird nas of ukraine. (in ukrainian) nordhaus william d. (1969). invention, growth and welfare: a theoretical treatment of technological change. m.i.t. press. perroux françois (1950). economic space: theory and applications. the quarterly journal of economics, 64(1), 89–104. porter, m. e. (1998) clusters and competition: new agendas for companies, governments, and institutions. on competition. boston, ma: harvard business school press. porter, m. (1990). the competitiveness advantage of nations. london: macmillan. state regional policy of ukraine: features and strategic priorities (2007), [monograph] / as edited by z.s. varnalia. nisi. (in ukrainian) baltic journal of economic studies 137 vol. 8 no. 2, 2022 1 verkhovna rada of ukraine, ukraine e-mail: slavka3636@urk.net orcid: https://orcid.org/0000-0001-7321-1763 2 national university "odessa law academy ", ukraine e-mail: yamaslova@gmail.com orcid: https://orcid.org/0000-0001-6725-7036 3 odessa district council; ukraine charitable movement charitable foundation, ukraine (corresponding author) e-mail: natalyodk2016@gmail.com orcid: https://orcid.org/0000-0001-8487-8440 doi: https://doi.org/10.30525/2256-0742/2022-8-2-137-145 administration of electronic registries by central executive authorities: praxeological aspect antonina slavytska1, yana maslova2, natalia bilak3 abstract. the subject of the study are conceptual, theoretical, methodological and applied provisions for the use of digital tools in law enforcement activities on the example of specific institutions (the national agency for the prevention of corruption, the ministry of justice of ukraine). methodology. general scientific methods were used in the research process. the method of comparison was used to summarize the approaches of various researchers on the main dominants of the implementation of the idea of electronic registries and their interaction by default. analysis was used to determine quantitative and qualitative characteristic parameters of the specifics of the national agency for the prevention of corruption of the ministry of justice of ukraine in the digital era. induction and deduction were used to determine the approaches to the main dominants of the legal forms of activity of the central bodies of state executive power. the results of the study showed that the introduction and application of digital skills in the activities of authorized subjects of power, creates conditions both for the effective execution of their powers, and contributes to the public interest, in general. conclusion. what is common to the functioning of electronic registries is that they help to ensure transparency of the activities of specific state institutions and effective information interaction between them. on the example of the national agency for the prevention of corruption it is established that the administration of anti-corruption registries is a separate block of powers of the main state anticorruption agency of ukraine, so it is an obligation, which is ensured by the commitment for quality performance. other electronic tools have been used to compare the activities of the national agency for the prevention of corruption, but they are not covered by a separate block of authority. at the same time, it is substantiated that the ramification of the powers of the ministry of justice of ukraine has caused the need to create a significant number of registers under its jurisdiction and subject to systematization according to common characteristics. key words: register, electronic register, the national agency on corruption prevention, the ministry of justice of ukraine, administration of registries. jel classification: d70, d73 1. introduction ukraine has chosen to focus on the digitalization of administrative processes, the implementation of a smart state and the formation of a developed system of electronic registries and databases. the work of electronic databases has become especially relevant in the conditions of partial isolation associated with the covid-19 pandemic, the imposition of martial law and the consequences of escalation of military aggression by the russian federation. at present, more than 100 state registries of various kinds have been created and secured, the functioning of which is accompanied by an extensive system of normative legal acts of various hierarchical levels. in fact, the legal, organizational and financial aspects of the creation and operation of public electronic registries are regulated by the law of ukraine "on public electronic registries" (on public electronic registries, 2021). the state electronic registry is an information and communication system designed to ensure the collection, accumulation, protection, accounting, display, processing of registry baltic journal of economic studies 138 vol. 8 no. 2, 2022 data and provision of registry information. it is equally important that the administration of electronic registries should be based on a set of certain principles (e.g., interoperability; presumption of reliability of registered data and information; introduction of the most advanced and effective technical and technological measures to ensure maintenance of registries, etc.). at the same time, the legally enshrined obligation to ensure maintenance of state registers in electronic form, actualizes scientific research in the direction of changing the legal status of the holders of such registers, for example, the national agency for the prevention of corruption, the ministry of justice of ukraine. thus, the powers of registry holders include: a) the power to ensure (e.g., ensuring the formation and/or implementation of state policy in the field of relevant registries; implementation of regulatory and legal regulation in the field of relevant registries); b) control and supervisory powers (e.g., implementing and ensuring the use of technical and cryptographic information security measures in the maintenance of the registry; use of means and technologies to back up registry information and physical safety of its carriers; use of authentication means to verify the integrity of information entered into the registry and registered information transmitted through the electronic interaction system, as well as the identification of public registrars, creators and persons using registered information by special access). however, the practical application of these powers is different, and a single model of their application in ukraine has not yet been developed. the introduction of the position of deputy head of the relevant body for digital development, digital transformation and digitalization (cdto) in ministries and other central government executive bodies is legislated, which will facilitate the formation of a unified approach (some issues of activities of departments of digital development, digital transformation and digitalization of central and local executive authorities and deputy heads of central executive authorities, regional, kyiv and sevastopol city state administrations on digital development, digital transformation and digitalization, 2020). the above shows the importance of analyzing the practice of implementation of digital technologies by central government executive bodies to maintain electronic registers. 2. theoretical and legal foundations of the administration of state electronic registers at the same time, with a significant number of normative and legal acts, it should be noted the lack of a unified approach of the legislator with regard to the use of the conceptual apparatus and disclosure of the essence of the main legal categories used in the researched area, that is explained by the fact that such legislation acts were adopted at different period of times and were not always adapted to the newly adopted ones. in particular, at the legislative level it is common to use the terms: "register", "cadaster", "electronic register", "public electronic register", "state register", "unified register" and others. in order to better understand the chosen topic, it is necessary to conduct research and a comparative analysis of specific legal categories. for example, the official web-portal of the parliament of ukraine in the section "legislation of ukraine" contains more than 50 interpretations of the category "register", which mainly regarding narrow areas, are regulated by special legislation and have not general meaning (in particular, "register" is considered as the state register of configurations of semicon ductor products of ukraine, which is maintained in electronic form (on protection of rights for configurations of semiconductor products, 1997) or as a system for collecting, accumulating and processing information (on approval of the regulations on the register of state corporate rights, 1999); "state register" is considered as an electronic database, which contains specific information (on approval of the order of maintaining the state register of publishers, producers and distributors of publishing production, 2017); "public electronic register (register, cadaster, etc.)" is considered as an information and communication system aimed at ensuring the collection, accumulation, protection, accounting, displaying, processing of register data and the provision of register information (on public electronic registries, 2021). that is, in this case, the legislator distinguishes such definitions as "cadastre", "registry ", "state electronic registry ", calling them for short – "registry ". at the same time, no attention is paid to such essential characteristics as publicity, statehood and electronic nature, which in this case are the main ones when interpreting the term "public electronic registry ". taking into account the above, the term should be supplemented with these essential characteristics. in addition, we believe that "cadastre" and "registry " are not identical concepts, since the term "cadastre" is mainly used in the land legislation, water and construction sectors (in particular, the urban planning cadastre of ukraine, state water cadastre, state land cadastre), while the term "registry " is a more general category that has a number of characteristic functional features. the term "registry " should not be equated with categories such as "database", "notices", etc. the above is justified by the fact that the "register" is a much broader category, it is an automated unified information system that contains information about the relevant category of subjects and other official data, the order of formation and maintenance of which baltic journal of economic studies 139 vol. 8 no. 2, 2022 is regulated by a legal act, with a clear definition of the holder and administrator, access procedures and other operational issues. registries, as a rule, have a unique complex internal organizational and technical structure and may consist of modules or subsystems. for example, the unified register of convicts and persons in custody, which is an information system, contains information about convicts, persons in custody, and structurally consists of: 1) subsystems (in particular, "register of registration cards", "register of registration cases", "notification", "pre-trial probation", "supervisory probation", "penitentiary probation"; "register of medical cards", "casandra"; "providing information on request") and 2) modules (in particular, information-analytical module of registration of convicts and detainees; electronic services of case management of probation subjects, etc.) (the procedure for forming and maintaining the unified register of convicts and detainees, 2018). often there are names of registries with a specific use of the words "state" or "electronic" (in particular, state agrarian register, state register of transactions, state register of geographic names, state register of immovable monuments of ukraine, electronic register of licenses for currency transactions and persons granted licenses for currency transactions, etc.). as for the concept of "administration of public electronic registries", it is not defined at the legislative level. considering the above-mentioned, we propose to supplement art. 2 of the law of ukraine "on public electronic registries" by another paragraph in the following edition: "administration of public electronic registries – is a set of measures for the creation, implementation, maintenance, information and technical service, modernization of public electronic registries, which operation is provided by legislation acts". an important aspect in analyzing the theoretical and legal foundations of the administration of state electronic registries is also to identify the basic principles on which these registries function (in particular: unity of methodology; compulsory registration; singularity of registration; continuity of information entry; compatibility of registries; technological neutrality; guarantee of objectivity; relevance, reliability, completeness and security; presumption of reliability; openness, free and accessible; rule of law; binding information; protection of personal and other registry data; guarantee of free access; guarantee of restoration of violated rights; registration and logging of actions in the registry; implementation of perfect and effective measures; provision of retrospective access; indefinite storage of registry data; balance of interests; compliance with the state policy of digital development) (on public electronic registries, 2021). in addition to mentioned principles, special attention should be paid to those ones that ensure the formation of foundations for the prevention of corruption violations, which include: the principle of ensuring the creation of conditions for prosecution for violations regarding to the administration of public electronic registries, which consists primarily in defining in job descriptions a clear list of competencies for the administration of public electronic registries, consolidation of powers for specific officials, the ability to identify the official who performs actions with the register data (including any abuse and violations), ensuring continuous monitoring; the principle of data synchronization and planning, which consists primarily in that the development of registries should provide a function of synchronization of register data, which will allow to quickly enter and receive complete information about persons or objects (including persons responsible for administration); the principle of preventing unauthorized changes and deletion of registration data, etc. to summarize, it is concluded that the main areas of human life and areas of interest are accompanied by various registries, from which people can quickly and remotely obtain the necessary information. at the same time, the functioning of registries contributes to the fight against corruption and simplifies the procedure for obtaining the necessary data. further research is needed to study the implementation of the procedure for automating administrative decisions, which is a component of e-government. this experience has already been successfully applied in estonia, where there are more than 13 programs in which artificial intelligence has replaced human resources. for example, the e-residency program, which provides free access to government services. artificial intelligence also controls the granting of subsidies to farmers by analyzing the use of previously granted benefits with the help of satellite images. in addition, the implemented artificial intelligence algorithm scans the resumes of employees who have been dismissed in order to facilitate the search for a new job (ua.news, 2019). 3. administration of electronic registers administered by the ministry of justice of ukraine the ministry of justice of ukraine (hereinafter – the ministry of justice) is a central state executive body and the main body among the central executive authorities responsible for the implementation of state law policy, on bankruptcy and notaries sphere; enforcement of court judgements and decisions by other authorities; state registration of civil status acts, material rights to immovable property and their baltic journal of economic studies 140 vol. 8 no. 2, 2022 encumbrances; state registration of encumbrances over movable property; state registration of legal entities, public formations without legal personality status and individuals-entrepreneurs; registration of the statute of the territorial community of the city of kyiv; registration of the statutes of the national academy of sciences and national specialized academies of sciences; registration of print media and news agencies as subjects of information activity; in the field of execution of criminal punishments and probation; on the detention of prisoners of war; in the field of legal education of the population; ensures the formation of state policy in the field of archives and record keeping and the creation and operation of the state system of insurance fund of the documentation. at the same time, the ministry of justice has the status of a state body on bankruptcy and a body authorized to ensure inspection under the law of ukraine "on purification of government" (on approval of the regulations on the ministry of justice of ukraine, 2014). the diversification of the powers of the ministry of justice required the creation and further administration of a significant number of registries under the jurisdiction of the ministry, which for convenience can be classified according to specialization and areas of activity into: 1) those which operation is related to ensuring of normative activity (in particular, the unified state register of normative and legal acts); 2) those which operation is related to notaries sphere (in particular, the unified register of special forms of notarial documents; the unified register of notaries of ukraine; the hereditary register; the unified register of powers of attorney, the register of special forms of documents of the information system of the ministry of justice of ukraine); 3) those which operation is related to ensuring of property and non-property rights (in particular, the state register of civil status acts of citizens; the state register of material rights to immovable property, the state register of encumbrances over movable property); 4) those which operation is related to activities of civil society institutions (in particular, the unified register of public formations, the unified state register of legal entities, individuals-entrepreneurs and public formations; the register of public associations); 5) those which operation is related to court examinations (in particular, the register of certified court experts, the register of methods of conducting court examinations); 5) those which operation is related to accounting , display, search and systematization of information on subjects are serving and/or have served a sentence or are in penitentiary institutions under investigation (in particular, the unified register of convicts and detainees); 6) those which operation is related to bankruptcy proceeding (in particular, the unified register of enterprises in respect of which bankruptcy proceedings have been instituted); 7) those which operation is related to media activity (in particular, the unified state register of print media and news agencies as subjects of information activity (official site of the ministry of justice of ukraine, 2022). as to the specifics of maintenance of the above registers, it is mediated by the legal status of the ministry of justice as a whole. thus, the holders of specific state registers are territorial bodies of the ministry of justice (for example, the state executive service of ukraine on the unified state register of enforcement proceedings). at the same time, such registers are characterized by a number of characteristic features, the main of which include: legal regulation of the order of creation and functioning; being at the departmental disposal and management of the subject falls under the competence of the ministry of justice; regulation of issues within the direct competence of the ministry of justice. with regard to such features as public nature and electronic maintenance of registries, in this case it would be appropriate to point to the law of ukraine "on public electronic registries", which provisions constitute that the maintenance of registries, which allow public authorities to collect, process and disseminate official information about the registries objects specified by laws, is carried out electronically in accordance with the legally established requirements, according to which they are created and named as public electronic registries (on public electronic registries, 2021). improvement of the ministry of justice’s activity on the administration of registries have been actualized with the recommendations of the fifth report from the commission to the european parliament and the council on the implementation by ukraine of the action plan on visa liberalization (vlap) (visafree dialogue between ukraine and the eu. action plan on visa liberalization, 2010) for ukraine with regard to improve the identification system and art. 18 of the law of ukraine "on administrative services" (on administrative services, 2012). thus, the proposals of the ministry of justice concerning the system of identification of identity and the functioning of state and unified registries were supported. among the proposals supported by the government was the need to develop a single optimal structural and functional model of identity identification using state registers and other information databases under the jurisdiction of the ministry of justice, with the definition of its administrator – the newly created state enterprise "national information systems" (hereinafter – se "nais"), whose organizational structure is represented by forms of the head enterprise and 22 regional branches. the main tasks of the se "nais" include: technological support for the creation and maintenance of software; maintenance of automated systems of unified and state registers, baltic journal of economic studies 141 vol. 8 no. 2, 2022 functioning in accordance with the orders of the ministry of justice and other electronic databases established by law; providing access to the registers of natural and legal persons, as well as storage and protection of information data (official website of state enterprise "national information systems", 2022). the main purpose of such actions is to standardize the existing state registries and databases, as well as to take organizational and legal measures aimed at unconditional compliance with the requirements of the legislation in terms of full acquisition of intellectual property rights to software products that ensure the functioning of state and unified registries by the state (some issues of improving the personal identification system and the operation of state and unified registries, 2015). the official website of the se "nais" contains information about unified state registries; contract forms; information from open data; normative legal acts regulating the order and principles of creation, functioning and termination of registries. the list of information to disclosure in the form of open data, managed by the ministry of justice of ukraine, is determined at the departmental order level (on approval of the list of information to disclosure in the form of open data, managed by the ministry of justice of ukraine, 2016). the list of such information includes disclosure of the register of data sets kept by the ministry of justice of ukraine. a separate subsection is devoted to the normative regulation of the names of registers and their list, determination of the person responsible for the disclosure of data registers of structural subdivisions, the frequency of updating, etc. in addition to state registries, this list also includes "information, data and notifications to disclosure in the form of open data managed by the ministry of justice of ukraine". these are notices of auction and other information about the sale of confiscated and seized property and their results, about the property for gratuitous transfer; data from the central database of the system of electronic auctions of seized property, etc. it is important to note that in order to protect information under martial law, the ministry of justice of ukraine has partially suspended the disclosure of information in the form of open data, managed by the ministry of justice of ukraine (on the suspension of disclosure of information in the form of open data, managed by the ministry of justice of ukraine, 2022). first of all, it is about the unified state register of legal entities, individual entrepreneurs and public formations. thus, the improvement of the activities of each of the registers administered by the ministry of justice consists in creating the possibility of a single entrance to the information and telecommunications system, the structural elements of which are individual registers. at the same time, a condition for forming such a mechanism is the conversion of all registers of the ministry of justice and its territorial bodies into electronic form. these changes will unify and synchronize the existing state electronic registers and create a single information resource to reduce the time of information search, saving material and technical resources, compliance with the ideas of human-centrism and digitalization in the practice of state executive authorities. 4. administration of electronic registries held by the national agency on corruption prevention structurally, the national agency on corruption prevention (hereinafter – nacp) has established a structural unit responsible for the implementation of digital technologies in anti-corruption institutions, including the administration of electronic registries – the department of digital transformation and innovation development (on approval of the regulations on the department of digital transformation and innovative development, 2020). currently, the nacp registries are not part of the basic group, which means that they are not subject to the relevant requirements for the operation of an electronic registry. that is, anti-corruption registries are not required to be electronic. the registries held by the nacp – anti-corruption registries include: unified state register of declarations of persons authorized to perform the functions of the state or local government, unified state register of persons that committed corruption or corruption-related offenses and unified state register of financial reports of political parties. at the same time, administration of the first two registries is expressly provided for by paragraph 9 of item 1 of art. 11 of the law of ukraine "on prevention of corruption" (2014). however, the formation and maintenance of the unified state register of financial statements of political parties is not directly provided as the authority of nacp, but is a way of state control over compliance with legislative restrictions on the financing of political parties, legitimate and targeted use of political party funds allocated from the state budget to finance their statutory activities, timely submission of party reports on property, income, expenses and financial obligations. in parallel, the nacp is defined as an authorized power entity that should provide public access to anti-corruption registries (on datasets to be disclosed in the form of open data, 2015). in particular, the nacp is the administrator of public information, which must download datasets in the form of open datasets, which must be published in the form of open data, and is legally responsible for the accuracy and baltic journal of economic studies 142 vol. 8 no. 2, 2022 relevance of published datasets. consider separately the transformation of the nacp’s approach to the administration of each anti-corruption registries. unified state register of declarations of persons authorized to perform the functions of the state or local government (hereinafter – the register of anticorruption declarations) was introduced as a result of legislative consolidation in the relevant legislation of requirement for electronic declaration by entering information on the nacp’s website. meaningful unified state register of declarations consisted of two parts: public (posted on the official website of the nacp) and confidential (not posted on the official website of the nacp, is confidential) (unified state register of declarations of persons authorized to perform the functions of the state or local government, 2016). system of submission and publication of declarations of persons authorized to perform the functions of the state or local government, began to operate in two stages (the first stage – from 00 hours 00 minutes on september 1, 2016 for: annual declarations for 2015 of officials who, as of september 1, 2016, hold a responsible and especially responsible position for 60 calendar days; declarations of persons, who terminate the activities with regard to performance of state or local selfgovernment functions, who terminate their activities from september 1, 2016 or later, and as of the day of such termination occupy a responsible and especially responsible position; the second stage – from 00 hours 00 minutes on january 1, 2017 for all other declaration subjects and declarations (notifications) provided by the legislation of ukraine (about the start of the system of submission and publication of declarations of persons authorized to perform the functions of the state or local government, 2016). problems with the use of the unified state register of declarations were the lack of automatic completion of information contained in the databases and registries of other public authorities, as well as the lack of a unified information system for the integration of web portals with the system of electronic identification and authentication (reva, 2020). in 2021, the conceptual framework for the administration of unified state register of declarations (or register of anti-corruption declarations) was updated (procedure for forming, maintaining and publishing (providing) information of unified state register of declarations of persons authorized to perform the functions of the state or local government, 2021). in fact, this means the beginning of the application of distributed data registry technology – "blockchain". accordingly, each document entered in the unified state register of declarations is automatically assigned a unique identifier and electronically sealed, which makes it impossible for unauthorized changes to be made to the submitted document (ensures the integrity of the document). submission of documents to the system is confirmed by sending a message to the email address of the declaration subject specified in the personal electronic cabinet and to the personal electronic cabinet of the declaration subject. from then on, the data of documents entered into the registry is stored in a structured form, as well as in a form that is convenient for visual perception, in particular in html format. among the main changes, it should be noted that after opening any declaration, it is possible to view other documents of the subject of the declaration without additional search. at the same time, the work with qualified electronic signatures is simplified, as the subject of the declaration is given the opportunity to fill out documents from various devices and qes for inclusion in the registry. therefore, the main characteristics of the administration of unified state register of declarations are: is maintained in electronic form; users of anticorruption resource consist of: registered declaration subjects, nacp authorized employees, system administrators, who manage accounts, authorized persons of other state authorities, individuals and legal entities with regard to the public part; functionally, register of anti-corruption declarations is aimed at: creating, storing, submitting and reviewing electronic documents of the declaration subjects; user activity monitoring (exceptions are persons, who access the public part of register); availability of user-friendly interfaces and services; mandatory electronic user identification; integration and exchange of data with information and telecommunication and also reference systems, registries, data banks, including those which contain information with restricted access, administrated by state or local authorities, etc. administration of unified state register of financial reports of political parties (hereinafter – "politdata") is not expressly provided for as a nacp powers by the law of ukraine "on prevention of corruption". the use of information and telecommunication technologies in this field is due to the fact that: 1) the relevant legislation of the napc establishes an obligation of "…exercising state control over compliance with legal restrictions on the financing of political parties, legal and targeted use of political parties’ funds allocated from the state budget to finance their statutory activities, timeliness of submission of party reports on property, income, expenses and financial obligations, reports on the receipt and use of election funds in national and local elections, reports on the receipt and use of campaign fund for the initiative to hold a national referendum, reports on receipt and use of the national referendum fund, reports on receipt and use of baltic journal of economic studies 143 vol. 8 no. 2, 2022 funds of the initiative group, completeness of such reports, report of external independent financial audit of parties, compliance with their requirements, accuracy of included information" (par. 8-1 art. 11 the law of ukraine "on prevention of corruption") (on prevention of corruption, 2014); 2) the law of ukraine "on political parties in ukraine" (2001), among the obligations of political parties, is highlighted – quarterly, no later than forty days after the end of the reporting quarter, submission to the nacp report on property, income, expenses and financial obligations (including its local organizations, which in compliance with the established procedure have acquired the status of a legal entity) by filling in on the official website of the national agency on corruption prevention (article 17); 3) political parties’ reports on property, income, expenses and financial obligations are determined as public information which is subject to disclosure; 4) tendencies to intensify the use of modern technologies by state authorities affected all aspects of nacp activities. that is, "politdata" is a portal developed by the nacp for the accumulation of financial data on political parties operating in ukraine, which was created to simplify the submission of electronic reporting for political parties, as well as to ensure citizens’ access to this information (official site of unified state register of financial reports of political parties, 2022). electronic system for submitting and disclosure of political parties’ reports "politdata" started functioning on may 11, 2021 (about acceptance in constant (industrial) operation of information and telecommunication system "unified state register of financial reports of political parties", 2021). in this way, administration of "politdata" nacp allows to simultaneously create, store, submit and view reports and annexes thereto, other electronic documents; protect data (including personal) from unauthorized access, destruction, alteration and blocking of access to them through the implementation of organizational and technical measures, by introducing means and methods of technical protection of information, as well as integrate and exchange data with information and telecommunications and also reference systems, registries, data banks, including those which contain information with restricted access, administrated by state or local authorities, etc. (procedure for forming, maintaining and publishing (providing) information of unified state register of financial reports of political parties, 2021). the use of unified state register of persons that committed corruption or corruption-related offenses (hereinafter – the register of corruptors) is provided by art. 59 of the law of ukraine "on prevention of corruption" (2014). accordingly, this register contains both public information (for example, information about persons under criminal, administrative, disciplinary or civil prosecution for corruption or corruption-related offenses) and information with restricted access (for example, information about persons who are members of the bodies providing operational-search or intelligence or counter-intelligence activities, whose membership in these bodies constitutes a state secret, and who are prosecuted for committing corruption offenses). the procedure for maintaining of the register of corruptors was detailed in 2018 (on approval of the regulations on unified state register of persons that committed corruption or corruption-related offenses, 2018) by stating that it is an electronic resource aimed at electronic fixation of information on corrupt officials. equally important in maintaining this registry is the boundary between the public and private interests of individuals who may be included in data sets. in order to prevent the abuse of power and transparency of procedures, specific grounds for inclusion in the registry of corruption are established by law, namely in connection with the presence of an electronic copy of an effective court decision from the unified public register of court decisions or a duly certified paper copy of a disciplinary sanction order. thus, electronic copies of judgments should be sent to the registry of corruption by transferring them from the unified public register of judgments using special software in the form of electronic files with an electronic digital signature. the specified transfer of electronic files is additionally provided by: protected telecommunication channels, uniqueness of electronic file names; maturity (files must be transferred no later than the next working day from the date of entering information into the unified public register of court decisions) (procedure for sending copies of court decisions on persons committed corruption or corruption-related offenses, and on legal entities to which criminal and legal measures applied for commission of a corruption act, 2018). in practice, the updated register of corrupt officials with added integration with prozorro allows state institutions to quickly find out if there is an institution participating in their tender in register of corrupt officials. at the same time, private entities participating in tenders do not need to spend extra time on the formation of the appropriate certificate (official nacp website, 2022). one of the main problems in the functioning of anti-corruption registries is the risk of unauthorized access to data in the registry. role models created to access the registry are not allocated to the necessary categories of users. this significantly complicates understanding of the scope and access to functionality baltic journal of economic studies 144 vol. 8 no. 2, 2022 by certain categories of users, as well as creates inconsistencies with the list of users entitled to such access in accordance with the regulations. the most common cases of illegal access to registries are when the access key is stolen through phishing emails or staging its theft (analysis of the current state of state electronic registries and assessment of potential corruption risks, 2021). to summarize, the authors conclude that common to the functioning of anti-corruption registries is that they are electronic tools: by which the nacp performances its powers; that constitute the content of the nacp’s separate powers with regard to operation of relevant anti-corruption registries, which means obligation of implementation and obligation for the quality of implementation. other electronic tools have been used for comparison the activities of the national agency on corruption prevention, which are a way to reflect the nacp’s compliance with the principles of transparency and citizens’ access to information, but they are not covered by separate powers block. such electronic tools include, for example, "knowledge base" of the nacp, posted on the institution’s official website, or "anti corruption portal" of the nacp. 5. conclusions thus, the improvement of the activities of each of the registers administered by the ministry of justice consists in creating the possibility of a single entrance to the information and telecommunications system, the structural elements of which are individual registers. at the same time, a condition for forming such a mechanism is the conversion of all registers of the ministry of justice and its territorial bodies into electronic form. these changes will unify and synchronize the existing state electronic registers and create a single information resource to reduce the time of information search, saving material and technical resources, compliance with the ideas of human-centrism and digitalization in the practice of state executive authorities. the study highlighted the specifics of administration of electronic registries held by the national agency on corruption prevention: unified state register of declarations of persons authorized to perform the functions of the state or local government, unified state register of persons that committed corruption or corruption-related offenses and unified state register of financial reports of political parties. it was found that common to the functioning of anticorruption registries is that they are electronic tools: a) by which the nacp performances its powers; b) that constitute the content of the nacp’s separate powers with regard to operation of relevant anticorruption registries, which means obligation of implementation and obligation for the quality of implementation. it is proposed to supplement art. 2 of the law of ukraine "on public electronic registries" by another paragraph in the following edition: "administration of public electronic registries – is a set of measures for the creation, implementation, maintenance, information and technical service, modernization of public electronic registries, which operation is provided by legislation acts. " references: on public electronic registries: law of ukraine dated 18.11.2021 № 1907-ix. available at: https://zakon.rada.gov.ua/laws/show/1907-20#text some issues of activity of departments on digital development, digital transformations and digitalization of central and local executive authorities and deputy heads of central executive authorities, regional, kyiv and sevastopol city state administrations on digital development, digital transformations and digitalization: resolution of the cabinet of ministers of ukraine dated 03.03.2020 № 194. available at: https://zakon.rada.gov.ua/laws/show/194-2020-%d0%bf#text on approval of the regulations on the department of digital transformation and innovative development: order of the national agency on corruption prevention dated 23.10.2020 № 475/20. available at: https://nazk.gov.ua/wp-content/uploads/2020/12/185-polozhennya-pro-viddil-nakaz.pdf on prevention of corruption: law of ukraine dated 14.10.2014 № 1893-ix. date of update: 09.12.2021. available at: https://zakon.rada.gov.ua/laws/show/1700-18#text on datasets to be disclosed in the form of open data: resolution of the cabinet of ministers of ukraine dated 21.10.2015 № 835 (in the edition of 21.10.2015). date of update: 23.11.2021. available at: https://zakon.rada.gov.ua/laws/show/835-2015-%d0%bf/ed20151021#text on operation of unified state register of declarations of persons authorized to perform the functions of the state or local government: decision of the national agency on corruption prevention dated 10.06.2016 № 3. available at: https://zakon.rada.gov.ua/laws/show/z0959-16#text on the start of the system of submission and publication of declarations of persons authorized to perform the functions of the state or local government: decision of the national agency on corruption prevention dated 10.06.2016 № 2. official journal of ukraine. 2016. № 55. ar. 136. reva, yu.o. (2020). anti-corruption declaration: theory, legal regulation, practice. qualifying scientific research work on the rights of the manuscript. dissertation for the degree of doctor of philosophy in specialty 081 – law. national university "odesa law academy ", odesa. baltic journal of economic studies 145 vol. 8 no. 2, 2022 procedure for forming, maintaining and publishing (providing) information of unified state register of declarations of persons authorized to perform the functions of the state or local government: order of the national agency on corruption prevention dated 29.07.2021 № 448/21. available at: https://zakon.rada.gov.ua/ laws/show/z0986-21#text on political parties in ukraine: law of ukraine dated 05.04.2001 № 2365. date of update: 24.11.2021. available at: https://zakon.rada.gov.ua/laws/show/2365-14#text official site of unified state register of financial reports of political parties. available at: https://politdata.nazk.gov.ua/#/ on acceptance in constant (industrial) 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criminal and legal measures applied for commission of a corruption act: order of the national agency on corruption prevention and state judicial administration dated 10.04.2018 № 167. available at: https://nazk.gov.ua/wp-content/uploads/2020/10/nak_167_54_18copy.pdf official website of the national agency on corruption prevention. available at: https://wiki.nazk.gov.ua/ category/reyestr-koruptsioneriv/ analysis of the current state of state electronic registries and assessment of potential corruption risks. ngo "office of effective regulation" within the usaid / uk aid project 02 "transparency and accountability in public administration and services / tapas", implemented by the eurasia foundation, and with the assistance of the ministry of digital transformation of ukraine. 2021. available at: https://wiki.nazk.gov.ua/ wp-content/uploads/2021/09/zvit_analiz-potochnogo-stanu-reestriv-_ua.pdf on protection of rights for configurations of semiconductor products: law of ukraine dated 05.11.1997 № 621/97-вр. available at: https://zakon.rada.gov.ua/laws/show/621/97-вр/ed20190926#text on approval of the regulations on the register of state corporate rights: order of the national agency of ukraine for state corporate rights management dated 14.05.1999 № 72. available at: https://zakon.rada.gov.ua/ laws/show/z0335-99/ed19990527/find?text=%d0%e5%ba%f1%f2%f0#text on approval of the order of maintaining the state register of publishers, producers and distributors of publishing production: resolution of the cabinet of ministers of ukraine dated 10.03.2017 р. № 135. available at: https://zakon.rada.gov.ua/laws/show/135-2017-п/ed20170310#n13 the procedure for forming and maintaining the unified register of convicts and detainees: order of the ministry of justice of ukraine dated 26.06.2018 № 2023/5. available at: https://zakon.rada.gov.ua/laws/show/ z0762-18#text in estonia judges will be replaced by artificial intelligence. ua.news. 26.03.2019. available at: https://ua.news/ ua/v-estoniyi-suddiv-zaminyat-shtuchnym-intelektom/?fbclid=iwar1q6uujmd8ytpugrnuhv9egdzx53qm qthvxvm3_vcr2hegarm1try9yqca on approval of the regulations on the ministry of justice of ukraine: resolution of the cabinet of ministers of ukraine dated 02.07.2014 № 228. available at: https://zakon.rada.gov.ua/laws/show/228-2014-п#text official site of the ministry of justice of ukraine. available at: https://minjust.gov.ua/m/str_22253 visa-free dialogue between ukraine and the eu. action plan on visa liberalisation: the european union, ukraine dated 22.11.2010. available at: https://zakon.rada.gov.ua/laws/show/984_001#text on administrative services: law of ukraine dated 06.09.2012 № 5203-vi. available at: https://zakon.rada.gov.ua/ laws/show/5203-17#n197 official website of state enterprise "national information systems". available at: https://nais.gov.ua/registries some issues of improving the personal identification system and the operation of state and unified registries: resolution of the cabinet of ministers of ukraine dated 05.06.2015 № 628-р. available at: https://zakon.rada.gov.ua/laws/show/628-2015-р#text on approval of the list of information to disclosure in the form of open data, managed by the ministry of justice of ukraine: order of the ministry of justice of ukraine dated 28.03.2016 № 897/5. available at: https://zakon.rada.gov.ua/laws/show/v897_323-16#text on the suspension of disclosure of information in the form of open data, managed by the ministry of justice of ukraine: order of the ministry of justice of ukraine dated 13.04.2022 № 1462/5. available at: https://minjust.gov.ua/n/22649 baltic journal of economic studies 115 vol. 8 no. 3, 2022 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: makoviy09@i.ua orcid: https://orcid.org/0000-0002-6847-2309 2 educational and scientific maritime institute of humanities, odessa national maritime university, ukraine e-mail: 200mirel@gmail.com orcid: https://orcid.org/0000-0001-6224-632x 3 odessa state university of internal affairs, ukraine e-mail: helga_odessa2008@ukr.net orcid: https://orcid.org/0000-0002-6506-1918 doi: https://doi.org/10.30525/2256-0742/2022-8-3-115-124 status and prospects of the execution of judgments of the european court of human rights in ukraine viktor makovii1, oksana kuznichenko2, olga budyachenko3 abstract. the subject of research are conceptual, theoretical, methodological and applied bases of legal and economic nature concerning the execution of judgments of the european court of human rights in ukraine. methodology. general scientific and special legal methods were used in the process of research. quantitative and qualitative parameters of organizational, legal and economic measures on execution of judgments, including judgments of the european court of human rights in ukraine were determined by means of the analysis. the synthesis provided the formation of common features of negative and positive factors that hinder and promote, respectively, the execution of judgments. the comparative legal method allowed to identify characteristic common and distinctive features in the execution of judgments of the european court of human rights in ukraine at different times (2016 and 2021), taking into account legal and economic prerequisites. the formallegal method created prerequisites for the formulation of conclusions regarding the effectiveness of individual and general measures taken to implement judgments. the purpose of the article is to establish the status and outline the prospects for the implementation of the decisions of the european court of human rights through the study of the legal and economic foundations of the relevant national and international legal regime of this process, as well as the jurisdictional activities of the subjects of control and supervision over its course. the results of the research showed that the state of implementation of the decisions of the european court of human rights in ukraine is directly related to a number of measures of various origins, including economic ones, which are based on strict compliance with the requirements of the ratified convention on human rights and fundamental freedoms. conclusion. legal and economic basis for the implementation of the content of the strasbourg court judgments on the territory of ukraine is covered by international and national legal regime, with priority given to the first. procedures for execution of the said judicial decision are determined, where two groups are distinguished in the plane of national legal regime: those that are aimed primarily at ensuring a private interest; those that create conditions for satisfaction of a public interest. characteristic features in the execution of court decisions compared to 2016 and 2021 were revealed: an increase in the number of appeals of ukrainians for the protection of rights and fundamental freedoms; an increase in the number of satisfied compensation claims; the presence of homogeneous problems contributing to the violation of human rights and interests in ukraine; a decrease in the level of implementation of compensation solutions, which is associated with certain negative aspects of social life of an economic nature; expansion of the scope of consideration on the merits and related judicial decisions, taking into account the list of rights defined by the convention for the protection of human rights and fundamental freedoms; improvement and implementation of a strategic approach in implementing the content of general measures for the execution of judgments, in particular this international instance; implementation of the legal, economic, cultural and informational framework at the level of educational standards, which will contribute to the implementation of the content of judgments of the european court of human rights. the following directions have been identified as priorities for the near future in terms of legal and economic execution of judgments of the european court of human rights: creation of a systematic mechanism for implementing the content of judgments, including those of the strasbourg court; this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 116 vol. 8 no. 3, 2022 maximum differentiation of general measures within the framework of the implementation of the content of such decisions; priority of measures of organizational, legal, economic, informational and educational nature; emphasis in the relevant measures on the issue of balancing public and private interests, but by no means to the detriment of the former. key words: human rights, enforcement of decisions, european court of human rights, general measures, individual measures, rights and economic measures. jel classification: f53, k10, k41 1. introduction the judicial method of protection of violated, contested and unrecognized rights and interests protected by law is the most qualified form of their protection, both among other jurisdictional forms, and in comparison with nonjurisdictional forms of protection. the provisions of article 55 and chapter viii "the judiciary " of the constitution of ukraine (1996) directly confirm the reasoning expressed, which is commented accordingly in the decision of the constitutional court of ukraine of 25 december 1997 № 9-zp (1997), which emphasizes the prohibition for the court to deny justice to any person, i.e., for the court to resolve his/her case, if this person believes that his/her rights and freedoms have been or are being violated, obstacles to their realization have been or are being created, or other violations of rights and freedoms have occurred. given the significance of litigation as a means of resolving any case on the merits, the question of achieving the end result of the relevant process in a fair, impartial, and timely manner is extremely important. however, no less significant is the question of the implementation of the content of the court ruling, which is designed to ensure the balance of interests in society by appeasing the immediate disturbance of the public peace that initiated the relevant process, as well as to perform a preventive and ideological function by encouraging socially useful behavior by members of society. one of the main legal means of enforcing a court decision in ukraine is the consolidation of the principle of binding court decisions at the general legal and relevant sectoral level, as well as the creation of a legal and economic procedure for its execution. the above is directly reflected in article 13 of the law of ukraine "on judicial system and status of judges: law of ukraine as amended on march 22, 2022 № 1402-viii", provisions of the procedural codes: clause 7, part 3, article 2 of the civil procedure code of ukraine (civil procedure code of ukraine as amended on april 6, 2022 № 1618-iv); clause 5, part 3, article 3 of the code of administrative procedure of ukraine (administrative procedure code of ukraine as amended on may 24, 2022 № 2747-iv); clause 14, part 1, art. 1 art. 7 of the criminal procedure code of ukraine (criminal procedure code of ukraine with amendments of may 3, 2022 № 4651-vi), as well as in the law of ukraine "on enforcement proceedings" (on enforcement proceedings: law of ukraine with amend ments of march 26, 2022 № 1404-viii) and other normative legal acts. according to the preamble of the law of ukraine "on the judiciary and the status of judges: law of ukraine as amended on march 22, 2022, №1402-viii" and part 4 of article 55 of the constitution of ukraine (1996), the state of ukraine creates conditions in the sphere of justice, which ensure the realization of the right of everyone to a fair trial, implementation of european standards in this sphere of public life, as well as providing a range of legal protection outside the national legal regime. the abovementioned creates preconditions for the involvement of the jurisdictional activity of the european court of human rights in the ukrainian law-making and law-enforcement practice, due to the particular importance of the stage of execution of this court's decisions. at different times, this issue was the subject of consideration by legal scholars, both of the general theoretical block, and of representatives of various branches of law. in particular, gennadiy tsirat (tsirat, 2000) put forward his own considerations regarding the enforcement of foreign arbitration awards, olena yevtushenko (2005) studied the peculiarities of recognition and enforcement of foreign court decisions. the works of the following researchers are directly related to the implementation of decisions of the european court of human rights, including in ukraine: vitaly zavhorodniy on the influence of the practice of the european court of human rights on legal activity in ukraine (zavhorodniy, 2018), volodymyr uvarov on the implementation of the above court decisions in criminal proceedings (uvarov, 2012), sanja trgovac, sidonija grbavac, sandra markovic in the context of the position of the constitutional court of the republic of croatia regarding the implementation of decisions of the european court of human rights (trgovac, grbavac, markovic, 2018), victor muraviov, nataliia mushak regarding the consideration of the stage implementation of the decisions of the european court of human rights as one of the main legal baltic journal of economic studies 117 vol. 8 no. 3, 2022 issues regarding the implementation of the convention on the protection of human rights and fundamental freedoms (muraviov, mushak, 2021), roman shyshka, oleksandr shyshka, nataliia shyshka, anatolii slipchenko, maxym tkalych regarding the implementation of the decisions of the european court on human rights through the improvement of civil legislation and ukraine. despite this, the issue of implementation of the decisions of the european court of human rights in ukraine, both in the context of their legal and economic basis, remains relevant and requires further study. 2. legal principles of enforcement of judgments of the european court of human rights in ukraine after ukraine signed and ratified the convention for the protection of human rights and fundamental freedoms, the question arose of ensuring its implementation in ukraine. in accordance with article 19 of the convention, the european court of human rights is a body of direct jurisdiction, which ensures compliance with its provisions by the signatories, and within the framework of article 46 of the convention is confirmed the obligatory execution of decisions of this court in the territory of each signatory country, including ukraine (council of europe, 1950). at the international level, the committee of ministers of the council of europe is the body responsible for supervising the execution of judgments of the european court of human rights. the competences of the latter in respect of the above-mentioned powers must be divided into those related to: 1) the interpretation of the content of the judgment directly by the court; 2) the willful violation by the signatory of the obligation to execute the final judgment; 3) the taking of additional measures determined by the court to execute the judgment by the signatory in the circumstances provided for in the preceding paragraph; 4) the closing of the case on the initiative of the court. respecting the obligations undertaken by the corresponding activity of the legislative body, ukraine has established guarantees of implementation of the judicial practice of the european court of human rights in the law of ukraine "on the enforcement of judgments and application of judgments of the european court of human rights" (on the enforcement of judgments and application of the case-law of the european court of human rights: the law of ukraine, as amended on october 16, 2012, № 3477-iv). chapter 3 "execution of decisions" of this normative legal act defines the organizational, practical and legal means that constitute the sociolegal mechanism of implementation of the content of the relevant decision of this international body in the territory of ukraine. in particular, it defines the powers of the representative body, which, in accordance with the provisions of ukrainian law, is responsible for ensuring the representation of ukraine in the european court of human rights and coordinating the implementation of its decisions. according to the decree of the cabinet of ministers of ukraine from april 29, 2004 № 553 "on organizational measures to ensure representation of ukraine in cases at the european court of human rights", such body is the ministry of justice of ukraine (on organizational measures to ensure the representation of ukraine in cases at the european court of human rights: resolution of the cabinet of ministers of ukraine, as amended on november 3, 2021 № 553). according to the article 5 of the law of ukraine "on enforcement proceedings" the body responsible for enforcing the mentioned category court decisions is the body of the state enforcement service of ukraine (on enforcement proceedings: the law of ukraine as amended on march 26, 2022 № 1404-viii). the enforcement procedure is carried out on general principles determined by the law of ukraine "on enforcement proceedings" (on enforcement proceedings: the law of ukraine as amended on march 26, 2022, № 1404-viii), as well as taking into account the specifics provided by the law of ukraine "on enforcement proceedings and the application of case-law of the european court of human rights" (on enforcement proceedings: the law of ukraine as amended on october 16, 2012, № 3477-iv). the latter distinguishes the implementation of the following procedures: 1) payment of compensation to the debt collector under normal conditions; 2) payment of compensation in certain extraordinary circumstances (inability to locate the residence of the creditor – an individual, his death or termination of the creditor – a legal entity); 3) taking additional measures of an individual nature; 4) measures of a general nature. these procedures can be divided into two groups: 1) those that are aimed primarily at private interests; 2) those that create conditions for the satisfaction of public interests. in terms of social (public interest), general measures are the most significant for the prevention of violations of human rights and fundamental freedoms, the elimination of the problem indicated in the court decision and its root cause, which is directly reproduced in the following forms of activity: 1) changes in the current legislation and practice of its application; 2) changes in administrative practice; 3) providing training for law enforcement and the judiciary on the convention and the court's practice; 4) other measures determined by ukraine upon agreement with the committee baltic journal of economic studies 118 vol. 8 no. 3, 2022 of ministers of the council of europe, which, in accordance with the content of the court decision, are aimed at ensuring the elimination of deficiencies of a systemic nature, the cessation of violations of the convention caused by these deficiencies, and the provision of maximum compensation for the consequences of these violations. thus, the execution of judgments of the european court of human rights is a separate and fateful procedural stage for the consequences of the application of the convention for the protection of human rights and fundamental freedoms, as it is designed to monitor the compliance of declaring countries with the obligations assumed under this international legal act, as well as to implement a rapid response to certain deformities of law enforcement procedure in favor of human rights and interests. the legal basis for the implementation of the content of this procedural stage includes both international and national legislation. the relevant role in this activity is assigned to the supervisory bodies of international and national jurisdiction, namely the committee of ministers of the council of europe and the ministry of justice of ukraine. at the same time, the enforcement procedure itself fully complies with the national legal regime for the execution of judicial decisions, taking into account the features defined by the special rules of international law and the national law adopted in accordance with it. 3. state and prospects of implementation of the decisions of the european court of human rights in ukraine: the legal and economic component obviously, the study of the state of execution of judgments of the european court of human rights can be carried out in terms of a number of criteria, in particular: 1) by sectoral affiliation of disputed relations, within which human rights and freedoms were violated (in civil, criminal, administrative cases); 2) depending on the type of right defined by the provisions of the convention (right to life, prohibition of torture, right to liberty and security of person, right to a fair trial, etc.); 3) by the body that analyzes the execution of court decisions (the supreme court and other higher courts, the ministry of justice of ukraine, the state executive service of ukraine); 4) by the jurisdiction of the subject supervising the implementation of decisions (ministry of justice of ukraine – national body, cabinet of ministers of the council of europe – international); 5) by the measures taken as a result of the implementation of the relevant decision (general, individual, special); 6) by the direction of implementation of the content of the court decision (law enforcement, law-making, educational sphere). the state of implementation of decisions of the european court of human rights is directly mediated by statistical data of appeals of ukrainians to this court and the level of their satisfaction. thus, according to available information, the number of appeals of ukrainians to this human rights body for a long period of time is among the leaders among other countries, which is based, in particular, on the study by public organizations of the imperfection of legal protection at the level of national legislation, despair in the domestic judicial system and hope for a fairer judgment in the european court (center for civil liberties, 2016). at the same time, according to the results of the above study, it was found that as of 2016 the level of non-execution of decisions of the european court of human rights was about 90%, which created the preconditions for taking appropriate measures, primarily the introduction of elements of the case law system, which do not exist in the ukrainian legal system. this served as a basis for further changes in the procedural codes by introducing elements of case law, which led to the dissemination of the practice of using decisions of the european court of human rights in ukrainian judicial proceedings. the above, in particular, contributed to the reduction of the load of the european court of human rights with the appeals of ukrainian citizens in 2021 (11,350 cases against 18,150 cases in 2016). at the same time, if in 2016, applicants consolidated claims for 1,1713,166.92 uah compensation in cases reviewed, and it was satisfied within 434,347 euros (3.7%), then in 2021 – from 1,759507,068.14 uah of the claimed compensation, claims for payment have been satisfied 82283358.68 uah (4.6%). that is, there is an increase in the amount of compensation claimed, as well as the share of positively resolved cases in this part, which is explained by more effective measures to implement the decisions of this court in ukraine, primarily through the implementation of general measures of educational, economic, information and legal nature, increasing the general legal culture of the population, which enables applicants to better prepare complaints to the court. most of the materials reviewed in 2016 can be conditionally grouped into the following homo geneous cases (annual report on the results of the activities of the commissioner for the european court of human rights in 2016): 1) failure to execute or excessively long execution of the decisions of national courts; 2) the direct excessive duration of civil and criminal proceedings; 3) lengthy and ineffective investigations into the circumstances of people's deaths; 4) conditions of detention, in particular related to failure to provide adequate medical care, ill-treatment baltic journal of economic studies 119 vol. 8 no. 3, 2022 in places of pre-trial detention and execution of punishments, as well as lack of internal remedy; 5) deficiencies in legislation and judicial practice, which lead to the improper application of special means and precautionary measures to applicants; 6) shortcomings of judicial practice, which lead to the violation of the right to a fair trial, as well as bringing a person to justice twice for the same violation; 7) improper administrative practice of state authorities, in particular law enforcement agencies. undoubtedly, the consideration and resolution of these cases has a corresponding specificity, which is reflected in a certain way in the relevant measures constituting the content of the judgment. the decisions of the european court of human rights during the period in question resulted in the following measures: 1) of an individual nature: – compensatory payments were made in the total amount of 612294315.54 uah; – the right of applicants to apply to the relevant court for review of the decision of the national court on the basis of the decision of the european court of human rights has been clarified; 2) of a general nature: – prepared drafts of normative legal acts, namely: a) to prevent torture and create an effective mechanism for the protection of convicts; b) to introduce an alternative mechanism for the execution of court decisions; c) to ensure the investigation; d) to improve the mechanism of administrative punishment in the form of administrative detention; e) to appoint a medical examination in connection with the placement of persons in a psychiatric hospital; – informational and educational activities were carried out, in particular: a) decisions of the european court of human rights are translated into ukrainian; b) such decisions are published in the sections of official publications; c) explanations are given to ordinary citizens, institutions and organizations regarding the interpretation of provisions of the convention, implementation of decisions of this international court, the procedure and order of appeal to it upon relevant requests; d) participation of the commissioner of the european court of human rights under the ministry of justice of ukraine in educational activities to explain the legal basis for the activities of this court, the procedure for appealing to it and execution of judgments; e) holding training and methodological and scientific events of various nature on the problematic issues raised in the mentioned judgments with the participation of representatives of the ministry of justice of ukraine, other state and judicial authorities, international law enforcement organizations; f ) commissioners for cases of the european court of human rights together with representatives of national courts of higher instances prepared explanations for judicial and law enforcement bodies regard-ing the content of lawmaking and law-enforcement violations set forth in deci-sions of the european court of human rights; g) work has begun on creating a ukrainian interface of the database of decisions of the european court of human rights. at the same time, the cases heard by the european court of justice in 2021 indicate that the following subject areas of litigation prevail (annual report on the results of the activities of the commissioner for the european court of human rights in 2021): 1) excessive length of proceedings in civil, administrative and criminal cases; 2) torture or inhuman or degrading treatment or punishment, as well as cruel treatment of persons in pre-trial detention or penal enforcement facilities, and ineffective investigation of complaints about such treatment, inadequate conditions of detention of these persons; 3) shortcomings in national legislation with regard to the lack of legislative conditions for mitigating life imprisonment; 4) drawbacks in legislation and law enforcement practice in terms of the timing and legal grounds for detention, as well as the creation and application of an effective mechanism for compensation for damage caused by these circumstances; 5) flaws in jurisprudence that result in a violation of the human right to a fair trial; 6) imperfections in law and jurisprudence that result in unlawful interference with the right to peaceful enjoyment of property; 7) deficiencies in legislation and administrative practices that result in unlawful interference with the right to peaceful possession of property; 8) lack of an effective statutory remedy for interference with the right to peaceful possession of property; 9) gaps in legislation and administrative practices that result in interference with the right to freedom of expression; 10) shortcomings of judicial practice, which lead to a violation of a person's right to respect for private and family life; 11) investigation of hate crimes; 12) violations of human rights during the maidan; 13) freedom of assembly; 14) freedom to alienate agricultural land; 15) lustration. as a result of the decisions of the european court of human rights, the following measures have been taken: 1) of an individual nature: – compensatory payments were made in the total amount of 76439400 hryvnias, which is 12.5% of the amount paid from the state budget of ukraine for the implementation of decisions in 2016; baltic journal of economic studies 120 vol. 8 no. 3, 2022 – additional measures have been taken to ensure the restoration of the violated rights of the applicants by re-examining their appeals by courts of national jurisdiction, taking into account the content of the judgment rendered by the european court of human rights; 2) of a general nature, distinguished by a more structured and strategic approach to the elimination of shortcomings in the legislation, administrative and judicial practice of ukraine identified by the european court of human rights: – the action plan was approved to implement the national strategy to solve the problem of nonenforcement of court decisions, whose debtors are a state body or state enterprise, institution, organization for the period up to 2022, which provides: the formation of a mechanism for a harmonious combination of social guarantees and opportunities for their financing; improvement of legislation in the field of bankruptcy of state enterprises; introduction of effective and efficient judicial control over the enforcement of court judgments; improvement of the procedure for establishing or changing the method or procedure for the enforcement of court judgments; expansion of the powers of bodies and persons involved in the enforcement of court judgments and decisions of other bodies; creation, on the basis of existing registries, of a system for recording judgments rendered against state bodies/ enterprises, with the ability to track the amount owed on such judgments; improving automation of enforcement proceedings; updating the existing debt of state enterprises; addressing the problem of existing state debt; improvement of means of legal protection for the purpose of execution of court decisions (order of the cabinet of ministers of ukraine as amended on march 17, 2021, no. 210-r); – the plan of priority actions of the government for 2021 was adopted, which provides for measures to implement the decisions of the european court of human rights, in particular, regarding the development of a draft law on the creation of adequate human guarantees for access to justice (4048), as well as a project on introducing amendments to the code of ukraine on administrative offenses, the criminal code of ukraine and the criminal procedure code of ukraine regarding ensuring the procedure for the execution of decisions of the european court of human rights (4049), etc. (order of the cabinet of ministers of ukraine as amended on march 24, 2021, no. 276-r); – drafts of normative legal acts have been prepared regarding a number of the problems raised above; – informational and educational activities were carried out both within the framework of the activities of special entities for the execution of court decisions and authorized bodies of state power of general competence. in particular, within the framework of implementation by the ministry of justice of ukraine of general measures on implementation of decisions of the european court of human rights, in particular, on creation of an effective mechanism of implementation of the content of judgments of national and international instances, the following measures were taken: – existing moratoriums on the execution of judgments, including the decisions of this court, were analyzed; – the prerequisites of their rationality in the comparison of private and public interests, taking into account the priority of rights over fundamental human freedoms, as well as the ways to abolish the above-mentioned moratoriums were determined; – prepared proposals on the expediency of creating an extra-budgetary fund to guarantee the enforcement of court decisions against enterprises subject to a moratorium, the contributions to which would be paid by such enterprises; – lobbied the international financial organization (european bank for reconstruction and development) for the preparation of the concept on the abolition of existing moratoria in the execution of decisions and judicial bankruptcy procedures for state enterprises; –work was carried out to develop a draft law on bringing the bankruptcy procedures of state-owned enterprises into line with european requirements and standards; – development of drafts of other normative legal acts aimed at improvement of normative regulation of bankruptcy procedures of state enterprises and economic companies, in the authorized capital of which more than 50 percent of shares belongs to the state. a cursory analysis of all the measures that have been taken to implement the content of the decisions of the european court of human rights shows the priority of those that are directly related to the implementation of their content, in particular through the implementation of certain measures. studies of normative novelties, which are proposed within the framework of general measures, testify to their effectiveness in view of the above. thus, the draft law of ukraine "on amendments to certain legislative acts regarding the implementation of decisions of the european court of human rights" submitted by the cabinet of ministers of ukraine regulates the following issues: humanizing criminal legislation, normalizing the procedure for exercising the right to strike at transport enterprises, as well as regulating issues related to related to the involvement of subjects authorized to resolve collective labor disputes (conflicts) (official portal of the verkhovna rada of ukraine (2020). draft law on amendments to certain legislative acts to implement judgements of the european court of human rights). baltic journal of economic studies 121 vol. 8 no. 3, 2022 equally relevant is a somewhat alternative draft law of ukraine "on amendments to the code of administrative offences, the criminal code of ukraine and the code of criminal procedure of ukraine regarding the implementation of decisions of the european court of human rights", proposed by the cabinet of ministers of ukraine, which outlines the position on eliminating such problematic issues raised in the decisions of this international court in 2016 and 2021, namely: – the application of administrative punishment in the form of administrative detention and the procedure for its review on appeal, taking into account compliance with the principles: legal certainty (formulation of clear conditions under which deprivation of liberty is carried out); expediency and effectiveness of the review of such a case on appeal, taking into account the timing of the punishment; proportionality of the punishment applied to the pursued purpose of its appointment; – humanization of certain norms of criminal law in terms of the application of punishment in the form of life imprisonment by replacing it with imprison ment for a fixed term or providing the possibility to apply parole to such persons; – confirmation of the adversarial model in criminal proceedings for the application of preventive measures in the form of detention; – implementation of the right to review the materials of criminal proceedings after the court decision has entered into force (official portal of the verkhovna rada of ukraine (2020). european court of human rights). in addition to the above, only in 2021, as part of the mentioned government priority action plan for 2021, other draft laws are proposed to ensure the implementation of the decisions of the european court of human rights, in particular, in the region: 1) human rights and access to justice; 2) protection of property rights; 3) creation of a humanistic system of execution of criminal punishments (order of the cabinet of ministers of ukraine as amended on march 24, 2021, № 276-р). in the context of implementation of the content of the decisions of the european court of human rights in the framework of educational activities to implement general measures, it is necessary to note the opinion tracing the formation of the main results of training of specialists in the following areas: 1) public authorities; 2) courts; 3) advocacy; 4) law enforcement agencies; 5) educational institutions and public organizations (zavhorodnyi, 2017). indeed, according to the results of the monitoring of educational programs of ukrainian educational institutions that train lawyers, it should be concluded that there is a broad introduction of normative requirements and educational components in their content, which form the culture of jurisdictional activities of the european court of human rights, including the execution of decisions of this court. thus, within the educational program "law" of the educational level "master" at the national university of kyiv-mohyla academy the ability to analyze domestic law enforcement, in particular, judicial practice, to evaluate it for compliance with the constitution and laws of ukraine, as well as the convention on the protection of rights is offered and fundamental freedoms and the practice of the european court of human rights as a special competence of its graduates, which is mediated, in particular, by the study of the academic discipline "application of the european convention on human rights and the practice of the strasbourg court in the activity of the defender" (official portal of the national university of kyiv-mohyla academy, 2022). a special importance in the implementation of general measures of informational and educational nature should be given to the study of procedures for implementing the achievements of the european community through the convention mechanism approved in the framework of the decisions of the european court of human rights, an example of which is the work of representatives of ukrainian law schools regarding: adaptation of mechanisms of municipal government to european standards (diegtiar et al, 2021), the protection of human rights within the limits of individual criminal proceedings (golovin et al, 2021), the implementation of private human rights at the border of labor and civil relations (makovii et al, 2021). thus, the state of execution of judgments of the european court of human rights is mediated by a number of measures, which are differentiated according to such criteria as: 1) sectoral affiliation of the disputed relations, within the framework of which violations of human rights and freedoms were identified; 2) the type of right, defined in the provisions of the convention; 3) the subject analyzing the state of execution of court decisions; 4) the jurisdiction of the subject supervising the execution of decisions; 5) measures taken as a result of the execution of the relevant decision; 6) the direction of implementation of the content of the court decision. given the subject matter of this study, more attention was paid to the range of measures that were taken as a result of the execution of the relevant decision, as well as the limits of the legal personality of the authorized body, which provided and controlled the procedure for their implementation. also according to the results of the comparison of the measures taken and the consequences of their implementation within the framework of the execution baltic journal of economic studies 122 vol. 8 no. 3, 2022 of decisions of the european court of human rights in 2016 and 2021 the achievements and miscalculations of organizational, economic, educational, informational, legal, etc. nature were highlighted. among the most positive aspects of the enforcement of the decisions of the said court should be noted the transition from episodic and static measures to systemic and strategic in the development of the entire state apparatus, primarily in the legal, economic and educationalinformational directions. amidst the negative manifestations of the mechanism of implementation of these court decisions are the problems associated with the execution of court decisions, including the above mentioned court in terms of collecting compensation in separate measures, i.e. economic or financial support of the said procedure. the above provided an opportunity to express views on this issue of different socio-economic and legal nature. 4. conclusions in conclusion of the study of the status and prospects of execution of judgments of the european court of human rights in ukraine, the following general considerations should be made. first, the legal basis for implementing the content of strasbourg court judgments is set out under international and national legal regimes, where the priority is given to the former. at the international level, the committee of ministers of the council of europe, whose competence is agreed in the relevant procedures, is the body responsible for supervising the execution of judgments of the european court of human rights. within the framework of the ukrainian legislation the authorized subjects, executing decisions of the european court of human rights, are the ministry of justice of ukraine, mainly for organizational and principle measures and the state executive service for direct enforcement. second, taking into account the content of national legislation, two groups of executive procedures are distinguished: 1) those that are aimed primarily at securing a private interest; 2) those that create conditions for the satisfaction of a public interest. the most detailed in terms of monitoring the results of implementation of the content of court decisions are the measures of the second group, which distinguishes: 1) changes in the current legislation and practice of its application; 2) changes in administrative practice; 3) providing training for representatives of law enforcement and judicial authorities on the study of the convention and the court's practice; 4) other measures determined by ukraine in coordination with the committee of ministers of the council of europe. third, the procedures for the execution of judgments of the european court of human rights are differentiated according to the following criteria: the sectoral affiliation of the disputed relations in which violations of human rights and freedoms were found; the type of right defined in the provisions of the convention; the subject analyzing the state of execution of judgments; the jurisdiction of the subject exercising supervision over the execution of decisions; the measures taken as a result of execution of the relevant decision; the direction of implementation of the contents of the judgment. fourth, a comparative monitoring of the state of implementation of the strasbourg court judgments in 2016 and 2021 found: 1) an increase in the number of appeals of ukrainians for protection of rights and fundamental freedoms (by 60%); 2) an increase in the number of satisfied claims for compensation (4.6% versus 3.7% of the total amount of payments, respectively); 3) the presence of homogeneous problems contributing to the violation of human rights and interests in ukraine (deficiencies in lawmaking and law-enforcement practices in criminal and administrative proceedings regarding the application of the relevant types of punishment, preventive measures and terms of justice, other deficiencies in judicial practices that lead to violations of the right to a fair trial, non-enforcement of judicial and administrative institutions); 4) decrease in the rate of execution of compensation claims (almost 8 times) due to the lack of an appropriate financial mechanism for such a procedure; 5) expansion of the scope of consideration on the merits and relevant court decisions, taking into account the list of rights defined by the convention for the protection of human rights and fundamental freedoms; 6) improvement and implementation of a strategic approach in the implementation of the content of general measures for the execution of judgments, in particular of this international instance; 7) implementation of legal, economic, cultural and informational principles at the level of educational standards, which will contribute to the implementation of the content of judgments of the european court of human rights. fifth, considering the analysis of the above mentioned, it is necessary to pay attention to perspective measures for implementation of judgments of the european court of human rights in ukraine, where the following directions should be of priority: 1) creation of a systematic mechanism of implementation of the contents of court decisions, including the strasbourg court decisions; 2) maximum differentiation of general measures within the framework of the implementation of the content of such decisions; 3) priority of measures of organizational, legal, economic, informational and educational nature; 4) emphasis in the relevant measures on the issue of balancing public and baltic journal of economic studies 123 vol. 8 no. 3, 2022 private interests, but by no means to the detriment of the former. undoubtedly, the above should serve for further scientific research in the issue of studying the problems of execution of judgments of 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(2021). contracts for the provision of services and labor contract: a comparative analysis of consequences for parties under ukrainian legislation. european journal of sustainable development, vol. 10(1), pp. 466–478. received on: 3th of august, 2022 accepted on: 14th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 43 vol. 8 no. 1, 2022 corresponding author: 1 state university of telecommunications, ukraine e-mail: evtushtnko.13.nat@gmail.com orcid: https://orcid.org/0000-0001-8865-8365 2 educational and scientific institute of management and entrepreneurship, state university of telecommunications, ukraine e-mail: gudzee@ukr.net orcid: https://orcid.org/0000-0002-9982-7328 doi: https://doi.org/10.30525/2256-0742/2022-8-1-43-54 consulting and internal communications: theoretical and methodological aspect natalia yevtushenko1, olena gudz2 abstract. scientists continue keep discussions about communications and communication processes, as well as their role in the activities of companies in the digital economy. the communications of consulting companies, where this management tool is of great importance in the process of their growth, are poorly studied. issues of the development of areas for effective communication management of consulting companies are still relevant. the purpose of the article is to study of theoretical foundations of the formation of a communication system of internal consulting interaction and hence, develop a scientific and methodological approach to assessing the state of the communication system of internal consulting interaction; provide practical recommendations for the effective management of internal communications on the example of the activities of consulting companies in ukraine. methodology. a set of general scientific methods was used: historical and dialectical methods – for reviewing scientific views on the content of consulting and communications, presenting the content of the main scientific categories; an abstract-logical method – for establishing logical relationships between the elements of the communication system of internal consulting interaction and developing, on this basis, a scientific and methodological approach to assessing the state of this system; the method of strategic analysis of diagnostics of the system of internal communications on the example of consulting companies in ukraine. results. the authors clarified basic concepts and components of the communication system of the communicative process of consulting interaction according to its examined features. connections between the elements of this system were established. the emergence in the communication system of a consulting company of the effect of communicative convergence between the participants in the interaction during the development of a joint idea and the production of joint communicative actions was fixed. it was developed a scientific and methodological approach to assessing the state of the communication system of internal consulting relationship, the implementation of which takes place within the framework of the procedural model. during the diagnostics of communication systems of such companies, their strengths and weaknesses, opportunities and threats were identified. this made it possible to solve problems related to business dealing in companies and give practical recommendations for addressing these problems. practical implications. the results of theoretical and practical research confirm the need for consulting companies to use a process model for assessing the state of the communication system of the communicative process of internal consulting interaction within the framework of a scientific and methodological approach. the approach will help the management of consulting companies to timely identify problems in the management of internal communications, evaluate them and make effective decisions to increase the loyalty of consultants, their productivity and receive planned income. value/originality. research is valuable. it substantiates the understanding of consulting interaction as a professional communication process in the communication system of consulting companies, which accompanied by the effect of communicative convergence. the results obtained can be useful for specialists and managers of internal communications. to get a fuller picture of the problems, company managers are encouraged to conduct surveys of employees and coordinate their competencies in accordance with the "effective consultant" model. key words: consulting, internal communications, consulting interaction, communication process, system, company. jel classification: g29, l20 baltic journal of economic studies 44 vol. 8 no. 1, 2022 1. introduction under the influence of globalization changes, in countries with developed economies, company managers are constantly working to analyze the results of their activities, in the process of which problems are identified, effective management solutions are developed and implemented to eliminate them. to achieve these results, managers are responsible for maintaining operational efficiency, optimizing the production and delivery of goods and services (porter, 2011). operational efficiency examines how a company performs compared to its own standards and those of competitors. therefore, the responsibilities of a performance management manager come down to three components: 1) the technical component associated with the efficient use of resources, the achievement of ultimate goals, as well as the use of technology to ensure high performance; 2) a conceptual component associated with the development of new systems and ways of working in the company; 3) the human component related to human capital and the well-being of employees. scientists have proven (daly, teague & kitchen, 2003) that the amount of time that a company manager spends on managing these components depends on his level in the organizational hierarchy (corporate management level – the highest level; functional – middle level; operational – the lowest level). so, the technical component takes up most of the time of the operational level managers, while the conceptual and human component takes up little time. functional managers spend more time on the conceptual and human components. the technical component takes a little time. top management representatives spend most of their time on concept and people work. it has been established (gramatnikovski, stoilkovska, & serafimovic, 2015) that almost all companies want their employees and managers to solve technical problems in order to improve the quality of products and services. the career advancement of managers always depends on their ability to solve complex technical issues (develop ment of new processes and products, or the creation of better distribution systems, accurate pricing systems, or better service delivery systems). in today’s world, the weight of many companies is the fact that they provide privileges to managers with technical knowledge. therefore, managers are seeking to acquire existing technical skills. these skills are highly valued by business owners. it established (chmielecki, 2015) that the activities of a manager in the 21st century have changed a lot. it now consists of a series of separate, fragmented episodes that prevent managers from having long, uninterrupted periods of time to talk about planning, organizing, leading, and controlling the company’s financial and intellectual resources. research has found that only five percent of managers’ time is devoted to tasks that last more than one hour. a largescale study involving thousands of functional and corporate level managers identified seven main components of their work (kraut etс, 1989): 1) management of employee performance indicators (management); 2) direction of subordinates (education and training); 3) playing the role of a leader (representative) of one’s group (defending the group's interests); 4) management of team performance indicators (facilitation); 5) allocation of resources (decision making); 6) coordination of interrelated groups (cooperation); 7) tracking the business environment (scan to adapt). these seven management tasks are found at all levels of management. the importance of each task and the amount of time that company managers devote to this task significantly differ depending on the level of management. thus, operational managers devote most of their time to tasks "1" and "2"; functional managers are mainly occupied with tasks "3", "4" and "5"; and corporate managers deal with tasks "6" and "7". in other words, managers and top managers perform the same functions, but with varying degrees of attention given their position in the corporate hierarchy. however, whatever work the management of companies does, all its actions involve communications in social, group and interpersonal relations. scientists regard communications as the basis of human capital activity in a company. communications are business communication in formal and informal forms, which understood in the production process as a key to planning, directing, organizing and contro lling the resources of organizations to achieve goals. unlike formal relationships, informal communication not tied to a place of work and hierarchy (hynes, 2005). similar views on the content of communications as a business communication has (safran, 2010). he believes that communication is the process of generating, transmitting, receiving and interpreting messages in interpersonal, group, social and mass relations through written and oral formats, which will lead to profit. another view is formed by scientists (layhif & penrose, 2001): communications are a means of cooperation, interaction, ensuring the achievement of the goals of employees, organizations and society due to the fact that modern business is a complex production, the collective nature of labor, the use of resources. a similar opinion has (blalock, 2005), who defines the role of communications in a company as a means of exchanging information and opinions, drawing up plans and proposals, reaching agreement, baltic journal of economic studies 45 vol. 8 no. 1, 2022 executing a decision, sending and fulfilling orders, and conducting sales. a group of scholars (udegbe etc., 2012) who argue that communication is a means of success and company growth supports this view. a separate view is formed by scientists (conrad & newberry, 2011), who study not just the content of communications in a company but also the process of their implementation. in their opinion, the effectiveness of this process is the communication skills of the company’s employees, which is a value both for them and the company. thus, amidst the digital economy and the implementation of globalization changes in socioeconomic relations, communications play a leading role in the activities of any company, where they are used in the form of: – business communication (formal and informal); – means of cooperation, interaction, means of information exchange, exchange of opinions, drawing up plans and proposals, means of success and growth of the company; – communication process, the effectiveness of which depends on the skills of employees. it has been proven (bartels etс., 2007) that the models and styles of communication are moving from the formal top-down to an updated format of extended information between company employees so that it quickly reaches managers at management levels to make effective management decisions. under such conditions, a formed communicative climate is perceived as "the relationship of workers with an abstract to the quality of mutual relations and communication in an organization". these views affected by the workplace. consulting companies are no exception. in these companies, communications are one of the main tools for establishing effective work in the provision of consulting services. the study of the features of assessing the internal communications of consulting companies through the prism of the theoretical and methodological aspect determines the relevance of the chosen topic. the purpose of the article is to study the theoretical foundations for the formation of a communication system for internal consulting interaction; develop, on this basis, a scientifically methodical approach to assessing the state of the communication system of internal consulting interaction; present practical recommendations for the effective management of internal communications as in the case of consulting companies of ukraine. 2. theoretical background for the formation of consulting interaction a significant contribution to the study of modern consulting, its theoretical, methodological and practical aspects was made by well-known foreign and domestic researchers such as: e. shane (shane, 1969), l. greiner, r . metzger (greiner & metzger, 1983), r . yuksvyarav (yuksvyarav, khabakuk & leimann, 1988), t. clark (clark, 1995), m. kipping (kipping, 1999), v. aleshnikova (aleshnikova, 2000), o. trofimova (trofimova, 2002), g. marinko (marinko, 2005), p. block (block, 2007), j. o'mahony (o'mahony, 2010), v. verba (verba, 2012), a. blinov (blinov & dresvyannikov, 2013), n. evtushenko (yevtushenko, 2019) and others. given the historical development of the content of the definition of "consulting" from assistance (professional or expert) to the process (professional activity), it is proposed (yevtushenko, 2019) to identify consulting with consulting activity and understand it as a process agreed with customers to create professional consultants of customer enterprises in order to ensure efficiency and improve development. it is advisable to consider this process taking into account the modern concept of relationship marketing based on a client-oriented approach. interaction implemented within the framework of the marketing interaction system is defined as a set of active subjects that create and perform their activities through an effective communication system within the framework of a regulated project (process) to obtain the desired performance in accordance with the goals and values set based on a long-term partnership. the scientist proved (yevtushenko, 2017; 2019) that in order to conduct effective activities, a consulting company must, first of all, organize its own process of managing internal communications of consultants, called consulting interaction. this interaction is a professional communication process between the subjects of economic relations in the communicative space. consulting interaction is not a separate communication, but the process of organizing the ratio of the individual contribution of each consultant to the common cause. the process of consulting interaction between a consulting company and a customer enterprise is presented in the form of a diagram (figure 1), illustrating the relationship and communication between them. according to the scheme, a consulting company offers consulting services to the market as a noncommodity form of meeting the customer’s needs following its activities. to solve its existing problems (needs), the customer company puts an order to the consulting company, providing for the comprehensive satisfaction of the specified needs of the enterprise. in the process of providing consulting services, a consulting company introduces consulting products into the activities of a customer enterprise, which are an intelligent tool to meet a set of customer needs. the fundamental source of the quality of baltic journal of economic studies 46 vol. 8 no. 1, 2022 consulting interaction is the set of competencies of consultants in accordance with the standard of consulting services as a set of mandatory rules for the provision of services, designed to guarantee a high level of their quality at all stages of a consulting project. it is justified (yevtushenko, 2019) that in the course of consulting interaction, problem situations of the customer enterprise are solved using a commu nication system through which the attitudes of some participants are expressed to the knowledge and understanding of others that helps consultants to form and maintain business contacts with clients. if the consulting interaction is not established, the communications of its employees will become uncoordinated. consequently, the activity of the consulting company ceases to be manageable. in such circumstances, consultants are not able to give clients professional. the research proposed (yevtushenko, 2019) to understand the communicative process of consulting interaction as the process of exchanging professional information between two or more participants in the implementation of the activities of a consulting company, using a single communication base, a system of norms, rules and principles of consulting interaction. communications of the communicative process of consulting interaction act as a means of cooperation, an information and technical resource aimed at achieving the goals of all participants in the interaction. this confirmed in the research of scientists (fedorchenko & kirilova, 2004), who state that communications are the means through which two or more employees come together in a production process to exchange ideas and understanding among themselves. communications of the communicative process act as a means of cooperation (gudz & strelnikova, 2018) if they represented by a set of activities aimed at establishing two-way communi cation between enterprises using appropriate tools. given the above, it proposed to understand the communications of the communicative process of consulting interaction (yevtushenko, 2019) as a system of interconnected and interacting elements that ensure the exchange of information in accordance with the socio-economic needs of the participants in the interaction for a specific period both inside the consulting company and outside it. this system operates based on purposefulness, focus, multi-level and efficiency in accordance with the set of core competencies of consultants. the communication system of the communicative process in the activities of a consulting company implemented through the following types of consulting interaction (yevtushenko, 2019): 1) external consulting interaction. it passes between the consulting company and the customer enterprise, as well as the external environment (public and private enterprises). it is fair to identify external consulting interaction with a system of measures aimed at awareness of consumers of consulting services, contact c us to m er co m pa ny c us to m er co m pa ny c us to m er co m pa ny consulting product consulting product consulting product c on su lti ng c om pa ny se rv ic e se rv ic e se rv ic e se rv ic e order order order the need the need the need the need the need the need the need the need marketing system of interaction figure 1. scheme of consulting interaction source: (yevtushenko, 2019) baltic journal of economic studies 47 vol. 8 no. 1, 2022 audiences, and the formation of incentive motives for demand for consulting services. the nature of external communications in the process of implementing consulting interaction varies depending on relationships with suppliers, consumers, competitors, forms of state statistical reporting, etc., although the principles of their construction remain the same. 2) internal consulting interaction. it is formed within the consulting company itself and aimed at a group of professional consultants to provide them with an effective process for receiving, processing, accumulating, transferring timely and unconverted information between management levels. communications of internal consulting interaction depend on the influence of well-known factors, which include: the form of the organizational structure; company size; communication policy; professio nalism of consultants; the complexity of the process of consulting interaction; homogeneity or difference in the individual characteristics of consultants. given the level of management, internal communications divided into formal: vertical (from the highest levels of management to the lowest; from the lowest levels to the highest); horizontal (between different departments) between the head and his working group (apparatus) and diagonal; informal communications. the possibilities of developing feedback of the communicative process of consulting interaction are characterized by such manifestations as its cyclist, the spread of the semantic plane and the deepening of content, the increase in the level of informational and emotional identity (closeness of understanding), empathy, etc. yevtushenko n. (yevtushenko, 2019) found that under these conditions, the effect of communicative convergence (integration) was formed. this is such an effect that occurs because of the communicative process between the participants in the interaction in the development of a joint idea and the production of joint communicative actions, subject to the establishment of mutual understanding, the identity of the motivational attitude, value-psychological unity of the participants in the communicative process. the scientist notes that mutual understanding and psychological unity in the process of implementing consulting interaction is another indicator of the level of convergence of subjects of communication, which manifested through consistency, drawing up communicative actions. thus, the level of coordination of the actions of the subjects of communication in a situation where they take on the corresponding roles alternately depends on their involvement in the general context of communication as a whole, and on a specific general communicative action, incl. at the same time, the effectiveness of information exchange between the consulting company and the customer enterprise depends on the successful solution of the problem of correlating language means with the meaning of the message. 3. methodological provision considering the theoretical basis for the formation of consulting interaction, a scientific and methodological approach to assessing the state of the communication system of the communicative process of internal consulting interaction proposed for use in order to increase the loyalty of employees and their productivity and receive planned income. the implementation of this scientific and methodological approach relies on a process model for assessing the state of the communication system of the communicative process of the company’s internal consulting interaction (figure 2). the process model in the activities of a consulting company is realized at the following stages: step 1: the purpose: setting tasks in accordance with the problems that have arisen, taking into account the elements and tools of the communication system of internal consulting interaction. step 2: organization: determine the conditions of efficiency of the communication system of internal consulting interaction in the communicative space. step 4. action coordination: establish the relationship of communication processes in the system of communications of internal consulting interaction in the company. step 5. system diagnostics: to assess the state of the communication system of internal consulting interaction in the company using an effective strategic management tool – swot analysis. the object of the method is the communication system of the company’s internal consulting interaction. the essence of swot analysis is to study the external and internal environment, identifying the company 's strengths and weaknesses, development prospects and threats. the result of the swot analysis is the development of an internal communications management strategy aimed at developing a consulting company and preventing problems that may arise during this process. step 6. recommendations and control: develop management solutions to improve the existing communication system of the communicative process of internal consulting interaction based on a set of competencies of a manager-consultant. this will help to regulate and control the work of the company's consultants. we believe that the main element of management models are managers-consultants. according to the general provisions of the decision-making theory, they develop, make and implement managerial decisions within the framework of each individual problematic issue that arises in the communication baltic journal of economic studies 48 vol. 8 no. 1, 2022 system of the communicative process of the company's internal consulting interaction. let us consider in more detail the theoretical and practical aspects of the scientific and methodological approach to assessing the state of the communication system of the communicative process of internal consulting interaction in the company. 3.1. setting tasks in accordance with the problems encountered in internal communications the role of internal communications is "building and nourishing employee relations, establishing trust, providing timely and reliable information and thereby contributing to general motivation, particularly in times of change and stress" (dolphin, 2005). problems in the communication system of internal consulting interaction are associated with violations that formed during the implementation of this interaction. however, often the sources of problems are the planned goals of the activities of consulting companies, in particular, goals aimed at: – ensuring the speed and quality of information exchange of the communication system of internal consulting interaction in the company; – change management support during the implementation of internal consulting interaction; – strengthening the level of loyalty and involvement of employees in the communication process of the company 's internal consulting interaction; – increasing the productivity of consultants and the efficiency of business processes in the company. the regulation of the communication system for internal consulting interaction in the company is formed in the field of application when determining the elements of the system and tools for managing it. it established that a high-quality communication system of consulting interaction is formed and implemented in the process of balancing the elements of the communication process, divided into stages of assessing the state of the communication system of internal consulting interaction of the company resource result the purpose increasing the loyalty of consultants, their productivity and receiving the planned income setting tasks in accordance with the problems encountered organization determine the conditions for the effectiveness of the communication system action coordination establish the relationship of communication processes system diagnostics assess the state of the communication system recommendations and control develop management solutions to improve the existing communication system in the company a new problem in the communications system influence of internal and external factors on activity n eg at iv e re su lt p os iti ve re su lt figure 2. process model for assessing the state of the communications system of internal consulting interaction source: developed by authors baltic journal of economic studies 49 vol. 8 no. 1, 2022 components: social and managerial and technical and economic. the social and managerial component of the communicative process of consulting interaction takes into account the following elements (yevtushenko, 2019): – general professional competencies of consultants (education, length of service (experience), certification results, self-education, advanced training); – knowledge of information technology consultants (knowledge of programming languages, application programs, operating systems); – psychological characteristics of consultants (adaptability, readiness for change, loyalty, perception of corporate values, sociability, openness, emotio nality, responsibility); – social interaction (conflict, feedback, cohesion, group interactions); – the role of consultants in the management system (loyalty to management, awareness of goals, initiative, ability to participate in management); – elements by management functions; – coordination of communication transfer in the control system (uniform distribution of tasks, reaction to information overload, rigidity of the hierarchy, degree of separation of access to information). the technical and economic component of the communicative process of consulting interaction considers the following elements (yevtushenko, 2019): – hardware (number and models of computers, wear and tear, degree of utilization, capital productivity); – software (quantity, types, cost, progressiveness, return, safety); – communication channels (types, workload, throughput, speed, failure, noise, protection); – networks (types, degree of protection, sufficiency); – information support (speed of access, degree of use, method of access to databases, updating); – information processing systems (software and hardware complexes, crm systems, etc.). detailing the communication systems of the communicative process of internal consulting interaction in the company occurs through the following management tools: 1) corporate intranet portal; 2) corporate social network; 3) distribution by e-mail; 4) information boards (stands); 5) newsletters; 6) job descriptions; 7) meetings of managers with staff; 8) videoconferencing; 9) adaptation interviews; 10) feedback. 3.2. conditions for the effectiveness of the communication system the implementation of the communicative process of consulting interaction takes place in a communicative space, which is known as an environment that provides conditions for the formation and implementation of professional communications in the course of communication between the participants in the interaction. the basic rule for the development of a communication space in a company: communications are tied to a corporate strategy on which the goals and content of messages will depend. the effectiveness of consulting interaction in the communicative space depends on the components of the communicative process, which include (yevtushenko, 2019): 1) goals of communication. the primary purpose of communications is to provide recommendations for the formation of needs, taking into account changes and stimulating demand. 2) multi-level communications. communication is implemented taking into account the relations and positions of partners, their relationship and mutual influence under such levels: internal language; communication between people; group communication. from the point of view of promoting a consulting service, communication at all these levels is associated with two groups of problems. the first group concerns the internal language and communication between people, the level of which depends on the socio-psychological aspects. the second group is related to the professionalism of consultants. 3) direction of the message. it is associated with the mutual understanding of partners and feedback in the process of implementing consulting services to the customer enterprise. communication in this process is defined as a two-way direction of information, proving the existence of a communication chain, where the reaction of the recipient is also a signal for the sender. 4) efficiency of communications. it depends on the means of communication and channels for trans mitting information between the participants in the consulting interaction. 5) corporate culture through communication norms and communication values. the relationship between the components of the communicative process of consulting interaction in the communicative space sis hown in figure 3. it has been proven (yevtushenko, 2017; 2019) that it is advisable to consider the communicative space in the process of formation and implementation of consulting interaction in a sociocultural and ethnopsychological context. thus, in the communicative plane, feedback provides psychological, social, informational, organizational, technological effectiveness of the communication process of consulting interaction. the psychological component shows the level of comfort in communication, the social component indicates the proximity of views, the information component indicates an adequate and positive perception of the information provided, the baltic journal of economic studies 50 vol. 8 no. 1, 2022 intentions and goals of the participants of the communicative process mutual understanding of partners and feedback means, messages and channels of information transmission corporate culture channel transmitting communication communicative process customer company consulting communicative space components of the communicative process company relationships and positions of partners, their relationship and interaction figure 3. conditions for the effectiveness of consulting interaction in the communicative space source: (yevtushenko, 2017; 2019) organizational component indicates the effectiveness of the organizational conditions of the communi cation process, and the technological component indicates proper and reliable technical and technological support of the process. in such conditions, communications are able to provide the necessary level of information exchange between structural elements both at the stage of formation of demand for a consulting service and at the stage of its implementation to the customer enterprise. the effectiveness of managing a consulting company as a separate system will depend on the goals and quality of communications conducted within the framework of internal and external consulting interaction. 3.3. the relationship of communication processes in the communication system of the company it has been determined (yevtushenko, 2017) that it is advisable to consider the communication system of the communicative process of consulting interaction within the framework of two styles of interactions – cooperation and competition. cooperation (collaboration, partnership) as an organizational and economic aspect of consulting interaction forms the processes of coordination of participants’ interaction. competition (rivalry, conflict) is a form of productive collision of partici pants in consulting interaction in the struggle for their interests within the framework of the socio-psychological aspect. the effectiveness of communications of consulting interaction is ensured by such specific functions as: informational; 2) valueoriented; 3) regulatory. a high-quality communication system of the communicative process of consulting interaction (yevtushenko, 2019) is based on balancing the elements of the socio-management and technical and economic components. in this case, internal and external consulting interaction is organized between the elements within the company’s management system and externally accompanied by appropriate professional communications. the main purpose of the communication system of the communicative process of consulting interaction is to guarantee the necessary and sufficient information exchange within the framework of internal and external interaction. this exchange creates conditions for the rapid exchange of information and the creation of professional messages between external and internal elements of the system, which have the necessary level of information protection at minimal cost. baltic journal of economic studies 51 vol. 8 no. 1, 2022 4. empirical study the stage "diagnosis of the communication system" of the process model for assessing the state of the communication system of internal consulting interaction had a practical implementation. diagnostics relied on the top 15 in-demand consulting companies on the ukrainian consulting services market. these companies were selected by clutch experts in 2020 among 102 companies. in the study (yevtushenko & halimon, 2021), based on these data, a leadership matrix was formed, taking into account the typology of f. kotlyar’s competitive strategies. within the framework of the leadership matrix, the top 15 consulting companies in ukraine were divided according to their capabilities in relation to their competitive positions in the market (table 1). table 1 distribution of the top 15 consulting companies in ukraine in the f. kotliar leadership matrix (2020) matrix quadrants number companies location "leader" 1 reprezent kyiv "challenger" 2 rozdoum kharkiv 6 finmodelslab lviv "nishevik" 3 salestech kyiv 4 addition advisory kyiv 5 the arbridge kyiv "follower" 7 pragmatic dlt kyiv 8 creative cooperative odesa 9 fiddle.digital kyiv 10 azon5 lviv 11 a-hr kyiv 12 keplercode lviv 13 indigo tech recruiters kyiv 14 nullgravity kyiv 15 pragmaspace kharkiv source: (yevtushenko & halimon, 2021) in the course of diagnosing the communication system of internal consulting interaction of ukrainian consulting companies, it was found that the managers of these companies strive to ensure the effectiveness of the internal communication system, taking into account the elements and tools for managing them. at the same time, companies operate in the unstable competitive environment of ukrainian reals under the influence of the economic and political crisis. at the first stage of diagnosing the communication system of internal consulting interaction, we will conduct a swot analysis of nine consulting companies that are in the "follower" square of the f. kotlyar leadership matrix. note that these companies have little experience in the market of consulting services, the purpose of which is the opportunity to become market leaders. let find the strengths and weaknesses of these companies according to the object of study – the communication system of internal consulting interaction (table 2). based on the results of the analysis of strengths and weaknesses, it found that the communication system of internal consulting interaction of companies located in the "follower" square of the f. kotlyar leadership matrix has all the conditions for effective communications within companies. the communications of these companies are implemented with the help of modern tools through communication channels, and the consultant-managers have professional experience working with them. however, communication channels of internal consulting interaction between companies are still scattered. it has been established that in the development of internal communications, the majority of consultants are passively involved, focusing most on paper communication channels. it marked that companies in the process of developing a communication system for internal consulting interaction do not take into account regulations and information standards against the backdrop of the existing corporate culture. at the second stage of diagnosing the communi cation system of internal consulting interaction of the studied consulting companies, we will identify the opportunities and threats of their system in order to develop directions for their further research (table 3). table 2 strengths and weaknesses of ukrainian companies located in the "follower" square of f. kotlyar’s leadership matrix strengths weaknesses – development of informal communications; – information obedience of the staff; – information memory, taking into account the experience of consultants in working with tools and communication channels of internal consulting interaction; – high level of loyalty and commitment to the company; – availability of elements for building a communication system of consulting interaction; – fulfillment of the conditions for conducting effective communications; – presence of traditions and corporate culture. – differences in communication channels; – insufficient support of the communication system by information technologies; – focus on paper communication channels; – passivity of staff participation in the development of the communication system; – lack of information standards in the company, regulations and information cleaning system (blocking and deleting outdated information). source: built by authors baltic journal of economic studies 52 vol. 8 no. 1, 2022 based on the results of the analysis of opportunities and threats, it found that the communication system of internal consulting interaction of companies located in the "follower" square of the f. kotlyar leadership matrix has potential opportunities for the development of this system against the background of existing threats. these companies are constantly updating information support and technological equipment. consultant-managers of companies develop information policy and standards of consulting services. in the course of the work of the companies under study, measures were taken to improve the communication skills of consultantsmanagers at the relevant levels of management. these opportunities affect the increase in the loyalty of consultants and the growth of their productivity, which guarantees the receipt of planned income in the future. however, in the companies under study, against the background of opportunities, there are threats associated with the theft of valuable information and production losses during the transmission of information with distortion. informational disorientation of consultants in the company and constant violations on the part of consultants have a negative impact on increasing the loyalty of consultants and their productivity. in addition, measures associated with the introduction of new software or equipment into the activities of companies accompanied by resistance to change. according to the results of the swot analysis, it was found that in the practice of the companies under study, sometimes there are violations in the communication system of internal consulting interaction, characterized by a lag, or management processes from technological support, or vice versa. these shortcomings, consultant-managers seek to mend. however, in most cases, the studied consulting companies located in the follower square of the f. kotlyar leadership matrix have young specialists among consultant managers with little work experience and a set of competencies. 5. recommendations in order to address the issues of increasing the productivity of the consultant-managers of the companies, which are located in the "follower" square of the leadership matrix of f. kotlyar, we propose to revise the set of their competencies. the dissertation research (yevtushenko, 2019) presents a scientific and methodological approach to building the "effective consultant" model of a consulting company. the result of this approach was the developed set of key competencies for each group of consultants (manager consultant, expert consultant, specialist consultant) within the framework of the "intellectual resource" package according to the levels of human capital development. the research substantiats that such an approach will allow companies to effectively use the intellectual knowledge of employees as a sustainable competitive advantage and achieve a high economic effect in the shortest possible time. the necessity and importance of this approach brought up in the article "depen dence of the knowledge structure of the company employees on a set of the competencies" (yevtushenko, kuzminska & kovalova, 2021). since the consultant-manager administers the communicative process of consulting interaction, let consider his activities in more detail. a consultantmanager, from the standpoint of the content of his characteristics, is a specialist endowed with the functions of a leader in managing a business and its individual business processes, taking into account the goal-setting system in a strategic perspective table 3 opportunities and threats of ukrainian companies, located in the follower square of the f. kotliar leadership matrix opportunities threats – increasing productivity in the process of building a communications optimization system; – improving the quality of interaction between consultants in the company; – reorientation of consultants' communications from "where to find out" to "where is more accurate information"; – carrying out activities to attract consultants to active participation in the implementation of the communication system of internal consulting interaction; – constant updating of information support of the consultants' communication system; – development of information policy and standards of consulting services; – development of communication skills of consultant-managers by management levels. – free filling of the information vacuum with incorrect information; – violation of the communication system of internal consulting interaction in the company; – reducing the productivity of consultants in the process of finding information; – theft of professional information; – production losses during the transmission of information with distortion; – information disorientation of consultants in the company; – resistance to change; – reduction of consultants' involvement in the system of communications of internal consulting interaction, as a consequence of loyalty. source: built by authors baltic journal of economic studies 53 vol. 8 no. 1, 2022 (yevtushenko, 2017). in the practice of a consulting company, a consultant-manager is: – an official who has access to the communication system of expert consultants and specialists, software and hardware, business information and communication processes; – the main coordinator and organizer of the communication system of internal consulting interaction and manages the communication processes formed in the course of this interaction; – responsible for the results of the formation and implementation of consulting interaction (internal and external) and the efficiency of the consulting company. considering the foregoing, it is proposed to add to the existing competencies of a consultant-manager those that are scientifically based following the "effective consultant" model (yevtushenko, 2019), in particular: – ability to comply with ethical behavior and the code of professional conduct and ethics (organizational model of corporate culture) established at the state or international level; – knowledge of planning changes and developing new projects; – ability to evaluate and ensure the quality of work (projects) and decisions; – interaction risk management skills, including risk identification (prevention, reduction, transfer, acceptance, contingencies) and the ability to assess it; – the ability to deepen knowledge and improve skills, based on the experience of one's own and other past tasks; – knowledge of corporate culture. 6. conclusions the results of the process model within the framework of the scientific and methodological approach to assessing the communication system of the communicative process of consulting interaction are indicators of the management system that characterize: – the effectiveness of the management system, expressed through the results of the company 's activities in accordance with the financial statements; – the content and organization of the management process, expressed through indicators of managerial work (indicators of labor productivity); – the effectiveness of the organizational structure and its activities (the norms of corporate culture and management standards, standards of consulting services, contractual terms for the distribution of rights and responsibilities of consultants, etc. have been adopted). if, according to the results of the process model, within the framework of the scientific and methodological approach to assessing the communication system of internal consulting interaction, the activities of managers are not productive, then the consulting company does not achieve the planned financial results. to solve problematic issues in the process of internal consulting interaction, it is advisable for the manager to develop measures to improve this system. in this direction, the consultant-manager of the company is obliged to optimize the organizational structure of management, find the criteria for the productivity of consultants and set their standard values within their own company. it is also desirable for the company’s consultant manager to redistribute the rights and obligations of consultants (experts and specialists), determine the set of consultants’ competencies in accordance with the "effective consultant" model with the help of outside experts, and plan activities to improve the qualifications of consultants. in such a coordinated management system, the manager of a consulting company will understand the level of competence of his consultants, which will affect the revision of the level of expenses for the salaries of consultants and the system of their motivation. the consultant of such a company will show an emotional attachment to the leadership and give himself fully to his potential. as a result, the value of the existing communication system of internal consulting interaction is able to develop staff loyalty, which will accompanied by the effect of communicative convergence and the receipt of planned income. references: aleshnikova, v. i. 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(1988). management consulting : theory and practice. moscow: economics. baltic journal of economic studies 146 vol. 7 no. 2, 2021 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: andriy.maksymuk@lnu.edu.ua orcid: https://orcid.org/0000-0002-5119-0380 2 ivan franko national university of lviv, ukraine. e-mail: nataliya.kuzenko@lnu.edu.ua orcid: https://orcid.org/0000-0003-4935-8102 doi: https://doi.org/10.30525/2256-0742/2021-7-2-146-160 institutional factors of economic performance: evidence from the world value survey andriy maksymuk1, nataliya kuzenko2 abstract. this article highlights the impact of values on the country’s welfare. values that are quite constant over a long period of time form an institutional framework within the country. they can contribute to economic development or even prevent it. the aim of the article is to explore, what is the influence of social values, democracy and trade on welfare levels in different counties. the hypothesis is that the dominance in society of secular-rational values and the values of self-expression, democracy and trade (openness to the world) have a positive effect on the level of welfare of countries. the empirical part of the paper is based on the comparative analysis of relationship between gdp per capita and four values such as tolerance and respect, obedience, trust and freedom of choice for two waves of wvs – 2005–2009 and 2010–2014. using correlation and regression analysis, the relationships between these indicators were evaluated. these values have a positive impact on welfare in oecd countries, some countries of latin america, asia and africa with middle income per capita. however, there is a negative relationship between obedience and gdp per capita. this value is more important for some african and asian countries and india. the relationship between gdp per capita and the aggregate value index showed a strong positive correlation for oecd countries. then the regression model was estimated to assess the impact of values, trade and level of democracy on welfare growth and development. the results of the regression analysis showed a significant effect of the aggregated value indicator for all six samples, but this effect is weaker for high-income countries. the effect of the level of democracy is significant and positive only for the sub-sample of democratic countries, while it is negative for high-income countries. the effect of the level of trade on gdp per capita is statistically significant for the sample of all countries, the sub-sample of non-democratic countries and the sub-sample of high income and upper-middle income countries. thus, we conclude that the institutional factors (the values and the level of democracy) are important determinants of gdp per capita for democratic countries while for non-democratic countries trade is more important. key words: social values, formal and informal institutions, gdp per capita, trade, democracy. jel classification: a13 1. introduction the difference of economic development in the world encourages scientists and researchers to find answers to the question of why the level of welfare in some countries is high, and in others, on the contrary, is low. there is a need for interdisciplinary researches that take into account not only quantitative economic factors but also other formal and informal institutional factors. in this paper, our focus is on the relationship between informal institutions and economic development. values that are quite constant over a long period of time form an institutional framework within the country. however, globalization affects social processes in countries, the reaction and perception / non-perception of society of certain value categories. this, in turn, can affect government policy and economic well-being. values can contribute to economic development or even can prevent it. we assume that level of democracy and trade (openness level) as well as system of values (tolerance and respect for other people, trust, freedom of choice and obedience) has impact on gdp income level. the higher the level of secular-rational and self-expression values, the level of democracy and trade (openness), the higher gdp level is. it is our hypothesis we are going to test in this paper. baltic journal of economic studies 147 vol. 7 no. 2, 2021 based on g. tabellini’ approach (tabellini, 2005), we constructed an aggregate value index that include four indicators – tolerance and respect, obedience, trust and freedom of choice. according to inglehart-welzel cultural map (inglehart and welzel, 2020), values like that describe culture of country. depending on what values prevail in society, it can be assumed what value system dominates in a country – traditional or secular; survival or self-expression. this allows us to analyse whether the propensity for conservative views and materialistic values (survival values) really contribute to economic well-being or vice versa. comparative analysis of relationship between gdp per capita and four values such as tolerance and respect, obedience, trust and freedom of choice for two waves – 2005–2009 and 2010–2014 – allowed us to make certain assumptions about the importance and impact of values on the level of well-being. there is a positive relationship between gdp per capita tolerance and respect, trust and freedom of choice. these values are likely to have a positive impact on welfare in oecd countries, some countries of latin america, asia and africa with middle income per capita and up as they are above the trend line. for other countries (with some development troubles) these values are not so important. however, there is a negative relationship between obedience and gdp per capita. this value is more important for some african and asian countries, and india. correlation analysis of the relationship between gdp per capita and the aggregate value index allowed to determine the nature of this relationship and more clearly classify the countries where these values play an important role and, accordingly, contribute to economic development. there is a strong positive correlation for oecd countries. afterwards we add two more variables in the analysis – the democracy index and trade which shows the country’s openness to the world. also these variables are the criteria for dividing our counties for samples. we built regression model to evaluate the influence of values, trade and level of democracy on welfare growth and development. there is a significant effect of the aggregated value indicator for all six samples (depends on income and democracy level), but the effect is weaker for high-income countries. the coefficient for the level of democracy is significant and positive only for the sub-sample of democratic countries, while it is negative for the high-income countries. the effect of the level of trade on gdp per capita is statistically significant for the sample of all countries, the sub-sample of nondemocratic countries and the sub-sample of high income and upper-middle income countries. we conclude that the institutional factors (the values and the level of democracy) are important determinants of gdp per capita for democratic countries while for non-democratic countries trade is more important. 2. literature review the starting point of our study is the inglehartwelzel cultural map (inglehart and welzel, 2020). this map illustrates two main dimensions of intercultural variation: traditional values versus secular values, and survival values versus self-expression values. traditional values emphasize the importance of religion, parent-child ties, deference to authority and traditional family values. people who embrace these values also reject divorce, abortion, euthanasia, and suicide. these societies have high levels of national pride and a nationalistic outlook. secular-rational values have the opposite preferences to the traditional values. these societies place less emphasis on religion, traditional family values and authority. divorce, abortion, euthanasia, and suicide are seen as relatively acceptable (suicide is not necessarily more common). survival values place emphasis on economic and physical security. it is linked with a relatively ethnocentric outlook and low levels of trust and tolerance. self-expression values give high priority to environmental protection, growing tolerance of foreigners, gays and lesbians, and gender equality, and rising demands for participation in decision-making in economic and political life (inglehart and welzel, 2020). on the development path values of self-expression become more important than values of survival. changing the position of the country on the map diagonally from the bottom up means development. according to inglehart and welzel (inglehart, welzel, 2005), the greatest changes in society’s value system occur on the stage of transition from an agrarian to an industrial economy. and at the stage of transition from an industrial society to a knowledge society, the role of individualism increases. therefore, the values of survival change towards the values of self-expression. hence, we assume that such values as tolerance and respect for other people, trust and freedom of choice have a positive impact on income level; obedience has a negative influence. moreover, we investigate the influence of values among such factors as trade and democracy regime on gdp per capita level. the idea is to find out whether the influence of values is the same for democratic and authoritarian regimes. the theoretical and methodological basis of our study are the works of such authors as r . inglehart and c. welzel (inglehart, welzel, 2005), g. tabellini (tabellini, 2005), s. knowles and c. weatherston (knowles, weatherston, 2006), c. dobler (dobler, 2011), d. pyrkosz (pyrkosz, 2017), g. amoranto, n. chun, and a. deolalikar (amoranto, chun, deolalikar, 2010) and others. c. dobler (dobler, 2011) in her work investigates the impact of formal and informal institutions on baltic journal of economic studies 148 vol. 7 no. 2, 2021 economic growth in the middle east and north africa. the author attributes trust, limited and generalized morality and dignity, and life after death to informal institutions. the author defines beliefs as accumulating of physical and human capital. c. dobler refers to formal institutions: property rights; legal system – the rule of law, form of government – democracy. c. dobler concludes: “regarding informal institutions, the evaluation of wvs data indicated a societal structure of limited morality in the mena region. the results regarding trust and control are not that obvious; however, respect and obedience indicate a hierarchical society with an emphasis on collective and hierarchic structures. in addition, the analysis of further survey questions showed a traditional attitude regarding the roles of women, education, work, and family in general” (dobler, 2011). d. pyrkosz (pyrkosz, 2017) studies the cultural determinants of economic development of poland and ukraine in the period 1990–2014. this research is also based on wvs data. the author emphasizes that values are an important factor in economic development, and common values between countries strengthen their interaction and provide comparative advantages. the author believes that poland needs to develop rational values, and ukraine should develop the values of selfexpression. g. amoranto, n. chun, and a. deolilakar (amoranto, chun, deolalikar, 2010) explore the relationship between class status and more progressive values. the study is based on the world values survey (wvs) data and covers the period 1996–2008 for different countries. the authors associate the middle class not only with parameters such as consumption or income, but also with higher education, more skilled and stable jobs and the ability to “save”. the authors formed six groups of values that contribute to greater economic growth and prosperity: market competition, increased mobility, trust, gender equality, the value of science and technology, and political activism. they believe that the middle class plays a greater role in political activity compared to the poor and upper classes, so the middle class is especially important in the development of society, because it requires greater political responsibility. in all these works, values are an important factor in economic and institutional development, which indicates the relevance of this study. despite the fact that the issue of values is covered in many works, there is still a need for further research, as the world is constantly changing and economic development is rather a dynamic process. 3. methodology the methodology of our study is based on papers of g. tabellini (tabellini, 2005), s. knowles and c. weatherston (knowles, weatherston, 2006). later, this approach was used by c. dobler (dobler, 2011). using world value survey (wvs) data, g. tabellini (tabellini, 2005) developed an aggregated index of four cultural values: trust, control, respect, and obedience. we also used these values, but over different time period, for different sample of countries and on the basis of different indicators (questions) of wvs: 1. tolerance and respect for other people (percentage of people that consider it especially important that a child learns tolerance and respect for other people at home). 2. obedience (percentage of people that consider it especially important that a child learns obedience at home). this factor does not promote growth. according to g. tabellini, obedience is a typical characteristic of hierarchical societies where individuality is suppressed and obedience is more important than personal opinion and responsibility. suppression of individuality makes co-operation difficult and affects economic growth negatively. 3. trust in people you meet for the first time (proportion of people reporting that people you meet for the first time can be completely or somewhat trusted). according to g. tabellini, high level of trust decreases transaction costs, thus increasing the number of transactions and promoting economic growth. 4. freedom of choice and control (10-point scale, where 10 means “a great deal of choice” to indicate how much freedom of choice and control you feel you have over the way your life turns out). we believe that the more control you feel you have over the way your life turns out, the higher output you produce. similarly to g. tabellini, we calculated an aggregated value indicator, using the following formula: aggregated_indicator = tolerance&respect obedience + trust + 10*choice&control (1) the indicator of freedom of choice and control, based on the 10-point scale, was multiplied by 10, in order to convert it to the 100-point scale (like other indicators). the indicator of obedience that is expected to show negative relationship with gdp per capita has a minus sign in this formula. this aggregate index allows us to assess the relationship between welfare and values and then using regression analysis to model the impact of the aggregate value index, democracy and trade on gdp per capita. 4. empirical results and discussion the empirical part of the paper is built on the comparative analysis of relationship between gdp per capita and four values such as tolerance and respect, obedience, trust and freedom of choice for two waves – baltic journal of economic studies 149 vol. 7 no. 2, 2021 2005–20091 and 2010–20142. then we build regression model to assess the impact of values, trade and level of democracy on welfare growth and development. figure 1 shows relationship between tolerance and respect for other people and gdp per capita in studied countries. we have calculated logarithms of average gdp per capita over 2005–2009 for each country using the world bank data3. we believe that the more a country deviates from traditional values, the higher its level of wellbeing is compared to other countries. african and asian countries are generally located in the bottom left corner, what means that they do not pay enough attention to this value and have comparatively low gdp per capita. oecd countries are located in the top right corner, what means that they have comparatively high gdp per capita and pay much attention to tolerance and respect for other people. ukraine is located above the trend line, thus ukrainians do not pay enough attention to this value, and percentage is one of the smallest in the world. since several countries were covered by both waves, it is worth analysing how their value orientations have changed. percentage of people that consider it especially important that a child learns tolerance and respect for other people at home decreases in south africa (-25.4 percentage points), south korea (-16.1), argentina (-13.3), and china (-12.5). meanwhile, the percentage increases in india (+33.5), thailand (+6.7), romania (+6.6), and slovenia (+6.2). a slight increase is also recorded in ukraine (+2.9). in general, data from the last wave show weaker relationship between this indicator and gdp per capita (figure 2). ukraine moves below the trend line, what means that this value becomes more important for ukraine, than the world’s average level for countries with comparable levels of gdp per capita. ukraine is located on the graph near armenia, nigeria, morocco and tunisia. negative relationship is found between gdp per capita and percentage of people that consider it especially important that a child learns obedience 1 the wave 5 of 2005-2009 covers 48 countries: argentina, australia, brazil, bulgaria, canada, chile, china, colombia, cyprus, finland, france, georgia, germany, ghana, hungary, india, indonesia, italy, jordan, south korea, malaysia, mali, mexico, moldova, morocco, netherlands, norway. peru, poland, romania, russia, rwanda, serbia, vietnam, slovenia, south africa, spain, sweden, switherland, thailand, turkey, ukraine, egypt, great britain, usa, burkina faso, uruguay and zambia. 2 the wave 6 (2010-2014) covered 54 countries: australia, chile, cyprus, estonia, germany, japan, south korea, kuwait, netherlands, poland, qatar, singapore, slovenia, spain, sweden, usa, uruguay, algeria, azerbaijan, argentina, armenia, brazil, belarus, china, colombia, ecuador, georgia, iraq, kazakhstan, jordan, lebanon, libya, malaysia, mexico, peru, romania, russia, south africa, thailand, turkey, ghana, haiti, india, kyrgyzstan, morocco, nigeria, pakistan, philippines, rwanda, zimbabwe, tunisia, ukraine, egypt, and uzbekistan. 3 world development indicators, 2020. gdp per capita (current us$) | world bank databank. [online] available at: https://data.worldbank. org/indicator/ny.gdp.pcap.cd (accessed 30 april 2020) argentina switzerland brazil bulgaria canada chile china colombia cyprus finland france georgia germany ghana hungary india indonesia italy jordan south korea malaysia mali mexico moldova morocco netherlands norway peru poland romania russia rwanda serbia vietnam slovenia south africa spain sweden australia thailand turkey ukraine egypt great britain usa burkina faso uruguay zambia y = 0,0888x + 2,514 r² = 0,4796 6,00 7,00 8,00 9,00 10,00 11,00 50 55 60 65 70 75 80 85 90 95 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 05 -2 00 9 percentage of people that consider it especially important that a child learns tolerance and respect for other people at home figure 1. relationship between gdp per capita and tolerance and respect, 2005–2009 baltic journal of economic studies 150 vol. 7 no. 2, 2021 australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil south africa china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia belarus thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = 0,0369x + 6,5449 r² = 0,1286 6,00 7,00 8,00 9,00 10,00 11,00 12,00 40 45 50 55 60 65 70 75 80 85 90 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 percentage of people that consider it especially important that a child learns tolerance and respect for other people at home figure 2. relationship between gdp per capita and tolerance and respect, 2010–2014 argentina australia brazil bulgaria canada chile china colombia cyprus finland france georgia germany ghana hungary india indonesia italy jordan south korea malaysia mali mexico moldovа morocco netherlands norway peru poland romania russia rwanda serbia vietnam slovenia south africa іспанія sweden switzerland thailand turkey ukraine egypt great britain usa burkina faso uruguay zambia y = -0,0463x + 10,852 r² = 0,3089 6,00 7,00 8,00 9,00 10,00 11,00 13,4 23,4 33,4 43,4 53,4 63,4 73,4 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 05 20 09 percentage of people that consider it especially important that a child learns obedience at home figure 3. relationship between gdp per capita and obedience, 2005–2009 at home. oecd countries are located in the top left corner, while african countries are located in the bottom right corner (figure 3). many communist or post-socialist countries are located in the bottom left corner, what means that people in these countries do not consider obedience to be important, but the gdp per capita in these countries is much lower than the one in most developed countries. ukraine is also baltic journal of economic studies 151 vol. 7 no. 2, 2021 located below the trend line, what means that people do not consider obedience very important compared to some asian, african and latin american countries. compared to the previous wave, the relationship between the obedience and gdp per capita also becomes weaker, but negative relationship persists (figure 4). having analysed dynamics of this indicator, we have found that the highest growth is recorded in india (+34 percentage points), and uruguay (+13.1), while the highest decrease is recorded in egypt (-25.5), morocco (-21.7), and rwanda (-18.2). in ukraine, the obedience also becomes less important, compared to the previous wave (-7.6 percentage points). the relationship between the level of trust and gdp per capita is positive (figure 5). oecd countries are located in the top right corner, while african, asian, south american and former ussr countries (including ukraine) are located in the bottom left corner, what means that the level of trust in other people is low in these countries. it is worth mentioning that the poorest african countries (mali, burkina faso, and rwanda) report average levels of trust and even higher than in some eu countries. for the trust in people you meet for the first time, the highest growth is found for chile (+10.4 percentage points), south africa (+9.4), and ukraine (+9.1), while the highest decrease is found for sweden (-11.2), uruguay (-8.6), and ghana (-7.3). in 2010–2014, the relationship between the level of trust and gdp per capita becomes weaker (figure 6). in ukraine, both the level of gdp per capita and the level of trust increase. the relationship between the perception of freedom of choice and control and gdp per capita is also positive (figure 7). african and post-socialist countries (including ukraine, with one of the lowest scores) are located in the bottom left corner. oecd countries (somewhat higher) and latin american countries (somewhat lower) are located in the top right corner. some countries are located in the bottom right corner, which means that their perception of freedom of choice and control is high, but their gdp per capita is not high enough (asian, african countries and moldova). however, the countries with the low level of the perception of freedom of choice and control, but high level of gdp per capita are located in the top left corner: italy, poland, hungary, and the netherlands. concerning the perception of freedom of choice and control, the largest decrease in comparison to the previous has been recorded in russia (-1.08), argentina (-0.53), south africa (-0.49), and jordan (-0.37). the largest growth of this indicator is recorded in morocco (+0.88), thailand (+0.61), ukraine (+0.54), and slovenia (+0.39). compared to the previous wave, the relationship between this indicator and gdp per capita has become weaker (figure 8). ukraine is again below the trend line near other post-socialist and north african countries. countries with high gdp per capita and high level of perception of freedom of choice and control are located in the top right corner (qatar, kuwait, australia, australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil belarus china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia south africa thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = -0,0278x + 10,16 r² = 0,203 6,00 7,00 8,00 9,00 10,00 11,00 4 14 24 34 44 54 64 74 84 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 percentage of people that consider it especially important that a child learns obedience at home figure 4. relationship between gdp per capita and obedience, 2010–2014 baltic journal of economic studies 152 vol. 7 no. 2, 2021 argentina australia brazil bulgaria canada chile china colombia cyprus finland france georgia germany ghana hungary india indonesia italy jordan south korea malaysia mali mexico moldova morocco netherlands norway peru poland romania russia rwanda serbia vietnam slovenia south africa spain sweden switzerland thailand turkey ukraine egypt great britain usa burkina faso uruguay zambia y = 0,0445x + 7,7591 r² = 0,2011 6,00 7,00 8,00 9,00 10,00 11,00 8 18 28 38 48 58 68 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 05 -2 00 9 proportion of people reporting that people you meet for the first time can be completely or somewhat trusted figure 5. relationship between gdp per capita and trust, 2005–2009 australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil belarus china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia south africa thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = 0,0254x + 8,4743 r² = 0,0465 6,00 7,00 8,00 9,00 10,00 11,00 12,00 5 15 25 35 45 55 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 proportion of people reporting that people you meet for the first time can be completely or somewhat trusted figure 6. relationship between gdp per capita and trust, 2010–2014 baltic journal of economic studies 153 vol. 7 no. 2, 2021 argentina australia brazil bulgaria canada chile china colombia cyprus finland france georgia germany ghana hungary india indonesia italy jordan netherlands malaysia mali mexico moldova morocco south korea norway peru poland romania russia rwanda serbia vietnam slovenia south africa spain sweden switzerland thailand turkey ukraine egypt great britain usa burkina faso uruguay zambia y = 0,7813x + 3,4102 r² = 0,1336 6,00 7,00 8,00 9,00 10,00 11,00 5 5,5 6 6,5 7 7,5 8 8,5 lo ga ri th m o f a ve ra ge g d p pe r c ap it a ov er 2 00 520 09 freedom of choice and control figure 7. relationship between gdp per capita and choice and control, 2005–2009 australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil belarus china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia south africa thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = 0,4775x + 5,6454 r² = 0,0665 6,00 7,00 8,00 9,00 10,00 11,00 5 5,5 6 6,5 7 7,5 8 8,5 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 perception of freedom of choice and control figure 8. relationship between gdp per capita and choice and control, 2010–2014 baltic journal of economic studies 154 vol. 7 no. 2, 2021 the usa, and sweden). countries with high level of perception of freedom of choice and control, but low level of gdp per capita are located in the bottom right corner (uzbekistan, kyrgyzstan, and pakistan). the relationship between gdp per capita and the aggregated value indicator is positive (figure 9). r-squared is higher than for every separate component of the aggregated indicator. oecd countries are located in the top right corner, while african, asian countries, and ukraine are located in the bottom left corner. the relationship between gdp per capita and the aggregated value indicator is also weaker for the new wave, than for the previous one, but stronger, than for each component value, what confirms that the calculation formula of this indicator is suitable for analysis of the effect of values on gdp per capita. compared to the previous wave, the largest growth of this indicator was recorded in egypt (+27.5), ukraine (+25), morocco (+22.1), and rwanda (+20.7), while the largest decrease was recorded in uruguay (-22). despite the growth of gdp per capita, ukraine moved below the trend line, due to the considerable improvement of the aggregated value indicator (figure 10). further, we studied the relationship between gdp per capita and the level of democracy (formal institutions), using data of the center for systemic peace4, ranging from -10 (autocracy) to +10 (full democracy). the relationship between the level democracy and gdp per capita is positive (figure 11). oecd countries are located in the top right corner, asian and african countries – in the bottom left corner. relatively democratic countries with low level of gdp per capita, in particular, african, asian countries and moldova, are located in the bottom right corner. ukraine is also located below the trend line and is one of the most democratic countries with comparable level of gdp per capita. the relationship between the level of democracy and gdp per capita also became weaker, compared to the previous period (figure 12). the highest progress in the development of democratic institutions was observed in malaysia (+3 points), egypt, ghana, turkey, and morocco (both +2 points), a certain regress was observed in russia, thailand (both -2 points), and jordan (-1 point). in ukraine, the level of democracy did not change, compared to the previous period. oecd countries are located in the top right corner, african countries, china and some argentina australia brazil bulgaria canada chile china colombia cyprus finland france georgia germany ghana hungary india indonesia italy jordan south korea malaysia mali mexico moldova morocco netherlands norway peru poland romania russia rwanda serbia vietnam slovenia south africa spain sweden switzerland thailand turkey ukraine egypt great britain usa burkina faso uruguay zambia y = 0,0329x + 4,75 r² = 0,602 6,00 7,00 8,00 9,00 10,00 11,00 77 97 117 137 157 177 197 217 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 05 -2 00 9 figure 9. relationship between gdp per capita and the aggregated value indicator, 2005–2009 4 polity iv project: polity iv individual country regime trends, 1946-2013. available at: http://www.systemicpeace.org/polity/polity4x.htm (accessed 30 april 2020) baltic journal of economic studies 155 vol. 7 no. 2, 2021 australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil south africa china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia belarus thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = 0,0319x + 5,2153 r² = 0,4472 6,00 7,00 8,00 9,00 10,00 11,00 43 63 83 103 123 143 163 183 203 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 figure 10. relationship between gdp per capita and aggregated value indicator, 2010–2014 post-socialist countries are located in the bottom left corner. countries with low levels of democracy, but relatively high levels of gdp per capita (kuwait and qatar) are located in the top left corner, while countries with relatively high levels of democracy, but low levels of gdp per capita (african and asian countries) are located in the bottom right corner. the last studied indicator is the level of economy openness that has been calculated as an average ratio between the level of trade (exports and imports of goods and services) and gdp over 2005–2009. we use data from the world bank database5. the relationship between the level of trade and gdp per capita is very weak (figure 13). african and south asian countries have both low levels of gdp and low levels of openness. eu countries have both high levels of gdp and openness. however, many oecd countries have high level of gdp per capita, but relatively low level of openness. there are also countries with high level of openness, but relatively low level of gdp per capita – ghana, moldova, jordan, and thailand. ukraine is located below the trend line, having average level of openness. the relationship between gdp per capita and the level of trade became stronger for the new wave (figure 14). compared to the previous period, the highest trade growth was recorded in south korea (+20.3 percentage points), netherlands (+18.8), and romania (+17.2), while the highest decrease was recorded in malaysia (-39.3), egypt (-21.3), and jordan (-21.2). in ukraine, the trade-to-gdp ratio grew by 7.6 percentage points. low levels of gdp per capita and low levels of openness are observed in african and south asian countries. the highest level of openness is observed in singapore. the eu countries are generally characterized by the high levels of gdp per capita and relatively high levels of openness (netherlands, slovenia, and estonia are among leaders). australia, usa, and japan demonstrate relatively low levels of openness, but high levels of gdp per capita. malaysia, belarus, thailand, and kyrgyzstan, despite relatively high levels of openness, are located below the trend line and have relatively low levels of gdp per capita. correlation analysis was used to establish the relationship between the level of welfare and the aggregate value indicator, the level of democracy and trade (openness) for two waves – 2005–2009 and 2010–2014. correlation analysis confirms the previous results (table 1). the relationships between gdp per capita and both the aggregated value indicator and the level of democracy are positive and significant, while 5 world development indicators: trade (% of gdp). 2020. | data. available at: https://data.worldbank.org/indicator/ne.trd.gnfs.zs (accessed 30 april 2020) baltic journal of economic studies 156 vol. 7 no. 2, 2021 brazil australia argentina bulgaria canada chile china colombia cyprus finland france morocco germany ghana hungary india indonesia italy jordan south korea malaysia mali turkey moldova georgia netherlands norway peru poland romania russia rwanda serbia vietnam slovenia south africa spain sweden switzerland thailand mexico ukraine egypt great britain usa burkina faso uriguay zambia y = 0,183x + 7,7104 r² = 0,387 6,00 7,00 8,00 9,00 10,00 11,00 -7 -5 -3 -1 1 3 5 7 9 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 05 -2 00 9 democracy figure 11. relationship between gdp per capita and democracy, 2005–2009 the relationship between gdp per capita and trade is insignificant. compared to the previous period, the correlation coefficient between the level of democracy and gdp per capita became insignificant (р-value = 0.22), and it is significantly different from the correlation coefficient for the previous period (р-value = 0.0066). however, the significance of the correlation coefficient between gdp per capita and the level of trade improved (р-value 0.065). the correlation between gdp per capita and the aggregated value indicator remains relatively high and significant (table 2). the change in the coefficients for the last wave may be due to the fact that the sample for 2010–2014 increased by six countries which could affect the result. however, in two cases there is a very strong positive correlation between gdp per capita and aggregate value indicator, which once again confirms our hypothesis – values affect the level of welfare of the country and this can not be ignored. further, we conducted a regression analysis to find out how aggregated value indicator, the level of democracy and trade affect gdp per capita for two waves – 2005–2009 and 2010–2014 (table 3 and 4). baltic journal of economic studies 157 vol. 7 no. 2, 2021 australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil belarus china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia south africa thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = 0,0344x + 8,8735 r² = 0,0293 6,00 7,00 8,00 9,00 10,00 11,00 -10 -8 -6 -4 -2 0 2 4 6 8 10 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 democracy figure 12. relationship between gdp per capita and democracy, 2010–2014 table 1 correlation analysis of the relationship between gdp per capita and the aggregate value indicator, level of democracy and trade, 2005–2009 aggregated value indicator trade level of democracy correlation with gdp per capita 0.775868 0.038677 0.622075 observations 48 48 48 р-value 9.35e-11 0.794094 2.36e-06 table 2 correlation analysis of the relationship between gdp per capita and the aggregate value indicator, level of democracy and trade, 2010–2014 aggregated value indicator trade level of democracy correlation with gdp per capita 0.668724 0.252662 0.171194 observations 54 54 54 р-value (correlation) 3.27e-08 0.06529 0.215814 р-value (compared to the correlation f or the previous wave) 0.268153 0.283044 0.006608 the equation to be estimated is: y = α + β1 * avi + β2 * dem + β3 * trade, (2) where y indicates log (gdp per capita), avi stands for values (informal institutions), dem is a level of democracy and trade is a level of openness. as the sample of countries for the first wave is smaller, there are some limitations in the use of econometric instruments. therefore, for this period, we obtained the result for the general sample, as well as separately tested this hypothesis for countries where the level of democracy is high or above average. the results for 2005–2009 are represented in table 3. effects of the aggregated value indicator and the level of democracy are significant for the sample of all 48 countries and for the sample of 39 relatively democratic countries (index is higher than 5). baltic journal of economic studies 158 vol. 7 no. 2, 2021 argentina australia brazil bulgaria canada chile china colombia cyprus finland france georgia germany vietnam hungary india indonesia italy jordan south korea malaysia mali mexico moldova morocco netherlands norway peru poland romania russia rwanda serbia ghana slovenia south africa spain sweden switzerland thailand turkey ukraine egypt great britain usa burkina faso uruguay zambia y = 0,0016x + 8,7904 r² = 0,0015 6,00 7,00 8,00 9,00 10,00 11,00 25 45 65 85 105 125 145 165 185 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 05 -2 00 9 average level of trade (% of gdp) over 2005-2009 figure 13. relationship between gdp per capita and trade, 2005–2009 australia chile cyprus estonia germany japan south korea kuwait netherlands poland qatar singapore slovenia spain sweden usa uruguay algeria azerbaijan argentina armenia brazil belarus china colombia ecuador georgia iraq kazakhstan jordan lebanon libya malaysia mexico peru romania russia south africa thailand turkey ghana haiti india kyrgyzstan morocco nigeria pakistan philippines rwanda zimbabwe tunisia ukraine egypt uzbekistan y = 0,0059x + 8,5407 r² = 0,0638 6,00 7,00 8,00 9,00 10,00 11,00 24 74 124 174 224 274 324 lo ga ri th m o f a ve ra ge g d p pe r ca pi ta o ve r 20 10 -2 01 4 average level of trade (% of gdp) over 2010-2014 figure 14. relationship between gdp per capita and trade, 2010–2014 moreover, the effect of the level of democracy is almost 4 times stronger for democratic countries, while the effect of the value indicator is stronger for the sample of all 48 countries. w hite heteroskedasticity test provides no evidence of heteroskedasticity in all analyzed models. such an influence of democracy on the welfare of democratic countries may be due to the fact that baltic journal of economic studies 159 vol. 7 no. 2, 2021 democracy is a value itself and is formed under the influence of other values at the same time. it promotes effective interaction between government, business and society, which in turn increases the efficiency of production and redistribution, and thus contributes to institutional and economic development. for the second wave (2010–2014), we tested our hypothesis for six samples: for all countries; democratic / non-democratic countries; high income / high and upper middle income / low, lower and middle income countries. the results of the regression analysis (2010–2014) show a significant effect of the aggregated value indicator for all 6 samples (for non-democratic countries р-value is more than 0.05 but less than 0.1), but the effect is weaker for high income countries. the coefficient for the level of democracy for the new wave remains significant and positive only for the sub-sample of democratic countries, while it is negative for the high-income countries. the effect of the level of trade on gdp per capita is statistically significant for the sample of all countries, the sub-sample of non-democratic countries and the sub-sample of high income and upper-middle income countries (table 4). white heteroskedasticity test provides no evidence of heteroskedasticity in all analysed models. therefore, depending on countries’ democratic level, we have obtained an interesting result – the aggregate value indicator and the level of democracy are important factors of welfare in democratic countries. instead, neither aggregate values nor democracy have an impact on gdp per capita in non-democratic countries. the level of welfare of these countries is affected by trade. this result is natural. sustainable democracy and the values in democratic countries associated with it contribute to the growth of prosperity. in nondemocratic countries where the voice of society is weak, other factors have a greater influence. 5. conclusion in this paper we aim to explore how the social values (tolerance, obedience, trust, freedom of choice and control), democracy and trade can affect the level of welfare in different counties, since, there is uneven economic development in the world, which may be due to differences in social values that form the institutional environment. we hypothesize that the dominance in society of secular-rational values and the values of self-expression, democracy and trade (openness to the world) have a positive effect on the level of welfare of countries. using correlation and regression analysis, the relationships between these indicators were evaluated. as a consequence, the institutional factors (the values and the level of democracy) are important determinants of gdp per capita for democratic countries while for non-democratic countries trade is more important. there is a significant effect of the table 3 regression analysis, 2005–2009 independent variables for all countries for democratic countries (level of democracy>5) aggregated value indicator 0.026215**** 0.018881*** level of democracy 0.101722*** 0.382472** trade 0.001629 -0.00191 r-squared 0.696101 0.667452 observations 48 39 f-statistics (white heteroskedasticity test) 0.381349 0.508194 no stars means p>0.05, * means p≤0.05, ** mean p≤0.01, *** mean p≤0.001, **** mean p≤0.0001 table 4 regression analysis, 2010–2014 independent variables for all countries for democratic countries (level of democracy>5) for nondemocratic countries (level of democracy<6) for high-income countries for high-income and upper middle income countries for low income, lower and uppermiddle income countries aggregated value indicator 0.031304**** 0.024772**** 0.026563 0.014276** 0.02385**** 0.022993**** level of democracy 0.028328 0.345843** 0.013898 -0.04775* 0.010077 0.029608 trade 0.0063** 0.002724 0.008803* 0.001029 0.00413* 0.000707 r-squared 0.530667 0.677871 0.483579 0.561678 0.423934 0.29207 observations 54 33 21 17 40 37 f-statistics (white heteroskedasticity test) 1.761622 0.678281 1.432408 0.902352 1.896903 1.261312 baltic journal of economic studies 160 vol. 7 no. 2, 2021 aggregated value indicator for all countries, but this effect is weaker for high-income countries. the effect of the level of democracy is significant and positive only for the sub-sample of democratic countries, while it is negative for high-income countries. the effect of the level of trade on gdp per capita is statistically significant for the sample of all countries, the subsample of non-democratic countries and the subsample of high income and upper-middle income countries. we have used a world values survey dataset for two waves – 2005–2009 and 2010–2014 – which were collected from 48 countries for first wave and 54 countries for the second and world bank dataset. references: amoranto, g., chun, n., & deolalikar, a. (2010). who are the middle class and what values do they hold? evidence from the world values survey. working paper 229, asian development bank. doi: 10.2139/ssrn.1743180 dobler, c. (2011). the impact of formal and informal institutions on economic growth: a case study on the mena region, hohenheimer volkswirtschaftliche schriften, no. 65, isbn 978-3-653-00883-8, peter lang international academic publishers, frankfurt a. m. doi: 10.3726/978-3-653-00883-8 inglehart, r ., & welzel, c. (2005). modernization, cultural change, and democracy: the human development sequence. cambridge: cambridge university press. doi: 10.1017/cbo9780511790881 r ., inglehart, c. haerpfer, a. moreno, c. welzel, k. kizilova, j. diez-medrano, m. lagos, p. norris, e. ponarin, & b. puranen et al. (eds.) (2014). world values survey: all rounds – country-pooled datafile version: https://www.worldvaluessurvey.org/wvsdocumentationwvl.jsp. madrid: jd systems institute. knowles, s., & weatherston, c. 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(2010). culture and institutions: economic development in the regions of europe.  journal of the european economic association, vol. 8(4), pp. 677–716. doi: 10.1111/j.1542-4774.2010.tb00537.x tabellini, g.(2005). culture and institutions: economic development in the regions of europe. cesifo working paper series no. 1492, igier working paper no. 292. available at: https://ssrn.com/abstract=754086 world bank (2020). world development indicators (wdi) online database, gdp per capita (current us$) | data. available at: https://data.worldbank.org/indicator/ny.gdp.pcap.cd (accessed 30 april 2020). world bank (2020). world development indicators (wdi) online database, trade (% of gdp) | data. available at: https://data.worldbank.org/indicator/ne.trd.gnfs.zs (accessed 30 april 2020). wvs database (2020). worldvaluessurvey.us. available at: http://worldvaluessurvey.us/wvscontents.jsp? cmsid=findings (accessed 25 july 2020). baltic journal of economic studies 24 vol. 7 no. 4, 2021 corresponding author: 1 university of security management in košice, slovakia. e-mail: vsbm@vsbm.sk orcid: https://orcid.org/0000-0002-4826-0130 doi: https://doi.org/10.30525/2256-0742/2021-7-4-24-34 migration in the context of the principles of terrorism marián mesároš1 abstract. the content and subject of this paper, that is migration in the context of the principles of terrorism, is in close cerrespondence with the scientific project of the ministry of interior of the slovak republic called creating and testing presentations of projects preventing illegal criminality. migration is a problem all over the world and represents a huge financial, but above all a social, burden for economically developed countries. in early 2020, the problem partially receded as a result of the global pandemic, but the problem still exists and is waiting to be solved. the same problem is being faced not only by the eu countries, but also by the usa on the border with mexico. however, populist manifestations of the new usa government will bring another problem of huge dimensions. eu countries must quickly find a common solution on how to protect countries in the northern mediterranean sea and avoid declarations of legacy linked to the past. a new image is being gained by terrorism penetrating the cyberspace, and migrants getting ready to do so represent an instrument in the hands of organizations from the arabian world. after world pandemics, eu countries will begin to recover from economic problems, and migrants will gain new strength because they will already have information about how to obtain shelter benefits in individual countries. they primarily want to go to economically developed countries, so the happiness of post-socialist countries is that they are not among the dream countries of economic migrants. there is one rule that will always be true, and namely, the easy money will wean the native population off their work habits, and subsequently whatever they get without work in their home country they can get in any other eu country. the research methods used to write this article were: analysis, synthesis of available information, reports, scientific articles on the topic, and subsequent deduction to determine conclusions. key words: migration, society, globalization, safety, terorism, integration, polotical solutions, cyberspace. jel classification: o15, f22, f52, d24 introduction recently, people not only in the eu, but all over the world, have been traumatized by the word migration. while in previous centuries migrations represented progress and help for developing countries, today migrations are a fear for developed countries. since certain countries of the world are today traumatized by the сoronavirus pandemic, the migration wave seems to have lost its significance. the media rarely reports on the rescue of migrants by non-governmental organizations, as in the case of the ship ocean viking off the coast of libya, which rescued 260 people on march 4, 2021. one can only wonder why the migrants were not returned to libya, but overloaded the already overcrowded migration camps in italy, france, or other countries on the northern mediterranean coast. the solution to the migration crisis is quietly resonating within eu governments and has more than once led to the tearing up of governments. it is not the purpose of this article to pass judgment on who should accept migrants or how many migrants individual eu countries should accept. anyway, those setting out on the long journey from africa have already decided for their dream country. the eu bodies have not yet been able to find consensus on common criteria for establishing admission quotas for each member state. some developed eu countries mistakenly believe that the post-socialist countries that were transformed into eu structures in the early 1990s can solve this problem. however, one fact is forgotten, namely the post-socialist countries were not socialist before the world war ii, so the basics of building a free market economy remained and lasted 40 years during the construction the socialism. modern migrations represent a different phenomenon, namely individual people in numbers of several thousand. baltic journal of economic studies 25 vol. 7 no. 4, 2021 1. migration 1.1 migration and its origins and possible results many recognized sources claim that there are now about one billion migrants in the world. based on the estimated world population of 7 million people, this is an alarming number, as one in every 7th inhabitants of the earth is a migrant. currently about 250 million people are trying to migrate, mostly from developing countries or from places threatened by military conflicts. many migrants are represented by economic ones who seek a new place of residence, usually in an illegal way, that is, with the help of human traffickers (modern business). the remaining 750 million of migrants are moving towards their dream country, within the internal affairs of countries, primarily in asia and africa (mesároš, lošonczi, 2019). the european union, despite having about 500 million inhabitants, is too small to handle so many migrants, especially if they are of different nationalities, races or religions. the most serious resource of migration is represented by the globalization of the world after the end of the two world wars and contributes, in addition to prosperity, to the degradation of traditions primarily of developing countries, humiliating their religion. the security and legal aspects of globalization have affected entire nations for more than 100 years. already at birth, humans engage in a struggle for survival, which they repeatedly face, however, without trying to regulate it. subsequently, such despondency cools religious and/or national sentiments and escalates into actions frighteningly called terrorism. the european union, which is a modern empire of european states, must confront this problem and consistently analyze and seek promising, perhaps unacceptable, solutions. based on data from recent studies, it is a well-known fact that the natural decline of the population in the eu member states has decreased greatly in recent years. this means that more investment in social and health services for the elderly is needed in the near future, which should have a positive impact on the eu economy. one of the un scripts on maintaining the stabile growth of the eu population refers to the fact the eu needs more than 47 million migrants within the years 2000–2050. from this point of view, migration can be positive for the labor market. on the other hand, eu citizens are very afraid of an overflow of labor from central and eastern europe. that is why the parliamentary assembly of the council of europe has proposed the creation of a european migration monitoring center, focusing on detailed monitoring of all migration and integration policies and the effectiveness of measures taken. according to the november 2002 eurobarometer, a majority of eu citizens agreed with eu enlargement, whereas 22% of citizens were against it, while the percentage of countries expected to be affected by migration was even higher, i.e. austria 32%, sweden 28%, france, germany and finland 27%. from a macroeconomic point of view, migration should have many positive aspects, such as an increase in the productive labor force, more taxpayers, more subsidies to social funds, and the acquisition of new skills by young people. all this should also have a positive effect on the economic efficiency of a future multicultural europe. this is why integration measures should ensure that all migrants have suitable conditions and participate fully in the life of a particular country. although the content of this article is not intended to solve the world's problem, it attempts to point to its current state as alarming and to suggest possible solutions. the author of this article has long been concerned with security in general and therefore considers the current state of the world an alarming and serious warning to future generations. 1.2 migration and its short history one of the most frequently used words at the present time is "safety ". the word refers to the safety of a person, a group of people, a nation, a nationality, a country, or a group of people of the same religion. fear for one's safety usually stems from the fact that the environment is insufficiently protected. attacks on social and/or personal security have become an important strategy for achieving not only personal but also group interests. the globalization of the world economy and the desire for wealth lead to military conflicts, often expressed in religious and/or racial forms of fanaticism. it is noteworthy that countries with no pressing need to solve such problems use third countries both to present themselves as "peacemakers" and to build and reconstruct what has been destroyed by military conflicts. it is not necessary to be familiar with this fact as much as eric margolis1 to understand that designating possible enemies as allies of al-qaeda represents a way of how to withold their political and human rights and make such enemies illegal. a similar concept was created by israel, namely the concept directed against the palestinians. however, it has yet to be confirmed whether al-qaeda, so glorified and at the same time condemned, was really that powerful, or whether it was just a creation of the western world, representing a kind of bridge to allow unimpeded entry with un sanction into this country full of crudeoil and enormous mineral resources. 1 eric margolis – writer and foreign editor of sun national media, canada. baltic journal of economic studies 26 vol. 7 no. 4, 2021 another example of how propaganda can become a reality is in egypt. the majority of the population of this country elected their government voluntarily, namely in favor of stabilizing political and social life. those brave men who chose to take on this burden were immediately declared terrorists, and the country, which was trying to stabilize itself, was again destabilized. one should not look for the cause of such a problem, because a similar situation, though more bloody, can be observed both in syria and not far from the borders of slovakia, specifically in ukraine. 1.3 migrants – protected species the designation of migrants as a protected species expresses the situation not only aptly, but also frighteningly. however, is characterizing the migration (in the future being compared to the migration period – the end of the 4th up to the beginning of the 7th century) it is necessary to mention the fact of the existence of the present humanity, namely also as a result of migration. the appearance of the then africa was absolutely different, i.e. living conditions were excellent, that is why the designation species is suitable and apt (mesároš, 2012). humans came to europe via asia 40,000 years ago, and began settling in the americas 20,000 years ago. such a demanding and complex mission reached its pinnacle thanks to the technological revolution in the 18th and 20th centuries. it seems that the present humankind (7 billion) will quietly live and reproduce. but it was not so in the past, and it will not be so in the future. 1.4 reasons of human migration with the growth of relative prosperity, man began to separate labor and personal property. the rich began to exploit the poor, which more than once led to various riots and military conflicts. modern political scientists confuse and erroneously compare migration from europe to america (19th and 20th centuries) with current migration (which began in 2015). the migrants who came to america 80,000 years ago were a blessing to the continent and a driving force behind subsequent development. many of the migrants stayed on the new continent, but many of them returned and brought with them not only money, but also invaluable knowledge of science and technology. so those who returned tried to give back to their countries what they had lost by the departure of their people to the new world. it is very important to ask the following questions: for what reason do so many migrants leave their home countries? who caused or contributed to this situation? the answer is that there cannot be only one culprit, since, for example, if one wants to cause any body to move, the first impulse is necessary, which may be accidental or intentional, but it is followed by other impulses. all of us involved in foreign security policy understand that the goal of such momentum at this time is economic globalization, in whatever form it takes. the desire for profit knows no boundaries and is characterized by the search for weaknesses of opponents and their intimidation, even in a political way. the pursuit of power by individual political parties, mostly in the third world, is a breeding ground for world powers, which they can also properly exploit. forms of abuse of unstable states have a long tradition and are supported by the desire for power and personal gain. similar, sometimes even funny, events took place in the former czechoslovakia, precisely as a result of the regime of that time. it was unprecedentedly flattering to government representatives in the 1950s, for example, when shoemakers from the ussr (union of soviet socialist republics) came to gain new experience in the footwear industry. in the czech town gottwaldow (now zlín) the soviet shoemakers could see a huge banner saying: "soviet shoe industry – example to us". however, the soviets politely asked the management of the czech industry to remove the banner. why does this story blend in with the topic of migration? the american world "policeman" repeatedly looking for suitable places to build up his capital, turns his attention to countries willing to obey him. methods of attracting attention take different forms; the author of this article does not want, for example, to condemn the nuclear weapons tests in north korea, but it is necessary to emphasize that the un has not yet set a date for a meeting in favor of solving the serious problem, and the american aircraft carrier has already sailed to the coast of the korean peninsula (mesároš, 2018). 2. migrations in history of slovakia although migration has always been a part of human life, it became more intense in the period since the 17th century, namely due to technological progress and maritime discoveries. european countries were acquiring colonies and therefore deliberately supporting the settlement of their inhabitants in the new territories. it is estimated that approximately 65 million people from europe moved to north america and south america between the seventeenth century and world war ii and in international migration waves. 17 million people decided to go to africa and australia. two world military conflicts in the 20th century further intensified global migration. america and australia gradually became immigration countries, while europe became a region of migration. baltic journal of economic studies 27 vol. 7 no. 4, 2021 this has greatly influenced the modern state of europe. european states are characterized not only by a high proportion of different ethnic and national minorities, but also by a large number of migrants who gradually arrived in certain countries after world war ii. this has turned europe into a mosaic of many cultures living together in one large unit. in the past, as in the present, people left their homeland as a result of war, starvation, or persecution. within the involuntary migration an important milestone is represented by the year 1951 when convention relating to the status of refugees (the 1951 refugee convention / the geneva convention of 28 july 1951) was adopted in geneve. the convention defines the concept of a refugee, the form of legal protection, other forms of assistance, and the social rights that refugees are to receive from the signatory countries of the convention. the basic rule of the convention is that refugees should not be returned to their country if they face persecution there. the convention also defines the responsibilities of refugees toward their host countries and specifies that certain categories of people, such as war criminals, cannot be granted refugee status. the 1951 convention relating to the status of refugees was more or less limited to the protection of the european refugees after the ww ii. as the 1967 protocol broadened its applicability and removed geographical and temporal limitations, it became a universal instrument as the problem of human displacement spread throughout the world. just as european countries are related to the phenomenon of migration, the same can be said of present-day slovakia, which is also diverse as a result of migration waves on its territory. slovakia's history is influenced not only by slovak history, but also by other cultures gradually coming to its territory. settlement of the territory of slovakia lasted about 15 centuries, and the slovaks as a modern nation can be talked about as early as the end of the 19th century. many other tribes and ethnic groups also formed the population of the territory of present-day slovakia, for example, hungarian tribes came to europe around the 10th century, when they settled in the eastern part of the island of rye island (žitný ostrov). further, the population of slovakia was affected by the attacks of the ottomans (ottoman empire), specifically for several centuries. the attacks caused the migration of populations from the southern sides of europe, such as present-day hungary, romania, and croatia to the territory of the present slovakia. within the 12th and 13th romanies strated to come to europe. they settled in the territory of the hungarian monarchy because, unlike in western european countries where they were persecuted, the hungarians tolerated them. since the hungarian monarchy was neighboring the ottoman empire and waging wars with it, the monarchy needed craftsmen to equip its armies. many romanies were blacksmiths and therefore needed a monarchy. during the reign of maria theresia and joseph ii. several measures were taken focusing on settling romanies and their assimilation. since the 14th and 17th centuries the territorry of the present slovakia started to be settled by the vlachs (in slovak: valasi) who brought with them a pastoral culture and settled mostly in the mountainous regions of slovakia. they brought many elements with them nowdays regarded as symbols of slovakia, e.g. valaška (sheperd´s axe having a long handle), bryndza (sheep cheese), žinčica (whey of the sheep milk). the germans, who arrived in several waves and were mainly engaged in crafts and mining, also had an important influence on the formation of the slovak population. nor should we forget the influence of several waves of slovaks from what is now slovakia to the so-called "lowlands" (the northern part of former yugoslavia), where a small population of slovaks remained living after the wars with the ottoman empire ended. later during the 20th century many slovaks left slovakia for the usa and countries of south america. this form of migration was motivated by money, i.e., people left to make money, but there were also those who were persecuted ( jews) or left slovakia for fear of the nazi and then communist regimes. the modern slovak population has been shaped by many factors throughout its history, i.e., what is considered slovak culture has absorbed elements of many cultures and ethnic groups that existed on slovak territory (mesároš, lošonczi, 2019). 3. migrants between the period 2016–2020 based on relevant studies, it can be argued that 90% of migrants are people under middle age. they are not ashamed to take small children and old people (even 100-year-olds) with them. this is one of the calculations of the arabs, namely to arouse the compassion of europeans. to a certain extent they succeeded. however, a year later it turned out that 90% of migrants (about 1 million) in germany did not have any labor skills, because they lived very well in their home country. they have no relatives in europe, they are believers, and they are unable to respect the laws and rules of the countries where they wanted to go (germany, sweden, great britain). preliminary estimation of german employment specialists says the majority of migrants will only be able to be employed as early as in 10 years. within 2017 other 2 million migrants have come, however there is not a specialist that would estimate costs of tax payers for covering the life of migrants during the 10 years. but politics and the election of german representatives for the next period are more important than fear of the immediate future. baltic journal of economic studies 28 vol. 7 no. 4, 2021 it is necessary to state the author of this paper is no racist or unwilling to improve living conditions of migrants, however being a safety analyst he is a realist, pragmatist and proposes aiding migrants in their home countries, namely within solidarity and under the auspices of the un. 3.1 integration of migrants into society international migration represents statements including a large amount of theses, opinions and directions, generous and limited approaches (doina popescu ljungholm, 2014). migration policy is closely related to the integration of migrants into society. the result of this process should provide them with the same chances and prospects in life as the majority society. integration policy is a set of tools that should facilitate the successful integration of migrants into life in the host countries. the importance of integrating migrants into society is being stressed, as unsuccessful integrating will result in their staying at the edge of society. we can say that they are marginalized (they are many in the lower social strata) and segregated (they live in isolated communities). failure to integrate will make it difficult for them to find a better-paying job and/or obtain higher education, and their chances of success will be greatly reduced if they fail to learn the language of the host country. nowdays, they are frequently discriminated and abused as cheap labour. living at the edge of society forces them to solve the situation contrary to law. the economic component of integration and the need for migrants to find work in the host country in order to become economically independent and selfsufficient are often emphasized. migration, however, concerns every spehere of life. for migrants, not only jobs and salaries are important, but also the place of residence, educational opportunities for them and their children, access to healthcare and social services. except the economic integration it is political, cultural and citizenship integrations that seem to be very important. integration of migrants into these spheres means for them the opportunity to be part of society (civic associations, organizations, communities), to participate in political (the right to vote and to be elected) and cultural life of society (to be able to preserve their cultural characteristics). through the successful integration of migrants into these spheres of life, they can feel that they are an appropriate part of society in the host country. until this happens, migrants will often have a sense of inferiority and uprootedness, a sense of belonging to neither their home country nor their host country. one can meet such a problem not only in case of the so-called first generation of migrants, but also with the next generations being born in their host country, i.e. already its citizens. therefore, the goal of integration policies should be represented by practical issues concerning the lives of migrants, as well as efforts to create a general awareness that migrants are an adequate part of society. there is usually no need to create autonomous policies and independent measures focused on migrants, it is enough to keep in mind that within existing policies there are special groups, such as migrants, whose status and needs may be different. such an approach to migrants within the public policies is called integration mainstreaming (mesároš, lošonczi, 2019). 3.2 the present state of the migration crisis the present migration is the result of illegal human trafficking. most of the victims of this crime (modernday slavery) are between the ages of 16 and 30, and predominantly women from poor socio-economic backgrounds. such people live in very poor conditions, they have debts and/or do not have a permanent job. the human trafficking predominates in favour of sexual slavery – approximately 53 % of all the cases. this form of trafficking is followed by exploitation in connection with forced labor – about 40 % of all the cases. the activities associated with this type of illegal migration concern ordinary people only partially. it concerns specific people and their families. the impact on internal order and security is obvious, but the residents of destination countries are only minimally interested. anyway, they do not perceive the problem of illegal migration in connection with human trafficking the way they perceive illegal migration and people from third countries. nowadays, the most numerous cases of illegal migration in europe, the most perceived by inhabitants living there, are connected to illegal human smuggling over the frontiers of the european countries. the illegal migrants go across the majority of these countries, holiday resorts or places refering to the old continent. they have a direct impact on security and internal order in these countries, i.e., they pose a great security risk (mesároš, 2010). the number of people leaving their home countries to live in other places continues to grow. actual estimations of the uno are as follows: more than 213 million migrants in 2010, an increase of 15 million in 2005. migrants represent not only highly qualified workers, but also people trying to unify with their family. migrants who have decided for one of the european countries as their dream country are represented by approximately 32 % of the worldwide migration process. from an eu perspective, current migration has different characteristics compared to the first migration baltic journal of economic studies 29 vol. 7 no. 4, 2021 wave. one characteristic feature is the abolition of border checks between participating countries. this represents a profit only for the third country citizens. growing migrant pressure at the eu's external borders has gradually led to the fact that individual states cannot change the instruments of national legislation, and thus cannot influence key aspects of migrants' entry into and stay in dream countries. illegal migration in eu countries is difficult to manage with traditional political instruments. reasons for migrations necessitate asking the following questions: – why are mass migrations appearing just now? – what are the reasons people decide to leave their home countries? – who organizes and conducts mass migrations? – if anybody conducts and organizes the migration situation, why do they do so? at the present time, also thanks to the eu measures and calming down the war situation in syria, the number of migrants has substantionally decreased, namely by as much as 50%, which means that 2018 meant a partial calming of the situation in europe. however, another problem arises in relation to the security of refugee camps in france, germany, italy and turkey, which represents another phase of solving migrations. figure 1 shows the migration routes before 2015 and also partially after taking the eu measures in 2016 (štatistiky mv sr). not every country is accomodating, even if it is just a transit land. for example, hungary built a fence on its border with serbia and tightened laws on illegal entry and shelter. this affected the route that many refugees had used before. so migrants try every possible way to get to the country of their dreams, and they don't want to ask for shelter until they are there, and so they are always looking for new routes for refugees. figure 2 shows the original refugee routes through hungary in black. the routes used after the closure of the hungarian borders are shown in red. after the closure of the borders and the construction of the fence with serbia, refugees began to use the route through croatia and slovenia. the route less used by refugees is the one across the black sea. the refugee situation is most complicated for countries such as greece, macedonia and italy, which are the first countries in contact with refugees in europe. the pressure of these countries concerns securing safety of citizens and protection of figure 1. refugee routes source: (štatistiky mv sr) baltic journal of economic studies 30 vol. 7 no. 4, 2021 internal order due to the flow of refugees. in 2014 170 000 refugees sailed over the mediterraean sea to italy, in 2015 the number increased by 10 %. most of the refugees came to italy from libya as a result of the chaotic situation there, which means that human traffickers can act without any fear. many refugees, however, did not survive the journey over the mediterranean sea (the number is estimated at tens of thousands). since this route also fits murderers, the relationship between irregular migration and terrorism is considered by scholars around the world (light, thomas, 2021; križovský, kavečanská, drotárová, 2020; rožňák, hrala, drotárová, 2020; lošonczi, križovský, reitšpís, 2018; brodeur, wright, 2019). in 2014, about 65 000 migrants entered europe via the balkan route, and 220,000 migrants sailed across the mediterranean sea. during the first half of the year, more than 140,000 migrants used the balkan route to get to greece, and about 90,000 migrants used the mediterranean route to get to italy. the total number of migrants who used the route through the mediterranean sea was represented by the following countries and percentages: 25% eritrea, 12% niger, 7% somalia, 6% sudan and 5% syria. the percentage and name of the countries from which migrants came who used the balkan route in 2014 are as follows: 50% kosovo and albania, 20% syria, 15% afghanistan and 15% other countries. the balkan route, without migrants from balkan, was taken by 61% of migrants from syria and iraque, 30% of migrants from afganistan and 23% from pakistan. most migrants go primarily to germany and other german-speaking countries. but why don't they use air transport? one seat on a human traffickers' ship costs 1,000 euros or more, while a flight from lebanon to great britain costs about 400 euros, and from egypt to italy only about 320 euros. so, why do migrants prefer ships of human traffickers? first, the governments of the countries from which the migrants come are unwilling to stop migration, and second, according to the relevant guidelines, air and shipping companies that transport persons without personal and travel documents to any of the eu countries are obliged to transport such persons back to their home countries, and to do so at the companies' expense. however, the manual does not refer to persons with refugee status and shelter seekers. in any case, migrants who prefer the dangerous route through the mediterranean sea and the balkan route do not have valid personal and travel documents, and, despite this, try to enter certain countries illegally – illegal migration. figure 2. new refugee routes source: (štatistiky mv sr) baltic journal of economic studies 31 vol. 7 no. 4, 2021 a lot of people in africa are dying of femine or they do not have enough money to pay human traffickers for being transported over the mediteranean sea to europe; even if their lives are in danger, they can not emigrate in mass. it is necessary to distinguish economic migrants from those really fleeing from a war and/or political persecuting, i.e. immigrants. people who have money and are able to buy a place on a ship from human traffickers seek to enter an economically developed country such as germany, sweden, great britain and similar countries; such people are considered economic migrants, illegally crossing the borders of european countries and with a clear goal. if people are fleeing from war, they tend to go to a safe place, i. e., the first country where there is no war and no danger of losing their lives or the lives of their relatives. the decrease in the number of migrants following the balkan route is due to an agreement between turkey and the eu. the essence of the agreement is the reception and return of illegal migrants from greece to turkey. 4. political solutions as a source of increasing migration although economic development efforts have always involved migration, these efforts, however, have always been a source of fear for the populations of such countries. the above-mentioned migration should not be confused with that aimed at expanding the eu, finding work, and getting to know a particular country/countries, especially in the case of the younger generation. migrations represent a threat not only when large numbers of people flee war and violence, but also when countries, mostly in africa, have been trying for a long time to solve a climate problem or the problem of their political instability. some countries, primarily developed countries in america and europe, have supported in favour of their own economics both instability in particular functioning countries and migration to destabilize the eu representing an important player in the world history. another problem is the perception of migration by some european countries, which are trying to follow their own ideas in solving the demographic problem. for example, germany has faced a declining population in recent years. germany has 6.4 children per 1,000 inhabitants, far fewer than comparable economically developed countries. however, this number is gradually decreasing, so germany is applying an "open door" policy. changing demographics in an upward direction implies a higher pension. however, a very large number of migrants are needed to create an ideal retirement system. germany experienced a baby boom in 1965, and in 15 years this generation will need their own children to contribute to creating a pension for them. since the children of the generation mentioned are usually few in number, a sufficient number of productive young people are needed. germany sees its salvation in migrants, namely migrants from third countries. however, not every migrant is suitable and qualified to maintain the pension system. and there is a risk on the part of german society, whether it can handle and tolerate such a flow of migrants, mainly because of the existing risks and threats to internal order and security in the country. in any case, migration forces consideration of legal or illegal ways to enter eu countries, i.e., without the necessary personal and travel documents and without checking the previous lives of migrants contributes to a precedent that threatens instability throughout the eu. the following possibilities/arguments should be considered: the first argument explains mass migration as solidarity on the part of europe, like a voluntary exchange of migrants. this argument is often used by countries whose soldiers are in places that migrants leave. the second arrgument is related to demographics, i.e., europe is aging, and migrants should affect the growth momentum by making this or that country young. the third argument is about global warming, i.e. the huge drought in africa and the gradual movement of people into europe. 5. terrorism as a possible result of emigrations 5.1 historical development of terrorism terrorism has accompanied the development of humanity since the struggle for power became a political matter. depending on particular social conditions, terrorism has manifested itself in different ways in certain historical periods, whereas means of terrorism just like its various forms used to be changed. although the past of terrorism is very long, it is still part of human society and threatens the lives and laws of all people in the world. terrorism is a challenge for all governments of the world, it sustains fear and antagonism and forces individual states to fight it, i.e., to invest energy and resources to solve it, while they should be used to solve more serious problems, such as poverty, inequality, environmental risks, etc. (štatistiky mv sr). antiquity special literature argues that the first known terrorist actions were inspired by religious fanaticism. as early as in the 1st century ad there was a sect of the so-called sicarii who attacked roman legionaries and apostate jews. baltic journal of economic studies 32 vol. 7 no. 4, 2021 in ancient greece terrorism was frequently carried out by sovereigns, in wars of conquest, civil wars or in suppressing rebellions, in servile revolt and conquered tribes. at that time, violence against slaves, prisoners, and free citizens was not considered unusual. terrorism practices took different forms, using different methods, which were characteristic of antiquity and lasted until the 11th century. the middle ages in the middle ages, that is, around the 11th century, a group of assassins was established in the shia branch of islam. members of this group committed violent acts against christian crusaders and some sunni muslims in persia and syria, characterized by asceticism, secrecy and the fact that they perceived the murders they did as evidence of true religious obedience. they believed their death as a result of fighting would bring them directly to paradise. also, the territory of europe experienced one of the most ruthless ways of terror, represented by the attacks of the military leader of the mongols, namely genghis khan, and his group in the 13th century. ghengis khan let massacre millions of inhabitants of the conquered places, even if they did not put up resistance to his group. a specific form of terror in the middle ages is considered to be religious terror that was represented by the inquisition of jesuits and other church institutions against religious adversaries. practices of terrorism did not have any legal limitations and at first were considered to be common intimidating forms of reigning and gaining power. later, using the practices was specified by law. the human era according to specialists, the present form of terrorism came into existance by declaration of the french revolution, mainly at the time from 1793 to 1794, i.e. after the deposition of the king, after his execution and establishment of a new power. the first definition of terrorism followed the behavior of the revolutionaries themselves. a distinctive personality at the time was maximilien de robespierre, who under the slogan of defending the revolution and the republic (la grande terreur – the great terrror) terrorized not only his real enemies, but later the population of france itself. the literature often dates the beginning of the current form of terrorism to the second half of the 19th century in imperial russia, the regime of which was the most undeveloped and most despotic. at that time, the first important political organization "land and liberty " was formed and encouraged a revolution in russia. in 1874 the populist wing of the movement started the first series of such terrorist actions. in the late 19th cent. and the early 20th cent. it is balkan that that became the center of terrorism, where some of the worst events ever mentioned in history occurred, precisely as a result of political struggle. the following dictatorial regimes and examples of state terrorism were developed in the 20th century: in latin america it was the dictatorship of chilean general augusto pinochet, in argentina it was the government of the argentine military junta, communist regimes notable for their brutality were represented by the cambodian government of pol pot and the khmer rouge, and finally nazism and stalinism represented the highest level of terrorist state known to the 20th century. present days from the last decades of the 20th century to the present, the world has experienced 4 major terrorist waves representing a new/modern form of terrorism, namely the following cycles/waves: the first wave of terrorism – has its beginning in the imperial russia in 1880. russian anarchists terrorized political figures through individual and systematic assassinations. the protagonists of the first wave of terrorism did not defend themselves against what they were called. terrorist attacks by russian anarchists contributed to the emergence of terrorist groups in other countries, namely armenia, poland, the balkans and india. the second wave of terrorism – is designated as "anti-colonial". it began in 1917 and lasted until 1965. the main motive of terrorist groups in this wave was the right of nations to self-determination. the assassinations of political leaders characteristic of the first wave have been partially replaced by murders directed against the police and law enforcement forces. such actions were meant to provoke an inadequate and violent state response and thereby increase public support for the terrorists and damage the image of a particular colonial and repressive state. the terrorists began to realize how important it was to let their actions be known. the third wave of terrorism – become an international phenomenon and expanded around the world. it began in 1968 and continued through the 1980s. this wave of terrorism was prominently associated with leftist movements whose activities were primarily directed against american and western european imperialism. the terrorist organizations that fall into this period can be divided into three groups. the first group was represented by terrorist organisations fighting for national liberation, e.g. palestinian terrorist organisations, the second group is represented by left-wing terrorist organisations in western europe, i.e. ira (ireland), raf (germany), frap, grapo and eta (spain). the third group was represented by right-wing extremist terrorist groups working mainly in latin america (tupamaros in uruguay, montoneros in argentina). third-wave terrorism became important ideologically and internationally, which meant that terrorist organizations began cooperating with foreign baltic journal of economic studies 33 vol. 7 no. 4, 2021 organizations and sometimes conducted actions outside their territory. the fourth wave of terrorism – which began in 1979. during this period there were significant changes in the structure of world forces. the fourth wave terrorism manifests itself mainly in the depolarization of power, american hegemony and globalization, ethnic and religious conflict, regional instability, and civil wars. this wave of terrorism also means an increase in terrorist organizations based on islamic fundamentalism and the use of new elements of terrorism, namely weapons of mass destruction. the present form of terrorism includes not only new terrorist groups, but also organisations having been created in the third wave. modern terrorism has more forms, which manifests itself in cycles/waves, while individual cycles/waves refer to many committed terrorist acts. in any case, one cannot deny the historical diversity of manifestations of terrorism. 5.2 terrorism in the 21th century the un report states that the risks of terrorism in the 21st century are very high and relevant. many terrorist groups in this century operate on the principle of autonomous cells. cells prepare their actions and terrorist attacks independently of the center. each cell is obliged to work independently and not make contacts with the other cells, that is why to get into the cells and prevent their activity will present a serious problem in the furure. 5.3 reasons of origins and spreading the terrorism the majority of sociologists argue that all human actions and events are complex. the same is true for terrorist actions and campaigns. therefore, explaining the causes of terrorism is a complicated and neverending task (mesároš, 2018). for the purposes of this paper, it can be argued that the causes of terrorism cannot be precisely defined because the decisions of individuals and groups to join terrorist activities are the result of many events, not all of which are equally important. though the exact chain of reasons of particular terrorist attacks can not be determined with mathematical precision, familiarizing with the reasons of origins and spreading the terrorism necessitates researching the phenomenon from several viewpoints such as: a) general-sociological viewpoint: is any violence or threat as a means to gain advantages or political respect. individuals or groups undertake terrorist actions to enrich themselves and gain political influence. b) technical viewpoint: represents the high level of development of science and technology, as well as differences in the living standards of a part of the human population, while all this allows terrorists to easily obtain more destructive means to intimidate and attack the most vulnerable and well-protected targets. c) politological viewpoint: according to this view, terrorists are not only lone madmen, but they are often members of a strictly and secretly organized group, absolutely believing in the rightness of their actions. d) effectivity viewpoint: many terrorist actions forced different societies or world powers to act. they have taken actions that have resulted not only in stopping certain processes, but also in changing political power and the political map of the world (mesároš, lošonczi, 2019). conclusion migrations from the african continent and south america have something in common. although it may seem wrong, migrations are driven by money. in any case, the aim of this article is not a political solution, but a gradual examination of the individual phases of migration from 2014 to 2020. after world pandemics, eu countries will begin to recover from economic problems, and migrants will gain new strength because they will already have information about how to obtain shelter benefits in individual countries. the populism of governments in favor of accommodating migrants will certainly surprise many political parties and show a pragmatic motive for migration. is it unsuitable to say, as stated above, not all migrants are the same? they primarily choose economically developed countries, so the happiness of post-socialist countries is that they are not among the dream countries of economic migrants. if it is confirmed that the sole purpose of brexit was to regulate migration, it will become clear to everyone that the problem addressed in this document should be a priority for every eu country. there are many studies indicating that even coordinated economic assistance to individual countries in africa is not a good form of solution. on the contrary, in specific african countries that receive financial support, it generates corruption and loss of money in favor of the government of the african continent. there is one rule that will always be true, and that is that easy money will wean the native population off their work habits, and subsequently whatever they get without work in their home country they can get in any other eu country. anknowlegements the article was created within the scientific project supported by the ministry of interior of the slovak republic called creating and testing presentations of projects preventing illegal criminality. baltic journal of economic studies 34 vol. 7 no. 4, 2021 references: mesároš, m., & lošonczi, p. (2019). migrácie v kontexte princípov terorizmu. košice: vydavateľ všbm v ke, 372 s. isbn: 978-80-8185-035-5 mesároš, m. (2011). teória bezpečnosti. košice: multiprint s.r.o, 96 strán. isbn: 978-80-89282-61-6 mesároš, m. (2012). ochrana osôb a majetku v kontexte ochrany ľudských práv a chránených záujmov. bratislava: sav, 399 s. isbn: 978-80-224-1240-7 mesároš, m. (2018). bezpečnostný optimizmus ako dôsledok nárastu terorizmu vo svete. wyzsza szkola menedzerska w warszawie, dba thesis, 68 s. štatistiky mv sr (statistics of the ministry of interior of the slovak republic) doina popescu ljungholm (2014). preventing illegal migration in romania. in: procedia – social and behavioral sciences, v. 149, p. 741–745. doi: https://doi.org/10.1016/j.sbspro.2014.08.302 mesároš, m. (2010). bezpečnosť, bezpečnostná veda a vzdelávanie v procese globalizácie. košice: multiprint s.r.o, 165 s. isbn: 978-80-89282-45-c mesároš, m. (2018). migrácie ako dôsledok politických a globalizačných riešení v kontexte princípov terorizmu. ipe management school – paris, francúzsko, msc thesis, 93 s. light, m., & thomas, j. (2021). undocumented immigration and terrorism: is there a connection? in: social science research, č. 94. doi: https://doi.org/10.1016/j.ssresearch.2020.102512 križovský, s., kavečanská, a., & drotárová, j. (2020). criminal aspects of illegal migration. in: security dimensions: international and national studies. krakow, č. 33, s. 74–83. rožňák, p., hrala, m., & drotárová, j. (2020). mobile einheit der fremdenpolizei gegen illegale migration in der tschechischen republik. in: kriminalistik – unabhängige zeitschrift für die gesamte kriminalistische issenschaft und praxis, vol. 74, no. 10, pр. 610–615. lošonczi, p., križovský, s., & reitšpís, j. (2018). current state and trends in the area of crime prevention. in: proceedings of the third international workshop seculin, рp. 40–50. brodeur, a., & wright, t. (2019). terrorism, immigration and asylum approval. in: journal of economic behavior & organization, č. 168, s. 119–131. doi: https://doi.org/10.1016/j.jebo.2019.10.002 ústava sr , siedme vydanie, 1.5.2006 (constitution of the slovak republic, the 7th edition, 1.5.2006). baltic journal of economic studies 189 vol. 2, no. 2, 2016 corresponding author: 1 department of marketing, ukrainian state university of chemical technology. e-mail: chupryna_n_n@mail.ru background and substance of detection of ecological conflicts in the economy nataliia chupryna1 ukrainian state university of chemical technology, ukraine abstract. the purpose of the paper is to study the nature of ecological conflicts in the economy, which, subject to globalization enable (or impossible) to solve pollution and the destruction of all elements of the environment. identify ecological conflicts in the economy borders, which will be decisive in shaping their capabilities and develop alternatives to overcome ecological conflicts. methodology. the study is based on an analysis of the state of the ecological component of the ukrainian economy in recent years and the results of the country's industrial enterprises. the work of industrial enterprises may provoke the creation of ecological conflicts. research findings of leading scientists in this field are also used. results of the research have made it possible to determine the nature of the identification of ecological conflicts in the economy. ensure the development and dissemination of ecological conflicts in the dynamics. developed by constructing a map of ecological conflicts makes it possible to analyze the components of ecological conflicts in more detail and to develop management actions aimed at eliminating environmental conflict in the economy. the necessity of engaging potential ecological conflicts in the future by setting its limits in the economy. practical implications. environmental problem, namely a warning or ecological conflicts optimal solution is a prerequisite for the country's development as an integral state with a healthy population that can live in the country and to use its resources freely (within the legislation). however, overcoming ecological conflicts not paid enough attention to both at the state and local level. the main stages of analysis and possible options for the development ecological conflicts become the basis for the formation of government priorities towards the greening of the main industries in the economy. features of occurrence of each individual environmental conflict, the implementation of research on this issue, systematization and analysis of the results and ways to overcome ecological conflicts in industrialized countries it should be one of the main priorities of the state, and implemented, both at micro and macro levels in the economy. when considering the greening process, the development and management of the ecological security of the state is necessary to describe manifestations ecological conflicts enough, their functions and characteristics. the intervention of the state in addressing ecological conflicts should not only lead to its solution, but also provide the possibility of co-existence and further development of all participants in ecological conflicts in the economy. value/originality. thus, we can determine that the development and overcoming ecological conflicts in modern conditions depends on the economic and political situation in the country. map construction of ecological conflicts makes it possible to take advantage of the positive potential of ecological conflicts for the development potential of the region. assessing the scope of the conflict, it will reduce the economic cost of its solutions. key words: ecological conflicts in the economy, industrial companies, subject, ecological problems, conflict solution. jel classification: m38, q57 1. введение на сегодняшний день в украине, как в стране, в которой: функционируют крупные промышленные предприятия химической, металлургической и других отраслей производства; сельскохозяйственной стране, на площадях обрабатываемых земель используются различные виды агрохимических добавок; применяются пищевые добавки при разведении сельхоз животных, существует не только угроза возникновения экологических конфликтов, а уже и практика их преодоления. к сожалению, решение экоконфликтов в украине не всегда является эффективной, а иногда даже существование экоконфликтов не определено, как местными органами власти, так и на государственном уровне. вопросам экоконфликтов и методик их решения посвящены работы таких известных ученых, как baltic journal of economic studies 190 vol. 2, no. 2, 2016 о.  балацький, б. буркинський, о. веклич, в. садабаш, в. степанов, с. харичков, м. петрушенко, с. харичков, к. гофман, а. гусев, м. федоренко, т. гомер-диксон, г. бехлер, к. шпильман, с. мейсон, д. шпринц, н. гледич, и. янга, л. хенс и др. 2. предпосылки возникновения экологических конфликтов для эффективного управления экологической ситуацией в стране нужно проводить политику, которая нацелена на экологизацию страны в целом. в этой политике необходимо достаточно четко определить экологическую направленность промышленных предприятий, как в рамках региона, так и в рамках страны в целом (chuprina, 2015). необходимо отметить, что существует обратнопропорциональная зависимость между экологической составляющей и ростом промышленного производства. то есть фактически сформировался принцип их взаимодействия в условиях глобализации, а именно: экологическая ситуация в стране ухудшается с интенсивным ростом объемов производства промышленных предприятий. и, наоборот, падение производственной активности предприятий промышленности, и, как следствие, кризисное положение экономики страны, но экологическая составляющая улучшается (рис. 1). однако, если анализировать ситуацию взаимодействия экоконфликтов и результатов работы предприятий промышленности, то мы можем определить существование прямо пропорциональной зависимости, то есть увеличение объемов производства приводит к повышению экоконфликтов. одним из приоритетов развития экономики страны (особенно в промышленно ориентированных странах) является обязательным учет такого фактора, как экологическая составляющая. безусловно, пересечение всех интересов в этой области может привести к возникновению экоконфликтов. отсутствие однозначного подхода к определению экоконфликтов и невозможность применения неадаптированного к условиям украины подходов к их определению и рахрешению приводит к необходимости собственных отечественных разработок в этой сфере. при этом нужно учитывать опыт решения экологических проблем других стран (martinez-alier, 2002; j. linking 2009; michelot, 2013; martinez-alier, j. 2010; daly, 2015). по определению многих ученых, конфликт – это норма сосуществования людей в социуме. именно поэтому, мы можем отметить, что в индустриальном обществе экологические конфликты неизбежны. то есть оптимального выхода из этой ситуации и альтернативных путей ее развития почти не существует в современных конкурентных условиях. но анализ и логика выхода из экоконфликтов на базе применения тактических и стратегических подходов может дать возможность успешно воспользоваться результатами экоконфликтов. сущность экоконфликтов заключается в столкновении интересов двух основных игроков: природы, как таковой, и человека. государство в этом виде конфликтов играет две основные функции: во-первых, она может быть причиной конфликта, из-за несовершенства нормативно-правовых актов, политических, социальных, демографических, культурных и других факторов. во-вторых, может прекратить или разрешить экологический конфликт путем применения инструментов государственного воздействия. эти инструменты могут иметь как дипломатический, так и силовой эко система промышленные предприятия (экономика страны) эко конфликты эко система промышленные предприятия (экономика страны) эко конфликты рис. 1. взаимодействия экологических и промышленных составляющих рис. 2. сущность возникновения экоконфликта экологические конфликты природа общество человек другие полезные ископаемые земля воздух государство вода предприятие государство причина субъект результат регулятор взаимодействие точка экоравновесия baltic journal of economic studies 191 vol. 2, no. 2, 2016 характер. выбор того или иного инструмента влияния зависит от уровня развития и степени обострения экоконфликтов, условия его формирования и становления, а так же его место в системе экобезопасности страны. однако выбор одного из этих инструментов (или их комплексное применение) должно быть обосновано. в  частности, обосновывается выбор инструмента воздействия (или их взаимодействие) и возможные направления и альтернативные варианты развития событий, как с позиции государства, так и с позиции участников экоконфликтов. исследуется влияние государства с позиции роста национальной экономики и имиджа страны (рис. 2). при вмешательстве государства должны быть учтены интересы участников конфликта, а путь его преодоления привести к дальнейшему экономическому и экологическому развитию государства. с позиции возникновения и преодоления экоконфликтов необходимо определить поэтапную трансформацию экоконфликтов, что влияет на состояние окружающей среды и формирует новое, усовершенствованное развитие промышленного предприятия. эта трансформация и степень зависимости участников экоконфликта друг от друга, и, как следствие, является демонстрацией их возможного сотрудничества или сосуществования. это сотрудничество (сосуществование) является достаточно сложным элементом взаимодействия и одним из путей решения экоконфликтов. оно может характеризовать особенности взаимодействия участников экоконфликта, взаимоотношения их интересов и приоритетов, которое достигается в точке «экологического равновесия». точка экологического равновесия – это когда находится оптимальное решение для всех участников экологического конфликта. характеризуя особенности состояния взаимодействия всех участников экоконфликта (включая государство). применение новых прогрессивных методов управления дают возможность находиться в точке экологического равновесия или приблизиться к ней. развитие экоконфликтов и достижения точки экоравновесия в каждом отдельном случае имеет свои особенности, характеризующиеся специфическими условиями, в которых находятся участники экоконфликтов. но, достаточно важно, на современном этапе развития, не только преодоления экоконфликтов, а то время, когда система находится в точке экоравновесия, и, по возможности, увеличить этот срок всеми возможными средствами. и именно в этом, необходимо вмешательство государства. необходимо заметить, что на государство, как механизм урегулирования экологических конфликтов может влиять много факторов, которые перемещают решения конфликта с точки «экоравновесия» в сторону или общества, или природы. к таким факторам мы можем отнести: экономические, социальные, политические, демографические, научно-технические, нормативно-правовые и другие. точка «экоравновесия» – это не всегда оптимальное решение решения экоконфликтов: 1. когда речь идет о жизни, здоровье нации и возможные кризисные последствия для природы решения экоконфликтов, то доминирование интересов экосистемы должно играть решающую роль в решении экоконфликтов государством. 2. иногда, для развития общества, науки и техники, экономически обоснованно может быть решение экологических конфликтов и в интересах общества, но, со временем, необходимо будет кардинально изменить этот дисбаланс, чтобы такое решение не привело к экологическому кризису. 3. сущность карты построения экоконфликтов но, несмотря на то, что в начальный период времени (t0) может быть принято решение в пользу того или иного субъекта экоконфликта в динамике, в оптимальном случае будет достигнута «точка экоравновесия», что делает невозможным доминирование одного из субъектов экоконфликта (рис. 3). классификация конфликтов, предложенная в работе (emelyanenko, 2003) дает возможность разработать «карту построения экоконфликтов». карта построения экоконфликтов дает наглядное видение вариантов альтернатив проявления экоконфликтов по признакам. это дает возможность разработать прогрессивные средства и принципиально новые управленческие схемы, которые приведут к более оптимального пути решения екоконфликтив, рост количественных и качественных показателей экономики в целом. задействование новой схемы управления экоконфликтами необходимо рассмотреть как фактор объединения всех участников экоконфликта для выхода на новый, усовершенствованный уровень функционирования (рис. 4). исходя из рисунка 4 мы можем видеть, что существует много моделей построения экоконфликтов. именно поэтому, при решении каждого отдельного экоконфликта необходимо строить свою уникальную рис. 3. развитие в динамике и решения экоконфликтов t0 t1 topt1 tn-1 tn topt2 t интересы общества интересы природы baltic journal of economic studies 192 vol. 2, no. 2, 2016 концепцию из данной ситуации. экоконфликты могут отличаться по признакам и альтернативам их проявления: способам решения и сферы проявления экоконфликтов, направленностью воздействия, количеством участников. по определению в.в. сабадаш, екоконфликты – это конфликт по поводу владения, распоряжения природным ресурсом (sabadash, 2012). но необходимо, по нашему мнению, еще отметить, что в современных условиях глобализации экоконфликты – это еще и возможность (или невозможность) избежать проблемы загрязнения и уничтожения окружающей среды, а именно водных, земельных, биологических и других ресурсов. необходимо, также, отметить, что разные авторы по-разному выделяют основную характеристику конфликтов. так вишнякова н.ф., балабанова а.в., савельева к.в., корзун в.а. считают, что конфликт это – столкновение, противостояние и противоречие, но с точки зрения других авторов, таких как, пиренн м.и., уткин з.и., считают, что конфликт – это ситуация, несовместимость; скибинская л.и. – стремление, ложкин г.в. – адаптационная реакция, ворожейкин и.е., кибалов я., захаров д.к. – конфликт – это нормальное проявление социальных связей; анцупов а.я., шипилов а.и. – способ решения. основываясь на исследованиях ученых, мы можем видеть самые разные подходы к определению конфликта, говорит о неоднозначной и сложной природе конфликта, а из-за этого и методов его решения. экоконфликт не является исключением из этого вывода, так как является одной из разновидностей конфликтов вообще. достаточно внимания уделил петрушенко м.м. моделированию экоконфликтов, что по нашему мнению дает возможность оценить экоконфликт и его последствия в денежном эквиваленте (petrushenko, 2012) и обеспечить управление экологическими рисками (anghelache, 2011). 4. определение границ экоконфликтов для дальнейшего изучения и анализа экоконфликтов, а также для их эффективного преодоления необходимо указать границы экологического конфликта. это позволит: уменьшить время развития и преодоления последствий экоконфликтов; задействовать новые формы сотрудничества между участниками экоконфликтов; стимулировать применение новых методов управления для обеспечения выхода из экоконфликтов и при преодолении его последствий; обоснованно подойти к оценке выгод и затрат для каждого из участников экоконфликтов; учесть, какие нормативно – правовые акты могут быть задействованы на данной территории для преодоления как самого экоконфликта, так и его последствий. границы экологических конфликтов могут быть очерчены несколькими составляющими (рис. 5): 1. что? – это убытки, которые могут нести обе стороны экоконфликтов. эти убытки могут иметь денежный эквивалент (то есть, сколько теряет предприятие от экоконфликтов, ден. ед., или сколько вреда будет нанесено природе, ден. ед.) 2. где? – площадь проявления экоконфликта – то есть на какой территории возник экоконфликт и его распространение с течением времени; 3. когда? – это промежуток времени, где t1 – начало экоконфликта; tn – окончание экоконфликта; tn-1 – срок продления экоконфликта, что включает в себя обострение и разрешения конфликта. t (когда?) s (где?) w (что?) екоконфлікт рис. 5. границы экологического конфликта рис. 4. карта построения экоконфликтов альтернативные проявления пр из на к способ решения правовые насильственные ненасильственны е сфера проявления экоконфликта экономические социальные научные направленность влияния вертикальные горизонтальные латеральные степень выраженности открытые скрытые смешанные количество участников внутренние межличностные межгрупповые baltic journal of economic studies 193 vol. 2, no. 2, 2016 возникновение экоконфликтов может быть обусловлено рядом противоречий, которые обусловлены сосуществованием человека с природой. необходимо отметить, что, человек (предприятие) могут быть не только причиной экоконфликтов, но и его решением, то есть наоборот, не причиной, а результатом. не все взаимоотношения человека и природы могут вызывать экоконфликт, потому, что есть допустимые нормы вмешательства человека в экосистему, но необходимо отметить, что экоконфликт может возникнуть и без вмешательства человека (природные кризисные явления – торнадо, наводнения и др. 5. преодоление экоконфликта анализируя экоконфликты и их преодоления, мы можем определить, что оба субъекта экоконфликта (человек и природа) играют двойную функцию в создании экоконфликта и его решении (рис. 6). причины экоконфликтов приодоление экоконфликтов человек человек природа природа рис. 6. преодоление экоконфликтов когда оба субъекта экоконфликта (человек (общество) и природа) самостоятельно регулируют экоконфликт – это лучший вариант, потому что не надо задействовать государственные инструменты власти для решения такого типа экологических конфликтов, то есть мы можем видеть пример саморегулируемых экоконфликтов. такие конфликты предусматривают интеграцию функций участников экоконфликта, и характеризуется умением системы к самовосстановлению. это дает возможность уменьшить или совсем отказаться от регулирующей функции государства и может быть применена в тех случаях, когда стратегические цели участников экоконфликта пересекаются. именно поэтому, исследования возможности саморегулирования экоконфликтов является одним из основных этапов изучения процесса преодоления экоконфликтов. это дает возможность выбрать и адаптировать инструменты саморегулирования экоконфликтов, что в свою очередь, приведет к привлечению инструментов государства в других, более напряженных аспектах экономики. можем отметить, что саморегулируемые конфликты – это один из видов удачного управления, предоставляет возможности принимать важные решения в конкурентной среде создавая тем самым конкурентные преимущества. с учетом основных показателей возникновения, развития и решению экоконфликтов выделяют экоконфликты на макрои микроуровне. безусловно, эта градация обусловлена разной степенью влияния экоконфликта и приводит к выявлению различных подходов к решению влияния макрои микроэкологических конфликтов друг на друга. необходимо отметить, что конфликтный потенциал экологического фактора, проанализированного в работе садабаш в.в. (sabadash, 2009) может быть как основным этапом решения экопроблемы, а именно «точкой переключения», что дает возможность выхода на новый уровень развития взаимодействия природы и общества для достижения более эффективных методов сосуществования системы «общество природа» 6. выводы таким образом, мы можем определить, что развитие и преодоление экоконфликтов в современных условиях зависит от экономической и политической ситуации в стране. карта построения экоконфликтов дает возможность воспользоваться положительным потенциалом экоконфликта для развития потенциала региона. оценивая пределы конфликта, позволит уменьшить экономические затраты на его решения. references chuprina, n.m. 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(2009). konfliktniy potentsial ekologichnogo chinnika. uchenyie zapiski tavricheskogo natsionalnogo universiteta im. v.i. vernadskogo. seriya «ekonomika i upravlenie», 22 (61): 111-118. наталия чуприна предпосылки и сущность выявления экологических конфликтов в экономике аннотация. целью работы является исследование природы экологических конфликтов в экономике, которые, при условии глобализации дают возможность (или делают невозможным) решение проблемы по загрязнения и уничтожения всех элементов окружающей среды. выявление границ экоконфликтов в экономике, которые будут определяющими при формировании их возможностей и разработке альтернативных вариантов преодоления экоконфликтов. методика. исследование основано на анализе состояния экологической составляющей экономики украины за последние годы и результатах работы промышленных предприятий страны. работа промышленных предприятий может провоцировать создание экологических конфликтов. также использованы результаты научных исследований ведущих ученых в данной области. результаты исследований дали возможность определить сущность выявления экологических конфликтов в экономике. проследить развитие и распространение экологических конфликтов в динамике. разработанная карта построения экологических конфликтов дает возможность более детально проанализировать составляющие экологического конфликта и выработать управленческие действия, направленные на ликвидацию экологического конфликта в экономике. обоснована необходимость задействования потенциала экологических конфликтов в будущем установив его пределы в экономике. практическое значение. проблема экологии, а именно предупреждение или оптимальное решение экоконфликтов является предпосылкой развития страны, как целостного государства со здоровым населением, которое может жить в стране и свободно пользоваться ее ресурсами (в пределах законодательных актов). однако, преодолению экоконфликтов не уделяется достаточно внимания как на государственном, так и на местном уровне. основные этапы анализа и возможные варианты развития экоконфликтов становятся основой для формирования государственных приоритетов в направлении экологизации основных отраслей производства в экономике. особенности возникновения каждого отдельного экологического конфликта, осуществление исследований по этой проблеме, систематизация и анализ полученных результатов и путей преодоления экоконфликтов в индустриальной стране это и должно быть одним из главных приоритетов государства, и, осуществляться, как на микроуровне, так и на макроуровне в экономике. при рассмотрении процессов экологизации, развития и управлением экологической безопасности государства необходимо достаточно подробно описать проявления экоконфликтов, их функции и характерные черты. вмешательство государства при устранении экоконфликтов должно привести не только к его решению, но и предоставить возможности сосуществования и дальнейшему развитию всех участников экологического конфликта в экономике. значение/оригинальность. таким образом, мы можем определить, что развитие и преодоление экоконфликтов в современных условиях зависит от экономической и политической ситуации в стране. карта построения экологических конфликтов дает возможность воспользоваться положительным потенциалом экологических конфликта для развития потенциала региона. оценивая пределы конфликта, позволит уменьшить экономические затраты на его решения. baltic journal of economic studies 4 vol. 2, no. 5, 2016 innovative approaches to the regional development in ukraine volodymyr andryshyn1, oleksandr butusov2 uzhhorod national university, ukraine abstract. the purpose of the paper is the detection, theoretical study and the analysis of key innovative approaches to regional development in modern conditions and the justification of a necessity of their use in practice. methodology. the study is based on theoretical methods to study this problem. theoretical and methodological basis of the study are works of scientists on the innovative approaches to the regional development in modern conditions. the dialectical method of cognition, as well as such methods as a systematic and structural analysis, logical generalization are used to study the formation of scientific positions and forming the methodological foundations of the innovative approaches to regional development. results of the survey showed that among the existing innovative approaches to the regional development two are considered to be the most suitable in the present conditions – interregional cooperation and cluster approach. theoretical, methodological and practical aspects of regional development, which determine the transformation of the socio-economic relations in the context of sustainability of regional development and are caused by using innovative approaches to the regional development, are described. practical implications. the priorities of the dynamic regional development through activization of interregional economic cooperation and development of regional and interregional clusters are defined. the development of interregional and international cooperation, implementation of the potential of regional cluster initiatives, development of the system of innovation-oriented investment projects, innovative development of the industry and the realization of its export potential can lead to the qualitative structural shifts in the socio-economic development of regions and ukraine as a whole. value/originality. despite the existing considerable experience of the implementation of these processes in highly developed countries, the assumption is made that the most suitable alternative for ukraine’s economy is not mechanical copying of foreign experience but taking into account only the main features. considerable interest shows the experience and peculiarities of using innovative approaches to the regional development especially in countries with economies in transition and in developing countries. key words: region, regional development, innovative approach, interregional cooperation, cluster approach. jel classification: p25, o17, r11 corresponding author: 1 department of enterprise economics, uzhhorod national university. e-mail: volodymyr.andryshyn@uzhnu.edu.ua 2 department of enterprise economics, uzhhorod national university. e-mail: alex.butusov1@gmail.com 1. introduction in the context of globalization the regions of ukraine meet new challenges concerning intensive development of new approaches and techniques of managing, challenges in the practical use of innovative mechanisms and instruments to stimulate socio-economic development of territories, which are successfully used in the world. studying of approaches to regional development in ukraine is of particular relevance, because of the proven relationship between the level of socio-economic development of the country and its regions’ development. the issues of reproduction of the productive forces are solved at the level of regions, projects for socioeconomic development are implemented, key social needs of the population are satisfied and indicators of regional economic development is a criterion for determining the level of economic development of the state as a whole. nowadays new and modern forms of organization of management of regional production systems that contribute to the development of the regions should be created. this can be done through the introduction of new and improvement of current approaches to regional management and justification of theoretical and methodological aspects of management of development of the regions of ukraine, as well as identifying features of their development become extremely important scientific and practical tasks. baltic journal of economic studies 5 vol. 2, no. 5, 2016 in economic literature there are different approaches and opinions regarding the improvement of the mechanisms of socio-economic development of the region. in particular, these issues are the subject of works of scientists: s. bila, n. gavkalova, l. hryshyna, v. havrylenko, l. horal, t. voytkiv, s. sokolenko, m. khmara and others. 2. definition of the essence of regional development first of all, it should be mentioned that the region is a certain part of the country and is characterized by unity, uniformity, and complexity. there is no single clear definition of "region". different authors have different interpretations of its content, based on the analogy of this definition with the concept of "economic region" or giving it a slightly different content. the term "region" appeared later, than the term "district", but they are often used synonymously. the regions in the understanding of the concept of state regional policy and the law of ukraine "on stimulation of regional development" are the territorial units with a system of bodies of executive power and bodies of local self-government (the autonomous republic of crimea, regions, cities of kyiv and sevastopol). regions serve as the basis for sustainable socioeconomic development of the country due to the fact that the initial accumulation and distribution of human, intellectual and social capitals, natural, logistical, financial and other resources take place at the region level. that is why the regional development has strategic importance and is one of the most important things for the country development (gavkalova, 2013). if we consider the region as a complex economic system, we meet the problem of planning and management of its socio-economic development. the modern economics pays more and more attention to the study of problems of development, because this concept is considered to generate changes and achieve a new quality level of the current operation. the development is associated with changes that can significantly differentiate an object from a previous state and this difference means the acquirement of a new quality. the development is defined as a closely related process of quantitative and qualitative transformations. quantitative changes – growth, means an increase or decrease of the constituent parts of the organization. qualitative changes are the transformation of the structure and functions of the organization, its parts and elements. the last ones are not to be accompanied with a change of quantitative characteristics (dakus & simchenko, 2012). the development as a category can be considered from a several points of view, namely: the development as the process (movement), as a result, as an attribute, as a regularity, as a dynamics (kuzmin & melnik, 2011). optimization of any process should lead to the improvement of the state of the object and its results, what is the purpose of development. 3. description of innovative approaches to the regional development hryshyna and havrylenko (2014), exploring innovative approaches to the development of the region note that an important part of innovative tools for the development of the region in conditions of integration processes is the formation of regional and interregional clusters in ukraine that will contribute to the development of technology-intensive enterprises and the benefits of company’s specialization. the cluster organization of production is observed now in traditional industries: construction, light industry, agriculture, while the priority for the european countries is the development of primarily high-tech innovation clusters in the fields of engineering and biotechnology. at the same time, hryshyna and havrylenko argue that in the context of integration processes the interregional cooperation is one of the most effective mechanisms of activation of innovative processes and investment for the realization of highly efficient innovative projects. improvement of existing and development of new interregional economic relations and cross-border cooperation will increase the role of regions in foreign economic cooperation, their active participation in the activities of international organizations. this is possible to achieve it if new full-fledged projects and programs aimed at sharing the resource potential of the regions and achievement on this basis of stable, sustainable development will be prepared and implemented at the interregional level. a similar assumption is expressed by pinko (2016), stating in her study that a strong innovative potential for enhancing regional development has the creation of regional and interregional clusters, stimulating productivity, investment in technologically innovativeoriented production, transport, transit, recreation and tourism regional complexes. regional and interregional clusters form a solid basis for solving problems of employment and import substitution, accelerate the growth of the competitive potential of the territories, ensure social stability. another important approach, enhancing regional development, states the scientist, is the use of the potential and benefits of interregional cooperation, which contributes to the development of the internal market, strengthen economic and social cohesion of the country. the innovative component of the interregional cooperation is focused on sustainable and balanced socio-economic development at the national level by improving the competitiveness of regions. due to the implementation of common interregional projects in the field of production, services, infrastructure the socio-economic situation in baltic journal of economic studies 6 vol. 2, no. 5, 2016 the regions is improved and the economic cooperation between depressed regions and regions-leaders is enhanced; disproportions of regional development are levelling; opportunities are created to learn new and not involved previously resources for development. the international interregional cooperation on the cross-border, transnational level and interregional cooperation opens up new opportunities for ukraine with the neighbour countries. chukhno (2015) examines approaches to the region development from the point of view of management and distinguishes two areas: approaches using methods and tools of regional commercial management (for example, the use of project management approaches, more attention to the effectiveness of interventions, including economic, effective system of motivation of personnel (using the economic methods of motivation), increasing of client focusing etc.); approaches that involve public organizations, communities, local businesses to the processes of regional development management (public involvement in the creation and implementation of regional development programs, public-private partnership, etc.). among the existing innovative approaches to regional development chukhno points out the following: – clusters – the creation of conditions for the emergence and development of clusters in various spheres of life of the region will contribute to the unification of scientific and industrial potential of regions, when applied correctly, can contribute to the solution of strategic tasks of regional development, improvement of socio-economic indicators and the development of industrial and social infrastructure of the region. however, the previous experience of creation of clusters on the basis of the initiative of government agencies and administrative enforcement proved ineffective, the role of the state in this matter should be to develop ideas, creating a support mode for cluster members, etc.; – public-private partnerships – the main objective of the partnership, based on the experience of foreign countries, is the development of social infrastructure and meeting social and household needs of the population. public-private partnerships are created and operate in our country, however, such partnerships are not widespread and their activity is not sufficiently effective due to the imperfection of the legislation in this matter, the weak protection of the interests of the private partner, instability of the legislative base and influence of the political situation on these partnerships; – interregional cooperation in modern conditions – this approach to the management of regional development is of particular relevance and can bring significant benefits as to individual regions and to the state as a whole. the creation of different types of interregional cooperation in the economic, social, cultural, educational and other areas, in addition to raising the development potential of regions and the achievement of direct economic or social outcomes from such interactions will contribute to establishing interregional relations, which deteriorated as a result of social processes taking place in our country recently and speculation of a significant part of political forces at the regional differences. interregional cooperation with other countries will strengthen the capacity and pace of development of border regions, as well as further integration of ukraine into the european community. proponents of the cluster approach in regional development horal, and voytkiv (2012) believe that cluster development of regions is one of the characteristic features of the modern innovative economy. clustering can become one of directions of development of the economy and maintain it at the proper level in the system of world economic relations for the regions of ukraine, say the researchers. economy-driven cluster is a model of a competitive and investment-attractive economy, providing high level and quality of life of the population. however, it should be mentioned that the cluster will bring the expected results only when their activities are adapted to the dynamic changes in the external environment that surrounds them. basing on studying the world experience of formation and functioning of clusters, the researchers came to the conclusion that a new promising form of interaction between authorities, businesses and the public can become their joint membership in territorially-sectorial clusters as voluntary associations of complementary territorial resources. in the last decade, clusters and regional policies based on them are the most successful tool of economic development of regions in western countries. scientists came to the conclusion that cluster initiatives that support forms of cooperation between enterprises, public sector institutes (universities, research centres), are the driving forces of economic growth and employment growth in many regions of the world. zaharchenko and zaharchenko (2009), basing on studying of foreign practice of clustering of the economy in the regions also inclined to the feasibility and relevance of creating cluster structures in ukraine. moreover, the researchers believe that the competitiveness of ukraine in general and at the regional level in particular will largely depend on how quickly will shape and unfold the support model and the development of modern cluster structures. however, the scientists are against the mechanical copying of foreign experience clustering of the economy while creating clusters in ukraine. from the position of the transformation of the economy using the cluster approach to the regional development should provide, according to the scientists, enhancing its competitiveness through: − conversion of companies and organization of new production companies and corporate structures, regional-based (production and trading, manufacturing and financial); baltic journal of economic studies 7 vol. 2, no. 5, 2016 − increasing of profitability and competitiveness of production, both individual companies and their alliances; − diffusion of innovation: within corporate structures, and in the innovation space around so called “growth poles”. − market self-management at the regional level, which already manifests itself in the formation of regional systems of market relations, regional markets and market infrastructure. in the context of a clustering of ukraine’s economy a considerable interest shows the experience of creation, developing and functioning of clusters, especially in countries with economies in transition and in developing countries. the original synthesis of this experience was made by sokolenko (2006). based on the analysis of international practices of implementation of cluster strategies, the scientist makes the following policy conclusions: − application of the cluster approach is a natural stage in the development of the modern economy and is the key to the development of a highly developed economic system; − advantage of the cluster production mechanism is that it is based on the effective combination of internal cooperation in the process of production with the internal competition within the industrial cluster. it uses the network character of interaction of its participants, because the horizontal integration facilitates the formation of a focused chain of distribution of new knowledge, technologies and innovations. the specificity of the cluster is getting its members a synergistic effect that is reflected in the competitiveness of the whole system compared to individual economic entities; − distinctive feature of the cluster is its innovative orientation. the most successful clusters’ forms are those where there is ongoing or anticipated "breakthrough" in the field of technology and production technology, followed by access to new market niches. that is why all countries are actively using the cluster approach in the formation and regulation of their national innovation programs; − realization of a cluster policy is based on the organization of interaction between bodies of state power and local self-government, business and educational institutions. their coordination promotes innovative production and services, mutual improvement and strengthening the effectiveness of their work; − competitive clusters tend to have developed relationships with similar clusters in other regions and countries. the promotion of such international linkages is becoming an important part of cluster policy, accelerates the development of cooperation between related clusters, and increases the efficiency of their cooperation. khmara (2013), exploring the use and application of the cluster approach to the development of the region explains its innovative character – clusters have a greater ability to innovate because of the following reasons: participants of the cluster are able to more adequately and quickly respond to the requirements of buyers; members of the cluster facilitates access to new technologies, which are used in various fields of business; suppliers and consumers even from other industries enter the process of innovation; cost of r&d is reduced as a result of cooperation between the companies; firms are under the intensive competitive pressure in the frameworks of cluster. the scientist points out the differences between traditional industrial clusters and the innovation ones. the reason is the existence of a system of close relationships between firms, their suppliers and customers and knowledge institutions, among them research centres and universities who are generators of new knowledge and innovations, provide high educational level of the region. you have the option of coordinating efforts and resources to create new product and technologies. in essence, the cluster makes possible the existence of a closed process chain, from product creation to production and to market entry. another discrepancy of innovative clusters from traditional ones, says khmara, is creating within them mainly exportoriented products and technologies that means that inner competitive advantages are more significant on an international scale (khmara, 2013). the most comprehensive in the sense of identification and substantiation of modern approaches to the development of the region is the survey of the team of scientists led by bila (2011). the use of innovative approaches to regional development, according to bila, should be focused on the following: strengthening of inner motivation at the regional (local) level of socio-economic growth; creation at the regional level of effective economic structures, focused on the intensification of the resource potential use; creation at the regional (interregional) level of competitive manufacturing systems of innovative type; satisfaction of internal needs of the territories by using own and attracted resources. interregional cooperation within a country can substantially expand the total effective capacity of the domestic market, it not only contributes to the realization of material interests of regions, but it is a way of fostering the social, humanitarian, social and cultural relations of the communities (bila, 2011). interregional cooperation, according to bila, is a tool to solve internal problems, not on the basis of competition for the attraction of the centralized financial resources, obtain budget subsidies and subventions or regional tax preferences, but on the basis of more efficient use of baltic journal of economic studies 8 vol. 2, no. 5, 2016 resources development of the region. this reduces the burden on the state budget for solving problems of the local (regional) development. interregional cooperation is one of the most effective mechanisms for enhancing innovation processes and to attract investments for the realization of highly efficient innovative projects, is able to form new centres of economic development, around which areas of economic growth can be formed because of the possibility of consolidating resources and efforts of the regions in the implementation of projects of common interest. interregional cooperation should be considered as a powerful organizational innovation that significantly improves the efficiency of regional policy through: development of subjectivity of regions, increasing their ability to produce their own initiatives and development projects to create the appropriate infrastructure development. under these conditions, the role of the state lies not in generating, but in the direction of development, which requires a much lower financial and managerial resources; features of formation of national projects of macroregional (interregional) level, allowing to achieve the proper importance of the national projects and, accordingly, the multiplier effect brought by the project funds; ability of integrated development of territories (including depressed regions), due to the greater detailing of the process of cooperation that becomes possible due to the development of areas of cooperation at the local level; providing practical dimension of the european integration strategy of ukraine by establishing direct communication between the interested partners in interregional cooperation with the eu regions; direction of state support of regional development at consolidated design problem that allows to avoid the dispersion of resources and minimization of misuse of funds, to achieve a cumulative effect as a result of this support. regarding the cluster approach to regional development, researchers note that the main advantages of cluster organization of production are: strengthening cooperation between business, science and government. world practice shows that the establishment of clusters often occurs in the framework of public-private partnership with active participation of the state as a founder and sponsor of cluster initiatives; stages as well as research institutes that play a bridging role between industry, government and science; increase of efficiency of work thanks to fast access to resources, knowledge, innovative technologies and vendors, as well as by reducing transaction costs; intensification of innovation activities of companies. thanks to the so-called spillover effect and closer contact with consumers and other companies, the ability exists to create and disseminate new ideas and technologies among cluster members and borders, which promotes primarily the growth of value added products and the orientation on production and manufacturing high-tech products of final consumption; improving the investment attractiveness of the regions and the country as a whole, due to the high level of investor confidence in the developed network structures (compared to individual small companies), and the presence of guarantees and benefits to investors and to the state if its participation in cluster initiatives; accelerating the creation and development of new business. new companies have the opportunity to develop in favourable conditions through the coordination of partner relationships within the cluster; formation of a closed production cycle (and chain growth of value added) within the country by creating within the cluster missing earlier production units that are directly connected with the development of import substitution (bila, 2011). 4. conclusions according to the above mentioned scientists conclusions, innovative approaches to the regional development should be implemented primarily in the following areas: the use of catalysts and multipliers of regional development; motivation of regions to selfdevelopment, diversification of areas of economic activity, search and leveraging the latent potential of the development; overcoming of the paternalistic expectations, minimization of subsidized and fund support mechanisms for the regions. the need to ensure the development of the regions based on innovation is caused by the importance of the optimization of the spatial economic characteristics of ukraine in accordance with the peculiarities of allocation of available and potential resources, also by the requirement to meet the general and specific needs of the population. at the same time, the use of innovative approaches to the regional development should be focused on: strengthening the internal motivation at the local level socio-economic growth; creation at the regional level of effective management structures aimed at intensification of use of the resource potential; formation of interregional and regional levels competitive production innovative systems; satisfaction of internal needs of the territories at the expense of own and attracted resources. prospects of further studies on this issue are to determine the characteristics of some innovative approaches in the management of regional development from the point of view of the specific circumstances and ensuring integrated development of ukrainian regions. baltic journal of economic studies 9 vol. 2, no. 5, 2016 references bila s.o. (2011). innovative approaches to regional development in ukraine: analytical report: the monogram. – kyiv: nisi, 80 p. chukhno i. (2015). innovative approaches in the management of regional development. theory and practice of public administration 1(48): 165-170. dakus a.v. & simchenko n.o. (2012). the economic development of enterprise: concept and definition. actual problems of economics and management, 6. retrieved from: : http://probl-economy.kpi.ua/pdf/2012-3.pdf gavkalova n.l. (2013). management of regional development: problems and prospects: the monogram. – kharkiv: khnue, 400 p. horal’ l. & voytkiv t. (2012). the usage of cluster approach as the condition for efficiency of innovation development of the region. economic analysis, 10(1): 112-115. hryshyna l. & havrylenko v. (2014). innovative development approaches of the region under the integration processes. economy and management of enterprises, 1: 126-131. khmara m. (2013) cluster approach of strategy innovation development for foreign countries. international relations, 1(40): 51-54. kuzmin o.e. & melnik o.g. (2011). diagnostics of potential of enterprise. marketing and management of innovations. the scientific journal: 155-164. pinko v. s. (2016) innovative ways of economic development and their implementation at the regional level. retrieved from: http://www.economy-confer.com.ua/full-article/1971/ sokolenko s. (2006). strategy of competitiveness of ukraine's economy based on the integration of systems clusters. sevastopol. retrieved from: http://www.zoa.gov.ua/source/partition/1/00000039800001.doc zaharchenko v. & zaharchenko s. (2009). cluster approach to the analysis and improvement of competitiveness of economy of ukraine and its regions. bulletin of khmelnitsky national university, 5: 55-57. владимир андришин, александр бутусов инновационные подходы к развитию регионов в украине аннотация. целью работы является выявление, теоретическое обоснование и анализ основных инновационных подходов к региональному развитию в современных условиях и обоснование необходимости их использования на практике. методика. исследование базируется на теоретических методах для исследования этой проблемы. теоретической и методологической основой исследования являются труды ученых о внедрении инновационных подходов к региональному развитию в современных условиях. диалектический метод познания, а также следующие методы: системного и структурного анализа, логического обобщения используются для изучения формирования научных позиций и формирования методологических основ инновационных подходов к региональному развитию. результаты исследования показали, что среди существующих инновационных подходов к региональному развитию два считаются наиболее подходящими в нынешних условиях – межрегиональное сотрудничество и кластерный подход. описаны теоретические, методологические и практические аспекты регионального развития, которые определяют трансформации социально-экономических отношений в контексте устойчивого регионального развития и обусловлены использованием инновационных подходов к региональному развитию. практическое значение. определены приоритеты динамичного развития регионов за счет активизации межрегионального экономического сотрудничества и развития региональных и межрегиональных кластеров. развитие межрегионального и международного сотрудничества, реализация потенциала региональных кластерных инициатив, развитие системы инновационно-ориентированных инвестиционных проектов, инновационного развития промышленности и реализации ее экспортного потенциала может привести к качественным структурным сдвигам в социально-экономическом развитии регионов и украины в целом. значение/оригинальность. несмотря на существующий значительный опыт реализации этих процессов в высокоразвитых странах сделано предположение, что наиболее подходящий вариант для экономики украины это не механическое копирование зарубежного опыта, а учет только ключевых составляющих. немалый интерес показывает опыт и особенности использования инновационных подходов к региональному развитию, особенно в странах с переходной экономикой и в развивающихся странах. baltic journal of economic studies 19 vol. 3, no. 1, 2017 financial instruments of the state policy for the prevention of terrorist acts in ukraine mykola bunchuk1 national academy for public administration under the president of ukraine, ukraine abstract. the article’s objective is to determine the mechanism for implementing the financial instruments of the state policy to counter terrorist acts in the territory not controlled by ukrainian authorities in donetsk and luhansk regions. methodology. within the scientific research, for the most effective approaches at the national level to prevent the threat of international terrorism, under the conditions of the deep internal political crisis and extremely difficult economic situation, in order to improve the efficiency of public administration in developing and implementing the anti-terrorism state policies in ukraine, the paper analyses international and domestic regulations on preventing the terrorist financing, considers factors that affect the deterioration of the social and economic situation of the temporarily occupied parts of donbas. results of the research allow formulating the definition of financial instruments of antiterrorist policies, the paper develops and proposes a series of organizational measures in order to prevent the terrorist financing in ukraine. practical implications. based on the above, we propose an option of classification of main illegal mechanisms that may be used to finance terrorist activities in the territories of donetsk and luhansk regions uncontrolled by ukrainian authorities, dividing them into internal and external. given the above studied factors and classification of financing of terrorist acts in eastern ukraine, we can assume that for the purpose of evading duty payable to relevant state bodies of ukraine, external supplies of inventories in the uncontrolled areas of the donetsk region, which are later obtained by illegal armed groups, are possibly carried out as follows: on behalf of a commercial entity registered in a foreign country for the ukrainian commercial entity, registered in settlements located in the uncontrolled territory; crossing of international transit traffic that moves through the russian federation checkpoints of the ukrainian-russian border on the uncontrolled ukrainian territory. value/originality. we have concluded that the introduction of financial instruments of the state policy to counter terrorism will bring the following positive results: ensure systematic implementation of the state policy in the prevention and counteraction to legalization (laundering) of proceeds from crime or terrorist financing; enhance a compliance of the national system of combating legalization (laundering) of proceeds from crime or terrorism financing with the international legal standards; improve inflow of foreign investment in order to stimulate the national economy. however, the effectiveness of the above measures should be determined in accordance with the principles of economic analysis of the state policy. key words: money laundering, state anti-terrorism policy, policy instruments, financial and economic mechanism, terrorism financing. jel classification: r13, k14, p16, h72, j18 1. introduction the search for the most effective approaches at the national level to prevent the threat of international terrorism, the identification of promising vectors of international cooperation in this area gain a particular importance for ukraine, which is forced to rethink its external positioning and the previously declared nature of the strategic partnership in the conditions of deep internal crisis and extremely difficult foreign policy situation due to the events in the east of ukraine and in crimea. in this sense, the emergence of programs to finance the fight against terrorism in a number of countries, including the improvement of measures to combat terrorist financing, attracts attention. in the future, the process of implementing reforms in the country, particularly in terms of the eu-ukraine association agreement (law of ukraine n 1678-vii, 2014), provides for anti-terrorism cooperation based on the performance of un security council resolution n 1373 of 2001, the un global counterterrorist strategy 2006 and other un documents (portal un sc) and corresponding author: 1 department of management of national economy and economic policy, national academy for public administration under the president of ukraine. e-mail: nick-nick.71@mail.ru baltic journal of economic studies 20 vol. 3, no. 1, 2017 the relevant international conventions and regulations, thus envisaging the deepening of cooperation in order to combat money laundering and financing of terrorism within the operation of the financial action task force (fatf). according to the above, ukraine should join the international practice of preventing the terrorist financing that will significantly reduce the risk of terrorist attacks with minimal costs. thus, at the date, scientists, politicians, and economists are facing an urgent need to develop and implement effective financial and economic measures to overcome the terrorist acts through the regulation of the hybrid military conflict in donbas by the antiterrorist legislation. the purpose of the article is to determine the mechanism for implementing the financial instruments of the state policy to counter terrorist acts in the territory not controlled by ukrainian authorities in donetsk and luhansk regions. 2. recent research and publications analysis a significant contribution has been made by such prominent domestic and foreign authors as a. abadi, j. gardeazabal, a. vining, d. weimer, m. viscusi, kh. liang, o. kiliievych, a. mertens, i. rozputenko, j. stiglitz and others. the key attention of the authors has been paid to the analysis of social and economic factors of terrorism, financing sources, and analysis of the state policy, in particular, an efficiency of measures to protect from transnational terrorism at the national and international levels. they have also introduced the concept of catastrophic risk from terrorism in the standard model of endogenous growth and analysed the effect of increased terrorist risk in accordance with the positions of countries on foreign direct investments. thus, in the integrated global economy where international investors are able to diversify other risks, terrorism can cause a large movement of capital between countries (abadie, gardeazabal, 2006). at the same time, scientists believe that the creation of modern forms of terrorism is brightly demonstrated by the creation of the islamic state, the richest terrorist organization in the history with the estimated wealth of 2 billion us dollars. this has been caused by the ability of the islamic state to take control over the autonomous territory and reign it by using the marketing tools of the 21st century to create an international brand in the strategy of attracting foreign soldiers (schori liang, 2015). therefore, some international financial and economic tools, particularly to counter the islamic state, in our opinion, may be useful when overcoming the financial problems associated with terrorist manifestations in ukrainian donbas. 3. the paper main body the law of ukraine "on prevention and counteraction to legalization (laundering) of proceeds from crime or terrorist financing" states that the state financial monitoring is a set of actions taken by state financial monitoring units designed to meet the requirements of the law on the prevention and counteraction to legalization (laundering) of proceeds from crime terrorist financing (law of ukraine n 1702vii, 2014). the regulatory law also states that the main objectives of state financial monitoring units as a specially authorized body are to implement the state policy in combating legalization (laundering) of proceeds from crime or terrorist financing. thus, on the demand of the implementation of article 18 of the abovementioned law of ukraine, by decree no. 1407-r dated december 30, 2015, the cabinet of ministers of ukraine approved the strategy of development of the system of prevention and counteraction to legalization (laundering) of proceeds from crime, terrorist financing and financing of proliferation of weapons of mass destruction by 2020 (decree of the cabinet ministers ukraine № 1407-р, 2015). the aim of the strategy is a legal, organizational and institutional improvement and provision of stable operation of the national system of prevention and counteraction to legalization (laundering) of proceeds from crime, terrorist financing and financing of proliferation of weapons of mass destruction. it is expected that the implementation of this strategy will help ensure: systematic implementation of the state policy in combating legalization (laundering) of proceeds from crime, terrorist financing and financing of proliferation of weapons of mass destruction in accordance with the international standards; harmonization of the national system of combating legalization (laundering) of proceeds from crime, terrorist financing and financing of proliferation of weapons of mass destruction with the international standards; reduction of the corruption level; effective cooperation and continuous exchange of information with executive authorities, other public bodies – state financial monitoring units, and competent authorities of foreign states and international organizations in this area; training of government officials in financial monitoring and employees of primary financial monitoring units; transparent and efficient use of the state budget; stimulation of the inflow of foreign investments into the national economy; filling of the revenue part of the state budget; baltic journal of economic studies 21 vol. 3, no. 1, 2017 promotion of the liberalization of the eu visa regime for ukraine. so, based on the legislative acts of ukraine with the purpose of forming a monitoring system in the ato area, combating smuggling, as well as identifying persons involved in terrorist activities, the "temporary mode of control over the movement of persons, vehicles and goods across the conflict line within the donetsk and luhansk regions" has been replaced by the resolution of the cabinet of ministers of ukraine dated march 1, 2017 no. 99 approving the "procedure for the movement of goods to and from the antiterrorist operation area". this procedure has been adopted pursuant to the decision of the national security and defence council of ukraine dated february 16, 2017 "on urgent measures to neutralize threats to the energy security of ukraine and enhance the protection of critical infrastructure" approved by the decree of the president of ukraine no. 37/2017. based on the above, in order to further define the characteristics of financial and economic instruments of the state counter-terrorism policy that have emerged in terms of the anti-terrorist operation in eastern ukraine, we have determined the factors that affect the deterioration of the social and economic status of donbas: destruction and transfer of production facilities of the donetsk and luhansk regions to the territory of the russian federation; outflow of the intellectual potential of the regions; lack of synchronization between the financial and banking systems of the main part of ukraine and of the regions beyond the control (inability to provide social benefits, including pensions); problems of the fuel and energy sector due to the lack of gas/electricity in some areas related to the destruction of gas transmission systems and suspension of energy supply due to the lack of payments for consumption; decline of the coal industry through the closure of most mines and transition to illegal coal mining; lack of jobs for the population; growth of the protest potential of the population due to increased salary arrears; shortage of food and basic necessities and sale at an unreasonably high price; ban of the sale of goods, other that manufactured in russia, in the territories outside the control of ukraine; non-state control, so-called "protection racket", of certain sectors of economic activities and money laundering of the "administrative elite" of the temporarily occupied territories of donbas. based on the above, we propose an option of the classification of main illegal mechanisms that may be used to finance terrorist activities in the territories of donetsk and luhansk regions uncontrolled by ukrainian authorities, dividing them into internal and external. internal: hidden import of cash to conduct financial transactions using payment cards (pensions and social benefits); import of inventories in the violation of regulatory requirements of the procedure for movement of goods; concealing of profits of enterprises that have been re-registered in ukraine, and which in fact are located in the uncontrolled territories of donbas; leaving exports to the uncontrolled areas; a part of goods for humanitarian convoys from the main territory of ukraine is sold for cash in the uncontrolled parts of donbas; illegal payment of customs duties to "fiscal structures" of the uncontrolled areas of donbas. external: receipt of funds from the sale of marketable products and equipment of industrial enterprises outside the uncontrolled donbas; no opportunity for state accounting of cash and imported goods, including military goods of the russian federation under the guise of humanitarian convoys; external funding of various programs uncontrolled by ukraine (economic, social, military, security, etc.) for the development of the temporarily occupied territories and commercial investment projects in order to implement measures aimed at discrediting the government of ukraine before the local population; establishment of foreign economic relations by certain foreign commercial entities with companies controlled by terrorist organizations. given the above studied factors and classification of financing of terrorist acts in eastern ukraine, we can assume that for the purpose of evading duty payable to relevant state bodies of ukraine, external supplies of inventories in the uncontrolled areas of the donetsk region, which are later obtained by illegal armed groups, are possibly carried out as follows: on behalf of a commercial entity registered in a foreign country for the ukrainian commercial entity, registered in settlements located in the uncontrolled territory; crossing of international transit traffic that moves through the russian federation checkpoints of the ukrainian-russian border on the uncontrolled ukrainian territory. thus, the anti-terrorist policy tools to prevent the funding of the so-called people's republic of donetsk and luhansk people's republic are considered by us to be as follows: methodological and practical support in prevention and counteraction to legalization (laundering) of proceeds from crime or terrorist financing; use by primary financial monitoring units of measures to strengthen the requirements for reclamation/ clarification of the information required for the implementation of the "know your customer" rules, including on the basis of information from public sources, namely, the internet, social networks, etc.; baltic journal of economic studies 22 vol. 3, no. 1, 2017 strengthening of control over payment systems and non-bank financial institutions in terms of expansion of the internal financial monitoring requirements; review of the state regulations governing payments in cash, for the purpose of reduction of marginal amounts of cash transactions; strengthening of control over the activities of nonprofit organizations; strengthening of interagency cooperation between state regulators, primary financial monitoring units, the state financial monitoring service and law enforcement agencies; strengthening of international cooperation in countering terrorist and separatist activities. thus, given the fact that credit and financial institutions are the most "attractive" for the legalization (laundering) of money in ukraine and worldwide, in order to prevent terrorist financing in ukraine, it is expedient to take a number of organizational measures and, above all, to minimize cash flows through increased use of electronic payments; to introduce modern forms of accountability that would ensure strict control of money circulation; to provide employees of search and detective units with more powers to obtain information on financial and economic activities of individual investors; to unify the national legal framework; a common system to monitor the movement of cash and cashless transactions to prevent terrorist groups from concealing their capital. 4. conclusions considering the study of provisions of the national and international regulations, we have concluded that the introduction of financial instruments of the state policy to counter terrorism will bring the following positive results: ensure systematic implementation of the state policy in the prevention and counteraction to legalization (laundering) of proceeds from crime or terrorist financing; enhance compliance of the national system of combating legalization (laundering) of proceeds from crime or terrorism financing with the international legal standards; improve the inflow of foreign investment for the stimulation of the national economy. with due regard to international standards, the urgent need to establish effective organizational and regulatory measures of prevention and counteraction to legalization (laundering) of proceeds from crime is evident (kiliievych, 2011). however, the effectiveness of the above measures should be determined in accordance with the principles of economic analysis of the state policy. references: law of ukraine “on the ratification of the association agreement between ukraine and the european union" dated september 16, 2014 n 1678-vii [electronic resource]. – retrieved from: http://www.kmu.gov.ua/control/ publish/article?art_id=246581344. portal of the un security council. [electronic resource]. – retrieved from: http://www.un.org/ru/sc/ alberto abadie, javier gardeazabal (2006). terrorism and the world economy. european economic review. january, 107-192. christina schori liang/isil inc.: (2015). a portrait of a modern terrorist enterprise. global terrorism index, 76-80. law ukraine «on the prevention and counteraction to legalization (laundering) of proceeds from crime orterrorist financing" dated november 28, 2002. supreme council of ukraine. 2003. no. 1. decree of the cabinet ministers ukraine dated december 30, 2015 "on the strategy of development of the system of prevention and counteraction to legalization (laundering) of proceeds from crime, terrorist financing and financing of proliferation of weapons of mass destruction by 2020" // [electronic resource]. – access mode: http://www.kmu.gov.ua/control/uk/publish/article?art_id=248755388 temporary mode of control over the movement of persons, vehicles and goods across the conflict line within the donetsk and lugansk regions (decree of the first deputy head of the atc at the security service of ukraine – the head of the antiterrorist operation in the donetsk and lugansk regions dated november 22, 2015 no. 27og., latest version – decree no. 415og dated june 12, 2015, latest modifications dated december 16, 2015). [electronic resource]. – retrieved from: zakon.golovbukh.ua/regulations/2341/8374/8375/465003/. resolution of the cabinet of ministers of ukraine from march 1, 2017 r. number 99 on approval of the transfer of goods to the area or the area of the antiterrorist operation. [electronic resource]. – retrieved from: http://www.kmu.gov.ua/control/ru/cardnpd?docid=249790429 decree of the president of ukraine no. 37/2017 on the decision of the national security and defense council of ukraine dated february 16, 2017 "on urgent measures to neutralize threats to the energy security of ukraine and enhance the protection of critical infrastructure". [electronic resource]. – retrieved from: http://www.president.gov.ua/documents/372017-21302 kiliievych o.i. (2011). economic analysis of the state policy, textbook. – k.: nadu, 80 p. baltic journal of economic studies 23 vol. 3, no. 1, 2017 николай бунчук финансовые инструменты государственной политики предупреждения террористических актов в украине аннотация. цель статьи заключается в определении финансовых инструментов механизма реализации государственной политики противодействия террористическим проявлениям на неподконтрольных со стороны украины теріторіях донецкой и луганской областей. методика. в рамках научного поиска наиболее действенных подходов национального уровня по предупреждению угрозы международного терроризма в условиях глубокого внутриполитического кризиса и чрезвычайно сложного экономического положения, с целью повышения эффективности деятельности органов государственного управления при формировании и реализации государственной политики противодействия терроризму в украине, в работе проанализированы международные и отечественные нормативно-правовые акты относительно предотвращения финансирования терроризма, рассмотрены факторы, которые влияют на ухудшение социально-экономического состояния временно оккупированной части донбасса. в результате сформулировано определение финансовых инструментов антитеррористической политики, разработано и предложено проведение ряда организационных мероприятий в целях предотвращения финансирования терроризма. практическое значение. разработан вариант классификации основных противоправных механизмов, которые могут быть использованы для финансирования террористической деятельности на неподконтрольной украинской власти части донецкой и луганской областей, разделив их на внутренние и внешние. учитывая исследованные факторы и классификации процессов финансирования террористических проявлений на востоке украины, в работе раскрыты пути поставки товарно-материальных ценностей на неподконтрольные районы донецкого региона, что в дальнейшем поступают до незаконных вооруженных формирований, с целью отклонения от уплаты пошлины соответствующим государственным органам украины. значение/оригинальность. внедрение разработанных финансовых инструментов государственной политики противодействия терроризму позволит получить такие позитивные результаты: обеспечит системную реализацию государственной политики в сфере предотвращения и противодействия легализации (отмыванию) доходов, полученных преступным путем, или финансированию терроризма; повысит соответствие национальной системы предотвращения и противодействия легализации (отмыванию) доходов, полученных преступным путем, или финансированию терроризма с международными правовыми стандартами; улучшит стимулирование притока иностранных инвестиций в национальную экономику. однако, определение эффективности вышеизложенных мероприятий должно происходить согласно принципов методологии экономического анализа государственной политики. baltic journal of economic studies 93 vol. 3, no. 1, 2017 implementation of modern foreign approaches to ukrainian pension system reforming anna khemii1 taras shevchenko national university of kyiv, ukraine abstract. goal. a study of the experience of western european countries in implementing structural reforms of the pension insurance system and the implementation of such experience in ukraine. the main task of the pension system of any country in the world is to ensure the corresponding stable level of incomes of pensioners and at the same time maintain their financial stability. the increase in the proportion of pensioners increases the burden on pension systems, and mainly measures taken by countries are aimed at reducing pension costs and parametric reforms. methodology. this article investigates the prerequisites and consequences of reforming the pension systems of the member states of the organization for international cooperation and development. considered measures to ensure the financial stability of pension systems of the countries concerned, increased the social and stimulating role of pension insurance in the society. the methodological basis of the article is methods of scientific cognition, which enable to expose basic conformities to the law of development of the pension systems, priority ways to ensure their financial sustainability. such methods are in particular used: analysis and synthesis – during research of financial indicators of pension systems; systematization – for revealing methods for reforming pension systems, their detailed analysis and the definition of their features; scientific abstraction – with the purpose of forming theoretical generalizations and conclusions. results. the article investigates the trends of reforming pension insurance systems in some countries. it is established that today the main characteristics of pension reforms in foreign countries are increasing the retirement age, improving the solidary component of the pension system, reducing the role of state pension insurance. some countries raise their contribution rates; the conditions for early retirement are becoming tougher. almost nobody decided to reduce the nominal size of pensions, but some countries introduce automatic adjustment of their size depending on the growth of life expectancy, incomes and expenditures of the pension system. in recent years, a number of countries, despite budgetary problems, have introduced tax incentives or co-financing voluntary savings to increase the proportion of citizens taking part in them. others used nonfinancial incentives to expand coverage. the article outlines the main directions of reforming the pension system in ukraine, namely, the expansion of the tax base for the working population, the introduction of the second pillar of the pension system, and the popularization of individual funded programs. practical significance. the necessity of changes in the pension system of ukraine on the basis of the effects of the reform of pension systems of the leading countries of the world. this made the cardinal changes in the systems in the countries of the world: the transition from financing pensions from current receipts to the system of individual accounts and savings, raising the retirement age, reviewing tariffs and requirements for risk management in pension funds, etc. importance/ originality: conducted a sample of reforms in pension insurance of foreign countries and offered the possibility of implementing only the part that can be adapted and applied in the light of the individual characteristics of the ukrainian state. key words: pension system, pension reform, pension insurance, pension schemes, organization for international cooperation and development (oecd). jel classification: g18, g21, g22, j14, e24 1. introduction the pension systems of most countries in the world have undergone significant changes during the last decade. the main factors of the reform are deterioration in demographic trends – a significant change in the ratio between employees and those who receive pensions as well as the change in the structure of production and consumption of the national product. aging directly influenced the financing of the solidarity system, since a smaller number of people of working age should corresponding author: 1 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: u_anyta@mail.ru baltic journal of economic studies 94 vol. 3, no. 1, 2017 maintain a sufficient level of pensions for an increasing number of older people in the world as a whole. the economic crisis and, as a result, the slow pace of economic growth, as well as the increase in the level of public debt in many oecd countries, created additional obstacles to ensuring the financial stability of pension systems. this caused the cardinal changes in the systems in the countries of the world: the transition from financing pensions from current receipts to the system of individual accounts and savings, raising the retirement age, reviewing tariffs and requirements for risk management in pension funds, etc. 2. literature review issues of reforming the pension system of ukraine are in the field of vision of many scientists and practitioners. domestic scientists, specialists on employment issues of the ministry of labour and social policy of ukraine made a significant contribution to the study of these processes and the search for mechanisms of improving the pension insurance system in ukraine. among them are libanova e.m., malevanyi m.i. (2014), oleksandrova g.m. (2016), zhuk d.s. (2011), kasich a.a. (2011), etc. the foreign experience of reforming pension systems is considered by such domestic scientists as rudyk v.k. (2011), yakimova l.p. (2013), petrushka a.v. (2015), bondaruk i.s. (2009) and others. without detracting from the role and importance of ongoing research, it should be noted that today the issues of foreign experience in the field of pension insurance are insufficiently studied. there is a need for scientific developments that would summarize the accumulated experience of the leading countries of the world taking into account the latest trends in social protection and on their basis would form a strategy for the development of ukraine's pension system. 3. goals and tasks of the article based on the analysis of foreign experience in the development of pension insurance systems, the purpose is to identify the main trends in the implementation of pension reforms by the example of oecd countries. to achieve the stated goal, the following tasks are set: to define the concept and types of pension systems, to analyse the differences in the pension systems of the oecd countries; to analyse the experience of pension reforms in the countries studied, to identify the main directions for implementing pension reforms in the conditions of the pension crisis. 4. the main material of the research pension provision of the population in various forms for many centuries played an important role in various countries but began to acquire the systemic nature only in the late xix – early xx century. since then, in most countries of the world, the continuous process of the evolution of pension systems goes on. during this period, generally accepted classification was formed with the separation of the two main types of pension systems: the distribution (pension contributions go to current pension payments) and cumulative (pension contributions are formed on individual accounts and invested in various assets in the financial market, and investment income increases the final pension). modern international practice is such that in most countries there are combined pension systems that combine state distribution, as well as mandatory and voluntary accumulative elements (figure 1). the mixed type of the pension system is the most effective in terms of financial stability and the level of pensions paid (stalebrink, 2014). in its pure form, cumulative and distribution models are seldom present in the world practice, as well as the model in which both compulsory and voluntary accumulative parts were simultaneously present. the main task of the pension system of any country in the world is to ensure the corresponding stable level of incomes of pensioners and at the same time maintain their financial stability. according to the organization for economic cooperation and development (oecd), from 2013 to the end of 2015, 26 countries out of 34 ones have made changes to their pension systems (oecd, 2015). in nine countries, these were reforms affecting the majority of the population. in other, the changes affected certain groups of employees (for example, private or public sector) or pensioners themselves. the process of aging of the world population, caused by the increase in life expectancy and low birth rates, forms new challenges in the world. according to the oicd forecast, the proportion of people aged 65 and over should increase from 8% of the total population in the world by the end of 2015, to almost 18% in 2050 (figure 2), and from 16% to 27% among countries members of the oicd. among the oicd countries, the share of the population, whose age will be more than 75 years in 2050, will equal the proportion of the population over 65 years of age today. the increase in the proportion of pensioners increases the burden on pension systems, and mainly measures taken by countries are aimed at reducing pension costs and parametric reforms. thus, the czech republic and finland reduced the indexation of pension payments, france changed the order of indexation, and greece and belgium temporarily froze it. since 2017, slovakia has been linking indexation to inflation (previously  – both to inflation rates and wage growth), the same rules are applied in sweden, finland, portugal and germany. in turkey, the indexation depends on the rate of gdp. baltic journal of economic studies 95 vol. 3, no. 1, 2017 luxembourg will index pensions only if pension incomes exceed expenditures (oecd, 2015). 0% 5% 10% 15% 20% 25% 30% 65+ 75+ 65+ 75+ 2015 2050 world oecd weigthed fig. 2. the share of elderly older than 65 and 75 in the total population source: (european commission, 2015) was 60 for men and 55 for women, now it is on average 65 and 63, respectively. over the past two years, canada, belgium, spain announced a gradual increase in the retirement age to 67 years, in germany it is raised from 65 to 67 per month per year, in the netherlands it will reach 67  years already in 2021 and in australia in 2023. hungary raises the age from 62 to 65, in portugal its increase from 65 to 66 will be associated with the increase in life expectancy. in slovenia, where the retirement age is one of the lowest – 58 years – it will rise to 60 for those who paid contributions for 40 years, if the payment time is shorter – up to 65 years. in france, the minimum necessary period for the payment of contributions will be gradually raised from the current 41.5 years to 43 years (oecd, 2015). some countries raise their contribution rates (for example, canada and france). the conditions for early retirement are becoming tougher: in finland, this opportunity was lost to private sector employees, in portugal  – for everybody, in poland, during the 2009 reform, the number of citizens eligible for early retirement was halved. in spain, the pension is reduced by 7% for each "premature" year of retirement. along with this, countries introduce incentives for later retirement, expand opportunities to combine receiving a pension with the continuation of employment. pension system level і mandatory, redistributive level іі mandatory, accumulative level ііі voluntary, accumulative target pension (resourcetested) base pension minimum pension state (public) pension private pension schemes with defined benefits (db) points system schemes of conventionalaccumulative accounts (national accounts) schemes with defined benefits (db) schemes with defined contributions (dc) schemes with defined credit fig. 1. the overall structure of pension systems abroad source: (yakimova, 2013) the retirement age is rising steadily. this was done by 30 of the 34 oecd countries (by 2015, latvia became the 35th participant of the oecd): 20-year-olds who started working in 2014 will retire not earlier than 64 years, and in the czech republic, ireland and great britain  – in 68 years. in the countries with economies in transition, where in the mid-1990s the retirement age baltic journal of economic studies 96 vol. 3, no. 1, 2017 almost nobody decided to reduce the nominal size of pensions, but some countries introduce automatic adjustment of their size (depending on the growth of life expectancy, incomes and expenditures of the pension system). the solidarity component remains the basis of pension systems. at the same time, in almost all countries they are mixed, including a cumulative component. participation in funded schemes can be mandatory for the employer – such conditions are typical for korea, the netherlands, hong kong, china, singapore, sweden, turkey, the united kingdom, new zealand. in germany, japan, poland, france, slovakia, corporate pension schemes for employers are voluntary. individual funded plans are mandatory in chile and mexico, voluntary in the czech republic; in australia  – mandatory for the employers, but voluntary for the employees. in recent years, a number of countries, despite budgetary problems, have introduced tax incentives or co-financing voluntary savings to increase the proportion of citizens taking part in them. others used non-financial incentives to expand coverage: for example, the uk and canada introduced autosubscriptions – automatically including employees with the option to opt-out; the same mechanism operates in italy, new zealand, the usa. mexico expands its coverage by connecting to the mandatory savings of self-employed and civil servants. some countries are moving in the opposite direction: for example, peru and uruguay granted employees the right to return to the distribution system. in slovakia, where in 2060, according to the forecasts of the european commission, pension costs will be highest and pensions the lowest in the eu, in 2015 they cancelled the minimum period of savings of 10 years and allowed their inheritance, and temporarily opened the entrance to the funded part for everybody  – previously it was possible to be chosen only up to 35 years. the czech republic, having offered the employee to co-finance a cumulative contribution at the expense of deduction from a solidarity contribution (thus the distributive part of the pension of such workers was reduced), faced an almost complete refusal of people to participate in this system. at the same time, state co-financing of voluntary savings made it possible to make them wide-scale: 4.9  million employees participate in them, compared to 0.08 million, who have chosen a cumulative contribution to state systems. in new zealand, by the moment of launch in 2007 the program “kiwisaver” based on an automatic connection of employees and state subsidies, less than 10% of ablebodied citizens participated in voluntary savings, by 2010 this share increased to 55% (oecd, 2015). the german rister program, thanks to state subsidies for 10 years from the start in 2001, increased coverage from 2.5 to 27% of working-age citizens. in spain, despite the tax benefits, up to 2012, they managed to attract to voluntary corporate programs no more than 3% of employees, and 15% – to individual ones. however, even in quasi-obligatory funded systems, the percentage of employees' participation is much lower than in compulsory ones, where it reaches 70%, and in iceland it exceeds 85%. at the same time, real payers can be significantly less than those covered by the funded system  – both quasi-obligatory and mandatory  – due to poor citizens' awareness and significant informal employment. for example, in chile, where individual pension contributions are mandatory for employees, under the coverage of 70% of the ablebodied population, in reality contributions are paid by 40%, in mexico with 60% of the attracted – 38%. so, it can be determined that the need for pension reforms was due to a significant need for fiscal consolidation, and most countries actually implemented reforms to improve the financial sustainability of their pension systems. some countries did this while maintaining or improving the quality of pension income, at least for some population groups. 5. conclusions and recommendations for the further research ukraine is currently at the stage of development of the national pension system. in this context, the study of the experience of the pension systems functioning in developed countries, including the experience of their reforming and prompt response to the challenges, is of particular importance, which significantly affects the financial provision of citizens upon retirement and is also an important source of investment resources. analysing the experience of foreign countries, we can identify the main ways of reforming the pension system: 1. expansion of the base of taxation of the working population by increasing the minimum age of retirement and / or the basic age of retirement, thereby increasing the contribution while maintaining the quality of payments for those who are able to work longer. however, this measure remains controversial in ukraine due to the low life expectancy of the population – 71.38 years (for those born in 2015) (state statistics service of ukraine, 2017) in comparison with the countries of europe. an alternative to expanding the base can be an increase in the length of employed service for both men and women. as an alternative to the retirement age increase, some countries have introduced an automatic link between the level of pension and life expectancy, that is, the amount of assistance, other things being equal, will decrease as people begin to live longer. 2. introduction of the second pillar of the pension system – mandatory funded pension insurance. reforms of solidarity systems are usually aimed at reducing pension payments. this raises the need to develop private pension provision and its role in the baltic journal of economic studies 97 vol. 3, no. 1, 2017 income of future pensioners. all oecd countries have accumulative pension systems, on average in 34  countries, the distributing part provides a pension of 41% of the average earnings, taking into account the funded part, it increases to 58%, i.e. about a third of the pension is provided by savings. however, the efficiency of the accumulation schemes in the world, not only in ukraine, largely depends on subjective and general economic factors. its profitability can fluctuate in significant limits, depending on changes in the economic environment and the quality of management. there is always a risk of losing savings or reducing the level of investment income in comparison with their size, laid down in pension schemes. already in the concept of the accumulative system, there are numerous risks. the participants of the system are fully responsible for its failures; the state guarantees the affected ones at the very best only a minimal pension. the system is ideal for well-paid employees, who can accumulate a sufficient amount of money on pension accounts. to date, one of the most difficult issues for the budget of ukraine is the cost of transition to cumulative insurance. there is a need to compensate for the current generation of pensioners the means that are diverted to the funded system. taking all risks into account, the introduction of cumulative is constantly postponed. 3. promotion of individual funded programs. with the transition to reform in developed countries, the common response to new challenges was the desire to reduce public pension payments during the modernization of pension schemes, and to encourage (sometimes forcedly) employees, especially those with medium and high earnings, to accumulate on their security in old age. a number of countries have taken measures to increase the coverage of voluntary private pension schemes. 4. according to the analysis, many countries raised pension income by increasing taxes or contribution rates to defined benefit systems. for ukraine, this tool is not acceptable, since only in 2016 there was a reduction in the rates of a single social contribution for employers and the abolition of that for employees. an increase in taxation is possible with a compensatory approach for employees. for example, the payment of interest in the accumulation fund by reducing the tax on personal income. further effective reform of ukraine's pension system will depend on two key aspects: first, on the degree of citizens' trust in accumulative pension programs; second, on the ability to ensure financial stability and the expected level of funds return invested in financial institutions related to the provision of pension services. references: aleksandrova, h.m (2016). “financial, economic and social factors, implications of pension reform in ukraine”, finansovo-ekonomichni y sotsial'ni faktory ta naslidky vprovadzhennya pensiynoyi reformy v ukrayini, molodyy vchenyy, № 3, p. 4-8. retrieved from: http://nbuv.gov.ua/ujrn/molv_2016_3_4. bondaruk, i. s. (2009). “foreign experience of pension systems”, zarubizhnyy dosvid orhanizatsiyi system pensiynoho zabezpechennya, formuvannya rynkovykh vidnosyn v ukrayini: zbirnyk naukovykh prats' ndei.  – vypusk 4 (95). – p. 166–169. retrieved from: http://dspace.udpu.org.ua:8080/jspui/handle/6789/2121 european commission (2015), the 2015 ageing report: economic and budgetary projections for the 28 eu member states (2013-2060), publications office of the european union, luxembourg [online]. retrieved from: http://www.oecd-ilibrary.org/social-issues-migration-health/pensions-at-a-glance-2015 [accessed 13 february 2017] kasych, a.o. (2011). “directions pension reform ukraine”, napryamy reformuvannya pensiynoyi systemy ukrayiny, visnyk zhytomyrs'koho derzhavnoho tekhnolohichnoho universytetu. ekonomichni nauky, № 2 (56), p. 206–208. retrieved from: http://eztuir.ztu.edu.ua/handle/123456789/4700 mal'ovanyy, m.i. (2014). “state and problems of financial security pension system ukraine”, stan ta problemy finansovoho zabezpechennya systemy pensiynoho strakhuvannya ukrayiny, oblik i finansy, № 1, p. 89-95. retrieved from: http://nbuv.gov.ua/ujrn/oif_apk_2014_1_16. oecd (2015), pensions at a glance 2015: oecd and g20 indicators, oecd publishing, paris. doi: http://dx.doi.org/10.1787/pension_glance-2015-en petrushka, o. v. (2015). “the experience of reforming the pension systems of foreign countries and its use in ukraine”, dosvid reformuvannya pensiynykh system zarubizhnykh krayin ta yoho vykorystannya v ukrayini, nauka y ekonomika. – vyp. 1. – p. 19-27. retrieved from: http://nbuv.gov.ua/ujrn/nie_2015_1_5. rudyk, v. (2011). “the development of the pension system in western countries”, rozvytok systemy pensiynoho zabezpechennya v zakhidnoyevropeys'kykh krayinakh, ekonomika ukrayiny. –№ 10. – p. 72–78. stalebrink, o.j. (2014). public pension funds and assumed rates of return: an empirical examination of public sector defined benefit pension plans, american review of public administration. № 1(44), p. 92–111. state statistics service of ukraine [online]. retrieved from: http://www.ukrstat.gov.ua/населення [accessed 13 february 2017] yakimova, l.p. (2013). “evolution of pension systems: analysis, modeling, prediction”, evolyutsiya pensiynykh system: analiz, modelyuvannya, prohnoz, monograph, donbas. derzh. tekhn. un-t. – alchevs'k, p. 358. baltic journal of economic studies 98 vol. 3, no. 1, 2017 анна хемий реализация современных иностранных подходов к реформированию системы украинской пенсионной системы аннотация. целью работы является изучение опыта стран западной европы в проведении структурных реформ системы пенсионного страхования и имплементация такого опыта в украине. основной задачей пенсионной системы любой страны мира является обеспечение соответствующего стабильного уровня доходов пенсионеров и сохранения при этом своей финансовой устойчивости. рост доли пенсионеров повышает нагрузку на пенсионные системы, и в основном меры, принятые странами, направленные на сокращение расходов на пенсии и на параметрические реформы. методика. в статье проанализированы причины и последствия реформирования пенсионных систем стран-членов организации международного сотрудничества и развития. рассмотрены меры обеспечения финансовой стабилизации пенсионных систем соответствующих стран, повышение социальной и стимулирующий роли пенсионного страхования в обществе. методологической основой статьи являются методы научного познания, позволяющие выявить основные закономерности развития пенсионных систем стран мира, приоритетные пути обеспечения их финансовой устойчивости. в частности используются следующие методы: анализ и синтез – в ходе исследования финансовых показателей пенсионных систем; систематизация – для выявления методов реформирования пенсионных систем, их детального анализа и определение их особенностей; метод научной абстракции – с целью формирования теоретических обобщений и выводов. результаты. в статье рассмотрены тенденции реформирования пенсионного страхования в отдельных странах мира. определено, что на современном этапе характерными признаками пенсионных реформ в зарубежных странах является повышение пенсионного возраста, улучшение солидарной составляющей части пенсионной системы, снижение роли обязательного страхования. некоторые страны повышают ставки взносов, ужесточаются условия для раннего выхода на пенсию. на сокращение номинального размера пенсий почти никто не решился, но некоторые страны вводят автоматическая корректировка их размера в зависимости от роста продолжительности жизни, доходов и расходов пенсионной системы. в последние годы ряд стран, несмотря на бюджетные проблемы, ввели налоговые льготы или софинансирования добровольных накоплений, чтобы увеличить долю граждан, принимающих в них участие. другие использовали нефинансовые стимулы для расширения охвата. в статье выделены основные направления реформирования пенсионной системы украины, а именно расширение базы налогообложения работающих слоев населения, введение второго уровня пенсионной системы, а также популяризация индивидуальных накопительных программ. практическое значение. обоснована целесообразность внесение изменений в пенсионную систему украины, исходя из последствий реформирования пенсионных систем ведущих стран мира, так как в последних произошли кардинальные изменения в пенсионных системах стран мира: переход от финансирования пенсий за счет текущих поступлений в систему индивидуальных счетов и накоплений, повышение пенсионного возраста, пересмотр тарифов и требований по управлению рисками в пенсионных фондах и тому подобное. значение/оригинальность статьи заключается в проведении выборки необходимых реформ в пенсионном страховании зарубежных стран и предложена возможность имплементации только той части, которая может быть адаптирована и применима в учетом индивидуальных особенностей украинского государства. baltic journal of economic studies 90 vol. 2, no. 3, 2016 corresponding author: 1 department of economics of enterprise, innovation and advisory services in agriculture, lviv national university of veterinary medicine and biotechnologies named after s.z. gzhytskyi. email: myzukapavlo@ukr.net 2 lviv university of business and law. email: maxym.filyak@gmail.com ways to improve organizational efficiency of territorial development and post-conflict stabilization in ukraine pavlo muzyka1 lviv national university of veterinary medicine and biotechnologies named after s.z. gzhytskyi, ukraine maksym filiak2 lviv university of business and law, ukraine abstract. the purpose of the paper is to advise to optimization improvement pathways in territorial development and post-conflict stabilization in ukraine that currently undergoes change from the «firefighting» real-time operational mode to the routine bureaucratic mode. the major challenges include the resolutions of deficient operational models such as: forgetting, chemical dependency of management, inability to make decisions, reluctance to start a dialogue, «cut-off» solutions and some others. methodology. a desk and in-depth study is carried out of several national territorial stabilization programs dealing with the government that ensure infrastructural support to post-conflict regions and communities in the east of ukraine. it is studied how the programs are managed by the controversy of the results-based and process-based approaches (2015-2016 data) via ngos and subcontractors. improving stabilization tools, it leverages transformation of its own systems into a firm yet flexible entity. results of the research showed that stabilization project systems should seek a balance between the results-based and process-based ends of management, the first focusing on quicker and more flexible lower-level results, and the second building bureaucracy via continuous processes. practical implementation. regional subcontractors can improve satisfaction and widen participation by supporting informal initiative from the grassroots level. a good solution to resolve operational conflicts is hiring a helping hand to the administrator  – a typical results-based manager who will help follow the harmony to achieve immediate results. any improvement in the transparency of the system and the formalization of relations between the beneficiary and the subcontractor, shifted in addressing issues at the level below, does not require exclusive access to the principal decision-maker, and would simply and easily be implemented at the technical level of the beneficiary institutions. value/originality. the article concludes with the statement of the two radically different approaches to management systems that work in such projects, the first on the basis of a result, and the second in the process, and the two being incompatible. there are people and organizations propagating result and work to achieve it, but working with the staff aimed at the process because they can either not reach or stretch operation, hoping that they will thus extend their contracts. key words: development program, stabilization and support assistance, results-based management, bureaucracy, efficiency. jel classification: a13, a23, j11 1. introduction personnel and organizational management system deficiencies in recovery program areas have become critical by early 2016 with the need to tackle the extended conflict in the east with a more systematic manner, apart from the «firefighting» strategies that have been commonly used in 2015, and therefore the program management has began considering the various ways to combat these imperfections and obvious downsides in the view of the need to carry on with the extended conflict situation of the «slow fire» in 2016 and possibly 2017. the selected case study descriptions of the above research are presented below in form of the short findings. they all describe organizational and personal downsides experienced by post-conflict territorial stabilization programs, and suggest solutions as visible from the current perspective. baltic journal of economic studies 91 vol. 2, no. 3, 2016 2. the project manager that forgets this seems to be a good person and an acceptable manager  – but there is no integrity of thought and no transmission of promise in his mind. that is, in a conversation, he/she pays attention to unimportant details, «switches on» and forgets about whether there is still anything important that he/she really needs to mention, and, when recalled – swears that he/she was really talking about this important thing. in this mental obscurity, there is an advantage, as such manager can «blow in his verbal jungle», and then he/she completely forgets the issues that were discussed – and no longer presents any of the issues of his/her «wild ideas» to any colleagues or partners. the main thing that the colleagues should somehow watch that he/she should not forget any critical thing, because then alter, as the consequences of omitting a really serious thing can become significantly more expensive, this «forgetting manager» will usually dump the blame on someone else  – but not himself. if he/she is smart and realizes the «forgetting downside» of his/her mind, then he hires a personal assistant  – quality-focused, older, sophisticated and somewhat autocratic secretary. 3. middle management dependent on sedative drugs you can rarely find anything which is more dangerous than that quiet middle management is dependent, in their lives, on the sedative and «life-affirming» chemicals and pharmacy. the problem is not in the chemicals as such – it lies in the fact that the manager relies on the chemicals too heavily and becomes heavily addicted. then, if he or she did not take a pill today, the personality is deforming itself and shows its true inside without embellishment, and even more – demonstrates even a mental strain that developed in such person since the start of active use of the sedative drugs. thus, vital solutions in the project’s or organization’s life seem to depend on one or two tablets taken in time – or not taken. such people should not have any place in any top program management. 4. eternal non-decisiveness and fear the study showed that there operate some organizations and projects, even fairly large and prestigious, where work in unexplored areas is accompanied by the wish of key personnel to avoid any responsibility for decisions (although the process is essentially an assembly of the known modules that only a few people have ever gathered together, and we are not speaking about any really hi-tech innovativeness), and it is often accompanied by the fear of being laid off. why are they afraid of ? they are, because they do not see any broader picture and at the same time realize their inability to produce a result «at a glance». in addition, their large hierarchy is guided by people who are, in turn, guided by the «collective-building» approach to results-based management. that is, they approach a «mind-changing» intellectual organization as a construction site where they are free to temporarily hire and fire foremen and their «construction teams»  – and sometimes so quickly and dramatically, that the next team does not understand what it is building today, and why. 5. reluctance to start a dialogue another strange feature identified by the research, which goes against the democratic traditions is noticeable in the discussion and decision-making in the organization or project. this downside is the failure of program senior management to start a dialogue with the mid-level management of with sub-contractors. if the hierarchy of the organization allows explaining this «peculiarity» by national or ethno-cultural management (as it is often international management that does not want to talk to the local implementers), something very strange which has been noticed here is the impossibility of such dialogue with independent sub-contractors, which are in the same center of decision-making as the top management at the «customer» side within the framework of such a development program. the question is not even in the fight against the status, but rather in the need to address issues really needing practical attention of both parties every 1-2 weeks of the project. to create an atmosphere of dialogue, a usually more concerned smaller party finds it necessary to seek contacts and intermediaries to appoint a meeting, and at one time «push» the necessary decisions. on the other hand, this deficiency could easily be remedied by establishing a dialogue, although it must be recognized that the initiator will still be the most interested party, and as a rule, it is not the largest player in this situation. it should be noted that to talk to the decision-maker, one need to avoid any gossip or fear on the part of the many employees of the «customer» side. 6. «cut-off» solutions versus harmonious move if during the critical, fast project deployment phase of the program, the implementers are encouraged to fragile, but creative action in «sprinter mode» of operation, then on the phase when the uncertainty has become «dragged in time» and prolonging into further instability, then the «sprinting» staff often fails to «drudge» the routine processes that emerge. therefore, the top management sends an administrator to the field – the one capable of restoring order, but often also transferring the administrative methods on the field management staff that has been recently accustomed to unusual and unforeseeable circumstances. this administrator is either feared, or listened to, in the hope that he/she will soon be replaced. however, such administrator does not particularly understand the interconnection between conditional critical work paths and intermediate results of operations. a good baltic journal of economic studies 92 vol. 2, no. 3, 2016 solution is hiring a helping hand to this administrator – a typical results-based manager who will help follow the harmony to achieve immediate results. 7. focus on destruction management to restore the programs attracts strange type of people to the operational program management level. especially, and it can be shown, the people previously engaged in rapid response to natural disasters and calamities in other parts of the world. we call them destructionists because of their specific approach to management and attitude. w hen they work on the project of «restoration», in fact they want to fracture their reality and often become accustomed to it. often in other parts of the world they are in situations of natural cataclysm, where social capital cannot be restored (at least within the terms of the project), and the infrastructure is damaged irreversibly (pischulina, 2009). w hen they work in «restoration», they unconsciously want to be inside this destruction. however, if their colleagues and subordinates do not destroy, but build, that is equal to restoring, then the «destructionists» start destructing their own colleagues, partners and subordinates. they literally mentally, morally destruct from the inside, wear out their labour potential (giving a bunch of unnecessary instructions, setting unrealistic deadlines and loading work, and then suddenly dismiss those who are already «empty». they need to obviously return to the settings and territories of destruction and our territory, in order to stabilize the conflict, should attract real «builders» and «renovators» to stabilization projects. 8. strange doubles on the side of the program beneficiary sometimes a strange, though explainable phenomenon can be observed  – the one of irrational dubbing. on the one hand, there are entire departments or positions that partially duplicate each other 's functions. however, the really important functions have no duplicates, and if, say, a person with a «key organizer» of the meeting that is just listening to the first deputy is gone on vacation, then there is no one to replace him or her. moreover, work in this direction halts because there is no one else to perform it and this is an essential function. how to fix it? probably, any improvement in the transparency of the system and the formalization of relations between the beneficiary and the subcontractor, ever shifted in addressing issues at the level below to the question, that does not require exclusive access to the «big boss» of the beneficiary organization, and would be simply and easily be resolved at the technical level of the beneficiary institutions. at the level of state structures, a successful project is better managed at the level of competent heads of departments than at the level of permanent employment and way affiliated with the big boss alternates. 9. visible conflict of the process and the result there are two radically different approaches to management systems. the first is set on the basis of a result, and the second on the process. it is incompatible approaches. there are people and organizations propagandize result and work to achieve it, but working with the staff, aimed at the process because they either cannot reach or stretch operation, hoping that they will thus work longer. people from the «process» cannot take the job, providing results, and vice versa, although the latter is true only in part («results-oriented» still can get used to the role of «process-oriented» but consider it a perversion). effectiveness often depends on the quality and experience of key personnel (filyak, 2013), but also, and even more by filling the «fabric» of the organization, that is, from the mid-level professionals. if all of them at this average level are replaced by inexperienced students, even super-productive leader ceases to be such and fails the larger tasks. thus, it is the average level of experts that determines the mood of the company, its task-focus and professionalism. again, it is noted that «results-oriented» people are more democratic and unite smaller groups (there is a need only in the necessary links in the chain), while the «process-oriented» build complex and threedimensional hierarchy. 10. tensions between the results-based and process-based «ends» of the program in territorial revitalization management systems, the project begins first case as a results-oriented, but then, enhanced by the character of the middle management and the slightly unexpected nature of the development of the subject in a very dynamic areas, this project develops into a «dragged-in» process, which, however, due to the document success indicators inherent in the project, search through jobs involving all hands to show the result of a planned or an imitation of «tomorrow». if the organization is configured in the result, it is better to have the highest level of secretariat and level of people belonging to the «results-oriented» ideology, while the average level can be filled by the «processoriented» staff. if the organization is set up in the process (e.g. education), they have the middle tier (managers) working on the result, while the leaders  – charismatic visionaries, as well as secretarial staff, and often teachers (line performers) and so on are engaged in the process. otherwise, the «results-oriented» manager will be driven off the playing field, making the high-quality work for the process-based chief who often wants unnecessary procedural makeovers. worst of all, however, the head that focuses on results but does not know at all how and when he should take to achieve the process. they are sometimes thrown from side to side, and if they do not admit this defect and refuse to learn, they also become a ramshackle structure as a result. baltic journal of economic studies 93 vol. 2, no. 3, 2016 references filyak, m. «managerial scratch notes» of phase 1 project. «gromadski initsiatyvy». (13): 3-4. business planning in small cooperative entrepreneurship. – chasopys publishing – 2013. filyak, m.s. outcomes of phase 2 micro projects’ potential and sustainability analysis. «gromadski initsiatyvy». (21): 8-16. pishchulina, o. new jobs in ukraine: results and prospects. department of economics and social strategies. retrieved from: http://old.niss.gov.ua/monitor/october09/15.htm a national monitoring and situation analysis system (excerpts for round 1). «gromadski initsiatyvy» (32): 2-10. павел музика, максим филяк пути повышения организационной эффективности территориального развития и постконфликтной стабилизации в украине аннотация. целью работы является определение путей оптимизации территориального развития и постконфликтной стабилизации в украине,  – систем, в настоящее время подвергающихся изменению в переходе от подхода на основе «тушения пожаров», в рабочем режиме реального времени  – к общепринятому бюрократическому построению работы. основные задачи включают в себя анализ дефицитных оперативных моделей, таких как: забывания, химической зависимости системы менеджмента, неспособности принимать решения, нежелания начать диалог, радикальных решений и некоторых других. методология. было проведено кабинетное и фокус-групповое исследование ряда национальных программ по стабилизации, в которых государство выступило партнёром и которые обеспечивают инфраструктурную поддержку в постконфликтных регионах и населенных пунктах на востоке украины. было изучено, каким образом программы ведут полемику между ориентированным на конкретные результаты подходом и технологическими методиками, основанными на данных 2015-2016, от нпо и субподрядчиков. улучшая инструменты стабилизации, программы использует преобразование своих собственных систем в структуре, на гибкой организационной основе результаты исследования показали, в целом, что системы проектов по стабилизации должны искать баланс между ориентированным на конкретные результаты подходом и основанных на процессах методах управления,  – в котором первый подход делает упор на более быстрые и более гибкие результаты более низкого уровня, а второй подход строит бюрократию с помощью непрерывных повторяющихся процессов. практическое значение. региональные субподрядчики могут повысить удовлетворенность и расширить участие за счет поддержки неформальной инициативы низового уровня. хорошее решение для решения оперативных конфликтов  – это дополнительно нанять менеджера по поддержке администратора  – то есть типичный менеджер, ориентированный на результат, который поможет администратору следовать гармонии для достижения немедленных результатов. любое улучшение прозрачности системы и формализации отношений между бенефициаром и субподрядчиком, сдвинутые в решении проблем на уровень ниже, не требует исключительного доступа к основной фигуре, принимающей решение, и может быть просто и легко реализовано на техническом уровне учреждений-бенефициаров. значение/оригинальность. исследование завершается утверждением о двух принципиально различных подходах к системам управления, которые работают в таких проектах: первый на основе результата, а второй на базе процесса, и оба они в целом не совместимы. есть люди и организации, ориентированные на результат и работающие для его достижения, но работающие с персоналом, направленным, наоборот, на процесс, так что они не могут либо не достигают необходимых результатов и затрагивают процессы в надежде, что они смогут таким образом продлить свои контракты. baltic journal of economic studies 136 vol. 3, no. 2, 2017 corresponding author: 1 department of economic and mathematical modelling, kyiv national economic university named after vadym hetman. e-mail: iistr@yandex.ru modelling of scenarios of the crisis phenomena transfer among financial markets inna strelchenko1 kyiv national economic university named after vadym hetman, ukraine abstract. the phenomenon of crisis transference among financial markets in different countries is especially evident during the global financial crisis of 2007-2009. abnormal imbalances emerged in the market of secondary financial instruments in the united states in the second half of 2006 and quickly spread to the financial markets of most countries of the world. however, the rate of fall of the main macroeconomic indicators, the duration of the latent period (the time between the date of the beginning of the financial crisis in the source country and date of the recorded fall in gdp of the country that is subjected to “contagion” (strelchenko, 2016), and recovery period are substantially different. to generate an effective economic policy actually, there is a task of determining the possible scenarios of transferring crisis. the research subject is a process of transfer of the crisis phenomena among the financial markets of countries with different levels of economic development. methodology. the paper presents the results of a study on the differentiation of the financial markets reactions to the crisis transfer. to build the corresponding classification model, self-organization kohonen neural networks are used. the purpose of this work is to build a neural network model for clustering economies according to the response to external financial shocks. this model allows predicting the scenarios of transferring crisis among financial markets. conclusion. as a result of the study, there is built a neural network with the architecture of the kohonen map. the neural network has one hidden layer consisting of six neurons and has a hexagonal structure. six clusters describe six possible scenarios of the economy dynamics under the impact of the transfer of crises. cluster number one and two unite countries characterized by a short period of economic recovery and return of the main macroeconomic indicators to the precrisis levels. a longer recovery period and high volatility in exchange rates, gross domestic product, and decline in export-import operations characterize the third and fourth clusters of som. as for the countries that were in the last two clusters (including ukraine), then the result of the crisis phenomena transfer is that the average amplitude of the fall in macroeconomic indicators exceeded 15% for the sixth cluster, and 9% for cluster number 5. key words: crisis, contagion, macroeconomic indicator, clustering, neural network, kohonen map, radial basis network. jel classifiaction: c38, c45, g01, g15 1. introduction based on studies of the mechanisms of transboundary transfer of financial crises rests the modern theory of “contagion” (kaminsky, reinhart, 2001; calvo, reinhar, 1995; sachs, tornell, velasco, 1996). the effect of “contagion” is evident in the atypical fall in exchange rates, stock prices, government bonds, stock indices, etc. (strelchenko, 2016). the analysis of researches on the theory of “contagion” reveals the following features specific to the processes of cross-border transfer of financial shocks: 1. the effects of transmission of financial shocks differ significantly depending on the level of economic development, liberalization of the market economy, corruption and shadow economy mode of operation of the exchange rate, etc. 2. in some cases, especially “contagion” exposed country with strong historical trade links. because of this, the shortest latent period of the reaction is observed in the group of countries that are compactly located near the country  – the sources of the crisis. for example, during the “asian flu” in 1997-1999  – among the new industrialized countries width the asian development model of the national economy, and the so-called “tequila effect” in south america (1994). to identify groups of countries with similar response functions for the spread of financial shocks, promising baltic journal of economic studies 137 vol. 3, no. 2, 2017 is the use of neural networks, in particular, models with radial basis architecture or kohonen maps. 2. the advantage of using neural networks in problems of classification one of the most important applications of neural networks is classification. often, these tasks do not include final reference values for learning neural networks. their goal is to divide the original sample into groups according to the specific characteristics of similarity. to address these challenges, self-organizing neural networks are successfully used. the most famous algorithm for constructing a neural network of this type is the algorithm wta or “winner takes all” (kohonen, 2001). neural networks, learning without a teacher on the wta algorithm and implement clustering training samples according to certain criteria, better known as maps, which organize themselves  – sofm (selforganizing feature map) or kohonen maps (kohonen, 2001). according to problems solved with kohonen maps, it is necessary to note the following: elements within a specific cluster should be similar on certain grounds; similar clusters should be located close to each other. procedure of training the sofm by wta-rule consists of the following steps (kroese, 1996): 1. prior to the training, it is necessary to set the map topology: rectangular or hexagonal (fig. 1). a) b) fig. 1. possible configurations of kohonen maps: а) hexagonal; b) rectangular. 2. sets the radius update. it defines the range of neighbouring neurons to be training (fig. 2). 3. set the initial matrix of synaptic connections 4. for each cluster element calculate the distance to the training vector by the equation: ( )∑ −= p ppqq xwd 2 )]([)()( 11 −− −⋅λ⋅⋅+= ippipip twxtwtw η )(),( 1 ipip twtw − )( ip tx e n n wnv % > 60 1,0 6 =>nvn , (1) and choose the winner neuron to a minimum value dq. 5. for the winning neuron and nodes within a specified radius, update the weights according to the wta-rule (kohonen, 2001): ( )∑ −= p ppqq xwd 2 )]([)()( 11 −− −⋅λ⋅⋅+= ippipip twxtwtw η )(),( 1 ipip twtw − )( ip tx e n n wnv % > 60 1,0 6 =>nvn , (2) where ( )∑ −= p ppqq xwd 2 )]([)()( 11 −− −⋅λ⋅⋅+= ippipip twxtwtw η )(),( 1 ipip twtw − )( ip tx e n n wnv % > 60 1,0 6 =>nvn   – p-th neuron setting of kohonen map before and after correction, respectively; ( )∑ −= p ppqq xwd 2 )]([)()( 11 −− −⋅λ⋅⋅+= ippipip twxtwtw η )(),( 1 ipip twtw − )( ip tx e n n wnv % > 60 1,0 6 =>nvn  – p-th element of input data vector submitted to the t-th training step; η  – learning rate, 0<η<1 , which changes in the process of self-organization of a neural network (usually the initial value closer to unity and gradually decreasing); λ – the neighbourhood function between neuron and neuron-winner, which determines the size of the weight adjustment of connections for each neuron (for the winning neuron, neighbourhood function is equal to one and decreases when it moves away from by linear or exponential law). – element to be training for r = 0; – element to be training for r =1; – element to be training for r =2; – element to be training for r =3. – element to be training for r = 0; – element to be training for r =1; – element to be training for r =2; – element to be training for r =3. fig. 2. choice neighbouring neurons to study, according to the size range: 6. the learning process continues as long as the synaptic weights of the current training cycle compared with the previous one become insignificant. compared to other mathematical tools designed to support decision-making in conditions of uncertainty and the large number of influencing factors, neural networks have a number of specific advantages: 1) allow effective modelling of nonlinear processes; 2) no need in strict mathematical specification of the model in solving non-formalized or badly formalized tasks; 3) adaptability for changes influencing factors; 4) parallel data processing; 5) effectiveness in dealing with incomplete or noisy data; 6) the possibility of classification in many ways; 7) the performance of forecasting time series, depending on many factors; 8) the ability to search for hidden patterns in data arrays. the main drawbacks of neural networks are as follows: the lack of a unified theory for choosing the structure of the neural network; the practical impossibility of isolating the knowledgetrained neural network, for researchers nn is a “black box.” 3. model construction to implement kohonen neural network algorithm in this research, we used the tools of matrix laboratory matlab. baltic journal of economic studies 138 vol. 3, no. 2, 2017 when building a neural network, it is necessary to solve the problem of the optimal ratio between the number of neurons in the hidden layer and the size of the training set. empirical research shows that to achieve high rates of synthesis and learning neural network training set number of elements should be done inequality (callan, 1998): ( )∑ −= p ppqq xwd 2 )]([)()( 11 −− −⋅λ⋅⋅+= ippipip twxtwtw η )(),( 1 ipip twtw − )( ip tx e n n wnv % > 60 1,0 6 =>nvn , (3) where nw  – he number of hidden layer neural; nnv  – the size of the training set; %e – is the fraction of errors envisaged in the course of testing. for kohonen neural network, the number of neurons in the hidden layer will determine the number of clusters of a future som. to separate the training sample into six groups corresponding to the migration scenarios of the crisis phenomena among the financial markets, the size of the training sample will be determined from the relationship (3): ( )∑ −= p ppqq xwd 2 )]([)()( 11 −− −⋅λ⋅⋅+= ippipip twxtwtw η )(),( 1 ipip twtw − )( ip tx e n n wnv % > 60 1,0 6 =>nvn . the size of the training set should cover statistics for more than 60 countries. a neural network structure represented by blocks simulink is presented in figure 3. the configuration of kohonen maps is hexagonal. 4. modelling of scenarios of the crisis phenomena transfer among financial markets training sample  – array of dimension , where the number of rows  – the number of countries included in the training sample, and the number of columns  – macroeconomic indicators: gdp; the exchange rate of the national currency; part of the country international investment position that characterizes the external liabilities of residents to non-residents; foreign exchange reserves; the value of government bonds. the training sample of sixty-six countries represented countries in each group of imf classification. namely: 1. advanced economies: euro area (1), estonia (2), lithuania (3), australia (4), canada (5), special administrative region of china hong kong (6), china, p.r .: macao (7), czech republic (8), denmark (9), iceland (10), israel (11), japan (12), south korea (13), new zealand (14), norway (15), singapore (16), sweden (17), switzerland (18), united kingdom (19), united states (20). 2. emerging and developing economies: bangladesh (21), bhutan (22), brunei darussalam (23), cambodia (24), china p.r .: mainland (25), fiji (26), india (27), indonesia (28), kiribati (29), lao people's democratic republic (30), malaysia (31), mongolia (32), myanmar (33), nepal (34), papua new guinea (35), philippines (36), samoa (37), solomon islands (38), sri lanka (39), thailand (40), tonga (41), vanuatu (42), vietnam (43), albania (44), bosnia and herzegovina (45), bulgaria (46), croatia (47), hungary (48), latvia (49), macedonia (50), montenegro (51), poland (52), romania (53), serbia republic (54), turkey (55), armenia (56), azerbaijan (57), belarus (58), georgia (59), kazakhstan (60), kyrgyz republic (61), moldova (62), russian federation (63), tajikistan (64), ukraine (65). the statistical information used to calculate contained in the public domain at the international monetary fund (imf, 2017). using the function tool built kohonen self-organizing map, which splits the original sample into six clusters based fig. 3. a neural network structure represented by blocks simulink baltic journal of economic studies 139 vol. 3, no. 2, 2017 on the pattern data selected quarterly macroeconomic indicators for the period 2007-2009. the classification results are shown in figure 4. as a result of the simulation, we received six groups of countries with similar characteristic dynamics of macroeconomic indicators: gdp; the exchange rate of the national currency; a part of the country international investment position that characterizes the external liabilities of residents to non-residents; foreign exchange reserves; the value of government bonds. the simulation gave a distribution of economies in the following way (presented according to the structure of som): 1. euro area (1), estonia (2), lithuania (3), czech republic (8), denmark (9), israel (11), singapore (16), switzerland (18), united states (20), brunei darussalam (23), malaysia (31), myanmar (33), philippines (36), thailand (40), albania (44), bosnia and herzegovina (45), bulgaria (46), croatia (47), latvia (49), macedonia (50), montenegro (51). 2. australia (4), canada (5), new zealand (14), norway (15), sweden (17), indonesia (28), kiribati (29), samoa (37), tonga (41), vanuatu (42), hungary (48), poland (52), serbia republic (54). 3. bangladesh (21), armenia (56), georgia (59), moldova (62). 4. iceland (10), south korea (13), united kingdom (19), bhutan (22), india (27), nepal (34), solomon islands (38), romania (53), turkey (55). 5. special administrative region of china hong kong (6), china, p.r .: macao (7), japan (12), china p.r .: mainland (25), lao people's democratic republic (30), papua new guinea (35), azerbaijan (57). 6. cambodia (24), fiji (26), mongolia (32), sri lanka (39), vietnam (43), kazakhstan (60), belarus (58), kyrgyz republic (61), russian federation (63), tajikistan (64), ukraine (65). analysis of the obtained results indicates the high quality of the constructed model. the average characteristics of classification within each group are very similar. it is also important to note that the neural network is included in one cluster of countries that are close geographically and historically folded close economic ties. to clarify the results obtained, the author considers it necessary to further work to supplement output data rates for a longer period and to compare the results of clusters with the radial base neural network. 5. conclusions as a result of the study, there is built a neural network with the architecture of the kohonen map. it allows including a certain economy to a class for the four macroeconomic indicators: gdp; exchange rate of the national currency; part of the country international investment position, that characterizes the external liabilities of residents to non-residents; foreign exchange reserves; the value of government bonds. the neural network has one hidden layer consisting of six neurons and has a hexagonal structure. six clusters describe six possible scenarios of the economy dynamics under the impact of transfer crises. cluster number one and two unite countries characterized by a short period of economic recovery and return of the main macroeconomic indicators to the pre-crisis levels. a longer recovery period and high volatility in exchange rates, gross domestic product, and decline in export-import operations characterize the third and fourth clusters of som. as for the countries that were in the last two clusters (including ukraine), then the result of the crisis phenomena transfer is that the average amplitude of the fall in macroeconomic indicators exceeded 15% for the sixth cluster, and 9% for cluster number 5. to clarify the results obtained, the author considers it necessary to further work to supplement output data rates for a longer period and to compare the results of clusters with the radial base neural network. fig. 4. kohonen self-organizing map that reflects the clustering of countries’ economies on the dynamics of the chosen indicators for 2007-2009 baltic journal of economic studies 140 vol. 3, no. 2, 2017 references: strelchenko i. (2016). the selection of the indicators to classify economies according to the level of response to external financial shocks based on kohonen networks. modern science, 5: 35-41. kaminsky g., reinhart c. bank lending and contagion: evidence from the east asian crisis. regional and global capital flows: macroeconomics causes and consequences: 73–116. calvo g., reinhart c. capital inflows and real exchange rate appreciation in latin america, international monetary fund, 40: 108-151. sachs j., tornell a., velasco a. financial crises in emerging markets: the lessons from 1995. brookings papers on economic activity, 27 (1): 147-216. t. kohonen, self-organizing maps (third extended edition), new york: 501 p. kroese b. an introduction to neural networks. university of amsterdam: 120 p. matviychuk, a. v., & strelchenko, i. i. (2015). vykorystannya systemy vyperedzhauchikh indykatoriv dlya prognozuvannya negatyvnykh zrushen’ na finansovomu rynku ukrainy. finansy ukrainy (finance of ukraine), 8, 74-87. retrieved from http://nbuv.gov.ua/ujrn/fu_2015_8_7 [in ukrainian]. r . callan the essence of neural networks, prentice hal: 248 p. statistical information according to international monetary fund. site of international monetary fund. retrieved from: http://data.imf.org/. инна стрельченко моделирование сценариев переноса кризисных явлений между финансовыми рынками аннотация. явление переноса кризисных явлений между финансовыми рынками разных стран особенно ярко проявилось в период мирового финансового кризиса 2007-2009 гг. аномальные дисбалансы появились на рынке вторичных финансовых инструментов в соединенных штатах во второй половине 2006 года и быстро распространились на финансовые рынки большинства стран мира. тем не менее, темпы падения основных макроэкономических показателей, продолжительность латентного периода (промежуток времени между датой начала финансового кризиса в стране-источнике и датой зафиксированного падения ввп страны, подверженной «инфекции» (strelchenko, 2016) и период восстановления существенно различаются. для создания эффективной экономической политики актуальной является задача определения возможных сценариев переноса кризиса. предметом исследования являются процессы переноса кризисных явлений между финансовыми рынками стран с разным уровнем экономического развития. методология. в статье представлены результаты исследования дифференциации реакции финансовых рынков перенос кризисных явлений. для построения соответствующей модели классификации использовалась нейронная самоорганизующаяся сеть кохонена. цель этой работы  – построить модель нейронной сети для кластеризации экономики в соответствии с реакцией на внешние финансовые потрясения, которая позволит прогнозировать сценарии переноса кризиса между финансовыми рынками. выводы. в результате исследования  – построена нейронная сеть, имеющая архитектуру карты кохонена. нейронная сеть имеет один скрытый слой, состоящий из шести нейронов, и гексагональную структуру. шесть кластеров описывают шесть возможных сценариев динамики экономики под воздействием переноса кризисных явлений. кластер номер один и два объединяют страны, характеризующиеся коротким периодом восстановления экономики и возвратом основных макроэкономических показателей до докризисного уровня. более длительный период восстановления и высокая волатильность обменных курсов, валового внутреннего продукта, сокращение экспортно-импортных операций, характеризуют третий и четвертый кластеры самоорганизующейся карты. что касается стран, которые попали в два последних кластера (включая украину), то в результате переноса кризисных явлений средняя амплитуда падения макроэкономических показателей превысила 15% для шестого кластера, и 9% для кластера номер 5. baltic journal of economic studies 182 vol. 7 no. 4, 2021 corresponding author: 1 institute of education content modernization, ukraine. kyiv national economic university named after vadym hetman, ukraine. e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 odessa national medical university, ukraine. e-mail: valmar@i.ua orcid: https://orcid.org/0000-0002-1611-3654 3 state scientific institution "institute for modernization of educational content", ukraine. e-mail: 1spartak@ukr.net orcid: https://orcid.org/0000-0003-0117-294х doi: https://doi.org/10.30525/2256-0742/2021-7-4-182-187 economic tools of realization strategic management in universities yurii safonov1, valeria marichereda2, ievgen bazhenkov3 abstract. the main purpose of the paper is to analyze the economic instruments for the implementation of strategic management in universities. methodology. this study combines economic and managerial analysis of higher educational management. in this study, a set of general scientific and special research methods was used to achieve the goal of the study. the method of logical analysis of the literature was used. the functional, structural and economic analysis was used with purpose to research the main economic tools of realization strategic management in universities. comparative analysis and synthesis methods were used to study different types of economic and strategic instruments. using the method of generalization, conclusions and recommendations were made to improve the mechanism of strategic management used in the educational sphere. as the information base for the study the works of scholars in the field of strategic and educational management were used. findings. the article analyzes the process of strategic management based on the concept of balanced scorecard in the university. the authors used an adaptive mechanism to develop and implement a strategy in the management system of the university. a set of indicators assessing the process of implementing strategic management was proposed. management influence indicators, primary control factors, development indicators and financial outlook were analyzed. the management system of the university on the basis of strategic management was described, in which the correspondence between the economic indicators of the university and its organizational structure is presented. challenges to the further implementation of strategic management in developing countries are considered. practical implications. the results of this study form the methodological and practical basis for improving management processes in developing countries. the results of the study can become the basis for the formation of effective educational management, ensuring the continuous development of universities. key words: strategic management, university, educational management, higher education, development. jel classification: i23 1. introduction higher education in developing countries, like other production and non-production spheres, is increasingly feeling the pressure of the market. being bound by new responsibilities and freedoms, the managerial processes in universities are becoming more and more adequate to those used in the field of entrepreneurship. higher education institutions have faced a number of problems related to effective management processes, among which are: (a) the unsuitability of management structures to market conditions; (b) the focus on current operational activities; (c) the presence of social burden, which is not always consistent with commercial activities; (d) the availability of a wide range of diverse resources; (e) complex functional connections. the contradiction between the existing management technologies and the conditions of external environment requires changes in the organization of university management, primarily in terms of interaction with the external environment, which is the society as a whole with its educational baltic journal of economic studies 183 vol. 7 no. 4, 2021 needs and demands, as well as individual consumers of educational services represented by enterprises nd organizations. management in universities in today 's environment must ensure flexibility and adaptability to market conditions, including a long-term, strategic period (ofori, atiogbe, 2012). in today 's operating environment of organizations, an important stage of strategic management is not only to develop a rational strategy, but also to ensure its cost-effective implementation. a qualitatively new approach can be based on the use of an adaptation mechanism to implement strategies. thus, the goal of this paper is to analyze the economic tools of realization strategic management in universities. this study combines economic and managerial analysis of higher education management. in this research, a set of general scientific and special research methods was used to achieve the goal of the investigation. the method of logical analysis of the literature was used. in order to study the main economic instruments of strategic management implementation in universities, functional, structural and economic analysis was used. comparative analysis and synthesis methods were used to investigate different types of economic and strategic instruments. using the method of generalization, conclusions and recommendations were made to improve the mechanism of strategic management used in the educational sphere. as the information base for the study the works of scholars in the field of strategic and educational management were used. 2. discussion and research results the classic process of developing and implementing a strategy consists of six stages (figure 1) (luxton, 2005). in modern conditions, the main disadvantages of this algorithm are: – lack of a step-by-step control mechanism, and, consequently, an adaptive principle for the formation and implementation of strategic management; – lack of an economic mechanism for implementing the strategy. in this regard, the process of strategy development and implementation can be clarified and expanded as follows figure 2. this approach assumes: 1) use of the economic indicators of the university 's activities in the following areas: financial perspective, marketing perspective, internal processes and development prospects (setting up a balanced scorecard (bsc)) for analytical process; 2) adjustment of the strategy, which is a step-bystep assessment of indicators or actions in a real unstable environment and is characterized by feedback. the adaptive approach to the strategy’s implementation is resulted from the changes in the external environment, as well as functional relationships within the university (transition from a centralized management system to a more flexible one) (guerra et al., 2017). the adaptive mechanism, on the one hand, will allow universities to operate effectively in the market of educational services, and on the other hand, will ensure the functioning of the economic mechanism of inner-university management (khadija hamdani & salah koubaa, 2021). the adaptive mechanism assumes: 1. allocation of two management contours: strategic in the functional context (determines the general directions of development, formed on the basis of the mission and goals of the university; characterized by common basic indicators) and operational-tactical (includes elements of private regulation and is a tool for implementing the strategy; characterized by indicative indicators, tied to certain types of activities). at this level, the commercial principle of the university manifests itself. thus, the gap between operational and strategic planning and management is bridged (figure 3). mission strategies indexes measuring assesment actions figure 1. steps of strategies’ creating and realization source: luxton, 2005 mission strategies economic indicators measuring assessment actions figure 2. steps of adaptive strategies’ creating and realization baltic journal of economic studies 184 vol. 7 no. 4, 2021 2. allocation of independent profit centers (strategic economic zones), which can be faculties or departments. in this regard, the operational and tactical level of management can be considered as the level of interacting subsystems (profit centers), and these subsystems are in some way self-organizing. self-organization is understood as "the property of a system to acquire a spatial, temporal and functional structure without a specific external influence imposing a functioning system". 3. giving profit centers economic independence, which will ensure the growth and strengthening of horizontal ties between subsystems, with their subsequent replacement of the vertical hierarchy without premature destruction of the latter. at the same time, the actions of profit centers (subsystems) will be regulated on the basis of performance indicators determined by the university’s strategy and representing a certain corridor within which the actions of subsystems are possible. thus, as a new methodological approach to the formation and implementation of the strategy of the university in a dynamic external environment is proposed to use the ability of its structural units to self-organization. that is, there is a transition to a qualitatively new level of strategy formation, which is not the management of the organization, but the processes of self-organization on the basis of indicative planning. the self-organizing process itself, in turn, controls the organization. the chain of interactions in the system under consideration can be represented as follows: the object of management (faculties, departments) is a supplier of a "finished product" in the market of educational services (goldman & salem, 2015). if the supply of educational services matches the demand of consumers, the system operates in a stationary mode, while the university’s administration provides current funding, material support and quality control. in practice, the changing external environment constantly dictates new conditions that require the university to respond adequately, both at the operational, tactical and strategic levels, which is provided by the management system presented in figure 3. in this case, the "imbalance" between supply and demand in the market of educational services forms the factors of university management. thus, input information is the primary factor of management and represents information about the range of specialties, prices for educational services, the required quality of specialists and trends in these data. based on the primary information, control actions are developed that directly characterize the interaction between the object and the subject of management, at the strategic, operational and tactical levels (figure 3). primary factors and managerial influence predetermine the set of indicators. indicative regulation is an indirect regulation of autonomous subsystems, which provides them a perspective of economic development and at the same time sets some limits on the activities (based on indicators). it includes components of general regulation and self-regulation; it is an assessment and control mechanism. the indicators reflect the boundaries within which the system can function and develop sustainably. this control mechanism involves a feedback system and, depending on the results, can demand price state budget profit information state order budgeting of the university and its departments forming a strategy and operational plans of managing the university price, specialty, quality, trends educational process scientific and research activities scientific and methodic activities financing support strategic management operational management performance management supply of educational services figure 3. the university management system baltic journal of economic studies 185 vol. 7 no. 4, 2021 serve to revise the company 's mission, strategic goals, or overall strategy (macdonald, 2019). primary control factors are defined as follows: 1. meeting the needs of consumer groups of educational services lies in two spheres: (a) demand studies – demand forecasting – product lifecycle development; (b) proposal studies – competitors studies – competitive assessment. the following indicators are considered: recruitment by specialties, competition between applicants, services’ price, employment level of graduates, value of services for consumers, availability of distribution channels for the educational product (equipment, building, it), communication with consumer groups, training of technical personnel. 2. meeting the needs of employers and the state as the main employer. to the above indicators are added the following: forecasting the demand of enterprises for the university’s specialties; availability of job offers; training. 3. recognition of the university as a center of innovation. the indicators are: development of new directions; the volume of innovative developments in the market; the use of it in educational process; participation of the university in programs for the development of society (social orientation); contribution to the sectoral result of scientific and technical activities (share in the sectoral volume of r&d); the university’s share in the scientific and technical potential of the industry. managerial influence is formed in the following areas: i. internal processes, which are aimed at providing the material and technical basis for the implemen tation of the adjusted goal (ensuring the quality of educational services), namely: 1. personnel direction: the proportion of highly qualified specialists, the dynamics of the personnel number, age characteristics of the personnel. 2. material and technical direction: equipment depreciation, equipment renewal rate, the ratio of active and passive part of fixed assets. 3. creation of an effective accounting and control system. ii. the development perspective, which is determined in the following areas: 1. innovation orientation: assessment of scientific activity, the rate of change in the amount of r&d carried out, the proportion of r&d performed to improve the economic potential of the country. 2. opening new strategic directions. 3. improving the quality of education: increasing the employees’ professional level, improving the material and technical base, the effective use of material and technical base, the use of it in the educational process. however, another category of factors affecting both the internal and external processes of the university should be taken into account. this category represents financial factors that, on the one hand, link the university with the external environment (through the price and income stream from the university’s activities in the educational services market, as well as budgetary funds), and, on the other hand, are a regulatory mechanism in the interaction of the management (administration) and profit centers (faculties) within the management system. the financial perspective is formed taking into account the following features of the university’s activities: – the main goal of the university is to meet the social needs of society, and the financial perspective is only a tool for the implementation of the mission; – the main direction of the development of the financial perspective is to ensure financial potential, that is, the university’s development through the cost-effective organization of activities in conditions of limited resources. in this regard, the university’s financial potential means both the financial self-sufficiency of profit centers (faculties), effective distribution and use of financial resources (etzkowitz et al., 2008). 1. financial self-sufficiency is the establishment by each economic unit of the university and its subdivisions of the size and structure of funds necessary for reproduction activities. the analysis of the university’s financial self-sufficiency is similar to the analysis of the financial stability of commercial organizations. the indicators of autonomy and efficiency of the profit center are considered as main indicators. 2. the effective allocation and use of resources is advisable to analyze with factor-cost analysis, which allows not only to determine what was spent, but also how it was spent. the following are considered as activity’s indicators: current liquidity ratio (the university must at least pay current liabilities); indicator of competitive admission for budget funding; standard cost of education (validity of the scale of payment). the system of university’s management factors considered above is embedded in the balanced scorecard (bsc) concept, developed by r . kaplan and d. norton and aimed at the effective implementation of strategic management (figure 4). for the successful implementation of the university strategy it is necessary to have a correspondence between the economic indicators of the university and its organizational structure (audretsch, 2014). any inconsistency requires changes in the organizational structure, namely decentralization and consideration of university faculties as profit centers, but at the same time the presence of a general administrative leadership that will manifest itself through indicative regulation. baltic journal of economic studies 186 vol. 7 no. 4, 2021 thus, defining the contours of strategic and operational-tactical control, profit centers gain economic freedom while maintaining controllability within certain limits of the adopted strategy. the limiting indicators of this "corridor of action" are the indicators defined by the strategy and presented in the balanced scorecard. 3. conclusions in modern conditions, the importance of strategic management has increased. an important feature of strategic management is the constant monitoring of changing conditions in the internal and external environment, which implies the need to respond quickly to the accumulation of a certain critical mass in them, making adjustments to individual components of the strategic management process, without changing the previously adopted general direction of the strategy (okumus, 2003). in our opinion, it is advisable to identify some problems of transition to strategic university management since this process is at the initial stage of elaboration in developing countries. first, it is related to the lack of financial resources, which is a consequence of the residual principle of funding applied to the education system. and this “principle” is a reflection of the postulate of education as a non-productive sphere of society. this leads to limited financial opportunities for personnel development, improving the information environment of the university, etc. naturally, the shortage of financial resources arising in such conditions to ensure the functioning and development of the university, has to be compensated for account of off-budget activities. the second negative factor, which is a serious obstacle to the successful implementation of the university strategy, is quite acute here. the fact is that all of its elements related to improving the quality of staff training, development of scientific, educational, methodological work, get wide understanding and support in the team. but as for the issues associated with the inclusion of the university in the market economic relations, the need to actively engage in attracting off-budget funds, directly participate in maintaining the university’s high competitiveness in the educational services market and, moreover, in the labor market, there is no complete unity of opinion in the team. a certain part of the academic staff still maintains the belief that education as a public good and the marketplace are totally incompatible concepts. financial perspective providing financial capacity to maintain and improve the quality of education through: – efficient allocation and use of financial resources – financial self-sufficiency internal processes ensuring the quality of educational services via: – availability of the material base necessary to achieve the goals – creating the effective control system – involving the teaching staff in the educational planning process development perspective improving the quality of educational services with the help of: – opening up and developing new directions – innovative direction of development – selection and retention of highly qualified staff – professional development of employees marketing perspective the quality of the services corresponds to expectations due to: – recognition of the university's contribution to the creation new knowledge – recognition of the university as a regional center for innovation goal figure 4. the balanced scorecard system for universities baltic journal of economic studies 187 vol. 7 no. 4, 2021 therefore, the relevance of the problem of economic education and upbringing of team members, the formation of market economic between the academic staff thinking is fully preserved. this once again emphasizes the relevance and timeliness of the transition to strategic management as a qualitatively new level of leadership and the need for a decisive rejection of any elements of a spontaneous nature of management, which in the 21st century is absolutely incompatible with the objective conditions of functioning of any complex socio-economic system. references: audretsch, d. b. (2014). from the entrepreneurial university to the university for the entrepreneurial society. the journal of technology transfer, 39(3), 313–321. doi: https://doi.org/10.1007/s10961-012-9288-1 goldman, c. a., & salem, h. (2015). getting the most out of university. strategic planning. rand corporation. guerra, f. r . et al. (2017). university strategic planning: a process for change in a principal preparation program. ncpea international journal of educational leadership preparation, 12, 1–spring. available at: https://files.eric.ed.gov/fulltext/ej1145462.pdf etzkowitz, h. et al. (2008). pathways to the entrepreneurial university: towards a global convergence. science and public policy, 35(9), 681–695. doi: https://doi.org/10.3152/030234208x389701 khadija hamdani, salah koubaa (2021). the strategic planning of university transformation: the case of moroccan public universities. projectics / proyéctica / projectique, 28, 51–68. doi: 10.3917/proj.028.0051 available at: https://www.cairn.info/revue-projectique-2021-1-page-51.htm luxton, a. (2005). strategic planning in higher education. all books. book 2. available at: http://digitalcommons.andrews.edu/books/ macdonald, m. (2019). strategic plans help universities tell their story. university affairs. available at: https://www.universityaffairs.ca/features/feature-article/strategic-plans-help-universities-tell-their-story/ ofori, f., & atiogbe, e. (2012). strategic planning in public universities: a developing country perspective. journal of management and strategy, 3(1). doi: https://doi.org/10.5430/jms.v3n1p67 okumus, f. (2003). a framework to implement strategies in organizations. management decision, 41(9), 871–882. doi: https://doi.org/10.1108/00251740310499555 baltic journal of economic studies 29 vol. 2, no. 4, 2016 corresponding author: 1 department of economic cybernetics, vasyl stefanyk precarpathian national university. e-mail: dmytryshyn_l@hotmail.com 2 department of economic cybernetics, vasyl stefanyk precarpathian national university. e-mail: bogdan.bc.2201@mail.ru regional aspects of development and financing peculiarities of agriculture in ukraine lesia dmytryshyn1, bohdan brynzei2 vasyl stefanyk precarpathian national university, ukraine abstract. the aim of this work is the study and generalization of conceptual foundations, problematic and peculiarities of functioning of agriculture in modern economic conditions, the conceptual foundations of state regulation at the regional level and features of their financial providing. methodology. theoretical and methodological basis of the research is the work of scientists on problems of financial providing of agriculture development. the authors used the combination of the following methods in the process of scientific investigation: generalization and scientific abstraction – to concretize the conceptual-categorical apparatus; monographic method – to present the views of scientists on this problem; comparative analysis – to detect the features of agriculture development and to compare instruments of its financial providing. results. the functioning features of agricultural enterprises of the region in current economic conditions have been researched, highlighting fundamental principles: the rational use of resources; state regulation and state support; financial providing. the main purposes of state support of agriculture were determined in the article: increase in production of high quality products with the aim of solution of the food security problem; the increase of competitiveness of the agricultural sector to stimulate economic growth; the intensification of research work that will create competitive advantage for domestic producers in the long term perspective; development of rural areas; increase of rural employment and so on. practical value. it was established that a significant number of unresolved financial problems of this economic sector requires the development and implementation of new, adequate to modern conditions, methodical approaches to financial and credit providing of industry, in particular the expansion of the market of banking services (project financing and forward loans, forfaiting, factoring); the widespread introduction of rural credit cooperation. the development of the national agricultural enterprises in new economic conditions is impossible without their financial support at the expense of investment resources. the optimal variant of financial policy of agricultural enterprises is the development of ways of attracting and using of financial resources for the future to achieve strategic and tactical goals of the company. in this case income must be generated and used in accordance with the scale of production and real tasks, taking into account the dependence of receipts from the influence of external and internal factors; expenses should consider their economic validity and the minimization, confirmed by the respective financial calculations, and differentiation by their degree of importance and areas of use. the main problem of financial providing of agricultural enterprises of the region at the present stage is the absence of a mechanism of integrated use of traditional and non-traditional sources of financial resources for the national managing conditions. originality. on the basis of this study the authors proposed conceptual framework for financial support of agricultural enterprises that constitute the basis of scientific research to establish an effective models of financing of agricultural producers. key words: agriculture, development, financial resources, state support, region. jel classification: q1, o13, g18, h1, h7 1. introduction agriculture as one of the most promising sectors of ukrainian economy in modern conditions requires the formation of measures to overcome the decline in production, strengthening of a financial state of agricultural producers, the use of existing reserves, the transition of agricultural production to the innovative type of development. under these conditions the role of the state in supporting of the agricultural sector is the most significant for the formation of effective baltic journal of economic studies 30 vol. 2, no. 4, 2016 organizational and economic mechanism of its functioning. theoretical questions on the issues of state regulation and features of financial providing of agricultural producers were studied by the following national scientists: m.  ya.  demianenko, o.  ye.  hudz, p. a. stetsyuk, v. p. synchak, a. v. chupis, v. a. borysova, s.  m.  kvasha, yu.  o.  lupenko, o.  o.  nepochatenko, n.  s.  prokopenko etc. however, despite the great diversity of scientific issues and the depth of their investigation in modern economic science, insufficient attention is paid to methods and tools for additional access to financial resources by agricultural enterprises. the aim of the article is the study and generalization of the conceptual foundations, problematic and peculiarities of functioning of the rural sector in the current economic environment, the conceptual foundations of state regulation at the regional level and peculiarities of their financial providing. 2. state financing of agriculture in the conditions of transformation of ukrainian economy a balanced combination of state regulation of agrarian sector with the mechanisms of the free market is extremely important. in this case we should carefully apply the measures of direct intervention in the market, which has proved their low efficiency in most developed countries, and we should give preference to measures aimed at improving the efficiency and competitiveness of agricultural production (ivanko, 2006). to promote agricultural development government must support productivity growth, improve food security at household level and stabilize the market. innovative development of agricultural production and processing, the creation of a modern national system of industry informatization as close as possible to the needs of the agrarian market subjects, ensuring of constructive interaction between the state and agricultural business, control over observance of requirements of ecological safety of agricultural production and food quality must become the main directions of state regulation and support. along with this, in the modern socioeconomic conditions, the effectiveness of state economic regulation of the agro-industrial complex is directly based on the rational combination of measures at the central and regional levels, and it requires the development of fundamentally new methodology of the state regional agricultural policy. during determining the development priorities, goals and objectives of regional policy the main attention should be paid not so much to the choice between the principles of fairness and efficiency, but to the search of their optimum ratio and also the proper distribution of functions between the centre and the regions. the economic basis for a modern agricultural policy should be not only quantitative increase of agricultural production and profitability of agricultural enterprises, but also integrated satisfaction of the growing needs of region subjects in terms of better living conditions, environmental safety and social development. taking into account the specificity of regional agrarian policy in ukraine, regulatory support, administrating, financial, economic and social regulation should be its main methods at the present stage, which will create a temporary favorable conditions mainly for new, strategically important for regional agriculture enterprises, providing their restructuring. in addition, modern regional agricultural policy should take into account structural, social and institutional factors that will ensure not only the growth of agricultural production, but also complex economic, environmental and social development of the region. riabokon (riabokon, 2001) indicated that in the present circumstances of agricultural production in the region we need active using of functional management relations. the ministry of agrarian policy of ukraine should be a key unit of the management institutions which unites along with the state also professional, cooperative and corporate associations of agricultural producers, inter-professional associations of operators of food markets, which have a part of the government functions and are created on democratic principles. it should be noted that in modern economic literature, bipolarization is considered the most effective way of formation and using of the operators of the grocery market, which is achieved by the methods of vertical production and marketing integration, where the operator on the supply side acts as one integrated manufacturer and on the demand side – as the end consumer. in this case, the competition is moved to the area of assessments of the end user, which determines the matching measure of quality and prices of the offered products to his requirements. the authors (lupenko, mesel-veseliak, 2012) noted that in order to use the potential of agriculture more fully a profitable environment should be created primarily for the functioning of different organizational and legal forms of management in agrarian sector on an equal economic basis; for harmonization of interests of owners, employees and rural communities; for the formation of a competitive production structures on internal and external markets; for provision of profitability of agricultural enterprises at the level of 15 percent necessary norm to ensure the expanded reproduction of the production. this can be achieved through the continuation of reforms in the country 's economy and its agricultural sector towards the optimal combination of industrial and agricultural production, the subordination of their activities to the needs of internal and external markets of agricultural products and foodstuffs, socio-economic development of rural areas, the transition from sectoral to territorial-self-governing management system of baltic journal of economic studies 31 vol. 2, no. 4, 2016 integrated development of agricultural production and rural areas, the formation of an effective scientifictechnological, budgetary, tax, financial, credit and pricing policy. in this case, it is worth noting that according to the report "economic results of agricultural production in 2014", the financial result from operating activities of agricultural enterprises (except small) in 2014 amounted uah 34.5 billion profit against uah 12.3 billion in 2013; the income from production of agricultural products and services in crop and livestock production received 81.5% of enterprises, profit amounted uah 5,8 million in average for one enterprise. in 2013 this indicator was respectively 64.3% and uah 3.2 million. thus, the profitability of crop production and production of agricultural products and services decreased in 2013 against 2012 in almost two times (the official website...). state support of national agricultural producers, as it is known, can be arranged not only through direct budget payments, it may be arranged in the form of indirect measures (purchase and commodity interventions with grain, purchases of agricultural products and foodstuffs for state needs etc.). it is also impossible to agree with the conclusions: "government support is a combination of various instruments and tools of financing", "state support is a payment from the state budget". support is supplemented by such effective measures of organizational-economic character of the state as the organization of leasing operations, debt re-structuring of agricultural organizations, cancellation of penalty from enterprises, organization of the system of credit cooperation, stimulating of the creation of agricultural consumer, trade and purchasing, processing and service cooperatives, the introduction of the unified agricultural tax, etc. so, according to most scientists, the main objectives of the state support of agriculture are increasing of production volumes of high-quality products with the aim of solution of food security problem; the competitiveness of agrarian sector of economy for stimulation of economic growth; intensification of research work that will create competitive advantage for national producers in long term perspective; the development of rural areas; increasing of employment of the rural population (hudz, 2007; luzan, 2008; oliynyk, 2009; vasylchak, 2009). 3. credit-investment and insurance instruments of financing development of the national agrarian enterprises in new economic conditions is not possible without their financial support at the expense of investment resources. the crisis in the global and national economies led to the reduction of investment pro-grams of national and foreign investors in the agricultural sector of ukraine. the modern character of ukrainian economy determines the need for national agricultural enterprises in the investment support, which will promote not only the maintenance but also the development of industry (liashenko, 2014). the intention of agricultural enterprises to development, innovation, effective activity in conditions of constant shortage of financial resources causes the constant need for borrowing. the use of borrowed capital provides the opportunity to expand the scope of investment activities of enterprises, to provide more effective use of private capital, to accelerate the formation of various trust funds and eventually increase the market value of the enterprise. credit resources play a crucial role in the development of agriculture. this is due to the seasonal gap between the investments and continuity of the reproduction processes. significant requirement in working capital with insufficiency of own funds transforms loan into significant source of formation of financial resources and necessitates a search of ways of credit support. however, loan obtaining by enterprises of the agrarian sector remains problematic. this is largely due to (oliynyk, 2013) a decrease in state support for villages; inaccessibility of credit resources for rural entities because of high interest rates; disregard of seasonal work during crediting. further development of market relations has caused the dependence of the agriculture functioning from the financial-credit system. we should emphasize that regardless of the amount of loans granted to rural agriculture, only this region achieved the highest growth of gross output compared with other sectors of the economy that largely reflects the effective use of financial resources. the trend of crediting is due to both subjective and objective factors. it is known that one of the conditions for credit receiving is the creditworthiness of the borrower, that is a guarantee of repayment. in conditions of low profitability and often unprofitableness, low liquidity of the assets, the agricultural enterprises are often not creditworthy. the result is a vicious circle: the lack of financial re-sources is the reason for the low efficiency of agricultural production, which in its turn makes it impossible to obtain credit. in these circumstances, we need a development and implementation of new, adequate to modern conditions, methodical approaches to financial and credit providing. the main tasks for improving of crediting of agricultural enterprises are: the expansion of the market of banking services (introduction of nontraditional ways of crediting by ukrainian banks, which are widespread in europe, – project financing, forward crediting, forfaiting, factoring); an enlargement of possibilities and the promotion of alternative financial institutions; the development and application of all possible sources for capital attraction during crediting of rural agriculture (rational use of budgetary baltic journal of economic studies 32 vol. 2, no. 4, 2016 funds, increase of assignations from the state for crediting, attraction of foreign credits, the creation of mechanisms of public, banking or mixed crediting); resolution of property and land issues; the solution of the problems of old debts. according to (oliynyk, 2013), the key foundation of the system of financial providing of agricultural enterprises are financial resources that can be generated from own, borrowed and non-repayable sources. and their main problem is a rational use of the use, the accumulation and formation of financial resources in the process of economic activities that form the basis of the effective financial policy of the enterprise. the optimal variant of financial policy of agricultural enterprises is the development of ways of attracting and using of financial resources for the future to achieve strategic and tactical goals of the company. in this case income must be generated and used in accordance with the scale of production and actual tasks, taking into account the dependence of financial revenues from the influence of external and internal factors; expenses should analyze their economic validity and the minimization, confirmed by the relevant financial calculations, and differentiation by a degree of their importance and directions of using. the main problem of financial providing of agricultural enterprises of the region at the present stage is the absence of a mechanism of integrated use of traditional and non-traditional sources of financial resources for the national managing conditions. another direction of improvement of financial provision of agricultural enterprises is the conclusion of forward contracts, which will give the opportunity to replenish their financial resources on an interest free basis. advantages of forward contracts for agricultural enterprises are the following: the flow of financial resources at key stages of production, high purchase prices for the products and their guaranteed sales, way of insuring of price risks. so, at the present stage of development of the agrarian economy there is a necessity of organization self-financing revenues; agricultural receipts crediting bank credit; accounts payable; credits of credit unions; credits of cooperative banks; credits of the agricultural fund insurance insurance reimbursement state financing programs of reducing of credit interest rates; programs of compensation of insurance rates; compensation by environmental programs; compensation by leasing operations; tax benefits investment issue of securities and access to financial markets external factors of influence: state financial support; depreciation policy; industry; tax policy; interest rates on loans; the development of the financial market and its infrastructure; inflation internal factors of influence: form of ownership; organizational and legal structure; the creditworthiness of the enterprise; internal financial policy of the enterprise; the purpose and objectives of financial and economic activities during certain period of time; increase of accounts payable; increase in revenue sources of financial resources of agricultural enterprises key issues: insufficient government financial support; low level of development of insurance coverage; the lack of an effective mechanism of mortgage lending; low level of development of rural credit cooperation fig. 1. conceptual framework of financial support of agriculture baltic journal of economic studies 33 vol. 2, no. 4, 2016 of widely available credit network for rural entities by means of combining and enhancing of the existing rural financial resources. in ukraine today, credit cooperatives are represented by credit unions, which unfortunately have not the possibility of legal crediting of subjects of entrepreneurial activity. consequently, it is advisably to develop the system of rural credit cooperation based on the experience of foreign countries. rural credit cooperatives are self-regulated organizations, controlled by their members; their rights and obligations differ in the following ways: making deposits, obtaining loans, participating in the work of the cooperative (oliynyk, 2013). according to the data (the official website...), 01.01.2015 in ukraine there were 613 agricultural service cooperatives, among them 147 – cooperatives of cultivation and harvesting, 179  – dairy, 34 – grain, 163 – processing and marketing of meat, 66 – fruits and vegetables, 171 – cooperatives of another specialization. this fact indicates about high potential of development in this area, because the need for financial mechanism is not actually implemented through the national banking system. the scientist (hudz, 2007) proposes to group financial resources by the fol-lowing classification criteria, taking into account new economic conditions of management of agricultural enterprises: variation level of income, planning methods, forms of usage, risks of invested financial resources, form of exposure, level of exposure, form of establishment, membership in the economic process, method of accumulation, the purpose, the stage of movement. the mechanism of ensuring of the financial resources for enterprises is shown as a set of interrelated economic relations, which appears during search, formation, accumulation, using and ensuring of financial resources in accordance with objectives. the defining characteristic of this mechanism is the movement of financial resources. 4. conceptualization of the study on the basis of this study the following conceptual framework of financial providing of agricultural enterprises has been proposed (fig. 1). 5. conclusions consequently, the development of agricultural production in the regional aspect should be based on the effective mechanism of state support, as improving the effi-ciency of agricultural production is hampered by the lack of financial resources in the industry. this requires the improvement of crediting of agricultural enterprises, that is the expansion of the market of banking services; empowerment and promotion of the development of alternative financial institutions; development and application of all possible sources to raise capital during agriculture crediting; solution of property and land issues; the solution of the problems of old debts, as well as the implementation of appropriate investment programs. one of the possible solutions of improvement of the financial state of agricultural enterprises in the region can be the creation of appropriate credit cooperatives, which will contribute to improvement of the state of agriculture in the region; increase of employment and income of the rural population; development of rural areas; middle-class formation and the solution of social problems of rural communities; expanding access to credits for small businesses in rural areas and other categories of borrowers. taking into account the importance of creation in ukraine of the cooperative credit system, especially for financial and credit services to rural areas, the government should support this process. researched and analyzed conceptual features of the functioning and financial security of agriculture in the current economic conditions will form the basis of future research on the formation of an effective model of financing of agricultural producers. references demianenko, m.ya., ivanyna, f.v. (2008). state support as an ensuring factor of competitive agricultural production. ekonomika apk (economics of agro-industrial complex), 9, рр. 3–10. hudz, o.ye. (2007). financial resources ensuring of the agricultural enterprises: dis. abstract. ... doctor of econ. sciences: spec. 08.00.03 "economy and management of enterprises (economics of agriculture and agro-industrial complex)". national scientific center “institute of agrarian economics” uaas, 39 р. ivanko, a.v. (2006). regulation of agricultural production of the region: dis. abstract ... cand. of econ. sciences: spec. 08.07.02 "economics of agriculture and agro-industrial complex". national agricultural university, 31 р. liashenko, v.i. (2014). the first phase of modernization of economy of ukraine: experience and problems. zaporizhzhia: kpu, 798 р. lupenko, yu.o., mesel-veseliak, v.ya. (2012). strategic directions of development of agriculture of ukraine for the period until 2020. к.: nnts «iae», рр. 7-11. luzan, yu.ya. (2008). development of state support of agrarian sector of ukraine in the conditions of wto membership. oblik i finansy apk (accounting and finance of agro-industrial complex), 3, рр. 6. baltic journal of economic studies 34 vol. 2, no. 4, 2016 oliynyk, k.a. (2013). financial support of small agricultural enterprises: dis. abstract ... cand. of econ. sciences: spec. 08.00.04 "economy and management of enterprises (by economic activities)". mykolaiv nat. agrarian university, 23 р. oliynyk, t.i. (2009). state support of agrarian sector of economy of ukraine. ekonomika apk (economics of agro-industrial complex), 7, рр. 80–85. riabokon, v. p. (2001). economic and social problems of development of agriculture of ukraine in modern conditions: dis. abstract. ... doctor of econ. sciences: spec. 08.07.02 "economics of agriculture and agro-industrial complex". institute of agrarian economics of uaas, 47 р. the official website of the state statistics service of ukraine. retrieved from: http://www.ukrstat.org.ua. vasylchak, s.v., datsiuk-tomtchuk, m.b. (2009). topical issues of state support of competitiveness of agricultural production. visnyk snau (bulletin of snau), 4, рр. 95–98. леся дмитришин, богдан бринзей региональные аспекты развития и специфика финансирования сельского хозяйства украины аннотация. целью работы является исследование и обобщение концептуальных основ, проблематики и особенностей функционирования сельского хозяйства в современных экономических условиях, концептуальных основ государственного регулирования на региональном уровне и особенностей их финансового обеспечения. методика. теоретическую и методологическую основы исследования составляют труды ученых по проблемам финансового обеспечения в сфере развития сельского хозяйства. в процессе научного исследования использовалась совокупность следующих методов: обобщение и научной абстракции – с целью конкретизации понятийно-категориального аппарата; монографический  – при освещении взглядов ученых на исследуемые проблемы; сравнительного анализа – при выявлении особенностей развития сельского хозяйства и сопоставлении инструментов его финансового обеспечения. результаты. исследованы особенности функционирования сельскохозяйственных предприятий региона в современных экономических условиях с выделением принципиальных положений: рационального использования ресурсов; государственного регулирования и государственной поддержки; финансового обеспечения. установлено, что основными целями государственной поддержки сельского хозяйства являются увеличение объемов производства продукции высокого качества с целью решения проблемы продовольственной безопасности; повышение конкурентоспособности аграрного сектора экономики, что будет стимулировать рост экономики; активизация научно-исследовательской работы, что создаст конкурентное преимущество национальных товаропроизводителей в долгосрочной перспективе; развитие сельских территорий; повышение занятости сельского населения и тому подобное. практическое значение. установлено, что значительное количество нерешенных финансовых проблем данной сферы хозяйствования вызывает необходимость разработки и реализации новых, адекватных современным условиям методических подходов к финансово-кредитному обеспечению отрасли, в частности расширение рынка банковских услуг (проектное финансирование, форвардное кредитование, форфейтирование, факторинговые операции); широкое внедрение сельской кредитной кооперации и тому подобное. также развитие национальных аграрных предприятий в новых экономических условиях невозможно без их финансовой поддержки за счет инвестиционных ресурсов. при этом оптимальный вариант финансовой политики сельскохозяйственных предприятий заключается в разработке направлений привлечения и использования финансовых ресурсов на перспективу с целью достижения стратегических и тактических целей предприятия, при которых доходы должны формироваться и использоваться в соответствии с масштабами производства и реально поставленных задач, с учетом зависимости финансовых поступлений от влияния внешних и внутренних факторов; расходы должны учитывать их экономическую обоснованность и минимизацию, подтвержденную соответствующими финансовыми расчетами, и дифференциацию по степени их важности и направлениям использования. основной проблемой финансового обеспечения сельскохозяйственных предприятий региона на современном этапе является отсутствие механизма комплексного использования как традиционных, так и нетрадиционных для отечественных условий хозяйствования источников финансовых ресурсов. значение/оригинальность. на основе проведенного исследования предложены концептуальные основы финансового обеспечения сельскохозяйственных предприятий, положенные в основу научных исследований по формированию эффективной модели финансирования сельскохозяйственных производителей. baltic journal of economic studies 77 vol. 7 no. 2, 2021 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: olha.zamaslo@lnu.edu.ua orcid: https://orcid.org/0000-0001-7128-8425 2 ivan franko national university of lviv, ukraine. e-mail: vkovalenko29@ukr.net orcid: https://orcid.org/0000-0003-2946-1364 3 simon kuznets kharkiv national university of economics, ukraine. e-mail: olgalozinskaya1@gmail.com orcid: https://orcid.org/0000-0003-2882-3546 scopus author id: 57220577967 doi: https://doi.org/10.30525/2256-0742/2021-7-2-77-82 digital transformation level indicators of banks olha zamaslo1, viktor kovalenko2, olha lozynska3 abstract. the article studies the approach to assessing the banking digitalization influenced by economy digitalization, dynamically spread electronic payments, e-commerce, and innovative digital service technologies. digitalized banking services, widespread online platforms and digital customer communication channels require an approach to assessing the banking digitalization identifying the bank’s competitiveness, strengths and weaknesses strategically. the aim is to develop a banking digitalization indicator system and assessment methods within a complex indicator. to achieve this, the research applied generalization, grouping, systematization to form a grouped indicator system; static, dynamic, structural indicator assessment methods; normalization and integration by arithmetic mean. this approach utilizes the banking digitalization indicators systematically generalized by three groups: digital banking platform indicators; bank’s digital service indicators; indicators of digital communications with the bank’s customers. each group provides a flexible indicator set to track the changing banking digitalization trends. outlining the mathematical transformation of indicators into a single integrated indicator determines the use of innovative products and services and substantiates the areas of ensuring competitiveness and improving the bank’s development strategy. while assessing the banking digitalization, this approach grants the following advantages: this analytical tool monitors, analyses, and assesses the banking digitalization trends; banks will realize the strengths and weaknesses of digital tools to ensure the banking market competitiveness; competitive positioning of a bank in the banking service market; analysing, assessing, and positioning improve the bank’s development strategy, relevant technologies, and digital transformation tools. future research should consider an approach to improving the development of the bank’s marketing strategy utilizing digital technologies. key words: assessment, indicator, competitive position, digital tools, digital services, digital channels, digital platforms. jel classification: g21, l11, l13 1. introduction digital transformation represents a dynamic direction in improving banking. it identifies new customer interaction forms, processes, and banking products. digital transformation and implemented fintechs provide innovative functions for banking institutions and determine the key competition priorities in the sector. according to the annual digital banking maturity review (deloitte, 2020), in 2020, banks increased the introduction of new digital tools and processes, such as: account opening (by 34%), remote customer identification and verification (by 23%), and distance payments (by 18%). establishing the fact of digital transformation in the banking sector requires the development of a digital transformation strategy by banking institutions, which, in turn, necessitates the planning and monitoring of key digitalization indicators and measuring the banking business transformation progress to adjust to the changing market. moneythor’s assessment (2018) of 54 banks in 13 countries suggests that only 46% of banks clearly outline the results of applying their digital transformation strategy and devote a part of their reports to the deliverables of their digital metrics and determining the dynamics of these indicators. the remaining 54% of banks present the digitalization baltic journal of economic studies 78 vol. 7 no. 2, 2021 indicators in different sections of their reports, and metrics are often expressed in approximate figures not compared to the previous years’ results. therefore, the growth trends in digital banking transformation worldwide shape the urgent need to establish a basic set of indicators that reflect the level of adoption and use of digital technologies while creating, distributing, and regulating banking services. 2. literature review assessing the digital transformation level currently forms one of the main tasks in engineering a strategic vision for the development of banks. international analytical organizations, consulting agencies, and scientists dedicate their works to finding an approach to such assessment. however, the methods and models, fragmentary indicators used to assess the digitalization of banking institutions are limited. the alliance for financial inclusion, a leading international organization for financial inclusion policy and regulation, aims to expand access to high-quality financial services around the world. the alliance’s digital financial services working group has developed a basic set of financial inclusion indicators to standardize key indicators and maximize their suitability and practicality for the afi members (alliance for financial inclusion, 2019). the selection criteria are as follows: usefulness and relevance, conciseness, specificity, and simplicity of data collection. the whole indicator set is measured taking into account: – access (percentage of administrative units with digital banks, number of digital financial services agents per 10,000 adults; number of active digital financial services agents per 10,000 adults; number of payment points per 10,000 adults; percentage of adult population with registered digital financial services accounts; – use (percentage of active digital financial services accounts; digital financial services transactions (by volume) per registered account; value of digital financial services transactions, including cash in/cash out, bill payments, bank payments, p2p transfers, disbursement and repayment of loans (microfinance loans), g2p payments, salary payments, value chain payments, e-commerce payments, etc.); – quality (disclosure requirement, number of complaints per 10,000 active digital financial services accounts, percentage of complaints resolved, transaction failure, dispute resolution, financial literacy) (alliance for financial inclusion, 2019). this approach is appropriate for assessing the digital transformation of the banking sector as a whole and quite fragmentarily characterizes a particular banking institution in its digitalization. moneythor (2018) indicates the most common digital transformation indicators that are analysed and published by banks. they include: – a percentage of the customer base of digital financial services (67% of banks); – an increase percentage in the customer base of digital financial services (63% of banks); – a volume of digital financial services transactions (48% of banks); – an increase percentage in the volume of digital financial services transactions (48% of banks). both static and dynamic indicators should be noted, i.e. banking institutions analyse the transformation of digital banking, which forms the main goal of banking. at this point, it seems necessary to emphasize the reasonable conclusions made by moneythor: – digital transformation indicators are relatively hidden in published bank reports; – the most common indicators include the number of active users and the volume of digital transactions; – most banks do not publish the results of digital transformation indicators; – digital transformation indicators are measured at a simplified level (moneythor, 2018). scholars also put attention on assessing the digital transformation of banking institutions. the indicators used by mbama (2018) include quality of digital services, involvement of employees and consumers in digital transformation, susceptibility of digital services and their risk. qun et al. (2019) analyse organizational innovations, technological innovations, new interactions with customers, and new revenue models in digital banking. internet banking is studied by amin (2016), raza et al. (2015), and martins et al. (2014). for these purposes, the authors use the indicators of service quality and bank customers’ satisfaction with these services according to the following parameters: security of digital transactions, informativeness of the bank’s website, its convenience and ease of use, and listed online services. to determine digital transformation, the scientists apply a method of expert assessments of respondents. ali and ali (2014) consider mobile banking as an aspect of the digital transformation of banking. while analysing mobile banking, the authors use the following indicators: services offered by mobile banking to meet customer needs; quickness; mobile access; advertising and functionality; quality of service in terms of awareness, reliability, accessibility, accuracy, sensitivity, courtesy and usefulness; transaction efficiency in terms of privacy and security; ease of use, simplicity, timeliness, confidentiality; costs of using mobile banking: equipment costs, access costs and transaction fees; risk related to the service. jun and palacios (2016) establish the following criteria for assessing mobile banking: convenience of mobile applications and their functions, accuracy, ease of use, and version upgrades. baltic journal of economic studies 79 vol. 7 no. 2, 2021 bidarra et al. (2013), engaged in mobile banking research, assess the security, confidentiality, usefulness, ease of use, trust, and risks associated with digital services provided through mobile applications. dootson et al. (2016) explore social networks as a tool to maximize the banking product benefits and improve the dialogue with the banking service consumer. the authors use the method of expert surveys, their processing using regression models and t-tests to assess the perceived usefulness of social networks in banking for the customer, the latter’s intention to use social networks to interact with the financial institution. a separate unit for assessing the digital banking transformation is determining the level of its effectiveness. wheelock and wilson (2017), plotnikova and kudryavtseva (2020), ovidiu and alina (2015), and bataev and plotnikova (2019) devote their works to this aspect. the authors determine the impact exerted by digital bank indicators on profits, determine the parameters affecting the assessment of the digital bank efficiency, formulate econometric models to analyse the assessment of the banks’ efficiency. thus, the assessment of digital banking transformation is widely studied by practitioners and scholars. however, the lack of a systemic approach to creating an indicator set to measure the banking digitalization level, their suitability for the analysis of tools while forming a marketing strategy of banking, assessment, and monitoring of the banking institution’s competitive capacity are of great importance. it is necessary to form methods that are instrumental in quantifying the level of the digital banking transformation as qualitative assessment often provides inaccurate results, which depend on the expert group composition. 3. aims and methods this study aims to develop a system of the digital banking transformation indicators and methods of their assessment within a complex indicator. the following tasks require full completion to achieve this aim: – systematizing the digital transformation parameters according to the set of criteria and characteristics and determining the indicators of the digital banking transformation level by each parameter. to implement this task, generalization, grouping , and systematization methods were used; – identifying the methods for analysing the digital banking transformation indicators. the methods of static, dynamic, and structural assessment of indicators were proposed to accomplish this task; – grounding the methods of a quantitative assessment of indicators and their consolidation. normalization and integration by the arithmetic mean method were recommended while completing this task. 4. discussion the studied literature sources afford grounds to systematize the digital banking transformation parameters by the following characteristics: – digital banking platforms; – digital services provided by the bank; – digital communications with the bank’s customers. digital banking platforms comprise internet banking and mobile banking. digital banking channels are also represented by atms, digital kiosks and/or pos machines, and mobile terminals. the indicators peculiar to this digital transformation characteristic should quantitatively assess the channel popularity among the users to develop appropriate plans aimed at increasing the number of consumers and the volume of the bank’s digital services. with this object in mind, it is advisable to calculate, monitor, and analyse: – the static indicators: popularization of digital platforms among the banking service consumers (number of visitors to the bank’s website within a certain period (a month, a quarter, or a year); number of registered users of the bank’s mobile applications; number of branded online inquiries; number of atms, pos machines, and mobile terminals) and volume of transactions through digital platforms (volume of transactions performed through the bank’s website within a certain period (a month, a quarter, a year); the volume of transactions through the bank’s mobile applications; the volume of the atms, pos machines, and mobile terminal transactions); – dynamic indicators: popularization of digital platforms among the banking service consumers (an increased number of sign-ins on the bank’s website within a certain period (a month, a quarter, a year); an increased number of registered users of the bank’s mobile applications within a certain period (a month, a quarter, or a year); an increased number of atms, pos machines, and mobile terminals) and the volume of transactions through digital platforms (an increased volume of transactions performed through the bank’s website within a certain period (a month, a quarter, a year); an increased volume of transactions through the bank’s mobile applications within a certain period (a month, a quarter, a year). based on surveys and the experts’ involvement, it is possible to further assess the quality and functionality of online platforms: – automation and ease of use of the platform (the assessment is targeted at virtual assistance in digital operations); – functionality (for example, utility service payments, opening loans and deposits, ordering credit and debit cards, etc.); – design and ergonomics of the platform (the assessment addresses the compatibility with devices and software baltic journal of economic studies 80 vol. 7 no. 2, 2021 (ios, android, windows, browser), adaptation to languages, availability of platform user settings); – navigation, including search tools and ease of finding the necessary information; – cybersecurity and information security. the assessment of the digital banking service indicators is directed at identifying areas of digital strategy for the banking development in terms of products and services, which might help increase profitability. alliance for financial inclusion (2019) systematizes the digital service assessment indicators by the following categories: – mobile wallets; – branchless banking transactions; – electronic wallets, i.e. electronic money accounts, including debit cards, nfc/rfid cards, etc. however, such a classification is significantly limited. for the purposes of digital transformation assessment, it is proposed to systematize digital services by the following features: – by the customer type: digital services to individuals, legal entities, and individual entrepreneurs (business banking); – by the banking service content: deposit, credit, online utility service payment, online insurance, and other non-bank financial transactions, payment transactions by debit and credit cards, etc.; – by the automatized details entry: through details, qr-codes; – by the payment method: from debit and credit cards, from the internet card, with electronic money, etc. it is suggested that the dynamics of the number of customers who have used the service and the transaction volume are analysed by banking services. as recommended by moneythor (2018), it is also advisable to determine the proportion of the customer base using a certain digital banking service. assessing the indicators of digital communications with the bank’s customers forms the third aspect of the assessed level of the digital banking transformation. these include the ability to use social networks (facebook, instagram etc.), messenger chatbots (telegram, viber etc.) to establish long-term productive relationships with the bank’s customers through consulting services, advice, information about banking products and services. in this way, banks can increase their revenues using the best communication strategies. this assessment is designed to determine the communication channel effectiveness for the development of appropriate plans to increase the consumer number and the bank’s volume of digital services. the indicators aimed to assess digital communications can reflect: – the number of general and individual consultations and advice provided in a particular communication channel; – the number of responses to questionnaires posted on a particular communication channel; – the number of subscribers on social networks. these should also be analysed by static, dynamic, and structural indicators. figure 1 provides a systematic generalization of the digital banking transformation indicators. to determine the integrated level of digital banking transformation for the purposes of forming a competitive strategy, it is necessary to provide a comparative assessment of the bank’s competitive position in the sector. accordingly, the collected statistics require processing pursuant to the following steps: – formation of a digital transformation indicator database divided into three groups (figure 1) and built on the data of the country’s banks from open sources; – considering that different indicators can be presented in different scales and units of measurement, it is necessary to normalize the indicators by the minimax method in the range [0… 1], where the minimum and maximum scaled values correspond to 0 and 1, respectively, by the following formula: ′ = − − x x x x x ij ij j j j min max min ; where ′x ij is the normalized value of indicator j of bank i; xij is the actual value of indicator j of bank i; xj min is the minimum value of indicator j for the group of surveyed banks; xj max is the maximum value of indicator j for the group of surveyed banks; – integration of the normalized indicators into a complex indicator reflecting the competitive capacity of each bank by three groups with the help of the arithmetic mean method. this intermediate stage will reveal the aspect in which a single bank holds a leading competitive position, or lags behind competitors; – integration of indicators by three groups into a single indicator of the digital banking transformation level with the help of the arithmetic mean method. it is possible to perform a verbal assessment of the integrated level of digital banking transformation according to the harrington scale: 0.8–1.0 is a very high level of digital banking transformation; 0.63–0.8 is a high level of digital banking transformation; 0.37–0.63 is an average level of digital banking transformation; 0.2–0.37 is a low level of digital banking transformation; 0–0.2 is a very low level of digital banking transformation. baltic journal of economic studies 81 vol. 7 no. 2, 2021 an alternative to assessing the integrated level of digital transformation is ranking to establish the bank’s rating among the surveyed ones. this systemic approach to determining the level of digital banking transformation provides a basis for analysing the competitive position and presents the grounds for forming the banking institution’s development strategy. realizing the problems and advantages while providing digital services, using online platforms and digital communication channels determines the success in the bank’s competitive scenario in today’s rapidly changing trends of the financial market. 5. conclusion digital transformation of banking services, the widespread introduction of online platforms and digital channels of communication with customers determine the need to develop an approach to assessing the digital banking transformation level, which would identif y the bank’s competitive position, its strengths and weaknesses in the strategic dimension. three groups, namely, the indicators of digital banking platforms, indicators of digital services provided by the bank, and indicators of digital communications with the bank’s customers, are parts of the systematic generalization of the bank’s digital transformation indicators forming the base for the approach proposed by this article. for each group, this study provides a flexible set of indicators that are instrumental in tracking the changing trends in banking digitalization. the approach to the mathematical transformation of indicators into a single integrated indicator outlined in the work offers means for determining the level of use of innovative products and services and helps substantiate the assessment system for digital banking transformation digital banking platforms digital services provided by the bank digital communications with the bank’s customers assessment target: determining the platform popularity among the users to develop appropriate plans aimed at increasing the number of consumers and the volume of the bank’s digital services assessment target: identifying areas of digital strategy for the banking development in terms of products and services, which might help increase profitability assessment target: determining the communication channel effectiveness for the development of appropriate plans to increase the consumer number and the bank’s volume of digital services quantitative static indicators of the popularization of digital platforms among the banking service consumers and the volume of transactions through digital platforms quantitative dynamic indicators of the popularization of digital channels among the banking service consumers and the volume of transactions through digital platforms expert assessment of the quality and functionality of online platforms quantitative static, dynamic, and structural indicators of the use of digital banking transactions classified by: the customer type; the banking service content; the automatized details entry; the payment method quantitative static, dynamic, and structural indicators of the use of digital communication channels classified by: the number of general and individual consultations and advice provided in a particular communication channel; the number of responses to questionnaires posted on a particular communication channel; the number of subscribers on social networks. figure 1. assessment system for digital banking transformation source: developed by the authors baltic journal of economic studies 82 vol. 7 no. 2, 2021 areas of competitiveness and improve the bank’s development strategy. the application of the proposed approach to assessing the digital banking transformation level grants the following advantages: – the proposed approach represents an analytical tool for monitoring, analysis, and assessment of trends in the digital banking transformation; – banking institutions will be able to realize the strengths and weaknesses of the used digital tools to ensure competitiveness in the banking market; – enabling competitive positioning of a single bank in the banking service market; – the results of analysis, assessment, and positioning make it possible to improve the development strategy, relevant technologies, and tools of digital transformation in a banking institution. in terms of the direction for future research, it should focus on an approach to improving the process of developing the bank’s marketing strategy based on digital technologies. references: ali, a., & ali, h. 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(2017). the evolution of scale economies in us banking. journal of applied econometrics, 33, 16–28. baltic journal of economic studies 205 vol. 8 no. 3, 2022 1 zaporizhzhia national university, ukraine (corresponding author) e-mail: liliia_khorishko@ukr.net orcid: https://orcid.org/0000-0002-0618-976x 2 "zaporizhzhia polytechnic" national university, ukraine orcid: https://orcid.org/0000-0002-8981-4769 doi: https://doi.org/10.30525/2256-0742/2022-8-3-205-209 mechanisms for ensuring estonia's permanent development: the environmental aspect liliia khorishko1, tetyana vasyl'chuk2 abstract. the latest trends in global development actualize the problem of ecological modernization in order to ensure the sustainability of socio-economic and political functioning of modern states, creating additional opportunities for an appropriate response to possible threats. the issues of ecological modernization are key on the agenda of the eu, which seeks to demonstrate leadership in addressing it. ecological modernization and the subsequent digitalization of the economic sphere are considered one of the most important components of sustainable development of the eu and each member state. these processes and mechanisms for their practical implementation are approved in the program the european green deal. the european commission created the recovery and resilience facility, which provides for the coordination of efforts of eu member states to ensure resilience and sustainability of development. the subject of the study is the content and characteristics of sustainable development in estonia. the purpose of the scientific exploration is to identify environmental aspects and to specify mechanisms for sustainable development in estonia. research methodology: systematic approach, methods of analysis and generalization. estonia has developed a long-term strategy "estonia 2035", which defines the basic principles of sustainability and sustainable development of the state. the tools for implementing the set sustainable development goals are legislative, managerial, educational and awarenessraising. in this strategy, the priorities of sustainable development of the state are innovation and sustainability of the economy, its competitiveness in world markets, energy efficiency, digitalization of management processes, safe environment for citizens, stimulating their activity in different spheres of society. environmental issues are a key aspect of the "estonia 2035" strategy, which meets such sustainable development goals as rational consumption, sustainable cities and communities, combating climate change, and preserving the ecosystem. a recovery and sustainability plan, correlated with the "estonia 2035" strategy, was presented to enhance the ability to implement the basic principles of sustainable development and obtain additional sources of funding. estonian officials are actively engaging financial and political mechanisms to implement sustainable development. according to the plan approved by the european commission, estonia will receive 969.3 million euros in funding from the recovery and resilience facility. they will be distributed along the following lines: ecological modernization, digitalization, economic and social sustainability. in addition, political mechanisms, in particular public diplomacy, are actively used. they are aimed at positioning environmental initiatives according to the state branding strategy and intensifying cooperation with stakeholders in the implementation of international environmental projects. research results: sustainability and resilience of estonia's development correlate with the need to implement environmental modernization of the economy and digitalization of management processes; implementation of the "estonia 2035" strategy, national recovery and sustainability plan is facilitated by economic and political decision-making mechanisms at the supranational and national levels of government. key words: digitalization, energy efficiency, ecological modernization, green economy, public diplomacy, stakeholders, sustainable development. jel classification: q54, q57, q58 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 206 vol. 8 no. 3, 2022 1. introduction the global challenges of our time and their foreseeable consequences actualize the formation of the environmental agenda, a key aspect of which is the ecological modernization of the world economy. the basic principles of the green economy are low-carbon, resource-efficient, socially inclusive (unep, 2022). the progressive transition to a green economy will improve resource consumption efficiency, decarbonize, create a safe living environment, and expand opportunities for sustainable development of the global community (united nation, 2015). in this context, there is a growing interest among global policy actors in the formation of sustainable development strategies, a key aspect of which is the issue of ecological modernization. the main goal of the scientific exploration is to determine the environmental aspects and to specify the mechanisms of sustainable development in estonia. the national sustainable development strategy resilient estonia 21 was agreed upon by the government and enacted by the parliament back in 2005 (ministry of the environment, 2005). with this document, estonia confirmed its intentions to implement the un sustainable development goals by 2030, updating the public on key ideas such as security of living space, quality of life, environmental friendliness and balanced economic development. the state is a member of the eu, so the key pillars of sustainable development correlate with the relevant initiatives of european institutions. in particular, it is about the program the european green deal, aimed at reducing carbon emissions by 55% by 2030 and achieving climate neutrality by 2050. the implementation of the key principles of this program and the need to find additional sources of investment actualizes for estonia the issues of intensifying the process of ecological modernization of the national economy, increasing the level of energy efficiency in order to ensure sustainability and sustainability of national development in the current political reality. the comprehensiveness of the study consists in defining the environmental aspects and specifying the mechanisms of achieving sustainable development in estonia. systematic approach in the research will allow to specify essentially substantive characteristics of sustainable development of estonia, its ecological aspects and to define their correlation with the corresponding initiatives of the eu. the method of analysis will contribute to the clarification of the essence of sustainable development, directions and mechanisms of its implementation. the use of the method of generalization will contribute to the formation of intermediate and final conclusions about the mechanisms of sustainable development in estonia. 2. the environmental component of estonia's sustainable development sustainable development is seen by the estonian ruling elite as the basis for ensuring the state's subjectivity in domestic and foreign policy. given today 's challenges and threats to national security, much attention in the political discourse is paid to the issues of low-carbon development of the national economy, the formation of a safe space for citizens, the search for investment in the development of renewable energy sources and increasing the efficiency of resource consumption (riigikogu, 2020). the general principles of the state's sustainable development are defined in the long-term strategy "estonia 2035", which is considered by officials as an instrument of strategic management and budget planning. it was developed by the government on the initiative of various stakeholders (non-governmental organizations, politicians, experts, citizens) and enacted by the parliament. this strategy views the state's sustainable development through the prism of the following priorities: 1) development of human capital and the full involvement of public initiative; 2) innovation and sustainability of economic development; 3) a safe environment for citizens; and 4) effective public administration (estonian government). the step-by-step implementation of these priorities will be carried out in the context of the eu-approved agenda (2019–2024), relying on the mechanisms of financial support for estonia's sustainable development. one of the most important parts of the eu's agenda is combating climate change and the ecological modernization of the national economies of its member states. consequently, environmental topics are key in the "estonia 2035" strategy, which correlates with the following sustainable development goals – responsible consumption, sustainable cities and communities, combating climate change, and preserving the ecosystem. first, it is about activation of state institutions and stakeholders in the implementation of ecological modernization of the national economy. among the priorities are the efficient consumption of national resources, modernization of transport infrastructure, development of alternative energy sources, primarily offshore wind energy. emphasis is placed on attracting innovation and research potential to develop and implement green technologies aimed at adapting to global challenges and gradually achieving carbon neutrality. second, improving the functioning of the national ecosystem is seen by the ruling elite as the basis for the formation of a safe space of life of society and sustainable development of the state as a whole. baltic journal of economic studies 207 vol. 8 no. 3, 2022 the question is about the introduction of new approaches in the formation of a sustainable and safe space of self-actualization of citizens. it should be characterized by a balance of the following indicators: safety of living, opportunities for physical activity, accessibility of goods and services. an important role in ensuring the efficiency of its functioning is assigned to the formation of a waste management system and the renewal of the public transport fleet in order to minimize the negative impact on the environment. at the same time, the global pandemic and the need to respond adequately to its consequences have brought to the fore the search for additional opportunities to ensure the sustainability of economic and political development. the european commission created the recovery and resilience facility, which provides for the coordination of eu and national governments' efforts to ensure sustainability and resilience. in this context, estonian officials presented a recovery and sustainability plan correlated with the "estonia 2035" strategy and agreed at the level of the european commission. the estonian plan focuses on several key aspects of sustainability that require financial support from the eu institutions. first, the ecological modernization of leading industries and transport infrastructure, ensuring energy efficiency and rational consumption of resources in order to gradually reduce the effects of the negative impact of climate change on the ecosystem of the state as a whole, the preservation of its biodiversity. second, the promotion of an environmentally friendly space and appropriate infrastructure for citizens to live in, which meets their key needs in the context of adaptation to climate change. finally, investing in the development of an environmental monitoring system to optimize management and control of the environment, predicting possible environmental crisis situations and responding to them in a timely manner to minimize the impact on the national economy. among the tools for implementing estonia's sustainable development goals, officials emphasize: 1) legislative, aimed at improving the national legislative framework for environmental protection, achieving carbon neutrality, the introduction of key principles of the "green economy "; 2) managerial, aimed at optimizing the communication of power institutions at the national and regional levels for the implementation of environmental modernization, taking into account national interests, the specifics of regional development and the needs of citizens; 3) educational, awareness-raising, aimed at creating an environmental culture of citizens, increasing the involvement of public initiative (estonia, 2021). therefore, the main ideas and principles of estonia's sustainable development are documented in the long-term national development strategy, as well as in the recovery and sustainability plan. in these documents, the state acknowledges its responsibility to combat climate change and its consequences for the ecosystem and the livelihoods of citizens. at the same time, the implementation of estonia's comprehensive environmental modernization is an integral part of the implementation of relevant eu environmental initiatives. 3. sustainable development mechanisms in estonia a key aspect of estonia's sustainable development is the combination of economic and political influence mechanisms implemented by the government with the active support of eu institutions. in this context, the european commission created the recovery and resilience facility (rrf, 2020). it accumulates 723.8 billion euros, of which 385.8 billion euros are loans, and the remaining 338 are grants. these funds will be used to support member states' economic development and environmental modernization. the amounts of payments for the implementation of national recovery plans depend on the concrete results of the implemented reforms. at the same time, member states have the opportunity to raise funds from other sources to expand funding for areas that are a priority for them. the reallocation of financial resources is based on submitted national recovery plans, which should include roughly 37% of spending on the green economy and 20% on the digitalization of the economy and governance. the estonian national plan is focused on green and digital transition, economic and social ustainability. its implementation will increase estonia's economic development and gdp growth from 0.89% to 1.3% by 2026, create 4,000 additional jobs, and expand opportunities for structural reforms in the economy (european commission, 2021). several of the most promising goals presented in estonia's national plan can be distinguished (see table 1). according to representatives of the european commission, the estonian national plan provides for 42% of the funds to be used for climate goals and 22% for digitalization. consequently, a positive decision was made on the funding presented in the initiative plan for recovery and resilience facility resources in the amount of 969.3 million euros. in order to intensify the implementation of the plan, estonia was granted 126 million euros immediately after the approval of the decision by the european commission (press corner ec, 2021). also, estonia baltic journal of economic studies 208 vol. 8 no. 3, 2022 is forming a national greenfund investment fund of 100 million euros, which aims to ensure longterm investments in environmental modernization, development and production of green technology. political mechanisms of sustainable development are also used quite actively in estonia, in particular, it is a question of public diplomacy. first, the main idea of the state branding strategy is environmental friendliness and innovativeness in the formation of a space of opportunities for self-actualization of citizens. in this context, the green tiger platform was established to coordinate the efforts of public and private stakeholders in creating the prerequisites and further development of the green economy in estonia. the state is positioning itself as a responsible actor for implementing the 2030 agenda for sustainable development. in particular, the national report (economic and social council, 2020) was presented at the sustainable development policy forum. it emphasizes the positive dynamics of environmental modernization of the economy, increasing the use of energy from renewable sources, and confirms estonia's continued participation in the implementation of the sustainable develop ment goals in domestic and foreign policy. second, estonian government members actively participate in special pr events aimed at popularizing among the public the ideas of sustainable develop ment and increasing the level of environmental responsibility and culture of citizens. in particular, with the assistance of the world energy council, the estonian ministry of economic affairs and communications held the world energy leaders' summit (world energy leaders' summit, 2021). during the meeting they discussed the problems of digitalization of the energy sphere, ways of implementation of ecological modernization of the world energy, peculiarities of development of regional energy systems and sources of financing the energy transition. third, estonia is actively involved in international projects aimed at coordinating the efforts of partner states to implement environmental sustainability initiatives at the level of certain regions. the executive agency for innovation and networks has initiated a grant of 719.7 million euros for the implemen tation of the baltic synchronisation project. it is aimed at synchronizing the power grids of the baltic states with continental europe, so it involves cooperation between estonia, latvia, lithuania and poland. the harmony link across the baltic sea between poland and lithuania, built as part of the project, will be the basis for the formation of a renewable energy system (innovation and networks executive agency, 2020). they will ensure the energy sustainability of the entire region and enhance the ability of participating states to implement the european green deal. estonia, together with poland, lithuania, latvia, and indirectly finland, is involved in the rail baltica project, which aims to further integrate the baltic states into the european rail network (rail baltica, 2014). it involves the construction of electrified railway infrastructure. the project will take into account the following environmental aspects: 1) the use of environmental technologies and materials; 2) development of a route outside the natura 2000 protected area; 3) installation of noise barriers; 4) digitalization of the traffic control system. the funding comes from grant funds in the amount of 824 million euros allocated in the connecting europe facility. estonia itself will receive 235 million euros for implementation of its commitments. the project provides for the construction of new multimodal passenger terminals designed to connect urban, intercity and regional connections with commercial and recreational areas. this will expand opportunities in the formation of so-called smart zones of comfort and safety of citizens, which are table 1 the main goals of financing the estonian national plan direction main goals planned financing, million euros environmental modernization supporting businesses in making the green transition and introducing green technologies 220 introduction of renewable energy sources and energy efficiency 92 greening public transport in tallinn and building a terminal as part of the rail baltica project 96 digitalization digitalization of public services 97 supporting digitalization of small and medium-sized businesses 83 formation of high-capacity networks in rural areas 24 economic and social stability improving access to health care, digitalization of medical management processes 326 stimulating the development of the labor market, creating conditions for a combination of training and work for young people and re-training opportunities 10 improving the competitiveness of estonian business, involving its representatives in regional and global projects 33 source: factsheet (2021) baltic journal of economic studies 209 vol. 8 no. 3, 2022 one of the main components of sustainable development. the built infrastructure will also make it possible to integrate the management system of different types of transport connections, which will help boost trade and accelerate the transportation of goods in the baltic states to the eu. 4. conclusions the main principles of the state's sustainable development are defined in the long-term strategy "estonia 2035". among the main priorities of the strategy, officials emphasize environmentally friendly and innovative economic development, safety in all spheres of life, and involvement of citizens' initiatives. it is synchronized with the european green deal and other eu environmental initiatives in implementation of these priorities. in order to attract additional sources of financing, the estonian national recovery and sustainability plan was presented, which focuses on the implementation of the green and digital transition, ensuring economic and social sustainability. estonia aims to combine economic and political devices to implement the main qualities of sustainable development. economic ones are connected with the attraction of financial support from the eu and the functioning of the national investment fund, and political ones are connected with participation in the formation of the environmental agenda, intensification of cooperation with stakeholders and implementation of the state branding strategy. references: economic and social council (2020). compilation of main messages for the 2020 voluntary national reviews / note by the secretariat. available at: https://sustainabledevelopment.un.org/content/documents/ 26196compilation_main_messages_vnrs.pdf (accessed february 2, 2022). estonian government (2021). development stategy "estonia 2035". available at: https://www.valitsus.ee/en/ estonia-2035-development-stategy/strategy/ strategic-goals (accessed january 26, 2022). estonia (2021). recovery and resilience plan. available at: https://rtk.ee/toetusfondid-ja-programmid/taaste ja-vastupidavusrahastu-rrf/eesti-taastekava (accessed february 2, 2022). european commission (2021). estonia’s recovery and resilience plan. available at: https://ec.europa.eu/info/ business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility/estonias-recovery-and-resilienceplan_en (accessed february 2, 2022). factsheet (2021). laying the foundations for recovery: estonia. available at: https://ec.europa.eu/info/sites/ default/files/factsheet-estonia_en.pdf (accessed may 31, 2022). green tiger (2020). about the green tiger. available at: https://rohetiiger.ee/en/ (accessed february 2, 2022). press corner ec (2021). nextgenerationeu: european commission disburses €126 million in pre-financing to estonia. available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6939 (accessed june 1, 2022). ministry of the environment (2005). estonian national strategy on sustainable development. available at: https://sdgtoolkit.org/tool/estonian-national-strategy-on-sustainable-development/ (accessed january 26, 2022). rail baltica (2014). rail baltica – project of the century. available at: https://www.railbaltica.org/about-railbaltica/ (accessed may 31, 2022). riigikogu (2020). riigikogu discussed green transition as a matter of significant national importance. available at: https://www.riigikogu.ee/en/press-releases/riigikogu-discussed-green-transition-as-a-matter-ofsignificant-national-importance/ (accessed february 2, 2022). rrf (2020). recovery and resilience facility. available at: https://ec.europa.eu/info/business-economy-euro/ recovery-coronavirus/reco very-and-resilience-facility_en#the-effects-of-nextgenerationeu-on-the-eus-real-gdpuntil-2024-in-a-high-productivity-scenario (accessed february 4, 2022). united nations development programme (2015). sustainable development goals. available at: https://www.ua.undp.org/content/ukraine/uk/home/sustainable-development-goals/background.html (accessed february 4, 2022). world energy leaders’ summit (2021). estonia to host the world energy leaders's summit. available at: https://www.worldenergy.org/news-views/entry/estonia-to-host-world-energy-leaders-summit-2021 (accessed february 4, 2022). received on: 15th of july, 2022 accepted on: 28th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 7 vol. 8 no. 3, 2022 1 higher school of insurance and finance, bulgaria (corresponding author) e-mail: lborisov@vuzf.bg orcid: https://orcid.org/0000-0001-7476-313x doi: https://doi.org/10.30525/2256-0742/2022-8-3-7-13 consumer confidence and real economic grow th in the eurozone lachezar borisov1 abstract. over the past 15 years, the world economic system has experienced two global crises: the financial and economic crisis of 2008 and the pandemic crisis of 2020. the financial crisis of 2008 had a significant impact on the development of the world economy, including the eurozone. although some sectors of the economy are not recovering and have not reached pre-crisis levels of efficiency, overall economies are characterized by predictable and positive economic trends. the pandemic crisis poses new challenges to the economy in terms of business closures, disrupted supply chains, and high and accelerating inflation. all this brought to the fore the need to analyze the correlations between various indicators and the dynamics of economic growth, so that when unforeseen crises occur, decisions can be made quickly. the aim of the study is to analyze the degree of correlation between the indicator of consumer confidence and real gdp growth by quarter in the euro area. the tested hypothesis is that for the last three years there has been a strong correlation between quarterly data on real economic growth and consumers' direct assessments, as expressed by the consumer confidence indicator. the regression analysis and hypothesis testing are performed using seasonally adjusted monthly data on consumer confidence indicator and seasonally adjusted annual data by quarters on real annual gdp growth in q2 2019 – q1 2022. the in-depth regression analysis shows that there is a statistically significant linear relationship between the indicator of consumer confidence and real annual gdp growth by quarters for the period under study. the results of the granger causality test confirm the conclusions drawn from the dynamic, correlation, and regression analyses. the results of the test prove not only the presence of causality, but also the ability of the consumer confidence indicator to predict real annual growth by quarter during periods of crisis. all this allows to conclude that in periods of import crises, the indicator of consumer confidence can also be used as an early signal of the presence of systemic problems and to determine the dynamics of gdp, as well as to implement specific economic measures and policies. key word: early warning systems, casual relationship, covid-19, economic and inflationary crisis. jel classification: c13, e32, e37, o47 1. introduction over the past 15 years, the world economic system has experienced two global crises. the financial and economic crisis of 2008 left long-lasting traces on the development of the world economy, including the eurozone. before the covid-19 crisis, there were still sectors that had not fully recovered or had not reached pre-crisis levels of efficiency. nevertheless, economic activity in the eurozone, as in the rest of the world, is characterized by predictability and positive economic trends. the challenges facing economies in this period are mainly related to the acceleration of digitalization processes and the non-compliance of some countries, mainly outside europe, with the rules of international trade of the world trade organization. this leads to trade wars, which are reflected in the international prices of certain raw materials. in this relatively positive period of economic development, the emergence of covid-19 also led to a new economic crisis with global repercussions. the first negative effects were felt in europe due to supply disruptions from china, and a number of industries began to experience difficulties. after the transmission of the virus to europe, a number of administrative and restrictive measures were imposed on various businesses, borders were closed, etc. this led to a breakdown of many systemic ties in the economies of the eurozone member states and the virtual shutdown of many businesses. the recovery of economies from the damage caused by the covid-19 pandemic and the cautious policies of central banks, including the ecb, led to the emergence and acceleration of inflation around the this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 8 vol. 8 no. 3, 2022 world, including in the euro area. in the current situation, the risk of a deflationary spiral, as feared after the european debt crisis (mihaylova-borisova, 2016), is no longer raised, but the question of entering an inflationary spiral and stagflation is raised. the european central bank has been much more cautious in taking measures in fighting inflation compared to the federal reserve system (borisova, 2021). when the pandemic crisis erupted, it was the federal reserve that was the first bank to take unconventional measures to deal with the crisis, while the european central bank waited before intervening more aggressively in the markets. in the current environment of accelerating inflation, the european central bank has again refrained from raising interest rates because of concerns about the large accumulated debts of some eurozone countries, causing inflation to continue rising. this has a corresponding effect on countries' economic growth. record levels of inflation have been achieved in the eurozone, as well as in the us and the uk (borisov, 2022), but the actions of central banks in europe and the us are different. rising energy and food prices are also at record levels. all this has brought to the fore the need to analyze the relationships between various indicators and the dynamics of economic growth, so that quick decisions can be made in the event of unforeseen crises. moreover, some short-term indicators can also serve as information for early warning of crises and, on this basis, for specific economic policies. the aim of the study is to analyze the degree of correlation between the indicator of consumer confidence and real gdp growth by quarter in the euro area. the thesis is that for the past three years there has been a strong correlation between quarterly data on real economic growth and consumers' direct assessments as expressed by the consumer confidence indicator. there are statistically significant causal relationships between quarterly real annual gdp growth and the indicator of consumer confidence, and they can serve to determine the direction of gdp dynamics and identify the presence of systemic problems. based on this information and during the crisis, specific economic measures and policies can be adopted and implemented. 2. literature review there are various studies in the economic literature analyzing such relationships. in particular, in 2018, one of the first attempts was made in the european union to identify the impact of consumer confidence on gdp growth (sorić, 2018). the empirical analysis in the study is based on data from 11 new eu member states. the analysis shows that consumer confidence rose sharply during the global financial crisis of 2008, indicating that the crisis was to some extent psychologically manageable. the study also shows that the impact of consumer confidence on gdp has largely stabilized at previous pre-crisis levels. the conclusions drawn for the countries in question are fairly robust and remain unchanged when additional control variables are included in the model. the author concludes that a possible solution to contain the psychological factors of the crisis is a quick, consistent and clearly communicated management policy, which, in turn, can help prevent a significant decline in consumer confidence. using quarterly data for the united states from 1980 to 2005, the relationship between measures of consumer, investor and business confidence and economic fluctuations is explored (afshar, et all, 2007). the paper implements vector autoregression and uses error correction methodology. the results show that consumer confidence, stock returns and purchasing managers' index are responsible for large fluctuations in gdp and can predict it. an empirical analysis of the effect of the consumer confidence index on gdp was also conducted for japan (utaka, 2003). the paper uses a vector autoregression, which includes variables representing consumer confidence. it is shown that consumer confidence has a significant impact on the dynamics of gdp in quarterly and monthly data, while in semiannual data it has no effect. the conclusion is that consumer confidence affects only short-term economic fluctuations. the usefulness of the short-term business surveillance indicators maintained by the european commission for forecasting gdp growth rates in belgium, spain, germany, france, italy and the netherlands has been investigated (mourougane & roma, 2003). a linear relationship between real gdp and confidence indicators is estimated. the case study also showed that confidence indicators can be useful for predicting the rate of economic growth of real gdp in the short run in most of the observed countries. in 2021, predictive value was demonstrated for gdp dynamics based on consumer and business perceptions, and a correlation was found based on economic shocks caused by the covid-19 pandemic (kitrar, 2021). the same study also points out that consumer and business assessments are reliable and available long before quantitative gdp growth statistics and can be used as an early warning system of economic growth dynamics and taken into account in policy making. the theory has been further developed in a study of other "balance of opinion" indicators that can serve as an early warning of a crisis (kitrar & lipkind, 2021). for canada, a model has been developed for forecasting real gdp growth for the current quarter, using zero to three months of indicators for that quarter (zheng & rossiter 2006). the equation relates canada's quarterly gdp growth to monthly data on baltic journal of economic studies 9 vol. 8 no. 3, 2022 retail sales, housing starts and consumer confidence. the authors' model predicts gdp growth in the first month of the quarter and its accuracy usually increases with the release of additional monthly data. another study based on data on the u.s. economy shows that a linear regression model can overcome some limitations and provide an effective coefficient to explain the variation between the consumer confidence index and the business climate index with real gdp growth (michis, 2011). the predictive power of confidence indicators and their ability to predict discrete events, namely economic recessions, is examined for four european economies (taylor & mcnabb, 2007). the results show that both consumer and business confidence indicators are pro-cyclical and generally play a significant role in predicting recessions. a study of the relationship between the consumer confidence indicator, the overall business climate indicator, and real gdp growth by quarter was also conducted for bulgaria by analyzing data for the period 2019–2021 (borisov, 2021). the study separately proves a statistically significant causal relationship between the overall index of business climate and the consumer confidence index with real annual gdp growth by quarter. the individual functional relationships are derived using a linear regression model. other relationships between qualitative valuations and gdp in terms of the influence of external and internal factors on value creation are also the subject of analysis. 3. methodology in order to analyze a causal relationship between the indicator of consumer confidence and real gdp growth, the official, publicly available statistical data published by eurostat for the euro area are used. in particular, seasonally adjusted monthly data on consumer confidence indicator and seasonally adjusted annual quarterly data on real gdp growth are used. the period from q2 2019 to q1 2022 is analyzed based on available statistical information and taking into account the fact that this period covers the beginning of the covid-19 pandemic, the economic recovery after it and the inflationary processes that followed it. the analyzed period also includes the pre-crisis period and the introduction of restrictive measures against business. the statistical information used corresponds to the methodology of the european commission (ec, 2022). the analysis compares reported quantitative data on real gdp growth with an indicator of consumer confidence. it is obtained as the average value of the balance of consumer expectations about developments over the next 12 months. the survey includes expectations about the financial situation of households, the general economic situation in the country, households' savings, etc. the consumer confidence indicator collects information about the direction of change in variables and consumer confidence regarding basic economic processes. thus, the study will actually analyze the relationship between a purely quantitative indicator and an indicator that is calculated on the basis of qualitative assessments. as for the analysis of correlations between the indicator of consumer confidence, which is published monthly, and real gdp growth, the correlation is tested with data for each of the months falling in the quarter for which gdp growth is calculated. tests to examine correlations with months at the beginning and end of the gdp reporting period also provide information on the predictive power of the consumer confidence indicator. the correlation is examined with the help of pearson coefficient. after identifying the strongest correlations between the indicator of consumer confidence and real gdp growth, a regression analysis is carried out to prove causal relationships and find functional dependencies. in addition, the study rejects the so-called null hypothesis that there is no causal relationship between the indicator of consumer confidence and real gdp growth by quarters. the statistical significance of the causal relationships between the indicators for the analyzed period is investigated. in addition to the results of the dynamic analysis, correlation analysis and regression analysis, the data on the causal relationship between the indicator of consumer confidence and real annual gdp growth are also investigated using granger causality test. this approach seeks, on the one hand, to confirm the results and, on the other hand, to determine whether the consumer confidence indicator is useful for predicting real annual growth by quarter or vice versa. in addition to proving causality, this approach also searches for the predictive power of the consumer confidence indicator. 4. results and discussion 4.1 correlation relationships to analyze the relationship between the consumer confidence indicator and real annual economic growth for the period q2 2019 – q1 2022, correlation coefficients are tested starting from the month that coincides with the data release for both indicators. a 1-month and 2-month time series lag was then created for the consumer confidence index, as shown in table 1. this was done in order to find the highest correlation coefficient and hence the lag for regression analysis of the functional relationship between the two indices. the results show that there is a strong correlation between the indicator of consumer confidence and real baltic journal of economic studies 10 vol. 8 no. 3, 2022 annual gdp growth in seasonally adjusted quarterly data. the strongest correlation is observed with the data on consumer confidence indicator for the month that coincides with the second month of the quarter for which gdp is reported, which means a lag of minus 1 month. the correlation in this interval is strong, and the pearson coefficient, respectively, has a value of 0.779. with this in mind, the study will use data from the consumer confidence indicator for the second month of the quarter in which gdp is reported. the high linear correlation between the indicator of consumer confidence and real annual growth by quarter in the euro area is confirmed by a dynamic analysis of the indicators. the seasonally adjusted data of consumer confidence indicator and real annualized gdp growth by quarters remained relatively constant until the beginning of covid-19, until the direct effects of the introduced administrative restrictive measures on business became apparent. both indicators began to decline in the first quarter of 2020, and the second quarter of 2020 saw the lowest value in the period under review. the consumer confidence indicator and real annual growth declined by more than 10 points each during the quarter. the highest values over the period under review are observed for both indicators in the second quarter of 2021. high levels of inflation are not yet present at that time. after the second quarter of 2021, inflation begins to accelerate, which has a negative impact on both consumer confidence and real gdp growth by the end of the period under review. although these two indicators have different characteristics and one is based on quantitative results and the other on qualitative evaluations of consumers, they have similar dynamics. the results of the correlation analysis indicate a strong correlation between the indicator of consumer confidence and real annual gdp growth by quarters according to seasonally adjusted data. despite the fact that the components of the consumer confidence indicator are based on unmeasured statistical signs, there is a strong linear correlation at the level of 0.779 for the pearson coefficient. all of this requires a causal relationship study using a detailed regression model to analyze the causal relationship between the consumer confidence indicator and gdp. the analysis will also answer the question of whether consumer confidence can serve as an early warning indicator of the direction of real growth by quarter. this also requires rejecting the hypothesis that there is no causal relationship between the consumer confidence indicator and real growth. table 1 coefficient of linear correlation (pearson) real gdp growth (y/y), (month – t1) linear correlation coefficient consumer confidence indicator (month – t) 0.713 consumer confidence indicator (month – t-1) 0.779 consumer confidence indicator (month – t-2) 0.476 source: eurostat, own calculation 1 "t" is the last month of the reference quarter for real gdp growth -25,0 -20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 15,0 20,0 q2 2019 q3 2019 q4 2019 q1 2020 q2 2020 q3 2020 q4 2020 q1 2021 q2 2021 q3 2021 q4 2021 q1 2022 real gdp growth (y/y) consumer confidence indicator (t-1) figure 1. consumer confidence indicator (t-1) and real gdp growth by quarter (y/y) source: eurostat, own calculation baltic journal of economic studies 11 vol. 8 no. 3, 2022 4.2 regression analysis the regression function was used for regression analysis, and the corresponding indicators were interpreted accordingly. the result of the study between the indicator of consumer confidence as a factor (x-variable) and real annual gdp growth by quarters as a dependent variable according to the methodology is presented in table 2. – according to the results of the regression analysis, the pearson correlation coefficient (multiple r) is 0.779, indicating a strong correlation between the indicator of consumer confidence as a factor (x variable) and real annual gdp growth by quarter as the dependent variable. – 60.6% of the variance of real annual gdp growth by quarter can be explained by the variance of the consumer confidence indicator. the result is due to the fact that r2 (r square) is 0.606. – adjusted r2 (r square) is 0.567. – the standard error is 4.61. this means that for the variable-factor relationship in the model, the observed values deviate on average by 4.61 units from the regression line for the 12 observations made. – the significance f = 0.00284 < 0.05, indicating that the functional relationship is statistically significant for the chosen significance level of 0.05. the value of the indicator is extremely low and this means that the regression model is statistically significant. – the coefficients of the regression equation indicate that the relationship between real annual gdp growth by quarter and consumer confidence indicator has the following form: yt =11.352+1.096*xt-1, in which: y real annual gdp growth by quarter (seasonally adjusted data); x is the consumer confidence indicator (seasonally adjusted data); t is the last month of the reference quarter for real gdp growth. – according to the regression model, the intercept in the function is (11.352) and the corresponding value of the student's t-criterion is (t=3.699) and since p-value=0.0041<0.05, it follows that the intercept is statistically significant. – the coefficient in front of the factor (х) has a value of 1.1096. it is statistically significant at 0.05 level of significance (t= 3.926; p-value = 0.0028 <0.05). the combined results of the regression analysis show that there is a statistically significant causal relationship between the indicator of consumer confidence and real annual growth by quarter. this relationship can be expressed by a linear equation using consumer confidence indicator data for the month falling in the middle of the base quarter of gdp. the model also shows that 60.6% of the variance of real annual gdp growth by quarters can be explained by the variance of the consumer confidence index. the regression model also shows that the coefficients in the linear equation are statistically significant. 4.3 granger causality test specific results of the granger causality test in examining the causality and usefulness of the consumer confidence indicator for predicting real annual gdp growth are presented in table 3. the granger causality test was carried out and it was found out that the null hypothesis that the consumer confidence indicator does not cause the table 2 regression function results from the data analysis package summary output regression statistics multiple r 0.779 r square 0.606 adjusted r square 0.567 standard error 4.613 observations 12 anova df ss ms f significance f regression 1 327.965 327.965 15.411 0.0028 residual 10 212.815 21.282 total 11 540.78 coefficients standard error tstat p-value lower 95% upper 95% lower 95% upper 95% intercept 11.352 3.068 3.7 0.004 4.515 18.189 4.515 18.189 x variable 1 1.096 0.279 3.926 0.003 0.474 1.718 0.474 1.718 source: eurostat, own calculation baltic journal of economic studies 12 vol. 8 no. 3, 2022 growth of real annual gdp by quarters is rejected. this means that the consumer confidence indicator can serve to predict the dynamics of real annual gdp growth and there is a causal relationship. these conclusions are also true when using consumer confidence indicator data with a lag of 1 and 2 months. the results are better if one uses the consumer confidence indicator for the month falling in the middle of the gdp reference quarter (t-1). the results of the dynamic analysis, correlation analysis and regression analysis and the proven causal relationship between the consumer confidence indicator and real annual gdp growth by quarters are confirmed by granger causality test. specifically, the test proves that the consumer confidence indicator is useful in predicting real annual gdp growth by quarter and there is a causal relationship. moreover, greater predictive power and correlation are present when using data from the consumer confidence indicator for the month that falls in the middle of the gdp reference quarter. this, in turn, confirms the results of the correlation analysis. 5. conclusions the study provides a brief overview of the periods of economic crises over the past 15 years, as well as the general economic situation resulting from the covid-19 pandemic and subsequent inflationary problems in the euro area. in crises of this kind, the need for indicators serving as an early warning for appropriate economic policies and measures is presented. for the period in question, from q2 2019 to q1 2021, for which publicly available data on the consumer confidence indicator and real annual gdp growth by quarter (seasonally adjusted data) are available, there is a strong correlation between the indicators. this is also the period that covers the crisis caused by the covid-19 pandemic, the recovery period, and the time when serious problems arise due to the acceleration of inflation that has emerged in the euro area. the dynamic and correlation analysis show the relationship between these two indicators, despite their fluctuations, which are due to the crisis, the consequences caused by disruptions in the supply to the economy, the forced administrative contraction of some enterprises and inflation. in-depth regression analysis shows that there is a statistically significant linear relationship between the indicator of consumer confidence and real annual gdp growth by quarter over the period under study. the correlation between the indicators is also the strongest when using the data of the consumer confidence indicator for the month, which falls in the middle of the reporting quarter of gdp. the regression analysis also shows that most of the variance of real gdp growth by quarter can be explained by the variance of the consumer confidence indicator used in the model. on the basis of statistically significant linear regression model the functional dependence of real annual gdp growth by quarters is derived. the results of the granger causality test confirm the conclusions drawn from the dynamic, correlation, and regression analyses. the results of the test prove not only the presence of causality, but also the ability of the consumer confidence indicator to predict real annual growth by quarter during periods of crisis. all this allows to conclude that in periods of import crises the consumer confidence indicator can also be used as an early warning signal of crises. the consumer confidence indicator, based on a proven statistically significant model, can also serve as an indicator for predicting the dynamics of economic growth during crises. thus, signals from consumer surveillance in the eurozone can also be used to take appropriate action by governments as well as by the european central bank. table 3 granger causality test f-statistic prob. consumer confidence indicator (month – t-1) does not granger cause real gdp growth (y/y), (month – t) 10.599 0.014 real gdp growth (y/y), (month – t) does not granger cause consumer confidence indicator (month – t-1) 0.254 0.630 consumer confidence indicator (month – t-2) does not granger cause real gdp growth (y/y), (month – t) 5.942 0.045 real gdp growth (y/y), (month – t) does not granger cause consumer confidence indicator (month – t-2) 0.389 0.552 source: eurostat, own calculation references: afshar, t., arabian, g., & zomorrodian, r . 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(2021). the relationship of economic sentiment and gdp growth in russia in light of the covid-19 crisis. entrepreneurial business and economics review, 9(1), 7–29. kitrar, l., & lipkind, t. (2021). development of composite indicators of cyclical response in business surveys considering the specifics of the ‘covid-19 economy’. higher school of economics research paper no. wp brp, 121. mihaylova-borisova, g. (2016). risks of falling of the euro zone and some eu countries in a deflationary spiral. ikonomiceski i sotsialni alternativi, 3, 49–60. michis, a. a. (2011). denoised least squares forecasting of gdp changes using indexes of consumer and business sentiment. basel: bank for international settlements, 383–392. mourougane, a., & roma, m. (2003). can confidence indicators be useful to predict short term real gdp growth? applied economics letters, 10(8), 519–522. gruber, g. (2021). the impact of external and internal drivers on value creation. forum scientiae oeconomia, 9(2), 23–45. sorić, p. (2018). consumer confidence as a gdp determinant in new eu member states: a view from a timevarying perspective. empirica, 45(2), 261–282. taylor, k., & mcnabb, r . (2007). business cycles and the role of confidence: evidence for europe. oxford bulletin of economics and statistics, 69(2), 185–208. utaka, a. (2003). confidence and the real economy-the japanese case. applied economics, 35(3), 337–342. zheng, i. y., & rossiter, j. (2006). using monthly indicators to predict quarterly gdp. bank of canada working paper, n 2006–26. received on: 27th of july, 2022 accepted on: 8th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 107 vol. 2, no. 3, 2016 corresponding author: 1 department of management and marketing, vasyl stefanyk precarpathian national university. e-mail: romaniuk.md@gmail.com 2 department of management, economics and law, kirovograd flight academy of the national aviation university. e-mail: zinulechka@ukr.net migratory threats to national security of ukraine: current challenges and ways of regulation mychailo romaniuk1 vasyl stefanyk precarpathian national university, ukraine zinaida smutchak2 kirovograd flight academy of the national aviation university, ukraine abstract. the purpose of the article is to disclose the migratory threats which are connected with external and mass internal inter-regional migrations, which are caused by the annexation of the crimea and military aggression in donbas by russia. methodological and practical aspects of improving the management of intensive interstate and inter-regional migratory processes, negative consequences of which threaten national security of the country because of hybrid war in donbas, illegal migration, worsening of the demographic situation, departure of scientists and specialists abroad are described in the article too. the main strategic objective, which consists of maintenance of state sovereignty, territorial integrity of ukraine, and also integration in european and migratory space, ensuring close to the world standards of quality and length of life, realization of rights and freedoms of citizens, is formulated. actions and tasks of the state migratory policy, ways and methods of regulation of external migrations of the population are considered. principal reasons of external migrations of population are identified and analysed. the inwardly-regional, interregional and intergovernmental migrations of population of ukraine in the years of its state independence (19912014) are analyzed in details. the results of analysis showed that migratory activity goes down on inwardly-regional and interregional levels. also intensity of exchange of population went down between the regions of country. at the same time ukraine for years state independence through depopulation processes lost 6,5 million persons, and in the external migratory moving of population of loss made over 1 million persons. the problem of illegal external labour migration is considered. it is noted that illegal migration from ukraine to the threats to national security in the law of ukraine "on the national security of ukraine" is not included, and a threat to national security posed by illegal migration from ukraine state authorities and management of both central and local underestimated. attention is accented on that adjusting of migratory processes at the macrolevel must become to the ponderable component of socio-economic policy of the state, and the measures of migratory policy consist of that to obtain organization of migratory space of country and take under effective state control those migratory processes that take place in it. proposals concerning perspective and effective actions of the state migratory policy of ukraine in regulating migratory movement of the population from the positions of national priorities and regional peculiarities, and also personal needs of migrants and prevention of migratory threats to national security of ukraine are formulated. it is determined that the decisive role in the regulation of labour migration processes, as a whole in ukraine and its regions, belonging to the management of social-economic factors, such as living conditions and employment of people who can change as a result of redistribution of the state budget, wage-fund, public forms of consumption. key words: external migrations, internal migrations, interregional migrations, forced mass internal migratory resettlements, interstate migrations, foreign labour migrations, migratory threats to national security, migratory challenges, state migration policy. jel classification: j61, j60, j10, j69, f22, f52, j68 1. introduction now the migration processes in ukraine differently exert its influence in its demographic development, participation in the international division of labour entering the european and world markets, social and national security. this fact is of particular relevance since ukraine in june 2014 signed the association agreement with the eu. today the main strategic objective is to maintain state sovereignty and territorial integrity of ukraine and integration into the european economic space and baltic journal of economic studies 108 vol. 2, no. 3, 2016 migration, ensuring closer to international standards of quality and length of life, the rights and freedoms of citizens. analysis and consideration of current migration trends in our country in the context of ukraine's participation in european and global migration space is regarded as one of the important factors in the formation of their own national policies. this problem directly and indirectly is in the plane of national security of ukraine. today there is especially distinguished appearance in problem regions of ukraine a considerable number of displaced persons due to the annexation of the crimea by the russian federation, foreign military aggression of donbas and military conflicts that are continuing in the donetsk and luhansk regions. it should be noted that because of these reasons, the most urgent problem for ukraine was the rapid growth of internal (resettlement) migration and emigration. from april 2014 – the beginning of hostilities in donbas, from donetsk and luhansk regions moved according to the oun more than 2 million people, among them 1 mln. 750 thousand people moved to other regions of ukraine, and over 300 thousand people emigrated to russia. almost 25 thousand people came to ukraine from the annexed crimea. most internally displaced persons from donbas is located in the donetsk region  – 660 thousands, luhansk  – 249  thousand, kharkiv  – 2010  thousand, kyiv  – 123  thousand, zaporizhzhia  – 116 thousand, dnipropetrovsk – 76 thousand, kyiv – 48 thousand, odesa – 36 thousand people (state statistics service of ukraine). these data are close to the real as it is impossible to count exactly the terms of military operations and realization of anti-terror operation. the main reason that encouraged high intensity of migration of population in ukraine is annexation of crimea, the donbas hostilities, terrorism and attacks on the territorial integrity and sovereignty. based on their geographical location and level of features and socio-economic development and the development of the labour market and wages in the country, ukraine is an active participant in international economic processes and one of the largest countries  – donors of workforce in europe. in terms of social-economic crisis, the role of labour migration as a source of reducing tension in local labour markets significantly increases. the rapid intensification of international mobility of ukraine, which is the process of globalization and increase in the intensity of international migration, actualizes the problem – the regulation of migration processes, providing for them an organized, safe and non-conflict nature. the purpose of the article consists in research of modern challenges and threats that entailed the mass interregional and intergovernmental migratory transferring of population to the separate regions of ukraine, general methodological going near the study of threats of modern migratory processes to national safety of country in theoretical and practical aspects and realization of measures of public migratory policy in relation to their warning and solution. 2. model and results in the conception of public migratory policy of ukraine it is marked, that it is sent to providing of effective state administration, conditioning migratory processes for steady demographic and socio-economic development of the state, increase of national strength security by prevention of origin of out-of-control migratory processes and liquidation of their consequences, concordance of national legislation in the field of migration with international standards, strengthening of social and legal defence of citizens of ukraine, that live or work abroad, inhibition of principle of defence interest of ukraine, and also that now threat national safety of ukraine: illegal migration; intensifying of demographic crisis; departure out of ukraine of scientists, specialists, skilled labour force (the decree of the president of ukraine № 622, 2011). acceptance of important laws and innovations of public migratory policy grounds to assert that basic incentive reason of such actions was conditioned by an external factor and, in particular, reformation of migratory sphere is notedly activated since on a summit ukraine  – eu in november in 2010 to ukraine was given the plan of operating under liberalization of visa regime (visa-free dialogue between ukraine and the eu. action plan on liberalization of visa regime). for years of state independence in the period of economy reformation and transformation of all social-economic system, and also in connection with democratization of public life, economic crisis and falling of standards of life of swingeing majority of population of country character, volumes, composition and orientation of internal and external migratory streams, tested substantial changes and purchased a new value. these changes are that there is reduced to a minimum a volume of daily flows of labour circular migration virtually ceased massive outflow of rural residents to cities, but instead there is a partial reorientation of migration flows of population from urban areas to rural areas, tenfold increased volumes of seasonal labour migration and external labour trips abroad. complex and often interrelated problems of external migration of the population of ukraine as a whole and its regions in particular. during the years of state independence, there are three main periods of international migration movements of population: 1991-1993 years; 1994-2004 years; 2005-2014 years. before and during the collapse of the ussr (1989-1991 years), and in the early years of statehood of ukraine (1991-1993) to the ukraine from russia, kazakhstan, uzbekistan and other countries of uis came 2,4 million persons, some of which were as immigrants because of the job, and representatives and descendants of deported peoples, and persons who were persecuted, dispossessed, and political prisoners. deep and permanent public changes in the walk of life of former soviet union were accompanied by expansion of processes of population moving through international baltic journal of economic studies 109 vol. 2, no. 3, 2016 borders often forcedly as a result of violence and threats. these migratory moving overcame 9 million persons and after these volumes in europe it were the most shell migratory processes from the times of the world war ii. at the same time over 2 million forced migrants from donbas in 2014-2015 are most migratory migrants in europe at the beginning xxi of century. as it is known to principal reasons of external migrations of population belong: 1) armed conflicts; 2) pursuits on an ethnic sign; 3) violations of human rights; 4) economic difficulties; 5) ecocatastrophes; 6) insolvency of governments to put right the deserving standard of living. only officially by the state on beginning in 2013 in countriesrecipients, where was most of ukrainian labour migrants (over 1 million ukrainians) there are, in particular, 208,8 thousands in italy, 159,3 thousands in germany; in russia – 126,4  thousands; in czech republic  – 116,4  thousands; in israel  – 97,6 thousands, in spain  – 77,2  thousands, in the usa  – 59,9  thousands, in greece  – 50,1 thousands, in portugal  – 48,0 thousands, in canada  – 43,0 thousand citizens of ukraine, that live on territory of these countries officially (vidyakina, stakanov, 2011). according to the data of the international organization of labour in 2012 the amount of ukrainian labour migrants was almost 6 million persons; among them about 50% are young people under age 35. there is not long-term strategy of development of rural territories in ukraine; accordingly, as a result, we look after the problems of migration in the country. as many villages fall into a decay, and even just disappear, a working seating capacity diminishes, and a salary remains extraordinarily subzero, people do not see possibility and prospect in a village. such negative prospect makes the rural population to migrate to the cities or abroad in search of work. it should be noted that during 1995-2010 from the region of carpathians (lviv, ivano-frankivsk, zakarpattia and chernivtsi) annually duration of people worked abroad from six months to one year is about 300-500 thousand persons, the majority of them were from rural locality. by the state on the end of 2013 one third of population of ukraine lived in the rural settlements of ukraine (31,4% from the general amount of population). from 1993 the quantity of rural population annually grew short on 132  thousand and reductions of this index of persons is taking place making progress rates including through emigration. for 2010-2012 the quantity of rural population diminished almost on 100 thousand persons. table 1 migrations of population of ukraine in the years of state independence (1991-2014), persons years volumes of gross migration inwardly-regional interregional intergovernmental general volume including migratory balance arrived left 1991 1188374 740622 800817 490597 310220 180377 1992 1055036 667095 814356 538205 276151 262054 1993 1021114 670670 634851 341192 293659 47833 1994 893210 607611 515717 187392 328325 -140933 1995 839188 607260 422976 166551 256425 -89874 1996 858126 615536 376262 129538 246724 -117186 1997 846094 583678 299244 108559 190685 -82126 1998 894582 585083 221096 71810 149286 -77476 1999 875348 528576 176383 65794 110589 -44795 2000 461880 274861 154000 53700 100300 -46600 2002 450084 267448 118737 42473 76264 -33791 2003 443231 279313 103188 39489 63699 -24210 2004 445663 295149 84749 38567 46182 -7615 2005 439269 284373 74977 39980 34997 4583 2006 440898 280757 74209 44227 29982 14245 2007 435844 275941 76176 46507 29669 16838 2008 407507 265960 59725 37323 22402 14921 2009 367104 242798 52387 32917 19470 13447 2010 394954 257685 45487 30810 14677 16133 2011 379542 258171 46272 31684 14588 17096 2012 377590 272275 90878 76361 14517 61844 2013 360119 261723 76287 54100 22187 31913 2014 273752 211106 64297 42698 21599 21099 in all 14148509 9333691 5383071 2710474 2672597 37777 source: it is expected from data of the state statistics service of ukraine baltic journal of economic studies 110 vol. 2, no. 3, 2016 annually about 50 thousand peasants drive out abroad, 80,5% among them are young people and women. in 2012 ukraine was the fifth, after turkey, morocco, albania and china, by a quantity of the group citizens of the third countries that lived on territory of the eu. rating of ukraine by part of emigrants was the first in poland and czech republic, second place  – in russian federation, slovakia and hungary, third place  – in estonia, fourth place  – in greece and italy. in ten countries the quantity of ukrainian labour migrants exceeded 100 thousand persons (state statistics service of ukraine). actuality of the problems related to the mass intergovernmental migratory processes, most increases on a background of general demographic crisis that overcame ukraine, beginning from 1991, and that entailed the crisis of migration largely, that in modern terms shows up in reduction in intensity of migrations in the middle of areas, considerably megascopic after a military conflict in donbas at the interregional level and by the intensive streams of foreign labour migrants. the detailed analysis of inwardly-regional, interregional and intergovernmental migrations of population of ukraine in the years of its state independence (1991-2014) is shown in a table 1. migratory activity goes down at inwardly-regional and interregional levels. yes, if in 1991 within the limits of areas of country 594,2 thousand persons changed a residence, then in 2000 – 461,9 thousands, in 2007 – 435,8 thousand persons, in 2014  – only 273,7 thousand persons (by 59% less). also intensity of exchange of population went down between the regions of country: on a permanent residence to other regions in 1991 there are 354,8 thousand persons left, and 385,8 thousand persons arrived, in 2000 these indexes presented 274,9 thousand persons in relation to arrive and drop-out, in 2007 is 276,0 thousand persons, and in 2014 year it is 211,1 thousand persons (by 38% less). in a period from 1994 to 2004 years negative balance of external migration, that was almost 100 thousand persons annually, took place in ukraine, and beginning from the year positive migratory balance that for period 20052014 presented 212,8 thousand persons takes place in external migrations of population of ukraine. at the same time ukraine for years of state independence through depopulation processes lost 6,5 million persons, and in the external migratory moving of population the loss was over 1 million persons. among 2,7 million persons a drop-out from ukraine in the period of 1992-2012 years on a permanent residence to other countries of person with higher education laid down to 23,5%. according to researches of international organization from migration and the age-related structure of the ukrainian emigrants after five age-related groups have such kind: migrants in age 15-19  – 3%; 20-24  – 15%; 25-34  – 34%; 35-44  – 31%; 45 and older  – 17%. most of migrants from ukraine are persons with the complete secondary and middle special education (48%), so they are graduating students of high general schools, gymnasiums, lyceums, schools and colleges, people with base higher education (24%) are graduating students of higher educational establishments with an educationally-qualifying level "bachelor", and also persons with complete higher education (18%) are graduating students of higher educational establishments with an educationally-qualifying level "specialist" and master's degree (datsko, 2014). as for illegal foreign labour migration from ukraine it is much higher. foreign employers are advantageous to deal with illegal migrant workers, for persons who arrived in the country to earnings on illegal grounds there is a legal and social protection. moreover they are forced to accept any job  – seasonal, difficult and dangerous, the rates set by them is much lower than citizens of the country. foreign migrant workers from ukraine in many countries are forced to work extended working hours and for hazardous working conditions, have limited or no access to health care and social security, protected against low wages, occupational injuries, diseases. this problem requires urgent solution. ukraine, as it provided by the part three of the article 25 of the constitution of ukraine, guarantees care and protection to its citizens who are abroad. a similar provision is contained in the article 8 of the law of ukraine "on citizenship of ukraine". it aims to provide the legal implementation of this constitutional provision. the law of ukraine "on the national security of ukraine" to the main real and potential threats to national security of ukraine ascribed: illegal migration (in the defense sector and security of the state border of ukraine) and the outflow of scholars, professionals, skilled labour from ukraine (in social and humanitarian areas). illegal migration from ukraine is not included to threats to national security and a threat to national security from illegal labour migration from ukraine by state authorities and management of both central and local is underestimated. and that is why adjusting of migratory processes at the macrolevel must become the ponderable constituent of social-economic policy of the state. task in relation to a management migration, especially its external forms, consists not in that how to erect barriers through the system of administratively-restrictive measures that does not give possibility to get migrants to the developed countries, but how on the basis of observance of human rights and humane principles to manage the migratory streams of population, in particular, permanent and labour migrants taking into account interests of the state, host countries and regions (malinovska, 2011). 3. findings the measures of migratory politics consist in that, how to obtain arrangement of migratory space of country and take those migratory processes taking place under effective state control. among basic, these tasks and measures in modern terms are the following: baltic journal of economic studies 111 vol. 2, no. 3, 2016 1) resettlement and employment of forced migrants from the areas of donbas and crimea; 2) to activate a voice process in relation to entering into contracts about mutual employment of citizens and their social defence with countries where the amount of labour migrants – citizens of ukraine – is the biggest; 3) to assist the acceleration of making alteration to the agreements about a collaboration in the field of labour migration and social defence of labour migrants; 4) to realize measures in relation to the acceptance of projects of agreements that regulate motion of labour force with the countries of the eu; 5) to prepare the complex government program of adjusting of migratory processes with clear distribution of plenary powers and duties of central executive and local self-government bodies; 6) to take measures for reduction in scales of illegal labour migration of population outside the country; to conduct work in relation to the input of the analytical accounting with the aim of realization of control after a return to ukraine of citizens, tourist services appeared; 7) to create the effective mechanisms of legalization of profits of citizens, that work abroad: to work out the mechanism of creation of favourable terms for translation to ukraine of standard of labour migrants – citizens of ukraine; 8) to study the system of taxation of labour migrants of other countries and ration tax of profits of labour migrants treatment – citizens of ukraine; 9) to carry out practical measures on the settlement of educational migration (presently over 60 thousand ukrainian students are studying abroad and so much foreigners are studying in ukraine) on three levels: state, regional and even institutions of higher education both with countries-donors and with countries-competitors in the market of educational services. 10) to develop the mechanisms of counteraction of the negative migratory tendencies of creative and, especially, persons-innovators that can have destructive influence on social-economic development of separate territories and state as a whole (romanjuk, 1999). 4. conclusions today the special actuality have distinguished problems regarding the implementation of measures for the construction and employment of forced migrants from the annexed crimea, donetsk and luhansk regions covered by hybrid war, support of ukrainians living in the cis countries, baltic states and abroad, regulating the status of the crimeantatar people, cooperation with international organizations in countering and combating illegal immigration, border management, bringing ukrainian migration legislation in line with international norms and principles of migration, settlement of intense flows of labour migration, social and legal defence of ukrainian citizens working abroad and prevent the outflow of intellectual capacity. the decisive role in the regulation of labour migration processes as a whole in ukraine and its regions belongs to the management of social-economic factors, such as living conditions and employment of people who can change as a result of redistribution of the state budget wage-fund, public forms of consumption. under current conditions, migration policy should very carefully monitor migration processes and their current trends and events, respond quickly to change and control them to subordinate national and regional interests and personal interests of migrants and generally promote national security of ukraine. references datsko, o. (2014). influence of international migration and strengthening of threat to economic security of the country. problems of external migration of ukraine and other post-soviet states: materials of round table – lviv, spolom, p. 25-29. kovalyk, i. (2011). principles and consequences of international labor force migration for ukraine, strategy of development of ukraine, issue 2, p. 278. malinovska, o. (2011). labour migration: social consequences and ways of reaction – kyiv, niss, 40 p. malinovska, o. (2002). management of migration: some conclusions from the european experience. science issues uapa, issue 2, p. 446–453. on the concept of state migration policy (2011). the decree of the president of ukraine № 622/2011. retrieved from: http: // zakon2.rada.gov.ua/laws/show/622/2011 organisation of migration. retrieved from: http://iom.org.ua/ua/ prybytkova, i. (2011). security of documents and migration policy: conclusions and recommendations of the international working groups for ukraine – kyiv, europe without barriers, p. 9-30. romanjuk, m. (1999). migration of the population of ukraine: national priorities and regional differentiation regulation of the mechanism of regulation. economy of ukraine, issue 9, p. 38-44. romanjuk, m. (2009). migration determinants of national security of ukraine: theoretical and methodological, and practical aspects. demography and social economy, issue 1 (11), p. 50-60. state statistics service of ukraine. retrieved from: www.ukrstat.gov.ua vidyakina, m., stakanov, g. (2011). labour migration from ukraine to the eu macroeconomic dimension – kyiv, ssc, 196 p. visa-free dialogue between ukraine and the eu. action plan on liberalization of visa regime. retrieved from: http://www.kmu.gov.ua/document/244813925/....20для%20укра_ни.pdf. baltic journal of economic studies 112 vol. 2, no. 3, 2016 михайло романюк, зинаида смутчак миграционные угрозы национальной безопасности украины: современные вызовы, пути урегулирования аннотация. целью работы является исследование миграционных угроз, связанных с внешними и массовыми внутренними межрегиональными миграциями, вызванными аннексией крыма и военной агрессией россии на донбассе. также раскрыты методологические и практические аспекты усовершенствования управления интенсивными межгосударственными и межрегиональными миграционными процессами, негативные последствия которых несут в себе угрозы национальной безопасности страны из-за гибридной войны на донбассе, нелегальной миграции, обострения демографической ситуации, отъезда за пределы страны ученых, специалистов. сформулировано основное стратегическое задание, которое состоит в сохранении государственного суверенитета, территориальной целостности украины, а также интеграции в европейское и миграционное пространство, обеспечении приближенных к мировым стандартам качества и продолжительности жизни, реализации прав и свобод граждан. рассмотрены мероприятия и задания государственной миграционной политики, пути и методы регулирования внешних миграций населения. определены и проанализированы основные причины внешних миграций населения. проведен детальный анализ внутрирегиональных, межрегиональных и межгосударственных миграций населения украины в годы ее государственной независимости (1991–2014 гг.). результаты анализа показали, что на внутрирегиональном и межрегиональном уровнях снижается миграционная активность. также снизилась интенсивность обмена населения между регионами страны. вместе с тем, украина за годы государственной независимости из-за депопуляционных процессов потеряла 6,5 млн. человек, а во внешних миграционных перемещениях населения потери составили свыше 1 млн. человек. рассмотрена проблема нелегальной внешней трудовой миграции. отмечено, что нелегальная миграция с украины к угрозам национальной безопасности в законе украины «об основах национальной безопасности украины» не включена, и угрозу национальной безопасности со стороны нелегальной трудовой миграции с украины органы государственной власти и управления как центральные, так и на местах недооценивают. акцентировано внимание на том, что регулирование миграционных процессов на макроуровне должно стать весомой составляющей социальноэкономической политики государства, а мероприятия миграционной политики состоят в том, чтобы добиться упорядочения миграционного пространства страны и взять под контроль те миграционные процессы, которые в нем происходят. сформулированы предложения, которые касаются перспективных и действенных мероприятий государственной миграционной политики украины по упорядочению миграционного пространства, регулированию миграционного движения населения с позиций национальных приоритетов и региональных особенностей, а также личных потребностей мигрантов и предупреждения миграционных угроз национальной безопасности украины. определено, что в регулировании трудовых миграционных процессов решающая роль принадлежит управлению социально-экономическими факторами, то есть такими условиями жизни и трудовой деятельности людей, которые могут изменяться в результате перераспределения бюджетних средств, фонда зароботной платы, общественных норм потребления. baltic journal of economic studies 55 vol. 2, no. 5, 2016 corresponding author: 1 department of economic theory and intellectual property, zhytomyr national аgroecological university. e-mail: prudnikov_juv@ukr.net functioning of the system of local agricultural markets: institutional aspects yurij prudnikov1 zhytomyr national аgroecological university, ukraine abstract. the purpose of this article is the generalization and systematisation of features of modern institutional support for functioning and development of a system of local agricultural markets. the methodology of research is formed on the basis of systematic approach to the studying socio-economic phenomena and processes that are taking place in a process of functioning and development of the system of local agricultural markets. research results – based on the system analysis there are substantiated features of functioning and development of the system of local agricultural markets from the point of view of its institutional support. the stated is done with the purpose of determination of practicability, goal orientation, volumes, purpose and tasks of government intervention into the process of functioning and development of the system of local agricultural markets. applying a general scheme of system analysis to the system of management of local agricultural markets and taking into account that the management system consists of two subsystems – management and controlled, in the context of this research there is made characteristics of the system in the form of answers to a specified list of questions. the essence of developed theoretical and methodological approach lies in the development of legitimate answers to four key questions peculiar and relevantly placed for each stage of research: 1) determination of elements of internal and external environments, which are included to the system of local agricultural markets; 2) characteristics of relations and connections among revealed system elements; 3) a process of functioning of the system of local agricultural markets as itself; 4) features of development of the system of local agricultural markets. developed measures of regulatory nature aimed at overcoming identified disadvantages and development of the system of local agricultural markets are directed to the satisfaction of needs of target consumers of agricultural production and increase of quality product homogeneity within the commercial batch; increase of efficiency of agricultural production sales by direct manufacturers, formation of logistic system; reduction in prices’ volatility; complex solution of a problem of development of infrastructural component of the system of markets, trading platform network expansion, prevention of misuse of market power, countermeasures for collusion of intermediate sellers and overcoming barriers that obstruct direct manufacturers to enter the markets of agricultural production, increase efficiency of a whole complex of the state regulations. practical importance of the research results consists in the fact that the formed theoretical and methodological foundations of system analysis of the functioning and development of the system of local agricultural markets from the point of view of its institutional support will make possible its efficient functioning and development. key words: local markets, system of local markets, agricultural production, institutional support, institutions. jel classification: в15, а11, о13 1. introduction agricultural production sales by entities are carried out within institutional limits of structures, which in economic sense are traditionally considered as markets. in the context а taking into account a territorial aspect it is referred to the local agricultural markets. a totality of local markets from the point of view of national economy management is considered as a system of interrelated elements, which coherent functioning ensures the result that exceeds the sum of results of functioning of single markets (belyaev, 2012; dubrovin, belov, 2011). such a system effect or, in other words, a manifestation of emergence is determined by many causes. local agricultural markets in a wide sense are poly production with a possible interchange for a consumer of one commodity item by another, which determines a correlated change in price (stupnikova, 2013). moreover, mono production local markets have flexible enough, practically conventional territorial boundaries, which fluctuations will be under the influence of transportation cost, information price, baltic journal of economic studies 56 vol. 2, no. 5, 2016 as well as due to certain non-economic factors. a dynamics of market area requires their studying only as an integral aggregate. and, finally, only in an aggregate the local agricultural markets can provide achievement of a certain level of food security of the whole country, determine conditions of renewal of agricultural production and identify a status of the country as a net exporter or net importer of agricultural production by a certain commodity item. all mentioned above testifies a relevance of using system methodology in the process of substantiation of institutional support and identification of objectives, tasks and tools of local agricultural markets’ regulation. 2. methodological essence of system analysis of local agricultural markets the purpose of functioning of local markets is the balance of agricultural production’s demand and supply, minimization of transactional costs and risks in the interaction of market agents as well as establishment of effective distribution of “rent” as the difference between product realization price for ultimate customer and expenses for this production by agricultural manufacturer. criteria of this goal’s achievement should be food security of the country and growth of profitability of agricultural production. at the same time, using systematic approach requires some specifications in formulations. system analysis envisages three aspects of the system research – substrate aspect, aspect of functioning and aspect of development. applying a general scheme of system analysis to the system of management of local agricultural markets and taking into account that the management system consists of two subsystems – management and controlled, in the context of this research there is made characteristics of the studied system in the form of answers to a specified list of questions. this list should be considered as a methodology of system analysis of sectoral local, regional or national markets in the context of determining the appropriateness, volumes, purpose, tasks and directions of government intervention in their functioning. 3. identification of elements included in the system of local agricultural markets the first question to be answered when studying the system of local agricultural markets is the determination of elements, which it includes. characteristics of the system from the point of view of substrate require a description of the system elements, relations between them and ties where these relations are manifesting. in the controlled subsystem these element are obviously agricultural production, which serves as a subject of an agreement, and turnover assets, which are necessary for tangible agreements. these assets can be grouped according to the sphere of application, namely, assets of trading platforms, assets of transport, logistics, informational infrastructures and infrastructure of quality control sphere. an important asset that has a non-material form but participates in the functioning of local markets and ensures decrease in transactional costs of market agreements is a social capital of these agreements’ parties. a question concerning the possibility of the state influence on social capital is controversial enough, depends on an interpretation of the category of social capital. if to suppose that there is no possibility to influence on social capital, it should be considered as an element of environment. nonmaterialized but important elements of the system of local agricultural markets are prices for various groups of production, and also prices for the use of turnover assets. there is no doubt that the system elements are active participants – entities that are under the managerial influence or are able to influence by themselves. we include to the controlled subsystem the following economic entities: agricultural manufacturers – business of various legal organizational forms; buyers of production who can belong to different categories: citizens – ultimate consumers of agricultural production; processing companies, which buy raw materials from direct manufacturers and intend to sell agricultural production as food after significant processing or some post-harvesting (sorting, washing, packing); intermediate sellers who contemplate to sell the production in more outlying regions without any processing or post-harvesting; intermediate sellers who want to sell the production after a keeping period in special storage areas without any changes in the production’s quality. as a result of combination of decisions of all buyers and sellers, such elements of the system of local agricultural markets are formed as demand and supply. besides the mentioned subjects, the system of local agricultural markets also includes infrastructural organizations possessing technical assets, which ensure agricultural production turnover: organizations that make the production quality check, transportation providers, enterprises that provide informational services, services for production storage, as well as central units of contracts’ execution, which possess trading platforms. when implementing contracts between actors in local agricultural markets, contracts –agreements in written or oral form – are executed. a contract should be also considered as an element of the system of local markets. the state also serves as an element of this system: as the owner of assets of public use (transport network, for example) and as an arbiter who control observance of rules. the state participates in the organization of agreement and ensures self-organization of the local markets’ system. the state can not only control baltic journal of economic studies 57 vol. 2, no. 5, 2016 observance of rules, but also set them, serving as an element of environment that will be explained below. buyers as well as sellers can act in local markets as individual independent entities or as a part of certain associations. the latter should be considered as elements of management subsystem t together with bodies of state, regional and local government. based on data of the official website of the ministry of agrarian policy and food of ukraine, institutions, which operate at the state level and should be included to the system of local agricultural markets, are determined. such institutions are: the ministry of agrarian policy and food of ukraine, in particular, the department of strategy and economic development – as the main element of management subsystem; state agriculture inspection of ukraine (a procedure of the inspection’s liquidation is started from december 2015 onwards), the agrarian fund of ukraine ssbi (starting from december 2015 a question about liquidation of the institution is bringing up) and the agrarian fund pjsc – in the part of public purchases and interventions made by them; the state veterinary and phytosanitary service of ukraine, as well as the state service of ukraine on food safety and consumer protection – in the part of control over the quality of agricultural production, which get to the market turnover. an important place in the formation of the system of local agricultural markets is also taken by the state service of ukraine for geodesy, cartography and cadastre in the part concerning the procedure of allocation of territories for building trading areas and other elements of infrastructure of the system of local markets. at the regional level, elements of the management subsystem of the local agricultural markets are general departments of agro-industrial development of regions, and also departments of agro-industrial development within district state administrations. as a result of analysis of regulations on structural subdivisions of the ministry of agrarian policy and food of ukraine, in the context of solving the issue of improving the organization of local agricultural markets by means of optimization of state influence on the system of these markets, it is determined that the main element of management subsystem of the system of local agricultural markets is the department of strategy and economic development. the elements, which can take up managerial influence, are other state institutions and immediate economic entities: sellers, buyers, intermediate sellers and infrastructural organizations – table 1 elements of internal and external environment of the system of local agricultural markets elements of internal environment elements of external environment materialized: agricultural production assets of sphere of circulation demand supply agreement non-materialized: services of assets of sphere of circulation prices for agricultural production prices for use of assets of circulation sphere social capital of parties of agreements elements of controlled subsystem – subjects, which take up managerial influence: sellers – producers buyers – ultimate consumers, buyers – processing companies buyers – intermediate sellers who resell after temporary storage infrastructural organization – transport, keepers, quality controller, informational elements of management subsystem – subjects, which exert managerial influence: ministry of agrarian policy and food of ukraine department of strategy and economic development state agriculture inspection of ukraine agrarian fund of ukraine ssbi agrarian fund pjsc state service of ukraine on food safety and consumer protection state veterinary and phytosanitary service of ukraine state service of ukraine for geodesy, cartography and cadastre general departments of agro-industrial development of regions departments of agro-industrial development within district state administrations sellers associations buyers associations laws of ukraine: “on basic foundations of state agrarian policy until 2020” “on state support of agriculture of ukraine” “on wholesale markets of agricultural production” other regulations: “single and comprehensive strategy and action plan for agriculture and rural development in ukraine for 2015-2020” general plans for territories’ development independent factors of market conjuncture: price performance of the world and national agricultural markets state of financial markets source: own research baltic journal of economic studies 58 vol. 2, no. 5, 2016 owners of technical assets in the sphere of circulation. it should be noted that the analysis of regulations allows considering the department of strategy and economic development as the most important element of the management subsystem in name only. real importance of each element can be determined only after the determination of ties and relations among them. within the first question there also should be defined conventional borders of the studied system, i.e. determined what has to be considered as external environment regarding this system. it follows that the environment formed by existent legal norms, proper acts of the state and regional levels approved by the state and regional programs of agrarian sector development, such as “single and comprehensive strategy and action plan for agriculture and rural development in ukraine for 2015-2020”, is considered as external in relation to the system of local agricultural markets (the only comprehensive strategy and action of plan for the development of agriculture and rural areas in ukraine for 2015-2020, 2015). in ukraine, there is a set of special laws, which purpose is the institutionalization of relations between the state and other subjects of the sector of agro-industrial production, in particular, in the field of operation of agricultural markets. one of these laws if the law “on state support of agriculture of ukraine” (about state support of agriculture of ukraine, 2004) and “on wholesale markets of agricultural production” (about wholesale markets of agricultural products: the law of ukraine, 2009). beside laws and regulations, external environment of the system of local agricultural markets is also determined by price performance of the world and national agricultural markets, state of financial markets and general plan for appropriate territories’ development. a structure of elements of internal and external environment of the system of local agricultural markets is shown in table 1. 4. characteristics of relations among elements of the system of local agricultural markets another question of research of the system of local agricultural markets concerns the characteristics of relations among revealed elements of the system. among the elements of the system the following relations exist: competition (among subjects-buyers and subjects-sellers), purchase and sale (among subjects on agricultural production or services of technical assets), distribution (among subjects concerning extent of remuneration), belonging (among subjects and other impersonal system elements – assets and production), correlation of volumes (between demand and supply during the price assessment), concordance and coordination (within associations), regulation and control (among state institutions and other subjects). the relations are realized in material form, in form of non-material services, which accompany the flow of material substance, in the form of flow of funds and information, as well as form of compulsion, which can be implemented only by governmental authorities. at this stage of analysis it is necessary to determine whether the department of strategy and economic development has relations (in any of the mentioned forms) with the system elements that take up managerial influence. as it follows from the regulation on department (regulation on department of strategy and economic development of ministry of agrarian policy and food of ukraine, 2016), the most its important tasks are related to providing other governmental authorities with information for decisionmaking, in particular, preparation of projects of law and regulations, development of proposals concerning lines of development of aic and introduction of mechanisms for the development of agrarian economy, ensuring methodical unity in forecasting branches’ development, analysis of statistical key figures, conducting price survey, addition of balances of demand and supply, preparation of analytical materials and so on. the most effective regulations are used by the department in the field of metrology and standardization as well as in the field of public procurement. 5. functioning of the system of local agricultural markets the third question concerns functioning of the system of local agricultural markets. an aspect of the system functioning is revealing through the determination of the place, role and functioning of elements in the system, as well as highlighting quality of relations. this allows characterising the system in terms of sustainability, balance, homeostasis and self-organization (tsvetkova, 2010). as we consider relations among economic entities by using market pattern, thus their functions are functions of buyer or seller. disadvantages in the execution of functions of the main elements of the local markets’ system – seller, buyer and market price – are caused by imperfect execution of functions of auxiliary (infrastructural) market participants. functions of entities, which belong to the market infrastructure, consist of providing appropriate services in sufficient volumes, which allows sustaining prices for these services at the moderate level and meeting the demands of sellers and buyers of agricultural products for these services. in this regard, infrastructural agents should have appropriate assets in sufficient volumes: transport organizations must have transport vehicles of different cargo-carrying capacities, with cooling agents (for animal production), immune to moisture (for plant products) etc.; organization, which store agricultural production, must have proper storages for grain crops, fruit and vegetables; organizations, which check the quality of production, must have necessary baltic journal of economic studies 59 vol. 2, no. 5, 2016 measurement instrumentation and be certified by the department of strategy and economic development; news agencies must have various media means – printed and online media; mediatory agents can perform their function if they have high-developed entrepreneurial skills and readiness to take risks. insufficient proposition of services of technical assets determines their outrageous price increase, makes distant markers inaccessible for producers, and situation in these markets – less competitive. imperfect functioning of organizations that have to provide information to participants of local markets, lack of reliable information sources causes insufficient awareness of market participants, first of all, of prices in other places of agreements’ conclusion. it should be noted that investing money in technical assets, infrastructural agents strive to get some return. high share of incomes of mediatory and infrastructural elements in prices of agricultural production sales can be determined both their abuse of monopoly power in terms of insufficient competitiveness of market environment and actually high expenses for maintenance of technical assets. insufficient demand for their services does not allow them obtaining a positive return from scale and expanding volumes of offer of services with simultaneous decreasing in expenses per unit and decreasing in prices for services. optimizing government regulation of the system of local markets, we are facing a complex problem of choice of a criterion that will allow diagnosing the abuse а mediatory and infrastructural organizations of their market power at the macro level and formation of a method of revealing such abuses not relating to separate subject of abuse, not by lodging of “injured” counterparts (it is possible only concerning a processing company – direct buying), but by the characteristics of a set of market agreements. 6. development of the system of local agricultural markets the fourth question of methodology of research of the system of local agricultural markets concerns its development. an aspect of development envisages revealing of internal conflicts of the system and research of such its states as growth, evolution, development. a feature of development of the system of local agricultural markets should be considered as the increase in volumes of agreements concluded in competitive conditions with simultaneous decrease in prices’ volatility and growth of the levels of efficiency of economic activity of direct manufacturers of agricultural production and satisfaction of its consumers’ needs. phenomena and processes, which deprecate achieving stated orientations, should be considered as contradictions to the development of the system of local agricultural markets. the main directions of the state regulatory influence on the development of the system of local agriculture market are: firstly, measures of the government regulation can be realized by means of compulsion of separate subjects to direct functioning of the system towards its more sustainable functioning; another direction envisages the state stimulation of formation of inverse relationships, which will ensure self-organization of the system. w hen choosing measures of the government regulation, we have to understand that economic agents remain independent economic entities and the state in most cases is not able to command what to do, how and for whom. we can choose only measures, which will be positively understood by independent entities. 7. measures on functioning and development of the system of local agricultural markets a systematized list of regulatory measures aimed at overcoming disadvantages in the functioning and development of the system of local agricultural markets stipulates the following: 1) for better consumers’ needs satisfaction, prevention of breaking of good quality goods markets it is necessary to perfect a system of certification and control over the product quality, improve awareness of buyers, develop infrastructure of markets, as well as take measures for increasing quality product homogeneity within goods items; 2) in order to increase of efficiency of agricultural production sales by direct manufacturers it is necessary to inspire them to form large goods items of production, which is homogeneous by quality, inform about requirements for the quality and consumer needs, as well as development of transport infrastructure, approaching of places of conclusion of agreements to producers; 3) for decreasing volatility of prices there are needed measures toward the promotion of long-term contracting and improvement of informational support of participants of marketing agreements; 4) complex solution of the problem of development of infrastructural component of the system of markets, expanding of the network of trading areas require implementation of program measures, development of general plans of territories’ development, encouragement of creation of specialized procurement terminals in order to form homogeneous wholesale consignments; 5) for prevention of misuse of market power, countermeasures for collusion of intermediate sellers and overcoming barriers that obstruct direct manufacturers to enter the markets of agricultural production, there is required a stimulation of creation of agricultural producers’ associations and cooperative associations, which will oppose their monopoly power to power of intermediate sellers; baltic journal of economic studies 60 vol. 2, no. 5, 2016 6) increase in efficiency of the whole complex of state regulatory actions needs reforming of management subsystem of the system of local agricultural markets, introduction of state programming, optimization of relations between the national and regional levels of this sphere’s regulation, improvement of informational support for processes of development and implementation of management actions. 8. conclusions and prospect of further research thus, the formed theoretical and methodological foundations of analysis of the system of local agricultural markets will ensure efficiency of their functioning. the proposed step-by-step research of object as a system will allow determining clearly its structure, including materialized and non-materialized elements, controlled elements and elements, which are unaffected by managerial influence from the direction of government authorities, identifying relations among these elements. the use of method of opposition in a way “as it should be” and “as it can be” will allow foreseeing possible gaps in functioning of certain elements of the system of local markets, which determine disadvantages of the whole system, and also identifying their causes. studying the system of local agricultural markets in terms of its development, namely focusing on contradictions of development, will allow revealing problems in the self-organization of the system of markets that can lead to the disruption of economic potentials of market participants, their incapability to perform main functions. prospects of further research are the development of innovative models of functioning of the system of local agricultural markets. references about state support of agriculture of ukraine (law of ukraine on june 24, 2004). supreme council of ukraine [pro derzhavnu pidtrimku silskogo gospodarstva ukrayini: zakon ukrayini vid 24 chervnya 2004 r.]. supreme council of ukraine, vol. 49, art. 527 (as amended). about wholesale markets of agricultural products: the law of ukraine on june 25, 2009 [pro optovi rinki silskogospodarskoyi produktsiyi: zakon ukrayini vid 25 chervnya 2009 r.]. official bulletin of ukraine, vol. 58, art. 20–24. belyaev, v.i. local markets: their role, place and importance in the development of reproductive processes in the regions [lokalnyie ryinki: ih rol, mesto i znachenie v razvitii vosproizvodstvennyih protsessov v regionah]. retrieved from: http://izvestia.asu.ru/2012/2-1/econ/thenewsofasu-2012-2-1-econ-01.pdf. dubrovin, i. & belov, e. (2011). evaluation of resource potential of the local market (for example meat) [otsenka resursnogo potentsiala lokalnogo ryinka (na primere myasoproduktov)]. logistics, vol. 6, p. 48-49. north, d. (1997). institutions, institutional change and functioning of the economy [institutyi, institutsionalnyie izmeneniya i funktsionirovanie ekonomiki] (nesterenko, a.n. transl. from english). moscow: fund economic book “beginning”, 180 p. regulation on department of strategy and economic development of ministry of agrarian policy and food of ukraine, approved by the ministry of agrarian policy and food of ukraine in april 6, 2016 n 130 [polozhennya pro departament strategiyi ta ekonomichnogo rozvitku ministerstva agrarnoyi politiki ta prodovolstva ukrayini: zatverdzheno nakazom ministerstva agrarnoyi politiki ta prodovolstva ukrayini 06 kvitnya 2016 roku n 130]. retrieved from: http://cct.com.ua/2016/06.04.2016_130.htm. stupnikova, a.v. (2013). theoretical aspects of the formation and functioning of local markets [teoreticheskie aspektyi formirovaniya i funktsionirovaniya lokalnyih ryinkov]. problems of modern economy, vol. 2, issue 46, p. 70–72. the main priorities of the common agricultural policy (cap) of the eu [osnovni prioriteti spilnoyi agrarnoyi politiki (sap) krayin es]. retrieved from: http://www.amdi.org.ua/home/amdi-news/300-the-.html. the only comprehensive strategy and action of plan for the development of agriculture and rural areas in ukraine for 2015-2020 [the only comprehensive strategy and action of plan for the development of agriculture and rural areas in ukraine for 2015-2020]. retrieved from: http://minagro.gov.ua/system/files/єдина%20комплексна%20 стратегія%20розвитку%20сільського%20господарства%20та%20сільських%20територій%20на%2020152020.pdf. tsvetkova, g.s. (2010). to a question about the positioning of the local market [k voprosu o pozitsionirovanii lokalnogo ryinka]. vestnik osu, vol. 8, issue 114, p. 148–153. baltic journal of economic studies 61 vol. 2, no. 5, 2016 юрий прудников функционирование системы локальных сельскохозяйственных рынков: институциональные аспекты аннотация. целью данной статьи является обобщение и систематизация особенностей современного институционального обеспечения функционирования и развития системы локальных рынков сельскохозяйственной продукции. методологию исследования сформирована на системном подходе к изучению социально-экономических явлений и процессов, происходящих в процессе функционирования и развития системы локальных рынков сельскохозяйственной продукции. результаты исследования – на основе системного анализа обоснованы особенности функционирования и развития системы локальных рынков сельскохозяйственной продукции с позиции ее институционального обеспечения. указанное осуществлено с целью определения целесообразности, целевой ориентации, объемов, целей и задач государственного вмешательства в процесс функционирования и развития системы локальных рынков сельскохозяйственной продукции. приложив общую схему системного анализа системы управления локальными рынками сельскохозяйственной продукции и учтя, что система управления состоит из двух подсистем – управляющей и управляемой, в контексте данного исследования осуществлен характеристику системы в форме ответов на определенный перечень вопросов. содержание разработанного теоретико-методологического подхода заключается в разработке обоснованных ответов на четыре ключевых вопроса, характерны и релевантно размещены для каждого этапа проведения исследования: 1) определение элементов внутренней и внешней среды, которые входят в состав системы локальных рынков сельскохозяйственной продукции; 2) характеристика отношений и связей между выявленными элементами системы; 3) собственно процесс функционирования системы локальных рынков сельскохозяйственной продукции; 4) особенности развития системы локальных рынков сельскохозяйственной продукции. разработаны меры регулятивного характера, направленные на преодоление идентифицированных недостатков в функционировании и развитии системы локальных рынков сельскохозяйственной продукции, направляются на: удовлетворение потребностей целевых потребителей сельскохозяйственной продукции и повышение качественной однородности продукции в рамках товарных партий; повышение эффективности реализации сельскохозяйственной продукции ее непосредственными производителями, формирование логистической ситсеми; снижение волатильности цен; комплексного решения проблемы развития инфраструктурного компонента системы рынков, расширение сети торговых площадок, предотвращения злоупотреблений рыночной властью, противодействия сговоре между посредниками и преодоления барьеров, препятствующих выходу непосредственных производителей на рынки сельскохозяйственной продукции, повышение эффективности всего комплекса государственных регулирующих мероприятий. практическое значение результатов исследования заключается в том, что сформированы теоретико-методические основы системного анализа функционирования и развития системы локальных рынков сельскохозяйственной продукции с позиции ее институционального обеспечения сделают возможным ее эффективное функционирование и развитие. baltic journal of economic studies 82 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-82-87 risks in the investing svitlana gutkevych1, mykhailo vikhliaiev2 abstract. risk is a possible danger of performance. it is necessary to choose and make a decision in production, economic activity, which is always burdened with risk. therefore, the risk is a normal phenomenon, a consequence of the actions of a variety of reasons that give rise to its various species. risk management involves optimal use of all possible or allowable means of avoidance, or reduce the risk degree associated with significant losses; risk control, optimization of risk or maximum possible decrease in volumes and probability of possible losses. investment risk is the risk of an investment project, which is defined as the probability of obtaining a possible loss from its implementation. the investment risk of industries is characterized by the level of uncertainty in the forecast of profit from investments. the risk is possible only when the controlled economic system functions in conditions of uncertainty, and the person who makes the decision is interested in the final result. key words: risks, investment attractiveness, industries, profit, factors, development. jel classification: g32, e22, e27, d24, k23, n50 corresponding author: 1 national university of food technologies, ukraine. e-mail: gutkevych@ukr.net orcid: https://orcid.org/0000-0003-2645-4011 2 publishing house “helvetiсa”, ukraine. e-mail: vikhliaievm@gmail.com orcid: https://orcid.org/0000-0002-1906-5176 1. introduction in modern conditions, investment attractiveness is associated with the objective economic category of risk, which presupposes future events. investment risk is the risk of an investment project, which is defined as the probability of receiving a possible loss from its implementation. however, this definition is not specific enough to quantify project risk. so, at a loss, you can take a full or partial non-return of invested funds, or receiving less than planned profit, or getting a profit from the implementation of the project less than some necessary profit. risks arise when there is uncertainty, that is, the presence of incomplete or inaccurate information for making a decision. uncertainty is one of the causes of risk. when choosing an investment object, a variety of future investment projects is required, which will assume the likelihood of reducing the investment risk. the investment risk of industries is characterized by the level of uncertainty in the forecast of profit. the risk is possible only when the controlled economic system functions in conditions of uncertainty, and the person who makes the decision is interested in the final result. 2. investment risk investment risk as a category is determined by the following elements: the subject of risk, the object of risk and the source of risk (figure 1). investment risk can be viewed as the uncertainty in obtaining a total profit or in obtaining the amount of return on investment that the investor expects. w hen investing, the investor sets the maximum risk level of the invested capital, taking into account the risk assessment. the object of risk in the investment process is an investment project, that is associated with the effectiveness, efficiency of the project in conditions of uncertainty. reducing the level of risk implies reducing the likelihood and volume of losses in the agrarian and industrial complex. in the agrarian and industrial complex, it is agriculture, the efficiency of which is largely predetermined by natural and climatic conditions, is the most risky sector of the economy for an investor. investment risk is a factor influencing the formation of investment attractiveness of sectors of the economy, in particular agriculture. the indicator characterizing the degree of risk is defined as a relative value. 3. risk reduction methods as practice shows, the optimal risk coefficient is 0.3. it is possible to determine the principles for choosing a specific risk reduction method: – the consequences of the risk need to be determined; – the risk should not be greater than the amount of equity capital; – not risk a lot for the sake of little. baltic journal of economic studies 83 vol. 7 no. 3, 2021 risk reduction techniques include: – elimination from activities (circumstances) containing risk; – transferring responsibility for the risk to another party; – carrying out own measures (control systems, security, etc.) to reduce the risk; – responsibility for risk. to select a risk reduction method, the required funds for risk reduction are compared with contributions from damage prevention. reducing the degree of risk depends on different methods of protection: insurance, hedging, guarantees, limiting, reserve funds, collateral, and others. the source of risk is the factors influencing the investment and contributing to the uncertainty of the results. the set of methods allows to determine and assess the risk at different phases of the project development, find ways to reduce it and influence the main parameters of the project. depending on the results of the completed risk analysis, as well as on how risk-averse the investor is, the latter decides to accept, change, or reject the project. for example, an investor, based on his appetite for risk, would do the following with a risk of more than 30%. if the risk indicator, or normalized expected loss, exceeds or is equal to 30%, then in order to accept the project, it is necessary to implement proposals to reduce the risk. risk mitigation suggestions are any actions to change data that can reduce the risk without exposing the project to loss. for these purposes, the rules developed in advance are used, providing for the appropriate actions of the participants in case of certain changes in the conditions for the implementation of the project; the projects may provide for specific stabilization methods that ensure the protection of the interests of the participants in the event of an unfavorable change in the conditions for the implementation of the project (including in cases where the objectives of the project will not be fully achieved or not achieved at all) and prevent possible actions of the participants that threaten its successful implementation. in one case, the degree of the risk itself can be reduced (due to additional costs for creating reserves and stocks, improving technologies, organizing labor, smoothing its seasonality, reducing production accidents, material incentives for improving product quality), in the other, the risk is redistributed between participants in the form of price indexing, the provision of guarantees, various forms of insurance, including crops, property pledge, a system of mutual sanctions. as a rule, the use of stabilization mechanisms in a project requires additional costs from the participants, the amount of which depends on the conditions for the implementation of measures, the expectations and interests of the participants, and their assessments of the degree of possible risk. these costs are subject to mandatory consideration when determining the effectiveness of the project. if at this stage it is possible to reduce the risk so that leu becomes less than 30%, and there is a choice among this kind of project options, then it is better to choose the one with a lower coefficient of variation. if it is not possible to reduce the risk to the specified level, the project is rejected. projects with a risk of less than 30% (leu <30%) require insurance. it is proposed to create an insurance figure 1. elements of investment risk investment process risk source is the factors of undetectable investment results object is an investment project results (efficiency) and conditions of its assimilation (functioning) entity is a person (investor) who is interested in the results of risk management and investment risk reduction baltic journal of economic studies 84 vol. 7, no. 3, 2021 fund in the amount of a certain share of the principal investment amount. you can take this share equal to the value of the risk indicator (normalized expected loss). that is, if the risk is approximately 25%, then it is necessary to provide for deductions from retained earnings during the implementation of the project or conclude an agreement with an insurance company in the amount of 25% of the principal investment amount and send these funds to the reserve , to be used only in case of critical situations associated, for example, with natural and climatic conditions and natural disasters, with the unplanned expenditure of free funds, as well as other problems in order to normalize the financial and economic situation. investment risk management is carried out through the following functions: – planning (forecasting) and identification of risks; – development of methods for responding to risks; – control of response to risks. formation of investment attractiveness is associated with investment risk management. it is the art and formal methods of forecasting, analysis, assessment, prevention of the occurrence of risk events, taking measures to reduce the degree of risk throughout the life cycle of an investment project and distribution of possible damage from risk between project participants. all projects and most aspects of a project are risky to varying degrees. they can be exposed to financial, organizational, social, political and other types of risk. considering risk as a factor or function, as an uncertainty affecting the return on investments, it can be managed as a type of activity, that is, using various methods, measures that allow one to predict risk and determine methods to reduce it. 4. classification of risks in the economic theory, a generally accepted classification of risks has not been developed. the conceptual and classification apparatus of the risk theory has not yet been sufficiently systematized. investing, like the entire financial system, is associated with a variety of risks. in this regard, consideration of the methodological aspects of risk classifications is an urgent issue. risks can be systematized by grouping principle. the effectiveness of the organization of risk management largely depends on the systematization of risks to achieve the set goal. scientifically based classification of risks allows you to clearly determine the place of each risk in their overall system. each risk has its own management system and applies to almost all sectors of the economy (figure 2). an opportunity is created for the effective application of appropriate methods and techniques of risk management. so, the algorithm of the method of expert assessment of the risks of an investment project includes: – a complete list of all possible risks at each stage of the project (or phase of its life cycle); – expert determination of the importance of risks; – rating (ranking) of risks according to the degree of their importance for the project; – search, organization of work to reduce the degree of risks and their management. depending on the results, risks can be divided into two groups: pure and financial. the net risks in the agricultural sector include environmental, political, transport, production and trade risks. financial or speculative risks include banking risks: credit, currency, interest, liquidity, inflation, bankruptcy and others related to financial and credit transactions. depending on the place of manifestation: – external (international), national; – internal. by type of production: – risks of the main production; – risks of auxiliary and service industries. by the form of exposure: – risks of direct losses; – risks of consequential losses. by complexity: – private (local) risks; – systemic risks (that is, those caused sequentially initiated by a chain of local risks); – aggregate risk (that is, the risk that takes into account the actions of all types of private risks). due to the occurrence: – risks of accidental events; – planned risks. by the degree of predictability: – predictable with a high probability; – predictable with low probability; – unpredictable. by the time of manifestation: – retrospective; – the current period; – future (distant) period. by the degree of control: – controlled risks that can be avoided or their consequences reduced; – partially controlled risks, which can only be partially avoided or their harmful consequences reduced; – uncontrollable risks that cannot be avoided or their harmful consequences cannot be reduced. security: – insured risks; – uninsured risks. the classification of risks also includes groups by regularity: – systematic (regularly recurring); – unsystematic. systematic risks affect performance. this group includes the following types of risk: political, which can be international (external) or internal (national); baltic journal of economic studies 85 vol. 7, no. 3, 2021 financial and economic, which are manifested in the economic downturn, inflation, etc.; legislative ones related to political instability affecting the legal regulation of economic activity; force majeure associated with extraordinary circumstances (natural disasters, etc.). non-systematic or individual risks that appear for each investment object are associated with mistakes in the choice of production technologies – innovative; the sales market of the planned production output – market; terms of execution – production. based on the study of the classification of investment risks, a block diagram of risk management is proposed. the risk management model includes a sequence of actions to maintain the necessary balance of types of risk, investment attractiveness and the effect of investment. the basis of any risk management model is the risk management technology, which is unchanged, including such elements or stages as the formulation of the problem associated with the hypothesis of investment risk management, its verification by risk criteria. based on the hypothesis, methods of risk reduction are determined, that is, to reduce the loss of risk management. their mobility during investment will allow the investor to obtain the greatest effect, both material and social. it should be noted that for each object of investment in the agricultural sector, risk factors have a certain significance and require individual analysis. for an investor, a bank must be attractive to investors. let us consider more specifically the essence of banking investment risks associated with portfolio investments. in any economic activity, especially in the agroindustrial complex, there is a danger of losses arising from the specifics of business operations. it is a commercial risk. commercial risk means uncertainty about the possible outcome and its uncertainty. an integral part of commercial risks are financial risks associated with the likelihood of losing any sums of money or not receiving them in certain conditions. an investor, making a venture capital investment, knows in advance that only two types of results are possible for him or her: income or loss. a feature of financial risk is the likelihood of damage occurring as a result of any operations in the financial, credit and exchange spheres, transactions with stock securities, that is, the risk that arises from the nature of these operations. the leading principle in the work of commercial banks in the transition to market relations is the pursuit of as much profit as possible. it is limited to the possibility of incurring losses. in other words, risk is the value of a probabilistic event leading to losses. the higher risks the higher the chance of making a profit. it is possible to make a profit only if the opportunities to incur losses (risks) are foreseen in advance (weighed) and insured. therefore, the problems of economic risks in the activities of commercial banks should be given priority attention. the main problems include the development of a classification of banking risks, assessment bases and methods for calculating economic, political and other risks of a bank, an individual borrower, a group of enterprises, an industry, a country. risks for arbitrary banking operations include credit, interest rate, foreign exchange, portfolio risks and the risk of lost financial gain. credit risk is associated with urgency and repayment. it poses the danger of non-payment by the borrower of the principal debt and interest to the lender for the use of the loan in the terms specified in the loan agreement. credit risk management is a system for making decisions by a bank arising from approved policies and procedures that are aimed at minimizing the bank’s costs. interest rate risk is the danger of losses by commercial banks, credit institutions, investment funds, as a result of the excess of interest rates paid by them on borrowed funds over the rates on loans provided. currency risk poses the danger of currency losses associated with a change in the exchange rate of one of the foreign currencies in relation to another, including the national currency, during foreign economic, credit and other currency transactions. portfolio risk is the possibility of losses in the securities market. the risk of missed possible profit is determined by indirect or collateral financial damage (not received profit) as a result of non-implementation of any measure or termination of business activities. all of these risks are interrelated. credit risk can lead to the risk of liquidity and insolvency of the bank, as well as to the risk associated with the inability of the bank to reimburse administrative and business expenses. interest rate risk is independent, as it is associated with the situation in the credit market, and acts as a factor that does not depend on the bank. the bank must adjust to changes in the level of market interest rates. the most important elements of the classification of banking risks are: – type of the commercial bank; – attractiveness of the bank for the investor; – the composition of the bank’s clients; – risk calculation method; – degree of banking risk; – distribution of risk over time; – the nature of risk accounting; – the ability to manage banking risks; – risk management tools. currently, taking into account the direction of activity of banks, there are three types of commercial banks: – specialized; – industry; – universal. for example, a specialized, innovative bank is dominated by increased risks associated with lending to risky enterprises, technologies, the implementation of which is difficult at first. this also requires special methods for regulating banking risk, in particular, baltic journal of economic studies 86 vol. 7, no. 3, 2021 obtaining guarantees from the state, introducing a pledge right to real estate, etc. a holding institution specializing in the purchase of controlling stakes in securities evaluates the risk of transactions with securities, etc. thus, specialized banks bear risks for those specific banking operations that constitute the direction of their activities. sectoral banks are closely related to a specific industry, therefore, the range of their risks, in addition to the risks of arbitrary banking operations, depends mainly on economic, that is, external risks for the bank of the bank’s clients. in the industry bank, it is necessary to calculate the size of the average industry risk to determine unused reserves at enterprises and institutions of the industry and to develop the main directions of the banks’ activities. universal banks take into account all types of banking risks in their activities. therefore, it is advisable to develop an optimal set of types of risk for each type of the bank. the higher degree of risk in the considered options is possessed by industrial banks as medium-sized, non-mobile, serving specific industries and clients, and the least by universal banks, which have the ability to cover losses from one type of activity with income to another. depending on the area of origin, banking risks are classified into: – the risk of countries, industries; – the risk of financial reliability of an individual bank (that is the risks of insufficient bank capital, unbalanced liquidity, insufficient required reserves); – the risk of a particular type of banking transaction. on the other hand, risks, depending on the sphere of occurrence or influence, are divided into external and internal. external risks include risks that are not directly related to the activities of the bank or a specific client. we are talking about political, social, economic, geographical and other situations and, accordingly, the losses of the bank and its clients caused by them. the economic external risks of the bank, not directly related to its activities, include the instability of exchange rates; inflation; insolvency or bankruptcy of the bank’s clients, its refusal to make payments and non-payment of the debt in due time; change in the price of the client’s goods after the conclusion of the contract, errors in documents or payment for goods, abuse of clients or theft of foreign currency by them, payment of counterfeit banknotes, checks. internal risks, in turn, are divided into risks in the main and auxiliary activities of the bank. risks in the main activity of the bank represent the most common group of types: credit, interest rate, currency, risk on factoring and leasing operations, risk on settlement operations of the bank and operations with securities. risks in the bank’s auxiliary activities include losses in the formation of deposits, risks of bank abuse, risks of off-balance sheet transactions, risks of loss of the bank’s position in the market, loss of the bank’s reputation, the composition of its clients, the risk of downgrading the bank rating, etc. they differ from the risks of the bank’s core activities in that they generally have only a conditional, indirect assessment and are expressed in lost profits. but within each of the listed types of risks, additional groups can be distinguished. for example, the emergence of new types of loans, such as: avalanche, pawnshop, position, consortium, accounting and acceptance, has created new types of risks on credit operations and various private methods of calculating them. in a market economy, the instability of the banking system is increasing, which affects the state of various sectors of the economy and enterprises. business entities begin to reduce their own funds and reserves, this leads to a disruption in the normal circulation of credit resources and an increase in the risk of all banking operations. therefore, at present, the most common method for minimizing risks is the allocation and compliance with prudential standards of bank liquidity. many commercial banks, especially specialized ones, calculate only certain types of risks in various areas of banking activity. determination of the size of the admissible aggregate risk of a bank, an individual client, and an economic region becomes promising. depending on the calculation methods, complex and private risks are distinguished. complex risk includes assessment and forecasting of the bank’s risk and compliance with prudential standards of bank liquidity. private risk is based on the creation of a scale of risk ratios when weighing risk for a particular banking operation or group. the degree of bank risk or risk weighting takes into account full, moderate and low risk, depending on the position on the risk scale. the degree of banking risk is characterized by the likelihood of an event. it is expressed as a percentage or specific ratios. the liabilities of commercial banks are grouped into six groups based on the degree of investment risk and the possible loss of part of the value. appropriate correction factors or percentages are assigned to individual categories and groups of assets. the same risk may have a different degree depending on the possibilities of guaranteeing it, insurance and other methods of regulation. for example, longterm bank loans issued for the construction of a new enterprise have 100% risk; when insuring this amount in government agencies, the degree of risk is reduced to 10-50% (subject to insurance in the amount of 5090% of the loan), and upon receipt of a government guarantee to zero. the peculiarity of finding the degree of banking risk is its individual value associated with taking on a specific risk for a specific banking operation. in many ways, it is determined by the subjective position of each bank. attempts to regulate the degree of banking risk for individual transactions should be flexible. the distribution of risk over time is an important factor in a market economy. the main operations of the bank are subject to the past and current risk (in some cases – baltic journal of economic studies 87 vol. 7 no. 3, 2021 and the future). operations on issuance of guarantees, acceptance of bills of exchange, documentary letter of credit operations and others are subject to the current risk. but the very possibility of paying for the guarantee after a certain time, paying bills, issuing a letter of credit at the expense of a bank loan expose these operations to future risk. when the time comes to pay the guarantee, if the bank did not take into account the likelihood of these losses, it also bears the past risk, that is, the one that the bank assumed directly when issuing guarantees. the distribution of risk over time plays a very important role in predicting losses and taking this factor into account in order to avoid the imposition of past risks and mistakes on the future activities of the bank. by the nature of accounting, banking risks are divided into risks on balance sheet transactions and risks on off-balance sheet transactions. the credit risk arising from balance sheet transactions also applies to offbalance sheet transactions, for example, in the event of bankruptcy of an enterprise. it is necessary to correctly take into account the degree of possible losses from the same activity, taking place simultaneously both on balance sheet and off-balance sheet accounts. thus, the assessment of the degree of risk of transactions in currency options (new types of securities) should be made based not only on the currency risk, but also on the market risk on transactions with securities, as well as risks on individual off-balance sheet transactions: with treasury bonds, euro deposits, exchange indices, etc. in terms of management capabilities risks are divided into open and closed. open risks are not the subject to regulation, closed ones are regulated. the above classification and the elements underlying the economic classification are intended not so much to list all types of banking risks, but to show the influence of the risk factor on the investment attractiveness of banking funds for sectors of the economy as investment objects. the balanced liquidity of the bank’s balance sheet and the creditworthiness of clients are the main factors that determine the riskiness of the operations carried out by the bank and characterize its financial reliability. 5. conclusions in the financial activities of an enterprise, the principle of balancing risks is important, that is, risky investments must be financed from their own sources. it is necessary to include compensation for the risk of capital investments in profit (part of the profit at risk), that is, like an insurance premium to compensate for risk. competitive risk must be within acceptable limits and must be managed. the problem of the ratio of risk and profit is one of the main ones in the investment activity of business entities. due to the insurance protection of investment risks, the implementation of the investment project is ensured at all stages of its implementation. investment risks insurance covers only an insignificant, about 1%, part of the domestic insurance services market. risk assessment should be predictable in a risky business environment. in the world practice, the degree of risk of invested capital is characterized by a subjective quantitative assessment of the expected value of the maximum and minimum income or loss. references: 1. korinko, m. d. (2007). dyversyfikatsiia: teoretychni ta metodolohichni osnovy: monohrafiia [diversification: theoretical and methodological basics: monograph]. kyiv: nnts iae, 488 p. 2. yastremskyi, o. i. (1992). modeliuvannia ekonomichnoho ryzyku [economic risk modelling]. kyiv: lybid, 176 p. 3. gutkevych, s. o., sabluk, p. t., shevchuk, v. ya., & zavadskykh, h. m., shenderivska, l. p. (2020). efektyvnist: haluzevyi pidkhid. monohrafiia [effectiveness: sectoral approach]. kharkiv: “disa plius”, 222 p. 4. synergetic bases of investment in economy sectors: monograph (2013). kyiv: ntuu “kpi”. baltic journal of economic studies 67 vol. 7 no. 5, 2021 corresponding author: 1 national university “odessa law academy”, ukraine. e-mail: dyntuvaleriia@gmail.com orcid: https://orsid.org/0000-0002-8948-1845 researcherid: aao-3927-2020 2 national university “odessa law academy”, ukraine. e-mail: olegdykyj@gmail.com orcid: https://orsid.org/0000-0001-9659-9350 researcherid: g-4515-2017 doi: https://doi.org/10.30525/2256-0742/2021-7-5-67-72 cryptocurrency as an instrument of terrorist financing valeriia dyntu1, oleg dykyj2 abstract. the purpose of the article is to explain the use of cryptocurrency as a terrorist financing tool. this article has emphasized the ways, which terrorists appraise for being a reliable fundraising means and their adoption. methodology. for the purposes of the study, the methods of scientific abstraction, synthesis, observation, generalization, as well as the method of induction of literature and legal documents were used to determine the features of bitcoin, promoting and preventing its use for terrorism financing. results. the development of the internet and electronic devices has radically changed all spheres of human life, including criminal activity. digitalization has led to the improvement of ordinary crimes and the emergence of new types of crime, which, in principle, cannot exist without special digital electronic devices. among the first implementers of new technologies were terrorists, who took advantage of digitalization to increase profitability. thus, terrorists have now significantly increased their attention to cryptocurrency as a digital means of payment, namely bitcoin. bitcoin has a number of features that have attracted the attention of criminals as a way to evade responsibility for a crime. in particular, decentralization avoids the need for confirmation by a central authority, and pseudo-anonymity provides a certain level of anonymity. in addition, terrorists are aware that bitcoin's confidentiality is extremely fragile and needs to be enhanced. the paper analyzes several ways to enhance anonymity, such as software that anonymizes traffic and prevents ip identification, peer-to-peer mixers, centralized mixing services (tumbler), and other approaches. it is worth emphasizing that for the fight against crime, the main issue is the de-anonymization of the bitcoin owner/user, which allows the identification of the criminal. currently, law enforcement agencies use direct and indirect de-anonymization, proliferation analysis, quantitative analysis, time analysis, and transactional network analysis, among others, to achieve the above goal, which are discussed in detail in this article. in addition, agencies around the world investigated and uncovered terrorist groups and their financial facilitators. specifically, on august 13, 2020, the u.s. department of justice's office of public affairs announced "the largest cryptocurrency seizure in the context of terrorism in history." to investigate the agenda, the legal documents of those investigations that contain information about the terrorist fund-raising mechanism were examined and analyzed. the legal documents revealed that these investigations used the aforementioned de-anonymization approaches. key words: cryptocurrency, bitcoin, terrorism-financing, criminal investigation, de-anonymization. jel classification: k14, k24, l86, o17, o33 1. introduction technological advances and transformative scientific achievements have changed the familiar way of life and, consequently, criminal behavior as part of human activity. the transition to the digital economy, in addition to positive improvements such as the high speed of transactions, unification of the global payment system, etc., has created new challenges that modern society has to face. more precisely, because of digitalization, the methods and ways of committing some crimes have changed. in particular, digitalization has led to the improvement and development of traditional types of crime that have been known for a long time. ordinary criminal activity has shifted to the online space, which has made it more productive and efficient thereby baltic journal of economic studies 68 vol. 7 no. 5, 2021 modernizing its characteristics such as speed, anonymity, limitlessness, etc. for example, the internet and darknet are used as a platform for the illegal sale of drugs (silk road, evolution, agora, etc.), and digital payment systems are used for money laundering (liberty reserve case, etc.). in addition, cryptocurrency is used for pump-and-dump schemes that used to apply to stocks. in the schemes mentioned in recent years, scammers use susceptible cryptocurrency markets to create artificial attention and demand based on far-fetched information and encourage unwitting investors to buy the currency. what's more, offenders can issue a new token and spread positive news about its use, as they did with savethekids in 2021. additionally, digitalization has led to the emergence of a new type of crime that did not exist before the invention of the computer and the internet, namely cybercrime. technically, the realization of these crimes is impossible without special digital electronic devices. for example, malicious software (malware), hacker attacks, ransomware attacks, etc. it is noteworthy that despite its recent appearance, the development of cybercrime has reached impressive scale. according to a new report by the center for strategic and international studies (csis) and mcafee, cybercrime now costs the world nearly $600 billion, or 0.8 percent of global gdp (economics of cybercrime, 2017). in 2017, for example, one of the most devastating cyber attacks occurred with the notpetya malware, which caused an estimated $10 billion in damage. it should be noted that the development of cybercrime is in step with the times and responsive to change. for example, in 2020, the covidlock malware became widespread due to the covid-19 pandemic. it was claimed to give users access to statistical information about covid-19. however, it was infected with ransomware. covidlock had a screen lock feature that denied the victim access to their phones. the main purpose of ransomware is to extort money, which in this case was done in bitcoin. covidlock demanded $100 in bitcoin in 48 hours. otherwise, there was a threat of public leakage of personal data and erasure of phone memory. thus, digitalization has created an environment that has fostered the development of existing crimes and the creation of new crimes that have a huge impact on the growth of crime. this process is constantly in flux. 2. brief information about bitcoin it is worth emphasizing that terrorists are always among the first users of new technologies that can increase the profitability of their efforts and push them to achieve their malevolent goals. according to the global terrorism index 2020 report, the global economic impact of terrorism in 2019 was $26.4 billion (terrorism index, 2020). it should come as no surprise that terrorists have adapted the function of the digital economy with all its advantages. initially, terrorist organizations used fiat currency to transfer funds and raise money, the use of which caused many problems (money laundering controls, bank policies, etc.). nowadays, despite its relatively short existence, terrorists have significantly increased their attention to cryptocurrency, particularly bitcoin. bitcoin is a decentralized digital currency for storing and validating transaction data based on a peer-to-peer (p2p) distributed network (nakamoto, 2009). data is stored in a public ledger, the basis of which architecture is blockchain. blockchain organizes its data into blocks that are connected in a chain. each block contains a hash of the previous block and a merkle tree of transactions. any changes in the transaction information cause the merkle root hash and, consequently, the hash of a particular block to change. for a better understanding of the nature of bitcoin, it is worth considering the elliptic curve digital signature algorithm (ecdsa) as an essential part of it. ecdsa is the elliptic curve analog of the digital signature algorithm (dsa). dsa can be considered as a variant of the elgamal signature scheme. the possibility of using the discrete logarithm problem in public key cryptosystems was recognized in 1976, when diffie & hellman (1976) introduced public key cryptography. koblitz (koblitz, 1987) and miller (miller, 1986) independently introduced ellipticcurve cryptography. scott vanstone proposed the ecdsa in 1992 in response to a request from the national institute of standards and technology for public comment on their digital signature standard (dss) proposal. it can be seen as an effective variant of elgamal's (elgamal, 1985) digital signature scheme. it was adopted: in 1998 as an international standards organization standard (iso 14888-3); in 1999 as an american national standards institute i standard (ansi x9.62); in 2000 as an institute of electrical and electronics engineers standard (ieee 1363-2000) and federal information processing standard (fips 186-3). in continuation of the above, any user can create a fake address that includes the corresponding public/ private key pairs stored in the user's wallet. the problem of forgery can be solved by signing the created transaction with the user's private key. the information about the transaction must then be sent out to the p2p network nodes. the payer's public key can be used to verify the correctness of the corresponding private key, which was used to sign the transaction. accordingly, the characteristics of bitcoin, such as decentralization, transparency, and irreversibility, increase its reliability. since the use of blockchain eliminates the need for a central authority, each user can have access to any public address, transaction, and furthermore, transaction history cannot be changed. baltic journal of economic studies 69 vol. 7 no. 5, 2021 3. bitcoin anonymization and de-anonymization among other features that bitcoin undoubtedly possesses is the fact that it is gradually sinking into disrepute because illicit use has given rise to the myth of complete anonymity as its additional feature. it takes careful consideration and a deep dive into the details to understand how bitcoin's anonymity works and can be compromised. first of all, it should be emphasized that bitcoin has several anonymous features: 1. the bitcoin address is not linked to the user's personal information at the protocol level. 2. transactions are also not linked to the identity of the user. if miners agree to include the transaction in the block, anyone can transfer bitcoins from one address to any other address, without having to disclose personal information. 3. bitcoin transaction information is transmitted by randomly selected nodes on the p2p network. bitcoin nodes connect to each other via ip addresses. thus, the nodes are not aware if the transaction was created by the node that transmitted the information or if it simply redirected the data. however, bitcoin itself is not anonymous, as the official bitcoin website makes clear: "bitcoin is not anonymous and cannot offer the same level of privacy as cash" (about bitcoin, 2021). furthermore, according to reid and harrigan (2011), anonymity was not the primary goal for bitcoin as a crypto currency, "however, bitcoin is often referred to as anonymous. we conducted a passive analysis of anonymity in the bitcoin system using publicly available data and network analysis tools. the results show that the actions of many users are far from anonymous" (reid & harrigan, 2011). all confirmed transactions are publicly announced on the blockchain (meiklejohn et al., 2013), thereby all transactions are pseudonymous (ober, katzenbeisser & hamacher, 2013). moreover, according to the fbi's intelligence assessment, bitcoin's anonymity depends on the user's actions (federal bureau of investigation, 2012). thus, user information can be de-anonymized, which basically means tying a public bitcoin address to a user's identity or ip address. as the aforementioned information suggests, bitcoin's privacy is extremely fragile. terrorists are aware of this and use several means to enhance bitcoin's anonymity. some of them will be considered below. first, the user can use tor/i2p software or any other similar tool that provides anonymization of traffic and prevents ip-identification. users can then generate a new address for any transaction, making it difficult to tie it to a specific person. hierarchical deterministic (hd) wallets do this automatically and deterministically. hd wallets contain keys in a treelike structure, starting with an initial seed provided by some user, and in which parent keys can produce subsidiary keys, and so on to infinity. in addition, bitcoin can be bought and sold through exchange sites and other trading platforms. it should be noted that cryptocurrency exchanges can be centralized and decentralized. a centralized cryptocurrency exchange is created and managed by a third party, which acts as an intermediary, monitors the course of trading, and ensures the stability of the process. a decentralized exchange assumes no thirdparty supervision and is based on a p2p network and an open protocol. in this case, users have more control, because the storage of assets is in the hands of the exchange. at the same time, cryptocurrency exchanges can be used as a kind of anonymizer. if the exchange site is big enough, the bitcoins deposited into the account will effectively mix and turn into completely different bitcoins when withdrawn later, and even without a service fee. another means of anonymization are centralized mixing services (tumbler). in general, the user sends an amount of bitcoins to the tumbler service, pays a fee, and receives the same amount of completely different bitcoins, or the tumbler service transfers the bitcoins to the address specified by the user. the level of anonymization depends on the total number of users and bitcoins available for mixing. mixing services may vary depending on the amount of commission, the authentication and registration process, and the time delay. this method has many disadvantages related to the reliability of the mixing service (reliability of data collection, storage and protection, security, confidentiality, etc.). another way is through bitcoin peer-to-peer mixers. it is based on peer-to-peer groups of bitcoin users who are willing to mix their bitcoins and make exchanges without a third party. this allows users to exchange bitcoins directly. the coinswap, coinjoin protocols allow multiple users to collect one exchange transaction in several stages. when the transaction is fully collected, it sends users' bitcoins to each other according to the destination. any participant does not know the interconnection between the initial and final coin addresses. to further confuse blockchain traffic analysis, the aforementioned procedure can be performed in multiple rounds with multiple recipients. it should be emphasized that the development and improvement of mixing tools is a continuous process. new mixer services are appearing every day, offering updated anonymization solutions. however, despite attempts to increase bitcoin's anonymity, it can be de-anonymized. consider several ways to de-anonymize it. firstly, de-anonymization can be direct or indirect, depending on the way in which the user cooperates. direct de-anonymization involves making personal baltic journal of economic studies 70 vol. 7 no. 5, 2021 contact with the user (e.g., for sales or payment purposes). when communicating, information about the public address is extracted. for indirect deanonymization, user data is collected from publicly available sources. digital user names can be found on various websites, social networks, laundry services, etc. a bitcoin address can be linked to a specific person if his/her personal information was somehow connected to such a bitcoin address. these can be addresses used to deposit or withdraw funds from a regulated exchange or wallet, public donation addresses, or addresses used to send bitcoin using personal information (for example, when paying in an online store). a telling illustration of the use of both methods is the silk road investigation, in which they were used to identify the person and whereabouts of the chief administrator of the darknet market website ross william ulbricht, known as dread pirate roberts. specifically, law enforcement linked ross ulbricht's google and linkedin profiles, which contained his photos, to provide a visual link between the two computer profiles online. it should also be noted that lerner (lerner, 2013) and koshy (koshy, koshy & mcdaniel, 2014) et al. were the first to suggest the possibility of bitcoin wallet being linked to the ip address of its owner. besides, reid and harrigan (reid & harrigan, 2011) argue that limited anonymity depends on blockchain technology itself. as mentioned, there is a public ledger of all verified transactions to prevent double spending. in this regard, de-anonymization can be provided by transactional network analysis. its main idea is to define multiple inputs combined into a single transaction. all addresses that are used as input for a transaction can be grouped in the user's network, and presumably they can belong to the same person. in principle, all of these inputs could have been generated by other addresses, but the fact that they are linked in a single transaction suggests that all of these inputs, and therefore all of the linked addresses, are controlled by a single user. moreover, this strategy can be used in conjunction with the "shadow" address mechanism. essentially, transactions can rarely have one input and one output, since the number of bitcoins sent (output) must equal the number previously received (input). often a transaction consists of many small inputs. this happens because the entire amount of the previous transaction is forcibly expended; thus, the user is unable to use the input part. for the same reason, a transaction consists of several outputs. for the purpose of returning "change," bitcoin uses a so-called change address, which is called a "shadow address". these addresses allowed users to create a transaction that returned surplus bitcoins from the input to the sender. in this way, the transaction would return the money to the user making the input and could be matched with the user. in addition, several analyses can be used for deanonymization. one of them is dissemination analysis, the main idea of which is to calculate the share of bitcoins in a certain address that have been transferred from a certain address. then it should be determined whether these addresses are connected by a single direct transaction or a chain of transactions. others are quantitative analysis, which does not look at specific transactions but examines specific amounts, and time analysis, which tracks specific time intervals. 4. examples of terrorist fundraising schemes in recent years, it can be noted the constant acceleration of the use of cryptocurrency to finance terrorism. in 2020, investigations into cryptocurrency terrorist financing schemes were more unveiled than ever before. agencies around the world (france, great britain, the u.s., india, etc.) have investigated, uncovered terrorist groups and their financial facilitators. notably, on august 13, 2020, the u.s. department of justice office of public affairs announced "the largest cryptocurrency seizure in the context of terrorism in history ". three foreign terrorist organization (fto) groups have allegedly used cryptocurrency and social media to attract attention and raise funds for their terrorist campaigns. u.s. authorities seized millions of dollars, more than 300 cryptocurrency accounts, four websites and four facebook pages associated with the criminal enterprise (global disruption, 2020). consider several schemes that have been uncovered in the above-mentioned investigations. terrorist fundraising scheme example 1. fundraising was done partly through social media and the three official fto websites. the organization and their fronts launched a bitcoin fundraising campaign in early 2019 and it was conducted in three phases. in the first phase, the fto encouraged adherents to donate and required them to send bitcoins to a single bitcoin address hosted on a u.s. bitcoin exchange. approximately may 11, 2017 and january 31, 2019, an fto members opened virtual currency exchange (vca) 3 and vca 1 accounts, respectively, on virtual currency exchange (vce) 1. in order to register the account, they provided an email address to vce 1. on january 31, 2019, a test transaction was conducted from vca 3 to vca 1, designed to confirm that vca 1 is open and usable. in addition, around january 31, 2019, the fto launched a public fundraising campaign on its twitter account asking for bitcoin donations. the twitter message included the aforementioned bitcoin deposit address where donors could send their donations. baltic journal of economic studies 71 vol. 7 no. 5, 2021 on the same day, january 31, 2019, vca 2 was created for vce 1. the ip address used to set up vsa 2 resolved to the same ip address that was used to log into vsa 1 on the same date. vsa 2 turned out to be a burner account because it did not conduct any transactions. in the second phase, the fto decided to use a bitcoin exchange within the fto-controlled infrastructure and directed donors to donate to a single bitcoin address based within the fto rather than on a third-party bitcoin exchange. the fto registered an additional vca 4 using the same email account used for vca 1. then, approximately feb. 1, 2019, the fto called for donors to send donations to the new vca 4 bitcoin deposit address. using clustering methods, law enforcement determined that vca 4 was combined with nine other bitcoin addresses. clustering of bitcoin addresses showed the presence of a common owner/controller. to summarize: the first two stages used one specific account number (static bitcoin addresses) where anyone could send donations. in such a situation, vce can examine individual bitcoin addresses, identify a terrorist trail, and take legal action, such as freezing the transactions in question. in the second phase, about 1,16938125 bitcoins were collected through 65 transactions. in the third phase, the fto used a dynamic bitcoin system. on their official site, any donor could obtain new bitcoin addresses. in addition, the fto launched two additional official sites, which domain is in the same area, to collect bitcoins for the campaign. presumably, all three sites are registered and operated by the same person. two of the sites contained identical information regarding donation schemes. the content of the third of these had similarities in the use of photo and the donation process. about 2.39361558 bitcoins were collected through 124 transactions using the aforementioned algorithm. along with this, direct de-anonymization was used during the investigation. in particular, the fto website included an e-mail address for contact. consequently, the law enforcement agent began an e-mail correspondence in which the agent requested the purpose for which the money would be used and expressed the intention to donate $1,100. on the same day, several responses were received explaining the use of the money, as well as a request for an estimated donation amount for a money transfer easement. in addition, it was indicated that donations could be sent via moneygram or western union. throughout all three phases of the fto fundraising campaign, the terrorist organization received donations from cryptocurrency accounts located on various virtual currency exchanges. once the fto collected btc from donor accounts as part of this fundraising campaign, the organization typically converted the virtual currency into traditional fiat currency or exchanged it for something of value to spend the btc. law enforcement tracked at least one cash-out transaction during an investigation using blockchain analysis (civil action, 2020). the fto and its affiliated terrorist groups use multilevel transactions to take over the btc movement. terrorist fundraising scheme example 2. it is worth noting that the fto has supervised a btc money laundering network, using telegram and other social media channels to collect btc donations for its illegal purposes. the fto uses social media and telegram channels to act as charities, but they raise funds for illegal activities. in april 2019, the administrator of the now-defunct telegram group fto provided a bitcoin address as a repository for donations to fto. messages in the telegram group during the same time period advertised fundraising campaigns for soldiers. the group's media content included watermarked images and additional information about the fto. approximately may 5, 2019, virtual currency accounts (vcas) aq1 sent their entire btc balance, approximately 0.14610741 btc, to the btc address cluster containing the root address (vca aq2). vca aq2 can be seen as a central hub for the collection of funds and their further redistribution through the money laundering network. approximately from february 25, 2019 to february 5, 2020, vca aq2 received around 15.27050803 btc through 187 transactions. between february 25 and july 29, 2019, vca aq2 sent approximately 9.10918723 btc through 38 transactions to a virtual currency exchange account (vca aq1) (preliminary assessment, 2021). the fto subsequently used a common moneylaundering technique by which the proceeds were funneled to various online gift card exchanges where users could exchange cryptocurrency for various gift cards. in both cases, law enforcement used blockchain analysis, specifically involving large databases that grouped btc transactions into "clusters" by analyzing the data underlying the btc transactions. 5. conclusions to summarize, digitalization has changed all areas of human activity, including criminal ones. this contributed to the improvement of conventional crimes, the development and creation of new types, which, accordingly, could not be created without special digital electronic devices. the gradual increase in the number of cybercrimes demonstrates the applicability of new technologies in criminal activity. the main characteristics that attract criminals to cybercrime are the high speed of action, accessibility, limitlessness, uncertain jurisdiction of states, and difficulty for legal investigation. baltic journal of economic studies 72 vol. 7 no. 5, 2021 it is worth emphasizing that one of the clear results of digitalization is the creation of cryptocurrency. bitcoin and other cryptocurrencies have changed not only the financial system, but also the ways and means of criminal activity. the global nature of blockchain has pushed crime beyond national borders. peer-topeer networks, mixers and other means of increasing anonymity have made it possible to hide financial transactions. digital infrastructure has created a favorable environment for money laundering, other financial crimes, and international funding of terrorist organizations. terrorist organizations are now using an integrated approach, combining social media, messengers and cryptocurrencies for international fundraising. the terrorist organization attracts many donors around the world by posting detailed instructions on the cryptocurrency transaction process on social networks and messenger channels, following which potential donors can 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(2011). an analysis of anonymity in the bitcoin system. 2011 ieee third international conference on privacy, security, risk and trust and 2011 ieee third international conference on social computing , 2011, pp. 1318–132. doi: https://doi.org/10.1109/passat/socialcom.2011.79 reid, f., & harrigan, m. (2011, sept. 30). bitcoin is not anonymous. fergal reid’s blog. available at: http://anonymity-in-bitcoin.blogspot.com.br/2011/07/bitcoin-is-not-anonymous.html (accessed 08 december 2021). there's nowhere to hide from the economics of cybercrime (2017). the official website of mcafee enterprise. available at: https://www.mcafee.com/enterprise/en-us/solutions/lp/economics-cybercrime.html (accessed 08 december 2021). baltic journal of economic studies 83 vol. 8 no. 2, 2022 1 national aerospace university "kharkiv aviation institute", ukraine e-mail: tetyana.calinescu@gmail.com orcid: https://orcid.org/0000-0003-4919-5788 researcherid: v-9142-2017 2 national aerospace university "kharkiv aviation institute", ukraine e-mail: a.likhonosova@gmail.com orcid: https://orcid.org/0000-0001-6552-8920 researcherid: 1995957 3 volodymyr dahl east ukrainian national university, ukraine (corresponding author) e-mail: zelenko.olena@gmail.com orcid: https://orcid.org/0000-0003-4880-246x researcherid: v-9966-2017 doi: https://doi.org/10.30525/2256-0742/2022-8-2-83-90 international financial activities: accounting, taxation and insurance tetyana calinescu1, ganna likhonosova2, olena zelenko3 abstract. the need for the study of international financial relations is justified by the lack of modern scientific discourses on the methods of regulation of financial tensions in the new epidemiological conditions of business environment and appropriate methodology to manage the level of rejection of players in the international financial market. the purpose of this study is to find points of contact between accounting, tax and insurance accounting in the development of joint measures to overcome global financial risks in the process of international cooperation. the focus of the study: the development of modified accounting tools for a comprehensive and systemic solution to the internalization of international relations; unification of the national tax system, based on the requirements of the modern development of the global financial system; development of insurance measures to overcome global risks in the process of international financial cooperation. the research was conducted on the basis of expert reviews and assessments of the state of international financial relations, modern theoretical and methodological, normative-legal and legislative aspects of international financial activity; methods of dialectics, methods and principles of scientific knowledge, statistical and economic tools were used. the growth of crossborder cooperation, the emergence of new financial flows and the transformation of financial relations online have created a number of new financial linkages that not only change the traditional financial systems worldwide and the global financial system, but also require the universalization, modification, internalization of certain accounting, taxation and insurance instruments. in order to universalize the measurement of failure trends of business players in international financial markets, one of the possible models for managing a dynamic object – a system-situation model of behavior of international investors, based on combining the systemic and situational views of business players on the interpretation of financially sensitive information – is proposed; a schematic representation of the vulnerability of financial and innovation activities of business players in the context of unpredictable reactions to the proposed positions of the global financial market. it is determined that the development of international financial activity should move in the direction of: the coordination and development of countries in various financial spheres on the adoption of appropriate regulations supranational character; meaningful universalization in international financial relations; restructuring of the national financial system of ukraine; the viability of the national financial system in the direction of centralized imperative regulation of international financial relations. key words: international finance, globalization, unification, harmonization, accounting, taxation. jel classification: f01, f31, h 30 1. introduction the history of international financial relations shows the following (vaitsethovska, 2019): – the growth of global financial risk capacity; – the increasing globalization of the international financial system and the emergence of new modified financial instruments due to the development of telecommunications and the digital economy (сalinescu, likhonosova, zelenko, 2019); baltic journal of economic studies 84 vol. 8 no. 2, 2022 – cooperation of countries to integrate efforts to counter global financial problems; – unification and harmonization of legislation of member countries of international financial institutions; – facilitating the work of most of the world's countries to create a unique alliance to address global financial needs in a comprehensive and systemic way. the relevance of the study of international financial relations is justified by the lack of methods for regulating financial tensions in the new epidemio logical conditions of business environment and appropriate methodology for managing the level of rejection of players in the international financial market in modern scientific discourses. there has been a significant shift in the distribution of global wealth: the economically developed countries no longer possess the stock of indivisible financial power. new players and holders of sources of capital have emerged – the oil countries and the central banks of asian countries. moreover, thanks to the liquidity they provide, the role of hedge funds and private equity funds in the modern system of financial intermediation is rapidly increasing. all this necessitates the formation of an effective, realistic mechanism for a timely response to the new challenges of the international financial market under conditions of uncertainty, turbulence in economic development and related social consequences. therefore, the purpose of this study is to find points of contact between accounting, tax and insurance accounting in the development of joint measures to overcome global financial risks in the process of international cooperation. consequently, the objectives of this study are: 1) the development of modified accounting tools for a comprehensive and systemic solution to the internalization of international relations; 2) unification of the national system of taxation, based on the requirements of the modern development of the global financial system; 3) development of insurance measures to overcome global risks in the process of international financial cooperation. the methodological basis of the study was based on expert reviews and assessments of the current and future state of international financial relations, modern theoretical and methodological, regulatory and legislative aspects related to the strengthening of accounting, tax and insurance components of international financial relations. the study uses methods of dialectics, methods and principles of scientific knowledge, tools of statistical and economic analysis to form effective accounting, tax and insurance management tools of international financial activities. 2. literature review it is necessary to agree with the opinion of modern ukrainian researchers of international financial relations (sidenko, кulbida, 2020), that the key role in their reform and management is played by international financial organizations, under the influence of which there is a strengthening of macroeconomic stability in ukraine, the solution of most socioeconomic problems, internalization and activation of the economy in global financial systems, including currency and financial relations. in the context of new global challenges, especially the development of the current state of the global pandemic covid-19, it is the activity of international financial organizations that is of great importance. the international monetary fund (imf) estimates that as a result of the pandemic and quarantine the world economy will fall by 3%, in developed countries it is expected to fall twice as much – 6%, and the total loss to the world economy will be $9 trillion a year. for example, the expected economic losses in ukraine are expected, according to imf forecasts, to be 3.9% (covid and economy…, 2020). the peculiarity of modern financial crises in most countries of the world (including ukraine) is the huge losses incurred by all countries. therefore, the recovery of most national economies will require not only significant financial resources, but also advisory assistance, development of anticrisis measures (accounting, tax, insurance and others), analytical calculations to jointly overcome the consequences of emerging financial problems. the current scientific achievements of the study of international financial relations are mainly: the formation of legal mechanisms (vaitsethovska, 2019a; vaitsethovska, 2019b), strategic guidelines of international partnership (ivanov, klymenko, savotianenko, 2020), problems of national economy in the destabilization of international financial market (implications of higher commodity…, 2022) and other, taxation and insurance. although these are the main reference points that affect the financial security of the state and affect economic relations in society. international financial activity should be considered in terms of development and accumulation of certain experience in two aspects: national (public) finance and international finance. although most countries give priority to the development of national finance, the international financial system should be considered more structured, perfect and systematically developed. as an example, for the accumulation of experience, the european financial system can be considered a higher level in the choice of priorities. in this sense, attention should be paid to the priorities defined in the european financial system, namely: a. emphasis should be placed on the controlling function of finance, on the judicious use of accounting tools. baltic journal of economic studies 85 vol. 8 no. 2, 2022 b. formation of effective fiscal policy, harmo nization of national tax systems to the conditions of international finance development. such optimization should take place not only in bringing its tax system to the same international requirements, but also in finding a balance between income, specific and universal taxes in order to regulate their fiscal and distributive-regulatory importance. c. ensuring national financial security, which can only happen by choosing the right financial insurance mechanism. general variations in financial and economic behavior and generalized global factors influencing it have been studied in detail by scholars, linking them to tax burdens (molent, 2020). however, lois p., drogalas g., karagiorgos a. and karasteriou e. note the emergence of the phenomenon of unpredictable financial behavior, which is expressed in tax evasion due to undeclared employment (lois, drogalas, karagiorgos, karasteriou, 2020). the authors jadoon i., mumtaz r ., sheikh j., ayub u. and tahir m. provide an unusual analogy of the impact of greening processes on financial stability in the world, emphasizing the importance of green energy investments on the financial performance of multinational corporations ( jadoon, mumtaz, sheikh, ayub, tahir, 2021). martini a. conducts a detailed study of the importance of global socially responsible investing in terms of the dynamics of business unit financial behavior. such financial activity has intensified in recent decades, evolving from a religious niche into a mainstream risk analysis strategy for institutional and retail investors. research shows that the lack of a globally accepted taxonomy of what constitutes sustainable financial activity, combined with practical and behavioral difficulties, are major critical challenges holding back the development of the socially responsible investing industry worldwide (martini, 2021). similar aspects, but in terms of human capital attributes, are explored by lamboglia r . and mancini d., highlighting the achievements and possible shortcomings of regulatory activity in this area at the international level in recent years, with a particular focus on the european union (lamboglia, mancini, 2021). carneiro j., rodrigues l. and craig r . contrast the international harmonization of the financial and economic environment, noting that full unification and harmonization is not always acceptable for each individual country with its own models of financial behavior of business participants (carneiro, rodrigues, craig, 2017). 3. results and discussion international financial cooperation has always played a special role in ensuring the vitality of any country 's economy and the viability of its financial system. however, the growth of cross-border cooperation, the emergence of new financial flows and the transformation of online financial relations have created a number of new financial linkages that are changing not only the traditional financial systems of the world and the global financial system, but also require universalization, modification, internalization of certain instruments of accounting, taxation (argilés-bosch, somoza, ravenda, garcía-blandón, 2020) and insurance. according to experts, at the current stage of development of international financial relations it is worth paying special attention to such factors as (adrian, 2021): 1. digital technology is a factor that will greatly increase its influence during 2019–2021. even though digital technology in finance was developing intensively even before the pandemic, the need for contactless payments has accelerated the digitalization of the industry many times over. virtual assets, whose proliferation and growth have also accelerated significantly over the past two years, will not be the least of these. the emergence of cryptocurrencies and new forms of financial intermediation services will play a key role in determining the new foundations of the international monetary system. the intensive development of digital technology will have a significant impact on the sectors of the real economy and may change the structure of many industries in the future. 2. following the concept of sustainable development is another important factor that cannot be ignored by humanity, and one that will have a tremendous impact on the development of the international system of financial relations. global climate change will hit the economic situation of all countries without exception: the financial and economic indicators of developed countries will deteriorate significantly, and the economies of poor countries will suffer catastrophic financial losses. already now, due to global warming, some regions of the world are losing their ski resorts (due to melting glaciers). as a rule, in such regions, the tourism industry was the leading one, and due to the loss of specialization, the local population faces the problem of further employment and labor emigration. after all, most countries, recognizing the principles of the concept of sustainable development, are actively working to mitigate human impact on the environment. as a result, innovative industries are actively developing, stimulating international financial and, in particular, investment flows. 3. global demographic trends are the third factor to be considered in the development of international financial relations. in recent decades, different demographic trends can be observed in different countries of the world. developed and intensively baltic journal of economic studies 86 vol. 8 no. 2, 2022 developing countries are experiencing a significant "aging" of the population and a shortage of people of working age. at the same time, other regions, especially southern africa, are experiencing a demographic boom. all this is happening against the backdrop of changing gender policies, uncontrolled or, on the contrary, regulated migration flows (in order to obtain necessary, but at the same time cheap labor). all this will inevitably affect the economic situation of certain regions and countries of the world: changes in the demographic structure and demographic policy will inevitably lead to changes in financial flows, both in volume and in direction. 4. geopolitical relations in general are a factor that currently plays a key role in shaping international financial flows. the international political arena is gradually becoming multipolar. ukraine and its territories play a significant role in these processes. its territories have become a "stumbling block" for the russian federation. it was the crimean peninsula and ukrainian donbass that caused financial and economic sanctions against russia. the aggressor country has already faced the threat of withdrawal from the swift payment system. instead, russia itself has repeatedly announced the creation of its own international payment system, which will be an alternative to the swift payment system. against the background of the polarization of geopolitical interests, the countries-economic partners are changing, there are significant fluctuations in energy prices (the issue of the launch of nord stream), and so on. 5. structural change is another factor to consider. it existed before, but during the pandemic its influence has increased significantly. the need to maintain financial and economic relations in these difficult times greatly accelerates the processes of technologization, automation and restructuring of the system of partnership relations, including supply. the pandemic years are a crisis, but according to the classical definition of "crisis" it is a "tipping point." countries that have realized this fact are trying to use these difficult circumstances for the benefit of the country 's financial and economic development, introducing "sustainable" changes in the system of economic relations, digitizing administrative and financial and economic relations with their own population and economic entities. ukraine is currently striving to be among those countries that are trying to turn the problems of structural change to their advantage. the development and implementation of the "diia" software application, the motto of which is: "country in a smartphone" – is a real confirmation of this. the software product offers a variety of registration and financial services that previously could only be obtained in person, standing in line at the relevant administrative structures and then at financial institutions to obtain permits and pay all official fees. to ensure the viability of national finances in accordance with the development of international finance (khovrak, 2013) and taking into account the presented influencing factors, including in ukraine, the following transformations should be carried out in accordance with the above priorities a, b and c: in developing priority a: should be fully aligned with the reporting standards used in european countries (albu, cătălin, gray, 2020), and include a set of demographic indicators, which of course affects the state and amount of financial resources used in the country and the scale of funding from international financial institutions. as for priority b, it is necessary to refer to the recommendations of the international roman formulary (maxton, jorgen, 2017), as well as worldrenowned economists (friedman, friedman, 2017), who advocate optimizing the tax systems of different countries to meet global requirements by raising taxes on the rich and inheritance (this is what ukraine is doing today, trying to create a register of the richest people in the country and take out the process of tax declaration of these people), taxes on energy, properly formed fiscal policy through the development of the philosophy of social welfare. the process of harmonization of corporate (income) taxes in european countries to the common tax base of the european union remains relevant (barrios, andria, gesualdo, 2020). when considering priority c, it should be noted that choosing the right insurance and financial security mechanism depends on a successful international audit and the chosen cybersecurity (lois, drogalas, karagiorgos, thrassou, vrontis, 2021) and taxation system. the results of a successful audit at various levels of international financial relations should be the basis for the right choice of instruments to insure, protect and mitigate threats from global financial risks. trends in the transformation of financial relations, new living conditions during the global pandemic, rapid turbulence in world markets, changing trends in migration flows, and fundamental changes in business behavior are now creating new frontiers of economic instability, financial inequality and social injustice in the world. the process of increasing the gap in the provision of various population groups with access to quality services (educational, medical, logistics), opportunities to make their own decisions, to implement their own initiatives, the level of economic, social, qualification and other resources. in this regard, there is a proliferation of aspects and forms of exclusion of business players from managerial decision-making in international business arenas. a mckinsey global institute study shows that the assets of only four groups of investors have almost tripled since 2015 by the end of 2020 (figure 1) (white, madgavkar, townsend, manyika, olanrewaju, baltic journal of economic studies 87 vol. 8 no. 2, 2022 sibanda. kaufman, 2021), equivalent to about 5% of global financial assets at the end of 2020. this is an impressive achievement for players who five years ago were on the fringes of global financial markets. the constant rise in oil prices and the steady growth of oil exports, particularly to developing countries, is the reason for the inflow of petrodollars. a significant part of the revenues from the sale of oil to consumers at high prices is deposited in investment funds and private portfolios of investors from oil-exporting countries. most of these funds are then invested in global financial markets, increasing liquidity. this explains the phenomenon of a "global savings glut," which has kept interest rates quite low over the past few years. the presence of epidemiological restrictions, new economic barriers, globalization and migration challenges aggravate the situation with the isolation of individual business players from the global market, which leads to a loss of economic confidence in business regulators, the formation of inaction, disinterestedness and lack of motivation of financial players. interdisciplinary information and technical mechanisms of using each individual country 's capabilities can become certain tools for measuring trends in the alienation of business players from the international financial market. in this regard, the dissemination of various informatization tools, access to information, and understanding of the possibilities of its use, will be the key to attracting potential investors and business players to many areas of public administration and will correct the direction of migration flows. in order to universalize the measurement of rejection trends of business players in international financial markets it is proposed to consider one of the possible models of dynamic object management – a system-situational model. the system-situational model of behavior of international investors is based on combining systemic and situational perceptions of business players on the interpretation of financially sensitive information (likhonosova, 2018). the system representation is determined through the following system-forming invariants: а) marginal invariants of resources: – time (t) – extremely non-reproducible resource, which is set by stationary intervals (past, current and future) of time, ordered respectively тpast < тpresent < тfuture; – financial knowledge (fkn) – an extremely inexhaustible resource, ordered relative to time. так, fkn(тpast) ≤ fkn(тpresent) ≤ fkn(тfuture) in the assumption that knowledge accumulates over time, but also loses its value; b) marginal invariants of development: – the limit of predictability (pd) of behaviour of international investors, which is determined by the signs of the level of perfection of financial information (environment of pure investment competition); – the limit of danger (pk), the achievement of which leads to the premature disappearance of functional features and investment opportunities of business players or a complete change of scope. to measure the vectors of behavior of international investors, the limit of catastrophe could be a situation of investment passivity that does not support the accumulation of financial knowledge. it should be emphasized that these constraints play the role of system-forming invariants on a given time interval and remain unchanged for any changes in other properties of international financial investors. thus, this systemic representation provides indicative boundaries for tracking and timely response to different patterns of behavior of international investors for further construction of the appropriate organizational and economic mechanism of regulation of investment actualization spheres. situational representation of the behaviour of international investors is presented through the definition of its essential properties in the dynamics of the past (тpast), current (тpres), future trends (тfuture) and target (ptar) of its states, which are set by stationary time intervals (lois, drogalas, karagiorgos, thrassou, vrontis, 2021). consolidation of system and situational representations is represented by determining systemforming invariants for a certain stationary time interval, for example тpres: rl (тpres), rk (тpres) and figure 1. distribution of holders of large international assets by investor groups source: developed by the authors based on (white, madgavkar, townsend, manyika, olanrewaju, sibanda. kaufman, 2021) baltic journal of economic studies 88 vol. 8 no. 2, 2022 determining situational states for a certain point in time in the selected stationary interval (1): t т р t т p t т р tі pres past і pres pres і pres pres і� � � � � � � � � �   � � � �, , �� � �т р t тpres tar і pres� � � �, , t т р t т p t т р tі pres past і pres pres і pres pres і� � � � � � � � � �   � � � �, , �� � �т р t тpres tar і pres� � � �, , (1) which allows us to create a targeted problemdiagnostic mechanism for predicting the behavior of international investors in dynamic financial markets. the problem in this modeling mechanism should be understood as a negative deviation of some of these situational states from the desired state (strategically, this state is adequate to the state of perfect predictability of behavior of international investors) at one or another moment of the corresponding stationary time interval t тк sut� �� �. in general, the problem-diagnostic mechanism can be represented in the context of mathematical modeling as a system of subsets of cartesian products of the set of system-forming invariants (2): r r zd к іnv� �� � � 2 � � (2) and sets of situational time states per target state (3): р р р р z таz zpast pres sut tag sut іnv sut; ; �� �� �� �� � � � (3) from here it is possible to calculate (4): r p p р р р рd к d к j d j к 1 1 1� � �� � � � � � ��� �� � � �� �( , ), ,( , ) (4) where: r1 � many problems of predicting the behaviour of international investors in dynamic financial markets; р рd j d 1 � �� �, ,… – the set of values (quantitative or qualitative) of the system-forming variables of the invariant of perfection; р рk j k 1 � �� �, ,… – the set of values of the system-forming variables of the danger invariant; р рj d j k � �� �, ,… – the problem of expansion policy and the emergence of new financial markets with new properties for potential investors, the problem of defining the limit of excellence рj d � , and the limits of danger рj k � , behaviour of international investors in relation to some variable рj . for example, the number of business players in the financial market who come up with their own proposals simultaneously on several market positions. r2 � – a set of strategic problems of dangerous targeted behaviour of business players in financial markets (pandemic conditions) (5). r z zіnv sut2 �� � � � �� ��� � � �p p р р р р р р р рd к past pres sut tar d м d pres�� � � �, , , }{ , ,( , ), �� � � � � � �р р р р р р р р р рd s d tar к past к pres к sut, ,( , ), , ,( , ), , ,� � � � � � (( , )р рк tar� �� � (5) where the first four two-element sets represent a class of strategic problems of financial regulation at the international level; the last four two-element sets are a class of strategic problems of the danger of breaking traditional financial chains and changing the behaviour of financial players. r р р р р p p р рpast pres sut tar past tar pres3 � � � � � � � � �� �� � � � �( , , ) , , , ttar sut tarр р� � � �� � � �, , ,� � 6 (6) where r3 � – class of tactical target problems of financial market targeting in the direction of responding to different behaviour of financial players; p ppast tar� �,� � – a subclass of targeted general problems of the financial market in the direction of regulating the possible rejection of business players in the past; р рpres tar, ,� � � – a subclass of targeted topical problems of new business players entering the financial market; р рsut tar,� � – a subclass of preventive target problems of realization of a market player's business position. the main purpose of identifying and implementing measures to overcome these problems is to prevent existing problems of regulating the financial and innovative activities of major business players in the global financial market. obviously, a necessary condition for defining classes, subclasses and individual problems is the certainty (qualitative or quantitative) of systemic and situational characteristics inherent in the behavior of the main business players in the global financial market. in summarized form, figure 2 schematically shows the vulnerability of financial and innovative activities of business participants in the context of unpredictable reactions to the proposed positions of the global financial market. figure 2 shows that the object of research in the process of its functioning, cyclic performance of the function (change of states: goal current – expected – goal) dynamically changes the behavior of business players in one of the opposite directions (the limits of perfection or danger). using the proposed idea and being aware of the level of possible threatening rejection of business players from the planned performance of the financial market, it is possible to determine the trajectory of further development of the business unit in the relevant sphere of influence. 5. conclusions the study proved that the solution of global financial problems depends on the coordinated actions of the entire world community. therefore, the development of international financial activity must move in the direction of: baltic journal of economic studies 89 vol. 8 no. 2, 2022 1) coordination and development of countries in various financial spheres regarding the adoption of appropriate regulations of supranational character (international standards) in order to minimize global risks in the international financial sphere; 2) meaningful universalization in international financial relations: currency, tax, credit, accounting, insurance, budgetary and others in order to control international financial activities and comprehensive impact on the national legislation of different countries; 3) restructuring of the national financial system of ukraine in accordance with the conditions of development of international financial activity and management of currency, tax, accounting, insurance, credit and other financial relations; 4) ensuring the viability of the national financial system in the direction of centralized imperative regulation of international financial relations and control over the fulfillment of international financial requirements. based on the above, it can be concluded that regardless of whether discount rates rise or oil prices fall, the four types of influential investors will continue to grow and determine the direction of the global financial capital market. however, there are some concerns about the growth of the four groups of influential investors. with the rise of credit derivatives and collateralized debt obligations, banks have recently spared themselves the consequences of bad loans. as financial institutions make more and more loans without securing the long-term performance risks of these loans with their own capital. this is why regulators need to find ways to verify noncompliance. if such instruments are smoothly implemented in the financial markets, we believe they will promote liquidity, financial innovation and diversification, which gives reason for healthy optimism in the development of global financial markets. figure 2. schematic representation of the vulnerability of financial and innovation activity of business players source: developed by the authors references: vaitsethovska, o. 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(in ukrainian) baltic journal of economic studies 213 vol. 7 no. 5, 2021 corresponding author: 1 pavlo tychyna uman state pedagogical university, ukraine. e-mail: chyrva81@ukr.net orcid: https://orcid.org/0000-0001-5246-9001 2 pavlo tychyna uman state pedagogical university, ukraine. e-mail: ch56@i.ua orcid: https://orcid.org/0000-0003-3791-6111 3 pavlo tychyna uman state pedagogical university, ukraine. e-mail: natashamalyarchuk2612@gmail.com orcid: https://orcid.org/0000-0002-5284-1376 doi: https://doi.org/10.30525/2256-0742/2021-7-5-213-220 formation of the mechanism of socio-economic development of ukraine olga chirva1, anna chirva2, natalia malyarchuk3 abstract. the subject of the research is the theoretical and methodological aspects of the formation of the mechanism of socio-economic development of ukraine. methodology. the study used the following general scientific methods: theoretical generalization; methods of positive and normative analysis, statistical analysis. the purpose of the work is to substantiate the formation of the mechanism of socio-economic development of ukraine. results. the purpose of the article is the formation of the mechanism of socio-economic development of ukraine. analysis of the socioeconomic status of households in ukraine showed that the average monthly total income of one household in 2020 was 12248 uah. minor disproportions are observed because the urban household received on average 12620 uah per month, while the rural household received 11470 uah per month. it was determined that on average per one person in a household (hereinafter people) the equivalent aggregate income (hereinafter income) was 5832 uah per month, in urban households – 6096 uah, in rural households – 5286 uah. it was proved that the level of average monthly income per person was 2.8 times higher than the established subsistence minimum (2078 uah). it was found that the main source of income in households with one child was income from work (77%), and in households with three or more children the share of this income was 1.2 times lower. the socio-economic condition of ukrainian households is analyzed. the structure of total resources of all households is examined the structure of total household expenditures is also analyzed. the distribution of users of internet services by purpose is studied. the formation of the mechanism of socio-economic development of ukraine in terms of sustainable development is carried out. it is proved that the mechanism of formation and development of socio-economic systems can be characterized as a mutually agreed system of legal and methodological support, based on the basic principles of territorial systems (sustainability, multilevel, partnership, dynamism, focus on local needs, public participation) and aimed at ensuring the welfare of the community, the well-being of residents and increasing the competitiveness of the territorial system, by developing appropriate tools. key words: mechanism, socio-economic development, households, income and expenditure of the population. jel classification: e20, e69, j10 1. introduction constant changes in the global market conditions, institutional and structural transformations of the national economy require the development of a sustainable socio-economic development mechanism based on appropriate tools, goals and principles of improvement, efficiency and development of economic entities and relevant territories that implement innovations and develop new products and services. ensuring sustainable socio-economic development of ukraine is impossible without improving the relevant mechanisms of activity and management practices of the development of the relevant system. to ensure sustainable socio-economic development of the population in modern conditions of activity the necessary basis is the effective formation and use of resource potential and its intensification of innovation processes. the effectiveness of sustainable socio-economic growth of the population and economic entities is determined by the ability of the management system to influence all business processes and coordinate its internal capabilities with economic baltic journal of economic studies 214 vol. 7 no. 5, 2021 and incentive tasks to ensure competitiveness based on the development of the mechanism and its implementation in the global dimension. in modern conditions of transformation of economic relations and socio-economic systems, reforming the institutional and legal field of socio-economic development of our country, which is characterized by the gradual introduction of european norms, decentralization processes on the background of complex geopolitical and economic challenges, there is a need for an effective system to monitor socio economic development, which would allow to make certain management decisions promptly and to determine their impact on the relevant processes. today, many strategic programs and plans for regional development do not contain a clear rationale for the system of financing. the implementation of strategic programs and plans affects the level of socio-economic development. all this requires constant monitoring of statistical indicators and the results of sociological surveys to assess the socio-economic development of the regions. that is why the study of the current state of socio-economic security of the population, the formation of the mechanism of socio-economic development of territories is quite relevant and requires thorough research. 2. analysis of the socio-economic status of ukrainian households in recent years there has been a particular aggravation of socio-economic problems of rural development. this is due, on the one hand, to the global process of urbanization, inherent in our country, and on the other hand – economic, social, cultural, spiritual decline of the ukrainian village, due to a number of problems associated with the inefficient use of socio-economic potential. as a result, rural areas of ukraine today face a number of challenges caused by the destruction of social and communal infrastructure, deteriorating quality of human capital, growing socio-demographic inequality, inefficient use of available natural resources, and deteriorating environmental conditions. on the contrary, effective reforming and ensuring socioeconomic development of indigenous rural areas is an important reserve for equalizing spatial and structural socio-economic distortions, the basis for developing real sectors of the economy, stimulating business activity, improving infrastructure and quality of life (vasyltsiv, 2013). the average aggregate monthly income per household in 2020 was 12,248 uah. an urban household received an average of 12,620 uah per month, while a rural one received 11,470 uah. on average per person in a household (hereinafter referred to as a person), the equivalent aggregate income (hereinafter referred to as income) was 5,832 uah per month, in urban households – 6,096 uah, in rural households – 5,286 uah. the level of average monthly income per person was 2.8 times higher than the established living wage (2 078 uah). average per capita household income in 2020 compared with the previous year grew faster than the consumer price index for this period: 103.8% vs. 102.7%, respectively. inequality in the distribution of aggregate income is characterized by the lorenz curve and the concentration coefficient (gini index), which takes values from 0 (equal distribution of income among the population) to 1 (all income belongs to one person). the gini index of aggregate income decreased from 0.249 in 2019 to 0.247 in 2020. the ratio of the minimum level of aggregate income among the poorest 10% of the population to the maximum level among the poorest 10% of the population decreased in ukraine from 3 to 2.9 times, among urban residents – from 3.1 to 2.9 times, and among rural residents – from 2.8 to 2.7 times. the wealthiest 20% of the population received 36% of total aggregate income in 2020, as in the previous period. the ratio of aggregate incomes of the most and the least wealthy 10% of the population remained at the level of 2019 and amounted to 4.9. the share of aggregate income of the 40% of the least well-off was, as in 2019, a quarter of all aggregate income. the ratio of the growth rate of the average per capita equivalent aggregate incomes of 40% of the least well-off and the total population was 1.02 times in 2020 (in 2019 – 0.97 times). the proportion of the population with per capita equivalent of total monthly income below 50% of the median level of total income (2 555 uah) in 2020 is 4% (in 2019 – 4.2% and 2 478 uah respectively). compared to 2019, the differentiation of the level of well-being of the population, calculated by the criterion of monetary income, decreased. the gini index was 0.260 in 2020 compared to 0.265 in 2019. the minimum level of monetary income among the richest 10% of the population exceeded the maximum level among the poorest 10% of the population by 3.1 times (3.3 times in 2019). the richest 10% of the population received 5.3 times more income than the poorest 10% of the population (5.5 times). m. kuybida, k. chernitsyna believe that "the most important task of the development of ukrainian society is to improve the quality of management of socioeconomic development of the state and regions. the need to improve state regulation of socio-economic development of regions is due to the inefficient use of financial and material resources aimed at development, the inability of most regions to solve their socioeconomic problems, the limited powers of regional authorities to regulate the rational use of resources and create conditions for improving the quality of life" (kuybida & chernitsyna, 2010). baltic journal of economic studies 215 vol. 7 no. 5, 2021 households met their needs at the expense of resources from various sources. average monthly total resources (hereinafter – resources) per household amounted to 12,432 uah, urban – 12,806 uah, rural – 11,651 uah and increased compared to 2019 in ukraine as a whole to 3%, in urban areas – to 1.7%, in rural areas – to 5%. resources per person, on average 5920 uah, 6186 uah and 5369 uah, respectively. in the structure of resources of households, the predominant part (94%) consisted of cash incomes (in 2019 – 92%). in urban households, their share increased by 1.9 percentage points. and amounted to 96%, and in rural areas – by 2 percentage points and amounted to 88%. compared to 2019, the share of income from employment increased by 0.3 percentage points to 64% of household resources. at the same time, the share of wages and salaries (58%) increased by 1 percentage point, and the share of income from entrepreneurship and self-employment (6%) decreased by 0.7 percentage points. the share of pensions, scholarships, and social benefits (including cash and noncash benefits and subsidies) increased by 0.9 percentage points to one-fifth of household resources, including benefits and subsidies for housing, utilities (cash and noncash) as 1% (1.4% in 2019) of all household resources. significant differences were the structures of formation of aggregate resources of urban and rural households. employment income for urban households accounted for 70% of resources (their share increased by 0.3 percentage points compared to 2019), a fifth was pensions, scholarships, and social benefits provided in cash (up 1.8%). half of the resources of rural households were income from employment, 0.3 percentage points more than in 2019. traditionally important for this group of households was such a source of resources as income from personal subsidiary farming, which accounted for 16% of their total income (17% in 2019). pensions, scholarships, and social benefits provided in cash continued to be a significant source of resources, with their share increasing by 1.6 percentage points to one-fifth. bil m. m., mulska o. p. note that the problematics of consumer research has a multifaceted nature. on the one hand, modern society is evolving as a consumer society. the ideas of saving, conserving environmental resources with the encouragement of long-term consumption are increasingly being promoted. on the other hand, the priorities of consumerism persist with the growing rights of consumers, in particular with regard to access to quality products and in sufficient quantity. for developing or transforming societies, to which ukraine belongs, the study of consumption and cost structure is rather of an acute social nature, which, however, is intertwined with the structural weaknesses of the economy and the contradictions of innovative development. households are an important object of analysis of consumption patterns, highlighting its main patterns. these institutional units make it possible to "individualize" the assessment of the needs of the population and to identify risk trends in the relationship between economic growth and well-being (bil & mulska, 2021). the main source of aggregate resources in households with one child was income from work (77%), while in households with three or more children the share was 1.2 times lower. households with many children had 9% of income from private farming and self-sufficiency, 63,8 20,3 6,0 9,9 64,1 21,2 5,5 9,2 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 employment income * pensions, scholarships, social benefits income from personal subsidiary farms ** help from relatives, other people and other income % 2019 2020 figure 1. the structure of the total resources of households * wages, income from entrepreneurship and self-employment. ** income from the sale of agricultural products and the value of consumed products obtained from personal subsidiary farms. baltic journal of economic studies 216 vol. 7 no. 5, 2021 while pensions, scholarships, and social payments (cash and non-cash) accounted for one-fifth of all resources. in households without children, labor income accounted for 53% of resources (down 3 percentage points from 2019), pensions, scholarships, and social benefits (cash and noncash) for 31% (up 4 percentage points), and income from private farming and self-growing for 6% (down 0.4 percentage points). average monthly total expenditures (hereinafter referred to as costs) per household were 9,524 uah, urban – 9,820 uah, rural – 8,903 uah. average expenses per person amounted to 4535 uah per month, in urban households – 4744 uah, in rural households – 4103 uah. household consumer spending accounted for 91% of all total spending, down 0.1 percentage point from 2019 (figure 2). households spent 49% of all spending on food (including meals outside the home) (0.7 percentage point more than in 2019). households spent 39% of all total spending on nonfood items and services (excluding out-of-home food), 0.9 percentage points less than in the previous period. spending on alcoholic beverages and tobacco products accounted for 1.2% and 2.3% of household spending, respectively (1.2% and 2% in 2019). the share of non-consumer expenditures, as in the previous period, was 9% of total household expenditures. households spent 39% of their total spending each month on non-food items and services (not including the cost of food outside the home) (40% in 2019). the average household spent 14% of total expenses on housing (including current repairs), water, electricity, gas, and other fuels; 5% on closet renovations; and 1% to 4% of total expenses on other areas of consumption, education, recreation and culture, the purchase of household goods, household appliances and current housing maintenance, communications, transportation, health care, etc.). consumer spending on non-food goods and services of urban households was 1.3 times higher than that of rural households, in particular, on recreation and culture, education, housing, water, electricity, gas and other fuels, communications – 3-1.2 times, on transport, health care (drugs and medical services), household items, household appliances, current housing, clothing and shoes – 13-5% respectively. karp’yak m. o., stegney m. i. believe that "the modern dynamism of socio-economic development poses new challenges to the state associated with the need to confront the negative consequences of continuous transformations, the most striking of which we consider the growth of inequality and social polarization caused by changes in the social structure of society. a consequence of these changes today is the spread of such a negative social phenomenon as social exclusion, which in the 1960s was interpreted by the american sociologist t. parsons as a concomitant and almost inevitable effect of modern society. the problem of social exclusion in ukraine and its regions is primarily associated with dysfunctional processes of regulation of the main spheres of life, including employment, wages and access to social services. in addition, the presence of other destabilizing factors of an economic nature creates a significant risk of people being socially excluded today, including: the presence of significant imbalances in the labor market, including high levels of unemployment and job losses; a significant level of poverty, especially among the working population; the risk of not getting a job in accordance with the level of qualifications one has acquired and other factors that pose a particular threat 48,5 1,2 2,0 39,6 8,7 49,2 1,2 2,3 38,7 8,6 0,0 10,0 20,0 30,0 40,0 50,0 60,0 for food for alcoholic drinks on tobacco products for non-food goods and services ** other expenses % 2019 2020 figure 2. structure of total household expenditures * including the cost of meals outside ** without the cost of meals outside baltic journal of economic studies 217 vol. 7 no. 5, 2021 to the preservation and development of the state's human potential" (karp’yak & stegnei, 2021). "innovation, as part of an enterprise's competitive advantage, is not only a strategically important resource, but also an area of potential loss when financial support is unsustainable. the close relation ship between competitiveness, investment attractiveness and innovation is a crucial area of economic analysis"(irtyshcheva at el., 2021). modern information and communication technologies, in particular the internet, are becoming more accessible and increasingly common among the population (appendix 9). according to the survey, the proportion of people who reported using the internet was 76% (70% in 2019), among residents of large cities such people were 83% (80%), in small towns – 78% (74%). in rural areas, the proportion of people who reported using the internet increased from 56% to 64% compared to 2019. in households with children, 85% of people used the internet (79% in 2019) and 65% without children (60%). the percentage of households with access to internet services at home increased from 66% to 79%. the percentage of children under the age of 18 who used the internet was 76% (73% in 2019). among internet users, 85% reported using the world wide web at least once a day; at least once a week but not every day, 13%; and less than once a week, 2%. of all users, 86% said they use the internet at home, 79% say they use it somewhere through their cell phone or smart phone, 18% say they use it at work, 10% say they use it at their place of study, 8% say they use it elsewhere (at friends, acquaintances), 0.7% say they use it somewhere through another mobile access device, 0.4% say they use it in a public internet access center and 0.1% say they use it in a commercial internet access center. the population used the internet for a variety of purposes. the most common internet services for users were downloading movies, pictures, music, watching tv or videos; listening to radio or music; playing or downloading videos or computer games – 72%, 59% said the purpose of using the internet was to communicate, 36% said the purpose was banking, 34% was to make phone calls over the internet, 33% sent (received) email, 28% was to find health information for themselves and others, 21% was to order (buy) goods and services, 20% was to read or download periodicals online. compared to 2019, the share of users who used the internet for banking purposes increased by 1.7 times. "the management of the financial autonomy of a region must: ensure the achievement of the goals of economic development of the region of the whole system; be based on the principles of democratization of management, which will allow to direct the economic activity of the entire population of the territory to use the available reserves; organically fit into the economic, political and organizational structure of the state; be flexible, able to rebuild or to complete with the specifics of development of each city and district, located in the region" (melnychuk, chyrva, chvertko, chyrva & berbets, 2020). children under 18 primarily used the internet to download movies, pictures, and music; watch tv or videos; listen to radio or music; play or download videos or computer games (89% of users this age), 72% used the internet for educational, professional, or private purposes through online courses (except complete online courses), half used the internet to participate in social media, communicate, 21% to send (receive) e-mail and telephone calls over the internet, and 10% used the internet to read or download periodicals. 83% of men and 80% of women used the world wide web. males were more likely than females to use the internet to download movies, pictures, music, watch tv or videos; listen to radio or music; play or download videos or computer games, read or download online periodicals, and download software. women mostly used the internet to participate in social networks, communicate, bank, search for healthrelated information, both for themselves and for others, and to order (buy) goods and services. to ensure sustainable socio-economic development of the population, in our view, it is necessary to form an appropriate mechanism for implementation. 3. the mechanism of socio-economic development of ukraine in terms of sustainable development kholodniuk z. v. notes that "during the financial and economic crisis there is a change in the economic mechanism, which in one way or another affects the economy and the social situation in each region. inter-regional differences are growing, which leads to changes in regional policy: structural changes, the rejection of centralism and the transition to federalism in public administration, the reduction of the distributive function of the state budget, and so on. these processes are inevitably aimed at expanding the economic independence of regions, the development of local self-government, which in conditions of unstable economic development is a tool to overcome the crisis" (kholodniuk, 2011). kovalchuk v. g. believes that "the state mechanism of management in ukraine should be considered as a complex, which includes several independent mechanisms, each of which is able to influence in one way or another on the objects of management. this is a system, which, in addition to the tools of influence on the object of management, also includes methods, levers, policies, appropriate regulatory and information baltic journal of economic studies 218 vol. 7 no. 5, 2021 support, and so on. there is a rich evolutionary experience of changing and improving the mechanism of management of remote territorial components of the state or regions. more thoroughly this problem began to be solved with the introduction of administrative-territorial formations. administrative structures of regional management emerged and are constantly being improved out of practical expediency. the ongoing processes of economic and social transformation determine the objective need for theoretical rethinking of the internal content and purpose of all elements of the mechanism of regulation of socio-economic development of the region" (kovalchuk, 2013). stehnei m., irtysheva i., gurina o. to note "first of all, indirect methods include stimulating the development of the regional economy and job creation, stimulating the social consciousness of business leaders, expanding public-private partnerships, comprehensive support for innovation and science development in the region, implementing relevant social innovations, and debunking the regional economy " (stehnei, irtysheva & gurina, 2018). the mechanism of formation and development of socio-economic systems can be described as a mutually coordinated system of legal and methodological support, based on the fundamental principles of territorial systems (sustainability, multilevel, partnership, dynamism, focus on local needs, population participation) and aimed at ensuring community well-being, the well-being of residents and the benefit of future generations and increasing the competitiveness of the territorial system (figure 4). among the list of methodological support for the mechanism of formation and development of decentralized socio-economic territorial systems an important place belongs to the program-target method, focused on the efficiency of resources based on the system approach and the method of development of local communities using local resources based on the situational approach. the proposed mechanism for the formation and development of decentralized socio-economic territorial systems requires the improvement of sociohumanitarian guidelines and state-building capacity of the national identity in the direction of strengthening social protection guarantees and public-private partnerships in accordance with the sustainable development goals by 2030. the main direction of modernization of the strategic directions of territorial and national socio-economic development should be a human-centered approach that prioritizes the interests of socio-economic development. "it is proved that the state policy in the field of human capital development in ukraine today does not meet the modern challenges associated with the rapid 4,5 33,1 3,3 19,8 71,5 4,1 34,4 59,3 36,2 27,8 20,7 18,0 26,9 2,5 22,7 61,2 3,7 42,9 50,4 21,0 31,0 16,7 0 20 40 60 80 search for information about goods and services not previously mentioned sending (receiving) e-mail interaction with public authorities reading / downloading newspapers and magazines online software download download movies, images, music; watching tv or videos; or listening to the radio or music; play or download video or computer games phone calls via internet / volp (skype, italk, via webcam) participation in social networks, communication (access to sites, chats, blogs or online discussions) banking services search for health-related information for yourself and others order (purchase) of goods and services 2019 2020 figure 3. distribution of users of internet services by purpose of use (% of population who reported that used the internet) baltic journal of economic studies 219 vol. 7 no. 5, 2021 development and proliferation of digital technology. the consequences of this already today are growing inequality in the labor market, the lack of highly qualified specialists with digital competencies at the proper level, increasing trends of emigration of intellectual capital and the gene pool of the nation abroad, the shrinkage of the "middle class" and the strengthening of social degradation. the solution of these problems requires the development and implementation of a unified state strategy for human capital development, which will stimulate its formation, development and effective use in the vector of transition to a new technological mode, will ensure economic growth and high living standards of the population"(irtyshcheva, trushliakova & sirenko, 2020). 4. conclusions analysis of the socio-economic status of households in ukraine showed that the average monthly aggregate income per household in 2020 was 12248 uah. there are slight disparities, as an urban household received on average 12620 uah per month, and a rural regulatory and legal, scientific and innovative, software and technical, resource and infrastructure support subjects: individuals; entities; citizens' associations; subjects of power. the object is socio-economic development tools: • tax holidays; • reduction of the tax burden; • balanced • tax policy; • raising of social standards; • stimulating of the development of small business principles: • sustainability; • multilevel; • partnership; • dynamism; • focus on the local population; • public participation tasks: • well-being of the population; • ensuring the improvement of territories; • the benefit of future generations; • ensuring of socio-economic growth; • increasing of the competitiveness of territories. mechanism of formation and development of socio-economic systems figure 4. the mechanism of formation and development of socio-economic systems one – 11470 uah per month. it was determined that on average per person in a household (hereinafter people) the equivalent aggregate income (hereinafter income) was 5832 uah per month, in urban households – 6096 uah, in rural households – 5286 uah. it was proved that the level of average monthly income per person was 2.8 times higher than the established subsistence minimum (2078 hryvnia). it was found that the main source of income in households with one child was income from work (77%), and in households with three or more children the share of this income was 1.2 times lower. the formation of the mechanism of socio-economic development of ukraine in terms of sustainable development is carried out. it is proved that the mechanism of formation and development of socioeconomic systems can be characterized as a mutually agreed system of legal and methodological support, based on the basic principles of territorial systems (sustainability, multilevel, partnership, dynamism, focus on local needs, public participation) and aimed at ensuring the welfare of the community, the well-being of residents and increasing the competitiveness of the territorial system, by developing appropriate tools. references: vasyltsiv, t. g., boyko, v. v., & popovichenko, yu. a. (2013). strategic priorities of the state policy of social and economic development of rural areas. socio-economic problems of the modern period of ukraine, 6, 79–87. baltic journal of economic studies 220 vol. 7 no. 5, 2021 state statistics service of ukraine (2021). available at: http://www.ukrstat.gov.ua/ kuybida, m., & chernitsyna, k. (2010). state regulation of socio-economic development of regions. scientific bulletin "democratic governance". available at: http://lvivacademy.com/vidavnitstvo_1/visnik5/fail/+kujbida.pdf bill, m. m., & mulska, o. p. (2021). models of consumer behavior of households and regional features of their formation in ukraine. regional economy, 2(100), 53–60. doi: https://doi.org/10.36818/1562-0905-2021-2-5 karp’yak, m. o., & stegney, m. i. (2021). assessment of social exclusion in ukraine and its impact on the socio-economic development of the state at the national and regional levels. regional economy, 2(100), 72–82. doi: https://doi.org/10.36818/1562-0905-2021-2-7 irtyshcheva, i., sukhostavets, a., falovych, v., kovbasa, o., liashok, o., & kolesnik, e. (2021). modelling the innovative competitiveness of an enterprise with a change in investment provision. estudios de economía aplicada, 39(5): special issue: innovation in the economy and society of the digital age. doi: https://doi.org/10.25115/eea.v39i5.5041 kholodniuk, z. v. (2011). improving the mechanisms of implementation of socio-economic policy of the state in the management of the region. public administration: improvement and development, 7. available at: http://www.dy.nayka.com.ua/?op=1&z=580 melnychuk, yu. m., chyrva, o. h., chvertko, l. a., chyrva, h. m., & berbets, v. v. (2019). the role of management in the financial independence of the region. tem journal, 8(2), 584–590. available at: http://www.temjournal.com/content/82/temjournalmay2019_584_590.pdf stehnei, m., irtyshcheva, i., & gurina, o. (2018). financial mechanism of the socio-oriented economic development of the black sea region. baltic journal of economic studies, 4, 202–208. doi: https://doi.org/ 10.30525/2256-0742/2018-4-4-202-208 kovalchuk, v. g. (2013). improving of the mechanism of public management by sustainable development of the region. available at: http://www.dridu.dp.ua/zbirnik/2013-01(9)/13kvgsrr.pdf irtyshcheva, i., trushliakova, a., & sirenko, i. (2020). strategic human capital management in the context of digitalization. baltic journal of economic studies, 6(5), 178–183. doi: https://doi.org/10.30525/2256-0742/20206-5-178-183 baltic journal of economic studies 34 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: my.post7@protonmail.com 2 department of education, science and sports of the ministry of internal affairs of ukraine, ukraine e-mail: vitvitskyi_ss@ukr.net 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: tatianaponomarova@ukr.net doi: https://doi.org/10.30525/2256-0742/2022-8-4-34-39 definition of criminal and illegal activities in the economic sphere serhii vitvitskyi1, anton syzonenko2, tetiana titochka3 abstract. the purpose of the article is to define the essence of criminal and illegal activities in the field of economy; to clarify its determinants; to highlight the features of national prevention of socially dangerous acts that threaten the economic security of the state. the scientific discussion is presented, which highlights the problem of determining the markers of illegal activity in the field of economy. such markers include: 1) the investigated criminal offenses always create a platform for the "shadow" economy; 2) criminal offenses in the field of economy are interconnected with corruption, which simplify such illegal activities (the subjects of criminal offenses in the field of economy are usually officials); 3) the presence of intent to obtain economic benefits; 4) the presence of only direct intent; 5) illegal actions are committed by all possible criminal means. the causes and conditions of criminal and illegal activities in the sphere of economy are determined. the groups of factors of criminal and illegal activities in the sphere of economy are considered. it is noted that mistakes in economic planning inevitably result in artificial (often unintentional) formation of conditions conducive to the commission of illegal acts. socio-economic causes are retrospective in nature, i.e., they are historically conditioned phenomena associated with economic changes, the latter occurring over the past fifty years. some national means of preventing socially dangerous acts in the economic sphere are proposed. results. the author's approach to the concept of criminal illegal activity in the field of economy is proposed. the complex of reasons and conditions of criminal and illegal activity in the sphere of economy is developed, which include 1) insufficient level of social protection of the population; 2) unsatisfactory level of economic development of the state; 3) inconsistency of the mentality of the society with the social values recognized at the highest state level; 4) the presence of "dead" zones in the labor market; 5) insecurity of small and medium-sized businesses in the state, etc. it is found that the measures and means of national prevention of criminal illegal activities in the sphere of economy should include 1) stabilization of the political situation in the country; 2) solving the problems of small and medium-sized businesses; 3) identification of gaps in economic planning and forecasting of economic measures for the next years; 4) development of the labor market, including the creation of "dead" zones, the continuation of a number of state-owned enterprises; 5) increase the level of social protection of vulnerable categories of the population (elderly people, people with special needs, people raising children on their own, etc.); 6) improve the social package provided to employees; 7) increase the level of average wages, etc. key words: criminal offence, economy, economic security, determiners, economic sphere, prevention, `shadow` economy, labor market. jel classification: k14, f52 1. introduction today, criminal illegal activities in the economic sphere constitute a significant part of the total number of criminal offenses. according to statistics published on the website of the prosecutor general's office, in 2016, 6940 criminal offenses were committed in the field of economic activity (12% of the total number of illegal acts), in 2017 – 6297 cases (1.2% of the total number of illegal acts), in 2018 – 6334 cases (1.3% of the total), in 2019 – 5947 cases (1.3%), in 2020 – 5342 cases (i.e. 1.5%), as of october 2021, the number of violations in the field of economic activity was 5308 (1.8% of the total number of illegal acts) (official statistics of the prosecutor general's baltic journal of economic studies 35 vol. 8 no. 4, 2022 office). this indicates the presence of a number of determinants, the impact of which on the economic security of ukraine is negative. the peculiarities of criminological influence on the determination of economic illegal activity were studied by a number of scientists, including a. m. boiko, n. o. gutorova, v. m. driomin, o. o. dudorov, o. g. kalman, v. p. korzh, i. v. ozersky, v. m. popovich, ye. l. streltsov, v. ya. tatsiy, etc. however, identifying the specifics of determining the determinants of criminal offenses in the field of economic activity requires additional attention, which emphasizes the relevance of the topic of the article. the purpose of the article is to clarify the essence of criminal unlawful activity in the economic sphere, to characterize its determinants; to highlight the peculiarities of national prevention of socially dangerous acts that threaten the economic security of the state. 2. the essence of criminal unlawful activity in the sphere of the state economy in the conditions of modern technological and information development of the national economy, economic crime is gaining dangerous proportions. committing crimes in the sphere of economy is a real danger for the state and individual citizens, as the development of the economy ensures the existence and development of society. the scientific interest in the problem of economic crime and the difficulties of overcoming it is caused by the fact that in the national literature there is a differentiated approach to the definition of crimes in the field of economy. in many scientific works, one can find various interpretations of this phenomenon, in particular, "crimes in the field of economy ", "economic crimes", "shadow economy ", "criminal economy ", etc. these concepts are often identified, but there are attempts to prove the different nature of these phenomena. in particular, o. yakovlev defined economic crime as property and mercenary crime, as well as crime in the sphere of economy; the author notes that economic crime is characterized by a combination of mercenary encroachment on property, the order of economic management, committed by persons who occupy a certain social position in the structure of the economy (skakun, 2018). the distinction between the concepts of "economic criminal offense" and "economic offense" has the right to exist, since from a phenomeno logical point of view these are really different definitions. in a broader context, this study is focused on economic offences that have a negative impact on economic security as a component of the national security of the state. economic crime is characterized by its scale, which is mainly due to the encro achment on certain social relations, the improper functioning of which destabilizes the process of public administration. as s. kravchuk notes, all these concepts have a different range of illegal acts. thus, crimes in the sphere of economy, according to the author, are mainly economic crimes; economic crime involves the commission of crimes in the sphere of economic activity, including the use of official position. s. kravchuk classifies acts related to causing material damage or obtaining material benefits as crimes of a material nature (kravchuk, 2009). identifying the features of economic crime from the point of view of criminology is associated with the peculiarities of the concept of economic crime as a negative phenomenon. the founder of the theory of economic crime is considered to be e. saterland, who first introduced the concept of economic crime and called it "white-collar". the most important feature of the former is the abuse of power for the purpose of enrichment. investigating the official position and social status of the offender, sutherland defined "white-collar" crime as "anti-social, enrichmentoriented behavior of people who occupy a prestigious position in society and behave in such a way that, simultaneously with the law-abiding behavior of the rest of the people, they abuse the social trust enjoyed by another group" (kharko, 2010) in the context of the doctrine of economic and legal sciences, economic criminal activity in some aspects is associated with corruption. at the same time, it should be noted that corruption as an institution should be considered as an independent phenomenon, which is the main risk to the economic security of the state, and relates mainly to the service sector, not to the economic sphere. s. kravchuk argues that economic crimes are crimes committed in the economic sphere with the use of legal technical, accounting, financial and accounting, control and administrative rights and powers. the scientist identifies eight essential features inherent in economic crime: – has a continuing nature; – is characterized by high latency; – consists of criminal acts committed by state actors; – violates the order of economic management; – committed by legal entities (which can be explained by the fact that according to the criminal law, only a legal entity can be the subject of a crime); – has a close connection with organized crime, corruption, "shadow" economic activity; – forms a semi-criminal mentality among the citizens of the state (kravchuk, 2009). the above features seem to be reasonable, but the authors have a slightly different approach, according to which the signs of criminal activity in baltic journal of economic studies 36 vol. 8 no. 4, 2022 the field of economy should include the following: 1) the investigated criminal acts are always a platform for the formation of the "shadow economy "; 2) criminal acts in the economic sphere are interconnected with corruption acts that facilitate such illegal activities (the subjects of criminal offenses are often officials); 3) the presence of intent to obtain economic benefits; 4) the presence of only direct intent; 5) the commission of an illegal act is committed by all possible criminal prohibited methods. d. m. harko in his work "criminological problems of defining the concept and signs of modern economic crime as a factor of shadowing of the economy of ukraine" identifies the following signs of economic crime: – it is a type of crime that has a predominantly mass character and, accordingly, causes massive damage; – covers various abuses of economic power; – is committed in the course of professional activities of a manager; – has multiple episodes of committing a crime; – is performed by both individuals and legal entities; – is a more complex socio-economic phenomenon than traditional crime; – has a latent nature; – causes significant economic damage to the interests of the state (harko, 2010). summarizing the different views of scientists on the signs and features of economic crime, scientists offer the following definition of economic crime: "economic crime is an unlawful act committed in the sphere of economy with the use of official position, violating the order of economic management, and aimed at obtaining economic benefits." given this definition, the following features of economic crime can be distinguished: – characterized by abuse of power; – has a property character; – has a latent character; – is characterized by the use of legal and illegal economic activities. the development of the crisis situation in the economy is a factor that attracts criminals to commit economic crimes, in addition, it should be borne in mind the struggle for economic power, which makes it possible to expand the number of ways to seize power, as well as to commit illegal actions in the economic sphere (sakun, 2018). according to the authors, criminal unlawful activity in the field of economy is a set of socially dangerous and illegal acts that encroach on the economic security of the state, the established procedure for the functioning of economic institutions of the state, the procedure for the exercise by business entities of their powers and management functions. 3. the notion of causes and conditions of illegal criminal activity in the economic sphere criminal illegal activity in any sphere is determined by a number of reasons, which, first of all, have a national, social nature. however, there are reasons and conditions that allow differentiating criminal offenses depending on the catalysts that cause them. the causes and conditions of criminal offenses in the sphere of economic activity should be understood as negative social and economic phenomena and processes that have different determinative value, including accidental, but, interacting, create, promote, modify and determine the existence and manifestations of economic crime. based on the analysis of sociopsychological factors, it should be noted that new conditions have emerged for the formation of social tension in connection with the sharp stratification of society by the level and quality of material security. values have changed in society. material wellbeing, regardless of the methods of its achievement, began to dominate more than work. a sharp increase in the welfare of a narrow circle of people generates not only envy, but also the desire to get the same, or a surrogate of the same benefit. benefit shapes and determines the behavior of many segments of the population (moiseyenko, 2020). profit and violence are the "core" of any type of criminal offense, which remains unchanged for a long period of time. however, the gradual change of mentality and social needs transforms criminal actions, giving them new forms while maintaining the old intentions. thus, it can be confidently stated that the main reason for committing criminal offenses is the satisfaction of material needs at a level sufficient for a certain stratum of the population. analyzing the determinants of criminal offenses in the field of economic activity, one should pay attention not only to short-term (current) factors, but also to long-term and medium-term factors that determine the development of this phenomenon. these are factors that arise and operate in ukraine and are related to the primary accumulation of capital and redistribution of property. in 1997 and 2008, the negative consequences of the global economic crisis became apparent, and mediumterm factors are acting at a certain stage of society transformation. these stages last about forty years, during which there are significant changes in the functioning of the economy. long-term factors of the existence of criminal offenses in the sphere of economic activity are rooted in socio-economic contradictions of society development, in the change of forms of ownership, in the problems of the country 's integration into the world market, in the traditions of economic life, in the nature of legal and information support of entrepreneurial activity, etc. baltic journal of economic studies 37 vol. 8 no. 4, 2022 at the same time, the possibilities of forecasting crime in the sphere of economic activity in general are limited. accounting of open criminal proceedings carried out by the prosecutor's office does not allow to see the regional peculiarities of criminal offenses of this category, as well as other types of criminal offenses. on the one hand, there is a decrease in the official statistics on the number of detected offenses and criminal proceedings opened on them, on the other hand, surveys and interviews with law enforcement officers and businessmen indicate the opposite (moiseyenko, 2020). thus, one can say that the causes and conditions of criminal activity in the economic sphere are as follows: 1) insufficient level of social protection of the population; 2) unsatisfactory level of economic development of the state; 3) inconsistency of the mentality of society with social values recognized at the highest level of the state; 4) the presence of "dead" zones in the labor market; 5) vulnerability of small and medium-sized busi-nesses in the state. the current system of recording criminal offences is based on the number of open criminal proceedings and their movement. however, it does not take into account other criteria for comparison that would allow to analyze certain issues. this is, for example, the number of persons who have committed the same crime and their criminal legal characteristics (criminal record, type of subject and social status), form and type of complicity, type of repetition, scope of the criminal offense, type and amount of damage, amount of compensation, the presence of aggravating and mitigating circumstances and their number in each criminal offense, types and geography of the criminal offense, etc. thus, the system of accounting of criminal offenses does not allow to separate from the array of realizations such offenses that are committed in the field of economy. also, the authors are unable to distinguish between criminal offences committed in complicity by the same officials who are employees of a business entity (legal entity), as well as those who do not work at this enterprise. the existing system of registration of criminal offences does not allow to identify those persons who have committed criminal offences repeatedly. records are kept only on persons who have committed criminal offences repeatedly. moreover, it is impossible to determine what types of repetition are in question: general, special or recidivism. similar cases with statistical data that determine such qualifying features of criminal offenses of officials as the amount of damage caused by the crime (moiseyenko, 2020). according to the authors, the causes and conditions of committing criminal offenses in the field of economy should be understood as a complex set of socially prohibited, socially dangerous phenomena and processes that determine economic criminal activity by creating unsatisfactory living conditions for citizens of the country. 4. groups of factors of criminal illegal activity in the sphere of economy the determinative complex of criminal offenses in the field of economy includes a fairly large number of reasons that are associated with the mechanism of criminal unlawful activity. scientists point out that according to the latter, they should be divided into general (indirect impact) and special (factors of direct action). general factors affect the criminal situation in general. according to it, criminologists distinguish the following groups of factors: socioeconomic; regulatory and legal and organizationalmanagerial. socio-economic factors in the system of criminological determinants of economic crime are decisive, since they determine the criminal behavior of not only an individual, but also the criminogenic situation in society as a whole. socio-economic factors are a complex of historically variable negative phenomena in the economic life of society, which, on the one hand, form a certain level of economic and legal consciousness of people, and on the other hand, create conditions in the sphere of production, distribution and exchange of material wealth for the realization of their vital needs for material support by criminal means. at the same time, mistakes in economic planning inevitably result in artificial (often unintentional) creation of conditions favorable for committing illegal actions. it is also interesting that socio-economic factors are retrospective, that is, they are historically conditioned phenomenon associated with a number of economic transformations that have taken place in the country over the past fifty years. the shadow economy, which began to develop even before ukraine gained independence, laid a solid platform for the formation of forms of economic theft, which has been transforming from year to year and has already acquired its final form in the current criminal legislation. the intensification of criminogenic economic factors in the late 90s of the twentieth century was caused by the formation of monopoly associations and the granting of privileges by state officials in financing; illegal transfer of state resources to non-state economic entities; distortions in pricing. the general economic crisis that gripped ukraine during this period was characterized by a decline in production, imbalance of the economy, falling living standards, inflation and hyperinflation, declining labor productivity, etc. this finally aggravated the crime situation in the country, creating ideal conditions for the intensification of criminal offenses in the field of economic activity and further criminalization of society. shadowing processes baltic journal of economic studies 38 vol. 8 no. 4, 2022 covered, first of all, the sphere of legal production, ordinary entrepreneurship associated with concealment of additional profits from accounting. at the level of a particular business entity, the boundary between official and hidden economic activity has virtually disappeared, which has given rise to the circulation of shadow and legal capital, driven by business expediency. the concentration of criminal capital led to the replacement of leaders of the underground trade union format with oligarchic leaders of financial and industrial groups. the criminal scheme of connections between financial and industrial groups, corrupt officials and shadow business has become a reflection of the official system of governance (moiseyenko, 2020). today in ukraine there is no well-established system of money circulation, imperfect tax system, there is a number of debts that will not be "closed" in the near future, and all available funds are mostly spent on solving urgent economic needs of the state. in this context, the development of criminal activity in all spheres is inevitable. criminalization of any prohibited act is always socially conditioned and, almost always, the first reason for this is the unsatisfactory material condition of citizens, lack of stability in the political and economic sphere, etc. thus, the number of cases of tax evasion, engagement in prohibited activities, and so on begins to grow. pseudo-economic shadow relations are reproduced according to their own laws, creating the material basis for organized crime and corruption. the latter becomes a norm, an effective regulator of distribution and redistribution of shadow profits and excess profits at the level of individuals, social groups (corporations) included in this system, and the state as a whole. the causes of criminal offenses in the field of economic activity are both objective and subjective in nature. in order to understand this type of crime, it is important to identify the circums tances that not only give rise to it, but also support it both at the macro level and in a specific area of organizational and economic activity, as well as at the individual level of life of people in solving personal economic problems. the objective socio-economic determinants of economic (commercial) crime include the socio-economic crisis in the state, the loss of historical traditions and moral norms based on respect for private property, honest earnings, honest financial business, a fairly high tax burden, a high level of the shadow economy, the passive attitude of the state to the existence of the criminal "elite", a significant level of corruption, lack of transparency and fair competition (zhuzha, chernei, 2020). in this way, there is a redistribution of values and moral needs of citizens, in the absence of sufficient resources for normal existence, materialism in its purest form comes to the fore. the symbiosis of social and economic issues in the framework of the considered illegal activity is due to the nihilism of the state, the lability of law enforcement agencies and the gradual transformation of the mentality of ukrainian society. the same reasons, in fact, underlie corruption. unfortunately, modern society will have to go a long way to learn to live without corruption, and the legislator urgently needs to develop a modern mechanism to counter such actions, which will include not only repression, but also appropriate ways to raise living standards to a higher level. regulatory and legal determinants. shortcomings of legal regulation of economic relations are one of the leading factors of sustainable criminal development of the economy. these include, first of all, the imperfection of the legislative framework and other regulations governing both the activities of business entities and the activities of law enforcement and regulatory authorities. legal measures to regulate economic relations, if they do not meet the objectives of socio-economic development of society and the requirements of objective economic laws, have a great negative impact on the criminogenic situation. from the criminological point of view, this is crucial for explaining the legal factors of determination of criminal offenses in the field of economic activity. one of the shortcomings of the regulatory and legal nature, which affects the level of criminal offenses in the field of economic activity, is the lack of clear specialization of law enforcement and regulatory authorities at the legislative level, which, in fact, gives rise to duplication of functions by their various structural units. another problem is legal conflicts in the mechanism of obtaining by law enforcement agencies of information constituting commercial or banking secrets or data that became known in connection with the performance of control functions by state regulators. quite often in practice there are cases of unjustified refusal to provide such information to the initiators of the request. as a result, the latency of criminal offenses increases, the effectiveness of preventive work decreases. no less difficult task during the investigation of criminal offenses in the field of economic activity is the search by the pre-trial investigation authorities for legal grounds to involve specialists of regulatory or other specialized bodies as specialists (moiseyenko, 2020). it should be emphasized that the unstable regulatory situation caused by constant changes in the criminalization of certain illegal acts, decriminalization of a number of economic criminal offenses, as well as the narrowing of the subject composition of abuse of power or abuse of authority only to law enforcement officers, gave a new impetus to the commission of socially dangerous acts in the field of economy. baltic journal of economic studies 39 vol. 8 no. 4, 2022 organizational and managerial determinants. the growth of negative trends in the economy of the transition period was facilitated by the destruction of the management system that developed within the administrative command system. partial reduction of the specialized control and audit apparatus and then its complete liquidation (simultaneously with the disbanding of state control bodies at all levels) created unlimited opportunities for various financial frauds. the control and audit apparatus was unprepared for the new economic conditions. it was not mentioned in any of the economic programs for the transition to market relations. in fact, the activities of officials in such important areas as, in particular, the formation and use of the budget, privatization, licensing of certain types of economic activity, foreign economic activity, etc. remained outside the control of the state (zhuzha, chernei, 2020). another manifestation of organizational and managerial determinants of criminal offenses in the field of economic activity is the shortcomings in the activities of law enforcement agencies. first, there is no clear mechanism for interaction between law enforcement agencies, as well as with regulatory authorities and business entities. second, law enforcement officers often face problems in their activities due to lack of funds to ensure audits, inspections, engagement of specialists, etc. third, in practice there are cases when employees, whose main task is to detect criminal offenses in the field of economic activity, are assigned with functions that are not typical for them (for instance, of a different nature) (moiseyenko, 2020). therefore, taking into account the determinants, measures, means and methods of nationwide prevention of criminal and illegal activities in the economic sphere, which were discussed above, should include 1) stabilization of the political situation in the country; 2) addressing the problems of small and medium-sized businesses caused by the events of recent years; 3) identifying gaps in economic planning and forecasting economic activities for the coming years; 4) development of the labor market, including the creation of "dead" zones, expansion of the number of state-owned enterprises; 5) increasing the level of social protection of vulnerable categories of the population (elderly people, people with special needs, people raising children on their own, and so forth); 6) improvement of the social package provided to employees; 7) increase of the minimum wage, etc. 5. conclusions thus, the study has led to the conclusion that criminal illegal activities in the economic sphere is quite common, which is due to a number of state transformations. the absence of an established social base for the realization of the basic needs of the population, the lack of a clear system of economic planning and forecasting, regular (not always positive) revision of criminal legislation and regulations governing economic relations – all these are the main reasons that negatively affect the criminological picture in terms of criminal offenses in the field of economy. a positive change in this situation is possible only through the creation of a unified economic and legal mechanism for the protection of the state and citizens through the integration into modern practice of a number of criminological measures and means of prevention, which should be implemented at all levels: from the national to the social. references: heneralna prokuratura [general prosecutor's office]. available at: https://www.gp.gov.ua kharko, d. m. kryminolohichni problemy shchodo vyznachennya ponyattya ta oznak suchasnoyi ekonomichnoyi zlochynnosti yak faktora tinizatsiyi ekonomiky ukrayiny [criminological problems regarding the definition of the concept and signs of modern economic crime as a factor in the shadowing of the economy of ukraine]. available at: http://www.apdp.in.ua/v55/119.pdf kravchuk, s. y. ekonomichna zlochynnist v ukrayini [economic crime in ukraine]. available at: http://westudents.com.ua/knigi/116-ekonomchna-zlochinnst-v-ukran-kravchuk-sy.html dzhuzhia, o. m., & chernyeya, v. v. (2020). kryminolohiya: pidruchnyk [criminology: textbook]. kyiv: nats. akad. vnutr. sprav. moyseyenko, v. v. (2020). determinanty vchynennya kryminal’nykh pravoporushen u sferi hospodarskoyi diyalnosti [determinants of committing criminal offenses in the sphere of economic activity]. yurydychna nauka, vol. 2 (104), рp. 50–60. skakun, t. o. (2018). ekonomichni zlochyny: sutnisni oznaky ta kryminalistychnyy analiz yikh vchynennya [economic crimes: essential features and forensic analysis of their commission]. efektyvna ekonomika, vol. 3. available at: http://www.economy.nayka.com.ua/?op=1&z=6195 received on: 11th of september, 2022 accepted on: 25th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 108 vol. 7 no. 4, 2021 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: kopylyuk@ukr.net orcid: https://orcid.org/0000-0002-0977-1309 researcherid: f-3146-2019 2 state institution “m.i. dolishniy institute of regional research of the national academy of sciences of ukraine”, ukraine. e-mail: juliatymchyshyn@gmail.com orcid: https://orcid.org/0000-0002-2285-677x researcherid: n-5049-2018 3 lviv university of trade and economics, ukraine. e-mail: olexmu@gmail.com orcid: https://orcid.org/0000-0003-2625-5741 researcherid: f-2153-2019 doi: https://doi.org/10.30525/2256-0742/2021-7-4-108-115 formation and implementation of innovation policy of cross-border regions oksana kopylyuk1, julia tymchyshyn2, oleksandra muzychka3 abstract. the subject of the research is theoretical, methodological and applied bases of formation and realization of innovative policy of cross-border regions. the following methods were used: analysis and synthesis, induction and deduction (to reveal the essence and characteristic types of innovation policy of cross-border regions), generalization, comparison, grouping (to study the condition and innovation potential of the eu countries and ukraine), strategic analysis (to develop the basic principles of innovation policy of cross-border regions), and others. the purpose of the article is to reveal the essence, the order of development and instruments of implementation of innovation policy of cross-border region development, as well as systematization of types and justification of approaches to the definition of innovation potential of the cross-border region. results. the essence, the basic stages of development of innovative policy of the cross-border region were revealed. it was proved that such policy is formed taking into account the innovation component and overcoming the barrier function of the border and the interaction of border territories of 2 or more countries in the implementation of innovations. to create a high degree of interaction in innovation, it is necessary to ensure the development, implementation and realization of innovation on the basis of joint institutional, scientific, educational, financial and resource potentials. the main stages of development of an innovation policy of the cross-border region, in particular: 1) analysis of innovation potential, 2) substantiation of the process of creating a regional innovation system and its management, 3) development of a joint vision, 4) identification of priorities, 5) development of a plan of action with a narrow set of policies, 6) monitoring and evaluation. it characterizes the types of inclusive innovation policy of the cross-border region on the basis of territorial, production and social inclusiveness. it is proved that the innovation policy of a cross-border region provides its innovation functionality, cross-border critical mass and cross-border cooperation. it is reasonable to measure cross-border interactions using quantitative indicators, such as co-financing of innovation, venture capital volumes for innovative start-ups, co-patents, volumes of innovation cooperation, joint publications, mobility of highly qualified personnel to the total number of interactions. the modern financial toolkit for the implementation of cross-border cooperation on an innovative basis is characterized and the practical importance and area of use of the latest financing tools, such as: "pathfinder", "accelerator", "transition", crowdfunding, crowdlending, venture capital, etc. the parameters of identification of the cross-border territory as an innovative region were defined, namely: 1) a developed system of research organizations and educational institutions, 2) a common program for the production of innovative products and technologies, 3) the formation of cross-border business innovation, 4) the use of modern funding tools, 5) achieving cross-border interaction and mutual benefit, 6) the creation of cross-border technology parks and technology incubators, innovative cross-border start-ups, crossborder clusters and growth poles. it is analytically confirmed that in order to create a multifunctional innovative crossborder region it is necessary to enhance the intensity of innovative activity. key words: cross-borde region, innovative policy, innovation potential, financial tools, cross-border effect. jel classification: f36, f68, o39, r58 baltic journal of economic studies 109 vol. 7 no. 4, 2021 1. introduction existential challenges and threats, such as global warming and overcoming the effects of the covid-19 pandemic, require international cooperation at the supranational level in innovative ways. the european policy of consolidation is based on innovation and focuses on the development of regions within the framework of smart specializations. at the meso-level, the formation of a new paradigm of regional development is based on the principles of regional policy aimed at convergence and cohesion, as well as the intensification of processes of interregional and cross-border cooperation. solving common problems in boundary regions, achieving added value and cross-border effect is the basis of cross-border cooperation of boundary regions aimed at their convergence. the introduction of innovations and the implementation of the "smart specialization strategy " focus on new opportunities for cross-border cooperation in science, technology and engineering, innovations in specifically defined areas and projects. in this regard, it is advisable to form cross-border policy with an emphasis on the innovation component, overcoming the barrier function of the border, as well as the ability and interaction of the boundary regions of neighboring countries to implement the innovation potential. these innovation policies aim to promote inclusive growth and remove barriers to the participation of people, social groups, firms, sectors, and regions that are underrepresented in innovation (oecd, 2011). innovative cross-border programs and projects make it possible to increase regional competitiveness, improve the investment climate and implement specific targets in the areas of accessibility, culture, security, production, science and technology. boundary regions, which are focused on innovation in their development, reach a higher level of crossborder cooperation and use innovative approaches to financing and instruments of eu structural funds, grants, loans, etc. the main emphasis is on a wider use of innovation potential by defining cross-border interaction and cross-border critical mass as important parameters for the functioning of boundary regions. interactions lead to technological convergence. the effects are particularly strong for innovative processes and those countries that lag behind in technological development or have weak domestic institutions (bian, meier, jean-marie and xu, ting, 2021). innovation is characterized by positive consequences and the combining of different resources (wuchty, jones, uzzi, (2007), bloom, schankerman, van reenen, 2013). consequently, innovation policy of development of cross-border regions should be coordinated and formed in participating regions on both sides of the border, focus on the sources of funding and tools to support cross-border innovation, and correspond to the common target, namely the cross-border territory as an innovation region. the purpose of the article is to reveal the essence, the order of development and tools for implementation of innovation policy of development of a cross-border region, systematization of its types and justification of approaches to the definition of innovation potential of a cross-border region. 2. methodology the global crisis caused by covid-19 led to the closure of borders between countries, which hampered the mobility of people and slowed the development of tourism and communications. at the same time, in some problematic areas that require joint solutions, cross-border activity is intensified in the aspect of healthcare, institutional cooperation, ecology, transportation and security issues. consequently, the further development of information technology, the need to solve common problems and ensure modernization breakthroughs in the functioning of cross-border territories have entailed the emergence of the latest innovative forms and tools of cooperation. in the methodological aspect of the study of the principles of formation of innovation policy of crossborder regions development is sufficiently disclosed and based on the use of general scientific and specific scientific methods. among the scholars who have investigated the problem of innovation in regional development are (cappellano, kurowska-pysz, 2020), who proposed a mission-oriented approach for cross-border regional development. the authors presented the моа concept in three main aspects: 1) sound public problem solving; 2) research and development (r&d) of territories involved in crossborder regional development; 3) mobilization of many cross-sectoral projects (cappellano, kurowskapysz, 2020). according to the oecd, issues of innovation policy support in cross-border regions address three main questions, namely: 1) why and when does it make sense to collaborate for innovation across borders? 2) how can public and private actors cooperate across borders? 3) what policy instruments are used for cross-border innovation cooperation? (oecd, 2013). the formation of innovative cross-border cooperation based on a systems approach has been proposed by (makkonen, weidenfeld williams, 2017) and it has been noted that a cross-border regional innovation system (cbris) is an adaptation of a regional innovation system to a cross-border regional context. moreover, cbris is used to assess the potential for the development of innovativeness in boundary regions. baltic journal of economic studies 110 vol. 7 no. 4, 2021 foreign scientists consider the stages and measurements of the degree of integration of crossborder regional innovation systems, distinguish asymmetric cost management system, the system aimed at the formation of knowledge and symmetric innovation system using such criteria as economic synergy, research synergy, knowledge flows, institutional building, policy building, persistence (korhonen, koskivaara, makkonen, yakusheva, malkamäki, 2021). thus, it can be stated that the achievement of cross-border synergies and effects are characteristic features of the construction of integrated cross-border innovation systems and the formation of policies for their development. problems of cross-border regional innovation systems, their conceptual preconditions, empirical evidence and policy foundations are revealed by (makkonen, weidenfeld, 2016). the drivers of innovation globalization (bian, meier, ting xu, 2021) consider strong cross-border institutions to help reduce imbalances in collaboration as well as increase the mobility of innovation processes across countries. the authors argue that, first, cross-border institutions are less affected by shocks, since their processes are mainly domestic rather than international; second, it is difficult to organize and determine the level of innovativeness within a large number of countries. therefore, (archibugi michie, 1995) suggest activities within the three stages of innovation globalization as follows: adopting existing foreign knowledge, seeking foreign knowledge in the production of innovation, and intensifying international cooperation in the production of innovation. it is believed that cross-border regions can become the innovation core, which means that the development of an integrated cross-border innovation policy will ensure convergence and rapprochement on the basis of innovation. it should be noted that the literature defines such territories as functional regions for innovation, which are understood as boundary innovation regions that demonstrate a high degree of internal interaction in innovation activities (nauwelaers, walburn, 2013). it can be stated that for the creation of innovative cross-border regions the following is necessary: 1) high level of crossborder flows of knowledge and technologies, as well as their mutual coordination in the functional aspect; 2) cross-border cooperation in research and educational activities for the formation of advanced innovative knowledge and technologies; 3) joint inno vative products, services, transfer of technologies; 4) basis of co-financing and determination of diversified sources of financing of subjects and participants of innovative activity; 5) directions of overcoming of barrier function of border and formation of joint cross-border innovative structures; 6) derogation of legislation; 7) cultural, historical and ethnic affinity. 3. results and discussion 3.1. principles of innovation policy of cross-border regions according to (nauwelaers, walburn, 2013) crossborder regional innovation policies are those that are defined according to functional areas, crossing the boundaries of administrative regions. it is characte-rized by a greater ability to "absorb" regional innovation systems. in particular, the increase in investment in research and development (r&d) has different effects on economic growth in regions, depending on the degree of "absorptive ability " (ahlin, drnovšek, hisrich, 2014). the organization for economic cooperation and development (oecd) presents innovation policy on the basis of inclusiveness, emphasizes its goal and a new focus on development while engaging in research, innovation and entrepreneurship (oecd, 2020). we believe that such a policy target defines development, implementation and realization of innovations created in the joint cross-border space, provides cross-border interaction on the basis of joint institutional, scientific, educational, financial, resource potentials. according to modern studies innovation policy on the basis of inclusiveness is differentiated into the following types: territorial, social, industrial, the characteristics of which are summarized in table 1. the integrated innovation policy of the crossborder region is based on the exogenous cross-border potential of the boundary territories and is aimed at overcoming disproportions, increasing competitiveness and ensuring inclusive development (territorial, industrial, social) of the cross-border region on innovative principles. according to (nauwelaers, walburn, 2013) the development and implementation of cross-border innovation policy covers 6 stages, at each of which participants from different regions should coordinate their plans, resources and actions. researchers have identified the following as the main stages: 1. analysis of innovation potential. 2. rationale for the creation and management of the regional innovation system. 3. developing a common vision. 4. prioritizing. 5. developing an activity plan with an agreed set of policies. 6. monitoring and evaluation. based on the use of the positions of this study, it is proposed to consider the integrated innovation policy as an integral part of the regional policy of the crossborder region, taking into account the functional capacity for innovation. the peculiarity of this policy is that it covers the following key aspects: baltic journal of economic studies 111 vol. 7 no. 4, 2021 1) analysis of exogenous innovation cross-border potential; 2) assessment of the innovation capacity of the crossborder region; 3) determination of innovative functionality and critical mass of the cross-border region; 4) prioritizing, forming innovative methods of cooperation; 5) institutional, financial and organizational support of the built-in innovation policy; 6) development of an action plan and a way to implement the policy; 7) monitoring, auditing, and controlling the implementation of the policy; 8) basic principles of policy adjustment. innovation functionality of a cross-border region is the density of cross-border interaction in the field of innovation and achieving high critical mass. it is reasonable to measure cross-border interactions using quantitative indicators, such as co-financing of innovation, venture capital volumes for innovative start-ups, co-patents, volumes of innovation cooperation, joint publications, and mobility of highly qualified personnel to the total number of interactions. the cross-border critical mass is determined by calculating the share of innovative economic sectors in the cross-border region to their total number, the share of nominal gross value added in the technology sector, the number of patents and total publications in the cross-border region. the sequence of actions for the development and implementation of integrated innovation policy of the cross-border region one of the key stages determines the financial support of this process with the specification of sources and tools for implementation. 3.2. innovation policy instruments of the cross-border region innovation policy of the cross-border region is implemented with the help of financial instruments, which can take the form of capital, quasi-capital, investments, loans, guarantees or other instruments to minimize risks, and, if necessary, can be combined with grants (regulation of the european parliament and of the council, 2012). the implementation of cohesion and convergence policies in the eu involves improving the financial instruments of cross-border cooperation, attracting capital on a cyclical, renewable basis to achieve the highest financial leverage, which reflects the ratio of public and private capital. for the planning period of 2021–2027 along with traditional instruments of cross-border cooperation (grants, programs, projects, mezzanine capital, venture capital, clusters, technology incubators, innovation agencies, business associations, accelerators, offices of technology transfer) the newest instruments are introduced which are directed to realization of one of the goals of cross-border cooperation ("interregional innovation investments".) the amount of funding for cross-border innovation was approved at 11.5% of the overall indicative budget (a total of 970 million euros). the latest instruments of financing cross-border innovations "pathfinder", "accelerator", "transition" ensure the implementation of innovative projects and cover high risks of breakthrough innovations (horizon europe framework programme for research and innovation, 2021–2027). "pathfinder" is a tool used by a consortium of at least 3 cross-border legal entities as part of the implementation of large grant projects (3-4 million euros) with a clear focus on technological research (trl-1). table 1 characteristics of inclusive innovation policy types of cross-border regions policy type policy content characteristics cross-border territorial inclusiveness policy aimed at convergence by overcoming disproportions through innovation and the development of innovative advantages in 2 or more boundary regions of different countries. recognition of innovation as a means of overcoming backwardness and forming a cross-border region of innovation through the development of research centers, technology parks, technology incubators, implementation of networking programs and projects of technology financing, startups, etc. cross-border production inclusiveness innovation policy, taking into account the sectoral and industrial smart specialization of the cross-border region, the involvement of enterprises and other structures in r&d, the creation of an inclusive entrepreneurial environment. implementation of innovative projects in the priority sectors of the economy of the cross-border region, the development of small and medium-sized businesses, startups based on smart specializations. cross-border social inclusion policy of innovative social breakthrough in the alignment of social parameters of the cross-border region through participation in innovative programs and projects, access to innovative forms of cross-border cooperation. increased social indicators of cross-border region development, wage and living standards, reduced unemployment and greater access to innovative and investment sources of funding for common social programs and projects. source: systematized by the authors on the basis of oecd baltic journal of economic studies 112 vol. 7 no. 4, 2021 "transition" is a tool for implementing the results of research on the innovation capabilities of single applicants, small start-ups, research organizations, universities with funding up to 2.5 million euros. "accelerator" is a tool to accelerate access to the innovation ecosystem to global scientific advances as part of business acceleration, investing in cross-border projects in the form of grants with funding amounts up to 2.5 million euros. cross-border crowdfunding based on a digital crowdfunding platform to support the development of small and medium-sized enterprises that do not require large investments is becoming an innovative form of financing cooperation. the cross-border crowdfunding mechanism aligns the interests of project owners, intermediaries, and investors, i.e., individuals able to finance through online platforms. funding on such beginnings takes the form of loans or through the purchase of securities. therefore, regulation (eu) 2020/1503 of the european parliament and of the council of 7 october 2020 on european crowdfunding service providers for business distinguishes between credit-based and investment-based crowdfunding, regulates the framework for cross-border business financing through common approaches, rules and authorizations across the eu and extending crowdfunding services from national to cross-border scales. the regulation governs unified rules on the disclosure of information about project owners, platforms and crowdfunding risk management, the powers of national authorities to supervise the functioning of the platforms (regulation (eu), 2020/1503). online crowdlending platforms, as an innovative form of financing, provide solely credit coverage of the needs of project owners by attracting lendersindividuals. the interest rate is set by the crowdlending platform and is determined by the risk rating for each project. crowdlending is an investment in which investors receive a regular return on invested capital. crowdlending is often performed with the security of assets, shares and/or personal guarantees. investors usually have the right to return their investment with interest. profits can be withdrawn or reinvested into other projects on the crowdlending platform (crowdlending platform, zwebb fintech). any credit activity facilitated by an online electronic platform that matches loans with lenders’ interest is variably called "crowdlending", "loan-based crowdfunding", "p2p lending" or "marketplace lending" (gregory). venture capital is used as a collective investment tool for cross-border smes through funds that invest no more than 70% of equity and reserve capital in assets that are eligible investments. at the same time, the enterprise should meet the requirements of the "portfolio". a "portfolio company " in the eu is a company that is not admitted to trading on a regulated market or in the multilateral trading system, has at least 250 employees, and is not a credit or investment institution. in this case, its annual turnover should not exceed 50 million euros, and the annual balance sheet should not be more than 43 million euros. venture capital financing is carried out through unit or quasiequity instruments, taking into account returns and costs, providing for fees, payments and charges of investors and agreed with the managers of the venture capital fund (regulation (eu), 2013). an important tool for innovation remains "innovafi"("іннова-fi"), which provides funding for innovation, including cross-border from the european regional development fund (erdf) for interreg programs. this tool makes it possible to move away from the grant system of financing research and development work to financing under the new component "interregional innovation investments". financial instruments of realization of innovation policy of the cross-border region have distinctive features, spheres of use, mechanisms of co-financing, as well as monitoring aspects of targeted use of funds at different stages of cross-border cooperation. involvement of financial instruments for the implementation of innovative development programs allows the efficient use of funds in programs and projects, diversify revenue sources, and ensure the recoupment of innovative investments and efficiency in cyclical and renewable financial resources. the implementation of cross-border innovation policy will ensure innovative partnership, expand the use of various sources of financing, economic, social, cultural and cognitive convergence, and also erase the barrier functions of borders. 3.3. innovation potential in the implementation of innovation policy of cross-border regions boundary territories should create conditions for identifying the cross-border region as functional for innovation. a cross-border innovation region should be characterized by complementarity, a high level of cross-border flows of knowledge, capital, people, goods and services, a common social, cultural and institutional environment. national regulatory, administrative and institutional differences should not hinder the realization of innovative potential. it is believed that the cross-border innovation region should have the following key characteristics: 1) a well-developed system of research organizations, educational institutions, and information transfer agencies with a focus on cross-border cooperation; 2) general economic and production program with a focus on the production of innovative products and technologies; baltic journal of economic studies 113 vol. 7 no. 4, 2021 3) formation of cross-border business innovations; 4) the usage of modern sources and instruments of financing and the possibility of implementing projects through the resources of european structural funds; 5) сross-border interaction, mutual benefit, and value-added in the process of forming a "region of innovation"; 6) creation of cross-border technology parks and incubators, innovative cross-border start-ups, crossborder clusters and growth poles. the basis for determining the innovation potential of the countries and boundary regions of the eu and ukraine is the information published on the website of the european innovation scoreboard (eis). based on the calculation of 27 indicators covering human resources, innovation in companies, innovation in r&d, financing, sme innovators, intellectual assets, impact on employment, impact on sales, key drivers of innovation, and innovation environment, a total inno-vation index is determined all eu countries in 2021. are divided into innovation leaders with fluctuations of the total innovation index more than 140 (switzerland, sweden, denmark, finland, belgium), strong inno-vators with fluctuations of the total innovation index within 120-140 (nor way, the netherlands, germany, england, luxembourg, estonia, austria, france, israel, ireland), moderate innovators with a fluctuation of the total innovation index from 80 to 120 (croatia, cyprus, italy, lithuania, slovenia, spain), demonstrating innovation indicators below the eu average, novice innovators with a fluctuation of the total innovation index below 80 (poland, latvia, slovakia, hungary, serbia, bosnia and herzegovina, montenegro and others). ukraine showed a downward trend in this indicator from 39.31 in 2016 to 33.58 in 2021. (european innovation scoreboard, 2021). statistics on innovation indicators in the eu and ukraine have significant differences, not carried out in the framework of cross-border cooperation. border regions in ukraine and neighboring regions in poland, hungary, slovakia, romania did not demonstrate high innovation potential. in countries that develop cross-border cooperation with ukraine, this indicator showed a positive annual growth trend, in particular in poland it increased from 54.27 to 65.88 in 2016–2021, in hungary – from 72.65 to 76.42, slovakia – from 68.33 to 70.98, romania – from 31.32 to 35.09. that is, to create a functional innovative cross-border region in the boundary regions of ukraine and the eu it is necessary to enhance the intensity of innovation activity, to implement joint programs, projects and enterprises, which have innovative orientation and provide cross-border effect. to evaluate the cross-border innovation activities and calculate the total index it is proposed a number of indicators: the number of institutions carrying out research work in the cross-border region, the number of personnel involved in the implementation of research work, the cost of research work by source of funding with the allocation of eu structural funds, innovative activity of enterprises and their activity in the cross-border region, the number of acquired and sold new technologies in the cross-border region, the implementation of innovative industrial products. these indicators will allow to identify a cross-border region as functional for innovation or a cross-border region with a low level of innovation attractiveness. 4. conclusions in modern conditions, cross-border cooperation develops on the basis of convergence, smart specialization and innovative orientation. innovation policy of cross-border regions should be formed on the basis of integration, functionality and innovation capability. it is aimed at solving common problems, achieving a cross-border effect, added value in the economic, social, cognitive spheres. functioning of innovative cross-border regions is provided by cooperation in research and educational activities to create innovative knowledge and technologies, innovative products and services, accompanied by cross-border flows of knowledge, people, capital, derogation of legislation, common cultural and ethnic heritage. innovative policy of cross-border regions as a target defines development, implementation and realization of innovations created in common cross-border space, provides cross-border interaction on the basis of joint institutional, scientific, educational, financial, resource potentials. the basic stages of innovative policy of the cross-border regions are suggested, in particular: 1) analysis of the innovative potential; 2) substantiation of the process of creation and management of the regional innovative system; 3) development of a joint vision; 4) prioritization; 5) development of an action plan with an agreed set of policies; 6) monitoring and evaluation. the content and characteristic of the types of inclusive innovation policy with the allocation of territorial, production and social inclusiveness are presented. cross-border territorial inclusiveness is a policy of introduction of innovations for achievement of convergence at the expense of innovative advantages in 2 or several boundary regions of different countries. cross-border production inclusiveness is a policy of innovation taking into account the sectoral and production smart specialization of the cross-border region, the involvement of enterprises, organizations, baltic journal of economic studies 114 vol. 7 no. 4, 2021 institutions in r&d. cross-border social inclusion is a policy of innovative social breakthrough in equalizing the social parameters of the cross-border region through participation in innovative programs and projects aimed at social convergence. to implement the innovation policy of the crossborder region, a modern financial toolkit is used, which is cyclical, renewable, co-financed and targeted. along with traditional tools of cross-border cooperation, such as grants, programs, projects, mezzanine capital, venture capital, clusters, incubators, innovation agencies, business associations, accelerators, technology transfer offices, the newest tools implementing one of the goals of cross-border cooperation "interregional innovation investments" are introduced. the scope of cross-border innovation financing tools such as "pathfinder", "accelerator", "transition", crowdfunding, crowdlending, venture capital, and others is disclosed. for definition of the cross-border region as innovative it is offered to allocate the following key parameters: 1) developed system of research organizations, educational institutions; 2) common program for production of innovative products and technologies; 3) formation of cross-border business innovation; 4) use of modern tools of financing; 5) achievement of cross-border interaction and mutual benefit; 6) creation of cross-border technology parks and incubators, innovative cross-border startups, crossborder clusters and growth poles. prospects for further research in this direction should be aimed at developing methodological approaches to assessing the innovation potential of the cross-border region and the development of directions to achieve modernization innovation breakthroughs. references: ahlin, b., drnovšek, m., & hisrich, r .d. 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(2007). the increasing dominance of teams in production of knowledge. science, 316 (5827), 1036–1039. baltic journal of economic studies 233 vol. 7 no. 2, 2021 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: olha.tsapko-piddubna@lnu.edu.ua orcid: https://orcid.org/0000-0002-7233-6019 doi: https://doi.org/10.30525/2256-0742/2021-7-2-233-239 inclusive grow th policy and institutional assessment: the case of central and eastern european countries olga tsapko-piddubna1 abstract. the article highlights the necessity of inclusive growth and development concept implementation in times of economic and social instability as it is widely recognized as the one that can and should tackle the common long existing problems like poverty, inequality, and insecurity. thus, the subject of this research is to compare the patterns of inclusive growth and development across economies of central and eastern europe (cee); and to investigate the driving policies and institutions to countries’ inclusive growth and development. the research objective is to highlight policies that would increase equality, economic well-being, and as a result, the competitiveness of cee countries. methods. for this purpose, the comparative analysis of cee countries’ inclusive growth and development patterns was done; and the empirical evaluation was done to observe relationship between the inclusive development index and indicators that described economic policies and institutional factors relevant to inclusiveness. in a comparative analysis and a cross-country regression model (for both dependent and independent variables), a recently developed by world economic forum performance metric was used. results. the main findings suggest that the czech and slovak republics are the best performing among cee countries in inclusive growth and development patterns. on the contrary, ukraine, moldova, and russian federation are the worst. economic growth of these countries has not transformed well into social inclusion. still, there is a great potential for all cee economies to improve their social inclusiveness in comparison with eu-28 and norway (the most inclusive economy in 2018). results of the empirical research indicate that redistributive fiscal policy has little influence on inclusive growth and development. nevertheless, it should create a public social protection system that is engaged in decreasing poverty, vulnerability, and marginalization without hampering economic growth. besides, an effective and inclusive redistributive state system of cee economies should accentuate on supporting human economic opportunities. according to the results of the regression model, positive strong influence on inclusive growth and development is associated with the employment and labour compensation policy that allows people to directly increase their incomes and feel active and productive members of society; the basic services and infrastructure policy which is a necessary ground for present and future human and economic development; the asset building and entrepreneurship policy provides diminishing inequality and rising economic opportunities by fostering medium and small business creation and enlarging possibilities of home and other asset ownership. altogether these policies would increase broad-based human economic opportunities and consequently both equality, economic well-being, and cee economies’ competitiveness in the long run. the counter-intuitive effect observed in the regression model between education and skills development policy and country’s inclusive growth and development needs further investigations, as education is important for social mobility and decrease in income and wealth inequality. key words: inclusive growth and development, inequality, economic opportunity. jel classification: o11, o15 1. introduction for decades economists have focused on increasing economic growth and accelerating crosscountry convergence, while paying less attention to distributional concerns. these were neo-classicists, who considered economic growth as a necessary condition that would bring an increasing wealth and higher living standards to all strata of society. according to economy growth approach many developing countries, including transition economies of central and eastern baltic journal of economic studies 234 vol. 7 no. 2, 2021 europe (cee countries – the czech republic, estonia, hungary, latvia, lithuania, moldova, poland, romania, the russian federation, the slovak republic and ukraine) were given advices to reform their economies according to neoliberalist set of rules – washington consensus. privatization, trade, and financial liberalization/deregulation were considered as panacea for future sustained economic growth, equal opportunities, and prosperity for all. for a long time, a scarce attention has been devoted to distributional patterns both by politicians and economists. as a result, such transition reforms not only led to development and growth, but also, they have contributed to the redistribution of income and wealth in societies breeding the stronger economic and political influence of more newly created affluent elites. however, over the past several years, a worldwide consensus has emerged on the need for a more socially inclusive approach to generate economic growth, the approach that pays attention to detrimental macroeconomic effects of income and wealth inequality, inequality of opportunity and poverty. considering this, inclusive growth, i.e., an economic growth that is distributed fairly across society and creates opportunities for all, has become a central concern in the development literature and in policymaking in many countries. economies which follow the pattern of inclusive growth and development (top-10 according to world economic forum report (wef, 2018): norway, iceland, luxemburg, switzerland, denmark, sweden, the netherlands, ireland, australia, and austria) prove to develop more sustainably and less susceptible to political, economic and social instability. thus, the primary intension behind this study is to determine policies and institutions which would favour inclusive economic growth and development of cee economies. apart from this, after more than quarter of the century of transition it is interesting to analyse cee economies’ growth and development pattern from the point of inclusiveness. moreover, for detecting the potential to improve cee countries’ social inclusiveness, it is useful to compare them with eu-28 and norway – the most inclusive country in the world in 2018. 2. literature review the concept of inclusive growth came to light in the context of understanding that lowering inequality is vital to long-term sustained economic growth and that diminishing inequality is not a by-product of growth process. long before, relatively little attention was paid to inequality and there has been no consensus among economists on the origin of it. in the 19th century, k. marx in his well-known work “capital” argued that inequality was a result of exploitation. later, in the middle of the 20th century, economists believed that “a rising tide lifts all boats”, that was economic growth would bring an increasing wealth and higher living standards to all sections of society. according to s. kuznets (1955), economic growth would suffice to resolve the problems of inequality and poverty. the neo-classical theoretical justification of inequality is represented in marginal productivity theory, which attempts to explain inequality by arguing that each factor of production is rewarded in line with its contribution to production. according to this theory, as long as there is sufficient competition and free markets, all will receive their just rewards in relation to their true contribution to society. thus, marginal productivity theory associates higher incomes with greater contribution to society. the more the rich people contribute, which means that the harder they work and the more they save, the better it is for workers, whose wage will rise as a result. partially the kuznets theory was true to industrialized countries in the post-war period – in the 1950s and 1960s every group was advancing, and those with lower incomes were rising most rapidly. since than the kuznets original hypothesis has been alternatively tested and as a result any strong evidence have been found for the idea that differences in income would diminish pari passu with economic growth (d. pini, 2015). the gains created by productivity increase has far from been distributed evenly in societies. moreover, it is not explained in standard theory how countries with similar technology, productivity and per capita income can significantly differ in their before-tax distribution. the reasons for this are other possible causes of inequality like exploitation, discrimination, exercising of monopoly power, rent seeking and many institutional and political factors. recently, economists’ views have evolved to understanding that policies driven by an exclusive growth focus can set back inclusion and vice versa, high and persistent inequality can undermine the sustainability of growth itself (imf, 2017). according to present approach, growth and inequality reduction can be instrumental to each other, and they are a byproduct of a prudent policymaking. as noted by nobel laureate – j. stiglits (2016), rules do matter as they determine how fast the economy grow, and who shares in the benefits of that prosperity. in addition, he argues that under the right rules, shared prosperity and strong economic performance reinforce each other. there is no trade-off, which means we do not have to sacrifice sustained economic growth for the sake of equality. in accordance with equality and economic performance complementarity, j. stiglits suggests an agenda to tame the growth of wealth among the top and establish rules and institutions that ensure security and opportunity for the middle class. baltic journal of economic studies 235 vol. 7 no. 2, 2021 similar views are presented by f. novokmet, t. piketty, l. yang and g. zucman (2018): the rise in inequality is not inevitable; policies and institutions are important in shaping inequality. there are more in-depth papers on determinants of inequality. recent research conducted by s. cevic and c. correa-caro (2020) suggests that fiscal policy needs to be better designed to have a greater redistributive effect in the long term. according to their results, the redistributive impact of fiscal policy is statistically insignificant. moreover, taxation and government spending policy appear to have the opposing effects on income inequality. 3. research objective and methodology as economic policy and institutions do matter (as they define the redistribution of national income and are vital for creating opportunities), the research objective of this study is to suggest policies and institutions that would favour cee economies’ inclusive growth and development based on crosscountry regression model. thus, the empirical evaluation (of the relationship between an indicator of inclusive growth and development, and indicators relevant to inclusive growth policies and institutions) would allow to highlight policies that would increase equality, economic well-being, and competitiveness of cee countries. besides, the other research objective is to follow the cee economies’ inclusive growth and development pattern and to reveal the potential to improve their social inclusiveness based on comparative analysis across these countries. norway and eu-28 were included into the analysis as a benchmark. there is considerable literature on evaluating countries’ performance based on the most widely used measure of a country’s economic progress – gdp. for many years, this indicator has been considered as a useful accounting tool for economic output, value added, and productivity; more frequently it has been even used as a proxy for well-being. wef argues of an alternative performance metric to evaluate socioeconomic progress which enables to consider the distributional concerns. the performance metric of inclusive growth is represented by number of indicators – key performance indicators – which independently can evaluate progress in different spheres that are relevant to inclusive growth (their growth and development, inclusion, and intergenerational equity and sustainability aspects). at the same time values of these indicators are taken to calculate a composite index – the inclusive development index (idi). it is worth noting that idi is a broader index of economic progress and well-being, which shows how the traditional measure of growth – gdp per capita – often falls short. almost a third of the 103 countries covered in wef report (wef, 2018) experienced a decrease in inclusive development scores even though their gdp per capita increased. as economies grow and develop in inclusive or non-inclusive way, many policies are implemented simultaneously and therefore might influence these processes. a cross-country regression model is suggested to determine the significant influence of relevant to inclusive growth policies and institutions on countries’ growth and development. more specifically, we want to increase the understanding of the underlying causal links and assess the quantitative impact of each of these policies on countries’ inclusiveness. thus, a specification of the model is expressed as follows: idi = α + β1*education + β2*basic services + β3*corruption & rents + β4*financial intimidation + + β5*asset building + β6*employment + β7*fiscal transfers + εit (1) in this model (1) idi is a dependent variable that represents growth and development processes, and there are seven independent variables that represent the inclusive growth policies and institutions (see table 1). these seven independent variables are pillars taken from the framework developed in wef report (wef, 2017). the framework represents the ecosystem of structural policy incentives and institutions that widely diffuse the benefits of an expanding national economy in terms of household income, opportunity, economic security, and quality of life. the empirical research is conducted for 96 world economies using a standard approach in regression analysis – the method of ls. statistic data used in the analysis are taken from databases of wef, world bank (world development indicators) and from credit suisse report (credit suisse, 2017). data processing is done with eviews (8.0) software. 4. results and discussion the following part of this paper is devoted to the comparative analysis of cee countries’ inclusive growth and development patterns based on wef performance metric; and to observation of the relationship between the inclusive development index and indicators that describe economic policies and institutional factors relevant to inclusiveness. 4.1. the comparative analysis of cee countries’ inclusive growth and development patterns most cee economies are quite inclusive, and their idi scores vary with a tendency of higher ones belonging to eu members and lower – to non-eu countries (see figure 1). baltic journal of economic studies 236 vol. 7 no. 2, 2021 among cee economies, those of the czech and slovak republics have the highest values of idi. these countries succeeded in making their growth processes more socially inclusive as they have significantly higher scores in idi ranking than based on gdp per capita among advanced economies (see table 2). such trend is also typical to estonia, romania, and moldova. by contrast, russian federation and ukraine have significantly lower rankings in idi than in gdp per capita, suggesting that their economic growth has not transformed as well into social inclusion. moreover, ukrainian idi score is half lower of conceptually possible score and is the lowest among cee economies. comparing with eu average idi score, only the score of the czech republic is higher among cee economies. there still exists significant potential for all the rest countries to reach eu level and another great table 1 inclusive growth policy and institution framework framework pillars types of indicators for delivering inclusive outcomes from growth 1. education and skills development a) access b) quality c) equity to what extent is education at all levels accessible, of high quality, and inclusive in terms of attainment and learning outcomes? 2. basic services and infrastructure a) basic and digital infrastructure b) health-related services and infrastructure to what extent are citizens provided with adequate physical, digital infrastructure, and high quality, affordable health service? 3. corruption and rents a) business and political ethics b) concentration of rents to what extent are broad-based economic opportunity and efficient allocation of resources through zero tolerance of bribery and corruption, low barriers to entry, and fair competition in product and capital markets fostered? 4. financial intermediation of real economy investment a) financial system inclusion b) intermediation of business investment to what extent does the financial system deploy private savings for employment generating productive purposes? 5. asset building and entrepreneurship a) small business ownership b) home and financial asset ownership to what extent does the country foster business creation and home ownership? 6. employment and labour compensation a) productive employment b) wage and non-wage labour compensation to what extent is the country succeeding in fostering widespread economic opportunity in the form of robust job creation, broad labour force participation and decent working conditions? 7. fiscal transfers a) tax code b) social protection to what extent does a country’s tax system countervail income inequality without undermining economic growth? to what extent are the country’s public social protection systems engaged in mitigating poverty, vulnerability, and marginalization? source: world economic forum (2017) figure 1.comparative performance of idi versus gdp per capita 2018 source: world economic forum (2018); world development indicators database (2018) baltic journal of economic studies 237 vol. 7 no. 2, 2021 challenge for all cee countries to move towards the level of norway. 4.2. the results of the cross-country regression model the coefficient of determination shows that 82 % of the total fluctuations of idi are due to the influence of independent variables. results of the cross-country regression model (1) prove that policies and institutions that provide broad-based equal economic opportunities to all sections of society are the most statistically significant and therefore vital to ensuring inclusive economic growth. thus, such causal links can be outlined (see table 3). employment and labour compensation policy is the most influential factor of promotion inclusive growth and development. its positive influence on inclusive growth and development implies fostering of widespread economic opportunity particularly in the form of robust job creation, broad labour force participation and decent working conditions. this policy successful implementation should provide an increase in productive employment (labour force transition from low-productive sectors/industries to high-performing ones and by attracting those who are unemployed) and subsequently increase in employees’ incomes and in their self-awareness as of active and productive members of society. the next significant influence belongs to basic services and infrastructure policy variable. an implementation of this policy is a necessary ground for present and future human and economic development. such outcomes of its effective implementation as healthy nation (which implies healthy labour force) and an adequate developed physical and digital infrastructure altogether attract investments into economies and increase economic activity there. the significance of asset building and entrepreneurship variable means that in order to favour more socio-inclusive growth countries should foster medium and small business creation, enlarge possibilities of home and other asset ownership as they are typically the first means by which working households accumulate wealth beyond savings from wages and might serve as a ladder to the middle class and beyond. stimulating asset building and entrepreneurship with well-known instruments of monetary and fiscal policy, while simultaneously creating the right legislative and institution environment should decrease income and wealth inequality and widen economic opportunities. other two variables included in the model – financial intimidation of real economy investment, and corruption & rents are the next statistically significant variables. as these policies are important for economies’ inclusive growth and development the effectiveness of their implementation should be also fostered in tackling bribery and corruption, lowering barriers to entry, and fostering fair competition in product and capital markets, enhancing private savings for employment generating productive purposes. table 2 comparative performance of idi ranking versus gdp per capita ranking for norway and cee countries 2018 advanced economies emerging economies upper-middle income lower-middle income rank n or w ay c ze ch r ep ub lic sl ov ak r ep ub lic e st on ia l ith ua ni a h un ga ry l at vi a po la nd r om an ia r us si an fe d. m ol do va u kr ai ne idi 1 15 20 22 1 2 4 5 10 19 31 49 gdp per capita 2 28 29 30 1 4 5 3 15 9 49 43 source: world economic forum (2018) table 3 relationship between inclusive growth and development of policies, institutions, and economies independent variables: education basic services corruption & rents financial intimidation asset building employment fiscal transfers coefficient -0.03 0.29 0.15 0.17 0.30 0.37 0.02 t-statistics (probability) -0.46 (0.64) 4.07 (0.00) 1.86 (0.06) 2.46 (0.01) 3.38 (0.00) 6.84 (0.00) 0.32 (0.74) r2=0.82; adjusted r2=0.80 source: authors’ processing in the eviews software baltic journal of economic studies 238 vol. 7 no. 2, 2021 in our model education and fiscal transfers’ policy are insignificant variables. as it concerns education policy (with its focus on high quality, accessible and inclusive in terms of attainment and learning outcomes education), it is considered to foster widespread economic opportunity, but in our model this variable has insignificant impact and goes in the direction of decreasing the inclusive growth and development. this goes in the opposite direction to the theory, which states that an increase in education should imply an increase in the skilled labour supply, a decrease in the relative skilled/unskilled wage and an overall decrease in income inequality. such a counter-intuitive effect (between education and skills development policy and country’s inclusive growth and development pattern) is present in ukraine. this country is the least inclusive cee economy (figure 1), but at the same time the score of education and skills development pillar is the highest (5.86), it is even higher than that of the eu average score – 5.32. ukrainian education system can be described as supportive of inclusive growth, with high enrolment rates and equitable outcomes for students across socioeconomic levels. but at the same time, it has scarce influence on improvements in inclusiveness of economic growth and development. this counterintuitive effect might have two possible explanations. the first one is that the composed indicator of education and skills development policy does not describe properly the real changes in education and skills development that might have influence on labour productivity. and the second one, the possible positive impact of education policy variable on inclusive growth in ukraine might be absorbed partially by large-scale migration of qualified workforce (so called brain drain) and partially by lack of productive workplaces. thus, people in ukraine are well educated and intelligent but the level of education has little to do with their professional skills; or no matter how educated or skilled they are, they still fulfil the existing vacancies on labour market (which are not highly productive in many developing economies and do respond to their skills qualification) or otherwise emigrate. those countries, including ukraine, which pay attention only to the supply of educated work force without creating productive workplaces, eventually prepare its people to emigration. thus, well developed education and skill policy has no or little impact on inclusiveness of growth and development unless prudent complementary state policies are implemented, in particular policies on stimulating efficient production and providing productive employment and fair labour compensation. the later policies can be a sustainable source to increasing incomes of the employed. as education is important for social mobility and decrease in income and wealth inequality, its influence on inclusive growth and development processes needs further investigations. as it concerns redistributive policy of fiscal transfers, it should develop and provide a country’s tax system that countervails income inequality without undermining economic growth. besides, this policy should create such a public social protection system that is engaged in decreasing poverty, vulnerability, and marginalization. at the same time, the developed and effectively functioning system of fiscal transfers is important but not as above policies which directly favour human broad-based economic opportunities. the insignificance of fiscal transfers’ policy variable (consistent with the empirical results of s. cevic and c. correa caro (2020)) might imply its ineffectiveness around the world. for example, in many developed and developing countries there are no effective progressive taxes (on property, inheritance and capital) that would decrease inequality. on the other side, such global tendencies like capital liberalization and deregulation, competition for capital and tax evasion – altogether assist in lowering the accumulated sum of money from national taxpayers. as a result, in many economies around the world the state redistribution system is not functioning effectively. some attempts are made around the world to fight tax evasion and to cooperate with other countries in sharing information about personal incomes and assets building. for example, foreign account tax compliance act is a legislative effort in the usa to combat tax evasion by u.s. persons holding accounts and other financial assets offshore. such practices should be followed by other countries. thus, cee countries’ governments should better use taxes and transfers to moderate differences in income and wealth. it is suggested to use better well-known fiscal transfers’ tools, for example, by making tax system more progressive, scaling back tax deductions, eliminating tax exemptions and by ensuring greater tax compliance. it is worth noting that in norway statistically significant variables of our regression model are among the best performing. it would be advisable for developing economies to take norwegian inclusive growth policies and institutions development pattern as a benchmark. 5. conclusions and recommendations gdp growth is a necessary but not a sufficient condition for generating inclusive socioeconomic progress and broad-based improvement in living standards. countries’ further development should go in line with inclusive growth theory, supporting economic growth and inequality reduction by prudent policymaking. baltic journal of economic studies 239 vol. 7 no. 2, 2021 the eu membership obviously stimulates/provides such the inclusive growth policymaking as the eu members – cee economies have better idi scores than non-eu countries. according to this research, inclusive growth and development is not only the matter of redistribution policy. policies that provide broad-based equal economic opportunities to all sections of society are more vital to ensuring inclusiveness of economy’s growth by increasing economic well-being, equality and therefore economies’ sustainability and competitiveness. among them there can be mentioned the employment and labour compensation policy that allows people directly increase their incomes and feel themselves as active and productive members of the society; the basic services and infrastructure policy which is a necessary ground for present and future human and economic development; the asset building and entrepreneurship policy provides diminishing inequality and rising economic opportunities by fostering medium and small business creation and enlarging possibilities of home and other asset ownership. these policies are determinant to social mobility, decrease in inequality and in the long run are the ground to social and economic stability, and cee countries’ competitiveness. references: cevik, s., & correa-caro, c. 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(2016). rewriting the rules of the american economy: an agenda for growth and shared prosperity. roosevelt institute, 1–115. available at: https://community-wealth.org/sites/clone.community-wealth.org/files/ downloads/report-stiglitz.pdf world bank. world development indicators database (2018). available at: http://databank.worldbank.org/data/ reports.aspx?source=world-development-indicators world economic forum (2018). the inclusive development index 2018 summary and data highlights. wef working paper, 1–14. available at: http://www3.weforum.org/docs/wef_forum _incgrwth_2018.pdf world economic forum (2017). the inclusive growth and development report 2017. wef working paper, 1–75. available at: http://www3.weforum.org/docs/wef_forum_incgrwth_2017.pdf baltic journal of economic studies 55 vol. 8 no. 1, 2022 corresponding author: 1 institute of industrial economics of the national academy of sciences of ukraine, ukraine e-mail: zaloznova.iep@gmail.com orcid: https://orcid.org/0000-0003-3106-1490 researcherid: a-9110-2018 2 institute of industrial economics of the national academy of sciences of ukraine, ukraine e-mail: msirynapetrova@gmail.com orcid: https://orcid.org/0000-0002-0515-5349 researcherid: i-4594-2018 3 institute of industrial economics of the national academy of sciences of ukraine, ukraine e-mail: oleksandrserdyk@ukr.net orcid: https://orcid.org/0000-0003-3049-3144 researcherid: b-7030-2018 doi: https://doi.org/10.30525/2256-0742/2022-8-1-55-61 the regime of international private-public partnerships in achieving the sustainable development goals in ukraine yuliia zaloznova1, iryna petrova2, oleksandr serdiuk3 abstract. the purpose of the article is to substantiate the introduction of international public-private partnerships (ippps) to achieve the sustainable development goals in ukraine. methodology. the methodological framework of the research relies on the systems approach, which allows the authors to determine the main characteristics of international public-private partnerships to achieve the sustainable development goals; the comparison method, which illustrates the unity of the strategic focus of international public-private partnerships and the sustainable development goals; the dialectical method, which facilitates establishing potential directions for developing international public-private partnerships in ukraine. results. the importance of fostering international public-private partnerships to achieve the sustainable development goals in ukraine is argued. the authors have defined the regime of "international-public-partnerships" in terms of the ideology of the modern economy. the components of the regulatory regime of international public-private partnerships are characterized: the goals to be achieved through introducing the regime; subjects covered by the regime; incentives, benefits, and restrictions necessary to achieve the declared goals; resources involved as part of the regime’s implementation; action plan for the regime’s implementation. the algorithm for introducing the regulatory regime of international public-private partnerships is considered: initiation and initial selection of a project for implementation in terms of an international public-private partnership; assessment and structuring of an ippp project; drafting an ippp agreement; conducting tendering procedures and concluding the ippp agreement; management of the implementation of the international public-private partnership agreement (the ippp monitoring implementation). analysis of the current state of the implementation of public-private partnerships shows that state policy remains ineffective. the main directions of the road map of the regulatory regime of international public-private partnerships involve: amending the legislation on public-private partnerships; increasing the level of responsibility and competence of officials charged with the formation and implementation of public policy on international public-private partnerships; guaranteeing additional sources of business financing; strengthening the role of public-private partnerships amid decentralization. the road map of the ippp regulatory regime is aimed at stimulating the development and implementation of public-private partnership agreements for the realization of long-term projects in priority economic activities in all regions of ukraine. practical implications. the main development directions of the regime of international-public-private partnerships in the current economic realities are outlined. value/originality. the introduction of the regulatory regime of international public-private partnerships in ukraine is substantiated, given the achievement of the sustainable development goals. key words: public-private partnership, regulatory regime, regime of international public-private partnership, sustainable development, roadmap. jel classification: f21, l32, p26, q56 baltic journal of economic studies 56 vol. 8 no. 1, 2022 1. introduction public-private partnerships (ppps) are one of the indicators of the sustainable development goals (sdgs) and a mechanism for financing their achievement through mobilizing private investment for infrastructure development and improving the quality and accessibility of public services. in 2019, the united nations economic commission for europe adopted the concept of "people-first ppps to achieve the sustainable development goals" and the guiding principles on people-first public-private partnerships (ppps) for the un sustainable development. by these documents, the united nations economic commission for europe regulated the use of a new model – people-first ppps (public-private partnership support agency, 2021). a vast deal of publications devoted to the development of public-private partnerships for achieving national sdg indicators is available in the academic realm (boyer e.j., 2019; levochkin m., 2016; zapatrina i.v., 2017, 2018; kosovych, b., 2020; lukianenko i.h., mariano vych m.e., 2017, 2020; simson o.e., 2013; kruhlov v.v., 2019). however, the integrated application of public-private partnerships, taking into account the international component to achieve sustainable development, has been poorly studied in the works of the mentioned specialists. the purpose of the article is to substantiate the introduction of international public-private partnerships to achieve the sustainable development goals in ukraine. thus, the following tasks have been set and solved: the interrelation between public-private partnerships and the sdgs has been identified; the concept of the regime of international public-private partnerships has been proposed, and its components have been characterized; an algorithm for implementing international public private partnerships has been provided; a road map for the ippp development has been put forward. 2. the regime of international public-private partnerships the application of public-private partnerships is regarded as an essential tool for achieving the sdgs. international documents, in particular, the resolution adopted by the general assembly on 25 september 2015 a/res/70/1 "transforming our world: the 2030 agenda for sustainable development", indicate ppps as one of the priority areas for achieving sustainable development (un general assembly, 2015). the interrelation between the sustainable development goals and public-private partnerships emerges from the two sdgs, i.e., goal 17 "strengthen the means of implementation and revitalize the global partnership for sustainable development", which explicitly states "encourage and promote effective public, public-private and civil society partnerships, building on the experience and resourcing strategies of partnerships" (un general assembly, 2015), and goal 9 "build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation", which asserts "develop quality, reliable, sustainable and resilient infrastructure, including regional and trans-border infrastructure, to support economic development and human well-being, with a focus on affordable and fair access for all" (un general assembly, 2015). the peculiarity of public-private partnerships in achieving the sustainable development goals is that a partnership involves the resources of various economic entities that interact to obtain the result, thereby increasing the synergistic effect. the resources involved in the partnership’s implementation are funds of private domestic and foreign investors; financial resources of the state and local budgets; funds from international organizations, including the european bank for reconstruction and development and the world bank in the european union. the availability of an international component in public-private partnership projects indicates a change in the parties because international organizations also have an interest in and assist in projects’ implementation (for example, the public-private infrastructure advisory facility (ppiaf), the ebrd’s infrastructure project preparation facility (ippf), and others). in this regard, it is proposed to supplement the ppp with an international component, given the resources of international organizations and donors, and introduce the concept of "a regime of international public-private partnerships" – the regulatory incentive regime that encourages investment attraction, combining a system of incentives and benefits, mandatory conditions, and restrictions to keep the balance of interests of international donors, the state and business (shylepnytskyi, petrova, 2020). the components of the regulatory regime of the international public-private partnership (rjippp) are as follows (1): rjippp = {g; s; i; r; p}, (1) where g – goals to be achieved by the introduction of the regime; s – subjects covered by the regime; i – incentives, benefits, and restrictions required to achieve the declared goals; r – resources involved in the implementation of the regime; p – plan for the implementation of the regime (table 1). thus, the regime of international public-private partnerships should be regarded as a system that ensures the realization of functionally united processes of actions of stakeholders, determines the sequence of stages of the ippp functioning and application of a set of rules of conceptual, institutional, and methodological nature for their implementation. baltic journal of economic studies 57 vol. 8 no. 1, 2022 3. plan for the implementation of the regime of international public-private partnerships the algorithm for introducing the regulatory regime of international public-private partnerships consists of five successive stages: 1. initiation and initial selection of the project for its implementation based on international publicprivate partnerships. the selection is made within the scope of social and economic development strategies and programs. it includes formulating the ippp concept and the initial analysis of the project indicators (feasibility study). 2. evaluating and structuring the ippp project. this stage covers the analysis of the project’s technological, financial and economic, legal, and environmental characteristics. following the assessment of the above indicators, a decision on the implementation of the ippp project and the development of its structure is made. the structuring of the ippp project comprises a project justification form, the distribution of risks among the participants, and the financial structure of the project company. 3. design of an international public-private partnership agreement. it entails the development of elements of the ippp agreement (rights and obligations of the parties, alteration provisions, procedure for resolving conflicts, etc.). this stage results in a draft international public-private partnership agreement to decide on a private partner in tendering procedures. 4. conducting tendering procedures and concluding the ippp agreement. the public executive body undertakes tendering procedures to determine the private sector for project implementation. after the selection of a private partner, the international public-private partnership agreement is concluded. 5. management of the international public-private partnership agreement (the ippp monitoring). it is carried out during the term of the international public-private partnership. the considered algorithm for introducing the regulatory regime of international public-private partnerships will attract additional resources to the economy of ukraine, including international funds, for the creation of innovation infrastructure and implementation of innovation projects in priority types of economic activity. the ippp regime is the organizational basis for the interaction between the state, science education organizations, and businesses with the involvement of international organizations in the framework of ukraine’s integration into the european union. 4. a road map for the development of the regime of international public-private partnerships in ukraine in ukraine, the algorithm for introducing the regime of international public-private partnerships is in progress and functions fragmentarily. the implementation of state policy on public-private partnerships in ukraine does not ensure the realization and functioning of projects based on ippps. effective functioning of international public-private partnerships requires a well-coordinated system of management of public-private partnerships, availability of professional skills in all ppp participants, and qualified public authorities in the field of ppp. however, none of the above conditions are ensured in ukraine. for ukraine, which needs significant financial investments, public-private partnerships are a key to solving a range of problems. 12 years have passed since the entry into force of the law of ukraine "on public-private partnership" (law of ukraine "on public-private partnerships", 2010). but, in ukraine, this regulatory act did not allow the creation of an effective system of public regulation, taking into account the interests of business and the public. table 1 components of the regulatory regime of international public-private partnership regime components characteristics goals to be achieved by the introduction of the regime (g) support for small and medium-sized innovative enterprises; activation of the transfer of r&d results; commercialization of innovations; creation of innovation clusters in the region; international cooperation. subjects covered by the regime (s) domestic and foreign investors, including international organizations. incentives, benefits, and restrictions required to achieve the declared objectives (i) special tax, customs, credit and exchange rate regimes to stimulate investment. requirements for investors, which are put forward in the framework of their activities, are regime restrictions. resources involved in the implementation of the regime (r) financial resources of private investors, both ukrainian and foreign; borrowed financial resources; funds of the state and local budgets; funds of international organizations plan for the implementation of the regime (p) implementation of projects based on international public-private partnerships as part of the regime that implies the very process, which consists of several stages source: drawn up according to data (petrova, 2021; shilepnytskyi, petrova, 2020; tarash, petrova, 2015) baltic journal of economic studies 58 vol. 8 no. 1, 2022 the current status of public-private partnerships shows that state policy remains ineffective. in particular, as of 01.01.2022, 193 agreements were concluded in terms of ppps, of which 31 agreements are implemented (22 – concession agreements, 5 – joint activities agreements, 4 – other agreements), 162 agreements are not implemented (119 – not fulfilled, 43 – terminated / expired) (ministry of economy of ukraine, 2022). it should be noted that statistics available on official sources do not provide information on the total number of ppp contracts specifying their current status. the monetary value of ppp projects is not indicated, which does not allow tracing the amount of financing and clarifying what funding sources are involved in these projects. statistics make it only possible to trace the territorial aspect of the ppp implementation; in particular, most of the agreements are fulfilled in zakarpatska and mykolaivska oblasts (figure 1). the bulk of public-private partnership agreements is fulfilled in housing and communal services, such as heat generation, transportation and supply and natural gas distribution and supply (8 agreements, which is 25.8% of the total); collection, treatment and distribution of water (8 agreements, which is 25.8% of the total); production, distribution and supply of electricity (3 agreements, which is 9.7% of the total); construction and/or operation of highways, roads, railways, runways, bridges, overpasses, tunnels and subways, sea and river ports and their infrastructure (3 agreements, which is 9.7% of the total); waste management, except for collection and transportation (1 agreement, which is 3.2% of the total) (ministry of economy of ukraine, 2022). following ukrainian practice, agreements in the housing and utilities sector are characterized by a low cost of capital expenditures, a simple scheme of return on investments, and guaranteed demand. thus, the above statistics on the implementation of ppp agreements demonstrate that regulatory acts adopted in previous years did not improve the situation in ukraine. consequently, the quality of public regulation of public-private partnerships remains low. the main barriers hindering the development of public-private partnerships are: an insufficient level of interaction between business, local self-government bodies, and executive authorities at the level of districts, particular cities, villages, and amalgamated territorial communities; complicated access to resources; low business activity toward ppps; unagreed regulatory activities of local authorities; inconsistency of the legislative framework; an insufficient professional level of officials of public authorities and local self-government bodies responsible for the implementation of public-private partnerships; a low level of participation of civil society institu tions in the implementation of public-private partnership activities; complicated procedures for obtaining permits by entrepreneurs, the issuance of which is within the competence of local executive authorities and local governments; a low level of knowledge about the development of high-quality business plans and participation in grant programs; the lack of interaction and coordination between different structural units of authorities which are directly related to the development of various economic sectors; the non-availability of long-term crediting, which restrains the progress of the production sector, and difficulties in getting external financing due to highinterest loans; the lack of a well-established system of guarantees and insurance of credit and investment risks; the lack of open-access information about state and municipal property and land plots that can be used for business development. keeping in mind the above problems thwarting the development of public-private partnerships and, accordingly, the implementation of the regulatory regime of international public-private partnerships, the authors propose introducing a ppp "road map": 1. to amend the legislation on public-private partnerships: 1.1. to revise current regulatory legal acts for their impact on business to modify them or cancel those that impede the development of entrepreneurial activities. 1.2. to create a unified electronic register of publicprivate partnership projects for introducing the international public-private partnership regime. 1.3. to organize training in the ippp use for representatives of local executive bodies and local governments. 2. to raise the level of responsibility and competence of officials charged with the formation and implementation of public policy on international public-private partnerships. 2.1. to analyze the activities of local authorities and local governments responsible for the ippp implementation. 2.2. to give amalgamated territorial communities organizational and methodological assistance in developing public-private partnership programs. 2.3. to create a single information resource (website) for entrepreneurs, which would contain relevant data about international public-private partnerships, up-to-date data about the change in the specific baltic journal of economic studies 59 vol. 8 no. 1, 2022 figure 1. number of ppp projects in progress source: drawn up according to data (ministry of economy of ukraine, 2022) baltic journal of economic studies 60 vol. 8 no. 1, 2022 regulatory legal acts, data about state and municipal property, land plots, etc. 2.4. to organize training sessions on raising funds to finance ippps for representatives of local executive bodies and local self-government bodies. 2.5. to establish and arrange the work of the regional expert group for public-private partnerships. 2.6. to arrange the work of a "one-stop-shop" for the implementation of investment projects. 3. to guarantee additional sources for business financing. 3.1. to develop a concept for the creation and operation of public-private partnership support funds at individual amalgamated territorial communities to promote their activities. 3.2. to improve the access of entrepreneurs to information about grants and credits and conduct a series of training sessions on preparing grant and loan applications. 3.3. to provide consultations on the organization and implementation of public-private partnership projects. 4. to strengthen the role of public-private partnerships in the context of decentralization. 4.1. to create platforms for business communication and organize interregional business forums. 4.2. to share the best practices of public-private partnerships. 4.3. to organize outreach activities to promote public-private partnerships and the regulatory regime of international public-private partnerships. the proposed measures of the ppp "road map" are designed to stimulate the introduction of the international public-private partnership regime for implementing long-term projects in the regions of ukraine and strengthen their investment attractiveness for private investors and international financial organizations. 5. conclusions the formation and development of the regulatory regime of international public-private partnerships is a dynamic process that requires constant study, analysis, and scholarly generalization. thus, keen interest in ippps is explained by the fact that in terms of partnerships, there appear new effective models of financing; the redistribution of state property occurs following the criterion of efficiency; more progressive methods of management are used; financial resources and donor assistance of international organizations are attracted. it has been found that partnerships between the state and business primarily focus on achieving the sustainable development goals and have a more synergistic effect due to the cooperation of specific capacity of private and public property. the regime of international public-private partnerships is a technology of the public regulation of the economy to achieve the sustainable development goals through the tendering admission of business to the sphere of state responsibility and cooperation with international organizations driven by pooling resources and competencies, the distribution of risks, obligations and benefits, and the observance of the economic interests of all partners. the institutional support of public-private partnerships, which is favorable for fulfilling business interests and maintained by the public party, plays an essential role in introducing the regime of international publicprivate partnerships. the regulatory regime of international public private partnerships has significant potential; 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(in ukrainian) baltic journal of economic studies 146 vol. 8 no. 2, 2022 1 alexandru ioan cuza university of iaşi, romania (corresponding author) e-mail: sebastian.tocar@feaa.uaic.ro orcid: https://orcid.org/0000-0001-8937-4460 doi: https://doi.org/10.30525/2256-0742/2022-8-2-146-152 cultural determinants of foreign direct investment: nationalist-xenophobic at titudes sebastian tocar1 abstract. cultural characteristics related to the values of national identity (patriotism, nationalism) and attitudes toward other peoples (xenophobia) represent important elements of cultural specificity that influence various dimensions of socioeconomic life, including economic processes. unfortunately, these specific characteristics are not often investigated, especially in this context, probably because of the difficulty of quantifying them and the general sensitivity of the topic. this study presents an original approach to the study of nationalist-xenophobic attitudes and their relationship to foreign direct investment (fdi). the aim of this study is to identify theoretical benchmarks for approaching the topic of nationalism-xenophobia, to develop a synthetic indicator to quantify nationalism-xenophobic attitudes, and to highlight the mechanism of their influence on fdi attraction. the methodology used for conducting this research comprises the methods of analysis, synthesis, induction (for logical connections and theoretical argumentation), weighted average technique (for the elaboration of nationalism-xenophobia index), cronbach’s alpha coefficient of internal consistency (to test the reliability of the construct) and pearson correlation coefficient (for the correlation analysis). the author's contributions include a study of the relationship between nationalist and xenophobic sentiments, the development of the nationalism-xenophobia index, an indicator of the intensity of these sentiments in society, an analysis of the relationship between nationalism-xenophobia relations and the amount of fdi attracted per capita, the identification and explanation of the cultural mechanism by which nationalist and xenophobic sentiments influence various phenomena, including fdi. logical-theoretical assumptions and arguments are confirmed by the results of quantitative data analysis. the findings of the study confirm that the cultural characteristics associated with nationalism and xenophobia represent important elements of cultural specificity that influence economic processes, including fdi. numerous studies show that the nationalist dimension of ethnocentrism is closely related to xenophobia. analysis of countries' scores on the nationalismxenophobia index depending on the dominant christian denomination and the presence of a communist past shows a link between nationalist-xenophobic, orthodox (and, to a lesser extent, catholic) values and the values of communist ideology, which negatively affect fdi attraction. furthermore, nationalist-xenophobic attitudes have a negative impact on fdi attraction, both directly and indirectly, showing a strong negative impact. key words: nationalism, xenophobia, foreign direct investment, intercultural, cultural values, nationalismxenophobia index. jel classification: c43, f21, z12, z19 1. introduction cross-border investments, one of the main determinants of economic growth in developing countries (including post-communist countries), involve engaging in cross-cultural communication, the characteristics and the results of which are strongly determined by cultural parameters related to national identity: ethnocentrism (patriotism, nationalism) and xenophobia, concepts that encompass the attachment to national cultural values and the separation from / rejecting of other cultures (and values, respectively), considering them “external” (latcheva, 2014). through reduced international cooperation, isolationism, etc. (balabanis et al., 2001), nationalistic and xenophobic sentiments impede a country 's economic development in a modern context dominated by globalization. on the other hand, economic nationalism can be seen as a way to ensure the profitability of domestic businesses in competition with foreign firms ( jakobsen and jakobsen, 2011). as for the relationship with foreign direct investment baltic journal of economic studies 147 vol. 8 no. 2, 2022 (fdi), the situation is less ambiguous: nationalist and xenophobic sentiments impede intracultural communication, reduce interstate cooperation, and negatively influence the decision of the foreign investor (balabanis et al., 2001; khoury et al., 2010). however, while the literature provides several views on this relationship, in the author's opinion a systematic approach that explains the impact of nationalist and xenophobic attitudes on fdi is lacking. the purpose of this study is to identify theoretical benchmarks for approaching the topic of nationalismxenophobia, to develop a synthetic indicator to quantify nationalist-xenophobic attitudes, and to highlight the mechanism of their influence on the attraction of fdi. to achieve this goal, the author used a combination of methods, techniques and tools of quantitative and qualitative analysis, such as analysis, synthesis, induction, the method of weighted average value, cronbach's alpha coefficient and pearson's correlation coefficient. the author's contributions include a study of the relationship between nationalist and xenophobic sentiments, the development of the nationalismxenophobia index, an indicator of the intensity of these sentiments in society, an analysis of the relationship between nationalism-xenophobia relations and the amount of fdi attracted per capita, the identification and explanation of the cultural mechanism by which nationalist-xenophobic sentiments influence various phenomena, including fdi. the work is conducted as follows. the second section illustrates an analysis of the specialized literature regarding the main concepts under study and the relationship between them. the following sections present the methodology and data sources, as well as the results of the analysis, including the development of the nationalism-xenophobia index. the last section formulates conclusions and discusses limitations and directions for future research. 2. nationalism, xenophobia and foreign direct investment cultural characteristics related to the values of national identity (patriotism, nationalism) and attitudes toward other peoples (xenophobia) represent important elements of cultural specificity that influence economic processes, although they are not often studied, probably because of the difficulty of quantification and the general sensitivity of the topic. nevertheless, these elements determine how people relate to their own culture ("loyalty " within the group) and to the culture of others ("hostility " toward other groups) (cashdan, 2001). nationalistxenophobic values, being an integral part of culture, influence the highlighting of some cultural values and the undervaluation of others, participating in the modeling of the value system. on the other hand, the system of cultural values characteristic of each country influences the predisposition of culture to the cultivation of nationalistic-xenophobic attitudes. the author puts nationalism and xenophobia together, even hyphenating them in order to emphasize the connection between these concepts. while patriotism is characterized by a person's attachment to his people, his country, its history and culture, nationalism is the taking of this attachment to an extreme, the idealization of his own nation ("blind patriotism") and the shift of attention from a positive assessment of one's own group to differentiation from other groups and hostility toward them (mummendey et al., 2001). numerous researches demonstrate that the nationalist dimension of ethnocentrism is strongly correlated with xenophobia (mummendey et al., 2001; davidov, 2009; logan et al., 2015) leading to the statement that nationalism is xenophobic by its nature (latcheva, 2010). even at the level of cultural values, nationalism (ethnocentrism) is also associated with xenophobia (ethnic discrimination): an analysis based on milton rokeach's system of cultural values revealed equality and cleanliness (neatness, tidiness) as values most involved in discrimination (including discrimination based on ethnicity) and at the same time as values characteristic of ethnocentrism. cleanliness corresponds to a high level of ethnocentrism and discrimination, and equality corresponds to a low level of both parameters (rokeach, 1973). patriotism, which theoretically does not involve offensive attitudes toward other groups, taken to the extreme of cultivating a sense of superiority of one's own nation, becomes nationalism and is directly linked to xenophobic sentiments in society. these cultural characteristics will affect all areas of society, including the economic. there are several studies that demonstrate the impact of the concepts described above on economic phenomena in society, particularly on foreign investment. along with corruption, legal structures or individual rights, xenophobia is one of the social factors that will influence a foreign investor's decision to invest in a particular country (khoury et al., 2010). nationalist sentiments cannot be useful for international cooperation because they create stereotypical images of foreigners (with a negative connotation), which, together with exaggerated self-perception, can lead to isolationism, violations of minority rights, ethnic violence and economic nationalism, expressed in a reduction of interstate cooperation, commercial protectionism, restrictions on foreign investment, foreign companies, etc. (balabanis et al., 2001). baltic journal of economic studies 148 vol. 8 no. 2, 2022 in societies dominated by nationalist ideas, domestic enterprises are preferred to foreign companies, which obliges the authorities to impose strict rules on foreign investment, rules that will lead to a reduction of fdi. public authorities will act in accordance with widespread nationalist sentiments in society (seen as preferences of the electorate) by raising tax rates, canceling contracts, or expropriating assets of foreign companies ( jakobsen and jakobsen, 2011). on the other hand, economic nationalism can be seen as a way to ensure the profitability of domestic (state and private) enterprises, especially given the fact that they have difficulty surviving in competition with foreign firms ( jakobsen and jakobsen, 2011). given that in today 's globalized and internatio nalized economic environment, foreign direct investment is an indispensable tool for sustainable economic growth in developing countries, the exacerbation of nationalist and xenophobic sentiments will have a categorically negative impact on the economies of those countries that cannot effectively manage these sentiments. 3. methodology data the author used unctad's online database (2022), the online cultural measurement database developed by geert hofstede (hofstede insights, 2022), and the world values survey online database (2022) to collect data. method to develop the nationalism-xenophobia index, the author applied a weighted average method, with the weights of the three elements being equal. the elements of the indicator were responses to three relevant questions from the world values survey (wvs). the reliability of the construct was tested using cronbach's alpha internal consistency coefficient. to analyze the correlation between the index of nationalism-xenophobia and hofstede's cultural dimensions, as well as between the index and the volume of fdi per capita, the author used pearson's correlation coefficient. 4. results nationalism-xenophobia index to quantify nationalistic-xenophobic attitudes, the author developed the nationalism-xenophobia index, which is based on responses to relevant questions in the world values survey, a data source used in numerous studies in this field (for example: shayo, 2009; latcheva, 2014; pradkhan, 2016 etc.). this index included the results of responses to three questions from the world values survey, which address both the nationalism and differentiation from other groups aspect ("employers should give preference to people (nation)") and the xenophobia aspect (percentage of people who would not want immigrant neighbors and the percentage of people who did not mention tolerance and respect among important qualities of a child). the index was obtained by applying the weighted average method, with each of the elements having equal weight. this composition of the index was chosen due to the maximum reliability (compared to other combinations of elements), based on the results of the cronbach's alpha internal consistency coefficient calculation. the cronbach’s alpha value (0.899 for the initial items and 0.91 based on standardized items) demonstrates the usefulness of the elaboration of nationalismxenophobia index. to conduct the analysis, the author looked at the results of the most recent study available (wvs, wave 2017–2020). figures 1 and 2 present a comparative demonstration of the results of calculating the index of nationalism-xenophobia for european countries, depending on two important factors that could explain the cultural specificity that determines a particular level of this indicator: the dominant christian denomination and the presence of a communist past. the predominant christian denomination was determined based on results reported in the world christian database and the world religion database (swiss metadatabase of religious affiliation in europe (smre), 2022). of all the european countries analyzed in the wvs, those in which the most prevalent denomination represents less than 50% of the population were excluded. the situation in terms of nationalistic-xenophobic attitudes by dominant christian denomination is suggestive: on average, orthodox countries have the highest index values, predominantly catholic countries are in the middle zone, and protestant countries have the weakest nationalistic-xenophobic tendencies. at the same time, it is important to note that catholic countries are represented in all areas of the chart: even though they are mostly concentrated between the other two groups, there are catholic countries both with low values (france, spain) and very high index values (lithuania and hungary), and even the country with the highest index score (slovakia) belongs to this group. at the same time, cyprus has a consistently lower rate than other orthodox countries, being surrounded by catholic countries, and finland's rate is noticeably higher compared to the rest of the protestant countries. the results obtained in calculating the nationalismxenophobia index suggest two possible explanations: baltic journal of economic studies 149 vol. 8 no. 2, 2022 orthodox doctrine (following catholic doctrine) includes elements that encourage the spread of nationalist-xenophobic attitudes; accordingly, orthodox religiosity is positively associated with these attitudes. a second explanation might be as follows: orthodox (and, to a lesser extent, catholic) doctrine and nationalist-xenophobic sentiments are based (in part, though the values involved play an important role) on shared cultural values, so that the development of one of these aspects creates a favorable environment for the other. the ranking of european countries on the basis of the values of the index and depending on the communist past indicates the existence of a presumptive relationship: post-communist countries in general show a higher level of nationalist xenophobic attitudes, capitalist countries have, with one exception (cyprus, which is a predominantly orthodox country), a low level of the index. the distribution of countries on the basis of the nationalism-xenophobia index according to the denomination and the communist past suggests an association between the nationalist-xenophobic, orthodox (and, to a lesser extent, catholic) values and the values of the communist ideology. correlation analysis confirmed a strong correlation between the values of the index of nationalismxenophobia, on the one hand, and the christian confession, respectively, the presence of a communist past (table 1). 0 10 20 30 40 50 60 70 sw ed en ic el an d n or w ay d en m ar k fr an ce sp ai n fi nl an d a us tr ia po la nd c yp ru s c ro at ia it al y sl ov en ia b el ar us se rb ia g re ec e r om an ia r us si a l ith ua ni a g eo rg ia h un ga ry m on te ne gr o b ul ga ri a sl ov ak ia othodox catholic protestant figure 1. the values of the nationalism-xenophobia index for the european countries according to the dominant religious denomination 0 10 20 30 40 50 60 70 sw ed en ic el an d n or w ay d en m ar k u ni te d k in gd om fr an ce n et he rl an ds sp ai n sw itz er la nd fi nl an d a us tr ia po la nd c yp ru s e st on ia c ro at ia it al y sl ov en ia n or th m ac ed on ia g re ec e r us si a r om an ia l ith ua ni a b el ar us g eo rg ia se rb ia b ul ga ri a h un ga ry c ze ch r ep . m on te ne gr o sl ov ak ia capitalist countries post-communist countries figure 2. nationalism-xenophobia index values for european countries depending on the communist past or its absence baltic journal of economic studies 150 vol. 8 no. 2, 2022 the more one moves from orthodox doctrine through catholic doctrine to protestant doctrine, the weaker the nationalist-xenophobic sentiments. regarding the communist past, the results of the correlation analysis confirm that former communist countries are strongly associated with a higher intensity of nationalist-xenophobic sentiments. the impact of nationalist-xenophobic attitudes on fdi through the cultural values as already mentioned, nationalism (ethnocentrism) is associated with xenophobia (ethnic discrimination) even at the level of those cultural values with which they are associated: purity and equality (rokeach, 1973). cultures that emphasize purity and undervalue equality are more conducive to the spread of nationalist-xenophobic attitudes. on the other hand, nationalist-xenophobic attitudes will encourage the cultivation of the cultural value of purity and discourage the cultivation of equality. the ratio of nationalism and xenophobia influences fdi both directly (the spread of these attitudes in society will negatively influence both the decisions of foreign investors (regarding the initiation and development of investment) and state authorities (regarding strategies for attracting foreign investment), and indirectly (through the cultural specificity of society, values related to nationalism and xenophobia are reflected in the country 's score on the cultural dimensions). cultural measurements represent the most successful and widespread way of the quantitative approach to the cultural factor. earlier research has shown that hofstede's system of cultural dimensions is the most comprehensive and outlined (tocar, 2019). in order to explore the relationship between nationalistic-xenophobic attitudes and hofstede's cultural dimensions (through the cultural values of purity and equality), the author conducted a correlation analysis between the nationalisticxenophobic index and the scores on hofstede's cultural dimensions (table 2). the pearson coefficient values demonstrate a very strong, highly significant relationship between the nationalism-xenophobia index and the two dimensions developed by hofstede: power distance (positive) and indulgence versus restraint (negative). there is also a highly significant moderately strong correlation between the index and two other dimensions: individualism vs. collectivism (negative) and uncertainty avoidance (positive). content analysis conducted earlier (tocar, 2019) revealed a cultural value of purity or equality for each of these dimensions, and the direction of the correlation follows the direction suggested by the extremum of the dimension in which the cultural value was identified. thus, strong nationalist-xenophobic attitudes are associated with greater power distance, collectivism, stronger uncertainty avoidance and restraint. thus, the connection between nationalisticxenophobic attitudes and cultural dimensions based on cultural values is confirmed by the analysis of both quantitative and qualitative data related to these concepts. at the same time, the author observed that the cultural value of national security (protection from attacks) is associated with strong uncertainty avoidance and restraint. given the fact that nationalist organizations often argue for xenophobic attitudes in terms of national security, and quantitative data analysis confirms this connection, the author sees national security as a cultural value associated with nationalist-xenophobic attitudes, even if the rokeach analysis did not reveal this connection. a smaller distance of power corresponds to an emphasis on equality, as does a low level of prevalence table 1 pearson coefficient values for the relationship between the index of nationalism-xenophobia and christian confession and the communist past parameter correlation christian denomination communist past pearson correlation coefficient nationalism-xenophobia index -.780** .800** significance .000 .000 notes. 1) ** – p < 0,01. table 2 the values of the pearson coefficient for the relationship between the nationalism-xenophobia index and the hofstede’s cultural dimensions parameter correlation hofstede cultural dimension pdi idv mas uai lto ind pearson correlation coefficient nationalism-xenophobia index .722** -.607** .398* .637** .377* -.811** significance .000 .000 .029 .000 .040 .000 notes. 1) ** – p < 0,01; * – p < 0,05. 2) pdi – power distance index; idv – individualism vs. collectivism; mas – masculinity vs. femininity; uai – uncertainty avoidance; lto – long-term orientation vs. short-term orientation; ind – indulgence vs. restraint. baltic journal of economic studies 151 vol. 8 no. 2, 2022 of nationalistic-xenophobic attitudes, and a strong positive correlation confirms this relationship. stronger uncertainty avoidance is associated with an emphasis on the values of purity and national security, as well as a high level of prevalence of nationalist-xenophobic attitudes, and the correlation between the quantitative representations of these concepts is accordingly strongly positive. societal restraint is associated with cultural values of purity and national security (and a low ind score), as well as strong nationalistic and xenophobic sentiments, with a strongly negative correlation between the index and the ind score. in order to examine the relationship between nationalist-xenophobic sentiments and fdi from a quantitative point of view, the author analyzed the correlation between the values of the nationalistxenophobic index and the per capita stock of fdi (table 3). the results of the correlation analysis between the nationalism-xenophobia index and the amount of fdi per capita are consistent with the compelling claims drawn from the literature: nationalismxenophobia hinders fdi attraction, and the negative correlation between these variables is strong and highly significant. thus, nationalistic-xenophobic attitudes contribute to emphasizing the cultural value of cleanliness (tidiness, neatness) and undervaluing equality, modeling cultures characterized by great power distance, strong uncertainty avoidance and restraint that shape people's attitudes, decisions and actions towards fdi, leading to a decrease in the amount of fdi attracted. thus, the spread of xenophobic nationalistic attitudes in society, reflected in its cultural specificity through the emphasis on cultural values of purity and national security and underestimation of the cultural value of equality, negatively affects the attraction of cross-border investments into the economy. at the same time, the analysis confirmed that the nationalism-xenophobia index is a relevant indicator for quantifying the factor of the same name, given the consistency of the research results with qualitative and quantitative data. 5. conclusions the cultural characteristics related to nationalism and xenophobia represent important elements of cultural specificity, which influence economic processes, including fdi. numerous researches demonstrate that the nationalist dimension of ethnocentrism is closely associated with xenophobia. the distribution of countries according to the index of nationalism-xenophobia by christian denomination and communist past shows a link between nationalist-xenophobes, orthodox (and, to a lesser extent, catholic) values and the values of communist ideology, which (as further revealed) have a negative impact on the attraction of fdi. nationalist-xenophobic attitudes have a negative impact on fdi both directly (the spread of these attitudes in society will negatively influence both the decisions of foreign investors (regarding the initiation and development of investment) and the decisions of government agencies (regarding strategies for attracting foreign investment), and indirectly (through the cultural specificity of society, values associated with nationalism and xenophobia (purity, equality and national security) are reflected in assessments of the country along cultural dimensions). quantitative analysis confirmed the logical-theoretical propositions about the sharply negative impact of nationalist-xenophobic sentiments on the attraction of fdi in the economy and the consistency of the developed index. limitations and directions for future research the main limitation of this study is that world values survey data are provided by time period (waves) and a limited number of countries under consideration. another limitation is related to the data on countries' scores on the cultural dimensions developed by hofstede: for some countries they are calculated, for others they are estimated, and for some countries they do not exist (e.g., cyprus). in future studies, the author could increase the number of countries analyzed, improve the consistency of the index by adding some new elements, and deepen the analysis of certain categories of countries (e.g., post-communist). table 3 the value of the pearson coefficient for the correlation between the nationalism-xenophobia index and the fdi stock per capita in 2020 parameter correlation fdi stock per capita pearson correlation coefficient nationalism-xenophobia index -.728** significance .000 note. ** – p < 0,01; * – p < 0,05. references: balabanis, g., diamantopoulos, a., mueller, r ., & melewar, t. (2001). the impact of nationalism, patriotism and internationalism on consumer ethnocentric tendencies. journal of international business studies, 32(1), 157–175. baltic journal of economic studies 152 vol. 8 no. 2, 2022 cashdan, e. (2001). ethnocentrism and xenophobia: a cross-cultural study. current anthropology, 42(5), 760–765. davidov, e. (2009). measurement equivalence of nationalism and constructive patriotism in the issp: 34 countries in a comparative perspective. political analysis, 17, 64–82. hofstede insights (2022). country comparison tool. available at: https://www.hofstede-insights.com/ jakobsen, j., & jakobsen, t. (2011). economic nationalism and fdi: the impact of public opinion on foreign direct investment in emerging markets, 1990‐2005. society and business review, 6(1), 61–76. khoury, s., wagner, e., & kepler, j. (2010). explaining the dearth of fdi in the middle east. topics in middle eastern and north african economies. available at: http://ecommons.luc.edu/meea/136 latcheva, r . (2010). nationalism versus patriotism, or the floating border? national identification and ethnic exclusion in post-communist bulgaria. journal of comparative research in anthropology and sociology, 1(2), 187–215. latcheva, r . (2014). measuring national identity. in: в a. michalos, ed. 2014. encyclopedia of quality of life and well-being research. springer science + business media dordrecht, pp. 3941–3953. logan, s., steel, z., & hunt, c. (2015). investigating the effect of anxiety, uncertainty and ethnocentrism on willingness to interact in an intercultural communication. journal of cross-cultural psychology, 46(1), 39–52. mummendey, a., klink, a., & brown, r . (2001). nationalism and patriotism: national indentification and out-group rejection. the british journal of social psychology, 40, 159–172. pradkhan, e. (2016). impact of culture and patriotism on home bias in bond portfolios. rev manag sci, 10, 265–301. rokeach, m. (1973). the nature of human values. new-york: thw free press. shayo, m. (2009). a model of social identity with an application to political economy: nation, class, and redistribution. american political science review, 103, 147–174. swiss metadatabase of religious affiliation in europe (smre) (2022). religious affiliation. available at: https://www.smre-data.ch/en/data_exploring/religious_affiliation#/ tocar, s. (2019). comparative analysis of some cultural dimensions systems: a qualitative value-based approach. cross-cultural management journal, xxi(1), pp. 21–34. unctad (2022). foreign direct investment: inward stock, dollars per capita. available at: https://unctadstat.unctad.org/wds/tableviewer/tableview.aspx world values survey (2022). wvs wave 7. available at: https://www.worldvaluessurvey.org/wvscontents.jsp baltic journal of economic studies 4 vol. 3, no. 2, 2017 features of the state regulation of the production of genetically modified products in the world and in ukraine viktoriya bashuk1 ivan franko national university of lviv, ukraine abstract. the purpose of this article is to investigate the regulation of the use, consumption, and trade of genetically modified organisms in different countries of the world, as well as in ukraine. the definition of international approaches to risk assessment of genetically modified products is of particular importance for international trade. methodology. the study is based on data from different sources, beginning with the first mention of genetically modified organisms, ending with the latest received data from different countries. purpose. show how different countries refer differently to the production of genetically modified products, differently perceive it and are guided by different principles. find ways to solve the problems associated with the introduction of gmos in ukraine and compare them with other countries. results. the study showed that developed countries have developed clear rules for the production, labelling, consumption, and trade of products containing gmos. also, the bodies and structures responsible for compliance with all these rules are defined and a large number of legislative acts has been adopted, which cannot be said of ukraine. in ukraine, this is a large gap because “on paper” also seems that there are some rules according to gmos but they are not clear, consistent, and they are not followed due to their observance, as these powers are entrusted to a large number of structures. due to imperfect legislation and lack of funds, products that are imported are not tested for gmos content, there are no studies on the safety of their consumption and cultivation, the reliability of information on labels is not followed. practical implications. in ukraine, in order to ensure the proper level of state regulation, protection, and use of genetically modified products obtained with the help of modern biotechnologies, it is necessary to adhere strictly to the fulfilment of the main criteria: 1) adoption and further improvement of legislation regulating this area of activity; 2) registration and prevention of the danger of genetic pollution of the environment as a result of the production of genetically modified products; 3) determination of economic efficiency from growing gm plants; 4) introduction of a transparent gmo registration system and issuing permits for field testing of transgenic plants, limiting plant testing to several years; 5) solution of a problem of intellectual property protection in this area and technology transfer; 6) determining the degree of influence of genetically modified products on human health and the biosystem as a whole; 7) formation of public opinion, development of environmental education; 8) enhancement of international cooperation in plant biotechnology and biosafety. value/originality. ukraine is a big country that is developing, it has a good potential and can get economic benefits from the production of genetically modified products, so it is necessary to fill in all the gaps in this matter in the near future in order to take its place in this sphere. key words: genetically modified organisms (gmos), genetically modified products, trade regulation, regulation of using gmos, ukraine. jel classification: q16, q16, f10, q17, h70 corresponding author: 1 department of international economic relations, ivan franko national university of lviv. e-mail: victoriabashuk@gmail.com 1. introduction using of genetically modified organisms (gmo) have provoked a serious debate in the majority of industries. scientists from different countries have diverging views of making products with gmo. the same opposite views have formed on trading with such products. the definition of international approaches to the risk assessment of genetically modified products has a particular importance to international trade. the establishments of barriers in international trade of food products with gmo can be the main obstacles, which are contrary to the principles and objectives of free trade embodied by the world trade organization (w to). ukrainian scientists also shared their opinions about the cultivation and consumption of gm products. baltic journal of economic studies 5 vol. 3, no. 2, 2017 2. gmo trade regulation within wto countries that are wto members covered under the agreements within this organization. according to these agreements, lawful measures will be those (first of these is on sanitary and phytosanitary measures) that meet certain international standards, guidelines, or recommendations and are deemed necessary to protect the life or health of humans, animals and plants and thus are regarded as relevant agreements of using sanitary and phytosanitary measures (sps) and general agreement on tariffs and trade (gatt) of 1994. none provisions of the gatt-1994 don’t oblige member-state of wto to cultivate gm crops on their territory and wto rules can be used only for trade in goods between countries. the vast majority of trade rules, which are used by importing countries, are limiting. thus, the basic rules of gatt-1994 can be applied also to import of gmos. in accordance with the regulations of the agreement on sps, any measures of the wto state members in the issue of imports, including products from gmos, must be based on scientific principles and are not supposed to remain in force without sufficient scientific justification. as soon as the gm product is imported into a specific country, its distribution is regulated by national legislation (volkov, 2014). 3. international regulatory acts which govern using gmo nowadays production, turnover, and using of gmo is regulated by such international regulations as: convention on biodiversity, rio de janeiro, 5 june 1995; cartagena protocol on biological security to convention on biodiversity montreal (canada), 29 january 2000; codex alimentarius 1999, convention on “access to information, public participation in decision-making process and access to justice on issues concerning environment”, orgus (denmark), june 1998. authorities in many countries of the world purposefully support the development of modern biotechnologies as an important labour force, the growth of economics, an increase of welfare of the population, and improve the competitiveness of their (national) production (dromashko, 2011). each country has its own attitude to the gmp but we can distinguish at least two opposite positions regarding using this product: first, the so-called american point of view is based on the active support and extensive use and export of transgenic crops; the second attitude (european) is more critical (lozinska, 2009). 4. regulation of using gmo in the usa the american approach to the genetically modified organisms is based on the product rather than on production process and considers biotechnology as secure is inherently and its products how such are do not differ from unmodified analogues. as the result, us government hasn’t adopted any specific law on gmos and there still using a legislation, which was adopted for usual products. thus, gmos is regulated by the law on plant protection, federal law on food products, drugs and cosmetics, federal law on insecticides, fungicides and rodenticides and law on control of toxic substances (balasynovich & iaroshevska, 2010). in the usa, the issue of gmos regulation lies within the competence of the management on sanitary inspection behind quality of food and drugs of the usa (fda), department of agriculture (usda) and agency for the protection of the united states environment (epa). the distinction of their forces is estimated by the federal system for regulation of biotechnology, which has been in force since 1986 (balasynovich & iaroshevska, 2010). there are (in the usa) no specific requirements for marking of gmo products, as a separate class of foodstuffs because gmo products are not considered less safe rather than usual foodstuffs. however, gmo products are subject to standards of binding marking, which require marking of any products, which are led to particular risks for health and environment. it can be, for instance, the presence of an allergen or change of food properties. american experts believe that the licensing exhaust system of gmo in the market is complemented by the tight control at the stage of production of new products with special requirements to the research results of each modified protein is quite effective. orientation on the final product while elaboration of national measures in the area of market regulation suggests using the principle of notification, which is carried out by informing regulatory authorities about the implemented modifications by the manufacturer of a new product. according to the decision of these bodies, the goods may be admitted to the market on a common basis without additional inspection or after inspection and the issuance of a special permit. all of this information is available to society on the basis of the law «on freedom of access to information». 5. regulation of using gmo in canada canada is a country with a high development level of agricultural biotechnology, which applies a control system. it has a developed system of regulation of markets for new products and feeds. but this system, as in the other countries, is not perfect and falls under the influence of varying factors. back in 1993, the government of canada adopted the “main directions of federal regulation of production and turnover of biological products”. the main objective of this document is to ensure safety supply of high income for human health and the environment by the implementing baltic journal of economic studies 6 vol. 3, no. 2, 2017 of biotechnology products. this document contains the basic principles of national policy in this area. the main legislative acts in the field of state administration are the laws «on food and drugs», «on feeds», «on seeds» and a large number of bylaws. in canada, the functions of regulation and control over commercial use of new food products are entrusted to the ministry of health, ministry of environmental protection and the agency for control over the foodstuffs. it is also noteworthy that for canadian system, a gradual procedure of production regulation and turnover of new foodstuffs is common. under the category of new food products, according to canadian law, a significant number of products are subject to it. the mechanism of sale regulation of new products involves three stages: pre-market notification, premarket approval, and a system of food-processing standards (stepnova & berlova, 2007). despite the existence of efficient control system, since 2000 under the influence of new scientific data about gmos and under the pressure of public opinion in canada, as well as in the united states, there has been a definite change in the approach to control of new food products. in general terms, it boils down to the following key points: recognition on the federal level of a necessity for voluntary marking not only organic but also gm-products; assumption of the development of mandatory marking of some new products; possibility of a moratorium on commercial turnover such gmos, that risk of which (when it can fall into the environment) at this stage of the development of science is difficult to assess; requirement of recognition as not scientifically proven widespread principle of «stable equivalence» of new products in the usa and canada; need for reducing the level of secret research and development, despite the existing regulations regarding the protection of intellectual property rights. 6. regulation of using gmo in argentina and brazil there is another state, «mega-countries» keen on growing gm crops is argentina, which area is covered by them over 23.9 million hectares, and the regulation over gmos is based on the control flow of product but not on the production technology. at the early stage of formation, the regulation system of gm crops in argentina was too similar to the same system in the united states. but the flexibility, rationality, and a scientific approach are the main principles of this system, which allow adjusting the rules in accordance with the new scientific evidence about biosafety of gm crops. based on a series of resolutions in 1991, the secretariat of agriculture, fisheries, food and livestock of argentina controls a large number of transgenic crops. in accordance with the requirements of the resolutions, three different departments are responsible for the registration: • national advisory commission on agricultural biotechnology, “conabia” is responsible for scientific assessment, technical release, and influence on the environment. this commission is a multidisciplinary between-institute consulting group on biotechnological assessment. the commission provides a consulting technical support and control in the area of biosafety and about questions of production of transgenic material into the environment. • national agrifood health and quality service, “senasa” with the help of technical consulting group regulates gmos food security. • national directorate of agrifood markets, “dnma”, which is responsible for the assessment of the potential influence of commercial gmo on the market for goods (iakovleva, vinogradova & kamionskaia, 2015). it should also highlight such a powerful producer of genetically modified products as brazil. the first law on biosafety entered into force in brazil in 1995 and was replaced in 2005 by a new one. until like any gm plant will get into a field, all the risks had assessed, which are related to production into the environment, including potential harm to human health and other organisms. if a gm plant does not pose a potential threat, it is entitled to its field production but it has to be comprehensively tested, including the research of the possible influence on the environment. the right to commercial using of gm crops in brazil is also provided to the national technical commission on biosafety (ctnbio) (iakovleva, vinogradova & kamionskaia, 2015). a law since 2005 in brazil actually legalized gm crops. there was also established a national council on biosafety, the competence of which includes the analysis of socio-economic risks of gmos and the national technical commission on biosafety, which defines the technical aspects in this field. in february 2008, in brazil two varieties of gm maize were permitted for commercial use: insect-resistant mon 810 and liberty link bayer cropscience herbicide tolerant glufosinate ammonium (balasynovich & iaroshevska, 2010). 7. regulation of producing and turnover of gmo in the eu in contrast to the american regulation system of production and turnover of genetically modified products, there is the so-called «european model of state regulation of genetically modified products». about active inclusion to the competition on the biotechnology market of eu countries is evidenced the fact that countries such as germany, france, and baltic journal of economic studies 7 vol. 3, no. 2, 2017 britain are increasingly investing in the establishment of biotechnology companies. for example, eu companies, going by joining into large enterprises, have created the world's largest biotech corporations syngenta and aventis. however, softening of the eu position relating to the gmos is accompanied by the formulation of clear rules for gmos turnover, which provide the possibility of their identification by consumers, in particular, was introduced mandatory marking of products containing gm components (lozinska, 2009). the european union is considering genetically modified organisms as the result of a special production process. therefore, there was developed a special system with rules of conduct with gmos, which entered into force in the beginning of 90-es. until 2004, was acted in an unofficial moratorium on approving new gmos in the eu. under the pressure from trading partners, especially the united states, in 2004, the eu replaced the moratorium on the revised regulatory system, which covers the security matters, gmo marking and tracking, having created the most rigid code of laws about gmos in the world. only approved gmos can be placed on the market in the eu (including imports). each case must be considered separately. the approval and permitting procedures is very complex and require the participation of all member countries of the eu because, in the case of approval, such gmos can be placed in all 27 national markets of the membercountries of the eu over the next 10 years. till today, the eu has remained two-level regulation of all operations with gmo's: national and pan-european. in the field research of new gm crops, national standards are applied, for commercial use it must comply with both national and international regulations (standards). in 1997, the european commission has developed regulations in the eu for production and trade of new foodstuffs and their ingredients. according to this document, all products in the eu must be tested and marked before their supply to the market, and all products containing gmos must meet standards that ensure food safety for the population and environmental protection. it was a necessary condition for their commercial turnover. the implementation of the principle of tracking allows us to monitor all effects of the gmo on human health and the environment, to check the correct marking, and also gives a possibility to withdraw the goods from commercial turnover in case of revealing of the negative consequences of their use. thus, information about the presence of gmos in the goods is available to all market participants and it can be kept for five years from the start of use of each product. all certified and admitted to the commercial use gm-products must be marked and entered in a special register, the same for foodstuffs and feeds. based on the fact that currently there are no absolutely pure products, new eu rules allow the accidental existence of gm impurities in certain batches of foodstuffs and feeds but no more than 1% (stepnova & berlova, 2007). the eu has imposed strict mandatory marking rules, and its system is based on the production process, not only on the product, and includes a wide range of products with few exceptions and very low threshold. furthermore, in the countries-members of the eu, voluntary rules of marking products without gmos are operating. in relation to access to the eu market, if gmos are not allowed the eu which was found in the party of the imported goods, the eu could apply protective measures, starting with additional testing requirements and certification and ending with a temporary cessation of the import of the problematic product. in the case, if the shipment contains gmos but only those that were allowed in the eu, they must be marked in an appropriate way. it is noteworthy that in the eu, the concept of «coexistence» meant not only a spatial separation of places of cultivation and processing of organic, traditional, and gm farming but the application of the system of product traceability throughout the production chain «from farm to spoon». new eu recommendation is true carry the question of establishing «buffer zones» around the industries associated with the processing and obtaining of products containing gmos at the regional level, which can be competently considered characteristics such as variability of natural and climatic conditions, volumes and field sizes, topographic characteristics of the area, the terrain, the crop species features, and agriculture management specificities. the regulation should include an assessment of each new gm crops by strictly regulated criteria and possible detrimental effects on the environment and should determine the potential risk in each specific case, by installing, if it’s necessary, measures to limit risk and control. 8. problems of the state regulation of the gmo market in ukraine scientists of ukraine are divided into two camps: those who are associated with gmo producers, of course, are against labelling gm products because they receive grants from foreign corporations, this is their «bread». the second group of scientists defends another position. they are not against gmos and genetic engineering but they want everything to be clean and open. this is certainly progress in science (makarovskaya, 2008). if practically the whole world studies transgenic organisms, getting new plant varieties, then in ukraine it is possible to introduce them, say technically, to grow rapeseed with a high oil content, which is used as an baltic journal of economic studies 8 vol. 3, no. 2, 2017 environmentally friendly fuel or there is an opportunity to present ukraine as a country whose products don’t contain gmos, thereby affirming their authority in europe and the world (koval, 2007). however, one should not make categorical conclusions that in our state research work on the use of gmos should be prohibited (but with appropriate restrictions). after all, stopping it completely, the domestic science can lag behind the world science, in particular from the european one. it is pertinent to recall that ukraine isn’t a newcomer in the field of creating transgenic plants. fundamentals of genetic engineering of plants were laid in the institutions of the national academy of sciences of ukraine and the odessa institute of selection and genetics in the 70s of the last century. it was these sources that determined the intensive development of genetic engineering of plants in ukraine in the mid-1980s, as a result of which the institute of cell biology and genetic engineering was founded in the 1990 year. at the current stage of the work of nas, scientists are coordinated within the framework of the basic research program «genetic and cellular engineering as the basis of the «green revolution» in plant growing» (20022006) (blum, sivolap, rydiy & sozinov, 2006). food products produced in ukraine with the help of modern biotechnology can be classified into the following categories: 1. foods consisting of living viable organisms or containing chemicals, such as corn. 2. foods isolated from gmos or containing ingredients that are isolated from gmos, for example, flour, food proteins or oil obtained from gm soy. 3. foods containing individual ingredients or additives, synthesized by gm microorganisms (gmm), for example, dyes, vitamins, and essential amino acids. 4. products containing ingredients treated with enzymes that are synthesized with petroleum products, for example, high fructose corn syrup, made from starch with a glucose isomerase enzyme (iulevich, kovtun & gil, 2012). british pg economics together with the ukrainian institute of food biotechnology and genomics estimated the possible economic effect from the introduction of gm technologies in the ukrainian agrarian sector. in particular, the introduction of gm seeds for seedlings can increase the country 's annual income by $ 525 million. agricultural biotechnologies, if they are authorized for the use in ukrainian farms, will provide a noticeable economic and food benefit, raise the profitability of farms and reduce risks. the environment also improves as farmers start using softer herbicides, and insecticides replace insect-resistant crop lines (brooks & blum, 2012). scientists suggest using gm technology for growing four traditional crops  – soybeans, corn, rapeseed, and sugar beet. moreover, it is proposed to take such gm – plant varieties, resistant to herbicides, and corn  – also to certain types of insect pests. despite the total ban on the use of genetically modified varieties of plants in ukraine, most of the soybean in ukraine is grown using herbicide-tolerant technology. in addition, in ukraine, maize varieties resistant to various pests are used. there are several economically sound arguments regarding the legalization of gm technologies in ukraine. according to experts, their use should increase the yield and, accordingly, increase the gross yield. for four basic crops, the profit will be from 1.5 to 9.5%. the use of herbicides in the care of them will be reduced by 4.4-7.8%. as a result of the use of tolerant herbicides gm crops, the effect of herbicides on the environment will be reduced by 15-24%. reducing the number of treatments with pesticides will save from 0.78 to 150000 l of fuel; to the atmosphere will be emitted less carbon dioxide – from 2.73 to 5.05 million kg (brooks & blum, 2012). however, it should be noted that products with gmos in ukraine are not officially grown. it should also be noted that today in ukraine there is no single state body that would deal with gmo issues. in accordance with the law on biosafety, powers for control and regulation are dispersed between five executive bodies: the cabinet of ministers, the ministry of education and science, the ministry of environmental protection, the ministry of health, and the ministry of agrarian policy. for ukraine, this problem is also extremely relevant because no one checks what is imported into the country. there is a real threat to become a dump of genetically modified rubbish, which doesn’t comply with the european standards. the legislative base seems to exist, there is a permission to sell products with gmos with mandatory marking but there is no control because there is a catastrophic lack of funds to implement the regulations. there is a serious danger of becoming economically dependent on gm-producing companies because they, as owners, have the exclusive right to sell and distribute seed material, and they charge huge fines for unauthorized use. but the greatest harm can be incurred by the environment. the modified genetic material contains in plant remains, gets into the soil, adversely affect it. in addition, signs of gm plants, for example, resistance to herbicides, can also acquire weeds. so, since no gm culture in ukraine is officially registered, their importation to ukraine and cultivation are illegal. however, ukraine's agriculture is not free from gmos. gmos get to food products in ukraine mainly from agricultural raw materials, imported to ukraine and from gm crops grown in ukraine. for example, gm potatoes were imported to ukraine for field research back in the 90's. in conditions that existed in those years, it was impossible to ensure proper control over its use. as a result, gm crops are grown uncontrolled in the ukrainian fields. ukrainian producers of agricultural products see the benefits of gmos in higher yields. experts estimate that baltic journal of economic studies 9 vol. 3, no. 2, 2017 from 50% to 80% of soybeans grown in ukraine are genetically modified. there is no official data on this score. experts explain this by the fact that ukrainian soybean is consumed in the domestic market, and not for export. in ukraine, gm is also much less grown  – potatoes, maize, barley, and also gm cotton. the lack of effective programs for field supervision and seed control encourages agricultural producers to use gm crops. the widespread use of gm seeds in agriculture is hindered by the low level of protection of intellectual property rights in ukraine. mainly, it concerns wheat and rapeseed, and hybrid seeds of corn and soybeans are already in the market (malysh, 2013). in the light of ukraine's current integration aspirations to join the european community and the strengthening of agricultural products in its market as a competitive and quality producer, there is a need for an effective mechanism for exercising state control over the turnover of genetically modified organisms. this issue remains unresolved for ukraine and requires further comprehensive improvement. the first effective steps have already been taken. in particular, the association agreement with the eu stipulates that ukraine should develop an integrated strategy for regulating gmos. an interesting point is included in this agreement. in particular, article 404, which refers to agriculture, states that, among other things, both parties will cooperate to expand the use of biotechnology. in fact, this article paves the way for the liberalization of the existing practice of certification of genetically modified seed stock. this provision justifies the expectations of the agribusiness industry. ukraine belongs to the perspective markets for transnational corporations for the production of seeds. it should be recalled that with the accession to the wto, ukraine has undertaken certain obligations that can be applied, among other things, to regulate the production of genetically modified products, namely: from the date of accession to the wto, ukraine undertook to abolish and not reintroduce or apply quantitative restrictions on imports or other non-tariff measures such as licensing, quoting, prohibitions, permits, previous authorization requirements, licensing requirements and other restrictions on such effect that cannot be justified in accordance with the provisions of the relevant wto agreement; ukraine should apply import licensing according to the rules of the wto import licensing agreement, which provide for transparency, simplification, and acceleration of procedures but should not exert too restrictive and influential influence on trade; ukraine has the right to apply sanitary and phytosanitary measures to protect the life or health of humans, animals, or plants, which must be based on scientific principles and don’t create unjustified discrimination or hidden restrictions on trade; ukraine should apply technical regulations and standards for the purposes of national security, prevent fraudulent actions, protect the life or health of humans, animals or plants, and protect the environment, on the basis of scientific justification and without creating unnecessary obstacles to trade (volkov, 2014). however, in pursuance of this decree, state bodies must develop a number of normative documents but this has not been done. in particular, the state registration of gmos has not been developed, there is no order of labelling of food products and agricultural raw materials, import and transit of gmos, provisions on licensing of laboratories, should determine the content of gmos and others. that is, on november 1, 2007, the decision came into force but it is absolutely not provided. the law of ukraine «on the state biosafety system for the creation, testing, transportation and use of gmos» also outlines the main principles of the state policy in the field of handling gmos, the main of which are: the priority of preserving human health and protecting the environment compared to obtaining economic benefits from the use of gmos; provision of security measures for the creation, research, and practical use of gmos for economic purposes (novozhilov, 2008). on may 13, 2009, the cabinet of ministers adopted a decree on mandatory labelling of food products for gmos, which was long awaited (environmental groups) and was feared (producers). according to the resolution, all foodstuffs containing gmo of more than 0.1% volume are subject to labelling. in addition, food products that do not contain gmos but have been produced using agricultural products containing more than 0.1% of gmos should be labelled (this product is called «food produced with the use of gmos»). in practice, this means that all gm foods need to be labelled since the 0.1% threshold is the measurement error in the laboratory, determines the content of gmos. products that do not contain gmos generally containing less than 0.1% of gmo can be labelled as such that they «do not contain genetically modified organisms». this information is subject to control (verification) in accordance with the established procedure by the state committee for technical regulation and consumer policy. not labelled gm  – food in accordance with the above procedure should be removed from circulation (iaroshevskaya, 2009, p. 18). we can say that the legislative basis in ukraine for gmo is undeveloped and seriously lags behind the eu standards. 9. conclusions the production and consumption of genetically modified foods are growing every year. the study also does not stand still and try to study the influence of gmos on living organisms, people and the environment as deeply as possible and in detail. in developed countries, clear rules for the production, labelling, baltic journal of economic studies 10 vol. 3, no. 2, 2017 consumption, and trade of products containing gmos are developed. also, the bodies and structures responsible for compliance with all these rules adopted a large number of legislative acts. ukraine «on the paper» also seems to have some gmo rules but they are not clear, consistent and nobody follows them because these powers are entrusted to a large number of structures. due to imperfect legislation and lack of funds, products that are imported are not tested for gmo content, studies are not conducted on the safety of their consumption and cultivation, the reliability of information on labels is not followed. therefore, in order to ensure an appropriate level of the state regulation, protection, and use of genetically modified products obtained with the help of modern biotechnologies, it is necessary to strictly adhere to the fulfilment of the main criteria: adoption and further improvement of the legislation to regulate this field of activity; accounting and prevention of the danger of genetic pollution of the environment as a result of the production of genetically modified products; determination of economic efficiency from growing gm plants; implementation of a transparent gmo registration system and issuing permits for field testing of transgenic plants, limiting plant testing to several years; solution of the problem of intellectual property protection in this area and technology transfer; determination of the degree of influence of genetically modified products on human health and the biosystem as a whole; formation of public opinion, development of environmental education; intensification of international cooperation in biotechnology of plants and biosafety. ukrainians have the right to know what they consume, and what effect these products have. references: balasynovich b. & iaroshevska iu. (2010). gmo: the challenges and the experience of legal regulation. institute for economic research and policy consulting, 255 p. blum ya., sivolap yu., rydiy r . & sozinov a. (2006). a new wave of the «green revolution». brooks g. & blum ya. (2012). potential economic and ecological effect from the introduction of modern gm crops into the agricultural production of ukraine, 88 p. dromashko s.e. & others. (2011). genetically modified organisms and problems of biosecurity. minsk. state institution of education “researchers training institute national academy of sciences of belarus”. 70 p. iakovleva i. v., vinogradova s. v. & kamionskaia a. м. (2015). state turnover regulation of biotechnological (gm) agricultural products: an analysis of different approaches in the world’s practice. ecological genetic. no 2. p. 21-25. iaroshevska yu. (2009). the choice of ukraine regarding the policy in the field of genetically modified organisms: the eu model or the us? kiev. institute of economic research and policy consulting. 66 p. iulevich o.i., kovtun s.i. & gil m.i. (ed.) (2012). biotechnology: textbook. nikolaev. nsau. 476 p. koval l. (2007). transgenes: salvation or threat. government courier. no. 90. lozinska т. м. (2009). the concept of three-dimensional product typology in public administration of food market development. actual problems of public administration. №2. p. 117-125. makarovskaya v.r . (2008). administrative and legal regulation of production and consumption of genetically modified foods. medical law of ukraine: the legal status of patients in ukraine and its legislative support (genesis, development, problems and prospects for improvement). materials of the ii international scientific and practical conference. lviv. p. 155-159. malysh n. (2013). genetically modified organisms in the food safety system of ukraine. the state and the market. no 2(14) p. 116-122. novozhilov o.v. (2008). legislative and regulatory framework for the use and regulation of the turnover of genetically modified organisms in ukraine. genetically modified organisms: problems and prospects of use in ukraine. moscow. agrarian science. p. 15. resolution of the cabinet of ministers no. 468 of may 13, 2009. on approval of the procedure for labeling food products containing genetically modified organisms or produced with their use and put into circulation. stepnova а. & berlova h. (2007). about regulation of genetically modified products markets. all about meat. no 6. p. 2-7. volkov о. (2014). state regulation of the turnover of gmos in ukraine: current status and the blueprint of reforming. kyiv. usaid agroinvest. 37 p. baltic journal of economic studies 11 vol. 3, no. 2, 2017 виктория башук особенности государственного регулирования производства генетически модифицированной продукции в мире и в украине аннотация. целью данной работы является исследование регулирования использования, потребления и торговли генетически модифицированными организмами в разных странах мира, а также в украине. определение международных подходов к оценке риска генетически модифицированной продукции имеет особое значение для международной торговли. методология. исследование базируется на данных, взятых из разных источников, начиная с первых упоминаний о генетически модифицированных организмах, заканчивая новейшими полученными данными из разных стран. цель. показать, как различные страны по-разному относятся к производству генетически модифицированных продуктов, по-разному их воспринимают и руководствуются разными принципами. найти пути решения проблем, связанных с введением гмо в украине, и сравнить их с другими странами. результаты. исследование показало, что в развитых странах разработаны четкие правила производства, маркировки, потребления и торговли продуктами, содержащими гмо. также определены органы и структуры, ответственные за соблюдение всех этих правил, принято большое количество законодательных актов, чего нельзя сказать об украине. в украине в этом вопросе большой пробел, потому что «на бумаге» тоже вроде присутствуют некоторые правила относительно гмо, но они не четкие, не последовательные и за их соблюдением никто не следит, так как эти полномочия возложены на большое количество структур. из-за несовершенства законодательства и отсутствия средств не проверяются продукты, которые импортируются, на содержание гмо, не проводятся исследования по безопасности их потребления и выращивания, не следят за достоверностью информации на этикетках. практическое значение. в украине для обеспечения надлежащего уровня государственного регулирования, защиты и использования генетически модифицированной продукции, полученной с помощью современных биотехнологий, необходимо четко придерживаться выполнения главных критериев: 1) принятие и дальнейшее совершенствование законодательства по регулированию этой сферы деятельности; 2) учет и предупреждение опасности генетического загрязнения окружающей среды в результате производства генетически модифицированной продукции; 3) определение экономической эффективности от выращивания гм–растений; 4) введение прозрачной системы регистрации гмо и выдачи разрешений на полевые испытания трансгенных растений, ограничение испытаний растений несколькими годами; 5) решение проблемы защиты интеллектуальной собственности в этой области и трансфера технологий; 6) определение степени влияния генетически модифицированной продукции на здоровье человека и биосистемы в целом; 7) формирование общественного мнения, развитие экологического образования; 8) активизация международного сотрудничества в области биотехнологии растений и биобезопасности. значение/оригинальность. украина  – большая страна, которая развивается, имеет хороший потенциал и может получить экономическую выгоду от производства генетически модифицированных продуктов, поэтому необходимо в ближайшее время заполнить все пробелы в этом вопросе, чтобы занять свое место в сфере генетически модифицированных продуктов. baltic journal of economic studies 195 vol. 2, no. 2, 2016 corresponding author: 1 department of complex problems of state creation, institute of legislation of the verkhovna rada of ukraine. e-mail: lucy_ganzhurova@ukr.net regulation of product certification and standardization processes in the european union liudmyla shabelnyk1 institute of legislation of the verkhovna rada of ukraine, ukraine abstract. research is aimed at investigation of current state of technical regulation system in european union. special attention is paid to peculiarities of standardization and certification in certain countries of eu in order to implement foreign experience in ukraine. despite the wide academic coverage of technical regulation issue, a range of issues remain unsolved, especially the problem of historical retrospective and possibility of positive experience implementation. subject of study. theoretical and methodological approaches to the regulation of certification and standardization of processes in the eu, as well as comparative analysis of the systems in the past and the present. methodology. the survey is based on research of available publications on the topic, comparative analysis, induction and deduction. issues of standardization and certification were widely discovered by numerous researchers: f.d. duyvis (1960), w. hesser and a. inklaar (1998), c. shapiro (1999), a. richen and a. steinhorst (2005). but in spite of the deep theoretical background of scientific works, it is obvious that the most important documents for technical regulations are iso standards (especially iso/ iec 17021:2006 «conformity assessment  – requirements for bodies providing audit and certification of management systems»). results. the article discovers relationship between main standardization bodies in eu, studies main legislative documents, reveals its historical retrospective and provides in-depth study of technical regulation system in germany and the uk. information from the article can be used for general understanding of main processes of technical regulation in eu; practical discovery of marking signs on the products and comparative analysis of standardization systems in different countries. practical implications. it is important to mention practical demonstration of technical requirements in the eu: the signs marking certificate in, certificate vs, certificate onorm, certificate lvs, which mean compliance with national standards of the community. for example, certificate din means compliance with the german standards institute (deutsches institut für normung), certificate bs – requirements for producers in the uk, certificate onorm – sign labeling in austria and certificate lvs has french origins. value/originality. the study provides complex overview of product certification and standardization processes in the european union, taking into account legislative basis and executive authorities on the european as well as on the local markets. key words: standardization and compatibility, technical requirements, international trade policy. jel classification: l15, d63, f13 1. introduction at the present stage of economic development efficiency of production depends mainly on the implementation of standards. states with well-developed technical regulation system have the appropriate level of competitiveness on the world market. according to the european committee for standardization, all products produced at the enterprises of the eu (regardless of the size of enterprises) meet the standards. such policy ensures free trade policies in the eu and protects consumers. 2. certification and standardization in the eu currently, the processes of standardization and certification in the european union are governed in accordance with international requirements of iso (international organization for standardization). it should be noted that iso influence is extended to all areas of economic activity, except for electronics and electrical engineering. regulation of electronics and electrical engineering is entrusted to the international electrotechnical commission (iec  – international electrotechnical commission). baltic journal of economic studies 196 vol. 2, no. 2, 2016 as it is mentioned in iso/iec 17021:2006 «conformity assessment  – requirements for bodies providing audit and certification of management systems», the overall aim of standardization is declared as "an assurance to all stakeholders that the management system meets specific requirements. the value of certification is reflected in the degree of public trust and confidence, which are provided by an impartial and competent assessment by a third party ". cenelec – european committee for standardization in electrical engineering etsi – european telecommunications standards institute cen – european committee for standardization fig. 1. major standardization bodies in the european union source: developed by author the european committee for standardization was established in march 1961, although in fact it began the development of standards only in 1970. currently, cen members are all member states of the european union, three are the members of the european free trade association (iceland, norway and switzerland are assigned to the central secretariat  – scientific and technical nonprofit organization based in brussels). european committee for standardization in electrical engineering, which was established in 1972, is not an institution of the european union, although it is directly involved in the formation of the technical adjustment for eu member states. under belgian law the committee is a nonprofit organization headquartered in brussels. members of the european committee for standardization in electrical engineering are the national standards bodies of electrical products in european countries. the european telecommunications standards institute, formed in 1988, bases its activities in the technological park of sophia antipolis, france. each year european telecommunications standards institute publishes two thousand european standards for information and communication technologies (ict), including fixed, mobile, radio communication and internet technologies. 3. principles of standardization and certification an important aspect of the study of standardization and certification are the principles of their implementation in eu member states. the analysis allows establishing the basic principle of certification and standardization for the european union – liberalization of relations concerning certification and standardization. we mean the fact that the product which has all necessary documents valid on the territory of one country of the community can be implemented in other eu countries. in our opinion, the second essential principle of certification and standardization of products in the eu is harmonization of technical regulation procedures. the essence of harmonization is to create single unified product requirements affecting the health and safety of humans and the environment. features of harmonization are being discussed in detail by the eu directives, approved by the eu commission. for instance, directive 98/34 / eu «laying down a procedure for the provision of information in the field of technical standards and regulations» regulates the exchange of information on technical regulations between member states; directive № 2001/95 / eu "on general product safety " declares the purpose and means of placing safe products on the market. responsibility for the harmonization of standards is entrusted to cen and cenelec as well as implementation of standards at the national level is done by certification authorities of each of member state. in the above-mentioned iso 17021:2006 certification and standardization principles underlying the activities of technical regulation in the european union are classified in a different way. impartiality responding to complaints management of impartiality responsibility privacy openness fig. 2. principles of certification and standardization in the european union source: developed by author the commission, which solves special issues in the field of standardization eots council research laboratories fig. 3. structure of the european organization for testing and certification source: developed by author baltic journal of economic studies 197 vol. 2, no. 2, 2016 for the successful implementation of its duties certification bodies in each country must be accredited (accreditation means formal recognition of competence to perform relevant types of certification). according to global concept for certification and testing of industrial products, adopted in 1989, certification bodies and research laboratories that are accredited in one of the countries automatically receive accreditation for all countries of the european community. the only requirement is timely notification of eu commission's authority. undoubtedly, there is a clear need for coordination and control over the activities of certification at european level. these functions are performed by the european organization for testing and certification (eotc), which was established by the eu commission, the secretariat of the european free trade area (efta) and the european committee for standardization (cen, cenelec). 4. local technical regulation systems in our opinion, germany can be accepted as a country with the most prominent example of successful organization of the national standardization system. since january 2010 there is a single national accreditation body dakks (deutsche akkreditierungs stelle gmbh). so, all certification bodies and testing laboratories are tested in this institution, with the possibility of getting comprehensive information on the desired subject. the system of technical regulation of products in the uk is very similar to the german and is considered as one of the oldest in europe. the main body for certification and standardization is the british organization for standardization, which was established back in 1910. as s part of organization operates testing center for serial production and quality assurance council, which is responsible for certification and labeling. undoubtedly, british standards organization represents the country in iso, cen and cenelec. in fact, accession to the european union means accepting the rules of technical regulation and providing a representative (usually the national authority certification and standardization) to the three main eu standardization bodies: cen (european committee for standardization); cenelec (european committee for standardization in electrical engineering) and etsi (european telecommunications standards institute). an important feature of standardization and certification of products in the eu is sequence of reforms and transformations. according to the resolution of the european council from 21 december 1989 law dynamics in the chosen field depends on the development of individual modules for each stage of the assessment. in other words, this provision makes it impossible to develop the legal framework for technical regulation without considering each element of the system in practice. 5. conclusions summarizing the above information, we can conclude the existence of a powerful system of technical regulation in the eu, which ensures high quality of products (thus defending the interests of consumers), facilitates the exchange of information between manufacturers in europe and is able to dynamically respond to changing needs of the international market. consequently, the successful implementation of certification and standardization of industrial products in the eu for a long period indicates the feasibility of the relevant case law in ukraine. references clayton, c., michael, r . (2003). the innovator's solution: creating and sustaining successful growth, boston: harvard business school press. different types of etsi standards. – retrieved from: www.etsi.org duyvis, f.d. (1960). standardization as a tool of scientific management.  – retrieved from: https://www.ideals.illinois.edu/bitstream/handle/2142/5530/librarytrendsv2i3g_opt.pdf ?sequence=1 hesser, w., inklaar, a. (1998). an introduction to standarts and standartization, beuth verlag gmbh. list of cen members. – retrieved from: // www.cen.eu/go/members/ rapex alert system. – retrieved from: ec.europa.eu richen, a., steinhorst, a. (2005). standardization or harmonization, bptrends. shapiro carl (1999). information rules: a strategic guide to the network economy, boston: harvard business school press. людмила шабельник регулирование процессов сертификации и стандартизации продукции в странах европейского союза аннотация. исследование направлено на изучение текущего состояния системы технического регулирования в европейском союзе. особое внимание уделяется особенностям стандартизации и сертификации в некоторых странах ес в целях реализации зарубежного опыта в украине. несмотря на широкий охват исследования проблемы технического регулирования, ряд вопросов остаются нерешенными, особенно проблема baltic journal of economic studies 198 vol. 2, no. 2, 2016 исторической ретроспективы и возможности реализации положительного опыта. предмет исследования. теоретические и методологические подходы к регулированию сертификации и стандартизации процессов в ес, а также сравнительный анализ систем в прошлом и настоящем. методология. работа основана на исследовании имеющихся публикаций по теме, сравнительном анализе, индукции и дедукции. проблемы стандартизации и сертификации были досконально изучены многочисленными исследователями: f.d. duyvis (1960), w. hesser и a. inklaar (1998), c. shapiro (1999), a. richen и a. steinhorst (2005). но, несмотря на глубокие теоретические основы научных работ очевидно, что наиболее важными документами в области технического регулирования являются стандарты iso (в частности, iso / iec 17021: 2006 «оценка соответствия – требования к органам, проводящим аудит и сертификацию систем менеджмента»). результаты. в статье обнаруживается взаимосвязь между основными органами по стандартизации в ес, изучаются основные законодательные документы, раскрывается историческая ретроспектива и обеспечивается углубленное изучение системы технического регулирования в германии и великобритании. информация из статьи может быть использована для общего понимания основных процессов технического регулирования в ес; практического исследования маркировочных знаков на продуктах и сравнительного анализа систем стандартизации в разных странах. практическое значение. важно отметить практическую демонстрацию технических требований в ес: знаки маркировки сертификат in, сертификат vs, сертификат onorm, сертификат lvs означают соответствие национальным стандартам сообщества. например, сертификат din означает соблюдение требований института стандартов германии (deutsches institut für normung), сертификат bs  – требований для производителей в великобритании, сертификат önorm  – знак маркировки в австрии, сертификат lvs имеет французские корни. значение/оригинальность. в исследовании содержится комплексный обзор по процессам сертификации и и стандартизации продукции в европейском союзе, с учетом законодательной базы и исполнительной власти на как на общеевропейском, так и на местных рынках. baltic journal of economic studies 161 vol. 7 no. 2, 2021 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: melnichenko@knute.edu.ua orcid: https://orcid.org/0000-0002-5162-6324 researcherid: n-9535-2016 2 kyiv national university of trade and economics, ukraine. e-mail: m.bosovskaya@knute.edu.ua orcid: https://orcid.org/0000-0002-6021-5228 researcherid: n-4652-2016 3 kyiv national university of trade and economics, ukraine. e-mail: a.okhrimenko@knute.edu.ua orcid: https://orcid.org/0000-0003-0405-3081 researcherid: n-5566-2016 doi: https://doi.org/10.30525/2256-0742/2021-7-2-161-169 the formation of a nation tourism brand of ukraine svitlana melnychenko1, myroslava bosovska2, alla okhrimenko3 abstract. performing a large range of functions, tourism implies an embodiment of an important economic, social, and geopolitical factor affecting the competitive innovative development of all the countries. despite the covid-19 influence, the tourism sector remains one of drivers for the global and nation economies because it plays the generating and integrating role within the context of ensuring the positive dynamics of quantitative and qualitative parameters describing the development of economic systems. furthermore, the tourism sector is an effective multiplier with regard to enhancing the main macroeconomic indicators. a brand is a powerful means for promoting tourism in the internal and global tourism markets. forming and supporting a nation tourism brand constitute an important goal for effective development of the tourism sector, as well as a precondition for capturing its opportunities and strategic prospects. the article’s purpose is to substantiate conceptual basics and methodical frameworks regarding the formation and development of the nation tourism brand of ukraine. having generalized scientific and analytical researches, we have revealed that ukraine ranks low on the level of tourism attractiveness and value of its nation tourism brand. in addition, we have observed the low level of competitiveness of its tourism sector in the global market. therefore, there is a need to draw up a branding conception grounded in the holistic approach and implementation of its provisions into the tourism sector through a leverage portfolio, instruments of mechanisms, and recommendations concerning improvement of processes of formation, development, monitoring, and supporting the nation brand of ukraine. the nation tourism brand of ukraine is considered as the integral unique tourism image and a behaviour model for ukraine as a country supplying a tourism product. a tourism product integrates outcomes of more than 50 industries of the economy and contains immanent attributes and determinants, which embody its identity and determine value for consumers alongside advantages for stakeholders. the formation of the nation tourism brand contemplates the structural and logical consequence of processes, which comprises six stages: brand-context, brand-monitoring, brand-start, brand-support, brand-effect, and brand-foresight. a semantic model for creating and supporting the nation tourism brand of ukraine reflects the main groups of descriptors: stakeholders, principles, factors, functions, processes, results, and aims. the identification of these descriptors enables to indicate the content, intrinsic features, functions, and processes of the tourism branding of ukraine. we have suggested a threelevel model of the nation tourism brand’s advantages for stakeholders, which describes expenses and benefits for indicated groups of stakeholders within the context of the functioning of the formed tourism brand of the country. forming the nation tourism brand will foster ensuring the competitiveness, image, leadership positions, business perfection, customer loyalty, positive perception of tourism products by stakeholders, tourism sector, and nation tourism system of ukraine. key words: tourism, tourism system, brand, tourism brand, branding, brand management, brand formation, brand development, stakeholders, efficiency, competitiveness, image. jel classification: 010, p43, z30 baltic journal of economic studies 162 vol. 7 no. 2, 2021 1. introduction the global covid-19 pandemic has immensely influenced the tourism business. nevertheless, under effective management, the crisis position in many cases conduces to the creation and/or development of stronger and more competitive business entities, products, and projects. hence, opportunities of using the comprehensive social factors as determinants for development will facilitate ensuring the rising basic positions for the tourism sector of ukraine. in such case, the promotion of ukraine in the internal and global tourism markets is of great importance. this process is provided by the creation and efficient usage of the nation tourism brand. successful countries being leaders in the tourism industry maintain own competitive advantages, including those emerged owing to the effective promotion of own brands, which allows providing the sustainable economic growth. the relevance of tourism is evidenced by global trends and prospects of its development. during non-crisis periods, the global tourism industry has exerted powerful influence on the general state and formed tendencies of development of the global economy since the global tourism industry has involved 10% of all the investments and every tenth employee in the world, and it accounts for up to 7% of gdp (unw to, 2019). in ukraine, the positive influence of the tourism sector on the state of the economy is insufficient. ukraine has the significant tourism potential, resource preconditions, convenient geographical location but does not use them appropriately and to the fullest extent. therefore, the activity related to the formation and promotion of the nation tourism brand in the global and domestic tourism markets is a prior vector for the post-crisis renovation of the economy and a strategic goal for development of business entities and tourism destinations, as well as the nation economy. the formation of nation tourism brand is an important component for ensuring the competitiveness, image, leadership positions, business perfectness, customer loyalty, positive perception by stakeholders, etc. 2. literature review a country’s brand is of considerable political, economic, and socio-cultural importance (anholt, 2013; kotler et all, 2002; o'shaughnessy et all, 2000; fan, 2006; kaneva, 2011). according to the treating the nation as a brand”, o’shaughnessy considers: “one conclusion is that the reputational capital of a nation with respect to a product category will influence choice more than a nation’s overall attractiveness, though fragments of a nation’s imagery may be successfully exploited” (o’shaughnessy, et al., 2000). nation brand is the total perception of international audiences about a country (handayani et al., 2013, 173). examining the nation brands, a majority of scientists have concluded that tourism is a component of a nation brand (particularly, visiting a country is a factor of its perception). “in the context of the nation brand ... may be based upon the following factors: personal experience, e.g. visiting the country; education or knowledge; prior use or ownership of a product made in that country; the depiction of the country through media channels; stereotypes, etc.” (fan, 2005). from the point of view of one of worldwide acknowledged specialists in nation brands s. anholt (2006), a nation brand is formed by the following main components: tourism, exports, people, culture and heritage, governance, investment, and immigration (figure 1). the brand finance as the world’s leading independent brand valuation consultancy, in determining the strength of nation brands, takes into account results of activities based on a large amount of data in terms of three key components: a) products and services; b) investments; c) society, where the organization indicates tourism among six sub-components. within tourism, experts evaluate openness, infrastructure, value, and appeal (brand finance, 2018, p.16). consequently, scientists emphasize that, on the one hand, tourism as a component of the nation brand takes into consideration the level of the interest in visiting a country and engaging the outstanding natural and human-made landmarks. on the other hand, tourism will significantly benefit from a strong nation brand (caldwell et all, 2004). the bloom consulting being an official data partner of the world economic forum researches tourism brands of countries. the results of their ranking not only measure perceptions and appeal of a tourismspecific country brand but also classify its relative branding performance in a tangible and realistic manner (bloom consulting, 2020). the ranking variables account for the economic performance of a country’s tourism sector, its online performance, as well as digital measurements. we observe the increase of the interest in examining the tourism brands of countries or destinations and factors affecting them. it was determined that a new quality of tourism activities can bring to the formation of the national tourist brand, which is built on the symbolization of customer value of tourism resources and territory has a characteristic, respectively, on which the socio-economic and cultural influence of the tourist destination and its attractiveness to potential tourists and export development oriented model of tourism (boiko, 2013, p. 42). scientists prove a hypothesis, which states that an efficient branding strategy for the brand management in tourism is primarily influenced by the perception of demand (seric, 2011). in certain scientific papers, researchers have done an analysis of performance baltic journal of economic studies 163 vol. 7 no. 2, 2021 indicators for the nation tourism branding of countries: indicators of the inbound tourism flow, country’s international tourism revenues, average cost of a vacation, travel & tourism competitiveness index in particular countries of central and eastern europe (nikolaichuk, 2020). for instance, s. cosma, c. pop, and a. negrusa propose to present romania’s competitive advantages and the branding strategy this country should have as a tourist destination (2007). v. cujba and r . sirbu present the results of the research on the creation, organization, administration and promotion of the wine complex “cricova” (2020). taking into account the existence of the scientific interest and practical necessity, problems concerned with the formation of the nation tourism brand of ukraine require the system complex examination. 3. generalization of the main statements the brand of ukraine is an essential precondition for its promotion in the internal and global tourism markets. according to n. seric, “management of the nation touristic brand is a new weapon in the global market” (2011). nowadays, the nation brand of ukraine is lowly valued on a global scale (table 1). nation brands tourism the level of interest in visiting a country exports the public's image of products and services of a specific country governance public opinion about national government competence and fairness, as well as its perceived commitment to global issues investment and immigration the power to attract people to live, work and study, and also how people's perceive quality of life and buiness environment in a specific country cultural & heritage the public's perception of a nation's heritage and culture people the country's citizens' reputation for competence, openness, and friendliness figure 1. the anholt-gf k nation brands hexagon source: (anholt, 2006) table 1 ranking and value of certain nation brands in 2017–2020 rank 2020 rank 2019 rank 2018 rank 2017 name of country 2020 nation brand value, usd 2020 brand rating 2019 nation brand value, $ 2018 brand rating 2017 brand rating brand value change, % 2020/2017 1 1 1 1 united states 23,738 ааа 27,751 25,899 21,055 12.7 2 2 2 2 china 18,764 аа 19,485 12,779 10,209 83.8 3 3 5 4 japan 4,261 аа+ 4,532 3,598 3,439 23.9 4 5 3 3 germany 3,812 ааа 4,854 5,147 4,021 -5.2 5 4 4 5 united kingdom 3,314 ааа3,850 3,750 3,129 5.9 6 6 6 6 france 2,699 аа+ 3,096 3,224 2,969 -9.1 7 7 9 8 india 2,027 а+ 2,561 2,046 2,046 -0.9 8 9 7 7 canada 1,900 ааа2,183 2,224 2,056 -7.6 9 8 8 9 italy 1,776 аа2,110 2,214 2,034 -12.7 10 10 10 10 south korea 1,694 аа 2,135 1,845 1,845 -8.2 … … … 55 56 60 61 ukraine 97 а93 84 68 29.9 source: drawn up by the authors on the basis of data provided by brand finance baltic journal of economic studies 164 vol. 7 no. 2, 2021 over the past 10 years, the nation brand of ukraine achieved the highest positions in 2012–2013 (45th  position; estimated at 124–126 billion usd) when ukraine has been demonstrating the orientation of its vector towards western values of transparency and democracy, it hosted the european-level final sports competition, and amounts of international arrivals and investments have been increasing. since 2014, significant changes have occurred. in the report of the nation brands, experts accentuate that political factors has considerably affected the brand of ukraine, particularly the russian invasion of crimea and support to rebels in donetsk and luhansk. the continuing instability is a major problem for its nation brand. in losing crimea, ukraine has lost not just a significant landmass and economic base, but the better part of its tourist industry (brand finance, 2014, p. 6). nevertheless, ukraine is in a better position compared with certain countries in the eastern european (slovakia, slovenia, bulgaria, lithuania, croatia, latvia, estonia). since 2016, regardless of low ranks (59th-61st positions in the world), the nation brand value of ukraine has been slightly growing (from 56th to 84th billion usd) (figure 2). this tendency is a positive factor. with regard to the evaluation of the tourism brand, ukraine ranks 34th among 42 european countries, according to the ranking of tourism brand, a study conducted by the bloom consulting in 2019–2020. as compared with the previous period, ukraine slipped two positions and ranks 96th among 198 countries on a global scale. hence, we observe an insufficiently favourable situation regarding effectiveness of the tourism brand of ukraine. therefore, there is a need for forming the nation brand of ukraine as the integral unique image of a country, which supplies tourism products, embodies its uniqueness and identity, and is characterized by value for a customer and advantages for other stakeholders. the formation of the nation brand contemplates the particular structural and logical consequence comprising six stages: brand-context, -monitoring, -start, -support, -effect, and -foresight (figure 3). within the brand-context, in forming the nation tourism brand, we consider it necessary to indicate the holistic (complementary) approach grounded in the methodological synthesis of inter-disciplinary and multi-aspect scientific knowledge on branding in order to draw up the conception of management and its implementation through a system of recommendations, methods, and mechanisms. taking into account this assertion, we may formulate basic components of the brand-context generalized in the form of a semantic model for forming the nation tourism brand of ukraine (figure 4). forming the nation tourism brand of ukraine is a consolidating process, which involves the following types of stakeholders: a) representatives of the public sector (central and local authorities); b) the private sector (tourism clusters and business organizations performing various types of economic activities, particularly tourism, hospitality, restaurant, transport, and servicing infrastructure); c) the civil sector (professional and civil societies). their mutual 0 20 40 60 80 100 120 140 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 48 54 45 45 53 68 59 61 60 56 55 65 68 124 126 80 44 56 68 84 93 97 position value, billion usd figure 2. dynamics of the position and nation brand value of ukraine in 2010–2020 source: drawn up by the authors on the basis of data provided by brand finance baltic journal of economic studies 165 vol. 7 no. 2, 2021 partnership contemplates developing a large-scale system of measures for promoting a tourism product in the national and global markets. the principles are inbound provisions in this process whereas the main factors of influence on forming the brand are grouped as objective, subjective, and special ones. the brand-start stage contemplates formulating and implementing the brand conception, brand visualization, information and communication support. the semantic model for the brand ensures indicating and carrying out general managerial functions such as the regulatory, organizational, prognosticative, coordination, motivational, administrative, consulting, research, communication, information, creative, etc., and special ones. the special functions encompass: creating/strengthening the competitive advantages; establishing links with customers and disseminating the information; presenting peculiarities of a nation tourism product; symbolic embodiment of uniqueness and utility from consuming a tourism product; forming/strengthening the trust of investors; triggering the impressions, emotions, and customer commitment. within the brand-start, it is necessary to create a single internet-portal for providing the open access to information on nation tourism products, the existing tourism infrastructure, tourism resources, and presenting virtual trips. it is convenient to use modern technologies such as dashboards as information and analytical panels for visualization of data, e.g. concerning arrivals of foreign citizens in ukraine, visiting certain destinations by tourists, amounts of tourist tax, etc. in ukraine, the tourism brand conception is not stable. since independence of ukraine, in changing the central executive authorities in the tourism industry, approaches to the brand and its logotype has been also transforming: a) the state tourism administration of ukraine (2002–2006) – an inscription “ukraine” in sunbeams underpins the logotype; b) the state service of tourism and resorts of the ministry of culture and tourism of ukraine (2008– 2010) – a logotype is presented as an inscription “tourism in ukraine” on a blue background; c) the state agency of ukraine for tourism and resorts of the ministry of infrastructure of ukraine (2014–2018) – the brand’s slogan is “ukraine: it’s all about u”; d) the department of tourism and resorts of the ministry of economic development and trade brand-context brand-monitoring brand-start brand-support brand-effect brand-foresight determining the methodological frameworks (approaches, principles, and methods), forming a purpose, selecting the target priorities (individuality, values, advantages, and attributes), generalizing a model for brand building scanning, assessing internal and external environments and a competitiveness level of a nation tourism product implementing and carrying out the main functions of the nation tourism brand within various processes and procedures (directed towards internal and external environments) undertaking measures regarding promoting the brand, entering new markets, implementing innovative technologies and instruments, etc. concerning the brand development determining the effectiveness, value, and strength of the nation tourism brand and its advantages for different groups of stakeholders prognosticating the development of the tourism market and markets of related products and planning scenarios for variants of strategic reference points of the nation tourism branding figure 3. structural and logic consequence for forming the nation tourism brand of ukraine source: compiled by the authors baltic journal of economic studies 166 vol. 7 no. 2, 2021 figure 4. semantic model for forming the nation tourism brand of ukraine source: drawn up by the authors public sector private sector civil sectorstakeholders and beneficiaries strategic orientation; reflection; emergence; anticipation; flexibility and adaptiveness to transformations and global factors; complementarity of stakeholders; efficieny; ethics; sociocultural balance principles processes directed towards the internal environment: − developing / improving the tourism products and services; − creating / enhancing the infrastructure; − implementing the innovations; − enhancing the staffing; − visa liberalization special functions − creating / strengthening the competitive advantages; − establishing links with customers and disseminating the information; − presenting peculiarities of the nation tourism product; − symbolic embodiment of uniqueness and utility of consuming a tourism product; − forming / strengthening the trust of investors; − triggering the impressions, emotions, and customer commitment brand value brand power brand development index brand image brand loyalty outcomes objectives economic: the increase of revenues in the tourism and related sectors and involvement of investors political: strengthening the geopolitical positions of the country social: extending the opportunities for employment, strengthening the national idea, and forming the active citizenship cultural and psychological: forming the social culture and values objective: − the tourism potential; − conditions for tourism development (socio-economic, political, ecological, and technological) subjective: − tourists’ worldview; − tourists’ mentality; − perception of attributive signs by touristsfactors special: − government support for tourism development; − level of tourism infrastructure development directed towards the external environment: − measures regarding publicizing tourism trips within the country among citizens of ukraine and other countries; − participation in exhibitions; − intensifying the activity in the internetenvironment and social networks; − establishing offices in other countries brand vision brand idea conceptualization brand visualization information and communication support for the brand baltic journal of economic studies 167 vol. 7 no. 2, 2021 of ukraine (since 2018) – the brand’s slogan is “ukraine now ”, which demonstrates ukraine as an open modern country where all the exciting things are happening now. it is worth mentioning that, in ukraine, a debate concerning creating another brand conception and its visualization continues. such situation does not foster the growth of values and effectiveness of the brand. at the brand-support stage, authorities undertake measures regarding promoting the brand, entering new markets, implementing innovative technologies and instruments regarding the brand development. in addition, within this stage, authorities deal with the following processes: a) ones directed towards the internal environment, which are directly concerned with forming and improving a tourism product, its components, the tourism environment, and accessibility of the country in the context of visa liberalization; b) ones directed towards the external environment related to the brand promotion, presenting the tourism potential and opportunities through the communication with a target audience at international exhibitions, on the internet, and on social networks, which involves modern innovative instruments. we think that, nowadays, the tourism brand of ukraine is at the stage of brand-support, which requires comprehensive actions aimed at disseminating the slogan and logotype “ukraine now ” among domestic and foreign tourists. however, beyond supporting the visual component, it is important to undertake a system and complex programme for supporting the brand coordinated by the main groups of stakeholders in relation to the two above-mentioned processes (directed towards the internal and external environments). the brand-effect stage contemplates determining effectiveness of the functioning of the brand. from the standpoint of the interests of various groups of stakeholders, we may use the g. kalinkina’s approach (kalinkina, 2006) regarding multi-benefit of a product, which comprises a set of utilities for different market agents. therefore, multi-benefit of the brand for various stakeholders takes the following formalized form: pi aijqj ui i n j m i n i n = + ==== ∑∑∑∑ 1111 , (1) where pi is a set of benefits (value, effects, and advantages) for external market agents (stakeholders); qj is a set of benefits for internal market agents (stakeholders); aij is the ratio for the correlation between utilities of internal and external market agents (stakeholders); ui is the element that takes into account the impact of an institutional factor; n is the number of external market agents (stakeholders); m is the number of internal market agents (stakeholders). simultaneously, taking into account the existence of a wide circle of stakeholders in forming and implementing the nation tourism brand, we may present the model of advantages for stakeholders (figure 5). outcomes of benefits/advantages from using the nation tourism brand consist of the following indicators: brand value, brand power, brand image, brand loyalty. these indicators collectively express the extent of influence the brand exerts on efficiency of the functioning of the tourism sector. completeness of the nation tourism brand is concerned with attaining established economic, geopolitical, social, cultural and psychological objectives. the aforementioned outcomes are applied for implementing the next stage – brand-foresight, which deals with prognosticating the development of the tourism market and markets of related products and plans scenarios for variants of strategic reference points of the nation tourism branding. 4. conclusion completeness of the nation brand is a means for increasing the tourism interest in ukraine and a precondition for the growth of tourist flows. value of the nation brand implies not only opportunities for creating the positive image, the increase of utility from activities in the global, regional, and national markets but also strengthening the positions of the country on a global scale. substantiating the methodological frameworks for forming the tourism brand, we suggest considering the tourism brand as an integrated, dynamic, and multi-benefit product proposing a set of values and advantages for market entities (stakeholders). the determining influence of the brand is stipulated by a set of its identification contexts: substantive, structural, transcendental, functional, etymological (evolutional), managerial, emotional and psychological, cultural, monetary, and value. this allowed to indicate the holistic (complementary) approach to its identification as a set of unique characteristics, which provides particular guarantees to target stakeholders regarding receiving benefits and advantages. substantiating the significance of developing the nation tourism brand enables to come to a conclusion that this component of the stable influence of “soft comprehensive power” stipulates its perception as the most important instrument for ensuring the competitiveness, forming the image and leadership positions, achieving business perfectness and customer loyalty, and the positive perception of tourism products, the tourism sector, and national tourism system of ukraine by stakeholders. baltic journal of economic studies 168 vol. 7 no. 2, 2021 – the increase of revenues in the tourism and related sectors; – enhancing the level of tourism competitiveness; – involving investments; – strengthening the geopolitical positions of the country; – forming the social values macro level: country levels of advantages for beneficiaries: meso level: regions, destinations, clusters, local communities − forming the investment attractiveness of territories and efficiency of investing in development of tourism destinations; − forming and developing the public-private partnership projects; − enhancing the quality of a complex tourism product will enable to form tourism clusters and destinations, as well as to ensure confidence and collaboration; − gaining synergetic benefits from strategic collaboration; − providing the completion of long-term contracts; − support for gaining direct benefits by local communities − reduction of uncertainty in the process of preparation for a trip and undertaking it; − guaranteeing optimal indicators of service quality (price, service, and time); − providing confidence and reduction of uncertainty (minimizing the risks during a trip); − maximum satisfaction of needs in compliance with anticipations; − providing confidence in the operative response to claims; − guaranteeing the professionalism and attention in the process and after purchasing a trip − recognition of the national tourism brand will enable to beneficially position a certain business entity in the market; − the growth of efficiency, absolute and relative indicators of activity; − scaling the activity, the increase of a market share; − achieving competitive advantages − maximizing the profits, minimizing the expenses; − acceleration of a rate of return; − the increase of business value − forming stronger and solider civil and professional environments; − conducing to making significant positive changes in processes of managing and planning the tourism sector non-government organizationstourists business entities investorslocal level: figure 5. model of the nation tourism brand’s advantages for stakeholders source: drawn up by the authors references: anholt, s. 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(2011). nation branding-toward an agenda for critical research. international journal of communication, 117–141. kotler, p., & gertner, d. (2002). country as brand, product, and beyond: a place marketing and brand management perspective. journal of brand manegement, 249–262. nikolaichuk, o. (2019). justification of the tourist brand management mechanism. black sea economic studies. doi: 10.32843/bses.48-20 o’shaughnessy, j., & o’shaughnessy, n. j. (2002). treating the nation as a brand: some neglected issue. journal macromarketing, 20(1), 56–64. doi: 10.1177/0276146700201006 seric, n. (2011). management of the national touristic brand: the role of the branding strategy in croatia. international journal of management cases, 13(4). doi: 10.5848/apbj.2011.00105 unwto (2019). global and regional tourism performance. available at: https://www.unwto.org/global-andregional-tourism-performance baltic journal of economic studies 35 vol. 7 no. 4, 2021 corresponding author: 1 odessa state university of internal affairs, ukraine. 2 international university of economics and humanities named after academician stepan demianchuk, ukraine. e-mail: milabogush@mail.com orcid: https://orcid.org/0000-0002-2494-6111 doi: https://doi.org/10.30525/2256-0742/2021-7-4-35-42 implementation of the state policy registration of property rights using benchmarking methods oleg bolgar1, liudmyla bogush2 abstract. the subject of the study is organizational and economic relations that arising in the application of market instruments of regulation of public services for the registration of rights. methodology. the instrumental and methodological apparatus of the research is formed by the applied methods of economic analysis of the activities of organizations in the service sector, statistical methods, selective observation, the method of economic and mathematical modelling, grouping, generalization, expert assessments, methods of economic theory, marketing, etc. the aim of the article is to develop theoretical and methodological provisions, as well as the development of practical recommendations to improve the process of providing public services for the registration of property rights on the basis of benchmarking. the results of the study showed that the current state of the public services sector is characterized by uneven development and use of modern forms and methods of their management. improvement of the system of management of public services involves studying the application of best practices, finding solutions for those areas where the gap between the desired and actual state of public services is maximum or exceeds accepted standards. benchmarking is the most suitable tool for solving these problems. conclusion. the development of public services for the registration of property rights is a process of consecutive management decisions, based on which methods and ways to improve the effectiveness of their provision are determined. each stage of the benchmarking process is characterized by a high degree of responsibility of the decisions made, since the wrong choice at one stage will lead to incorrect conclusions and results of subsequent stages. therefore, when developing a system of public services for the registration of property rights, a consistent algorithm that meets the requirements of management is needed. the benchmarking process is constant and regular. property rights registration authorities, being monopolists in providing registration services at the regional level, implement the function of satisfying the needs of the population and are financed from the budget. a number of reasons, such as the impersonality of budget funds, indirect interaction between the consumer and the service producer, lack of motivation of employees to meet public needs, lead to the emergence and increase of gaps in the perception of consumers and service producers. in turn, benchmarking is a reliable tool for optimizing the process of providing the services in question and minimizing these gaps. key words: benchmarking, state registration, property rights, quality of services, service economy, public goods, management tools, market tools. jel classification: m31, i20, h82, g21, p51 1. introduction the current level of development of socio-economic relations is characterized by the dominant role of the service sector, the intensification of scientific and technological progress and the integration of economic entities. the centerpiece in the development of the service sector is people as consumers and as carriers of human capital, which is the most important factor in economic growth. the activities of market entities are aimed at maximizing the satisfaction of service needs. the role of the state in the service economy is reduced, on the one hand, to the regulation of the service sector, and on the other hand, to the provision of a wide range of public services to economic entities and citizens. government services are of paramount, strategic nature for the economy, but in ukraine the state as a service provider is considered relatively recently. in today's economy, the development of public services aimed at the formation of public goods; in particular, they include services for the registration of property rights. the most important factor of production is land resources, without which it is impossible to carry out baltic journal of economic studies 36 vol. 7 no. 4, 2021 economic activity. in the course of the land reform, which was launched about 25 years ago, the land property of citizens, legal entities, the state and local self-government is being formed (martin, 2015). these processes are accompanied by the need to solve various problems, and therefore the role of state registration services in the economy is growing. one of the peculiarities of state registration services is the content regulation of the provision process, as well as the behavior of the subjects performing these services (nyhan, 2009). public services are necessary for the normal functioning of the economy, while the organizations that provide them are monopolists in their field. in this regard, it is necessary to search for modern market instruments that help to improve both the quality of management of public services and the efficiency of the provision process (watson, 2017). one of the main such tools is benchmarking. other market instruments include various economic, managerial, social, marketing and other methods that are used to improve the functioning and development of the sphere under consideration. among the set of various market instruments in the sphere of state services for the registration of property rights, such tools as elements of the marketing complex, outsourcing, benchmarking, customer surveys, gap analysis can be noted as the most progressive ones. the above determines the importance of the topic of the article, its theoretical orientation and practical significance. 2. theoretical substantiation of the necessity and possibility of applying benchmarking to state services for registration of property rights the state of the public services sector is currently characterized by uneven development and use of modern forms and methods of their management. improvement of the management system of public services involves studying the application of best practices, finding solutions for those areas where the gap between the desired and actual state of public services is maximum or exceeds accepted standards. benchmarking is the most suitable tool for solving these problems. benchmarking, as a management tool, is based on identifying examples of best practices, comparing results and processes of government activities, should be carried out continuously and be permanent in public administration. the interpretation of the term "benchmarking" is not clearly traced in the domestic marketing literature. in essence, benchmarking is an advanced, strategically oriented methodology of comparative competitive analysis of the organization of business processes (production of goods or services) of an enterprise with similar processes (goods) of other, more successful companies; the concept that involves the unconditional formation of enterprises and organizations of gravitation towards continuous development; the development process based on a constant search for new ideas, development of best practices, techniques and forms of business, their adaptation and further application in their own business practice (galanter, 1981). it is believed that the concept of benchmarking originated in japan in the late 50s of the xx century. the concept of "benchmarking" is compared there to the term "dantotsu", which means "the effort, concern, and concern of the best (leader) to become even better (leader)" (ohinata, 2004). despite the fact that the philosophy of process improvement has existed for quite a long time (including the concept of total quality management, kaizen, reengineering), the concept of benchmarking has become widespread relatively recently. it should be noted that the interpretation of the concept of "benchmarking" accepted in the scientific literature states its full compliance with the set goal. that is, a certain sequence of methods for managing an enterprise or organization in a competitive environment. the considered method of service process management allows, on the one hand, to create a set of services, adequate to market conditions, on the other hand, to apply the accumulated experience of effective management. the main goal of benchmarking is to ensure a leading position by improving the quality of services and optimizing business processes (spendolini, 2013). in management theory, benchmarking is considered as finding, establishing and analysing the best experience and the possibility of its application. in general, we can recognize benchmarking as an organization management tool. the main idea of benchmarking is to focus on existing successful solutions to such problems. that is, the organization recognizes a more effective solution to the problem by its competitors, both direct and indirect, and the organization's employees are ready for training (gronroos, 1990). in service organizations the implementation of benchmarking system can be carried out by setting goals and objectives and performing a number of functions. the goals of benchmarking in the field of public services can be: – increasing the degree of citizens' satisfaction by improving the quality of service and reducing the time of processes; – optimization of the level of costs for the implementation of public services (reduction of budget expenditures at various levels); – strengthening of positions in the system of state organizations; baltic journal of economic studies 37 vol. 7 no. 4, 2021 – justification of the implementation of innovative activities in various areas. then the tasks of benchmarking may be as follows: – determination of areas of research that correspond to the set goal; – choice of research area: internal, external structures, one or more areas of activity, national, international experience; – identification of research objects whose experience may be of value to the organization; – establishment of comparison criteria consistent with the goals set; – setting up a productive relationship with a benchmarking counterparty; – obtaining reliable information; – choice of adequate methods for analysing the information received (stewart, 2004). this scheme characterizes the cyclical nature of the benchmarking process: in the case of a cycle interruption, the result cannot be long-term. at the same time, it is necessary to note the consistent and mandatory nature of all actions, their purposefulness. the importance of benchmarking in the public sector is primarily that the conclusions derived from it can indicate directions and create incentives for innovative changes similar to those sent by the market in the private sector. the practice of results management around the world shows that simply monitoring results cannot lead to significant improvements in efficiency and productivity. for this reason, benchmarking is one of the most specific tools of this theory. in particular, it allows the application of performance indicators, the formation of systems incentives and "conditional competition", which are necessary for the system of public services in the country (forsythe, 2011). as the global experience shows, public sector organizations have recently been increasingly turning to benchmarking their services. in the u.k. public sector, benchmarking has been recognized as a powerful tool for improvement and a way to implement the systematic changes needed to deliver modern public services (le grand, 2019). it was also recognized that efficient public services play an important role in enhancing the competi tiveness of the private sector by reducing the bureaucratic burden on business. benchmarking is a way to create the incentives necessary for change in the implementation of both key and non-key activities to raise the standard of public services through the dissemination of best practices (needham, 2011). in europe, benchmarking is used as a tool to make improvements in the work of both public and commercial organizations, as a means of improving the competitiveness of the european economy as a whole. in canada, the system of benchmarking municipal services of the province of ontario has become widespread. this system analyzes information about such parameters of services as efficiency, performance, public perception in the context of individual processes of their provision (watson, 2017). in the us, the most significant benchmarking initiatives include projects in north carolina (a joint project of 35 state municipalities), oregon (oregon options), minnesota (minnesota milestones) and florida (florida benchmarks). common to these projects was the emphasis on benchmarking of financial indicators (efficiency, unit cost) (fernandez, 2016). in the 2000s, virginia polytechnic institute and state university did some very interesting research at the municipal level regarding zoning and building permit services. the system of benchmarking indi cators includes both indicators of unit cost and indicators derived from the survey, characterizing customer satisfaction with the process of service delivery (clarity of procedure, availability of staff, clarity of infor mation, time of service provision) (seybert, 2006). in a market environment, the process of implementing benchmarking faces obstacles that can be successfully overcome in the public sphere. it is in the area of public services the use of benchmarking has considerable potential due to the public status of service producers, the directive nature of their orders, the commonality of the system of organization of public services (spendolini, 2013). it is customary to distinguish five main types of the benchmarking process (some scientists distinguish a larger number of types): – internal benchmarking; – external competitive benchmarking; – external intra-industry benchmarking (combined); – external cross-industry benchmarking; – combined cross-industry and external benchmarking. 3. typology of modern benchmarking as a method of state registration of property rights as james h. harrington, "there is no best type of benchmarking. each of the different types (internal, external competitive, external industry, external cross-industry, and a combination of external and internal) has advantages and disadvantages that must be considered". it should be noted that there is a fundamental difference regarding the processes of internal and external benchmarking. as for internal benchmarking, it can be noted that it is aimed at finding common elements of similar activities and determines which of them should be standardized and applied in the organization as a whole. external benchmarking is aimed at establishing communication between market baltic journal of economic studies 38 vol. 7 no. 4, 2021 participants and, in fact, is a market research. in public services, benchmarking can be both external and internal. it is also customary to distinguish certain forms of benchmarking. corporate benchmarking is point – based and, most often, one-time in nature; it focuses on one specific process that has been identified as problematic in advance (identification occurs by expert means). the goal is to find an optimization solution in the problem area. an advanced approach to benchmarking – tracking progress against a system of exogenously defined goals. it is used as part of the implementation of the strategic planning cycle. the purpose – the formation of information about the achievement of the goals and objectives of the activities of the subject of benchmarking. benchmarking of performance is a comparison of achieved values of indicators with adequate external standards (professional standards, national statistics data, the results of the activities of similar institutional units in terms of parameters). its purpose is to evaluate the performance of organizations controlled by the subject of benchmarking, providers of public services (wang, 2015). to assess the quality of public services, benchmarking can be considered the most applicable. a number of researchers call this form statistical benchmarking. this form of benchmarking should be understood as evaluation, benchmarking and transfer of managerial innovations, which are based on the analysis of the system of performance indicators. performance benchmarking is characterized by minimization of unit costs in its cyclic use. it can be carried out annually without significant revision of the conditions and mechanisms of its implementation. the other forms of benchmarking considered involve creating all the elements anew in each cycle. we can say that performance benchmarking is a single organized approach to the analysis of various activities in public administration. the quality of service delivery in a formalized form is expressed as a set of performance indicators. this brings clarity and incontestability of facts for the participants of the benchmarking process about the achievement of a certain level of performance and the possibility of its improvement on the basis of best practices. 4. organization directions of modern benchmarking as a method of state registration of property rights we will analyze possible ways of organizing benchmarking in the sphere of state services for the registration of property rights. in the first method of benchmarking, the state agency for registration of property rights acts as the coordinator of the process. at the same time, it develops a questionnaire, conducts an assessment and provides data to other participants in the bench marking process. the cadastral organizations do not contact each other. the coordinator provides information to the participants for decision-making. the second method assumes parity of all participants in the benchmarking process within their rights and obligations to provide, collect and exchange information. development of the questionnaire and evaluation of the results are carried out collectively. in this case, the accounting bodies constantly exchange information, and the benchmarking process itself is continuous (stapenhurst, 2009). the third method is a combination of the functions of the state body for the registration of property rights as the coordinator of the process, on the one hand, and the activities of accounting organizations, on the other hand, in a joint study of research areas. local accounting bodies develop a questionnaire, there is an ongoing exchange of information between them, and the state body evaluates and interprets the data, as well as provides training on benchmarking mechanisms. the fourth method involves the creation focus groups consisting of the subjects of the benchmarking process. differentiation of composition of participants is determined by chosen direction of research. in benchmarking the data are pre-selected and processed according to this option. the exchange of information between accounting bodies is limited. the process can be coordinated by both state and regional bodies, if they have the necessary experience. the definition of the method of benchmarking organization is determined by its ultimate goal. the first two methods discussed above provide for a greater concentration of benchmarking management functions in a central unit; in turn, the last two methods, on the contrary, involve mutual coordination of participants, and they can be considered more developed (monro, 2003). its own algorithm characterizes each of these options for benchmarking public services for the registration of property rights. however, it should be noted that all of the options considered, and thus the algorithms for their implementation, differ from each other only in terms of the organization of the process, while its content in most cases is the same. the first option of organizing the benchmarking process is centralized. it is characterized by the following algorithm. stage 1. involves the creation of an "agent" for benchmarking, developing performance indicators, organizing and controlling the collection, analysis, processing of information that arises during this process. in this case, the state body acts as an "agent". baltic journal of economic studies 39 vol. 7 no. 4, 2021 stage 2. the activity related to performance measurement has a certain set of limitations, most thoroughly discussed by stewart and walsh (stewart, 2004). among these limitations, there are general and specific ones that are specific to benchmarking, since they are based on solving the problems of the relevance of information and confirming its significance and objectivity by the participants of the benchmarking process. since the initiator of benchmarking is interested in improving, first, management processes, management quality indicators should take place in the system of indicators simultaneously with indicators of socioeconomic efficiency. the formation of a system of performance indicators is central to the design of benchmarking systems. it should ensure their maximum quality and applicability for solving the tasks at hand. stage 3. questionnaire creation and provision of data to the participants of benchmarking. at the same time, benchmarking participants are not in contact with each other, but only with the "agent" of the benchmarking process. stage 4. at this stage, the system of indicators is coordinated with the participants of the bench marking process. this is due to the mutual influence of indicators in one area, which can lead to difficulties in the process of data analysis, as well as in the formation of aggregated performance indicators. in case of inconsistency of the indicator system, it is subject to correction by the "agent" of the benchmarking process. stage 5. making the order of management decisions in the benchmarking system. the benchmarking system must have the properties of stability and efficiency, for which it must be stable in organizational terms. the decision to formally or informally implement a benchmarking system is made by each participant based on an analysis of a number of provisions. in other words, one of the essential factors of system stability is the primacy of managerial decisions. stage 6. establishment of relationships between the results of benchmarking and the amount of incentives for the best "suppliers" of public services. provision of additional financial resources is necessary to encourage participants of the process, which are the best among the rest, as well as to compensate their costs associated with the collection and analysis of information, implementation of technologies that improve the quality of services. this statement shows the scale of the implementation of the benchmarking mechanism and its interaction with the legal and budgetary system of the state. as a result, it is necessary to achieve clarity within the framework of two directions: 1) the legal status of the benchmarking system and its indicators; 2) determining the relationship between the achieved values of indicators and the amount of budget allocations. stage 7. data collection by the "agent" of the benchmarking process from each of the participants involves the accumulation of baseline data, calculations, internal audit of the effectiveness of activities and individual processes. stage 8. determination by the "agent" of the best practice in the benchmarking system and the volume of incentives (greener, 2009). the relationship between the achieved values of performance indicators and the volume of incentives depends on the management structure of public service producers, including their obligations regarding the quality and efficiency of their activities. the benchmarking process is regular. this helps achieve certainty in addressing the two issues noted above (step 6). the final provision should be a decision on how to integrate the benchmarking process into the government's both funding and its plan system. the second option for organizing the benchmarking process is one of the decentralized ones presented. this option differs from the previous one, first, in that there is no "agent" for conducting the benchmarking process. it is necessary to recognize the fact that the considered variant is the most progressive, however, in connection with absence in this system of any material incentives, it can be applied only in a highly organized system of public services. it is characterized by the following algorithm. stage 1. such an algorithm is an agreed decision by the participants of the benchmarking process to conduct it. all participants in the benchmarking process have equal rights and responsibilities. stage 2. is similar to stage 2 of the first option and consists in creating a system of correct performance indicators. stage 3. involves the preparation of a questionnaire by the participants of the benchmarking process on the principles of consistency and openness. stage 4. at this stage, the system of indicators is coordinated with the participants of the benchmarking process. in case of inconsistency of the indicator system, it is subject to correction by the participants of the benchmarking process. stage 5. it is identical to this stage of the first option. stage 6. data exchange between all participants in the benchmarking process: each of the participants must collect the necessary background information, conduct internal audits of performance and individual processes and provide them to the other participants in the process. stage 7. identification of best practices in the benchmarking system by participants. the complexity baltic journal of economic studies 40 vol. 7 no. 4, 2021 of this stage lies primarily in the fact that state services for the registration of property rights are provided by one body in each administrative unit of the state. this circumstance determines the monopolistic position of the provider of public services, and, consequently, the motivation in this option of organizing the process of benchmarking can only be the desire to improve the quality of services provided (daft, 2012). the benchmarking process is an ongoing one that facilitates the introduction of benchmarking into the activities of public service providers. in the organization of the third variant of the benchmarking process, as in the case of the first variant, the role of the state body is noticeable. it is characterized by the following algorithm. stage 1. involves the definition of a coordinator for benchmarking, who develops performance indicators, as well as collects, processes, and analyzes information obtained in the benchmarking process. the state body acts as the coordinator. stages 2-5 are identical to the first two options for benchmarking. the only difference is in the implementation of stage 3. the benchmarking participants compile the questionnaire. at the same time, the benchmarking participants exchange information with each other, and the coordinator of the benchmarking process evaluates and interprets the data. stage 6. data collection by the benchmarking process coordinator from each of the participants includes providing them with baseline data, conducting internal audits of performance and individual processes. if necessary, the coordinator provides training on benchmarking procedures. stage 7. the coordinator identifies best practices in the benchmarking system. this option also does not provide financial incentives for participants in the benchmarking process, so the incentive can only be the desire to improve the quality of services (brown, 2016). the benchmarking process is also constant and regular. the fourth option of organizing the benchmarking process involves the formation of focus groups of process subjects, depending on the direction of research. the following algorithm characterizes it. stage 1. involves the definition of a coordinator for benchmarking, who develops performance indicators, as well as collects, processes, and analyzes information obtained in the benchmarking process. the coordinator can be a federal or regional body, if it has the necessary experience. stage 2. at this stage, focus groups of participants in the process are determined. stage 3. preparation of the questionnaire by the participants of the corresponding focus group. at the same time, the participants of the benchmarking focus group exchange information with each other, and the coordinator of the benchmarking process evaluates and interprets the data. stages 4-5 are identical to the other options for organizing benchmarking. stage 6. data collection by the benchmarking process coordinator from each of the participants includes providing them with baseline data, conducting internal audits of performance and individual processes. if necessary, the coordinator provides training on benchmarking procedures. stage 7. the coordinator determines the best practices in the benchmarking system. this option does not imply financial incentives for participants in the benchmarking process. this stage also reveals how effectively and correctly, the focus group participants were selected. if the composition of focus groups is not effectively determined, it may be revised (calhoun, 2014). 5. conclusion the benchmarking process is constant and regular. property rights registration authorities, being monopolists in provision of registration services at the regional level, implement the function of satisfying the needs of the population and are financed from the budget. a number of reasons, such as depersonalized budget funds, mediated interaction between the consumer and producer of services, lack of motivation of employees to meet public needs, lead to the emergence and increase of gaps in the perception of consumers and producers of services. in turn, benchmarking is a reliable tool for optimizing the process of providing the services under consideration and minimizing these gaps. thus, during the research the current state of the sphere of services was analyzed. as a result, it was revealed that it is caused by a number of factors of economic life. first, we are talking about the globalization of economic life in a crisis and the informatization of management processes. these objective phenomena determine the state of the modern business sphere, including the sphere of providing business services. a feature of today 's service economy is the changing role of information in the process of providing, managing and consuming services. information is becoming an integral part of the service in one capacity or another. information services become an integral part of the basic service offerings of non-core sectors of the economy; they are an obligatory element of a set of additional services; information (additional information services) can form the commitment of consumers to a particular service organization; information is an integral element of the service baltic journal of economic studies 41 vol. 7 no. 4, 2021 environment of the service; information systems in the service sector act as a means of service performance. it turns out that most authors define a service through some sign (or several signs). from our point of view, there are exceptions in the diverse list of services that do not meet one or two of the criteria specified in the authors' definitions. by service we mean the action aimed at satisfying the needs of the client, which in general has the properties of immateriality, individuality, inseparability from the performer and non-preservability. the main problem in the process of managing public services is determining their rational scope, from the point of view of society. the process of creating government bodies and empowering them to perform certain public services is subjective and usually carried out by representatives of the dominant ideology in society. decisions about the level of public services can be made on the basis of such factors as the influence of the church, the influence of culture, and the influence of mentality. we consider the definition of state activity as a service activity to be of fundamental importance, emphasizing that in today 's service economy, absolute priority is given to the consumer. therefore, public sector services should primarily focus on customer needs: to offer and implement services in accordance with customer requirements in terms of basic, additional services, service environment. in the course of the study, the mechanism of benchmarking as a management tool was considered, which is based on identifying examples of best practices, comparing the results and processes of the activities of the country 's authorities. it is revealed that the process of benchmarking should be carried out continuously and be permanent in the framework of public administration. for organizations that provide public services, four options were proposed for organizing the benchmarking process with different degrees of involvement of state and regional authorities. the most progressive form of organization of this process is the decentralized version without state intervention, but it is possible only in highly organized systems, the participants of which seek to improve the quality of services provided without additional incentives. the most possible options for organizing bench marking can be options with the participation of the management body in the status of an "agent" or coordinator of change. the development of public services for the registration of property rights is a process of consecutive managerial decisions, based on which methods and ways to improve the effectiveness of their provision are determined. each stage of the benchmarking process is characterized by a high degree of responsibility for the decisions made, because a wrong choice at one stage will lead to incorrect conclusions and results of subsequent stages. therefore, when developing a system of public services for the registration of property rights, a consistent algorithm that meets the requirements of management is needed. references: brown, t. 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(2015). hypotheses about performance measurement in counties: findings from a survey. j. of public administration research and theory, 11, 403–428. baltic journal of economic studies 53 vol. 8 no. 3, 2022 1 taras shevchenko national university of kyiv, ukraine (corresponding author) e-mail: pavlo.dziuba@gmail.com orcid: https://orcid.org/0000-0003-2932-0908 researcherid: abe-3572-2021 2 taras shevchenko national university of kyiv, ukraine e-mail: gdarja03@gmail.com orcid: https://orcid.org/0000-0003-4734-4268 researcherid: afg-5478-2022 3 taras shevchenko national university of kyiv, ukraine e-mail: shtogrin.k@gmail.com orcid: https://orcid.org/0000-0002-7431-9810 researcherid: abc-5852-2021 doi: https://doi.org/10.30525/2256-0742/2022-8-3-53-64 risk, return and international portfolio diversification: k-means clustering data pavlo dziuba1, darya glukhova2, kyryl shtogrin3 abstract. the work is devoted to the study of the international investment portfolio, its features such as risk, profitability and the level of international diversification, as well as global flows of portfolio investments. the methodology of the work is as follows. the paper develops k-means clustering model to study the patterns of global portfolio investment flows and equity markets. the model groups 30 developed and emerging stock markets according to three variables: return, risk and the level of international diversification. thus, the main purpose of this paper is to investigate different stock markets on a global scale through an in-depth analysis of the respective market portfolios and their measures of risk, return and international diversification, as well as their interrelationships. the researcher develops and builds the model in such a way as to either confirm or refute the hypotheses put forward. the results of the study demonstrate the following results, which present opportunities for further research. the study supports the hypothesis that portfolios of investors from developed stock markets have a better level of international diversification than portfolios of investors from emerging stock markets. however, there is high withingroup variation in the levels of international diversification among developed markets. there are three groups of developed markets based on the level of international diversification of investors in their respective markets: low-level markets (ca. 22%); mid-level markets (43%); and high-level markets (ca. 61%), while emerging markets are generally more heterogeneous. the hypothesis that stock markets that are domestic to investors with higher levels of international diversification have higher rates of return and lower rates of risk has not been confirmed. in general, developed stock markets are characterized by higher returns and international diversification with lower risk ratios. nevertheless, the higher level of international diversification in developed market portfolios is not always accompanied by better stock performance. the best risk-return ratio (return – 0.46%, risk – 5.56%) is observed for markets from the cluster with an average level of international diversification. while the markets in the cluster with the highest level of international diversification have unreasonably high-risk ratios, which are not compensated by better returns. markets in the cluster with lower levels of international diversification have unreasonably low rates of return that are not accompanied by correspondingly lower risks. key words: home bias, international diversification, risk, return, international investment, portfolio investment, investment decision. jel classification: c38, f21, f37, g11, g15, g41 1. introduction the field of academic finance poses various challenges to researchers and requires careful study of financial phenomena. for example, global capital flows are one of the most complex and fundamental components of modern finance and constitute a large-scale area of financial research. global capital flows can be divided into foreign direct investment, international portfolio investment and international debt flows. the purpose of this article is to explore some issues related to international portfolio capital flows. for several decades there has been an active growth of global this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 54 vol. 8 no. 3, 2022 portfolio investments. this has been made possible by the constant liberalization of capital markets and the internationalization of financial transactions. in addition, active economic and political integration at different levels (e.g., the creation of a single european currency) has removed barriers to capital flows. among other reasons, the emergence of global financial centers such as singapore, dubai, and luxembourg, the increasing pace of digitalization and decentralization of finance, disintermediation, and the formation of complex securities and financial instruments have also contributed to the expansion of portfolio capital flows. as a result, the total value of global portfolio investment is many times greater than that of foreign direct investment. however, the structure and dynamics of international portfolio investments proved to be very adaptive and changeable. the global financial crisis of 2007–2008, the european debt crisis, the covid-19 pandemics have left their mark on global portfolio capital flows. in addition, the processes of disintegration and fragmentation that are partly shaping the global economy today have affected the international dimension of portfolio capital flows. it should be noted that there have been significant challenges in international financial markets over the past 5 years. border closures, disrupted supply chains, a crisis of confidence and loss of certainty have changed the international nature of free flow of capital. as a result, key indicators and characteristics of sustainable financial growth have become unstable. moreover, financial markets in different countries have responded to the aforementioned challenges in very different ways: some markets have become more resilient, while others have gone into negative territory. the peculiarities of the current situation in global capital flows require a synergistic formula to solve the problems that financial markets are currently facing. in-depth data analysis and sound empirical results are made possible by the application of contemporary findings by cooper, sercu, and vanpee (2013), coeurdacier and gourinchas (2016), bose, macdonald, and tsoukas (2015), dziuba, priyatelchuk, and rusak (2021), and others. with this in mind, this article combines two approaches in its analysis. the neoclassical approach from traditional finance and the behavioral approach from behavioral economics and finance. thus, the focus of our work is on the analysis of returns, risk, and the level of international diversification of the various markets of the world and their particular interdependence on the example of equities. risk and return are the two most fundamental characteristics of an investment portfolio. any portfolio manager uses these two variables and their ratios to assess portfolio performance. the third variable, i.e., the level of international diversification, is based on the phenomenon of home bias and represents the behavioral perspective of international finance. the work is based on the development of the k-means model with the division of markets into different clusters or groups. this type of analysis allows us to classify data according to variables of different nature and specificity. for a number of reasons, our work analyzes two-cluster, four-cluster, and five-cluster models to confirm and/or refute model hypotheses. 2. literature review to begin with, in the 1950s, markowitz (1952; 1959) and roy (1952) developed the theory of portfolio selection, which provided investors with the ability to analyze the degree of risk in relation to expected returns. for his achievements, markowitz (along with sharpe and miller) was awarded the nobel memorial prize in economic sciences in 1991. markowitz's theory is known today as modern portfolio theory (mpt). since markowitz's theory, however, several improvements have been made to the model, including postmodern portfolio theory. later, in the 1960s, lintner (1965), mossin (1966), sharpe (1964), and treynor (1965) developed the capital asset pricing model (capm), which became the only fundamental framework for evaluating investment performance in terms of risk and return. many of the models used in portfolio investment management are based on consolidated portfolio theory. the most fundamental component of portfolio theory is capm. capm states that through absolute diversification, an investor can eliminate the unsystematic risk associated with a particular company. diversification provides a significant reduction in the level of risk if the portfolio components have a low level of correlation. in fact, if the portfolio is properly diversified, taking full advantage of international diversification at different levels, the overall risk level of the portfolio will be virtually zero. investors make investment decisions on a rational basis, depending on how they evaluate the risk/return ratio. capm assumes that rational investors diversify risk that can be eliminated, such as unsystematic risk, leaving only systematic risk, which varies with the beta ratio of the portfolio. solnik (1974b) concludes that most portfolio investment models fail to consider the international aspect of capital flows, focusing excessively on disparate, independent markets. solnik (1974b) notes that the rapid growth of cross-border investment and the increasing share of foreign firms in financial markets calls for a more thorough examination of the international aspect of portfolio investment. based on capm, solnik develops the international capital asset pricing model (icapm). rogach and dziuba baltic journal of economic studies 55 vol. 8 no. 3, 2022 (2011) note that "icapm determines what is the equilibrium expected return on financial assets when the expected return is measured in the investor's local currency and is shaped by constant changes in exchange rates". breuer and ruiz de vargas (2021) also confirm that models developed in an interna tional context face additional complexity and need to account for exchange rate risks. modern portfolio theory is a theory of investment management according to which an investor maximizes the expected return of a portfolio for a given rate of risk or minimizes risk for a given rate of expected return by determining the necessary parity between different asset classes. modern portfolio theory has been empirically tested many times and is widely used by investment professionals, as hu (2022) confirms, but the basic assumptions of the theory are often criticized, as omisore, yusuf, and christopher (2011) note. the main drawback of the theory is its simplistic underlying assumptions. the effectiveness of modern portfolio theory has been called into question because markowitz's model of financial markets does not correspond to what financial markets actually are. in recent years, especially after the global financial crisis of 2007–2008, the basic assumptions of modern portfolio theory have come under considerable criticism from various scholars, particularly those in behavioral economics and finance. for instance, rodríguez, gómez, and contreras (2021) point out that the approach by markowitz (1952; 1959) does not consider distributional characteristics of the returns, i.e., skewness and kurtosis, and investor’s risk tolerance. geambasu, sova, jianu, and geambasu (2013) remark that, as a result, investors and researchers began to search for alternative theories of portfolio management. portfolio management specifies that an investment portfolio can be substantially characterized using three features such as risk, return and investor's risk tolerance. dziuba, pryiatelchuk, and rusak (2021) note that risk and return are two fundamental and objective characteristics of any investment portfolio. they characterize the efficiency of a portfolio and serve as universal standard indicators for any investment professional. despite the fact that risk and return are rather basic indicators, their importance for analysis is undeniable. the term "investor risk tolerance" is defined in a wide variety of ways. there are different views on whether investor risk tolerance is an intrinsic and enduring characteristic of the individual investor and whether it also takes into account external factors (e.g., economic shocks), which depend on how risk tolerance is measured. however, the definitions of investor risk tolerance have strong similarities. in davies’ (2017) opinion risk tolerance is the investor’s willingness and ability to take a certain level of risk. grable (2017) defines that risk tolerance is the willingness to engage in a risky behaviour in which possible outcomes can be negative, and notes that there are many risk-associated concepts that are very different such as risk aversion, risk perception, risk preference, among others. the above definitions follow the behavioral paradigm of studying finance and investment. grable (2017) concludes that risk tolerance varies among individual investors because it is an individual indicator, but at the same time it can show a certain level of stability over the life of the investor, despite various external factors. however, investor risk tolerance is ultimately an individual characteristic that depends on each investor, and it requires further study and discussion. in this paper, the k-means cluster model is based on the classification of 30 markets into different clusters based on 3 attributes (variables). these three variables are profitability, risk, and the level of international diversification. since the motivations for using risk and return have already been substantiated in our model, it is important to discuss the third variable. the third variable used in the analysis is the level of international diversification. the theory of international diversification advanced by solnik (1974a) is considered the basis for international portfolio management and one of the most important aspects of modern portfolio theory. solnik (1974a) argues that an investor benefits from an investment portfolio built using foreign investment assets because it increases portfolio returns and reduces risk. the benefits of international diversification theory have been repeatedly empirically tested and recognized by global academic community, e.g., levy and sarnat (1970), sercu (1980), grauer and hakansson (1987), among others. however, another body of research argues that investors are not taking full advantage of international portfolio diversification. in fact, the structure of many investment portfolios does not match the recommended international portfolio. this discrepancy between the practice and theory of international portfolio investing has been called the home bias. home bias is a kind of suboptimal investor behavior because it does not maximize the utility of an investment decision. it is one of the unresolved phenomena in modern finance and part of an array of different behavioral biases. home bias is a complex phenomenon in international finance. it can be considered at different levels for different markets and securities. there are various definitions of home bias, so it is necessary to cite some of them. cooper, sercu, and vanpee (2013) identify equity home bias as "the empirical phenomenon that investors’ portfolios are concentrated in domestic equities to a much greater degree than justified by portfolio theory ". fidora, fratzscher, and thimann (2007) set out that home bias is "(an attitude) baltic journal of economic studies 56 vol. 8 no. 3, 2022 towards holding domestic financial assets". chan, covrig, and ng (2005) determine that home bias is "a phenomenon, when investors do not exploit diversification opportunities, as they allocate a relatively large fraction of their wealth to domestic equities". as far as 1970s levy and sarnat (1970) revealed that foreign investment assets made up less than expected share of american investors portfolio. another fundamental research has been made by french and poterba (1991) who demonstrate that investors in the usa, japan, uk, germany, and france have very strong preference towards domestic stock market. moreover, the dominant part of global equity market is owned at domestic level. then the number of other studies confirmed the results of levy and sarnat, including existence of home bias for other markets, e.g., cooper and kaplanis (1994), tesar and werner (1994), ahearne, griever, and warnock (2001), karolyi and stulz (2003), solnik (2008), vanpée and demoore (2012), among others. a huge body of data on home bias confirms that this phenomenon exists in virtually all markets around the world. home bias is well documented for various stock markets around the world. however, home bias for other securities, such as bonds, requires further analysis. it is clear that the bond market differs from the stock market in terms of pricing of securities, dynamics, institutions, regulation, etc. yakubovskiy, dominese, rodionova, and derenko (2021) investigate the yields dynamics of government bonds for some countries of the emu and find that internal factors of yield determination have become less significant, while the central bank policy and its monetary instruments play more important role in the dynamics of bonds yields. even though there is a broad range of different papers on the causes of home bias existence, such as ahearne, griever, and warnock (2001), cai and warnock (2005), dvorak (2005), daude and fratzscher (2008), coeurdacier and gourinchas (2016), bose, macdonald, and tsoukas (2015), among others, there is still no consent on the fundamental cause of home bias. many different assumptions have been made, ranging from asymmetries of information to the degree of development of financial markets and the level of financial education. from the authors' point of view, behavioral factors play an important role in the spread of home bias, as many investors, especially nonprofessional investors, often perceive foreign financial markets as something unknown, unpredictable and uncertain due to a lack of professional competence and experience. kim and kim (2022) maintain that unfamiliarity with a specific country has a strong positive correlation with the level of home bias in the international equity markets. hiraki and liu (2021) find out that, in general, managers of global equity mutual funds in the usa do not tend to exhibit home bias. fund managers are more likely to diversify internationally if they are younger or better educated (mba or international education). one of the other reasons for the existence of a "home bias" is the degree of development of the financial markets. it is clear that investors prefer developed capital markets with better liquidity and lower transaction costs. however, if an investor wants to analyze a specific market to develop his or her strategy, it is necessary to identify key indicators for evaluation. for example, it should be noted that investors pay a lot of attention to the international investment position (iip) of the country entering the market. based on a country 's international investment position, an investor can monitor the financial openness, debt sustainability, financial stability and creditworthiness of, among other things, a particular market. zadoia (2021) points out that there are different models of an international investment position and finds that ukraine, for instance, has balanced iip model, while czech republic is moderate recipient, and hungary is active recipient. also, kim and kim (2021) note that one of the reasons for home bias is the hedging against real exchange rate and wage risks. in general, it is possible to determine some groups of factors, such as institutional factors, behavioral factors, transaction factors and other factors as it is outlined in dziuba and shtogrin (2020). home bias refers to a group of behavioral biases studied in behavioral economics and finance. behavioral economics and finance are based on the fundamental assumption that economic agents are not completely rational in their decisions. however, people's behavior may have limited or suboptimal rationality, which does not produce the best results, but is quite effective in meeting the needs of the economic agent. it should be noted that there is a wide range of various behavioral biases that influence the financial decisions of investors, including fomo effect (hershfield, 2020), irrational exuberance (shiller, 2015), loss aversion (pompian, 2012), overconfidence (glaser and weber, 2007), disposition effect (yang, 2019), endowment bias (thaler, 1980), hindsight bias (biais and weber, 2009), and other effects (baker and nofsinger, 2010). byrne and brooks (2008) note that there is an alternative treatment of investors’ behaviour, meaning that a significant minority of investors act under behavioral biases so that their investment decisions are not fully effective. hirshleifer (2015) stresses that "modern understanding of the finance field requires grounding in psychological as well as rational approaches". since modern portfolio theory is thought to be part of the neoclassical approach to finance, applying a behavioral finance perspective to the model will contribute to a better understanding of global investment flows. baltic journal of economic studies 57 vol. 8 no. 3, 2022 3. methodology, hypothesis, and data based on the themes and issues in international finance, behavioral finance, and portfolio investment management discussed in the literature review section, the following hypotheses would be motivated. the authors' first hypothesis suggests that portfolios of investors from developed markets have a better level of international diversification than portfolios of investors from emerging markets. the second hypothesis assumes that markets that are domestic to investors with a higher level of international diversification have a higher rate of return and a lower level of risk. the model was developed using the cluster analysis method. the cluster method was chosen for several reasons due to the nature and specificity of the data, as well as the advantages of cluster analysis. cluster analysis belongs to the group of methods of classification analysis. it allows to divide a set of observations into different clusters or groups, so that the observations in one cluster are sufficiently similar to each other. the main advantage of cluster analysis is that observations can be classified into several variables of any nature, and the required number of clusters can be determined depending on the goals of the study. there are different types of cluster analysis. however, this model is based on the k-means clustering method. the purpose of k-means is to group similar observations into clusters using centroids with the number of clusters denoted by k. one of the drawbacks of k-means clustering is the selection of the optimal number of k (clusters). however, the model is based on the silhouette method of choosing k, which guarantees the correctness of the chosen number of clusters. thirty markets were selected for analysis, such as great britain, france, germany, usa, japan, norway, canada, hong kong, ireland, italy, netherlands, spain, thailand, turkey, poland, indonesia, korea, india, argentina, austria, denmark, belgium, sweden, egypt, brazil, switzerland, greece, hungary, mexico, malaysia. the msci market classification was used to develop the model. the model includes the following market categories: 17 msci developed markets (uk, france, germany, usa, japan, norway, canada, hong kong, ireland, italy, netherlands, spain, austria, denmark, belgium, sweden, switzerland); 12 msci emerging markets (thailand, turkey, poland, indonesia, korea, india, egypt, brazil, greece, hungary, mexico, malaysia); and 1 msci standalone market (argentina). the raw data are absolute monthly returns for 30 stock markets, denominated in u.s. dollars, at the gross index level. stock size is standard (largeand mid-cap stocks). data are for the 5-year period from june 30, 2017 to june 30, 2022. this data became the basis for calculating monthly return and risk percentages in order to determine the market portfolios for each market in question. the main idea of the model is to describe each market using three characteristics, such as the rate of return, the rate of risk and the level of international diversification. the figures for levels of international diversification have been calculated using data on home bias based on papers by bose, macdonald, and tsoukas (2015), boermans, cooper, sercu, and vanpée (2022). in particular, the choice of markets for the study was driven by the availability of home bias data. for many frontier markets, home slope data are not available due to a lack of information on investment activity in these markets. it should be noted that the methodology for calculating home slope is quite diverse. among others, we prefer the methodology provided by fidora, table 1 the average monthly levels of return and risk, and level of international diversification for 30 msci markets (2017–2022) № country return, % risk, % level of international diversification, % 1 argentina 0.12 13.91 13.47 2 austria 0.26 8.77 57.23 3 belgium -0.25 6.25 48.17 4 brazil 0.69 10.69 2.60 5 canada 0.77 5.65 44.00 6 denmark 1.02 4.61 42.78 7 egypt -0.52 7.00 1.07 8 france 0.49 5.78 33.82 9 germany 0.01 6.04 30.63 10 greece -0.41 9.24 9.49 11 hong kong 0.31 4.90 22.40 12 hungary -0.04 8.67 17.57 13 india 0.80 6.28 2.08 14 indonesia 0.28 6.82 0.57 15 ireland 0.04 5.94 65.86 16 italy 0.34 7.09 45.43 17 japan 0.26 4.05 21.35 18 korea 0.20 6.65 7.18 19 malaysia -0.14 4.15 3.62 20 mexico 0.29 7.68 1.90 21 netherlands 0.67 5.48 66.53 22 norway 0.84 6.49 54.65 23 poland -0.45 8.66 3.43 24 spain -0.09 6.60 14.61 25 sweden 0.37 5.99 43.54 26 switzerland 0.64 4.06 42.70 27 thailand 0.26 6.69 1.67 28 turkey -0.75 10.42 0.43 29 uk 0.31 5.01 43.52 30 usa 1.01 4.98 28.00 notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). 2. yield and risk levels are calculated as monthly averages using the mean and standard deviation, respectively. baltic journal of economic studies 58 vol. 8 no. 3, 2022 fratzscher, and thimann (2007) for calculating equity home bias based on coordinated portfolio investment survey by imf. the model is designed for two, three, four, and five clusters. the silhouette estimation method is used to determine the most optimal number of clusters. the results of the evolution of the silhouette estimates show that the model with two clusters has the highest level of accuracy. the lowest score is attributed to the three-cluster model. nevertheless, the fourand fivecluster models also have quite high performance in comparison with the two-cluster model. therefore, this article analyzes three models: two-, four-, and five-cluster models. 4. results and discussion the two-cluster model divides markets into two groups. the first group consists of 14 markets, and the second group consists of 16 markets. the first group includes great britain, france, germany, the united states, norway, canada, ireland, the netherlands, austria, denmark, belgium, sweden, and switzerland, and the central object of the cluster is italy. the second group includes japan, hong kong, spain, thailand, turkey, poland, indonesia, india, argentina, egypt, brazil, greece, hungary, mexico, malaysia, while korea is the centerpiece of the cluster. obviously, the first group includes only markets from the msci developed markets classification. although the second group covers mostly msci emerging markets, it includes three markets from the developed markets group. the inclusion of japan, hong kong, and spain in the second group appears to be due to a relatively low level of international diversification (21.35; 22.40; 14.61, respectively). however, this inclusion may be incorrect due to the absence of the other two factors (e.g., the risk level of these markets indicates that they belong to the first group). the average rate of return in the first cluster is significantly higher than in the second (0.47% vs. 0.05%). the average rate of risk in the first cluster is lower than in the second cluster (5.87% vs. 7.65%). the average level of international diversification is also significantly higher in the first cluster (46.20% vs. 7.72%). it is possible to conclude that the first cluster of markets has higher efficiency with more optimally constructed portfolios of developed markets. moreover, investors in the first cluster choose more internationally diversified portfolios. the four-cluster model divides markets into four groups. the first cluster consists of 8 developed markets: great britain, france, canada, italy, denmark, belgium, switzerland and sweden, the center of the cluster. the second cluster covers 6 markets: germany, the united states, japan, spain, hungary and hong kong, the centerpiece of the group. these five markets are developed, although one market (hungary) is developing. this can be explained by the fact that hungary has the highest level of international diversification among emerging markets. the third cluster unites 4 markets: norway, ireland, the netherlands and austria, which is the center of the cluster. all four markets are developed and have the highest level of international diversification. the fourth cluster covers 12 emerging markets: thailand, 0,671 0,305 0,605 0,601 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 2 3 4 5 silhouette scores figure 1. development of the silhouette scores for different clusters notes: 1. the corresponding figures have been calculated and the graphs have been compiled by the authors. 2. in order to simplify and facilitate the perception of the results, the underlying calculations are not given. baltic journal of economic studies 59 vol. 8 no. 3, 2022 turkey, indonesia, korea, india, argentina, egypt, brazil, greece, mexico, malaysia and poland – the center of the cluster. the first cluster has the highest rate of return and the lowest level of risk among the four clusters. the fourth cluster has the lowest rate of return and the highest rate of risk among the four clusters. however, the first cluster is not the leader in terms of international diversification. the third cluster has the highest level of international diversification and fairly high rates of return. it should be noted that the market portfolios of the first cluster have the most optimal risk and return indicators, but, nevertheless, investors prefer to invest almost 43% of the portfolio globally. in addition, this can be explained by the fact that investors from developed markets prefer to invest in assets from developed markets. on the other hand, the second cluster, consisting mainly of developed markets, has a relatively low level of international diversification. the main reason for this phenomenon is that most popular stocks for international portfolio diversification are national for the markets of the second cluster. the most effective stocks are those of multinational corporations, located, in addition, in the united states, germany, and japan. therefore, national investors from these markets have no incentives to diversify internationally. at the same time, there is a third cluster, which unites developed markets and has the highest level of international diversification. the dynamics of this cluster can be explained by two reasons. ireland and the netherlands are wellknown global financial centers and are known for their excellent offshore financial services. offshore investment funds provide a very high level of international diversification due to the nature of offshore financial centers. norway and austria have a high level of international diversification because their domestic stock markets do not offer the full range of investment opportunities due to the limited presence of multinational companies. it can also be concluded that a low level of international diversification (i.e., less than 5%) is usually accompanied by lower returns and higher market portfolio risk. it should also be noted that despite the lower level of the silhouette index compared to the 2-cluster model, the 4-cluster model leads the study to more complex results. the five-cluster model divides markets into five clusters. the first cluster includes 7 markets: uk, italy, denmark, belgium, sweden, switzerland and canada, which is the central object of the cluster. the table 2 statistics for centroids of clusters of the two-cluster model cluster return, % risk, % level of international diversification, % sum of weights within-cluster variance 1 0.47 5.87 46.20 14 137.41 2 0.05 7.65 7.72 16 66.45 notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). table 3 descriptive results for the two-cluster model cluster 1 2 number of objects by cluster 14 uk, france, germany, usa, norway, canada, ireland, italy, netherlands, austria, denmark, belgium, sweden, switzerland 16 japan, hong kong, spain, thailand, turkey, poland, indonesia, korea, india, argentina, egypt, brazil, greece, hungary, mexico, malaysia intra-cluster dispersion 137.41 66.45 minimum distance to the centroid 1.45 1.14 average distance to the centroid 8.93 7.08 maximum distance the to centroid 20.33 14.94 central object italy korea notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). table 4 statistics for cluster centroids of the four-cluster model cluster return, % risk, % level of international diversification, % sum of weights within-cluster variance 1 0.46 5.56 43.00 8 18.02 2 0.24 5.87 22.43 6 39.70 3 0.45 6.67 61.07 4 38.51 4 0.03 8.18 3.96 12 23.18 notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). baltic journal of economic studies 60 vol. 8 no. 3, 2022 second cluster includes 5 markets: france, germany, japan, hong kong and the united states, which is the central object of the cluster. the third cluster consists of 4 markets, including norway, ireland, and the netherlands, and the central object of the group is austria. it should be noted that the third cluster fully coincides with the third cluster in the 4-cluster model. the fourth cluster combines spain, argentina, greece and hungary, with spain as the central object of the cluster. the fifth cluster includes 10 markets: thailand, turkey, poland, indonesia, korea, india, egypt, brazil, malaysia and mexico – the central site. the first cluster has the highest rate of return. however, the second cluster has the lowest risk, and the third cluster has the highest level of international diversification. moreover, the fourth and fifth clusters have the lowest rates of return and the highest rates of risk with the lowest levels of international diversification. the first cluster appears to be the most optimal in terms of the three variables. the second cluster is also quite efficient in terms of risk and return, even though it has relatively average levels of international diversification. the third cluster has the highest level of international diversification, but, as in the 4-cluster model, the level table 5 descriptive results of the four-cluster model cluster 1 2 3 4 number of objects by clusters 8 6 4 12 intra-cluster dispersion 18.02 39.7 38.51 23.18 minimum distance to the centroid 0.70 0.98 4.38 0.86 average distance to the centroid 2.81 5.08 5.32 3.91 maximum distance to the centroid 9.18 8.21 6.43 11.10 markets uk, france, canada, italy, denmark, belgium, sweden, switzerland germany, usa, japan, hong kong, spain, hungary norway, ireland, netherlands, austria thailand, turkey, poland, indonesia, korea, india, argentina, egypt, brazil, greece, mexico, malaysia central object sweden hong kong austria poland notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). table 6 statistics for cluster centroids of the five-cluster model cluster return, % risk, % level of international diversification, % sum of weights intra-cluster dispersion 1 0.46 5.52 44.31 7 4.97 2 0.42 5.15 27.24 5 29.13 3 0.45 6.67 61.07 4 38.51 4 -0.11 9.61 13.79 4 20.76 5 0.07 7.50 2.46 10 8.06 notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). table 7 descriptive results of the four-cluster model cluster 1 2 3 4 5 number of objects by clusters 7 5 4 4 10 intra-cluster dispersion 4.97 29.13 38.51 20.76 8.06 minimum distance to the centroid 0.46 0.98 4.38 3.12 0.62 average distance to the centroid 1.75 4.39 5.32 3.92 2.37 maximum distance to the centroid 4.00 6.61 6.43 4.32 4.80 markets uk, canada, italy, denmark, belgium, sweden, switzerland france, germany, usa, japan, hong kong norway, ireland, netherlands, austria spain, argentina, greece, hungary thailand, turkey, poland, indonesia, korea, india, egypt, brazil, mexico, malaysia central object canada usa austria spain mexico notes: 1. figures calculated by the authors using data from the msci indices (msci, 2022). baltic journal of economic studies 61 vol. 8 no. 3, 2022 of risk is suboptimal, although the rate of return is quite high. based on the 5-cluster model, it is possible to conclude that the level of international diversification below 15% can be accompanied by a relatively low rate of return and a high risk rate. however, it remains unclear why there is a strong 17% difference in international diversification between the first and second clusters, despite the fact that the economic structure and level of development of financial markets are the same. a comparison of all three cluster distributions yielded the following results. although the twocluster model has the highest silhouette score and the most optimal distribution of markets across clusters, its results are quite predictable and follow conventional wisdom. however, models with more clusters provide some interesting results for further discussion. developed markets generally have a better level of international diversification, although it may vary from market to market, and better risk-return ratios. markets in which investors prefer low levels of international diversification (below 5% for the 4-cluster model and below 15% for the 5-cluster model) were found to have lower returns and higher risk ratios. these markets practically belong to the msci emerging markets group. as a consequence, these markets need further integration into global financial markets in order to better exploit portfolio diversification opportunities. second, there are markets with a high level of international diver sification, such as norway, ireland, the netherlands, and austria, due to a number of factors, such as offshore financial activity and limited opportunities in national stock markets. in addition, investors in a number of developed markets prefer to diversify their portfolios globally, while their national stock markets provide an effective risk-return ratio. however, there are some developed markets that are domestic to various multinational companies, and, as a consequence, investors in these markets prefer to invest more capital in national stock markets. at the same time, there is a large difference in the levels of international diversification between some clusters, and this result requires further discussion. it is also important to note that the simultaneous efficient operation of a national stock market and a high level of international diversification can only occur if international diversification occurs between units of the same cluster or units of clusters with similar risk and return ratios. the high rate of internalization and liberalization of financial markets has led to global financial integration and the emergence of transfer mechanisms. the crisis events of recent years throughout the global economy have tended to shift from one market to another. quite similar risk and return ratios in developed market clusters suggest that developed markets are interdependent, while the significant differences between developed and emerging market clusters demonstrate the potential gap between these markets. 5. conclusions the paper examines 30 different markets around the world using three variables such as risk, return, and the level of international diversification. the paper combines traditional finance and behavioral finance approaches for in-depth analysis. the work is based on the development of a k-means clustering model. three different types of models were analyzed, such as two-cluster, four-cluster, and five-cluster. the choice of the number of clusters was determined using the silhouette scoring method. the highest number of silhouette scores was awarded to the model with two clusters. however, models with four and five clusters also yield results of interest for this paper. the main purpose of the model is to confirm and/or refute the following two hypotheses of the paper. the first hypothesis is that portfolios of investors from developed markets have a better level of international diversification than portfolios of investors from emerging markets. the first hypothesis is confirmed by the results of the model. developed markets generally have a better level of international diversification (hence, a lower level of "home bias") compared to emerging markets. the two-cluster model clearly differentiates markets into developed and emerging markets, with the exception of japan, hong kong, and spain (this was done because of their relatively lower international diversification rates). among developed markets, however, there is extremely high within-group variation in international diversification levels. based on the four-cluster model, three clusters (groups) of developed markets can be identified. the first group has an average level of international diversification (43%). the second group of markets has a low level of international diversification (about 22%), and the third group of markets has the highest level of international diversification (about 61%). the results of clustering in the five-cluster model confirm the above conclusions. one likely reason for the very high level of international diversification in some markets, such as ireland and the netherlands, is their offshore financial services, including offshore investment funds. moreover, while developed markets have been divided into three different clusters, most emerging markets have been combined into one cluster. this might suggest that emerging markets are more homogeneous in terms of model variables, while developed markets are more heterogeneous for some reason (for example, there are some financial inequalities between developed markets, or portfolio investment flows are unbalanced). however, only the baltic journal of economic studies 62 vol. 8 no. 3, 2022 five-cluster model differentiates emerging markets into two clusters, with one cluster having about 14% international diversification and the second cluster having about 2.5% international diversification. the second hypothesis is that markets that are domestic to investors with a higher level of international diversification have a higher rate of return and a lower level of risk. however, the results of clustering with different k-numbers leave some doubt about this hypothesis. the two-cluster model clearly shows that developed markets have higher rates of return and international diversification with lower rates of risk. however, the results from the other two models again point to significant intra-group differences. the best international diversification performance of investors from developed markets is not always followed by the best stock performance in these markets. based on the four cluster model, the best risk-return ratio (0.46% return, 5.56% risk) is observed for markets from the cluster with medium international diversification. while the markets in the cluster with the highest level of international diversification have unjustifiably high risk indicators, which are not compensated by the best yield (yield – 0.45%, risk – 6.67%). with almost the same rates of return, the level of risk is higher by almost one percent. at the same time, markets from the cluster with a lower level of international diversification have unreasonably low rates of return, not accompanied by correspondingly lower risks (return – 0.24%, risk – 5.87%). the reasons for these conclusions may be very different. nevertheless, one of the possible obvious explanations for the low level of international diversification is the high level of listing of multinational companies on the stock exchanges of a number of developed markets. for emerging markets, the two-cluster and four-cluster models indicate a tendency for markets with lower levels of international diversification (e.g., lower levels of global financial integration) to have lower returns and higher risk. for the two-cluster model, the return is 0.05% and the risk is 7.65%, while for the four-cluster model the return is 0.03% and the risk is 8.18%. however, the five-cluster model divides emerging markets into two clusters (clusters № 4 and 5). cluster № 5 has the lowest level of international diversification with a rate of return of 0.07% and a risk rate of 7.50%. on the contrary, cluster № 4 has six times higher international diversification, but its rate of 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(in ukrainian) received on: 3th of august, 2022 accepted on: 31th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 12 vol. 7 no. 2, 2021 corresponding author: 1 wsb university in gdańsk, poland. e-mail: ggorniewicz@wsb.gda.pl orcid: https://orcid.org/0000-0001-6384-3716 2 nicolaus copernicus university in torun, poland. orcid: https://orcid.org/0000-0002-1879-4924 * the most spectacular instance of such a flow was the purchase of alaska by usa from russia made in 1867. a bit sooner (in 1819), usa bought florida from spain. https://doi.org/10.30525/2256-0742/2021-7-2-12-20 foreign direct investments in the world with special consideration of consequences grzegorz górniewicz1, adrianna czarnecka2 abstract. this paper describes the key phenomenon occurring in the contemporary world economy, which is foreign direct investments. the paper focuses mostly on the scale of fdi flow in the world. furthermore, much attention was paid to the determinants of the inflow of investments and to their economic consequences. key words: foreign direct investments, determinants, consequences. jel classification: o33 1. introduction in the last decades, one can observe the dynamic growth of the international flows of the means of production. the ever-lasting globalization processes will probably stimulate the said phenomenon in the future. the international flows of the means of production include mainly international capital flow, workforce and knowledge. theoretically speaking, one could possibly distinguish international flow of land*. yet, nowadays, the last possibility is not exemplified. the international capital flow embraces what follows: foreign and portfolio loans and foreign direct investments, the latter of which is the subject of the present paper. a important reason for international flow of the means of production, including foreign direct investments, is the possibility of bigger profit abroad than in one’s native country. furthermore, the key role is definitely played by the opportunity to make use of the resources (mainly capital and human resources) for which there is no demand on one’s native market. the main purpose of this paper is to demonstrate the disproportions in the world allocation of foreign direct investments. furthermore, the paper presents the causes of fdi flows and their consequences. 2. definition the primary literature on the subject presents a plethora of definitions of the concept of foreign direct investments. among them, there is the paradigmatic definition of foreign direct investment, which was worked out by organization for economic cooperation and development (oecd). according to its definition, the foreign investment is a business enterprise in which one foreign investor acquires or is in the possession of long-lasting share as expressed by having at least 10% of equities of that enterprise or 10% of votes at the annual general meeting of shareholders, which according to oecd yields an efficient influence on managing a business enterprise (oecd, 2008, p. 17). another oft-cited definition, broader though compatible with the above-stated one, is the definition by the international monetary fund. it assumes the following form: the direct investment is an investment made for the sake of obtaining the long-lasting share in the business enterprise operating in the economy other than the native economy of the very investor, while the aim of the investor is to obtain the efficient influence on managing the enterprise ( jasiński, mesjasz, 1997, p. 34). as can be noted, that definition does not specif y the lower threshold of the shares in a given enterprise yielding the efficient influence on the decisions made in it. some authors try to stipulate their own definitions, which, essentially, to a large degree overlap with the definitions presented above. an enterprise investing in the form of fdi can be: – subsidiaries – when the investor has over 50% of votes at the general meeting of shareholders; – an associate – then the investor has 10-50% of voting rights; baltic journal of economic studies 13 vol. 7 no. 2, 2021 – quasi-corporate – in the form of a branch which is 100% connected with the parent corporation (redo, siemiątkowski, 2017, p. 35). among foreign direct investments, one can distinguish the ones of greenfield, brownfield and acquisitions type. the former are the investments created from scratch. they involve building completely new business enterprises. greenfield ones characterize mainly the developing countries. on the other hand, brownfield-type investments occur mainly in the highly developed countries. they involve taking over the enterprises being already in existence or they assume the form of a merger (górniewicz, 2007, p. 13). acquisitions consist in investing cash in already existing foreign entities. therefore, a foreign investor takes control over an entity located in another country (redo, siemiątkowski, 2017, p. 36). 3. statistical data according to the data in investment trends monitor foreign direct investments amounted to 1,39 trillion dollars in the whole world in 2019 (see diagram 1). the best result in the last several years was achieved in 2007. then dfi exceeded 2 trillion dollars. generally speaking, one must say that the decrease in foreign direct investments on the turn of the first and second decade of xxi century resulted from the collapse of the mortgage loan market caused by the bursting of speculative bubble on the property market in u.s.a in august 2007 initiated the world economic crisis. it is commonly considered the greatest recession since the times of great depression within 1929-1933. in recent years, most fdi has been located in the usa. in 2018, they were over 250 billion dollars. the next places were: china (almost 140 billion dollars), hong kong (116 billion dollars), singapore (78 billion dollars) and netherlands (70 billion dollars). detailed data is presented in diagram 2. in 2018, most investments were received in developing countries (54.5%). 42.9% was located in developed countries, and 2.6% of all fdis in countries referred to as transition economies. fdi flows were affected by the following trends in the global economy: – fdi in the united kingdom down 6% as brexit unfolds; – hong kong, china divestments cause a 48% fdi decline among turbulence; – singapore up 42% in a buoyant asean region; – zero-growth of flows to both the united states and china; – brazil up 26% at the start of a privatization programme; – german inflows triple as mnes extend loans to foreign affiliates in a year of slow growth (investment trends monitor, 2020, p. 2). in 2018, most fdi came from japan (143 billion dollars), china (130 billion dollars) and france (102 billion dollars). detailed data is presented in diagram 3. interestingly, the united states disappeared from the list of the world's largest investors, which in 2017 was definitely in first place with a result of 342 billion dollars. analyzing the industry structure, one must note that in the world flows of foreign direct investments, it is the services that predominate. services encompass 0 0,5 1 1,5 2 2,5 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 diagram 1. global flows of fdi (in trillions of dollars) source: my own lay-out on the basis of world investment report 2013: global value chains: investment and trade for development, united nations, new york and geneva 2013, pp. 213 – 216; world investment report 2015. reforming international investment governance, united nations, new york and geneva 2015, p. 4 and investment trends monitor, https://unctad.org/en/publicationslibrary/diaeiainf2020d1_en.pdf [2020.05.03] baltic journal of economic studies 14 vol. 7 no. 2, 2021 0 20 40 60 80 100 120 140 160 china hong kong singapore netherlands united kingdon brazil australia spain india 2017 2018 diagram 2. fdi inflows in 2018 year (in billions of dollars) source: my own lay-out on the basis of world investment report 2019. key messages and overview. geneva: united nations, p. 3 0 20 40 60 80 100 120 140 160 180 japan china france hong kong germany netherlands canada united kingdom korea, republic of 2017 2018 diagram 3. fdi outflows in 2018 year (in billions of dollars) source: my own lay-out on the basis of world investment report 2019. key messages and overview. geneva: united nations, p. 4 63 26 7 4 services manufacturing primary unspecified diagram 4. the structure of fdi by the sectors of the economy (in %) source: my own lay-out on the basis of world investment report 2018. investment and new industrial policies. new york and geneva: united nations, pp. 7–8 baltic journal of economic studies 15 vol. 7 no. 2, 2021 63% of the overall number of fdi (see diagram 4). the second best was manufacturing (26%), and the third best was the sector called primary (7%). the remaining share fell on the unspecified industries (4%). 4. the determining factors of fdi fdi are the main factor of intensive development and modernization of economy (chakrabarti, 2001, blonigen, 2005, siemiątkowski, 2005). fdi had the special role in this activity in developing (asiedu, 2006, jenkins, 2005) and transformation countries, such as poland and the most accession’s countries of the european union (wyrzykowska, 2010, p. 179, rudnytska, 2015, siemiątkowski, 2013, luo, xue, han, 2010, bevan, estrin, 2004). planning and the successively making foreign direct investments is related with the occurrence and the analysis of multifarious factors and conditions jointly being the equivalent of the determinants specifying this activity (sitek, 1997, p. 75). an entrepreneur, to properly plan the investment, must identify many properties of the investment environment in those realms which may contribute to the further success of an enterprise (guillén, garcia-canal, 2009). many researchers on that subject, in the light of the multitude of determinants, try to classify them. a relatively popular typology of the afore-mentioned determinants is the division into four groups: institutional, cultural, socio-economic and politico-legal ones (bandelej, 1999, pp. 8–14). others classify the above factors into supply and demand ones (tuselmann, 1999, p. 3), and still others – into geographic, economic, political and legal (coskun, 2001, pp. 222–223). in the early stages of the process of classifying the determinants of the foreign direct investments, one should differentiate between two of their general groups. the first one is constituted by the determinants contributing to making a decision as to making a direct investment abroad; or, to put it in another way, these the factors assisting such a decisions and determining taking such a step. the second distinguished group should be constituted by the determinants of the already made investment, that is the factors conditioning the current operations of foreign investors. it is only when we distinguish these two groups of determinants of fdi that we acquire the basis for any further typologies (buckley, clegg, cross, liu, voss, & zheng, 2007). the group of determinants causing or conditioning making a direct investments is usually subdivided into external and internal factors (górniewicz, 2007, p. 101; kolstad, wiig, 2012). the internal determining factors stem from the nature of the operations of a given enterprise as well as from the resources the business enterprise owns and controls. on the other hand, the external determinants are not subject to control exercised by the business entity but they embrace the factors connected with its environment – both within the country and outside of it. yet, applying the criterion of the direction of the flow of fdi, some economist divide the determining factors of investments into outward foreign direct investment and inward foreign direct investment into home economy (górniewicz, 2013, pp. 64–66). the first group of determinants cause the business enterprises to decide to „leave” the home economy and transfer the so-far business operations or its certain parts to the economies of the target countries (ramasamy, yeung, laforet, 2012). the second group, however, embrace the determinants attracting foreign investors and encouraging them to make investments in the target country (blalock, gertler, 2008). 5. the consequences of fdi the increasing significance of fdi in the world economy begs the question about benefits and dangers which result from them both to the country from which the capital outflows and to the country in which a given capital is located (górniewicz, siemiątkowski, 2006, pp. 161–168). even though specifying all the positive and negative aspects of the flow of investments is certainly impossible, it is worth investigating those most important aspects, which might include: 1. balance of payments, 2. employment, 3. markets on which the product or the service is sold, 4. the resources of means of production, 5. gnp, 6. infrastructure, 7. technology, 8. competitiveness, 9. government budget, 10. legal provisions, 11. the image of a country on the international arena, 12. regional development, 13. the cost of running the business enterprise (górniewicz, siemiątkowski, 2007, pp. 273–275). in the country to which the foreign capital flows, the inflow of fdi in the short run will positively influence the balance of payments. in connection with the probably increased inclination towards export of the joint ventures with the foreign capital, the balance of payments should also improve in the long run. still, there are some serious misgivings to be considered. the first one is the possibility of transferring abroad the means that had been worked out, that is to native countries and the second is the growth in the import of the resources and the products necessary to run a business (siemiątkowski, 2016a). in the short run, the investments made abroad might give rise to the deterioration of the balance of payments in the country exporting capital because to start a new baltic journal of economic studies 16 vol. 7 no. 2, 2021 enterprise or the affiliate of the already existent foreign company (buying the existent enterprises or starting the new ones), what is necessary is the transfer of financial means. however, in the long run when enterprises start to make profits and the part of them will start flowing to the native country, its balance of payments will not improve (budnikowski, 1997, p. 138, safarians, 2016). in the countries which is a target of the capital flow, the inflow of fdi might directly cause new job vacancies in the emerging business enterprises. the investments coming from abroad might also indirectly influence the growth of employment in the target country through the increase of capital in the environment of the new business and also within the remit of the suppliers of semi-finished goods, raw materials of materials (fosfuri, motta, rønde, 2001). still, there exists the danger that there will occur the decrease in employment in national enterprises, the latter of which might get pushed away by the foreign capital due to the expansion of foreign corporations. what is likely is the decrease in the production capacities in the business entities whose production is pushed out of the market and thus the decrease in employment might occur. what is also possible is the decrease in employment contingent upon the form of foreign direct investments of the brownfield type. taking over the already operative companies in the target country is usually connected with their restructuring. this, in turn, at its early stages involves downsizing. the determination of the influence of fdi on the employment rate in the country in which the capital originated is complicated. in the short run, this influence mainly depends on whether the outflowing capital would have been used if the very outflow had not occurred at all. if it would have been, the outflow would mean the loss of potential job vacancies. still, if there is still in a given country the surplus of capital, this danger obviously does not exist (górniewicz, 2007, p. 111, siemiątkowski, 2016b). due to the inflow of fdi, the native performers might gain the access to the markets native to foreign investors (agiomirgianakis, asteriou, papathoma, 2003, p. 6). there is still some serious danger relating to the loss of both the access to national market as well as foreign markets potentially inflicted upon the business entities operating within the economy which is a target of the investments. from the perspective of the country exporting the capital, there are definitely more positive aspects related to investing abroad. first of all, fid should influence the acquisition of new markets and the expansion connected with the former. this fact is a primary incentive for making foreign direct investments. the additional benefit is the capability of increasing the competitiveness on native markets due to the lower cost of producing goods abroad, which, in turn, allows for expanding the national market. the country exporting capital may be afflicted with the bad consequences of the outflow of fdi. one of bad consequences is the situation in which an investor transfers the entire business activity abroad simultaneously losing his or her shares in the national market. the extreme instance of this situation would be the entire loss of the market in one’s native country (górniewicz 2007, p. 112). for the country admitting the inflow of the capital, the benefit will be obviously the acquisition of the new means worked out abroad. it will increase the capital in the target country, which – especially in the case of the developing country of central-eastern europe – is insufficient for the rapid increase of the rate of development. furthermore, what might prove to be a benefit is the acquisition of all the necessary experience by national workers employed in the affiliates of foreign business entities. the country exporting the capital will obtain the new means of production but at the same time it might prove negative for economy. the national means of production might get pushed away by the cheaper ones originating in the country from which the capital moved. in the case of the target country of fdi, one might expect the increase in production in the business entities with foreign capital and thus the direct increase of the overall national product. w hat can also be manifested is the indirect influence of fdi on the global product in the target country. w hat is likely is the production growth in the cooperating enterprises as well as in the so-called business environment (borensztein, de gregorio, lee, 1998, hermes, lensink, 2003). as it usually is, the negative influence of foreign direct investments on the gross national product of the target country may manifest itself. it also manifests itself in pushing away the national production by the joint ventures with the foreign capital at their disposal; so, it even causes to the decrease of gnp (mączyńska, 1999, pp. 89–90). the production of subassemblies to the goods produced abroad and the profits of the citizens of the exporting country included in gnp are undoubtedly the positive effects for the country exporting the capital (borensztein, de gregorio, lee, 1998). the negative phenomenon turns out to the probable decrease of the production in the country due to the transfer of its part across the border. from the perspective of the infrastructure in the target country receiving the foreign capital, it is difficult to pinpoint the dangers. one of them might be the fact that roads are worn out quicker; however, this is a natural consequence of business activity regardless of the origin of the capital. the benefits thereof seem all too obvious. the improvement of the situation with respect to infrastructure might be caused, for instance, by the implementation of the strategy of attracting the investors, the strategy baltic journal of economic studies 17 vol. 7 no. 2, 2021 usually encompassing the assumptions related to the development of the infrastructure around the areas which are the target of the very investments. usually, the next step is the development of the infrastructure accompanying the development of the activities of joint ventures with the foreign capital share. the influence of the inflow of fdi to a given country can have both positive and negative consequences in the realm of technological solutions (wang, blomström, 1992, pao, tsai, 2011). it may give rise to the inflow of ground-breaking and the so-called „dirty” (outmoded, capital-consuming and detrimental to the natural environment) technologies (tamazian, chousa, vadlamannati, 2009). also in the case of the country exporting capital, one can point to both positive and negative aspects. among the former, what should be enumerated is – among others – creating the research and development base abroad, which in the long run might cause the transfer of technologies from the affiliate to the mother company, which is still quite unlikely (blalock, gertler, 2008). what is more likely is backing up the mother corporation with high-class specialists originating from the target country. in the recent years, such trends manifest themselves in the case of the transfer of doctors or it specialist from the newly-joined member states of european union to the so-called “old union” member states [the original 15 member states comprising european union]. the country to which capital flows may count on the increase of competitiveness on its own market through the increasing number of potential competitors. there is still some fear that competitiveness will decrease because foreign capital may push away the national capital and even give rise to the monopolization of a given industry. the capital „donor” must expect some decrease of competitiveness on his or her own market (and at best he can expect no changes) in the short run. however, in the long run, he or she may expect some improvements – especially when the goods produces in the foreign affiliate companies will reach the national market. the influence of fdi on the government budget of the country to which the capital flows is multidimensional. as the first and foremost influence of the investments in this respect one can regard the potential growth of income to the budget due to the taxes paid in connection with the rise of new business entities (bożyk, misala, puławski, 1998, p. 162). what is implied here is both direct taxes, paid by the business entity and the employees employed there, but also indirect taxes, related to the sales of produced goods. what is more, foreign direct investments, by contributing to the increase in the employment rate, directly relieves the government budget. it is because the amount of allowance from the public means is decreased; that is, the state now can pay the unemployed smaller allowances or later on – smaller social benefits. the increase of the number of business entities – regardless of whose property it is – will contribute to the increase of the income to the budget if not short-term, then definitely mediumor long-term. apart from the undeniably positive, as noted above, influences of the foreign direct investments on the government budget of the country to which the capital flows, some negative influences may be unfortunately pointed out too. the business enterprises with the foreign capital share may, wanting to compensate for the high cost of investing outside its home economy, avoid paying taxes in the target country. such a mechanism may also be based on exaggerating cost of business operations or not revealing the real cost at all. then, the budget of the country to which the capital flows will certainly make losses. perhaps the proportions of such malpractice among the joint ventures with the foreign capital share is bigger than in the case of national business entities because the foreign companies have the greater capability of regulating cost by the contracts with the parent corporations. however, one should bear in mind that generally the majority of business entities strive for paying as little taxes as possible. the internally financed (only from the capital within one’s native country) business enterprises also subscribe to the above “code” of behaviour. undoubtedly, the important area of influence exerted by direct investments on the economies of particular countries is the area of legislation (busse, hefeker, 2007). a particularly intense influence is manifested in the country to which the capital flows. still, one should unequivocally state that good legislation is one of the indicators of the foreign capital inflow to the economy. thus, legislation which restricts the operations of business entities automatically becomes the barrier for the foreign capital inflow (górniewicz, siemiątkowski, 2006, p. 176, holburn, zelner, 2010). the area in which the undeniably positive consequences of the inflow of foreign direct investments is manifested is the prestige and the improvement of the image of the target economy on the international arena. the increased inflow of fdi causes the country to gain prestige in the eyes of managers, politicians and entreprenuers. the natural conclusion derived from the increased inflow of investments is being certain of the stability of a given economy and about the good conjuncture on a given market. the above factors entail the other ones in the form of the increased credibility of polish economy, which results in, for instance, obtaining the better position in the international ratings of competitiveness. the effect of such phenomena might be even bigger inflow of investments, which, in turn, potentially contributes to the development of the entire economy. the flow of foreign direct investment might exert the essential influence on the development of particular baltic journal of economic studies 18 vol. 7 no. 2, 2021 regions of economies to which the capital flows but also on the regions of the economies from which the capital flows out. in the case of the country to which the capital flows, what is particularly important is the proper pursuit of the policy of attracting foreign investments. that policy should favour investors in the areas which are economically lagging, which would allow for the acceleration of the process of equalizing the developmental levels in those regions. encouraging investors might assume two different forms: offering the investment area with the developed infrastructure, erecting technological parks with the infrastructure, creating tax incentives etc. one of the most important parametres of the economy is the cost of running business. it is also on this factor that the foreign direct investments have a bearing – both on the part of the country to which the capital flows and on the part of the country exporting capital. the positive influence of the target economy in this respect may be manifested in the consequences of the strategy of attracting foreign investors. the government, striving to encourage as many investors as possible to allocate the capital in the target country, will probably want to create the congenial conditions to run business for foreign investors – also with respect to cost. thus, it is possible to decrease the financial burden of all the business entities. simultaneously, the situation might occur in which the increased demand for service of the business environment will cause the increase of service prices, which as a result will give rise to the increased cost of running business as a whole (zhorzholiani, 2019). one of the consequences of the countries being a target of fdi is the fear of political consequences of the home economy being dominated by foreign owners representing (first and foremost the interest of their native countries). for example, in the highly developed countries such as canada allocating significant part of american capital, there is the fear that in case of usa pursuing a policy of economic sanctions against any third countries, there might occur some pressure to include in this sort of action the foreign enterprises with the american capital share, which might prove inconsistent with the national interest of canadians (górniewicz, siemiątkowski, 2006, p. 181). on the other hand, in the developing countries being rich in mineral materials, there are commonly shared fears that fdi and in particular the business activities of big concerns might contribute to excessive exploitation of those materials and inconsistency with the long-term interest of the countries endowed with the said materials. still, in the developing countries having the aspirations of becoming the continental hegemonies (e.g. brazil, india or iran) what is restricted is the share of foreign capital in business companies (generally to 50% and sometimes even to 0) (budnikowski 2001, pp. 153–154, cui, jiang, 2012). 6. conclusions foreign direct investments constitute the important part of contemporary international flows of means of production. w hat testifies to it is the relatively big scale of that phenomenon. despite a certain collapse caused by the world economic crisis the level of fdi is still high. although fdi flows into all the continents, their respective amounts vary. generally, the greatest number of fdi was allocated to asian, european and north american countries. the investments generally skipped the poorly developed areas, which particularly relates to africa. one should expect that in the forthcoming years, the proportions of foreign direct investments will steadily grow. the reasons for this phenomenon should be subscribed to the economy being increasingly receptive and the processes of globalization still proceeding. the important issue connected with fdi are the 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(2019). the assessment of corruption impact on the inflow of foreign direct investment (in the case of georgia, armenia and azerbaijan). torun international studies, 1(12), 181–192. doi: http://dx.doi.org/10.12775/tis.2019.012 baltic journal of economic studies 150 vol. 7 no. 3, 2021 corresponding author: 1 lviv polytechnic national university, ukraine. e-mail: olesia.s.lemishovska@lpnu.ua orcid: https://orcid.org/0000-0002-5695-0924 researcherid: e-6028-2018 2 lviv polytechnic national university, ukraine. e-mail: iryna.i.yaremko@lpnu.ua orcid: https://orcid.org/0000-0001-9772-6817 researcherid: r-8740-2017 doi: https://doi.org/10.30525/2256-0742/2021-7-3-150-158 capital reserve management of public companies: accounting tools as information function of target mechanism olesia lemishovska1, iryna yaremko2 abstract. the purpose of the article is to present the financial and economic content and purpose of capital reserves, insurance funds to ensure future costs and payments as the main components of the reserve system of public companies. the methods of theoretical and comparative analysis allowed to expand the view of the objects of reservation in the global space by comparing the norms of international standardization of financial reporting and the mandatory requirements of individual states in the field of reservation. the research methodology covers the analysis of reserved sources for ukrainian and global companies in the context of the large-scale socio-economic crisis caused by the global covid-19 pandemic. based on a comparative assessment of the potential of reserve sources of surveyed companies, reservation in today’s crisis economy and in the foreseeable future is one of the most necessary and important means of ensuring the stable operation of socially significant companies. the study of regulatory norms of different states and principles and norms of standardization of public financial reporting led to the conclusion that for internal management purposes and market counterparties and public administration in the face of increasing unpredictability and depth of risk requires a more detailed and reliable information base on existing modern companies reserved funds to overcome the risks of loss (reduction) of capital. the practical consequences of weak imperatives on the obligation to create reservation facilities have been reflected in the allocation of subsidies from the state budgets of different countries to commercial structures in many areas of the economy. the existing issues actualize multi-vector developments in the system of interdisciplinary research, which substantiates the scientific legitimacy and relevance of our study. the results of analytical and logical approaches in assessing the state of backup support for ukrainian and well-known international companies became the basis for obtaining evidence and arguments in formulating the parameters of adequate information for the current needs of targeted management of backup processes. the methods of verification of reserve system components proposed in this study can be used to establish general trends in the development of information parameters (accounting and public reporting system) in the field of reserve management and future losses (reduction) of capital of modern public companies. key words: management, company, equity, reserves, trust funds and provision, formation, use, accounting and analytical support. jel classification: g32, м41 1. introduction the market management system always includes various risks in the process of conducting their financial, investment and economic activities. the degree and strength of the negative factors of the external (general economic) environment on the stable functioning of economic systems are different at different stages of the global and national environment. the dynamism of modern processes of globalization and concentration of capital is accompanied by the high complexity of civilizational changes, which carry new risks with them. increased competition forces the company to change the baltic journal of economic studies 151 vol. 7, no. 3, 2021 format of its operation, which requires additional costs for the modernization of production and management processes. the economic crisis of 2008-2011 showed a lack of attention (theory and practice) to the formation of companies’ own insurance and stabilization funds, many of which were allocated budget support. to overcome systemic risks and ensure stable operations in the practice of many companies introduced adequate to the specifics of their activities concept of crisis management, a component of any of them was to create different types of reserves to cover possible future losses (reduction) of their capital. in today’s conditions of stagnation and recession of global and national economies, the creation of companies’ own reserve system is of particular importance. the cardinal mines in the market system, the social environment and the loss by companies of part of the capital for measures to combat the global pandemic indicate the need to create reserve and insurance funds. an additional argument for such management measures is the weak outlines of the expected future state of the economic space. the above and other factors completely differently focus the projection of economics and management science on the creation of companies of any national economies with their own backup systems. in this article we emphasize that only such a backup system can be effective in practice, which really contains the productive power of economic resources allocated for this type of targeted measures. only in this case, the reserved sources become a guarantee of protection not only of the interests of the owners (equity of the company), but also the attracted capital of investors and creditors. in many cases, the reserve and insurance funds presented by companies are fictitious because they are not backed by real assets. the novelty of our study is the substantiation of a different view of the reserve system of a modern company, which is confirmed by analytical reviews of the state of reserves in ukrainian and multinational companies, the content of mandatory regulations of different states on the obligation to reserve funds by national entities. the conceptual bases of development of information support of processes of management of reserves offered in our research are constructed on the basis of a real condition of modern global and national social and economic environment and projections on its uncertainty in the foreseeable future. the acquisition of modern subjects of market economy (companies, corporations) of increasing social importance objectively necessitates the formation of reserves of socio-economic nature, which is one of the problematic components of the research topic. the relevance of our study is based on real problems in the management of stable operation of modern companies, and is confirmed by the importance of thematic developments in the international scientific environment, which explores the main areas of improvement of accounting and analytical support of equity management (evstafeva, 2011). in theoretical and applied research, this problem has not been adequately covered, which justifies the feasibility of formulating multi-vector developments. in our study, the emphasis of the problem focuses on the objectivity of the information field for any paradigms of reserve and trust fund management. this article aims to demonstrate the fictitiousness of information provided in public reporting on the sources of provisions by ukrainian and international companies and to draw attention to the need for radical changes in international standardization of accounting tools to expand parameters and provide a higher level of reliability to information support processes. the research methodology includes a comparison of regulatory requirements in european countries regarding the obligation to create reserve funds, legislation in the field of accounting and reporting on reserves, insurance and trust funds as part of equity. the objectives of the article are to disclose the financial economic and accounting content of reserves and capital, the specific content, role and functional purpose of the reserve system in the enterprise, the study of semantic parameters of accounting information to characterize capital reserves as a tool for the protective function of equity. an element of scientific novelty in the subject area of knowledge should be considered justified in this study, the feasibility of introducing a criterion on the degree of redundancy as an indicative component in the concept of sustainable development, methods of investment attractiveness, etc. 2. target function and regulations in the field of redundancy and construction of formalized information numerous analytical reviews of the activities of well-known international and fairly large ukrainian companies (corporations) during the global pandemic pointed out that in previous periods they did not create a proper protective mechanism (insurance funds) in case of an unexpected multifactorial crisis environment. for this reason, various countries have developed programs for the allocation of subsidies or targeted subsidies (subventions) from the state budget to commercial structures of many sectors of the economy to maintain their stable operation or functioning in general. lack of own spare (reserve) sources to mitigate the factors of negative impact on the financial and economic condition of economic entities also affects the social plane, as it is directly related to job losses due to reduced production and services, lack of their own sources for temporary maintenance of their employees during forced leave. baltic journal of economic studies 152 vol. 7, no. 3, 2021 in conditions when overcoming such circumstances becomes the subject of joint activities of commercial structures and state institutions, the importance of objective information about the formed by companies (especially socially significant) reserve (insurance) funds and trust funds increases significantly. this study analyzes the principles of formation of formalized sources of information – targets of the accounting and public reporting system, which are set according to international principles (standardization in the field of accounting and financial reporting) and regulatory (imperative) regulations of different authorities. the importance of this information is that it is based not only on internal management decisions in the formation of reserve and insurance funds, but also confirmed by the fact that the company’s public reporting data are the basis for analysis and evaluation by external users of its protective function. own and involved (involved) in capital turnover. reserves and earmarked operating capital are primarily intended for the financial stabilization of the entity in the indefinite future, but the official presentation of their availability, structure and volume increases the confidence of the entity by investors, creditors and other market counterparties. such information is expected to be extremely necessary for public administration bodies of general economic processes, a component in regulating the economic security of economic units of national economies. any of the types of monitoring is based on the data of public reporting, including the state of reservation (insurance) of fixed capital by companies. the objectivity of the results of monitoring processes is directly dependent on the system of indicators involved in it, which reveal the expected appearance and strength of negative factors, establishing on their basis the needs and amounts of targeted insurance savings. in modern theory and practice, “when monitoring supplies and reserves, attention is mainly focused on tracking certain quantitative, qualitative and structural indicators, bypassing the study of conditions and circumstances of threats and the prerequisites for their duration” (mekh, 2004). current problems concern not only the difficulties of clear verification of information indicators on reservation objects, but also the development of adequate to the modern socio-economic environment approaches to building a system of criteria for identifying real threats that require early creation of reserves or insurance trust funds. in many cases, the current standardization of public financial reporting allows only a general idea of the reflected in the accounting method of insurance (reserve) capacity of the company, ignoring the clear articulation of the productive power of the presented resources to protect working capital. the principles and approaches to the formation of accounting reserves (accounting regulations and recommended methods) set out in the standards need to be changed, as the practice of information formation based on them allows the possibility of manipulating data on the objects of reservation. the infrastructure of international financial reporting standards is implemented in most countries, on the basis of which their application is enshrined at the state level, including in ukraine. this applies both to the international principles for the presentation of information in financial statements (ias 1) and to the disclosure of reserves and earmarked capital (ias 37). in this context, we present the views of well-known scientists – economists in the field of accounting and financial reporting (mathews, perera, 1996), which indicate the importance of comparative analysis of different accounting systems and methods. in their works it is substantiated that the results of such analysis allow to establish a typical model of accounting development on the basis of a better understanding of its change under the influence of environmental factors. these and other well-known scholars in the field of knowledge (hendriksen, van breda, 1991) also point to the possibilities of expanding the choice of acceptable solutions based on the experience of improving such accounting models. from the point of view of our research, the above concerns the differentiation of types of reserves and regulations on the order of their reflection in public reporting. for comparison, we present the practice of implementing international standards in the field of accounting and reporting of reserve and trust funds of capital collateral by the mandatory requirements of some european countries. for example, in the czech republic, the group of indicators on funds and profits provides opportunities to give only summary information on the role of the reserve fund. in comparison with the regulations of this country, in slovakia, the following balance sheet items are provided for the group of indicators on share capital and funds: 413 – reserve investment revaluations; 414 – legal reserve funds from participation in capital, and in the article funds created from profits and recognized economic results, item 421 – legal reserve fund. latvian legislation reflects in the balance sheet generalized information on the state of equity separate articles – fixed or partial capital, reserve for revaluation of long-term deposits and reserves. in ukraine, in accordance with the accounts of the fourth class “equity and collateral” information on the authorized and additional capital in the balance sheet is supplemented by the following items: 43 – reserve capital; 47 – ensuring future expenses and payments; 48 – targeted financing and targeted revenues; 49 – insurance reserves. legislative norms of public reporting in germany in the consolidated balance sheet item “equity and contributions to the reserve fund” identified a separate baltic journal of economic studies 153 vol. 7, no. 3, 2021 position group of indicators: 31 – capital reserve; 32 – deduction of profit to the reserve; 3210 – deductions to the reserve according to the legislation; 3230 – contributions to the reserve in accordance with the statute; 3240 other deductions to the reserve. in the development of the above, we indicate the possible parameters of providing information about equity and reserves in the balance sheet of the british company. in particular, under the item capital and reserves reflect: revaluation reserve; other reserves; reserves for redemption of preferred shares; reserve for own shares; reserve provided by the founding documents; other reserves. according to the possible form of a balance sheet by an american company under the group item share capital, it is allowed to provide information on a wide range of reserve and trust funds. analysis of the content and results of recent research indicates an insufficiently concretized conceptual and categorical apparatus and formalized quantitative expression of accounting reserves, trust and special funds and future capital provision in almost all national systems of standardization of public reporting. at present, the legislative regulation of the procedure for creating and determining various types of reserves and capital provision does not regulate the mechanisms and methods of calculating almost all components of the reserve system, i.e., the size of the necessary sources to cover losses and unforeseen costs. existing problems in modern practice of management of components of reserve system put forward the objective need of working out in more adequate standardization both methods of reflection in the account of reserve objects, insurance funds and maintenance of future expenses and payments, and development of adaptive basic principles of their presentation in the public reporting. modern companies. 3. review of scientific developments on the research topic analysis of case studies and publications in the field of information generation to develop an adequate for modern companies backup management subsystem (risk management) shows that this topic is given increased attention by scientists and practitioners. in the thematic works of scientists it is quite reasonable to conclude that to develop an effective for a particular enterprise protective mechanism must first solve the existing “problem of accounting and analytical support, which will meet the needs of reserve management” (krutova, tarasova, 2016). research works of scientists from different countries on this topic show that there are numerous problems in the approaches to the presentation by companies of their actual sources to ensure reflected in their balance sheets targeted provision for future costs and payments and various special funds. scholars note the lack of clear semantic articulation of these accounting objects, not specified financial and economic expression of their presentation in public financial (corporate) reporting. for example, in a study (ponokova, 2007) made a completely objective conclusion: “reserves that are formed in the financial statements are purely financial in nature, … they do not represent any stocks or values, and the financial result is reserved and the assessment of the main objects of accounting (income, expenses), assets, capital and liabilities of the organization)”. the starting point of the vast majority of studies is the analysis and evaluation of the basic provisions of mandatory requirements (international norms and state legislation) of the processes of formation of reserves and insurance funds and the principles of their public presentation. according to the results of this type of analysis in most cases it is concluded that the basic principles of “capital reservation of the enterprise involve the formation of a certain stock of its value without comparability with a specific asset held to ensure it” (pylypenko, 2016). against this background, the need for and the actual creation of reserve capacity by companies not provided by law are studied very limitedly. in this context, in scientific developments, in particular in publications (haiduk, 2016), argues that in practice there is an objective difficulty in clearly formulating this type of accounts (reserve, trust and special funds and future capital provisions), as their set depends on the specifics of a particular company. in general, in the development of this issue, scientists mostly take the position that the task of the process of formation of reserves in accounting is to reflect the degree of readiness to use a certain amount of resources in the need for protection of fixed capital in the future.this, in our opinion, absolutely correct justification, should be supplemented by such a component as creation of an appropriate reserve for protection of the market value of share capital from reduction. 4. economic and managerial aspects in the field of reservation the current state and review of the operating environment of companies in many sectors of the economy draw attention to the appropriate content of economic content and adequate to these conditions of the functional tasks of backup system management. the level of existing and expected threats determines the need for economic entities to form their own protective functions. the high degree of uncertainty of the modern business environment highlights the need to develop an adaptive management mechanism for the formation of its own reserve system, which should be considered in the context of the concepts of preserving financial and physical capital. baltic journal of economic studies 154 vol. 7, no. 3, 2021 in the parameters of financial and economic definitions and most accounting conventions, the content of reserve capital and reserve funds is positioned so that in real practice the reserved amount should cover the loss of capital assets. from the conceptual basis of modern management models – are the means of protective function in the form of various types of capital reserves. such compensation can be formed from any source, not just from profits or legally permitted operating expenses. for example, the company’s reserve capital can be replenished by additional contributions from partners, which are provided in exchange for specific privileges (priority in the payment of dividends, etc.). components of the backup system (funds) are created for strictly defined purposes. in our opinion, in addition to the well-known ones, reserves for covering (financing) problematic completion of research works, as well as dividend funds in the coming years should be relevant for modern practice, as financial results are expected to decline in many sectors of the economy. the reserve in the “ideal” sense is considered as a separate part of the economic resources of the enterprise, which is concentrated in reserve (insurance) funds and is intended to cover unforeseen needs or allocate funds to insure fixed capital. in a general sense, the reserve is understood as the source from which the necessary resources are drawn. in the same “ideal sense” it is about filling it with real assets, and not recognized by the existing method of the object of “accounting reserve”, which in essence only visually changes the capital structure. securing future expenses and payments, as an economic category, is considered a target source to guarantee the repayment of a certain type of debt, and financially – legally are liabilities with an indefinite amount or time of repayment on the date of their creation. together with the signs of security obligations are signs of the internal reserves of the enterprise and until their use carry the productive energy of capital. in the operational management system, reserves are considered as a categorical concept from the standpoint of the existing reserves of economic resources to ensure the smooth operation of the entity and untapped opportunities to improve efficiency. from this point of view, the company’s reserves refer to the reserve stocks of raw materials, free production capacity and specific material elements for the production process, which are involved in the company’s economic turnover if necessary. in a more formalized sense, capital reserves are understood as the company 's “accumulated” (blocked from distribution) net profit, i.e., the created source of coverage of possible or expected additional costs or losses. from the financial and economic point of view, it is a real stock of economic values or cash created by the enterprise for specific reserve and insurance purposes. the economic mechanism of controlling the redundancy process is based mainly on the part of the profit that is blocked from distribution and stored for use in the event of certain events. for the tools involved in this mechanism, information on the reserves that are formed in the accounting system and actually constitute a source of potential opportunities for the protection of fixed capital is primarily important. by its purpose, the accounting of reserves provides information to the target subsystem of enterprise management, but its functions should also be considered as an input, transition and output element of the management process. from the point of view of the creation of reserve (insurance) objects and future capital provision, the accounting system is a tool of soft infrastructure in the management of obviously risky operations. at the same time, the tools of this system (methodological and methodological arsenal) include appropriate mechanisms for counteracting risks, making it impossible to withdraw from the enterprise part of the actual functioning capital. accurate and complete reflection of the facts of formation by the company of various objects of capital reserves, sources of future expenses and payments and trust funds is the main function of accounting, but it is also reasonable to assume that adequate accounting methodology to reflect such objects allows to improve management efficiency. parameters of the concept of risk management. this applies to such functional management tools as planning, analytical function and budgeting, monitoring and control processes for the targeted use of reserved sources. in general, the functions of the reserve system in financial management include the provision of protection against impending risk. the creation of reserves in the accounting system is compared in order to more realistically reflect the financial result, reducing it in the period when the risk arose, and not when the real losses were incurred. the economically sound structure of reserves and trust funds of an insurance nature is an important indicator of rationally prudent management of an economic entity and the financial basis for ensuring its stable functioning in crisis conditions. from the point of view of the canonical principles of economic doctrines, insurance of functioning capital increases the investment attractiveness of any subject of a market economy. at the same time, the reservation processes require (in the classical version of economic theories) the withdrawal from the company 's turnover of part of the possible reinvestment of profits (additional capital) in the special reserve of the company. in practice, an aggressive provisioning policy is unattractive to owners and shareholders because it blocks their ability to receive dividend income. in addition, it should be noted that the objects of capital reserves recorded in the financial accounting system and the information used in management processes about them are debatable. it is not only about the reality of the economic matter of these reserve sources, but also baltic journal of economic studies 155 vol. 7, no. 3, 2021 about the lack of confidence that the negative processes against which the created reserves will occur. that is why the incorrect creation of the reserve distorts the financial result of two periods of creation and write-off. therefore, in determining the provision by purpose and amount, the entity should clearly consider the criteria of numerical risks and uncertainties, which in no way justifies the creation of excessive reserves or intentional overstatement of liabilities. the given economic managerial and accounting content for the construction of the reserve system of modern companies allows us to state that its functional role is to ensure stable (sustainable) activity of the company in uncertain conditions of its future operation. the reservation system contains restrictive, protective and guarantee functions, which in their synergistic interaction provide the concept of development implemented by the company. 5. analytical review of reservation practice market economy entities must (theoretical speculation and declarative principles of socially responsible business) create sources to cover unexpected future costs (losses) in compliance with the “reserve criteria”. these, in addition to the traditional and most common components of the provision, should include funds for supplementary pensions, targeted guarantees for the fulfillment of guarantee obligations, fulfillment of obligations under onerous (unprofitable) contracts or insurance funds for fulfillment of obligations in case of termination, etc. despite a number of objective and subjective factors that constrain the processes of reservation on the subjects of modern market economy, we present the argument formulated in the distant past by a famous scientist (gerster, 1926): “the greater the amount of reserves compared to the authorized capital, the more stable the financial condition should be considered, and the greater the amount of secured debts relative to unsecured, the lower the potential probability of bankruptcy of the enterprise”. the parameters of the conducted analytical review include arbitrarily selected enterprises of the corporate type (of llc amc capital group, ukrgazvydobuvannya jsc, energoatom nnegc, ukrtransgaz jsc, kyiv metro me) that are significant enough for the national economy of ukraine and well-known companies operating in the international economic space (volkswagen ag, nestle group, samsung electronics co., roche holding ltd, bayer ag). the presented data on the status and approaches to the provision of companies taken for analytical review do not significantly change the general view of the current common practice of creating capital reserves and ensuring future costs and payments; other selection of objects (socially significant companies) for analytical assessment would not change the general picture in the field of modern practice of management of components of reserve system. the low level of the following reserve indicators of the surveyed companies has an objective justification. first of all, it should be noted the deterrent effect of tax rules, which in most countries do not recognize the tax costs of creating trust and insurance funds. the created reserve item, taking into account tax restrictions, has a double negative impact on the company’s presentation of its performance – it reduces the financial result and, in addition, increases contingent liabilities, which is reflected in the deterioration of profitability and solvency. the formation of reserves is accompanied by a number of subjective choices, including the problem of using an adequate assessment of the degree of risk threat as a tool to determine the need and size of the source of the reserve system. the processed financial statements of the surveyed companies provide information on open reserves, which are certified in their balance sheets under various items of structuring information on equity. the results of the creation of required and optional (at the initiative of company management) reserves are given in separate articles of the sections “additional capital” and “reserve capital”. at any of the companies there are also hidden reserves, which are not reflected in the balance sheet, and therefore we did not take them into account. it should be noted that the created reserve capital and other types of reserved sources are a factor in increasing the amount of equity in all surveyed companies. our analytical assessment leads to the conclusion that the creation of reserves and trust funds for future expenses and payments provided companies with the opportunity to evenly distribute future expenses between reporting periods, i.e., to form more objective information about financial results. international financial reporting standards provide for the possibility of creating reserves to compensate for the loss of impairment of assets (tangible and intangible economic resources), which is especially relevant for ukrainian companies. the results of the analysis show that, unlike foreign companies, ukrainian companies do not practice creating this type of reserve. undoubtedly, the magnitude of the potential depletion of the productive power of assets can be estimated only hypothetically (the expected period of need and the size of the created target reserves), but we consider it necessary to introduce into ukrainian practice foreign experience. the materials of the analytical review show that in both ukrainian and foreign companies, accounting standardization and practice pay much attention to the depreciation of receivables as a component of the assets of the entity. this is confirmed by the data of the processed reports of both groups of companies. the reserve for doubtful debts becomes especially important in the event of a crisis of non-payment in baltic journal of economic studies 156 vol. 7 no. 3, 2021 the economy, receivables of debtors in liquidation and bankruptcy, which indicates the need to improve existing methods. in general, it should be noted that the formation of different companies is carried out on the basis of applicable for each country mandatory rules for accounting. the financial statements of different companies reflect different types of reserves (reserve capital, doubtful debt reserve) and legally permissible reserves of an economic nature (potential reserves) and numerous objects of reservation for similar content and purpose. many of the reserves reported by corporations are formed in accordance with the statutory rules of a particular company or defined by the governing body and the founders of the types of insurance funds for the management of the system of protective functions. it is worth giving more detailed results of the analytical assessment of general state of capital reserves and target reserve funds and its individual components on the basis of public financial statements of analyzed companies (all indicators are calculated before the global pandemic 2020). table 1 provides information on these indicators at ukrainian enterprises as for 2019. the data of analyzed ukrainian companies show the general picture of practice of reserve creation emphasizing the lack of reserve sources formed on the initiative of management. the sample includes joint-stock companies with state ownership ( jsc ukrgazvydobuvannya, jsc ukrtransgaz), a state-owned enterprise (se neaс energoatom), a municipal enterprise (kyiv metropoliten) and a commercial corporation (capital group asset management company). the data given in the table show that at two enterprises of state – corporate type, and also at municipal enterprise there is no legally regulated reserve capital due to their unprofitable activity. the municipal enterprise by the nature of its activity is socially oriented with the support of its activities with subsidies. on the comparative example of the private company llc amc capital group and the profitable publicprivate corporation ukrgazvydobuvannya jsc it is possible to establish the all-ukrainian approach to creation of reserves and provisions that are involved in the economic turnover of capital a private company creates reserve capital and current provisions in the amount of minimum legislation. as for public-private corporations, the creation of reserve capital is also minimized there, but current liabilities are equal to 71.4% of the registered (authorized) capital. the same situation is present at jsc ukrtransgaz, which is partly related to the formation of sources for payments on preferred shares. it is important to disclose information (table 2) on the created reserves of the short-term period (provisions), long-term reserves (long-term provisions), deferred reserves (translation reserve) and other reserves (other reserves), which are listed in the public reporting of selected global companies. analytical assessment of provisions is carried out in comparison with total liabilities and equity, the total amount of capital (total equity) and retained earnings. the above information demonstrates the different structure of reserve sources, their different percentages to the capital invested in the company. this is a natural factor in terms of the different specifics of their activities, compliance with various laws, but it also largely depends on the policy chosen by management in the field of creation of reserves of employed capital. we can note that most companies do not have short-term reserves (provisions), deferred reserves (translation reserve) and reserves intended to cover losses of the current period – other reserves. the results of the evaluated components of the reserve system of the studied companies demonstrate the idea of the created potential to insure the stability of their activities in the conditions of uncertainty of their future operation. the strategic development plans of most commercial structures are traditionally dominated by well-known criteria of market growth, but the criteria of reserve provision are insufficiently expressed in them, which, to some extent, distorts the declared prerequisites for the development of companies in many sectors. table 1 balance sheet items with reserve purpose as a part of ownership and total equity (thousand uah) company name involved (functioning) capital including % of reserves and current provisions to the capital: ownership capital (registered capital) reserve capital current liabilities (provisions) target capital reserves special reserve funds involved registered llc amc capital group 32 253 30 000 107 66 х х 0.54 0.6 ukrgazvydobuva-nnya jsc 145 630 950 3 854 125 578119 2174199 х х 1.9 71.4 energoatom nnegc 218 867 050 168 875 664 4 394 643 х х 2.0 2.6 ukrtransgaz jsc 190 275 014 6 494 612 3 972 777 х х 2.1 61.2 kyiv metro me 51 344 183 3 010 437 193 426 х х 0.38 6.4 baltic journal of economic studies 157 vol. 7 no. 3, 2021 6. conclusions the results of the evaluated components of the reserve system of ukrainian and global companies demonstrate different parametric characteristics. provisioning information is a necessary condition of financial reporting to disclose the fair property and financial condition and financial results of a modern company. therefore, the imperative norms of state institutions should regulate significantly higher requirements for the creation of reserve and trust funds of an insurance nature by economic entities of national economies. in the field of international standardization of accounting and financial reporting and national accounting legislation, the issue of developing an adequate conceptual framework for the presentation of information on reserved sources for insurance of capital invested in the company remains relevant. in the parameters of the actual global and national socio-economic environment and its projection in the foreseeable future, there are numerous risks of companies losing part of the capital operating in their turnover. the creation by companies of their own reliable backup system is one of the means of maintaining their stable operation, management tools to mitigate the expected systemic multifactorial crisis factors. the acquisition of increasing social significance by many companies (corporations) objectively presupposes the consideration of components of a socio-economic nature in their reserve system, in particular, target reserves for the protection of pension funds. we propose to supplement the existing methods of assessing the effectiveness of socially significant companies (increasing the cost of capital, capturing the market, maximizing profits, etc.) with indicators of the degree of insurance of own reserves of capital invested in the company. we believe that such an adjustment criterion will provide a higher level of assessment of the potential financial and economic stability of the company, its disposition in the context of concepts of sustainable development. table 2 indicators of reserves and components of reserve sources in companies for 2020 indicators, million company name nestle group (cny) volkswagen ag (eur) samsung electronics co., ltd roche holding ltd (chf) bayer ag (eur) absolute amount % of capital absolute amount % of capital absolute amount % of capital absolute amount % of capital absolute amount % of capital total liabilities and equity 127940 100 101276 100 3025110 100 18440 100 84586 100 total equity 52862 41.3 46217 45.6 2255596 74.6 17517 95.0 47739 56.4 retained earnings 83060 64.9 100772 99.5 2184398 72.2 300 1.6 26151 30.9 provisions 802 0.6 x x 3491 1.5 x x x x long-term provisions 1162 0.91 14554 x 524 0.17 35 0.19 18261 21.6 translation reserve 21526 16.8 x x x x 7.9 0.04 x x other reserves 45 0.04 3564 x x x 13 0.07 x x references: evstafeva, e. 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(in russian) financial statements for 2019 of llc amc capital group. available at: http://capital-group.com.ua/finansovazvitnist-kompanii financial statements for 2019 of ukrgazvydobuvannya jsc. available at: https://ugv.com.ua/page/docs?count=1 financial statements for 2019 of energoatom nnegc. available at: http://www.energoatom.com.ua/ua/ actvts-16/financial_statements-126 financial statements for 2019 of ukrtransgaz jsc. available at: https://ugv.com.ua/page/docs?count=9 financial statements for 2019 of kyiv metro me. available at: https://http://metro.kiev.ua/node/5985 financial statements for 2020 of volkswagen ag. available at: https://annualreport2020.volkswagenag.com/ notes/balance-sheet-disclosures/ liabilities/equity.html financial statements for 2020 of nestle group. available at: https://www.nestle.com/aboutus/mediadocuments financial statements for 2020 of samsung electronics co., ltd. available at: https://www.samsung.com/global/ ir/financial-information/audited-financial-statements/ financial statements for 2020 of roche holding, ltd. available at: https://www.roche.com/dam/jcr:988cc95a0813-4e70-a7c8-f61a4b902749/en/fb20e.pdf financial statements for 2020 of bayer ag. available at: https://www.bayer.com/sites/default/files/2021-02/ bayer-annual-report-2020.pdf/ baltic journal of economic studies 10 vol. 2, no. 5, 2016 a company’s marketing mix in terms of glocal marketing kateryna bekh1 institute of international relations of taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to sum up the theoretical foundations of glocal marketing and the peculiarities of display of such marketing on the example of marketing mix of mondelēz international. methodology. a large amount of available sources of information devoted to glocal marketing is analysed in order to achieve the purpose of the research. the research covers and highlights the concepts and ideas concerning this marketing, the sources of which are works that meet such requirements of information as relevance and reliability best of all. moreover, the author's definition of the concept of glocal marketing is given. mondelēz international is considered in the paper as an example of a company that uses the glocal approach in marketing. the choice of a company for analysis is so, in particular, because various representatives of mondelēz international argue that this company uses a glocal strategy to promote its products in different countries of the world. marketing mix of mondelēz international is considered in the paper on the example of products under such trademarks as barni, belvita, oreo, picnic, tang and toblerone. results. the paper sums up the theoretical foundations of glocal marketing and considers the practical examples of the use of such marketing. there are numerous differences between countries, such as: social, technological, economic, environmental, political, legal and ethical. it means that marketing has common and distinctive features in different countries. the local aspects of marketing activities have an impact on the determination of global marketing orientation of a company. at the same time, every global marketing problem has its local display, and therefore requires a glocal approach in solving the problem. glocal marketing is marketing combining the advantages of global and local approaches, taking into account trends and changes in the marketing environment generated by the dialectics of unity and struggle of the global and the local. combining the ideas of global marketing and local marketing allows allay or even completely avoid the shortcomings occurring if only global or only local approach is used. the same products of a company may be under another trademarks, have a variety of flavours or forms depending on a country. the product price correlates with inputs. mondelēz international often chooses the reduction of its product weight rather than the rise of product price. mondelēz international sells its products in 165 countries organized into five segments. each segment has its own structure of product consumption and other peculiarities. the product promotion depends on the features of a product. the positioning of a product may not differ in different countries, but advertising may be altered depending on the market if needed. the analysis of different sources of information as well as the research of marketing mix confirms with specific examples that mondelēz international uses glocal marketing. practical implications. the advantages and at the same time the distinctive features of the implementation of glocal marketing are marked out while considering the theoretical foundations of the research. such distinctive features have also been supported by specific examples of activities of mondelēz international. the research has confirmed the existing theoretical achievements in the field of glocal marketing. the research is also a continuation and further development of these achievements, concepts and ideas. value/originality. specific examples of activities of mondelēz international, adduced in the paper, combined with theoretical foundations of the issue of glocal marketing, are logically united and mutually complementary. the further development of scientific understanding of the concept of glocal marketing is obtained, as well as the implementation of its principles in practice. it will help, in particular, to large transnational corporations to conduct efficiently their activities in markets of different countries under conditions of cultural differentiation manifested in diversity of needs, tastes and preferences of local consumers. all this is intended for the reduction of costs and the increase of revenues of such corporations in conditions of the current marketing environment, as well as the maximization of satisfaction of the customers' needs in different countries. key words: glocal marketing, glocalization, mondelēz international, marketing mix, global approach, local approach, needs of local consumers. jel classification: d12, f23, f61, m31 corresponding author: 1 department of international business, institute of international relations of taras shevchenko national university of kyiv. e-mail: katerynabekh@gmail.com baltic journal of economic studies 11 vol. 2, no. 5, 2016 1. introduction researches of various authors confirm the existence of numerous differences between countries in different dimensions of steeple analysis: social, technological, economic, environmental, political, legal and ethical. economic features of the latter dimension are studied mostly in terms of cross-cultural management. however, ethical (cultural) and other components of steeple analysis are also highly important for marketing of companies that operate in conditions of heterogeneity of marketing environment in different countries. first of all, it regards the peculiarities of needs, tastes and preferences of local consumers. marketing has common and distinctive features in different countries. common features are observed not only among countries sharing the common history. after all, the traditional marketing mix (product, price, place and promotion) dictates the marketing foundations applicable to practically any market conditions of some country. at the same time, every country has its own steeple and other peculiarities of development. it means that product, price, place and promotion may differ depending on the country where products are sold. thus, the local aspects of marketing activities have an impact on the determination of global marketing orientation of a company. at the same time, every global marketing problem has its local display, and therefore requires a glocal approach in solving the problem. 2. theoretical foundations of glocal marketing according to dacko, glocal marketing is "marketing on a global scale that emphasizes customization at the level of local culture. glocal marketing involves a combination of global marketing and local marketing" (dacko, 2008). the ukrainian researcher zhukov considers that "companies should think globally while realizing strategic marketing, and act locally while realizing operational (tactical) marketing with a focus on some regional features" (zhukov, 2015). he uses the concept of "glocalization" as "a positive phenomenon of development of international business in general and international marketing activities in particular ", as "an effective and promising hybrid of two current trends  – globalization and localization (regionalization)" (zhukov, 2015). there are also other researchers using the concept of glocalization in marketing. in particular, the american researcher kotler defines glocalization as "the strategy of introducing well-known international brands into another country with appropriate local adaptations" (mirae asset global investments, 2014). the author defines the glocal marketing as marketing combining the advantages of global and local approaches, taking into account trends and changes in the marketing environment generated by the dialectics of unity and struggle of the global and the local. the advantages and at the same time the distinctive features of the implementation of glocal marketing are: marketing strategy 's conformity with the processes of globalization and localization; economies of scale thanks to partial standardization and mass marketing, combined with due attention to peculiarities of traditions, demand, needs, tastes and preferences of local consumers; taking into account steeple and other features of development at the global and local levels; sufficiently rapid reaction to global and local changes in the marketing environment of business activities; use of experience and achievements obtained in some countries to improve a company 's marketing activities in other countries. resulting from the aforementioned, the glocal marketing combines the advantages of global marketing and local marketing. such synthesis allows allay or even completely avoid the shortcomings occurring if only global or only local approach is used. 3. glocal marketing of mondelēz international mondelēz international, inc. is one of the world's largest snack companies with lobal net revenues of $29.6 billion and earnings from continuing operations of $7.3 billion in 2015 (mondelēz international, 2016a). in ukraine, the products of the company are sold under such trademarks as barni, belvita, dirol, halls, korona, luxe, milka, oreo, picnic, toblerone, tuc and others. various representatives of the company argue that mondelēz international uses a glocal strategy to promote its products in different countries of the world. mary beth west, head of marketing of mondelēz international (york, 2012), and chris montenegro mcgrath, vice president of global public affairs and sustainability and wellbeing of mondelēz international (ramakrishnan, 2015), are among such representatives. even irene rosenfeld, chairman and chief executive officer of mondelēz international, emphasizes that the company uses a glocal strategy meaning the pairing of global ideas and local insights (goudreau, 2013), (yale school of management, 2014). information about the glocal approach in marketing of mondelēz international can be found on the company's official website (mondelēz international, 2016, p. 3), (kraft foods, 2010), (kraft foods, 2012), in researches and articles (silverstein, singhi, liao & michael, 2012, pp. 141-142), (ferrante, 2015, p. 4), (khosla & sawhney, 2013), (pringle, 2013), (singapore management university, 2013), (the philippine beat, 2015), (clearing customs, 2012), (alexander, 2013). the research of 4p's of marketing of mondelēz international below confirms the company 's use of glocal marketing. product. mondelēz international sells barni products in more than 40 countries. but these products may be baltic journal of economic studies 12 vol. 2, no. 5, 2016 under other trademarks in some countries, for instance, barny in the uk, ourson in france, brumik in czechia, and teddy grahams in north america (mondelēz international, 2016b, p. 1). the picnic snacks have been being sold in ukraine since 1993. this snack can also be bought in other countries but it may be called otherwise, for example, mr.big in canada and lunch bar in australia (mondelēz international, 2016). tang is a billion-dollar brand of mondelēz international. this beverage is sold in approximately 35 countries and is available in a variety of flavours based on local consumers' preferences. orange flavour tops the tang sales worldwide but local flavours make up 25 per cent of tang sales in emerging markets. different flavours gained popularity among consumers in different countries, for instance, orange, orange-mango, apple in argentina; orange, grape, pineapple in brazil; orange, orangepeach, lemon in china; tamarind, horchata in mexico; orange, mango in the middle east; honey lemon, mango in the philippines (mondelēz international, 2016f ). when mondelēz international launched oreo in china, its cookies were too sweet, too big and too expensive for chinese consumers. so oreo was adapted to the chinese market tailoring to local tastes and basing on a global platform. today oreo is sold with locally relevant flavours like oreo green tea ice cream and in more affordable forms like wafers in china. it is an example of keeping the global brand architecture intact but adapting it to local consumer needs. owing to the aforementioned, oreo has become the number one among cookies in china and this country is now oreo's second largest market in the world. mоreover, oreo thins, created in china, have been successfully launched in the usa and australia (mondelēz international, 2016e). price. like many other companies, mondelēz international is experiencing higher costs for numerous ingredients. the company tries to carry such costs for as long as possible but when further restraint of its product price rise is impossible, the company has to reduce the weight of its products to keep the prices at a level acceptable to consumers. in 2016 many food manufacturers raised their product prices due to the falling value of the pound following the great britain's decision to leave the european union. so mondelēz international had to reduce the weight of the toblerone 400g bars to 360g and the 170g bars to 150g in the uk without changes in packaging or price but changing the form of bars to ensure toblerone remained on-shelf and was affordable to consumers (bbc news, 2016). in such a way the company tries to avoid significant price increases for their products choosing the reduction of its product weight rather than the rise of product price. place. mondelēz international sells its products in 165 countries (mondelēz international, 2016a, p. 1). the company 's operations and management structure are organized into five reportable operating segments (mondelēz international, 2016a): 1) latin america; 2) asia pacific; 3) eastern europe, middle east and africa ("eemea"); 4) europe; 5) north america. there are different structures of product consumption in different segments (table 1). europe is a segment, which brought the largest percentage of the company 's net revenues in 2015 – 35.5%, where chocolate gained the largest percentage – 15.6% of the company 's net revenues in 2015; biscuits (including cookies, crackers and salted snacks) – 8.2%; beverages – 5.2%; cheese and grocery – 3.9%; gum and candy – 2.6%. at the same time mondelēz international gained the largest percentage of the 2015 net revenues from the sales of products under the biscuit category – 38.5%. almost the half of the abovementioned number is from the north america segment, where biscuits have the largest percentage – 18.8% of the company 's net revenues in 2015; gum and candy – 3.9%; chocolate – 0.8%. in latin america the biscuits category also has the largest percentage while in europe, asia pacific and eemea the largest numbers has the chocolate category. promotion. mondelēz international positions belvita in various countries as breakfast biscuit. the choice of such kind of positioning is entailed by the fact that the consumers' breakfast issue may be considered in both local and global aspects. breakfast in a local understanding has some peculiarities depending on a country. meanwhile there are also global problems table 1 percentage of 2015 net revenues of mondelēz international by product category segment product category total biscuits chocolate gum & candy beverages cheese & grocery latin america 5.4% 2.8% 3.7% 2.6% 2.3% 16.8% asia pacific 4.3% 4.9% 2.4% 1.4% 1.8% 14.8% eemea 1.8% 3.1% 1.8% 1.8% 0.9% 9.4% europe 8.2% 15.6% 2.6% 5.2% 3.9% 35.5% north america 18.8% 0.8% 3.9% – – 23.5% total 38.5% 27.2% 14.4% 11.0% 8.9% 100.0% (mondelēz international, 2016a, p. 4) baltic journal of economic studies 13 vol. 2, no. 5, 2016 related to the issue, for instance, many people around the world do not pay the required attention to breakfast, often skipping it due to feeling too pressed for time. belvita rapidly gained sales popularity even in markets where breakfast biscuits were an entirely new concept. belvita is transforming the breakfast category by creating a new mainstream biscuit occasion. today this biscuit is sold in more than 50 countries in such positioning (mondelēz international, 2016c, p. 1). and in 2015 belvita was introduced in china as the first breakfast biscuit (mondelēz international, 2016c). however, the positioning of a product may not always be appropriate for all countries where the company is represented. for instance, oreo is famous in various countries with its twist, lick, dunk ritual. but in different countries the oreo advertising campaign characters can be different, for example, a boy and his father, a mother and her son, a boy and his dog, and other combinations. the advertising campaign prepared by mondelēz international is tested with local consumers to see what resonates best before starting the campaign in some country. and local employees of the company determine which variant suits best for a particular country. thus, the marketing mix of the company 's products corresponds to glocal ideas, confirming the use of glocal marketing by mondelēz international. 4. conclusions the purpose of the research has been achieved in the paper, i.e. summing-up of the theoretical foundations of glocal marketing and the peculiarities of display of such marketing on the example of marketing mix of mondelēz international has been made. and the following conclusions have been drawn: 1. there are numerous differences between countries, such as: social, technological, economic, environmental, political, legal and ethical. it means that marketing has common and distinctive features in different countries. the local aspects of marketing activities have an impact on the determination of global marketing orientation of a company. at the same time, every global marketing problem has its local display, and therefore requires a glocal approach in solving the problem. 2. glocal marketing is marketing combining the advantages of global and local approaches, taking into account trends and changes in the marketing environment generated by the dialectics of unity and struggle of the global and the local. combining the ideas of global marketing and local marketing allows allay or even completely avoid the shortcomings occurring if only global or only local approach is used. 3. the same products of a company may be under another trademarks, have a variety of flavours or forms depending on a country. 4. the product price correlates with inputs. mondelēz international often chooses the reduction of its product weight rather than the rise of product price. 5. mondelēz international sells its products in 165 countries organized into five segments. each segment has its own structure of product consumption and other peculiarities. 6. the product promotion depends on the features of a product. the positioning of a product may not differ in different countries, but advertising may be altered depending on the market if needed. 7. the analysis of different sources of information as well as the research of marketing mix confirms with specific examples that mondelēz international uses glocal marketing. 8. the prospects for further researches in the field of glocal marketing cover theoretical and practical aspects of the issue, because glocal marketing is used not only by companies that say openly about their use of glocal approach. this type of marketing is also typical of companies using the global basis for their activities and applying the necessary adaptations in marketing according to peculiarities of a country. the further research of glocal marketing is called upon to find the most optimal ratio of the global and the local in glocal marketing approach. in its turn, it will allow to determine the most optimal strategy of the reduction of costs and the increase of revenues, while meeting the needs of local consumers in different countries. references alexander, d. 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(2013, 26 jun). glocal warming. singapore management university. retrieved from: http://www.smu.edu.sg/perspectives/2013/06/26/glocal-warming the philippine beat. (2015, may 14). mondelez philippines ‘glocalizes’ products to bring delicious moments of joy. the philippine beat. retrieved from: http://philippinebeat.com/2015/05/mondelez-philippines-glocalizesproducts-to-bring-delicious-moments-of-joy yale school of management. (2014, may 1). mondelēz international ceo irene rosenfeld on strategy in the global snack market. yale school of management. retrieved from: http://som.yale.edu/news/2014/05/ mondel%c4%93z-international-ceo-irene-rosenfeld-strategy-global-snack-market york, e.b. (2012, march 29). kraft marketing chief looks to mondelez, trying new marketing tools. chicago tribune. retrieved from: http://articles.chicagotribune.com/2012-03-29/business/ct-biz-0322-kraft-q-a-20120320_1_ kraft-foods-global-snacking-kraft-marketing zhukov, s.a. (2015). mizhnarodna marketynhova diialnist pidpryiemstv v umovakh hlokalizatsii. zbirnyk naukovykh prats khmelnytskoho kooperatyvnoho torhovelno-ekonomichnoho instytutu. economic sciences, 9, 415-418. катерина бех маркетинг-микс компании при глокальном маркетинге аннотация. целью работы является обобщение теоретических основ глокального маркетинга и особенностей проявления данного маркетинга на примере маркетинг-микса компании «mondelēz international». методика. для достижения цели исследования был проанализирован большой объем доступных источников информации о глокальном маркетинге. для данного исследования были выбраны и освещены те концепции и идеи о данном маркетинге, источниками которых являются работы, которые наилучшим образом соответствуют требованиям актуальности и достоверности информации. также дано авторское определение понятия «глокальный маркетинг». «mondelēz international» была рассмотрена в данной работе в качестве примера компании, которая использует глокальный подход в маркетинге. на выбор компании для анализа повлияло, в частности, и то, что разные представители компании утверждали, что «mondelēz international» использует глокальную стратегию для продвижения своей продукции в разных странах мира. маркетинг-микс компании «mondelēz international» рассмотрен в данной работе на примере товаров под торговыми марками «barni», «belvita», «oreo», «picnic», «tang», «toblerone». результаты. в работе обобщены теоретические основы глокального маркетинга, а также рассмотрены практические примеры применения такого маркетинга. между странами существуют многочисленные различия, в частности: baltic journal of economic studies 15 vol. 2, no. 5, 2016 социальные, технологические, экономические, экологические, политические, правовые, этические и другие. это означает, что маркетинг в разных странах имеет как общие, так и отличительные черты. локальные аспекты маркетинговой деятельности влияют на определение глобального маркетингового направления компании. в то же время каждая глобальная маркетинговая проблема имеет свое локальное выражение, и, следовательно, требует глокального подхода к решению проблемы. глокальный маркетинг – это маркетинг, который объединяет преимущества глобального и локального подходов, учитывает тенденции и изменения маркетинговой среды, порождённые диалектикой единства и борьбы глобального и локального. объединение идей глобального и локального маркетинга позволяет смягчить или даже полностью избежать тех недостатков, которые проявляются, если применять только глобальный или только локальный подход. одни и те же товары компании в разных странах могут иметь разное название или вариацию вкусовых добавок, выпускаться в различных формах. цена на товары зависит от цен на производственные ресурсы. компания «mondelēz international» часто прибегает к варианту уменьшения веса своих товаров, чем к повышению цен. «mondelēz international» реализует свою продукцию в 165 странах мира, которые организованы в пять регионов. каждый из этих регионов имеет свою структуру потребления товаров компании и другие особенности. продвижение товара зависит от особенностей данного товара: позиционирование может не отличаться в разных странах, но в рекламу могут быть внесены изменения в зависимости от рынка, если такие изменения необходимы. анализ различных источников информации, а также исследование маркетингмикса на конкретных примерах подтверждают использование глокального маркетинга компанией «mondelēz international». практическое значение. при рассмотрении теоретических основ исследования были выделены преимущества и в то же время характерные черты применения глокального маркетинга, которые также были подтверждены конкретными примерами деятельности «mondelēz international». исследование подтвердило существующие теоретические достижения в сфере глокального маркетинга, а также является продолжением и дальнейшим развитием данных достижений, концепций и идей. значение/оригинальность. конкретные примеры деятельности «mondelēz international», приведённые в данной статье, в сочетании с теоретическими основами рассмотрения вопроса глокального маркетинга, составляют логическое единство и взаимодополняемость. получило дальнейшее развитие научное понимание понятия «глокальный маркетинг», а также применение его принципов на практике, что поможет, в частности, крупным транснациональным корпорациям эффективно вести свою деятельность на рынках разных стран в условиях культурной дифференциации, которая проявляется в разнообразии потребностей, вкусов и предпочтений местных потребителей. всё это призвано уменьшить расходы и повысить доходы подобных корпораций в условиях современной маркетинговой среды, а также максимизировать удовлетворение потребностей потребителей в разных странах. baltic journal of economic studies 125 vol. 8 no. 3, 2022 1 odessa state university of internal affairs, ukraine e-mail: liliya.matveeva@i.ua orcid: https://orcid.org/0000-0002-8402-5584 2 odessa state university of internal affairs, ukraine e-mail: smsm0k0v@gmail.com orcid: https://orcid.org/0000-0002-7471-4650 3 odessa state university of internal affairs, ukraine (corresponding author) e-mail: oduvs2015@ukr.net orcid: https://orcid.org/0000-0002-6420-6169 doi: https://doi.org/10.30525/2256-0742/2022-8-3-125-133 hate crimes: international, regional, economic, and national aspects liliia matvieieva1, sergii smokov2, maksym korniienko3 abstract. the subject of this study is the scientific and practical problems of defining the definition of "hate crime" in international, regional and domestic legal systems. general scientific, interdisciplinary and special scientific methods were used in the process of research. thus, logical and systematic methods allowed us to select and analyze the information on the topic of research. specific sociological method allowed to determine the social determinants of the existence of this type of crime. the formal-legal method allowed us to trace the level of institutionalization of hate crimes and formulate definitions of legal concepts and categories. the comparative legal method allowed for a comparison of international, regional and national legislation on combating intolerance and combating hate crimes. the purpose of this article is to identify the key areas for the formation of an active legal policy aimed at increasing the capacity to combat hate crimes. analysis of experience in combating intolerance and discrimination and the development of proposals for improving domestic legislation. the main stages of the formation, development and legalization of hate crimes are highlighted. such crimes in the modern world are considered to be the most dangerous type of criminal acts. factors associated with the acquisition of the character of hate crime as an acute social problem since the second half of the 20th century are named. the main recommendations of modern human rights institutions regarding the fight against these crimes are considered. the most important guarantees of prevention of any human discrimination in the future, which are reflected in the international agreements on human rights and enshrined in the constitutions of modern states, are analyzed. the practice of the european court of human rights in this direction is considered. the legal regulation of hate crimes in the national legislation of ukraine is analyzed. it is emphasized that the main directions of implementation of domestic legal policy in the field of combating discrimination are carried out in accordance with the provisions of the constitution of ukraine, sectoral legislation and international obligations of ukraine. statistical data characterizing the level of hate crimes in the national legal system is presented. the characteristics of hate crimes are studied. it is emphasized that the motive itself is of key importance in establishing the corpus delicti and the correct qualification of hate crimes. it was concluded that the list of aggravating circumstances for hate crimes should be clearly defined at the national legislative level, which would avoid ambiguous interpretations of the wording contained in the articles of the criminal code of ukraine providing for punishment for crimes committed on the grounds of intolerance. it was stressed that an effective response to hate crimes is necessary in order to prevent such crimes from becoming a serious public threat. in the opinion of the authors, such a problem can be solved through legal education of ukrainian society and the formation of a culture of tolerant and respectful attitudes toward all people. it is the duty of a modern state to ensure the adoption of appropriate national legislation, the collection of statistical data, and the thorough investigation and prosecution of hate crimes. key words: human rights, vulnerable population groups, discrimination, socio-economic factors, hate crimes, practice of the european court of human rights. jel classification: k38, j16 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 126 vol. 8 no. 3, 2022 1. introduction modern international, regional and national institutions insist that hate crimes are a very dangerous phenomenon. such offenses have always existed. in the history of mankind, it has led to terrible consequences. one can cite numerous historical facts of religious wars, crusades, inter-ethnic and inter-ethnic conflicts, pogroms and persecution based on anti-semitism. hate crimes are considered to be the most dangerous type of criminal act in the modern world, because hatred can destroy civil society. since the second half of the 20th century, hate crimes have become an acute social problem. this is due to the following factors: – firstly, with the development of civilization, liberalization and humanization of interpersonal relations, the population of modern states has become particularly sensitive to any manifestations of xenophobia and persecution based on national, racial, religious hatred, as well as homophobia, hostility towards any category of population, etc; – second, modern globalization processes have accelerated migration, the mixing of races, ethnicities and cultures, religions and customs, which, in turn, leads to mutual misunderstanding and increased xenophobia. it can be said that almost all processes in public life are integrated and mutually influenced. the level of crime is also influenced by economic, social and political factors that are mostly general and not related to a specific type of crime, but at the same time they affect all the processes taking place in society and the level of crime in general. criminal hate crimes remain a painful problem for modern ukrainian society. the inaction of state authorities, law enforcement and law enforcement agencies in combating hate crimes leads to violence, numerous and gross violations of human rights. analysis of recent research and publications. hate crimes are the subject of attention of such scholars as a. hrynchak (2018), o. druchek (2021), n. dryomina-volok (2009), l. matvieieva (2020), o. pankevich (2014), s. rabinovych (2017) and others. the legal basis for the scientific research was the provisions of international and european legal acts in the field of protection of human rights and freedoms, norms of domestic legislation, the practice of the european court of human rights, data of sociological and statistical studies, materials of mass media and internet resources. the concept of "hate crimes" has been widespread since the second half of the 1980s in the united states. it is believed that the term "hate crime" was first publicly introduced in a u.s. congressional hearing in 1985 by congressman and judge john konies. also, this term was used by american journalists to define xenophobic criminal acts. j. jacob and k. potter in the book "hate crimes. criminal law and identity politics" emphasize that hate crimes are primarily "crimes caused by prejudices and stereotypes against persons of a different race, nation, skin color, religion, sexual orientation" (hrynchak, pp. 49–51). in 1990, congress passed the hate crimes statistics act, which gave one of the first definitions of the term as: "any violence directed against members of groups united by a particular identity." (hate crime statistics) since the 1990s, the term "hate crime" has been legalized in a number of european countries. at the end of the 20th century, the definition of "hate crime" became legal and was enshrined in legislation. violence motivated by racism, anti semitism, and homophobia – hostility toward homosexuals – was criminalized. over time, the number of scientific studies devoted to the problems of crimes committed on the grounds of national, racial, and religious hatred or enmity, as well as homophobia, has also grown. n. dromina-volok, analyzing the problems of the criminal legal prohibition of racial discrimination as an international duty of the state, concludes that the term "hate crime" is introduced into the legislation of many modern states, it can be considered as a legal qualification of a special type of crime committed under the influence of feelings of extreme hostility, hatred towards persons of another race, nationality, religion, ethnic origin, political beliefs, gender, age, sexual orientation or people with special needs. such a definition has been introduced in the criminal legislation of some states in the united states and a number of states in western and central europe. hatred can act as a qualifying attribute of a special discriminatory crime and/or as an aggravating circumstance (ukraine, the russian federation, the united states, great britain, etc.). in those states that have not adopted a formal legal classification of discriminatory crimes as "hate crimes," judicial practice takes into account the presence of a hate motive, which entails a more severe punishment even in the absence of a formal legal classification of the crime as a "hate crime" (greece, germany, switzerland, etc.) (dryominavolok, 2009, p. 458). note that the term "hate speech" has been interpreted in recommendation № r 97 (20) of the committee of ministers of the council of europe to member states on "incitement to hatred," according to which it is defined as all forms of expression that include provoking, encouraging, spreading or justifying xenophobia, racial intolerance, anti semitism and other expressions of hostility towards baltic journal of economic studies 127 vol. 8 no. 3, 2022 minorities, migrants or people with immigrant background (recommendation nr (97) 20). at the same time, note that discrimination can affect anyone, regardless of gender, age, or health status. the term "discrimination" (from the latin discriminatio – difference) means when anyone is disadvantaged because of any of their unprotected characteristics. 2. international and regional standards on hate crime prevention hate crimes are among the most inhumane crimes and serious violations of human rights accepted internationally. global and regional legal systems have developed basic guidelines for dealing with hate crimes. for example, international treaties contain a system of detailed general and regional standards that impose clear obligations on states to respond to hate crimes. the term "discrimination" was first used in the universal declaration of human rights, which was adopted by the un general assembly on december 10, 1948, and which is referred to in virtually all human rights instruments. the provisions of the declaration are fully enshrined in the constitution of ukraine. states that have signed the universal declaration of human rights have pledged to provide protection against discrimination or incitement to discrimination (universal declaration of human rights, 1948). the un convention on the elimination of all forms of racial discrimination emphasizes that the existence of racial barriers is contrary to the ideals of any human society. the definition of "racial discrimination" means any distinction, exclusion, restriction or preference based on race, color, descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural or any other field of public life (international convention on the elimination of all forms of racial discrimination). the convention requires accession states to establish liability for racist and xenophobic crimes. the convention was signed by ukraine on march 6, 1966 and ratified on january 21, 1969. after the proclamation of ukraine's independence, international treaties ratified during the soviet bloc came into force on the territory of ukraine in accordance with the law of december 10, 1991 "on the operation of international treaties on the territory of ukraine," which established that international treaties concluded and duly ratified by ukraine are an integral part of the national legislation of ukraine (practice of crime investigation in ukraine, 2021). the international covenant on civil and political rights requires the criminalization of incitement to discrimination, hostility or violence based on racial, national or religious hatred (part 2, article 20) (international covenant on civil and political rights, 1966). ensuring the protection of human rights is one of the most important activities of the council of europe, which includes legal institutions aimed at combating discrimination and hate crimes. all member states of the council of europe have signed the convention for the protection of human rights and fundamental freedoms, which aims to protect human rights, democracy and the rule of law. the european convention on human rights does not contain provisions directly related to hate crimes, but article 14 of the convention prohibits discrimination, guarantees equality in the use of other convention rights, establishes the provision that the use of the rights and freedoms recognized in the convention must be provided without discrimination on any basis – gender, race, color, language, religion, political or other beliefs, national or social origin, belonging to national minorities, property status, birth, or on any other basis (convention on the protection of human rights and fundamental freedoms, 1950). the content of the article suggests that the list of such characteristics is not exhaustive. it is to this article that victims of hate crimes may appeal if the state has not fulfilled its obligations under other norms of the convention. over time, article 14 was supplemented by protocol № 12 to the convention, which expands the prohibition of discrimination and creates guarantees of equality in the enjoyment of all rights, including those provided by the national laws of member states (protocol № 12 to the convention, 2000). thus, protocol no. 12 to the convention has a broader scope than article 14, which applies only to the rights specified in the european convention on human rights. therefore, o. pankevich emphasizes certain features of art. 14 conventions that make it unique in the system of the convention mechanismfor the protection of individual rights and freedoms: – first, this article does not contain a general prohibition on discrimination, limiting itself to the purpose of ensuring without discrimination "the enjoyment of the rights and freedoms recognized in the convention"; – second, article 14 of the convention has no independent meaning, it complements the other normative articles of the convention and protocols by supplementing the guaranteed rights; – third, the application of this article can only be done in conjunction with other articles of the convention (pankevich, 2014, p. 23–24). baltic journal of economic studies 128 vol. 8 no. 3, 2022 thus, in the case of "nachova and others vs bulgaria", the european court of human rights issued a historic decision and ruled that state authorities are obliged to investigate possible racist motives behind violent acts, and bulgaria's failure to do so constitutes a violation of the non discrimination clause, contained in art. 14 of the european convention on human rights failure to distinguish between ways of solving situations that are significantly different from each other may constitute illegal treatment, which is incompatible with the requirements of art. 14 of the convention (nachova and others vs bulgaria, 2005). hate crimes fall under the jurisdiction of the organization for security and co-operation in europe. the osce ministerial council has repeatedly stated that hate crimes not only violate the rights of individuals, but can escalate into conflict and violence on a larger scale. it is extremely important to respect both international humanitarian law and human rights in vulnerable security situations, where the most vulnerable populations are the first to suffer. therefore, the osce office for democratic institutions for human rights monitors hate crimes and develops general recommendations and policies in this area. according to the osce office for democratic institutions and human rights, the most frequent victims of hate crimes in ukraine are: foreigners and representatives of various ethnic communities; members of religious minorities and their property (churches, synagogues, mosques, cemeteries) and private property; roma; and gay, lesbian, bisexual and transgender people (184 offen ses and 4 convictions, 2020). members of these communities are particularly vulnerable to hate crimes, especially in the absence of legal protections. an important document related to the prevention of hate crimes is the european union framework decision on combating racism and xenophobia, adopted on november 28, 2008, which aims to establish a unified approach to the definition of hate crimes in the national legal systems of european states and is another step toward harmonizing the criminal legislation of european union member states. this decision applies to all countries that are members of the european union or aspire to such membership. the constitutions of modern states of the world contain references to international and regional legal instruments and include a number of their provisions, which are referred to in the interpretation of national human rights legislation and in jurisprudence. 3. legal regulation of hate crimes in the national legislation of ukraine ukraine has assumed international legal obligations to combat hate crimes as a member of the united nations, the council of europe and the osce. the experience in combating these phenomena, reflected in the eu legislation, is also taken into account. association agreements between ukraine and the eu provide for overcoming discrimination in all its forms and manifestations. the second phase of the eu action plan on visa liberalization for ukraine requires effective implementation of legislation and anti-discrimination policies, implementation of relevant un and council of europe documents. the creation of an effective system for preventing and countering discrimination is also provided for in the national human rights strategy, and item 3, article 105 of the action plan for its implementation directly requires the provision of punishment for crimes committed for reasons of intolerance based on such grounds as race, skin colour, religious beliefs, sexual orientation, transsexuality, disability, language. the implementation of domestic legal policy in the sphere of combating discrimination is carried out in accordance with the provisions of the constitution of ukraine, sectoral legislation and ukraine's international obligations. the basic law of ukraine guarantees equality of rights and freedoms of citizens. unlawful restriction of people's rights and freedoms on the grounds of gender, age, disability, race, color, political, religious or other beliefs, ethnic and social origin, citizenship, family and property status, place of residence, language, etc. is discrimination (constitution of ukraine, 1996). one of the strategic goals of the national strategy in the field of human rights, approved by the presidential decree № 119/2021 dated march 24th 2021, is the creation of an effective system for preventing and countering discrimination. the strategy seeks to unite society on issues related to an understanding of the values of human rights and freedoms, which are secured and protected on the basis of the principles of equality and nondiscrimination. as a result of the implementation of the strategy in ukraine should ensure the comprehensiveness and consistency of ukrainian legislation in the sphere of prevention and counteraction to discrimination, taking into account the best international, including european, experience, the real challenges in the field of human rights and freedoms in ukraine. one of the tasks of preventing and counteracting discrimination is to create and ensure the effective functioning of a system of prevention, counteraction, documentation, investigation, and prosecution of criminal offenses baltic journal of economic studies 129 vol. 8 no. 3, 2022 committed for reasons of intolerance (on the national human rights strategy, 2021). modern state sectoral legislation reflects the values of society. hate crime legislation shows how much society values equality and promotes such social values. this is possible if the laws are effectively implemented. if hate crime laws are not enforced, respect for the law is undermined and the rule of law is weakened. modern scholars have traditionally understood hate crimes as criminal acts motivated by prejudice against certain groups of people. such crimes consist of the following elements: first, it is an act that constitutes an offense under the current criminal law; second, it is a prejudicial attitude that guides the offender in committing the crime (matveeva, 2020, p. 52–53). the victims of such crimes tend to belong to social groups that are represented in small numbers in society, and, accordingly, the prejudice is fueled by the subject's belief in superiority over persons to whom the protected characteristic may be extended (for example, in post-soviet states the victims of such attacks often include members of national minorities, lgbt activists, persons of no fixed abode and others). thus, hate crimes are rooted in prejudice, can occur in different societies, and carry the seeds of potential conflict. o. druchek believes that hate crimes as a criminological phenomenon are characterized by increased public danger and a significant level of latency; they are implemented according to the principles of escalation and spiral development (druchek, 2021, p. 451). such crimes are singled out as a separate category because of these features. a shortcoming that the european court of human rights constantly points out to ukraine is the lack of a qualifying corpus delicti for hate crimes and a list of circumstances that aggravate responsibility, such as sexual orientation and gender identity, in the ukrainian criminal code. to bridge this gap, in april 2020 draft law № 3316 "on amendments to the criminal code of ukraine (on combating hate crimes based on sexual orientation and gender identity)" was registered with the parliament. it provided for the expansion of criminal legislation with the concepts of "sexual orientation" and "gender identity. the committee on law enforcement recom mended that the verkhovna rada of ukraine reject draft law №3316 (and alternative № 33162 and 3316-3) on the criminalization of hate crimes based on sexual orientation and gender identity due to the need for revision and appeals by the all-ukrainian council of churches (conclusion of the verkhovna rada committee, 2020; matveeva, 2020, p. 52). and on september 1, 2020, the so-called gender bill was withdrawn. in june 2020, the european commission against racism and intolerance published its conclusions on the implementation of the priority recommendations given to ukraine in 2017. the european commission against racism and intolerance specializes in human rights monitoring related to the fight against racism, discrimination on any grounds, xenophobia, antisemitism and intolerance in europe. first, ukrainian state authorities have not criminalized hate crimes based on sexual orientation and gender identity, and second, they have not cancelled court hearings for roma who seek to prove their identity in order to obtain identity documents (conclusions of the council of europe commission against racism on ukraine's failure to implement its priority recommendations). in order to improve national legislation and implement the association agreement between ukraine and the european union, the cabinet of ministers has initiated amendments to a number of codes and laws of our country, relating to combating discrimination and increasing responsibility for the spread of especially dangerous diseases. such possible changes are generally consistent with the aspirations and expectations of civil society (draft law amendment № 5488, 2021). the draft law of ukraine "on amendments to the code of administrative offences and the criminal code of ukraine on combating discrimination", submitted on may 13, 2021 by the cabinet of ministers of ukraine to the verkhovna rada of ukraine, stands out among various legislative initiatives of recent years by its comprehensive approach and focus on the systematic elimination of a number of legislative gaps. the verkhovna rada committee on the integration of ukraine into the european union considered the bill at its meeting on june 9, 2021 and adopted a conclusion, which states that bill № 5488 does not contradict international legal obligations of ukraine in the sphere of european integration (conclusion of the verkhovna rada committee of ukraine, 2021). the draft law 5488 aims to implement a number of fundamental national and international documents, in particular, such as the national human rights strategy, the association agreement between ukraine and the european union, the european atomic energy community and their member states, the strategy for a comprehensive response to human rights barriers in access to hiv and tuberculosis prevention and treatment services until 2030, the action plan for the national human rights strategy for 2021–2023. in addition, draft law № 5488 meets the goals of the global partnership to eliminate all forms of hiv-related stigma and discrimination, ukraine has officially expressed its intention to join in 2020 (the public advocated for the adoption of draft law № 5488, 2021). baltic journal of economic studies 130 vol. 8 no. 3, 2022 on june 20, 2022, the verkhovna rada ratified the "council of europe convention on preventing and combating violence against women and domestic violence," known as the "istanbul convention". the purpose of the document is to break gender stereotypes that allow violence against women. the convention promotes and protects the right of people to live free of violence and prohibits all forms of discrimination against women. the convention proposes to criminalize violence against women and provide punishment for it. a number of articles of the criminal code are currently in force in ukraine, but they are not as broadly and in detail as in the istanbul convention. the document provides for protection mechanisms for both men and women subjected to domestic violence. ratification of the istanbul convention gives experts of the council of europe an opportunity to monitor how ukraine fulfills its obligations. ukraine can demand increased accountability for rapists of our citizens abroad, as well as demand prosecution of ukrainian criminals who are hiding abroad. countries that have ratified the convention must criminalize: psychological violence; stalking; physical violence; sexual violence (including rape, which includes various types of sexual acts with a person without consent); forced marriage; female circumcision; forced abortion; and forced sterilization (law of ukraine № 2319-ix, 2022). as of july 31, 2022, the unified state register of court decisions returns 432,548 documents, of which 27,316 are from 2021 (from january 1 to december 31, 2021) when searching for the word "discrimination" (unified state register of court decisions, 2022). the provisions of national legislation concerning hate crimes refer to "racial, national and religious intolerance". the commission of a criminal offence on the grounds of racial, national, religious hatred or discord or on the grounds of gender is one of the aggravating circumstances in the commission of a criminal offence under article 67 of the criminal code of ukraine. in addition, a number of articles of the criminal code (articles 115, 121, 122, 126, 127 and 129) contain language based on motives of racial, national or religious intolerance as a qualifying attribute (criminal code of ukraine, 2001). in accordance with the provisions enshrined in international and regional legal acts, the domestic legislator provides for a separate corpus delicti. "violation of equality of citizens on the basis of their race, national or regional origin, religious beliefs, disability and other characteristics" (art. 161 of the criminal code of ukraine), which contains an open list of characteristics protected by the echr , against which crimes based on intolerance can be committed. at the same time, experts have expressed the expediency of supplementing the above list of characteristics with those that have become established in human rights practice, such as sexual orientation and gender identity, occupation, as one of the most significant characteristics that may contribute to the establishment of the corpus delicti under this article (practice of crime investigation in ukraine, 2021, p. 19–20). different countries have different methods of counting hate crimes, depending on the sources of data: victim surveys; police reports; and final court decisions. court decisions indicate a minimum level of crime. national experts emphasize that there is a tendency of annual increase in the number of cases involving article 161 of the criminal code of ukraine by pre-trial investigation bodies. thus, in the period from 01.01.2015 to 06.30.2020, 616 criminal proceedings with signs of crimes committed on the grounds of intolerance were registered in the edpr . of these 616 criminal proceedings, 374 (61%) were closed due to lack of corpus delicti (crime investigation practice in ukraine, 2021, p. 31). this ratio indicates a low efficiency of application of this article. the practice of investigating hate crimes motivated by homophobia or transphobia remains unsatisfactory. investigators ignore such motives when committing crimes, qualifying them mainly as ordinary hooliganism or other crimes without aggravating circumstances, without taking such motives into account when sentencing the offender. the difficulty in determining the corpus delicti is the reason for the low effectiveness of investigations into criminal offenses motivated by intolerance. in the practice of the echr , there are cases in which the theme of crimes based on hatred against ukraine was voiced these are fedorchenko and lozenko v. ukraine (december 20, 2012), pichkur v. ukraine (2014), burlya and others v. ukraine (february 6, 2019). belyaev and others v. ukraine ( june 9, 2019), kornilov v. ukraine (november 12, 2020), zagubnia and tabachkova v. ukraine (november 12, 2020). in the case "fedorchenko and lozenko v. ukraine", the applicants stated that they provided evidence of the existence of a racist motive for the crime and that, despite the information available to the state authorities, that several roma houses were set on fire on the same day, and to the direct racist statements of one of the accused, there is no evidence that the state authorities carried out any verification of the claims that the crime was committed on the basis of ethnic enmity. the european court of human rights considers it unacceptable that, in such circumstances, the investigation, which lasted more than eleven years, failed to take any serious steps to identify and punish the perpetrators, and accordingly the court considers that there has been a violation of article 14, in baltic journal of economic studies 131 vol. 8 no. 3, 2022 conjunction with the procedural aspect of article 2 of the convention (fedorchenko and lozenko v. ukraine, 2012). in the case "zagubnia and tabachkov v. ukraine", the european court noted that the national authorities did not provide any clear and understandable grounds for rejecting the arguments of the applicants that the attack on them should be qualified as a crime of violation of equality, provided for by article 161 of the criminal code of ukraine, or recognition of this provision as inapplicable. ukraine failed to fulfill its obligation to disclose motives for religious bias and was found guilty of violating articles 9 and 14 of the european convention (right to freedom of religion, prohibition of discrimination, taken together with article 3) (zagubnya and tabachkova v. ukraine, 2020). based on this analysis, the following main directions for lawmaking in the area of hate crimes can be identified: first, indicating hate motive as an aggravating circumstance; second, improving existing legal provisions by expanding the texts of laws to include hate motive; and third, applying special articles of criminal law that define hatred as an independent crime. 4. conclusions the formation in modern society of an understanding of equality as a value and an awareness of everyone's role in its affirmation is the most important vector in the strategic fight against discrimination. the duty of any modern state is to protect and ensure the safety of people on its territory regardless of race, nationality, ethnic origin, language, color, religion, age, disability, sexual orientation, gender identity and other characteristics. the fight against hate crimes is becoming systemic in nature and requires the efforts of both government agencies and civil society. trends in the global development of the world point to the prospect of an increase in the number of hate crimes based on such characteristics as sexual orientation, gender identity, nationality/ethnicity or race. following the recommendations of international institutions to combat hate crimes, today 's progressive states criminalize such crimes by indicating the broadest possible list of characteristics that can constitute grounds for discrimination. according to the authors, the list of circumstances that aggravate punishment for committing a crime against a person or group of persons based on intolerance should be clearly established at the national legislative level. this approach will avoid ambiguous interpretations of the wording contained in the articles of the criminal code of ukraine providing for punishment for crimes committed on the grounds of intolerance. it is the motive that is of key importance for establishing the corpus delicti of a crime and the correct qualification of hate crimes. an effective response to hate crimes is necessary to ensure that such crimes do not become a serious public threat. this problem can be solved through systematic action aimed at educating society legally and fostering a culture of tolerance and respect for all people. modern states therefore commit themselves to ensuring that appropriate national legislation, statistics, thorough investigations and prosecutions of hate crimes, and training and awareness raising activities are carried out in accordance with the basic principles of international and regional law. references: 184 pravoporushennia i 4 zasudzhenykh: shcho stoit za statystykoiu zlochyniv nenavysti v ukraini? ukrainska helsinska spilka z prav liudyny, 2020 [184 offences and 4 convicted: what is behind the hate crime statistics in ukraine? ukrainian helsinki human rights union, 2020]. available at: https://helsinki.org.ua/articles/184-pravoporushennia-i-4-zasudzhenykh-shcho-stoit-za-statystykoiu-zlochynivnenavysti-v-ukraini/ vysnovky komisii proty rasyzmu rady yevropy shchodo nevykonannia ukrainoiu yii priorytetnykh rekomendatsii. ofis rady yevropy v ukraini. strasburh, 02 chervnia 2020 [conclusions of the council of europe commission against racism on ukraine's failure to implement its priority recommendations. office of the council of europe in ukraine. strasbourg, 02 june 2020]. available at: https://www.coe.int/uk/web/kyiv/-/council-ofeurope-s-anti-racism-commission-says-ukraine-has-not-implemented-its-priority-recommendations vysnovok komitetu verkhovnoi rady ukrainy z pytan intehratsii ukrainy do yevropeiskoho soiuzu shchodo proektu zakonu ukrainy № 5488 vid 09 chervnia 2021 roku [conclusion of the verkhovna rada committee on ukraine's integration into the european union on draft law of ukraine № 5488 of june 09, 2021]. available at: http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=71891 vysnovok komitetu verkhovnoi rady ukrainy z pytan pravookhoronnoi diialnosti shchodo proektu zakonu ukrainy № 3316 vid 09.04.2020 r. [conclusion of the verkhovna rada committee on law enforcement on the draft law of ukraine № 3316 of 09.04.2020]. hrynchak, a. a. (2018) protydiia rasyzmu, ksenofobii ta ekstremizmu: navchalnyi posibnyk [countering racism, xenophobia and extremism: a training manual]. kharkiv. hromadskist vystupyla za ukhvalennia zakonoproektu № 5488, yakyi poklykanyi protydiiaty dyskryminatsii [the public called for the adoption of the draft law № 5488, which aims to counteract discrimination]. baltic journal of economic studies 132 vol. 8 no. 3, 2022 tsentr prav liudyny zmina, 2021. available at: https://zmina.ua/statements/gromadskist-vystupyla za-uhvalennya-zakonoproyektu-%e2%84%965488-yakyj-poklykanyj-protydiyaty-dyskryminacziyi/ druchek, o. v. (2021) protydiia zlochynam, zdiisnenym na grunti nenavysti: poniattia, zmist, oznaky [combating hate crimes: concept, content, signs]. yurydychnyi naukovyi elektronnyi zhurnal, vol. 4, pp. 450–453. dromina-volok, n. v. 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[zagubnya and tabachkova v. ukraine: echr judgment № 974_f74, dated 12.11.2020]. available at: https://zakon.rada.gov.ua/ laws/show/974_f74#text katehoryzatsiia ta rozsliduvannia zlochyniv na grunti nenavysti v ukraini. praktychnyi posibnyk. biuro z demokratychnykh instytutiv i prav liudyny obsie [categorization and investigation of hate crimes in ukraine. a practical guide. osce office for democratic institutions and human rights. warsaw, odihr/osce 2019]. varshava, bdipl/obsie 2019. 74 s. konventsiia pro zakhyst prav liudyny i osnovopolozhnykh svobod vid 11 lystopada 1950 r [convention for the protection of human rights and fundamental freedoms of 11 november 1950]. available at: http://zakon2.rada.gov.ua/laws/show/995_004 konventsiia rady yevropy pro zapobihannia nasylstvu stosovno zhinok i domashnomu nasylstvu ta borotbu iz tsymy yavyshchamy (stambulska konventsiia): zakon ukrainy № 2319-ix vid 20.06.2022 [council of europe convention on preventing and combating violence against women and domestic violence (istanbul convention): law of ukraine № 2319-ix of 20.06.2022]. available at: https://zakon.rada.gov.ua/laws/show/994_001-11#text konstytutsiia ukrainy: pryiniata na v sesii verkhovnoi rady ukrainy 28 chervnia 1996 r. vidomosti verkhovnoi rady ukrainy. 1996. № 30. st. 141 [constitution of ukraine: adopted at the v session of the verkhovna rada of ukraine on 28 june 1996]. available at: https://zakon.rada.gov.ua/laws/show/254%d0%ba/ 96-%d0%b2%d1%80#text kryminalnyi kodeks ukrainy vid 5. 04. 2001 roku № 2341-iii [criminal code of ukraine of 05.04.2001 № 2341-iii]. available at: https://zakon.rada.gov.ua/laws/show/2341-14#text matvieieva, l. (2020) mizhnarodni ta yevropeiski standarty zakhystu prav vrazlyvykh hrup naselennia [international and european standards for the protection of the rights of vulnerable groups]. visnyk penitentsiarnoi asotsiatsii ukrainy, vol. 3(13), pp. 48–59. mizhnarodna konventsiia pro likvidatsiiu vsikh form rasovoi dyskryminatsii: redaktsiia vid 04.02.1994, № 995_105 [international convention on the elimination of all forms of racial discrimination: version of 04.02.1994, no. 995_105]. available at: https://zakon.rada.gov.ua/laws/show/995_105#text mizhnarodnyi pakt pro hromadianski i politychni prava vid 16 hrudnia 1966 roku [international covenant on civil and political rights of 16 december 1966]. available at: https://zakon.rada.gov.ua/laws/show/995_043#text nachova ta inshi proty bolharii (nachova and others v. bulgaria): rishennia yespl №№ 43577/98, 43579/98 vid 06.07.2005 r. [nachova and others v. bulgaria: echr judgments №№ 43577/98, 43579/98 of 06.07.2005]. available at: https://www.srji.org/resources/search/21/ pankevych, o. (2014). zaborona dyskryminatsii: deiaki zahalnoteoretychni y filosofsko-pravovi aspekty interpretatsii (za materialamy praktyky yevropeiskoho sudu z prav liudyny) [prohibition of discrimination: some general theoretical and philosophical and legal aspects of interpretation (based on the case law of the european court of human rights)]. visnyk natsionalnoi akademii pravovykh nauk ukrainy, vol. 3(78), pp. 20–31. praktyka rozsliduvannia v ukraini zlochyniv, vchynenykh z motyviv neterpymosti. zvit za rezultatamy doslidzhennia [practice of investigation of crimes committed with intolerance motives in ukraine]. kyiv, 2021. available at: ttps://drive.google.com/file/d/1gzzu2ftbzt2lahrl9nnnnc7k91qgtf u2/view pro diiu mizhnarodnykh dohovoriv na terytorii ukrainy: zakon ukrainy vid 10 hrudnia 1991 roku № 1953-xii vtratyv chynnist na pidstavi zakonu № 1906-iv (1906-15 ) vid 29.06.2004 [on the effect of international treaties on the territory of ukraine: the law of ukraine № 1953-xii of december 10, 1991 expired on the basis of the law № 1906-iv (1906-15) of 29.06.2004]. available at: https://zakon.rada.gov.ua/laws/show/1953-12#text pro mizhnarodni dohovory ukrainy: zakon ukrainy vid 29 chervnia 2004 roku № 1906-iv [on international treaties of ukraine: law of ukraine of 29 june 2004 № 1906-iv]. available at: https://zakon.rada.gov.ua/laws/ show/1906-15#text pro natsionalnu stratehiiu u sferi prav liudyny: ukaz prezydenta ukrainy vid 24 bereznia 2021 roku № 119/2021 [on the national human rights strategy: decree of the president of ukraine of 24 march 2021 no. 119/2021]. available at: https://zakon.rada.gov.ua/laws/show/119/2021#text proekt zakonu pro vnesennia zmin do kodeksu ukrainy pro administratyvni pravoporushennia ta kryminalnoho kodeksu ukrainy shchodo borotby z proiavamy dyskryminatsii vid 13.05.2021, № 5488 baltic journal of economic studies 133 vol. 8 no. 3, 2022 [draft law on amendments to the code of ukraine on administrative offenses and the criminal code of ukraine on combating discrimination of 13.05.2021, № 5488]. available at: http://w1.c1.rada.gov.ua/pls/ zweb2/webproc4_1?pf3511=71891 proekt zakonu pro vnesennia zmin do kryminalnoho kodeksu ukrainy (shchodo protydii zlochynam na grunti nenavysti za oznakamy seksualnoi oriientatsii ta hendernoi identychnosti) vid 09.04.2020, № 3316 [draft law on amendments to the criminal code of ukraine (on combating hate crimes based on sexual orientation and gender identity) of 09.04.2020, № 3316]. available at: http://w1.c1.rada.gov.ua/pls/zweb2/ webproc4_1?pf3511=68552 protokol № 12 do konventsii pro zakhyst prav liudyny i osnovopolozhnykh svobod (ets n 177) № 994_537 ratyfikatsiia vid 09.02.2006 [protocol no. 12 to the convention for the protection of human rights and fundamental freedoms (ets n 177) № 994_537 ratification of 09.02.2006]. available at: https://zakon.rada.gov.ua/laws/show/994_537#text rabinovych, s., & pankevych, o. (2017). test na nedyskryminatsiiu v praktytsi yevropeiskoho sudu z prav liudyny: otsiniuvalni aspekty [non-discrimination test in the case law of the european court of human rights: evaluative aspects]. pravo ukrainy, vol. 4, pp. 97–107. rekomendatsiia nr (97) 20 komitetu ministriv rady yevropy derzhavam-uchasnytsiam z pytan "rozpaliuvannia nenavysti" vid 30.10.1997 № 994_093 [recommendation nr (97) 20 of the committee of ministers of the council of europe to member states on "incitement to hatred" of 30.10.1997 no. 994_093]. available at: https://zakon.rada.gov.ua/laws/show/994_093#text fedorchenko ta lozenko proty ukrainy: rishennia yespl № 387/03 vid 20.09.2012 r. [fedorchenko and lozenko v. ukraine: echr judgment № 387/03 of 20.09.2012]. available at: https://zakon.rada.gov.ua/laws/ show/974_933#text hate crime statistics. available at: https://ucr.fbi.gov/hate-crime/2010/resources/hate-crime-2010-about hate-crime received on: 2th of august, 2022 accepted on: 19th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 277 vol. 7 no. 5, 2021 corresponding author: 1 university of the state fiscal service of ukraine, ukraine. e-mail: topchii8233@edu-knu.com orcid: https://orcid.org/0000-0002-0904-2018 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: zadereiko@acu-edu.cc orcid: https://orcid.org/0000-0003-2117-0917 3 university of the state fiscal service of ukraine, ukraine. e-mail: didkivska@edu.cn.ua orcid: https://orcid.org/0000-0001-8617-0702 4 university of the state fiscal service of ukraine, ukraine. e-mail: bodunova@sci-univ.com orcid: https://orcid.org/0000-0002-6205-3904 5 university of the state fiscal service of ukraine, ukraine. e-mail: shevchenko@neu.com.de orcid: https://orcid.org/0000-0003-1181-2680 doi: https://doi.org/10.30525/2256-0742/2021-7-5-277-286 international anti-corruption standards vasyl topchii1, svitlana zadereiko2, galyna didkivska3, olesia bodunova4, dmytro shevchenko5 abstract. the article studies the issues of combating corruption in the aspect of its incorporation into international standards. corruption has been identified as a threat to democracy and economic development in many states. it arises from the process of the exchange of power for material assets, that is, when a competent person performs or refrains from performing certain actions for remuneration, and due to the weakness or weakness of state, political and public institutions that control and limit these processes. it was noted that now the world community is seriously thinking about those negative consequences (threat of statehood, undermining trust in the authorities, causing harm to the individual, society, the functioning of organized crime, a drop in the level of professionalism of employees, a decrease in the level of legal awareness of spirituality) caused by corruption, and realized that while measures taken by individual states to combat corruption could have short-term effects, all states needed to act as one in order to achieve serious positive results. it is noted that the international community, in an effort to develop effective measures to prevent and eradicate corruption, has adopted a number of international treaties, as well as recommendations that are not binding, but are used by states as effective mechanisms for monitoring corruption. it was concluded that in recent years much has been done to strengthen anti-corruption legislation in ukraine and its compliance with international anti-corruption standards. currently, in the current political environment, knowledge and study of international anti-corruption standards is becoming increasingly relevant for both ordinary citizens and law enforcement. key words: corruption, countering, international standards, anti-corruption, international legislation. jel classification: k33, k42, d73 1. introduction in the socio-political and academic literature on international political issues, politicians and scholars are increasingly pointing out that government corruption not only has an international dimension, but is also a serious problem of global politics. the risk of widespread corruption is not objectionable. corruption is inherent, albeit to varying degrees, in all countries, regardless of their political structure and economic level of development. the particular urgency of the topic lies in the acuteness of the existing problem, its enormous scale, the imprint of corruption in all spheres of society and at all levels of government. the widespread discussion of the problem of corruption and the public resonance caused by high-profile corruption scandals confirm the urgency of its solution, and thus the scientific awareness of all aspects of this problem. this is necessary to modernize the state economy, improve the power and quality of public administration. countering and preventing corruption is one of the most important tasks not only for each state, but also for the entire global community. it is generally recognized that the fight against corruption affects baltic journal of economic studies 278 vol. 7 no. 5, 2021 the interests of almost all states. in today 's globalized society, the fight against corruption generates a set of problems that affect all areas of society. without denying the increasing use of corruption for the purpose of exercising power, it can be noted that the need for international efforts to successfully address these problems is recognized both by scholars and specialists in various fields, as well as by public and state figures in individual countries. to improve the effectiveness of the fight against corruption in government, it is necessary to develop and implement a consistent anti-corruption policy that will protect society from the negative impact of corruption and protect the rights of man and citizen. in the context of globalization, national anti corruption measures are insufficient. it is no coinci dence that un secretary-general ban ki-moon notes that, for example, billions of dollars are stolen or wasted each year in developing countries – due to bribery and other abuses... the global financial crisis underscores the need for greater regulation. to this end, it is necessary to work together to fight corruption more actively. the global community, concerned about the growing number of corruption crimes around the world, has developed a number of fundamental international instruments to counter and fight corruption. among them stands out the fundamental "un convention against corruption" (un, 2003). the need for international organizations and governments to engage and cooperate closely with society in the fight against corruption was manifested in the establishment in 2006 of the un convention against corruption coalition (uncac), an international network of civil society organizations in support of the uncac. from then on, both state and non-state actors began to influence the formation of a single global anti-corruption standard. the empirical basis of the scientific article was the provisions of legal acts of ukraine, the provisions of international law, in particular relating to the issue of combating and preventing corruption. during the work on the article was actively used scientific data from modern jurisprudence, science of international relations, world politics and economics. the theoretical basis of this article served as modern scientific developments of domestic and foreign scientists on international anti-corruption standards, directions of improvement of legislation on this issue and law enforcement practice. during the study were used general scientific methods of analysis and synthesis, historical and systematic approach. political analysis and descriptive and comparative analysis were used extensively. the case-study method was used to assess the role of civil society organizations in international cooperation against corruption, as well as to study the experience of individual states in the fight against corruption. 2. the problem of corruption within the legislative framework among the challenges facing the global community, the issue of combating corruption today remains particularly problematic. as it acquires new traits, corruption is penetrating all spheres of life, thereby damaging the state. the world bank estimates that one trillion dollars are wasted annually around the world. even more dangerous is the close connection between corruption and organized crime. these phenomena, being symbiotic, complement each other, thus increasing the sustainability of their activities. the global community, concerned about the trends of corruption, is trying in every way to counter this phenomenon. in this regard, discussions are taking place in global forums and international standards and mechanisms are being adopted to combat corruption. however, in most cases, the fight against corruption is conducted locally, at the national level, since the process of integration of states on this issue is slow. in addition, among the adopted international instruments, declarative acts outnumber generally binding documents. problems with the harmonization of legislation on liability for corruption are also a serious obstacle. corruption is a threat to democracy and economic development in many states. it arises in the process of exchanging power for material goods, that is, when a competent person performs or refrains from performing certain acts for reward, and because of the weakness or infirmity of the state, political and social institutions that control and limit these processes. in today 's world, the issue of combating corruption is very relevant. all states are concerned about this social phenomenon, which serves as a springboard for various types of crime to flourish, which in turn can destabilize society, create many "shadow" economies, and disrupt the normal functioning of state bodies. as a result, it can threaten the existence of the social institution of the state, which is the impetus for the emergence of pockets of anarchy and widespread violations of human rights. the legal definition of corruption dates back to antiquity. for example, in roman law, "corrumpere" meant any unlawful act committed against a judge. machiavelli (1990) believed that corruption was the exploitation of public opportunities for personal gain (abashidze, 2007). in his work the prince, he noted: "there is one unmistakable way to find out what an assistant is worth. if he cares more about himself than about the state, and in any way seeks his benefit, he will never be a good minister to the state, and he will never be able to rely on him" (machiavelli, 1990). thus, the preamble to the un convention against corruption (united nations, 2003) notes that "corruption is no longer a local problem, but baltic journal of economic studies 279 vol. 7 no. 5, 2021 a transnational phenomenon that affects all societies and economies, making international cooperation in preventing and combating corruption extremely important..." in the international legal sense, "corruption is the abuse of public power for personal gain" (united nations, 2003). the world community is now thinking seriously about the negative consequences of corruption (threat to statehood, undermining trust in government, harming individuals and society, the functioning of organized crime, a lower level of professionalism among employees, a lower level of legal consciousness and spirituality) and has realized that while measures taken by individual states to combat corruption may have a short-term effect, all states must act as one unit to achieve serious positive results. corruption exists in every society. what is common to all states is that corruption is condemned in every culture and that most countries have adopted anti-corruption legislation. in an effort to develop effective measures to prevent and eradicate corruption, the international community has adopted a number of international instruments, as well as recommendations that are not binding, but are used by states as effective mecha nisms to control corruption. recently, however, the international practice of bribing foreign officials has become widespread. in some countries, it was even possible to get a deduction for a bribe from a company 's tax liability (council of europe, 2015), and not surprisingly, international corporations were paying bribes around the world to secure business. a series of related juicy corruption scandals have changed the situation. for example, during investigations in the mid-seventies, more than 400 u.s. companies admitted that they also bribed foreign government officials, politicians, and political lotions with "gratuities" totaling more than $300 million (council of europe, 2015). in this context, the u.s. congress passed the foreign corrupt practices act (1977), which for the first time made bribery of a foreign official a crime. the adoption of this law prompted greater cooperation among states in discussing corruption problems and the need to develop international standards to combat corruption, both globally and regionally. for comprehensive study of such phenomenon as corruption, except acts it is necessary to address the theoretical bases stated in works of scientists. according to professor dolgova (1997), corruption represents "the social phenomenon which is characterized by bribery – bribability of the public or other servants and on this basis mercenary use by them in personal or in the factional, corporate interests of official office powers, related the authority and opportunities." famous scientist-lawyer, professor kuznetsova (gurov et al., 1994) defines corruption as "socially dangerous phenomenon which is expressed in bribery of employees of government and non-state structures". kirpichnikov (1997) gives the following definition to corruption: "corruption is a corrosion of the power. as rust corrodes metal, thus corruption destroys government and corrodes the moral background of society ". volzhenkin (1998) gives the most developed definition to corruption. according to him, corruption is the social phenomenon consisting in decomposition of the power when the public (municipal) servants and other persons authorized for performance of the state functions use the official position, the status and authority of a post on the mercenary purposes for personal enrichment or in group interests. the political scientist nye (1967), defines corruption as "behavior which doesn't correspond to formal duties of a public role, owing to the private relations (personal, family) used for enrichment or increase in the social status". it cannot be said that corruption is always illegal, because it can exist within the legal framework. thus, corruption now includes not only illicit gain and embezzlement, but also other options that are legal in many countries. for example, the concept of "lobbyism," which exists in the united states and consists of sponsoring politicians, public organizations and the press to perform actions that benefit a certain group of people. according to the philosophical encyclopedia, "lobbyism" (from the english lobby – lobby, corridor, foyer) is a rendering pressure upon public authorities from social and political groups, the commercial organizations or individuals for the purpose of adoption of acts favorable by him, administrative or political decisions" (stiopin, 2000). at the same time a legislative basis for this activity is the first amendment to the constitution of the usa (1787) affirming the right for freedom of speech and a possibility of the appeal to the congress. according to official figures, annually in washington as lobbyists is registered from about 10,000 people (lobby it, 2021). although corruption is perceived negatively from the legal point of view, from the economic point of view many authors justify the manifestation of corruption. theobald (1990), derived such benefits of corruption: – accumulation of the capital; – enterprise; – penetration of business approach on bureaucratic wednesday; – influence of market forces. timofeev (2000) considers that "in many cases the corruption will be considered as the phenomenon positive, reasonable as manifestation of common sense in economic behavior of the person. it turns out that quite so it becomes visible if to address a historical retrospective. time washes away a soot baltic journal of economic studies 280 vol. 7 no. 5, 2021 of legal prejudices and ideological myths from the historical phenomena and allows to make out deep motive of public conduct of the person – his rational economic interest which explains, and sometimes and justifies crime of the legal law". levin and satarov (1997) see corruption as a "lubricant" that can compensate for weaknesses in public administration. while these conclusions may seem fair at first glance, they are incorrect because they do not take into account the negative effects of corruption. based on the above, it is reasonable to say that corruption is a form of dishonest as well as unethical behavior of a person who is entrusted with some rights to represent the government at any given level, in order to exercise the functions of government aimed at gaining personal benefit. 3. global corruption indicators the need to combat corruption is recognized by government institutions, businesses, and civil society organizations around the world. the specifics of this problem, the theoretical and practical difficulty of combating it lies in the lack of a single criterion for assessing corruption and generally accepted methods of measuring its level in a particular state. also, for obvious reasons, the level of corruption in a country cannot be objectively assessed by collecting only empirical data. in order to improve the effectiveness of anti-corruption measures at the national and, especially, international levels, it is necessary to be able to distinguish corruption and understand the extent of its impact on the state and society. but how does one know which countries have excessively high levels of corruption, and where corruption is extremely rare? the most commonly used measure of a state's level of corruption is the corruption perceptions index, introduced by transparency international. first launched in 1995 as a unique and innovative project, the corruption perceptions index quickly attracted major media attention, which in turn increased public interest in the problem and even led states to compete in trying to improve their performance. the index was based on a ten-point scale of assessments by independent international finance and human rights experts (since 2012, it has been based on a hundred-point scale). the score is higher – the level of corruption is lower. but this approach has several drawbacks: first, there are notoriously no absolutely independent experts – this affects the objectivity of assessments; and second, due to the growing popularity of transparency international, the corruption perception index is increasingly influenced by perceptions. the situation described in works "corruption and the government: causes, consequences and reforms", " when everyone considers that all wallowed in corruption, unless the saint will refrain from bribery " (rose-ackerman, 1999). public opinion becomes tolerant of corruption, initially at the domestic level, and then to political corruption. third, national perceptions of corruption should not be ignored; the same action may be considered a tradition or a norm of behavior in one state and a corruption offense in another. fourth, using this ranking, it is sometimes difficult to track the dynamics of the fight against corruption around the world; states both leading and lagging in this ranking rarely change their positions fundamentally. it is also no longer a question of any precise quantitative measurements of corrupt practices. in 1999, ti compiled the bribe payers index, which is a ranking of the most economically developed countries according to the prevalence of corrupt practices in the activities of companies in these countries. thus, the citizens of any state have the opportunity to get acquainted with the countries involved in the "export of corruption". on the one hand, this indicator may partially reflect the level of corruption in the state, loyalty to corrupt officials or the desire to fight them by the business of a particular state; on the other hand, international business has its own specifics, data on corrupt deals abroad may distort the real picture of the level of corruption in the state. since 2003, ti has been conducting a study called the global corruption barometer, which is a sociological survey of citizens from various countries about their experiences with corrupt acts. the objectives of this project are to look at corruption by sector; to identify the most corrupt government agencies; to assess the effectiveness of government anti-corruption efforts, etc. its undoubted advantages are a broad empirical base of data on manifestations of corruption; the possibility of analyzing government efforts to combat corruption; a study of these phenomena in dynamics. however, the barometer data does not always correspond to the corruption perceptions index, and the questions of the sociological survey change the compilers in an attempt to achieve maximum objectivity in assessing the level of corruption from year to year. in addition to corruption studies conducted by transparency international, there are many other indicators of corruption in a state. the research "quality of public administration" created in 1996 by experts of the world bank kauffman, kraayem and mastruzzi is represented very productive and important for the solution of objectives of this research. "the quality of public administration" is the rating of efficiency of public administration consisting of six indicators: accounting of opinion of the population and accountability of public baltic journal of economic studies 281 vol. 7 no. 5, 2021 authorities, political stability and lack of violence, overall performance of the government, quality of the legislation, rule of law, corruption control. it is noteworthy that in most countries with low indicators of corruption control, other indicators of the quality of public administration are also low. researchers kaufmann, kraay and zoydo-lobaton conducted a series of the international surveys (with participation of the world bank, international country risk guide, etc.). participants of polls were divided into two groups: businessmen and ordinary citizens of the country, and group of experts. advantages of the kkz index is the broad coverage of the countries in which surveys, and a variety of the sources used at them were conducted. one of shortcomings of this method – too wide range of questions and also their heterogeneity at various polls. the most various indicators of corruption (indicators by which it is possible to determine corruption level in the state) are considered in article "political institutes and corruption: role of the unitary state and territorial device and parliamentarism" (gerring et al., 2004): gdp per capita; restrictions for capital flow; negative impact on investments and so forth. young researchers recognize that the main problem in measuring the level of corruption in a state or region is the large number of indicators by which it is measured. undoubtedly, in order to increase the effectiveness of international cooperation in combating corruption in government, it is necessary to establish more accurate criteria for determining the level of corruption than those that exist today. it is to this end that a number of the following activities are proposed: 1) to analyze the causes and distribution of corruption in the concrete country, to track a historical way of this phenomenon in specific conditions; 2) to define what is the maximum allowed level of corruption and whether everywhere it will be identical; 3) to study the available national successful experience of fight against corruption, also to consider failures of the states on this way; 4) to investigate the international documents directed to fight against corruption, to estimate their efficiency at the moment; 5) to compare the 3 and 4 points to consider the possibility of application of experience of the country’s most of which of all succeeded in fight against corruption and creation of the international standards which can be implemented to the countries with the high level of corruption (considering their specifics, to carry out so-called "benchmarking" of anticorruption); 6) to create the anti-corruption programs combining "carrot and stick" – from democratization of all spheres of life, economic and political freedoms, creation of an active civic stand at the population and, as a result, formation of civil society, conducting scheduled and explanatory maintenance about harm and inadmissibility of corruption before strengthening of selection of shots at a position of public service, inevitability of punishment for an assistance; 7) to increase quality of anti-corruption examination of normative legal acts, to introduce the system of assessment of the regulating influence of bills at the state and local levels of public administration. corruption measurement methods, important for this research, are given in work of "corruption around the world" (tanzi, 1998). the hypothesis that there are no direct methods of measuring corruption is interesting. "there are no direct ways to measure corruption yet, but there are indirect ways to get information about its prevalence in a state or a public authority " (tanzi, 1998). this information, according to the famous economist tanzi (1998), can be found: 1) in the reports on corruption available in the published sources, including newspapers. the internet becomes more and more valuable source; 2) concerning cases of the corruption crimes investigated at such often state institutes which face corruption as tax administration, customs, police and some other; 3) in studies from the survey. 4. international experience in combating corruption a number of studies that cite the monetary amount of a bribe as an indicator of corruption cannot be fully considered as such, since corruption is not only manifested in bribes (appointing relatives to positions, etc.). moreover, it is not always possible to accurately measure bribes in monetary terms (vacation pay; payment for medical treatment abroad, etc.). in the work "corruption – the world's big c: cases, causes, consequences, cures" (senior, 2006) are given several cases, to give definition which as "corruption crime" or "lack of structure of corruption crime" is quite difficult. the author tries to understand and explain why one is corrupt and the other is not. but here, too, the answers are not obvious. from this it can be concluded that the same event can be viewed differently in different countries: in one country it will be an act of corruption, in another – not. from this it can be concluded that the perception of corruption is conditional, and its assessment by citizens is often subjective. an interesting way to measure the level of corruption in the state could be an assessment of the effectiveness of a particular public service, for example, the registration of legal entities. this assessment could include the time spent waiting for the provision of a service, its cost, as well as the availability of options baltic journal of economic studies 282 vol. 7 no. 5, 2021 for obtaining a service through corrupt practices, their number and cost. of course, it is impossible to determine the level of corruption in a country by one criterion, but the number of indicators could be reasonably increased with a careful development of the evaluation methodology. the paper considers that the most appropriate is the conventional division of all states into: 1) those which fight against corruption and recognize her harm for economic, political and social development of the country; 2) those who do not consider corruption in government to be a serious problem. it is possible to distinguish between successful and unsuccessful anti-corruption states, or not at all. it is difficult to distinguish between "successful" and "unsuccessful" states in the fight against corruption. the key question here is what counts as success? the answer is not straightforward. perhaps "successful" in the fight against corruption can be considered that state, where the predominance of personal interest over public interest of officials in the exercise of power is illegal, it is systematically fought, all conditions for the fight are created, the concrete results of anti-corruption fight are visible. it is obvious that complete eradication of corruption in the state is impossible. therefore, it is a certain abstract ideal – a state with an established system of counteraction and fight against corruption, the transparency of which is confirmed by public control and active international cooperation in this direction; and officials have no incentives to engage in corrupt acts. closeness to it (which in this case is a strong factor for the successful fight against corruption) can be achieved when the fight is conducted in a comprehensive way, on all fronts. this requires a political will against corruption in the state; developed anti-corruption legislation, its practical application; participation in international cooperation in the fight against corruption, accession to major international anti-corruption documents; a properly built system of selection of civil servants, the presence of incentives for them not to engage in corrupt practices; the development of civil society institutions, their participation in monitoring the activities of the authorities; the openness of the government, its accountability; the turnover of power, the democratic nature of the electoral system and some other indicators. each state has a relation to the fight against corruption, independently adopting measures, which it is guided by in this fight. in this paper we propose to consider the most effective anti-corruption international standards (programs), the borrowing of which would be useful both for the international community as a whole, and for ukraine in particular. analysis of the fight against corruption in states that have not yet achieved great success in this area is also important for solving the tasks of our study: their experience can warn other states and the entire international community against committing the mistakes already made in the anti-corruption fight. the lessons of international experience in combating corruption in the state are especially relevant for our state, which is in search of an effective anti-corruption policy. considering the corruption perceptions index for previous years, the top twenty least corrupt countries are denmark, new zealand, finland, sweden, norway, singapore, switzerland, the netherlands, australia, canada, luxembourg, germany, iceland, great britain, barbados, while virtually all of the above countries have been successfully fighting corruption and have been high in the rankings for at least the last decade. undoubtedly, all states that successfully fight corruption consider this problem as a threat to their security. as a rule, a balanced anti-corruption policy and specialized institutions are created to counteract this pernicious phenomenon. it is possible to distinguish three models of combating corruption in states that have been successful in combating corruption. the first model is represented in the countries of northern and western europe (it is especially well traced in the scandinavian countries). the state institutions of norway, sweden, finland, and denmark are among the best in the world, often combining the principles of a social and constitutional state. free competition in the economy, a developed civil society, and the high role of the media in combating corruption crimes are the cornerstones of their anti-corruption policies. a characteristic feature of the "northern european" model of anti-corruption policy can be considered the active role of public authorities in the redistribution of funds in the state with their maximum possible transparency and accountability to the public. one of the reasons why any corruption crime covered in the media immediately becomes a national scandal is undoubtedly the moral approach established in the societies of these states. due to the high level of trust between people, any corruption offense is perceived sharply negatively, as a manifes tation of immoral behavior. the population trusts the state, tax evasion is not considered acceptable in scandinavian countries, and in addition, every citizen can review the documents received by public institutions. for example, in denmark there are about 20 acts which to a degree concern fight against corruption. parliament of denmark, public activists, members of the media closely interact and carry out joint monitoring of potential acts of corruption. in denmark the state gives social guarantees to citizens and carries out them. citizens trust the government baltic journal of economic studies 283 vol. 7 no. 5, 2021 and are ready to pay high taxes, knowing that the quality of public services will be by all means high. an important point is the developed corporate social responsibility of the danish business. the reputation of the company is usually more important for her heads, than short-term success from participation in the corruption transaction. the lack of the separate act on fight against corruption doesn't prevent finland to counteract this destructive successfully phenomena. a number of the conditions which are consciously realized by the authorities of finland allows to constrain corruption in the limits which aren't posing threat to social development: – existence of the developed institutes of civil society, including media; – aspiration to minimization of intervention of the state in the economic sector; – transparency and publicity of decision-making process by officials, openness and availability of the majority standard and bylaws; – political, financial and personnel independence of a justice system of executive power, the valid guarantee of protection of the persons who rendered assistance to competent authorities in fight against corruption; and also other measures directed to bureaucratization reduction, improvement of quality of public administration, creation of a control system for activity of officials at the worthy level of the salary of officials etc. especially it would be desirable to note work with civil society and creation of the atmospheres of rejection of corruption in all forms society and negative attitude to her among public servants. other model of anti-corruption fight is presented in the countries of southeast asia, first of all, in singapore, hong kong, taiwan, malaysia. also it is possible to carry south korea and japan to this model. its specifics consist in the verified personnel policy, the greatest possible leaving of the state regulation of economy, creation of special anti-corruption bodies, equality of all before the law, severe punishment for corruption crimes. singapore's economic success has also been due to the effective fight against corruption and the political will of its leaders. it has established a special anti-corruption body, the corruption investigation bureau, which is fully independent and takes action against corruption and combating it. reference can be made to singapore's leading anticorruption principles: 1) public servants are paid according to a formula tied to the average salary of those successfully employed in the private sector; 2) supervised annual reporting by public officials of their assets, assets and debts; the prosecutor has the right to inspect any bank, share and current accounts of those suspected of violating the prevention of corruption act; 3) greater severity in corruption cases against high-ranking officials to maintain the moral authority of incorruptible political leaders; 4) elimination of excessive administrative barriers to economic development. thus, it can be noted that anti-corruption policy is formed on the creation of a system of state control, in which officials have almost no need to commit inducements of corruption crimes. at the same time, the principle of public control over the actions of officials, as well as the principle of equality before the law and the inevitability of punishment for the crime committed in singapore. the republic of korea attaches great importance to involving citizens in the fight against corruption. in 1999, the open program was established in seoul. it is an online system for citizens to report corruption. any report submitted must be investigated. citizens are given security guarantees when they participate in the fight against corruption. communication with officials is kept to a minimum, and the progress of the application is displayed in the citizen's personal internet cabinet. the creation of the program has significantly increased the effectiveness of the fight against corruption in the republic of korea, increased public confidence in the seoul administration, and made the administration's activities open and public. in japan, the core of anti-corruption policy is a welldeveloped personnel policy and a strict system for regulating the activities of officials. at the level of high salaries, the behavior of officials is regulated by the law "national public service ethics" (national personnel authority of japan, 1999). the dual system of incentives (material and moral) with harsh penalties for non-compliance with laws and regulations demonstrates the effectiveness of japan's fight against government corruption. the "american model" of anti-corruption efforts (the united states, canada, and partly australia) is characterized by a combination of strict, restrictive laws and a system of incentives and rewards that discourage corruption. the u.s. anti-corruption legislation is systemic in nature. it consists of legal acts regulating lobbying, banking, stock exchange and other activities. although this is not a guarantee that corruption has been completely eliminated, the level of corruption in the us is much lower than in other countries. the fight against corruption is made easier by the fact that in the u.s. there are virtually no immunities for officials. any official, including the president, congressmen and senators, may be sued, albeit in a special manner, upon release from office. it is also worth noting that the united states of america attempts to prevent acts of corruption in the exercise of power by preventing corruption based on the operation of standards of honor codes for public officials. in general, i would like to emphasize that all countries that successfully fight corruption use the widest range of means and methods, including always baltic journal of economic studies 284 vol. 7 no. 5, 2021 close cooperation with civil society structures, based on a system of law thinking, openness and accountability of the authorities. nevertheless, the examples of anti-corruption strategies in the united states, europe and east asia show that no state has eradicated corruption completely. 5. legal measures to combat corruption today, a number of international documents on fighting corruption have been adopted within the framework of various international organizations, which emphasizes the importance of the problem and the fact that the fight against corruption is a problem of all states in the world. these are such international contracts as: 1) the inter-american anticorruption convention adopted by the organization of american states (1996) came into force in 1997; 2) the convention against corruption involving public officials of the european communities or officials of member states of the european union (council of the european union, 1997); 3) the convention on combating bribery of foreign public officials in international business transactions (organization for economic cooperation and development, 1997), came into force in 1999; 4) the convention of the council of europe (1999b) on criminal liability for corruption, came into force of 2002; 5) the convention of the council of europe (1999a) on civil responsibility for corruption, came into force in 2003; 6) the convention of the united nations (2003) against corruption, came into force in 2005; 7) the convention of the african union (2003) on preventing and combating corruption, came into force in 2006; 8) the anti-corruption convention of league of arab states (2010), didn't come into force yet. among the above-mentioned international treaties on combating corruption is the un convention against corruption (2003), a universal international treaty uniting 172 states. the day of opening for signature of the convention – december 9 – since 2004 is celebrated as international anti-corruption day. this convention defines the criminalization of acts of corruption, provides for measures to prevent corruption in the public and private sectors, to establish international cooperation in this area and to recover assets, as well as technical assistance, exchange of information, implementation mechanism and monitoring of its implementation. ukraine ratified the un convention of against corruption by the law of ukraine no. 251-v (verkhovna rada of ukraine, 2006). the issue of implementation of article 20 of the un convention against corruption (un, 2003) on illicit enrichment is difficult for many states, as it is for ukraine. this article was not included in the list of what ukraine has jurisdiction over and is obliged to enforce. according to this article "subject to the constitution and the fundamental principles of the legal system, each state party shall consider adopting such legislative and other measures as may be necessary to establish the crime as intentional illicit enrichment, that is, a significant increase in the assets of a public official which exceeds his lawful income and which he cannot rationally prove" (un, 2003). the specified situation can conflict to the constitutional principle of a presumption of innocence and the right of defendants not to testify against itself and also the husband (wife) and other close relatives. nevertheless, ukraine seeks to improve the legislation in this sphere. various options of improvement of forms of declaring not only the income, but also expenses of officials are studied. so, the resolution of the cabinet of ministers of ukraine (2006) no. 1673 "on a state of the financial and budgetary discipline, measures to strengthen the fight against corruption and control over the use of the state property and financial resources" lays the legal foundations of control of shortcomings and violations of the financial and budgetary discipline and also the mechanism of prosecution of persons who are found guilty of their assumption. the duty of declaring of expenses is established in many countries. need of such declaring is fixed at the legislative and subordinate levels by acts of parliament, public service, taxes, financial control, codes of behavior for various categories of officials, the legislation on fight against corruption. similar acts work in the usa, great britain, belgium, italy, finland, canada, australia, china and other states. ukraine also joined the convention on fight against bribery of officials of the foreign states in case of carrying out the international business operations of the organization for economic cooperation and development (1997). this convention was ratified by the law of ukraine no. 998-154 (verkhovna rada of ukraine, 1997). ukraine is a participant of the criminal convention of the council of europe on the fight against corruption (1999b), ratified in 2006 by law of ukraine no. 252-v (verkhovna rada of ukraine, 1999). ukraine also takes part in the civil convention of the council of europe on fight against corruption (1999a). the convention is directed to protection of persons who suffered losses owing to acts of corruption, including a possibility of indemnification. besides, this convention is, perhaps, the only international document which gives definition to corruption. article 2 of the convention (1999a) states: "corruption means direct or indirect extortion, offers, giving or taking of a bribe or any other illegal benefit or a possibility of her receiving which break appropriate performance of any duty baltic journal of economic studies 285 vol. 7 no. 5, 2021 by the person getting bribes, illegal benefit or an opportunity to have such benefit, or behavior of such person". ratification by ukraine of the civil convention of the council of europe on fight against corruption of 1999, certainly, promotes strengthening of anti-corruption standards (verkhovna rada of ukraine, 2005). implementation of rules of international law in the sphere of fight against corruption is an important component of formation of a global anti-corruption order and also a necessary condition of effective fight against corruption at the national level. the analysis shows that practically of all states fragmen tation of the implemented provisions of the international acts, their selective character is inherent in the legislation that considerably reduces success of the right of realization (khabrieva, 2012). summing up the result above of stated, it should be noted that in recent years a lot of things are made for strengthening of the anti-corruption legislation in ukraine and its compliances to the international standards on fight against corruption. now in the existing political situation knowledge and studying the international standards of fight against corruption becomes more and more relevant both for ordinary citizens, and for law enforcement officials. 5. conclusion so, in the scientific article international anticorruption standards were investigated and on the basis of this research in the conclusion there is an opportunity to develop some practical recommendations to improve the quality of anti-corruption fight for ukraine: 1) with the interaction of the scientific community, state structures, business and representatives of civil society it seems advisable to create an expert group dealing with the identification of corrupt practices, their measurement and classification. this event would allow not only to fight corruption on the state level more effectively, but also to demonstrate the active position of ukraine in the world anticorruption fight and spread of the global anti corruption standard of behavior; 2) the initiative to create an international body under the un that would specialize in combating and countering corruption is useful. such an initiative for ukraine would give an opportunity to strengthen the international position in the global anti corruption movement, which, in turn, would have a positive impact on improving ukraine's international standing and competitiveness on the world stage. references: abashidze, a. kh. 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(in russian) baltic journal of economic studies 11 vol. 8 no. 2, 2022 1 covenant university, nigeria e-mail: oladejo.bada@stu.cu.edu.ng 2 covenant university, nigeria (corresponding author) e-mail: kehinde.adetiloye@coveantuniversity.edu.ng orcid: https://orcid.org/0000-0002-7171-0793 3 covenant university, nigeria e-mail: felicia.olokoyo@covenantuniversity.edu.ng orcid: https://orcid.org/0000-0003-0176-0194 doi: https://doi.org/10.30525/2256-0742/2022-8-2-11-21 educational factors as determinant of international reserves accumulation in organisation of petroleum exporting countries oladejo tokunbo bada1, kehinde adekunle adetiloyе2, felicia omowunmi olokoyo3 abstract. there has been tepid growth of international reserves in opec economies despite huge chunks of oil revenue with high developmental needs. this study investigated the influence of educational factors using various levels of literacy in stimulating macroeconomic determinants of international reserves in opec member states with data between 2008 and 2018 obtained from world bank development indicators across 15 member states. the study employed dynamic panel model and analysed the data using system of generalised method of moment (sgmm). the findings show that educational levels, such as, adult, youth literacy, tertiary school and secondary school enrolment mitigate the adverse effect of exchange rate and stimulate the effect of crude oil prices while tertiary enrolment stimulate the effect of foreign direct investment and reduce the adverse effect of economic crises. in all, youth literacy was most impactful for these economies while economic crises were significantly positive at all levels as a primary determinant of international reserve accumulation. it was therefore concluded that educational enhance the economy to accumulate more reserves. the study recommended among others that national governments should ensure adequate funding is channelled to educational sector to improve the quality of education at institutions youth and secondary education levels in order to harness adequate knowledge and skills to enhance the efficiency of foreign investments. key words: macroeconomic factors, international reserves, sy-gmm, youth literacy. jel classification: f13, f23, f43 f53 introduction the desire to accumulate reserves in developing and emerging market economies has often been marred by series of macroeconomic shocks and fluctuation right from the major source of revenue base. this is more acute for economies with exporting crude resources in primary force, epically among organization of petroleum exporting countries (opec) members who export crude petroleum to the world market. in the previous literature, it was observed that macroeconomic factors strongly form the foremost determinants of accumulation of international reserve across the globe. for instance, nigeria, angola, venezuela and uae experienced a sharp drop of about 20% in their reserves between 2009 and 2015 (arinze, 2020). in 2015, nigeria’s international reserves dropped from $29billion to $25 billion in a space of few months in 2016, and a slight drop in 2018 to $38.8 billion after an increase in 2017. angola experienced major decrease in 2015, from $23.8 billion to $16.3 billion in 2018. the shock does not spare venezuela, who had a decline in 2015 from $16.4 billion to $7.5 billion in 2019. also, saudi arabia had another significant decrease in 2015 from $616 billion to $499 billion in 2018. the non opec member such as china’s reserves dropped from $3,406 in 2015 to $3,223 in 2018. azerbaijan experienced a drop from $7.9 billion to $6.7 billion in 2017, and oman had a slight decrease from $17.5 billion to $16.6 billion in 2018. one of the reasons for this unstable reserve is that the revenues of opec members is tied to a product with volatile prices though some states were characterized with ineffective macroeconomic misalignments and economic crises (arinze, 2020). baltic journal of economic studies 12 vol. 8 no. 2, 2022 in order to identify appropriate determinants of international reserves that is not susceptible to shock in the system ( jung & pyun, 2020), a number of empirical studies have been conducted on various determinable factors influencing international reserves accumulation. however, there are still inconsistencies in their findings and some authors believed that existing literature strictly focused on macroeconomic variables while some strand of the literature argued against the procedure of static method of analysis data. the debate on the most effective determinants of international reserves accumulation among oil exporting countries still remains unsettled in the literature. for instance, cheung and ito (2009); aizenman and lee (2007); aizenman, chinn, and ito (2013); aizenman and ito (2014); and aizenman and lee (2019) tested precautionary determinant on international reserves accumulation in various countries while dooley and garber (2005); dooley, folkerts-landau, and garber (2007); aizenman and lee (2004); korinek and servén (2016); and choi and taylor (2018) examined mercantilist determinant yet reserves is not stable and there are no consensus on the strong determinant of reserves as some of the variables indicate a negative relationship with international reserves accumulation in some developing countries. similarly, the recent literature and trends of international reserves have shown that most of macroeconomic determinants have failed to effectively support international reserves accumulation in opec economies during financial and economic crises. as a result, this study considers educational factors that can mitigate the effect of macroeconomic determinants and stimulate the positive effect of other factors. educational factors are very essential due to its emphasis on skills acquisition, competencies, knowledge and increase in natural capacities that can enhance productivity (world economic forum, 2016). it increases the efficiency of individual workers and enhances entrepreneurial management in order to expand economies productivity beyond minimal production process. however, the recent decline and acute fluctuations in international reserves force a re-examination of the efficiency of these factors. most of the previous studies on the determinants of international reserves in emerging and developing economies focused attention on macroeconomic variables such as exchange rate, inflation rate, monetary and fiscal policies instruments to reveal whether the self-insurance or the mercantilist motive prevails in determining the adequate level of international reserves accumulation (lane & burke, 2001; jeanne, 2007; aizenman & lee, 2007, cheung & qian, 2009; delatte & fouquau, 2012; and aizenman et al., 2015). but little is known about the influence of educational factors, among the factors determining international reserves (mahraddika, 2019; komareck and benecka, 2018; audu and okomoko, 2013). the inconsistencies and conflicting results on the previous studies have created gap to be filled in the empirical study, which this study attempts to achieve. the question of whether educational factors contributed significantly and positively to the determinants of international reserves is important in the literature. in light of the above, this study considered dynamic method to investigate the role of educational factors on the determinants of international reserves accumulation in opec economies between 2008 and 2018. 1. literature review: concept of international reserve the idea of international reserves accumulation could be traced to the end bretton wood systems in 1970s when many countries of the world support the view of holding international reserves in foreign currencies as part of central banks’ assets. an international reserve is the assets controlled by monetary authorities to finance payment imbalances and foreign exchange intervention in the markets to influence the exchange rate as well as other relevant and statutory obligations (imf, 2015). this means that a country’s coffer that comprises of gold and foreign currencies collectively constitutes its international reserves. it was meant for meeting foreign payment of certain obligations, such as, commercial and sovereign debts, imports financing, as well as foreign currency intervention in the market during unwar ranted fluctuations. it could be used by countries to absorb unexpected capital movement, shocks or contingencies as well as catering for external obligations. this also can be used by monetary authorities to back its liabilities or constitute the financial resources relevant to its international economic relations. with that system, international reserves were maintained in foreign currencies at a fixed exchange rate regime. however, following the collapse of the system ideas shifted the attention of most countries to a free-floating exchange rate regime under which international reserve holdings act like "shock absorbers" during volatility in foreign transactions, like imports variations accrued from trade shocks or capital account variations due to the capital retraction or financial crisis (pina, 2015; korinek & servén, 2016). conceptually, international reserves play three major important roles in the world. first, it is the belief of mercantilists’ that international trade has a positive relationship with international reserves. this school of thought agreed with the idea of accumulating more reserves to facilitate the expansion of trade across the globe promoting export baltic journal of economic studies 13 vol. 8 no. 2, 2022 and importing a little as possible. second, international reserves are important to periodically solve the problem of balance of payments disturbances arising from current and capital accounts. third, international reserves remain necessary if countries are to withstand adverse effect of economic activities or serve as shock absorber against financial crises. augustine, antony and thankgod (2015) stated that countries hold foreign reserves purposely to ensure external financial market stability, stable exchange rate, exchange rate forecasting and targeting, as well as, credit liberty. therefore, international reserve accumulation remains one of the essential functions of the apex bank of any country. european central bank (2006) stated that international reserve holding is self-insurance against currency crisis and most importantly in a case of overvalued currency. cheng (2015) posits that reserves accumulation is one of the catching-up techniques in an economy characterized by an underdeveloped financial market where the apex institutions engage in the financial intermediary role. this is done to prevent the repetition of the incidence of the financial crisis of the late 1990s. 1.2 educational factors and macroeconomic determinants of international reserve over the decades, the debates on the determinants of international reserves have generated considerable arguments in academic papers. heller (1966) proposed national product, interest rate and relevant components of money stock as the major determinants of international reserves considering south africa data. in addition, aizenman and lee (2007) categorized determinants of international reserves into two: the mercantilist motives and precautionary concerns. it was stated that trade openness, savings, ratio of external debt to gdp, degree of capital account liberalization, and economic growth jointly influenced the decision of countries to accumulate more reserves in order to achieve both precautionary and mercantilist motives. there are good numbers of empirical studies that have investigated and focused primarily on the most effective determinants of international reserves in developing and emerging economies. lane and burke (2001), aizenman and marion (2004), eichengreen and mathieson (2000), and romero (2005) identified economic growth, current and capital account vulnerabilities, exchange rate flexibility and opportunity cost as the factors contributing to growth in international reserves. however, aizenman & lee, (2007) and cheung & qian, (2009) argued that over reliance on the performance of macroeconomics factors had been subjected to constant criticisms during economic down turn and maintenance of adequate level of reserves. therefore, this study explored if the difficulties encountered by developing and opec members’ state to accumulate and stimulate reserves during economic shocks can be explained by lack of quality educational factors. how education interacts with macroeconomic factors to influence the level of international reserves have not generated considerable argument in the literature. however, the debate on how educational factors directly influence economic performance has provided solid arguments. education remains crucial in the components of human capital development in view of its enablement at human capital performance. empirical studies have suggested that educational factors are distinctive features of economic system and recent work has established the significant impact of education over economy productivity (wef, 2016). sparreboom and staneva, (2014); nanok and onyango (2017); johnson and velmurugan (2019) stated that increasing the level of education in developing economies will boost the employability and productivity. in general, earnings tend to increase in accordance with workers’ level of educational attainment and those with higher qualifications and/or more work experience can expect to earn more. returns to education differ widely between workers in paid employment, for whom an additional year of schooling generally results in a higher income, and those in self-generated entrepreneurial activities, for whom significant returns are far less certain. some empirical studies have shown that developing and developed countries make huge investments on education. demir, bilik and aydin (2018), opined that education index influence foreign direct investment, which in turn affects international reserves of a country. the study carried out in turkey by okten and arslan (2013) confirmed a positive and significant effect of educational conditions on foreign direct investment. based on these empirical findings, it could be inferred that educational factors may influence foreign direct investment either positively and thereby affecting the accumulation of international reserves of opec members. the world economic forum (2016) suggested three channels through which education affects a country’s productivity. first, it increases the collective ability of the workforce to carry out existing tasks more quickly. second, secondary and tertiary education specifically facilitates the transfer of knowledge about new information, products, and technologies created by others (barro & lee, 2010). finally, by increasing creativity, it boosts a country’s own capacity to create new knowledge, products, and technologies. investment in secondary education provides a clear boost to economic development, much more than can be achieved than by universal primary education alone. hence, the focus of the united nations millennium baltic journal of economic studies 14 vol. 8 no. 2, 2022 development goals on universal primary education was important but insufficient. universal primary education must be complemented with the goal of ensuring broad sections of the population have at least completed junior secondary education (iiasa, 2008). the sustainable development goals (sdgs) also have education targets including that ‘by 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and effective learning outcomes’. this shows more of an awareness of the importance of secondary education. only broad-based secondary education and universal primary education is likely to give poor countries the human capital boost necessary to bring large segments of the population out of poverty. for more industrialised countries, tertiary education of younger adults also plays a key role in economic growth (iiasa, 2008). 1.3 theoretical review this study is hinged on the two relevant and related theories that critically explain the ideology behind the international reserves accumulations. first, the keynes theory of holding cash balances for precautionary purposes was propounded in 1936. this theory postulated that central banks as a custodian of foreign currencies accumulate reserves to fulfil the motives safe guarding against unforeseen circumstances. it also stresses further that the rates of interest as well as the level of national income determine the holding of a certain amount of money. second, mercantilist theory of reserves originated from thomas mun (1571–1641) and jean baptiste colbert (1619–1683). mercantilism can be viewed as an economic policy designed to maximize a nation’s exports. it also is a policy that focuses on accumu lating reserves through a favourable trade balance. it was established that a nation’s wealth is attributed to the amount of gold acquired. a country will be better off, if it had more gold than the others. this assumption had consequences on the policy of the country’s economy. thus, the most suitable method of achieving prosperity is by embarking on few imports and encouraging huge exports, which thereby create a net foreign exchange inflow and maximizes the gold stocks of the country. gold accumulation was believed to be very essential for a powerful and strong state and this prompted some countries such as britain to design and implement policies suitable for protecting their traders and maximize income. the above theoretical reviews are essential because they offer comprehensive explanations on how and reasons for accumulating international reserves by various countries. the mercantilist theory was based on the premise that some countries accumulate reserves for the purpose of export-led growth techniques by undervaluing the of real exchange rate while precautionary motive serves as selfinsurance against sudden external shocks. aizenman and lee (2007) tested for the comparison between mercantilist motive and precautionary motive of holding international reserves and found the latter to be more suitable. hence, the promoting exports and enhancing growth can result to the accumulation of reserve for both mercantilist and precautionary purposes. nevertheless, the reasons may change over time and varies across the countries (ghosh, ostry, & tsangarides, 2014). it was on this premise that the study found the two theories relevant to underpin the study. 1.4 empirical review several studies have been carried out on determinants of international reserves in different countries but studies peculiar to opec members and educational factors as determinants are limited. empirically, the study by islam (2020), explored the impact of macroeconomic factors to determine the level of reserves in bangladesh using quarterly data ranging from 1994q2 to 2016q4. the johansen co-integration test for the study of reserves demand function reveals that the current account vulnerability and exchange rate flexibility play a crucial role in bangladesh’s longterm reserve demand policies. the study conducted by nayak and baig (2019), estimated a basic buffer stock model of international reserves for india and china, using quarterly data for the period 1993q1–2015q4. the study estimated with autoregressive distributed lag (ardl) to determine the relationship rather than co-integration. the study revealed that gdp or imports, domestic interest rate, volatility of reserves and exchange rate play a significant role in the international reserve accumulation. the research by muhammad and muzammil (2019), investigate the impact of macroeconomic indicators on foreign reserves in the context of pakistan. the vector autoregressive (var) model was used to estimate pakistan’s foreign exchange reserves demand with current account vulnerability, capital account vulnerability, exchange rate flexibility, and the opportunity cost of holding reserves as independent variables. the results indicated that macroeconomic variables such as remittances, exchange rate, the ratio of current account deficit to gdp, and interest rate differential (measure as proxy for opportunity cost) determined the country’s long-run reserves demand function. the granger causality analysis proved that the various macroeconomic variables fail to cause reverse causality. this implied that in pakistan, the demand for reserves is driven by macroeconomic stability. the problem with above studies is the concentration on one country without considering cross country data. baltic journal of economic studies 15 vol. 8 no. 2, 2022 furthermore, schroder (2017) assessed the effect of mercantilist and precautionary motives on international reserves in china. the study employed quarterly data from 1998q4 to 2011q4, which were collated from imf’s and international financial statistics (ifs) databases. a dynamic ordinary least square (dols) was used to analysis the variable considered for the study. the findings indicated that the mercantilist motives have a significant effect on reserves compare to precautionary motives that has no significant effect on reserves. pina (2017), considered 75 countries to evaluate the international reserves holding and global interest rate between 2000 and 2013. the international reserve, gold holdings, special drawing right (sdr) and other reserve asset were the variables considered for the study. multiple regression analysis was considered to determine the association and impact that existed between holding of international reserve and interest rate fluctuation. it was discovered that a percent change in interest rates will positively influence level of reserves. a nearest intention to the current study was indicated by keskin (2021) which showed that social prosperity wasted by the opec members was about 40% while utilising about 60% for the development of their countries. this appeared to a general average as some would have gained more while other would have lot more. this was the more reason to pursue the literacy interaction. 2. methodology: theoretical framework and modelling the study adopted precautionary motive of holding money as postulated by john maynard keynes in 1930 was ranked as the most important in this study. the basis for this theory stemmed from the fact that people hold money to offset any emergency or unforeseen contingencies relating to the reason why some developing countries hold and accumulate reserves in form of gold, sdrs and other international financial instruments. hence, it enables individual to meet unexpected rise in expenditure or unexpected delays in receipt. based on the keynes theory, demand for money is a function of revenue. it is believed that there existed a stable and direct relationship between income and transactions money balances. this means that the higher the magnitude of revenues in an economy, the higher the international reserve accumulated. this relationship can be expressed as: mt = k(py) (1) where mt = amount of reserves demand balances for transaction, precautionary or speculative motives; k = fraction of revenue, which could be held by the public, p = price level, y = income level. the size of (k) which is fraction of revenue will be a function of variables conditions and behaviour of some important variables in the economy. method of data analysis to investigate the determinants of international reserves in opec economies, we introduce a dynamic specification because international reserves show signs of high degree of autocorrelation. this study is modelled after audu and okumoko, (2013), aizenman, cheung, and qian (2019) and mahraddika (2019). the models are adapted because audu and okumoko, (2013) assessed the determinants of international reserves while mahraddika (2019) evaluated international reserves accumulation using the dynamic panel data estimator. in this study, system generalised method of moment (sgmm) was adopted due to the following reasons; to overcome the endogeneity problem that is associated with long-term determinants of growth. a commonly used estimation method to estimate the parameters in a dynamic panel data model with unnoticed individual specific heterogeneity is to transform the model into initial differences (arellano & bond, 1991). when lagged levels of the variables are tools for the endogenous differences and the parameters estimated by gmm, sequential moment conditions are then used. the fact that the gmm estimator in the first difference (diff) model may have very low finite sample properties in terms of bias and accuracy when the sequence is persistent as reported by blundell and bond (1998), as the instruments are then unreliable predictors of endogenous changes. in order to achieve the objectives of this study, we assumed that international reserves are influenced by other variables other than macroeconomic factors which are educational factors. thus, simple reserve demand equation is specified in equation 1. the mt will be substituted for international reserves holding in opec economies as dependent variable while (py) will be substituted for other macroeconomic determinants of international reserves as independent variables. we start the study of international reserves accumulation by applying a linear dynamic panel-data regression. y = f(x) (2) the explicit form of equation 2 is represented below: yit = α + yit – 1 + αxit + µit where yi,t is total international reserves held by country in time t and the lagged dependent variable, is yi,t – 1 included to account for the persistence or inertia of holding of reserves over time. resrsit = α0 + α resrsit –1 + αtmdit + µit (3) the traditional macroeconomic determinants include variables such as economic crises, exchange baltic journal of economic studies 16 vol. 8 no. 2, 2022 rate, inflation rate, trade openness, foreign direct investment, crude oil prices, and natural resources dependence, also, given the mono-cultural nature of most commodities dependent developing economies. the objective of the study is addressed with equation 4 specified below: where; resrs is foreign reserve, crdpr is crude oil prices, nrsdpc is natural resources dependence, fdi is foreign direct investment, encrs is economic crises, exchr is exchange rate, infl is inflation rate, topens is trade openness, gdp is gross domestic products, β0 is constant term andµ is the error term. 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = 𝛽𝛽𝛽𝛽0 + 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟(−1) + 𝛽𝛽𝛽𝛽1𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2𝑟𝑟𝑟𝑟𝑒𝑒𝑒𝑒𝑐𝑐𝑐𝑐ℎ𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖_𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽6𝑜𝑜𝑜𝑜𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽7𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8𝑔𝑔𝑔𝑔𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜇𝜇𝜇𝜇𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = 𝜑𝜑𝜑𝜑0 + 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟(−1) + 𝜑𝜑𝜑𝜑1𝑟𝑟𝑟𝑟𝑒𝑒𝑒𝑒𝑐𝑐𝑐𝑐ℎ𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑2𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑3𝑜𝑜𝑜𝑜𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑4(𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑5(𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑6(𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑7(𝑔𝑔𝑔𝑔𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑8(𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖_𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜀𝜀𝜀𝜀𝑡𝑡𝑡𝑡 (4) β1 – β8 represent the coefficient of explanatory variables. the model 5 specified below examines the interaction of educational factors with macroeconomic determinants of international reserves accumulation in opec economies. 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = 𝛽𝛽𝛽𝛽0 + 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟(−1) + 𝛽𝛽𝛽𝛽1𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2𝑟𝑟𝑟𝑟𝑒𝑒𝑒𝑒𝑐𝑐𝑐𝑐ℎ𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖_𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽6𝑜𝑜𝑜𝑜𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽7𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8𝑔𝑔𝑔𝑔𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜇𝜇𝜇𝜇𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = 𝜑𝜑𝜑𝜑0 + 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟(−1) + 𝜑𝜑𝜑𝜑1𝑟𝑟𝑟𝑟𝑒𝑒𝑒𝑒𝑐𝑐𝑐𝑐ℎ𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑2𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑3𝑜𝑜𝑜𝑜𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑4(𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑5(𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑6(𝑖𝑖𝑖𝑖𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑7(𝑔𝑔𝑔𝑔𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜑𝜑𝜑𝜑8(𝑖𝑖𝑖𝑖𝑐𝑐𝑐𝑐𝑖𝑖𝑖𝑖_𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 ∗ 𝐻𝐻𝐻𝐻′)𝑖𝑖𝑖𝑖,𝑡𝑡𝑡𝑡 + 𝜀𝜀𝜀𝜀𝑡𝑡𝑡𝑡 (5) where h comprises the educational indicator, variables captured using education. h’ is a column vector of education variables. 3. data analyses and results: determinants of interactional reserves the dynamic panel estimation result is shown in table 1. it reveals a direct relationship between crude oil price and international reserves, as a unit increase in crude oil price yields about 4.2% increase in international reserves. on the other hand, exchange rate exerts a negative response on international reserves, as a unit increase of exchange rate, depletes resources by 0.24 units. this implies that changes in exchange rate negatively impacts reserves. in addition, the indicator of reserves in time of imports (economic crisis) varies directly with international resources. the expectation is in line of this result, as the larger the reserves, the higher the number of months of imports it can finance. specifically, a unit increase in the export dynamism leads to about 53.0 units’ accumulation in reserves. expectedly, the natural resource dependence exerts a considerable large impact on the international reserves of opec member states, basically because an average country in the opec has commodity export (oil) constituting about 89.2 percent of its entire merchandise exports. in furtherance, the results show that foreign direct investment, though significant but exert a less proportionate effect on international reserves. the diagnostics also show that the specifications do not suffer from second-order serial correlation and the instruments are not over-identified. the sargan test is not significantly different from zero, meaning that the instruments used are not weak. likewise, the ar at lag 2 shows no autocorrelation in the residuals, thereby confirming the appropriateness of the model. 3.1 controlling for education factors the interaction between tertiary education and crude oil price, foreign direct investment, natural resource dependence and exchange rate show insignificant impact while that of economic crisis and gross domestic product indicate significant impact on international reserve at 1%. in the same vein, the link between secondary education and crude oil price, exchange rate, economic crisis and gross domestic have positive and significant impact on international reserve at 1%, 5%, 1% and 1% respectively while the interaction between secondary education, foreign direct investment and natural resource dependence are statistically insignificant at 5%. the result in the table 5 indicates that adult literacy level has negative relationship with fdi and the relationship in insignificant. the same insignificant impact is also noted in dependence on natural resources. the relationships become significant with 0,1 level of confidence with exchange rate, which is also negative. nevertheless, the impact of adult literacy is significant at 0.01 level of confidence with economic crises and gdp. the impact in these cases is positive. in all, it becomes clear that the impact of this social indicator is negative for these determinants, but the long run determinants remain stable. the results in table 5 indicate that youth literacy on the fdi is insignificant but negative with very low coefficient, while it is significantly negative for the natural resource dependence at 5percent level of significance. the variable is also strong still with the negative and significant impact on the natural resource dependence and exchange rate. however, it is positive and significant for economic crises at 0.05 level of confidence. in addition, the youth literacy exerts a positive impact on the gdp that is also significant. the impact of education at tertiary level is insignificant for each of the independent variables baltic journal of economic studies 17 vol. 8 no. 2, 2022 table 1 determinants of international reserves ols static panel dynamic panel variables pooled fixed effect random effect sys-gmm resrs_1, log 0.416*** (0.0715) crdpr, log 0.247** 0.293*** 0.411*** 0.0421 (0.104) (0.0799) (0.0816) (0.121) exhr 0.000298* -0.00363*** 0.000163 -0.00244*** (0.000159) (0.000818) (0.000251) (0.000922) infr -0.00862*** -0.00342*** -0.00411*** -0.00213** (0.00136) (0.00100) (0.00119) (0.000839) fdi_in, log 0.0128 -0.0528** -0.0478 -0.123*** (0.0335) (0.0257) (0.0302) (0.0296) encrs, log 1.013*** 0.873*** 0.988*** 0.530*** (0.0444) (0.0695) (0.0635) (0.119) opns, log 0.949*** 0.551** 0.702*** 1.622*** (0.163) (0.224) (0.206) (0.262) nrsdpc, log 0.229 0.780 -0.547 1.654** source: output from data. standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 table 2 determinants of international reserves: educational factors interaction – education (adult literacy) interacting variables results obs wald test (p) ar hansen j test sargan test 1 2 crdpr*ltcy_adt 0.342 (0.443) 66 0.000 0.002 0.311 0.871 0.912 fdi_in*ltcy_adt -0.0123 (0.00868) 66 0.000 0.012 0.212 0.814 0.973 nrsdpc*ltcy_adt -0.117 (0.164) 66 0.000 0.043 0.119 0.771 0.902 exhr*ltcy_adt -0.0167* (0.00866) 66 0.000 0.005 0.810 0.721 0.897 encrs*ltcy_adt 0.216*** (0.0186) 66 0.000 0.018 0.064 0.825 0.954 gdp*ltcy_adt 0.0557** (0.0284) 66 0.000 0.024 0.082 0.911 0.927 source: authors’ output from data. standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 table 3 determinants of international reserves: educational factors interaction – education (youth literacy) interacting variables results obs wald test (p) ar hansen j test sargan test 1 2 crdpr*ltcy_adt -1.256*** (0.463) 66 0.000 0.008 0.717 0.981 0.970 fdi_in*ltcy_adt -0.0135 (0.00824) 66 0.000 0.032 0.112 0.874 0.974 nrsdpc*ltcy_adt -0.283** (0.144) 66 0.000 0.044 0.529 0.8761 0.952 exhr*ltcy_adt -0.0172** (0.00845) 66 0.000 0.025 0.850 0.881 0.899 encrs*ltcy_adt 0.208*** (0.0182) 66 0.000 0.044 0.564 0.985 0.9564 gdp*ltcy_adt 0.0289 (0.0390) 66 0.000 0.024 0.082 0.977 0.927 source: output from data. standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 baltic journal of economic studies 18 vol. 8 no. 2, 2022 of fdi and exchange rate but positive for economic crises and gdp. the level of significance recorded for the two variables is 0.01 indicating the level of impact of tertiary education on the two variables. the results above show the interactions of the variables with secondary school education among opec members on the determinants of international reserve among the countries. four of the variables are significant while two are not. the positive significant variables are crude oil dependence and gdp. the two variables exert impact of at least 0.05 level of confidence. exchange rate is moderately significant at 0.05 and this is positive. 4. discussion of findings the study revealed that all the variables considered are normally distributed and correlation test for multi-collinearity shows no forms of autocorrelation in the model. the basic system generalised methods of moments regression revealed that exchange rate, inflation rate, foreign direct investment, economic crises, and natural resources dependence significantly influence international reserves in opec economies. the interaction section revealed the role of adult literacy, youth literacy, tertiary education, and secondary education in enhancing the determinants of international reserves. the interaction of crude oil price with educational factors proxied by adult literacy, the dependence of international reserves on crude oil price diminished moderately suggesting that education dependence mitigates the extreme dependence of reserves on crude oil price proceeds. this scenario plays out such that as an economy with developed human capital can easily harness relevant knowledge, innovation and expertise required to initiate and develop dynamic products and services that are internationally competitive and command good price in the international market. the evidence is visible in some opec economies, prominent among these is the structural transformation witnessed in abu dhabi and a host of south-eastern asian countries where commitment to education development has earned the economies a significant economic transformation in the past decades. in the same manner, controlling for education in the nexus table 4 determinants of international reserves: educational factors interaction – education (tertiary) interacting variables results obs wald test (p) ar hansen j test sargan test 1 2 crdpr*ltcy_adt 0.0194 (0.0349) 59 0.000 0.015 0.271 0.891 0.903 fdi_in*ltcy_adt 0.00683 (0.00862) 59 0.000 0.012 0.142 0.812 0.914 nrsdpc*ltcy_adt -0.173 (0.118) 59 0.000 0.031 0.189 0.910 0.952 exhr*ltcy_adt 0.00642 (0.0102) 59 0.000 0.011 0.059 0.837 0.925 encrs*ltcy_adt 0.314*** (0.0206) 59 0.000 0.038 0.274 0.924 0.915 gdp*ltcy_adt 0.0180*** (0.00476) 59 0.000 0.041 0.091 0.982 0.927 source: output from data. standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 table 5 determinants of international reserves: educational factors interaction – education (secondary) interacting variables results obs wald test (p) ar hansen j test sargan test 1 2 crdpr*ltcy_adt 0.325*** (0.111) 65 0.000 0.015 0.271 0.891 0.903 fdi_in*ltcy_adt -0.00279 (0.00600) 65 0.000 0.012 0.142 0.812 0.914 nrsdpc*ltcy_adt -0.130 (0.105) 65 0.000 0.031 0.189 0.910 0.952 exhr*ltcy_adt 0.0166** (0.00654) 65 0.000 0.011 0.059 0.837 0.925 encrs*ltcy_adt 0.228*** (0.0132) 65 0.000 0.038 0.274 0.924 0.915 gdp*ltcy_adt 0.0904*** (0.0198) 65 0.000 0.041 0.091 0.982 0.927 source: output from data standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 baltic journal of economic studies 19 vol. 8 no. 2, 2022 between international reserves and foreign direct investment also mitigates the adverse effects of fdi on reserves in the opec member states. this implies that fdi can yield more impact on reserves if the education infrastructure is well designed and developed such that the spillovers (in terms of financing and expatriates’ knowledge) can be easily adopted, assimilated, and reproduced domestically. for some resource rich countries, especially african economies, despite appreciable fdi inflow, the economy has remained worse-off. this is not unconnected to the reality that most fdis to these institutionally weak economies are rent-seeking and extractive in nature and are for industrial support and consumption of investors’ home countries. unless directed and monitored, fdis can be unhelpful for development. put differently, a larger proportion of the returns on investment are repatriated to the investors’ home country under the guise of payments for imported production-machinery, equipment, consumables, expatriate payments and royalties. it is necessary to note that among the education categories controlled for, tertiary education yielded the largest impact on the relationship between fdi and international reserves. while other education categories mitigated the adverse effects of fdi on reserves, the relationship becomes positive after controlling for the role of tertiary education. following the interaction of tertiary education, fdi inflows exert a positive and significant influence on international reserves. this implies that tertiary education tends to be more prominent in equipping the skills set required to stimulate a competitive drive of the economy and equip it with the capacity required to assimilate and further initiate knowledge spillover from fdi for domestic sufficiency and attain trans-border and export gains. the outcome is not surprising, as the technological prowess, scientific knowledge, and entrepreneurial skills to stimulate development, drive economic competitiveness and develop internationally competitive dynamic products can only be attained at the tertiary level. it is necessary to note that gross domestic product (gdp) becomes a significant determinant of reserves following interaction with education development. recall from table 1, prior to the interaction, gdp indicator was not significant – a situation that can be linked to the fact that an appreciable number of opec member states depend heavily on foreign exchange from crude oil proceeds (exported in its raw forms with no or little value addition) for financing consumption expenditure. as rightly emphasized in the preceding discussion, human capital development via education and training drives competitiveness and enhances the creation of value-addition – via human development, technology and innovation and dynamically enhances export baskets diversification thereby ensuring supply-side elasticity and value in the international market. proliferation of knowledge helps in the develop ment of other latent sectors of the economy and mitigates the manifestation of the popular dutch diseases, hence, attracting foreign exchange inflows from multiple sources and alleviates the undue concentration on crude oil proceeds for budgetary, fiscal and macroeconomic management. this corroborates the evidence obtained following the interaction of education development with natural resource dependence. the results, readily available in table 2-5 show that on controlling for education development, the erstwhile strong link between natural resource dependence and international reserves dwindled considerably. this further indicates that education development is capable of spurring growth in other sectors of the economy and equally promotes international competitiveness, hence, mitigating the dependence on natural resource exports and reducing the susceptibility of the national economy to market vagaries. the diagnostics also show that the specifications do not suffer from secondorder serial correlation and the instruments are not over-identified. 5. conclusion and recommendations the study investigated the role of educational factors on the determinants of international reserves accumulations in opec economies. specifically, the study disaggregated educational factors into various levels, such as adult literacy, youth literacy, tertiary education and secondary education. the results show that adult literacy, youth literacy, tertiary education, and secondary education positively influence international reserves and have significant impacts on its accumulation. in all economic crises remain highly significant across the various levels of education, while crude dependence (as a variable) was highly negatively significant in the regressions just as exchange rate management was moderately negatively significant in the regressions. this simply means that education is all through important for accumulation of international reserves in most of the opec member states while depending on the resource is negatively impactful for international reserves accumulation. the study concludes that education is a significant factor in the future development and accumulation of international reserve in these countries. therefore, the study concluded that educational factors play a significant role on the determinants of international reserves accumulation in opec economies within the period under consideration. based on the interactions of the new variables, the study recommends among others that governments of the opec member states should place a high baltic journal of economic studies 20 vol. 8 no. 2, 2022 premium on funding education and shift attention to the development of human capital which can easily harness relevant knowledge, innovation, and expertise required to initiate and develop 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(2014). is education the solution to decent work for youth in developing economies? identifying qualifications mismatch from 28 school-to-work transition surveys. international labour office. geneva: ilo. available at: http://www.ilo.org/employment/areas/youthemployment/work-for-youth/ publications/thematic-reports/wcms_326260/lang--en/index.ht world economic forum (2016). global competitiveness report 2015–2016. available at: http://reports.weforum.org/global-competitiveness-report-2015-2016/education/#view/fn5 baltic journal of economic studies 130 vol. 7 no. 5, 2021 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: t.melnyk@knute.edu.ua orcid: https://orcid.org/0000-0002-3839-6018 researcherid: https://publons.com/researcher/1673478/tetiana-melnyk/ 2 independent researcher, ukraine. e-mail: juliar_2006@ukr.net orcid: https://orcid.org/0000-0002-8501-1299 researcherid: https://publons.com/researcher/2226436/julia-mykolaivna-tunitska/ 3 kyiv national university of trade and economics, ukraine. e-mail: a.lyubyma@knute.edu.ua orcid: https://orcid.org/0000-0002-4871-9212 doi: https://doi.org/10.30525/2256-0742/2021-7-5-130-143 export potential of ukrainian agro-industrial complex: factors of formation and evaluation tetiana melnyk1, yuliia tunitska2, anna liubyma3 abstract. with the intensification of international integration processes, export potential is the most important factor in the economic growth of states and a condition for equal accession to the world economy. the purpose of the study is to identify the factors of formation and implementation of the export potential of the agroindustrial complex of ukraine, its evaluation, the definition of the place of ukrainian products on world food markets. methodology. to achieve the designated objectives, a comprehensive approach was used, which included the calculation of indicators of export potential of ukrainian agro-industrial complex in international trade with the countries of the world and in comparison with major trading partners through the dynamics and structure of foreign trade, export value per capita, export quota, export share of goods in their production, net export potential coefficient; the ratio of the export quota to the population; the country's export efficiency ratio; the country's participation in the international division of labour; the indicator of comparative (relative) advantages. research results. it was established that the export potential of ukrainian agro-industrial complex is formed under the influence of stimulating and restraining factors. during the period under review (2010–2020) high rates of development of foreign trade in agri-food products of ukraine were revealed, especially with the countries of asia, europe and africa. however, there are also negative trends: strengthening the export potential of the complex at the expense of raw materials and semi-finished products and at the expense of losing positions in the world market of ukrainian products with high added value; unjustified priority to stimulate export of agricultural products, which confirms the low level of export efficiency, despite the significant activity of ukraine in the world market compared to partner countries; low level of export potential of ukrainian agroindustrial complex in comparison with eu countries as a result of technological backwardness of the producer; small list of export agro-industrial commodity groups with sustainable comparative advantages and their low technology in relation to countries of all world regions indicates the low level of development of agriculture and the economy as a whole. in this regard, there is a need for structural reforms in the agro-industrial complex of ukraine, strengthening institutional support for the production and export of food products, which contain a high level of added value. practical implications. the main theoretical provisions and conclusions formulated by the authors can serve as a methodological basis for improving the export strategies of various sectors of the economy. value/originality. the proposed results can be used to justify the mechanism of formation of the export potential of the agro-industrial complex of ukraine on the basis of increasing the production of goods with high added value. key words: export potential, foreign trade, agro-industrial complex, globalization, integration. jel classifications: f14, f15, f18, f55 baltic journal of economic studies 131 vol. 7 no. 5, 2021 1. introduction in a globalized world economy, the efficiency of the economic complex of the state and the success of its participation in international integration processes is directly proportional to the level of export development, which indicates the importance of the issues of this article. historically, the key to achieving the leading position of ukraine in the international arena is a powerful agro-industrial complex (the share of agricultural exports in the country 's gdp in 2020 was 14%) (state statistics service of ukraine, 2020), which in the context of the changing structure of the world population, aggravation of the global food problem and the intensified search for ways to solve it, provides both domestic and foreign markets with food. favorable geographical location, natural and climatic conditions, as well as exceptional land and human resources contributed to the formation of the export potential of the agro-industrial complex of ukraine (hereinafter the aic) – the ability of the agrarian sector to produce the necessary amount of goods competitive in foreign markets, which will contribute to the economic growth of the country (polkovnichenko, rosokhach, 2016). despite periodic losses due to falling world prices, total exports continue to grow every year, replenishing the budget (45% of ukraine's total export revenues in 2020) (state statistics service of ukraine, 2020) and investing in the modernization of the agricultural sector. the structure of ukrainian food exports consists mainly of agricultural raw materials without a significant increase in the volume of processed products, which is a consequence of imperfect mechanisms of state regulation of the development of agriculture and foreign economic relations. the situation is aggravated by crises related to the loss of the main market due to the military-political confrontation and the introduction of quarantine measures due to the covid-19 pandemic. ukrainian exporters, working in harsh competitive conditions, are forced to adapt to the global challenges and bring food production in line with modern global quality standards, mostly with limited financial resources and insufficient state support compared to developed countries. consequently, in the current realities of volatile external environment, the reorientation of commodity and geographic structure of food exports on the basis of a comprehensive approach to monitoring the export potential of the ukrainian agro-industrial complex by assessing its trends, identifying national conditions and factors of formation, determining the comparative advantages of ukrainian products on world markets, which indicates the relevance of the chosen topic of research. 2. literature review ukrainian scientists mainly study the general trends and prospects of development of exports of the main types of agricultural products of ukraine. thus, based on a thorough analysis of the export-import balance of ukraine's agro-industrial complex, it was proposed to solve the key problems of agriculture and food industry by supporting the network interaction of enterprises (izhevskyi, 2018). a list of regions and specific countries where ukrainian agricultural products are in greatest demand was determined, as well as the ranking positions of ukraine on world markets of certain products (dukhnytskyi, 2019). the main risks of foreign economic activity of domestic subjects of agribusiness were investigated (voronych, 2019). researchers are constantly in the field of view of topical problems of development of export potential of agro-industrial complex of ukraine in the context of globalization and integration processes, the main positive and negative features of the historical trajectory of ukraine's development in the context of globalization (lazarieva, vakar, 2019). the main trends in the expansion of exports of domestic agricultural products to the eu have been revealed and it is proved that the conditions of access of ukrainian exporters to european agricultural markets are influenced by the systemic actions of eu regulatory policy (golovachova, iksarova, kudyrko, 2018). the prospects of increasing the market presence of ukrainian agricultural products in asia were investigated, and the heterogeneity of the influence of various factors on the creation of international competitiveness for different types of agricultural products in different sales markets was proved; the threats of further expansion of the free trade zone (ftz) between ukraine and the eu were identified (bosak, 2019). the institutional preconditions of functioning of agro-industrial complex of ukraine were investigated, in particular, it was proved that the evolution of agrarian policy of eu is a forming factor of export potential of agro-industrial complex, the specifics of agricultural logistics and its influence on agro-industrial complex were defined (okhrimenko, 2018). numerous works are aimed at assessing the export potential of individual subcomplexes of ukrainian agro-industrial complex, especially grain products. the content of its export potential is determined and its components are singled out (zrailo, 2019). the emphasis is made on the competitive advantages of the production of finished food products from grain and the ways of intensification of its processing using domestic demand and increasing exports of finished products are proposed (lyakhovska, 2019). on the basis of assessment of the cost and expenditure components of the balance of grain crops the directions baltic journal of economic studies 132 vol. 7 no. 5, 2021 of improvement of their exports and imports are justified (budziak, budziak, 2020). the main trends and problems of ukrainian exports of livestock products are investigated, and the directions of its growth on the eu market are proposed (heraimovych, humeniuk, kubai, 2019). priority directions of development of export potential of ukrainian dairy industry in the conditions of activation of integration processes were determined (popko, 2018). the prospects of commodity diversification of food exports to the eu and measures to strengthen the export potential of milk processing enterprises and dairy products production are substantiated (melnyk, samosudov, 2020). the activity of the main exporters of ukrainian dairy products in 2014-2018 and the level of tariff and non-tariff protection of the eu market are assessed (chesnik, rozhko, strus, 2019). the system is proposed for the formation of the export potential of the agrarian sphere of the region (nadvynychnyi, 2018). noted the strategic importance of the agricultural sector in ensuring the foreign economic security of ukraine (urba, 2019). assessing the scientific papers on this issue, we believe that current trends in the development and implementation of the export potential of agricultural and food products of ukraine are covered insufficiently and fragmentarily. there are no comprehensive studies combining its assessment by commodity and geographical structures (by regions and countries of the world), the system of export potential indicators in dynamics over a long period (the last 10 years), characterized by crisis changes due to escalation of military-political and economic confrontation with the russian federation and the introduction of quarantine measures related to covid-19, find out the place of ukrainian products on world food markets and compare with the largest partner countries in foreign agricultural trade, to study the factors and prospects of its formation and implementation, which determined the purpose of this research. 3. methodology to study the export potential of the agro-industrial complex of ukraine, it was proposed to apply a comprehensive approach, which includes: – analysis of the dynamics of commodity and geographical structure of foreign trade, in particular, export of agri-food products as a form of realization of export potential of ukrainian agro-industrial complex in combination with identification of key factors influencing its formation; – methods and inherent quantitative indicators to assess the success of the export potential of the country 's agro-industrial complex, including comparison with the main partner countries of the world and the eu (to obtain a more realistic assessment of export potential), as well as with the regions of the world by commodity groups, in particular: the value of exports per capita of the country employed in the production of agricultural products; the ratio of exports of agricultural commodity groups to gdp (export quota); the ratio of exports of agricultural products to their production volume; the coefficient of net export potential; the coefficient of export efficiency of the country; the country 's participation in the international division of labour; the indicator of comparative (relative) advantages of foreign trade (formulas 1-5). exq ex gp i= (1), where is the ratio of exports of agricultural products to the volume of their production; ехi is the export of agricultural products to the і-th country; gp is the production of agricultural products in the country. с e i fttexp = −( ) →/ max (2), where cexp is the coefficient of net export potential; е is the export of agricultural products of ukraine; і – import of agricultural products of ukraine; ftt – ukraine's foreign trade turnover in agricultural products. еех w eu ех pp ех gp ех pp ех g і і w eu w eu w eu і i і( ) = ⋅ ⋅ ⋅ ( ) ( ) ( ) / / / / � 100 ppі � (3), where еех w eui ( ) is the export efficiency of the i-th country in the world (within the eu); ехі/ppі is the export of the i-th c country per capita engaged in agricultural production; ехі/gpw(eu) is the share of exports of the i-th country in the production of agricultural products of the world (eu); ехw(eu)/ ppw(eu) – exports per capita in the world (eu), engaged in the production of agricultural products; ехі/gpі is the share of exports of the i-th country in its production of agricultural products. cpidl w eu ех ех gp gp і і w eu і w eu ( ) = ( ) ( ) / / (4) where cpidlіw(eu) is the coefficient of participation of the country in the international division of labor in the world (within the eu); gpі – production of agricultural products of the i-th country; ехі is the export of the i-th country; ехw – world exports (eu); gpw – production of agricultural products in the world (eu). ra ex im ex im ij ij ij i i =      ln / / (5) where raij is an indicator of the relative (comparative) advantage of the i-th country for the j-th product; ex imi i, � – export and import of the i-th country; ex imij ij, � – export and import of the j-th commodity of the i-th country. if raij > 0, the country has an baltic journal of economic studies 133 vol. 7 no. 5, 2021 advantage in foreign trade in certain goods. if raij < 0, then the country has no comparative advantage for that good/product group. the arguments in favor of the proposed comprehensive approach are as follows: first, the resultsof a thorough analysis of the commodity and geographical structure of foreign trade in agricultural products of ukraine in general and exports, in particular, as a form of realization of the export potential of agriculture are the basis for its assessment and are accompanied by the definition of the main factors of its formation; secondly, the use of quantitative indicators to assess the export potential makes it possible to determine the effectiveness of the export potential of the country 's agro-industrial complex in comparison with other exporting countries and by commodity groups in trade with major regions of the world. 4. findings ukraine has favourable natural and climatic conditions for the development of agriculture, temperature variations that do not pose a threat to crops, a favourable geographical location, the availability of water and land resources. ukraine has 60.3 million hectares of land, which is 6% of europe's territory. the area of agricultural land is 42.7 million hectares (70% of ukraine) and arable land is 32.5 million hectares (78.4% of all agricultural land), including chernozems 17.4 million hectares (8% of the world's reserves) (stategeocadastre, 2020). however, violation of the rules of crop rotation, the insufficient use of organic fertilizers and uncontrolled decline in groundwater level leads to erosion, pollution and degradation of soils (from 2000 to 2020, the fertility level of soils of ukraine decreased by 3.14%) (lazarieva, 2019). ukraine's accession to the wto, transition to international quality standards, liberalization of customs regimes within the framework of the trade facilitation agreement (tfa), as noted in the paper of (ladychenko, tunitska, 2019), which contributed to the geographical diversification of foreign trade, were the stimulating factors for the export potential of the agricultural sector. acquisition by ukraine of the status of associated member of the eu and the signing of the memorandum of understanding "dialogue on agrarian issues" between the ministry of agricultural policy and food of ukraine and the directorate general for agriculture and rural development of the european commission. with the entry into force of the deep and comprehensive free trade area between ukraine and the eu (dcfta) on january 1, 2016, highly profitable eu markets were opened, which helped improve the quality of ukrainian food and strengthen the food security of ukraine, cooperation with international organizations and financial support for the development of ukrainian agribusiness, including smes, is proved in the work (melnyk, tunitska, 2020). the export potential of the country during the period under review has increased with the adoption and implementation of important regulations for the development of the agro-industrial complex of ukraine, in particular, the state target programme for rural development in ukraine for the period up to 2015, agricultural sector development strategy up to 2020, the concept of the ukrainian publicprivate partnership development program for 2013–2018, justification of the export strategy for the food and processing industry of ukraine for 2019–2023. however, the following factors have a negative impact on the export potential of ukrainian agroindustrial complex: the volatility of the political situation, military intervention by the russian federation, the lack of satisfactory scientific validity of economic reforms; the low level of state support, the lack of effective mechanisms of investment risk insurance; significant state support by the u.s. and the eu of their national producers, which reduces the level of international competitiveness of ukrainian food, forming a negative investment image of ukraine; development of large agricultural holdings, which creates the risk of unemployment for farmworkers (today there are 14 million people living in rural areas, of which 3.6 million work in agriculture) (state statistics service of ukraine, 2020); lack of legal regulation of genetic engineering in the country; technological backwardness of the vast majority of producers; high level of depreciation of fixed assets; use of extensive type of farming. throughout 2010–2020 foreign trade in agri-food products of ukraine was characterized by the excess of annually growing volumes of exports over imports. thus, in 2020 agricultural products worth 22,199.1 million usd were exported outside of ukraine, which is 123% more than in 2010 (table 1). the dynamics of foreign trade growth was negatively affected by the military and political confrontation with the russian federation, as evidenced by the negative growth rates in 2013–2015. however, while during the next five years the growth rate of imports of agricultural products to ukraine steadily increased by 10-13%, the rate of exports was abrupt. in addition, due to quarantine restrictions related to the pandemic coronavirus covid-19, the volume of exports in 2020 as a whole exceeded the figure for 2019 by only 0.2%. since the beginning of the period under review, the share of agri-food exports in total ukrainian exports has doubled to 45.1% in 2020, even despite the covid-19 global crisis. baltic journal of economic studies 134 vol. 7 no. 5, 2021 table 1 main indicators of foreign trade in agricultural products of ukraine in 2010–2020 year exports, million usd imports, million usd export surplus, million usd external turnover, million usd exports increase rate, % import increase rate, % foreign trade increase rate, % 2010 9936,1 5761,9 4174,2 15698 2011 12804,1 6346,7 6457,4 19150,8 28,9 10,1 22 2012 17880,6 7519,7 10360,9 25400,3 39,6 18,5 32,6 2013 17024,3 8184 8840,3 25208,3 -4,8 8,8 -0,8 2014 16669 6059,3 10609,7 22728,3 -2,1 -26 -9,8 2015 14563,1 3484,4 11078,7 18047,5 -12,6 -42,5 -20,6 2016 15281,8 3891,1 11390,7 19172,9 4,9 11,7 6,2 2017 17756,9 4301,2 13455,7 22058,1 16,2 10,5 15 2018 18611,8 5055,5 13556,3 23667,3 4,8 17,5 7,3 2019 22144,2 5736 16408,2 27880,2 19 13,5 17,8 2020 22199,1 6495,5 15703,7 28694,6 0,2 13,2 2,9 source: calculated by the author according to the state statistics service of ukraine table 2 dynamics of the geographical structure of agricultural foreign trade of ukraine in 2010–2020, % region indicator 2010 2014 2015 2016 2017 2018 2019 2020 cis export 33,5 14,8 10,0 7,5 7,6 8,0 6,5 5,9 import 14,0 12,0 9,0 3,8 3,2 3,4 4,0 3,9 europe export 20,4 28,6 27,9 27,1 32,1 33,1 33,2 29,6 import 43,0 46,6 48,5 50,1 53,8 54,9 56,3 57,0 asia export 31,4 40,7 47,1 48,2 44,7 44,8 43,7 50,2 import 19,4 21,2 22,3 24,5 22,6 22,1 20,6 20,7 africa export 13,8 15,3 13,8 15,9 14,3 12,5 15,0 13,0 import 5,8 4,7 5,7 5,1 5,1 5,1 4,4 4,6 america export 0,4 0,4 0,8 0,8 0,7 1,0 1,0 0,8 import 17,5 14,2 13,7 15,6 14,2 13,4 13,6 13,4 australia and oceania export 0,0 0,0 0,0 0,0 0,0 0,1 0,1 0,1 import 0,2 0,8 0,3 0,3 0,3 0,3 0,3 0,4 other unspecified countries export 0,5 0,1 0,4 0,5 0,5 0,5 0,4 0,3 import 0,0 0,5 0,5 0,5 0,8 0,8 0,8 source: calculated by the author according to the state statistics service of ukraine table 3 geographical structure of ukrainian agro-industrial products exports in 2020, % (top-10) europe cis asia africa america australia and oceania netherlands 21,6 belarus 38,9 china 32,0 egypt 47,4 usa 57,5 australia 72,9 spain 15,0 republic of moldova 17,8 india 13,5 tunisia 12,4 mexico 7,9 new zealand 13,6 poland 11,6 azerbaijan 13,0 turkey 9,6 morocco 11,7 canada 6,8 tuvalu 3,3 germany 8,8 kazakhstan 11,1 indonesia 5,1 libya 10,3 brazil 5,8 new caledonia 1,9 italy 8,6 armenia 5,6 saudi arabia 3,9 algeria 5,9 costa rica 4,8 fiji 0,6 uk 5,8 russian federation 5,3 iraq 3,6 ethiopia 1,5 ecuador 3,3 marshall islands 0,5 belgium 5,7 republic of uzbekistan 4,2 israel 3,4 mauritania 1,2 suriname 2,8 papua new guinea 0,4 france 5,5 kyrgyz republic 1,8 bangladesh 3,1 republic of kenya 1,2 venezuela 2,1 french polynesia 0,1 portugal 2,4 turkmenistan 1,3 republic of korea 2,7 mozambique 0,9 peru 1,9 palau 0,0 romania 2,3 republic of tajikistan 0,8 lebanon 2,6 south africa 0,8 guyana 1,5 cook islands 0,0 others 12,7 others 0,2 others 20,5 others 6,7 others 5,6 others 6,7 source: calculated by the author according to the state statistics service of ukraine baltic journal of economic studies 135 vol. 7 no. 5, 2021 the key markets for domestic agricultural products remain three regions: asia (china, india, turkey, indonesia, etc.), africa (egypt, tunisia, morocco, libya, etc.), europe (including the netherlands, spain, poland, germany, etc.) (tables 2, 3). in 2020, their total share was more than 98% of the value of ukrainian agricultural exports. the status of the main importers of ukrainian agricultural products has passed to asian countries, whose share in 2010–2020 increased from 31 to 50.2%, while the same indicator of former strategic partners – the cis countries decreased in 5 times and amounted to 6% in 2020. only countries in the asian region increased the volume of ukrainian food imports during quarantine measures due to covid-19. although european countries accounted for one-third of ukraine's agricultural exports over the past three years, their share in the region dropped from 33.2% in 2019 to 29.6% in 2020. analysis of the global market for agricultural and grocery products revealed an almost threefold increase in demand for agro industrial products over the past 10 years due to the aggravation of the global problem of hunger. in 2019, 820 million people suffered from it, including 8% of the population of developed countries in north america and europe (fao, 2020). in 2020, finished food products (37.7%) held the largest share in the structure of world exports, ahead of plant products (33.1%), live animals; animal products (22.9%); fats and oils held the smallest share (6.3%). the list of commodity groups has been identified for which demand will grow over 2010–2020, as evidenced by their dynamics and share in world exports (see table 4). these are meat and edible offal; fish and crustaceans; milk and dairy products, poultry eggs; natural honey; vegetables; edible fruits and nuts; grains; seeds and fruits of oilseeds; fats and oils of animal or vegetable origin; prepared grain products; processed vegetable products; various food products; alcoholic and soft drinks and vinegar; food industry residues and wastes. in 2020, their share of total world exports is 4-9%, and their combined share is 80%. the development of ukraine's exports does not correspond to global trends. the basis of ukrainian exports over the past 10 years are only 4 commodity groups: cereals (6th place among world exporters in 2020); seeds and oilseeds (8th place); fats and oils of animal or vegetable origin (5th place) and residues and wastes of food industry (16th place), the total share of which in the structure of ukrainian agricultural exports in 2020 was 84%. this trend is quite positive in terms of maintaining a highly competitive niche in export supplies and their expansion. however, it is necessary to accelerate the search for ways to diversify commodity exports through the supply of products that require deep technological processing of vegetable and livestock raw materials. contrary to the global trend in the structure of demand, the share of finished food products decreased from 26 to 15% in the total structure of exports of ukrainian agro-industrial complex due to the reduction by half on average of the already small export share of all product groups, except for food industry waste. the share of milk and dairy products, poultry eggs; natural honey; vegetables, edible nuts and fruits; meat and fish products; cocoa and cocoa products; finished grain products; processed vegetable products; alcoholic and soft drinks and vinegar decreased by 1.5-3 times. the decline in the share of the above mentioned ukrainian goods in their world exports indicates that ukraine is gradually losing its competitive position on the international market of these goods (table 4). economically developed countries of the world, having an established system of crop rotation management and realizing the significant effect of soil depletion from growing such traditional exportoriented crops as sunflower, corn and rapeseed for ukraine, import them and products of primary processing. instead, ukraine exports raw materials that, after processing in developed countries, return in the form of finished food products with high added value. thus, compared with 2010, their share in total imports of agricultural products has increased from 44 to 52%, in particular, the share of imports of meat and fish products, finished grain products, alcohol, various foods, tobacco products and dairy products has increased by half or two times. the orientation of ukrainian exporters to a limited number of agri-food commodity groups is also erroneous, given the dependence of the efficiency of export operations on seasonal fluctuations in world prices for these products, mainly grain, whose main competitive advantage is a relatively low cost. table 5 shows that despite the increase in exports, there is a growing negative balance due to excess imports in such commodity groups of agriculture as fish and crustaceans; other products of animal origin; vegetables; edible fruits and nuts; coffee, tea. rapid deterioration of the foreign trade balance against the background of decreased export and increased import occurred in milk and dairy products, poultry eggs, natural honey, meat products, fish, alcoholic and nonalcoholic beverages, and vinegar. negative balance and a decrease in exports are characteristic of cocoa and cocoa products; finished grain products and processed vegetable products. in the long term, to ensure a highly competitive position on the international food market, ukraine should not rely solely on the development of agricultural exports, given the average global level of its export potential. in 2019, for example, the vast baltic journal of economic studies 136 vol. 7 no. 5, 2021 table 4 comparison of the dynamics and structure of agricultural exports of the world and ukraine in 2010–2020 section, uktzed group and product name increase in exports of agricultural products in 2020 to 2010, % share of world exports of goods in total world exports of agricultural products, % share of commodity exports in the total exports of agricultural products of ukraine, % share of ukrainian exports in total world exports of agricultural products, % the place of ukraine in the world rankings world ukraine 2010 2020 2010 2020 2010 2020 2010 2020 total aic 33,8 123,4 100 100 19,3 45,1 0,9 1,4 i. live animals; products of animal origin 29,5 54,1 23,4 22,9 7,8 5,4 0,3 0,3 01 live animals 23,5 1316,8 1,7 1,4 0 0,2 0,1 0,2 84 46 02 meat and edible offal 36,8 623,3 8,6 8,6 0,9 2,9 0,1 0,5 44 27 03 fish and crustaceans 24,5 100,9 6,8 6,5 0,2 0,2 0,01 0,0 88 84 04 milk and dairy products, poultry eggs; natural honey 25,7 -34,2 5,7 5,7 6,5 1,9 0,9 0,5 20 31 05 other products of animal origin 39,5 103,2 0,6 0,6 0,1 0,1 0,1 0,2 50 52 ii. vegetable products 42,3 199,0 30,9 33,1 40 53,6 1,11 2,3 06 live trees and other plants 23,4 222,4 1,7 1,4 0 0 0,0 0,0 81 70 07 vegetables 26,9 41,0 4,6 4,6 1,2 0,8 0,2 0,2 46 37 08 edible fruits and nuts 56,1 14,2 6,5 7,7 2,1 1,1 0,3 0,2 47 50 09 coffee, tea 32,2 52,1 2,9 3,1 0,1 0,1 0,0 0,0 92 83 10 cereals (grain crops) 39,3 281,7 7,6 7,6 24,8 42,4 2,9 8,0 11 6 11 products of flour and cereals industry 32,8 91,0 1,4 1,2 0,8 0,7 0,3 0,8 58 25 12 seeds and oleaginous fruits 56,4 69,7 5,7 6,9 10,9 8,3 1,6 1,7 10 8 13 natural shellac 34,7 -25,1 0,5 0,5 0 0 0,0 0,0 65 78 14 vegetable materials for the manufacture 35,3 2710,9 0,1 0,1 0 0,2 0,2 4,0 52 9 ііі 15 fats and oils of animal or vegetable origin 21,3 120,1 6,4 6,3 26,3 25,9 3,3 5,9 7 3 iv. finished food products 31,9 30,7 39,3 37,7 25,9 15,1 0,6 0,6 16 meat and fish products 36,9 -53,6 3,4 3,3 0,5 0,1 0,1 0,0 60 78 17 sugar and sugar confectionery -6,7 21,2 3,4 2,7 2,1 1,1 0,5 0,6 38 24 18 cocoa and cocoa products 3,6 -66,0 3,3 2,6 6 0,9 1,6 0,5 19 32 19 finished grain products 61,8 23,1 4,4 5,0 2,6 1,4 0,5 0,4 33 40 20 vegetable processing products 29,0 -17,9 4,4 4,0 2,1 0,8 0,4 0,3 33 44 21 different food products 72,2 29,9 4,3 5,3 1,2 0,7 0,3 0,2 51 56 22 alcoholic and non-alcoholic beverages and vinegar 32,5 -49,6 7,8 7,5 4,5 1 0,5 0,2 31 47 23 food industry residues and wastes 41,1 229,1 5,0 5,1 4,8 7,1 0,3 2,0 31 16 24 tobacco and industrial tobacco substitutes -1,3 106,3 3,4 2,3 2,2 2 0,6 1,3 37 26 source: calculated by the author according to the state statistics service of ukraine, the world bank, fao, trendeconomy, and un comtrade majority of ukraine's largest trading partners were at a much higher level in terms of agricultural production per capita engaged in the farming sector; in terms of exports of agricultural products per capita, which amounted to 5864.8 u.s. dollars per capita, ukraine was ahead of some cis and asian countries, giving way to economically developed countries and world leaders in the production and export of food – the netherlands (445684.9 usd per capita), canada (142361.3 usd per capita), germany (110221.0 usd per capita), etc. (table 6). although ukraine participates quite actively in the international division of labour in agriculture, as evidenced by the size of the export quota (35.9%) and its level is higher than that of the selected partner countries, the net export ratio is the highest in the sample – 0.5 (except for brazil and new zealand), and the international division of labour in agriculture is above 1 (2.0), such active participation is not accompanied by a corresponding level of export efficiency. in general, agricultural export efficiency, which shows the per capita income of each percent of baltic journal of economic studies 137 vol. 7 no. 5, 2021 table 5 ukraine's foreign trade in agro-industrial products in 2010–2020 section, product group uktzed exports, million usd share of goods in total exports, % imports, million usd share of goods in total imports, % foreign trade balance, million usd 2010 2020 2010 2020 2010 2020 2010 2020 2010 2020 i. 771,4 1188,4 7,8 5,4 1241,7 1257,8 21,6 21,9 -470,3 -69,4 01 3,6 51,5 0 0,2 67,5 80,9 1,2 1,4 -63,9 -29,4 02 90,2 652,2 0,9 2,9 458,0 165,0 7,9 2,9 -367,8 487,2 03 21,0 42,2 0,2 0,2 568,6 680,3 9,9 11,9 -547,6 -638,1 04 648,8 426,6 6,5 1,9 135,4 308,4 2,4 5,4 513,3 118,2 05 7,8 15,8 0,1 0,1 12,2 23,2 0,2 0,4 -4,4 -7,4 ii. 3976,3 11890,1 40 53,7 1563,7 1988,3 27,1 34,7 2412,6 9901,7 06 1,8 5,7 0 0 73,9 48,8 1,3 0,9 -72,1 -43,0 07 119,2 168,1 1,2 0,8 129,9 262,5 2,3 4,6 -10,7 -94,4 08 208,8 238,4 2,1 1,1 733,3 794,9 12,7 13,9 -524,5 -556,5 09 9,9 15,0 0,1 0,1 234,1 251,3 4,1 4,4 -224,2 -236,3 10 2467,1 9417,3 24,8 42,5 145,6 178,9 2,5 3,1 2321,5 9238,4 11 80,9 154,6 0,8 0,7 27,5 35,2 0,5 0,6 53,5 119,5 12 1085,7 1842,4 10,9 8,3 178,9 388,0 3,1 6,8 906,7 1454,4 13 1,3 0,9 0 0 39,6 28,0 0,7 0,5 -38,4 -27,1 14 1,7 47,4 0 0,2 0,9 0,7 0,0 0,0 0,8 46,7 ііі 15 2617,3 5759,6 26,3 26 451,5 280,4 7,8 4,9 2165,8 5479,2 iv. 2571,1 3361,1 25,9 15,2 2504,9 2969,0 43,5 51,8 66,1 392,2 16 48,7 22,6 0,5 0,1 100,3 160,6 1,7 2,8 -51,6 -138,0 17 206,5 250,2 2,1 1,1 231,4 74,1 4,0 1,3 -24,9 176,1 18 591,6 201,4 6 0,9 407,3 375,9 7,1 6,6 184,3 -174,5 19 254,3 313,1 2,6 1,4 125,8 241,5 2,2 4,2 128,5 71,6 20 210,4 172,6 2,1 0,8 223,3 209,0 3,9 3,6 -12,9 -36,4 21 122,9 159,6 1,2 0,7 466,5 484,9 8,1 8,5 -343,5 -325,3 22 443,7 223,7 4,5 1 270,6 587,4 4,7 10,2 173,1 -363,8 23 479,1 1576,5 4,8 7,1 208,4 278,0 3,6 4,8 270,6 1298,5 24 213,9 441,4 2,2 2 471,4 557,5 8,2 9,7 -257,5 -116,1 source: calculated by the author according to the state statistics service of ukraine gdp (agricultural) exported compared to the world average, taken as 100%. the more a country exports per capita and the lower the share of exports in gdp (agriculture), the higher the economic efficiency of exports. according to our calculations, ukraine is characterized by an export efficiency slightly above the world average of 3.2 or 320%, ahead of the cis countries (not including the russian federation). while the level of export efficiency of developed partner countries (netherlands, germany, france, usa, canada) is 20-200 times higher than the world average. such a striking lag of ukraine according to this indicator is connected, first of all, with the distorted commodity structure of agricultural export, drawbacks of state regulation, degradation of science and lack of advanced technologies in the industry. a comparative analysis of the export potential of ukraine and the eu also showed a low level of export efficiency of ukraine, despite the significant level of participation in the international division of labour, the share of exports in agricultural products and export quotas. the increase in production is achieved primarily due to the number of employees, much higher than in the eu, which indicates the technological lag of ukrainian producers from economically developed countries (table 7). ukraine is one of the leaders in the world export market of food products with a limited number of agricultural products – raw materials and semifinished products. however, it is obvious that there are significant reserves to increase food supplies to traditional and other countries through the introduction of deeper technological processing. the results of calculation of the indices of relative advantages, which characterize the realized export potential of the agro-industrial complex as a whole in trade of ukraine with other regions of the world in 2010–2020 and determination of the priority of export of commodity groups are presented in tables 8 and 9. for those commodity items, which in the initial data showed no exports or imports, the index of comparative advantage could not be calculated, which indicates the implementation of only baltic journal of economic studies 138 vol. 7 no. 5, 2021 table 6 comparison of the export potential of the farming sector of ukraine and major trading partners, 2019* state production of agricultural products per person employed in agriculture, usd exports of agricultural products per person employed in the agricultural sector, usd export quota, % ratio of agricultural exports to production volume, % net exports ratio coefficient of participation in the int. division of labour export efficiency coefficient ukraine 16341,7 5864,8 11,48 35,9 0,5 2,0 3,2 netherlands 106937,4 445684,9 8,25 416,8 0,2 23,5 88,0 spain 65527,1 56083,8 3,21 85,6 0,2 4,8 32,2 poland 20889,4 14817,3 3,73 70,9 0,1 4,0 5,1 germany 97821,4 110221,0 1,46 112,7 -0,2 6,4 60,5 italy 42195,2 39122,7 1,77 92,7 -0,1 5,2 16,5 united kingdom 84590,3 45107,0 0,54 53,3 -0,5 3,0 14,3 france 86843,3 75740,8 1,89 87,2 0,1 4,9 49,1 belarus 20919,9 6944,7 5,98 33,2 0,0 1,9 0,9 republic of moldova 16329,6 6909,0 10,55 42,3 0,4 2,4 0,2 azerbaijan 3070,4 444,4 1,64 14,5 -0,4 0,8 0,0 armenia 6553,7 1510,4 2,58 23,0 -0,3 1,3 0,0 russian federation 23357,9 4187,2 1,03 17,9 -0,1 1,0 4,5 kazakhstan 13612,9 2685,9 1,77 19,7 0,0 1,1 0,5 india 2828,9 146,3 0,00 5,2 0,0 0,3 0,7 turkey 13585,9 4013,9 0,77 29,5 0,0 1,7 3,0 israel 110641,1 37967,7 2,68 34,3 -0,5 1,9 1,7 republic of korea 11050,9 2573,9 0,36 23,3 -0,7 1,3 0,4 egypt 6414,3 1080,0 0,35 16,8 -0,4 1,0 0,4 usa 170469,4 54880,4 0,22 32,2 0,1 1,8 219,8 canada 176343,6 142361,3 1,96 80,7 0,1 4,6 79,5 brazil 29351,0 11187,1 0,55 38,1 0,8 2,2 30,3 australia 112985,2 64085,4 2,36 56,7 0,3 3,2 26,3 new zealand 110636,4 124850,1 5,11 112,8 0,7 6,4 23,9 * data on global agricultural exports in 2020 is not fully available source: calculated by the author according to the state statistics service of ukraine, fao, and ilo table 7 comparison of indicators of export potential of agro-industrial complex of ukraine and eu countries, 2020 state agricultural production per capita employed in agribusiness, usd exports of aic per capita employed in aic, usd export quota, % ratio of agricultural exports to production volume, % net exports ratio coefficient of participation in the int. division of labour export efficiency coefficient ukraine 14361,3 6559,0 14,23 45,7 0,6 1,2 0,5 austria 147640,3 61753,0 3,66 41,8 0,0 1,1 3,5 belgium 411886,0 259771,5 7,61 63,1 0,1 1,7 24,6 bulgaria 36696,1 17887,0 8,47 48,7 0,1 1,3 0,3 greece 60018,1 15191,6 4,43 25,3 0,0 0,7 0,8 denmark 338491,5 213003,5 6,56 62,9 0,2 1,6 11,9 estonia 121460,1 56114,1 6,51 46,2 -0,1 1,2 0,4 ireland 268344,5 111704,0 3,86 41,6 0,2 1,1 6,6 cyprus 100807,2 21114,0 2,17 20,9 -0,4 0,5 0,1 latvia 64448,2 37743,1 10,61 58,6 0,0 1,5 0,3 lithuania 81427,8 60808,6 13,26 74,7 0,2 2,0 0,9 luxembourg 236985,0 674413,8 2,00 284,6 -0,4 7,5 0,5 malta 122244,0 44888,2 2,06 36,7 -0,4 1,0 0,1 portugal 108921,4 31874,7 4,01 29,3 -0,2 0,8 1,5 romania 23576,2 4547,9 3,48 19,3 -0,1 0,5 0,3 baltic journal of economic studies 139 vol. 7 no. 5, 2021 state agricultural production per capita employed in agribusiness, usd exports of aic per capita employed in aic, usd export quota, % ratio of agricultural exports to production volume, % net exports ratio coefficient of participation in the int. division of labour export efficiency coefficient slovakia 79588,7 32387,0 3,73 40,7 -0,2 1,1 0,5 slovenia 80046,3 33778,9 3,61 42,2 -0,2 1,1 0,2 hungary 69230,8 33196,0 7,64 47,9 0,2 1,3 1,2 finland 192685,3 16992,7 0,80 8,8 -0,5 0,2 0,6 netherlands 385559,6 361792,7 12,47 93,8 0,2 2,5 66,0 spain 171344,4 52209,0 5,15 30,5 0,2 0,8 17,0 poland 51347,7 18471,6 6,85 36,0 0,2 0,9 3,2 germany 191322,7 61569,9 2,44 32,2 -0,1 0,8 26,9 italy 159537,9 39972,2 3,04 25,1 0,0 0,7 13,8 croatia 52071,9 14088,0 4,28 27,1 -0,2 0,7 0,2 czech republic 103686,9 36005,2 4,09 34,7 0,0 0,9 1,6 sweden 315696,1 91437,4 2,16 29,0 -0,2 0,8 5,6 france 210692,9 55312,7 2,86 26,3 0,1 0,7 23,8 source: calculated by the author according to the state statistics service of ukraine, eurostat, and preliminary data by market experts table 8 indicators of relative advantages in mutual trade between ukraine and the countries of the world by commodity groups of agro-industrial complex in 2010–2020 section, product group uktzed europe cis asia america africa australia and oceania other unspecified countries 2010 2020 2010 2020 2010 2020 2010 2020 2010 2020 2010 2020 2010 2020 01 -6,3 -3,6 3,5 6,5 -0,5 4,8 -0,7 -0,8 3,7 02 -6,6 0,1 5,3 5,0 1,1 6,6 -6,5 -1,9 4,5 0,3 -3,3 -3,3 03 -4,9 -2,5 -0,2 1,0 -3,9 -1,7 -2,3 -4,3 -8,8 -8,3 -4,6 -5,9 -5,9 04 -1,9 -0,4 2,6 2,2 6,3 -1,0 7,6 -0,8 -5,2 -5,2 05 0,5 0,6 1,5 4,0 1,6 -0,4 -2,8 -5,9 06 -6,4 -2,7 1,9 3,2 -3,9 0,0 -5,3 0,2 0,2 07 -0,5 0,1 3,0 -1,2 -0,9 -0,6 -2,0 -0,2 -0,9 -0,8 3,3 3,2 3,2 08 -0,6 0,7 1,6 -0,3 -1,2 -2,4 -7,5 -4,2 -5,5 -6,4 -0,6 -4,4 -4,4 09 -2,4 -3,1 -2,2 1,3 -4,0 -2,8 -3,5 -3,4 -3,8 -6,8 -1,7 -0,7 -0,7 10 1,1 3,1 3,0 0,5 4,0 4,8 -8,0 2,3 15,1 -3,0 -0,3 -0,3 11 -0,5 0,7 1,6 0,3 3,9 4,4 0,9 4,1 1,7 3,6 -1,9 -1,9 12 2,5 2,5 3,8 3,5 2,2 1,4 -1,0 -3,0 2,0 1,1 -5,3 -4,0 -4,0 13 -4,8 -3,6 2,1 0,1 -6,4 -4,2 -4,8 -3,5 14 7,0 2,8 2,7 1,5 3,2 2,2 15 2,2 3,5 3,3 3,8 1,3 2,9 0,6 4,3 8,3 4,8 8,6 8,6 16 -3,3 -2,4 0,5 -0,2 -2,7 -1,6 -2,5 -2,4 3,2 -1,6 1,6 -0,5 -0,5 17 0,4 0,9 1,1 3,9 1,4 1,1 -4,6 2,0 0,7 2,3 -1,4 -1,4 18 -1,1 -0,8 2,3 2,9 1,0 -0,1 3,4 1,8 -14,3 -6,1 4,1 19 -1,3 -0,3 1,8 3,4 2,8 1,1 2,2 4,2 2,9 1,8 0,8 -1,3 -1,3 20 -0,9 0,2 2,6 1,4 -2,7 -1,0 -2,5 0,7 -2,0 -4,8 6,7 0,2 0,2 21 -2,6 -1,5 0,5 2,3 -0,7 -0,7 -4,0 -2,3 2,1 0,8 -0,7 -0,7 22 -1,0 -1,5 2,0 1,2 -0,8 -0,5 -0,7 -0,9 -0,8 -0,7 0,4 -3,3 -3,3 23 0,5 1,0 1,7 5,5 3,3 3,6 -3,8 1,8 -1,4 -1,4 24 -5,3 -3,5 0,3 2,4 0,0 1,5 -4,4 -1,5 -1,7 source: calculated by the author according to the state statistics service of ukraine (end of table 7) baltic journal of economic studies 140 vol. 7 no. 5, 2021 table 9 priority commodity groups of ukraine's exports for sale in the world markets by the criterion of relative advantages in 2020 europe cis asia america africa australia and oceania other unspecified countries g ro up u k t z e d r el at iv e ad va nt ag es in de x g ro up u k t z e d r el at iv e ad va nt ag es in de x g ro up u k t z e d r el at iv e ad va nt ag es in de x g ro up u k t z e d r el at iv e ad va nt ag es in de x g ro up u k t z e d r el at iv e ad va nt ag es in de x g ro up u k t z e d r el at iv e ad va nt ag es in de x g ro up u k t z e d r el at iv e ad va nt ag es in de x currently sold in the region and have high advantages 10 3,1 01 6,5 01 4,8 04 7,6 02 4,5 15 8,6 12 2,5 02 5,0 02 6,6 10 2,3 10 15,1 14 7,0 04 2,2 10 4,8 11 4,1 15 4,8 15 3,5 05 4,0 11 4,4 15 4,3 23 1,8 23 1,0 06 3,2 12 1,4 15 4,3 09 1,3 15 2,9 18 1,8 12 3,5 23 3,6 19 4,2 15 3,8 17 3,9 18 2,9 19 3,4 20 1,4 21 2,3 22 1,2 23 5,5 24 2,4 currently poorly represented in the market of the region, but have advantages and prospects for development 02 0,1 03 1,0 14 1,5 14 3,2 01 3,7 06 0,2 02 4,3 05 0,6 10 0,5 17 1,1 17 2,0 11 3,6 07 3,2 04 1,6 07 0,1 11 0,3 19 1,1 20 0,7 12 1,1 20 0,2 10 1,2 08 0,7 13 0,1 24 1,5 17 2,3 12 2,0 11 0,7 14 2,7 19 1,8 13 0,5 17 0,9 21 0,8 14 0,3 20 0,2 15 0,4 16 0,5 17 0,8 18 0,3 currently sold on the market, but has no advantages 01 -3,6 16 -0,2 03 -1,7 01 -0,8 03 -8,3 01 06 -1,1 03 -2,5 07 -1,2 05 -0,4 02 -1,9 04 02 -3,3 07 -0,1 04 -0,4 08 -0,3 06 0,0 03 -4,3 05 03 -5,9 08 06 -2,7 07 -0,6 05 -2,8 06 04 -5,2 09 09 -3,1 08 -2,4 06 -5,3 07 -0,8 05 11 13 -3,6 09 -2,8 07 -0,2 08 -6,4 08 -4,4 19 -0,2 16 -2,4 13 -4,2 08 -4,2 09 -6,8 09 -0,7 20 -0,2 18 -0,8 16 -1,6 09 -3,4 13 10 -0,3 21 19 -0,3 18 -0,1 12 -3,0 14 11 -1,9 22 21 -1,5 20 -1,0 13 -3,5 16 -1,6 12 -4,0 23 22 -1,5 21 -0,7 16 -2,4 18 -6,1 13 24 24 -3,5 22 -0,5 21 -2,3 20 -4,8 14 22 -0,9 22 -0,7 16 -0,5 23 -3,8 24 -1,7 17 -1,4 24 -1,5 18 19 -1,3 21 -0,7 22 -3,3 23 -1,4 24 source: calculated by the author according to the state statistics service of ukraine baltic journal of economic studies 141 vol. 7 no. 5, 2021 unilateral foreign trade operations or the absence of foreign trade in these goods. in general (with the exception of the cis market), in recent years, the list of domestic export groups that had sustainable relative advantages in mutual trade with the world (the indices of relative advantages are greater than one and positive) is small, and all of these groups are low-tech exports. ukrainian agricultural exports to australia and oceania are extremely underdeveloped. however, there is a potential opportunity to increase exports of ukrainian products with a greater degree of technological processing, in particular, to the markets of european countries – products of the flour-and cereal industry, sugar and confectionery products from it; to the markets of asia – finished grain products; tobacco and its industrial substitutes; america – sugar and confectionery products; vegetable processing products; africa – products of the flour-and-cereal industry; sugar and confectionery products from it; finished grain products. 5. conclusions the formation of export potential of ukrainian agro-industrial complex is influenced by both positive and negative restraining factors. the results of the analysis for 2010–2020 indicate the following trends: high dynamism of foreign trade in agri-food products in ukraine and annual increase in the total trade surplus; the main markets for domestic agricultural products are asia, europe and africa, while imports from the cis, a major partner in the past, are declining; under conditions of aggravation of the world food problem, despite the crisis related to covid-19, there is a significant increase in global demand for agricultural products, especially finished food, and the structure of ukrainian exports is dominated by commodity groups of low-tech raw materials, which steadily occupy the leading position in the world market; halving the share of finished food products in the overall structure of ukraine's agricultural exports and the rapid deterioration of the foreign trade balance due to a decrease in their exports and an increase in imports; weakness of ukrainian agro-industrial complex is due to the priority of strengthening the export potential of agricultural products (commodity groups and semi-finished products), as evidenced by the low level of export efficiency, despite the significant activity of ukraine in the world agricultural market compared to major foreign trade partners; low technological formation of the export potential of the agroindustrial complex of ukraine compared to the eu countries, which is manifested in low export efficiency; a limited list of commodity groups of ukrainian exports with stable relative advantages and their low-tech in relation to countries of all regions of the world, except the cis market, where high comparative advantages in finished food products are observed. undeveloped export of ukrainian products to the markets of australia and oceania. thus, the lack of structural reforms in the agro-industrial complex of ukraine can lead to irreversible lagging behind the main direction in the globalized world – the production and export of food products with high added value. the approach proposed by the authors to the assessment of the export potential of the agro-industrial complex can become a methodological basis for expert assessment when justifying and improving national strategies for the development of countries' 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(in ukrainian) baltic journal of economic studies 141 vol. 3, no. 2, 2017 corresponding author: 1 department of economy and international economic relations, v.o. sukhomlynskyi national university of mykolaiv. e-mail: tanyastroyko@gmail.com 2 department of economy and international economic relations, v.o. sukhomlynskyi national university of mykolaiv. e-mail: burkun@ukr.net transport infrastructure of ukraine: the modern realities and development prospects tetiana stroiko1, vitaly bondar2 v.o. sukhomlynskyi national university of mykolaiv, ukraine abstract. the purpose of the article is to conduct a complex research of the state of transport structure of ukraine and substantiate prospects of its development. the developed transport system and corresponding infrastructure are a guarantee of high level of the country’s development, increasing the level of its investing attractiveness. moreover, transport infrastructure serves as a uniting factor in the process of integration. thus, the main function of transport infrastructure is the formation of external conditions for the management of economic entities. it is determined that the development of a state directly depends on how efficiently it performs management in different spheres. first of all, it concerns transport infrastructure. today, the global trends necessitate constant perfection of management of transport infrastructure, in particular, investment attraction. the state and development level of transport infrastructure is one of the most important factors of socio-economic development of both member states of the european union and ukraine. transport infrastructure occupies a services market sector with a market share of 75%. and in the macroeconomic context, the share of transport infrastructure in the overall volume of gross domestic product of ukraine is 7%. in the modern management conditions, a negative dynamics of transportation and its share in the gross domestic product of ukraine are determined mostly by the influence of economic crisis processes and negative state of development of transport infrastructure of the country. for the evaluation of activities of transport of ukraine, we used the main indicators of its performance as criteria. the main criteria of performance evaluation of transport are: the volume of cargo transportation, cargo turnover, the ratio of modes of transport in cargo transportation, the volume of passenger transportation, passenger turnover, the cost of transportation, the ratio of passenger and cargo traffic in the economy. transport, as an infrastructure branch, should provide timely and efficient cargo and passenger transportation and promote the integration of the ukrainian economy into the european and world economic system. however, the existing unsatisfactory condition of the rolling stock of various types of transport in ukraine causes a low level of using the potential of ukraine as a transit state and, accordingly, reduces the competitiveness of the country’s economy. summarizing the above, it should be noted that the development of the transport infrastructure of ukraine is largely determined by the ability of authorities to implement systemic institutional changes aimed at conducting reforms. first of all, this concerns the implementation of the policy of european integration. in particular, it is necessary to create favourable conditions for the development of entrepreneurship, to realize the power decentralization and complete the administrative and territorial reform, to ensure further liberalization of foreign economic activity and to increase the efficiency of the use of financial resources allocated by the eu to support economic reforms in our country. key words: transport infrastructure, european integration, transit country, transport, cargo and passenger transportations. jel classification: а20, в22, в41 1. introduction the developed transport system and corresponding infrastructure are a guarantee of high level of the country’s development, increasing the level of its investing attractiveness. moreover, transport infrastructure serves as a uniting factor in the process of integration. thus, the main function of transport infrastructure is the formation of external conditions for the management of economic entities. single transport infrastructure of ukraine is a set of different modes of transport that ensure transportation of cargo and passengers and act as a complex, which includes: railway, motor, marine, river, air, and pipeline transport including all communications, transportation baltic journal of economic studies 142 vol. 3, no. 2, 2017 hubs, motive power, handling equipment, devices, and facilities. we made an attempt to conduct a complex research of the state of transport infrastructure of ukraine and substantiate its development prospects. 2. general state of the transport infrastructure of ukraine efficient functioning of the transport infrastructure is extremely high for the country that is geographically located in the centre of europe (geographical centre of europe is near rakhiv, zakarpattia region). ukraine has an access to the black and azov sea that increases a significance and role of the transport infrastructure, connecting the country with mediterranean countries. the territory of ukraine includes the most important transportation routes linking western europe with the countries of asia and the caucasus. the connection of corresponding business entities by transport network is essential for their economic cooperation (kyrylenko, 2016). the state’s development directly depends on how efficiently it performs management in different spheres. first of all, it concerns transport infrastructure. today, the global trends necessitate constant perfection of management of transport infrastructure, in particular, investment attraction. the state and development level of transport infrastructure is one of the most important factors of socio-economic development of both member states of the european union and ukraine (shyba, 2016). transport infrastructure occupies a services market sector with a market share of 75%. going to the macroeconomic context, the share of transport infrastructure in the overall volume of gross domestic product of ukraine – 7% (fig. 1). in the modern management conditions, a negative dynamics of transportation and its share in the gross domestic product of ukraine are determined mostly by the influence of economic crisis processes and negative state of development of transport infrastructure of the country. transport is a set of transport and auxiliary means, connections, controls, communications, and various technical devices, mechanisms, and structures that ensure their work. connections – roads, railways, waterways, air routes, monorail and cable cars specially adapted and equipped for traffic flow. the transport system of ukraine consists of different modes of transport. each of them has its own specifics. in order to ensure the operation of the country’s economy, all modes of transport should be interrelated and operate harmoniously. general transport network of ukraine includes 21.0 thousand kilometres of railways, 159.4 thousand kilometres of highways with a hard surface, 1.6 thousand kilometres of operational river shipping routes with an access to the azov and the black sea. for the evaluation of activities of transport of ukraine, we use the main indicators of its performance as criteria. the main criteria of performance evaluation of transport are: the volume of cargo transportation, cargo turnover, the ratio of modes of transport in cargo traffic, the volume of passenger transportation, passenger turnover, the cost of transportation, the ratio of passenger and cargo traffic in the country’s economy. the volume of transportation is the amount of cargo carried by one or another mode of transport. table 1 provides a dynamics of cargo transportation by different modes of transport during 2000–2015. all modes of transport demonstrated a reduction in traffic in 2015 compared to 2010 that is related to objective causes of a complex economic and political situation in the country. table 1 cargo transportation by modes of transport, million tons 2000 2005 2010 2011 2012 2013 2014 2015 2015 in % to 2000 2010 transport in total 1529 1805 1765 1887 1853 1837 1623 1474 96,40 83,51 railway 357 450 433 469 457 444 386 350 98,04 80,83 marine 6,3 8 4 4 4 3 3 3 47,62 75,00 river 8,3 13 7 6 4 3 3 3 36,14 42,86 motor 939 1121 1168 1253 1260 1261 1131 1021 108,73 87,41 air 0 0,1 0,1 0,1 0,1 0,1 0,1 0,1 х 100,00 pipeline 218 213 153 155 128 126 100 97 44,50 63,40 built by the author on data (transport i zviazok ukrainy 2015) 1765 1887 1853 1837 1623 1474 7,0 7,1 9,3 9,2 10,2 10,3 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2010 2011 2012 2013 2014 2015 year m to ns 0 2 4 6 8 10 12 % volume of transportation, m tons share of gdp, % fig. 1. dynamics of the volume of cargo transportation in ukraine in 2010-2015 built by the author on data [3] baltic journal of economic studies 143 vol. 3, no. 2, 2017 a growing share of road transport caused a decrease in the proportion of transportation by other modes of transport. in particular, the share of rail transport has decreased by 0.79 percentage points, pipeline  – by 2.09 pp, river and marine by 0.20 and 0.02 pp, respectively. the ratio of transport modes in cargo transportation characterizes the level of territorial concentration of production and the dynamics of its change. the ratio of transport modes in cargo transportation is determined by the composition of cargo-generating sectors, the degree of territorial concentration of production. if we consider the ratio of transport modes in western countries, it is the following: generally, railway transport accounted for 25%, motor – 40%, and the rest 35% – inland water, marine cabotage, and pipeline. in cis and countries of eastern europe as a whole, railways are dominated in the cargo turnover –about 60% on average, whereas freight transport by road amounts only to 9%. in north america, shares of railway and motor transport in cargo turnover are almost equal, whereas in russia they amount to 46 and 9% respectively (lavrova, 2012). in ukraine in 2015, as in previous years, the biggest share in the structure of cargo turnover is occupied by railway transport (fig. 2). 0 20 40 60 2010 2011 2012 2013 2014 2015 railway marine river motor air pipeline fig. 2. structure of cargo turnover by transport modes, % built by the author on data (transport i zviazok ukrainy 2015) in the structure of cargo turnover by transport modes, the biggest share is occupied by railway transport, which share accounts for more than 50% in the structure of general cargo turnover. at the same time, the proportion of cargo turnover of railway transport has a tendency to increase; so, in 2015 compared to 2010, this index has increased by 6.20 pp. it is a determining mode of transport that deals with bulk cargo for the industry, construction, and agriculture. the main cargo-generating sectors in the railway transport always were fuel and energy complex (mines, power plants, and oil refining), mining and metallurgical complex (crude ore, coke, metallurgy), and construction (sand, gravel, cement). the main cargo base for railway transport was being formed on the territory of three regions – dnipropetrovsk, donetsk, and luhansk. unfortunately, in relation to the complex political and economic situation in the east of the country, cargo base for railway transport has lost its volumes. also, a significant proportion is occupied by cargo turnover of motor transport, which share in 2015 amounted to 15.84%, which exceeds the level of the 2010 year by 3.05 pp. road transport in ukraine transported goods primarily for own use over short distances (average distance of transportation is 47 km). in the transport structure of ukraine, railways are a universal mode of transport with the widest opportunities for transportation. the overall length of the railway network of ukraine is over 21 thousand kilometres presented by six railroads that cover almost all territory of the country. its universality can be explained by some features of our country as well as features of just railway transport. at the modern level of development of technical means, railways can be built everywhere and can ensure the shortest connection between any points of our country. placement of the railway network on the territory of ukraine evolved in the course of a long historical process of development for over a hundred years and reflects the distribution of industry and environmental and economic efficiency of the use of agriculture. the densest network of railways is located in the central and table 2 the average distance of transportation of one ton of cargo by different modes of transport, km 2000 2005 2010 2011 2012 2013 2014 2015 2015 in % to 2000 2010 railway 484 497 504 520 520 506 544 557 115,08 110,52 marine 1362 1120 1271 1242 1033 941 1452 1173 86,12 92,29 in international traffic 1632 1432 1664 1666 1301 1102 1616 1666 102,08 100,12 river 706 491 549 388 407 488 432 498 70,54 90,71 in international traffic 1234 956 991 965 1169 1021 955 1083 87,76 109,28 motor 21 31 46 46 46 47 49 52 247,62 113,04 air 1974 2658 4315 4023 2960 2753 3044 3053 154,66 70,75 in international traffic 2023 2661 4328 4031 2975 2763 3060 3066 151,56 70,84 pipeline 859 932 895 883 870 886 821 830 96,62 92,74 built by the author on data (transport i zviazok ukrainy 2015) baltic journal of economic studies 144 vol. 3, no. 2, 2017 southern regions of ukraine. the main railway lines in this part of the network interconnect the main industrial areas (bortnyk). one of the most important qualitative indicators on cargo transportation is the average distance of transportation as it is this indicator that makes an influence on the size of turnover and duration of delivery. reduction of the distance of transportation reduces costs of cargo transportation and the need for transport in rolling stock. the average distance of transportation of one ton of cargo by different modes of transport is given in table 2. the average distance of transportation of one ton of cargo by the main modes of transport in 2015 compared to 2010 increased. in particular, the average distance of transportation of one ton of cargo by railway and motor transport increased by 10.52% and 13.04% respectively. transport, as an infrastructure branch, should provide timely and efficient cargo and passenger transportation and promote the integration of the ukrainian economy into the european and world economic systems. however, the existing unsatisfactory condition of the rolling stock of various types of transport in ukraine causes a low level of using the potential of ukraine as a transit state and, accordingly, reduces the competitiveness of the country’s economy. 3. development prospects of the transport infrastructure of ukraine in terms of european integration the transport system of ukraine is presented by almost all modes of the surface, water, air, and pipeline transport; however, in the development, it significantly behind the european system (table 3). given the number of population and historical aspects of development, the most interesting for ukraine is the positive experience of poland in the modernization of transport infrastructure in terms of approximation to the eu. however, at the same time, it is not necessary to focus solely on operational and financial as well as management and administrative levers. because in the process of reforming, the exceptional importance belongs to the institutional component of stimulating innovation processes in the development of transport infrastructure. in particular, as the experience for ukraine, one can use three key reforms, which were at one time successfully implemented by poland. first, it concerns a liberalization of the economy and foreign economic activity that stimulated the business development and increasing its competitiveness. in this context, poland in the period of postsocialist transformations carried out a number of important measures to encourage the establishment of businesses in all sectors of the economy (borshchevskyi). among others, this concerned also transport and logistics infrastructure. in other words, economic entities that searched for opportunities for additional income and had the necessary financial resources for this could easily invest them in the implementation of relevant investment projects. at the same time, the sphere of transport and transport infrastructure was marked by high investment attractiveness, as was badly in need of modernization. moreover, over the past decades, it faced a lack of investment resources. the second important direction towards the transformation of transport infrastructure of poland in terms of the country’s approximation to the eu was a decentralization of power and change of administrativeterritorial structure. this allowed forming an effective system of local government that received a sufficient volume of financial and administrative and management powers to implement its tasks. on this basis, there was formed a support system of road transport infrastructure within the local territorial communities. this gave an opportunity to essentially modernize and improve road industry, carry out a modernization of secondary roads, provide a formation of local logistical centres and creation of other objects related to the modernisation of transport infrastructure at the expense of local budgets. moreover, financial self-sufficiency of local communities, which occurred as a result of administrative-territorial reform made, it possible to maintain the majority of transport infrastructure’s objects in good condition and achieve certain synergy effects caused by the joint efforts of local government and business organizations that have implemented investment projects in the field of transport infrastructure. consequently, the table 3 comparison of transport provision of ukraine and some countries of europe in 2015 country area, ths.sq.km length of roads, ths.km road density, km/ths.sq.km rail mileage, ths.km rail density, km/ths.sq.km ukraine 603,7 163,0 270,0 21,0 34,8 poland 312,6 426,4 1364,0 20,2 64,6 france 551,6 951,7 1725,3 29,6 53,7 germany 357 647,2 1812,9 43,5 121,8 spain 307,6 683,4 2221,7 16,1 52,3 italy 301,2 487,8 1619,5 20,2 67,1 built by the author on data (transport i zviazok ukrainy 2015) baltic journal of economic studies 145 vol. 3, no. 2, 2017 modernization of transport infrastructure acquired a sustainable and balanced character, and its results led to positive changes in other areas of the economy. the third direction of realization of poland reforms, which have found its positive reflection in the modernization of transport infrastructure of the state, was the adaptation to the requirements and standards of the eu in the development of institutes of civil society. first of all, it concerns formation of a network of public organizations and other non-state institutions, which activities ensured an efficient use of tools of financial support of the eu for candidate countries. for these programs, poland attracted significant amounts of funds for the development of various parts of the transport infrastructure. at the modern stage, the cooperation of ukraine and the european union includes interchange of information and common activity: at the regional level, considering and implementing progress achieved within various transport agreements, in particular, the eastern partnership transport panel, transport corridor europe – caucasus – asia, baku process, and other transport initiatives. the cooperation covers the following spheres (uhoda pro asotsiatsiiu mizh ukrainoiu ta yevropeiskym soiuzom): development of sustainable national transport policy; development of sectoral strategies based on the national transport policy on the motor, railway, river, marine, and air transport, as well as intermodality, taking into account terms and the main stages of implementation, administrative responsibility, and financial plans; development of multimodal transport network related to the trans-european transport network, and infrastructural policy improvement; adherence to the relevant international transport organizations and agreements; scientific and technical cooperation and information exchange for the development and improvement of technology in the field of transport; promotion of the use of intelligent transport systems and information technology in the process of management and use of all modes of transport, and also support for intermodality and cooperation in using space systems and implementing business solutions that facilitate transportation. 4. conclusions summarizing the above, it should be noted that the development of transport infrastructure of ukraine is largely determined by the ability of authorities to implement systemic institutional changes aimed at conducting reforms. first of all, this concerns the implementation of the policy of european integration. in particular, it is necessary to create favourable conditions for the development of entrepreneurship, to realize the power decentralization, and complete the administrative and territorial reform, to ensure further liberalization of foreign economic activity, and to increase the efficiency of the use of financial resources allocated by the eu to support economic reforms in our country. what about ukraine, in order to approximate the transport sector of ukraine to the eu transport system, as well as challenges of perspective development of europe, the main tasks should be the following: – ensuring the integrity of the country; – conducting sector reforms in line with european standards; – increasing demand for transport; – the need to reduce greenhouse gas emissions; – security aspects of transport in order to reduce the number of road accidents; – the need to improve the transport efficiency; – promoting research activities; – completion of trans-european transport network; improvement of the integration of road, railway, air, and water transport (maritime and inland water transport) into a single logistic chain. referencesе: kyrylenko o. m. (2016). ekonomiko-istorychni zasady formuvannia transportnoi infrastruktury ukrainy. problemy systemnoho pidkhodu v ekonomitsi. vyp. 1: 7-13. shyba о. а. (2016). stratehiia rozvytku transportnoi infrastruktury ukrainy v umovakh yevrointehratsii. prychornomorski ekonomichni studii. vyp. 8: 35-40. [electronic resource]. available at: http://nbuv.gov.ua/ ujrn/bses_2016_8_9 transport i zviazok ukrainy 2015 (2016) [electronic resource] [tekst] : statystychnyi zbirnyk. lavrova yu. v. (2012). marketynh. klasychni polozhennia i osoblyvosti zastosuvannia na transporti. kharkiv: izd-vo khnadu, 227 s. bortnyk n. p. rol pravovoho rehuliuvania v rozvytku transportnoi infrastruktury ukrainy shchodo asotsiatsii z yevropeiskym soiuzom na prykladi zakhidnoho [electronic resource]. available at: http://ena.lp.edu.ua:8080/ bitstream/ntb/34592/1/6_34-39.pdf borshchevskyi v. modernizatsiia transportnoi infrastruktury v protsesi nablyzhennia do yes: dosvid polshchi dlia ukrainy [electronic resource]. available at: http://journals.iir.kiev.ua/index.php/ec_n/article/ download/3062/2750 uhoda pro asotsiatsiiu mizh ukrainoiu ta yevropeiskym soiuzom. hlava 7. transport [electronic resource]. available at: www.kmu.gov.ua/docs/agreement/annex_xxvi_to_xliii_to_agreement.pdf baltic journal of economic studies 146 vol. 3, no. 2, 2017 татьяна стройко, виталий бондарь транспортная инфраструктура украины: современные реалии и перспективы развития аннотация. целью работы является проведение комплексного исследования состояния транспортной инфраструктуры украины и обоснование перспектив ее развития. развитая транспортная система и соответствующая инфраструктура является залогом высокого уровня развития страны, повышая уровень ее инвестиционной привлекательности. кроме того транспортная инфраструктура выступает объединяющим фактором в процессе интеграции. поэтому главной функцией транспортной инфраструктуры является формирование внешних условий для хозяйствования экономических субъектов. определено, что развитие государства напрямую зависит от того, насколько эффективно оно осуществляет управление в различных сферах. прежде всего, это касается транспортной инфраструктуры. сегодня мировые тенденции диктуют необходимость постоянного совершенствования управления транспортной инфраструктурой, в частности привлечение инвестиций. состояние и уровень развития транспортной инфраструктуры является одним из самых весомых факторов социально-экономического развития как стран – членов европейского союза, так и украины. транспортной инфраструктуре принадлежит сегмент рынка услуг с рыночной долей в 75%. а в макроэкономическом разрезе – доля транспортной инфраструктуры в общем объеме валового внутреннего продукта украины составляет семь процентов. в современных условиях хозяйствования отрицательная динамика транспортных перевозок и их доля в валовом внутреннем продукте украины обусловлены, в основном, влиянием экономических кризисных процессов и негативным состоянием развития транспортной инфраструктуры страны. для оценки деятельность транспорта украины, нами использованы основные показатели его работы в качестве критериев. основными критериями оценки работы транспорта выступают: объем перевозок грузов, грузооборот, соотношение видов транспорта в грузовых перевозках, объем перевозок пассажиров, пассажирооборот, стоимость перевозки, соотношение пассажирских и грузовых перевозок в экономике страны. транспорт, как инфраструктурная отрасль, должно обеспечивать своевременные и эффективные грузовые и пассажирские перевозки, содействовать интеграции экономики украины в европейскую и мировую экономической системы. однако существующий неудовлетворительное состояние подвижного состава различных видов транспорта в украине вызывает низкий уровень использования потенциала украины как транзитного государства и, соответственно, снижает конкурентоспособность экономики страны. подытоживая изложенное, следует отметить, что развитие транспортной инфраструктуры украины в значительной степени определяется способностью власти внедрять системные институциональные изменения, направленные на проведение реформ. прежде всего это касается реализации политики европейской интеграции. в частности, необходимо создать благоприятные условия для развития предпринимательства, осуществить реальную децентрализации власти и завершить административно-территориальную реформу, обеспечить дальнейшую либерализацию внешнеэкономической деятельности и повысить эффективность использования финансовых ресурсов, выделяемых ес на поддержку экономических реформ в нашем государстве. baltic journal of economic studies 73 vol. 7 no. 5, 2021 corresponding author: 1 vasyl stefanyk precarpathian national university, ukraine. e-mail: zvarych2810@gmail.com orcid: https://orcid.org/0000-0003-2033-5054 2 vasyl stefanyk precarpathian national university, ukraine. e-mail: lena_zl@ukr.net orcid: https://orcid.org/0000-0002-5088-7565 doi: https://doi.org/10.30525/2256-0742/2021-7-5-73-77 innovations as an important component in the system of environmental sustainability in the management of the use of resource potential in the regions of ukraine ihor zvarych1, olena zvarych2 abstract. this article highlights the impact of innovation on achieving environmental sustainability of regional economic systems in the context of effective management of significantly limited natural resources in modern ukraine, which was the subject of the study, its key objective and main task. methodology. the proposed work uses systemic and synergetic approaches, methods of analysis and synthesis, induction and deduction, historical and comparative analysis, etc. value/originality. consideration of the issues of regional innovation and environmental sustainability of regional economic systems in their combination is a novelty in modern studies of ecologicaleconomic processes. it is exhaustively taken into account that innovation is a complex process of transformation of newly obtained ideas and goals into an actual object of economic relations. at the same time, it was found that in the conditions of transformation of the modern ukrainian economy began to manifest such features as frequent and unpredictable changes in demand due to the emergence of completely new needs, which can be satisfied only by qualitatively new, predominantly knowledge-intensive products. therefore, there is an urgent need to restructure regional economies on a fundamentally new basis, which provides a real opportunity to reproduce the existing innovation potential, improve the innovation and technological level of all spheres of economic activity in the region and achieve a much higher degree of competitiveness. at the same time, given the significant role of innovation processes in improving and ensuring the proper environmental sustainability of regional economic systems, the definition of appropriate tasks, taking into account their characteristics, is a prerequisite for the effective management of natural resources of the country as a whole and its regions. therefore, in european practice, the european innovation scoreboard (eis), calculated by eurostat, is used to determine the achieved level of regional innovation development. at the same time, the methodology used in its basis to assess the effectiveness of national research innovative projects is not without criticism. and one of the main criticisms was the absence of a conceptual or theoretical model of innovation. simultaneously, this paper proposes a fundamentally new approach to determining the effectiveness of innovation in the hierarchical-regional dimension, which is based on the use of appropriate tools of multidimensional statistical analysis and statistics of the european union (in particular, eurostat) and the state statistics service of ukraine. in addition, synchronously with their standardization, based on the obtained values of innovation levels in the regions, matrices were formed separately for incoming and outgoing regional innovation indices. result. the achieved levels of innovativeness of ukrainian regions in the context of ensuring appropriate environmental sustainability of their economic systems in the management of significantly limited natural resources were determined. practical implications. another real opportunity has arisen to significantly improve the management of the available natural resources of each region and the state as a whole in terms of ensuring the proper environmental sustainability of regional economic systems. key words: state, region, territory, environmental, sustainability, innovation indices, socio-economic development, innovation, innovations activity, natural resources, innovation process. jel classification: r58 baltic journal of economic studies 74 vol. 7 no. 5, 2021 1. introduction the fact that the decisive innovative impact on the economic development of economic entities and their territories is carried out mainly at the expense of investment (both internal and external) is generally undeniable. however, the issues of analytical definition of such impact and the development of appropriate methods and models of their investment and innovation development are still open. summing up the statements about investment and innovation policy, it is important to note that investment today are those economic resources that are directed not only to the expansion and modernization of production processes, but also on human capital (spending on education, research, training, etc.). it is becoming increasingly important at the present stage of economic development, since buildings and structures, machinery and equipment and, most importantly, the intellectual product as the main factor in modern economic development is mainly the result of human activity. the quality of human capital is also influenced by infrastructure, in particular its social component as a defining dominant providing subsystems of the regional economic sisterhood, so investment in social infrastructure, including environmental infrastructure, is also an investment in human capital. however, a new innovative form of investment (investment in innovation) has recently appeared in the economic literature, which is associated with the innovative direction of the world economy, aimed, in particular, at the economic use of available resources and the preservation of the environment for present and future generations. therefore, the study of the impact of innovation on the environmental sustainability of economic systems in the context of the effective management of natural resources is of important theoretical and practical importance. in conclusion, it should be noted that further in this article the authors will proceed from the broadest interpretation of investment (it is the pooling of capital for income or social effect), and innovation is modern ideas and the latest product in the organization of labor, engineering, technology and other areas of scientific and social activity, based on the use of scientific advances, which are the end result of innovative activity. 2. the impact of regional innovation on environmental sustainability given the significant role played by innovation processes in the modern economy, the definition and consideration of their features is a prerequisite for sustainable development of the state as a whole and its regions in particular (baula, savosh, liutak, 2017; voloshchuk, bogachuk, ivanyshyn, 2020; ganechko, afanasiev, 2016; strielina, gromenkova, 2010; peresada, 2020). note that ecological sustainability is the ability of the agrarian landscape to resuspend changes under the influence of various external factors, to preserve the structure and features of functioning under the transformation of the natural environment and anthropogenic pressure (in particular, agricultural production). therefore, environmental innovations play an extremely important role in ensuring the sustainable development of society and are the final eco-innovative product for the creation, use and implementation of environmentally oriented innovations, which are implemented in the form of environmental goods (products, works or services), technologies of their production, management methods at all stages of the production process and product sales, contributing to the development and growth of social and economic entities, ensuring resource and environmental safety, minimising the negative protection environment. thus, the consideration of these issues in their totality is a novelty in research practice, so their study is tentatively relevant in the context of the relevant repeated research tasks, which are solved by systemic and synergetic approaches, methods of analysis and synthesis, induction and deduction, historical and comparative analysis, etc. 3. european practice of defining regional innovation for this purpose, to determine the level of regional innovativeness it is proposed to use the european table of innovation development, calculated by eurostat (european innovation scoreboard). however, the european innovation scoreboard (eis) methodology for assessing the effectiveness of national research and innovation systems has not been criticized, which was fully justified (baula, savosh, liutak, 2017). thus, the 2017 eis calculation for ukraine was based not on 27 indicators, but on 18 (i.e., 2/3). accordingly, comparing ukraine and poland, for example, on the basis of one combined indicator, for which all 27 indicators were used in calculating the eis, is, according to the authors, generally incorrect. in 2016, the oecd criticized the eis, particularly in (methodology report on european innovation scoreboard, 2017) for: the unbalanced use of input and output indicators; the calculation of performance indicators does not take into account structural differences between states; there is no conceptual and theoretical discussion. relevant information in the eis must be supplemented with contextual and qualitative information in order to formulate appropriate policies. the global entrepreneurship monitor (gem) (the global entrepreneurship monitor (gem)) created an index of motivation that reflects the relative prevalence of entrepreneurs driven by improvement rather than necessity. using gem and eis data, baltic journal of economic studies 75 vol. 7 no. 5, 2021 a public opinion survey of this index is presented, as its value, according to many scholars, is lower than that of national statistical services. official statistical information on entrepreneurial activity is limited to data on registered enterprises, without distinguishing the reasons for founding a new enterprise (innovation opportunity or necessity). the motivational index is considered the best, taking into account the relationship between entrepreneurship and innovation (zvarych, 2018; the global entrepreneurship monitor (gem); bruno, izsak and hollanders, 2013; the nomenclature of territorial units for statistics). the changes in the eis measurement scheme compared to 2016 are as follows: the first is related to the regrouping of the innovative parameters of the eis. the purpose of this regrouping is to better differentiate the conditions and investments in innovation, the activities of enterprises, and the impact of such measures on them. the second difference was the addition of another dimension to better reflect the environment in which businesses innovatively respond to changes in the environment, such as new business expansion opportunities or threats that typically arise from existing businesses as well as new members. the third is to break down all output indicators to measure economic impact in two dimensions: measuring their impact on employment and estimating their impact on sales. 4. determination of regional innovativeness of territories of ukraine further, to determine the level of innovativeness of the regions of ukraine it is proposed to use, on the one hand, a structural measure of development as a tool of multivariate statistical analysis, and on the other hand, the eis 2017 indicators. in the process of discussing the level of regional innovation based on the analysis, one of them is the interpretation of regional innovation as a proportional relationship between innovation indicators such as input and output (zvarych, 2018). based on this approach, it is proposed to determine the effectiveness of regional innovation. to do this it is necessary to perform the following steps: to form statistical matrices based on regional innovation factors separately by input and output types; to determine the degree of innovativeness of each region of ukraine; to evaluate the effectiveness of innovation in a hierarchical context. definition of statistical matrices based on regional factors of innovativeness separately by input and output types. the european innovation scoreboard highlights the following spaces: knowledge creation and entrepreneurship; investment; innovation; and impact. selected spaces can be grouped into appropriate matrices according to the following hierarchical or indicator characteristics in terms of: national; regions in each state; meters of each input group; meters of each output group. according to their characteristics, regional innovation indicators were grouped into input and output types and the corresponding national statistical calculation indicators and corresponding units of measurement were selected. the next step is to construct a measure of regional innovation such as input and output. the construction of such an index of regional innovation of the input type is based on partial indices, which are defined for two groups of indicators: knowledge creation and entrepreneurship; investment. a partial inputtype index of regional innovation for each group of measures using data for all regions in all countries is the arithmetic average of the normalized values of each indicator for each region in each country. the normalized value is defined as the ratio of the deviation of the indicator from the minimum in the state to the deviation of the maximum and minimum values in the state. thus, we get a value, the range of change of which is a value from 0 to 1. the construction of such an index of regional innovations of the output type is based on partial indices for certain groups of indicators: innovation; impact. the principle of calculation of partial indices is the same as for input indices. the constructed partial indices are used to build regional innovation indices input and output. these indices by analogy are arithmetic averages of their partial indices. thus, their values will also change in the interval [0, 1]. since all eis indicators are stimulators, the interpretation of the indices is as follows: closer to 1 the value of the index shows a higher level of input or output type innovation. these indices allow us to rank regions according to their level of innovation on a national scale, taking into account the costs of innovation and the effects of innovation (methodology report on european innovation scoreboard 2017). semantic interpretation of the effectiveness of regional innovation requires refinement of the procedure of classification of regions, taking into account the chosen method of correlation of input and output indices. the generalization will make it possible to determine the level of regional innovation efficiency in the region. the proposed measure of innovation efficiency in the region will allow to determine the degree of innovation and state efficiency, in fact, at the national level. the last step is the construction of a measure of the effectiveness of innovation of the country in a hierarchical regional context, the measurement of which in a hierarchical interpretation takes into account the influence of the region on the state level in the field of innovation. regarding the results from the implementation of innovations, the leading positions are occupied by kharkiv region, kyiv and sevastopol (figure 1). baltic journal of economic studies 76 vol. 7 no. 5, 2021 zaporizhzhia, sumy, odessa, ivano-frankivsk, mykolaiv and lviv regions have slightly higher values compared to the input index. this indicates that innovation, in addition to financial, economic, and educational factors, has a significant impact on other factors not reflected in the eis. the effectiveness of innovation depends on technological (especially the focus on the development of modern technologies and market needs for new products), organizational and managerial (state of management; ability to innovate, change, restructuring; regional management structure) and, especially, social and psychological (attitude, expectations and reaction to the introduction of innovation) factors (zvarych, 2018). the proposed measure of the effectiveness of regional innovation provides a real opportunity to determine the measure of the effectiveness of innovation of the state (meis). table 1 shows the meis estimates for different values. as can be seen from table 1, the values of the measure of innovation effectiveness in the national context belong to the numerical range [0,01; 1]. its values, which are closer to the minimum, mean that the country has a weak position in terms of the effectiveness of innovation in a regional context, and values closer to 1 indicate the high effectiveness of its innovation in terms of territories (zvarych, 2018). 5. conclusions thus, based on the analysis of modern assessment of innovation, a methodological approach to determine the degree of innovation in a hierarchical regional context, drawing on the tools of multivariate statistical analysis, has been developed. the analysis of innovation in the regions of ukraine on the basis of the proposed methodological approach led to the following conclusions: the proposed eis does not contain a basic model of innovation, which would allow to justify the choice of innovative measurements and indicators and reflect the reasons that can be affected by innovation policy; the use of a single composite indicator and rating table does not allow figure 1. average values of output type innovation indices for the period 2010–2020 source: (zvarych, 2018) table 1 measuring the effectiveness of innovation in a national context (meis) 2010 2012 2014 2015 2016 2020 α=0,01 0,89 0,96 0,96 0,92 0,92 0,96 α=0,2 0,87 0,90 0,93 0,89 0,89 0,93 α=0,4 0,80 0,83 0,86 0,85 0,82 0,87 α=0,6 0,57 0,70 0,60 0,82 0,78 0,70 α=0,8 0,30 0,43 0,35 0,60 0,53 0,43 α=1 0,10 0,10 0,11 0,11 0,11 0,10 baltic journal of economic studies 77 vol. 7 no. 5, 2021 us to track the complexity of the innovation process; too many indicators determine innovation in hightech industries. this shifts innovation performance in favor of those countries that specialize in high-tech industries, particularly high-tech manufacturing; many indices are highly correlated and thus can cover and measure the same aspect of the innovation process. most indicators are not available for ukrainian statistics, so the distortion of data may jeopardize the reliability and accuracy of comparisons of ukraine's innovation performance with other countries. at the same time, a logical conclusion can be drawn about the lack of regional and state policy to stimulate and support innovation, because the costs are too minuscule, especially on a regional scale. meanwhile, to determine the achieved degree of efficiency of innovation in the national context, it is proposed to interpret the use of indicator as a multiplier of innovation in the regions. its importance directly determines the position of the state on the effectiveness of innovation in the regional context, and can therefore serve as a guide for national policy on this important issue. references: ganechko, i. g., & afanasiev, k. m. (2016). innovation activity in ukraine: tendencies and problems of development. bulletin of uzhgorod nat. un-ty. economics series, vol. 1(47), іssue 1, рр. 189–193. baula, o. v., savosh, l. v., & liutak, o. m. (2017). prospects for innovative development of ukraine’s economy in the context of the eu innovation scoreboard. bulletin of uzhgorod nat. un-ty. economics series, vol. 12, рart 1, рр. 24–28. voloshchuk, ju. o., bogachuk, s. v., & ivanyshyn, o. v. (2020). principles of ensuring innovative development of enterprises. innovative economy, vol. 1–2, рр. 73–78. peresada, a. a. (2020). investment process management. kyiv: libra, 472 p. strelina, o. m., & gromenkova, v. a. (2010). development of innovative technologies in the conditions of integration of ukraine into the international economic space. bulletin khmelnytskyi nat. un-ty, no. 5, issue 4, рp. 318–322. european innovation scoreboard. available at: http://www.ec.europa.eu (accessed 17 december 2021). zvarych, o. i. (2018). innovation indices of input and output regions. current problems of modelling and management of socio-economic systems in the context of globalization. mater. international. scient.-practic. conf. (drohobych, may 11). drohobych, рр. 147–151. methodology report on european innovation scoreboard 2017. available at: http://www.ec.europa.eu (accessed 17 december 2021). the global entrepreneurship monitor (gem). available at: http://www.gemconsortium.org (accessed 17 december 2021). bruno, n., izsak, k., & hollanders, h. (2013). new ways of measuring innovation, ius exploratory reports. brussels: european commission, 2013. available at: http://www.hollanders.unumerit.nl/eis/new%20ways%20 of%20%.measuring.innovation.pdf (accessed 17 december 2021). the nomenclature of territorial units for statistics. available at: http://www.ec.europa.eu/eurostat/web/nuts (accessed 17 december 2021). baltic journal of economic studies 94 vol. 2, no. 3, 2016 corresponding author: 1 department of management named after e. khraplyvyi, lviv national agrarian university. e-mail: mbilozir@mail.ru 2 department of management named after e. khraplyvyi, lviv national agrarian university. e-mail : volodymyrk@mail.ru possibilities of foreign experience in crediting of agricultural enterprises in ukraine mariana nazar1, volodymyr kovaliv2 lviv national agrarian university, ukraine abstract. the purpose of this article is to analyze existing systems of agricultural enterprises crediting in developed countries, as well as identify opportunities for the application of international experience in economic practice of ukraine. the subject of research is models of farms crediting in developed countries. the methodology of this study is based on the use of methods of theoretical generalization, comparison and systematic approach towards the development of proposals of the usage of foreign experience in ukrainian reality. results. experience in developed countries strongly suggests that the development of agricultural sector is not possible without effective public policy. efficient crediting system of farms should include cooperative, commercial, specialized banks etc. proper infrastructure of crediting institutions should be established. however, there are no structured creditors in ukrainian agricultural crediting system and commercial banks credit agricultural enterprises in efficiently. the system of agricultural sector crediting is over centralized as well as dependent on funds allocated by state budget. it is possible to solve this problem by creation of regional crediting unions of agricultural enterprises based on the european model. practical meaning. taking into consideration the experience of developed countries, it is obvious that in a growing economic crisis, with the emergence and increasing competition in the agricultural market in order to form national agricultural sector co-operative banks should be founded. thus, so far, it is neglected. actuality. the relevance of this study is to identify ways to improve state support of agricultural enterprises and further improvement of the legal framework related to the functioning of agricultural sector crediting system based on the experience of foreign countries. key words: crediting, financial support, credit, agricultural enterprises, bank crediting. jel classification: g21, g28, o24, q14 1. introduction effective use of agricultural potential of ukraine is hampered by a lack of financial resources in the farm. however, their crediting is a key component of sustainable economic development and food security insurance. the problem of agricultural enterprises financing is caused by the specificity of the industry: deficit of free financial resources, low capital productivity, seasonality of production, and the production cycle, which depends on climatic conditions. all this makes the sector unattractive for crediting. agricultural enterprises pay special attention to finding funding sources, which are required for continuous operation and further development of the industry. so, the question of bank crediting of agricultural enterprises is rather crucial as well as crediting by nonbanking financial institutions, which are considered to be the main funding institutions worldwide. thus, the purpose of the article is to research areas and funding mechanisms of solving the problems of agricultural enterprises based on international experience. 2. presenting of the main material agricultural policy of most of the countries is aimed at supporting agricultural producers through subsidies, grants, benefits. let us concentrate more on systems of financing of agricultural enterprises in western europe and the united states, which has its own specificity. for example, in the uk there wasn’t any specialized system of agricultural crediting; farmers were supported by government subsidies. agricultural crediting is not the subject to state regulation, but that does not mean that commercial banks do not participate in agricultural sector crediting midlend national bank deserve particular attention. it includes the financial management of agricultural department. in that department each manager works directly with clientfarmer, estimates his credit history, level of enterprise management, studies all the parameters funds movement, which enables the evaluation of the real needs of customers concerning financial costs (official site midland national bank) baltic journal of economic studies 95 vol. 2, no. 3, 2016 nowadays, secured credits on land are widespread. the abovementioned credits are given by the agricultural mortgage corporation. among other sources of long-term crediting of the agricultural sector an english melioration company can be mentioned, as well as private loans related to life insurance policies (yudin, 1992). farmers in the uk often use bank overdrafts instead of bank loans. their main advantage is that the percentage is calculated from the amount provided as a one-day loan. once paid the check at the bank, the loan amount decreases, interest on overdraft are added and should be paid quarterly. in 1955 agricultural credit corporation in the uk was established to guarantee return of farm credits, which guaranteed receiving bank overdrafts to farmers. those overdrafts were directed for the reconstruction of farms to improve the efficiency and profitability of the agricultural sector. but the share of government subsidies in the value of agricultural production equals more than one-quarter and is nearly the highest in the world (bodak, 2012). unlike in the uk, in germany, belgium, france, denmark, the us historical development of the agricultural sector has led to the creation of specialized institutions for agricultural enterprises lending. in france, kinds of loans, which are reimbursed in case of successful enterprise development, are very widespread, as well as loans with preferential interest. the leading role in farm crediting plays credit agricol, which is one of the largest banks in europe, it serves over 75% of the credit needs of the agricultural sector in france. according to official statistics, 9 out of 10 french farms are clients of the bank (official site credit agricole bank). program of german agriculture crediting aims to support investment measures to rationalize and improve the living conditions of agricultural producers, improve product quality, and to introduce high-tech industries (the experience of state regulation and support of agriculture abroad). in canada, a leader in lending of the agricultural sector is the state farm credit corporation (farm credit corporation) established in 1959. the corporation provides credit on the full range of tangible and intangible costs, acquisition of additional land, construction and modernization of facilities, purchase necessary equipment and animals, providing fertilizers, seeds purchase, payment of debt and others objectives. term of the loan payment, which is provided by the corporation, amounts from 10 to 30 years. the size of the credit depends on the economic situation of the borrower (nahornyi, 1998). activities of other credit institutions that operate in the market of loans for the agricultural sector are strictly regulated by the ministry of agriculture of canada. thus, the activity of credit facility in the system of agrarian relations in canada is regulated and coordinated by the state and aimed at development of efficient production. the most developed system of specialized concessional crediting exists in the us, where 12 federal land banks were founded back in 1912, which are subordinate to the council on agricultural crediting by the ministry of finance. these banks are also privileged because they are not subject to any local or federal taxes. lenders provide ample opportunity to the agricultural producers to choose sources of credit depending on the type and condition of the loan and the borrower. for financial services farmers set up special agencies: forest service of farmers, farmers' guarantee funds, and commodity credit corporation. there are also commercial and cooperative banks, other specialized agencies that deal with financial services of local agricultural producers. according to y. luzan (luzan, 2005), in the us these institutions provide the program of commercial lending of future harvest defined by the us congress due to an appropriate range of crops. they also organize purchase of main types of food products surplus directly from manufacturers, as well as provide special farm loans for their development and agricultural insurance support. abovementioned institutions also provide low-interest loans to support production of strategic agricultural products with credit repayment in the form of goods etc. farmers who participate in certain programs of the us congress are granted with annually approved state guaranteed prices for agricultural products. in addition, after relevant contracts signed, farmers get the opportunity to obtain interest-free loan of non-profit and 50% of the total future production. there are also some government programs to support exports of agricultural products and foodstuffs (luzan, 2005). in our opinion, on conditions of limited funding, in order to support domestic agricultural enterprises, the experience of credit guarantees programs should be taken into consideration as they were particularly effective in the united states. efficiency of agricultural sector crediting in the european union is based on the following principles: • it is a system of agricultural service cooperatives that allow agricultural producers to reject the services of intermediaries. the producers are owners and customers at the same time for them • it is a multilevel system of agricultural crediting cooperation. at the local level these are credit cooperative organizations (rural cooperative fund, credit unions, etc.). at the regional level, they are united in local and regional banks, and they, in turn, create a central national level cooperative financial institutions – central cooperative bank. such cooperative financial and crediting system of financial cooperation is the financial basis for the agricultural sector in a market economy and gives a possibility to provide affordable loans and other financial services for farmers (honcharenko, 2006). agriculture of central and eastern europe during the transformation of the economic system faced with many new issues: privatization, reform of land ownership and trade, stabilization of prices etc. the consequence of privatization was the creation of a great amount of new agricultural enterprises, which experienced lack of baltic journal of economic studies 96 vol. 2, no. 3, 2016 resources for economic activity in new conditions. in most countries with the economy in transition lending of the agricultural sector in 1990 was carried out on a cooperative basis with the participation of the state in crediting process. in slovakia state implements financial support of agricultural enterprises through credit leverage with the help of the state fund for agriculture and food, which focuses on providing loans at low interest rates (3-5%). it cooperates with the agricultural bank, which in turn provides economic analysis of credit conclusions granted to the fund, and the business plan in terms of the possibility of credit repayment. projects valued by bank according to the economic criteria are returned to the fund, which makes the final decision on the loan. it should be noted that the demand for such loans exceeds the supply. slovak bank of guarantee provides with agricultural crediting. in addition, the bank provides a limited amount of subsidies. loan guarantees concern working capital loans given by commercial banks. guaranteed loans are provided at the lower rate compared to non-guaranteed due to the lower risks for bank (chrastinova, 1999). czech model of crediting support of agriculture is formed gradually. at the beginning of reformation this sphere was maintained by direct subsidies. in 1992 publicinterest long-term loans were introduced, but a year later, to strengthen the effectiveness of the credit industry support the state guarantee fund for agriculture and forestry was established. the fund receives costs annually from the budget and in addition from the financial market. its help lays in interest payments to banks and providing of credit guarantees under many programs. additionally, the fund provides interest-free loans (10-20 years) to farms in regions affected by floods (silar, 1999). in hungary it was decided to provide credit support to farmers by creating special institutions different from the abovementioned. agricultural crediting guarantee fund, established in 1991, is the first organization in the country that specializes in credit guarantees. the purpose of the fund is to provide smes better access to credits and increase their credits reliability. the fund provides guarantees to smes, which take medium and long-term loans from financial institutions that are members of the fund or cooperate with it (danilovska, 2005). in poland, the system of cooperative banks provides loans for 90% of production, marketing and processing of agricultural products. farm crediting system in poland now resembles a credit system of western countries and consists of three levels: the central bank of credit unions; 9 regional banks; 1,200 local cooperative banks. in agricultural credit policy of poland considerable place is given to the modernization and rationalization of the agrarian structure, consolidation of young farmers in the countryside, aid to agriculture in areas with conditions unfavourable for agriculture. state regulation in this area is implemented with the support of the agency for restructuring and modernization of agriculture. the scope of the agency mainly includes loans, development projects and agricultural processing companies (more than 1/3 credits); purchase of machinery and equipment to improve productivity and product quality (20%); purchase products produced by agricultural enterprises (43%) (danilovska, 2005). some ways of problem solutions of farms crediting in these countries, though significantly different among themselves (which shows the flexibility and great potential credit as a tool for intervention) may be used today in ukraine. although there are three parties in each of these states, roles and responsibilities of each differ substantially. especially differ positions of the bank in the system: in each country, its role in the evaluation of offers is leading, but the responsibility of participation in risk is different. thus, experience of poland may be useful in terms of basic principles of providing payments to interest on loans (the system is definitely more effective than national) if to talk about the possibilities of borrowing of governmental crediting support techniques in the sphere of agriculture. an example of slovakia in terms of low-interest loans is not feasible to be introduced in ukraine, because commercial banks will not agree to reduce interest rates substantially, and the state does not possess enough levers of influence for them. world practice shows that the credit system of agricultural enterprises should combine government support specific mechanisms for the protection of bank loans, maintenance of various financial intermediaries, especially cooperative and specialized (agricultural) banks that are essentially different in terms of their functions and terms of providing support and crediting. the experience of developed countries shows that in a growing economic crisis, with the emergence and increased competition in the agricultural market for the modern formation of national agricultural sector agricultural cooperative banks should play an extremely positive role. nowadays the establishment of the banks in ukraine is neglected. 3. findings in our opinion, from the foregoing items stabilization, development and innovation should be allocated. particularly, it is essential to select the elements that will enable direct impact on the current state of ukraine's economy, where the main problems are generated. we believe that the main problem lays in the lack of available resources, which is cheaper and in sufficient quantity. in recent years it was proved that the banking system is not able to ensure the development of the credit market. we, therefore, suggest to use the polish experience in financial support, due to the fact that it has developed strategy and created a number of agencies and foundations that deal with co-financing enterprises since the independence was proclaimed. thus, there were following steps towards stabilization of the situation in poland: • deregulation of prices on agricultural products; • abolition of subsidies on consumption and capital goods; baltic journal of economic studies 97 vol. 2, no. 3, 2016 • stabilization of the currency; • introduction of real interest rates; • beginning of privatization process; • exposition of the domestic market to more foreign competition. funds and agencies with a target orientation played an important role in the stabilization and innovative development of agricultural enterprises. in 1992 the fund of agriculture restructuring and debt relief was founded, whose main field of work was the issuance of credits associated with the liquidation of unfavourable production conditions (drought, floods, etc.). the agency of restructuring and modernisation of agriculture was set up in 1993. it deals with additional payments to credit interest data by banks that cooperate with it; provides credit guarantees and sureties for bank loans; financing / co-financing of activities related to upgrading of rural infrastructure, which presupposes target elevation, change of qualifications of professional farmers (podstavka, 2000). at the beginning of competitive agriculture, creation of the agency of restructuring and modernisation of agriculture has funded 33 credit lines, in 1996, there were 21 lines, and after 1998 only 8 lines remained and they obtain the following character: 1. implementation of investment projects in agriculture and its services. 2. purchase of land. 3. opening or creation of farms by people under 40 who have worked at least for 3 years in agricultural sphere or with qualification connected with agriculture. 4. investment measures under sectoral programs. 5. credit for working capital. 6. creation of new jobs. 7. elimination of consequences of natural disasters. 8. buying up and storage of agricultural goods. one of the biggest problems today is the discrepancy of interest rates and capabilities of enterprises. producers are not able to pay 40-60% per annum for short-term loans, which may be a subject to insurance. certainly the percentage affects inflation but, in our opinion, right measures of nabu are able to reduce interest rates through the discount rate, targeted credit auctions etc. taking into consideration foreign experience it can be claimed that reasonable rate for agricultural business is 3-5% per annum, preferential loans are carried out at 1-2.5%. this situation creates difficult conditions for ukrainian enterprises in the light of ukraine's accession to the eu. 4. conclusions due to international experience, we consider that the state must continue provide crediting support to agricultural producers. if mechanism of crediting at lower rates will remain, the amount of partial compensation of interest rates should be fixed and not dependant on bank lending rates. compensation for investment lending programs should be more sufficient than the short-term crediting to replenish working capital. state interest towards directions of the agricultural sector should be prior while selecting companies to participate in the programs of concessional lending. we consider it appropriate to support agricultural producers from budget, both by loans of commercial banks and credit unions. in order to provide crediting of agricultural enterprises in crisis, the government should support the establishment of crediting cooperatives in rural areas through the proceedings of special lending programs. references: yudin, a. (1992). state regulation of lending and agriculture in the uk and us. international agricultural journal, 5: 44-50. bodak, h.i. (2012). foreign experience of agricultural production. scientific bulletin of national forestry university, 22.6: 164-169. official site midland national bank. retrieved from: http://www.midlandnb.com/2706/mirror/. official site credit agricole bank. retrieved from: http://www.credit-agricole.fr/agriculteur. the experience of state regulation and support of agriculture abroad. russian agrarian portal "agricultural education". retrieved from: http://www.agroobzor/econ/a-125 nahornyi, v.d. (1998). the structure, functions and budget of the ministry of agriculture and food canada. scientific and technological agriculture, 3: 44. luzan , y.a. (2005). financial aspects of the market environment in the agricultural sector. accounting and finance, 6: 5-13. honcharenko, v. (2006). credit co-operatives, build new rural financial infrastructure. "mirror of the week". chrastinova, h. (1999). finansing of the agricultural sector of slovak republic and credit infrastructure in transition economies. oecd proceedins. oecd centre for co-operation with nonmember, 358-364. silar, s. (1999). credit support and the guarantee fund for fermers and foresty in czech republic. agricultural finance and credit infrastructure in transition economies. oecd centre for co-operation with nonmember, 263-276. danilovska, a. (2005). support for lending in poland compared to other countries. association of agricultural economists and agribusiness. annals of science, v.6: 66-70. podstavka, m. (2000). financial system of agriculture on the background of polish integration into the european union.fapa, 79-86. baltic journal of economic studies 98 vol. 2, no. 3, 2016 марьяна назар, владимир ковалив возможности зарубежного опыта в кредитовании сельскохозяйственных предприятий в украине аннотация. целью данной статьи является анализ действующих систем кредитования сельскохозяйственных предприятий в развитых странах мира, а также выявление возможностей применения зарубежного опыта в экономической практике украины. предметом исследования являются модели кредитования сельскохозяйственных предприятий в развитых странах мира. методика данного исследования базируется на использовании методов теоретического обобщения, сравнения, а также системный подход для разработки предложений по применению зарубежного опыта в украинских реалиях. результаты. опыт развитых стран убедительно свидетельствует, что развитие аграрного сектора экономики невозможно без эффективной государственной политики. результативная система кредитования сельскохозяйственных предприятий должна включать кооперативные, коммерческие в.т.ч. специализированные банки и тому подобное. должна быть соответственно сформирована инфраструктура кредитных институтов. однако, в украине система агрокредитования не имеет сейчас структурированного кредитора, а коммерческие банки неэффективно кредитуют сельскохозяйственные предприятия. система кредитования аграрной сферы является чрезмерно централизованная и зависит от средств, выделяемых государственными бюджетами. решить данную проблему можно созданием по европейскому образцу региональных кредитных союзов аграрных предприятий. практическое значение. изучение опыта развитых стран показывает, что в условиях роста экономического кризиса, с возникновением и обострением конкуренции на аграрном рынке для современного становления отечественного аграрного сектора экономики исключительно положительную роль должны сыграть сельскохозяйственные кооперативные банки, созданию которых в украине уделяется недостаточно внимания. значение/оригинальность. актуальность данного исследования заключается в выявлении путей для улучшения государственной поддержки сельскохозяйственных предприятий и дальнейшем совершенствовании нормативно-правовой базы, связанной с функционированием системы кредитования аграрного сектора на основе применения опыта зарубежных стран. baltic journal of economic studies 62 vol. 1, 2015 european chemical industry competitiveness: historical trends and development prospects dmytro gladkykh1, donetsk national university (vinnitsa), ukraine abstract. the purpose of the paper is to analyze historical trends and development prospects of the european chemical industry competitiveness. it is concluded that the chemical industry is one of the eu’s most successful spheres, boasting €527 billion in sales in 2013, making it the second-largest global manufacture. methodology. to explain the competitiveness of the eu chemical branch in the global market, it is proposed the constant-market share methodology to chemical exports coupled with econometric analysis. results. the constant market share (cms) approach to assessing competitiveness, developed in the 1970 s for analysis of trade, is based on the principle that changes in the geographic and product structures of exports will affect a country’s export growth relative to that of the world, and that is way its global export market share. there were analyzed the eu biggest exporters (germany, france, italy, uk, spain, netherlands, belgium, poland), the usa, japan; china, india, saudi arabia, brazil. practical implication. the analysis presents the results of competitiveness assessment in a different way, showing the average annual growth rate of eu and world chemical exports in the top section and then decomposing the gap between the two into that thanks to growth dynamics (structure effect) and competitive effect. it is defined a lot of factors that are important to industrial competitiveness. on the cost side, in many industries labor is a large enough share of overall production costs that international differences in salaries can have a large bearing on competitiveness. costs are also affected by a variety of government policies. it is also defined that innovation is one of the most important factors, which opens up new opportunities both in terms of new products and more efficient processes for manufacturing existing products. value/originality. given analysis helps to understand the causes and factors that have an impact on the european chemicals competitiveness what gives an opportunity to make forecasts and prospects of the future development of this sector. key words: chemicals competitiveness, global manufacturing, constant market share, international comparison, competitive effect. jel classification: f 14, f 17, l 65. 1. introduction the chemical industry is one of the eu’s most successful spheres, boasting €527 billion in sales in 2013, making it the second-largest global manufacture. but in spite this strength, the current situation appears to be cause for worry. the chemical branch was affected by the 2008-09 global crisis, and after a rapid cyclical turnaround, production has stagnated since 2011. over a longer time horizon, the eu’s share of global exports has fallen sharply, suggesting a decline in competitiveness, amongst other factors. in order to understand the competitive performance of the eu chemical branch in the global market, oxford economics has applied the constant-market share methodology to chemical exports coupled with econometric analysis (oxford economics, 2014). using constant-market share analysis of chemical exports at the aggregate and subsector level for the eu and some other large developed and developing countries that are significant chemical exporters, this paper bears out that the majority of the decrease in extra-eu export market share observed over the past 20 years (including that since the 2008-09 financial crisis) is thanks to declining competitiveness as opposed to slow-growing destination markets. falls have also been seen in other developed countries at the expense of china and saudi arabia, albeit the magnitude of the european decline is larger than that of the usa. the decline has been driven by petrochemicals and polymers (competitiveness, 2015). because of the erosion of competitiveness, the eu has slipped from number three to four out of seven leading global exporters with regard to absolute levels of competitiveness (landscape, 2014) within the eu, the countries with the highest level of competitiveness are the belgium, netherlands and germany, while poland and spain have leapt in the rankings at the expense of france and great britain. corresponding author 1 department of international economics assistant, donetsk national university (vinnitsa). e-mail: music23@mail.ru baltic journal of economic studies 63 vol. 1, 2015 2. competitiveness assessment methodology the constant market share (cms) approach to assessing competitiveness, developed in the 1970 s for analysis of trade, is based on the principle that changes in the geographic and product structures of exports will affect a country’s export growth relative to that of the world, and that is way its global export market share. thus, even if a country maintains its export share in destination markets and spheres it serves, if demand in those countries and sectors is growing slowly than the average, its global export market share will fall. in theory, this has to mean that if one corrects for the fact that a country’s export product mix and geographic distribution is different from the average, its export growth should equal world export growth, thus maintaining a “constant market share” of exports in markets and spheres it serves (alliance, 2014). in practice, a country’s export growth differs from the world even after accounting for the structural effect. this difference is termed the competitiveness effect, and it measures change in market share in the destination markets and spheres that the country serves. if this is falling it is assumed to indicate a reduction in competitiveness and conversely. the great strength of the given approach is its ability to decompose export growth into that driven by global growth trends (which are beyond the direct control of individual countries) and that thanks to national competitiveness (which can be influenced by economic policies). it provides a useful and easy-to-understand way of gauging the extent to which trade performance is driven by external and internal factors. other measures of changes in competitiveness, such as movements in the trade balance, don’t have this ability. strength is that the indicators are consistent across countries, thus facilitating international comparisons. besides, export data quality is good compared to other indicators because of the administrative information that needs to be collected when products cut across national borders. a final strength is the granularity of the information about sectors. it is conducted the analysis in five subsectors of chemicals for the eu and six other countries. analyzing countries: eu: defined as aggregate of 8 biggest exporters (germany, france, italy, uk, spain, netherlands, belgium, poland), accounting for over 90% of extra-eu exports; developed countries: us, japan; developing countries: china, india, saudi arabia, brazil. subsectors: petrochemicals, polymers, basic inorganics, specialty chemicals, consumer chemicals (chemical connections, 2015). the fig. 1 shows the evolution of the eu’s export market share. the given graphic shows the instability of the chemicals export of the eu. we can see that the eu’s global export market share dipped in the early 1990 s but then recouped 0 5 10 15 20 25 30 35 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 source: (oxford economics, 2014, see p. 6) fig. 1. the eu chemicals market share in 1991-2011, % those losses later in the decade, with the movements driven by changes in competitiveness. since 2003 it has fallen steadily, with the majority of this fall thanks to declining competitiveness rather than slower-growing export markets. the table 1 presents the results of competitiveness assessment in a different way, showing the average annual growth rate of eu and world chemical exports in the top section and then decomposing the gap between the two into that thanks to growth dynamics (structure effect) and competitive effect. table 1 the results of the eu competitiveness assessment periods 1992-2000 2000-2008 2008-2014 average annual growth rate, % growth of the eu chemical exports 9,7 10,8 5,3 growth of world chemical exports 9,6 13,6 10,6 percentage points, % difference between world and eu export growth 0,2 -2,7 -5,3 due to structure effect 0,3 -0,8 -1,5 due to competitive effect -0,2 -1,9 -3,9 source: (oxford economics, 2014, see p. 6) as we can see, in the postcrisis period, average annual eu chemical export growth was 5,3 percentage points less the 10,6% rise in world exports, and it is seen that this gap was thanks to worsening competitiveness, though slowergrowing markets were an important reason too. 3. international prospects of the eu chemicals competitiveness trade in chemicals is large business: total world exports excluding intra-eu trade rose nearly sevenfold to €525 billion from 1995 to 2014. for comparison, non-eu chemical manufacturing reached €2.7 trillion in 2014, implying that about 20% of production is exported. the eu remains the second-largest chemical exporter after the usa and ahead of japan (and would be the largest if intra-eu trade were included). in spite of it, there are baltic journal of economic studies 64 vol. 1, 2015 some dramatic changes in these shares over the past 20 years. the eu’s share has fallen to 18% (smaller than the declines in the usa) at the expense of dramatic increases in developing countries. the goal is to describe and understand these tendencies. in the 1990 s, there were dramatic changes in the european economy. in the first part of the decade, market share fall in the wake of the collapse of the soviet union and reunification of germany, both of which imposed adjustment costs on germany particularly and had indirect adverse effects on other countries of western europe (energy policy, 2013). but the strengthened connections between eastern and western europe worked to the eventual benefit of nations such as the czech republic and poland. after a period of adjustment during which they moved to more marketoriented economies and modernized their industrial capacity, they could offer chemicals of comparable quality but with significantly lower wages and production costs. thus put pressure on germany, the united kingdom and other large exporters within europe, but also helped the eu improve its export market share in the 1990 s. besides, the global economy picked up considerable momentum in the end of 1990 s, in particular in the usa, where industrial production rose 5.1% annually in 19952000. as the us is the main market, this gave a boost to european exporters and contributed to a recovery of market share. by the late 1990 s, exchange rate integration was underway with the introduction of the euro as an accounting unit on january 1, 1999 and as a currency in 2002. the euro weakened significantly in the two years after its launch. the effect on the cost of exports may have helped support the eu’s global export market share in the 2000 s beginning (european chemistry, 2013). subsequent to that competitive pressures started to mount with the accession of china to the wto in december 2001. as china gained expanded access to international markets and continued its rapid process of industrialization and development of low-cost producing, the eu’s share of chemical exports began a sharp decline. in the wake of the 2008-2009 global financial crisis, the eu share slid further, partly thanks to a recovery in its key markets (the usa and non-eu europe), but mainly thanks to a further deterioration of competitiveness. 4. the eu comparison with the developed countries the usa, as the eu, has had a considerable fall in market share, and the large majority is because of declining competitiveness. the damage had been done by the mid2000 s. later, export competitiveness has stabilized. as said earlier, the eu is not alone among developed countries in facing competitive pressures in the chemical sector. japan demonstrates a completely different pattern, which shows the advantage of being located near a high-growth region. its actual global export market share has fallen significantly less than that of the usa, and about as much as the eu’s share. but the reason for this is not better competitiveness; rather, it is the structural effect of growth dynamics. japan has become a key exporter to china, which has the most rapid industrial manufacturing growth in the world, and accounting for this would have implied an increase in market share in the 2000 s. in essence, proximity to growing markets is helping offset a large and growing competitiveness gap in japan. 5. the eu comparison with the developing countries chemicals export market shares are on the rise across the developing world, but as in the developed world, there are contrasts in trends over time. the fastest increase is in china, where market share increased fourfold to exceed that of japan by 2014 by a comfortable margin. this rise is evident across most subsectors, illustrating the development of a diversified chemical sector in china. most of the increase in market share occurred after china’s entry into the wto in 2001. the structural effect was flat to negative in the 1990 s and 2000 s, showing the fact that one of china’s largest destination markets during that time was japan, which was dealing with two decades of deflation and poor economic growth. since the financial crisis, it has focused its attention on india and other asian markets, resulting in a positive structural effect. nonetheless the large share of the increase in market share is because of increasing competitiveness. similar patterns are evident in india, though the scale is smaller. saudi arabia’s export market share has rose as well, with all of it occurring within the past seven years. the spike in 2008 is undoubtedly because of the opening of a plant that serves export markets but the increase has continued in the post-crisis years. unlike for china, the increase is concentrated in petrochemicals and polymers; other spheres have low export market shares and have not seen any significant increases over the sample period. furthermore, a bigger proportion of the rise in market share is explained by growth in destination markets, albeit the improvement in competitiveness is substantial as well. brazil is a different story, where export market share (1% of world exports in 1992) has struggled to rise. there was a slight rise in the mid-2000 s as the government of lula da silva implemented structural reforms designed to support the business environment. since then reform has stalled and the tangle of red tape, regulation, and taxes known as the “custo brasil” has stymied further improvements in competitiveness. 6. potential drivers of the chemical competitiveness there is a long literature on the factors that are important to industrial competitiveness, and many of them are important not only for the chemical industry but for the whole spheres of tradable goods. because competitiveness baltic journal of economic studies 65 vol. 1, 2015 is about offering superior customer value at an attractive price, all drivers are in one way or another connected with the production costs or product quality. on the cost side, in many industries labor is a large enough share of overall production costs that international differences in salaries can have a large bearing on competitiveness, and is one of the causes that some industries, such as mass-market apparel, have migrated to the developing world over the past decades. while the chemical industry is less labor intensive than producing as a whole, there is reason to believe that labor costs may nonetheless matter. another cost that is important in the chemicals industry is energy and raw materials costs. the chemical branch is the most energyintensive of all producing sectors: in the eu, it accounts for 20% of industrial energy using, well above its 7% share of producing output. for certain subsectors like petrochemicals and basic inorganics, energy and feedstock costs are larger than payroll costs, so it is expected this to be very important – indeed evidence from the usa shale gas boom is suggestive in this regard. exchange rates also influence the cost of goods purchased by foreign consumers, and macroeconometric research demonstrates that a weaker currency tends to be followed acceleration of export growing. it is expected the same to be true in the chemicals industry, though the impact of higher import prices could have an offsetting impact in subsectors that are important importers of raw materials. costs are also affected by a variety of government policies. on the negative side, burdensome tax systems reduce after-tax profits (and the resources to invest in activities that support competitiveness) and also increase compliance costs. similarly, regulations, if not well structured, increase the resources that companies must devote to compliance and, in some cases, have unintended consequences that stymie new product development and innovation (cefic, 2015). on the positive side, governments have an important role to play in the development and quality of infrastructure such as transport networks, with roads being the most important with respect to international trade. to the extent that it reduces transportation costs, complements private business investment and promotes supply chain breadth, the quality of a country’s infrastructure can enhance competitiveness. with regard to product quality, the most important factor is innovation, which opens up new opportunities both in terms of new products and more efficient processes for manufacturing existing products. the internet is the archetypal example, having spawned not only new products, but new industries. but the chemical sector is also rife with examples of wider innovation impacts, such as lightweight materials for automotive and aerospace efficiency, development of cleaner-burning fuels, and others. 7. conclusions it is analyzed historical trends and development prospects of the european chemical industry competitiveness. it is concluded that the chemical industry is one of the eu’s most successful spheres, boasting €527 billion in sales in 2013, making it the second-largest global manufacture. to explain the competitiveness of the eu chemical branch in the global market, it is proposed the constantmarket share methodology to chemical exports coupled with econometric analysis. the constant market share (cms) approach to assessing competitiveness, developed in the 1970 s for analysis of trade, is based on the principle that changes in the geographic and product structures of exports will affect a country’s export growth relative to that of the world, and that is way its global export market share. the strength of the approach is the ability to decompose export growth into that driven by global growth trends and that thanks to national competitiveness (which can be influenced by economic policies). it provides a useful and easy-to-understand way of gauging the extent to which trade performance is driven by external and internal factors. there were analyzed the eu biggest exporters (germany, france, italy, uk, spain, netherlands, belgium, poland), the usa, japan; china, india, saudi arabia, brazil. the analysis presents the results of competitiveness assessment in a different way, showing the average annual growth rate of eu and world chemical exports in the top section and then decomposing the gap between the two into that thanks to growth dynamics (structure effect) and competitive effect. it is defined a lot of factors that are important to industrial competitiveness, and many of them are important not only for the chemical industry but for the whole spheres of tradable goods. on the cost side, in many industries labor is a large enough share of overall production costs that international differences in salaries can have a large bearing on competitiveness, and is one of the causes that some industries, such as mass-market apparel, have migrated to the developing world over the past decades. exchange rates also influence the cost of goods purchased by foreign consumers, and macro-econometric research demonstrates that a weaker currency tends to be followed acceleration of export growing. costs are also affected by a variety of government policies. on the negative side, burdensome tax systems reduce after-tax profits (and the resources to invest in activities that support competitiveness) and also increase compliance costs. on the positive side, governments have an important role to play in the development and quality of infrastructure such as transport networks, with roads being the most important with respect to international trade. it is also defined that innovation is one of the most important factors, which opens up new opportunities both in terms of new products and more efficient processes for manufacturing existing products. baltic journal of economic studies 66 vol. 1, 2015 references alliance for competitive european industry (2014). retrieved september 8, 2015 from http://www.cefic.org/ documents/policycentre/competitiveness/shifting-gears-for-new-eu-industrial-partnership-manifesto.pdf cefic (2015). impact of lower oil price on the european chemical industry. retrieved september 5, 2015 from http://www.cefic.org/documents/policycentre/competitiveness/impact-of-lower-oil-price-on-the-europeanchemical-industry.pdf chemical connections. (2015). how opening up chemicals trade can boost growth and jobs in europe. retrieved september 5, 2015 from http://www.cefic.org/documents/policycentre/competitiveness/chemicalconnections.pdf competitiveness of the european chemical industry (2015). how to regain ground in the global market. retrieved september 4, 2015 from http://www.cefic.org/documents/policycentre/competitiveness/competitiveness-ofthe-european-chemical-industry-2014.pdf energy policy at the crossroads (2013). finding the road to a competitive, low carbon and energy efficient europe. retrieved september 8, 2015 from http://www.cefic.org/documents/policycentre/ets/energy-roadmap-thebrochure-energy-policy-at-the-crossroads.pdf european chemistry for growth (2013). unlocking a competitive, low carbon and energy efficient future retrieved september 8, 2015 from http://www.cefic.org/documents/policycentre/ets/energy-roadmap-the%20 report-european-chemistry-for-growth.pdf landscape of the european chemical industry (2014). retrieved september 5, 2015 from http://www.cefic. org/documents/landscape-european-chemical-industr y/landscape-of-the-european-chemical-industr ymarch-2014.pdf oxford economics (2014). evolution of competitiveness in the european chemical industry: historical trends and future prospects. retrieved september 3, 2015 from http://www.cefic.org/documents/policycentre/ competitiveness/oxford-study-2014.pdf дмитрий гладких конкурентоспособность европейской химической промышленности: исторические тенденции и перспективы развития аннотация. целью статьи является анализ исторических тенденций и перспектив развития конкурентоспособности европейской химической отрасли промышленности. получены выводы, что химическая промышленность ес является наиболее успешной сферой, прибыль которой в 2013 году составила 527 млрд. евро, став второй крупнейшей глобальной отраслью. методология. для объяснения конкурентоспособности химической отрасли промышленности ес на глобальном рынке предложена методика расчета постоянной рыночной доли экспорта химической продукции, а также эконометрический анализ. результаты. предложенная методика, развитая в 1970-х гг. для анализа торговли, базируется на принципе, что изменения географической и товарной структур экспорта влияют на рост экспорта страны, что в итоге влияет на экспортную долю на глобальном рынке. были проанализированы крупнейшие экспортеры ес (германия, франция, италия, великобритания, испания, нидерланды, бельгия, польша), сша, япония, китай, индия, саудовская аравия, бразилия. практическое значение. анализ показывает результаты оценки конкурентоспособности различными способами, отражая средний уровень увеличения доли стран ес в глобальном экспорте химической продукции, а также динамику структурных эффектов и эффектов конкуренции. определено несколько факторов, которые влияют на конкурентоспособность химической отрасли. с затратной стороны важно выделить оплату труда, которая значительно влияет на конкурентоспособность отрасли. также важно отметить характер политики, проводимой государством. не менее значимым фактором являются инновации, которые открывают новые возможности для производства новой продукции и новых процессов, способных улучшить качество уже существующих продуктов. значение/оригинальность. данный анализ помогает понять причины и факторы, которые влияют на конкурентоспособность химической отрасли ес, что дает возможность прогнозировать перспективы будущего развития данного сектора. baltic journal of economic studies 188 vol. 7 no. 4, 2021 corresponding author: 1 transport and telecommunication institute, latvia. e-mail: veronika.silinevicha@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-4-188-195 characteristics and trends of indicators of export, import, and electricity consumption in lat via. wind power consumption characteristics and trends veronica silinevicha1 abstract. energy markets with high penetration rates of renewables are more likely to face price fluctuations or volatility, which is in part due to the stochastic nature of renewables. latvia's electricity market is an excellent example of such a market, as more than 40% of latvia's electricity generation comes from hydropower, which challenges the projected spot electricity prices for latvia's electricity market. the article identifies trends in the natural and value indicators of total exports, imports, total currency turnover and electricity consumption in latvia with a more detailed study of the characteristics and trends of electricity consumption indicators from renewable resources for the period 2014, 2015–2019. in addition, wind power utilization rates were considered both for the observed period as a whole and on a monthly basis for 2019. in general, the results of the study confirm the feasibility of latvia's plans to increase both total electricity consumption and its share from renewable sources. at the same time, the coronavirus pandemic has already begun to lead to negative consequences for electricity consumption in eu countries, which have so far affected latvia to a lesser extent. nevertheless, these consequences will inevitably lead to an adjustment of latvia's electricity plans towards an increase in the share of production and consumption of electricity from renewable sources, including wind energy, despite its upward price trend. the author with employment of the tools excel trendline obtains trends of indicators, approximating formulae dependencies and the coefficients of determination for the relevant diagrams and charts. key words: electric power indicators of export, import, total exchange turnover and electricity consumption, electricity from renewable sources, trends. jel classifications: e20, c30, r30 1. introduction latvia provides detailed statistics on the natural and price indicators of electricity generation and consumption from various types of power plants (tpp), including hydro and wind power plants (hpp and wpp). the current analysis of these indicators carried out both in companies related to the production and distribution of electricity, for example (central statistical bureau of latvia 2021; jsc augstsprieguma tīkls, latvian electricity market overview 2020; european network of transmission system operators for electricity 2020; review of res perspective in baltic countries till 2030), and in academic environment (balodis 2020; prohorova 2020; viskuba, silinevicha, 2020; etc.). trends, indicators and prospects for the development of latvia's energy sector in conjunction with climate change for the next decade are reflected in the national plan of latvia for 2021–2030. the author set herself the task of analyzing the dynamics and trends of the indicators under consideration for the period 2014, 2015–2019 – a period ending, on the one hand, with the adoption by the european union of strategic decisions to combat harmful emissions into the atmosphere and the global transition to the production of electricity using renewable sources, and, on the other hand, the outbreak of the coronavirus pandemic. the expansion of electricity production from renewable sources will grow only at the expense of wind power, since the hydro power generation capabilities of the daugava hpp cascade are limited by its design characteristics. the results obtained in the article can serve as a basis for subsequent identification of trends in the analyzed indicators in the post-coronavirus perspective and for the development of appropriate practical recommendations. calculation of trends of indicators, approximating formulae dependencies and the coefficients of determination for the relevant diagrams and charts are based on big data collected from the latvian transmission system operator augstsprieguma tīkls, baltic journal of economic studies 189 vol. 7 no. 4, 2021 central statistical bureau of latvia, and nord pool, the nordic power exchange. the data used in the empirical study is collected from hourly data from the period 1 january 2014 to 31 december 2019. the analysis of a small number of selected indicators in the work is carried out using graphs and displaying on them the equations of the trends of these indicators, as well as the coefficients of determination r2, obtained by the authors using the trendline excel toolkit. with a large number of analyzed indicators, their display on the graphs is cumbersome, therefore the graphs are accompanied by tables in which the trend equations and the coefficients r2 and r – the correlation coefficients between the estimated and observed values of y and x. trends reflects the dynamics of growth (decrease) of statistical indicators and can be used to forecast them for a short-term period (usually for one period – a month, a year). regression dependences, (rawling, pantula, dickey, 2018) which make it possible to qualitatively assess the direction of the trend, were selected by the author from linear equations that, according to observations of xi yi, have the following general form: y = bx + a, (1) where the coefficients a and b – are the least squares estimates. linear regression relationships were used only to assess the qualitative direction of trends. other types of trends provided by the trendline excel toolkit are partially used in the work in order to obtain greater reliability of their direction. recall that for a linear regression model with one parameter х, the coefficient r2 is equal to the square of the correlation coefficient between the estimated and observed values of y and х. in estimating regression models, the value of the coefficient of determination r2 is interpreted as the model correspondence to the presented data (abdey, 2018). 2. method and materials used power generation in the baltic states is provided by condensing and co-generation tpp, hpp, and wpp. in estonia and lithuania, most of the electricity is generated mainly by condensing plants powered by shale oil and gas, respectively. in latvia – at cogeneration thermal power plants and the daugava hpp cascade, which gives significant competitive advantages in the fight against environmental pollution. according to (international renewable energy agency, 2019) the total installed capacity of renewable energy facilities in 2010 and 2018, respectively: in latvia – 1622 and 1797 mw; in lithuania – 278 mw and 832 mw; in estonia – 256 mw and 633 mw. thus, in latvia the production of electricity from renewable energy sources (res) increased insignificantly during this period, while in lithuania and estonia this production increased by about 3 and 2.5 times. these countries were forced to significantly increase "clean" electricity production due to the consequences of the closure of the ignalina nuclear power plant (lithuania) and phased preparations to reduce electricity production from oil shale (estonia). all of the baltic countries are experiencing power shortages. latvia's production covers less than 90% of electricity consumption, importing it from lithuania and estonia, which in turn import it from other european union countries – finland, sweden and poland. latvia also imports from third countries, such as russia. the average daily production and consumption of electricity in latvia depends on many factors, so latvia imports and exports electricity by buying and selling it on the nordpool electricity exchange. latvia imports electricity mainly at night and on weekends, when it is cheaper on the market, which allows it to reduce the flow of water in the reservoirs of the daugava hpp cascade and use the accumulated reserves for production during peak hours. over the past four years, electricity trade between the baltic states and other european countries has doubled. 3. discussion and research results the dynamics of statistical natural electricity indicators in latvia in mwh for the period 2015–2019 is presented in table 1 and shown in figure 1. the following designations of average hourly volumes (mwh) have been introduced: production (q1), consumption q2), import (q3), export (q4), total exchange turnover q5 (import + export: q5 = q2 + q3) and the excess of import over export q6 (q6 = q3 – q4). table 1 electricity generation, import, export and consumption in latvia, 2014–2019 indicator mwh (year) 2014 2015 2016 2017 2018 2019 total net electricity production (q1) 4857 5384 6228 4401 6500 6108 deliveries to the internal market, consumption (q2) 7172 7201 7263 7278 7408 7226 import (q3) 5338 5247 4827 4074 5172 4612 export (q4) 3119 3424 3794 4136 4264 3494 import+export total (q5) 8457 8671 8621 8210 9436 8106 import-export (q6) 2219 1823 1033 (62) 908 1118 source: created by the author based on central statistical bureau of latvia baltic journal of economic studies 190 vol. 7 no. 4, 2021 data on latvia's total electricity demand, net electricity production, imports and exports for the period 2014–2019 are shown in figure 1. there have been no significant fluctuations in final energy consumption over the last decade, moreover, the usage of electricity in 2020 decreased due to the coronavirus crisis (a state of emergency was declared in the baltic states in mid-march to limit the spread of the covid-19 pandemic, which affected demand for electricity, especially in the legal entity segment). along with the increase in power generation, power exports have also largely increased (the graph shows the ratio of net power generation to power exports). the electricity import is volatile, during the researched time period, however, it is partly relating to export changes. it should be noted that latvian exports exceeded imports in 2017. that year, latvia's domestic electricity production covered 101% of consumption. the data in table 1 and figure 1 show that electricity imports to latvia are increasing when electricity generation at the daugava hpp cascade decreases due to a drop in the water level in the reservoir. accordingly, the export of electricity increases significantly with the growth of electricity generation at the daugava hpp cascade with an increase in water inflow into the reservoir. during the observed period, only in 2017, the volume of exports q4 = 4136 mwh slightly exceeded the volume of imports q3 = 4074 mwh of electricity. table 2 shows the minimum, average and maximum values of the average hourly indicators qi, the corresponding trend equations qti, as well as the values of the coefficients r2 and r. table 2 and figure 1 show that annual electricity consumption in latvia is virtually unchanged and averages 7258 mw h, peaking at 7408 mw h in 2017 and decreasing to 7226 in 2019. note that the closeness of the relationship (according to scale chedoke) between statistical data on these indicators and linear trend equations, expressed by the coefficients r2, ranges from weak (qt1, qt3) to moderate (qt2, qt4, qt6). these equations can be used for a short-term "approximation" of the corresponding indicators for the next year, but not for an accurate estimation, since regression models with coefficients r2, <1 are of low practical value. electricity production (qt1), consumption (qt2) and export (qt4) trends are upward. the trends in imports (qt3) and the excess of imports over exports (qt6) of electricity are of a downward character, which indicates the dynamics of a slow but decreasing dependence of latvia on imports of electricity. the trend of the exchange turnover of electricity (qt5) has a neutral character with practically zero coefficient r2, and the corresponding equation cannot be used for a short-term "approximate" forecast of this indicator. according to (latvenergo: savlaicīgas investīcijas modernu elektrostaciju attīstībā stiprinās latviju, 2020) it is noted that the baltic countries are technically capable of providing the electricity needed, but for commercial reasons it is often more profitable to import it due to high carbon dioxide emission costs -2000 0 2000 4000 6000 8000 10000 2014 (x=1) 2015 (x=2) 2916 (x=3) 2017 (x=4) 2018 (x=5)) 2019 (x=6) q1 q2 q3 q4 q5 q6 figure 1. dynamic of electricity generation, import, export and consumption in latvia, 2014–2019 source: created by the author based on data from central statistical bureau of latvia table 2 minimum, average and maximum values of average hourly indicators qi and their qti trend equations indicators qimin qimax qimid equation qi r2 r q1 4401 6500 5580 qt1 = 222.17x +4802.1.1 0.2471 0.5 q2 7172 7408 7258 qt2 = 25.886x + 7167.4 0.339 0.58 q3 4074 5338 4878 qt3 = -131.66x + 5339.1 0.2629 0.51 q4 3119 4264 3705 qt4 = 0.135.34x + 3231.5 0.3294 0.57 q5 8106 9436 8584 qt5 = 3.6857х + 8570.6 0.0002 0.014 q6 (62) 2219 1173 qt6 = -267х + 2107.7 0.398 0.63 source: created by the author baltic journal of economic studies 191 vol. 7 no. 4, 2021 and lack of sufficient heat load to run large gas power plants in riga in economic cogeneration mode. the covid-19 pandemic in europe and the baltic countries has led to an average decrease in electricity consumption of about 10% since the beginning of 2019 due to slowing economic development (balodis, 2020). the baltic countries have the smallest decrease in electricity consumption in the european union: in march and april 2020, consumption decreased by 6.2% compared to the same period in 2019 (estonia – 4%, latvia – 4.3%, lithuania – 6.3%). it is claimed that during this period of the pandemic, none of the eu countries violated or worsened the security of electricity supply, that is, they did not stop the supply of gas and electricity or reduce their production. in march 2020, the total electricity generation in the baltic countries increased by 2%, while latvia had the highest electricity generation – 12% more than in february, and for the first time the production-toconsumption ratio was 107%, while in estonia – 48%, and in lithuania – 35% (prohorova, 2020). table 3 presents data on the share (%) of electricity generated (without own consumption and losses) in latvia from renewable sources, which are hpp and wpp, obtained by the author by calculation using statistical data from jsc "augstsprieguma tīkls", latvian electricity market overview. the share of electricity produced by solar energy was not taken into account. despite the fact that in 2019 solar power plants produced 3 times more electricity than in 2018, its share (csb 2019) in the total generated electricity is still insignificant. the total share of hpp and wpp by year is shown in figure 2. figure 2 shows the dynamics of the total share of electricity produced by hpp and wpp in the total amount of electricity produced in latvia during the period under review. the linear trend of this indicator (lower line in figure 2), as well as the logarithmic trend, over the observed period has a neutral character with a barely noticeable increase, but with very low determination coefficients – r2 = 0.022 and 0.0791, respectively. from table 3 and figure 2 it follows: first, the share of electricity production from res for these years averaged 42.25%, with a maximum of 58.7% in 2017 and falling in 2018 and 2019; second, both the total share and its components are unpredictable, so more qualitatively this trend can be determined by the 2020 and 2021 statistics. we recall that in accordance with national energy and climate plan of latvia 2021–2030, the share of renewable energy in final energy consumption should increase (in %) in 2020, 2022, 2025, 2027 and 2030, respectively, to 40.95, 41.25, 42.5 43.75 and 45. electricity, like any other product, can be bought, sold, and traded under the rules of the electricity market. this is the result of worldwide liberalization of electricity markets. in order to minimize risks, maximize profits, and make plans, it is important for electricity market participants to forecast future prices. in this paper data of latvia’s price zone in nord pool power market is analysed. the data set consists of historical hourly electricity prices (eur/mwh) from january 1, 2014 to december 31, 2019. in figure 3 shows the dynamics of changes in the average cost (c) of one mwh of consumed electricity in latvia (european network of transmission system operators for electricity 2020). for the period 2014–2015, the indicators of the minimum (сmin), maximum (cmax), average (cmdl) values are, respectively, 34.7 (2017), 50.1 (2014) and 42.35 euro/mwh. a linear regression with a very low coefficient of determination r2 = 0.0116 shows a neutral trend of this indicator with a barely noticeable downward direction. logarithmic y = 0,8086x + 39,42 r² = 0,022 y = 4,3256ln(x) + 37,507 r² = 0,0791 0 20 40 60 80 2014 x1 2015 x2 2016 x3 2017 x4 2018 x5 2019 x6 hpp+wpp (%) figure 2. dynamics of the share of hpp and wpp in the total share of electricity generated in latvia source: created by the author based on jsc "augstsprieguma tīkls". latvian electricity market overview table 3 shares of electricity generated in latvia at hpp and wpp, 2014–2019 indicator (%) 2014 2015 2016 2017 2018 2019 hpp (%) 34 30 50 58 37 34 wpp (%) 2.4 2.3 0.7 0.7 1.9 2.5 hpp+wpp (%) 36.4 32.3 50.7 58.7 38,9 36,5 source: created by the author based on jsc "augstsprieguma tīkls". latvian electricity market overview baltic journal of economic studies 192 vol. 7 no. 4, 2021 regression with a higher coefficient r2 = 0.1065 gives more confidence in the downward trend of the indicator in question. in 2018, the average electricity exchange price in the latvian trading area was 46.28 euro/mwh, and the average daily price ranged from 11.99 to 89.45 euro / mwh. the current coronavirus crisis, global hydrocarbon production processes and the hydrological situation in the nordic countries with heavy rainfall have impacted the region's reduced demand for electricity and were a determining factor in the fall in electricity prices in the first quarter of 2020 (prohorova, 2020). in march, monthly electricity prices continued to decline in all nord pool trade zones. in the baltic states, the average monthly price of electricity and electricity prices fell by an average of 14%. the average march price in the baltic trading zone was about 24 euro/mwh. it can be assumed that the cx trend, taking into account the 2020 results, will transform from neutral to downward. 4. wind power consumption characteristics and trends the situation with wind power capacity is different, not only in the total baltic volumes, but also in the volumes of each country. in 2001, the installed capacity of wind power plants was only 2 mw, but in the next two years it has increased significantly to 24 mw. the next spike, when the installed capacity rose sharply to 62 mw in total, occurred in 2012. this can be explained by the beginning of the period of operation of several wind farms, for example, 20.07 mw of installed capacity of the producer winergy llc. the total installed capacity of wind turbines in latvia in 2019 was about 68 mw. in contrast, in estonia, the installed capacity in 2019 was 310 mw, which is 4.5 times more than in latvia. however, lithuania is absolute leader between baltic counties with 548 mw installed (see figure 4). according to the "national energy and climate plan for 2021–2030", which was prepared by the ministry of economics of the republic of latvia, latvia plans to increase the share of res in electricity generation by increasing the installed capacity of wind generators and solar photovoltaics, taking into account the capacity of latvia's electricity transmission network, which currently allows to increase the amount of electricity transferred to the network by 800mw. taking into account the considerations of maritime spatial planning, it is planned to develop joint offshore wind farms projects (with a maximum capacity of 800 mw) on the latvian-estonian border and the latvianlithuanian border (the ministry of economics of the republic of latvia. national energy and climate change plan, 2021–2030). the partnership process has already begun in september 2020, when latvia's economy minister and estonia's economy and infrastructure minister electronically signed a memorandum of understanding for a joint latvian and estonian offshore wind farm project to produce energy from renewable sources. other renewable energy sources are not that well developed and can be put in one group of "other res". this group in each country is different, it contains summarized installed capacities of different types of renewable energy sources (in latvia 126 mw, lithuania 199 mw, estonia 221 mw of total installed capacity in 2021). according to entso-e, other res in latvia consist only of biomass, but data from "ast" jsc show biogas and some solar energy. anyway, the volumes are gradually growing, however, in obedience to the "national energy and climate plan for 2021–2030", latvia does not plan to increase biomass and biogas capacity for electricity generation. lithuanian other res consists mostly of solar, biomass and other. in researched time period, the installed capacity of lithuania's other res fluctuated, but maintained the leading position between the baltic states, but the situation changed in 2019, when the installed capacity of solar power in estonia increased rapidly. thus, estonia's other res are solar energy, biomass and waste. to summarize the analysis in the baltic countries, it should be noted that the countries use their y = -0,3457x + 43,56 r² = 0,0116 y = -2,958ln(x) + 45,594 r² = 0,1065 0 20 40 60 2014 (x1) 2015 (x2) 2016 (x3) 2017 (x4) 2018 (x5) 2019 (x6) c (euro/mwh) figure 3. dynamics of cost per mwh for latvian electricity consumers, 2014–2019 source: created by the author based on (european network of transmission system operators for electricity 2020) baltic journal of economic studies 193 vol. 7 no. 4, 2021 geographical, natural potential, carry out rational maintenance and work on modernization and reconstruction for a sustainable future of the energy system. wind and solar power capacity is growing, not only in the baltics, but all over europe. the baltic countries have not exploited their full potential, which, combined with the eu's 2050 carbon neutrality goal, investments, support schemes and auctions, smart strategy and implementation could lead us to a dramatic increase in renewable energy capacity, especially wind and solar. figures 5 and 6 show, respectively, the dynamics of statistical indicators for the planned consumption of wind energy qwes (mwh) for the day ahead and its cost cwes (euro/mwh) on the nord pool exchange for latvia (nord pool. market data, 2020). the observation covers the period from 2015 to 08/20/2020. the trend of the qwes indicator (figure 5) with the coefficient r2 = 0.7, also shown in figure 5, has a clearly pronounced upward character with a high strength of connection with statistical data and indicates a steady annual increase in wind power consumption in latvia. the upward trend of the cwes indicator, shown in figure 6 by the equation with a high value of r2 = 0.7, in turn indicates a significant increase in the cost of one mwh of wind power consumed in latvia. over the past 5 years, this cost has doubled on average. comparing the data for the comparable period of 2015–2019, presented in figures 5 and 6, we get: first, the corresponding trends are multidirectional; second, the average cost of consumed wind power (123.5 euro/mwh) is three times higher than the average cost of electricity 40.8 (euro/mwh) consumed from all pps. such ratios are not yet in favor of wind power, and during its development, it is necessary to correlate economic with environmental justifications. let us further investigate in more detail the indicators of consumed wind energy in 2019, calculated by the authors, based on statistical data (nord pool. market data, 2020). table 4 shows the author's calculations of the amount of wind power planned for consumption a day ahead and its cost on the nord pool exchange in the relevant month (mwh, euro/mwh): – ŵ, ĉ – hourly average; – ŵp, ĉwp – average values during peak hours from 8.00 to 12.00. graphs displaying the dynamics of monthly changes in ŵ, ŵp (mwh), and ĉ, ĉwp (euro/mwh) are shown in figure 7 and 8. 0 200 400 600 800 1000 2001 2003 2005 2007 2011 2013 2015 2017 2019in st al le d c ap ac it y (m w ) 2009 year latvia lithuania estonia figure 4. total installed capacity of latvia’s, lithuania's and estonia's wind turbines in 2001–2019, mw source: created by the author, using (the wind power database. production capacities) dates y = 15,56x + 79,173 r² = 0,708 0 50 100 150 200 2015 (x1) 2016 (x2) 2017 (x3) 2018 (x4) 2019 (x5) 2020 until 20.08 (x6) qwes (mwh) figure 5. dynamics of planned wind power consumption for the day ahead in latvia, 2015–2020 source: created by the author based on (nord pool. market data 2020) baltic journal of economic studies 194 vol. 7 no. 4, 2021 table 4 estimated indicators of wind power consumption in latvia, 2019 month ŵ ĉ ŵp ĉwp january 171 57 174 64 february 219 47 211 50 march 222 40 230 43 april 141 44 118 52 may 135 44 123 57 june 89 45 76 66 july 122 49 96 61 august 58 39 47 60 september 161 49 149 67 october 159 47 153 56 november 183 45 181 48 december 224 39 213 42 source: created by the author based on (nord pool. market data 2020) the graphs of the ŵ and ŵp indicators (figure 7) practically repeat each other, with close monthly values and close averaged values of 157 and 148 (mwh), which indicates that the peak periods practically do not affect the change in the trend of consumed wind y = 16,789x + 72,307 r² = 0,9265 0 50 100 150 200 2015 (x1) 2016 (x2) 2017 (x3) 2018 (x4) 2019 (x5) 2020 until 20.08 (x6) cwes figure 6. dynamics of the cost on the nord pool exchange of wind energy planned for consumption a day ahead in latvia, 2015–2020 source: created by the author based on (nord pool. market data 2020) energy. at the same time, the months of the year significantly affect the trend of these indicators, which take the lowest values in the warm months from april to september and the highest in the rest of the months. the graphs of the ĉ and ĉwp indicators (figure 8) are also similar in character. in general, the indicator values during peak hours (ĉwp) are higher than the average hourly monthly values. their averaged values 45 and 55 (euro/mwh) differ by only 18%. 5. conclusions 1. latvia's electricity production, consumption and export trends are weak but upward. electricity import and excess import over export trends are downward, indicating the dynamics of latvia's slow but decreasing dependence on electricity imports. cannot be used for a short-term " approximate" forecast of this indicator. 2. the trend of planned wind power consumption for the day ahead in latvia has a clearly pronounced upward character with a high strength of connection with statistical data (coefficient r2 = 0.7) and indicates a steady annual increase in wind power consumption 0 50 100 150 200 250 ŵ ŵp figure 7. dynamics of average hourly values of indicators ŵ and ŵp (mwh), 2019 source: created by the author based on (nord pool. market data 2020) baltic journal of economic studies 195 vol. 7 no. 4, 2021 0 10 20 30 40 50 60 70 80 ĉ ĉp figure 8.dynamics of average hourly values of indicators ĉ and ĉwp, 2019 source: created by the author based on (nord pool. market data 2020) in latvia, which corresponds to the goals of increasing the share of res in final energy consumption should grow and reach its share up to 45% by 2030. at the same time, the upward trend in the cost of one mwh (wind power consumed in latvia with a high value of r2 = 0.7) does not correlate with the trend in its consumption. this circumstance, as well as the consequences of the coronavirus pandemic, may require an adjustment of plans to increase electricity consumption from res, which will require a more detailed assessment of the volume of wind energy imports and possibly implementation of measures to increase wind energy production capacity in latvia. references: abdey, j. (2018). data analysis for management programme, module 6 unit 1, london school of economics and political science, uk, рp. 8–16. balodis, m. (2020). krīzes ietekme uz enerģētikas nozari eiropā un baltijā. elektroenergijas tirgus apskats izdevums nr. 104/2020. gada aprīlis. available at: https://latvenergo.lv/storage/app/media/uploaded-files/ eta_apr_2020.pdf central statistical bureau of latvia. available at: www.csb.gov.lv european network of transmission system operators for electricity. available at: https://www.entsoe.eu international renewable energy agency (irena). available at: https://irena.org/publications/2019/jul/ renewable-energy-statistics-2019 jsc "augstsprieguma tīkls". latvian electricity market overview. available at: http://www.ast.lv/en/electricitymarket-review?year=2017&month=10 prokhorova, r . (2020). as covid-19 izraisa pieprasījuma samazinājumu. elektroenergijas tirgus apskats izdevums nr. 104/ 2020. gada aprīlis. available at: https://latvenergo.lv/storage/app/media/uploaded-files/ eta_apr_2020.pdf rawlings, j. o., pantula, s. g., & dickey, d. a. (2018). applied regression analysis. a research tool. 2end ed. springer-verlag ny, p. 7, 21, 87, 107–110. isbn 0-387-98454-2 the  ministry of economics of the republic of latvia. national energy and climate change plan 2021–2030. available at: https://www.em.gov.lv/lv/nozares_politika/nacionalais_energetikas_un_klimata_plans/ the wind power database. production capacities. available at: https://www.thewindpower.net/country_en_42_ latvia.php nord pool. market data. available at: https://www.nordpoolgroup.com/ legal acts of the republic of latvia. electricity market law. available at: https://likumi.lv/ta/en/en/id/ 108834-electricity-market-law viskuba, k., & silinevicha, v. (2020). wind farm project results and innovative business models. humanities and social sciences: latvia, vol. 28, issue 1, рp. 5–29. issn 1022-4483 viskuba, k., & silinevicha, v. (2021). renewable energy sources in the baltic states and new business approach of the sector. vilnius university open series, pp. 120–127. doi: https://doi.org/10.15388/vgisc.2021.16 baltic journal of economic studies 14 vol. 8 no. 3, 2022 1 national university "odessa law academy ", ukraine (corresponding author) e-mail: 7777735@ukr.net orcid: https://orcid.org/0000-0002-7669-0576 researcherid: grs-5378-2022 2 national university "odessa law academy ", ukraine e-mail: conduit88@gmail.com orcid: https://orcid.org/0000-0002-8208-3879 researcherid: grs-0529-2022 doi: https://doi.org/10.30525/2256-0742/2022-8-3-14-19 the role of economic courts in the economic development of ukraine nana bakayanova1, oleg tsiselskyi2 abstract. the subject of the study is the role of economic courts in the economic development of ukraine. the purpose of the article is determined by the current economic processes taking place in the country in connection with the full-scale aggression of the russian federation and the introduction of martial law in the territory of the state by the decree of the president of ukraine of february 24, 2022. according to preliminary forecasts, by the end of 2022 inflation in the country will increase to over 30%, and by the end of 2023 and 2024 it is expected to reach 20.7% and 9.4% respectively. therefore, the purpose of the article is to provide a theoretical and practical substantiation of the impact of economic courts on the support and development of the state's economy in modern conditions. the methodological basis of the work is a set of general philosophical, general scientific and logical methods, the combination of which allowed to achieve a certain level of objectivity, comprehensiveness, as well as the validity of the study and the reliability of the conclusions. the leading role in the work is played by the statistical method, which made it possible to outline the trends in the number of considered economic cases, the amount of property claims of plaintiffs and the amount of funds allocated for recovery (indicators for 2021, 2020, 2019, 2018, etc. were considered). the results of the study make it possible to conclude that the influence of economic courts is both direct and indirect. direct influence is manifested in the results of administration of justice, resolution of commercial disputes and satisfaction of interests of business entities. the indirect impact is related to the replenishment of the special fund of the state budget of ukraine by economic courts through the receipt of court fees. in addition, the difficulties faced by judges of economic courts in the context of the full-scale aggression of the russian federation against ukraine are highlighted: 1) the danger to the life and health of judges, court staff and visitors to the court in general (for example, in odesa from february 24, 2022 to september 8, 2022, air alert was announced fifty-one times, its total duration was thirty-nine hours); 2) destruction or damage to the material and technical base of economic courts (for example, in the economic court of donetsk region and the economic court of luhansk region, located in the same building, the plaster on the facade of the building was damaged, the building of the economic court of mykolaiv region was damaged); 3) lack of judges (this is due to the suspension of the work of the high qualification commission of judges of ukraine, on the one hand, and the fact that some judges left the country with the beginning of hostilities); 4) insufficient level of funding (in 2020, the supreme court received six appeals from economic courts regarding insufficient funding, and in 2021, special attention was paid to the problem of underfunding of the economic court of kyiv region, which led to a shortage of funds in the wage fund of the court staff ). practical implications. it is determined that any further actions of the state should be aimed at raising the qualification level of judges of economic courts and public confidence in them, popularization of the procedure for applying to economic courts and legal proceedings. value/originality. the study confirms the effectiveness of economic courts and allows to analyze it from a new perspective, since, as most scientific studies show, the effectiveness of economic courts is mainly associated with: the speed of consideration of cases; a small number of decisions appealed to a higher instance (compared to the indicators of general and administrative courts); the percentage of cases considered. key words: commercial (economic) courts, judicial system, economics, entrepreneurship. jel classification: d63, l26, j53 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 15 vol. 8 no. 3, 2022 1. introduction the expediency of the existence of economic courts in the judicial system of ukraine for a long time caused a heated debate among both scholars and practitioners. however, during their functioning these courts have proved their effectiveness. based on the data of the vast majority of studies, the efficiency of economic courts is mainly associated with: 1) the speed of processing cases; 2) a small number of decisions that are appealed to a higher instance (compared to the indicators of general and administrative courts); 3) the percentage of cases considered (in 2021, 99.75% of cases from the total number received were considered (court statistics, 2021). unfortunately, the role of these courts in the development and strengthening of the country 's economy remains without due attention. it should be noted that both narrow and broad approaches are used to define the concept of "national economy ". according to the first, the national economy is a set of economic entities and relations between them, which has a spatially defined and specifically formed national organizational structure, is characterized by economic integrity and is aimed at meeting the needs of society in material and social benefits. according to the second approach, the national economy is an economic activity on a national scale, structured in the sectoral and territorial space, which is regulated by an institutional system that corresponds to the economic, political and ideological system (order) formed in the country (zamrygha, 2019). it is impossible to disagree with the fact that there is a direct link between the state of the economy and the standard of living of the population, which is an indicator of the level of well-being and the degree of satisfaction of basic life needs of society. in this regard, it is worth paying attention to the concept of "sustainable economy ", which can be defined as an economy with a relatively stable, moderately fluctuating product of the population and per capita consumption. the advantage of such an economy is that it experiences neither growth nor decline, but has a constant population (and, hence, a "stock" of labor) and a constant stock of capital (czech, e. daly, 2004). in the context of full-scale aggression by the russian federation, the state of ukraine's economy is one of the most important problems of our time. as noted in previous forecasts, the economy of our country by 2022 will fall by one third, and inflation will increase to more than 30%. the national bank of ukraine expects inflation to reach 20.7% in 2023 and 9.4% in 2024 (shevchuk, 2022). such indicators are due to the fact that with the beginning of hostilities one third of ukrainian enterprises ceased their activities due to destruction, temporary occupation of certain regions, serious damage to logistics and production links and communications, forced migration of the population, etc. (zhyrij, 2022) thus, the problem of the role of economic courts in strengthening the economy under such conditions is extremely relevant and requires a comprehensive and consistent study. 2. current state of economic courts administration of justice at a high level requires proper organizational, financial, logistical and other conditions. the study of the impact of economic courts on the development of the national economy will not be comprehensive without highlighting the problems faced today, in particular, by judges of economic courts: 1. threat to the life and health of judges, court staff and court visitors. for example, in odesa, from 24 february 2022 to 8 september 2022, air-raid alert was declared fifty-one times, with a total duration of thirty-nine hours (statistics of air-raid alerts, 2022). 2. destruction or damage to the material and technical base of economic courts (for example, in the economic court of donetsk region and the economic court of luhansk region, which are located in the same building, the plaster on the facade of the building was damaged, the building of the economic court of mykolaiv region was significantly damaged). 3. lack of judges. this situation is caused both by pre-war problems, primarily related to the suspension of the work of the high qualification commission of judges of ukraine, and by the fact that with the outbreak of hostilities some judges left the country. baltic journal of economic studies 16 vol. 8 no. 3, 2022 4. insufficient level of funding. in 2020, the amount of funding could meet the needs of the courts only by 50-60%, and in 2021, the financial support of the courts was only 38.4% of the required amount, which is the lowest figure for the last few years (in 2017 this figure was 79.1%, in 2018 – 77.9%, in 2019 – 69.5%, in 2020 – 64.4% (semyshocjky, 2021) (see figure 1 below). in addition, in 2020, the high council of justice received six appeals from economic courts regarding insufficient funding, and in 2021, special attention was paid to the problem of underfunding of the economic court of kyiv region, which led to a shortage of funds in the wage fund of the court staff (economic court of kyiv region, 2021). 3. the importance of economic courts for the economy of the state in order to clearly demonstrate the importance of economic courts in strengthening the economy, it is advisable to consider statistical indicators on the selected issues through the prism of two aspects: 1) in relation to economic entities (which has a direct character); 2) in relation to the state (with an indirect character). as for business entities, when applying to the court, these entities aim to resolve a certain type of legal disputes – economic disputes. in general, a dispute is a contradiction, different opinions of two or more persons regarding a certain phenomenon or subject. in turn, economic disputes are a type of legal disputes that arise in the process of economic activity (dictionary of the ukrainian language, 1970–1980). it should be noted that for the first time in the legislative acts of ukraine the term "economic dispute" was used in article 1 of the law of ukraine "on arbitration court". there is no single definition in the legal literature. thus, o. grebentsov believes that an economic dispute in the narrow sense is a dispute arising in connection with the implementation of entrepre neurial activity and is directly related to it, and in the broad sense is a dispute arising from any property relations, as well as in connection with the implementation of entrepreneurial activity. in turn, o. belyanevich defines the economic dispute as a legal conflict in economic relations arising from the direct implementation of economic activity and its management, which affects the subjective rights and obligations of their participants (talykin, 2014). without dwelling in detail on the concept of "economic dispute", which is not the direct subject of the study, it should be noted that in the current conditions of war ukrainian enterprises have faced a number of problems. among them, for example, is the need to evacuate production facilities. according to statistics, during the two months of war, about 1171 ukrainian enterprises started the process of evacuation of their production facilities (about 400 enterprises partially or completely moved their facilities, 216 of them resumed their work). the following regions were most often chosen for business relocation: transcarpathian, lviv, ivanofrankivsk, ternopil, khmelnytskyi, chernivtsi, vinnytsia, volhynia and rivne regions (alenin, 2022). regarding the importance of business entities for the country 's economy, it is worth supporting the thesis that it is entrepreneurs who ensure the welfare of the population, because the functioning of enterprises provides the population with jobs, goods, services and products for consumption. in addition, domestic companies allocate funds to support the armed forces of ukraine. for example, during the first month of the charity campaign for online payment and automatic withdrawal of novapay funds, nova poshta transferred uah 3.4 million to support the armed forces of ukraine (funds were transferred to a special account of the national bank of ukraine for the armed forces of ukraine (nova poshta, 2022). returning directly to commercial disputes, it should be noted that in 2018–2021, the total amount of claims filed with the courts of first instance amounted to uah 1 250 000 000 000, of which uah 491 billion were penalties (39.3%). during the same period, fines in the amount of uah 103.9 billion were imposed in 52.8 thousand cases (17.4% of cases considered in the courts of first instance), of which uah 66.7 billion, or 64.2% of the imposed fines, were recovered. in order to highlight in more detail the amount of money that was the subject of dispute in courts, it is important to pay attention to court statistics on individual cases in certain years. thus, in 2021, based on the results of consideration of 48,000 commercial cases with property claims of plaintiffs for a total amount of uah 273.3 billion, uah 128 billion (46.8% of the amount of claims filed by plaintiffs) was sent for recovery. in 2020, based on the results of consideration of 40,200 commercial cases with property claims of the plaintiffs in the amount of uah 260.2 billion, uah 83.2 billion (32% of the claims) were awarded for recovery (supreme court, 2021). thus, the amount of funds allocated as penalties in 2021 increased by almost 54% compared to 2020. in addition, it is impossible to ignore the penalties that are applied to business entities. it should be reminded that penalties in accordance with article 230 of the commercial code of ukraine are a sum of money (forfeit, fine, penalty), which a participant of economic relations is obliged to pay in case of violation of the rules of economic activity, non fulfillment or improper fulfillment of economic baltic journal of economic studies 17 vol. 8 no. 3, 2022 obligations. thus, in 2021, fines in the amount of uah 24.6 billion (26% more than in 2020 – uah 19.5 billion) were imposed in 13.9 thousand cases (16.2% of those considered in the courts of first instance), and a total of uah 17.7 billion (71.6% of the declared fines) was paid, which is 80.6% more than in 2020 (uah 9.8 billion). in 2020, the number of cases considered by local economic courts amounted to 79.1 thousand, of which 46.7 thousand claims were fully or partially satisfied (59%). the total amount of the claimed claims amounted to uah 260.2 billion, of which uah 83.2 billion (32%) was subject to recovery. in 13.6 thousand cases (17.2%), penalties in the amount of uah 19.5 billion were claimed, of which uah 9.8 billion (50%) were recoverable. in 2019, the number of cases considered by local economic courts amounted to 75.1 thousand, of which 43.1 thousand claims were fully or partially satisfied (57.4%). the amount of the claimed claims amounted to uah 269.4 billion, of which uah 112.4 billion (41.7%) were penalties. in turn, in 13.3 thousand cases (17.7% of the cases considered), penalties in the amount of uah 29 billion were declared, of which uah 17.7 billion (61%) were penalties. (supreme court, 2021). in 2018, the number of cases considered by local economic courts was lower compared to the previous year and amounted to 63.2 thousand cases. the total amount of the claimed claims amounted to uah 447.5 billion, of which uah 167.4 billion (37.4%) were penalties. in 12 thousand cases (19% of cases), penalties in the amount of uah 30.7 billion were claimed, of which uah 21.5 billion (70% of the claimed amount) were penalties. thus, on the example of the above indicators it is possible to trace the tendency to increase the amount of claims with each subsequent year. and this trend is quite long-lasting: in 2015, according to the results of court proceedings, about uah 231 billion was recovered in favor of economic entities, while in 2014 it was twice less – uah 109.6 billion (lviv, 2016). taking into account the difficult economic situation in the country, international investments play a significant role for ukraine and are able to support the state of the national economy and quality indicators of economic activity. it should be noted that foreign direct investment today is available in all sectors of the national economy. at the same time, most investors represented in the ukrainian market prefer the processing industry, as well as wholesale and retail trade. this situation is determined by the fact that new products appear here quickly, their assortment changes just as quickly and costs are recouped, and economic risks are relatively low. also popular are industries that do not require longterm capital investments and the development of new technologies, in particular the financial sector and real estate sector (markevych, 2019). in 2021, the top five countries in terms of foreign direct investment were the united states, china, hong kong (china), singapore and canada. as for the present, the investment climate has also suffered and undergone significant changes due to military actions. preliminary data for the first quarter of 2022 indicate that the volume of new project announcements decreased by 21%, cross-border mergers and acquisitions activity decreased by 13%, and the volume of international project financing transactions decreased by 4% (unctad, 2022). it is important to emphasize that the movement of finance across national borders allows capital to find the best source of profit. in addition, international capital flows contribute to the dissemination of best practices in corporate governance, accounting rules and legal traditions, as well as protect states from unfavorable policies (loungani, razin, 2001). given the importance of foreign investment for the country 's economy, especially in these difficult times, we consider it necessary to pay attention to the court statistics on cases involving foreign investors. thus, during 2018–2021, the economic courts of first instance considered 7 thousand cases involving foreign investors for a total amount of uah 47.7 billion in penalties. based on the results of consideration of 3.8 thousand cases (54.6% of the cases considered), the claims were fully or partially satisfied and uah 7.9 billion of penalties were recovered (16.5% of the declared funds): – in 2018, 2.2 thousand cases were considered, of which 56%, or 1.2 thousand cases, were satisfied, and uah 3.3 billion of penalties were sent; – in 2019, 2.4 thousand cases were considered (by 8.9% more), of which 43%, or 1 thousand cases, were satisfied and uah 2.1 billion of penalties were sent; – in 2020, 1,600 cases were considered, of which the claims were satisfied in 63%, or 1 thousand cases, and uah 0.6 billion of fines were accrued; – in 2021, 0.7 thousand cases were considered, 73% of claims were satisfied, or in 0.5 thousand cases, and uah 1.6 billion of fines were imposed (supreme court, 2021). therefore, the award for the deduction of funds is a manifestation of the protection of the legitimate interests of business entities. the funds received can be used to continue further production, pay wages, pay taxes and fees, utilities, etc. thus, entrepreneurs support not only their own employees, who are also consumers of goods and services, but also the economy of the state as a whole. as for the second aspect, namely the strengthening of the economy indirectly through the state, it is baltic journal of economic studies 18 vol. 8 no. 3, 2022 worth paying attention to the filling of the special fund of the state budget of ukraine by economic courts. according to statistics, in 2021, the special fund of the state budget of ukraine received uah 839.5 million from the budget of ukraine for the consideration of cases by economic courts. it should be noted that the commercial court of cassation received uah 330.2 million, which is 20.9% more than in 2020 (uah 273.2 million) and accounts for almost 64.9% of the total amount. in 2016, the amount of court fees paid to the special fund of the state budget of ukraine for the consideration of cases by the economic courts of ukraine amounted to uah 868 million (supreme court, 2021). in 2015, the applicants paid uah 49.4 million of court fees to the special fund of the state budget of ukraine for consideration of cases in the cassation instance, while in 2014 this amount was uah 31.9 million (an increase of 54.8%) (resolution of the plenum of the hscu, 2017). in the same year, 107 million uah of court fees were paid for consideration of cases by commercial courts on appeal, which is 79.7% more than in 2014 (59.6 million uah) (resolution of the plenum of the hscu, 2016). in 2008, to the state budget of ukraine decisions on dedication of state duty in an amount exceeding uah 60 mln (supreme economic court of ukraine, 2008). to demonstrate the effectiveness of the economic courts, it is worth paying attention to the expenditures planned in the state budget of ukraine for the administration of justice. thus, in accordance with the law of ukraine "on the state budget for 2021", almost uah 14 million is allocated to ensure the administration of justice by local and appellate courts, as well as the functioning of bodies and institutions of the justice system (law of ukraine "on the state budget for 2021", 2019). in 2020, this amount amounted to almost uah 13 million (law of ukraine "on the state budget for 2020", 2020), and in 2016, uah 93,909,000 thousand was provided for the administration of justice by the supreme economic court of ukraine, and uah 3,447,964.4 thousand for the administration of justice by local and appellate courts (law of ukraine "on the state budget for 2016", 2016). thus, it can be argued that there is a significant disproportion between the costs of courts and the revenues they provide. it should be noted that the availability of money in the budget in the current conditions is absolutely necessary, because it will help to support the ukrainian army as much as possible, to pay salaries to employees of state-owned enterprises in a timely manner, to preserve social programs for low-income groups, including idps, and other categories of people in need of support and assistance. 4. conclusions the above statistical indicators of the functioning of economic courts allow us to conclude that they are extremely important for the economic development of the state, and disputes about the expediency of their existence are groundless. the authors believe that further actions of the state should be aimed at raising the level of qualification of judges of these courts, public confidence in them, popularization of procedures for applying to economic courts and court proceedings. achievement of the set tasks is possible with the help of judicial selfgovernment bodies, the national school of judges of ukraine, mass media, higher educational institutions (holding joint scientific and practical conferences, round tables, lectures, methodological seminars, etc.) as for the last task, which concerns the popularization of the procedure for applying to commercial courts and consideration of cases, in our opinion, in the current conditions of digitalization and obtaining information by the vast majority of the population through various social platforms (for example, special chatbots in telegram, as well as social platforms such as facebook, youtube, etc. references: court statistics (2021). judicial power of ukraine. available at: https://court.gov.ua/inshe/sudova_statystyka/ zamrygha, a. 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(2021). sjoghodni sudy prokhodjatj cherghove vyprobuvannja cherez shtuchno stvorenyj deficyt suddivsjkykh kadriv i brak finansuvannja [today the courts are undergoing another test due to the artificially created shortage of judicial personnel and lack of funding]. law and business, vol. 28 (1534), pp. 1–14. available at: https://zib.com.ua/ua/148270.html commercial court of kyiv region (2021). regarding the critical state of funding of the economic court of the kyiv region, judicial power of ukraine, march, 18. available at: https://ko.arbitr.gov.ua/sud5012/pres-centr/ news/1090439/ law of ukraine "on arbitration court". information of the verkhovna rada of the ukrainian ssr , 1991, no. 36, art. 469. talykin, je. (2014). formuvannja ponjattja ghospodarsjkogho sporu v konteksti nalezhnoji ghospodarsjkoji jurysdykciji [formation of the concept of economic dispute in the context of proper economic jurisdiction]. law forum, vol. 1, pp. 466–472. alenin, a. 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2017 corresponding author: 1 department of personnel management and labour economics, ukrainian state employment service training institute. e-mail: doc.cherkasov@gmail.com 2 department of personnel management and labour economics, ukrainian state employment service training institute. e-mail: kolesn.irina2011@yandex.ru the mechanism of strategic, political and process management of the quality of university services andrii cherkasov1, iryna kolesnyk2 ukrainian state employment service training institute, ukraine abstract. the purpose of this work is to justify the need to develop and implement a mechanism for managing the quality of higher education services, which will solve a number of pressing problems that have arisen at the national level, at the level of the higher education system and the level of individual higher education institutions. methodology. this study is based on the use of enqa standards and recommendations, as well as modern general methods and practice of quality management. results. the functioning of the mechanism for managing the quality of higher education services should be considered at three levels of decision-making (three hierarchically subordinate components of the mechanism), which are as follows: strategic, political and process. it is determined that the management of a higher education institution, like any organization, is carried out at three levels of decision-making: strategic, tactical, and operational. the paper substantiated the content and features of the implementation of the functions of each component of the quality management mechanism. practical implications. the work determined the components of strategic management of the quality of higher education institutions' services, which include: strategic analysis of the external environment and self-assessment of the educational institution, development of strategic plans, management of the implementation of the higher educational institution strategy. value/originality. it is determined that the political management of the quality of higher education services includes a broad setting of goals of the higher education institution, which in turn is determined by senior management, set forth in written, formally announced (published) and communicated to all staff and units of the higher education institution. the political goals of the education institution regarding quality are structured by functional and administrative management areas. key words: higher education, quality management, university management, development, educational services, strategy. jel classification: i21, i23, i25, i28 1. introduction the results of an analytical research of the state and development of the quality management processes of higher education in post-soviet countries determine the loss of functioning efficiency of the higher education institute, which does not fully comply with its fundamental functions. evidence of this are the low levels of socio-economic, humanitarian, scientific, technical and innovative development of a country. at the same time, these trends are accompanied by the rapid growth of the higher education system, which manifests itself in the sequential formation of a large network of universities with three times more large contingent of students, post-graduate students and doctoral candidates, compared to the 1990 year. a serial analysis of quality control processes on the level of the entire higher education system and individual universities found that in modern conditions, the solution of the issue of higher education quality improvement and the performance of its basic functions, as a public institution, is largely due to the improvement of internal management systems in universities. experience with bureaucratic licensing and accreditation procedures shows that the quality of governance of higher education in terms of a network of accredited universities, which count more than 1000 institutions, is quite an effective mechanism in terms of the minimum requirements and the formation of formal obstacles to the entry way to the educational services market for everyone (which may ultimately discredit the public institution of higher education). at the same time, the european experience of higher education management and doctrinal documents of the bologna process determine that the main link in the process of quality assurance in higher education are universities that are directly the operators of the education market. baltic journal of economic studies 100 vol. 3, no. 1, 2017 stimulating factor for the development of activity in the sphere of quality management on the level of universities is the fact that the dynamics of the contingent of entrants each year is reduced and the network operators of the higher education services market for a long period of time will operate in the market, which shows a decrease of its capacity. however, the main fundamental factor that determines the need for intensification at the institutional level of higher education quality management is the lack of a positive effect of the functioning of the higher education system on the country 's economic development, its social, innovation and humanitarian components. such trends are a fundamental factor in the reduction of financial resources that government can spend on the functioning of higher education. thus, there is a situation where universities are facing two strategic threats. the first lies in the fact that customer base is reduced with an unchanged number of participants in a competitive market. another threat is that high schools network, which is the core of a public institution of the higher education in the long term will feel a decrease in public funding, due to the lack of appropriate filling the state budget due to the effect from the functioning of higher education. it should also be noted that the substitution of a lack of russian matriculates by foreign students, which can be considered as one of the solutions to the problem of customer base and capacity of the higher education market increasing, is also an issue, mainly due to the quality management. in the context of the functioning of the international education market, which is characterized as a high-tech and modern type of service production, the importance of acquiring competitive advantages of individual universities and the recognition of documents on education in other countries. in this case, there is the issue of compliance with international standards of quality and availability of relevant certificates in high school. as a consequence, the quality of governance is becoming one of the most important in this case but, in this direction, it acquires a distinct utilitarian character. 2. methodological aspects and methodological approaches to quality management in higher education the economy of the sphere of higher education is an object of numerous researches. scientists devoted their attention to the question of higher education quality in general (bagirov, 2005), european integration processes in the field of educational services (gayrapetyan, 2006), socio-economic development of the education market (kasyanov, 2004; kratt, 2003). a separate science stream was formed in the sphere of university management (popov, 2002) and internal quality control systems of higher education (sobolev, stepanov, 2004). at the same time, a complex of questions that concern concrete aspects of the implementation of universities quality management conception is still unsolved and demands attention within the current condition of universities services market. in these conditions, the development and implementation of higher education quality management mechanism is an important issue, which has a high potential for solving the problems that arise on the national level, the level of the higher education system and individual universities level. the most important feature of this trend of improvements and modernization of education is that the development and implementation of the control mechanism are largely associated with organizational measures and are not capital intensive. in this case, we are talking about the fact that the higher education system development is not associated with an increase in the budget or private financing (although the fundamental factors and possibilities of such an increase in current conditions are absent), and a more efficient use of existing resources, the volume of which in the tactical and strategic perspective will decrease. the lack of progressive changes in the individual university management system, in particular, the quality of the management of their services, has promising implications of a negative character, which are to eliminate institutions and radical institutional changes. university management, as well as management of any other organization, carries out at three levels of decision-making: strategic, tactical, operational. on the basis of standards and guidelines of the enqa, as well as modern common methodology and quality management practices, the functioning of the higher education services quality management mechanism is appropriate to consider in the plane of the three levels of decision-making (three hierarchically subordinate components of the mechanism): strategic, political and process. strategic management of universities quality services is not a separate area of strategic planning and overall long-term institution management philosophy. the quality of services should be considered as the primary target setting in general tree university purposes. medium-term planning is interpreted as a political level of the implementation of management functions, due to the fact that, despite the overall strategic direction of the university management quality, implementation of the strategy requires the implementation of decomposition of certain tasks and functions, with the result that there is a certain organizational structure with functional and linear units. positioning quality as the main and target goal of universities functioning, quality management, along with other functional areas also requires an appropriate selection (along with marketing, finance, administration and pr-accompaniment) providing a certain functional status and the corresponding organizational support (formation of separate organizational units). in turn, baltic journal of economic studies 101 vol. 3, no. 1, 2017 the operational level of management is considered as a kind of process control due to the fact that the modern methodology of quality management and the relevant international standards require the use of a process approach to quality management. as a consequence, the individual functional areas of management and linear units in the short term are treated as institutional units, mediating systematic set of specific processes that occur at the output of university to provide services with a certain level of quality. thus, short-term planning, organization, management and control are based on the actual results and forecasts of individual processes implementation. 3. the main stages of the formation and conceptual provisions of the quality management mechanism of university services the initial conditions for a construction of the university strategic management system are some of the objective tendencies, which are formed in the external environment, which simultaneously serve as strategic guidelines that limit the scope and target arguments of control functions, threats and opportunities. the composition of these conditions includes the following: – increase of the level of requirements for the quality of educational services from the part of consumers that is caused by the possibility of choosing from a number of similar training programs in a number of universities; – emergence of a large number of logistics objects that can be used in the educational process, which consequently generates certain consumer expectations; – simultaneous expanding the range of basic and additional services that are provided in one university (including regional higher education system) with increasing differentiation of consumer demand (quantitative and qualitative increase in the list of consumer needs); – increased competition between universities on the educational services market, which is exacerbated by unfavourable demographic processes and the presence of sufficiently extensive (both in the regional and sectoral dimension) network of universities; – significant differentiation of consumer demand and the state order for individual specialty, which is accompanied by fairly significant disparities in the labour market. objectivity of the demands of universities services strategic quality management development is caused by the fact that all the activities of universities should be focused on the achievement of clearly defined targets in terms of quality, thus an adaptability of universities to change character of the external environment, review the contents, directions and volumes of provided services become important. one of the key requirements of enqa and iso standards is to have formulated strategic quality objectives, which are specified by appropriate policies and procedures for quality assurance. the strategy, policy, and quality of assurance procedures should be publicly released and get an official status. the strategy, policy and procedures are conventionally combined in quality management doctrine, the development of which is based on a comprehensive study of the strategic perspectives of the labour market and educational services. customer needs and expectations also require studying, so as needs and expectations of research stuff, personal and other stakeholders. the structure of university quality doctrine should be put in this form: – quality management policy of educational, scientific, methodical and educational activities of the university; – strategic development targets of the university in the projection of quality service management; – mechanisms, instruments, arrangements and implementation measures of the strategic targets achievement policy. public displays of universities doctrine in the field of quality are formulated and promulgated: mission, vision, strategic goals and objectives of the university with the appropriate decomposition of the task in the organizational dimension (between different departments and organizational units). consistent formulation of these provisions will ensure the understanding of the strategy and quality policy within the university and to reach the awareness of staff on certain key issues, in particular: – vision (positioning) of universities in the education market and the wider society; – key objectives of the university’s functioning; – key stakeholder groups and consumers, on the needs satisfaction of which university operates; – quality management objects (specific characteristics of educational services and the content of universities obligations concerning their long-term provision), and ways to ensure their future state. at the same time, doctrine in the field of quality and its external manifestation in the form of a succinct mission is a means of identification and differentiation of university in the market. with the help of mission, there is an opportunity to highlight and demonstrate the uniqueness, identity and customer value of services of a particular university. identification of high schools in the market environment can also be achieved by determining the value for schools: consumers of its services and society in general; faculty and staff; image at the regional, national and international level; material and technical equipment and innovative teaching techniques. all of the above provisions on the strategic positioning of universities fit quite well in the overall economic concept of the strategic management in the organization. generalized, the process of strategic management of the higher education services quality should be divided into three components (a strategic baltic journal of economic studies 102 vol. 3, no. 1, 2017 analysis of the environment and the university selfassessment, formulation of strategic plans, managing the implementation of the university strategy), the implementation of each of them determines reaching a certain higher level of service quality (fig. 1). a strategic analysis of the environment and the university self-assessment is the initial element of the strategic management of the university. the main purpose of the self-assessment is to identify opportunities and problematic issues at the stage of the development and implementation of quality management systems, as well as the evaluation of the functioning of individual processes and needs in their improvement at the stage of development of the quality management system. in this case, the work explores the organizational units of universities in functional areas based on grounded index systems that identify problem areas, assesses the state of the internal and external environment. on the basis of this formulation, there is carried out an analysis of strategic development priorities in the field of quality. the basis of this kind of analysis is methodical bases of strategic intra studies (swot, step, abc, c om po ne nt s of u ni ve rs iti es s er vi ce s’ s tr at eg ic q ua lit y m an ag em en t strategic analysis of the environment and self assessment of universities the formulation of universities strategic plans universities management strategy implementation self-assessment of the quality and management system. evaluation of strengths and weaknesses analysis of university environment, identification of threats and opportunities identification of competitive advantages of the university, the capability deficiencies evaluation of universities strategic prospects, analysis of consumer attitudes and expectations analysis of the processes of individual functional areas of quality management diagnosis of the quality characteristics of competitors services (including foreign universities) formulating of objectives in the field of quality and criteria of their achievement assessment of potential opportunities and planning of universities development by functional areas strategic planning of universities competitive position in the market environment evaluation of predictive parameters of universities by optimistic and pessimistic scenarios planning of organizational measures for optimization of the quality management system planning the influence of the quality management system functioning on the performance of universities available resources for the implementation of the universities strategic plans structured implementation process of universities strategic plans modelling prospects of strategy in the tactical perspective implementation of the integrated complex development programs for certain functional area evaluating the strategy effectiveness in the field of quality monitoring of the strategy implementation in the field of quality, corrective and preventive measures fig. 1. elements of universities services strategic quality management baltic journal of economic studies 103 vol. 3, no. 1, 2017 pest analysis), systematic approach, method of expert assessments and sociological method (involving internal and, if necessary, external experts), economic analysis, graphical method, modelling method. as a result of this kind of self-generated report documents, some of which are intended for internal use in the process of management decision-making, the other part is made as a report on the quality of selfassessment and is open to public access document that declared the status quo of a quality management system and the results of its operation (it is desirable that both of these parts of the report information as much as possible to match). the strategic planning of a university in the field of quality is to develop a strategic plan designed to increase customer value and enhance the university educational services customer’s satisfaction. this plan consists of a series of long-term university’s objectives, set out specifying tasks and responsibilities aimed at their solution. taken together, this is a strategic vision of the university in the field of quality. it is also necessary to note the importance of choosing the basic positioning strategies in the market and assess the effectiveness of planning and forecasting. strategic planning in the field of university’s services quality management covers a number of important questions, the generalized sense of which is the following: – formulation of development objectives and specifying aims in the field of quality, assessment monitoring and control parameters; – scheduling of key indicators of university’s work in functional (studying process, research activities, development of methodical support, educational activities and additional services for students) and administrative (finance, marketing, pr-support and international relations) directions; – planning of the university’s quality management system development and its impact on competitive position; – evaluation of university’s development forecast indicators according to optimistic and pessimistic scenarios. the planning process of quality management strategies in the higher education is associated with a number of complications in its development. the main obstacle is connected with a problem of preliminary decisions making process that is dependent on the structure of authority in high school. a new strategy usually destroys a type of relationship, which was developed in an educational institution, and may enter into conflict with the policy guidance. the natural reaction on this is the fight against any innovation that breaks traditional relationships and structure of the authority. another significant problem is that the introduction of strategic planning in general and in the field of quality management in particular, leads to a conflict between the former activities (operational control), providing a profit, and the new, that carry strategic advantage in the future. in universities on the early stages of the implementation of strategic planning in the field of quality management is no corresponding motivation of personnel, there is any reliable information about the external environment of universities, and the available statistics on competitors is not sufficient to develop a strategy. programme-oriented planning is an important method of forming the strategic objectives and criteria of quality management, as it allows formulating priorities for future development of the university in the field of quality. there is a possibility of adapting a standard set of goals and criteria specific to the university environment. the essence of this kind of adaptation is to analyse the existing objectives of the functional areas of the university quality control and selection of the most important management criteria, based on the specifics of the university, as well as the composition used endpoints of the educational and scientific sphere (shapovalova, 2002). among the objects of university’s strategic quality management planning, it is worth to distinguish the following: – quantitative and qualitative composition of the teaching staff, its age and sex structure; – logistical support (training and laboratory facilities, equipment, communications) – procedure for the reception and the contingent of students stuff coming to study; – development and improvement of methodical maintenance technology of the educational process; – research and development work, innovation process; – university’s international relations, scientific cooperation, exchange programs; – indicators of financial and economic activity, a situation in the education market, the competitive position of the university. speaking about the implementation of strategic plans in the field of universities quality management services, we should note that this issue is largely related to the market positions of university within the framework of regional, sectoral and national higher education system. despite the overall imperative of total quality management and continuous improvement, resource, market and human resource capacity of universities in a variety of situations are characterized by difference, which determines the need to choose different strategies for implementing long-term plans in the field of quality management. among a sufficiently large number of standard strategies, in terms of planning and for a particular control object, we have identified four species strategies (strategy attack, defence, concentration diversify), which will be described below (cherkasov, radionov, 2013). universities quality policy is a common intention and the direction of the university in the field of quality baltic journal of economic studies 104 vol. 3, no. 1, 2017 management, which manifest themselves in the mediumterm goals and objectives, formally expressed by top management and appropriately disclosed. publication of universities quality policy requires reporting to the public about the results of its implementation. such statements should be formal and based on the results of self-assessment or the assessment carried out by third parties. in both cases, such an assessment must be made on the basis of clear diagnostic systems and indicators. based on the content, position in the structure of educational services governing quality management systems and features of the policy in universities, in the composition of its main characteristics should be included: – compliance with the strategic goals and objectives of the university in the field of quality management; – availability of the provisions governing the continuous improvement of individual processes of the university; – ability to assess the validity of the provisions of the quality policy; – provision of a quality policy should be communicated to all members of the faculty and staff of the university. on this basis, it should be noted that the political control of the quality of higher education services includes a broad statement of intentions and objectives of the school. it is determined by the top management of universities, made in writing, shall be officially proclaimed (published) by management and communicated to all staff of the university (in particular its subdivisions). mission, vision, and policy in the field of quality management should be understood and accepted by all. it is important to set goals to be a concrete expression in the form of some of the measured parameters and characteristics, which allows precise control of the degree of achievement of objectives. the goal in terms of quality is what achieves or aspires a university in the field of quality. it is necessary to develop achievable and measurable goals related to quality policy. the formulation of the objectives should be carried out so specifically that they can be understood, to put into practice and assess the extent of their achievement (zhuravsky, 2003). fig. 2 shows an example of the formulation of the political objectives of universities in the field of quality management system and political objectives with an appropriate assessment of their achievement criteria. the main political goal of the university in the field of quality (one of its variants) is proposed to be determined as the provision of universities services of high customer value, satisfaction of all stakeholders (students, employers, faculty, university staff ), as well as the fulfilment of all basic functions of universities in the regional (branch) socio-economic system. this kind of policy formulation takes into account the objectives of universities entrepreneurial component, which is to provide such services, which would be characterized by relatively high consumer qualities and in the future given the option to convert the cost of training students in far exceeding their cash flows. the social component of the university is also important. the thing is in provided services that are first of all designed on the base of the needs of satisfaction of all stakeholders, both in internal and external environment. another important issue is a consideration of the need to ensure implementation of the role of universities, in the environment in which they operate (region, industry, professional sphere). in this case, we are talking about the fact that functioning of universities should act as a catalyst of scientific and technical, social, innovative development of the humanitarian sphere, which is defined as a priority target area of the university range of services. the political objectives of the university in the field of quality are structured in functional and administrative areas of university management, or in other words, the key functional areas of quality management. in this kind of functional zones, there are marked educational process, scientific-technical and innovative activity, methodological support. among the administrative functions of services quality assurance, allocated are universities administration, marketing and pr-support, finance, resources and logistical support. for each of the functional areas of management and administration offered certain groups of performance indicators to be used as criteria of political goals achieving. these indicators are quantitative, relatively easily calculated internal services of universities and are quite informative. quality management of university services on the basis of the process approach is one of the key requirements of iso standards, which are the basic and the most general methodological basis for the application of specific educational standards of quality management. iso standards are documented and regulate secure expression of process-oriented management philosophy. at the same time within the said concept of the quality, this control is total (tqm, total quality management), that is, the object of control is the whole system of services provision at all stages preceding their provision, and stages that occur after the end of the educational services providing process. thus, the whole manufacturing process and service providing process are considered as a systematic collection of related processes, a more specific level, which in turn may also have an atomic structure. in general, the term of a process is fundamental, as for modern management and quality management, in particular. the process in the broad sense means some sequence of interrelated or interacting activities (work, operations), whose aim is to turn the "inputs" of the process in its "outputs" in order to achieve a certain result, as a rule – the creation of certain products or provision of certain services to consumers (kratt, 2003). baltic journal of economic studies 105 vol. 3, no. 1, 2017 the main political goal in the universities quality service management: ensurance of high customer value of universities services, satisfaction of all stakeholders (students, employers, faculty, university staff), and performance of all basic functions of universities within the regional (branch) socio-economic system educational work the growing number of students accepted for education and amount of carried out paid educational services on the base of provision of a high quality by using innovative scientific and methodological knowledge, development and growth of scientific and methodological potential of the research stuff the total number of accepted students, persons the amount of funds of individuals and entities paid fees, monetary units the volume of budget financing per student, monetary units. academic stuff’s workload, students per member of academic staff with science degrees political goals evaluation criteria of their achievement methodical support formation of the university methodical potential through the development of methodological support of the educational process and adaptation of best practices with the conditions of use of a particular university. support for the relevance of methodical support number of developed educational-methodical complexes of disciplines, pieces. provision of disciplines by relevant educationalmethodical complexes, % number of issued textbooks and teaching aids in the year, units. the library fund per student, copies. the scientific, technical and innovative activity formation of the research staff with the highest qualification, activation of scientific work, the growth of academic qualifications of faculty and students, increase of demand for scientific work in the real economy number of protected dissertation theses, units. number of dissertation councils, units. the amount of commercial orders for scientific works, monetary units. number of received security documents for intellectual property objects per year, units. the share of research stuff with science degrees, % administration ensuring effective management based on the process approach, the optimal distribution of powers, high discipline, motivation of the research stuff, informational horizontal and vertical communication expenses for the maintenance of the administration, monetary units; turnover (separate higher qualification stuff), % performance of teaching and research work, monetary units; the degree of target achievement (strategic and political), % marketing and pr-support provision of regional and industry leadership in the market of educational, scientific and related services. the high level of awareness among the public about the university, its positive image and high business reputation in professional circles and society the share of university in the regional market of higher education services, % the rate of market share growth and the amount of funds paid by legal entities and individuals for training, % the number of positive mentions in the media about the university that were not caused by universities departments activity number of branches separate divisions, units finance, resources and logistics achieving financial sustainability of university, the possibility to carry out high-level resource and logistical support for its development and maintain existing facilities. stable investment activity, achieving high intensity of labour in university income from services, monetary units. permission put into operation, m2 for 10 years; the cost of purchased technical devices, equipment, monetary units; capital provision of educational and scientific stuff, monetary units; the number of full-time students per 1 computer with the age of less than 5 years, persons fig. 2. the policy objectives in the field of universities quality management services and benchmarks of their achievement baltic journal of economic studies 106 vol. 3, no. 1, 2017 as a part of the process, including facilities management, one often identifies certain resources that are divided by the criteria of long-term and short-term usage. here a resource in general is understood as a wide range of production facilities factors and logistics used in the provision of educational services: faculty, staff, buildings, technologies and teaching methods, equipment, technology, intellectual property, etc. each one is considered as a separate system with a certain level of autonomy, as a consequence, the analysis process requires the external environment, which affects it. but the most important issue is that each of the processes should be controlled. in other words, each of the processes is a specific area of management authority and responsibility. using modern quality management philosophy, the official responsible for the implementation of a separate process quality management system is a process owner or manager. the activities of the organization traditionally speak about workflows or business processes. the latter term is currently used in respect of any organizations that are not necessarily commercial, including universities. one of the key properties required of any workflow is its so-called "capability ", which is understood as the ability of the process to perform the desired function from it and produce the output result or services to the established and expected properties. process control loop is typically included to ensure that properties in the process scheme. the scope of the concept of "process" is not limited to technological and production processes or service processes. in fact, any work performed by humans or machines is a process. thus, the process can be considered, on the one hand, in a very general sense, as the totality of people, equipment, materials, methods of measurement and the external environment, which interact with each other to produce "output" of required quality, and on the other, a narrower sense, as a kind of limited employment or operation performed by a specific person or a machine (erokhin, 2004). modern quality management philosophy is based on a process-oriented thinking, which, in turn, requires a clear information base, provided by evaluation and diagnostic systems. such diagnostic and evaluation systems are typically statistical database analysis, which determines the list of corrective and control actions, as well as being the basis for management decisions. the information on the functioning of all processes is a certain code, a function that describes the work of universities in a certain time interval, the use of an operational impact on the arguments of this function later change the state of the entire system of universities. to put these provisions more specifically, all of the key activities within the university (teaching process, scientific-technical and innovative activity, methodological support, administration, universities, marketing and pr-support, finance, resource and logistics) are modelled as processes, which are characterized by certain inputs and results (outputs) and management features (fig. 3). the purpose of the functioning of the quality management system is the problem of control and remedial action on the input streams and the internal operations of their processing. the purpose of this control action is to obtain the desired output (planned) result, with this kind of outputs must get sustainable (since all the processes are cyclical, and the cycle of processes of functional and administrative management of the university + + + + + + managed business process 1 managed business process 2 managed business process 3 managed business process … managed business process… n r es ou rc es t he re qu ir em en ts an d ex pe ct at io ns o f co ns um er s m ee tin g th e de m an ds o f c on su m er s fig. 3. system of the universities services process-oriented quality management baltic journal of economic studies 107 vol. 3, no. 1, 2017 some processes can be very short). such a resistance can be statistically evaluated as a low variation of planned and actually received indicators characterizing the process output. another important issue is to ensure the qualitative characteristics of the process output, which also require consideration and support. 4. conclusion thus, effective process of management of universities services quality is based on the following: identification of management processes, main working (control processes) and auxiliary processes of the organization; a clear subordination of each process to responsible person – the owner or manager of the process; development of continuous monitoring and improvement of each process system, including the evaluation system of process parameters; carrying out (if necessary) a radical restructuring process – business process reengineering; reorientation of all important control systems: financial, personnel, procurement and other processes to support. the implementation of the process approach and quality management as a whole is largely dependent on its organizational support. anyway, each process requires identification. another important issue is that within each process working staff, organization, and management of which, within the specificity of the functioning of universities, is the main component of process management. as a consequence, strictly organizational support processes are the key to managing the quality of university services. references: bagirov, v. (2005). high quality university education – the requirement of time. higher education in ukraine. vol. 1, p. 15–19. cherkasov, а. & rodionov, a. (2013). formation of innovative-integrated quality control system of agrarian higher education. scientific bulletin of national mining university, vol. 41, p. 141–148. erokhin, s. (2004). state regulations and market self-regulation economic model of higher education. problems of economics, vol. 4, p. 23–29. filippov, v. (1998). comparative analysis of control systems in universities, companies and the economy education. university management, vol. 1, p. 7–9. gayrapetyan, v. (2006). regulation of the european integration processes in the field of educational services – donetsk, 20 p. kasyanov, d. (2004). socio-economic development of the education market – donetsk, 190 p. kratt, o. (2003). higher education services market: methodological foundations of the research environment – donetsk, ooo "south east ltd", 360 p. popov, o. (2002). university management and management in the field of knowledge. alma-mater, vol. 11, p. 43–44. shapovalova, t. (2002), features of investment in education as a factor of economic growth – kiev, grot, 129 p. sobolev, v. & stepanov, s. (2204). concept, model, and performance criteria internal quality control system of higher education. university management, vol. 2, p. 26–30. zhuravsky, v. (2003). higher education as a factor of state and culture in ukraine – moscow, inyur , 416 p. андрей черкасов, ирина колесник механизм стратегического, политического и процессного управления качеством университетских услуг аннотация. целью работы является обоснование необходимости разработки и внедрения механизма управления качеством услуг высшего образования, что позволит решить ряд актуальных проблем, возникших на общегосударственном уровне, уровне системы высшего образования и уровне отдельных высших учебных заведений. методика. исследование основано на использовании положений стандартов и рекомендаций enqa, а также современной общей методологии и практики управления качеством. результаты. функционирование механизма управления качеством услуг высшего образования следует рассматривать в плоскости трех уровней принятия решений (трех иерархически подчиненных составляющих механизма): стратегического, политического и процессного. определено, что управление высшим учебным заведением, как и любой организацией, осуществляется на трех уровнях принятия управленческих решений стратегическом, тактическом, оперативном. обосновано содержание и особенности реализации функций каждой из составляющих механизма управления качеством. практическое значение. определены составляющие процесса стратегического управления качеством услуг высших учебных заведений, в состав которых входит: стратегический анализ внешней среды и самооценка учебного заведения, разработка стратегических планов, управление реализацией baltic journal of economic studies 108 vol. 3, no. 1, 2017 стратегии высшего учебного заведения. значение/оригинальность. определено, что политическое управление качеством услуг высшего образования включает широкую постановку целей высшего учебного заведения, которые в свою очередь определяются высшим руководством, излагаются в письменной форме, должны быть официально провозглашены (опубликованы) и доведены до всего персонала и подразделений высшего учебного заведения. политические цели учебного заведения в области качества структурированы по функциональным и административным направлениям управленческой деятельности. baltic journal of economic studies 113 vol. 2, no. 3, 2016 corresponding author: 1 department of social budgetary costs and economic development, state educational and scientific institution "academy of financial management". e-mail: nastenochka@ukr.net foreign experience of pension system reforming and possibility of adaptation in ukraine anastasiia svyrydovska1 state educational and scientific institution "academy of financial management", ukraine abstract. the purpose of the paper is to analyze foreign experience of reforming pension systems. reforming pension systems around the world is due to the need to balance the cost of social support for people who are growing, with the financial capabilities of the country. ukraine, like other european countries is facing the crisis of public pensions. one reason – the rapid aging of the population. the experience of some countries shows that the increase in the rates of deductions has a negative impact on employment, leads to a significant increase in public debt, and therefore is unacceptable. some economists believe that a full transition to retirement savings scheme  – a solution. however, this would create an additional burden on public financial systems and current generation of taxpayers. therefore, it is necessary to determine the main directions of the crisis of pensions. with the economic downturn global scale of the efficiency of the pension system of ukraine, its compliance with the standards of the welfare state is becoming more acute. that is why there is an urgent need for adaptation based on international experience to review previously proposed ways to reform the pension system of ukraine. methodology is actual works of scientists and researchers. results are exploring the features of the international experience of reforming pension systems and proposition of directions of reform of the pension system of ukraine on the basis of demographic, social, financial, political and cultural characteristics of its development. value. background research finding is due to government regulation mechanisms of social insurance in ukraine. the most developed social protection system with the eu. consideration of these specific programs of effective systems of social insurance is an important basis for the analysis of international experience. decisive impact on the social security system in the eu provides current demographic trends (falling birth rates below the natural reproduction and aging), strengthening european integration and economic globalization. this raises the need to find a new eu approach to achieve the optimal balance between economic and social components of social development, which would avoid a conflict between the priorities of economic development and social justice. from this point of view is an interesting assessment of the most effective options for upgrading existing systems of social protection in the eu in case of individual programs. key words: pension system, funded pension system, social protection of citizens. jel classification: h55, h75, j32 1. introduction the first full-fledged pension system became otto bismarck introduced in germany, the mandatory pension system, which was based on the principle of solidarity of generations (1889). later, similar systems have been introduced in other major european countries: denmark (1891), great britain (1908), france (1910), sweden (1913), italy (1919) (moseyko, n.d.). following the positive example of european countries in the first half of the twentieth century, the rest of the world has developed a national pension system based on the principle of solidarity in the pension system. each country has gone its own way of constructing pension system based on the demographic and socioeconomic features of development. however, the tasks of any pension system are: protection from poverty; providing income at the end of work, size is usually proportional to the amount of income that was paid just before retirement; protection of income from lower real standard of living over inflation. it is noted that accumulation and distribution system of pensions inherent positive qualities and shortcomings. the main advantage of large distributive pension systems based on current funding that it is possible to start immediate payment of pensions. such systems provide greater protection and a higher rate of substitution (ratio of pensions to wages) for people with low incomes, i.e. income redistribution within a generation. however, the distribution system there is a direct correlation between the value of pension funds and baltic journal of economic studies 114 vol. 2, no. 3, 2016 demographic situation, the state of the labour market  – employment, unemployment, wages, the ratio of contributors to the pension system and pensioners. the main principle of funded system is a personal responsibility of each insured person by creating conditions of their lives. the pension system is fully based on a cumulative basis, increases the total savings of the economy and leads to increased investment and economic growth. funded pension system is devoid of the influence of demographic factors, gives its participants freedom of choice and provides differentiation of pensions based on wages and efficiency savings. however, in the very concept of a funded system there are many hidden risks. it is more effective for workers with high wages who are able to save up for their retirement accounts a significant amount of money, but does not provide a mechanism of redistribution and prevent poverty. yield funded system significantly affected by changes in economic conditions and the quality of management (barr, 2002). the most difficult part is the cost of transition to a funded system over the need to redress the loss to pensioners resources diverted to the funded pension system. according to some estimates, the cost of migration is from 120 to 160% of gdp. thus, none of the systems today can be considered as uniquely effective to achieve the main goal of pension policy. 2. international experience of reforming pension systems in developed countries international experience of reforming the pension system shows that the main trend is the transition to a funded pension system, which is the positive side of the opportunity to increase investment in the economy and obtaining investment income for retirees. yes, the us has a three-tier pension system: the first level is a joint system, but its complement other pension programs that enable citizens to save their money for pensions; second level  – a mandatory funded system under which working people transfer part of their earnings on savings accounts; third pillar is a voluntary private funded system, which allows citizens who wish to obtain even greater opportunity to retire and pay large fees in the long term employment, to maintain the desired level of retirement (popov, 2001). the positive side of the us social security system, the experience which can be used in reforming the pension system in ukraine is to develop strategic aspects based on forecast changes in demographic and economic conditions. in the uk distributive pension system operates with low pensions, the reform envisaged indexation of pensions according to the rise in prices, not wages. if the size of the state pension is below the poverty line, those receiving only the basic state pension are entitled to social assistance provided on the basis of their income. mandatory pension system second level entitles workers to become members or state pension system, which depends on earnings or vocational system of pre-established payments or personal pension system established with contributions. basic state pension system and distribution in sweden is financed through insurance premiums, constituting 18.5% of earnings, 16% of which comes into the state system. the majority of current contributions used to pay current pensions but the social insurance institution opens contingent individual accounts for insured, which affects this part of the contributions. the pension is calculated based on the amount of accumulated funds given the current life expectancy of persons who cease employment, and increase production over the expected period of pension payment. guarantee of minimum income in old age is carried out using the pension insurance nets for people who have low incomes during their working life. some contributions are capitalized in the system, and the employee has the option of placing them on individual accounts in private structures or public accumulation fund. thus, sweden has a system of defined contribution, which is the insurance net, giving the public a choice and offers them effective incentives  – the right choice regarding the retirement age: a long stay in a pension or a higher standard of living in retirement period; a significant correlation between contributions and pensions improves labour market efficiency. the swedish system is not at risk, as the distribution system, it does not have the costs associated with the transition to a funded system, which confirms the flexibility of distribution systems. most latin american countries have developed a payg pension system with large public expenditure on pensions. implementation of large pension programs requires funding problems similar to the problems of central and eastern europe, which is mainly the result of the adoption of unjustified decisions that do not include the possibility of the budget. this situation has forced a number of latin american countries to seek better mechanisms of financing pensions and in particular to encourage the introduction of private pension systems, as state-funded programs in latin america were insufficiently effective. in switzerland there are three levels of the pension system. level i  – a national solidarity system. level ii  – a national mandatory system, funded by contributions from employers and employees to corporate pension funds or pension funds open. level iii  – a voluntary pension system whose members contributing to public pension funds. june 21, 2013 the swiss federal council published a package of measures to reform the pension system (called "retirement 2020") to counter the increase in fiscal pressure on public pension systems in connection with further aging. according to preliminary government estimates, the financial gap in the budget of the state pension system will grow from 1.3 billion dollars of the united states in 2020 to 9.1 billion dollars of the united states in 2030. since 1990, life expectancy in switzerland has increased by 3 years, and by 2050 the number of pensioners makes up a third of the population. baltic journal of economic studies 115 vol. 2, no. 3, 2016 by the end of this year will complete the discussion and preparation of legislative initiatives to reform the pension system, and next year will be submitted to parliament a bill. if it is passed by mps, the implementation of this law in practice, scheduled for 2020, planned to be held on this issue a national referendum (since these reforms, inter alia, amendments to the constitution). government proposed a comprehensive reform of national solidarity pension system (pillar i) and the mandatory occupational pension system (pillar ii), including: 1. the retirement age. the retirement age of women (now 64 years) at first and second rise for 1 year (by 2 months per year) equals retirement age of men (65 years). early retirement age for men and women (58 years under current law) will be increased by 4 years to 62 years, but under certain conditions this age will not change for workers with wages lower than the average for a year if they paid pension contributions from 18-21 years. although the official retirement age remains 65 years (even now people can delay their retirement before reaching 70 years), but there will be more options for a person in deciding retirement at age 62-70 years; for example, since 62 years, working can continue to work part-time while receiving partial pension. 2. pension pillar i. to cover most of the deficit solidarity system is offered in two phases to increase the rate of value added tax (vat) from 8% to 10%, namely by 1% in 2020 and by 1% in 2030, based on actuarial estimates and financial needs solidarity system. 3. pension pillar ii. the contributions, that is, the share of individual pension contributions paid as an annual annuity payments will be gradually reduced to 0.2% per year – from 6.8% to 6.0% over 4 years. in order to prevent the reduction in pension benefits compared to its current level (according to official calculations, the lower the contribution would reduce pension pillar ii 12%), the government offers a number of countervailing measures, including subsidies for working people a ripe old age and strategies to encourage participants pillar ii to start saving money for future retirement earlier with young children. 4. guaranteed percent increase in the value of assets in occupational pension credit members. it is proposed to change the method of calculation of the minimum increase in asset value in percentage on the accounts of pillar ii. instead of the current system where this percentage is set in advance for the next year based on assumptions about future investment returns, this percentage will be calculated at the end of the year, depending on the actual yield levels achieved during the year. in australia, the second level of pensions is in the form of mandatory participation in the system of individual capitalized accounts and have clearly defined the first level of retirement (old age pension), the hallmark of which is the fact that it is financed by taxes and pensions are not determined on the basis of income, and given the level of welfare. as the state pension financed by taxes and is higher for the poorest population groups, the first level has a strong redistributive character. the second level puts pensioners at risk of inefficient management of pension assets and has the essential elements of redistribution. in new zealand has a relatively universal system of pensions in precise amounts, supplemented voluntary capitalized pension system with a defined contribution. universal distribution system is funded by taxes. retirement age increases from 60 to 65 years. it is planned to create a managed fund government within which should be partial capitalization of funds for future pension costs. the proposal to switch from pensions’ firm size, financed by taxes, the system of mandatory participation in private funds from individual accounts in the country was not accepted. 3. international experience of reforming pension systems in latin countries interesting is the experience of chile, where pensions were privatized in the early 1980s. were set up private savings funds with pre-established contributions that employees pay 10% of earnings, employer contributions or the government was not provided. workers have the right to choose and change the fund, at the termination of employment workers can gradually choose some of their savings to the fund. there is a minimum pension guarantee that is provided to protect workers with low earnings, and to protect investors from poor performance of their chosen fund: in cases where a worker with 20 years of pensionable service receives a pension below a certain level, the government increased it to the guaranteed level. there transient conditions for workers moving from the old to the new distribution system. that is, the second pillar is mandatory, guided by the private sector and based on individual accounts. there is also first (residual) level in the form of guarantee pension recipients’ second level. the reform of the pension system in chile has both positive and negative consequences. the reformed system strengthened financial discipline contributed to the accumulation and expanded and deepened the financial markets and thus contributed to the growth of the chilean economy in 1980. however, firstly because it is based on the principle established in advance fees, risk on amounts exceeding the minimum pension, it falls on the same worker. secondly, it is individualistic, in the absence of redistribution both within one generation and between different generations. thirdly, there are deficiencies in the coverage of contributors arising from non-payment of contributions. the positive is the guarantee of state spending on pensions for older citizens who have not adopted the new system, the cost of temporary contributions for workers who have just moved to a new system of costs to issue index-linked bonds and guarantee minimum pension, which helps protect the investors from the consequences of poor performance chosen they fund baltic journal of economic studies 116 vol. 2, no. 3, 2016 and pensioners  – from the bankruptcy of the insurance company. however, the negative features of the chilean pension reform are: the high cost of services administration of pension funds; significant level of poverty (in chile more than a third pension fund clients have incomes below the poverty line). promised one of providing retirement has not been reached. instead, the stated 70% of earnings over the past 10 years of service the employee average pay was 39%, while for women the figure was 14%. so from july 1, 2008 in chile, along with the accumulative pension system introduced civil solidarity pensions to persons who are not entitled to any other pension, including accumulation. in order to encourage competition in the pension of 2009 was introduced auction system between non-state funds and insurance companies for the right to service new customers. this permitted bid foreign entities. chilean experience was taken into account in the implementation of the reform of the pension system in other countries of the continent (argentina, colombia, peru, uruguay, mexico, bolivia, el salvador). pension reforms in latin american continent were successful in terms of reducing the retirement of debt and create a more stable financial system. the volume of pension funds in chile, where the new system has been operating for over 20 years is 54% of gdp in colombia – 14 argentina  – 6% of gdp. the common features of the reform of pension systems in latin america was: full recognition by the government pension liabilities of the old distribution system; state minimum pension guarantee in the event of bankruptcy of the private pension funds; different forms of employee compensation to mitigate the difficulties of the transition and promotion of adherence to the new system; strengthen state regulation of the use of pension funds. but were serious problems persists despite the reforms. coverage of workers’ pensions remained at the pre-reform level (only 50-60% of the working population). this situation has the potential to cause serious social risks for the whole system. none of the continent failed to solve the problem of high cost of decentralized management of the pension system. 4. international experience of reforming pension systems in central and eastern europe countries hard financial crisis experienced public pension systems in most transition countries of central and eastern europe (pyrozhkov, 1999), which is the result of political decisions that reflect the transition from central planning to a market economy and does not take into account the role of individual incentives. mostly imbalance pension system also caused great demographic load – unfavourable ratio of pensioners to the number of payers of insurance premiums resulting from the low retirement age and aging population. with the reduction in state revenues and the need for macroeconomic stabilization comprehensive pension reform is an integral part of the overall economic reform in these countries is crucial to ensuring high and sustainable rates of economic growth. the features of the developed countries are, firstly, the presence of mature, comprehensive distribution schemes, supplemented by voluntary system based on commercial insurance. secondly, the need to make changes so as not to violate the consent of political parties and social partners, not reduce confidence in the long-term capacity of pensions. that is why most developed countries have chosen the so-called parametric approach to pension reform, i.e. implementation of corrective measures that change, sometimes quite dramatically, the current system characteristics (level of contributions, retirement age or pension indexation formula under the existing financial possibilities). in the initial stages of reforms in almost all countries, including the usa, germany, japan, italy, attempts were made to increase the income of the pension system by raising the contributions that generated much opposition members. modernized framework is also collecting contributions. for example, belgium, italy, switzerland and portugal were cancelled maximum salary when calculating premiums. a variety of approaches have been to reduce pension costs. whereas, according to the oecd, raising the retirement age for 1 year reducing pension costs by 5-10%, some states (us, japan, italy, sweden) in order to reduce the number of pensioners increased the statutory retirement age, stretching is increasing for decades. for example, in the us retirement age for men and women increased during the 2000-2027 from 65 to 67, france  – 62, japan  – up to 65. in sweden, the new pension system does not establish a common retirement age. it is flexible, the choice of the pensioner, ranging from 61 to 67 years. another method is reducing the value of assistance per capita by modifying mechanism accrual pension for new retirees or indexation formula. in the uk, france, italy it is moved to the calculation of pension based on the salary for the entire period of employment, rather than chosen by years of highest earnings. among european countries, the most ambitious pension reforms have been implemented in the uk and sweden. these states have rebuilt much of its pension schemes on savings principles. the solidarity system is quite vulnerable to political risk, the essence of which is manifested in the fact that politicians often promise more than the pension system is able to provide for the implementation of such promises, especially during political battles usually resort to cover the deficit of pension obligations through the state budget, the use of all possible sources for this purpose, frozen pensions. for developed countries worsening demographic situation is characterized, corresponding to the general trend of an baltic journal of economic studies 117 vol. 2, no. 3, 2016 aging population, but the problem is particularly acute for ukraine. ukraine has one of the highest among the countries of the former soviet union average percentage of pensioners per 1000 of population, accounting for 28.2%, mainly it is the result of its relocation in the war with the north, siberia and others. in ukraine, the lowest retirement age (women – 55 years, men  – 60 years), the legislative establishment of which was made in 1928, when life expectancy was 47 years: women 49, men 45 years (korczak-chepurkivskyy, 1929). today, life expectancy in ukraine already is 67 years: 62 years – for men, 74 years – for women (see table). table retirement age population in some foreign countries country female male pension age life expectancy after retirement pension age life expectancy after retirement ukraine 55 20 60 2,6 italy 57 27 60 18 czech republic (gradual increase) 57-60 19 62 10 poland 60 19 65 6 uk 60 21 65 11 hungary 62 15 62 6 france 62 21 62 14 estonia (gradual increase) 63 14 63 2 germany 65 17 65 11 spain 65 18 65 11 usa 65 15 65 10 canada 65 17 65 5 norway 67 15 67 10 japan 70 15 70 8 source: compiled from statistics most countries in central and eastern europe who made pension reform, increased the retirement age people, as reflected in the table, with in some countries the retirement age rose once (poland, hungary) and in other countries (estonia, the czech republic) is increasing gradually. in some countries, women and men retire at the same time in the same age. according to studies, after-pension age in ukraine for men is on average 2 years and for women 20 years, which is the cause of raising the retirement age. developed countries need to raise the retirement age arising from an aging population and worsening ratio of under 8 contributions payers to the number of pensioners, which could lead to deterioration of the solvency of national pension systems and their bankruptcy. scientists estimate (libanova, 2000) if increase the retirement age by five years, then, according to estimates, the number of pensioners will decrease by 40% and pensions can gradually increase by 60-70%, and taking into account the cancellation of pension  – twice. it should recognize that the extreme urgency factor is increasing age. 5. conclusions in summary, it should be noted that the problem of pensions of the elderly is relevant for all countries. recently, most countries faced with serious social problems that threaten public finance crisis, one of the most critical elements of the crisis was just the public pension system. since neither solidarity nor funded system do not solve the pressure from an aging population, financial capabilities do not meet the funding kept growing need for their support. therefore, it becomes necessary to reform the public pension system, which would increase the retirement age, or age which is entitled to a pension privatization of some parts of pension schemes, enable diversified investment existing trust funds, changing the base for calculating the amount of assistance (such as increasing the number of waste years taken into account when calculating aid). at the same time, governments are taking a number of measures and, in particular, partly offset other social programs (unemployment, etc.). given the economic, social and demographic situation in ukraine, there should be carefully studied the experience of countries that are faced with problems of this kind. analysis of global pension systems confirms that the need to reform the first public pension systems would increase the retirement age, restructuring public pension system towards the introduction of multi-mixed pension system, privatization, if necessary, parts of pension programs, to enable a diversified investment existing trust funds or create new ones, change the base for calculating pensions. foreign experience of reforming the pension system allows using many useful lessons. however, mechanical drawing models and mechanisms of social protection that had positive results in other countries without specific socio-economic, political, socio-cultural and sociopsychological characteristics and conditions are undesirable and impossible. public policy should be as reasonable to illadvised decisions not to cause disappointment in the ongoing reform of society. it should also be noted that the transition to a system of capitalization of pension contributions will require at least 30-40 years, after which only earn a full pension system. three-tier pension system will make it possible to distribute among its constituents risks associated with changes in the demographic situation (which is more sensitive to the payg) and fluctuations in the economy and the capital market (which felt more than in batch system). such risk sharing will make the pension system more financially sustainable and balanced that insure workers against reducing the overall level of income in retirement and is essential and beneficial for them. prospects for further research. further development should be based on a deep system analysis of international experience of reforming the individual components of the pension system weaknesses and benefits of the current pension system of ukraine to develop instruments forming effective and socially oriented pension system in ukraine that would meet the principles of the state welfare and be able to take challenges. baltic journal of economic studies 118 vol. 2, no. 3, 2016 references moseyko, v.v. (n.d.). genesis of pension systems as a manifestation of the social functions of the state. retrieved from: www.rusrand.ru/doklad5/moseiko.pdf barr, n. (2002). pension puzzle. prerequisites and policy options in the development of pension systems. questions of economy, № 29. retrieved from: http://imf.org/external/pubs/ft/issues/issues29/rus/issue29r.pdf popov, a.a. (2001). pension system us and russia: evolution and reform attempt (different stages of development). usa – canada: economy, politics, culture, №3, p. 3-23. pyrozhkov, s.i. (1999). human development and social policy. the deepening economic reforms and economic development strategy of ukraine till 2010. proceedings of sciences. conf. kiev, ukristei, 211 p. korczak-chepurkivskyy, j. (1929). table of hoped surviving population lives in 1925-1926. kharkov, roslit, p. 14-18. libanova, e. (2000). demographic preconditions pension reform. social protection, №2, p. 48-57. anastasiia svyrydovska зарубежный опыт реформирования пенсионной системы и возможность адаптации в украине аннотация. целью работы является анализ зарубежного опыта реформирования пенсионных систем. реформирование пенсионных систем во всем мире вызвано необходимостью сбалансировать расходы на социальную поддержку людей, растущих с финансовыми возможностями страны. украина, как и другие страны европы, стоит перед кризисом системы государственного пенсионного обеспечения. одна из причин – быстрое старение населения. опыт ряда стран показывает, что увеличение ставок отчислений негативно влияет на уровень занятости, приводит к значительному увеличению государственного долга, а потому неприемлемо. ряд экономистов считает, что полный переход на накопительные пенсионные схемы – это решение проблемы. однако это создаст дополнительную нагрузку на государственные финансовые системы и нынешнее поколение налогоплательщиков. поэтому существует необходимость определения основных направлений выхода из кризиса систем пенсионного обеспечения. в условиях экономического спада мировых масштабов проблема действенности пенсионной системы украины, ее соответствия стандартам социального государства приобретает все большую остроту. именно поэтому существует настоятельная необходимость на основе адаптации зарубежного опыта пересмотреть предложенные ранее пути реформирования системы пенсионного обеспечения украины. методикой является фактическая работа ученых и исследователей. результатами статьи является исследование особенностей зарубежного опыта реформирования пенсионных систем и предложения направления осуществления реформ системы пенсионного обеспечения украины исходя из демографических, социальных, финансовых, политических и культурных особенностей ее развития. значение. актуальность темы исследования обусловлена поиском государственных механизмов регулирования социального страхования в украине. наиболее развитые системы социальной защиты имеют страны ес. рассмотрение отдельных программ этих эффективно действующих систем социального страхования является важной базой анализа международного опыта. определяющее влияние на системы социальной защиты в странах ес оказывают современные демографические тенденции (падение рождаемости ниже уровня естественного воспроизводства населения и его старение), усиление европейской интеграции и экономической глобализации. это вызывает необходимость поиска в странах ес новых подходов для достижения оптимального соотношения между экономическими и социальными составляющими общественного развития, которые позволили бы избежать конфликта между приоритетами экономического развития и принципами социальной справедливости. с этой точки зрения интересна оценка наиболее эффективных вариантов модернизации систем социальной защиты в странах ес на примере отдельных программ. baltic journal of economic studies 62 vol. 2, no. 5, 2016 corresponding author: 1 central ukrainian national technical university. e-mail:data0201@yandex.ru specific of accounting of non-financial assets in health institutions natalya pryadka1 central ukrainian national technical university, ukraine abstract. the purpose of the paper is to analysis of the modern state of accounting of non-financial assets and present accounting in health institutions protection during the period of medical reforms. the account of nonfinancial assets has his specific in medical establishments. reforms, which implemented in ukraine, affecting the account of non-financial assets. medical institutions relate to the general government. methodology. the survey is based on a comparison of data from the national and international reforms in medical industry. results of the survey showed that in the dictionary of v. raizberg next determination is driven: "public sector – it is a set of business units, that carry out economic activity, are in a public domain, controlled by public authorities or designated and hired persons" (raizberg, 1999). in the commercial code of ukraine it is indicated: "the subjects of public sector of economy are subjects that operate on the basis of only public domain, and also subjects, which state share in authorized capital exceeds fifty percents or be value that provides a right to the state for decisive influence on economic activity of these subjects" (сс, 2003). practical implications. public sector structure specifies data of international public sector accounting standards. substancial load concept "public sector" in national and international practice are relevant (poznyakovska, 2009). accounting in health institutions has specific terms, inherent to the government sector. they are determined by the types of activity and terms of assignation (pasichnik, 2005). medical services must be accessible to all stratum of population. they must have free basis. they come forward as a public benefit independent of individual possibility to pay for him. therefore lion's part of general charges for health protection is used on the grant of medical services to the population. at the same time "upgrading of medical services lies inplane providing of unitization of going near the grant of medicare, standardization of medical documentation, approaching of services to the patients by their decentralization and integration, in accordance with health care level" (eshchenko, 2016). value/originality. current state analysis of accounting non-financial assets of health care institutes has an important value. account of non-financial assets influence on transference of data about non-financial assets to the financial reporting. a national account of nonfinancial assets is now reformating. this situation foresees changes and possible defects. the analysis of account gives an opportunity to avoid errors and defects. key words: non-financial assets, accounting, health care, public sector, public institutions. jel classification: m41, i18, h42 1. вступление общественное развитие невозможно без существования и трансформации государственного сектора экономики. в словаре в. райзберга приведено следующее определение: «государственный сектор – это совокупность хозяйствующих субъектов, которые осуществляют экономическую деятельность, находятся в государственной собственности, и управляются государственными органами или назначенными ними наемными лицами» (raizberg, 1999). в то же время хозяйственный кодекс украины определяет, что: "субъектами хозяйствования государственного сектора экономики являются субъекты, действующие на основе государственной собственности, а также субъекты, государственная доля в уставном капитале которых превышает пятьдесят процентов или составляет величину, которая обеспечивает государству право решающего влияния на хозяйственную деятельность этих субъектов "(gospodars' kyj kodeks ukrai'ny, 2003). такое видение структуры государственного сектора конкретизирует определение, которое дано в международных стандартах бухгалтерского учета для государственного сектора, что подтверждает соответствие смысловой нагрузки понятия "государственный сектор" национальной и международной практики (poznyakovska, 2009). baltic journal of economic studies 63 vol. 2, no. 5, 2016 2. специфика нефинансовых активов медицинских учреждений свою специфику учета в государственном секторе имеют учреждения здравоохранения, ее определяют виды деятельности и условия ассигнования (pasichnyk, 2005). ведь медицинские услуги должны быть доступны всем слоям населения, то есть в своем составе иметь бесплатную основу, и выступать тем общественным благом независимым от индивидуальной возможности заплатить за него. поэтому львиная доля общих расходов для здравоохранения используется на предоставление медицинских услуг населению. в то же время "повышение качества медицинских услуг лежит в плоскости обеспечения унификации подходов к оказанию медицинской помощи, стандартизации медицинской документации, приближение услуг к пациентам путем их децентрализации и интеграции, в соответствии с уровнями оказания медицинской помощи" (eshchenko, 2016). таким образом для обеспечения качества выполнения задач здравоохранения необходимо современное обеспечение условиями труда, а именно нефинансовыми активами, что предусматривает значительные объемы расходов на содержание отрасли. на фоне растущих потребностей общества в медицинском обеспечении обостряется необходимость исследования, анализа и обобщения фактической информации, которая производится и перегруппировывается в учетной системе. проблемы бюджетного учета освещались в трудах известных отечественных и зарубежных ученых с.м.  алешин, и.а.  андреев, м.и.  баканов, р.т.  джога, и.к.  дрозд, а.м.  белов, ф.ф.  ефимова, п.т.  ворончук, а.а.  грищенко, а.н.  голядченко, е.п.  дедков, о.в.  дышкант, п.с.  ещенко, н.н.  ермошкин, з.у.  жутова, а.  зверев, и.и.  каракоз, с.с.  котова, л.  киндрацкая, и.а.  кондратюк, н.и.  малов, ф.с.  михальчук, ю.  пасечник, в.и.  самборский. за последние годы опубликованы результаты исследований п.и.  атамас, с.я.  зубилевич, п.  петрашко, с.в.  свирко, н.и.  сушко, а.а.  чечулина, и.д.  фарион. анализ работ отечественных и зарубежных ученых подтверждает значимость и практическую ценность полученных научных результатов. впрочем, пока не достаточно фундаментальных исследований в области учета и анализа деятельности медицинских учреждений, особенно в отношении учета нефинансовых активов. дальнейшего исследования требуют проблемы совершенствования методики их учета, анализа, концептуальных подходов к формированию и распределению в целях улучшения финансового состояния повышения эффективности использования и экономии ресурсов. целью исследования является анализ современного состояния и перспектив реформирования бухгалтерского учета нефинансовых активов и их трансформация в отчетность учреждений здравоохранения на основе очерченных недостатков, проблем и существующих базовых под ходов. 3. проблемы учетного процесса учреждений здравоохранения важным элементом современной инфраструкт уры международной экономики выст упает бухгалтерский учет и финансовая от четность медицинских учреждений, в которых четко прослеживается аналитическая составляющая. поэтому в процессе совершенствования методики учета нефинансовых активов учреждений здравоохранения крайне необходимо обеспечить полнот у формирования качественной информационной базы как основы принятия управленческих решений, направленных на повышение эффективности управления учреждениями здравоохранения, улучшения их экономики, обеспечения финансовой устойчивости, а значит, рентабельной деятельности. трудно не согласиться с мнением, что: "на законодательном уровне не существует разделения систем бухгалтерского учета, однако практика регулирования бухгалтерского учета в украине свидетельствует, что такое распределение реально существует. оно обусловлено формой собственности, масштабами и спецификой отдельных видов деятельности субъектов хозяйствования. именно поэтому стандартизация бухгалтерского учета как на международном уровне, так и в украине, происходит в рамках корпоративного, государственного секторов, малого и среднего бизнеса. создаваемые системы учета не являются автономными, все они базируются на единой методологии, но в организационном плане являются обособленными, поскольку имеют разное нормативное обеспечение, существенные особенности текущего учета, нюансы в смысле финансовой отчетности" (kanjeva, 2010). на базе учетных данных формируются плановые мероприятия по финансированию отрасли, поэтому "обеспечения достаточного по объемам и эффективного финансирования является главным залогом нормального функционирования системы здравоохранения в любой стране. как свидетельствует мировой опыт, любая система здравоохранения в большей или меньшей степени сталкивается с проблемой дефицита финансовых ресурсов. каждая из стран европейского союза в свое время прибегала к реформированию национальной системы здравоохранения. каждая из стран шла своим собственным путем, но проблемы, которые им приходилось решать, были одинаковыми" (malagardis, 2015). baltic journal of economic studies 64 vol. 2, no. 5, 2016 4. опыт проведения реформ стран европы следует заметить, что в странах восточной европы (польше, эстонии, хорватии, венгрии, словении), где достаточно низкий уровень неформальной экономики и занятости в том числе, новый подход к финансированию здравоохранения предусматривал не увеличение объема расходов, а имел целью их рациональное и оптимальное использование. в то же время страны с меньшей формальной занятостью (россия, румыния, албания) не смогли ввести механизмы эффективного финансирования из-за особенностей выплат и налогообложения. поэтому эффективное использование ресурсов выступает особенно важным моментом при реформировании отрасли. в  украине (государству с относительно высоким уровнем неформальной занятости) существует бюджетная система финансирования и распределения ресурсов. в то же время, существует высокий процент неформальных платежей. несмотря на то что здравоохранение является технически громоздкой отраслью, следующим шагом становится введение соответствующих специализированных компьютерных программ и оборудования. вводится регистрация пациентов и медицинских услуг с использованием соответствующих компьютерных программ, ведется учет статистических данных на основе системы интегрированной отчетности (malagardis, 2016). реализация положений пилотного проекта не обходится, конечно, без проблем. одной из них является неготовность некоторых медицинских работников, особенно людей старшего возраста, работать в новых условиях. главная причина в этом заключается в отсутствии у них необходимых знаний и опыта, раскрыто в статье "пилотные регионы работа продолжается" (malagardis, 2016). "необходимым фактором успешной автономизации лечебных учреждений является коренное изменение организационной структуры управления предприятием. важной составляющей такой реорганизации является возможность руководителей разного уровня иметь оперативную и достоверную информацию о состоянии предприятия и его подразделений по различным аспектам деятельности. в первую очередь это касается информации о состоянии финансового и материального обеспечения медицинского заведения, планирование бюджета и контроля за его выполнением, непрерывный анализ выполнения контрактных обязательств, расчета себестоимости оказанных медицинских услуг, анализа качества этих услуг и тому подобное. успешное решение этих задач невозможно при традиционном бумажном накоплении информации и формировании отчетности. итак остро стоит проблема замены бумажной технологии ведения документооборота на электронный с использованием компьютерного оборудования. активное использование аналитических и моделирующих возможностей информационных систем позволит руководителю оптимально смоделировать структуру своего лечебного учреждения, правильно организовать процесс планирования бюджета и контроль за его выполнением. при этом экономия средств может составить до 20%" (djachenko, 2016). в украине продолжается выбор оптимального проекта реформирования здравоохранения. свои работы предлагают не только деятели бюджетной сферы, но и коммерческие идеологи, так в. кондрук свое предложение обосновывает следующим образом: "в мире существует несколько успешных моделей предоставления медицинских услуг: частное финансирование здравоохранения, которое породило самую успешную в мире медицину – сша (при этом, доступную не всем); модель бисмарка (финансирование медицинских услуг через обязательное страхование), которая успешно реализована в германии; модель бевериджа (бюджетное финансирование медицинских услуг) – еще успешнее реализована в великобритании. однако, ответственная политика в любой сфере, особенно в такой чувствительной как здравоохранение, должна отталкиваться от реального положения дел. невозможно перенести модель здравоохранения, которая успешно работает в соединенных штатах америки, германии или великобритании, на украинскую почву и сделать эту модель такой же успешной в украине. на сегодня полная разруха организации здравоохранения в украине дает нашей стране уникальный шанс не копировать консервативную модель 200, 130 или 70-летней давности, которые успешно реализованы в сша, германии или в англии, со всем известными преимуществами и недостатками той или иной модели, а создать новую модель, которая будет построена на современных достижениях и учтет положительный опыт организации здравоохранения успешных стран и «цели тысячелетия в области здравоохранения» всемирной организации здравоохранения (воз). поэтому для удобства в обсуждении этих предложений я назвал новую модель организации здравоохранения – «модель 5», подчеркивая этим, что она не повторяет ни одну из существующих четырех основных" (kondruk, 2016). 5. предпосылки реформирования сектора здравоохранения важно отметить, что стратегическое планирование деятельности медицинских учреждений предусматривает длительный срок. это определяется тем, что отрасль является информационно и технологически насыщенной, базируется на дорогом оборудовании, документации, образах, результатах тестов и консультаций, и, немаловажно, существует уже действующий технологический процесс, и испольbaltic journal of economic studies 65 vol. 2, no. 5, 2016 зование ресурсов должно быть эффективным и качественным, что в свою очередь обеспечивается современным техническим оснащением. таким образом здравоохранение является капиталоемкой отраслью экономики, поэтому, очевидно, необходимо ожидать роста расходов в будущем. в то же время контроль качества – аудит, сертификация – приобретают все больший вес, когда приходит время нехватки средств. по мнению польских ученых, а именно, дж. хлуска, учет в системе здравоохранения польши является результатом выполнения условий политических, культурных, социальных, правовых, налоговых и финансовых требований, поэтому нестабильность в упомянутом секторе, проявляется в постоянном изменении структуры здравоохранения и отсутствии четкого регламента действий, конечно, это приводит к изменению правил финансирования услуг медицины. что в свою очередь это провоцирует кратковременные подходы к реализации целей отрасли, в том числе и бухгалтерского учета (chluska, 2004). а это в свою очередь не соответствует учетным принципам, таким как сопоставимости, непрерывности и др., ведь постоянные изменения в учетных методиках приводят к постоянной "подгонке" учетных данных к обновленным нормативным требованиям. в свою очередь м. macuda, в период формирования польской системы здравоохранения, подчеркивал, что "внимание должно быть уделено учету, как в целом, так и его подсистемам – финансовому и управленческому учету. информация, полученная от управленческого учета, обеспечит отображение видов расходов в оценке медицинского обслуживания. в то же время для внешних пользователей более интересна информация от финансового учета, то есть показатели финансового положения и нефинансовых активов учреждения в области здравоохранения, а также их ликвидность", что бесспорно, также важно и для украинского учета (macuda, 2013). методология, используемая в области польского бухгалтерского учета в системе здравоохранения, является формой общественного договора в рамках закона. закон предусматривает, что влияние правильного применения стандартов будет: 1) определением достижений прошлого, что должно обеспечить проверку изменения в методах управления и их влияние на эффективность функционирования; 2) получением информации для того, чтобы принимать рациональные решения, касающиеся распределения ресурсов; 3) осуществлением управленческого планирования на основе статистической информации (fijałkowska, 2014). п. атамас отмечает, что в бюджетной сфере, почти отсутствуют хозрасчетные отношения, такие учреждения не имеют уставного капитала, а все их активы являются государственной собственностью (atamas, 2003). основным отличием бюджетных учреждений от других неприбыльных организаций, как отмечает с. левицкая, является их полная зависимость от бюджетного финансирования, которое осуществляется в рамках бюджетного кодекса (levyc'ka, 2004). в то же время следует отметить, что в отличии от международной практики в системе бухгалтерского учета в бюджетной сфере украины различают два основных объекта: учреждение, получает средства бюджета, и собственно бюджет. в отечественной практике учета исполнения бюджетов применяется кассовый метод отражения доходов и расходов. учреждения, которые получают средства бюджетов, используют различные методы учета доходов и расходов. так, учет доходов общего фонда сметы учреждений осуществляется по кассовому методу (kanjeva, 2010). в сегодняшней жизни как украинского так и иностранного учета важный акцент получает учетная политика. которая в себе должна вместить и согласовать неоднозначности в трактовке законодательных актов по бухгалтерскому учету и медицинских законов, а также их подзаконных нормативных документов, таким образом обеспечить сохранение учетных процессов, их соответствие принципам бухгалтерского учета. как указывает дж. хлуска, в учетной политике должны быть учтены процессы, как бюджетного финансирования так и самофинансирования, и принимать во внимание не только положение баланса, но и других действий, которые носят в себе характер организации функционирования субъекта деятельности. удовлетворения информационных потребностей с учетом отдельных партнеров, налоговиков, сотрудников, а также необходимость мониторинга и контроллинга конкретных задач может быть достигнуто за счет развития аналитики дополнительных счетов, которые подробно описывают синтетические счета общей бухгалтерской процедуры (chluska, 2012). с точки зрения дж. хлуска бухгалтерский учет в медицинских учреждениях должен охватывать всю информационную систему, которая играет важную роль в формировании финансовой отчетности, главная цель которой удовлетворить потребности внутренних и внешних пользователей, так учет в системе здравоохранения является результатом политической обстановки, культурных, социальных, правовых, налоговых и финансовых изменений в стране касательно государственного сектора экономики. такие моменты создают нестабильность данной отрасли, которая выражается в частых реструктуризациях, изменениях правил финансирования услуг медицинских учреждений, структурных изменениях в системе здравоохранения, несогласованности в остатках региональных политик, управлении колебаниями многих решений «по своему усмотрению», а это имеет принципиальное значение для baltic journal of economic studies 66 vol. 2, no. 5, 2016 функционирования больниц и вызывает отсутствие четкого регламента действий. это в свою очередь, становится причиной кратковременного подхода к реализации целей бухгалтерского учета. в результате кратковременного учета не всегда возможно выявить все проблемы и недочеты, с которыми сталкивается больница. надежная и достоверная картина раскрывается в долгосрочной перспективе поэтому учетная политика должна базироваться на индивидуальных подходах (с акцентом на принципы благоразумия) и быть ориентирована на генерацию информации, полезной в управлении медицинским учреждением (chluska, 2004). 6. заключение в настоящее время в мировом сообществе наблюдается несколько моделей функционирования системы здравоохранения, которые в свою очередь имеют различные подходы и методики к учету нефинансовых активов медицинских учреждений. важен тот фактор, что каждая из них не идеальна и имеет свои недостатки. таким образом перед правительством украины стоит важная задача поиска вариантов решений. новые технологии способствуют более быстрому решению проблем здравоохранения, но в то же время специфика отрасли заключается в уже существующем технологическом процессе и наличии влиятельных взглядов и мнений, которые не имеют желания воспринимать обновленную систему. важно заметить, что персонал государственных медицинских учреждений достаточно консервативен. нежелание стремительно воспринимать информационные потоки, приносит вред в процессе экспериментальных пилотных проектов. итак, в украине существует настоятельная необходимость разработки новой системы здравоохранения, которая за основу взяла бы и накопленный опыт временами, и в то же время, не повторяла его ошибки. а это в свою очередь обеспечит бухгалтерский учет простой, прозрачной и достоверной информацией, которую легко будет трактовать и использовать для внутренних и внешних потребностей. одной из преград выступает стремительное развитие технического обеспечения системы здравоохранения, которое в свою очередь фактически относится к нефинансовым активам. оборудование дорогостоящее, поэтому не всегда своевременно попадает в учреждения, а процесс ит – развития такой быстрый, что даже оборудование, на которое еще действительный полезный срок использования может быть морально устаревшим, и не отвечать требованиям общественного прогресса. ведь бухгалтерский учет сталкивается с необходимостью согласовывать законы, регламентирующие учет и законы о медицинской деятельности, которые имеют влияние на принципы ведения бухгалтерского учета и накладывают на него существенный оттенок специфики отрасли. поэтому бухгалтерский учет нефинансовых активов должен проводиться так, чтобы не было никаких нарушений, которые возникают из-за коллизий в нормативно – законодательных актах. references atamas p.j. 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(2015). strategichne planuvannja dlja efektyvnogo rozmishhennja resursiv ta upravlinnja medychnymy poslugamy v ukrai'ni, elektronnyj resurs, rezhym dostupu: http://www.healthfin.kiev.ua/pages/ review/res_19u.htm malagardis a. (2016). pilotni regiony: robota prodovzhujet'sja, urjadovyj portal – elektronnyj resurs, rezhym dostupu: http://www.healthfin.kiev.ua/pages/review/res_10u.htm pasichnyk ju.v. (2005). bjudzhetnyj potencial ekonomichnogo zrostannja v ukrai'ni – donec'k: tov «jugovostok, ltd», monografija, 642 s. poznjakovs'ka n.m. (2009). problemy ta perspektyvy reformuvannja buhgalters'kogo obliku u derzhavnomu sektori – visn. nac. un-tu vodnogo gosp-va ta pryrodokorystuvannja, (ch.2): 396–403. rajzberg b.a., l.sh. lozovskyj, e.b. starodubceva (1999). sovremennj ekonomycheskyj slovar' (2-e yzd., yspr.) – ynfra-m, moskva, 477 s. наталя прядка специфика и проблемы учета нефинансовых активов системы здравоохранения аннотация. целью данной работы является анализ современного состояния учета нефинансовых активов и отчетности в области здравоохранения в период медицинских реформ. бухгалтерский учет нефинансовых активов имеет свою специфику в медицинских учреждениях. реформы, которые проводятся в украине имеют ключевое влияние на учет нефинансовых активов. медицинские учреждения относятся к сектору государственного управления. методология. исследование основано на сопоставлении данных национальных и международных реформ в медицинской отрасли. результаты исследования показали, что в словаре в. райзберга приведено следующее определение: «государственный сектор – это совокупность хозяйствующих субъектов, осуществляющих экономическую деятельность, находятся в государственной собственности, управляются государственными органами или назначенными ними наемными лицами» (rajzberg, 1999) . в хозяйственном кодексе украины указано: "субъектами хозяйствования государственного сектора экономики являются субъекты, действующие на основе государственной собственности, а также субъекты, государственная доля в уставном капитале которых превышает пятьдесят процентов или составляет величину, которая обеспечивает государству право решающего влияния на хозяйственную деятельность этих субъектов "(gospodars'kyj kodeks ukrai'ny, 2003). практические достижения. структура государственного сектора конкретизирует данные международных стандартов бухгалтерского учета для государственного сектора. содержательные нагрузки понятия "государственный сектор" в национальной и международной практике соответствуют (poznjakovs'ka, 2009). учет в учреждениях здравоохранения имеет специфические условия, которые присущи всему государственному сектору. но в то же время они определяются видами деятельности и условиями ассигнования. медицинские услуги должны быть доступны всем слоям населения. они должны иметь бесплатную основу. они выступают общественным благом независимым от индивидуальной возможности заплатить за него. поэтому львиная доля общих расходов для здравоохранения используется на предоставление медицинских услуг населению. в то же время "повышение качества медицинских услуг лежит в плоскости обеспечения унификации подходов к оказанию медицинской помощи, стандартизации медицинской документации, приближение услуг к пациентам путем их децентрализации и интеграции, в соответствии с уровнями оказания медицинской помощи" (jeshhenko, 2016). значение/оригинальность. анализ современного состояния бухгалтерского учета нефинансовых активов учреждений здравоохранения имеет важное значение. подходы к учетному процессу нефинансовых активов влияют на перенос данных о нефинансовых активах в финансовую отчетность. национальный учет нефинансовых активов находится в процессе реформирования. эта ситуация предполагает изменения и возможные недочеты. анализ подходов к учету позволяет избежать ошибок и недостатков. baltic journal of economic studies 91 vol. 8 no. 2, 2022 1 the educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv, ukraine (corresponding author) e-mail: nataliia.klymenko@knu.ua orcid: https://orcid.org/0000-0001-5223-8166 doi: https://doi.org/10.30525/2256-0742/2022-8-2-91-97 improving the quality of competence formation related to public administration aspects of national security among the applicants of higher education nataliia klymenko1 abstract. the aim of the article is to study the current state of formation by institutions of higher education in ukraine of competencies related to state-management aspects of national security in applicants for higher education to staff state authorities and local governments, as well as the private sector with specialistsadministrators capable of solving complex problems in the determining areas of national security (political, economic, social and humanitarian). methodology. the methodological basis of the study are modern general and special methods of scientific knowledge, including: analysis (in the study of educational and professional (epp) programs and educational and scientific programs (esp) to identify components aimed at forming the competencies of higher education applicants related to public and management aspects of national security); generalization, synthesis and prediction (to summarize the materials worked out and formulate conclusions and recommendations based on the results of the study). results. the results of the analysis of a number of educational and professional and educational-scientific programs for the specialties 281 "public administration and management" and 256 "national security (in certain areas of security and types of activity)" allowed us to conclude that the lack of educational components to form competencies related to public and management aspects of national security in future management specialists in existing educational programs for specialty 281 "public administration and management". practical implications. the analysis shows that the training of applicants for higher education in the specialty 256 "national security (in certain areas of security and types of activity)" is almost entirely aimed at the training of military specialists, despite the need of public authorities and local governments in specialists – managers in this specialty. value/originality. the author presented to the scientific community developed with her participation educational and professional and educational and scientific programs on specialty 256 "national security (in certain areas of security and types of activity)" for the first (bachelor) and second (master) levels of higher education (full-time and part-time forms of training), which are expected to begin, since 2022–2023 academic year, the training of management specialists for the determining areas of national security at the at the educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv. key words: higher education, educational programs, formation of competences, national security, public administration. jel classification: i23, h56, н83 1. introduction for timely identification and adequate response to contemporary challenges and threats in ukraine and the world, the country needs specialist managers capable of solving complex problems in the defining areas of national security (political, economic, social and humanitarian). these specialists, when performing the duties of an employee of a state or municipal body or institution, must be able to forecast and monitor threats under conditions of uncertainty, develop adequate management decisions under conditions of limited resources, and organize at their level the appropriate counteraction. such an approach to the formation of human resources capacity in the sphere of national security in modern conditions of large-scale pandemic and counteraction to armed aggression, as well as prevention of the emergence and elimination of the consequences of crisis situations of natural, manmade, social, environmental nature is professional and thorough, which, unfortunately, cannot be achieved in baltic journal of economic studies 92 vol. 8 no. 2, 2022 the educational programs existing in most institutions of higher education. after all, as noted by scholars (kryshtanovych, pushak, fleichuk, franchuk, 2020), effective national security depends on the knowledge, skills, and abilities of qualified personnel. not least of these is the lack of appropriate competencies among management specialists responsible for the formulation and implementation of national security policy. and the lack of a well-thought-out and transparent personnel policy and consistency in the work of state authorities regarding the implementation of decisions made in the sphere of national security, as noted by h. sytnyk (sytnyk, 2010), negatively affects the development and implementation of policy in this area. and, as the scientists rightly point out, the situation can only be corrected by establishing a systematic work on the training of relevant professionals, which will be based on a clear methodological basis and practical training methods (kryshtanovych, pushak, fleichuk, franchuk, 2020). therefore, their training is an important task, which cannot be successfully solved without the implementation of a focused, realistic and progressive state policy in the field of education and science. after all, today, as never before, the role of public policy in the educational training of specialists in the field of national security of ukraine is becoming more acute. this is due to the fact that their training at the proper level will be the guarantor of ukraine's independence (kryshtanovych, pushak, fleichuk, franchuk, 2020). given this, the purpose of the article is to investigate the current state of formation of competencies related to public administration aspects of national security in higher education institutions in ukraine, and to provide suggestions for improving the quality of their formation. to achieve this goal, the task was set to study the state of formation of competencies related to public and management aspects of national security in higher education applicants within the existing educational and professional programs (hereinafter – epp) and educational and scientific programs (hereinafter – esp) on specialties 281 "public administration and management" and 256 "national security (in certain areas of security and types of activity)" and on the basis of the study to prepare proposals to improve the quality of formation of the above competencies of higher education applicants. the methodological basis of the study are modern general and special methods of scientific knowledge, among which: analysis (in the study of epp and esp in order to identify components aimed at forming competencies of higher education applicants related to state and management aspects of national security); inductive and deductive (to analyze and summarize information on the research topic); generalization, synthesis and prediction (to summarize the materials worked out and formulate conclusions and recommendations based on the research results). 2. analysis of competence formation within the framework of existing educational and professional and educational-scientific programs special competencies and programmatic outcomes that address national security issues are provided in the higher education standard for the second (master's) level of higher education in 281 "public administration and management," as follows: "fk06 (ability to carry out professional activities taking into account the needs to ensure the national security of ukraine). prn03 (knowledge of the basic principles of national security and ability to prevent and neutralize challenges and threats to the national interests of ukraine within their professional competence)" (standard of higher education in specialty 281, 2020). on this basis, the department of global and national security at the educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv teaches a number of disciplines that provide for the formation of competencies related to public administration aspects of national security, namely: – in the esp "public management and administration" of the second (master's) level of higher education specialty 281 "public administration and management" to the mandatory components include the discipline "public management in the sphere of national security ", which introduces applicants to the philosophical aspects and methodological foundations of public administration in the sphere of national security, as well as the institutional set-up of public administration in the sphere of national security of ukraine; – in the esp "public service" of the second (master's) level of higher education specialty 281 "public administration and management" to the mandatory components include the discipline "national security ", which introduces students to the philosophical aspects of security as a phenomenon of living nature, the system foundations of national security; the basis of public policy of national security of ukraine, as well as the discipline "information and cyber security in public administration"; – in the esp "local self-government" and the esp "parliamentarism and parliamentary activity " of the second (master's) level of higher education specialty 281 "public administration and management" only one discipline – "national security " belongs to the mandatory components. at the same time, it should be noted that in the epp "government in the public sphere" of the first (bachelor) level of higher education specialty baltic journal of economic studies 93 vol. 8 no. 2, 2022 281 "public administration and management" among the mandatory components the discipline "conceptual foundations of national security " is outlined, and the first elective block "public administration in the field of national security " is composed of five disciplines, including "institutional foundations of national security system formation", "fundamentals of national security strategic planning", "foreign policy and national security ", the "institutional foundations of national security system formation", "foreign policy and national security planning", "economic component of national security " and "social and humanitarian component of national security ". it should also be noted that the second elective block "regional governance and local self-governance" contains the discipline "management of social and economic security of the region". however, the analysis of the submitted programs shows that the proportion of disciplines that involve the formation of competencies related to public administration aspects of national security, primarily in the mandatory components of the eps and epp, is quite small: one or two compulsory disciplines. under such conditions, it is difficult to talk about the formation within the framework of the abovementioned programs of competencies related to the state-management aspects of national security. as for the formation of such competencies in other ukrainian institutions of higher education that train applicants for public administration and management, the analysis of compulsory and selective components of second (master's) level educational programs conducted by s. andreiev (andreiev, 2021) shows that in the educational programs of 9 of 17 institutions of higher education there are no disciplines on security among the compulsory components at all, and in the remaining 8 – only 3 are devoted specifically to national security, in the sample components there are such disciplines only in 2 institutions of higher education out of 17, the programs of which were analyzed by the researcher. according to the above, it should be noted that today public authorities focus on the need to form a wide range of competencies in the field of national security, the possibility of obtaining which gives the specialty 256 "national security (in certain areas of security and types of activity)" branch of knowledge 25 "military sciences, national security, state border security ". however, the vast majority of institutions of higher education that train specialists in this specialty train military specialists. thus, the existing training programs for specialists with higher education in the following institutions of higher education are oriented to the training of military personnel in the specialty 256 "national security (in certain areas of security and types of activity): – the national defence university of ukraine named after ivan cherniakhovskyi (esp "strategic leadership in the security and defense sector"), a prerequisite for which is a master's degree and operational (operational-tactical) level of military education; – national academy of the state border guard service of ukraine named after bohdan khmelnytskyi (esp "national security (sphere of boundary activities)"), a prerequisite for which is a bachelor's degree and a tactical level of higher military education; – іnstitute of department of state guard of ukraine taras shevchenko national university of kyiv, which trains specialists on the basis of complete general secondary education (esp "personal and property security "). the only exceptions are the epp "national security " of the first (bachelor) level of higher education and the esp "national security " of the second (master) level of higher education of the national university of ostroh academy. in addition, according to the website "vstup.osvita. ua" training of candidates for higher education in the specialty 256, in addition to those mentioned above, also carry out: zhytomyr polytechnic state university (epp "national security (in certain areas of security and types of activity)" educational levels "bachelor" and "master"); national academy of the security service of ukraine (epp "organization of protection of information with limited access", epp "cyber protection of information resources", "counterintelligence protection of cybersecurity of the state and critical infrastructure objects" educational levels "bachelor" and "master"); admiral makarov national university of shipbuilding (pps "domestic political security " educational level "bachelor"). however, it was not possible to read the content of these educational programs on the websites of the relevant institutions of higher education due to their lack of public access. 3. competencies of a specialist in the field of national security domestic scientists determine the main attributes of a specialist in the sphere of national security to be his ability to correctly formulate the problem of public administration in the determining areas of national security; critical approach, constructing, norming, ontological analysis in finding an answer to the question raised, that is, not so much the assimilation of traditional knowledge on public administration in the sphere of national security, as the acquisition of new (competitive) knowledge; classification of such knowledge; typification of knowledge on public management of national security by forming appropriate types of thinking; self-analysis baltic journal of economic studies 94 vol. 8 no. 2, 2022 of own mental and practical actions with the results obtained for this purpose (sytnyk, abramov, kuchma, datsiuk, 2010). professionals who must carry out their activities in the sphere of national security require a deep understanding of the processes taking place in this sphere, knowledge of the basics of national security theory, the ability to make prompt managerial decisions, including under conditions of uncertainty and time pressure, taking into account numerous, often contradictory factors. at the same time, the complexity and uncommonness of the tasks faced by the security sector structures constantly increase the level of requirements for professionalism, competence, business efficiency of the specialist, his ability to carry out analysis related to the development and implementation of public policy, which should be aimed at identifying and responding to threats to national security (sytnyk, 2010). approved and put into effect by the order of the ministry of education and science of ukraine from 23.12.2021 № 1423 the standard of higher education for the second (master) level of higher education in the specialty 256 national security (in certain areas and activities) branch of knowledge 25 "military science, national security, and state border security " is referred to special (professional, subject) competence: "ск 1. ability to carry out professional activities in relevant areas of national security; ск 2. ability to analyze and assess the current state and trends of international relations and international security problems, their impact on national security in the context of ukraine's membership in nato; ск 3. capability to use the conceptual and categorical apparatus of the theory of national security, analyze and develop the structure of the national security system and the principles of its functioning; ск 4. be able to analyze and predict the development of the security environment (global, regional and national aspects) for individual security areas and activities; ск 5. ability to organize targeted activities for the formation and implementation of public policy in the areas of national security and defense; ск 6. ability to organize activities of territorial defense, mobilization preparation and mobilization within the limits of official duties; ск 7. capability to integrate knowledge and solve complex national security problems (across individual support areas and activities) in broad and/or multidisciplinary contexts with incomplete or limited information, taking into account aspects of social and moral responsibility " (standart vyshchoi osvity, 2021). in the above-mentioned standard, the object of study determines the national security of ukraine as a whole and its areas and activities, real and potential threats to the national security of ukraine; leadership of the security and defense sector of ukraine and its components. the objectives of the training are to prepare a professional capable of solving problems of research and innovation in the field of national security, to identify and counteract threats to national security of ukraine (in certain areas of security and types of activity). the theoretical content of the subject area consists of basic laws, regularities, categories, concepts, principles, methods and techniques that are used to ensure national security in accordance with the competencies of the components of the security and defense sector of ukraine (standart vyshchoi osvity, 2021). the standard provides that persons who have completed a bachelor's degree may apply for a master's degree. program of professional entrance exami nations for persons who have received a preliminary level of higher education in other specialties must provide verification of the acquisition of competencies and learning outcomes defined by the standard of higher education in the specialty 256 national security (in certain areas of security and activities) for the first (bachelor) level of higher education (standart vyshchoi osvity, 2021). at the same time, it should be noted that today there is no officially approved standard for the specialty 256 "national security (in certain areas of security and activities)" of the branch of knowledge 25 "military sciences, national security, state border security " for the first (bachelor) level of higher education, but its draft was developed and published on the website of the ministry of education and science of ukraine in 2021. the specified project describes the subject area of the specialty as follows: the object of study – the national security of ukraine as a whole and its areas and activities, real and potential threats to the national security of ukraine; ensuring individual components of national security. the learning objectives are to acquire the ability to solve complex national security problems and issues and/or in the process of learning, which involves identifying threats to ukraine's national security, characterized by uncertain conditions and requirements. theoretical content of the subject area – concepts, principles, methods and techniques used to ensure national security in accordance with the competence of its constituents. the subject of study and activities – ensuring national security in certain areas. methods, techniques and technologies – general scientific and special scientific methods, innovative technologies of training specialists with higher education; communicative methods of scientific interaction, information and communication technologies and techniques, quantitative and qualitative methods of research and data analysis (draft standard of higher education…, 2021). baltic journal of economic studies 95 vol. 8 no. 2, 2022 4. new educational programs for training management specialists in the field of national security the purpose of the epp "government in the field of national security " in specialty 256 "national security (in certain areas of security and activities)" of the first (bachelor's) level of higher education, developed by specialists of the department of global and national security at the educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv on the basis of the above-mentioned draft standard, is defined as providing special education in the field of national security with broad access to employment in public authorities that form and implement state policy in the field of national security; security centers of amalgamated hromadas (united territorial communities); public associations, nongovernmental and international organizations whose activities are related to ensuring national security; scientific and educational institutions that study national security problems, etc. this epp also provides for the creation of prerequisites for further study of state-management aspects of national security at the second (master's) level of higher education at the esp and epp "strategic management in the sphere of national security " in specialty 256 "national security (in certain areas of security and activities)" for fulltime and part-time forms of study, as well as the opportunity to obtain additional qualifications in the system of postgraduate education and professional development. integral competence of epp "government in the sphere of national security " assumes that after its successful mastery, bachelors will be able to carry out managerial activity in solving complex specialized tasks in the determining areas of national security (political, economic, social, humanitarian), including in crisis situations, which involves the application of theories and methods of the relevant industry and is characterized by complexity and uncertainty of conditions. the list of components of the epp "government in the sphere of national security ", aimed directly at the formation of competencies related to the statemanagement aspects of national security shows that 26 of the 50 obligatory components of the epp are aimed at the formation of such competencies. in addition, the disciplines of both selective blocks ("national security management at the national level" and "national security management at the regional level"), each consisting of 7 disciplines, as well as 10 disciplines in 8 blocks of the selective list of disciplines by student choice, who chooses 1 discipline from each block, are aimed at their formation. the purpose of the esp and epp "strategic management in the field of national security " specialty 256 "national security (in certain areas of security and activities)" of the second (master's) level of higher education for full-time and part-time forms of study is to provide training of professionals, highly qualified personnel for national security sphere, capable of analyzing, developing and implementing the state policy in the field of national security, effectively and efficiently performing management functions at the strategic level of management, promote innovative processes in the defining areas of national security in order to protect national interests, including preparing them to continue to study at the third educational and scientific level of higher education (doctor of philosophy). the integral competence of the programs assumes that after their successful mastery the masters will be able to carry out managerial activity in the determining areas of national security (political, economic, social, humanitarian) while solving complex problems and problems at the strategic level of management and/or in the process of learning, involving research and/or innovation, application of theories and scientific methods of the relevant industry and is characterized by uncertainty of conditions and requirements. it should be noted that of the 16 learning outcomes, 1 is provided exclusively for educational and scientific programs. the list of obligatory components of the esp "national security strategic management" includes 16 of the 21 obligatory components aimed at building competencies related to public and managerial aspects of national security. in addition, seven disciplines of each of the three elective blocks ("nationwide level of strategic management in the sphere of national security ", "the security component of strategic management in state foreign policy " and "information dimensions of national security "), as well as two disciplines on the elective list of disciplines by student's choice are also aimed at their formation. persons who have successfully completed the esp or epp "strategic management in the sphere of national security " and have received a master's degree in specialty 256 "national security (in certain security areas and activities)" will have the opportunity to work in senior positions in state and local government bodies from deputy head of a structural unit (sector, division, management, department, directorate) to state secretary of state power bodies. there will also be an opportunity to continue studying at the third educational-scientific level of higher education (doctor of philosophy), or to acquire additional qualifications in the system of postgraduate education and advanced training. baltic journal of economic studies 96 vol. 8 no. 2, 2022 in the list of mandatory components of the epp "strategic management in the sphere of national security " almost the same ratio of components aimed at the formation of competencies related to publicmanagement aspects of national security, because the volume of the program for the part-time form of study is reduced by 30% at the expense of the research component. 5. conclusions the conducted study indicates that the beginning of the training of applicants for higher education on the epp "management in the sphere of national security " first (bachelor's) and esp and epp "strategic management in the sphere of national security " second (master's) levels of higher education on specialty 256 "national security (in certain security areas and activities)" on full-time and part-time forms of training at the the educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv will allow to some extent meet the need of public authorities and local self-government in specialistsadministrators since 2022–2023 academic year, the professional responsibilities of which include addressing a wide range of issues of national security in its defining spheres. prospective for further research in this direction is to work on the development of esp for the specialty 256 "national security (in certain areas of security and types of activities)" for the third (educationalscientific) level of higher education. after all, today ukraine is faced with an alternative: either its political, administrative and socio-economic systems will be fundamentally renewed and thus its competitiveness, including its system of national security, will be guaranteed, or the country will find itself on the periphery of world processes. this necessitates a significant improvement in the quality and structure of professional training of managerial personnel for the national security system, increasing their professionalism and competence. therefore, according to the author's convictions, the training of personnel for the sphere of national security of ukraine should take into account that: – education, science, and security are closely intertwined; – training is an important component of state policy in the field of national security of the state, because the level of their training affects all levels of national security, because these personnel should really become the basis for successful national security, because, as noted by scientists, "those countries that consider them a strategic reserve, will have the prospect of successful implementation of the objectives of its security development" (kryshtanovych, pushak, fleichuk, franchuk, 2020); – the educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv, which is the successor of the national academy of public administration under the president of ukraine, has a qualified research and teaching staff with many years of experience in training specialists for public administration in the field of national security, relevant scientific and educational and methodo logical framework can meet the need of the state in training management specialists capable of solving complex problems in the determining areas of national security. references: kryshtanovych, m. f., pushak, ya. ia., fleichuk, m. i., & franchuk, v. i. (2020). derzhavna polityka zabezpechennia natsionalnoi bezpeky ukrainy: osnovni napriamky ta osoblyvosti zdiisnennia [public policy of national security of ukraine: the main directions and features of implementation]. lviv: spolom, 418 р. (in ukrainian) sytnyk, h. p. (2010). kontseptualni zasady zabezpechennia natsionalnoi bezpeky ukrainy: ch. 3: derzhavna polityka ta osnovy stratehichnoho planuvannia zabezpechennia natsionalnoi bezpeky [conceptual principles of ensuring the national security of ukraine: р. 3: public policy and basics of strategic planning for national security]. kyiv: nadu, 208 р. (in ukrainian) standart vyshchoi osvity za spetsialnistiu 281 "publichne upravlinnia ta administruvannia" dlia druhoho (mahisterskoho) rivnia vyshchoi osvity, zatverdzhenyi nakazom ministerstva osvity i nauky ukrainy vid 04.08.2020 r. № 1001 [standard of higher education in specialty 281 "public administration and administration" for the second (master's) level of higher education, approved by order of the ministry of education and science of ukraine of 04.08.2020 № 1001]. available at: https://mon.gov.ua/ua/osvita/vishaosvita/naukovo-metodichna-rada-ministerstva-osviti-i-nauki-ukrayini/zatverdzheni-standarti-vishoyi-osviti (in ukrainian) osvitni prohramy: navchalno-naukovyi instytut publichnoho upravlinnia ta derzhavnoi sluzhby kyivskoho natsionalnoho universytetu imeni tarasa shevchenka [educational programs: educational and scientific institute of public administration and civil service of taras shevchenko national university of kyiv]. available at: http://ipacs.knu.ua/?lang=ukr&tip=dop&tipn=&page=68 (in ukrainian) robochi navchalni prohramy: filosofskyi fakultet kyivskoho natsionalnoho universytetu imeni tarasa shevchenka [working training programs: faculty of philosophy, taras shevchenko national university of kyiv]. available at: http://philosophy.univ.kiev.ua/ua/view/navch_programy/2/2/2 (in ukrainian) baltic journal of economic studies 97 vol. 8 no. 2, 2022 andreiev, s. (2021). bezpekova skladova fakhovoi kompetentnosti zdobuvachiv vyshchoi osvity z publichnoho upravlinnia ta administruvannia [security component in the structure of professional competence of higher education applicants by public administration and management]. scientific herald: public administration, 4(10): 5–21. doi: https://doi.org/10.33269/2618-0065-2021-4(10)-5-21 (in ukrainian) stratehichne kerivnytstvo u sektori bezpeky i oborony: osvitno-naukova prohrama natsionalnoho universytetu oborony imeni ivana cherniakhovskoho [strategic leadership in the security and defense sector: educational and research program of the ivan chernyakhovsky national university of defense]. available at: https://nuou.org.ua/ assets/documents/project-onp-sksbo-256-2021.pdf (in ukrainian) natsionalna bezpeka (sfera prykordonnoi diialnosti) (operatyvno-taktychnyi riven): osvitno-profesiina prohrama natsionalnoi akademii derzha-vnoi prykordonnoi sluzhby ukrainy imeni bohdana khmelnytskoho [national security (sphere of border activity) (operational and tactical level): educational and professional program of the national academy of the state border guard service of ukraine named after bohdan khmelnytsky]. available at: https://nadpsu.edu.ua/wp-content/uploads/2021/02/opp_nb-otr-2019.pdf (in ukrainian) osobysta ta mainova bezpeka: osvitno-profesiina prohrama instytutu upravlinnia derzhavnoi okhorony ukrainy kyivskoho natsionalnoho universytetu imeni tarasa shevchenka [personal and property security: educational and professional program of the institute of public protection of ukraine, taras shevchenko national university of kyiv]. available at: http://indo.univ.kiev.ua/images/2021/256___2018.pdf (in ukrainian) natsionalna bezpeka: osvitno-profesiina prohrama natsionalnoho universytetu "ostrozka akademiia" dlia bakalavriv [national security: educational and professional program of the national university "ostroh academy " for bachelors]. available at: https://www.oa.edu.ua/ua/osvita/ects/info_prog/bachelor/fakultet_mizhnarodnih_ vidnosin/256_nacionalna_bezpeka_za_okremimi_sferami_zabezpechennya_i_vidami_diyalnosti/ (in ukrainian) natsionalna bezpeka: osvitno-profesiina prohrama natsionalnoho universytetu "ostrozka akademiia" dlia mahistriv [national security: educational and professional program of the national university "ostroh academy " for masters]. available at: https://www.oa.edu.ua/ua/osvita/ects/info_prog/mag/fakultet_mizhnarodnih_ vidnosin1/256_nacionalna_bezpeka/ (in ukrainian) sytnyk, h. p., abramov, v. i., kuchma, d. ia., & datsiuk a. v. (2010). kontseptualni osnovy zaprovadzhennia spetsialnosti 8.150103 "derzhavne upravlinnia u sferi natsionalnoi bezpeky " dlia profesiinoi diialnosti u sferi publichnoho upravlinnia [conceptual bases of introduction of specialty 8.150103 "public administration in the field of national security " for professional activity in the field of public administration]. kyiv: nadu, 40 p. (in ukrainian) standart vyshchoi osvity: druhyi (mahisterskyi) riven, haluz znan 25 voienni nauky, natsionalna bezpeka, bezpeka derzhavnoho kordonu, spetsialnist 256 natsionalna bezpeka (za okremymy sferamy zabezpechennia i vydamy diialnosti), zatverdzhenyi i vvedenyi v diiu nakazom ministerstva osvity i nauky ukrainy vid 23.12.2021 r. № 1423 [standard of higher education: second (master's) level, field of knowledge 25 military sciences, national security, state border security, specialty 256 national security (by certain areas of support and types of activities), approved and put into effect by order of the ministry of education and of science of ukraine of 23.12.2021 № 1423]. available at: https://mon.gov.ua/storage/app/media/vishcha-osvita/zatverdzeni%20 standarty/2021/12/24/256-nats.bezpeka-mahistr.pdf (in ukrainian) proiekt standartu vyshchoi osvity za spetsialnistiu 256 "natsionalna bezpeka (za okremymy sferamy zabezpechennia i vydamy diialnosti)" dlia pershoho (bakalavrskoho) rivnia vyshchoi osvity [draft standard of higher education in specialty 256 "national security (by selected areas of activity and activities)" for the first (bachelor's) level of higher education]. kyiv, 15 p. (in ukrainian) baltic journal of economic studies 20 vol. 7 no. 3, 2021 corresponding author: 1 mangosuthu university of technology, south africa. email: kayambazinthu@outlook.com orcid: https://orcid.org/0000-0001-9074-5644 researcherid: e-5654-2019 scopus author id: 57003422600 doi: https://doi.org/10.30525/2256-0742/2021-7-3-20-28 the service encounter in higher education institutions: a systematic literature review steven kayambazinthu msosa1 abstract. this paper reviews existing literature on the service encounter in higher education institutions. it aims to analyse and provide more insight on the term service encounter, identify dimensions, the types of service encounter and how the service encounter is evaluated. the service encounter (se) is a critical aspect of the service delivery process. it is used to determine whether the service delivered has been satisfactory or dissatisfactory. furthermore, the service encounter offers an opportunity for the service provider to demonstrate his or her ability to offer a remarkable experience. however, it has been proven that many service providers do not take advantage of the service encounter to create student satisfaction. as a result, many encounters have left marks of unpleasant and negative feelings on the student. in higher education institutions, the service encounter helps both students and academicians communicate and understand the needs of either party. this study adopted a systematic review of the literature using several academic databases. a plethora of studies on the service encounter were reviewed from several academic databases but only 50 articles published from 1984 to 2018 were cited in this study. a descriptive analysis was used to highlight the classification of the sources used, the number of articles cited in this study and the year when the articles were published. the study identified several definitions of the service encounter and also found that there are several dimensions and types of the service encounter. the divergent views that emanate from these findings stem from the fact that there is a growth in literature and the body of knowledge on the service encounter in different sectors of the economy. the findings of this study could assist academics and practitioners to have a deeper understanding of the service encounter. such an understanding is very critical in addressing the needs of students and other stakeholders of higher education institutions. moreover, it can help faculty members and institutional managers deal with moments of truths which if properly managed can facilitate the realisation of student expectations and ultimately, satisfaction. this study further provides a basis for future research using the available service encounter evaluation tools or instruments. key words: service encounter, moment of truth, higher education institutions, service evaluation, customer satisfaction, service quality. jel classification: i23, l80, l84, m31 1. introduction although most customers expect extraordinary service experiences, in reality, they rarely occur. in selected cases when customers get an extraordinary experience, they are normally in disbelief that a service provider would deliver a quality service that deviates from an expected service norm (collier, barnes, abney & pelletier, 2018). the process of consumption for most goods and services involves an exchange process between the customer and the organisation. these exchanges or ses (also known as “moments of truth”) act as a yardstick for service quality evaluation. conversely, these exchanges provide the organisation with several opportunities to evaluate the perception of customers regarding the quality of the service received or delivered. thus, one of the ways of improving service quality is for service providers to understand the whole se experience ( john, 1996). the service sector is known for the moment of truth or the se, many of which leave marks of unpleasant and negative feelings while others leave marks of positive feelings (weeks, 2015). in most cases, the se takes place in full view of other students. the nature of the service received by one student helps other students to form their own expectations of an ideal service (anaya, miao, mattila & almanza, 2016). every se is unique such that an element of baltic journal of economic studies 21 vol. 7, no. 3, 2021 student impressions and satisfaction with the higher education institution is cumulative. thus, the spillover of the outcomes from previous ses underlines the value of the overall se experience. the touchpoints such as the classroom, online student portals, posters, and brochures are the higher education institution's mechanism to facilitate the se and interactions with students (voorhees, fombelle, gregoire, bone, gustafsson, sousa & walkowiak, 2017). the higher education sector, specifically universities world over is at a crossroads as a result of the increase in the number of unresolved complaints. students complain about the lack of a functional system to apprise them regarding the status of their complaints (bothwell, 2016). the treatment of students as customers has been a subject of debate. the customer narrative has several advantages that it presents to the students. extant research suggests that students should be legitimately treated as customers of the university because they have the same rights as other customers. these rights include the right to register a complaint regarding poor teaching methods, university facilities, outdated books in the library, cumbersome processes and poor accommodation (hussey & smith, 2010). with this perspective in mind, it must be noted that students as customers, interact with members of the faculty, and other departments, such as finance, housing, and the library through a process known as the se. the se facilitates the exchange process between an organisation and the customer. thus, the benefits received by a party to a transaction during the process of exchanges are contingent on the benefits that the other party receives. for instance, when resolving customer complaints, the firm will only address the complaint if the customer will continue with the relationship as a result of the complaint being resolved. simply put, both parties exchange value if the mutual benefits derived from the transaction are adequate (boshoff, 2017). the se is very important for service providers and is also an opportunity for higher education institutions to exceed the expectation of students. however, employees’ negative attitude, coupled with poor service performance, gives students a bad impression of the service provider and they tend to believe that the service experience has been unreasonable. such negative attitudes include ignoring students and interacting impersonally (fukawa & erevelles, 2014). therefore, the ability of institutional employees to read students behaviour expressed emotions and facial expressions will enable them to read students’ silent feedback. this will enable the institution’s employees to correct service failures in real-time even in the absence of the student explaining his or her dissatisfaction with the se (mattila & enz, 2002). ultimately, students expect value for their money. thus, higher education institutions have a challenge or an obligation to improve their services, facilities and also to be pro-active in responding to students’ complaints. failure to meet students’ needs and expectations may lead to dissatisfaction and, subsequently, the service will be deemed to have failed (fosu & owusu, 2015). the higher education environment is volatile and susceptible to change in the blink of an eye such that the onus is on the service provider to deliver a se experience of high quality to win the allegiance of timepressed students. the understanding of ses is crucial for institutions to be able to re-engineer business and service processes. the absence of effective tools to monitor and capture students’ behaviour throughout the service lifespan is a major setback to institutions in their quest to gaining insight or information about ses. the advent of technology has provided a platform for institutions to start tracking ses’ performance. therefore, institutions must embrace technology in their operations so that social and transactional interactions can be monitored (qiu, 2013). previous research avers that the se that is definitive and heart-felt is outstanding than a “hi and bye” interaction, especially as the basis for a sustainable relationship. thus, relationships should be created naturally by service employees who are driven by a meaningful purpose and are passionate about the work they do. in service systems where human interventions are key, students feel valued to be assisted by such employees (bolton, gustafsson, mccoll-kennedy, sirianni & tse, 2014). the behaviour of lecturers is critical for effective interaction and service delivery during the se. they are the ambassadors of the institution. as such, their appearance, demeanour, body language, facial expression, language, and tone have a great influence on the student service experience and evaluation. even with the best lecturers, the se can be unpleasant if etiquette is not valued and followed (cockerell, 2013). one of the most important aspects of higher education is student engagement in their studies and university life in general which is crucial to attracting students and maximising their success. universities need to position themselves as offering quality and different services that meet student expectations (o’connor & moodie, 2007). however, the challenge is that some higher education institutions tend to oversell their potential and academic readiness by boasting that they have state-of-the-art learning facilities, technology, laboratories and other supporting infrastructure. therefore, this rhetoric and misrepresentation of their actual capacity help students to build fuzzy expectations. another observation is that sometimes students receive a service that is hugely compromised because university lecturers assume multiple roles such as stand-up lecturing, curriculum development, mentoring, project supervision, and other administrative responsibilities. as such, the level of service quality delivered may become less desirable and standardised (yeo, 2008). baltic journal of economic studies 22 vol. 7, no. 3, 2021 service failure during encounters is unavoidable despite efforts to offer a zero defects service. employees may be rude to students, lecturers may not show up for the scheduled class, the classroom environment may be dirty and congested. students experience an unpleasant se because the service has not been delivered as expected or planned (ennew & schoefer, 2003). similarly, when faculty members exhibit inappropriate behaviour and attitude towards students, their reaction may be negative because, naturally, students expect the behaviour of faculty members to be above the board. also, the personal opinions and biases of faculty members may have a negative impact on the learning experience and, consequently, students may be helpless in dealing with the situation (hoffman & lee, 2015). lloyd and luk (2011) have noted that while it is important to get a good outcome during the se, employees of higher education institutions such as lecturers need to pay attention to small things like gestures and other behaviour cues. thus, students form perceptions regarding the se not only from the outcome of the service but also from the interaction (process) such that it is important to emphasize to the institutional employees the need to ensure quality during the interaction as that forms the basis for assessing service quality and the se. this study performed a systematic literature review of the se using sources from 1984 to 2018. specifically, the meaning of the se, the dimensions, the types of the se and the methods of evaluation. 2. methodology and design this paper adopted a non-empirical approach to collect information from different sources. an extensive search and review of the literature were conducted from different journal articles, books, conference proceedings and websites. a plethora of studies on the se were reviewed from a total of 73 sources but only 50 sources were cited in this study. from the information collected, and reviewed, various se models have been discussed to ground the discussion and lay a solid foundation of the concept. furthermore, a lecturerstudent se framework has been developed to provide a picture and an understanding of a basic classroom se evaluation experience in institutions of higher learning. simply put, this study sought to provide a theoretical perspective of the se in higher education institutions and how it is evaluated. 2.1 research questions a systematic literature review was conducted to addressing the following issues: (1) the definition of the service encounter; (2) the dimensions of the service encounter; (3) the types of service encounter; (4) methods of evaluating service encounter in higher education institutions. therefore, table 1 illustrates the research questions underpinning this study. table 1 research questions underpinning this study id research questions rq1 what is the service encounter rq2 what are the dimensions of the service encounter rq3 what are the types of service encounter rq4 what are the methods used to evaluate the service encounter in higher education institutions 3. results and discussion 3.1 data sources in terms of the classification of the sources cited in this study, out of 50 articles, 40 articles cited were journals articles representing 80% percentage of the sources followed by 7 books representing 14%, 2 articles were cited from the internet representing 4% and 1 article from conference proceedings representing 2% of the sources cited as shown in figure 1. figure 1 shows the number of articles cited per source (journals, books, internet and conference proceedings). the information used in this study was also grouped or categorised based on the year of publication as illustrated in figure 2. thus, 5 articles were published in 2017 followed by 4 articles published in 2015 and 2012, 3 articles published in 2014, 2013, 2008 and 2006, 2 articles per the year of publication (2018, 2016, 2011, 2005, 2003, 2000, 1996) respectively were used in this study. only 1 article per the year of publication (2010, 2007, 2002, 1999, 1994, 1992, 1990, 1987, 1985 and 1984) was cited in this study as shown in figure 2. the results further show that there is an increase in the scientific interest on the se in the latter years since the majority of sources used were from recent publications. figure 2 shows the number of articles published each year (from 1984 to 2018) that were cited in this study. 3.1 what is the service encounter every component of the service process where students engage with higher education institutions presents an opportunity for a service breakdown. while the importance of processes may be undermined, others may be critical for a good student experience (palmer, 2011). thus, the se is the meeting and interaction between a service provider such as a faculty manager, a lecturer and a student. it is sometimes known as the ‘‘moment of truth’’ solomon, marshal & stuart, 2012). table 2 shows the results of previous studies on the conceptualisation of the se based on different schools of thoughts by eminent scholars. 3.1 what are the dimensions of the service encounter a plethora of studies on the se have come up with different dimensions. for instance, previous research baltic journal of economic studies 23 vol. 7 no. 3, 2021 suggests that the three dimensions of the se are pre-core se, the core se, and the post-core se. the pre-core se period is the time interval before the core se that focuses on leading students to interact with the institution in the core-se. thus, this period includes numerous ses. the pre-core se takes place when students start searching and evaluating information about the institution’s service offering or make enquiries with the institution. some of the scenarios of pre-core ses are seeking information from online reviews, asking questions to front desk employees and onboarding processes. the examples during this stage encompass activities like orientation for first-year students on services available on campus (voorhees et al, 2017). the core se period refers to the period during which the primary service offering is given to the student. the primary service is aimed at meeting the student’s basic needs which is instrumental in motivating the student to engage with the institution. this period is known as the moment in which the student is “in the factory” and the core interactions are between students and institutional employees such as lecturers and librarians, other students and technologies. this stage encompasses activities such as the delivery of a lecture (bitner, brown & meuter, 2000). the postcore se refers to the period that follows the core se. during this period, students analyse and act based on prior experience emanating from the two previous periods. in this period, the institution’s goal is to retain most of the students and foster an improvement to subsequent ses. post-core encounters encompass activities such as the receipt of a student survey, social media posts request, scenarios involving a student complaint, or the institution’s initiatives to maintain a good relationship with students (voorhees et al., 2017). according to walker (1995), the se evaluation is a function of three distinct integrated stages, i.e. peripheral service performance, core service figure 1. number of articles cited per source 40 7 2 1 80% 14% 4% 2% 0 10 20 30 40 50 60 70 80 90 journals books websites conference proceedings pe rc en ta ge source of articles number of sources cited percentage 0 1 2 3 4 5 6 1980 1985 1990 1995 2000 2005 2010 2015 2020 nu m be r of a rt ic le s pu bl is he d pe r ye ar year of publication figure 2. number of articles published per year baltic journal of economic studies 24 vol. 7 no. 3, 2021 performance, and overall se. the model explains what happens in a typical se scenario. it further highlights that student expectations can change during the se. before consumption of the core service, consumers encounter peripheral components which may include employee personality and attitude and subsequently compare the performance with the expectations which are regarded as passive. the impression created by the service provider sets the direction or tone for future interactions. the overall se is a function of the three integrated stages and determines whether the customer is satisfied, dissatisfied or neutral. for instance, in a higher education institution and specifically teaching, attention will be drawn to the environment in which the lecture will be delivered, the reputation of the institution, the clothes or grooming of the lecturer and not the core service of learning. ramdas, teisberg and tucker (2012) suggest there are four dimensions of the se viz. the structure of the interactions, the service boundary, the allocation of service tasks, and the delivery location. the authors argue that service providers such as higher education institutions should define and deliver services by evaluating interactions using the four dimensions as one way of creating mutual values for both parties to a transaction, i.e. higher education institutions and students. in the same vein, qiu (2013) argue that in the fast pacing digital and global economy where change is the only constant, conventional wisdom may not always be true. thus, to generate knowledge that can be applied scientifically in a dynamic environment, there is a need for service science to help in fostering the engineering, planning, design, delivery, and operations of person-centred integrative ses. extant research suggests that the se is crucial to the student’s service experience. the quality of the service experience during the se has a bearing on students’ satisfaction and their perception of the institution and its employees. the se is a multidimensional concept and includes the social contact dimension (sed) and the physical dimension (pd). the sed is the interaction between the faculty member and the student. the pd entails that students value the environment used to provide or deliver the service. service providers can minimise dissatisfying ses or experiences through disintermediation. disintermediation is an internal procedure where human interference is eliminated when discharging a service and is replaced with technology or equipment (solomon, marshal & stuart, 2012). for example, higher education institutions can table 2 results of the studies on the conceptualisation of the service encounter authors domain definition surprenant and solomon (1987:87) service encounter ‘‘dyadic interaction between a customer and a service provider.’’ larivière et al. (2017:239) service encounter “any customer-company interaction that results from a service system that is comprised of interrelated technologies (either companyor customer-owned), human actors (employees and customers), physical/digital environments and company/customer processes.” shostack (1985:243) service encounter “a period of time during which a customer directly interacts with a service.” drennan and mccoll-kennedy (2003:296) service encounter “traditionally, ses have been characterized as low tech, high face-to-face contact.’’ john (1996:61) service encounter ‘‘is a personal (and social) interaction between a service provider and service customer. a service encounter is a social encounter, especially in high contact service experiences. as social interactions, all service encounters are performed within the context of the cultural background of the participants: that is, both the client and the service provider representing the organization.’’ patterson and mattila (2008:262) service encounter ‘‘are first and foremost social exchanges, with the interaction between a service provider and customer being a crucial component of satisfaction and providing a motive to continue relationships.’’ voorhees et al. (2017:270) service encounter “any discrete interaction between the customer and the service provider relevant to a core service offering, including the interaction involving the provision of the core service offering itself. ” norman (1984) qiu (2013:1) service encounter service encounter “any episode in which the customer comes into contact with any aspect of the organization and gets an impression of the quality of its service.” ‘’service encounters involve all interacting activities in the service delivery process, creating a reciprocal influence between service providers and customers. for example, consumers are the customers in the retailing service sector, students are the customers in educational service systems, and patients are the customers in healthcare delivery systems. surely, it is the service encounter that enables the necessary manifest function that engages the providers and customers in order to show the “truth” of service.’’ baltic journal of economic studies 25 vol. 7, no. 3, 2021 adopt the use of technology and conduct processes such as online registration. another school of thought suggests that the se has three dimensions, i.e. temporal duration, affective or emotional content and the spatial proximity of the service employee and student. the three dimensions play a significant role in relationship development and the outcome of the se. this means that any variation in the three dimensions of the se will have a significant impact on the service providers’ performance and outcome. it further shows that service providers’ performance has a direct impact on affective responses and satisfaction and an indirect impact on satisfaction through affective response. service providers’ performance during an interaction can either lead to positive or negative reactions (price, arnould & tierney, 1995). therefore, service failure will occur if the reaction is negative or the student is not satisfied with the encounter. mattila and enz (2002) claim that the affective response has a significant impact on student encounter-level evaluation even in the context of short and monotonous ses. 3.2 what are the types of the service encounter the se can be categorised as a remote encounter, a telephone encounter or a face-to-face encounter. a student can experience any of the three or a combination of the three. remote encounters are ses that occur without human interaction or contact such as registration through a web-based portal. even in the absence of human contact, the se is an opportunity for the service provider to reinforce student perception of the quality of the service sought. in some organisations, ses are done or experienced through a telephone conversation. however, the chances of variability in the interaction are high in a telephone conversation. the tone, knowledge of employees and efficiency in handling student issues or queries form an important criterion for assessing service quality on the part of the student. in face-to-face ses, both verbal and non-verbal cues are important for ascertaining service quality (wilson, zeithaml, bitner & gremler, 2012). the se can also be viewed in terms of the level of contact. some ses are short or brief, whereas others are long. high contact services are those where there is direct contact between the student and the service provider. during high contact ses, students are exposed to physical cues about the service provider. these cues may include the appearance and behaviour of employees. in low contact ses, there is little and, in some cases, no contact between the student and service provider. contact is done through equipment or physical distribution channels. recently, most of the services are migrating from high to low contact because, in the modern era, high contact services are regarded as a recipe for inconvenience (wirtz, chew & lovelock 2018). 3.3 what are the methods of evaluating the service encounter there are several attributes used to evaluate service encounter quality. for instance, douglas, douglas, mcclelland, and davies (2015) suggest that the key determinant of quality is access, attentiveness, availability and communication. access encompasses service location, ease of the environment and contact with university staff. attentiveness encompasses staff willingness to help or assist a student by providing the necessary support. availability refers to staff dedication in terms of the time they can give and listen to students, whereas communication is the ability of the university to engage with students using the medium or language they understand. it encompasses things such as lecturers’ communication when classes are cancelled, providing feedback on modules and supervision of students. students have some expectations which, at a minimum, mus t be met by the institution. however, when faculty members are late for classes, do not interact with students, have ambiguous or unfair policies, the overall classroom experience becomes distracted. consequently, the faculty must set standards that must be adhered to by its members (hoffman & lee, 2015). students as customers of the university approach the se with different forms of expectation, ranging from unfamiliar situations that are not well defined to well-defined familiar ones. w hat is critical for service providers to know is that whether expectations are met or not will have an impact on the perceived quality of service. the majority of ses require close interaction between a service provider and the consumer. to determine whether the interaction was satisfactory or not depends on several factors such as the appearance of the faculty member and his or her perceived level of competence. although the factors raised may contribute to service heterogeneity and variability, they are difficult to control (rasli, danjuma, yew & igbal, 2011). boshoff (2017) believes that regardless of the facial features of service employees, their appearance should not be overlooked. the university employees, such as lecturers physical appearance must reflect respect for themselves and their students. thus, there is a need for proper grooming and a professional dress code that portrays them as ‘professional’ rather than ‘sexy’. service quality is largely dependent on the perception of students based on their se experience. w hen student expectations are high, the level of tolerance for service failure is low. however, universities can modify student expectations by offering different choices to them. w hat is critical to offset any negative perception regarding the service being offered is that the support services and facilities should play a very important role in contributing to overall service quality in higher education and not only focus on academic excellence alone (yeo & li, 2014). baltic journal of economic studies 26 vol. 7 no. 3, 2021 according to brochado (2009), the evaluation of the se requires one to determine service quality such that the instruments used to evaluate the se are similar to the ones used to measure service quality. thus, ses that are properly managed enhance customers’ perception of service quality. according to bitner (1994), evidence of service quality occurs during the service encounter. previous research on the se has been conducted in different sectors of the economy using various research instruments and methods of evaluation. for instance, tan (2012) and alexiadou evaluated ses using the servperf instrument developed by cronin and taylor (1992). similar studies have also been conducted by durvasula et al., (2005) using the servqual which was developed by parasuraman (1991, 1988). bitner et al, (1990) evaluated service encounters using the critical incident technique (cit). this is one of the groundbreaking studies on the se which relies on the recall of memorable se events or scenarios. another instrument that has specifically been used to evaluate service encounter quality in the higher education sector is the herdperf (fridaus, 2005; 2006). also, smith et al., (1999) evaluated service encounters using an experimental design and 12 items scale questionnaire. other studies that evaluated the service encounter used 21 items scale questionnaire (yazdanpanah et al., 2013), the website qem (migdadi, 2008) and a 27 items scale questionnaire (azza & norchene, 2017). table 3 shows the se methods of evaluation and these are related to research question number 4. 4. conclusion in this paper, the se has been discussed from the conceptualization to how it is evaluated. the se is the heart of the service delivery process in the higher education sector. it is an integral part of the process that ensures that the final product is delivered to the satisfaction of the student. however, it must be noted that the se depends on the conduct or performance of university employees, lecturers and tools (machines and computers) that aid service delivery. thus, the failure of either an employee or the service touchpoints to perform optimally is deemed as the failure of the whole process aimed at assisting the student to meet his or her needs. simply put, that is the moment of truth. this study sought to provide information on the se, specifically the higher education sector because most of the previous studies have been conducted in a profit-making business environment. therefore, this study facilitates the understanding of students as customers of the university. the reviewed literature has provided several definitions of the se that are key to its conceptualization. besides, the literature shows evidence of various dimensions and types of the se. the findings have further unearthed the different methods of evaluating the se. ultimately, the evaluation of the encounter is not independent of each part of the process. students look at the totality of the se to ascertain whether the se was satisfactory or not. this study contributes to the literature and an understanding of the se in the higher education sector. from the academician and practitioner point of view, the evaluation of the se is vital because it can serve as a benchmark of the institution performance in relation to other services provided by other institutions. furthermore, the se evaluation enables an institution to evaluate the current level of service quality thereby providing a launchpad for quality improvements. future research should focus on empirical findings on the se in the higher education sector. table 3 evaluation methods of the service encounter authors domain methods of evaluation tan (2012); cronin and taylor (1992); alexiadou et al., (2017) se in the service sector servperf parasuraman et al., (1991; 1988), durvasula et al., (2005) se in the service sector servqual bitner et al., (1990) se in the service sector cit firdaus (2005; 2006) se in the service sector hedperf smith et al., (1999) se in the service sector experimental design and 12 items scale questionnaire yazdanpanah et al., (2013) se in the service sector 21 items scale questionnaire migdadi, (2008) se in the service sector website qem azza and norchene (2017) se in the service sector 27 items scale questionnaire references: alexiadou, c., stylos, n., andronikidis, a., bellou, v., & vassiliadis, c. a. 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(2014). beyond servqual: the competing forces of higher education in singapore. total quality management, 25, 95–123. baltic journal of economic studies 93 vol. 3, no. 2, 2017 tourism studies in the higher education in sweden: focusing on sustainability olga milinchuk1 zhytomyr state technological university, ukraine abstract. in this paper the swedish higher tourism education is presented by analyzing the development of tourism education. descriptive information of english taught university programs has been collected with a purpose to gain a deeper understanding of the general features of tourism higher education in sweden. methodology. the paper is based on a web-based content analysis of swedish universities’ web-sites. in total six master degree programs at five universities were analyzed. results of the analysis showed that the first swedish academic program in tourism was opened in 1978 and from its inception tourism education is of growing significance. instead of the higher number of degree programs in tourism, which are taught in swedish, there is a limited number of those taught in english. just one bachelor programme is taught in english in international tourism is developed at dalarna university and one ph.d. programme in tourism is developed at mid sweden university. master programs related to tourism are offered at dalarna university, linnaeus university, lund university, mid sweden university, and umeå university. based on the curricula analysis of these programs, five main themes are identified: 1) tourism as a social phenomenon; 2) sustainable development of tourism; 3) tourism destination development; 4) economics of tourism, and 5) tourism through service studies. the findings show that the major university programs in tourism adopt an interdisciplinary approach, which combines elements of social sciences, humanities, and business administration. according to the observed curricula, the view on tourism as on social phenomenon prevails. in the studying process, the concept of sustainable development and classical social concepts such as ethnicity, gender, class, culture, and power relations are widely integrated into different tourism courses, making the programs comprehensive, and attractive for international students. the recognition of the tourism programs is supported by the increasing number of international students obtaining degree program in sweden. practical implications. this paper presents the swedish experience of institutionalization of tourism studies into the higher education, which may be interesting for program administrators, faculty, and prospective graduate students. value/originality. the analysed data shows the specific features of master’s programs in tourism studies and identifies the focusing of swedish higher education on sustainability. key words: tourism education, education development, curriculum, master program. jel classification: a23, d83 corresponding author: 1 department management of organization and administration, zhytomyr state technological university. e-mail: olgamilinchuk@gmail.com 1. introduction sweden has a very long tradition of higher education and some of the best universities in the world can be found here (http://www.universitas21.com/ranking/map). there are 48 higher education institutions in various parts of the country. the total number of qualifications awarded within bachelor and master degree programs in 2014/2015 academic year is 80882 (swedish higher education authority, 2016). universities and university colleges are open for swedes as well as for international students by offering courses and programs in english. altogether there were 343344 individuals taking first or second-cycle courses and programs during the autumn semester of 2015 (swedish higher education authority, 2016). of this number, 33180 were incoming students, which corresponds to almost 10% of the entire student population. most of the international students come from germany, france, and china (swedish higher education authority, 2016). several authorities work together to provide education for swedish and international students. one of them is a swedish council for higher education (uhr). it is a governmental agency with the main tasks to provide support and information, to coordinate admissions to higher education, to develop international cooperation and to meet other needs of the education sector. another institution aimed to ensure the quality of higher education and gather statistics about it is the swedish high education authority (ukä). swedish institute (si) provides extensive information to international students about studying at swedish universities and baltic journal of economic studies 94 vol. 3, no. 2, 2017 manages scholarship programs for students from a number of different countries. the author of this paper participated in one of the si programs and was awarded the scholarship to carry out a research project at european tourism research institute (mid sweden university, östersund). spending time inside the swedish education system, particularly exploring tourism education, the author finds important to share her views on tourism programs in sweden and hopes that it will be useful for program coordinators as well as for future incoming students who are interested in tourism programs. the aim of this paper is to gain a deeper understanding of the special characteristics of different tourism programs taught in english at swedish universities and to summarize the general features of tourism higher education in sweden, which makes it internationally comprehensive. in order to address this aim, the paper had the following research objectives: to collect descriptive information about the higher education system in sweden; to analyse tourism education development in sweden; to discuss special characteristics of english taught tourism programs at swedish universities. the general method is a web-based content analysis of publicly available information on swedish universities’ web-sites. the selection of six master programs for this study is taken based on tourism profile and english language criteria. by gathering publicly available information, this paper seeks to represent the current state of the first and second cycle tourism education programs in sweden. 2. development of tourism higher education in sweden: a literature review tourism education is of growing significance. from its inception in the 1960s, it emerged both as an area of study in its own right and as a subject for study up to diploma and degree level for research (airey, 2005). in sweden, the first academic program in tourism was opened in 1978. as anders steene, one of the founders of tourism studies in sweden, described in his article “till 1978, just a few courses in ticketing at travel agencies and some vocational schools for hotel and restaurants” existed in sweden as well as in norway and denmark (steene, 2012: p. 148). the situation changed in 1975 when the swedish government and parliament made decisions to establish a tourism council “with the task of marketing sweden as a tourist destination and to expand higher education with essentially a college in every country” (steen, 2012: p. 148). according to the first decision (regeringens proposition, 1975:9) tourism was recognized “as a key economic sector in the swedish economy” (steene, 2012: p. 148). the second decision (regeringens proposition 1975:47) “gave sweden 12 new colleges in addition to the six already existing universities” (steen, 2012: p. 148). with this legislative base, the possibility was created to develop new courses at new universities and university colleges. the idea to develop tourism programs came up at three colleges – östersund and borlänge in the north, and kalmar in the south of sweden – mainly because all of them were located in popular tourist areas since östersund and borlänge had developed winter mountain tourism and kalmar had summer tourism (steene, 2012). the newly started swedish tourist board in 1975 (regeringens proposition 1975:46) gave an institutional support to create the best possible courses in tourism based on local conditions. as a result, “in autumn 1978, the first students started their studies in tourism at the three colleges” (steen, 2012: p. 150). from 1978 till 1992, the duration of the tourism program was two years. in 1991/1992 academic year the swedish university and college office (uhä) extended tourism study program from two to three years and gave the opportunity to obtain a bachelor of science degree in tourism (steen, 2012). to the three mentioned colleges in 1980’s, two more programs in tourism were opened at karlstad university college and at gothenburg university (steen, 2012). throughout 1990’s and early 2000’s, the number of programs and universities has increased tremendously. in 2008, there were 30 programs in tourism studies in 13 locations, of which seven programs were already at master’s level (andersson, 2008). with an aim to answer the question of what do students study within tourism programs, it is important to analyse curricula. the issues of tourism curricula design existed from the moment tourism became an independent area of study. the development of the first tourism curricula in higher education had vocational origins (koh, 1995, holloway, 1995; tribe, 2005). in sweden, the first curricula developed “as a mix of traditional academic knowledge and practical skills to meet demands of tourism industry representatives to make the students employable” (steen, 2012: p. 149). it was supported with a practice of curricula development in the united kingdom which had mostly vocational character (airey, johnson, 1999). the evolution of tourism knowledge from vocational till liberal ends has been described in the range of articles of tribe (1997, 2000, 2006, 2009). according to tribe “a vocational curriculum is a curriculum for employment. it is a curriculum to equip students to engage in the vocational world and to participate in it. a liberal curriculum is a curriculum for thinking and reflection” (tribe, 2005: p. 55). vocational/ professional or business-oriented curricula, as well as liberal, are still widely spread among the universities around the world (ayikoru, tribe, airey, 2009) and an analysis of special characteristics through a baltic journal of economic studies 95 vol. 3, no. 2, 2017 subject availability at swedish universities programs in tourism studies can be important to understand special comprehensive vocational or liberal features of tourism higher education in sweden. 3. the general profile of master’s programs in tourism studies there are a lot of possibilities to study in sweden for the international students, particularly to undertake the program in tourism studies. the international applicants can choose the university program or university college program. the difference is that a university can always offer post-graduate (ph.d) studies while university colleges cannot. according to the swedish higher education act (1992:1434), all courses, programs, and qualifications are placed in three cycles: first cycle (higher education diploma, 120 he credits; bachelor, 180 he credits), second cycle (one-year master, 60 he credits or two-years master, 120 he credits), and third cycle qualifications (licentiate, 120 he credits and doctoral degree, 240 he credits). english-taught courses in tourism studies are represented within all three qualifications cycles in sweden. today there are more than 30 programs in tourism studies, which belong to the first and second qualification cycles. the programs are offered by universities in dalarna/ borlänge, gothenburg, karlstad, linnaeus/kalmar, linköping, lund/helsingborg, malmö, östersund, orebro/grythyttan, södertörn/stockholm, and umeå. the subjects include economics of tourism, tourism management, destination development, tourism hospitality, culture, nature, events, city tourism, leisure and sport management. just one program of the thirdcycle qualification is offered by mid sweden university in collaboration with the european tourism research institute (etour), four-year ph.d. program in tourism (fuchs, fredman, ioannides, 2015). in table 1, the swedish universities, which offer master programs related to tourism studies and the link to their web-sites, are shown. in addition to the aforementioned master programs, there is one the first cycle program in tourism studies, which is called international tourism management programme at dalarna university. this is only one in sweden which an english-taught bachelor degree program in tourism studies. there are common criteria, which form the identity of each higher education program: admission requirements, program curricula, and degree requirement (lee, dopson, ko, 2016). to profile correctly master’s program the criteria of institutional affiliation can be added. due to the institutional background, the academic profile largely differs from university to university. based on a web-based review of the key criteria, the main features of master’s programs in tourism studies in sweden can be summarized: 1. institutional affiliation. the observation of programs shows the variation in institutional affiliation in sweden. the bachelor and master programs at dalarna university are located in the school of technology and business studies, as well as a master program at linnaeus university is located in school of business and economics. the master program at mid sweden university is affiliated with the faculty of human studies in the department of tourism studies and geography. the rest of the master programs are affiliated with the faculty of social science in the department of service management and service studies at lund university and in the department of geography and economic history at umeå university. the “umbrella” of an organizational unit within organizational structure influences the curricula of the programs, affecting its disciplinary variability, the content of every discipline, and the professional specialization of lecturers. this, however, is more obvious within the framework of bachelor’s programs and less within master programs curricula, which is also supported by the data of this paper. 2. according to the general admission requirements, in order to enter the program at dalarna university and linnaeus university, the students must have a bachelor’s degree in tourism studies or in another social science. at lund university, the admission requirements specify that at least 60 he credits must be within the area of social science, service management, business administration or equivalent. at umeå university and mid sweden university for students to be accepted to the programs, it is necessary to have 90 credits within the main field in human geography, tourism studies or similar tourism-related subject. since the selected programs are taught in english, all universities required either toefl or ielts test score or english proficiency equal to b/english 6 at swedish upper secondary school. table 1 the universities that offer english-taught master programs in tourism studies, 2017 university university web-site programme dalarna university linnaeus university lund university mid sweden university umeå university http://www.du.se/en/ https://lnu.se/en/ http://www.lunduniversity.lu.se/ https://www.miun.se/en/ https://www.umu.se/en/ tourism destination development economics of tourism and events tourism and sustainability service management, tourism tourism tourism baltic journal of economic studies 96 vol. 3, no. 2, 2017 there are no other additional admission requirements to enter swedish master tourism programs such as letters of recommendation, work experience, and prerequisites. at linnaeus university and lund university, students can be asked to write a statement of purposes. the absence of additional requirements may indicate that departments feel that work experience is not necessary at the master’s level or that tourism studies became a mature field, which engages all levels of students. 3. every university’s program curricula has its own specialization based on multidisciplinary perspective combining elements of social sciences, humanities and arts, business, and other sciences (tribe, 2016) with a focus on advanced research. the content depends on the main field of study: a degree with the main field of study in tourism studies is offered at dalarna university, linnaeus university, mid sweden university; with the main field of study in human geography offer umeå university and mid sweden university; with the main field of study in service management with specialization in tourism provide lund university. the aforementioned institutional affiliation influences specialization as well as the core curricula of the program. degree requirements are relatively similar in all master programs. after successful passing of all courses, students are expected to write the master’s thesis. in contrast to other countries, where master’s programs offer non-thesis options such as a comprehensive final exam or written exam (lee, dopson, ko, 2016), swedish tourism second-cycle programs are fully researchoriented. but within the one-year master program, the time for writing the thesis has been diminished and under this time constraints, multiple non-thesis options can be implemented in curricula. the information about the programs and their aims, about subjects of curricula, and degree certificates received by students within the programs is presented in table 2. most of the master programs in tourism studies in sweden are designed for the students who plan a professional career in public or private sectors, academia, research or consulting. it is supported by the fact that the discipline in methodology, such as qualitative and quantitative methods in tourism / theory and research methods / methods in social sciences / research design and methodology, is incorporated in all programs. there are also additional subjects with an aim to develop research capacities of students such as “individual project studies in tourism” or “independent reading course”. while the courses in methodology are obligatory for the second-cycle studies, there are no other repeated courses. all the courses within the curricula are different and every program has its own unique identity. the curricula of master programs offered by swedish universities in the field of tourism studies have been reviewed and according to the findings the five main thematic studying directions can be identified: 1) tourism as a social phenomenon. this holistic approach is exemplified by tourism programs at mid sweden university and at umeå university; 2) sustainable development of tourism. this is a major concept, which is visible especially in the master program at linnaeus university, as well as in individual courses at mid sweden university, at dalarna university, at lund university; 3) tourism destination development. specific professional skills in destination development are offered as by the program at dalarna university as well as in individual courses at lund university and at umeå university; 4) economics of tourism. business view on tourism is offered by the program at dalarna university and in an individual course at mid sweden university; 5) tourism through service studies. this is a unique approach to discovering operations in tourism organizations through service sector development offered at lund university. it is obvious from the review that the special feature of tourism studies, which is common for all master programs, is the focus on sustainability. one of the programs at linnaeus university fully integrates the sustainability within all courses of the curricula. according to the information on the website, the scope of the program includes “political and scientific aspects of sustainable development in all courses”, within the curricula “gender aspects of social, financial, and environmental sustainability are included as an integrated part of all work, which involves analysing or planning for tourism” (https:// lnu.se/en/programme/tourism-and-sustainabilitymaster-programme/). the suggestion that full integration of sustainability into academic curricula is the best method for hospitality and tourism programs is supported by boley (2011, p. 24) who writes that “hospitality and tourism undergraduate program should integrate sustainability into all aspects of their curriculum, as well as continue to offer special classes and specific majors that allow students to further explore the subject matter”. therefore, the program is an example of successful incorporation of sustainability into program curricula. while the international literature has discussed the importance of sustainability within tourism curricula (rusinko, 2010), the master programs in tourism studies in sweden has already incorporated the courses of tourism sustainable development (table 3). according to the curricula of master programs in tourism studies in sweden, it can be assumed that the coordinators of the universities’ programs are aware of their responsibility to produce postgraduates who are capable of thinking critically about the ways to minimize the negative impacts of the tourism industry and to facilitate the positive ones. baltic journal of economic studies 97 vol. 3, no. 2, 2017 table 2 the curricula of swedish master degree programmes in tourism studies the title of university program the aim of the program subjects degree certificate one-year master programme in tourism destination development at dalarna university to achieve a broad understanding of the opportunities and limitations that come with developing tourism destinations in a sustainable way semester 1 sustainable destination development event tourism – planning, marketing, evaluation managing and interpreting natural and cultural sites place and destination marketing semester 2 theory and research methods degree thesis in tourism degree of master of science [60 credits], main field of study: tourism studies one-year master programme in economics of tourism and events at dalarna university to acquire the tools for economic analysis and apply them to public and private policy-making related to tourism and events semester 1 economics of tourism econometrics event tourism economics of leadership semester 2 advanced microeconomics welfare economic analysis of public policy master thesis in economics degree of master of science [60 credits], main field of study: economics one-year master programme in tourism and sustainability at linnaeus university to provide a comprehensive specialization in social, cultural, economic, and environmental aspects of tourism in a sustainability perspective, including sustainable development semester 1 tourism studies and tourism theory tourism and anthropocene individual project in tourism studies semester 2 evaluation and planning of tourism sustainability methodology tourism studies, master’s thesis degree of master of science [60 credits] with specialization in sustainability, main field of study: tourism studies two-year master programme in service management, tourism at lund university to gain industry-relevant knowledge about management and leadership in the service sector with a focus on tourism semester 1 service management: theory – development and traditions managing service organizations semester 2 methods in social sciences destination development and marketing semester 3 service studies: perspectives on sustainability value creation and innovation in tourism semester 4 master thesis in service management degree of master of science [120 credits], main field of study: service management with a specialization in tourism two-year master programme in tourism at mid sweden university** to provide with thorough knowledge about the subject allowing them to develop the ability to carry out independent scientific work and to develop skills necessary to find employment worldwide semester 1 tourism in a changing world tourism and sustainability agenda tourism management and economics quantitative methods in tourism semester 2 qualitative methods in tourism independent reading course applied research (fieldwork project) semester 3 internship or exchange at another university semester 4 master thesis in tourism studies/human geography degree of master of science [120 credits], main field of study: tourism studies or human geography two-year master programme in tourism at umeå university** the program focuses on how tourism affects destinations and the consequences tourism have for societal development semester 1 tourism destinations and regional development semester 2 population and mobility methods in social science semester 3 tourism and geography research design and methodology semester 4 master thesis in human geography degree of master of science [120 credits], main field of study: human geography, specialization: tourism source: web-based content analysis of announced programs for 2017/2018 ay and 2017/2019 ay **mid sweden university and umeå university offer oneand two-year master programs in parallel baltic journal of economic studies 98 vol. 3, no. 2, 2017 5. discussion and conclusion the purpose of this paper was to provide a descriptive general profile of tourism higher education programs in sweden. with this aim in the paper, the development of tourism studies in higher education was followed as well as the master’s tourism programs and their core curricula were analysed. according to the content analysis of the second-cycle programs in sweden, which are entirely taught in english, there are a lot of different opportunities to gain a deep knowledge in tourism studies from interdisciplinary liberal perspective. the accent in the second-cycle programs is made on disciplines in methodology to enable students to produce, analyse, and present research results. however, the content of the programs shows a lack of specialization in special interest tourism such as culture, convention, sport, nature-based, wineand food-oriented tourism. there is a lack of courses that provide knowledge about strategic development, regional tourism planning, innovation, e-tourism and other courses with a view on modern tourism in a changing world. nonetheless, most of the relevant issues can be elaborated on during the process of writing an independent thesis what gives the students privilege of the advanced studies. variability of the courses within master tourism programs in sweden shows that there are no narrow vocational curricula. except for the programme in economics at dalarna university, all programs cultivate the view on tourism as on a social phenomenon without a specific direct integration to business. for example, the curricula at linnaeus university, mid sweden university, and umeå university encompassed more liberal approach through such courses as tourism and anthropocene, tourism in a changing world, and population, and mobility. nonetheless, the issues related to destination development within the programme at dalarna university and service-oriented studies at lund university can be viewed as vocational. therefore, the main specific characteristic of swedish higher tourism education is a social view on tourism as a phenomenon instead of business-oriented perspective, which is still rather widespread in curricula in developing countries. another specific feature of tourism master programs in sweden is a strong focus on sustainability in social, economic and environment aspects of tourism. the topic of sustainability became the forefront topic within swedish society and has also trickled down to the university level. within all programs, a view on tourism, which has a sustainable vector of development, is observed. sustainable style of living of swedish society and the higher education programs with focusing on sustainability formulated a competitive edge of postgraduate studying in sweden. acknowledgements. this publication has been produced during my scholarship period at european tourism research institute at mid sweden university, thanks to a swedish institute scholarship. the insightful comments made by lusine margaryan and sandra wallreinius are sincerely appreciated. table 3 the courses with sustainability agenda within curricula of swedish master degree programmes in tourism studies the title of university program the course the aim of the course one-year master programme in tourism destination development at dalarna university sustainable destination development the course enables students critically evaluate developmental as well as managerial options in terms of destination sustainability; to analyse and evaluate the conditions for sustainable tourism planning in specified geographical contexts; to discuss research issues within the field of sustainable destination development. two-year master programme in service management, tourism at lund university service studies: perspectives on sustainability the course enables students to understand, explain, and analyse the meaning of sustainability in the service sector, including cultural, social, financial, environmental, and ecological conditions and implications, to work within actual sustainability projects related to service organizations. oneand two-year master programme in tourism at mid sweden university tourism and sustainability agenda the course provides students with a holistic understanding of the sustainability agenda (cultural, economic, environmental, and social dimensions) and the role of tourism in it; equip students with applied tools to critically analyse, challenge and suggest improvements in current sustainable tourism practices. references: airey, d., & johnson, s. (1999). the content of tourism degree courses in the uk. tourism management, 20(2), 229-235. andersson, b. (2008). turismutbilndingar 2008. med perspektiv på utbud och efterfrågan. tillväxtverket. rapport 0001. stockholm. baltic journal of economic studies 99 vol. 3, no. 2, 2017 ayikoru, m., tribe, j., & airey, d. (2009). reading tourism education: neoliberalism unveiled. annals of tourism research, 36(2), 191-221. boley, b. b. (2011). sustainability in hospitality and tourism education: towards an integrated curriculum. journal of hospitality & tourism education, 23(4), 22-31. koh, k. (1995). designing the four-year tourism management curriculum: a marketing approach. journal of travel research, 34(1), 68-72. holloway, c. (1995). towards a core curriculum for tourism: a discussion paper. national liaison group for higher education in tourism. lee, m. j., dopson, l., & ko, s. (2016). graduate study in hospitality management in the united states: master of science programs. journal of teaching in travel & tourism, 16(3), 213-227. rusinko, c. a. (2010). integrating sustainability in higher education: a generic matrix. international journal of sustainability in higher education, 11(3), 250-259. steene, a. (2014). tourism education in sweden: past, present and future. browser download this paper. tribe, j. (1997). the indiscipline of tourism. annals of tourism research, 24(3), 638-657 tribe, j. (2000). balancing the vocational: the theory and practice of liberal education in tourism. tourism and hospitality research, 2(1), 8-25. tribe, j. (2006). the truth about tourism. annals of tourism research, 33(2), 360-381. tribe, j. (2005). tourism, knowledge and the curriculum. an international handbook of tourism education, 47-60. tribe, j., & liburd, j. j. (2016). the tourism knowledge system. annals of tourism research, 57, 44-61. fuchs, m., fredman, p., & ioannides, d. (2015). tourism phd studies. in tourism education: global issues and trends (pp. 61-79). emerald group publishing limited. higher education in sweden. status report 2016:11. retrieved may, 15, 2017, from http://english.uka.se/ download/18.5d85793915901d205f916275/1487932593678/status-report-statistics-higher-educationsweden-2016.pdf regeringens proposition 1975:9 proposition om reformering av högskoleutbildningen. retrieved may, 15, 2017, from http://data.riksdagen.se/fil/4396e661-24c2-4323-8ad2-b04c559bda7f regeringens proposition 1975:4 proposition om planering och samordning av samhällets insatser för rekreation och turism, retrieved may, 15, 2017, from http://www.riksdagen.se/sv/dokument-lagar/dokument/proposition/ regeringens-proposition-om-planering-och_fy0346 regeringens proposition 1975:47 proposition om inrättande och finansiering av sveriges turistråd, retrieved may, 15, 2017, from http://www.riksdagen.se/sv/dokument-lagar/dokument/proposition/regeringens-propositionom-inrattande-och_fy0347/html list of swedish master programs’ websites: master programme in tourism destination development at dalarna university –http://www.du.se/en/studyat-du/programmes/one-year-master-programme-in-tourism-destination-development/ master programme in economics of tourism and events at dalarna university –http://www.du.se/en/studyat-du/programmes/master-programme-in-economics-of-tourism-andevents-60-credits-/ bachelor programme in international tourism management at dalarna university –http://www.du.se/en/itm master programme in tourism and sustainability at linnaeus university –https://lnu.se/en/programme/tourismand-sustainability-master-programme/kalmar-international-autumn/ master programme in service management at lund university –http://www.lunduniversity.lu.se/lubas/i-uoh-lusasma-turi master in tourism (two year) at mid sweden university – https://www.miun.se/en/education/programmes/ business-law-social-sciences-and-tourism/master-in-tourism-120-higher-education-credits/about-the-program/ master in tourism (one year) at mid sweden university – https://www.miun.se/en/education/programmes/ business-law-social-sciences-and-tourism/master-one-year-in-tourism-studies-60-credits/about-the-program/ master programme in tourism at umeå university – https://www.umu.se/en/education/master/mastersprogramme-in-tourism/ list of support state institutions websites: swedish council for higher education (uhr) – https://www.uhr.se/en/start/ swedish high education authority (ukä) – http://english.uka.se/ swedish institute (si) – https://eng.si.se/ swedish institute official resource of studying in sweden – https://studyinsweden.se/ swedish council for higher education official recourse – http://www.studera.nu/startpage/higher-educationstudies/higher-education-in-sweden/study-levels-and-degrees/ central application portal of university admission in sweden –https://www.universityadmissions.se/intl/start the leading global network for research universities for the 21st century “universitas 21” – http://www.universitas21.com/ranking/map baltic journal of economic studies 100 vol. 3, no. 2, 2017 ольга милинчук туризмология в высшем образовании швеции: фокус на устойчивость аннотация. в статье рассмотрено особенности высшего образования в сфере туризма швеции путем анализа истории его развития и сбора информации о существующих англоязычных университетских программах. целью написания статьи является получения более глубокой характеристики туристического высшего образования в швеции. методология. статья базируется на анализе содержания интернетресурсов шведских университетов. в целом проанализировано шесть магистерских программ. результаты показывают, что первая шведская академическая программа в сере туризма была открыта в 1978 году и с этого момента высшее образование в сфере туризма стремительно развивалось. сегодня в швеции существует значительное количество магистерских программ в сфере туризма, в некоторых из них преподавание ведется на английском. в высшем образовании швеции представлена лишь одна бакалаврская программа «международный туризм» в университете даларны и одна докторская программа в центральношведском университете, где преподавание ведется на английском. англоязычные магистерские программы в сфере туризма предлагают университет даларны, университет линнаеуса, университет лунда, центральношведский университет и университет умео. на основе анализа рабочих планов указанных магистерских программ было выделено пять основных учебных направления: 1) туризм как социальный феномен; 2) устойчивое развитие туризма; 3) разработка туристических маршрутов; 4) экономика туризма, и 5) туризм в сфере услуг. результаты показывают, что большинство университетских программ в сфере туризма адоптировали междисциплинарный подход к обучению, что объединяет элементы социальных и гуманитарных наук, а также бизнес-администрирование. в рассмотренных рабочих планах магистерских программ доминирует взгляд на туризм как на социальный феномен, а в учебный процесс интегрирована как концепция устойчивого развития, так и классические социальные концепции такие, как этничность, гендер, классовые отношения, культура, что делает программы современными, конкурентными и привлекательными для международных студентов. признание образовательных программ в сфере туризма подтверждает увеличивающееся количество международных студентов, что получают высшее образование в швеции. практическое значение. статья представляет шведский опыт институционализации туристического высшего образования, что может быть интересным для администраторов учебных программ, преподавателей и перспективных студентов. значение/оригинальность. проанализированные данные показывают особенности магистерских программ в сфере туризма и определяют фокусирование шведского высшего образование на вопросах устойчивого развития. baltic journal of economic studies 1 vol. 7 no. 5, 2021 corresponding author: 1 mangosuthu university of technology, south africa. e-mail: kayambazinthu@outlook.com orcid: https://orcid.org/0000-0001-9074-5644 doi: https://doi.org/10.30525/2256-0742/2021-7-5-1-10 integrating technology and digital connectivity in service recovery strategies to achieve recovery satisfaction during the covid-19 pandemic: a hybrid approach steven kayambazinthu msosa1 abstract. recently, the business landscape has changed because of the covid-19 pandemic, which has led to changes in the behaviors of both customers and business owners. the covid-19 pandemic and its associated restrictions on store closures have presented a new challenge to businesses that rely on physical interaction, brick and mortar to meet different customer needs. mandatory shutdowns and social distancing measures have left voids that have been filled by digitalisation. the main problems customers face are service failures and breakdowns. as a result, customers are grappling with how they can have their problems addressed during the pandemic. there is therefore a need for a paradigm shift in terms of how businesses respond to unforeseen circumstances and pandemics because it is the only firm that use automation that will be more robust in competitive scenarios. this study is aimed at providing a hybrid approach to integrating digital technology into service recovery strategies, namely apology, explanation, speed, compensation and empowerment, during the covid-19 pandemic in order to achieve customer recovery satisfaction. therefore, a model for integrating technology and digital connectivity into service recovery strategies to achieve recovery satisfaction has been proposed. thus, this model provides insight into how businesses can use digital technology to implement service recovery strategies during a pandemic. this is critical to help enterprises maintain consistency and minimize service variability due to changes caused by the covid-19 pandemic. this study contributes to the literature on digital technology and service recovery by using current methods to address today's challenges. key words: service recovery strategies, technology, digital connectivity, customer service, covid-19 pandemic, recovery satisfaction. jel classification: m31, o31, l81, o33 1. introduction since the outbreak of the covid-19 pandemic, customer preferences have shifted. in light of today 's business dynamics, service providers are struggling to find the best approach to meeting the diverse needs of their customers (vader, martin & lin, 2020). moreover, managers are presently navigating how they might support customers in the wake of the covid-19 pandemic, which has brought about numerous hurdles (dixon, mckenna & de la o, 2020). the reality is that providing excellent customer service during a pandemic is a challenge because most customer service employees must work from home. furthermore, many employees have to deal with personal issues whilst simultaneously meeting the needs of a diverse range of clients (vardhan, 2021). therefore, to facilitate customer interactions during the covid-19 pandemic, businesses must foster customer relationship management (donthu & gustafsson, 2020). according to kang et al. (2020), the pandemic has had a particularly negative impact on marketing processes because of the huge number of problems encountered in managing physical sales channels and customer relationships. in addition, customers are tired of being told that they are getting terrible service "due to covid." in some cases, companies are accused of using the pandemic as an excuse for long phone waits or late deliveries. while businesses struggled with the consequences of the crisis, consumers were initially lenient about delays and other inconveniences. however, the broad justification is no longer acceptable (peachey, 2021). for most customers who are restricted to their homes, digital delivery has become an essential service. baltic journal of economic studies 2 vol. 7 no. 5, 2021 customers who were once considered "digitally resistive" are now adopting technology at a rapid rate. it is expected that once the acute medical crisis is over, many customers who have switched to digital services will stay with them. companies that make this transition to digital and create a superior experience have a chance to increase their customer base and retain relationships with them after the pandemic is over (diebner, silliman, ungerman & vancauwenberghe, 2020). consequently, companies must understand how the pandemic is affecting all consumer engagement touchpoints and ensure that they are not at the whim of such external occurrences in order to design a sustainable future in the ‘new normal’. for business-toconsumer (b2c) organizations of all types, it's critical to recognize how far the modern customer experience has advanced and how different it can become. understanding new behaviors will help companies navigate, respond and adapt their various touchpoints (sharma & lacaze, 2020). therefore, this study seeks to provide a hybrid approach to integrating technology and digital communications into service recovery strategies during the covid-19 pandemic. 2. technology and digital connectivity during the covid-19 pandemic the world has been forced into seclusion under covid-19. until everyone is vaccinated, social separation or distancing is the most efficient strategy to slow the spread of the virus. as a result, everything that depends on human-to-human contact (i.e., most elements of people's lives) must be changed to take into account the danger of the virus. mandatory shutdowns and social distancing measures have left voids that have been filled by digitalisation (cohron, cummings, laroia & yavar, 2020). digitalization is the use of digital technology and digitized data to enable or improve processes. it improves, not transforms, an existing business process or processes. that is, it converts a human-driven event or set of events into a software-driven process (gupta, 2020). another school of thought argues that digitization refers to the reorganization of many aspects of social life around digital communication and media infrastructures. individual, industrial, and regional prosperity has become dependent on the acquisition of digital skills (bloomberg, 2018). the good news is that any business can be transformed by digital technology. burket (2017) argues that they just need to figure out how to use or invent technology to solve problems or streamline procedures. integrating digitalization into all aspects of the economy increases productivity. according to ashtonhart (2020), firms using automation will be more resilient in competitive scenarios. thus, the need for digital technology (dt) has been demonstrated by covid-19, where traditional physical procedures are digitally modified to ensure continuity. dt provides connectivity, streamlines disparate processes, and reduces the likelihood of disruption during a pandemic (fitzpatrick et al., 2020). one of the consequences of the covid-19 disaster for businesses has been a major increase in the adoption of dt that assists firms to reduce face-to-face interactions whilst also protecting consumer and staff health and well-being. covid-19 is an acute disruption right now, but it could recur or become a more chronic disruption in the future. this makes it difficult for executives leading their companies down the complex path of digital transformation to determine which digital steps are equivalent to an intense dose of azithromycin, and which pivots are needed to respond to constant and prolonged disruption (e.g., moving from on-premises to cloud computing) (kane, phillips, copulsky & nanda, 2020). the coronavirus is indefinitely changing the way people live and work. some behaviors that emerged during the crisis, such as widespread use of the internet, will persist long after the pandemic is over. therefore, organizations must adapt to these behavioral changes and meet new customer needs in order to remain competitive. advanced analytics will be used to extract information from customer data, and efforts will be made to integrate internal and external data to gain a more holistic view. therefore, early detection of change signals will be critical to improving the customer experience and revising customer value propositions to meet changing market conditions, preferences and needs (cohron, cummings, laroia & yavar, 2020). figure 1 shows that as of january 2021, there were 4.66 billion active internet users worldwide, representing 59.5 percent of the world's population. 92.6 percent (4.32 billion) used mobile devices to access the internet (statista, 2021). these statistics provide fertile ground for companies to integrate technology and digital connectivity into their business as the world's digital population is high. 3. theoretical background of service recovery service recovery is a multi-dimensional concept that encompasses customers, employees and the process if a complaint is registered after a service failure (kumar & kumar, 2016). service recovery can be used as an effective weapon to gain a competitive advantage in a turbulent business environment (singhal, krishna & lazarus, 2013). addison and haig (2013) posit that service recovery, if properly executed, can turn angry customers into fanatics who will extol the service provider for top-notch service. therefore, service providers are advised to consider the magnitude of service failure when designing recovery strategies. baltic journal of economic studies 3 vol. 7 no. 5, 2021 balaji and sarkar (2013) warn that a service provider's inability to determine the severity of failure can lead to misallocation of resources and a firm's inability to satisfy and retain customers. the magnitude of the service failure determines the type of service recovery strategy that can be used to mitigate customer dissatisfaction. for example, if a customer suffered a financial loss, an apology would not be adequate because the customer would expect compensation from the service provider. in extreme cases, no amount of recovery performance or strategy will restore the customer to the previous position because of the damage caused by the initial failure. no matter the apology or size of compensation, any recovery tactic would not make the customer whole again and there is thus no way to recover (mccollough, 2009). when service failure is severe, no amount of recovery or compensation is sufficient to please the customer. chuang, cheng, chang and yang (2012) made a finding that is consistent with the prospect theory, which contends that when the outcome and processrelated service failures are severe, it is not easy for the service provider to resolve the problem by either a tangible or psychological recovery approach. simply put, customers believe that the losses associated with a denial of service are greater than the profits gained from service restoration efforts, so they consider any restoration efforts insufficient to mitigate the effects of a serious denial. the prospect theory and mental accounting principles suggest that the effectiveness of service recovery depends on the severity of the failure, such that service recovery strategies or tactics will be only effective when failure severity is low. with respect to gain and loss, as the severity of service failure becomes low, the perceived loss from failure and the perceived gain created by the effort to restore the service decrease, so that the customer will consider the loss to be less and the gain to be greater. the implication is that low service recovery efforts guarantee little benefit, but can be just as effective as high recovery efforts when peripheral services fail (yi & lee, 2005). 4. service recovery strategies 4.1 apology brands with the best price, the most fashionable product, or the most memorable marketing campaign may not have an advantage over those who demonstrate emotional intelligence and communicate with care, honesty, and empathy, thereby inspiring trust. people want to be seen and understood in times of crisis, and they are especially sensitive to tone and intention (acker, 2020). therefore, service employees need to have a proper understanding of the problem and the figure 1. global digital population source: statista (2021) baltic journal of economic studies 4 vol. 7 no. 5, 2021 experience of the customer. an apology on its own may not be enough. customers want to be heard and feel that their stress and inconvenience is acknowledged and understood; that the service provider genuinely cares about them; and that efforts are being made to correct the problem (michel & coughlan, 2009). an apology is a service recovery method that does not directly fix the service failure, but rather implies that the service provider acknowledges the customer's problem and acknowledges that a mistake was made (iglesias, varela-neira & vazquez-casielles, 2015). while some researchers have emphasized the need for apologizing, mostafa, lages and shabbir (2015) doubt the effectiveness of apologizing in increasing perceived justice. they believe that apologizing to customers can be interpreted as an admission of responsibility in some situations, thereby exacerbating the perception of interactional injustice. as a result, a discussion of the various sorts and dimensions of apology should be offered to facilitate comprehension. managers should develop successful apology strategies, such as the channels used to deliver apology messages and acceptable methods for apologizing to disappointed consumers. by refusing to compensate consumers monetarily, they can save the company money ( jung & seock, 2017). manica, papagiannidis, and bourlakis (2017) reflect on what is known as social media apology. however, there are mixed views on the use of social media apology in connection with a service provider's rejection. while the importance of using technology in the digital age to interact with customers is well known, such use should be approached with a degree of caution. the use of social media apology, such as on twitter and facebook platforms, for service failure cases can reach customers who were not affected by the incident, which can have a negative impact on the organization's image. 4.2 speed the "locked down" nature of the response to the covid-19 pandemic, which forces most people to be physically separated from their friends, extended family, workplaces and favourite places, is forcing businesses to adapt to a digital or remote way of doing business thereby dramatically altering people's daily experiences (acker, 2020). however, as time passes, it becomes apparent that some of these modifications will remain long after covid-19 ends, as customers have changed. most consumers have higher customer service expectations now than before the epidemic, and they want quick and easy interaction with companies and stores (ludwig, 2021). van der heijden et al. (2013) warned service providers to be wary of the time and effort spent interacting with customers to obtain information about a service failure event, as the time lost cannot be used to restore service failure, which can have a negative impact on the speed of service restoration. the period or time taken to respond to customer complaints should not be too long because the customer will not find the recovery effort or solution satisfactory. this is regardless of whether the service provider response was empathetic and caring, or not (xu, tronvoll & edvardsson, 2014). customers want to experience service recovery immediately after a service failure has occurred, and the burden is on them to make decisions about future consumption. therefore, managers are encouraged to focus on immediate recovery solutions because recovery solutions that offer future solutions are less effective and desirable (silber, israel, bustin & zvi, 2009). in contrast, zhou, tsang, huang, and zhou (2014) from another school of thought believe that service providers should consider delaying the provision of a solution in the event of a service failure because the elapsed time can calm the negative emotions caused by the service failure, thereby allowing customers to respond rationally to the service provider's recovery efforts. conventional wisdom, however, suggests that restoration of services must be provided immediately to deal with service failures and customer complaints. the authors suggest that, under certain conditions, delayed response has a favorable effect. some services, such as hairdressing, are inseparable, while some are separable, such as freight transportation. an immediate response is ideal for non-separated service failures because customers are very impatient with waiting and such cases magnify a customer’s negative emotions. 4.3 compensation compensation is an effective service recovery strategy. however, it is more effective if customers perceive it as a benevolent offer. thus, service managers should advise employees to provide compensation in a way that shows sincere regret for the service failure (lastner, folse, mnagus & fennell, 2016). compensation is considered a very good service recovery strategy and helps defuse customer anger and dissatisfaction after a service failure. service failure that is caused by a service provider leads to the lowest satisfaction, whereas service failure that is caused by the customer leads to the highest satisfaction with the same compensation (fu, wu, huang, song & gong, 2015). service managers must identify the different types of customers they deal with and choose the right type of compensation when a service failure occurs. tsai, yang and cheng (2014) aver that service providers can go the extra mile by designing processes to allow employees to select compensation based on the characteristics of the consumer. baltic journal of economic studies 5 vol. 7 no. 5, 2021 gelbrich and roschk (2011) advise that to facilitate compensation, company procedures should not prescribe the type of compensation, but give employees the discretion to ask applicants about their expectations for an acceptable solution to the problem. nikbin et al. (2015) believe that customers who are compensated after a failure of service will be confident that they will deal with the provider again without fear or risk of probable failure because they believe the provider will compensate them this time to restore the relationship. however, it should be noted that different compensation strategies do not produce the same degree of recovery satisfaction. therefore, managers are advised to use different recovery tactics in different cases of failure of service (fu, wu, huang, song & gong, 2015). a high value of compensation leads to high satisfaction. in addition, in the case of financial loss due to a service failure, customers expect quality service restoration commensurate with the loss, and in some cases, compensation is appropriate if it restores the customer's condition before the failure occurred (ellyawati, pharmmesta, purwanto & herk, 2013). consumers are subjected to different types of losses emanating from a similar type of failure. singhal, krishna and lazarus (2013) coined a principle “like recovers like”, meaning that compensation should be the same as that which was lost. in addition, the recipient of the complaint must be involved in the process of restoring services, because once he or she gets out of the picture, the customer loses faith and trust in the process, which can sometimes be difficult to restore. yi and lee (2005) argue that failure to provide services results in loss of economic and social resources, with economic resources recoverable through compensation and social resources recoverable through apologies. 4.4 empowerment service failures can be discovered if the frontline can spot them when they occur, or if the customer brings the problem to the attention of the frontline employees. the frontline employee may have the ability to deal with the failure process while management is responsible for dealing with service failures related to financial situations. the level of authority given to employees determines the extent to which they can intervene when service failures are reported. this is so because managers draft company policy such that it is within their discretion to determine the limits and powers of employees (schumacher & komppula, 2016). institutional managers should keep an eye on analyzing the organisational structure and ensuring an optimal work environment through employee empowerment. this will make it easier for frontline employees to respond appropriately to certain service failure scenarios (harun, rokonuzzaman, prybutok and prybutok, 2018). there is a link between how a company is organized and how effectively it adapts to chronic digital upheaval. more digitally savvy companies, in particular, are more likely to be organized around cross functional teams, and they are less likely to report that management processes and structures hinder their ability to work digitally. companies that have reached digital maturity tend to give their employees more autonomy to make decisions, resulting in increased speed and flexibility (kane, phillips, copulsky & nanda, 2020). thus, employees represent the organization when complaints are registered, and they should be empowered to provide a small atonement that will appease disgruntled customers, rather than refer every issue to supervisors or managers. therefore, organizations should empower employees to effectively handle customer complaints (ekiz & khoo-latimore, 2011). human resources departments should avoid recruiting individuals with low efficacy and polychronicity to frontline positions since these employees have low self-confidence and prefer a self-learning and multitasking approach. these people would not be able to do the job successfully, and they would not help the company recover; instead, they would cause problems and possibly increase costs (daskin & kasim, 2016). in addition, training and empowerment programs should be encouraged and developed so that, supported by recognition and rewards programs, employees are more likely to improve their service recovery performance (abou & abou, 2013). in order to address errors that depend on individual staff, management should endeavour to promote an organisational culture that cultivates the right attitude by members of staff. therefore, training should be arranged for employees so that they can quickly troubleshoot problems. this should be combined with service recovery processes and actions to compensate customers for problems encountered, thereby minimizing irritation and customer dissatisfaction (zainol, 2012). according to park and ha (2016), service-oriented businesses should ensure that frontline personnel are well trained to conduct collaborative recovery processes in as constructive, considerate, and efficient a manner as possible. it is difficult for service workers who are not professionally trained to provide good service or maintain quality (lee, wu, wu & liang, 2012). nowadays, in order to improve the quality of service, the competencies of service personnel are critical, so there is a need to improve service knowledge. two competencies that are critical to effective service delivery are employee skills and behavior (skaalsvik, 2013). baltic journal of economic studies 6 vol. 7 no. 5, 2021 4.5 explanation the explanation does not produce any tangible results for the client. however, the tone and manner in which the explanation is given to the customer to explain the service situation can be related to interactional justice. the actual act of explaining is unrelated. in some cultures, explanation is used as a tool to resolve conflict and preserve harmony in society, so it is associated with procedural justice (chern & hui, 2011). service providers should determine or weigh the cost of service recovery strategies against the benefits, because sometimes the cost of recovery can increase enormously. helping customers understand the reason for the failure of service by providing sufficient explanation is a powerful and low-cost strategy that managers can use to achieve effective and efficient service recovery efforts (grewal, roggeveen & tsiros, 2008). customers are always interested to know why there was an interruption in service. therefore, a clear explanation can help calm a tense situation. for an explanation to be considered adequate, it must include the following characteristics. first of all, the content of the explanation must be correct and include relevant facts and information. second, the delivery of explanations should reduce customer dissatisfaction. the most effective explanations are perceived as genuine, sincere and not manipulative (wilson, bitner, zeithaml & gremler, 2012). while an explanation for service failure may seem like common sense, bradley and sparks (2012:48) caution service managers that not all employees provide an explanation. as a result, managers should encourage their employees to explain service errors because explanation is the most important and cost-effective tool for restoring customer happiness. the explanation makes customers feel good because it helps them understand why the service didn't work and reduces their conclusions about the reasons for the breakdown (chern & hui, 2011). 5. criteria or considerations for using particular service recovery tactics the effectiveness of the service is determined via outcomes such as customer satisfaction, loyalty and retention (miller, craighead & karwan, 2000). similarly, a great service recovery initiative will create consumers who are happy, content, optimistic, satisfied and relieved, rather than consumers who got nothing for the problems or failures they encountered (keefe, russel-bennet & tombs, 2007). there are two service failure mitigation strategies, namely proactive and reactive strategies. proactive strategies are used before a service failure occurs, while reactive strategies are used after a service failure. proactive strategies include offering assurances of service quality and efforts to build rapport between the service provider and the client, while reactive strategies may include offering apologies, explanations, and compensation after a service failure (worsfold, worsfold & bradley, 2007). some service recovery strategies include apologizing (acknowledging the problem), helping (fixing the problem), and compensating (paying the cost of the problem). the challenge for service providers is to better understand which recovery strategy would be ideal in a particular situation (levesque & mcdougall, 2000). for example, service failure caused by unfriendly service is more of a psychological factor, so efforts to restore service, such as providing money, may be inappropriate and fatal to the service provider, since in such a scenario the customer would expect an apology and an admission of responsibility for the service failure (siagian & triyowati, 2015). 6. discussion 6.1 a hybrid approach to service recovery service failures inevitably occur throughout the life cycle, and any effort to prevent them may be futile. however, service providers have a second chance to fix the situation with service recovery. thus, the use of service recovery strategies like an apology, explanation, compensation, speed and empowerment can help the organization to restore customer confidence and pacify the angry customer. the challenge businesses face is how to adapt to a changing business environment where physical interaction or customer contact is becoming less and less desirable. the reality is that customer contact norms are changing in today 's digital world. therefore, organizations must identify and adapt to this new dynamic in order to continue to attract and retain customers. businesses and their customers are rapidly adopting technology. significant technology trends include social media, mobile computing, analytics and cloud computing. even when considered separately, they have a significant impact on the customer experience. moreover, taken together, these digital changes are extremely disruptive, creating both opportunities and risks for businesses (deloite, 2013). thus, it is becoming increasingly clear that technological advances and innovations will continue to be important in customer-firm interactions. these technological exchanges are predicted to become an important criterion for long-term corporate success (meuter, ostrom, roundtree & bitner, 2000). clow and baack (2018) believe that evolving technology has changed the way brands and companies are influenced. a customer facing a service failure is not limited to telling family and friends about it. such a customer can use social media and instantly be heard by many customers in a short period of time. baltic journal of economic studies 7 vol. 7 no. 5, 2021 however, organizations are lucky because they can use the same technology to interact with customers and stimulate positive word-of-mouth. therefore, businesses should consider using available digital platforms. for example, social media offers opportunities for two-way communication with consumers in their homes or other places of employment. integrating technology and digital connectivity into service recovery strategies will expand access to corporate facilities. as digital interactions with companies and stores expand, consumers expect to be served 24 hours a day, seven days a week. in circumstances where the consumers are trying to get help with difficulties on the site, they may be turned off and leave the sale entirely if they do not get prompt help. all types of organizations, including retailers and service providers, should have an employee on call to handle issues after hours. customer support should be available around the clock because they work the same way. “anything that brands deliver to customers today, especially digital services, should be available 24 hours a day, seven days a week” (ludwig, 2021). people communicate with organizations through a variety of digital mediums, such as websites, review sites, social media, and so on, which requires a multi-channel customer experience. businesses can synchronize communication with customers across channels using multichannel customer service technologies. this leads to more consistent contact between consumers and customer service representatives (rodela, 2021). in this regard, companies must take an unbiased look at their operations, considering the possibility that a completely new approach is required. channels, people, processes, technology and information all need to be considered as part of the operating model. during the operational model assessment, appropriate design concepts for today 's digital world should be defined and utilized. this will allow for the identification of areas for improvement and the development of new skills (deloite, 2013). technological advances now make it possible for customers to seek help and services from a corporation, even if they are in a remote location. customers can apology explanation speed compensation empowerment online channels recovery satisfaction digital connectivity (process) service recovery strategies (process) customer satisfaction (outcome) covid-19 pandemic lockdown restriction figure 2. technology and digital connectivity integrated service recovery framework source: author’s construct baltic journal of economic studies 8 vol. 7 no. 5, 2021 communicate "face-to-face" with company experts through web video chats, remote online access and other technological techniques to help troubleshoot and solve problems. there are many other areas in which technology and customer service are inextricably linked, and it is up to companies to capitalize on both. whatever a company decides to do and apply, it must remember that it must first understand the complex relationship between technology and customer service, and then use its power to become a strong force and partner of choice for even more customers (newman, 2016). therefore, this study proposes a framework that integrates technology and digital connectivity into service recovery strategies, namely speed, apology, compensation, explanation, and empowerment, as shown in figure 2. thus, integrating technology into the traditional way of doing business will help service providers offer seamless and timely service, which is critical, especially during a pandemic, due to restrictions imposed by several governments that make physical interaction less desirable. 7. conclusion the purpose of this paper was to propose a hybrid approach to integrating technology and digital capabilities into service recovery strategies, namely speed, apology, explanation, compensation, and empowerment, to achieve customer satisfaction with recovery. newman (2016) believes that a company should focus on creating value for its customers at every stage and in every transaction and, despite the small number of human interactions, be able to form bonds and emotional connections with them. the enterprise should be able to improve the overall quality of service and interaction with its customers through the implementation of technological customer service. in today 's fast-paced world, customers demand simplicity, convenience and flexibility to access a company's services from anywhere, anytime, because it gives them exactly what they want. this is the added value from the customer's perspective. thus, providing excellent customer service today is the most important differentiator for any company or brand. in an era of lockdowns and social distancing, businesses must develop ways to support customers and meet their needs. managing time-starved customers requires a pragmatic approach, especially in this period of the covid-19 pandemic. regardless of sudden changes in business operations, the burden remains on the service provider to keep customers excited or risk customer attrition. the development of this concept was prompted by 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(2014). does delaying service-failure resolution ever make sense? journal of business research, 67(2), 159–166. baltic journal of economic studies 221 vol. 7 no. 5, 2021 corresponding author: 1 scientific institute of public law, ukraine. e-mail: vova4orniy@ukr.net orcid: https://orcid.org/0000-0002-9383-4703 2 kyiv institute of the national guard of ukraine, ukraine. e-mail: osa71@gmail.com orcid: https://orcid.org/0000-0001-9520-4732 3 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: alex@ecg.ua orcid: https://orcid.org/0000-0002-7778-673x doi: https://doi.org/10.30525/2256-0742/2021-7-5-221-227 interaction of interpol ukrbureau units with the state migration service of ukraine to combat economic crimes commit ted by foreigners serhii chornyi1, serhii ostrovskyi2, oleksandr gaponov3 abstract. joint counteraction against international crime by all law enforcement agencies of different countries brings common results in eradicating this phenomenon in the world and reducing the number of crimes in a single state. this is one of the most relevant areas of international cooperation worldwide. that is why the issue of interaction in the field of law enforcement acquires special attention and relevance. that is why special attention is paid to the content of the concept of "interaction" and "interaction of law enforcement agencies". today there is a significant increase in economic crime, with international transnational crime paying particular attention to economic crimes committed by foreigners. a significant role in countering this phenomenon is played by specially formed international institutions (bodies), namely: international organizations; international conferences; international commissions and committees. the most famous of these include the following: united nations (un) commission on crime prevention and criminal justice; un office on drugs and crime; council of europe (council of europe committee of experts on the evaluation of anti-money laundering measures); european committee on crime problems; international criminal police organization (interpol), etc. the central body for combating international crime is the international criminal police organization – interpol, which began its activities after the entry into force (june 13, 1956). the purposes of interpol are: to ensure and develop the widest possible mutual assistance between all criminal police agencies within the framework of the laws in force in the various countries and in the spirit of the universal declaration of human rights; creation and development of institutions capable of successfully contributing to the prevention and suppression of criminal offenses (art. 2 of the interpol charter). the structure of the internal organs of interpol consists of: general assembly; executive committee; general secretariat; national central bureaus; counselors; file control commission. interpol maintains relations with many international organizations on issues related to its sphere of activity. interpol maintains a national central bureau of interpol in each of its member countries, through which international police cooperation is regulated. the national central bureau is an authorized police authority or entity with the status of an interpol representative in its country. the main purpose of national central bureaus is to involve the police authorities of the country in the international fight against crime, to establish and maintain contacts with other national central bureaus and the general secretariat of interpol by ensuring a continuous, rapid and high-quality exchange of information. in ukraine, such a unit is the national central bureau of interpol, which operates within the structure of the national police of ukraine and organizes international cooperation of all law enforcement agencies of our state within the framework of the organization. as part of combating crime, the national central bureau of interpol cooperates with the state migration service of ukraine, organizes cooperation, as well as initiates and coordinates operational and investigative activities aimed specifically at preventing and solving crimes, identifying and deporting from ukraine persons – citizens of foreign countries involved in criminal activity, in particular members of transnational organized crime networks, persons who have committed sexual crimes against children, and the like. a special area of interaction is the fight against economic crimes committed by baltic journal of economic studies 222 vol. 7 no. 5, 2021 foreigners that disrupt the economic systems of various states. the state migration service of ukraine sends requests about economic crimes committed by foreigners to the interpol national central bureau. key words: interaction, interpol ukrbureau divisions, law enforcement agencies, crime, state migration service of ukraine, inquiry, cooperation, information, foreigner. jel classification: h11, h30, h61, i38, r50, d72 1. introduction the concept of interaction of bodies endowed by the state with subordinating powers, to date, has no unified concept both in the theory of law and in practice. it should be noted that subordination relations are built on the basis of direct subordination, in terms of relations with public administration bodies. subordination arises between bodies located in co-subordinate structural units, between which there are managerial relations and operate according to the principle of verticality. independent actors have the power to coordinate structural relations among themselves. by interacting, they pursue a common goal. before considering the content of interaction between interpol's ukrbureau and law enforcement agencies of ukraine, it is necessary to consider the content of the concept of "interaction" and "interaction of public administration authorities with interpol". interaction is the cooperation of subjects on the basis of mutual assistance of their structural parts and elements in order to fulfil the set goals and objectives. in the context of globalization, as the world undergoes processes of integration and transformation, international interaction with different countries is of particular importance. the world community has reached a level of development in which all of humanity or some part of it is trying to exist, to develop as a single organism. there is a constant search for dialogue between different cultures, worldviews, and political systems. in the context of the development of interstate relations, interaction in the law enforcement sphere, aimed at countering offenses and solving crimes, is of particular importance. interpol is one of the central international organizations that organize and coordinate international law enforcement cooperation among member states. this international criminal police organization includes 188 countries around the world. interpol police cooperation is based on actions taken by these agencies on the territory of their countries and in strict compliance with their national laws. all interpol member countries have equal rights, regardless of the size of their financial contributions. interpol is an administrative organization that acts as an intermediary between police agencies around the world. it has no authority and therefore relies heavily on the cooperation of national law enforcement agencies in processing requests from abroad. accordingly, each member country establishes an interpol national central bureau organization with the status of interpol representative in its country, the main purpose of which is to involve law enforcement agencies of the country in the international fight against crime in cooperation with other national central bureaus and the general secretariat of interpol. organizations of the interpol national central bureau of member countries interact with them, ensuring the continuous, rapid and highquality exchange of information related to international crime and other offenses. thus, the interaction between the units of interpol's ukrbureau and law enforcement agencies of ukraine is a systematic activity of the body, which ensures the exchange of official and confidential operational and investigative information within interpol and law enforcement agencies of ukraine to combat crimes in the field of foreign economic activity, fuel and energy complex, crimes related to the theft of vehicles and in the financial and banking sector, as well as crimes committed with the use of firearms and explosives, crimes related to drug trafficking and illegal migration. 2. research methodology methodology implements such functions as determining how to obtain scientific knowledge that reflects dynamic processes and phenomena; foreseeing a special way to a specific research goal; ensuring the completeness of information about the process or phenomenon under study; assistance in introducing new information into the fund of science theory; providing clarification, enrichment, systematization of terms and concepts in science; creating a system of scientific information based on objective facts; and is a logical and analytical tool of scientific knowledge. the methodology of the study of interaction between interpol ukrbureau and the state migration service of ukraine to combat economic crimes committed by foreigners is based on the methodological basis of scientific research on the fight against transnational crime. the methodological framework is a scientific foundation from the position of which the explanation of the main scientific phenomena and identification of their regularities are given. in a broad sense, it is the basic assumptions on which the study is based. the methodological foundations of the study of interaction between interpol ukrbureau and the state migration service of ukraine to combat economic crimes committed by foreigners consist of a system baltic journal of economic studies 223 vol. 7 no. 5, 2021 of different methods of studying general and specific patterns of emergence, development and functioning of phenomena and processes. the concept of "method" in a broad sense means "the way to something" or the way of subject activity in any form. in other words, method is a way of cognition and practical transformation of reality, a system of techniques and principles governing the practical and cognitive activity of people (subjects). consequently, the method is reduced to a set of certain rules, techniques, methods and norms of knowledge and action. in this article, scientific methods were used to translate the topic of interaction between the units of interpol ukrbureau and the state migration service of ukraine regarding the counteraction of economic crimes committed by foreigners from the theoretical to the practical dimension on the basis of reasonable objective laws of the world, to identify the features of interaction between interpol and the state migration service of ukraine, the specifics of requesting and receiving information, to highlight and analyze the legal regulation of cooperation in combating economic crimes committed by foreigners. the theoretical level assumes not direct but mediated by forms of thinking contact with reality, the empirical level – aimed directly at the sensually perceived object, it is a specific unity of sensory and mental reflection of reality, in which the sensory reflection comes to the fore. sensory information is then processed by rational means. accordingly, in this scientific study were used general scientific and private methods, namely: 1) methods of isolation and research of empirical object (observation, experiment, model experiment, scientific fact); 2) methods of processing and systematization of obtained knowledge (analysis and synthesis, induction and deduction, analogy, systematization, classification, empirical law, empirical (descriptive) hypothesis, observation, experiment, model experiment, scientific fact). 3. peculiarities of interaction between units of interpol ukrbureau and law enforcement agencies of ukraine interaction between the police of different countries in the interpol system as part of state cooperation in the fight against crime can be developed only in strict compliance with the general principles of international law and, above all, the principle of cooperation, the sovereign equality of states, noninterference in their internal affairs, the principle of respect for human rights, as well as ensuring the inevitability of punishment for an unlawful act committed. according to the decree of the cabinet of ministers of ukraine "on the national central bureau of interpol" of 25 march 1993 ¹ 220, the interaction of law enforcement agencies of ukraine with the competent authorities of foreign countries in addressing issues of combating crime of transnational nature or going beyond the borders of the country is carried out only through the national central bureau of interpol. the national police performs the functions of the national central bureau of interpol. in ukraine, the specifics of cooperation of the national central bureau of interpol with all law enforcement agencies in the territory of an interpol member state, which conduct criminal and operationalsearch cases, are normatively defined. the national central bureau of interpol ensures cooperation of ukrainian law enforcement agencies in the fight against crime by: 1) coordination and cooperation with law enfor cement agencies within the country; 2) interaction with international law enforcement agencies of foreign member states; 3) interaction with the general secretariat as the central body in the fight against international crime: the international criminal police organization – interpol; 4) analytical and prognostic activities on the state of crime in ukraine and the level of threat of criminal activity of ukrainian citizens abroad. that is, interaction can be internal and external, and, accordingly, the purpose and objectives of interaction change. at the same time, cooperation can be both between states and international organizations. interpol as an international organization is characterized by universal interaction and multilateral content. thus, representatives of various state authorities empowered on behalf of ukraine, the activity of which is related to the implementation of state functions in the field of law enforcement, provide representation of the interests of ukraine in treaty and institutional forms of international cooperation on law enforcement, both bilateral and multilateral levels, including international legal assistance issues. interaction with law enforcement agencies within the country is done by sending requests. law enforcement agencies of ukraine send requests directly to the interpol national central bureau or through the territorial units of the interpol national central bureau – departments and groups of the interpol national central bureau, ensuring coordination with: – the ministry of internal affairs of ukraine; – divisions of the national police of ukraine; – other law enforcement agencies of ukraine; – territorial divisions of other ministries and central executive authorities of ukraine. exchange of information between law enforcement agencies of different states, real-time access to information resources and databases of the general secretariat of interpol, as well as analytical, statistical and reference materials are carried out using a global baltic journal of economic studies 224 vol. 7 no. 5, 2021 telecommunications system i-24/7 (interpol 24/7), which was introduced in 2002. it is a tamper-proof network with a limited number of users that is unparalleled globally and is an effective tool for interna tional law enforcement cooperation. i-24/7 communications are the exclusive domain of the interpol national central bureau and the general secretariat. through the i-24/7 system, authorized law enforcement officers of member states are authorized to access the following databases of the general secretariat: persons and notices; forensic data; travel and official documents; stolen property; (firearms and dangerous materials); (organized crime networks). according to the order of the ministry of internal affairs of ukraine, prosecutor general's office, national anti-corruption bureau of ukraine, the security service of ukraine, state bureau of investigation, ministry of finance of ukraine, ministry of justice of ukraine № 613/380/93/228/414/510/2801/5 dated august 17, 2020 "on approval of the instruction on the procedure for the use by law enforcement agencies of ukraine of the information system of the international criminal police organization – interpol" established the procedure for sending requests to the national central bureau of interpol, their standard form and content. law enforcement agencies of ukraine shall send requests/requests for use of interpol information system to the authorized unit and/or authorized territorial units. structured subdivisions of the prosecutor general's office, the central department of the security service of ukraine, the national anticorruption bureau of ukraine, the central office of the state bureau of investigation, apparatuses of ministries and central executive authorities, the department of criminal sentence enforcement shall send requests/requests to the authorized unit. territorial (regional) subdivisions (bodies), departments of law enforcement agencies of ukraine shall send requests / appeals to the relevant authorized territorial subdivisions. requests / appeals of territorial (regional) subdivisions (bodies), departments of law enforcement agencies of ukraine requiring immediate execution may be sent directly to the authorized subdivision. by decision of the director of the state bureau of investigation, requests/requests of the territorial offices of the state bureau of investigation may be sent to the authorized department through a structural subdivision of the central office of the state bureau of investigation determined by this director. authorized territorial subdivisions within fifteen days pre-process requests/requests of territorial (regional) subdivisions (bodies), departments of law enforcement agencies of ukraine regarding their validity, completeness, correctness of registration, compliance with interpol rules and ensure their transfer to the authorized subdivision. it should be noted that the cabinet of ministers of ukraine on september 13, 2002 № 1371 "on the participation of central executive authorities in the activities of international organizations, of which ukraine is a member", the national police is defined as the responsible central body of the executive power of ukraine, which follows from the membership of ukraine in the icpo – interpol. thus, based on the membership of our state in icpo – interpol, the decision to form the national central bureau of interpol is taken by the cabinet of ministers of ukraine, which determines the central body of executive power that fulfills the obligations of ukraine as a member of interpol. accordingly, it is the national police of ukraine. in turn, the determination of the structural unit, which directly performs the tasks and functions of the national central bureau of interpol, falls under the authority of the chairman of the national police. thus, in accordance with clause 10 of part 1 of article 22 of the law of ukraine "on national police", the head of the police approves the provisions of the independent structural subdivisions of the police apparatus. in 2017, in the structure of the national police of ukraine the order of the national police from. april 26, 2017 № 64 "on approval of the staff schedule of the apparatus of the national police" ukrbureau interpol was reorganized into the department of interpol and europol of the national police of ukraine. accordingly, in 2017, the department of international police cooperation was created on the basis of the liquidated department of interpol and europol and the department of international cooperation of the national police of ukraine. today, it interacts with all law enforcement agencies and considers requests from them. the basis of international cooperation within the framework of interpol is: – the search for a person with a purpose of extradition; – obtaining information about a person suspected of committing a crime; – informing law enforcement agencies of other states about an individual's illegal activity; – establishing the whereabouts of missing people; – establishing the whereabouts of witnesses or victims; – identification of persons and unidentified corpses; – locating and identifying different things; – obtaining information about the method of committing a crime, information about the actions of persons, events and circumstances related to the crime; – seizure of prohibited substances and items; – obtaining information about the illegal activities of organized crime networks and criminal organizations and their members; – obtaining analytical, scientific, statistical and reference information on law enforcement issues. accordingly, international cooperation in combating crime is carried out, as noted above, through requests. baltic journal of economic studies 225 vol. 7 no. 5, 2021 the request must contain: the name (position) of the requestor, the mailing address or e-mail address and contact telephone number, if any; a general description of the information or the type, title, details or content of the document for which the request is made, if known to the requestor; signature and date, subject to a written request. upon receipt of a request to a body, division of the ministry of internal affairs, an employee of a special structural unit (responsible person) that organizes access to public information in the prescribed manner shall immediately register the request and send it in the prescribed manner for further consideration by its management. after reviewing the request, the management immediately, but no later than the second working day from the day of receipt of the request, sends the original request to the heads of structural divisions for execution in accordance with the competence. structural units – co-executors, no later than two days before the end of the execution period, provide the main executor of the request with information and/ or draft response within their competence. the official designated as the main executor of the request shall, at least one day before the deadline for the execution of the request, submit a draft response for the applicant to management. the answer to the sent request is provided within five working days from the date of its receipt. restricted information is not provided to the applicant. the time limit for responding to a request may be shortened if the request is related to the protection of human life or freedom, the quality of food and household items, emergencies that have occurred or have occurred and threaten the safety of citizens, accidents, disasters, to protect information about the state of the environment. these circumstances facilitate quicker responses to such requests; they are provided within 48 hours of receipt. responses to requests with a large volume of information may be extended by 20 business days with justification for such an extension. these interpol databases are supplemented by international wanted notices from interpol member countries. the interpol notification system was established in 1946. the purpose of these reports is to inform member states about wanted persons, professional criminals, unidentified corpses, etc. today this distribution has the following functions: to inform the member countries of interpol about the accused, convicted, missing, and internationally wanted persons. it is also reported about persons prone to committing crimes and other unlawful acts; petition-appeal to the member states of interpol about persons who have committed a crime in the territory of the petitioning country, their residence, relocation, detention with a view to extradition, request for the indication of an unidentified corpse, etc. the system of international communications is obliged to comply with the constitution of interpol, and the general secretariat even has the right to cancel it in case of violations of the rules of interpol. at the same time, the large number of them makes it impossible to verify each one. that is why today there is a need to develop a mechanism of responsibility of interpol member countries for violation of sending international communications. accordingly, this paper proposes the imposition of financial penalties for countries that send international communications containing incorrect data and declaring certain persons internationally wanted. the procedure for appealing "red notices" to the commission for the control of interpol’s files is also imperfect, since the said commission meets only a few times a year, which makes the efficiency of the appeal consideration mechanism impossible. that is why it is proposed by the authors to increase the number of meetings of the commission for the control of interpol’s files to once a quarter. 4. cooperation between interpol ukrbureau units and the state migration service of ukraine: content and specific features the state migration service of ukraine is one of the central bodies of executive power, interacting with the divisions of the interpol ukrbureau. the main tasks of this body are as follows: 1) participation in the formation and implementation of state policy in the field of migration, citizenship, immigration and registration of individuals; 2) procedures, within its competence, related to: consideration of documents on the acquisition / termination of ukrainian citizenship; preparation of materials for consideration by the commission on citizenship affairs under the president of ukraine; making decisions on the granting, loss and cancellation of refugee status in ukraine; 3) generalization of the practice of application of legislation in the field of migration, in particular granting refugee status, as well as on issues of citizenship, registration / deregistration at the place of residence / stay of individuals, immigration and emigration of ukrainian citizens or foreigners and stateless persons, development and introduction of proposals for its improvement in the prescribed manner. the peculiarities of the state migration service of ukraine are as follows: issuance of passports and other identity documents to citizens of ukraine permanently residing in ukraine, as well as documents for entry to ukraine, staying in ukraine and a departure from ukraine or permanent residence on its territory and refugee certificates to foreigners and stateless persons; ensuring the protection of the rights of refugees and other categories of migrants; registration / deregistration at the place of residence / staying of individuals, identification of citizens of ukraine who have lost their passport and other identity documents, as well as address and reference work; creating and ensuring the functioning of the state information system of registration of individuals and their documentation; implementation baltic journal of economic studies 226 vol. 7 no. 5, 2021 of international readmission agreements; identi fication of foreigners and stateless persons who have lost their passport documents. the state migration service of ukraine cooperates with the units of the interpol ukrbureau on issues of obtaining information databases and providing information on the search for criminals, missing persons, forged documents, etc. accordingly, the instruction on the procedure for making decisions about exclusion of foreigners and stateless persons by the state migration service of ukraine and its territorial bodies, approved by order of the ministry of internal affairs of ukraine on december 17, 2013 № 1235, states that decisions about prohibiting the entry into ukraine are made by the state migration service of ukraine and its territorial bodies on the initiative of the units of the interpol ukbureau – in case of establishing grounds for prohibiting the entry into ukraine to persons in the process of cooperation with the law enforcement agencies of other states and international law enforcement organizations. with regard to combating economic crimes committed by foreigners, the state migration service of ukraine can obtain the following information through the national central bureau of interpol when requesting operational and investigative activities related to the detection of crimes in the field of economic activity: – official names of commercial structures and other legal entities – subjects of entrepreneurial activity located abroad; – date of registration with the relevant state authorities, legal address, telephone numbers and other means of telecommunication; – the names and surnames of the heads of such structures; – key focus areas; – the amount of the authorized capital; – information about termination; – information of a criminal nature about their supervisors and other employees. the national central bureau of interpol may refuse to respond to a request (in part or in full) if: 1. the request does not fall within the competence of interpol; 2. the request has political, religious, racial, military content; 3. the sovereignty and security of one's own state or the requested state would be violated by responding to the request; 4. providing a response to a request would violate human rights; 5. the request is made in violation of the requirements; 6. responses to inquiries from individuals are not provided. it should be noted that information about the opening of financial accounts in foreign banks by individuals, including citizens of ukraine, and legal entities, as well as about the movement of funds is usually a banking or commercial secret and may be reported by foreign law enforcement agencies only after consideration of an official request of the general prosecutor's office of ukraine by the highest justice agency (prosecutor's office) of the requested state in the process of providing legal assistance in a criminal case. 5. conclusion it should be noted that although the main purpose of the national central bureau of interpol is cooperation with law enforcement authorities of ukraine in combating crime, the legislator in the criminal code of ukraine has not addressed the unregulated issue of international cooperation, the content of which is the implementation of requests for international legal assistance in accordance with international treaties, as well as has not established the specifics of the legal status of the subject of interaction with law enforcement authorities of ukraine. there are no specific features of the legal regulation of the interaction of the national central bureau of interpol with the law enforcement agencies of ukraine and in the laws of ukraine recognizing their legal status. therefore, it is considered necessary to immediately fill this gap by supplementing the criminal code of ukraine with the following article: "the national central bureau of interpol exchanges information on law enforcement issues and coordinates actions in the fight against crime that transcends ukrainian borders or is transnational in nature. at the request of ukrainian law enforcement authorities, the national central bureau of interpol shall organize and coordinate an international search for suspects, accused (defendants) and convicted persons hiding from bodies of pre-trial investigation, court, evading criminal punishment, as well as missing persons, and at the request of foreign authorities – search in ukraine for persons hiding from pre-trial investigation, court, evading criminal punishment, as well as missing persons and other persons in cases determined by law. organizes and carries out international cooperation to ensure public safety and order during the preparation and holding of international mass events, the exchange of information with the general secretariat of interpol, europe, law enforcement agencies and other state bodies of ukraine, as well as with the competent authorities of foreign states on the fight against crime. provides organization and coordination, within its competence, of the work of representatives of the national central bureau of interpol in foreign diplomatic institutions of ukraine and international organizations, exchange of information with the intelligence services of ukraine on issues of combating crime. provides information and analytical support to law enforcement agencies and other state bodies". and also to supplement the laws of ukraine, which define the legal status of law enforcement agencies of ukraine, with the article "on international cooperation with the national central bureau of interpol". baltic journal of economic studies 227 vol. 7 no. 5, 2021 references: interpol. available at: https://www.interpol.int/en/about-interpol/legal-materials. constitution of icpo-interpol interpol. available at: https://www.interpol.int/en/about-interpol/structure-andgovernance bilenchuk, p. d., kofanov, a. v., kobylyanskyi, o. l., & paniotov, e. k. (2009). the interaction of law enforcement agencies in the investigation of transnational crimes: international legal foundations: monograph / ed. p.d. bilenchuk. kyiv: nnipsk knuvd, 84 p. yudin, e. (1978). system approach and principle of activity. methodological difficulties of modern science. moscow: nauka, 391 p. kocherin, e. a. (2000). fundamentals of state and administrative control. moskow: information and publishing house "filin", 289 p. ryabina, o. philosophy and methodology of science. available at: http://psi.nuczu.edu.ua/images/topmenu/ kafedry/kafedra-socialnyh-i-gumanitarnyh-dyscyplin/fmn-5.pdf khabibulina, n. i. (2001). political and legal problems of semiotic analysis (theoretical and methodological research): author. dis. doct. legal. sciences: 12.00.01. spb., 48 p. kozinkin, v. a. (2009). the use of information detected in the means of cellular systems of mobile communication in crimes investigation: abstract of ph.d. dis. cand. legal. scientific. moskow, 27 p. department of interpol and europol. available at: http://interpol.np.gov.ua/?page_id=37.i24/7 on approval of the instruction on the procedure for the use by law enforcement agencies of ukraine of the information system of the international organization of criminal police – interpol. order of the ministry of internal affairs of ukraine, office of the prosecutor general, national anti-corruption bureau of ukraine, security service of ukraine, state bureau of investigation, ministry of finance of ukraine, ministry of justice of ukraine dated august 17, 2020, no. 613/380/93/228/414/510/2801/5. available at: https://zakon.rada.gov.ua/laws/show/ z0849-20#text on the procedure for participation of central executive bodies in the activities of international organizations, where ukraine is a member. resolution of the cabinet of ministers of ukraine dated september 13, 2002. no. 1371 // official gazette of ukraine dated october 04, 2002. no. 38. р. 36. article 1776. on the national police. law of ukraine // russian justice. 2015. no. 40-41. art. 379. on approval of the national police apparatus staff. order of the national police of ukraine dated january 26, 2017, no. 64. available at: https: //zakon.rada.gov.ua regulations on the department of international police cooperation of the national police of ukraine. order on the national police of ukraine dated january 06, 2018. no. 11. available at: https: //zakon.rada.gov.ua regulations on state migration service of ukraine. resolution of the cabinet of ministers of ukraine dated july 17, 2009. no. 750. available at: https://zakon.rada.gov.ua instruction on the procedure for the adoption the decisions on the entry into ukraine prohibition for foreigners and stateless persons by state migration service of ukraine and its territorial bodies. order of the ministry of internal affairs of ukraine dated december 17, 2013, no. 1235. available at: https://zakon.rada.gov.ua gavrylyuk, v. i., dubina, v. i., & danylyuk, m. p. (2007). topical aspects of international cooperation of the internal affairs bodies of ukraine in the direction of combating human trafficking. kyiv: tsyfra, 175 p. baltic journal of economic studies 83 vol. 7 no. 2, 2021 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: oleh.ilnytskyy@lnu.edu.ua orcid: https://orcid.org/0000-0001-7343-8810 2 state university of internal affairs in lviv, ukraine. e-mail: n.v.ilkiv@gmail.com orcid: https://orcid.org/0000-0002-3182-8391 3 ivan franko national university of lviv, ukraine. e-mail: tina1-83@ukr.net orcid: https://orcid.org/0000-0002-2619-2085 doi: https://doi.org/10.30525/2256-0742/2021-7-2-83-90 qualitative indicators of bank performance assessment for the purposes of participation in the deposit guarantee system in ukraine oleh ilnytskyi1, natalia ilkiv2, khrystyna chopko3 abstract. one of the directions of reforming the system of deposit insurance in the world is risk-oriented approach, which means that the degree of involvement in the system is determined by the degree of exposure of the participant’s operations to risk. correct estimation of the degree of risk of banking operations requires a well-grounded approach to the study of indicators-criteria that should be clear, understandable, and objective. the subject of research is the performance of the deposit guarantee system in ukraine. therefore, the present research aims to solve applied problems of establishing the content of qualitative indicators of banking operations that arise in their application for the sake of determining the degree of risk in the operations of the participant of the deposit guarantee fund in the estimation of the amount of recurring charges. methodology. systemic method was applied to establish the content and assign qualitative indicators of bank performance for establishing their actual content in accordance with the regulation. on this basis, using a formal logical method, definitions of legal notions were formulated with due account of the financial and economic meaning as well as the established goal of legal regulation. formal dogmatic approach allowed to make an analysis of the regulatory and legal framework of the state, to identify functional capacity of the system of protection of the rights and interests of bank depositors, their technical and legal excellence. also, a number of other general scientific methods of research were applied, in particular: analysis (to study systemic application of the notions), historical legal (to study the establishment, change and development of the deposit guarantee system), comparative legal (to study the legislation determining specific principles of the functioning of the deposit guarantee system of natural persons in foreign states) etc. as the result, there has been established the essence of the current qualitative indicators used in the determination of the degree of risk of banking operations in ukraine as far as application of the means of influence for violation of banking legislation by the national bank of ukraine to participating banks over the reporting period, as well as administrative and economic sanctions applied for violation of legislative requirements related to the deposit guarantee system of natural persons are concerned. also, proposals have been developed concerning the procedure of their application for the sake of increasing the opportunities for ensuring risk-oriented approach. key words: risk-oriented approach, written warning, fine, administrative and economic sanctions, recurring charge. jel classification: e61, g21 1. introduction legal support of sustainable development and activity of banks in ukraine, creation of proper competitive environment in the financial market, protection of legitimate interests of depositors and clients of banks, creation of favourable conditions for development of economy of ukraine, and support of domestic commodity producer are the main purposes of normative regulation of banking activity (unnumbered paragraph 2, art. 1 of law of ukraine on banks and banking no. 2121-ііі dated december 07, 2000 (hereinafter referred to as law no. 2121-ііі)). baltic journal of economic studies 84 vol. 7 no. 2, 2021 the functioning of the deposit guarantee system for individuals is an important element in ensuring this goal. through legal, institutional and organizationalfinancial mechanisms also, to ensure protection of the rights and legitimate interests of bank depositors, strengthen trust in the banking system of ukraine, and ensure an effective procedure for removing insolvent banks from the bank liquidation market (part 2, art. 1 of law of ukraine on the deposit guarantee system no. 4452-vi dated february 23, 2012 (hereinafter referred to as law no. 4452-vi)). the financial mechanism of accumulation of funds received from the sources specified in art. 19 of law no. 4452-vi with ensuring their further distribution and use in accordance with the regulatory purpose, mediated through the functions of the deposit guarantee fund (dgf), is an organizational and financial guarantee to ensure the tasks of the deposit guarantee system. at the same time, crucial financial involvement of commercial banks in the development of the assets of the deposit guarantee fund via payment of initial, regular and special charges (subparagraphs 1-3, part 1, art. 19 of law no. 4452-vi) simultaneously acts as the element of indicative regulation of banking operations by the national bank of ukraine. it establishes a directly proportional dependence between the defined empirical performance criteria of the relevant financial institution and the level of its mandatory payment in favour of the deposit guarantee system for individuals at the regulatory level. formally and actually, an important role is played by normatively defined qualitative indicators of banks’ activity, along with quantitative ones for the general assessment of the generalized degree of risk of the fund’s participant. they account for 20% of the total score in the structure of the final assessment of the degree of risk of the activity. this further affects the formula economic calculation of the amount of fees. thus, the established system ensures encouragement of good-faith performance of the fund’s participants (banks that have got a license for carrying out banking activity in ukraine, of which currently there are 74 in ukraine). at the same time, such significance requires uniform regulatory approaches to determining and applying respective qualitative indicators, since it leads to direct legal consequences for banking operations in ukraine. building an effective deposit insurance system has long been of intersectoral scientific interest. it is of great importance for the stable functioning of the banking system and, consequently, for ensuring financial security. significant commercial risk of banking results entails priority mass withdrawal of deposits, loss of confidence in the stability of financial institutions and policies, which further undermines the fundamentals of the monetary and credit market and accelerates its collapse in unfavourable periods of economic cycles, as experience shows. one of the key roles in the financial safety net system is played by the deposit guarantee system. but the role of the deposit guarantee system in promoting financial stability is ambivalent (and may even become negative), which is mentioned in reference literature (kane, 2016, 2007; demirgüç-kunt and laeven, 2007). on the one hand, the insufficient level of coverage of deposits with guarantees increases the risk of panic among depositors during the crisis. as a result, there is a significant outflow of deposits. however, excessive protection through guarantees may reduce depositors’ responsibility in the process of deposit placement as well as responsibility of the bank management. in particular, researchers stress that some financial security systems in general have shown the signs of unfair social and economic functional role during the latest crisis. so, some of them use the funds of citizens to save the wealth of owners of large financial institutions. besides, different conditions of deposit guaranteeing for financial institutions competing in the same markets, if not adequately reflected in the price of deposits, will create conditions for regulatory arbitration and affect competition (kane, 2016; danylenko, 2017). back in the 2000s the international monetary fund and the world bank jointly performed an applied analysis of the national deposit protection systems and their impact on the status of the banking system. the study embraced 61 countries, in which in total 898 observations were performed. final results revealed a great diversity of the mechanisms used to protected depositors’ interests. bringing deposit protection system into conformity with general standards in such conditions becomes a rather complicated task (dovnar, 2008), however some general approaches and positive practices to be accepted in the ukrainian legal system have become the object of critical analysis and study (andriievskaia, 2014; buchko, 2016; kurylo, klochko, timchenko, gulyk, 2017; adamyk, skirka, 2017). at the same time, the results of the conducted research contain a certain holistic generalization of the functioning of the deposit guarantee system in the economic, financial legal or criminal legal aspects. they do not disclose certain aspects of the practical application of the norms of its individual constituent elements, and leave these issues without proper theoretical justification. however, the relevance of the theoretical assessment of the quality of the relevant institutions testifies to the long-term functioning of the deposit guarantee system, especially in the global financial crisis of 2008–2009, as well as the political and socio-economic national crisis of 2014–2016. up till now critically few researches have been dedicated directly to specific steps and development of the ‘roadmap’ leading to the adjustment of the ukrainian legal and financial system to the baltic journal of economic studies 85 vol. 7 no. 2, 2021 requirements of the regulatory documents of the european union, that constitute the formal foundation for one of the important elements of the economic and monetary union within the eu – (the european deposit insurance scheme – edis) – directive of the european parliament and of the council 2009/14/ec dated march 11, 2009, as well as directive of the european parliament and of the council 2014/49/ec dated april 16, 2014. at the same time, detailed description of their content (kovalenko, 2016; hodak, 2017) leaves the mechanisms of implementation of specific requirements for the prospects of unification of the conditions of the bank system performance in the european space undisclosed. w hile establishment the amounts of payments to be made by the participants of the deposit insurance system on the basis of assessment of the risks of their operations (para. 16, preamble, para. 3 (d), art. 1 of directive of the european parliament and of the council 2009/14/ec) and assignment of the authorities allowing to assess available risks of the system and take some preventive actions before their appearance to the institutions regulating the deposit guarantee system (para. 16, 36, 48, art. 13 of directive of the european parliament and of the council 2014/49/ec) constitute one of the vectors of the reform of the deposit guarantee system within edis. the present research aims to establish the normative content of the qualitative indicators of bank performance in the application of sanctions by the national bank of ukraine and its significance for the development of a recurring charge to deposit guarantee fund. materials of practical law enforcement became an occasion for detailed research of the declared problems. they noted the existence of significant inconsistencies between banks and the national bank of ukraine and the deposit guarantee fund as banking regulators and supervisors on the content of quality indicators used in banking when determining the degree of risk for calculating recurring charge in the form of differential charge. this leads to the request of banking institutions for scientific opinions on the application of the relevant rules, taking into account the doctrinal interpretation of their content for further use as evidence to justify their position before the courts in the relevant disputes. as the results of inspections performed by the deposit guarantee fund in 2019, it was established that the fund’s participants, while calculating the amount of the recurring charge, made certain violations. these were the following: 1) unreliable estimation of the degree of risk by which the basic annual rate in the national and foreign currency was weighted; 2) wrong estimation of the score by quantitative and qualitative indicators; 3) unreliable determination and estimation of the base for accounting the recurring charge for deposits in the national and foreign currency, etc. the above in total led to submission of an unreliable report about recurring charge calculation to the fund, underestimated amount of the recurring charge subject to payment to the fund, wrong determination of the bank’s risk degree, etc. on the basis of the results of inspections of banks for completeness of payments of charges to the fund, underestimation of the amount of recurring charge paid by the banks to the fund for the overall amount of 87.9 mln uah has been found, and due to this, a fine for incomplete payment of the recurring charge by the banks to the fund in the amount of 11.7 mln uah has been imposed. in general, violations in terms of completeness and timeliness of payment of charges to the fund have been identified with 27 participants, and the share of this violation makes up 25 % of all violations traced. the authors of the present research have been involved in provision of respective opinions many times. the results constitute a commercial secret, but the general developed approaches to the assessment of the arguments of regulators of the market of banking services and its direct participants are provided in the text of the research as the outcomes of processing of the materials provided for verifying correctness of estimations. the dialectical approach is the foundation of research, taking into account the specifics of the topic, purpose and task. systemic method is applied to establish the content and assign qualitative indicators of bank performance for establishing their actual content in accordance with the regulation. on this basis, using a formal logical method, definitions of legal notions are formulated with due account of the financial and economic meaning as well as the established goal of legal regulation. formal dogmatic method allows to make an analysis of the regulatory framework of the state, to identify functional capacity of the system of protection of the rights and interests of bank depositors, their technical and legal excellence. also, a number of other general scientific methods of research have been applied, in particular: analysis (to study systemic application of the notions), histo-rical legal (to study the establishment, change and development of the deposit guarantee system), comparative legal (to study the legislation determining specific principles of the functioning of the deposit guarantee system of natural persons in foreign states) etc. 2. characteristics of sources of financing the activities of the deposit guarantee fund the bases of the financial redistributive mechanism of functioning of the deposit guarantee system are established by articles 19 and 20 of law no. 4452-vi. they identify the sources of funds of the dgf and the following legal areas of their use to achieve the objectives of this system. in the system of public finances of ukraine baltic journal of economic studies 86 vol. 7 no. 2, 2021 there is an additional guarantee state extra-budgetary fund, which acts as a source of ensuring the legitimate property interests of depositors. this corresponds to the chosen american model of bank deposit insurance system. in spite of the public nature of the fund’s operations, as far as ensuring administration is concerned, the sources of development determined by art. 19 of law no. 4452-vi testify to a high degree of financial selfgovernance of the system. it has been determined that the core sources of the assets of the deposit guarantee fund in 2019 (over 30 % of the sources of financial resources development) include recurring charges from the fund’s participants (para. 2, part 1, art. 19 of law no. 4452-vi). they are paid in the fixed amount under unnumbered paragraph 1, part 1, art. 22 of law no. 4452-vi, or under the regulatory legal act of the deposit guarantee fund in the form of differential charges. this is calculated by weighing of the basic annual charge rate by the degree of risk of the participant’s operations (paragraph 4, part 1, art. 22 of law no. 4452-vi). 3. fundamentals of the risk assessment methodology of the bank-member of the deposit guarantee fund the basics of the methodology of estimating the amount of recurring charges in the form of differential charges are set in the regulation on the procedure of estimation, accounting and payment of charges to the deposit guarantee fund, approved by decision of the executive directorate of the deposit guarantee fund no. 1 dated july 02, 2012 (registered with the ministry of justice of ukraine on february 27, 2012, no. 1273/21585) (hereinafter referred to as regulation no. 1), as well as the algorithm of estimation and threshold values of quantitative indicators, score by qualitative and quantitative indicators for the determination of the degree of the bank’s risk in the estimation of the recurring charge in the form of differential charge to the deposit guarantee fund, passed to ensure its enforcement, approved by decision of the executive directorate of the deposit guarantee fund no. 5513 dated december 26, 2017. the degree of risk is a numerical indicator of the fund’s participant, under unnumbered paragraph 2, part 1, section іv of regulation no. 1. the degree of risk is determined with due account of the bank category, the degree of risk and the overall score calculated in accordance with the figures determined by the fund, that characterize the indicators. the list of indicators, component indicators used for their calculation is presented in tables 1, 2 of annex 4 to regulation no. 1. the indicators have been established and united by their content into two categories – quantitative and qualitative. table 1, annex 4 of regulation no. 1 contains the list and ranging of quantitative indicators characterizing the level of capital (indicator: к1, к2); quality of assets (indicator: яа1, яа2, яа3); liquidity level (indicator: л1, л2, л3); efficiency of performance (indicator: е1, е2, е3); liabilities management quality (indicator: п1, п2). qualitative indicators, instead, characterize the banks’ compliance with the legislative requirements, including regulatory legal acts of the national bank of ukraine, the fund, compliance with the requirements and obligations set by them. in total they determine the degree of formal good faith of the banking institution by the fixed indicators-criteria (table 2). among other things, para. 1 of table 2 ‘the list of qualitative indicators’ (20 % of the overall score)’ of annex no. 4 (para. 1, chapter іv) contains the following qualitative indicator. it is taken into consideration in the estimation of recurring charges of the fund’s participants in the form of differential charges – ‘over the reporting quarter the national bank of ukraine has not applied any means of influence to the bank, but for a written warning and a fine for submission of distorted statements under the regulatory legal act on application of means of influence’. the above regulatory formulation table 1 development of financial resources of the fund in 2019 the source of development of the assets of the dgf mln uah recurring charge 3,692.9 revenues from investment into state securities 661.7 revenues in the form of interest on the balance of money in the settlement accounts in the national bank of ukraine 163.2 repayment of internal governmental bonds 2,805.4 money obtained from performance of measures envisaged by the regulation plan, including: 4,885.3 liquidation (repayment of creditor claims) 4,406.7 during interim administration (repayment of target loans) 478.6 other revenues, including: 14.2 fines, penalties collected 11.6 other revenues 2.6 total by all sources: 12,222.7 source: data of the annual report of the deposit guarantee system, 2019 baltic journal of economic studies 87 vol. 7 no. 2, 2021 constitutes one of the sources of disputable situations between the deposit guarantee fund and banks participating in the deposit guarantee system. 4. legal nature of measures of influence of the national bank of ukraine “measures of influence” are regulated by article 73 of law no. 2121-iii. they are sanctions of administrative or financial nature, applicable by the national bank of ukraine within the administrative regulation of banking. means of influence are applied by the national bank of ukraine in case banks or other entities, which may be subject to inspections conducted by the national bank of ukraine under law no. 2121-ііі, violate banking, currency legislation, legislation in the field of prevention and counteraction of legalization (laundering) of income obtained by criminal means, or financing of terrorism and proliferation of weapons of mass destruction, regulatory legal acts of the national bank of ukraine, its requirements set under art. 66 of law no. 2121-ііі, or in case they conduct any risky operations that pose a threat to the interests of depositors or other bank creditors, in case foreign states or interstate associations or international organizations apply sanctions against banks or holders of a significant share of the bank, and that constitutes a threat to the interests of depositors or other bank creditors and/or stability of the banking system, in proportion to the committed violation or the degree of such threat. the above list of means of influence includes written warning (para. 1, part 1, art. 73 of law no. 2121-ііі) and fine imposition (para. 9, part 1, art. 73 of law no. 2121-ііі). the procedure of application of the means of influence set by article 73 of law is determined by the regulatory acts of the national bank of ukraine. currently, such act is the regulation on the application of means of influence by the national bank of ukraine, approved by resolution of the management board of the national bank of ukraine no. 346 dated august 17, 2012 (registered with the ministry of justice of ukraine on september 17, 2012 under no. 1590/21902) (hereinafter referred to as regulation no. 346). regulation no. 346 determines the procedure for selecting means of influence to be applied to banks, specifies the norm of para. 1, art. 73 of law 2121-ііі. these means shall be adequate to specific violations that have been committed. selection of adequate means of influence shall be performed with due account of the nature of the violations committed by the bank; the reasons that have caused appearance of the violations traced; the overall financial status of the bank; the amount of possible negative consequences for creditors and depositors; information of the deposit guarantee fund on violation of the requirements set by the law of ukraine on the deposit guarantee system by banks, the results of bank inspection conducted by the fund (para. 3.2, section 3, chapter і). the obligatory element of the decision on application of means of influence is quantitative, qualitative assessments and opinions of the national bank of ukraine, including conclusions about availability of signs of the bank’s risky operations posing a threat to the interests of depositors or other bank creditors as well as substantiation of the adequacy of application of a specific means of influence on the basis of established circumstances (facts) (unnumbered paragraph 3, part 3, art. 73 of law no. 2121-ііі). thus, the board of the national bank of ukraine or the committee on supervision and regulation of banking, oversight of payment systems applies measures of influence and conducts the necessary qualification on the severity and danger of the established violation, compares it, according to the criteria, with the adequacy of selected measures impact. table 2 the list of qualitative indicators for the determination of the degree of risk in bank operations № list of qualitative indicators 1 over the reporting quarter the national bank of ukraine has not applied any means of influence to the bank, but for a written warning and a fine for submission of distorted statements under the regulatory legal act on application of means of influence. 2 the national bank of ukraine does not apply any special regime of controlling performance to the bank and no supervisor has been appointed for the bank due to available financial problems in its operations. 3 the bank ensures timely and complete performance of its financial commitments to the national bank of ukraine. 4 the bank performs available action plan and/or capitalization program and/or plan of bringing the value of credit risk norms for transactions with the persons related to the bank into conformity with the requirements of the national bank of ukraine and/or other requirements of the national bank of ukraine concerning elimination of violations of the requirements of banking legislation, compliance with the requirements of the regulatory legal acts of the national bank of ukraine for the sake of avoiding or overcoming unfavourable consequences that may pose a threat to the security of money entrusted to this bank or bring harm to the due process of banking operations. 5 no administrative and economic sanctions have been applied to the bank for violation of the legislative requirements related to the deposit guarantee system. source: annex 4 to regulation on the procedure of estimation, accounting and payment of charges to the deposit guarantee fund, approved by decision of the executive directorate of the deposit guarantee fund no. 1 dated july 02. 2012 (registered with the ministry of justice of ukraine on february 27, 2012 under no. 1273/21585) baltic journal of economic studies 88 vol. 7 no. 2, 2021 5. the impact of the applied measures on the assessment of the degree of risk of banks in ukraine the study of the system of measures of influence shows that a written warning on its content is a requirement for the bank to eliminate violations of banking, currency legislation, legislation on financial monitoring, regulations of the national bank of ukraine and/or take measures to prevent such violations in further activities (para. 1.1, 1.3 of chapter 1 of section ii of regulation no. 346). thus, by its legal consequences written warning contains the minimum scope of actual punitive element among the listed means of influence and does not cause any significant interference into the activity of the financial institution in relation to which the written warning is made. written warning is of a universal nature of application. the openness of the list of grounds for its application is evidence of this (subparagraph ‘з’, para. 1.3, section 1, chapter іі of regulation no. 346 – ‘other violations’). due to this, written warning should be considered the smallest means of influence to be applied for any committed violation on the basis of the opinion of the national bank of ukraine or the committee on supervision and regulation of bank performance, oversight of payment systems on the sufficiency of statement and raising of the requirement to eliminate the violation to counteract its negative consequences for the sake of protecting the interests of depositors or other bank creditors, functioning of the banking system. it is logical that the nature of the written warning as a means of influence, its application in case of violation, indicates a competent official conclusion of the national banking regulator to ensure a low level of risk in the activity. this does not require significant intervention and additional warnings from the state. imposition of fine as a means of influence is applied in cases envisaged by section 9 of chapter іі of regulation no. 346, including for violation of the requirements of the regulatory legal act of the national bank of ukraine that regulates the procedure of filling out and submission of statistical reporting to the national bank, viz.: for non-submission/untimely submission of statistical reporting or submission of unreliable statistical reporting (unnumbered paragraph 5, para. 9.1, section 9, chapter іі of regulation no. 346). also, para. 9.8, section 9, chapter іі of regulation no. 346, determines the differentiation of the penalty, and names its grounds – significant or insignificant errors in statistical reporting as such grounds, which fact testifies to the difference in the approaches to the need of taking into account the adequacy of applied means of influence even within the framework of implementation of one of them. they depend on the consequences of the violation. reporting deficiencies do not significantly affect the actual operations of the financial institution. as a result, exceptions have been established for the submission of distorted reporting for the calculation of the regular fee in the form of a differentiated fee for the application of a measure of influence in the form of a fine. they are a formal violation that can have varying degrees of materiality as the violation itself, and different causes (including error). at the same time, establishment of unreliable data in reports as the result of violations in actual performance will lead to application of other means of influence for the respective violations. in these conditions, in their logical interrelation, non-compliance with the provision of the qualitative indicator concerning absence of means of influence applied to the bank over the reporting quarter testifies to availability of an empirical confirmation of the growing degree of risk in the operations of the fund’s participant. the increase in the size of the recurring charge in the form of a differentiated charge as compared to the participants whose activities meet the above indicators is proportionally determined. the european court of human rights analyses the observance of the guarantees of the convention for the protection of human rights and fundamental freedoms in the activities of public authorities and keeps stressing the special importance of the principle of “good governance”. it presupposes that when it is all about the issue of general interest, in particular, if the case affects such basic human rights as proprietary rights, state authorities must act in a timely and most consistent manner (see judgments in the cases beyeler v. italy [gc], application no. № 33202/96, p. 120; öneryıldız v. turkey [gc], application no. 48939/99, p. 128; magadat.com s.r.l. v. moldova, application no. 21151/04, p. 72, dated april 08, 2008, and moskal v. poland, application no. 10373/05, p. 51, dated september 15, 2009). in particular, state authorities have the duty to introduce internal procedures that will increase transparency and quality of their actions, minimize the risk of error occurrence (see, for example, judgments in the cases lelas v. croatia, application no. 55555/08, p. 74, dated may 20, 2010, and toscuta and others v. romania, application no. 36900/03, p. 37, dated november 25, 2008) and will contribute to legal certainty in civil law relations connected with proprietary interests (see above judgments in cases öneryıldız v. turkey [gc], application no. 48939/99, p. 128; beyeler v. italy [gc], application no. 33202/96, p. 119) (p. 70 of the judgment of the european court of human rights in the case rysovskyi v. ukraine, application no. 29979/04 dated october 20, 2011). being guided by the above principle, the use of the notion ‘…for submission of distorted reporting...’, in relation to which there is no normative counterpart in regulation no. 346, in para. 1 of table 2 ‘the list of qualitative indicators (20 % of the overall score)’ baltic journal of economic studies 89 vol. 7 no. 2, 2021 of annex no. 4 (para. 1, chapter іv) to regulation no. 1 constitutes an independent ground for acknowledging illegitimacy of such definition. the nature of the means of influence as sanctions and such a textual discrepancy between the grounds for their application and the further consequences for the impact on the legal status of a person in the field of property rights should always be interpreted in favour of the person. however, para. 5 of table 2 ‘the list of qualitative indicators (20 % of the overall score)’ of annex no. 4 (para. 1, chapter іv) to regulation no. 1, makes determination of the degree of risk in activity depends on the application of administrative and economic sanctions for the violation of the legislative requirements set for the deposit guarantee system over the reporting period to the bank. according to art. 33 of law no. 4452-vi, if the bank violates the legislation on the deposit guarantee system, the fund shall apply administrative and economic sanctions to the bank in the form of a written warning, or a fine, or a decree on elimination of violations of the legislation on the deposit guarantee system in proportion to the committed violation. in 2019, the fund imposed sanctions on banks for the following violations: 1) non-submission of the data to the fund by the bank in case submission of such data was required by the law and/or regulatory legal acts; 2) untimely submission of the data to the fund by the bank in case submission of such data was required by the law and/or regulatory legal acts of the fund; 3) submission of unreliable data to the fund by the bank in case submission of such data was required by the law and/or regulatory legal acts of the fund; 4) violation of the procedure of depositor data base maintenance by the bank; 5) non-performance of decisions and/ or regulatory legal acts of the fund or decrees on the elimination of violations of the legislative requirements on guaranteeing of deposits of natural persons by the bank; 6) untimely performance of decisions and/ or regulatory legal acts of the fund or decrees on the elimination of violations of the legislative requirements on guaranteeing of deposits of natural persons by the bank. respectively, the official authorized to hear cases, as of january 01, 2020, passed 128 decisions of which: 48 were warnings about taking steps to prevent violation of legislation on the deposit guarantee system in further activity; 75 were decrees about elimination of violations of the legislation on the deposit guarantee system; 5 were resolutions on the closure of the case on legal violations in the field of guaranteeing of deposits of natural persons. unlike para. 1 of table 2 ‘the list of qualitative indicators (20 % of the overall score)’ of annex no. 4 (para. 1, chapter іv) to regulation no. 1, para. 5 does not contain any warnings concerning any exceptions for estimating the recurring charge in the form of differential charge depending on the type of sanction or the violation for which it is applied. taking into account the above conclusions concerning legal significance of warning within sanctions for violations in the field of banking as well as for ensuring actual differentiation depending on the stated degree of risk in the operations of a controlled banking institution, we consider that such single-option wording testifies to the fiscal goal of controlled forms of the fund’s operations. thus, under the plan of holding inspections of the participants of the deposit guarantee fund for 2019, approved by decision of the executive directorate of the fund no. 2943 dated november 01, 2018, in 2019 the fund’s staff performed all in all 68 inspections of banks. according to the results of the inspection, no violations were found in only 10 banks (15%). at that time, violations of different severity and for various reasons (including technical) were allowed in 85% of inspected institutions (58 banks). however, in the current conditions of legal regulation there is no opportunity to differentiate them as necessary by qualitative indicators of the degree of risk in their operations. 6. conclusion taking into account legal importance of written warning of the national bank of ukraine as a means of influence, judging by the systemic, logical and semantic interpretation of the prescription of para. 1 of table 2 ‘the list of qualitative indicators (20 % of the overall score)’ of annex no. 4 (para. 1, chapter іv) to the regulation on the procedure of estimation, accounting and payment of charges to the deposit guarantee fund, approved by decision of the executive directorate of the deposit guarantee fund no. 1 dated july 02, 2012 (registered with the ministry of justice of ukraine on february 27, 2012 under no. 1273/21585) the notion ‘…for submission of distorted reporting...’ is not related to specification of cases of exception application as far as means of influence in the form of written warning are concerned, and is related to fine imposition only. exceptions in the form of written warning and find for submission of distorted reporting, applied by the national bank of ukraine, is caused by low level of severity of the respective violations of law and objective conditions under which they are committed and under which respective means of influence can be applied, as well as establishment in the law enforcement decision of the absence or low degree of threat to the protection of the interests of depositors or other bank creditors or the functioning of the banking system. this allows you to select these means of influence as adequate. this does not indicate to any deviation from qualitative indicators and an increase in the degree of risk in the bank's activities. baltic journal of economic studies 90 vol. 7 no. 2, 2021 at the same time, the provision of para. 5 of table 2 “list of quality indicators (20% of the total score)” of annex no.4 (para. 1 of section iv) to the regulation on the procedure for calculating, accruing and paying fees to the deposit guarantee fund approved by the executive board dgf dated july 2, 2012 № 1 (registered in the ministry of justice of ukraine on february 27, 2012 under № 1273/21585) on the legal significance of administrative and economic sanctions for violation of the legislation on the deposit guarantee system for individuals is unalterable. it does not take into account the difference in the legal nature of such sanctions, the grounds (violations) of their application, which complicates the differentiation of the participation of banks in the fund depending on the degree of risk of their activities. references: buchko, i. 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(2017). administrative and legal status of the deposit guarantee fund. ternopil. regulation on the procedure of estimation, accounting and payment of charges to the deposit guarantee fund, approved by decision of the executive directorate of the deposit guarantee fund no. 1 dated july 02, 2012 (registered with the ministry of justice of ukraine on february 27, 2012 under no. 1273/21585). available at: https://zakon.rada.gov.ua/laws/show/z1273-12#text (in ukrainian) regulation on the application of means of influence by the national bank of ukraine, approved by resolution of the management board of the national bank of ukraine no. 346 dated august 17, 2012 (registered with the ministry of justice of ukraine on september 17, 2012 under no. 1590/21902). available at: https://zakon.rada.gov.ua/laws/show/z1590-12#text (in ukrainian) case of rysovskyi v. ukraine (application no. 29979/04) 20/10/2011. european court of human rights. available at: http://hudoc.echr.coe.int/fre?i=001-107088 kovalenko, a. (2016). public and legal regulation of banking activity in ukraine in terms of european integration. kyiv. baltic journal of economic studies 199 vol. 2, no. 2, 2016 influence of different factors on level of institutional support to effective labour market functioning iryna yurchyk1 vinnitsa institute of trade and economics of kyiv national university of trade and economics, ukraine abstract. the aim of the study. the effective functioning of labour market influenced by active integration processes is largely depending on such an important component as the institutional support. therefore, to ensure change of priorities in development of the national labour market in terms of its compliance with the objectives of the national economy, it is necessary, in the first place, to identify and analyze the impact of a large number of factors putting pressure on the institutional support. methodology. the research is based on analysis, comparing views of different scholars on transformational changes in the national labour market, factors influencing the institutional capacity and efficient functioning of the labour market. results. in the progress of the study, we have found that institutional support serving the labour market of ukraine is influenced by more than one factor. first of all, the state of institutional support to the labour market is influenced by both internal (endogenous, controlled) and external (exogenous, uncontrolled) factors. external factors of institutional support to the national labour market are characterized by external competitive environment, in which our government has only limited ability to influence them. the internal factors include those that could be controlled at national or regional level. practical implications. synergistic effect from combination of influence of external and internal factors on institutional support determines the effectiveness or ineffectiveness of functioning and regulation of the national labour market. under a skilful management of factors that affect the level of institutional support, there will be a transformation of inefficient labour market institutions into effective ones and vice versa. thus, institutional support factors interacting with each other, affect the efficiency of the labour market functioning. the dominant system in innovative model of the labour market development should be the one of innovative institutional support aimed at attracting wider investment; creation of knowledge and their transfer, use, and consumption; enhancement and preservation of intellectual capital; dissemination and commercialization of innovations; information; lower uncertainty in the behaviour of institutional actors; development of innovative infrastructure of the labour market; development of knowledge-based industries; and creation of new highly skilled jobs. key words: the labour market, innovations, institutional support, the efficiency of the labour market. jel classification: j4, o3, p30, j48 corresponding author: 1 department of philosophy and economic theory, vinnitsa institute of trade and economics of kyiv national university of trade and economics. e-mail: irina_yurchik@ukr.net 1. introduction the effective functioning of labour market in ukraine influenced by active integration processes is a challenge, which could be successively settled depending largely on such an important component as the institutional support. therefore, to ensure change of priorities in development of the national labour market in terms of its compliance with the objectives of the national economy, it is necessary, in the first place, to identify and analyze the impact of a large number of factors putting pressure on the institutional support. in the progress of the study, we have found that institutional support serving the labour market of ukraine is influenced by more than one factor. first of all, the state of institutional support to the labour market is influenced by both internal (endogenous, controlled) and external (exogenous, uncontrolled) factors. external factors of institutional support to the national labour market are characterized by external competitive environment, in which our government has only limited ability to influence them. the internal factors include those that could be controlled at national or regional level. 2. external factors of institutional support to the labour market significant external factors that influence the level of institutional support to national labour market consist of: globalization and integration of ukrainian economy in the baltic journal of economic studies 200 vol. 2, no. 2, 2016 global labour markets of capital, goods and services; the cyclical nature of development of the global and ukrainian economy, which explains the regular change in periods of recession and recovery, inevitability of crises, recession, and growing cyclical unemployment (yemelianeko, lysyk, 2014). y. m. marshavin stresses out that economic globalization influences labour market of our country in two ways: through strengthening the migration flows and structuring the labour demand in ukraine, driven by transnational and international companies; we experience a gradual transformation of the domestic labour market in parallel with integration processes; the economic globalization indirectly influences the labour market of ukraine through various channels and factors, which primarily include international trade and direct foreign investments, changes of prices on international markets of goods and services, which is extremely important for ukrainian export and import (especially for energy, metals, and agricultural products); external loans made by both business entities and the ukrainian state; fluctuations of exchange rates, etc. therefore, globalization of the labour market goes in parallel with globalization of finance, goods and capital markets (marshavin, 2011). globalization and internationalization put a controversial influence on the efficiency of the national labour market and its institutional support. first of all, these processes somewhat weaken a tension on regional labour markets by increasing the scope of application of workforce; by accelerating the outflow of excessive "labour force" abroad; by helping to create higher standards of social and labour relations between our people who come across the best european experience. from another perspective, the internationalization and globalization processes provoke demographic distortions; the emergence of child abandonment, loss of intellectual, educational potential and talented people; expansion of foreign cultures and values; ignoring important social (protection of working people) and cultural needs of our population, etc. according to the results of a study by u. sadova (sadova, 2009), such influences by risk groups are: substantial population losses accompanied by gradual increase of immigration rate mostly from asian countries, inefficient investment in the human capital of individuals who become emigrants (demographic deformation and social degradation risks); loss of intellectual and educational potential, weakening of competitive environment on regional labour markets (risk of economic disintegration and informational disorientation); uneven distribution of the economically active population. according to many scientists, "it is important to apply the experience of european countries that would allow to gradually eradicate multiple manifestations of antisocial labour behaviour in economically active population of ukraine, which directly determines the efficiency of the national labour market" (hrynkevych, 2014). in this regard, even current level of internationalization is well calling for greater international cooperation on issues, such as rights of migrant workers, labour standards, working conditions, safety and health, wages remittance, freedom of association, conflict settlement, prohibition of child labour, and elimination of forced labour. therefore, in such circumstances, the integration process may become a factor of the labour market internationalization through combined policy aimed at increasing the labour force quality and its ability to adapt to changes in demand and technology (zinoviev, vikhort, 2009). 3. internal factors of institutional support to the labour market the transformation/transitional processes in ukrainian economy, accompanied by a change of ownership, the emergence of new forms of business and significant restructuring of the social structure of the society, have definitely influenced the process of transformation of the institutional environment of interaction between employees and employers. it has taken place on the background of falling living standards as a result of the crisis and recession in 90-s, reduced labour demand, high inflation, hidden unemployment, unresolved problems of low productivity and other degradation, resulted in formation of flawed labour market infrastructure, controlled by institutions, acting contradictory in many cases. many scientists believe that the main internal factors are: a specific response of the labour market to the global crisis (significant delays in wages payment, violation of labour law, deterioration of hiring terms, the manifestation of various forms of opportunism, which remains unchallenged for employers); modernization of ukrainian economy, which creates, on the one hand, new opportunities for restructuring and growth of effective employment, and, on the other hand, the risks of structural unemployment and social instability; uncontrolled migration, which puts additional pressure on the labour market, thus promoting its shadow segment; higher risks of unemployment, associated with threats to reduce production of uncompetitive goods in some sectors of the economy, and disproportionate employment in the regions (yemelianeko, lysyk, 2014). terebkov identifies the following factors influencing the demand for labour: a) a position and activity of trade unions; b) state policy concerning low-profit and unprofitable companies; c) the volume of public, private and foreign investment; d) the magnitude of the shadow economy; e) the availability of natural resources for the economy, etc. teron considers that the main factors of differentiation process in the spatial development on the labour market in local and global territorial taxonomic units are: a country 's transition from neo-keynesian model to the liberal one; active influence of endogenous factors on the business structure of the region; increase in volume and dynamics of capital flow; reduction of the economic cycle length; globalization processes, growing competition between baltic journal of economic studies 201 vol. 2, no. 2, 2016 companies and multinational corporations at all levels; development of post-industrial society characteristics and rapid development of localized innovation-and-investment cradles (clusters, industrial parks, technopolises, innotech units, etc) (teron, 2009). it is believed that the labour market is being formed and operates within the depths of socio-economic system in a complex interaction with all parts and elements of a structure influenced by multiple factors, which forms up four complexes: 1) production; 2) population; 3) social issues; 4) legislation and management of the economy. the whole system of these factors is spatially determined and real socio-economic effect is achieved at the regional and intraproductive level. in this case, the market is supposed to perform important, in many ways crucial national economic functions, i.e. to act as active factor of the national economy. to harmonize the innovation, knowledge-oriented labour market in terms of its compliance with the objectives of national economic development, it is necessary to take into account a great number of factors that influence, both effectively and ineffectively, the level of institutional support. one of the types of factors that affect the institutional support of the labour market are demographic ones, which by turns lower and increase the efficiency of its operation and development. for example, the statistical data show that the workforce of the country has quantitatively reduced during recent years. in addition, scientists believe the demographic distortions take place, manifested in changing the quality characteristics of the population, increasing the number of disabled individuals (pensioners, disabled persons) and unemployed, in growing transfer payments from the budget to support socially disadvantaged groups of people. increased mobility manifested in changing residence and jobs has been also observed (petrenko, 2013). libanova identifies factors that restrict or impair labour mobility, namely territorial (lack of sufficient information), institutional (undeveloped housing market, factual conservation of mandatory residence registration), and socio-demographic factors that are very common (age, marital status, care of minor children or children of school age) (tilikina, 2008). 4. factors of innovative transformations there is unlimited quantity of approaches to determining the factors that form up effective and ineffective institutional support to the national labour market. for example, the level of institutional support to the labour market is influenced by globalization trends which determine computerization, science and education as factors of innovative transformation. in this regard, l. m. nekhorosheva indicates "the emerging era of the three "i"  – "inventions (new knowledge)  – innovations  – investments" (nekhorosheva, 2005). some politicians, choosing a strategy of country development, promote a system of four "i" principles, which include institutions, infrastructure, innovations and investments (rud, 2010). d. north believes that innovation is the most important factor that may reduce transitional costs so that make incentives for using new forms of production and exchange emerge. the innovation factor can influence the institutional capacity of the labour market, promoting the efficient use of labour and increasing its competitiveness and business innovation activity. the most significant transformations done under influence of the factor of innovative transition and scientific-technological progress are considered: formation of informational needs; integration processes in regional economics and business models through creation of innovative infrastructure facilities; modification of business models and organizational/managerial structures and types of companies; promotion of outsourcing model for small innovative businesses in regions of the state; internationalization of business and growth of virtuallytraditional business models (rud, 2010). innovative factors of economic growth in industrialized countries precondition the excessive demand of competitive market for skilled labour over market supply. this objective reason defines transformation of competitive-commercial mechanisms in competitive-motivational mechanisms of post-industrial labour markets. being influenced by innovative factors, the competitive-commercial mechanisms of labour markets in industrialized countries no longer reflect the competitive relationship between, on the one hand, the investment strength of businessmen, associated primarily with creation of modern jobs with high demand for innovative skills and knowledge, and, on the other hand, with competitive potential of the market for meeting such requirements through supply of qualified open-minded employees with adequate professional and qualification skills and industrial experience. in 2012-2014, a share of companies engaged in innovative activities in recommended types of economic activities was 14.6%, including the companies involved in technological innovations – 9.5% (5.2% – products, 7.2% – processes), non-technical  – 8.6% (4.7%  – organizational, 6.4%  – marketing). unfortunately, 85.4% of companies in ukraine were inactive in innovations. therefore, this fact leads us to the conclusion, that the national economy cannot be recognized an innovation-oriented one yet, given the vast majority of regional businesses operate extensively, or develop intensively in terms of reproduction and using the labour force. it should be noted that there is a direct relationship between the size of a company and its innovative status, because to implement innovations, the company must have a certain number of personnel involved in carrying out research and development (r&d) activities that lead to actualization of innovations. accordingly, the highest share of both technologically innovative and nontechnologically-innovative companies was characteristic for large companies (32.9% and 20.7%, respectively). in 2014, the companies allocated almost 80% of total baltic journal of economic studies 202 vol. 2, no. 2, 2016 innovation expenditures for purchase of machinery, equipment and software, and only about 9% for in-house r&d, 4% – for purchase of other external knowledge and acquisition of outsourced r&d. in ukraine, during 20122014, 18.1% of companies which presented technological innovations collaborated with other companies and organizations, including universities, research institutes and others. in 2012-2014, the geographic distribution of innovative partner companies was as follows: 16%  – ukraine, 5.7%  – europe, 1.3%  – china and india, and 1.2%  – the usa. other countries represented 3% of partner companies in terms of innovation cooperation. in addition to introduction of technological innovations, the companies may be active in organizational and/or marketing innovations that provide support to innovations in the sphere of products and processes, enhance corporate quality and efficiency and improve the exchange of information and use of new knowledge and technologies, and can influence the productivity of firms, promote entering new markets or market segments and developing new ways of products distribution. the level of technical support and technological development of industrial and service spheres serves an economic basis for formation of the competitive requirements to labour force, and, therefore, largely defines the nature of competitive relationship in the labour market. given the importance of such investment and innovation components for strengthening the technological basis of production process, as exogenous factors that influence the labour market, it should be necessary to consider indicators of investment and innovative activity at the macro level. ultimately, the mere growth of tech-capacity of the technologies applied, the intensification of capital provision and implementation of innovations along with other factors, have to create the grounds for sustainable economic growth and improvement of overall competitive environment in the economy. influence of technological factors contribute to strengthening the dynamism in the labour processes, which leads to transition in work functions and professions; to extinction of old and emergence of a growing number of new jobs that require workers to regularly update their professional skills; to further complication of labour functions, creation of innovative nature of work, which increases the requirements to capacities of professional workforce, its ability to attain new knowledge, its professional mobility and ability to adapt to the new conditions of economic activity. in these conditions, the education plays a key role in development of human resources. the most important task of vocational education is to ensure high skills of workforce, characterized by settled competencies which are an integration of theoretical knowledge, practical skills and methods of their application to address specific production tasks. the quality of human resources directly depends on the development of a system of vocational schools: their material and technical outfit; completeness of teaching staff; the level and standards of education in a country; the relationship between education, science and industry; scope of field practical training; the level of university science and involvement of students in it. traditional institutional support to the labour market related to reduction of labour force effectiveness and low competitiveness is exposed to influence of a number of factors, namely: techno-globalism, one of whose objectives is to ensure ability of the workforce to participate in a dynamic economy, based on the use of knowledge and innovations. a negative factor is attributed to the low level of innovation culture in both employees and employers; inadequate access to information, which highlights innovative changes; the outflow of capital and "brains" from ukraine; and low activity of foreign and domestic investors. in modern conditions that presume mandatory optimization of public policy in the labour sphere and its development under the laws of a socially-oriented market economy, the governmental institution responsible for this sphere are strongly required to deeply understand not only economic patterns and trends of social development, but also social and psychological factors that determine the process of realization of labour potential by individuals, other processes of multiple labour activities that precondition social status, wealth, and well-being of a human being. 5. quantitative and qualitative factors of influence it should be noted that all factors influencing the level of institutional support to the labour market are advisable to distinguish between quantitative and qualitative ones (babych, 2012). according to babych, s. m., the efficiency of the labour market in terms of quantity assumes full employment, which means involvement of the maximum number of manpower; in turn, in terms of the quality, it is economically reasonable to use human resources and to socially optimize coordinated interests of workers, employers and the state, thus providing the effective employment. the focus on the needs and interests of the society, industry, and population is likely a core condition of transition from traditional employment to economically and socially effective one. the availability of highly skilled workers, considered a "core workforce", with companies and organizations significantly influences the efficiency of their work. for example, zabavina, k. y. provides classification of quantitative and qualitative characteristics of the workforce. she believes that the main quantitative characteristics are: a number of employees with higher and vocational education with significant work experience; a number of employees with the highest qualification (candidates and doctors); a structure of employees in terms of professional training; gender/age structure of employees; an average number of years of education and vocational training; baltic journal of economic studies 203 vol. 2, no. 2, 2016 professional experience; and duration of employment. the qualitative characteristics of workforce should be attributed to three main components: the physiological one (physical and mental health, temper); intellectual and educational/training one (intelligence, knowledge, high ability to learning, level of professional education, qualifications, formed expertise, experience, reflected in training, innovative, creative thinking, the desire for professional self-improvement, entrepreneurial skills, the ability to use high-tech, intellectual products, culture and quality of work, its intellectual component and creative content); and socialhumanistic one (general culture, morality, spirituality, activity, responsibility, honesty, courtesy, kindness, social maturity, social values and orientations, readiness for cooperation, collaboration, motivational orientations, etc). all factors influencing institutional support to the labour market are diverse in the economic nature; unequal in time and place of manifestation; vector and action strength, etc. in ukraine, labour relations in a context of employment policy feature some specifics, defined by a number of factors: market labour relations are in the making; a direct consequence of production shrinkage becomes not growing unemployment, as it happens in a developed labour market which operates effectively, but the growth of inner/in-house unemployment. it should be noted that the strength of influence of individual factors varies depending on the level of socioeconomic development of a country, including individual regions, and transitions in the economy. of particular importance, these factors become during economic crisis, which should be certainly taken into account in development of a mechanism of state regulation of the labour market. as for domestic labour market, its competitive environment is characterized by uncertainty, the presence of monopolistic competition, and an ability of employers to influence wages and rates. at the same time, employees are limited in their freedom of choice; they lose a link between the quality of labour, the results of their job and wages, which is strong demotivational factor. important is the fact, that under a skilful management of factors that affect the level of institutional support, there will be a transformation of inefficient labour market institutions into effective ones and vice versa. thus, institutional support factors interacting with each other, affect the efficiency of the labour market functioning. for example, domestic experts, ranging factors of labour mobility against a probability of regulating their influence, divide them into three groups: the controlled factors (regulating factors); uncontrolled factors (factorsconditions); and factors that are not directly controlled, but indirectly regulated. the regulating factors are mainly of socio-economic nature, there are directly planned, regulated and modified by the state. these include differences in wages, introduction or cancellation of privileges, and state policy in the labour market. among the regulating factors distinguish legal (laws, regulations, etc.), economic (budgetary and not budgetary funds, financial expenses, compensations, etc), institutional (organizations involved in regulation, maintenance and intensification of the processes), and advocacy ones (statistical data, information in media, methodical and normative literature). 6. conclusion synergistic effect from combination of influence of external and internal factors on institutional support determines the effectiveness or ineffectiveness of functioning and regulation of the national labour market. therefore, institutional changes in the employment sphere present significant rearrangement of factors that determine the effectiveness and innovativeness of operation and development of the labour market. this, in turn, confirms that the dominant system in innovative model of the labour market development should be the one of innovative institutional support aimed at attracting wider investment; 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(2009). institutional framework for regulation of the intellectual market in ukraine. derzhava ta rehiony, 3: 63-67. ирина юрчик влияние факторов на уровень институционального обеспечения эффективного функционирования рынка труда аннотация. цель исследования. в условиях интеграционных процессов эффективное функционирование рынка труда во многом зависит от такого важного компонента как институциональное обеспечение. поэтому, для обеспечения изменения приоритетов, которые будут развивать национальный рынок труда в аспекте его соответствия задачам развития национальной экономики, необходимо выявление и анализ влияния большого количества факторов, оказывающих давление на его институциональное обеспечение. методология. исследование базируется на анализе, сравнении взглядов разных ученых по трансформационных изменений национального рынка труда. а также, факторов, влияющих на институциональное обеспечение и эффективное функционирование рынка рабочей силы. результаты. в процессе исследования было выявлено, что на институциональное обеспечение, которое обслуживает рынок труда в украине, влияет не один фактор. прежде всего, на состояние институционального обеспечения рынка труда влияют как внутренние факторы, так и внешние. внешние факторы институционального обеспечения рынка труда характеризует ситуацию внешнего конкурентной среды, при которой правительство имеет возможность частично влиять на них. к внутренним факторам следует отнести такие, которыми можно на государственном или региональном уровне управлять. практическое значение. синергетический эффект от сочетания влияния внешних и внутренних факторов на институциональное обеспечение определяет эффективность или неэффективность функционирования и регулирования национального рынка труда. поэтому в условиях умелого государственного управления факторами, которые влияют на уровень институционального обеспечения, имеет место трансформация неэффективных институтов рынка труда в эффективные, и наоборот. таким образом, факторы институционального обеспечения, взаимодействуя между собой, влияют на эффективность функционирования и развития рынка труда. доминирующей в инновационной модели развития рынка труда должна быть система инновационного институционального обеспечения, которая будет направлена на широкое привлечение инвестиций; создание знаний, их передачи, использования, потребления; приумножения и сохранения интеллектуального капитала; распространения и коммерциализация инноваций; информация; снижение неопределенности в поведении институциональных субъектов; развитие инновационной инфраструктуры рынка труда; развитие наукоемких отраслей; создание высококвалифицированных рабочих мест. baltic journal of economic studies 42 vol. 2, no. 3, 2016 corresponding author: 1 department of information security and information society development, national institute for strategic studies. e-mail: tolyan-1993@ukr.net information threats in a globalized world: economics, politics, society (experience of ukraine) anatoliy holovka1 national institute for strategic studies, ukraine abstract. the scientific article deals with both integral vision of the contemporary informative risks in the globalized world and their classification. the essence of the informative security is exposed, which is one of main factors of steady development of the modern informative society. in consideration of the foreign practice, the experience of ukraine is also analyzed in counteraction to the contemporary informative threats. the effective policy of safety and counteraction to the informative threats is one of the basic constituents of the state national safety system and at the same time testifies to the correct character of connections between the public organs and the society. under the conditions of unrestrained progress of information technologies and general informatization in all sectors of people’s life (politics, economy, defense, energy etc.), providing of control and defense of informative space of the country becomes much more difficult task. modern ukrainian realities certify convincingly, that ukraine is in an extremely difficult political situation that influences all spheres of ukrainians’ life. the key reason of such situation is a military-informative aggression against ukraine from russia, which is the fact of waging a «hybrid war». as it is known, this type of war combines the application of both classic soldiery instruments (military technique, firearms, regular troops) and methods of informative influence (cyber-attack, informative diversions, aggressive propaganda, impact on public opinion). this factor encourages such research. the object of the study is the phenomenon of information risks in the modern world. subject of research – is the impact of modern information threats to the state and society, namely the economic, political and social spheres. for a holistic analysis of the subject of research was used appropriate methodology – systematic approach, method of comparative analysis, general scientific methods (analysis, synthesis, generalization, induction, deduction etc.). the article is aimed to illuminate the essence and the basic types of informative threats. the result was formulated comprehensive conclusions: first, explained the importance of understanding of informative threats, and presents their essence and classification. in addition, explained that while researching this question it is important to analyze the whole category of informative security, which is a component of the state national security. the experience of ukraine that got into the conditions of external military-informative aggression can be an example in this context. in the study of ukrainian realities, it is determined that modern information challenges affecting important areas of social reality. key words: information threats, cyber security, information security, information, society, state. jel classification: o13, z18, y90 1. introduction the problem of counteraction to the informative threats acquired the special value in conditions of modern life, when the use of information technologies and their dynamic development is a peculiar attribute of the modern world. besides, similar risks affect economic and financial relations, state-administrative personnel, social and political sphere, culture, social sector etc. because of this fact, the effective safety system construction in this sphere is on the agenda of many scientific, public and business organizations, and state structures as well. for this reason, the research of this range of problems is actual. the article is aimed at illumination of the essence and the basic types of informative threats. the following tasks appear in accordance with the aim: 1) illuminations of the essence of informative threats and their classification; 2) the definition of the category «informative security»; 3) the analysis of the ukrainian experience in counteraction to the contemporary informative threats. the use of such methods and approaches became the methodological basis of this research: • systematic approach, which was used for systematization of the basic contemporary informative threats as well as a complex analysis of the informative security as an integral great number of elements and also connections between them; • method of comparative analysis, which was applied while studying the ukrainian experience of counteraction baltic journal of economic studies 43 vol. 2, no. 3, 2016 to the informative threats in comparing to the foreign practice; • general scientific methods such as analysis, synthesis, generalization, induction, deduction and others. 2. information and information threats in the modern world, information technologies became the integral part of our life. they are presented in all segments: economy, politics, as well as in inner, legal and other cultural spheres. actually, such instruments essentially improve, optimize and accelerate the man’s work / the work of enterprises / of public institutions; and this fact influences positively the common development of the human civilization. thus, the benefit and necessity of their use is undoubted today. information in such conditions becomes a major strategic resource, a basic productive force, which provides the further development of city, region or country. that is why, like any other traditionally existent resources, information also needs a special protection. however, it is an important fact, that the dependence of the modern society on information technologies makes it vulnerable to contemporary challenges and threats in the informative sphere. for this reason, while using the term «information» we also use such a category as «informative threats» that should be understood as the totality of all external and internal factors, which render a ruinous influence on the informative infrastructure of the state or its separate constituent, and also threaten the safety of a separately taken person or a social group (baber, 2002). it is worth mentioning, that the common and generally accepted classification of informative threats is absent in scientific circles today. in addition, this question is regulated in a different way in different states even at the legal level. therefore, it is difficult to find the definite answer to the question «which threats should be referred to the informative ones»? a subjective look on the basic informative threats systematization, which exists in the modern globalized world, will be mentioned below. thus, to the modern informative threats we can refer: • cyberterrorism and cybercrime; • distribution of unconstitutional and anti-state slogans and ideas in different information sources; • aggressive propaganda (both on the part of external actors and on the part of the state); • spreading of information directed at the exasperation of interracial / interethnic / interconfessional / interclass / interregional animosity; • spreading in mass media and internet of the violence cult, anti-patriotism, asocial behaviour; • ruinous effect on the public opinion; • limited access to public information by the population; • low level (absence) of the personal data protection; • low protection of the critical informative infrastructure; • presence of other external or internal risks, which threaten the safety of both state and social informative space. in the view of the specific threat information can provide four main aspects of action, namely: values, technological, social, political and legal. value aspect (impact on public opinion) technological aspect (impact on cybersecurity) socio-political aspect (censorship and restriction of access to public information) legal aspect (imperfect / ineffectiveness of legal framework) fig. 1. four major aspects of information threats obvious is the fact that such risks spread their impact on almost all social institutes, establishments and public organs of the day. the term and power of action, as well as the inflicted losses and damages (not only material) are different. wide spectrum and the variety of informative threats determine the search for effective methods and mechanisms, which protect from the threats. 3. concept of information security while analyzing a concept of «informative threats» we cannot avoid the concept of the «informative security». in modern science and legal systems as well as in the previous case there is a problem with its exact definition. in a wide sense under informative security (it is important not to mix it up with the «safety of information») it is understood the direct condition of protecting interests of a person, a society and a state in the informative sphere. in recent years there has been a marked increase in the importance given to matters of national security, specifically «anti-terrorist» measures by state actors. there has been a worrying trend for governments around the world to justify many contentious decisions as a response to the threat of terrorism. this terrorism emphasis has given rise to a variety of legislative measures described by their authors as a vital component in increasing the capacity of the relevant law enforcement agencies to fight the so-called «war on terror». as information and communication is just as important to perceived enemies of the state as it is to the state itself, ict legislation is one of the targets of emphasis by governments (carey-smith, may 2007). in the narrow understanding it is the condition of the protection of data handling and retention systems, where the confidentiality, the availability and the integrity of information, as well as general protection of the informative space of the country and its components (in particular of public opinion), is provided from present risks. in the conditions of an irresistible development of information technologies, we have an opportunity to observe, how baltic journal of economic studies 44 vol. 2, no. 3, 2016 the political influence of the state becomes scaled down and the role of the centers, which manage the informative streams, becomes scaled up. in addition, in the context of informative security it is reasonable to remember the fact, that mass media, news agencies, television channels influence the forming of the public mind. all above-listed elements strengthened their reputation as «the fourth power». as practice (including ukrainian) shows, it is possible to carry out a determinant influence on all spheres of the social vital activity, in particular on the political sphere, by means of such instruments. the basic subjects of informative security providing are both state structures (that carry out the activity by means of the power, determined by the current legislation) and public institutes (as their strategic allies and the participants of the national non-state security system). an important component of information security is cyber security. societies in today’s world are becoming more and more dependent on open networks such as internet where commercial activities, business transactions and government services are realized. this has led to the fast development of new cyber threats and information security issues, which are utilized by cyber criminals. mistrust for telecommunications and computer network technologies have tremendous socio-economic impacts on global enterprises as well as individuals. moreover, the occurrence of international frauds often requires the investigation of facts that occur across international borders. they are also often subject to different jurisdictions and legal systems. the increased complexity of the communication and networking infrastructure is making preventing of cyber-crimes difficult therefore new approaches for cybersecurity are desired (szczypiorski, mazurczyk, janicki, 2016). 4. experience of ukraine the beginning of the xxi century was marked by the emergence of new social and political realities of mankind. the processes of globalisation, introduction of new information technologies and formation of an information society have imparted additional importance to information security, which is an element of national security. it is the development of the information sector that will in the near future determine the political and economic role of separate states on the international stage; the ranking of countries in the information sector; and the processes of democratisation and overcoming the aftermath of totalitarianism in ukraine. this is conditioned by the following factors. only timely and reliable information enables state power bodies to make balanced and well-grounded decisions; information support for domestic and foreign policies creates preconditions for their public support, and helps to form an objective image of ukraine in the world. at the same time, analysis of the present situation and trends in the development of the national information space shows that the level of ukraine's information security, at least by some indicators, is reaching a critical limit (tropical problems of ukraine’s information security, 2001). this is primarily due to the fact that ukraine has become an object of the military-informative pressure, which is a component part of the hybrid war strategy on the part of the russian federation today. as both foreign and national experience show, the state resources are usually not enough for the effective resistance to the informative blows. for this reason, the ukrainian government and the power structures use the potential of the civil society institutes in the solution of such problems. their help often plays a significant role in the resistance to the informative challenges, providing the effective functioning of the safety system in general. it is although impossible to ignore numerous problems that appear while attracting the civil society to the realization of the policy of the ukrainian informative space security. temporary restriction on broadcasting a number of foreign tv channels cannot be considered as a sufficient measure to counter information aggression. to obtain the desired result it is necessary to create a fundamentally new system of defense of ukraine. decision of former acting president alexander turchinov about enforcing decisions of the national security and defense on april 28, on measures to counter the information aggression of foreign states was important, but only a first step aimed at strengthening defense of the information space. context media is convinced that the state subjects non-state subjects security structures executive structure local governments non-governmental organization mass media non-governmental «think tanks» individual citizens and social groups fig. 2. main subjects of information security baltic journal of economic studies 45 vol. 2, no. 3, 2016 creation of a truly efficient and effective defense is possible only in the interaction of public authorities, specialized organizations working in the information market, media, media experts, non-governmental organizations. using years of experience and advanced leadership positions in media monitoring and media analysis, context media develops and proposes effective measures aimed at strengthening the country 's information security, combining them into a set of services called «information protection of ukraine». the study is conducted in the information field of the individual directions, including government agencies work and their managers, regional policy, protests, political parties and organizations, etc. there are also a variety of forms of information – from the operational notices to the monthly analytical reports containing detailed information in different directions. for example, experts of context media developed a model for search and operational analysis of information for the state institutes. the proposed system requires a change in the process of collecting and analyzing data to determine timely information threats, as well as aspects affecting the reputation of ukraine. however, implementation of the system allows maintenance of high standards of freedom of speech in the media (information security of ukraine, 2013). both in foreign countries and in ukraine public associations, non-governmental organizations and trade unions play an important role in the realization of aims of the national security in the sphere of information. their collaboration with the state is realized through the public councils by the state structures, by concluding treaties, even at the international level, by realization of joint projects. in this sphere, the participation of nongovernmental analytical centers and mass media is also important. the solution of such problems as informative security and building of civil society in ukraine is in direct connection with the increased role of the intellectual property, the development of the national informativelycommunication system as the complex of institutions, which provide the realization of the effective public informative policy, of the national informative space security, its own ideology and culture. the ukrainian policy of the informative security providing is an important component of the policy of national security. it must be based on systematic preventive activity of the state structures in reference to the informative security granting to a person, social groups, the society and the state. the analysis testifies that the real threats to informative security of ukraine exist at the personal, social and state level. it is also necessary to mark that ukrainian realities confirm the thesis that informative challenges touch all the vital functions of the society. while analyzing the contemporary practice, we can make sure of this fact once again. the main spheres of the informative risks activity are economic, political and social. in the economic sphere, it shows up in the presence of informative diversions and blows, which are directed at doing harm to the informative infrastructure by separate industrial objects, private and state enterprises, large corporations etc. such criminal acts are never directed to the whole system of the national economy, but have separate subjects of managing or financial institutes as their final aim. for example, numerous attempts to attack the internet resources of the ukrainian stock exchange. besides, it is worth mentioning that the recent cyberattack against the corporation «prykarpattyaoblenergo» badly influenced the work of the ivano-frankivsk power supply system and the power grids of other regions as well. regular fake reports and propaganda about mythical «death of the ukrainian economy», «death of hryvnia» and default that must happen very soon – are also informative threats, which make a problem not only for informative, but also for economic security of ukraine, as they influence the citizens and investors’ moods. the informative factor is one of the most important in the process of forming of the national exchange rate. in the political sphere, the force of informative risks is quicker, as they threaten to the principles of the ukrainian national security. the informative blows from the external enemies are often directed to the undermining of the political situation in a certain region by means of confrontation of the center and the periphery. for example, the political agitation of pro-russian forces in donbas for the nearest beginning of the war against kyiv, using of propaganda instruments in odesa, kharkiv and dnepropetrovsk regions, informative diversions in zakarpattia are related to the «ruthenian question». the social sphere is also a surrounding of ruinous action of informative threats. the main danger is in the use of communicatory and manipulative technologies for the exasperation of interconfessional, interclass, ethnic, interregional contradictions and conflicts. external actors (for example russia) usually pursue this object; however, similar instruments are often popular among political parties or blocks and oligarchic clans. they use information technologies to achieve their lucrative political impulses, or to satisfy their financial interests. an example here might be the frequent media coverage of political antiadvertising, manipulation and propaganda messages, and use of «black pr» technology. this is the everyday reality in the ukrainian political system. only concerted action of the current state leadership of ukraine together with community groups can lead to achieving the desired results in the sector of information security. addressing the cooperation between the authorities and society is important in the context of building an effective system to counter threats and risk information. this is due to the fact that the resources of the state are not enough to win the «information confrontation» with external and internal enemies. therefore, current government partnership with social groups and associations that act as its «non-state allies» baltic journal of economic studies 46 vol. 2, no. 3, 2016 is necessary. all the information mentioned in the article threats can be eliminated with the active position of the ukrainian public and government agencies wish to engage non-governmental entities to form security policy. 5. conclusions thus, the significance of information as an important strategic resource of the state and society caused the increase of their dependence on the informative sphere condition. for this reason, in the contemporary conditions of uncontrollable development of information technologies the presence of various informative threats became an integral part of the public reality. contemporary informative risks have a strong influence on all spheres of social life and affect the national interests as well. while researching this question it was important to analyze the whole category of informative security, which is a component of the state national security. the experience of ukraine that got into the conditions of external military-informative aggression can be an example in this context. while setting the ukrainian national security strategy as a «travelling map» of the general security sector reformation, the informative safety appears as its important part, which protects the national interests in the informative sphere. the perspective of further scientific researches in this field should be mentioned. it is conditioned by a number of factors. the necessity of theoretical comprehension of such categories as «information», «informative threats», «informative security» should be mentioned as well. it is also necessary to determinate the effective mechanisms of the perfection of national informative safety system; to improve the existing effective methods of counteraction to the informative threats and to develop the new ones; to increase the efficiency of the process of citizens’ attraction to the forming of the informative policy and the safety policy. references carey-smith, m., & may, l. (2007). information security and civil society organizations. oai (recent advances in security technology): p. 314-327. baber, z. (2002). engendering or endangering democracy? the internet, civil society and public spher. asian journal of social science, 30(2): p. 287-303. szczypiorski k., mazurczyk w. & janicki a. (2016). recent advances in cybersecurity. springer open. retrieved 26 february 2016, from: http://www.springeropen.com/collections/rac information security of ukraine. (2013). context media. retrieved may 2013, from: http://www.context-ua.com/ en/protection tropical problems of ukraine’s information security (2001). razumkov centre. retrieved 2001, from: http://www.razumkov.org.ua/eng/journal_pos.php?y=2001&cat=1&pos=41 анатолий головка информационные угрозы в глобализированном мире: экономика, политика, общество (опыт украины) аннотация. в научной статье представлены целостное видение современных информационных рисков в глобальном мире, рассмотрены их классификацию. раскрыта сущность информационной безопасности, как одного из главных факторов устойчивого развития современного информационного общества. также были проанализированы опыт украины в противодействии современным информационным угрозам при учете зарубежной практики. взвешенная и эффективная политика безопасности и противодействия информационным угрозам является одной из основных составляющих системы национальной безопасности государства и вместе с тем свидетельствует о правильном характер связей между государственными органами и обществом. в условиях безудержного прогресса информационных технологий и всеобщей информатизации всех секторов жизни человека (политики, экономики, обороны, энергетики и т. д.). обеспечения контроля и защиты информационного пространства страны становится все более сложной задачей. современные украинские реалии убедительно свидетельствуют, что украина находится в крайне сложной политической ситуации, определяющим образом влияет на все без исключения сферы жизни украинского социума. ключевая причина такого положения вещей это военно-информационная агрессия против украины со стороны россии, то есть факт ведения «гибридной войны». как известно данный тип войны сочетает в себе применение как классических военных инструментов (военной техники, огнестрельного оружия, регулярных войск), так и методов информационного воздействия (кибератаки, информационные диверсии, агрессивная пропаганда, манипуляция общественным мнением). эти факторы и делают актуальными такие исследования. объектом исследования является феномен информационных рисков в современном мире. предмет исследования – это влияние современных информационных угроз на государство и общество, а именно экономический, политический и социальный сегменты. для целостного анализа предмета исследования была использована baltic journal of economic studies 47 vol. 2, no. 3, 2016 соответствующая методология – системный подход, метод сравнительного анализа, общенаучные методы (анализ, синтез, обобщение, индукция, дедукция и т.д.). целью научной статьи есть исследование сущности и классификация основных типов информационных угроз. в результате были сформулированы всеобъемлющие выводы: во-первых, было объяснено важность понимания информационных угроз, а также представляет их сущность и классификация. кроме того, обосновано идею того, что исследуя этот вопрос, важно проанализировать также категорию информационной безопасности, которая является составной частью национальной безопасности. опыт украины, который в условиях внешней военно-информативной агрессии послужил примером при исследовании данной проблематики. при изучении украинских реалий, было установлено, что современные информационные проблемы, сказывающиеся важные сферы социальной реальности. baltic journal of economic studies 116 vol. 7 no. 4, 2021 corresponding author: 1 uzhhorod national university, ukraine. e-mail: maryna.korol@uzhnu.edu.ua orcid: https://orcid.org/0000-0003-4031-0858 2 john paul ii catholic university of lublin, poland. e-mail: ihorkorol@kul.lublin.pl orcid: https://orcid.org/0000-0001-7826-0249 3 uzhhorod national university, ukraine. e-mail: olena.zayats@uzhnu.edu.ua orcid: https://orcid.org/0000-0001-9904-8706 doi: https://doi.org/10.30525/2256-0742/2021-7-4-116-122 monetary circulation and banks in the interpretation of the main economic schools maryna korol1, ihor korol2, olena zayats3 abstract. the topicality of the research lies in the fact that the long-term evolution of financial markets, reinforced by global transformations, has led to the development of convergent processes in banking activities in the presence of significant paradigmatic differences between the major banking systems of the world. the existing peculiarities in the mechanisms and methods of regulation of the banking sector within individual countries have caused drastic changes in views on the nature of the bank and its activities. the traditional view of banks as institutions of financial intermediation, providing the exchange of monetary assets between the owners of savings and borrowers, does not provide for the creation of new money. instead, proponents of the alternative viewpoint emphasize that in today's world banks finance borrowers mainly through the mechanism of money emission. both points of view are present to varying degrees in various theoretical and conceptual approaches to understanding the essence of the bank as an institution of financial intermediation. the current economic realities require a detailed study of national banking systems, which largely developed historically, and methodological aspects of their evolution in the context of global transformations. the research subject. in the process of evolution of theoretical and conceptual approaches to the definition of the essence of money, banks, the banking system, the prevailing point of view on this issue has not yet taken a definite form. nevertheless, the recognition of the effectiveness of banks as a factor of economic growth brings together the positions of competing schools of economic theory. banks become a factor in the investment process even in the theoretical models of the neoclassical school, which traditionally denies the dependence of economic growth on the money supply. endogenous growth models recognize the role of banks primarily as a factor in accumulating capital and increasing savings, as well as a mediator between owners of savings and borrowers. although the keynesian school of thought initially gave little weight to the functioning of the banking system, neo-keynesian models have attempted to explain the importance of confidence in the banking system and the need for sound regulatory constraints. the above-mentioned has urged us to carry out this research. the methodological framework of the research is based on an analysis of research on the global debate about the nature of banks in the economy and the architecture of monetary policy. a wide range of theoretical and empirical research methods were used: systematic analysis, synthesis and generalization to formulate conclusions. the aim of the research is to generalize and systematize the evolution of perspectives on money in the interpretations of today’s main economic schools. conclusion. the findings consist of a conceptualization views' evolution on money, the banking sector in a more open economy to capital flows, and our firm belief that the banking system and the related process of money issuance affect income levels cyclically and over the long term. key words: money, banks, banking system, economic schools, globalization. jel classification: e51, e59, g21, g34 baltic journal of economic studies 117 vol. 7 no. 4, 2021 1. introduction in the fundamental works of foreign and domestic scientists presented the theoretical and methodological basis for the interpretation of the essence of money, banking and functioning of banking systems. nevertheless, theoretical approaches to the positioning of money and the banking system in contemporary models of monetary policy, which differ in terms of competing schools of economic theory, need to be improved. today there is no dominant viewpoint on either of these two issues. the paradigm of monetary policy is determined by the traditional assumption about money neutrality in relation to income and relatively new elements regarding the endogeneity of the money supply and the institutional role of the banking system in the process of crediting the economy. in the context of different theoretical approaches to the evolution of the interpretation bank’s essence and the banking system, we proposed an improved definition: the bank – a financial institution endowed with economic and legal independence, carrying out banking operations in the field of monetary policy and money circulation, the ultimate goal of which is to make a profit and/or to meet customer needs. even if there is no profit goal, then it is customer satisfaction that remains the goal of the bank, as in islamic banks. the various issues of the functioning of the banking system can hardly be separated from the existing monetary regime or, in a broader sense, from the conceptual views on the role of money in the economy and the parameters of the optimal monetary policy. the logic of the classical school is first described, then the features of keynesian theory and the fundamental points of the new institutional economics are analyzed. the logical outcome of this analysis should be a consideration of the key features of contemporary neoclassical, neo-keynesian, and postkeynesian views on money and banks. according to r . werner (werner, 2012), the financial crisis of 2008-2009 created a kind of consensus among economists of various schools and areas on the need to include the peculiarities of the banking system functioning in existing macroeconomic models. previously, the relevant issues were either not considered significant or received a fragmentary interpretation, which did not provide a considerable impact on the fundamentals of economic life in general or monetary policy in particular. 2. the logic of the classical school representatives it is well known that the creators of classical theory (a. smith, d. ricardo) denied the dependence of economic growth on the amount of money in circulation, in connection with the denial of the previous postulates of mercantilism about the determining influence of the accumulated gold and silver reserves on the wealth of nations. as the value of accumulated precious metal inventories increased, the price level rose, and at the same time investment incentives as a factor in longterm growth weakened. so far, such considerations have materialized in the thesis that "money is neutral to income"; accordingly, there is no need to analyze the functioning of the banking system, which only serves the money supply, nothing more (dostaler & maris, 2000). no later than the late 1980s, nobel laureate r . lucas (lucas, 1988) said that economists "greatly exaggerate" the impact of the functioning of the financial system on economic growth. nevertheless, classical school economists have recognized that the money supply proposition can be a source of macroeconomic imbalances in the short term (smithin, 2002). keynesian school economists recognize that money can be as important factor in production as capital or labor. the discussion between the proponents of both classical and keynesian is further complicated by the contradictions between the proponents of the three alternative views of money, the austrian, the marxist, and the post-keynesian. monetarism first emerged as one of the strands of keynesian theory. the proponents of monetarism initially denied only the dependence of the demand for money on interest rates (vertical lm line), and considered the dependence of investment and private consumption on the cost of credit resources high (horizontal is line). under such conditions, fiscal policy is unable to stimulate incomes while maintaining the effectiveness of monetary policy. however, it was later proven that the "monetary " form of the is and lm lines leads to the absence of the influence of the money supply on income, given the labor market dependencies (ad-as model). but by the late 1950s it had become so transformed that its proponents began to accept the incomeneutral monetary policy (gdp) thesis. ideologists of monetarism such as a. marshall (1923) or m. friedman (1948) recognized the need for institutional measures to reduce information asymmetry and develop the credit market. banks were recognized not only as an important element in open market operations, which were supposed to regulate the money supply and the interest rate, but also as a factor in the investment process. 3. the logic of the neoclassical school representatives modern neoclassical models combine the theoretical apparatus of long-term models of economic growth with analytical constructions of monetary policy. for example, m. goodfriend and b. mccallum (goodfriend & mccallum, 2007) proposed a neoclassical model that takes into account the baltic journal of economic studies 118 vol. 7 no. 4, 2021 influence of money supply and the banking system in a standard theoretical design with rational expectations. the example of the united states shows that changes in the performance of the banking system or the quality of collateral assets require significant changes in central bank rates. some neoclassical models even recognize the role of consumer lending as a factor in monetary policy, which explains the features of "catching up" economic growth in a monetary union with industrialized countries (backe & wojcik, 2008). d. levine (levine, 2004) identifies the following mechanisms for a favorable relationship between the financial system and economic growth: 1) the accumulation of savings for the lending of investment projects and innovations that improve the allocation of resources; 2) providing information on investment opportunities (financial intermediaries reduce the cost of collecting and obtaining such information); 3) monitoring of the investment process and the impact on the management of corporations; 4) diversification and risk management; 5) exchange of goods and services. the financial sector stimulates economic growth through support for public sector investment projects and opportunities for intertemporal smoothing of private consumption and investment in human capital. close to the predictions of neoclassical models are the arguments of individual economists such as hodgman (1961), king (1986) or sinkey (1979), who emphasize the importance of banks as a means of obtaining a monetary multiplier effect from the expansion of the deposit base. this corresponds to the positioning of banks as intermediaries between savings owners and borrowers. differences from the situation until the middle of the twentieth century are that modern banks are able to generate money supply without attracting deposits from households and businesses (the effect of a banking multiplier). this feature allows you to neutralize one of the factors reducing aggregate demand, because the accumulation of funds on deposits in one way or another limits aggregate demand. negative side effects are an increase in the risks of banking in the economy with an accelerated growth of money supply. usually, the "surplus" of money supply is accompanied by accelerating inflation, the emergence of various "bubbles" and distortion of investment "signals", which ultimately leads to a cyclical decline in production. 4. the logic of the keynesian school representatives despite the above-mentioned possibilities for taking into account the peculiarities of the banking system in neoclassical models, objectively the effect of the banking multiplier is an argument in favor of keynesian models with the stimulation of aggregate demand. however, this is not the case. initially, keynesian school supporters focused on the feasibility of fiscal instruments, as it was a combination of a significant dependence of money demand on interest rates with a weak dependence on this indicator of private consumption and investment; under such conditions, monetary policy became incapable of stimulating aggregate demand, and therefore interest in banking was not properly justified. although d. m. keynes recognized the importance of money as an element of contracts between entrepreneurs (davidson, 2007), the feasibility of a two-tier banking system and the use of the central bank rate to regulate lending (huber, 2014), in practice he was primarily concerned with the consequence of reducing of money supply which can lead to a wave of "bankruptcies, defaults and failures" (dimand, 2011). the threat of inflation and related crises in the banking system has not been considered. similarly, d. m. keynes repeatedly stressed the risks of over-lending and the emergence of various price "bubbles", but later supporters of the keynesian school mostly supported the development of bank lending. for example, in the early 1950s, d. robinson claimed that banks did not respond sufficiently to postwar economic growth (robinson, 1952). the high inflation of the 1960s and 1970s led to a departure from keynesian economic policy schemes in favor of neoclassical models with rational expectations, which denied the effectiveness of the expected changes in the money supply. from the early 1980s, the academic environment began to be dominated by models of the real business cycle (rbc), which did not provide for the influence of price factors on the dynamics of the equilibrium trend of gdp. however, neo-keynesian models soon emerged, which included price stability mechanisms (at least in the short term) in rbc models. gradually, a class of dynamic stochastic general equilibrium – (dsge) models emerged, which are now the main tools for analyzing monetary policy in central bank research units. although such models are a holistic synthesis of methodological principles regarding the lack of flexibility of nominal wages and prices, the global financial crisis of 2008–2009 drew attention to their main drawback – the lack of detailed, and therefore realistic modeling of incentives, restrictions and intermediaries' financial behavior, including banks (cukierman, 2011). it has been suggested that just as the great depression of 1929–1933 radically changed views on the economic policies of the then states, the great recession of 2008–2009 will stimulate a revision of the dominant views on monetary policy. under the influence of the crisis of 2008–2009, the positions of critics of the above-mentioned economic mainstream, which largely denies the significant baltic journal of economic studies 119 vol. 7 no. 4, 2021 impact of the money supply and banking system on economic growth, were strengthened. r . werner notes that by the mid-1980s almost all models (classical, most of neoclassical ones, keynesian, monetary and post-keynesian, as well as most eclectic models) included a quantitative equation of money circulation: mv=py where m – money supply (monetary aggregates m0, m1, m2, m3 or m4); v – money velocity (initially measured by the frequency of gold turnover during the observation period); p – gdp deflator (price level); and y – income in real terms (gdp) (werner, 2012). however, since the early 1980s, the adequacy of the quantitative equation of money circulation has been undermined by empirical studies that have shown volatility in the velocity of money and the demand for money. negligence of the banking system occurred despite a significant number of banking crises – more than 100 in the postwar years. similarly, there is no evidence of a significant effect of interest rates on cyclical dynamics, at least such an effect is much weaker than theoretical models suggest. there are also no signs of the determining influence of aggregate supply factors. somewhat paradoxically, the significant growth of the financial sector since the early 1980s is often seen as an argument against the neoclassical interpretation of monetary policy, which in fact never provided benefits from the issuance of money. for example, k. bresser-pereira considers the financial crisis of 2008-2009 as a consequence not only of "fictitious" financial wealth, but also of "reactionary " ideology of neoliberalism, based on assumptions about self-regulation of financial and commodity markets. this is contrasted with the period of "30 brilliant years of capitalism" (1948–1977), when government regulation avoided serious crises, while at the same time there was a steady increase in the welfare of the largest industrialized countries. instead, the deregulation of the 1980s and 1990s, especially in the financial sphere, created the preconditions for chaotic and unstable development. criticism of the financial mechanisms of the last three decades has sufficient grounds in empirical research. in particular, an inverse relationship between private sector lending and economic growth was found for 16 cee countries; instead, the money supply has a favorable effect (petkovski & kjosevski, 2014). the obtained result is explained by the large volume of non-performing loans and numerous banking crises since the beginning of the transition period. to improve the situation, it is proposed to institutionally strengthen the banking system and expand the range of banking services. it should be recognized that some supporters of neoclassical models also offer measures to reorient banks and financial companies to lending to the real sector, especially in economically backward regions (uysal, 2019). this should increase the demand for money, in addition to the use of national currencies in bilateral trade. as early as the early 1930s, i. fischer claimed that investment was necessary for gdp growth to exceed interest rates (this was necessary to prevent debt growth). however, this position has its own drawbacks. as shown by p. samuelson (1958) and j. tyrol (1985), given the high rate of gdp growth and low interest rates, various "bubbles" in the markets of individual assets can last quite a long time (the economist, 2020). in our opinion, it is incorrect to identify the processes of globalization and the excessive growth of financial markets with the logic of neoclassical models of economic development. firstly, neoclassical models do not provide any long-term benefits from excessive money supply, and this is usually the root cause of crises. secondly, openness to capital flows alone is not a problem unless confidence in the economy is lost and the various financial sector regulators are strong enough to prevent speculative processes. in general, this draws attention to the root causes of the increase in monetary aggregates. if this is due to increased savings and in a reliable macroeconomic environment, there is no reason for a crisis. otherwise, in the case of accelerated growth of the money supply, which can occur due to many reasons: a) attempts to monetize the inflow of capital and thus avoid the strengthening of the currency; b) lobbying efforts of the banking sector interested in increasing consumer lending; c) populism in economic policy, which does not allow to control the budget deficit. recently, representatives of the neo-keynesian and post-keynesian trends have been actively promoting the benefits of money endogenization, when the supply and demand of the money supply respond to the level of income; relevant issues are often neglected by representatives of the neoclassical school (georg & pasche, 2008). neo-keynesian models use the taylor rule, when the interest rate is determined on the basis of the achieved level of inflation and the phase of the business cycle. supporters of the post-keynesian trend are divided into two strands, accommodationism and structuralism, which share assumptions about the emission of the banking system, but diverge in the treatment of bank reserves. proponents of the first argue that an increase in demand for credit requires an additional increase in the central bank's monetary base (while banking activity does not change significantly). instead, supporters of structuralism are convinced that in response to increasing demand for credit, it is necessary to change the structure of assets and liabilities of the banking system. proponents of the accommodative approach to monetary policy see the origins of their own position in the position of economists of the austrian school baltic journal of economic studies 120 vol. 7 no. 4, 2021 since the early twentieth century (dow, 2011). it is claimed that the endogeneity of the monetary base corresponds to the realities of the current behavior of most central banks, especially the anglo-saxon countries (usa, canada). in particular, it concerns the ability of central banks to maintain a stable level of short-term interest rates and to influence the behavior of the banking system, which prevents the emergence of an "excessive" supply of money stock. proponents of the structuralist approach, on the other hand, convincingly claim that central banks in the united states, the united kingdom, and the eurozone have shown their own inability to control the appropriate level of money supply (dow, 2011). this requires the management of bank reserves, which will allow to form the appropriate preferences of commercial banks for lending. banks influence lending volumes by inversely affecting the central bank's refinancing rate, setting interest rates on loans and deposits due to the oligopolistic structure of the financial market, trying to avoid reserves and increasing equity, and determining additional conditions for obtaining loans. growing competition between banks and non-banking institutions has led to a process of financial deregulation, which has led to excessive risks – especially in the banking system. assessing the arguments of both neo-keynesian and post-keynesian trends, the current situation with a record low interest rate objectively weakens the argument in favor of using the taylor rule as a regulator of money supply. on the other hand, supporters of the post-keynesian trend negatively assess the consequences of the "surplus" of the money supply in the pre-crisis years of 2002–2008, but did not form realistic proposals for ways to limit the excessive growth of the money supply. typically, raising interest rates is criticized as hindering investment, while measures to administer bank reserves may be ineffective. instead, the use of bank reserves to manage the money supply may be accompanied by an increase in interest rates. 5. the logic of the post-keynesian school representatives. over the last decade, representatives of the postkeynesian school have attempted to create a new holistic theory of monetary policy (modern monetary theory, mmt) (wray, 2019). the starting point is the endogeneity of the stock of money, which depends not on the savings of the population, but on the volume of public debt. the increase in the central bank's monetary base may be due to an increase in either government spending or public debt. in some ways, the second option is even more important, since government spending is financed by government loans. this position is fully consistent with the views of the keynesian school, according to which fiscal policy is dominant. the central bank has no ability to control the stock of money, but can only determine the level of short-term interest rates, as in the standard neo-keynesian models. however, this is not enough to maintain the balance of the money market. the equilibrium level of the monetary base, which corresponds to the optimal supply of money, can only be determined by means of open market operations with government bonds. thus, public debt is not so much necessary for government spending as it is for money management. it is this thesis that determines the popularity of mmt, as it is about removing restrictions on increasing the national debt and budget deficit (coats, 2019). the only limitation for the emission financing of the budget deficit is the availability of productive resources in the economy (inflation will appear only after some optimal level of income at full employment). it is advisable to maintain the interest rate at "zero" level, which will stimulate investment and reduce the cost of servicing the public debt. such proposals are criticized from several perspectives: recognition of inflation only when the economy "overheats," exaggeration of the impact of fiscal policy and the ability of current government spending to generate tax revenues in the future, and lack of guarantees regarding the public debt (sumner & horan, 2019). t. pelley (palley, 2019) calls mmt a "simplified and incomplete" interpretation of long-known keynesian ideas. one of the biggest drawbacks of the new theory is that it ignores the expectations of market participants. if monetary issuance raises expectations of faster inflation in the future, it is bound to raise long-term interest rates. accordingly, the cost of long-term loans, which mainly finance investment projects, will rise. instead, cheap short-term loans are likely to lead to "bubbles" in individual asset markets. mmt theorists believe that deposits do not serve as a source of credit, but rather that the lending process creates the corresponding deposits (huber, 2014). accordingly, investments do not depend on deposits. the stock of money is not created by the central bank, but by the banking system. loans are first made according to the demand for them, and only then do banks receive proper reserves from the central bank. modern banking systems have been criticized for instability, asset inflation, the redistribution of monetary assets in favor of the financial sector, and increased vulnerability to crises. in this context, the current practice of partial provisioning and the existing paradigm where a certain target level of inflation is seen as an indicator of the adequacy of the money supply are criticized. in assessing mmt's arguments, it should be noted that assumptions about the emission financing of baltic journal of economic studies 121 vol. 7 no. 4, 2021 budget deficits on a permanent basis can at most be temporary and are applicable mainly to industrialized countries with developed financial markets and high confidence in the economy. low-income countries clearly lack confidence in their ability to service their own public debt by borrowing in local currency, accelerating inflation and ending the experiment of stimulating the economy by issuing fiscal deficit financing. like the evolution of views on banks in the keynesian school, the arguments of institutional theorists in explaining economic processes have undergone equally radical changes. initially such representatives of institutionalism as t. veblen (1907) and d. commons (1934) considered banking capital "parasitic" and denied the favorable impact of the banking system on economic growth (zavadska, 2018). socio-psychological factors in the behavior of market participants seemed much more important. in the post-war years the idea of the negative impact of banks on the economy was shared by d. galbraith (1967). however, the institutional school theorists were the first to identify the importance of analyzing economic processes, taking into account legal and political factors. later, the relevant arguments were developed by such representatives of the new institutional school as r . coase (1990) and o. north (2005), who recognized the possibility and necessity of state regulation of monetary, financial and credit institutions. the study of such categories as "consumption", "utility " and "alternative means" "revived" the earlier proposals of j. schumpeter (1912) on the recognition of the constructive role of banks in economic life and the need for their autonomy, but subject to strengthening the links with the real economy and the formation of a market for banking products and services. 6. the logic of the new institutional school representatives today, supporters of the new institutional school emphasize the importance of exploring the conditions that impede compliance with contracts (currie & messori, 1998). this is important for the banking sector, because non-repayment of credit is the basis for crises. the main reason is considered to be an increase in transactional funds. the focus on contract compliance is close to neo-keynesian models, which assume several equilibrium states depending on the state of individual markets, but in this case there are imbalances between labor supply and demand, savings and investment, and so on. the global debate about the role of banks in the economy and the architecture of monetary policy resonates in ukraine. proponents of neoand postkeynesian orientation clearly predominate. it should be noted that all proposals to stimulate economic growth in ukraine call for an increase in the money supply and lending. 7. conclusions based on the analysis, we can conclude that the banking system and the process of money emission influences not only short-term (cyclical), but can also affect long-term income. the post-crisis situation of 2010-2020, when interest rates fell to record lows and governments borrowed heavily to provide fiscal stimulus to the economy, is used by proponents of postkeynesianism, the so-called modern monetary theory (mmt). assumptions about the emission financing of budget deficits on a permanent basis can at most be temporary and apply mainly to industrialized countries with developed financial markets and a high level of confidence in the economy. it is a mistake to equate the processes of globalization and the excessive growth of financial markets with the logic of neoclassical models of economic development, since these models do not envisage any benefits from the excessive supply of money. openness in itself to capital flows is not a problem unless confidence in the economy is lost, the money supply is increased by savings growth, there are no excessive budget deficits, and the various financial sector regulators are robust enough to prevent speculative processes. taylor's rule is sufficient to recognize the endogenization of the money supply, although at record low interest rates the inadequacy of the relevant central bank policy should be recognized. at the same time, supporters of post-keynesianism have no realistic proposals on how to limit the excessive growth of money (administrative measures may be ineffective, and the use of bank reserves to manage the money supply may be accompanied by an increase in interest rates). references: backe, p., & wojcik, c. 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(2012). towards a new research programme on ‘banking and the economy’ – implications of the quantity theory of credit for the prevention and resolution of banking and debt crises. international review of financial analysis, 25, 1–17. werner, r . (2012). towards a new research programme on ‘banking and the economy’ – implications of the quantity theory of credit for the prevention and resolution of banking and debt crises. international review of financial analysis, 25, 1–17. wray, l. (2019). alternative paths to modern money theory. available at: http://www.paecon.net/paereview/ issue89/wray89.pdf (accessed 01 october 2020). zavadska, d. (2018). determining the role of banks in the financing of innovative development processes of the economy. baltic journal of economic studies, 4(3), 68–73. doi: https://doi.org/10.30525/2256-0742/ 2018-4-3-68-73 baltic journal of economic studies 65 vol. 8 no. 3, 2022 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: vdulger74@ukr.net orcid: https://orcid.org/0000-0003-3051-657x 2 odessa state university of internal affairs, ukraine e-mail: vonarab55@gmail.com orcid: https://orcid.org/0000-0002-1277-3153 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: ivanhozlu@ukr.net orcid: https://orcid.org/0000-0002-2705-3968 doi: https://doi.org/10.30525/2256-0742/2022-8-3-65-71 the institute of citizen appeals as an active mechanism for the protection of socio-economic human rights volodymyr dulger1, serhii baranov2, ivan khozlu3 abstract. the institute of appeal of citizens to state authorities as an effective mechanism of implementation of socio-economic human rights and freedoms is studied. attention is drawn to the fact that human rights are the highest social value and determine the degree of political, economic, cultural and other human freedoms. the authors established that the state must be accountable to the individual for its activities, in this regard, ensuring human rights and freedoms is the main responsibility of the state, but all this is possible subject to the principle of the rule of law, which in many countries is enshrined as constitutional. it was found that the problematic issues remain related to the definition of international requirements for the mechanism of implementation of the right of citizens to appeal to public authorities, providing a mechanism for exercising the right of citizens to appeal to public authorities using the latest information technologies, etc. the authors have found that the institute of citizens' appeal to public authorities, as a mechanism for exercising human rights and freedoms, includes many important areas, such as the conduct of public affairs, both directly and through freely elected representatives; the functioning of public control; ensuring the right of access to public information, etc. the peculiarities of the development of the institute of citizens' recourse in the context of international experience in the realization of human rights and freedoms were investigated. it was found that the dynamism of the development of international law at the present time has also influenced the fairly rapid development of the institute of citizens' right to appeal to public authorities, which in turn has affected the increased participation of citizens of different states in the political processes in the world. the concept of the right of citizens to appeal to public authorities has been formulated. international requirements for the mechanism of implementation of the citizens' right to appeal to public authorities were analyzed and identified. the authors found that the international requirements for the mechanism of implementation of the citizens' right to appeal to public authorities are based on five basic principles. the prospect of introducing information technology in the process of citizens' applications to public authorities is considered. it was determined that the rapid development of modern information technologies and their introduction into various spheres of social life has not bypassed their introduction into the legal sphere, which in turn led to the processing of increasing volumes of information in a short period of time, and on the other hand, was a consequence of threats of violation of individual rights, through unauthorized access to personal data, their theft and use for criminal purposes. shows the problematic aspects arising from the introduction of modern technologies in the work with the citizens' appeal, which affect the protection of personal data. the experience of many countries, such as great britain, germany, scotland, usa, etc., in the implementation of the system of electronic appeal and the use of electronic petitions as the most progressive form of communication with the government is analyzed. key words: institution of citizens' appeal, legal mechanism, human rights and freedoms, social rights, economic rights, electronic petition. jel classification: k38, k39 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 66 vol. 8 no. 3, 2022 1. introduction human rights are the highest social value. they determine the degree of political, economic, cultural, and other human freedoms. but the realization of these freedoms is possible only in conditions of the formation of a state governed by the rule of law and the aspiration of the current state power for democratic transformations. the state needs to be accountable to the people for its activities, so ensuring human rights and freedoms is the primary responsibility of the state. in addition, the realization of social and economic human rights is impossible without sustainable economic growth in the state and is a guarantee of strengthening democracy in society. thus, an increase in production, especially those that are not monopolized by the state or big capital, forms the material basis for further social development of society, due to the fact that there is an increase in the material income of citizens and, accordingly, their well-being. all this is possible in the conditions of formation of a socially lawful state, which proclaims the main value of human rights and freedoms. but all this is possible if the principle of the rule of law, which in many countries is enshrined as constitutional, is respected. if power lays this principle in the basis of public administration, it defines the supreme values of man, his rights and freedoms, which, in turn, forms the content and direction of its development. the mechanism for the implementation of human rights and freedoms is their guarantees, which, in turn, act as a totality of legal norms. one of these institutions, through which human rights and freedoms are realized in an individual state, is the establishment of permanent two-way communication between the current government and the people, through the appeal of the latter to the relevant state bodies and the opportunity to participate in the management of state and public affairs, in order to influence the improvement of these bodies, as well as enterprises, institutions, organizations, regardless of ownership, to protect their rights and legitimate interests and restore them in case of violation. the institute of citizens' appeal to public authorities, as a mechanism for implementing human rights and freedoms, includes many important areas, such as the conduct of public affairs, both directly and through freely elected representatives; the functioning of public control; ensuring the right of access to public information, etc. all this encourages the individual to participate in the processes of state administration, to take an active civic position and, as a consequence, to form a civil society. in general, the problem of realizing the right of citizens to appeal to public authorities has been sufficiently developed in modern legal science. thus, scholars l. mosca, l. dahlberg, a. michels, l. hoffman and others dealt with the problematic issues of implementing the right of citizens to appeal to public authorities. in addition, beyond the zone of attention of scientists remained some of the issues associated with the definition of international requirements to ensure the mechanism for exercising the right of citizens to appeal to public authorities, providing a mechanism for the implementation of the right of citizens to appeal to public authorities using the latest information technology, etc. 2. peculiarities of the development of the institute of citizens' recourse in the context of international experience in the realization of socio-economic human rights and freedoms in the history of genesis of development of the state and law the institute of appeal of citizens to public authorities has passed a long way and is still of scientific interest. thus, there are opinions of scholars that this institution has its origins in the adoption of the great charter of freedoms in 1215, in connection with which article 61 provided for consideration of complaints by the king no more than 40 days. other scholars link the emergence of the institution with the emergence of political power itself. but in spite of this, it is possible to assert that in any case the mechanism of relations between representatives of power and society was established by means of appeals to persons representing power. it should be noted that it was in great britain that the right to address the authorities was legislated in the "bill of rights" of 1689. also an integral part of human rights in the political history of the united states of america was the right of recourse, which was enshrined in the u.s. constitution of 1787. then france took the baton to consolidate the right of recourse, which already in the constitution of 1791 consolidated the right to petition individual citizens to the relevant authorities. formation and normative consolidation of the right of citizens to address public authorities has gone a long way, but in the history of the state and law it entered, according to scientists, as the first political right of citizens. despite its rather ancient origin and development, the universal declaration of human rights of 1948 can be considered the most significant step in the recognition of the right of citizens to apply to public authorities at the international level. thus, under articles 7, 8, and 19, the right of citizens to apply to public authorities was equated with the rights to judicial protection, to restoration of rights by competent national courts, in case of violation of other rights, and to freedom of opinion. moreover, in 1948 the one hundred and eighty-third plenary session of the general assembly determined that the right of petition was baltic journal of economic studies 67 vol. 8 no. 3, 2022 a fundamental human right. despite this, the next step was not taken and the 1966 international covenants "on civil and political rights" and "on economic, social and cultural rights" no longer explicitly mentioned the right of petition to public authorities. but at the same time, article 34 of the "convention for the protection of human rights and fundamental freedoms", adopted in 1950, enshrines the right of individual complaints, namely, that the court may receive complaints from any natural person, any nongovernmental organization or any group of individuals who are victims of one of the high contracting parties referred to in this convention and its protocols. at the same time, it should be remembered that the right of citizens to appeal to state authorities in this convention is enshrined only procedurally, due to the fact that it establishes the procedure for appeal only in case of violation of substantive norms. the dynamism of the current development of international law has also influenced the fairly rapid development of the institution of the right of citizens to appeal to public authorities, which in turn has influenced the increased participation of citizens of different states in the political processes in the world. one such example is the establishment of the right to appeal to the european parliament in the form of a complaint or inquiry, which fall within the scope of the european union. this became possible only after the entry into legal force of the maastricht treaty (kovalova, korniienko, pavliutin, 2020). due to the rapid growth of scientific and technological progress from the beginning of the 21st century, it became possible to improve the system of organizing citizens' appeals to public authorities, which virtually eliminated the red tape. scotland was the first to modernize the organization of citizens' appeals to public authorities, where, as early as 1999, the parliament created an advanced system of appeals based on information technology, which allows filing, registering and reviewing appeals electronically. next, the best experience of scotland was borrowed by other countries. thus, already in 2005 – borrowed from germany and portugal (dahlberg, 2011), in 2012 – ireland, in 2014 – luxembourg. also in 2015, the westminster parliament proposed the introduction of the newest system of appeals to the public authorities, which included the creation of a petitions committee to oversee the consideration of electronic appeals (ming, teng, jodaki, 2020). 3. analysis and definition of international requirements for the mechanism of realization of the right of citizens to appeal to public authorities in the process of formation and development many states of the world have passed a difficult way from complete humiliation of social and economic human rights and freedoms to the creation of effective democratic mechanisms to ensure the protection of such rights. due to the individual experience of each state, it became necessary to develop unified requirements in the context of international law, which would form a certain model of state development in a democratic direction. these requirements must be defined as international norms establishing human rights and freedoms and reflecting the achievements of human civilization internationally and domestically. the establishment of the right of citizens to apply to public authorities or to participate in public affairs at the international level is an expression of a component of human rights. therefore, international requirements concerning the right of a citizen to appeal to public authorities are primarily aimed at improving the domestic legislation of states in the direction of ensuring human rights and freedoms. the right of citizens to appeal to public authorities is the inalienable right of everyone to directly apply, orally or in writing, individually or collectively, to public authorities for protection and realization of their rights, freedoms and legitimate interests. based on the content of this definition, it can be argued that the right of citizens to appeal to public authorities is a means of protecting violated rights, freedoms and legitimate interests. also, the right of citizens to appeal to public authorities is derived from the right to freely express their opinion, the right of access to information, the right to participate in public (state) affairs directly or through freely elected representatives. in this regard, it can be confidently asserted that the right of a person to appeal to public authorities is an attributive property of a free person. earlier, the emergence and development of the institute of appeal of citizens to public authorities was considered, but it is necessary to analyze the emergence and consolidation of international requirements for the mechanism of implementation of the right of citizens to appeal to public authorities. currently, the right to appeal to public authorities is enshrined in the constitutions of various countries around the world, including romania, italy, japan, switzerland, and others. the very awareness of the importance of the right of citizens to appeal to public authorities is associated with its enshrined in the legislation of many countries at the constitutional level, as well as its definition and consolidation in international legal documents. the united nations has played an important role in ensuring and protecting the right of citizens to appeal to public authorities, which has introduced a system of universal human rights cooperation, namely, the development of a mechanism for individual complaints (kovalova, korniienko, postol, 2019). baltic journal of economic studies 68 vol. 8 no. 3, 2022 in order to more fully understand the content of international requirements for the mechanism of implementation of the right of citizens to appeal to public authorities, it is necessary to investigate the basic principles underlying the effective implementation of this right, both at the international and national levels. the first principle is the close relationship between the right of citizens to appeal to public authorities and other human rights and freedoms. therefore, this right cannot be considered separately from, for example, the right to equality and non-discrimination, to freedom of opinion and expression, as well as freedom of peaceful assembly and association, and respect for others. the right of citizens to appeal to public authorities is also closely linked to the full realization of the right of access to information, which, as part of the right to freedom of expression, is a means of ensuring openness and transparency of the existing authorities, as well as accountability for the decisions of public authorities. ensuring the right of citizens to appeal to public authorities implies protection of life, health, including physical integrity, and freedom of all citizens wishing to exercise this right. the second principle of ensuring the right of citizens to appeal to public authorities is the creation, both internationally and domestically, of an environment conducive to the realization of this right by all members of society, supporting and encouraging their participation, ensuring their legal awareness, through training, etc. the third principle provides for equality and nondiscrimination in the exercise of the right of citizens to appeal to public authorities, which is the prerogative of the state. the implementation of this right must be carried out regardless of the social, economic, political, or any other status of a citizen. appropriate mechanisms for recourse to public authorities must also be created for stateless persons and persons with the citizenship of other states to the extent necessary to exercise their legal rights, as enshrined in international documents and reflected in national legislation. the fourth principle of implementation of the right of citizens to appeal to public authorities is to ensure equality before the law, which is to ensure the right to effective justice. it is in the context of justice that a reliable system of appeal against the decisions of judges, both at the international level and in the state itself, is created. the right to appeal against court decisions is a separate area of implementation of the right of citizens to appeal to public authorities. the right to appeal against court decisions ensures the determination of the right to personal judicial protection and equality before the law for every citizen and individual. the fifth principle is access to public information. thus, states must guarantee and enforce the right of access to information. states must recognize, protect and implement the right of access to information in their national constitutions. laws and regulations on the right of access to information must be consistent with international law, namely the protection of human rights and freedoms. this principle also provides for the maximum disclosure of information of public interest and in the possession of the state. if the state imposes any restrictions on access to public information, they must comply with international law and not violate human rights. the exception may be cases involving the restriction of access to information that contains state secrets and its disclosure may harm national security. access to public information should be free or at minimal cost, quickly processed, and have a system of independent control in cases of denial of requests. that is, states must promote the principles of openness and transparency in all aspects of decisionmaking processes of public (state) bodies. the sixth principle is the effectiveness of ensuring the right of citizens to appeal to public authorities. this principle is the basis for the creation in states of civic education programs aimed at increasing both individual and collective legal awareness and legal culture. these programs of civic education must be implemented in the school system, in various other educational institutions, and in state and nonstate institutions. civic education programs should include knowledge of human rights, the importance of participation for society in the political life of the country, an understanding of the political system, the legal mechanisms for exercising one's rights, through active participation in government through the exercise of one's rights, including the right to appeal to public authorities. 4. perspective on the introduction of information technology in the process of citizens' applications to public authorities the rapid development of modern information technologies and their introduction into various spheres of public life has not bypassed their introduction into the legal sphere. on the one hand, this is due to the need to process increasing volumes of information in a short period of time, and on the other hand, to the emergence of new threats of human rights violations, through unauthorized access to personal data, its theft and use in criminal interests. all this led to the creation of electronic systems capable of performing the above tasks. if to speak about the mechanism of realization of the citizen's right to appeal to state authorities, the creation of a system based on information technology will not only ensure the protection of personal data, under certain conditions created by the state, but will also eliminate further bureaucratic red tape and baltic journal of economic studies 69 vol. 8 no. 3, 2022 corruption component of the process. all of the above has pushed society to create and develop the concept of e-government. so, with the development of the concept of e-government, the problem of the relationship between the citizen and the state, in particular, in such a new form as an application to public authorities using information technology in electronic form becomes more and more relevant. as mentioned earlier, in 2005, a version of the electronic filing system, which had been developed in scotland back in 1999, was first presented to the german national parliament as part of a joint project between the scottish parliament and the bundestag, the "online services department". this new system was also introduced in the bundestag and in the parliaments of all 16 individual german states, including cities with special status (barnes, kaase, allerback, farah, heunks, inglehart, ect., 1979). among the various appeal bodies, the best known is the committee of the german bundestag. in germany, appeals to public authorities, both at the national and international level, can now be filed electronically. this innovative method is largely the result of scottish practice, the experience of which will be discussed below. the development of appeals institutions in germany has created new ways to improve the system by taking into account the opinion of the public through the possibility of holding hearings and public discussions in the committee of appeals (schmidt, johnsen, 2014). at the same time, mechanisms not related to the use of information technology continue to operate in the country. it is also interesting to study the experience of great britain to implement an equally innovative method in providing a mechanism for the implementation of the citizen's right to appeal to public authorities. in the uk there is a developed electronic system of filing complaints to the central government authorities. thus, since 2006 the country has had an electronic system of appealing to the office of the prime minister, as well as to other higher public authorities of the state. an electronic petition system has also been implemented at a very high level, thanks to which an electronic appeal against the introduction of toll roads and car tracking collected more than 1.8 million electronic signatures in 2007 (leston-bandeira, 2016). to submit an electronic petition, a citizen must go through the registration process on the site with verification through an email address, as well as provide a name and zip code. based on the above, we can say that the development of information technology has greatly accelerated and improved the relationship between citizens and the state, in connection with which the collective appeal in the form of an electronic petition is becoming increasingly popular; the use of information technology in the mechanism for exercising the right of citizens to appeal to public authorities requires continuous improvement in terms of protection of personal data, ensuring the identification of users in the digital environment, while excluding the possibility of abuse of the right to appeal, manipulation of public opinion, etc. 5. conclusion summarizing the results of the study of the genesis and development of the institute of the right of citizens to appeal to public authorities, international requirements for the mechanism of its implementation and the impact of information technology on the further improvement of the mechanism of the right to appeal, it is possible to come to the following conclusions: 1. in the history of genesis of development of the state and law the institute of citizens' appeal to public authorities has passed a long way and is still of scientific interest. thus, due to the rapid growth of scientific and technological progress from the beginning of the xxi century it became possible to improve the system of organization of citizens' appeals to public authorities, which virtually eliminated bureaucratic red tape. scotland was the first to modernize the organization of citizens' appeals to public authorities, where, as early as 1999, the parliament created an advanced system of appeals based on information technology, which allowed to submit, register and consider appeals electronically. further, the best practices of scotland were borrowed by other countries. so, already in 2005 – borrowing in germany and portugal, in 2012 – ireland, in 2014 – luxembourg. and in 2015, the westminster parliament proposed the introduction of the newest system of appeals to the public authorities, which provided for the creation of a committee on petitions, which oversees the consideration of electronic appeals. 2. the right of citizens to appeal to public authorities is the inalienable right of everyone to appeal directly orally or in writing, individually or collectively, to public authorities for the protection and realization of their rights, freedoms and legitimate interests. 3. the basic principles underlying the effective implementation of citizens' recourse to public authorities, both at the international and national level, are the close relationship between the right of citizens to recourse to public authorities and other human rights and freedoms; ensuring the right of citizens to recourse to public authorities consists in creating, both at the international and national level, conditions conducive to the realization of this right by all members of society; equality and non-discrimination in the exercise of the right; ensuring equality before the law, which is a guarantee of the right to effective justice; access to public information. baltic journal of economic studies 70 vol. 8 no. 3, 2022 4. the development of information technology has greatly accelerated and improved the relationship between citizens and the state; subsequently, collective recourse in the form of an electronic petition has become increasingly popular; the use of information technology in the mechanism for exercising the right of citizens to appeal to public authorities requires continuous improvement in terms of protection of personal data, ensuring the identification of users in the digital environment, while excluding the possibility of abuse of the right to appeal, manipulation of public opinion, etc. references: asher, m., bandeira, k. l., & spaicer, v. hansard society, assessing the effectiveness of e-petitioning through twitter conversations [internet; cited 2020 march 6]. available at: https://www.oidp.net/docs/repo/ doc174.pdf barnes, s. h., kaase, m., allerback, k. r ., farah, b., heunks, f., inglehart, r ., ect. (1979). political action: mass participation in five western democracies. beverly hills: sage publications. beato, g. from petitions to decision [internet; cited 2020 march 14]. stanford social innovation review. available at: https://ssir.org/articles/entry/from_petitions_to_decisions bochel, c. (2016). process matters: petitions systems in britain’s legislatures’. the journal of legislative studies, 22(3): 368–384. bull, r . (2015). building a framework for governance: retrospective review and rulemaking petitions. administrative law review, 67(2):265–319. carman, c. 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(2009). petitioning online: the role of e-petitions in web campaigning. in: baringhorst s, kneip v, niesyto j, editors. political campaigning on the web. new brunswick: transaction; 145 p. olena kovalova, maksym v. кorniienko, & yurii v. pavliutin (2020). the role of public organizations in ensuring national security of ukraine vol. 37, nº 65 (julio-diciembre), 136-155 cuestiones políticas esta revista fue editada en formato digital y publicada en julio de 2020, por el fondo editorial serbiluz, universidad del zulia. maracaibovenezuela. doi: https://doi.org/10.46398/cuestpol.3865.11 olena kovalova, maksym korniienko, & olena postol (2019). ensuring of child's dignity as a principle of modern education: administrative and legal aspects. asia life sciences supplement. asian international journal of life sciences, 21(2):341–359. rosenberg, d. (2020). ethnic perspective in e-government use and trust in government: a test of social inequality approaches. new media & society. available at: https://journals.sagepub.com/doi/ baltic journal of economic studies 71 vol. 8 no. 3, 2022 abs/10.1177/1461444820920655 rot, a., sobińska, m., hernes, m., & franczyk, b. (2020). digital transformation of public administration through blockchain technology. studies in computational intelligence, 887:111–126. schmidt, j. h., & johnsen, k. (2014). on the use of the e-petition platform of the german bundestag. hiig discussion paper series, 3:1–49. received on: 2th of august, 2022 accepted on: 12th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 153 vol. 8 no. 2, 2022 1 ukrainian-american concordia university, ukraine (corresponding author) e-mail: natalia.chaplynska@uacu.edu.ua orcid: https://orcid.org/0000-0002-0531-7678 2 ukrainian-american concordia university, ukraine e-mail: olena.zhytkevych@uacu.edu.ua orcid: https://orcid.org/0000-0003-2042-8795 3 ukrainian-american concordia university, ukraine e-mail: dayanna.cardenas@uacu.edu.ua orcid: https://orcid.org/0000-0002-3376-7684 doi: https://doi.org/10.30525/2256-0742/2022-8-2-153-161 mathematical method for evaluation of e-learning competitiveness of educational companies natalia chaplynska1, olena zhytkevych2, dayanna gabriela3 abstract. the purpose of the article is to analyze the parameters of the educational sector on a global scale, to summarize and present the differences in investments, internet penetration in the educational sphere in different countries, and to show the impact of covid-19 on global education. the article highlights educational digital transformations and innovations in different countries, the development of e-learning and new tools and means that have been developed during the covid waves. the article offers the basic concepts and characteristics for e-learning management of ukrainian educational companies using effective management and mathematical tools and means. methodology. to analyze relevant quantitative and qualitative data on e-learning management, a literature review, observation and research methodology, and comparison were used. stratification and decomposition approaches are used to develop a model for assessing the competitiveness of e-learning educational enterprises. research results show that the educational field requires new technologies, tools and equipment. various e-learning platforms and massive open online courses have shown significant effectiveness during the pandemic. at the same time, a significant number of challenges remain: internet penetration in different countries, investment in the development of learning equipment, the quality of e-learning materials, the ability to teach and learn with all the necessary tools and equipment, and access to devices. educational companies that understood the trends in time and were able to change their products accordingly have gained additional profits. this study contributes to the evaluation of the competitiveness of e-learning educational companies and organizations. the results of the study were used to further develop the proposed model. the proposed model has six functions that describe the main aspects of a typical domestic educational enterprise. practical implications. in the context of digital transformation and innovation, companies and countries must understand what tasks they need to solve, what problems to avoid, and find the best way to develop their own activities. these ideas have been developed into a model, which in this study is based on mathematical fuzzy logic and the hopfield neural network. value/originality. the model can be implemented in the ukrainian domestic educational market by companies in order to develop and improve their competitive strategy. key words: educational innovations, education in pandemic period, e-learning management of educational companies, mathematical and structural model of evaluation of education enterprise competitiveness level. jel classification: i21, i25, o31, o32 1. introduction with covid-19 spreading rapidly across asia, europe, the middle east, and the americas, countries took swift and decisive action to prevent the development of a full-blown pandemic. risk control decisions resulted in millions of students being placed on temporary "homeschooling". this required changes not only from individual educational institutions, but also from educational systems around the world. these changes have led to new examples of educational innovation. in the 21st century, new e-learning platforms began to develop and are in high demand during the pandemic. some educational companies began to develop their own programs and platforms to meet the demands of the pandemic. those who were able to develop and baltic journal of economic studies 154 vol. 8 no. 2, 2022 demonstrate their own innovative product in time made significant profits. however, many national and private educational institutions and companies are still in the process of transformation and require additional investment. innovative technologies, the right educational ecosystem and environment, tools, methods and modes of learning require significant investment and labor. due to unstable economic and environmental conditions, which have created new opportunities for innovation in the global e-learning market, ukrainian domestic educational companies are faced with the problem of developing and adopting a competitive strategy to improve their operations. for the first time, a model of evaluation of e-learning competitiveness of companies based on fuzzy logic and hopfield neural network has been introduced, which can be implemented in ukrainian domestic educational market by companies in order to solve the described problem. 2. global educational sector when it comes to education around the world, there are not only significant differences in educational attainment, but also in the level of investment in the sector. before covid-19, the education sector required significant investment. in 2018, norway spent the largest share of its gdp on education. it is equal to 6.7%. the second place belongs to new zealand (6.2%), and the third place is occupied by the united kingdom (6.1%). the lowest level belongs to italy (4.1%), japan (4.0%) (armstrong, 2021). norway was only seventh with 5.6% in 2019, while iceland (7.1%), sweden (6.9%), and denmark (6.3%) provided the largest investment in education as a share of gross domestic product in europe in 2019 (clark, 2021). at the beginning of 2020, educational institutions around the world began to face multifaceted challenges. learning regimes required new approaches. thus, on the one hand, the impact of digitalization increased, and on the other hand, the expectations of students, staff, and faculty changed. in 2020, more than 1.2 billion children worldwide in 186 countries were restricted from accessing classrooms. as an alternative, more and more educational institutions are facing the need to provide quality education online (li, lalani, 2020). figure 1 shows a statistical realization of the situation where covid-19 swept the world and up to 1.3 billion people were affected by national school closures. even at the beginning of march no one foresaw the magnitude of the situation that began to rapidly increase by march 18th. most of the challenges the educational institutions faced were related to the following areas: – in 2020, the way education is delivered has changed dramatically, with more distance learning classes using digital tools, aids, and electronic platforms; – increasing safety measures while providing educational services; – developing e-learning platforms and new content for online classes. increased adoption of technology-based learning solutions in corporate training, regardless of industry, is driving the growth of the e-learning market. to organize online learning in ukraine, it is necessary to take into account the level of internet penetration and the availability of devices for online classes among the population. in ukraine, the audience of internet users is growing rapidly. according to various sources, these figures vary. consider comparing internet penetration in different regions since 2012 (figure 2). as can be seen from figure 3, europe is one of the most digitized regions and has the highest level of internet penetration. consider comparing some european countries in 2012 and today (table 1). table 1 internet penetration by states, 2012 year country internet penetration (%) ukraine 38 russian federation 40 us 83 great britain 84 source: (world bank , 2021) the number of regular internet users in ukraine by the end of the 3rd quarter of 2019 increased by 0 0,2 0,4 0,6 0,8 1 1,2 1,4 25 27 29 2 4 6 8 10 12 14 16 18 20 22 figure 1. covid-19’s impact on global education in 2020 (numbers of learners impacted by national school closures worldwide) source: (infographics, 2021) baltic journal of economic studies 155 vol. 8 no. 2, 2022 7% compared to the previous year. this is evidenced by the results of a study conducted by the research company factum group at the request of the internet association of ukraine. one reason for this growth is the so-called "smartphoneization" of the population. in 2021, 22% of users are accessing the internet exclusively through smartphones. for a significant portion of new users in 2019–2020, the smartphone is the first and only device to access the web. the minister of transformational digitalization of ukraine, mr. fedorov, said that in april 2021 internet penetration in ukraine will be 62 to 70% (cabinet of ministers of ukraine, 2021). given the quarantine measures, more and more people need access to the internet. in general, at the end of 2021 the share of internet users in ukraine is 71% (22.96 million), 65% of the population has access to the internet at home (ukrainian internet association, 2021). in terms of global databases, the number of internet users worldwide will be 4.9 billion (63.22%) in 2021, up from 4.6 billion in 2020. the country with the most internet users is china (854 million). and the region with the highest internet penetration is northern europe – almost 97% ( johnson, 2021). for example, denmark – 99%, the uk – 98%, sweden, switzerland – 97%, and germany – 95% of the population. it would also be good to draw attention to the situation of e-learning in latin america. surprisingly, despite the fact that online education was the most popular learning system in latin america and the caribbean during the coronavirus pandemic, a significant portion of students in the region have limited access to the internet or digital platforms. some latin american governments and ministries of education have had to suggest other creative ways to deliver educational resources. in mexico, for example, the solution was found by broadcasting educational programs on television and radio. a popular program “aprende en casa” was launched in 2020 in order to provide the learners with quality educational content developed for each school level on a daily basis (degenhard, 2021). 3. digital transformation and innovation in education developed countries were restructuring administrative systems, digital strategy, programs, forms of learning, trends in education, creating new ecosystems. these processes have had a significant impact on educational innovation (figure 3). expanding access to educational opportunities and providing high-quality education leads to higher per-student spending. this must be balanced against other public spending requirements, overall fiscal burdens, and the creation of an appropriate ecosystem. thus, the question of whether resources allocated to education are yielding adequate returns has become quite important. it is difficult to calculate the optimal level of resources needed to prepare one student for a future job, but international comparisons can provide useful guidance. most countries understood the problem and tried to invest more resources in education. figure 4 shows that software development in education was one of the most important among all other areas during covid-time, with 25% of respondents spending more on software development to meet covid-time requirements. however, 38% did not indicate any additional spending on figure 2. global internet penetration rates in 2012, 2015, 2017, 2019, by region source: (johnson, 2021) baltic journal of economic studies 156 vol. 8 no. 2, 2022 figure 3. education digital transformation and innovation source: (yanckello, lowendahl, 2021) 25 15 38 22 17 22 46 15 12 18 49 20 17 24 37 22 17 21 44 17 0 5 10 15 20 25 30 35 40 45 50 education financial sector and accounting it and computer software marketing and advenrtising medical and health care spend more spend less no change unsure figure 4. covid-19 impact on software spending worldwide 2020, by industry source: (shanhong , 2021) baltic journal of economic studies 157 vol. 8 no. 2, 2022 educational software development, and as we will see later in this article, this is a fundamental error. among innovative sources of education during the pandemic, coursera, skillshare, udemy, codecademy, edx, pluralsight, future learn and moodle are considered to be the most popular online learning platforms. there are also online course platforms focused on specific courses, for example learn-worlds, teachable, thinkific, kajabi, podia. the market size of e-learning surpassed usd 250 billion in 2020 and will witness a cagr of over 21% through 2027 (global market insights, 2020). the two most popular companies with their own platforms of educational type are edx and coursera (table 2), which state that the only way to offer courses on their sites is via an agreement between the platform and the educational institution (university, for instance). in this way, they ensure fair quality control of courses by entering into agreements with educational organizations and prestigious institutions. this also helps attract visitors to use the courses on the aforementioned platforms. table 2 comparison of massive open online courses (mooc) provider platforms 2019 platform students (millions) courses micro programs degrees coursera 45 3800 420 16 edx 24 2640 292 10 udacity 11,5 200 40 1 future learn 10 880 49 23 source: (shah, 2019) note that prometheus is quite popular in ukraine. it has launched an educational platform of mass open online courses created in ukraine. the main goal of the platform is to provide free access to universitylevel courses to anyone who wants to. it also opens the opportunities for online publishing of the educational courses. prometheus is an educational ngo founded in 2014 by ivan prymachenko and oleksii molchanovskyi (degeler, 2014). until april 2019 it was a member of ngo-coalition promoting reforms in ukraine – reanimation package of reforms (ngos-members, 2022). the main difference between the different platforms is that some of them, such as edx, are non-profit companies and ask their members for a monetary fee, but do not require a subscription fee from students. on the other hand, some platforms, such as coursera, are for-profit and require users to pay a subscription fee, in addition to paying for the appropriate certificate if the student wishes (coursera, 2022). for its part, edx offers free courses and paid programs. in free courses, the student has access to the course for a certain period of time for free. however, if a student wants unlimited access or a certificate, he or she must pay. edx offers two different business models for its partners: (1) the self-service model; in which the partner can use the lms (learning-management system) platform for free to create and offer their courses through edx company, but without assistance from the platform (afterwards, they must pass a quality control review); and (2) the model supported by edx in which the platform offers design services to create courses. the revenue sharing for the first model assumes that edx keeps the first $50,000 (usd) generated by the course and $10,000 for each repeat. from there, the remaining income is shared 50% between both parties. in the support model by edx, the platform charges $250,000 as a base fee for each new course, and $50,000 each time the same course is repeated. after this, the educational provider keeps 70% of the subsequent revenue. the chosen model works course by course and can be changed every 12 months (roos, 2021). on the other hand, coursera distributes 6% to 15% of the income generated by each course, plus an additional 20% of the global income of all the courses for each organization. in total in 2020 global massive open online courses market size costs 6134,79 million usd, it was expected 8160,97 million in 2021. it is projected increasing at a cagr of 33,39% to reach 46105,10 million usd by 2027 (figure 5). as can be seen in figure 5, mooc will evolve rapidly, and companies need to understand the importance of emphasizing the development of the various tools, equipment, and approaches needed to create a quality mooc. consider the most important trends that need to be developed in e-learning companies. figure 5. global massive open online course market source: (research and markets (2022) baltic journal of economic studies 158 vol. 8 no. 2, 2022 1. project-based learning using 3d modeling, designing etc. evolving educational models consist of courses based on practical projects, such as coding, creating web sites, learning how to use 3d models in practice, etc. this has many advantages over traditional teaching methods. instead of passing theoretical exams, students can defend a real project or design work suitable for evaluation and practical use. such project involves student of different ages and inspire them to work in teams and collaborate (edsurge, 2019). 2. hybrid educational models. many companies and educational institutions can save on building maintenance, transportation costs and premium lunches for employees. at the same time, it is beneficial for employees because they save travel time to their place of work, and therefore can reduce the cost of renting an apartment, etc. 3. gamification as a part of e-learning. gamification is becoming increasingly popular, especially due to the widespread use of online learning services and apps. students from an early age expect to be exposed to games and fun video elements while learning. therefore, developers use interactive elements from the game industry to engage and retain users. by incorporating educational games to achieve greater motivation and student participation, gamification is becoming part of the educational process even in traditional schools and universities. there are problems with educational programs for elementary school students in ukraine, as young children find it difficult to learn online via smartphones, laptops, or desktops. another problem is that not every family can afford digital devices for every family member. also, when children are in different classes, there is often not enough space at home for separate rooms for each child. 4. facilitation. team projects which engage participants in creating, discovering, and applying learning insights (guth, pepper, 2021). 5. virtual class or project based learning in virtual environment. it is an instructional model for students, which help to create original products in learning activities in a virtual reality for problem solving. 6. special learning management system. they can help manage the educational process. they can include information of various types: learning success, educational resources, materials, electronic journals, contacts and communication between instructors and students, assignments, assignments, etc. the most popular among them moodle (especially in ukraine, because of free version and effectiveness of tools), blackboard, canvas (very popular in usa) (bouchrika, 2021). 7. adaptive learning. new approaches in the learning process that allow for adjustment to the student. this creates a unique way of learning that is not available in traditional classrooms. this system can provide students with immediate assistance, resources specific to their learning needs, and relevant feedback that students need (orakci, 2020). 8. mobile learning. all programs and courses should be available on cell phones. this type of training is one of the leading on the market and will continue to be so. the main reasons are the steadily decreasing cost of devices and the internet. 4. survey methodology a wide variety of e-learning platforms and growth opportunities in the global e-learning market require ukrainian educational enterprises to develop competitive strategies. since the e-learning market is considered a competitive market, which is rapidly growing in the educational sector, the competitive strategy of the enterprise should cover all aspects of its activities. to develop a competitive strategy and identify necessary areas for improvement, an analysis of existing models, methods and software for assessing the level of competitiveness of companies in the field of e-learning is needed. the results of the studies included in this paper indicate a lack of strategic direction, differentiation and a comprehensive approach to cover all the necessary aspects of the company 's activities in the market of e-learning. in particular, computational methods have varying degrees of depth and scope of research, which makes them inadequate and insufficient for practical application by educational enterprises in ukraine. all of this together means that it makes sense to develop a new method that eliminates the existing shortcomings of traditional approaches and provides new opportunities for modern companies to operate in competitive markets with a high degree of instability. it has been justified that in order to provide the effective assessment of competitiveness and deficiencies of existing methods managers of enterprises (regardless of their scope of operating) must concern the system of interconnection between internal and external influence factors of a company activity (azarova, zhytkevych, 2013, 2014; azarova, moroz, zhytkevych, 2013). this interrelationship has to be shown by linking main areas of company operating activities in competitive markets. 5. findings the authors have developed a mathematical model to assess the level of competitiveness of the company, based on the analysis and systematization of e-learning management for the educational enterprise (formula 1-2) (azarova, zhytkevych, 2013, 2014; azarova, moroz, zhytkevych, 2013). baltic journal of economic studies 159 vol. 8 no. 2, 2022 x′m , x′c –input parameters of the set x' for evaluating the impact parameter xi; li, i = 1,n, (n = 6) – aggregate functions; l – the set of output parameters. the model has been developed by using stratification and decomposition approaches, which allows transforming and displaying the set of inputs (x') to the set of outputs (l). these sets can take into account a wide range of influence factors of educational entities competitiveness activities, which, in turn, have been limited by the application of criteria and minimal impact in order to avoid double counting. the set of inputs consists of parameters that are grouped into six aggregate functions. these functions describe the main activity aspects of the typical domestic educational enterprise, such as: efficiency of promotion and sales of educational product; effectiveness of educational activity; competitiveness of a product; financial function; organizational culture of an enterprise; environment factors and efficiency of e-learning management. the set of output parameters (l) can be classified into five possible stages: – not competitive; – weakly competitive; – steadily competitive; – strongly competitive; – leader comparatively to the market average. in order to evaluate the aggregate functions, we offer to use the set of influence factors for each one. detailed description of these functions and factors is here. we start with the first aggregate function – efficiency of promotion and sales of educational product, which is closely related to stimulation demand for a company’s service, therefore it is all about informing, persuading, or reminding target audiences about its product. the efficiency of promotion and sales of an educational product can be quantitatively and qualitatively assessed by a set of these influence factors: x11 – company 's ability to create awareness; x12 – get people to try products and send their feedback; x13 – provide information about the product and keep loyal customers; x14 – increase use of a product, identify potential customers; x15 – teaches clients about potential services. the investigation of the second aggregate function – effectiveness of educational activity, completed by these influence factors: x21 – ability to design educational interventions, courses, mooc; x22 – measuring change as a result of participation in educational activities; x23 – accreditation of continuing education: the critical elements; x24 – availability to access to a mobile multimedia learning system by a company; x25 – availability to access to a mobile multimedia learning system by students. the evaluation of the third aggregate function – competitiveness of a product, which are educational services, is offered by the set of influence factors as: x31 – availability of learning management system; x32 – ability to participate in students' exchange programs locally and abroad; x33 – practical significance; x34 – assistance with employment; x35 – reliable material and technical base; x36 – flexibility of the mode of study (adaptive or hybrid learning); x37 – involvement of new tools to educational process (possibility to create and work with virtual room, gamification); regarding the financial function, which provides important accounting information for decision-making, therefore data should be processed further to make more thorough decisions. for this purpose, financial ratios provide deeper approaching: x41 – current ratio; x42 – total assets turnover; x43 – total debt to total assets; x44 – profit margin; x45 – return on invested capital. (1) (2) baltic journal of economic studies 160 vol. 8 no. 2, 2022 the assessment of the fifth aggregate function – organizational culture of an enterprise, the set of influence factors are: x51 – values, behaviors, beliefs and policies; x52 – defined practices; x53 – accepted behaviors in a company; x54 – human resources; x55 – company's response to circumstantial challenges. e-learning can provide new channels for the traditional teaching and learning but there are still many questions about what makes e-learning an effective and satisfactory method. so, one should be very careful with setting up influence factors for the evaluation of the sixth aggregate function – the environment factors and efficiency of e-learning management: x61 – learning engagement; x62 – student’s self-efficacy; x63 – well-being of students; x64 – superficial control; x65 – perceived familiarity. these influence factors, which are input parameters of the set x' of the offered model, have been chosen based on outcomes of the analysis of the relevant quantitative and qualitative data for e-learning management. the analysis conducted by literature review, observation, research methodology, comparison and minimal criterion approach, which allows to eliminate double counting of interrelated factors. in order to test and formalize the mathematical model for assessing the level of e-learning competitiveness that takes into account different types of influence factors we can offer the apparatus of artificial intelligence. a process for evaluating the aggregate functions can be completed by using fuzzy logic that permits to implement this process with minimal time and financial resources (azarova, moroz, zhytkevych, 2013). further evaluation of the level of competitiveness can be completed by applying mathematical apparatus of hopfield neural network (azarova, zhytkevych, 2014). thus, the proposed mathematical method of identification of the level of competitiveness is based on mathematical fuzzy logic and hopfield neural network. this method provides advantages such as: – implementation conducted by natural language of expert; – doesn’t require evaluation of all possible options and combinations of various assets; – involves minimal time and financial resources, therefore saves limited resources; – allows controlling and monitoring of the possible changes from the internal and external environments, speeds up, simplifies and reduces the cost of such a process supported by the mathematical software package mathlab 8.0 or others. 6. conclusions the result of this analysis shows that society is still in the process of understanding what changes should be made in education around the world. the development of education today should be linked to the development of software and free access to the internet to create powerful learning environments based on investments in new tools and equipment. some educational companies have already profited from innovative e-learning platforms and mooc, but the field of education is not responding to the current supply. coursera, skillshare, udemy, codecademy, edx, pluralsight, future learn and moodle are considered to be the most popular e-learning platforms. the two most popular platforms of educational type in the world are edx and coursera, which state that the only way to offer courses on their sites is via an agreement between the platform and the educational institution, companies. the basic concepts and characteristics for assessing the management of e-learning with the effective management and mathematical tools and instruments were proposed in relation to the ukrainian educational companies. to automate the process of assessing the level of competitiveness of educational companies based on the proposed mathematical model and method, machine learning tools can be used. the list of six aggregate functions set out herein can be reviewed by addition or subtraction, since they strongly depend on the scope of operations of each educational company or institution. the developed model should be automated and tested in order to provide actual results. the results of testing can be utilized for further proceeding with competitive strategy development. therefore, the plan of actions based on testing outcomes is required. references: armstrong, m. 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(2014). assessment of level of competitiveness of the enterprise by means of the mathematical apertures of artificial intelligence [paper presentation]. science and education: materials of the vi international research and practice conference, munich, (pp. 169–171). publishing office vela verlag waldkraiburg. baltic journal of economic studies 16 vol. 2, no. 5, 2016 improving marketing logistics management of enterprises of agro-industrial complex raisa bilovol1, alina chaikina2 poltava national technical yuri kondratyuk university, ukraine abstract. the purpose of the paper is to prove the need of improving marketing logistics management at enterprises of agro-industrial complex with the use of balanced scorecard method that will allow objectively evaluate its effectiveness. methodology. the survey is based on the use of general scientific research methods, methods of analysis and synthesis, method of abstraction. results. research of state sales of agricultural products in agrarian enterprises helped us to identify and organize the following disadvantages: intermediary structures that are engaged in marketing of agricultural products significantly increase their costs that excess in 2-4 times the original price of agricultural products; inadequacy of agricultural market infrastructure and lack of wholesale and retail markets for agricultural products; low level of development of information electronic communications; backwardness of transport infrastructure and poor quality of roads, particularly in rural areas; high level of physical and moral deterioration of transport; low level of development of industrial and technological base of agricultural enterprises warehousing. practical implications. we systemized and proposed indicators of evaluation of marketing logistics at enterprises of the agro-industrial complex based on the balanced scorecard in key areas: financial and cost-effectiveness indicators; indicators of internal logistics business processes; quality and development staff; indicators in the direction of working with clients. to the financial indicators and indicators of economic efficiency we included such as sales per 1 employer at marketing department (qs/employer), proportion of logistics cost of marketing in the total cost of the enterprise (%), coefficient of the implementation of marketing plan (cm), roi in logistics marketing (%), profitability of marketing channels (%). internal logistics business processes in enterprises of the agro-industrial complex represented by such indicators as the share of orders that executed late, including objective reasons (%), share of reject (fault of the manufacturer) (%), share of violating the terms of delivery, including objective reasons (%), speed of loading-unloading works (sp). indicators of evaluation of marketing logistics in the direction of quality and staff development at enterprises of the agro-industrial complex are characterized by such indicators as share of qualified personnel in marketing department (%), coefficient of employee turnover (ce), share of expenditure on staff training in marketing department (%), level of investment return of staff training in marketing department (l). as the indicators of evaluation of marketing logistics at enterprises of the agro-industrial complex in the direction of working with clients, we proposed such as the share of stable clients (%), reliability of supply (csr), speed of customer and clients service (csp), share of complaints on supply (%). conclusions. thus, using the proposed indicators of evaluation of marketing logistics in various areas, management of enterprises of the agro-industrial complex should determine the optimal set of parameters that will allow making realistic assessment of the results of functioning of its marketing logistics. key words: management, estimation of sale logistic, balanced scorecard system, agrarian enterprises, sale logistic. jel classification: l22, m31, r14 1. introduction enterprises of the agro-industrial complex are the system of interconnected logistics operations with the movement of agricultural raw materials, products, property and information for the purpose of meeting the needs of their customers and maximize own profit. therefore, implementation of management subsystem of marketing logistics that is implemented by function of management is really important for the enterprises of agroindustrial complex, due to the following factors, such as the high costs of production and sale of domestic products; considerable lag sphere of circulation of agricultural products from the production sector; lack of logistics system of sales. sales of agricultural products dealing with intermediary structures that increase costs that corresponding author: 1 department of management and logistics, poltava national technical yuri kondratyuk university. e-mail: bilovolri@ukr.net 2 department of management and logistics, poltava national technical yuri kondratyuk university. e-mail: alinachaikina@ukr.net baltic journal of economic studies 17 vol. 2, no. 5, 2016 exceeding in 2-4 times the original price of the product; imperfection of agricultural market infrastructure development and lack of wholesale and retail markets of agricultural products; low level of development means of the information electronic communications; underdevelopment of transport infrastructure, quality of roads, particularly in rural areas; high level of physical and moral deterioration traffic; low level of development of industrial and technical base of warehouse facilities of agricultural enterprises (zarubanna, 2014). so at enterprises of the agro-industrial complex should be set up the logistics management subsystem, experts of which could ensure the implementation of specified functions and be able to adequately assess the effectiveness of marketing logistics management. 2. scientific analysis of categorical apparatus value of sales logistics in enterprise management and evaluation of its performance are investigated in the work of such scientists as alyesinskaya t.a., anikin  b.a., zarubanna l.v. (zarubanna, 2014), vitkovski  j., coyle  j., robert s. kaplan, mirotin l.b. among ukrainian scientists engaged in matters of logistics enterprises subsystem we can distinguish such as balabanov  l.v., golikov e.a., degtyarenko  v.n., kirshyn m.v., kolmakova o.m. (kolmakova o.m., smachylo v.v., 2012), krykavsky e.m. (krykavsky, 2006), malyarets  l.n., smyrchynskyy v.v. (smyrchyns'kyj, 2008), ryszard b. and jakubiec m. (barcik ryszard and marcin jakubiec, 2013) etc. but our research of the scientists’ works shows that they did not have a common approach to assessing indicators of marketing logistics management in enterprises of the agro-industrial complex that develops under fierce competition and demanding consumer needs for quality agricultural products and services. if we want to improve the business activity of agricultural enterprises we need to study and improve marketing logistics management in enterprises of agroindustrial complex. in table 1 we study reviews of the literature sources about scientists concerning the interpretation of the essence of the concept “sales logistics”. so, we can evaluate the effectiveness of marketing logistics management at enterprises of the agroindustrial complex as a whole, the efficiency of logistics services (division) within a particular enterprise or to count only individual logistic indicators if the agricultural company does not have such unit. 3. methods of assessing the indicators for logistics management at enterprises of agro-industrial complex generalizing definitions of theorists and practitioners regarding the concept of “marketing logistics” suggests defining the features of marketing logistics: – planning, control, and management of transportation, warehousing and other tangible and intangible transactions (zarubanna l.v., 2014; kyslyj v.m., bilovods'ka o.a., olefirenko o.m., 2010; krykavsky e.m., 2006); – part of the common enterprise logistics system that provides a rationalization of physical promote products table 1 the interpretation of scientists’ definition of “marketing logistics” definition of “marketing logistics” author planning, control, and management of transportation, warehousing and other tangible and intangible transactions, carried out in the process of bringing the finished product to the customer in accordance with the interests and requirements of the latter, as well as transmission, storage, and processing of relevant information. zarubanna l.v. (zarubanna l.v., 2014) part of the general enterprise logistics system that provides rationalization of physical promotion of products to consumers. kolmakova o.m. (kolmakova o.m., smachylo v.v., 2012) complex interrelated functions that implemented in the process of distribution of material flow between different wholesale buyers, including the activities of planning, control, and management of transportation, warehousing and other tangible and intangible transactions that are carried out in the process of bringing the finished product to the customer in accordance with its interests and requirements. krykavsky e.m. (krykavsky e.m., 2006) part of the general logistics system that provides the most effective organization of products distribution. it covers the entire chain of distribution systems, marketing, transportation, storage, and others. smyrchynskyy v.v. (smyrchyns'kyj v.v., 2008) planning, managing and physical processing of the flow of finished products accompanied by the necessary information, financial and service flows from the moment of acceptance of goods from production to the customer in order to optimize consumables and time characteristics of that parts of tangible and intangible flows. kisliy v.m. (kyslyj v.m., bilovods'ka o.a., olefirenko o.m., 2010). a sign of coherence of logistics and marketing is a concept called marketing logistics. taking of logistic activities in cooperation with marketing happens in area of point of contact, which is logistics in delivery and distribution, creating commonly a structure of marketing logistics. ryszard b. and jakubiec m. (barcik ryszard and marcin jakubiec, 2013) baltic journal of economic studies 18 vol. 2, no. 5, 2016 to consumers (zarubanna l.v., 2014; krykavsky e.m., 2006); – set of related functions that are implemented in the process of distribution of tangible and intangible flows (zarubanna l.v., 2014; kyslyj v.m., bilovods'ka o.a., olefirenko o.m., 2010; krykavsky e.m., 2006); – part of the general enterprise logistics system (kolmakova o.m., smachylo v.v., 2012; smyrchyns'kyj v.v., 2008); – ensures the efficient organization of production distribution (smyrchyns'kyj v.v., 2008). investigating definitions of theorists and practitioners regarding the concept of “marketing logistics” we appropriate to define it as a subsystem of the general logistics management of enterprise, which represents the process of management of planning , control of marketing logistics operations in order to meet consumer demand with minimal costs, taking into account the features that are related to the production, warehousing , storage and transportation of agricultural products. unlike existing interpretations, our proposed definition enables more holistically reveal the essence of marketing logistics, including three components: – organizational aspects of marketing logistics at the enterprise; – customer satisfaction; – disclosure of the essence of marketing logistics, considering the features of agricultural enterprises. synthesis of methods and systematization of assess indicators of logistics activity of enterprises of agroindustrial complex, including of marketing logistics provided an opportunity to highlight the following methodological approaches: 1. functional efficiency of logistics is measured as a useful economic effect (number of manufactured products, volume of logistics services, value of received profits and so on, and also demonstrates a high level of production and as a result of savings in material and financial resources). 2. comparison of the results that are achieved in the process of functioning of the logistics system and the cost of their achievement gives a better judgment about the effectiveness of logistics savings and inventory sales. this integrated indicator may be an indicator that represents the ratio of economic benefits derived from the implementation of the logistics concept and the capital that was invested in logistics. for a quantitative assessment of such economic category as efficiency, we should use a relative measure – coefficient of efficiency (ce) of material flow in the logistics chain. building efficiency indicators are based on relation “actual effect to the potentially possible effect”: cе = ef / pf, (1) there ef – actual effect derived from the functioning of material flow in the logistics chain for a certain period of time, uah per units of products; pf – maximally achievable (potential) effect, which can be obtained in specific conditions of production for the same period of time, while optimizing material flow, uah per units of products (krykavsky, 2006). accepting with the proposals of authors, we offer to evaluate the effectiveness of marketing logistics management in enterprises of the agro-industrial complex by the balanced scorecard method. the main purpose of the use of the balanced scorecard is to provide quantitative and qualitative consistency between different indicators that help holistically measure the effectiveness of marketing logistics and consequently the success activity of the enterprises of the agro-industrial complex (anykyna b.a., 2009; myrotyn l.b., tashbaev i.e., kasenov a.g., 2012). developing this idea, we offer to evaluate marketing logistics management at enterprises of the agroindustrial complex in four directions (fig. 1). more detailed assessment areas of marketing logistics management at enterprises of the agro-industrial complex are considered, offering specific indicators for any of them. depending on the strategic objectives of enterprises of the agro-industrial complex that are set by the direction for the sales department, in each case should be chosen an optimal set of financial indicators for their complex analysis (table 2). directions of marketing logistics assessment of the agricultural enterprises evaluation of financial indicators and indicators of economic efficiency assessment of business relationships with clients, consumers the quality of the staff and their professional development evaluation of internal logistics processes fig. 1. evaluation of marketing logistics management at enterprises of the agro-industrial complex for the defined areas baltic journal of economic studies 19 vol. 2, no. 5, 2016 for the purpose of assessing marketing logistics management at enterprises of the agro-industrial complex in the direction of assessment of internal logistics business processes, each enterprise of the agro-industrial complex depending on the specifics should identify those business processes, which are in high priority for internal logistics processes, and constantly monitor their implementation. so in tab. 3 we offer indicators of evaluation of internal logistics business processes at enterprises of the agro-industrial complex. unfortunately, in practice of domestic enterprises of the agro-industrial complex, estimation of marketing logistics in the direction of quality and development of staff is less popular than on the financial direction. not table 2 indicators of marketing logistics management at enterprises of the agro-industrial complex on financial indicators and indicators of economic efficiency indicator formula characteristics of indicator sales per 1 employer at marketing department (qs/employer) sales of finished products/number of employees at marketing department indicator is calculated for the purpose of comparing its dynamics or with other enterprises-competitors proportion of logistics cost of marketing in the total cost of the enterprise (%) cost of marketing / total costs of the enterprise characterizes the importance of the cost of marketing in the structure of total cost of the enterprise coefficient of the implementation of marketing plan (cm) (actual marketing volume – planned marketing volume) / planned marketing volume the severity of the calculation consists in the contingency plans, as well as their reliability roi in logistics marketing (%) (net income / total investment in marketing logistics) * 100% the presence of indicators about the amount of investment at the enterprise profitability of marketing channels (%) (profit of marketing channels – cost of marketing, transportation, lack of storage) / (cost of marketing) * 100% the indicator shows profitability of marketing channels and used for the purpose of comparison and optimization table 3 indicators of the evaluation of marketing logistics in the direction of assessment of internal logistics business processes at enterprises of the agro-industrial complex indicator formula characteristics of indicator the share of orders that are executed late, including objective reasons (%) (the share of orders that executed late, including objective reasons / total number of orders) * 100% refers to the indicators that characterize the reliability of supply the share of reject (fault of the manufacturer), (%) (amount of reject products / total number of products) * 100% provides information about work of system of quality control the share of violating the terms of delivery, including objective reasons (%) (amount of deliveries violating the terms of delivery, including objective reasons / total amount of deliveries) * 100% violation of terms of delivery is possible for objective reasons and subjective reasons the speed of loading-unloading works (sp) (actual time – normative time) / (normative time of loading-unloading works) shows the speed of technical staff work table 4 indicators of the evaluation of marketing logistics in the direction of quality and staff development at enterprises of the agro-industrial complex indicator formula characteristics of indicator the share of qualified personnel in marketing department, (%) (the share of qualified personnel in marketing department / total amount of qualified personnel in marketing department) * 100% qualified personnel in marketing department provides positive work in the department coefficient of employee turnover, (ce) (employees who left enterprise for a certain period – inevitably released employees) / average number of employees during the corresponding period shows dissatisfaction employees with working conditions the share of expenditure on staff training in marketing department, (%) (the cost of training staff in marketing department/sum of costs for training all employees) * 100% comparing the cost of training staff in marketing department with the cost of training all employees in enterprise level of investment return of staff training in marketing department, (l) cash sales from revenue/cost of training staff in marketing department it is difficult to distinguish changes in money earnings revenue and level of investment spending after education of staff training in marketing department baltic journal of economic studies 20 vol. 2, no. 5, 2016 all enterprises of the agro-industrial complex used this way, but the study of the quality of the human resources, performance of their work and methods of stimulating work activity will help to identify the reserves of increasing staff productivity and also efficiency of enterprises of the agro-industrial complex as a whole. therefore, indicators of evaluation of marketing logistics in the direction of quality and staff development at enterprises of the agro-industrial complex we propose to consider in the table 4. evaluation of marketing logistics in the direction of client and customers services are diverse, and that is why we can evaluate it by using indicators of reliability, stability, speed, flexibility because good governance work with the clients is a factor that improve the competitiveness of agricultural enterprises in market conditions. actions on formation of the system of logistics services at the enterprises of the agro-industrial complex are performed in the following sequence: – segmentation of the consumer market, its division into specific consumer groups, any of each may require certain services according to the characteristics of consumption; – determining the list of the most important for customers services; – systematization of services included in the drawn up list, focusing attention on the most important services for customers; – setting standards of services for different market segments; – evaluation of services provided, establishing the relationship between service level and cost of services provided, determining the level of service that is necessary to ensure the competitiveness of enterprises of the agro-industrial complex; – establishment of feedback with customers to ensure compliance with marketing services to the needs of customers. indicators of evaluation of marketing logistics at enterprises of the agro-industrial complex in the direction of working with clients, consumers are in the table 5. 4. conclusions thus, using the proposed indicators of evaluation of marketing logistics in various areas, management of enterprises of the agro-industrial complex should determine the optimal set of parameters that will allow making realistic assessment of the results of functioning of its marketing logistics. however, we encourage responsible managers and experts to carry out such an assessment systematically and on the condition of comparison of its results in dynamics, as well as with results of other agricultural enterprises-competitors. the prospect of further research is to develop indicators to measure the marketing logistics in the context of the various options of its organization at enterprises of the agro-industrial complex, depending on the size and specifics of their activities. references zarubanna, l.v. (2014). logistychne upravlinnja pidpryjemstvom: sutnist' ta peredumovy rozvytku. stalyj rozvytok ekonomiky, vol. 7, p. 120–123. kaplan, robert s., and norton, david. (1993). putting the balanced scorecard to work. harvard business review 71, no. 5, p. 134–147. kyslyj, v.m., bilovods'ka, o.a., olefirenko, o.m. (2010). logistyka: teorija ta practica. – kyiv, cul, 360 p. kolmakova, o.m., smachylo, v.v. (2012). adaptacija systemy zbalansovanyh pokaznykiv dlja ocinjuvannja dijal'nosti pracivnykiv transportnyh pidpryjemstv. visnyk ekonomiky transportu i promyslovosti, vol. 33, p. 191–194. krykavsky, e.m. (2006). logistyka dlja ekonomistiv. – lviv, vydavnyctvo nacional'nogo universytetu «l'vivs'ka politehnika», 448 p. maljarec', l.m., shtereverja, a.v. (2008). zbalansovana systema pokaznykiv v ocinci dijal'nosti pidpryjemstva. – harkiv, hneu, 188 p. table 5 indicators of the evaluation of marketing logistics at enterprises of the agro-industrial complex in the direction of working with clients indicator formula characteristics of indicator the share of stable clients, (%) (the share of stable clients / total amount of clients) * 100% characterizes on how much consumers are satisfied with the work of the enterprise reliability of supply, (csr) number of completed deliveries / total amount of planned supply determines on how the enterprise complies with the terms of delivery the speed of customer and clients service, (csp) number of timely supply / total number of deliveries depending on the information obtained via telephony clients and consumers the share of complaints on supply, (%) (the number of orders on which complained / total number of orders) * 100% diagnoses level of customers’ service quality through surveys. baltic journal of economic studies 21 vol. 2, no. 5, 2016 smyrchyns'kyj, v.v. (2008). logistyka. – ternopil, tneu, 221 p. anykyna, b.a. (2009). logystyka: uchebnoe posobye. – moscow, ynfra, 244 p. myrotyn, l.b., tashbaev, i.e., kasenov, a.g. (2012). logystyka: obsluzhyvanye potrebytelej. – moscow, ynfra, 407 p. barcik, ryszard, and marcin jakubiec. (2013). marketing logistics. university of bielsko-biała, p. 5–12. раиса биловол, алина чайкина усовершенствование управления сбытовой логистикой предприятий аграрно-промышленного комплекса аннотация. цель исследования – доказать необходимость совершенствования управления сбытовой логистикой предприятий аграрно-промышленного комплекса с помощью метода сбалансированной системы показателей, который позволит объективно оценить ее эффективность. методы исследования. в процессе написания статьи были использованы общенаучные методы исследований, методы анализа и синтеза, метод научной абстракции. результаты исследования. исследование состояния сбыта сельскохозяйственной продукции аграрных предприятий позволили выявить и систематизировать следующие недостатки: посреднические структуры, занимающиеся сбытом аграрной продукции значительно увеличивают расходы, превышающие в 2-4 раза первоначальную цену сельскохозяйственной продукции; несовершенство развития инфраструктуры аграрного рынка и отсутствие оптово-розничных рынков сельскохозяйственной продукции; слабый уровень развития средств информационных электронных коммуникаций; отсталость транспортной инфраструктуры и низкое качество автомобильных дорог, особенно в сельской местности; высокий уровень физического и морального износа транспорта; низкий уровень развития производственно-технической базы складского хозяйства аграрных предприятий. практическое направление. нами систематизированы и предложены показатели оценки сбытовой логистики предприятий аграрно-промышленного комплекса на основе сбалансированной системы показателей по основным направлениям: финансовые показатели и показатели экономической эффективности; показатели внутренних логистических бизнес-процессов; показатели качества и развития персонала; показатели работы с клиентами и потребителями. к финансовым показателям и показателей экономической эффективности целесообразно отнести следующие: объем реализации на 1-го работника отдела сбыта; доля логистических затрат на сбыт в общих затратах предприятия; коэффициент выполнения плана по сбыту; рентабельность инвестиций в сбытовую логистику; рентабельность канала сбыта продукции. внутренние логистические бизнес-процессы предприятий аграрно-промышленного комплекса представлены следующими показателями: доля заказов, выполненных несвоевременно, в т. ч. по объективным причинам; доля брака по вине производителя, доля нарушение сроков доставки, в т. ч. по объективным причинам; скорость погрузочно-разгрузочных работ. показатели качества и развития персонала характеризуются следующими показателями: доля квалифицированного персонала отдела сбыта; коэффициент текучести кадров; доля расходов на обучение работников отдела сбыта; уровень отдачи инвестиций в обучение сотрудников отдела сбыта. показатели работы с клиентами и потребителями представлены следующими показателями: доля стабильных клиентов; надежность поставок; скорость обслуживания потребителей, клиентов; доля жалоб на поставку. выводы. таким образом, используя предложенные показатели оценки сбытовой логистики по разным направлениям, руководство предприятий аграрно-промышленного комплекса должна определить оптимальный набор показателей, что позволит реально оценить результаты функционирования системы сбытовой логистики. baltic journal of economic studies 40 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: t.voloshanivska@gmail.com orcid: https://orcid.org/0000-0002-1060-5412 2 interregional academy of personnel management, ukraine e-mail: sky_2012@ukr.net orcid: https://orcid.org/0000-0003-0650-1087 3 department of science and innovation of the board of education, science and sports of the ministry of internal affairs of ukraine, ukraine e-mail: a.s.7.tarasenko@gmail.com orcid: https://orcid.org/0000-0003-0369-520x doi: https://doi.org/10.30525/2256-0742/2022-8-4-40-49 about data protection standards and intellectual property regulation in the digital economy: key issues for ukraine tetiana voloshanivska1, liudmyla yankova2, oleksandr tarasenko3 abstract. changes that are constantly taking place in the digital economy cause increasing instability of legislation in the field of data protection and security. for example, in ukraine, under martial law, there is an urgent need to adapt the legal regulation to european data protection standards (in terms of personal data processing). first of all, the correlation between eu law, national law of the eu member states and national legislation of the eu candidate countries results in the principle of direct effect of eu law. in addition, eu data protection law has become an essential source for eu member states in regulating artificial intelligence (ai), e-commerce and the internet of things (iot). the article considers the specific topic of the conditions of approximation of international norms and legislation of ukraine to eu law, trying to answer the questions of personal data protection in the conditions of martial law that have arisen. this work is based on a comparative analysis of the general data protection regulation 2016/679 and internal data protection rules in ukraine. at present, the research purpose of the article is to reveal the fact that data protection is a specific category of procedural law based on the principles of intellectual property law regarding data access rights and data ownership rights in the digital economy. key words: data protection standards, digital economy, general data protection regulation, information security, intellectual property (ip), personal data. jel classification: g14, o34 1. introduction at present, the research purpose of the article is to reveal the fact that data protection is a specific category of procedural law based on the principles of intellectual property law regarding data access rights and data ownership rights in the digital economy. in his futuristic opinion guido noto la diega states that: "one may naively believe that your own phone is your own property. it is not. the phone belongs to the copyright holders for the code that runs in it, the manufacturers for its design, the patents for how it works, and the trademarks not only for the logos but also for things like the way it "swipes". what happens when embedded software and other ip-protected digital content is no longer an exclusive feature of computers and phones? what happens when patented things and closed systems are everywhere: in the bedroom, in the bathroom, in the body? our behaviour becomes severely constrained by the de facto, legal and technical control that iot companies retain over their things – and which we consequently lose. we have become digital tenants, not owning or controlling any of the objects around us and the data about us. to the point where we can say that we no longer own: we are owned." (guido noto la diega, 2022) one way or another, it can be argued that we are still the owners of personal data. although data protection legislation is very young, many data protection rules are universal and based on common values. florent thouvenin and aurelia tamò-larrieux note that "the literature on data ownership as a property right is divided: while some authors argue baltic journal of economic studies 41 vol. 8 no. 4, 2022 that the existing regulatory system is inadequate to protect individuals in the digital economy, others consider it adequate (or adequate enough) and therefore discourage the establishment of data ownership rights. the first group of authors highlights the potential threats of big data and global trade to the protection of fundamental rights and freedoms of european citizens. in their view, data ownership can help mitigate some of the negative effects of the digital economy." (florent thouvenin, aurelia tamò-larrieux) thor berger and carl benedikt frey noted that "digital transformation has impacted society on various levels, mainly on the economic level. the automation of various business operations, such as increasing production, reducing costs and improving operational structures, has given businesses a huge advantage in terms of sustainability. the digital economy has offered new opportunities for business and the labour market. the wide and diverse range of services offered by the digital economy has created numerous new jobs, which has impacted both the business and labour markets. the digital economy uses vast amounts of data and information for its operational structure, which has helped to deliver the same public services such as healthcare and education more efficiently. a sustainable digital economy has also impacted social governance mechanisms by improving the quality of interaction between governments and citizens." (thor berger, carl benedikt frey, 2017) it is noteworthy that the regulatory framework for the digital economy has begun to influence and replace national legislation, which raises some concerns. the application of the general data protection regulation 2016/6791 (hereinafter – gdpr) by the eu member states and candidate countries for accession to the eu can be considered a problematic issue of procedural law. in the eu, the procedural rules for the protection of personal data are set out in the following documents: – regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of individuals with regard to the processing of personal data and on the free movement of such data and repealing directive 95/46/ec (general data protection regulation)2; – regulation (eu) 2016/794 of the european parliament and of the council of 11 may 2016 on the european union agency for law enforcement cooperation (europol) replacing and repealing council decisions 2009/371/jha, 2009/934/jha, 2009/935/jha, 2009/936/jha and 2009/968/jha (regulation (eu) 2016/794); – regulation (eu) 2018/1725 of the european parliament and of the council of 23 october 2018 on the protection of natural persons with regard to the processing of personal data by the union institutions, bodies, offices and agencies and on the free movement of such data and repealing regulation (ec) no 45/2001 and decision no 1247/2002/ec (regulation (eu) 2018/1725); – regulation (eu) 2018/1727 of the european parliament and of the council of 14 november 2018 on the european union agency for criminal justice cooperation (eurojust) replacing and repealing council decision 2002/187/jha (directive (eu) 2016/680); – directive (eu) 2016/680 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the prevention, investigation, detection or prosecution of criminal offences or for the execution of criminal penalties, and on the free movement of such data and repealing council framework decision 2008/977/jha (directive (eu) 2016/680); – directive 2002/58/ec of the european parliament and of the council of 12 july 2002 on the processing of personal data and on the protection of privacy in the electronic communications sector (privacy and electronic communications directive) (directive 2002/58/ec), etc. it is striking that in the regulations and directives the data protection provisions mainly concern the control of the transposition of member states' legislation. 2. european digital single market and legal mechanisms of data protection in the eu and ukraine in this study, the authors agree with endre győző szabó, vice president of the national authority for data protection and freedom of information of hungary, that "gdpr , as a legal act of the european union aimed at the highest level of harmonization, requires member states to establish independent data protection authorities to protect the rights of individuals and ensure the free flow of personal data within the union." (endre győző szabó, 2018) under the gdpr , a person has following rights: a) the right of access to stored personal data, art. 15 gdpr; 1 the gdpr came into force on the 25th of may, 2018 and repealed the data protection directive 95/46/ec. regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec. available at: https://eur-lex.europa.eu/legal-content/en/ txt/pdf/?uri=celex:32016r0679 2 ibid. baltic journal of economic studies 42 vol. 8 no. 4, 2022 b) if incorrect personal data are processed, there is a right to rectification, art. 16 gdpr; c) under legal conditions, there is a right to demand erasure or restriction of processing and the right to object to processing, art. 17, 18, 21 gdpr; d) in case of consenting to data processing or signing a data processing contract and the data processing is carried out by automated means, there is a right to data portability, art. 20 gdpr; e) the right to lodge a complaint with the competent state officer for data protection, art. 77 gdpr3. the revocation does not affect the lawfulness of data processing carried out on the basis of contracts or letters of consent before the revocation. by florent thouvenin, aurelia tamò-larrieux " while the gdpr certainly facilitates the free flow of personal data within the eu by establishing a (relatively 16) uniform regime across all eu member states, it also imposes significant restrictions on the processing of personal data and thereby limits the free development and introduction of digital goods and services. although innovation remains possible, the gdpr has at least increased its cost, sometimes to a level that makes the introduction of innovative digital goods and services economically unfeasible. there are many flexible provisions in the gdpr that allow member states to "introduce national provisions to further clarify the application of the rules" of the gdpr , to introduce "sectoral laws in areas requiring more specific provisions", or to "clarify the rules, including for the processing of special categories of data."4 for comparison, these rights are also contained in the provisions of ukrainian laws related to the right to privacy. the legal basis for data protection in ukraine is determined by the national norms establishing the right to information. the right to information is a constitutional principle and is based on international documents: universal declaration of human rights of the united nations (1948), international covenant on civil and political rights, convention for the protection of human rights and fundamental freedoms (1950). the constitution of ukraine of 28 june, 19965 guarantees the right to information in provisions of these articles and following its provisions the right to information includes the right to open data and information on public administration activities and the right to information about the status of environmental security, etc. as it is known, "the digital single market strategy aims to provide better access for consumers and businesses to online goods and services across europe, for example, by removing barriers to crossborder e-commerce and access to online content, while enhancing consumer protection". an environment in which digital networks and services can thrive the digital single market aims to create the right environment for digital networks and services by providing high-speed, secure and reliable infrastructure and services, supported by an appropriate regulatory environment. key issues are cybersecurity, data protection/e-privacy, and fairness and transparency of online platforms. the digital single market strategy aims to maximise the growth potential of the european digital economy so that every european can fully benefit from it – in particular by developing digital skills, which are essential for an inclusive digital society."6 similarly, thomas cottier and michelangelo temmerman write: "the elevation of intellectual property to the realm of international law, in an attempt to coordinate and even harmonize different legal orders in order to serve a transnational and increasingly globalized economy, has resulted in transparency taking on additional features that go beyond the classic principles of publicity and accessibility of the law." (cottier, thomas, temmerman, michelangelo, 2010) the basic law on personal data protection is the law of ukraine "on personal data protection" no. 2297-vi dated june 1, 2010 (hereinafter – the pdp law) and three by-laws approved by the order of the ukrainian parliament commissioner for human rights no. 1/02-14 dated january 8, 2014 "on approval of documents in the field of personal data protection"7: – typical procedure for personal data processing; – the procedure for the human rights commissioner of the verkhovna rada of ukraine to monitor compliance with the legislation on the protection of personal data; – the procedure for notifying the ukrainian parliament commissioner for human rights about the pro cessing of personal data that poses a particular risk to the rights and freedoms of personal data subjects, about the structural unit or responsible person who organizes the work related to the protection of personal data during their processing, as well as the publication of this information. 3 op cit. 4 op cit, p. 320 5 constitution of ukraine. available at: https://zakon.rada.gov.ua/laws/show/254%d0%ba/96-%d0%b2%d1%80#text 6 for more about the digital single market see the report of the directorate-general 'communications networks, content and technology. available at: https://ec.europa.eu/digital-singlemarket/en/digital-single-market) 7 the decree of the commissioner of the verkhovna rada of ukraine for human rights "on approval of documents in the field of personal data protection. available at: https://zakon.rada.gov.ua/laws/show/v1_02715-14#text baltic journal of economic studies 43 vol. 8 no. 4, 2022 the law of ukraine "on personal data protection" regulates legal relations related to the protection and processing of personal data. the law regulates legal relations related to the protection and processing of personal data, aims to protect the fundamental rights and freedoms of man and citizen, in particular the right to privacy, in connection with the processing of personal data. the pdp law applies to the processing of personal data, which is carried out in whole or in part by automated means, as well as to the processing of personal data contained in the file or intended to be included in the file, using non-automated means. 1. the subjects of relations related to personal data are: – the subject of personal data; – owner of personal data; – personal data administrator; – third party; – commissioner of the verkhovna rada of ukraine on human rights. 2. the owner or administrator of personal data may be enterprises, institutions and organizations of all forms of ownership, public authorities or local selfgovernment bodies, individual entrepreneurs who process personal data in accordance with the law. 3. the administrator of personal data, the owner of which is a public authority or local self-government body, except for these bodies, can only be an enterprise of state or communal ownership. 4. the personal data owner may entrust the processing of personal data to the personal data controller in accordance with the agreement concluded in writing. 5. the personal data controller may process personal data only for the purpose and to the extent specified in the contract. it should be noted that the gdpr and the pdp law have many similarities in principles: – lawfulness; – fairness; – transparency; – data minimization; – purpose limitations; – accountability; – storage limitations; – data integrity; – confidentiality, etc. the next similarities with gdpr and the pdp law, that need to be mentioned in this paper, are: – legal grounds of data processing and of "legitimate interests"; – unified and extended gdpr-like terminology; – updated concept of sensitive data with a comprehensive list of legal grounds for processing such data; – data protection rules about video surveillance; – data protection rules concerning the use of tracking technologies in electronic communications; – requirements for data processing agreements, etc. comparing the gdpr and the law of ukraine "on personal data protection", it should be noted that the objects of protection in both documents are personal data.8 in parallel and in comparison to the gdpr , the pdp law starts with the definition of personal data, while the gdpr mostly indicates the relationship between data subjects and data. in the pdp law, "personal data" may be referred to as confidential information about a person by law or by the person concerned. personal data related to the exercise of official or official powers by a person authorized to perform the functions of the state or local self-government is not confidential information. the ukrainian act provides for a specific qualification of personal data specified in the declaration of a person authorized to perform the functions of the state or local self-government, which is submitted in the form determined in accordance with the law of ukraine "on prevention of corruption", does not belong to information with restricted access, except for information specified by the law of ukraine "on prevention of corruption". supplement article 2 of the pdp law with instructions that: – personal data base – a named set of ordered personal data in electronic form and/or in the form of personal data files; – the owner of personal data is a natural or legal person who determines the purpose of processing personal data, establishes the composition of these data and procedures for their processing, unless otherwise provided by law; – consent of the subject of personal data is a voluntary expression of will of an individual (subject to his/ her awareness) to grant permission to process his/ her personal data in accordance with the specified purpose of their processing, expressed in writing or in a form that allows to conclude that it has been granted. the key issue of this provision is that "in the field of e-commerce, the consent of the personal data subject may be provided during registration in the information and communication system of the e-commerce entity by marking the consent to the processing of his personal data in accordance with the stated purpose of their processing, provided that such system does not create opportunities for processing personal data before the marking": – depersonalization of personal data – deletion of information that can directly or indirectly identify a person; 8 for additional information about gdpr . available at: https://www.itgovernance.co.uk/articles-of-the-gdpr baltic journal of economic studies 44 vol. 8 no. 4, 2022 – file – any structured personal data accessible according to certain criteria, regardless of whether such data is centralized, decentralized or separated by functional or geographical principle; – processing of personal data – any action or set of actions, such as collection, registration, accumulation, storage, adaptation, modification, updating, use and dissemination (distribution, sale, transfer), depersonalization, destruction of personal data, in particular with the use of information (automated) systems; – the recipient is a natural or legal person to whom personal data is provided, in particular a third party; – personal data – information or a set of information about a natural person who is identified or can be specifically identified; – personal data manager – a natural or legal person who is authorized by the owner of personal data or by law to process this data on behalf of the owner; – the subject of personal data is a natural person whose personal data is processed; – third party – any person, except for the subject of personal data, the owner or manager of personal data and the ukrainian parliament commissioner for human rights, to whom the owner or manager of personal data transfers personal data. data subjects are data processors and controllers, organizations that have the right to possess and process personal data, which are obliged to keep records of the personal data they possess, as well as their processing activities. the data controller is a natural or legal person who, alone or jointly with others, determines the purposes or means of processing personal data (e.g., names, e-mail addresses, etc.). the controller also checks whether the legal conditions for protecting the rights of data subjects are met. unlike the ukrainian law, the notification of the personal data subject about the fact of data processing is regulated in detail in the gdpr . although the gdpr understands that the required level of expertise should be determined, in particular, in light of the data processing operations carried out and the protection required for the controller. the data controller is a natural or legal person who, alone or jointly with others, determines the purposes or means of processing personal data (e.g., names, e-mail addresses, etc.). the controller checks whether the legal conditions for protecting the rights of data subjects are met. data processors are required to keep records of the personal data they hold and their processing activities. at the same time, ukraine lacks a system of justice in the field of personal data protection that would demonstrate how court decisions are made in the digital era. in contrast, in the eu, the sphere of data protection regulation is associated with well-known data protection cases. for example, in the facebook/ whatsapp merger case, the european commission decided for the first time in its history to impose fines on a company for providing incorrect or misleading information since the merger regulation of 2004 entered into force.9 the commission's previous decisions on this matter were taken under the 1989 merger regulation in accordance with other fining rules.10 the case weltimmo s. r. o. vs. nemzeti adatvédelmi és információszabadság hatóság, case c 230/1411, shows that companies should take into consideration that in case of doing business in multiple eu member states, data protection legislation could be closer to the targeting customers. the request for the preliminary ruling has been made in proceedings between weltimmo s. r. o. (‘weltimmo’), a company which has its registered office in slovakia, and the nemzeti adatvédelmi és információszabadság hatóság (national data protection and freedom of information authority; "hungarian data protection authority ") concerning a fine imposed by the latter for infringement of law cxii of 2011 on the right to self-determination as regards information and freedom of information (az információs önrendelkezési jogról és az információszabadságról szóló 2011. évi cxii. törvény; the law "on information"), which transposed directive 95/46 into hungarian law. when considering collecting personal data in a new jurisdiction, it is worth considering conducting a privacy impact assessment, as recommended in the proposed eu data protection regulation, to ensure that local rights are not infringed; but if there is significant presence in any eu member state or a particular nationality is targeted by your activities, local consultation should be taken. in its judgment (case c-230/14 of 1 october 2015), the european court of justice demonstrated the ability of the national regulators of the eu member states in the field of personal data protection to resolve issues related to organizations located outside their borders. 3. rights of access to data, possession of personal data and their processing according to the law pdp, "it is prohibited to collect, store, use and disseminate confidential information about a person without his/her consent, 9 council regulation (ec) no 139/2004 of 20 january 2004 on the control of concentrations between undertakings (the ec merger regulation). available at: https://eur-lex.europa.eu/legal-content/en/all/?uri=celex:32004r0139 10 for more see https://ec.europa.eu/commission/presscorner/detail/pl/ip_17_1369 11 case c 230/14, request for a preliminary ruling under article 267 tfeu from the kúria (hungary), made by decision of 22 april 2014, received at the court on 12 may 2014, in the proceedings weltimmo s. r. o. vs nemzeti adatvédelmi és információszabadság hatóság. baltic journal of economic studies 45 vol. 8 no. 4, 2022 except in cases determined by law, and only in the interests of national security, economic welfare and human rights (article 32 of the constitution of ukraine). confidential information about an individual includes, in particular, data on his/ her nationality, education, marital status, religious beliefs, health status, as well as address, date and place of birth (article 11 of the law of ukraine no. 2657-xii "on information" dated 2 october 1992)." (the law of ukraine "on information") information about an individual (personal data) – information or a set of information about an individual who is identified or can be specifically identified. article 32 of the constitution of ukraine stipulates that it is not allowed to collect, store, use and disseminate confidential information about a person without his/her consent, except in cases determined by law, and only in the interests of national security, economic welfare and human rights. information on the receipt by an individual of budget funds, state or municipal property in any form, structure, principles of formation and amount of remuneration, remuneration, additional benefits of the head, deputy head of a legal entity of public law, manager, deputy does not belong to information with restricted access. head, member of the supervisory board of a state or municipal enterprise or a state or municipal organization aimed at making a profit, a person who permanently or temporarily holds the position of a member of the executive body or is a member of the supervisory board of an economic entity in the authorized capital of which more than 50 percent of shares (stakes, shares) directly or indirectly belong to the state and/or territorial community, except as provided for in article 6 of the law of ukraine "on access to public information". (the law of ukraine "on access to public information") the consent of the subject to the processing of his personal data must be voluntary and informed. the consent may be given by the subject in written or electronic form, which makes it possible to conclude that it has been given. documents (information) confirming the consent of the subject to the processing of his personal data are stored by the owner during the processing of such data: – in the absence of consent, the transfer of personal data is allowed provided that it is provided for in part 16 of article 2297 of the law no 2297 and is conditioned by the interests of national security, economic welfare and human rights; – the procedure for access of third parties to personal data is determined by the terms of the consent of the personal data subject provided by the owner of personal data to the processing of this data, or in accordance with the requirements of the law (article 16 of law no 2297); – personal data are objects of protection (article 5 of law no 2297), information or their aggregate about a natural person who is identified or can be specifically identified (article 2 of law no 2297). information about a natural person is confidential, and access to confidential information is limited. it is noteworthy that in the conditions of martial law, according to the authors, there are several exceptions to the above rules concerning the activities of state military administrations and other legal entities, namely: – limits of the right to information in times of martial law; – limits for the sake of national security, sovereignty and territorial integrity; – limits for the sake of the necessity to respect individual and public interest; – limits in criticism and opinion expression; – limits in interference in the work of public authorities. in the european union, the processing of personal data (collection, storage and transfer to third parties) is carried out exclusively on the basis of the express consent of the legal representative or the subject of personal data, that is, in accordance with art. 6 paragraph 1 letters a-f gdpr , which defines it as: "1. processing shall be lawful only if and to the extent that at least one of the following applies: (a) the data subject has given consent to the processing of his or her personal data for one or more specific purposes; (b) the processing is necessary for the performance of a contract to which the data subject is a party, or in order to take steps at the request of the data subject prior to the conclusion of the contract; (c) the processing is necessary for compliance with a legal obligation to which the controller is subject; (d) the processing is necessary for the protection of the vital interests of the data subject or another natural person; (e) the processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller; (f ) the processing is necessary for the purposes of the legitimate interests pursued by the controller or a third party, unless such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require the protection of the personal data, in particular where the data subject is a child. point (f ) of the first subparagraph shall not apply to processing carried out by public authorities in the performance of their tasks."12 12 op cit. baltic journal of economic studies 46 vol. 8 no. 4, 2022 ukrainian legislative acts describe these situations in a slightly different way. according to the decision of the constitutional court of ukraine no. 2-рп/2012 dated january 20, 2012, information about personal and family life of a person (personal data about him/her) is any information or a set of information about an individual who is identified or can be specifically identified, namely: nationality, education, marital status, religious beliefs, health status, property status, address, date and place of birth, place of residence and stay, etc. data on personal property and non property relations of this person with other persons, including family members, as well as information on events and phenomena that have taken place or are taking place in everyday, intimate, social, professional, business and other spheres of a person's life, except for information related to the exercise of powers by a person who holds a position related to the performance of functions of the state or local self-government bodies. such information about a person and his/her family members is confidential and may be disseminated only with his/her consent, except in cases specified by law, and only in the interests of national security, economic welfare and human rights. the list of personal data recognized as confidential information is not exhaustive. in the law "on personal data protection" the processing of personal data means any action or set of actions, such as collection, registration, accumulation, storage, adaptation, modification, updating, use and dissemination (distribution, sale, transfer), depersonalization, destruction of personal data, including with the use of information (automated) systems. the processing of personal data is carried out in an open and transparent manner, using means and in a manner consistent with the defined purposes of such processing. accordingly, the subjects of relations related to personal data are: – subject of personal data is a natural person whose personal data is processed; – the owner of personal data is a natural or legal person who determines the purpose of personal data processing, establishes the composition of this data and the procedures for their processing, unless otherwise specified by law; – personal data controller – a natural or legal person who is authorized by the controller of personal data or by law to process this data on behalf of the controller; – third party – any person, except for the subject of personal data, the owner or manager of personal data and the ukrainian parliament commissioner for human rights, to whom the owner or manager of personal data transfers personal data; the verkhovna rada commissioner for human rights is an official who, independently of other state bodies and officials, exercises parliamentary control over the observance of constitutional rights and freedoms of man and citizen. the owner or administrator of personal data may be enterprises, institutions and organizations of all forms of ownership, public authorities or local governments, individual entrepreneurs who process personal data in accordance with the law (public authority, bank within the framework of contractual relations, supermarket, if a cone card is issued, etc.). for this purpose, the grounds for processing personal data are defined: – consent of the personal data subject to the processing of his personal data; – permission to process personal data granted to the owner of personal data in accordance with the law solely for the exercise of his powers; – conclusion and execution of a transaction to which the subject of personal data is a party or which is concluded in the interests of the subject of personal data or for the implementation of measures preceding the conclusion of a transaction at the request of the subject of personal data; – protection of the vital interests of the subject of personal data; – the need to fulfill the obligation of the owner of personal data, which is provided by law; – the need to protect the legitimate interests of the personal data controller or a third party to whom the personal data is transferred, unless the need to protect the fundamental rights and freedoms of the personal data subject in connection with the processing of his/her data prevails over such interests. it is important to clarify how gdpr affects businesses in terms of regulating the protection, storage and disposal of sensitive digital documents. at the same time, the gdpr adds several additional requirements to the existing requirements for the protection of personal data against unauthorized or unlawful processing and/or accidental loss and damage. according to the gdpr , everyone whose personal data is stored by an organization has the right to be forgotten, the right to data portability and the right to object.13 an individual should know: – responsibilities when it comes to hard copy personal data processing, storage and destruction; – rights under gdpr (incl. demands to report gdpr breaches to the regulator, requirements on demonstrating compliance to the regulator). according to the article 11 of the pdp law "the subject of personal data has the right to: 13 for more see https://gdpr-info.eu/ baltic journal of economic studies 47 vol. 8 no. 4, 2022 – know about the sources of collection, location of their personal data, the purpose of their processing, location or place of residence (stay) of the owner or administrator of personal data or to give an appropriate order to obtain this information to authorized persons, except in cases established by law; – receive information about the conditions for granting access to personal data, in particular information about third parties to whom his personal data is transferred; – access to his/her personal data; – receive no later than thirty calendar days from the date of receipt of the request, except in cases provided by law, a response on whether his personal data are processed, as well as to receive the content of these personal data; – submit a motivated request to the personal data controller with an objection to the processing of their personal data; – make a reasoned request to change or destroy their personal data by any owner and administrator of personal data, if these data are processed illegally or are unreliable; – protect his/her personal data from illegal processing and accidental loss, destruction, damage due to intentional concealment, failure to provide or untimely provision of data, as well as protection from providing information that is unreliable or dishonors the honor, dignity and business reputation of a physical person individuals; – file complaints about the processing of his/her personal data with the commissioner or the court; – apply legal remedies in case of violation of the legislation on the protection of personal data; – enter a reservation regarding the limitation of the right to process his/her personal data when giving consent; – withdraw consent to the processing of personal data; – know the mechanism of automatic processing of personal data; – protect against an automated decision that has legal consequences for him." it is noteworthy that there are no additional procedural rules related to the protection of data protection rights. on the contrary, the fines for violations of these provisions differ in the laws depending on the type of violation and the severity of the violation. the pdp law proposes to establish the following fines: for individuals – from uah 10,000 to uah 300,000, and for legal entities – from uah 30,000 or 0.05 percent of the total annual turnover to 5 percent of the total annual turnover (but not less than uah 300,000).14 this is provided by article 8 of the law of ukraine "on personal data protection": "the subject of personal data has the right to receive any information about himself/herself from any subject of relations related to personal data, subject to the provision of information about the surname, name and patronymic, place of residence (place of stay) and details of the document certifying the individual who submits the request, except in cases established by law. the subject of personal data has the right to submit a reasoned request to the owner of personal data to prohibit the processing of his personal data (part thereof ) and/or change their composition / content. such request shall be considered by the controller within 10 days from the date of its receipt. if, as a result of consideration of such a request, it is established that the personal data of the subject (part of it) is processed illegally, the controller is obliged to stop processing the personal data of the subject (part of it) and notify the subject of personal data. if, as a result of consideration of such a request, it is established that the personal data of the subject (part of it) is unreliable, the owner is obliged to stop processing the personal data of the subject (part of it) and/or change their composition / content and notify the subject of personal data. in case of impossibility to satisfy the request, the personal data subject is provided with a reasoned answer about the absence of grounds for its satisfaction." taking into account the presented legislative approach, the appeal against the failure to satisfy the request or motivated demand of individuals to the commissioner or to the court with the provision of supporting materials (screenshots or photos, copies of the request or motivated demand and the contested response, etc.) is controlled by procedural norms. gdpr has a broader legal framework for data management compared to the law of ukraine "on personal data protection". the publication of personal data and performance of a task in the public interest based on norms resulting from art. 6 paragraph 1 point (e) and paragraph 3 of gdpr in conjunction with special legal norms, e.g., arising from the data protection laws of eu member states. art. 6 paragraph 3 gdpr stipulates that: "the grounds for the processing referred to in points (c) and (e) of paragraph 1 the following are: 1. union law. 2. the legislation of the member state to which the controller is subordinated. 14 for more see https://yur-gazeta.com/dumka-eksperta/chi-realno-prityagti-do-vidpovidalnosti-za-porushennya-zahistu-personalnih-danih-v-ukrayini.html baltic journal of economic studies 48 vol. 8 no. 4, 2022 the purpose of the processing must be specified in that legal basis or, in the case of processing referred to in point (e) of paragraph 1, must be necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller. this legal framework may contain specific provisions to tailor the application of the rules of this regulation, in particular: general conditions governing the lawfulness of processing by the controller; types of data to be processed; data subjects concerned; subjects to whom and for what purpose personal data may be disclosed; purpose limitation; retention periods; and processing operations and processing procedures, including measures to ensure lawful and fair processing, such as those relating to other specific processing situations as provided for in chapter ix. union or member state legislation must be justified by an objective of public interest and be proportionate to the legitimate aim pursued." 4. conclusions in summary, it should be noted that in order to document the free movement of personal data and their processing, the gdpr is considered as a data protection legal framework for the protection of specific rights of individuals, albeit for candidate countries. the preliminary review has shown that the provisions set out in the gdpr and the pdp law are quite similar. for ukraine, given the function of personal data protection authorities, it is extremely important to use the experience of the european public sector in developing the free movement of data in the digital single market. undoubtedly, the gdpr is a valuable source for improving the practice of data protection functions and influencing the system of protection of citizens' rights. references: guido noto la diega (2022.) internet of things and the law. legal strategies for consumer-centric smart technologies, routledge research in the law of emerging technologies, london and new york, 2022, p. 276. doi: https://doi.org/10.4324/9780429468377 florent thouvenin, aurelia tamò-larrieux. data ownership and data access rights meaningful tools for promoting the european digital single market? in burri, mira. big data and global trade law, cambridge university press, 2021. p. 321. doi: https://doi.org/10.1017/9781108919234 thor berger & carl benedikt frey (2017). industrial renewal in the 21st century: evidence from us cities, regional studies, 51:3, 404–413. doi: https://doi.org/10.1080/00343404.2015.1100288 the gdpr came into force on the 25th of may, 2018 and repealed the data protection directive 95/46/ec. regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec. available at: https://eur-lex.europa.eu/legal-content/en/txt/pdf/ ?uri=celex:32016r0679 regulation (eu) 2016/794 of the european parliament and of the council of 11 may 2016 on the european union agency for law enforcement cooperation (europol) and replacing and repealing council decisions 2009/371/jha, 2009/934/jha, 2009/935/jha, 2009/936/jha and 2009/968/jha. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32016r0794 regulation (eu) 2018/1725 of the european parliament and of the council of 23 october 2018 on the protection of natural persons with regard to the processing of personal data by the union institutions, bodies, offices and agencies and on the free movement of such data, and repealing regulation (ec) no 45/2001 and decision no 1247/2002/ec. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32018r1725 directive (eu) 2016/680 the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, and repealing council framework decision 2008/977/jha. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32018r1727 directive (eu) 2016/680 the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, and repealing council framework decision 2008/977/jha. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32016l0680 directive 2002/58/ec of the european parliament and of the council of 12 july 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (directive on privacy and electronic communications. available at: https://eur-lex.europa.eu/legal-content/en/all/ ?uri=celex%3a32002l0058 endre győző szabó (2018). about specific issues of the gdpr of the european union in hungarian yearbook of interantional law and european law 2017, eleven international publishing, 2018 the netherlands, p. 365. constitution of ukraine. available at: https://zakon.rada.gov.ua/laws/show/254%d0%ba/96-%d0%b2%d1% 80#text baltic journal of economic studies 49 vol. 8 no. 4, 2022 for more about the digital single market see the report of the directorate-general 'communications networks, content and technology. available at: https://ec.europa.eu/digital-singlemarket/en/digital-singlemarket) cottier, thomas, temmerman, michelangelo (2010). transparency and intellectual property protection in international law. doi: https://doi.org/10.1017/cbo9781139108843.011 the decree of the commissioner of the verkhovna rada of ukraine for human rights "on approval of documents in the field of personal data protection. available at: https://zakon.rada.gov.ua/laws/show/v1_0271514#text the law of ukraine "on information". available at: https://zakon.rada.gov.ua/laws/show/2657-12#text the law of ukraine "on access to public information". available at: https://zakon.rada.gov.ua/laws/show/ 2939-17#text received on: 20th of september, 2022 accepted on: 25th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 35 vol. 2, no. 4, 2016 corresponding author: 1 department of economics, kremenchuk mykhailo ostrohradskyi national university. е-mail: zbyrannykoksana@gmail.com the formation of the competitiveness of the enterprises of machine-building complex of ukraine oksana zbyrannyk1 kremenchuk mykhailo ostrohradskyi national university, ukraine abstract. the purpose is to analyse the existing approaches to determine the value of the production of innovative products and innovation in enterprises of machine-building complex of ukraine in order to improve their level of competitiveness. methodology. statistical analysis and generalization of scientific approaches to the formation of the competitiveness of machine-building enterprises. results of the of the analyzed approaches allowed to identify the cause of the imperfection of innovation policy in engineering. according to the research, the number of machine-building enterprises engaged in innovation activity, constantly shrinks; the share of innovative products in the total is only 3.5-4%, and the volume of imports of high-tech products exceeding the size of own production; the level of knowledge-intensive industrial production is only 0.3%. all this slows down the process of creating competitive products and as a result, the failure to provide highly own products to other industries, take a niche world of mechanical engineering. practical implications. ensure accelerated economic growth of the country as the defining condition for implementation of the european integration aspirations of ukraine in the short term requires the intensification of innovative activity of the machine-building enterprises. the current state of innovation activity of enterprises in ukraine is characterized by a number of negative factors: the internal environment of the majority of machine-building enterprises does not correspond to the market conditions of managing: high energy productions, the growth of the degree of wear and tear of fixed assets and reduce investment to update them, the lack of introduction of advanced production and resource-saving technologies, reducing innovation activity due to lack of financial resources significantly affect the level of the competitive machine-building enterprises. value/ originality systematic approaches to determining the impact of innovation on the level of competitiveness of the machine-building enterprises on the external and internal markets. key words: innovative products, indices of volumes of production engineering, indexes of competitiveness of production engineering, competitive advantages, innovation activity. jel classification: b49, c10, g31 1. introduction strategy for economic and social development of ukraine provides that the priority of state policy at the present stage is a structural realignment of the industry, the transition to innovation model of economic growth. the existing scientific and technical potential of the machine-building industry appears in the structure of industrial production and export, which so far is dominated by products with a low level of processing. therefore, the task of ensuring maximum competitiveness and efficiency of the national economy was in the rank of a national priority: developed a long-term program of strategic development of «ukraine-2020». (decree of the president of ukraine about ukraine's sustainable development strategy-2020 from january 12, 2015 5/2015). base to improve competitiveness and increase the export potential of the country must become an innovative technical and technological renewal of production, implementation of energy-saving and innovative models of economic development, increasing the release of technological science intensive production. 2. research analysis and problem statement research on factors that influence the formation of the competitiveness of machine-building enterprises, their list and analyse the content of authors such as n.  bahvalova, n.  vìvčarin, a.  getman, n.  horbal, i. dolzhansky, t. zagorna and kramarenko, o. kuzmin, m.  maslov, m.  radêva, i.  sabadir′ova, d.  červan′ov, v. shapoval. however, in the study of the problem of not baltic journal of economic studies 36 vol. 2, no. 4, 2016 enough attention paid to exactly the value of innovative products of machine-building enterprises, which today is one of the main factors to strengthen their own positions among competitors and the possibility of entering the world market. in such circumstances, there is a need to systematize their approaches to determining the impact of innovation on the level of competitiveness of the machine-building enterprises on the external and internal markets. 3. research results the development of the innovation sphere makes machine-building enterprises to intensify innovation activity, above all for the development and maintenance of its competitive advantage and ensure success. innovative products vary according to the degree of novelty. to assess the effectiveness of innovations in the ukrainian statistics to identify two levels: new to the market and new products for the company. in 2015 industrial enterprises have implemented 3136 innovative types of products, of which 548 – new exclusively for market, 2588 – new only for the enterprise. out of the total number of embedded products 966 – new types of machines, equipment, devices, machines, etc. the largest company, it affected the metallurgical production (56,3%), manufacture of basic pharmaceutical products and pharmaceutical preparations (11,5%), food products (8,3%), machinery and equipment, not classified under other equipment (5,4%). the effectiveness of innovation spending in 2015 amounted to 1.7 uah/usd, that is 1 uah innovation expenditure accounted for 1,7 uah sales of innovative products. in 2014 the corresponding rate was 3.3 uah/ usd, this shows that the rates of growth of volumes of realization of innovative products in comparison with the growth of innovative expenses, which were carried out mainly for the purchase of machinery, equipment and software and the acquisition of other external knowledge services (fig. 1). in 2015 for enterprise innovation were spent 13,8  billion uah, including for the purchase of machinery, equipment and software – 11,1 billion uah, for internal and external research and development  – 2,0  billion uah, acquisition of other external knowledge (acquiring new technologies) – 0,1 billion usd and 0,6 billion uah – for education and training of personnel for the development and adoption of new or significantly improved products and processes, the activity on the market introduction of innovations and other works associated with the creation and implementation of innovations (other expenses). the main source of financing of innovative expenses remain the own funds of enterprises – 13427,0 million uah (or 97,2% of total expenditure on innovation). the funds of the state budget received 11 enterprises, and local budgets – 15, the total volume of which amounted to 589,8 million uah (0.7%); the money of domestic investors received 9 enterprises, foreign – 6, in general, their volume totalled 132,9 million uah (1,9%); the loans availed itself of 11 enterprises, the amount of which was 113,7 mln. (0.8%). with the aim of improving and accelerating industrial processes in the ukrainian industrial enterprises within the 2015 created and implemented the latest technology: 181 enterprise acquired 1131 new technology, of 12148,3 10365,4 12605,7 12882,1 18784,0 24995,4 30892,7 40188,0 45830,2 31432,3 33697,6 42386,7 36157,7 35891,6 25669,0 23050,1 6,9 5,3 4,2 4,2 4,1 4,3 5,0 3,7 3,8 4,0 4,2 3,0 3,1 3,8 3,3 1,7 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 the total number of innovative products in ukraine, mil.uah the effectiveness of investment costs, uah fig. 1. dynamics of the volume of sales of innovative products and the efficiency of innovative expenses source: developed by the author on the basis (statistic information) baltic journal of economic studies 37 vol. 2, no. 4, 2016 which 66 – outside ukraine. out of the total number of technologies purchased 439 by setting out of which 43 – outside ukraine; 393 – as a result of research and development (12); 120 – contracts on acquisition of patents, licenses the use of inventions, industrial designs, utility models (8); 37-agreements on the acquisition of technology and know-how (3); 129 – together with the purposeful taking on the work of skilled professionals (pisarenko, 2015). innovation is a factor of creating competitive advantage. in modern conditions in the world markets are changing competitive conditions that result in a dynamically changing competitive advantage. in the creation of innovative products, including high-tech equipment and the latest technology, occupies an important place the machine-building industry. the enterprises of the machine-building complex of ukraine ensure the modernization of farms, meet consumer demand of the population for aids and appliances, household, and is the basis of economic and defensive potential of the country. analysis of the level of development of mechanical engineering in ukraine showed that for 2011-2015 is observed a gradual slowdown of the industry, as evidenced by the index of volume of production engineering (gladka, 2016) (table 1) and the volume of sales of machine-building enterprises of ukraine (fig. 2). the dynamics of the above-mentioned indicators showing a decrease in the index of volume of production engineering for 2011-2014 from 115,4% to 79,4%. but in 2015 observed growth indicator up 85,9% relative to previous years, despite the reduction in turnover. the commodity structure of exports of machinery products, indicates that in the structure of exports machinery industry dominated by specific quantity of metal machines and mechanisms, electrical equipment, which is about 57%, of which 30% falls on the boilers, machines, vehicles and mechanical devices, 27% for electrical machines and equipment. the second place is occupied by vehicles, which share is 41%, of which 32% – rail tramway locomotives and road-building equipment, 5% – ground vehicles, except railway, 1% – floating marine and river transportation, 3% of aeronautical and space vehicles. on the structure of ukrainian imports machinery, the largest share of the take up boilers, machines, vehicles and mechanical devices 63,8%, of which the electrical machinery accounted for 28%, boilers and mechanical devices – 36%. the second place is occupied by vehicles, the share of which is 31.2 usd%, in structure of which 27%-means of ground transport. in general, recent years up to half of imported supplies the on-equipment, vehicles and other equipment. calculated ratios of structural shifts show you if changes in the commodity structure of exports as (kstrexp = 0,10) and import fig. 2. dynamics of volume of sales machine-building enterprises of ukraine for 2011-2015 source: developed by the author on the basis (statistic information) 133469,0 143533,1 117301,9 94088,4 103707,1 0,0 20000,0 40000,0 60000,0 80000,0 100000,0 120000,0 140000,0 160000,0 2011 2012 2013 2014 2015 th e am ou nt o f r ea liz at io n, m ln .u a n table 1 indexes the volume of product engineering for 2011-2015 years years the volume indexes of production engineering (in % to the previous year) 2011 115,4 2012 96,7 2013 86,4 2014 79,4 2015 85,9 baltic journal of economic studies 38 vol. 2, no. 4, 2016 (kstrımp= 0,05) products machinery over the past ten years. changes primarily related to the significant increase in the volume of exports of railway locomotives and electric machinery and increasing imports of means of transport. the low competitiveness of the machinebuilding complex of ukraine specifies the geographical structure of exports. despite the fact that the ukrainian machine-building products are exported to more than 60 countries, mainly is competitive only in the markets of the cis, including russia, belarus, kazakhstan. the export is carried out mainly for such commodity groups as boilers, machines and equipment, electrical machinery and equipment, railway and tramway locomotives, road-building equipment with respect to the geographical structure of import, the main exporters of the product engineering to the ukraine is a country of the european union that supply, above all high-tech products with a high degree of added value (balabanova, 2013). as regards the domestic engineering, which had always been oriented for export, in recent years the export decrease of the ukrainian machine-building products with 5670416,3 thousand usd in 2010 to 3940855,8 ths. usd in 2015. the level of competitiveness of domestic products of machine-building industry characterizes the indexes of competitiveness in the external market, namely: is index of relative comparative advantages of rca (relative comparative advantage index), an index of relative export competitiveness rxa (relative export advantage index), an index of relative dependence on import of rmp (relative import penetration index), an index of relative trade advantage rta (relative trade advantage index). the dynamics of these indicators is presented in table 2. the most accurate indicators that reflect the competitive advantages of national machinebuilding complex on the external market is the index of relative trade advantage (rta) and the index of relative comparative advantage (rca), a negative value which during the 2011-2015 years attests to their lack of (advantages). also the low competitiveness of the industry confirms the index of relative export competitiveness (rxa), which during the 2010-2015 is within the interval [0;1], indicating the lack of a competitive industry in foreign markets. the index of relative dependence on import (rmp) during the period does not exceed the unit and is accepted. the competitive advantages of foreign production machinery can be explained by the presence of a huge experience in the creation of machines and units and the use of modern technologies that reduce production time and reduce costs, improve quality and allow you to implement projects on a turnkey basis. as well, the advantage of foreign machine builders over the ukrainian is the possibility of execution of orders in credit with deferred payment, that is almost impossible to implement in the current context of development of the ukrainian economy. table 2 dynamics of indexes of competitiveness of production engineering of ukraine in the external market indexes of competitiveness 2011 2012 2013 2014 2015 index rxa 0,532 0,592 0,503 0,501 0,521 index rсa -1,231 -1,359 -1,420 -1,530 -1,232 index rmp 0,709 0,771 0,721 0,711 0,701 index rta -0,177 -0,179 0,219 0,262 -0,192 the main reasons for the low level of competitiveness of ukrainian machine-building workers are the following: – slow pace of scientific and technical progress; – the lack of material resources for the expansion of the product range, improving its quality; – update of fixed assets in enterprises and the introduction of new technologies; – significant tangible costs anticipated in the development of industries and the related necessity according to ukrainian standards, legislative and regulatory framework to the requirements of the european standards, norms and rules; – practical and material is not the willingness of many of the subjects of the technical re-equipment of enterprises, introduction of modern technologies and equipment, modern quality management systems and product certification; – environmental problems, which include: the absence of the conditions and the interest of the producers to the problems of the environment and production of clean foods; – insufficient level of continuous training of specialists with quality, including executives. these features have a very low level of competitiveness of domestic enterprises in the machinery industry, which needs an immediate solution for the effective functioning of enterprises and the economy as a whole (gladka, 2016). according to the research, the number of machinebuilding enterprises engaged in innovation activity, constantly shrinks; the share of innovative products in the total is only 3,5-4%; the volume of imports of high-tech products exceeding the size of own production; naukoêmnostì level of industrial production – 0,3%. this imperfection of innovation policy in machinery slows down the process of creating competitive products and as a result, the failure to provide highly own products to other industries, take a niche world of mechanical engineering. to improve the situation, we need great tools, most of which are at the expense of investments. baltic journal of economic studies 39 vol. 2, no. 4, 2016 today the technical base of the machinery of the country is characterized by negative trends. note too large a percentage of the fixed assets: in general, in the field of over 63% in manufacture of machinery and equipment – 60,8%, electric, electronic and optical equipment – 52,7%, manufacture of vehicles and equipment is another 14,6%. one of the ways to overcome negative tendencies of technological lag machine-building enterprises – increased funding for the purchase of new machinery, equipment and software, as well as conducting and stimulating research. currently, the proportion of funds directed at technological updates, approximately 70% of the total funds, and on scientific research and development research works is only 10%. (scientific and innovative activity in ukraine, 2014. stat., bo.). 4. conclusions in our country there are directions to overcome adverse conditions regarding the competitiveness of machine-building enterprises: the need for policy to support competitive enterprises and decisive relief from enterprises – of bankrupt enterprises; support of new competitive advantages of enterprises, which aim is the creation of high-tech products with innovation; strict conducting the antimonopoly policy. this requires the development of a modern competitive environment, the current financial and banking system, the implementation of a real government support and establishment of innovative-investment processes. systematization of the above approaches, found that the active development of any industry, but especially such technologically system as engineering, largely depends on the susceptibility of its businesses to innovation: a consequence of the implementation of innovation activities is its significant influence on the results of the operation of enterprises in the direction of expanding the range of products, maintaining and expanding traditional markets and capture new in ukraine and abroad, keeping up-to-date domestic and international rules and standards of production, increase flexibility and improve working conditions, increase production capacity and efficiency of existing, reduce pollution, reduce energy costs, replacement of the removed from the production of outdated products, reducing material costs. references pisarenko, t.v. (2015). innovation and its impact on economic development in ukraine [innovation and its impact on economic development in ukraine: monograph], ukrintei, kyiv, ukraine, 116 p. gladka, l.i. (2016). the competitiveness of ukrainian products for on the example of machine-building complex and the ways of its improvement. journal of young scientist, issue 7 (34), p. 26–30. balabanova, n.v. (2013). the competitiveness of products of machine-building complex of ukraine, transactions of mukachevo state university, issue 5, p. 21. scientific and innovative activity in ukraine, 2014. stat., bo. [electronic resource]. – access mode: http://www.ukrstat.gov.ua оксана збиранник формирование уровня конкурентоспособности предприятий машиностроительного комплекса украины аннотация. целью работы является анализ существующих подходов к определению значения производства инновационной продукции и внедрение инноваций на предприятиях машиностроительного комплекса украины с целью повышения их уровня конкурентоспособности. методика. статистический анализ и обобщение научных подходов к формированию уровня конкурентоспособности машиностроительных предприятий. результаты. проанализированы подходы позволили выявить причину несовершенства инновационной политики в машиностроении. по результатам исследований количество машиностроительных предприятий, занимающихся инновационной деятельностью, постоянно уменьшается; доля реализованной инновационной продукции в общем объеме составляет лишь 3,5-4%, а объем импорта высокотехнологичной продукции значительно превышает размеры собственного производства; уровень наукоемкости промышленного производства всего 0,3%. все это тормозит процесс создания конкурентоспособной продукции и как следствие – неспособность обеспечить другие отрасли экономики высокоэффективной собственной продукцией, занять определенную нишу мирового машиностроения. практическое значение. обеспечение ускоренного экономического роста страны как определяющее условие реализации евроинтеграционных стремлений украины в краткосрочной перспективе требует интенсификации инновационной активности машиностроительных предприятий. современное состояние инновационной активности предприятий в украине характеризуется рядом негативных факторов: внутренняя среда большинства baltic journal of economic studies 40 vol. 2, no. 4, 2016 машиностроительных предприятий не соответствует рыночным условиям: высокая энергоемкость производства, рост степени износа основных средств и уменьшение инвестиций в их обновление, недостаточное внедрение прогрессивных производственных и ресурсосберегающих технологий, снижение инновационной активности из-за нехватки финансовых средств существенно сказываются на уровне конкурентоспособности машиностроительных предприятий. значение/оригинальность систематизированы подходы к определению влияния инноваций на уровень конкурентоспособности машиностроительных предприятий на внешних и внутренних рынках. baltic journal of economic studies 159 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-159-167 nanoeconomics and innovative marketing as factors of sustainable development in global environment tetiana ostapenko1, maksym kolesnyk2 abstract. the relevance of the research topic is determined by the fact that the world is changing towards the environmental situation deterioration: ozone holes, air pollution and water contamination, food crisis and many natural disasters. these problems must be solved at all possible levels – global, local and individual. the object of the research is defined as influence of nanoeconomics on the sustainable development of different national economics and world economy in general. the peculiarities of the global environment in the context of sustainable development should be outlined at these levels and mainly at the level of nanoeconomics. the purpose of the study is to identify the individual innovative factor in global sustainable development. the subject of research is nanoeconomics in the framework innovative marketing of global sustainable development. the main research methods are a systematic approach and structural analysis, comparison and observation, mathematical methods (regression analysis, in particular). the results of the study include the assessment of three sustainable development components (economic, ecological and social), their impact on the quality of the global environment, nanoeconomics and innovative marketing. the results obtained can be used in the elaboration of state programs for sustainable development with the focus on the global, national and individual levels as well as on the education and upbringing in different educational establishments from preschool institutions to corporate universities. sustainable development of the countries studied is determined by the high rates of the environmental protection policy. although the environmental pollution is still ongoing, there is a tendency of a less hazardous impact on the natural world. waste is recycled rather than utilized, which is an act of the consumer system improvement when not only brand new goods and services are purchased but also those that can easily be processed. such policy reflects an economically frugal approach to the environmental development. to sum up, the social component is crucial for sustainable development since all the countries under study are highly developed and the poverty is not a decisive factor of the development with the food problem solved long ago. however, helping those in need becomes the basis for the governmental and the private sector activity. these issues are resolved with the implementation of the agenda 2030. hence, the global sustainable development goals are subject to the economic, social and environmental factors of nanoeconomic evolution in the countries studied. key words: global environment, sustainable development, nanoeconomics, innovative marketing, global sustainable development goals, agenda. jel classification: q56, q01, m31 corresponding author: 1 national aviation university, ukraine. e-mail: ostapenco@ukr.net orcid: https://orcid.org/0000-0003-2032-1365 2 national aviation university, ukraine. e-mail: maks.vit.koles@gmail.com orcid: https://orcid.org/0000-0003-0814-4220 1. introduction the article is devoted to the issue of global changes in the planet’s ecosystem that must be solved by means of various levers (global, national, local and personal) affecting the sustainable development and determining the progress of the global environment with the main approaches to environmental protection challenges through economic and social mechanisms. the research is based on the role of individualistic and innovative approaches to environmental challenges since the issue of reducing ozone holes should be resolved not only at the un level but also at the level of individuals, who should synergistically prevent the activation of emissions into the atmosphere. however, such individual innovative behavior must be motivated at the national and local levels. baltic journal of economic studies 160 vol. 7, no. 3, 2021 the problems which are explained in the article by influence of the nanoeconomics on sustainable development. pollution of environment is defined by enterprise factor and by the individual causes. we have chosen three countries: singapore, finland and usa. these states are the firsts in the level of competitiveness and in the level of development of nanoeconomic system. also these countries elaborate waste, using ecologic, economic and social aspects. the world goals of the sustainable development help the states and individuals form clear environment and improve the quality of people’s life. it is intended to determine the conditions of nanoeconomics’ influence on the sustainable development at the global level. the aim is achieved through the following tasks’ accomplishment: nanoeconomics’ identification as a sustainable development factor, exposition of the global sustainable development conditions, the description of environmental, economic, and social components of sustainable development in such countries as: singapore, finland, and the united states. the systemic approach was used to characterize sustainable development. the structural analysis was applied in assessing the levels of the global environment while the method of comparison was directed at determining the characteristic features of the sustainable development system in the studied countries–singapore, finland and the united states. the mathematical methods allowed to calculate the correlation link between nanoeconomics and the indicators of the environmental situation in the studied countries. the problems of sustainable development are revealed in various works of national and foreign scientists, but the issue of the nanoeconomics’ impact on the sustainable development is not sufficiently covered in scientific publications at different levels. thus, scholar j. mensah (mensah, 2019) highlights the content of sustainable development, especially its significance, history, principles and the impact on human activity. researcher k. hylton (hylton, 2019) estimates the extent of the legislation formation with regard to sustainable development and its adjustment policies at the state level. scientists s. brodhag and s. thaliere (brodhag & taliere, 2006) describe the strategies of sustainable development and conditions of their formation at the level of the enterprise and national economy. experts m. browning and a. rigolon (browning & rigolon, 2019) concentrate on the issues of green space and its impact on the scientific progress in different countries. nanoeconomics as the lowest level of the economic system contributes to the sustainable development formation while the issues of nanoeconomic development are highlighted in the works of such scientists as: k. arrow, g. kleiner (kleiner, 1997), o. inshakov (inshakov, 2007), i. manakhova (manakhova, 2011), b. schmarzo and others. the sustainable development issues at the nanoscale are not considered in scientific sources, the relevance of which is recognized. moreover, a human being as an individual factor of sustainable development is not singled out. besides, strategic state and local conditions are analyzed, but the importance of an individual person is not assessed. such researches will be further conducted as we must raise the generation that economically treats the environmental problems of all humankind and local areas (with their atmospheric, water, soil characteristics) as well as their own homes, which should also be environmentally friendly. 2. international approaches to definition of sustainable development natural conditions have a huge positive impact on human development and welfare. the concept “natural conditions” encompasses the absorption functions, i.e., air and water as the environments that absorb humanmade pollution and resource functions as the production is based on the use of forests, fishing and mining. the protection of absorption functions is important for human health. the protection of production or resource functions is crucial for the economic security of those whose lives depend on these resources. highquality natural conditions affect welfare indirectly as an important component of sustainable industrial production and service delivery (nair chandran, 2020). sustainable development results in the formation of natural conditions in different countries of the world and in the global environment on the whole. economies that receive a significant part of their income from natural resources are unable to sustain the growth, compensating for the deterioration of natural conditions by the accumulation of physical capital (asian development bank, 2017). as a rule, the impoverishment of the natural environment causes the greatest damage to the poor segments of the population, whose incomes often depend on natural resources and who have few opportunities to replace them with other types of resources. the approaches to the growth in the global environment that focus on the environmental quality and resource efficiency have a positive impact on the savings, investments, economic growth and human welfare especially in a long-term perspective. stable development foresees the big quantity of external environment factors existence. this environment experiences the active influence of innovative factors, as the problem of environment custody directly depends on quality of innovations. among all of such innovative factors, the authors highlighted nanoeconomics and innovation marketing. nanoeconomics, as the economy of innovative baltic journal of economic studies 161 vol. 7, no. 3, 2021 individuals and innovative marketing as innovative concept of market manufacturing, is decisive in national innovative systems formation – nanoeconomics defines personal factor of such systems as innovative marketing – permanence (sustainability) of provision, implementation and promotion conditions of new (nanoeconomics in particular) products and processes. sustainable development determines the existence of nanoeconomics when people create the conditions in which they exist and then these conditions determine the quality of their life. it is well known that the quality of individuals’ life depends on the decisions made at the marketing level, state level and at the level of the global environment. the latter form the appropriate policy and are characterized by the use of the sustainable development management levers. the efficiency of certain corrective measures will depend on the nature of the problem as well as on the economic and institutional situation. it is to be noted that a clear international environmental policy is formulated in resolution 38/361 of the united nations general assembly and is regulated by the world commission on environment and development (wced). according to the united nations commission on sustainable development (csd) (1992), its goal is to meet the needs of the modern society without compromising the ability of future generations to meet their own needs. the theory of sustainable development is an alternative to the paradigm of economic growth which disregards the environmental threats caused by the development in compliance with the extensive model (sidelnikova, 2014). this model is common in developing countries where individuals suffer from the increased use of space, territory, air and water resources, thus trying to regulate all these factors at the global level. so, at the united nations general assembly special session 119 (“rio + 5”, june 1997) it was noted that all public sectors should contribute to the development and implementation of the sustainable development strategy. the session required all countries to formulate and develop national sustainable development strategies that reflect the contributions and responsibilities of all the parties concerned by 2002. the latest achievement of the united nations in the study of sustainable development is the final document of “rio + 20”, entitled “the future we want”. the united nations conference on sustainable development or rio + 20 took place in brazil, june 2012. it was a forum aimed at debating and developing initiatives within the concept of sustainable development. the issues tackled upon the vital activity of individuals and various effects on the quality of nanoeconomics. a particular individuals form innovative approaches to marketing complex realization. in the study, nanoeconomics is defined as an integral part of social production (or economics as a whole), the productive force of which is the individuals who acquire the skills of economic behavior, make the best management decisions in the process of learning and training and ensure high competitiveness and its experience acquisition sharing in the economic environment on the basis of nanotechnologies application. global sustainable development challenges must be adjusted and solved through the implementation of the future global agreement (coates & nghi, 2017). in 2015, the sustainable development agenda was adopted by the relevant un conference. seventeen goals were announced for people and our planet. the sustainable development goals are a universal call for action in order to put an end to poverty, protect the planet and improve the lives and prospects of everyone and everywhere. seventeen goals were adopted by all un member states in 2015 as a part of the 2030 agenda for sustainable development which set out a 15-year plan to achieve the goals (estrada, 2017). nowadays, a certain progress is being made in many spheres, but, in general, appropriate measures to meet the goals have not yet been taken to reach the scope and extent required. the year 2020 became a period of decisive steps to achieve the goals by 2030. with less than ten years left to achieve the sustainable development goals, world leaders at the sdg summit in september, 2019 announced a decade of action and progress in the favor of sustainable development and pledged to mobilize financial resources, improve operational efficiency at the national level and strengthen institutions to achieve the goals by the target date of 2030, leaving no one behind. the un secretary-general called on all public sectors to unite efforts for a decade of action and progress at three levels (obama, 2017): – global action to ensure more effective leadership, a wider range of resources and smarter solutions for sustainable development goals in connection with realization of innovative marketing programs; – local action encompassing the required transition in politics, budget, institutions and the regulatory framework of governments, cities and local authorities when innovative marketing is used to promotion and realization of stable development programs on local level; – collective action, including the initiatives of youth, civil society, the media, the private sector, unions, academia and other parties concerned to provide and maintain an ever-growing dynamics towards implementing necessary transformations. as we can see, the agenda is spelled out for both global environment and nanoeconomics and in innovative marketing complex realization. many countries achieve the goals in different ways (feng wang yong & baochang, 2012), the list of which is given below: baltic journal of economic studies 162 vol. 7 no. 3, 2021 3. influence of nanoeconomics on sustainable development in singapore, finland and the usa it is worth considering the system of the sustainable development issues and solutions in the leading countries. though being developed, singapore, finland and the united states are facing many grave challenges. these countries solve environmental pollution problems from the standpoint of helping developing countries. however, the issues of sustainable development are also their great concern. so, it is necessary to study the environmental situation in these countries and analyze its effect on nanoeconomics. thus, singapore is a country with a developed economy, with well-handled issues of efficient production and responsible consumption, a country with extensive it capabilities, mechanical engineering and responsible agriculture. the country invents new technologies to improve the life and well-being of the population and uses the innovative marketing levers. waste management is one of the indicators in assessing the quality of the environment and usage of innovative marketing in their recycling. therefore, the statistics on this component in the life of society are given in table 1. as we can see in table 1, the largest amount of waste is generated in construction, ferrous metals, cardboard and paper spheres. it is to be noted that these are the industrial spheres where not an individual becomes a producer of waste but enterprises and it can be recycled with the appropriate technologies available. thus, plastics, that do not decompose in the environment or decompose over long periods of time, have the lowest rate of recycling while most wastes are sent for conservation. in addition, waste produced by human activity– foods (organic waste), textiles, leather and horticultural products – is not processed intensively enough: 18%, 4% and 73%, respectively. the country has a responsible attitude to waste sorting and a personal responsibility for it. there are state legislative acts that support this attitude to waste generation and disposal. training takes place from school and lasts a lifetime. awareness of one’s own contribution to the environment becomes the basis for the responsible life of an individual singaporean. the social component of sustainable development in singapore includes employment and pay, as shown in table 2. goal 1 no poverty goal 10 inequality abolition goal 2 no hunger goal 11 sustainable cities and local authorities goal 3 good health and well-being goal 12 responsible consumption and production goal 4 quality education goal 13 stable climate goal 5 gender equality goal 14 life under water goal 6 clean water and sanitation goal 15 life on land goal 7 affordable and clean energy goal 16 peace, justice and powerful institutions goal 8 decent work and economic growth goal 17 partnerships goal 9 industry, innovations, and infrastructure table 1 waste management statistics and its recycling in 2019 waste type waste generation (tons) waste recycling (tons) recycled % total accumulated (tons) construction and demolition 1440 1434 99% 6 ferrous metals 1278 1270 99% 8 paper / cardboard 1011 449 44% 561 plastic 930 37 4% 893 foods 744 136 18% 607 timber 438 289 66% 139 horticultural products 400 293 73% 107 ash / dirt 252 25 10% 226 textile / leather 168 6 4% 161 used slag 129 127 98% 3 nonferrous metals 126 124 99% 2 glass 75 11 14% 64 scrap metal 33 31 94% 2 others (pebbles, ceramics) 210 15 7% 195 totaling 7234 4247 59% 2984 source: www.tablebuilder.singstat.gov.sg baltic journal of economic studies 163 vol. 7 no. 3, 2021 as we see, employment in this country is quite high and the unemployment rate is very low amounting for 3.6%. employment is growing from year to year. so, this shows a positive trend in the development of human potential and nanoeconomics. monthly indicators of salaries are also growing, so salaries have almost doubled in the period between 2009 and 2019, as evidenced in table 3. such figures show that poverty is uncommon in the country, and the average monthly income is growing. it is to be pointed out that the state also influences the circumstances regarding environmental protection. moreover, there are a number of documents that regulate these issues: the code of activity to obtain a license for a general waste collector; a general waste collector’s license; a safe guide for general waste collectors; an application document for used oil products processing. the correlation analysis of the study proves a close link between the environmental component and the nanoeconomics in singapore since these aspects are resolved at the nanoscale when a person either suffers from excess waste in the environment or affects its collection, accumulation and disposal. in its turn, such human activity affects global recycling rates and also the formation of the global environment for sustainable development. the natural environment protection in finland is the key to the development of the national economy. the country with a strong forestry sector, represented by the paper and furniture industries, is very active in protecting the whole sphere from pollution, deforestation and careless treatment. statistics on environmental protection are represented in table 4. as we can see in table 4, the environmental costs on protection measures are imposed on the sphere of consumption, the activity of enterprises with regard to the turnover of fixed and working capital and investment policy. the consumer sector is the most productive one in terms of environmental costs and for innovative marketing complex realization. meanwhile, it is the sector of nanoeconomics where revenues and payments are directed at the sustainable development. table 4 environmental protection costs in 2016-2018 (million eur) sector 2015 2017 2018 public … … … consumption 333 376 388 investments 16 21 20 working capital and equity (paid–received) 326 346 352 industry … … … totaling 2754 2750 2939 source: www.stat.fi either enterprises or individuals consume as little energy as possible positively affecting nanoeconomic factors of the national economic development. furthermore, finland is a country with responsible waste management, as described in table 5. table 5 waste production and recycling in finland in 2018 waste type waste production waste recycling total waste 128252 125234 chemical waste 538 519 metal waste 887 200 paper and cardboard waste 625 563 timber waste 4371 3269 animal and plant waste 1039 952 household and mixed waste 2262 2165 dirt, ash 999 777 mineral waste 116303 115365 other waste 1428 1230 hazardous waste 1899 1736 source: www.stat.fi table 2 employment rates in singapore in 2019 and 2020 work, employment unit the last period the latest data the previous period employment rate (quarter) ‘000 september 2020 3.613 3.645 employment changes (quarter) ‘000 september 2020 -32.1 -113.5 unemployment % to the workforce september 3.6 2.8 total workforce ‘000 2019 3.740 3.675 source: www.tablebuilder.singstat.gov.sg table 3 gross monthly income from work (usd) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2927 3000 3299 3480 3705 3770 3949 4056 4232 4437 4563 source: www.tablebuilder.singstat.gov.sg baltic journal of economic studies 164 vol. 7 no. 3, 2021 the social component of sustainable development in finland is determined by the pay indicators and the unemployment rate. it is well known that the pay has been rising for ten years and the unemployment rate has also risen but not significantly. as indicated in table 6, the average pay determines the gradually rising income levels and rather low extreme poverty rates. it is necessary to admit that the higher the income level of an individual representative of the nation is, the more money is spent on luxury goods and technologies that allow to bring the environment into a balanced state. the unemployment figures in finland are at the level of 6.2 – 7.4%. they are not as low since in singapore they are within 3%. unemployment is known to be the cause of poverty although unemployment benefits are paid in developed countries; still finns are seeking employment at the earliest opportunity in order to live a good quality lifestyle. the correlation analysis proves that finland has the closest link between nanoeconomics and the environmental component to become a country with high competitiveness, due to its nanoeconomics based on human development in the favorable sustainable environment where a person, as a member of a highly developed society, has a chance to grow and improve a quality of life. the latter is provided by individuals and enterprises. so, the sustainable development is ongoing along with the growing importance of nanoeconomics in the national and global environment. another country under review is the united states which is a powerful player in the global markets of goods and services in general. statistics on the environmental situation in this country are limited, thus oecd data are used for the study. a large country has a huge amount of waste, as indicated in table 7. the waste disposal and recycling rates are also indicators of sustainable development. the country promotes waste sorting and environmental friendliness at the federal level. moreover, the index of political measures is rather high while environmental taxes are paid fairly and are used for sustainable development needs. the average annual pay in the united states is kept within 92,400 usd in the private sector and within 97,100 usd – in the public sector that amounts to 7,600 usd per month. these are the significant indicators with a positive effect on the national nanoeconomics. more and more americans set up businesses and pay taxes contributing to the country’s development although more and more private companies have recently suspended their activities. the high unemployment rate underlying the poverty poses a big challenge for the united states. its indicators are at 6.9% level in 2020 which turned out to be a severe pandemic period. meanwhile, ordinary americans keep losing their jobs. the united states is a country with the lowest link between nanoeconomics and environmental protection. therefore, the us has developed the document entitled “the united states global development policy and agenda for sustainable development 2030”. its basic provisions cover global development goals and their conformity to american realities. 4. conclusions the approaches to the growth in the global environment that focus on the environmental quality and resource efficiency have a positive impact on the savings, investments, economic growth and human welfare especially in a long-term perspective. the efficiency of certain corrective measures will depend on the nature of the problem as well as on the economic and institutional situation. the latest achievement of the united nations in the study of sustainable development is the final document of “rio + 20”, entitled "the future we want". the united nations conference on sustainable development or rio + 20 took place in brazil, june 2012. it was a forum aimed at debating and developing initiatives within the concept of sustainable development. the issues tackled upon the vital activity of individuals and various effects on the quality of nanoeconomics. in the study, nanoeconomics is defined as an integral part of social production (or economics as a whole), table 6 monthly pay in finland in 2010–2019 (eur) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3006 3080 3184 3259 3302 3342 3371 3396 3455 3532 source: www.stat.fi table 7 the environmental situation in the usa in 2010-2018 indicator 2012 2013 2014 2015 2016 2017 2018 local waste production (tons) 231380 243471 237782 242055 242935 sustainable environmental policy (index) 3.17 2.67 2.58 2.69 environmental tax revenue (mil. usd) 0.779 0.755 0.742 0.728 0.713 source: www.statista.com baltic journal of economic studies 165 vol. 7 no. 3, 2021 the productive force of which is the individuals who acquire the skills of economic behavior, make the best management decisions in the process of learning and training and ensure high competitiveness and its experience acquisition sharing in the economic environment on the basis of nanotechnologies application. sustainable development of the countries studied is determined by the high rates of the environmental protection policy. although the environmental pollution is still ongoing, there is a tendency of a less hazardous impact on the natural world. waste is recycled rather than utilized, which is an act of the consumer system improvement when not only brand new goods and services are purchased but also those that can easily be processed. such policy reflects an economically frugal approach to the environmental development and approaches to its provision with innovative marketing measures, which add the stability to innovative development of nanoeconomics. to sum up, the social component is crucial for sustainable development since all the countries under study are highly developed and the poverty is not a decisive factor of the development with the food problem solved long ago. however, helping those in need becomes the basis for the governmental and the private sector activity. these issues are resolved with the implementation of the agenda 2030. hence, the global sustainable development goals are subject to the economic, social and environmental factors of nanoeconomic evolution in the countries studied. references: asian development bank (2017). firing up regional brain networks: the promise of brain circulation in the asean economic community. available at: www.adb.org/publications/regional-brain-networks-aseanfinal. pdf&usg=afqjcnhj48tkpgrlukm23u26i-h5uhdxeow brodhag, c. and taliere, s. (2006). sustainable development strategies: tools and policy coherence. natural resource forum, 30, 136–145. doi: 10.1111/narf.2006.30.issue-2 browning, m. and rigolon, a. (2019). school green space and its impact on academic performance: a systematic literature review. international journal of environmental research and public health, 16 (3), 429. doi: 103390/ ijerph16030429. coates brendan and nghi luu. china’s emergence in global commodity markets, june 1, 2017. available at: www.static.treasury.gov.au/uploads/sites/i/2017/06/0i-china-commodity-demand.pdf estrada francisco (2017). a global economic assessment of city policies to reduce climate change impacts, nature climate change, no. 7, 403–406. available at: nature.com/articles/nclimate330i feng wang yong cai and baochang gu. (2012). population, policy and politics: how will history judge china’s one-child policy? population and development review. 38 issue supplement, 115–129. hylton, k. n. (2019). when should we prefer tort law to environment regulation? washburn law journal, 41, 515–534. sustainability 2019, 11, 294. inshakov, o. v. (2007). nanoekonomika i ekonomicheskaya genetika [nanoeconomics and economic genetics]. volhohrad. (in russian) kleiner, g. b. (1996). sovremennaya ekonomika rossii kak «ekonomika fizicheskih lits [modern economy of russia as an economy of physical entities]. economic issues. issue 4. (1997 ed.) nanoekonomika. anatomiya esche odnogo strannogo rossiyskogo fenomena [nanoeconomics. anatomy of one more strange russian phenomenon]. judicial news. issue 22. (in russian) manakhova, i. v. (2011). nanoekonomika: mnogourovnevyiy podhod k issledovaniyu ekonomicheskih otnosheniy [nanoeconomics: multi-level approach to researching economic relations]. saratov university news. economics. management. law. issue 2. vol. 11. (in russian) mensah justice (2019). sustainable development: meaning, history, principles, pillars and implications for human action: literature review. cogent social sciences, volume 5, issue 1. available at: www.tandfonline.com/ doi/full/10.2080/23311886.2019.1653531 nair chandran (2020). derzhava staloho rozvytku. maibutnie uriaduvannia, ekonomiky ta suspilstva [the state of stable development: the future of government, economy and society]. kyiv: our format. (in ukrainian) obama barak ( january 13. 2017). the irreversible momentum of clean energy. science 355, no. 6321. available at: www.science.sciencemag.org/content/355/6321/126 sidelnikova, v. k. (2014). stalyi rozvytok ekonomiky ukrainy v umovakh hlobalizatsii [stable economic development of ukraine in global conditions]. h.s. skovoroda kharkiv national pedagogical university. issue 14. (in ukrainian) schmarzo bill. mastering nanoeconomics in the era of digital transformation. “the economic data, analytics digital transformation”. available at: http://www.linkedin.com/puls/mastering-nanoeconomics-era-digitaltransformation-bill-schmarzo baltic journal of economic studies 166 vol. 7 no. 3, 2021 appendices singapore year gdp per capita (dependent), usd production of waste tons (the independent variable) 2020 95603 7234 2019 101458 6937 2018 100092 6830 2017 94941 6548 2016 89386 6437 2015 86975 6029 2014 84423 6038 2013 83002 5856 2012 82065 5623 2011 80052 5464 2010 75294 6321 gdp = 12.06 ∙ prod.waste + 12497.5 the coefficient of correlation = 0.79 and the coefficient of determination = 0.62 indicate the presence of a linear   70000 75000 80000 85000 90000 95000 100000 105000 5000 5500 6000 6500 7000 7500 g d p pe r he ad production of waste tons singapore connection between the variables. the independent variable coefficient is statistically significant with p-value = 0.004 finland year gdp per capita (dependent), usd production of waste tons (the independent variable) 2020 50748 128252 2019 49336 117376 2018 47544 115487 2017 44995 116287 2016 42570 114672 2015 41836 112376 2014 41587 111457 2013 40969 110829 2012 41016 109379 2011 39353 107269 2010 38862 107897 baltic journal of economic studies 167 vol. 7 no. 3, 2021 gdp = 0.62 ∙ prod.waste 27459.4 the coefficient of correlation =0.9 and the coefficient of determination =0.82 are high enough and indicate   30000 35000 40000 45000 50000 55000 105000 110000 115000 120000 125000 130000 g d p pe r he ad production of waste tons finland a close linear connection between the variables. the independent variable coefficient is statistically significant with = 0.0001 the usa year gdp per capita (dependent), usd production of waste tons (the independent variable) 2020 20807 243158 2019 21433 242967 2018 20611 242935 2017 19542 242055 2016 18745 237782 2015 18238 243471 2014 17527 231380 2013 16784 230158 2012 16197 230006 2011 15542 299567 2010 14992 298637 gdp = 0.62 ∙ prod.waste 27459.4 the coefficient of correlation =0.5 and the coefficient of determination = 0.25 are low enough and indicate the absence of a linear connection between variables. the diagram shows that the production of waste in the first two years of research was rather high and can be regarded as emissions, taking the given figures into account, that allows to conduct further analysis without the period between 2010 and 2011. in other cases, there is a linear trend’s presence. the independent variable coefficient is statistically insignificant with p-value = 0.11   14000 15000 16000 17000 18000 19000 20000 21000 22000 220000 240000 260000 280000 300000 320000 g d p pe r he ad production of waste tons usa baltic journal of economic studies 52 vol. 3, no. 1, 2017 the rationale for the application of the inflation targeting regime in ukraine roman kalinovskyi1 taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is the consideration of the basic choices of a monetary regime of monetary policy, which include the monetary targeting regime, the regime of exchange rate targeting, the inflation targeting regime, and a strategy without an explicit nominal anchor. the article also discusses their implementation in various countries of the world and the resulting consequences. the subject of research is the consideration of the existing monetary regimes and the rationale for the selection of one of them to ensure sustainable development of the economy of ukraine. this research examines, among other things, such unresolved parts of the general problem as the search for ways how to increase the degree of the central bank influence on the economy by changing the existing monetary regime to more optimal. methodology. the research is based on a comparison of data on the effectiveness of monetary policy in different countries in specific time periods. given the consequences of the implementation of certain monetary regimes in different countries, there are drawn conclusions about the appropriateness of the choice of a specific regime for the ukrainian economy. the results of the comparison showed that the most suitable choice for the economy of ukraine is the choice of the inflation targeting regime, since it generates the inflation expectations at a low level, in most cases allows reducing inflation in the short term, contributes to strengthening the central bank independence and credibility, allows overcoming internal and external shocks, eliminates the contradictions connected with the objectives of monetary policy, reduces the likelihood of crises, as well as creates positive conditions for the development of the economy as a whole. practical implications. thoroughly examined the advantages and disadvantages of the underlying monetary regimes, conclusions were drawn concerning the promising directions of development of monetary policy in ukraine, as well as recommendations on further actions of the state bodies of ukraine. value/originality. the conclusions of the research substantiate the benefits of inflation targeting regime to enhance the effectiveness of monetary policy, as well as provide recommendations concerning the further implementation of the inflation targeting regime in ukraine. key words: monetary policy, monetary regime, nominal anchor, targeting, inflation. jel classification: e42, e52 corresponding author: 1 department of economic theory, macroand microeconomics, taras shevchenko national university of kyiv. email: roma_kalina@mail.ru 1. introduction in conditions of low economic growth rates, inflation and devaluation of the national currency, it is extremely important to find ways to overcome the negative effects of the aforementioned processes and phenomena. given the uncertainty factor, the influence of the central bank on the country 's economy is quite powerful. the main direction of a monetary policy improvement is to change its regime on more effective. the research urgency is caused by the desire of the national bank of ukraine (nbu) to move in the near future to full-fledged inflation targeting. in the "main principles of monetary policy for 2015", it is noted that strategic objective of the nbu is to achieve and maintain in the medium term low and stable inflation (5% per year with a tolerance of ±1%) and a gradual transition to inflation targeting. thus, the research problem is stated as follows: is the inflation targeting regime the best choice for ukraine? the current paper aims to demonstrate differences in an implementation of basic monetary regimes and to prove that the inflation targeting regime will be the most effective for ukraine. 2. basic monetary regimes in most cases, central banks choose one of three basic nominal indicators characterizing the results of its activity: the existing amount of money in circulation, the value of the exchange rate or the inflation rate. providing the stable dynamics of these variables on the level for a certain period of time is called its targeting (koncewicz, 2012). baltic journal of economic studies 53 vol. 3, no. 1, 2017 we can consider three basic choices of monetary regime. the first is the regime of monetary targeting. it is based on the belief that the change in the money supply entails a corresponding change in the rate of inflation. in order for this regime to be effective, a necessary condition is an existence in the economy a stable connection between the change in the money supply and inflation. the second monetary regime is based on the exchange rate targeting. it suggests that the central bank as the intermediate target of monetary policy sets the nominal exchange rate and tries to provide stability against the currencies of the so-called countries of the anchor due to interest rate changes and direct foreign exchange intervention. the third monetary regime is based on inflation targeting. also, some central banks are adopting a strategy without an explicit nominal anchor, which consists in establishing and achieving several goals simultaneously (gnativ, 2009). 3. monetary regimes’ features and different countries’ experience the essence of monetary targeting is that the central bank, on the basis of the inflation tar-get, estimate of potential output growth and the dynamics of money velocity within the quantitative equation of exchange (mv = py) determines the target rate of monetary aggregates growth and announces it to the public. for the implementation of monetary targeting in the country, an important condition should be met: the demand for money within the country should be stable. this means that the velocity of money has to be on the same level for a certain horizon targeting. this condition is quite difficult task for the central bank. the reason is that the demand for money depends essentially on the changes occurring in the socio-economic relations, the stability of international financial markets, and the like. given this, the effectiveness of this regime is low in countries with economies in transition. during 1970-2000 the monetary targeting was tried in many countries such as the uk, greece, albania, georgia, china, etc. most of them were forced to abandon this regime due to a low efficiency of monetary aggregates influence on the ultimate goal – price stability. examples of effective targeting of the money supply are germany and switzerland. indicators of monetary targets in these countries were achieved only by 50%; however, inflation has been kept at an average level that does not exceed 3%. the effectiveness of this regime in germany and switzerland was based on the confidence in the monetary authorities (radionova, 2009). ukrainian scientist t. slipchenko noted that the main advantages of monetary targeting as a monetary regime are "sovereignty " – the central bank chooses the inflation target, and has the ability to adjust policy depending on internal changes in the volume of production and a close relation-ship with the instruments of monetary policy, that is, a high level of control by the central bank, since monetary aggregates are measured quickly enough, and, accordingly, reports on the implementation of monetary targets communicated to the public with relatively short time lags up to several weeks (slipchenko, 2010). as you can see, the advantages of this regime include a high level of coordination of monetary and overall macroeconomic policy, the ability to a rapid reaction by the central bank and the stability of expectations associated with full awareness. the disadvantages include the impossibility of control over the money supply in case of a high share of cash, insolvency in case of significant fluctuations in the demand for money, the ambiguity of the relationships between changes in the money supply and its actual performance in time intervals (prushkovskaya, 2010). not less than 50 economies of the world continue to rigidly fix the courses of their currency units relative to third currencies. these include, for example, hong kong, malta, latvia, lithuania, estonia, etc. selection of the regime of the exchange rate targeting is an effective tool to control inflation. the effectiveness of this regime directly depends on such factors as the degree of openness of the economy measured by share of imports in consumption, the volume of foreign exchange reserves and so on (papaika, 2010). the disadvantages of this regime are the dependence of monetary policy on external economic factors, the possibility of an inflow of short-term speculative capital and the risk of destabilization of the financial system in the global currency crises. as shows the analysis of the experience of individual countries, the policy of the exchange rate targeting may have different consequences. thus, the positive results were achieved in bulgaria, latvia, tunisia, argentina. a classic example of a country that had a bad experience is brazil, where the application of the regime of the exchange rate targeting led to hyperinflation. in 1990, the reserve bank of new zealand was the first to use inflation targeting regime. currently, such policy is carried out in at least 26 countries, including economically developed countries (australia, sweden, canada, uk), developing countries (brazil, chile, mexico), and countries with emerging market economies (poland, czech republic, slovenia, hungary). the last introduced the inflation targeting regime during the transition period, with the result that has reached the low level of inflation and sustainable economic growth, and also raised public confidence in the monetary authorities. the concept of "inflation targeting" is defined as the monetary strategy that involves the public announcement of the inflation temps by the central bank that must be achieved within a certain period, and provides increased transparency and accountability of the monetary regulation bodies. baltic journal of economic studies 54 vol. 3, no. 1, 2017 an important condition for the transition to the inflation targeting regime is a presence of the central bank's clear vision of how monetary policy affects the real economy. this makes it possible to determine, which instruments are appropriate to use in a given situation, a time lag of the measures of the central bank impact on macroeconomic indicators and how they will be effective. in the developing countries, the influence of monetary policy on the economy is characterized by a greater uncertainty due to permanent institutional and structural changes. the technology of conducting monetary policy under inflation targeting is based on two main principles. the first is a forecast of how the inflation process will develop for the assumption that monetary policy will not change. the second is a prediction as to what will be the future inflation and other macroeconomic indicators in the case of current changes in monetary policy. so, if the inflation forecast exceeds the inflation target, the central bank needs to raise interest rates, and vice versa, if the inflation forecast is below the inflation target, the central bank should reduce the interest rate. it should be noted that the effects of monetary policy occur with a time lag, so the medium-term forecast of macroeconomic development, in particular, inflation, has a sufficient importance. since the applying of inflation targeting regime, the deviation of the predicted values of inflation from the target acts as an intermediate goal, so the quality of the forecast becomes the key element of the effectiveness of monetary policy (gritsenko, 2008). thus, the effective system of analysis and forecasting is one of the most important preconditions for a successful transition of central banks from the exchange rate targeting regime to the inflation targeting regime. central banks applying inflation targeting, target out also inflation expectations, which serve as a connecting thread between operating targets and the ultimate goal of monetary policy. not only the officially proclaimed inflation target is affected by the expectations of economic agents, but also its forecasts, which are specified by the central bank in periodic public reports. the process of forecasting by the monetary authorities is a "black box" for the public and associated with the use of a number of complex macroeconomic regimes. if economic agents trust the central bank, even unexpected external and internal shocks, which were not considered by the central bank in the forecasting process, may be impaired by the influence of optimistic inflation expectations. that is, the expectations of economic agents are influenced both by the actual change of the direction of monetary policy, and just announcements about upcoming intentions of the central bank. 4. advantages and disadvantages of inflation targeting inflation targeting is implemented through active and passive approaches. the passive approach includes the following monetary policy tools: a narrow corridor of the interest rates in the interbank market, the conduct of irregular transactions in the open market, the use of reserve requirements to regulate liquidity. the active approach, in turn, provides for a wide interest rate corridor, the lack of regular transactions in the open market and minimal use of reserve requirements. international experience of inflation targeting regime confirms its effectiveness, since none of the countries that have adopted this strategy, abandoned it. in these countries, today the macroeconomic situation is characterized by steady economic growth, less vulnerability to external shocks, low and stable inflation. application practice shows the existence of subtypes of this regime, as different countries use inflation targeting that was developed according to their system characteristics. such subtypes include: full-fledged inflation targeting – full transparency lighting inflation target, strict adherence to the selected target without corrective measures from the central banks. first used in new zea-land, later it spread among developing countries, particularly in brazil, colombia, hungary, mexico and poland; disguised inflation targeting – allows changes in the level of inflation. in this subtype of the regime, there is certain opacity. used by the european central bank and by the federal reserve system of the united states; experimental inflation targeting – means the broad inflation tasks proclamation in conditions of low public confidence in the central bank. the advantages of inflation targeting are: the ease of evaluating the effectiveness of monetary policy, a flexible exchange rate policy and a creation of conditions for the balanced development of all sectors of the economy, slowed because of the negative impact of inflation. according to domestic economist v. gordienko, significant benefits of the monetary policy regime of inflation targeting include: 1) formation of inflation expectations at a low level; 2) in most cases allows reducing inflation in the short term; 3) helps to strengthen the actual central bank’s independence and credibility; 4) allows overcoming internal and external shocks; 5) resolves contradictions associated with the objectives of monetary policy; 6) reduces the likelihood of crises; 7) creates positive conditions for the development of the economy as a whole (gordienko, 2012). the disadvantages of this regime you need to include are the impact of factors that are not controlled by the central bank (e.g., the status of the financial sector) on the inflation dynamics, as well as limiting opportunities for stimulating economic growth and reducing unemployment with monetary policy instruments. baltic journal of economic studies 55 vol. 3, no. 1, 2017 5. recommendations for ukraine based on the experience of other countries, the main direction for improving the monetary policy of ukraine is determined as a phased transition from the regime of targeting the exchange rate (which was defined as a financial priority of the monetary policy of ukraine in 1997 (bazilevich, 2007)) to the regime of inflation targeting. during the first stage, you need to reduce utilization of foreign exchange interventions that will make the exchange rate more flexible and to increase the influence of interest rate policy, which should become the main tool of the nbu. it is also important to implement a number of measures aimed at the development of the stock market of ukraine. the purpose of the second stage is the transition to full inflation targeting by further liberalization of operations with capital movement. the main results of the second stage should be the transparency and efficiency of the impact of interest rate policy and a flexible exchange rate. the criteria for the formation of the most favourable environment for the transition to the inflation targeting in the country are: the central bank independence, transparency and informational openness of the nbu, central bank credibility, a qualitative inflation forecast, high level of training of analysts and a robust statistical base, a developed financial market, free pricing, low level of dollarization of the economy, coordination of instruments of monetary and fiscal policy. so, the possible positive aspects of the implementation of inflation targeting in ukraine include: 1) increasing trust of the population, primarily in the national bank of ukraine and the government, which is one of the factors in the formation of inflation expectations; 2) ensuring stable economic development of ukraine in the long term; 3) increasing of foreign investment (which will affect the development of financial-credit sector and the economy as a whole); 4) lower prices for imported goods; 5) increasing transparency and efficiency of functioning of the government securities market; 6) creation of mechanisms to counter external shocks and manage cash flow in all sectors of the economy; 7) reducing the likelihood of crises. however, according to vishnevska, the implementation of the inflation targeting regime in ukraine in the absence of basic preconditions was a necessary step, but, as practice shows, untimely, and the proof is the inability of the nbu in 2014 to ensure price stability in conditions of macro-economic instability (vishnevska, 2015). the inflation targeting regime was implemented in unfavourable for ukraine's economy conditions, in particular with inflation almost of 24.9 % in 2014, the devaluation of hryvnia by almost 310 % (from 8.3 uah/usd in 2013 to around 34,0 uah/usd in february 2015) and the fall of gdp by 15.2% in 2014. the influence of the external environment will further increase the dependence of inflation targeting on the budget needs (kornev, 2015). 6. conclusions one of the main preconditions for the effective functioning of the economy is ensuring of a stable and low inflation. the achievement of the inflation target is possible primarily due to the choice of the optimal central bank monetary policy. given the socioeconomic realities of ukraine, the most expedient one is the implementation of the inflation targeting regime. inflation targeting should be viewed as a monetary system device, which is characterized by a public proclamation of the official quantitative inflation target in the medium term and a clear understanding and confidence that low and stable inflation is the primary goal of monetary policy in the long run. in addition, an important condition for the implementation of this monetary regime is understanding that it will stimulate positive changes concerning the implementation of monetary policy, strengthening the effectiveness of the use of its main tools to increase the independence of the central bank in terms of accountability and transparency and will contribute to the development of the system analysis and forecasting of the inflation target in the country. there are the following ways to improve monetary control in conditions of implementation of the inflation targeting regime: enhancing the role of interest rates in managing inflation through adherence to the basic rules of interest policy; strengthening the capacity of the nbu to develop its own forecasts of macroeconomic indicators, which will be the basis for making monetary decisions and will enhance the independence of the regulator; improving the efficiency of the process of making monetary decisions and improving communication policy with the aim of restoring confidence in the regulatory actions; a better coordination of monetary and fiscal policy to achieve the inflation target and keeping it at low levels for a long time. a promising direction for further research is an in-depth analysis of the transmission mechanism of monetary policy, directly connected with the inflation targeting regime and that may lead to the more effective impact of the central bank on the economy of ukraine. baltic journal of economic studies 56 vol. 3, no. 1, 2017 references: bazylevych, v., bazylevych, k., & balastryk, l. (2007). macroeconomics – kyiv, knowledge, 703 p. gnativ, a.a. (2009). inflation targeting as an optimal monetary policy regime in ukraine. regional economy, vol. 2, p. 119-125. gordienko, v.p. (2012). inflation targeting as an effective method of ensuring price stabil-ity. finance and credit activities: the theory and practice problems, vol. 1, issue 2, p. 15-21. gritsenko, a.a. (2008). the institution of inflation targeting: international experience and prospects of introduction in ukraine – kyiv, institute of economics and forecasting of nas of ukraine, 272 p. koncewicz, k.s. (2012). the analysis of regimes of monetary policy in various countries of the world. krok, vol. 1, p. 214-216. kornev, i.v. (2015). the improving of the monetary policy effectiveness and instruments of its realization in ukraine. scientific notes of national university "ostrog academy ", issue 28, p. 125-129. papaika, a.a. (2010). world experience of anti-inflationary policy of the state: recommendations for ukraine. economics industry, vol. 2, p. 3-8. prushkovskaya, e.v. (2010). targeting as an aspect of monetary policy in conditions of globalization. economics and entrepreneurship, vol. 3, p. 141-146. radionova, i.f. (2009). macroeconomics – 2 – kyiv, kneu, 423 p. slipchenko, t. a. (2010). theoretical analysis of monetary regimes and selection criteria for ukraine. scientific herald of nltu of ukraine, vol. 20, p. 232-238. vishnevska, v.s. (2015). economic mechanism of inflation targeting in ukraine – lviv, nul, 22 p. роман калиновский обоснование целесообразности применения режима инфляционного таргетирования в украине аннотация. целью работы является рассмотрение базовых вариантов выбора монетарного режима денежно-кредитной политики, к которым относятся режим монетарного таргетирования, режим таргетирования обменного курса, режим таргетирования инфляции, а также стратегия без явного номинального якоря. исследуется их внедрения различными странами мира и вызванные ими последствия. предметом исследования является рассмотрение существующих монетарных режимов и обоснование выбора одного из них для обеспечения устойчивого развития экономики украины. в  данном исследовании рассматриваются, помимо прочего, такие нерешенные части общей проблемы, как поиск путей повышения степени влияния центрального банка на экономику посредством изменения существующего монетарного режима на более оптимальный. методика. исследование основано на сравнении данных о степени эффективности проведения денежно-кредитной политики разными странами мира в определённые периоды времени. рассматривая последствия внедрения тех или иных монетарных режимов в разных мировых экономиках, делаются выводы о целесообразности выбора определённого режима для экономики украины. результаты сравнения показали, что наиболее целесообразным для экономики украины является выбор режима инфляционного таргетирования, поскольку последний формирует инфляционные ожидания населения на низком уровне, в большинстве случаев позволяет снизить уровень инфляции в короткий срок, способствует укреплению фактической независимости центрального банка и доверия к нему, позволяет преодолеть внешние и внутренние шоки, устраняет противоречия, связанные с целями монетарной политики, снижает вероятность возникновения кризисов, а также создает положительные условия для развития экономики страны в целом. практическое значение. всесторонне исследовав преимущества и недостатки базовых монетарных режимов, были сделаны выводы относительно перспективных направлений развития монетарной политики в украине, а также даны рекомендации относительно последующих действий государственных органов украины. наиболее значимыми являются такие рекомендации, как снижение степени использования валютных интервенций, что сделает обменный курс более гибким, и усиления влияния процентной политики, которая должна стать основным инструментом нбу. также важно осуществить ряд мероприятий, направленных на развитие фондового рынка украины. для перехода к режиму полного таргетирования инфляции необходима дальнейшая либерализация операций, связанных с движением капитала. основными результатами этих действий должны стать прозрачность и эффективность влияния процентной политики и гибкий валютный курс. значение/оригинальность. полученные выводы обосновывают преимущества применения режима baltic journal of economic studies 57 vol. 3, no. 1, 2017 инфляционного таргетирования для повышения эффективности монетарной политики государства, а также предоставляют рекомендации относительно дальнейшего внедрения режима таргетирования инфляции в украине. перспективным направлением дальнейших исследований является углубленный анализ трансмиссионного механизма денежно-кредитной политики, который непосредственно связанный с режимом инфляционного таргетирования и может привести к более эффективному воздействию центрального банка на экономику украины. baltic journal of economic studies 43 vol. 7 no. 4, 2021 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: iuliiagern@ukr.net orcid: https://orcid.org/0000-0002-4929-0411 researcherid: g-7178-2017 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: tnshkoda@ukr.net orcid: https://orcid.org/0000-0003-1016-4853 researcherid: m-1847-2013 3 kyiv national economic university named after vadym hetman, ukraine. e-mail: savych@kneu.edu.ua orcid: https://orcid.org/0000-0001-5934-9002 researcherid: aal-1229-2020 doi: https://doi.org/10.30525/2256-0742/2021-7-4-43-53 marketing tools in strategic management of young scientists’ human capital iuliia gernego1, tetiana shkoda2, oleksandr savych3 abstract. the purpose of the paper is to identify the marketing tools, which are promising areas of functional provision of strategic management of young scientists’ human capital in ukraine. the novelty of the research is represented by the created theoretical model of the conceptual scenario of strategic management of young scientists’ human capital. the object of the scientific research is the process of using marketing tools in strategic management of young scientists’ human capital. the research methodology includes such methods: comparative analysis, critical analysis, statistical analysis, economic-mathematical analysis and graph-analytical. the research is based on the results of mass sociological survey of young scientists in ukraine performed within the framework of the project "realization of the young scientists’ potential in integration of science, education, and business" (0120u102126) in 2020 year. the obtained results confirmed fully the proposed hypothesis h1 and h2 and partially the hypothesis h3. the discussion section of the paper proposes the improved method of evaluating the human potential of young scientists, which includes four vectors: assessment of business qualities of educational managers, evaluation of the effectiveness of the organizational structure of management of scientific and educational institutions, assessment of the overall effectiveness of marketing activities of scientific and educational institutions, general evaluation of marketing potential of human development in the strategic management of human capital of research and educational institutions. the fourth component is proposed to produce marketing tools used by young scholars based on the results of a mass sociological survey. the practical value of the proposed instruments for the young scientists’ community and scientific and educational institutions, where they are employed, is in the use of the adapted graph-analytical method, which gives the opportunity to assess the marketing tools in strategic management of young scientists’ human capital. key words: marketing tools, strategic management, human capital, young scientists. jel classification: i23, j24, m31 1. introduction the connection between the community of young scientists and society creates a necessary condition for increasing the interest of young scientists in realizing their potential in the scientific field. currently, the lack of popularization of science and education, and the low prestige of the scholarly profession in ukraine create a measure of factors that affect the low attractiveness of science (zhabin, isakova, skorokhod, 2018) as an area of professional realization for young researchers. according to ukrainian legislation, the category of young scientists includes those under the age of 35 for phd and researchers without scientific degree or under the age of 40 for doctors of science (parliament of ukraine, 2015). in accordance with the need to ensure the successful resolution of the above-mentioned problems about the development potential of young scientists, it is important to use marketing tools in the process of strategic management of young scientists’ human capital. in particular, an important feature of the baltic journal of economic studies 44 vol. 7 no. 4, 2021 use of marketing tools in realizing the potential of a young scientist is its innovative basis, which implies the use of modern tools to promote professional achievements. the covid-19 pandemic has significantly affected the scientific communication among young scientists and its features. thereby, in may 2020, during the strict covid-19 quarantine in ukraine, the council of young scientists at the ministry of education and science of ukraine conducted a survey (cys at mesu, 2020), which showed that 84.6% of young scientists in ukraine used such an opportunity as preparation of a scientific publication. the second most important marketing tool was participation in an online scientific conference (54.0%). this study emphasizes the interest of public authorities in the effective strategic management of human capital of young scientists, which contributes to strengthening the positive image of ukrainian science and education in the world and the practical implementation of state documents such as the strategy of higher education of ukraine for 2021-2031 (mesu, 2020), one of the objectives of which is to enhance the status of employees of educational institutions in society and stimulate their professional development, including young scientists 2. literature review on the place of marketing tools in strategic human capital management recently, research and educational institutions as organizations are interested in the long-term, strategic perspective of human capital management. this creates the reason to particularly increase the importance of the process of forming a human capital management strategy. the human capital management strategy determines the expected growth dynamics of the organization, key indicators of success and satisfies the needs arising from the current stage of growth (roskowski, 2003). in the process of research of human capital management strategy it is reasonable to consider this strategy as a plan indicating the direction of movement of enterprises in the field of human capital management. it is aimed at achieving certain goals with rational commercialization of human potential, the necessary level of art effect and elasticity of strategic management decision. in accordance with the above definition, it is also important to note that human capital management strategy refers to dynamic strategies. thus, according to l. frolova and t. nosova (frolova, nosova, 2015), the dynamic strategy characterizes the change of dynamic equilibrium of the system "enterprise – environment", namely the process of its quantitative and qualitative changes for a certain period of time. this interpretation, taking into account the influence of the external environment, coincides with our understanding of the importance of the analysis of the poly-subject environment in the conceptual scenario of strategic management of human capital of young scientists, where, in particular, such component of the poly-subject environment as the market environment, is external in relation to the organization. the use of marketing tools in strategic human capital management already represents a stage of practical implementation of human capital management strategy. at the same time, the whole process of strategic human capital management on the example of the target group of young scientists reflects the conceptual scenario, which includes several stages: 1) conceptual; 2) scenario; 3) implementation. representation of such conceptual scenario of strategic management of human capital is presented in figure 1. in particular, the conceptual stage includes: selection of management subjects; development of an appropriate scientific concept of strategic management of human capital (shkoda, 2018), which should be enshrined in the appropriate document of strategic development of young scientists; analysis of the polysubject environment; definition of the current vision and system limitations. at the scenario stage a suitable variant of human capital management strategy is selected using a scenario model of human capital management strategy selection, defining strategic goals and objectives, as well as objects of management. the realization stage of the conceptual scenario is the main within the framework of our study, because it includes the justification and forecasting in the areas of functional support of strategic management of human capital, which includes the marketing area. in particular, it includes: marketing of the product, price, promotion, distribution and personnel. in accordance with these components, the purpose of our study is to identify the marketing tools most appropriate for the effective implementation of marketing policy in the process of strategic management of young scientists’ human capital. in particular, among the current marketing trends, researchers highlight digitalization and strengthening of online communication with customers (radionova-girsa, 2018). for instance, during the covid-19 pandemic (hoekstra, leeflang, 2020), the use of multichannel marketing to enhance personalization with consumers (reshetnikova, smerichevsky, polishchuk, 2019), the increasing influence of globalization and digitalization (savych, shkoda, 2020), the formation of a new paradigm of strategic marketing and market reformatting (dligach, 2014). the growing role of internet marketing nowadays is seen by some scholars as a third communication revolution that enables organizations to communicate freely with their target audience regardless of location and time (scott, 2017). baltic journal of economic studies 45 vol. 7 no. 4, 2021 choosing the right set of marketing mix or combining numerous marketing tools is important to find contact with the target audience (sturiene, 2019). the influence of such an indirect marketing tool as corporate social responsibility is also growing (bhattacharya, good, sardashti, 2020). in particular, it corresponds to the emergence and increasing dissemination of the concept of sustainable development for the selection of appropriate marketing tools (csapo-horvath, 2021) to implement the process of strategic human capital management of young scientists, including sustainable development goal 4 "quality education" (gernego, 2020; irtyshcheva, trushliakova, sirenko, 2020). in marketing, at its current stage of development, the following trends are considered most important і stage c o n c e p t u a l subject of management: ministry of education and science of ukraine, scientific and educational institutions, staff, young scientists, potential employees, recipients of educational services, business organizations formation of the scientific concept of strategic management of human capital in ukrainian scientific and educational institutions analysis of a poly-subject environment: market environment, socio-labor environment determination of the current vision and systemic constraints for strategic human capital management of ukrainian scientific and educational institutions based on relevant principles іі stage s c e n a r i o selection of the appropriate version of the human capital management strategy for ukrainian scientific and educational institutions using the scenario model of strategy selection defining strategic goals and strategic objectives in accordance with the chosen version of the human capital management strategy object of management: human capital management processes in organizations with young scientists object of management: human capital management processes in organizations with young scientists substantiation of policy and areas of functional support for strategic human capital management ііі stage i m p l e m e n t a t i o n a l forecasting the development of areas of functional support for strategic human capital management using appropriate methods operational implementation of human capital management strategy control and monitoring of the human capital management strategy implementation making appropriate adjustments in case of necessity figure 1. conceptual scenario for young scientists’ human capital strategic management source: composed by the authors baltic journal of economic studies 46 vol. 7 no. 4, 2021 for young scientists, namely: adaptation of tools for the promotion of young scientists to digital technologies, digitalization of marketing communications of young scientists, increasing the combination of offline and online participation of young scientists in scientific conferences and forums, direct communication with business, which is important for professional success of young scientists, increasing the involvement of young scientists in socially responsible activities. these trends are characteristic of such a component of the marketing complex as marketing promotion. in accordance with the above mentioned research, it is advisable to put forward the following hypotheses of our study, taking into account the specifics of marketing: h1 – the most effective marketing tools in the process of strategic management of young scientists’ human capital are digital marketing promotion tools; h2 – the majority of young scientists in ukraine do not use cooperation with business as a marketing tool for promotion, which negatively affects the commercialization of the results of their intellectual activity in the process of strategic human capital management; h3 – the use of popular science articles as a marketing tool to promote science is most common among young scholars, hence the most effective. verification of the hypotheses put forward in this study will make it possible to draw appropriate conclusions about the prospects of using appropriate marketing promotion tools in the process of strategic management of the human capital of young scientists. 3. methodology the main methods used in this study are as follows: 1) comparative and critical analysis for the theoretical part; 2) statistical analysis to substantiate the results of the study; 3) economic and mathematical modeling to determine the relationship of the components of the discussion part; 4) graph-analytical method – to visualize the provisions of the work. the study of marketing tools used by young scientists to realize their potential, and useful for scientific and educational institutions in the context of strategic management of human capital of young scientists, was carried out in 2020 as part of the mass survey of young scientists conducted by of the young scientists’ team of the project “realization of the young scientists' potential in integration of science, education, and business”, with the support of the council of young scientists of ukraine. the general population of the study is 11,500 young scientists in ukraine (state statistical service of ukraine, 2020). number of completed questionnaires – 579, of which 10 questionnaires were rejected. confidence probability (accuracy) – 95%, error – 5% (required sample size – 372). the sample is representative of the whole of ukraine. the stratification principle was used in the construction of the sample. the regions of ukraine were taken as the stratums. table 1 respondents' answers to the question "in your opinion, what are the most effective ways to promote information about your own research and development?" your scientific degree doctor of science candidate of science (phd) without scientific degree % per column % per column % per column in your opinion, what are the most effective ways to promote information about your own research and development participation in conferences and forums 83,9% 76,3% 75,2% publications in journals, publications of educational institutions and research institutes 67,9% 57,2% 59,0% publication of own manuals, monographs, methodical materials 48,2% 35,8% 28,8% internet projects of scientific, social, technical subjects 21,4% 33,4% 43,2% competitions of scientific works, innovative projects, social initiatives 42,9% 34,4% 32,4% media 21,4% 23,1% 31,1% social networks 28,6% 42,8% 46,4% exhibitions, investment forums 17,9% 27,1% 26,1% public hearings, round tables with government officials and the real sector 23,2% 25,1% 28,8% articles in publications of authorities, of the real sector representatives (enterprises) 14,3% 13,7% 14,9% other 5,4% 3,0% ,9% n/a ,0% ,0% ,0% source: composed by the authors baltic journal of economic studies 47 vol. 7 no. 4, 2021 table 2 respondents' answers to the question “do you promote science? write exactly how" your scientific degree doctor of science candidate of science (phd) without scientific degree % per column % per column % per column do you promote science? write exactly how no, i don't 21,8% 25,5% 32,0% popular science articles 32,7% 46,3% 31,5% speeches in the media 29,1% 16,1% 13,2% public lectures 23,6% 26,5% 21,9% activity in internet 23,6% 33,6% 36,5% sports and entertainment events 7,3% 9,1% 5,9% small academy of sciences 14,5% 12,1% 7,8% other 12,7% 5,4% 5,0% n/a 1,8% ,0% ,0% source: composed by the authors table 3 respondents' answers to the question "how many times a year do you participate offline at scientific conferences and forums in ukraine?" and "how many times a year do you participate offline at scientific conferences, forums abroad?" your scientific degree doctor of science candidate of science (phd) without scientific degree in average in average in average how many times a year do you participate offline at scientific conferences and forums in ukraine? 3,29 2,46 1,90 how many times a year do you participate offline at scientific conferences, forums abroad? 1,09 ,74 ,48 source: composed by the authors table 4 respondents' answers to the question "do you have contacts with foreign colleagues? how well do you know the experts?" your scientific degree doctor of science candidate of science (phd) without scientific degree % per column % per column % per column do you have contacts with foreign colleagues? how well do you know the experts? no 7,3% 26,2% 45,2% know their works 36,4% 37,9% 35,3% know their works and communicate on conferences 38,2% 29,5% 13,6% know their works and support exchange of information 29,1% 20,1% 12,7% know their works and have common publications 38,2% 16,8% 7,7% have experience of joint teaching activities 7,3% 2,7% 4,5% have experience in joint research projects 25,5% 14,4% 9,5% other 1,8% ,7% ,5% n/a ,0% ,0% ,0% source: composed by the authors the respondents from all regions of ukraine were interviewed. at the same time, a third of respondents are from kyiv (33.5%). kharkiv, lviv, and dnipro regions, which have significant research and university centers, rank second in the number of respondents. the general characteristics of the young ukrainian scientists who participated in the study are as follows: 67.9% of the respondents are women, 61.5% of the surveyed young scientists have a scientific degree and 24% have a scientific title. when developing the research form, the questions related to the marketing components were not singled out as a separate block. specifically, the questionnaire contained blocks such as: 1) general information; 2) financial support; 3) professional activities; 4) international cooperation and academic mobility; 5) academic entrepreneurship; and 6) academic baltic journal of economic studies 48 vol. 7 no. 4, 2021 policy/open-ended questions. within these blocks, respondents were asked a series of questions reflecting the marketing promotional tools that both young scientists and their educational and research institutions use in the strategic management of their human capital. 4. results. marketing tools at the implementation stage of strategic management of young scientists’ human capital the detailed analysis of the questionnaire for young scientists of ukraine in the project "realization of young scientists' potential in the integration of science, education, and business" makes it possible to determine which practical marketing tools are most effective in the process of strategic human capital management of young scientists. for example, the statistics of the respondents' answers to the question "in your opinion, what are the most effective ways to promote information about your own research and development?" is presented in table 1. according to the results of the survey presented in table 1, among all three groups of young scientists (doctor of sciences under 40, candidate of science (phd) under 35, researcher without a degree under 35) the most popular tools to promote information about their own research and development are participation in conferences and forums (83.9%; 76.3%; 75.2% accordingly), and publications in journals, publications of table 5 respondents' answers to the question "how many times a year do you take part in public events/events on socially responsible topics (for example, environmental, human rights, educational, where you participate on a volunteer basis)?" your scientific degree doctor of science candidate of science (phd) without scientific degree in average in average in average how many times a year do you take part in public events/events on socially responsible topics (for example, environmental, human rights, educational, where you participate on a volunteer basis)? 3,66 2,91 3,06 source: composed by the authors table 6 respondents' answers to the question "do you have experience of cooperation with business?" your scientific degree doctor of science candidate of science (phd) without scientific degree % per column % per column % per column do you have experience of cooperation with business? no, i don’t 50,0% 60,4% 64,5% less than 1 year 7,4% 12,6% 10,9% from 1 to 3 years 13,0% 12,6% 12,3% more than 3 years 29,6% 14,3% 12,3% source: composed by the authors table 7 respondents' answers to the question "do you have experience in commercializing the rights to the results of your intellectual activity? where?" your scientific degree doctor of science candidate of science (phd) without scientific degree % per column % per column % per column do you have experience in commercializing the rights to the results of your intellectual activity? where? no, i don’t 76,8% 88,3% 94,1% yes, i do in scientific activity 17,9% 5,0% 2,7% yes, i do (in educational activity) 5,4% 3,3% ,9% yes, i do (in production activity) 3,6% 1,7% ,5% yes, i do (in non-production sphere) 1,8% ,7% ,5% yes, i do (in own business) 1,8% 1,7% 1,4% other ,0% 1,0% 1,4% source: composed by the authors baltic journal of economic studies 49 vol. 7 no. 4, 2021 educational institutions and research institutes (67.9%; 57.2%; 59.0% respectively). interestingly, such a modern marketing tool as social media is quite popular among phd candidates (42.8%) and researchers without a degree (46.4%), but not very important for young doctors of science (28.6 %). in addition, internet projects of scientific, social and technical topics are used by respondents to promote their own research and development in the following proportions: 21.4%, 33.4% and 43.2%, respectively. it should be noted that digital tools are used by all categories of young scientists, but with different frequency. so, it can be considered as the proof of the authors’ research hypothesis h1. according to table 2, 76.4% of young doctors of science, 74.5% of candidates of science (phd) under the age of 35 and 68% of researchers without a scientific degree are engaged in popularization of science. the obtained data partially confirm the authors' hypothesis h3, because for the latter group activity on the internet (36.5%) is a more effective way to promote science than popular science articles, which are most often used as a marketing tool by young scientists who are doctors of science (32.7%) and candidates of science (46.3%). it also partially confirms the authors' hypothesis h1 that the most effective marketing tools in the process of strategic management of human capital of young scientists are digital tools for marketing promotion. the format of respondents' participation in conferences and forums also needs further clarification. the results of the answer to this question are presented in table 3. young scientists make little use (on average, once a year for all groups) of such a marketing tool as offline participation in scientific conferences and forums to promote their own research results, which also partially confirms the h1 hypothesis. most often among the surveyed respondents this is done by young doctors of science, who do it on average 3 times a year. however, according to table 4, a significant proportion of young scientists know the works of their foreign colleagues and communicate with them at conferences (38.2%; 29.5%; 13.6%, respectively, in groups), i.e. have the opportunity to do so online. at the same time, researchers without a degree generally have the least opportunities to contact foreign colleagues – 45.2%. young doctors of science are most likely to be able to popularize science through such a tool as research projects, as 25.5% of them have experience in collaborative research projects with foreign colleagues. similarly, 38.2% of the group of young doctors of science have joint publications with foreign colleagues, while for researchers without a degree, this figure is only 7.7%. the results obtained (table 5) show that among young scientists in ukraine such a marketing tool as the use of social responsibility is not very pronounced, as on average respondents participate in events on socially responsible topics 3 times a year, which in general is only 17% of the surveyed young scientists. the state of young scientists' use of such a marketing tool as collaboration with stakeholders, namely business, is shown in table 6 and table 7. the vast majority of young scientists have no experience of cooperation with business. the highest this disappointing figure is among researchers without a degree and is 64.5%. young doctors of science have the most practical experience of cooperation with business for more than 3 years – 29.6%. the vast majority of young scientists in all three groups have no experience of commercializing the rights to the results of their intellectual activity (76.8%; 88.3%; 94.1%, respectively). this almost completely limits the use of marketing tools to promote commercialized intellectual products of young scientists as a result of the realization of their human capital. thus, we have a full confirmation of the authors' hypothesis h2. таble 8 business qualities of educational managers’ assessment № managers’ qualities validity estimation 1 2 3 4 1 business (education, knowledge, practical experience) 0,15 2 opportunities (talent, genius) 0,15 3 cultural qualifications and erudition, honesty and decency 0,1 4 character (will, activity, obligation, efficiency, care for subordinates) 0,15 5 priority temperament (choleric, sanguine, phlegmatic, melancholic) 0,1 6 direction of interests (material, social, spiritual) 0,1 7 age qualification (young, average, elderly) 0,1 8 health (good, satisfactory, bad) 0,15 9 the average estimation of business qualities source: composed by the authors baltic journal of economic studies 50 vol. 7 no. 4, 2021 5. discussion modern vision and system limitations of strategic management of human capital of scientific and educational institutions of ukraine is formed through the proposal to assess the potential of human development on the example of a professional group of young scientists. in the context of this study, the evaluation of human development potential is based on the study in accordance with the elements of graphanalytical method of analysis "square of potential" (fedonin, riepina, oleksiuk, 2006). in particular, the following groups of indicators were selected for the purposes of the current analysis, namely: assessment of business qualities of educational managers from the professional group of young scientists (indicator 1), efficiency of organizational structure of management of scientific and educational institutions (indicator 2), overall efficiency of marketing activities (indicator 3), marketing potential of human development in strategic management of human capital (indicator 4). the group of indicators of organizational structure and management is assessed through the business qualities of educational managers (table 8) according to the following scale: present – 1 point; too rare – 2 points; not strong and not weak – 3 points; often – 4 points; systematically – 5 points. the average estimation of business qualities is conducted in accordance with the formula 1. , 1 1 n k n i k j ijj m ∑∑ = == βα (1) where km – the average indicator of business qualities of managers, points; i = 1,2,3,...,n – number of experts; таble 9 evaluation of the effectiveness of the organizational management structure of scientific and educational institutions № question the company profile validity estimation 1 do the institutions work with purpose? institutions have strategic and tactical goals that are developed independently. 2 is the flexibility of institutions sufficient? the speed of response of institutions to change. 3 is the organizational structure clearly visible? institutions have a diagram of the structure of the organization, a description of the relevant functions and procedures. 4 is there enough delegated power? there is freedom in decision-making at different levels of government, but within the limits of their delegated authority. 5 do institutional management have enough time to discuss strategic objectives? involvement of managers in strategic and tactical issues. 6 is there a spirit of cooperation in the institutions? in institutions, "corporate" psychology, activities aimed at cooperation 7 do managers have enough information? there is a unified database and communication system that allows you to quickly learn about the latest developments and make decisions according to the existing prerequisites. the average estimation of qualities source: composed by the authors тable 10 evaluation of the overall effectiveness of research and educational institutions marketing activities № indicator validity estimation 1 2 3 4 1 corporate identity (developed areas) 2 adaptation to conditions of unstable environment, points 3 weak competitive pressure, points 4 consumer commitment, points 5 marketing strategies, points 6 objectives of the enterprise, points 7 opportunities to penetrate new markets, points the average estimation of qualities source: composed by the authors baltic journal of economic studies 51 vol. 7 no. 4, 2021 j = 1,2,3,...,k – the number of proposed qualities of managers; αi, βj – weight of the j-th quality of managers and evaluation of the j-th quality by the i-th expert. the algorithm of table 9 is used to assess the effectiveness of the organizational structure of domestic scientific and educational institutions management. the study of the general marketing component of the human development potential of scientific and educational institutions is carried out by means of an overall assessment, which is presented in table 10. an overall assessment was made to study the component of the marketing potential of human development in the strategic management of human capital of research and educational institutions. the studies studied are presented in table 11. schedule of vectors estimated by average estimations (tables 8-11) is represented within the figure 2. the obtained ratios of the components of the potential of the subjects under study allow us to determine at what level each component is, and therefore to identify the corresponding relationships between the levels of different vectors (figure 2) and to decide which vectors to develop further. thus, the proposed methodology makes it possible to assess the prospects of human potential development of scientific and educational institutions in which young scientists work. in particular, one of the four important components of the discussed methodology is the marketing of human development potential in the strategic human capital management of domestic scientific and educational institutions. its elements таble 11 general assessment of the marketing potential of human development in the strategic management of human capital of research and educational institutions № indicator validity estimation 1 2 3 4 1 participation in conferences and forums 2 publications in journals, publications of educational institutions and research institutes 3 publication of own manuals, monographs, methodical materials 4 internet projects of scientific, social, technical subjects 5 competitions of scientific works, innovative projects, social initiatives 6 media 7 social networks 8 exhibitions, investment forums 9 public hearings, round tables with government officials and the real sector 10 publications in publications of authorities, of the real sector representatives (enterprises) 11 csr events the average estimation of qualities source: composed by the authors ііі vector iv vector іі vector 100 60 40 20 i vector figure 2. the worst, best and most balanced squares of the potential of the studied subjects source: composed by the authors baltic journal of economic studies 52 vol. 7 no. 4, 2021 are proposed taking into account the marketing tools that young scientists in ukraine use in their activities, which were identified on the basis of analysis of the results of a mass survey within the framework of the project "realization of the young scientists’ potential in integration of science, education, and business". 6. conclusions the use of marketing tools contributes to the formation of a positive image of a young scientist in ukrainian society, thereby demonstrating the competitiveness of domestic science and improving the prospects for commercialization of its potential. it is important to disseminate information about international scientific internships of young scientists and their publications on the results of scientific research, using modern marketing tools. this will not only promote positive communication with society as a whole, but also improve the interaction of young scientists with business, especially those whose developments are of an applied nature. the authors' hypothesis of the h1 study that digital marketing promotion tools are the most effective marketing tools in the process of strategic human capital management of young scientists has been fully confirmed. in particular, according to a mass sociological survey conducted within the project "realization of the young scientists' potential in the integration of science, education, and business", an average of 78.5% of young scientists use participation in conferences and forums as the most effective way to promote information about their own research and development, and at the same time of all respondents use this tool in person only on average only 2-3 times a year, i.e. at other times young scientists prefer the online format using digital technologies. on average 58.3% of young scientists have no experience of cooperation with business, also on average 86.4% of young scientists in ukraine have no experience of commercialization of rights to the results of their intellectual activity. these results fully confirm the authors' hypothesis h2 that young scientists in ukraine do not use the marketing tool of cooperation with business for their own promotion and it negatively affects the results of their intellectual activity in the process of strategic management of human capital. hypothesis h3 proposed by the authors is partially confirmed. this is related to the fact that popular science articles are indeed one of the most common marketing tools for promoting science among young scientists, but it is not the most effective for all three groups, and for the group of researchers without a degree, the most effective tool for promoting science is their online activity – 36.5%. as the subject matter of this study, the authors proposed a method for assessing the human potential of a professional group among young scholars, which is a modification of the"square of potentials" method of evaluation. the author's modification takes into account four vectors: assessment of the business qualities of educational managers, assessment of the effectiveness of the organizational management structure of scientific and educational institutions, assessment of the overall effectiveness of marketing activities of scientific and educational institutions, the overall assessment of the marketing potential of human development in the strategic management of human capital of scientific and educational institutions. the latter component includes marketing tools identified by the authors as a result of a mass survey of young scientists in ukraine. this largely reflects the place of marketing tools in the process of strategic management of human capital of young researchers. acknowledgements: the publication is prepared within the framework of the young scientists’ project "realization of the young scientists’ potential in integration of science, education, and business" (0120u102126) performed at the expense of the general fund of the state budget. references: bhattacharya, a., good, v., & sardashti, h. 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(2018). problems of young scientists of ukraine and recommendations for their solution. analytical material. available at: https://www.civic-synergy.org.ua/ wp-content/uploads/2018/04/problemy-molodyh-vchenyh-ukrayiny-ta-rekomendatsiyi-shhodo-yihnogovyrishennya.pdf ?fbclid=iwar0opqjuj3hqgt-1pfn8jexnoktcgs8jdxgumsovjzklr0uuzchs_8pj3pw baltic journal of economic studies 21 vol. 7 no. 2, 2021 corresponding author: 1 university of natural sciences and humanities in siedlce, poland. orcid: https://orcid.org/0000-0003-0119-2705 2 rzeszow university of technology, poland. orcid: https://orcid.org/0000-0003-2243-2165 3 nicolaus copernicus university in torun, poland. orcid: https://orcid.org/0000-0002-1879-4924 https://doi.org/10.30525/2256-0742/2021-7-2-21-27 litigation with huawei 5g corp and ict security norbert malec1, marcin jurgilewicz2, adrianna czarnecka3 abstract. currently, there is an open discussion in the world on the introduction of new technologies to the lives of citizens and the economic sector. doubts concern the impact of these technologies on the security of the individual and the state. companies with modern technologies try to cooperate with the government and enter markets with their services. not all countries undertake such cooperation. the presented text deals with the deliberations on the introduction of the new 5g technology. its implementation meets the social discussion on social and state security. the implication of modern technology requires changes to the laws of states. the text focuses on studies on a study case concerning huawei and a dispute with the us government. the discussed example presents the challenges of the authorities and rules enshrined in legal regulations with the functioning of companies introducing 5g to domestic markets. the presented text shows the legal conflict between the trump government and a company that had to go to legal action. paper presents analyzes the jurisprudence of the us courts in the dispute between the two above-mentioned entities. key words: 5g, state security, new technology, development, law. jel classification: f63, l24 1. introduction public reflections on a new generation of 5g communications technologies started in 2011, based on the prospects for new markets, new usages and advanced technologies which could not be considered during the time frame of development of the 4g/lte standards (current generation of mobile communications systems) previous generation (4g) (the european parliament, 2016). modern 5g technology arouses great emotions among people. what is new is unknown. therefore, many conspiracy theories arise on this subject, and when they are used by people propagated in the broadly understood media to unjustifiably discredit specific solutions and spread information chaos, a reaction and logical arguments are required (ciosek, 2020). some people believe that the 5g network negatively affects our health, but it can also be used to take control of our minds. this technology and the frequency on which it works is supposed to cause a person to receive encrypted messages and behave in accordance with the information provided. it is supposed to cause a drastic increase in mental illness and even lead to genocide. this is what the opponents of 5g think. on the other hand, the fifth generation of cellular networks is only an improved earlier researched technology that has been improved slowly for many years (persona, 2019). the implementation of 5g can also be revolutionary for the economy and our everyday life. the effect is to be the modernization of industry, but also the development of smart cities, agriculture and transport. this network will be necessary in order to support modern devices connected to the mobile network. increasing the capacity of this network will enable the introduction of the so-called the internet of things, i.e. networks of various devices connected to the internet. examples include: devices monitoring and controlling the health of patients who are at home, regulating the level of street lighting, building heating or car traffic (ignar, 2019). an example of use will be its use in the performance of tasks by autonomous devices, e.g. cars which have to collect a lot of information from the environment in order to move safely on the roads. thanks to the speed of data transfer, a given autonomous device will very quickly obtain more information within a second, which will increase their efficiency and security. in addition, it will be possible to download videos or photos or other files faster. the 5g network may also have an impact on the automotive and transport sectors (michalski, jurgilewicz, 2021). the so-called intelligent cars will be able to communicate with each other and with municipal infrastructure objects in order to warn about baltic journal of economic studies 22 vol. 7 no. 2, 2021 dangers or inform about traffic jams. such information flow will improve security, and moreover, traffic in the city may be liquidated. another intention is that there will no longer be routers or wi-fi access points in the buildings. this technology is to be advanced enough to even replace wi-fi in some situations (ignar, 2019). considering all wireless networks, including the g5, in terms of state security, the vulnerability of this technology to attacks should be taken into account. risks to the country 's critical infrastructure should also be identified and assessed (siemiątkowski, et al., 2019). it should be determined what should be the scope of state control over cellular network operators and devices installed in them, so as to ensure effective supervision of competent services for the implementation of defense objectives and the protection of public order in the country. it is a wireless network that is much more vulnerable to attacks than a fiber or cable network. w hen the last two networks are poorly developed in the country, less secure wireless solutions are used (krawiec, et al., 2018). the impact of 5g technology can be divided into: service and business and technological side. from the service and business perspective we can notice a significant increase in mobile video consumption will drive around six times higher traffic volumes per device in north america and europe after 2020. from the technological perspective we can noticed the prospect of economic fibre-like radio access with data rates, the prospect of implementing specific network functions. human security was the answer to new threats and challenges (marszałek-kawa, and plecka, 2018). it places a human being in the centre of the debate, analysis, politics and interest. people are important and a state is an instrument of ensuring their welfare. elementary goods protected in the framework of human security including life and personal safety may be threatened not only by an external aggression but also by internal factor (szpak, 2015). considering all wireless networks, including the g5, in terms of state security, the vulnerability of this technology to attacks should be taken into account. risks to the country 's critical infrastructure should also be identified and assessed. it should be determined what should be the scope of state control over cellular network operators and devices installed in them, so as to ensure effective supervision of competent services for the implementation of defense objectives and the protection of public order in the country. it is a wireless network that is much more vulnerable to attacks than a fiber or cable network. when the last two networks are poorly developed in the country, less secure wireless solutions are used. wireless public networks are used widely by everyone, including politicians, state officials, government agencies and services, the risk of exposure of sensitive data transmitted via wireless networks cannot be ignored. 5g technology promises extensive remote reading and control capabilities (internet of things), which may lead to its use in the management of critical infrastructure. by implementing the 5g technology on a national scale, state services should ensure the necessary actions from the stage of preparation and implementation of outlays to ensure effective state control and the safety of citizens. detailed analysis and assessment of the security of 5g technology is the responsibility of experts and relevant state services (szpak, 2015; jurgilewicz et al., 2020). 2. research results this paper examines the around the huawei legal problems in the united states. the paper makes an attempt to analyze the undertaken efforts by the chinese corporation to defend its business operations in the us. the authors argue that the corporation can be successful winner in the federal court, therefore the trump administration act will be void. worries over chinese participation in 5g ( jones, 2019) wireless networks stem from assertions that huawei cellular network instruments might contain backdoors enabling purveyance by the chinese administration and most important that chinese regulations compel commercial business to assist the state intelligence agency on the collection of information when warranted. the controversy has led the american authorities to ponder whether chinese huawei corp. and zte corp (zte corp, 2019) might be allowed to participate in 5g deployments. it should be note that the usa has a right to ban huawei equipment on its soil only based on art. xxi of the w to gatt security exception which allows a party to take action or measures ‘which it considers necessary for the protection of its essential security interest the (general agreement on tariffs and trade, 1947). huawei has faced various assertions of intellectual property theft and in january of 2019 corporate espionage (huang v. huawei techs. co.2015), including copying proprietary source code from cisco systems instruments, and an worker stealing a robotic arm for smart phone stress testing from a t-mobile american laboratory. during testimony to the senate intelligence committee in 2018, american intelligence chiefs warned against the huwaei, with fbi director christopher a . wray stating that they were concerned about the risks of allowing any corporation or entity that was beholden to foreign administration that don not share our values to gain positions of power inside american telecommunications networks (salinas, 2018). on august 13th of 2018 president trump signed into regulations the national defense authorization act ndaa . section 889 of the ndaa restricted federal agencies from procuring covered huawei baltic journal of economic studies 23 vol. 7 no. 2, 2021 co ltd telecommunications and video instruments or services; contracting with third parties that use covered huawei co ltd instruments or services; or awarding grants or loans used to procure covered huawei co ltd instruments or services. on 15th may of 2019, president signed executive order 13873 to declare a national emergency under the international emergency economic powers act eepa , allowing for restrictions to be imposed on commerce with foreign adversaries that involve information and communications technology. president stated that the american needed to protect itself against foreign adversaries that create and exploited security vulnerabilities in information and communications systems without making specific references to any country or vendor. also on may 15th of 2019 the american department of commerce also added huawei co ltd and various affiliates to its entity list under the export administration regulations by restricting its ability to perform commerce with american commercial business. department cited that the corporation had been indicted for knowingly and willfully causing the export, reexport, sale and supply, directly and indirectly, of goods, technology and services (banking and other financial services) from the american to iran and the administration of iran without obtaining a license from the department of treasury 's office of foreign assets control ofac. in addition the h.r .5515 – john s. mccain ndaa 2019 (mccain, 2019) barred the american federal administration from obtaining instruments from several chinese dealers, including huawei and zte corp. on august 7th of 2019, the american department of defense dod, general services administration gsa , and national aeronautics and space administration nasa released an interim rule implementing section 889(a)(1)(a) of the ndaa 2019 prohibits executive agencies from procuring or obtaining, or extending or renewing a contract to procure or obtain, any instruments, system, or service that uses covered telecommunications instruments or services as a substantial or essential component of any system, or as critical technology as part of any system. the most important legal procedures were undertaken by the american federal prosecutors who have filed criminal charges against huawei in the western district of washington state on january 16th of 2019, and on january 24th of 2019 separate charges in city of new york. the corporation's arraignment in federal court in brooklyn, ny were based on charges that huawei (defendant) worked to skirt american sanctions on iran, in particulate that since in or about july of 2007, huawei corp. repeatedly misrepresented to the american administration and to various victim financial institutions, and their american and euro zone subsidiaries and branches and by that violated applicable american regulations, including the itsr (amendment to the iranian transactions and sanctions regulations, 2018). the 10 counts indictment, returned by a grand jury on january 16th 2019 in the western district of washington state charged huawei corp. with, seven counts of wire fraud, one count of obstruction of justice. and attempted theft of trade secrets conspiracy from bellevue, washington based t-mobile usa. the alleged conduct described in the indictment occurred from 2012 to 2014, and includes an internal huawei announcement that the corporation was offering bonuses to worker s who succeeded in stealing confidential information from other companies. furthermore it was alleged that between on or about april 12, 2013, and on or about might 31, 2013, at 26 bellevue, within the western district of washington, and elsewhere, huawei device 27 co., ltd. and huawei device usa, inc. attempted to (a) knowingly and without authorization steal, appropriate, take, carry away, and conceal trade secrets belonging to t-mobile; and by fraud, 2 artifice, and deception obtain trade secrets belonging to t-mobile; 3 (b) knowingly and without authorization copy, duplicate, sketch, draw, 4 photograph, download, replicate, transmit, deliver, send, communicate, and 5 convey trade secrets belonging to t-mobile; and 6 (c) knowingly receive, buy, and possess trade secrets belonging to t-mobile, knowing the same to have been stolen, appropriated, obtained, 7 and converted without authorization; 13 counts indictment brought in the eastern district of new york state included conspiracy charge defraud the united states that around july 2007 huawei allegedly obstructed the operations of the office of foreign assets control ofac, an agency that enforces american sanctions laws, with deceitful acts. the alleged acts testimony by a huawei senior vice president to the american congress that huawei’s business in iran did not violate any rules or regulations, including related to sanctions. in or about· 2017, i-ida wei and huawei usa became aware of the american administration's criminal investigation of huawei and its affiliates. in response to the investigation, huawei and huawei usa made efforts to move witnesses with knowledge about huawei iran-based business to the prc, and beyond the jurisdiction of the american administration, and to destroy and conceal evidence in the united states of huawei iran-based business in or about and between july-2007 and the date of the filing of this superseding indictment, both dates being approximate and inclusive, within the eastern district of new york and elsewhere, the defendants iida wei and sky com, together with others, did knowingly and willfully conspire to defraud the united states by impairing, impeding, obstructing and defeating, through deceitful and dishonest means, the lawful baltic journal of economic studies 24 vol. 7 no. 2, 2021 administration al functions and operations of ofac, an agency of the united states, in the enforcement of economic sanctions laws and regulations administered by that agency and the issuance by that agency of appropriate licenses relating to the provision of financial services. in furtherance of the conspiracy and to effect its objects, within the eastern district of new york and elsewhere, the defendants huawei and sky com, together with others, committed and caused to be committed. separately the federal communications commission fcc on november 22nd of 2019 american voted to impose new restrictions on subsidies for american telecom commercial business. the ruling was designed to constrain chinese commercial business, including huawei and zte corp and to prohibit american carriers from using federal subsidies to buy products from any businesses found on a new fcc blacklist. the american regulators unanimously branded chinese firms zte corp. and huawei as threats to national security and blocked them from accessing $8.5 milliards in federal funds for services and instruments. the fcc determinations meant in fact that banned carriers receiving universal service fund subsidies from using that money to buy instruments from commercial business considered a national security threat it means the chinese commercial business huawei and zt corp, unfortunately without fair process and without proper support in evidence or regulations. the chinese corporation claimed later that the order exceeded the fcc’s statutory authority, because nothing in the universal service provisions of the communications act could authorize the fcc to make national security judgments or to restrict use of universal service funds usf funds based on such judgments. indeed, the fcc might has no national security expertise neither authority. finally american congress might not constitutionally give the fcc such authority, because it was an independent agency not subject to the direction of the office of the american president. the fcc determinations called in addition for carriers receiving usf funds to remove and replace any existing instruments from huawei and zte corp. they might be using already, and was proposing to establish a reimbursement program to help offset the cost of transitioning to more trusted dealers. huawei has sued to invalidate the entire provision, with the most prominent argument that section 889 was an unconstitutional bill of attainder. at the present (as december 10th 2019) all of section 889 were subject to a legal challenge. on may 28th of 2019, huawei technologies co., ltd., and its us-based affiliate, huawei technologies usa, inc. filed a motion for summary judgment, based on the complaint huawei filed on march 6th, of 2019 against the american administration in the american district court for the eastern district of texas, alleging that section 889 of the ndaa, which restricts administration contractors or agencies from dealing with certain huawei products or services, violated the american constitution. according to the complaint, the administration s prohibitions violated the bill of attainder and the due process clauses of the american constitution. the prohibition also “violated the separation-of-powers principles enshrined in the constitution, because congress was both making the regulations, and attempting to adjudicate and execute it, the regulations lawsuit seeks a permanent injunction against the federal restrictions. plaintiff huawei by and through their attorneys, brought this action under the american constitution and 28 u.s.c. §§ 1331, 2201, and 2202, seeking a declaration that pertinent provisions of section § 889(f )(3)(a), (c) of the ndaa 2019 that defined certain instruments and services produced or provided by huawei technologies co., ltd. and its subsidiaries and affiliates as “covered telecommunications instruments or services, and consequently restricted the procurement and use of such instruments by executive agencies, federal administration contractors, and federal loan and grant recipients are unconstitutional. huawei urged a district judge amos mazzant in sherman, texas to bylaw that a regulations that prohibits american federal agencies and contractors from buying or using the huawei instruments was unconstitutional the corporation argument was that it was punished without a hearing or trial by section 889 of the 2019 national defense authorization act. but it is obvious that in most cases federal judges are usually reluctant to second guess the administration's evaluation of a national security risk. for instance the american court of appeals in washington lain 2018 affirmed that kaspersky lab, a russian cybersecurity corporation, wasn't unlawful fully targeted by a similar regulations that excluded it from federal computer systems because of its close relationship with the russian administration. the court affirmed the district court’s dismissal of the ndaa case for failure to state a claim upon which relief can be granted, as well as its dismissal of the directive case for lack of jurisdiction. the attorney for claimant were prepared to challenge a defense spending authorization regulations blocking executive agencies from using huawei and zte's telecom instruments, because the american action was a bill of attainder that singled out a corporation for punishment without trial, procedure that's forbidden by the american constitution provisions. in a petition huawei asked the court to hold the fcc’s order unlawful on the grounds that it fails to offer huawei required due process protections in labeling huawei as a national security threat. the fcc in accordance to the plaintiff baltic journal of economic studies 25 vol. 7 no. 2, 2021 also failed to substantiate its arbitrary findings with evidence or sound reasoning or analysis, in violation not only of the american constitution, but also the administrative procedure act apa, and other regulations. filed petition for review challenged the order of the fcc both insofar as it bared use of federal usf to purchase products and services from commercial business that the commission deemed a threat to american national security, and insofar as it arbitrarily and capriciously designated huawei as such a corporation. it seems that the fcc failed to address multiple legal arguments and material facts presented in comments on the proposed rule. and its cost-benefit analysis considered only costs associated with prohibiting the use of usf funds for huawei and zte corp. products and services – a remarkable deficiency that exposes the bylaw as simply a vehicle for targeting and burdening these two commercial business, not a genuine attempt to develop a generallyapplicable and fair bylaw that would seriously protect telecommunications networks and supply chains. in addition the bylaw was also unlawfull fully vague and inconsistent with due process. the order states no standard or criteria whatsoever for identif ying a corporation as a genuine threat to the integrity of communications networks or supply chains – again revealing that the fcc goal in the order was simply to impose restrictions on huawei and zte, and them alone. furthermore, the order fails to give huawei constitutionally required due process before stigmatizing it as a national security threat, such as an opportunity to confront supposed evidence and witnesses, and a fair and neutral hearing process. this was contrary to all american constitutional traditions. section 889, according to the complaint, also violated the due process clause by selectively depriving huawei of its liberty – severely curtailing its freedom to do business, stigmatizing it by effectively branding it a tool of the chinese administration and a risk to american security, and denying it any pre-deprivation legal process to confront the congressional charges against it. and section 889 violated the vesting clauses and the resulting separation of powers by legislatively adjudicating huawei to be “guilty of an alleged connection to the chinese administration, and by implication a threat to american security, rather than leaving it to the executive and the courts to make and adjudicate any such charges. it seems that the fcc initial designation of huawei also lacked either legal or factual support, because it was based only on a fundamental misunderstanding of chinese regulations, as well on unsound, unreliable, and inadmissible accusations and innuendo, not evidence. another legal avenue for the huawei was filing on december 5th of 2019 a petition with the fifth circuit court in new orleans challenging the fcc determinations. firstly, the huawei declared any sort of ban on national security grounds constituted foreign policy, rather than telecoms regulation. secondly, huawei declared the fcc acted arbitrarily by singling out the corporation and zte corp. without setting out any standards by which those commercial business were being judged. huawei’s important argument was that singling out the corporation in this way violated its due process rights. the complaint argued that the ndaa deprives huawei of the liberty to sell to federal agencies, as well as by stigmatizing it and “discouraging other entities across the american from doing business with huawei. it argued that it was deprived of this liberty without “any pre-deprivation opportunity to be heard, present evidence, or defend itself, in violation of the due process requirement that a legislative deprivation of liberty be imposed in accordance with general rules. thirdly huawei declared the fcc compounded that unfairness by not allowing the huawei to comment on the part of the bylaw that mentioned it specifically, which was announced only after the consultation period suffice to justify such unlawful means. huawei’s primary argument was that the ndaa was an unconstitutional bill of attainder. art. i, section 9 of the american constitution prohibits “bills of attainder, regulations that, under american sc precedent, “legislatively determine guilt and inflict punishment upon an identifiable individual without provision of the protections of a judicial trial. the american sc has established 3 criterions for determining whether a legislative act imposes punishment the historical criterion, which looks at whether the burden inflicted was consistent with the types of burdens that have historically been deemed punishment; the functional criterions examining whether the burden was a means to an end or an end in and of itself by balancing the purpose of the regulation and the burdens imposed; and the motivational criterion, ascertaining whether congress’s intent was to punish. the most important criterion was the functional test. finally, huawei argued that the it can be argued that in the line of american sc determinations ndaa violated the separation of powers because applying legislative rules to enumerated individuals “constitutes the exercise of executive and/ or judicial power. for instance in the 1810 sc ruling of the case case of fletcher v. peck, and two later concurrences 1983 sc ruling in the case of immigration and naturalization service v. chadha and the 1995 sc ruling in the case of plaut v. spendthrift farm, inc. it must be pointed out that by specifically prohibiting the use of huawei products while leaving up to the secretary of defense the determinations whether other chinese entities are state controlled, american congress has made a legislative adjudication that should be made by the judiciary or the executive branch, and has thus deprived the plaintiffs of recourse that might otherwise be available including opportunities for executive consultation and subsequently judicial review. baltic journal of economic studies 26 vol. 7 no. 2, 2021 but it will be seen whether the federal district court in the easter district of texas, where the regulations lawsuit was filed, will decide on the unconstitutionality of the section 889 of the act. 3. conclusion the 5g network enables the emergence of new innovative services that transform sectors such as manufacturing, energy, automotive and health into the iot era. the implementation of the 5g network is associated with a number of benefits achieved at various levels: starting from the most easily measurable effects, i.e. a step improvement in the performance parameters of telecommunications networks, including a significant improvement in the availability of highquality services, through the creation of completely new services using 5g technology, to impact on the scale of entire economic and social areas. secondorder benefits are the effects of the use of goods and services addressed directly to society. four distinct environments can be identified that will be affected by 5g networks: smart cities, out-of-city areas, smart homes and smart workplaces. the term smart city is not a new concept, but it is still not fully clearly defined yet. according to the definition given in the etsi tr 103 290 v1.1.1 (2015-04) standard, a city can be defined as smart if investments in human and social capital as well as traditional transport and modern ict communication infrastructure support economic development and high quality of life with sound management of natural resources by governing with the participation of citizens (kordonska and hurnyak, 2018). in particular, the conditions conducive to the development of 5g networks will be created using regulatory policy and investment. development and implementation of appropriate legal regulations and incentives investment should contribute to the implementation of an effective policy supporting the construction of infrastructure for 5g will contribute to ensuring the sustainable development of the 5g network by preventing it the creation of areas without access to this network (marszałek-kawa, and siemiątkowski, 2020). references: amendment to the iranian transactions and sanctions regulations, 31 c.f.r . part 560 (itsr) ofac amended the iranian transactions and sanctions regulations (itsr) to implement the president’s may 8th, 2018 decision to withdraw from the jcpoa, as outlined in the national security presidential memorandum (nspm). ciosek, i. (2020). aggravating uncertainty – russian information warfare in the west. torun international studies, 1(13), 57–72. http://dx.doi.org/10.12775/tis.2020.005 commission staff working document (2016). 5g global developments in communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions. department of justice office of public affairs chinese telecommunications device manufacturer and its u.s. (2019). affiliate indicted for theft of trade secrets, wire fraud, and obstruction of justice january 28. eastern district of texas on august 14, 2015. huang v. huawei techs. co., 215-cv-1413-jrg-rsp (e.d. tex. aug. 14, 2015). etsi technical raport (2015). machine-to-machine communications (m2m); impact of smart city activity on iot environment. fletcher v. peck, 10 u.s. (6 cranch) 87 (1810). https//www.wto.org/english/docs_e/legal_e/gatt47_02_ e.htm#articlexxi. huang v. huawei techs. co., 215-cv-1413-jrg-rsp (e.d. tex. aug. 14, 2015). huawei technologies usa, inc., and huawei technologies co., ltd., plaintiffs, v., in the united states district court for the eastern district of texas sherman division. ignar, m. (2019). co to jest 5g? zalety i zagrożenia sieci 5g. komputronik. jones, j. l. (2019). u.s. marine corps (ret.) recommendations on 5g and national security february 11. judgment in the case of kaspersky lab, inc.v. united states department of homeland security, no. 18-5176 (d.c. cir. 2018) the d.c. circuit affirmed the dismissal of the lawsuit. judgment in the case of kaspersky lab, inc.v. united states department of homeland security, no. 18-5176 (d.c. cir. 2018). judgment in the case of plaut v. spendthrift farm, inc., 514 u.s. 211 (1995). jurgilewicz m. et al. (2020). the implementation of selective passenger screening systems based on data analysis and behavioral profiling in the smart aviation security management – conditions, consequences and controversies, journal of security and sustainability issues vol. 9(4), june 2020, s. 1145–1155. https://doi.org/10.9770/jssi.2020.9.4(2) kordonska, a. and hurnyak, i. (2018). efficient use of common resources in conditions of sustainable development. torun international studies, 1(11), 75–87. http://dx.doi.org/10.12775/tis.2018.007 krawiec, p., mongay batalla, j., gajewski, m., sienkiewicz, k., wiśniewski, p., & latoszek, w. (2018). national institute of telecommunications in the face of challenges for the implementation of 5g networks in poland. telekomunikacja i techniki informacji. baltic journal of economic studies 27 vol. 7 no. 2, 2021 marszałek-kawa, j and plecka, d. (eds.) (2019). the dictionary of political knowledge. toruń: wydawnictwo adam marszałek. marszałek-kawa, j., and siemiątkowski, p. (2020). the implementation of the sustainable development goals at the local level. the case of the districts of kuyavian-pomeranian province. baltic journal of economic studies, 6(2), 1–8. https://doi.org/10.30525/2256-0742/2020-6-2-1-8 michalski k., & jurgilewicz m. (2021). konflikty technologiczne. nowa architektura zagrożeń w epoce wielkich wyzwań, warszawa, difin. persona, m. (2019). 5 mitów na temat technologii 5g. na fali nauki. plaintiffs’ motion for summary judgment, huawei technologies usa, inc. et al v. us of america, et al, no. 4-19-cv-159-alm (e.d. tex. filed may 28, 2019). plaintiffs’ motion for summary judgment, huawei technologies usa, inc. et al v. us of america, et al, no. 4-19-cv-159-alm (e.d. tex. filed may 28, 2019). salinas, s. (2018). six top us intelligence chiefs caution against buying huawei phnes. cnbc. siemiatkowski, p., tomaszewski, p., jurgilewicz, o., and poplavska, z. (2019). assessment of basic elements of the security system of local communities. journal of security and sustainability issues, 9(2), pp. 617–635. https://doi.org/10.9770/jssi.2019.9.2(20) szpak, a. (2015). cities and human security. torun international studies, 1(8), 119–133. http://dx.doi.org/ 10.12775/tis.2015.011 the general agreement on tariffs and trade (gatt 1947), art. xxi. world trade organisation. the john s. mccain national defense authorization act for fiscal year 2019, pub. l. no. 115-232. baltic journal of economic studies 240 vol. 7 no. 2, 2021 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: aisch@ukr.net orcid: https://orcid.org/0000-0001-8437-5210 2 taras shevchenko national university of kyiv, ukraine. e-mail: mvi1210@ukr.net orcid: https://orcid.org/0000-0002-7167-215x 3 taras shevchenko national university of kyiv, ukraine. e-mail: roman.stakanov@gmail.com orcid: https://orcid.org/0000-0003-3412-8451 doi: https://doi.org/10.30525/2256-0742/2021-7-2-240-249 labour migration from ukraine under the global economic turbulence olexandr shnyrkov1, valerii mazurenko2, roman stakanov3 abstract. the purpose of the article is to analyse the trends of labour migration from ukraine under the global economic crisis caused by covid-19. the subject of the research is international labour migration in ukraine. the study should predict the consequences of the coronavirus crisis for labour migration and place of ukraine in the world labour market in the nearest future. methodological basis of the research comprised the list of theoretical and empirical methods of research; there was provided the analysis of recent research publications subject under the discussion, compared the results obtaining with statistical data, suggested the practical recommendations that were received on the base of survey results. researches in a number of oecd countries have found that the risk of infection among migrants is at least two times higher as among locals. the number of international migrants is declined in 2020 for the first time in recent history, as the number of new migrants slows down and re-emigration rates substantially increased. ukraine has the highest rates of permanent immigrants among european countries. in 2019, there was among approximately 5 million people of foreign origin in ukraine, the largest migration groups were from belarus, kazakhstan, moldova, russia, and uzbekistan. at the same time, ukraine ranked 8th in the world and 2nd in europe for emigration in 2019. ukraine was the largest country of origin of refugees in europe amounted to 93 thousand people at the end of 2018. in 2019, as in previous decades, the largest migration corridors in europe were in ukraine, including the russia-ukraine and ukraine-russia corridors, which held the first positions in the volume of migration in this part of the world. the military conflict in the east of ukraine has strengthened the current trend towards reorienting of ukrainian migration to the west. the employment structure of ukrainian labour migrants is mostly inefficient, as only 26.8% of ukrainian workers are employed abroad according to the qualifications obtained. the covid-19 pandemic has affected virtually all spheres of public life; it has affected emigration from ukraine, a crucial factor of which has been the introduction of lockdown in key host countries of ukrainian labour migration, in particular, in the eu. however, the existence of an unconditional demand for ukrainian workers in the labour-importer countries has led to the solution of problems with access of workers in an ad hoc manner in the first half of 2020, in particular, through the organization of workers transportation from ukraine for seasonal work. the results of the study have shown that despite the fact that the structure of permanent migration from ukraine is dominated by migration to the russian federation, trends in long-term and especially in temporary labour migration since 2014 and until now, clearly indicate a change in the vector of labour movement towards the eu. labour emigration is not able to solve the problem of ukraine’s economic development; it just solves the task of maintaining the welfare of the migrant families and provides the opportunities to develop the human capital of migrant children, primarily through funding by means of migration capital their education in ukraine. analysis of the current global and national economic situation, regulatory measures, both in ukraine and in the countries of migration destination, which directly or indirectly affect migration flows, indicates that in the medium term we cannot predict that the covid-19 pandemic will significantly affect large-scale labour migration. key words: labour migration, ukraine, crisis, remittances, covid-19, lockdown. jel classifications: f22, l26, f22, f22, f02 baltic journal of economic studies 241 vol. 7 no. 2, 2021 1. introduction international labour migration fell into a state of catastrophic crisis due to the new pandemic of covid-19, while showing the sharp increase in history in early 2020. the lockdown has significantly affected international migration, which has become a fundamental and important component of the globalized economy. governments around the world have closed their borders and severely restricted people’s mobility in an attempt to stem the spread of the new virus. however, these measures were largely limited in stopping the spread of cross-border containment, but they had a significant negative impact on the global economic dynamics. the processes of international labour migration, the effectiveness of national, regional and global levels of its regulation have been discussed in the economic literature for a long period of time. it is important to consider how the world labour market is being transformed under the influence of the processes of digitalization, virtualization and robotization of the world economy. however, the covid-19 pandemic had a significant impact on both the structure and development, as well as on future trends in international labour migration and migration policy transformation. these issues are especially relevant for small open economies, such as ukraine, which are significantly dependent both on the global economic situation and on trends in labour migration and remittances to the country, which affect the fx market stability and the national economy as a whole. the study should answer to the above questions, as well as predict the consequences of the coronavirus crisis for labour migration and place of ukraine in the world labour market in the nearest future. theoretical and empirical research methods are used in the work, which involves the analysis of recent research publications, comparison of the results with statistical data, as well as aggregation of the data in the form of practical recommendations to national and international regulatory institutions. 2. literature review the issue of labour market research is the subject of long-term interest for scientists. classical economists (adam smith, david ricardo) based their approach on the opportunity for the market to ensure the full use of labour resources and rejected government intervention in the economy. neoclassicists (a. marshall, a. pigou, m. friedman) highlighted the study of human capital and with the respect to knowledge as a driver of labour market and economic development in general, as well as the issuance of money as the only factor that can indirectly stimulate employment. they drew attention to the study of human potential and great importance to knowledge as a driver of the labour market development and the economy in general, and the currency issue as the only factor that may indirectly encourage employment. keynesian theory ( j.m. keynes) focuses on government regulation of the labour market, and employment is a function of an effective demand, the lack of which can lead to sharp production decrease and, consequently, to higher unemployment. neoclassical synthesis (p. samuelson) (ryazantsev, tkachenko, 2010) argues for the need to combine approaches of market and state regulation of labour markets focusing on unemployment as a trend. concept study of the international labour market allows to expand the consideration of modern theories of international migration. e. ravenstein (ravenstein, 1989) formulated the 11 basic laws of migration in 1885, which later grounded for further study of the trends international labour migration. we can highlight the following statements that remain relevant for modern international labour migration: – the main reason for migration is economics. even when formally labour migration is not explicitly declared, the real reason for the international movement is employment. furthermore, regardless of the initial type of migration, the country of origin will have an impact on the labour market and the social system of the destination country. – migration is a more significant factor in the growth of large cities than natural population growth (and this idea can also be extended to the mechanism of population growth in most developed countries); – the scale of migration increases with the development of transport, trade, industry; – migration mainly takes place over short distances (despite technological development, intra-regional migration is currently predominant in absolute terms, it accounts for 60% of the total international migration). neoclassical approach (r . böhning, j. simon) (adepoju, 2000; böhning, 1972) argues that international migration flows as a derivative of regional differences in income and wages, as well as imbalances in labour supply and demand in different parts of the world. synthetic theory of migration (d. massey) (massey et al, 1993) determines international labour migration by globalization of the labour market and the formation of migration networks, when the migration vector is determined primarily by the migration direction to regions where there are already established significant diasporas. the social capital allows to substitute the lack of physical capital and reduce the transaction costs of migration. the concept of migration systems (m. kritz, l. lim, g. zlotnik) (kritz et al, 1992) argues that the international migration trends are not permanent, but largely influenced by the geographical factors, and migration itself forms a single migration system. it includes countries of origin and destination countries baltic journal of economic studies 242 vol. 7 no. 2, 2021 between which the interdependence of asymmetric nature is formed. the concept of migration systems correlates with the phenomena of regionalization and regional economic integration acting as a trigger of formation of regional labour markets. in the 21st century, the key focus of migration research has shifted to the 1) migrant integration models; 2) the impact of migration on economic development at the national, regional and global levels; 3) the development of migrants themselves (ivakhnyuk, 2016). much of the academic research of international organizations, in particular the oecd and the world bank, focuses on the second area of research. taking into account not only purely quantitative characteristics of welfare (such as income, wages) in determining the motivation of international migration is important for understanding the development factors of the international labour market. thus, a. deaton (deaton, 2013) argues that the society cannot be assessed using only living standards indicators, but a welfare should be evaluated as a whole a set of indicators: 1) the material well-being (income, wealth, gdp per capita); 2) physical and psychological well-being (life expectancy, health standards, the level of happiness); 3) quality of education, 4) participation in public life. although the covid-19 pandemic is a new factor influencing the world economy as a whole and international labour migration in particular, its impact has been extensively studied in a number of research papers. thus, a. khanna notes (khanna, 2020) that the recession caused by covid-19 may have more serious consequences for the global labour market than that which the world faced during the crisis of 2009. the ilo estimates that up to 25 million people could become unemployed worldwide due to the impact of covid-19, with estimates ranging from the 5.3 million by “low-scenario” job losses and the 24.7 million – by “high-scenario” (ilo, 2020). the impact of the crisis, as in the case of the 2008 recession, may vary by country. during the peak of covid-19 in wuhan, almost 5 million people in china lost their jobs in january and february 2020 (cheng, 2020). angus reid institute survey found that 44% of canadian households lost their jobs (macleans, 2020), about 900,000 workers lost their jobs in spain in mid-march 2020 (keeley, 2020). in march 2020, more than 10 million us workers lost their jobs and addressed for the state aid. 3. global migration context long-term trends in international migration show that migration is largely associated with global economic, social, political and technological transformations that affected wide range issues of global political agenda. the growing scale of international migration takes place in accordance with the current development of the global economy, the number of international migrants, according to un and ilo estimates is almost 272 million people (un desa, 2019) (in 2000, this figure was 150 million people (world bank, 2020a). the majority of people emigrate for reasons related to employment, family reunification and education. almost two-thirds of the world’s international migration (164 million people) is workers. the covid-19 pandemic has caused global health problems, which in turn has led to an economic and social crisis that could potentially result in the largest recession in the world economy since the end of world war ii. travel restrictions, lockdowns and social distancing measures introduced in response to covid-19 substantially decreased the quality of life of the world’s population. according to world bank estimates (world bank, 2020b), from 88 to 115 million people fall into poverty due to the deep economic crisis. also, the availability of work does not protect against income loss during the crisis. according to the international labour organization data (ilo, 2020b), global workers’ incomes fell by 10.7% during the first three quarters of 2020 compared to the same period in 2019. the estimated revenue losses amounted to 3.5 trillion usd or 5.5% of world gdp. according to latest world bank forecasts, the current crisis will exacerbate the problem of poverty, causing the reduction in global per capita income by 3.6 percent, leading to an increase in the number of people living below the poverty level by 70-100 millions of people (kondratenko, 2021). the crisis caused by covid-19 had unprecedented impact for migration flows. prior to the pandemic constant migration flows to the oecd countries amounted to 5.3 million people in 2019, similar figures amounted to 5 million migrants in 2017 and 2018. after the pandemic almost all oecd countries have restricted visits for foreigners, the issuance of new visas and residence permits decreased by 46% in oecd countries in the first half of 2020 compared to the same period in 2019, which was the largest decrease in the history. the decline was 72% in the second quarter of 2020, and overall immigration in 2020 resulted in a historical minimum for international migration to the oecd (huddleston, 2015). migrants, especially those in low-paid jobs, may be both more affected by the economic consequences of the pandemic and more vulnerable to the covid-19 in countries where the pandemic is spreading. as of september 4, 2020, immigrants from the 20 countries with the highest number of covid-19 cases accounted for almost 32% of the total number of international migrants, and they transferred 37% of all remittances to their countries of origin in 2019 (cheng, 2020). for example, the oil-producing countries of the gulf cooperation council (gcc) are an important for immigration from south asia and east baltic journal of economic studies 243 vol. 7 no. 2, 2021 africa. since many migrant workers in gcc countries returned to their countries of origin or were no longer able to get to work due to lockdown, this drastically reduced their income and, as a result, the ability to send money to their families in their countries of origin. thus, the global economic crisis, as well as falling oil prices in the gcc countries reduced remittance flows to sub-saharan africa and south asia in 2020 by 23% and 22%, respectively (world bank, 2020a). migrants’ transfers rose from 126 billion usd in 2000 to the expected 666 (world bank, 2020b) or 689 billion (world bank, 2020a) in 2020, remittances to lowand middle-income countries reached a record 554 billion usd in 2019, surpassing the volume of fdi to these countries for the same period. in 2019, the top five recipients of migration capital were india (83.1 billion), china (68.4 billion), mexico (38.5 billion), the philippines (35.2 billion) and egypt (26.8 billion) (world bank, 2020a). remittance flows to lowand middle-income countries fell on 19.7 percent to 445 billion usd due to the economic crisis caused by the covid-19 pandemic in 2020, which meant a decrease in wages and employment for migrant workers. the number of international migrants is declined in 2020 for the first time in recent history, as the number of new migrants slows down and re-emigration rates substantially increased. international migrant workers suffered from the pandemic, both as a result of their significant involvement in the direct process of countering the spread of covid-19 and because of their significant vulnerabilities, such as living conditions and poverty. researches in a number of oecd countries have found that the risk of infection among migrants is at least two times higher as among locals. however, the further development of migration policy under crisis, its differentiation and emphasis on the problems of migrant integration will be important in the short term to achieve a sustainable inclusive global economic recovery. a more inclusive approach to migration policy in a wide range of related areas leads to sustainable results of migrant integration. 4. migration profile of ukraine it is recommended to use the data from international organizations, expert assessments, as well as indirect forms of analysis, and the inward remittances dynamics in the study of labour emigration in ukraine. gaps in the state system of migration estimation illustrates the fact that, the volume of overseas labour migration, according to official data from the state employment center for 2020, totals to 86.3 thousand people (state employment center, 2021). however, according to the un, ukraine has the highest rates of permanent immigrants among european countries, along with germany, russia, the united kingdom and poland. in 2019, among approximately 5 million people of foreign origin in ukraine the largest migration groups were from belarus, kazakhstan, moldova, russia and uzbekistan (un desa , 2019). at the same time, ukraine ranked 8th in the world and 2nd, after russia, in europe for emigration in 2019. in 2019, as in previous decades, the largest migration corridors in europe were in ukraine, including the russia-ukraine and ukraine-russia corridors, which held the first positions in the volume of migration in this part of the world. after the beginning of russianukrainian military conflict in 2014, ukraine faced a new phenomenon of increasing the number of internally displaced persons (idps). ukraine ranked 13th in the world and 2nd in europe, after turkey, with a figure of 800 thousand idps in 2018. the motivation of internal displacement by military conflict distinguishes the migration of idps in ukraine from the rest of europe, where the motives for such displacement are originated natural disasters. although idps could potentially be seen as an additional catalyst for the economic development of the host regions by increasing social activity, opening new businesses by internal migrants, and interest in carrying out the work vacancies for which there is no demand from local residents, these benefits are not used in ukraine, while there are no application of such a large-scale human resource in the country. the military conflict in the east of ukraine has strengthened the current trend towards reorienting of ukrainian migration to the west (table 1). ukraine was the largest country of origin of refugees in europe amounted to 93 thousand people at the end of 2018. a large share of refugees from ukraine went to the russian federation. according to the un high commissioner for refugees (unhcr , 2019), about 400,000 people have moved to russia since the beginning of the military conflict in 2014, some of whom have received refugee status or temporary table 1 eu/russia migration comparison for ukrainian emigration migration, million persons remittance, million usd remittance, share in total, in per cent 2012 2017 2015 2019 2015 2019 eu 0.603 0.901 3397 7725 48.8% 64.8 russia 0.511 0.341 1835 1266 26.4% 10.6 source: compiled by the authors on the basis (national bank of ukraine, 2017a, 2017b, 2020) baltic journal of economic studies 244 vol. 7 no. 2, 2021 asylum, as well as russian citizenship, without renouncing from ukrainian. given the pan-european negative trend of population decline, some european countries have reached the most favourable regulatory environment for attracting workers from like-mended countries, as evidenced by the example of ukrainian labour migration to poland. the fastest growth rate of migration was observed in 2014-2017, when in 2017 alone poland issued 660 thousand residence permits, of which 85% were received by ukrainian labour migrants (eurostat, 2018). the employment structure of ukrainian labour migrants is mostly inefficient, as only 26.8% (state statistics service of ukraine, 2018) of ukrainian workers were employed abroad according to the qualifications obtained in 20015–2017, and 36.1% were employed in non-skilled vacancies at all. the share of those who worked in a specialty or position that required higher qualifications was significantly higher in the united states (58.3%), russia (43.6%) and the czech republic (40.3%) and significantly decreases in poland – to 16.4%. in contrast to most other labour force exporters, ukraine is characterized by a negative demographic trend. ukraine, like other european countries, shows a trend in the increase of the elder population, however, due to the economic factor, it has a more significant natural population decline, multiplied by permanent net emigration with a significant rate of temporary emigration. the negative trend of labour resources could be seen in ukraine in the 21st century. every year the population of ukraine is reduced by 170-180 thousand (mirror weekly, 2017). only due to natural population decline, our country is among the countries with the highest dynamics of population decline in the world. the traditional problems of natural population reduction and irreversible migration in the late 20th – early 21st century (due to which the number of economically active population of ukraine decreased by almost 1 million people) were sophisticated by the problem of russian military aggression, as a result of which ukraine lost another 3 million economically active citizens, which together resulted in a 22% of cumulative reduction of national labour force in the 21st century. the demographic forecast of the number of ukrainian citizens is at the rate of 32-35 million in 2050 (iom, 2016), and up to 28 million according to the un average forecast in 2100 (figure 1), given the growing share (up to 50%) of the population aged over 60, lack of a balanced migration and macroeconomic policy threatens the national security of ukraine under the demographic crisis (united nations, 2017). the population of ukraine will decline according to the basic and pessimistic un forecasts, as can be seen from figure 1, and according to the optimistic forecast, population growth will start with a mark of 40 million people only after 2075. under such circumstances, the need to attract additional labour from abroad in the medium and long term seems inevitable, which involves the development of effective immigration policy, the best practices of countries using supply-driven and synthetic migration policy systems (for instance, canada and australia). according to the state tax service of ukraine, 11.8 million potentially active citizens were absent in the database in 2020, they did not receive any income at all, and 4.1 million citizens of ukraine in the controlled territory are invisible on the tax map of ukraine, since they did not perform any action of paying taxes (economic truth, 2020). according to the state statistics service, 3.4 million people worked in ukraine without official registration in january-march 2020. 20.6% of the total employed population aged from 15 to 70 worked without an official employment. of the 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 baseline optimistic scenario pessimistic scenario figure 1. forecast of population change in ukraine in 2015–2100 source: compiled by the authors on the basis (united nations, 2017) baltic journal of economic studies 245 vol. 7 no. 2, 2021 total unofficially employed 1.35 million are women and 2 million are men. external labour migration is an important component of the economic security for ukraine. according to the methodology of the ministry for development of economy, trade and agriculture of ukraine (ministry for development of economy, trade and agriculture of ukraine, 2013), the integrated index of economic security consists of 9 indices (130 separate indicators), of which 43% (55 indicators) are directly or indirectly affected by international migration. thus, according to the index, 71% of sub-indices of demographic security depend on migration, foreign economy – 45%, investment and innovation – 71%, macroeconomic – 75%, food – 73%, social – 67%, financial – 22%. to determine the importance of money transfer from migrants for the national economic situation, it is necessary to consider their impact on the balance of payments of ukraine. the balance of payments of the ukraine has been in an unstable position for a long period of time. the current account in ukraine mostly has a stable deficit since 2006 (national bank of ukraine, 2017a). money transfers of migrants coming to ukraine through correspondent accounts of banks, international payment systems, as well as informal channels, are one of the key factors that keep the balance of payments from stronger fluctuations. the volume of remittances to ukraine in the period after 2008 shows a steady increase in absolute terms, while showing a steady rate in relative terms (ranging from 7.5 to 8.5% of gdp since 2015) (table 2). unlike other indicators of foreign economic activity, remittances are much less dependent on domestic and foreign economic fluctuations, they tend to be counter-cyclic. also, in contrast to the global trend of declining remittances, the inflow of migration funds to ukraine has remained stable in the pandemic time. as can be seen from table 1, ukraine received 12.1 billion usd as private money transfers in 2020 compared to 11.9 billion in 2019. at the same time, according to the national bank of ukraine, 4.7 billion usd was transferred through informal channels in 2020 (holubov, 2021). the role of remittances for the ukrainian economy in general, and for the balance of payments in particular, is constantly growing. if in absolute terms the income from migrants is significantly lower than the income from the export of goods (12.1 billion and 49.3 billion, respectively), the relative share of migrant revenues is becoming increasingly important. during the 2008–2020 the volume of remittances increased by 96%, and the volume of exports decreased by 24% over the same period (from 66.9 to 49.3 billion usd). it should also be noted, that the official data of the national bank of ukraine on money transfers may be understated. thus, according to the world bank (world bank, 2020a), their volume in 2019 amounted to 15.788 billion usd, and the share of remittances in gdp in 2016–19 varied between 10-11% (world bank, 2020a). at the same time, despite the differences in absolute indicators, the tendency to increase the absolute amounts of remittances and its importance for the stability of the national economy is obvious. however, migrants wishing to be involved in the process of financing long-term local infrastructure projects (22% of their total (iom, 2016)) do not have an institutional mechanism to realize their aspirations. although migrants heavily interested in investing in the development in small and medium business in ukraine in construction, trade and industry, which generally intersects with the investment priorities of foreign investors in ukraine, confirming the feasibility of considering migrant revenues as potential migration capital in ukraine, given that the public authorities provide the necessary conditions for investment. although it has its own specifics associated with a high degree of “revenue shadowing”, the problem of efficient use of migrant remittances, is generally not separated from the comprehensive need to improve the investment climate in ukraine. we consider macroeconomic efficiency being in need for reforms in tax, pension, and monetary systems, education and science financing, innovation, transparency in the distribution of funds and the provision of benefits to business. table 2 dynamics of private money transfers to ukraine, million usd 2008 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* total revenue 6177 7019 7526 8537 6489 6959 7535 9264 11111 11921 12099 salary 3024 4022 4619 5652 4318 4116 4794 6269 7911 8907 8796 private transfers 3153 2997 2907 2885 2171 2843 2741 2995 3200 3014 3325 volumes of remittances in % to gdp 3.4 4.1 4.1 4.5 4.8 7.6 8.1 8.2 8.5 7.7 8.3 * – preliminary data source: compiled by the authors on the basis (national bank of ukraine, 2017a, 2017b, 2020) baltic journal of economic studies 246 vol. 7 no. 2, 2021 5. migration transformation under the covid-19 pandemic the covid-19 pandemic has affected virtually all spheres of public life; it affected emigration from ukraine, a crucial factor of which was the introduction of lockdown in key host countries of ukrainian labour migration, in particular, in the eu. however, the existence of an unconditional demand for ukrainian workers in the labour-importer countries has led to the solution of problems with access of workers in an ad hoc manner in the first half of 2020, in particular, through the organization of workers transportation from ukraine for seasonal work. charter flights with employees from ukraine to poland, the czech republic, germany, austria, finland, the united kingdom, finland, and israel were organised. the italian government has decided to grant a temporary residence permit for a period of 6 months to agricultural workers and those who are working in households. canada has exempted key categories of migrant workers from entry restrictions when its borders have been closed to foreigners. the portuguese government has decided to provide rapid regularization to all immigrants whose residence permit applications were already pending. the uk has extended visas for around 2,800 health workers (doctors, nurses and paramedics) and their families (international trading centre, 2020). w hile in ukraine there was limited re-emigration during spring of 2020 about 500,000 migrants returned to the country, mostly those with shortterm contracts), but its scale was not as significant as expected. this is particularly confirmed by the amounts of migrants remittances, which decreased in march-april 2020 compared to 2019 by 8% (from 1.892 to 1.748 billion usd) (libanova, 2020), however, as it is shown in table 2, they entered the growing trend by the end of the year. 1.27 million citizens of ukraine lived in poland as the largest recipient of ukrainian labour migration in january 2020. this figure has been relatively stable since march 2019. poland experienced a lockdown due to the covid-19 epidemic in march-april 2020, but only 15% of ukrainian migrant workers returned to ukraine, and in may the number of ukrainian workers in poland increased again (radio liberty, 2020). at the same time, long-term ukrainian migrants who have either permanent residence permits in the eu countries or the citizenship of labour-importing countries tended to stay abroad and limit or cancel their arrival to ukraine. it is estimated that 400-500 thousand migrants who temporarily returned to ukraine with the beginning of the pandemic make up about one-fifth of the permanent migration pool (2.5-3 million) of labour emigrants from ukraine (world bank, 2020a). then they either already returned to the countries of employment or do so in a favourable economic environment in close future. a key factor, which continues to be the determining motivation for emigration, is the significant wage difference between ukraine and the eu countries. as of january, 1, 2021, 21 of the 27 eu member states set a national minimum wage. thus, the monthly minimum wage is usually below 700 eur in the eastern eu countries and more than 1,500 eur in the north-west of the eu (eurostat, 2021). in january 2021 minimum wage was: bulgaria (332 eur), hungary (442 eur), romania (458 eur), latvia (500 eur), croatia (563 eur), the czech republic (579 eur), estonia (584 eur), poland (614 eur), slovakia (623 eur), and lithuania (642 eur) (eurostat, 2021). in comparison, the minimum wage in ukraine in january, 1, 2021 increased to 173 euros, which is almost twice less than in bulgaria and more than 3.5 times less than in poland (national bank of ukraine, 2021; verkhovna rada, 2020). the global labour market, transformed under the influence of digitalization and robotization, has received a new vector of development due to the corona crisis. during recent years migration processes have become increasingly interconnected with the development of technology and innovation. some new trends in the labour market, such as distance working, are gradually becoming the workers way of life. a layer of social migrants is formed: they live in one country, but being employed and receive salary from abroad. however, they are completely immersed in the social environment of other regions, gain skills in multinational and multicultural teams. all these trends are quite typical for the virtual labour market in ukraine. thus, the growth of the it sector in ukraine continued despite the crisis. it can be argued, given the current structure of labour migration from ukraine, including the prevailing employment in sectors that require manual labour of migrants, that the trends, which are important for the national and global labour market on virtualization of migration, will not significantly affect the dynamics and the structure of labour emigration from ukraine in the medium term. 6. conclusions despite the fact that the structure of permanent migration from ukraine is dominated by migration to the russian federation, trends in long-term and especially in temporary labour migration since 2014 and until now, clearly indicate a change in the vector of labour movement towards the eu (especially to poland). the employment structure of ukrainian workers remains low skilled (and employment in the fields of construction, work in households and agriculture still prevailing), and the change in the migration vector does baltic journal of economic studies 247 vol. 7 no. 2, 2021 not improve the quality of overseas employment of workers from ukraine. absolute numbers of remittances and their relative values in relation to gdp have been growing in ukraine in recent years in full accordance with their countercyclical nature and, in general, structure of money transfers correlates with key countries of migration destination (increasing role of the eu countries, and reduction of russia). the stability of migration flows under current circumstances in the ukrainian economy can be considered a relatively positive phenomenon, however, the short-term advantage could transform into a strategic defeat and the final loss of ties with the homeland of most of the ukrainian citizens abroad. permanent emigration from ukraine is especially vulnerable under the projected change in the population of ukraine by 2100, according to the basic and pessimistic scenario of which in our country there will be a sharp fell in the population and labour force. labour emigration is not able to solve the problem of ukraine’s economic development; it just solves the task of maintaining the welfare of the migrant families and provides the opportunities to develop the human capital of migrant children, primarily through funding by means of migration capital their education in ukraine. under the reduction, stagnation or minimal recovery of ukrainian economy, the departure of the active labour force is able to suspend the degradation of the socio-economic environment in the country. however, in long term perspective in ukraine, as well as in other european countries, growing share of elderly people is a stable negative demographic trend, which is aggravated by economic, political and military problems, and both temporary and permanent departure of labour will lead to the loss of a key resource of the country – human capital, and, as a result, will leave no chances for the implementation of the ukrainian “prosperity” development project as well as slowdown of economy’s rate of development. analysis of the current global and national economic situation, regulatory measures, both in ukraine and in the countries of migration destination, which directly or indirectly affect migration flows, indicate that in the medium term we cannot predict that the covid-19 pandemic will significantly affect largescale labour migration. the issue of the dynamics of this process is largely related to the prospects for economic recovery in the eu, and consequently, the demand for labour from ukraine. a significant advantage in this case is the geographical proximity of our country to a key importer of migrant workers, which allows, if necessary, to quickly react on the shortage of workers in the eu in the case of a dynamic improvement in the economic regional trends. references: adepoju, a. 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(2020). 6.6 million americans filed for unemployment last week. retrieved january 23, 2021, from: https://slate.com/business/2020/04/unemployment-jobs-numbers-economy-coronavirus.html world bank (2020a). migration and development brief 32: covid-19 crisis through a migration lens, april. washington, dc. world bank (2020a). personal remittances, received (current us$) – ukraine. retrieved january 23, 2021, from: https://data.worldbank.org/indicator/bx.trf.pwkr .cd.dt?locations=ua world bank (2020b). personal remittances, received (% of gdp) – ukraine. retrieved january 23, 2021, from: https://data.worldbank.org/indicator/bx.trf.pwkr .dt.gd.zs?locations=ua world bank (2020b). phase ii covid-19 crisis through a migration lens. retrieved january 23, 2021, from: https://www.knomad.org/sites/default/files/2020-10/migration%20%26%20development%20brief%20 33%20-%20october%202020.pdf baltic journal of economic studies 22 vol. 8 no. 2, 2022 1 the state institution "south ukrainian national pedagogical university named after k. d. ushynsky ", ukraine e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0002-7224-7892 2 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 3 the state institution "south ukrainian national pedagogical university named after k. d. ushynsky ", ukraine е-mail: ss.romanenko9@gmail.com orcid: https://orcid.org/0000-0002-4446-9244 4 national university odesa academy of law, ukraine e-mail: kornienkoi568@gmail.com orcid: https://orcid.org/0000-0002-4324-9135 doi: https://doi.org/10.30525/2256-0742/2022-8-2-22-28 organizational and managerial system of development of sports and health activities in ukraine: current state and national peculiarities konstantin bogatyrev1, inna irtyshcheva2, serhii romanenko3, iryna korniienko4 abstract. the subject of the study is the process of assessing the current state and national characteristics of organizational and managerial system of development of sports and recreational activities in the transformation of the national economy. methodology. general scientific methods used in the study, in particular: theoretical generalization; methods of positive and normative analysis and statistical analysis. the purpose of the research is the process of assessing the current state and national characteristics of the organizational and management system of development of sports and recreational activities. the conclusion of the study. the main legislative and regulatory documents regulating sports and health activities in ukraine are defined, including the constitution of ukraine, the civil code of ukraine, the law of ukraine "on physical culture and sports" and the law of ukraine "the fundamentals of legislation of ukraine on health protection". legislation of ukraine aimed at regulating the state policy of sport and health and divides it into separate spheres: health (health care) and sport (physical education and sports), according to which the state policy of both spheres, created on the principles of efficiency and humanity orientation, equal access and health, modern orientation, yet must understand the combination of sport and sphere in achieving the main goal – "preservation and restoration of physiological and psychological functions, optimal labor and social activity with maximum biological possibilities of individual life." it is established that in ukraine the medical sphere may be financed from different sources: state and local budgets, insurance and charity funds, other financial sources not prohibited by law. analysis has shown that in ukraine the level of budget expenditures on health care does not exceed 3% of gdp, while according to the world health organization, a necessary condition for the effective functioning of the medical sector is the level of budget expenditures on health care from 6% to 8%, determined by the amount of gdp. it is analyzed that in 2015 in ukraine there was an actual decrease in the level of health care in % (from 3.6% to 3.0%). if to take into account the parallel reduction of state expenditures as a whole for the studied period, it is possible to state a decrease in the level of efficiency of expenditures on health care in the structure of the reduction of total state budget expenditures. the analysis showed that in the structure of central government spending (including transfers) for 2015–2020, the share of spending on health care (as a percentage of gdp from 3.2% to 2.5%, and as a percentage of the state budget from 11.0% to 9.6%) decreased, the share of spending on spiritual and physical development remained virtually the same, and the share of spending on economic activity, security, the judiciary and defense increased. it has been proven that in parallel with the centralized method of providing a package of basic medical services in ukraine, the "additional subsidy for the maintenance of health care and educational institutions" has been significantly reduced. not all communities were ready for this change, and new low-income communities and those that could not cover all the necessary costs of development, health care, physical education and sports were ready for this change and enjoy the need to find new opportunities for funding sports and health. key words: sports and health activities, financing, national characteristics, world health organization. jel classification: g18, h30, h51, h61, i10 baltic journal of economic studies 23 vol. 8 no. 2, 2022 1. introduction in today 's world, sports and recreation are becoming a priority for many countries. more and more often the health care system is considered in close connection with sports activities. in addition to the personal responsibility of each person, the state is also responsible for their health, and, more precisely, the development of the sports and recreational sphere is one of the main priorities of state policy. the health of not only the current population, but also of future generations of the population is ensured at the state level, which can be ensured through the system of development of sports and recreational activities. after all, the three main components of ensuring each person's health are adherence to a regime, maintenance of activity through physical exercise and control of health indicators. the inseparable combination of sport and health is due to modern living conditions, urbanization, the rapid development of scientific and technological progress and digital technology. most human activities are becoming so automated that physical activity is significantly reduced. and with the covid-19 pandemic, distance learning and work, online shopping, social networking and internet chatting have become widespread. people began to spend more time at home, which further reduced physical activity, and increased the vulnerability of the human body to various diseases. thus, the health risks to the nation have increased. in the context of the covid-19 pandemic, more and more people are talking not only about the need for vaccination, but also about the need for physical activity and sports. "after all, people with a strong immune system are much more likely to have an easy course of covid-19 if they get the coronavirus. here's the bottom line: sports can help fight the coronavirus. the world health organization usually recommends endurance sports for 150, or better, 300 minutes a week. during the pandemic, the organization did not publish any separate recommendations. sports are necessary to prevent cardiovascular disease, diabetes, high blood pressure, cancer or depression" (europe and the world, 2021). 2. legislative and normative regulation of sports and recreational activities in ukraine among the main legislative acts regulating the sports and health sphere in ukraine are the constitution of ukraine (constitution of ukraine. information of the verkhovna rada of ukraine (vru), 1996; civil code of ukraine, 2003; law of ukraine, 1994; law of ukraine "fundamentals of legislation of ukraine on health care", 1993). the enumerated legal acts regulate the basic provisions of sports and recreational activities (table 1). legislation of ukraine is aimed at regulating the state policy of sport and health and divides it into separate spheres: health (health care) and sport (physical education and sports), according to which the state policy of both spheres is built on the principles of priority and guarantee, humanistic orientation, equal access and security, modern orientation, which once again proves the importance of combining the fields of sport and health to achieve the main goal – "preservation table 1 the main provisions of the state policy of regulation of sports and recreational activities in ukraine name of the legal document provisions, categories constitution of ukraine "the state must protect human life. everyone has the right to protect his life and health and the life and health of others against unlawful infringements". "human life and health, honor and dignity, integrity and security are recognized as the highest social value" the civil code of ukraine "personal intangible benefits protected by civil law are health, life; honor, dignity, and business reputation; name (rank); authorship; freedom of literary, artistic, scientific, and technical creativity, as well as other benefits protected by civil law" law "fundamentals of the legislation of ukraine on health care" health is "a state of complete physical, mental, and social well-being, not merely the absence of disease or infirmity ". health care is "a system of measures implemented by state and local government bodies, their officials, health care institutions, physical persons – entrepreneurs, registered in the prescribed manner and licensed to engage in entrepreneurial activity by medical practitioners, medical and pharmaceutical workers, public associations and citizens in order to preserve and restore physiological and psychological functions, optimal efficiency and social activity of a person at the maximum biologically possible individual life expectancy ". law of ukraine "on physical culture and sports" sport is "the activity of actors of physical culture and sport, aimed at identifying and uniformly comparing the achievements of people in physical, intellectual and other training through sports competitions and appropriate training for them". sports activities are "activities carried out by subjects of physical culture and sports in order to develop sports". physical education and recreational activities are "activities carried out by subjects of physical culture and sport for the development of physical culture". source: (constitution of ukraine. information of the verkhovna rada of ukraine (vvr), 1996; civil code of ukraine, 2003; law of ukraine, 1994; law of ukraine "fundamentals of the legislation of ukraine on health care", 1993) baltic journal of economic studies 24 vol. 8 no. 2, 2022 and restoration of physiological and psychological functions, optimum efficiency and social activity with the maximum biologically possible individual life" (law of ukraine "fundamentals of the legislation of ukraine on health care", 1993). in addition to the principles listed above, public health policy is based on the principles of comprehensiveness, diversity and decentralization. the state policy of the sports sphere (physical culture and sports), in addition to the above principles common to the sphere of rehabilitation, is supplemented by the principles of patriotism and spirituality, safety, and continuity. to realize the rights and interests of citizens in the sphere of sports and health activities in ukraine operates a branched network of institutions (subjects) of health, physical culture and sports. health care subjects include "health care institutions and individuals – entrepreneurs engaged in economic activities aimed at maintaining and restoring physiological and psychological functions, optimum performance and social activity of a person, which are registered and licensed in the manner prescribed by law" (law of ukraine (draft) "on health care facilities and medical care", 2014). the network of institutions in the field of physical education and sports is very extensive and is aimed at meeting the cultural, sports and recreational needs of various segments of the population. thus, all institutions with an extensive network of physical culture and sports either directly carry out sports and recreational activities or contribute to their development and promote sports and healthy lifestyles. subjects in the sphere of physical culture and sports ensure the development of various types of sports, the formation of appropriate sports and health skills in the population, creating appropriate conditions for healthy physical development and health improvement, physical activity and physical fitness, healthy recreation and healthy lifestyles in general. any sport – professional or amateur (home) requires serious attention and medical support. the flow of injured "amateur sports" is growing – statistics show that the injury rate among people doing sports "for health" is now higher than in professional sports. the growing interest in healthy lifestyles is certainly a positive factor, but playing sports without proper training and supervision is often accompanied by injuries. injuries that used to be common to professional athletes are becoming more common among amateurs. thus, all citizens should be able to receive medical consultation and professional medical assistance, which is guaranteed by the state in every civilized country. in ukraine the following types of services are provided free of charge: emergency medical care, primary, secondary and tertiary care, palliative care. as in every civilized state, in ukraine the state recognizes the right of citizens to health care and provides opportunities to engage in physical activity and sports, but every citizen must take care of his or her health, not harming others and ensuring a healthy life for posterity. reasonable balanced physical activity and preventive check-ups with doctors are ways to maintain the health and well-being of the population, and an additional means, especially in conditions of the covid-19 pandemic, is to follow the vaccination schedule. the world practice of health care financing has different examples and conceptual approaches to the construction, in particular, the most popular is the budgetary approach, which is most clearly implemented in great britain, and in which 50-90% of health care financing comes from state and/or local budgets. the importance of each citizen's personal responsibility for his or her health and physical activity is exacerbated by the disappointing data on the financial provision of the health care system in ukraine. 3. the current state of financing of sports and recreational activities in ukraine the share of financing of the health care system in ukraine from the state and local budgets is the largest, but the growth rate of health care costs is much lower than the corresponding characteristics of changes in the prices of medicines, professional equipment, and services, which worsens the situation with the free health care services (dmitryk, 2018). according to the world health organization (who), a necessary condition for the effective functioning of the medical sector is that the level of budget expenditures on health care should be between 6% and 8%, determined by the gdp (gorbunova, 2017). attempts have been made to set the minimum value for expenses from the state budget at 5%. according to the law "on state financial guarantees of medical care": "the volume of funds from the state budget of ukraine allocated for implementation of the medical guarantee program is determined annually in the law of ukraine on the state budget of ukraine as a share of the gross domestic product (percentage) not less than 5 percent of the gross domestic product of ukraine. expenses on the program of medical guarantees are protected items of budget expenditures" (law of ukraine "on state financial guarantees of medical care", 2022). however, actual compliance with this limit has not been achieved. according to the draft state budget of ukraine for 2022, it is now possible to get as close as possible to the minimum level of health care expenditures, which are envisaged "taking into account the continuation of the health care reform and amount in the consolidated budget (state and local budgets baltic journal of economic studies 25 vol. 8 no. 2, 2022 (4.2% of gdp) 224 billion uah". state budget expenditures (including transfers) on health care amount to 192.5 billion uah (+ 31.1 billion uah by 2021). in the structure of total state budget expenditures this is 13.1% (yermolychev, 2021). as already noted, in recent years the growth of state budget expenditures on health care has been slower than the growth of prices. between 2015 and 2020, per capita health care expenditures grew by 20%. between 2015 and 2020, ukraine saw a real decline in health care expenditures as a % of gdp from 3.6% to 3.0%. if to take into account the parallel reduction of public expenditures as a whole for the studied period, it is possible to state the decrease of the priority level of health care expenditures in the structure of the decreasing total state budget expenditures. 2015–2016 can be considered a turning point in the trends of ukraine's fiscal policy. before that, during 2014–2016 in our country due to successful state programs of financial consolidation and macroeconomic balance the trend of quasi-fiscal deficit and the previous economic crisis was successfully overcome, as well as the level of public debt was reduced. the level of public debt in ukraine decreased from 4.9% of gdp in 2014 to 1.8% of gdp in 2017. that is, in 2015–2016 in ukraine, the trend of economic growth was restored and inflation decreased. these changes occurred mainly due to the imf's extended funding facility. however, imf support was insufficient, as political instability, business imbalances, imperfect judicial, tax and customs reforms, and anti-corruption measures had a negative impact on the economic situation. "ukraine's economy began to shrink even before the covid-19 crisis. ukraine's economic growth began to slow down in the second half of 2019. the strengthening of the national currency had a negative impact on ukraine's trading conditions, and the global economic slowdown led to lower prices for key export items. at the same time, government spending declined, reflecting lower incomes and reduced spending on housing subsidies. industrial production began to decline in response to lower demand and increased competition. since january 2020, ukraine's gdp began to fall (by 0.5% compared to january 2019). in anticipation of and in response to covid-19 and related economic uncertainty, the ukrainian government revised its macroeconomic forecast for 2020 downward, lowered expectations for gdp growth, raised inflation and unemployment forecasts, and suspended medium-term planning, limiting its time horizon to one year" (world health organization, 2020). in april 2020, the budget code of ukraine was amended (table 2) to address the effects of the covid-19 pandemic, which were aimed at stopping the decline in key macroeconomic characteristics. planned 2020 budget increases, including health care in the context of the need to overcome the cocrisis, were important to support economic, sports, and health recovery, but the effectiveness of these changes was marginal. as a result, expenditures on the national health service of ukraine (nhsu) (+ uah 15.8 billion or + 0.4% of gdp) and on the covid-19 anti-covid fund (+ uah 64.7 billion or 1.6%) were increased (law of ukraine "on the state budget for 2020", 2020). considering the priority of consolidated expen ditures of the state budget of ukraine (table 3), it should be noted that health care and physical development, being in the list of priority areas, do not withstand competition with expenditures on education and social protection. in the period 2015–2020, there is a decrease in the levels of funding for healthcare, both as a percentage of gdp and as a percentage of the consolidated budget. funding for education and social protection throughout the study period displaces health care expenditures in the structure of the state budget expenditures of ukraine, and since 2018, even expenditures for economic activities are ahead of health care expenditures. as for state budget expenditures on spiritual and physical development, they are in the category of priorities, second to almost all areas of priority spending, ahead only of expenditures on environmental protection. priority areas are also financed by central government spending, which, in turn, declined significantly in terms of health care spending in the years (2014–2015) after the crisis (table 4). table 2 amendments to the law "on the state budget for 2020" (for april 2020) thousands of hryvnias % of gdp initial changed the difference (thousands of hryvnias) difference (%) initial changed difference income 1095580446 975833650 -119746796 -10,9 27,5 24,5 -3 costs 1199231214 1281624506 82393292 6,9 30,1 32,2 2,1 borrowing -7375047 -7386547 -11.500 0,2 -0,2 -0,2 0 deficit 96275720 298404308 202128588 209,9 2,4 7,5 5,1 source: explanatory tables to the draft additional amendments to the law on the state budget for 2020 (verkhovna rada of ukraine, 2020) baltic journal of economic studies 26 vol. 8 no. 2, 2022 table 3 priority of consolidated expenditures of the state budget of ukraine expenditures in % of gdp expenditures in % of gdp 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 national functions 5,9 5,6 5,6 5,4 5,1 5,1 17,3 16,1 15,7 15,3 14,8 15,5 including debt service 4,3 4,0 3,7 3,3 3,0 3,1 12,7 11,5 10,5 9,3 8,8 9,6 defense 2,6 2,5 2,5 2,7 2,7 2,6 7,7 7,1 7,0 7,8 7,8 8,0 security and the judiciary 2,8 3,0 3,0 3,3 3,6 3,3 8,1 8,6 8,4 9,4 10,5 10,1 economic activity 2,8 2,8 3,4 4,0 3,9 4,1 8,3 7,9 9,7 11,3 11,2 12,5 environmental protection 0,3 0,3 0,2 0,2 0,2 0,2 0,8 0,7 0,7 0,7 0,7 0,7 utilities 0,8 0,7 0,9 0,9 0,9 0,7 2,3 2,1 2,6 2,4 2,5 2,1 healthcare 3,6 3,2 3,4 3,3 3,2 3,0 10,4 9,0 9,7 9,3 9,4 9,2 spiritual and physical development 0,8 0,7 0,8 0,8 0,8 0,8 2,4 2,0 2,3 2,3 2,3 2,5 education 5,7 5,4 6,0 5,9 6,0 5,9 16,8 15,5 16,8 16,8 17,4 17,8 social protection 8,9 10,8 9,6 8,7 8,1 7,1 25,9 30,9 27,0 24,7 23,4 21,4 total 34,2 35,0 35,4 35,1 34,5 32,9 100,0 100,0 100,0 100,0 100,0 100,0 source: world health organization, 2020 table 4 priority of expenditures of the central government of ukraine (including transfers) for 2015–2020 expenditures in % of gdp expenditures in % of gdp 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 general government functions 5,2 5,0 4,8 4,6 4,3 4,3 18,1 17,4 17,2 16,7 15,9 16,4 including debt service 4,2 4,0 3,7 3,2 3,0 3,1 14,6 14,0 13,2 11,7 11,1 11,9 defense 2,6 2,5 2,5 2,7 2,7 2,6 9,0 8,7 8,9 9,8 9,9 10,0 security and the judiciary 2,7 3,0 2,9 3,3 3,6 3,3 9,5 10,5 10,5 11,9 13,2 12,6 economic activity 1,9 1,5 1,8 2,3 2,3 2,7 6,6 5,1 6,3 8,2 8,4 10,3 environmental protection 0,2 0,2 0,2 0,2 0,2 0,2 0,7 0,7 0,6 0,5 0,6 0,7 utilities 0 0 0,1 0 0 0 0 0 0,2 0 0 0 healthcare 3,2 2,4 2,6 2,5 2,5 2,5 11,0 8,4 9,4 8,9 9,1 9,6 spiritual and physical development 0,3 0,2 0,3 0,3 0,3 0,3 1,2 0,7 0,9 1,0 1,0 1,2 education 3,7 3,3 3,1 3,0 3,1 3,2 12,9 11,6 11,1 10,8 11,6 12,3 social protection 8,7 10,3 9,1 8,2 7,5 6,6 29,8 36,0 32,4 29,6 27,8 25,1 block transfers 0,4 0,3 0,7 0,7 0,7 0,5 1,3 1,0 2,6 2,6 2,4 1,8 total 29,0 28,7 28,1 27,7 27,1 26,2 100,0 100,0 100,0 100,0 100,0 100,0 source: world health organization, 2020 in the structure of central government spending (including transfers) for 2015–2020, the share of spending on health (as a percentage of gdp from 3.2% to 2.5%, and as a percentage of the state budget from 11.0% to 9.6%) decreased, the share of spending on spiritual and physical development did not change, but the share of spending on economic activity, security, judiciary and defense increased. "in 2017, ukraine began a major reform of health care financing, which included the centralization of the cost of purchasing basic medical services by a single national payer, the nssu (including the cost of primary care from 2018 and the entire package, including specialized and emergency care, as well as from april 2020). this reform freed local governments from responsibility for funding basic services (except utilities and capital expenditures), allowing them to redirect funds from the health care system to other areas. to compensate, the central government significantly increased health care funding in nominal terms from 2018 to 2020. however, health care spending at the central level remained unchanged as a share of gdp (2.5%)" (world health organization, 2020). against the backdrop of decentralization processes in ukraine's healthcare administration, a reform to centralize spending on the national health service of ukraine's basic medical services package (covering spending on primary care starting in 2018 and the entire package of specialized and urgent care starting in 2020) was implemented in 2017. through these reform measures, local governments have been able to relieve themselves of responsibility for the financial provision of basic health services (with the exception of utility payments and capital costs). this has also expanded the financial capacity of local communities by transferring financial resources for health care to other areas. as financial compensation for possible losses during the reform, "the central government has significantly increased funding for the health care system in nominal terms during 2018–2020. however, baltic journal of economic studies 27 vol. 8 no. 2, 2022 central health care spending remained unchanged as a share of gdp (2.5%)" (world health organization, 2020). thus, from 2015 to 2020, the government of ukraine tried to achieve financial equalization of healthcare opportunities at the level of different communities with different financial capacities and to provide citizens with a guaranteed level of medical services. however, the level of "basic" health care grants does not always cover the needs of communities. an additional source of financial support for community health was the "stabilization grant" (starting in 2015) and the "supplemental health and education grant" (starting in 2017), the total value of which exceeded the level of the "base" grants. financing is one of the main factors of sustainable development of any state. the welfare of the population depends on financial investments in any sphere of the national economy. the study of the current state of state financing of such spheres as health care, physical culture and sports is an important condition for their further development. the identification of promising sources of funding for physical culture and sports will ensure their further development (melikh, irtyshcheva & bogatyrev, 2019). however, in parallel with the introduction of a centralized method of providing a package of basic medical services in ukraine, the "additional subsidy for health care and education" was significantly reduced. not all newly formed communities have been ready for this change, as there are low-income communities that are unable to cover all the necessary expenses for development, health care, physical education and sports. therefore, it is necessary to find new opportunities for funding sports and health. 4. conclusions the main legislative and regulatory documents regulating sports and health activities in ukraine are defined, including the constitution of ukraine, the civil code of ukraine, the law of ukraine "on physical culture and sports" and the law of ukraine "the fundamentals of legislation of ukraine on health protection". the legislation of ukraine is aimed at regulating state policy in the field of sport and health and divides it into separate directions: health (health) and sports (physical education and sports), according to which public policy of both spheres, created on the principles of efficiency and orientation to humanity, equal access and health, modern orientation, yet to be understood as a combination of sport and sphere on the way to achieving the main goal – "preservation and restoration of physiological and psychological functions, optimal labor and social activity with maximum biological possibilities of individual life". it is established that in ukraine the medical sphere may be financed from different sources: state and local budgets, insurance and charity funds, other financial sources not prohibited by law. analysis has shown that in ukraine the level of budget expenditures on health care does not exceed 3% of gdp, while according to the world health organization, a necessary condition for the effective functioning of the medical sector is the level of budget expenditures on health care from 6% to 8%, determined by the amount of gdp. it is analyzed that in 2015 in ukraine there was an actual decrease in the level of health care in % (from 3.6% to 3.0%). if to consider the parallel reduction of state expenditures as a whole for the studied period, it is possible to state the decrease in the level of efficiency of health care expenditures in the structure of the reduction of total state budget expenditures. the analysis showed that in the structure of central government spending (including transfers) for 2015–2020, the share of spending on health care (as a percentage of gdp from 3.2% to 2.5%, and as a percentage of the state budget from 11.0% to 9.6%) decreased, the share of spending on spiritual and physical development remained virtually the same, and the share of spending on economic activity, security, the judiciary and defense increased. it has been proven that in parallel with the centralized method of providing a package of basic medical services in ukraine, the "additional subsidy for the maintenance of health care and educational institutions" has been significantly reduced. not all communities were ready for this change, and new low-income and communities that could not cover all the necessary development, health, physical education, and sports costs were ready for this change and enjoy the need to find new opportunities for funding sports and health. references: coronavirus and outdoor sports: useful or risky? website: news and analytics about germany, ukraine, europe and the world. available at: https://www.dw.com/uk/koronavirus-i-sport-na-svizhomu-povitri-korisno-chirizikovano/a-53028351 constitution of ukraine. information of the verkhovna rada of ukraine (vvr), 1996, № 30, art. 141. available at: https://zakon.rada.gov.ua/laws/show/254%d0%ba/96-%d0%b2%d1%80#text civil code of ukraine. information of the verkhovna rada of ukraine (vvr), 2003, №№ 40–44, p. 356. available at: https://zakon.rada.gov.ua/laws/show/435-15#text "law of ukraine" on physical culture and sports". information of the verkhovna rada of ukraine (vvr), 1994, № 14, p. 80. available at: https://zakon.rada.gov.ua/laws/show/3808-12#text baltic journal of economic studies 28 vol. 8 no. 2, 2022 levkovska, l., at el. (2020). current trends in the development of the water management complex: ukrainian realities and international experience. baltic journal of economic studies, vol. 6, no. 5, рр. 196–202. doi: https://doi.org/10.30525/2256-0742/2020-6-5-196-202 law of ukraine "fundamentals of the legislation of ukraine on health care". information of the verkhovna rada of ukraine (vvr), 1993, № 4, p. 19. available at: https://zakon.rada.gov.ua/laws/show/2801-12#text law of ukraine (draft) "on health care facilities and medical care" (2014). available at: https://bit.ly/3sp0dja dmitryk, k. (2018). what is coming for us next year? general indicators and expenditures on health care of the state budget 2018. apteka.ua, january 8, 2018. available at: https://www.apteka.ua/article/440833 melikh, o., bogatyrev, k., irtyshcheva, i. (2019). conceptual approaches to the development of health-improving tourism, baltic journal of economic studies, vol. 5, no. 2, рр. 131–136. doi: https://doi.org/10.30525/22560742/2019-5-2-131-136 gorbunova, k. (2017). state budget-2017: health care system in numbers. apteka.ua, january 16, 2017. available at: https://www.apteka.ua/article/397685 law of ukraine "on state financial guarantees of medical care" (2022). available at: https://zakon.rada.gov.ua/ laws/show/2168-19#text yermolychev, r . (2021). medicine is accessible to all: health care expenditures increase every year. deputy minister of finance of ukraine. available at: https://interfax.com.ua/news/blog/774513.html world health organization (2020). budget space for the health care system in ukraine. a policy document to support the dialogue on the preparation of the 2021 budget. available at: https://www.euro.who.int/__ data/assets/pdf_file/0003/463872/ukr-budgetary-space-for-health-ukr.pdf melikh, o., irtyshcheva, i., & bogatyrev, k. (2019). organizational and economic fundamentals of development of sports tourism in the system of management of sports and health activities. baltic journal of economic studies, vol. 5, no. 5, рр. 79–83. doi: https://doi.org/10.30525/2256-0742/2019-5-5-79-83 baltic journal of economic studies 77 vol. 2, no. 5, 2016 corresponding author: 1 department of accounting and taxation, v.o. sukhomlynskyi national university of mykolaiv. e-mail: kot28125@rambler.ru formation of the mechanisms of food security at the regional level alla uzhva1 v.o. sukhomlynskyi national university of mykolaiv, ukraine abstract. an important challenge today is to strengthen food security and improve people's lives through increasing competitive products. the crucial vector of forming food security is activities of agricultural business, which are directly responsible to the people for providing sufficient high-quality food. in terms of the desire of ukraine to integrate as a full partner in the european and world community, the problem of food security is of special significance. the need for food security of ukraine requires maintaining an appropriate level of food self-sufficiency, which involves the use of state support for domestic agricultural producers and measures of import controls to protect own producers from foreign competition. subject. the combination of theoretical, methodological approaches and organizational measures to create mechanisms in order to ensure food security at regional level. methods. methods of comparison, analysis, theoretical and logical synthesis, graphical method are used. the methodological basis is a comprehensive research method. purpose. the purpose of the research is to substantiate the need to develop mechanisms to ensure food security of regions in transition to the concept of sustainable development. results. it is established that the priorities of sustainable development of the agricultural sector in the region are the formation of food security, at the same time, a set of principles is defined that ensure sustainable development of regions; food security indicators are formed for the people of the region. components of mechanisms are proposed, which regulate food security of regions and contribute to provision of the population with quality products in sufficient quantity. it is found that the basis for monitoring food security in the region and development of mechanisms to ensure it is the reproduction approach that will help to reveal the totality of processes of “production-distributionexchange-consumption” in the defined territory, and to develop a mechanism of management on this basis. creation of the complex regional program for food quality and security assurance is proposed, which should include issues of improving mechanisms of protection of the regional food market from low-quality and dangerous products; creation of economic, institutional and social conditions, and mechanisms of wide implementation at the enterprise level of the quality and environment management system as the most effective tool for ensuring quality and security of products meeting the requirements and expectations of consumers. key words: food security, region, mechanism, agricultural business, food quality. jel classification: q180, r100, q130 1. introduction sustainable development of any country and the welfare of its population are largely dependent on food security. food security has a special place in the life support of society as availability of food is a basic condition of human life. at the legislative level, food security is defined as the state of food production in the country that is able to fully meet the needs of every member of the society for food of appropriate quality provided its balance and accessibility to every member of the society (poltorak, 2015). we fully agree with the statement of p. sabluk and i. lukinov that enhancing the level of food security through increasing food production, improving quality and balance for nutrients, and ensuring greater availability of each person for food resources for a healthy diet is a strategic priority of social and economic development of ukraine (lukinov, sabluk, 2000). thus, food security should be formed in the country as a whole and in each region. this is due to the fact that every region has different climatic conditions, social and economic status of certain territories, demographics and available potential. thus, food security of the region is understood as an ability of the social and economic system to create and distribute food resources, to provide consistently all categories of the population with food in the defined territory. the crucial vector of forming food security is the activity of agricultural business, which is directly responsible to the people for provision of food of sufficient quality. the issue of food security is extremely important because it focuses on conceptual directions of the baltic journal of economic studies 78 vol. 2, no. 5, 2016 regional agricultural policy in conditions of market economy transformation. 2. food security in conditions of sustainable development of regions sustainable development, as a world model, integrates ecological, social and ecological measurement of environment in a global perspective. during the research, we consider sustainable development as a permanent growth of potential of the social and economic system that can meet the growing needs of present and future generations for goods and services on the basis of the established optimal territorial and branch structure, which will ensure sustainable use of environmental conditions, drastic reduction in consumption, which do not recover, preserve biological balance and healthy environment. transition of agricultural business to sustainable development will mean a qualitative state of the complex actively functioning system, in which the possible negative impact of processes on food security of regions and state of agricultural and ecological systems will be minimized, or eliminated without consequences for them. thus, in terms of the desire of ukraine to integrate as a full partner in the european and world community, the problem of food security is of special significance. the world practice shows that only the state, which can guarantee provision of the people with food in conditions, is able to pursue an independent policy. the need for food security of ukraine requires maintaining an appropriate level of food selfsufficiency, which involves the use of state support for domestic agricultural producers and measures of import controls to protect own producers from foreign competition. reliability of food security is both selfsufficiency with food, and availability of funds for their import in required quantities with minimum potential vulnerability of food security of the population in case of difficulties with imports of food (no currency, rising prices, embargoes, etc.). v. voloshyn and v. trehobchuk indicate that in every region of ukraine, there are specific territorial and production social systems, which are characterized by certain composition and structure, and have significant differences (voloshyn, trehobchuk, 2002). so any region is a complex biological and social, and economic system, which includes the following subsystems: nature, society and production. they are interconnected and interdependent, and should be developed, so that they could mutually reinforce and complement each other based on the sustainable use and operation of natural resources potential. the priority of transition of regions in ukraine to the model of sustainable development is that interests of social progress, environment and economy are fully balanced, weighted and optimized for the highest possible number of demographic, social, environmental, economic, industrial, technical and technological indicators. therefore, a complexity is needed, when deciding on the rational use and conservation of environment. sustainable development of regions defines improvement of quality of life of the people within capabilities of the ecosystem and is the next step after the theory of economic growth. this is a characteristic of sustainability processes or conditions, which can function indefinitely. regional and local authorities provide economic, social and environmental infrastructure, manage and support it, define policy and standards in the field of implementation of national, regional and local resource and ecological priorities in regions. sustainable development of regions should be based on the following principles: protection and maintaining a proper state of environment of the region in the process of social and economic development; establishing strict liability for the deterioration of environment; implementation of organizational and practical measures on greening of economic activity, eliminating sources of negative human impact on environmental quality; ensuring public access for the population and organizations to environmental information, including information on hazardous materials and activities; carrying out expert assessment of possible environmental impacts of all activities that may negatively affect the environment; involving organizations and all categories of the population to achieve objectives of sustainable development. we believe that these principles should be taken into account in the development and approval of regulations, and social and economic programs of development of the region, ensuring coordinated activities of the state and local authorities to solve practical problems and use of production and resources potential, optimization of territorial organization, providing food and environmental security, productive forces, maintaining social and economic stability of the region. the development of the agricultural sector of regions is the main basis of food security of the population according to rational nutritional standards. strategy and tactics of forming food security of ukraine at the regional level in conditions of high volatility and uncertainty of factors of territorial development is particularly urgent problem for agricultural enterprises of different types of ownership, which produce goods and services of different functions in order to ensure food security of ukraine at the regional level. there are the following indicators of food security of the population of the region: the degree of satisfaction of physiological needs of the population for nutrients and energy, diet compliance with the requirements of baltic journal of economic studies 79 vol. 2, no. 5, 2016 minimization of harmful substances; level of physical and economic availability of different food categories of the population; price stability in the food market; independence of providing citizens with food and resource support of the agriculture complex on imported supplies; level and pace of development of industries of the domestic agricultural complex, possibility of their expanded reproduction; sizes of strategic food stock in the state reserve and available food reserves (kapinus, 2002). the research has found that the main indicators of food security of the region are compliance of the following: extent and structure of the final food consumption with rational physiological consumption norms; production potential of areas of agricultural business sufficient for production of basic foodstuffs in volume and variety necessary for a safe level of regional exports, food imports; volume and structure of exports and imports of food at a safe level for the region defined by capabilities of economically viable production of basic foodstuffs in the region; food quality and security with the requirements of sanitary and hygienic, ecological and epidemiological standards of consumption (iliashenko, 2006). thus, maintaining food security requires development of mechanisms of its implementation, taking into account requirements of the population for quality foodstuffs according to rational consumption norms. 3. food quality and security assurance the main requirement for the quality of foodstuffs is security, which ensures no contaminants, common toxins or any other substance that may make food products harmful to health. optimal provision with safe, nutritious food is inviolable condition and prerequisite for the protection and promotion of health. control over safety and quality of food products is based on checking the final products of companies in ukraine. however, over the last decade in the world, the tendency has become more significant to realize the importance of an integrated interdisciplinary approach with the consideration of the entire food chain, many of problems related to food safety, arise in the original production. given that, in recent years, organization of food control in many european countries has undergone reorganization and has become the only institution responsible for the entire food chain – “from farm to consumer.” this system has many advantages and deserves so that it is recommended for ukraine. the current system in ukraine for regulation of food security largely comes from the legal definition of what is a dangerous product, programs to enforce the rules in order to remove these foods from the food market and imposing sanctions against those, who violate the relevant regulatory standards. however, it is not very effective because control of the finished product can never be sufficiently complete to ensure that pollution levels are below the established ones, and security, which cannot be controlled in the finished product. low level of responsibility for violations of standards, rules and regulations and quality of food does not improve the situation in the field of quality and security of food in the country (mykytiuk, skydan, 2005). the problem of improving quality and security of food can largely be solved at the regional level through the formation of the regional policy. a negative factor for improving quality of products is the fact that common interests of new owners of the means of measures to improve control over food quality and security on each link from agricultural producer to consumer m easures for implementation at local enterprises of modern quality and security management systems m easures for implementation of awareness-raising activities on issues of food quality and security m easures to coordinate the work of concerned parties in the issue of food quality and security assurance c omplex regional program for food quality and security assurance m easures for introduction of the national system of standardization, accreditation, confirmation of compliance at the regional level m easures for resource support of implementation of the program m easures for creating a single monitoring system of implementation and effectiveness of the program fig. 1. integrated approach to food quality and security assurance at the regional level baltic journal of economic studies 80 vol. 2, no. 5, 2016 production, management and employees of enterprises are to achieve a single temporary benefit, and not to achieve high competitiveness of products and, therefore, survive in the new economy. consequently, formation of the complex regional program for food quality and security assurance is proposed, which should include resolution for issues of improving mechanisms to protect regional food market from low-quality and dangerous products; creation of economic, institutional and social conditions, and mechanisms of wide implementation at the enterprise level of the quality and environment management system as the most effective tool for ensuring quality and safety of products meeting the requirements and expectations (fig. 1). the issue of improving food quality and safety of domestic food production as one of the main indicators characterizing level of food security of the state lies in the plane of the regional agricultural policy, the priority of which is the improvement of control over quality and safety of food products. openness should be an important principle of the regional policy in the field of food quality and safety. one of the effective ways for enforcement on compliance with food quality is availability for the society of results of food control. 4. mechanisms for implementation of regional food security today, regions in ukraine are divided into consuming and producing food due to various factors. some regions are in need of external food products. thus, the main conditions of food security in regions are the following: economic availability of food; rational combination of food of local production and imported as a part of a single economic space of the country; lack of interregional trade barriers. to characterize the state of food consumption in the region, the following systems of indicators are used: composition and structure of the population of the region; cost of living, cost of the minimum food basket compared to the average monthly wages and welfare payments, average pension; number of people with incomes that are below the subsistence level; share of spending of the population for purchase of food in the cost structure; distribution of income in the society; ratio of the monthly food ration with rational norms; level and dynamics of food prices; development of food trade infrastructure and the retail trade structure. development of the food security system in the region provides an integrated approach that includes not only the study of social and economic conditions in the region and elements of the food security system, but also interaction of the state with the system agents including demand and supply management in the food market, facilitating creation of infrastructure of food supply, measures of performance and regulation of the food market in the region. the research has found that the reproduction is the basis for monitoring mechanisms of food security improving food quality food production targeted assistance to the population optimal provision with safe food system of control over food quality and safety rules and regulations development of infrastructure and logistics optimization of interbranch economic relations establishing financial and credit mechanism import regulation formation of intervention fund innovation and technological development system of organization and management of food security fig. 2. mechanisms of food security of regions baltic journal of economic studies 81 vol. 2, no. 5, 2016 food security in the region and development of mechanisms to ensure it. thus, reproductive approach allows not only to prove the priority of ensuring formation of food security in individual regions, but also leads to differences of regional strategy from providing the national one. after all, components of the mechanism of food security at the regional level are present in figure 2. this approach makes it possible to identify the totality of processes of “production-distribution-exchangeconsumption” in the defined territory, and on this basis to develop a mechanism of control. it is possible to define the regional system, its financial foundation of development, sources of funds and mechanism of their involvement in the territory only if the regional economy is considered as a complete system with its own set of reproductive relations. the priority at the current stage of development is considered as competitive domestic production of food through development of a large domestic food market, saturation of the domestic consumer market with competitive goods and gradual replacement of imports by domestic products. this is necessary not only to ensure economic and food security of the region and the country as a whole, but also to fight unemployment, provide income growth for both consumers and producers, form the revenue part of budgets of all levels due to tax revenues, develop investment in the economy of the region. thus, implementation of the reproductive approach to solving the food problem determines the priority of forming the food safety system at the regional level. 5. conclusions the issue of food security has an important place in concepts of the national security of all developed countries. in terms of the desire of ukraine to integrate in the european community, the problem of food security is of special significance. the crucial factor of social and economic development of the state is to ensure food security at the regional level. transformation processes in the agricultural sector should be primarily focused on providing all categories of the population with quality food in the required quantity and assortment. the issue of food quality and security cannot be underestimated as they are important signs of the food chain. development of the effective national and regional monitoring systems for quality and security of food products, stimulating local enterprises for production of “healthy” food will provide conditions to overcome technical barriers for promotion of products to foreign markets, to increase the credibility of domestic producers in foreign and domestic markets, to contribute to improvement of public health. for regions, production for domestic consumption of basic foodstuffs is an important factor. it is necessary to develop mechanisms for changing types and forms of the state support for agriculture; to improve regulation of food imports, to introduce quotas on imports of competitive products that are produced in abundance in the region; to carry out a single antimonopoly policy in the agricultural sector. we believe that further studies of this problem should pay attention to the assessment of performance of mechanisms of food security at the regional level taking into account characteristics of each region. references voloshyn, v., & trehobchuk, v. (2002). conceptual framework for sustainable development of regions of ukraine. regional economics, vol. 1, p. 7–22. iliashenko, v. (2006). mechanisms of the state management of sustainable development of food supply in ukraine. collection of research papers of nadu, vol. 1, p. 88–94. kapinus, y. (2002). food problem: ukraine in the international dimension. state management in conditions of integration of ukraine in the european union. materials of research and application conference, p. 247–248. mykytiuk, v., & skydan, о. (2005). formation of food security in ukraine: regional aspect – zhytomyr, publishing house of state agricultural and ecological university, 248 p. poltorak, a. (2015). comprehensive assessment of food security of ukraine. economic journal – xxi, vol. 7–8 (2), p. 15–18. lukinov, і., & sabluk, p. (2000). on the strategy of transforming agriculture and food security of ukraine: scientific report. agricultural economics. vol. 8, p. 3–36. алла ужва формирование механизмов продовольственной безопасности на региональном уровне аннотация. важной проблемой настоящего является укрепление продовольственной безопасности и повышение уровня жизни населения на основе увеличения объемов конкурентоспособной продукции. определяющим вектором формирования продовольственной безопасности является деятельность субъектов аграрного бизнеса, которые несут непосредственную ответственность перед населением за достаточное обеспечение качественным продовольствием. в условиях стремления украины интегрироваться как полноценный партнер в европейское и мировое общество проблема продовольственной безопасности baltic journal of economic studies 82 vol. 2, no. 5, 2016 приобретала особое значение. необходимость обеспечения продовольственной безопасности украины требует поддержание соответствующего уровня продовольственного самообеспечения, которое предусматривает использование государственной поддержки отечественных производителей сельскохозяйственной продукции и употребления мероприятий импортного контроля с целью защиты собственных производителей от иностранной конкуренции. предмет исследования. совокупность теоретических, методических подходов и организационных мероприятий по формированию механизмов обеспечения продовольственной безопасности на региональном уровне. методология. в процессе исследования применены методы сравнения, анализа, теоретического и логического обобщения, графический метод. методологической основой стал комплексный метод исследования. цель. цель исследования заключается в обосновании необходимости формирования механизмов обеспечения продовольственной безопасности регионов в условиях перехода на концепцию устойчивого развития. результаты. установлено, что приоритетными направлениями устойчивого развития аграрной сферы региона является формирование продовольственной безопасности, при этом определенно ряд принципов, которые обеспечивают устойчивое развитие регионов; сформированы показатели продовольственного обеспечения населения региона. предложены составляющие механизмов регуляции продовольственной безопасности регионов, которые будут способствовать обеспечению населения качественной продукцией в достаточном количестве. выяснено, что в основу мониторинга продовольственной безопасности региона и разработки механизмов ее обеспечения должен быть поставлен воспроизводительный подход, который даст возможность обнаружить всю совокупность процессов «производство-распределениеобмен-потребление» на определенной территории, и на этой основе разработать механизм их управления. предложено формирование комплексной региональной программы обеспечения качества и безопасности продовольствия, которая должна предусматривать решение вопросов усовершенствования механизмов защиты регионального продовольственного рынка от некачественной продукции; создание экономических, организационных и социальных предпосылок и механизмов широкого внедрения на уровне предприятий систем управления качеством как наиболее эффективного инструмента обеспечения качества и безопасности продукции, удовлетворения требований и ожиданий потребителей. baltic journal of economic studies 147 vol. 3, no. 2, 2017 corresponding author: 1 department of finance and banking, dnipropetrovsk state agrarian and economic university. e-mail: halatyr@i.ua important provisions for the development of agriculture of ukraine svetlana khalatur1 dnipropetrovsk state agrarian and economic university, ukraine abstract. the aim of the work is to study the state of development of agriculture in ukraine. the indicators of production and yield of the main agricultural crops and production of the main types of livestock products are analysed. the main directions of the development of agriculture are determined taking into account the transformations in the agrarian sphere. solutions of the problem of investment support for the development of agriculture are investigated. the main factors that restrain the growth of the industry and inhibit the development of agricultural enterprises are given. based on the results of the analysis, the main problems that the sector has faced recently are identified and the issues that require priority solutions are listed. the subject is the theoretical and methodological foundations and practical recommendations on the search for reserves for the development of the agricultural sector. methodology. the study is based on a comparison of data from 2009 to 2015, using statistical compilations. the results of the research showed that the livestock sector begins to decline in ukraine and this means that in the further such situation, it is possible to lose the opportunity not only to export livestock products abroad but also to meet the domestic needs of the country’s population. the state of agriculture in ukraine is considered. the results showed that the main reserves of the development of agriculture in ukraine are the state regulation, assessment of the attractiveness of the investment climate, the use of environmentally safe technologies, the use of modern technologies and mechanisms for the economic stimulation of production and processing of agricultural products. value/originality. the data obtained during the research years of the main reserves of agricultural development in ukraine are able to provide a better understanding of the state of the agricultural sector in the conditions of the economic downturn in general and in lithuania in particular. key words: agriculture, agro-industrial complex (aic), investment climate, productivity, crop production, animal husbandry, environment-friendly technology, economy, agricultural sector. jel classification: q13, l1 1. introduction ukraine is a country with strong agricultural potential and vast prospects of agriculture. it has favourable climatic conditions and quality of land resources, the presence of which indicates the possibility of effective development of agricultural production. agriculture today is among the most promising sectors of the ukrainian economy. ukraine is gradually becoming a serious player in global agricultural and food markets, occupying leading positions in the trading and processing of grains exporting significant amounts of vegetable oil and dairy products. however, insufficient and inadequate legal framework and the lack of real funding agriculture ukraine (despite the formal existence of state support programs) hinder the development of enterprises of the agricultural sector. analysis of recent research and publications. the study prospects for agricultural development has long been involved ukrainian scientists, including a.n. borodin, i.r . zalutsky, v.k. zbarskyy, u.y. luzan, v.j.  mesel-veselyak, b.i.  paskhaver, a.j.  picos, i.v. prokop, p.t. sabluk, m.p. talavyrya, n.m. fedorov, v.g.  andreychuk, v.  yurchushun, p.s.  berezovsky, n.v.  vyshyvaniuk, o.n.  onishchenko, g.v.  cherevko, l.m. hazuda, i.v. svynous and others. unsolved aspects of the problem. despite a thorough analysis, carried out in the writings of these authors, the problem of effective agricultural development requires further theoretical and methodological research and practical developments. the purpose of the article. the main purpose is to analyse the current state of agricultural development, identification of key provisions of agricultural development in ukraine. presenting the main material. agriculture of ukraine (apc) is a leading inter-sectoral territorial and industrial structure of the economy of ukraine, producing 2/5 of gdp and concentrates 1/3 of all employees in the economy. this is a complete, integrated system of large-scale, baltic journal of economic studies 148 vol. 3, no. 2, 2017 complex structure and territorial organization. the role of agribusiness in the economy cannot be overestimated because of its level of development areas and sustainable operation depends on security needs of the population in the major types of food according to physiological norms of consumption, welfare, and the amount of supply to the market. however, the pace of economic development of agriculture insufficient because it does not solve important social, economic, and social needs. the current state of agriculture of ukraine is characterized by a deep crisis caused by factors as general economic character and shortcomings agricultural policy. the essence of the crisis is the shortage and poor quality of food, stagnation, and the high cost of production, a marked decrease in food self-sufficiency of the population and its regions, the growth of imports of basic foodstuffs in the food balance. 2. the current state analysis of agriculture of ukraine: among the reasons for this situation, there can be distinguished (pavlenko, 2015): 1. the lack of land prices and taking into account its agricultural production. 2. the inadequacy of means and ends in agricultural development – deformation structures complex. 3. the disparity in prices for agricultural and industrial products. 4. false strategy investments. 5. ignoring the experience of developed foreign countries. 6. too poor logistics in the processing industries, much of the park is worn and outdated, full immunity to the field of scientific-technical progress. 7. inefficiently used production capacity of the complex, its potential, slowly increasing core performance agriculture – crops and livestock. production of significant amounts of agricultural products, including livestock, moved to peasant households, which does not contribute to the quality and competitiveness, the use of new technologies, and improving resource availability. 3. livestock as an important reserve of agricultural development let us analyse the dynamics of livestock and poultry in ukraine for 2009-2015 years based on table 1. analysing the data in table 1, we can conclude that the cattle population has declined by more than 14% in all types of households ukraine. there was a decrease in the number of pigs, sheep, and goats more than 10%, only agricultural enterprises increased the number of pigs and poultry by 11.5%. overall livestock dynamics in all types of households for years has studied the negative trend. this shows that the livestock industry like agriculture in ukraine gradually declines. livestock industry in ukraine began to decline, which means that in the future this regard thereto ukraine, with its huge potential not only lose the opportunity to export animal products abroad but also provide domestic needs of the population. let us analyse the dynamics of livestock and poultry productivity in agricultural enterprises for the years 2009-2015 based on table 2. analysing the data in table 2, it can be concluded that the productivity of cattle and pigs increased by about 4%, average annual milk yield per cow table 1 dynamics of livestock and poultry in ukraine for 2009–2015 years, million heads name 2009 2010 2011 2012 2013 2014 2015 change, % farms of all categories cattle 4827 4494 4426 4646 4534 3884 3750 77,69 including cows 2737 2631 2582 2554 2509 2263 2167 79,17 pigs 7577 7960 7373 7577 7922 7351 7079 93,43 sheep and goats 1833 1732 1739 1738 1735 1371 1325 72,29 poultry 191 204 201 214 230 213 204 106,58 agriculture cattle 1627 1526 1511 1507 1438 1310 1270 78,06 including cows 605 589 584 575 565 529 505 83,47 pigs 3308 3625 3319 3557 3879 3733 3704 111,97 sheep and goats 316 299 290 265 248 205 187 59,18 poultry 100 111 106 118 132 122 112 111,55 households cattle 3200 2968 2915 3139 3096 2574 2480 77,50 including cows 2132 2042 1998 1979 1944 1734 1662 77,95 pigs 4269 4335 4054 4020 4043 3618 3375 79,06 sheep and goats 1517 1433 1449 1473 1487 1166 1138 75,02 poultry 91 93 95 96 98 91 92 101,10 baltic journal of economic studies 149 vol. 3, no. 2, 2017 increased by 37.48%. the performance of sheep, goats, and poultry decreased because the average annual wool clip from a sheep decreased by 39.29% and the average annual egg production of laying hens decreased by 10%. 4. plant growing as an important reserve of agricultural development one should consider the fact that the main indicator of the relative productive economic status and development of crop production and agricultural productivity is generally crops. an analysis of the dynamics of productivity of major crops for the years 2009-2015 is done based on table 3. given the data from table 3, we can conclude that the yield of major crops studied for years had tended to increase overall productivity increased by more than 15% in all cultures. regarding the acreage of major crops, in the last 20 years, they have also undergone significant changes. given the data from table 4, we can conclude that the area of sown crops such as maize, soybean, sunflower, and sugar beet tends to increase because the culture is in great demand and brings high returns in respect to other cultures – a trend decline. square pure vapour in 2015 compared to 2009 decreased by almost 60%. however, note that often argued on the need to reduce arable land in ukraine, because the reduction of the cultivated area can be regarded as positive. but still table 2 dynamics of productivity of livestock and poultry in farms for the years 2019-2015, kg indicator 2009 2010 2011 2012 2013 2014 2015 change,% the average weight per head of cattle, which is sold to processors, kg cattle 423,00 414,00 424,00 439,00 438,00 427,00 439,00 103,78 pigs 108,00 108,00 108,00 108,00 109,00 110,00 112,00 103,70 average annual milk yield per cow, kg 3893,00 3975,00 4109,00 4676,00 4827,00 5027,00 5352,00 137,48 average annual wool clip from a sheep, kg 2,80 2,30 2,20 1,90 1,80 1,60 1,70 60,71 the average annual egg production of laying hens, units 280,00 281,00 286,00 293,00 289,00 276,00 252,00 90,00 table 3 dynamics of productivity of major crops for 2009-2015 years c/ha indicator 2009 2010 2011 2012 2013 2014 2015 change, % cereals 29,80 26,90 37,00 31,20 39,90 43,70 41,10 137,91 including wheat 30,90 26,80 33,50 28,00 33,90 40,10 38,80 125,56 rye 20,70 16,70 20,70 22,70 22,80 25,80 25,90 125,12 barley 23,70 19,70 24,70 21,10 23,40 30,10 29,50 124,47 oat 17,60 14,80 18,10 20,90 19,40 25,10 23,20 131,81 corn grain 50,20 45,10 64,40 47,90 64,10 61,60 57,10 113,74 millet 13,60 13,70 17,80 10,30 13,10 18,00 18,90 138,97 buckwheat 7,40 6,70 9,90 8,70 10,60 12,20 10,00 135,13 fig 58,30 50,50 57,30 62,10 60,00 50,00 53,40 91,59 legumes 17,50 15,10 14,60 15,60 14,50 21,40 20,40 116,57 sugar beet (factory) 315,00 279,00 363,00 411,00 399,00 477,00 436,00 138,41 sunflower 15,20 15,00 18,40 16,50 21,70 19,40 21,60 142,10 rape 18,50 17,00 17,30 22,00 23,60 25,40 25,90 140,00 soy 16,80 16,20 20,40 17,10 20,50 21,60 18,40 109,52 flax (fibre) 6,50 4,00 5,90 8,60 7,30 6,30 8,90 136,92 potato 139,00 132,00 168,00 161,00 160,00 176,00 161,00 115,82 vegetables 183,00 174,00 195,00 199,00 200,00 208,00 206,00 112,56 annual grasses hay 30,60 32,00 34,10 31,60 33,70 38,20 36,60 119,60 perennial grasses hay 32,20 35,80 38,00 36,50 38,30 45,70 38,10 136,92 fruits and berries 70,70 78,20 84,90 89,90 103,50 95,20 104,50 115,82 grape 66,00 60,30 75,50 67,20 85,80 98,60 92,30 112,56 baltic journal of economic studies 150 vol. 3, no. 2, 2017 negative changes in the structure of sown areas, because over the period decreased sown area of important crops such as potatoes, while an increase in sown area of sunflower – one of the most liquid cultures. this culture is very exhausting the soil and, therefore, the ten-course rotation should not take more than one field. however, in many cases, tenants grow on leased land only corn and sunflower and thereby destroy the fertile layer of soil, which is very difficult to recover (sirenko, 2009). consequently, a significant increase in crop yields over the past year, the corresponding changes in the structure of sown areas led to a slight increase in the volume of gross crop production in 2015 compared to previous years. the decline in production livestock industry is primarily due to significant changes that have occurred in the structure of livestock and poultry farms of all categories over the period. the main reason for the decline of dairy and beef cattle farms in ukraine are chronic loss-making industry because business owners reasonably rid of unprofitable enterprises – reduce the number of heads (sirenko, 2009). renaissance of cattle is associated with significant investments, as most livestock buildings of the former collective and state farms are destroyed or redesigned. moreover, in most cases, cultivated pastures become old shrubs. the problems of the industry should note the low potential productivity of the existing number of cows, which need to improve dramatically selective stock breeding. it confronts business owners who wish to develop their farms’ cattle in such financial constraints that they are not able to overcome (andreychuk, 2015). thus, the decline in livestock production has become a macroeconomic factor since led to increased food shortages of animal origin, and thus to higher prices for them. this reinforced inflationary pressures, especially painful blow to the poorest segments of the population, to which such products have become available by the price. for a comprehensive analysis of trends in agricultural development in ukraine, there is required a detailed investigation of economic efficiency of all sectors of agricultural production. table 4 dynamics of acreage for major crops 2009-2015, ha indicator 2009 2010 2011 2012 2013 2014 2015 change, % the entire cultivated area 26990 26952 27670 27801 28329 27239 26902 99,67 cereals 15837 15090 15724 15449 16210 14801 14739 93,07 including wheat 6852 6451 6781 5772 6684 6061 6867 100,22 rye 468 286 284 303 284 187 152 32,48 barley 5122 4505 3787 3425 3359 3041 2826 55,17 oat 433 326 288 310 252 247 213 49,19 maize 2149 2709 3620 4625 4893 4691 4123 191,86 millet 119 95 169 191 98 103 112 94,12 buckwheat 273 225 311 300 189 140 133 48,72 fig 25 29 30 26 24 10 12 48,00 legumes 371 429 374 318 280 227 250 67,39 industrial crops 6545 7296 7441 7854 7869 8437 8350 127,58 including sugar beet (factory) 322 501 532 458 280 331 237 73,60 sunflower 4232 4572 4739 5194 5051 5257 5105 120,63 rape 1060 907 870 566 1017 882 682 64,34 soy 644 1076 1134 1476 1370 1806 2158 335,09 flax 2 1 2 2 2 2 2 100,00 potatoes and cucurbit crops 1950 1967 2028 2023 1961 1900 1823 93,49 potato 1409 1408 1439 1440 1388 1348 1291 91,63 open ground vegetables (without seed) 451 462 498 494 483 463 440 97,56 forage crops 2658 2599 2477 2475 2289 2101 1990 74,87 including fodder root crops (including sugar beet to feed livestock) 247 244 236 230 224 216 213 86,23 annual grasses (including crops 485 473 445 497 393 346 309 63,71 corn for silage and green fodder 585 583 531 499 469 408 393 67,18 grasses of previous years (mowed area for coverless sowing) 1289 1238 1207 1195 1152 1119 1027 79,67 square pure vapour 1523 1465 1211 1247 981 830 612 40,18 baltic journal of economic studies 151 vol. 3, no. 2, 2017 the worsening situation in agriculture is due not only to the lack of financial resources but also low-demand food and low purchasing power of the population. the ban on exports to russia also negatively affected the development of the industry, the result of which was a significant reduction in the production of milk and eggs. thus, among the main factors that, despite some improvements, restrain the growth of the industry and hamper the development of agricultural enterprises are the following (pavlenko, 2015): – failure and/or unavailability of financial resources; – high fuel prices and seeds, deterioration of material base and, consequently, high production costs and low efficiency; – mostly low yield production, which hinders its modernization and innovative development processes; – the inconsistency of products with international quality standards and, therefore, low competitiveness in foreign markets; – exports of raw materials and semi-finished products caused by the absence or the lack of capacity for effective processing and subsequent implementation; – unstable political situation and military operations in the east, which caused a drop in production in the donetsk and luhansk regions and affected its reduction in ukraine. – towards sustainable rural development, a solution to the issues is possible through the implementation of sustainable economic, social, and environmental development, which can achieve the formation of clusters. “economy of territories based on clusters – a model of an attractive and competitive economy based on the use of synergy effects and scale” (andreychuk, 2015). clusters can cover all economic activities, including in the field of social service areas. in economically developed countries, clusters’ formation is provided by the state support. in ukraine, the clusters are created spontaneously by “informal intuitive clustering” in agriculture, they took the form of food value chain, and their members are trying to get maximum benefit from the resources and are not intended to influence the development of rural areas. “spontaneity and uncontrollability of such clusters are determined by the lack of clustering strategies in regional bodies that are responsible for balancing economic, social, and environmental components of sustainable development of territories under their jurisdiction” (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015). sugar beet processing system that existed in the prereform period can serve as examples of clusters. with the transition to a market economy, the country tried to get out of the strategies of regional cluster approach but the new owners of enterprises that process agricultural products have not yet reached an understanding of the need to act as integrators of respiratory congestion clusters. however, in some regions, promoting the organization and functioning of clusters by public authorities have accumulated experience (e.g. khmelnytskyi regional state administration initiated the creation of organic cluster systems). this work is also carried by poltava regional state administration. but the factor that inhibits the clustering process is the lack of legal and regulatory framework and methodological support from the state and local governments, which can initiate the establishment of agro-industrial clusters to ensure a comprehensive rural development (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015). an important condition for the agricultural development is the development of the field of logistics. its basis – transportation and production operations, ensuring supply (procuring logistics), production (logistics) and marketing (distribution logistics) of agricultural products. the development of logistics around the capital city plays an important role in ensuring quality control of agricultural products and its direct supplies from the producer to the consumer without major metropolitan transport costs (pavlenko, 2015). the natural basis of agricultural area is favourable soil and climatic conditions. the presence of large amounts of black soil in southern areas and sod-podzolic soils in the northern areas, sufficient water availability in territories, and mostly favourable weather patterns create the necessary conditions for effective agriculture. however, for increasing productivity, critical is not only the quality of soil and reclamation and appropriate measures and ensuring reasonable rotation. land use restricted area because of their contamination. the accident at chernobyl was removed with the use of 204 thousand hectares of kyiv region, including 126 hectares of forest (pavlenko, 2015). the main areas of agricultural development, taking into account transformations in agriculture, are (pavlenko, 2015): – agriculture has developed on the basis of rational land use and ecosafety of land management to the needs of the capital city and in the food situation in domestic and international markets; – efficient agriculture sectors of specialization field of economic and environmental positions can be grain crops (wheat, rye, and cereals), sugar beet, potatoes, vegetables, fruit and forage crops and cattle, poultry and pigs; – over the environmental situation and the poor state of land resources, one should significantly reduce the share of sunflower crops as corn, soybeans, and canola, as well as to increase the role of natural pastures and perennial plants; baltic journal of economic studies 152 vol. 3, no. 2, 2017 – improving the efficiency of a typical suburban agriculture – horticulture, berry, potato, dairy and beef cattle, poultry – has come at the expense of intensification of production on the basis of innovation and investment; – sugar beet is advisable to concentrate in areas with suitable natural conditions, and enhance the industry – through the introduction of modern technologies, mechanisms of economic stimulation of production and processing of sugar beet production; – the best direction of livestock development should increase the productivity of livestock and poultry, improve product quality, intensify production; – important is the creation of a modern infrastructure of the agrarian market development of logistics, creation of effective forms of production, promotion of a small business; – an essential part of the further development of agricultural production in the region should be: job creation, increased employment in rural areas; – all the areas of agricultural development in the context of the impact of the capital city are carried out taking maximum environmental factors into account. 5. findings formation of a favourable investment climate, increased investment is a prerequisite for the gradual resumption of economic growth. so the investment public policy should be based on an integrated approach, combining mechanisms of the investment potential of the country, its regions, and sectors, especially agribusiness. however, the process of increasing volumes of investments into the national economy inhibits a number of factors such as (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015): – inconsistent investment policy in agriculture with a predominance of residual principles of budget funds and imperfect mechanisms of their use; – innovative poor infrastructure, excessive wear, and lack of conditions for not only advanced but also a simple reproduction of fixed assets; – processors’ monopoly in agricultural markets and intermediaries, which leads to high transaction costs; – low profitability of agricultural enterprises and hostile environment for small business in rural areas; – low liquidity of investments and the unresolved problem of mortgage; – imperfect mechanism of economic relations between sectors, leading to low profitability and lack of capital investment attractiveness of the agricultural sector, which adversely affects the formation and expanded reproduction of material-technical base of agriculture. the problem of providing investment industry is the acutest among small and medium-sized agricultural enterprises and private farms. achieving improvements in this area are most dependent on the use of local opportunities for investment support. however, such opportunities in the most regions and areas are limited. therefore, there becomes a problem of investment support for the development of agriculture and village scale. solving it has a national significance and requires a consolidation of efforts of all levels and areas of production, society, government, and economic management. scientists of nsc “institute of agrarian economy” developed strategic directions of the development of agriculture of ukraine until 2020, which defined a set of indicators that will contribute to the fully meeting the needs of agricultural development in investment capital (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015). economic and legal problems include (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015): – gaps in the regulatory framework; – high probability of political risk; – a significant level of the shadow economy and corruption; – the absence of economic, environmental, research, market, financial information, the streamlined marketing system of agricultural products; – high level of risk for investors; – low solvency of the population. the financial and economic problems cover the lack of effective short-term and long-term lending industry and the low level of development of the leasing market. formation of a favourable investment climate in the market economy should be both at the macro and regional and sectoral levels through an objective assessment of existing problems, find ways to improve the situation and further optimization of the totality of political, legal, economic, social, organizational, informational factors. to solve the problem of investment support for the agricultural development, envisaged (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015): – the improvement of investment policy by reorienting it to stimulate investment entities, strengthening the role of investment support for agribusiness producers, and the improvement of the mechanisms of its implementation, improving conditions for attracting foreign investment in agricultural production and rural development; – formation of investment resources in agriculture’s proportions that characterize the relationship between own and borrowed sources as 2:1; – improving the mechanisms of the state investment support for agricultural producers by providing it on a return basis, preventing cases of unjustified isolation and misuse of funds, refocusing support for the needs baltic journal of economic studies 153 vol. 3, no. 2, 2017 of small and medium businesses, increase in funding of investment in the development of the public sector in rural areas to the level of their needs; – priority use of state budget funds for the development of seed-trial, tribal, education, irrigation water management, reforestation lands that are derived from the agricultural use, implementation of soil tillage systems with the contour of the territory; – formation of a mechanism to support investments of private farms; – creating conditions for the priority development of livestock, especially beef and dairy cattle from the state budget, loans, and equity investors; – stabilizing and strengthening the role of credit facility during the formation of the sources of financing investment in agriculture; – removing obstacles to foreign investors in agriculture in compliance with national interests; – facilitate the creation of deserted rural areas separated farmers and tribal estates and their independent resources; – provision of depressed rural priority development status, which under the legislation provides incentives to investors; – increased level of protection to investors and owners of land and property objects; – directing at least a third of revenues to road funds to the construction, repair, and construction of roads in rural areas; – implementation of measures to provide funding for the development of logistics research institutions of agribusiness in the amount of at least 6% of the value of their assets. as this production is largely seasonal in nature, the proper functioning of the industry requires a rational and reasonable ratio between own and borrowed funds. therefore, it increases the need to find external sources, the most common of which are loans. 6. conclusions bank loans help to develop industry, small business, and agriculture but sustainable development needs primarily mediumand long-term loans. short-term loans solve the problem of obtaining adequate resources for field work and long-term is a prerequisite for the expansion and renewal of assets. a characteristic feature of the current state of lending to agricultural enterprises of ukraine is the dominance of short-term loans. according to the international finance corporation, 77% of agricultural producers use the loans for the purchase of fuel and lubricants, 48% – for the purchase of plant protection products, 36% – for the purchase of seed. only 13% of companies use loans for the technological modernization of production and 6% – in its expansion (foreign direct investment in agriculture ukraine declined by a third over the past year-ucab, 2015). for the limited budgetary resources, it is necessary to cooperate with ukrainian agricultural enterprises by foreign investors, which is investing in modernization of fixed assets. the equally important external source of financing of agricultural enterprises is foreign investments. but only 2% of total investments in ukraine are directly invested in agriculture. according to the law of ukraine “on state support for agriculture of ukraine” budget support is provided to budgets of all levels in amounts, which prevent the normal working of unprofitable farms. as a result, it is concluded that the state support for agriculture – a complex of legislative and organizational budgetar y measures that are objectively necessar y to create a favourable competitive environment of the industr y. these measures together with the criteria and conditions for their implementation form the mechanism of the state support of agriculture. summing up the above-mentioned, we can conclude that the relevant provisions for the development of agriculture of ukraine are: state regulation, attractive investment climate, the use of ecological technology, the introduction of modern technologies, mechanisms of economic stimulation of production and processing of agricultural products. cultures should be grown in a particular area given the climatic features that contribute to maximum productivity and profitability. references: alex pavlenko: development of agriculture – the key to socio-economic and financial stability of our country [electronic resource]. available at: http://www.agroua.net/news/index.php? nd = 20 & monthsel = 04 & yearsel = 2015. andreychuk, v.g. (2015). the effectiveness of the agricultural enterprises: the theory, methodology, analysis: monograph. k.: kneu. – 290 p. foreign direct investment in agriculture ukraine declined by a third over the past year-ucab [electronic resource]. available at: http://www.agroua.net/news/index.php?nd=07&monthsel = 04 & yearsel = 2015. sirenko, n.m. (2009). the new role of agriculture in economic development. visnik bilotserkivskogo derzhavnogo agrarnogo universitetu. vol 63. p. 58-61. baltic journal of economic studies 154 vol. 3, no. 2, 2017 светлана халатур важные резервы развития сельского хозяйства украины аннотация. целью работы является изучение состояния развития сельского хозяйства украины. проанализированы показатели производства и урожайности основных сельскохозяйственных культур и производства основных видов продукции животноводства. определены основные направления развития сельского хозяйства с учетом трансформаций в аграрной сфере. исследованы решения проблемы инвестиционного обеспечения развития сельского хозяйства. приведены основные факторы, которые сдерживают рост отрасли и тормозят развитие сельскохозяйственных предприятий. по результатам анализа определены основные проблемы, с которыми в последнее время сталкивается отрасль, и приведены вопросы, требующие первоочередного решения. предметом являются теоретико-методологические основы и практические рекомендации по поводу поиска резервов развития отрасли сельского хозяйства. методика. исследование основано на сравнении данных с 2009 по 2015 года, используя статистические сборники. результаты исследования показали, что отрасль животноводства начинает сокращаться в украине и это означает, что при дальнейшей такой ситуации, возможно потерять возможность не только экспортировать животноводческую продукцию за границу, но и обеспечивать внутренние потребности населения страны. рассмотрено состояние сельского хозяйства украины. результаты показали, что основными резервами развития сельского хозяйства украины является государственное регулирование, оценка привлекательности инвестиционного климата, использование экологически безопасных технологий, использование современных технологий и механизмов экономического стимулирования производства и переработки сельскохозяйственной продукции. значение/оригинальность. полученные данные за исследуемые года основных резервов развития сельского хозяйства украины способны обеспечить лучшее понимание состояния отрасли сельского хозяйства в условиях экономического спада в целом и в литве, в частности. baltic journal of economic studies 196 vol. 7 no. 4, 2021 corresponding author: 1 v.o. sukhomlynskyi mykolaiv national university, ukraine. e-mail: tanyastroyko@gmail.com оrcid: https://orcid.org/0000-0002-0044-4651 researcherid: aab-2925-2021 2 v.o. sukhomlynskyi mykolaiv national university, ukraine. e-mail: natasha.danik29@gmail.com оrcid: https://orcid.org/0000-0001-5821-6232 3 v.o. sukhomlynskyi mykolaiv national university, ukraine. e-mail: dprokofyev42@gmail.com оrcid: https://orcid.org/0000-0001-6055-2307 doi: https://doi.org/10.30525/2256-0742/2021-7-4-196-202 development of financial decentralization as a basis for self-sufficiency of territorial communities tetiana stroiko1, natalia danik2, dmytro prokofyev3 abstract. the purpose of this article is to analyze the achieved results in the process of financial decentralization in ukraine, with the further improvement of the methodology of its implementation for increasing the efficiency in the system of financial security of local budgets. methodology. for the purpose of substantiation of directions of financial decentralization development in conditions of hromadas self-sufficiency the following modern methods of research are used: historical, dialectical method of knowledge, system analysis, abstractedly-logical, graphic, statistical. the object of the study is the processes of development of financial decentralization through the prism of self-sufficiency of hromadas. the theoretical basis of this research is the fundamental provisions of economic theory, national economy, state and regional administration, and theory of local finance. results. it has been proved that the most effective option is when the population residing in a particular territory takes part in the implementation of management functions in the region, which requires significant financial resources to ensure the implementation of management responsibilities. it is for this purpose that the process of decentralization, which is a complex and multi-component process connected with fiscal decentralization, was initiated in ukraine. it has been substantiated that for further effective reform it is necessary to solve the issue of changes in the constitution of ukraine, as well as in the administrative organization of the country. practical implications. it is determined that the keynote of fiscal decentralization is the principle of fiscal equivalence, when the efficiency of a particular hromada is achieved through such a mechanism of formation of revenues to local budgets that the end consumer of public goods at the local level will be financially responsible for expenses, as well as their order, volume and priority, within the limits of taxes transferred to them. the tax system bottlenecks of personal income were identified. it has been proven that the more freedom in setting the rates of local taxes and fees is given to local governments, the more there is an opportunity to set them at a level that will be suggested by local residents, because the hromada will demand at a high level of taxation a proper quality provision for their vital needs and, in addition, local government accountability. key words: fiscal decentralization, taxes, fees, fiscal reform, amalgamated territorial community, budget, local authorities. jel classification: н71, н76, м48, r51 1. introduction ukraine today is a country that is a hostage of unpopular decisions made by the authorities concerning the standard of living of every citizen. and this ordinary citizen, according to the constitution of ukraine, has the right to a decent life, which means social security, clean streets with full lighting and convenient road interchanges, quality education, as well as modern medicine. but the population does not feel that the authorities treat their vital needs with decency, and the main reason for this is that such structures are isolated from the realities of society. baltic journal of economic studies 197 vol. 7 no. 4, 2021 like any other phenomenon, decentralization has many advantages and disadvantages. the most significant advantages of regional decentralization, as well as increased self-sufficiency of hromadas, are the creation of a basis for the development of civil society. after all, the main task of decentralization is to form a democratic field in which hromada residents will gain practical experience of co-participation in addressing the vital needs of their hromadas, contributing to their development and level of responsibility. the negative aspects of decentralization include complicating the process of implementing strategic state programs and giving priority to regional political elites. thus, with the development of fiscal decentralization there is an increase in self-sufficiency of hromadas, which manifests itself in increased competitiveness, independence, resource availability and financial potential of regions, the development of investment and entrepreneurship in the territory, which ultimately will ensure the economic expansion of certain territories. that is why the most effective option is when the population living in a particular territory is directly involved in the implementation of management functions in the region, which requires significant financial resources to ensure the implementation of management responsibilities. it is for this purpose that the process of decentralization was initiated in ukraine in 2014. this is a complex and multi-component process, primarily related to fiscal decentralization. it is the basis for equitable replenishment of local budgets and its allocation. 2. the main stages of decentralization in ukriane european researchers foresee the following three elements of decentralization: fiscal decentralization, which includes the transfer of financial resources in the form of subsidies and tax authorities to subnational government units; administrative decentralization, which involves the transfer of functions performed by the central government to geographically remote administrative units; political decentralization with an emphasis on the transfer of authority and respon sibility to elected bodies of local self-government (scott, 2009; gemmell, kneller, sanz, 2013). under the conditions of local self-government reform, through administrative and financial decentralization, the formation of local budgets, specifically their revenue side, is a task that needs to be solved as soon as possible. the implementation of the foundations of financial decentralization in the economic and administrative system of our state is supported and defined as key in the concept of local government and territorial organization of power reform in ukraine, approved by the cabinet of ministers of ukraine on 18.06.2014 № 591-р (pro skhvalennia kontseptsii reformuvannia mistsevoho samovriaduvannia...). decentralization of fiscal powers is the main condition for ensuring the independence of local governments in the field of finance, and, conversely, strengthening the financial independence of local government should be seen as a result of financial decentralization (according to the legislation of ukraine) (podatkovyi kodeks ukrainy, 2011).. thus, the reform was initiated, a sufficient number of methodological materials and roadmaps were developed, and the experience of european countries was systematized and used to some extent.today it is possible to talk about the achievement of certain positive results. the main results of the first stage of the reform of local self-government in ukraine for the period 2014–2019 are systematized, outlining the main achievements. so, the first steps of the reform answered the following question: " what is decentralization in practice? (it turned out that it is not just a process of transferring powers and creating local autonomy). in order for this process to be feasible and effective, conditions for development should be created. that is, the entire legal framework must be updated, significantly motivating territorial consolidation in order to effectively unite the efforts of citizens of villages, regions (oblasts), and districts (raions) in addressing the vital needs of this very hromada. the financial support of local budgets, as it turned out, can also be effective and truly independent, autonomous of the state budget, if the managers of funds are residents of local hromadas. the data presented in figure 1 suggests the positive results of the first steps of the five-year local self-governance reform, which prompts to move forward, that is, to the next, no less significant stage of decentralization, which continues even now in 2020–2021 (figure 2). for further effective reform it is necessary to carry out many important measures related to service in local government, namely training of specialists of a new formation, incentives to improve the image of local authorities and hromadas, it is also necessary to address the issue of changes in the constitution of ukraine and in the administrative organization of the country. all of these problems should be solved as soon as possible, otherwise the mechanism of reform will not ensure its successful advancement. 3. financial decentralization as a fundamental tool of local self-government today it is clear to all that the central point and at the same time the problem for local self-governance baltic journal of economic studies 198 vol. 7 no. 4, 2021 1 2014 the concept of reforming local government authorities and territorial organization implementation plan step 1 amendments to the constitution of ukraine community support support of the venice commission the current constitution changes in the budget code of ukraine changes in the tax code of ukraine 2019 the law of ukraine "on the principles of state regional policy" 0.5 billion uah 20.75 billion uah financial decentralization (local budgets) 68.6 billion uah 275 billion uah the law of ukraine "on voluntary unification of territorial communities" 982 amalgamated hromadas 4500 local councils (radas) 11 million people in amalgamated hromadas introduction of the institute of headmen in the amalgamated hromadas 3207 thousand headmen the law of ukraine "on cooperation of territorial communities" 530 cooperation agreements 1.5 million hectares of land into communal property step 2 step 3 figure 1. results of stage i of the local self-government reform in ukraine, 2014–2019 1 june 12, 2020 a new administrative organization 1469 amalgamated hromadas july 17, 2020 draft resolution no. 3650 "on the formation and liquidation of districts" new districts – 136 old districts – 490 july 15, 2020 draft resolution no. 3809 "on the conducting of regular local elections" october 25, 2020 figure 2. significant dates of the second stage of the local self-government reform in ukraine, 2020–2021 is financial provision, that is, the formation of local budgets. therefore, it is the problem of establishing local taxes and fees, as well as the development of local taxation as an instrument of local self-governance that deserves special attention. it is local taxes and fees that are tax payments that are fully received by the relevant local budget, and the establishment of which (although within a legally defined framework) is carried out by local self-government bodies. for the state to effectively implement resource allocation and inter-budgetary relations, it is necessary to fully delegate not only accumulative, but also distributive and controlling responsibilities, and this step must be real, so that society has the opportunity to show its active civic position in addressing local issues, and the authorities would stop discrediting themselves with fake statements about the independence of hromadas. the purpose of the fiscal decentralized approach is to distribute fairly the funds earned in the region for its direct development and to support projects that encourage entrepreneurs to provide and social baltic journal of economic studies 199 vol. 7 no. 4, 2021 component in the running of their own business. such a balanced, cutting-edge expenditure budget policy will lead to stable development of the region and should contribute to the investment attractiveness of the individual hromada, which will ultimately lead to the balanced development of the whole country. consequently, the keynote of fiscal decentralization is the principle of fiscal equivalence, when the efficiency of a particular hromada is achieved through such a mechanism of formation of revenues to local budgets that the end consumer of public goods at the local level will be financially responsible for expenses, as well as their order, volume and priority, within the limits of taxes transferred to them. this order makes it possible to distribute the tax burden within the hromada, because its residents have the ability to regulate and control both the level of taxation and the level of their economic benefits, which is the financial leverage to encourage people to take part in the fiscal accumulation and provision of their own administrative-territorial region. 4. financial decentralization at the legislative level according to the developed strategy for decentralization in ukraine, the budgetary legislation provides for the following changes, which will take effect on january 1, 2021: 1) the structure of sources of regional budget revenues remains unchanged; 2) 1,470 budgets of hromadas switched to direct inter-budgetary relations with the state budget; 3) personal income tax in the amount of 60% is credited to the budgets of hromadas; 4) district budgets are not included in the horizontal equalization system, in particular they will not receive a basic dotation; 5) district budgets will be formed from revenues from the use of district property, grants and subventions from other budgets (reforma detsentralizatsii). such changes will lead to the most effective result, as long as they are carried out by competent bodies at the local level, that is, the functions and powers of village, settlement, and city councils (radas) have changed somewhat, so the development, review, and subsequent execution of local budgets in full should be carried out by newly formed municipalities, that is, it should prepare the entire package of documents in a short time, and then approve it. and it should be done without mistakes, clarifications and changes, after all, what rates of taxes and fees approved by local councils, with those will have to work the whole fiscal year, since in accordance with ukrainian legislation the next six months no changes to any elements of local taxes and fees can be made (paragraphs 4.1.9 clause 4.1. art. 4 tcu). in addition, according to сlause 4.5. of art. 4 of the tcu, benefits for the expansion or modification of the existing order are also possible only from the next fiscal year (podatkovyi kodeks ukrainy, 2011). in the law of ukraine "on the state budget of ukraine for 2021" it is noted that horizontal equalization will be implemented for 1,438 budgets of amalgamated hromadas and 24 budgets of regional ones, while basic subsidies and educational subventions for district budgets are not provided. consequently, the basic part of the state budget will be formed only by village, city and town budgets, the funds of which can be raised only on contractual terms in the implementation of clearly defined economic or social and other projects. the following figure provides information on how hromada budgets are funded by the various financial sources (zakon ukrainy "pro derzhavnyi biudzhet ukrainy na 2021 r."). the structure of funding of hromada budgets in 2021 by different sources of funding was investigated. based on the data of figure 3 shows that 60% of individual income tax according to the legislation should be transferred to hromada budgets, and this is a very controversial issue among scientists, because the way in which the share of this tax should be sent to the budgets of local governments raises a number of controversial issues. there are different mechanisms for collecting such a tax, namely: charging a part of the personal income tax to hromada budgets at the place of work of taxpayers or at the place of residence of taxpayers; some drafts propose to implement a proportional distribution of amounts of personal income tax revenues between residence and place of work of taxpayers; and, finally, there is an option to allow taxpayers to make an independent choice where tax on their income should be sent. it may seem that too much attention is paid to this problem, but imagine that people registered in one place live and work in another, which means that a share of their income in the form of personal income tax is sent to the budget, where they do not live, and therefore do not use the benefits that are the equivalent of their payments. this situation is seen as a systemic error that must be corrected, because this approach misrepresents the whole picture of fiscal equalization. if this issue is not resolved at the legislative level, it will ultimately lead to an understanding of the precariousness of the entire construction of fiscal decentralization, which will discredit all efforts to consolidate village and town councils (radas) in ukraine. baltic journal of economic studies 200 vol. 7 no. 4, 2021 5. contradictions and ways to resolve them in the context of financial decentralization observing the process of decentralization, it can be argued that this process does not last very easily, to solve this problem great efforts have been made, but these efforts will be in vain, because the personal income tax is more than 50% of the income of hromadas, that is, its revenue is the basis in this scheme. to solve the problem in the system of charging tax on personal income it is proposed to study the theoretical aspects of public finance, as well as the experience of european countries with existing practices regarding the financing of local government through personal income tax. most importantly, after studying theoretical works on the subject of public finance, it was possible to establish that the more freedom in setting the rates of local taxes and fees is given to local governments, the greater the possibility of setting them at the level suggested by local residents, since the hromada will demand, with a high level of taxation, adequate quality provision for its vital needs and, in addition, accountability from local governments. but in practice it works differently, because the administration of taxes such as value added tax, personal income tax and corporate income tax, which are the main sources of tax revenues of the budget, is more effectively performed by the state government, but the solution of social problems should be provided by local taxes and fees, that is, property tax mainly, which in volume is simply impossible. so, in practice there is a combination of local taxes and fees and interbudgetary transfers to cover the above-mentioned costs. as a result of a comprehensive analysis of approaches to establishing the rate of personal income tax in european countries, it can be said with certainty that all of them determine its establishment not at the place of work, but at the place of residence of the payer. consequently, the idea of the whole decentralization reform is precisely that local government should serve those who elect it and, accordingly, reside in the territory of that hromada. therefore, the charging of personal income tax to local budgets at the place of residence of the payer of this tax is the only possible step for a fair balance of financial opportunities of territorial units. understanding such a legislative conflict, it is necessary to consider in more detail the operational consequences of such actions of the authorities. the government in this situation should come up with a proposal to reorganize as soon as possible at the legislative level the information and methodological system so that the treasury would have the opportunity in 1 tax on profits of companies and monetary institutions of public utilities rent payment for special use of forest resources of state importance rent payment for special use of water bodies of local importance rental payment for the use of mines and quarries for the extraction of minerals of national importance excise tax on sales of excisable goods by retailers fee for vehicle parking spaces tourist tax single contribution payment for the placement of temporarily free funds of local budgets administrative fines and other sanctions payment for licenses for certain types of economic activities and certificates issued by executive bodies of local councils and local executive authorities administrative fee for state registration of legal entities, individuals (entrepreneurs and public formations) payment for the provision of other administrative services administrative fee for state registration of rights to immovable property and its encumbrances state duty rent payment for water bodies (their parts) concession payments for communal property 100% personal income tax rent payment for special use of forest resources of state importance rental payment for the use of the production of oil, natural gas and gas liquid 60 37 5% 3% rental payment for the use of mines and quarries for the extraction of minerals of national importance figure 3. financing of hromada budgets in 2021 by various sources of funding baltic journal of economic studies 201 vol. 7 no. 4, 2021 the next two or three years, using the rules, to set off part of the personal income tax at the place of residence of the person paying it. and here begins the difficulties, from the very beginning of the distribution of responsibilities (that is, who and for what will be responsible in this complex process of reform), especially when it comes to the city of kiev, because here the registration, place of residence and place of employment are generally three different places. this is where the authorities should delegate the ministry of finance of ukraine to model and begin to implement, step by step, a new system for calculating personal income tax. the ministry of finance of ukraine, in turn, realizing the complexity of the process, creates an electronic format of relations, which will be accessible, convenient and reliable. the main thing in this scheme is to convince taxpayers that their timely and honest registration of residence is a guarantee of development of the territory in which they live, and that this is not another insidious plan against freedom of choice of residence. many businesses already have this information about its employees, but the next step is to obtain a declaration of residence. in such circumstances, the costs will be incurred precisely by enterprises (employers) to collect information about employees, but further the situation should be simplified for these enterprises. following the idea of fiscal decentralization, the funds received from the taxpayer will be transferred by the treasury to the accounts of hromadas of such personal income tax payers through a unified information system. only after collecting data on the payment of personal income tax for six months, with the distribution of information on the place of residence and place of work of the payer, it will be possible to begin to build a model for the transformation and redistribution of the personal income tax under the new rules. using the experience of developed table 1 reasons for setting the personal income tax rate by local authorities at the payer's place of residence reason explanation contradictions personal income tax is about the total income of citizens, not just wages and salaries income can be derived from a variety of sources other than the basic wage if the personal income tax is linked to the place of work, the essence and basic idea of the tax is lost distribution of competence between the political and fiscal jurisdictions the funds of taxpayers that have made their choice of political force should be distributed precisely at the place of residence of the electorate if people don't elect local authorities because they don't live there, that creates a situation of "taxation without representation" provision of services to its residents by local authorities people residing in a certain area automatically want to improve living conditions obviously, where people work, it is also necessary to create comfortable living conditions, but it is no longer a question of accumulation, but of spending countries, which have gone through all these stages of the formation of fiscal decentralization, it is only possible to predict what the consequences will be. distribution and redistribution of personal income tax will be the main factor in the alignment of local budget relations in the regions and kiev in the next few years (lelechenko, vasylieva, kuibida, tkachuk, 2017). 6. conclusions accordingly, the situation during the transition period will provide another advantage for local governments is the opportunity to convey to their voters/taxpayers the importance of a reliable indication of residenceplace, and will also open new ways for government officials to think about solutions and problems of official registration of residence and peculiarities of the ukrainian housing market. the study defined the essence of fiscal decentralization in modern theory and practice as a fullscale procedure of changing the sources of expenditure and, accordingly, its funding on the granting auto nomy and financial freedom to territorial communities, in order to increase the effect of transparency of the budget revenue generating process. as part of the institutional analysis of the consequences of the decentralization of public finances, a number of suggestions can be made to solve the aforementioned issues of fiscal decentralization. first, it is necessary to improve the existing tax system in order to give local authorities the ability and opportunity to create budgets from its own sources in order to strengthen the autonomy of local authorities in providing the necessary resources. second, it is necessary to stimulate territories that spread the trends of economic growth through reforming the mechanism of collecting personal income tax. it is also advisable to conduct further research in the aspect of land value taxation, taking into account the capabilities baltic journal of economic studies 202 vol. 7 no. 4, 2021 of hromadas and to propose optimal mechanisms of land value taxation. the implementation of the aforesaid proposals to fund the budgets of local governments and hromadas, in the end, should be the leverage on the structure of fiscal sources that will clearly indicate the need and value of all tax revenues at the local level. in conclusion, it is worth emphasizing that the process of decentralization is a multifaceted process, which covers not only the financial but also the social, political, and demographic situation in the country, so only if the authorities carry out a balanced policy of balancing the functioning and development of regions, it will be perceived by the population positively and for the purpose for which it was started. references: scott, z. (2009). decentralisation, local development and social cohesion: an analytical review. university of birmingham: governance and social development resource centre. available at: http://www.gsdrc.org/docs/ open/po60.pdf gemmell, n., kneller, r ., & sanz, a. (2013). fiscal decentralization and economic growth: spending versus revenue decentralization. economic inquiry, 51(4), 1915–1931. available at: http://www.socsci.uci.edu/ ~jkbrueck/course%20readings/econ%20272b%20readings/gemmell-kneller-sanz.pdf pro skhvalennia kontseptsii reformuvannia mistsevoho samovriaduvannia ta terytorialnoi orhanizatsii vlady v ukraini (2014) [approval of the concept of local self-government reform and territorial organization of power in ukraine]. cabinet of ministers of ukraine; regulation, concept of 01.04.2014 № 333-р. (in ukrainian) podatkovyi kodeks ukrainy (2011) [tax code of ukraine]. available at: http://zakon.rada.gov.ua/cgibin/laws/ main.cgi?nreg=2755-17 (in ukrainian) "reforma detsentralizatsii" uriadovyi portal ukrainy [«reform of decentralization» government portal of ukraine]. available at: https://www.kmu.gov.ua/diyalnist/efektivne-vryaduvannya/reforma-decentralizaciyi (in ukrainian) zakon ukrainy "pro derzhavnyi biudzhet ukrainy na 2021 r." [the law of ukraine "on the state budget of ukraine for 2021"]. available at: https://zakon.rada.gov.ua/laws/show/1082-20#text (in ukrainian) lelechenko, a. p., vasylieva, o. i., kuibida, v. s., & tkachuk, a. f. (2017). mistseve samovriaduvannia v umovakh detsentralizatsii povnovazhen [local self-government in conditions of decentralization of powers]. kyiv. (in ukrainian) baltic journal of economic studies 134 vol. 8 no. 3, 2022 1 national university "odessa academy of law", ukraine (corresponding author) e-mail: irynam1503@gmail.com orcid: https://orcid.org/0000-0003-2083-9500 2 national university "odessa academy of law", ukraine e-mail: alina.vaiier@gmail.com orcid: https://orcid.org/0000-0002-8662-9322 3 national university "odessa academy of law", ukraine e-mail: savon12@ukr.net orcid: https://orcid.org/0000-0001-5624-7262 doi: https://doi.org/10.30525/2256-0742/2022-8-3-134-142 selected issues of implementing measures to prevent corruption during martial law iryna myloserdna1, alina prokhorenko2, kateryna savon3 abstract. the subject of the study is the conceptual and praxeological theoretical basis for the implementation of measures to prevent corruption during martial law. methodology: general and special methods of scientific knowledge were used in this study. the comparison method was used to summarize the approaches of various researchers on the main dominants to the definition of the concepts of "restrictions" and "anti-corruption restrictions". the analysis was used to determine quantitative and qualitative parameters that characterize the specifics of applying restrictions on relatives' work in relation to servicemen. the results of the study showed that there is an urgent need in ukraine to adjust the anti-corruption mechanism so that the existing anti-corruption measures are improved and adapted to the conditions of martial law. conclusion. it has been established that measures to prevent corruption, such as anti-corruption declarations and special inspections, have been simplified during martial law, which has a positive effect, mediated by the presence of objective reasons for the impossibility of their normal application. attention is drawn to the fact that some anti-corruption restrictions have been forcibly terminated – there are temporary reservations regarding restrictions on receiving gifts and restrictions on the use of official powers or one's position. it is substantiated that anti-corruption restrictions during the martial law period have gained signs of flexibility, but only for charitable purposes and for the purpose of material support of the defense of ukraine, which corresponds to the modern national interests. the current order of application of anti-corruption restrictions to servicemen of the armed forces of ukraine and other military formations, formed in accordance with the legislation, was analyzed. it is noted that at the subordinate level was used an expansive interpretation of the restriction of joint work of close persons by applying it to almost all members of the armed forces of ukraine, which is not consistent with the prescriptions of the relevant anti-corruption legislation. amending art. 27 of the law of ukraine "on prevention of corruption" by singling out military officials as subjects who are not subject to the restriction on joint work of relatives. key words: martial law, corruption, prevention of corruption, anti-corruption restrictions, military officials. jel classification: d73, k19 1. introduction activities to prevent corruption are relevant to every state, regardless of the degree of development of the democratic system. for ukraine, the issue of preventing corruption after the introduction of martial law (on the legal regime of martial law, 2022; the issue of introducing and enforcing measures of the legal regime of martial law in ukraine, 2022; on approval of the decree of the president of ukraine "on the introduction of martial law in ukraine") took on new significance. on the one hand, the destabilization of social relations due to corruption during a special period is unacceptable, since the needs of national security come to the fore. on the other hand, the perception of ukraine as a europeantype state is impossible against the background of its association with a developed corruption system. thus, the political will in the aspect of preventing corruption must be adjusted so that existing anti-corruption measures are improved and adapted to the conditions of martial law. the value of studying corruption prevention measures is underlined by the constant updating of the principles of their application at the european this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 135 vol. 8 no. 3, 2022 union level (the prevention of corruption as part of mandatory due diligence in eu legislation, 2021; eu contribution on eu-level anti-corruption policy/ practice, 2021), which is noted in the relevant doctrinal works (pinchuk, shevchenko, 2021; kornuta, goloyadova, zavhorodnia, reva, 2020). particular attention should be paid to the practical implementation of anti-corruption legislation in relation to certain categories of entities to which it applies. the need to ensure the defense of ukraine, protection of its sovereignty, territorial integrity and inviolability in connection with the ongoing large scale armed aggression of the russian federation against ukraine has forced the state and society, all ukrainian people to stand up to protect the sovereignty and territorial integrity of ukraine. therefore, the application of anti-corruption restrictions and prohibitions, for example, to military personnel, is disproportionate and violates the balance between the tasks and functions assigned to the armed forces of ukraine and other military formations formed in accordance with the laws, and the negative consequences of such restrictions and prohibitions. this indicates the importance of analyzing the implementation of measures to prevent corruption during martial law with a focus on individual anticorruption restrictions. 2. normative and praxeological changes in the implementation of the anti-corruption mechanism normative legal regulation of corruption prevention must correspond to the state of social relations and the challenges of martial law. the regulation of the anti-corruption sphere is no exception. therefore, a logical step in this direction was the adoption of the law of ukraine "on protection of subjects' interests in filing declarations and other documents during martial law or state of war", which slightly changed the conditions for filing declarations by persons authorized to perform state or local government functions. if part 1 of art. 45 of the law of ukraine "on prevention of corruption" (2014) stipulates that the authorized subjects of the declaration must submit by filling in on the official website of the national agency the declaration of the person authorized to perform the functions of the state or local government for the past year in the form determined by the national agency, annually before april 1. according to paragraph 1 of part 1 of the law of ukraine "on protection of subjects of reporting and other documents during martial law or state of war", individuals, individual entrepreneurs, legal entities submit accounting, financial, accounting, calculation, auditing reports and any other documents required by the current legislation in documentary and/or electronic form, within three months after the termination or cancellation of martial law or the state of war for the entire period of non-submission of reports or the obligation to submit documents. in addition, during martial law or a state of war, as well as within three months after its termination, these persons are not subject to administrative and (or) criminal liability for failure to submit or untimely submission of reports (on protection of subjects of reporting and other documents during martial law or state of war, 2022). at the same time, the aforesaid law does not distinguish the peculiarities of submission of declarations depending on the type – annual declaration, declaration upon termination of employment and declaration of a candidate for office. clarification of the national agency for the prevention of corruption № 4 of 07.03.2022 details the specifics of reporting on the types of declarations, in particular: 1) the annual declaration (with any marking) for the year 2021 shall be submitted from 00:00 on the day following the day of termination or cancellation of martial law to 00:00 on the corresponding day of the third month from such day. such a declaration must cover the reporting year (the period from january 1 to december 31, 2021 inclusive) and contain information as of december 31 of the reporting year; 2) the declaration on release, if release occurred during martial law, shall be submitted between 00:00 of the day following the termination or cancellation of martial law and 00:00 of the corresponding day of the third month from that day. such a declaration shall be submitted for a period not covered by declarations previously submitted by the subject of the declaration and shall contain information as of the last day of such period, which is the last day of the activity entailing the obligation to submit the declaration, the occupation of the position conditioning the performance of such activity; 3) the declaration of a candidate for a position, if the person is appointed to a vacant position in the civil service or local government service during martial law, shall be submitted between 00:00 of the day following the day of termination or cancellation of martial law and 00:00 of the corresponding third month from such day (regarding the application of certain provisions of the law of ukraine "on prevention of corruption" regarding financial control measures under martial law (filing a declaration, notification of significant changes in property status, notification of opening a foreign currency account with a non-resident banking institution, inspections, 2022). this filing deadline also applies to the requirements to file a notice of material change and a notice of the opening of a foreign currency account with baltic journal of economic studies 136 vol. 8 no. 3, 2022 a non-resident banking institution. that is, authorized persons – subjects of declaration are obliged to submit the specified notifications within three months after termination or cancellation of martial law or state of war, provided that such obligation arose during martial law. in addition, attention is drawn to the fact that persons who are physically unable to submit reports or documents on time due to the immediate consequences of their participation in hostilities are exempt from administrative and/or criminal liability and submit reports or documents within one month of the end of the consequences that made it impossible to submit them. thus, if the subject of the declaration does not have the physical ability to submit declarations, notifications of significant changes and notifications of opening a currency account with a non-resident banking institution within three months of the abolition of martial law or state of war due to the direct consequences of participation in hostilities, they shall be submitted in the period from 00:00 of the day following the end of the consequences that made it impossible to submit them until 00:00 of the corresponding day of the next month. of great importance is the entry into force of the law of ukraine "on amending certain laws of ukraine on the functioning of civil service and local government during martial law", which contributed to the introduction of a simplified procedure for entry into civil service positions and positions in local government. in particular, according to paragraphs 7 and 8, during martial law, special checks, stipulated by the relevant anti-corruption legislation, are not conducted with respect to applicants for responsible or especially responsible positions and positions with increased risk of corruption, a list of which is approved by the national agency for the prevention of corruption, as well as checks conducted with respect to applicants for positions for which the measures to purge power (lustration). at the same time, the organization of a special inspection of persons appointed during martial law must be carried out within three months from the date of termination or cancellation of martial law, except if such person is released before the date of termination or cancellation of martial law or end of the specified inspections during martial law (on amendments to some laws of ukraine concerning the operation of civil service and local government during the period of martial law, 2022). thus, measures to prevent corruption, such as anti-corruption declarations and special inspections, were simplified during martial law, which has a positive effect, mediated by the presence of objective reasons for the impossibility of their normal application. at the same time, conditions were created for further improvement of the corruption prevention mechanism. this was reflected in the adoption of the law of ukraine "on the principles of state anticorruption policy for 2021–2025" (2022), which defines the basic tenets of the formation and implementation of anti-corruption policy in ukraine. 3. legal nature of anti-corruption restrictions and conditions of their adaptation to the special period while guaranteeing to every citizen the right of access to public service, the state at the same time restricts public servants in certain rights, given the specifics of their service. in a general theoretical sense in the categories of "restrictions" and "prohibitions" should be highlighted certain aspects. first of all, these categories act as external factors that significantly affect the interests of certain individuals. denisova a.m. it is emphasized that the category of "legal restrictions" in legal literature is perceived by scientists depending on the specifics of social relations and legal ways of influencing them (denisova, 2011: 51). in particular, limitations can be found in the close relationship between the internal structure of the subject and the external legal conditions imposed on this subject. the point of view of k.m. zubov seems to be correct. zubov, who argued that restrictions established by law are legal restrictions. the actual "limitation of rights" needs to be distinguished from the definition of "restriction", as it can be issued by the direct head of a state body, but is not regulated by the requirements of the current legislation. the researcher emphasizes that legal restrictions in their content are relatively extensive, voluminous and multifaceted, and the lack of a single normative act, which approved an exhaustive list of such restrictions for officials, creates only certain difficulties in regulating this area of legal relations (zubov, 2010: 15). thus, in a broad sense, the categories of "limitation of rights" and "prohibition" correlate as whole and partial. in contrast, the narrow understanding of "restrictions" encompasses those behavioral criteria that one must fulfill. signs of legal restrictions include the following: a) they entail negative conditions for the realization of the subject's own interests by meeting the demands of the opposite party and the interests of society in order to protect or defend them; b) it is a type of notice of reduction of freedom and authority, which is achieved by establishing specific prohibitions, duties or charges; c) is a manifestation of a negative legal motivation; d) their main purpose is to limit the activity of a subject of law, which has a pronounced negative nature; e) are used to protect public interests, baltic journal of economic studies 137 vol. 8 no. 3, 2022 as they are aimed at implementing a protective function for social interests in general. a systematic analysis of the legal nature of the categories of "burdens" and the establishment of common and distinctive features with the definition of "restrictions" as anti-corruption measures is necessary. legislative restrictions aimed at preventing corruption offenses have a fairly wide range of means of direct regulation of social relations in various spheres of public life, which corresponds not only to the realities of law enforcement, but also to international practice of prevention of corruption (platonenko, 2019: 231). the dialectical value of the analysis of anti corruption restrictions lies in two aspects of the interpretation of "restrictions": 1) direct restriction of rights or prohibition to act in a certain way; 2) restriction or prohibition of the exercise of certain rights (complete or partial impossibility of exercise of certain rights of an individual) under certain conditions. the latter approach indicates that the subject of legal relations remains with all the rights and freedoms that he is endowed with, and that limited is only a variation of their implementation (fiegel, 2016: 359) in terms of restrictions that apply after the termination of public service. anti-corruption restrictions are aimed at preventing corruption. the legal concept of "corruption" is defined by article 1 of the law of ukraine "on prevention of corruption" as the use by the persons specified in the law of their official powers or related opportunities to obtain illegal benefits or acceptance of such benefits, or acceptance of the promise/offer of such benefits to themselves or other persons, or requirements to other individuals or legal entities to induce them to use their official powers or related opportunities illegally (on prevention of corruption, 2014). thus, anti-corruption restrictions are aimed at creating conditions in which corruption is impossible. this research is based on the combined approach to anti-corruption restrictions proposed by s.m. klimova and t.v. kovalova (2015) taking into account the need to implement the provisions of article 2 of article 12 of the un convention against corruption regarding inclusion in the measures to prevent corruption, ‘inter alia’ (among other things), establishing restrictions, in appropriate cases and for a reasonable period, regarding the professional activities of former public officials in the private sector after their resignation or retirement, if such activity or work is directly related to the functions that such public officials performed during their tenure of office or the performance of which they supervised (un convention against corruption, 2003). analysis of the provisions of the law of ukraine "on prevention of corruption" allows identifying the following groups of restrictions: "restrictions on the use of official powers or his position" (article 22), "restrictions on receiving gifts" (article 23), "restrictions on cooperation and combining with other activities" (article 25), "restrictions after termination of activities related to the performance of functions of the state, local government" (article 26), "restrictions on joint work of close persons" (article 27) (on prevention of corruption, 2014). in fact, the combination of the above instruments is a set of anti-corruption mechanisms, which by their nature are special obstacles to corruption and related offenses. anti-corruption restrictions have the following common features: 1) they are informational in nature and they are designed to purposefully change the behavior of a specific subject – the subject of the law of ukraine "on prevention of corruption", and have a deterrent effect; 2) they are exclusively legal in nature, which turns them into an effective means of protecting the interests of society in the form of implementation of the negative motivation of personal enrichment of subjects and serves to achieve socially beneficial goals; 3) the end result of their application should be to ensure the effective functioning of public authorities, the development of social processes and strengthening the rule of law; 4) they have an absolute and applied nature of action, since they cannot be revoked and apply to specific officials. during martial law in ukraine, some anti-corruption restrictions were forced to cease. for example, there are temporary provisions (will be in effect from the day martial law is imposed until its termination, as well as within one month of its termination) regarding restrictions on receiving gifts and restrictions on the use of official powers or one's position. accordingly, at this time, the requirement that gifts conform to generally accepted notions of hospitality and limitations on the value of gifts do not apply: receipt of funds fully used (if there is a confirmation of full use of received funds for one or more specified purposes) for such purposes as: transfers to special accounts opened by the national bank of ukraine to support the armed forces of ukraine and/or for humanitarian aid to persons affected by the armed aggression of the russian federation against ukraine; making charitable donations in favor of the armed forces of ukraine, as well as for the support and protection of persons affected by the armed aggression of the russian federation against ukraine; expenses for the purchase and supply of goods with their subsequent transfer to the ownership of the armed forces of ukraine, other military formations formed in accordance with the legislation of ukraine, voluntary formations of territorial communities, intelligence baltic journal of economic studies 138 vol. 8 no. 3, 2022 agencies, law enforcement agencies; carrying out expenses for the purchase and delivery of goods, payment for work or services provided as humanitarian aid to persons who suffered as a result of the armed aggression of the russian federation against ukraine; receipt of goods for free or at a price below the minimum market price for their subsequent transfer to the armed forces of ukraine, other military formations formed in accordance with the legislation of ukraine, voluntary formations of territorial communities, special services, law enforcement agencies (subject to confirmation of transfer of such goods in full); receipt free of charge or at a price below the minimum market price of goods provided as a charitable donation or humanitarian aid to persons affected by the armed aggression of the russian federation against ukraine (subject to confirmation of the provision of such goods in full for these purposes), as well as persons who actually reside in the temporarily occupied territories of ukraine or in the territories where hostilities are (were) taking place, or persons who were forced to leave their place of actual residence as a result of temporary occupation (threat of temporary occupation), conducting (threatening to conduct) hostilities, etc. (on amendments to the law of ukraine "on prevention of corruption" on peculiarities of application of legislation on prevention of corruption under martial law, 2022). similarly, the ban on state and local self-government bodies receiving benefits, services and property in case legal advisors (including foreign ones) provide protection of rights and interests of ukraine, state bodies and local self-government bodies in foreign jurisdictions is suspended (on amendments to the law of ukraine "on the state budget of ukraine for 2022", 2022). thus, anti-corruption restrictions during martial law have acquired signs of flexibility, but exclusively for charitable purposes and for the purpose of materially ensuring the defense of ukraine, which corresponds to modern national interests. 4. peculiarities of applying anti-corruption restrictions to military personnel in accordance with the provisions of part 2 of art. 17 of the constitution of ukraine, the defense of ukraine, the protection of its sovereignty, territorial integrity and inviolability are entrusted to the armed forces of ukraine (constitution of ukraine, 1996). by assigning this duty to the armed forces of ukraine, the legislator in the basic law clearly defined the purpose of existence and tasks of the armed forces of ukraine, their main purpose, which dominates over all other provisions, requirements and restrictions. the armed forces of ukraine as a military formation with an appropriate structure determined by article 3 of the law of ukraine "on the armed forces of ukraine" (1991) mainly consist of their personnel, the number and order of manning which is determined by articles 4-5 of the law of ukraine "on the armed forces of ukraine". any restrictions in the activities and the list of powers (rights and duties) of the personnel of the armed forces of ukraine impede the proper and effective performance by the armed forces of ukraine of its main tasks – the protection of the sovereignty, territorial integrity and inviolability of ukraine – and therefore are unacceptable. the fact is that most of the norms and provisions of anti-corruption legislation are, firstly, designed for peacetime, and secondly, mostly do not take into account the specifics of functioning of the armed forces of ukraine and other military formations, formed in accordance with the laws. thus, legal and organizational principles of functioning of the system of prevention of corruption in ukraine, the content and procedure for application of preventive anti-corruption mechanisms, the rules provided by the provisions of the law of ukraine "on prevention of corruption" apply in general to military officials of the armed forces of ukraine and other military formations, formed in accordance with the laws on elimination of consequences of corruption offenses, etc. such preventive anti-corruption mechanisms include restricting close people from working together. according to part 1 of art. 27 of the law of ukraine "on prevention of corruption", the persons referred to in paragraph 1 of article 3 of this act shall not be directly subordinate to persons close to them or be in direct subordination in connection with the performance of powers close to them. for the correct interpretation of the relationship of direct subordination it is necessary to consider that: a) direct subordination takes place when there is a relationship of direct organizational or legal dependence of the employee on the manager; if there is dependence, but it is indirect, then the anti-corruption restriction on the joint work of close persons does not apply; b) the decision (participation in the decision) of issues of hiring, dismissal, application of incentives, disciplinary penalties, giving instructions, orders, etc., control over their implementation – this is a nonexhaustive list of possible forms of direct dependence; c) participation in solving the issues of hiring, firing, application of incentives, disciplinary penalties, giving instructions, assignments, etc., control over their implementation, usually (but not always) indicates the presence of direct subordinate relations; sometimes these powers may take place even without relations of direct subordination (in particular, candidates for positions of heads of territorial bodies of the central executive body are coordinated with baltic journal of economic studies 139 vol. 8 no. 3, 2022 heads of local state administrations, i.e., the latter participate in the procedure of selection of personnel, but are not direct managers for heads of these authorities of territorial bodies) (khamhodera, 2019: 314). according to the provisions of part 2 of article 27 of the law of ukraine "on prevention of corruption" (2014), in case of circumstances that violate the specified anti-corruption requirements, measures must be taken to eliminate such circumstances voluntarily or by compulsory transfer or dismissal from the position held. to determine the specifics of the impact of the restriction on the joint work of close persons in relation to servicemen of the armed forces of ukraine, it is necessary to determine the range of servicemen to whom the said restriction applies, as well as the content of "direct subordination" of servicemen of the armed forces of ukraine and specifics of application to them of the stated anticorruption restriction. according to subparagraph "g", paragraph 1, article 3 of the law of ukraine "on prevention of corruption", the subjects covered by this law are, in particular, military officials of the armed forces of ukraine, state service of special communication and information protection of ukraine and other military formations formed in accordance with the laws, except for military service personnel, cadets of higher military educational institutions, cadets of higher educational institutions which include military institutes, cadets of faculties, departments and departments of military training (on prevention of corruption, 2014). first of all, it should be noted that the concepts of "military officials" and "servicemen holding a military post" are not identical. the specifics of acquiring the status of a military official are present. having analyzed the provisions of article 6 of the law of ukraine "on military duty and military service" (1992), the following provisions are highlighted: – the staff lists include military positions (staff positions to be filled by servicemen) and their corresponding military ranks; – military officials – members of the armed forces who hold a full-time position connected with the performance of organizational and managerial duties (responsibilities for managing a branch, labor collective, section of work, production activities of individual employees of enterprises, institutions or organizations regardless of ownership) or administrative and economic duties (responsibilities for managing or disposing of state, municipal property, such as establishing procedures for its storage, processing, exercising control over these organizations, etc.), or specially authorized to perform such duties in accordance with the law (regarding the application of certain provisions of the law of ukraine "on prevention of corruption", on the submission of declarations by persons authorized to perform state or local government functions, military personnel, and other certain categories of subjects of declaration, 2020); – military posts provided for in wartime regulations, when the armed forces of ukraine and other military formations switch to wartime organization and regulations, are to be replaced by reservists or other conscripts in the manner prescribed by the head quarters of the armed forces of ukraine, and in the security service of ukraine and the foreign intelligence service of ukraine – in the manner prescribed by their heads. it should be noted that military officials of the armed forces of ukraine hold staff positions during martial law in accordance with the order of the ministry of defense of ukraine (on approval of amendments to the instruction on the organization of implementation by citizens of ukraine of the regulations on military service in the armed forces of ukraine, 2019), where there is no reference to the limitation of close relatives working together as a reason for not being appointed to a position. the procedure for military service in the armed forces of ukraine by citizens of ukraine and issues related to military service in the armed forces of ukraine are regulated by the regulation on military service in the armed forces of ukraine by citizens of ukraine (2008). accordingly, servicemen, who are close persons within the meaning of the law of ukraine "on prevention of corruption", cannot be in relations of direct organizational and legal dependence of a subordinate on his manager, including by solving (participating in solving) issues of acceptance for military service, appointment to a position, dismissal from military service, application of incentives, disciplinary penalties, providing instructions, orders, control over their implementation. that is, at the subordinate level an expansive interpretation of the restriction of joint work of close persons is proposed by applying it to almost all servicemen of the armed forces of ukraine, which contradicts the provisions of the law of ukraine "on prevention of corruption" and is a negative factor in the staffing of the armed forces of ukraine. as for the content of the concept of "direct subordination" in relation to military service and its adaptation to servicemen, in particular under martial law, it is vague, which leads, on the one hand, to an unjustified expansion of the effect of limiting joint activities of close persons in relation to military personnel, and on the other, to complications in the staffing of the armed forces of ukraine and other military formations, formed in accordance with the baltic journal of economic studies 140 vol. 8 no. 3, 2022 laws, and as a consequence the inability to effectively implement their own tasks and functions. the peculiarities of the subordination of servicemen at the appointment to a military post, certification, and dismissal from the service are multifaceted and include a number of plots. at the same time, it limits the right of persons who meet the established requirements to apply for this position, provided that a close relative can be involved in the official confirmation of the decision. the performance of military service by persons who are formal servicemen is also problematic from the standpoint of compliance with the anti-corruption restriction on the service of close persons. according to the law of ukraine "on the internal service statute of the armed forces of ukraine" (1999), the features of military service, regardless of martial law, are as follows: 1) individual command is one of the principles of construction and leadership of the armed forces of ukraine and means: a) vesting the commander (superior) with full dispositive power over his subordinates and making him personally responsible to the state for all aspects of life and activities of a military unit, subdivision, and each serviceman; b) granting the commander (superior) the right to independently make decisions and give orders; 2) in accordance with their service position and military rank, servicemen may be superiors or subordinates in relation to other servicemen; regarding official and personal issues a serviceman should address his immediate superior, and if it is impossible to solve them – to the next immediate superior; superiors to whom servicemen are subordinated in service, including temporarily, are immediate superiors for these servicemen; the principle applies – "the immediate superior nearest to the subordinate is the immediate superior," etc. thus, direct subordination is not always covered by the relationship with a direct superior, which is also a feature of military service. it is also noteworthy that in accordance with part 5 of art. 45 of the law of ukraine "on prevention of corruption" (2014), the effect of chapter vii of this law (the provisions of which are devoted to financial control) does not apply, in particular, to conscripted military servicemen during mobilization, for a special period, conscripted military service of reservists in a special the period of military service under the draft of officers, as well as military officials from the number of military servicemen under the contract of private members, military service under the contract of non-commissioned officers and sergeants, junior officers of the military service under the contract of officers, except military personnel, who undergo military service in territorial recruitment and social support centers. that is, there is an exclusion from financial anti-corruption control, instead anti-corruption restrictions apply on general grounds. it is advisable to amend article 27 of the law of ukraine "on prevention of corruption" by singling out persons who are military officials of the armed forces of ukraine, the state service of special communications and information protection of ukraine and other military formations formed in accordance with the legislation as subjects who are not subject to restrictions on joint work of close persons. 5. conclusions the article deals with the conceptual and praxeological theoretical basis for the implementation of measures to prevent corruption during martial law. attention is focused on the fact that the normative-legal regulation of corruption prevention should correspond to the state of public relations and the challenges of martial law. it has been established that measures to prevent corruption, such as anti-corruption declarations and special inspections, have been simplified during martial law, which has a positive effect mediated by the presence of objective reasons for the impossibility of their normal application. it is noted that anti-corruption restrictions have the following common features: 1) they are informational in nature and they are intended to purposefully change the behavior of a particular subject – the subject of the law of ukraine "on prevention of corruption", and have a deterrent effect; 2) they are exclusively legal in nature, which turns them into an effective means of protecting the interests of society in the form of implementation of the negative motivation of personal enrichment of subjects and serves to achieve socially beneficial goals; 3) the end result of their application should be to ensure the effective functioning of public authorities, the development of social processes and strengthening the rule of law; 4) they are absolute and applied, since they cannot be abolished and apply to certain officials. during martial law in ukraine, certain anticorruption restrictions were forcibly suspended – temporary reservations were made regarding restrictions on receiving gifts and restrictions on the use of official powers or one's position. it is substantiated that anti-corruption restrictions during martial law acquired signs of flexibility, but only for charitable purposes and for the purpose of material support of the defense capability of ukraine, which corresponds to modern national interests. analyzed the current procedure for applying anti-corruption restrictions to military personnel of the armed forces of ukraine and other military formations formed in accordance with the law. baltic journal of economic studies 141 vol. 8 no. 3, 2022 it is noted that at the subordinate level an expansive interpretation of the restriction of joint work of close persons was used by applying it to almost all members of the armed forces of ukraine, which is inconsistent with the prescriptions of the relevant anti-corruption legislation and is a negative factor in the staffing of the armed forces of ukraine. amending art. 27 of the law of ukraine "on prevention of corruption" by singling out among the subjects not subject to restrictions on joint work of close persons persons who are military officials of the armed forces of ukraine, the state service of special communication and information protection of ukraine and other military formations established in accordance with the law. references: the issue of introducing and ensuring the implementation of measures of the legal regime of martial law in ukraine: resolution of the cabinet of ministers of ukraine dated february 24, 2022 no. 181-r. available at: https://zakon.rada.gov.ua/laws/show/181-2022-%d1%80#text on the legal regime of martial law: law of ukraine dated may 12, 2015 no. 389-viii. available at: https://zakon.rada.gov.ua/laws/show/389-19#text on the approval of the decree of the president of ukraine "on the introduction of martial law in ukraine": law of ukraine dated february 24, 2022 no. 2102-ix. available at: https://zakon.rada.gov.ua/laws/show/2102-20#text the prevention of corruption as part of mandatory due diligence in eu legislation. 2021. available at: https://transparency.eu/wpcontent/uploads/2021/04/web_the_prevention_of_corruption_due_diligence_ eu-legislation.pdf eu contribution on eu-level 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submission, notification of significant changes in property status, notification of opening a foreign currency account in a non-resident bank institution, conducting inspections): clarification of nak no. 4 dated march 7, 2022. available at: https://nazk.gov.ua/ uk/documents/roz-yasnennya-4-vid-07-03-2022-shhodo-zastosuvannya-okremyh-polozhen-zakonu-ukrayinypro-zapobigannya-koruptsiyi-stosovno-zahodiv-finansovogo-kontrolyu-v-umovah-voyennogo-stanu-podannyadeklaratsiyi-p/ on making changes to some laws of ukraine regarding the functioning of the civil service and local self government during the period of martial law: law of ukraine dated may 12, 2022 no. 2259-ix. available at: https://zakon.rada.gov.ua/laws/show/2259-20#text on the principles of state anti-corruption policy for 2021-2025: law of ukraine dated june 20, 2022 no. 2322. available at: https://zakon.rada.gov.ua/laws/show/2322-20#n9 denisova, a. m. 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(2015). mechanisms of preventing corruption in ukraine: a study guide. kharkiv: harri nadu publishing house "master". un convention against corruption: international document dated 10.31.2003 (ratified on 10.18.2006). available at: http://zakon3.rada.gov.ua/laws/show/995_c16 on amendments to the law of ukraine "on prevention of corruption" regarding the specifics of the application of legislation in the field of prevention of corruption under martial law: law of ukraine dated 07/08/2022 no. 2381. available at: https://zakon.rada.gov.ua /laws/show/2381-20#n2 baltic journal of economic studies 142 vol. 8 no. 3, 2022 on amendments to the law of ukraine "on the state budget of ukraine for 2022": law of ukraine dated 05/31/2022 no. 2280-ix. available at: https://zakon.rada.gov.ua/laws/show/2280-20#n18 constitution of ukraine dated june 28, 1996. available at: https://zakon.rada.gov.ua/laws/show/254%d0%ba/ 96-%d0%b2%d1%80 on the armed forces of ukraine: law of ukraine dated december 6, 1991 no. 1934. available at: https://zakon.rada.gov.ua/laws/show/1934-12#text khamkhodera, o. p. (2019). prevention of corruption in the public service. administrative law of ukraine. full course: textbook / galunko v., dikhtievskyi p., kuzmenko o., stetsenko s. and others. the second edition. kherson: oldi-plus. on military duty and military service: law of ukraine dated march 25, 1992 no. 2232. available at: https://zakon.rada.gov.ua/laws/show/2232-12#text regarding the application of certain provisions of the law of ukraine "on the prevention of corruption", regarding the submission of declarations by persons authorized to perform the functions of the state or local self-government, by military personnel and other separate categories of declaration subjects: clarification of the national agency for the prevention of corruption dated 03.08. 2020 no. 8. available at: https://nazk.gov.ua/wp-content/uploads/2020/08/rozyasnennya-8.pdf on the approval of the amendments to the instruction on the organization of the implementation of the provisions on the completion of military service by citizens of ukraine in the armed forces of ukraine: order of the ministry of defense of ukraine dated september 25, 2019 no. 502. available at: https://zakon.rada.gov.ua/ laws/show/z1095-19#text on the provision of military service by citizens of ukraine in the armed forces of ukraine: decree of the president of ukraine dated december 10, 2008 no. 1153/2008. available at: https://zakon.rada.gov.ua/laws/ show/1153/2008#text on the statute of the internal service of the armed forces of ukraine: law of ukraine no. 548 of 03/24/1999. available at: https://zakon.rada.gov.ua/laws/show/548-14#text. received on: 2th of august, 2022 accepted on: 9th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 62 vol. 8 no. 1, 2022 corresponding author: 1 danube institute of national university “odessa maritime academy “, ukraine e-mail: kovalenko@dinuoma.com.ua orcid: https://orcid.org/0000-0001-7430-9412 2 danube institute of national university “odessa maritime academy “, ukraine e-mail: bnp.di2017@gmail.com orcid: https://orcid.org/0000-0002-6365-4701 doi: https://doi.org/10.30525/2256-0742/2022-8-1-62-74 support for cluster initiatives and cluster policy (case study of the euroregion "the lower danube") sergey kovalenko1, natalia bykovets2 abstract. the purpose of the article is to investigate the essence and significance of the cluster initiative and the cluster policy as tools for strategic development and increasing of the economy competitiveness of the euroregion "the lower danube" based on the analysis of factors providing state support for cluster initiatives in the context of the promotion of the european union strategy for the danube region. the theoretical and methodological background is the works of ukrainian and foreign academic economists studying general systems theory, systemic analysis, and also strategic planning methodology at enterprise, regional and national levels. the research is based on the fundamental provisions of economic theory, the theory of strategic planning, institutionalism, regional and global economics, cluster theory, the location theory, the growth pole theory, m. porter’s competitive theory, networked economy theory, spatial economic agglomeration, as well as modern theoretical developments on the problems of formation and implementation of the euroregional policy of the eu. the research hypothesis is the assumption that the cluster approach is the most effective mechanism for the development of international economic cooperation in modern conditions and, eventually, the meso-level of competitive crossborder integration systems and a necessary requirement for qualitative growth of ukraine’s integration into the european economic area. the goal statement can be described as a meso-economic synthesis of concepts of the development of innovation clusters and international integration associations. based on the analysis of problems of formation and development of clusters, the methods and tools of state support of cluster initiatives are explained, and the most important strategic directions of activity of executive bodies aimed at stimulating the processes of formation and development of clusters in the euroregion "the lower danube" are formulated. cluster policy aimed at stimulating cluster initiatives with a further formation of cross-border innovation clusters can be considered as one of the effective tools for intensifying innovation activity in the euroregion "the lower danube". the authors conclude that the creation of cross-border clusters in the euroregion "the lower danube" with the participation of odesa region of ukraine is associated with the necessity to form a united cross-border area. at the same time, the state is given a leading role in ensuring a favorable cluster environment (including the reduction of barriers to trade) and stimulating international cooperation. it is proposed to develop meso-level integration processes within the common economic space of euroregions, with the active participation of ukraine on the basis of a cluster approach, forming cross-border cluster systems based on competition, cross-border cooperation, virtualization of interinstitutional networks and formation of "clouds" of highly efficient intercluster interactions. key words: cluster initiatives, international cluster, cross-border cluster genesis, cluster-based policy, competitiveness. jel classification: m16, f23 1. introduction new vector of economic integration of european states influenced ukraine's foreign policy which underwent significant changes requiring the development of an economic strategy in the euroregional aspect. being a border country with the eu, ukraine has both the prospects and the responsibility to develop cross-border relations in order to fulfill the tasks set by the eu-ukraine partnership and cooperation agreement, which provides for the intensification of economic growth in border regions. the priority of the european union strategy for the baltic journal of economic studies 63 vol. 8 no. 1, 2022 danube region is to support the competitiveness of enterprises, including the formation of clusters in the countries of the danube region, taking into account different levels of innovation in the euroregion "the lower danube". in this connection, transnational cooperation is extremely important, as well as cooperation between companies and institutions on the both sides of the border, supporting the business environment as a result of cross-border clustering, which determined the urgency of the research. the process of progressive advance of the economy is closely interconnected with the use of various integration forms of interaction and with the formation of international partnership. the formation and functioning of cluster structures in the euroregions make it possible to get economic, industrial, communication, infrastructural, social benefits and goodwill, both for their immediate participants and for the territories where clusters are located. the cluster approach is an effective tool that ensures the innovative development of the economy based on the formation of most preferable interaction between representatives of business, government, science and education. the functioning of cluster incorporation of organizations plays an important role in the longterm development of the euroregions and member countries (ukraine, romania, republic of moldova). сross-border clusters are recognized to provide an increase in competitiveness, both in traditional and new knowledge-intensive sectors of the economy of the euroregions. foreign experience proves the effectiveness of cluster policy and its positive impact on the level of competitiveness of the economy of the euroregions. integration processes in eastern europe create preconditions for the formation of international clusters in cross-border states, including ukraine, romania and moldova, in order to increase the international competitiveness of commodity producers (state regional policy of ukraine, 2007). support for cluster initiatives is an effective tool for stimulating the economic development of depressed cross-border regions, as well as accelerating innovative growth in both high-tech and traditional sectors of economic activity of the euroregion "the lower danube". the positive results of the formation of cross-border clusters are the development of cooperation and the establishment of partnerships between companies, which, in their turn, intensify the generation of innovations, reduce transaction costs and, consequently, create additional competitive advantages for the euroregions (cluster policy in europe, 2008). network clusters have become a new source of competitive advantages of the euroregions with the participation of ukraine and have essentially changed not only the system of location factors, but also the structure of the economic space itself. the intro duction of a cluster form of business organization in the cross-border dimension contributes to the development of the network structure of the economic space, strengthening its unity and integrity. under modern conditions, both national and regional cluster policy is needed, and efforts in this direction are made by the states within the framework of established euroregions. however, being initiated from above, such a policy should be implemented from below, and the proposed regulatory measures require adequate reasons, analytical and methodological support. 2. an overview of the relevant publications the term "cluster initiative" was introduced in 2003 by economists c. ketels, g. lindqvist and o. solwell. according to the scientists, this concept implies work on increasing of the cluster competitiveness and its growth rates together with the involvement of cluster firms, state and research institutes in the process. the cluster initiative is defined as "coordinated actions aimed at increasing the competitiveness and growth of the regional industry cluster with the involvement and direct participation of key cluster members: companies, associations, educational institutions, etc." the the french economist f. perrault was a pioneer who introduced the scientific concept of "growth pole" in the early 50s of the twentieth century. in his opinion, economic growth does not occur evenly, but resembles cells. he defines "poles of growth" as agglomerations of enterprises concentrated in certain places, where economic growth, business activity and innovation process are of the greatest intensity. f. perrault and his successors i. wallerstein, t. gegerstrand, and j. budville noted that regional centers, where enterprises of core industries are located, attract factors of production leading to the development of regional growth points. government institutions can purposefully facilitate these processes, in particular with the aim to revive the economic development of backward regions of the country. h. richardson, j. friedman, p. potier, h. lasuen, and h. hirsch also belong to the most prominent representatives of regional growth theories. the models proposed by above-mentioned researchers are based on such basic provisions as the emergence of growth centers, their expansion channels, the formation of agglomerations, the processes of diffusion of innovation, to avoid uneven growth under conditions of free competition in the spatial economy of the region. michael porter in his work "competitive advantage of nations" concludes that while setting the policy of expanded investment economy, it should be focused toward the development of interconnected industrial clusters based on baltic journal of economic studies 64 vol. 8 no. 1, 2022 the transplantation of economic institutions, the development of cooperation and competition (porter, 1998). the approach to assessing the competitiveness of a cross-border region can be defined using the concept of competitive advantage of the country, offered by m. porter. the idea of industrial clusters, defined by m. porter, includes "the union of companies in one industry, linked by a strategy of vertical integration of suppliers, manufacturers, financial institutions". according to porter, this concept means "geographically concentrated companies, firms in related industries that both compete and cooperate with each other, creating a single process of interaction" (porter, 1990). another researcher, s. rosenfield, understood cluster as"a group of territorially concentrated companies that share common values and technocultural orientations, directly or indirectly operating in a single regional market in terms of cooperation and competition." in opinion of m. enright, a cluster is "a group of commercial and non-commercial organizations that have an interconnected sphere of productive and non-productive activities and services, concentrated around key production, and for which group membership is an important element of individual competitiveness" (enright, 2000). 3. previously unsolved aspects of the problem during recent years, ukraine has attempted to create a legal framework for the clustering process. the concept of cluster policy as a type of innovation has been developed in the european countries (declaration concerning regionalism in europe, 1996). o. tersina believes that a cluster revolution is currently taking place in ukraine – any community seeks to create a cluster, often not having the slightest notion of what it is. in ukraine, the issues of cluster development have attracted interest over the past ten years. as for scientific research concerning odesa region, there are only a few of them. nowadays, the task is to develop theoretical and methodological principles of strategic planning for the creation and development of cross-border cluster systems in various branches of economy, taking into account their potential role as a problem-solving system focused on modernizing peripheral regions of ukraine. it should be noted that the mechanisms of formation of ukrainian cross-border cluster systems have not been studied yet. c. ketels proved that the implementation of cluster initiatives promotes cluster growth, increases competitiveness, strengthens ties between industry and academic community, helps firms to become more competitive in international markets, and contributes to the emergence of new technologies. according to foreign experience, four out of five cluster initiatives are successful in meeting the set goals. it is necessary to analyze the institu tional mechanisms of development of cross-border cluster systems in europe, including the example of cluster systems of the black sea macroregion and the euroregion "the lower danube", to single out opportunities, barriers and prospects for ukrainianromanian cross-border clusters, to identify key characteristics and evaluation parameters of their effectiveness in modern economic conditions and provide rationalization for the key principles of the analysis of the amount of state support and stimulation of clustering processes. 4. problem statement the purpose of the article is to investigate the essence and significance of cluster initiatives and cluster policy as tools for strategic development and increasing of the economy competitiveness of the euroregion "the lower danube" on the basis of an analysis of the factors providing state support for cluster initiatives in terms of promoting the strategy of the european union for the danube region, the task of which is to promote competitiveness of enterprises associations, including the development of transborder clusters. 5. research methods the theoretical and methodological framework of the study is the works of ukrainian and foreign economists on general systems theory, systems’ analysis, as well as the methodology of strategic planning at the enterprise, regional and national levels. the study is based on the fundamental provisions of economic theory, the theory of strategic planning, institutionalism, regional and global economics, cluster theory, the production allocation theory, the theory of growth poles, m. porter's theory of competition, network economics, spatial economic agglomeration, and modern theoretical developments on the formation and implementation of eu euroregional policy. the scientific hypothesis of the study is the assumption that the cluster approach is the most effective mechanism for the development of international economic interactions under modern conditions and, at the final result, is the meso-level of competitive cross-border integration systems and a necessary condition for qualitative growth of ukraine's integration into the european economic area. the problem statement can be characterized as mesoeconomic synthesis of the innovation clusters development concepts and international integration associations. in our opinion, it allows cultivating both a mechanism and a scientific understanding of the development of modern integration systems (hayek, 1945). baltic journal of economic studies 65 vol. 8 no. 1, 2022 m. porter investigated the most successful companies on a global scale and found out that regularly enough firms from one or more countries achieve greater results than their competitors. this was the beginning of the theory of industrial clusters. an important feature of the development of industrial innovation clusters, from the point of view of m. porter and many other researchers, is the combination of cooperation and competition: firms cooperate and compete with each other at the same time. this paradoxical effect of coexistence within the cluster is called co-competition (coopetition). in this case, clusters of companies compete with each other in the markets of goods and production factors and cooperate to obtain funding from governments, in the development of new markets and technologies (perroux, 1950). 6. results many researchers have attempted to structure the basic theoretical background causes of the cluster concept. for example, m. enright points at the connection of the observed spatial clustering with the theories of business externalities, savings from agglomeration, labor unions and knowledge spillover. the national cluster policy of the countries of the danube-black sea region is aimed at the development of regional innovation clusters as centers for increasing innovation development and competitiveness of institutions in the region. the creation and development of organized international clusters is the basis for the implementation of pan-european programs for cross-border and transnational cooperation of separate euroregions. the possibility of creation cross-border clusters in the odesa region on the borders with moldova and romania in the euroregion "the lower danube" deserves special attention (iermakova, 2017). reducing the importance of the territorial component of the location of production with the development of information technology leads to the formation of virtual inter-firm networks and the ability to create international cluster systems that can evolve rapidly in modern conditions. thus, the cluster approach becomes broader and allows involving more companies and countries in the information exchange. the creation of maritime, tourist, wine clusters in the euroregion "the lower danube" with the participation of entrepreneurs from the ukrainian danube region, romania and moldova is the most advanced. the attraction of foreign investments in the economy of the danube region and the creation of competitive conditions for the national capital would help to solve the following problems: 1. renovation of the technological base of enterprises in the region, modernization of existing and re-profiling of idle industries. 2. development of transport networks, ports, and creation of new revenue lines. 3. extension and diversification of export potential and development of import-substituting productions in separate branches. the investment program of the euroregion "the lower danube" provides: – development of strategies for paticipatory development of cities and villages of the region in the framework of cross-border cooperation; – improving of the investment environment (legal harmonization, tax discrimination, removal of customs barriers, legitimization of income); – creation of foreign-owned business; – creation of business and information centers on cross-border cooperation; – creation of an international free economic activity zone; – creation of international all-purpose exchange; – transport and infrastructure development; – carrying out of joint marketing research. cluster strategy of cross-border cooperation provides for the formation of territorially localized cluster associations of border regions around foreign companies-innovators, the network agents of which (manufacturers of innovative products and services, suppliers, infrastructural facilities, researchand-development centers, academic institutions) cooperate on the basis of competition and interaction, generating a synergistic effect, complementing each other and enhancing the competitive advantages of both the companies themselves and the cluster as a whole. worldwide and domestic experience shows clear evidence that clusters provide favorable conditions for innovative development, manufacturing of competitive products, new job fornation. therefore, promoting the formation and development of crossborder clusters should be the basis of the strategy of socio-economic development of the euroregion "the lower danube". if euroregions are considered as a form of cross-border economic cooperation, which is very important for the ukrainian danube region, they will contribute to strengthening good neighborly relations between counries and will be a kind of tool for integration into european structures. this is especially essential for ukraine and moldova in connection with the range expansion of the eu and romania's joining the european union. the european region "the lower danube" must become a kind of a receptor area through which the neighbouring countries "grow", so to speak, by their border territories, easing the strain at the border, creating a special investment emvironment, opening baltic journal of economic studies 66 vol. 8 no. 1, 2022 new vistas of economic prosperity and cultural cooperation. the location of the danube region at the intersection of important international routes from europe to asia contributes to the development of the marine and transport complex potential, which includes three commercial sea ports (reni, izmail, ustdunaisk), 2 ship repair facilities, state shipping company – "ukrainian danube shipping company ", 4 railway stations; locomotive facility, a number of road transport enterprises, airport "izmail". the conclusions of the segmentation of the region lie in the fact that the created training and informationanalytical cluster will have a technical base, a program for further promotion of cluster systems, skills and experience in the analysis and implementation of clusters. besides a long-term result of the activity is the sharing of cluster systems implemen tation methods with the help of training and information-analytical cluster on the territories of the euroregion "the lower danube" (ukraine, romania and moldova) (kovalenko, 2019). the development of the euroregion "the lower danube" is aimed at solving the following tasks: achieving a harmonious and balanced development of economic activity in the border regions of our countries; solving a number of issues and problems in the field of environmental protection; ensuring an appropriate level of employment and social protection of the population; improving the life quality in our regions; taking steps to integrate transport infrastructure between the countries-participants of "the lower danube" into a single network of european transportation corridors; the formation of a single cultural space in the danube region; solution of a number of issues related to the elimination of the consequences of natural and human-made disasters. it is planned to open joint trade centers and centres providing services to the population in odesa (ukraine) and on the territory of the counties of cahul (moldova), galaţi, brăila and tulcea (romania), as well as to create an association of free trade zones on the basis of the special economic zone of reni (ukraine), free trade zones galaţi (romania) and giurgiuleşti (republic of moldova). the idea of the latter is to combine the elements of foreign trade, tourist, recreational and exportproduction zones. its activities should be aimed at delivering of freight flows, handling of exportimport and transit cargo, developing of transport and communication infrastructure, intensifying of industrial production and processing of agricultural raw materials, developing of entrepreneurial initiative of the local population. the actions to open international ferry freight-and-passenger service izmail (ukraine) – tulcea (romania) are carried out, as well as the actions to open an international railway freight-and-passenger service reni (ukraine) – giurgiuleşti (moldova) – galaţi (romania). it should be noted that these projects are considered not only as local and important only for the development of the transport and communication infrastructure of the euroregion "the lower danube", but also as a prospective element of international transport corridors (in particular, the cretan itc no. 7 – "danubian waterway " and the transport ring the black sea economic cooperation) (kovalenko, 2020). we understand the term "cluster initiatives" as measures to activate and develop a cluster, an instrument of regional cluster policy, implemented together with the subjects of cluster associations of organizations, and, in a narrow sense, it is a project carried out by cluster members aimed at developing this integrated structure in the region (mikula, 2004). the following factors contribute to the development of cluster initiatives: concentration of business entities on the territory of the region, availability of labor resources of appropriate qualifications and the basis for their development, quality of the education system, availability of a base for r&d, the tradition of indu strial cooperation and territorial economic planning. classification of cross-border regions of ukraine according to the contact-morphometric principle allows referring the odesa region to regions with a high degree of boundary contact (figure 1). for a more detailed description of the degree of "boundary contact" of the regions of ukraine, we offer the following: – morphometric boundary coefficient imbound, which is calculated by the formula: imbound = lext / ltot, (1) where lext – length of the external (state) border of the region in kilometres, ltot – the total length of the region's borders in kilometres. – coefficient of administrative-territorial border iаdboard, which is calculated by the formula: iadbord = next / ntot, (2) where next – the number of administrative districts of the region that cross the state border, ntot – the total number of administrative districts of the region. during the years of independence, no incentives have been created to increase imports of high technology, purchase of a license, know-how for the production of nationally competitive goods (table 1). in this context, it is advisable to identify ways to increase the efficiency of foreign goods trade from the odesa region, taking into account the specifics of modern economic conditions. these ways include: – implementation of diversification of the commodity structure of exports. this will minimize the risks baltic journal of economic studies 67 vol. 8 no. 1, 2022 associated with export earnings shortfalls in case of deteriorating external environment; – to balance the structure of exports and imports in terms of trading partners of the odesa region. these structures should not be dominated by the shares of separate countries in order to avoid political and foreign economic risks; – the direction of import substitution policy to strengthen the orientation of certain categories of industrial manufacturing (competitive primarily in price parameters) to meet the needs of the domestic market in both consumer goods for the population and industrial products (intermediate goods). the necessity to cluster the cross-border economy of the euroregion "the lower danube" is caused by the main task of forming the export potential of the odesa region, namely, the reorientation of the national economy to achieve a more uniform and balanced export return of its regions. cluster initiatives are intended to launch an anti-recessionary mechanism for enhancing foreign trade with romania and moldova. the current state of foreign trade is characterized by disequilibrium and stagnation. there is a negative trend of reducing export-import volumes with romania and moldova (figures 2-6). as we see, trade and economic relations between the odesa region and romania and between the odesa region and the republic of moldova have significantly weakened recently, having a negative impact on the state of cross-border cooperation in the euroregion "the lower danube". the odesa region and ukraine as a whole see great strategic interest in the functioning of this euroregion. the strong points of this euroregion include: figure 1. classification of cross-border regions of ukraine according to the contact-morphometric principle export, % figure 2. ratio of the ukrainian euroregions in export of goods import, % figure 3. ratio of the ukrainian euroregions in import of goods figure 4. figures of foreign trade between odesa region and romania and between odesa region and moldova baltic journal of economic studies 68 vol. 8 no. 1, 2022 advantageous geographical position of the ukrainian part of the euroregion; availability of three ports (reni, izmail, ust-dunaisk); putting into operation of orlovka ferry; romania's joining the eu since 2007; favorable geographical environment for the development of the agro-industrial complex; availability of research centers, strong system of higher education. there are a number of untapped opportunities in the euroregion that can improve the effectiveness of cooperation. for example, the emergence of the new ferry will increase the flow of freight and traffic. it is advisable to create specialized agro-industrial, tourist, transport, energy clusters; cooperation in the field of ecology and environmental protection, in particular, cleaning of the danube riverbed; formation of integrated tourist products, creation of a single tourist network; improvement of financing instruments for cross-border cooperation projects. the main provisions that contribute to improving the quality of justification and the subsequent process of implementing cluster initiatives in the euroregion "the lower danube" include: 1) training of qualified personnel for the development and implementation of cluster projects; 2) the formation of a cluster policy focused on the specifics of certain cluster structures, the choice of appropriate instruments of state support; 3) improving of the clustering processes management, which implies the following: – including of predictive-analytical and organizationaleconomic blocks in target programs for the implementation of cluster projects, as well as ensuring the variability of measures due to the instability of the external environment; – formation of a regional agency to manage clustering processes; – developing of a problem-oriented monitoring system. cluster policy helps to increase the competitiveness of the region, besides, creation of a common or single cluster at the border has all the benefits of clustering for the regions of neighboring countries. crossborder regions gain additional socio-economic and environmental synergetic effect from the functioning of the cluster, helping to increase the value chains that will be created by servicing a single complex of two parts of the cluster, involving all areas of production and economic activity of the cross-border region. a joint cluster for neighboring states, using the primary competitive advantages, receives additional impetus to create new factors that later become functions. but the creation and functioning of joint clusters of cross-border regions depend largely on the state policy of the countries in which they are created. it is possible to single out the basic directions of a cluster policy of cross-border regions concerning their creation and functioning: creation of a favorable investment, tax climate; application of the principle of subsidiarity, according to which tasks should be considered at the local or remote from center level, at which their solution is possible and effective; combination of interests of central and local authorities. national regional cluster policy includes the following directions: – identification and monitoring of the situation of economic clusters development at the territorial level, as well as determination of the cluster structure; – territorial localization of its separate links, co-financing of analytical experiments of clusters development prospects in the foreign market, an estimation of a cluster detection on the territory and social sphere; – formation of communication sites for potential participants of territorial clusters, as well as through their integration into the process of development and evaluation of regional development strategy; – promotion of the consolidation of cluster members (as well as through associative forms), implementation of programs to promote cluster enterprises in foreign markets, conducting joint marketing research and promotional activities, implementation of educational policy agreed with the main representatives of the cluster, providing communication and cooperation of enterprises and educational institutions. (thousand usd) (thousand usd) figure 5. figures of foreign trade in services between odesa region and romania and between odesa region and moldova figure 6. export surplus of odesa region (moldova, romania) baltic journal of economic studies 69 vol. 8 no. 1, 2022 the conducted analysis revealed the peculiarities of the development of support mechanisms and outlined the directions of state regulation of clusterization. the majority of scientists understand cluster policy as the actions of state bodies at the national and regional levels aimed at supporting the processes of clustering the economy in order to increase the competitiveness of production. cluster policy is defined as measures carried out by municipal and state authorities to create and support the development of clusters in certain areas and includes regulatory measures, investment, financial and budgetary mechanisms, information support. the objectives of the cluster policy are to increase the competitiveness and innovation potential of enterprises and individual industries, to develop small and medium enterprises and to promote the diversification of the national economy by means of stimulation and development of regional industry clusters. the main direction of the cluster policy is to strengthen the interrelations between economic entities-members of the cluster in order to simplify the access to new technologies, to guarantee optimal risk sharing, joint access to foreign markets, joint r&d, sharing knowledge and fixed assets, accelerating learning processes by intensifying the contacts of leading specialists, reducing the transaction costs of interaction by increasing trust between cluster members. according to some scholars, cluster policy is a set of measures that can help in solving the main problems, such as: – increasing of the competitiveness of the economy by means of development of competitive markets; – increasing of the innovation of various sectors of the economy; – accelerated small and medium enterprise development; – encouragement of local initiative and intensification of cooperation between the state, business and the scientific community. cluster policy is defined as a system of state measures and mechanisms to stimulate and support clusters that ensure sustainable balanced economic development of peripheral regions and the country as a whole, innovation promotion, implementation of comparative (competitive) advantages of these territories. government cluster policy should support the growth of existing or emerging regional clusters, rather than trying to create entirely new ones. at the same time, cluster policy involves shifting of the center of gravity from individual firms to regional systems of firms. this policy is based on the idea of "election of winners", as in the focus of attention there should be stimulating of the strong or potentially strong points of regional industry, as well as stimulating of social processes, such as cooperation between local partners based on trust, by means of knowledge sharing. the cluster strategy allows forming an all-round view of the state development policy taking into account the growth potential of the territories of economic entities. moreover, it is based on the dialogue between key players in the cross-border region, the formation of an overall vision of common goals. the following groups table 1 commodity composition of the trade of odesa region with republic of moldova and romania (2020) (%) code and name of goods moldova romania export import export import i. live animals; products of animal origin 3,5 0 0,1 0 ii. products of vegetable origin 3 11 5,4 0,8 iii. fats and oils of animal or vegetable origin 3,5 0 10 0,6 iv. ready-made food products 17 10 1,3 4,3 v. mineral commodities 0,4 14,5 0,4 32 vi. products of chemical and related industries 6 0,19 0,2 17,4 vii. polymeric materials, plastics and articles made therefrom 7 2,4 1,4 2,5 viii. raw hides and skins 0,3 0,01 0 0 ix. wood and wood products 0,7 0 1,9 6,5 x. mass of wood or other fibrous cellulosic materials 2,4 2,7 0,3 2 xi. textile materials and products 2,5 0,3 1 0,1 xii. footwear, headwear, umbrellas 3,2 0,2 4,6 0,3 xiii. works of stonemasonry, gypsum, cement 4 2,9 0,1 2,3 xiv. natural pearl, cultured pearl, gemstones 0 0 0 0 xv. base metals and articles made therefrom 8,9 53,5 13 13,2 xvi. machines, equipment and mechanisms 30,8 0,9 5 11,6 xvii. vehicles for land transport, aircrafts, floating crafts 2,6 0,2 55 4 xviii. optical and photographic devices and apparatus 0,7 0 0 0 xix. various industrial goods 3,5 1,2 0,3 2,4 total: 100 100 100 100 baltic journal of economic studies 70 vol. 8 no. 1, 2022 (blocks) of criteria are accepted as the main target parameters during realization of current competitive selection of pilot innovative territorial clusters: scientific-technological and educational potential of cluster; production potential of the cluster; quality of life and level of development of transport, energy, engineering and housing infrastructure of the cluster base territory; level of organizational development of the cluster. state support of the creation of innovation clusters means the following: creation of legal norms, development of specific forms and methods, interaction of government agencies, economic agents and all stakeholders that contribute to this process. support for the innovation clusterization should be carried out in order to: develop private initiative, growth of the intellectual potential of the region; sprawl the financial base of local budget formation; support skilled labor workforce, improve employment and life quality; create conditions to ensure economic, technological and information security of the region (kovalenko, 2017). on the basis of analysis of problems of cluster formation and development, it is possible to formulate the most important strategic directions of executive authorities aimed at stimulating cluster formation and development processes: creation of communication platforms and conditions to organize processes of coordination and mutual approval of cluster participants' interests; formation of an institutional environment that ensures free flow of information, people, assets and services between cluster members; development and implementation of small and medium business development programs forming the economic environment of services provided for the main enterprises of clusters; promoting of the formation of human potential which meets the requirements for the quality specification of personnel from enterprises of the cluster (training and retraining of personnel, attracting highly qualified personnel, development of the education system); maintenance and development of infrastructure necessary for the development of clusters: social, innovative, industrial, transport, information; creation of a regulatory environment providing transparency of the competitive environment, stability and transparency of market, including property relations, lowering of barriers to market entry, reduction of corruption costs, compliance with property rights; development of innovation environment: support for the creation of venture funds, technology transfer centers, business incubators, innovation and technology centers, technology parks, etc., stimulation of the development of small high-tech firms, improving their infra structure; support of innovative potential of funda mental and applied research on the basis of state organizations; general assistance in the commercialization of r&d, etc.; financial support (creation of state investment companies having interest in the reconversion of crisis enterprises and creation of new ones; granting preferences and benefits, etc.; promoting access to credit resources, providing benefits for the use of state property, etc.); presentation of clusters in the international and domestic markets; promotion of the integration of cluster system enterprises into nationwide economic processes; introduction of supervisory institutes for significant projects in the cluster; stimulation of the processes of cluster enterprises integration into general economic processes. assistance in the implemen tation of comprehensive technical re-equipment of prospective clusters production (nordhaus, 1969). the following methodological support for the formation of cluster development strategies of the euroregion "the lower danube" has been worked out (figure 7). target-focused stimulation of cluster enterprises from regional authorities of regulation and administration (which is practically not implemented today) is necessary at the current stage of economic development. cross-border regions are characterized by the policy of creating a favorable environment for cluster development, which provides for the removal of administrative barriers, improvement of the business climate and development of infrastructure. the analysis revealed the peculiarities of the support mechanisms development and outlined the directions of state regulation of clusterization. cluster continuity can be achieved in terms of formation of such a system of state mechanisms that would contribute to effective – formation of the state organized area, including the cluster creation, its development networks, business environment (or innovation ecosystem); – regulation by means of consolidation of the activity of all interested in the effective development of clusters of economic entities of the territory. coordination can be achieved through the initiation of new projects and support for nuclear cluster enterprises, as well as the use of various economic policy instruments. – monitoring of the achievement of cluster and territory development targets, as well as the efficient allocation of limited resources. the strategic goal of modern cluster policy is the development of these network structures on the principles of public-private partnership, where the state and business unite their efforts and interests. while supporting the creation and development of clusters, the state takes part in the implementation of collective projects based on the needs of business and the market, which significantly increases the efficiency of budget spending. the place and role of clusters in the economy of the euroregion "the lower danube" is determined baltic journal of economic studies 71 vol. 8 no. 1, 2022 fi gu re 7 . d ev el op m en t m od el o f a c lu st er s tr at eg y fo r th e e ur or eg io n "th e l ow er d an ub e" di ve rs if ie d gr ow th st ra te gy m is si on – in te ns if ic at io n of cr os sbo rd er c oo pe ra ti on in th e e ur or eg io n “t he l ow er d an ub e” d ef in in g of s tr at eg ic g oa ls c ho ic e of c lu st er st ra te gy c lu st er p ol ic y b as ic c lu st er d ev el op m en t s tr at eg ie s of th e e ur or eg io n “t he l ow er d an ub e” e ff ic ie nc y as se ss m en t o f c ro ss -b or de r c lu st er s ys te m s st ab ili za ti on st ra te gi es sw o t -a na ly si s ed uc at io n r & d in te gr at io n te ch no lo e co lo gy o f t he d an ub e es tu ar y ec on om y in te rn at io na l ec on om ic ac tiv ity f un ct io na l c lu st er s tr at eg ie s (s ub st ra te gi es ) ce nt ra liz ed gr ow th st ra te gi es : – re in fo rc em en t o f ex is tin g po si tio ns , – m ar ke t de ve lo pm en t, – pr od uc t de ve lo pm en t in te gr at ed gr ow th st ra te gi es : – pr og re ss iv e in te gr at io n, – re gr es si ve in te gr at io n su rv iv al s tr at eg ie s n um be ro f de ci si on s m ad e in co ns is te nc y co ef fi ci en t o f de ci si on s m ad e d eg re e of ra tio na lit y of th e st ru ct ur e of d ec is io ns m ad e in re la tio n to th e op tim al st ru ct ur e l ev el o f im pl em en ta tio n of d ec is io ns m ad e t im el in es s co ef fi ci en t o f de ci si on -m ak in g (d ec is io n im pl em en ta tio n) a na ly si s of th e po ss ib ili tie s to cr ea te a c ro ss -b or de r cl us te r a na ly si s of fa ct or s of co m pe tit iv en es s an d co m pe tit iv e ad va nt ag es a na ly si s of e nt re pr en eu ri al ac tiv ity o f a ct or s of c ro ss bo rd er e co no m ic s pa ce a na ly si s of in no va tio n an d in ve st m en t a ttr ac tiv en es s a na ly si s of m ar ke t f ac to rs gr ow th st ra te gi es gi es baltic journal of economic studies 72 vol. 8 no. 1, 2022 by their ability to satisfy the interests not only of business and the state, but also of the population. this requires the development of an appropriate taskoriented methodology which will make it possible to identify strategic niches for the development of the cross-border region, defining the priorities and mechanisms of euroregional cluster policy. based on the study of trends in cross-border innovation space of ukraine, it is proposed to form strategic directions based on cross-border cluster formation for the development of such problem solving systems as "growth poles" and innovative "growth centers" of the danube-black sea euroregion. at the first stages of "growth centers" development the basic elements may be residents of free economic zones (fez), innovation incubators. for example, the growth ring of the lower danube is a cross border innovation and education cluster that will bring together organizations (university research centers, business incubator, technology park, cci branch and a number of sez venture companies) that will be both customers and core elements of the innovation transfer platform in the field of development of the maritime complex of the danube-black sea euroregion with the participation of companies from ukraine (danube region), romania and moldova. conceptual basis for cluster policy formation is the embedding in the european process of self-organization of innovative forms of cross-border cooperation based on cooperation, specialization, synergy, competition, which is the core of euroregional development strategy, where functional and structural effects take place: growth of science-intensive economy, structural modernization formation of a new business culture and as a result – improvement of life quality and formation of a new creatively active personality ( jacobs, jane, 2009). the cluster development strategy of the danubian subregion (romania-ukraine-moldova) has been set up to meet the common challenges which are faced by member states and third countries located in the danube region and taking benefit from improved cooperation by contributing to economic, social and territorial cohesion. these issues cannot be considered at the national level only, taking into account their transnational and strategic nature. the strategy creates synergies and promotes cooperation and interaction of all stakeholders in order to make better use of available resources. the concept of clustering is a vector of the odesa region development to create innovative value-added products. on the territory of the odesa region 4 clusters are created: cross-border infrastructure cluster "the clean danube" was created to prevent and eliminate emergencies caused by human-made disasters in the drainage and sewerage system in the border area of the danube delta by means of: – construction, reconstruction and modernization of the sewerage network and full repairs of water pumping stations in izmail and izmail district; – reconstruction of the sewerage network and sewage treatment plants in tulcea; – taking into use the surface and wastewater quality control system based on their biochemical analysis at the test center. cross-border logistics cluster project "development of intermodal cross-border communication on route isaccea – orlivka – izmail – tulcea". the project is worked out as part of the joint operational program "romania – ukraine 2014–2020" and is aimed at restoring regular passenger traffic between izmail and tulcea (romania) and creating additional conditions for the passage of goods and vehicles of the international ferry ro-ro service isaccea (romania) and orlivka (ukraine). the project partners are: administrative and territorial unit of isaccea municipal administration, romania, (main partner); orlivka village council, ukraine; executive committee of izmail city council, ukraine; administrative and territorial unit of tulcea county through tulcea county council, romania. this project contributes to the development of the transport network (one of the priorities in the framework of european-ukrainian cooperation), to the restoring of regular cross-border passenger service between izmail and tulcea (romania) and to the creation of additional conditions for the passage of goods and transport. the implementation of the planned infrastructure component is expected to increase trade turnover, to strengthen trade relations between ukraine and europe, as well as to increase the number of tourists. in general, this project is aimed at implementing a cooperation agreement signed in 2017 between the city of izmail represented by the executive committee of the izmail city council and the county of tulcea represented by the county council of tulcea. agro-ecological-recreational cluster in tarutyno district "frumushika nova" and "agro-industrial cluster on bee-farming development". agro-ecological-recreational cluster in tarutyne district "frumushika nova" comprises: – scientific competency group on the development of steppe territories; – center for ethnographic, rural ecological tourism and open-air museum "bessarabian village frumushikanova". besides, in odesa region, the pilot project "agroindustrial cluster on bee-farming development" is being imlemented, which is expected to improve the level of honey harvesting and processing and increase the marketability of the released product. baltic journal of economic studies 73 vol. 8 no. 1, 2022 the project sites are bilyaivka and rozdilna districts for a period of 3 years. creation of a honey cluster will help to move to a new level of honey processing and to get the product of a high-quality. the project involves not only bee farmers, but also leading scholars, representatives of local and regional authorities. the basic concept of creating tourism clusters is the intercoordination which means that different functional characteristics of entities implement a common goal, thereby increasing the efficiency of work, accelerating the achievement of planned results, introducing new technologies, allowing for raising of loan, initiating competitive principles in the distribution of contracts, forming the optimal structure of production, determining the priorities of development. the tourism industry of odesa region comprises several forms of clusterization: – territorial clusters: tourist cluster of odesa, agrorecreational-tourist cluster frumushika-nova, tourist cluster of odesa region, etc.; it is planned to create a tourist cluster in vilkove; – functional tourist clusters according to types of tourism: cluster of rural ecological tourism, cluster of recreational tourism, cluster of wine tourism, odessacard, cluster of medical tourism and others; – situational (event) tourist clusters created for a specific event: festival, conference, exhibition, congress, celebration, etc.; – sectoral clusters related to tourism: «odesa tourism» association, ukrainian tourism association, odesa association of travel agencies, tourism development association «great odesa», museums of odesa, etc. many clusters are being created and are operating in ukraine, and the initiative for their creation comes from the business entities themselves, united into formal or informal groups for a definite purpose. such clusters are created according to the "communitive initiative" concept and have no additional benefits and guarantees. at the same time, the concept of clusterization at the state level is becoming topical. although the concept of creating clusters in ukraine has not been adopted yet (though being developed), in a number of state development programs of certain industries and sectors of the economy, as well as in definite regional development programs, the cluster is recognized as an effective mechanism for economic development and increasing of the competitiveness of a definite industry or region. 7. conclusions 1. thus, the implementation of cluster initiatives is an integral part of the modernization of the economy of the euroregion "the lower danube" at the present time. one of the modern concepts of increasing of the competitiveness of the national economy is the cluster concept based on state incentives for the creation and development of clusters in the euroregions. 2. clusterization of the cross-border economy, as shown by the international practice, influences and is at the forefront of the processes of competitiveness strengthening and innovation accelerating. therein lies a new economic phenomenon providing an opportunity to withstand the pressure of global competition and properly meet the requirements of national and regional development. 3. transboundary cluster genesis is generally immanent to the danube-black sea basin and is (for a number of peripheral regions of ukraine and municipalities) a significant factor in their economic growth. the cross-border clusters created in the coastal zones are immanent to the economy of our country; their condition and characteristic features reflect as a mirror its defects of different aspects – either situational or fundamental, problem situations, "weak points" (from the actual unemployment of the "marine factor" in the territorial and economical dynamics, to outsize "raw material lopsidedness", moving out assets and profits outside the national territory). 4. in parallel to the monitoring, there should be built a system of regulation of cross-border cluster genesis, focused on both the support of cluster initiatives and the correction of cluster self-organi zation processes in order to neutralize their probable negative sides. especially delicate and priority objective is the state support of possible areas of crossborder activity (tourism, agriculture, shipbuilding and ship-repairing, shipping traffic) in the danubeblack sea region. 5. the exclusive location of the danube region and the low level of innovation potential contribute to the consideration of the region as a kind of "development corridor" between ukraine and the eu with high importance of international relations, which in its turn requires effective implementation of euroregional development strategy aimed at deep integration of the region into international processes at the same time preserving their identity as the subject of ukraine. cluster policy aimed at stimulating cluster initiatives with the further formation of cross-border innovation clusters can be considered as one of the effective tools for intensifying innovation activity in the euroregion "the lower danube". 6. thus, the creation of cross-border clusters in the euroregion "the lower danube" with the participation of odesa region of ukraine is associated with the necessity to form a united cross-border area including, for example, a united transport and logistics network; a united chain of added value cost; a united scientifictechnological and innovative space. at the same time, the state is given a leading role in ensuring a favorable cluster environment (including the reduction of trade barriers) and in stimulating international cooperation. baltic journal of economic studies 74 vol. 8 no. 1, 2022 references: cluster policy in europe / a brief summary of cluster policies in 31 european countries (2008). europe innovation cluster mapping project. oxford research as, january, 34 р. declaration concerning regionalism in europe/assembly of european regions (1996). strasbourg: secretariat general immeuble europe, 10 p. enright, m. j. 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(in ukrainian) baltic journal of economic studies 78 vol. 7 no. 5, 2021 corresponding author: 1 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: alla.ivashchenko@kneu.edu.ua orcid: https://orcid.org/0000-0002-4599-7137 2 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: anna.kornyliuk@kneu.edu.ua orcid: https://orcid.org/0000-0001-8713-0681 3 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: polishchuk@kneu.edu.ua orcid: https://orcid.org/0000-0002-6133-910x researcherid: j-5444-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-5-78-87 innovation vouchers as a modern financial tool for the development of smes alla ivashchenko1, anna kornyliuk2, yevheniia polishchuk3 abstract. the subject of the study is innovation vouchers as a modern tool to support "green" sme projects. innovation vouchers are financial instruments that perform a number of functions for the development of smes. they can stimulate its cooperation between research institutes or universities in the development of innovations and implementation of innovative solutions. it can become an alternative more effective tool for the use of public funds. innovation vouchers formed the basis of financial support for the implementation of the development strategy of the region in the context of smart specialization. in the countries of the eastern partnership, such tools are only part of the practice, while the oecd countries have been actively using them for more than 10 years. in this regard, it was decided to analyze existing sme support programs using innovation vouchers in oecd countries and to give practical recommendations for the implementation of foreign experience in the development of sme support policies in the eastern partnership countries. the main method of research is the analytical method. a critical analysis of the scientific literature and policy documents helped form the concept of the use of innovation vouchers by smes. the study analyzed 47 programs to support smes with innovation vouchers, which operated for 12 years (from 2008 to 2020). both quantitative indicators (total value of the program with innovation vouchers, maximum voucher value, etc.) and qualitative data (target group, directions of innovation financing) were taken into account. classification features of innovation vouchers, their target audience, distribution of programs among target group participants (smes, companies of different ages, universities, state research institutes, microbusinesses, incubators, gas pedals, science parks, etc.), cost of vouchers, validity of innovation vouchers were determined. the main conclusion may be that when introducing innovation vouchers as tools to support micro-, smalland medium-sized businesses, it must be taken into account that the circle of knowledge providers must be broad (it may include private and public research organizations, universities, and other relevant types of providers). the requirement for co-financing needs to be met as well in order to reduce the risks of inefficient use of funds. in addition, support for innovative enterprises should be broadcast at all levels: local and national. the following target stakeholder groups can benefit from the results of the study: research institutes, universities, smes, policy makers, government, ngos involved in innovation support, etc. key words: financial instruments, smes, innovation vouchers, r&d. jel classification: g10, g20, o31, o32 1. introduction smes are the driving force of economic growth. in ukraine it reaches more than 95% of operating enterprises. in addition to the fact that smes are the main employer in different countries around the world, in order for it to skillfully perform the function of a driver, it is necessary to create conditions for the development and implementation of innovation in its activities. innovative sme development and management strategies often run counter to survival and result in survival, or managers choose inefficient development paths. moreover, development requires innovative solutions; on the other hand, it is difficult for entrepreneurs to allocate funds for the development of baltic journal of economic studies 79 vol. 7 no. 5, 2021 innovation. another problem is the lack of personnel who could deal with these developments. this gave rise to the idea of creating such a financial instrument as an innovation voucher. on the one hand, it combines the goals of smes and research institutes or universities capable of conducting research and development, and on the other hand, such instruments make it possible to successfully manage the inefficient use of public funds through the mechanisms of innovation vouchers. although innovation vouchers are not a new phenomenon in the economy, there is a lack of generalizations in the classification of innovation vouchers, foreign experience and its use in ukraine or other eap countries, as well as the concept of using innovation vouchers by smes. therefore, the main purpose of this article is to examine successful examples of the use of innovation vouchers for smes in different countries and to offer recommendations for policymakers and other stakeholders on their application in emerging economies. the objectives of the study are as follows: – to analyze sme programs in the eu and other countries where innovation vouchers are used as a financial tool for innovation development; – to develop a classification of target groups of innovation vouchers and determine the type of knowledge provider; – to analyze requirements for co-financing projects in different cases; – to develop a concept for the use of innovation vouchers by smes. methods and data research. this article discusses the key features of innovation vouchers as an important mechanism of financing innovative development of smes. the analytical method is used to determine the design of innovative voucher programs. as a result, a conceptual scheme of innovation voucher based on 5 key characteristics of the instrument was formed. for this purpose, the database of innovation voucher policy instruments was studied. the total sample includes 57 innovation voucher programs over the past 12 years (2008–2020). both quantitative data (total program funding, maximum voucher amount) and qualitative data (target groups, thematic areas) were used for the study. literature review. as the sustainable development goals have become the number one issue on the global agenda, green financial instruments are seen as the main key to solving "green" problems. therefore, researchers in the financial field have looked at innovative vouchers from different perspectives. various types of innovation voucher mechanisms have been described in the relevant literature: innovation vouchers with subsidized costs for business or technical services from external suppliers (langhorn, 2014). the literature emphasizes the importance of innovation vouchers as tools for building regional development capacity. for example, in the czech republic in the ústí, innovation vouchers supported smes in cooperation with research centers – consumption from activities increased by 26% and the book value added increased by 25%. at the same time, there was a 9% increase in personnel costs between 2013 and 2015. another region of the czech republic, ostrava, also shows successful support for technology transfer in the field of biotechnology through innovation vouchers (matulova, stemberkova, zdralek, maresova, & kuca). green financial instruments in the western balkans are seen as essential for achieving sustainable development goals (luksic, boskovic, novikova, & vrbensky, 2021; doranova, griniece, miedzinski and reid; shevchenko et al, 2021; kholiavko et al, 2021). in italy, innovation voucher programs have a regional context. for example, the region of lombardy has a strong experience in launching such programs. sala, landoni and vergomnti (2015) highlighted the advantages of these instruments and their impact on the innovative development of smes and their collaboration with local research centers and universities. in china, innovation is quite a popular tool for green projects. zhao and radziwon (2021) emphasized the effectiveness of such tools for sme development in the context of demand-side policies to promote sustainability and resilience. green finance and innovation vouchers, in particular, can help chinese companies become resilient to the challenges posed by covid-19 (sadiq et al., 2021). on the policy-making side, this tool is also considered by guerrero and urbano (2019). they have proven that it can be successfully implemented as a policy and has a direct and indirect contribution to the development of cooperation between smes and universities. other literature focuses on case studies in which innovation vouchers helped turn an idea into a product. using the example of antibiotic vouchers in the united states, outterson & mcdonnell (2016) demonstrated the partial effectiveness of this financial instrument because of the length of the exclusivity period, the relationship between value and reward, the encouragement of high-quality innovation, and the retention of vouchers for appropriate cases. innovative vouchers were also used to prevent malaria in ghana and tanzania (don de savigni et al., 2012). in other african countries (nigeria and brunei), green vouchers and other financial instruments are offered to agricultural enterprises (raimi, olowo, & shokunbi, 2021). another example of a targeted application is green mining. it can also be useful for the eastern baltic journal of economic studies 80 vol. 7 no. 5, 2021 regions of ukraine, where mining is one of the leading industries (shavina and prokofiev, 2020). as a financial instrument, the innovation voucher can be used even in the implementation of social projects (shein, payusov, & kurdyumov, 2020), turism (yakymchuk et al., 2021), education (shkarlet, kholiavko, dubyna, 2019), and for the development of green energy industry (chiu, lin, liang, 2021). innovation vouchers can be distributed in different ways. for example, in the netherlands, they are distributed by lottery (cornet, vroomen, and van der steeg, 2006). schade and grigore (2009) point out as an advantage of innovative vouchers that they require less bureaucracy than grants. spiesberger & schönbeck j. (2019) hold a similar opinion. the mentioned work is interesting because the authors study the experience of armenia, belarus, georgia and moldova, which can be useful for ukraine. a sample group of innovation vouchers was considered, and without any doubt the authors argue that this financial instrument is quite successful in stimulating the use of renewable energy sources and energy efficiency. 2. innovation vouchers as key tools for enhancing innovations by smes taking into account that in most cases smes have limited opportunities to develop and implement innovations and conduct r&d due to the lack of funding, relevant experts and experience in this area, some small-scale financing schemes could be useful for sme development in this direction. according to the innovation policy platform, innovation vouchers are one of the most popular funding mechanisms, which involves issuing state support funding (mainly up to €10,000) to smes, which can only be distributed to knowledge providers (universities, r&d institutes, innovation centers, etc.). this type of support provides many potential benefits for the work of smes, such as stimulating innovation, strengthening cooperation between smes and r&d and knowledge providers, enhancing knowledge transfer, and eliminating information asymmetries for smes. another feature of this support is the possibility for smes that do not have their own sources to use the r&d capabilities of other institutions. innovation voucher support can be provided at the local, regional and national level by public authorities and can be directed directly to the predetermined goals of the respective voucher program. the other side of the usefulness of the innovation voucher scheme is that r&d and knowledge providers also receive funding to carry out their core business of developing and implementing innovation. for a better understanding, the main characteristics of innovation vouchers, namely objectives, implementation algorithm, potential benefits and risks for smes, as well as the most influential factors are presented in figure 1. among the theoretical concept of innovation voucher schemes that are beneficial to both smes and r&d and knowledge providers, applied examples of the use of innovation vouchers are of great importance. examples of such applications are analyzed in appendix 1 in various areas such as construction, manufacturing, business services, logistics, etc. according to the oecd's innovation voucher policy dashboard, 27 countries, mostly from the eu, asia, south america, and australia, implemented innovation vouchers during the years under study. on average, one country implemented two innovation voucher programs, while portugal, austria, and belgium were the leaders in the number of implemented programs with nine, six, and five implemented, respectively. the number of innovation voucher programs over the study period is shown in the graph. the data show a gradual increase in the use of innovation vouchers since 2008. the maximum popularity was achieved in 2016, after which there is a gradual decline in the popularity of this tool. a detailed study of existing programs allowed to form a conceptual scheme of innovation vouchers based on 5 main characteristics, in particular: 1) target groups; 2) type of knowledge provider; 3) annual funding range of the program and the maximum amount of funding per innovation voucher; 4) program duration; 5) requirements for co-financing of projects. 3. target group an important component of innovation voucher programs is the identification of the main recipients, i.e., the groups eligible to receive funding. table 1 presents the main classification attributes and corresponding target groups based on the database of innovation voucher policy instruments (table 1). the analysis showed that there is a wide range of recipients, both private and public. in addition, some initiatives are aimed at targeted support of certain groups of the population. for example, the development of innovation voucher programs in malta and south korea involves providing vouchers to certain lowincome groups. such groups usually include people with disabilities, those who are at high risk of poverty, etc. such initiatives have not only an economic but also a social impact, contributing to social inclusion. in addition, malta specifically supports women, thereby motivating them to engage in research and innovation and reducing the gender imbalance. baltic journal of economic studies 81 vol. 7 no. 5, 2021 innovation vouchers objectives: – reducing the access gap for smes to providers of knowledge-based innovation; – development of innovations by universities/research institutes at the request of smes; – increasing the research potential of smes through cooperation with universities/ r&d institutions. reasons for innovation voucher application: – limited access to research knowledge by smes; – information asymmetry in the business sector regarding potential suppliers of relevant research innovation projects; – failure of smes to develop the right research questions; – different timeframes (universities/r&d institutions are mainly focused on long-term projects, not smes who want quick results. required steps: (i) availability of vouchers (promotion in the press, on the websites of specialized organizations); (ii) application submission by sme with direct research request and proven ability to apply such project; (iii) issuance of vouchers by a government agency (selection of submitted applications by smes is possible); (iv) allocation of an innovation voucher with the definition of research tasks to a particular university/r&d institution; (v) establishment of terms within which the voucher must be used; (vi) sme and university/r&d institution reporting on voucher use and impact. influential factors drivers: – limited management by the issuer of innovation vouchers; – wide dissemination of advertising to overcome the information asymmetry between smes and universities/r&d institutions; – university/r&d institutions access to funding; – a clear match between a potential sme response and an appropriate knowledge provider; – the state agency acts as an intermediary to provide overall management of the program. negative sides: – a small lump sum; – short-term use of the voucher; – location (in most cases the sme and the university are located in the same country or region); – lack of innovation on a global scale (focus on local innovation); – fuzzy program evaluation mechanism. main goal: to strengthen cooperation between smes and universities/r&d institutions in order to implement innovation at company level through knowledge transfer on the basis of funding of up to 10,000 euros. figure 1. concept of sme innovation vouchers application source: (cornet, vroomen björn, marc van der steeg , 2006; shkarlet, kholiavko, dubyna, 2019; voucher schemes in member states – european commission) 1 1 1 2 3 5 6 8 11 7 5 5 3 0 2 4 6 8 10 12 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 figure 2. number of innovation voucher programs in 2008–2020 in oecd countries source: based on oecd innovation vouchers policy instrument dashboard the next step of the study was to determine the most common target groups (table 2). the data show that the greatest support is directed at smes and businesses without an indication of their age. 4. type of knowledge provider the next step was to analyze the main types of knowledge providers, i.e., organizations that will be suppliers of innovative developments, new technologies, etc. in total, 4 groups of suppliers baltic journal of economic studies 82 vol. 7 no. 5, 2021 table 1 innovation vouchers target groups classification classification feature target groups companies by age any age, nascent, young or established companies companies by size smes, micro-enterprises, companies of any size research and education institutions hei, public or private research institutes intermediaries incubators, accelerators, science parks or technology parks, technology transfer offices, industry associations economic actors (individuals) entrepreneurs governmental entities national and subnational government researchers, students and teachers phd students, postdocs, secondary education students, teachers, undergraduate and master students, established researchers social groups especially emphasized civil society, disadvantaged and excluded groups, women source: based on oecd innovation vouchers policy instrument dashboard table 2 innovation vouchers target groups distribution target group number of programs percentage of programs smes 40 15,4% firms of any age 36 13,8% firms of any size 15 5,8% heis 15 5,8% public research institutes 15 5,8% entrepreneurs 13 5,0% micro-enterprises 12 4,6% incubators, accelerators, science parks or technology parks 10 3,8% national government 10 3,8% private research institutes 10 3,8% established researchers 8 3,1% nascent firms 8 3,1% phd students 8 3,1% technology transfer offices 8 3,1% other 52 20,0% source: based on oecd innovation vouchers policy instrument dashboard 0 2 4 6 8 10 12 14 16 18 other hei and public research institutes mixed private business number of programs figure 3. distribution of programs by type of knowledge provider source: based on oecd innovation vouchers policy instrument dashboard. data available only for 47 programs baltic journal of economic studies 83 vol. 7 no. 5, 2021 were singled out: private business, universities and state research institutes, mixed and other suppliers. the mixed category includes initiatives that include several types of knowledge providers. it is noteworthy that most programs involve the active participation of private business, including smes, in innovative transformations. 5. the range of annual program funding and the maximum amount of funding per innovation voucher the data show that about half of the programs have annual budgets of less than 5 million euros and only two programs have budgets of more than 100 million euros. the colombian program has a budget of 100-500 million euros, and the program itself runs for 8 years and aims to support r&d in business. the largest program, more than 500 million euros, was founded by south korea in 2020 and aims to develop key sti activities. as for the maximum possible financing, the most popular instruments are those exceeding 10 thousand euros, followed by instruments up to 6 thousand euros. only 17 programs have information about the duration of the program. the analysis showed that, on average, the program lasted for 5.5 years. austria and italy implemented their programs for two years, and poland for 11 years. participation in some of the innovative voucher programs studied requires additional funding from other sources, that is, the amount of the voucher should not cover the full cost of the project. it is believed that such a situation can serve as a safeguard against the misuse of public funds. of the initiatives analyzed, 37 (or 57%) require an additional 1 1 5 5 8 9 14 14 0 2 4 6 8 10 12 14 16 100m-500m euro more than 500m euro 20m-50m euro 50m-100m euro 5m-20m euro less than 1m euro not indicated 1m-5m euro number of programs figure 4. distribution of programs by amount of funding source: based on oecd innovation vouchers policy instrument dashboard 9 11 12 15 0 2 4 6 8 10 12 14 16 varies depending on conditions 6-10k euro 2-6k euro more than 10k euro number of programs figure 5. distribution of programs according to the maximum amount of the innovation voucher source: based on oecd innovation vouchers policy instrument dashboard. data available only for 47 programs baltic journal of economic studies 84 vol. 7 no. 5, 2021 contribution, 14 (25%) require no contribution, and 11 (19%) require no information. thus, the vast majority provides for co-financing from other sources. 6. conclusions the study of individual programs of innovation vouchers allowed to form their key characteristics. in particular, it was found that this instrument is aimed at supporting a wide range of target groups. however, a detailed analysis showed that it is primarily aimed at supporting smes and firms without any indication of age or size. in addition, there are programs specifically designed for microbusinesses and individual entrepreneurs. in addition, among possible knowledge providers, preference is often given to private businesses, a large part of which are also smes. the amount of an innovation voucher is usually small (up to 10 thousand euros), and in most cases the recipient must provide co-financing. in our opinion, the requirement to invest additional funds reduces the risks of inefficient investment of public funds. the study will contribute to the formation of an effective design of innovation vouchers for sme development in those countries that are only planning to implement such programs to support innovative development. in particular, understanding the key features and existing options for target groups, key topics, etc. will allow programs to be implemented that will better meet the needs of smes. the following recommendations can be made. firstly, innovation voucher programs should include a broad list of knowledge providers: private and public research organizations, universities, and other relevant types of providers. this will greatly expand access of smes to innovative knowledge and accelerate their development. secondly, it is necessary to implement the requirement for co-financing. it is also believed that requiring smes to invest their own additional funds reduces the risks of inefficient investment of public funds. thirdly, state agencies should implement a specific framework for issuing innovation vouchers with predetermined conditions and criteria for their allocation and timing for their use. finally, the encouragement and promotion of innovation voucher support policies should be carried 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(2021). the impact of innovation vouchers on green innovation efficiency. academy of management proceedings, 1, 14580. doi: https://doi.org/10.5465/ambpp.2021.156 baltic journal of economic studies 86 vol. 7 no. 5, 2021 appendix a successful examples of the implementation of innovative vouchers № of project project name sector / company challenge innovation voucher solution impact 1 reduction of weather risk system (rowers method) construction (amg company) the construction process is virtually independent of weather conditions, especially wet conditions. the rowers method developed can simplify the construction process by using standardized parts, making construction cheaper and easier. construction company amg applied for an innovation voucher grant, received it, and negotiated with architectural firm gh design to develop architectural details for applying the rowers method to construction processes. the rowers method and its standard have become a key component in the construction industry. amg exceeded all kpis, namely: turnover, productivity, personnel qualification. 2 high-efficiency filters manufacturing (airguard filters) development of a new product aimed at the clean circulation of filtered air for any device. lack of funding for equipment and production, as well as the company 's inability to implement the product, was the reason for applying for the innovation voucher program. the innovation voucher collaboration with bridge pr and media enabled an extensive pr strategy (press releases, linkedin presence, technical presentations, etc.) that resulted in airguard filters becoming a member of the railway alliance and its products proving very useful to the rail sector. the marketing and promotion strategy developed as part of the innovation voucher program was the basis for launching a portfolio of new products. the company 's kpis such as sales and profitability were increased, and new jobs were created. 3 "business dashboard" online business audit tracking business services (business delta) as a result of the due diligence, the company produced a detailed action plan specifying the necessary kpis in various areas such as sales, marketing, hr , and finance, as well as recommendations for increasing the value of the business. however, monitoring the results over time required additional expertise of consultants. the developed online audit system made it possible to track the results of consultants' work and offer professional advice and support at every stage of the business online. the innovation voucher program has paid for the implementation of developed it specifications and the application of "proof of concept" as part of the innovation voucher authorized company collaboration. the company 's turnover has grown tremendously, and due to the constant demand for the system used, additional it specialists as well as auditors were required. the new "business dashboard" provides the ability to monitor all kpis, this product offered a new demanding service for the market. 4 application for delivery of cars by individual drivers logistics (dmn logistics) the payroll system was based on hours worked, and managing and controlling the workflow and schedule of employees was too complicated (faxes, mail). a possible solution could be an application designed to keep track of employees and update their current status instantly. the innovation voucher grant was to work with the business growth hub to develop an application that would record and store all data related to the workflow of individual drivers, such as hours worked, their location, jobs completed, etc. increased productivity, fast account management, job creation, excess turnover and profits. 5 cooperation between smes and university of surrey know-how, academic expertise the lack of specialists involved in smes leads to a limited number of innovation processes, a lack of proven expertise in new technologies and the development of new projects, as well as their testing and implementation. the innovation voucher scheme aims to cover the services of the university of surrey in relation to innovative projects at different stages from development to implementation. the funding amount for an innovation voucher ranges from 5,000 to 10,000 pounds. strengthening innovation projects in the sme sector, as well as recovery from covid-19, introduction of new processes, academic expertise in new areas related to business, innovation and social sciences. baltic journal of economic studies 87 vol. 7 no. 5, 2021 № of project project name sector / company challenge innovation voucher solution impact 6 innovation vouchers for smes that do not have their own resources for r&d r&d, innovation smes lack the ability to develop and implement product innovations, service innovations, and process innovations. therefore, smes can benefit from the experience and expertise of research institutes. innovation voucher a: up to 2,500 euros (max. 80% of costs) for activities leading up to the development of the innovative product. innovation voucher b: up to 5,000 euros (max. 50% of the costs) for the implementation of r&d processes. hightech start-up innovation voucher: up to 20,000 euros (max. 50% of costs) for r&d implementation in specific areas such as ict, green it, life sciences, etc. hightech digital innovation voucher: €20,000 (max. 50% of costs) to implement r&d in areas related to digitalization and industry 4.0. hightech mobility innovation voucher: 20,000 euros (max. 50% of costs) for r&d implementation in areas related to future mobility. development and implementation of business r&d and innovation smes. source: formed by authors on the basis of (guerrero, urbano, 2019; innovation vouchers. enterprise ireland (ei); innovation vouchers. innovation policy platform; kholiavko, grosu, safonov, zhavoronok, cosmulese, 2021; shkarlet, kholiavko, dubyna, 2019; spiesberger, schönbeck, 2019; stip compass) (end of appendix a) baltic journal of economic studies 20 vol. 8 no. 3, 2022 1 national university "odesa law academy ", ukraine (corresponding author) e-mail: bilatiunova@gmail.com orcid: https://orcid.org/0000-0001-7886-793x 2 kyiv institute of intellectual property and law, national university "odesa law academy ", ukraine e-mail: panovanatalia@gmail.com orcid: https://orcid.org/0000-0001-9139-3580 3 national university "odesa law academy ", ukraine e-mail: yevheniiafrolova@gmail.com orcid: https://orcid.org/0000-0002-9006-9444 doi: https://doi.org/10.30525/2256-0742/2022-8-3-20-26 encouragement as a method of managing social relations: applied significance in public service liubov bila-tiunova1, natalia panova2, yevheniia frolova3 abstract. the subject of the study is the conceptual, theoretical and methodological basis for the use of incentives as a method of management of social relations in general, and in the public service, in particular. methodology: general and special methods of scientific knowledge were used in this study. the method of comparison was used to summarize the approaches of various researchers on the main dominants to the definition of the concepts of "method", "method of encouragement", "formal and informal techniques that constitute the content of the method of encouragement". the analysis was used to determine quantitative and qualitative parameters that characterize the specifics of the influence of the method of encouragement on public service relations. the results of the study have shown that in ukraine, there is an urgent need to reassess the methods of public relations management with an emphasis on methods of a dispositive nature. conclusion. an argumentation is offered regarding the distinction between encouragement as a "method of regulating relations in the public service" and as an "institution of encouragement in the public service". formalized informal ways that cover the method of encouragement in public service are analyzed. it is established that the issue of informal ways of the method of encouragement in the public service has formed in connection with non-material variations of motivation of civil servants. the advantages of informal methods of method of encouragement in public service are revealed. the properties of the methods of proper regulation of public relations (public administration) are identified. it is noted that the content of each method is determined by the following features: the nature of relations between the participants of public interaction; techniques and means that are used (can be used) in the process of regulating influence; motivation that provides necessary/desirable behavior of a private person or authorized subject, acting as a subordination party or one of the parties of coordination interaction. it is argued the thesis that encouragement as a "method of regulation of public-service relations" is not identical to "institution of encouragement in public service". formalized informal ways that encompass the method of encouragement in public service are analyzed. it has been established that the problem of informal ways of method of encouragement in public service has formed because of non-material variations in motivation of public servants. the advantages of informal ways of method of encouragement in public service are revealed. key words: method, public administration, encouragement, public service, public servant, ukraine. jel classification: c49, h83, h19 1. introduction regulation of public relations is dialectically closely connected with their evolution. the choice of method of influence within the framework of relations regulated by the norms of public law is not sponta neous. at the same time, long-term use in related areas, positive international experience, the need to improve and complement existing regulators mediate the transfer of social methods of influence in the publiclaw sphere. the accent in the interaction of public authorities with private subjects changes from the overwhelming imperative to the expanded discretion, from the predominant use of the method of coercion to the method of persuasion. that is, to implement an effective and efficient regulatory mechanism of ordering public relations arising in the public-law sphere, in this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 21 vol. 8 no. 3, 2022 addition to common elements, new methods and means used in these relations must be taken into account. first of all, it is about the method of encouragement with its praxeological expression in public service. the issue of methods of activity of public authorities is becoming increasingly relevant in connection with the formation of ukraine as a country with a market economy and radical changes in the mechanism of public administration (bilatiunova, neugodnikov, danylenko, 2019; bilatiunova, bilous-osin, kozachuk, vasylkivska, 2019; sanjay, 2017) and, accordingly, in the organizational and legal status of the subjects of its implementation, as well as objects for which it is carried out (for example, decentralization of power, development of contractual relations in the activities of public administration, denationalization of the economy) (kolpakov, kuzmenko, 2013: 720). the value of the study of encouragement as a method of managing public relations in general and public relations in the sphere of public service in particular is further justified by: a) the trends of public service reform enshrined at the international (recommendation on leadership and public service capacity, 2019) and national levels (strategy for public administration reform in ukraine for 2022–2025, 2021); b) the need to form a profile of a new type of public servant. the latter includes the observance of official discipline by civil servants, which can be ensured, among other things, by the method of encouragement. this demonstrates the importance of analyzing the legal and applied principles of the incentive method and the peculiarities of its application to optimize public service. 2. the dialectic of determining the method of public relations management in general, the method is understood as a way of a certain activity, its organization and achievement of results. accordingly, the methods of proper regulation of public relations should be understood as means and techniques of direct and purposeful impact of subjects of public administration on certain objects of management, in other words – specific public relations. in legal science there is no single point of view regarding the definition of the concept of "method", they are systematized in table 1. approaches to the definition of the category "methods of public administration". thus, the essence of ordering methods, depending on the chosen approach, will reflect the purpose of the impact, but in any case will be disclosed through the management techniques and methods of activity (impact on the controlled or controllable object). an appeal to the theonoretical developments of domestic scientists in the field of public admini stration and administrative law gives grounds to highlight the following features of methods of management of social relations (public administration): 1) they express public interest; 2) the purpose of public administration methods usage and their applied value is to ensure public administration itself; 2) methods are manifested in the process of public administration implementation, expressing the regulating influence of public administration on various social relations; 3) reflect the nature of the relationship between the subjects of public administration and the subjects on which power-organizing influence is directed; 4) receive external expression through the forms of public administration, providing each administrative act, contract (etc.) with qualitative and stylistic content, without being fully exhausted by any of the forms; 5) is a means of implementing the competence of public administration subjects; 6) are mainly used based on variability; 7) the content of influence in each specific case depends on the specifics of the object, concerning which the method of public administration is applied; 8) have a specific nature of influence on objects of administration, i.e. they can exert both direct (administrative penalty measures) or indirect effects (restrictions on the rights of civil servants, encouragements, etc.). therefore, methods of public administration should be defined as ways and means of regulatory impact of subjects of public administration on the behavior of other (mainly subordinate) authorized subjects and private individuals, which are designed to ensure compliance of their activities with legislative requirements, the stable development of the entire sphere of public relations, safety and implementation of public interests. it should be noted that the doctrine of administrative law emphasizes the close connection of methods of state-authoritative activity with other elements of administrative regulation, namely: a) forms of public administration. as already mentioned, methods are reflected in the forms of public administration. without the forms of public administration methods would lose their essence, because it would be impossible to implement them in practice. in this case, the methods of public administration are specific means and methods of direct and purposeful impact on specific objects, and the form is the external manifestation of specific actions carried out by the subjects of public administration to implement the tasks assigned to them (bytiak, 2005: 438). thus, on the one hand, forms and methods are interdependent and in constant baltic journal of economic studies 22 vol. 8 no. 3, 2022 development. in comparison with the forms of public administration, methods have a lesser degree of normative regulation. it seems erroneous to consider methods of public administration exclusively as a secondary category in relation to the forms. b) instruments of public administration, which in general are the result of a combination of forms and methods and mean the way of external expression of power-regulatory impact of the subjects of public administration, carried out within the legally defined limits of competence in order to achieve the desired social result (yakovliev, 2016: 158; halunko, pravotorova 2021: 204). at the same time, the introduction and use of the category "instruments of public administration" is the result of updating the conceptual and categorical apparatus of administrative and legal science (melnyk, 2018), along with which the study of methods of public administration does not lose its relevance as a category that allows to distinguish public administration among other types of activities. in this connection, it is logical to consider the methodological component of public administration as an independent element. along with this, methods can be considered as part of public administration tools (halunko, pravotorova 2021: 204). but thereby not losing its independence and applied meaning; c) functions of public administration. on this occasion o.d. krupchan (2012: 258–259) notes that if state authority is a form of legal mediation of functions, whereas methods are more related to their practical implementation. understanding methods as methods of implementation of organizational impact in the relationship between subjects and objects of public administration, the style of managerial activity also adjoins to the methods. but not as personal, individualized features of personnel management activity, but as a set of means of activity, which is a separate manifestation of a more general phenomenon – methods of public administration. expressing the qualitative side of the implementation of management functions, methods – by analogy with functions – are directly related to the state-authoritative powers corresponding to these functions. this, so to speak, competent peculiarity of methods emphasizes, first of all, the generality (relative to the functions) of the basic requirements for their legal regulation and, consequently, for its improvement. as a result, the methods implement the functions and objectives of public administration, the rights and freedoms of man and citizen, as well as to ensure the legitimate interests of legal persons. so, summing up, it is worth noting that the category of public administration methods is closely related to other components of public administration activity, such as purpose, functions, forms, tools. all of the above indicates the multidimensionality of the concept under study. at the same time, the allocation of methods as an independent element has an important applied value, as it allows us to study the qualitative features of the activities of public authorities. it is important to note that in the scientific literature the term "methods of public administration" is used as synonyms with others, in particular: "administrative and legal methods", "methods of implementation of power-management actions", "methods of management", "methods of public-power activity ". in fact, the essence of these categories remains largely unchanged. it should be borne in mind that the term "administrative and legal methods" usually refers to methods of administrative law or methods of administrative and legal regulation, which are not identical in their content to the methods of public administration. methods of administrative law and methods of administrative-legal regulation should be different from the methods of public administration. the former are independent legal, rather than administrative categories. their essence comes down to the mechanism of legal regulation (one for all branches of law) (yurovska, 2017; 190). the differences lie in the fact that the methods of administrative-legal regulation apply to all participants of public relations, both to public administration bodies and to private individuals. the choice of one or another method of management of social relations depends on many factors: the competence and powers of the state body or official, the specifics of the object of management, the goals and functions of public administration. also the use of a certain arsenal of methods of power and administrative influence, given the nature of this activity, must necessarily comply with the principle of legality, as well as be the most effective to achieve the purpose for which it is used. the content of each method is determined by the following features: 1) the nature of the relationship between the participants of public interaction; 2) techniques and means that are used (can be used) in the process of regulatory influence; 3) motivation, which ensures the necessary/desired behaviour of a private person or an authorized entity acting as a subordinate party of subordination or one of the parties of coordination interaction. therefore, the essence of the method is manifested both in the will of the authorized subject in relation to other subordinate participants of legal relations, and in the nature of the will. thus, it was found that the methods of proper organization of public relations are a complex and multifaceted construction that expresses the substantive essence of public administration. at that, methods of public administration can change, and their combination can change. so, new types of baltic journal of economic studies 23 vol. 8 no. 3, 2022 public administration methods may be introduced by legislation and obsolete ones may be cancelled. 3. encouragement as a method of regulating social relations the variability of methods generates different gradations of their types and systematization. depending on the form of expression, methods are divided into: legal (contained in normative and individual legal acts and entailing legal consequences) and non-legal (characterized by the implementation by an authorized subject of certain organizational actions (meetings, briefings, etc.)) (nahaiev, 2018: 175; kovalenko, 2012; 702). depending on the degree of consideration in the power impact of interests there are types of methods: administrative – based on the use of objective organizational relations between people and general organizational principles of management; economic – monetary and financial policy, tax policy, impact on market pricing, economic stimulation, etc.; legal – legal impact on the social and legal sphere and its individual elements (chernov, voronkova, banakha, et al., 2016: 24). according to the content characteristics are considered groups of methods: legal regulation, organizational-administrative (administrative), economic, socio-political, socio-psychological and moral-ethical, which in turn are also divided into types (dziundziuk, meltiukhova, fomitska, 2011: 102). for the purposes of allocation of the method of encouragement in the system of methods of regulation of social relations, the classification will be of practical importance: 1) depending on the degree of use in the managerial impact of the legal obligation of the authority of the subject of management to: direct (unambiguously binding impact; lack of choice of options for action; faster and more reliable result; exclusion of positive initiative; the need for prompt adjustment; complex procedures of application); indirect (indirect impact on the will; multivariate actions and the possibility of discretion; promotion of the activity of private individuals; delayed and not unconditionally guaranteed result; do not require regular administrative intervention) (averianov, andriiko, bytiak ta in., 207: 299; bilokur, khamkhodera, avdieiev, 2019: 142); 2) depending on the nature of their influence on the will and behaviour of individuals (otherwise, on the motivational means used): persuasion, encouragement, coercion (zhuravel, 2020: 82). the method of encouragement involves a set of techniques of state-authoritative influence on authorized subjects, aimed at creating favorable conditions that motivate subjects of administrativelegal relations to perform certain actions, useful from the point of view of society and the state, by creating interest in obtaining additional benefits, which are simultaneously an incentive for socially active legal behavior (kozachuk, 2010). in the special literature, the method of encouragement is often not allocated as an independent method, but is disclosed within the method of persuasion. at the same time, greater emphasis should be placed on the impossibility of equating encouragement with persuasion, since these methods have a number of distinctive features: 1) the actual basis for encouragement is a merit or action that is positively evaluated by the subjects of power; 2) encouragement (as a single act) is related to the assessment of actions already taken; 3) the encouragement is personalized, it is applied to certain individual or collective subjects; 4) encouragement is manifested in moral approval, granting of rights, privileges, material values and other benefits. 4. the use of the method of encouragement in the management of social relations encouragement as a "method of management of public relations" is not the same as the "institution of encouragement in public service". at the same time, the actual implementation of methods of regulation of public-service relations aimed at creating favorable conditions for public service and incentives for public servants to qualitative performance of state or local self-government functions includes established methods of influence that have a normative basis. thus, the concept of "method of encouragement" is broader than the concept of "means of encoura gement", because the method is the approach to the regulation of public-service relations, and the means can be both formally established and material, and have an informal non-material nature. regarding the formalized methods that cover the method of incentives in public service, we note the following. first, the importance of this method is indicated in the international standards of public service (on the protection of the right to organization and procedures for determining the conditions of employment in the public service, 1978; on the equal remuneration of men and women for work of equal value, 1951). second, the national legislation provides for specific methods of encouragement (on the state service, 2015). these include: the announcement of gratitude (noted employees of ministries, other central committees, enterprises, institutions, organizations under their control, military personnel and employees of military formations, rank and file, employees of state law enforcement agencies); awarding a diploma, certificate of merit, other departmental awards of the baltic journal of economic studies 24 vol. 8 no. 3, 2022 state body (regulations on departmental encouragement awards, 2012); awarding with government awards and recognition with a government award (some issues of the introduction of encouragement awards of the prime minister of ukraine, 2000); state awards (state awards are the highest form of rewarding citizens for outstanding achievements in the development of the economy, science, culture, social sphere, defense of the fatherland, the protection of constitutional rights and freedoms, nation-building and social activities, for other services to ukraine. they are determined only by the laws of ukraine. the state awards are: 1) the title of hero of ukraine – the highest degree of distinction in ukraine, which is awarded for a remarkable heroic deed or remarkable labour achievement; 2) order: freedom; prince yaroslav the wise i, ii, iii, iv, v degrees; "for merit" of the i, ii, iii degrees; bohdan khmelnytskyi i, ii, iii degrees; heroes of the heavenly hundred; "for courage" i, ii, iii degrees; princess olga i, ii, iii degree; daniel of galicia; "for valiant mining work" i, ii, iii degree); 3) medal: "for military service"; "for impeccable service" of the 1st, 2nd, 3rd degrees; "defender of the fatherland"; "for a saved life"; 4) "named firearm" award; 5) honorary title of ukraine; 6) state prize of ukraine: taras shevchenko national prize of ukraine; state prize of ukraine in the field of science and technology; state award of ukraine in the field of architecture; state prize of ukraine named after oleksandr dovzhenko; state prize of ukraine in the field of education; 7) presidential award (bila-tiunova, 2020: 385). it should be noted that such formal ways of encouragement are observed in the practice of different states, for example, in the czech republic, the official body may give a public servant award for excellent service in the form of a written appreciation, which is recorded in the personal file of a public servant, material gift, the value of which may not exceed 5000 for one calendar year (on the service of civil servants in administrative institutions and on the remuneration of civil servants and other employees of administrative institutions [on service], 2002). specification of formal ways of the method of encouragement is additionally carried out at the level of the type of public service. for example, methods of encouraging police officers include: early removal of disciplinary action, provision of additional paid leave lasting up to five days, entry on the board of honour, early assignment of the next special rank, encouragement with a monetary reward, encouragement with the departmental encouragement award of the ministry of internal affairs of ukraine "firearms", encouragement with departmental encouragement awards of the national police of ukraine, encouragement with a valuable gift, assignment of a special title, one degree higher than the rank provided for by the full-time position held, encouragement with departmental encouragement awards of the ministry of internal affairs of ukraine, encouragement with departmental encouragement award of the ministry of internal affairs of ukraine "cold weapon" (about the national police, 2015; disciplinary statute of the national police of ukraine, 2018; regulations on encouragements in the national police of ukraine, 2019). as can be seen, the variability of the application of incentives in accordance with the current national legislation is wide enough. the choice of the latter is based on the analysis of the professional qualities of an employee of the national police of ukraine, the results of his service activity, the degree of service activity, initiative, as well as the state of compliance with the service discipline. the cumulative evaluation of the above criteria allows the immediate supervisor of such a person to form a proposal for encouragement (award letter). the question of informal methods of incentive method in public service arose in connection with non-material variations in the motivation of public servants. the need to focus on non-material motivation is particularly acute during the financial crisis, the growing negative trend toward so-called "sham" wage increases (salaries), which are often effectively negated by tax increases, and the lack of adequate replenishment of bonus funds, which could serve as a real interest of civil servants in the results of their hard work. in general, the above factors significantly reduce the impact of economic (material) incentives and motivation of civil servants. as for intangible motivation, this is a factor that can eliminate purely mechanical service ("work for the sake of work") and contribute directly to its effectiveness, quality and efficiency. a properly motivated civil servant often shows initiative, is not afraid to take responsibility, strives to carry out the provisions of his job description in full and with the least amount of time and money, and is able to produce original ideas or mechanisms for improving his work, because he directly understands better in practice how to make such improvement not just declarative. informal methods of incentive method in regulating public-service relations will be: a) involvement of public servants in the process of discussion and direct decision-making in those areas and issues where it is possible and expedient (addressing certain issues of organizational, information and technical and logistical support); b) public recognition (e.g., by publishing on the official website of a government agency or announcing a "best employee" or "board of honor," where it is appropriate to recognize the best public servants for a certain period of time, indicating the results of their hard work); c) verbal baltic journal of economic studies 25 vol. 8 no. 3, 2022 praise, which contributes to the formation of authority among colleagues and may be carried out not only individually, but also in the course of meetings or general meetings of the team (for example, setting a public servant as an example to colleagues and delegating him to represent his unit, department or staff in other structural units of the same body or another state body, local government); d) professional training, vocational training and retraining, trainings, seminars, refresher courses and their participation in the preparation of various kinds of projects, which are optional. thus, non-material ways of organizing public service relations, which make up the method of encouragement, can not only save the state budget of ukraine, but also motivate civil servants to high-quality, effective and productive work. consider it expedient in the process of urgent reform and improvement of the institute of public service to introduce the practice of fixing at least some of the above non-material methods of motivation at the level of subordinate normative legal acts. 5. conclusions the article deals with the principles of the use of encouragement as a method of public relations. the properties of the methods of proper regulation of public relations (public administration) are highlighted. it is noted that the content of each method is determined by the following features: the nature of the relationship between the participants of social interaction; techniques and means that are used (can be used) in the process of regulatory impact; motivation that provides the necessary/desirable behavior of a private person or authorized subject, acting as a subordinate party or one of the parties of coordination interaction. it is argued that the methods of proper regulation of social relations are a complex and multifaceted construction that expresses the substantive essence of public administration. at that, methods of public administration can change, and their combination can vary. thus, new types of public administration methods can be introduced by legislation and obsolete ones can be cancelled. for the purposes of identifying the method of encouragement in the system of methods of management of social relations as a classification of methods were chosen: a) depending on the degree of use in the managerial impact of legally binding powers of the subject of management; b) depending on the nature of their influence on the will and behavior of individuals (otherwise, on the used motivational means). it is argued the thesis that encouragement as a "method of regulation of relations in public service" is not identical to the "institution of encouragement in public service". formally enshrined informal ways that encompass the method of encouragement in public service are analyzed. it is established that the problem of informal methods of method of encouragement in public service has formed because of non-material variations in the motivation of civil servants. the advantages of informal ways of method of encouragement in public service were revealed. references: bila-tiunova, l., neugodnikov, a., & danylenko, yu. 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published on: 30th of september, 2022 baltic journal of economic studies 24 vol. 3, no. 1, 2017 a new approach to the assessment of effective management of gas supply diversification oleh dzoba1, liliya marynchak2, oleksandra romashko3 ivano-frankivsk national technical university of oil and gas, ukraine abstract. the purpose of the paper is to study the current state and trends in the development of the basic indicators of the eu gas sector, to generalize the theoretical and methodological approaches to calculating the gas diversification factor, assess and analyze its level in the eu countries in 2001-2015, and study the experience of european countries in addressing the diversification problems. methodology. the methodological basis of the study was the works of domestic and foreign scientists devoted to the issues of gas supply diversification. the study is based on the analysis of the gas sector indicators and used analysis, synthesis, combination grouping and statistical-economic methods. results of the of the study showed that in the eu countries in recent years there has been a noticeable tendency to reduce natural gas reserves, reduce the level of its production and increase consumption, which leads to an increase in import dependence. the largest consumers of natural gas in the eu are the united kingdom, germany, italy, the netherlands and france. the main external importers of pipeline gas to the eu countries are the russian federation, algeria and norway, and liquefied gas – qatar, algeria and nigeria. it is established that at the end of 2015, the most diversified gas supply is to countries such as france, belgium and italy; a low level of gas supply diversification is observed in hungary, poland and greece. practical implications. the analysis of basic indicators which characterize the state and development of trends of the european gas market in 2000-2015 is carried out. the assessment and analysis of the level of diversification of natural gas supplies in the eu countries in 2001-2015 have been analyzed. value/originality. it was proposed an original approach to calculate the gas diversification factor, which takes into account both the number of sources and the structure of the volumes of supplies from different sources. key words: natural gas, proved reserves, extraction, consumption, gas supply, diversification, index of diversification. jel classification: l71, l95, o13, l11, f50 corresponding author: 1 department of theory of economics and management, ivano-frankivsk national technical university of oil and gas. e-mail: dzoba1960@gmail.com 2 department of finance, ivano-frankivsk national technical university of oil and gas. e-mail: lmarynchak@yahoo.com 3 department of finance, ivano-frankivsk national technical university of oil and gas. e-mail: romashka-ua@mail.ru 1. introduction one of the main conditions for the state economical security is an effective energy policy on sustainable energy supplies. currently, global energy sector is characterized by limitations and exhaustion of hydrocarbon reserves, an imbalance between the availability of domestic energy resources and their demand, an increasing demand for energy, fluctuations in energy prices and increasing environmental requirements for their use. 2. trends of eu gas market the current state of the eu gas market is characterized by the following trends: reduction of proved reserves; decline in natural gas production; the increasing demand for natural gas; rising import dependence; the attempts of some eu countries to diversify domestic gas market through alternative sources and routes of gas supply. proved reserves of the european union according to the british company british petroleum at the end of 2000 were estimated at 3.82 trillion m3 (2.5% of world reserves), and at the end of 2010 they decreased to 2.44 trillion m3 which is only 1.3% of world reserves and is the lowest among all regions. it should be noted that gas is extracted by only 7 countries out of the 27 countries of eu (table 1). as shown in table 1, the most significant natural gas reserves, the value of which at the end of the analyzed period amounted to 0.7 trillion m3 (63.6%) can be found in the netherlands. we should note the annual negative trend towards reducing the resource base by baltic journal of economic studies 25 vol. 3, no. 1, 2017 increasing production of hydrocarbons and reducing the proportion of the finding of large fields. at the end of 2000 the united kingdom had a significant share of natural gas reserves – 1.2 trillion m3 (31.4%), but due to the exhaustion of gas fields during 15 years, the resource base has decreased by 6 times (to the level of 0.2 trillion). romania is the only eu country which during the reviewed period was characterized by the growth of the resource base. proved natural gas reserves of the country in 2005 due to the detection of hydrocarbons in the area of snake island have doubled in comparing with the previous analyzed period and came up to 0.63 trillion m3. in 2005 a foreign investor, the austrian oil company omv, came to romania, which had bought 35% of shares of parent petroleum romanian company petrom, and signed an agreement on developing the shelf. thus, romania at the end of 2010 took a second place (24.5%) among the eu countries on proved reserves. during the analyzed period poland had proved reserves of gas in 0,1-0,12 trln.m3. poland is the only eu country which for the past 15 years was characterized by stabilization of the resource base. one of the largest gas fields in the eu – przemysl-yaksmanitse lies in this country. most european countries don’t have their own natural gas deposits due to the unbalanced distribution of natural gas resources. the general trend during analyzed period is stabilization of proved natural gas reserves in poland and the decline in proved reserves in other eu countries. according to british petroleum, the deposits of natural gas in the eu under the existing extraction volume and unchanged stocks would last only for 11 years (comparing the production volumes and proved reserves of natural gas according to the data of 2015). thus, the limited internal resource base is typical for this region. the major trends in the volume of extraction depend not only on natural gas reserves, but on the volume of exploration, development of new deposits and implementation of new technologies. indicators of natural gas in the eu are shown in table 2. the data in table 2 show a slight decline of extraction in 2000-2004 and increase of reduction of gas production in the coming years. in 2015, the annual natural gas extraction in europe decreased to 120.1 billion m3, representing 3.4% of world production. this trend is due to the exhaustion of gas fields, complication of terms of gas production, reduction in exploration work and proved reserves. the largest share of gas extraction during 2000-2008 was from the uk, but in 2000 the country produced 108.4 billion m3 (46.7% of total eu production), whereas in 2015 only 39.7 billion m3 ( 33% of total production), which is almost three times less. this table 1 proved reserves of natural gas in the eu, trillion m3 country period 2000 2002 2004 2006 2008 2010 2012 2014 2015 netherlands 1,50 1,43 1,33 1,22 1,14 1,17 0,8 0,7 0,7 great britain 1,20 1,00 0,83 0,41 0,29 0,26 0,2 0,2 0,2 romania 0,34 0,31 0,30 0,63 0,62 0,60 0,1 0,1 0,1 germany 0,22 0,19 0,16 0,13 0,10 0,07 0,1 <0,05 <0,05 italy 0,18 0,16 0,11 0,09 0,06 0,08 0,1 <0,05 <0,05 denmark 0,14 0,13 0,12 0,12 0,06 0,05 <0,05 <0,05 <0,05 poland 0,12 0,12 0,11 0,11 0,11 0,12 0,1 0,1 0,1 (bp statistical review of world energy, june 2011 – june 2016) table 2 the volume of the natural gas extraction in the eu, billion m3 country period 2000 2002 2004 2006 2008 2010 2012 2014 2015 netherlands 58,1 60,3 68,5 61,6 66,6 70,5 63,8 55,7 43,0 great britain 108,4 103,6 96,4 80,0 69,6 57,1 38,9 36,8 39,7 romania 13,8 13,2 12,8 11,9 11,4 10,9 10,0 9,7 10,3 germany 16,9 17,0 16,4 15,6 13,0 10,6 9,0 7,7 7,2 italy 15,2 13,4 11,9 10,1 8,5 7,6 7,8 6,5 6,2 denmark 8,2 8,4 9,4 10,4 10,1 8,2 5,8 4,6 4,6 poland 3,7 4,0 4,4 4,3 4,1 4,1 4,3 4,1 4,1 other ue countries 7,6 7,7 7,5 7,4 6,1 5,9 7,1 5,4 5 eu 231,9 227,6 227,3 201,3 189,4 174,9 146,7 130,5 120,1 (bp statistical review of world energy, june 2011 – june 2016) baltic journal of economic studies 26 vol. 3, no. 1, 2017 negative trend is due to the exhaustion of most fields. due to the sufficient volume of proven reserves and commissioning of new gas fields on the north sea offshore, netherlands managed to increase production during the years 2000-2010 by 12.4 billion m3, which brought this country to the position of the largest distributors of gas in the eu. as shown in table 2, the netherlands (35.8% of production in 2015) and the uk (33%) were the largest producers of gas among european countries. these two countries account for almost 70% of the extracted natural gas in the eu. the smallest volume of natural gas is produced in poland. overall in 2000-2015 gas production in the eu decreased. the largest reduction in gas production was noted in the uk. the eu is the only region in the world where over the last 15 years the extraction volume of gas has decreased. consumption of natural gas in the country depends on economic growth, industrialization, industrial policy and the development of other energy resources, table 3. as shown in table 3, overall gas demand in the eu increased by 2010 and reached the maximum level of consumption during the analyzed decade  – 492.5 billion m3. during the following years there was a 22 % reduction in demand. according to the results of 2015, the volume of natural gas increased by 4.5% compared to the previous period. overall consumption in the european union over the last fifteen years decreased by 8.7%. the structure of natural gas consumption in some countries remained virtually unchanged throughout the period under review, which indicates the inertia of energy sectors of these countries and dependence of national economies on the appropriate resources. geography of gas consumption is characterized as follows: 70% gas (based on 2015) accounted for 5 european countries (uk, germany, italy, the netherlands and france). at the same time, the share of gas consumption in bulgaria, denmark, greece, finland, lithuania and sweden is less than 1% of total eu volume. during the period under review in the eu there was a growing imbalance between the volume of consumption and production of natural gas. dynamics of natural gas deficit is negative, because it has a clear upward trend. thus, if the european union in 2000 met the demand of gas production at 52.66%, in 2010 – only at 29.87%. therefore, a feature of the european gas market is characterized as high level of import dependence . according to the forecasts of a british company “british petroleum” in the long run out of the extractive energy resources there will be an increasing demand for natural gas due to its more favorable environmental characteristics (bp world development forecast: forecast of world energy development 2030). the increase in gas demand in the eu is predetermined by (saprykin v., 2004): the prospect of the nuclear power plants shutdown in some eu countries (germany, switzerland, belgium). may 30, 2011 the german government announced its decision to close by 2022 all 17 nuclear reactors, which today produce about 23% of electricity. switzerland by 2034 plans to close all five nuclear power plants, which account for about 40% of energy in the country. the gradual closure of the belgian nuclear power plants to be completed by 2025; the need to supply natural gas to certain regions of the eu, which still do not receive it due to the construction of new gas pipelines; increasing number of the eu member states (croatia became the 28th member of the eu july 1, 2013, candidates for the eu membership are albania, iceland, macedonia, serbia, turkey and montenegro, possible candidate are bosnia and herzegovina, kosovo). due to the absence of its own resource base, european countries have to import natural gas, table 4. a characteristic feature of the european gas market during the years of 2009-2015 was stable level of import dependance (except 2014), since the volume of imported natural gas was almost at the same level, although since 2011 there was a downward trend in import. partially deficit of natural gas is covered by domestic import  – from denmark and the netherlands. the major foreign importers of pipeline gas to the eu are the russian federation, algeria and norway. certain amounts of gas to european countries are transmitted from libya. it should be noted that big share of imported table 3 eu gas balance indicators period 2000 2002 2004 2006 2008 2010 2012 2014 2015 consumption volume, billion. m3 440,4 451,2 486,0 486,9 489,7 492,5 439,8 384,5 402,1 extraction volume, billion m3 231,9 227,6 227,3 201,3 189,4 174,9 146,7 130,5 120,1 deficit,, billion m3 208,5 223,6 258,7 285,6 300,3 317,6 293,1 254 282 ratio of energy dependence, % 47,34 49,56 53,23 58,66 61,32 64,49 66,64 66,06 70,13 (bp statistical review of world energy, june 2011 – june 2016) baltic journal of economic studies 27 vol. 3, no. 1, 2017 gas during 2009-2011 came from russia (26-28%), and in 2012 – up to 34%, therefore european countries have become more dependent on russian gas. thus, one third of the analyzed energy resources to eu countries comes from russia, but due to the international standards of security energy supplies from other sources should not exceed 25% (volovich a.). diversification of natural gas supply to the european union is provided by lng technology, which is natural gas transportation in liquefied state using special gas carriers. belgium, france, greece, italy, spain, portugal and the united kingdom are the lng consumers among the europien countries. the main importers are qatar, algeria and nigeria. certain amounts of liquefied natural gas european countries get from norway, peru, trinidad and tobago, egypt, emena, oman, equatorial guinea and libya. it should be noted that during the analyzed period the ratio between the volume of natural gas transportation by pipelines and by lng technology has changed towards increasing the main pipeline transportation. a significant deficit of energy in the eu causes the urgency of solving the problem of diversification of sources and routes of supply to domestic national markets. 3. indicators of diversification of gas supply the analysis of publications shows the lack of scientifically proved methodical approaches to evaluation of the diversification of certain types of energy resources to the national markets. natural gas is no exception. considering the problem of diversification of gas supply for certain national markets, the share of the natural gas in the energy balance of the country should be taken into consideration, as well as the the number of external sources of gas supply, diversification of the transport infrastructure for gas to supply, and the share of gas coming from different sources. to assess the impact of the diversification of gas supply we should reasonably measure its level using quantitative and qualitative indicators. to assess the level of diversification we suggest the following indicators (dzoba o., 2012): the absolute level of diversification. it is determined by the total number of independent gas suppliers. for more complete idea about the nature of diversification it would be desirable to allocate the number of suppliers by gas pipelines and lng. in accordance with international standards, energy imports is considered reliable if the supply is carried out of at least three sources (volovich a.), thus compliance with these conditions means that gas supply is diversified. the maximum volume of supply from one source. according to the international criteria of energy security, energy supply from one source should not exceed 25% (volovich a.), therefore the limiting volume of supply will be: qm = 0,25 * qt, (1) where qt – the total import volume of natural gas, m3. the relative diversification coefficient, which takes into account the number of suppliers and their supply volumes. %, q qi c t n і d 100 1 ∗= ∑ =       > ≤ = mіm mіi i qqifq qqifq q (2) where qi – the amount of gas supplied by individual producer (from one source): %, q qi c t n і d 100 1 ∗= ∑ =       > ≤ = mіm mіi i qqifq qqifq q (3) n – the number of sources of gas supply. we propose the following grading diversification, which covers four main areas (table 5). table 4 assessment of the indicators of natural gas import to the eu indicator period 2009 2010 2011 2012 2013 2014 2015 gas imports to the eu, billion m3 including 411,6 418,9 405,5 404,3 396,9 362,2 409,2 via pipelines 331,7 334,1 345 358,9 355,2 320,8 361,7 lng 79,8 84,9 60,5 45,4 41,7 41,4 47,5 including imports of russian gas 110,4 117,1 105,5 136,2 136,2 120,8 133,2 the volume of gas transit through ukraine to the eu, billion m3 92,8 95,4 101,1 81,2 83,7 59,4 64,2 the share of imported russian gas, % 26,82 27,95 26,02 33,69 34,32 33,35 32,55 the share of ukraine's gts transit in import, % 22,55 22,77 24,93 20,08 21,09 16,40 15,69 the share of ukraine's gts transit in russian gas, % 84,06 81,47 95,83 59,62 61,45 49,17 48,20 (bp statistical review of world energy, june 2011 – june 2016) baltic journal of economic studies 28 vol. 3, no. 1, 2017 table 5 gradation of the diversification level of gas supply the diversification coefficient diversification zone cd < 50% critical diversification level 50% ≤ cd < 75% low diversification level 75% ≤ cd < 90% medium diversification level cd ≥ 90% high diversification level (developed by the author) it should be noted that this factor can be considered if the minimum condition of diversification is met, namely the energy supply is carried out of at least three sources. 4. evaluation of the diversication of gas supplies in the eu using these indicators, we will analyze the principle of diversification of the eu countries, including the uk (table 6). the coefficients of diversification of gas supplies in europe in the years 2001-2015 were summarized in table 7. the analysis showed that a high diversification level is typical for france and spain, but during the last 2-3 years the diversification of gas supply has deteriorated. belgium has achieved a high level during 2009-2011, and italy – in 2010-2012. for germany diversification coefficient by 2012 was in medium rate, and over the next two years dropped to 73%. until 2005 the diversification rate in the uk was low, and the next four years were characterized by critical diversification, in 2010 the index moved to the average rate, but at the end of the reviewed period it was characterized by weak diversification again. for the netherlands it was also characterized by variable diversification zones: low (2001-2002), medium (2003-2007), high (2008), medium (2009-2010) and low (2011-2014). critical diversification of sources and ways of natural gas supply is characteristic of slovenia. austria has optimized the partial gas supply since 2007 to reach a low level of diversification. in 2008 greece also moved into this zone. the critical diversification level of natural gas supply is observed in post-soviet countries such as hungary, poland and romania. as for the other eu countries, the partial diversification of gas supply is typical for the czech republic (imports gas from norway and russia), luxembourg (during 2001-2002 carried supplies from germany and the netherlands, and since 2003 gas was imported from belgium instead of netherlands) and sweden (since 2003 – two sources of natural gas supply). table 6 the volume of gas supply to the uk in 2001-2015, billion m3 country period 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 belgium 1,2 1,8 1,8 1,8 1,12 0,74 1,26 germany 0,4 0,6 1,0 1,0 1,6 netherlands 0,5 1,1 0,5 0,5 0,3 0,6 8,2 9 6,44 8,07 6,4 7,3 9,5 6,6 3,1 norway 2,2 3,6 6,61 9,1 11,55 14,1 16,4 25,3 23,7 25,63 21,7 26,8 29,1 25,9 25,7 other countries of eu 1,3 3,3 0,4 0,2 usa (lng) 0,18 trinidad and tobago (lng) 0,07 0,6 0,39 0,47 1,97 1,63 0,6 0,1 0,4 0,4 qatar (lng) 0,27 0,12 5,75 13,89 21,9 13,3 8,6 10,4 11,9 yemen (lng) 0,26 0,7 norway (lng) 0,26 0,94 0,4 0,2 0,1 0,1 egypt (lng) 0,96 0,16 0,08 0,51 0,12 0,1 0,1 0,1 algeria (lng) 0,45 2,0 0,64 0,37 1,68 1,25 0,2 0,1 0,4 0,5 0,4 australia (lng) 0,08 nigeria (lng) 0,4 1,3 0,1 0,1 the total amount bln.m3 2,7 4,7 7,51 11,4 15,17 21,06 29,46 36,46 41,12 53,63 53,4 49,2 51,2 44,2 41,9 the absolute level of diversification of gas supply (the number of independent gas suppliers) 2 2 3 4 6 7 8 7 9 11 9 8 8 6 8 the limited vo-lume of supply, billion m3 0,68 1,18 1,88 2,85 3,79 5,27 7,37 9,12 10,28 13,41 13,33 12,30 12,80 11,05 10,48 the coefficient of diversifica-tion, % 43,52 48,40 36,98 45,18 48,86 58,05 66,50 55,61 67,38 77,21 84,29 68,50 68,16 66,40 60,26 (bp statistical review of world energy, june 2011 – june 2016) baltic journal of economic studies 29 vol. 3, no. 1, 2017 the other eu countries import the entire volume of natural gas from one supplier: bulgaria, finland, lithuania, latvia and slovakia from russia, and ireland – from britain. these countries are in a position that is internationally called critical monopoly dependence, because they are 100% depended on one gas supplier. to increase gas diversification in eu, countries should deepen cooperation with countries  – suppliers and transit countries of energy resources, conduct a search for alternative exporting countries, develop diverse routes and introduce new technologies. in addition, countries when developing their own strategies of gas supply should not only consider the pros and cons of diversification, but the ratio of supply from different sources and the risk of abusing the energy security. 5. conclusions as a result of research the original approach to the evaluation of the diversification level of gas supply to individual national markets was offered, which takes into account the number of sources and the structure of supply from various sources, and the diversification level of natural gas supply to the eu countries was analyzed. it was found that in eu countries in recent years there has been a noticeable tendency to depletion of natural gas reserves, reducing its production and growth of consumption, which leads to the increase of the import dependence. eu demand in natural gas by domestic production was met in 2015 only by 29.87%. the largest consumers of natural gas in the eu are the united kingdom, germany, italy, the netherlands and france. the major foreign importers of pipeline gas to the eu are the russian federation, algeria and norway, and lng – qatar, algeria and nigeria. to reduce energy dependence, eu countries should diversify sources and routes of energy supply to ensure their own energy security. by the end of 2015 the most diversified gas supply countries were france, belgium and italy; the lowest level of diversification of gas supplies can be noted in hungary, poland and greece. table 7 diversification ratios of gas supply of the eu countries in 2001-2015, % country period 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 germany 81,93 82,87 81,28 80,10 79,39 78,95 79,18 78,13 80,45 79,30 76,37 75,92 73,41 72,12 72,98 italy 74,54 81,49 82,98 83,73 83,92 88,76 88,70 86,33 89,16 90,56 94,40 94,16 81,32 83,64 82,37 france 92,17 92,61 93,08 91,47 96,04 95,75 92,67 92,72 92,49 97,10 93,66 85,57 85,56 80,20 84,53 spain 83,30 91,29 91,51 97,37 96,62 100,00 99,95 100,00 100,00 100,00 99,39 95,61 87,38 88,84 74,82 austria 38,58 46,80 49,32 48,08 46,66 46,53 50,13 53,40 56,83 47,45 72,92 71,05 50,00 50,00 50,0 belgium 68,57 74,62 83,99 73,12 74,89 78,92 76,25 75,02 91,69 97,23 100,00 95,36 83,84 91,67 84,06 great britain 43,52 48,40 36,98 45,18 48,86 58,05 66,50 55,61 67,38 77,21 84,29 68,50 68,16 66,40 60,26 hungary 45,26 37,80 39,47 39,89 48,11 49,02 50,10 47,61 36,11 38,39 39,93 43,63 25,0 25,0 25,0 poland 35,71 32,79 35,57 38,19 62,32 58,77 58,33 51,53 46,86 35,54 39,68 43,18 40,79 41,04 45,72 nether-lands 50,99 65,33 83,26 85,03 89,36 87,22 83,72 90,39 80,84 77,21 66,79 69,83 64,53 72,41 63,62 greece 50,00 48,92 50,00 45,00 41,08 41,96 46,89 57,37 62,69 71,91 da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e 49,0 slovenia 50,00 50,00 50,00 59,09 59,09 59,09 59,09 da ta un av ai la bl e 50,00 50,00 da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e portugal 35,57 41,35 50,00 50,00 50,00 50,00 50,00 51,10 71,32 66,73 da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e da ta un av ai la bl e 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(2008). diversification projects in ukraine's energy sector: state, problems and ways of their realization // national security and defence – ukrainian centre for economic and political studies named after razumkov, № 6, p. 2-53. dzoba, o. (2012). evaluation of diversification of natural gas supply in the european – scientific journal "economic journal – xxi", № 7-8, p. 37-40. saprykin, v. (2004). "gas triangle" eu-ukraine-russia: unity and struggle of interests – zerkalo nedeli, №8 (332). volovich, a. diversification prospects of energy supply to ukraine [electronic resource].  – retrieved from: http://www.niss.gov.ua/monitor/mart2009/5.htm. олег дзёба, лилия маринчак, александра ромашко новый подход к оценке эффективного управления диверсификацией газоснабжения аннотация. целью статьи является исследование современного состояния и тенденций развития базовых показателей газового сектора ес, обоснование теоретико-методологических подходов к расчету коэффициента диверсификации газоснабжения, оценка и анализ его уровня в странах ес в 2001-2015 годах, изучение опыта европейских стран в решении проблем диверсификации. методологической базой исследования стали труды отечественных и зарубежных ученых, посвященные вопросам диверсификации газоснабжения. исследование основано на проведении анализа показателей газового сектора и основывается на методах анализа, синтеза, комбинационного группирования и статистическо-экономическом методе. результаты исследования показали, что в странах евросоюза в последние годы наблюдалась заметная тенденция к сокращению запасов природного газа, снижение уровня его добычи и рост объемов потребления, что приводит к росту импортозависимости. крупнейшими потребителями природного газа в ес являются великобритания, германия, италия, нидерланды и франция. основными внешними импортерами трубопроводного газа в страны ес являются российская федерация, алжир и норвегия, а сжиженного газа  – катар, алжир и нигерия. установлено, что на конец 2015 года самым диверсифицированным является газоснабжение таких стран, как франция, бельгия и италия; низкий уровень диверсификации газоснабжения отмечается в венгрии, польше и греции. практическое значение. проведен анализ базовых показателей, характеризующих состояние и тенденции развития европейского газового рынка за 20002015 годы. осуществлены оценка и анализ уровня диверсификации поставок природного газа в странах ес в 2001-2015 годах. значение/оригинальность. предложен оригинальный подход к расчету коэффициента диверсификации газоснабжения, который учитывает как количество источников, так и структуру объемов поставок из разных источников. baltic journal of economic studies 88 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-88-96 typologization of the effects from the introduction and use of information and communication technologies and their characteristics tetiana hushtan1, svitlana danylo2 abstract. the subject of the study is to consider the impact of information and communication technologies (ict) on the country’s economic development that requires providing the systematic research of objective prerequisites for increasing ecological and economic efficiency of the introduction and use of ict. the economic justification for the implementation of ict taking into account the economic consequences of its impact on the environment is impossible without studying, systematizing economic and environmental effects from the use of ict. scientific studies of the economic problems of the implementation of ict, in our opinion, should be deepened on the basis of the need to take into account the positive and negative economic consequences of their impact on the environment and therefore require further research in this direction. the purpose of the paper is to determine the impact of information and communication technologies on the country’s ecological and economic development and to systematize the economic, social and environmental effects from the introduction and use of ict. the dialectical method of scientific knowledge, method of analysis and synthesis, comparative method, method of data generalization are used in the paper. the paper outlines and describes the main directions of influence of information and communication technologies (ict) on economic development of industry, on development of agriculture, on the sphere of transport and communication. the classification of the effects from the introduction and use of ict is given, namely: by the life cycle of the product – the effects that arise at the stage of development, production, realization, consumption and disposal of the product; by recipients of influence – the effects that arise in enterprises, government bodies, which use ict, households, which are consumers of ict goods and services, and in the environment; by the form of manifestation – direct and indirect effects. ict provide extensive opportunities for learning, promote the participation of citizens in public life, etc., but at the same time they can increase the unevenness of the economic development of the regions of the country due to the difference in access to ict. the development of ict provides a reduction in the material component of production and consumption, helping to reduce the resource intensity and ecological sustainability of economic processes, and improve the environmental situation. key words: information and communication technologies, market, effects, information, enterprises, investments, information society, business, ecology. jel classification: c42, o32 corresponding author: 1uzhhorod trade and economic institute of kyiv national university of trade and economic, ukraine. e-mail: hushtantetiana@gmail.com orcid: https://orcid.org/0000-0002-0299-0437 researcherid: https://publons.com/researcher/4506839/ 2uzhhorod trade and economic institute of kyiv national university of trade and economic, ukraine. e-mail: kveta_utei@ukr.net orcid: https://orcid.org/0000-0003-3300-7172 1. introduction the intensive development of information technology in the modern world leads to the fact that information becomes crucial for economic, social and environmental progress. the development of information and communication technologies (ict) in the information society is becoming crucial for socio-ecological and economic development. there is a close connection between the level of ict development and the socioecological and economic development of the state. the transition to the information society and the need to take into account the results of the impact of baltic journal of economic studies 89 vol. 7, no. 3, 2021 information and communication technologies on the country’s economic development requires providing the systematic research of objective prerequisites for increasing ecological and economic efficiency of the introduction and use of ict. the economic justification for the implementation of ict taking into account the economic consequences of its impact on the environment is impossible without studying, systematizing not only economic but also environmental effects from the use of ict. the theory and practice of assessing the socio-eco-economic efficiency of ict implementation and use will require further improvement. information and communication technologies are a potentially powerful mechanism for transforming public life and growing the world economy. icts are also able to expand the range of social projects and increase their effectiveness. thus, thanks to the use of ict, the state has already received significant benefits in the field of health, education and environmental protection. improving the characteristics of ict and the implementation of new functionalities actually play the role of an engine for large-scale changes in the economy. such changes are twofold: first, there are changes in the internal nature of the goods or services provided by icts, and second, as a means of seriously transforming the relationship between governments, companies, citizens and consumers. in this regard. among many other goals, one of the most important tasks of ict is to support sustainable development. the concept of sustainable development emerged as a result of combining three main points of view on the development of society: economic, social, and environmental. 2. analysis of recent research and publications the works of both domestic and foreign scolars and scientists: o. balatsky (balatskiy, 1979), l. varakin (varakin, 2005), m. zgurovskiy (zgurovskiy, 2005), v. ivanova (ivanova, 2008), v. inozemtsev (inozemtsev, 2000), m. castells (castells, hymanen, 2002), v. kovalevskyi (kovalevskyi, 2003), d. lyon (lyon, 1996), c. nelson (nelson, 1993), m. makarova (makarova, 2002), ye. khlobystov (khlobystov, 2004), a. chukhno (chukhno, 2003) et al. are devoted to the study of the relationships between economic development and environmental processes, the problems of assessing the positive and negative economic, social, environmental effects from the introduction and use of ict. in spite of the results obtained, scientific studies of the economic problems of the implementation of ict, in our opinion, should be deepened on the basis of the need to take into account the positive and negative economic consequences of their impact on the environment and therefore require further research in this direction. the purpose of the paper is to determine the impact of information and communication technologies on the country’s ecological and economic development and to systematize the economic, social and environmental effects from the introduction and use of ict. 3. introduction and use of information and communication technologies the intensive development of information technologies in the modern world leads to the fact that information becomes crucial for economic, social and environmental progress. the transition to the information society implies the implementation of systemic changes in the social, economic, political, legal, and cultural structure of society. the development of information and communication technologies in the information society becomes crucial for socio-eco-economic development. there is a close link between the level of ict development and the socioeco-economic development of the state. information and communication technologies is a potentially powerful mechanism for transforming public life and the growth of the world economy. at a basic level, they help different institutions work more productively, thereby increasing their competitiveness and productivity. ict are also able to expand the range for realization of social projects and improve their effectiveness. thus, thanks to the use of ict, the state has already benefited greatly from health, education and the environment (the role of modern information technologies in socio-economic development, 2005). improving the characteristics of ict and the implementation of new functional capabilities actually play the role of engine for realization of large-scale changes in the economy. such changes are twofold: firstly, there are changes in the internal nature of goods or services provided through ict, and secondly, as a means of a serious transformation of relations between governments, companies, citizens and consumers. in this regard, among many other goals, one of the most important tasks of ict is to support sustainable development. the concept of sustainable development arose as a result of the unification of three main points of view on the development of society: economic, social and environmental. the economic, social and environmental spheres are equally important and interdependent. at the same time, economic sustainability means that economic growth takes place without the presentation of special requirements for the social sphere or for natural resources; the environmental sustainability means not only minimizing the impact on the natural environment, but also on the state of natural resources and preserving them for the future; social sustainability means improvement and, in no case, destruction of the achieved level of social equality (european information technology observatory yearbook, 2002). baltic journal of economic studies 90 vol. 7, no. 3, 2021 the effective use of the benefits of ict can be a driving force in achieving of sustainable development, which expresses the relationship between the economic, environmental and social spheres. 3.1. areas of influence of ict on the economic development of industry the impact of ict has its positive and negative manifestations in any area of the national economy. consider the directions of the influence of ict on the economic development of industry: 1) positive impact: – increasing labor productivity; – increasing market efficiency (as a result of obtaining access of enterprises to the global market of suppliers and consumers); – reduction of expenses on account of management automation; – the properties of virtual ict goods (low marginal costs for copying, distributing and providing communications) reduce operating costs; – an opportunity for enterprises to respond quickly on market development; – increasing of efficiency of supply and production networks, reduction of stocks due to the use of systems “exactly on time”; – carrying out the internet conferences, negotiations allow to reduce expenses for business trips; – ict market growth (new types of goods, entrepreneurial activity, employment growth); – structural changes in the economy (an increase in the share of services); – increasing the need for qualified ict specialists; – increasing the number of the internet users, personal computers; – the use of advanced technologies is more energy-efficient; – telework (for example, at home through the internet), as well as internet conferences, negotiations reduce the number of passengers, reducing emissions of harmful substances (including co2) from vehicles; – efficient management of supply systems reduces cargo transportation, reducing emissions of harmful substances (in particular, co2) into the atmosphere; – increasing the efficiency of consumption of natural resources due to the dematerialization of goods, the use of efficient technologies and renewable energy sources; 2) negative impact: – comparative advantages of using ict in different regions may contribute to uneven distribution of economic benefits; – at the initial stage of ict implementation, significant investments and long waiting times are needed for their use; – availability of costs related to the security of information systems, the risk of using the internet (viruses, attacks, etc.); – a reduction in the number of jobs due to automation of production processes; – increasing the digital gap among the population within the country, between countries, regions, etc.; – electricity consumption, even in standby mode; – use of toxic substances in the production of ict equipment; – the problem of recycling waste for electronic devices, etc. 3.2. areas of influence of ict on the development of agriculture consider the directions of the impact of ict on the development of agriculture: 1) positive direction: – possibility of remote on-line monitoring and analysis of business processes using the internet; – possibility of rural communication development; – use of global and local knowledge systems for farms; – global positioning and dispatching of field technology, etc.; – increasing e-literacy among the rural population; – the need for qualified ict specialists; – satisfaction of cultural needs, leisure activities of rural inhabitants; – rational use of agricultural lands, natural resources, etc.; 2) negative direction: – increasing economic inequality between rural and urban populations; – increasing the digital gap between rural and urban areas; – electricity consumption by ict equipment. 3.3. areas of ict impact on transport and communications in our opinion, the main areas of influence of ict on the sphere of transport and communication are: 1) positive direction: – an increase in the volume of freight by increasing the number of deliveries to “home”; – expanding travel opportunities through the use of mobile ict; – increasing the density of telephone lines; – development of mobile communication, high-speed internet access; – opportunity to purchase travel documents, including international ones, at ticket offices throughout the country and with the help of the internet; – optimization of transportation using logistics systems; – increasing the need for qualified ict specialists; – increasing the number of the internet users, mobile communication; – greater accessibility of international communication, etc.; baltic journal of economic studies 91 vol. 7 no. 3, 2021 2) negative direction: – reduction of passenger traffic due to telework, internet conferences, etc.; – growth of losses of companies engaged in activities in the field of traditional means of communication (post, telegraph communication); – reducing the number of jobs due to automation of process management; – an increasing in the digital gap between the population within the country, between countries, regions, etc.; – increasing cargo and passenger transportation, and, accordingly, co2 emissions into the atmosphere, due to the growth of the level of “human mobility”; – increasing electricity consumption by ict equipment, etc. 3.4. classification of economic, social and environmental impacts related to ict implementation most studies use the classification of economic, social and environmental effects associated with the implementation of ict, where they are divided into three groups: first-order effects associated with the processes of development, production, operation and utilization of ict equipment; second-order effects associated with the use of ict; third-order effects, which are the combined effects of the massive use of ict in the long run. in figure 1, a classification of effects from the introduction and use of ict is provided. according to the product life cycle, the effects divided on the effects of emerging at the stages of development, production, sale, consumption and disposal; according to the recipients of influence – the effects in enterprises, government bodies that use ict, in households that are consumers of ict products and services, and in the environment. according to the form of manifestation the socio-ecoeconomic effects of the introduction and use of ict should be divided into direct and indirect ones. direct socio-eco-economic effects are a direct consequence of the development, production, operation, utilization of ict equipment or the purpose of the introduction and use of ict (monitoring and control of natural objects, etc.). indirect socio-eco-economic effects are not aimed at the introduction of ict and arise in the process of their use as a side effects (the change figure 1. classification of effects from the introduction and use of ict source: compiled by authors 9 classification of effects from the introduction and use of icts according to the periodicity of calculation: short-term (for a year, a quarter, a month); mid-term; long-term according to the life cycle of the product: at the stages of development, production, marketing, consumption, utilization according to the form of manifestation: direct, indirect according to the scale: global, national, regional, local according to the direction of influence: positive direction, negative direction according to the sphere of influence: economic, social, political, environmental, technological, cultural according to the degree of use of icts: first-order, second-order, third-order according to the recipients of influence: the effects that arise in enterprises that use icts, bodies of state power using icts, households that are consumers of ict goods and services, the environment baltic journal of economic studies 92 vol. 7 no. 3, 2021 in the volume of emissions of harmful substances from transport by changing the volume of passenger and freight due to the introduction of teleworking, e-commerce, etc.). consider the economic, social and environmental effects for determination of the socio-eco-economic implications of the introduction and use of ict. as it can be seen from table 1, the benefits of ict development are the growth of the ict market, the emergence of new jobs. the development of ict stimulates investment in research and development in this area; companies are ready to invest as much as possible in ict implementation. this leads to the emergence of new types of entrepreneurial activities related to the providing of ict infrastructure and the providing of the necessary services: mobile communications market, fiber optic production, etc. application of ict in business can: reduce costs through automation of management, as well as the properties of virtual ict goods (low marginal costs for copying, distributing and providing communication); reduce operating costs; increase the efficiency of networks for supply and production; reduce the volume of stocks due to the use of systems “exactly in time”; conducting of internet conferences, negotiations reduces expenses for business trips. small and mediumsized enterprises, thanks to the development of e-commerce, have the opportunity to enter on new consumer markets, which previously was only available to large companies. 3.5. impact of ict in the economic, social and environmental spheres the development of ict, in particular the internet, provides consumers with more opportunities for obtaining information about a products or companies, for organizing communities and movements for consumer rights protection. due to the fact that online economic relations occur without direct contact between the consumer and the company providing the goods or services, the trust and image of the company is of great importance. therefore, the development of ict to some extent contributes to increasing social responsibility in the activities of companies. the use of ict is also closely linked to the rapid expansion of world financial markets: ict facilitate rapid exchange of information, high speeds of realization of financial transactions, and attracting most number of participants, including private investors. however, there are some problems associated with the development of ict. a significant problem is the uneven distribution of economic benefits between countries and regions. this is due to the fact that the rapid development of ict allows developed countries to achieve greater economic growth through the use of ict, while developing countries have no access to benefits from the introduction of new technologies and are increasingly lagging behind in economic development. at the same time, the very development of ict can provide an opportunity to “equalize” the economic development of different regions. table 1 influence of ict in the economic sphere first-order effects (related to the development, production, operation, utilization of ict) second-order effects (related to ict use: e-commerce, etc.) third-order effects (associated with the massive use of ict in the long run period) 1. growth of the ict market: increasing the size of the industry and the level of employment. 2. constant investments in ict: increasing of investments in ict, researches and developments. 3. the emergence of new types of entrepreneurial activity: – realization of structural changes in the economy; – increasing the risk of bankruptcy as a result of market volatility. 1. application of ict in business: – creating opportunities for new types of efficiency in business; – access to new markets and goods for small and medium businesses; – increasing of costs on proving security of information systems. 2. the development of financial markets: – increasing the opportunities for the development of new financial markets and promoting greater participation in them. 3. improving of relations between business and the market: – extension of the consumer rights and the possibilities of their protection; – increasing the social responsibility of companies as a way of attracting consumers to e-commerce, etc. 1. ensuring sustainable development: reducing environmental impacts due to fundamental changes in the global economy in the long-term period. 2. distribution of economic benefits: – increasing uneven distribution of economic benefits due to differences in the level of use of ict benefits in different regions or sectors of the economy; – ensuring an even distribution of economic benefits through ict source: compiled by authors baltic journal of economic studies 93 vol. 7 no. 3, 2021 in the social sphere, the development of the ict industry (production, implementation and use of ict) contributes to the creation of new jobs and the increasing the need for qualified it specialists (table 2). opportunities for education are expanded: in particular, distance learning helps people with disabilities to receive education without attending regular classes at educational institutions. with the development of the internet, access to information about health, medicines expanded, opportunity to receive services in areas of health care (online consultation), public administration (e-government) become available. the internet can also be used by inhabitants of developing countries to fight for their rights and appeal to international human rights organizations. negative aspects of the impact of ict in the social sphere are related to the security and reliability of information obtained through ict tools. in particular, quite often you can find false and unconfirmed information on the internet, the use of which can sometimes lead to undesirable consequences. a significant problem is the use of the internet and computer equipment for criminals to commit economic crimes (internet fraud), the printing of false documents, the spread of child pornography, drug propaganda, and the creation of sites of terrorist organizations. ict also increase the disparity in access and use of their benefits by representatives of different segments of the population (urban and rural population), countries. this phenomenon is called “digital gap” and it is connected with the fact that people who have broad access to ict tend to have more opportunities for higher education, highly paid work and decent living standards. the development of the internet also has an impact on the dissemination and preservation of cultural values. ict can contribute to this (to create local community websites on the internet, to place information on their culture and civilization, etc.) and to provoke a reduction in the diversity of cultures as a result of the wide spread of western culture (westernization) and english on the internet. ict can also have an impact on the environment (table 3). the development of ict provides a reduction in the material component of production and consumption, contributing to reducing the resource intensity and ecological sustainability of economic processes, resource conservation, and improving the environmental situation. the advantage of ict is the improving working conditions, the increasing of the skills of employees, and more. but at the same time, information technology can harm the environment. the production, use and utilization of ict equipment is becoming a serious environmental problem, since, in particular, computers have a relatively short lead time, their production is accompanied by the use of toxic chemicals, and utilization requires substantial control. that is why in the developed countries of the world a lot of attention is paid to the problem of waste utilization: companies that product computers and other ict equipment are obliged to adhere strictly to the rules of utilization of electronic equipment in order to prevent environmental pollution. table 2 influence of ict in the social sphere first-order effects (related to the development, production, operation, utilization of ict) second-order effects (related to the ict use: e-commerce, etc.) third-order effects (associated with the massive use of ict in the long run period) 1. changing the level of employment: – creation of new jobs in the field of ict; – reducing the number of jobs resulting from the automation of production processes. 2. the emergence of a digital gap: the difference in access to ict. 1. access to information: – availability of the information on the internet about health, medicines, etc.; – access to information on the internet in the field of public administration (e-government); – enhancing e-literacy among the rural population. 2. safety issues: – availability of unconfirmed, inaccurate, false information on the internet; – use of the internet and computer equipment for committing crimes. 3. access to services: the possibility of receiving services in the field of health care, distance learning, public administration for people with disabilities, etc. 4. creating new communities of people on the internet. 5. new methods of protest: use of internet by the inhabitants of developing countries to appeal to human rights international organizations to fight for human rights. 1. change in cultural diversity: – reducing the diversity of cultures as a result of the spread of western culture and english on the internet; – dissemination and preservation of cultural values through ict; – the possibility of “dialogue” between cultures and civilizations. 2. creation of local communities through ict. 3. enhancing of civic culture: increasing the participation of citizens in public life through ict. source: compiled by authors baltic journal of economic studies 94 vol. 7 no. 3, 2021 3.6. the potential of ict for improving the environment however, ict, on the other hand, has a powerful potential for improving the environment. there are many examples that prove this. the development of communication systems, in particular the internet, in some cases, for example, eliminates the need to go to work or study daily, which in turn can lead to less frequent use of cars. the development of e-commerce, in particular, making purchases on the internet, eliminates the need for shopping trips, and, consequently, the use of automotive tools. however, as a result of not optimized deliveries “home” increases the amount of freight. along with this, icts are already used to improve transport, reduce its negative environmental impact. they provide an opportunity to regulate the behavior of drivers: to implement control over traffic flows, to apply flexible tariffs on individual sections of roads, and to differentiate drivers in different categories with the help of “chips”. with such electronic systems, traffic flows in cities can be organized more efficiently. the use of means in information and communication technologies reduces the amount and volume of material products that circulate in various sectors of the economy. one of the most obvious examples is the “e-books” that exist in the form of downloaded electronic files. the result of developing the technology of “e-books” for the publishing industry is a significant reduction in the need for paper, reducing the need for glues and paints, reducing transport costs, etc. table 3 influence of ict on the environment first-order effects (associated with the development, production, operation, utilization of ict) second-order effects (associated with ict use: e-commerce, etc.) third-order effects (associated with the massive use of ict in the long time period) 1. development and production of ict equipment: – relatively small workload of ict equipment production; – use of toxic substances in production; – the emergence of new, energy-efficient ict. 1. reduction of emissions of harmful substances from transport due to: – reduction of passenger traffic as a result of the proliferation of telework (“at home”); – reduction of the number of freight traffic as a result of logistics application; – reducing traffic congestion, reducing travel times through the use of modern means of communication. 2. increase in the emissions of harmful substances from transport due to: – an increase in the number of deliveries “home” with the development of e-commerce due to unoptimized delivery system. 1. separation of processes of economic growth from increasing environmental load: the possibilities of reducing consumption of energy and emissions of harmful substances into the environment per unit of gdp. 2. exploitation of ict equipment: increasing the level of environmental pollution in the production of electricity consumed by ict equipment, even in standby mode. 3. utilization of ict equipment: – the problem of utilization of waste due to rapid moral depreciation of ict equipment; – increasing the level of recycling and reuse of waste – an increasing in the number of travelers due to increased human mobility through ict and increased leisure time. 3. application of ict in business: reducing environmental burden when introducing new business models of e-commerce, ict-managed systems. 4. virtualization of material products: saving natural resources by distributing virtual goods (e-books, e-handbooks, films, music on the internet). 5. effects associated with the life cycle of goods: – increasing the life cycle of goods on the market when using e-commerce models; – saving of natural resources due to the reduction of the terms of development through the use of ict. 6. dissemination and management of information on the state of the environment: – introduction of monitoring of the state of the environment; – use of satellite systems to reduce the negative consequences of natural disasters; – control over the effective use of natural resources; – availability of publicly available information on the state of the environment: climate, biodiversity, etc., which helps to increase the population’s activity in the field of environmental protection 2. changing the principles of population settlement: – the possibility of increasing the compactness of people living in a certain territory and reducing the use of natural resources (reducing the area used for offices, shops, etc. through the use of the internet for work and in everyday life); – reverse effect: the possibility of creating settlements in any locality, which can lead to increased environmental load source: compiled by authors baltic journal of economic studies 95 vol. 7 no. 3, 2021 a similar effect is accompanied by the spread of technologies that use mpeg standards, which makes companies producing audio products able to use cds for their products. at the same time, virtualization of products should be balanced with the opposite trend of “de-virtualization.” this means that the resources required for the production of virtual products (energy, consumables, labor intensity, etc.) should not exceed the corresponding total resources necessary for the production of material products. (european information technology observatory yearbook, 2002) ict provide producers with effective means to quickly and accurately meet the existing needs of society by globally expanding the search potential of potential consumers and producing larger volumes of products. at the same time, they have the opportunity to reduce their losses caused by the reduction in the life cycle of goods (e-government and the business environment. the impact of ict on sustainable development, 2002). the use of ict for a long period of time may lead to changes in the principles of resettlement: using the internet for work and in everyday life allows you to reduce the area used for offices, shops, etc., thereby making people more compact in the area and reducing the use of natural resources. at the same time, using the internet to work and in everyday life allows an individual to create settlements in any area where access to the internet is available, which may lead to an increase in the use of natural resources. the implementation of ict allows to receive more information on such phenomena as climate change, biodiversity and helps explore natural conditions for the timely application of environmental protection measures. for example, sensors connected to a computer system, allow you to capture the leakage of a particular resource and optimize production processes from the point of view of resource efficiency. there are systems in the world that disseminate information on common issues (creating a development dynamic, 2001) such as climate change, biodiversity, marine and coastal management, and energy resources. the processes of the development, production, operation and utilization of ict equipment have a negative impact on the environment. most fields of ict applications, such as e-commerce, e-government, e-banking, etc., increase not only the efficiency of the use of natural resources but also can affect the change in the use of transport, and hence the emission of harmful substances into the air. 4. conclusions the use of ict promotes increasing of work productivity in many areas of the national economy but their implementation requires significant capital investment. in the social sphere, icts provide extensive opportunities for learning, promote the participation of citizens in public life, etc., but at the same time they can increase the unevenness of the economic development of the regions of the country due to the difference in access to ict. negative effects are more related to the availability of ict (production, operation and utilization of ict equipment), and the positive effects – with using of ict. the development of ict provides a reduction in the material component of production and consumption, helping reduce the resource intensity and ecological sustainability of economic processes and improve the environmental situation. based on the study and systematization of socio-ecoeconomic effects from the introduction and use of ict, the classification features and classification of effects are presented, namely: according to the product life cycle – the effects that arise at the stage of development, production, sale, consumption and utilization of the product; according to recipients of influence – the effects arising from enterprises, government bodies that use ict, households that are consumers of ict goods and services, and in the environment; according to the form of manifestation – direct and indirect effects. the conducted analysis and systematization of the effects of the introduction and use of ict can be used as a basis for the formation of scientific and methodological approaches to the social-ecologicaleconomic substantiation of the implementation of ict. references: balatskiy, o. f. (1979). ekonomika chistogo vozdukha [the economy of clean air]. kyiv: naukova dumka. (in russian) zgurovskiy, m. z. (2005). put k informatsionnomu obshchestvu – ot zhenevy do tunisa [the way to the information society – from geneva to tunisia]. zerkalo nedeli, vol. 34. available at: http://www.compete.org.ua/. (in russian) inozemtsev, v. l. (2000). sovremennoye postindustrialnoye obshchestvo: priroda, protivorechiya, perspektivy [modern post-industrial society: nature, contradictions, perspectives]: manual for students of higher schools. moscow: logos. (in russian) ivanova, v. v. (2008). rol informatsiinoho rynku v transformatsiinykh protsesakh ekonomiky [the role of the information market in the transformational processes of the economy]. ekonomiko-matematychne modeliuvannia sotsialno-ekonomichnykh system [economic and mathematical modeling of socio-economic systems], vol. 13, pp. 16–24. (in ukrainian) baltic journal of economic studies 96 vol. 7 no. 3, 2021 castells, m., hymanen, p. (2002). informatsionnoye obshchestvo i gosudarstvo blagosostoyaniya: finskaya model [information society and the state of welfare: the finnish model]. moscow: logos. (in russian) kovalevskyi, v. o. (2003). teoretyko-metodolohichni zasady informatsiinoho suspilstva [theoretical and methodological foundations of the information society]. available at: http://kovalevsky.webs.com.ua/theory/ theory.htm. (in ukrainian) lyon, d. (1996). informatsiine suspilstvo: problemy ta iliuzii. informatsiia, ideolohiia ta utopiia [informational society: problems and illusions. information, ideology and utopia]. suchasna zarubizhna sotsialna filosofiia. kyiv. available at: http://www.philsci.univ.kiev.ua/biblio/lajon.html. (in ukrainian) makarova, m. v. (2002). elektronna komertsiia [e-commerce]. kyiv: academy. (in ukrainian) rol sovremennykh informatsionnykh tekhnologiy v sotsialno-ekonomicheskom razvitii [the role of modern information technologies in socio-economic development] (2005). microsoft newsletter, vol. 29. available at: http://microsoft.com/rus/. (in russian) khlobystov, ye. v. (2004). ekolohichna bezpeka transformatsiynoi ekonomiky [ecological security of the transformational economy]. kyiv: chornobylinterinform. (in ukrainian) chukhno, a. a. (2003). postindustrialna ekonomika: teoriia, praktyka ta yikh znachennia dlia ukrainy [postindustrial economics: theory, practice and their significance for ukraine]. kyiv: logos. (in ukrainian) creating a development dynamic (2001). final report of the digital opportunity initiative. accenture. markle foundation, united nations development programme. e-government and the business environment. the impact of ict on sustainable development (2002). european information technology observatory, pp. 250–285. european information technology observatory yearbook (2002). european information technology observatory. nelson, c. a. (1993). international business: a manager's guide to strategy in the age of globalism. varakin, l. e. (2005). digital divide in the global information society. the theory and practice of measurement: 3-rd ed., prepared specially for the world summit on the information society (tunis, 2005). moscow: ita. baltic journal of economic studies 144 vol. 7 no. 5, 2021 corresponding author: 1 international university of business and law, ukraine. e-mail: nenkofamily@ukr.net orcid: https://orcid.org/0000-0003-2473-2823 2 black sea research institute of economy and innovation, ukraine. e-mail: k.v.mozharovska@gmail.com 3 kyiv regional center of the national academy of legal sciences of ukraine, ukraine. e-mail: dzerao@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-5-144-152 modern features of administrative and legal regulation of innovation activities of enterprises in terms of economic competition serhii nenko1, kateryna holovko2, oleksandr dzera3 abstract. the subject of the study are organizational and economic relations arising in the process of administrative and legal support of innovation activities of enterprises in terms of economic competition. methodology. instrumental and methodological apparatus of the study consists of the applied methods of economic analysis of organizations, statistical methods, sample observation, method of economic modeling, grouping, generalization, expert evaluations, methods of economic theory, marketing, etc. the aim of the article is to study modern features of administrative and legal regulation of innovative activity of enterprises in conditions of economic competition. the results of the study are to identify the typical principles of state innovation policy. the study of existing principles shows that they are largely based on administrative and legal methods of regulation, which is explained by the organizational and managerial focus of the principles of state innovation policy. finally, the conclusion about the need to unify the principles of state innovation policy in relation to enterprises operating in a competitive environment is formulated. conclusion. analysis of the regulatory framework governing the innovative activities of enterprises has revealed a number of problems. the most important of them are: absence of unity in determining the fundamental concepts of the innovation sphere; lack of unity in determining the powers of executive authorities in the innovation sphere; inconsistency in the construction of executive authorities that regulate innovation activity; non-unity in determining the powers of the executive bodies of state power; legal and linguistic uncertainty in the formulation of the powers of the executive authorities; ambiguity of the range of issues on the adoption of normative legal acts regulating relations in the field of innovation; absence of unity in the definition of the object of state support; no uniformity in the interpretation of the concept of "state innovation policy" in the laws; vagueness and ambiguity in the definition of goals and objectives of state innovation policy; different interpretations of the concept of "state support to subjects of innovation activity"; unreasonable limitation of the range of recipients of state support; presence of excessive administrative barriers in obtaining state support. based on the above, it can be concluded that the administrative-legal regulation in the field of innovation activities of enterprises in a competitive environment is in its formative stage and needs further improvement. key words: enterprises, innovation, innovative activity, administrative support, legal support, economic structures, competitiveness, administrative law. jel classification: e69, f15, f20, k22, k23 1. introduction the legal regulation of innovative activity is considered from the point of view of administration by various state bodies and officials. now all over the world there is an understanding that in the future profits can only be obtained by defeating the competitor (gilbert, 2006). but this can be done not by expanding production, but by inten sifying it on the basis of new technologies, new organizational solutions. knowledge of peculiarities of legal regulation of innovative activity will help in the future, when taking the appropriate position in the bodies of power and management, as well as when engaging in entrepreneurship. it should be remembered that the legal regulation of innovative activity is an baltic journal of economic studies 145 vol. 7 no. 5, 2021 interdisciplinary course that combines both civil and administrative factors. the study begins with administrative factors, which determine many of the concepts and phenomena that exist in civil law. most economists consider the innovative activity of enterprises as a continuous innovative process of scientific, technical, technological and organizational changes (tkacheva, osadchuk, kapustina, kobersy, 2020). the period of creation, distribution and use of innovations is called the innovation cycle. despite the differences in the understanding of the term "innovation", all researchers agree that innovation is of great importance for the development of a country 's economy. at the same time, under the conditions of innovative economy (knowledge economy, noospheric economy) the approach to the sources and resources of economic growth changes radically. the principle of rational use of material, labor and financial resources becomes decisive. such socio-economic institutions as science, education and management begin to play a leading role. qualitative changes in the economy can be achieved only by improving the legal regulation of relations in the sphere of science and education management. the first steps in this direction in ukraine have already been taken, but much remains to be done in terms of improving the legal support for the development of innovative businesses, especially in a competitive environment. today, manufacturers of goods have entered into a fierce struggle for the consumer – the competition in the market has increased significantly. as experience shows, more often than not, the one who pays attention to innovation wins. nothing gets a manager more focused on innovative ideas than the realization that manufactured goods may lose relevance in the near future. innovation is fundamental to the success of any enterprise, because every time the need to interest the consumer increases. in addition, most domestic enterprises have long been in need of modernization. 2. the essence of integrated economic structures in the modern world, their forms, types and structure the country 's transition to the course of import substitution, ensuring the dynamics of economic growth in conditions of economic instability revealed the need for practice-oriented convergence of science and production, the search for new directions of effective development of business structures, the introduction of progressive ways to organize their activities and increase the rate of production of innovative products. one of the ways to enhance national innovation processes is to optimize approaches to the use of different types of resources by economic agents. thus, under equal economic conditions, it is the possession of significant reserves of resources and their rational consumption not only provides additional competitive advantages to the commercial structure and enhances its entrepreneurial activity, but also affects the specifics of innovation and features of the formation of the innovative potential of the enterprise. in this regard, modern conceptual understanding of the essence of innovation and innovation capacity of the organization, as well as the use of effective mechanisms for their management, predetermine the ability of the economic entity to develop fundamentally new products, strengthen its competitiveness and adequately respond to current market changes (arrow, 1962). for a more in-depth study of the innovation potential of the organization and its structure, first of all, it is necessary to define the concept of "innovation", since at present in the scientific literature there is no one frame of mind, which would clearly reveal the relationship between the categories of "innovation" and "innovation potential" (caiazza, 2015). comparison of scientific definitions allows to draw a conclusion about the synonymity of the concepts of "novelty ", "innovation" and "novation" in terms of similar essence of economic phenomena they denote (qualitatively new additions or changes, affecting the final actions or results) (baregheh, rowley, sambrook, 2009). given the above, it seems possible to define innovation as a complex process of formation of an advanced idea and technology development, implementation of innovative ways of organizing production and management, as well as realization of qualitatively new products or services, due to different conditions of macroand micro environment of economic entity functioning. at the same time, the main components (theoretical concept, technical invention, commercial use) and properties (scientific and technical novelty; practical applicability; commercial feasibility) are considered to be well enough structured. revealing the relationship of the properties and components of innovation, it can be noted that the theoretical concept of a new idea as a starting point or the beginning of innovation must necessarily have scientific and technological novelty (gerbing, anderson, 1988). further development of the theoretical concept of innovation and its transformation into a real product (process) is formalized as an invention, as a result of which a new, practically applicable object appears at the junction of science and technology. the transition of an invention into the category of innovation directly occurs through its use in economic activity for the purpose of profit, since innovation itself is ultimately a direct way of commercializing conceptual ideas into real economic practice (oecd, 1996). thus, the objective goal of creating innovation should be to ensure the competitiveness of an economic entity that knows how to aggregate advanced knowledge and service baltic journal of economic studies 146 vol. 7 no. 5, 2021 research projects, promptly regulating its economic processes and effectively accumulating the power of its innovation potential (dasgupta, stiglitz, 1980). it should be noted that in the study of the innovative potential of the enterprise it is important not only to understand the essence and components of innovation, but also to consider the basis on which various types of innovations in the economy are distinguished. analysis shows that as the main classification attributes of innovation is most appropriate to use the following: the objectives of innovation, the significance of innovation, the scope of innovation, the reasons for their emergence, the nature of the needs to be met, the place of innovation in the production system of the economic entity. such groupings of innovations and the allocation of their individual types can more fully justify the essence of the innovative potential of the enterprise and determine the main directions of its formation and development. however, the interpretation of the innovation potential of the organization is impossible without a separate definition of the concept of "potential" (hasan, tucci, 2010). the term potential (from the latin word potential – power) is polysemous and is widely used in natural science and humanities literature to denote various categories in physics, chemistry, mathematics, metallurgy, ecology, linguistics, and biology (baregheh, rowley, sambrook, 2009). in the broadest sense of the word, potential is the totality of all available capabilities, means in any field, sphere. in the applied sense, potential is an "opportunity " or "capability," but at any given time it can denote the totality of the means that predetermine that capability. in a figurative sense, potential is understood as a degree of power in some respect (fellner, 1951). in general, it can be concluded that interpretations of potential are varied and the specifics of their presentation depend on the particular field or area of knowledge within which the term is considered. in modern economic conditions it is customary to allocate a variety of types of potential of commercial structures, among which the key importance, at the junction of a number of other potentials of socioeconomic systems, belongs to the innovation potential as an important condition for ensuring competitiveness and economic efficiency of their functioning (androshhuk, davymuka, 2015). based on the above materials of the study of the essence of the terms "innovation" and "potential" and given the particular importance and number of structural links of the place of innovation potential in relation to other types of potentials of socio-economic systems, it is necessary to dwell on the content of the concept of "innovation potential of the enterprise" (caiazza, 2015). the work considers it necessary to clarify the formulation of the essence of innovation potential of the modern economic entity, combining the key aspects of the resource and productive approaches. the innovation potential of an enterprise should be understood as a rationally organized set of its resources and key competencies, determining the dynamic ability to carry out qualitatively new transformations and ensure the effectiveness of the results of innovation activities in accordance with the needs of the changing environment. in turn, the intensity of activity on the development and introduction of new or improved products into the economic turnover of the enterprise is an innovative activity. thus, the formation and use of innovative potential by the enterprise should be based on the rational use and reconfiguration of its resources, processes and relationships, taking into account the needs of the turbulent market, contributing to the growth of competitiveness of the economic entity, increasing its innovative activity and innovation efficiency. at the same time, effective management of innovation potential will allow the enterprise not only quickly adapt to the risks and changes in the external environment, but also increase the overall sustainability of the organization in adverse circumstances. it is obvious that the effectiveness of the processes of formation and use of innovation capacity of a commercial organization depends on a clear understanding of the composition of its elements and their relationships. at the same time, the existing variety of models describing the structure of innovation potential of an economic entity determines the relevance of their analysis, systematization and improvement of the content. 3. features of the innovative activity of the enterprise in a competitive environment experience shows that the person who focuses on innovation first wins most often. nothing makes a manager focus on innovative ideas as much as the realization that manufactured goods may lose relevance in the near future. innovations are a fundamental factor of successful production activity of any enterprise, because with each time the need to interest the consumer increases. in addition, the majority of domestic enterprises have long been in need of modernization. the evolutionary trend in economic theory, which is increasingly taking shape in a new paradigm, is based on the idea of economic natural selection. the development of the most competitive economic subjects occurs at the expense of the displacement of other members of the population of economic subjects from the economic space. the process of economic natural selection forms a certain "organizational baltic journal of economic studies 147 vol. 7 no. 5, 2021 genotype" – the properties and characteristics of economic subjects that allow them to survive and develop in the changing conditions of the economic environment. routine processes of behavior of economic subjects are considered from the point of view of evolutionary economics as the main subject of research. their role in economic development can be compared to the role of genes in biological evolution. in the process of innovative competition an important role is played by the procedures of searching for new technical and organizational solutions aimed at increasing the stability in the competitive struggle. their result is the formation of new routines in interaction with the economic environment, fixed by "natural selection". the main thesis of our research, corresponding to the institutional-evolutionary direction of economic theory, is the following: innovative competition in its most distinct form is displaced from the sphere of production of goods (services) and even from the sphere of technological preparation of production to the sphere of creation of institutional advantages of technological development of the firm. the product life cycle in the context of innovative competition acquires an additional stage. in addition to the stage of scientific development, which lays down all the competitive characteristics of the subsequent product (service) life cycle, including the conditions for its operational modernization (updating of operating systems and computer programs) and subsequent disposal, is formed by what is proposed to call the stage of institutional and technological design of the product life cycle (azoev, 2010). at this stage, firms compete to create an institutional innovation environment that will support the entire subsequent life cycle and create a positive image of the company 's technological capabilities and prospects. the most acute and fierce forms of competitive rivalry move into areas of control over scarce resources that enable the formation and maintenance of this institutional and innovative environment. this environment allows a company to conquer an increasing number of potential markets with currently uncertain prospects (blundell, griffith, van reenen, 1999). for example, the korean samsung group is ready to allocate more than 20 billion dollars for these purposes. one of the most promising areas of investment is green energy and innovative ways to save energy. the company, which makes a wide range of goods, from clothing to high-tech electronic products, has announced that it is ready to commit nearly $20.6 billion to research and expansion over the next decade. five areas are recognized as priority areas for samsung's development: solar cell production, development of batteries for hybrid and electric cars, improvement of led technology, biopharmaceuticals, and creation of medical equipment. the main focus will be on the development of products using leds. samsung is allocating the most money for research and expansion in this area – $7.6 billion. much of the investment, $5.3 billion and $4.8 billion, respectively, will be spent on the development of solar energy and the creation of powerful batteries for cars. it is noteworthy that samsung was not the only electronics manufacturer that decided to increase its own spending on research activities. previously, such competitors as toshiba and sanyo made similar statements. the first company has already allocated about 14 billion dollars. for its own development over the next three years. these funds will mainly be used to finance new toshiba assembly facilities, as well as to improve the equipment of existing factories. the japanese company sanyo plans to increase spending on research in the field of solar energy and batteries – in three years it intends to spend more than 2 billion dollars on such developments, making serious competition in these areas samsung (tsai, 2018). competition is increasingly moving into the sphere of potential markets, becoming proactive and thus non-market, or rather, pre-market, if one understands the market as an established system of institutions serving the formed product lifecycle. it is becoming increasingly difficult and dangerous to compete in today 's market because technology is mobile, government support is unpredictable, and so on. it is hard for innovative companies to win even in the young emerging markets stage, where production costs are critical. it is better to immediately become a technological center, a factory of ideas and technologies, and to form its own international network of manufacturers and developers (aghion, bloom, blundell, griffith, howitt, 2005). the formation of the own innovation system is a tool for the competition of technological formats of companies in the fight for the technological future. the main thing in this competition is to win time, as it is considered to be the main resource in innovative competition. spreading your own system and displacing a competitor's system means depriving the competitor of its planned future format, its planned chain. the most important function of forming an extensive and controlled by the firm innovation system is the desire to minimize losses from the "leakage" of the results of technological innovation in favour of competitors and consumers. the fact is that technological innovations, being part of the scientific process, by their very nature have the properties of a public good, i.e., the subject of innovation cannot turn to its own advantage the entire effect of the investments made. even taking into account all the elements of the existing legal system of protection of property rights to the results of intellectual activity, baltic journal of economic studies 148 vol. 7 no. 5, 2021 it companies find themselves in the most vulnerable position in terms of obtaining income on investments in new technologies. innovative competition manifests itself in the desire of companies to move to the earliest stages of the product life cycle in order to avoid direct collision within overlapping market niches. as an it company masters more and more complex stages of the research and production process, it loses interest in those components of business processes that become more accessible to other competitors, especially as the latter become more motivated to catch up with the leader, whose benchmarks become clearer and more accessible. in the field of it, thanks to the intensive inflow of resources, the development and even improvement of technologies developed by pioneer firms occurs at a very high speed, so leading firms in their desire to rise higher up the technology chain have reached the stage of anticipating and planning the technological development roadmap of the industry. leaders compete for the right to outline images of the future, for the right to inspire the rest of the it community (which includes all stakeholders – from software developers and investors to ordinary consumers) with sketches of possible directions of development of the industry (martins, terblanche, 2003). this kind of competition involves the active use of non-systemic, psychological methods of influencing competitors and consumers. firms form a special psychological image of the exclusivity and uniqueness of their key assets, where unique figures of visionary leaders take center stagе ( jansen, van den bosch, volberda, 2006). only these exceptional individuals have the qualities of prophets capable of predicting future technological development and drawing a reliable technological roadmap. thus, innovative competition becomes irrational, since even the closest competitors are fundamentally unaffordable the business competencies of a charismatic leader. 4. problems of administrative and legal regulation of innovative activity of enterprises in legal science it is customary to talk about regulating with the help of legal norms a certain range of relations arising between certain subjects. at that, it is difficult to determine the composition of subjects of innovative activity, as well as what relations are innovative. without an answer to these questions, it is impossible to continue to discuss the applicable method of impact on innovative relations. thus, there is no possibility to talk about the construction of a new branch of law. the only thing that is possible in this situation is the incorporation (unification) of normative acts containing the term "innovation" according to a certain criterion, for example, legal power (сastro, clementi, macdonald, 2009). in any complex social relations, there are horizontal (civil law) and vertical (administrative law) relations. if to consider innovative relations from the point of view of management, and it is necessary to manage any social process, the leading role belongs to administrative law. if to take the emerging horizontal relations between equal subjects about the use and alienation of innovative objects, the leading role belongs to civil law (feld, foigt, 2003). attempts to give priority to civil-law relations in the innovation sphere to the detriment of administrative ones will be biased. as the ukrainian practice shows, the creation and commercialization of new knowledge practically does not happen without the help of the state. therefore, the state is now pursuing a policy of creating a national innovation system with such a tool as administration, trying to link the commercial calculation of private companies with state coercion. the ukrainian state is the largest subject of innovative relations, the main customer of innovative product, which for years has been trying to build relations on contractual, civil law principles for the development and creation of high-tech products, especially in the military sphere on contractual, civillegal principles. there are certain successes in this direction, but the former system of planning and bringing the order to the performer has not yet outlived its usefulness. it is successfully used in foreign practice as well. the ukrainian system of contract law has failed in innovation for two main reasons. first, it is difficult to trust the defense of the right enshrined in the contract because of the imperfection of the ukrainian judicial system, and second, the law of a higher level is subject to constant change. freedom of contract, stable legislation and a strong independent judiciary in ukraine during the years of reform have not become a reality for a number of subjective and objective reasons. since it is predicted that a delay of five to seven years in the creation and development of an effective national innovation system threatens ukraine with the danger of falling by the wayside in global technological and hence economic development, it seems imperative to return to administration in this area, which, however, is already happening (blikhar, vatras, melnychenko, podra, anikina, 2020). unfortunately, there is no single normative act uniting the administration in the innovation sphere. further legal research in the field of administration of innovation activity of enterprises in ukraine is an urgent need. relations on the consolidation of rights to the results of intellectual activity (which were previously sufficiently regulated) turned out to be fully enough regulated, but the movement, dynamics and use of such results were again without proper legal regulation. correction of such situation will contribute to the baltic journal of economic studies 149 vol. 7 no. 5, 2021 revival of the turnover of innovative product, improvement of bilateral and multilateral innovative relations arising between business entities in a market economy. innovation is intellectual property, to the disposal of which the creator has the exclusive right. the author of innovation (intellectual property) has the right to demand protection of his rights from the claims of third parties. intellectual property is granted legal protection by the state. with a literal interpretation of these provisions, it turns out that a number of treaties that existed before are now becoming illegal. this category includes an agreement on assignment of the right to apply for an invention (utility model, industrial design, selection invention), an agreement on assignment of the right to obtain a patent for an invention (utility model, industrial design, selection invention). today in ukraine there is a considerable experience of administrative and legal regulation of innovation activity: since 1991 more than 90 normative legal acts of administrative nature, designed to promote the development of innovative activity of organizations, have been adopted. as a rule, they include: – establishment of a basic conceptual apparatus and, accordingly, a clear delineation of the scope of application of the law and subsequent subordinate normative legal acts; – determination of principles, methods and procedure for formation and implementation of the state innovation policy, its priority directions. establishment of competence of regional bodies of legislative and executive power, as well as specially created bodies (including those acting on a voluntary basis) in the field of innovation activity, determination of forms of interaction with the subjects of scientific and innovation activity; – establishment of the form, types of support and stimulation of innovation activity, setting the possible amounts and sources of financing. financing is carried out within the established limits of innovative programs and innovative projects, implemented under the state (republican, regional) orders; – establishment of the procedure for concluding state agreements (contracts) for the implementation of innovative programs and projects. freedom of access to information about the priorities of the state innovation policy, about completed research and development works of innovative nature prepared for use in production, about implemented innovative programs and projects (information support of scientific and innovation activity) is guaranteed, except for cases provided for by the legislation on state, official and commercial secrets; – determination of the form of assistance for training, retraining and advanced training of personnel engaged in innovative activities; – regulates the creation and activity of innovation and venture capital funds. in some cases, targeted innovation programs are adopted in the form of a law. thus, the "innovative" laws can be divided into two main groups: – "special" laws regulating exclusively innovative activities (verkhovnа radа of ukraine, 2002); – "integrated" laws that combine the regulation of scientific, scientific-technical, and innovative activities. in turn, each of these groups consists of several subgroups, depending on the object of legal regulation, the emphasis in the regulation of innovation, the predominance of legal norms governing individual issues of innovative activity. thus, the group of "special" laws includes the following: – laws on innovation, its development and stimulation; – laws on state support of innovation activities; – laws on innovation policy; – "complex" laws on innovation activity (innovation development) and innovation policy; – "private" laws, regulating separate questions of innovative activity (for example, innovative activity in the sphere of science and higher education) or its state support (for example, support of subjects of innovative activity, priority innovative projects, innovative activity in the agroindustrial complex). the most numerous is a subgroup of laws on innovations, their development and stimulation. laws of this subgroup contain norms about general provisions, about forms of realization of innovation activity, about state innovation policy; about organization, regulation, coordination, financing and state support of innovation activity; final provisions. the laws included in this subgroup are not uniform: along with the presence of common institutions, norms regulating the same aspects of innovative activity, they contain norms that are specific to individual subjects only. laws on state support of innovation activities – the next largest subset of laws – include general provisions; norms on the powers of public authorities in the field of state support of innovation activities and its state regulation, on the forms and measures of state support, including financing; final provisions. their main difference from the subset of laws on innovation activities is the absence of articles regulating the implementation of innovative activities (forms of implementation of innovative activities) in the framework of the realization of state innovation policy. another feature of this subset of laws is the presence of articles on the powers of the authorities in the field of state support for innovation, which regulate in detail the social relations connected with state support for the activities of enterprises: issues of goals, principles, directions, and various forms of state support. what these subsets of laws have in common is the existence of articles governing general provisions, financing baltic journal of economic studies 150 vol. 7 no. 5, 2021 of innovation; and final provisions (versteeg, ginsburg, 2017). laws on innovation policy is another representative subset of laws, it is characterized by detailed regulation of state innovation policy issues, combining the following elements: goals, principles, objectives, rules, directions, formation, implementation, as well as concepts of innovation policy. laws of this subgroup contain norms about the basic concepts used in the legislation, the legal basis for the regulation of policy in the field of innovative development; its financing and state support; the powers of public authorities; innovation policy. in some laws you can find the following provisions: on the innovation infrastructure, the responsibility of subjects of innovation activity; on innovation programs; on the councils of innovation policy, inventive and rationalization activity; on the examination of innovation projects. as for "integrated" laws, they can be divided into: – laws on innovation and other activities (scientific, research and technological); – laws on state support of both innovation and other types of activity (scientific, research and technological, investment, production); – laws on scientific and technical policy of scientific and innovation activities; – laws on science and research and technology policy, containing chapters on state support for innovation activities. compared to the previous group, this one is quite small (14 laws), which makes it difficult to analyze the laws included in it. the exception is a subset of the laws of the subjects on scientific, research and technological, and innovation activities. these laws regulate certain aspects of scientific, research and technology, and innovation activities with different degrees of detail. they define the basic concepts used in the law; designate the legislation on scientific, scientific-technical and innovative activity; distinguish the subjects of scientific, scientific-technical and innovative activity (including "scientific organization", "scientific workers"); there are norms on the organization and regulation of scientific, scientifictechnical and innovative activity, including the management of this activity; on the powers of public authorities, on the formation and implementation of state policy in the field of scientific, scientific technical and innovative activity; regulates the issues of financing of scientific, scientific-technical and innovative activity; stimulation and state support of scientific, scientific-technical and innovative activity (shevchuk, blikhar, komarnytska, tataryn, 2020). in addition to special "innovation" laws, a number of laws regulating certain aspects in the field of innovation have been adopted. the subject of their regulation, as a rule, are tax benefits to the subjects of innovation activity, budget expenditures to ensure innovation activity, providing local governments with state powers to state support of educational institutions implementing innovative educational programs, operation of technology parks, regulation of innovation activity in certain areas and other issues related to innovations. the analysis shows that this category of laws is diverse and has significant potential in regulating certain aspects of innovative activity. the legal regulation of a number of aspects connected with realization of innovative activity of the enterprises is carried out by the by-laws. in particular, at the level of by-laws the following is regulated: – regional target programs for the development of innovative activities; – measures to develop and stimulate innovation; – formation of the infrastructure of innovative activity; – the procedure for creation and accreditation of subjects of the innovation infrastructure; – procedure for granting subsidies and other forms of property support to subjects of innovation activity (innovation infrastructure) at the expense of the regional budget; – issues of innovation in education; – holding competitions of innovative organizations and innovative projects; – approval of statistical observation forms. the analysis of the regulatory framework governing the innovative activities of enterprises has revealed a number of problems. the most important of them are: – non-unity in the definition of the fundamental concepts of the innovation sphere; – absence of unity in determining the powers of executive authorities in the field of innovation; – inconsistency in the construction of the executive authorities that regulate innovative activity; – there is no unity in the issue of determining the powers of the executive bodies of state power; – legal and linguistic ambiguity in the wording of the powers of the executive branch; – uncertainty of the range of issues on the adoption of normative legal acts regulating relations in the sphere of innovation; – lack of unity in defining the object of state support; – non-unity in the interpretation of the concept of "state innovation policy " in the laws; – ambiguity and vagueness in defining the goals and objectives of the state innovation policy; – absence of a unified approach to the issue of formation of the participants of the state innovation policy; – different interpretation of the concept of "state support of subjects of innovative activity "; – absence of unity in the definition of the object of state support; – unclear distinction between the objects of state support and various forms of state support; – unreasonable limitation of the circle of recipients of state support; baltic journal of economic studies 151 vol. 7 no. 5, 2021 – excessive administrative barriers in obtaining state support. sources of law in the field of innovation are clearly insufficient, and this hinders the creative process in ukraine. the situation can be corrected by adopting an appropriate unified law. 5. conclusion innovative competition is most clearly theorized within the framework of institutional-evolutionary direction of economic theory. the main goal of competition is to maximize control over the institutional and innovative environment of the company, in which value added is created. the field of innovation itself is extremely vulnerable because of leakage of generated benefits, so competitive success here is identified with the minimization of losses from possible technological flows and related methods of extracting added value in favor of competitors. the main vector of the competitive process is the desire of firms to seize control over the initial (upper) floors of the extended life cycle of a product or technology. at the very beginning of the product life cycle there is a stage of institutional and technological design. competitive survival in the real mass production of it products is problematic for any company, since the key routine technological competencies of final assembly are available to many companies. thus, the barriers to entry in the final assembly market are low and cannot be a source of competitive advantage. the capture of key competences at the r&d stage transforms the sources of control over the benefits created in the institutional and innovative environment that exists around the firm, in the direction of strengthening their rent nature. control over promising patents in order to secure their own technological future and make it difficult for competitors to deploy technological formats is becoming a major source of rental income for it companies. however, competition for patents should be viewed more broadly, as one of the key elements of the institutional innovation environment that the firm forms around itself to maximize control over the flows of value created in the process of innovation. the most important element of the institutional innovation environment is a clear vision and implementation of the company 's technological roadmap of development and its key technologies responsible for creating attractive products for consumers in the near future. the way in which the technological roadmap is formed defies rational understanding and copying, as it is the realm of creative processes. the ukrainian state is the largest subject of innovative relations, the main customer of innovative product, which for years has been trying to build relations on contractual, civil law principles for the development and creation of high-tech products, especially in the military sphere on contractual, civillegal principles. there are certain successes in this direction, but the former system of planning and bringing the order to the performer has not yet outlived its usefulness. it is successfully used in foreign practice as well. unfortunately, there is no unified normative act uniting the administration in the innovation sphere. further legal research in the field of administration of innovation activity of enterprises in ukraine is an urgent need. currently, ukraine has accumulated considerable experience of administrative and legal regulation of innovation activities: since 1991 it has adopted more than 90 laws and regulations of administrative nature designed to promote innovation activities of organizations. analysis of the regulatory framework governing the innovative activities of enterprises has revealed a number of problems. the most important ones are: non-unity in defining the fundamental concepts of the innovation sphere; lack of unity in defining the powers of executive authorities in the innovation sphere; inconsistency in the construction of executive authorities regulating innovation activities; absence of unity in the issue of determining the powers of the executive bodies of state power; legal and linguistic uncertainty in the formulation of the powers of the executive authorities; the uncertainty of the range of issues on the adoption of regulatory legal acts regulating relations in the field of innovation; there is no unity in the definition of the object of state support; lack of unity in the interpretation of the concept of "state innovation policy " in the laws; ambiguity and vagueness in defining the goals and objectives of the state innovation policy; there is no unified approach to the issue of formation by the participants of the state innovation policy; different interpretation of the concept of "state support of subjects of innovative activity "; nonunity regarding the definition of the object of state support; unclear distinction between the objects of state support and various forms of state support; unreasonable limitation of the range of recipients of state support; presence of excessive administrative barriers in obtaining state support. based on the above, it can be concluded that the administrative and legal regulation in the field of innovation activities of enterprises in a competitive environment is in its formative stage and needs further 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(2017). measuring the rule of law: a comparison of indicators. law & social inquiry, 42(1), 100–137. baltic journal of economic studies 98 vol. 8 no. 2, 2022 1 borys grinchenko kyiv university, ukraine (corresponding author) e-mail: kazakoksana1974@gmail.com orcid: https://orcid.org/0000-0003-2088-9022 researcherid: h-7843-2017 2 national technical university of ukraine "igor sikorsky kyiv polytechnic institute", ukraine e-mail: obelectv@ukr.net orcid: https://orcid.org/0000-0002-1553-5150 researcherid: aak-1180-2020 doi: https://doi.org/10.30525/2256-0742/2022-8-2-98-104 remote employment: a short-term strategy for adapting to the crisis or the new reality of human resource management oksana kazak1, tetyana obelets2 abstract. the purpose of the article is to explore the use of remote employment as a short-term adaptation strategy for the enterprise in times of crisis and as a long-term strategy for human resource management in the future. the subject of the study is new strategies in human resource management, which began to be widely used during the covid-19 pandemic. the main focus of the article is on remote employment. its spread is studied, on the one hand, as an opportunity for companies to adapt to crisis phenomena in the short term, on the other hand, as a long-term strategy in human resource management, which will become a new reality in the management process. methodology. this article uses a comprehensive approach using the component method and multivariate correlation to analyze the results of public opinion surveys on the introduction of remote employment as a human resource management strategy in an unstable environment and to examine the likelihood of digitalization of labor. results. an analytical assessment of sociological research on the introduction of remote employment as a strategy for human resource management in conditions of instability was carried out and trends were identified, the main ones for different countries. the probability of digitalization of labor and the use of remote employment for workers with different educational and qualification levels and different professional groups were investigated. the effectiveness of the introduction of new flexible forms of employment and adaptation to remote employment in enterprises was analyzed. it has been proven that the effectiveness and sustainability of the positive results achieved can be maintained with the clear planning of work processes in the enterprise. the practical implications of this study are the optimization of a set of human resource management strategies and remote employment in particular, as well as a radical revision of the format of the work organization. this study was performed as part of the research work of the department of finance and economics of borys hrinchenko kyiv university (№ 0118u001561) on the topic: "development of the economy of kyiv in terms of european integration". key words: human resources management, remote employment, digitalization of labor, covid-19 crisis. jel classification: m12, m15, m51, m52, m54 1. introduction a look into the future is conducive to the modernization of human resource management methods, given that new cloud technologies and internet platforms now offer unlimited possibilities for the diversification of enterprise areas of activity. the digital economy creates opportunities for businesses to actively use remote employment based on information and communications technology (ict). but digital evolution and the use of digital tools for work and education raise questions of equity, reflecting the deep social and economic inequalities that already exist. the covid-19 pandemic has exacerbated this situation. under conditions of socio-economic turbulence, the cornerstone of the human resource management strategy must be the constant development of stability, independence of judgment and flexibility. when using only machine (computer) algorithms, which are based on analysis of past development, the effectiveness of the human resource management process becomes extremely fragile. covid-19 proved baltic journal of economic studies 99 vol. 8 no. 2, 2022 that under the pressure of the crisis people and businesses are able to find ways out of it. at the same time, the work of human resource management professionals is focused on the possibility of attracting and using the creative potential of employees in the most acceptable way for both employees and employers. to maximize benefits in an unstable environment, management decisions must be flexible, based on the use of various forms of employment, especially remote employment using icts, to motivate employees to think creatively and self-actualize. 2. analysis of recent research and publications the changes in social and economic conditions brought about by covid-19 have posed new challenges for scientists, sociologists, economists, and human resource managers. o. kazak (2020), l. branski et al. (2022) were looking for variants of the functions to be performed by human resources management specialists during the rapid transformations of the external and internal environment caused by the covid-19 pandemic. conceptual issues related to organizational tensions that arose during the covid-19 pandemic crisis were considered in the works of s. carmin et al. (2021) and s. prady et al. (2021). the impact of the pandemic on the mental health of employees was studied by giorgi g. et al. (2020), and hamouche s. (2020). the issues of adaptation and well-being of employees in the covid-19 era are devoted to the work of joel b. carnevale and isabella hatak (2020), and jain n. and aggarwal s. (2021). possibilities of implementing remote employment in connection with covid-19 were considered in the studies of a amin al-habaibeh et al. (2021) and john j. horton et al. (2020) etc. however, the transition from standard to remote employment remains underreported among human resource management strategies. the relevant question is whether remote employment will remain an adaptation strategy in crisis situations, or whether it will become a new paradigm of enterprise activity in the medium and long term. the aim of the article is to explore the use of remote employment as a short-term strategy for adapting the enterprise in times of crisis and as a long-term strategy for human resource management in the future. 3. presentation of the main material of the study today 's digital technologies are evolving rapidly, especially in the fields of computer technology and telecommunications. new digital methods and tools for remote work are appearing and being rapidly adopted, especially under the influence of the covid-19 pandemic, which requires workers to constantly improve their skills and proficiency. therefore, the main task of human resources departments at the company and hr specialists is to determine the work tasks that can be performed remotely and those that can only be performed at the physical workplace at the company. it is important to identify a list of jobs that may be cut due to the pandemic situation, and to identify key positions and employees who need to continually develop their skills and expertise with new technologies, applications and digital devices. the unexpected and radical organizational changes highlighted by the covid-19 pandemic have actualized the importance of choosing certain adaptive management strategies to level out the crisis of uncertainty and instability. the results of a 2020 realtime study in the united kingdom, the united states and germany, conducted jointly by researchers from the universities of oxford, zurich and cambridge, show that the direct impact of the covid-19 pandemic on the labor market is significantly different. first, it varies from country to country, second, among workers employed under different models of labor relations, and third, among workers in different sociodemographic cohorts. for example, workers in germany were less affected by the crisis than those in the united states and the united kingdom. germany had a well-functioning part-time/week (short-time work – stw) scheme, with 34% of workers taking advantage of this scheme during the pandemic. in the us and the uk, redundancy schemes were used: 36% of employees surveyed in the uk and 25% in the us reported that they were fired from their main job (abi adams-prassl et al., 2020). the result of this study shows that workers whose job duties cannot be performed from home are more likely to lose their jobs. in addition, there are large differences in the likelihood of losing a job across industries and occupations, mainly because the average percentage of tasks that workers can perform at home differs significantly across industries and occupations. in addition, workers with temporary contracts often lost their jobs. women and workers without higher education were more affected by the crisis. the researchers noted that the gap in the likelihood of job loss between workers with higher education and workers without higher education can be explained entirely by their professional affiliation and the proportion of professional duties that workers can perform at home. however, these factors could not explain the gender gap in the probability of losing a job during a crisis. the impact of the educational and qualification level of workers on the possibility of using new digital technologies and the introduction of remote employment as an adaptation strategy during the baltic journal of economic studies 100 vol. 8 no. 2, 2022 pandemic was revealed in the survey "dgb-index gute arbeit 2021". the results of this study, conducted by the association of german trade unions (deutscher gewerkschaftsbund (dgb)), showed how much work conditions have changed over the past year and a half – in particular, in the context of digitalization of work and the growth of remote employment. a study of the effects of the pandemic on german workers included a survey of 6,400 randomly selected workers. the pandemic caused a rapid increase in the digitalization of businesses: the use of electronic communications, networking, and digital forms of employment increased. many employees worked with new software or new digital devices that companies gave them to set up a remote workplace. during the pandemic, many companies acquired new digital workflow tools. this was especially noticeable in the use of software or applications. nearly one in two respondents (46%) dealt with new software at work during this period. a quarter of respondents (24%) used new hardware (digital devices or tech tools) (dgb-index gute arbeit, 2021). the level of digitalization of work processes in companies correlates with the skill level of employees (figure 1). in the dgb performance index 2021, respondents assigned their job responsibilities to one of four levels (dgb-index gute arbeit, 2021): – ancillary or semi-skilled work that does not usually require professional training or no more than one year of professional experience; – technical activities that usually require two to three years of vocational training or a degree from a vocational school or college; – specialized activities that usually require a master's or technician's experience, or a specialist's degree, in a vocational school or a bachelor's degree; – activities of high complexity that usually require a university education with a master's degree, a state examination, or a doctoral degree. the ability to use digitalization differed significantly between groups of workers with different qualifications. one in five workers (21%) in low-level or semiskilled jobs used new software, while at the highest level, where workers are in high complexity jobs, new applications and software were introduced to nearly four in five workers (78%). in 2021, highly skilled workers were also mostly using new digital devices and equipment. new digital technologies were used by 37% of surveyed workers whose jobs involved high complexity, 29% of professionals, 23% of technicians, and 15% of the lowest-skilled workers. at the same time, three-quarters of employees who worked with the new software suggested that the new technology was introduced because of the pandemic. as for new digital devices or equipment, two-thirds (64%) saw pandemic as a key factor in their adoption. according to the decree of the german federal ministry of labor and social affairs "on occupational health and safety (corona-arbschv)", employers in due to the pandemic are obliged to offer their employees the opportunity to do their work from home, "unless there are good operational reasons to the contrary." (hubertus heil, 2021) as a result, remote employment increased dramatically. nearly a third of respondents (31%) had been working from home since the pandemic began. more than half of this 21% 15% 7% 39% 23% 21% 66% 29% 53% 78% 37% 71% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% new software/applications new digital devices/technical tools remote work ancillary or semi-skilled work technical activities specialized activities activities of high complexity figure 1. digitalization and remote employment depending on the skill level of workers source: compiled based on dgb-index gute arbeit 2021 baltic journal of economic studies 101 vol. 8 no. 2, 2022 group (54%) had not practiced it before. remote work was introduced to a greater extent for highly skilled workers (71%), for workers of the lowest qualification group the opportunity to work remotely was minimal (7%) (dgb-index gute arbeit, 2021). the ability to work from home also clearly correlates with profession. while, for example, 94% of teachers often worked from home, the figure was 1% among geriatric nurses and 5% among construction and trade workers (dgb-index gute arbeit, 2021). only for those professions whose activities were in direct contact with clients, patients, etc., the transition to remote work was not possible. particular attention should be paid to the sociopsychological state of workers during the transition to remote employment. digitalization and the transfer of the work process to remote mode, while reducing the risk of contracting infectious diseases, have contributed to the spread of psychological stress associated with additional workloads. one in three respondents (35%) perceive replacing face-to-face contacts with digital communication as additional stress; only 8% of respondents believe this change has eased their workload. similar assessments were given to remote work. one-third of respondents (32%) reported an increase in workload at home, and 15% reported a decrease in stress. stress is closely related to other characteristics of the work process. for example, it may be the lack of a properly equipped workplace at home (personal office, workspace, necessary equipment and software, etc.), insufficient skills with the latest applications and digital technologies, absence or poor technical support, presence of other family members, especially if they need care (children, elderly people, etc.). the introduction of remote employment, for which the pandemic was the impetus, is now perceived not only as a short-term adaptation strategy, but also as a possible new long-term reality in human resource management. however, the new norm in the organization of work processes should not be the only goal of human resource management specialists, it should help to increase mobility, increase flexibility, and ensure the economic and psychological stability of employees. the concentration of hr departments on mobile, predominantly highly skilled workers creates risks of labor fragmentation, stratification of workers by income and working conditions, pushing some workers into marginal employment or creating the risk of becoming unemployed. the successful long-term use of such a strategy in human resource management as remote employment requires employees to make a conscious and voluntary choice in favor of this form of employment. the use of new digital technologies does not automatically lead to an improvement in working conditions; the decisive factors are the creation of an ergonomic workspace and a favorable emotional and psychological climate. taking into account the psychological propensity of employees to work remotely, their interests in creating decent working conditions for remote work and decent pay for such work will provide conditions for self-determination and full self-fulfillment of all employees. effective workflow management for employees who have moved to telecommuting is becoming the most pressing task for human resource professionals today. today 's digital technologies provide remote employment opportunities for many types of tasks in companies whose activities are related to various sectors of the economy. the proliferation of the latest technology, computers, and telecommunications tools is expanding the possible areas of virtual activity. therefore, remote employment is likely to be used in the future not only as a response to the crisis, but also as a standard strategy in human resource management (table 1). during the pandemic in ukraine, the number of workers for whom remote employment became an increasing priority increased. ukrainian enterprises and organizations were also more active in offering vacancies with remote employment. this is evidenced by the results of a study conducted in 2020 by robota.ua at the request of ageless (tіtаrеnkо, 2021). more than 140 companies that operate in ukraine and use the portal for personnel search and recruitment took part in the study. the results of the survey of company managers showed that their companies gradually adapted to remote employment (figure 2). table 1 employees' perceptions of changes in employment before the pandemic new realities expectations of employees i would like to work where i am comfortable, and i understand that office work is the norm. i have proven to be productive working remotely, so i want to be able to work remotely when i need to. working environment i go to the office to do my job. i can work where i am most productive. remote work remote work is a privilege available to those categories of workers who meet certain conditions. the ability to work remotely is a typical condition, and only significant business circumstances affect flexibility. source: remote work in ukraine. august 2020. available at: http://publications.chamber.ua/2020/human%20capital/ey_amcham_remote%20 work_presentation_august_2020.pdf?fbclid=iwar0drd89glohm1q9wbujpnke4padfdxvt--_7faegdl baltic journal of economic studies 102 vol. 8 no. 2, 2022 as can be seen from the data presented in figure 2, 12.5% of the respondents responded that they fully adapted and the efficiency of the company increased, 31.6% of the respondents responded that they adapted without changes in efficiency, it should be noted that more than 40% of companies responded that they do not work remotely. most respondents said that employees' work schedules have not changed due to the move to telecommuting, but one in four company executives surveyed said that remote employees have a more stressful work schedule. during the covid-19 crisis and in the postpandemic period, there is an urgent need to transition to human resource management strategies that take into account the latest technological advances and the needs of employers and employees. business leaders need to optimize the work organization process to ensure greater efficiency and productivity. deloitte survey global human capital trends 2021 showed that 70% of managers believe that the transition of their company to remote employment has had a positive impact on employee welfare (deloitte, 2021). however, the stability of the results achieved by using remote methods of labor organization can be maintained under certain conditions. specialists in human resource management of enterprises need, first of all, to determine what level, scale of functions, requirements and competencies of employees are necessary for stable operation of the enterprise in the near future. secondly, to establish compliance or inconsistency of the available and required number of workers with the relevant requirements of educational and qualification level; thirdly, to investigate the productivity of workers employed according to standard schemes at workplaces in the enterprise, and the productivity of workers employed remotely. according to experts whose functional responsibilities include human resource management, to ensure the sustainability of remote employment, clear workflow planning is essential (figure 3). at the forefront of the work of human resource managers are the tasks of setting up a workflow to support remote workers and the subsequent use of remote (virtual) employment in the enterprise. for example, the main task of managers is to provide digital platforms for remote workers to share. human resources professionals felt it was important that the move to telecommuting was a personal choice for each employee, and it was the managers' job to set the new work schedule, standardize telecommuting, and so on. managers were least interested in providing additional compensation and benefits (cell phone reimbursement, internet payments, energy reimbursement, etc.) to support the well-being of remote workers. compensation and benefits ranked last among the most important actions to ensure the sustainability of remote employment. organization of the work process with the widespread introduction of remote employment in the future should provide employees with technical means, additional computers, monitors, laptops and the creation of conditions for obtaining appropriate skills and knowledge to work in 0 5 10 15 20 25 30 35 40 45 fully adapted, productivity increased adapted without changes in efficiency did not work remotely % work efficiency 30,1 13,2 11 36 0 10 20 30 40 remote work did not influence the work shedule worked a little bit more worked much more did not work remotely %work shedule figure 2. distribution of answers to the question about the adaptation to remote employment of the enterprises whose activities were carried out in the ukrainian labor market, 2020 source: robota.ua survey data commissioned by ageless. available at: https://ageless.com.ua/blog/doslidzhennyarobota-ua-ukrayintsi-dedali-bilshe-obyrayut-viddalenu-zajnyatist/ baltic journal of economic studies 103 vol. 8 no. 2, 2022 a virtual environment. modern research confirms that countries that actively implement digital technologies in the development of economic processes have a high positive correlation between the indicator promoting e-business for individuals and the indicator characterizing the proportion of businesses that have conducted training to develop/improve the ict skills of their staff (bezrukova et al., 2022). in addition to all of the above, under conditions of uncertainty, it is extremely important for human resource management departments to create a favorable psychological climate in the team, taking into account the individual, psychological and physiological characteristics of each employee, as well as developing new models to help mid-level managers in the management of entrusted units. working in a virtual environment requires finding new leaders who can unite and motivate employees working remotely to work productively. the ability to hire the most productive, highly skilled professionals will depend on the integrated use of various human resource management strategies: the introduction of remote employment, offering flexible working hours, tiered compensation and benefits schemes, creating a corporate culture that unites all employees. 4. conclusions thus, the covid-19 pandemic underscored the importance of rethinking human resource manage ment strategies in enterprises around the world. different countries used different adaptation strategies during the crisis: they moved workers to temporary or part-time employment, or resorted to downsizing. however, a common strategy for all countries was the widespread introduction of remote employment. opportunities to use digitalization and remote employment differed significantly between groups of workers with different qualifications: the likelihood of performing their functional duties remotely was highest for highly skilled workers. during the pandemic, 39 36 31 24 23 16 10 8 0 10 20 30 40 implementation of digital platforms for collaboration allowing the employee to make a personal choice in determining how to do the job establishment of a new work schedule and implementation of standarts investing in the training of team leaders providing home access to the internet and necessary technologies setting up workspace at home extended corporate benefits (support, including financial, for care of family members) expansion of welfare-related compensation and benefits % figure 3. distribution of responses to the question, " what factors do you think are most important in achieving sustainability of remote/virtual employment?" source: deloitte research data global human capital trends survey – 2021 baltic journal of economic studies 104 vol. 8 no. 2, 2022 the number of workers for whom remote employment became a higher priority increased, and some executives were able to improve the efficiency of their businesses during the crisis by implementing remote employment. thus, with the gradual removal of pandemic restrictions and the further development of digital technology, remote employment, widely used as a short-term adaptation strategy, is very likely to be used in the future not only as a response to the crisis, but also as a standard strategy in human resource management. to work steadily under uncertainty and operate effectively during a recession, a set of human resource management strategies focused on remote employment must be optimized. the main tasks of business managers and hr specialists in the use of remote employment will be a radical revision of the format of the work organization. in addition to setting up a workflow, organizing a remote workplace, providing technical tools, establishing a new work schedule, and standardizing remote work, it's important to keep the interests of employees satisfied. to summarize, since employees are the driving force behind any enterprise, it is important in human resource management to pay more attention to leadership development, training, and employee development to ensure greater commitment and productivity. references: abi adams-prassl, teodora boneva, marta golin, & 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(2021). from vicious to virtuous paradox dynamics: the social-symbolic work of supporting actors. organization studies, 42(8), 1241–1263. doi: https://doi.org/ 10.1177/0170840620907200 baltic journal of economic studies 1 vol. 8 no. 1, 2022 corresponding author: 1 university of akureyri, iceland e-mail: helga@unak.is orcid: https://orcid.org/0000-0002-8857-8063 2 university of iceland, iceland e-mail: siggig@hi.is orcid: https://orcid.org/0000-0001-8897-3699 3 university of akureyri, iceland e-mail: gko@unak.is orcid: https://orcid.org/0000-0001-5651-0585 doi: https://doi.org/10.30525/2256-0742/2022-8-1-1-8 free trade agreement (fta) with china and interaction bet ween exports and imports helga kristjánsdóttir1, sigurður guðjónsson2, guðmundur kristján óskarsson3 abstract. the world trade system appears to gravitate toward trade blocks. while the european union (eu) is by far the largest trade block in europe, the subject of this research is focused on another european block, the european free trade association (efta), with the member states of iceland, liechtenstein, norway, and switzerland. unlike the eu, the efta countries can enter into free trade agreements (ftas) individually, with another country, whenever they choose. the world's largest increasing trading house over the last two decades is china, but it has not yet signed an fta with the eu. however, china has a bilateral agreement with both iceland and switzerland. the methodology of this research involves using the stata program for statistical regression estimation of simultaneous equation system since it estimates the interaction between the trade going between the countries. this allows for considering substitution or complementary effects between the goods flowing back and forth between the countries. the methodology is based on the means of the gravity model. this research aims to answer the following question: is it beneficial for small countries such as iceland and switzerland to have a bilateral agreement with china? this research focuses on estimating trade flows, in us dollars, between china and iceland on the one hand and between china and switzerland on the other. results from regression analysis indicate that when accounting for the ftas, import to iceland from china positively affects exports from iceland to china, but not the other way around. however, estimates for trade between switzerland and china show the reverse of this to be true. when presenting and analyzing literature and economic studies in the field, selection data and presenting the threestage regression result, accounting for the free trade agreements with china, our conclusion is the following: the trade relation of china with the two small european countries of iceland and switzerland has developed such that in 2014 the free trade agreements between china and iceland, and china and switzerland came into effect. a combination of the three-stage least-squares regression, as well as the gravity model, allowing for accountancy of ftas is applied. we conclude that when accounting for the ftas over the short period from 2011 through 2018, import to iceland from china has stimulated exports from iceland to china, but not the other way around. however, the estimates for switzerland are reverse to the estimates received for iceland. key words: china, exports, free trade agreements ftas, international trade, european free trade association efta, trade, gravity model. jel classifications: f14, f23, m14, m21 1. introduction in the last decades, we have seen the world trade system gravitate toward trade blocs, with the european union (eu) being the flagship of europe. eu does not have free trade agreement (fta) with china, however by the end of the year 2020, they entered into a comprehensive agreement on investment, excluding trade issues, under the world trade organization (wto) law (global risk insights, 2021). therefore, it is particularly interesting to analyze the impact of the european countries in the european free trade association (efta) on the fta with china. we look at the countries of the smaller european trade bloc. all the efta countries have individually made free trade agreements with china, which is the subject of this research. efta member countries are iceland, baltic journal of economic studies 2 vol. 8 no. 1, 2022 liechtenstein, norway, and switzerland. unlike the eu, the efta countries do not have common tariffs on products imported from nonmembers (europe, 2021; european free trade association, 2021; óskarsson & kristjánsdóttir, 2021; kristjánsdóttir & óskarsdóttir, 2021). therefore, individual efta countries can enter fta. the efta countries of iceland and switzerland were the first european countries to enter into fta with china in 2014. does it pay off for small countries like iceland and switzerland to have a bilateral agreement with a large country like china? this current research seeks to answer this question and analyze how international trade is affected by ftas. the focus is directed towards the fta between iceland and china, effective from july 1st, 2014, and the fta between china and switzerland, effective from july 1st, 2014. countries have gained an advantage throughout history by entering international trade (bergstrand, 1985; markusen, 2004). when considering historical development, it appears that having similar culture has helped when over-coming geographical distances. from ancient history to modern times, both through recession (hjálmarsdóttir & kristjánsdóttir, 2022) and growth, trading involved travelling, with traders often needing to travel long distances to engage in international trade, in association with increasing returns and imperfect competition (helpman & krugman, 1989). baier & bergstrand (2007) mention that a "gravity model has been a workhorse for cross-country empirical analyses" determining the impact of ftas on international trade flows, while kono (2007) questions when trade blocs block trade. nevertheless, the gravity model has proven extensively over the years (anderson, 1979; mccallum, 1995; anderson & wincoop, 2003; helpman, melitz & rubinstein, 2008). empirical results have shown that at some point free trade has a relatively small impact on the quantity of trade between countries (rose, 2004), however, looking closer at the matter, ftas have indeed resulted in more trade between countries (bagwell & staiger, 2005; subramanian & wei, 2007; eicher & henn 2011; handley 2014). with more liberalization thorough out the world, asia has been a noteworthy case of increasing free trade. considerable literature is available on the subject. kien & hashimoto (2005) sought to examine the asian free trade area (afta) using two-way trade flows by the gravity model, finding that afta resulted in trade creation between the member countries. elliot & ikemoto (2004) found that asian countries increased trade with countries outside asia after engaging in a fta. furthermore, frankel stein & wei (1995) found free trade agreements between asian countries to increase trade. after china joined wto in 2001, its trade with the outside world has increased dramatically, with the other asian countries (kein & hashimnoto, 2005), the us (handley 2014) and europe (subramanian & wei, 2007). however, fta were not made between china and european countries until switzerland and iceland in 2014. this current research seeks to add to the existing literature by analyzing the trade pattern between iceland and china, on the one hand, and switzerland and china, on the other hand, in an econometric setting, measuring the impact of kilometer distance and culture distance, together with the effects of economic size, population size and most importantly, the ftas membership. previous results obtained by (kristjánsdóttir et al., 2022) with similar data, sought to answer the following question: is it beneficial for the efta trade bloc to have free trade agreement with china? results are positive for exports from china to efta but not for exports from efta to china. therefore, it is not possible to conclude that the free trade agreement between the efta countries and china will pay off for the european countries – for the time analyzed. moreover, individual countries within the efta have ftas with china. this current research provides numerical presentation and econometric analysis of the trading effects on individual efta countries that entered a ftas with china in 2014. macro-economic data for both exports and imports are analyzed. it is the first time the macroeconomic data has been applied like this. 2. theoretical background this study is placed within the research on international trade, based on the gravity model, which has frequently been used to predict the effects of fta on trade flow. the gravity model explains well how exports between countries is subject to their size in gross domestic product (gdp), and wealth in gdp per person, population size, and geographical distance and decreases with less transaction cost which proxies are e.g., distance, and similar culture and languages, and ftas can also be included (baldwin, 1994; feenstra, 1998; anderson & van wincoop, 2003). the use of the gravity model in the econometric study was started by the noble laureate jan tinbergen (1962) (the model originally based on newton's law of universal gravitation in physics). tinbergen used the gravity model in research on international trade flow, estimating the effect of the fta on trade. with pöyhönen (1963), continuing work to analyze international trade flow, and other researchers followed like bergstrand (1989), deardroff (1995), and helpman et al. (2008). while the gravity model has been extensively used, an attempt at its theoretical explanation continued with anderson (1979). the model appears to work well (deardorff, 1984; bergstrand, 1989; filippini & molini, 2003). baltic journal of economic studies 3 vol. 8 no. 1, 2022 although the gravity model has received criticism, the model has been established further with improvements and usefulness in various circumstances, with increased commerce between nations at the end of the twentieth century. mccallum (1995) firmly refuted this common belief, where he showed with the gravity model that borders did indeed matter. he did his research on interprovincial trade within canada and international trade between usa and canada. while canada and usa are very similar in many ways, share the same language, have similar cultures and interrelated histories, the border did have a profound effect on the trade within canada and between canada and usa (mccallum, 1995). in the following years, when international trade increased between countries, mccallum's findings encouraged the gravity model's usage. minded of mccallum's findings, anderson & wincoop (2003) argued that the interprovincial trade within canada and international trade between usa and canada were considerably less than mccallum (1995) found. however, the effect was there, nevertheless. more importantly, anderson & wincoop (2003) developed the gravity model further, so it could have been used in other circumstances than just for a subset of countries or certain industries. further improvements were made to the gravity model. for example, helpman et al. (2008) improved anderson & wincoop (2003) findings when they added heterogeneity and fixed trade cost to the gravity model. the research by helpman et al. (2008) was like what melitz & ottaviano (2008) found when they developed a monopolistically competitive trade model with heterogeneity. the usage of the gravity model is therefore gaining strength with time. used extensively over the years, its theoretical foundation has been improved over time with research such as by anderson, 1979; mccallum, 1995; anderson & wincoop, 2003 and helpman et al. 2008. the empirical literature where the gravity model is used is rich. although the literature where the gravity model is used is substantial, the empirical results from research on the matter vary in terms of whether fta results in more trade between countries. rose (2004), for example, examined countries that joined general agreements of tariffs and trade (gatt), later wto and found little difference in trade patterns between those countries and those that did not join these organizations. the research contained a large portion of countries of the world, or 175 and spanned 50 years (rose, 2004). later research shows that other factors such as wto can lead to more trade between countries. the issue must be examined in more detail. bagwell & staiger (2005), for example, did point out that there was indeed an increase in trade between countries if they joined gatt/wto, but it depended on issues like what the country does with its membership, with what countries it negotiates, and finally, which products the countries agree to trade freely. subramanian & wei (2007) found trades between countries to depend on three issues. first, those developed countries that participated more actively than developing countries in free trade negotiations experienced an increase in trading. secondly, bilateral trade was greater among the trading countries when both sides undertook liberalization than when only one did. last, industries that did not remove barriers, such as tariffs and quotas, did not experience trade increases (subramanian & wei, 2007). further research is presented by eicher & henn (2011) and handley (2014), who found that trade of goods and services do usually increase between countries when they are engaged in a free trade agreement or members of organizations that emphasize free trade, such as wto. the result can depend on other underlying issues. for example, eicher & henn (2011) found to trade increased between countries if they were engaged in regional trade and had strong market power. the research on free trade between countries undertaken in the latter half of the twentieth century was mainly focused on free-market economies in the western world. at the turn of the millennium, the former soviet union countries were already freemarket economies, and china had become increasingly focused on international free trade. china joined wto in 2001 after a long and careful negotiation process (subramanian & wei, 2007), and trade between china and europe began to increase. however, free trade agreements between china and western countries did not take place right away. rather, ftas were made between china and other asian countries (kien & hashimoto, 2005). shortly after china joined wto, it made further agreements with countries in asia. china saw a dramatic increase in both imports and export after it joined wto in 2001, and in the first decade of this century, the total value of exports and imports increased by more than 600% (wto, 2019). while international trade between china and other countries decreased sharply during the recession of 2008 and 2009 (lai & li, 2013) the trade increase again shortly thereafter and has continued to do so ever since (wto, 2019). the chinese entrance into wto in 2001 led to a large increase in the export of goods to the us. the effect of increasing trade between these gigantic two countries has shaped the current political agenda. a rift is currently taking place (lawrence, 2018; lu, 2018; yu, 2018), and such is the impact that globalization itself is being reshaped (bao & wang, 2019). the free trade china has experienced since 2001 has indeed increased, not just with the us but also with the other large trading partners in the world, such as other asian countries and notably europe (wto, baltic journal of economic studies 4 vol. 8 no. 1, 2022 2019). however, china has been careful when it comes to assigning free trade agreements with other countries, particularly the large and established developed economies such as the countries that constitute the european union. increase in free trade has had a large impact on china and its recent development, improving the living standards of the chinese people, both in terms of foreign trade and in terms of more overall economic growth. it is therefore noteworthy that china doesn’t seem to put emphasis on further ftas, china has for example not agreed upon ftas with the european union. the careful and slow emphasis china has on fta with european countries maybe because of distrust towards the eu as an entity. therefore, china has rather focused on non-eu countries such as switzerland and iceland (lanteigne, 2010). by focusing on european countries that are not part of the eu, china can create a test a small market zone and possibly enter the eu market "from the back door" since countries like iceland are associated with the eu through the ees contract (lanteigne, 2010). china made an fta with iceland in 2014 and with switzerland in 2014. in line with previous research, one could potentially expect the ftas to result in increased imports and export. indeed, many research using the gravity model as their workhorse support that fta between countries has increased both import and export aitken (1973). baier & bergstrand (2007) found that fta doubled two countries bilateral trade on average after ten years. therefore, in line with previous literature, the same could hold for iceland and china, as well as switzerland and china after fta between the countries came into force in 2014. 3. data variable data is obtained from un comtrade database (2019) and the world bank (2019). 4. model setup and variables the model setup is somewhat based on previous research in relation to international trade and investment, including among other variables the conventional variables of the gravity model, considering remoteness (kristjánsdóttir, 2013, 2017, 2019a, 2019b, 2021; kristjánsdóttir et al. 2017, 2020; kristjánsdóttir & karlsdóttir, 2020; kristjánsdóttir & kristjánsdóttir, 2021; kristjáns dóttir & óskarsdóttir, 2021). in equation (1) we present the bergstrand (1985) empirical specification of the gravity model. the dependent variable px accounts for exports from country i to j. the explanatory variable yi accounts for the gdp in country i, and yj accounts for the gdp in country j. the a variable in the model is a dummy variable, taking a value of 0 or 1. finally, u is the error term of the equation. px uij i j ij ij ij= β β β β β 0 1 2 3 4(y ) (y ) (d ) (a ) (1) the equation can also be written as equation (2), with the dependent variable exports written out as exp, from country i to j, running over time t. exp e eij t i t j t ij ij ij t , , , ,(y ) (y ) (d ) (a )= γ γ γ γ γ ζ0 1 2 3 4 (2) then we transform the equation to a log-linear form and estimate the gravity equation in a log linearity format, with gdp inserted for y, in equation (3): ln exp lnij t i t ij t( ) (gdp ), , ,= + +ω ω ξ0 1 (3) table 1 variables in the model applied exp_icelandij,t exports from country (i) to country (j), over time (t). current values (us$), un comtrade database (2019) (https://comtrade.un.org/data/) exp_chinaij,t exports from country (i) to country (j), over time (t). current values (us$), un comtrade database (2019) (https://comtrade.un.org/data/) exp_switzerlandij,t exports from country (i) to country (j), over time (t). current values (us$), un comtrade database (2019) (https://comtrade.un.org/data/) imp_icelandji,t imports from country (j) to country (i), over time (t).trade value (us$), un comtrade database (2019) (https://comtrade.un.org/data/) current values. imp_chinaji,t imports from country (j) to country (i), over time (t).trade value (us$), un comtrade database (2019) (https://comtrade.un.org/data/) current values. imp_switzerlandji,t imports from country (j) to country (i), over time (t).trade value (us$), un comtrade database (2019) (https://comtrade.un.org/data/) current values. gdpi,t gdp at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. it is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. data are in current us dollars. dollar figures for gdp are converted from domestic currencies using single year official exchange rates. an alternative conversion factor is used for a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions. https://data.worldbank.org/indicator/ny.gdp.mktp.cd?view=chart ftaij,t fta (free trade agreement) binary dummy variable takes the value of one 1, if the countries trade agreement is in place and the value of zero 0 otherwise. baltic journal of economic studies 5 vol. 8 no. 1, 2022 the variable fta is generally presented as a binary variable, taking the value of one 1, if the countries trade agreement is in place, and the value of zero 0 otherwise. our version, however, accounts for the regional trade agreement status over time t. we expect there to be a positive coefficient for the fta variable, indicating that ftas tend to generate more trade among the fta members. this is presented in equation (4) with insertion of fta as the dummy variable taking a value of 0 or 1: ln exp lnij t i t ij t ij t( ) (gdp ) fta, , , ,= + + +ω ω ω ξ0 1 2 (4) the simultaneous equation system, starting with equation (5.1), allows for simultaneous estimation. exports of goods from iceland to china, and from china to iceland are estimated simultaneously. the statistical program stata allows for the use of the command reg3, allowing for three-stage estimation for the systems of simultaneous equations. a similar approach is applied by kristjánsdóttir (2019a) when asking the question, "does investment replace aid as countries become more developed?" using a simultaneous equation system. the stata program allows for the estimation of a system of structural equations, where some equations contain endogenous variables among the explanatory variables. first, equation (5.1) estimates exports from iceland to china as a function of exports from china to iceland, gdp, population, distance, and regional trade agreement effects. secondly, equation (5.2) exports from china to iceland are estimated as a function of exports from iceland to china, gdp, population, distance, and regional trade agreement effects. ln exp iceland ln exp china lnij t i t i t( ) ( ) (gdp ) r, , ,_ _= + + +ω ω ω ω0 1 2 3 tta , ,ij t ij t+ξ ln exp iceland ln exp china lnij t i t i t( ) ( ) (gdp ) r, , ,_ _= + + +ω ω ω ω0 1 2 3 tta , ,ij t ij t+ξ (5.1) simultaneous estimation with equation (5.2) ln exp china ln exp iceland lnij t ij t i t( ) ( ) (gdp ), , ,_ _= + + +ω ω ω ω4 5 6 7 rrta , ,ij t ij t+ξ ln exp china ln exp iceland lnij t ij t i t( ) ( ) (gdp ), , ,_ _= + + +ω ω ω ω4 5 6 7 rrta , ,ij t ij t+ξ (5.2) the variables used in the research are defined, and the data set in this current research runs from the year 2011 through 2018, with data obtained from the world bank (2019). 5. regression results iceland-china and switzerland-china are estimated separately, and the strength of the relationship between an independent and dependent variable, presented by r-square, is 0.92 and 0.86. after running regressions listed in the previous chapter, the results are as follow. the gdp effects are significantly negative for exports from iceland to china, meaning that the economic size of china does not increase the flow of exports from iceland to china. other gdp effects are not significant. previous results (kristjánsdóttir et al., 2022) show that fta only improves the flow of good from china to iceland, not the flow of goods from iceland to china. the regression results in this paper show that when accounting for the ftas, iimport to iceland from china (ln_isl_ imp_chn) has significant positive effect on exports from iceland to china, but not the other way around. however, estimates for switzerland are reverse to estimates for iceland, since import to switzerland from china does not have significantly positive effects on export from switzerland to china. 6. summary and conclusions this paper seeks to evaluate the potential gains or losses for iceland and switzerland when having free trade agreement with china these two countries are small developed and relatively high-income european countries, who are not members of the eu, and who separately entered ftas with china in 2014. for this purpose, we estimate merchandise data obtained from the united nations comtrade database, accounting for the time 2011–2018 of commercial trade. the unique feature of the research is that it estimated two equations simultaneously in an equation system. this is referred to as a simultaneous equation system, and the variables estimated are exports and imports, from and to china, gdp, population, distance, and regional trade agreement effects. data applied in this current research include data from un comtrade database and the world bank. the research regression is performed by estimating data on export and import flows. the research method involves a gravity model approach since it allows for the inclusion of economic size and the distance between countries, thus accounting for economic geography. this is particularly useful when comparing the trade results for switzerland and iceland with china since it allows for a more neutral comparison. the gravity model also allows for accountancy of ftas. earlier results by (kristjánsdóttir et al., 2022) indicate that both the small european economies of switzerland and iceland are similarly affected by trade with china. when entering into free trade agreement in 2014, the small economies were hoping to boost their exports to china's large economy. this, however, was not the case. the result was the flow of goods from china into the small economies increased. the flow of goods from these small economies to china decreased. therefore, the conclusion was that fta with china have not proved beneficial for these small economies. when accounting for the ftas with china, we find export from iceland to china to be dependent on imports from china. however, imports to iceland from china are not dependent on export to china. also, we find export from switzerland to china not to be baltic journal of economic studies 6 vol. 8 no. 1, 2022 table 2 three-stage least-squares regression iceland-china three-stage least-squares regression equation obs parms rmse "r-sq" chi2 p ln_isl_exp_chn 8 3 .110859 0.9208 80.88 0.0000 ln_isl_imp_chn 8 3 .309494 -0.7736 3.95 0.2666 coef. std. err. z p>|z| [95% conf. interval] ln_isl_exp_chn ln_isl_imp_chn 1.932324 .6776355 2.85 0.004 .6041829 3.260465 ln_gdp_chn -2.06851 1.006513 -2.06 0.040 -4.04124 -.0957807 fta_isl .6092274 .1401674 4.35 0.000 .3345043 .8839504 _cons 41.39452 18.52896 2.23 0.025 5.078423 77.71062 ln_isl_imp_chn ln_isl_exp_chn -1.370503 2.770461 -0.49 0.621 -6.800506 4.0595 ln_gdp_isl 2.357592 2.734657 0.86 0.389 -3.002236 7.717421 fta_chn .4427797 1.030283 0.43 0.667 -1.576539 2.462098 _cons -11.29369 23.40345 -0.48 0.629 -57.16361 34.57623 endogenous variables: ln_isl_exp_chn ln_isl_imp_chn exogenous variables: ln_gdp_chn fta_isl ln_gdp_isl fta_chn table 3 three-stage least-squares regression switzerland-china three-stage least-squares regression equation obs parms rmse "r-sq" chi2 p ln_che_exp~n 8 3 .1508688 0.8563 47.62 0.0000 ln_che_imp~n 8 3 .1481301 0.5024 15.35 0.0015 coef. std. err. z p>|z| [95% conf. interval] ln_che_exp_chn ln_che_imp_chn -.2620265 .8856638 -0.30 0.767 -1.997896 1.473843 ln_gdp_chn 2.621751 1.5341 1.71 0.087 -.3850289 5.628532 fta_che -.0709073 .268255 -0.26 0.792 -.5966775 .4548629 _cons -48.78763 27.58243 -1.77 0.077 -102.8482 5.272934 ln_che_imp_chn ln_che_exp_chn .9046656 .2786634 3.25 0.001 .3584954 1.450836 ln_gdp_che -4.433025 3.239017 -1.37 0.171 -10.78138 1.91533 fta_chn -.3782944 .2216591 -1.71 0.088 -.8127383 .0561495 _cons 122.8073 85.22708 1.44 0.150 -44.23471 289.8493 endogenous variables: ln_che_exp_chn ln_che_imp_chn exogenous variables: ln_gdp_chn fta_che ln_gdp_che dependent on import from china. however, imports to switzerland from china to be dependent on export to china. all in all, when we summarize the results, we find that when accounting for the ftas, import to iceland from china has stimulated exports from iceland to china, but not the other way 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(2018). a trade war that is unwarranted. china & world economy, 26(5), 38–61. doi: https://doi.org/ 10.1111/cwe.12255 baltic journal of economic studies 4 vol. 2, no. 3, 2016 analysis of agrarian sector resource providing in ukraine iryna bezpiata1 mykolaiv national agrarian university, ukraine abstract. the aim of this article is an analysis of material well-being level in agrarian sector of economy by productive resources (by land, labour, hardware) providing with that provides efficiency of economic activity and ground of basic directions of the rational bringing in and use of resource potential of agrarian sector of economy in ukraine in market conditions. research methodology consists in the use of statistical and economic research methods for analysis of productive resources using modern state of agriculture for period from 2010 to 2014 years. research results show that the resource providing agrarian sector development can be defined as totality of certain types of resources (land, technological, labour, financial) and sources of their forming, directly participating in the processes of agrarian sector economies development that can be mobilized with the purpose of providing the scale using of their potential possibilities and transition of agriculture to the qualitatively new state. analysis of the modern state of material well-being of agrarian sector resources of economy in ukraine is unsatisfactory and with every year gets worse. to overcome this problem agricultural commodity producers are unable only by themselves. for the improvement of the economic state of agrarian sector of economy in whole country and regional state support of home agricultural producer, stimulation of his activity is needed. and first of all the self-weighted investment policy of the state should become such measures in the agrarian sector of economy that will allow bringing in of greater amount of investment resources for the improvement of technical equipment at agricultural enterprises, development of production co-operation and products sale, introduction of personnel management modern methodology, increase in labour activity level in agrarian sector, realization of the permanent updating and increase in products quality control, etc. practical value. got results in the process of research can be drawn on in practical activity of agricultural commodity producers, management organs at regional and national level on increasing of resource potential using efficiency in agrarian sector of economy. value/originality. research results allow defining basic directions for increasing of resource potential using efficiency in agrarian sector of economy. one of terms of efficiency introduction, competitive and high-performance agricultural production is investment activity that is sent to financing of the projects and programs, related to development of agrarian economy sector. investment activity is based on investment policy of the state, clear legislative field, set priorities and directions and sent to forming of effective management mechanism by investments, creation of economically advantageous terms that would stimulate stock accumulations and its effective use, taking into account realities and specific of agrarian economy sector. key words: agricultural sector, land resources, labour resources, technical and technological providing of agrarian sector, plant-grower, stock-raising. jel classification: q15, r34, o13 corresponding author: 1 department of economy of companies, mykolaiv national agrarian university. e-mail: bezpyata@gmail.com 1. introduction agrarian sector – is one of basic industries of national economy from which efficiency of functioning are depended state food safety as well as effective work of contiguous industries, their competitiveness and development of the state. modern economic position of most agricultural commodity producers that provide creation of value added to a full degree, and thus, the economic value of the state, gives an opportunity to carry out only a simple recreation. the indicated is predetermined by many factors among that in particular: the ineffective use of available assets and resources; use of underproductive and ineffective technologies and facilities; absence of the clear, systematized protectionism of public policy in part of investment of capital public investments in development and modernisations of industry, introduction of development of scientific and technical progress and others like that. one of terms of introduction of effective, competitive and high-performance agricultural production there is investment activity (tatarenko, 2012). baltic journal of economic studies 5 vol. 2, no. 3, 2016 2. basic constituents of resource potential in agrarian sector ukrainian agricultural resource potential is submitted by land, water, climate and biological resources. land is essential one among all of them, which is the main production mode in agriculture. in recent decades the development of this sector is held basing on the maximal utilization of the production of land resources. ukraine owns considerable land resources. at the end of 2014 its land fund was 60,3 million hectare, or nearly 6% of europe. in particular, agricultural land in the structure of the country 's land is 70,8%, forests – 17,6%, water – 4,0%. at the end of 2014 ukraine had 41,5 million hectares of farmland. over 27,5 million hectares of land were privatised. over 7 million of citizens received land certificates (share), 96% of certificates were replaced by state acts on land private ownership. entirely new land relations were formed, basing on the private ownership of land. based on established land lease, agricultural formations of market direction were created. in recent years, there is a reduction of arable land in farms and an increase in their farms and households (lupenko, 2012). the area of arable land accounted for 26,7 mln. hectares in 2000, farms – 1,1  mln. hectares and households – 4,4 mln. hectares. at the end of 2014 – under 19,3 mln. hectares, 3,9 mln. hectares and 11,8 mln. hectares accordingly. the vast majority of agricultural producers do not adhere to scientifically based crop rotation and soilprotecting technologies. the right amount of organic and mineral fertilizers is not used for the cultivation of crops, leading to soil depletion, reduced fertility and increased degradation. agricultural development of the soil exceeds environmental standards. according to the government land agency (table 1) the plowed farmland in ukraine at the end of 2014 was 78%, and in some areas – up to 90%, which is dangerous, especially when there are large areas of eroded lands. excessive tillage leads to an annual increase in eroded areas to 80-90 thousand hectares. the share of agricultural land, exposed to the harmful effects of water erosion, is more than 30%, deflated soil occupies a half of the arable land. the ecological condition of large areas of agricultural land is the poor, particularly the area of acid soils occupies 10,4 mln. ha (25,0%), saline (medium and largely) and 35 saline – 4,7 mln. ha (11,3%), wetlands – 3,9 mln. ha (9,4%), stony – 5,4 mln. ha (13,0%). efficient and ecologically safe use of bioclimatic potential and natural soil fertility is decisive strategic factor of the production of human activity in agriculture. the fertility of the land is easier to lose than to restore. moreover, the last one takes a lot of effort, money, resources and time. also, an important prerequisite for the efficient use of land resources and compliance with agricultural technology is the optimal ratio of sectors of production (crop and livestock) in agricultural formations. it affects the selection of crop rotation, efficient use of land resources, overcome seasonality. crop cultivation includes a large number of crops that combine four homogeneous groups: grains and legumes, technical, potatoes, and vegetable and melon, and forage crops. the structure acreage effects productivity, overall productivity of the land, the state and fodder for livestock development, and therefore determines the level of production of all agricultural producers. the largest share of the acreage of ukraine during the last 5 years is occupied by cereals – 50%, the second come technical cultures – 30%, including almost 20% are sunflower crops. the smallest share in the structure of table 1 structure of agricultural areas of ukraine years agricultural lands, th. ha including plough land, th. ha % for agricultural lands sowing areas of agricultural cultures, th. ha % for plough-land 2010 41576,0 32476,5 78,11 26951,5 82,99 2011 41557,6 32498,5 78,20 27670,5 85,14 2012 41536,3 32518,4 78,29 27801,3 85,49 2013 41525,8 32525,5 78,33 28329,3 87,10 2014 41511,7 32531,1 78,37 27239,1 83,73 source: from data of gst of ukraine table 2 dynamics of agricultural cultures production in ukraine, thousand tones types of agricultural cultures years 2010 2011 2012 2013 2014 2014 in % tо 2014 grain and leguminous crops 39270,9 56746,8 46216,2 63051,3 63859,3 162,61 sugar beets (factory) 13749,2 18740,5 18438,9 10789,4 15734,1 114,44 sunflower 6771,5 8670,5 8387,1 11050,5 10133,8 149,65 beets 1447,7 1412,4 1196,1 2335,3 2198,0 151,83 potato 18704,8 24247,7 23250,2 22258,6 23693,4 126,67 vegetables 8122,4 9832,9 10016,7 9872,6 9637,5 118,65 garden-stuffs and berries 1746,5 1896,3 2008,7 2295,3 1999,1 114,46 source: from data of gst of ukraine baltic journal of economic studies 6 vol. 2, no. 3, 2016 sown areas of crops is occupied by fodder crops and each year this figure is reduced. these trends are agricultural producers’ reaction to market demands and low regulation of the agro-food market in ukraine. production of basic types of agricultural products given by volumes, in particular plant-growers, in ukraine in the economies of all categories is driven to the table 2. undertaken study of plant-grower development testifies that for the last five years the production of plantgrower goods increases gradually. during 2010-2014 the production of grain and leguminous crops increased to 62,61%, sugar beets – to 14,44%, sunflower – to 49,65%, potato – 26,67%, vegetables – 18,65%. in the pattern of grain production and leguminous crops in 2014 most part belongs to corn on grain – 44,63%, wheat – 37,77% and barley – 14,46%. due to stable domestic demand for grain of wheat, barley, corn, and also seed of sunflower, ukraine continues to occupy leading positions in the world agricultural market. ukraine supplies to the world market more than 15% of corn and over 10% of grain-growing, yielding after the export of agricultural production only to the usa (zorya, 2015). on results of 2014 the leader in grain-crops export is a corn, the volume of sale of which attained over 14,9  mln.  tons, providing the first place among export cultures (kernasyuk, 2015). the level of population food providing is examined as a major factor and qualificatory criterion of standard of the social living of any country, viability of its economic pattern and political system. in the decision of this problem the special role belongs to the stock-raising. a stock-raising is a complex of connected agriculture industries. it provides the population with feed (meat, milk, eggs), industry with the most valuable foods – with raw material (skins, fur, wool, fuzz, feather), and plant-grower – with organic fertilizers. a stock-raising embraces the row of subindustries, basic among which are the cattle breeding, pig breeding, sheep breeding, poultry farming. without regard to favourable in ukraine terms for development of stock-raising industry, production and consumption of products volumes calculating per one person dissatisfy the rational norms and are considerably low in comparison with other countries in the world. studying the basic tendencies of cattle and bird population indexes changing it follows in ukraine, that in the last few years there is a trend to reduction in cattle population to 13,58% (from 4494,4 thousand herd in 2010 to 3884,0 thousand herd of cattle in 2014). such types of cattle have an analogical tendency to annual reduction in population, as pigs – to 7,66%, sheep, goats – to 20,82% and horse – 23,52%. look after the best situation in the poultry farming of ukraine. this industry of stock-raising is vice versa marked with the annual gradual increase in bird population that testifies to development of this activity direction. the estimation of production of stock-raising basic products types in ukraine is presented in the table 3. the most successful year for the meat production (all kinds in for slaughter weight) in ukraine was 2013, the most subzero indexes of production are observed in 2010. in 2014 the production of meat exceeded the indexes of previous years by 14,60%, that is the positive factor of industry development. in the pattern of meat production in 2014 most part belongs to poultry meat – about 50,00%, on the second place is a production of pork – 31,47%, beef and veal – 17,49%. what touches the production of other types of stockraising foods evidently is that the production of wool and honey diminishes with every year. a production of milk in ukraine is more or less stable for the last five years. technical and technological rearmament of every enterprise is the basic direction of efficiency increasing of the labour, land resources, complex mechanization and automation of technological processes, intensification of production using and on this basis increase in agricultural cultures productivity, animals productivity, volumes and quality of products, profitability and profitability of agricultural production (bilyak, 2004). one of basic factors that determine firmness of agriculture development is a level of it technical and technological providing. in ukraine the level of the technical rigging of agriculture went down substantially (table 4). from datasheet it is evidently that the amount of tractors in country agriculture in the period of 20102014 diminished by 13,55%%. and the same time such a situation is not only with tractors but also with all agricultural technique. thus, only for this period the amount of combine harvesters grew short by 17,07%, table 3 production of stock-raising basic products types in ukraine types of products years 2010 2011 2012 2013 2014 2014 in % tо 2014 meat of all kinds (in for slaughter weight), thousands tones 2059,0 2143,8 2209,6 2389,4 2359,6 114,60 milk, thousands tones 11248,5 11086,0 11377,6 11488,2 11132,8 98,97 eggs, million points 17052,3 18689,8 19110,5 19614,8 19587,3 114,87 wool, t 4192 3877 3724 3520 2602 62,07 honey, t 70873 70311 70134 73713 66521 93,86 source: from data of gst of ukraine baltic journal of economic studies 7 vol. 2, no. 3, 2016 combines for corn – by 28,00%, for potatoes – by 23,53%%, for beet – by 35,71%, for linen – by 60,00%. loading on one physical tractor and one combine substantially grew and exceeds normative indexes almost twice. the quality indexes of technical potential of country agriculture testify to the material and moral aging of technique. majority of technique is purchased in 1991, the structure of tractor park is oriented to dt-75, мтz-80, with an insignificant volume of more power-hungry machines. in connection with annual quantitative composition reduction in car-tractor park and book value of agricultural enterprises, possibilities of the use of depreciation decrees for updating the fixed assets are diminished. in addition, only less insignificant part of these facilities heads for the technique purchase. practically all sums go to addition to the turnover means in connection with their deficit. existent terms of budgetary support and leasing development, which determine the dynamics of active market part of the fixed assets, does not provide the proof updating of agriculture material and technical base. experience of the machine-technological stations creation in ukraine cannot be named as successful; in most cases economies form a car-tractor park independently. however a level of it using is not enough. analogical tendencies are characterize the dynamics of energy powers availability and consumption of electric power in country agriculture. energy powers that is used in agriculture of country in 2014 comparatively to 2010 grow by 6,45%. mainly it takes place due to increasing power of electric motors in 2 times and equipments for the production of renewable energy – more than in 6 times. but power of engines of tractors, combines and selfpropelled machines and cars diminishes here. also almost three times amount of draught animals diminished in a count on mechanical force. thus, the level of agricultural technique provision remains insufficient in number and quality, swingeing majority of technique is morally and physically threadbare, that results in the considerable overruns of labour and money. efficiency of agrarian production and competitiveness of products in internal and external markets depend also on the level of providing, use of labour resources and application of scientifically-reasonable management methods. a human factor – in optimal combination with natural, material and technical – is that initial link that forms basic motive force of becoming, development and effective management of all socio-economic modes in rural locality. at the same time development of several options in the conditions of market presents increase requirements to the man internals as carrier and personalized proprietor of labour force that is used in the process of consumer costs creation in form of commodities or services (pokrovs'ka, 2014). table 4 presence of agricultural technique in agriculture at the end of year indexes years 2010 2011 2012 2013 2014 2014 in % tо 2014 tractors, thousand points 151,3 147,1 150,1 146,0 130,8 86,45 power of engines of tractors, thousand, kvt 12557 12656 12942 12908 11826 94,18 middle engine of tractor power, kvt 83,0 86,0 85,9 88,4 90,4 108,92 combine harvesters, thousand points 32,8 32,1 32,0 30,0 27,2 82,93 combine for corn, thousand points 2,5 2,3 2,1 2,0 1,8 72,00 combine for potatoes, thousand points 1,7 1,7 1,6 1,5 1,3 76,47 combine for beets, thousand points 4,2 3,8 3,6 3,0 2,7 64,29 combine for linen, thousand points 0,5 0,4 0,3 0,3 0,2 40,00 options and aggregates for milking, thousand points 10,9 10,8 11,2 11,2 10,5 96,33 source: from data of gst of ukraine table 5 dynamics of quantity in capable of working rural population and middle salary in agriculture in ukraine indexes years 2010 2011 2012 2013 2014 2014 in % tо 2014 amount of the employed population in agriculture, hunt, forestry, thousand persons 3094,5 3393,8 3496,0 3577,5 3091,4 99,90 amount of the hired workers is in agriculture, thousand persons 647,3 633,7 623,9 582,2 526,7 81,37 average monthly nominal salary in agriculture, hrn. 1430 1791 2026 2270 2476 173,15 source: from data of gst of ukraine baltic journal of economic studies 8 vol. 2, no. 3, 2016 in the present terms the question of agrarian producers providing by labour resources appeared actual enough in the context of system crisis and deepening of processes depopulation in a village, that stipulated worsening of quantitative and qualitative descriptions of skilled potential (table 5). the analysis of table data testifies that amount of the concerned population in agriculture, hunt and forestry in ukraine during 2010-2014 hesitates sharply. the greatest index presents 3577,5 thousand persons in 2013, that comparatively with 2010 is more by 483 thousand persons, or by 15,61%. thus in 2014 this index went down again to the level of 2010 and presented 3094,1 thousand persons. what touches the amount of the hired workers in agriculture is that this index annually has a tendency to decline and in 2014 it went down by 120,60 thousand persons, or by 18,63%. though an average monthly nominal salary in agriculture with every year increases, however it remains one of the least among other industries in the national economy of the country. 3. conclusions thus, analysis of the modern state of resources provision in agrarian sector of economy in ukraine is unsatisfactory and it gets worse every year. to overcome this problem agricultural commodity producers are unable be themselves. for an upturn in agrarian sector of economy in whole country and regional state, support of home agricultural producer, stimulation of his activity is needed. and first of all such measures in the agrarian sector of economy should become the self-weighted investment policy of the state, that will give an opportunity of bringing in of greater amount of investment resources for the improvement of technique at agricultural enterprises, development of production and sales co-operation, introduction of personnel management modern methodology, increase in labour activity level in agrarian sector, realization of the permanent updating and increase in quality of product control and others like that. references bilyak, n.i. (2004). estimation of the modern state of logistical support in agroindustrial complex. zb. nauk. pr. lnau, luhans'k: lnau, № 34/46, 34-38. kernasyuk, yu. (2015). where is ukrainian agrarian expected. ahrobiznes, №3 (298), 10-14. lupenko, yu.o., demyanenko, m.ja, kisil, m.i. etc. (2012). strategic directions of investment support agricultural development in ukraine till 2020. kyiv: nnc iae, 66. pokrovs'ka, o.v. (2014). enterprise labour resources and the ways of their using efficiency increasing in agriculture. retrieved from:http://repository.vsau.org/getfile/2819.pdf tatarenko, o.h. (2012). investment constituent of agrarian sector of economy development. investytsiyi: praktyka ta dosvid, № 5, 71-73. zorya, a., zvyahina, k. (2015). that investments brought a harvest. ahrobiznes, № 6 (301), 18-20. ирина безпьята анализ ресурсного обеспечения аграрного сектора украины аннотация. целью данной статьи является анализ уровня обеспеченности аграрного сектора экономики производственными ресурсами (земельными, трудовыми, техническое обеспечение), обеспечение которых обеспечивает эффективность хозяйственной деятельности и обоснование основных направлений рационального привлечения и использования ресурсного потенциала аграрного сектора экономики украины в условиях рынка. методика исследования заключается в использовании статистико-экономических методов исследования для анализа современного состояния использования производственных ресурсов в сельском хозяйстве за период с 2010 по 2014 года. результаты исследования показывают, что ресурсное обеспечение развития аграрного сектора можно определить как совокупность определенных видов ресурсов (земельных, технологических, трудовых, финансовых) и источников их формирования, непосредственно участвующих в процессах развития аграрного сектора экономики, которые могут быть мобилизованы с целью обеспечения широкомасштабного использования их потенциальных возможностей и перехода сельского хозяйства к качественно новому состоянию. анализ современного состояния обеспеченности ресурсами аграрного сектора экономики в украине является неудовлетворительным и с каждым годом ухудшается. преодолеть данную проблему в одиночку сельскохозяйственные товаропроизводители не в состоянии. для улучшения экономического состояния аграрного сектора экономики страны необходима общая и региональная государственная поддержка отечественного сельскохозяйственного производителя, стимулирование его деятельности. и в первую очередь такими мерами должна стать взвешенная инвестиционная политика государства в аграрном секторе экономики, что позволит привлечения большего количества инвестиционных ресурсов для улучшения технического оснащения на сельскохозяйственных предприятиях, baltic journal of economic studies 9 vol. 2, no. 3, 2016 развитие кооперации производства и реализации продукции, внедрение современной методики управления персонала, повышение уровня трудовой активности в аграрном секторе, осуществление постоянного обновления и повышения контроля качества продукции и т.п. практическое значение. полученные результаты в процессе исследования могут быть использованы в практической деятельности сельскохозяйственных товаропроизводителей, органов управления на региональном и национальном уровне по повышению эффективности использования ресурсного потенциала аграрного сектора экономики. значение/оригинальность. результаты исследования позволяют определить основные направления для повышения эффективности использования ресурсного потенциала аграрного сектора экономики. одним из условий внедрения эффективного, конкурентоспособного и высокопроизводительного сельскохозяйственного производства является инвестиционная деятельность, которая направлена на финансирование проектов и программ, связанных с развитием аграрного сектора экономики. инвестиционная деятельность базируется на инвестиционной политике государства, четком законодательном поле, установленных приоритетах и направлениях и направлена на формирование действенного механизма управления инвестициями, создания экономически выгодных условий, которые стимулировали бы накопления капитала и эффективное его использование, учитывая реалии и специфику аграрного сектора экономики. baltic journal of economic studies 119 vol. 2, no. 3, 2016 corresponding author: 1 department of management, national university of food technologies. e-mail: felina9@bk.ru 2 department of management, national university of food technologies. e-mail: opiankova@ukr.net features of adaptation in the life cycle of enterprise development iryna fedulova1, oksana piankova2 national university of food technologies, ukraine abstract. the aim of study is structuring of life cycle stages of organization in accordance with the changes in it, and taking into account mechanisms that make it possible to identify the point of transition from one stage of the life cycle to the next one. methods. we used a comparison method, which revealed the similarities and differences between alive and economic systems in the process of their life cycle. there were also used the empirical and theoretical methods, such as methods of analogy, abstraction and deduction. they allowed establishing specific characteristics of the organization transition to a new stage of its life cycle in a number of essential features, means the basis of the particular nature and purpose of the organization to adapt to environmental conditions. the result of this study is to determine the basic characteristics of the enterprise behavior at stages of its life cycle development from the perspective of an evolutionary approach to the development of economic systems. significant changes in the activities of the enterprise include the existence of a variety of transients, which are specific and determined by the features of the environment in which they occur. ordering of the properties of the environment that create the conditions for the operation and development of enterprises, also showed, that one of the properties is adaptation, that connects the possibilities of the environment with the potential for development of internal. comparative characteristics of the principles of alive and economic systems has allowed revealing many similarities. however, the economic system are developed under human control, based on his knowledge and skills, which enabled to justify adaptation to the environment as the main managerial transition characteristic to a new stage of development. adaptation and its competitive nature determine the range of basic management techniques in a cyclic flow of the organization development. this approach allows to justify the type of adaptation and development cycle of the enterprise and to determine the direction of its further positive long-term changes in the competitive struggle. the practical significance. revealed essence of adaptation in the process of organization life cycle, not only allows identifying the transition to a different phase of development, but also helps to identify the challenges that the organization faced in the process of achieving the goal. the essence of adaptation considered in three processes of organization activity: the main, auxiliary and management, allowing identifying the characteristics of each development cycle and their priorities for organizations. value/originality. the novelty of this study is a comparative description of the basic principles of alive and economic systems, the identification of the properties of external environment of the organization, which creates conditions for the functioning and development of organizations, and the selection on their basis the adaptation mechanism as the basic property of evolutionary systems. as well, as value of the adaptation at each stage of development of the organization to ensure its long-term development. key words: development, life cycle of development, development principles, adaptation in the life cycle. jel classification: e32, o12, o21 1. вступление жизненный цикл развития организации отражает содержание и структуру системных параметров организации, которые характеризуют определенные возможности организаций сохранять единство и целостность по отношению к цели в условиях нестабильности внешней среды. поэтому возникает необходимость структурировать этапы жизненного цикла организации в соответствии с изменениями, которые в ней происходят, и с учетом тех механизмов, которые позволяют идентифицировать точку перехода с одного этапа жизненного цикла на последующий. новизной данного исследования является сравнительная характеристика основных принципов развития живых и экономических систем, выявление свойств внешней для организации среды, которые создают условия для функционироваbaltic journal of economic studies 120 vol. 2, no. 3, 2016 ния и развития организаций, и выделение на основе этого адаптационного механизма, как основного свойства эволюционных систем. целью данного исследования является определение основных характеристик поведения предприятия на этапах его жизненного цикла развития с точки зрения эволюционного подхода к развитию экономических систем. такой подход является предпосылкой обоснования типа и цикла развития предприятия и определение на основе этого направлений его дальнейших положительных долгосрочных сдвигов. для этого поставлено задание выявление сущности адаптации в процессе протекания жизненного цикла развития организации, что не только позволяет идентифицировать переход на другую фазу развития организации, но и помогает выявить проблемы, с которыми организация столкнулась в процессе достижения цели. в процессе проведенного исследования использовался метод сравнения, который позволил выявить сходства и различия живых и экономических системах в процессе протекания их жизненного цикла. также использовались эмпирическо-теоретические методы, а именно методы аналогии, абстрагирования и дедукции, которые позволили установить конкретный признак перехода организации на новый этап ее жизненного цикла по ряду существенных признаков, а именно содержанием и целями адаптации организации к условиям внешней среды. таким образом, логика проведенного исследования заключается в выявлении основных принципов и особенностей развития экономически систем, основных влияющих посылов внешней среды на достижение цели развития и выявление адаптационного механизма, как точки идентификации перехода организации в процессе протекания ее жизненного цикла развития. 2. современные концепции жизненного цикла развития организации развитие  – это процесс закономерно качественного изменения, это, прежде всего необратимое изменение. абсолютно устойчива система не способна к развитию, так как любые отклонения от определенного состояния подавляются, и система возвращается в исходное равновесное состояние. кроме того, развитие – это качественный переход системы (организации) из одного состояния в другое. для перехода в новое состояние система должна стать неустойчивой. постоянная неустойчивость вредна для системы, как и гиперстойкость, потому что она исключает память системы, адаптивное закрепление полезных для выживания в данной среде характеристик системы. закон развития заключается в том, что каждая организация в процессе своей деятельности стремится к оптимальной самореализации как целого, так и своих составных элементов на основе их активности и динамического равновесия. каждая организация стремится достичь наибольшего суммарного потенциала при прохождении всех этапов жизненного цикла. не всякую последовательность изменений можно назвать развитием. особенно, если в этих изменениях невозможно увидеть закономерность и цикличность. сам по себе время существования не является организующим началом. вместе с тем, при исследовании процессов развития организации необходимо учитывать фактор времени и частоту качественных изменений в ходе развития – этапы жизненного цикла организации. теория жизненных циклов организаций с позиции их существования в конкурентной борьбе рассматривалась многими исследователями. жизненные циклы всех экономических объектов, процессов и систем имеют одну теоретическую базу: любой жизненный цикл начинается с зарождения, проходит стадии роста, зрелости и спада. модель жизненного цикла организации (greiner, 1972) рассматривает 5 этапов жизненного пути организации, которые называются «стадиями роста». при этом он рассматривает эволюционные и революционные этапы развития предприятия. согласно этой модели, наибольшее значение для построения модели организационного развития имеют пять ключевых факторов: возраст организации; размер организации; этапы эволюции; этапы революции; темпы роста отрасли. модель жизненных циклов организации (adizes, 1998) рассматривает десять этапов развития организации. в рамках этой модели жизнедеятельности организации выделяют «болезни роста» – специфические системные кризисы, связанные с развитием. то есть он рассматривает развитие путем протекания через кризисы и эти кризисы систематизированы в соответствии с предложенными этапами развития, в частности здесь рассматриваются кризис старта, рыночная уязвимость, ловушка семейственности, кризис автономности, неудачный предприниматель; кризис корпоративных отношений, кризис управляемости, кризис доверия, кризис коммуникаций. эти кризисы выявляют возможные приоритеты в выборе направлений деятельности организации и определяют цели развития. жизненный путь организации в бизнесе (emelyanov, povarnitsina, 1998) выделяет четыре этапа жизненного цикла организационного развития. каждый из этих этапов в свою очередь делится на шесть стадий, характеризующих ход каждого большого цикла развития. изменение этапов в соответствии с этим подходом происходит через трансформацию внутри организации при попытке разрешить кризис каждого отдельного этапа. некоторые учёные (dovben, gembel, 1998) рассматривают четыре этапа жизненной траектории предприятия. каждый этап характеризуется особенностями направлений функционирования и целенаправленности развития предприятия, определяется своими возможностями и их истощением. в литературе также встречается пять стадий жизненного цикла с учетом особенностей финансовой деятельности предприятия, которые находятся на разных стадиях жизненного развития и заключаются в разных baltic journal of economic studies 121 vol. 2, no. 3, 2016 уровнях инвестиционных потребностей (blank, 2001). эти этапы характеризуются различными темпами прироста общего объема финансовых ресурсов; различными возможностями привлечения заемного капитала; уровнями диверсификации финансовых операций; уровнем финансового риска. отдельные исследователи рассматривает четыре стадии жизненного цикла предприятия, которые определяются изменениями в эффективности его деятельности и идентифицируются экономическими показателями, такими как объем продаж и расходы (bazarov, 2002). последняя фаза – фаза кризиса, которая характеризуется уменьшением эффективности и потерей места на рынке. особенностью жизненной концепции развития организации (milner, 1998), которая состоит из пяти этапов, является то, что последняя стадия упадка характеризуется ростом конкуренции, проблемами уменьшения спроса, поиском путей сохранения рынков, использование новых возможностей, увеличением потребности в специалистах. то есть конкуренция определяется основной характеристикой последнего этапа и не рассматривается на предыдущих. классификация поведения организации на различных этапах ее жизнедеятельности в зависимости от вида стратегии в конкурентной борьбе рассматривали и другие ученые (yudanov, 1998), (knyish, 2000), (korotkov, 2001). первый этап развития  – «серая мышь» (коммутантная стратегия); второй этап  – «хитрый лис» (патиентна стратегия); третий этап «мощный слон» (виолентная стратегия). в (efremov, 2001) добавлены «первые ласточки» (эксплерентная стратегия)  – это предприятия, которые ориентируются на поиск новых революционных решений. однако понятие конкурентное поведение предприятия является более широким чем жизненный путь развития. несмотря на то, что все модели жизненных циклов основаны на различных переменных организации, все рассматривают развитие через похожие стадии жизненного цикла. каждая модель имеет стадии становления, накопления или эффективности, зрелости или формализации и контроля, диверсификации или разработки структуры и адаптации. некоторые модели имеют стадию спада, которая может быть преобразована в стадию обновления. нужно отметить, что ни один из авторов не определяет интервал времени в течении которого организация остается на определенной стадии развития и не определяют механизм перехода на последующую стадию. 3. принципы развития экономических систем различают две формы развития: эволюционную и революционную. в условиях эволюционной формы  – развитие можно охарактеризовать как процесс постепенного, непрерывного количественного изменения, который готовит качественные изменения; революционная форма характеризует скачкообразный переход от одного качественного состояния к другому, от старого – к новому. развитие любых систем происходит циклически. длинные, средние и короткие циклы в экономике находят свое отражение в развитии отдельных предприятий. такое воздействие может быть первоначальным  – импульсы отдельных составляющих экономики образуют новые волновые процессы и вторичным  – волновая сущность экономических процессов обусловливает развитие конкретного предприятия. развитие предприятия нужно рассматривать в контексте жизненных циклов и важным здесь является то, что деятельность предприятия протекает в форме процессов, которые имеют разную продолжительность во времени и различное направление деятельности. в сферу основной деятельности предприятия включается производство, продвижение и сбыт продукции, это порождает производственный и маркетинговый циклы развития. важной сферой для предприятия является сфера обеспечения производства материальными, финансовыми, трудовыми и информационными ресурсами. это создает на предприятии логистический, финансовый и кадровый циклы развития. перспективная деятельность предприятия проявляется в его инвестиционной, инновационной и организационной деятельности, эти процессы также имеют свои жизненные циклы. отдельные этапы деятельности многократно повторяются, имеют разную продолжительность, которая зависит от внутренних и внешних условий хозяйствования. на основе концепции циклов жизни технологий, продуктов и систем возможна временная, ресурсная и организационная синхронизация всех процессов и стадий производства. у каждой системы есть свой цикл формирования развития, охватывающий период времени от зарождения системы до ее разрушения. длительное существование систем обуславливается тем, что каждая из них имеет свойство самовоспроизведения. если новая образованная система ничем не отличается от предыдущей, цикл развития называется симметричным или конформным, а развитие – экстенсивным. если в системе у элементов появляются новые свойства, цикл называется асимметричным и приобретает дисбаланс свойств: в наличии есть элементы со «старыми» свойствами и элементы с новыми. однако система становится более совершенной, а ее развитие интенсивным. в аналитическом виде закон развития предлагает рассматривать с помощью таких отношений (novikova, 2013): ∑∑ = = = n i m j ijj rr 1 1 max 1 )( rkr m j jj →∑ = ),...,( 1 mjj kkfk += (1) ∑∑ = = = n i m j ijj rr 1 1 max 1 )( rkr m j jj →∑ = ),...,( 1 mjj kkfk += (2) baltic journal of economic studies 122 vol. 2, no. 3, 2016 таблица 1 принципы развития живых и экономически систем принцип сущность принципа в развитии живых систем особенности принципа в экономических системах базовые принципы развития открытых систем наследственность одна из основных свойств живых организмов передавать из поколения в поколение наследственные признаки, сохранение и воспроизведение у потомков основных признаков внешнего и внутреннего строения, физико-химических особенностей и жизненных функций родителей происходит накопление и осознание суммы знаний, навыков и опыта в предпринимательской деятельности и в управлении, что приводит к типичным действиям экономических субъектов. накопленный опыт повышает способность к выживанию, выступает фактором стабильности и удерживает от неоправданных и пагубных решений и действий. изменчивость способность живых организмов приобретать новые признаки, отличные от предков и их состояний в процессе индивидуального развития, разнообразие признаков среди представителей данного вида свойство меняться со временем, в результате чего изменения происходят по определенным этапам, которые создают жизненный цикл развития. экономическая система с разной скоростью проходит стадии зарождения, развития, стабилизации и спада. для того, чтобы избежать разрушения, экономическая система должна постоянно изменяться и переходить к новым состояниям. изменчивость выражает свойство системы избежать стадии отмирания путем трансформации ее элементов и их взаимодействия. система обменивается с внешней средой информацией, энергией, ресурсами и определяет возможность предприятия адаптироваться к изменениям. развитие материальных систем осуществляется не непосредственно и прямо, а посредством изменения их составляющих элементов. мысленный процесс случайных преобразований в организации находится в рамках принципа изменчивости. на рынке один товар сменяет другой не только по причине своего превосходства, но и в соответствии с этапом развития всей системы. отбор выживание наиболее приспособленных в борьбе за существование организмов, способных оставить многочисленное потомство; процесс, благодаря которому благоприятные наследственные характеристики становятся общими в последующих поколениях популяции размножающихся организмов, а неблагоприятные наследственные характеристики становятся менее общими выражает неравноправие элементов системы при прохождении жизненных циклов развития. отбор предусматривает перераспределение ресурсов и рынков в пользу наиболее конкурентоспособных систем. отбор может управляться директивным или конкурентным механизмом. при использовании директивного механизма используют пороговые критерии, свидетельствующие о существенных трансформации, он проявляется в виде неравноправных условий хозяйствования. конкурентный механизм позволяет проходить отбор естественным эволюционным путем как невозможность для субъекта приобретение необходимых ресурсов при одинаковых условиях доступа и проявляется через процессы банкротства. системность это упорядоченное множество элементов направленных на достижение определенной цели. уровень упорядочения элементов системы определяется совместимостью всех ее элементов, степенью познания закономерностей, которым подчиняется исследуемая система. субъект рассматривается как элемент системы, а эволюция как процесс. система трансформируется в результате тех процессов, которые происходят во внешней среде. открытая экономическая система постоянно обменивается информацией с внешней средой, между ними существует обратная связь. неопределенность это объективная невозможность получения абсолютного знания про объективные и субъективные факторы функционирования системы, неоднозначность ее параметров. неопределенность развития вытекает из того, что существует наиболее вероятная траектория эволюции с сохранением основных принципов развития. вспомогательные принципы развития экономических систем принцип динамического равновесия требует: а) оптимального соотношения между элементами системы, а также между целым и его частями; б) оптимального соответствия между устойчивостью и изменчивостью, самоорганизацией и беспорядком; в) оптимального соотношения системы с внешней средой. принцип оптимального развития организации стремятся обеспечить оптимальное развитие, перемещая материальные ресурсы менее важных на более важные и перспективные направления. при недостатке материальных ресурсов в организации средства переключаются на обеспечение наиболее важных направлений и сфер деятельности. принцип разумного консерватизма или инерции изменение потенциала системы, способствует развитию, происходит с некоторым опозданием, обусловленным темпом изменения ресурсов или технологий. принцип стабилизации стремление к стабилизации наиболее эффективных этапов жизненного цикла – это принцип реализуется совместно со всеми вышеперечисленными принципами. принцип адаптации каждая организация стремится сгладить последствия внутренних и внешних возмущающих воздействий. речь идет о гомеостазе системы (относительное постоянство ее существенных параметров, от которых зависит благоприятное развитие) и о характере гомеостатических (восстанавливающих гомеостаз) реакций. в результате реакции системы на воздействия вызывает функциональное напряжение – стресс. высокая эластичность гомеостатических реакций означает их антистрессовый, адаптивный характер. baltic journal of economic studies 123 vol. 2, no. 3, 2016 ∑∑ = = = n i m j ijj rr 1 1 max 1 )( rkr m j jj →∑ = ),...,( 1 mjj kkfk += , (3) где r j  – потенциал организации на j-том этапе жизненного цикла, rij  – потенциал организации в i-том виде деятельности на j-том этапе жизненного цикла, kj  – коэффициент влияния потенциала каждого предыдущего этапа жизненного цикла на следующие, fj  – функция влияния, rmax  – планируемые результаты по конкретным видам деятельности организации, n  – количество видов деятельности, m – количество этапов жизненного цикла. эта формула интересна тем, что в развитии просматривается временной, ресурсный и функциональный аспекты деятельности организации в процессе ее развития. цикличность изменений на предприятии обусловлена такими противоречиями: 1. на уровне внешней среды: между общей закономерностью периодического обновления общества и всех составляющих его систем и замедленной реакцией государства на эти тенденции. данные обстоятельства приводят к волнообразному развитию не только экономики в целом, но и отдельного предприятия как элемента экономической системы. 2. на уровне предприятия: между появлением техники и технологии нового поколения и запаздыванием реагирования менеджеров на отбор, внедрение и распространение инноваций. 3. на уровне индивида: противоречие между необходимостью развития лидерских свойств у руководителей и усиления их склонности к власти в период инновационных преобразований. жизненный цикл развития организации нужно рассматривать как последовательность фаз (стадий), которые в своей совокупности составляют весь период эволюционного развития предприятия. на каждой фазе принципиально меняются направления и интенсивность развития, главные стратегические усилия, требования к развитию персонала вообще и к каждой личности в отдельности, направление маркетинговой деятельности, требования к развитию конкурентоспособности предприятия, возможности формирования потенциала, тип организационного механизма, финансовые, инвестиционные, конкурентные и главное – инновационные стратегии развития. сегодня в экономической науке появилось новое направление  – эволюционная экономика. она связана с эволюционным мировоззрением и рассматривает все системы в процессе постоянных и обусловленных изменений. развитие в эволюционной экономике рассматривается как результат прошлого и условие будущего, а изменения связываются с идеями дарвина о наследственности, изменчивости и отбора. использование этих принципов в экономике открывает новые перспективы, но в то же время связано с рядом трудностей методического и практического характера. сегодня эти принципы в управлении нужно дополнить также принципами системности и неопределенности (табл. 1). в биологических системах природа закладывает определенный алгоритм, по которому биологический объект рождается, растет, стареет и умирает. к таким объектам относится и человек. организация не является творением природы, ее создают люди, поэтому жизненный цикл организации не подчиняется только законам природы. объектом исследования эволюционной теории развития экономических систем является неравновесные процессы, которые выступают основой для их динамической трансформации. организация стареет и загнивает не от времени, а от просчетов и ошибок в управлении – от плохого менеджмента. поэтому проблема профессионального менеджмента или профессионального управления является ключевой в управлении жизненным циклом предприятия. мы выделяем принцип адаптации систем, как таковой, который хотя и сродни отбору, но отвечает за переход организации от одного этапа развития к другому в процессе протекания жизненного цикла развития организации. при этом, если адаптация соответствует этапу жизненного цикла, то организация развевается, а если нет  – возможно прекращение развития и существования организации как таковой. 4. свойства внешней среды в процессе функционирования организаций если говорить о внешней среде организации в целом, то нужно отметить, что каждое предприятие имеет свой потенциал развития и подчиняется закономерностям циклического развития всей социально-экономической системы. свойства внешней среды, которые создают условия для функционирования и развития предприятий можно систематизировать следующим образом: 1. неоднородность. различные свойства различных частей и подсистем в данный момент времени. это может быть естественная неоднородность, связанная с различными природными, социальными и культурными особенностями, историей развития и накопленным опытом. рыночная неоднородность определяется особенностями развития конкуренции и процедурами отбора эффективных субъектов хозяйствования, размещением и уровнем развития факторов производства. социальная неоднородность определяется особенностями распределения благ и возможностей, стремлением к лидерству. неоднородность это свойство как внутренней так и внешней среды предприятия. 2. ограниченность. ресурсы предприятий как правило ограничены. количество идентифицированных потребностей и потребителей также ограничено во времени. вследствие возникает конкуренция за потребителя и за ресурсы. это основной источник всех социально-экономических угроз и рисков, инициирует естественный отбор экономических субъектов. 3. коммуникативность. возможность информационного взаимодействия субъектов хозяйствования и социально-экономических институтов. уровень разbaltic journal of economic studies 124 vol. 2, no. 3, 2016 вития глобализационных процессов, информационных технологий и национальной интеграции способствует развитию коммуникативности, а именно не только получать и передавать информацию но и трансформировать ее. 4. сопротивление. люди сопротивляются не имениям, как таковым, а неуверенности в их целесообразности и неопределенности результатов. такое сопротивление легче предотвратить, чем его устранить. для того, чтобы изменения были восприняты, персонал должен понимать, что именно конкретные меры означают для каждого персонально и для развития предприятия в целом. 5. а даптивность. преодоление негативных переходных процессов, которые угрожают устойчивости предприятия, выступают необходимым требованием таблица 2 сравнительный анализ жизненных циклов развития предприятия в соответствии с принципами системного управления и возможностями к адаптации этапы жизненного цикла развития предприятия процессы деятельности предприятия основные, которые создают потребительскую ценность и стоимость вспомогательные, которые отвечают за ресурсное обеспечение управленческие, осуществляющие целевое влияние на процессы деятельности и их регулирования зарождение внедрение идеи, становление эффективной технической системы, разработка концепции продукции, которая может обеспечить конкурентные преимущества. ключевым ресурсом выступают информация и персонал, которые на донном этапе выступают важнейшими конкурентными преимуществами. формируются стратегические цели развития в соответствии с требованиями, предъявляемыми внешней средой. создание системы управления и организации. мотивация сотрудников. адаптация касается наилучшим использованием возможностей внешней среды, в основном это касается формирования целевой аудитории потребителей, поиск ключевых параметров сегментирования и описание рынка потребителей, осознание базовых параметров товара, а именно таких характеристик, без которых товар не способен выполнять свои ключевые функции, без которых товар не существовал бы. данные характеристики обычно называют обязательными характеристиками или «the must». рост повышение качества продукции и соответствие ее требованиям потребителя и его ожиданиям. сырье и материальные ресурсы, их объем, доступность, цена, качество, условия поставки. создание деловой репутации предприятия, доступность капитала. гибкость управления, оперативный переход предприятия на новые системы выпуска и наращивания объемов продукции. финансирование различных проектов предприятия. адаптация определяется наращиванием своих преимуществ за счет лучшей чем у конкурентов соответствия тактики требованиям внешней среды, создание ключевых компетенций. это создание ожидаемого уровня товара, представляет собой набор характеристик, которыми должен обладать продукт по мнению целевого потребителя, учет ожидания потребителя о функциях продукта, поиск отличий от товаров-конкурентов. зрелость диверсификация продукции и производственно-хозяйственной деятельности, многообразие номенклатуры и услуг. более глубокое удовлетворение потребностей потребителей. управленческие ресурсы, управленческий персонал создают ключевые конкурентные преимущества на рынке. оптимизация денежных потоков предприятия и бизнес-структур. ценовая политика нацелена на отпускные цены с учетом возможных скидок и наценок. стимулирование сбыта. корпоративная культура. адаптация определяется предотвращении угроз и нивелировании слабых сторон в соответствии с требованиями конкурентной борьбы, созданием условий для снижения затрат на обеспечение факторами производства, поддержание технологического лидерства перед другими отраслевыми конкурентами относительно принятия решений, оптимизации структуры управления. формирование дополненного уровня или дифференциация важных для потребителя характеристик, которые делают товар уникальным, не похожим на товары ключевых конкурентов. данный уровень отражает более высокую степень развития продукта или услуги кампании. спад поиск других путей удовлетворения потребительских нужд, психологическое позиционирование товара у потребителей, в случае отсутствия поиск нишевого рынка потребительской ценности. возможности модернизации производства исчерпаны. дефицит финансовых ресурсов представляет наибольшую опасность. изношенность материальной базы. система управления жесткая и требует новых идей в повышении эффективности организации и управления. адаптация определяется в поиске новых условий понимание потребностей потребителей. baltic journal of economic studies 125 vol. 2, no. 3, 2016 адаптации предприятия к новым условиям. это свойство предприятия изменять свои параметры в зависимости от состояния внешней среды с целью повышения устойчивости и эффективности. устойчивое развитие в эволюционной экономике, основанной на знаниях, не исключает внутренних противоречий, что связано с бифуркациями, которые представляют собой скачок параметров системы вследствие критического состояния, и с флуктуациями, которые представляют собой отклонения параметров системы от состояний компенсированной и некомпенсированной устойчивости. предложенная (polyakov, stepanov, 2003) концептуальная модель инновационного развития предприятия включает следующие допущения: источником развития выступают инновации; развитие предприятия имеет как волновой так и импульсный (дискретный) характер; основным параметром является время как природный измеритель волновых процессов; существуют два вида воздействий: те, которые влияют на амплитуду и те, которые влияют на вид волнового процесса. первый тип воздействия связан непосредственно с деятельностью. второй  – с реализацией стратегии предприятия. 5. адаптация организаций к внешней среде в процессе протекания ее жизненного цикла жизненный цикл развития предприятия мы рассматриваем путем протекания четырех фаз (этапов). каждая фаза включает повторяющиеся периоды интервалы: повышение, насыщения (точка максимума) и снижение. каждая из определенных фаз характеризуется высотой и шириной. максимальная высота фазы – это достижение максимального эффекта, ширина фазы – период времени, в течение которого обеспечивается стабильность. высота фазы зависит от адаптационного потенциала, который определяет возможности предприятия противодействовать внешней среде, используя его лучшие возможности и нивелирующие угрозы. важно сбалансированность развития, а это значит, что высота и ширина каждой фазы развития должны быть оптимально сбалансированы, иначе могут возникнуть непредвиденные проблемы и может произойти нарушение стабильности. если эффективность в отдельной фазе достигается быстро, то это может создать для предприятия опасность относительно быстрого обеспечения всеми видами ресурсов и потребность очень гибкого и динамичного управления. длительное достижения эффективности может стать рискованным из-за возникновения изменений во внешней среде по спросу, емкости рынка, конкурентных преимуществ продукции и тому подобное. существенные изменения в деятельности предприятия предусматривают существование различных переходных процессов, которые имеют специфический характер и определяются особенностями условий, в которых они протекают. в табл. 2 проведен сравнительный анализ жизненных циклов развития предприятия в соответствии с принципами системного управления и возможностями к адаптации. процесс адаптации предусматривает получение информации из внешней среды, корректировки ее для собственного поведения, повторение процесса корректировки поведения на основе обратной связи. это важнейшее свойство эволюционных систем, которое задает скорость протекания процессов развития. предоставлен перечень основных факторов эффективности деятельности предприятия в контексте его жизненного цикла рассматривает только важнейшие направления сравнительного анализа отдельных этапов жизненного цикла развития предприятия. значение и сущность отдельных факторов может меняться в зависимости от деятельности предприятия, но в этот перечень отражает тактические и стратегические факторы, которые выступают основой для определения адаптационного механизма, который является основным фактором развития эволюционных систем. 6. результаты исследования основой понимания развития и его протекания на наш взгляд выступает адаптация, которая определяется возможностями предприятия в конкурентной борьбе и проявляется в возможностях эффективно решать конкретные локальные задачи, накоплении ресурсов на отдельных этапах, что создает предпосылки для достижения устойчивого развития предприятия и его адаптационные возможности. причем адаптацию мы предлагаем рассматривать как механизм конкурентной борьбы, который меняется на разных этапах развития предприятия, способность к самосохранению, приспособлению, структурной перестройке, преобразованию в условиях нестабильности. основная характеристика адаптации  – это приспособление к изменениям внешней среды. когда происходит изменение в конкурентной стратегии предприятия это свидетельствует об исчерпывании возможностей данного этапа и необходимы новые связи и отношения между субъектами хозяйствования на рынке и внутри предприятия. рынок диктует, что на данном этапе нужен поиск новых движущих сил и, соответственно, происходит новый этап развития, который формируется с построением новых структурных изменений конкурентной борьбы. именно обеспечение конкурентоспособности предприятия является тем фактором, который определяет целенаправленное поведение предприятия на обеспечение его устойчивости и определяет сущность адаптации. в дальнейших исследованиях необходимо разработать эффективные механизмы адаптации для каждого этапа жизненного цикла развития и определения кризиса конкурентоспособности исходя из задач устойчивости и безопасности предприятия. baltic journal of economic studies 126 vol. 2, no. 3, 2016 references adizes, i. 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(1998). konkurentsiya: teoriya i praktika. – m. : «marketing», 1998. – 298 р.: 154-162. ирина федулова, оксана пьянкова особенности адаптации в жизненном цикле развития предприятия аннотация. целью работы является структурирование этапов жизненного цикла организации в соответствии с изменениями, которые в ней происходят, и с учетом тех механизмов, которые позволяют идентифицировать точку перехода с одного этапа жизненного цикла на последующий. методика. использовался метод сравнения, который позволил выявить сходства и различия живых и экономических систем в процессе протекания их жизненного цикла. также использовались эмпирическо-теоретические методы, а именно методы аналогии, абстрагирования и дедукции, которые позволили установить конкретную характеристику перехода организации на новый этап ее жизненного цикла по ряду существенных признаков, а именно исходя из конкретной сущности и цели адаптации организации к условиям внешней среды. результатом данного исследования является определение основных характеристик поведения предприятия на этапах его жизненного цикла развития с точки зрения эволюционного подхода к развитию экономических систем. существенные изменения в деятельности предприятия предусматривают существование различных переходных процессов, которые имеют специфический характер и определяются особенностями условий, в которых они протекают. систематизация свойств внешней среды, которые создают условия для функционирования и развития предприятий, также показала, что одним из свойств есть адаптация, которая соединяет возможности внешней среды с потенциалом развития внутренней. сравнительная характеристика принципов развития живых и экономических систем позволила выявить много общего. однако, экономические системы развиваются под управлением человека, на основе его знаний и компетенций, что позволило обосновать адаптацию к внешней среде как основную управляющую характеристику перехода на новый этап развития. адаптация и ее конкурентный характер определяют диапазон основных управленческих методов в циклическом протекании развития организации. такой подход позволяет обосновать тип адаптации и цикл развития предприятия и определить на основе этого направления его дальнейших положительных долгосрочных сдвигов в конкурентной борьбе. практическое значение. выявленная сущность адаптации в процессе протекания жизненного цикла развития организации не только позволяет идентифицировать переход на другую фазу развития организации, но и помогает выявить проблемы, с которыми организация столкнулась в процессе достижения цели. сущность адаптации рассмотрена по трем процессам деятельности организации: основной, вспомогательный и управленческий, что позволило выявить особенности каждого цикла развития и их приоритетные задачи для организаций. значение/оригинальность. новизной данного исследования является сравнительная характеристика основных принципов развития живых и экономических систем, выявление свойств внешней для организации среды, которые создают условия для функционирования и развития организаций, и выделение на их основе адаптационного механизма, как основного свойства эволюционных систем. а также значение адаптации на каждом этапе развития организации для обеспечения ее долгосрочного развития. baltic journal of economic studies 134 vol. 8 no. 1, 2022 corresponding author: 1 chernihiv polytechnic national university, ukraine e-mail: prokopenkolena22@gmail.com orcid: https://orcid.org/0000-0003-0701-933x researcherid: f-8771-2014 2 chernihiv polytechnic national university, ukraine e-mail: maksim-32@ukr.net orcid: https://orcid.org/0000-0002-5305-7815 researcherid: f-3291-2014 3 chernihiv polytechnic national university, ukraine e-mail: popelo.olha@gmail.com orcid: https://orcid.org/0000-0002-4581-5129 researcherid: i-8572-2016 doi: https://doi.org/10.30525/2256-0742/2022-8-1-134-147 the essence of the deposit behavior of households and features of its formation in the conditions of turbulent development of the financial services market olena tarasenko1, maksym dubyna2, olha popelo3 abstract. financial resources of households in most developed countries are the largest in volume, stable in terms of the development of the financial services market and economy as a whole. it is the development of the mechanisms for attracting these funds from economic entities, knowledge of the process of making financial decisions, is an important and integral part of forming a solid foundation for sustainable economic development. accordingly, conducting research in this area is relevant and necessary. thus, theoretical and methodological provisions for the formation of deposit behavior of households in current changing conditions of the financial services market is the subject of this research. within the study, a range of classical scientific approaches is used. the following general and special research methods were used, namely: analysis, synthesis, content analysis, system approach and method of logical generalization, process approach, etc. methods of graphic visualization of research results were used as well for better presentation. the purpose of the article is to study the nature and features of the formation of deposit behavior of households in the financial services market in terms of its transformation. thus, as a result of the study, within the article, a detailed analysis of the essence of deposit behavior of households is carried out, and the author’s concept of the interpretation of the following categories "deposit behavior", "deposit behavior of households" is formulated. the article identified and systematized the main factors influencing the formation of this type of behavior; these factors are divides into groups: endogenous and exogenous. the detailed consideration of the formation process of deposit behavior of households in the financial services market allowed to identify the main stages of its formation and to describe their features. it is established that the process of reflection of economic entities plays an important role in the formation process of deposit behavior of households, which highlighted the need to deepen theoretical issues of this direction. accordingly, the essence of financial reflection is specified, the specific features of the implementation of reflective management of the formation process of deposit behavior of households in the financial services market is considered. key words: behavior, deposit behavior, household deposit behavior, reflection, reflective management, financial services market. jel classification: d14, g21 1. introduction households play a key role in building the national economy, especially in the formation and develop ment of the financial services market. these economic entities have the ability to generate significant amounts of financial resources that can be attracted on a long-term basis to ensure sustainable development of the national economy. baltic journal of economic studies 135 vol. 8 no. 1, 2022 transformation of savings into credit and investment funds through the indirect role of financial institutions allows to create internal financial resources for stable, gradual and secure economic development of the state. however, in a significant number of countries there are no proper conditions for the outlined transformation, respectively, financial resources of households are not always fully involved in the financial market, which complicates the development of the national economy, forming its dependence on other sources of financial resources. in ukraine today, households do not play the role in the country 's economy that these entities play in the developed advanced countries of the world, where such entities are primarily the main investors in the national economy. a significant number of negative factors of the social, political, historical, economic nature, which affect the processes of the formation of household savings, contributed to the decline in public confidence in financial institutions. this, in the end, led to the creation of the irrational models of the deposit behavior of households, their tendency to save without transferring such resources to the use of financial institutions. it is the presence of irrational actions of citizens in the financial services market, including the deposit services market, that leads to the creation of unfavorable conditions for intensifying the economic development of the country. accordingly, these issues need their own study, scientific substantiation in order to find new mechanisms, ways to form models of the rational deposit behavior of households. this can be implemented only through the deepening of theoretical, methodological and applied provisions of the financial services market, the formation of this type of behavior in different conditions of economic development. 2. literature review features of the formation of the deposit behavior of households is an extremely important area of research. among the leading scientists of the national and foreign importance, who have devoted their publications to various aspects of the financial market, the following ones should be noted: bublik e.a. (2012), demian b., burlutskyi s. (2014), fedyshyn m.f., abramova a.s. (2019), george a., akerlof amd robert j. shiller (2015), grigoraș-ichim c.e., cosmulese c.g. (2018), ilchuk v.p. (2014), kahne man d. (2011), kholiavko n., grosu v. (2021), kopylov a.a. (2011), kosach i. (2019), lomachynska i.a. (2011), marhasova v., garafonova o. (2020), prokopenko v. (2018), shamanska o. (2014), shevaldina v.g. (2012), shkarlet s.m. (2016–2017), smirnov o.yu. (2006), taleb nassim nicholas (2010), thaler richard h. (2015), tkalenko n.v. (2011), vlasenko o. (2015), zatonatskiy d. (2021), zhavoronok a. (2021), zhuk o.s. (2018), and others. the main results of the research (2) show that increasing concentration, lowering the interbank interest rate, disinflation, increasing the bank's capitalization and re-ducing the bank's liquidity have a significant impact on the lowering interest rates on deposit products in the slovak banking sector. the authors prove that the high-capitalized banking sector has a lower transition to deposits. scholars argue that in the context of a market rate, the deposit rate of the highly capitalized banking sector should also decrease, and this decrease should be higher than the reduction of the market rate (gavurova, kocisova, rozsa, halaskova, 2019). the authors investigated that deposit reimbursement schemes (drs) are basi-cally a combination of two instruments: a tax on the purchase of a certain product and a subsidy for a separate collection of the same product at the stage of its use. scientists believe that the drs efficiency in terms of further processing is higher in cases where current processing rates are relatively low (linderhof, oosterhuis, van beukering, bartelings, 2019). the aim of the article is to study three categories of household deposits in 15 eurozone countries. scientists analyze the data at the household level and apply a logit model. the researchers concluded that the impact of the well-being and socio demographic characteristics of households on their propensity to own deposits was the opposite of guaranteed and non-guaranteed deposits (kochaniak, 2019). the study is based on the assessment of the withdrawals’ extent from house-hold deposits. the authors analyzed the importance of high value deposits for individual populations and indicated those in which sediments were the most frequent (kochaniak, 2018). the purpose of the researchers' article is to study the impact of the revocation of licenses on the degree of the household confidence in banks and reduce their incentives to make deposits. the authors investigated that a slight positive effect from the closure of bank branches due to the revocation of licenses for retail deposits is relevant (vasilyeva, novopashina, 2018). in the article, the authors study the dynamics of deposits in russia, as well as identify the risks of reducing the volume and structure of deposits. researchers have developed an approach to calculating liquidity ratios and determining a stable part of banks' liabilities based on the use of the household deposit portfolio (trofimov, 2017). the main idea of the research is to analyze the understanding of the fintech landscape in indonesia, which, according to the authors, is characterized by baltic journal of economic studies 136 vol. 8 no. 1, 2022 a het-erogeneous, dynamic and developing network of organizations and innovative mechanisms to increase the scalability of financial services. it is found within the study that the mechanisms of platforming, decentralization, localization and democratization by fintech platform operators have a positive effect on the scale of financial services and financial behavior of households (muthukannan, tan, chiang, 2021). the aim of the authors' work is to empirically determine the impact of finan-cial development on trade in services. researchers use three proxies to measure fi-nancial development: financial system deposits, liquid liabilities and private loans. after statistical tests and reliability tests, the authors investigated that financial development has a positive impact on trade in services in central and south america, but does not have a significant impact in asia and africa ( jiang, khan, zaman, iqbal, 2021). researchers have studied the preconditions for the emergence and use of fi-nancial convergence by participants in the global financial services market to provide additional competitive advantages and sustainable development by changing the established order in the financial market sectors. the authors consider practical ways to determine the existence of financial convergence, based on a modern approach using the methodology of calculating sigma convergence (rysin, galenko, duchynska, kara, voitenko, shalapak, 2021). according to the authors, in today 's world, financial services are developing most intensively in the field of electronic payments. the article is based on the analysis of the development of the financial services market in ukraine, identification of problems and prospects for the development of this market. considering the prospects of further research, the authors emphasize the further study of the development of financial technologies in the financial sector, transactions with bankcards and electronic money in ukraine (roshylo, kovalevych, gut, ventsel, berdar, 2020). 3. the essence and the features of the formation of the deposit behavior of households let's start the study by considering the essence of the category "deposit behavior of households". it should be noted that the outlined type of behavior, as well as the financial behavior of all economic entities that use financial services, is directly related to the ongoing process of making appropriate decisions on the use of their own financial resources. however, such processes occur in an environment of constant influence on their very significant number of factors that are formed both within the economic environment as a whole and inherent in individuals, households, etc. it is logical to begin the consideration of the essence of the category "deposit behavior of households" with the study of the content of such definitions as "deposit behavior", "household". in figure 1, the author's approaches to the analysis of the outlined categories are presented. please note that it is extremely difficult today to study some features of the behavior of economic entities within the national economy, including the financial services market due to the lack of necessary analytical data, the presence of a significant number of different models of economic models, including financial, the deposit behavior, and insufficient development of methodological tools for such research. however, it can be unequivocally stated that behavior is a generalized category for describing the actions of a particular subject in a given situation. in economics, which directly examines the basic economic processes of production, exchange, distribution and consumption, the behavior is primarily related to the peculiarities of the formation of interaction between entities as a result of these processes. thus, taking into account the specifics of deposit operations, the peculiarities of the functioning of financial institutions, the category of "deposit behavior" should be considered as follows: deposit behavior – the process of interaction with the environment about the placement of temporarily free financial resources in the temporary use of the depository institution, as it has the right to accept these resources for storage, use them at its discretion on terms of return, timeliness, payment and timeliness. it is worth noting that, in general, a certain type of the deposit behavior is common to all economic entities that own a certain amount of financial resources that these entities can transfer to financial institutions. however, in each case, such models have their own, quite diverse features. for households as economic entities, this type of behavior is quite different from the decision-making processes for the management of financial resources by owners and management of enterprises, management of organizations, institutions, etc. given the specific role of households in the development of the national economy, the household’s deposit behavior should be considered as a process of interaction of economic entities that carry out economic activities and have a common budget with financial institutions to place temporarily free financial resources they have, which involves the transfer of these funds in the temporary use of such institutions with the right to use them at its discretion on terms of return, timeliness, payment, timeliness, transparency and coordination of interests. it should be noted that the behavior of households is largely determined by the social environment, baltic journal of economic studies 137 vol. 8 no. 1, 2022 th e pr oc es s of in te ra ct io n of th e en tit y w ith th e en vi ro nm en t o n th e pl ac em en t o f te m po ra ri ly fr ee fin an ci al r es ou rc es th at it ow ns ,w hi ch in vo lv es th e tr an sf er o f t he se fu nd s fo r te m po ra ry u se to th e de po si to ry in st itu tio n, as it h as th e ri gh t t o ac ce pt th es e re so ur ce s fo r st or ag e, us e th em a t i ts d is cr et io n on r et ur n ,p ay m en t a nd tim el in es s. a se t o f i nd iv id ua ls , pe rs on s w ho to ge th er fo rm a si ng le e co no m ic e nt ity an d ca rr y ou t j oi nt ec on om ic a ct iv iti es a nd ha ve a c om m on b ud ge t. d e p o si t b e h a v io r o f h o u se h o l d s th e pr oc es s of in te ra ct io n of e co no m ic e nt iti es th at c ar ry ou t e co no m ic a ct iv iti es a nd h av e a jo in t b ud ge t w ith fin an ci al in st itu tio ns fo r th e pl ac em en t o f t em po ra ri ly fr ee fi na nc ia l r es ou rc es th ey h av e, w hi ch in vo lv es th e tr an sf er o f t he se fu nd s fo r te m po ra ry u se to s uc h in st itu tio ns w ith th e ri gh t t o us e th em a t i ts d is cr et io n , tim el in es s, pa ym en t, tim el in es s, tr an sp ar en cy a nd co or di na tio n of in te re st s h o u se h o l d d e p o si t b e h a v io r co m bi na tio n fi gu re 1 . th e es se nc e of th e ca te go ry "d ep os it b eh av io r of th e ho us eh ol d" so ur ce : c om pi le d by th e a ut ho rs ta ki ng in to a cc ou nt ( sm ir no v, 20 06 ; th al er r ic ha rd , 2 01 5) h o u se h o l d a se t o f i nd iv id ua ls w ho c ar ry o ut jo in t ec on om ic a ct iv iti es an d ha ve a s in gl e bu dg et e c o n o m ic e n t it y d e p o si t i n st it u t io n s te m po ra ri ly fr ee fi na nc ia l re so ur ce s re tu rn ur ge nc y tim el in es s co m m er ci al b an ks (p ri va te ,p ub lic ) cr ed it un io ns ha ve th e ap pr op ri at e lic en se to c ar ry o ut de po si t a ct iv iti es in t e r a c t io n ow ns tr an sf er s fo r te m po ra ry us e pa ym en t on c on di tio ns tr an sp ar en cy co or di na tio n of in te re st s fi gu re 2 . s ch em e of th e es se nc e of th e de po si t b eh av io r of th e ho us eh ol d so ur ce : c om pi le d by th e a ut ho rs ta ki ng in to a cc ou nt ( g eo rg e, a ke rlo f a m d r ob er t j . s hi lle r, 20 15 ; k ah ne m an , 2 01 1; t al eb n as sim n ic ho la s, 20 10 ) baltic journal of economic studies 138 vol. 8 no. 1, 2022 moral principles, and therefore, the use of the model of economic man-maximizer does not adequately reflect reality. the limitation of the rationality of the household behavior may be the difference in the desired goals (demian, burlutskyi, 2014). with this in mind, let's identify the main features of the deposit behavior of households, using the results of clarifying the nature of this category. these include the following: 1) the process of interaction – deposit behavior of households is a phenomenon, the formation of which is a complex process of transformation of individual attitudes to the activities of depository institutions; such behavior occurs even when a person may not have free financial resources, but already has a clear position on saving a frugal lifestyle and their own views on the transfer of funds at the disposal of other entities; 2) subjective dimension – for its formation of the deposit behavior of households it is necessary to have at least two entities: the owner of financial resources and a financial intermediary who has the opportunity to attract these funds; 3) effectiveness – deposit behavior of households is already in its content the result of interaction between two economic entities, as such behavior has already formed and exists; 4) duration of formation – the deposit behavior of households is created for a long time under the influence of various factors, worldviews of the individual, his individual attitude to financial institutions, the experience of interaction with them; 5) complexity of transformation – a long period of formation of the deposit behavior of households leads to complex processes of its transformation into its model of the rational type. note that this behavior changes very quickly if a person wants to withdraw their own funds at some point in time. however, the formation of the long-term, optimal, predictable behavior occurs only in the long run. in figure 2, the model of creating the deposit behavior of households as a result of interaction between the household and depository institutions is shown. the process of forming the deposit behavior of households is quite complex. this is due to the large number of different types of households, the peculiarities of their economic behavior, and the presence of a large number of factors influencing decisions on the use of their own financial resources and the activities of financial institutions. some types of the deposit behavior are formed under the influence of a number of factors, among which an important role is always played by specifically specific factors that arise in the process of creating a particular type of behavior. for example, for different segments of the population, which can be ranked by income level, the factors that would affect the characteristics of the behavior of citizens are generally very similar, however, for some groups they will be specific. for example, wealthy citizens have their own specific attitude to the implementation of savings and this directly determines their behavior in the deposit market of the country. for less protected segments of the population who do not have temporarily free funds, another model of the deposit behavior will be typical, or rather its absence. in this case, such citizens will have a certain attitude to the activities of depository institutions, which, when changing their level of socio-economic security, may affect the formation of future behavior of such persons. it is virtually impossible to identify exhaustively specific factors that influence the formation of different types of the deposit behavior of households. it is only advisable to do this when conducting a study of a specific group of people and their attitudes to the functioning of depository institutions. however, in general, as for any complex macroeconomic system, within the deposit services market it is possible to identify a list of those factors that play the greatest role in shaping the deposit behavior of households in the country. in figure 3, a set of such factors is presented. all the outlined factors were divided into two major groups: exogenous and endogenous. the first group included all the factors that are formed in the external environment, within which the relationship between depository institutions and their customers are formed. they were divided into political, economic and social. endogenous factors are considered as a set of factors that are inherent in the person who decides to transfer part of their funds to financial institutions. this group includes all the personal characteristics that are inherent in each person as a separate economic entity. it should be noted that the peculiarities of the economic environment in which depository institutions and households operate are often decisive in the processes of forming the deposit behavior of households. the experience of the development of the deposit services market in ukraine shows that the stability of the national economy is an important and priority condition for the development of the defined market based on the rationalization of models of the deposit behavior of households. however, ensuring the long-term sustainability of the national economy is a difficult task for many countries. thus, the financial services markets in such countries are developing in a rather turbulent environment, characterized by periodic crises, which are often due to deeper economic and political transformations within the global financial system. turbulent development of the financial services market significantly complicates the processes of formation of the deposit behavior, especially in households, and often leads to a radical decline in their confidence in the functioning of depository baltic journal of economic studies 139 vol. 8 no. 1, 2022 in st itu tio na l ec on om ic so ci al exogenous endogenous f a c t o r s o f f o r m a t io n o f d e p o si t h o u se h o l d b e h a v io r e xo ge no us fa ct or s ar e fa ct or s th at a ris e an d op er at e w ith in n at io na l a nd w or ld ec on om ic s ys te m s. in di vi du al e nt iti es d o no t h av e th e ab ili ty to in flu en ce s uc h fa ct or s, b ut c an o nl y ta ke th em in to a cc ou nt in th e de ci si on -m ak in g pr oc es s fo r fu rt he r in ve st m en ts . e nd og en ou s fa ct or s ar e fa ct or s th at ar is e an d in flu en ce th e be ha vi or o f a pa rt ic ul ar in di vi du al o r gr ou p of in di vi du al s w ith in a s in gl e ho us eh ol d. s uc h fa ct or s ar e fo rm ed d ur in g a pe rs on 's li fe , p ar tly de pe nd o n hi s m en ta l p er ce pt io n of th e w or ld . st ab le le gi sl at io n in th e fi el d of d ep os it se rv ic es b y fi na nc ia l in st itu tio ns av ai la bi lit y of in st itu tio ns to g ua ra nt ee th e re tu rn o f d ep os its , th ei r e ff ec tiv e fu nc tio ni ng av ai la bi lit y of e ff ec tiv e le gi sl at io n in th e fi el d of c on su m er pr ot ec tio n of s uc h se rv ic es ef fe ct iv e m ec ha ni sm fo r s ta te s up er vi si on o f f in an ci al in st itu tio ns in th e co un tr y le ve l o f e co no m ic d ev el op m en t o f t he c ou nt ry av er ag e in co m e of c iti ze ns m ac ro fi na nc ia l s ta bi lit y in th e co un tr y in th e lo ng ru n th e le ve l o f i nt eg ra tio n of th e fi na nc ia l s er vi ce s m ar ke t i nt o th e gl ob al fi na nc ia l s ys te m ec on om ic s ta bi lit y in th e co un tr y tr an sp ar en cy o f t he o pe ra tio n of d ep os ito ry in st itu tio ns de m og ra ph ic s itu at io n in th e co un tr y po pu la tio n st ru ct ur e (u rb an , r ur al ) th e le ve l o f p ro pe ns ity in th e co un tr y to c on su m e ge ne ra l d ev el op m en t o f t he fi na nc ia l s er vi ce s m ar ke t a nd it s in di vi du al c om po ne nt s ge ne ra l f in an ci al m ar ke t c on di tio ns hi st or ic al p re co nd iti on s fo r t he d ev el op m en t o f t he d ep os it se rv ic es m ar ke t th e le ve l o f t ru st in th e ac tiv iti es o f f in an ci al in st itu tio ns in so ci et y av ai la bi lit y of te m po ra ri ly fr ee fi na nc ia l r es ou rc es th at c an b e at tr ac te d le ve l o f f in an ci al lit er ac y of ho us eh ol ds ex pe ri en ce in u si ng de po si t s er vi ce s fe at ur es o f t he m od el o f e co no m ic be ha vi or im pl em en te d by th e ho us eh ol d (c on su m er , s av in gs ) ag e of th e ow ne r o f fi na nc ia l r es ou rc es th e le ve l o f ed uc at io n of th e ow ne r o f f in an ci al re so ur ce s th e le ve l o f f in an ci al co nf id en ce in d ep os ito ry in st itu tio ns re si de nc e fi gu re 3 . f ac to rs in th e fo rm at io n of th e de po si t b eh av io r of h ou se ho ld s so ur ce : c om pi le d by th e a ut ho rs b as ed o n th e s tu dy ( k op yl ov , 2 01 1, p . 6 5; l om ac hy ns ka , 20 11 , p . 1 72 ; s ha m an sk a, 2 01 4, p . 1 09 ; s he va ld in a, 2 01 2, p . 3 15 ) baltic journal of economic studies 140 vol. 8 no. 1, 2022 institutions, the level of which is restored for a long time. accordingly, the national economy is losing in the long run the financial resources of households, the volume of which is rapidly declining, which affects the increase in the cost of borrowed funds, complicating the financial condition of banking institutions. the reasons for the formation of a turbulent environment for the development of the financial services market may be the following: political instability and radical changes in the political landscape; high dependence of the country 's economy on the world markets for goods, products and raw materials; low level of gold and foreign exchange reserves; low quality of institutional support for the functioning of financial institutions; a significant economic downturn in the country, which leads to macro-financial instability; ineffective monetary policy, and other reasons. conducting research in the field of determining the behavior of economic entities is important to understand the peculiarities of the deposit market, as its entire algorithm is based on trust between consumers and producers of deposit services. trust is a part of a person's behavior, a factor that influences his further actions and intentions to transfer his own funds to financial institutions. this only confirms the importance of analyzing the whole process of origin and transformation of the household behavior in open economic systems. in figure 4, a diagram of the process of formation of this type of behavior is presented. let’s consider its essence in more detail. first of all, the initial condition for the emergence of deposit relations on the basis of already formed a certain model of deposit behavior is the availability of a particular person's free financial resources, which he already wants to transfer for temporary use to a financial institution. in this case, the person is often unaware of the process of reflection, i.e. selfconsideration of the need to invest, the amount of potential contribution and planning the expected results of such actions (stage 1 – reflection and decisionmaking on the contribution). if the investor decides not to invest at all, the idea of buying a deposit product was situational and temporary. at this stage, the process is pre-behavioral, when a person reflects on certain possibilities and decides how to proceed. as a result, a decision is made on further action. with a positive decision on the feasibility of opening a deposit account, the future client of the financial institution begins to explore existing opportunities for deposit, assess potential income, risks, analyze the overall market of deposit services (stage 2 – analysis of existing deposit products). quite often the outlined is not carried out, and the decision is made situationally or on the basis of opinions of other persons who can share own experience of interaction with that, or other bank or credit union. the number of factors influencing both the decision on the feasibility of investing in a depository institution and the choice of such an organization is significant and it is virtually impossible to quantify their impact on people. as a result, a person chooses a depository institution and buys a deposit product (stage 3 – choosing a financial intermediary and the appropriate type of deposit). at the time of the funds transfer to the depository institution, it is possible to state the existing model of deposit behavior of the household, as it is possible to clearly define the relationship to the deposit currency, its term, the depository institution (state bank, foreign banks), etc. (stage 4 – concluding a deposit agreement). the availability of this information makes it possible to describe the behavior of a particular person and his attitude to the functioning of financial institutions (stage 5 – transfer of own financial resources to banking and non-banking institutions; stage 6 – expiration of the deposit agreement, refund with interest to their owner). however, if we take a closer look at the process of forming the deposit behavior of households, it becomes clear that certain actions (and this is part of the phenomenon of behavior) a person begins to perform before the start of the deposit relationship. the choice of banking institution, product, consideration of the potential benefits and risks of nonrefund, all this is already beginning to shape the very behavior and personal attitude of the person to the savings process. that is, even in the early stages a person gradually makes decisions about the appropriateness of the contribution and thus already determines certain aspects of their own behavior. however, there is no interaction with depository institutions at this stage. it is, given the specifics of the deposit behavior of households, in our opinion, it is appropriate to distinguish two stages of formation of such behavior: 1. pre-behavioral – a stage of reflection on the feasibility of making savings and transfer them for temporary use to depository institutions. at this stage, the process of forming the future model of the deposit behavior of households, which occurs as a result of the influence of a significant number of different factors. 2. behavioral stage – the process of interaction between the owners of financial resources and depository institutions, during which a specific type of a model of the deposit behavior of the household is formed. 4. the role of reflection in the formation of the deposit behavior of households as already mentioned, the process of formation of the deposit behavior of households is complex and depends on many factors, which are difficult to identify and analyze, and sometimes impossible, given baltic journal of economic studies 141 vol. 8 no. 1, 2022 h o u se h o l d av ai la bi lit y of te m po ra ri ly fr ee fin an ci al r es ou rc es t h e p r o c e ss of re fl ec ti on as se ss m en t o f s av in gs o pp or tu ni tie s, an al ys is o f t he c ur re nt s ta te o f t he de po si t s er vi ce s m ar ke t, re fle ct io n on th e ne ed to in ve st in a d ep os ito ry in st itu tio n do n ot in ve st in ve st ch oi ce o f d ep os ito ry in st itu tio n ch oi ce o f d ep os it pr od uc t a na ly si s of th e de po si t m ar ke t, th e ac tiv iti es o f de po si to ry in st itu tio ns d e p o si t in st it u t io n s ba nk in g in st itu tio ns cr ed it un io ns c ho ic e of d ep os ito ry in st itu tio n an d de po si t pr od uc t v is it in g a de po si to ry in st itu tio n c on cl ud in g a de po si t a gr ee m en t t ra ns fe r of fu nd s in te m po ra ry p os se ss io n to th e de po si to ry in st itu tio n r ec ei pt o f f un ds o n th e fi na nc ia l m ar ke t co nv er si on o f f un ds in to c re di t a nd in ve st m en t re so ur ce s fo r t he d ev el op m en t o f t he n at io na l ec on om y ex pi ra tio n of th e de po si t a gr ee m en t, re tu rn o f fu nd s w ith in te re st to th ei r o w ne r pr o c e ss de ci si on m ak in g p r o c e ss de ci di ng o n fu rt he r ac tio ns re ga rd in g fi na nc ia l r es ou rc es in ve st do n ot in ve st fi gu re 4 . s ch em e of th e pr oc es s of fo rm at io n of th e de po si t b eh av io r of h ou se ho ld s in th e fin an ci al s er vi ce s m ar ke t so ur ce : c om pi le d by th e a ut ho rs ta ki ng in to a cc ou nt ( v la se nk o, 2 01 5) baltic journal of economic studies 142 vol. 8 no. 1, 2022 the rapid emergence of such factors, their short-term impact, but significant consequences for the financial services market. especially knowledge of the process of formation of the deposit behavior of households is complicated by the fact that among the outlined factors, informal institutions, institutions formed in society play an important role, and assessing their impact from an analytical point of view is extremely difficult. however, it is possible to learn theoretical aspects of the impact of such factors, to analyze the peculiarities of their origin and development in the consideration of the deposit market as a holistic macroeconomic system. understanding and using the principles and motives of the investors' behavior, which are determined by the sum of their psychological attitudes (such as confidence, propensity to consume, liquidity benefits), expands the ability to effectively manage significant demand and investment resources accumulated by the population (bublik, 2012, p. 37). a special role in shaping the deposit behavior of households in the first pre-behavioral stage is played by the processes of reflection and decision-making on the use of their own financial resources by these entities. accordingly, reflection, which is inherent in households at this stage, is one of the key processes, which is an integral part of creating a model of appropriate behavior. issues of reflection of citizens in the field of savings are becoming important, because at this stage through the use of specific tools it is possible to influence the decision-making process to obtain the expected results in increasing the amount of funds accumulated by financial institutions. understanding the factors that have the greatest impact on making positive investment decisions allows you to partially manage and regulate such processes. this can be done only if research is conducted in this area. reflection is an integral part of shaping the economic behavior of households in general, as it is an objective process that is inherent in everyone. economic reflection is an important component of knowledge of the individual subject of economic processes and patterns of the society’s development in which it operates and develops. in particular, due to reflective processes, a person of chance makes decisions about their own economic actions, which is important from the standpoint of knowledge of such actions and understanding of the mechanisms of influencing such a process to obtain the desired result. in the financial sphere, it is appropriate to consider the process of financial reflection as one of the cases of economic reflection. this type applies to more reflective processes that involve household decisions about the appropriateness of using financial services. let’s consider in more detail the essence and features of the process of financial reflection. in figure 5, the theoretical platform for the existence of this type of reflection is substantiated. the relationship between financial institutions and their potential customers is based on the motives for participating in such relationships. they are different for each party, but they are quite similar in nature. the process of financial reflection involves deciding on the continued use of financial resources held by an individual or a business entity. this type of reflection should be understood as follows: financial reflection – the process of learning based on the worldview of the individual features of financial institutions, thinking about possible use of their services, which based on active use of observation, analysis and evaluation leads to individual decision to interact with such institutions in the future. financial reflection is a process of analyzing the information that a person has at a particular time and based on which makes decisions about further action using their own temporarily free financial resources. financial reflection as a separate phenomenon is characterized by certain characteristics and features that distinguish this type of reflection from other types (figure 5). however, there is also a set of features that are common to this type of reflection and other types. the following features are typical for reflection on the deposit services market: 1) the important role of experience in the decision-making process on the transfer of own funds to financial institutions; 2) significant influence of informal factors on the decision-making process in the field of savings (trust, beliefs, education, profession, religion, experience of others, etc.); 3) the need to choose between higher income and greater risk, which requires consideration of the possible consequences of a particular decision; 4) mandatory availability of temporarily free financial resources at the disposal of an individual who reflects on the options for their use; 5) the need for alternative ways of investing within the financial services market, which creates potentially different areas of their use; 6) the existence of a certain level of information vacuum on the activities of financial institutions, objectively insufficient level of information transparency of their activities, which does not allow to clearly and comprehensively determine the level of risk of loss of own funds transferred to financial intermediaries. given the outlined features of financial reflection, its nature and features of manifestation within the deposit services matket, it is advisable to create such conditions for the operation of depository institutions, the introduction of which would correct the deposit behavior of individuals by external influence on the reflection process. this, in turn, by increasing the pressure on individual motives and beliefs of baltic journal of economic studies 143 vol. 8 no. 1, 2022 figure 5. theoretical platform for the existence of financial reflection source: compiled by the authors taking into account (ilchuk, dubyna, prokopenko, 2014, p. 145) financial reflection subject 1 subject 2 фінансові відносини interaction influence influence interaction occurs under pressure ways of influencemethods of influence de ci si on m ak in g pr oc es s decisionm aking process financial relationships motives motives formation behavior patterns implementation leads to positive processes negative processes active formation of deposit, credit and investment resources stable development of the financial services market, increasing the pace of its operation the emergence of irrational behavior of subjects, the formation of herd behavior formation of unpredictable and difficult to predict events and phenomena formation of opportunistic behavior of subjects formation of predicted behavior of economic entities the process of learning based on the worldview of the individual features of financial institutions, thinking about the possible use of their services, which based on the active use of methods of observation, analysis and evaluation leads to individual decision to interact with such institutions in the future features inherent in financial relations arises within the components of the financial system, which are characterized by periodic instability, instability and turbulence objectively existing asymmetry of information conditionality of individual traits of the consumer of financial services requires a significant amount of information about the subjects of financial relations, which allows to draw conclusions and on their basis to form further actions transfer of ownership of financial resources the individual, may increase his propensity to make savings and transfer them to financial institutions. in this case, there is a need to study the issues of reflective management and the peculiarities of its implementation within the deposit services market. reflective management in its content is a process of influencing the transformation of the deposit behavior of households in order to increase their willingness to transfer their own financial resources to depository institutions. reflection is an integral part of the formation of the behavior of the business entity, including the deposit behavior of households. reflective management as a separate type of management always involves the presence of the subject and object of management. unlike other types of management, in reflection the subject is the body, the system that influences the object of reflection – the individual whose behavior must be transformed in a certain direction. within the deposit services market, the objects of reflective management are potential and existing clients of financial inter mediaries, and the subjects should include public authorities and partly depository institutions (figure 6). baltic journal of economic studies 144 vol. 8 no. 1, 2022 the specifics of reflexive management as a category allows us to identify certain types of such management and identify their basic characteristics: macrosystem (significant coverage of consumers of financial services; an important role of public institutions; continuity of implementation; long-term results); microsystemic (subjective conditionality; periodicity; customer orientation; obtaining short-term results), and justify that each of these types of management has its own range of methods and tools that should be used to influence the deposit behavior. for large macroeconomic systems, reflective management has its own characteristics, as it affects a wide range of actors that are part of such a system. however, during this process, the conditions of its other components always change. within the deposit services market, in order to increase the propensity of individuals to make savings, public authorities must change not only the general economic indicators of the national economy, ensure a certain level of stability, but also transform the activities of financial intermediaries, strengthen their sustainability requirements and promote improving the system of consumer protection in the financial services market, etc. within the deposit services market, reflective governance should be aimed at changing the perceptions and attitudes of the household towards savings. this can only be achieved by transforming the functioning of financial institutions and ensuring stable conditions for the country 's economic development (first of all, preventing critical devaluation and inflation processes). in our opinion, the peculiarities of the process of reflective management within the deposit services market include the following: 1) can be carried out by public authorities, and partially implemented by financial institutions themselves, which, using marketing technologies, also influence the decision-making process of households on the use of their own free financial resources; 2) the effectiveness of reflective regulation in macroeconomic systems depends on the quality of state regulation of individual economic systems; 3) reflective management within the deposit services market is a continuous process, as it must occur constantly with periodic determination of the effectiveness of such a process; 4) reflective management is a complex structured process in which the influence of public authorities can be exercised directly on the owners of financial resources and indirectly through the implementation of measures to transform the activities of financial institutions, i.e. the impact on owners and managers; 5) reflexive management can be segmental and general; the introduction of any of these types requires the implementation of new mechanisms of influence on the process of formation of the deposit behavior to obtain the desired result; 6) reflective management can be a partial component of the system of state regulation of financial services markets, including and in the field of deposit services. however, on the other hand, increasing the role of such management in supervising the functioning of financial intermediaries requires a shift in emphasis in the conduct of all state policy on the development of the financial services market. reflective management is directly related to behavioral economics, behavioral finance and its active implementation requires the use of new theoretical, methodological approaches to building a new model of state regulation of the financial services market. at the heart of this model, more attention is paid to the state's ability to change not only the external environment of financial institutions and the existence of individual clients, but also the behavior of major depositors under the influence of various exogenous and endogenous factors. 5. conclusions households play an important role in the development of the financial services market, as these entities have the ability to generate temporarily free financial resources and provide them for temporary use to financial institutions. such a process can be effective only in the conditions of the household’s trust in these institutions, i.e., in the presence of the rational deposit behavior. the formation of such behavior in society is an important factor in ensuring the overall economic development. given the importance of these issues, the article provides a detailed analysis of the essence of the deposit behavior of households, which allowed formulating the author's concept for the interpretation of such categories as "deposit behavior", "deposit behavior of households". it is also established that this type of behavior is formed in society as a result of the influence of a significant number of factors that have been identified and divided into two groups: endogenous and exogenous. the process of forming the deposit behavior of households is a complex and continuous process, which can be detailed through the separation of individual stages, which was implemented. an important role in this process is played by the process of reflection of economic entities on the implementation of their own savings, making decisions on their temporary disposal to depository institutions. in this regard, within the article, the essence of financial reflection is analyzed in detail, the features of its formation are described. attention was also focused on understanding the nature of reflective management and it was found that within the deposit services market it is possible to implement certain types of such manabaltic journal of economic studies 145 vol. 8 no. 1, 2022 public authorities (nbu) households influen ce t he s ub je ct o f re fl ex iv e co nt ro l o bj ec t o f r ef le xi ve co nt ro l c ha ng es in d em an d fo r de po si t s er vi ce s an d gr ow th in a cc um ul at ed s av in gs r e su l t tr an sf or m in g ho us eh ol d be ha vi or g oa l: c re at in g co nd iti on s fo r ac tiv e de ve lo pm en t o f t he d ep os it se rv ic es m ar ke t, in cr ea si ng th e vo lu m e of g en er at ed d ep os it re so ur ce s an d th ei r tr an sf or m at io n in to c re di t a nd in ve st m en t f un ds g oa l: p re se rv at io n of o w n fin an ci al r es ou rc es a nd th ei r in cr ea se b y pr ov id in g te m po ra ry u se to d ep os ito ry in st itu tio ns ha ve te m po ra ri ly fr ee fi na nc ia l re so ur ce s an d th in k ab ou t h ow to u se th em ha ve th e op po rt un ity to in flu en ce th e de ci si on s of e co no m ic e nt iti es th ro ug h tr an sf or m at io ns o f t he in st itu tio na l f ra m ew or k fo r th e de ve lo pm en t o f t he d ep os it se rv ic es m ar ke t re fle ct o n th e ne ed to u se th ei r ow n ca sh to d ep os it th em in to ac co un ts w ith d ep os ito ry in st itu tio ns ha ve th e op po rt un ity to in flu en ce th e pr oc es s of r ef le ct io n of ho us eh ol ds o n th e fe as ib ili ty o f in ve st in g in d ep os ito ry in st itu tio ns af fe ct f or m at io n of d ep os it be ha vi or o f h ou se ho ld s c ha ng in g th e ru le s fo r pr ov id in g de po si t s er vi ce s to e co no m ic en tit ie s in cr ea si ng th e fin an ci al s ta bi lit y of d ep os ito ry in st itu tio ns f or m at io n of c re di t a nd in ve st m en t r es ou rc es in fo rm at io n by pr od uc tio n us in g fi gu re 6 . a lg or it hm o f t he m ac ro sy st em r efl ex iv e co nt ro l o f t he fo rm at io n pr oc es s of th e de po si t b eh av io r of h ou se ho ld s in th e fin an ci al s er vi ce s m ar ke t so ur ce : c om pi le d by th e a ut ho rs baltic journal of economic studies 146 vol. 8 no. 1, 2022 gement through the use of a number of specific tools by both public authorities and depository institutions. acknowledgments. this research is carried out within the framework of the scientific project "transformation of the households’ behavior in the financial services market in the context of digitalization" with the 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(2021). insider threat management as an element of the corporate economic security. financial and credit activity: problems of theory and practice, 1(36), 149–158. baltic journal of economic studies 228 vol. 7 no. 5, 2021 corresponding author: 1 interregional academy of personnel management, ukraine. e-mail: ariftabo@ukr.net orcid: https://orcid.org/0000-0002-1827-1699 2 national academy of security service of ukraine, ukraine. e-mail: ponomarenkoirin@gmail.com orcid: https://orcid.org/0000-0003-1434-4552 doi: https://doi.org/10.30525/2256-0742/2021-7-5-228-234 economic policy of the state in conditions of informatization of health care in ukraine as an integral part of the social sphere tetiana arifkhodzhaieva1, iryna ponomarenko2 abstract. the purpose of the article is to analyze domestic and international legal norms on the protection of medical information in order to improve the system of national legislation in the field of health care. the methodological basis of this study is a system of methods, the set of which is determined by the purpose and features of the study: dialectical, systemic, system-structural, analytical-synthetic, comparative-legal methods of analysis of domestic and international legal regulation of economic policy of the state in the conditions of informatization of health care of ukraine. it argues that ukraine, seeking to integrate into the european space and building its own strategy of economic development, must be clearly aware of both its capabilities and external factors of influence. the choice of possible alternatives is too complex a task, but the leading idea of socio-economic policy should remain the desire to ensure sustainable economic development of the country. in particular, the following is analyzed: recent international and domestic normative acts regulating state economic policy activities in the field of health care informatization in ukraine: in particular, general data protection regulation of the european union (gdpr), cms interoperability and patient access final rule, onc's cure act final rule, order of functioning of the electronic health care system of ukraine; materials of judicial practice, including materials of cases of the european court of human rights, the results of sociological research. a comparative analysis of the gdpr and the health insurance portability and accountability act (hipaa) was conducted. the main problematic issues of state economic policy in the context of health informatization in ukraine are highlighted. compared to previous regulations governing medical data, the gdpr pays much more attention to the implementation of new requirements that have arisen due to the growing digitalization of healthcare, and therefore may contribute to strengthening their protection. results. it is theoretically substantiated that quality medical reform is possible only with the introduction of modern methods of informatization and, consequently, information protection. as the analysis has shown, currently in ukraine the legal system providing information protection in the medical sphere needs immediate improvement. this requires: systematizing and codifying national legislation in accordance with european legal norms and international law; developing a comprehensive legislative act, which would regulate the collection, protection and transition of medical information at the legislative level, following the example of gdpr (for structuring the medical information system, ensuring mandatory certification for information protection, development of cryptography/encryption technologies, delimitation of rights of access to information for medical workers, ensuring access to information with mandatory use of electronic signature, medical workers need to take short courses and register with information security specialists (defined access rights and the ability to change the level of access, provide input for identification and authentication), correcting data and entering new information is carried out with a confirmation of electronic signature, develop an algorithm for transferring information between medical institutions). key words: economic, medical reform, informatization, information protection, codification, informationcommunication technologies. jel classification: g14, d83 baltic journal of economic studies 229 vol. 7 no. 5, 2021 1. introduction stable economic development of the state and society is impossible without the existence of both socially protected and socially oriented population of the country. the relevance of socially-oriented administrative and legal regulation of the country is increasing in the context of the economic crisis, the pandemic coronavirus, military actions in the east, which in general has a negative impact on the welfare of the population both today and in the near future. the socialization of the ukrainian economy involves filling all reforms with social content, activating the social role of the state, working out the mechanism of interaction between the state and society in the social sphere, ensuring decent living and working conditions, increasing the well-being of citizens (obervan, 2012). the highest social value is human life and health, information about the state of which is an important component of the social characteristics of a citizen as a participant in all social relations (constitution of ukraine, 1996). health care is a complex socio-economic system that provides organizational and socio-economic relationships that are formed in the process of meeting the needs of the population for medical services. according to a. g. akhlamov and n. l. kusyk: "from an economic perspective, only adequate health care improves the quality of human capital by increasing a person's ability to work productively " (akhlamov, kusik, 2011). protection of human rights, including the right to information, is a fundamental constitutional right. ensuring human rights, including the right to medical information, is what determines both the level of democracy of the state itself and the level of integration of national law into the world community, the compliance of the law with international legal standards (martsenyuk, 2018). due to the significant changes taking place in the course of medical reform, there is an urgent need to amend the current legislation with regard to the further implementation of the electronic health care system. after all, the quality of information management methods determines the effectiveness of first aid and further patient treatment. unfortunately, today the exchange of personal health records between health care providers, health information networks, health care providers and patients is complicated by the problematic economic, technical and legal protection of so-called "sensitive personal data", which are subject to heightened protection requirements under relevant laws. this issue, as k. yu. tereshko rightly pointed out, is a sensitive, human-centered one, since it is particularly vulnerable, as the european court of human rights has repeatedly emphasized: "protection of personal information (especially medical information) is fundamental to the right to respect for private and family life. respecting the confidentiality of medical information is a basic principle of the legal system of all state parties to the convention" (the case "m.s. v. sweden", 1997; tereshko, 2019). issues of functioning of social economic policy in the conditions of informatization of health care of ukraine were studied by both domestic and foreign scientists, in particular o. evseeva, j. zhalilo, a. chukhno, o. stefanyshyn, l. shevchuk, o. novikova, e. libanova, v. akopov, a. andriychuk, h. blinova, n. bolotina, t. hurs’ka, m. maleina, o. martsenyuk, a. marushchak, i. seniuta, s. stetsenko, v. soloviov, k. tereshko, o. tykhomyrov, etc. however, according to the analysis of european and domestic legislation, scientific research in the field, case law, including the european court of human rights, in connection with recent changes in legislation, they have partially lost relevance, which led to the choice of the topic of research. the methodological basis of this study is a system of methods, a set of which is due to the purpose and peculiarities of the study. dialectical method allowed to identify trends in the development of socio economic policy in terms of informatization of health care in ukraine and formulate proposals to improve domestic legislation in this direction. the systematic method and the method of analysis were used to identify the relationship between the problems of development of information law in the medical sphere and the essence of socio-economic processes. the combination of methods of system-structural analysis and analytical-synthetic method allowed to propose a new model of the information industry and the subject of legal regulation. using the comparative legal method the analysis of domestic and international legal framework for the regulation of information security in the medical sphere was carried out. proposals for improving national legislation were also given. 2. research results state social policy is an integral part of the economic sphere, and the direction of its implementation depends on the state economy. social policy, according to a. a. kochetkova, "a system of economic relations in which the state provides each member of society with legal guarantees of a decent standard of living..." (kochetkov, 2005). health economics studies the socio-economic patterns of formation and use of material, labor and financial resources aimed at improving the health care system and medicosocial support measures to improve public health (akhlamov, kusik, 2011). improving public health and improving the quality and efficiency of medical services in the context of digitalization are the main objectives of health care. baltic journal of economic studies 230 vol. 7 no. 5, 2021 an analysis of "...incidents in the first half of 2020 showed that the healthcare industry has failed to protect the main artifact of the digital age – citizens' personal data, including medical records. the main channel of information leakage (e.g., information related to the coronavirus pandemic) was the web. in 64.2% of cases around the world personal data was spread in the form of lists – documents, reports, fragments of records, in 35.8% of cases the leak occurred as a result of hacking into data storage, illegitimate access to data, accidental disclosure due to improper server settings or application errors" (covid-19, 2020). according to the info watch group center of expertise, which investigated covid-19-related medical information leaks, there were 72 cases of leaks in the first half of 2020 alone. for example, the personal and medical records of 16 million coronavirus patients in brazil were exposed to the public because a hospital employee accidentally posted a spreadsheet on github with usernames, passwords, and keys to confidential government systems. the information was eventually removed from github, and government officials changed passwords and revoked access keys to secure their systems (covid-19, 2020). similar leaks have occurred in germany, wales, new zealand, india, and other countries. even worse, according to interdust analysts, about 85% of covid-19 contact tracing apps still leak data. as can be seen, the coronavirus pandemic has highlighted a number of problematic issues related to information security in the medical field. at the same time, according to a black book market research llc survey of more than 3,600 respondents (security professionals, providers) in late 2020, "spending on cybersecurity by european healthcare facilities has been trending downward since 2019, and 92% of healthcare facilities have no security staff at all" (rule of interaction, 2020). 3. european union general data protection regulation in may 2018, a truly "landmark" document in the direction of data protection came into force. in the medical field, the european union general data protection regulation (gdpr) was adopted, replacing previous data protection laws in the eu. health information is defined in this document as a "special category " of personal data that is considered "sensitive" in nature, and therefore has a higher level of processing security (general regulation for the acquisition of personal tributes from the european union (gdpr), 2018). gdpr involves a reformatting in terms of control and ownership of medical records. these are moving from doctors, scientists, hospitals, and health care providers to patients. patients are now required to consent to the use of their medical data and can revoke it if necessary. thus, compared to previous health data protection rules, the gdpr is much more focused on meeting the new requirements that have arisen with the increasing digitalization of health care, and can therefore strengthen their protection. personal data must be processed in accordance with the following data protection principles: processed lawfully, fairly and transparently; collected for a legitimate purpose; adequate, relevant and limited by necessity; accurate; kept for as long as necessary; security, integrity and confidentiality ensured (european union general data receipt regulation (gdpr), 2018). the gdpr sets higher standards for informed consent and notification obligations (art. 7), strengthens the protection of the right of access to personal health data. it is worth noting the fact that data controllers inform the supervisory authority within 72 hours if personal data are leaked (art. 33, 34), and they must inform patients in case of a data security breach (general regulation for the acquisition of personal tributes from the european union (gdpr), 2018). therefore, the gdpr clearly states that organizations must be accountable for the personal data they collect. this is ensured by conducting a legal audit to assess not only what kind of personal data has been collected, but also how it is protected. as can be seen, the gdpr does deserve attention. but despite the fact that it has been in force for two years now, some problematic issues still arise. for example, for february 2021 alone: a) sky med international is accused of failing to take adequate measures to ensure the security of subscribers' personal information on membership emergency travel plans. as a result, the company left an unsecured database containing 130,000 member records (the unsecured database contained members' personal information stored in plain text, such as names, dates of birth, home address, medical records and member account numbers). in addition, the ftc claimed that sky med misled consumers by stamping "hipaa compliance" on every page of its website, giving the false impression that its privacy policy had been revised to comply with the health insurance portability and accountability act (hipaa) security and privacy requirements (ftc gives final, 2021); b) in poland, a fine (85,000 pln) was imposed on a private entrepreneur, a provider of medical services. in particular, according to the instructions of the polish personal data protection authority, the private entrepreneur was obliged to inform his patients about the breach of their personal data and to give them recommendations to minimize the possible negative consequences of the incident. given that the administrator did not do that, in accordance with art. 58 sec. 2 of the gdpr , an administrative baltic journal of economic studies 231 vol. 7 no. 5, 2021 fine was imposed on him (the first penalty for failure to comply with the order of the administrative decision, 2018). 4. health insurance portability and accountability act (hipaa) it should be noted that in 1996, the health insurance portability and accountability act, or hipaa, was enacted in the united states of america (usa) to legislate for the protection of health information, with the primary purpose of regulating health insurance portability and accountability and setting standards for protecting patients' medical records and personal health information (health insurance portability and accountability act, 1996). hipaa allows the use of the "necessary minimum" rule (u.s. department of health & human services, 2020) when developing systems that meet all privacy requirements, i.e., the system must report all necessary efforts to use, request or disclose only the information that is minimally necessary to achieve the goal. hipaacompliant applications are considered to be the most secure around the world. the main difference between the gdpr and hipaa is that hipaa applies only to the collection and processing of medical personal data. it directly applies to a specific range of people who have access to this group of data. in addition, it is very important that under hipaa you can disclose phi (health information that identifies an individual – names, phone numbers, addresses, dates of birth, social security numbers, payment information, medical test results, medical records, photographic images, x-rays, etc.). (fact sheet on interoperability and patient access, 2020) for the purpose of treatment without prior patient consent, whereas under the gdpr the primary basis for the disclosure of medical data is the patient's explicit consent (provided that the patient is capable of knowingly giving such consent). in addition, hipaa, unlike gdpr , does not provide for a patient's right to request that his or her medical records be expunged from the medical facility. full user privacy in compliance with hipaa is ensured by the curogram platform (a unique development in telemedicine that supports video communication, two-way text messaging via smartphone and works directly with any electronic medical record system). curogram helps healthcare providers automate workflows, streamline interaction between doctors and nurses, better coordinate patient care, and find and connect with other healthcare providers faster (curogram, 2019). it is important to emphasize that the objects of protection in a medical institution's information system are: information in databases (db) of database management systems (dbms); file server resources of a medical institution; db backups of dbms and archival copies of file server resources; information of the manager's operating system, dbms, automated workstation (aws) of the medical information system (mis) administrator and information security (is) administrator; technological process of collection, processing, storage and transfer of information in mis; hardware and software complex that ensures mis operation (secure multilateral computing, 2020). any user of the healthcare facility who has access to the mis is morally, administratively and criminally responsible for the confidentiality of the information he or she enters, uses, or transmits to other users. it's worth emphasizing that in february 2021, two pieces of legislation will go into effect in the united states to work with hipaa – the cms interoperability and patient access final rule (implementation and support of secure and interfacebased application programming that allows patients to easily access their applications. the cms rule also requires medicare and medicaid providers to send electronic notifications of a patient's admission, discharge, or transfer to another health care facility to the community provider or practitioner) (achieving confidentiality in electronic health records using cloud systems, 2020) and onc's cure act final rule (applies to health it systems as well as health care providers, health information exchanges, and health information networks used by such systems. the rule requires all systems to implement standardized apis so that patients and their health care providers can easily retrieve electronic health information using smartphone apps. the central component of the rule is the blockchain provisions that prohibit actions that impede access and exchange of ehi, with some exceptions for privacy and security) (blockchain technology analysis, 2020). the main purpose of these documents is to make it easier for patients to access their medical records, while respecting appropriate security and confidentiality measures. as for the domestic legislation, unfortunately, today in ukraine there is no law that would regulate the collection and processing of patients' medical data. the main documents for the legal regulation of this direction are the laws of ukraine "on information", 1992, "on protection of personal data", 2010, "on protection of population from infectious diseases", 2000, "on amending the law of ukraine "on protection of population from infectious diseases", 2020, "on state financial guarantees of medical services to population", 2017. however, an analysis of the provisions of the law of ukraine "on information" (rules of interaction of cps and patient access, 2020) shows that only the information that is recorded only on a physical medium or displayed in electronic form is protected. baltic journal of economic studies 232 vol. 7 no. 5, 2021 this, of course, does not provide real protection for human rights in information relations. after all, most information about a patient is obtained directly from the patient by the medical worker and is not recorded in documents. at the same time, it is necessary for treatment and should be protected as confidential. in our opinion, this position of the legislator is quite ambiguous, so we consider it advisable to supplement part. part 3 of article 1 of section i of the law of ukraine "on information" to read as follows: "information is any information and/or data that are stored both on physical media, displayed in electronic form and in unrecorded form". the 1994 law of ukraine "on protection of information in information and telecommunication systems" and a number of regulatory documents on technical protection of information (la tpi) are hopelessly outdated. "moreover, they oblige public authorities, objects of critical infrastructure facilities and private companies that want to provide services to public authorities, to implement the so-called complex system of protection of information (cspi) this, besides being morally obsolete, has proven its ineffectiveness for many years" (healthcare system, 2020). it should be noted that in september 2017, the electronic health system "e-health" was developed and implemented, an information and telecommunication system that provides a single information space and data exchange through a central database (final rule of the onc treatment law, 2020). the system integrates filing of electronic declarations with family physicians, prescriptions, medical referrals, statistics on coronavirus patients, etc. however, this system, in violation of technical information security requirements, does not actually have a csp compliance certificate. therefore, the storage of patient data cannot be called secure. currently, the ministry of health together with the ministry of digital transformation is working on further integration of the e-health system into the portal and application called "diia". in order to improve the information security effectiveness of this system, we propose to ensure compliance with hipaa requirements as a proven and established standard in software development. it is worth noting the order of functioning of the electronic health system of ukraine from 24.05.2018 № 411 (law of ukraine, 1992), which for the first time provided for the provisions and control of the maximum information on the collection, processing, storage of information about patients, which is fully consistent with gdpr regulations. however, this is not enough. it is because of legislative gaps that the protection of this group of data remains unprotected in ukraine. it is important that in november 2019 an interdepartmental working group was created under the secretariat of the ukrainian parliament commissioner for human rights to develop legislative proposals for the protection of personal data. in addition, a coordination working group was created to develop a bill to amend the law of ukraine "on personal data protection" in accordance with the provisions of the gdpr . although there are currently no significant changes in the domestic legislation. submitted by the interdepartmental working group under the ukrainian parliament commissioner for human rights draft law of ukraine "on amendments to the law of ukraine", and "on protection of personal data" (on the forms and conditions of consent to the processing of personal data)" from 10.02.2020 № 2671-1, 04.03.2020 returned for revision. as a consequence, there are numerous cases of security breaches of medical information. for example, the national cybersecurity coordination center (nccc) under the security and defense council of ukraine detected a leak of personal medical data from one of the largest clinics in dnipro during its monitoring. "among the information that appeared in the public domain were the personal data of the employees and clients of this clinic, in particular, the last name, first name and patronymic, dates of birth, residence addresses, telephone number, e-mail, medical records (which is considered medical information), including results of medical tests, diagnosis, information about the disease, pcr test results, covid-19 patient lists" (andriychuk, strilkina, 2018). the leak occurred as a result of configuration errors in the information systems and databases of clinics that had access to the internet. it is worth noting that open access to databases gave the opportunity not only to steal personal information, but also to illegally make adjustments to it, including changing prescriptions for drugs, results of medical tests and examinations, and editing records in protocols. the dnipro clinic reacted to this fact rather passively, and patient data remained publicly available for quite a long time (andreychuk, strilkina, 2018). this fact is a violation of paragraphs. 13 item 2 of the general part of the procedure of functioning of electronic health systems of ukraine, because the dnipro clinic is the administrator of the register, and, accordingly, is responsible for the use of appropriate measures to protect the processed data. 5. conclusions thus, state social policy is a multilevel and functional system that ensures the socio-economic development of the country. it is aimed at ensuring the guaranteed constitutional rights and freedoms of citizens, achieving balance and stability in society, baltic journal of economic studies 233 vol. 7 no. 5, 2021 reducing social tensions and improving their well being. a qualitative medical reform is possible only with the introduction of modern methods of informatization and, consequently, data protection. as the analysis showed, the legal system of information protection in the medical sphere needs immediate improvement in ukraine. for this purpose it is necessary: to systematize and codify national legislation in accordance with european legal norms and international law; to develop a comprehensive piece of legislation regulating the collection, protection, and transition of medical information, following the example of gdpr , at the legislative level (structure the medical information system, provide for mandatory certification for information protection, to develop cryptography/encryption technologies, delimit the rights of access to information by medical workers, provide access to information with the mandatory use of electronic signatures, medical workers need to take short courses and register with information security specialists (defined access rights and the ability to change access levels, provide input for identification and authentication), data correction and new information entry is performed with the confirmation of electronic signature, to develop an algorithm of information transition between healthcare facilities); amend the law of ukraine "on protection of personal data" (as for the forms and conditions of consent to the processing of personal data); supplement p. 3 of art. 1 sec. i of the law of ukraine "on information"; to develop medical information system software in compliance with the gdpr requirements; legislatively enhance the responsibility for violating protection of information in the medical field. ukraine, striving to integrate into the european space and building its own strategy of economic development, must be clearly aware of both its capabilities and external influences. choosing possible alternatives is too difficult a task, but the leading idea of socio-economic policy should remain the desire to ensure sustainable economic development of the country. references: analysis of blokchain technology recommendations to be applied to medical record data storage applications (2020). available at: https://mecs-press.org/ andriychuk, a. s., & strilkina a. a. (2018). breakdown of the model of keruvannya with access to private medical information. radioelectronic and computer systems, 2(86), 26–32. achieving confidentiality in electronic health records using cloud systems (2020). available at: https://mecs-press.org/ akhlamov, a. g., & kusik, n. l. (2011). economics and financing of health care: teaching method. way, 134 p. curogram: a web-based sms app for medical practices (2019). available at: www.curogram.com covid-19 has distributed 3.5 million personal data (2020). available at: https://www.comnews.ru/ content/208448/2020-08-05/2020-w32/covid-19 kochetkov, a. a. (2005). fundamentals of economic theory: a course of lectures, p. 472. ftc gives final approval to settlement with emergency travel services provider related to allegations it failed to secure sensitive data (2021). available at: https://www.ftc.gov/news-events/press-releases/2021/02/ ftc-gives-final-approval healthcare system technology using smart phones and web apps (case study iraqi environment). available at: https://mecs-press.org/ fact sheet on interoperability and patient access (2020). available at: https://www.cms.gov/regulations-andguidance/guidance/interoperability/index constitution of ukraine. art. 43 (1996). martsenyuk, o. g. (2018). the rights of physical and legal entities to medical confidentiality information. medical law of ukraine: legal status of patients of ukraine and legislation of security: materials of the ii all-ukrainian conference, 17-18 april, lviv, pp. 166–171. obervan, o. r . (2012). the essence of social policy in the formation of innovative economy in ukraine. efficient economy, no. 5. available at: http://www.economy.nayka.com.ua/?op=1&z=1143 secure multiparty computation for privacy preserving range queries on medical records for star exchange topology (2020). available at: https://mecs-press.org/ the first penalty for failure to comply with the order of the administrative decision (2018). available at: https://uodo.gov.pl/pl/138/1889 rule of interaction between cms and patient access (2020). available at: https://iapp.org/news/a/health-careinteroperability-preparing-to-meet-new-privacy-and-security-obligations law of ukraine: about information (1992), 2657-xii. available at: https://zakon.rada.gov.ua/laws/show/ 2657-12#text tereshko, h. ya. (2019). information of civil legal persons in the sphere of medical service. medical right, 1(23), 65–73. baltic journal of economic studies 234 vol. 7 no. 5, 2021 brazil has access to 16,000,000 patients from covid-19 (2020). available at: https://xakep.ru/2020/11/27/ covid-leak u.s. department of health & human services, hipaa privacy rules for the protection of health and mental health information (2020). available at: https://www.omh.ny.gov/omhweb/russian/hipaa/phi_pro tection.pdf healthcare data breaches will cost the industry $ 4 billion (2020). available at: https://blackbookmarketresearch. newswire.com/news/healthcare-data-breaches-costs-industry-4-billion-by-years-end-2020-21027640. general regulation for the acquisition of personal tributes from the european union (gdpr) (2018), 1725. available at: http://aphd.ua/gdpr-ofitsiinyi-ukranskyi-pereklad law on mobility and development of medical insurance (1996). available at: https://everlegal.ua/hipaa-yakzakhyschayut-medychni-dani-patsientiv-v-ssha final rule of the onc treatment law (2020). available at: https://www.healthit.gov/curesrule baltic journal of economic studies 141 vol. 2, no. 3, 2016 corresponding author: 1 department of international management and finance, national technical university «kharkiv polytechnic institute». e-mail: taniya2009@list.ru financial capacity of industrial enterprise tatiana nazarova national technical university «kharkiv polytechnic institute», ukraine abstract. the purpose of the article is to determine the economic content of the category of financial capacity, the study of the influence of the main factors affecting the operation of the industrial enterprises financial potential, as well as the rationale for the selection of best management practices. for every ukrainian industrial enterprise is an urgent problem of the formation of optimal financial resources to ensure the stable operation of the enterprise, financial stability and solvency. the question remains effective financial capacity management system, taking into account the current realities of the ukrainian economy. the study highlighted the direction of the management process financial potential of the industrial enterprises. the components and elements of the financial potential of the control system and its functional units. methodology. data for the study were taken from scientific publications and legislation. the methods of general scientific knowledge, as well as integrated assessment models, is to develop and study the dynamics of the integral index, built on a clearly identified mechanism of mathematical relationships. results. on the basis of a generalized approach to the definition of "financial potential" category author suggested his own definition of this category, offered economic components of financial capacity. practical implication. the result of this study is on the direction of cash flow optimization in the enterprise at the expense of control financial flows. formation of current funding matrix with the release of surplus area, and a balanced current funding deficit. value/originality. on the basis of the study proved that the implementation of this approach facilitates the development of highquality management decisions on the development of a financial management plan for the financial flows in an industrial plant, consequently, will increase its competitiveness. key words: financial potential, industrial enterprise, financial stability, the current funding. jel classification: l 00, g 17, g 39 1. introduction the problem of finding ways to strengthen the financial condition of industrial enterprises and optimize the management of its financial potential remains valid throughout the period of market relations in the ukrainian economy. this is due, primarily, the lack of a unified methodology for comprehensive economic analysis and assessment of the financial condition of the financial potential of industrial enterprises. current economic conditions pose many industrial enterprise tasks to be quickly and efficiently addressed. this issue is to increase production, management of all types of resources, optimum capacity utilization. one of the main problems is the possibility of using its own financial capacity to respond quickly to changes in the external economic environment. as a result, the aspects of the research nature of the financial capacity of the company acquire relevance to maneuver financial resources effectively. the study aims are to clarif y certain provisions within the methodological support of the financial potential management of industrial enterprises. 2. the essence of the financial capacity of enterprises the problem of using ukrainian industry financial capacity is becoming more urgent in terms of relentless globalization of the market. it generally emphasizes the importance of monitoring the state of business enterprises in terms of external and internal factors determining its activities and its financial capacity for sustainable development. in economic literature there is quite a clear interpretation of the category «financial capacity», that is why by analyzing the literature table the major existing definitions of this category was formed. for the first time the concept of financial capacity was allocated by a. volkov (1976). in his view, «financial potential is one of the resources of national income produced, which after all processes implemented redistribution of material and the material in the growth of the means of production». a. volkov shared financial potential in absolute and relative. absolute financial potential of advanced manufacturing is identified with the resources of national income produced. the relative financial potential of advanced production expressed as baltic journal of economic studies 142 vol. 2, no. 3, 2016 a percentage of national income. analyzing the literature in finance and financial management, we note the exact concept of financial potential of the company. each of the approaches are to define the essence of the financial potential of the enterprise is correct and describes the concept from different angles (table 1). summary of scientific approaches formed the essence of the financial capacity of its position and made it possible to formulate the nature of the financial potential of industrial enterprises (fig. 1) 3. optimization of financial flows of enterprises engineering industry is the only industry that provides hardware, comprehensive mechanization and automation of production processes, promotes scientific and technological progress in all other sectors. for the efficient management sector in general and the management of individual machine-building enterprises in particular, it is necessary to identify problematic aspects of the industry and, consequently, their elimination. experience in industrialized countries shows: that the industry is an indicator and a catalyst for industrial development. functioning of engineering companies carried out under conditions of dynamic changes in the environment which is influenced by globalization processes strengthen economic, political factors, the global financial crisis etc. the economic situation of engineering for different periods of operation of the complex was investigated in the works of many local scientists and researchers. however, table 1 defining the essence of the concept of «financial capacity» of the enterprise author the interpretation of the concept bykova v.g (2005, р. 56) this is the driving force required to transfer the company focused resources from the static state to a dynamic that provides the most effective implementation of the goals and directions of the company. kuntcevich v.o. (2004, р. 123-124) this ability is to optimize the financial system with the involvement and use of financial resources. financial development potential of the enterprise totality of the available financial resources, system capabilities for their involvement and effective management to achieve tactical objectives and company strategic goal maximization enterprise value in the long period. onishko s.v. (2003, р. 67-68) financial potential reflects not only familiarize oneself with available financial resources, but their reserves can be used under certain conditions. stetsyuk p.a. (2007, p. 130) financial potential in essence is greater than financial resources and includes the last. management of financial capacity support financial stability of industrial enterprises components of financial capacity financial sales manufacturing management development targets, which are based on the following procedures: analysis and forecast financial and economic state of the environment, internal environment analysis, identifying strengths and weaknesses. development of financial management strategy features enterprises create reserves growth the financial potential of the industrial enterprise is a dynamic characteristics of the enterprise business system, serving as a set of functional components that reflect the actual and potential businesses fig. 1. the essence of the financial potential of industrial enterprises (author`s own development) baltic journal of economic studies 143 vol. 2, no. 3, 2016 dynamic changes in environmental conditions, increased globalization of the economy ukraine necessitate analyzing the economic situation of mechanical engineering at the present stage of its development as creating systems industries. in a sharp deterioration in economic conditions necessary to develop measures to improve the financial and economic security of industrial enterprises of all forms of ownership. it is necessary to develop the concept of large and medium industrial enterprises in ukraine in terms of european integration. implementation areas, contributing to the development of industrial enterprises will be difficult and almost impossible without a controlled mechanism of industrial enterprises, which will significantly improve the competitiveness of ukrainian industrial enterprises with integration into the world economic system. the financial stability of the company is largely determined by the level of synchronization in terms of flows of money and time. effective cash management can reduce the need for businesses in debt. actively managing cash flow can provide: more efficient and economical use their own financial resources generated from internal sources; decrease of the enterprise development rate relation from the loans; acceleration of the turnover; reducing the risk of the company insolvency; efficient use of temporarily free balances in the composition of current assets and accumulating of investment resources. using models of financial balance in order to ensure the solvency and liquidity of the company that is in crisis, aimed at increasing the incoming cash flow and reduce output. the increase in incoming cash flow is achieved through the following main activities: 1) mobilization of internal reserves of self-financing; table 2 matrix of current financing coverage ratio of current assets net working capital wоc /а < 0 % [0 %; 50 %] > 50 % th e ba la nc e of c ur re nt fu nd in g (b c f) su rp lu s b al an ce d efi ci t 6 surplus of current funding. the situation where investment in inventories and receivables amount payable covered irrationally, that there is excessive borrowing. at the inefficient use of short-term loans, this situation threatens significant losses related to these loans cover and complete loss of short-term liquidity. 5 surplus of current funding, excessive borrowing money for a short period. the situation may affect the short-term liquidity 4 the company has a sufficient size for woc finance their needs and your balance. surplus in the current funding woc> 0 indicates inefficient use of its own funds. the development of a competent financial policy (short and long term investments), otherwise the company is experiencing inflationary risk and the risk of lost benefits 3 enterprise is too dependent on short-term loans to finance their needs. this own funds not enough. there is a high risk of losing the current liquidity of losses 2 well-balanced situation, rational credit policy and effective short-term financing, but such a situation is typical for the current low level of liquidity. 1 current funding is well balanced with sufficient liquidity. 9 the deficit of current funding. in the absence of its own working capital, the company is also not able to finance its current activity because the limited involvement of short-term loans necessary to use drastic measures to financial recovery. 8 it is necessary to reduce the amount of borrowing because their coverage is not enough money 7 the company is not enough money to finance their needs, therefore, in this situation, you must either reduce the cfn (conducting effective policy management of accounts receivable and inventory, attract additional short-term loans) or increase woc (accumulation of additional own short-term capital by reducing the dividend increase authorized capital, sales of fixed assets without causing harm to the principal activity) to build the matrix, the following indicators were used: their working capital of the company (working capital) wоc = current assets current liabilities coverage ratio of current assets with net working capital ccawc= woc / а (asset balance) current financial needs cfn = s + rec – pay where s – stocks, rec, pay – receivables and payables the balance of current funding (bcf) is an indicator of the balance of current financial requirements and sources of funding: bcf = woc – cfn square 1,2,3 balance; square 4,5,6 – excess; square 7,8,9 – deficit. the calculation of the integral index )/()( min1 max 1 min 11 jjjjj ggggi −−==( )/()( min 1 max 1 min 11 jjjjj ggggi −−= ) / ( )/()( min 1 max 1 min 11 jjjjj ggggi −−= ) (1) where tnggg ),....,( 21=g – centered and normalized column vector of uncorrelated principal components 6 baltic journal of economic studies 144 vol. 2, no. 3, 2016 2) refinancing of receivables; 3) sales promotion of primary products; 4) attracting additional joint stock (equity) capital; 5) obtaining new loans. initial cash flow decreased due to the following measures: 1) reduce current payments under operating activities (reducing production costs); 2) restructuring of account payable; 3) review the dividend policy; 4) investment freeze. ensuring the growth potential of the financial industry on the basis of a comprehensive evaluation and predictive factors by introducing structural matrix of current financing (cf) (table 2), with zones: surplus and a balanced current funding deficit. the control of financial flows is based on a matrix of current financing. definite integral index of financial capacity of industrial enterprises (ij) enables businesses to rank in terms of financial capacity, depending on their position in the matrix of current funding (table 2). it was established that the companies that have a high rating, effectively carry out the operational management of current assets and short-term liabilities. with taking into assessment stage of development companies on the basis of calculation allows for scenario using the whole arsenal of tools, among which is dominated by tactical and budget planning. of particular relevance this aspect of financial flows acquires to companies that are in the early stages of their life cycle, where access to external financing sources are limited. thus, the development of a financial plan should include priority: development of management measures for improving the management of financial flows of the company. 4. conclusion under the financial potential should be understood the capabilities of financial resources and competencies of industrial enterprise solution to provide current and strategic tasks aimed at sustainable operation and development of the company. it defines the financial position of the company, its solvency and liquidity, level of social protection of workers, the development of technology base; can objectively evaluate the financial capacity to ensure at all stages of the high level of competitive advantage. for receiving the greatest possible effect on the financial capacity it should be managed with modern tools to be implemented in the financial policy of the company. while its developing should be taken into account that the basis for the formation of the financial potential of the company have the financial resources and opportunities for their formation and effective use. proper evaluation stage of the company, its financial resources and their effective use, forecast results will develop only right scenario using the entire arsenal of tools, among which is dominated by tactical and budgeting, financial instruments. proved that the basic characteristic of the process of determining the financial capacity of the industrial enterprise is to assess financial condition. for this purpose, supplemented with scientific and practical approach to evaluating the effectiveness of the implementation strategy for the growth of financial potential, based on a comprehensive and predictive assessment of factors affecting the level of financial potential of industrial enterprises, and indicators characterizing the financial potential, forming a matrix of current funding allocation zone surplus and a balanced current funding deficit. references: bykova. v.g. 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(2012). modeling financial management of the enterprise potential. problems of economics, № 2, р. 33-37. baltic journal of economic studies 145 vol. 2, no. 3, 2016 татьяна назарова финансовый потенциал промышленного предприятия аннотация. целью статьи является определение экономического содержания категории финансовый потенциал, исследование влияния основных факторов влияющих на управление финансовым потенциалом промышленного предприятия, а также обоснование выбора наиболее оптимальных методов управления. для каждого украинского промышленного предприятия является актуальной проблема формирования оптимального объема финансовых ресурсов для обеспечения стабильной работы предприятия, финансовой устойчивости и платежеспособности. остается открытым вопрос результативной системы управления финансовым потенциалом с учетом нынешних реалий украинской экономики. в результате исследования выделены направления процесса управления финансовым потенциалом промышленного предприятий. определены составляющие и элементы системы управления финансовым потенциалом, его функциональные звенья. методология. данные для исследования были взяты из научных публикаций и законодательной базы. использованы методы общенаучного познания, а также интегральные модели оценки, заключающиеся в создании и исследовании динамики интегрального показателя, построенного на четко оговоренном механизме математических зависимостей. результаты. на основе обобщения подходов к определению категории «финансовый потенциал» автором предложено собственное определение этой категории, предложены экономические составляющие финансового потенциала. практическое значение. результатом исследования является направления по оптимизации движения денежных потоков на предприятии за счет контроля финансовых потоков. формирование матрицы текущего финансирования с выделением зоны излишков, сбалансированного текущего финансирования и дефицита. значение/оригинальность. на основе проведенного исследования обосновано, что реализация данного подхода способствует разработке качественных управленческих решений по разработке финансового плана по управлению финансовыми потоками на промышленном предприятии, что, в последствии, повысит его конкурентоспособность. baltic journal of economic studies 210 vol. 8 no. 3, 2022 doi: https://doi.org/10.30525/2256-0742/2022-8-3-210-219 transformational changes in organizational management and human resources in the digital age alla cherep1, valentina voronkova2, olena androsova3 abstract. the relevance of research into transformational change in organizational management and human resources in the digital age is significant in the digital age, as organizations need to develop a humanistic approach to human resources. to do this, it is necessary to change all the bottom-up management mechanisms to create an effective functioning organization in which the person is the subject of all processes. all of this suggests that modern business must be adaptive, customerand person-centered. the transformational processes taking place due to the impact of ict on the development of human resource management show that it is something between online and offline, a combination of the digital and physical world. to date, there are no companies in which the anthropocracy conceptual works, there are no step-by-step instructions on how to switch to amocracy. the purpose of the research is theoretical and practical transformational changing aspects in the organizational management and human resources in the digital age. study results. 1. the impact of ict on the development of trends in the global transformation of human resource management. 2. the place and role of organizations in transformational change are disclosed. 4. the directions of implementation of the european vision of human resource management as a factor in the development of it trends in the digital age are clarified. 5. the concept of personnel management as a factor in the development of humanistic principles under conditions of transformational change is formed. 6. the impact of ict on the innovative development of regenerative economy and humane human resource management is analyzed. it is concluded that business today should be adaptive and client-oriented, client-oriented and people-oriented. in a democracy, the organization is a tool that people use to improve their lives, the main issue of bureaucracy is how to get people to better serve the goals of the organization. leaders must adopt new people-centered principles and apply them to their organizations. the development of cloud platforms will help create products with a fundamentally new architecture – more flexible and scalable. the model of organization based on the concept of anthropocracy is a humanistic view aimed at people, relationships, empowerment, competence development, "the person who stands above everything." at the heart of aorganizational activity is a redefinition of economics as a subsystem of society and nature, as a tool for achieving a socially just and environmentally sustainable future, and a humanistic approach to managing organizations and human resources. key words: transformational changes, organization management, human resources management, digital age. jel classifications: a13, b49, o39, p16, p49, z10 1 zaporozhzhia national university, ukraine (corresponding author) e-mail: cherep.av.znu@gmail.com orcid: https://orcid.org/0000-0001-5253-7481 2 engineering educational and scientific institute named after y.m. potebnya of zaporozhzhia national university, ukraine e-mail: valentinavoronkova236@gmail.com orcid: https://orcid.org/0000-0002-0719-1546 3 zaporizhzhia national university, ukraine e-mail: androsovaef@gmail.com orcid: https://orcid.org/0000-0002-2727-2474 1. introduction the relevance of the research topic is that we live in a changing world, where the future is no longer an extrapolation of the past, and change is inexorable, because this is an era of upheaval. over time, the rate of transformation of matter into more complex structures and systems gradually increases. the research and consulting company gartner (usa) annually compiles a list of the most promising it trends that can be useful for the development of innovative digital organizations and human resource management. a systematic analysis of the most promising it-trends for innovative digital organizations includes the following areas for their development: this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 211 vol. 8 no. 3, 2022 1. generative artificial intelligence. 2. data factories. 3. cloud platforms. 4. decision-making intelligence. 5. cybersecurity network. 6. software components. 7. hyperautomation. 8. artificial intelligence development. 9. aggregate experience. 10. autonomous systems. 11. distributed enterprises. 12. calculations for increased privacy. the use of modern it trends will ensure the sustainable development of organizations and the possibility of creating a stable technical base with great human potential. in turn, this will allow enterprises to optimize their costs and increase investments in digital technology (voronkova, et al., 2021). the purpose of the research is theoretical and practical aspects of transformational change in organizational management and human resources in the digital age and the impact on them of information and communication and computer technology. formation of the goals of the article (goal setting): 1. to determine the impact of ict on the development of the global transformation of human resource management. 2. to identify the place and role of organizations in transformational change. 3. to clarify the directions of implementation of the european vision of personnel management as a factor in the development of it-trends in the digital age. 4. to form the concept of personnel management as a factor in the development of humanistic principles under conditions of transformational change. 5. to analyze the impact of ict on the innovative development of a regenerative economy and humane human resource management. research methodology – analytical methods and synthesis, modeling and forecasting, system and structural analysis, the use of synergistic approach. analysis of recent studies and publications, which started to solve this problem and on which the author relies. (cherep a., et al., 2019). therefore, to cure the ills that plague organizations, the bureaucratic model of management must be radically rethought. to create flexible, creative, and successful organizations, completely new approaches to the coordination of human labor are needed. people, not structures, processes, and methods, must be at the core of the organization. instead of a model that seeks to maximize control to make the organization more efficient, we need a model that maximizes each employee's contribution to the process. bureaucracy should be replaced by bureaucracy, because in an organization, people are above all, and in a bureaucracy, people are the tools with which people create goods and services (voronkova, cherep a., et al., 2022). 2. the impact of ict on the development of the global transformation of human resource management ict influence the global transformation of business development, the economy, human resource management developing in the context of system methodology and agile management, which must be adaptive, especially in the global transformation of business, banking and retail, associated with highly professional and competent professionals, activities that develop in the context of goods and services to end users. with new technology and globalization leading to transformational change, there are deeper processes going on: consumer behavior is changing, business now has to transform itself in order not to miss out on new opportunities. digital transformation and globalization promote competition in business, thanks to technological development, which leads to competition with china, south africa and south america. the entire western world has already become a subject of the digital world. the trends taking place today in the context of ict influence the development of trends in global transformation of human resource management and business transformation. the first trend is a decrease in the operating cost of business, which depends on the company avoiding paperwork, seals, and signatures to improve overall efficiency. here it is important to understand that there is an end point, because it is impossible to reduce costs indefinitely (cherep o., et al., 2022). the second trend is the ability to use technology to improve contact and relationships with customers, and here companies can get almost endless opportunities to become more competitive and increase revenue, which is why companies need to have a highly competitive workforce. right now almost everyone is busy cutting costs, but when companies realize what they have accomplished in this area, they will have to think about increasing revenues. and here it is very important to improve contacts, the quality of dialogue and relationships with customers, for which the quality of staff training is also important. to do this, it is necessary to abandon the balance sheet and product-oriented business models and move to customerand person-oriented models. if previously the key business objectives were to produce something massively and cheaply and distribute it to the widest possible audience, now it is customer relations, dialogue and constant contact with the consumer that are important. baltic journal of economic studies 212 vol. 8 no. 3, 2022 the third trend is something between online and offline, which has resulted in digital – a combination of digital and physical experiences. banks have a large network of branches, retailers also have a very large physical presence, and thanks to digitalization, customers have come to love online shopping, video meetings. during the pandemic, this transformation accelerated, because it was important for a person to be able to come to some physical location to solve a complex problem that could not be solved remotely. or in order to get new knowledge in a "human" format, consultation, implementation of some plans, improvement of the quality of one's life, it was necessary to consult with highly professional specialists. so – the purpose and role of physical points of presence for dialogue with clients in the near future will change greatly. those companies that can do it faster than others will have a big competitive advantage. if classical management theories, old business models were aimed at stability, then in today 's digitalization and globalization conditions business technologies must be adaptable to humans. customers' needs, preferences, and behaviors are changing rapidly today, so by the time the technology is launched, it may be obsolete. unlike local financial institutions, banks have advanced in their approaches, processes and technologies to develop global hr transformation trends. many projects are being developed in the banking industry: how to serve customers remotely, how to set up internet technologies, how to use self-service channels, atms. all these technologies are new, as banks started to develop new sales processes, new tactics and approaches to pricing, which changed clients' expectations and their level of advancement in the market, which changed the market as a whole (cherep o., et al., 2022). the fourth trend is big data, accumulated by multiple systems within large organizations or gathered from various parts of the world wide web as raw material, providing new opportunities for new business development based on information technology. what economists call market imperfections are often driven by information asymmetries and the inability of decision makers to gather relevant data about new market opportunities, potential acquisitions, price differentials among vendors, and other aspects of how digital technology works. such market failures often allow intermediaries and companies with large volumes of relevant and well-organized information to make more profits by creating and merging companies whose business is based on the use of accumulated data. many markets, from the airline market to the stock market, have become more transparent thanks to the internet, but there are many other markets that still need similar changes. one of them is the real estate market, because real estate agencies provide sellers and buyers with incomplete infor mation and therefore thrive. in addition, the accumulation of information through the introduction of electronic processes can lead to byproducts or so-called "residual data" that companies can also use for profit. another type of information business, which is exclusively associated with the accumulation and visualization of information. companies that expect to take advantage of the imperfections of the information market must be able to assess the effect of moving to new levels of information transparency, which are constantly opening up in today 's information technology economy. all this suggests that modern business should be adaptive and clientoriented, that is, first and foremost clientand person-oriented (kyrychenko, et al., 2021). 2. the place and role of organizations in terms of transformational change organizations today are living human organisms that are holistic information systems undergoing transformational changes in the digital age. these changes are leading to dramatic changes in the capabilities of computing resources and networking platforms. the digital age shows rapid changes in the digital life of every country, indicating its evolution and rapid development. yes, the latest iphone has about 6,000 times more transistors than the i486 chip that powered computers in the late 1980s. in 2017, global internet traffic was more than 46,600 gigabytes per second, a nearly 40 millionfold increase since 1992. this rapid growth has opened up exciting new horizons for organizations as machines have become much more powerful with more computing power to process data. gradually, entirely new industries were born, such as social networking, which allows people to interact with each other like never before. the waves of this technological explosion are reflected everywhere: in online commerce, the sharing economy, synthetic biology, augmented reality, artificial intelligence, 3d printers, and the internet. the digital age is evolving rapidly: when the first wave has almost subsided, new ones are rolling in. in the next few years, more than one trillion devices will be connected, and almost the entire planet will become touch-sensitive. in this whirlwind of digital transformation, the most important question for every organization is: are organizations and employees changing as fast as the world around us? in most organizations, the answer will be no (cherep o., et al., 2022). managers like to attribute this maladaptability to the human factor, but people in general do not resist baltic journal of economic studies 213 vol. 8 no. 3, 2022 change, but rather depend on it. humans are the source of disruption. the evolution of organizations has been as follows. only 11 percent of the companies on the list of the top 500 corporations with the highest gross revenues in 1955 remain on that list today. the average age of companies on the list of the 500 largest-cap corporations was 60 years old in 1950, and it is now less than 20 years old. between 2010 and 2019, u.s. companies reported spending $550 billion on restructuring, usually the result of belated attempts at strategic renewal. there is a consistent pattern that the digital world is evolving faster than most companies have time to adapt to it. every day, companies are updating their products or production processes, trying to cope with outdated management practices, constantly closing facilities, downsizing, and merging with their competitors. in the digital age, the place and role of organizations requiring "transformational change and benefits" that can transform over time, so the ability to change is a hallmark of the digital age. the task of organizations is to unlock the creative potential of employees and direct it in an effective direction, to prevent the absorption of organizations, organizations must become a beacon of innovation (voronkova, nikitenko, et al., 2022). a 2018 gallup poll found that only one-third of u.s. workers are enthusiastic and dedicated, 53 percent are dissatisfied with their jobs, and 13 percent are indifferent. globally, those numbers are 15, 67 and 18 percent, respectively. every organization expects employees to perform at three levels: 1) basic security rules, financial discipline and customer service; 2) diligence, as organizations need employees who are willing to perform complex operations and take responsibility for the results of their activities; 3) competence and staff professionalism. team members must have certain skills in order to do their jobs effectively, and while humility, hard work, and competence are important qualities, they are rarely of great value. it takes more than that to win in the creative economy of the digital age. organizations need proactive activists who don't wait to be asked, don't limit themselves to their direct responsibilities. this requires people who can look at challenges differently, propose new solutions, and use creativity (kyrychenko, et al., 2021). at the top of the organizational pyramid. the pyramid has the following characteristics: 1) obedience; 2) hard work; 3) competence; 4) initiative; 5) creativity; 6) courage. the qualities located in the highest pyramid are the result of dedication to something that inspires, that deserves a certain amount of dedication. initiative, creativity and courage cannot be shown by command, an organization will not have evolutionary advantages even without innovative leaders. if executives want to build an innovative organization that looks boldly to the future, it all depends on having a staff full of energy, enthusiasm, and willingness to work. each employee must set a goal: to grow, to enjoy their work, to be creative and creative, and to use recipes for success for the good of the organization. according to the gallup institute, 89 percent of employees are satisfied with what they do; 70 percent of employees' enthusiasm depends on their managers; 51 percent of americans in management positions are not too concerned about their jobs, and 14 percent are completely indifferent. many organizations on the planet suffer from the same ills of inertia, awkwardness, and moral decay because they operate under the same bureaucratic scheme. many organizations lack humanity, humanistic approach to personnel, use of their originality, lack features of anthropocracy management. it is no coincidence that m. weber wrote that bureaucracy becomes stronger when everything human, personal, irrational and emotional is eradicated, when it suppresses the human component and absorbs human souls. the aim of bureaucracy now is to turn people into programmable robots. 3. directions for the implementation of the european vision of personnel management as a factor in the development of it-trends the directions of implementation of the european vision of personnel management as a factor in the development of it-trends are implemented in the context of the development of the most modern technologies and are concentrated around the following digital technologies. 1. generative artificial intelligence, one of the most promising types, is a machine learning method in which a neural network processes a certain array of data (text, images, video) and creates original content based on it. generative ai has great potential for developing new content in many areas, from advertising and marketing to programming and medicine. in 2025, this technology will account for at least 10% of all produced content, it can become an effective tool for content creators, in the near future this technology will create different types of content according to specified parameters: descriptions, tags and more. to date, the dall-e neural network already copes with this task, which is able to visualize text by successfully selecting similar images (text-to-image) (voronkova, & cherep a., et al., 2022). 2. data factories are intermediary b2b services between it platforms and client companies that help coordinate data exchange between market participants, increase data processing efficiency and storage reliability, optimize scalability, and enable faster baltic journal of economic studies 214 vol. 8 no. 3, 2022 implementation of new technologies and bring them to roi. built-in analytics modules allow you to process information accurately and quickly. the data factory reduces the time and cost of integrating data from the various systems used by businesses: crm, erp, hris, whose services are increasingly in demand due to the ever-growing volume of data and the lack of skilled personnel in the field of data science and data engineering. with their help, companies can scale their business more efficiently without fear of encountering growth problems due to improperly designed infrastructure. 3. cloud platforms have been considered a promising trend for many years, they are increasingly being used, in particular, the share of services and applications created in the cloud infrastructure is growing significantly. this will provide them with flexible use of resources for faster, more reliable and affordable development and maintenance of it solutions. 4. intelligent decision-making is a structured decision-making method that combines data science and social science theory. the development of this discipline will help to effectively scale machine learning technologies, with each decision presented as a set of processes to analyze actions, receive feedback, and adjust them based on the information obtained. decision intelligence makes it possible to automate the decision-making process, involving artificial intelligence technology and the appropriate human resources. the particular interest method is to large businesses because it allows companies to make management decisions faster and more accurately, reducing the risk of errors due to the "human factor"(cherep o., et al., 2022). 5. cybersecurity network – provides a flexible, distributed and integrated security architecture for companies, as enterprises need to decentralize security measures for their it products, focusing their security directly on users, not just services and applications. to this end, the zero trust concept was developed, consisting of a set of decentralized solutions that include security measures such as device control, distribution of access levels, behavior analysis and additional authentication tools. the cybersecurity network can include sophisticated blockchain solutions and a number of other new technologies, which increases the protection of devices and elements of the it infrastructure of companies: computers, communication channels, databases. 6. component programs include a set of modular components that help you change the software architecture quickly and safely. component programs are much more adaptive than "whole" products, making it much easier and faster to launch and scale software, and to develop new products based on existing code. one of the most promising approaches to component application development is the creation of a single unified platform (sdk) that would be fully compatible with all company products. the modular structure provides it with flexible scalability and extensibility, simplifies maintenance and servicing, and increases the efficiency of metrics and analytics collection, which will provide the business with a much more dynamic development compared to traditional formats. 7. hyperautomation implies large-scale automation that covers the maximum number of business processes, using which it is possible to significantly improve profitability through accelerated scaling, and reducing the influence of the human factor will make the business more sustainable. hyper-automation allows to optimize the number of personnel, entrusting automation to a number of work processes previously performed by employees, freeing up company resources, helping to focus them on key areas, to focus on the development of new products. this trend goes well with widespread remote working, companies will be able to make decisions more flexibly and quickly, making their business processes more efficient and responsive. 8. artificial intelligence development involves a comprehensive approach to artificial intelligence system design. companies should keep in mind that any machine learning models quickly lose their relevance and cease to be useful for automating business processes, so after collecting data, designing repositories and analytics layers, then companies must harmoniously incorporate the created ml model into current business processes. by integrating them into their technical infrastructure and developing ai-based systems by 2025, corporate profits will triple. 9. aggregate experience is a business strategy in which companies leverage different types of experiences: employees, customers and users, which helps make all stakeholders more loyal and improve a number of business metrics – primarily revenue and profits (kyrychenko, et al., 2021). the tx concept is actively used by many it companies around the world; it is about building continuous multi-channel communication with both customers and employees. in addition, it is not worth sparing money to attract and retain users and motivated specialists in order to get a complete business experience. 10. autonomous systems are self-managing programs or tools/equipment capable of changing their algorithms in real time without changing their software, bringing the field of information technology closer to the invention of full-scale artificial intelligence. the most important advantage of autonomous systems is their excellent ability to adapt to conditions of novelty or uncertainty. in this respect, they resemble human intelligence in that they can baltic journal of economic studies 215 vol. 8 no. 3, 2022 adjust their algorithms and optimize their work independently, which opens up significant prospects for this direction in many fields, including robotics, drones, manufacturing equipment and many others. 11. distributed enterprises are a business trend based on moving away from the traditional office format and toward remote or hybrid forms of working in an organization. this trend is extremely popular among it companies and will soon be adopted by other types of businesses as well. hybrid work model, in which employees meet in the office only 1-2 days a week to solve common problems, and the rest of the time they work remotely. profitability of geographically distributed companies will grow 25% faster. 12. privacy-enhancing computing is a technology that enhances security measures for storing and processing personal data at the software and hardware level. it has become especially popular following stricter legal requirements to protect user data in many countries around the world. by 2025, most large companies will use settlements to improve data privacy. note that so far they dominate only the most innovative and high-tech companies in the u.s. and europe (cherep o., et al., 2022). 4. the concept of personnel management as a factor in the development of humanistic principles in the context of transformational change the concept of personnel management as a factor in the development of humanistic principles in the context of transformational change (the concept of anthropocracy) should consider such mechanisms as planning, resource allocation, project management, product development, performance evaluation, wage calculation, staffing, training, motivation of personnel. each of these mechanisms should work on the principles of a humanistic approach to personnel. it should be noted that today there are no companies that operate under the concept of anthropocracy, there are no step-by-step instructions on how to switch to anthropocracy mode. this is not the same as moving an information system to a cloud service or launching a new quad-portal. it needs to be created carefully, to develop approaches that are both revolutionary, evolutionary, radical in their aims, and pragmatic, which in practice involves much experimentation. this is how managers can weed out unreliable ideas without destroying the entire structure of the organization. at the same time, approaches cannot replace competencies because competencies are knowledge, experience, skills, practice, dedication and hard work. consider the concept of crowdfunding, which, according to team members, is at odds with important priorities. each organization must decide which bureaucratic ills cost the organization the most, decide which rules stifle resilience, initiative, and dedication (nikitenko, et al., 2020). among them: wastefulness, fragmentation, autocracy, monotony, timidity, politicking, and other "diseases" of the bureaucratic machine that affect organizational efficiency. it is also necessary to understand which managerial processes and rules – planning, goal setting, budgeting, staffing, product development, promotion, training, development – are most negatively leading to more and more problems. it is necessary to determine which post-bureaucratic principles (ownership, markets, meritocracy, community, openness, experimentation, and controversy) will most help overcome this mess. the concept of personnel management as a factor in the development of humanistic principles in a transformational change requires radical changes in human heads, teams and key organizational processes. changes are needed that will lead to real breakthroughs, and the organization should not resist these changes, because the "changing concept" is progress, big program values of reorganization, new organizational and corporate culture. reorganization has to be broken down into component parts and distributed among small teams, which is how amazon software developers work. all organizations suffer from bureaucratic pressure, so they are inert, sluggish, inhumane. therefore, in large companies, the only way to deal with outdated management methods is to make organizational changes that put people before bureaucracy. the model being created is a fully humanistic organization with high humanistic values, in which the individual is the top priority of organizational revitalization, and the concept of anthropocracy is developed from the individual to the outcome, based on innovation. leadership skills and creativity of many people are needed to bring about change in the organization and overcome bureaucracy. the inability to be proactive, the inability of leaders to initiate change and solve problems effectively, is another shortcoming of centralization and bureaucratization, which work against the individual as the subject of all processes, and the need to challenge stifling orthodoxy. an organization and leaders who cultivate creativity as an essential component in the process of creating humanistic values, and thus the need to move away from templates, offer new answers and see solutions where no one else has seen them, are needed. the importance of knowledge, information and an appropriate culture of innovation as a source of creativity is widely recognized by leaders seeking change in the direction of anthropocracy (kaufmann scott, 2021). in an innovative organization, there is baltic journal of economic studies 216 vol. 8 no. 3, 2022 a tangible link between innovation and information workers, whose activities are related to the processing of existing information and the acquisition of new information. leadership and management are two sides of the same coin in an organization in which both roles are the working part of a successful manager. in an organization as a living organism there are self organized teams that work on the basis of agilemanagement, on the basis of self-organization and anthropocracy, with man as the highest value. if the manager feels that the company is not allowed to develop, prohibiting creative solutions to problems, then the organization lacks the concept of anthropocracy and simple approaches to it (motivation of employees, development and self-development). 5. the impact of ict on the innovative development of the regenerative economy and humane human resource management the impact of ict on the innovative development of a regenerative economy and humane human resource management is important for today 's complex processes, which can be measured in the context of a new paradigm of emergent (integrity) and systemic. it is based on a new attitude to the individual as the highest value in society, a new attitude to information and communication, to the human resource as a set of knowledge, experience, competencies. the internet has played a key role in enabling the masses not only to be heard, but also to participate in discussions, debates, and governance (gemel, et al., 2021). the internet has spawned a new "collective intelligence" as a new political, economic, social, technological phenomenon that promotes economic prosperity, which requires high-tech human resources. "the knowledge economy " has always been the main source of prosperity, and as production has become more technologically advanced, so has the attitude toward human resources. the more educated people in society, the more productive the economy, as evidenced by the achievements of the "economic miracle" of the east asia, such as japan, south korea, taiwan, hong kong and singapore (nikitenko, et al., 2021). therefore, education is one of the factors determining the economic growth performance of the "east asian miracle," because increased education increases the rate of economic growth and the training of a highly educated workforce. the second factor in economic growth we will call technology, which allowed countries to flourish-china, britain, germany-which required a highly skilled workforce that would help increase economic productivity to produce more efficient knowledge to work with technology. hence, higher education must focus on productive knowledge that can increase the economic efficiency of individual highly productive and competitive countries and enterprises, as well as develop their own human resource capacity (oleksenko, 2017). enterprises must use their human resources effectively to ensure that companies achieve the level of efficiency that they can achieve by managing all institutions to regenerate human and natural capital. to do this, enterprises must implement regenerative management to create stable, healthy and sustainable systems that can lead to an economy that works in coordination with the rest of the world, creating a livable environment. the new regenerative economic paradigm and human resource management includes the following principles of regenerative management, which is even called "regenerative capitalism": 1. humane relations – the recognition of life and work as the highest humanistic value, the attitude to the human economy as an integral cultural part, which in turn is the biosphere part. 2. adaptability, innovation, sensitivity to staff – the use of internal abilities and capabilities created something new in all social areas. 3. wealth perception as a whole – real wealth is achieved through the harmonization of numerous capital forms – human, innovative, strategic, humanistic capital. 4. effective and equitable participation of employees in all forms of financial wealth, which should be fairly distributed among all participants in the process in the expanded real wealth view context, including spiritual wealth (nikitenko, 2020). 5. reliable circulation flow – a continuous desire to minimize the energetic flow, materials and other resources in all production cycle processes: reuse, re-production, recycling. 6. prevalence of the "marginal effect" – creative collaboration increases the likelihood of creating wealth value by establishing relationships, exchanges and the ability to recover quickly. 7. striving for balance – balancing flexibility, longterm ability to learn effectively and become stronger after shocks, due to which, under increasing dynamic conditions, fragile strength foci can be created. 8. community formation – the functioning and healthy nurturing, stable communities and regions, both real and virtual, in connection with humane, decent relations with the team in order to form locally-oriented economies. this corresponds to the basic natural principles of human psychology and humanistic management, which is the regenerative economic basis and management, developing the philosophical innovative concept (rezanova, 2017). baltic journal of economic studies 217 vol. 8 no. 3, 2022 it is the regenerative economy and management that is the foundation of the global economy, the principles of which are the "entry code" for large enterprises and the creation of a regenerative future. humanistic management must become a key factor in changing strategy, appeal to consciousness, and form a corporate culture based on a positive attitude toward personnel. the new regenerative economic paradigm and human resource management includes: an active way to realize one's abilities, talents and programs; new life orientations of a person (knowledge, information, creative and intellectual activity, innovative thinking, scientific and educational activity, search for connections); development of new creative technologies (information, biotechnology, genetic engineering, nanotechnology, artificial intelligence) and their application in the regenerative economy; formation of values (material, scientific, spiritual, production); formation of new ideas and their application in technological innovations; use of imagination, inspiration, knowledge, information, originality as powerful engines of development of creative personality; implementation of a creative approach based on the human talent capitalization, increasing its intellectual capital, which on the ict basis can become a catalyst for accelerating the service economy and human capital development (decision of the national security and defense council of ukraine dated may 14, 2021, 2021). human capital can be considered at the individual level (the individual), at the level of the organization and at the level of the state as a formed and developed set of abilities, personal traits and motivations, due to the acquired knowledge and abilities, implemented in work, is the basis of all production in value, used to obtain additional value in the production process as self generating value: 1) health capital (biophysical) and labor capital; 2) consumer capital (relations in the organization with consumers of its products and services, the business communication system); 3) structural capital (hardware and software, training and retraining system); 4) organizational and entrepreneurial (perseverance, business acumen, innovation, organizational skills, high responsibility, energy and willpower, ability to take risks); 5) cultural and moral capital (a set of intellectual abilities, education, skills, moral qualities, qualification training of the individual; 6) intellectual capital (amount of knowledge, practical skills, creativity, intellectual property – patents, knowhow, creative sectors, trademarks, software that ensure competitiveness) in combination with human forms social and cultural capital, which is the economic knowledge basis required for the formation and creation of creative space and its implementation, required by the economy, which is effectively reproduced. the convergence of innovative regenerative economic development and human personnel management is based on the creative economic merger, creative business and creative management, which are determined by economic, cultural, technological, social, cultural factors (pinker, 2019). the creative economy includes: creative assets that can generate economic growth and development; a source of income from industries that promote cultural diversity and human development; technological challenges, intellectual property and creative industries; a set of activities related to the development of the creative and cultural sectors derived from individual creativity, skills, talents that have the potential to create wealth and jobs for human development opportunities (formation of modern concepts of organization management and administration in conditions of digitalization, 2021). such activities are the basis and result of providing opportunities for innovative regenerative economic development and human resource management. technologies must be more human in nature and generate less waste in the form of resources, responding directly to the basic needs of the people who use them. if there are large economic and social inequalities in society, opportunities for such sustainable development begin to fall short. according to the international labor organization, the world needs about a billion more jobs to address global unemployment. many people who are given opportunities will be able to find jobs and livelihoods through the acquisition of skills, assets, access to knowledge, and career opportunities. thus, the new regenerative economic and human resource management paradigm in the systemic dimensions includes institutional system restructuring, changing attitudes towards society and the economy – only with the adoption of new consumption and production models, prosperity and justice, entrepreneurship and humanistic management (cherep a., et al., 2020). 6. conclusions all of this suggests that modern business should be adaptive and client-oriented, that is, it should be primarily clientand person-oriented. in a democratic society, an organization is a tool that people will use to improve their lives and the lives of those for whom they work. the main question of the bureaucracy is how to make people better serve the goals of the organization, the main question of the baltic journal of economic studies 218 vol. 8 no. 3, 2022 bureaucracy is to what extent the organization should identify and encourage the best that people can give it. leaders must adopt new people-centered principles and apply them to their organizations. at the same time, the development of cloud platforms will help to create products with a fundamentally new architecture – more flexible and scalable. more and more companies are using cloud only when building their it infrastructure, completely abandoning the traditional approach of deploying local data centers. cloud platforms are constantly evolving and improving, helping to quickly develop and bring new it products to market, and the largest technology providers are amazon web services, microsoft azure and gcp. bureaucracy and overemphasis on formal processes remain a problem in complex organizations, and employees are deprived of basic opportunities to express themselves. unsatisfied employees with no prospects for development translate into inefficiency and low productivity of the company, so systematic problem solving can save it from gradual decline. the human democracy model of organization is a humanistic view focused on people, relationships, empowerment, competency development, the "man above all"; look at anthropocracy management 3.0 as biblical leaders. at its core is a redefinition of the economy as a social and natural subsystem, and therefore as a tool for achieving a socially just and environmentally sustainable future – not the end goal it is now. only the formation of a new regenerative economic and human resource management paradigm will facilitate new systemic changes that will lead to sustainability, a paradigm of rethinking economics, science, education, culture, and management. references: voronkova, v. h., nikitenko, v. o., cherep, a. v., & cherep, o. g. 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(2019). methodological approach to the redistribution of investment projects within a company according to formal criteria. financial and credit activity-problems of theory and practice, 28, 1, 256–263. received on: 5th of july august, 2022 accepted on: 22th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 72 vol. 8 no. 3, 2022 1 odessa district administrative court, ukraine orcid: https://orcid.org/0000–0002–6387–0199 doi: https://doi.org/10.30525/2256-0742/2022-8-3-72-77 realization of the constitutional right to a fair trial in the context of the pandemic-economic crisis ihor zavalniuk1 abstract. the subject of the study are public relations in the sphere of ensuring the constitutional right to a fair trial in the modern judicial proceedings in europe and ukraine. methodology. the methodological basis of the study are methods of induction and deduction, dialectical-materialistic method, the method of analysis and synthesis, the historical method, which allowed to objectively understand the content and essence of the issues under study. the aim of the article is a theoretical and practical study of the aspects of realization of the constitutional right to a fair trial in the conditions of the pandemic economic crisis. the results of the study showed that the use of any digital technology for tasks related to the administration of justice under anti-epidemic restrictions requires an appropriate legal framework, since the principle of legality should apply to all procedural actions, including remote questioning using messengers. the digitalization of the judiciary itself carries significant risks that lie in the realm of cybersecurity and certain constitutional and even ethical constraints. in particular, both ukrainian and foreign experience of digital monitoring of persons subject to quarantine restrictions revealed the first threats of leakage of personal information and large-scale government interference in private life, incorrect assessment of information by artificial intelligence, followed by the imposition of controversial fines. conclusion. the author considers it possible to consider the right to a fair trial in ukraine as a legal tradition, since this right is not enshrined at the constitutional level. this situation presents several problems: the right to a fair trial depends entirely on the beliefs and sense of justice of the individual law enforcement officer, and complainants are deprived of their constitutionally guaranteed ability to invoke a violation of the right to a fair trial if their substantive and procedural rights are not respected. in today's environment, litigators with authority need to improve both their digital and health culture in order to be able to use information tools to address litigation and procedural decision-making, taking into account the health risks to individuals in an adverse epidemic situation. solving these and other interrelated tasks will ultimately contribute to the smooth operation of the epidemic in accordance with international standards and the adaptation of ukrainian judicial proceedings to european standards of justice. key words: constitutional law, justice, the right to a fair trial, judicial proceedings, epidemic crisis, economic crisis, digital technologies. jel classification: k10, k38, k40, k41 1. introduction the genesis of the doctrine of the category of justice indicates that the search for the good both for the individual and for society as a whole is based on a sustainable balance of equality and freedom. in this connection, the dualism of choice takes on special significance: the individual is primary and society is secondary (liberals); or society is primary and the individual is secondary (communitarians). depending on the solution of the main ontological problem, the choice of value priorities is made – either the freedom of the individual or the good of society. the problem of the correlation between private and public interests is outlined above. the category of justice underlying the right to a fair trial in this case must not allow the loss of liberty of some to be justified by the greater good of others. the fairness of a trial requires that those involved in a case have an equal opportunity in the process, which is not equivalent to formal procedural equality. as m. savchin notes, "justice is not only about equality, but also about appropriate situations and about right, progressive inequality " (savchin, 2009). in exploring the relationship between formal and real justice, american philosopher and founder of the liberal-state concept of domestic and international this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 73 vol. 8 no. 3, 2022 law, j. rawls believed that the category of justice is based on two principles: – everyone should have equal rights with respect to the broadest scheme of equal fundamental freedoms compatible with similar schemes of freedoms for others; – social and economic inequality should be organized in such a way that it can reasonably be expected to benefit everyone, and access to positions and offices should be open to all (rawls, 2001). in addition to the existence of formal and real justice, when considering the right to a fair trial, one must remember the existence of general and private justice. general justice is understood as the idea of justice, while private justice is more formalized, instrumental and is provided through the implementation of certain distributional programs. general justice provides legitimation of the existing social order on the basis of the correlation of this or that social phenomenon with the accepted system of values. private justice, on the other hand, is a specific set of political and legal principles governing social relations. 2. constitutional and legal category of fair trial in the context of the pandemic-economic crisis in the study of problems of implementation of the category of justice there are questions related to the existence of the category of justice only in its formal embodiment, as well as the sufficiency of only the legislative consolidation of justice in the state of law. as j. rawls wrote: "if we hold that justice always expresses a certain kind of equality, then formal justice requires that laws and institutions be applied equally (i.e., in the same way) to members of the classes they define... formal justice is adherence to principle, or, as is often said, obedience to the system" (rawls, 2001). the effective existence of justice in general and the realization of the right to a fair trial in particular is largely dependent on the level of the rule of law in the state. meanwhile, even with these criteria in place, the likelihood of a violation of the principle of fairness in the protection of individual rights and freedoms remains, since a particular law enforcement officer may not resort to the relevant rules or interpretations when dealing with disputes. the legal literature notes that justice is ensured primarily by the fact that the measure of freedom must be equal in relation to everyone. at the same time, the requirement of equality not only does not contradict, but is part of the principle of the welfare state. the social policy of the state implies social protection of the individual, smoothing the actual social inequality of people by redistributing income among the population through taxation, subsidies from the state budget, social programs, which is designed to promote social justice and to overcome unjust forms of inequality. in the judicial process, fairness can be seen in two aspects: as fairness of procedure (i.e., making a decision in compliance with the requirement of equality of procedural opportunities of the parties) and fairness of decision (i.e., compliance with the decision to the rules of law, moral requirements, in a broad and narrow sense). it is worth disagreeing with this view of the authors on the dual manifestation of the category of justice, since the procedural rules of decision-making are unified and static and do not depend on the specific circumstances of the case under consideration. the final decision of the court, of course, must conform to the principle of justice and depends entirely on the circumstances of the case. some authors note that a fair trial in the convention implies the fairness of the trial itself, which should not be equated with the notion of fairness of the outcome of the trial (fritsky, 2004). it seems that the right to a fair trial presupposes an internal balance of the parties' interests, taking into account the specifics of a particular case, the evidence presented and the possibility of challenging the decision. the external manifestation consists in the norms of publicity of proceedings within a reasonable time by an independent and impartial court. the judge's discretion in this regard takes on a special role, since the criteria of fairness are subjective. fairness should be characterized as a property (quality) of law; accordingly, the objectivity of the decision depends on how correctly the court understands the circumstances of the case and brings them into conformity with the law. the principle of fairness permeates virtually the entire content of the constitution of ukraine. in general, the principle of fairness is implicit in the constitution of ukraine and is reflected in the interpretation of its provisions by the judicial authority of constitutional review. as i. marochkin writes, the principle of justice is enshrined at various levels of the basic law, including democracy, the social state, forms of ownership, and public associations (marochkin, 2010). the existence of true justice is conditioned on its formalization in legal legislation in order to level out the risk of arbitrariness, particularly in the judicial system. it should be emphasized that justice can only exist where there is legal law, since the vagueness of laws in general and the broad scope of their interpretation contributes to arbitrary decisions. in this regard, it is appropriate to quote r . von jhering: "the law is used in two senses: objective and subjective". ( jhering, 2017) in the objective sense, law is the totality of legal principles applied by the baltic journal of economic studies 74 vol. 8 no. 3, 2022 state, the legal order of life. the concrete transfor mation of an abstract norm into a concrete human entitlement is law in the subjective sense. "in both directions", jhering emphasizes, "the right meets resistance, in both directions it must overcome it, that is, by fighting to conquer or defend its existence" ( jhering, 2017). terminologically in the constitution of ukraine the principle of justice is expressed in the following formulations: "equal duties", "equal", "equal before the law", "equal opportunities", "equal access", "equal right and obligation", "everyone is guaranteed", "everyone has the right", "no one can", "no one is obliged", "on equal grounds" (constitution of ukraine, 1996). the right to a fair trial is not directly enshrined in the constitution of ukraine, there is no such wording in the ukrainian procedural legislation. in this regard, legal science has expressed opinions on the need for a direct textual enshrinement of the right to a fair trial. an important condition for the fairness of a trial is the impartiality of the court, which also serves as a condition for an effective judicial defense. at the same time, the constitution of ukraine contains only general indications concerning the principle of justice. the role of the constitutional court of ukraine in this case is to guarantee the legal harmonization and distinction of social and political interests, to form a reasonable legal balance between social security, embodied in the requirements of justice, and personal freedom, support for the needy and economic efficiency, ensuring social peace and creating conditions for dynamic development (constitution of ukraine, 1996). it seems that the criteria of justice should be established by the norms of law and only then manifest in specific legal relations, affecting the legal consciousness. it should be noted that the principle of justice is prescribed not only in procedural law, but is also reflected in substantive law. 3. pandemic-economic peculiarities of ensuring the constitutional right to a fair trial in european proceedings the cоvid-19 pandemic, announced in early 2020, has made significant adjustments to govern ment agencies, including becoming a kind of test for the judicial systems of most states. anti-epidemic measures naturally limited the ability of citizens to seek judicial protection, while the protection of everyone's life and health took precedence over state obligations to ensure unimpeded access to court. forced restrictions in one form or another were also subject to the right to a fair trial enshrined in article 6 of the european convention for the protection of human rights and fundamental freedoms (hereinafter the convention) (convention for the protection of human rights and fundamental freedoms, 2010). as m. entin emphasizes, "this right occupies a special place, since it guarantees the realization of all the other rights enshrined in the convention" (entin, 2003). the most acute issue of its implementation is in criminal proceedings. this is partly due to the specifics of criminal procedural legal relations, and partly – to the less digitalization of this type of legal proceedings. in criminal proceedings, ensuring the right to a fair trial implies: a reasonable period of proceedings; guarantees of publicity and publicity of the trial; respect for the presumption of innocence; the defendant's comprehensive right to a defense. at the same time, the european court of human rights (hereinafter – the european court) adheres to a systemic interpretation of the concept of "fair trial" and "recommends not only to consider violations of specific elements of article 6, but also to assess the process as a whole for compliance with the standard of fairness" (kononenko, 2008). this "combined" nature of this right always complicates the mechanism for its implementation, even in normal, non-quarantine conditions, because, firstly, it is necessary to balance the rights of individual participants, and secondly, to coordinate the elements of the right to judicial protection themselves, since "the existence of these rights forms in the officials responsible for the proceedings corresponding obligations, aimed at creating conditions for the real provision and implementation of these rights". (magrelo, 2013) pandemic restrictions have made such challenges even more difficult and have highlighted the common problem of the conflict between the right to a fair trial and everyone's right to health and safety. each state solved this problem on the basis of its own organizational, digital resources and existing legal and regulatory framework. each state has dealt with this problem based on its own organizational and digital resources and existing legal and regulatory framework. the quarantine restrictions and monitoring technologies that have been imposed have forced the legal community to take a fresh look at the components of the right to a fair trial. the experience accumulated by states in the functioning of criminal proceedings under pandemic conditions requires preliminary analysis and relevant conclusions that can influence the determination of further ways to optimize the criminal process (gardashuk, 2003). the european commission for the efficiency of justice of the council of europe reached similar conclusions in a special declaration of june 10, 2020. while commending the efforts of european states to adapt their judicial systems to deal with the epidemic baltic journal of economic studies 75 vol. 8 no. 3, 2022 threat, the commission noted that such situations can recur, which means that preventive measures must be taken to ensure the smooth functioning of courts and an adequate level of judicial protection of individual rights in such emergencies. the decla ration articulates important principles that, if adhered to, will meet this daunting challenge (the declaration of health emergencies has been extended to june 10, 2020). of particular importance in this context is the principle of the rule of law and human rights, since the right to a fair trial must always be protected and the possibility of its realization becomes particularly important in the context of a pandemic. all emergency measures taken must comply with the principles of legality, legal certainty, proportionality and necessary review. in particular, court closures should be proportionate to the epidemic threat and offset by alternative means of access to justice, including remote access. 4. internet technologies of court proceedings in the context of ensuring the constitutional right to a fair trial it is no exaggeration to say that the pandemic also revealed a problem common to european states – the lack of legal, technical and informational preparedness of courts to work under quarantine restrictions and social distance. for example, spain, where the reform of the judiciary has been long delayed, found itself in a situation where the right to a fair trial became very difficult to ensure due to the introduction of a "worrying situation" in march 2020 (weissbrodt, 2020). in fact, the courts considered only those cases that had the characteristic of urgency. the urgency was associated with the threat of irreparable damage to any rights, so this category included cases of arrests, detentions, certain investigative actions, contesting the arrest of property, and issuing protective orders. the rights of parties to apply to the court online for protection were also limited by these categories. because spain has a very high degree of decentralization of power, including the judiciary, individual regions can adjust the order of proceedings, including in urgent cases. in particular, on march 20, 2020, the supreme court of murcia suspended the procedure under which every suspect must appear in court, allowing its use only in exceptional cases where the suspect tries to flee. an alternative to appearing in person for suspects, including those on bail, was the use of email and telephone. in this case, the courts proceeded from the need to ensure social distance and minimize the risk of illness for both judges and other participants in the process. however, spain's conservative judicial system has demonstrated a lack of flexibility and willingness to use alternative information and communication resources. shortage of personnel in the court administration, their insufficient technical equipment, incompatibility of information systems in courts of different regions, limited material and legal opportunities for conducting court hearings via videoconferencing led to the fact that it is impossible to ensure reasonable time of court proceedings, even in criminal cases. the overall situation with respect to case processing times remains tense even after the relaxation of quarantine measures. interestingly, compliance with reasonable time limits for such cases is difficult and will obviously be difficult for some time to come, not only because of the certain backlog of cases, but also because of the employment of judges and courtrooms to reduce the huge backlog of civil cases, which spanish courts have always handled more than, for example, france or germany. in great britain, although it has left the european union, but adheres to the norms and principles enshrined in the convention, during the pandemic and the economic crisis there has also been an increase in the use of information technology to facilitate access to justice. individual cases began to be handled using skype and the cloud video platform. their use required appropriate instruction and technical support from the public. in general, the uk has retained the pan-european approach, according to which the urgency of the trial is the basis for active court activity (possibly in remote mode, i.e., in the format of "remote justice"). all these measures ensured the consideration of those materials, the violation of the terms of consideration of which leads to a violation of human rights, primarily materials on the release of the accused on bail or the extension of the period of detention. the pandemic simultaneously served as a catalyst for more legislative activity aimed at expanding the use of video recording of testimony in court proceedings (macdonald, 2021). the author considers it necessary to make the following reservation. while it is a question of ensuring the right to a fair trial in the sense and content invested in it by the european convention for the protection of human rights and fundamental freedoms and the decisions of the european court, this problem is in many ways not limited to the european space. since the cоvid-19 epidemic and the economic crisis swept the world, most states have faced the enormous challenge of maintaining an acceptable level of access to justice for their citizens in the face of social distancing and quarantine measures in place. in particular, digital opportunities in the context of the pandemic are actively used by china, which since 2017 has been actively working on the project of online justice. a unified online platform of court decisions has been created, with more than baltic journal of economic studies 76 vol. 8 no. 3, 2022 12,000 courts connected to it. at the same time, legal professionals with the level of information competence to work with online services have been trained. all of these measures enabled china to handle many cases remotely in 2020, including some criminal cases. a report in the press about a trial in which the judge, dressed in a medical gown, singlehandedly, without the participation of the parties, considered a case of violation of anti-epidemic rules and sentenced the defendant to nine months in prison caused a great resonance. according to the president of china's supreme people's court, by the end of may alone, chinese courts had completed 2,736 cases related to the epidemic, a large portion of which were handled using the "smart court" system (vitkauskas, 2018). in the u.s., many courts have limited the personal presence of participants in the process and have begun to use virtual or hybrid technology. various nongovernmental organizations, such as the criminal justice council, among others, have promoted their active use. although the use of videoconferencing has also revealed certain problems associated with limiting the publicity of trials guaranteed by the first and sixth amendments to the u.s. constitution. during the pandemic, ukrainian courts faced the same problems as courts in other states. ukrainian courts faced a difficult task: to ensure judicial protection of the rights and freedoms of citizens, access to justice in the current situation, while preserving the safety of participants in the process and court employees. to some extent, the sharp corners of this issue are smoothed out, because over the past decade ukraine has been actively pursuing the digital modernization of the courts, and such activities are fully consistent with the strategy for development of ukraine 2030 (timchenko, 2018). courts have become more active in accepting documents through electronic internet reception rooms, they consider mainly urgent cases, and they use videoconferencing systems more often. obviously, the constant increase in the information support of the courts has allowed at least partially to ensure the so-called "urgent proceedings". in general, this approach to the organization of judicial activity in not quite normal conditions of social life is consistent with the global vector. however, ensuring a criminal justice process that fully meets the criterion of a "fair trial" has proven to be no easy task under the conditions of the pandemic. the author agrees with the researchers who note that "the results of the ukrainian judicial system in this short period have not only revealed new, but also exposed pre-existing problems". a significant range of these problems is associated with the implemen tation of judicial control, the need to optimize which has long been recognized at the level of both academics and law enforcement officials. pandemic also raised the issue of further digitalization of the judicial process because "those who live by numbers can be saved by numbers" (marochkin, 2010). of course, modern information technology, which allows remote participation in court hearings, can to some extent resolve the contradiction between the right to a fair trial and the right to safety and health, which should also be ensured by the courts while the epidemic situation remains unfavorable. this is not a purely ukrainian problem, but a general global one, developed with the onset of the economic and pandemic crises, as the judicial process must adapt to new social norms in the face of viral danger and a balance between protecting public safety and protecting the health of participants in criminal proceedings, including officials and judges. however, their effectiveness will largely depend on a number of factors that cannot be ignored. 5. conclusions speaking of fair trial, it should be noted that it requires equal opportunity for those involved in the process, which is not equivalent to formal procedural equality. the right to a fair trial, guaranteed by article 6 of the convention, is a complex right that encompasses a whole system of rights, freedoms and principles. this right includes the right of access to a court, the right to execution of a court decision. in turn, the right of access to a court covers: – the right to initiate legal proceedings; – the right to a resolution on the merits of a case concerning civil rights and obligations; – the right to the inadmissibility of unjustified revision of a court decision that has finally entered into legal force. at the same time, the right not to unreasonably review a judgment that has finally entered into force must meet certain minimum conventional criteria. accordingly, review is only possible within a reasonable time, the trial must be fair and public in light of the facts of the case, the trial should be conducted by a court established by law, and finally, the court must be impartial and independent. the author considers it possible to consider the right to a fair trial in ukraine as a legal tradition, because this right is not enshrined at the constitutional level. nevertheless, judicial acts still contain references to the constitutional right to a fair trial. at the same time, the constitution of ukraine guarantees judicial protection of rights and freedoms to everyone. it should be noted that the practice follows the path of considering the right to a fair trial as an integral part of the constitutional right to judicial protection. thus, the law enforcement baltic journal of economic studies 77 vol. 8 no. 3, 2022 officer has to interpret the basic law, draw his own conclusions, and ensure that the right to a fair trial is protected. several problems arise in such a situation: first, the right to a fair trial depends entirely on the beliefs and sense of justice of the individual law enforcement officer, and second, complainants are deprived of the constitutionally guaranteed opportunity to invoke a violation of the right to a fair trial if their substantive and procedural rights are not respected. the use of any digital technology for tasks related to the administration of justice under anti-epidemic restrictions requires an appropriate legal framework, since the principle of legality should apply to all procedural actions, including remote questioning using messengers. the digitalization of the judiciary itself carries significant risks that lie in the realm of cybersecurity and certain constitutional and even ethical constraints. in particular, both ukrainian and foreign experience of digital monitoring of persons subject to quarantine restrictions revealed the first threats of leakage of personal information and large-scale government interference in private life, incorrect assessment of information by artificial intelligence, followed by the imposition of controversial fines. obviously, the automatic transfer of such events into the sphere of legal proceedings would make it very difficult to comply with the principle of the presumption of innocence and would not allow to ensure the fairness of the process as a whole. in today 's environment, litigators with authority need to improve both their digital and health culture in order to be able to use information tools to address litigation and procedural decision-making, taking into account the health risks to individuals in an adverse epidemic situation. solving these and other interrelated tasks will ultimately contribute to the smooth operation of the epidemic in accordance with international standards and the adaptation of ukrainian judicial proceedings to european standards of justice. references: constitution of ukraine (1996). law no. 254k / 96-bp of 28.06.1996. the official bulletin of the verkhovna rada of ukraine. no. 30. article 141. convention for the protection of human rights and fundamental freedoms (2010). international convention for the protection of human rights and fundamental freedoms. doc. from 04.11.1950. council of europe. government courier. november 17. no. 215. declaration of a state of health emergency extended until june 10, 2020. available at: https://courdappelduquebec.ca/ en/news/details/declaration-of-a-state-of-health-emergency-extended-until-june-10-2020/ entin, m. (2003). fair trial under the law of the council of europe and the european union. constitutional law: an eastern european review, vol. 3(44), pp. 85–97. fritsky, o. (2004). constitutional law of ukraine. kyiv: yurinkom. inter, 455 p. gardashuk, t. (2003). the idea of justice in modern society. philosophical thought, vol. 1, pp. 102–122. kononenko, v. (2008). decision of the european court of human rights as a precedent for interpreting the convention for the protection of human rights and fundamental freedoms. law of ukraine, vol. 3, pp. 131–113. magrelo, m. (2013). precedent that does not oblige: some aspects of the essence of decisions of the european court of human rights in the legal system of continental law. bulletin of the ukrainian bar academy, vol. 3(28), pp. 61–67. marochkin, i. (2010). problems of ensuring the independence of the judicial power. problems of legality, vol. 112, pp. 167–177. rawls, j. (2001). justice as fairness: a restatement. nyc: the new york times company. timchenko, i. (2018). constitutional justice in ukraine – formation and development. bulletin of the academy of legal sciences of ukraine, vol. 2(33) – 3(34), pp. 286–290. vitkauskas, d. (2018). protection of the right to a fair trial in accordance with the european convention on human rights. guide for lawyers. second edition. council of europe. savchin, m. (2009). constitutionalism and the nature of the constitution: monograph. uzhgorod: polygraph center "lira". macdonald, r . (2021). the european system of the protection of human rights. martinus nijhoff publishers, pp. 59–60. weissbrodt, d. (2020). international human rights: law, policy, and process. (1st edition ed.) anderson publishing. jhering, r . (2017). hrsg.: bibliographisches institut & f. a. brockhaus, wissen media verlag. received on: 25th of july, 2022 accepted on: 28th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 9 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-9-19 migrations as a result of the globalisation marián mesároš1, josef reitšpís2 abstract. the globalisation of the world economy is a driving force of the development of the individual countries in the world. mineral resources in some countries are very important for the development of such countries, however they also attract world economies that offer new technologies and new possibilities in the development of the infrastructure. the technological progress of less developed countries also brings undesirable accompanying phenomena, namely the dependence on spare parts, the inability of such countries to carry out an independent research development, and an inconspicuous lifestyle change of the population. cheap labour force lures foreign capital and later, as a result of the change of political regimes, begins to have enhanced demands, including various trade union demands. this is the moment when the particular government starts being influenced, the population is dissatisfied and the dissatisfaction results in social riots. however, the foreign capital has meanwhile achieved its business interests and that is why it leaves the particular country. subsequently, this results in internal problems and many times in migrations of the dissatisfied population. research tools used to write this article was analysis, analysis, synthesis of available information, reports, scientific articles on the subject and subsequent deduction to identify conclusions. following the latest findings, it takes at least ten years for migrants to start accepting laws and habitual practice of a particular foreign country. the same holds true for migrants from south america who decide to leave their home country to live in the usa. that is why the assimilation problem has to be solved very carefully and, if it is possible, to solve the problems of potential migrants on the territory of their home country. key words: migrations, security, globalisation, fellowship, criminality, riots, capital. jel classification: o15, f52, d24 corresponding author: 1 university of security management in košice, slovakia. e-mail: vsbm@vsbm.sk orcid: https://orcid.org/0000-0002-4826-0130 2 university of security management in košice, slovakia. e-mail: vsbm@vsbm.sk orcid: https://orcid.org/0000-0003-4248-5758 introduction according to the history of humankind, the past and the present societies have had and have the same signs and used and use the same procedures in favour of achieving their aims. all this is represented by the desire for tangible property that is officially hidden by the aid to developing countries. anyway, it is always about the material part of everyday life. it is not necessary to cite well-known authors to understand that the disintegration of the bipolar world follows its own regularities and tries to adapt to a particular time. at the time of food surplus and tangible property people started to be divided into rich people and those that had to rely on manual work. in spite of the fact people as a species come from africa, nowadays this continent is the poorest one, though having a lot of mineral resources. as to the content of this paper, it is necessary to mention the fact the capital in general needs to be reproduced (mesároš, lošonczi, 2019). in developed countries, the conditions for expanding the capital are limited so this fact results in moving the capital into the industrially less developed countries. except, cheap labour is a breeding ground for investments and subsequent globalisation, namely an aimed globalisation or a random one. a typical and unpleasant phenomenon that follows is represented by subsequent disintegration of the society in a particular country. a typical example of this is the so-called african spring. however, the colonising of asia, africa and america also had unexpectedly positive manifestations, namely the origins of strong states as a result of revolutions and the subsequent using of the acquired knowledge. anyway, globalisation is a clear source of migrations that worried europe in the past baltic journal of economic studies 10 vol. 7 no. 3, 2021 as well and should attack again and with a new power. however, is europe prepared for such a situation? 1. migrations as a phenomenon of the 21st century 1.1 migrations and their short history one of the most frequently used words at the present time is “safety”. this word refers to the safety of a person, a group of persons, nations, nationalities, countries or a group of persons of the same religion. fear for one’s safety usually refers to an environment not protected enough. attacks on social and/or personal safeties have been promoted to an important strategy of achieving not only personal, but also group interests. the world economy globalisation and the desire for wealth result in war conflicts that are frequently reflected by religious and/or racial forms of fanaticism. it is remarkable that countries not being in immediate need for solving such problems employ/use the third countries in favour of both presenting themselves as “peacemakers” and building and renewing what was destroyed by war conflicts. one does not have to be familiar with this fact as much as eric margolis1 is to understand that designating potential enemies as allies of al-qaeda represents a way of how to withhold their political and human rights and make such enemies illegal. a similar conception was created by israel, namely the conception aimed at palestinians. however, it has been not confirmed up to now whether al-qaeda, so much glorified and at the same time condemned, was really so powerful and whether it was not only a creature of the western world representing a kind of a bridge enabling by an authorisation of the uno trouble free entering this country full of crude oil and huge mineral resources (mesároš, lošonczi 2019). other examples of how a propaganda can become a reality can be provided by egypt. the majority of the population of this country elected its government voluntarily, namely in favour of stabilizing political and social lives. the brave men who decided to bear this burden were immediately designated as terrorists and the country trying to stabilize its position was destabilized again. it is not necessary to look for the reason of such a problem as a similar situation, however a more bloody one, can be observed both in syria and near the frontiers of slovakia, namely in ukraine. 1.2 migrants – a protected species designating migrants (2017) a protected species not only expresses the situation in an apt way, but also in a frightening one. such a designation of human beings, i.e., a protected species, as a result of their effort to save their lives is unsuitable but not dignified. however, characterizing the present migration (that will be, in the future, compared to the migration period, i.e., the late 4th up to the early 7th century) necessitates to mention the fact the present humankind also exists as a result of a migration. after homo sapiens evolved in africa (about 150 000 years ago), it managed to occupy the whole african continent. however, the appearance of the then african continent was absolutely different, i.e. living conditions were excellent, that is why the designation species is suitable and apt (mesároš, 2011). anyway, this quite stabilized species decided to leave africa 80 000 years bc. its journey was absolutely different from the journey of the current migrants. on their way to the new world the then migrants discovered unknown kinds of mineral resources, new crafts were coming into existence and agriculture was being perfected. people got to europe through asia 40 000 years ago, and started occupying america 20 000 years ago. such a demanding and complicated mission reached its top thanks to the technical revolution in the 18th and 20th centuries. though the present humankind (7 thousand million people) seem to be able to live and reproduce quietly, it was not so in the past and it will not be so in the future either (mesároš, lošonczi, 2019). through the increase in relative welfare one started to divide labour and personal property as well. rich people started to exploit poor people, which many times resulted in various riots and war conflicts. modern political scientists wrongly confuse and compare the migrations from europe to america (19th and 20th cent.) with the present migration (early 2015). migrants who came to america 80 000 years ago were blessing for that continent and a driving force of the next development. many of the migrants stayed in the new continent, however a lot of them went back and brought not only money, but also invaluable knowledge in science and technology. so those who went back tried to give to their home countries what they lost through their leaving for the new world. in connection with migration, it is necessary to ask the following questions?: what is the reason so many migrants leave their home countries? who has caused or contributed to such a situation? the answer is there cannot be only one culprit similar to the following experiment: if one wants to cause anybody to move, what is necessary is the first impulse that can be accidental or intentional, however it has to be followed by other impulses. all those of us dealing with foreign safety policy realize the intention of such an impulse (migration) has consisted in the economic globalization, whatever its 1 eric margolis – writer and foreign editor of sun national media, canada baltic journal of economic studies 11 vol. 7, no. 3, 2021 form may be. striving for profit knows no frontiers and is characteristic of searching for weak points of opponents and abusing them even through a political way. the desire for power of the individual political parties, mainly of the third countries, represents a breeding ground for the world powers, which they can properly use as well. the forms of abusing unstable states have a long tradition and are supported by the desire for power and personal benefits. 1.3 migrant between the period 2016–2019 based on the relevant findings, one can allege 90% of migrants are people younger than the middle age. they are not ashamed of taking young children and old people (even 100 years old) with them. it is one of the calculations of arabs, namely to arouse compassion of the europeans. to a certain extent they have been successful. after one year, however, it has been found out 90% of the migrants (nearly 1 million) in germany do not have any work skills, as in their home countries they lived a very comfortable life and did not have to work a lot (or at all). in europe they have no relatives, they are believers and not able to respect laws and rules of countries where they have intended to get (germany, sweden, great britain). the preliminary estimate of german employment specialists says the majority of migrants will only be able to be employed as early as in 10 years. within 2018 other 2.5 million migrants came, however there is not a specialist that would estimate the costs of tax payers for covering their life during the following 10 years. 1.4 integrating migrants into the city the migration policy is in close connection with the process of integrating migrants into the society. the result of this process shall ensure similar chances and perspectives in their life in comparison to the majority population. the integration policy is a set of instruments that should contribute to successful integrating migrants into their life in host countries (mesároš-lošonczi, 2020). the importance of integrating migrants into society is being stressed, as unsuccessful integrating will result in their staying at the edge of the society. we can say migrants are marginalized (they are numerous in lower social strata) and segregated (they live in isolated communities). unsuccessful process of integration will result in their difficult finding a better paid job and/or getting university education, and their chances of success will drop very much if they do not manage to learn the language of the host country. nowadays, they are frequently discriminated against and abused as cheap labour. living at the edge of the society forces them to solve the situation contrary to the law. 2 the globalisation as a driving power of the increasing migration wave early in the 21st century 2.1 the beginnings of the globalisation the globalisation can be considered as a phenomenon concerning everybody. the origin of this phenomenon was contributed by spanish, portuguese, british and dutch seafarers and businessmen. thanks to their discovery journeys and business expansion into the newly discovered regions, their home countries became the first global powers. the gradual interconnection of the world happened in the years 1875-1925, namely by accepting the gregorian calendar and the unification of the time zones. an important supporter of world business expansion was the industrial revolution in the second half of the 19th century. the development of the business expansion was stopped under the influence of world war i. at that time the particular countries responded by taking the respective measures against the free market. the measures were made even stricter after the great depression in the 1930s. the beginning of the globalisation process can be dated after 1945 when multinational corporations began coming into existence, air traffic was perfected and widened, and the communication technologies started expanding. the top of the chronicle into the history of the globalisation is represented by the internet providing all the necessary information. this top of the process of globalisation needs to be accepted with all its innovations and problems (mesároš, 2010; mesároš, 2011). on the other hand, globalisation is opposed by localisation or nationalism. the effort of nationalism is to weaken globalisation trends and preserve the specifics of the independent states. the ideology of nationalism is in some countries based on chauvinism and favouritism. 2.1 types of the globalisation globalisation represents one of the most discussed topics at the present time and necessitates to be considered from several aspects. globalisation can be considered from several viewpoints, namely from the economic and the socio-political viewpoints, from the viewpoint of its instruments, manifestations, economic impacts and the activity of world organisations and institutions, mainly business institutions such as the world bank and the international monetary fund and their structure. these are considered to be symbols of the globalisation. 2.2 characteristics of globalisation globalisation can be characterized as a marginalisation of the national, economic and racial individualities baltic journal of economic studies 12 vol. 7, no. 3, 2021 of the individual independent states, their mutual bringing close to each other, and a common direction. the characteristic feature is the effort of bringing the economy to life, growing the economy in less developed countries and adapting such countries to the world standard set by developed countries. as to the social part of globalisation, it is characteristic of limitations and unfair (protectional) advantages of the individual countries, giving countries close to each other and the effort of achieving an intensive friendship and cooperation. next, the social part of globalisation intensively tries to develop the communication, mutual interconnection of the separated parts of the world, and rapid development of the information technologies and their mass availability. the globalisation is a process focusing on interfering in all parts of the world, creating the same conditions in all countries of the world, and adapting the whole legal system to the standard of developed democratic countries. all this means the same life conditions should be created in all countries, namely with an emphasis laid on the democratic and political system and on observing the human rights. globalisation is represented by various political and business organisations working worldwide and focusing on economic and political reforms in less developed countries, whereas the most economically and politically developed countries have got the main say there. the main aim of such organisations is to reduce the poverty in the world to the lowest possible level, and to ensure observing the basic human rights and freedoms in all countries in the same way. in achieving such aims there are often mistakes made, namely as a result of an unsuitable procedure and wrong decisions made by competent people (mesároš, 2010). 2.3 globalisation vs. localisation the opposite of globalisation is localisation. localisation tries to change the methods causing globalisation in favour of the local business. localisation is based on a simple principle, namely countries get all possible economic means on their own territory. the international business shall only be limited to supplying goods and raw materials countries can not get on their own territory. the policy of localisation tries to enhance the powers of the sovereign states (regions, municipalities etc.) and to gain the superiority over the powers of international organisations. it means, the local decentralized control of the matters concerning a particular place. such a control should contribute to the enhancement of social unity, to the reduction of poverty and inequality, the improvement of the quality of life, the improvement of the social infrastructure and consideration for the ecology. just the consideration of the ecology represents the most serious paradox, i.e., the aims of the supporters of globalisation and localisation are in substance the same, however, the means and procedures in favour of achieving their aims are absolutely different. this fact enables doubting both the directions, i.e., globalisation and localisation. this is the reason why it is difficult to decide for one of them. probably, none of the two directions is the right one, so that forces people to look for the golden middle way or absolutely new starting points. the globalisation and many of the word connections containing the adjective of this noun, i.e., “global”, represent a group of similar words whose meaning seems to be exact. in fact, very few people are able to define the term exactly, as the explanations of the term and opinions about it markedly differ from each other. there are two very frequent mistakes: – believing the process of unifying the world does not concern us and is happening out of us; – imagination that within the process of globalisation one has a possibility of selection. this is accompanied by the enthusiasm for the existence of possibilities, or frequently also by anger and dislike for consumerism. what is to consider is not the question whether we are for or against globalisation, but how to come to terms with it. globalisation is difficult to be assessed as it represents a threat for some people, however a chance for others. it is a process that has begun and represents a common destiny for the population of the whole world. this new and enormously discussed phenomenon can be considered from two different levels, which contributes to at least a basic clarification of this notion (mesároš, lošonczi, 2020). the levels are represented by: – globalisation of the world economy, its instruments, trends and problems resulting from it; – the socio-political globalisation, its manifestations, perspectives, but also its adversaries. these viewpoints are interconnected and mutually influenced. the socio-political and economic changes as a result of globalisation occur at the same time and are interconnected in favour of creating conditions for “the new world order”. 2.4 development of the economic relations the subject of developing the economic relations worldwide, i.e., globally, is not an absolutely new phenomenon. it started drawing one´s attention as early as in the time when the world economy began achieving its top, i.e. when all countries of the world joined the worldwide system of economic and political relations in various ways. this happened at the turn of the 19th century. the form of the then interconnection of the individual parts of the world economy was determined by the colonial and semi-colonial relations among industrially baltic journal of economic studies 13 vol. 7, no. 3, 2021 developed countries and economically less developed and/or underdeveloped countries. within the 20th century the character of these relations changed substantially. at the present time, these colonial and semi-colonial relations are being entered by politically independent states (or economic subjects within the states). however, the degree of their economic maturity continues to be markedly different. this is remarkable in comparison to the present industrially developed countries on the one hand, and developing countries on the other hand. this fact is also remarkable in comparison to the particular economic subjects belonging to one group of the countries or to the other one. the development of the globalisation processes in the last decades have been markedly supported by the ongoing revolution within the information technologies. also the acceleration of globalisation was caused by the continuing strong effort to enforce the free market in the whole world, political changes in favour of effort expanding free business, and the care of common care of the environment. at the present, the forming of the world economic contacts take an even more noticeable shape than in the previous decades. one of the main trends within the 21st century having a worldwide impact is represented by the expansion of the global economy. the world economic powers cross the international borders, which is reflected in more democracy, more freedom, more business, more opportunities and prosperity. through the business exchange between the individual countries the world is heading for one economy. one economy and one market represent the most natural degree in the history of the economy. the process of the re-division of the economic roles between the individual national economies that is typical of the present time contributes to deepening their economic dependency. the global economy based on the above mentioned presupposes an absolutely free market, i.e. creating business conditions successfully functioning within national economies. bringing economies close to each other is documented the most noticeably by the integration processes in western europe. the free market has played a key role in the present development of the eu countries and continues to be a support of their further economic development (mesároš, 2012). the next development of the relations between the developing and the developed countries necessitates to have a close look at the adjective “developing” (especially in the meaning of providing the economic aid, and/or in the meaning of setting conditions of providing such an aid). the developing countries do not represent a homogeneous group. according to the economic maturity, the developing countries can be divided into three basic types: – developing countries requiring the humanitarian aid; – developing countries that have created conditions for the economic growth, or the entry of foreign investors in the national economies; – “new” less developed countries (primarily countries of central europe and eastern europe). the group of the developed countries uses a wide scale of the economic development models that can be used in developing countries as well. however, as regards the specific value and cultural and religious systems, some countries refuse the models. that is why they have to look for the inspiration of their further development in other resources. some of the developing countries may be influenced by nationalism, ethnic identity or a certain form of religious or cultural fundamentalism. in spite of the fact the globalisation processes are being slowed down by the mentioned problems and/ or preferential tendencies of some other countries, there are also optimistic prognoses that free business, for the time being developed in regions, will quickly and unstoppably grow into the world free business. the economic globalisation of the individual countries and their adaptation to the conditions of the world free market frequently happens according to a similar model. countries being found in such a form of economic development hand over their experience in solving possible problems, and also instructions and procedures in solving them (“know-how” within the economic aid) to less developed countries. however, if the same model of adapting the economic globalisation is used in countries having different economic conditions, this causes various problems. moreover, as the economy of any country has its specifics, a unique model of the economic growth cannot always be used. from the political viewpoint, such investments are primarily expected to enhance the national production, the employment growth and to improve the standards of living. the importance of the new technologies and products in the economy of the receiving countries and the immediate effect on the balance of payments are important as well. a majority of the foreign direct investments (fdis) is carried out by big companies in private ownership, i.e., multinational corporations (multinational and/ or transnational companies). by means of investments abroad multinational corporations increased their turnover within the last decades. this activity helped multinational corporations develop into a resolute multinational economic giant. 2.5 globally organised companies a remarkable part of “foreign business” is represented by movements of goods and capital inside globally organised companies. the aim of their strategy is increasing the profit of the whole chain of the individual units of global corporations. the activity baltic journal of economic studies 14 vol. 7, no. 3, 2021 of a global company includes research, development, production, distribution and finally sale and marketing, which represents an internationally integrated unit. a global company uses the cheapest resources to get the necessary raw materials, it produces or completes products in countries providing the cheapest labour, and uses its managerial and technical resources in the most economic way. this enables a global company to behave at the markets of the individual countries in a very flexible and effective way. in the competitive fight with domestic companies, a global company is usually more successful than small companies which can result in their gradual being weak or finally liquidated. this means if there is only one big company, it has a dominant position, which often leads to creating a monopoly and abusing. a country whose economy is dominated by foreign companies gradually becomes dependent on such companies and their economic strategy, that is why it is difficult for such a country to keep its overall political and economic powers. this partially makes such a country weak and disturbs its independency, and does not represent a globalisation but bipolarisation, i.e. a division of the world into rich and strong countries on the one hand and poor and dependent countries on the other hand. rich countries are represented by home countries of the global companies that behave as multinational corporations producing investments. by means of the foreign direct investment (fdi) such countries influence other countries and try to strengthen their political and economic powers more and more. poor countries are represented by the countries accepting investments from abroad, whereas their economy gradually becomes dependent on other countries. on the other hand, when at the market of one country there are two or more equally strong companies (of the same specialisation), this can have a very positive effect. this results in an equivalent competitive fight where each of such companies has the same conditions and chances and the companies are mutually influenced. this situation seems to be the most suitable for customers who have a possibility of choice. that is why a great emphasis should be laid on the anti-monopoly laws, and also the legislation should focus on directing the economic situation in favour of achieving such a state. primarily small economies are afraid of large investments by foreign companies. what they often refer to are possible adverse and long-term effects of the fdi on the balance of payments (leak of profits, licence fees etc.). the policy of foreign companies is not compatible with the aim of national economic and social policies as to their national security. various aspects of direct foreign investments and different national aims lead to various reactions of the individual governments and to the control of the fdi. as to the outflow of capital in the form of the fdi, most governments do not decide for any limitations. in case of inflow of capital and investments from abroad, a wide range of procedures has been created: from the inflow of capital that is not prevented (except cases when the inflow of capital threatens the national economy) to very strong restrictions connected with preferential policy. the economic globalisation is accompanied by the globalisation in the socio-cultural and political senses. such a globalisation is manifested by the amendment of various laws and rules and their reform in compliance with the “world standard“. such a legal standard for the development of democracy is indisputably profitable as it creates the same living conditions and environment in all countries. moreover, globalisation influences the whole culture and society, whereas opinions referring to globalisation are different. in all countries influenced by the globalisation there are the same social trends, whereas differences typical of such countries gradually decline. this is the moment when a “global culture” comes into existence that represents the culture of consumerist society. at the expense of the consumerist society traditional values begin declining in most countries. this is the reason for the origin of many problems concerning any manifestation of the globalisation, namely economic or a social ones. a new “universal international life style“ comes into existence that influences fashion, human behaviour, language etc. an important role in socio-political globalisation is in the hands of the mass media and information technologies. 2.6 globalisation supported by the private mass media the development of the mass media and information technologies accelerated a lot within the previous years and this has resulted in the influence of the mass media as a provider of information. as regards to this fact and under the influence of some other facts (personal or political interests of the owners of the private mass media, their foreign ownership, etc.) the mass media, primarily the private ones, started spreading ideas of cultural globalisation. in global societies, information, its availability and the extent of objectivity become one of the most important matters in enforcing political interests. what frequently happens is that the mass media culture is connected with consumerism and is considered to be one of the globalisation instruments. this tendency to equality, universalism and internationalism is opposed by an important antitendency that is manifested by the resistance to uniformity, desire to enforce uniqueness of the national culture and language and to refuse foreign examples. such trends do not oppose each other, but they are mutually interconnected. the more the lifestyle is baltic journal of economic studies 15 vol. 7, no. 3, 2021 unified, the more people adhere to the old values such as religion, culture and history. the more the external worlds are similar to one another, the more people rely on traditions that divide them. against the growing homogenisation it is necessary to focus on preserving the identity, namely religious identity, cultural identity, national identity, language identity and racial identity. 2.7 adversaries of globalisation the more extensively the globalisation is being manifested, the more one can observe resistance to it and strong responses of various critics asking for a remedy. the resistance and disagreement with the globalisation can be heard from many sides and has a lot of reasons, either reasonable or false ones. adversaries of the globalisation are divided into several main directions that are subdivided into various smaller groups. all the directions have something in common, however they are diametrically different. the first of the main directions of the resistance to the globalisation is represented by the extremist left that is divided into several kinds, and the most famous of them are: social and revolutionary anarchists, radikal socialists, communists etc. the lefthand extremists are usually part of various movements, organisations (legal or illegal ones), associations of citizens or political parties, and are manifested mainly by political and agitative activities, whereas they are typical of organizing demonstrations. such manifestations are usually non-violent, however in case of important events they get the form of violence and conflicts with the public order units. in such situations the militant section of extremist organisations is manifested, however it does not declare its support for any of such manifestations. 2.7.1 the left-hand extremists the ideology of the left-hand extremists is very close to the communist ideology and, following several changes, got the name social (or revolutionary) anarchism. the notion of globalisation is for left-hand extremists a synonym of americanisation and imperialism. they also promulgate hatred towards capitalism and class enemies that are represented by rich “bourgeoisie”, i.e., employers, private businessmen etc. the left-hand extremists want to give the power into the hands of the working class, i.e. the proletariat. this should result in real social justice and a society founded on the equality of all working people. the effort to achieve this aim by means of dictatorship of the proletariat is deep-seated in history and has not been really successful anywhere so far. moreover, the socialism and communism are connected with the internationalism that represents globalisation to a certain extent. that is why, the ideology of the left-hand extremists seems to be irrational, purely utopian and idealistic. it seems to be more probable that their persuasion tries to hide envy and incapability of adapting themselves rather than show the social injustice and exploitation of the working class. 2.7.2 ecologists the second group of the adversaries is represented by ecologists. opinions within this direction are no more differentiated, that is why the adversaries of globalisation are divided into several movements and organisations only that are nearly all legal. they are usually manifested non-violently, i.e., by means of demonstrations, however pressure activities and blocades are also very frequent. the subject of their critique are primarily organisations in connection with globalisation (mainly the world bank), whereas some of their projects in favour of helping the developing countries had an adverse influence on the environment and caused ecological disasters. representatives of the second group of globalisation adversaries criticize inconsideration of the competent influential people who try to achieve profit, though at the expense of the irretrievable destroying of the environment. some of their protests can be exaggerated or without purpose, however a large majority of the phenomena they criticize has its justification. for the overall process of globalisation, the ecologists are a beneficial critique in comparison to adversaries, and their warnings should be taken seriously. 2.7.3 the extreme right the third group of globalisation adversaries is represented by the extreme or even extreme right. just like the left, the right adversaries of the globalisation are also divided into several groups. they are nationalists, chauvinists, neonationalists and right-wing extremists (that are difficult to be defined). the moderate part of this political spectre has the form of a political party or an association of citizens (legal or semi-legal ones). the nationalism is a movement of a nation-oriented policy that should represent interests of the nation as a whole. programme of the nationalist or the national parties primarily focuses on protecting and preserving the traditional values, i.e. mostly religion and/or culture. nacionalist parties usually represent the conservative right-wing policy. the nationalist ideology is in some parts of the world politically deep-seated. 2.7.3.1 chauvinists or right-wing extremists chauvinism is a movement spreading hatred and spitefulness towards other nations and ethnic groups. this movement highlights one’s own nation and considers it to be superior to the other nations. it is baltic journal of economic studies 16 vol. 7, no. 3, 2021 accompanied by ignoring the basic facts and refusing not only the external, but also the internal critiques. chauvinism does not consider an individual and their attitude as important. for this movement it is essential to have an overall (negative) image about an enemy nation or an ethnic group, which is based on the historical experience. the fact the ideology of chauvinism consists in hatred towards other nations and ethnic groups indicates denying and judging any globalisation tendencies, international friendship and cooperation. such a persuasion is not supported by any logical reason, that is why this movement seems to be rather irrational and artificial. 2.7.3.2 the right-wing extremists the radical wings primarily represented by neonationalists and other types of the right-wing extremists are organized in illegal militant and political movements and organisations. the substance of such movements and organisations is the production and/ or distribution of publicity and information materials, or providing information about various activities etc. the activity of some right-wing extremists focuses only on violent manifestations in the form of terrorist attacks or the pursuing of certain groups designated by their movement as an enemy group. however, such manifestations are not very frequent. nationalists at the present time and neonationalists have nearly the same opinion in connection with globalisation. they consider globalisation as the effort of certain “upper classes” to have world power and to defeat independent and strong countries. the notion “upper classes” represents or refers to the most eminent world financiers and the most influential politicians, whereas many of them are of jewish origin, i.e. one can talk about jewry (zionism) serving the interests of the jewish religion. 2.7.3.3 freemasons many politicians or influential people who are not jews are designated as freemasons or hangers-on. they reject globalisation or international integration as they see it in the weakening of countries accompanied by the decline of traditional values and national principles that freemasons consider to be the most important. characteristic of them is resistance and frequent hatred towards immigrants because these represent for them a threat of weakening the national idea at the expense of the idea of cosmopolitanism and multiculturalism. some of the problems referred to by the adversaries of globalisation have got their justification and that is why the ideology of freemasons can not be designated as absolutely negative or positive. as to the starting points of their ideology, the opinions of the individual subgroups are very different and the spectrum of the offered starting points goes from the moderate and partial reforms to radical and revolutionary steps. 2.7.3.4 independent economists, political scientists and sociologists the last important group of adversaries of globalisation are represented by individual economists, political scientists and sociologists. it is difficult to include them in subgroups as they cover the whole opinion spectrum, namely from the moderate to radically critical ones, and from poor theories to practical remarks. the remarks of some of the members of this group concern only a few particular points and manifestations of globalisation, whereas other members criticize the globalisation as a whole and as a principle mistake in directing the humankind that will result catastrophically in all its directions. this group as a whole of adversaries of the globalisation represents the biggest contribution from the above mentioned groups, namely because it offers particular and acceptable solutions and starting points from various problems as a result of the globalisation. 2.8 globalisation and important world organisations the notion of globalisation is inseparably connected with the activity of several multinational business and political institutions. they primarily include the world bank (wb), the international monetary fund (imf), and the political and military organisations that are represented primarily by the united nations organisation (uno) and the north atlantic treaty organization (nato). the solution of the present problems of humankind requires new forms of cooperation of the interested countries, creation of effective mechanisms in favour of creating a really developing effective system of relations. this is necessary because at the present it is not possible to carry out neither the security interests nor the economic ones outside the system of the relations. connecting the operating process of the national economy on the government level with the activities of world organisations such as the world bank, the world trade organisation or the international monetary fund has become a necessity. the sphere of competence of a particular country is being reduced and its ability to act is bound by increasingly narrower borders and external restrictions. 2.8.1 the slovak republic slovakia is connected with the world through thousands of various relations. the relations can not be interrupted, on the contrary it is necessary to baltic journal of economic studies 17 vol. 7, no. 3, 2021 always look for new contacts, new markets and new friendships. the present independent slovakia is a country dependent on export and import. the country is dependent on the basic energies, fuels and raw materials. in connection with the entry of slovakia into the worldfull of global and regional problems, the question of protection of our national and state interests is very important. the membership of slovakia in the nato and the eu has started a new discussion on slovak national and state interests. the transformation of these organisations and their adaptation to new mainly security challenges provide slovakia with an opportunity and certainty to make discussions in compliance with its long-term interests. 2.8.2 the influence of the multinational corporations the notion of globalisation indicates the fact that one experiences the origin of the unstoppable and gradual processes of creating an absolutely new quality on the worldwide level. the processes lead to worldwide integrating and organising the production (production processes), trade (trade processes), bank and financial operations, technologies and information in connection with the phenomenon of the world supremacy of the multinational corporations that influence and determine the global political processes among the participants of the world politics more and more, namely security crisis and risks, world migration (influenced not only by the population explosion and the deepening unbalance between the north and the south), new quality of the organized crime and solutions of the global ecologic crisis, moreover, the processes also accelerate the civilisation conflicts, the decline of maintaining human rights, culture, morals, religious systems and other not quite subsidiary problems in national (state), regional and municipal systems. many studies deal with the relation between the globalisation, migration and terrorism (križovský, 2020; rožňák, 2020; wright, 2019; lighutaia, 2021). the driving force of this process is the globalisation of the economic activities that within the previous thirty years connects production and markets of various countries. the present phase of the globalisation is typical of the unbalance between the economic power of multinational corporations (the unbalance is strongly concentrated and works on the worldwide level and the individual companies, such as postmodern associations of citizens of the globalisation core (in the north), postcolonial societies within the globalisation (in the south); these companies are organised in 196 or 197 sovereign "national" and multinational states. countries are usually not willing to hand over their decision-making powers to multinational institutions. moreover, resistance and unwillingness to the negative aspects of the globalisation is increasing. many theoreticians dealing with the subject of the globalisation processes in europe and in the world realize a lot of positive and possible negative aspects and certain difficulties. in a simple way, the globalisation means “americanism” of the cultural life, is a synonym of the supremacy of multinational concerns and “normalisation” of the consumerist society. it is said the society is heading for creating a one dimensional people, which is able to overcome the worst anxieties ahead of humankind. the following table (table 1) represents positive and negative aspects of the process of globalisation, including possibilities of solving the aspects. from the real extensive subject and a wide range of the positive and negative aspects of the globalisation process that is typical primarily of crossing the frontiers of any state (the romantic provincialism is ending) this paper offers only a typical and significant casuistry of the most serious aspects. the globalisation problem forces to multidimensional, multicultural (multicivilisation) and universalistic thinking about the world. 2.8.3 social aspects of the globalisation in thinking about the notion of globalisation we consider the marginalizing of the national, economic and racial substances of the individual independent states, their coming closer to each other and the common direction. following the economic efforts and the economic wake-up, the basic feature in the globalisation process is also represented by the growth of the developing countries and their adapting to the world standard set by the developed countries. the social part of the globalisation includes restricting the preferential efforts, their coming closer to each other and the effort to achieve the most intensive friendship and cooperation between the individual countries. the accompanying phenomenon in the social part of globalisation is intensive developing the communication and interconnection of the countries separated so far, the above standard development of the information technologies and their mass accessibility. it is the process whose aim is to interfere in all countries of the world and to create the same conditions, next to adapt the national legal system to the standard of the countries having a developed legal system. the aim of the globalisation process is to create the same living conditions with the emphasis on the democratic and political systems and on the human rights observance in all countries (mesároš, 2011). such efforts are represented by various political and trade organisations working worldwide whose main activity is helping and directing economic and political reforms in less developed countries, whereas baltic journal of economic studies 18 vol. 7 no. 3, 2021 the developed countries have a decisive say. the direct consequence of such a model are mistakes caused by wrong procedures and decisions, by abusing the powers, non-respecting the racial, religious and other differences, which results in achieving the exact opposite of the main intention theory. as a result of all this, one can allege the globalisation processes bring huge security risks whose consequences deny advantages of the globalisation. conclusion the present form of migration represent a threat that influences all countries of the world. arab and african migrants consider the eu countries the promised land, and many times such an imagination is true. the eu asylum law, mainly the one concerning germany and the great britain (irrespective of brexit), is generous and suitable for postsocialist countries as well. in the first years of the stay in their promised land family relations of the migrants will help them a lot. if migrants have no relatives in the promised land, they have to rely on the refugee camps. however, following the latest findings, it takes at least ten years when migrants start accepting laws and habitual practice of a particular foreign country. the same holds true for migrants from south america who decide to leave their home country to live in the usa. that is why the assimilation problem has to be solved very carefully and, if it is possible, to solve the problems of potential migrants on the territory of their home country. as stated above, the home countries of many migrants are destroyed as a result of war conflicts that were enormously contributed by the world globalisation and its consequences. however, the principle of solidarity does not mean the efforts of the domestic population trying to build their home country according to their imaginations and in favour of their children will be made difficult by the european countries, namely on behalf of the voluntary aid. though such considerations are true, they are necessary to be achieved upon the principle of fellowship and solidarity. table 1 positive and negative aspects of the globalisation (mesároš, 2010) positive aspects of globalisation negative aspects of globalisation possible solutions of negative aspects of globalisation an increasing offer and quality of goods the world economy is more inclined to sudden collapses (the casino economy) strict regulating the activity of multinational companies and preventing their further interconnection falling production and sale prices the differences between the poor south and the rich north are the biggest in history and are always increasing reducing the speculative flowing the capital new work opportunities poor territories of the countries are more frequently famine, wars and illnesses than ever before collecting taxes from the transfers of capital and dividing money in poor territories the standard of living within the consumerism is increasing the economic and political migrations and xenophobia are increasing. abolishing the international financial institutions (imf and wb) and their replacing by a new establishment in the form of a world monetary parliament a wider and freer access to information (information democracy) in the northern territories the differences between the highest and the lowest incomes are deepening, i.e. the middle stratum is disappearing making the rules for the environment protection stricter and subordinating the economic growth to the rules of the permanent sustainability communication possibilities are getting wider (information society and education society). the economic and political influences of the multinational companies are increasing (the insufficient amount of legitimacy of the global authorities) to unleash a revolution for the purpose of bringing down the world capital pressure on the global justice and the universality of human rights the environment is getting worse, deserts are getting wider. etc. clashes of the civilisations are getting accelerated. crisis of the religious systems the global crime is getting worse, terrorism and extremism are getting increased. migrations baltic journal of economic studies 19 vol. 7 no. 3, 2021 references: mesároš, m. (2010). bezpečnosť, bezpečnostná veda a vzdelávanie v procese globalizácie. košice: multiprint s.r.o, 165 s. isbn: 978-80-89282-45-c mesároš, m. (2012). ochrana osôb a majetku v kontexte ochrany ľudských práv a chránených záujmov. bratislava: sav, 399 s. isbn: 978-80-224-1240-7 mesároš, m. (2011). teória bezpečnosti. košice: multiprint s.r.o, 96 s, isbn: 978-80-89282-61-6 mesároš, m., lošonczi, p. (2020). právna ochrana osôb a majetku v eú a sr. vysokoškolská učebnica, isbn: 978-80-8198-039-8 rožňák, p. hrala, m. drotárová, j. (2020). mobile einheit der fremdenpolizei gegen illegale migration in der tschechischen republik. in: kriminalistik unabhängige zeitschrift für die gesamte kriminalistische wissenschaft und praxis, vol. 74, no. 10, p. 610–615. brodeur, abel, wright, taylor (2019). terrorism, immigration and asylum approval. in: journal of economic behavior & organization, č. 168, p. 119–131. doi: doi.org/10.1016/j.jebo.2019.10.002 križovský, s., kavečanská, a., drotárová, j. (2020). criminal aspects of illegal migration. in: security dimensions: international and national studies., vol. 33, no. 33, p. 74–83. light, michael, thomas, julia (2021). undocumented immigration and terrorism: is there a connection? in: social science research, no. 94. available at: doi.org/10.1016/j.ssresearch.2020.102512 mesároš, marián, lošonczi, peter (2019). migrácie v kontexte princípov terorizmu. košice: vydavateľ všbm v ke, 372 s. isbn: 978-80-8185-035-5 baltic journal of economic studies 67 vol. 1, 2015 ecotourism certification programs: standards and benefits mariia holub1, simon kuznets kharkiv national university of economics, ukraine abstract. the problem of researching the ecotourism certification processes in the world is very up-to-date nowadays. the relevance of the research is stipulated by current state of environ-mental pollutants, the development of sustainable politics implementation and the fact that now people aware of real danger of environmental catastrophe that threatens the survival of civilization. that’s why the purpose of the article is conducting a complex analysis of foreign ecotourism certi-fication programs. moreover, it is necessary to study the evolution of ecotourism development to understand the key issues of this problem. the object of this article is the analysis of ecotourism certification worldwide. the subject of the article is the detection of theoretical, methodological and practical aspects of implementation of effective ecotourism certification programs in ukraine. to clarify all aspects of studying this issue it is necessary to use such theoretical and methodological basis as: modern theories of the genesis and evolution of ecological tourism, logical and analogy analysis, historical method, hypothetical method, classification and graphical method. using such methods it was found that the development of ecotourism formation has taking three evolutionary steps, which affected the creation of its definition. this fact reveals the classification of different types of sustainable tourism and provides an impetus of ecotourism certification studies. moreover, it was identified that there is a logical regularity in ecotourism certification programs all over the world. as the result, it was found that practically all the ecotourism certification processes are functioning successfully nowadays. by the way, it can be observed the rapid increase in the amount of ecocertified companies. moreover, the programs which were analyzed in this article were divided into several steps (depends on the ecotourism certification program) following which a company can successfully passed the assessment process. unfortunately, there is no such certification processes in ukraine. that’s why the issue of developing ecotourism services certification in ukraine is urgent nowadays. practical implications. however, analysis of the experience of foreign countries can be the basis for the development of ecotourism services certification in ukraine. value/originality. modeling processes of ecotourism certification of different programs will help to emphasize the details of assessing ecotourism potential in ukraine. key words: ecological tourism, sustainable development, ecotourism certification, mass and alternative tourism, sustainable tourism. jel classification: l83, q56, q57 1. introduction the current state of environmental pollutants in the all countries is a testament to the need to resolve the issues of efficient use of natural resources. another important issue for ukraine is the international integration to the world economy. on the one hand it is a sustainable development of industrial areas. on the other hand, there should be given the need for simultaneous combination of economic and environmental interests of ukraine. that’s why the problem of developing ecological tourism is very up-to-date not only for ukraine, but also for each citizen of our earth. moreover, the organization of monitoring the tourism entrepreneurs in ecological sphere is crucial nowadays. the issue of ecotourism certification is aim of many scientific discussions all over the world. unfortunately, this problem isn’t investigated profoundly yet in ukraine. however, various aspects of the development of the implementation of ecocertification processes were studied by such scien-tists as: m. honey and a. rome, x. font and j. bendell, а. bien, m. wood and others. that’s why the purpose of the article is conducting a complex analysis of foreign ecotourism certification programs. moreover, it is necessary to study the evolution of ecotourism development to understand the key issues of this problem. the object of my research is the analysis of ecotourism certification worldwide. the subject of my research work is the detection of theoretical, methodological and practical aspects of implementation of effective ecotourism certification pro-grams in ukraine. to clarify all aspects of studying issue it is necessary to use such corresponding author 1 department of international economic relations, simon kuznets kharkiv national university of economics. e-mail: mary.may@list.ru baltic journal of economic studies 68 vol. 1, 2015 theoretical and methodological basis as: modern theories of the genesis and evolution of ecological tourism, logical and analogy analysis, historical method, hypothetical method, classification and graphical method. to achieve the purpose it is necessary to solve the following tasks: to examine the existing ex-perience of the theoretical foundations and methods of ecotourism research area; to select the most successful programs of ecotourism certification; to conduct the complex analysis of these programs. 2. the ecotourism evolution ecotourism is a growing niche market within the larger travel industry, with the potential of being an important sustainable development tool. with billions of dollars in annual sales, ecotourism is a real industry that seeks to take advantage of market trends. at the same time, it frequently operates quite differently than other segments of the tourism industry, because ecotourism is de-fined by its sustainable development results: conserving natural areas, educating visitors about sus-tainability, and benefiting local people (wood, 2002). however, it was found that such situation wasn’t observed all the time. throughout the de-velopment of tourism in different times people had different purpose during traveling. today, peo-ple aware of real danger of environmental catastrophe that threatens the survival of civilization. this caused early development of alternative kinds of tourism, trying to minimize the negative impact. one of these ways can be a new evolutionary step, where ecotourism is seen as a setoff to mass tourism. this process is depicts schematically on fig. 1. mass tourism altenative types of tourism ecotourism the purpose of travel: technocratic the purpose of travel: orientation to nature the purpose of travel: orientation to sustainable development fig. 1. the process of ecotourism evolution this indicates that at the present stage of development of tourism tourists’ outlooks have changed dramatically. the sustainable development of all sectors of the economy has become more important. note that now tourists have started to act more responsible during visiting tourism desti-nations. also, ecotourism is an auxiliary element in the development of sustainable economic de-velopment. although ecotourism may share some of its aspects with other forms of tourism, it should be viewed as distinct from the other categories of tourism (tab. 1). when properly understood, eco-tourism goes further by striving to respect and benefit protected areas as well as the people living around or on the land (honey, 2008) table 1 (igad, 2011) categories of tourism nature tourism travelling to unspoiled places to experience and enjoy nature. it involves moderate and safe forms of exercise such as hiking, biking, sailing and camping. wildlife tourism travelling where the main attraction is to watch animals, birds and fish in their native habitats. adventure tourism nature tourism which requires physical skill and endurance (rope climbing, deep-sea div-ing, bicycling, water rafting or kayaking) and involves a degree of risk taking, often in little-charted terrain alternative tourism tourism with a small or specialist market, or product that is distinct from mainstream or mass tourism. green tourism an early term essentially synonymous with ecotourism, but never very well defined. cultural tourism tourism that focuses on exposing or introducing tourists to different local cultures. outdoor tourism all forms of tourism that take place outdoors including high-impact and consumptive tourism such as motorized vehicles, hunting etc sustainable tourism sustainable tourism is “envisaged as leading to management of all resources in such a way that economic, social and aesthetic needs can be fulfilled while maintaining cultural integrity, essential ecological processes, biological diversity and life support systems” a clear distinction should be made between the concepts of ecotourism and sustainable tour-ism (fig. 2). a l t e r n a t i v e s u s t a i n a b i l i t y ecotourism nature based other forms of sustainable tourism mass tourism other tourism products non-sustainable practices fig. 2. position of ecotourism within the tourism spectrum (igad, 2011) the term ecotourism refers to a sub-sector within the tourism industry that focuses on mini-mizing environmental and cultural consequences, contributes to conservation, community projects and environmental education. on the other hand sustainability principles apply to all types of tour-ism activities, operations, establishments and projects, including conventional and alternative forms (unwto, 2013). because ecotourism was originally just an idea, not a discipline, many business and governments promoted it without an understanding of its most basic principles. the interna-tional ecotourism baltic journal of economic studies 69 vol. 1, 2015 society has tracked the results of stakeholder meetings since 1991 to develop the set of principles, which are being embraced by a growing constituency of non-governmental organi-zations, private sector business, governments, academia and local communities (wood, 2002). these principles are shown on fig. 3. the benefits of ecotourism flowing to local businesses are also dramatically higher than those from mass tourism. standard all-inclusive package tours typically deliver just 20 % of revenue to local companies, while airlines, hotels and large tour companies capture the rest. in contrast, ecotourism operations that are based and hire locally can return as much as 95 % of in-country ex-penses to the local economy (unep, 2013). there are quite favorable conditions and resources for the development of ecotourism in ukraine. unfortunately, underdeveloped tourism infrastructure has led to the fact that ecotourism stays behind global trends. as many scientists estimate, there is a great potential for the development of ecotourism in protected areas. however, it is important to remember, that ecotourism is not only a holiday reserved territories but also preserve "wilderness" in the mountainous and woodland territories of ukraine. ukraine has great recreational potential, and with the right approach ecotourism can become a great part in the process of the replenishment of the state budget. that’s why it is very important to conduct the certification of ecotourism ob-serving the experience of foreign countries. 3. foreign experience of ecotourism certification more than 61 countries had at least one, and some countries more, standards of voluntary certification in the field of tourism in 2012 (unwto, 2013). there we can find ukraine. however, it should be noted that although our country has adopted state-level standardization and certification of tourism services, the ecotourism certification process wasn’t considered in any of these documents. this fact indicates the need of implementation such certificates. certification is a way of ensuring that an activity or a product meets certain standards. with-in the tourist industry, different organizations have developed certification programs measuring dif-ferent aspects of tourism: quality, for the entire tourism industry; sustainability, also for all sectors; ecotourism, for sustainable tourism that takes place in natural, protected, or fragile ecosystems, that may include indigenous communities, and that conforms to the definition above (bien, 2006). american scientists m. honey and a. rome underline that certification is a voluntary pro-cedure that assesses, audits and gives written assurance that a facility, product, process or service meets specific standards. it awards a marketable logo to those that meet or exceed baseline stand-ards (honey, rome, 2000). however, due to the fact, that there is no any certificate like this in ukraine, it is important to analyze foreign experience in ecotourism certification. this research will help to find out the basic rules for future studies in ukraine. nowadays it is used to incline that such certification should be controlled and supported by the government. spanish scientists x. font and j. bendell mapped out how governments take ac-tions to enable the operation of certification programs. 20 of the 59 schemes are led by government agencies, and a further 18 have government involvement either through direct financial support, marketing support, verification procedures, or surveillance of procedures being followed by the certification body. government agencies involved generally include both environmental ministries (or equivalent) and tourism boards; in fewer cases standards institutes have an involvement. govern-ment financial support is crucial to half the programs, and grants or loans are available core principles of ecotourism minimize the negative impacts on nature and culture strive to maximize economic benefit for the host country, local business and communities seek to ensure that tourism development doesn't exceed the social and environmental limits rely on infrastructure that has been developed in harmony with the environment educate the traveler on the importance of conservation stress the importance of responsible business direct revenues to the conservation and management of natural and protected areas emphasize the need for regional tourism zoning emphasize use of environmental and social base-line studies fig. 3. principles of ecotourism baltic journal of economic studies 70 vol. 1, 2015 through a variety of support measures for consultants and assessment processes (font, bendell, 2002). center of ecotourism and sustainable development recon that a major problem for true eco-tourism businesses is a practice called greenwashing. this term refers to a business that presents itself as “sustainable”, “ecological”, “green”, “responsible”, “ecotourist”, etc., when it doesn’t com-ply with generally accepted standards, or worse, it is in contradiction with them. for those who are really trying to do their best to comply with all ecotourism standards, the businesses that falsely use the term ’ecotourism’ compete unfairly and damage the credibility of the whole industry. one way of determining which businesses are truly practicing ecotourism is certification (bien, 2006). certification is not an end in itself. it is one of a number of tools for motivating businesses and others to improve their environmental, social, and economic performance, while rewarding them for doing so. these rewards are sometimes tangible and sometimes not. there are a number of other reasons why certification is important (fig. 4). to understand clear the modern trends in ecotourism certification it is needed to study the worldwide known successful examples more accurate. for example, the government in costa rica initiates the certification of sustainable tourism (cst) for companies that are following green politics (cst, 2013a; cst, 2013b). this certification is free and voluntary. cst includes a five-steps scale to assess the achievement of sustainable tourism (tab. 2). now more than 61 tour oper-ates have this certificate in costa rica (cst, 2013a; cst, 2013c) table 2 (honey, bien, 2005) the level of sustainability level minimum percentage of compliance 0 < 20% 1 20% – 39% 2 40% – 59% 3 60% – 79% 4 80% – 94% 5 > 94% tour operates have to answer 108 questions about sustainability in their organization. after that the special department evaluate the results and asses all the aspects in company. the process ends with the assignment of the appropriate level (cst, 2013d). in addition, in australia for example, there is the eco certification program. the eco cer-tification program is a world first and it has been developed to address the need to identify genuine nature and ecotourism operators. eco certification is product-specific– this means that it is need-ed to answer the criteria as it applies specifically to each of products. the eco certification pro-gram is divided into three levels. there are more than 450 certified entrepreneurs (ecotourism australia, 2015). to obtain this certificate it is needed to achieve steps, which are depicts in fig. 5. benefits for certified businesses benefits for consumers benefits for governments benefits for the environment and local communities it helps businesses to improve themselves. it tends to reduce operating costs. the process of certification is often accompanied by easier access to technical assistance and financing for businesses. it can provide a marketing advantage to certified businesses. it provides tourists with environmentally and socially responsible choices. it increases public awareness of responsible business practices. it can alert tourists to the environmental and social issues. certified businesses tend to offer better quality service. it helps governments protect their market niches. it raises industry standards in health, safety, environment, and social stability. it lowers the regulatory costs of environmental protection. it can help reduce poverty, especially in rural areas. it requires the businesses to protect the environment and do little or no damage to it. it requires businesses to respect local culture, provide economic and social benefits for it. when the business is economically sustainable, and offers quality of service it is likely to continue offering benefits for the long term. fig. 4. advantages of ecotourism certification implementation (bien, 2006) fig. 5. the process of ecotourism certification in australia (ecotourism australia, 2015) to register the application form on the web-site to pay once-only fee to collect all the documents* to wait for the results after 2 weeks evaluation to act depending on the results to correct all mistakes with the help of consultant to get the certificate negative positive *necessary documents: business plan marketing plan organizational plan environmental plan baltic journal of economic studies 71 vol. 1, 2015 this certification isn’t free. the payment depends on company’s turnover (tab. 3). table 3 (ecotourism australia, 2015) payments for ecotourism certification in australia company’s turnover once-only aplication fee ongoing annual fee < $ 250 000 $ 395 $ 510 $ 250 001 – $ 1 000 000 $ 455 $ 730 $ 1 000 001 – $ 5 000 000 $575 $ 1 025 $ 5 000 001 – $ 10 000 000 $ 695 $ 1 225 > $ 10 000 001 $ 925 $ 1 360 after the company passed the inspection of all documents and paid the first payment, the organization sends certificate and marketing materials to achieve the results. each year, companies have to pay the fee and send the completed annual declaration, where all the operational activites are observed. the monitoring the level of rules adequence is carried out every three years. moreover, only after tourism company pay aplication fee, it will be provided with all rules needed to follow and the list of documents needed to be done, to achieve a certificate. unfortunately, this example can’t b used in ukraine, because of tha lack of money in such organisation. besides, people want to be confident in certification organisation. therefore, the ecocertification process should be free and monitored by the government. in romania there is the ecotourism certification system (aer , 2015) it is a mechanism for putting into practice preliminary stage • to fill in a self-evaluation form for each of the products • to fill in an application form for certification first stage • to send all documents to the certification department within aer second stage • the certification department will record all these requests and will contact the evaluators and the applicant, in order to determine the following:the number of days necessary for each evaluation; the evaluation period for each product; the number of evaluators necessary for evaluation of one or several products; the evaluation fee that the applicant has to pay. third stage • on the established date the evaluator(s) will travel to the location indicated by the applicant in order to begin the on-site evaluation procedure.within 10 days of the on-site evaluation, the evaluators will analyse all the documents submitted by the operator and will establish the number of points after their own evaluation all this will then be submitted to the certification department which, according to the number of applications, will plan the meeting of the certification committee. fourth stage • the results of the analysis can lead to the following decisions: awarding; temporary awarding; not awarding; withdrawal; final withdrawal the basic principles of ecotourism, in order to ensure nature conservation and sustainable development of local communities through tourism. it is based on the nature and eco-tourism accreditation program promoted by the australian ecotourism association (neap is the first accreditation system in ecotourism) and on nature’s best developed by the swedish ecotour-ism association (the first accreditation system in ecotourism in the northern hemisphere). the eco-tourism certification system addresses two different categories of applicants: ecotourism programs / tours provided by tour-operators (i.e. eco-tours of maximum 15 par-ticipants), small-scale accommodation structures in rural and natural areas (eco-lodges and guesthouses of maximum 25 rooms). the certification system operates with a set of criteria established by the association of eco-tourism in romania, which must be fulfilled by the products of the tour operator which is subject to the certification procedure. the criteria fall into two categories: basic criteria. these represent the basic norms that must be fulfilled by the product undergo-ing certification in order to obtain a temporary classification from the point of view of ecotourism. complementary criteria. these are the norms that establish the classification of a product in terms of ecotourism. besides fulfilling the basic criteria, fulfilling 50% of the complementary criteria leads to certification of the product as complying with the principles of ecotourism. fig. 6. the ecotourism certification process in romania baltic journal of economic studies 72 vol. 1, 2015 certification procedure takes 5 steps, which are depicted in fig. 6. to understand the results of the certification it is necessary to explain which of them. if an organization receive the decision “awarding”, it means that the company will get the eco-certified logo over a period of 3 years if the products of the applicants fulfil all the applicable basic criteria plus a minimum 50% of the applicable complementary criteria. in case of “temporary awarding” the company will get the eco-certified logo over a period of maximum one year and a half if the products of the applicants fulfil all the applicable basic criteria but do not fulfil minimum 50% of the applicable complementary criteria. the ecocertified logo is awarded temporarily on condition that this requirement is fulfilled within maximum a year. if the company gets “not awarding” decision, it means that company’s products fail to meet the requirements established in the evaluation criteria. withdrawal (over a period of up to 6 months) of the eco-certified logo for products that no longer fulfil initial awarding conditions, but that can be addressed within a time limit set by the committee. for this to happen, the applicant will sign a statement regarding the measures taken in order to address the situation. final withdrawal of the eco-certified logo from the products that no longer fulfil the initial awarding conditions and that: can no longer be addressed; or have not been addressed within the time limit; or where the operator has not signed the statement regarding the measures taken. if the company wants to succeed it has to follow each step. this certification isn’t free. the evaluation fee has been established in euro and represents the equivalent in lei on the date of pay-ment. it consists of: travel costs of evaluators – 25 euro/trip; accommodation costs – 25 euro/night; evaluators’ fees – 50 euro/evaluation day; other costs (administrative costs)  – 30 euro/evaluated product. for ukraine, this mechanism can’t be fully used because of the financial situation most of the companies. the same problem we observed in case of australian ecotourism certification. the advantage of this certification is that companies are able to see in advance all the criteria for a full understanding if they can comply with the criteria. however, if a subjective assessment does not meet the objective one, the company can only submit in six months the next application certification. the company does everything independently, in contrast to the australian certification system, where there is a special consultant who will help to get the certificate if your first try failed. the rainforest alliance works with hotels, inbound and outbound tour operators and other tourism businesses to help them improve their environmental, social and economic practices. our standard for tourism operations has been recognized by the global sustainable tourism council (gstc). through training and technical assistance, we teach them how to operate sustainably and assess their progress toward this goal. they create a verification standard 2.0 (rainforest alliance verified, 2012). the verification standard 2.0 makes explicit the outcomes to be achieved as a result of the implementation of sustainable management at business level and the impacts on destinations. this allows designing assessment systems for these impacts, both for the business and the destination. the verification standard 2.0 is organized in three fields: business, cultural and environmental (tab. 4). table 4 the structure of the verification standard 2.0 field principles the business field sustainable management planning safety management suppliers management quality management communication and marketing management human resources management education for sustainability health in food and beverages services the socio-cultural field contribution to local development respect to local cultures and people legality and ethics of labor practices rescue and protection of historical – cultural heritage the environmental field climate change protection of natural areas rational use of water pollution rational use of energy integrated solid waste management biodiversity protection all the principles are made operational through criteria and indicators that measure compliance. the indicators and assessment requirements may vary according to the business sector addressed by the verification tool (accommodation, tour operators, restaurants or community enterprises). mandatory criteria for these sectors were defined. so, each of the certificates has its own peculiarities. it is very important to understand details of the ecotourism certification process in case if company wants to obtain this certificate. it means that an activity or a product meets certain standards in quality and sustainability 4. conclusion to sum up, ecotourism is a fast growing sphere of tourism, with the potential of being an important sustainable development tool. this type of tourism has its principles which distinguish it from others. moreover, it operates differently than other types of the tourism industry, because eco-tourism is defined by its sustainable baltic journal of economic studies 73 vol. 1, 2015 development results: conserving natural areas, educating visitors about sustainability, and benefiting local people. center of ecotourism and sustainable development recon that a major problem for true eco-tourism businesses is a practice called greenwashing. to solve this problem it was found the eco-tourism services certification which was characterized in this article. it should be noted that all the aforementioned ecocertification processes are functioning successfully nowadays. by the way, from year to year more and more companies have been changing their operational politics in the sphere of sustainable development. as the result for this, we can observe the rapid increase in the amount of ecocertified companies. unfortunately, there is no such certification processes in ukraine. that’s why the issue of developing ecotourism services certification in ukraine is urgent nowadays. moreover, in case of relying on foreign experience we must take into account the fact that the effect of implementation can be quite different in ukraine. however, analysis of the experience of foreign countries can be a significant impetus for the development of ecotourism services certification in ukraine. references aer (2015). association of ecotourism in romania. retrieved from http://www.eco-romania.ro/ bien, a. (2006). a simple user’s guide to certification for sustainable tourism and ecotourism, 3-d edition  – center of ecotourism and sustainable development, 30 p. cst (2013a). sustainable tourism cst: certification for sustainable tourism in costa rica, certi-fication for sustainable tourism’s website. retrieved from http://sustainabletourism.co.cr/ cst (2013b). when and why it appears? certification for sustainable tourism’s website. retrieved from http://sustainabletourism.co.cr/ cst (2013c). agencias tour operados, certification for sustainable tourism’s website. retrieved from http://sustainabletourism.co.cr/ cst (2013d). what is cst all about?, certification for sustainable tourism’s website. retrieved from http://sustainabletourism.co.cr/ ecotourism australia (2015). roc certification. retrieved from http://www.ecotourism.org.au/ font, x. and bendell, j. (2002). standards for sustainable tourism for the purpose of multilateral trade negotiations. world tourism organization, madrid honey, m. & bien, a. (2005). analyzing costa rica as a model for the implementation of market-ing certification in five target countries – a publication of center on ecotourism and sustainable development the international ecotourism society (ties), 63 p. honey, m. & rome, a. (2000). protecting paradise: certification programs for sustainable tourism and ecotourism. washington, d.c.: institute for policy studies, october 2001. retrieved from http//www.conservationfinance.ort/ documents/cf_related_papers/ standardsforparadose.pdf. honey, m. (2008). ecotourism and sustainable development: who owns paradise? (second ed.). – washington dc: island press, 568 p. igad (2011). ecotourism in the intergovernmental authority on development  – united nations economic commission for africa, 58 p. rainforest alliance verified (2012). verification standard for tourism services. version 2.0 / blanco sosa, saúl antonio, gonzález oviedo, marianela, rioja malasenkov, silvia, 30 р. unep(2013). branching out for a green economy. united nations environment programme, for-ests. retrieved from http://www.unep.org/ unwto (2013). world tourism organization retrieved from http://www.unwto.org wood, m. (2002). ecotourism. principles, practice and policies for sustainability – unep & ties. united nation publication, 32 p. мария голуб программы сертификации экологического т уризма: с тандарты и преимущес тва аннотация. в настоящее время во всем мире проблема исследования процессов сертификации экотуризма является очень важной. стоит заметить, что актуальность исследования обусловлена текущим состоянием окружающей среды, темпами перехода компаний на устойчивое развитие, а также тот факт, что сейчас люди более осведомлены о реальной опасности экологической катастрофы, которая грозит вымиранию цивилизации. именно поэтому, целью данной статьи является комплексный анализ зарубежных программ сертификации экотуристских услуг. кроме того, необходимо изучить эволюцию развития экологического туризма, чтобы расставить ключевые моменты этой проблемы. объектом изучения этой статьи является анализ сертификации экотуризма во всем мире. в свою очередь, предметом исследования этой статьи является выявbaltic journal of economic studies 74 vol. 1, 2015 ление теоретических, методологических и практических аспектов реализации в украине мировых программ сертификации экологического туризма, которые активно и эффективно функционируют. для уточнения всех ключевых моментов изучения данной проблемы необходимо использовать следующую теоретическую и методологическую основу: современные теории генезиса и эволюции экологического туризма, логический анализ и анализ аналогии, исторический метод, метод гипотез, классификационный и графический метод. после проведенного исследования, используя вышеперечисленных методы, было установлено, что развитие экологического туризма происходило в три этапа, которые повлияли на дальнейшее изучения его сущности. об этом факте свидетельствует классификация различных типов устойчивого туризма. это положение дает толчок исследованиям сертификации экотуристских услуг. кроме того, было установлено, что существует логическая закономерность в программах сертификации экотуризма во всем мире. в результате было выявлено, что практически все процессы сертификации экотуризма успешно функционируют. кроме того, необходимо заметить, что в настоящее время наблюдается резкое увеличение количество компаний, которые уже прошли сертификацию по предоставлению экотуристских услуг. стоит сделать акцент на том, что программы, которые проанализированы в этой статье были разделены на несколько этапов (в зависимости от программы сертификации экотуризма), следуя которым компания, желающая пройти выбранный вид сертификации, будет иметь возможность успешно пройти процесс проверки и оценки предоставляемых услуг. к сожалению, в украине не была выявлена сертификация экотуристских услуг. стоит заметить, что данная проблема в развитии процесса сертификации экологического туризма является актуальной в настоящее время и требует дальнейших исследований. практическое значение. тем не менее, анализ опыта зарубежных стран может стать основой для развития сертификации экотуристских услуг в украине. значение/ оригинальность. моделирование процессов прохождения экотуристской сертификации в разрезе различных международных программ помогло выявить важные аспекты в данном процессе, а также подчеркнуть особенности оценки экотуризма в украине. baltic journal of economic studies 91 vol. 7 no. 2, 2021 corresponding author: 1 kyiv national economy university named after vadym hetman, ukraine. e-mail: kalenuk@ukr.net orcid: https://orcid.org/0000-0003-1807-2849 2 kyiv national economy university named after vadym hetman, ukraine. e-mail: l.tsimbal@ukr.net orcid: https://orcid.org/0000-0002-0873-9227 3 national pedagogical dragomanov university, ukraine. e-mail: germanirina777@gmail.com orcid: https://orcid.org/0000-0002-1690-6590 doi: https://doi.org/10.30525/2256-0742/2021-7-2-91-100 intelligent drivers of smart economy in the global ecosystem iryna kalenyuk1, liudmyla tsymbal2, iryna uninets3 abstract. consistent and pervasive intellectualization and greening of the economy is manifested in the formation of smart economy, which is seen as a modern form of global ecosystem development. an important role in it is given to the latest technologies – information and communication technologies, which are becoming an important tool for “smart” management of processes and relationships between elements and actors at different levels in the global ecosystem. the research methodology is based on the systematization of theoretical approaches to understanding the concept of “smart economy”, based on which the author's position on defining the essence, structure and key drivers of smart economy development is formulated. the aim of the article is to identify the main intellectual factors in the formation of the smart economy within the global ecosystem. smart economy is defined in a narrow (means of organizing economic relations and relationships within a certain locality) and broad sense, a system of economic relations based on the use of modern smart technologies, implementation of the principles of sustainability and social responsibility and subject to the creation of comfortable and safe conditions of life of citizens). the key processes of the formation of smart economy are: intellectualization, digitalization, greening, socialization, institutionalization and urbanization. the content of key intellectual drivers of smart economy and modern trends of their development are revealed: expansion of human role as a subject of social, cultural, ecological and moral values, subject of values of sustainable development, subject of social relations (property, management); increasing the importance and implementation in all spheres of social activity of important global and strategically important values of environmental protection, providing a comfortable environment (economic, social, political, business environment, etc.); results of intellectual activity (newest technologies, products) become an important factor of development and a tool for ensuring relationships and interactions between all components of the ecosystem; transformation of the management process: involvement of a wider range of actors, development of new mechanisms for the involvement of all actors and stakeholders in the decision-making process. key words: smart economy, intellectualization, greening, sustainable development, green development, smart development. jel classification: f63, o18, o19, o44 1. introduction the society’s development in modern era has the following features as an unprecedented increase in the role of knowledge and attention to social and environmental problems of humankind. the intellectualization processes in world economic development are strengthening. this caused emergence of the smart economy concept, which is the embodiment of a consistent and pervasive intellectualization and greening of the economy. in modern production process, the role of information-rich capital resources, goods, technologies, and highly qualified human resources has grown substantively. these highly qualified human resources not only have large amounts of modern knowledge, but also are capable to work with them, thus producing qualitatively new knowledge. the new economy’s driver is the spread of new technologies. the new technologies play a new important role, thus performing certain important functions, included but not limited to managing the processes and relationships baltic journal of economic studies 92 vol. 7 no. 2, 2021 between different elements and actors, and shaping the global ecosystem’s network. therefore, the emergence of intelligent technologies that control other processes marks a new quality of economic life. in fact, this embodies the smart economy concept. an urgent problem is the study of factors and drivers of such development of countries that are balanced with the natural environment. in the new social context, the issue is raised not only on innovation or ensuring innovative development, but also primarily on ensuring the ecosystems development. therefore, this approach emphasizes that the economy should be percepted as an ecosystem, in which different areas of activity and their actors are balanced. finding out this concept’s features and the main trends of its manifestation is an urgent problem of modern world economics. 2. recent research and publications analysis the theoretical and methodological understanding of the essence of transformational processes occurring in the society is one of the most pressing problems in the scientific literature. therefore, the emergence of such theories as post-industrial society, technotronic society, information society, and knowledge society can be considered as a reflection of this understanding. thus, the key issues and the aspects of developing a new type of society and formation are studied in the works of d. bell (bell, 1973), v. inozemtsev (inozemtsev, 1998), m. castells, f. machlup (machlup, 1966), a. chukhno (chukhno, 2005), d. lukianenko (lukyanenko, 2008), and others. since the end of the last century, the topic of environmental protection has become relevant in scientific research; the concepts of sustainable development, green growth, and green economy were studied in the works by foreign and domestic economists a. bowen, i. gaidutskiy, i. kalenyuk, j. harris , d. pearce, n. stern, m. jänicke, and others. a new milestone at the beginning of the 21st century is the emergence of the concept of smart economy. this concept embodies spreading new smart technologies with the aim to manage efficiently the economic, social, and environmental processes. moreover, such management should be based on increasing attention to social and environmental issues, which led to developing a new approach to the perception of economic phenomena and the processes, namely their study as elements of the ecosystem. the study of the smart economy formation is the basis for a significant number of scientific papers by j. bruneckiene, j. sinkiene (2014), l. galperina et al. (2016), v. maksimova (2011), v. mazurenko (2014), r . novotny et al. (2014), m. heylin (2006), d. kellner (2002), d. held, a. mcgrew (1999) etc. the study of the role of ict in the formation of smart economy and smart cities was carried out in the works of n. komninos (2009, 2011), m. angelidou, n. gountaras & p. tarani (2012). in general, the concept of smart cities and their success has become very relevant because of the studies by r . giffinger (2011), m. angelidou (2016), a. caragliu, p. lombardi, s. giordano, h. farouh, & w. yousef (2012), k. malthouse (2014), v. kumar (2017), krisna adiyarta (2020), t. nam & t. a. pardo (2011), h. chourabi et al. (2012), h. ahvenniemi et al. (2018), m. eremia et al. (2016). overall, understanding the smart economy concept despite the “obviousness” still needs in-depth economic research and justification. research methodology. the smart economy analysis is based, first of all, on the systematization of theoretical approaches to understanding this complex phenomenon. this allowed us to define the author’s approach to understanding the essence and structure of smart economy as a key trend in the society at the present stage of its development. also, there are determined the dominant processes of smart economy formation in the modern world economy as a global ecosystem the key drivers of smart economy development are identified, which allows us to reveal their content and define the current trends of their development. the purpose of the paper is to identify the main intellectual factors in the smart economy development within the global ecosystem. 3. the research findings accelerated intellectualization is an important prerequisite for the smart economy development, which is manifested in increasing the innovation of production processes and their creative component, the constant increase in knowledge and information, development of innovative products, and the development of intellectual needs. the emergence of the “smart” term is most often associated with the digitalization process deployment that is spread of information and communication technologies, together with their intellectual functions in all spheres of life, the spread of internet of things (iot) and artificial intelligence (ai), networking, and network communication forms. thus, the smart economy development is influenced by the formation of industry 4.0, the spread of technologies and their entry into the economic system, the constant growth of human comfort and environmental quality, and innovative networks development (galperina, 2016). in addition, the globalization processes, which make it possible to maintain systemic governance and balance by coordinating the dependence of individual countries on the global development level, and key processes (including political, economic, financial, and social) are preconditions. this, therefore, involves expanding the openness of economic entities, liberalizing markets, creating structures that are resistant to external influences or capable to adapt quickly to the challenges of the economic, social, and cultural information environment (maksimova, 2011). baltic journal of economic studies 93 vol. 7 no. 2, 2021 the transformation of the modern society’s economic base is accompanied by the strengthening of the human centrism and the nature centrism processes, i.e. increased attention to social and environmental problems of social development. an important trend of modern global development is greening as increase of society’s attention to environmental protection issues. greening is realized in the system of ensuring ecological and economic interests, ensuring the integrity of natural systems, environmental protection, etc. moreover, this trend is manifested not only in the declaration of important principles and goals, but also it becomes an essential component of all various types of social activities. in the implementation of any economic, social, business projects, consideration of the environmental context is increasingly becoming mandatory. it is also worth noting such an important trend of modernity as socialization, i.e. the growing importance of solving social problems of the population. socialization is aimed at ensuring the welfare of the population, compliance with pan-civilization values, formation and implementation of social values, etc. institutionalization is becoming a necessary accompanying process because the implementation of new ideas requires strengthening of government institutions and new communications between them. for instance, audretsch et al. emphasizes the need to develop institutionalization of business ecosystems (audretsch, 2021). it is provided through the spread of new technologies and mechanisms of economic management, active participation of the state and other entities in the regulation of communications and various activities (research and development, innovation, entrepreneurship, etc.). the spread of ict creates new opportunities for effective management, provision of effective communications and feedback, expansion of opportunities to include new entities in management processes. the concept of “e-government” appears as the embodiment of a new system of relations between the state and its institutions with citizens in various branches of government. within the framework of e-government, with the help of ict and the internet, new wide opportunities are created for quick and direct access of citizens to public authorities, for the provision of quality services by state institutions and, thus, to protection of their interests. the vast majority of scientists consider the concept of smart economy in a rather narrow sense, as part of a particular system – smart city. this is the definition of a system of a certain locality, all parts of which are connected though intelligent technologies, operate and are managed based on the principles of economic relevance, sustainability, and social responsibility. v. kumar considers the smart city system as follows: smart people, smart economy, smart mobility, smart environment, smart living, smart governance (kumar, 2017). indonesian scholars indrawati, n. azkalhaq, and h. amani emphasize that smart economy “refers to an open, transparent, diverse economy that adds value to smart cities. se will promote an efficient and effective business environment that supports and encourages innovation regardless of the outcome. it also provides a stable labour market with resources and the ability to adapt and make changes as needed. se guarantees the success and economic growth of the city, as well as the livelihoods of its citizens” (indrawati, 2018). lithuanian scientists j. bruneckiene and j. sinkiene define the main components of smart economy as follows: innovation and knowledge economy; learning economy; digital economy; competitive economy; green economy; network economy; socially responsible economy (galperina, 2016). in general, we believe that there are all reasons to consider smart economy in a narrow and broad sense. in a narrow sense, smart-economy means a system of economic relations and interconnections within a certain locality, which is provided through the latest technologies based on the principles of sustainability and social responsibility and serves the purpose of creating comfortable and safe living conditions for citizens. in a broad sense, we can interpret smart economy as a way of economic relations organization, which is based on using the latest smart technologies, implementation of the sustainability and social responsibility principles and subordinated to the goals of creating comfortable and safe living conditions for citizens. this, in fact, means that smart economy is considered an ecosystem, in which all major components are balanced. the key processes of smart economy formation are intellectualization, digitalization, greening, socialization, institutionalization, and urbanization (figure 1): the term “ecosystem” was first used in ecology when the english ecologist a. tansley introduced it in 1935. later, in 1942, in his classic work on the biology of lake in minnesota, raymond lindeman defined an ecosystem as a group of living organisms (biocenosis) that adapted to living together in a certain habitat (biotope), forming a single whole with it. in economic research, j. f. moore, who formulated the idea of business ecosystem, first used the term “ecosystem” in 1996. (moore, 1997). since then, the approach to the study of economics as an ecosystem has become increasingly popular in science. for instance, c. wessner emphasizes the importance of understanding the economy as a national innovation ecosystem. this approach allows to understand that this system is not fixed, it is evolutionarily growing in accordance with new needs and circumstances. this system is susceptible to changes provided by new policy initiatives. baltic journal of economic studies 94 vol. 7 no. 2, 2021 the ecosystem approach is based on the fact that complex relationships are formed between various participants in the innovation economy (individual entrepreneurs, corporate participants – such as big business and universities) and emphasizes the importance of incentives for different participants to create an innovation-friendly environment (wessner, 2004). at the same time, there is no unity in academic literature in defining the range of major ecosystem participants. the main participants in ecosystems are entrepreneurs, business support networks, corporations, financial experts and governments that integrate ict/telecommunications innovation into their national development agendas. the international telecommunication union (itu) considers ecosystem as a combination of the following components: business, finance, business support, the public sector, academia and the private sector (itu-d digital innovation ecosystems). the main problems in the digitalization policy implementation are lack of relevant policies, programmes, resources and know-how for innovators and producers of digital change in their communities; lack of proper systemic issues assessment of innovation ecosystem focused on ict (business ecosystem, technological ecosystem and innovation ecosystem – three engines of economic growth); lack of cooperation between stakeholders of the main growth factors for the creation of ict projects for innovation and entrepreneurship (international telecommunication union (itu), icts for a sustainable world). summarizing these approaches, we can note the following important features of ecosystems: firstly, systemacity (i.e. the presence of a complete form of integration between various components); secondly, the presence of close relationships between components; thirdly, formation of an environment conducive both to the entities themselves and to the global space of human activity. in current global ecosystem, new technologies not only provide important functions, but also allow to manage the processes and relationships between different elements and entities. in addition, the management is “smart”, which requires a more precise definition – what exactly is “smartness”, which actually gives name to a new type of economy. j. sinkiene et al. pays much attention to the study of “smartness” concept emergence. they agree with b. hatt and s. otto, who consider “smartness” a much broader phenomenon than just intelligence or awareness. “it is a social construction that includes cultural capital, social capital, innate intelligence, and creativity or ingenuity… associated with power” (hatt, otto, 2011). j. sinkiene et al. argues that the social system smartness has such properties as “intelligence, erudition, digital nature, innovation, knowledge management, sustainability, networking and flexibility” (sinkiene, 2014). in our opinion, the concept of “smartness” has several important aspects. the first aspect is related to the growing importance of important global and strategic values in all spheres of social activity: preserving the environment, providing a comfortable environment (economic, social, political, business environment, etc.). the second aspect in the modern world is the expansion of perception and human importance – not just as one of production factors. to ensure development of modern society, the necessary resource is not just a human resource as a carrier of working ability. socioeconomic development of any entities and systems at all levels is ensured by the increasingly active inclusion of human as participant in social relations (property, management), bearer of social, cultural, moral values, and the values of sustainable development. and the third important aspect is the transformation of the management process itself, which is about expansion of the range of participants and relevant change in its mechanisms and instruments. management of various systems (economy, region, locality, and city) requires such instruments that ensure the “smart” nature of functioning, systematics of all relationships, focus on the sustainable development values. this system is ensured by involving the largest possible intellectualization smart economy institutionalization socialization urbanization greening digitalization figure 1. key processes of smart economy formation baltic journal of economic studies 95 vol. 7 no. 2, 2021 range of actors, which allows to consider their needs and interests. however, it is a difficult task to ensure effective management in the expansion context of the entity itself. in this situation, one cannot do without such an instrument as modern technology. thus, the rapid development of ict radically changes not only the technological basis, but also the entire system of economic relations in society. the rapid acceleration of all transactions transforms all interactions, mechanisms, and instruments for the economic activity implementation. to the greatest extent, the smartness principle can be implemented at the locality level – a city, where there are real opportunities to link all components into a single “smart” ecosystem. such an ecosystem includes human-centred approaches to creating and implementing smart city solutions, which create added value and become a collective good. it also necessarily requires ict as a necessary instrument for “smart” management, but is not limited to available technological solutions. under the influence of increasing attention to environmental and social issues, the latest technologies are already helping to provide smart management for all related processes. in the academic literature on smart cities, the opinion on the rise of smartivism and the role of so-called smartivists as “an individual who steps forward by actively supporting the creation of a better place on a free basis” (rise of the smartivist) is disclosed. the separation of smartivists is made by analogy with the “creative class” of r . florida. the smartivist can act as a stand-alone expert or support smart city initiatives (e.g., free project consortia, new legal entities such as non-profit organizations, associations) to address specific issues (ibid). this expansion of the range of human qualities’ functions and areas suggests that not only the role of human is growing, but also one’s importance as a carrier of collective intelligence and management entity at different levels. according to giffinger and his associates, collective intelligence is becoming the most effective success factor for smart cities. “smart building based on human capabilities as the sum of individual players (bees) in a community (hive) allows to create and make decisions that lead to effective transformation of community into a strong ecosystem of smart city solutions.” thus, an important feature and driver of a smart city success is the ability of city or community to use collective intelligence. “collective intelligence provides a 360-degree perspective, covering all aspects of the community, as well as considering connections with neighbouring communities or regions” (redefining the smart city concept: a new smart city definition). the success of the smart city concept implementation in each case depends on the ability to combine in one stream the whole amount of smart initiatives, projects and solutions that are developed and implemented by a large number of different private and public entities throughout the city and in different strategic areas (ibid). as mentioned above, information and communication technologies are necessary tools for combining the whole amount of initiatives into a single effective management process. in modern world, they not only provide and accelerate communications, but also become intelligent, performing more and more intellectual and managerial functions. the concepts of the internet of things (iot) (a system of managing things, devices, animals using the internet) and artificial intelligence (ai) (the ability of an engineering system to acquire, process and apply knowledge and skills) are emerging. along with the concept of ict, other concepts are often used: digital technologies, nbics – technologies (nano-, bio-, info-, cogno-, socio-technologies). according to i. ardashkin, smart technologies are the broadest concept, which includes all different types of technology, they embody “a way of expressing the maximum possible development of technology, through which we identify the maximum limits of human capabilities, a kind of technological evolution’s categorical level” (ardashkin, 2018). the term internet of things (iot) was first used by k. ashton, one of the founders of the university of massachusetts auto-id centre. while working for procter & gamble, he suggested that management use radio frequency tags to create a supply management system. since then, physical item management systems have become more important parts of our lives. the most common definition of this concept is the following: “the internet of things is a network of physical entities that have built-in technologies that allow to interact with the environment, transmit information about one’s condition and receive data from the outside” (internet of things). the organization of remote control of various items requires the following necessary elements: items must have their own name (“label”), form a network and receive information from the outside using various controllers, sensors, bluetooth and wi-fi, and be guided by a small built-in computer. the concept of “smart home” has emerged, and in it, the owner can remotely control the process of switching on and off all appliances and devices (signalling system, electricity and heating, home appliances). artificial intelligence is the creation of such systems that are able to perform intelligent functions: to acquire and process information, make decisions and perform certain functions. john mccarthy, the founder of programming and lisp language, first used the term “artificial intelligence”. today, artificial intelligence systems are widely used in space sphere, economics (hightech equipment, production management systems and demand forecasting), education (educational products baltic journal of economic studies 96 vol. 7 no. 2, 2021 and technologies, university rankings), medicine (diagnostics, recording of patients and their physical condition), politics (analysis of voter data and their preferences), retail (analysis of consumer behaviour), etc. the further spread of artificial intelligence systems also has certain obstacles due to ethical considerations, technical limitations, and dependence on a significant number of specialists and resources. the above examples of ict are evidence of rapid development of digitalization. however, the main impact of new technologies on the economy is that their spread is accompanied by networking processes, which generally lead to a new technical regime of interaction and the nature of relations between economic agents (ustyuzhanina, 2018). the rapid networking development has become the core of the fact that the term “digital economy” (originated in the mid-1990s) was quickly replaced by the concept of “networking economy” (parinov, 2002). networking enables connection of remote entities to different networks. the modern world of economy is a truly global ecosystem in which all regions, structures, businesses, people and other entities are connected in a single network through ict. such reality not only accelerates all processes and transactions, but also transforms the whole system of relations (management, employment, property, etc.) and the economic structure at all levels. the un report “future possibilities” in 2020 named the rapid development of six areas as the main trend of future development: the exabyte economy, the wellbeing economy, the net zero economy, the circular economy, the biogrowth economy, and the experience economy. all these areas are a direct aspect of smart economy development. with regard to ict, the following trends are forecasted for the exabyte economy. after the pandemic, more and more people (+ 7% annually) will work via the internet. the internet of things (iot) will develop: by 2023, there will be about 3.5 billion connections, compared to 1 billion in 2018. by 2025, big data revenue will exceed 90 billion usd, which is twice as much as in 2018. 5g technology will speed up data flow. gradually, education, personalized healthcare, finance, and energy efficiency will shift online. after the pandemic, digitalization and automation will only grow. the cognitive computing market is projected to reach 49.3 billion usd by 2025. the estimated economic impact of the internet of things is 11.1 trillion usd annually in 2025. this is equivalent to 11% of world gdp, almost 40% of which can be obtained in developing countries. 5g will add up to 12.3 trillion usd to world output in ten years. improving the health of people with chronic diseases through the connection of devices for remote monitoring by 2025 is estimated at 1.1 trillion usd per year (future possibilities, 2020). the “smart” nature of the new economy is manifested in spreading ecological and economic values, ensuring the integrity of natural systems, environmental protection, etc. moreover, this trend is manifested not only in the declaration of important principles and goals, but it also becomes an integral part of all various social activity types of. in the implementation of any economic, social, or business projects, consideration of environmental context is increasingly becoming mandatory. in the international community, this process is known as “greening”, and in its understanding, different approaches can be distinguished. the term first appeared in 1970 in book by c. reich “the greening of america”. basically, he put in this concept a much broader meaning than attention to the environment. nevertheless, in the beginning of the 21st century, this term was caught up and began to be widely used both in the scientific literature and in the media. the turning point in increasing attention to environmental issues was the un conference in rio de janeiro (brazil) in 1992 – the earth summit. based on it, the governments of 178 countries adopted the declaration on environment and development and the declaration on guiding principles of sustainable development. in the same year, the commission on sustainable development was established. since then, many important global events have taken place, consistently promoting the ideas of sustainable development and environmental protection into politics and economics at various levels. following the 20th anniversary of the rio de janeiro conference in 2002, a new rio+20 conference was held, bringing together country leaders, thousands of private sector representatives, non-governmental organizations and other groups. a joint effort at this summit has developed a strategy on how to reduce insecurity, promote social justice, and ensure that all environmental measures are considered. it was emphasized that the green economy is “one of the important tools available for achieving sustainable development… the institutional framework for sustainable development should be inclusive, transparent and effective and that it should find common solutions related to global challenges to sustainable development” (the future we want). in 2008, the united nations environment programme (unep) launched the green economy initiative (gei), a programme of global research and assistance at the country level to encourage politicians to support environmental investment. at the un general assembly in 2015, unep published “uncovering pathways towards an inclusive green economy”. over the last decade, the concept of a green economy has become a strategic priority for many governments and intergovernmental organizations. in total, 65 countries have entered the path of an inclusive green economy and relevant strategies. by turning their economies into drivers of resilience, these countries are ready to baltic journal of economic studies 97 vol. 7 no. 2, 2021 address the major challenges of the 21st century, from urbanization and resource scarcity to climate change and economic instability. according to unep, the green economy includes three main concepts: low-carbon, resource-saving and socially inclusive development. in a green economy, employment and income growth are driven by public and private investment in infrastructure and assets that reduce carbon emissions and pollution, increase energy and resource efficiency, and prevent biodiversity loss (un environment programme, green economy). as a result of persistent work on the green economy implementation, the concept of an inclusive green economy emerged. an inclusive green economy is an economy that improves people’s well-being and creates social justice, while reducing environmental risks and resource scarcity. an inclusive green economy is an alternative to modern dominant economic model, which enhances inequality, promotes overconsumption, causes resource shortages and poses widespread threats to the environment and human health. it is an opportunity to promote both sustainability and social justice as functions of a stable and prosperous financial system within a limited and fragile planet. this is the way to achieve the 2030 agenda for sustainable development, and eliminate poverty while maintaining the environmental thresholds that underpin human health, well-being and development (what-inclusive-green-economy). in its simplest terms, this economy is low-carbon, efficient and green in production, but also includes consumption and results based on sharing, circularity, cooperation, solidarity, sustainability, opportunities, and interdependence. it focuses on empowering national economies, using targeted and appropriate fiscal and social protection policies, and with the support of strong institutions specifically designed to protect social and environmental minimum levels. well-known economist nicholas stern in his work “the economics of climate change” states “if we do not act, the total costs and risks of climate change will be equivalent to losing at least 5% of world gdp now and forever. given a wider range of risks and consequences, the loss estimate can increase up to 20% of gdp or more” (stern, 2006). thus, we can trace the process of permanent growth of the world community 's attention to environmental issues, which is confirmed by the growing number of events, publications, and action programmes at various levels. an example of “greening” policy practical implementation is the european commission’s policy to support farmers. farmers receive direct green payments for the conservation of natural resources and the provision of public goods to the population at non-market prices. these direct environmental payments are made, if farmers follow three mandatory rules in favour of the environment: crop diversification (greater crop diversity makes soils and ecosystems more resilient); maintenance of permanent pastures (pastures support carbon sequestration, and protect biodiversity (environment)); allocation of 5% of arable land to the areas useful for biodiversity (such as environmental focus areas (efas), such as trees, verdant hedges or fallow land), which improves biodiversity and habitat conditions (sustainable land use). the green economy is considered as a way to achieve sustainable development. it requires shifting away from a resource-intensive model of growth, transforming consumption and production towards a more sustainable model, and increasing added value and reinvesting in resource-rich developing countries. to achieve a green economy, policy makers should strategically refocus consumption, investment and other economic activities to: 1) reduce carbon emissions, enhance energy and resource efficiency, prevent biodiversity loss and ecosystems, including efficient, low-impact technology development; buildings, transport infrastructure; investment in renewable energy; application of the life cycle approach; promotion of ecological goods and services; permanent source of materials; support and restoration of natural capital, consisting of land, soil, forests, fresh water, oceans, marine resources, wildlife and other components of biodiversity; 2) improve access to energy, food, clean water, biological resources, sanitation, public health and health care system, new jobs, health and social protection, ict, training and education, including education for sustainable development and sustainable consumption promotion (working towards a balanced and inclusive green economy). in the context of general greening trend, there is also a term for new understanding of growth – green growth. green growth is also defined as a policy that ensures “environmentally sustainable economic progress to promote low-carbon socially inclusive development” (oecd, 2011a). a number of academic papers are devoted to the study of green growth essence and factors ( jänicke, 2012; bowen, 2011). at the beginning of the new century, national and international efforts are intensifying to stimulate green growth as a new approach to increasing sustainable wealth. in 2009, the oecd, which promotes an integrated approach to addressing interconnected global challenges, began working on green growth as a way to address some of the world’s most important challenges. in june 2009, the ministerial declaration on green growth was signed by all oecd member countries, which ensured the possibility of both greening and growth. oecd ministers approved the baltic journal of economic studies 98 vol. 7 no. 2, 2021 green growth strategy (ggs) (oecd, 2011a) in may 2011. it suggests that green growth can open up new sources of wealth by encouraging greater efficiency and productivity of natural resources, innovation, and new markets for green technologies, goods, and services (green growth and developing countries). the concepts of smart development and smart economic development are emerging (dagiliene, 2020). l. dagiliene et al. defines smart development as one that focuses on “achieving economic goals through the use of ict, access to infrastructure and services through technological innovation.” in turn, smart economic development so far includes three components (economic + social + environmental with the use of ict); it is based on knowledge and soft skills aimed to use technology, innovation, infrastructure for economic development; emphasizes sustainable development of neoliberal economy and growth capitalization in the form of digital innovation (ibid). greening is becoming a major trend in modern politics, firstly, at the global level and, secondly, at the national government level. the international practice of state support of the whole country life’s ecological orientation is becoming more diverse and widespread (yegorova, 2013). the introduction of economic incentives affects greening of investment and production of goods and services in general. this, in turn, forms new demand features – consumption of goods and services considering environmental component. not only are the general and technical characteristics of products or services important to consumers, but also their impact on human health and the environment. the chain reaction goes on: there is formation of environmentally conscious public opinion, and appropriate mentality. it has a wide range of manifestations in economic, public, social, and other activities. and most importantly – environmental guidelines should penetrate into human psychology, ecological consciousness of all social groups and entities should be formed. in addition, ecologically oriented consumer behaviour should be formed, when important values become conservation and economical use of resources in both production and consumption, transition to renewable energy sources, competent waste disposal, etc. an important aspect of the greening overall process is that all its manifestations are realized through new technology capabilities, in fact – information and communication technologies, nanotechnologies, biotechnology, etc. 4. conclusions thus, a new paradigm of social development is being formed. this new paradigm incorporates the features with the focus on intangible wealth (such as intelligence, information, knowledge), social and environmental values based on the widespread use of modern technologies. it is with this approach that the main development subject is no longer the economy itself, but the ecosystem itself at all the same levels, including but not limiting to – micro level, meso level, macro level, and also regional, international, and global level. the global ecosystem development is characterized by the development of such processes as intellectualization, digitalization, socialization, greening, etc., which together form the general trend of smart economy development. the key word of this new economy is “smart”, which permeates all its components, basic relationships and processes, thus defining its essence. the general intellectualization process lies at the heart of this concept, which is a general trend of social and economic development. on the other hand, this general process intensifies and acquires new complex forms of manifestation. the results of intellectual activity (such as advanced technologies, know-hows, products, and services) become an independent, but very influential factor in development, and even an important instrument for ensuring the relationships and interactions between all ecosystem components. the development of modern society requires more than just human resources as carriers of the ability to work. at present, the human perception is gradually expanded, the human importance is growing, and thus a person is being more actively included in all process as a bearer of social, cultural, and moral values, and as a bearer of sustainable development values. in turn, not just the carrier, but also as the subject of social relations (such as property, management), in which these values must be realized. that is why there is growing importance and implementation of important global and strategically important values in all spheres of social activity, which is next important factor in smartizing the economic 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(2013). practica stimulirovanija perehoda k “zelenoj ekonomike”: mezdunarodnij opit. koncept, vol. 3, pp. 1651–1655. available at: http://e-koncept.ru/2013/53333.htm baltic journal of economic studies 58 vol. 3, no. 1, 2017 corresponding author: 1 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: natakudryavskaya@gmail.com the model of interaction bet ween insurance intermediaries and insurance companies in the assurance of sustainable development of the insurance market nataliia kudriavska1 taras shevchenko national university of kyiv, ukraine abstract. the purpose of this paper is the investigation of the model of interaction between insurance intermediaries and insurance companies in the assurance of sustainable development of the insurance market. the methodology is based on the new studies and books. it is underlined the importance of potency and effectiveness of this model, its influence on the insurance market stability. it is analysed the european experience and specific of ukrainian insurance market. the main ways for improving its model and ways of its practical realization are characterized. results. the problems that exist in the broker market in general are connected with an ineffective state policy. in particular, we can say about the absence of many laws, acts, resolutions, which explain what a broker have to do in case of different problems with insurance companies, another brokers and clients. at the same time, the problem of distrust to national brokers exists. it provokes a decline of the demand for their services and so on. however, it is possible to solve these problems. practical implications. for this, it is necessary to do some acts. the first one is to implement resolutions that regulate relationships between insurance brokers and insurance companies, clearly regulate the model of its interaction. this model affects the stability of the insurance market in general. the second is to find methods of solving problems of the increase in insurance culture of the population (for example, by the way of advertisement). the third one is to solve problems connected with the appearance of foreign brokers in the insurance market of ukraine. actually, the ukrainian market of insurance brokers is not developed enough. that is why it needs big changes and reforms. value/originality. among alternatives of the strategic development of insurance, the method of quick liberalization and gradual development is distinguished. according to the liberal way, it is possible to transfer to the market mechanisms of functioning of insurance both in the inside and outside markets. the gradual development includes the state defence of national companies until they will be competitive. key words: interaction model, insurance market, insurance intermediary, insurance company, effectiveness, stability, european experience, specific of ukrainian insurance market. jel classification: r14, d18, p2 1. вступление модель взаимодействия страховых посредников и страховых компаний играет важную роль в обеспечении стабильного развития страхового рынка. от того, насколько рынок есть стабильным и прогнозированным, зависит его эффективность, в частности способность привлекать страховщиков, а также возможность платить им страховые компенсации. отдельные аспекты исследованной проблемы анализируются в работах современных украинских ученых-экономистов. в частности, системное видение модели взаимодействия страховых посредников и страховых компаний представлено в работах в. базилевича, о. власенко, з. варналий, р. пикус, о. черняка, а. старостиной, н. крылова, в. петровского и др. о. гаманкова изучала рынок страховых услуг украины с позиций роли на нем страховых посредников и страховых компаний. в. бубенко исследовал страховые услуги как такие, что оказываются страховыми посредниками и страховыми компаниями; д. козенков, л. богачова, о. богачова обращались к вопросам законодательного регулирования деятельности страховых посредников и страховых компаний. в. фурман акцентировал внимание на необходимости усовершенствования государственного регулирования деятельности страховых посредников и страховых компаний в украине путем внедрения новых нормативных актов. в общем существует ряд научных работ, посвященных изучению модели baltic journal of economic studies 59 vol. 3, no. 1, 2017 взаимодействия страховых посредников и страховых компаний в украине и других государствах европы и сша. в то же время есть необходимость представить системное научное видение модели взаимодействия страховых посредников и страховых компаний в украине, апеллируя к опыту и урокам мировых страховых рынков. цель статьи  – проанализировать специфику модели взаимодействия страховых брокеров и страховых компаний в обеспечении стабильного развития страхового рынка. задания статьи определяются анализом специфики этой модели на просторах украинского страхового рынка, обращением к особенностям модели взаимодействия страховых посредников и страховых компаний в мире, а также определении ее влияния на стабильное развитие страхового рынка. 2. страховые посредники на современном рынке в соответствии с действующим законодательством украины, страховые брокеры могут вести свою деятельность только после того, как они зарегистрировались в государственном реестре страховых брокеров, который формируется и контролируется госфинуслуг. в большинстве стран законодательство, которое регулирует деятельность страховых посредников, предполагает порядок их регистрации, требования к уровню профессиональной подготовки и предоставления информации, а также необходимость финансовых гарантий покрытия ответственности, которая возникает в процессе посреднической деятельности. сам факт регистрации посредника определяет наличие предыдущего этапа получения разрешения и предшествующую ему проверку квалификации. все зависит от критериев, которым должен соответствовать страховой посредник, а также от того, насколько сложным есть процесс прохождения регистрации. в этом понимании регистрация, что производится без постановки требований к страховому посреднику, есть очень рискованной и опасной. ведь она, с одной стороны, дает возможность вести статистический учет, но, с другой, не может сформировать у клиента чувство защищенности и гарантированности. смотря на это, такая ситуация дает основания вести речь о том, действительно ли посредник владеет квалификацией. если ее нет, то это становится очевидным фактом. то есть, на сегодняшнем страховом рынке украины регистрация страховых посредников есть фактически формальным и условным актом. в то же время заданием регистрации есть решение, по крайней мере, двух заданий. во-первых, дать разрешение контрольно-ревизионным службам и клиентам проверять деловые связи посредников, а также по возможности сгруппировать их за четкими категориями. во-вторых, очень важным есть осуществление проверки того, насколько посредник отвечает определенным критериям. реализация этих аспектов обусловливает стабильность страхового рыинка. профессиональная компетентность страховых посредников  – это существенный и определяющий элемент защиты страховиков, поэтому необходимо систематически проводить мероприятия, которые были бы направлены на получение страховыми посредниками общих, коммерческих, профессиональных навыков и знаний. содержание квалификационных требований в разных странах есть отличительным, таким, что зависит от особенностей национального страхового рынка. так, международное бюро страховиков и перестраховиков (объединение национальных профессиональных ассоциаций страховых посредников европейского союза) в своей резолюции от 7 октября 1992 р. предлагает установить программу обучения с минимальным объемом в 300 часов за период на 18 месяцев. здесь обязательным есть сдача экзаменов после курса обучения. в украине же сегодня такой возможности не существует (blashchuk, 2010). в том случае, когда посредники неудовлетворительно исполняют свои обязанности, и при этом их клиенты терпят финансовые лишения, последние должны обязательно получить компенсацию. оказание таких финансовых гарантий требуется в первую очередь от брокеров. в общем принято считать, что страховые компании несут полную финансовую ответственность за профессиональные действия своих агентов. при этом возникает ряд проблем, если речь идет о тех агентах, которые работают на несколько страховых компаний. по поводу страховых брокеров, то существуют некоторые виды гарантий покрытия их профессиональной ответственности. наиболее распространенным, а в многих странах обязательным, есть страхование профессиональной ответственности страховых брокеров. существует также такой вид гарантии, как банковский депозит. в то же время на украинском страховом рынке до этого времени отсутствует механизм оказания финансовых гарантий со стороны страховых посредников. фактически в украине, где большое количество населения осуществляет страхование только через определенную необходимость (в основном при оформлении кредитов, страховании авто, страховании поездок за границу и т.п.) институт брокерства пока что переживает процесс своего постепенного «приживания» и поиска доверия со стороны страхователей. больших страховых брокеров на территории украины до этого времени работает мало. фактически все они в основном работают с корпоративными клиентами. основному количеству обычных граждан большинство посредников предлагают самые распространенные виды страхования, в частности страховки автомобиля, недвижимости, очень редко – медицинское страхование и страховаbaltic journal of economic studies 60 vol. 3, no. 1, 2017 ние жизни. то есть, главной отличительной чертой страхового брокера от страхового агента есть то, что агент работает непосредственно на страховую компанию, а брокер не привязан к никакой страховой компании, он действует самостоятельно, работает на себя. 3. страховые компании и страховые посредники от того, насколько эффективно будет действовать этот механизм, зависит стабильность страхового рынка. в общем, главное отличие между оказанием услуг страховой компанией и страховыми посредниками определяется тем, что посредники могут сделать скидку и дать консультацию страховику. на сегодня механизм взаимодействия страховых компаний, страховиков и страховых брокеров в украине находится только на начальном этапе развития, он формируется. заданием страховых брокеров есть максимальное содействие завлечению финансовых ресурсов страховиков. это происходит путем консультирования страховиков по поводу видов страховых продуктов, которые предлагают разные страховые компании. то есть, речь идет о продвижении страховых продуктов на рынок страхования. урегулирование убытков дает возможность залучить больше потенциальных клиентов в страховые компании. то есть, брокер, оказывая помощь страховым компаниям в расширении и развитии своего рынку, содействует повышению уровня и культуры страхового рынка украины, его приближению к мировым требованиям и стандартам. по поводу страховиков, то заданием страховых брокеров есть систематическое и надежное оказание гарантий за выплатами и компенсаций за страховыми случаями. именно это может существенно изменить менталитет населения по поводу покупки страховых продуктов. так, обратившись к брокеру, клиент может сэкономить время на поиски будущего страховика. учитывая то, что брокер постоянно проводит отбор страховых компаний, именно от посредника клиент имеет возможность получить на выбор список из 5–10 уже проверенных брокером компаний с описанием цены, специфики их услуг. в то же время для получения такой информации самостоятельно клиент должен потратить значительное количество времени. кроме того, брокер оказывает консультации клиенту по поводу самого процесса страхования. учитывая то, что фактор цены имеет для клиента очень важное значение, брокер получает возможность помочь найти дешевую и в то же время надежную страховку. если клиента больше всего интересует качество продукта страхования, то брокер может доступно объяснить ему предложенные несколькими страховыми компаниями полисы. окончательный выбор страховой компании клиент делает самостоятельно, после чего они с брокером подписывают страховой договор. соответственно с этим договором, брокер берет на себя обязательства с обслуживания клиента, то есть, он не только приводит его в страховую компанию, но и обязывается консультировать и сопровождать при наступлении страхового случая. также брокеры оказывают помощь своему клиенту на протяжении всего термина страхования. заданием страхового брокера есть не только оказание услуг и советы, но и в случае наступления страхового случая он должен контролировать то, чтобы страховая компания исполняла свои обязательства по поводу компенсации убытков клиента. если страховая компания не исполняет эти обязательства, то брокер должен внести эту компанию в так называемый «черный список» и больше не рекомендовать ее своим клиентам. таким образом, своей деятельностью брокер формирует здоровую конкурентную среду между страховиками. честная конкуренция есть важным фактором стабильности страхового рынка. в то же время такие услуги брокера могут стоить клиенту около 15–20% от цены всей страховки. необходимо подчеркнуть, что брокер должен осознавать свою ответственность перед страховым рынком, которая заключается в том, чтобы не понижать цены до неэкономического уровня. финансовая стабильность страховиков важна и для брокера, и для его клиента. то есть, развитие института страховых брокеров влияет на общее развитие страхового рынка в украине, помогает стране выйти на мировой страховой рынок и занять на нем достойное место. впрочем, сегодня очень медленно развивается процесс участия страховых брокеров в страховом рынке украины. для осознания причин этого необходимо провести глубокое исследование страхового брокеража в украине. 4. современный брокераж в украине в общем, состояние развития страхового брокеража в украине характеризуется такими аспектами, как количество брокеров, соотношение между количеством брокеров и страховых компаний, величина страховой премии, что была получена непосредственно на расчетный счет от брокера, доля рынка, которая обслуживается брокерами (bubenko, 2010). количество страховых брокеров в украине на протяжении последних пяти лет постоянно уменьшается. этот факт должен вызвать внимание со стороны страхового рынка и общества, ведь фактически постепенно исчезает очень важный для существования рыночных отношений институт страховых брокеров. в экономически развитых странах на одну страховую компанию приходится несколько десятков страховых брокеров, которые обслуживают рынок. в то же время в украине в конце 2005 р. в реестре госфинуслуг было зарегистрировано 80 брокеров, в baltic journal of economic studies 61 vol. 3, no. 1, 2017 2006 р.  – уже 78 брокеров, в 2007 р.  – 69 брокеров, в 2008 р.  – 68 брокеров, в 2009 р.  – 65 брокеров, в 2014 р. – 61 брокер, в 2015 р. – 60 брокеров, в 2016 р. – 59 брокеров. для сравнения приведем факты по поводу других стран. так, в маленькой швейцарии сейчас зарегистрировано около 3000  брокеров в сфере страхования и перестрахования. конечно, там и предложение на услуги страхования значительно выше, но разница все же существенная. кроме того, она говорит о том, что институт брокеража в экономически успешных странах активно развивается. таким образом, он есть важным для эффективного функционирования страхового рынка. как свидетельствуют расчеты экспертов, страховые брокеры в украине обслуживают только 5% страхового рынка. в то же время в сша и канаде они работают с 95% страхового рынка, в италии – з 92%, в германии – с 87%. в западной европе одну страховую компанию обслуживает 10 брокеров, а в украине для 20 страховиков работает только один брокер. уменьшение страховых брокеров на рынке страхования связано в первую очередь с возникновением проблем с выплатами вознаграждения. так, в г. киеве и киевской области действует 42 брокера, что составляет почти 64% от их общего количества по отношению к другим регионам украины. в то же время существуют целые регионы, где эти институты почти полностью отсутствуют. в основном это западная и центральная украина. этот факт свидетельствует о неравномерности распространения страховых услуг в разных регионах украины. необходимо подчеркнуть, что в украине развитие страхового бракеражу находится по существу на начальном этапе. 5. основные тенденции развития страхового брокеража в украине в общем, основными тенденциями есть такие. первая  – наименее развитым есть страхование жизни. это можно объяснить тем, что страхование жизни не имеет такого широко развитого сектора рекламы и его предложение на рынке страхования есть минимальным. на протяжении 2010–2016 гг. динамика страхования жизни почти не изменилась. вторая – личное страхование составляет 1,78% всех полисов, которые предлагают брокеры. имея большую часть подписания договоров, чем в страховании жизни, личное страхование приносит больше прибыли непосредственно брокерам и страховым компаниям. третья – ведущую роль в страховании занимает страхование имущества. это можно объяснить тем, что, во-первых, при получении кредита в банку обязательно нужна страховка, во-вторых, имущество страхуется, когда существует вероятность стихийного бедствия. четвертая – страхование ответственности есть наиболее распространенным видом страхования при подписании обязательств и при наличии возможности невыполнения партнером условий договора. его часть на рынке страхования равна почти 10%. пятая  – наиболее распространенным и прибыльным есть обязательное страхование. имея самый большой показатель подписания договоров, оно приносит 70,7% прибыли. то есть, главную часть рынка страховых услуг составляет страхование имущества, а самую меньшую – страхование жизни. это можно объяснить проблемами в экономическом развитии страны (в частности, на протяжении последних лет), стихийными бедствиями, предложением и спросом на страховые полисы и т.п. таким образом, за статистикой, около одной трети страховых полисов на страховом рынке украины реализуют именно брокеры. главные плюсы покупки полиса через брокеров – это оказание консультации в процессе покупки полиса. но наиболее полезными страховые брокеры будут тогда, когда непосредственно наступает страховой случай. в некоторой степени по-другому выглядит ситуация со страховыми агентами, которые заинтересованы только в том, чтобы продлить действие максимального количества полисов. при этом их практически не интересует то, что будет происходить дальше с клиентом. именно поэтому много страховых агентов с такой целью выдают себя за страховых брокеров (furman, 2006). если агенты сегодня пытаются представить себя как брокера, то остальные, в свою очередь, пытаются приблизиться к агентам. большинство страховых брокеров сегодня имеют и брокерскую, и агентскую структуры. в то же время необходимо подчеркнуть, что ни классические брокеры, ни брокеры-агенты сегодня не могут гарантировать своим клиентам выплаты компенсации при наступлении страхового случая. так, в европейских странах все брокеры обязаны страховать свою ответственность. и если застрахованное лицо по их вине несет убытки, то оно может получить финансовую компенсацию за полисом ответственности. но существуют случаи, когда брокеры добровольно страхуют свою ответственность, чтобы поддержать собственный имидж и сделать безопасной свою деятельность. бывали случаи, когда посредники самостоятельно выплачивали компенсации клиентам. они считают, что это дешевле, чем терять свою репутацию на рынке (varnalij, 2004). то есть, основной проблемой в развитии страхового посредничества есть то, что сегодня на рынке страхования еще не достаточно определены проблемы с вознаграждением. в мировой практике вознаграждение согласовывается со страховиком и высчитывается из сумы страхового платежа. в то же время в украине существуют некоторые противоречия в законодательстве по поводу комиссионного вознаграждения страховым брокерам. так, согласно с действующим законодательством, оплата за оказанbaltic journal of economic studies 62 vol. 3, no. 1, 2017 ную комиссионером (брокером) услугу осуществляется в порядке, определенном сторонами в договоре (bubenko, 2008). но ему дается право отсчитать принадлежащие ему за договором суммы с денежных средств (страхового платежа), что пришли к нему. именно здесь возникает проблема касательно расчетов с брокером, потому что для это существует много препятствий. так, если брокер самостоятельно отсчитает сумму с денежных средств, то он может иметь проблемы со страховой компанией или не получить вознаграждения вообще. такие противоречия могут привести обоих представителей в суд. это происходит потому, что, согласно с юридическими нормами и положениями, брокер не имеет права на подписание договора со страховиками и получение от них комиссионного вознаграждения. эти аспекты должны быть прописаны в профильных законах, которые регулируют вопросы страхования и функционирования рынка финансовых услуг. но таких положений в законах украины «о страховании» и «о финансовых услугах и государственном регулировании рынка финансовых услуг» нет. также украина не может отделиться от мировых тенденции в развитии страхового посредничества. в связи с этим правительство украины пытается достигнуть мировых стандартов. так, на это время стал возможным выход отечественных страховых брокеров на международный рынок и выход иностранных брокеров на рынок украины. учитывая то, что, если украина пытается «войти» в европу, то она должна исключить требования действующего законодательства по поводу запрета работы страховых посредников в интересах страховиков-нерезидентов (bazylevych, 2006). так, 10 апреля 2008 р. в рамках ратификации договора о вступлении украины в сот верховная рада приняла изменения к закону украины «о страховании». этим было значительно улучшено условия входа в украину иностранных страховых и перестраховых брокеров. в частности, была отменена норма касательно брокеров-нерезидентов, которые имели право оказывать услуги только через постоянные представительства в украине, должны были зарегистрироваться как плательщики налогов и быть включенными в государственный реестр страховых и перестраховых брокеров. как считает много участников рынка страховых услуг, с одной стороны вход иностранных брокеров на украинский рынок может с него вытеснить отечественных представителей, а с другой стороны это дает возможности для выхода украинских брокеров на международный уровень (matyuha, 2007). все эти изменения были вызваны присоединением нашей страны к сот. так, нерезиденты получили право страховать авиационные, морские и космические риски. в будущем в украину может прийти много иностранных компаний, брокеров и финансовых групп. в то же время существуют недостатки такой политики, ведь субъекты с мировым именем могут вытеснить отечественных брокеров со страхового рынка украины (vlasenko, 2006). уже сегодня выход на наш рынок таких мировых лидеров, как marsh & mclennan, willis, aon limited, besso limited і oakeshott, як правило, связан с приходом в украину мульти-национальных компаний, а также клиентов, которые обслуживаются у них по всему миру. такие больше иностранные брокеры размещают на протяжении года не значительное количество очень больших рисков своих клиентов. таким образом, представительства международных брокеров на территории украины и отечественные брокеры, как правило, занимают разные рыночные позиции и пока что не могут конкурировать друг с другом. 6. выводы таким образом, проблемы, которые возникают на рынке брокерства, в основном связаны с неэффективной политикой государства, в частности, недостающим количеством законов, актов, положений, которые объясняют, что должен делать брокер при наступлении каких-либо противоречий со страховыми компаниями, другими брокерами, клиентами. также существует проблема недоверия страховиков к отечественным брокерам, что ведет к уменьшению спроса на услуги, которые они оказывают и т.п. впрочем, все эти проблемы можно решить. для этого необходимо осуществить несколько мероприятий. первое  – принять положения, которые регулируют отношения страховых брокеров и страховых компаний, четко регламентируют модель их взаимодействия. ведь эта модель существенно влияет на стабильность страхового рынка в общем. второе – найти способы решения проблемы повышения страховой культуры населения (например, путем рекламы). третье  – решить проблемы, связанные с появлением иностранных брокеров на страховом рынке украины. по сути рынок страховых брокеров украины еще не достаточно развит, поэтому он требует существенных изменений и реформ. среди альтернатив стратегического развития страхования выделяют подход быстрой либерализации и постепенного развития. либеральный путь предусматривает полный переход на рыночные механизмы функционирования сферы как касательно внутреннего, так и касательно внешнего рынков. постепенное развитие предусматривает защиту государством национальных компаний, пока они не станут конкурентными. baltic journal of economic studies 63 vol. 3, no. 1, 2017 references: bazylevych, v. d. (2006). strahova sprava kiev, znannja, 353 s. blashchuk, t. v. (2010). stragove pravo hmelnytskyj, tsjypal a.a, 288 s. bubenko, i. v. (2010). strahuvannya. harkiv, hdeu, 104 s. varnalij, z. s. (2004). osnovy pidpryjemnytstva. kiev, znannya-pres, 352 s. vlasenko, o.o. (2006). rozvytok strahovoho rynku ukrajiny. finansy ujrajiny, 8, s. 140-145. matyuha, m. m. (2007). strahovi posluhy. universytet "ukrajina", 344 s. bazylevych, v. (2008). strahuvannja: pidruchnyk. kiev, znannja, 1019 s. furman, v. m. (2006). strahovyj rynok v ukrajini: problemy stanovlennja i rozvytku: avtoref. dys... d-ra ekon. nauk; in-t ekonomiky i prognozuvannja. nanu kiev, 36 s. наталия кудрявская модель взаимодействия страховых посредников и страховых компаний в обеспечении стабильного развития страхового рынка аннотация. целью работы есть исследование модели взаимодействия страховых посредников и страховых компаний в обеспечении стабильного развития страхового рынку. методика. концепция статьи основана на новейших работах и исследованиях в сфере страхового рынка. сделано акцент на важности эффективности модели взаимодействия страховых компаний и страховых посредников, ее влияния на стабильность рынка страхования. анализируется европейский опыт и специфика украинского страхового рынка. определяются главные пути усовершенствования этой модели и пути их практической реализации. результаты. проблемы, которые возникают на рынке брокерства, в основном связаны с неэффективной политикой государства, в частности, недостающим количеством законов, актов, положений, которые объясняют, что должен делать брокер при наступлении каких-либо противоречий со страховыми компаниями, другими брокерами, клиентами. также существует проблема недоверия страховиков к отечественным брокерам, что ведет к уменьшению спроса на услуги, которые они оказывают и т.п. впрочем, все эти проблемы можно решить. практическое значение. для этого необходимо осуществить несколько мероприятий. первое  – принять положения, которые регулируют отношения страховых брокеров и страховых компаний, четко регламентируют модель их взаимодействия. ведь эта модель существенно влияет на стабильность страхового рынка в общем. второе  – найти способы решения проблемы повышения страховой культуры населения (например, путем рекламы). третье  – решить проблемы, связанные с появлением иностранных брокеров на страховом рынке украины. по сути рынок страховых брокеров украины еще не достаточно развит, поэтому он требует существенных изменений и реформ. значение/оригинальность. среди альтернатив стратегического развития страхования выделяют подход быстрой либерализации и постепенного развития. либеральный путь предусматривает полный переход на рыночные механизмы функционирования сферы как касательно внутреннего, так и касательно внешнего рынков. постепенное развитие предусматривает защиту государством национальных компаний, пока они не станут конкурентными. baltic journal of economic studies 4 vol. 3, no. 3, 2017 influence of marketing communicative strategies on consumer behaviour: a case of the high-technology market of ukraine victoria zhurylo1, olga prygara2 taras shevchenko national university of kyiv, ukraine abstract. the purpose of the study is to research consumer behaviour types and to develop marketing strategies of communicative influence on the consumer in the high-technology goods market. methodology. marketing research in ukrainian market of high-tech goods is conducted to define motivations of the consumers and the peculiarities of their market behaviour. the profiles of target customers are developed and the typology of consumer behaviour is formed, based on the reasons of purchasing of high-tech goods and on the level of consumer involvement in the purchasing process. results showed that highly rational, cautious, and demonstrative behaviours can be observed in case of high consumer involvement in the buying process. rationally-confident, comfortable, adaptive behaviour can be observed in the case of low involvement. the peculiarities of communicative influence for each type of consumer behaviour in the market of high-tech goods are determined and the appropriate strategies of marketing communication are offered. practical implementation. strategies of communicative influence and communication sources depend on consumer behavioural types and the stage of the process of adopting innovations. in case of highly rational consumer behaviour, generic strategy, benefit strategy, and unique technical advantage strategies are recommended to be used as the main communicative strategies. benefit strategy, unique technical advantage strategy, positioning strategy should be used in the case of rationally confident behaviour. the technology of intrusion, intimidation, positioning strategy, affective strategy, and resonance strategy should be used in the case of cautious consumer behaviour. brand strategy should be used in the case of demonstrative consumer behaviour. the communicative strategies of product positioning and the strategy of resonance can be used in the case of comfortable consumer behaviour. brand strategy is the main communicative strategy in the case of adaptive consumer behaviour. communicative influence and communication sources depend on the stage of adopting innovations: 1) awareness, 2) attitude formation, 3) decision, 4) confirmation, 5) implementation. the main communicative channels on the first and second stage of the process of adopting innovations are: exhibition activity, tv advertising, outdoor and print advertising, internet advertising, specialized publications, testing centres for goods, state educational programs. the main communication channels on following stages are testing centres, the advice of friends and acquaintances, customer’s experience, the advice of vendors-consultants. key words: high-tech goods, consumer motives, type of consumer behaviour, communicative influence, strategies of marketing communication. jel classification: f23, l10, l20, m21, m37 corresponding author: 1 department of international economics and marketing, taras shevchenko national university of kyiv. e-mail: vikzhur@gmail.com 2 department of international economics and marketing, taras shevchenko national university of kyiv. e-mail: olgaprygara@gmail.com 1. introduction the company sending the communication message aims to inform, persuade, and force consumers to act in a way that is in line with its market interests. it predetermines the desired response from the consumer and sends a message. at the same time, the effectiveness of developing a communication strategy depends on the ability of the communicator to listen to the signals of the market, to take into account the influence of sociocultural factors and the environment of the consumer on the formation of his own preferences. therefore, the research of the main motivations of consumers of hightech goods, identification of the features of their market behaviour, which forms the basis for developing an effective strategy of communicative influence, becomes of special significance. the difficulty of forecasting of the high-tech markets development dynamics, incertitude of competitive environment, rapid changes in technologies baltic journal of economic studies 5 vol. 3, no. 3, 2017 and products, high level of market and technological uncertainty of consumers and manufacturers cause the need to look for the mechanisms of influence on the mentioned markets development, the development of modern market tools of consumers’ demand formation, including the formation of effective communicative strategies of high-tech enterprises. 2. review of theory and literature during the last decades, a great number of scientific and practical works were published, dedicated to the research on consumer behaviour and tools of marketing influence on the consumers’ decision. the publications of such authors as r .  blackwell, p.  miniard, j.  engel (2006), m.  solomon (2012), statt (2003), g.  foxall, r .  goldsmith, s.  brown (2001), w.  wells (2014), i.  ajzen, m.  fishbein (1991, 2000), t.  hansen (2005) are particularly noteworthy. in their works, researchers describe mechanisms of consumer decisions and define the factors, which influence their preferences and behaviour in the market on the whole, study the system of the researching methods of existing problems and forecasting the future ones. big amount of literature sources is devoted to the problem of the companies’ communicative strategies creation: these topics cover d.  aaker (2001, 2007, 2009), s.  moriarty, t.  duncan (1998, 2002), l.  percy.  (1997), p.  smith, c.  berry (1998), p. de pelsmacker, m. geuens, j. van den bergh (2004), d. ogilvy (1983), k. rotzoll (1986, 1991) and others. however, the marketing tools, strategies, and mechanisms discussed in these studies cannot be used by high-technology producers without appropriate adjustments and modifications taking into account specific features of the product and particularities of consumer behaviour. many scientific works are dedicated to the functioning of high-tech products markets and to the research of market activity features of business entities in these markets. among them, it is necessary to distinguish r .  rexroad (1983), j.  mohr, s.  slater (2010), w.  shanklin, j.  ryans (1984), r .  moriarty, t.  kosnik (1989), g.  moore (2014), m.  raynor, h.  riggs (1983). considering special aspects of marketing activity and marketing instruments application on these markets, scientists take up the position that specific features of the commodity, market, and market interests of its agents impact the formation of marketing strategies. however, many scientists concentrate their attention primarily on the specific aspects of the functional strategies development. scientists emphasize that high tech industries contribute to features some modification of the classic marketing strategies and offer a variety of strategies based on specific attributes (e.g.: for periodto-market technologies for the life cycle, the period of adaptation latest products, etc.). thus, the communicative influence mechanisms on the consumer decisions in the high-tech goods market are not described fully enough, this issue stays partially researched for today. in our opinion, it is a matter to determine the actual cause-and-effect relationships between the motivational features of the target consumer’s behaviour and the type of communication strategy of a high technology company with the aim of the most effective impact on the market. the aim of this article is to identify the specific of the communicative influence on target consumer segments in the high-tech goods market based on the research of the consumer behaviour types. in fact, it is the explanation of the communicative influence type choice  – rational, irrational or mixed, which prepares the ground for the strategies creation and companies’ marketing communication technologies. the key features of the consumer motivation and behavioural process are the basis of target consumer behaviour classification in the researched market and of creating the target segments profiles. to reach the purpose of this research, the following tasks are set and accomplished: 1) to identify the peculiarities of consumer motivation and consumer behaviour in ukrainian high-tech goods market; 2) to create the target consumers profiles; 3) to develop a classification of consumers behaviour based on motivational peculiarities of their market behaviour; 4) to explain the specific features of communicative influence of every type of consumer behaviour. 3. data collection results of the research on consumer motivation and peculiarities of their market behaviour are the informational basis of the strategies of marketing communications on the target segments. to study the consumer market behaviour in the high-tech goods market, we have conducted the marketing research, during which qualitative and quantitative methods of collecting primary marketing information were used. the quantitative method included focus-group survey of target consumers, who have had the experience in purchasing and using high-tech goods. there were 3  focus-groups, in which 26 respondents participated. the quantitative method included collecting necessary information with the help of mass sample observation (sample group included 246 respondents). the necessity to use respondent focus-group survey was due to the complexity of forecasting what consumers of high-tech products would do and high probability of wrong marketing theory creation, whose usage would blunt the effectiveness and reach the research objective significantly. that is why the coherent use of these survey methods allowed getting accurate market information. the process of focus-group and sample survey conducting was based on the standard selection procedure and the target respondents’ survey. baltic journal of economic studies 6 vol. 3, no. 3, 2017 4. empirical assessment of consumer behaviour formation in the market of high technology goods and the peculiarities of the communicative influence on target consumers the key factor, which determines the consumer behaviour in the high-tech goods market in ukraine, is the type of purchasing decision or the main motivation to the purchasing. it is widely accepted that there is no unified and overall applicable motives classification. the compilation of human motives classification depends primarily on the aims and objectives of a study and its practical application. in marketing, consumer motivations are traditionally classified into rational and emotional, the similarity between which lies in the fact that they are both simultaneously involved in the consumer choice in the market. while making a decision to purchase something, the consumer is not guided by rational or emotional motives only, although the significance of both can vary crucially for different segments. rational motives are considered in traditional economic aspect assuming that the consumer observes all possible alternatives and makes his choice to maximize the profit and get the certain practical benefit using this product. emotional motivation is related to the consumers wish to reach the certain emotional state and determined by subjective self-perception, his emotional expectations from the purchase. usually, when the consumer makes a decision to buy something, his emotional field may contain rational and emotional motives simultaneously. although some of them have the edge on another and differ depending on target segment’s profile. according to research results, we created a classification of the main motives of the destination high-tech goods consumers and determined the main motives hierarchy in two age segments (segment 1 – age 17-29, segment 2 – age 30-45), which is proper to studied market (fig. 1). it should be noted that the group of social motives was singled out, it shows the consumers desire for the socialization, their achievements’ demonstration, using the social status elements, and it is conditioned by formed products’ social position on certain market segments as highstatus one. considering the researches of ukrainian consumers’ motivations, we defined three basic rational motives to purchase high-tech products: 1) profitability motive: the desire of the consumer to rationally and economically spend time, effectively managing costs; 2) convenience and additional benefits motive: the consumer’s desire to facilitate and simplify their actions, to spend less effort to solve problems, to improve the quality of life and provide a high level of comfort; 3) security motive: the need for self-secure, for being confident in the future, for not being preoccupied with their health and property. ensuring the sustainability, stability, confidence in future self-fulfilment will be demanded by the society. in their turn, emotional motives are the following: 1) satisfaction motive: the desire of a consumer to get psychological satisfaction from the possession and use of the goods, to meet the aesthetic needs; 2) freedom motive: the human need for autonomy and independence in various spheres; the desire to be mobile, energetic, take a proactive stance (that also characterizes independence of a consumer); 3) motive of individuality: the consumer wish to be unlike others, to state their uniqueness and exclusiveness with the help of new technologies usage. 4) self-fulfilment motive: the need for personal growth and development, success, self-esteem, and self-affirmation; this motive expresses the willingness of an individual to realize their full potential; 5) recognition motive: the desire of a consumer to form their status in the society, to improve the motives hierarchy consumer motives segment 1 consumer proportion (confidence limit), % consumer motives segment 2 motives hierarchysegment 1 segment 2 1 recognition motive 34–52 38–58 self-fulfilment motive 1 2 fig. 2. motivational segmentation of ukrainian high-tech goods consumers source: compiled by the authors according to the research results selffulfilment motive 32–48 34–54 convenience and additional benefits motive 2 3 convenience and additional benefits motive 24–42 19–37 profitability motive 3 4 profitability motive 18–36 9–23 satisfaction motive 4 5 social affiliation motive 8–22 7–21 knowledge motive 5 6 motive of individuality 7–20 freedom motive 6 7 satisfaction motive 5–17 4–16 motive of individuality 7 8 knowledge motive freedom motive 3–13 2–7 social affiliation motive recognition motive 8 fig. 1. the main consumers’ motives in two age segments source: the authors’ calculations according to primary marketing information baltic journal of economic studies 7 vol. 3, no. 3, 2017 image, to draw attention of their surrounding; 6) social affiliation motive: the desire of a consumer to keep up with their surroundings, to follow current trends, to meet the requirements of their time, to be competent in modern achievements and different areas. the last three motives are classified as socio-emotional and reflect the consumer’s desire for the socialization, demonstration of their achievements, using elements of social prestige. these motives are caused by the already developed social position of a product that is considered to be product status. as it can be seen from the data given above, the ukrainian youth needs are socially-oriented and, on the contrary, middle-aged consumers’ needs are connected with self-realization and they belong to rationallyemotional motivation. according to the results, the motivational segmentation of ukrainian consumers in the high-tech market is made and the profiles of four target groups are defined (fig. 2). one of the main factors, which influence the formation of certain types of consumer behavioural models in a studied market, is the factor of target consumer involvement to the process of purchasing, which shows the level of interest and understanding of the importance of meeting the urgent demand and solving the existing problem. it is determined that such factors define the level of consumer involvement: the level of perceived risk in the process of gathering information and market risks evaluating, emotional commitment to the certain high-tech brand and individual consumers’ characteristics (for example, “technophiles” segment shows the high level of involvement in majority of purchasing situations). let us analyse the consumer risk perception in details. according to received data, the financial risk connected with high price gains a significant importance (it was mentioned by 68.5% of surveyed). the consumers also mention such kinds of risks which influence their purchase decisions: • time risk – 35.0% of surveyed will put the purchase back waiting for the more modern model; • exploitation risk – 30.0% of surveyed beware of the problems connected with the technical exploitation of goods; • service risk – 22.0% of surveyed are a bit afraid of problems with maintenance service; • informational risk – 21.0% of surveyed can refuse the purchase due to negative information about the product or manufacturer; • 23.0% of surveyed will put the purchase back due to lack of needed information. consequently, we have created the typology of purchasing behaviour among ukrainian consumers, in which such types of purchasing behaviour depending on the reason for purchasing the high-tech goods and the level of consumer involvement in the process of purchasing can be observed: highly rational, rationallyconfident, cautious, comfortable, demonstration, and adaptive (fig. 3). these purchasing behaviour types differ from one another by the character of making the purchasing decision, the level of involvement in the purchasing process, the choice of information processing strategy, the number of market alternatives, age: youth, middleaged people gender: prevailing men income level: prevailing middle class age: youth, middle aged and elderly people gender: men and women income level: low, middle and high age: middle aged and elderly people gender: prevailing men income level: middle, high age: youth, middle-aged people gender: men and women income level: middle and high technophiles rationalists idealists high-status consumers dominant motives • satisfaction motive • motive of individuality • convenience and additional benefits motive • self-fulfilment motive dominant motives • profitability motive • convenience and additional benefits motive • self-fulfilment motive • freedom motive • security motive dominant motives • satisfaction motive • motive of individuality • convenience and additional benefits motive • recognition motive • social affiliation motive dominant motives • satisfaction motive • knowledge motive • self-fulfilment motive • profitability motive • freedom motive fig. 2. motivational segmentation of ukrainian high-tech goods consumers source: compiled by the authors according to the research results baltic journal of economic studies 8 vol. 3, no. 3, 2017 which are estimated, the number of external sources, involved during the looking for the information, the time of purchasing decision. let us review the consumer behavioural reactions according to every behavioural type more detailed. highly rational behaviour is observed in the high-risk situations and consumer wishes to have the maximum benefits from the products’ technical capabilities. high level of financial, exploitation and time risk, and also the risk of an information gap in new technology or product force the consumer to look for information thoroughly. rationally-confident behaviour is inherent to consumers during rational purchasing with a low level of perceived risk, which reduces the consumer sensibility to the price. usually, this behaviour type is observed during the repurchase. the consumers who have never bought the particular high-tech product before but have the experience of using the product from relative product group can also demonstrate the rationally-confident behaviour. cautious behaviour is characterized by high complexity of variants evaluation before the purchasing. despite the consumers’ emotional involvement in the purchase, he looks for the best alternative in the market. the consumer demonstrates the highly rational approach in the process of looking for information. demonstrative behaviour is inherent to the consumers who strive for the attention and inclined to the demonstrative consuming. the important factor is a degree of a market novelty of the product because the demonstration of outdated even though expensive model does not contribute to the consumer higher social status. comfortable behaviour is characterized by the easy decisions about the purchase and is inherent to the consumers with high income level who want to get the emotional satisfaction from the purchasing and usage. consumers demonstrate high external search activity paying attention to the functions, brand image, and style. the emotions experienced by the consumer during the first experience of product consuming will define the further attitude to the goods. adaptive behaviour – this behavioural type can be characterized as “socially-induced”. the consumer purchase the product desiring to keep up with surrounding people, to be “socially adaptive” while inspecting the favourable social commitment to the product, its active usage by the surrounding people and feeling low financial, exploitation, and other market risks. having defined the types of customers purchasing behaviour, let us develop recommendations for marketing communications strategies with every type of purchase (fig. 4). russian scientists in the field of communications pyrogova y. k. and parshyn p. b. provide an explanation of rational and emotional strategies of communicative influence (pyrogova y. k. and parshyn p. b., 2000). thus, for highly rational consumer behaviour, rational strategies and communication technologies should be used. rational consumer strives to achieve optimum amount of benefits. communication should appeal to provide all technical specifications of the product, information concerning maintenance, service, and price. communication, based on informing on benefits and unique technical advantages (uta) of the product can minimize high level of perceived risk by customers with highly rational behaviour. rationally-confident consumer behaviour is observed during the repurchase. like in the case of highly rational consumer behaviour, rational strategies and communication technologies should be used: communication, based on informing on benefits and technical advantages of the product. besides, in this case, the consumer makes the decisions based on the previous positive purchasing experience and, as a result, attachment to the certain manufacturers’ product is formed. so, positioning strategy is also important here. cautious consumer behaviour is characterized by high emotional involvement in the purchase. and the consumer demonstrates the highly rational approach in the process of decision-making. in a situation of fig. 3. types of purchasing behaviour of ukrainian high-tech goods consumers source: compiled by the authors highly rational behaviour cautious behaviour demonstrational behaviour rationally-confident behaviour comfortable behaviour adaptive behaviour h ig h in vo lv em en t rational motivation socially-emotional motivation technophiles, rationalists technophiles, individualists high-status consumers high-status consumers individualists rationalists individualists emotional motivation l ow in vo lv em en t baltic journal of economic studies 9 vol. 3, no. 3, 2017 the high level of financial risk, the consumer will probably postpone the purchase for some time. thus, the technology of intrusion, stereotypes creation, intimidation, positioning strategy, affective strategy, and resonance strategy due to irrational influence on decision-making process can be used here. demonstrative consumer behaviour is characterized by demonstrative consuming. brand image, price, and market novelty of product are the most important factors of decision-making process, so brand image strategy is the main communicative strategy in this case. comfortable consumer behaviour is highly emotional behaviour. it is based on emotions experienced by the consumer during the first experience of product usage. so, the main communicative strategies are positioning strategy and the strategy of resonance. adaptive consumer behaviour is “socially-induced” behaviour and consumer decision is influenced mostly by reference groups. brand strategy is the main communicative strategy in this case. figure 5 shows the model of communicative influence on the consumer market behaviour on high tech goods market. strategies of communicative influence depend on consumer behavioural types. besides, communicative fig. 4. specific features of communicative influence for different consumer behavioral types on the high-tech goods market source: compiled by the authors highly rational behaviour rationallyconfident behaviour rational influence technology of conviction generic strategy benefit strategy uta strategy cautious behaviour demonstrative behaviour comfortable behaviour adaptive behaviour irrational influence technology of conviction eventtechnology technologies of intrusion, stereotypizat ion, intimidation positioning strategy resonance strategy affective strategy “brand image” strategy technologies of inheritance, intimidation technologies of intrusion, attitude technologies of inheritance, motivation change, intimidation positioning strategy resonance strategy benefits strategy uta strategy positioning strategy “brand image” strategy stage 1 awareness stage 2 attitude formation stage 3 decision stage 4 confirmation stage 5 implementation communication sources: • exhibitions • tv advertising • internet advertising • internet blogs • centres of product testing • sales managers • government educational programs communication sources: • centres of product testing • internet advertising • internet blogs • friend advice • previous experience strategies of communicative influence: • strategy of conviction • event technology • strategy of stereotypization, intimidation • technology of inheritance • brand strategy • positioning strategy fig. 5. model of communicative influence on the consumer market behaviour in the high tech goods market baltic journal of economic studies 10 vol. 3, no. 3, 2017 influence and communication sources depend on the stage of adopting innovations. the process of adopting innovations consists of five stages: 1) awareness; 2)  attitude formation; 3) solution; 4) development; 5) confirmation (e. rogers, 1960). in our opinion, the proposed model can be used for considering the behaviour of consumers of new technological products and the formation of a technological culture of consumption. stages of consumer behaviour of high-tech products on ukrainian market: stage 1 – awareness. on the first stage, the potential user receives the first information about the product, either at the expense of either a quick advertisement, either through the vision of the product in action or after hearing the information from acquaintances. the direction of communicative influence is cognitive. so, rational strategies should prevail through the technologies of uta (if there are competitors, they are few and they are technologically strong enough, and we decide to oppose them, with an emphasis on a clear advantage); benefit strategy (allows focusing on product attributes comparing to competitive ones). if we talk about unique high tech product, technology monopoly or innovative product, the generic strategy can be used. stage 2 – attitude formation. at this stage, a potential user will appeal to a significant amount of information sources, will interpret the information obtained to form the minds of the advantages/disadvantages of the company and the product. the direction of influence is affective; accordingly, irrational strategies come to the forefront, although rational strategies also take place. positioning strategy (where among the criteria of positioning rational and emotional components may be used) and brand strategy are the most effective strategies of communicative influence. the strategy of resonance is to establish a link between the advertised brand and a certain situation, a situation that has become stereotyped images  – for example, the use of this high tech product that means success in a career and promotion on the career ladder. it is possible to use methods of suggestion, for example, identification. on the first and second stages, the effective channels of communication include: • exhibition activity: exhibitions are devoted to new technologies and developments. both professionals and ordinary users interested in technology innovations visit them. • television. the most popular channel is television. the probability that the consumer will receive the required message increases several times. • outdoor advertising and print advertising. the presence of external and printed advertising will strengthen the effect of advertising on television. increase the likelihood of consumer interest in the novelty. • internet advertising: banners. pop-up banners in the middle of a web page usually nerve the consumer but often the information presented on them has a high memory. • blogs. on blogs, consumers can also get product information, even hear first reviews. • specialized publications usually make an overview of the most expected new products, thus, they are interested in the consumer, encourage him to further search or passively campaign for the purchase of new items. • testing centres for goods. in ukraine, they are usually located either in the store or at exhibition events. • recommendations from friends/relatives. families, friends, relatives could get information about the device before or already use it. • sales consultants. the essence of the advice of sellers-consultants in the first two stages of the model is to familiarize yourself with the availability of a new technological product, providing a brief overview and consumer interest. • advertising in tv films. this kind of communication has an impact on the younger generation. seeing that the film’s hero uses the device, consumers can step up their search for the information about the device. • state educational programs. unfortunately, in ukraine, their role as a source of familiarity with the novelty is rather small, due to the lack of technological provision of educational institutions and students with the latest developments. stage 3  – decision. a level of influence is conative, so circulation is realized in “pushing” the recipient to action (to purchase), prompting him of the expected actions from him. this stage actualizes other elements of communication influence  – internet blogs, personal sales (personal consultation, product testing). stage 4 – confirmation, stage 5 – implementation. a level of influence is suggestive and conative, that is, suggestion through both conscious psychological elements and elements of the unconscious and pushing to action. the result of suggestion can be conviction obtained without logical evidence and prompting the recipient of the expected actions from it. strategies  – internet blogs, internet advertising, brand strategy, adventure strategy. the communication channels on stage 3-5 will differ from the previous stages. the potential user has already received the main array of information from different sources and, in the future, will choose the most reliable sources, which will affect the final decision. in our opinion, it can be: • testing centres. it is very important before you decide to get familiar with the high-tech product, its software and functionality, to test it. • the advice of friends and acquaintances. • customer’s experience and his opinion. baltic journal of economic studies 11 vol. 3, no. 3, 2017 • the advice of vendors-consultants who can provide specific information that the consumer did not receive from other sources during the formation of the thought. 5. conclusions the research on the consumers’ motivation in ukrainian market of high-tech goods made it possible to find out that on the present stage of its development, the equal formation of the rational and emotional motivation is observed and certain emotional motives have the pronounced social orientation. the classification of consumer purchasing behaviour is influenced by two factors: the direction of the target consumer motivations development (rational, emotional, and socially-emotional) and consumer involvement in the purchase process. the purchasing behaviour types differ from one another by the character of purchasing decision, the degree of involvement in the purchasing process, the choice of information processing strategy, the number of market alternatives, which are evaluated, the time of purchasing decision. results show that highly rational, cautious, demonstrative behaviours can be observed in the case of high consumer involvement in the buying process. rationally-confident, comfortable, adaptive behaviour can be observed in the case of low involvement. strategies of communicative influence and communication sources depend on consumer behavioural types and the stage of the process of adopting innovations. in the case of highly rational consumer behaviour, generic strategy, benefit strategy, unique technical advantage strategies are recommended to be used as the main communicative strategies. benefit strategy, unique technical advantage strategy, positioning strategy should be used in the case of rationally confident behaviour. the technology of intrusion, intimidation, positioning strategy, affective strategy, and resonance strategy should be used in the case of cautious consumer behaviour. brand strategy should be used in the case of demonstrative consumer behaviour. the communicative strategies of product positioning and the strategy of resonance can be used in the case of comfortable consumer behaviour. brand strategy is the main communicative strategy in the case adaptive consumer behaviour. communicative influence and communication sources depend on the stage of adopting innovations: 1) awareness, 2)  attitude formation, 3) decision, 4) confirmation, 5) implementation. the main communicative channels on the first and second stage of the process of adopting innovations are: exhibition activity, tv advertising, outdoor and print advertising, internet advertising, specialized publications, testing centres for goods, state educational programs. the main communication channels on the following stages are testing centres, the advice of friends and acquaintances, customer’s experience, the advice of vendors-consultants. considering the structural shifts, which occur in the social-economic sphere from time to time and directly influence the consumer preferences and change their behavioural models, the research on transformations in consumer motivation must be conducted on a regular basis. references: blackwell, r .d., miniard, p.w., engel j.f. 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(2012). consumer behaviour: buying, having, and being. upper saddle river, nj: pearson education, 640. vandecasteele, b., geuens, m. (2011). motivated consumer innovativeness: concept, measurement, and validation. advances in consumer research, vol. 38. [url]: http://www.acrwebsite.org/volumes/15867/volumes/ v38/na-38. wells, v.k. (2014). the influence of behavioural psychology on consumer psychology and marketing. journal of marketing management, 30 (11/12): 1119-1158. http://dx.doi.org/10.1080/0267257x.2014.929161 baltic journal of economic studies 12 vol. 3, no. 3, 2017 виктория журило, ольга пригара влияние маркетинговых коммуникационных стратегий на поведение потребителей на рынке высоких технологий украины аннотация. цель исследования – исследование типов поведения потребителей и разработка маркетинговых стратегий коммуникационного влияния на потребителя на рынке высокотехнологичных товаров украины. методология. маркетинговые исследования на украинском рынке высокотехнологичных товаров проводились для определения мотиваций потребителей и особенностей их рыночного поведения. были разработаны профили целевых клиентов и сформирована типология поведения потребителей, основанная на причинах покупки высокотехнологичных товаров и на уровне вовлеченности потребителей в процесс закупок. результаты показали, что в случае высокой потребительской вовлеченности в процесс покупки можно наблюдать такие типы потребительского поведения: очень рациональное, осторожное, демонстративное поведение. рационально-уверенное, комфортное, адаптивное поведение может наблюдаться в случае низкой вовлеченности в процесс покупки. определены особенности коммуникативного влияния для каждого типа потребительского поведения на рынке высокотехнологичных товаров и предложены соответствующие стратегии маркетинговой коммуникации. практическая реализация. стратегии коммуникативного влияния и коммуникационные каналы зависят от потребительских поведенческих типов и стадии процесса внедрения инноваций. в случае высоко рационального поведения потребителей, родовая стратегия, стратегии выгод, стратегии использования уникальных технологических преимуществ рекомендуется использовать в качестве основных коммуникативных стратегий. стратегия преимуществ, уникальная стратегия технологических преимуществ, стратегия позиционирования должны использоваться в случае рационально уверенного поведения. в случае осторожного поведения потребителей следует использовать технологию вторжения, запугивания, стратегии позиционирования, аффективную стратегию и резонансную стратегию. стратегия бренда должна использоваться в случае демонстративного поведения потребителей. коммуникативные стратегии позиционирования продукта и стратегия резонанса могут быть использованы в случае комфортного поведения потребителей. стратегия бренда является основной коммуникативной стратегией в случае адаптивного поведения потребителей. коммуникативное влияние и источники коммуникации зависят от стадии принятия инноваций: 1) осведомленности, 2) формирования отношения, 3) решения, 4) подтверждения, 5) осуществления. основными коммуникативными каналами на первом и втором этапах процесса внедрения инноваций являются: выставочная деятельность, телевизионная реклама, наружная и печатная реклама, интернет-реклама, специализированные издания, центры тестирования товаров, государственные образовательные программы. основными коммуникационными каналами на следующих этапах являются центры тестирования, советы друзей и знакомых, опыт клиентов, советы поставщиковконсультантов. baltic journal of economic studies 31 vol. 3, no. 1, 2017 corresponding author: 1 department of economic cybernetics, vasyl stefanyk precarpathian national university. e-mail: dmytryshyn_l@hotmail.com 2 department of economic cybernetics, vasyl stefanyk precarpathian national university. e-mail: tori55@i.ua spatial differentiation of the regions of ukraine concerning the knowledge economy lesia dmytryshyn1, viktoriia bushynska2 vasyl stefanyk precarpathian national university, ukraine abstract. the purpose of the research is a set of theoretical and methodological, methodical and applied provisions concerning the analysis of economic development built on knowledge (ke) in the regions of ukraine and also the determination of their integral estimation of ke development level. methodology. the research methodology is based on a systematic approach, within which analysed kam methodology (knowledge assessment methodology) developed by the world bank, identified key groups of indicators, such as the general condition of regional economies, economic stimulus and the characteristics of the institutional system, innovation, r&d sector and informational infrastructure. considered the key factors that determine the position of knowledge in the regional development, namely: the business community, the scientific environment and the system of self-government, which forms regional policy in the light of specific conditions of areas. the possibility of this methodology’s application in the regional aspect is determined. for the research are chosen all regions of ukraine. exceptions are temporarily occupied territory. accordingly, histograms of each of the key indicators’ groups are built that help to determine the level of development of a particular region. results. established that the symbiosis of innovative potential with the unique economic mechanisms is the catalysts that enhance the development of the regional knowledge economy. this analysis helps to see social and economic differences between the regions of ukraine. determined that the characteristic feature is an inadequate level of funding of science, which causes the slowdown of innovation activity in the regions because of links imbalance between industry and research industry sector. in most cases, the regions occupied similar positions in different groups of indicators. this allows us to conclude that the development of the knowledge economy components in the region is balanced. noteworthy the fact that during analysing each of the indicators groups, the lion's share of regions was located around the median value, which points to the similarity of the condition of knowledge development in the economy of the regions. highlighted powerful, competitive and potentially most perspective regions in terms of ke development in 2015. the practical implication of the results is findings and proposals for the formation of a regional knowledge economy development strategy. found that the program support of the knowledge economy development should aim at the accelerated and harmonious growth of all triad elements "education – science – manufacturing" and their resulting components. key words: economy of knowledge, innovations, knowledge assessment methodology, ukraine regions, spatial aspect, system analysis. jel classification: i25, i28, o18, p40, r11 1. introduction at the current stage within the legal and political system in ukraine, the regions are the basic units of territorial division, which have local self-administration. in an economic sense, the regions are a subsystem of the territorial economy of the country, and within their borders, the institutional processes occur. since the regions do not have sovereignty and associated legal regulations, their nature is determined by the internal structure (e.g. number of economic subjects, the production efficiency but, at the same time, employment and unemployment and the business environment), external structure (i.e. commodity and financial flows) and total assets (size of gross regional product – grp). today the ideas of classical theories have receded into the background, and the region is only considered as a place of localization of certain types of activities. currently, the region can be interpreted as a place where innovations are generated, and where there are processes of their absorption and diffusion. that is, the region should be considered as the fundamental baltic journal of economic studies 32 vol. 3, no. 1, 2017 organization level of the economy, and as a sphere for the creation of knowledge and innovations and technical and technological skills (christopherson, 2008; pike, rodríguez-pose, & tomaney, 2016). of course, each region has its own features inherent only in it. in different areas, there are different mechanisms of development and application of innovations, especially the mechanisms of education and qualification training, as well as the ability to cooperate and create links in the form of entire network systems. 2. economy of knowledge – a feature of the regional competitiveness therefore, it can be argued that the innovative ability is determined by the regional potential as well as due to the ability of any spatial structure to generate and distribute innovations. the innovative sphere is developed in quite different way in those planes where there is a strong and dominant centre of the metropolis that is in planes with multi-function structure. on the territory, where separate subjects of international importance operate, the development of innovative processes is different than in those areas where the sector of small and medium enterprises is well developed. the coexistence of exceptional innovative potential together with unique mechanisms that are unique to the certain region creates the essence of the regional economy based on knowledge (cooke & memedovic, 2003; cooke & schienstock, 2000). on the base of these considerations, we focus on those catalysts, which enhance the regional economic development based on knowledge. the first engine of the development of the regional economy based on knowledge is the business environment. enterprises should produce knowledge themselves by obtaining and using knowledge with the aim of achieving lasting competitive advantages that increase their value in the marketplace. the second initiator of the creation of the economy based on knowledge is the scientific environment. these subjects mainly generate theoretical knowledge and their practical application will lead to significant dissemination of knowledge for the requirements of socio-economic growth. the last element in this system  – the system of self-government, which forms the regional policy through the prism of a deep knowing of the special conditions of the territory, which it covers. state authorities should monitor the development of the economy based on knowledge as the most strategic process. the knowledge-based economy is closely associated with the community of people who learn. however, education cannot be seen only as a direct transfer of information. education is a joint process of individual interconnected elements that get an education, which, in its turn, leads to the so-called social capital. effective improvement of professional qualifications is connected with several postulates: 1. continuous professional training of the employee during his entire professional career is necessary (it concerns, first of all, institutions outside the university). 2. the employee must be continuously adapted to changes in the location and nature of a job. 3. the training should also include skills training to produce own and create new knowledge. it is considered that the increase in the efficiency of education, resulting in the social capital formation is the main factor of the regional development, and the ability of regions to adapt to the requirements of the economy based on knowledge. education and skills become a strong attribute in a particular market. investments in human resources are required to increase public capacity since the employees with the competence, experience, motivation and engagement are the creators of the intellectual capital of the enterprise. it is worth saying that the importance of human capital does not change in direct proportion to the change of the number of people. it is better to consider the level of this capital in the qualitative perception than in a quantitative one because it does not obey all the rules of the market. one should pay an attention to the fact that culture in the broadest sense of this word plays an important role in the economy based on knowledge. it deals with social elites and development of cultural centres, as well as entrepreneurship and work culture. another manifestation of the regional development is the perception of the future. these questions can be directly linked to migration, consumption and investment decisions. that is why poorer regions have the greatest problem with the shortage of people with knowledge. even if there are highly skilled workers in this area, there is the process of migration in conditions of the lack of jobs for them. other regions will use income generated by these workers, or, what is worse, such persons will be employed in other spheres and will not realize their inner potential. all these aspects affect the formation of the competitiveness of the region, which creates favourable conditions for local business, and it is more competitive due to the search for investment capital, and this fact facilitates the inflow of foreign investments. 3. empirical analysis to determine the state of development of the regional economy based on knowledge in ukraine, the input data set will contain diagnostic functions, taking into account all aspects of such an economy. it consists of 5 key groups of indexes formed in a similar way to the methodology (chen & dahlman, 2005): 1) the characteristic indexes of the general state of the economy; 2) the indexes of economic stimulus and the characteristics of the institutional structure; baltic journal of economic studies 33 vol. 3, no. 1, 2017 3) the indexes of innovation activities in the region; 4) the indexes of r&d sector; 5) the indexes of the development level of information infrastructure. these indexes were analysed concerning regions of ukraine in 2015. the extrapolation method was used to eliminate gaps in the dataset. this sample was divided into stimulants and destimulants, which were presented with the opposite sign. they include the following indexes: proportion of population with average person equivalent total income per month below the subsistence level (%), provision of population with medical hospital beds, number of crimes (cases per thousand persons), unemployment rate (%) unemployment rate of women (%) unemployment rate of men (%). the results of the conversions were normalized. selected data ("state statistics service of ukraine," 2015) array of diagnostic indicators for the study is so large that it is impossible to represent it for each region in each year. therefore, it was decided to represent each group of indexes separately for the last study period (fig. 1–5). each figure shows the deviation of the development level of the 22 regions (excluding the temporarily occupied territories) in the context of a specific group of classification features. zhytomyr region lviv region -1 -0,8 -0,6 -0,4 -0,2 0 0,2 0,4 0,6 0,8 1 1,2 fig. 1. the level of characteristic indexes of the general state of the economy of ukrainian regions in 2015 most regions during the diagnostics of the level of economic development of regions (fig. 1) showed a significant deviation from the medium level. the highest level is presented in the lviv region, due to the significant growth of the gross regional product, the long life expectancy of the population among women and men, as well as the growth in the number of workplaces. the lowest level of economic development of the region is presented in the zhytomyr region, due to a relatively weak level of industrial development, which is reflected in the grp. in its turn, a high level of morbidity has also played its role. among the indexes of economic stimulus and institutional structure (fig. 2) the dnipro region has the highest level, but kharkiv region has also rather high level. these results were achieved thanks to high rates of capital formation, which was caused by a large number of loans to small and medium businesses. also, it is worth saying that these regions are safe enough according to the crime statistics. kirovohrad and zaporizhzhia regions are the antagonists respectively to these regions. dnipro region kirovohrad region -1,5 -1 -0,5 0 0,5 1 1,5 fig. 2. the level of economic stimulus indexes and characteristics of institutional structure of the regions of ukraine in 2015 kharkiv region khmelnytsky region -1 -0,5 0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 fig. 3. the level of characteristic indexes of innovative activity of the ukrainian regions in 2015 the level of innovation activity of the regions (fig.  3) is directly linked to a large number of factors that influence it, for example, the number of students of educational institutions, the number of studies conducted for the r&d sector, as well as the volume of their subsidy amounts. kharkiv and dnipro regions are the leaders in terms of the innovative development of the regions of ukraine. this fact is directly related to the population size and concentration of production capacities, which in its turn determined this course of events. as to the level of indexes of r&d sector (fig. 4), they can be divided into two groups: 1) education (number of students of educational institutions, researches, conducted for the r&d sector, as well as their subsidy amounts); 2) labour force (unemployment rate, employment rate, level of economic activity of the population of the region). kharkiv and dnipro regions managed again to achieve the best results. this is because the r&d baltic journal of economic studies 34 vol. 3, no. 1, 2017 sector is the basis for innovation activities. therefore, without a doubt, the result was expected. but a very low level of development of scientific researches in ternopil region was surprising. the relatively low level of population employment in the industrial sector and high unemployment level were the root causes of this phenomenon. dnipro region ternopil region -1,5 -1 -0,5 0 0,5 1 1,5 2 fig. 4. the level of characteristic indexes of the r&d sector of the ukrainian regions in 2015 4. conclusions application of spatial statistics and multivariate comparative analysis made it possible to assess the state of the regional economy based on knowledge. noteworthy is the fact that the analysis allows seeing social and economic differences between the regions of ukraine and could be the basis for creating and maintaining a common regional policy. the factors that served as the basis for the research are formed in accordance with the methodology, developed by the world bank. in most cases, the regions occupied similar positions in different groups. references: chen, d. h., & dahlman, c. j. (2005). the knowledge economy, the kam methodology and world bank operations. retrieved from: http://documents.worldbank.org/curated/en/695211468153873436/theknowledge-economy-the-kam-methodology-and-world-bank-operations christopherson, s. (2008). local and regional development. by andy pike, andrés rodríguez-pose and john tomaney. economic geography, 84(2), 241-242. cooke, p., & memedovic, o. (2003) strategies for regional innovation systems: learning transfer and applications (pp. 15-19): united nations industrial development organization vienna. cooke, p., & schienstock, g. (2000). structural competitiveness and learning regions. enterprise and innovation management studies, 1(3), 265-280. pike, a., rodríguez-pose, a., & tomaney, j. (2016). concepts and theories of local and regional development local and regional development (pp. 61-70): routledge. state statistics service of ukraine. (2015). retrieved from: http://ukrstat.gov.ua леся дмитришин, виктория бушинская пространственная дифференциация регионов украины относительно экономики знаний аннотация. предметом исследования является комплекс теоретико-методологических, методических и прикладных положений относительно анализа развития экономики построенной на знаниях (эз) в регионах украины, а также определение их интегральной оценки уровня развития эз. методика. в основу методологии исследования положен системный подход, в пределах которого проанализирована методология kam (knowledge assessment methodology) мирового банка, идентифицировано ключевые группы показателей, такие, как: общего состояния экономики регионов, экономических стимулов и характеристики институционного порядка, инновационной деятельности, сектора r&d и информационной инфраструктуры. рассмотрены основные факторы, которые определяют место знаний в развитии региона, а именно: бизнес среда, научная среда, а также система самоуправления, которая формирует региональную политику сквозь призму особых условий развития территорий. определены возможности адаптации данной методологии в региональном разрезе. для проведения исследования были избраны все регионы украины. исключениями odessa region rivne region -1 -0,5 0 0,5 1 1,5 2 2,5 3 3,5 fig. 5. the level of development indexes of informational infrastructure of the ukrainian regions in 2015 odesa region stands out with its development level of information infrastructure (fig. 5), which is reflected in large indexes of the presence of the telephone lines, subscribers of cable television and the internet. baltic journal of economic studies 35 vol. 3, no. 1, 2017 служили временно оккупированные территории, а также места проведения боевых действий. согласно этому было построено гистограммы каждой из ключевых групп показателей, с помощью которых можно определить уровень развития конкретного региона. результаты. установлено, что симбиоз инновационного потенциала с уникальными экономическими механизмами есть теми катализаторами, которые усиливают развитие региональной экономики знаний. благодаря данному анализу удалось увидеть социальные и экономические отличия между регионами украины. определено, что характерной особенностью является недостаточный уровень финансирования науки, который в свою очередь предопределяет замедление инновационной деятельности в регионах через дисбаланс связей между промышленностью и отраслевым научным сектором. доказано, что постепенное снижение инновационной деятельности регионов приведет к потери инновационного потенциала государства в целом, которое ослабляет позиции украины в международном рейтинге и делает невозможным привлечение научных учреждений и инновационных предприятий к реализации общих проектов. в большинстве случаев регионы занимали похожие позиции в разных группах показателей. это позволяет сделать вывод о равномерном развитии компонентов экономики знаний в регионах. также следует заметить, что во время анализа каждой из групп показателей львиная доля областей располагалась вокруг медианного уровня, который указывает на сходство состояния развития знаний в экономике регионов. выделено мощные, потенциально конкурентоспособные и наиболее перспективные с точки зрения развития эз регионы-лидеры по состоянию на 2015 год. практическое значение. практическое значение полученных результатов заключается в том, что можно сделать выводы и предложения относительно формирования региональной стратегии развития экономики, построенной на знаниях. выявлено, что программная поддержка развития экономики знаний должна быть направлена на ускоренное и гармоническое развитие всех элементов триады «образование – наука – производство» и их результирующих компонентов. baltic journal of economic studies 162 vol. 8 no. 2, 2022 1 zaporizhzhia national university, ukraine (corresponding author) е-mail: cherep2508@gmail.com orcid: https://orcid.org/0000-0002-3098-0105 2 zaporizhzhia national university, ukraine e-mail: karollinza@gmail.com orcid: https://orcid.org/0000-0002-2227-3865 3 zaporizhzhia national university, ukraine e-mail: e.v.makazan@gmail.com orcid: https://orcid.org/0000-0001-5855-0476 doi: https://doi.org/10.30525/2256-0742/2022-8-2-162-172 study of indicators of the level of development of material well-being of the population, the problem of inequality and poverty in ukraine in the context of statistical evaluation oleksandr cherep1, valentyna helman2, еvgeniya makazan3 abstract. the wealth gap between rich and poor countries, which is growing, causes poor countries to be pushed to the margins of the world economy, the growth of unemployment in them, and the impoverishment of the population. the income inequality that exists in ukraine has negative economic and social consequences. currently, there is a need to use statistical analysis to study the dynamics of indicators of the level of well-being of the population, the problems of inequality and poverty in ukraine in the context of the performance by the state of its functions as a subject of social policy in the face of modern challenges and risks. the purpose of this article is to study inequality, assess the extent and trends of this phenomenon in ukraine, determine the relationship between economic development and socio-economic inequality and develop proposals to reduce it. the dynamics and structure of the main indicators of the level of development of material well-being of the population in the context of statistical evaluation for the period 2000–2020 were analyzed. to analyze the dynamics of the gini coefficient in ukraine, the quintile coefficient of differentiation of aggregate income of the population and the quintile coefficient of funds (by aggregate income), the average annual growth/decline in the indexes of physical volume of gdp, real wages, employment and the number of unemployed population, the dynamics of the share of spending on social protection and social welfare in the structure of total budget expenditure and in the gdp of the country. an in-depth statistical analysis of the relationship between average monthly disposable income and the number of people with an average per capita equivalent gross monthly income below the legal subsistence minimum was conducted. in developing the state targeted social program to overcome and prevent poverty in ukraine, the focus is on ensuring economic growth, stimulating employment and others, increasing money incomes, conducting anti-inflationary policies, investments and targeted assistance for the economic development of certain sectors of the economy. key words: inequality, poverty, gini coefficient, income and expenditure of the population, social protection, lowincome family, living wage, real wages. jel classification: i14, i32, e24 1. introduction in the two decades leading up to the covid-19 pandemic, emerging and developing economies grew steadily, making much-needed progress in reducing poverty and increasing life expectancy (cugat, narita, 2020). the coronavirus pandemic has made its mark on global inequality, exacerbating pre-existing trends of poverty and income imbalance that were already increasing in many advanced economies, emerging markets, and developing countries (ventura, 2020). the oxfam research group report "inequality kills" (2022) asserts that since the beginning of the quarantine period, the incomes of 99% of humanity have declined rapidly and that inequality contributes to the death of at least one person every four seconds (ahmed, marriott, dabi, lowthers, lawson, mugehera, 2022). baltic journal of economic studies 163 vol. 8 no. 2, 2022 according to the world inequality report 2022, today 's income and wealth inequality is very high, close to the level of the early 20th century (at the height of western imperialism). the gap between the average income of the richest 10 percent of countries and the average income of the poorest 50 percent has narrowed from about 50 times to just under 40 times. although inequality within most countries has increased, global inequality between countries has decreased over the past two decades. growing imbalances within countries mean that, despite economic backwardness and high growth rates in emerging economies, the world today remains particularly unequal, and inequalities within countries are now even greater than the significant inequalities observed between countries (chancel, piketty, saez, zucman, et al., 2022). inequality negatively affects the life of the population, affects human development, is a source of social tension and state instability, and has a pessimistic effect on the development of the national economy. at the same time, on the other hand, it is a driving force of economic activity of the population (markina, kalinichenko, lesiuk, 2019). inequality is caused both by objective differences between different people and by different political values and priorities. undoubtedly, people differ in their abilities, aptitudes, success, ability to use available chances, and, ultimately, in their ability to realize their labor potential. today science recognizes inequality as a key problem of our time and almost the main factor of social instability: the higher and more diverse the inequality, the higher the demands for redistribution and the higher the risks of social tensions and social conflicts. this is due to its enormous impact both on the socio-psychological climate in society and on the economic situation. globally, the number of people living in extreme poverty has been declining for decades: from 1.94 billion in 1982 to 696 million in 2017. this decline is particularly encouraging because the world's population has grown significantly over the same period, from an estimated 4.5 billion people in 1981 to more than 7.8 billion in 2021. at the same time, the overall level of poverty has improved considerably in recent decades, but a number of individual countries have seen an increase in poverty. many countries where poverty is rising suffer from political instability or conflict, including military conflicts. others are hampered by frequent natural disasters or persistent environmental stresses (in particular the intensification of drought) caused by climate change (poverty rate by country 2022). after analysing the works of domestic and foreign scientists, including r . barro, n. birdsong, e. libanova, b. milanovich, a. moskvina, s. berveno, o. nazarova, o. chuprina, t. chatchenko, a. nadtochii, a. smahliuk, m. naumova, r . wilkinson, k. pickett, g. yurchyk, n. samoliuk and others, who are devoted to the issues of theoretical, methodological and practical aspects of the foundations of the formation of socio-economic inequality, establishing links with economic development, it becomes clear that today there is a need for more in-depth research using statistical analysis in order to study the dynamics of indicators of the level of well-being of the population, the problems of inequality and poverty in ukraine in the context of the state's performance of its functions as a subject of social policy in the context of modern challenges and risks. the purpose of this paper is to study inequality, assess the extent and trends of this phenomenon in ukraine, determine the relationship between economic development and socio-economic inequality and develop proposals to reduce it. the methodological basis of the study consists of general scientific methods of analysis and synthesis, logical generalization to achieve the set goal and solve the problems of research, formulation of conclusions. empirical, comparative and statistical methods are used to describe the problem of economic inequality, analyze the dynamics and study the trends of the main indicators of the level of development of material well-being of the population. to deepen the statistical analysis we used methods of correlation and regression, in particular, we smoothed the series of dynamics of indicators of the share of expenditures on social protection and social welfare in the expenditures of the consolidated budget of ukraine and the country 's gdp, as well as the study of the relationship between the average monthly disposable income and the number of population with average monthly equivalent total incomes below the legal subsistence minimum. 2. the study of inequality and income differentiation of the population the biggest and most controversial problem, characteristic not only for ukraine, but for the whole world, is economic inequality, which accompanies humanity throughout its existence. income inequality, which can and usually causes imbalance in access to basic social benefits (quality health care, level of education, comfortable housing), resources (financial, including loans, land, etc.), and realization of their basic rights in general for life, security, cultural development, social activity and participation in political life, etc.). but at the same time, income inequality itself is a consequence of other types and manifestations of inequality. for example, the lack of opportunities for quality education reduces the chances of children from poor families finding work, earning baltic journal of economic studies 164 vol. 8 no. 2, 2022 a decent income for it, and ultimately condemns them to poverty in adulthood. social stratification and poverty of a large part of the country 's population is primarily the result of low income from employment due to the weak adaptation of the national economy to globalization, the lack of competitiveness of entire industries and manufacturers, low labor productivity and poor organization, low-wage jobs and lack of necessary skills, and socio-economic stratification of regions. income and expenditures of the population always occupy an important place in the life of the population and the country as a whole. the increase in the income of the population and the decrease in its expenses is one of the most important economic issues addressed by the state. after all, the socio-economic condition of the country and the development of society directly depend on these indicators. as incomes rise, the quality of life increases and the consumption of life's goods raise. the standard of living characterizes the pace of economic development in ukraine this problem is particularly acute. according to official data, the income of the majority of the population today does not meet a sufficient standard of living (nazarova, chupryna, chatchenko, 2021). thus, in 2021, the average adult earns € 16.7 thousand. (usd 23,380) per ppp per year and has a fortune of € 72.9 thousand (usd 102.6 thousand) (chancel, piketty, saez, zucman, et al., 2022). the highest income in the world is earned in monaco – $ 186,080. afghanistan has the lowest per capita budget – $ 500. in the ranking of 69 countries ukraine ranks 53rd with an average income of $ 3570 (average income around the world, 2020). behind these averages are significant differences both between and within countries. the presence of income distribution leads to the formation of consumer structures that differ and are divided into social groups with different income levels, which leads to population stratification and changes in the socio-labor development of the country. currently, the richest (10% of the world's population) earn an average of € 87.2 thousand (usd 122.1 thousand) per year and receive 52% of world income, while the poorest part of the population (50% of the world's population) earns an average of € 2.8 thousand (usd 3.9 thousand) per year and receive 8.5% of this income, respectively, the middle class (40% of the world's population) earn 39.5% of world income (chancel, piketty, saez, zucman, et al., 2022). the gini coefficient (inequality index or equity index) measures the distance between the richest and the poorest sections of the population, the reduction of which is one of the many indicators of economic success of any country. the higher the coefficient is, the greater is the gap – 1% means equality of income, 100% – all income is concentrated in one hand. interestingly, in ukraine the gini coefficient is one of the lowest in the world – 25.36%. we are in the company of such countries as azerbaijan (22.45%), moldova (24.5%), belarus (24.75%), slovenia (24.84%), czech republic (25.43%), slovakia (25, 77%). in poland, the gini 2020 index was 30.19%, in denmark – 28.5%, in switzerland – 32.25%, in germany – 32.33%, in france – 32.55%, in britain – 33, 12 %. the deepest income gap between rich and poor is in south africa (62.73%), namibia (59.17%), zambia (58.09%), lesotho (54.43%), mozambique (53.87%), botswana (53.35%), brazil (52.44%) (indeks dzhyni-2020 u sviti). analysis of the degree of social inequality in ukraine by the gini coefficient (figure 1) shows a general downward trend (29% in 2020, 29% in 2005, 24.8% in 2010 and in 2015 – 25.5%, in 2020 – 25.4%), which is quite positive, but for the population it does not play an important role, as the poor remain poor, and the rich only get richer. in addition, the gini coefficient is an aggregate measure that describes the overall degree of inequality without a deeper understanding of the distribution of income among households. the accuracy of the indicator depends on reliable data on gdp and income, taking into account the shadow economy and informal economic activities present in each country. analysis of income differentiation in ukraine for 2000–2020 showed that the quintile coefficient of differentiation of total income of the population, which determines the ratio of the minimum level of income among the most affluent 20% of the population to the maximum level of income among the least affluent 20% of the population, ranked by the average per capita equivalent income, averaged 2 times and practically did not change in recent years, and the coefficient of funds (by total income), which shows that the total income of the most affluent citizens exceeds the income of the least affluent 20% of citizens more than three times, in particular, since 2016, this indicator has tended to increase. however, given the shadowing of the economy, the quintile coefficient of differentiation of total incomes of the population and the quintile coefficient of funds (on total incomes) are probably much higher (figure 2). the analysis of a number of distributions of the population by total income is characterized by heterogeneity (figure 3). 3. structure of expenditures, social orientation of the budget and economic development in 2020, the equivalent total income per person was 2,888 uah. 61 uah per month. the share of modal average per capita income of 21.6% indicates that the most common population strata baltic journal of economic studies 165 vol. 8 no. 2, 2022 figure 1. dynamics of the gini coefficient in ukraine, % source: (gini index, 2021; ukraine – gini index: 2010–2020) figure 2. dynamics of quintile coefficient of differentiation of aggregate income of population and quintile coefficient of funds (by aggregate income), in races source: (derzhavna sluzhba statystyky ukrainy) figure 3. distribution of the population of ukraine (%) in 2020 by the level of total average per capita income per month, uah source: (derzhavna sluzhba statystyky ukrainy) baltic journal of economic studies 166 vol. 8 no. 2, 2022 in the country are those who have an average monthly income of 4,000.1 to 5,000 uah per person. third, the median income was 2,622 uah, that is, half of the population had an average monthly per capita total income of less than 2,622 uah, while the other half had more. but note that the size of the median per capita aggregate income is below the average for ukraine, indicating that the vast majority of the population has incomes below their average value. incomes of the population of ukraine (in 2021 – 86016 uah, in 2020 – 73355 uah, in 2019 – 67528 uah per person) are formed at the expense of: – wages paid to hired employees (in 2021 – 45.4%, in 2020 – 45.3%, in 2019 – 47.0%), which remains the main type of monetary income of the population and a determining factor in the material well-being of the population; – social benefits and other current transfers received (pensions, allowances, scholarships, insurance payments and other payments) (in 2021 – 33.3%, in 2020 – 33.8%, in 2019 – 31.8%), which are no less significant components of the population's income and indicate that on average a third of the population's income is replenished by cash payments and benefits from the state; – profit and mixed income (in 2021 – 19.09%, in 2020 – 18.3%, in 2019 – 18.1%), property income received in the form of interest on deposits, securities, dividends and other income (in 2021 – 2.3%, in 2020 – 2.6%, in 2019 – 3.1%), which on average accounts for a fifth part of the population's income (derzhavna sluzhba statystyky ukrainy). thus, the main part in the structure of household incomes occupies the labor payment, which is mainly used for the purchase of goods and services (in 2021 – 92%, in 2020 – 89%, in 2019 – 92.1% of the total amount of expenses), the rest is paid by the population in the form of current taxes on income, property and other paid current transfers (table 1). wages and salaries are the main source of income, so consider the dynamics of nominal wages for the analytical period 2000–2020. nominal wages characterize the level of wages regardless of changes in prices for goods and services, so they are one of the factors for improving the well – being and standard of living of workers. in 2020, the average nominal salary of a full-time employee increased by 10.4% compared to 2019 and amounted to uah 11,591. in december 2020, the average nominal salary of a full-time employee was uah 14,179, which is 2.8 times higher than the minimum wage (uah 5,000) (derzhavna sluzhba statystyky ukrainy). it should be recognized that the level of wages in ukraine remains one of the lowest in europe. however, on the one hand, it should be taken into account that for 30 years ukraine has gone through an extremely difficult path of formation and trials, which led to significant losses of a socio-economic nature. on the other hand, despite internal and external constraints, ukraine's socio-economic environment has developed at a very significant pace. although few people today are satisfied with their own incomes and wellbeing, there is nevertheless considerable evidence of quite positive trends in the strengthening of the economic vitality of ukrainians. in negotiating real wages, employers and employees respond in some way to labor market conditions. if, for example, the level of gdp and employment are high, then real wages tend to grow (2000– 2004, 2010–2012, 2016–2017), which ensures an increase in the purchasing power of the population. conversely, if gdp and employment levels decrease, real wages grow slowly or even reduce (2005–2009, 2013–2015, 2018–2020) (figure 4). the dependence of the number of unemployed on the value of gdp is demonstrated by comparing the annual growth rates of the corresponding indicators (figure 4). in 2000–2020 the ukrainian economy showed stable, sometimes very high rates of gdp growth, but the vulnerability of gdp formation, as well as crisis phenomena led to the fall of gdp in ukraine (2009, 2014–2015, 2020). thus, in ukraine, table 1 expenditures of the population of ukraine for 2019–2021 (million, uah) 2019 2020 2021 expenses and savings – total 3699346 3 972 428 4 698 611 including purchase of goods and services 3406202 3 535 377 4 324 187 property income (paid) 39273 45 678 47 679 current taxes on income, property, and other paid current transfers 370036 408 390 504 104 including – current taxes on income, property, etc. 295767 313 366 377 108 – social insurance contributions 3842 3 882 5 298 – other current transfers 70427 91 142 121 698 accumulation of non-financial assets -21148 -30 118 -21678 growth of financial assets -95017 13 101 -155681 source: (derzhavna sluzhba statystyky ukrainy) baltic journal of economic studies 167 vol. 8 no. 2, 2022 the unemployment rate is related to the phases of the economic cycle: it decreases during the boom phase and increases during the decline phase. even periods of relative economic growth in ukraine have not contributed to a radical reduction in inequality, the increase in income has only stimulated the growth of imbalance, which is explained, in our opinion, by systemic problems, the existing mechanisms of distribution and redistribution within the current economic model. thus, the ukrainian situation is not unique, but rather reflects general trends typical of developing, or transforming, countries. in ukraine, to combat poverty, the "poverty reduction strategy " was adopted, which was valid until 2020 (stratehiia podolannia bidnosti). the strategy was adopted as part of the association agreement between ukraine and the eu and to implement the sustainable development goals. among the strategic directions of poverty reduction: increasing incomes, providing access to social services regardless of place of residence, minimizing the risks of social isolation of the rural population. a separate task in the strategy is to prevent the emergence of pockets of chronic poverty and social isolation among internally displaced persons. in september 2015, the un sustainable development summit in new york adopted the "sustainable development goals 2030" – key directions for the development of countries and the world as a whole. as a result of this work, the national report "sustainable development goals: ukraine" (2017) was published in 2017, which adapted 17 global sustainable development goals taking into account the specifics of national development. in 2020, the decree of the president of ukraine "on the s ustainable development goals of ukraine for the period up to 2030" was adopted, which outlined the key directions of the country 's development, which consist of 17 sustainable development goals, the first of which is the overcoming of poverty in all its forms (pro tsili staloho rozvytku ukrainy na period do 2030 roku). ukraine pays considerable attention to the policy of redistribution in order to reduce the level of poverty. the largest part of the state budget is traditionally spent on social support (health care, spiritual and physical development, education, social protection and social security) (in 2021 – 50.28%, in 2020 – 50.55%, in 2019 – 52.59%, in 2018 – 53.14%, in 2017 – 55.85%, in 2016 – 57.45%, in 2015 – 55.57%, in 2014 – 59.09%), although it tends to decrease due to a rise in spending on economic activity (in 2021 – 15.91%, in 2020 – 16.47%, in 2019 – 11.26%, in 2018 – 11.26%, in 2017 – 9.74%, in 2016 – 7.92%, in 2015 – 8.27%, in 2014 – 8.34%). thus, it is possible to note the government's policy to create opportunities for sustainable economic development. let's consider the structural features of expenditures of the consolidated budget of ukraine: social protection and social security are the largest expenditure item of the consolidated budget of ukraine – 19.92%, which in terms of volume outstrips expenditures on education – 16.97%, economic activity – 15.91%, national functions (including public debt servicing) – 13.7% and healthcare – 11.04% (figure 5). during 1990–2021, annual expenditures on social protection and social security averaged 21.3% of the total expenditures of ukraine's consolidated budget and, consequently, averaged 6.9% of the country 's gdp (figure 6). as can be seen from figure 6, the data on the indicators of the share of expenditures on social protection and social security of the figure 4. average annual growth / decline rates of indices of physical volume of gdp, real wages, employment and the number of unemployed population (percent compared to the previous year) source: (derzhavna sluzhba statystyky ukrainy) baltic journal of economic studies 168 vol. 8 no. 2, 2022 population in the expenditures of the consolidated budget of ukraine and, respectively, the share of expenditures on social protection and social security of the population in the gdp of the country are uneven and with fluctuations. to determine the general trend, the dynamics series was smoothed (indicators of the share of expenditures on social protection and social welfare in the expenditures of the consolidated budget of ukraine and, respectively, the share of expenditures on social protection and social welfare in the gdp of the country) by a three-term moving average (figure 6). in the average values it is possible to see more balanced fluctuations in the levels of the primary series, resulting in a more clearly distinguishable trend of development, in particular, we can distinguish periods: a trend of increasing levels of the indicator (from 1990 to 1993, from 1999 to 2016) and a trend of decreasing levels of the indicator (from 1993 to 1999, from 2016 to 2021). in particular, in recent years, during 2016–2021, with an actual increase in the volume of expenditures on social protection and social security from uah 258,326.1 million, in 2016 to uah figure 5. structure of expenditures of the consolidated budget of ukraine (functional classification) in 2021 source: (vydatky zvedenoho biudzhetu ukrainy) figure 6. dynamics of the share of expenditures on social protection and social security in ukraine during 1990–2021 source: (derzhavna sluzhba statystyky ukrainy) baltic journal of economic studies 169 vol. 8 no. 2, 2022 367,346.6 million in 2021, we observe a tendency to slow down their share in expenditures of the consolidated budget of ukraine from 30.92% in 2016 to 19.9% in 2021, and, accordingly, in gdp – from 10.8% in 2016 to 6.7% in 2021. at the same time, given external and internal risks and uncertainties, structural changes in social protection and social security expenditures show a downward trend, but their forecasting is still difficult in the context of the russian-ukrainian war. 4. the problem of overcoming poverty and the need to increase the level of average per capita total income studies by international organizations have shown an increase in the level of poverty in ukraine in 2020 by 50% and currently amounts to more than 19 million people. poor ukrainians are characterized by the following features: lack of higher education (among citizens with higher education, the poverty rate is 11%, among citizens with only secondary education – 29%); part-time work; wages bordering on the minimum; many children in the family (instytut demohrafii ta sotsialnykh doslidzhen imeni m. v. ptukhy natsionalnoi akademii nauk ukrainy). not only do the poor not benefit from the country 's economic growth, but they are also unable to contribute to society because of limited access to major markets. the state statistics service of ukraine indicates who is most often in the category of relatively poor people in ukraine: – families with three or more children – among them, 60.9% receive an income per capita below the real subsistence minimum; – families with children where there is at least one unemployed person – 46.1%; – single person over 65 years of age – 40.2%. when assessing material security in ukraine, the concept of absolute and relative poverty is used. the concept of absolute poverty is closely related to the concept of the poverty line or the level of income below which a person is considered poor and cannot meet basic needs. the world bank has set the poverty line at $1.9 a day. there are also national thresholds of poverty: in ukraine, the indicator of the "poverty line" can be represented either in the form of a natural set of goods of primary necessity, or in the form of a cost expression of this set of goods. the basic, official poverty line in ukraine is based on the living wage budget. the average annual statutory living wage in ukraine in 2020 was 2078.4 uah. income below the legal living wage in 2020 was 1.6% or 0.6 million people, in 2019 1.1% or 0.4 million people, in 2018 1.3% or 0.5 million people, in 2017 2.4% or 0.9 million people, in 2016 3.8% or 1.5 million people, in 2015 6.4% or 2.5 million people, in 2014 8.6% or 3.2 million people (nazarova, chupryna, chatchenko, 2021), which have a declining trend. relative poverty in ukraine is the level of income below the real poverty line. according to the state statistics service of ukraine, the actual living wage in 2020 per person (excluding the amount of mandatory payments) was equal to 3,847.2 uah per month. income below the actual living wage in 2020 had 23.2% of the population, or it is 8.8 million people, in 2019 – 23.1% or 8.9 million people, in 2018 – 27.6% or 10.6 million people, in 2017 – 34.9% or 13.5 million people, in 2016 – 51.1% or 19.8 million people, in 2015 – 51.9% or 20.2 million people, in 2014 – 16.7% or 6.3 million people (derzhavna sluzhba statystyky ukrainy). accordingly, the increase/ decrease of this indicator depends on the economic situation in the country. but the full scale of the existing problem becomes clear if we take into account not the indicators of inequality, but how the existing imbalance is perceived by the population. the state statistics service of ukraine published a report in which ukrainians assess their well-being. 67.1% of ukrainians consider themselves poor and only 1% of ukrainians consider themselves middle class. responding to a question about the income, which allows us to consider ourselves a representative of the middle class, 71.3% of respondents said the amount of more than 22 thousand uah per month. the report also states that only 1.6% of ukrainians believe that over the past year their financial situation has improved, 4.4% – rather improved, 43.6% – remained unchanged, 29.2% – rather worsened, 21.2% – worsened (shumylo, 2021). poverty has always been a pressing problem. now a large part of the population is poor or close to the border of the "social bottom. by early 2020, 24.4% of the population have incomes below the actual subsistence minimum. this is especially noticeable against the background of strong stratification, when the difference in incomes of the poor and the rich is tens, hundreds and thousands of times. and this process is dynamic, with the poor becoming poorer and the rich becoming even richer. the relevance of this issue is that social polarization, the stratification of our society into poor and rich is its main characteristic at the moment and in our time. the largest share of ukraine's consolidated budget expenditures on social protection is represented by expenditures on social protection of pensioners (over 50%). this is due to the aging of the population and the low retirement age, which accounts for the large number of people over the working age, as well as the existence of a significant number of benefits for pensioners (for example, all pensioners are entitled to free travel in public urban and suburban transport). baltic journal of economic studies 170 vol. 8 no. 2, 2022 the state of ukraine provides free secondary education, guarantees a basic package of medical services and specialized care for groups designated as vulnerable by the government, and provides benefits for low-income families. social payments and services financed from the state budget include the following types of state social programs: – social assistance (assistance to families with children, low-income families, disabled people from childhood, disabled children); – benefits (for war veterans, labor veterans, people affected by the chernobyl disaster, for individual professions); – housing subsidies (to pay for housing and communal services and gas) and social services (mainly for single disabled people). for example, in ukraine, targeted financial support is provided to families whose combined monthly income is below the level of the calculated indicator "total family income for all types of social assistance". this indicator is calculated annually and approved by the law on the state budget. amounts of social assistance to low-income families (2021): – for able-bodied citizens – uah 832.65; – for persons who have lost their ability to work – uah 1 854; – for children under 6 years – uah 2 616.9; – for children aged 6 to 18 years – uah 3 263; – for children aged 18 to 23 years (if they are studying) – uah 3 092.7 (pro derzhavnyi biudzhet ukrainy na 2021 rik; (pro derzhavnu sotsialnu dopomohu malozabezpechenym simiam). identify the close relationship between two variables – the population size with average per capita equivalent total income per month, below the legally established subsistence minimum (in particular, their share) and the value of the average monthly disposable income per person (reduced to the prices of the base year) according to the obtained statistical data (table 2). calculated indicators: x = 1.042, y = 0,883, variance: σх2 = 0,013, σу2 = 0.071, standart deviation: σх = 0,1146, σу = 0,2664, correlation coefficient: rxy = – 0,118, coefficient of variation: vx = 11%. thus, since the coefficient of variation (v) is 11% and slightly greater than 10%, the degree of data scattering is considered average. the correlation coefficient (rxy) has a value of -0.118, which indicates (according to the empirical rule (cheddock scale) for assessing the tightness of the relationship) a moderate relationship between indicators. moreover, it is inverse, as it has a negative value. that is, when the number of the population with an average per capita equivalent total monthly income below the legally established subsistence minimum increases, the average monthly disposable income per person (in prices of the basic period) decreases and vice versa. 5. conclusions undoubtedly, poverty is a consequence of imbalances in the social reproduction of heterogeneous types of labor, the presence of employed and unemployed, which determine the differentiation of the population in terms of welfare, access to basic social benefits, and so on. thus, reducing inequality and fighting poverty is becoming an increasingly acute problem for the whole world because of the consequences of the pandemic, while at the same time remaining very important for ukraine. now ukraine needs to adopt a strategic state-targeted social program to overcome and prevent poverty, which should be based on a labor rather than table 2 dynamics of indicators of the population with an average per capita equivalent aggregate income per month, below the legally established subsistence minimum and average monthly disposable income per person year the number of people with average per capita equivalent total income per month below the legally established subsistence minimum average monthly disposable income per person, uah million persons (x) in percentage of the total population (y) 2010 3,6 8,6 1528,9 2011 3,2 7,8 1770,8 2012 3,8 9 1994,3 2013 3,5 8,3 2180,6 2014 3,2 8,6 2232 2015 2,5 6,4 2650 2016 1,5 3,8 3090 2017 0,9 2,4 3939 2018 0,5 1,3 4870 2019 0,4 1,1 5762 2020 0,6 1,6 6224 source: (derzhavna sluzhba statystyky ukrainy) baltic journal of economic studies 171 vol. 8 no. 2, 2022 a socio-subsidiary basis. effective poverty alleviation in ukraine requires, above all, ensuring stable and rapid economic growth, anti-inflationary policies, investments and targeted assistance for the economic development of certain sectors of the economy, in particular, a wide range of measures aimed at developing agriculture, stimulating employment and, consequently, increasing the money income of the population. if economic growth is to benefit all segments of the population, more must be done and more must be done to increase the productive capacity of the poor. references: cugat, g., & narita, f. (2020). how covid-19 will increase inequality in emerging markets and developing economies. imfblog: official website. available at: https://blogs.imf.org/2020/10/29/how-covid-19will-increase-inequality-in-emerging-markets-and-developing-economies/ ventura, l. (2020). unemployment rates around the world 2020. global finance magazine, october 22. available at: https://www.gfmag.com/global-data/economic-data/worlds-unemployment-ratescom ahmed, n., marriott, a., dabi, n., lowthers, m., lawson, m., & mugehera,  l. (2022). inequality kills: the unparalleled action needed to combat unprecedented inequality in the wake of covid-19: report. research company "oxfam america": оfficial website. available at: https://www.oxfamamerica.org/explore/ research-publications/inequality-kills/ chancel, l., piketty, t., saez, e., zucman, g. et al. (2022). world inequality report 2022. world inequality lab. available at: https://www.wir2022.wid.world markina, i. a., kalinichenko, o. v., & lesiuk, v. s. 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(2009). the spirit level: why greater equality makes societies stronger. n.y.; berlin; london; sydney: bloomsbury press, 374 р. yurchyk, g. m., & samoliuk, n. m. (2016). otsiniuvannia dyferentsiatsii dokhodiv naselennia ukrainy z urakhuvanniam yikh tinovoi komponenty [income differentiation of residents of ukraine under conditions of shadow economy]. demography and social economics, 3(28), 133–145. available at: https://dse.org.ua/arhcive/28_ en.html (іn ukrainian) average income around the world (2020). worlddata.info: analytical portal. available at: https://www.worlddata.info/ average-income.php indeks dzhyni-2020 u sviti: yakym buv rozryv mizh bahatym i bidnym naselenniam [gini index 2020 in the world: what was the gap between the rich and poor population]. (2021). word and deed: analytical portal. april 23. available at: https://www.slovoidilo.ua/2021/04/23/infografika/svit/indeks-dzhyni-2020-sviti-yakym-buvrozryv-mizh-bahatym-bidnym-naselennyam (іn ukrainian) gini index. (2021). the world bank: analytical portal. available at: https://data.worldbank.org/indicator/si.pov. gini?view=map&year=2000 baltic journal of economic studies 172 vol. 8 no. 2, 2022 ukraine – gini index: 2010–2020 (2021). trading economics: analytical portal. available at: https://tradingeconomics.com/ukraine/gini-index-wb-data.html derzhavna sluzhba statystyky ukrainy [state statistics service of ukraine]: official website. available at: http://www.ukrstat.gov.ua/ stratehiia podolannia bidnosti [poverty reduction strategy]: order of the cabinet of ministers of ukraine № 161-r, march 16, 2016. available at: https://zakon.rada.gov.ua/laws/show/161-2016-%d1%80#n10 (іn ukrainian) pro tsili staloho rozvytku ukrainy na period do 2030 roku [on the sustainable development goals of ukraine for the period up to 2030]: decree of the president of ukraine № 722/2019, september 30, 2019. available at: https://zakon.rada.gov.ua/laws/show/722/2019 (іn ukrainian) vydatky zvedenoho biudzhetu ukrainy (funktsionalna klasyfikatsiia) v 2021 r. [expenditures of the consolidated budget of ukraine (functional classification) in 2021]. minfin.com.ua: analytical portal. available at: https://index.minfin.com.ua/ua/finance/budget/cons/expense/ (іn ukrainian) instytut demohrafii ta sotsialnykh doslidzhen imeni m. v. ptukhy natsionalnoi akademii nauk ukrainy [ptoukha institute for demography and social studies of the national academy of sciences of ukraine]. available at: https://www.idss.org.ua/index (іn ukrainian) shumylo, k. (2021). zlydennist zrostaie: 67% ukraintsiv vvazhaiut sebe bidnymy, a tilky 1% serednim klasom. chy tak tse? [poverty is growing: 67% of ukrainians consider themselves poor, while only 1% consider themselves middle class. is this true?]. ukrainian national news agency. august 16. available at: https://www.unn.com.ua/ru/ news/1940318-zlidennist-zrostaye-67-ukrayintsiv-vvazhayut-sebe-bidnimi-a-tilki-1-serednim-klasom-chi-tak-tse (іn ukrainian) pro derzhavnyi biudzhet ukrainy na 2021 rik [on the state budget of ukraine for 2021] law of ukraine № 1082-ix, december 15, 2020. available at: https://zakon.rada.gov.ua/laws/show/1082-20#text (іn ukrainian) pro derzhavnu sotsialnu dopomohu malozabezpechenym simiam [on state social assistance to lowincome families] law of ukraine 1768-iii, june 1, 2000 (last updated on december 09, 2021). available at: https://zakon.rada.gov.ua/laws/show/1768-14 (іn ukrainian) baltic journal of economic studies 168 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-168-176 modern management technologies in the hospitality industry olena sukach1, svitlana kozlovska2, natalia sushko3 abstract. the hospitality industry is currently one of the dynamic areas of the developing economy which stimulates the development of various sectors of the modern economy. the current challenges posed by the next economic crisis and the effects of pandemic constraints require the formation of new mechanisms for managing the hospitality sector. the main purpose of the research is to create modern management tools for the development of the investment potential of the hospitality industry. the subject of the research includes ukrainian hospitality enterprises, their financial condition and management in a pandemic. the process of systematization of literary sources has identified the main modern problems of the hospitality industry, which include hotels, restaurants, entertainment, sporting events, and other services related to tourism. however, this specific area has a unique set of problematic aspects that need to be solved immediately. understanding the importance of the management system in the hospitality industry and its adaptation to modern changes will help increase the competitiveness of such enterprises in the market. research methodology: the article uses the funds of empirical studies of the essence of the hospitality industry, as well as statistical analysis of the modern market of hotel services. also, the investment market in the sector of tourism was studied with the help of mathematical tools. modern management in the hospitality industry is aimed at deviating from the typical and traditional tools to meet customer needs, which is caused not only by social change but also by the development of various financial instruments. the study proves that the successful development of the hospitality industry is impossible without the use of modern management tools based on the principles of marketing. analyzing the market of hospitality services, in the process of development and implementation of innovative services, it is advisable to focus on the study of a competitive environment and the needs of potential customers. conclusions. the results of the study prove the importance of this area and the feasibility of developing and implementing effective management tools. the research substantiates and offers promising areas for attracting investment resources in the hospitality industry. also, according to the results of the study, the authors propose the stages of implementation of target marketing as an effective tool for the development of hospitality in ukraine. the concept of development of innovative services in the field of hospitality on the basis of the formed strategy of target marketing is developed. key words: hospitality industry, hotel business, financial instruments, investments, hospitality enterprises, the concept of development of innovative services. jel classification: e22, m11, m31, l26, l53 corresponding author: 1 rauf ablyazov university east european, ukraine. e-mail: sukach.o.m@gmail.com orcid: https://orcid.org/0000-0001-7150-0262 researcherid: e-7418-2019 2 rauf ablyazov university east european, ukraine. e-mail: ksv750704@gmail.com orcid: https://orcid.org/0000-0002-1754-1220 3 rauf ablyazov university east european, ukraine. e-mail: natalia_sushko@ukr.net orcid: https://orcid.org/0000-0003-2201-0755 1. introduction the hospitality industry is currently one of the dynamic areas of the developing economy which stimulates the development of various sectors of the modern economy. the current challenges posed by the next economic crisis and the effects of pandemic constraints require the formation of new mechanisms for managing the hospitality industry. at the current stage of social transformation, the hotel business is in a difficult situation, which is associated with significant competition in the market and the effects of the global financial crisis. in 2017 in ukraine, baltic journal of economic studies 169 vol. 7 no. 3, 2021 the number of hotels and similar accommodations was 4432 units, in particular: 3392 units were represented by private enterprises (statistical collection, 2018). in 2018, the number of accommodations raised to 4985 units (statistics, 2020). this situation forces hotel owners to develop and implement various measures that will allow them not only to stay afloat but also to take a leading position in this market. it is the uncertain state of the hotel business market in our country that requires hospitality entities to actively improve and implement the provisions of management policy aimed at ensuring the development and obtaining the necessary income. as the most important function of the hospitality industry, management activity in the hotel business should ensure constant, stable, competitive operation and development of the management system in the market of hotel services taking into account the internal and external environment of the enterprise. the basis of such activities is a marketing approach, which, in turn, involves the implementation of comprehensive marketing research, and the creation, based on them, strategies and software measures to ensure the economic efficiency of the hotel business and increase the level of meeting needs of the end user. currently, there are a number of problems in the hospitality industry in ukraine that need careful research and solution. in particular, it is necessary to: study the development trends of the hotel business, modern trends in the policy of promoting the hotel product on the market; evaluate the effectiveness of financial instruments for the promotion of hotel services; to generalize the existing experience of marketing policy implementation in the hotel business, as well as to form the maximum set of tools for financing the development of the hospitality industry. 2. literature review despite the considerable interest in the stages of development of the hospitality industry, the issues of the ultimate satisfaction of the needs of citizens in high-quality hotel services remain unresolved now. so, the results of research on the development of the hotel business are presented in the papers of a significant number of authors. for example, v. fedorchenko believes that human resources (skilled workers) are those important resources that underpin the hospitality industry (fedorchenko, 2003). the economic aspects of the development of the hotel industry were studied by h. krul, t. tleuberdinova, d. ussenova, o. yurchenko, etc. problems of marketing research are presented in the works by foreign scientists, such as t. ambler, j. evans, p. kotler, j.-j. lambin, etc. many foreign scientists agree that the hospitality industry is a joint activity of the service sector to meet the needs of vacationers. in common sense, the term “hospitality” is defined as respect for the guest, but the economic meaning of this definition is more complex; in this regard, experts have some differences in understanding the content of the hospitality industry. according to j. walker, the hospitality industry combines tourism, hotel and restaurant business, catering, recreation and entertainment, conference and meeting organization (walker john, 2017). according to dictionary merriam-webster, “the hospitality industry is a sphere of entrepreneurship consisting of such services based on the principles of hospitality, characterized by the friendly or courteous treatment of guests” (webster). many foreign researchers agree that the hospitality industry is a joint activity of different fields operating to achieve a purpose to meet the different needs of tourists. consequently, the hospitality industry is an organizationally significant, more complex area of activity that focuses on meeting the demand of not only tourists who actually travel but also of customers living in local lodging enterprises (malskay, pandyak, 2012). e. zin noted that the "hospitality industry " is a part of the social infrastructure of the region, which creates favorable conditions for the movement and development of the population (zin, 2007). “hotel business” means the activity that offers its own services and benefits that provide the necessary physical living conditions for tourists. this is how marcel gauthier explains the essence of the hotel industry. he also adds that this applies to services that tourists need during their business or family trips outside their permanent residence (zin, 2007). among ukrainian researchers, z. tymoshenko, h. munin, l. strashinska, yu. kariahin, t. demura, etc. have conducted research on the basic principles of hospitality marketing. however, despite the significant developments and results of the study, the use of financial instruments for the implementation of management and marketing policy in the hotel business remains open. 4. research results the hotel business is an integral part of the tourism industry. acting as the foundation for the material and technical base of tourism, it allows us to create a positive tourist image and helps meet the needs of tourists. the main factors in the formation and development of the hospitality industry are (malskaya, pandyak, 2012): – social development of public relations, which has led to demographic and migration processes, the availability of a network of hotels and other accommodation to implement them; – economic increase in the individuals’ incomes, the significant economic potential of some regions and centers; baltic journal of economic studies 170 vol. 7 no. 3, 2021 – features of a mindset, culture and religion that influence the formation of the hotel chain and determine the types of hotels; – scientific and technological progress; – development of recreational and tourist natural resources. nowadays, under the influence of globalization processes, the global hotel business is represented by four models of hospitality: american, european, asian, and eastern european. features of the american model of international hotel business development are based on the concept of the hotel chain using the benefits of the brands’ image as a marketing tool that promotes the hotel product in domestic and foreign markets. the european approach aims to maximize the coverage of target segments. in addition, european companies in their activities attach particular importance to the national and cultural characteristics of the countries in which they work. this allows those companies to achieve significant success in the international hotel business. the asian model is the most agile in developing the hotel business. the eastern european model of hospitality stands out from the european one due to the large share of postsoviet enterprises in the hotel industry, as well as the proximity of hotels typical of european countries and the asian model, according to the american model. in total, today there are about 402,900 hotels of various star ratings in the world. for example, approximately 204,100 “star” hotels have been opened in europe; consequently, the total number of all accommodation establishments, including mini-hotels, hostels, and apartments, reaches 660,000. most of the hotels with a star ratings are located in italy (32,803 hotels), followed by hotels in croatia (29,282 hotels), france, germany, great britain, and spain. according to the estimations, in 2018, there were more than 600,000 tourist accommodation establishments in the eu-27, and together they provided almost 28.3 million sleeping accommodations (table 1). more than a third (36.1%) of all sleeping accommodations in the eu-27 were concentrated in only two eu member states, namely italy and france (5.1 million sleeping accommodations each), followed by spain and germany (3.6 and 3.5 million sleeping accommodations respectively). as a rule, in recent years, the number of visits to tourist establishments in the eu tends to increase (figure 1). after the financial and economic crisis in 2008 and 2009, the number of nights began to recover in 2010 and reached a maximum of 2.8 billion nights in 2018, which was 2.7% more than in 2017 (tourism statistics, 2018). it is estimated that in 2019, residents spent 1.74 billion nights in tourist facilities in the european union. that is, taking into account non-residents there were 1.68 billion people who stayed overnight in short-term housing in the same year. that is, taking into account non-residents there were 1.68 billion people who stayed overnight in the short-term accommodations in the same year. in total, overnight stays in all types of accommodation in the eu in 2019 reached approximately 3.42 billion nights. when evaluating the distribution by type of accommodation, hotels and similar lodgings were clearly the most popular (64%), followed by rented apartments (23%) and campsites, recreation parks and trailers (13%). however, there were significant regional differences, while in denmark, luxembourg, france, and sweden the share of the camping market was more than twice the eu average (tourism statistics, 2018). all three types of tourist accommodation increased in 2018. the number of nights spent in hotels increased by 2.4%. nights spent on holidays and other shortterm accommodation and nights spent on campsites increased by 3.6% and 1.3%, respectively. as of january 1, 2020 (operational data from ukrstat), the number of dormitories and similar temporary accommodations in ukraine was 4989 units. this number has increased significantly in recent years (figure 2), which, accordingly, boosts the level of competition between them. the main reason for this situation is the increase in tourist flow within ukraine. thus, according to the statistics department, the number of official tour operators in ukraine in 2018 amounted to 1,833 units (+ 90 units compared to 2017). they table 1 number of tourist accommodation facilities in the eu, 2018 number of establishments (units) number of sleeping accommodations (thousands) nights spent (millions) eu-27 600,157 28,294 2,791.2 germany 50,020 3,474 419.6 spain 51,418 3,600 466.9 france 29,652 5,112 442.8 italy 216,141 5,113 428.8 united kingdom 84,580 3,944 354.4 other countries 168,346 7,052 679 source: formed by the authors according to: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=tourism_statistics#bed_places_in_ the_eu-27:_italy_and_france_predominate baltic journal of economic studies 171 vol. 7 no. 3, 2021 served 4,481,502 domestic tourists (+ 62%) and 75,945 foreigners (+ 92%) in ukraine. there are also a number of “independent” tourists who also use the services of hotels and similar lodgings. hotels and other places of temporary accommodation for tourists in ukraine are mainly represented by small and medium businesses (figure 3). the vast majority of hotel business entities consist of small entrepreneurs. accordingly and ambiguously, this is reflected in the results of their activity, namely the profit, seasonality of services, and inconsistencies in legislation. in the eu, one in ten companies in the european nonfinancial economy belonged to the hospitality industry. these 2.4 million enterprises employed 13.6 million people. hospitality enterprises accounted for 9.5% of those employed in the non-financial economy and 21.7% of those employed in services. the share of figure 1. trends in nights spent at eu-27 tourist accommodation establishments, eu-27, 2010-2018, % source: formed by the authors according to: https://ec.europa.eu/eurostat/statistics-explained/ 114,6 119,3 124,6 133,8 106,9 154,2149,9 140,7 128,5 127,8124,7120,1116,5 111,8109,9109,7109,9108,5 107,8 112,0 113,8 116,2 118,9 124,0 128,9 135,5 139,2 0,0 30,0 60,0 90,0 120,0 150,0 180,0 2010 2011 2012 2013 2014 2015 2016 2017 2018 0,0 30,0 60,0 90,0 120,0 150,0 night s spent by non-resident s night s spent by resident s t ot al night s spent figure 2. the number of accommodation facilities in ukraine for 2010-2019, units source: formed by the authors according to: http://www.ukrstat.gov.ua   baltic journal of economic studies 172 vol. 7 no. 3, 2021 hotel enterprises in total turnover and value added at actual value were relatively lower. thus, the hospitality industry accounted for 3.9% of turnover and 5.8% of value added of the non-financial economy. hospitality has a double meaning: on the one hand, it is a friendly attitude to the guest, and on the other hand, it means a cooperative enterprise in various fields, aimed at making a profit by meeting customer needs. as we know now, only in 2017-2018 entrepreneurs of the hospitality industry were able to make a profit (table 2). the reason for this is the rather low purchasing power of citizens who choose more budget accommodation, as well as the “dubious” quality of services provided. accordingly, increasing the number of “consumers” of hotel services contributes not only to increase the number of hotel enterprises but also to improve the quality of services provided under these conditions, the market policy of business participants becomes the basis for competitiveness of the hospitality industry. management decisions and the use of marketing technologies in the hospitality industry allow us to determine the guests’ needs, create attractive conditions and offer the most comfortable services for basic market research, product planning, advertising and promotion. modern marketing, which is often called integrated marketing, affects all sectors of any hotel business, its functional organizational structure. accordingly, the development of marketing strategies today is the foundation for the successful development of the hotel industry. as the main features that must be considered in the formation of marketing strategy, we can mention the following: 1. demand for hotel services is extremely elastic in terms of income and prices, but it also largely depends on socio-economic conditions. 2. due to seasonality in demand, there can be observed the so-called saturation phenomenon. 3. the offer of hotel services differs in its inflexible work practices. they can be consumed only in the places of their production; they cannot fully adapt to changes in consumers’ demand over time and space. 4. hotel product is developed by the efforts of many companies; each of them has its own methods of work, specific needs, and different business goals. figure 3. distribution of hotels and similar placements by business entities, units source: formed by the authors according to: http://www.ukrstat.gov.ua   table 2 the financial results of the activities of hotels and means of temporary accommodation of citizens in 2014-2018 financial result (balance) before tax, thousand uah net profit (loss), thousand uah profit-making businesses enterprises that received the loss % to the total number of enterprises financial result, thousand uah %to the total number of enterprises financial result, thousand uah 2014 -5,118,590.2 -5,142,911.5 47.7 170,797.8 52.3 5,313,709.3 2015 -5,243,358.3 -4,959,158.6 56.7 317,428.5 43.3 5,276,587.1 2016 -2,124,046.6 -2,028,619.9 59.0 803,661.3 41.0 2,832,281.2 2017 1,463,132.0 1,470,289.3 59.0 2,963,395.4 41.0 1,493,106.1 2018 2,158,170.2 1,846,720.1 63.8 2,697,681.8 36.2 850,961.7 source: formed by the authors according to: http://www.ukrstat.gov.ua baltic journal of economic studies 173 vol. 7 no. 3, 2021 5. high-quality hotel services cannot be achieved if there are even the slightest non-conformities because guest service consists of these smallest details. in this regard, many hotel chains prefer target marketing to optimize market opportunities and develop appropriate products for each segment of the target market. businesses can adapt their products, prices, distribution channels and advertising to maximize their outcome. in general, target marketing in the hospitality industry consists of three main stages (figure 4). thus, at the first stage the market of hotel services is segmented with the formation of groups of “consumers”. the purpose of segmentation is to create favorable conditions for guests and reduce hotel costs. defining marketing opportunities creates a basis for detailing the target group. this approach allows businesses not to dissipate their efforts but to focus them on the most promising sectors. this ensures the concentration of financial, physical and labor resources and increases the efficiency of the forms and methods of marketing, advertising, sales promotion, etc. it is impossible to achieve this goal without choosing and implementing a well designed marketing strategy. the choice of marketing strategy is based on the formation of marketing goals, development of alternative strategies, their justification and evaluation in accordance with the criteria of compliance with the goals, potential of the enterprise and the degree of risk in the sector of marketing. the practical implementation of marketing strategy is associated with the choice of the figure 4. the stages of target marketing source: author development 1 market segmentation definition of market segmentation criteria highlighting the specific characteristics of individual segments 2 target group selection determining ways to appeal to a particular market segment target segment selection 3 market positioning formation of a set of measures for each target segment development of a marketing strategy for a specific target segment range of tools that ensure the materialization of goals and objectives. w hen creating and promoting a new product, the analysis of the situation on the market of hotel services can reduce the risks of its commercialization. among the important strategic objectives for the development of the hospitality industry, it is advisable to consider the diversification of offers, expansion of the range of hotel services. the development of hotel chains facilitates the emergence of various forms of management, which, in turn, increases the efficiency of hotel management, as well as the inflow of investment in the hotel business directed from other sectors of economic activity. the hospitality industry is based not only on customer satisfaction and employment in a particular market segment but also on profit. as noted earlier, the financial results of the hospitality industry in 2017-2018 had positive results, and the profitability of operating activities was 22.3% (2018) (statistical publication, 2018). the main reason for stabilizing the situation was the improvement of the quality of services, as well as significant investment in this industry. thus, according to statistics, in 2019 the volume of capital investments in the hospitality industry amounted to 968,753 thousand uah (+ 6%). in 2018, this figure increased by 3.3% to 934.6 million uah. that is, annual investments in the hotel sector do not exceed 1 billion uah. there are no exact statistics on the sources of financing of the hotel segment, but within the whole baltic journal of economic studies 174 vol. 7 no. 3, 2021 economy only 7.7% of capital investments were made through bank lending, and more than 70% belonged to companies and organizations (capital investment, 2019). general investment activity in this area covers both tangible and intangible segments (table 3). the investments made it possible to solve a significant part of the problematic aspects of this business in 2013-2016 and raise the level of overall profitability in 2018 by 14.6%. to one degree or another, the implementation of investment projects was accompanied by the introduction of certain innovative technologies for creating new services and methods of providing them. therefore, along with advertising and brand promotion, the marketing strategic component in the hotel business is the implementation of certain innovative projects in the hospitality industry. the hotel product is an important factor influencing the hospitality industry. in this regard, much attention is paid to the quality and further upgrading of the hotel product. innovation in the hospitality industry is an important financial tool for competing in the hotel services market (malskaya, pandyak, 2012). the development of innovative services is carried out on the basis of monitoring innovative trends in the market, as well as analyzing the needs of potential consumers and the use of non-standard methods of solving strategic problems. however, when deciding to diversify the range of hotel services, it is necessary to take into account possible threats, namely significant material costs at all stages: from the generation of the idea of creating a new hotel product to its final implementation. we believe that the successful development of the hotel business is impossible without the use of integrated marketing. when analyzing the market of hotel services in the process of generating and creating innovative services, it is advisable to focus on studying the competitive environment and the needs of potential customers (figure 5). the concept of innovative services includes assessment of the impact of external and internal environment, definition of target segments, calculation of the sales forecast for hotel services. the possible sales forecast is the main result of the development of the marketing complex, the basis for financial analysis and determination of economic indicators of the project of implementation of innovative hotel services. at the same time, the innovative development of the enterprise means not only the main innovation process but also the development of a system of factors and conditions necessary for its implementation, i.e., innovation potential. one of the important points in the management of innovation in hotels is to determine (evaluate) the innovation performance. it is reasonable to group the main criteria for evaluating the results of innovation in the following areas: – indicators that assess the production effect of the introduction of innovative hotel services; – indicators that characterize the commercial gains of innovation; – indicators that reflect the impact of investments made by hotel service providers in the commercialization of innovative hotel services. thus, in modern conditions, innovations and innovative activities are becoming increasingly important for economic development and successful financial activity of the hospitality industry, at the same time, being a foundation for the acquisition and occupation of leading positions in the market. table 3 hospitality capital investments capital investment total including capital investment intangible assets out of them capital investment in intangible assets out of them in land in existing buildings and structures in construction and reconstruction of buildings in machinery and equipment in concessions, patents, licenses, trademarks and similar rights in the purchase of software 2010 1,256,770 1,250,502 10,771 33,457 883,990 276,709 6,268 384 3,800 2011 2,297,905 229,0949 17,093 18,087 1,758,462 381,058 6,956 667 5,887 2012 1,456,543 1,448,549 19,694 17,311 1,152,764 177,962 7,994 3,159 2,988 2013 783,491 778,504 5,726 7,512 638,505 95,318 4,987 304 4,386 2014 596,080 580,316 38,958 66,477 274,156 171,306 15,764 10,537 4,860 2015 941,890 934,123 1,121 21,600 663,159 179,814 7,767 529 5,867 2016 1,144,192 1,129,869 7,650 39,662 701,372 286,050 14,323 570 2,884 2017 1,155,422 1,140,634 3,486 5,446 763,418 259,069 14,788 707 10,175 source: formed by the authors according to: http://www.ukrstat.gov.ua baltic journal of economic studies 175 vol. 7 no. 3, 2021 4. conclusions at the present stage of human development, the problem of hospitality helps solve the problems of migration and interstate hospitality. today, the hospitality industry is growing rapidly. given modern technologies, market transformation trends, and the growing demand for hotel services, the role of marketing in conquering market segments should not be underestimated. the development and implementation of a marketing strategy to create and promote new services in the market is the basis of the modern hospitality industry. however, given the cost of this sector of activity, effective financial investment tools cannot be avoided. however, when choosing a mechanism to attract investment, it is necessary to clearly understand their return and profitability. in this regard, it is advisable to direct investments only to promising activities, in particular to innovative projects because innovation affects economic development and successful financial and economic activities in the hotel industry. given the above, on the basis of the research carried out, the article substantiates the stages of development and implementation of targeted marketing in the hospitality industry. based on the proposed stages, the authors form the concept of the development and implementation of innovative services in the hospitality industry. indicators for assessing the feasibility and effectiveness of investing financial resources in innovative services for profit are also summarized. thus, the hospitality industry is important not only for societies but also for the economy. modern transformations and changes in the demand of consumers of hotel services in close connection with new technological and marketing solutions will allow for effective management and development of the hotel industry in the future. references: collective placement in ukraine in 2017: statistical collection (2018). kyiv: state statistics service of ukraine. state statistics service of ukraine (2020). available at: http://www.ukrstat.gov.ua/ fedorchenko, v. (2003). theoretical bases of tourism personnel in ukraine. available at: http://www.ecologylife.ru/ tyrizm-2003/teoretichni-zasadi-kadrovogozabezpechennya-sferi-turizmu-v-ukrayini.html. krul, h. ya. (2011). basics of hotel business: tutorial. kyiv: center for educational literature. malskaya, m., & pandyak, i. (2012). hotel business: theory and practice. 2nd ed. kyiv: center for educational literature. tleuberdinova, t., & ussenova, d. (2015). theoretical foundation of formation and development of hospitality industry. bulletin of karaganda state series of economy, vol. 3(79). yurchenko, o. (2014), innovations in hotel business at the modern stage. bulletin of the lviv university. series international relations, vol. 34. figure 5. the concept of developing innovative services source: author development macro factor analysis analysis of the internal environment of the hotel defining target segments sales forecast for a new service for a planning period marketing communications and the budget for the promotion of services fo rm at io n of a m ar ke tin g se ct io n of a b us in es s pl an key market indicators competitive environment analysis c al cu la tio n of th e ef fe ct iv en es s o f t he im pl em en ta tio n of in no va tiv e ho te l s er vi ce s baltic journal of economic studies 176 vol. 7 no. 3, 2021 walker, john r . (2017). introduction to hospitality (subscription), 7th edition. university of south florida. publisher: prentice hall. webster, m. english dictionary. available at: https://www.merriam-webster.com/thesaurus/hospitality ambler, t. (2000). marketing and the bottom line. the new metrics of corporate wealth. london: financial times, prentice hall. evans, j. (2009). the art of self-branding : making yourself relevant to employers. mba review (december). cover story. kotler, p., & gertner, d. (2011). “a place marketing and brand management perspective revisited,” in nigel morgan and annette prichard’s destination brands: managing place reputation, 3rd ed., elsevier. lambin, j.-j. (2005) menedzhment, oriientovanyi na rynok [market-driven management], translated from english, edited by v.b. kolchanova, piter kom, st.-peterburg. tymoshenko, z., munin, h., & dyshlevyi, v. (2009). marketynh hotelnoho produktu [marketing of a hotel product]. available at: www.tourism-book.com. marketynh hotelnoho i restorannoho hospodarstva produktu [marketing of a hotel and catering product]. kyiv: nukht. munin, h., & kariahin, yu. (2008). hotel and restaurant business management. kyiv: kondor. modern hospitality models. available at: http://www.vfmgiu-tourism.ru/struktura_upravleniya_turizmom_39/ sovremennye_tendencii_razvitiya_industrii_gostepriimstva_364/sovremennye_modeli_gostepriimstva_368/ index.html the total number of hotels in the world announced (2019). hotel. report. available at: https://hotel.report/events/ nazvano-obshhee-kolichestvo-otelej-v-mire the official site of world tourism organization unwto (2020). statistics of tourism. available at: http://www.unwto.org. activity of business entities: statistical publication’2018 (2019). kyiv: state statistics service of ukraine. capital investment (2019). available at: https://www.me.gov.ua/documents/detail?lang=uk-ua&id=32a59dc21c2b-4b80-868c-2062907bdeaf&title=kapitalniinvestitsii-2019-rik tourism industries (2018). available at: https://ec.europa.eu/eurostat/statistics-explained baltic journal of economic studies 41 vol. 2, no. 4, 2016 corresponding author: 1 zhytomyr national agroecological university. e-mail: vitalina_k17@mail.ru formation of investment ontological provision of agricultural enterprises in the radioactive contamination vitalina kalenska1 zhytomyr national agroecological university, ukraine abstract. the paper aims at clarifying the ontological system formation features of the investment support of agricultural enterprises on the radiation-contaminated area. the objects of the research are the agricultural enterprises on the radiation-contaminated area. the article highlights the concept of investment support of agricultural enterprises which revealed the main principles of the investment activity organization; equality of all investors; equal rights for all investors; investment security; noninterference of the subjects to the investment process in the investment activity, subject to compliance with applicable law; independence in the selection of criteria for investment activities; observation of the rights and interests of the investment process participants when they conduct investment activities. methods. the study is based on scientific principles, means of scientific knowledge the use of which ensured the reliability of the results obtained and resolution of the goals and objectives. findings. the author has identified the features of the investment attractiveness of the agricultural enterprises located on the radiation-contaminated areas of ukraine that resulted in the finding that the agricultural enterprises in ukraine subjected to radioactive contamination are particularly problematic in terms of the investment development, which include: volyn, zhytomyr, kyiv, rivne and chernihiv regions. it is in these regions that the agribusinesses face considerable problems, since the investors, as usual, are afraid to invest due to numerous risks not only environmental, but also economic and social. practical significance. the investment support ontological system of the agricultural enterprises on the radiation-contaminated area is formed according to the following principles: clarity, consistency, scalability, least coding effect and least ontological commitments. it is also found that the ontology should be subject to a specific set of operations, which include: addition of new subjects, changing subjects, removal of the subject and search. conditions of successful investment at the macrolevel are determined by the following factors: stability and predictability of the political system; condition of the national economy (inflation level, gdp growth rates, production of major products, budget deficits, etc.) and prospects for its development; level of development of the state regulation system of innovation and investment development of territories and sectors; tax policy of the state; level of socio-economic development of the country, people's living standards; level of investment risk and uncertainty in the environment. the macrolevel includes international and national levels of the ontology which are most favourable for investment support of the enterprises operating on the radiation-contaminated areas. value/ uniqueness. having studied the investment support system ontology of the agricultural enterprises located on the radiation-contaminated area we made certain generalizations that lie in the fact that the investment attractiveness at the macrolevel is determined by a number of conditions created by a state for all economic entities, including foreign investors, to make a profitable investment in order to develop the national economy. the author selected the parameters of investment support system of the agricultural enterprises located on the radiation-contaminated area and suggested an ontology equation for the system of investment support of agricultural enterprises on the radiation-contaminated area. key words: investment support, investment attractiveness, ontology, radioactive contamination, agricultural enterprises. jel classification: d21, e22, f14 baltic journal of economic studies 42 vol. 2, no. 4, 2016 1. introduction stable and effective development of regions must be provided by outstripping growth rates of workforce productivity and, therefore, sufficient volume of investments. in the current context one of the most pressing challenges is the search of new approaches and methods in regard to the growth of investments in the regions’ economy that allows providing economic development of the territories. regions that are considered to be polluted are under difficult challenge. agricultural enterprises that are located on the polluted territory cannot realize manufacture efficiently as their products are not in demand. it should be noted that foreign investors who value ecological properties of goods are not highly motivated to provide enterprises located in the polluted areas with financial resources. moreover, negative ecological and economic status of such regions and agricultural enterprises that are located on their territory influences the investment activities in this sector of economy. this preconditions the dynamic solutions of the existing production and socio-economic problems in the abovementioned regions. promotion of investment prospects and inflow of additional investments into the economy of the polluted regions are still limited due to the persistent deficits of financial resources on the part of manufacturers and low paying capacity of the population, violation of provisions in agrarian business, weak participation of the state in promotion of the investments. by implication most of the ukrainian regions polluted with radiation are considered as subsidized territories: this does not allow facilitating any investments for long-term projects, especially for middle and small business patterns. therefore, ukraine cannot count upon the prospective development of investment field without active support of the state and review of the investment strategic planning on the basis of promotion of investment prospects in the polluted regions. in this regard, topicality and significance of theoretical, methodological, scientific and practical grounds for research are of immediate interest today, including realization of investment prospects strategies for agricultural enterprises that are located on the polluted territories on the basis of identifying the priority guidelines of regions’ development, possibilities of coordination and enhancement of production and distribution activities, more effective use of state forms of support for the purpose of achieving economic security and regions’ growth as well as social welfare. thus, the choice of the article’s subject was determined by the great interest to the search of new approaches and methods in regard to the formation of ontological system for providing agricultural enterprises located on the polluted territories with investments. 2. the notion of investment provision of the agricultural enterprises under general approach to the solution of the most important state problems in food security sector and stable social, and economic development of its regions, in particular those that are considered to be polluted,under executive decision-making process about allocation and efficiency enhancement of investmentson all hierarchical levels, it is essential to realize their nature, interrelations between investment variforms and processes as well as stable formation of investments prospects in various state regions with developed agricultural production. thus, it is important to analyze the notion of investments and investment provision of the agricultural enterprises located in the polluted area. the essence and content of the “investment” category is understood differently within various branches of economic science and in practical business activity. according to the macroeconomic approach investments are identified as a part of gdp, which is not consumed in the running period, and is considered as addition to capital. in other words, investments are the element total expenditure, connected with production facilities renovation, development of manufacturing and social infrastructure, inventory changes, etc. in microeconomics, in particular within the production theory approach, investments are identified as the formation process of new capital aimed at expanding reproduction of capital assets and building-up of human capital assets (verzylyn, 2007). v. fedorenko points out that the underlying motive of investments is the realization of profit in the form of additions to capital. research results of the investment theory confirm the interrelation between investment activity and additions to capital. the highest efficiency is achieved by allocation of innovative projects (fedorenko, 2004). h. tsado offers fundamental composition of investment according to the areas of usage: production expansion andmodernization; creation of production infrastructure; creation of inventory and stocks; creation of social infrastructure; personnel's professional training and skills maintenance; science and scientific services. the crucial role for investing in innovations is played by real investments market, taking into account the fact that real investments are aimed at increasing production capital, in other words, livestock (tsado, 2011). according to a. peresada, innovation investments are investments in new developments. he considers that under stable economic growth all investments must be recognized at the same time as innovations. in a down economy investment can be used to support operating technically underdevelopedproduction facilities (peresada, 2001). t. leybyert in her scientific works considers investment process as a large-scale cumulative action baltic journal of economic studies 43 vol. 2, no. 4, 2016 of search of the best investment solutions, connected with investor’s participation in investment property management with the aim of receivinginvestment income in certain investment environment. the main tool is investment activity, which is the activity of investment subject, who organizes, realizes and manages the investment process. the scientist believes that investment activity should be considered as the systematized body of rules and principles that identify the form and content of economic relations during the investment process with the aim of providing the existence of the object in future (leybyert, 2009). m. denysenko and a. hrechan consider investment provision system of innovative activity сast of economic relations that are formed in respect of search, involvement and efficient use of investments as wellas organization and management principles, methods and forms of their influence on life-sustaining activity of investments. they emphasize that investing in innovative activity is aimed at resources' provision of positive structural innovative shifts in economy (denysenko, hrechan, haman, 2008). т. tovt interprets the definition of the “investment provisions system of enterprises’ innovative activity” asaset of economic relations that are formed in respect of search that are formed in respect of search, involvement and use of investment resources required for investing in various directions of enterprises’ innovative activities with account of the existing internal chambers of these resources and possibilities to involve them from external sources (tovt, 2012). taking into account the essence and content of the “investment prospects” category, it is possible to distinguish the following key principles of investment activity organization: • voluntary investing; • equality of all the investment process participants; • equality of all the investors; • investments security; • non-interference of investment process parties into the investment activity under the condition of adherence to the law; • independence in choosing the criteria for investment activity execution; • adherence to the rights and interests of all the investment process participants during the execution of investment activity; among the key sources of the investments involvement to the machine builder are the following: a) internal funds: • state public funding; • credit funds; • revenues from public property privatization; • equity capital. b) externalfunds: • foreign investors’ resources; • external credits; • loans; • otherexternalinvestmentsources. 3. the peculiarities of investment prospects of the agricultural enterprises located in the polluted territories of ukraine current status of agricultural enterprises’ investment activity depends significantly on the role and place of this industry sector in the agrarian business. principally, it is subject to the nature of the economic relations between agricultural sector and other sectors of aic. moreover, it is formed under the influence of various natural environment and climatic, economic, financial, social and other peculiarities of the agricultural sector (peresada, 2001). among the most problematic investment development agricultural enterprises are those, which are located in the polluted territories of ukraine, including volyn oblast, zhytomyr oblast, kyiv oblast, rivne oblast and chernihiv oblast. aic enterprises are facing the greatest problems in these regions as the investors are afraid to invest in them due to the numerous ecological, economic and social risks. insufficient volumes of funds available for investment caused the material and production resources depletion, reduction of their cost effectiveness, low level of production concentration and specialization, poor development of agricultural market’s infrastructure. from our point of view, sufficient amount of capital resources guarantees renovation and improvement of agricultural production’s material and technical basis, enhancement of its efficiency, promotion of agricultural sector’s competitive abilities as a whole. material and resources' provision of agricultural production, its effective development under the conditions of transitive economy depend directly on the volumes, structure and investment directions including construction expenses, maintenance of production space, machinery and equipment, introduction of new technologies, provision of sufficient level of paying capacity, growth of financial support. moreover, insufficient financial package of the agricultural sector has a negative influence on investment activity of the agricultural enterprises located in the polluted territories. this preconditions equipment operation, load increase of old-fashioned equipment per unit, which in its turn weakens the effectiveness of agricultural enterprises’ production; reduction of major construction, growth of unemployment in rural localities (buslenko, 2013). taking into account the development of the country, internal funds (profit accumulation in the form of amortization fund; profits that are used for renovation and production expansion) are the key source of capital investments. however, in the current situation internal capital investment funds of the agricultural enterprises in ukraine are rather depleted. it is preconditioned by baltic journal of economic studies 44 vol. 2, no. 4, 2016 the low level of production cost effectiveness and fixed assets value (in particular, amortization funds). in the countries with market economy capital maintenance problems and introduction of advanced technology are resolved due to the flexible system of amortization funds’ functioning. amortization as the main source of investment of the ukrainian agricultural enterprises falls back every year. the main reasons for that are considerable underrun of fixed assets revaluation rates from actual costs during escalation (savits'ka, 2010). investment environment deterioration in agricultural sector was caused by the following factors (ratoshnyuk, 2013): 1) reduction of financial resources flow-in (shortfall of sales) as a consequence of the low effectual demand on food products; 2) additional income reductions of home producers for unreasonably high fraction of imported food products on the ukrainian internal market (shrinkage of market outlets); 3) carrying-out of cardinal reconstruction of the entire fiscal relations system within short time frames, refusal of state backing of agricultural sector without any adequate compensation of food producer’s material losses; 4) maintenance of the industrial sector monopolized structure of home agricultural plant and lack of market mechanisms for price relations between agricultural, processing, trading and purchasing, and resource-saving enterprises. as a consequence, price parity has increased and financial cost proportions of interindustry exchange have deteriorated, misbalance between income and expenditure has been formed; 5) incompletion of land reforms processes and institutional transformations in agricultural sector; the significant role in formation of the investment provision system of development of the agricultural enterprises located in the polluted territories is played by factors which influence the investment prospects. such factors include the groups, which determine the level of investment prospects of the territories for investors (butko, 2005): • factors, which influence the level of regions’ investment potential (natural and geographic, labour, industrial, innovative, institutional, infrastructural, financial, and consumption potentials); • factors, which determine the level of uncommercial investment risks (legislative, political, social, economic, ecological and criminal risks); • investment activity (concertation and distribution of investment assets, promotion, implementation of new capacities, development of direct and portfolio investments). it should be noted that investments in agricultural production are used for (andriychuk, 2004): substitution of old-fashioned and worn-out equipment; introduction of new technology and employment of modern machinery, and equipment; expansion of agricultural production; development of new production activities. among the key strategic aims of investment provision of the agriculture development on a long-term horizon with account of defined goal are the following (lupenkо, 2012): • formation of funding sources for a full supply of agricultural sector development needs with investment resources; • development of internal investment agricultural capacities of producers to the level that provides optimum compromise between in-house and thirdparty investment funding sources; • expansion of financing capacity for the road industry development in rural localities as one of the key factors of investment prospects promotion of agriculture and its effectiveness. taking into account the above mentioned purpose the ontological system of investment provision of the agricultural enterprises located in the polluted territories should be formed. 4. formation of the ontological system of investment provision of the agricultural enterprises located in the polluted area before analyzing the formation process of the ontological system of investment provision of the agricultural enterprises located in the polluted area, it is essential to give definition to the notion of “ontology”. the word “ontology” has two meanings: discipline of philosophy, which deals with the most common characteristic features of objective reality; artifact, structure that describes the meaning of elements in a system. informally, ontology is perceived as description of world view on a certain subject area of interests. this description includes terms and rules of terms’ usage that limit these meanings within certain field. formally, ontology is a system, which consists of a range of notions and statements about the latter, on the basis of which the classes, relations, functions and theories are described (hayna, 2014). ontology is a certain structure that describes the meaning of the elements belonging to a certain system; a set of notions, including the most general and concrete ones, which provide a full range of objects and relations, events and processes as well as attribute values and relations, which are defined if needed in time and space. ontology of investment provision describes investment activity, its constituents, which influence directly the involvement of investments in agricultural enterprises. every ontology has its vocabulary and thesaurus. the vocabulary of investment provision ontology includes the range of definitions that characterize the agricultural enterprises’ activity, describing their peculiarities and features. nowadays there are many ontologies, however, most of them cannot be used in the sphere of investment baltic journal of economic studies 45 vol. 2, no. 4, 2016 provision of the agricultural enterprises located in the polluted area as they have a range of specific notions (hayna, 2014). in the simplest sense, ontology includes the following stages of formation (vitushko, 2011): • allocation of concepts – basic notions of a certain subject field; • interaction of basic notions; • comparison of a constructed ontology with existing types (correlation with other fields of knowledge). there are numerous approaches and methodologies to the creation of ontology. most of them are based on the principles offered by t. gruber (gruber, 1993): 1. clarity – an ontology should effectively communicate the intended meaning of defined terms (the latter must not cause the user feel cognitive dissonance); 2. coherence – an ontology should logically consistent; 3. extendibility – an ontology should have space for expansion; 4. minimal encoding bias – the conceptualization the created ontology based on should be specified at the knowledge level without depending on a particular symbol-level encoding; 5. minimal ontological commitment – an ontology should consist of the most essential hypotheses about world’s modulation. the thesaurus of the investment provision system of the agricultural enterprises located on the polluted territories is identified as connectivity between objects of a certain subject field. relations between objects can be of three types: synonymous, hierarchical and associative. ontological system of investment provision of the agricultural enterprises located on the polluted territories includes the class of objects and the class of parameters. the general view of ontology can be depicted by means of the following formula (hayna, 2014): o = {p, c, a} – hard ontologies; (1) o = {p, c } – soft ontologies; (2) where: o is an ontology (description of living environment); p isa set of subject field concepts (parameters of investment environment); c is a set of relations between the latter, a is an axiom set (laws and rules that describe laws and principles of concepts’ existence). a certain set of actions should be done within ontology. among them are: 1. addition of new subjects. in order to add them one should point out the basic indicator for a subject, which is connected with properties of the subject. 2. changing of subjects. there are certain parameters for changing a subject. 3. extraction of subjects. in case of adding and changing of subjects one should point out new and changed parameters. in order to extract a subject, it is essential to know the place the latter takes in general hierarchy, the way the hierarchy of subjects changes and the properties of asubject after extraction as well as to determine the relations between this subject and the others, and how its extraction can influence the child subjects. 4. search. the systematization of the parameters of the investment provision system of the agricultural enterprises located on the polluted territories can be seen on the table 1. thus, s in the table represents the investment provision system of the agricultural enterprises located table 1 the investment provision system parameters of the agricultural enterprises located on the polluted territories № level parameters 1 international sm1 – investments of international financial organizations sm2 – investments of external investors sm3 – assistance of the international economic and diplomatic institutions sm4 – countries that promote investments in the agricultural enterprises located on the polluted territories 2 national sn1 – state investments in the polluted territories sn2 – investment prospects of agricultural businesses sn3 – occupational level in the polluted territories sn4 – supply of labour sn5 – favourable investment environment in the country sn6 – availability of sufficient financial and legal framework in the country 3 regional sr1 – availability of investment activity promotion in the region’s territory sr2 – availability of material and technical base sr3 – availability of sufficient number of personnel sr4 – favourable investment environment in the region’s territory sr5 – existence of enterprises that are in need of investments 4 level of enterprise sp1 – labour, innovative, personnel, production potential sp2 – basic material and technical base sp3 – availability of fixed assets sp4 – type and form of enterprise property sp5 – enterprise size sp6 – readiness for investments involvement baltic journal of economic studies 46 vol. 2, no. 4, 2016 on the polluted territories, m, n, r , and p are the parameters of the international, national, regional levels and the level of enterprise. all the parameters given in the table are used for description of ontology according to the definite principles: • the notions of ontology are coined on the basis of certain subject field parameters of living environment; • multi-level hierarchical composition of the notions’ terminological system; • principles of the notions’ description and interrelations between them. according to the abovementioned scheme, the ontology equation for the investment provision of the agricultural enterprises located on the polluted territories appears as follows: o = {pm,n,r ,p, c, a}, (3) where o is an ontology of the investment provision system of the agricultural enterprises located on the polluted territories; p, m,n,r , are a set of levels of the investment provision system of the agricultural enterprises located on the polluted territories; c is a set of relations between them; a is an axiom set (laws and rules that describe laws and principles of m, n, r and p levels’ existence). 5. conclusions thus, having conducted the research of ontology of the investment provision system of the agricultural enterprises located on the polluted territories, it is possible to conclude that investment prospects on the macroeconomic level are determined by a range of conditions, which are created by state for all subjects of economy management including foreign investors for profitable investment with the aim of national economy development. the conditions of the successful investing on the macro-level are determined by the following factors: stability and foreseeability of the political system; status of the national economy (inflation rate, gdp growth rate, production volumes of the most important product types, budget deficit, etc.) and prospects of its development; maturity level of the governmental regulation system of the territories and branches’ innovative and investmentdriven development; state tax policy; level of social and economic development of the country, quality of life; level of investment risks and uncertainties in business environment. macro-level includes international and national levels of ontology, which are the most favorable for investment provision of enterprises located on the polluted territories. references andriychuk, v. h. 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(2011) sutnist ta znachennya innovatsiyno-investytsiynykh protsesiv v systemi rehionalnoho rozvytku – innovatsiyna ekonomika, 154-160. verzylyn, v. a. (2007). ynvestytsyonnaya pryvlekatelnost ahropromishlennoho kompleksa rehyona – voronezh, 422 р. vitushko, a. (2011). ontolohiyi yak zasib orhanizatsiyi veb-portaliv analitychnykh struktur komunikatsiyi – naukovi pratsi natsionalnoyi biblioteky ukrayiny im. v.i. vernadskoho, 309-315. baltic journal of economic studies 47 vol. 2, no. 4, 2016 виталина каленская формирование онтологической системы инвестиционного обеспечения сельскохозяйственных предприятий на территории радиационного загрязнения аннотация. целью работы является выяснение особенностей формирования онтологической системы инвестиционного обеспечения сельскохозяйственных предприятий на территории радиационного загрязнения. объектами исследования выступают сельскохозяйственные предприятия на территории радиационного загрязнения. в статье выделены понятия инвестиционного обеспечения сельскохозяйственных предприятий, что обнаружило основные принципы организации инвестиционной деятельности; равноправие участников инвестиционного процесса; равноправие всех инвесторов; защищенность инвестиций; невмешательства субъектов инвестиционного процесса в инвестиционную деятельность, при условии соблюдения действующего законодательства; независимость при выборе критериев для осуществления инвестиционной деятельности; соблюдение прав и интересов участников инвестиционного процесса при осуществлении ими инвестиционной деятельности. методика. исследование основано на научных принципах, средствах научного познания, применение которых обеспечило достоверность полученных результатов и решения поставленных целей и задач. результаты. автором выяснены особенности инвестиционной привлекательности сельскохозяйственных предприятий радиационно загрязненных территорий украины, в результате чего установлено, что особенно проблемными в инвестиционном развитии сельскохозяйственных предприятий являются территории украины, подвергшихся радиационному загрязнению, к которым относим: волынскую, житомирскую, киевскую, ровенскую, и черниговскую области. именно в этих регионах предприятия апк сталкиваются с немалыми проблемами, поскольку обычно инвесторы боятся вкладывать свои средства в связи с многочисленными рисками, не только экологическими, но и экономическими и социальными. практическое значение. осуществлено формирование онтологической системы инвестиционного обеспечения сельскохозяйственных предприятий на территории радиационного загрязнения согласно следующих принципов: ясность, согласованность, расширяемость, минимум влияния кодирования и минимум онтологических обязательств. также выяснено, что над онтологией нужно делать определенный набор операций, к которым относятся: добавление новых субъектов, изменение субъектов, изъятие субъекта и поиск. условия успешных капиталовложений на макроуровне определяются следующими факторами: стабильностью и предсказуемостью политической системы; состоянием национальной экономики (уровень инфляции, темпы роста ввп, объемы производства важнейших видов продукции, дефицит бюджета и др.) и перспективами ее развития; уровнем развития системы государственного регулирования инновационноинвестиционного развития территорий и отраслей; налоговой политикой государства; уровнем социальноэкономического развития страны, жизненным уровнем населения; уровнем инвестиционных рисков и неопределенности среды функционирования. до макроуровня относим международный и национальный уровни онтологии, которые наиболее благоприятны для инвестиционного обеспечения предприятий, действующих на радиационно загрязненных территориях. значение/оригинальность. проведя исследование онтологии системы инвестиционного обеспечения сельскохозяйственных предприятий на территории радиационного загрязнения нами осуществлены определенные обобщения, которые заключаются в том, что инвестиционная привлекательность на макроэкономическом уровне определяется рядом условий, которые создает государство для всех субъектов хозяйствования, в том числе для иностранных инвесторов, для выгодного капиталовложения с целью развития национальной экономики. автор выбрал параметры системы инвестиционного обеспечения сельскохозяйственных предприятий на территории радиационного загрязнения и предложил уравнение онтологии для системы инвестиционного обеспечения сельскохозяйственных предприятий на территории радиационного загрязнения. baltic journal of economic studies 123 vol. 7 no. 4, 2021 corresponding author: 1 ukrainian state university of chemiсal technology, ukraine . e-mail: myachin2020fuzzy@gmail.com orcid: https://orcid.org/0000-0002-1491-5100 researcherid: https://publons.com/researcher/4351259/valentin-myachin 2 private institution of higher education "dniprovskii university of the humanities", ukraine. e-mail: el.judina@gmail.com orcid: https://orcid.org/0000-0003-3699-5321 researcherid: https://publons.com/researcher/4350920/olena-yudina 3 ukrainian state university of chemiсal technology, ukraine. e-mail: ardenalexx@gmail.com orcid: https://orcid.org/0000-0002-7106-5632 doi: https://doi.org/10.30525/2256-0742/2021-7-4-123-135 fuzzy-logical expert system for assessing the financial security of enterprises valentin myachin1, olena yudina2, oleksandr myroshnychenko3 abstract. the purpose of this study is to build a fuzzy expert system for assessing the financial component of the economic security of telecommunications enterprises. the methodological basis of the research is founded on scientific works of domestic and foreign scientists and leading experts in the field of financial analysis and modeling of economic processes, as well as statistical and financial reporting data that are publicly available. to construct an integral indicator of the financial security of an enterprise, a fuzzy conclusion is used. three financial indicators are used as input variables. the first indicator x1 is the current ratio (cr). the second indicator x2 is equity ratio (er). the third indicator is return on assets (roa). the output variable is defined as an indicator of the financial security of an enterprise y123 (fs). both the input variables and the output variable are converted to fuzziness by constructing membership functions. the type and parameters of the affiliation function are justified, and the bellshaped affiliation function is chosen to describe the uncertainty of values that fall under the normal distribution. the quantity of fuzzy sets at every input is considered as z=3 and the quantity of input variables is considered as ω=3. to achieve completeness of the model, the quantity of logic rules is considered as r=33=9. to calculate a degree of market concentration, mamdani fuzzy conclusion is applied. defuzzification is engaged to calculate the value of the output variable y123(fs) for an indicator that determines the degree of financial security of an enterprise and, as a result, the degree of its economic security. to assess the level of the financial security indicator of an enterprise, a fuzzy expert system is constructed. the fuzzy expert system allows you to use various indicators thanks to the fuzzy logic methodology, which takes into account the fuzziness of input variables and output variables as much as possible. for the three telecommunications companies whose core business is wireline communication, ratios are calculated based on financial reports. financial coefficients are used to determine the integral indicator of financial security of enterprises. this indicator can be characterized by both numerical values and linguistic terms. key words: financial security of the enterprise, integral indicator, fuzzy expert system, fuzzy logic, membership function, defuzzification, current ratio (cr), equity ratio (er), return on assets (roa). jel classification: g32, d81 1. introduction in modern conditions, participants in economic activity often have an objective need to obtain truthful information about the probability of bankruptcy and financial security of the enterprise. relevant information and its evaluation can be obtained in various ways. one of the ways to obtain such information is to analyze the financial condition of the enterprise. its main goal is to timely clarify and eliminate shortcomings in the financial efficiency of the enterprise's economic activities. enterprises of the telecommunications industry also need to develop practical tools focused on analyzing and monitoring both the financial condition and security. to assess the financial condition of an enterprise, including a telecommunications enterprise, a regulatory approach is used. the regulatory approach consists in comparing the calculated financial baltic journal of economic studies 124 vol. 7 no. 4, 2021 indicator with its regulatory value approved by law or, accordingly, with methodological recommendations adopted in the company itself. but standards or calculation algorithms approved by law often use methods introduced into the practice of financial analysis more than half a century ago, when there were no modern methods of in-depth data processing (data mining). for this reason, classical models for estimating financial condition, in particular, the evaluation of bankruptcy of an enterprise, can give a distorted assessment. in addition, many indicators of financial analysis do not have a clear rationing and largely depend on the field of activity of the enterprise. a typical telecommunications enterprise is a complex socio-economic system that operates in conditions of significant uncertainty in the internal and external environment. improving the efficiency of management decision-making in the administration of the telecommunications enterprise to a large extent can be provided by tools based on methods and models of fuzzy production systems. 2. modern methods for assessing the level of financial security of an enterprise the need to know the current financial condition of the enterprise and maintain its proper level in market competition causes the need to develop modern methods for assessing the level of financial security of the enterprise. in the theory and practice of financial analysis, there are a significant number of methods that are used to determine the level of financial security of business entities. in the course of the analysis of professional literature (korpan, 2017; kampo, dochynets & havrylets, 2017; yelisieieva & simon, 2016), it was determined that methods for determining the level of financial security of the enterprise can be based on: the study of cash flows, the definition of financial indicators-indicators, assessing the financial stability of the enterprise, methods of predicting bankruptcy, the definition of integral indicators and resourcefunctional approach. the approach based on the study of cash flows is due to the fact that the indicator of net cash flow is one of the indicators of the economic performance of the enterprise and determines its financial condition. but this approach is a narrow approach, since it does not cover all areas that affect the state of financial security of the enterprise (herasymenko & holovach, 2003). the indicator approach involves comparing the actual values of financial security indices with the limiting values of the indicators of its level. this approach achieves the highest level of financial security of the enterprise, provided that the entire set of indicators is within the threshold values, and the threshold value of each indicator is not to the detriment of the others and has a justified financial approach. this method should be recognized as appropriate and reasonable, but its disadvantage is that the use of this approach depends mainly on determining the threshold values, which depend on the state of the external environment, on which the company is unlikely to affect, but only to adapt to its conditions (hladchenko, 2001). kampo h., dochynets n. and havrylets o. propose to evaluate the level of economic security financial component of the enterprise based on the analysis of its financial stability, the degree of which is determined in terms of sufficiency of working capital (own or borrowed) to carry out production and marketing activities (kampo, dochynets & havrylets, 2017). this is a narrow perspective in assessing the level of financial security of an enterprise. in addition to working capital, the enterprise's financial activity involves its own fixed capital, profits, investments, securities, etc. integral models for estimating the probability of bankruptcy include the well-known models of e. altman (altman, 1968), r . taffler and h. tishaw (toffler & tishaw, 1977). parshyna o., myachin v. and kutsyns’ka m. presented a detailed overview of existing integrated models (parshyna, myachin & kutsyns’ka, 2016; myachyn & kutsyns’ka, 2015). to date, ukrainian scientists have already developed models such as the discriminant model for the integral assessment of enterprise financial condition (tereshchenko, 2004). this model is based on the application of the methodology of discriminant analysis based on financial indicators of a sample set of domestic enterprises and a comprehensive assessment of the financial condition of the enterprise. this evaluation method allows you to identify trends in the dynamics of the financial condition of the enterprise. krakos yu. and razgon r . recommend considering the financial security of an enterprise as a complex value, since it examines several components, in particular, the efficiency of enterprise management, solvency and financial stability, business and market stability, investment attractiveness (krakos & razghon, 2008). another method for assessing the level of financial security is considered within the framework of the resource-functional approach, according to which it is proposed to evaluate each functional component of financial security, and then determine the integral indicator by expert means. another method for assessing the level of financial security is considered within the framework of the resource-functional approach, according to which it is proposed to evaluate each functional component of financial security, and then determine the integral indicator by expert means. with this approach, the functional structure of financial security of an enterprise is determined by the following components: baltic journal of economic studies 125 vol. 7 no. 4, 2021 budget; monetary; currency; banking; investment; stock; insurance (blank, 2016). despite the overwhelming preference of scientists for the expert method in determining the weight of individual functional safety components, some authors modify the method of determining the weight of components into an overall integral index. this indicates that there is no single position of scientists in the formation of methods for assessing the financial security of enterprises. 3. justification of the levels of financial coefficients in the model of constructing an integral indicator of financial security of an enterprise to build an integral indicator of enterprise financial security, we highlight the following algorithm of actions: – selection of the financial analysis information base; – formation of groups of financial coefficients; – determination of the algorithm for calculating financial coefficients; – determination of the standard values of the coefficients for each group of ratios; – formation of a mechanism for assessing the financial security of the enterprise. the indicators involved should be, on the one hand, the most representative, but, on the other hand, their number should be limited enough not to overload the mathematical model. to form groups of estimated coefficients, first of all, we will use the opinion of such authors as yelisieieva o. and simon h. (yelisieieva & simon, 2016), sosnovska о. (sosnovska, 2019), diyazitdinova a. and saprykina a. (diyazitdinova & saprikina, 2018), starinets o. (starynets, 2018), who study the financial condition of telecommunications enterprises. liquidity is the ability to convert assets into cash in the shortest possible time, with minimal costs and without losing their value. thus, the characteristics of liquidity are: 1) absolute values of assets and cash; 2) conversion time (korpan, 2017). current liquidity ratio (other names – level 1 liquidity; total liquidity ratio; coverage ratio, current ratio (cr)) shows the relationship between the size of current assets and current liabilities; shows the ability of an enterprise to repay current (short-term, up to one year) liabilities only at the expense of current assets. the formula for calculating the current liquidity ratio (cr) is as follows: cr = =� � � � � � � current assets currentliability linecode linecode 1195 �� � 1695 . (1) the current liquidity ratio represents a general view of the company 's liquidity and is the starting point for its further analysis. this ratio allows us to check whether all assets with a turnover period of less than one year can cover liabilities with a maturity period of less than one year (chaika, loshakova & vodoriz, 2018). according to the traditional approach, the higher the current liquidity ratio, the more liquid the enterprise is. however, too high cr values are not an absolute advantage, since they can be associated with inefficient use of current assets and/or short-term liabilities. a value of cr<1 indicates decapitalization of the company and insufficient short-term solvency. the value of cr>2 is associated with inadequate management of current assets. diyazitdinova a. and saprikina a. for telecommunications enterprises offer a standard value of the current liquidity ratio of more than 0.75. moreover, these authors recommend a range of values for this coefficient of 2.0...2.5 and characterize it with the linguistic term "very high", they characterize a figure in the range 1.0...2.0 as "high", a value in the range 0.75...1.0 as "average", "low" corresponds to a 0.25...0.75 value, "very low" is equal to a value of 0.0...0.25 (diyazitdinova & saprikina, 2018). starinets о. for telecommunications enterprises suggests taking the current liquidity ratio >1 as the standard value (starynets, 2018). effective management of the financial stability of the enterprise allows the enterprise to better adapt to environmental conditions and control its dependence on external sources of financing. financial stability is one of the main factors influencing the achievement of financial equilibrium and financial stability by an enterprise (voloshchuk, 2015). the financial stability coefficient allows you to determine how much of the assets are financed from long – term sources of financing-equity and longterm borrowed financial resources. a high value of the indicator shows a low level of risk of solvency loss and good prospects for the functioning of the enterprise. the formula for calculating the margin of safety (mos) coefficient is as follows: mos = + = equity non currentliability balancesheetliability line� � � � �� � � � � � code linecode linecode 1495 1595 1900 + = + = equity non currentliability balancesheetliability line� � � � �� � � � � � code linecode linecode 1495 1595 1900 + . (2) sosnovska о. for communication enterprises offers the optimal value of the financial stability coefficient in the range of 0.7…1.0 (sosnovska, 2019). davydenko n. proposed a linguistic description of the different values of the financial stability coefficient. this author offers a point-based method for assessing financial stability (solvency). the value of the indicator within 0.8…0.9 is the most optimal and is characterized by the author's linguistic term as baltic journal of economic studies 126 vol. 7 no. 4, 2021 "normal", the value of the indicator within 0.4…0.8 is characterized by the linguistic term as "critical", the value of the indicator within 0.0…0.4 is characterized by the linguistic term as "below the critical" (davydenko, 2017). kampo g., dochynets n. and havrilets o. note that the standard value of the financial stability coefficient is 0.7…0.9. according to their data, the value of the financial stability coefficient for telecommunications industry enterprises in 2012, 2013, 2014 and 2015 was 0.560, 0.556, 0.361 and 0.631, respectively, which is outside its standard value (kampo, dochynets & havrylets, 2017). it should be noted that if the company does not have long-term obligations, the mos financial stability coefficient is transformed into the equity ratio (er). the formula for calculating the coefficient of financial autonomy or financial independence (equity ratio (er)) has the following form: er = =� � � � � � � � equity balancesheetliability linecode linecode 1495 19900 . (3) sosnovska о. for communication enterprises offers the optimal value of the coefficient of financial independence (autonomy) in the range of 0.5…1.0 (sosnovska, 2019). diyazitdinova a. and saprikina a. propose six financial coefficients for evaluating the financial condition of telecommunications enterprises. among them, the authors propose to use the autonomy coefficient, which is recognized as the share of own funds in total assets. these authors recommend a range of normative values in the range of 0.5…0.75 and characterize it with the linguistic term "high". the value of the indicator in the range of 0.25…0.375 was described by them as "very low" and "low", and the value of the indicator in the range of 0.375…0.50 was described as "average" (diyazitdinova & saprikina, 2018). return on assets (roa) shows the efficiency of using the company 's assets to generate profit. a high value of the indicator indicates the good performance of the enterprise. it is calculated as the ratio of net profit (or net loss) received to the average annual amount of assets. information about the value of assets can be obtained from the balance sheet, and information about the amount of net profit can be obtained from the statement of financial results (income statement). the formula for calculating the return on access (roa) ratio is as follows: roa = =� � � � � � � � � net income total assets linecode linecode 2350 1900 . (4) there is no single standard value for the indicator roa. it should be analyzed in dynamics, that is, comparing the values of different years for the study period. in addition, you should compare the value of the indicator with the figures of direct competitors (who have the same amount of assets or income). the higher the indicator, the more efficient the entire management process is, because the return on assets indicator is formed under the influence of all the company 's activities. sosnovska o. offers the optimal value of the return ratio on total assets (total capital) in the range of 0.05…1.0 for communication enterprises (sosnovska, 2019). starinets o. considers the coefficient of return on total assets >0 to be the standard value for telecommunications enterprises, and the dynamics of this coefficient should be directed towards growth (starynets, 2018). the final result of the study of financial coefficients is the determination of an integral indicator for assessing the level of financial security of telecommunications enterprises y123(fs). a necessary condition is the gradation of enterprises' financial security levels, which is presented on the basis of using the method of expert assessments and a review of literature sources table 1 characteristics of financial security index (fs) levels of telecommunication enterprises linguistic description of enterprise economic security levels thresholds of enterprise economic security levels characteristics of the company according to the established level of financial security high (excellent) 0,70 < y123(fs) ≤ 1,00 it indicates the existence of effective risk management methods, which are the result of adaptation to unstable economic conditions and minimizing threats to the economic activity of the enterprise. this level of financial security ensures the stable functioning of the enterprise in an uncertain economic environment. medium (satisfactory) 0,30 < y123(fs) ≤ 0,70 it indicates the presence of a moderate or acceptable influence of internal and external environment risks on the likelihood of obtaining a negative financial result and disruption of the enterprise's sustainable functioning. low (unsatisfactory) 0,00 ≤ y123(fs) ≤ 0,30 this level of financial security is characterized by a violation of the financial condition of the enterprise and its stable functioning, as well as inefficiency in the risk management process. baltic journal of economic studies 127 vol. 7 no. 4, 2021 (table 1) (korpan, 2017; sosnovska, 2019; diyazitdinova & saprikina, 2018). 4. development of a fuzzy-logic expert system for measuring the financial security indicator of telecommunications enterprises figure 1 introduces the general structure of the fuzzy logic expert system constructor as a data transformation within the system itself. for a fuzzylogical approach to determine the integral financial security (fs)) indicator y123 of an enterprise, we have selected three input indicators that affect the target indicator, namely: current ratio x1(cr), equity ratio x2(er) and return on assets ratio x3(roa). next phase of the fuzzy expert system construction is based on membership function selection. a fuzzy model makes the system quite difficult if it is based on a significant number of input variables, and therefore the number of input variables requires a reasonable optimal reduction (korol, 2012). to build a fuzzy expert system, we chose a bellshaped membership function, which visually looks like a symmetric curve and resembles the shape of a bell. this function is set by the formula which parameters are interpreted as follows: µ x x c a b( ) = + − 1 1 2 � , (5) where a – concentration ratio of the membership function; b – curvature ratio of the membership function; c – maximum coordinate of the member ship function (pegat, 2009). next phase of the fuzzy model construction is the identification of fuzzy logic rules. considering that quantity of the model inputs (input variables) is ω and every input has z of fuzzy sets (membership functions) then the quantity of fuzzy logic rules can be defined through the following formula: r z= ω . (6) table 2 introduces correlation between the quantity of the model fuzzy rules which secure model completeness and model inputs (input variables) ω as well as the quantity of z fuzzy sets in every input. the quantity of fuzzy sets at every input is considered as z=3, the quantity of input variables is considered as ω=3. then the quantity of fuzzy logic rules should result in r=33=27 to secure the model completeness. modelling of a degree of financial security indicator has been executed in in fuzzylogic toolbox software of matlab environment (version r2021a) by mathworks company which has affected setting and view of the bell-shaped membership function. the setting of the function is as follows: μ(x)=gbellmf (x, [a b c]). x is an input variable, a, b and c are aforementioned parameters (formula (3)). next figures 2-4 introduce attributes and membership functions for three input variables and one output variable. figure 2 introduces x1(cr) input variable which is a сurrent ratio and has three attributes (membership functions): low – (unsatisfactory) figure 1. general structure of the fuzzy-logic system constructor table 2 correlation between the quantity of the model fuzzy rules which secure model completeness and model inputs (input variables) ω as well as the quantity of z fuzzy sets in every input quantity of z fuzzy sets at every input quantity of the model ω inputs (quantity of the input variables) ω = 1 ω = 2 ω = 3 ω = 4 ω = 5 z = 1 1 1 1 1 1 z = 2 2 4 8 16 32 z = 3 3 9 27 81 243 (mamdani) baltic journal of economic studies 128 vol. 7 no. 4, 2021 degree of current ratio, middle – (satisfactory) degree of current ratio, high – (excellent) degree of current ratio). this function is a bell-shaped one and has value rate [0;2.5]. low membership function which means unsatisfactory degree has parameters [0.8 4.9 0.0732], middle membership function which means satisfactory degree has parameters [0.415 2.492 1.29], high membership function which means excellent degree has parameters [0.521 4.64 2.23]. figure 3 introduces x2(er) input variable which is an equity ratio and has three attributes (membership functions): low – (unsatisfactory) degree of equity ratio, middle – (satisfactory) degree of equity ratio, high – (excellent) degree of equity ratio. this function is a bell-shaped one and has value rate [0;1]. low membership function which means improper degree has parameters [0.184 4.17 0.04511], middle membership function which means satisfactory degree has parameters [0.1425 2.24 0.372], high membership function which means exceeding degree has parameters [0.423 7.157 0.938]. figure 4 introduces x3(roa) input variable which is a retern of assets and has three attributes (membership functions): low – (unsatisfactory) degree of retern of assets, middle – (satisfactory) degree of retern of assets, high – (excellent) degree of retern of assets. this function is a bell-shaped one and has value rate [-1;1]. low membership function which means insufficient degree has parameters [0.709 14.74 -0.703], middle membership function which means resposive degree has parameters [0.0647 1.4 0.07394], high membership function which means outstanding degree has parameters [0.5443 12.2 0.683]. figure 5 introduces output variable y123 ("financial security indicator (fs)") and has three attributes (membership functions): low – (unsatisfactory) and has parameters [0.237 3.756 0.063], middle – (satisfactory) and has parameters [0.198 2.5 0.5001], high – (excellent) and has parameters [0.239 3.13 0.937]. this function is a "bell"-shaped one and has value rate [0;1]. based on the description of two input and one output variables we have defined 33=27 fuzzy rules for the output variable conclusion. fuzzy logic rules are laid out as follows: rule 1: if (х1(сr) is low) and (x2(er) is low) and (x3(roa) is low) then (y123(fs) is low); rule 2: if (х1(сr) is low) and (x2(er) is middle) and (x3(roa) is low) then (y123(fs) is low); figure 2. membership function chart for input linguistic variable x3 ("current ratio (cr)") figure 3. membership function chart for input linguistic variable х2 ("equity ratio (er)") baltic journal of economic studies 129 vol. 7 no. 4, 2021 rule 3: if (х1(сr) is low) and (x2(er) is high) and (x3(roa) is low) then (y123(fs) is low); rule 4: if (х1(сr) is middle) and (x2(er) is low) and (x3(roa) is low) then (y123(fs) is low); rule 5: if (х1(сr) is middle) and (x2(er) is middle) and (x3(roa) is low) then (y123(fs) is middle); rule 6: if (х1(сr) is middle) and (x2(er) is high) and (x3(roa) is low) then (y123(fs) is middle); rule 7: if (х1(сr) is high) and (x2(er) is low) and (x3(roa) is low) then (y123(fs) is middle); rule 8: if (х1(сr) is high) and (x2(er) is middle) and (x3(roa) is low) then (y123(fs) is middle); rule 9: if (х1(сr) is high) and (x2(er) is high) and (x3(roa) is low) then (y123(fs) is middle); rule 10: if (х1(сr) is low) and (x2(er) is low) and (x3(roa) is middle) then (y123(fs) is low); rule 11: if (х1(сr) is low) and (x2(er) is middle) and (x3(roa) is middle) then (y123(fs) is middle); rule 12: if (х1(сr) is low) and (x2(er) is high) and (x3(roa) is middle) then (y123(fs) is middle); rule 13: if (х1(сr) is middle) and (x2(er) is low) and (x3(roa) is middle) then (y123(fs) is middle); rule 14: if (х1(сr) is middle) and (x2(er) is middle) and (x3(roa) is middle) then (y123(fs) is middle); rule 15: if (х1(сr) is middle) and (x2(er) is high) and (x3(roa) is middle) then (y123(fs) is middle); rule 16: if (х1(сr) is high) and (x2(er) is low) and (x3(roa) is middle) then (y123(fs) is middle); rule 17: if (х1(сr) is high) and (x2(er) is middle) and (x3(roa) is middle) then (y123(fs) is high); rule 18: if (х1(сr) is high) and (x2(er) is high) and (x3(roa) is middle) then (y123(fs) is high); rule 19: if (х1(сr) is low) and (x2(er) is low) and (x3(roa) is high) then (y123(fs) is low); rule 20: if (х1(сr) is low) and (x2(er) is middle) and (x3(roa) is high) then (y123(fs) is middle); rule 21: if (х1(сr) is low) and (x2(er) is high) and (x3(roa) is high) then (y123(fs) is middle); rule 22: if (х1(сr) is middle) and (x2(er) is low) and (x3(roa) is high) then (y123(fs) is middle); rule 23: if (х1(сr) is middle) and (x2(er) is middle) and (x3(roa) is high) then (y123(fs) is middle); rule 24: if (х1(сr) is middle) and (x2(er) is high) and (x3(roa) is high) then (y123(fs) is high); rule 25: if (х1(сr) is high) and (x2(er) is low) and (x3(roa) is high) then (y123(fs) is middle); rule 26: if (х1(сr) is high) and (x2(er) is middle) and (x3(roa) is high) then (y123(fs) is high); figure 4. membership function chart for input linguistic variable x3 ("return on assets (roa)") figure 5. membership function chart for output linguistic variable y123 ("financial security indicator (fs)") baltic journal of economic studies 130 vol. 7 no. 4, 2021 rule 27: if (х1(сr) is high) and (x2(er) is high) and (x3(roa) is high) then (y123(fs) is high). the constructed fuzzy inference model allows you to estimate the integral financial security indicator y123(fs) depending on three variables, namely: the variable x1, which is the current ratio (cr), the variable x2, which is the ratio of autonomy (equity ratio (er)) and the variable x3, which is the coefficient of return on assets (roa)). the dependence of the output variable y123 (fs), which is an indicator of the financial security of an enterprise, on the input variables x1(cr) and x2(er) at different levels of fixed values x3(roa)=-0.01, x3(roa)=0.05, x3(roa)=0.15 and x3(roa)=0.30 is an infinity of values of y123(fs), represented as a response surface constructed using the surface viewer visualizer (figure 6 a, b, c, d). the dependence of the output variable y123 (fs), which is an indicator of the financial security of an enterprise, on the input variables x1(cr) and x3(roa) at different levels of fixed figures x2(er)=0.1, x2(er)=0.3, x2(er)=0.7 and x2(er)=0.7 is an infinity of values of y123(fs), represented as a response surface constructed using the surface viewer visualizer (figure 7 a, b, c, d). the dependence of the output variable y123 (fs), which is an indicator of the financial security of an enterprise, on the input variables x2(er) and x3(roa) at different levels of fixed values x1(cr)=0.2, x1(cr)=0.8, x1(cr)=1.5 and x1(cr)=2.5 is an infinity of values of y123(fs), represented as a response surface constructed using the surface viewer visualizer (figure 8 a, b, c, d). visualization of the "input-output" surface allows to define that output index y123(fs), which is an indicator of the financial security of an enterprise, reaches its peak at the maximum values of the input parameters x1 (current ratio (cr)) and x2 (equity ratio (er)) and x3 (return on assets (roa)). to determine the indicator of financial security of telecommunications enterprises, we will use previously justified indicators – financial coefficients. to do this, as an example, consider the primary financial statements for the enterprises "mega link", "telemist" and "intellect dnipro telecom". the main activity of the enterprises lls "mega link" (usreou (unified state register of enterprises and organizations of ukraine) code 33769837), llc "telemist" (usreou code 34823863) and lls "intellect dnipro telecom" (usreou code 35340503) is activities in the field of wired telecommunications (class 61.10 according to clasifier of economic types of activities – 2010). further research was conducted based on the accounting (financial) statements for these enterprises, which are publicly available, in particular, on the website zvitnist.com. the results of processing financial statement data (form 1 balance sheet and form 2 a b c d figure 6. depending of output variable y123(fs) which is a degree of financial security indicator y123 (fs) on the input argument x1(cr) and input parameter x2(er) and at fixed value levels х3(roa)=-0.1 (а), х3(roa)=0.05 (b), х3(roa)=0.15 (c) and х3(roa)=0.30 (d). modelling results baltic journal of economic studies 131 vol. 7 no. 4, 2021 a b c d figure 7. depending of output parameter y123(fs) which is a degree of financial security indicator y123 (fs) on the input argument x1(cr) and input variable x3(roa) and at fixed value levels х2(er) =0.1 (а), х2(er)=0.3 (b), х2(er)=0.5 (c) and х2(er)=0.7 (d). modelling results а b c d figure 8. depending of output variable y123(fs) which is a degree of financial security indicator y123 (fs) on the input parameter x2(er) and input argument x3(roa) and at fixed value levels х1(cr) =0.2 (а), х1(cr)=0.8 (b), х1(cr)=1.5 (c) and х1(cr)=2.5 (d). modelling results baltic journal of economic studies 132 vol. 7 no. 4, 2021 statement of financial results) in the form of financial coefficients are presented in table 3. for the llc "mega link" enterprise from the data in table 3 it is possible to observe a decrease in the company 's financial independence, as evidenced by the dynamics of the financial autonomy coefficient. at the end of 2020, the company is able to independently finance 30.35% of its assets. the current liquidity value is below the regulatory limit (<1.5), which may indicate the probability of solvency loss in the near future. the value of the financial autonomy coefficient for the llc "telemist" enterprise in 2019 and 2020 is negative. this actually indicates a lack of financial independence. this company does not have its own funds to repay its liabilities, and the decrease in the financial autonomy ratio in 2020 compared to 2019 means a deepening of financial dependence in the reporting year. the financial condition of the enterprise of llc "telemist" can be characterized as extremely unstable, since the debt of the company exceeds the amount of its assets. the dynamics of the financial autonomy coefficient indicates an increase in the company 's financial independence for the llc "intellect dnipro telecom" enterprise. at the end of 2020, the company is able to independently finance 25.29% of its assets. the current liquidity value is above the regulatory limit (1.5), which indicates a low probability of solvency loss in the near future. the last stage of building a fuzzy expert system is to determine the financial security indicator of the enterprise y123(fs). the results of visualizing the calculation in the matlab environment are presented using the rule viewer visualizer (figures 9, 10 and 11). the fuzzy inference rule viewer allows you to visualize the fuzzy output process and get the result. these figures display the corresponding membership function, its cross-section level (for input variables), and the contribution of the individual membership function to the overall result (for the output variable). to estimate the financial condition using the fuzzy inference model, the values of the input variables and the result of the evaluation of enterprise financial security indicator y123(fs) are set in rule viewer (top line in figures 9, 10 and 11). for the 2019 llc "mega link" companies, the left column in figure 9 (a) represents 27 defined fuzzy rules, the next three columns show the values x1(cr)=10.6, x2(er)=0.35, and x3 (roa)=0.128 for the values of the input variables. the value y123 (fs) is shown in the right column for each fuzzy rule as the level of the enterprise's financial security indicator. for these inputs, the output value of the financial security indicator is y123(es)=0.50. table 4 shows the results of determining the enterprise financial security indicator y123(fs) for the three telecommunications companies studied. according to table 4 it is reasonable to conclude that the level of financial security of the enterprises of llc "mega link" and llc "intellect dnipro telecom" can be characterized by the linguistic term "medium level" or "satisfactory level", and the level of financial security of the enterprise of llc "telemist" can be characterized by the linguistic term "low level" or "unsatisfactory level". 5. conclusions summing up the above, it should be stated that to assess the level of the financial security indicator of an enterprise, the fuzzy set method is considered the most effective in comparison with linear models because table 3 financial coefficients calculated based on the data of the primary financial statements, which are used as input data for the constructed fuzzy-logical model for assessing the financial security indicator of an enterprise financial coefficients value of financial coefficients llc "меga link" llc "telemist" llc "intellect dnipro telecom" 2019 year 2020 year 2019 year 2020 year 2019 year 2020 year current ratio (cr) 0.65 0.49 1.50 0.00 1.24 1.52 equity ratio (er) 0.35 0.30 -3.19 -338.09 0.16 0.25 return on assets (roa) 0.128 0.111 -6.128 -79.6 0.013 0.003 table 4 enterprise financial security indicator y123 (fs), determined based on the results of the fuzzy-logical expert system for the studied enterprises indicator value of the enterprises’ financial security indicator llc "меga link" llc "telemist" llc "intellect dnipro telecom" 2019 year 2020 year 2019 year 2020 year 2019 year 2020 year indicator of enterprise financial security (y123(fs)) 0.500 0.493 0.246 0.161 0.403 0.439 baltic journal of economic studies 133 vol. 7 no. 4, 2021 a b figure 9. implementation of mamdani fuzzy conclusion in fuzzy logic toolbox software of matlab environment by mathworks company for evaluation of a degree of financial security indicator y123 (fs) for llc "меga link" in 2019 year (a) and in 2020 year (b) a b figure 10. implementation of mamdani fuzzy conclusion in fuzzy logic toolbox software of matlab environment by mathworks company for evaluation of a degree of financial security indicator y123 (fs) for llc "telemist" in 2019 year (a) and in 2020 year (b) а b figure 11. implementation of mamdani fuzzy conclusion in fuzzy logic toolbox software of matlab environment by mathworks company for evaluation of a degree of financial security indicator y123 (fs) for llc "intellect dnipro telecom" in 2019 year (a) and in 2020 year (b) baltic journal of economic studies 134 vol. 7 no. 4, 2021 it takes into account the uncertainty of the internal and external environment of the enterprise as much as possible. the fuzzy model theoretically allows you to use a significant number of input parameters, both quantitative and qualitative. however, the specific choice of parameters should be justified by their weight, on the one hand, and the complexity of collecting data necessary to evaluate the financial security of the enterprise, on the other hand. to implement a fuzzy-logical approach to determining the integral indicator of financial security of an enterprise (fs), three financial coefficients are involved that characterize solvency (current ratio (cr)), financial independence (equity ratio (er)) and profitability of total assets of the enterprise (return on assets (roa)) and affect the target indicator. fuzzy logic model developed for evaluation of a degree of financial security of telecommunications enterprises is executed in the following phases: 1) engagement of three financial coefficients as input variables of the model, which are calculated on the basis of statistical and financial reporting data; 2) selection of membership function parameters and type for three input variables and for the output one; 3) development of the system of 27 rules; 4) calculation of an indicator of financial security of the enterprise using mamdani fuzzy conclusion; 5) verification of the model adequacy. the authors' next research will be aimed at improving the fuzzy-logical model for assessing the financial security indicator of an enterprise and expanding the scope of application of the proposed model to enterprises in other sectors of the national economy. references: altman, e. i. 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(2015). innovatsiinyi rozvytok ta ekonomichna bezpeka promyslovykh pidpryiemstv: problemy kompleksnoho upravlinnia: monohrafiia [innovative development and economic security of industrial enterprises: problems of integrated management: monograph]. odesa: bondarenko m. o. yelisieieva, o. k., & simon, h. s. (2016). analiz hroshovykh potokiv firmy yak skladova formuvannia stratehii staloho rozvytku [analysis of a firm's cash flows as a component of forming a sustainable development strategy]. business-inform, 12, 380–384. baltic journal of economic studies 170 vol. 7 no. 2, 2021 corresponding author: 1 central scientific research institute of the armed forces of ukraine, ukraine. e-mail: military.technology@icloud.com orcid: https://orcid.org/0000-0003-3542-5407 2 central scientific research institute of the armed forces of ukraine, ukraine. e-mail: sergiigodz1968@ukr.net orcid: https://orcid.org/0000-0002-7860-2330 doi: https://doi.org/10.30525/2256-0742/2021-7-2-170-178 methodological approach to justification of the distribution of the armed forces of the state in peacetime and wartime military fomations taking into account military and economic aspects volodymyr mozharovskyi1, serhii hodz2 abstract. the division of the armed forces into peacetime and wartime military formations (mfs) is carried out taking into account a number of aspects, namely military and political, military and strategic, military and economic, physical and geographical, operational (operational and tactical), demographic, regulatory, etc. an important place is given to the military and economic aspects, such as macroeconomic indicators of the condition and development of the national economy, the dynamics of changes in its military budget and the maximum possible degree of military and economic tension (opportunities for the deployment of military organization in a special period); the degree of dispersion, protection and vulnerability of important economic facilities of the country, its transport capabilities (infrastructure); cost indicators for maintaining unions (units) with varying degrees of preparedness for the mission execution for the purpose intended, their mobilization (transition to the wartime table of organization and equipment) and alerting; opportunities for the country's economy to modernize and produce new models of amh, providing the needs of troops (forces) with the necessary material means (fuel and lubricants, food, property, etc.). analysis of the problematic issues of organizing the armed forces, in particular their division into peacetime and wartime mfs, reflects the following contradiction: on the one hand, increasing the number of permanent readiness (peacetime) unions (units) involves the growth of the amount of financial costs for their maintenance, but at the same time reduces the time for their alerting; on the other hand, increasing the number of wartime unions (units) that need to be mobilized and alerted, provides a reduction in financial costs for their maintenance, but increases the time to alerting. according to the authors, the solution to this contradiction requires a comprehensive approach, which provides an in-depth consideration of the experience of troops and the use of theoretical research methods to justify the division of armed forces in the peacetime and wartime mfs. however, there is a lack of methods (methodological approaches) that would allow the in-depth consideration of resource and time limitations on the maintenance and alerting of troops, and on this basis, justification of the optimal division of the armed forces into unions (units) with varying degrees of manpower and equipment organization, security, training and preparedness to execute missions for the purpose intended. in this regard, the authors propose a methodological approach, which, taking into account military and economic aspects, in particular, the average annual financial resources required for the maintenance, mobilization (completion) and alerting unions (units) of a certain type, will allow a more reasonable approach to the division of the armed forces into peacetime and wartime mfs. the methodological approach presented in the article also applies to others formed in accordance with the legislation of mfs, which are entrusted with tasks and functions for the national security, protection of the country's sovereignty, territorial integrity and inviolability. key words: alertness and mobilization preparedness, armed forces, military formations, unions (units), military and economic aspects, financial resources, methodological approach, optimization problem. jel classification: f45, h83, c18 baltic journal of economic studies 171 vol. 7 no. 2, 2021 1. introduction the armed forces are responsible for national security, protection of its sovereignty, territorial integrity and inviolability. one of the requirements for the armed forces is the need to keep a certain composition of mfs in permanent preparedness to respond immediately to threats to the military security of the state, the rest of mfs should be kept in preparedness for mobilization (transition to the wartime table of organization and equipment) and preparedness to execute missions on purpose in a special period. to this end, by purpose, tasks, manning level, equipment with armament and military hardware (amh), logistics support (ls), training and preparedness for executing missions for the purpose intended, mfs (subunits, unions, units) are divided into those, which are kept deployed in peacetime, i.e., mfs of permanent preparedness (peacetime mfs) and those, which are subject to mobilization and alerting in a special period (wartime mfs) (mozharovskyi, hodz, 2018; hodz, mozharovskyi, pantiushenko, 2020; mozharovskyi, hodz, sakovskyi, 2019). the division of the armed forces into peacetime and wartime military formations (mfs) is carried out taking into account a number of aspects, namely military and political, military and strategic, military and economic, physical and geographical, operational (operational and tactical), demographic, regulatory, etc. an important place is given to the military and economic aspects, such as macroeconomic indicators of the condition and development of the national economy, the dynamics of changes in its military budget and the maximum possible degree of military and economic tension (opportunities for the deployment of military organization in a special period); the degree of dispersion, protection and vulnerability of important economic facilities of the country, its transport capabilities (infrastructure); cost indicators for maintaining unions (units) with varying degrees of preparedness for the mission execution for the purpose intended, their mobilization (transition to the wartime table of organization and equipment) and alerting; opportunities for the country 's economy to modernize and produce new models of amh, providing the needs of troops (forces) with the necessary material means (fuel and lubricants, food, property, etc.) (mozharovskyi, hodz, 2018; mozharovskyi, hodz, 2019). analysis of the problematic issues of organizing the armed forces, in particular their division into peacetime and wartime mfs, reflects the following contradiction: on the one hand, increasing the number of permanent preparedness (peacetime) unions (units) involves the growth of the amount of financial costs for their maintenance, but at the same time reduces the time for their alerting; on the other hand, increasing the number of wartime unions (units) that need to be mobilized and alerted, provides a reduction in financial costs for their maintenance, but increases the time to alerting. according to the authors, the solution of this contradiction requires a comprehensive approach, which provides an in-depth consideration of the experience of troops and the use of theoretical research methods to justify the division of armed forces in the peacetime and wartime mfs. however, there is a lack of methods (methodological approaches) that would allow the indepth consideration of resource and time limitations on the maintenance and alerting of troops, and on this basis, justification of the optimal division of the armed forces into unions (units) with varying degrees of manpower and equipment organization, security, training and preparedness to execute missions for the purpose intended. in this regard, the authors propose a methodological approach, which, taking into account military and economic aspects, in particular, the average annual financial resources required for the maintenance, mobilization (completion) and alerting unions (units) of a certain type, will allow a more reasonable approach to the division of the armed forces into peacetime and wartime mfs. some provisions on this methodological approach have been set out in publications (hodz, mozharovskyi, pantiushenko, 2020). the purpose of the article is to present the essence and main content of this methodological approach. 2. main content of the methodological approach methodological approach to substantiation of the division of the armed forces into unions (units) of permanent preparedness (peacetime) ( )np and unions (units) that are subject to mobilization and alerting in a special period (wartime) ( )nw (taking into account economic aspects) includes source data and elements of the calculation process (algorithm). output data provide indicators that are necessary to calculate the required number of unions (units) of permanent preparedness and those that are subject to mobilization, as well as financial resources (funds) necessary for their maintenance and alerting. the initial data should include the following indicators: n n n nj j p w= = +∑ is a predetermined total number of unions (units) of the armed forces, taking into account their j-th types to be distributed; tp j , tw j is the time (normative) for completion (mobilization) and alerting of one union (unit) of j-th type; тp j is the time (normative) for completion, тw j is mobilization and alerting of all unions (units) of j-th type; тp is the total time (normative) of completion and alerting unions (units) of all types of permanent preparedness, тw is mobilization and alerting unions (units) of all types to be demobilized; т тp j п w j п, is the time taking into account the limitations required to alerting baltic journal of economic studies 172 vol. 7 no. 2, 2021 unions (units) of j-th types; ср j , сw j are the average annual financial resources (funds) (excluding the cost of amh), which are necessary for the maintenance, completion (mobilization) and alerting one union (unit) of j-th type; с с np j p j p j= ⋅ , с с nw j w j w j= ⋅ − are the average annual financial resources (funds) required for maintenance, completion (mobilization) and alerting unions (units) of j-th type; с сс сj w j lp j j1 1 , ,= + ≤ are the average annual financial resources (funds) that are needed to maintain and alert n n n nj p j w j j n= + ≤ all unions (units) of j-th type; с c np p j j p j= ⋅∑ are the average annual financial resources (funds) required for maintenance, replenishment and alerting n np p j j = ∑ , unions (units) of all j-th types; с c nw w j j w j= ⋅∑ are the average annual financial resources (funds) that are needed to maintain, mobilize and alert, n nw w j j = ∑ unions (units) of all j-th types; c c c c c n c nс сp j j p j j w j p j j p j w j w j j 1 1 , , w ( )= = = + = ⋅ + ⋅+ ∑ ∑ ∑ ∑� � c c c c c n c nс сp j j p j j w j p j j p j w j w j j 1 1 , , w ( )= = = + = ⋅ + ⋅+ ∑ ∑ ∑ ∑� � are the total average annual financial resources (funds), which are necessary (depending on the level of development of the country and the military and political situation) for the maintenance and alerting unions (units) of all j-th types; с сl j l j 1 1 , ,= ∑ are the total financial resources (funds) (subject to limitations), which are allocated by the state for one year for maintenance and alerting n unions (units) of all types (value с j l1 , is determined not only on the basis of economic capabilities of the state but also taking into account the values тp j n , тw j п; values с j l1 , , тм j п , тв j п , np j , nw j are interconnected, they cannot be appointed independently of each other). it is assumed that the total number of n n n n n nj j p w p j j w j= = + = +∑ ∑( ) unions (units), to be distributed are determined in advance. financial resources (funds) is necessary to maintain and alert them. it should be noted that с с l1 1 , , .″ taking into account the indicators of the initial data, we formulate in more detail the contradiction mentioned above: – on the one hand, there is considered an attempt or expediency to keep most or all of n np= unions (units) deployed in peacetime, which minimizes the total time т to bring them ready to execute missions for the purpose intended. however, in this case, taking into account the average annual financial costs cp j (excluding the cost of amh) for the maintenance, completion and alerting one union (unit) significantly increases the total financial costs с с np j p j p j= ⋅ . these costs may exceed the allocated (subject to limitations) average annual financial resources с cl j l j 1 1 , ,= ∑ ; – on the other hand, the other extreme is considered when in the special period the majority or even all n nв= unions (units) will be subject to demobilization and alertness. this version of their maintenance, taking into account the average annual financial costs с cp j w j> (excluding the cost of amh) to mobilize and alert one union (unit) minimizes the necessary total financial costs с с nw j w j w j= ⋅ (for example, holding mobilization meetings, classes, etc.). however, in this case, the time t to alert these unions (units) increases significantly and complicates the process of their combat coordination (for example, due to the possible lack of personnel trained in full in peacetime). as a result of such a contradiction, in fact, there is a problem of finding a compromise solution, i.e., the most acceptable option for the division of the total number of mfs n into peacetime unions (units) np (those deployed in peacetime) and wartime unions (units) nw (those that are subject to mobilization and alerting in a special period with reduced staff ). this takes into account the limitations on the allocated average annual financial resources с l1 , and time тм п , , тв п , required for maintenance and alerting of np , nw unions (units). 3. stages of the calculation process (algorithm) the algorithm for substantiating the division of the armed forces into unions (units) of permanent preparedness and those to be mobilized and alerted in a special period includes two successive and interrelated stages. at the first stage the calculation of the following indicators is performed: the required value of human, material and financial resources, subgect to limitations с l1 , on the average annual financial resources allocated for completion (mobilization) and alerting of np j , nw j number of unions (units) of j-th types; required (maximum allowable) number np j and nw j . of unions (units) of j-th types taking into account time limitations т тp j п w j п, for alerting. it is assumed that the strength of the armed forces to perform missions of national defence, as well as the total number n of unions (units) of the armed forces to be distributed, are the predetermined values. for example, the number of armed forces is determined in accordance with the forecast of the military and political (military and strategic) situation, intentions and capabilities of a potential aggressor, military and economic (resource) capabilities of the state, and so on. the set limits on financial resources (funds) с j l1 , allocated and time тp j п , тw j п , required for alerting the unions (units) of j-th type. it is these baltic journal of economic studies 173 vol. 7 no. 2, 2021 indicators that largely determine the possible number n n nj p j w j= + of all unions (units) of j-th types. it is also taken into account that depending on the availability of trained personnel and the necessary means, troops (forces) can be alerted in successive and parallel ways. in a successive way, each subsequent union (unit) is alerted after alerting the previous union (unit), i.e., in the absence of parallel sections for alerting this or that union (unit). in a parallel way, the unions (units) are alerted almost simultaneously; this on average takes the time t of alerting one union (unit). to perform calculations, a value is entered that will characterize one or another way of alerting unions (units) in the presence of the necessary resources. this value is called a coefficient of simultaneity (parallelism) β of the start of alerting (this coefficient can also be called the coefficient of simultaneity (parallelism) of works on alerting unions (units)). w hen β = 0 there is a successive way, when β = 1 there is a parallel way, when 0 1< <β there is a combined way of alerting unions (units). accordingly, for unions (units) of permanent preparedness, given their staffing (crews), there can be taken on average βp j = −0 7 0 9, , ; for unions (units) to be mobilized, given the uneven supply of these unions (units) with mobilization resources, the lack of the required number of services (crews) prior to their alerting, there can be accepted, according to the experience of troops, on average βw j = −0 2 0 6, , . given the timeliness ( , )т т т тp j p j п w j w j п″ ″ of alerting unions (units) of j-th type, we have: т n t t tp j p j p j p j p j p j p j п= ⋅ ⋅ − + ⋅ ≤( ) ,1 β β at 0 1< <β (1) т n t t tw j w j w j w j w j w j w j п= ⋅ ⋅ − + ⋅ ≤( ) ,1 β β at 0 1< <β (2) these time indicators are interrelated. each of them depends on the number of peacetime and wartime unions (units) np j , nw j of j-th type, as well as from the allocated financial resources. taking into account (1), (2) we obtain: n t t t p j p j п p j p j p j p j ≤ − ⋅ ⋅ − β β( ) , 1 0 1< <βp j , (3) n t t t w j w j п w j w j w j w j ≤ − ⋅ ⋅ − β β( ) , 1 0 1< <βw j . (4) taking into account the average annual costs cp j , which are necessary for the maintenance, completion and alerting of one union (unit) of j-th type np j , as well as average annual costs cw j , which are necessary for the maintenance, mobilization and alerting of one union (unit) of j-th type nw j , this can be written: c n c т t t p j p j p j p j п p j p j p j p j ⋅ ≤ ⋅ − ⋅ ⋅ − β β( ) , 1 (5) c n c т t t w j w j w j w j п w j w j w j w j ⋅ ≤ ⋅ − ⋅ ⋅ − β β( ) . 1 (6) adding the right and left parts of these inequalities we obtain: c n c n c т t t c т t p j p j w j w j p j p j п p j p j p j p j w j w j п w j⋅ + ⋅ ≤ ⋅ − ⋅ ⋅ − + ⋅ − ⋅β β β ( )1 ww j w j w jt ⋅ −( ) . 1 β c n c n c т t t c т t p j p j w j w j p j p j п p j p j p j p j w j w j п w j⋅ + ⋅ ≤ ⋅ − ⋅ ⋅ − + ⋅ − ⋅β β β ( )1 ww j w j w jt ⋅ −( ) . 1 β (7) this takes into account that values nм j and nв j should fulfil not only conditions (3) – (6) but also the condition of correspondence between the necessary с j1 , and average annual funds с j обм1 , : с с c c n c n c т t t j м j в j м j м j в j в j м j м j потр м j м j м j м j 1 1 , ( = + = ⋅ + ⋅ ≤ ⋅ − ⋅ ⋅ − β β )) ( ) .,+ ⋅ − ⋅ ⋅ − ≤c т t t cв j в j потр в j в j в j в j j обм β β1 1 с с c c n c n c т t t j м j в j м j м j в j в j м j м j потр м j м j м j м j 1 1 , ( = + = ⋅ + ⋅ ≤ ⋅ − ⋅ ⋅ − β β )) ( ) .,+ ⋅ − ⋅ ⋅ − ≤c т t t cв j в j потр в j в j в j в j j обм β β1 1 (8) from (8), the relationship between the maximum values np j and nw j can be obtained taking into account the allocated financial resources с j l1 , : n c с n c c с c c n с cp j j l w j w j p j j l p j w j p j w j p j w j≤ − ⋅ = − ⋅ >1 1 , , , n c с n c c с c c n с cp j j l w j w j p j j l p j w j p j w j p j w j≤ − ⋅ = − ⋅ >1 1 , , , (9) the same equation, expressed with nв j , can be written: n c с n c c с c c n с cw j j l p j p j w j j l w j p j w j p j p j w j≤ − ⋅ = − ⋅ >1 1 , , , . n c с n c c с c c n с cw j j l p j p j w j j l w j p j w j p j p j w j≤ − ⋅ = − ⋅ >1 1 , , , . (10) the time тp for completion and alerting all n np p j j = ∑ peacetime unions (units) of peacetime will be determined by the maximum value of the time of alerting unions (units) of j-th type, which should not exceed the required (maximum allowable) time subject to value restrictions тp j п . similarly, the time тw for mobilization and alerting all n nw w j j = ∑ unions (units) to be mobilized will be determined by the maximum value of the time of alerting unions (units) of j-th type, which should not exceed the required (maximum allowable) time subject to value restrictions тw j п. the acceptable time limits тp j п , тw j п for alerting troops are prior; on their basis, there are determined the number np j , nw j and the necessary funds for this с j1 , . increasing the financial resources с j l1 , allocated in the interests of the troops will change the value n n nj p j w j= + and the overall value n n n j p j w j= +∑( ) subject to the condition т тp j p j п< or т тw j w j п< for alerting unions (units) at the expense of the measures connected with reduction of time tp j , tw j for alerting one union (unit) of j-th type. baltic journal of economic studies 174 vol. 7 no. 2, 2021 in the case of limitations, the distribution problem n n nj p j w j= + of unions (units) of j-th type on the peacetime unions (units) np j and wartime unions (units) nw j, depending on the selected condition of the source and other data, taking into account the time tw j , necessary for mobilization and alerting one union (unit) of j-th type nw j ., as well as time tp j , necessary for completion and alerting one union (unit) of j-th type np j. in terms of finding the right solutions, there can be used three main options (regarding priority selection): the first option supposes that the priority is the predetermined total number of unions (units) to be distributed according to the order of their maintenance and the time spent for alerting them, as well as the required number of unions (units) of permanent preparedness; the second option means that the priority is the average annual financial resources (funds), which are allocated in the interests of unions (units) of j-th type of the total amount of funds allocated per year in the interests of unions (units) of all types, as well as the required number of unions (units) of permanent preparedness; the third option means that the priority is the time required (maximum allowable) taking into account the limitations for alerting unions (units) of the relevant types of permanent preparedness and those to be mobilized in a special period. the first option: a predetermined number n n n n n nj j p w p j w j j = = + = +∑ ∑( ) of unions (units) to be distributed according to the order of their content and time spent for alerting them, as well as the required value σ j pj n of unions (units) of permanent preparedness for combat duty and other tasks in peacetime are priority (set). in this case, the maximum allowable number σ j wj n of unions (units) to be mobilized will be calculated: n n nw j j p j j ∑ ∑= − , (12) after this, for the known values tw j , βw j the time is calculated т n t tw j п w j w j w j w j w j= ⋅ ⋅ − + ⋅( ) ,1 β β (13) required for alerting nw j unions (units) of j-th type. according to the known values c cp j w j> the necessary financial resources (funds) с1 are determined for maintenance and timely ( ,т тp j p j п< т тw j w j п< ) пalerting of the mentioned number n n np j w j jj = +∑∑ of unions (units). the second option: the allocated amount of financial resources (funds) с j l1 , , as well as the required value np j , consequently, тp j п . , are priority (set). in this case, the maximum allowable number nw j , according to the known values c cp j w j> , will be calculated: n c с n c c с c c nw j j l p j p j w j j l w j p j w j p j= − ⋅ = − ⋅1 1 , , , (14) then the time, calculates the time required to mobilize and alert this number of unions (units) of j-th type calculates according to the known values tw j , βw j : т n t tw j п w j w j w j w j w j= ⋅ ⋅ − + ⋅( ) .1 β β (15) the total number nj of unions (units) of j-th type in accordance with the average annual financial resources (funds) allocated for their maintenance с j l1 , will be: n t t t с с n c j p j п p j p j p j p j j l p j p j w j = − ⋅ ⋅ − + − ⋅β β( ) . , 1 1 (16) the third option: the time тp j п , тw j п , is priority (set), then according to the known values t tp j p j w j w j, , ,β β the values are clearly determined under the accepted conditions: n t t t p j p j п p j p j p j p j = − ⋅ ⋅ − β β( ) , 1 (17) n t t t w j w j п w j w j w j w j = − ⋅ ⋅ − β β( ) , 1 (18) according to the known values c cp j w j> the financial resources с сj j l1 1 , ,″ (8) necessary to maintain and alert the number np j , nw j found are determined. then, the certain funds с j1 , can be used to maintain and subsequently alert n j of unions (units) of j-th type: n n n t t t t t t j p j w j p j п p j p j p j p j w j п w j w j w j w j = + = − ⋅ ⋅ − + − ⋅ ⋅ − β β β β( ) ( )1 1 ... (19) using one of the selected priority options, the total number n of unions (units) is calculated, which can be distributed according to the order of their maintenance, taking into account the time spent and allocated funds for alerting n of unions (units). the problem is considered solved if the condition n nп″ is fulfilled, with т тп″ of alerting all unions (units) of j-th types. in this case, it is considered that the average annual financial resources (funds) с j l1 , , allocated for unions (units) of j-th type from the total amount of funds с l1 , , allocated for unions (units) of all types, are enough for np j , nw j of unions (units) of j-th types out of the total number n nп″ of unions (units). if the condition is not fulfilled, it is necessary to increase the allocation of average annual financial resources (funds) с l1 , or shorten the time tp j , tw j for alerting one union (unit) of j-th type. the second stage. it is known that for the same allocated (subject to limitations) average annual financial resources с cl j l j 1 1 , , .= ∑ different values of indicators can be obtained regarding the number of unions (units) of permanent preparedness ( )np j and unions (units) to be mobilized ( ).nw j so, taking into baltic journal of economic studies 175 vol. 7 no. 2, 2021 account the previously stated contradiction, the problem of distribution of unions (units) of j-th type in relation to the order of their content provides an optimization option for its solution, i.e., finding the optimal values n nоp j оw j, , given their integrity, subject to conditionslimitations regarding the allocated average annual financial resources (funds) с j l1 , and time тp j п , тw j п required for alerting these unions (units). the criterion for solving this problem may be the desire to achieve the maximum relative to the total number nj of unions (units) of j-th type. it is assumed that the unions (units) can be alerted in a sequential, parallel or combined way depending on the degree of their staffing, equipment and training; therefore, the coefficient of simultaneity (parallelism) β − of the start of alerting unions (units) of j-th type is calculated. to record the optimization problem, the following indicators are taken into account: с j l1 , . is the average annual financial resources (funds) allocated for unions (units) of j-th type of the total amount of funds с cl j l j 1 1 , , ,= ∑ allocated for unions (units) of all types; с j1 , is the is the required amount of financial resources (funds) to alert all the unions (units) of j-th type; the time т tp j p j п″ , т tw j w j п″ . for alerting unions (units) of j-th type. it should be noted that с cp j w j> , t tp j w j< . the proposed optimization problem belongs to the class of problems of linear integer mathematical programming. the essence of this problem is the need to find the values of variables np j and nw j of unions (units) of a certain j-th type, which deliver the extremum – the maximum of a given scalar function, taking into account the accepted system of conditions limitations on financial resources (funds) с j l1 , and sometimes тp j п , тw j п . with regard to the system of limitations, it is assumed that limitations, like variables, are non-negative values, and the number of limitationsequations is less than the number of variables. given the above, the objective function of the linear integer programming problem will be written as: max max .n n nj p j w j= + (20) with limitations: values np j and nw j should fulfil the condition regarding the timeliness of alerting unions (units) of j-th type: т n t t tp j p j p j p j p j p j p j п= ⋅ ⋅ − + ⋅ ≤( ) ,1 β β т n t t tw j w j w j w j w j w j w j п= ⋅ ⋅ − + ⋅ ≤( )1 β β ; (21) values np j and nw j should fulfil the condition of balance between the required average annual financial resources (funds) с j1 , and financial resources (funds) с j l1 , . allocated per year for unions (units) of j-th type of the total amount of funds с l1 , : с с c c n c n c т t t cj p j w j p j p j w j w j p j p j п p j p j p j p j 1 1 , ( ) = + = ⋅ + ⋅ = ⋅ − ⋅ ⋅ − + β β ww j w j п w j w j w j w j j l т t t c⋅ − ⋅ ⋅ − ≤ β β( ) ,, 1 1 where variables np j , nw j are non-negative integers, with с cp j w j> ; t tp j w j< ; β βp j w j> . the optimization problem mentioned (20–22) is provided for unions (units) of j-th type. however, such a problem can be written in a more general form, as the linear integer programming problem in a standard (symmetric) form: max max ( ).n n n n n n np w p j j w j j p j w j j = + = + = +∑ ∑ ∑ (23) the limitations set: values np = nj pjς and (22) с c n c n c c т t t p p w w j j p j p j п p j p j p j p j 1 1 1 , ,( ) ( ) ( ( = ⋅ + ⋅ = = ⋅ − ⋅ ⋅ − − − − − ∑ β β )) ( ) ) ,, j w j w j п w j w j w j w j p w lc т t t с с с∑ + ⋅ − ⋅ ⋅ − = + ≤ β β1 1 n w j wj n= σ should fulfil the condition of timeliness of alerting unions (units): т n t t tp p j j p j p j p j p j p п= ⋅ ⋅ − + ⋅ ≤∑ ( ) ,1 β β т n t t tw w j j w j w j w j w j w п= ⋅ ⋅ − + ⋅ ≤∑ ( ) ;1 β β values np and nw should fulfil the condition of balance between the required total average annual financial resources (funds) с l1 , . and total financial resources (funds) с l1 , . , allocated for a year for unions (units) of all types: where variables np , nw are non-negative integers, with с cp j w j> ; t tp j w j< ; β βp j w j> ; ( )c np p − − ⋅ and ( )c nw w − − ⋅ are the scalar product of vectors given in the coordinate form: c с с с сp p p p p j − { }1 2 3, , ,..., is the vector of average annual costs (excluding the cost of amh) for the maintenance, completion and alerting of each of the unions (units) of j-th type deployed in peacetime; c с с с сw w w w w j − { }1 2 3, , ,..., is the vector of average annual costs (excluding the cost of amh) for maintenance, mobilization and alerting of each union (unit) of j-th type, with с cp j w j> ; n n n n np p p p p j − { }1 2 3, , ,..., is the vector of unions (units) of j-th type, deployed in peacetime; n n n n nw w w w w j − { }1 2 3, , ,..., is the vector of unions (units) of j-th type to be mobilized in a special period. 4. example of calculations an example of solving the linear integer mathe-matical programming problem according to the third option of baltic journal of economic studies 176 vol. 7 no. 2, 2021 table 1 the results of solving the linear integer mathematical programming problem on the third option of priorities (option) indicators calculations max max n n nj p j w j= + j-th type of unions (units) j-1 j-2 j-3 j-4 j-5 j-6 j-7 j-8 j-9 сp j (mln uah) 85.8 97.9 231 264 42.9 13.1 40 80 50 tp j (hours) 38 22 44 26 36 28 12 24 17 βp j 0.8 0.7 0.71 0.8 0.7 0.71 0.83 0,8 0,71 tp j p j⋅ −( )1 β 7.6 6.6 12.76 5.2 10.8 8.12 2.04 4,8 4,93 tp j p j⋅β 30.4 15.4 31.24 20.8 25.2 19.88 9.96 19,2 12,07 тp j п (hours) 48 24 48 28 40 30 24 48 34 n t t t p j p j п p j p j p j p j ≤ − ⋅ ⋅ − β β( )1 2.32 1.30 1.31 1.38 1.37 1.25 6.88 6,00 4,45 т n t tp j p j p j p j p j p j= ⋅ ⋅ − + ⋅( )1 β β 48.0 23.98 47.95 27.98 39.99 30.0 23,99 48,0 34,0 cond. fulfilled: т tp j p j п″ yes yes yes yes yes yes yes yes yes c с np j p j p j= ⋅ × (mln uah) 199.06 127.27 302.61 364.32 58.77 16.38 275,2 480,0 222,5 сw j (mln uah) 25.4 29.0 68.25 78.0 12.65 3.7 10 16 10 cond. fulfilled: с cp j w j> yes yes yes yes yes yes yes yes yes tw j (hours) 107.28 136.75 89.89 186.11 180.38 124.86 93,64 133,33 82,66 cond. fulfilled: t tp j w j< yes yes yes yes yes yes yes yes yes βw j 0.6 0.5 0.5 0.6 0.5 0.6 0,6 0,6 0,6 cond. fulfilled: β βp j w j> yes yes yes yes yes yes yes yes yes tw j w j⋅ −( )1 β 42.913 68.374 44.896 74.445 90.188 40.946 37,456 53,333 33,064 tw j w j⋅β 64.369 68.374 44.896 111.67 90.188 74.916 56,184 80,0 49,596 тw j п (hours) 326 194 242 240 314 194 218 288 192 n t t t w j w j п w j w j w j w j ≤ − ⋅ ⋅ − β β( )1 5.96 1.81 4.35 1.72 2.46 2.86 4,27 3,90 4,30 т n t tw j w j w j w j w j w j= ⋅ ⋅ − + ⋅( )1 β β 320.13 192.13 240.19 239.72 312.05 192.02 216,12 287,99 191,77 cond. fulfilled: т tw j w j п″ yes yes yes yes yes yes yes yes yes c с nw j w j w j= ⋅ (mln uah) 151.38 52.49 296.89 134.16 31.12 10.58 42,7 62,4 43,0 с j l1 , (mln uah) 355.0 200.1 610.0 510.0 100.1 28.5 320,0 548,0 270,00 с l1 , (mln uah) 2941.7 с с c млн грнj p j w j1 , ( . )= + mln uah 350.44 179.76 599.5 498.48 89.89 26.96 317,9 542,4 265,5 с c млн грнj j 1 1 , , ( . )= ∑ mln uah 2870.83 cond. fulfilled: с cj j l1 1 , ,″ yes yes yes yes yes yes yes yes yes cond. fulfilled: с с l1 1 , ,″ yes baltic journal of economic studies 177 vol. 7 no. 2, 2021 priorities is given in table 1. here, j-th type of unions (units) means unions (units) of the corresponding types of troops such as mechanized, tank, artillery, antiaircraft missile brigades (regiments), etc. 5. conclusion the main content of the methodological approach to justify the division of armed forces, as the basic component of forces of national security, on peacetime and wartime mfs taking into account military and economic aspects, in particular the average annual financial resources required for the maintenance, mobilization (completion) and alerting unions (units) of a certain type. the authors believe that the originality of this methodological approach is as follows: – the proposed algorithm of calculations (1) – (19) allows to solve the problem of distribution of armed forces by several options, depending on the chosen condition of initial data (options of priority) it provides for the use of three priority options: the first option supposes that the priority is the predetermined total number of unions (units) to be distributed according to the order of their maintenance and the time spent for alerting them, as well as the required number of unions (units) of permanent preparedness; the second option means that the priority is the average annual financial resources (funds), which are allocated in the interests of unions (units) of j-th type of the total amount of funds allocated per year in the interests of unions (units) of all types, as well as the required number of unions (units) of permanent preparedness; the third option means that the priority is the time required (maximum allowable) taking into account the limitations for alerting unions (units) of the relevant types of permanent preparedness and those to be mobilized in a special period. according to the selected priority, the total number of unions (units) is calculated, which can be distributed according to the order of their maintenance. the problem is considered solved if the condition n nп″ is fulfiled, with т тп″ alerting of all types of unions (units). in this case, it is considered that the allocated average annual financial resources (funds) are enough to form the required number of peacetime and wartime unions (units). if this condition is not fulfilled, it is necessary to increase the allocation of average annual financial resources (funds) or shorten the time for alerting one union (unit) of j-th type. the advantage of this methodological approach, compared to the known ones, is that depending on the selected priority and a predetermined number of unions (units), it allows you to easily determine the number of unions (units) of permanent preparedness and unions (units) to be mobilized, taking into account the time for alerting them, which does not exceed the allowable values for the time of alerting, as well as the allocated average annual financial resources (funds); – the optimization problem offered (20) – (22) allows you to determine the maximum number of unions (units) in relation to the order of their maintenance, taking into account the limitations on the time required to alert unions (units), as well as allocated financial resources. the advantage of this optimization problem, compared with the known problems of this area of research, is that due to the developed equations of the relationship between the main indicators of the distribution, it is confined to the known linear integer programming problem taking into account the most important restrictions on the time of alerting unions (units) and allocated financial resources. it is believed that the methodological approach outlined in the article (the main content) allows a more reasoned approach to the division of the armed forces into peacetime and wartime unions (units), taking into account military and economic aspects, in particular, average annual financial resources required for the maintenance, mobilization (completion) and alerting unions (units) of a certain type. (end of table 1) optimal values obtained n n no j o p j o w j= + 7 2 5 2 3 3 10 9 8 n no p o p j j = ∑ 23 (46.9 % of no) n no w o w j j = ∑ 26 (53.1 % of no) n n nо o w o p= + 49 references: mozharovskyi, v. m., & hodz, s. v. (2018). metodychni aspekty obhruntuvannia boiovoho skladu zbroinykh syl derzhavy z pozytsii teorii vedvernenoho zbytku [methodical aspects of the substantiation of a staff of the armed forces of a state from the standpoint of prevented damage theory]. kibernetyka i systemnyi analiz, vol. 54, no. 1, pp. 154–167. baltic journal of economic studies 178 vol. 7 no. 2, 2021 mozharovskyi, v. m., & hodz, s. v. 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(2019). funktsionalna zalezhnist rivnia navchenosti ziednannia (chastyny) vid vydilenoi na boiovu pidhotovku kilkosti navchalnykh hodyn ta yikh rozpodilu mizh spetsialistamy (pidrozdilamy) rodiv viisk [functional dependence of the level of training of the union (unit) on the number of training hours allocated for combat training and their distribution among specialists (departments) of the branches]. spilni dii viiskovykh formuvan i pravookhoronnykh orhaniv derzhavy: zb. mater. mizh. nar. nauk.-prakt. konf. (odesa, 12–13 veresnia). odesa: viiskova akademiia. sakovskyi, h. a., & hodz, s. v. (2017). deiaki pohliady na problemni pytannia rozpodilu boiovoho skladu zbroinykh syl ukrainy na viiska myrnoho ta voiennoho chasu [some views on the problematic issues of division of the armed forces of ukraine into peacetime and wartime troops]. zb. nauk. pr. tsndi zs ukrainy, vol. 3(81), pp. 76–83. baltic journal of economic studies 98 vol. 1, 2015 advertising agency marketing management denis kislov1, national academy of public administration under the president of ukraine, ukraine yevgenia horobei2, atlantic group, ukraine abstract. goal of the paper. the goal of this article is to define the nature, specific features and factors pertaining to the advertising agency marketing management. one of the tools is the use of non-standard approaches to management of advertising agencies, which under certain conditions makes it possible to improve the situation and to bring the agency to a new higher level as well as to improve the efficiency of its functioning in the conditions of transformational economy of ukraine. methodology. monitoring of the marketing behavior of agencies that promote advertising services. the results of monitoring and analysis demonstrated that the majority of agencies have a disorganized approach to the agency marketing, which results in sporadic activities related to the use and organization of agency marketing. only individual agencies begin to form their own marketing strategy for the implementation of which marketing budgets are allocated. the main marketing functions of a ukrainian advertising agency have been identified. practical value. rapid development of technologies, sophistication and increased variety of goods and services, reduction of their life cycle, higher customer demands, the growth of volume and speed of obtaining information, increased competition  – all these changes that are taking place in the external environment make the ukrainian companies that provide advertising services search for new approaches to ensure better adaptation to these conditions. uncertainty, unpredictability and instability of the external environment will continue to grow. therefore, the companies that provide advertising services need to constantly adapt not only to the existing conditions but also ensure that they are able to quickly react in the future. the basic precondition for success is stability of the quality that is achieved through strategic planning, fine-tuned search system, efficient management, which encourages creation of a position of quality assurance director or manager, who would be responsible for the standards of client service quality. according to the monitoring results, agencies begin to form their own marketing strategies, for the implementation of which marketing budgets are allocated, which will facilitate the search for new customers. relevance/originality. based on the received data, further development of the advertising market may be determined by the development of other commodity markets, and first of all – by an increased volume of the consumer goods market. key words: sales volume, management of goods, pricing, marketing department, advertising services, advertising agency. jel classification: м11, м13, м37 1. introduction in the course of time, the exchange process is improved by those involved in it. in other words, a company acquires professional skills of management of its marketing. filip kotler defines marketing management as “analysis, planning, implementation and monitoring of activities designed for establishing, strengthening and maintaining profitable exchanges with target buyers for achieving certain objectives of the organization, such as profit, sales growth, increased market share, and so on” (kotler 2006). therefore, the essence of marketing management is to find the optimum number of customers necessary to sell all products produced by the company at a certain time. the task of marketing management is “to influence the level, time, and nature of demand in such a way as to help the organization to achieve the goals identified for it”, which in other words means “marketing management is demand management”. in view of this, marketing management implies the study of a desired level of demand for products of a given company; analysis of the situation when actual demand is higher than the desired one, their correlation, and the situation when actual demand is lower than the desired one. corresponding author 1 department of marketing and advertising, national academy of public administration under the president of ukraine. e-mail: kislov.denisv@gmail.com 2 master of arts, atlantic group. e-mail: evgenia.gorobey@ukr.net baltic journal of economic studies 99 vol. 1, 2015 the process of marketing management encompasses such activities of a company as organization of sales and stimulation thereof, advertising campaigns and marketing studies, goods management and pricing. r apid development of technologies, sophistication and increased variety of goods and ser vices, reduction of their life cycle, higher customer demands, the growth of volume and speed of obtaining information, increased competition  – all these changes that are taking place in the external environment make the ukrainian companies that provide advertising ser vices search for new approaches to ensure better adaptation to these conditions. uncertainty, unpredictability and instability of the external environment will continue to grow. therefore, the companies that provide advertising ser vices need to constantly adapt not only to the existing conditions but also ensure that they are able to quickly react in the long-term perspective. in this situation, the importance of an efficient system of marketing of a company that provides advertising ser vices grows. the goal of this article is to study the specific features of a system for managing a company that provides advertising services. the subject of the study is the marketing management process at companies that prov ide adver tising ser v ices. results of the study. under the influence of social or other interactions processes are constantly going on in the market that affect companies’ market opportunities; these processes include changes of prices and rates for the basic goods or services, the related products or services, changes in the infrastructure, ethnographic, demographic, political and environmental changes, emergence of new or elimination of old economic structures and so on. 2. marketing management process under the conditions of constant dialectic transformations in the society in general and in the market in particular, any company that wishes to have adequate demand for its products needs to know what the society or a certain part thereof really needs, and in what quantity, in a given place and at a given time. to receive such knowledge, it has to compare its goals against the market demands on a regular basis, and revise when necessary its strategic or tactical positions, develop operative steps, that is, exercise marketing management. schematically, the marketing management process looks as follows: analysis of market opportunities selection of target markets development of marketing complex implementation of marketing measures fig. 1. marketing management process (ortins’ka, dubovik t.& dubovik o.2003) let us look at the main functions and criteria for evaluating the work of marketing unit employees (table 1). 3. essays advertising business in ukraine development of advertising business in ukraine as an independent branch largely depends on the level of organization of the current advertising services in the ukrainian market and on the advertising forms selected by advertising agencies. under the current conditions, advertising business is one of the branches of economy that combines tens of thousands of different economic actors. the efficiency of functioning of the ukrainian economy as a whole depends to a large extent on how efficiently this system will work (cherevko, 2004). the post-industrial epoch that was marked by numerous economic, social and technological transformations gave us grounds to announce as a strategic production factor table 1 functions and criteria for evaluating the work of marketing unit employees (cherevko 2004) position functions evaluation criteria head of unit development of a marketing strategy; coordination of marketing programs; control of achievement of marketing plans and implementation of strategies improved marketing strategies; increased competitive power and weight of the company product manager development of production and pricing strategy; identification of the product range. introduction of new products. development of distribution network increased incomes from products; higher share of new products in stock marketing planning specialist situational analysis; identification of marketing goals, development of an action plan; study plan; monitoring of implementation of the plan achieved goal of the plan, improved competitive positions of the company advertising and public relations specialist development of the promotion complex strategy; organization of advertising campaigns; organization of public relations increased buyers’ awareness; involvement of new buyers; improved image of the company; increased efficiency of promotion measures specialist for marketing research and information support of marketing activities research of product consumers; monitoring of competitors; strategic analysis of work conditions; information support of marketing decisions availability of a systematically updated database; support of the information needs of heads and specialists on individual marketing functions baltic journal of economic studies 100 vol. 1, 2015 the knowledge obtained as a result of intellectual activities. employees who have social knowledge and intellect are the most important competitive advantage of any company, but it is especially relevant in a company that provides advertising services. it is beyond any doubt that the uniqueness of advertising business is in the fact that its most important resource is people, and it is people that determine the marketing policy of the advertising agency (mel’nikovich, 2009b). with ukraine’s access to new market relations, new requirements for advertising and its creation as a process emerged. this marked the beginning of new development of advertising agencies as a new type of economic entities. table 2 correlation of changes of consumer demand and company strategy (kotler, 2006) dynamics of consumer demand motivation marketing strategy changes a consumer gives preference management of product improvement increase in the diversity of new forms of service provision great profit can be made from products manufacturing management of marketing and distribution network bigger networks are opened and sales network is expanded sharp increase in the share of consumers’ spending on non-food products incentives for increased manufacturing through advertising wider diversity of non-food products start of production of new consumer goods and services increased efficiency of advertising activities is facilitated by creation of advertising agencies, which implement it at a high professional level by using more rational means and ensure high quality advertising. advertising agencies play a positive role as qualified coordinators between trade and production in the interests of consumers and the entire society (fig. 2-3). unlike in the developed economies, the history of ukrainian advertising started not a century and a half ago but only in 1991. this was the time when the first domestic agencies appeared as well as the pricing network on tv accompanied by more efficient options for information dissemination. expansion of foreign goods stimulated rapid development of advertising in the territory of ukraine (ronald lane & thomas russell, 2004) today, advertising budgets in ukraine are managed by approximately 20 powerful network agencies represented by the interests of the world’s largest advertising groups. these include: provid/bbdo, leoburnett, ddb,greykiev, ogilvy&mather, лінія 12, visage, arcjvt, saatchi&saatchi, aovertising, umc and others. 4. trends in world advertising market in industrially developed countries, large sums of money are spent on advertising, and hundreds of thousands of people are involved in the advertising business. for instance, in the usa, which has the most developed advertising market, the advertising per capita cost totals nearly usd 1,000-1,500, whereas in russia this figure is approximately usd 20-50, and in ukraine it does not exceed usd 0-12. this shows that the advertising services market in ukraine is underdeveloped and the management systems of the companies that work in this market are imperfect. according to the estimations of zenith optimedia, the contribution of developing states to the growth of the global advertising market will total approximately 63% from 2012 to 2015, and their share will increase from 34% to 38%. the fastest growth will be demonstrated by the markets in latin america, “rapid” asia, eastern and central europe  – on average, 10-11% every year in 2012-2015. however, regardless of this trend, the largest amounts of new dollars will still be invested in advertising by the usa; from 2012 to 2015, its contribution will be 28% of the additional $76 billion that will come to the global market. from 2012 to 2015, there will be changes in the rating of the world’s largest advertising markets. the usa, japan, china and germany will remain the top four leaders, whereas australia and south korea will take the eight and the tenth places respectively. at the same time, great britain will descend from the fifth to the sixth place, france – from the seventh to the ninth, and canada will leave the top ten altogether. instead, brazil will grow to the fifth position, and russia will join the top ten and take the seventh place. strengthening of the global economy will open up more opportunities for business development. advertising is an important tool for launching new products and entering fig. 2. communication model yesterday fig. 3. communication model today baltic journal of economic studies 101 vol. 1, 2015 new markets so the advertisers will increase their budgets wherever they will receive a significant effect from these investments. as a result, the interest in managing the process of provision of advertising services will grow. recently, numerous works have been dedicated to the problems of advertising business management  – from articles to monographs and manuals. this problem has been studied by many foreign and domestic researchers such as d.a. aaker, r . batre, j. burnet, f.  jefkіns, s.v.  veselov, v.v. gnatushenko, v.m. dem’yanov, s.v.  dinchev, l.yu. zayatіn, w.r . lane, yu. g. lysenko, g.k. russell, ye.v.  romat, s.v. chelakhov and others. some publications by practicing advertisers can be found on professional advertising portals and in professional marketing and advertising periodicals. table 3 top-10 advertising markets 2012 adspend 2015 adspend 1 usa 161 z41 1 usa 182 427 2 japan 51 724 2 japan 53 453 3 china 36 190 3 china 48 678 4 germany 25 646 4 germany 27155 5 great britain 19 502 5 brazil 23 901 6 brazil 18 217 6 great britain 20689 7 france 13 525 7 russia 13 714 8 australia 12 633 8 australia 13 658 9 canada 11 325 9 canada 13456 10 south korea 10 899 10 south korea 13303 million us dollars, current prices. the amounts are shown as calculated on the basis of the average exchange rate as of 2011 (telekritika, 2013) however, the advertising services market still lacks publications on the problems of management of an adverting agency marketing, and there is no uniform interpretation of the category of “advertising agency marketing management” as such. in general, this problem has not been subject to extensive scientific analysis, which fact necessitated this article. nevertheless, the theory of advertising business management demonstrates a number of problems that require further solution, including the optimal organizational structure of advertising agencies, improvement of the mechanism of interaction of the advertising process participants, and development of efficient mechanisms for managing the process of provision of advertising services (cherevko, 2004). 5. marketing agency process, and a role of marketing in it first, let us look at the structure of management of the agency marketing process and the place and role of the marketing unit in it. agencies can be of various sizes: they may have from several to dozens and hundreds of employees. agency management may opt for various organizational management structures. according to (romat, 2008; ronald lane & thomas russell, 2004) and our observations, the most typical structural units existing in universal and in many specialized agencies are: customer service department (department of orders), creative department, marketing department, research department (department of marketing research), department of public relations (pr-department), department of media planning (media department, or advertising department, or department for planning and media relations), department for production of advertising and other materials (production department), department for implementation of projects or operating department, business development (new business department or commercial department), department of corporate communications, department of strategic planning, information technology department, legal department, human resources department, financial and economic department. not all of these departments can be found in each type of agency. depending on the type of services the agency is going to offer its customers, it can include such units and functions that will be immediately involved in advertising product manufacturing: agency director. may be an individual or a collective entity; creative department  – a unit responsible for the development of ideas, creative processes based on the strategy identified by the strategic planning department. it has copywriters (responsible for the textual part of advertising), art directors (visual part), and graphic designers. the unit head is the creative director. customer service department is a group of managers acting as a link between the customer and the advertising agency. this includes strategic planning managers, who are responsible for communication planning. the unit works closely with consumer research and develops the strategy for the future advertising campaign (gorlov, 2007). depending on the internal structure, specialists identify several components of the advertising agency management complex: 1. creative team management. this component is part of the human resources policy, but since creative professions constitute the main part of the agency personnel, or at least the most important part of it, they are to be worked with separately even when they simply develop label inscriptions. the success of an advertising agency will be determined primarily by the creative personnel. 2. advertising service management. 3. monitoring of orders performance and quality control. the specific features of agency management are largely related to the specific nature of the type of companies themselves and their products. most often, the principal activities include production of an advertising message. yet, it can be done in various forms using various communication systems. the manager must take into consideration all the facts, know the target audience, specific features of the manufactured product, and market specifics. then, with due regard to this information, the baltic journal of economic studies 102 vol. 1, 2015 policy of the work of the entire organization is developed. advertising is entrepreneurial activity with a high level of risk. this should also be taken into account by a venture company manager. a good manager minimizes the risks, and only then strives to increase profits. recently, innovative approaches to business management have become more and more popular. the epoch has changed. now, entirely different factors influence the decision-making process compared to 10-20 years ago. management based on fear no longer works. the manager’s personal characteristics as well as his/her ability to lead come to the fore, while the job description and formalities become less important. non-standard views on the management, initiative and enthusiasm in everything are encouraged. today, interesting and relevant ideas of business conduct can most frequently be found in representatives of such countries as the usa, sweden, and france. this can be explained by the presence in them of a large number of business schools and other specialized business institutions. swedish economists and professors of the stockholm school of economics, kjell nordstrem and jonas ridderstrale, wrote the manifesto of a new era of business ten years ago, yet in our countries their ideas became popular not so long ago. the main ideas of nordstrem and ridderstrale include: globalism. wider and wider spread of the internet, cosmopolitanism, exchange of experience, and corporate mergers. constant search for business differentiation. you should create something new, something still unknown in the world, or look for some competitive advantage. the need for an innovative organizational structure. create conditions that ensure production not of the same goods but an uninterrupted flow of creative ideas. leadership. only a charismatic and confident leader can motivate his/her subordinates to move towards new professional achievements. freedom of power. an opportunity to freely use the most valuable resource – human mind. the ability to surprise people. the only way to sell your product is by surprising the consumer and by making him/ her interested. presentation of business as show business. nothing draws attention as much as a creative and non-standard approach. it is most obvious in show business. this means you should take some elements of a show and adapt them to your business. these and many other ideas form no longer new but very relevant understanding of the modern business structure and development (nordstrem & ridderstrale, 2006). in practice, with regard to real management of advertising agency marketing, these principles can be used as follows. the use of appropriate management in advertising is important as in no other business, because the tasks of the agency are in many aspects identified by the consumers and not by the producers of advertising services. the most important is the customer and the end consumer. today, the agencies have to constantly create the woweffect both in their products and in the development of their image. significant success in this respect was achieved by ogilvy & mother ukraine, whose flamboyant advertising campaigns produced a powerful creative image. nordstrem and ridderstrale recommend being faster with your plans and actions. every day someone has an idea that we could implement, and the longer we wait the more opportunities we lose. for advertising agencies, this piece of advice is extremely relevant, since trends are constantly changing very rapidly. a successful agency does not follow but dictates the trends itself. in advertising as in many other types of business, there is a notion of competitive bidding. this is a competitive form of provision of services or performance of works on the basis of pre-defined documented conditions, within the agreed timelines according to the principles of competition, justice, and efficiency. a contract is signed with the winner of the competitive bidding process – the participant who submitted a proposal that meets the requirements of the documents and offers the best terms. agencies constantly participate in such competitions. most of their time is spent on the development of bidding proposals. today, doing one’s job well is not enough; one should seek the ways to distinguish oneself, to surprise the customer and the end consumer. the brighter the way the agency presents its ideas, the higher the probability that it will get the order to produce a video or perform other works. today, for the presentation of ideas not only power point is used but also more modern means such as kinekt or augmented reality applications. kinekt enables a user to interact with the application using oral commands, body movements, objects, etc. augmented reality applications help you combine the virtual and real thus creating a brighter impression on the customer made by your presentation. 6. their marketing tasks in ukraine, universal and specialized agencies solve various marketing tasks aimed at ensuring the agency development. according to the results of the survey that we conducted, the most popular among them (in decreasing order) are search for new customers, identification of positioning, development strategy drafting, identification of the agency’s pricing policy, planning of the range of advertising services, market behavior monitoring, and other services. somewhat different priorities among representatives of advertising agencies were developed with regard to those marketing tasks that they are planning to perform in the future. the first place in terms of priority is taken by the implementation of pr-measures to promote advertising services and organize participation in various advertising festivals/contests. the second place is taken by the evaluation of efficiency of marketing activities that baltic journal of economic studies 103 vol. 1, 2015 the agencies are planning to implement to evaluate their advertising activities in the marketing communications market. the third place with regard to the need to implement by the agency is taken by the identification of its pricing policy and monitoring of the market behavior of the agency’s competitors. management of an advertising agency requires not only special knowledge of the media, creative and production spheres of advertising, but also the ability to understand creative people who create advertising. if we analyze activities of modern advertising agencies, we can come to a conclusion that they are no longer companies but creative laboratories, whose success depends on the presence or absence of a creative person. agencies are being transformed into a productive process that requires not only nice creative solutions but also efficient operations management. with regard to human resources issues, in order to retain personnel in the agency you have to make them interested. financial interest is not always the key. in advertising agency marketing management, a very important role is played by its head, his/her charisma and leadership qualities. the head has to be a role model for his/her subordinates. many creative directors make their employees believe in themselves and respect what they are doing. the most spectacular examples that i know include: former creative director of adventa lowe oleksii pasichnyk, head of think!mccannericson yevhenii kaminskyi, former creative director of havas worldwide kiev serhii kryvosheia, and its current creative director – kostiantyn sobol. these persons are good examples of head of an advertising agency. the employees have to believe in their own strengths and success. by delegating powers and trust one can ensure initiative and respect. each employee has to be aware of the agency’s goals and feel his/her responsibility for the final product. this is the main task of a manager. the basis for success is now the stability of quality, which is achieved through strategic planning, efficient management, fine-tuned search system and talent retention, etc. to this end, the leading western european and russian agencies create the position of quality assurance manager, who introduces the standards of quality of service provision to customers. for instance, russian agency movie has a quality director in its staffing list. in our opinion, ukrainian agencies should also introduce such positions, especially at the stage of standardization of their services (mel’nikovich, 2009a; mel’nikovich, 2009b). 7. conclusions generalizing our analysis of marketing management in the advertising sphere, the following conclusions can be made: 1. each agency in ukraine has its own unique functioning characteristics, its own service portfolio, its own view of the managers as to how the agency should be organized that leads to the emergence of difference organizational structures of management even in agencies with the same specialization; 2. the majority of agencies have a non-systemic approach to organization of agency marketing, which results in sporadic activities related to the application and organization of marketing in the agency. only some individual agencies begin to develop their own marketing strategies, for the implementation of which marketing budgets are allocated; 3. responsibility for the implementation of certain marketing tasks in the agencies is dispersed among various structural units and even among individual employees. for instance, the issues related to the agency development strategy drafting, identification of the marketing budget, agency positioning, and its pricing and products range policies are the responsibility of the owner or head of the agency. search for new customers is the responsibility of the customer service department or business development department. monitoring of market behavior or competitors is performed by the marketing department or research department, whereas promotion and pr event for promotion of advertising services may be organized and carried out by the corporate communications department, marketing department, business development department or even by the owner (head) of the agency. such situation in the marketing management sphere, which has developed in ukrainian advertising business, demonstrates a lack of agencies’ readiness for the implementation of a comprehensive system approach to organizing their marketing activities. 4. compared to highly developed countries, the ukrainian advertising market is far from saturation and has a great development potential. further development of the advertising market can be determined by development of other commodity markets, primarily an increase of the volume of the consumer goods market. the growth of the market of consumer goods and services, appearance of new brands influence the growth of the volumes of the advertising market. ukrainian companies, based on the experience of foreign companies, use the same business technologies as the world companies, but not in the quality and amount as in the world. the modern market of media services is influenced by a range of factors. the most influential among them are: increased competition, governmental regulations, deficit of highly qualified specialists. among the problems of both advertising industry and the ukrainian business in general one should also mention a chronic shortage of primary marketing information associated with the closeness of most ukrainian companies (turnover, profit, costs of the brand launch, advertising, etc.). baltic journal of economic studies 104 vol. 1, 2015 references romat, e.v. (2008) advertising marketing system, studcentr, st. petersburg, russia, 608 p. w. ronald lane and j. thomas russell (2004) advertising, translated by vinogradova t., piters, – st. petersburg, russia, 537 p. cherevko, v.b. (2004) “synthesis enterprise management system that provides advertising services” abstract of ph.d. dissertation, economic sciences, donetsk national university, donetsk, 16 p. ortins’ka, v.v., dubovik, t.v., dubovik, o.v. (2003) “problems of evaluating the effectiveness of advertising on the management of commercial enterprises” marketing in ukraine, vol. 6, pp. 121-125. mel’nikovich, o.m. (2009a) “study trends advertising development agencies in ukraine” marketing research in ukraine, vol. 1, pp. 62-67. mel’nikovich, o.m. (2009b) “marketing companies advertising industry”: d. sc. thesis kiev, kyiv national university of trade and economics, ukraine, 467 p. kotler, f. (2006) “principles of marketing”, available at: http://bibliograph.com.ua/biznes-42/7.htm (accessed 12 april 2015). telekritika (2013) “global advertising market, forecasts of network advertising agency”, available at: www.telekritika.ua/rinok/2013-04-30/81343, (accessed 12 april 2015). gorlov, o. (2007) “global advertising market, forecasts of network advertising agency” available at: http://www.training.com.ua/article/8/osoblyvosti_ukrainskoi_reklamnoi_industrii.html nordstrem, k. and ridderstrale, j. (2006) funky business. capital is dancing to the tune of talent, st. petersburg, russia, 135 p. денис кислов, евгения горобей управление маркетингом рекламного агентства аннотация. цель работы. статья направлена на определение сущности, особенностей и факторов управления маркетингом рекламного агентства. одним из средств является применение нестандартных подходов в управлении деятельностью рекламных агентств, что при определенных условиях позволяет улучшить ситуацию и вывести агентство на новый более высокий уровень, позволит повысить эффективность его функционирования в условиях трансформационной экономики украины. методика. мониторинг рыночного поведения агентств по продвижению рекламных услуг. результаты мониторинга и анализа установили, что большинство агентств имеют бессистемный подход к организации маркетинга в агентстве, в результате чего проводят спорадической активности по применению и организации маркетинга агентства. лишь отдельные агентства переходят к формированию собственной маркетинговой стратегии, для реализации которой выделяют маркетинговые бюджеты. определены основные маркетинговые функции рекламного агентства украины. практическое значение. быстрое развитие технологий, усложнение и разнообразие товаров и услуг, сокращение их жизненного цикла, повышение требований покупателей, увеличение объемов и скорости получения информации, рост конкуренции  – все эти изменения, происходящие во внешней среде, заставляют украинские предприятия, предоставляющие рекламные услуги, искать новые подходы для лучшей адаптации к этим условиям. неопределенность, непредсказуемость и нестабильность внешней среды будут расти и дальше. итак, предприятиям, предоставляющим рекламные услуги необходимо постоянно адаптироваться не только к действительным условиям, но и обеспечить способность к быстрому реагированию на будущее. основой успеха становится стабильность качества, что достигается стратегическим планированием, налаженной системой поиска? эффективным менеджментом, что побуждает внедрять должность директора или менеджера по качеству, который должен заботиться стандартам качества в обслуживании клиентов. согласно мониторинга агентства переходят к формированию собственной маркетинговой стратегии, для реализации которой выделяют маркетинговые бюджеты, будет способствовать поиску новых клиентов. значение/оригинальность. полученные данные дальнейшее развитие рекламного рынка может определяться развитием других товарных рынков, в первую очередь, увеличением объемов рынка товаров массового потребления. baltic journal of economic studies 28 vol. 7 no. 2, 2021 corresponding author: 1 national academy of management, ukraine. e-mail: nadiya.benko@gmail.com orcid: https://orcid.org/0000-0002-0542-5839 doi: https://doi.org/10.30525/2256-0742/2021-7-2-28-36 dominants of development and reproduction of human capital as a strategic component of change nadiia benko1 abstract. the subject of the study is the conceptual, theoretical, methodological and applied provisions of state regulation of development and reproduction of human capital for the national economic system management. methodology. general scientific methods were used in the research process. the method of comparison was used for generalizing the approaches of different researchers on the main dominants of development and reproduction of human capital. analysis was used to determine the quantitative and qualitative parameters of the dominants of human capital. synthesis was used to determine the methodological principles of labour market regulation and human capital development. induction and deduction were used for determining approaches to the main dominants of human capital. the aim of the article is to generalize various approaches to the main dominants of development and reproduction of human capital on different bases and purposes, to develop a modern theoretical basis for the development of human capital in the country’s economy. the results of the study have shown that to ensure the effectiveness of state regulation of the development and reproduction of human capital, it is necessary to create an appropriate social environment and conditions that promote the fullest use of knowledge and intellectual, creative potential of individuals. conclusion. the composition of the bases and goals of the dominants of development and reproduction of human capital in ukraine, in contrast to the existing one, should include labour market regulation policy, national model of combating unemployment, working capacity, cost of human capital and human development index. this will ensure investment, development and human capital management in ukraine. analysis of the methodo-logical principles of labor market regulation and human capital development of the european union and ukraine, and problems of human capital development in ukraine allowed us to conclude that they differ significantly. their difference is ex-plained by different levels of economic and social situation of countries and other factors, in particular the low speed of dissemination and implementation of progres-sive results of investment in education and science. the practical significance lies in increasing the scientific substantiation of theoretical provisions and practical measures to ensure the mechanism of state regulation of development and reproduc-tion of human capital is in accordance with transformational changes in social rela-tions and market conditions, processes of globalization. key words: human capital, human potential, dominants of human capital, tools to promote employment, tools to promote human capital. jel classification: b22, e22, e24, j24, o15 1. introduction the modern historical stage of development of a society is characterized by the formation of the economy of knowledge, innovations, global information systems, the economics of intellectual labour, science, new technologies. most of the researchers recognize the importance of human capital in the new economy, which is the main, intensive productive factor in the socio-economic development of modern society and an individual. different countries are at different stages of socio-economic development, have different resource potential, and set different goals based on political and economic interests. human capital is inextricably present in the field of these tasks as a strategic component of change. a fairly stable component structure of human capital has been formed in the theory of human capital. for the theoretical substantiation of the state programs of development of human capital, it is necessary to allocate dominants of its development and reproduction. in baltic journal of economic studies 29 vol. 7 no. 2, 2021 the scientific works of recent decades, the approaches of individual authors to the main dominants of the development and reproduction of human capital on different bases and goals have been formed, however, there is no unity on this issue. the contribution to the development of concepts of human capital as a resource of socio-economic development, research of the dominants of development and reproduction of human capital was made by foreign researchers, in particular: mcclellan d. c., spenser l. m., spenser s. m., smyrnov v. t., soshnykov i. v., romanchyn v. i., skobliakova i. v., boyatzis r ., chyzhova e. n., alwan kh. a. the results of research by the following ukrainian scientists were useful: tymoshenko k. v., nosyk o. m., polous o. v., dotsenko a. i., krayevska g. a., tereshchenko d. a., melnychuk d. p., semykina a. v. scientists emphasize the importance of specific groups of human abilities as a resource in socioeconomic development. in particular, in an industrial society, the concept of assessment of professional skills and abilities of workers due to the re-quirements of scientific and technological progress was dominant. in the period of the new economy, the concept comes to the fore in which the assessment of professional competencies is supplemented by an assessment of personal characteristics and social-labour relations of employees that affect the effectiveness of their work. this led to scientific controversy about the dominants of development and reproduction of human capital, their importance, and priority. 2. research of approaches to the dominants of development and reproduction of human capital the main reason for the need to actualize the role of human capital in the de-velopment of modern society is the transformation of the economic system and society as a whole under the influence of scientific, technological, and information revolutions. this leads to the need to form a completely different type of employee. in these conditions, such characteristics of the employee as creativity, ability to innovate, a high degree of adaptation to advanced innovative technologies, the ability to make quick and correct management decisions come to the fore. that is, the employee must not only be a highly qualified professional but also have a developed creative intelligence (tymoshenko, 2018). we can identify the following basic human capital elements of an individual: – knowledge, which is an appropriate form of information used in economic activities, which increases efficiency; – abilities, namely, the ability to successfully perform any activity. there are the following levels of development of abilities: lack of ability (zero level), partial abilities, average abilities, talent, genius; – experience or skills, skill of performance of concrete labor operations for a long time; – culture – principles and stereotypes of behavior within the existing knowledge, rules, traditions, morals in society; – motivation – the direction of activity, its intensity, satisfaction with the pro-cess and results; – health; – cultural and moral capital; – labour capital; – organizational and entrepreneurial capital; – intellectual capital (smyrnov et al., 2005). the creative abilities of a person, his or her intellect, intelligence, ability to find non-traditional solutions to complex problems play an exceptional role in the innovation process (nosyk, 2016). adhering to this provision, it can be stated that the transition of societies to the knowledge economy brings to the fore the individual – the bearer of intellectual, creative abilities to innovation. this necessitated the creation of an appropriate social environment and conditions that promote the fullest use of knowledge and intellectual, creative potential of the individual. as a result, the concept of human capital management was born, its intellectual component. currently, a significant number of different systems of indicators and indices have been developed, which are used to analyze the development of the social environment and conditions that promote the fullest use of human capital, including innovation, educational potential, informatization of society, use of information and communication technologies, etc. as part of the study of human capital over the past decades, the main domi-nants of its development have gradually formed. the dominants of human capital development are based on various bases and purposes, which are presented in the literature on this issue. one of them is “competence” (mcclellan, 1973). competence is increasingly used in the study of the potential of human capital carriers. the concept of competence does not have a single definition. in general, it is a cumulative assessment of some elements of human capital. competence is a characteristic of an individual that has a causal connection with his or her work. this characteristic includes skills, like communication skills and motives. the greatest attention to the conceptualization of the concept of competence is paid in various studies of the effectiveness of organizations, management, and human resources. boyatsis, r . (boyatsis, 2008) has made a great contribution to the development of the concept of competency. in order to study characteristics that are directly related to the effectiveness of managers – employees of organizations, regardless of their specifics, boyatsis identifies 19 managerial competencies: baltic journal of economic studies 30 vol. 7 no. 2, 2021 – focus on efficiency (desire to do something better than others); – proactivity (intention to act on a task); – diagnostic use of competencies (a way of thinking that uses certain models and concepts to ensure what is happening); – trying to make an impact; – self-confidence; – use of oral presentations (effectiveness of communication); – logical thinking (a process of thinking in which certain events are considered in causal connection with other events); – conceptualization (the ability to create your own concept that describes a particular event); – use of social influence (use of one’s influence to create a team, alliance, network, coalition); – positive attitude (trust in people); – group process management; – accurate self-assessment; – development of others; – unilateral use of power (directiveness); – spontaneity (ability to easily and freely express oneself in appropriate conditions); – self-control (subordination of own desires to the needs of the organization); – objectivity of perception; – internal balance and adaptability (patience at work and a correct understanding of changes in life and organization); – focus on relationships (attempts to build relationships with others) (trn.ua training portal, 2020). based on the competency approach, spenser l. and spenser s. identified the following components of competencies: – reasons; – psychophysiological features; – human’s belief in his or her ability to act effectively; – knowledge; – habits (spenser l. and spenser s., 2005). this structure of competence adequately fits into the theory of human capital. polous, o. (2017) identifies the dominants of human capital development in ukraine in the context of compliance with the convergence criteria of the european union (eu) and, in particular, the implementation of the maastricht criteria (convergence criteria): – inflation should not exceed more than 1.5% – the average value of the three member states of the european union with the most stable prices; – long-term interest rates on government bonds should not exceed more than 2% – the average value of the relevant rates in countries with the lowest inflation; – the exchange rate must not go beyond the established corridor during the last two years (+/15%); – public debt must be less than 60% of gdp; – the state budget deficit should not exceed 3% of gdp. according to the criteria’s estimates, ukraine has risen sharply in terms of “creative products”, which include the development of high value-added products, it products, design, media, fashion, and more. this happened also due to the digitalization of the economy, its gradual transformation into an economy with a high level of use of it technologies. medium and small businesses are increasingly using the opportunities of the internet and it as tools to grow their business. thus, the dominants of human capital development in ukraine should be considered in the context of meeting the convergence criteria. it is necessary to continue the pension reform, administrative reform to optimize the number of civil servants (except for education, which plays a key role in the formation of human capital, and health care, which supports its development). there is also a need to change the tax burden to increase wages and reduce the level of labor migration and to promote investment in ukrainian business, as well as to stimulate automation, robotization of ukrainian business and bring it to an innovative level (polous, 2017). another dominant of human capital development is studied by dotsenko, a. and krayevska, g., which is the reproduction of human capital of ukrainian settlements, in particular rural settlements. the researchers concluded that: – at the present stage in ukraine, there is a regressive regime of reproduction of human capital, due to the deepening of the negative process of depopulation; – the main trend in the reproduction of human capital is the change of generations, and the number of new generations is less than the generations that are dying; – hence, the main conclusion is the priority of the reproduction of human capital not quantitatively but qualitatively; – qualitative changes in the structure and reproduction of human capital are in the increase of the working age share of people and people who are in good health, who have a complete general secondary and higher education (especially in rural settlements where the share of people with higher education is almost three times less than in urban); – the process of reproduction of human capital has significant differences in urban and rural areas of ukraine, which led to the emergence of depressed rural are-as; – shifts in the sex and age structure of the rural population have led to a ten-dency to reduce the workload of the working population by younger and older people of working age (dotsenko and krayevska, 2011). in the study of modern dominants of human capital development, tereshchenko d. identifies the requirements dictated by the fourth industrial revolution. the study confirmed the key role of education in the formation of human capital. the results show that the main indicators of ukraine in the field of education do not allow to reproduce human capital in baltic journal of economic studies 31 vol. 7 no. 2, 2021 accordance with modern technological challenges, so timely measures by the state require the implementation of policies aimed at overcoming ukraine’s lag in productivity, education and other indicators, which allow to implement the concept of “industry 4.0” due to the growing quality of human capital. the author proves that the global concept of “industry 4.0”, which demonstrates modern changes in technology, methods of reproduction and the real needs of innovation, demonstrates certain features of approaches to the formation of human capital. the timely implementation of a high-tech path of economic development will allow states to achieve significant growth. ukraine lags far behind in terms of opportunities to introduce modern production and form an appropriate level of human capital. it is concluded that having significant scientific and educational potential, ukraine should accelerate the modernization of education, science, innovation through legal, administrative, economic, and other mechanisms of public administration and change approaches to ways of forming human capital (tereshchenko, 2019). melnychuk d. defines education as the starting point for the development of human capital, a major factor in the modernization of society because the personal and professional development of citizens is the most important prerequisite for effective modernization. there is no doubt that education contributes to the modernization of societies, and serves as a basis for the development of knowledge-intensive industries, the introduction of advanced technologies in economic practice. the author argues that the negative trend in ukrainian education will progress until the volume of enrolment in higher educational institutions and lists of specialties do not meet the real personnel demands that are formed at all levels of the economic system of society. currently, education is a secondary tool of social management, but it should become a leading institution for the development of professional qualities of citizens who are capable of ensuring high productivity and innovative results. the scientist concludes that the main reason that hinders the development of education and training is that the domestic economy is dominated by jobs of low technological complexity, which are unattractive for modern professionals, especially young people. the productive capacities of the vast majority of the economically active population remain underdeveloped. that is why investments in the formation of human capital must be accompanied by the revival of the productive sphere, supported by investments in the comprehensive development of enterprises. technical and technological modernization of economic sectors is the most important prerequisite for high efficiency of processes in the field of human capital management (melnychuk, 2015). nosyk o. states that the economic component of innovative development is the starting point of human capital development. from the scientist’s point of view, human capital as the value of knowledge, skills, and abilities accumulated by a person, which grows in the process of its use in various spheres of public life, on the one hand, is a basic resource of innovative development. on the other hand, the development of an innovative economy causes certain transformations of human capital, the generalizing manifestation of which is the increase in its level of innovation, as the ability to perceive innovation – the focus on creating, implementing, and using innovations. in the context of reproduction of human capital of innovative type, the researcher determines the unity of human lifetime: birth, investment, elementary development, basic development, the professionalization of knowledge, practical activities, aging; and cycles of investments in its development: formation, accumulation, realization in productive activity and incomes from it (nosyk, 2016). in unison with nosyk o., some foreign scientists like smyrnov v., soshnykov i., romanchyn v. and skobliakova i., see the innovative sector of the economy and its development as the starting point of human capital development (smyrnov et al., 2005). semykina a. determines competitiveness as the main dominant of human capital development. as trends that play a dominant role in the development of human capital in ukraine and the formation of its competitiveness, the scientist defines: 1) development of the national labour market, employment services, freedom of choice; 2) population decline in ukraine as a result of a demographic crisis; 3) the phenomenon of “aging” of the population; 4) trends of deteriorating health of the population; 5) reduction in the number of employees due to the demographic crisis and structural changes in employment; 6) reducing the inflow of young labour to enterprises; 7) trends in stagnation in economic activity, rising unemployment; 8) stably high share of employees in conditions that do not meet sanitary and hygienic standards: exposure to harmful factors, exceeding the maximum allowable noise, ultrasound, infrasound, exposure to chemicals, dust, vibration, etc., hard physical labour; 9) low level of mechanization, automation, intellectualization of labour; 10) increasing labour mobility in employment, training; 11) quality of knowledge in the field of school education, vocational and higher education; 12) increasing the share of full-time employees with higher education; 13) salaries; 17) increasing the competitiveness of human capital (semykina, 2018). baltic journal of economic studies 32 vol. 7 no. 2, 2021 as the scientist emphasizes, only three of them have positive effects on in-creasing the competitiveness of human capital, which are: the development of the national labour market, employment services, freedom of labour choice; increase in the share of full-time employees with higher education; growth of labour mobility in labour activities, training. the dominants of human capital development, from the standpoint of chyzhova e., determine the features and characteristics of the knowledge economy, its essential differences from the standard market economy. after all, it has other pat-terns and mechanisms. this is, in particular, the transition from an industrial econo-my to a science-intensive new economy with intensive use of science-based on intellectual sources (chyzhova, 2015). according to the world economic forum, currently, all countries are at different stages of economic development: the first, factorial stage, is typical for countries with the lowest level of development, for which the basis of macroeconomic growth is the mobilization of basic factors of production (land, commodities and unskilled labour); the second, investment stage, covers countries that are integrated into the world economy and use world technologies in domestic production; the third, innovative stage, is related to countries that have made the transition from an economy that imports technology to an economy that creates technology. here, it is worth noting that the structure of ukraine’s economy does not belong to any of these stages, as it has innovation sectors, investment, and sectors that depend mainly on production factors. in our opinion, the important dominants of the development and reproduction of human capital in ukraine and the regulation of investment in human capital are the policy of labour market regulation and national models of combating unemployment, as well as the working capacity of the population. this is confirmed by foreign studies. according to the european information and research center, most countries implement employment policy and regulate the labour market within the general economic and social policy, as employment is one of the main indicators and ratios of supply and demand in the country. the experience of developed countries shows that in order to solve the problem of unemployment it is necessary not only to regulate the labour market but also to implement economic reforms in all areas of production of products and services (european information and research center, 2020). the above emphasizes the fundamental thesis that the tools of state regulation of the labour market, mechanisms for regulating the labour market, models for regu-lating the level of employment ensure the proper development and management of human capital. 3. approaches to promoting employment and human capital development in the european union and ukraine according to the results of the study, the following approaches were formed in order to solve the problem in the european union and ukraine, which are highlighted in table 1. the results of the observations of the specialized agency of the european union were important for the study. the agency provides advice and support to experts for the eu institutions and partner countries with specific programmes and projects in the field of education and training, lifelong learning, labour market, and employment, social programmes, etc., including ukraine, in the context of the analysis of the working capacity of the population and policies to improve the development of human capital. as a result, materials were obtained, the analysis of which allowed us to conclude that human capital is the knowledge, competencies, and skills of individuals who are able to mobilize and use them to improve their lives through profitable employment and promote social and economic development; working capacity is the ability of an individual to get an initial job, keep a job and then get a new job. education and training is an important tool for the development of knowledge, competencies and skills that lead to employment (human capital and employability in the mediterranean region, 2009). the above emphasizes the need to consider the full development of human capital in ukraine, which is the main result of the effective work of the government. if we consider the current situation, it is obvious that the state ineffectively copes with its main task – to provide citizens with all the necessary conditions for the formation, effective use and disclosure of human potential and its high productivity. we believe that the main reason for these unfavourable trends is an insignificant investment in human capital. to immediately address the stated problems, we consider it appropriate to analyse the indicators that confirm the relevance and necessity of investment in human capital. today, the condition (value) of human capital in ukraine is quite sad: the population is rapidly declining and aging; the birth rate is much lower than the level required for simple population reproduction; the share of the working population is declining; labour migration increases, which leads to a loss of intellectual capital. ukraine had the opportunity to become a prosperous middle-income country, but it is becoming one of the poorest countries in europe. this disappointing conclusion appeared in the pages of the leading think tank atlantic council (atlantic council, 2020). the cost of living is determined based on damages and compensation if a per-son dies or is injured. in european countries, life costs an average from 1 to 2 million eur . based on european experience and in order to reduce baltic journal of economic studies 33 vol. 7 no. 2, 2021 table 1 methodological principles of labour market regulation and human capital development region approaches / priority tools to promote employment goals approaches / priority tools to promote human capital development 1 2 3 4 european union 1) youth employment policies; 2) high labour mobility; 3) encouraging entrepreneurship. 1. providing everyone with a job; 2. encouraging entrepreneurship and creating new jobs through the provision of state guarantees and partial compensation of wages; 3. reforming national employment services and improving their efficiency; 4. openness of labour markets and modernization of the social protection system; 5. high mobility of labor in accordance with the demand and supply for it; 6. facilitating the opening of own business through special training, providing start-up capital and simplified taxation; 7. helping young people gain knowledge, skills and experience to get a real job; 8. development of education and training through the eu grants for study or travel to another country. 1) education and training; 2) promising and comprehensive european migration policy; 3) research and innovation; 4) social issues. ukraine 1) promotion of productive employment; 2) carrying out an active employment policy to accelerate the return of the unemployed to work; 3) creating conditions for reducing the level of unofficial employment; 4) labour market reform; 5) increasing the level of income of working citizens; 6) deregulation of the relationship between employer and employee. 1. improving the quality of life and ensuring the appropriate level of social standards; 2. realization of the potential by citizens; 3. formation and implementation of effective policies in the field of education, science, health, social protection and culture; 4. reorientation of the health care system from the policy of treatment to the policy of strengthening and maintaining health and disease prevention; 5. improving the quality of secondary education, overcoming territorial differences in the qual-ity of education and transforming the content of education using a competency-based approach; 6. modernization of vocational education for training at a high level of competitive workers; 7. raising the level and optimizing the results of scientific and academic activities; 8. entry into the top 50 countries in the human development index; 9. mortality reduction by 10 percent; 10. poverty reduction (oecd) – 15 percent. 1) formation and implementation of effective policies in the field of education, science, health care, pensions; 2) development of personality, culture and sports; spreading the use of the ukrainian language in all spheres of life. source: compiled by the author according to the data (european information and research center, 2020; official portal of the verkhovna rada of ukraine, 2017; government portal, 2020). the number of road accidents, ukrainian activists organized a study in which experts calculated how much a ukrainian’s life costs. a global study to assess the cost of living and total damage from road accidents was conducted by the traffic challenge commissioned by the national programme for the prevention of road traffic injuries of children and youth (traffic challenge, 2020). today, these data is certified by the auditing company bdo, which is one of the five largest auditors in the world and operates in more than 150 countries. thus, the cost of living of a ukrainian, according to some estimates, is from 177,000 to 400,000 usd, and the total annual loss of the state is from 1 billion to 2 billion usd. with an understanding of our own value, we can effectively use people as a resource to achieve a high level of development of the country (community world blog, 2020; ukrainian truth, 2020; tsentr razumkova, 2018). the value of human capital is directly related to human development. human development is the expansion of choice so that people can live long and healthy lives, be educated and have the means to live a dignified life. the main dimension of human development is the human development index, which reflects life expectancy, literacy and access to resources. the human development index (hdi) is a combined, synthetic measure of average achievement in three key dimensions of human development: health baltic journal of economic studies 34 vol. 7 no. 2, 2021 and longevity, knowledge, and a decent standard of living. today the hdi is used by the united nations and the world bank (ibrd) to compare the level of development of countries on the basis of which it is possible to get an idea of the state of human capital in the world. all this is closely linked to the social environment created by improving human capital and labour efficiency (alwan, 2009). according to the 2019 human development report published for the united nations development program (undp), ukraine ranks 88th in this indicator, entering the group of countries with a high level of human development. ahead there is the group of countries (62) with a very high level of human development and 25 countries of the same level, demonstrating the intensity of deprivation of 34.5% (un development programme, human development report, 2019). the analysis of the methodological principles of labour market regulation and human capital development of the european union and ukraine, reflected in table 1, and the problems of human capital development in ukraine, allowed us to conclude that they differ significantly. their difference is explained by different economic and social situations of countries and other factors, the low speed of dissemination and implementation of progressive results of investment in education and science, in particular. the prospect of solving this problem is opened by the fact that the most obvious way to measure the effect of investment in education for society is to calculate the dependence of gdp growth on increasing the level of education of employees. investing in the healthcare system is also a priority dominant of human capital development. this direction first of all provides an increase in the working life of the person that is called to increase the general amount of expenses of time for work, to accelerate a time turn of the aggregated human capital. the health care system monitors the state of health, develops measures to preserve and improve health, which contributes to the restoration and strengthening of biological human capital (alwan, 2009). the dominants of human capital development in ukraine and the main tasks they solve are illustrated in table 2. table 2 dominants and tasks of development and reproduction of human capital dominants of development and reproduction of human capital basics and goals tasks 1 2 competence (mcclellan, 1973; boyatzis, 2008; trn.ua training portal, 2020; spenser, 2005) efficiency of management and human resources compliance with eu convergence criteria (polous, 2017) innovative level of business; creative products reproduction of human capital of settlements of ukraine (dotsenko and krayevska, 2011) elimination of depressed rural areas; increasing the share of people of working age and people who are in satisfactory health, higher education requirements of the fourth industrial revolu-tion (“industry 4.0” concept) (tereshchenko, 2019) overcoming ukraine’s lag in terms of labour productivity, education efficiency and other indicators that allow to implement the concept of “industry 4.0” education (melnychuk, 2015) personal and professional development of citizens; modernization of society economic component of innovation develop-ment (innovation economy, innovation sector of the economy) (nosyk, 2016; smyrnov et al., 2005) transformation of human capital, increasing its innovation competitiveness human capital (semykina, 2018) improving the competitiveness of human capital knowledge economy (chyzhova, 2015) the transition from an industrial economy to a science-intensive new economy with intensive use of science based on intellectual sources labour market regulation and anti-unemployment policy (european information and research center, 2020; official portal of the verkhovna rada of ukraine, 2017; government portal, 2020; human capital and employability in the mediterranean region, 2009) solving the problems of rising unemployment, outflow and disparity of labor, reducing the level of real incomes working capacity of the population (government portal, 2020; human capital and employability in the mediterranean region, 2009) projects in the field of education and training, health care, lifelong learning, labor market and employment, social programmes the cost of human capital (atlantic council, 2020; traffic challenge, 2020; community world blog, 2020; ukrainian truth, 2020; tsentr razumkova, 2018; alwan, 2009) actualization of investment in human capital human development index (hdi) (un development programme, human development re-port, 2019) improving the state of human capital and the level of quality of its content source: compiled by the author baltic journal of economic studies 35 vol. 7 no. 2, 2021 4. survey methodology the theoretical and methodological basis of the study are the fundamental provisions of modern economic theory, scientific works of domestic and foreign scientists, research results of international and domestic non-governmental research organizations, the action plan of the government of ukraine. systemic, process, historical and logical approaches were used to achieve the goal and defined tasks. general scientific methods were used in the research process. the method of comparison was used for generalizing the approaches of different researchers on the main dominants of development and reproduction of human capital. analysis was used to determine the quantitative and qualitative parameters of the dominants of human capital. synthesis was used to determine the methodological principles of labour market regulation and human capital development. induction and deduction were used for determining approaches to the main dominants of human capital. 5. conclusion the above emphasizes the need to raise the issue of a full development of human capital in ukraine, which is the main result of the effective work of the government. overcoming the social crisis will result in a significant improvement in the quality of life and an appropriate level of social standards. the state should help create opportunities for citizens to realize their potential, which affects the growth of the national economy and strengthens ukraine’s competitive position in the world. in view of the above, the government’s actions should be aimed at formulating and implementing effective policies in the fields of education, science, health, social protection, and culture, which are of great importance for national identity and pride. if we consider the current situation, it is obvious that the state ineffectively copes with its main task, which is to provide citizens with all the necessary conditions for the formation, effective use, and disclosure of human potential and its high productivity. we believe that the main reason for these unfavourable trends is an insignificant investment in human capital. thus, the main problem of modern public policy in the field of education is to find the optimal level of investment in education, which could simultaneously provide access to education for the general population but would not undermine the motivation for private investment in education. problems of human capital development in ukraine and the methodological principles of their solution are also related to the state of the healthcare system and investment in it, which is one of the most important indicators of the state and development of human capital, it is a biological part. accumulated biological human capital is the physical abilities involved in social reproduction to perform labour operations in their quantitative, qualitative, and value certainty in order to obtain income or other benefits. references: tymoshenko, k . v. 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(in ukrainian) alwan, kh. a. (2009). parameters of a condition and development of the human capital. rudn bulletin, economy series, no. 1, pp. 100–112. un development programme, human development report (2019). human development report 2019. available at: http://hdr.undp.org/sites/default/files/hdr_2019_overview_-_russian.pdf (accessed july 27, 2020). baltic journal of economic studies 36 vol. 8 no. 2, 2022 1 the administrative court of cassation within the supreme court, ukraine (corresponding author) e-mail: irina05072015@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-2-36-43 guarantee of protection of rights and interests of taxpayers in tax disputes iryna vasylieva1 abstract. in the article, the author proposes under the protection of the rights of the taxpayer to understand his actions (in some cases inaction), which he commits in accordance with the norms of tax legislation, on the one hand, and law enforcement activities of the authorized subjects of state power and their officials (in case the subject appeals by force of state enforcement), on the other hand, to stop violations of rights, restore violated rights, eliminating the threat of their violation. the main subjects authorized by the state to protect the rights of the taxpayer are the tax and judicial authorities. it is with the violation of subjective right legislator associates the use of remedies, enshrining in the tax code of ukraine the right of taxpayers or tax agents to appeal the actions, inaction and decision of the tax authorities and their officials. appeal of an interested person for protection of his rights implies the emergence of a substantive legal claim against the defendant for the implementation of his violated material interests. the substantive legal claim arises from a subjective substantive right arising in a substantive legal relationship. the plaintiff (taxpayer) believes that in order to exercise his subjective right, he has the right to demand from the defendant (tax authority), which is in a material legal relationship with him, the commission of certain actions or refraining from actions consistent with the right of the plaintiff. appeal of an interested person for protection of his/her rights is aimed not only at realization of guarantees of their realization, but also at resolution of the arisen conflict. the need to have certain legal means of resolving a legal conflict is an integral element of legal regulation, since it ensures the implementation of a legal norm and its stability. protection of violated rights and legitimate interests of the subjects of public-law relations is carried out by controlling the legality of actions (inaction) of the subjects of powers and acts adopted by them. current tax legislation as a way to protect rights provides for the possibility to recognize an act of a tax authority as invalid, and its actions (inaction) – as not complying with the law. legislator, by regulating the administrative and judicial procedure for resolving a tax dispute, thereby protects private interests from possible disfigured state interference. in this case, the administrative court, resolving a tax dispute, does not examine the conduct of the parties as such, but establishes how it complies with the norms of current tax legislation. it is on this basis the task of administrative court and its purpose of jurisdictional activity in resolving a dispute in the field of public-law relations is based, namely on the balance of rights of the state with the counter rights of a person (taxpayer) to ensure its protection of rights and legitimate interests, as applied for such protection. dispute in relations regulated by the norms of tax law acts as a mechanism to guarantee the realization of subjective rights of taxpayers and balancing public and private interests, because it is aimed at protecting and restoring the violated (disputed) right. key words: conflict, tax dispute, protection of rights, taxpayer, subject of power, court, appeal. jel classification: h20, k34 1. introduction protection and observance of human rights is proclaimed as a duty of the state in the constitution. protection of taxpayer's rights should not be an exception. protection of the rights of taxpayers and its guarantee is the key to the development of ukraine, attracting domestic and foreign investment. tax policy in ukraine plays an extremely important role in the formation of civil society, the formation of the rule of law, creating the proper economic foundations for the development of society, because the tax revenues of the state budget of ukraine and the economic progress of our state are linked to it. payment of taxes is the primary obligation of taxpayers, which is enshrined in the constitution of ukraine. however, the media report that arbitrary treatment of taxpayers by tax authorities occurs, which is also confirmed by the relevant judicial practice in ukraine, which baltic journal of economic studies 37 vol. 8 no. 2, 2022 has already been formed for certain categories of tax disputes. given the increase in the number of tax disputes resolved both administratively and judicially, nowadays the protection of taxpayers' rights acquires special importance. in fact, the solvency of the population, competitiveness of economic entities, the welfare of our country depend directly on its effectiveness. the degree of public confidence in the state is determined by the observance by officials of state bodies of the norms of law and its fundamental principles. in relations of tax control, in which the employees of the tax authority are vested with powers of authority, the issue of trust is the most acute. tax control to a much greater extent than other types of state control affects the interests of individuals and legal entities, especially business entities. it is less limited in the grounds for conducting, the timing and a list of measures of control over the controlled object, and its results can result in serious financial losses for the taxpayer (forcible recovery of tax payments and the application of financial penalties) and criminal prosecution. in practice, the tax authority is constantly improving the forms and methods of tax control in order to increase its effectiveness (with the observance of the rights and interests of the taxpayer often takes second place), and the legislation governing relations in the field of protection of the rights of the taxpayer is developing slower. the tax code of ukraine allows during inspections to request information from the taxpayer, its counterparties and third parties. despite the possibility of the authorities during the tax control to influence the behavior and freedom of the controlled party, the tax authority has no right to change the procedure of inspection established by law. in the legal relations of tax control the parties are equal before the law. the tax authority is obliged to respect the rights of a taxpayer and ensure the possibility of their implementation, which will allow to balance the private and public interest. the issue of protecting the rights of a taxpayer in the course of tax control is of interest to both legal science and legal practice. issues of tax disputes resolution are relevant and studied issue in the domestic literature, in particular by such lawyers as o. m. bondarenko, o. o. dmytryk, v. o. kurylo, m. p. kucheriavenko, o. m. minaieva, k. v. minaieva, a. o. monaienko, v. v. tylchyk, ye. a. usenko. tax control as a component of the system of public finance is implemented within legal relations, i.e., relations between subjects of law – participants (in this case the taxpayer and the tax authority) with respect to the object, in connection with which arise subjective rights and legal in this case on the execution of the obligation to calculate and pay tax. in the course of tax control, there is mainly direct interaction between the taxpayer and the tax authority. 2. conflict during tax audits when conducting tax audits, in most cases, there is already a potential conflict between the supervisory authority and the taxpayer, which could lead to a violation of the taxpayer's rights. when no errors, contradictions and/or inconsistencies are found, the tax control remains unnoticed by the taxpayer. thus, of interest is tax control in the aspect of interaction between the taxpayer and the tax authority, which should be carried out on condition of full observance of the taxpayer's rights stipulated by tax legislation. a distinctive feature of the norms of law from other social norms is the direct intervention of the state in the mechanism of implementation of legal norms. the existence of special state institutions designed to enforce the generally binding rules of conduct in cases where the subjects of legal relations do not follow the proposed model of behavior, provides law and order in society. thus, the law enforcement function of the state is manifested, directly affecting the authority of the institution of the state in society. the implementation of this function of the state is designed to ensure the enforcement of the rules of conduct established by the state. this function is one of the main internal functions of the country. the implementation of any function of the country is carried out in certain legal forms. the law enforcement function is implemented by the state, first of all, by enshrining the guarantees of the rights and freedoms of citizens, creating and ensuring the functioning of mechanisms for the protection and restoration of violated rights. at the same time, state functions cannot be found realized otherwise than through the functions of the subjects of power. one of the functions of state bodies that carry out law enforcement activities of the state is a jurisdictional function, which can be understood as the activity to resolve conflicts of a legal nature that arise in society. this function is carried out in the form of justice and pre-trial (administrative), as well as extrajudicial procedures of conflict resolution. in general, there are organizational and ideological ways to implement this function of state bodies. at the same time, ideological ways, the content of which describes the ideology of the country in the legal sphere, are mediated in normative-legal acts regulating material and procedural cases. organizational ways are implemented through the creation and logistical support of special subjects of jurisdictional activity and activities to implement the acts of jurisdictional authorities. baltic journal of economic studies 38 vol. 8 no. 2, 2022 legal relations that develop between the parties on the basis of substantive legal norms, by their nature are regulatory legal relations, because they arise on the basis of regulatory norms – norms that define the nature and content of the rights and obligations of the participants of regulated public relations, the order of acquisition and implementation of their rights and obligations. in particular, the current tax legislation of ukraine determines the persons obliged to pay taxes, the grounds of debt on payment, the procedure for its execution, establishes mechanisms for monitoring the proper execution of tax obligations by taxpayers, as well as special authorities empowered to take coercive measures in case of non-compliance of the obliged person with the established rules. for example, according to article 15 of the tax code of ukraine dated december 2, 2010 № 2755-vi taxpayers are individuals (residents and non-residents of ukraine), legal entities (residents and non-residents of ukraine) and their separate units, which have, receive (transfer) objects of taxation or carry out activities (operations) that are subject to taxation under this code or tax laws, and which are obliged to pay taxes and fees under this code (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). according to art. 16 of the tax code of ukraine, the taxpayer is obliged: to register with the regulatory authorities in the manner prescribed by ukrainian legislation, to conduct the prescribed manner of accounting for income and expenses, to make statements relating to the calculation and payment of taxes and fees; to submit declarations, statements and other documents related to the calculation and payment of taxes and fees to the controlling bodies in the manner prescribed by the tax and customs legislation; to pay taxes and fees within the time limits and in the amounts established by this code and the laws on customs affairs; to submit to a duly executed written request of supervisory authorities (in cases determined by legislation) documents on accounting of income, expenses and other indicators related to the definition of objects of taxation (tax liabilities), primary documents, accounting registers, financial statements, other documents related to the calculation and payment of taxes and fees (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). according to paragraph 61.1 of article 61 of the tax code of ukraine tax control – the system of measures taken by the supervisory authorities and coordinated by the central executive body, which ensures the formation and implementation of state financial policy to control the accuracy of charging, completeness and timeliness of payment of taxes and fees, as well as compliance with legislation on the regulation of cash circulation, settlement and cash transactions, patenting, licensing and other legislation, control over compliance with which is entrusted to the supervisory authorities (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). according to article 62 of the same code, tax control is carried out by: keeping records of taxpayers; information and analytical support of the regulatory authorities; verification and reconciliation in accordance with the requirements of this code, as well as verification of compliance with the law, control over compliance with which is the responsibility of the regulatory authorities, in accordance with the laws of ukraine governing the relevant area of legal relations; monitoring of controlled transactions and questioning officials, authorized persons and/or employees of the taxpayer in accordance with article 39 of this code (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). 3. regulatory function of law and the state in relation to taxpayers in essence, it is about the presence of a certain rule of conduct in a particular group of social relations, but the regulatory function of law and the state always borders on the protective function, which manifests itself, among other things, in the normatively enshrined mechanism of appealing against actions, inactions, and decisions of authorized government bodies and protection of the rights of citizens and legal entities. when regulatory legal relations are affected by a negative, not based on the norm of law, behavior of a subject of law, regulatory legal relations undergo changes, since their development in the former form is impossible due to the contradiction between the participants of legal relations. the fact of violation or denial of a right gives rise to protection legal relations, in which exists and is implemented the right of an interested person to protection and the obligation of an authorized body to implement protection. at that, the purpose of law-enforcement legal relations is to apply to the violator a certain sanction in the case of confirmation the illegality of a committed act. such a transformation of regulatory legal relations leads to the emergence of substantive protective legal relations, the content of which is the right of claim from the person whose rights are violated and the corresponding obligation to eliminate violations by the person who allowed the offense. nevertheless, the state may not be able to force the taxpayer to take certain actions against his will, or vice versa, the taxpayer will not be able to oblige the tax authority to perform an action that led to the violation of his right and interest. therefore, the enforcement of obligations to remedy violations and the enfor cement of remedies stands behind the potential for recourse to the competent authorities of baltic journal of economic studies 39 vol. 8 no. 2, 2022 the state for the protection of the violated right and interest. the substantive element of the protection legal relations that has arisen gives the person whose interests have been violated the right to appeal to a competent authority of the state for the protection of the violated right in order to actually exercise his right. it will not be an exaggeration to note that recourse to the protection of the right can be considered as one of the ways to implement a subjective right. the property of a subjective right to be exercised in a coercive manner has long drawn attention in the legal literature. o. s. ioffe emphasized that the possibility to resort to the coercive force of the state apparatus does not exist in parallel with other opportunities enshrined in subjective law, but is inherent in them, because without it they would not be legal opportunities (ioffe, 1961). the above views have been expressed with respect to subjective rights realized in the sphere of civil-law relations. however, in our opinion, they are fair with respect to the institute of right protection in the sphere of tax-legal relations. tax law regulates cases involving gratuitous alienation of property of individuals and legal entities for the benefit of the country. it is hardly a contro versial thesis that the taxpayer is interested in preserving his property and providing safeguards against its unlawful seizure. the owner's interest in the possession, use and disposal of his/her property is satisfied by granting him/her the subjective civil right – the right of ownership – by the state. in this regard, the right of ownership, as well as any other subjective right, which by its legal nature provides for certain legal means of protection, in the sphere of tax legal relations acts as a subjective right, the realization of which is provided by appealing to the taxpayer actions, inaction and decisions of tax authorities. 4. the concept of protecting the rights of taxpayers in legal science, there is no unity of opinion on the concept of protection of rights. some authors speak about the protection of civil and legal interests as a system of measures provided by law to combat offenses, which relies on state coercion and is aimed at ensuring the inviolability of the right and eliminating its violation, or as a set of law enforcement measures aimed at applying coercive influence on the offender in order to recognize or restore the disputed or violated right (sovetskoe grazhdanskoe pravo). other authors see the protection of civil rights and legitimate interests in the activities of authorized bodies and persons to implement subjective rights and legally protected interests in cases where the latter are challenged or violated by someone, in the actions of authorized bodies to prevent violations or restore violated rights and legally protected interests (arefev, 1982). some authors believe that the protection of rights and interests is a state-coercive activity aimed at the implementation of "restorative" tasks – to restore violated rights, to ensure the performance of legal obligations, it is a coercive way of exercising subjective right, applied in the manner prescribed by law by competent authorities to restore the violated or appealed right (chechina, 1985). the differences in the above statements are caused mainly by the different evaluation of scientists about when rights and interests need protection, in what ways and in what forms their protection should be carried out. it is indisputable to assess the conditions of the need for protection in the case of a violation or appeal of a subjective right. as noted by o. m. kozhukhar, protection of law is necessary to stop legal "anomalies", to restore normal legal relations and relations by forcing the subjects of law to a certain legal behavior (kozhuhar, 1989). in our opinion, the protection of a taxpayer's rights can be understood as his actions (in some cases inaction), which he performs in accordance with the norms of tax legislation, on the one hand, and law enforcement activities of authorized state subjects of power and their officials (in the case where the subject applies by force of state enforcement), on the other, in order to stop violation of rights, restore violated rights, eliminating the threat of their violation. the main state-authorized entities protecting the rights of the taxpayer are the tax and judicial authorities. other administrative bodies may also act in this capacity, but they are not endowed with such broad powers as those mentioned above. depending on the type and nature of the violated rights and the type of tax legal relations, protection of the rights of a taxpayer may represent only his actions (inaction) without recourse to the state-authorized authorities in the protection of taxpayer rights (self-protection). it is with the violation of subjective right legislator associates the use of remedies, enshrining in the tax code of ukraine the right of taxpayers or tax agents to appeal the actions, inaction and decision of the tax authorities and their officials. thus, according to paragraph 54.5 of article 54 of the tax code of ukraine, if according to the rules of this article the amount of monetary liability is calculated by the supervisory authority, the taxpayer is not responsible for the timeliness, accuracy and completeness of the charge such amount, but is responsible for the timely and full payment of accrued agreed upon obligation and has the right to appeal this amount in the manner prescribed by this code. according to paragraph 56.18 of article 56 of the same code, taking into account the limitation period baltic journal of economic studies 40 vol. 8 no. 2, 2022 defined by article 102 of this code, the taxpayer has the right to appeal in court a tax notification – a decision or other decision of the supervisory authority at any time after receiving such a decision (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). appeal of an interested person for protection of his rights implies the emergence of a substantive legal claim against the defendant for the implementation of his violated material interests. the substantive legal claim arises from a subjective substantive right arising in a substantive legal relationship. the plaintiff (taxpayer) believes that in order to exercise his subjective right, he has the right to demand from the defendant (tax authority), which is in a material legal relationship with him, the commission of certain actions or refraining from actions consistent with the right of the plaintiff. however, analyzing the problem of protecting the right in the field of public, in particular tax legal relations, it should be noted that this may take place in respect of the rights of only one party to a legal relationship – the taxpayer as an obliged person to pay tax. it is his subjective right – the right of ownership and his property is claimed by the state, establishing the obligation to pay tax. from the perspective of the authorized subject of power – the state, it is more appropriate to talk about the presence of not a right, but a public interest – the interest in meeting the needs of money funds necessary to financially meet the needs and functions of the state. the rights of the tax authorities, enshrined in article 20 of the tax code of ukraine, also should not be considered a right to be protected, because they are not subjective rights, and act as a manifestation of powers of the tax authorities in providing control over the calculation and payment of taxes. attention should also be paid to the fact that, despite the common with other branches of law prerequisite of the right to protection, in the sphere of tax legal relations the issue of protection of the right has its own sectorial peculiarities. so, it is hardly possible in tax law protection of rights outside of measures of state coercion by voluntary elimination of an offence by the person who has committed it. in addition, in relations regulated by tax legislation, protection of a subjective right may manifest itself not only in court in connection with the violation by an authorized party of the rights of a taxpayer or the conditions of its implementation, but also in the administrative procedure for appealing against decisions of tax authorities on their legality. in any case, the need to apply remedies arises at the moment of violation or denial of a right or legally protected interest, which has one of the parties to legal relations, that is, when the intervention of a competent jurisdictional body, which is not a party to the disputed legal relationship, is required to implement the right or protect the interest. d. m. chechot notes that adopting a norm and thereby assuming the possibility of emergence on its basis of subjective rights and legal duties, the state must provide for an appropriate form of protection of rights (chechot, 1968). at one time, questions about the forms of protection of rights and their classification were the subject of extensive discussions among proceduralists. at the same time, the problem was considered mainly from the point of view of the protection of rights, which were in the framework of civil law relations. such an approach determined the specificity of conclusions about the problem of protection of the right and forms of its implementation, which also included non-jurisdictional forms, providing protection of rights directly within the material legal relations, carried out by the parties to the legal relations themselves. at the same time, the predominant position on the problem was held by views according to which the form of protection of subjective rights and interests is understood as a certain procedure for the protection of rights and interests, carried out by a particular jurisdictional body, depending on its powers. the common feature of the jurisdictional form of protection of rights and interests is that it is carried out by a body authorized by the state under current legislation to resolve legal conflicts; activities to protect rights and legitimate interests take place in a certain procedural form established by law for this subject of authority; the legal act adopted on the case is binding. appeal of an interested person for protection of his/ her rights is aimed not only at realization of guarantees of their realization, but also at resolution of the arisen conflict. the need to have certain legal means of resolving a legal conflict is an integral element of legal regulation, since it ensures the implementation of a legal norm and its stability. 5. mechanism for resolving conflicts in the sphere of tax and legal relations the mechanism of conflict resolution in the sphere of tax-legal relations has certain features, reflecting the priority of power legal impact on such relations and their public nature. according to yu. a. krokhina, potentially the parties to such a conflict can resolve the confrontation between them through informal procedures. however, the participation of the state in the person of authorized bodies of power as a mandatory subject of tax-legal relations in conjunction with the prevailing imperative method of legal regulation of this area of relations does not allow to talk about the widespread use and effectiveness of such procedures (krohina, 2003). baltic journal of economic studies 41 vol. 8 no. 2, 2022 indeed, the protection of violated rights and legitimate interests of the subjects of public-law relations is carried out by controlling the legality of actions (inaction) of the subjects of powers and acts adopted by them. current tax legislation as a way to protect the rights provides for the possibility of invalidating the act of the tax authority, and its actions (inaction) – not in accordance with the law. the application of protective measures legislation provides for through the intervention of a third party acting as an arbitrator in resolving the dispute. these are, in accordance with the tax code of ukraine, the tax authority of the highest level or the court, as described above (para. 56.18 of article 56 of the tax code of ukraine). thus, according to paragraph 56.2 of article 56 of the tax code of ukraine, if the taxpayer believes that the supervisory authority incorrectly determined the amount of monetary liability or made any other decision, contrary to law or beyond the powers of the supervisory authority established by this code or other laws of ukraine, such taxpayer has the right to appeal for review of this decision to the supervisory authority of the highest level (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). according to item 56.3 article 56 of the same code the complaint shall be submitted to a higher level supervisory authority in writing or electronically by means of electronic communication (if necessary – with duly certified copies of documents, calculations and evidence, which the taxpayer considers necessary to provide with the requirements of item 44.6 article 44 of the code) within 10 working days following the day the taxpayer received the tax notification-decision or other appealed decision of supervisory authority. complaints against decisions of territorial bodies of the central body of the executive power, which implements the state tax policy, shall be submitted to the central body of the executive power, which implements the state tax policy (podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi). however, even at this stage of conflict in the publiclaw sphere there are inherent features related to the effectiveness of application of protective measures, in particular, in the case of disagreement, when the issue, about which the taxpayer has applied to the tax authority of the highest level, is under consideration of this sub-authority and is decided at its discretion in accordance with the current legislation, applying discretionary powers. n. h. pavlenko notes that the actions of the subject of power, protecting the public interests of the state are always presumed lawful. this allows, on the one hand, to consider his actions lawful until they are recognized as unlawful and cancelled, and, on the other hand, allows the subject of power itself to take measures to overcome counteraction. and this situation can be endless, since the claims of a person addressed directly to the subject of authority, create only an alleged conflict of private and public interests (pavlenko, 2016). in our opinion, simply establishing a fact, that is, without arguing its legal position, the unlawfulness of the decision, action or inaction of the subject of power cannot be a way to protect the right of the individual. on the other hand, as evidenced by o. a. serebria kova, under the administrative procedure of consideration of a dispute objectivity is affected by such a characteristic of the management system as the ability of the system to self-regulation (serebryakova, 2002). in this case, this characteristic of the system is an evaluative concept and is derived from many factors that determine the quality of the management system. obtaining an objective and legitimate result of resolving a dispute considered in an administrative procedure is possible only when this characteristic of the management system is high enough, since the recognition of a decision taken illegal means that at the primary levels of interaction between the relevant tax authority and the taxpayer the system fails and requires changes. in this situation, the role of the court, which, by making an appropriate decision to restore the violated right, in fact, intervenes in the sphere of direct regulation of relations, in the sphere of relations between the tax authority and the taxpayer, becomes important. the court in this case may go out on the issue of legality of actions (inaction) of the tax authority and oblige the latter to commit certain actions (or refrain from committing them) within its competence. thus, according to subparagraphs 3 and 4, the second part of article 245 of the code of administrative proceedings of ukraine, as amended on october 3, 2017 № 2147-viii in case of satisfaction of the claim, the court may decide to recognize the actions of the subject of power unlawful and obligation to refrain from performing certain actions; recognition of the inaction of the subject of power unlawful and the obligation to perform certain actions (kodeks administratyvnoho sudochynstva ukrainy v redaktsii vid 3 zhovtnia 2017 roku № 2147-viii). according to part 3 of article 245 of this code, when annulling a normative-legal or individual act, the court may oblige the subject of powers to commit the necessary actions to restore the rights, freedoms or interests of the plaintiff, for the protection of which he appealed to the court (kodeks administratyvnoho sudochynstva ukrainy v redaktsii vid 3 zhovtnia 2017 roku № 2147-viii). according to part 4 of article 245 of the same code in the case defined by paragraph 4 of part two of this article, the court may oblige the defendant – the subject of power to take a decision in favor of the plaintiff, if all conditions defined by law are met for baltic journal of economic studies 42 vol. 8 no. 2, 2022 its adoption, and the adoption of such decision does not provide the right of the subject of power to act at its own discretion (kodeks administratyvnoho sudochynstva ukrainy v redaktsii vid 3 zhovtnia 2017 roku № 2147-viii). according to part 5 of article 245 of the above code, if the court finds a normative legal act unlawful and invalid in whole or in part, and at that insufficient legal regulation of relevant public legal relations, which may entail a violation of rights, freedoms and interests of an uncertain circle of persons is revealed, the court has the right to oblige the subject of powers to adopt a new normative legal act to replace the normative legal act declared illegal in whole or in relevant part (kodeks administratyvnoho sudochynstva ukrainy v redaktsii vid 3 zhovtnia 2017 roku № 2147-viii). by reserving to the jurisdictional authority a certain share of redistributive rights, the legislator, by regulating the administrative and judicial procedure for resolving a tax dispute, thereby protects private interests from possible disfigured state interference. in this case, the administrative court, resolving a tax dispute, does not examine the conduct of the parties as such, but rather determines how it complies with the norms of current tax law. it is on this basis that the task of the administrative court and its purpose of jurisdictional activity in resolving a dispute in the field of public-law relations is based, namely on the balance of rights of the state with the counter rights of a person (taxpayer) to ensure its protection of rights and legitimate interests, since he applied for such protection. although it is impossible to put the interests of the state as the exponent of public interests on an equal legal footing with an individual or legal entity as a taxpayer, it is necessary to level out the difference between them as much as possible. that is why it is no accident that the principle of priority of human rights and freedoms is enshrined in article 3 of the constitution of ukraine, in particular, the human being, his life and health, honor and dignity, inviolability and safety are recognized in ukraine as the highest social value. human rights and freedoms and their guarantees determine the content and focus of state activity. the state is accountable to the individual for its activities. the assertion and guaranteeing of human rights and freedoms is the main responsibility of the state. in this sense, a dispute in law, and in particular in relations regulated by the norms of tax law, acts as a mechanism to guarantee the realization of subjective rights of taxpayers and balancing public and private interests, because it is aimed at protecting and restoring the violated (disputed) right, as well as preventing its violation in the future; aimed at resolving the legal conflict on the implementation of rights and obligations; aimed at ensuring the stability of the conditions for the implementation of the legal norm and the optimization of legal regulation; consideration of the dispute by the authorized body of state power ensures the stability of the legal system of society. 6. conclusions the application of tax legislation in practice reveals many contradictions in the relationship between tax authorities and taxpayers, with previously adopted regulations and acts of individual action. due to these circumstances, the conflict of interests in the sphere of tax legal relations lays the basis for the transition of a controversy to another stage, characterized by the emergence of different initial legal positions of the parties in the legal assessment of the essence of disputed tax-legal norms and, accordingly, the scope of their rights and obligations. the arising difference forms the basis for the emergence of a tax dispute, because it requires its resolution, the implementation of which is impossible without recourse to the authorized competent authorities of the state. in this regard, without an application of an interested person to the relevant jurisdictional authority, it is impossible to talk about the presence of a dispute. a tax dispute is a certain situation in the development of a conflict in the sphere of tax legal relations, or rather one of its stages – the stage aimed at resolving this conflict. in this case, the appeal of an interested person to a jurisdictional authority is aimed not only at resolving a tax dispute, but also pursues the goal of protecting their rights, providing guarantees for their implementation. therefore, a dispute in the sphere of tax legal relations acts as a mechanism of guaranteeing the realization of subjective rights of interested persons and balancing public and private interests, since it is aimed at protecting and restoring the violated (disputed) right, as well as preventing its violation in the future; aimed at resolving the arisen tax conflict regarding the implementation of rights and obligations; aimed at ensuring the stability of the conditions for the implementation of tax and legal norms and optimization of legal regulation; consideration of the dispute by the authorized body of state power ensures the stability of the legal system. when regulatory legal relations are affected by negative, not based on the norm of tax law, behavior of the subject of tax law, regulatory legal relations undergo changes, as their development in the former form is impossible because of the contradiction between the participants of tax legal relations. the fact of violation or denial of a right gives rise to a protective legal relationship, in which the right of an interested person to protection and the obligation of the authorized body of the state to implement protection exist and are implemented. baltic journal of economic studies 43 vol. 8 no. 2, 2022 in this regard, under the protection of the rights of a taxpayer it is proposed to understand his actions (in some cases, inaction), which he commits in accordance with the norms of tax legislation, on the one hand, and law enforcement activities of authorized by the state subjects of power and their officials (in case the subject appeals by force of state enforcement), on the other, in order to stop violation of rights, restore violated rights, eliminating the threat of their violation. the main subjects authorized by the state to protect the rights of the taxpayer are the tax and judicial authorities. references: arefev, g. p. (1982). ponyatie zaschityi sub'ektivnyih prav [the concept of protection of subjective rights]. protsessualnyie sredstva realizatsii konstitutsionnogo prava na sudebnuyu i arbitrazhnuyu zaschitu. kalinin. (in russian) ioffe, o. s. (1961). voprosyi teorii prava [questions of the theory of law]. moscow. (in russian) kodeks administratyvnoho sudochynstva ukrainy v redaktsii vid 3 zhovtnia 2017 roku № 2147-viii [the code of administrative procedure of ukraine as amended on october 3, 2017, no. 2147-viii]. available at: https://zakon.rada.gov.ua/laws/show/2147-19#n6636 (in ukrainian) kozhuhar, a. n. (1989). pravo na sudebnuyu zaschitu v iskovom proizvodstve [the right to judicial protection in lawsuits]. kishinev. (in russian) krohina, yu. a. (2003). yuridicheskiy konflikt v finansovoy sfere: prichinyi, suschnost i protseduryi preodoleniya [legal conflict in the financial sphere: causes, essence and procedures for overcoming]. zhurnal rossiyskogo prava, vol. 9, pp. 68–72. (in russian) pavlenko, n. h. (2016). prezumptsiia vynuvatosti v administratyvnomu sudochynstvi [presumption of guilt in administrative proceedings]. yurydychnyi naukovyi elektronnyi zhurnal, vol. 2, pp. 78–79. (in ukrainian) podatkovyi kodeks ukrainy vid 2 hrudnia 2010 roku № 2755-vi [tax code of ukraine from december 2, 2010 № 2755-vi]. available at: https://zakon.rada.gov.ua/laws/show/2755-17#text (in ukrainian) serebryakova, e. a. (2002). pravovyie aspektyi rassmotreniya sporov po voprosam sotsialnogo obespecheniya: monografiya [legal aspects of social security dispute resolution: monograph]. moscow. (in russian) sovetskoe grazhdanskoe pravo [soviet civil law]. leningrad, 1982. (in russian) chechina, n. a. (1985). predmet grazhdanskogo sudoproizvodstva / predmet pro tsessualnoy deyatelnosti v sude i arbitrazhe [subject matter of civil proceedings / subject matter of procedural activity in court and arbitration]. yaroslavl. (in russian) chechot, d. m. (1968). subektivnoe pravo i formyi ego zaschityi [subjective right and forms of its protection]. leningrad. (in russian) baltic journal of economic studies 75 vol. 8 no. 1, 2022 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine e-mail: akotina.kneu@gmail.com orcid: https://orcid.org/0000-0001-7783-866x 2 kyiv national economic university named after vadym hetman, ukraine e-mail: mstepura.kneu@gmail.com orcid: https://orcid.org/0000-0001-5881-5411 3 kyiv national economic university named after vadym hetman, ukraine e-mail: pavlokondro@gmail.com orcid: https://orcid.org/0000-0002-2230-7738 doi: https://doi.org/10.30525/2256-0742/2022-8-1-75-82 how does active digital transformation affect the efficiency of governance and the sustainability of public finance? the ukrainian case hanna kotina1, maryna stepura2, pavlo kondro3 abstract. the challenges of the digital economy are leading to radical changes in public governance, creating conditions for convenient and prompt access to public services and public information. moreover, the pandemic has caused drastic changes in the use of digital public service – it has become a necessity. ukraine has significant prerequisites for the development and effective transformation of public administration to a higher technological level. furthermore, during the time of crisis (2013–2014, 2020–2021), the government priorities were shifted to support digital transformations to improve the effectiveness of public administration and ensure the sustainability of public finance. the purpose of the paper is to investigate and assess a correspondence between efficiency of governance and sustainability of public finance based on digital transformations under the ukrainian approach. the main scientific question was: how does the active digital transformation in public governance affect the sustainability of public finance in ukraine? methodology. seeking the solution, own methodological developments were used; correlation analysis of main indicators of government effectiveness and sustainability of public finance was estimated. to assess the impact of digitalization on public governance efficiency, ukrainian governance practices over the past 13 years were analyzed, expressed by indicators of governance effectiveness, through the introduction of digital technologies. results. based on empirical research, it has been found that due to several limitations, a strong direct relationship between active digital transformation and the sustainability of public finances (debt security) has not been identified. but at the same time, significant progress has been made in efficiency of public governance through the implementation of costly but effective digital change. this correspondence is especially noticeable during the crisis caused by the pandemic (2020–2021). practical implications and value/originality. the convergence of synergies between key aspects – public governance, digitalization, finance, and security – has great potential for relevant solutions that provide a broader view of sustainable development issues. it can be noted that this issue is extremely relevant for further research in the field of public administration and finance in the context of sustainable development of the digital economy. key words: governance efficiency, government effectiveness, public finance, sustainability, debt security, government spending, e-government development, e-participation, digital transformation. jel classification: e61, e65, h54, h63, h83 1. introduction currently, digitalization is a challenge and a key benchmark for transformation and a gradual future for good governance in the public sector. world financial thought mentions that even whether the products of the modern digital economy are introduced into public governance to increase its efficiency, the focus should be on the quality of digital transformations, the openness of decision-making, protection of financial interests, and security. despite the availability of many digital tools to achieve the desired level of government effectiveness, developing effective ones remains a challenge, especially in periods of economic crisis. baltic journal of economic studies 76 vol. 8 no. 1, 2022 recent significant debt activity of governments and the expansion of the expenditure component of budgets around the world are an adequate response to the challenges posed by the pandemic. expanding government funding for the social sphere and supporting effective demand, many countries are considering improving the quality of public services. the availability and contactless of obtaining public services in the context of digital transformation is becoming especially important. ukraine has made great leap in this direction, and, in the last two years, it has almost become a state in a smartphone. digital support is especially meaningful in the recent emergency with which ukraine has faced. however, despite such capacities in the digital transformation of public administration, the issue of sustainability of public finance remains open. thus, the convergence of synergies between key aspects – public governance, digitalization, finance, and security – has great potential for relevant solutions that provide a broader view of sustainable development issues. hence, our paper consists of the following parts: after a brief introduction, we make a brief overview of the theoretical framework and literature review on the development of digital government products and their impact on the sustainability of public finances, the relationship between governance and security; the third part outlines the data and methodology and explains the choice of indicators, determines the order of construction and evaluation of its correlation; the fourth section describes in detail the progress of the study and the results obtained, and the final section presents the discussion, conclusion, and recommendations for further research. 2. literature review foreign and domestic authors have recently touched on the issues of sustainability and performance management provided in the public sector based on reliability, trust, transparency of public finance, predictability, and security (harborne et al., 2017). however, different authors (groves and valente, 2003; cabaleiro et al., 2013; lópez subires and rodríguez bolívar, 2017) note that the pandemic has led to continuing to provide public services on a mandatory basis, so there is a need for a coherent search of mechanisms, including digital transformations, to ensure the sustainability of public finance in multilevel government. financial capacity and sustainability are prerequisites in the public sector and they determine the impact of financial attitudes on the provision of public goods. (saleh et al., 2021). moreover, investigating the sustainability of developing eu countries and highlighting the importance of the public sector and fiscal sustainability as effective public governance matters (onofrei et al., 2021). the results of several studies show (çera et al., 2020) that cultural and national peculiarities matter in explaining the linkage between financial attitudes within additional funding and the quality of public goods. ukraine is one of the countries with a high bias to avoid uncertainty; it has a negative correlation between risk tolerance and public funding. therefore, the investigation of the correspondence between innovative transformations in public administration, security, and sustainability of public finance is relevant, especially in times of crisis. bergmann and grossi (2014) point out that security is an incentive for good governance and economic development. in a recent article, byrd and guimbert (2009) argue that the effectiveness of public administration would be enhanced if the existing links between public finance, security, and development were clearly defined. the fact that digital transformations in public administration contribute to a high level of information and financial security of the state has been also demonstrated by ukrainian authors (yarovoy et al., 2020). however, according to matheusa et al. (2020), open data could not lead to transparency and high-quality public goods provision but can generate information overload. moreover, digital transformation is not always accompanied by the trust of citizens as an indicator of good governance. (grimmelikhuijsen, 2009) public administration in the digital age strengthens citizens’ trust only in case of a high level of transparency, development of infrastructure, and data protection. in addition, ukrainian authors (danshina and britchenko, 2017; shcherbak, 2020) argue that digital transformation in ukraine's public sector is an issue how to take advantage of the "digital" world to open public data, increase productivity and economic growth, and improve the quality of life of ukrainian citizens. therefore, we focus our research on the current issue of the dialectic correspondence between government effectiveness and sustainability of public finance based on digital transformations taking into account the ukrainian approach and assessing the impact of digital transformations in public administration on the debt security. 3. methodology this research relies on official statistics from: world bank (government effectiveness index, control of corruption index (determined by the methodology of kaufmann, kraay and mastruzzi, 2010), division for public institutions and digital government of un department of economic and social affairs (e-government development index as a weighted average of the volume and quality of online services, development of telecommunications infrastructure, and baltic journal of economic studies 77 vol. 8 no. 1, 2022 e-participation index, which includes the evaluation of electronic information exchange, stakeholder engagement, i.e. electronic consultations, and electronic participation in decision-making), an independent academic institution with swiss roots international institute for management development (digital competitiveness ranking), internet world stats website (for international internet usage statistics), state treasury service of ukraine (share of funding of public governance digital transformation in total budget spending), ministry of finance of ukraine (debt security indicators (annex 1)) and the ministry of digital transformation of ukraine ("state and i", other digital products providing public goods and services). the main scientific question of the work: how does the active digital transformation in public governance affect the sustainability of public finance in ukraine? thus, for further research, the scientific hypothesis will be – digitalization in public governance increases its efficiency and facilitates the level of debt security. to assess the impact of digitalization on public governance effectiveness, we will analyze ukrainian governance practices over the past 13 years (including three crises 2008–2009, 2013–2014, 2020–2021), expressed by indicators of governance effectiveness, through the introduction of digital technologies. undoubtedly, the focus of the study will be on the adequacy and funding opportunities for the implementation of digital governance. therefore, we will analyze the relationship between the effectiveness of government in general, e-government in particular, and the sustainability of public finance in ukraine. we will determine the last position through the debt security indicator. 4. results and discussion digitalization is the part of transparent government that aims to improve openness, increase citizens’ involvement and trust as well. it is considered one of the essential conditions for good governance and a crucial means for balancing power between government and society. digital transformations are currently gaining momentum in ukraine. thus, according to world metrics (ukraine internet usage and marketing report, internet world stats website), the number of internet users in ukraine has increased by 35% (from 21.9 million to 29.4 million) over the last 5 years and covers almost 70% of the total population of ukraine. there is a steady upward trend in the implementation of innovative products in the public administration of ukraine, above all, it has almost become a "state in a smartphone" last years (especially, accelerated by circumstances reasoned by pandemics). currently, the government digital portal provides more than 50 administrative services for 25 million users (fedorov, 2021; matuszk, 2021). generally, over the last 10 years, various digital products have been introduced in the public sector of ukraine, such as open data, e-data, prozorro, smart city, open budget, state-and-i (diia), etc. these digital government portals aimed to support public authorities in disclosing and publishing data, to provide access to information on the use of public funds, to develop awareness and involvement of citizens in public decision making. however, the digital transformation in public administration is quite expensive. therefore, governments of many countries restrict access to public information due to the high potential costs of data protection (bannister and connolly 2012). it should be noted that government spending on e-governance in ukraine has increased decennially only for the last year. of course, the rise in budget funding requires carrying out additional sources and could affect the sustainability of public finances, especially under the crisis. sustainability of public finance from one side means the capacity of the government to be solvent without having to resort to unfeasible or undesirable policies, and from other – strength to support economic growth and fair distribution of fiscal burden between generations. from this perspective, public debt security becomes a defining landmark in ensuring the sustainability of public finance. according to ukrainian debt statistics (annex 1), the dynamics of ukraine's integrated debt security indicator are characterized by a secure level in the pre-crisis years and this high level of risk of the debt crisis since the 2009 crisis year. in 2014–2015, in line with the deep economic and financial crisis inside the country, the indicator was at an extremely dangerous level due to economic reasons (such as significant volatility spreads, high-interest rates on bonds, significant growth in nominal volume, and public debt-to-gdp ratio, along with a significant reduction in international reserves), which was reflected in the procedure of public debt restructuring of ukraine. after 2016, the level of risk remains high and the crisis of 2020 was reflected in the negative dynamics. understanding the additivity of expansionary fiscal measures in time of recession, we, as economists, remember that fighting a recession with larger budget deficits and debt-to-gdp ratio might mean short-term gain but long-term pain (slemrod and bakija, 2017). obviously, the sustainable concept in government effectiveness takes into account the short and longterm perspectives as well, both in terms of funding and information transformations. the correlation between government spending on digital transformation and debt-to-gdp ratio in ukraine shows (figure 1) that more active government support of digital innovations falls on the crisis period, due to the search for adequate ways to meet public needs. latest digital technologies modify the quality of public decisions, i.e., its effectiveness, which baltic journal of economic studies 78 vol. 8 no. 1, 2022 emphasizes the priority for the allocation of budget funds to this branch of economy in ukraine. given the considerable funding for supporting the implemen-tation of digital transformations, as well as issues related to cybersecurity and the sustainability of public finance, from our point of view, it is important to estimate the impact of digitalization on the effectiveness of public administration in ukraine. 4.1. digitization and efficiency of public administration in ukraine examining the first part of our hypothesis – digitalization in public administration increases its efficiency – we suggest whether there is a high degree of citizens' trust in e-governance and estimate the correlation between the dynamics of government spending on digital transformation and e-government development index and e-participation index in ukraine. according to figure 2. it can be clearly seen that: – an active government funding of e-governance indicates the intensive development of this sphere in ukraine. in the early 2010s under the 2013–2014 crisis, there was a maximum increase in government funding and during the pandemic (2019–2021) fiscal policy priorities have been shifted to digitalization as well; – the introduction of digital public services initially boosted citizens' trust, but over time, despite the development of e-governance, digital participation is volatile and remains at the level of the beginning of the decade. such a buoyant trend demonstrates no very close correlation between the government's financial support of e-governance and the involvement of citizens. – the pandemic has caused drastic changes in the use of digital public service, it has become a necessity. so, there are 5 times more users of online public services over 2021 compared to 2020 in ukraine. currently, digital public services are common among 60% of the population. therefore, the illustrated correlation on the graph (figure 2) partially rejects the first part of our hypothesis about the positive impact of digitalization on the effectiveness of public administration in ukraine. this suggestion can also be proved based on assessing the government effectiveness of ukraine. as figure 3 shows, government effectiveness index has improved by 85% over the past 12 years in ukraine but is still low compared to developed countries. based on world bank statistics (https://info.worldbank. org/governance/wgi/home/reports) on government effectiveness and control of corruption indexes in 2008 and 2020, it can be seen direct correlation between these indicators and sustained dynamics. thus, in the countries of central and western europe there is a high level of control of corruption and correspondingly high efficiency of government, while the countries of eastern europe (including ukraine) have a relatively high level of corruption and moderate efficiency of government. thus, among others, by the high level of corruption in public administration, even though one of the crucial aims of active digital transformation is to increase the transparency of public administration and its efficiency. 4.2. digitization and sustainability of public finance in ukraine examining the second part of our hypothesis, we suggest that digitalization in public administration 0 0,05 0,1 0,15 0,2 0,25 0 20 40 60 80 100 2008 2010 2012 2014 2016 2018 2020 debt to gdp ratio, % government spending on digital transformation, % figure 1. government spending on digital transformation and debt to gdp ratio, (2008–2020) source: generated and calculated by the authors on the base of https://www.treasury.gov.ua/ua/filestorage/vikonannya-derzhavnogo-byudzhetu, annex 1 baltic journal of economic studies 79 vol. 8 no. 1, 2022 0 0,05 0,1 0,15 0,2 0,25 0,3 0 20 40 60 80 100 2008 2010 2012 2014 2016 2018 2020 2021 pe rc en til e r an k year e-government development e-participation government spending on digital transformation, % figure 2. government spending on digital transformation and e-government development in ukraine, (2008–2020) source: generated and calculated by the authors on the base of https://www.treasury.gov.ua/ua/filestorage/vikonannya-derzhavnogo-byudzhetu https://publicadministration.un.org/egovkb/en-us/data/country-information/id/180-ukraine figure 3. government effectiveness and control of corruption indexes in ukraine, (2008–2020) source: illustrated by the authors on the base of https://info.worldbank.org/governance/wgi/home/reports facilitates the sustainability of public finance. to approve our assumption, we identify the correlation between the indexes of e-government development, government effectiveness, and integrated debt security indicator in ukraine (figure 4). estimating the correlation between the indexes of e-government development and government effectiveness, we note that there are relatively oneway upward trends. however, fluctuations in the trend of digital development in public administration have a wider amplitude compared to the government effectiveness index. therefore, it should be emphasized that digital changes are drivers of effective governance, but only with the high-quality infrastructure and strong citizens' trust. assessing the impact of digitalization of public administration on the debt security of the state over the past 12 years in ukraine, it can be concluded that against the background of the inconsistency of ukraine's financial system, the introduction of digital transformations still has a positive impact on public administration. at the same time, the slight boost in the efficiency of public administration is not closely facilitating the sustainability of public finance. however, taking into account the costliness of digital transformations (figure 5), more consideration needs to be paid to the issue of sustainability and citizens' trust in digital governance. moreover, the government of ukraine together with the development of digital infrastructure and data protection (cybersecurity) baltic journal of economic studies 80 vol. 8 no. 1, 2022 should think about the sustainability of public finance which is one of the factors of the quality of public administration and economic development of the country. hence, the illustrated correlation on the graph (figure 5) partially confirms the second part of our hypothesis about the positive impact of digitalization on the sustainability and security of public finance in ukraine, i.e. during the time of crisis (2013–2014, 2020–2021), the policy priorities were shifted to support digital transformations to improve the effectiveness of public administration and ensure the sustainability of public finance. 5. conclusion ukraine has significant prerequisites for further development and effective transformation of public administration to a higher technological level. however, the range of such development and measures of the introduction of new digital products should be the evidence for the effectiveness of public administration and the sustainability of public finance. government financial support of digitalization is possible with available sources of funding, and its validity – is the level of citizens' trust in e-government. established the dependence between the effectiveness of public administration and the sustainability of 0 10 20 30 40 50 60 70 80 90 100 2008 2010 2012 2014 2016 2018 2020 pe rc en til e r an k government effectiveness debt security e-government development figure 4. e-government development, government effectiveness and debt security in ukraine, (2008–2020) source: generated by the authors on the base of https://publicadministration.un.org/egovkb/en-us/data/country-information/ id/180-ukraine, https://info.worldbank.org/governance/wgi/home/reports, annex 1 0 0,05 0,1 0,15 0,2 0,25 0 10 20 30 40 50 60 70 80 sh ar e of t ot al g ov er nm en t s pe nd in g pe rc en til e r an k debt security government spending on digital transformation, % figure 5. government spending on digital transformation and debt security in ukraine, (2008–2020) source: generated by the authors on the base of https://www.treasury.gov.ua/ua/file-storage/vikonannya-derzhavnogobyudzhetu, annex 1 baltic journal of economic studies 81 vol. 8 no. 1, 2022 public finance in the context of digital transformation, considering national specific, we concluded that the development of digital technologies in public administration require additional funding, especially when government policy aims to ensure the digital culture. the research found that the development of digital governance is more dynamic than increasing government efficiency in ukraine. therefore, it is important that digital change becomes a driver of good governance and strong public confidence in government. as a result of the analysis of the correlation between the digitalization of government and debt security, it is proved that the instability of public finances in ukraine is not an obstacle to the implementation of digital transformations that have a positive impact on public administration. at the same time, a slight increase in the efficiency of public administration does not contribute much to the stability of public finances. however, the outcomes of the research confirm that the active digital transformation in the public administration of ukraine is one of the factors to improve the efficiency of government. the principal limitation of our experimental approach is the number of indicators and the study focused on the last decade, there is not enough data to deeply demonstrate how digitalization in public administration facilitates the sustainability of public finance. meanwhile, it can be noted that this issue is extremely relevant to further research in the field of public administration and finance in the 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(2020). the e-government development in ensuring the country financial and information security. financial and credit activity: problems of theory and practice, 2(33), 268–275. doi: https://doi.org/10.18371/fcaptp.v2i33.206853 annex 1 debt security indicators of ukraine, 2008–2020 indicator/year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 public debt to gdp ratio, % 19,12 33,46 40,05 36,40 36,70 39,91 69,37 79,06 80,90 71,84 60,91 50,24 60,44 gross external debt-to-gdp ratio, % 56,1 88,3 86,2 77,3 76,6 79,1 96 130 120,6 103 87,8 78,8 80,9 average government securities yield, % 11,86 12,21 10,39 9,17 12,94 13,13 13,98 13,07 9,16 10,47 17,79 16,93 10,2 embi+ index, points 845,5 1617,2 589,7 591,5 810 736,8 1013,5 2374,6 762,5 564,2 532,8 491,5 650,7 official international reserves to gross external debt ratio, % 31,00 25,63 29,47 25,19 18,23 14,37 6,01 11,30 13,81 16,29 18,15 20,78 23,18 integral indicator of debt security 0,50 0,30 0,37 0,40 0,31 0,30 0,12 0,13 0,22 0,27 0,24 0,30 0,26 risk assessment medium high high medium high high debt crise debt crise high high high high high source: generated by the authors on the basis of http://ppeu.stu.cn.ua/article/view/219431, http://skhid.kubg.edu.ua/article/view/108103, https://www.mof.gov.ua/uk/derzhavnij-borg-ta-garantovanij-derzhavju-borg baltic journal of economic studies 69 vol. 2, no. 3, 2016 corresponding author: 1 president of the international foundation “prostir (space)”. decentralisation and local self-government development as key issues of public administration reform in ukraine: current state and new objectives to be at tended denys zapysnyy1 international foundation “prostir (space)”, ukraine abstract. this article presents the status and the main objectives of the decentralisation process and local self-government development in ukraine. decentralisation is analyzed as an integrated part of wider public administration reform. a well-functioning public administration is necessary for democratic governance. it also directly impacts upon governments’ ability to provide public (administrative and municipal) services and to foster competitiveness and growth. public administration reform should lead to enhanced transparency, accountability and effectiveness and ensure a greater focus on the needs of citizens and business. on the basis the analysis of the ukrainian legislation, the best national and international practices, the proposals and the recommendations concerning possible ways of further local self-government development, in particular in the framework of the european integration policy implementation, are highlighted. key words: decentralisation, public administration reform, local development, local self-government, moderni zation, european integration, administrative (municipal) services delivering. jel classification: h83, f63, f15 1. description of the problem today, ukraine is facing an urgent need to implement large-scale decentralisation reform. decentralisation in ukraine can be viewed as a part of a wider public administration reform, which requires re-distribution of tasks, competences, and resources at central, regional, and local levels. in particular, this means the transfer of wider responsibilities, competencies, and resources from the state to the local self-government (lsg) authorities, in line with the sigma/oecd revised principles of public administration, provisions of the european charter of local self-government as well as the council of europe strategy for innovation and good governance on local level and its 12 principles for good governance on local level. ukraine slowed down the decentralisation during v.  yanukovych’s period (february 2010 – february 2014) and was requested to equip local authorities with real competence in the substantial share of public affairs; to address a too high territorial fragmentation and to reinforce the financial autonomy of local authorities. after “euromaidan” and v. yanukovych’s departure the new ukrainian government and the democratic parliamentary coalition in the verkhovna rada proclaimed the decentralisation reform as a key priority of their political agenda. better policy planning and co-ordination, sound administrative procedures and improved public financial management are of fundamental importance for the functioning of the local self-government system and for implementing the decentralisation reform required for integration with the eu. ukraine has to increase its efforts to improve its municipal administration on the basis of the relevant national strategy. a strong political commitment is also needed to steer the decentralisation reform process. 2. analysis of the last researches and publications during last period ukraine paid a high attention was paid to issues of the local self-government development. thus, we could point out the following researchers and scientists who devoted their works to this issue: o.  amosov, v.  bakumenko, m.  kanavets, y.  kovbasiuk, i.  koliushko, v.  kuybida, n.  nyjnyk, m.  pukhtynskiy, o.  rudenko, t.  pakhomova, o.  povajniy, o.  rudenko, s. serioguin, a. tkachuk, v. tolkovanov, v. udovychenko and others. at the same time, the new stage of the public administration reform which was started in 2014 will require additional attention and researches concerning the issues of the decentralization and local self-government modernisation. baltic journal of economic studies 70 vol. 2, no. 3, 2016 objective of the article. the main objective of this article is to present the current state of the decentralization as an important part of the public administration reform in ukraine as well as and to highlight the main perspectives of its further implementation. 3. presentation of the main content the development of local democracy in ukraine is closely monitored by many international institutions, in particular by the european union, the council of europe and its congress of local and regional authorities. thus, the coe congress carried out monitoring visits to ukraine and prepared the important recommendations in the field of decentralisation and lsg development. the european union supports democratic changes in ukraine by several activities, with focus on promoting implementation of the sigma/oecd revised principles of public administration (reliability and predictability openness and transparency, accountability, efficiency and effectiveness), including through conference of regional and local authorities for the eastern partnership (corleap) which is the eu platform that offers an opportunity to discuss the contribution by cities and regions in the development of the eastern partnership. the world bank is mainly involved in public finance reforms (for example implementation of medium term performance based budgeting). initiative on fiscal decentralisation was formulated in 2012 by the sub-group for local government and public administration reform of the civil society forum which drafted a short assessment of fiscal decentralisation efforts in eap countries (as of 2012) and a set of policy recommendations. the article 2 of the european charter of local selfgovernment stipulates that the principle of local selfgovernment shall be recognised in the domestic legislation, and where practicable in the constitution. in this regard, the eclsg creates itself an excellent benchmark for measuring the level and the scope of the decentralisation in the countries that have already signed and ratified this main european legal instrument in the field of lsg (european charter of local self-government). in this context, it has to be noted that ukraine signed the european charter of local self-government on 6 november 1996 and ratified it in 1997, without any reservations, with entry into force on 1st january 1998. ukraine signed in 2011 and ratified in 2014 the additional protocol to the european charter of local selfgovernment on the right to participate in the affairs of a local authority. the constitution of ukraine (1996) and the 1997 law on local self-government are based on a distinction between “local communities” (hromada – citizens of village, town, city) and “administrative and territorial units”. in 2014 11,520 local councils represented 27,210  villages and settlements; around 200 villages and towns were integrated into 64 city councils of regional (oblast) significance and about 1,000 were integrated into city councils of district (rayon) and republic significance. the constitution of ukraine defines 24 oblasts as well as the autonomous republic of crimea, the cities kyiv and sevastopol which have a special status. the status of the city of kyiv is regulated by the law on the capital of ukraine – the hero-city kyiv which was adopted in 1999. the city is divided into 10 districts (rayons) and its population is about 2.63 million inhabitants (encyclopedia of public administration in 8 tomes, 2011). administrative and territorial division of ukraine is characterized by a number of problems. ukraine with its nearly 28,000 municipalities is one of the most fragmented countries in europe (kuybida, tkachuk, tolkovanov, 2010). this fragmentation leads to decreasing financial autonomy, low quality of public services in small municipalities, lack of possibility to manage issues of local significance of municipalities etc. as a result residents of small communities do not have access to high-quality services in their communities and have to address their needs to district/city authorities or higher. there is lack of clear differentiation between concepts of local communities (hromada) as a social term and as a part of administrative and territorial division of the state. according to article 140 of the constitution a local community (hromada) is defined as “residents of a village or a voluntary association of residents of several villages into one village community, residents of a settlement, and of a city”. according to this article residents of each of the 28,000 settlements can establish a municipality. there is no clear procedure to do that but during the last years, despite the decreasing population of ukrainian, the number of local councils increased. at the same time this legal confusion leads to another problem: lack of ubiquity of local self-governance. we have to stress that the current administrative and territorial division of ukraine is not well structured. atus have a number of enclaves and exclaves, territory of one unit can contain territories of smaller units where local councils are functioning as well. this situation leads to overlapping of functions and competences of different levels of local self-government, misusing of local resources, conflicts etc. both municipal and district (rayon) levels have huge disproportions in terms of population and territories. for example, the population of the smallest ukrainian district is around 7 thousand, and that of the biggest district is more than 180 thousand. the same situation exists at municipal level. this causes disproportions in quality of public services that residents of different territorial units of the same level can expect. in addition, the costs of services with lower quality are dramatically higher. moreover, 92% of rural territorial communities have populations below 3,000 inhabitants and almost 11% communities – below 500 inhabitants (tolkovanov, 2006). it should also be noted that after “euromaidan” and yanukovych’s departure in february 2014 decentralisation became a high priority topic on political agenda of the baltic journal of economic studies 71 vol. 2, no. 3, 2016 new government and the democratic coalition in the verkhovna rada (parliament of ukraine). thus, on 1 april 2014 the government approved by its regulation № 333-p a new concept of the reform of lsg and of territorial organisation of authority in ukraine. this concept should be realised in two stages. at the first stage (2014) it was planned to create legal framework for voluntary amalgamation of territorial communities with state support foreseen for 5 years and aimed at developing infrastructure and transport accessibility; to regulate the legal framework of the administrative and territorial division (structure); to model administrative-territorial units in regions and to finalise proposals of a new administrative and territorial system; to ensure constitutional basis for the establishment of executive bodies of oblast (region) and rayon (district) councils and to distribute competences of lsg bodies and local state administrations; to organize information and awareness raising campaign about the reform of lsg and territorial organisation of power; to form (in legal terms) lsg bodies on the new territorial basis. these objectives were achieved only partly (creation of the legal framework for the amalgamation of the territorial communities and creation on its basis of 159 new amalgamated communities; adoption in the first reading of the amendments to the constitution of ukraine in the part referring to the decentralisation of power, information and public awareness campaign about lsg reform). at the second stage (2015‐2017) it is planned to unify and standardise administrative and social services to be delivered to population by lsg bodies in accordance with the principle of maximum services accessibility, and ensure the legal framework for its adequate funding; to hold local elections based on the reformed system of lsg bodies; to ensure institutional re-organisation of lsg bodies according to the new territorial basis and competences; to improve the system of territorial planning and to provide newly established communities with territorial planning schemes and general plans. significant efforts were undertaken by different stakeholders (in particular the president, the government and the parliament) to prepare the necessary amendments to the constitution with regard to the decentralisation of power. on 31 august 2015 the parliament passed in the first reading, by 265 to 226 majority, the draft law № 2217 on amendments to the constitution of ukraine in terms of decentralisation of power. the draft had been previously seen by the constitutional court which ruled on 31 july 2015 that it was consistent with the constitution of ukraine and not aimed at liquidation of ukraine's independence or violation of its territorial integrity. however to change the constitution at least 300 votes necessary. according to its explanatory note, the draft amends certain provisions of the constitution in terms of administrative and territorial structure. in particular, it reads that the territory of ukraine is divided into communities, being primary units in the system of administrative and territorial structure of ukraine. also, the draft provides for separation of powers in the system of local self-governments and their executive bodies at different levels based on the principle of subsidiarity, which corresponds to the principles of the european charter of local self-government. it provides for the establishment of local self-government executive bodies within communities, being accountable to community councils. community chairman presides at council meetings and heads the community local selfgovernment executive body. district councils and regional councils in their turn elect corresponding chairmen from among their members, to head the executive committee. material and financial scope of local self-government is introduced. in particular, it is determined that such a scope comprises land, movable and immovable property, natural resources, and other objects being in the communal property of a territorial community; local taxes and fees, some state taxes and other revenues of local budgets. in order to ensure that local authorities comply with the constitution and laws of ukraine the institute of prefects is introduced. according to the bill, a prefect is appointed and dismissed by the president of ukraine upon a submission by the cabinet of ministers (tolkovanov, 2006). on 17 june 2014 the parliament adopted the law №  1508-vii “on cooperation of the territorial communities which determines a legal basis of intermunicipal cooperation (imc), principles, forms, mechanisms of such cooperation, its stimulation, financing and control. this law determines the cooperation between territorial communities as relations between two or more territorial communities, which are performed on a contract basis in the forms determined by the law for the purpose of ensuring social, economic and cultural development of the territories, improvement of the quality of services delivering to the population on the basis of common interests and the purposes, effective implementation by lsg bodies of the competences determined by the law. the law foresees five main forms of imc (article 4), i.e.: delegation of one or several tasks to one cooperating entity by other cooperating entities, together with a transfer of appropriate resources; implementation of joint projects, which entails coordination of cooperating entities and accumulation of resources by them for a specified period of time, with the objective of joint implementation of appropriate measures; joint financing of municipal-owned companies, institutions, organisations and infrastructural objects, by the cooperating entities; creation of joint municipal companies, institutions and organisations by cooperating entities; creation of joint management bodies by cooperating entities, for joint execution of the authority determined by law. according to the information from the ministry of regional development, construction, housing and municipal economy of ukraine, by the end of 2015 thirty one imc projects have already passed the procedure of official registration and were included in the relevant state register (managed by the ministry). on 5 february 2015 the parliament adopted the law on the baltic journal of economic studies 72 vol. 2, no. 3, 2016 voluntary amalgamation of the territorial communities. according to this law, perspective plans of municipalities’ amalgamation were developed and adopted. despite of sceptical vision that municipalities would not initiate voluntary amalgamation, the process has started quite actively. as a result, 159 merged municipalities representing 794 former hromadas were formed by october 2015. the new lsg bodies of these communities were elected in the last local elections of 25 october 2015. this relative success of amalgamation and imc can certainly be attributed to a number of incentives foreseen in the tax and budget codes and other legislation. for example, article 24-1 of the budget code in force since january 2015 completes the provisions on the regional development fund offering additional resources to support economic development projects, which should further convince municipalities that are reluctant to envisage mergers or co-operation. the new legislation also includes measures aimed at sparing the sensitivities of the smallest local authorities and maintaining a fine coverage of the territory through the creation of authorities with ‘starosta’ status. concerning the distribution of the competences, it should be noted that own competences and responsibilities of lsg bodies are fixed by article 26 of the law on local self-government dating back to 1997. the system for allocating powers is fairly complex. it makes a distinction between the different organs of authority (council, executive body, mayor) and between its own and delegated powers. the list of competences is quite significant but the ukrainian legislation does not ensure the principle of subsidiarity: local authorities can execute only those functions prescribed directly by legislation. in accordance with article 19 of the constitutional bodies of state power and bodies of local self-government and their officials are obliged to act only on the grounds, within the limits of authority, and in a manner envisaged by the constitution and other laws. article 144 of the constitution proclaims that the rights of local selfgovernment are protected by judicial procedure. at the same time, the constitution stipulates that local authorities can address issues of local significance but the definition of the latter or explanation of what is covered by that notion do not exist in the ukrainian legislation. this situation does not correspond to article 4 of the european charter of local self-governance that proclaims the following: “local authorities shall, within the limits of the law, have full discretion to exercise their initiative with regard to any matter which is not excluded from their competence nor assigned to any other authority” (tolkovanov, 2011). it is important to note that the ukrainian constitution of 1996 does not define clearly the notion of regional self-government. at the same time, oblasts (regions) and rayons (districts) councils are included in local selfgovernment system; they represent common interests of local (city, village, settlement) communities. there are rayon and oblast councils which, being in theory bodies of local self-government, do not possess any real power neither financially nor organisationally (they do not have their executive bodies responsible to them). as a result, they are totally dependent on the state local administrations. besides, the oblast and rayon councils can delegate some of their powers to bodies representing the state – local state administrations – in accordance with the constitution and the national legislation. in this case, local state administrations are accountable to rayon and oblast councils. these arrangements made the system very confusing (tolkovanov, 2013). to make the picture even more complex there are some contradictions between provisions of different normative acts regulating lgs activities. in particular, there are contradiction between basic law on local self-government and sectoral legislation, i.e. legislation on land, construction, architecture and other issues. in addition, a number of practical barriers exist limiting the right of local authorities to execute their full responsibility for local development with full discretion, in particular a lack of professional and experienced staff, a weak financial base of local communities and weak capacities of local governments to execute their functions. also the absence of a clear division of the competences between state authorities and the lsg bodies is observed, which may give rise to overlapping or duplication in the exercise of powers. from 2012 till the end of 2014 the financial situation of local and regional authorities did not see any serious changes. a number of problems in local finance system of ukraine were identified by interviewed representatives that are similar to those existing in previous years. the revenues of local budgets were quite significant and represented 7.1% (2012) and 6.5% (2014) of gdp (without interbudgetary transfers). but taking into account that gdp per capita in ukraine is quite low the respective revenues of the local budgets cannot cover the needs of local communities. more than a half of local budgets expenditures (56.4% in 2014) consist of transfers from the state budget. this dependence of local budgets on state authorities grew during the last several years. however, the local authorities interviewed underlined that these financial resources did not cover all delegated competences of local authorities; around 20% of public services are underfunded. the structure of local budgets consists of own taxes and charges, share of state taxes and inter-budgetary transfers. the key role in the structure of local earnings is played by personal income tax that represented more than 60% of all revenues (without inter-budgetary transfers). at the same time it should be mentioned that rural areas and small communities did not benefit from this tax as it is only gathered in the communities were the taxed persons worked. thus, only big and developed communities could receive significant share of financial resources from personal income tax. during the 2012-2014 period, the share of own taxes in the revenues of local budget increased very slowly; it is represented only 8% of revenues of local budgets in 2014 (without inter-budgetary transfers). in 2012 there was an attempt to introduce new property tax as local one though baltic journal of economic studies 73 vol. 2, no. 3, 2016 it would concerned only a small part of private physical persons property, in addition it was not foreseen that local authorities could influence the share of the tax. the equalisation system was not transparent enough. the overall situation of local revenues system was characterised by a number of restrictions and limits imposed by the national legislation and the central government. local authorities did not have enough competences to regulate and administer even local taxes. the administration of taxes itself was complicated and resource-consuming. moreover, making use of own resources was problematic for the lsg as these resources were administrated by the central treasury. this situation led to significant delays in payment of local expenditures. at the same time local authorities did not have the right to open bank accounts in private or state banks even for own taxes and charges. access to capital was limited. nevertheless, the situation started to change considerably since 2014. by the adoption of the new budget and tax codes in december 2014, a considerable progress has been achieved in the area of financial decentralisation. the key innovations are the following: • increasing of financial resources of local authorities through establishment of new local taxes and increasing share of state taxes; • property tax is introduced for residential and/or nonresidential property. local communities have the right to decide on property tax rates and tax relief at their discretion in relation to location (zoning) and other criteria. tax rate may not exceed 2% of the minimal wage per square metre (24 uah per square meter, from december 2015 – 26 uah). in 2014, local budgets received 45 million uah from property tax. in 2015, tax revenue is expected to amount to 400 million uah (around 14 million eur); • local increment for excise tax is introduced for retail companies that trade in excisable goods. the tax is paid into local budgets, where retail outlets selling excisable goods are located. the rate is 5% of the value of excisable goods (with vat) starting from 1 january 2015 irrespective of whether local councils adopted relevant decisions, because the tax code sets a single rate of 5%. in 2015 the ministry of finance expects local budgets to receive about 8.1 billion uah of excise tax; • 60% of personal income tax will stay in cities of regional significance, districts and merged communities, 15% in the regions, and only 25% will go to the state budget; • 10% of profit tax will stay in the regions. competences of local authorities to regulate of and administer local taxes were enhanced. for example, local authorities are now authorised to increase/decrease tax rate (property tax), they can open bank accounts in banks (not only in the state treasury) to gather local taxes and charges etc. land tax has become a local tax, local authorities received the right to regulate its rate, introduce exceptions in the borders of their settlements and beyond. the equalisation system has changed dramatically. a  new formula of horizontal equalisation system based on local revenues has been introduced. both poor and rich communities receive incentives for development. poor communities (with revenues below 90% of country’s average) will receive 80% compensation of the expenditures to cover their needs through subsidies. communities with revenues from 90% to 110% of country’s average will not be subject to either compensation or deduction. and communities that earn more than 110% of country’s average will be a subject to deduction of 50% of the excess. local budgets planning system has been decentralised: local authorities are now fully responsible for their budget planning instead of having local earnings and expenditures planned by the ministry of finance. incentives for mergers of local communities were introduced. merged communities have the same taxes as cities of oblast significance; in addition they will have direct relations with state budgets (instead of rayon budgets). system of state subsides is distributed according to objective criteria. responsibility of ministries for sectoral development was increased by introduction of sectoral grants for education, healthcare, training of regular labour force and social system. the principles of formula-based calculation of grants according to introduced sectoral service delivery standards (for services guaranteed by the state) and their financing norms per user were introduced. though until the list of services is not approved and standards are not developed in social sectors (for example, education, health etc.) the principle cannot be fully implemented. at the same time, for small local authorities, for example villages that do not intend to merge the new tax and budget system is less favourable. but this step was made by the government to stimulate administrative and territorial reform in the country and introduce incentives for merging. according to the national reform council information, as a result of the legal changes in the first half of 2015 local budgets have increased by 37% in comparison to the same period of 2014. according to information of the analytical centre of the association of cities of ukraine own resources of local budgets increased threefold; the number of subsidized local budgets decreased from 96% in 2014 to 74% in 2015; the number of local budgets-donors increased from 3.7% to 15.2%. also 182 cities received the right to carry out foreign borrowing (previously only 16 cities could do this). in conjunction with fiscal decentralisation reform, the government and the parliament started to implement new basis for regional development policy. thus, the law on principles of regional policy № 156-viii was adopted on 5 february 2015. it defines the main legal, economic, social, environmental, humanitarian and organisational principles of the state regional policy. according to the law, the state regional policy is determined by a number of strategic documents, i.e.: • state strategy for regional development of ukraine which is developed in the long term perspective (7 years) and is approved by a decision of the government; • regional development strategies which are prepared baltic journal of economic studies 74 vol. 2, no. 3, 2016 by the state (oblast and rayon) administrations for the duration of the state strategy of regional development. these documents should define objectives, priorities and main problems of socio-economic development of the respective regions as well as stages and mechanisms of their implementation; monitoring and evaluation system implementation; • action plan on the implementation of the state strategy of regional development of ukraine as well as actions plans for the realisation of the regional strategies. among other important decisions on regional development, we have to stress the following documents: resolution № 195 of the cabinet of ministers of ukraine "using resources of the state regional development fund in 2015" of 18 march 2015; and resolution № 196 of the cabinet of ministers of ukraine "certain issues of the state fund of regional development for 2016" of 18 march 2015. it is important to note that the ministry of regional development, construction, housing and municipal economy of ukraine as the key authority for the implementation of the decentralisation reform demonstrates strong will to introduce project-based approach concerning the financing of regional projects in connection with the approved regional strategies and development priorities of the respective territories. the possibility to interfere in the distribution of funds by the government is totally limited; there is no possibility to distribute funds among regions voluntarily [8]. in addition, some schemes were introduced that is devoted to invest more funds to under-developed regions. the government decided to use the fund to support merged communities as well as further realisation of imc projects. in 2015 the fund amounts to 3 billion uah; it is planned that in 2016 it will amount to 4.7 billion uah. that status of local civil servants is regulated by the law on service in lsg bodies of 2001 and is in principle similar to the general civil service, while taking into account some specific features and the structure of local self-governance bodies. in both cases public service is a professional activity that should be conducted without political interference. the numbers of civil servants of lsg bodies are determined by the apparatus of the relevant council and its executive bodies. all other workers of public sector, including education, health sectors, police etc. are not a part of the service of local self-governance bodies. the total number of servants of local self-governance bodies in 2014 was 84,548 (without information on ar crimea, city of sevastopol and occupied territories of luhansk and donetsk oblasts). at the same time the total number of the state civil servants amounts to 295,709 (civil service in figures, 2015). during the last years the number of servants has slightly decreased. in accordance with the figure 16, women working in the state civil service and the service in lsg bodies (red colour) represented in 2014 75% (285 243 persons) of the total number (380257) of the civil servants (green colour), and men (blue colour) – only 25% (95 014 persons). the constitution of ukraine (article 38) recognises equal rights of all citizens to join the state and local self-government civil service. at the same time, as the figure 16 shows, more than 75% of total numbers of servants in local self-governance bodies are women. the law on service in lsg bodies regulates legal, financial and social conditions of the holders of not elected positions in local self-government bodies (procedure of appointment, ranks and categories, general salary and retirement conditions). it also stipulates the scope of authority for the officials of local self-governments and legal protection during the service in local self-governments. however, there is no sufficient control mechanism over local self-governments to check the local normative act concerning civil service for compliance with the law on service in lsg bodies. the procedure of selection and appointment of servants in local self-governance bodies are based on an open competition. however, this procedure is quite complicated and lengthy especially taking into account anticorruption requirements and checks before appointment of selected public servant. because of that combined with low prestige of public service and uncompetitive conditions the number applicants is very limited. at the same time there are cases of corruption and abuse of power in the process of recruitment. in 2014 only 57% of local servants were recruited on the basis of competition. promotions through unjustified managerial decisions and under political pressure are not uncommon. as a consequence, the proportion of management staff is already too high (26% in 2014) vis-à-vis the number of specialists (74%) at central and local bodies of state executive power. in local self-government the proportion is even higher (42% to 58% in 2012). according to the relevant programmes that are financed mostly from the state budget but also partly from local budgets public servants have to increase their competence through the national training system (modern leadership for modern government). the system is coordinated by the national agency on civil service as well as the national academy of public administration under the president of ukraine. public servants can increase their competence only in state-owned institutions. in 2014 around 8,000 local civil servants participated in such training. all these and other problems require a modernisation of the national legislation on public civil service (state civil service and service in lsg bodies). in this regard, the parliament approved in november 2015 the new law on civil service, which aims at improving the functioning of the state administration, but is also expected to have positive impact on the service in lsg bodies. according to this law, top civil service appointments will no longer be divided between political parties under a quota system, but will be made via transparent competition – a special commission will first vet candidates before the cabinet makes the final decision. the commission will consist of social activists, along with representatives of the parliament, the president, the government, the head of the national anti-corruption bureau, and members of trade baltic journal of economic studies 75 vol. 2, no. 3, 2016 unions. the law is also expected to help depoliticise the civil service there will be a difference between political and administrative positions. this law was entered into force on 1 may 2016 and the respective amendments to the law on service in lsg bodies should be adopted by the parliament of ukraine this year. 4. conclusions and recommendations after several years of “stagnation” the current ukrainian government re-started the process of improving the local democracy and the functioning of self-governments. on 1 april 2014 the government of ukraine approved (by its regulation № 333-p) the new concept of the reform of lsg and territorial organisation of the authorities in ukraine. significant efforts are connected with changes to the constitution in regard of decentralisation. the proposed changes passed the first reading in the parliament in august 2015. at the same time, the parliament of ukraine adopted in june 2014 the law on inter-municipal cooperation and in february 2015 – the law on voluntary merger of the territorial communities (hromadas). the process of voluntary merges was promoted by very strong financial incentives (close to cancelling of all transfers to very small municipalities, if they do not decide to merge). in such environment the voluntary amalgamation process started quite actively. as a result 159 merged municipalities representing 794 cities, settlement and village councils participated in municipal elections in october 2015. changes implemented since the end of 2014 also mean that most of competences that were transferred to central government in the past, now returned or are in the process of returning to the lsg level. there is an intention to transfer some other functions of the central government to municipalities, for example in the area of construction permits. in the end of 2015 the parliament of ukraine adopted the new law on civil service which was entered into force on 1st may 2016. this law will influence the functioning of the central government level, but is expected to have positive impact also on local level. this law is also expected to help depoliticise the civil service – there will be a difference between political and administrative positions. important changes are connected also with fiscal decentralisation – described in details in the following part. with this the most important unaddressed legislative issue is the situation on district and regional level there exist elected district and regional councils which, being in theory bodies of local self-government, do not possess any real power neither financially nor organisationally (they do not have any executive bodies responsible for them). ukraine, between 2012 and the end of 2014 did not carry out serious changes that would improve the financial situation of local and regional authorities. however, in the end of 2014 massive changes started, especially when the parliament adopted amendments to the budget and tax codes. the key innovations are as follows: increasing financial resources of local authorities through the introduction of new local taxes and increasing their share in some state taxes; providing local authorities with significantly enhanced freedom in regulation and administration of local taxes and their administration; modernisation of the equalisation system has been changed dramatically by the introduction of a new formula of horizontal equalisation system based on local revenues; decentralisation of the local budgets planning system; creation of the legal basis for amalgamation of the local communities; distribution of the state subsides according to the objective criteria; introducing the principles of formula-based calculation of grants according to introduced sectoral service delivery standards (for services guaranteed by the state) and their financing norms per user etc. at the same time, it will be recommended to ukrainian authorities to reinforce their efforts on further lsg development as an integrated part of wider public administration reform in order to pay a particular attention to the following objectives: • a completion of the constitutional reform in its part relating to the decentralisation of power should be treated as a priority objective: 2. territorial boundaries of local selfgovernance bodies and executive power should be defined in order to reinforce the three-tier system of administrative and territorial structure (with 27 regions, 120-150 rayons, 1500-1800 local communities); • a clear division of competences should be set between the local self-governance bodies of different levels (hromada, rayon and oblast). at the same time, the competences which are the most vital for peoples’ life should be transferred to the levels closest to the people following the principle of subsidiarity; • a clear division of competences should be set between the lsg bodies and local state administration bodies. the latter should transfer most of their competences to local self-governance bodies and retain only control functions; • the fiscal decentralisation reform should be continued with a particular focus on the implementing each of the recommendations formulated by the eap csf sub-group for local government and par in 2012; • the accountability of lsg bodies to the citizens of the respective hromadas should be reinforced. people will become aware that the quality of the local power operation will depend on their voting. so the quality of life will depend on the residents themselves; • standards for services delivery and its financing should be developed with particular focus on education, health, and other social services. full implementation of these standards into the state transfers/subsidies mechanisms will ensure consistent access to public services throughout the whole territory of ukraine. this step will stimulate optimisation of social infrastructure, spending resources for increasing quality of services instead of maintenance of public utilities; • a more transparent framework for local budgets should be established. increasing of local funds should be accompanied by enhancing mechanism of public control baltic journal of economic studies 76 vol. 2, no. 3, 2016 references civil service in figures (2015). national agency on civil service of ukraine, kyiv, retrieved from: www.nads.gov.ua council of europe. additional protocol to the european charter of local self-government on the right to participate in the affairs of a local authority, 2009, retrieved from: https://rm.coe.int/coermpubliccommonsearchservices/ displaydctmcontent?documentid=090000168008482a european charter of local self-government: standing conference of local and regional authorities, strasbourg, 1985. encyclopedia of public administration in 8 tomes (2011). group of authors headed by y. kovbasiuk. kyiv, national academy of public administration under the president of ukraine. tom 6 «civil service», 524 p. european handbook on the implementation of the model initiatives package on public ethics at local and regional levels. council of europe, strasbourg, 2006, 80 p. kuybida, v., tkachuk, a., tolkovanov, v. (2010). experience on the implementation of good governance standards on local level in ukraine and other european countries, kyiv, “kramar”, 317 p. modern leadership for modern government. council of europe centre of expertise for local self-government reform, strasbourg, 2013, retrieved from: https://wcd.coe.int/com.instranet.instraservlet?command=com. instranet.cmdblobget&instranetimage=2751082&secmode=1&docid=1991708&usage=2 public ethics benchmark. council of europe centre of expertise for local self-government reform, strasbourg, 2009, retrieved from: https://wcd.coe.int/com.instranet.instraservlet?command=com.instranet. cmdblobget&instranetimage=2564758&secmode=1&docid=1910774&usage=2 tolkovanov, v. (2006). “la mise en oeuvre du nouveau systeme de l’autonomie locale en ukraine”. these de doctorat (droit public), universite robert schuman de strasbourg iii, 405 p. tolkovanov, v. (2011). public administration reform in ukraine: main objectives, current status and problems to be solved. public policy and economic development: scientific journal. – mykolaiv, № 2, p. 5-12. tolkovanov, v. (2013). tools for ensuring good governance at local and regional levels. phd thesis in public administration. – zaporizhia, 436 p. toolkit on local government capacity-building programmes. council of europe, strasbourg, 2011, retrieved from: https://wcd.coe.int/com.instranet.instraservlet?command=com.instranet.cmdblobget&instranetimage= 2565163&secmode=1&docid=1910750&usage=2 денис записной децентрализация и развитие органов местного самоуправления как ключевые вопросы реформирования государственного управления в украине: текущее состояние и новые цели аннотация. в статье представлены статус и основные цели децентрализационных процессов, а также развитие органов местного самоуправления в украине. децентрализация анализируется в качестве интегрированного элемента более масштабных реформ государственного управления. эффективное государственное управление является необходимым для демократического управления. оно также непосредственно влияет на способность правительства предоставлять общественные (административные и коммунальные) услуги и стимулировать конкурентоспособность и рост. общественная административная реформа должна привести к улучшенной прозрачности, ответственности и эффективности, а также обеспечить большее внимание потребностям граждан и бизнеса. на основе анализа украинского законодательства выделены лучшие национальные и международные практики, предложения и рекомендации относительно возможных способов дальнейшего развития органов местного самоуправления, в частности в рамках проведения политики интеграции с ес. and supervision over utilisation of these funds. local authorities have to be accountable to local communities especially in terms of planning, implementation and reporting on spending of local finances; • awareness of the citizens of the decentralisation reform, its objectives and the main results should be enhanced and promoted; • further development of imc as an important stage for further amalgamation of the communities (hromadas) should be continued. at the same time, the process of amalgamation of the communities should be further supported by the central government. in this regard, the dialogue with the newly elected mayors and local elected representatives should be reinforced; awareness raising campaigns among mayors based on success-stories and peer-to-peer approach may be also used; • the autonomy of lsg bodies to manage their own human resources within the framework provided by the relevant laws should be further guaranteed. at the same time, proper control mechanisms of compliance with the provisions of law should be established. the new law on service in lsg bodies should be finalised and adopted. its quick implementation should be a priority for further realisation of the decentralisation reform in ukraine; • the delegated powers and competences should be fully financed by the central government, introduction of new privileges and bonuses should be accompanied by respective financial resources to the local budgets. baltic journal of economic studies 153 vol. 7 no. 5, 2021 corresponding author: 1 higher education institution "national academy of management", ukraine. e-mail: osospavlo@gmail.com orcid: https://orcid.org/0000-0001-7036-3737 doi: https://doi.org/10.30525/2256-0742/2021-7-5-153-158 new investment opportunities in pharmaceutical industry of ukraine due to the spread of coronavirus disease (covid-19) pavlo osos1 abstract. the subject of this article is the state of investment attractiveness of the pharmaceutical industry of ukraine in connection with the spread of coronavirus disease covid-19. methodology. the study mainly used systemic and logical approaches. at the same time, the following scientific methods were used in the research process: 1) analysis – the risks and benefits of investing in the pharmaceutical industry in ukraine are studied, in particular, the main factors that may affect its further development are identified; 2) deduction – the general state of operation of the pharmaceutical industry and important details that form a general picture of the industry are indicated; 3) induction – considerable attention has been paid to some important steps necessary for the further development of the pharmaceutical industry; 4) generalization – common features of the processes occurring at the national and supranational level in the functioning of the pharmaceutical industry have been established; 5) others. the aim of this article is to identify new opportunities, prospects and risks for investment in the pharmaceutical industry of ukraine in connection with the spread of coronavirus disease covid-19 (hereinafter covid-19). the results of the study demonstrate the significant potential of the pharmaceutical industry in ukraine for its further transformation: high employment in the industry, a large number of production facilities, compliance with international standards, etc. conclusion. the pharmaceutical industry of ukraine is one of the most profitable sectors of the national economy and has a leading position on the index of capital investment. despite the economic crisis, the industry's focus on innovation is driving growth, particularly in the pharmaceutical market. 48% of pharmaceutical manufacturers pay special attention to the study of new technologies and equipment. for further development of the domestic pharmaceutical industry, ukraine needs an effective strategy for implementing the stages of vaccine production on its territory due to the emergence of new diseases. production of such vaccines will help support ukraine's participation in competition in the promising segment of the global pharmaceutical market. in order to attract investment in the development of this area, the ukrainian government needs to ensure the effective functioning of public authorities and, in particular, to ensure the predictability of the economic and political situation. given the positive experience of foreign countries (usa, india and kazakhstan) in cooperation in the format of public-private partnerships (hereinafter – ppp), the introduction and further use of this mechanism of cooperation in the pharmaceutical industry of ukraine will have a positive impact on its investment attractiveness. effective actions of the government of ukraine, aimed at improving the welfare of citizens will serve as a guarantee of preventing the growth of counterfeit pharmaceutical products on the domestic market. key words: pharmaceutical industry, public-private partnership, investment attractiveness, investment risks, national economy, сovid-19. jel classification: e29, l60 1. introduction by its nature, investment is a key tool for increasing the profitability of the national economy and, accordingly, increasing the purchasing power of the population. the volume of investment financial injections into the national economy is influenced by the level of investment attractiveness of the country. investment attractiveness is determined by the political situation in the country, the effectiveness of government institutions, the overall macroeconomic situation and so on. the application of quarantine measures at the beginning of 2020 had a negative impact on the functioning of national economies in the world, in particular, on the national economy baltic journal of economic studies 154 vol. 7 no. 5, 2021 of ukraine. currently, the pharmaceutical industry is one of the most important industries in ukraine, characterized by knowledge-intensive, developed cooperation and sufficiently resistant to crises. further out-breaks of covid-19 and the emergence of its new strains define the pharmaceutical industry in ukraine as the basis of national security and, therefore, increase its investment attractiveness. at the same time, the deterioration of the overall macroeconomic stability of the national economy of ukraine may have a negative impact on the volume of financing of investment projects in the domestic phar-maceutical industry (krupiak, 2018). prospects for the development of the pharmaceutical industry in ukraine were studied by the following ukrainian scientists: krupiak i. y., krupiak  l. b., borushchak i., vitiuk  a. v., trachenko  k. r ., litvinova  o. v., posylkina  o. v., kovinko  o. m., stakhova  a. i., vovk a. p., as well as public figures and state officials bega v., and radutskyi m. the above-mentioned persons have examined in detail the issues related to financial characteristics of the pharmaceutical industry, trends in the pharmaceutical industry and the market, opportunities for vaccine production in ukraine, the peculiarities of national legislation on medicines, the possibility of implementing ppp mechanism in the pharmaceutical industry, especially its investment attractiveness, etc. foreign experts and scientists fred d. ledley, m.d., sarah shonka mccoy, assistant professor, gregory vaughan, ph.d., ekaterina galkina cleary, ph.d. have conducted the study on the profitability of large pharmaceutical companies compared to other large companies; keith speights identified, in particular, the feasibility and risks of investing in securities of pharmaceutical companies. at the same time, both domestic and foreign experts agree that there is significant scientific and economic potential in the pharmaceutical industry. 2. investment attractiveness of the pharmaceutical industry in modern conditions the pharmaceutical industry generates more than $1.2 trillion annually in national economies around the world. the stable and efficient functioning of this industry is a guarantee of a better quality of life for many citizens (speights, 2021). success in the research area related to the development of new pharmaceuticals plays a key role in determining the winners and losers in the pharmaceutical business, especially in creating new product niches for such businesses (pwc ukraine, 2021). the pharmaceutical industry is one of the most profitable sectors of the global economy. a study of the earnings of large companies in the s&p 500 (35 pharmaceutical companies and 357 companies in other industries) found that pharmaceutical companies had significantly higher average net income than companies in other industries from 2000–2018 (13.8% vs. 7.7%) (fred d. ledley et al., 2020). at the same time, the pharmaceutical industry belongs to knowledge intensive industries, according to the oecp classification. this industry is the world leader in gross value added per employee. about 1/5 of research and development costs are incurred in this industry (borushchak, 2017). today, the international pharmaceutical market shows signs of further growth in phar-maceutical production and investment in research organizations (r&d centers) due to the emergence and proliferation of new strains of covid-19. in 2019, the european pharmaceutical industry funded 37.7 million worth of researches. meanwhile, the average annual growth rate for research spending between 2016 and 2020 was 3.1% for europe and 7.6% for the united states (efpia, 2021). the need to develop vaccines against the spread of covid-19 is a key factor in significantly increasing investment in the pharmaceutical industry. the development of a negative scenario of the epidemic situation in the world due to the rapid spread of covid-19 prompted international financial institutions to fund projects related to vaccine development. the european investment bank continues to enter into loan agreements with international pharmaceutical companies to develop new vaccines against covid-19. at the same time, throughout the covid-19 pandemic, this international financial institution has provided significant support for the development of innovations to reduce the impact of the pandemic (ukrinform, 2021). the pharmaceutical industry is of great importance in the economy of ukraine. it is a fairly knowledgeintensive industry with well-developed cooperation. the ukrainian pharmaceutical industry produces about 1,400 (47%) of the 3,000 medicines on the domestic market. pharmaceutical companies make their own products in various forms (pills, powder, liquid, etc.). the main groups of pharmaceutical products include: cardiovascular drugs, vitamins, antibiotics, medical cosmetics, dietary supplements, etc. (vitiuk et al., 2018). at the same time, not a single vaccine is produced in ukraine today due to the lack of appropriate production facilities and the necessary financial resources. ukraine's limited state budget does not allow it to spend an average of $1 billion to $8 billion on vaccine production (beha, 2020). the dissemination of covid-19 reminded the world community of the importance of the effective functioning of the pharmaceutical industry. in particular, it marked the beginning of a new level of relationship between the international financial institutions, the government and the pharmaceutical industry. baltic journal of economic studies 155 vol. 7 no. 5, 2021 the ukrainian pharmaceutical industry is quite resistant to crisis situations and shows successful results, even during the period of strict quarantine measures related to covid-19. for example, in 2020, the volume of pharmaceutical sales through pharmacy chains increased by 8% compared with 2019. at the same time, despite the economic crisis, the growth of the pharmaceutical market is due to the industry 's focus on innovation. 48% of pharmaceutical manufacturers focus on exploring new technologies and equipment. for example, a domestic pharma ceutical company darnitsa financed innovative projects worth 291 million uah. a significant portion of these funds was directed toward industrial and digital transformation (mind ua, 2021). biopharma, a ukrainian pharmaceutical company specializing in the development and production of high-tech drugs, has invested $7 million in the construction of a new office and laboratory complex in 2020. in 2020, the pharmaceutical industry of ukraine was the leader among the sectors of the national economy in terms of capital investment. in the first quarter of 2020 alone, investments of 372 million uah were attracted in this sector. pharmaceutical manufacturing received a 72% increase in investment in 2019. only the energy industry performed better during this period (ufu-ture, 2020). due to strong demand for pharmaceutical products from domestic companies, cumulative compound annual growth rate (cagr) was 11.5% between 2017 and 2020; capital investment increased by an average of 16% (ukraineinvest, 2020). the industry employs over 350,000 pharmacists (vinnytsia regional employment center, 2021), revenues to the state budget in taxes and mandatory payments (about 2.5 billion uah), a significant number of production facilities (113 pharmaceutical plants) that meet international quality standards (radutskyi, 2020), provide significant investment potential for the ukrainian pharmaceutical industry. today, one of the most promising areas for investment in this industry is the development and production of vaccines against covid-19, which leads to fierce competition between the leading pharmaceutical corporations in this market segment. the development and production of such vaccines requires not only research capabilities, but also significant financial investments. investors give preference to financing vaccine development and production by companies that already have high quality and safe vaccines in their product portfolio. due to the lack of successful experience in the production of vaccines in ukraine, it is not the right time now for attracting funds from international financial institutions and private investors into such projects. unfortunately, due to the lack of vaccine production capacity and, most importantly, due to the lack of experience, ukraine has already lost the opportunity to produce vaccines developed by leading pharmaceutical corporations on its territory. the production of such vaccines will allow ukraine not only to save budgetary funds, but also to increase budget revenues through exports to other countries. 3. prospects for investment projects in the pharmaceutical industry of ukraine the world community may be confronted in the future with new manifestations of new diseases, so the production of vaccines in a given country will be an indication of the high development of its pharmaceutical industry. thus, the government of ukraine must immediately develop a strategy for the training and retraining of relevant specialists in domestic educational institutions and provide the necessary support to its own industry for the production of vaccines in ukraine. the development of the ukrainian economy requires significant financing. given ukraine's budgetary constraints, the ukrainian government needs to continue a constructive dialogue with private investors, including international financial institutions. today it is inexpedient to raise the issue of privatization of state strategic facilities, and it is better to develop flexible approaches to cooperation within the framework of ppp: concessions, joint ownership, property management and so on. so far, ppp cooperation in many countries has addressed issues related to improved governance and budgetary constraints. recently, there has been a sig-nificant increase in capital expenditures by pharmaceutical companies, including those associated with the development of vaccines to control the spread of covid-19. at the same time, the pharmaceutical industry has grown by 6-7% in recent decades, with the gross volume of pharmaceutical products sold on the world market reaching more than $1 trillion. in connection with large-scale economic challenges, conditions are created for effective dialogue between the leading players in the pharmaceutical industry and public authorities. the global experience of effective cooperation within the framework of ppp in the pharmaceutical industry is very significant. for example, the use of ppp mechanisms in india had a positive impact on the increase of the pharmaceutical market to $30 billion (+400%) in 2005–2015. implementation of more than 20 ppp projects between 2008 and 2015 has increased the pharmaceutical market of the republic of kazakhstan by almost 2.5 times. today, cooperation in the framework of ppp is of interest also in the u.s. in the direction of accelerating the development and market promotion of new drugs that are critical for the treatment of common diseases. baltic journal of economic studies 156 vol. 7 no. 5, 2021 according to global practice, ppp cooperation in the pharmaceutical industry is usually implemented in global and socially significant projects involving many stakeholders, such as the government, industry representatives, non-profit ngos, charitable foundations, etc. the distribution of financial burdens, risks and a transparent distribution of obligations of the parties cooperating in ppp investment projects makes such projects investment attractive and viable. although the development of ppp cooperation in the pharmaceutical industry today is very promising, there is little such cooperation in ukraine compared to foreign countries. cooperation within the framework of ppp may be appropriate to address issues related to the development of new medicines, reforming the domestic health care system, improving the quality of medical services and so on. the implementation in ukraine of investment projects worth more than $ 1 billion using the mechanism of cooperation ppp can have a positive impact on the feasibility and economic benefits of financing projects in the domestic pharmaceutical industry for potential investors (litvinova et al., 2019). 4. investment risks in the pharmaceutical industry of ukraine in the format of ppp in order to implement new projects within the framework of ppp cooperation in the pharmaceutical industry it is necessary to constantly work on increasing its investment attractiveness. such attractiveness is determined, above all, by the transparent "rules of the game" and a guarantee for the investor of the possibility of achieving the expected goal in the investment project. assessment of investment attractiveness requires a comprehensive approach to the study of the overall state of the national economy, the potential of the region, in particular the characteristics of the domestic pharmaceutical industry. at the same time, the stable functioning of the industry during economic crises and the possibility of self-financing of the industry in such crises is one of the key "benchmarks" for making the final decision on cooperation in the ppp format. when making such a decision on the advisability of participation in investment projects related to the reform of the pharmaceutical industry, including in the ppp format, all possible risks should be taken into account: technical and technological potential; established requirements for product quality; availability of raw materials, dependence on other sectors of the national and/or world economy, the need for large amounts of financial resources, etc. the lack of a clear investment strategy and the novelty of proposed solutions for the development of the pharmaceutical industry are also significant investment risks (posylkina, 2002). early anticipation and possible avoidance of the above risks will have a positive impact on the payback period of investment projects and the level of their profitability. the manufacturing sector of the pharmaceutical industry is quite profitable and reaches about 600%. such high profitability may be the reason for production of pharmaceutical products not registered in ukraine. according to world practice, the largest number of counterfeit copies of pharmaceutical products is found in the high price segment. in order to avoid the growth of counterfeit products on the domestic pharmaceutical market, the government of ukraine should make significant efforts to gradually increase the purchasing power of citizens (kovinko et al., 2017). today it is impossible to determine the adequate share of shadow economy in the pharmaceutical industry of ukraine due to its special nature. there are many statistical materials on the distribution of counterfeit products in ukraine. however, most of these materials do not contain sufficiently substantiated evidence, in particular, the methodology of calculation of such statistics (kulytskyi, 2019). the main goal of any investor is to receive the expected benefits and guarantee the integrity and inviolability of their assets. the state must be such a guarantor and make every effort to minimize the risks that may arise in the process of implementing investment projects. 5. conclusions the pharmaceutical industry is one of the most profitable sectors of the global economy, in particular, generating more than $1.2 trillion annually. the oecp categorizes the pharmaceutical industry as a knowledge-intensive industry and is the world leader in gross value added per employee. today, there are signs of further growth in pharmaceutical production and investment in research organizations (r&d centers) due to the emergence and proliferation of new strains of covid-19 on the international pharmaceutical market. the effective functioning of state institutions, especially the predictable economic and political situation in the country, is the key to successful investment in the pharmaceutical industry. international financial institutions are actively involved in financing investment projects related to the development of vaccines in connection with the spread of covid-19. the pharmaceutical industry in ukraine occupies a worthy place in the national economy, in particular, manufacturing companies provide about 1,400 (47%) of the 3,000 drugs available on the ukrainian domestic market. the need for new vaccines due to the spread of new baltic journal of economic studies 157 vol. 7 no. 5, 2021 strains of the covid-19 virus is a key factor in the significant increase in investment in the pharma ceutical industry. today ukraine does not produce a single vaccine, so ukraine cannot compete in this promising segment of the global pharmaceutical market. the limited capacity of ukraine's state budget does not allow it to spend an average of $1 billion to $8 billion on vaccine production. ukraine needs an effective strategy and the support of foreign investors to introduce on its territory the production of a vaccine capable of containing the spread of new diseases. an important direction in the implementation of this strategy is fruitful cooperation in the framework of ppp. cooperation in the framework of ppp in the pharmaceutical sector in ukraine is almost non-existent, despite the positive experience of using this mechanism of cooperation in foreign countries. references: krupiak, i. y., & krupiak, l. b. (2018). finansovi aspekty rozvytku farmatsevtychnoi haluzi derzhavy [financial aspects of development pharmaceutical industry of the state]. economy and society, vol. 19, no. 160, pp. 1072–1078. available at: https://economyandsociety.in.ua/journals/19_ukr/160.pdf (accessed december 2, 2021). speights, k. 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(2020). moz khoche vidnovyty vyrobnytstvo vaktsyn v ukraini. ale tse ne nadto realistychno [the ministry of health wants to resume vaccine production in ukraine. but this is not very realistic]. hromadske. available at: https://hromadske.ua/posts/moz-hoche-vidnoviti-virobnictvo-vakcin-v-ukrayini-ale-ce-ne-nadtorealistichno (accessed december 2, 2021). mind ua (2021). kryza yak mozhlyvist zrostannia farmrynku [crisis as an opportunity to grow the pharmaceutical market]. mind ua. available at: https://mind.ua/publications/20231404-kriza-yak-mozhlivist-zrostannyafarmrinku (accessed december 2, 2021). ufuture (2020). ukrainska farma otrymuie naibilshe kapitalnykh investytsii druhyi rik pospil [ukrainian pharmaceutical branch receives most capital investment for the second year in a row]. ufuture. available at: https://ufuture.com/uk/ukrayinska-farma-otrimuye-najbilshe-kapitalnih-investitsij-drugij-rik-pospil/ (accessed december 4, 2021). ukrainian government's investment promotion agency ukraineinvest (2020). farmatsevtyka [pharmaceutics]. ukrainian government's investment promotion agency ukraineinvest. available at: https://ukraineinvest.gov.ua/uk/ industries/pharmaceuticals/ (accessed december 2, 2021). vinnytsia regional employment center (2021). khto taki farmatsevty? [who are pharmacists?]. vinnytsia regional employment center. available at: https://vin.dcz.gov.ua/publikaciya/hto-taki-farmacevty (accessed december 2, 2021). radutskyi, m. (2020). zakon "pro likarski zasoby ": shcho i chomu zminiuiemo [law "on medicines": what and why we change]. ukrainian truth. available at: https://www.pravda.com.ua/columns/2020/04/22/7248831/ (accessed december 2, 2021). litvinova, o. v., & posylkina, o. v. 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(2017). farmatsevtychnyi rynok ukrainy yak rushiinyi vazhil rozvytku ekonomiky [pharmaceutical market of ukraine as the driving level of economic development]. scientific bulletin of uzhhorod national university, vol. 11, pp. 56–59. available at: http://www.visnyk-econom.uzhnu.uz.ua/ archive/11_2017ua/14.pdf (accessed december 5, 2021) kulytskyi, s. (2019). farmatsevtychna haluz i farmatsevtychnyi rynok v ukraini: stan i problemy rozvytku [pharmaceutical branch and pharmaceutical market in ukraine: state and problems of development]. social communications research center. available at: http://www.nbuviap.gov.ua/index.php?option=com_content &view=article&id=4227:rinok-likarskikh-zasobiv-v-ukrajini-2&catid=8&itemid=350 (accessed december 2, 2021). baltic journal of economic studies 11 vol. 7 no. 5, 2021 corresponding author: 1 baltic international academy, latvia. e-mail: tatjana.ptc@inbox.lv doi: https://doi.org/10.30525/2256-0742/2021-7-5-11-17 the impact of financial stabilization policies on the level of non-performing loans: problems and contradictions (the case of cyprus) tatjana ptasica1 abstract. the relevance of the article stems from the current level of non-performing loans (npls), which remain very high and pose risks of financial instability in cyprus. further reducing the high level of npls is one of the main strategic objectives of the cyprus stability program for the period 2019–2022. the purpose of this paper is to identify problems and contradictions in the current financial stabilization policy in the banking sector of cyprus and to help policy makers of financial policy to trace the problems and contradictions in the course of its implementation. the object of the study is the financial and, in particular, the banking sector of cyprus, which is largely concentrated within the two systemic banks. the methodology of the study is based on theoretical and methodological analysis of the scientific literature, statistical method, observations, comparative method and analysis, as well as analytical and comparative graphs, comparative and analytical approaches. the results of this study show that the profitability of the banking sector of cyprus is still negatively affected by a long period of low interest rates, as well as the burden of increasing provisions for bad debts. the adoption of the accounting standard (ifrs9) will lead to a further increase in the amount of provisions for impaired loans and thus have a negative impact on the profitability of banks. in addition, the decrease in the loan-to-deposit ratio was mainly due to a significant reduction in the loan portfolio of cypriot banks. the significant decline in total lending by banks is due to the high level of non-performing loans in cyprus, accounting for 31.8% of total loans at the end of november 2018. moreover, about half of all npls are npls of households. the estia program was created to address npls in cyprus. overall, the results of the study also show that the launch of the estia program in 2019 will lead to an increase in moral hazard. significant growth in demand for real estate in cyprus is due to government policy and is carried out through the citizenship for investment program. increased demand causes prices to rise and forms a bubble in the real estate market. in turn, the formation of a housing price bubble is one of the pre-crisis conditions. key words: the financial system of cyprus, non-performing loans, commercial banks, financial and stabilization policy. jel classification: g32, g39 1. introduction the european central bank (ecb) defines financial stability as a state in which the financial system, including financial intermediaries, markets, and market infrastructure, is able to withstand shocks and financial imbalances. financial stability mitigates the likelihood of financial intermediation failures (european central bank, 2020). the republic of cyprus (cyprus), in accordance with the provisions of the european stability and growth pact, has developed and is implementing its stability program (sp) for the period 2019–2022, approved by the council of ministers of cyprus on april 17, 2019. the sp outlines the fiscal policy strategy for the period 2019–2022 in line with the macroeconomic scenario adopted by the government and formulates the main objectives enshrined in supporting and strengthening the sustainable growth of the cyprus economy. one of the strategic objectives of the sp is identified to further reduce the high level of nonperforming loans (european commission, 2019, ministry of finance, 2019). high levels of non-performing loans in the banking sector of both developed and developing countries are often associated with financial crises (bernanke, gertler & gilchrist, 1999). baltic journal of economic studies 12 vol. 7 no. 5, 2021 financial crises have historical roots through the ages (reinhart, rogoff, 2014; reinhart, rogoff, 2009; reinhart, rogoff, 2008). the crisis arises from the interaction of various contributing factors and their combination: global economic development, politics, global macroeconomic factors, monetary policy, the rise of securitization, a fragmented regulatory structure, and other factors (thakor, 2015). in turn, cypriot npls losses are due to corrupt bank lending and the government's resistance to reforms aimed at making the economy more competitive, despite the adverse global economic conditions of the period (brow, demetriou & theodossiou, 2018). although the outlook today is positive, cyprus still faces many problems and contradictions. 2. the aim of the study the aim of the study is to identify problems and contradictions in the current financial stabilization policy in the banking sector of cyprus and to help policy makers of financial policy to monitor the problems and contradictions in the course of its implementation. the relevance of the topic of the study is due to the current level of non-performing loans, which remains very high and creates risks of financial instability in cyprus. the object of the study is the financial and, in particular, the banking sector of cyprus. the subject of the study is the impact of modern financial stabilization policies on the banking sector of cyprus. the practical significance of the study lies in the fact that the main provisions, conclusions, recommendations and methodological research approaches can be used to develop specific recommendations for improving the financial stabilization policy of cyprus. 3. methods the research methods are based on theoretical and methodological analysis of scientific literature, statistical method, observations, comparative method and analysis, as well as analytical and comparative graphs, comparative and analytical approaches. the chosen methods and techniques of the study allow to establish the impact of financial stabilization policy on the level of non-performing loans. 4. results despite the developed institutional system of supervision and monitoring, the current stabilization financial policy of cyprus, in the opinion of the author, has a number of problems and contradictions. thus, the profitability of credit institutions (see figure 1) is still negatively affected by the long period of low interest rates (see figure 2), as well as the burden of increasing provisions for doubtful debts (see figure 3). the main contradiction is that the introduction of the accounting standard (ifrs9), which will be gradually implemented over several years to regulate capital adequacy, will lead to a further increase in the amount of provisions for impaired loans and thereby negatively affect the profitability of banks. this is extremely important because from 2011 to 2017 inclusive, cypriot banks incurred annual losses and only reached marginal profitability by 2018 (see figure 1). in addition to the above, the overall deposit portfolio of cypriot banks continues to shrink (see figure 4). the total deposits of cypriot banks amounted to €47.7 billion in april 2019, compared to €49.0 billion at the end of december 2016, thus the banks' deposit portfolio decreased by 2.7% from 2016 to april 2019. there was also a decrease in the loan-to-deposit ratio (see figure 5). the decrease of the loan-to-deposit ratio to 80% (as of april 2019) indicates the ability of cypriot banks to cover withdrawals made by clients, if necessary. the contradiction of this situation is that the decrease in the ratio was not due to an increase in the total number of deposits in cypriot banks, but due to a significant decrease in the loan portfolios of cypriot banks (see figure 6). total loans from cypriot banks were €38 billion in april 2019, down from €62.7 billion at the end of december 2015, so total loans from 2015 to april 2019 declined by 39.4%. this decline occurred against the background of a long period of low interest rates. thus, in theory, credit for businesses and individuals should have become more accessible due to lower interest rates in banks in cyprus, but obviously this depends more on the credit policy of individual commercial banks rather than on the monetary policy of the ecb. the significant decline in total lending by banks is due to the high level of non-performing loans in cyprus. addressing the high level of npls in the cypriot banking system is a key priority (see figure 7). npls, excluding cypriot credit institutions' overseas operations, remain high despite the progress being seen, at 31.8% of total loans at the end of november 2018, compared to a much higher figure of 42.5% at the end of december 2017. in nominal terms, total npls of all credit institutions (excluding their foreign operations) fell 46.1% to €11.2 billion at the end of november 2018, compared with €20.9 billion at the end of december 2017. moreover, about half of all non-performing loans are non-performing loans to households (see figure 8). baltic journal of economic studies 13 vol. 7 no. 5, 2021 0,92 (5) (6) (5) (4) (3) (2) (1) 1 2 2010 2011 2012 2013 2015 2016 2017 2018 bi lli on e u r year (4) (4) (0) (0) (0) (1) 0 2014 figure 1. dynamics of profits (losses) in the banking sector of cyprus, 2010–2018 note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) 5,48 6,08 6,26 6,02 5,64 4,89 4,23 3,84 3,29 3,19 4,99 5,05 5,16 5,15 4,73 3,71 3,36 3,18 2,63 2,48 0 1 2 3 4 5 6 7 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 april in te re st r ar es (% ) corporate (non-financial) housing loans figure 2. average interest rates (for loans over 5 years*) in the banking sector of cyprus, 2010–2019 april note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) and the ministry of finance of cyprus (ministry of finance of cyprus, 2019) * non-financial corporate loans are loans to cypriot companies which do not belong to the financial sector. the above interest rates correspond to the average interest rates for loans with a term of more than 5 years. 7,3 13,5 15,3 16,6 16,8 16,3 15,7 4,5 11,7 14,2 15,7 15,9 14,9 14,1 0 2 4 6 8 10 12 14 16 18 2012 2013 2014 2015 2016 2017 2018 sept overall solvency ratio (%) et1 capital ratio (%) figure 3. total solvency ratio (%) and capital adequacy ratio et1 (%) of the aggregate banking sector in cyprus, 2012–2018 september note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) baltic journal of economic studies 14 vol. 7 no. 5, 2021 43316,8 32972,8 32282,6 32868,2 36585,8 37807,3 37599,1 37699,4 5332,6 2253,1 1957,8 2733,8 3198,2 3197 21518 11767,4 11884 10365,9 9224,9 8412,8 70157,4 46993,2 46124,4 45967,9 49008,9 49417,1 47863,9 47734 0 10000 20000 30000 40000 50000 60000 70000 80000 2013 2014 2015 2018 2019apr m ill io n, e u r year 2012 domestic residents residents of other countries of the world 2016 2017 7006,4 3258,4 6873,3 3161,3 domestic residents total other eurozone residents figure 4. total deposit portfolio of cypriot banks, 2012–2019 april note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) 103% 135% 133% 136% 113% 104% 82% 80% 2012 2013 2014 2015 2016 2017 2018 2019apr loans to deposits ratio (%) figure 5. dynamics of the ratio of loans to deposits in cypriot banks, 2014–2019 april note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) 53936,4 50081,8 49583,2 51201 45310,3 43115,5 30877,2 30890,8 4857,7 4302,1 3122,1 2704,3 13672,4 9213,7 8810,9 5839,1 72466,5 63597,6 61516,1 62738,6 55305,6 51352,3 39202,4 38008,3 0 10000 20000 30000 40000 50000 60000 70000 80000 2012 2013 2014 2015 2016 2017 2018 2019apr m ill io m , e u r years domestic residents other eurozone residents residents of rest of the world total 3485,9 8051,7 7291 6060,1 2176,7 2496,8 5828,4 1278,4 figure 6. total loan portfolio of cypriot banks, 2012–2019 april note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) baltic journal of economic studies 15 vol. 7 no. 5, 2021 figure 8 shows that npls for households, despite the progress observed, remain high at 49.8% of total npls at the end of 2018, compared to a much higher rate of 52% at the end of december 2017. in nominal terms, total non-performing loans to households across all credit institutions fell 47.1% to €5.17 billion at the end of 2018, compared with €10.97 billion at the end of december 2017. to address the problem of npls in cyprus, a federal estia program has been created. according to cyprus, non-performing loans with a total gross value of up to €3.4 billion as of september 30, 2017 are eligible to participate in the estia program (estia). moreover, the cypriot authorities estimate that the maximum total cost to the state if borrowers fully participate and comply would be approximately €815 million over 25 years (about €33 million per year) or 4% of gdp over 25 years (0.2% per year) (european commission, 2019). at the same time, the authorities expect that estia spending will not lead to an increase in public debt or violate the state's fiscal policy. estia applies to households whose owners cannot repay loans for the purchase of a separate home, live in cyprus and have real estate worth up to 350,000 euros, as well as meet other criteria set by estia. estia, on the one hand, aims to achieve a socially acceptable solution to the problem of overindebtedness of households to banks and, on the other hand, will help reduce non-performing loans in cypriot banks. estia is a one-time procedure which will start to be implemented in the next couple of months. under the terms of the program, the government will fund 1/3 of households' monthly contributions after loans are renegotiated between borrowers and banks, and 2/3 of households will have to repay (european commission, 2019). estia was originally approved by the cyprus council of ministers in july 2018, and the estia eligibility criteria were tightened in november 2018. the latest, but most important proponents calling for a change in the eligibility criteria for the estia scheme are cyprus' international lenders. representatives of the european commission (ec), the european stability mechanism (esm), the ecb and the international monetary fund (imf) called on the government to tighten estia eligibility criteria to reduce moral hazard and equity risks. thus, the main contradiction of this program is that, on the one hand, its goal justifies the means, but on the other hand, estia risks exacerbating moral hazard and serves as a program to subsidize strategic non-payers. currently, the implementation of estia and the introduction of electronic auctions in cyprus are stuck in legal and procedural issues. it was planned that the 3,6 4,5 13,3 17,3 27,1 43,2 47,5 45,3 46,4 42,5 31,8 0 10 20 30 40 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 nov % year figure 7. ratio of non-performing loans to total gross loans in cyprus (%), 2008–2018 november note: compiled by the author based on data from the statistical service of cyprus (statistical service of cyprus, 2019) and central bank of cyprus (central bank of cyprus, 2019) 2014 2015 2016 2017 2018 total npls 47,5 45,3 46,4 42,5 31,8 npls households 45 47 50 52 49,8 45 47 50 52 49,8 47,5 45,3 46,4 42,5 31,8 0 20 40 60 80 100 120 % year figure 8. ratio of npls of households to total npls in cyprus (%), 2014–2018 note: compiled by the author based on data from the central bank of cyprus (central bank of cyprus, 2019) baltic journal of economic studies 16 vol. 7 no. 5, 2021 real estate of persons with non-performing loans would be auctioned off electronically, and the debtor's main house would be protected through estia. however, nothing has been implemented so far, as the relevant online platforms are not yet ready. the predominant legal issues are related to the transfer of borrowers' personal data to the platform, through which applications for the scheme will be submitted electronically. another delay has to do with the memorandum that the banks will have to sign with the government. the memorandum is under legal service review, the provisions are reviewed one by one, and there are a number of legal ambiguities in the memorandum. the third reason for the delay appears to be how the thousands of cases included in estia are handled. in particular, efforts are being made to simplify the application process. interested parties must submit too many documents, as well as other loan restructuring and property appraisal data as collateral for a nonperforming loan to be included in estia. thus, the launch of estia for vulnerable homeowners has been postponed again. the launch of electronic auctions has also been delayed. the two issues are interrelated because, on the one hand, the electronic auctions will auction off the property of a borrower who fails to pay the required fees to the bank. estia, on the other hand, will provide a safety net for borrowers who cannot pay their loans. the cypriot ministry of finance prepared an action plan for the implementation of estia with eight set schedules, none of which have been met. the delay was also due to a change in the scheme criteria by the european commission competition network. borrower applications were originally scheduled to begin on december 1, 2018 and end on february 28, 2019, which did not happen. it is worth noting that due to the delay in applications, the rest of the schedule will have to be delayed. including the banks' evaluation of eligibility criteria and approval of applications by the appropriate state agency. as for electronic auctions, the government originally planned to implement them sometime between june and september 2019, but they have now also been postponed until the fourth quarter of 2019. the estia program has detractors who argue that estia promotes inequality before the law: the government and political parties encourage citizens to default on loans by protecting their primary residence and then reward them by forcing banks to give them discounts on the cost of the loan, while also forcing the taxpayer to indirectly pay a portion of it. in addition, dealing with non-performing loans is complicated by inaccurate cyprus land registry data and difficulties with asset valuation by banks. neither households nor developers have incentives to repay loans, and banks are reluctant to go through lengthy procedures, preferring to wait for house prices to rise. according to the royal institution of chartered surveyors, cyprus property price index, as of june 30, 2018, property prices in cyprus were up 7.6% year over year, with homes up 4.8%, offices up 11.6%, and warehouses up 4.2%, while gdp growth in 2018 hovered around 4% (royal institution of chartered surveyors, 2019). the growth in demand for real estate is due to artificial factors – specific government policies and the citizenship for investment program the "scheme for naturalization of investors in cyprus by exception" dated september 13, 2016. the purpose of this program is to further encourage foreign direct investment and attract wealthy people to reside and do business in cyprus. thus, in 2017, 5,517 people were granted cypriot citizenship, 18% more than in 2016, of which 23.8% were russian nationals, 9.1% were british citizens and 8.7% were citizens of ukraine (cyprus property news, 2019). the purchase of real estate is one of the most popular criteria of the investment scheme among foreign investors interested in obtaining a cyprus passport, while the central bank of cyprus notes that the purchase of real estate is not financed by loans provided by the cypriot banking system. according to christopher pissarides, a prominent economist and winner of the 2010 nobel prize in economics, cyprus can blow bubbles in the real estate market thanks to the citizenship for investment program. he called the current economic policy in cyprus unsustainable in the long term and pointed out that perhaps another bubble is being created in the real estate sector in cyprus (hazou, 2019). thus, the formation of a bubble in the real estate market creates significant preconditions for the beginning of the crisis in cyprus and, consequently, the possibility of a new surge in the level of non-performing loans in cyprus. 5. conclusions 5.1. further reduction of non-performing loans is one of the priorities of the current financial stabilization policy in cyprus. it is important that problems in certain areas of the cypriot economy do not lead to disruptions in the financial system, to large social costs in the form of financial instability or financial burden. 5.2. the level of non-performing loans at commercial banks in cyprus was 31.8% as of november 2018, and about half of all non-performing loans belong to households. 5.3. the cypriot banking system as a whole has sufficient liquidity, supported by the ecb, and at the same time it is heavily concentrated in the two systemic banks – bank of cyprus (boc) and hellenic bank (hb). the loan portfolio of boc and hb together accounts for 70% of total cypriot bank loans baltic journal of economic studies 17 vol. 7 no. 5, 2021 and therefore has the highest concentration of nonperforming loans. 5.4. the profitability of credit institutions in cyprus is still negatively affected by a long period of low interest rates, as well as the burden of increasing provisions for bad debts. despite the fact that the aim of the cheap money policy is to stimulate the economy and the lower the interest rate, the higher the demand for credit, accordingly, the main criterion for lending by cypriot banks is the solvency of the borrower, which has led to a significant reduction in the overall level of lending in cyprus. 5.5. the introduction of the accounting standard (ifrs9), which will be phased in over several years to regulate capital adequacy, will lead to a further increase in provisions for impaired loans and thereby negatively affect the profitability of banks. 5.6. cypriot authorities hope that amendments to the insolvency and collection laws passed in 2018, as well as the launch of the estia program in 2019, under which the government will provide financial assistance to restructure household debt, will help reduce the level of non-performing loans more quickly. essentially, estia means that banks will be able to build significantly less reserves on their balance sheets. the government will finance 1/3 of the monthly payments after loan renegotiations between borrowers and banks, which means that banks will receive a significant portion of the loans, while private funds buy bad loans for only 15% of their face value. but this scheme creates the moral hazard of a high-ceiling onincome criteria and the value of mortgaged properties. 5.7. risks to financial stability are mainly related to tighter financial conditions, weaker growth and a slowdown in the global economy due to trade wars between china and the united states, as well as political and geopolitical uncertainty. the uk's exit from the eu (brexit) has the potential to disrupt the financial market and, consequently, the economy as a whole. 5.8. in addition to the above, there are a number of risks, such as the pressure on the cypriot authorities from brussels, which could jeopardize the "citizenship for investment" scheme, which is of great importance for the cypriot economy. on the other hand, rapidly rising real estate prices and increasing construction activity are risky for the economy, which could lead to negative consequences in the future. with the help of the "citizenship for investment" program cyprus is inflating bubbles in the real estate market, which may indicate the preconditions for the development of the crisis in cyprus. the onset of the crisis could provoke a new round of growth in non-performing loans. 6. directions for further research further research could be related to the analysis of the long-term effects of the estia program. in this regard, it is proposed to use the construction of different versions of the implementation models of scenarios (e.g., bad, moderate, and good) and their analysis and evaluation. references: bernanke, b., gertler, m., & gilchrist, s. (1999). the financial accelerator in a quantitative business cycle framework / ed. taylor j., woodford m. // handbook of macroeconomics, vol. 1, elsevier science, рр. 1341–1393. doi: http://doi.org/10.1016/s1574 0048(99)10034x brow, s., demetriou, d., & theodossiou, p. (2018). banking crisis in cyprus: causes, consequences and recent developments. multinational finance journal, 22(1/2), 63–118. hazou, e. a new bubble in the making. january 2019. cyprus mail. available at: https://cyprus-mail.com/ 2019/01/13/fears-of-growing-property-bubble/ reinhart, c., & rogoff, k. (2014). recovery from financial crises: evidence from 100 episodes. american economic review papers and proceedings. reinhart, c., & rogoff, k. (2009). this time is different: eight centuries of financial folly. princeton: princeton university press. reinhart, c., & rogoff k. (2008). is the 2007 u.s. sub-prime financial crisis so different? an international historical comparison. american economic review, 98, 339–344. thakor, a. v. the financial crisis of 2007–2009: why did it happen and what did we learn? // the author 2015. published by oxford university press on behalf of the society for financial studies. doi: https://doi.org/ 10.1093/rcfs/cfv001 central bank of cyprus (2019). aggregate cyprus banking sector data. available at: https://www.centralbank.cy/ en/financial-stability/financial-system cyprus property news (2019). available at: https://www.news.cyprus-property-buyers.com/2019/03/08/ alarm-bells-over-house-prices/id=00155510 european central bank (2020). financial stability review. available at: https://www.ecb.europa.eu european commission (2019). stability and growth pact. available at: https://ec.europa.eu/info/businesseconomy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-preventioncorrection/stability-and-growth-pact_en ministry of finance of cyprus (2019). stability programme 2019–2022. available at: http://mof.gov.cy/assets/ modules/wnp/articles/201905/469/docs/stability_programme_2019_2022_ne.pdf royal institution of chartered surveyors (2019). available at: https://www.rics.org/ssa/ statistical service of cyprus. statistical abstract 2019. available at: http://www.cystat.gov.cy/mof/cystat/statistics.nsf/all/ baltic journal of economic studies 68 vol. 2, no. 5, 2016 corresponding author: 1 department of accounting and audit, ivan franko national university of lviv. e-mail: 05051@ukr.net 2 department of accounting and audit, ivan franko national university of lviv. e-mail: bylja@ukr.net 3 department of accounting and audit, ivan franko national university of lviv. e-mail: tenyukh.zoryana@gmail.com the peculiarities of state management of banks capitalization in ukraine yuriy radelytskyy1, yuliya popivnyak2, zoryana tenyukh3 ivan franko national university of lviv, ukraine abstract. research subject. the subject in this article is theoretical, methodical and applied aspects of state management of banks’ capitalization in ukraine, a consideration which allows the estimate efficiency of ukrainian banks refinancing and recapitalization, as well as to enunciate practical recommendations concerning an increase of their capitalization level. the purpose is an analysis of government support measures for the domestic bank system; furthermore the search for additional sources of financing bank funds and the development of capitalization level increase in conditions of social and economic transformations. methodology. in the research there are used general scientific methods of learning economic facts and the use of processes in their steady development and correlation: logic analysis, methods of scientific abstraction, induction, deduction, optimization, grouping and comparison, as well as graphic and tabular methods. results. the questions of government control in the bank system in the period of the world financial crisis is researched on international level by the financial stability council, basel committee on banking supervision, specialists of the world bank and international monetary fund. as a result of relative novelty of these problems only a small number of researches is devoted to the use of government bank support instruments and therefore further development of this topic has practical value for improving the renewal mechanisms of financial stability and reliability of the bank system in ukraine. after the analysis of the government control measures of the domestic bank capitalization, since 2009, and the effectiveness of budget resources segregation on refinancing and recapitalization of bank institutions in ukraine (including crisis period), it was found out that these mechanisms, unfortunately, did not change much the situation on the bank market. taking into account the unstable political situation in ukraine and its military conflict with russia, which has influenced the inflation growth, depreciation of the national currency and panic outflow of deposits, furthermore the forecast of an intensified bank crisis is used as confirmation to the problems with liquidity and bankruptcy of numerous groups of the domestic banks. therefore advisable is working of a structural and logical scheme of banks’ capitalization level increase, which consists of a selection of four categories of banks after stress-testing the measures of obligatory capitalization or processes of amalgamation and merging: financially consistent and reliable; 2) problem; 3) insolvent; 4) bad (helpless) banks. conclusions. realization of problem banks’ recapitalization with participation of the government is one of the possible variants of initiatives in handling the economic crisis’ condi-tions. nevertheless, problems with deposit-returns and debt-discharges are better to solve by refinancing and restricting their liabilities than by recapitalization. in authors’ opinion, more reasonable methods of banks’ additional capitalization-financing is attracting resources from privatization of state property and introduces new activation mechanisms of citizens savings used, particularly for converting deposits of artificial and physical bodies in hryvni and dollars into the preference shares of domestic banks. key words: bank, bank capital, capitalization level, recapitalization, refinancing, national bank of ukraine, preference shares. jel classification: g21, g28, g32, g33, g38 baltic journal of economic studies 69 vol. 2, no. 5, 2016 1. вступление мировой финансовый кризис выявил высокую концентрацию рисков и существенные дисбалансы в банковской системе как украины, так и других стран. из бюджетов были выделены значительные суммы средств на возобновление стабильности банковских систем, а также реформирования системы регулирования и надзора для нейтрализации вероятных проблем в будущем. проведённые мероприятия по рекапитализации системных финансовых учреждений за счет бюджетных средств привели к увеличению доли государственного капитала, которое наблюдается впервые за многие годы либерализации и поощрения частной собственности. однако в настоящее время процессы капитализации банков происходят медленнее, чем этого требуют тенденции развития международного рынка капитала и приходиться констатировать весьма низкий уровень капитализации банковской системы украины. более того, современные международные требования регулирования банковской деятельности к капиталу и ликвидности (базель iii) предусматривают повышение общего уровня капитализации, качества и структуры капитала банков с целью покрытия рисков банковской деятельности, введение которых является необходимым для стабильного функционирования финансового рынка украины в условиях глобализации. важным является также вопрос выхода государства из уставного капитала отечественных банков как временного, а не долгосрочного антикризисного действия, и поиск способов финансирования докапитализации банков. учитывая это, процессы адекватного наращивания объема, оптимизации структуры и совершенствования управления капиталом банков приобрели особенную актуальность. целью статьи является анализ мероприятий государственной поддержки отечественной банковской системы, а также поиск дополнительных источников финансирования капитала банков и разработка схемы повышения уровня капитализации банков в условиях социально-экономических трансформаций. в соответствии с определенной целью поставлены такие задания: раскрыть мероприятия государственного управления капитализацией отечественных банков; проанализировать процессы рефинансирования и рекапитализации банковских учреждений в украине; дать оценку эффективности рекапитализации отечественных банков в условиях кризиса; предложить практические рекомендации относительно повышения уровня капитализации банков в украине. в работе использованы общенаучные методы познания экономических явлений и процессов в непрерывном их развитии и взаимосвязи. во время решения заданий, поставленных в статье, применены методы логического анализа (при определении проблем и путей повышения уровня капитализации банков); научной абстракции, индукции, дедукции (в исследовании капитализации банка как экономической категории); оптимизации (в процессе разработки оптимизационной модели уровня капитализации банков); группировки и сравнения (во время обобщения отчетной информации исследуемых банковских учреждений); синтеза, графического и табличного метода (для наглядного отражения результатов проведенного исследования). 2. анализ последних публикаций в научной литературе проблематика низкого уровня капитализации банков исследуется в трудах таких известных ученых, как м.  д.  алексеенко, з.  м.  васильченко, а.  п.  вожжов, і.  б.  ивасив, в. в. коваленко, а. м. мороз, с. м. савлук, о. о. чуб. среди русских исследователей отмеченной проблеме посвящены труды в.  в.  иванова, в.  в.  клюевой, в.  и.  колесникова, а.  м.  косого, в.  о.  плотникова, к.  о.  попова, м.  в.  романовского, с.  о.  селищева, о. ю. симановского, б. и. соколова, в. а. царькова, ю.  м.  юденкова. фундаментальными в этой проблематике являются исследования западных ученых а.  бегера, є.  бригхема, ч.  вулфена, р.  г.  габбарта, п.  роуза, т.  у.  коха, ф.  мышкина, дж.  ф.синки, л.  мауэра и других. вопросы относительно международных стандартов достаточности капитала банка, которые способствуют адекватной капитализации отдельных банков и банковской системы в целом, нашли отражение в трудах таких ученых, как у.  гаумерт, п.  м.  нагь, у.  шульте-маттлер, к.  рамонас, дж. уотсон, дж. хоук, а также в. в. салтинский, к.  о.  киреева, к.  ф.  черкашина, н.  р.  сапожник. исследованию вопросов государственного регулирования капитализации банковских учреждений уделяют внимание многие ученые: о.  барановский, в. геец, о. дзюблюк, г. карчева, в. козюк, в. крылов, о. лаврушин, в. мищенко, с. науменкова, к. олексенко, с. циганов, в. шелудько. невзирая на многочисленные исследования ученых, в условиях продолжения неблагоприятных макроэкономических трендов на фоне социально-политического напряжения в стране, заметим, что не все аспекты данной проблемы в достаточной мере раскрыты, в частности это касается отсутствия единого подхода к определению сущности уровня капитализации банков и системного исследования ее механизма; вопросов разработки аггрегированной системы индикаторов оценки капитала банков, которая бы давала возможность обнаруживать трудности на ранних стадиях их возникновения для избежания проблем с ликвидностью и платежеспособностью и, соответственно, избыточных рефинансирований, направленных на погашение обязательств банковских учреждений; реформирования отечественного банковского регулирования в контексте ввода международных стандартов baltic journal of economic studies 70 vol. 2, no. 5, 2016 банковского надзора в условиях глобализации, а также присутствия государственного капитала в банковской системе украины и его вывода из нее, поиск альтернативных источников докапитализации отечественных банков. в условиях усиления процессов интеграции и глобализации экономических отношений в детальном исследовании и освещении нуждается усовершенствование работы по государственному управлению достаточностью капитала банков. 3. результаты исследования в отечественных банках проблемы с недостаточностью капитала начались в 2008 г. по оценкам экспертов, к началу в 2009 г. ведущие банки нуждались в капитале размером около 22 млрд. грн. отметим, что капитал банка должен быть адекватным объемам депозитного портфеля, ведь его величина свидетельствует о надежности возвращения привлеченных депозитов. однако соотношение уставного капитала и депозитной базы банков украины не было рациональным. в частности, уставный капитал банка «надра» в январе 2009 г. составлял 38,7  млн. евро, а депозитный портфель физических лиц – 800  млн  евро. соответствующие показатели «родовид банка» достигли 43 млн. евро и 278 млн. евро соответственно (kudriashov, 2010). первый этап антикризисных действий предусматривал рефинансирование банковских учреждений на сумму около 36,94 млрд. грн. в конце 2008 г. наибольшую государственную поддержку получили такие банки: оао «надра», оао «проминвестбанк», оао «кб «приватбанк», ао «банк «финансы и кредит», оао «кб «финансовая инициатива» и некоторые другие, а также оао «ощадбанк», оао «родовид банк» (national bank of ukraine, 2016). государство провело рефинансирование учреждений без четкого соблюдения стандартов прозрачности, равенства доступа всех банков, операционной независимости, наличия залогового обеспечения и низкого уровня риска. некоторые из рефинансируемых банков уже через год заявили о недостатке капитала. хотя на международном уровне принята практика, согласно которой банк, который имеет проблемы платежеспособности, должен сначала решить вопрос нехватки капитала и только потом претендовать на выделение новых кредитных ресурсов от центрального банка. в связи с ухудшением состояния ликвидности и с целью реализации валютной политики проводились аукционы по продаже валюты по льготному курсу для заемщиков, что дало возможность погасить часть займов в иностранной валюте. в конце 2008 г. был установлен мораторий на досрочное снятие депозитов и кредитование, что способствовало ограничению оттока средств из банковской системы украины. национальный банк украины (нбу) вводил временные администрации в банках, которые столкнулись с острой проблемой платежеспособности. среди антикризисных мероприятий регуляторов банковской системы украины необходимо отметить принятие закона украины «о первоочередных мерах относительно предотвращения негативных последствий финансового кризиса и о внесении изменений к некоторым законодательным актам украины» от 31.10.2008 г. № 639 – vі, основным положением которого стало создание стабилизационного фонда. целью деятельности такого фонда является направление государственных расходов на стимулирование внутреннего спроса на отечественном рынке. к сожалению, из-за фактического отсутствия бюджетных средств этот шаг носил сугубо декларативный характер. кроме того, государству в лице министерства финансов украины было предоставлено право принимать участие в формировании и/или увеличении уставных капиталов банков (капитализации банков) путем приобретения акций первичной эмиссии (долей в уставном капитале) банков или акций дополнительной эмиссии (дополнительных вкладов) банков в обмен на государственные облигации украины и/или покупки этих акций за средства государственного бюджета украины. также было увеличено до 150 тыс. грн., а впоследствии и до 200 тыс. грн., гарантированную сумму возмещения средств физических лиц по депозитам в размере вклада, включая проценты, которые подлежат выплате фондом гарантирования вкладов физических лиц в случае отозвания банковской лицензии и инициирования процедуры ликвидации банка (deposit guarantee fund, 2016). второй этап характеризовался рекапитализацией отечественных банков. исследователи мвф отмечают, что расходы на рекапитализацию и другие меры по реструктуризации на протяжении 20072011 гг. достигли 4,5% от ввп (tsyhanov, 2014). государство не только стимулировало банки проводить рекапитализацию, но и стало непосредственным участником процесса, национализировав самые проблемные банки. в начале 2009 г. было объявлено, что правительство начнет рекапитализацию 10-15 наибольших банков с целью их оздоровления за счет средств государственного бюджета. рекапитализация должна была осуществляться путем выкупа не менее как 50% плюс одна акция. на финансирование этой программы из государственного бюджета предусматривалось выделить 44 млрд. грн. (или приблизительно 2-3% ввп). заявления на рекапитализацию пришли от нескольких банков, в частности «надра» (потребность в капитале около 5 млрд. грн.), «укрпромбанк» (7 млрд. грн.), «укргазбанк» (1,5 млрд. грн.), «финансы и кредит» (более 2 млрд. грн.), «родовид банк» (3,2 млрд. грн.). baltic journal of economic studies 71 vol. 2, no. 5, 2016 отбор банков для оздоровления за счет государственных средств проводился по определенным критериям, которые касаются объемов депозитов населения и доли активов банка в совокупных активах всей банковской системы украины. было принято решение, что банки, которые нуждаются в государственной поддержке, должны отвечать таким требованиям: сумма депозитов населения в банке должна составлять более чем 1% депозитов всей банковской системы или активы – более чем 2% суммы активов банковской системы. несмотря на то, что увеличение уставного капитала при наличии убытков нецелесообразно, ведь в таком случае средства будут направлены на погашение обязательств, а не на обеспечение прибыльной работы учреждения, следовательно, при таких условиях и государственные ресурсы, привлеченные с целью рекапитализации, будут направляться на погашение долга, специалисты мвф и всемирного банка поддержали государственную программу рекапитализации банков в украине, поскольку считали, что в условиях финансового кризиса поступления капитала от их владельцев и новых инвесторов стало проблематичным. по мнению экспертов, государство должно поддержать пополнение капитала в проблемных банках, имеющих системное значение. резкий отток депозитов, а также значительные ограничения на привлечение ресурсов путем эмиссий акций и размещения долговых ценных бумаг могут стать причиной ухудшения положения не только отдельных банков, но и финансово-кредитной системы в целом. следствием будет ограничение проведения активных операций, которое приведет к уменьшению кредитования экономики, совокупного спроса и усилению кризисных явлений в реальном секторе. при таких условиях государство не может не вмешиваться в решение вопроса оздоровления банковской системы. при этом оно должно стать главным акционером и осуществлять полный корпоративный контроль для обеспечения защиты собственных интересов. такой вариант рассматривался как наименее затратный для укрепления банковской системы украины. в то же время подчеркивалось, что позитивных результатов можно достичь, когда вложенные средства будут использованы по целевому назначению (для удовлетворения претензий вкладчиков и обеспечения кредиторов банков). не исключалось, что владельцы банков могут потерять часть или даже все свои инвестиции. после стабилизации финансового состояния банков руководство должно обеспечить максимальное увеличение стоимости активов банка и подготовить его к продаже частным собственникам. таким образом, иностранные эксперты в качестве основной цели рекапитализации проблемных банков с использованием государственных ресурсов предлагали решение проблем с погашением обязательств перед вкладчиками и кредиторами. такой подход был принят правительством. в частности, специалисты министерства финансов украины придерживались мысли, что безусловной идеей рекапитализации является обеспечение полного доступа граждан к депозитам. по оценке в. пинзеника, с учетом 44 млрд. грн., которые было предусмотрено направить на рекапитализацию коммерческих банков, реальный дефицит государственного бюджета украины в ii квартале 2009 г. стал значительно больше, чем задекларированный, и превысил 10% ввп. для его погашения правительство осуществляет эмиссию облигаций внутреннего государственного займа. отсутствие достаточного объема бюджетных ресурсов для рекапитализации банков заставило обратиться к привлечению кредитов мвф. предыдущий транш был предоставлен для проведения рефинансирования проблемных банков. однако его использование оказалось нерациональным, ведь банки направили полученные средства иностранным кредиторам, а вкладчикам-резидентам возвращать депозиты не спешили. следовательно, большие трудности у государства возникают с проведением рефинансирования банков, ведь вложение капитала в уставные фонды предусматривает принятие на себя долгов банка, то есть частные долги превращаются в государственные. необходимо также учесть, что проведение рекапитализации банков со стороны правительства может сопровождаться коррупцией. необходимо обратить внимание на то, что передача полного или контрольного пакета акций государству может привести к снижению качества корпоративного управления в результате доминирования государственных органов в проведении контроля за деятельностью менеджеров. при таких условиях деятельность менеджмента не столько определяется рыночными факторами, сколько зависит от решений политиков, которые имеют отношение к корпоративному контролю, то есть происходят достаточно существенные изменения в мотивации их деятельности. работа менеджмента может быть нацелена прежде всего на выполнение установок органов государственного управления, которые нередко направлены на решение текущих, а не будущих проблем. в то же время вместо углубления рыночных преобразований наблюдается усиление административного вмешательства в экономику. кроме того, в условиях перехода контрольных пакетов акций в собственность государства усложняются также операции банка по дальнейшему увеличению уставного капитала путем проведения дополнительных эмиссий и размещения ценных бумаг среди частных собственников. попытки получить полный контроль за деятельностью банка со стороны правительства, постоянные проблемы по предоставлению бюджетных средств на приобретение пакетов акций baltic journal of economic studies 72 vol. 2, no. 5, 2016 дополнительной эмиссии тормозят проведение операции по увеличению капитализации банковского учреждения. такой корпоративный контроль становится препятствием и для привлечения частного капитала в виде участия инвесторов в приобретении ценных бумаг дополнительной эмиссии. деятельность, направленную на решение, прежде всего, текущих проблем государства, достаточно сложно согласовать с намерениями стратегических инвесторов (kudriashov, 2010). так, в апреле в 2009 г. нбу было принято решение о внесении предложения министерству финансов украины относительно участия государства в рекапитализации оао «родовид банк», оао «укргазбанк» и оао «акб «киев», по которым уже в июне того же года было принято решение о рекапитализации на общую сумму 9,5 млрд. грн. в результате проведенной рекапитализации этих банков часть государства в родовид банке достигла 99,97% (2,8  млрд.  грн.), в укргазбанке – 84,21% (3,2 млрд. грн.), в банке «киев» – 99,93% (3,5 млрд. грн.). всего в течение 2008-2011 гг. на рекапитализацию частных банков в украине было использовано 25,8  млрд. грн., что составляло почти 2,3% ввп. родовид банк получил 12,3 млрд. грн., укргазбанк – 9,3 млрд. грн., банк «киев» – 3,6 млрд. грн. (mischenko, 2013). на рис. 1 (national bank of ukraine, 2016) видно, что мероприятия государственной поддержки проблемных банков после нестабильной динамики дали им возможность выйти на докризисные показатели. собственный капитал ощадбанка был увеличен почти в 6 раз, капитал укрэксимбанка постепенно увеличивался с 2008 г., а в 2010 г. вырос в 1,5 раза. позитивную динамику по величине собственного капитала демонстрирует укргазбанк, что является рекордным показателем для этого банка и высоким показателем среди остальных отечественных банков. родовид банк характеризуются низкими показателем соотношения уставного капитала и активов, однако ликвидность поддерживается государством на приемлемом уровне. в целом показатели оао «родовид банк» могут считаться приемлемыми в связи с приобретением им статуса санационного банка. резкую тенденцию к снижению собственного капитала наблюдаем по результатам деятельности банков за 2015 г. (для оао «проминвестбанк» и оао «укрэксимбанк» этот показатель даже достиг отрицательного значения). нынешняя убыточность банковской деятельности вызвана, среди прочего, значительным ростом отчислений в резервы через снижение качества кредитных портфелей. заметим также, что три из восьми исследуемых банков (ао  «банк «финансы и кредит», оао «акб «киев» и оао «кб «надра») на данный момент ликвидированы. крайне актуальным является вопрос относительно выхода государства из капитала упомянутых банков, поскольку в соответствии с мировой практикой если такие мероприятия и использовались среди антикризисных действий, то лишь временно. в соответствии с программой экономических реформ на 2010-2014 гг. важным шагом в процессе обеспечения стабильности банковского сектора была разработка и реализация государственной стратегии относирис. 1. динамика собственного капитала банков, получивших наибольшую помощь за счет бюджетных средств, за 01.01.2008–01.10.2016 гг. -15 -10 -5 0 5 10 15 20 25 м лр д. г рн оао "ощадбанк" оао "укрэксимбанк" оао "укргазбанк" оао "родовид банк" ао "банк "финансы и кредит" оао "акб "киев" оао "проминвестбанк" оао "кб "надра" baltic journal of economic studies 73 vol. 2, no. 5, 2016 тельно государственных финансовых учреждений и банков, в которых государство стало основным владельцем в результате рекапитализации, что предусматривало приватизацию этих банков. с целью обеспечения выхода государства из капитала рекапитализированных ранее банков был принят закон украины «об особенностях продажи пакетов акций, которые принадлежат государству в уставном капитале банков, в капитализации которых участвовало государство» от 15.03.2012 г. № 4524 – vi. реализация норм указаного закона позволяет вернуть средства в государственный бюджет украины, направленных ранее государством на участие в капитализации банков. но, принимая во внимание общую конъюнктуру банковского рынка и отсутсвие интереса у иностранных инвесторов к украинским банкам, государство не сможет в ближайшей перспективе выгодно реализовать национализированные банки. другой путь решения проблем финансовых учреждений, в капитализации которых участвовало государство, – это аккумулирование средств этих банков в единую структуру, которая бы могла оказывать целевую поддержку проектов правительства. то есть, речь идет о создании нового учреждения или об объединении активов на базе существующего банка, или усилении роли украинского банка реконструкции и развития. вероятные выгоды от создания такой структуры являются весьма весомыми. стоит отметить, что в соответствии с законом украины «о банках и банковской деятельности» и законом украины «о внесении изменений к некоторым законодательным актам украины относительно предотвращения негативного влияния на стабильность банковской системы» от 04.07.2014 г. №1586 – vii  минимальний размер уставного капитала на момент государственной регистрации юридического лица, которое намеревается осуществлять банковскую деятельность, был увеличен и на сегодняшний день не может быть меньшим 500 млн. грн. тем не менее, нбу планировал инициировать увеличение минимального размера уставного капитала для новых банков до 750 млн. грн. с 2015 г. (хотя этого в последствии не произошло). по словам главы нбу в. о. гонтаревой, нбу планирует реформировать банковскую систему и уже до 2020 г. отечественная банковская система будет отвечать европейским стандартам. национальный банк страны считает, что в украине слишком большое колличество банков, а поэтому готовится успешные банки объединять, а проблемные – ликвидировать. по прогнозам национального банка, такие действия позволят до 2020 г. уменьшить количество банков и повысить концентрацию активов. по оценкам экспертов, сложно сказать, сколько банков останется, но приблизительно до 2020 г. в украине будет около 120 банков – или на треть меньше, чем сейчас (sehodnya, 2014). также нбу планирует выделить отдельную группу системно важных банков, для которой будут установлены более жесткие требования к нормативам капитала и ликвидности, но которые смогут надеяться на более системную и своевременную стабилизационную помощь со стороны нбу в периоды кризисов. при этом приоритетным механизмом капитализации рассматривают слияние и поглощение банков. в целом, нбу ставит целью наращивание доли иностранного капитала в банковской системе до 50% и уменьшение роли государства в банковском секторе до уровня ниже 10% к 2020 г. (insider, 2014). итак, в 2014 г., для преодоления финансово-экономического кризиса в государстве, нбу при поддержке мвф осуществил рекапитализацию отечественных банков на сумму 23,5 млрд. грн., активы или депозиты которых составляют 2% от общего объема в банковской системе, а в 2015 г. на эти же цели было выделено 22,5 млрд. грн. однако и этот вариант механизма рекапитализации, к сожалению, существенно не изменил ситуацию на отечественном банковском рынке (в  2014  г. было ликвидировано 19 банков, а в 2015 г. – 41  банк). таким образом, увеличение уставного капитала при наличии убытков нецелесообразно, поскольку в таких условиях государственные ресурсы, привлеченные с целью рекапитализации, банки направляют на погашение обязательств (прежде всего валютных, что негативно влияет на курс гривны), а не на создание условий для обеспечения работы учреждения. принимая это во внимание, необходимым является совершенствование действующего механизма предотвращения кризисных явлений в банковской системе и выход государства в перспективе из рекапитализированных банков (только укргазбанк из 3-х национализированных в 2009 г. демонстрирует позитивные результаты деятельности). в то же время за этот же период из банков вывели 110 млрд. грн. вкладов (voronovych, 2014). отметим, что национальный банк украины осуществил в 2014 р. стресс-тестирование 35 крупных и крупнейших банковских учреждений, на которые приходится 82% активов отечественной банковской системы, в два этапа: первый – 15 банков, а второй – 20 банков. по результатам проведенного стресс-тестирования только 5 банков его прошло, в частности приватбанк, райффайзен банк аваль, альфа-банк украина, сбербанк россии и пумб. сумма необходимой докапитализации банков первой группы составляет 56 млрд. грн. (из них 12,5 млрд. грн.  – для докапитализации государственных банков, 20,5  млрд. грн. – для банков с иностранным капиталом), второй – 10 млрд. грн. так, на протяжении 2014 г. и января-февраля 2015 г. было предоставлено кредитов рефинансирования на сумму 266 млрд. грн., из них (national bank of ukraine, 2016): овернайт – 125,4 млрд. грн.; тендерные кредиты и операции репо – 83,3 млрд. грн.; стабилизационные кредиты (под программы финансового оздоровления и для сохранения ликвидности) – 57,2 млрд. грн. baltic journal of economic studies 74 vol. 2, no. 5, 2016 24 апреля 2015 г. было проведено стресс-тестирование 20 ведущих банков украины доля которых составила 80% активов банковского сектора. при этом потребность в докапитализации отсутствовала у 4 банков, а 5 из оцененных банков ее уже выполнили. учитывая нестабильную политическую ситуацию в украине, можем спрогнозировать углубление банковского кризиса, подтверждением чего выступают проблемы с ликвидностью и банкротство многочисленной группы отечественных банков. поэтому, на наш взгляд, целесообразным является разработать по результатам стресс-тестирования структурно-логическую схему повышения уровня капитализации банков, которая заключается в выделении 4 категорий банков (финансово стойких и надежных; проблемных; неплатежеспособных; безнадежных (нежизнеспособных) и применить к ним соответственные меры обязательного характера (рис. 2). стоит отметить, что прежде чем докапитализировать банки ii, iii и iv категории, необходимо оценить состояние реального капитала: положительный или отрицательный (все плохие и сомнительные относительно возвращения кредиты должны быть в резервах). имущество и ценнные бумаги должны быть переоценены по рыночной стоимости с учётом фактических котировок и возможностью государства погашать ценные бумаги. по данным рис. 2 банки ii категории необходимо докапитализировать за счет средств собственников на сумму определенного процентного уровня от обязательного капитала (не менее 25%). нбу не должен допустить никаких «круговых» денежных потоков, лишь реальные деньги с указанием реальных источников. те банковские учреждения, которые не выполнят этого условия в течение трех месяцев, будут вынуждены проходить процессы слияния и поглощения другими банками, участников которых определяет нбу. остальную сумму (не менее 75%) необходимой докапитализации банков получают за счет конвертации депозитов в привилегированные акции этих банковских учреждений в порядке убывания сумм депозитных средств. процентная ставка дивидендов за привилегированными акциями в долларах может колебаться в пределах 6-7%, в гривне – 14-15%. одновременно с конвертацией банк и владелец ценных бумаг подписывают договора обратного выкупа этих акций по номиналу через 7-10 лет. нбу должен выступать гарантом выполнения этих соглашений. кроме этого, нбу уполномочивает топ-менеджмент банка или отдельных ключевых менеджеров осуществить обратный выкуп привилегированных акций к окончанию строка действия обязательств банка. кроме этого, нбу должен запретить разделение депозитных средств в течение не i группа банковские учреждения, показатели финансовой стойкости и надежности которых отвечают рекомендованным значениям и отображают позитивную их динамику iv группа безнадежные (нежизнеспособные) банки ii группа проблемные банки, которые имеют негативную динамику показателей и не могут вовремя и в полной мере рассчитаться со своими обязательствами позитивную их динамику iii группа неплатежеспособные банки докапитализация является сомнительной и если ее проводить, то лишь за счет средств владельцев банка стресстестирование докапитализация на 100% или слияние и поглощение с другим участником финансового рынка, или инициация ликвидации по решению национального банка докапитализация банка за счет владельцев на сумму не меньше 25% от обязательного капитала внесение остальной суммы необходимой докапитализации банков за счет конвертации депозитов в привилегированные акции этих банковских учреждений рис. 2. структурно-логическая схема повышения уровня капитализации банков baltic journal of economic studies 75 vol. 2, no. 5, 2016 менее полугода перед их конвертацией в привилегированные акции банка. к преимуществам описанного метода докапилизации можем отнести: 1) привилегированные акции являются капиталом для банков; 2) для физических лиц – это фактически долгосрочный депозит (без уплаты подоходного налога); 3) привилегированных акции дадут возможность получать дивиденды независимо от результата деятельности банка, а в случае банкротства – первоочередную выплату стоимости акций; 4) нбу не осуществляет эмиссию денег и рефинансирование, в результате чего не создаются условия для девальвации гривни; 5) не предполагается значительный отток средств из банковских учреждений, а если такое и будет иметь место, то это будет лишь краткосрочный эффект и банки смогут выполнять свои обязательства по ликвидности; 6) фондовый рынок получит ликвидность в десятки миллиардов гривен, что даст толчок к его цивилизованному развитию, ведь доходные привилегированные акции станут реальными ликвидными рыночными ценными бумагами. собственники банковских учреждений iii категории, оцененные как неплатежеспособные, должны будут докапитализировать их на 100%, или эти банки будут проходить процессы слияния и поглощения с другими участниками финансового рынка, или будут ликвидированы по решению нбу. в то же время докапитализация коммерческих банков iv группы является рискованной и ее экономическая целесообразность подвергается сомнению. 4. выводы проведение рекапитализации проблемных банков при участии государства является одним из возможных вариантов их оздоровления в условиях экономического кризиса. во время последнего мирового финансового кризиса правительства развитых стран (и украины в частности) оказались в ситуации, когда вливания бюджетных средств в финансовые учреждения стали необходимостью. были использованы инструменты повышения ликвидности, проводился выкуп проблемных активов, предоставлялись гарантии по обязательствам банков, однако наибольший масштаб приобрела рекапитализация, которая в некоторых случаях обрела форму национализации. тем не менее, проблемы возвращения депозитов и погашения задолженности перед кредиторами банков целесообразно решать путем рефинансирования и реструктуризации их обязательств, а не рекапитализации. применение механизма финансирования рекапитализации проблемных банков при участии государства, который используется в украине (привлечение ресурсов путем увеличения дефицита государственного бюджета, вложения в уставный капитал активов в форме государственных облигаций и т. п.), приводит к росту государственного долга, фискальным дисбалансам, нарушении стойкости государственных финансов и может превратиться в фактор ускорения инфляции. на наш взгляд, более целесообразными способами финансирования докапитализации банков являются привлечение ресурсов от приватизации государственного имущества и внедрение новых механизмов активизации использования сбережений граждан, в частности за счет конвертации гривневых и долларовых депозитов в привилегированные акции отечественных банков. в дальнейших исследованиях автором будут раскрыты теоретико-методические положения функционирования санационного банка украины как одного из государственных мероприятий по финансовому оздоровлению отечественных банков. references deposit guarantee fund. (2016). retrieved november 25, 2016. retrieved from: http://www.fg.org.ua. insider . (2014). nbu wants to increase requirements for banks and ban early withdraw deposits. retrieved from: http://www.theinsider.ua/business/5396aff58703b/. kudriashov, v. (2010). recapitalization problem banks by using government resources. economy of ukraine, vol. 1, 37-48. mischenko, v. (2013). capitalization of banking system in ukraine: present and prospects. journal of the national bank of ukraine, vol. 7, 11-17. national bank of ukraine. (2016). retrieved оctober 20, 2016. retrieved from: http://www.bank.gov.ua. pan'kiv, kh. (2012). capitalization of domestic banks as a basis for investment in the real sector of ukrainian economy. formation of market economy in ukraine, 26, 71-78. sehodnya.ua. (2014). what does nbu want to make with ukrainian banks. retrieved from: http://ukr.segodnya.ua/ukraine/chto-nbu-hochet-sdelat-s-ukrainskimi-bankami--528502.html. tsyhanov, s. (2014). measures of state support to banking systems in developed countries during the financial crisis. journal of the national bank of ukraine, vol. 1, 12-19. voronovych, z. (2014, october 08). does fund guarantees nothing? the high castle. retrieved from: http://www.wz.lviv.ua/economics/128843. baltic journal of economic studies 76 vol. 2, no. 5, 2016 юрий раделицкий, юлия попивняк, зоряна тенюх особенности государственного управления капитализацией банков в украине аннотация. предмет исследования. предметом статьи являются теоретико-методические и прикладные аспекты государственного управления капитализацией банков в украине, рассмотрение которых позволяет оценить эффективность рефинансирования и рекапитализации украинских банков, а также сформулировать практические рекомендации относительно повышения уровня их капитализации. целью является анализ мероприятий государственной поддержки отечественной банковской системы, а также поиск дополнительных источников финансирования капитала банков и разработка схемы повышения уровня капитализации банков в условиях социально-экономических трансформаций. методология. в работе использованы общенаучные методы познания экономических явлений и процессов в их непрерывном развитии и взаимосвязи: логический анализ, методы научной абстракции, индукции, дедукции, оптимизации, группировки и сравнения, синтеза, а также графический и табличный методы. результаты. вопросы государственного регулирования банковской системы в период мирового финансового кризиса исследовали на международном уровне совет финансовой стабильности, базельский комитет по банковскому надзору, специалисты мирового банка и международного валютного фонда. в связи с относительной новизной этой проблематики лишь небольшое количество исследований посвящено обобщению опыта применения инструментов государственной поддержки банков, поэтому дальнейшее развитие данной темы имеет практическую значимость для совершенствования механизмов возобновления финансовой стойкости и надежности банковской системы украины. проанализировав мероприятия государственного регулирования капитализации отечественных банков, начиная с 2009 г., и эффективность выделения бюджетных средств на проведение рефинансирования и рекапитализации банковских учреждений в украине (в том числе и в условиях кризиса), выяснено, что эти механизмы, к сожалению, существенно не изменили ситуацию на банковском рынке. учитывая нестабильную политическую ситуацию в украине и ее пребывание в военном конфликте с россией, который влияет на рост инфляции, обесценения национальной валюты и панический отток депозитных вкладов, спрогнозировано углубление банковского кризиса, подтверждением чего названы проблемы с ликвидностью и банкротство многочисленной группы отечественных банков. поэтому целесообразным является разработка структурнологической схемы повышения уровня капитализации банков, которая заключается в выделении за результатами стресс-тестирования 4 категорий банков и применение к ним мероприятий обязательной докапитализации или процессов слияния и поглощения: 1) финансово стойких и надежных; 2) проблемных; 3) неплатежеспособных; 4) безнадежных (нежизнеспособных) банков. выводы. проведение рекапитализации проблемных банков при участии государства является одним из возможных вариантов их оздоровления в условиях экономического кризиса. тем не менее, проблемы возвращения депозитов и погашения задолженности целесообразно решать путем рефинансирования и реструктуризации их обязательств, а не рекапитализации. на взгляд автора, более целесообразными способами финансирования докапитализации банков являются привлечение ресурсов от приватизации государственного имущества и внедрение новых механизмов активизации использования сбережений граждан, в частности за счет конвертации гривневых и долларовых депозитов юридических и физических лиц в привилегированные акции отечественных банков. baltic journal of economic studies 127 vol. 2, no. 3, 2016 corresponding author: 1 international marketing manager, global spirits. email: val.khokhlov@gmail.com perold-sharpe rebalancing strategies in practice valentyn khokhlov1 global spirits, ukraine abstract. the purpose of this paper is to investigate the different strategies for portfolio rebalanc-ing (buy-and-hold, constant weights, and constant-proportion portfolio insurance (cppi) suggested by perold and sharpe in a reallife environment using the actual market data and considering trans-action costs. methodology. exchange-traded funds were used to represent asset classes, and actual market prices in 2007-2015 for the etfs used to conduct the research. the monte-carlo simulations were used to generate 400 portfolios over 3 different time horizons in order to get a representative sample. two actual fee structures were used from the leading u.s. brokerage firms. results of the portfolio dynamics research show outperformance of cppi over other strategies on holding periods over 36 months, and on shorter time horizons cppi and constant weights strategies clearly dominate over buyand-hold strategy. contrary to the previous conclusions by perold and sharpe, there was no definite link between the stock market dynamics or volatility and the preferred strategy. we also see that after a bull market period the cppi portfolio allocation shifts to 100% equity. the portfolio turnover is typically higher and much more dispersed for cppi strategy than for constant weights strategy. we also found a strong negative correlation between the cppi portfolio turnover and the initial equity allocation, whereas for constant weights strategy the turnover is higher at 50% allocation to both stocks and bonds. practical implications. the strategy choice is shown to be more a matter of the holding period; cppi seems the best choice over longer periods. contrary to the widespread perception, our research shows that brokerage fees has not had a material influence on the simulated portfolio performance and, thus, should not be a factor for choosing a strategy. originality/value. unlike previous studies in this area that focused on analytical derivation based on sample statistics, we used the monte-carlo simulation on the actual asset prices and brokerage fees structures. the results of our research are much closer to the actual portfolio dynamics seen in practice. we also address issues like portfolio turnover and transaction costs that are often over-looked by academic researchers. key words: portfolio management, rebalancing, portfolio turnover, transaction costs, monte carlo simulation. jel classification: g11, g17 1. introduction portfolio rebalancing is an area of a great practical significance, since any portfolio manager should decide how to cope with deviations of actual asset weights from their targets. however, the academics generally paid little attention to this topic. perold and sharpe in their seminal paper (perold, 1988) formally introduced and analyzed three rebalancing strategies – buy-and-hold (bh), constant mix or constant weights (cw) and constant-proportion portfolio insurance (cppi). the two former strategies had always been used by practitioners with a constant tradeoff between keeping the current weights up to their target values and saving on transaction fees. the third strategy, cppi, was much more uncommon in practice despite its mechanics was investigated in much great details by black and perold (black, 1992). it was concluded by perold and sharpe that cw strategies are better on volatile, trendless market, whereas cppi in the best on a trendy market. other researchers, e.g. (blanchett, 2011), argue that bh strategy is not dead if both transaction costs and tax implications are considered. yet another aspect of the rebalancing was investigated in (leibowitz, 2001) that shows that a constant risk tolerance implies changing the asset allocation itself instead of keeping the constant 60/40 mix, which was used as a benchmark asset allocation by previous researchers. the purpose of this paper is to investigate practical issues of portfolio rebalancing. research objectives include checking perold-sharpe strategies on different holding periods and during different stock market conditions, using montecarlo simulations to check their behaviour on different time periods, analyze the portfolio turnover and the effect of transaction costs. we use both actual funds data and montecarlo simulation to generate portfolios. as perold-sharpe, we focus on the broad stocks-bonds portfolios, so we use etf funds that represent those asset classes broadly and do not consider portfolios of individual securities. baltic journal of economic studies 128 vol. 2, no. 3, 2016 the paper starts with the analysis of bh, cw, and cppi strategies for a traditional 60/40 stocks-bonds portfolio in 2007-2015, then the results are generalized using three samples of 400 monte-carlo simulated portfolios with three different holding periods (5 years, 3 years, 18 months). after that the portfolio turnover and the effect of transaction costs are considered both for different transaction costs models and different initial portfolio allocations. 2. performance over the entire holding period perold and sharpe is their research used a simple portfolio consisting of two assets, the risky asset and the risk-free asset. their approach is modelled in this research using investable assets and actual prices. spy exchangetraded fund is used as a proxy to the risky asset (stocks). finding a suitable proxy for the risk-free asset is more challenging, since investing directly into the treasuries is not always an alternative for small investors. that’s why two etfs may be considered – bil, which is a straightforward alternative for the bills considered by perold and sharpe but is virtually a zero-return zero-volatility asset, and tlt, which provides a more interesting risk-return profile while keeping credit risk at zero and having no correlation with stocks. the latter has been chosen as a more viable alternative. given the availability of price data, the longest time horizon accessible for our analysis are 102 months from july 2007 to december 2015. the three portfolios, representing bh, cw and cppi strategies respectively, were created on june 30, 2007 by investing $1,000,000 with the initial asset allocation 60% stocks, 40% bonds (technically, 3988 spy shares and 4697 tlt shares were bought). the bh portfolio was never changed after that. the cw portfolio was rebalanced at the beginning of each month by keeping the constant weights at 60% and 40% respectively. the cppi portfolio was rebalanced at the beginning of each month using the perold-sharpe formula for the amount invested in stocks with the floor lev-el of $700,000 and m = 2: dollars in stocks = m (assets  – floor) (1) the dynamics of the actual asset allocation for bh, cw and cppi portfolios is shown on figure 1. surprisingly the bh portfolio reverted to almost 60/40 allocation in 20142015, so at the end of the holding period its structure was very similar to the cw portfolio. the common sense may say that it did not make much sense to spend money on monthly rebalancing just to end up with the same asset mix. however, if the actual performance results are checked (see table 1), the annualized return of cw strategy is 0.8% higher and that is more than enough (as will be discussed below) to compensate for the additional costs incurred. the asset mix for cppi strategy is quite different – while it stayed pretty similar to the bh portfolio during turbulent times of the 2008-2009 crisis, on the rebounding market the cppi portfolio structure quickly shifted to 100% equity allocation, and its annualized return over the entire holding period turned out to be significantly higher than for two other strategies. 0% 20% 40% 60% 80% 100% a llo ca ti on to s to ck s buy-and-hold strategy constant weights strategy cppi strategy fig. 1. dymanics of the actual asset allocation for bh, cw and cppi strategies as readers may note from table 1, bh strategy dominates (i.e. delivers the highest current return) during 37 months between july 2007 and december 2015, cw strategy  – during 22 months, whereas cppi strategy dominates during 43 months. another metrics of practical use would be the table 1 performance and sample statistics of bh, cw and cppi strategies in 2007-2015 buy-and-hold constant weights cppi total return, annualized 3.86% 4.63% 6.16% standard deviation, annualized 9.18% 9.56% 10.43% number of months with the highest return for the current month 37 22 43 cumulative return up to this month 13 5 84 average monthly return 0.35% 0.42% 0.54% standard deviation of monthly returns 2.65% 2.76% 3.01% skewness -1.2341 -1.3301 -0.5174 excess kurtosis 4.3774 3.8289 1.9440 minimal monthly return -11.17% -10.78% -10.48% 5% percentile of monthly returns -3.95% -3.98% -3.97% median monthly return 0.66% 0.62% 0.77% 95% percentile of monthly returns 3.51% 4.14% 4.80% maximal monthly return 7.55% 6.04% 8.51% baltic journal of economic studies 129 vol. 2, no. 3, 2016 number of months a particular strategy delivered the highest cumulative return, i.e. the value of the portfolio at the end of the corresponding month was the greatest. the picture is quite different here. cppi strategy is the clear favourite outperforming bh and cw strategies in 84 of 102 months. bh strategy was the best during 13 early months, mostly in early 2008, and cw provided the highest value of the portfolio only during 5 months. the dynamics of the total cumulative return for different strategies is plotted on figure 2. fig. 2. dynamics of the total cumulative return for bh, cw and cppi strategy the sample statistics of 102 monthly returns for each portfolio are provided in table 1. while the average return for cppi is much higher than for cw or bh (which is natural given its outperformance in terms of the total return), the dispersion of monthly returns as measured by the standard deviation is also higher for cppi, however that difference is not huge. hence in terms of the sharpe ratio cppi strategy is clearly preferential. while the mean return and its standard deviation steadily increase as we shift from bh to cw and from cw to cppi, it’s not the case for down-side risk. all three portfolios are comparable in terms of 5% percentile (which is a sample measure corresponding to var 5%). it’s also interesting to note that the median return is higher for bh than for cw strategy, contrary to the average return. cppi strategy clearly dominated on the upward trend in 2011-2015 and, surprisingly, during market slump in the second half on 2008. however, during the most part of 2009-2010, especially on the rebounding market, cw appeared to be the best strategy. according to the peroldsharpe analysis, there should have been a correlation between the stock market volatility and the best strategy during that period. the current volatility (proxied by the monthly standard deviation of the daily spy returns) was plotted on figure 3 with the shaded bars indicating the strategy that worked best during the given month. however, it is not possible to conclude there is a correlation between the volatility and the best strategy, because during various periods of high volatility (october 2008, march 2009, and august 2011) different strategies provided the highest returns. also, during the periods of low volatility there was no clear preference for any particular strategy, albeit cppi may have been slightly more preferable. fig. 3. dominant strategy dependence on the stock market volatility 3. simulated portfolios over smaller holding periods after having considered three strategies over the entire holding period of 102 months, the monte carlo simulation was performed over smaller randomly selected holding periods (60 months, 36 months, and 18 months). each simulation consisted of randomly choosing a starting date, investing $1,000,000 in a 60% spy 40% tlt mix and running three portfolios (bh, cw, and cppi) with monthly rebalancing for the selected holding period. 400 simulations were run for each holding period length. the simulation with 60 months holding period (see panel a in table 2) shows clear outperformance of cppi over other strategies. it delivers the best performance for 357 of 400 portfolios, whereas cw strategy dominates for 39 portfolios, most of which were started in 2007 and baltic journal of economic studies 130 vol. 2, no. 3, 2016 early 2008, so they had a greater exposure to the financial crisis. hence it can be concluded that cppi strategy was dominant on the post-crisis growing market, however during the turbulent times of 2008-2009 cw strategy was better. the results for the simulation with 36 months holding period (see panel b in table 2) differ from the ones discussed above immaterially for bh and cw strategies, but cppi strategy generates lower returns. the amount of portfolios for which cppi dominated is significantly lower than be-fore, and at 36 months holding period much more cw portfolios become dominant. w hen the holding period is reduced further to 18 months (see panel c in table 2), the returns for all three strategies become much more aligned. w hereas bh and cw average returns are slightly lower, there is a significant drop in the average return for cppi strategy. w hile the numbers of dominant portfolios for each strategy stays about the same as for 36 months holding period, the 95% confidence intervals for all strategies have a substantial overlap. so, as the holding period shortens the distinction between the strategies blurs. the total portfolio turnover, which is calculated as the total value of transactions executed for rebalancing divided by the initial portfolio value, is zero for bh but becomes quite significant for cw and cppi (see table  2). it’s a common perception that bh strategy may turn out to be more desirable when after-fees returns are considered. however, when taking typical commission structures used by the major brokerage firms into account, it becomes apparent that the reduction in average return after fees is not significant. two fee models were modelled  – the volume-based model, which depends on the amount of shares traded, and the flat-fee model, which is based on a fixed fee per trade. the fees were calculated as follows: • for the volume-based model: $0.005 per each share traded, subject to a floor of $1 per trade and to a cap of 0.5% of the total trade value; • for the flat-fee model: $6.95 per trade. for our portfolio of $1,000,000 the typical transaction fees were way below $1,000 even for 5 years holding period. therefore, the maximum decrease in total return for the entire holding period is less than 0.1%, or less than 0.02% when annualized. in general, the volume-based model generates lower fees when there are many smaller transactions (in our case the monthly minimum commission is waived since the nav of the portfolio is higher than $100,000), whereas the flat-fee model favours a small number of large trades. however, for both fee models considered, as well as for any model that is reasonably competitive with those two, the amount of commissions is way too small to justif y switching from a strategy chosen on before-fees basis. 4. effect of holding period length on turnover the total portfolio turnover is analyzed over various holding periods ranging from 12 to 60 months using 100 monte-carlo simulations. the starting date was table 2 monte-carlo simulation results for bh, cw and cppi strategies over different holding periods panel a. holding period 60 months buy-and-hold constant weights cppi average return before fees, annualized 7.87% 8.34% 9.92% standard error 0.19% 0.17% 0.21% 95% confidence interval 7.50%-8.24% 8.02%-8.66% 9.51%-10.34% portfolios where the strategy dominates 4 39 357 average portfolio turnover 0% 197% 280% fees, volume-based model <0.01% 0.02% 0.02% fees, flat-fee model <0.01% 0.08% 0.07% panel b. holding period 36 months buy-and-hold constant weights cppi average return before fees, annualized 7.84% 8.45% 9.18% standard error 0.26% 0.25% 0.30% 95% confidence interval 7.33%-8.36% 7.95%-8.94% 8.59%-9.77% portfolios where the strategy dominates 14 161 225 average portfolio turnover 0% 114% 201% fees, volume-based model <0.01% 0.01% 0.02% fees, flat-fee model <0.01% 0.05% 0.05% panel c. holding period 18 months buy-and-hold constant weights cppi average return before fees, annualized 7.35% 7.48% 8.17% standard error 0.46% 0.46% 0.45% 95% confidence interval 6.46%-8.24% 6.58%-8.39% 7.30%-9.05% portfolios where the strategy dominates 16 156 228 average portfolio turnover 0% 54% 102% fees, volume-based model <0.01% 0.01% 0.01% fees, flat-fee model <0.01% 0.03% 0.03% baltic journal of economic studies 131 vol. 2, no. 3, 2016 randomly selected so that the holding period fits between july 1, 2017 and december 31, 2015. of course, for bh strategy the turnover is zero. for cw and cppi strategy a strong positive link between the holding period and the turnover is found (see figure 4), however the dispersion of the turnover is much higher for cppi. it can be explained by the fact that portfolios held during 2012-2015 are likely to shift to 100% equity allocation under cppi strategy, which decreased their rebalancing needs and turnover comparing to those held during 2007-2011. on the other hand, the turnover under cw strategy is much more consistent, because the target asset weights remain the same. if the dependence of the total broker commission to the holding period length is considered, however, a different picture appears. the flat-fee model (see panel b on figure 5) generates linearly increasing fees for cw strategy and for most portfolios under cppi strategy, because the number of trades is proportional to the number of rebalancing (i.e. the number of months the portfolio is being held). the only exception is cppi portfolios that shift to 100% equity allocation, as they do not re-quire subsequent rebalancing (they are the dots below the diagonal line on panel b). the volumebased model (see panel a on figure 5) leads to quite different results, the fees increase with the length of the holding period, however, at a much slower rate. the scatter plot depicting the amount of fees in this case is quite similar to the scatter plot for the turnover, because for the volume-based model fees are proportional to the amount of trades. 0% 100% 200% 300% 400% 500% 600% 700% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% po rt fo lio tu rn ov er initial allocation to stocks buy-and-hold strategy constant weights strategy cppi strategy fig. 6. total portfolio turnover dependence on the initial portfolio allocation panel a. volume-based model panel b. flat-fee model fig. 5. total brokerage commissions dependence on the holding period length 5. effect of initial asset allocation on turnover finally, the total portfolio turnover for different initial portfolio composition is analyzed using 100  monte-carlo simulations on the total holding period of 60 month. the starting date is randomly selected so that the holding period fits between july 1, 2017 and december 31, 2015, and the initial allocation to stocks is randomly chosen between 20% and 80%. for the cppi portfolio the floor level in formula (1) is adjusted accordingly. bh strategy, again, has no turnover. the portfolio turnover for cw is much less dispersed than for cppi, and the shapes are quite different for the strategies (see figure 6). for cw strategy the turnover ranges from 100% to 250% and the shape is slightly bended upwards in the middle (i.e. turnover is higher for portfolios with the initial allocation to stocks 40% to 0% 100% 200% 300% 400% 0 10 20 30 40 50 60 70 po rt fo lio tu rn ov er holding period, months buy-and-hold strategy constant weights strategy cppi strategy fig. 4. portfolio turnover dependence on the holding period length baltic journal of economic studies 132 vol. 2, no. 3, 2016 60% than for those at the ends of the 20%-80% range). w hile the dispersion of the turnover for cppi strategy is significantly greater, a strong negative correlation between the turnover and the initial allocation to stocks can be obser ved (i.e. the portfolios more exposed to equities have lower turnover). probably, it is due to the fact that as a cppi portfolio shifts to 100% equity allocation on the growing stock market less re-balancing is required. the dependence between the total brokerage fees and the initial allocation to stocks (see figure 7) is rather similar as the dependence between the commission and the holding period length. for the volume-based model the scatter plot is quite similar to scatter plot for the portfolio turnover, and the reason stays the same  – fees are proportional to the amount of shares traded. for the flat-fee model the total fee amount is the same irrespective of the portfolio allocation for cw strategy, but for cppi strategy some portfolios result in a lower total commissions. moreover, the higher is the initial allocation to stocks, the lower are the total fees  – it supports our previous conclusion that some of the cppi portfolios, which subsequently shift to 100% equities, require less rebalancing. of course, some cppi portfolios have never reached 100% allocation to stocks, and the amount of commissions stayed at the same level as for the cw portfolios. panel a. volume-based model panel b. flat-fee model fig. 7. total brokerage commission dependence on the initial portfolio allocation 6. conclusions three different portfolio rebalancing strategies  – buy-and-hold, constant weights and cppi  – have demonstrated different performance during the holding period considered in our research. despite the fact that cw strategy performed better on a turbulent market in 2009-2010 and cppi was certainly the best strategy on a growing market in 2011-2015, there is no evidence of definite correlation between the market volatility and the dominance of a particular rebalancing strategy. while there is some support for perold and sharpe conclusion that, in theory, cw should be superior in a market characterized by often reversals and cppi should be better in a bull market, practice shows it is not always the case. another common perception that has not been confirmed in this research is the attractiveness of bh strategy given its zero transaction costs. on our sample $1,000,000 portfolio the brokerage commissions were too small to justify changing the strategy because of the transaction costs and bh strategy was on average the least performing one. most probably the same will hold true for any portfolio exceeding $100,000 given the fact that brokers typically waive a minimal monthly payment on any portfolio larger than that. so, in our opinion, transaction fees should not be an es-sential consideration when choosing a rebalancing strategy over a sufficiently long time horizon. finally, the holding period length turns out to be a significant factor. on short time horizons (about 18 months) it does not really matter what strategy is being chosen, since no statistically sig-nificant difference in the mean returns has been found. however, as the portfolio is being held for a longer period the difference between strategies becomes more significant  – cppi outperforms cw and cw outperforms bh. when the holding period is longer than 36 months, there is a 95% proba-bility that cppi will outperform other strategies. therefore bh strategy makes little sense for any investor over long time horizons, and unless there are specific reasons to keep asset weights constant and opt for cw strategy, cppi strategy would be the best choice. references black, f., perold, a.f. (1992). theory of constant proportion portfolio insurance. the jour-nal of economics, dynamics and control, volume 16, issue 3-4, p. 403–426. blanchett, d.m. (2011). is buy and hold dead? exploring the costs of tactical realloca-tion. journal of financial planning, volume 24, issue 2, p. 54–61. leibowitz, m.l., bova, a. (2011). policy portfolios and rebalancing behavior. journal of portfolio management, volume 37, issue 2, p. 60–71. perold, a.f., sharpe, w.f. (1988). dynamic strategies for asset allocation, financial ana-lyst journal, volume 44, issue 1, p. 16–27. baltic journal of economic studies 133 vol. 2, no. 3, 2016 валентин хохлов стратегии перебалансировки perold-sharpe на практике аннотация. целью статьи является исследование различных стратегий перебалансировки портфеля (buy-and-hold, постоянные веса и постоянная пропорция страхования портфеля (cppi), предложенных perold и sharpe, в реалистичной обстановке с использованием рыночных цен и принимая во внимание транзакционные издержки. методика. для представления классов активов использованы биржевые фонды, по ним взяты реальные рыночные цены за 2007-2015 года. с помощью метода монте-карло сгенерированы по 400 портфелей на 3 разных горизонтах инвестирования, чтобы создать репрезентативную выборку. две реальные структуры брокерских комиссий взяты исходя из комиссионной структуры крупных брокеров на рынке. результаты исследования динамики портфелей показывают предпочтительность cppi над другими стратегиями на горизонтах инвестирования от 36 месяцев, тогда как на более коротких горизонтах cppi и стратегия постоянных весов является более предпочтительными, нежели стратегия buy-and-hold. вопреки выводам perold и sharpe, не было обнаружено связи между ценовой динамикой или волатильностью рынков и предпочтением той или иной стратегии. было замечено, что после периода «бычьего» рынка аллокация cppi портфеля имеет тенденцию к сдвигу в 100% акции. оборот активов в портфеле является более быстрым и менее стабильным для стратегии cppi по сравнению со стратегией постоянных весов. мы также обнаружили сильную негативную корреляцию между оборотом cppi портфеля и первоначальной аллокацией в акции, в то время как для стратегии постоянных весов наибольший оборот происходит при аллокации в акции и в облигации по 50%. практическое значение. показано, что выбор стратегии зависит в первую очередь от горизонта инвестирования, на длинных горизонтах предпочтительной кажется стратегия cppi. вопреки распространенному мнению, наше исследование показывает, что брокерские комиссии не оказывали существенного влияния на результаты сгенерированных портфелей, поэтому они не должны быть определяющим фактором при выборе стратегии. значение/оригинальность. в отличие от предыдущих исследований в этой области, которые фокусировались на аналитическом выводе и основывались на выборочных статистиках, мы использовали метод монте-карло на реальных ценовых данных и структуре брокерских комиссий. результаты нашего исследования гораздо лучше характеризуют динамику портфелей на практике. мы также затронули такие вопросы, как оборот портфеля и транзакционные издержки, которые зачастую упускают из виду академические исследователи. baltic journal of economic studies 27 vol. 8 no. 3, 2022 1 university of сustoms and finance, ukraine e-mail: kseny-8888@i.ua orcid: https://orcid.org/0000-0001-8683-6834 researcherid: aaf-9249-2019 2 vasyl' stus donetsk national university, ukraine (corresponding author) e-mail: o.doronina@donnu.edu.ua orcid: https://orcid.org/0000-0001-7430-4881 doi: https://doi.org/10.30525/2256-0742/2022-8-3-27-35 strategizing social security in the labor market in the context of transformation of key threats kseniia bondarevska1, olha doronina2 abstract. the aim of the article is to model strategies of social security in the labor market, which will provide an opportunity to conduct a scenario analysis of the effectiveness of current state policy measures, taking into account the impact of key threats to social security in the labor market and to strategize its priorities for the future in the context of the transformation of threats. the subject of the study is social security in the labor market and strategic priorities of its provision in the context of transformation of key threats. methodology. to achieve the goal of the study, a set of general scientific and special methods was used, in particular abstract-logical (to determine methodological approaches to assessing the impact of key threats on the level of social security in the labor market), simulation modeling (to model strategies for ensuring social security in the labor market); system generalization (to substantiate strategic directions for ensuring social security in the labor market). simulation modeling of strategies for ensuring social security in the labor market was carried out using economic indicators for 2006–2018, which makes it possible to specify the trends and factors of their change in the labor market in the conditions of its economic cyclicality (the period before and after the 2008 economic crisis, as well as the events of 2014 in ukraine). labor market indicators since 2019 were not taken into account in modeling strategies deliberately, since the study did not include an assessment of labor market parameters in the context of aggravation of social security risks that are pandemic (2020–2021) and military (2022) in nature due to their low controllability and spontaneity. the simulation model of the strategy for ensuring social security in the labor market was built using powersim software. results. the paper substantiates the expediency of using the method of simulation modeling as a tool for strategic management of complex socio-economic systems, in particular, relations in the labor market. the method of modeling social security strategies in the labor market, based on the method of simulation modeling, is proposed. the basis for the simulation experiment is to assess the dynamics of the main threats to social security in the labor market, expressed through seven economic indicators that characterize the security of employment and remuneration. six variants of models of strategies for ensuring social security in the labor market have been generated, which illustrate certain types of state personnel and socio-economic policies that have been implemented (should be implemented) under the influence of certain transformation processes and environmental factors. practical implications. the conclusions and methodological approaches to modeling strategies obtained as a result of the study can be implemented in the practice of state and regional management to reduce/neutralize the negative impact of certain types of threats on the labor market. value/originality. the author's methodology of simulation modeling of strategies for ensuring social security in the labor market and a roadmap for strategizing social security in the labor market in the context of the transformation of key threats, which can be implemented at different levels of management. key words: labor market, social security, threats, simulation modeling, strategizing. jel classification: e24, i38, j08 1. introduction in recent years, the labor market has been an extremely dynamic socio-economic system, both in the structure of the national economy of ukraine and the global economy as a whole. global transformation processes, including changes in the mode of production, the nature of industrial relations and property relations, demonstrate the development of this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 28 vol. 8 no. 3, 2022 the information society and knowledge economy. they provoke significant transformations of the labor market, which are associated with the emergence of new and change of traditional professions; development of non-standard forms of employment and organization of labor relations; growing demand for new competencies and employees of a new type who possess them or are ready to quickly master them; growing risks of structural unemployment in case of unwillingness of the workforce to adapt to current or future business needs. the relevant processes have a significant impact on the development of economic systems in general and form fundamentally new qualities of social and labor relations, focused on the priority of innovation and information component. at the same time, transformational changes in both the global and national economies carry numerous risks in the field of labor and employment, which provoke threats to social security in the labor market. in recent years, the most acute threats have been associated with the spread of informal employment, youth unemployment, the withdrawal of older people from the labour market, the decline in incomes, etc. in 2020, against the backdrop of the above, threats arose due to the spread of the covid-19 pandemic (a decrease in the level of working capacity and quality of the workforce due to an increase in the incidence rate, massive layoffs in certain sectors of the economy and an increase in unemployment due to the suspension of business activity, the inability to continue working in the usual format for most employees / unreadiness of a certain part of the workforce for new employment conditions, etc.) since the spring of 2022, after russia's full-scale invasion of ukraine on 24.02.2022, a number of new critical threats, which are signs of a wartime economy, have become acutely relevant for the ukrainian labor market. they significantly complicate the maintenance of social security in the labour market and actualize the task of not only determining the current state of threats, but also their forecast characteristics, in order to maintain the labour market in a viable state, re-adjust the economy to new conditions and ensure social protection of the population of ukraine. in addition, it should be noted that these threats to the labour market of ukraine may to some extent extend to the labour markets of the eu countries and other countries of the world, which are connected with it by migration and globalization processes. thus, the problem of maintaining social security of the labour market goes purely beyond the national economy. the results of the study of the problems of labor market development and social security were reflected in the scientific works of both foreign and domestic authors. among the works of foreign researchers, it should be noted the study of a. hijzen and в. menyhert (hijzen, menyhert, 2016), which highlights the risks in the field of labor market security and their consequences; с. crouch (2010), who defines the concept of flexible security in the context of workforce flexibility. scientific value has the approach of foreign scientists t. wilthagen (wilthagen, 2002) and f. tros (wilthagen, tros, 2004), who consider it necessary to distinguish between: work safety, which concerns the actual stay at a particular workplace; job security, which refers to the security of permanent employment; income security, and "combined" security, i.e., the ability to achieve a balance between work and personal life. the scientific works of g. standing (standing, 1999) are also devoted to the problems of security in labour and employment issues, he considers job security, workplace security, health and safety, as well as representative security, or the right to representation through trade unions. in previous studies (shaulska, 2020), it is substantiated that the management of the national economy acquires supranational features and can be effective if strategic management tools are used, since it allows taking into account dynamic changes in the external environment, predicting their parameters and ensuring positive dynamics of performance indicators in the future. using cluster analysis, based on modeling the impact of labor market and education indicators and gdp growth in the eu and ukraine, the strategic directions that should become the basis of the state personnel policy and ensure economic growth were substantiated. however, it is obvious that the current challenges for the labour markets of ukraine and the eu will not only change the trends of their development, but will also affect the involvement of individual national labour markets in certain clusters, which will require a change in the priorities of the state socio-economic and human resources policy. the aim of the study is to model social security strategies in the labor market, which will provide an opportunity to conduct a scenario analysis of the effectiveness of current state policy measures, taking into account the impact of key threats to social security in the labor market and to strategize its priorities for the future in the context of the transformation of threats. 2. simulation modeling as a tool for strategizing justification of strategic directions of ensuring social security in the labor market of ukraine based on the priorities of state policy, taking into account the current economic situation, becomes possible through the use of a wide range of economic and mathematical modeling tools. in the process of assessing the dynamics of the development of baltic journal of economic studies 29 vol. 8 no. 3, 2022 economic systems and phenomena, as well as trends of their changes in the future, a high level of effectiveness is evidenced by simulation modeling, during the application of which imitation takes place, that is, the reproduction of specific events, phenomena, objects, etc. simulation modeling has a number of advantages that play a leading role in the process of assessing the prospects for neutralizing threats to social security in the labor market. among them: the possibility of identifying not only the patterns of existence, but also trends in the development of the situation in the future; characterization of the interaction of components in the overall system; determination of dynamic processes and various behavioral aspects of the economic environment, taking into account the variability of external conditions. among the wide range of possibilities of using simulation modeling, namely, methods of system dynamics, discrete modeling, agent-based modeling, it is advisable to use system-dynamic models that provide a description of the behavior of the selected object under different conditions that may change. the main value of simulation modeling is that it is based on the methodology of system analysis, which allows to use this type of modeling as a universal method for decision-making under uncertainty and to take into account in the models of difficult to formalize factors, as well as to apply the basic principles of the system approach to solve practical problems (vlasjuk, 2013). the key to the success of simulation modeling is the passage of all its stages provided by the procedure. thus, in order to conduct a simulation experiment on the impact of key threats to social security in the labor market on the choice of a particular strategy, it is important to have such stages as: setting goals and objectives; selection of evaluation parameters and characterization of their numerical values; collection and systematization of information; software implementation of the simulation model using the powersim software package; checking the adequacy and accuracy of the obtained model; conducting simulation experiments; evaluating the results; substantiating the directions of the strategy for ensuring social security in the labor market of ukraine. 3. methodology of strategy modeling in order to substantiate the types of strategies for ensuring social security in the labor market in the context of the transformation of key threats, the author's methodology based on the method of simulation modeling has been developed. the basis for the simulation experiment is the assessment of the dynamics of the main threats to social security in the labor market, which are expressed in the form of quantitative indicators. taking into account the significant threats that take place in the labour market of ukraine and impede the achievement of social security in it, we consider it appropriate to choose parameters that indicate such threats and negative phenomena as: – spread of informal employment; – growth of youth unemployment; – low level of wages. that is why the main parameters of the modeling were defined as: informal employment rate (%); unemployment rate of persons aged 15-24 years (%); unemployment rate of persons aged 25-29 years (%); unemployment rate of persons aged 30-34 years (%); average monthly wage (uah); real wage index (%); ratio of wage arrears to wage bill (times). in particular, the above list of indicators provides an assessment of the phenomena in the field of employment security (level of informal employment, youth unemployment rate) and wage security (average monthly wage, real wage index, ratio of wage arrears to wage bill). the period from 2006 to 2018 inclusive was chosen as the time period of the study, which makes it possible to specify the trends and factors of their change in the labor market in the conditions of its economic cyclicality (the period before and after the economic crisis of 2008, as well as the events of 2014 in ukraine). labor market indicators since 2019 were not taken into account in modeling strategies deliberately, since the study did not include an assessment of labor market parameters in the context of aggravation of social security risks that have a pandemic (2020–2021) and military (2022) nature due to their low controllability and spontaneity. this may become the direction of further scientific research. the coefficient of labor supply and demand (the ratio of vacancies to the number of registered unemployed), which determines the degree of equilibrium of the labor market and its corresponding situation at the time of analysis (kds), was chosen as an effective indicator that reflects the essence of the strategy of ensuring social security in the labor market. thus, in case the coefficient reaches the level of one, full compliance of labor supply and demand and equilibrium labor market conditions are ensured, which, unfortunately, is unattainable in real economic conditions. if the number of vacant jobs exceeds the number of registered unemployed, the labour market situation is labour deficient, which indicates an excess of demand for labour over its supply. at the same time, the excess of the number of unemployed labour force over the number of vacancies represents a labour market surplus and determines the excess of labour supply over demand. thus, the closest possible approximation of the value of kds to unity is an important condition for balancing the labour market and ensuring social security of the population in terms of employment. baltic journal of economic studies 30 vol. 8 no. 3, 2022 figure 1. ratio of labor supply and demand in the labor market of ukraine (kds) during 2006–2018 figure 2. dynamics of the average monthly wage in ukraine for 2006–2018 figure 3. dynamics of the real wage index in ukraine for 2006–2018 baltic journal of economic studies 31 vol. 8 no. 3, 2022 during the period under study, there was a significant imbalance between supply and demand in the ukrainian labour market, with the most significant gap between the number of vacancies and workers seeking employment occurring during the 2008 crisis, when there was a significant reduction in labour demand and an increase in the number of unemployed (state, 2022). in general, during the period under study, the volume of demand for labor decreased by 65.7%, the volume of supply – by 56.2%. thus, the rate of reduction in the number of vacant jobs significantly exceeds the rate of reduction in the number of registered unemployed, as evidenced by a decrease in the ratio of supply and demand (figure 1). the lowest values of the supply-demand ratio were recorded in the crisis and post-crisis periods (2008 and 2015), which was caused by a simultaneous reduction in the number of vacancies along with an increase in the number of unemployed persons. at the same time, it is worth noting a certain improvement in the dynamics of the studied indicator since 2016, which is confirmed by positive trends in its growth, in contrast to the unstable dynamics of previous years. regarding changes in the level of threats to social security in the labor market, it is worth noting the increase in their severity during the crisis periods of 2008–2009, 2014, as evidenced by the increase in youth unemployment and informal employment, as well as the ratio of wage arrears to the wage bill. among the positive changes in the dynamics of labor market indicators, only a slight decrease in the level of informal employment and wage arrears can be noted. at the same time, the youth unemployment rate was characterized by unstable dynamics with a tendency to increase, showing a critically high level in the age group of young people aged 15-24. despite the constant growth of the average monthly wage during the study period, the real wage index is characterized by opposite trends, significantly decreasing in the post-crisis periods of 2009 and 2015 (figures 2, 3). the low degree of controllability of inflationary processes and the insufficient level of efficiency of macroeconomic policy causes the process of reducing real incomes of the population, which poses a significant threat to social security. the above changes in the dynamics of the main indicators of labor market development, in particular in the context of highlighting key threats to social security, require a detailed study. in accordance with the chosen logic of the study and taking into account the work of other scientists (berger, biffl, 2016), the mathematical model of the strategy for ensuring social security in the labor market is built according to equations (1-5). thus, the mincer equation provides an opportunity to calculate the average monthly wage: log(w) = β0 + β1x + β2sch + β3exp + β4exp2 + β5, (1) where exp – work experience; x – is a control variable that estimates the additional value added of an employee; sch – duration of study, in years; β1, β2, β3, β4, β5 – coefficients estimated empirically, most often by the least squares method. the empirical formula of gross consumer expenditures is used to estimate the economic parameters: uc t sub r t t t prof i k prof k prof cap� � � � � � ( )( )1 1 � � , (2) where uc – gross costs of the consumer, tprof – income tax, subi – investment subsidy, r – interest rate (discount coefficient), δк – impairment of fixed assets, tk – capital tax. gross value added is also recognized as an economic parameter of the labor market: g y k c pva с� � � � � � , (3) where gva – gross value added, y – the value of the production function, k – expenses incurred to fill the vacancy, c – expenses incurred for additional training of the employee, p – costs associated with management efforts to retain employees, τс – administrative expenses for dismissal of the employee. it is substantiated that the wage fund is influenced by the gross domestic product: gdp = gva + tprod – subp, (4) where gdp – gross domestic product, gva – gross value added, tprod – taxes on the product, subp – subsidy for products. the cost of firing an employee is described by the following equation: τf = τs + τfire + τc, (5) where τf – expenses for dismissal of an employee, τs – payments to dismissed employees, τfire – taxes on the dismissed employee, τс – administrative expenses for dismissal of the employee. during the simulation experiment, the dependence of the coefficient kds is presented in the form of a parametric equation describing its function from 7 variables: kds �� �� � � � � � �1 2 3 4 5 6 7, , , , , , , (6) where kds – a coefficient that characterizes the ratio of supply and demand of labor and is an indicator of the baltic journal of economic studies 32 vol. 8 no. 3, 2022 effectiveness of the strategy of ensuring social security in the labor market; ω1 – level of informal employment, %; ω2 – unemployment rate of young people aged 15-24, %; ω3 – unemployment rate of young people aged 25-29, %; ω4 – unemployment rate of young people aged 30-34, %; ω5 – level of average monthly wage, uah; ω6 – real wage index, %; ω7 – is the ratio of wage arrears to the wage bill, times. the simulation model of the strategy for ensuring social security in the labor market was built using powersim software based on economic indicators of the labor market (variables presented in equations 1-5). 4. models of social security strategies according to the results of the study, six variants of models of strategies for ensuring social security in the labor market were generated, which are mathematically described by a different combination of vectors of the dynamics of the above variables (equation 6), and substantively (economically) are an illustration of certain types of state personnel and socio-economic policies that are implemented (to be implemented) under the influence of certain transformation processes and environmental factors (in particular those that cause threats to social security in the labor market). accordingly, each of the models of strategies for ensuring social security in the labour market provides for its own set of optimal policies and management actions to be implemented at different levels of government. at the same time, it should be noted that some of the built models of strategies cannot be considered as relevant for the ukrainian economy under martial law, since, for example, reducing the severity of threats to employment security and wages is not possible at the moment, and reducing the level of youth unemployment may be "artificial" due to the emigration of some young people or their transition to other activities (service in the armed forces, volunteering, etc.). assume that the strategy of ensuring social security in the labor market can be expressed by the following conditions (figure 4). this strategy defines macroeconomic measures such as price stabilization and control of the limits of their growth (decrease in ω6, ω7), combined with a decrease in funding for measures to control the number of unemployed (reflected in the growth of ω2, ω3, ω4). such a strategy corresponds to the state of the labor market of ukraine before the "pandemic" period (2018–2019), which is reflected in a slight decrease in the level of informal employment, an increase in youth unemployment in all age groups of young people, an increase in the average monthly wage, a decrease in the real wage index, as well as a certain decrease in the ratio of wage arrears to the wage bill. the decrease in the performance indicator, which expresses the essence of the strategy of ensuring social security in the labor market, shows its inefficiency, which is clearly reflected in the form of a decrease in the ratio of supply and demand (figure 9). suppose that the strategy of ensuring social security in the labour market can be expressed by the following conditions (figure 5). according to the above conditions, the strategy provides for the lack of control over the indicators of informal employment and youth unemployment, which is expressed in the growth of parameters ω1, ω2, ω3, ω4. at the same time, the indicators of wage security, including the average monthly wage, the real wage index, the ratio of wage arrears to              ↓ ↓ ↑ ↑ ↑ ↑ ↓ = 7 6 5 4 3 2 1 1 ω ω ω ω ω ω ω dsk 1 янв 2020 г. 1 янв 2022 г. 1 янв 2024 г. 1 янв 2026 г. 1 янв 2028 г. 1 янв 2030 г. 0,10 0,12 0,14 0,16 0,18 0,20 1/da k d s jan,01,2020 jan,01,2022 jan,01,2024 jan,01,2026 jan,01,2028 jan,01,2030 figure 4. parameters of the first type model (kds1) – "pre-pandemic" strategy for ensuring social security in the labor market baltic journal of economic studies 33 vol. 8 no. 3, 2022 the wage bill, remain within the specified conditions without significant changes. according to the results of running the model taking into account the above conditions, it can be concluded that in 5 years a significant decrease in the ratio of supply and demand in the labor market is expected. in addition, it should be noted the unstable dynamics of the performance indicator, which is associated with the lack of positive changes in wages, the growing threat of informal employment, which is reflected in the increase in its scale, as well as the increase in youth unemployment. all this proves the ineffectiveness of this strategy in case of its practical implementation. change the strategy kds1, excluding measures aimed at reducing the level of informal employment of youth unemployment while increasing only nominal wages. in this case, the level of informal employment and youth unemployment will increase, the average monthly wage will also increase, while the real wage index and the ratio of wage arrears to the wage bill will show a downward trend. thus, the description of variables fluctuations will be as follows (figure 6). as a result of the experiment, a model was obtained that characterizes the unstable dynamics of the ratio of labor supply and demand with its significant decline in the long run (figure 6). under this strategy, both threats to employment security and threats to wage security are expected to increase. the state policy on the labor market in the case of the above strategy is characterized by passive regulation of employment relations, weakness of controlling institutions for the de-shadowing of social and labor relations, ineffective anti-inflationary measures. comparing the modeling data with the economic indicators of the labor market development, it should be noted that such a model of state policy was applied in 2012 and 2014–2015, which is reflected in the lowest indicators of the ratio of labor supply and demand (0.05-0.09). then the public policy model has undergone positive changes in the direction of combating informal employment, which is reflected in the kds1 model.              ↔ ↔ ↔ ↑ ↑ ↑ ↑ = 7 6 5 4 3 2 1 2 ω ω ω ω ω ω ω dsk 1 янв 2020 г. 1 янв 2022 г. 1 янв 2024 г. 1 янв 2026 г. 1 янв 2028 г. 1 янв 2030 г. 0,100 0,105 0,110 0,115 1/da k d s jan,01,2020 jan,01,2022 jan,01,2024 jan,01,2026 jan,01,2028 jan,01,2030 figure 5. parameters of the second type model (kds2) of the strategy for ensuring social security in the labor market              ↓ ↓ ↑ ↑ ↑ ↑ ↑ = 7 6 5 4 3 2 1 6 ω ω ω ω ω ω ω dsk 1 янв 2020 г. 1 янв 2022 г. 1 янв 2024 г. 1 янв 2026 г. 1 янв 2028 г. 1 янв 2030 г. 0,00 0,02 0,04 0,06 0,08 0,10 1/da k d s jan,01,2020 jan,01,2022 jan,01,2024 jan,01,2026 jan,01,2028 jan,01,2030 figure 6. parameters of the sixth type model (kds6) of the strategy for ensuring social security in the labor market baltic journal of economic studies 34 vol. 8 no. 3, 2022 analyzing each of the above strategies, it should be noted that the highest possible level of social security in the labor market can be ensured by the kds3 strategy, which provides for a reduction in the severity of threats to employment security in the form of reducing the level of informal employment and youth unemployment, as well as strengthening wage security in the context of increasing the average monthly wage, real wage index, reducing the indicator of wage arrears in relation to the wage fund. 5. strategizing social security priorities in the labor market in the course of the study, conclusions were drawn on the impact of each modeled component on the indicator of labor market balance, which is expressed in the ratio of demand for labor and its supply. thus, the reduction of informal employment provides a positive effect of state policy measures aimed at protecting the interests of the population in the labor market. at the same time, focusing only on reducing the threat of shadow employment without taking into account all other components of social security in the labor market will not be effective. the threat of rising unemployment among young people of all age groups can be neutralized through a set of state policy measures aimed at solving the problem of interaction between the labor market and the market of educational services by harmonizing the interests of educational institutions, employers and the state; development of youth entrepreneurship; creation of new jobs with fair wages. according to the results of the modeling, measures to normalize the level of unemployment among young people are the leading tool for achieving a balanced development of the labor market, which is reflected in the increase in the ratio of supply and demand of labor. at the same time, the only one among the considered simulation strategies that ensures the growth of the effective indicator is the kds3 strategy, the priority of which is to combine efforts to neutralize threats to employment security in the first place. the indicator of wage security, the growth of which takes place in almost all the studied variants of strategies, is the average monthly wage. it should be noted that the increase in the average monthly wage in itself does not have a positive impact on the ratio of labor supply and demand. only by increasing the real wages of workers it is possible to improve the state of social security and reduce the negative manifestations of threats associated with low wages. the ratio of wage arrears to the wage bill determines the level of fulfillment of the state's guarantees regarding the timeliness of payments and a kind of minimum wage security. together with other measures of the state policy on the labor market aimed at regulating the incomes of the population, the reduction of arrears will increase the level of balance between the demand and supply of labor. in order to implement the proposed methodology for modeling strategies for ensuring social security in the labor market in the practice of socio-economic management at the state level, it is advisable to develop a certain roadmap. the following sequence of enlarged steps in the process of strategizing social security in the labor market in the context of transformation of key threats is proposed: 1. updating the map of key threats to social security in the labor market. 2. updating the data set on the actual value of economic indicators of the labor market and their dynamics. 3. modeling strategies to ensure social security in the labor market under certain types of threats (according to the above methodology). 4. formation of a vision of the desired (probably possible) state of the labor market in the future and fixing the relevant prospective values of its economic indicators (justification of strategic priorities). 5. identify the features of the current social security strategy in the field of employment and remuneration and assess its effectiveness in terms of moving towards the desired one. 6. selection of variables of the model of social security strategy on the labour market that should be subject to priority impact. 7. justification of the system of measures and formation of appropriate policies to achieve strategic priorities of social security in the labor market. it should be noted that the proposed sequence of actions can be implemented both at the national and regional levels, and given the global nature of threats and the integration of labor markets of individual countries – adapted even for supranational, interregional level. 6. conclusions according to the results of the study, it can be concluded that in order to ensure social security in the labor market, it is necessary to form a strategy that can not only neutralize the existing threats and negative manifestations of economic instability, but also to maximize the level of protection of the population's interests in the field of employment and remuneration as much as possible under the conditions of certain types of threats and available resources of the state policy in the field of social policy, regulation of the labor market, economic policy formation, etc. the model of the strategy for ensuring social security in the labor market, built with the help of simulation tools, provides an opportunity to analyze various scenarios for the development of baltic journal of economic studies 35 vol. 8 no. 3, 2022 economic phenomena and changes in the dynamics of major threats; forecasting trends in the labor market, taking into account various configurations of existing parameters; adjusting public policy based on the identified strategic priorities. thus, the results of the simulation modeling of the strategy for ensuring social security in the labor market in the context of changes in the level of key threats are the source of the development of key principles of state policy aimed at the development of employment and remuneration, which aims to achieve a balanced development of the labor market and the formation of a high standard of living and well being of society. references: berger, j., & biffl, g. 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(2004). the concept of ‘flexicurity’: a new approach to regulating employment and labour markets. flexicurity: conceptual issues and political implementation in europe, vol. 10, issue 2, pp. 166–186. available at: https://journals.sagepub.com/doi/10.1177/102425890401000204 (accessed june 27, 2022). received on: 4th of august, 2022 accepted on: 7th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 203 vol. 7 no. 4, 2021 corresponding author: 1 dnipro state agrarian and economic university, ukraine. e-mail: skhalatur@gmail.com orcid: https://orcid.org/0000-0001-8331-3341 researcherid: t-7645-2019 2 odesa national academy of food technologies, ukraine. e-mail: k.natali_@ukr.net orcid: https://orcid.org/0000-0003-4645-545x researcherid: p-8578-2015 3 dnipro state agrarian and economic university, ukraine. e-mail: kurbatska.l.m@dsau.dp.ua orcid: https://orcid.org/0000-0003-2567-3060 doi: https://doi.org/10.30525/2256-0742/2021-7-4-203-213 new business strategies formation of enterprises and outsourcing development as a condition for increasing competitiveness in the markets of europe and ukraine: comparative analysis svitlana khalatur1, nataliia kuprina2, larysa kurbatska3 abstract. the purpose of the article is to substantiate the need for the formation of new business strategies of enterprises and the development of outsourcing as a condition for increasing competitiveness in the markets of europe and ukraine. the subject of research is the process of forming new business strategies of enterprises and the development of outsourcing as a condition for increasing competitiveness in the markets of europe and ukraine. methodology. theoretical and methodological basis of the study is the theory of systems, the theory of economic development, scientific developments of foreign and domestic models on the business strategy formation of enterprises, economic development of european countries. general scientific and special methods were used to achieve a specific goal, in particular: the methods of economic and financial analysis; statistical and economic method, including comparison, as well as the graphical method. conclusion. thus, in the context of globalization, all countries and their businesses are looking for new forms of international cooperation, including outsourcing. the effectiveness of outsourcing business strategies is confirmed by global practice, which shows that currently more than half of european companies use outsourcing in their activities. there is a unique opportunity for ukraine and its regions to take advantage of international outsourcing due to the possible positioning in today's market both as a provider of outsourcing services and as a customer. in the first case, this can be achieved through an attractive ratio of high skills and low wages, a satisfactory level of infrastructure development, and in the second case – by getting access to cheaper or rare resources, new technologies, best business practices, which forms the basis for the transition of ukrainian enterprises to innovative development. outsourcing is an effective way of doing business, given the benefits and opportunities that the customer company receives when using it. the business model of innovative outsourcing is an important direction of modern business development in the global marketplace. nowadays, personnel outsourcing is an effective tool for improving the performance of any enterprise, taking into account the above-mentioned advantages and limitations that the customer receives in their application. however, outsourcing should not be considered a universal tool for solving issues and problems of enterprises, as there are tasks that can not be entrusted to independent professionals. any business strategy of the enterprise must be consistent with the probable risks. key words: outsourcing, outsourcer, business process, types of outsourcing, enterprise management, it sphere. jel classification: f62, j29, m21 baltic journal of economic studies 204 vol. 7 no. 4, 2021 1. intrоduction in an unstable economy, companies must develop new strategies to maintain their competitive position in the market. the effective functioning of a modern enterprise largely depends on its organizational structure. one of the modern trends in the formation of the optimal structure of the enterprise is its simplification and greater transparency of internal interactions. restructuring aimed at improving the efficiency of the enterprise is possible on the basis of the allocation of individual units, including by separating part of the assets of the property complex of the enterprise to create a new entity with efficient business conditions. this process of removing noncore assets and transferring them to a third-party organization is other wise known as outsourcing. being only a tool for implementing a business strategy, carefully planned outsourcing can radically change the company 's performance, increase its value. therefore, outsourcing is an effective tool for enterprise restructuring and transformation. according to a study by ernst & young, outsourcing is practiced by the vast majority of european companies. thus, 70% of surveyed managers hire freelancers to perform at least one function, and 20% plan to increase the number of freelancers in the next two years; 49% of respondents reported that outsourcing minimizes expenses. ukrainian companies are reluctant to outsource some operations for fear of losing control of the business. there is a widespread belief that outsourcing is used only for a limited list of functions; its use leads to a reduction in jobs and wages. this mechanism is used mainly by domestic firms with foreign capital, as well as holdings with subsidiaries. the main objectives of economic development are to improve the overall efficiency of enterprises and to optimize the use of existing opportunities to obtain a sustainable position in the domestic and international markets. the emergence of internet technologies is shaping new market demands, changes in labor relations, new forms of cooperation and more. the instability of ukrainian enterprises, due to constant changes in their internal and external environment, requires the introduction of a strategic approach to management. a component of this approach is the use of outsourcing as a way to optimize the overall costs of the enterprise. the studied problem is the lack of theoretical and methodological foundations in the field of strategic decision-making on the transfer of non-core business functions to outsourcing and their economic justification. thus, modern business is very dynamic and requires flexibility and rapid response to changes in society. the conditions of market relations formation in ukraine, which are characterized by the influence of the external environment and increased competition, require the search for innovative means of survival of enterprises and maintaining their efficiency. for this reason, companies not only need to update production and marketing strategies, but also spend a lot of resources on organizing activities. a prerequisite for sustainable economic development is also to ensure the innovation component. in today 's global economy, innovation is the basis for the competitiveness of companies, industries and countries. they allow minimal risk to enter into price competition, to win competition for markets and purchases by developing new, more attractive products for consumers or introducing socially-oriented new technologies for the production of existing products and services. innovative type of development is based on the use of the latest technology, the change of production to a more technologically advanced, modern management and organizational solutions in innovative activities. new industries, centered on high technology and industries that directly meet people's needs, have become fundamental in society. the simultaneous need to form new business strategies of enterprises and the development of outsourcing as a condition for increasing competitiveness in the markets of europe and ukraine gives additional impetus to the study of this scientific problem. the purpose of the article is to substantiate the need for the formation of new business strategies of enterprises and the development of outsourcing as a condition for increasing competitiveness in the markets of europe and ukraine. 2. literature review a significant contribution to the development of business entities and the use of outsourcing in the activities of enterprises is presented in the works of domestic and foreign scientists. research and development on the application of outsourcing business functions are also implemented in the works of scientists. thus, alla ivashchenko, anna kornyliuk, yevheniia polishchuk, tetiana romanchenko and iryna reshetnikova (2020) studied the implementation of the smart specialization approach in regional strategies. smart specialization allows the region to be globally competitive. moreover, smart specialization priorities play a crucial role in creating a network between different regions, even those that are far apart and, at the same time, have much in common to stimulate and foster regional development. ola honningdal grytten and viktoriia koilo (2019) explore the international financial crisis that affected eastern european economies, the crisis was transferred from western europe to international financial baltic journal of economic studies 205 vol. 7 no. 4, 2021 markets, leading to a liquidity crisis and then a capital crisis, which eventually led to the bankruptcy of the real economy. in addition, fragile political and economic institutions seem to have been unable to resist the development of the crisis. the analysis revealed a significant economic overheating, reflected in the huge expansion of the real economy before the crisis, when the same variables correspondingly declined during the crisis. thus, the loss of financial stability was an important element of the crisis. in particular, the paper is consistent with the assertion of kasperovica, l.; lace, n. 2021 that in a dynamically changing business environment it is becoming increasingly difficult to identify the factors that influence a company 's positive financial performance and, therefore, its sustainable development. these authors have identified the dominant factors that emphasize the importance of supporting a profitable business. the identified factors are divided into groups that affect the financial, non-financial, digital and nondigital areas of activity. the set of identified factors in the interaction creates the conditions for a positive financial result of the business. 3. outsourcing as a condition for increasing competitiveness according to various estimates, the need for the services of outsourcing companies is more than $ 80 billion a year. in particular, in the european union, outsourcing services are used by about 45% of companies. studies show that outsourcing companies that provide it services, logistics, marketing, recruitment, bookkeeping, payroll and personnel accounting are the most popular. it should be noted that there are different approaches to defining the concept of "outsourcing", so it is impossible to identify a single subject category and determine its characteristics. it is advisable to define the following types of outsourcing: resource (provision of primary resources), functional (complete control of the outsourcing organization over business functions) and business process outsourcing (control over the interdependent structure of business functions). with a focus on the innovation market, the problem of effective organization and operational management of resource provisioning is a significant challenge. with the help of outsourcing strategies, it becomes possible to minimize the imbalance in the provision and allocation of resources between traditional and innovative activities. in addition, outsourcing makes it possible to solve priority tasks aimed at reducing the duration of the innovation cycle, accelerating the innovation process as a whole, ensuring the earliest possible introduction of innovations into the market. figure 1 analyzes the volume of the global market for outsourcing services for the years 2000–2019. figure 1 shows the dynamics of the outsourcing services market. analysis of statistical data shows that interest in outsourcing services increased between 2000 and 2012. in 2013, there was a decline in economic performance in the field of outsourcing, due to changes in the external environment and market conditions. outsourcing revenue of $104.6 billion was the highest in the u.s. in 2014. in 2016, the value of income decreased by 26.5%. outsourcing revenue is up 13.5% in 2017, and experts say growth is projected in the coming years if businesses choose profitable destinations. figure 2 shows the growth rate of the global outsourcing market for 2000–2019. thus, in the context of globalization, all countries and their businesses are looking for new forms of 1 0 20 40 60 80 100 120 45,6 52,4 60,1 64,8 70 76,3 77,1 80,5 87,5 91,3 93,1 95 99,1 82,9 104,6 88,9 76,9 88,9 85,6 92,5 figure 1. volume of the global market for outsourcing services in 2000–2019, billion u.s. dollars source: compiled by authors based on statistical data baltic journal of economic studies 206 vol. 7 no. 4, 2021 1 14,91 14,69 7,82 8,02 9,00 1,05 4,41 8,70 4,34 1,97 2,04 4,32 -16,35 26,18 -15,01 -13,50 15,60 -3,71 8,06 -20,00 -15,00 -10,00 -5,00 0,00 5,00 10,00 15,00 20,00 25,00 30,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 figure 2. global outsourcing services market growth dynamics 2000–2019, % source: compiled by authors based on statistical data 1 benefits of outsourcing disadvantages of outsourcing – cost reduction; – concentration of management in the main business; – improving quality and reliability; – introduction of advanced technologies; – using the positive experiences of others; – management improvement; – quick turnaround time. – threat of information leakage; – the danger of transferring many important functions; – training of other people's specialists instead of their own; – dependence on one source of supply; types of outsourcing accountant's legal personnel facility cleaning service transport informative logistics real estate operation outsourcing principles – organizational behavior; – professionalism of management; – motivation of outsourcing participants; – optimization of placing orders; – economic feasibility. figure 3. types, principles, advantages and disadvantages of outsourcing source: authors' own development baltic journal of economic studies 207 vol. 7 no. 4, 2021 international cooperation, including outsourcing. the effectiveness of outsourcing business strategies is confirmed by international practice, which shows that currently more than half of european companies use outsourcing in their activities. there is a unique opportunity for ukraine and its regions to take advantage of international outsourcing due to the possible positioning in today 's market both as a provider of outsourcing services and as a customer. in the first case, this can be achieved through an attractive ratio of high skills and low wages, a satisfactory level of infrastructure development, and in the second сase – through access to cheaper or rare resources, new technologies, best business practices, which forms the basis for the transition of ukrainian enterprises to the innovation path of development. experts believe that ukraine is a strategically important country for outsourcing. convenient logistics, it experience and expertise, a relatively cheap labor force and an urgent need to optimize resources form the basis for the sustainable development of outsourcing. modern enterprises concentrate their activities on very narrow chains of activity, and other activities are outsourced to independent external contractors. the question of the fundamental need for outsourcing has long been irrelevant in the world, the key importance is only the reliability and professionalism of the partners with whom the contract for certain services is concluded. transferring the functions of one or more links of the value chain to external partners has a number of strategic advantages: it allows to obtain components or services of higher quality; improves the company 's innovation capabilities through interaction and partnership with suppliers who have great intellectual potential and rich innovation experience; provides great flexibility of the company in case of sudden changes in the market situation or consumer preferences; accelerates the acquisition of resources and skills; allows you to focus on those operations that are effectively performed by the company, and those that are strategically appropriate to keep under its control. the disadvantages of the outsourcing and disintegration strategy are that the company risks taking on too many activities and losing some of its own resources and capabilities. figure 3 discusses the types, principles, advantages and disadvantages of outsourcing. both in ukraine and in the world clearly distinguish different types of outsourcing with qualitative characteristics. an important factor in effective cooperation in outsourcing is the way in which the outsourcing provider is organized and interacts with it. it is proposed to divide the organizations into: independent, dependent and formally independent outsourcing enterprise. this division is fundamental, based on the fact that each of the allocated types of outsourcing requires drastically different amounts and structure of resources to ensure the activity, on the one hand, and, accordingly, will differ significantly in the distribution of economic results from outsourcing, on the other hand. also important from the practical point of view of building relations in the system of outsourcing is the area of activity. outsourcing is divided by the following criteria: complex (dominant), fragmented (individual operations, functions or tasks), functionalconsulting, controlling and regulating. taking the two criteria for separation as a basis, strategies for the development of outsourcing activities are formed. before choosing an outsourcing company, there is an important aspect to consider, namely location, or in other words, the industry landscape of a particular country. however, in all countries there are some commonalities between service providers. you can look at the typical experiences of clients who hire companies in different parts of the world to make a more informed decision. table 1 lists the top 10 software development outsourcing countries in the world and the challenges for them. table 1 10 best countries in the world to develop software for outsourcing in 2021 ranking country advantages 1 vietnam high quality services at low prices, high education level of the population, favorable conditions for doing business and attracting foreign investment. 2 philippines effective communication (90% of the population speaks english), technical skills and competence. 3 poland some of the best programmers in java, python, shell and ruby. 4 china competence and development opportunities, low development costs. 5 taiwan resources for education, but there are difficulties in communication (low level of english). 6 romania investments in it development, a lot of qualified engineers, ability to communicate (59% of romanians speak english). 7 ukraine many skilled professionals, especially c ++ programmers. 8 india specialists are fluent in english. 9 brazil low prices, skilled workers, able to adapt to the needs of customers, no communication problems. 10 egypt many young professionals sell their services at affordable prices. source: compiled by the authors according to the top outsourcing countries. url: http://www.sour cingline.com baltic journal of economic studies 208 vol. 7 no. 4, 2021 according to table 1, the main characteristics of these countries, contributing to their inclusion in the top 10 outsourcing are: investment in it development, availability of skilled labor, ability to communicate (knowledge of english at a professional level), convenience of time zones. figure 4 shows the ranking of countries with the best software developers in europe. poland, a central european country, like ukraine, has enormous potential. according to outsourcing statistics, poland has become the third most experienced programmers in the world. professionals are fluent in english, and more than 30% of the country 's population uses english as a second language, which is one reason why most companies choose poland as a place to outsource. ukraine, a country in eastern europe, has a wide range of educational opportunities and a large number of it specialists. ukraine has become the best place for outsourcing and one of the best countries for software outsourcing, especially for web development and software. ukraine has many professionals who dominate the global software outsourcing market in web and mobile development, machine learning, artificial intelligence and blockchain technologies, with the most popular programming languages being c++, php, java and ruby. table 2 shows the features of ukraine that enable it to enter the world rankings for outsourcing. table 3 shows the indicators of the business environment of the european countries studied for an average of 2001–2020. ukraine's gdp continues to be relatively low, which is a serious problem of strategic importance for the country. ukraine needs to increase production and exports of finished products, which will increase gdp in the future. many factors offset the results of government actions aimed at increasing gdp, among them: the monopoly in the market of important sectors of the economy (alcohol, coal, fuel), corruption, the shadow economy expansion, the war in the east. to overcome all of these problems, significant and effective reforms are needed to help ensure future efficiencies. a comprehensive balanced macroeconomic policy, based on a comprehensive analysis of the dynamics of macroeconomic indicators, will lead the ukrainian economy out of crisis and improve the socio-economic situation. equally important are measures to improve the quality and transparency of activities, since, in addition to the basic measures, these ones will help increase the efficiency of budget expenditures, reduce losses from corruption, and improve the quality of public services. despite considerable natural and human potential, the privatization of much of the country 's productive capacity, and the numerous international loans used by the authorities over the past 20 years, ukraine's production facilities have not been modernized and the industrial facilities have become severely worn out. for the most part, domestic manufacturing products have lost their competitiveness in the international commodity market, and wide domestic demand is largely met by imported goods. ukraine's gdp, as a final indicator of economic efficiency, was much lower than in other european countries. this is due to underdeveloped economies, as low value-added countries have been hit harder than others by the weakening of foreign markets. in addition, economic development was constrained by excessive state budget expenditures, which necessitated a strengthening of fiscal policy. macroeconomic stabilization and restoration of the normal functioning of the banking system should be the priority measures to improve the situation. 1 0 1 2 3 4 5 6 1st place, slovakia 2nd place, poland 3rd place, hungary 4th place, ukraine 5th place, czech respublic figure 4 countries with the best software developers in europe source: daxx.com, industrytoday.com baltic journal of economic studies 209 vol. 7 no. 4, 2021 table 2 features of ukraine, which give it the opportunity to enter the world rankings for outsourcing feature characteristics business environment reforms are underway to create a democratic and transparent country, an efficient banking sector, and the development of international cooperation. technical skills and mastery the largest number of developers specializing in c++ and unity 3d. the country has the second highest number of javascript, magento, and scala software engineers in the world. large pool of technical talent and relatively low competition the ukrainian technology industry is focused on providing software development services through small and medium-sized companies. the competition from the world technology giants is low here, and most specialists work in it outsourcing. government support for the it industry it services exports account for 29% of the country 's total exports and reached $4.5 billion in 2019. the ukrainian government promotes the growth of the it industry through a low-tax system. digital transformation there are dozens of fintech projects focused on ukraine, but most development teams support the eu and u.s. banking sector. cost and quality of life the cost of living in ukraine is much lower than in other european countries. the low cost of living in ukraine does not automatically mean a low quality of life. the optimal environment for starting a business startups in ukraine are thriving. country assets regardless of the political, legal and financial climate emerging in our country, ukraine has an excellent geographic location, the largest territory in europe, abundant natural resources and an affordable but skilled workforce. source: compiled by the authors on the basis of official website of daxx company table 3 indicators of the business environment of the european countries under study, on average for 2001–2020 country foreign direct investment, net inflows (% of gdp) foreign direct investment, net outflows (% of gdp) gdp growth (annual %) gini coefficient (world bank estimate) gross capital formation (% of gdp) inflation, gdp deflator (annual %) tax payments (number) poland 3,25 1,03 3,79 33,17 20,84 2,21 23,80 bulgaria 8,36 0,90 3,59 36,93 24,07 4,26 16,33 czech republic 4,81 1,92 2,85 26,18 28,39 1,88 10,60 germany 2,03 3,10 1,27 30,88 20,57 1,36 10,40 romania 3,74 0,22 4,13 36,31 25,50 10,40 62,67 united kingdom 4,10 3,37 1,76 34,51 17,22 1,99 8,07 ukraine 3,80 0,22 2,43 26,46 22,38 15,78 72,73 estonia 8,09 3,69 3,78 32,76 29,42 4,55 7,67 hungary 9,80 7,63 2,56 29,87 23,68 4,32 12,33 latvia 3,45 0,77 3,73 35,83 28,03 4,63 8,47 lithuania 3,14 1,17 4,22 35,83 21,34 2,92 11,07 portugal 3,92 2,22 0,73 36,28 20,34 1,99 7,67 turkey 1,66 0,32 4,83 40,77 26,74 13,69 10,00 slovakia 4,14 1,15 3,93 26,49 25,14 1,96 22,20 france 2,05 3,32 1,29 32,07 22,71 1,34 11,40 spain 2,92 4,01 1,67 34,64 23,47 1,83 8,80 ireland 20,21 16,51 4,76 32,54 26,17 1,69 9,00 source: compiled by authors based on world bank data today ukraine is not competitive enough on the world stage, which is largely due to the low level of innovation. however, the experience of countries around the world shows that the restructuring of the national economy and the formation of strong competitive advantages become possible only when the country takes the course of development on the basis of innovation. table 5 analyzes exports of goods and services. significant macroeconomic imbalances, the military conflict in eastern ukraine and the annexation of the autonomous republic of crimea, deep structural imbalances and a lack of transparency in the public sector have led to the need for urgent corrective measures. the first priority should be to ensure macroeconomic stability in the financial sector. this should be accompanied by key structural reforms to accelerate economic growth. since ukraine is in a very baltic journal of economic studies 210 vol. 7 no. 4, 2021 table 4 the average value of macroeconomic indicators of the eu countries and ukraine for the period 2001–2020 country ratio of bank capital to assets (%) claims on the central government, etc. (% of gdp) current account balance (% of gdp) imports of goods and services (% of gdp) domestic credit provided by financial sector (% of gdp) expenditures (% of gdp) austria 7,71 12,22 1,74 49,33 128,37 45,04 belgium 7,61 21,22 1,23 80,92 134,04 40,97 bulgaria 10,82 1,05 3,29 63,57 60,29 32,61 croatia 13,90 16,15 2,21 46,52 87,29 39,91 cyprus 8,22 23,67 -4,27 67,70 255,57 42,65 czech republic 6,54 7,18 0,35 72,20 66,82 32,96 denmark 6,97 -3,88 6,96 48,14 213,60 40,44 estonia 12,08 -3,05 1,67 72,86 74,34 36,34 finland 9,30 9,12 -1,39 37,57 155,49 39,55 france 6,52 17,65 -0,68 30,85 147,41 47,78 germany 6,47 8,72 7,42 40,29 134,19 28,22 greece 10,72 13,64 -2,86 34,01 134,50 47,76 hungary ---17,76 2,23 80,56 60,28 43,49 ireland 14,86 16,41 4,77 84,85 160,68 34,86 italy 6,33 48,42 2,58 26,70 169,19 43,27 latvia 9,74 2,49 1,43 61,48 57,17 43,46 lithuania 9,61 2,64 1,53 71,22 51,91 32,79 luxembourg 7,44 0,14 5,21 175,54 190,11 38,22 malta 8,40 15,19 8,77 128,55 143,92 36,91 netherlands 6,21 14,43 10,84 69,33 207,17 40,95 poland 9,77 11,18 -0,52 48,16 73,44 34,26 portugal 7,04 24,75 1,38 43,44 173,76 43,76 romania 9,34 4,97 -4,38 43,59 37,89 33,21 slovak republic 10,45 15,49 -2,61 90,78 72,88 40,63 slovenia 10,69 15,46 5,69 69,42 68,54 43,35 spain 7,55 26,35 1,92 29,89 194,27 19,79 sweden 6,18 3,24 3,86 41,23 154,13 33,14 ukraine 13,51 20,26 -3,34 53,81 74,35 37,37 world --26,08 ---29,35 132,43 27,32 source: compiled by authors based on world bank data difficult political and economic situation, stabilization requires state policy, which must be accompanied by key structural reforms. the government needs to minimize the negative impact of fiscal stabilization on economic activity. in order to do this, it is necessary to: 1) try to find funds for a number of important infrastructure projects, in particular through concessional financing; 2) stimulate entrepreneurial activity as much as possible; 3) introduce adequate banking instruments to finance new projects; 4) support export activities as much as possible through information, technical and legal support for exporters themselves, through facilitating the entry of small and medium businesses into foreign markets, and through the formation of an export credit and insurance system. table 6 shows the average functioning of the tax system of the eu and ukraine for the period 2001–2020. thus, it can be argued that in the search for an optimal tax policy should not copy the experience of individual countries, without taking into account the specifics of the national economy. any innovations in national legislation should be based on the studied systems of taxation of countries with developed market economies and a thorough analysis of the feasibility and possibility of their application in national tax legislation. despite the positive factors, there are a number of problems in ukraine, which, according to experts, may lead to a significant slowdown in the growth of the outsourcing market. weak protection of investor rights, unclear tax rules, and the lack of effective copyright laws all make it difficult not only for outsourcers, but for any company. in ukraine, the main obstacles to the development of outsourcing are the lack of state support, the difficulty of monitoring the outsourcer, the unpredictability of its economic situation and so on. one of the main obstacles is the unreliability of partnership relations. the problems of outsourcing development also include high competition in the market. companies that work solely as contractors run the risk of remaining uncompetitive. now outsourcing baltic journal of economic studies 211 vol. 7 no. 4, 2021 companies are increasingly seeking to expand the range of their services, additionally offering consulting services, marketing and project management to optimize costs. according to experts working in the outsourcing market, unique services are what can allow a modern outsourcing company to survive in this market. in addition, these services must be in an area that cannot be automated. according to experts, every fourth workplace created in business process outsourcing is automated. today, more than 1 million jobs in major outsourcing countries are threatened by automation. 4. conclusions the above provisions on the practical application and features of outsourcing in ukraine and european countries require further study and elaboration. outsourcing is an effective way of doing business, given the benefits and opportunities that the customer company receives when using it. the business model of innovative outsourcing is an important direction of modern business development in the global marketplace. nowadays, personnel outsourcing is an effective tool for improving the performance of any enterprise, taking into account the above-mentioned advantages and limitations that the client company receives when applying them. however, outsourcing should not be considered as a universal tool for solving the issues and problems of enterprises, because there are tasks that cannot be entrusted to independent professionals. any business strategy of the enterprise must be consistent with the probable risks. rather frequent use of outsourcing can create additional difficulties. it should also be noted that the abovementioned innovative personnel management tools require a review of their content and feasibility in accordance with the current legislation of ukraine. at the present stage, outsourcing plays a very important role in improving the efficiency table 5 exports of goods and services, % of gdp country 2005 2014 2015 2016 2017 2018 2019 ratio of 2019 to 2005 the usa 10,01 13,54 12,44 11,87 12,09 12,22 13,54 135,28 japan 14,01 17,54 17,61 16,25 17,77 18,45 15,92 113,58 china 33,83 23,59 21,44 19,75 19,96 19,51 24,60 72,71 austria 48,62 53,39 53,09 52,45 54,04 55,76 53,44 109,92 belgium 74,28 79,80 77,81 79,38 82,31 82,58 79,32 106,79 bulgaria 42,86 64,90 64,54 64,73 68,15 66,94 64,88 151,36 croatia 36,73 43,30 46,38 47,63 50,03 50,52 40,43 110,09 cyprus 55,69 66,11 70,33 70,75 73,02 73,07 61,36 110,18 czech republic 62,18 82,55 81,05 79,56 79,73 78,39 76,87 123,62 denmark 47,45 54,61 55,42 53,43 55,14 55,64 54,83 115,55 estonia 65,47 81,33 76,87 77,45 76,14 74,26 84,02 128,33 finland 40,27 36,48 35,39 34,82 37,68 38,56 38,02 94,40 france 27,03 29,67 30,59 30,25 30,82 31,34 29,36 108,63 germany 38,06 45,62 46,85 46,02 47,40 47,42 45,42 119,34 greece 21,31 32,37 31,55 30,06 32,99 36,13 30,35 142,42 hungary 62,64 87,42 87,98 87,15 87,14 84,94 85,58 136,62 ireland 79,58 110,03 121,97 120,82 121,04 122,33 103,66 130,26 italy 24,60 29,11 29,72 29,33 30,84 31,45 28,63 116,39 latvia 43,21 61,20 60,72 60,40 62,13 61,30 60,26 139,46 lithuania 53,84 72,34 68,82 67,58 73,61 75,62 78,79 146,34 luxembourg 161,68 212,61 221,20 213,04 217,62 211,56 190,63 117,91 malta 104,37 148,85 153,77 151,90 149,77 144,87 156,98 150,41 netherlands 65,63 80,58 82,66 79,54 83,39 84,32 79,88 121,71 poland 34,61 47,57 49,50 52,19 54,35 55,59 46,32 133,83 portugal 27,08 40,22 40,62 40,21 42,72 43,52 39,61 146,23 romania 24,54 41,16 41,02 41,19 41,47 41,64 39,87 162,51 slovak republic 72,30 91,52 92,02 93,73 95,11 96,09 93,62 129,48 slovenia 59,81 76,15 77,15 77,97 83,17 85,38 74,22 124,08 spain 24,98 33,48 33,63 33,88 35,18 35,12 32,96 131,96 sweden 45,05 43,57 44,29 43,26 44,43 45,79 42,80 95,01 ukraine 48,75 48,59 52,60 49,30 48,01 45,21 42,96 88,12 world 28,64 30,18 29,31 28,46 29,43 30,11 30,40 106,14 source: compiled by authors based on world bank data baltic journal of economic studies 212 vol. 7 no. 4, 2021 of the company by transferring not only some functions, but often also business processes to external organizations to optimize the use of all resources and to focus on one type of activity. the final choice of strategy should be made by analyzing additional criteria and indicators, namely: the structure and level of possible losses, access to limited resources, the size of the enterprise and the type of economic activity, changes in competition in the industry and market segments, financial performance, the probability and magnitude of risks before and after the outsourcing agreement, the propensity to risk of the dominant stakeholders and managers and owners, connection with other types of interaction between counterparties, trends and tendencies in the environment, resource potential and its structure. table 6 the average operation cost of the eu and ukrainian tax system for the period 2001–2020 country labor tax and contributions (% of commercial profits) other taxes (% of revenue) profit tax (% of commercial profits) tax payments (number) tax revenues (% of gdp) taxes on goods and services (% of revenue) austria 34,41 3,93 16,86 12,00 26,01 27,18 belgium 48,55 0,50 8,50 11,00 25,02 25,08 bulgaria 23,24 0,16 5,19 16,33 19,67 44,42 croatia 19,11 0,74 0,00 24,93 20,73 46,25 cyprus 12,37 4,85 8,78 27,83 31,57 35,02 czech republic 38,77 0,14 5,60 10,60 14,44 28,50 denmark 3,11 4,56 20,84 10,00 32,84 37,84 estonia 38,79 8,58 7,67 20,14 36,24 finland 26,09 0,79 14,65 11,20 20,82 36,38 france 51,82 4,26 4,37 11,40 22,63 23,36 germany 21,68 22,06 10,40 11,22 23,37 greece 30,58 2,99 17,54 10,20 22,21 31,39 hungary 35,47 1,09 10,17 12,33 21,89 35,97 ireland 12,13 2,01 12,15 9,00 22,64 34,41 italy 41,52 5,01 23,06 13,80 22,35 22,79 latvia 27,05 0,47 6,27 8,47 21,24 41,00 lithuania 35,17 0,24 6,47 11,07 17,87 34,07 luxembourg 15,44 2,09 4,32 23,00 25,02 30,45 malta 10,84 0,57 31,16 7,44 38,43 35,45 norway 15,90 0,51 23,91 4,13 25,94 25,16 poland 25,15 0,73 15,05 23,80 16,49 35,82 romania 29,81 0,17 11,61 62,67 17,21 36,26 slovak republic 39,65 0,06 8,38 22,20 16,62 30,10 slovenia 19,41 1,79 13,74 15,33 19,22 35,36 spain 35,55 0,19 15,75 8,80 14,25 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(2016). transformation and development of production-logistics enterprises in ukrainian agrarian economy. management theory and studies for rural business and infrastructure development, 38(1), 70–87. doi: https://doi.org/10.15544/mts.2016.7 world bank (2021). world development indicators 2021, world bank. available at: https://data.worldbank.org/ indicator (accessed 11 may 2021). baltic journal of economic studies 10 vol. 2, no. 3, 2016 ensuring smart, sustainable, inclusive development of the regions of ukraine in the conditions of structural crisis tetiana bogolib1 pereiaslav-khmelnitskyi state pedagogical university named after hryhorii skovoroda, ukraine abstract. the formation of the economy based on knowledge-based innovative economy, new economy, at the present stage of social development is defining the international concept, according to which knowledge play a primary role, and their production is a source of economic growth and competitiveness. the economy is based on knowledge that provides a smart, sustainable and inclusive development. the purpose of the study. showing that the implementation of the strategy «europe 2020», the main directions of the fourth industrial revolution in the ukraine will be able to provide smart, sustainable, inclusive development of the regions of ukraine, will help to overcome the crisis and become a source for economic growth. research methods. in the process of writing were used scientific methods, methods of analysis and synthesis, method of scientific abstraction. the results of the study. macroeconomic instability has been transformed at the regional level, which led to the deepening of regions differentiation, particularly as it affected old industrial regions, including donetsk and luhansk. the crisis of public finances does not allow attracting of financial resources for economic development. as a result of hybrid war, the outflow of foreign investment amounted to 12.6 billion dollars usa. a significant part of the donetsk and luhansk regions is completely destroyed. along with this, it's perfect conditions in order to abandon the old and build new. there are all conditions to implement actively the european strategy «europe 2020» and the main directions of the fourth industrial revolution to a new stage of economic development, and ensure smart, sustainable and inclusive development of the regions of ukraine. conclusions and discussion position. the future of ukraine and its regions depends on the activity of the strategy «europe 2020» and the main directions of the fourth industrial revolution. in ukraine, in the regions, the main emphasis is on export-oriented industries: coal, metallurgical, chemical, machine-building industry. technically they are 3 and 4 technological structures, so they cannot become the breakthrough sectors of the ukrainian economy, so the main emphasis should be on smart, sustainable and inclusive development. key words: smart growth, sustainable development, inclusive growth, differentiation of regions, the fourth industrial revolution. jel classification: о40, о18, r19 1. introduction current process of regions’ development is based on the peculiar to it auto-poetic sub-integrity of self-organization mechanisms. at the same time the state should become a guarantor of forced development of national ictproduction, a catalyst of accelerated establishment of prior clusters of new economic production on the basis of wide use of instruments of state-private partnership, introduction of effective redistribution of new economic over-rent from consumers for the good of national producers based on the use of corresponding fiscal measures. scientific novelty. the scientific article determines main constituents of further development of regions of ukraine that are based on the smart, sustainable, inclusive development with wide use of it technologies, and as a result, creation of smart homes, smart cities and overcoming of regions development differentiation. actuality of scientific solutions lies in necessity of ukrainian economy’s overcoming the crisis and regions’ differentiation. ukraine has no financial resources to develop resource economy, an economic break should be made; those countries ensure their successful development that staked on knowledge economy. for ukraine the only smart move is ensuring of smart, sustainable, inclusive development. forming of economy, which is based on knowledge (innovative economy, new economy), at the present stage of social development is a determinative international corresponding author: 1 finance-humanitarian faculty, pereiaslav-khmelnitskyi state pedagogical university named after hryhorii skovoroda. e-mail: bogolib60@mail.ru baltic journal of economic studies 11 vol. 2, no. 3, 2016 concept, according to which knowledge play the leading role and their production is a source for economic development and competitiveness. economy based on knowledge guarantees the smart, sustainable and inclusive development. the purpose of the research. showing that realization of the strategy “europe 2020”, main directions of the fourth industrial revolution in the ukraine will be able to provide smart, sustainable, inclusive development of the regions of ukraine, will help to overcome the crisis and become a source for economic growth. methodology of researches is determined by works of ukrainian and foreign scientists, statistical data of the state statistics service of ukraine and the eu, legal documents and scientific articles. in the process of writing were used scientific methods, methods of analysis and synthesis, method of scientific abstraction. scientific results. macroeconomic instability has been transformed at the regional level, which led to the deepening of regions differentiation, particularly as it affected old industrial regions, including donetsk and luhansk. the crisis of public finances does not allow attracting of financial resources for economic development. as a result of hybrid war, the outflow of foreign investment amounted to 12.6 billion dollars usa. a significant part of the donetsk and luhansk regions is completely destroyed. along with this, it's perfect conditions in order to abandon the old and build new. there are all conditions to implement actively the european strategy «europe 2020» and the main directions of the fourth industrial revolution to a new stage of economic development, and ensure smart, sustainable and inclusive development of the regions of ukraine. conclusions and discussion position. the future of ukraine and its regions depends on the activity of the strategy «europe 2020» and the main directions of the fourth industrial revolution. in ukraine, in the regions, the main emphasis is on export-oriented industries: coal, metallurgical, chemical, machine-building industry. technically they are 3 and 4 technological structures, so they cannot become the breakthrough sectors of the ukrainian economy, so the main emphasis should be on smart, sustainable and inclusive development. 2. development of ukraine in terms of new economy modern society is a scene for deep, diversified transformation. an important role in modern society belongs to the new economy, which is based on knowledge. not coal, oil, metal are the main wealth of countries, but knowledge, education and scientific discoveries. those countries forge ahead that had staked on science and education. countries, with stake on rawmaterials branches, are significantly falling in development behind others and often becoming crisis areas. in terms of globalization the new economy is becoming an integral part of national economies of highly-developed countries, ensuring a sustainable development and competitiveness. modern world made a step toward the fourth industrial revolution and modern europe successfully implements the strategy “europe 2020”, which are based on smart, sustainable and inclusive development. ukraine today is at the cross-roads, all depends on the choice, which will be made; we consider that ukraine and its regions can develop successfully if refusing the old and taking a step towards the new: the strategy “europe 2020” and the fourth industrial revolution. problems of the new economy’s essence determination, ensuring of smart, sustainable and inclusive development, their role in economic dynamics, scientific and technological foundations of challenges facing humanity stipulate a stepping up of scientific researches in this field. western scientists d. bell, j. galbraith, m. castells, s. kuznets, u. rostow, r . solow, a. toffler, j. schumpeter attracted their attention to mechanisms of problem solutions, which arise in terms of development of the new economy in the modernized society, its backgrounds, foundations of realization and directions of possible revolution, role of knowledge and technological factors in the modern economic growth ensuring. ukrainian and russian scientists v. bazilevich, d.  boginja, t. bogolib, v. vlasjuk, v. geec, a. gricenko, v. dementev, v. inozemcev, v. polterovich, l. fedulova research the basis of the new economy, its formation and functioning in terms of market transformation, development of regions of ukraine. along with it there remain problematical questions of regions development in the context of structural crisis on the one hand, and development of knowledge economy, smart, sustainable and inclusive development on the other hand. 3. european vector of economy development in ukraine in 2014 ukraine signed the european union association agreement, so it should live under laws of the european union; adhere to the best examples of development of country as a whole and regions in particular. strategy «europe 2020» has 7 directions: • innovation union to improve conditions and opportunities to finance researches and innovations in order to guarantee that innovative ideas will be used in goods and services production, which will promote the economic growth, new job creation; • movement of young people to strengthen effectiveness of educational systems and promotion of young people attraction to labour market; • it technologies development plan in europe for accelerating of the extensive development of high-speed internet and enabling the participation in general commercial environment for private natural and legal persons; baltic journal of economic studies 12 vol. 2, no. 3, 2016 • sensible use of resources in order to make the economic growth independent from resources, promote the transition to economy with low carbon content, increase the use of renewable energy sources, modernize the transport sector and ensure a rational use of renewable energy sources; • industrial policy directed to globalization for business environment improvement, in particular for small and medium-sized businesses, to support the development of powerful and stable industrial base for general globalization; • plan to develop new abilities and increase a number of jobs in order to modernize labour markets, provide people with opportunity to obtain new knowledge and skills so as to increase job opportunities; improve relation between demand and supply in labour markets, including labour mobility; • european policy against poverty, so that social and territorial interaction would widely distributed throughout the territory, and achievements in the field of economic development and population employment help to decrease the level of poverty all over the eu (europe 2020. smart growth, 2013; the new european strategy «europe 2020», 2010). these directions are twisted with main directions of the fourth industrial revolution. in the world economic forum in davos in 2016 the fourth industrial revolution was announced. government of germany stated that german people build the industry 4.0, the usa said for some years that the age of world wide web is coming. chinese people claim: “where is crisis, there are opportunities” (the fourth scientific revolution, 2015). indeed, many ukrainian scientists consider that in prevailing conditions ukraine has a unique opportunity to overcome crisis in a worthy manner, while realizing the main directions of the strategy «europe 2020» and main directions of the fourth industrial revolution. fourth industrial revolution is conditioned by: • development of technologies of customer experience management. • transition from mass production of the same products to “mass customization”  – it is a mass production of individual orders. • globalization is displayed by “glocalization”, i.e. “think global, act local”. • development of technologies of the internet of things (it) – internet of things, even internet of everything. • opportunities of distance control of everything, including production. • 3d printing. • production returns home, i.e. development of automation and robotization grade advantages of labour resources cheapness. • smart objects. smart devices. smart sensors. • global standards compliance becoming a necessity and is needed even by local markets. • sustainable development and stable growth of everything: population, economy, science, technologies on the one hand and consistently growing problems of ecology on the other. every revolution, including industrial, opens up possibilities. social revolutions create certain means of social mobility, and industrial revolutions lead real innovators to the front and open up possibilities. correspondingly, ukrainian engineers, it specialists, entrepreneurs have new opportunities to develop new, advanced, progressive. 4. macroeconomic analysis of economy development in ukraine ukrainian economy and economy of regions are in conditions of structural crisis. it is caused by variety of reasons: hybrid war in the east of the country, territorial loss of ukraine, prolonged political crisis, battle of oligarchial clans for reallotment of land, enterprises, raw material resources, production distribution market. as a consequence of it the fall of gdp in 2014 amounted to 7,6%, in 2015  – 12,6%; fall of industrial production in 2014 amounted to 24,6%, in 2015  – 30,2%; inflation over a period of 2014-2016 amounted to 350%, growth of unemployment amounted to 40,2%, foreign debt of ukraine has grown up to 1 tln. 500 bln. uah (key figures for the 2006-2016 financial condition (the first half ), 2016). 5 million people leaved ukraine; 30 thousand people were wounded during military operations; 13 thous. people died; 1,5 bln. out-migrants, which most often have no job, means of subsistence, accommodation; there are 300000 orphaned children in ukraine (for comparison, there were 10 thous. people after the great patriotic war) (the main indicators of economic and social development of ukraine 2015-2016 (first half ), 2016). increase in prices for foodstuff amounted to 300%, for goods of first priority – 250%, for medicines – 500%, while income level grew by 26% (20% in 2015 and 6% in 2016), prices for gas grew by 7 times, for electric power – by 5 times, for public services  – by 5 times (the main indicators of economic and social development of ukraine 2015-2016 (first half ), 2016). consequently, differentiation of population life quality has sharply increased. the middle class is destroyed. ukraine has great losses in donetsk and luhansk regions. budget of ukraine in 2014 has received 23 bln. hryvnias less (about 1 bln. usa dollars), in 2015 – 28 bln. hryvnias (1,1 bln. usa dollars). ukraine has lost 4 thousands enterprises in the crimea, that amounts 1,18 tln. hryvnias. reduction of objects of industrial production in donetsk region in 2014 amounted to 31,5%, in luhansk region  – 42%; correspondingly in 2015 in donetsk region – 38,4%, in luhansk region  – 47,5% (in the donetsk region damaged and destroyed more than 10 thousand objects, 2015; for the restoration of luhansk region will require more than uah 3 billion, 2015). baltic journal of economic studies 13 vol. 2, no. 3, 2016 traditional production links “coal-coke-metal”, “coal electric power” are broken in basic industries of donetsk region. metallurgy production output amounts to 38,9% from the level of 2013, coke has fallen by 31,6%. export of metal production has fallen by 12,6 bln. usa dollars (the main indicators of economic and social development of ukraine 20152016 (first half ), 2016). losses of national metallurgy enterprises are evaluated as 40 bln. hryvnias, where 25 bln. hryvnias are losses from non-manufactured goods (the main indicators of economic and social development of ukraine 2015-2016 (first half ), 2016). losses from destruction of capital assets are 15 bln. hryvnias (the main indicators of economic and social development of ukraine 2015-2016 (first half ), 2016). coal production has fallen by 35%. among 150 coal mines 115 are situated in the territory of ukraine being beyond the control. chemical industry has reduced output by 47,5%. production of ammonia, carbamide, nitric acid, ammonium nitrate are closed down (the main indicators of economic and social development of ukraine 2015 2016 (first half ), 2016). agricultural industry has received more than 3% of gross production of agricultural production less (7,5  bln. hryvnias) (key figures for the 2006-2016 financial condition (the first half ), 2016). in ukraine 1514 objects of railroad infrastructure are damaged, 1561 km of highways are destroyed. donetsk and luhansk airports are destroyed completely (the main indicators of economic and social development of ukraine 2015-2016 (first half ), 2016). macroeconomic instability, economic and political crisis have led to outward investment outflow and withdrawal of capital outwards ukraine. 112 bln. usa dollars were got out from ukraine over the period of 20142016 (key figures for the 2006-2016 financial condition (the first half ), 2016). all of that has an effect on the national economy state and development of regions. economic crisis deepened a differentiation of regions. there are 24 regions in ukraine, but only 7 of them are not depressive: kyiv, zaporizhzhia, dnepropetrovsk, kharkiv, poltava, lviv and odesa regions. 17 regions are depressive by all macroeconomic indicators (the outflow of deposits, 2015). kyiv is successfully developing, but city authorities have an external debt of 2 bln. usa dollars, city cannot return it and more than once was found on the verge of default (bogolib, 2015). policy of the national bank is imperfect. in the context of deep economic crisis the national bank pursues a policy of flexible exchange rate, systematic refinancing of commercial banks, 82 banks are liquidated (the new ukrainian five  – year plan, 2010). population has lost about 200 bln. of savings, 174 bln. hryvnias are taken away from banks by population (the outflow of deposits, 2015). such a policy is insufficiently considered, evokes popular dissatisfaction, and harms all financial system of ukraine. ukraine has declared implementation of an administrative-territorial reform with main staking on regions and communities creation, which supposes settlements unification. directions of local governments’ decentralization are declared. decentralization is successful for developed regions, which are developing, have an industrial potential; for depressive regions decentralization is not a basis for development, conversely these regions without state budget’s support are destined to further decay. for donbas revival, in accordance with experts, 15 bln. dollars are necessary. donbas is an old-industrial region, where the main thing always was mining of coal and iron ore. it is a raw material region. coal mines are mostly not modernized, primary metals establishments with the exception of integrated iron-and-steel works named after ilyich and azovstal are in 3 and 4 technological mode by their technological equipment, their revival and modernization need more than 20 bln. dollars (the main indicators of economic and social development of ukraine 2015-2016 (first half ), 2016). the situation is not simple, especially considering the lack of funds in the state budget and direct foreign investment. 5. new directions of region development in ukraine we see a further development of ukrainian regions in the implementation of main directions of the strategy «europe 2020» and main directions of the fourth industrial revolution. in speaking of the fourth industrial revolution, famous economist, participant of davos meeting jennifer blanke said: “if you think about the 3rd industrial revolution, that was really computerisation  – that was the digital age that started around mid-20th century. and what we’re seeing is that the 4th industrial revolution is really building on that with all these exciting technologies, whether it’s biotech, artificial intelligence, 3d printing  – all of these different, exciting things that are coming together.” (the fourth industrial revolution, 2016). leading specialist of his consulting nariman behravet thinks that poor reaction of chinese officials to financial troubles is, maybe, a short-term risk for the world economy. specialist considers that it will not lead us to recession, but investors are strongly nervous, and it influences on financial markets throughout the world (davos-2016: the revolution of the future and the challenges of the present, 2016). the world economic forum described the fourth industrial revolution as a tsunami of technological innovations, which will be transforming our economy, but what an impact will it have on labour market, where will a job for all people come from, is still a question. ukraine has every prospect of success to be in the van of the fourth industrial revolution. in 1951 in ukraine was created and put into operation the third in the world computer (after the usa and great baltic journal of economic studies 14 vol. 2, no. 3, 2016 britain), called seam (the small electronic accounting machine) (davos-2016: the revolution of the future and the challenges of the present, 2016). as of the beginning of 2016 the amount of computers in the world runs up to 2 bln. and continue to increase. the most computers are in the usa, japan, germany, great britain, canada, france, spain, chinese, and australia (davos-2016: the revolution of the future and the challenges of the present, 2016). history of the world wide web begins in 1968, when in the usa a military computer network arpanet was started to develop. the name was created using abbreviation arpa (advanced research projects agency) and “net”. next year the first four imps had started working – in the universities of los angeles, santa barbara, salt lake city and stanford (the fourth scientific revolution, 2015). first users of internet appear in the territory of ukraine in soviet times. in the same time there starts some support of ukrainian part of internet domain space – ua domain. on 1 december 1992 the ua domain was officially delegated to ukraine. from this point it is conventional to consider the beginning of the history of ukrainian segment of internet (the fourth scientific revolution, 2015). leading innovative world corporations make everything to accelerate a rush course of the world industry. the list of the most innovative companies is headed by apple, google, tesla, and microsoft. innovations completely change not only mode of people’s life, but also their consciousness. almost all industrial processes are automating; even automobiles are able to transport us without drivers. ukraine, after the usa and russia, take the third place in the world by the level of it specialists training. biotechnologies, nanotechnologies, and genetic engineering can become leading blanches in depressive regions of ukraine. in ukraine a projects number is realized that can transform to depressive regions and territory of donbas and in the future to ensure their successful development – smart city and smart home. smart city projects are implementing in kyiv and vinnytsia. they are directed to cities’ development and are successfully introducing in megalopolises of the whole world. in april, 2015 kyiv joined to smart city movement. the main purpose of this initiative is, joining efforts and attracting modern technologies, to make kyiv developed and comfortable for life. under the kyiv smart city project a several projects are carried out. first of all, an electronic budget of the city is run and now citizens and public authorities of the city can keep up with main indicators of city public funds distribution. also banking card fare system is introduced and energy management system for desnianskyi district is developed (kyiv smart city, 2015). smart city projects are implementing in many big cities throughout the world: london, new york, paris, helsinki, berlin, tokyo, singapore and vienna. innovation attracting gives an opportunity to create conditions for fast and qualitative solving of main problems of megalopolises. thus, in boston after the terrorism act a preventive system of security control was run. it allows scanning of everything  – even social networks  – and determining of security sources for citizens. in 2015 vinnytsia was included to the uno smart cities development project. pilot project for “smart” cities net development includes turaw in the republic of belarus, vinnytsia in ukraine, goris in armenia and dushanbe in tajikistan (vinnitsa is included in the un project for development of «smart» cities, 2015). the aim of the project is to prepare megalopolises and settlements for a set of problems arising in terms of urbanization. in ukraine in many regions are successfully implementing smart home projects that have qualitative support systems and operational multiroom, with which help all electric appliances of a building are functionally linked and which can be centrally controlled from display panel. appliances can be attached to computer network, which allows controlling them via pc and having a remote network access to them via internet. owing to domiciliary informational technologies integration, all systems and equipment coordinate inter se functions performance by comparing programs and outer indicators. to determine high tech features of accommodation the following terms are used: intelligent building, smarthouse, digital home main functions of the smart house: • reliable and easy-to-use system of security and video control; • automatic centralized lighting correction depending on time of day and people’s moving around the house (especially important for those who rear children or nurse an elderly relative); • household activities, which are heaped on person’s shoulders, in the smart house are conforming with all house systems and performing by the most easy and effective way using modern equipment. it can be, for example, watering of a garden and its covering from the sun in accordance with weather conditions; doors opening for pets pasture so that in the morning they can go outside by themselves; • gas and water control; • energy-saving orientation; • home automation of a house allows improving of living conditions and simplifying of domestic tasks for invalids; • ability to control intellect and home appliances via interface using telephone directory, mobile communication or internet; • all functions are performing using one display panel; • fully-featured home theatre; • necessary facilities for games; • creative technology can be effectively introduced into interior of house, office; baltic journal of economic studies 15 vol. 2, no. 3, 2016 • presence of necessary facilities and functioning of rooms is in accordance with child rearing: its development, safety and entertainment. smart houses as well as most of current technology achievements firstly appeared on pages of fantastic publications; this idea has materialized only in the xx century after wide spreading of electricity in buildings and development of informational technologies. considering the macroeconomic state of regions, it is better to abandon the old and build new. new economy researches from the point of view of belkovskiy’s triad “non-industrialism  – industrialism  – post-industrialism” allows fixing of gradual strengthening of its role and forecasting of further growth of quantity and variety of its manifestations, increasing of specific weight of new economy in the context of accelerating of scientific and technological advance, constant update and modernization (krainik, 2002). new phenomena include smart cities and smart houses. in terms of traditional society decay the value of post-industrial, service, informational, knowledge economy is growing and smart development becoming the main point. transition to the new kondratiev wave indicates a gradual exhaustion of potential of modern version of the new economy, engine of future economy development will belong to other technologies and branches. intensification of efforts to develop new technologies, generation of production competitiveness, which will be necessar y in future markets, will become a basis for successful integration of ukrainian economy into the world one, obtaining a status of powerful player in terms of the new economy, whereupon the role of regions will considerably increase. regions will become a basis and initiators for development and introduction of new technologies, assimilation of new goods productions. 6. conclusions modern stage of the world economy development is characterized by accelerated scientific and technological and social advance, formation of the new economy, smart, sustainable and inclusive development, where knowledge reproduction has a significant impact on the dynamics of economic growth. regional development plays an important role in economic development, strengthening of the role and significance of regions’ development. regions in ukraine have a big disbalance of development. especially it concerns old industrial regional, including donetsk and luhansk regions, which are in the war zone. all old is situated in 3 and 4 technological structures. to modernize branches is not easy, it needs money, but there is no money. thus it will be more efficient to modernize new, successfully take part in the fourth industrial revolution and begin to realize the strategy “europe 2020”. new economy formation in ukraine, which is based on knowledge, is related to qualitative changes in structure and development level of national economy complex, ensuring of regional development. society, which is based on knowledge, needs an elaboration of new ideology that run through the whole society and is oriented at innovations. leading role in this process is assigned to interconnection of government, society, business and scientific society. in the long run it is a scientific-innovation sector of economy rather than fuel and raw materials sectors that will able to ensure the breakthrough of ukraine into the innovative economy. human intelligence is becoming the chief value of a new economy, and quality of labour will be characterized by capacity of an individual to generate new knowledge, ideas and discoveries. smart cities and smart houses will allow foreseeing of significant progress and establishing of socially fair way to apply labour and creative abilities of a human. a basis for modernization would become a smart, sustainable, inclusive development. in terms of crisis the state should not to dissipate financial resources, but to determine main regions, main branches, which will become priority on a long-term horizon, which will take into consideration the strategy “europe 2020”, main directions of the fourth industrial revolution; 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ru/news/events/32317. таьяна боголиб обеспечение умного, устойчивого, инклюзивного развития регионов украины в условиях структурного кризиса аннотация. формирование экономики, основанной на знаниях (инновационной экономики, новой экономики), на современном этапе общественного развития является определяющей международной концепцией, согласно которой знания играют первостепенную роль, а их производство является источником экономического роста и конкурентоспособности. экономика, основанная на знаниях, обеспечивает умное, устойчивое и инклюзивное развитие. цель исследования. показать, что реализация стратегии «европа 2020», основных направлений четвертой промышленной революции в украине сможет обеспечить умное, устойчивое, инклюзивное развитие регионов украины, поможет преодолеть кризис и станет источником экономического роста. методы исследования. в процессе написания статьи были использованы общенаучные методы, методы анализа и синтеза, метод научной абстракции. результаты исследования. макроэкономическая нестабильность трансформировалась на региональный уровень, что привело к углублению дифференциации регионов, особенно это сказалось на старопромышленных регионах, в том числе донецком и луганском. кризис государственных финансов не позволяет привлекать финансовые ресурсы для экономического развития. в результате гибридной войны отток внешних инвестиций составил 12,6 млрд. дол. сша. значительная часть донецкой и луганской областей разрушены полностью. вместе с этим, это прекрасные условия для того, чтобы отказаться от старого и начать строить новое. есть все условия, чтобы активно реализовать европейскую стратегию «европа 2020» и основное направления четвертой промышленной революции, выйти на новый этап экономического развития и обеспечить умное, устойчивое и инклюзивное развитие регионов украины. выводы и дискуссионные положения. будущее украины, ее регионов зависит от активности реализации стратегии «европа 2020» и основных направлений четвертой промышленной революции. в украине, в регионах основная ставка делалась на экспортоориентированные отрасли: угольную, металлургическую, химическую, машиностроительную промышленности. технологически они находятся в 3 и 4 технологических укладах, поэтому они не могут стать прорывными отраслями украинской экономики, поэтому основная ставка должна быть сделана на умное, устойчивое и инклюзивное развитие. baltic journal of economic studies 235 vol. 7 no. 5, 2021 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: t_deputy@ukr.net orcid: https://orcid.org/0000-0003-1101-8073 2 zaporizhzhia national university, ukraine. e-mail: almak17@ukr.net orcid: https://orcid.org/0000-0003-0042-165x doi: https://doi.org/10.30525/2256-0742/2021-7-5-235-242 digital intervention in legal mechanisms for detecting the proceeds of corruption tatiana kolomoiets1, oleksii makarenkov2 abstract. the article reveals the digital intervention in the legal mechanisms of detection of corruption proceeds. it is determined that digital technologies in the prevention of corruption are tools to promote integrity in the public sphere of public relations by ensuring non-contact interaction of an official with other citizens, avoiding the physical delivery of gifts and bribes, formalizing procedures and eliminating anthropogenic and sociogenic factors. legal mechanisms through digital technologies are capable of neutralizing corruption risks. their ability to take into account the specificity of the corrupting influence of private interest on the public interest, energetically superior to human control, does not detect expression and/or other variants of subjectivity, which are ontologically corrupt in and of themselves. innovativeness becomes an important feature of anticorruption legislation implemented through digital tools, as they are constantly updated. due to this connection, the anti-corruption legal mechanism acquires the features characteristic of the digital format of information circulation through telecommunications. this makes anti-corruption legislation a more dynamic system, which is minimally archaic, eliminates the dysfunction of algorithms of existing rules, because it is mathematically consistent. it is established that the process of changing the anti-corruption legislation due to the intervention of the digital format of data circulation has become natural. this contact between the numbers and the rules of law is strengthened. they are united by an initial element for recording specific legal and mathematical values, respectively. numbers are the ontological essence of formalization of legal requirements in electronic format. the calculation of the functional purpose of anti-corruption legislation is mentally seen through the construction of abstract models of legal regulation of social relations, based on human virtues. it is emphasized that the intensified use of digital technologies will help to differentiate the nature of corrupt practices for all dimensions of public administration and/or economic relations. particular effects are expected in the areas of state budgets/ funds, taxes, finance, national defense, law enforcement, circulation of information, and culture. it is emphasized that the electronic algorithmization of anti-corruption procedures makes it possible to provide a valid correlation of the degree of corruption risks with the degree of thoughtfulness of the proposed legal norms to eliminate them. such norms must be consistent with the values and other components of the political and legal system in which they are applied, as well as prevent problems of cross-border corruption, in particular within the framework of the eu, into which ukraine is integrating. it is concluded that electronic methods of anti-corruption law enforcement together and separately reveal the specifics of their manifestation. it is important to combine them with traditional legal regulators of integrity in the sphere of public law, where human nature is respected. it is promising to identify the specifics of digital technologies used in transitional and sustainable legal forms of organization of political, economic and other social interaction. key words: corruption prevention, digital interference, european union, integrity law, legal mechanisms, procedure, public official, technologies, telecommunication. jel classification: d73, k40, l96 1. introduction the dominance of the trend of digital communication means its decisive impact on the rule of law, which at present cannot be maintained without rethinking traditional (digital) forms of legal communication (paper, physical handwriting, baltic journal of economic studies 236 vol. 7 no. 5, 2021 physical presence at meetings, etc.). in the context of the topic of our work, the relevance of the problem is narrowed to issues of integrity of public servants – the dominance of public interests over their private interests in their professional activities. as a. gurría, secretary general of the organization for economic cooperation and development, has rightly noted, in all countries and at all levels of society, corruption threatens to distort social and economic interactions, reduce efficiency and increase inequality by rewarding those who have access to wealth. as a result, the cost of doing business rises, public resources are wasted; for example, globally, 57% of public procurement is based on bribery of officials by foreign participants in these procedures, and economically vulnerable citizens are left unprotected (oecd work on corruption and integrity). frustrated citizens may turn away from the state, disengage from political processes, migrate, or oppose the actions of corrupt political and economic elites (chan, 2018). accordingly, a proper understanding of the nature and facets of corruption prevention, combined with the use of the above-mentioned technologies in the law, determines the actual development as such, in general, and its sustainability on the basis of a sustainable rule of law, in particular. the achievements of the eu countries are a prime example. they have sufficient material and spiritual resources, as well as the means to protect them adequately. it is obvious that they can be considered among the most important forms of civilization and the main legal systems of the world (article 9 of the un charter). accordingly, there is a steady trend of intensification of digital research in the legal mechanisms of countering corruption. the obtained knowledge is a relatively stable invariant basis of various states and properties of legal phenomena, their essential sides and moments. the strength of their logic is manifested in the ability to identify objective patterns of development of anti-corruption law, to determine its trends, to predict the prospects of change and transformation of the constituent institutions of dissemination of standards of integrity in public authorities. it is because of these capabilities that logical knowledge is a component of progress in the field of law. the process of cognition of "digital interference in the legal mechanisms of detection of corruption proceeds" as a legal object moves from sensation, perception and representation of it to the formation of complex concepts, in which a higher mental abstraction arises from a lower, lower one goes to a higher, higher level of generalization, as the consequence of abstraction transforms the less abstract representation, revealing its inner meaning (kerimov, 2001). 2. analysis of the recent researches and publications the attention of scholars is constantly riveted to the substantive characteristics of the transition of legal relations from direct communication to a format mediated by artificial technology (intelligence). at present, the course of such relations is largely determined by the spread of information and communication technologies, namely hardware (reception, etc.), software, the internet, and other networks for transmitting information. anti corruption work in these relations is part of the general system of social regulation of social and other types of legal relations. these relations are related on the issues of digital circulation of data within the subject of study of the general theoretical sciences of law, information law, legal linguistics and their branches. among scientists, the relevant research was conducted by v. b. averyanov, o. m. bandurka, t. o. kolomoyets, v. k. kolpakov, e. v. nevmerzhytsky, s. g. stetsenko, m. i. havronyuk, as well as r . k. melekayev (established the definition prevention corruptibility of the russian federation legislation); a. m. novak (the introduction of digital technologies in public administration, the state in the smartphone, as a factor influencing the formation and implementation of national anti-corruption policy; m. a. sokolov (detection and elimination of normative legal acts defects in the mechanism of law-making); etc. the sincere scientists aspirations to offer effective solutions to ensure the integrity of public power and other public relations are reflected in numerous monographs (dissertations). v. franchuk, d. koretska-shukevich (revealed the administrative-legal framework for combating corruption-related offenses in ukraine and the republic of poland); o. bondarenko (the concept of criminal law counteraction to corruption in ukraine); v. trepak (applied theory problems of preventing and combating corruption in ukraine); d. ishchuk (administrative-legal status of specialized anti-corruption entities in ukraine); b. golovkin, v. batyrgareeva, o. novikov and others (issues of the state and trends of corruption in the economy private sector; typical corruption schemes in the field of entrepreneurship and revealed the main areas of prevention and counteraction to this phenomenon, including through the system of anti-corruption compliance); a. voloshenko (causes, essence, political and economic origins of systemic corruption in ukraine; approaches to comprehensive assessment of the current level of corruption; key determinants and basic concepts of the mechanism for preventing systemic corruption); a. biletsky (public participation in the corruption prevention of crimes in ukraine); m. plastun (the place and participation of the head of state in the anti-corruption system, in the baltic journal of economic studies 237 vol. 7 no. 5, 2021 formation and implementation of anti-corruption policy, its basic patterns of evolution in the historicallegal context). foreign scholars are also actively involved in understanding the issues of ensuring a permanently low level of corruption, namely: institutions against systemic corruption and oligarchic domination (s. vergara gonzalez); corruption, political incompetence and social division in spain 1874–2018 (r . preston); corruption of genomics, digital health, medical information campaigns and other components of the medical-industrial complex (s. o’mahony); subordination of the elite part of the population, simplification of its functional purpose by members of corrupt networks (politicians and their advisers, financiers, etc.), acceptability of social dialogue methods and civil disobedience to combat corruption, on the example of india (s. chella rajan), etc. at the same time, insufficient attention is paid to the issues raised in the topic of this article, given the steadily high level of corruption in ukraine. although fragmentary conclusions about them exist in scientific works. therefore, the previously stated problem remains relevant for research. 3. the essence of using digital to detect corruption the knowledge acquired by legal scholars is not now fully realized in legislation and law enforcement. this weakens the persistent tendency to the dominance of human virtues, especially among civil servants and entrepreneurs. the transformation of legal consciousness of ukrainians in the direction of rejection of the use of corruption as a means of communication, denying its value and acceptability in legal relations is also slowing down. the population of ukraine perceived corruption in 2014 (142nd in the world, 26 points) not much less than in 2020 (117th, 33 points), indicating a shaky anticorruption trend fueled by the benefits of digital technology. today 's world demonstrates the active use of the digital format for checking the dishonest actions of civil servants. while the first asset declaration procedures for these individuals were introduced on paper (back in 1965 in the united states, and as of the late 1970s in the united kingdom of great britain and northern ireland), such asset declarations are now filed exclusively on electronic media. this function has become natural for the administration of the balance of government revenues and expenditures in all highly developed countries. in addition to compliance with individual receipts, the digital format is used to monitor the fair use of public funds. for example, in ukraine there is an electronic system of organization of public procurement, which openly contains information about the conditions of spending public funds for the purchase of goods, works and services. the commission for the prevention of corruption of the republic of slovenia uses the software product erar (aerarium is the latin name for treasury and figuratively means public finances). it is an online tool for transparent monitoring of cash flows of public sector organizations (public expenditure monitoring application). in particular, this application provides a registry of gifts received by officials and public institutions (it summarizes the registries of gifts maintained by all public authorities) (erar – the application provides data on the use of public money in the republic of slovenia). the rules for the implementation of digital format of anti-corruption exist not only in the framework of purely specialized legislation. they are widely represented in the requirements for the formation of anti-corruption ratings, the prevention of the purge of criminal assets, the functioning of electronic systems of circulation and accounting of property, and so on. for example, 35 banks and 54 financial institutions in monaco hold more than 300,000 accounts and manage total assets of about 750 billion euros (approximately $819.4 billion). the money laundering charges relate mainly to crimes committed abroad. the principality does not face the usual forms of organized crime, nor does it have a significant smuggling market (monaco against money laundering). the countries with the best practices in the fight against corruption are the republic of france and the united kingdom of great britain and northern ireland (hereinafter, the uk). compared with neighboring countries, swiss regulation of anti-corruption legislation is underdeveloped. " when it comes to money laundering, switzerland implements only the absolute minimum of mandatory standards because of pressure from abroad. ... the effective fight against money laundering is only of secondary importance. unfortunately, i have come to the conclusion that there is nothing to be gained in switzerland. ... money laundering reporting switzerland is bogged down by a lack of information technology, which means that most documents have to be processed manually. at the end of last year, some 6,000 reports worth several billion francs had not yet been processed because of imperfect it", declared daniel thelesklaf. since 2016, between 12 and 17 billion swiss francs worth of assets have been recorded in switzerland each year. as a result of the combination of these shortcomings, switzerland protects only a "small fraction" of the laundered money passing through its banks (‘switzerland failing to tackle money laundering’: thelesklaf ). baltic journal of economic studies 238 vol. 7 no. 5, 2021 4. definition of digital interference in legal integrity mechanisms the process of changing the anti-corruption law due to the intervention of the digital format of data circulation has already become natural. it can also be stated that this contact between figures and legal norms is increasing. they are united by the source element for recording specific legal and mathematical meanings, respectively. numbers are the ontological essence of formalizing legal requirements in electronic format. the calculation of the functional purpose of anti-corruption law is mentally seen through the construction of abstract models of legal regulation of social relations, based on human virtues. mathematical logic allows us to systematize numerous illustrations of anti-corruption practices; separation in a rational ascent from the abstract to the concrete core of the problem. this part gives an idea of the main properties of the whole; it generates abstractions and expresses concrete links of anti-corruption legislation with the entire legal system. digital formats of information flow regulation and the legal system are united by the same nature of formulae construction. moreover, they change each other's nature by mutual impulses of action, by inter-symbolic interference. the energies of both matter (law and mathematics) overlap. for example, electronic procedures for checking corruption offenses, their risks, and all other components of the fight against corruption are possible only because they lend themselves to mathematical analysis. communication through telecommunications networks a priori reduces the opportunities (significantly complicates) for the delivery of legally prohibited gifts and bribes, as well as various means of persuasion, inducement to commit an offense, manipulation of feelings (emotions) of the official and so on. these issues are fully disclosed through the use of related sciences of knowledge (theories) of legal psychology, the theory of psychological type of legal understanding (manifestation of its components in action). such channels of interdisciplinary communication reveal the problem of the loss of effect of verbal communication acts in face-to-face meetings of people, compared to their non-contact interaction – online through software and over the internet. a characteristic preventive feature of digital communication of anti-corruption nature in the form of a dialogue (polylogue) with an official of a public authority is the availability (comprehensibility, ease, etc.) of their technical fixation. such fixation, as well as feedback, reactions and other elements of the history of electronic communication are potentially suitable for use as evidence in case of grounds for disciplinary, administrative and/or criminal proceedings. a psychological view of people's understanding of these possibilities shows that their willpower is naturally directed towards compliance with anticorruption legislation. for example, the digital format of communication does not allow for a conversation about a bribe, clarifying it, etc. otherwise, the technical fixation of extortion or bribery is sufficient evidence to establish the corpus delicti, namely: "acceptance of an offer, promise or receipt of an improper benefit by an official" and/or "offering, promising or giving an improper benefit to an official" (articles 368, 369 of the criminal code of ukraine respectively). the use of computer technology involves formalizing procedures and eliminating the human factor. reducing an official's actions to formulas requires a deeper understanding of the existing rules, their clarification and adjustment in accordance with the criteria of clarity, unambiguous clarity. otherwise, the anti-corruption procedure cannot be digitized – translated into the language of a computer program. for example, an adequate and understandable package of income (benefits) and other social guarantees reduces the temptation for officials in public office to spend money unscrupulously (huberts, hoekstra, 2016). algorithmization of the actions of public officials determines their formally declared transparency (openness of public information) in legal reality. for example, the system of automatic verification of officials' income declarations through a mechanism for detecting logical and/or arithmetical errors in them. this, at a minimum, provides grounds for increasing the confidence of citizens (informed, prudent, law-abiding) in the integrity of state power and further logically increases its authority to bring about the necessary changes for the development of society. the negative effect of the digitalization of legal mechanisms to identify the proceeds of corruption is the absorption of the anthropic nature of the law by digital technologies that work on mathematical formulas and algorithms. there is a leveling of humanity in the direct lawmaking and law enforcement, including emotional, sensory, rational, volitional slices of human psychology. in this case, the nature of anti-corruption legislation loses its purpose, which is to ensure the maximum development of everyone as a necessary condition for the free development of all. anti-corruption activity is not an end in itself. it does not weaken sociality and does not strengthen the abstractness of social ties. the struggle for virtue excludes the immersion of people in a virtual reality (augmented reality) instead of legal reality (does not replace it) and so on. the optimal option is to supplement law with artificial intelligence in the regulation of social relations. otherwise, the time of legal processes is reduced to the temporal needs of the baltic journal of economic studies 239 vol. 7 no. 5, 2021 operating processes of electronic computer programs. there is a sense of loss of spiritual values, including those of the present and/or future rule of law. they are replaced by a phenomenon of accelerating time, its unprecedented rapidity, and a desire for consumption that grows exponentially amid a tendency to reduce the capacity to comprehend the nature of law. the desire to enjoy and other forms of deconstructive legal life in an instant, to get everything at once, is actualized. legal values and their macrostructures of time are being replaced by the virtual values of the digital world and their microstructures of time (ancient greek καιρός "opportune moment"). the widespread introduction of electronic services exacerbates problems, namely: compatibility of innovative technologies; national security in the context of network, information warfare; protection of personal data from cybercrime, hacker attacks, spyware; contingencies in the form of database equipment failure; creation and protection of data backups, and loss of national identity and appeal, in particular due to the weakening of variation in the enrichment of the national language space, etc. 5. detection of corruption proceeds through digital technology in legal mechanisms in fact, the use of digital technologies in the volume corresponding to the civilizational level of the nation, its legal worldview, culture, consciousness. this is one of the ways of sustainable development and a necessary condition for the neutralization of corruptive factors in social relations. in particular, as exemplified by our state, the implementation of measures to institutionalize the digital format of public administration is aimed at significantly reducing corruption and bribery in all its manifestations. this includes developing effective, accountable and transparent institutions, as well as ensuring flexible, inclusive, participatory and representative decision-making at all levels; ensuring public access to information and protecting fundamental freedoms in accordance with national law and international agreements. public legal integrity in economic relations seeks to achieve higher levels of economic productivity through diversification, technological improvement, and innovation; support the development of domestic technology, research, and innovation, including by providing an enabling policy environment; develop effective, accountable, and transparent institutions at all levels; build capacity at all levels of relevant national institutions, including through international cooperation (eu support for e-governance and digital economy in ukraine). the importance of these technologies for monitoring the welfare of officials in the dynamics through the institution of annual declaration of their property/ income is known. it is noted that at the end of the 1990s, along with paper declarations, electronic declarations began to exist. an oecd study showed that in countries where declarations were accepted electronically rather than in paper form, the reliability of the data provided increased from 67% to 98% on average in the first two years. currently, there are more than 130 such countries (steblyanko, reznik, 2017). it is important for them to focus on identifying in these declarations only those incomes that are not officially recorded by the state in the existing accounting systems (registers), the movement of property, finance, which are managed by public authorities and their authorized subjects. physical presence for direct communication between a visitor and an official of a public authority is corruptogenic, for example, when interpreting the legislation of the republic of singapore. it creates conditions for forming the right impression, convincing the official to make the right decision contrary to the law, including anti-corruption, to a greater extent than non-contact communication. intermediaries are graphical interactive, automated and/or other computer input (processing, transmission) of information, such as operating systems macintosh and windows. the high degree of human-computer interaction instead of human human interaction in public law minimizes the corruption risks of communication of traditional forms and increases the multiplicative potential of integrity, namely: increases the quality (efficiency, effectiveness) of public servants as measured by fundamental rules and social values; excludes the shortcomings of public administration, its complex forms of dysfunction – resistance to positive and longterm changes, formalism, indifference to efficiency, hostility to technology, redundancy, nepotism, corruption (d’alterio, 2017). public relations culture and values must be supported by a clear set of rules, procedures and guidelines. the finance, legal, audit and human resources departments play an important role in this. supervision, control (verification of reporting) of compliance and enforcement are methods of implementing the integrity rules. especially in the areas of control/investigation of public procurement procedures, implementation of relevant contracts, overlapping of positions (huberts, hoekstra, 2016). these problems are compounded by the use of public authorities and/or public funds for the benefit of private individuals. taken together, this inevitably reinforces a persistent tendency to despise human virtues in an unstable environment of transitory and market relations. ukraine demonstrates far from the strongest mechanisms of combating corruption both at the national level and in international relations. questionnaires within the legal sociological approach to understanding the problem of corruption and baltic journal of economic studies 240 vol. 7 no. 5, 2021 acceptable options to minimize it have been used by the author since 2010 and prove the desire of ukrainians to exercise their rights in the least burdensome way for them. it is only natural that citizens oppose formal (inhumane) bureaucratic procedures, archaic norms of current law, and/or simplistic (non-legal) law enforcement practices by resorting to moral norms, violence, and corruption. all three types of social interaction tools become part of the legal reality for them. however, this reality goes beyond the formal requirements of existing laws and regulations. at the same time, the use of gifts, acquaintances and other means of corruption (70-85% of surveyed experts between 2012 and 2020) invariably dominates, or it is combined with moral norms and other non-legal regulators of human relations (figure 1). it is known that the spread of such practices has a particularly devastating effect in the sphere of public legal relations decisions/actions of civil servants are not determined by public interests. according to the successful experience of highly developed countries, the widespread introduction of information technologies into the scheme of legal relations (citizen – civil servant) contributes to the neutralization of corruption. it is important to focus the attention of scientists, but so that the technical component and the software are not left separately, and the legislation and other sources of law separately. otherwise, in ukraine and other countries of the region of eastern europe, as well as similar social communities of the world there is a consistently high level of illicit enrichment of public officials and other subjects of declaration, money laundering (corruption, bribery, real conflict of interest), involvement of senior officials and entrepreneurs in transnational corruption flows, etc. the solution to these problems lies in the joint use of anti-corruption legislative procedures and relevant technologies, programs, registries. at the same time, the correlation of such components with the already developed doctrines and successful anti-corruption practices is a rather divergent curve. their integral curve is an urgent task that needs to be solved, especially in the absence of an anti-corruption strategy in ukraine since 2018. for example, in midjune 2021, ukraine legally recognized the problem of shadow income and insufficient tax culture of citizens by adopting the law on one-time (special) voluntary declaration. to date, all anti-corruption mechanisms (legislative requirements and digital technologies) have failed to counteract these corruption-causing factors and/or turn them into the product of corrupt connections. the proposed fiscal methods and the focus on one aspect of improving the culture of citizens are expected to have a limited effect. they are not complemented by measures to improve the legal, financial, political and other types of culture of citizens; technologies of control, compliance with particularly large incomes of individuals (entrepreneurs) by state agencies and comprehensive legal requirements for their use (on the model of high-tech developed countries). equally lacking are proper material incentives for capable civil servants based on their performance in the form of additional compensation. there is no salary or corrupt income, the tools that citizens use to properly exercise and protect their rights and freedoms... (%) corruption tools – 63,7 moral / religious norms – 22,7 coercion / violence – 6,8 courts and other institutions determined by the laws of the state – 6,8 figure 1. the results of the application of socio-legal method for the knowledge of problematic issues of corruption prevention in the open society – 440 experts (entrepreneurs, civil servants and other professionals; mainly from zaporizhzhia region and partly from dnipro and kharkiv regions), summarized for 2012–2020 baltic journal of economic studies 241 vol. 7 no. 5, 2021 but they are paid according to their performance in the area they lead, etc. (ang, 2020). the lawyers' focus is on establishing patterns and systems in facts that are judged to be coincidences that have led to the rapid intellectual decline and spiritual dwarfism of our era. the excessive power of multinational corporations, the decline of politics and professions, problems of law and order, the fetishization of security, and the narcissism of the internet and social media reduce people to digital machines in need of constant monitoring and maintenance (o’mahony, 2019). this social reality breeds petty theft, grand theft, fast money, and access to money in the public sphere. there are types of corruption that are detrimental to economic growth in one way or another. in countries with big finance, dishonesty comes in the form of access to power and money (for access to money). nations with an overwhelming majority of financially poor (poor and below the poverty line) populations do not overcome any of the types of corruption that officials at the highest levels of government should be tough on (ang, 2020). 6. conclusions thus, digital technologies in the field of anticorruption are tools to promote integrity in public relations by ensuring the contactless interaction of an official with other citizens, avoiding the physical delivery of gifts and bribes, formalizing procedures and eliminating errors of anthropogenic and sociogenic factors. the content of legal mechanisms, enhanced by the potential of digital technologies (accounting systems, registers, communications, etc.), is able to neutralize corruption risks. the capacity of digital technologies to account for the specificity of the corrupting influence of private interest is energetically superior to any human control and does not detect expression and/or other variants of subjectivity, which in itself is ontologically corrupt. an important feature of the anti-corruption legislation implemented with the help of digital tools is innovation. digital technologies are constantly updated (every 3-9 months by 100%) and implemented. through this connection, the integrity (anti-corruption legal mechanism) acquires the features of its part (digital technology), becomes dynamic, minimizes archaic norms, eliminates the dysfunctions of existing algorithms of rules as those that do not comply with mathematical logic. the authors believe that the steady growth in the use of digital technology will help to differentiate the nature of corrupt practices for all dimensions of public administration and/or economic relations. this is especially important in the areas of state budgets/funds, taxes, finance, as well as national defense, law enforcement, information, culture, etc. electronic algorithmization of anti-corruption procedures makes it possible to ensure that the degree of corruption risks is legally correlated with the degree of ingenuity of the proposed legal norms to eliminate bad faith. they, in turn, should correspond to the values and other components of the political and legal system, where they are applied, as well as prevent cross-border corruption problems. in the framework of the eu, into which ukraine is integrating, this requires combining joint efforts of anti corruption states and solving tasks to determine the basic theoretical and methodological constructs of the use of digital technologies in anti-corruption institutions, the extent of their formal reflection in the legislation. the unity in the use of digital technology practices to verify and ensure the integrity of public servants, as well as an understanding of the trend of their movement, becomes relevant. further development requires a general theoretical framework for formal legal procedures for financial audit, compliance on the adequacy of sources of income and expenditure of public servants, as well as banking and other controls on their tangible assets using digital technology. the pan-european integration of anti-corruption efforts is also manifested in the strengthening by means of digital technologies of forensic capabilities of law enforcement control over the economic and legal soundness of financial and other types of business transactions; methods and algorithms for checking latent corruption in public procurement; legal directions of the economy deshadowing as a part of anti-corruption legislative mechanisms and constructive practices of their application conditioned by digital format. a separate area of actualization of human virtues is to increase the digital awareness of citizens as a component of their economic (tax, financial), political and legal culture, as well as strengthening the legal protection of lawyers, journalists and other categories of informants. digital intervention in the legal mechanisms for detecting the proceeds of corruption is also manifested in the operation and improvement of electronic registries of corruption factors, corruption risks and challenges to the virtue of public officials; enhancement of forensic and other practical capabilities of national agencies to detect, investigate and manage assets derived from corruption and other crimes. in this regard, the interconnection of interstate (inter-institutional) cooperation in the fight against transnational/global corruption requires significant revitalization. thus, electronic methods of anti-corruption law enforcement are total and individual reveal the specificity of their manifestation. it is assumed that their effectiveness will be influenced by the factors of successful combination with the traditional for baltic journal of economic studies 242 vol. 7 no. 5, 2021 the nation legal regulators of integrity in the sphere of public relations. such a combination should not lead to the loss of the fundamental nature of anti corruption legislation. it is important to show the specifics of the use of digital technology in transitional and sustainable forms of social interaction. all these and related issues can be developed through additional research. empirical data from the experience of interactive automated systems and other electronic networks, their telecommunication channels and hardware are needed to verify the conclusions. humanity counts on their potential. tools are inherently reliable and indifferent to human shortcomings. therefore, digital technologies are capable of accurately and quickly processing huge amounts of information, including anti-bribery and other forms of corruption. artificial intelligence in relevant technologies is advisable to introduce to control the fair flow of social relations in all spheres. it involves micro-structuring these areas into algorithms. this is done in order to exclude the effect of any potentially corrupt schemes inherent in the corresponding contact relations of direct human communication. it is worth tracing the consonant experience of digitizing the public space of such eu countries as the republic of estonia, the scandinavian countries, the republic of france, the federal republic of germany, the united kingdom and others. references: oecd work on anti-corruption and integrity. 24.09.2020. available at: https://www.oecd.org/corruptionintegrity/about/ chan, h. t. (2018). antikorruptsionnaya politika kak faktor politicheskoy stabil'nosti v sovremennom v'yetname: dysertatsiia k.polit.n.: 23.00.04 [anti-corruption policy as a factor of political stability in modern vietnam: dissertation of the cand.sc. (politology): 23.00.04]. moscow: rossiyskiy universitet druzhby narodov, 178 p. kerimov, d. a. (2001). metodologiya prava (predmet, funktsii, problemy filosofii prava) [methodology of law (subject, functions, problems of philosophy of law)]. moscow: avanta+, 560 p. erar – appendix provides data on the use of public money in the republic of sloveni. available at: https://erar.si/darila/ monaco anti-money laundering. available at: https://www.knowyourcountry.com/monaco1111 ‘switzerland failing to tackle money laundering’: thelesklaf. september 21, 2020. available at: https://www.swissinfo.ch/eng/-switzerland-failing-to-tackle-money-laundering---thelesklaf/46047196 pidtrymka yes dlya elektronnoho uryaduvannya ta tsyfrovoyi ekonomiky v ukrayini: uhoda pro finansuvannya zakhodu vid 11.02.2020 [eu support for egovernment and the digital economy in ukraine: an event financing agreement 11.02.2020]. available at: https://zakon.rada.gov.ua/laws/show/984_00120#text steblyanko, a. v., & reznik, o. m. (2017). elektronne deklaruvannya yak forma kontrolyu za diyalʹnistyu pratsivnykiv pravookhoronnykh orhaniv [electronic declaration as a form of control over the activities of law enforcement officers]. scientific bulletin of uzhhorod national university. series: law, іss. 44, рр. 160–164. d’alterio, е. (2017). integrity of the public sector and controls: a new challenge for global administrative law? i•con. oxford university press and new york university school of law, vol. 15, no. 4, 1013–1038. huberts, l., & hoekstra, а. (eds.) (2016). integrity management in the public sector: the dutch approach. the hague: the dutch national integrity office, 222 р. ang, y. y. (2020). china's gilded age. the paradox of economic boom and vast corruption. new york: cambridge university press, 258 р. o’mahony, s. (2019). can medicine be cured. the corruption of a profession. london: head of zeus ltd., 227 p. baltic journal of economic studies 143 vol. 8 no. 3, 2022 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: ugsbeplumvs@gmail.com orcid: https://orcid.org/0000-0002-1376-6764 2 science and innovation division of the department of education, science and sports of the ministry of internal affairs of ukraine, ukraine e-mail: a.s.7.tarasenko@gmail.com orcid: https://orcid.org/0000-0003-0369-520x 3 odessa state university of internal affairs, ukraine e-mail: defender_odzal@ukr.net orcid: https://orcid.org/0000-0002-0443-7168 doi: https://doi.org/10.30525/2256-0742/2022-8-3-143-153 legal and economic foundations of the national security of ukraine: state and prospects anatolii nikitin1, oleksandr tarasenko2, oleksandr dubenko3 abstract. the subject of the study is the state and prospects of development of legal and economic foundations of regulation of legal relations in the sphere of national security of ukraine. methodology. in the process of research were used general scientific and special legal methods. dialectical method made it possible to compare the level of legal protection of private and public interests as a type of national interests in comparison with the objects of national security. by means of analysis were determined quantitative and qualitative parameters of measures implemented within the framework of ensuring national security of ukraine in the sphere of protected national interests of legal and economic nature. synthesis provided the formation of common features that mediate the existence of the main categories in the sphere of national security, taking into account the time period in which the relevant measures are implemented. comparative-legal method allowed us to identify common and distinctive features in the implementation of measures of legal and economic nature to ensure national security at different times and in the future. the purpose of the article is to establish the state and determine the prospects of development of legal and economic provision of regulation of social relations in the sphere of national security, taking into account geopolitical and internal challenges of the corresponding period of the existence of ukrainian statehood. the results of the study showed that the state of legal and economic security of national security of ukraine needs to be adjusted and improved taking into account the needs of the time in the geopolitical space, which is reflected in the organizational, legal and legislative work of the verkhovna rada of ukraine and the research of scientists. conclusion. the legal and economic foundations of ukraine's national security developed under the influence of a number of factors, among which the determining ones are: international standards; creation of a legal regulation mechanism harmonizing private and public interests as part of national interests; prompt response to external and internal challenges, creation of the most effective conditions for the existence of civil society, including economic, involvement of institutions of democratic civil control in this activity. it is established that the formation of legal and economic security of national security of ukraine took place in three stages: the initial period, when the general rules of normalization of legal relations in this area were laid down; the period of unification and systematization of normative regulations in this sphere, taking into account the proportionality of public and private national interests included in the content of national security, with the priority of the latter, in particular in the field of economic security; the period of adaptation of the regulatory framework in the field of national security to the geopolitical challenges that ukraine faced after the revolution of dignity. the defining features of these stages are characterized. it is established that the legal regulation and economic provision of national security of ukraine today is determined by the following features: in the first place among the national interests are the state sovereignty, territorial integrity, democratic constitutional order, which are associated with a real threat to these interests due to the existing aggression; a number of strategic documents in the relevant areas of national security, the content of which contains a qualification of threats, directions of state policy and appropriate response measures, in particular to ensure economic security, were categorically defined; the legal status of subjects of national security has been normalized and significantly expanded; the content of the powers and this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 144 vol. 8 no. 3, 2022 functions of these subjects is reduced, and the content of the activities of citizens and public organizations is ignored; for the first time elements of democratic civil control in the sphere of national security are introduced into the legal field. analyzed modern scientific developments on the national security of ukraine, which allowed to highlight promising directions of development of measures of legal and economic nature aimed at ensuring national security, including the prevention of threats in the sphere of influence of geopolitical vectors of the modern world system on the formation of ukrainian statehood, preventing the impact of negative factors of internal and external origin, in particular: separatism; cybercrime; corruption; economic and financial threats; energy crisis; covid-19 pandemics, etc. in addition, a characteristic feature of such measures should be their ex-ordinary effectiveness, which is mediated by the involvement of all branches of government and institutions of civil society through deep coordination of such activities, the use of international experience, cooperation with international organizations of a military-economic type, the dissemination of the jurisprudence of international courts, using the example of the european court of human rights, etc. key words: national security of ukraine, economic security, economic and financial threats, state, prospects, legal principles, national interests. jel classification: f52, h56, k32 1. introduction any society and any state, as an external civilized manifestation of the former's being, needs external and internal means of ensuring its own identity, originality and authenticity. in order to create guarantees for the existence of the above-mentioned virtues of human existence, the question of creating social, economic and, probably, first of all, legal mechanisms of international and national origin is significant, even painfully important. among such legal constructs a prominent place is occupied by the legal construct, reproduced in international and ukrainian legislation – it is national security. unfortunately, more than ever in our time, when ukraine has been subjected to destructive aggression from a neighboring state with which it has long had a communicative socially conditioned relationship, the question of normalization, the importance and prospects for improving national security is extremely relevant and requires careful study. in connection with the widespread notion of national security as a state of protection of the rights, freedoms and interests of the individual, the interests of society and the state, which creates prerequisites for ensuring sustainable development of the latter, in the first normative acts of the world community after the end of world war ii the specified virtues received a direct mutual guarantee, taking into account the theoretical and empirical material available at the time. thus, even the un charter reproduces the basic premises for the assertion of the basic principles of national security, which are manifested, inter alia, through such measures to maintain international security as: the settlement and resolution of international disputes which might lead to a breach of the peace, the development of friendly relations, the development of international cooperation in solving problems of an economic, social, cultural, humanitarian nature, etc. (1948). the content of the universal declaration of human rights traces the elements of maintaining the security of the international community and the corresponding nationality in the context of ensuring the protection of human rights and freedoms, but taking into account the stated fundamental provisions of the existence of the un (art. 29), which actually balance the public and private interests in the protection of national security as a harmonious phenomenon (1948). the problem of national security and its legal regulation at the level of legislation of ukraine and other modern countries has been the subject of research by a number of scholars from different countries, where they sought to approach this social and legal phenomenon as a colorful category, which is traced in all manifestations of public life, regardless of the geographical or geopolitical location of the country. it is necessary to single out works of a general nature, on the example of studies of the conceptual foundations and effectiveness of the national security strategy of ukraine (zahorulko, 2020), the components of the system of its support and the main tasks at the current stage (titarenko et al., 2021), roles and forms of participation of public organizations in ensuring the national security of ukraine (kovalova et al., 2020), the essence and directions of influence of nato as an important factor in ensuring the national security of ukraine (biloshytskyi et al., 2021), definitions of national security, its main interpretations and signs, structure and factors, in particular in the comparison and interdependence of the categories "national interests" and "national values" (kryvyzyuk et al., 2021), administrative and legal foundations of national security of ukraine (hetman et et al., 2022). baltic journal of economic studies 145 vol. 8 no. 3, 2022 there are also separate studies in which certain factors of national security are revealed: the essence of migration as a prerequisite for ensuring national security and its legal regulation (buhaichuk et al., 2021), cybercrime in the manifestation of the complex category "information terrorism" as one of the serious threats to national security (varenia et al., 2021), the banking sphere as an environment for the development of cybercrime in its multifaceted nature (vitvitskiy et al., 2021), the nature of economic security as the material basis of national security (aleksandrova et al., 2021) and its international and national guarantees (yarmol et al., 2021). the above conclusions indicate the great relevance of additional research of the state and prospects of development of the right and economic foundations of national security of ukraine, especially given the tectonic shifts in the geopolitical space of the modern world community, which are currently taking place after the escalation of the russian invasion of the territory of ukraine. 2. the essence and manifestations of national security: a scientific approach existing studies of the essence, content and areas of manifestation of national security make it possible to formulate the following considerations. thus, according to the consequences of structuralfunctional analysis, national security in a postmodern society is perceived through the prism of measures to adequately counteract threats to vital national interests (kryvyzyuk et al., 2021). that is, in fact, national security is perceived in the plane of this scientific point of view exactly as a complex axiological socially conditioned phenomenon-non, which is an appropriate reflection of the postmodern culture in the axiological dimension of the sociopolitical being of a particular society. it is proposed to distinguish between positive and negative effects of the postmodern development of society on the perception of national security in it, where the first is perceived through new directions of its manifestation, and the second – through the violation of established traditions and customs in various spheres of public life, in particular, the functioning of the state as a socio-political superstructure. the above gave the authors the opportunity to formulate the need to develop a certain standard of national security, which would correspond to a mutually consistent construction of national interests and national values, which to a certain extent corresponds to the needs of the time, taking into account retrospective and mental parameters. within the framework of philosophical consideration of the essence of separatism, as one of the negative counterbalances to the national security of any modern country, it is pointed out that in the nature of this category of manifestations of such a trend of social being in the modern world as social transgression, which involves the leveling of certain cultural values, normative rules, moral foundations within the appropriate national boundaries (levyk et al., 2021). at the same time, the roots of separatism can be traced in the interaction of the everyday and political world of the individual and society, in the juxtaposition of the categories of "social transgression," "frontier". that is, there is actually a clash of interests of a particular individual and society, where separatism manifests itself through the boundary state of the individual, being on the border of the interests of different groups or societies, which actually have a different set of national values, as a result of which the volume and content of national security are different. taking into account the above-mentioned opinions, the perception of the content of such a boundary condition through philosophical-reflexive, ethical-normative and usuallypractical manifestations seems very significant, where the last two are significant in the context of the topic of this work. from the point of view of administrative-legal regulation of the system of national security of ukraine, the essence of the latter is considered as a totality of circumstances, within which the conditions for the stable development of any individual, society and state are created. among the main subjects, which are responsible for ensuring national security, are the power structures, in particular the armed forces of ukraine, endowed with special powers. according to researchers, the justification for the effectiveness of national security by prioritizing nonviolent means of protecting national interests and values is indisputable (hetman et al., 2022). in the context of the content of national security are defined groups of measures related to: the protection of territorial integrity and state sovereignty, ensuring constitutional order, creating conditions for political and economic security, ensuring public order, the fight against crime, etc. the social and legal means of implementation of these measures is a set of legal norms enshrined in various state programs, regulations, directives and international treaties, as well as other sources of national law. as for the subject composition of such relations and assessment of the effectiveness of their activity, the previous considerations received full support (titarenko et al., 2021). particular attention is paid to the place of public organizations among the subjects ensuring national security, in terms of normalization of their legal status. an attempt has been made to differentiate this issue in terms of functional and zonal criteria baltic journal of economic studies 146 vol. 8 no. 3, 2022 of the legal status of these organizations precisely depending on the specifics of involvement in activities in the field of national security, where the first involves determining their place among other actors directly ensuring national security, a clear definition of their respective competencies, the level and scope of cooperation with them and the degree of participation in the implementation of relevant measures, and the second involves manifestation of their competencies depending on the sphere and territory of national interests and the need to implement appropriate measures to protect national security. the position of researchers is quite rational in terms of improving the organizational and legal means of participation of public organizations in the system of measures to ensure national security, in particular through more thorough regulation of their legal status, a clear definition of their place among the other subjects of such activities, the creation of mechanisms for cooperation and coordination of their work, the introduction of developments in the international community in this matter (kovalova et al., 2020). an important component of the national security of a modern state, including ukraine, remains the issue of protection against external aggression, which may manifest itself in relevant internal and external manifestations. in such conditions an important role is played by international legal organizations of different functional orientation, among which nato as a leading military alliance, based on established, generally recognized values of a democratic society, has recently taken a priority place. ukraine's cooperation with this organization in the light of geopolitical events of recent decades, especially manifestations of aggression by some neighboring countries of our state, testifies to the correctness and great relevance of this activity, which is reflected in all spheres of life, in particular in the rule-making sphere. such activity in the context of national security creates prerequisites for: 1) increasing the level of defense capability of ukraine; 2) creating economic foundations for a proper investment climate on the territory of the state; 3) further involvement in other forms of integration processes with modern developed countries, in particular with the european union; 4) identification of internal and external problems that prevent the proper satisfaction of a set of national interests (information security, public corruption, insufficient development of foreign policy relations, etc.) (biloshytskyi et al., 2021). a relatively new type of threat to the national security of ukraine in the form of hybrid war, which manifests itself through the use of a complex of class military and rather extraordinary non-military information-psychological, economic and political tools, remains quite relevant. this requires the formation and implementation of a set of appropriate preventive, preventive and controlling measures by the security and defense sector. in addition, the main direction of response of the national security system is the above-mentioned measures to integrate ukraine into the international security system through nato membership, which has the consequence of modernization of the security and defense sector management system in order to bring it in line with the challenges of modern conflicts, achieving a level of interoperability of defense forces, the transition to standards of the said international organization, etc. (bratko et al., 2021). given the above, the issue of information security has long been a global problem, which has appropriate manifestations at the level of certain internal socio-political, economic and legal institutions of any country, including ukraine. noteworthy are studies in which so-called information terrorism, including cyberterrorism and media terrorism, categories of cybercrime in the information space, is defined as a significant component of the national security of the modern country. the most dangerous manifestations of threats to national security in the information space in modern conditions include: the use of computer systems and software, media content for extremist and terrorist crimes of a transnational nature, actions with signs of cyberterrorism (intimidation of public authorities, local government, international organizations through the misuse of relevant information and telecommunications technologies), the use of computer systems and software to commit extremist and terrorist crimes (varenia et al., 2021). no less important in the conditions in which ukrainian statehood is being formed is the issue of taking into account the problems of migration processes, with external and internal factors, in a set of measures to ensure national security. according to the authors, among the priorities among measures to ensure national security in terms of regulating migration processes is the proper normalization of the issue of fixing the migration status of an eminent person, the definition of his legal status regardless of the legal connection with the state of residence and the legal regime of the latter, taking into account the practice of the european court of human rights (buhaichuk et al., 2021). among others, the economic well-being of society and the individual occupies a worthy place among the components of national security, which is appropriately reflected in studies of the spheres of national security. thus, the issue of international and national guarantees of economic security is periodically raised in the context of rulemaking, law enforcement activities, in particular, the jurisdiction baltic journal of economic studies 147 vol. 8 no. 3, 2022 of the european court of human rights, which is the guardian of economic, social, natural and other human rights and economic security of the state. the determining principles of this component of national security are: the rule of law, legality, freedom of enterprise, priority of national interests, ending aggression against ukraine and the return of occupied territories, creating a real mechanism to maximize the social and economic rights of citizens, improving mechanisms for bringing the economy out of the shadows, eradicating corruption from all spheres of society, etc. (yarmol et al., 2021). in contrast to the previous study, according to other scientists, the solution to the issue of economic security as a component of national security of ukraine should be solved by overcoming the negative causes of internal genesis, where the following threats are in the first place: the uneven economic development of certain territories, the decline of certain industries, low living standards of the population, etc. according to the authors, the above creates the preconditions for the implementation of a set of macroeconomic measures of economic, legal, organizational and administrative nature, carried out by public authorities and local government using various forms and methods of state and legal regulation to ensure human rights, improve living standards and achieve sustainable development of the state (aleksandrova et al., 2021). in the area of economic security, other views on threats to national security have gained ground, in particular due to the negative impact of the covid-19 pandemic on national interests (pidyukov et al., 2021) and qualified cybercrime in the financial, in particular, banking sphere (vitvitskiy et al., 2021). the first one proposes to differentiate institutional, procedural and behavioral features, principles and indicators of the typology of challenges and threats caused by the crown virus pandemic in the world. the authors make a reasonable conclusion about the comparison of social protection and severe economic restrictions in the framework of the manifestation of these negative trends in public life. at the same time, the above has served to highlight two major trends in the development of the global community that directly affect national security: deglobalization, due to the preference for national and regional cooperation, and the geopolitical growth of china as a significant player in international economic policy. the study of qualified cybercrime leads to the identification of a number of areas for the design of coordinated public-private cooperation aimed at regulating issues: 1) general classification of cybercrime, as well as similar types of offenses in the banking sphere; 2) development of mechanisms of organizational and legal nature to ensure objective display of statistical data on cybercrime; 3) creation of a system to combat this type of crime, allocation of a place in it for special actors in the form of cyber units of all law enforcement and law enforcement structures. a separate place among the threats of modern society is occupied by the problem of providing all kinds of energy and resources vital for the existence of society. that is why the so-called energy security is fully perceived in scientific circles as a component of national security and must, along with other significant elements, be taken into account and subjected to scrupulous processing. it is appropriate to conclude that energy security directly correlates with economic security as part of the national security of a modern developed country and is indirectly reflected in the functioning of the socio-political and economic institutions of developing countries (mara et al., 2022). according to the results of the monitoring of existing studies on the nature of national security, including those cited above, the essence of national security includes categories of public and personal well-being, which is mediated by the creation of the most accidental conditions for the existence of both society and a particular individual, manifested as a physiological and social being with a set of natural, spiritual, social needs and the interests arising from them. at the same time, it should be noted that the relevance of the study of organizational, legal, socio-political, economic and legal foundations of the functioning and ensuring national security is mediated by the volume and depth of relevant scientific research, indicating the functional, zonal and regional factor in the development and improvement of this sphere of social life. prospective directions of development of measures to ensure national security, including prevention of threats in the sphere of influence of geopolitical vectors of the modern world system on the formation of ukrainian statehood, prevention of influence of negative legal and socio-economic factors of internal and external origin, in particular: 1) separatism; 2) cybercrime; 3) corruption; 4) economic and financial threats; 5) energy crisis; 6) covid-19 pandemics etc. are highlighted in any order. 3. legal and economic foundations of the national security of ukraine: state and prospects the state of normative regulation of social relations related to the implementation of activities that constitute the subject of national security of ukraine directly follows from numerous works in this area, analyzed above, which received publicity on the eve of the expansion of armed aggression against ukraine. this view is a scientific perception of the legal reality that currently exists in ukraine. baltic journal of economic studies 148 vol. 8 no. 3, 2022 an additional view of the above can be formed as a result of the study of legal acts in this area, where it is necessary to distinguish the subjects of these relations, the object and content. the development of the international legal acts analyzed above in the basic law of ukraine found a direct reflection in the first edition of the two most important achievements of ukrainian society – human security (art. 3) and state and public security (art. 17), which are directly reproduced in the content and manifestation of the latter through environmental (art. 16), economic (art. 17) and informational (art. 17), geopolitical (art. 18) security, security of personal and family life (art. 32) and other intangible manifestations on the prevention and elimination of threats to public and private interests protected by the state of ukraine (1996). it was the constitution of ukraine that recognized, in addition to the objects that are protected as part of national security measures, also prominent subjects of such activities, which implement the relevant state policy in the internal and external spheres. first of all, this is the verkhovna rada of ukraine (art. 85), the determining competence of which is legislative activity in this sphere (art. 92), the president of ukraine, who guarantees the realization of the state policy in the sphere of national security, in particular by leading the activity of the national security and defense council of ukraine and taking other important measures (mobilization, sole management of the power block of the state during the crisis, etc.) (art. 106), council of national security and defense of ukraine, which is a coordinating and supervising body of a mixed legal nature and provides, above all, operational management of all sub-objects of public administration and the private sector in times of crisis of society (107), the cabinet of ministers of ukraine as the main participant of the executive power in this order of implementation of state security policy (art. 116). a logical continuation of security policy after the adoption of the constitution of ukraine was the adoption of the fundamental normative act in this area, which in fact is common regarding the definition of the basic principles of delimitation of definitional concepts, subject composition, object and content, namely the national security concept of ukraine (1997), which defined the objects of national security as follows: rights and freedoms of a citizen, spiritual and material values of society, constitutional order, sovereignty, territorial integrity, inviolability of state borders; provided for: the range of principles of national security, priority national interests, a list of possible threats in the following important areas of life (political, economic, social, military, environmental, scientific and technological, information) and outlined (the main directions of state policy of national security of ukraine and the system bodies and measures to ensure it). however, the legislative foundations laid down in the constitution of ukraine again demanded a different legal form of such a document and relevant main provisions in it, which contributed to the adoption of a new normative-legal act of the relevant jurisdiction – the law of ukraine "on the fundamentals of national security of ukraine" (2003). this law embodied the legal regulation of a number of issues manifested in this sphere of public life. among his most significant possessions, the following should be noted: 1) systemic definition of the goal of state policy in the sphere of national security – protection of national interests and ensuring the security of individuals, society and the state in ukraine from external and internal threats in all spheres of life; 2) a comprehensive and voluminous functionally oriented legislative definition of "national security " and other important categories; 3) a statement of the legal foundations of national security, including the documents arising from this normative act, developed and approved by the president of ukraine: national security strategy of ukraine, cyber security strategy of ukraine, military doctrine of ukraine; 4) the legal regime of the objects of these relations is also extended to: – the rights and freedoms of all people regardless of the legal status of a citizen of ukraine; – moral and ethical, cultural, historical, intellectual values of society, informational and environmental environment and natural resources; 5) differentiated subjects of ensuring national security, where in addition to those specified by the constitution of ukraine, the national bank of ukraine, the courts of general jurisdiction, the prosecutor's office of ukraine, the national anti-corruption bureau of ukraine, local state administrations and local self-government bodies, the power structures (the armed forces of ukraine, the security service of ukraine, the foreign intelligence service of ukraine, the state border service of ukraine and other military formations formed in accordance with the legislation of ukraine), civil defense bodies and units, citizens of ukraine and citizens' associations; 6) the basic principles of activities in this area were supplemented by the following principles: democratic civil control over the military organization of the state and other structures in the system of national security; use of interstate systems and mechanisms of international collective security in the interests of ukraine; 7) the range of priorities of national interests has been expanded, including: ensuring constitutional baltic journal of economic studies 149 vol. 8 no. 3, 2022 human rights and freedoms; ensuring environ mentally and technologically safe living conditions for citizens and society, preservation of the natural environment and rational use of natural resources; creating conditions for the full life and development of children, their safety, well-being, and growth in a safe family environment; ukraine's integration into the european political, economic and legal space with the aim of acquiring membership in the european union and into the euro-atlantic security space with the aim of acquiring membership in the north atlantic treaty organization; development of equal and mutually beneficial relations with other countries of the world in the interests of ukraine; 8) threats to the national security of ukraine and relevant directions of state policy in the most important spheres of life were differentiated, which made it possible to distinguish: – in the political sphere, the following subgroups of threats and directions: in the foreign policy sphere, in the sphere of state security, in the military sphere and the sphere of security of the state border of ukraine, in the domestic political sphere; – in the economic sphere; – in the social and humanitarian sphere; – in the scientific and technological sphere; – in the field of civil protection; – in the information field. 9) special functions and powers of the above mentioned subjects of national security are defined. summarizing the results of the analysis and comparison of the model of legal consolidation of the foundations of national security according to the concept and the law of ukraine "on the fundamentals of national security of ukraine", it is necessary to point out a more comprehensive and systematic approach to the essence of this sociopolitical and legal category, which are formulated in the second legal act, as well as giving priority among national interests to human interests, that is, private as opposed to public. the dramatic events of the ukrainian reality since 2013 related to the hybrid aggression against ukraine have led to appropriate changes in the normative regulation of public relations related to national security, in particular the adoption of the new law of ukraine "on national security of ukraine" (2018). it also reflected the general trends that appeared on the agenda of ukrainian society and raised the procedure for regulating the relevant relations to a qualitatively new level of legal technique. first, in the definition of national security, there was a transformation of the priorities of national interests to be protected within the framework of appropriate measures of its content. state sovereignty, territorial integrity, democratic constitutional order came to the first place among them due to the real threat to these interests due to the existing aggression. second, it was possible to find definitions of categories of such strategic documents as the national security strategy of ukraine, the military security strategy of ukraine, the cybersecurity strategy of ukraine, the strategic defense bulletin of ukraine, the strategy of public security and civil protection of ukraine, the strategy for the development of the defense industry of ukraine, which is also indirectly due to the above-mentioned reason. third, the national interests have received a general definition, among which the fundamental ones are highlighted: state sovereignty and territorial integrity, democratic constitutional order, non-interference in the internal affairs of ukraine; sustainable development of the national economy, civil society and the state to ensure the growth of the standard of living and quality of life of the population; ukraine's integration into the european political, economic, security and legal space, membership in the european union and the north atlantic treaty organization, development of equal and mutually beneficial relations with other states. it is the latter of the national interests, as a form of response to the existing threat from the aggressor, as well as the request of the ukrainian society, was directly implemented within the framework of the relevant constitutional amendments (2019). fourth, the legal status of the subjects of national security is regulated in detail by introducing a specific term "security and defense sector", which defines the essence of the defense and security forces, as well as the separate role of citizens and public associations, which differ from the previous ones by non-specificity for their general legal status of activities. fifth, the content of the powers and functions of the above-mentioned entities is detailed, while the content of the activities of citizens and civic organizations in this area is left out, which is obviously due to the non-specificity of their competence against the background of the general legal status. sixth, for the first time, elements of democratic civilian control in the field of national security were introduced into the legal field in compliance with the principles of the rule of law, legality, accountability, transparency, efficiency and effectiveness. seventh, the qualification of threats and directions of state policy and appropriate response measures in the sphere of national security are laid down in the framework of the relevant strategies of a particular direction. the study of legislative work in the field of national security of ukraine allows us to determine the following legal prospects for ensuring the national security of ukraine. aggression against ukraine, as one of the priority threats to national baltic journal of economic studies 150 vol. 8 no. 3, 2022 security, initiates the submission to the verkhovna rada of ukraine in the vast majority of draft laws that stimulate the protection of various private and public interests that are the object of national security, precisely in the conditions of martial law. in particular, as of july 22, since the beginning of the war, the legislative body of ukraine has adopted almost three hundred laws and resolutions, of which 201 (67%) are directly or indirectly devoted to ensuring national security in war (2022). the above-mentioned legislative acts can be differentiated according to the direction of the state policy to ensure national security, namely: in the foreign policy sphere – 19%, in the state security sphere – 13%, in the military sphere and the security sphere of the state border of ukraine – 9%, in the domestic political sphere – 15%, in the economic sphere – 14%, in social and humanitarian spheres – 15%, in the scientific and technological sphere – 1%, in the sphere of civil protection – 3%, in the ecological sphere – 6%, in the information sphere – 5%. an example of these legislative initiatives can be: in the foreign policy sphere – resolution of the verkhovna rada of ukraine dated june 19, 2022 no. 2298-ix "on the appeal of the verkhovna rada of ukraine to the member states of the european union and the european union institutions to support granting ukraine the status of a candidate country for accession to the european union" (resolution of the verkhovna rada of ukraine, june 19, 2022, no. 2298-ix), in the field of state security – law of ukraine dated may 31, 2022, no. 2293-ix "on amendments to chapter v final provisions" of the law of ukraine " on the national agency of ukraine for finding, tracing and management of assets derived from corruption and other crimes on asset management under martial law" (law of ukraine, may 31, 2022, no. 2293-ix), in the military sphere and the sphere of security of the state border of ukraine – resolution of the verkhovna rada of ukraine of april 21, 2022 no. 2227-ix "on adoption as a basis of the draft law of ukraine on amendments to the law of ukraine 'on prevention of corruption' on peculiarities of application of legislation in the field of prevention of corruption in the conditions of martial law" (resolution of the verkhovna council of ukraine, april 21, 2022, no. 2227-ix), in the domestic political sphere – law of ukraine of may 12, 2022 no. 2259-ix "on amendments to certain laws of ukraine on the functioning of the civil service and local self-government during the period of martial law" (law of ukraine, may 12, 2022, no. 2259-ix), in the social and humanitarian spheres – resolution of the verkhovna rada of ukraine dated april 1, 2022 no. 2185-ix "on adoption as a basis of the draft law of ukraine on compensation for damage and destruction of certain categories of immovable property as a result of military acts, terrorist acts, sabotage caused by the military aggression of the russian federation" (resolution of the verkhovna rada of ukraine, april 1, 2022, no. 2185-ix), in the information sphere – law of ukraine of march 24, 2022 no. 2149-ix "on amendments to the criminal code of ukraine on increasing the effectiveness of combating cybercrime in the conditions of martial law" (law of ukraine, march 24, 2022, no. 2149-ix). no less relevant is the development of a draft law that proposes to amend the legislation governing relations in the field of national security by expanding the range of subjects of national security by the state space agency of ukraine with the corresponding range of functions and powers (official portal of the verkhovna rada of ukraine (2022)). draft law on amendments to the law of ukraine "on the fundamentals of national security of ukraine" and the law of ukraine "on space activities"). summarizing the above, it is necessary to note the following. the legal and economic foundations of the national security of ukraine were formed within the framework of the normative provisions of the constitution of ukraine and fundamental legislative acts adopted to develop its provisions, where three stages can be distinguished: 1) the initial period within the framework of the national security concept of ukraine of 1997, which laid down the general rules for regulating legal relations in this area; 2) the period of unification and systematization of regulatory requirements in this area in compliance with the proportionality of public and private national interests included in the content of national security, with priority given to the latter within the framework of the law of ukraine "on the fundamentals of national security of ukraine" from 2003 to 2018; 3) the period of adaptation of the regulatory framework in the field of national security to the geopolitical challenges faced by ukraine after the revolution of dignity within the framework of the law of ukraine "on national security of ukraine" from 2018 to the present. the transformation of the normative and economic basis of social relations in the field of national security has created conditions for qualitative transformations of the legal regulation mechanism, which would take into account the dynamics of socio-political and economic processes in modern society, as well as foreign and domestic political challenges, creating a compromise structure between the defining interests of society and the individual. among the prospects for the normalization of legal relations in the field of national security of ukraine, the priority measures taken by all institutions of power and public origin to protect national interests, in particular measures in the foreign policy sphere, baltic journal of economic studies 151 vol. 8 no. 3, 2022 in the field of state security, in the military sphere and in the field of state border security of ukraine, in the domestic political, economic, social and humanitarian spheres, in the scientific and technological sphere, in the field of civil protection, in the environmental and information spheres are highlighted. in addition, a characteristic feature of such measures should be their extraordinary efficiency, which is mediated by the involvement of all branches of government and civil society institutions on the basis of deep coordination of such activities, the use of international experience, cooperation with international organizations of military-economic type, the dissemination of judicial practice of international courts following the example of the european court of human rights, etc. 4. conclusions as conclusions on the basis of the study of the state and prospects of development of legal and economic foundations of public relations in the field of national security of ukraine, it is necessary to express the following. the legal and economic foundations of ukraine's national security are based on the fundamental provisions of international law, primarily the un charter and the universal declaration of human rights, which balance the interests of man and society and do not harm the former. it is the constitution of ukraine that continued the progressive movement towards the implementation of international standards for the protection of national interests within the framework of measures that are part of the national security of ukraine, where from the very beginning the protection of private rights and interests was a priority, which fully corresponds to the content of art. 3 of the constitution of ukraine. the formation of legal and economic support of national security of ukraine has passed three stages: 1) the initial period, when the general rules for regulating legal relations in this area were laid down; 2) the period of unification and systematization of regulatory requirements in this area in compliance with the proportionality of public and private national interests that are part of the content of national security, with priority given to the latter; 3) the period of adaptation of the regulatory framework in the field of national security to the geopolitical challenges faced by ukraine after the revolution of dignity. each of these stages is determined by its own generalizing features. thus, the first one defines the general concept of national security, the constituent elements of the relevant relations (subjects, object and content), the range of principles of national security and national interests, including economic content, the main threats and directions of state policy. among the features of the second one are the following: the system-forming definition of the purpose of the state policy in the field of national security, the system of legal foundations of national security has been formed, the issue of the legal regime of national security objects with priority given to some of them, including economic content, and its subjects in terms of functions and powers has become widespread; differentiated threats to the national security of ukraine, including economic and financial, and relevant directions of state policy in the most important spheres of life. the third stage was marked by the following changes: state sovereignty, territorial integrity and democratic constitutional order came to the forefront of national interests due to the real threat to these interests in connection with the existing aggression; categorical definitions of a number of strategic documents in the relevant areas of national security were found, with the inclusion in their content of the qualification of threats, directions of state policy and appropriate response measures; the legal status of the subjects of national security was regulated and significantly expanded; the content of the powers and functions of the abovementioned subjects is dechronized, and the content of the activities of citizens and public organizations is left out of attention; for the first time, elements of democratic civilian control in the field of national security were introduced into the legal field. in the context of the study of the prospects of legal and economic regulation of national security, the legislative work of the verkhovna rada of ukraine was analyzed in order to respond to the most serious challenge to the statehood of ukraine – the aggression of the russian federation, which allowed to identify the following areas of national security by proportion: in the foreign policy sphere, in the sphere of state security, in the military sphere and in the sphere of security of the state border of ukraine, in the domestic political, economic, social and humanitarian spheres, in the scientific and technological sphere, in the sphere of civil protection, in the environmental and information spheres. the modern scientific developments on the issues of ensuring the national security of ukraine are analyzed, which allowed to identify promising directions for the development of legal and economic measures aimed at ensuring national security, in particular, preventing threats in the sphere of influence of geopolitical vectors of the modern world system on the formation of ukrainian statehood, preventing the influence of negative factors of internal and external origin: 1) separatism; 2) cyber crimes; 3) corruption; 4) economic and financial threats; 5) energy crisis; 6) covid-19 pandemics, etc. baltic journal of economic studies 152 vol. 8 no. 3, 2022 in addition, a characteristic feature of such measures should be their extraordinary efficiency, which is mediated by the involvement of all branches of government and civil society institutions on the basis of deep coordination of such activities, the use of international experience, cooperation with international organizations of military-economic type, the dissemination of judicial practice of international courts on the example of the european court of human rights, etc. references: united nations charter (1945). available at: https://www.un.org/en/about-us/un-charter/full-text (accessеd july 22, 2022). universal declaration of human rights (1948). available at: https://www.un.org/en/about-us/universaldeclaration-of-human-rights (accessеd july 22, 2022). zahorulko, a. 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(in ukrainian) received on: 25th of july, 2022 accepted on: 29th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 54 vol. 7 no. 4, 2021 corresponding author: 1 uzhhorod institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: hushtantetiana@gmail.com orcid: https://orcid.org/0000-0002-0299-0437 researcherid: https://publons.com/researcher/4506839/ 2 uzhhorod institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: kolodiychuka@i.ua orcid: https://orcid.org/0000-0001-5727-0560 researcherid: https://publons.com/researcher/3438947/anatoliy-kolodiychuk/ doi: https://doi.org/10.30525/2256-0742/2021-7-4-54-62 defining conditions for increasing innovation activity in the industrial complex: essence, systematization, identification tetiana hushtan1, anatoliy kolodiychuk2 abstract. the subject of the study is to substantiate classifications of the factors of innovation development of the industry: according to the priority, traditional, barrier, according to the hierarchical level of innovation, the nature of supply demand for innovation, the peculiarity of the influence of factors on the market environment, the influence of factors on innovation localization, importance of innovations, the effect of innovation, nature of the impact, the power of influence, the type of competition, and other classifications of factors of innovation development of the industry. the need to intensify the development of ukrainian industry in an innovative way requires the identification of the impact on these processes of various factors. to group these influences, the assessment of these factors should be done in the context of separate classes. for this purpose, it is necessary to develop a classification of innovative factors of industrial development. the purpose of the paper is to investigate and systematize the defining conditions for the activation of innovative development in the industrial sphere. the following methods were used in the work: dialectical method of scientific knowledge, analysis and synthesis, comparative, as well as the method of data generalization. it is proved that the complex non-use of these classifications for the substantiation of innovative development of the industry will improve the quality of planning and forecasting documentation and provisions of industrial policy. the applied meaning arising from the criteria for the classification of factors is based on their specific spatiotemporal and situational application, in particular, in conditions of imperfect competition. the classification of innovative factors of industrial development according to their priority is given. in this classification, the priority is determined by the importance and relevance of innovative industry development tasks on the basis of conclusions made as a result of the literature review. summarizing the factors of innovation development in the barrier classification allows us to distinguish three aggregated groups of factors: socio-political and managerial, socio-economic, and financial. our socio-economic analysis of innovative development factors of industry also allowed us to identify the following their classification attributes: the hierarchical level of innovation implementation, the character of demand for innovation, the nature of the impact on the market environment, the type of impact, the time horizon of action, impact on the area of innovation localization, the economic essence of innovation, the nature of the significance of innovation, innovation effect, the nature of effective impact, the power of influence, the type of competition. key words: innovation development, industry, conditions, systematization, classes, processes, priority, competition. jel classification: e23, o31 1. introduction innovative development of the industry is influenced by a number of factors. these factors can be structured both vertically and horizontally. the structuring of factors "vertically " is essentially a reflection of the hierarchical groups of factors and the peculiarities of their influence. if we talk about the classification of factors " horizontally," we mean how different factors of the same hierarchical level affect the development of the industry. in this case, imperfect competition can be regarded as a special group of factors. baltic journal of economic studies 55 vol. 7 no. 4, 2021 therefore, the need to intensify the development of ukrainian industry in an innovative way requires identifying the impact on these processes of various factors. to group these influences together, these factors must be evaluated in the context of individual categories. to do this, it is necessary to develop a classification of factors of innovation development of industry. at the present stage, the problem of radical improvement of the parameters of the structure and efficiency of domestic industrial production requires the intensification of innovative industrial development. under the conditions of state deindustrialization, loss of its competitive position in the innovative sphere, on the one hand, and globalization of markets, technologies and capital – on the other hand, innovative development and achievement of competitive business, socio-economic conditions remains one of the driving forces of industrial revival and economic growth. also, at the present stage, the conditions of innovation activity in ukraine have become more complicated due to the deepening of imperfect competition, which manifests itself as an increase in the share of companies evading taxes in various ways, intensification of monopolization of certain markets, inhibition of innovation infrastructure and innovation range. innovative development of industry is influenced by a number of factors. these factors can be structured both "vertically " and "horizontally ". structuring factors "vertically " is essentially a reflection of hierarchical groups of factors and features of their influence. if we talk about the classification of factors "horizontally ", we mean how various factors of one hierarchical level affect the development of industry. at the same time, imperfect competition can be considered as a special group of factors. 2. analysis of recent research and publications the problems of determining the factors of innovative development of industry at the macro and micro level, their classification, patterns of the stimulating and inhibiting factors, the issue of developing an effective state mechanism for activating innovation development in industry were studied by scientists v. bozhkova (2011), o. horodyskyi (2007), l. solyanyk, yu. hrachova (2008), o. ihnatenko (2008), s. illyashenko (2010), o. kuzmin, t. kuzhda (2009), d. panteleychuk (2009), and others. factors of innovation development of industrial enterprises were studied by o. kuzmin, t. kudzhda (2009); spatial factors of innovation industrial development were considered in works of l. shevchuk (2011), s. schults (2010); environmental factors of innovation development of industry were investigated by v. bozhkova (2011), s. illyashenko (2010). however, many problems related to the classification of factors of innovation development of industry remain unclear. the aim of the article is to investigate and systematize the determining conditions for enhancing innovative development in the industrial sphere. 3. definitive conditions for enhancement of innovation activity in the industrial complex the determining place in the management of the industrial innovation development is the elucidation of industrial innovation development factors. first of all, let us note that under the category of "factor of innovation development of industry " we will understand the driving force of the system process, which is based on sound models and concepts, is based on the results of scientific and technological progress, which results in a strategic regulatory impact on industry, and which ends in a significant improvement in the structure and quality of industrial production. based on the study of several literature sources and the study of experience in the implementation of innovation, we developed a number of classifications of industrial innovation development in accordance with the classification criteria, which are shown in figure 1. it is known a number of factors of innovative development of industry, which differ in importance, duration, priority, etc. in the scientific literature, scientists use two approaches to the classification of factors: the traditional and by the priority of factors. we used both approaches. first, let us consider the traditional classification of innovative industrial development factors. the traditional classification developed by us contains the following groups of innovative industrial development factors: 3.1. geographic (natural-, political-, economic-, and social-geographic) position this group of factors reflects the influence of geographical factors on the innovative development of industry. the natural and geographical position affects the innovative development of industry through the relief, climate, hydrosphere of the territory in which the industrial facilities are located. the essence of the political and geographical position is reduced to the localization of the existing political situation. the influence of political and geographical location on the innovative development of industry is determined by the placement of industrial facilities in relation to state borders, political blocs of countries, territories with political instability, national and international transport corridors, etc. the influence of economic and geographical location on innovation activity in industry is manifested through the location of industrial baltic journal of economic studies 56 vol. 7 no. 4, 2021 facilities in relation to objects of economic value to them (markets for raw materials, markets for innovative products, customs borders, settlements, domestic and cross-border commodity and passenger flows, etc.). the socio-geographical position reflects the influence of territorial differentiation of the living standards of the population on the innovative development of industry. natural resource potential is a set of natural resources and stocks that can be used to innovation development of industry and able to provide it. we also made a classification of innovative industrial development factors by priority. as l.t. shevchuk notes, "the essence of the classification of factors by priority the value of their action lies in the fact that primarily consider factors whose influence in a particular spatiotemporal coordinate system is greatest" (shevchuk, 2011). in our classification, the priority is determined by the importance and relevance of innovative industrial development tasks based on the conclusions made in the development of the literature. in this case, the first place is given to the factors of actual innovative development of the industry (factors of the first order), which directly affect the innovative activity. the factors of innovation industrial development are follows: technology; legislation in the field of innovation activity; demand for innovative products; competitors; monetary policy of the state in the field of innovation activity; fiscal policy of the state in the field of innovation development of industry; development of international economic activity; the significance of the proposed innovation; business development; level of economic risk; investment resources (own, borrowed, attracted); information resources (including the unified information database of scientific and technological research); the volume of cost of innovation; payback period of innovations; bank lending of innovation sphere; insurance of innovation activity; the volume of state financial support for innovation development; the level of development of inter-firm innovation cooperation; the presence of cluster structures; formation of joint innovative projects (state, interstate and interregional level); technology transfer; cooperation of research institutions; venture business. 3.2. behavioral, innovation-entrepreneurial, and environmental factors the second-order factors include behavioral, innovation-entrepreneurial, and environmental factors. behavioral factors reflect the impact on the main generating force of innovative development, namely the highly skilled labor force. behavioral factors are follows: motivation of staff; readiness of personnel for innovations; level of personnel training; wage level; system of incentives for innovative activity; level of social status of staff; the prestige of innovative activity in society (the state of innovation culture); public according to the time horizon traditional by priority of factors by the hierarchical level of innovation introduction barrier by the power of influence according to the impact on the sphere of innovations localization according to the nature of the demand for innovation according to the peculiarities of the impact on the market environment by the economic essence of innovation by the nature of the effectiveness of the action by the nature of the significance of innovation by the nature of the impact of innovation on industrial development by type of innovative competition on the effect of innovation classification of innovation factors in industrial development figure 1. classification of innovation factors in industrial development source: compiled by authors baltic journal of economic studies 57 vol. 7 no. 4, 2021 recognition of innovative developments; the level of involvement of employees in making managerial decisions in the field of innovation activity; the possibility of further career advancement; international scientific, interregional, national cooperation; the level of communication "science and production", the possibility of commercialization of innovative developments; "outflow of minds"; development of innovative culture. innovation-entrepreneurial factors influence on the innovative development of industry at the micro level, and the innovative development of industry represents a synergistic effect from the innovation activity of entrepreneurial structures. innovative entrepreneurial factors are follows: efficiency of business management; specialization of the enterprise; organizational structure of the enterprise; personnel of the enterprise; suppliers of the enterprise; management technologies; consumers of innovative products of the enterprise; financial results of the enterprise activity; profitability of innovative products of the enterprise; regional government procurements of innovative products. environmental factors reflect the influence of spatial aspects of innovative development, the location of productive forces on the intensification of innovative activity; affect the development of the environment that makes possible the adoption of innovation. environmental factors are follows: geographic location; natural and climatic conditions; demographic development; resources; infrastructure; availability of technology parks, logistics centers; development of the financial market; level of education in the country; available level of scientific and technological progress; investment attractiveness of national industry for both domestic and foreign investors; efficiency of the mechanism of state innovation policy; innovative exhibitions, fairs, contests. ecological factors take into account the impact of the environment on the industrial development, the impact of new technologies on the ecology. ecological factors include: the impact of new technologies on the nature; the impact of new materials on the environment; the impact of new types of energy on the ecology; the impact of environmental regulations on the level of cost of innovative products; the impact of the environment on the quality of the workforce that introduces innovations; the benefits of implementing resourceand energy-saving technologies. 3.3. other factors of innovative industrial development the barrier classification developed by us contains the following groups of factors of innovation development of industry: legislative, political, managerial, economic, social, financial, environmental, scientific and technical, spatial, consumer, marketing, infrastructure, institutional, informational, humanitarian. a barrier may be any of the factors listed above, which makes it impossible to carry out innovation in the industry. the combination of legislative factors creates a legal and regulatory framework for the innovative development of industry. these factors regulate innovation processes at industrial enterprises, ensure the implementation of industrial reform on the path of innovative development. the influence of political convictions of the population, political parties, political events in the country on the development of the industrial sphere in an innovative way reflects political factors. managerial factors influence on the efficiency of innovative management of industry in general and management of innovation activities at industrial enterprises in order to increase their competitiveness. the general economic situation in the country reflects economic factors, including: development of entrepreneurship, international economic activity of the country, tax pressure. ensuring the needs of industry in a highly skilled workforce to intensify innovative activity, creating favorable conditions for its productive creative work, as well as meeting the demand for innovative products reflect the social factors of innovative development of industry. financial support of innovative development of industry reflects financial factors. financial factors, in turn, reflect the influence of monetary, fiscal and depreciation levers on the innovative development of industry in general, as well as industrial enterprises in particular. the requirement of ecological safety of industrial production in the process of activating innovation processes puts by a group of environmental factors, which reflects the environmental impact on the innovation-intensive industry. the group of scientific and technical factors of innovation development of industry outlines the development of scientific and technological progress, the potential of scientific personnel, technological basis of innovation development of industry, etc. first of all, the spatial factors embody the influence of the placement of innovative active industrial enterprises in relation to the sources of raw materials, labor markets, markets for sales of innovative products. according to l.t. shevchuk, the factors of placement can be simultaneously factors of development (shevchuk, 2011). e. alayev in the paper (alayev, 1983) notes that the same resource which, in relation to the object, served as a factor for the placement of the latter, correlated with the corresponding territory, can be considered as a development factor. influence of the level of prices and non-price characteristics of innovative products on the innovative development of industry has been reflected in baltic journal of economic studies 58 vol. 7 no. 4, 2021 consumer factors. the conditions of the distribution of innovative products and the provision of innovative services in the market determine the marketing factors of innovation development of industry. impact of development of scientific and innovative infrastructure on the course of innovative processes in industry is reflected in the group of infrastructure factors of innovation development of industry. influence of changes in institutions (the market of high-tech products, contractual relations in innovative business structures and between them, intellectual property relations) on the development of innovation activities in industry is taken into account in a group of institutional factors. one of the key groups in terms of resource provision of ground-breaking development of industry is a group of information factors. the group of information factors creates an information base for activation of innovation movement in the industry, which contains data on innovative developments and investmentinnovative alternatives. information resources are the source of innovation development. the factors of this group should include the following: providing industrial enterprises with access to scientific-technical, business and specialized information; assortment and cost of access to information products and services; access of educational institutions to foreign information resources; development of information infrastructure, etc. the level of qualification and experience of managers and their accountable workforce in industry, necessary to enhance innovation, reveal the humanitarian factors of innovative development of industry. the use of the barrier classification of innovative industrial development factors, which we have compiled, is of applied nature, and the strength of the impact of certain factors depends on the specific situation. in addition, in many cases it is necessary to take into account the multicollinearity of innovative industrial development factors (i.e. the strengthening of the influence of some factors at the expense of the action of others). summarizing the factors of innovation development in the barrier classification allows us to distinguish three aggregated groups of factors: socio-political and managerial, socio-economic, and financial. methods of research that are adequate to relevant approaches are given in table 1. by the hierarchical level of innovation introduction, factors of innovation development of industry can be divided into: – global. a group of global factors involves factors of global level that have an impact on the innovative development of industry through globalization processes in the world. examples of such factors include the activity of the united nations industrial development organization (unido), the policy of lending from the international monetary fund, the dynamics of indicators for the development of the world economy; – international. the group of international factors includes factors influencing innovation processes in industry through the system of international economic relations covering two or more countries. it includes integration associations of countries, state and dynamics of global capital movement, state and dynamics of international technology movement, state and dynamics of transnational workforce movement; – macroeconomic. macroeconomic factors influence the innovative development of industry at the level of the national economy. among these factors are the following: monetary policy of the central bank, fiscal policy in the state, development of strategies for innovative development of industry within the country, state standards of technical education, etc.; – regional. at the regional level, such factors are important in the innovative development of industry. for example, the infrastructure of the region, the investment attractiveness of the region; – microeconomic. at the level of individual business structures, the innovative development of the industry is influenced by microeconomic factors. among them are the following: efficiency of business management; organizational structure of the entity; specialization of the entity; personnel of the enterprise; suppliers of the company; financial results of the enterprise; management technology at the company; consumers of innovative products of the company; profitability of innovative products of the company. according to the nature of the demand for innovation. factors of new demand are as follows: the deployment of scientific and technological progress; table 1 research methods to be used in appropriate approaches to the classification of innovative industrial development factors approach to the classification of innovative industrial development factors method of research traditional descriptive and analytical by the priority of the factors sociological survey barrier correlation and regression dependencies source: compiled by authors baltic journal of economic studies 59 vol. 7 no. 4, 2021 factors of existing demand: increasing income levels of the population. the group of new demand factors includes the factors of innovative development of industry, which form the prerequisites for the emergence of new consumer needs. the group of existing demand factors includes the factors of industrial innovation development, which provide the growth of consumption of existing goods of innovative origin. the factors of specific influence on the market environment include: diversification factors in innovation markets; the level of scientific and technological progress; factors of market environment development for the implementation of innovation; market infrastructure. diversification factors in innovation markets provide modification and expansion of innovations in existing markets. market development factors for innovation expand markets for existing innovations. factors by the nature of the influence of innovations on industrial development include factors of direct influence: consumers, suppliers, legislative base, competitors; as well as factors of indirect influence: political events in the country, the development of innovation culture in society, the level of scientific and technological progress, the level of technology development. factors in the time horizon of action include: long-term (more than 5 years) – the strategy of innovation development of industry; medium-term (1-5 years) – cooperation of innovative active business structures; short-term (less than 1 year) – market conditions. long-term factors of innovative development of industry are strategic, medium-term are operational, and short-term are tactical. factors of influence on the sphere of localization of innovations include: industrial (available fixed assets), technological (new production technologies), managerial (motivation of management personnel, management strategies in the conditions of intensification of innovative activity, management personnel), social (income level of the population). production factors ensure the approbation and use in industrial production of innovative design developments that are aimed both at the simple expansion of production, and to improve its structure and types of production activities. technological factors create the necessary prerequisites for the introduction of industrial production innovative methods. management factors provide innovative transformation of organizational management structures at industrial facilities (microlevel), industries (meso-level) and industry as a whole (macrolevel), the improvement of management methods and leadership styles. social factors provide an opportunity to improve the standard of living of the population employed in industry. factors of economic essence of innovations include factors of influence on product innovations (level of scientific and technological progress), as well as factors of influence on procedural innovations (development of managerial technologies). factors influencing the formation and use in industry of food innovation (i.e., a new product or new service), which are characterized by market orientation, constitute the group of factors influencing product innovation. factors affecting procedural innovations contribute to the improvement of various processes in industrial enterprises (production, management, etc.), which increases the efficiency of their activities. factors by the nature of the importance of innovations include: factors of basic innovations (level of scientific and technological progress, epochal discoveries and inventions), factors of ordinal innovations (chain effect of consumption), factors of extraordinary innovations (snobbery effect in consumption), and factors of point-selective innovations (regional characteristics of demand). factors of basic innovations affect the practical implementation of significant advances in science and technology, which significantly change the conditions of competitive processes, transferring them to a qualitatively new, more technologically advanced level. factors of point-selective innovations affect the emergence and implementation of localized innovations with limited opportunities for their use. it is worth noting that a group of these factors, although increasing the efficiency of industry, but has a local nature. factors and their effect of innovation: factors providing economic effect (reducing the cost of innovative products), factors providing social effect (public access to information technology), factors providing environmental effect (new environmentally friendly technologies), factors providing comprehensive effect. factors that ensure the growth of profits from the introduction of innovation, becomes a group of factors that provide the economic effect. factors for achieving social results from the implemented innovations form a group of factors that ensure the social effect. factors reflecting environmental requirements for innovation are reflected in the group of factors providing the environmental effect. factors providing profit, social results and environmental impact are reflected in the group of factors providing complex (integral) effect of innovations. the slowdown of innovative development of domestic industry is a negative sign of the current period of development of the national economy. this problem is caused by a number of factors of negative influence on the activation of innovative activity in industry, from insufficient funding to the lack of highly skilled workforce baltic journal of economic studies 60 vol. 7 no. 4, 2021 in industrial enterprises, which could generate innovative developments. factors by the nature of the impact of innovation on industrial development can be divided into positive (stimulating) and negative (inhibiting). thus, the group of stimulating factors can be attributed to the factors that distinguished scientist t. i. horodyskyy (resource-legislative and management approach). in particular, he notes the following factors (horodyskyy, 2007): regulatory, finance and economics (system of financing innovative activity, system of formation of favorable economic environment in the innovation sphere) and organizational (mechanism of innovation activity realization, formation and implementation of innovation policy). we can distinguish the following approaches to the classification of inhibitory factors: macroeconomic, resource and potential, legislative, resource and management. thus, the macroeconomic approach (that is, the approach from the standpoint of state economic policy in the direction of ensuring the innovation development of domestic industry) is presented in the works of n. s. somenkova, which distinguishes the following factors that hinder or restrict innovation activity: high cost of innovation, low level of scientific and technological potential, low level of interaction and cooperation in the development of technological innovations, insufficient financial support of the state, lack of own funds, shortage of skilled personnel (somenkova, 2008). resource and potential approach has been reflected in the studies of d. yu. panteleychuk, who highlights such inhibitory factors: low investment activity of domestic and foreign investors, low level of state financing of innovation development and lack of own funds of enterprises, weakening of relations of science and production, imperfection of tax legislation (panteleychuk, 2009). however, in our opinion, the most complete group of inhibitory factors was described by o. ya. ihnatenko (ihnatenko, 2008) (resourcelegislative and management approach), distinguishing in this group three subgroups: economic (insufficient financial support of the state, lack of own funds, high costs on the innovation, long payback period of innovations, underdevelopment of the financial market and unwillingness of capital to a large investment in the innovation sphere, the complexity of attracting external financial resources due to the low attractiveness of the ukrainian industry for investment; the uncertainty of the terms of the innovation process, the high economic risk, low level of solvent demand for products), production (lack of information on sales markets, lack of information on new technologies, enterprises' unresponsiveness to innovations, lack of opportunities for cooperation with other enterprises and scientific organizations, lack of qualified management of innovative processes aimed at obtaining competitive advantages ) and legal (imperfection of instruments of legal regulation of innovation activity, lack of optimal level of taxation). under the influence of factors of innovation development of industry can be divided into: factors of weak influence (geographical location, natural and climatic conditions), factors of medium impact (insurance of innovation activity, amount of state financial support for innovation development, presence of cluster structures, international scientific, interregional and national cooperation, "brain drain", specialization of enterprise, organizational structure of enterprise, enterprise suppliers, environmental impact on quality of labor that introducing innovations), factors of strong influence (competitors, monetary policy of the state in the field of innovation activity, level of economic risk (kolodiychuk, 2017), information resources, bank lending, personnel motivation, level of social status of personnel, public recognition of innovation developments, level of communication "science and production", possibility of commercialization of innovative developments, personnel of the enterprise, management technologies, financial results of the enterprise activity, profitability of innovative products of the enterprise, investment attractiveness of national industry for domestic and foreign investors, the effectiveness of the mechanism of state innovation policy, the impact of new technologies on the environment, the impact of environmental regulations on the level of innovative products cost), very influential factors (technology, legislation in the field of innovation, demand for innovative products, fiscal policy of the state in the field of innovation development of industry, entrepreneurship development, investment resources, amount of expenses for innovation, level of personnel training, level of wages, incentive system for innovation activity, resources, infrastructure, availability of technology parks, logistic centers, level of education in the country, available level of scientific and technological progress). according to the influence on the conditions of imperfect competition factors of innovative development of industry can be divided into the following: factors of innovation development of industry, which exacerbate the conditions of imperfect competition (patent and licensing legislation), factors of innovative development of the industry that do not affect the conditions of imperfect competition (the level of scientific and technological progress), factors of innovation development of industry that mitigate the conditions of imperfect competition (state antimonopoly regulation in the markets of scienceintensive and innovative products). factors by types of innovative competition include the following: factors of innovative development of perfect competition industry (state antimonopoly regulation, transparency of government agencies, lack baltic journal of economic studies 61 vol. 7 no. 4, 2021 of barriers to entry-exit to the market, free access to market information, availability of substitute goods, etc.), factors of innovative development of imperfect competition industry (monopolization, corruption, insiderism, etc). it is important to note that the most important factor in the innovation development of imperfect competition is monopolization. the monopolized position does not stimulate the monopolistic enterprise to innovative activity, as it provides not a competitive advantage in the form of implementation of innovative developments, but the elimination of competitors. nevertheless, modern monopolies face "challenges" from related industries, which they eliminate with the help of innovative technologies, the use of which allows to reduce the cost of production. however, despite the high concentration of capital, the priority for the monopolist is to maintain a privileged position in the market, not the cost of leadership in innovative development. under conditions of thriving imperfect competition, administrative monopoly, which is created by granting exclusive rights to certain enterprises to engage in certain types of economic activity, has a particularly negative impact on innovative activity. 4. conclusions thus, in the traditional classification of innovative development factors of industry, all factors are considered in a certain order, established by many researchers. the classification of innovative factors of industrial development according to their priority is given. in this classification, the priority is determined by the importance and relevance of the tasks of innovative industry development, based on the conclusions drawn as a result of a review of the literature. generalization of innovative development factors in the barrier classification allows us to distinguish three aggregated groups of factors: socio-political and managerial, socioeconomic, and financial. in addition, our socio-economic analysis of factors of innovative development of industry also allowed us to identify the following their classification attributes: the hierarchical level of implementation of innovation, the nature of the demand for innovation, the nature of the impact on the market environment, the nature of influence, the time horizon of action, impact on the area of innovation localization, the economic nature of innovation, the nature of the significance of innovation, innovation effect, the nature of effective influence, the power of influence, type of competition. the applied value of these classifications lies in their specific spatiotemporal situational use in the development of planning and forecasting documentation and provisions of industrial policy. for example, when planning the introduction of innovations, the classification of factors is taken into account in the time horizon of action, which allows you to plan in advance the development of funds for them. the economic policy of the state should use the classification of factors according to the hierarchical level of innovation 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(in ukrainian) baltic journal of economic studies 81 vol. 1, 2015 indicator system for measurement of financial and economic activities in public institutions valeriy dudnyk1, ludmila lozovska2, national metallurgical academy of ukraine, ukraine abstract. the object of the work is study of methods for analyzing the current financial and economic performance of a company as well as the usage of existing methods for the assessment of the company in the current and future periods. analysis of financial and economic performance provides not only assessment of the current situation of a company, but a projection of its future behavior. thus, the results can be used for planning and prediction. different ways of handling of economic information are currently used in activity analysis to study the factors influencing the performance of a company and to account its reserves. an objective assessment of the financial and economic situation of the modern enterprise is the crucial part of justified decision-making. it forms the basis for determining the development strategy and acts as one of the key indicators for investors and creditors. tracking and evaluating the effectiveness of a company requires above all comprehensive assessment of its financial and economic activities, monitoring the implementation of decisions, and identification of reserves for improvement. the process of activity analysis requires generalization of models which allow using their results both as a guide for future development of the economic system as well as a base for comparison and evaluation of the present state of the company. this enables justified decision making in particular situations and clarifies usage of existing methods for assessment of the company in the current and future periods. results. financial and economic activities of a company require comprehensive analysis, which may be carried out in the following steps: formulating and analyzing business objectives of the company, forming the information basis, constructing a comparison table, analyzing the data, producing a comprehensive rating score of the financial and economic situation of the company. comprehensive rating score should take into account all important parameters of financial, economic, and industrial activity in the company. it should be constructed using the data on the production potential of the company, its profitability and business activity, financial independence and financial status, etc. the rating score can be determined using additive convolution. practical value. thus, a comprehensive analysis of financial and economic performance of a company through dynamic analysis using reference matrices allows: to get a justified assessment of the financial position and financial results of the company; to identify the causes of changes in financial position and financial results; to calculate a comprehensive rating that takes into account the most important parameters of financial, economic, and production activity of the company; to provide well-reasoned managerial decisions in finance in order to improve the financial condition and financial results of the company and to increase the efficiency of its economic activity. achieved results enable conducting a comprehensive analysis of the financial and economic state of public institutions. key words: financial position, financial results, efficiency, forming the information basis, dynamic analysis. jel classification: g13, g23, h21, d81 corresponding author 1 department of economic informatics, national metallurgical academy of ukraine. e-mail: vv.dudnyk@gmail.com 2 department of economic informatics, national metallurgical academy of ukraine. e-mail: l.lozovskaya@gmail.com 1. introduduction controlling is a well-known part of the concept of system management. it is usually em-ployed in those organizations where management is in crisis or economic activity does not meet modern requirements and market demands. reasons for development and implementation of con-trolling in organizations include worsening of economic indicators, appearance of new goals, lack of coordination in existing goals, outdated methods of planning and analysis, existing methods of accounting and analysis being inadequate for activity tracking and decision-making, duplicate or lacking functionality or conflicts arising from its usage. such conditions demand introduction of a controlling system in different areas: organization, products, procurement, personnel, equipment, information systems and reporting. (blank, 2001). baltic journal of economic studies 82 vol. 1, 2015 controlling is meant to solve the task of merging diverse management information of an organization into a single stream. controlling instruments can be classified by two criteria: their scope and period. one of the most effective methods of controlling implementation is gradual changing of information and control flows of the organization. currently, many enterprises have an urgent need for integrated methodical and instrumental support of major management functions: planning, monitoring, accounting and analysis, comprehensive coordination of business process management aspects. this need results is a growing interest on behalf of many organizations to software support for planning and accounting. however, even the introduction of the most modern and expensive software products cannot and will not con-tribute to the construction of a clear, unbiased model of a company without usage of modern analysis and prediction methods, especially when management personnel is incapable of at least medium-termed planning. it should also be noted that managers and analysts use different sets of tools. this fact can cause difficulties in coordination and lack of information provided to the company administration. controlling solves this very of task of management information integration within an organization. it should be noted that it is necessary to think carefully and weigh the need for the introduction of any tool. for example, companies that have monopoly in the market do not really need tools for detailed analysis of their competitors’ activity. in such cases, the budgeting system is the most appropriate method of planning. however, there are companies where the creativity of the staff is the primary source of income. usage of a budgeting system in such companies often gives negative effect by reducing motivation. implementation of controlling requires careful assessment of the tools to be implemented as well as the correspondence of the implementation complexity, the need for acquired information, and the resulting model of the company to its actual situation. step-by-step implementation will result in optimal usage of available human and financial resources. financial and economic analysis is one of the most important functions of the controlling system. it allows development of strategy and tactics of the company, control over their execution, objective assessment of the company effectiveness and identification of reserves for its improvement. certain models are the most appropriate for studying of company activities. such models should enable usage of the acquired results as a guide to the future development of the economic system, as a base for comparison and evaluation of the current state, and as a justification of management decisions in particular situations. analysis of financial and economic performance provides not only assessment of the current situation of a company, but a projection of its future behavior. thus, the results can be used for planning and prediction. our goal is to study methods for analyzing the current financial and economic performance of a company as well as the usage of existing methods for the assessment of the company in the cur-rent and future periods. 2. analysis of recent research and publications different ways of handling of economic information are currently used in activity analysis to study the factors influencing the performance of a company and to account its reserves. decision to use the either way depends on the goals and objectives of the analysis, available computational capacity, and many other factors. an objective assessment of the financial and economic situation of the modern enterprise is the crucial part of justified decision-making. it forms the basis for determining the development strategy and acts as one of the key indicators for investors and creditors. rapid changes in economic relations between the various entities require appropriate supply of information about financial and economic condition of market economy. financial reporting is the main source of information for formalized evaluation and analysis of financial and economic performance. domestic literature on economics often notes that “providing the investor with objective in-formation is a prerequisite for attracting investment through the securities market, the investor should obtain effective indicators of solvency and financial stability, calculated in accordance to financial statements” (zaharchuk, 2009). analysis of the recent research and publications indicates existence of issues in completeness and quality of information sources on the subject of objective assessment of financial and economic state of the modern companies. for example, g. kucherenko concluded that “existing principles of balance do not correspond to the economic concept of controlled resources, and therefore do not provide useful information to external users on the financial condition of the entity” (кucherenko, 2009). prominent russian scientist ya. sokolov emphasizes that “new methodologies have with-drawn concepts such as “abstract assets” and “persistent liabilities”, the lack of which, of course, distorts the analysis of the financial condition of the company”. reliability of traditional methods of assessment of financial and economic activity when applied to different economies is also a subject to discussion. ya. sheverya notes that “differences in information sources compilation (financial reports based on different standards) require adaptations and changes in methods and techniques to implement proper financial analysis” (sheverya, 2007). in today’s economy, performance analysis of financial and economic performance is an important component of overall management information system, primarily meant to ensure stable operation of the business. in practice, the assessment of the financial and economic state enterprises, regardless of the technique used, generally comes down to calculating numeric values of financial ratios, indicators of structural changes, the pace of change. success of financial analysis greatly depends on the select method. in practice, the following methods of financial baltic journal of economic studies 83 vol. 1, 2015 analysis are used most often (blank, 2001, кorobov, 2000): horizontal analysis, vertical analysis, trend analysis, method of financial ratios, comparative analysis, factor analysis. according to o. oleksyuk (оltksyuk, 1998), financial competitiveness of a company is characterized by its financial condition. flow of assets, labor, and material resources is accompanied by formation and expense of funds. thus, a company cannot conduct industrial, economic and financial activity without knowledge of its own financial condition and factors affecting it, without comparing profits to expenses. financial condition of a company reflects all aspects of its production and business activities. through analysis of the financial condition of a company it is possible to evaluate past, current, and future position of the company in the market environment and to take decisions which may affect future production and economic activity of the company. m. korobov notes that financial condition is characterized by the supply of financial re-sources necessary for normal industrial, commercial and other activities, by feasibility and efficiency of their deployment and usage in financial relations with other business entities, by solvency and financial stability of the company (кorobov, 2000). 3. statement of problem tracking and evaluating the effectiveness of a company requires above all comprehensive assessment of its financial and economic activities, monitoring the implementation of decisions, and identification of reserves for improvement. the process of activity analysis requires generalization of models which allow using their results both as a guide for future development of the economic system as well as a base for comparison and evaluation of the present state of the company. this enables justified decision making in particular situations and clarifies usage of existing methods for assessment of the company in the current and future periods. 4. principal research findings financial and economic activities of a company require comprehensive analysis, which may be carried out in the following steps. step 1. formulation and analysis of business objectives. financial analysis depends primarily on the purpose and objectives of the company, including the owner of the production means (i.e, the state), personnel, management, suppliers, partners, and tax authorities. all of them are interested in effective operation of the company. for example, the owners are interested in income and financial independence of the company. the management and personnel are interested in financial results, profitability, etc. step 2. formation of an information basis. financial statements are the basis for comprehensive economic analysis as the actual activities of a company are recorded in its integrated accounting system. comprehensive financial analysis considers performance indicators as a whole, without using the individual ones as a single data source. important requirements to the performance indicators system are: overall coverage of activity aspects, relationships among the indicators, their logical coherency. step 3. construction of a comparison table. this step involves aggregation of individual balance sheets and financial reports of the company to calculate financial ratios, which are then grouped into specific clusters of indicators and collected into a pairwise comparison matrix. the matrix of pairwise comparisons is a matrix //фij//n×n consisting of financial and economic indicators (utochnenie, 2009): 1, if ( ) ( ) 0, if growth rates are not comparable 1, if ( ) ( ) i j ij i j t t ф t ф t ф φ > φ  =  − < ∑ ∑ ∑ ∑ = = = == n i n j ij n i n j ij e a c 1 1 1 1 ∑ = = n i ikir 1 λ , 1 1 =∑ = n i iλ nkkk  ...21 ∑ ∑ ∑ = = == n i n j ij n j ij i x x 1 1 1λ , (1) where t(ф i ) denotes growth rate of the i-th indicator which is the ratio of the current indicator value to its baseline (preceding) period, i.e. t(ф i )=ф i (t)/ф i (t-1); n is the number of financial and economic indicators. growth rates of indicators are considered incomparable if the available knowledge for the current period does not allow to positively determine dynamics of the indicators, whether they are going to increase or decrease. construction of a dynamic analysis model consists of the following stages: − develop and analyze the goal; − select the analytical ratios; − group financial and economic indicators; − order the indicators of each group by their growth rates; − build a matrix of pairwise comparisons of financial and economic indicators using financial and operational ratios. step 4. data analysis. it should be performed as follows: 4.1. use the initial data of the company’s balance sheets and financial statements to construct the matrix of pairwise comparisons of growth rates of financial and economic indicators belonging to a particular group. 4.2. calculate generalized assessment of the financial condition of for the group of indicators which describe the distance between the approximation and the actual reference matrix. that is 1, if ( ) ( ) 0, if growth rates are not comparable 1, if ( ) ( ) i j ij i j t t ф t ф t ф φ > φ  =  − < ∑ ∑ ∑ ∑ = = = == n i n j ij n i n j ij e a c 1 1 1 1 ∑ = = n i ikir 1 λ , 1 1 =∑ = n i iλ nkkk  ...21 ∑ ∑ ∑ = = == n i n j ij n j ij i x x 1 1 1λ , (2) where c is the rating of financial and economic stability of the company; n is the number of indicators in the reference model; i, j are indices of the indicators; а ij is an element of a match matrix for the actual and reference growth rates (equal to one when the actual growth rate is less than the corresponding reference value, and zero otherwise); e ij is an element of the reference matrix of ratios of indicator growth rates. stability rating values are between zero and one. the closer stability rating is to the unit, the closer the indicators are to their reference ratios. baltic journal of economic studies 84 vol. 1, 2015 4.3. conduct a factor analysis of generalized assessments of financial condition of the company. define the main factors, rate them by degree of their influence over economic activity of the company. (zaharchuk, 2009, кucherenko, 2009, кorobov, 2000). 4.4. conduct a qualitative analysis of the results in order to identify problems and ways of increasing financial and economic stability of the enterprise. 4.5. make a short or long term prediction for the values of financial condition parameters. (zaharchuk, 2009). step 5. producing a comprehensive rating score of the financial and economic situation of the company. a comprehensive rating score should take into account all important parameters of financial, economic, and industrial activity in the company. the data on the production potential of the company, its profitability and business activity, financial independence and financial status, etc. should be used in construction of such rating. the rating score can be determined using additive convolution (yakovlev, 2006): 1, if ( ) ( ) 0, if growth rates are not comparable 1, if ( ) ( ) i j ij i j t t ф t ф t ф φ > φ  =  − < ∑ ∑ ∑ ∑ = = = == n i n j ij n i n j ij e a c 1 1 1 1 ∑ = = n i ikir 1 λ , 1 1 =∑ = n i iλ nkkk  ...21 ∑ ∑ ∑ = = == n i n j ij n j ij i x x 1 1 1λ , (3) where 1, if ( ) ( ) 0, if growth rates are not comparable 1, if ( ) ( ) i j ij i j t t ф t ф t ф φ > φ  =  − < ∑ ∑ ∑ ∑ = = = == n i n j ij n i n j ij e a c 1 1 1 1 ∑ = = n i ikir 1 λ , 1 1 =∑ = n i iλ nkkk  ...21 ∑ ∑ ∑ = = == n i n j ij n j ij i x x 1 1 1λ is weight coefficients, ni ,1= ; k i is the rating by the i-th indicator group. the weight coefficients are obtained after the indicators are ordered by the experts: 1, if ( ) ( ) 0, if growth rates are not comparable 1, if ( ) ( ) i j ij i j t t ф t ф t ф φ > φ  =  − < ∑ ∑ ∑ ∑ = = = == n i n j ij n i n j ij e a c 1 1 1 1 ∑ = = n i ikir 1 λ , 1 1 =∑ = n i iλ nkkk  ...21 ∑ ∑ ∑ = = == n i n j ij n j ij i x x 1 1 1λ . (4) here each of the experts offers his or her own ordering of financial and economic indicators by decreasing importance. preferences of individual experts are compiled into a generalized rating as in (4). after that a matrix of pairwise comparisons is constructed for groups of financial statement indicators. if one group of indicators is favored over another, the corresponding element of the matrix of pairwise comparisons х ij contains unity, otherwise it contains zero. weight coefficients of particular groups are calculated using the following formula: 1, if ( ) ( ) 0, if growth rates are not comparable 1, if ( ) ( ) i j ij i j t t ф t ф t ф φ > φ  =  − < ∑ ∑ ∑ ∑ = = = == n i n j ij n i n j ij e a c 1 1 1 1 ∑ = = n i ikir 1 λ , 1 1 =∑ = n i iλ nkkk  ...21 ∑ ∑ ∑ = = == n i n j ij n j ij i x x 1 1 1λ . (5) suppose that we have identified six groups of financial statement indicators: e.g., solvency liquidity, business activity, profitability, financial independence, the situation in the stock market, and property status (see table 1). 5. research conclusions. thus, a comprehensive analysis of financial and economic performance of a company through dynamic analysis using reference matrices allows: to get a justified assessment of the financial position and financial results of the company; to identify the causes of changes in financial position and financial results; to calculate a comprehensive rating that takes into account the most important parameters of financial, economic, and production activity of the company; to provide well-reasoned managerial decisions in finance in order to improve the financial condition and financial results of the company and to increase the efficiency of its economic activity. table 1 the matrix of pairwise comparisons of groups of financial report indicators and the calculation of weight coefficients # indicator group 1 2 3 4 5 6 sum weight coefficient 1 business activity 1 1 1 1 1 1 6 0,28571429 2 profitability 0 1 1 1 1 1 5 0,23809524 3 property status 0 0 1 1 1 1 4 0,19047619 4 financial independence 0 0 0 1 1 1 3 0,14285714 5 solvency liquidity 0 0 0 0 1 1 2 0,0952381 6 position in the stock market 0 0 0 0 0 1 1 0,04761905 references blank, i. 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(2006). коntroling na bazi informaciinyh tehnologii [controlling on the basis of information technologies] – київ, center of educational literature, 318 p. yaroschuk, s. rol koncepcii «kontrolingu» v procesi upravlinya pidpryiemstvom [role of the concept of “controlling” in business]. retrieved from http://www.library.tane. edu.ua/images/nauk_vydannya/vmtcdg.pdf on 13.03.2013. zaharchuk, n.(2010). analiz finansovoy zvitnosti yak faktoriv pryinyatya investytciynyh rishen [analysis of financial reports as a factor for investment decision making]. innvatciina ekonomika. ukrainian scientific and industrial journal, 1, pp. 196-199. zorina, о. (2009). organizatciya kontrolingu v ukraini: pytania teorii i praktyky [theory and practice of implementation of controlling in ukraine]. proc. of the bulletin of the national university “lvivska polytechnika”, 647(113). валерий дудник, людмила лозовская формирование системы показателей оценки финансово-хозяйственной деятельности в государственных учреждениях аннотация. целью работы является исследование методов анализа текущего финансово-экономического состояния предприятия, а так же использование существующих методик для оценки состояния предприятия в текущем и будущих периодах. учитывая, что анализ финансово-экономического состояния предприятия предусматривает не только текущую оценку деятельности предприятия, но и оценку состояния предприятия будущих периодах, то полученные результаты можно использовать для прогнозирования. для изучения факторов влияния на результаты деятельности предприятия с учетом резервов, во время анализа деятельности используются различные способы обработки экономической информации. объективная оценка финансово-экономического состояния современного предприятия является ключевой в процессе принятия обоснованных управленческих решений. она служит основой для определения стратегии развития предприятия, одним из ключевых показателей как для инвесторов так и кредиторов. отслеживание и оценивание эффективности деятельности предприятия требует прежде всего проведения комплексной оценки финансово-экономической деятельности учреждения, контроля над выполнением принятых решений и выявления резервов ее повышения. процесс исследования деятельности предприятия требует обобщения моделей, которые предоставляют возможность использования полученных результатов как в качестве ориентира будущего развития экономической системы, так и в качестве базы для сравнения и оценки достигнутого состояния, обоснования и принятия управленческих решений в конкретной ситуации, и дальнейшее уточнение использования существующих методик для оценивания состояния предприятия в текущем и будущих периодах. результаты. финансово-экономическая деятельность предприятия требует всестороннего анализа, который можно выполнять по следующим шагам: формулирование и анализ цели деятельности предприятия; формирование информационной базы; построение таблицы сравнений; анализ информационной базы; формирование комплексной рейтинговой оценки финансово-экономического состояния предприятия (системы). комплексная рейтинговая оценка должна учитывать все важнейшие параметры финансово-экономической и производственной деятельности предприятия. в процессе ее построения следует использовать данные о производственном потенциале предприятия, его рентабельность и деловую активность, финансовую независимость, имущественное состояние и др. рейтинговую оценку можно определить по формуле аддитивной свертки. таким образом практическое значение состоит в возможности проведения комплексного анализа финансово-экономического состояния предприятия (учреждения, системы) на базе динамического анализа с использованием идеальной матрицы, что предоставляет следующие возможности: получить объективную оценку текущего финансового состояния и финансовых результатов предприятия; определить причины изменения финансового состояния и финансовых результатов предприятия (учреждения, системы); рассчитать комплексную оценку, которая учитывает важнейшие параметры финансово-экономической и производственной деятельности предприятия; подготовить обоснованные управленческие решения в области финансов с целью улучшения финансового состояния и финансовых результатов предприятия, повышения эффективности хозяйственной деятельности. значение полученных результатов состоит в том, что они предоставляют возможность проводить комплексный анализ финансово-экономичного состояния государственных учреждений. baltic journal of economic studies 105 vol. 8 no. 2, 2022 1 zaporizhzhia national university, ukraine (corresponding author) e-mail: t_deputy@ukr.net orcid: https://orcid.org/0000-0003-1101-8073 2 zaporizhzhia national university, ukraine e-mail: almak17@ukr.net orcid: https://orcid.org/0000-0003-0042-165x doi: https://doi.org/10.30525/2256-0742/2022-8-2-105-114 transition of quantitative indicators of corruption to the quality of extreme forms of denial of legal values tatiana kolomoiets1, oleksii makarenkov2 abstract. the article reveals the transition of quantitative indicators of corruption into the quality of extreme forms of denial of legal values, such as war. the tolerant attitude of citizens to corruption and the high level of involvement of society in corrupt relations eventually weakens such a nation to the point that it becomes incapable of resisting external military aggression. the fact of such a failure is proof of the transition of the quantitative indicators of corruption into the quality of violence and war as extreme forms of denial of legal values, which are reflected at the level of the constitution and the norms of international law, including humanitarian law. it has been established that the main burden of destroying and weakening key economic and state institutions of power in peacetime is borne by corrupt and traitorous individuals. their activities range from illicit enrichment through the decline of entire sectors of the economy to espionage (the transfer of secret information to foreign states), propaganda of the values of other nations/states, terrorism and other subversive activities. bribery, appointments to positions based on kinship and personal ties rather than professional qualities, and other ways of corruption reveal the social danger of the motive (subjective side) of the perpetrator and the method (objective side) of the customer of the crime. war is caused by the inability of law enforcement agencies to neutralize corruption in peacetime. this pattern is characteristic of both sides of the war. the state had the advantage of striving to integrate into a civilization whose standards allowed for much greater anti-corruption efforts (legislative, organizational-institutional, etc.) than a state not integrated into a highly developed civilization. the desire to return the occupied territories becomes an additional incentive to improve the activities of law enforcement agencies and other components of state power. at the same time, the aggressor state, which violates international law, has no such incentives to eradicate corruption and improve (organizational and technological) law enforcement. the author also emphasized that military law is a fully dynamic matter of change in the rules at the national and international level in the territory of war and in time of war. it is a system of generally binding rules. it regulates the legal relations between military personnel, and in wartime extends to the entire population. it is also noted that all national legislation during martial law and its transformation due to war, variations in the legal requirements of the occupiers in territories under their control, the norms of international humanitarian law and the practice of its application by the international committee of the red cross, relevant judicial and other acts of law. the author recognized that the implementation of national law in time of war is limited by the need for organizational, economic and other costs to counter the enemy. its effectiveness is also shown by the inertia of great corruption in peacetime, namely: insufficient technical equipment of troops; underdevelopment and psychological weakness of civil servants in a number of positions, etc. public authorities are forced to focus on informing and educating the population through programs adequate to the military challenges for civil servants (ideological level). there is a growing need to formulate timely and adequate changes in legislation to meet the changing conditions of war. it is important to activate existing and form other organizational institutions to neutralize the enemy as quickly as possible and restore constitutional order throughout the country (volunteers, volunteers, territorial defense of local communities, and other forms of self-organization). key words: corruption, humanitarian law, illicit enrichment, international law, law enforcement agencies, legal value, military law. jel classification: d73 baltic journal of economic studies 106 vol. 8 no. 2, 2022 1. introduction the un estimates that annual economic losses due to corruption amount to at least $2.6 trillion (5 percent of global gdp). corruption in ukraine remains a constant threat to the economic and military components of national security. corruption in ukraine remains a constant threat to the economic and military components of national security. the rate of corruption eradication during 2012–2022 has been slow, and the corruption perceptions index has improved by only 6 points. the historical period before 2012 was not marked by more significant progress in anti-corruption policies. calculations of ukraine's losses from corruption indicate that long-term trends of illegal income growth at the level of 25-40% of gdp persisted. there were significant differences between the official incomes of citizens and their expenditures. accordingly, indicators of inefficiency show the following annual losses from corruption. spending on bribes and anti-competitive collusion in public procurement (a total of 540 billion uah in 2021) amounted to 4-8 billion dollars. smuggling is estimated at $4 billion (total imports were $73.3 billion). losses from tax optimization through offshore jurisdictions amounted to $ 2 billion. the consequences of the use of non-commodity schemes and/or minimum amounts of taxable income are estimated at least at $ 1 billion. the definition of officially lower than actual wages causes damage to the state budgets of $ 2 billion annually. foreign investment of $35 billion and investment income of $3 billion are lost. according to the ministry of finance of ukraine, the curtailment of investment plans of foreign companies due to the low pace of reforms and high level of corruption will lead to the loss of the budget of ukraine in 2022 by 8.5 billion uah the national agency for the prevention of corruption in ukraine estimates the organizational and legal effect of the implementation of anti-corruption strategy in ukraine at least 8 billion dollars. however, since 2018, the state still does not have such a strategy. 2. analysis of recent topical resources the topic of the article was chosen because of the need to investigate the transition of quantitative indicators of corruption into the quality of extreme forms of denial of legal values. for ukraine, such denial has become a reality of war. this demonstrates the close connection of high levels of corruption and related crimes with war, military law and challenges to the country 's security. this nation is protected from external aggressors and at the same time has strong internal enemies: corrupt officials. dishonest government officials have for decades committed crimes to steal national wealth and enrich themselves. the scale and depth of such thefts involving businessmen have become so great that they have critically diminished the country 's defense capabilities. as a result, a foreign aggressor took advantage of the country 's weakness and waged war on it. given the destructive role of corruption in peacetime, it has become an integral part of social relations in wartime. the subject of the law of war has traditionally been the domain of international lawyers (n. bhuta, a. pagden, b. straumann – the justification of war and international order; c. zanin, v. martins, r . valim, c. boland, l. murur – waging war through law). at the same time, the issue of anti-corruption and the survival and development of human communities in times of war-related crisis is extremely complex and interdisciplinary. it is considered in the works of lawyers specializing in the theory (philosophy, anthropology, sociology) of law, criminal law, labor law and commercial law and other branches of law (p. p. bogutsky, v. m. koryakin, yu. i. migachev, v. y. pashinsky, i. f. pobezhimov, m. m. prokhorenko, v. v. shulgin, etc.), as well as economists (n. mulder – the rise of sanctions as a tool of modern war; r . allio – assessing the true economic, social and political costs of war), political scientists (l.-a. berg – the politics of institutional change in the security sector after war; s.e. gent, m. j. c. crescenzi – market power war in world politics) and other scientists. however, the new actions of people reveal life circumstances that were not taken into account in the study of legal relations and human virtues in wartime by previous efforts of scholars. this actualizes research on the stated topic. 3. correlation between the depth of corruption and the likelihood of war the actualization of issues of transformation of legal consciousness, law enforcement practices and legislation is exacerbated in times of war for every country. and ukraine is no exception. although it is advisable to comprehend such changes before the war. peaceful time is the most appropriate time to properly define progressive systemic legal norms of anticorruption content and mechanisms for their effective implementation in wartime. our state has been at war with russia since 2014 and since then has taken legal measures to protect its citizens, territory, establish peace and restore all other constitutional values. formally, this state was not recognized by either side. and each of them had their own reasons for doing so. between 2014 and 2022, the influential states of the world (their associations) did not find it in themselves to force the russian federation to return the occupied territories, namely the autonomous republic of crimea and some areas of donetsk and luhansk oblasts. to ukraine's credit and its sincere peacefulness, it should be noted that it had all the necessary military baltic journal of economic studies 107 vol. 8 no. 2, 2022 forces to prevent the occupation of the autonomous republic of crimea by the russian military, but did not use them. the occupation of this territory cost the life of one ukrainian soldier, who was killed by the russian military, while other bloodshed was avoided. in essence, the return of the peninsula is a peaceful withdrawal of russian troops, compensation for the loss of a dead soldier's family and occupation. it should be noted that ukraine had all the necessary military forces to prevent the occupation of the autonomous republic of crimea by the russian military. however, it did not use them to honor ukraine and its sincere peacefulness. the occupation of this territory cost the life of one ukrainian soldier killed by the russian military, and another bloodshed was avoided. in essence, the return of the peninsula is a peaceful withdrawal of russian troops, compensation for the loss of a dead soldier's family, and a way out of the occupation. the above logic of legal history, combined with large-scale corruption, demonstrated the emergence of prerequisites for a full-scale war of russia against ukraine, which began on february 24, 2022. ukraine's peacetime losses from corruption have been greatly underestimated. the factors that revealed this were requests for hundreds of billions of dollars worth of military equipment, requests to cover a budget deficit of $5 billion a month, and so on. the existence of such requests meant a loss of national wealth, which was the greatest in 1990. in the work noted the absence of force majeure circumstances that could objectively reduce the country 's wealth without turning it into an investment of development. accordingly, it is a waste of military property and the material base of industrial relations. this negative trend was steadily increasing as government officials and entrepreneurs were not held accountable for the theft and embezzlement of state assets. a full-scale war showed a loss of the country 's economic and military potential at the level of 1990. taken together, this represents at least a tenfold increase in officially estimated losses from corruption, namely, more than $20 billion per year. the losses from corruption and related crimes have made ukraine vulnerable. they have clearly demonstrated the inability of its legal system to protect its citizens from the extermination and destructive actions of corrupt officials. such destruction is gradual. it was hidden to many, and only knowledgeable experts saw the reality of the destruction of the people and the nation. ukraine's external weakness was a reflection of its internal incapacity. it used the full range of peaceful means to restore law and order, namely: the principles of law and the universal values on which they are based; communicating with and mediating with the aggressor (occupier) with the help of foreign statesmen, international law and organization. ultimately, however, the country could not prevent corruption or war. then these phenomena only reinforce each other, denying legal values and human virtues, condoning violence, selfishness and other human vices. law and virtue presuppose peace and development. nevertheless, they are despised. the international community (foreign states and international organizations) proved unable to force russia to comply with the law/human rights. russia's denial of law as a value and its violent understanding of law led to the war. for them the law is rudeness, cruelty and violence. it denies the very essence of law. peaceful communication and agreements for russia do not become decisive in the law. for them, these are rather elements that help violence. the right itself is identified with their power – military and physical force, energy resources. the war of the russian federation demonstrates a mental substitution of concepts, namely, rights by force, power, violence, the ability to kill and to commit other violence. physically, the energy of violence is fueled by the use of uniquely large fossil natural resources. war can never be justified by anything other than necessary evil, and even when justified, it remains evil. above all, it must be waged to minimize harm. life must be protected by all means. one such means of protecting life is, in particular, the law of armed conflict. although its current content has repeatedly continued to be defined by polarization and dehumanization. the power of life transcends such a conflict paradigm and gives existing laws of war a binding extra-legal character. in this respect, humanitarian conscience is one of those means that promote the observance of the principles of protection. this conscience reminds humanity of its interconnectedness and of living together, so that necessity can no longer threaten the survival of the human species at any cost. both positivists and deconstructivists can use this spirit along with their textual and contextual interpretations to achieve the same goals: justice and equality for humanity (vanhullebusch, 2015). the main burden of destroying and weakening key economic and state institutions of power in peacetime is borne by corruptionists and traitors. their activities range from illicit enrichment through the decline of entire industries to espionage (the transfer of secret information to foreign countries), propaganda of other nations/states' values, terrorism and other subversive activities. bribery, appointments based on kinship and personal ties rather than professional qualities, and other methods of corruption reveal the social danger of the motive (subjective side) of the perpetrator of the crime and the method (objective side) of the person who ordered the crime. accordingly, the inability of law enforcement agencies to neutralize corruption in peacetime leads to war. the effectiveness of the fight against corruption correlates with the ability to resist military aggression from outside. in particular, the baltic journal of economic studies 108 vol. 8 no. 2, 2022 corruption indicator contributes to the elimination of funds from financing channels of terrorism and armed formations of foreign states. the level of the money laundering is determined using the basel aml indicator (basel anti-money laundering index) which measures the risk of money laundering and terrorism funding. the calculations show a statistically significant impact of fiscal pressure on the risk of money laundering. in other words, with an increase in the degree of fiscal freedom (respectively, a decrease in tax pressure) there is an increase in the risk of money laundering. in addition, some important control variables of the impact of tax pressure on certain facts relating to economic and financial crime, such as the level of economic growth, the quality of institutions, etc., must be considered. similar studies have revealed the differential impact of tax pressure on corruption in developed countries compared to developing countries. the influence of the quality of institutions on corruption was found to be much higher in developing countries than in developed countries. the excessive bureaucracy, 2 economic and political determinants of economic and financial crime 107 the lack of transparency, and the ambiguous and confusing legislation particularly stir up a poor person who becomes more and more preoccupied by the officer’s corruption to obtain immediate benefits (achim, sorin nicolae borlea, 2020). the absence of this correlation determines the pattern of increasing violence, particularly military violence. for example, the war of the russian federation against ukraine. ukraine's state advantage was its desire to integrate into the eu, whose economic and spiritual-legal civilizational standards encouraged us to make much greater anti-corruption efforts (legislative, organizationalinstitutional, etc.), compared to the military aggressor. an additional incentive for ukraine was the tension created by the russian federation since 2014, namely the renewal of law enforcement agencies and other components of state power for the return of enemy-occupied territories. at the same time, the military aggressor did not feel the challenges that would stimulate it to eradicate corruption and improve (organizationally and technologically) the law enforcement agencies. on the contrary, the limitlessness of material wealth covered the losses of corruption. the world community 's lack of an effective response to russia's violation of international law – the rules for all states – has created a sense of complacency and a lack of counterbalance to its wrongful decisions and violence. in fact, other countries around the world have given russia the impression of impunity for crimes, namely, to plunder the goods of another state, the ability to ignore international law, to use violence against neighboring states, to intimidate, to attack critical infrastructure in cyberspace, to commit war crimes at will, devaluing human values and international law and order. of course, such a misconception has nothing to do with natural law and is destructive to any state. the possibility of violence is fueled by the absence law preservation and development of man, mankind as a condition of law kratos equivalent – violence, strength, power, domination etc. peaceful methods, namely: communication, mana, compromise on the basis of parity and other principles of law, common human values methods of violence as manifestations of power, submission, namely: corruption, betrayal, murder, war figure 1. interpretation of law by a viable civilization (peaceful) and a military aggressor (the case of the russian federation) baltic journal of economic studies 109 vol. 8 no. 2, 2022 of courts, law enforcement, and other effective international institutions to prevent and punish it. nevertheless, there may be cases in which judges’ rule, overtly or otherwise, in accordance with the interests of their own countries. the multinational composition of international courts and tribunals can serve to limit the impact of such bias; hybrid tribunals have been specifically designed to ensure that national judges do not have an advantage (shane, 2014). in the context of an underdeveloped international legal system, h. lauterpacht noted how states “distrust the impartiality of international judges in their inevitable creative function of filling gaps.” in his view, to deny the very possibility that international judges can be impartial when their national interests are affected is to display a superficial skepticism that ignores both human nature and ... historical experience. international judges have a deep and ever-growing consciousness that they are the guardians of humanity 's best and most urgent hopes and occupy the highest position in the international hierarchy (lauterpacht, 2011). in addition to anti-corruption systemic shifts forward, during the 2014–2022 russian terror, ukraine succeeded in renewing its political elite, reforming courts, prosecutors, and municipal authorities. progress has also been observed in strengthening market conditions for entrepreneurship (conditions for the functioning of the land market, etc., were created) and the financial sector (banks and non-bank financial institutions). in the face of subversion by saboteurs from the russian federation, ukraine has renewed its army and law enforcement agencies, upgraded their skills and provided them with modern equipment; created territorial defense units; established stronger international ties, saturating them with work on a number of economic (scientific, military and other) projects; developed and adopted several new standards in higher education to ensure legal opportunities for academic mobility. anticorruption training courses (content, practices, innovations and trends) continued for civil servants. during the war, the pre-war institutes for advanced training of civil servants continued to offer curricula that included subjects for gaining knowledge on minimizing war losses, neutralizing the enemy, and restoring peace. their legal consciousness thus formed is an organizational weapon to fight the enemy. an important conclusion for states threatened with invasion by foreign troops is the need to saturate the minds of local and state officials with special knowledge of military law. the center for advanced training has created training courses for public servants of zaporizhzhia region, namely: "current issues of ensuring the rights of ukrainian citizens with the instruments of international humanitarian law" (three parts – theoretical and methodological basis, protection of human rights by legal instruments, denial nature of law by the requirements of the occupation legislation), "the law of war-forced migration: ukrainian case"; "organizational and legal protection of the person in the conditions of war", "the nature of changes in legal culture during the war". this strengthened the public administration's institutional capacity to restore peace and enforce the rule of national law throughout the country. its actions became deliberate, timely, and ultimately effective in wartime. despite the fact that the practical life of business confirms the persistence during the war of the main requests from local public authorities to illegally obtain funds from businesses in the form of regular provision of money for personal needs, kickbacks, etc. this is observed in enemy-free territories, where businessmen continue to operate. during the war, the problem of corruption in such areas is particularly acute, namely: at customs in the form of bribes for smuggling; when distributing humanitarian aid by referral; and at military registration and enlistment offices, the risk of bribes for assistance in evading conscription increases. the war exposed the conflict of interests of officials appointed to office based on personal connections between officials rather than on an assessment of their high professional qualities. an indicator was that corrupt officials left their posts in the first challenges of the war and went abroad or to the west of the country. they acted explicitly as in the parable of the gifted rather than the earned good. those who received them honestly, whose path to them was a manifestation of purely personal qualities and professionalism, often remained in office. the war-related transformations of corruption and its manifestations in times of war convince us of the validity of the hypothesis of the vulnerability of a nation with deep and long-standing problems of state dishonesty. such corruption is nothing less than an internal abuser. its actions are no less bloody than the violence of another country 's army. the only difference is in the pace and obviousness. corruptors commit violence stealthily and for a long time, while the enemy army commits violence openly and quickly. at the bottom of the corruption perceptions index are countries with unstable political situations, military conflicts, and where governments only have partial control over the territory of a state: somalia and syria (13 points) and south sudan (11 points). since 2014, ukraine has been characterized by all three factors that exacerbate corruption. the corruption perception index (cpi) for 2021 is not enviable: 122nd place with 32 points. malawi had the greatest success in fighting corruption in 2021 (+5), scoring 35 points and ranking 110th. in recent years, local law enforcement agencies have effectively investigated a number of corruption cases involving senior government baltic journal of economic studies 110 vol. 8 no. 2, 2022 officials. the malawi anti-corruption bureau arrested the minister of energy and two other officials on suspicion of corruption in the awarding of a state oil contract. these investigations have resulted in court verdicts in several high-profile cases. they also include the "cash gate" cases, the essence of which was the spending of budgetary funds without following the procedures of 2009–2014. the cash gate scandal involved the misappropriation of public funds by transferring funds from public bank accounts to private companies under the guise of paying for goods and services. the scandal was dubbed "cash gate" because low-level government employees arrested for the scheme were found to have cash in their homes and cars. it was uncovered in september 2013 when a public accounting clerk, whose monthly compensation was less than $100, was found with a huge sum of cash, valued at more than $300,000.00, in his car. a week later, malawi's budget director was assassinated. the government, with the assistance of the british government, conducted a forensic examination, the results of which were as follows. a preliminary report showed that government officials manipulated the payment system (integrated financial management information system – ifmis) to steal more than $32 million over a 6-month period from april 2013 to september 2013. government employees would run checks through the system to private contractors under the pretense that they were supplying goods or services to the government, when they were not. once the check was written, they would remove the transaction from the system. a full audit showed that the cash-gate scandal could have originated as early as 2009, and for the period ending in 2014, $356 million was involved (chiwala, 2018). if corruption is not addressed, productivity, investment, capital, and thus economic growth and development decline over time. from this perspective, regression analysis using panel data methods showed that poverty, inequality, drug trafficking, and the actions of armed agents affect violence. corruption was also found to have a negative impact on business growth. based on the methodology and the methods used, it was found that these variables were suitable for analyzing the prevalence of corruption and violence in the process of economic growth and development. institutional policies consist in strengthening the interaction between different economic agents, transparent participation in decision-making, adequate and strengthened governance, a strengthened judicial system and an adequate efficient resource allocation system. this would greatly reduce the vicious circle that impedes the development and economic growth of countries, makes the state weaker, and makes wars possible (poveda, martínez carvajal, pulido, 2019). 4. conditions of lawmaking, law enforcement, and support for legally advanced civilizations defined by corruption in keeping with the confucian notion that a true king must rule for the good of the people, xunzi believed that a true king could engage in punitive expeditions against corrupt rulers. rulers become corrupt when they violate the way and fail to fulfill their moral duties to the people. on the contrary, a true king always behaves virtuously and orders his army to refrain from massacring civilians. indeed, in keeping with the confucian view that the example of virtue can promote moral and political renewal, xunzi believed that the army of a true king could bring about moral change only by acting virtuously toward the people (traven, 2021). the basic legal principle of action in war has been the idea of the justness of its commencement. the authors rely on the scholarly doctrine of just war within the western legal tradition. war combines power and law (sein and sollen), where the first in the service of law and law limits the power. war becomes just in response to unprovoked aggression; as a last resort to restore a violated right (consecutio juris); to punish an offender. acceptable causes of such a war are defense (protection), return of lost property (territory), debt collection and retribution. two latin concepts, jus ad bellum and jus in bello, began to be used during the league of nations to denote a system of rules about the war beginning and its course. they became part of the everyday lexicon of theoretical work and practical application after world war ii in the late 1940s. the need to protect the innocent in wars of conquest is asserted. it is morally acceptable to wage punitive wars to overthrow corrupt leaders. if weapons are raised for a righteous cause, both aggressive and defensive warfare are appropriate. if the cause is unrighteous, then neither is right. morally permissible wars are those aimed at punishing corrupt leaders devoid of the tao. violence against the innocent, i.e., against those who have done no wrong, is inherently wrong (traven, 2021). the purpose of jus ad bellum is "to save succeeding generations from the scourge of war" (haque, 2017). this is the rule about the causes of war. ontologically it is the right of the sovereign, then the right of the state to wage war, the right to resort to the use of force. these rules define the conditions and legitimacy of the use of military force. according to them, the modern world limits the use of military force in international relations on a case by-case basis. the fact of war is the action of a subject carried out for certain reasons. this action entails a legal regime reflecting the validity of the reasons and the status of the subject. jus in bello – the laws of war are a system of legal regimes (rights and obligations) for belligerents. they are the rules governing the baltic journal of economic studies 111 vol. 8 no. 2, 2022 conduct of combatants during war. they apply if the war is just, for reasons justified in the doctrine (motive, material reasons). otherwise, the law during war does not apply to the aggressor, but only to the subject who pursues just causes in the war. anyone who does not fight for a good / worthy cause has no rights and can be executed. example: discussion of this by ordinary citizens on social media; changing the boundaries of the law in the face of unwarranted / excessive violence, etc. (kolb, 1997). the first act before or immediately after the outbreak of war is fully committed within one day. this is the imposition of martial law. during the same period, restrictions are imposed on the crossing of borders, in the financial sphere, as well as in the areas of justice (courts) and law enforcement. decisions to protect critical infrastructure, both physical and in cyberspace, are also becoming urgent. information resources of courts and law enforcement agencies, tax information and all national (regional) registries of individuals, entrepreneurs, etc. are subject to closure. the following decisions concern everything at once, namely the administration of justice and the continuation of the criminal process, the execution of criminal penalties, security and, if necessary, the evacuation of the population, the logistics of businesses (raw materials and finished products) and the population; tax burden and benefits; nomenclature of humanitarian aid and its customs clearance; liberalization of labor law requirements; movement of money, food, medicine, fuel, weapons; ensuring the rights of asylum seekers who have lost housing, clothing, and other components of life; protection of refugee rights abroad, etc. for example, the destruction of buildings during wartime generates large amounts of debris, the depositing of which on the ground requires liberalization of the relevant environmental law regulations. in peacetime, such storage is only allowed on concrete or other surfaces, which prevents debris of building components from entering the soil, otherwise the environmental inspectorate imposes huge fines. changes in the territory of the theater of military operations and the movement of military front lines are a variable factor for the adequate response of the parliament and public administration bodies. a separate area of work is to ensure strict executive table 1 an innovative way to engage legally highly civilized nations in restoring law and order in a war caused by corruption and related crimes № country 's parliament, government, head, nation date of the president's speech 1. european parliament 01.03.2022 2. the united kingdom of great britain and northern ireland 08.03.2022 3. canada 15.03.2022 4. the federal republic of germany / bundesrepublik deutschland 17.03.2022 5. united states of america 17.03.2022 6. switzerland / confoederatio helvetica / schweizerische eidgenossenschaft / confédération suisse / confederazione svizzera / confederaziun svizra 19.03.2022 7. israel / לֵאָרְׂשִי 20.03.2022 8. republic of italy / repubblica italiana 22.03.2022 9. french republic / république française 23.03.2022 10. japan /日本 23.03.2022 11. kingdom of sweden / konungariket sverige 24.03.2022 12. the european council (heads of state or government of the eu member states) 25.03.2022 13. state of qatar and participants of doha forum / رطق 26.03.2022 14. kingdom of denmark / kongeriget danmark 29.03.2022 15. kingdom of norway / kongeriket norge 30.03.2022 16. kingdom of the netherlands / koninkrijk der nederlanden 31.03.2022 17. kingdom of belgium / royaume de belgique 31.03.2022 18. commonwealth of australia 31.03.2022 19. romania / românia 04.04.2022 20. kingdom of spain / reino de españa 05.04.2022 21. united nations security council 05.04.2022 22. republic of ireland / poblacht na héireann 06.04.2022 23. hellenic republic / ελληνική δημοκρατία 07.04.2022 24. republic of cyprus 07.04.2022 25. republic of finland / suomen tasavalta 08.04.2022 26. republic of korea / 대한민국 11.04.2022 27. republic of lithuania / lietuvos respublika 12.04.2022 28. republic of estonia / eesti vabariik 13.04.2022 baltic journal of economic studies 112 vol. 8 no. 2, 2022 discipline in public authorities, preventing the resignation and departure abroad of officials of these bodies, and especially the leaders! winning the war with minimal losses presupposes the maximum preservation of productive forces and means, the economic ability to create added value and profit. accordingly, a balance is struck in the optimal ratio of fiscal benefits and incentives with the tax burden, so as to preserve both entrepreneurs and not to lose revenues to state budgets (funds). the outbreak of war required the mobilization of available national resources and support from other states. numerous speeches of the president of ukraine to the parliaments of foreign countries, civilizationally close to the ukrainian multinational nation, became a phenomenal legal phenomenon in the defense of ukraine (table 1). at the very least, it is a source of constitutional, international public, international humanitarian law. the content of the speeches, the combination of communication styles (diplomatic, formal, colloquial, and others), and the successful combination of denotations with emotionality ensured their effectiveness, empathy, and help in response. the legal result of such assistance is expressed in the determination of the highest officials of foreign states (their alliances). they decide to act quickly and make the necessary decisions to support ukraine. a separate type of such decisions are the sanctioning parts of legal norms aimed at punishing and weakening the military aggressor. state power in time of war rebuilds its structure, replenishes its armed forces. operational fulfillment of new tasks, conditioned by the need to defend against the armed forces of a foreign state, to neutralize and expel the enemy from its territory, to restore sovereignty in the territories temporarily occupied by the enemy, becomes urgent. that is, a number of wartime functions are added to the functionality of peaceful life. thus, economic, legal, law-enforcement and other functions of state administration are meaningfully adapted to the needs of victory in war, namely: other structures and nature of expenditures, relocation of productive forces; material provision and other protection of children, the elderly, the disabled, women and other socially vulnerable groups, etc. legal regimes are emerging for people who have lost their homes and migrated across the country because of war (internally displaced persons); those who have gone abroad (refugees or temporary asylum seekers); prisoners of war; victims of war, military and civilians, territorial communities. accordingly, the application of these regimes requires the creation or updating of existing procedures for their provision. these are the norms of administrative, criminal, criminal procedural branches of law. when you enter the offender's territory, do not do violence to his gods; do not hunt his wild animals; do not destroy earthworks; do not set fire to buildings; do not cut down forests; do not take the wool of domestic animals, grain, or implements. when seeing their elders or young men, return them without harming them. even if you meet adults, if they do not engage you in battle, do not treat them as enemies. if an enemy is wounded, give him medical attention and return him (traven, 2021). in addition to the warring parties, the international committee of the red cross remains responsible for observing international humanitarian law in time of war. this organization is the only entity that has a mandate from the world community to help people in time of war and to fulfill the requirements of international law, namely: the geneva convention of 12 august 1949 on the improvement of the wounded and sick in armed forces; on improving the fate of the wounded, sick and shipwrecked in the armed forces at sea; on the treatment of prisoners of war; on the protection of civilians during war; and the additional protocols ratified by not all states, concerning the protection of victims of international armed conflicts and concerning the protection of non-international armed conflicts victims, of 8 june 1977; as well, concerning the adoption of an additional distinctive emblem of 8 december 2005. foreign military and collaborators become a specific organization of state power in the occupied territories. they form the occupation authorities. the procedures of such formation and further exercise of power receive neither de facto nor formal legal legitimacy, as they contradict the principles of law and the requirements of international law. the essence of the occupiers' actions to organize power in the occupied territories is the result of their desires and illusions, which have nothing to do with the nature of law. the occupiers and/or other interested community refer to such actions and parts thereof in legal terms that cannot and do not make legal sense. as a result, the occupiers use words from the field of legal science and practice and do not create content for such nominations even in their imagination. moreover, as a result of this use of legal categories, nothing legal emerges in real life. all that remains are the words of the occupiers, corresponding to those parts of the imagination of their minds that deny real legal reality, both in relation to themselves and to all other members of the peoples of the world. foreign military and collaborators become a specific organization of state power in the occupied territories. they form the occupation authorities. the procedures of such formation and further exercise of power receive neither de facto nor formal legal legitimacy, as they contradict the principles of law and the requirements of international law. the essence of the occupiers' actions to organize power in the occupied territories is the result of their desires and illusions, baltic journal of economic studies 113 vol. 8 no. 2, 2022 which have nothing to do with the nature of law. such actions and their individual parts are referred to by the occupiers and/or other interested community as legal terms that cannot and do not add legal content. as a result, the occupiers use words from the field of legal science and practice, but do not create content for such nominations even in their imagination. moreover, as a result of this use of legal categories, nothing legal emerges in real life. all that remains are the words of the occupiers, corresponding to those parts of the imagination of their minds that deny the reality of the legal reality, both in relation to them and in relation to all the other representatives of the peoples of the world. 5. conclusions thus, the tolerant attitude of citizens toward corruption and the high level of involvement of society in corrupt relations weakens such a nation over time to the point that it becomes incapable of resisting external military aggression. the fact of such a failure demonstrates the transition of quantitative indicators of corruption into the quality of violence and war as extreme forms of denial of legal values, which are reflected at the level of the constitution and the norms of international law, including humanitarian law. in time of war, law is a wholly dynamic matter of transforming national and international rules in the territory of war – military law. it is a blueprint for national self-preservation and victory over the enemy, a balance between humanity and military necessity in action and rules. as a system of generally binding norms, it regulates legal relations between military personnel and in wartime extends to the entire population, as well as all national law during martial law and its transformation in connection with war, variations in the legal requirements of the occupiers on their territories, and international norms. and also, this humanitarian law and the practice of its application by the international committee of the red cross, the relevant judicial and other acts of law enforcement. legal regimes during the war are conditioned by the emergence of new categories of citizens, including those affected by it; by the emergence of occupying forces and collaborators; by the reaction of foreign states and its changing dynamics, etc. the legal regime in territories occupied by foreign troops testifies to the decay of their legal consciousness, which allows fictitious legal phenomena to exist on such lands and the population living there, in which the occupiers and collaborators do not believe, admit their falsity and rational inconsistency, and deny international law. they do not apply them to themselves and/or their countries. the invalidity of these norms is proved by their absence in the highly developed countries of the world. the implementation of national law in time of war is limited by the need for organizational, economic and other costs of countering the enemy. its effectiveness is also affected by the inertia of great corruption in peacetime, namely insufficient technical equipment of the troops, underdevelopment and psychological weakness of civil servants in a number of positions, etc. public authorities are forced to focus on informing and educating the public for adequate war challenge programs for civil servants (ideological level). there is a rapidly growing demand to formulate timely and adequate legislative changes suitable to the changing conditions of war. it is important to activate existing and form other organizational institutions to neutralize the enemy as quickly as possible and restore constitutional order throughout the country (volunteers, territorial defense of local communities, and other forms of self-organization). jus in bello, which shows more clearly the complex relationship between fundamental principles and specific applications of the laws of armed conflict to attacks on computer networks. principles such as the distinction between combatants and civilians, proportionality in attacking, and the prohibition against causing unnecessary suffering remain at the core of the commitment to the law regardless of the technology used. it is in the concrete application of laws that the impact of technology and the change in values and concepts brought about by the information revolution manifests itself. one of the most significant is the increasing value of intangible property and information in information societies. it will have an impact on the application of laws governing the conduct of hostilities to target analysis, protection of cultural property, and property crimes in general (harrison dinniss, 2012). international humanitarian law is applied in a very narrow and fragmented manner. the numerous casualties and victims of the war in ukraine proved the ineffectiveness of the international committee of the red cross, which is the only one authorized to apply the requirements of international humanitarian law and ensure the observance of human rights by the military, especially by the party that started the war. the backwardness and unsuitability of the un to combat war crimes. the archaic and uselessness of its security council has also been exposed. this body has absolutely no function for its peacekeeping function and is unfit for it. it is clear that the phenomenon of judicial development of international humanitarian law has not encompassed the totality of the law of armed conflict. nor are judicial bodies capable of assessing the conduct of all states in the same way. selectivity in the adjudication of humanitarian law has arisen for a variety of reasons, including the predetermined jurisdiction of courts and tribunals and the general baltic journal of economic studies 114 vol. 8 no. 2, 2022 reactive nature of judicial proceedings, where the judiciary can only decide cases referred to them. the compulsory jurisdiction of the international court of justice is recognized only by one permanent member of the security council, great britain, although the court makes legal decisions affecting all states, mainly through its advisory opinions (shane, 2014). current international law on war prevention is extremely outdated, namely: there are no conventions on combating cybercrime; on the use of software to prevent and record war crimes, etc. for example, the use of eyewitness to atrocities (url: https://www.eyewitness.global/), which automatically transmits information to the international criminal court. in fact, war and law are mutually exclusive concepts that follow from the works of roman jurists, the canon law and civil law of the middle ages, scholasticism, and the classics of international law of the salamanca school. war and law are treated separately. legal regimes in time of war norms of peremptory content (jus cogens). their essence is utilitarian, namely, to determine the exhaustive conditions for the outbreak of war and the legal status of the subjects of law in the course of it, the settlement of social relations. however, if war is unjust, the law of war does not apply. in that case, the law operates at the discretion and goodwill of the victim and has no other limitations. during an unjust war the right of mothers and other relatives of those killed (wounded, maimed) applies. the danger of the destructive insincerity and affectation of citizens who outwardly adopt slogans, fashionable communication trends, statements, and so on, remains an unacceptable basis of law, both in peacetime and in wartime. the essence of such people of conformist and marginal types of legal consciousness does not change, they continue to fail to conform to their new form. while dangerous in peacetime, their counterproductivity in wartime becomes critical, for example, leading to radical inhumane statements and actions contrary to the nature of law. as diego gambetta and steffen hertog note, the desire for purity often motivates right-wing terrorism. right-wing terrorists have a very strong desire to preserve the purity of their social environment and reject the invasion of alien forces perceived as corrupting (traven, 2021). references: vanhullebusch, м. (2015). war and law in the islamic world. boston: brill nijhoff, 302 p. achim, m. v., & sorin nicolae borlea, s. n. (2020). economic and financial crime. corruption, shadow economy, and money laundering. cham: springer, 305 p. shane, d. (2014). judges, law and war. the judicial development of international humanitarian law. cambridge: cambridge university press, 396 p. lauterpacht, h. (2011). the function of law in the international community hersch. oxford: oxford university press, 528 p. chiwala, v. s. (2018). cash gate scandal in malawi. a presentation made at the global expert group meeting on corruption involving vast quantities of assets held in lima, peru 3rd december, 11 p. poveda, a. c., martínez carvajal, j. e., & pulido, n. r . (2019). relations between economic development, violence and corruption: a nonparametric approach with dea and data panel. heliyon, no. 51–11, рp. 1–21. traven, d. (2021). law and sentiment in international politics. ethics, emotions, and the evolution of the laws of war david traven california, cambridge: university printing house, 328 p. haque, a. a. (2017). law and morality at war. oxford: oxford university press, 286 p. kolb, r . (1997). origin of the twin terms jus ad bellum and jus in bello. international review of the red cross, no. 320, рр. 553–562. harrison dinniss, h. (2012). cyber warfare and the laws of war. new york: cambridge university press, 360 p. baltic journal of economic studies 97 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-97-108 equity markets risks and returns: implications for global portfolio capital flows during pandemic and crisis periods pavlo dziuba1, olena pryiatelchuk2, denys rusak3 abstract. the paper is devoted to the study of risk and return tradeoff in the global equity market as well as particular market groups: developed, emerging and frontier markets. impact of this tradeoff on international equity portfolio liabilities is explored. the study confirms the hypothesis that there are some specific patterns of risk and return tradeoff during crisis periods and periods of markets regular regime that substantially differ from each other and define global portfolio equity flows and liabilities in a specific way. the paper thus carries out its main objective that implies revealing these patterns with respective qualitative features and quantitative markers, specifying their implications for equity portfolio flows to markets of different types. risks and returns for different market groups and global market as a whole are calculated for the period between 2002 and 2020 using standard methodology of contemporary portfolio theory and msci indices monthly values. the data for international equity portfolio liabilities as well as the share of particular market group in the global market are used as dependent variables. the latter are regressed by calculated risks and returns. using the model results and some analytical developments, two patterns of risk/return tradeoff are discovered. the pattern attributable to regular market regimes is characterized by positive returns which is 1.51 % in average for the global market, 1.48 % for developed markets and 2.03 % for emerging markets. risks in regular pattern are relatively small or moderate at the average level of 3.05 for the global market and are all below the median (3.48). respective risks for developed and emerging markets are 3.02 and 4.54. the sharpe ratios in regular pattern are positive at the average level of 0.60 for the global market, 0.57 and 0.45 for developed and emerging market groups respectively. the crisis pattern implies negative returns at the mean of -1.04 for the global market, -0.97 for the developed group and -1.35 for the emerging markets. high risks are all above the median and in average compile 5.5 for the global market, 5.47 for the developed markets and 6.68 for the emerging group. sharpe ratios for this pattern are negative being equal to -0.19 in the mean. the average value is -0.18 for developed markets and it is -0.24 for emerging markets. specific pattern of 2020 crisis should be settled out. its main feature that substantially distinguishes it from other crises is the combination of highest risk level and the positive returns at the same time. elaborated regression model confirms the direct impact of return and indirect impact of risk on global portfolio liabilities. the influence of risk for regular and crisis patterns does not differ substantially while the impact of return is much stronger during periods of increased volatility (respective model parameters are 3793.76 and 447.24). however, the discovered impact is much more reliable in crisis pattern that is supported by much higher determination ratio. developed markets experience similar effects. key words: international (equity) portfolio liabilities, risk, return, risk/return tradeoff, increased volatility, developed markets, emerging markets, frontier markets, covid crisis. jel classification: f21, f37, g11, g15, c46 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: pavlo.dziuba@gmail.com orcid: https://orcid.org/0000-0003-2932-0908 2 taras shevchenko national university of kyiv, ukraine. e-mail: pryyatelchuk@gmail.com orcid: https://orcid.org/0000-0002-5222-452x researcherid: i-1126-2018 3 taras shevchenko national university of kyiv, ukraine. e-mail: derusak@ukr.net orcid: https://orcid.org/0000-0001-6603-0761 baltic journal of economic studies 98 vol. 7, no. 3, 2021 1. introduction global portfolio capital flows have traditionally proved themselves to be very sensitive to different fluctuations in international financial markets, to specific shocks and turmoil in the global economy, as well as to particular unexpected shifts in business environment. unlike foreign direct investments they rapidly respond to all mentioned changes and can be quickly shifted from one market to another, providing, on the one hand, markets liquidity and on the other hand, international capital movement. therefore, portfolio flows represent the most mobile element of global capital flows. at the same time such flows result from particular decisions of particular international investors that in turn ground on three basic factors of portfolio decision making: risk, return and investor’s risk tolerance. in the present study we are not going to consider such higher order investment moments skewness and kurtosis as well as interrelation between returns under question since they would rather require specific attention in a stand-alone research. good theoretical analysis and empirical insights of this issue based on contemporary data and particular cases are provided by kim et al. (2014), mei et al. (2017), rogach, shnyrkov & dziuba (2019) and others. thus, our main focus will lie on risk and return in different markets and market groups, their dynamics and particular changes during periods of instability especially during current pandemic. as it is known, interrelation between returns is considered to be one of the basic preconditions for increasing efficiency of investment portfolios via decreasing their risks. notwithstanding this interrelation is extremely important in terms of contemporary portfolio theory insight and from empirical viewpoint it is derivative or so to say secondary considering its origin among other investment data. it is derived using the primary data on returns and somehow even the data on risks. therefore, the primary investment decisionmaking factors concentrate in risk-return framework with returns covariance remaining a supplementary index. another point of the special attention is the contemporary pandemic. one could hardly find any field not affected by the covid-19 pandemic during the last couple of years. the case is specifically challenging for the global economy that felt the pandemic influence substantially. that is also the point of an extreme importance for international financial markets that experienced significant volatility in 2020 and experience quite different expectations at the beginning of 2021. that resulted in substantial volatility of global market capitalization, increased volatility of returns in individual markets, decrease of international portfolio flows. this point is also to be studied in our research. one of our challenging expectations is that there might be a specific pattern of risk / return tradeoff that differs for periods of increased instability and for period of markets regular regime. one of these differences could be the shift of portfolio decisions between developed and less developed markets. such patterns could be used to explain and somehow to forecast international portfolio flows. moreover, one of the probable results of this study might be the comparison of mentioned patterns between different turmoil periods. the impact of crises of different types could be also different. 2. literature review contemporary theory of portfolio investing substantially rests on a well-known markowitz theory or as it is more often referred to as portfolio theory. one of its most profound provisions tells us that investment decisions are made by portfolio investors considering risk and return, and that statement is equally true to both investment portfolios and individual securities (markowitz, 1952, 1959). these two investment indices are reciprocal meaning the higher risk investors accept the higher risk premium they require. this point is the direct result of investors’ rationality and risk aversion behavior. interrelations between individual securities returns should also be considered while composing a portfolio: the lower they are the more efficient portfolio can be built up. these ideas have set up a dominating paradigm in the field which was joined and expanded by other approaches and concepts, such as resulting from fundamental seminal studies of sharpe (1964), lintner (1965), black (1972), merton (1973), black & litterman (1992) and others as well as findings of some more recent research like jobson (1991), best & grauer (1991), jorion (1992), arnott & bernstein (2002), lehar (2005) etc. analysis of risks and returns of international markets is considered to have been originated in the framework of international diversification concept founded by grubel (1968) and solnik (1974). this concept substantially rests on traditional portfolio theory, making it actually universal in terms of domestic and international markets exploration. its main focus is on risks, returns and interrelation between returns that is considered to be the main prerequisite for portfolio efficiency increase. this in turn stems from markowitz portfolio risk formula incorporating covariance between returns. mathematically the latter should be as low as possible. unlike studies of domestic markets research of internationally diversified portfolios mostly consider risks, returns and interrelation between returns for individual markets rather than individual securities. this is sort of extrapolation where an individual security under traditional approach is replaced by the whole market of a particular country in international diversification concept. baltic journal of economic studies 99 vol. 7, no. 3, 2021 grubel (1968) for example considers investment portfolios in two countries with only three possible investment alternatives (forms of holding wealth): real assets, money and bonds. after being autarchical mutual ownership of bonds is possible after opening these economies. real estate and money sections of local portfolios remain unchanged. main conclusions of markowitz theory were generally supported but grubel stressed out the importance of international investing in bonds. addressing only five factors of investing in foreign bonds grubel concluded that only if they remained the same demand for foreign bonds would be equal in both countries and both portfolios would be identical. empirical test using 11 developed markets from the us investor viewpoint proved that international diversification allowed to reach much better risk/return tradeoff while such markets as japan, the uk and australia seemed to be the most attractive. findings on more than 300 stocks from 7 european and us market using their weekly returns between 1966 and 1971 are provided by solnik (1974). this study has become the seminal paper in the field. particular number of portfolios consisting of a given quantity of stocks (from 1 to 300) was randomly composed. standard deviations for each portfolio were calculated and analyzed. solnik generally confirmed already existing idea about the minimum non-diversifiable level of risk that could not be removed away but at the same time he proved that this level was much lower for internationally diversified portfolio than for domestic market portfolios. this particular level of relative risk was 11.7 % for international market portfolio compared to 27 % for the us market. another significant idea was also confirmed: marginal diversification effect was decreasing with the expansion of portfolio structure. these results are explained by the fact that returns in different markets typically have lower correlations than returns of average stocks from the same market. that is because different markets have different systematic and specific factors affecting returns, mismatching between economic and business cycles etc. additional efficiency of international portfolio can be reached via combining purely international (by markets) and industry diversification. the effect of industry diversification was heavily studied in more recent papers with generally positive conclusions like in cavaglia, brightman & aked (2000), moerman (2008), donadelli & paradiso (2014), zaremba & umutlu (2018), bai & green (2020) and others. besides the mentioned studies further research in the field proactively explored risks and returns of different markets trying to discover implications for international diversification of investment portfolios. different markets risks, returns and their correlations particularly in terms of their sustainability were studied by longin & solnik (1995). using monthly excess returns for seven countries between 1960 and 1990 they found out that covariance and correlation matrices between them were not stable over time. however, they discovered the increase of correlation over 30 years and what is particularly relevant in terms of the present study that correlations increased during periods of increased volatility, i.e., during crises and turmoil. these findings promote further research particularly regarding changes of risk/return profile during different time periods. karolyi & stulz (1996) showed that comovements between different markets stock returns strongly depended on the absolute level of market return, particularly using the example of japanese stock market and s&p index. the higher the absolute return of a market in a pair the higher the correlation. they also confirmed the point about high correlations during periods of high volatility. that diminishes the advantages of international diversification during turmoil periods especially considering that large shocks spread more internationally than the small shocks. bekaert et al. (1998) traditionally supported the generally higher level of volatility in emerging equity markets focusing on the fact that additional measures like skewness and kurtosis should be used for asset allocation. in emerging markets returns distributions are far from being normal compared to developed markets. increase of correlations between markets returns during bear regimes but not during bull regimes was proved by longin & solnik (2001) using the monthly data for the five largest stock markets for the 38-year period. similar idea was also supported by ang & bekaert (2002), who underlined that those correlations decrease in highly volatile periods might question benefits of international diversification of investment portfolios from the u.s. investor perspective. however, they finally fix that international diversification is still valuable under regime shifts particularly when currency hedging opportunities are engaged. the substantial and powerful background for these and similar results stems from the idea that benefits and advantages of international diversification are exaggerated, particularly provided in a long-lasting debate by lessard (1976), butler and joaquin (2002) and others. in addition to the mentioned studies there is a great pile of scientific literature exploring different markets, their risks and returns considering different regions, or specific countries, or particular crisis periods such as morana & beltratti (2002), niklewski & rodgers (2013), dziuba (2017), yakubovskiy, rodionova & kyfak (2019) etc. hossein & nossman (2011) studied the spillover of risk to european equity markets depending on the risk source: us market, regional market and idiosyncratic shocks during the period between 1982 and 2007. they proved that the impact of the us market was generally lower than that one of local markets though it remained substantial for all local markets. in terms of risk management these results stand for good benefit for american investors when they invest during crisis baltic journal of economic studies 100 vol. 7, no. 3, 2021 periods. using the g7 markets case, androkopoulos, angelidis & skintzi (2014) explore the spillover of risk, return and illiquidity. they discover the existence of strong contemporaneous dependence between illiquidity and return within each market with return casing illiquidity. the opposite is not true in most cases. relation between illiquidity and volatility is significant within us market only. wang & khan (2017) find out that risk-returns tradeoff is time-varying depending on the market states for the us as well as for international market. aslanidis, christiansen & savva (2016) utilize the set of five large european stock markets (france, germany, italy, switzerland and the uk) and explore the intertemporal risk-return relation. keeping for three groups of factors (country specific, euro area and global) they reveal that there is a strong negative relation between conditional return and conditional volatility. the optimal combination of influencing factors varies across the markets. umantsiv et al. (2019) explored among others efficiency of managing public enterprises in terms of risks of their shares. there is a good portion of research devoted to markets of different types and regions, particularly carried out by rogach & dziuba (2017), they explored risks and returns for frontier markets group considering exchange rate risk factor, and cheng & jahan-parvar (2014) studied risks and returns in equity markets of pacific basin countries etc. 3. hypothesis, methodology and data risk and return tradeoff and the importance of this factor in terms of global capital flows define the framework, rationale and coherence of our study. our primary hypothesis provides that there are some specific patterns of risk and return tradeoff during crisis periods (for developed, emerging and frontier markets as well as for the global market as a whole) that substantially differ from those ones relevant for regular markets regimes and that define global portfolio equity flows in such periods. in the light of confirming or rejecting this hypothesis the main objective of the present study appears to reveal these patterns with respective quantitative markers, define their essential differences from patterns of regular market regimes and to specify their implications for equity portfolio flows to different market groups. risks and returns will be explored using standard technique. morgan stanley capital international indices monthly data for different market groups will be analyzed (msci, 2021). all indices’ values are at a gross level and converted into usd. absolute values are used to compute returns and their standard deviations. developed market group is represented by 24 markets: canada, the usa, austria, belgium, denmark, finland, france, germany, ireland, israel, italy, the netherlands, norway, portugal, spain, sweden, switzerland, the uk, australia, hong kong, new zeeland, japan and singapore. consolidated analysis of the group will be carried out using the special msci world index (world). emerging markets include argentina, brazil, chile, colombia, mexico, peru, czech republic, egypt, greece, hungary, kuwait, poland, qatar, russia, saudi arabia, south africa, turkey, united arab emirates, china, india, indonesia, korea, malaysia, pakistan, the philippines, taiwan and thailand – 27 markets altogether. respective group index is the msci emerging markets index (em). finally, the frontier group is represented by 22 markets of croatia, estonia, lithuania, kazakhstan, romania, serbia, slovenia, kenya, mauritius, morocco, nigeria, tunisia, benin, senegal, ivory coast, burkina faso, bahrain, jordan, oman, bangladesh, sri lanka and vietnam. this group is generalized by the msci frontier markets index (fm). all markets representing msci standalone indices are excluded from the study. for the global market we shall use the msci all countries world index + frontier markets (acwi fm). all data cover the period between june 2002 and december 2020 (march 2021 where available). the latter date is quite reasonable since it reflects the latest available full year data. the first date is explained by the fact that the imf data on global portfolio assets and liabilities is provided since 2001 and later on in the present study we shall use this data. thus, we fix the beginning of the period under question by 2002 since the earlier analysis would be of much less use in terms of contemporary crises. the full msci data for all indices used is available since may 2002 only. where possible, we shall also address the data for 2021 though it is not reflecting the full year and thus should be treated with caution. market groups volatility will be estimated using monthly returns computed via the standard statistical approach. standard deviations will be calculated for 12 monthly returns for each year under question. such approach might seem to be statistically inconsistent due to the little quantity of observations – all others equal 60 returns is considered to be relevant quantity. however, since the expected statistical result is quite predictable considering existing factors and actually known periods of instability, we do not need the precise statistical coincidence and other possible statistical verification. the pure quantitative result would be quite sufficient for the current analysis. exceptions are for 2002 where we have only 7 returns and for 2021 with 3 returns only. data on global portfolio flows is represented by assets and liabilities figures rather that by direct flows data. that is because of two reasons. firstly, cumulative data is much more sustainable in terms of statistical analysis compared to the yearly basis data. secondly, the imf coordinated portfolio investment survey (cpis) provides assets and liabilities statistics in a comprehensive and organized way so that it can be relevantly used in the analysis (imf, 2021-1). this data baltic journal of economic studies 101 vol. 7 no. 3, 2021 will be arranged for all countries represented by msci indices mentioned above reflecting assets and liabilities in equity securities (installments in investment fund securities are also included) at each year end. global market capitalization data stand for all domestic markets cap and is provided by the world federation of exchanges – wfe (wfe, 2021). it is also the stockage data as of the end of the year. the data for 2021 is as of the end february – the latest available data. identifying crisis periods can be carried out using purely equity market markers. they might be global market capitalization; global portfolio equity flows and world market volatility measured as a traditional standard deviation. the first indicator is obviously the derivative from the second and the third, since the decrease in capitalization is typically the direct results of rapid increase in volatility and equity outflows particularly the shift from equities to debt securities. so, we can actually exclude this indicator as the secondary one and use it rather to check the obtained results than to get them. interrelation between flows and volatility is not so evident; it can be either direct or reverse. all in all, volatility is the pure characteristic of the market, the primary reflection of the underlying processes, interaction between demand and supply. therefore, we shall use this ratio to define periods of increased volatility in the global market and utilize two other indicators as auxiliary ones. another approach could be logical or dialectical when we just identify the instability period using the wellknown facts and considering existing environmental factors. we shall consider the mentioned points just to confirm the identified downturns and help explaining one or another market behavior. the matter is that existing factors are normative in their essence, they just show what should be or how the market should behave. however, we really do not know what is actually going on in the markets. considering this we should use some market indicator like volatility or others. 4. main findings identification of increased volatility periods dynamics of global market volatility expressed as acwi fm index standard deviation is presented at figure 1 and demonstrates that during the period under question we can fix four well-defined periods of volatility jump: 2007-2008, 2015, 2018 and 2020. firstly, the period 2007-2008 is the most obvious one. it was the global financial crisis. notwithstanding the major crisis drop down happened in 2008 it also touched upon two months of 2007 and still the volatility began increasing slightly before the crisis itself. so, regardless the nominal increase of volatility in 2007 we shall consider this period as 2008 only. furthermore, the 2007 volatility increase was pretty small and can be considered as current market adjustment. for this period volatility increase is explicitly supported by predicted substantial drop in world market capitalization as well as by decrease of global portfolio assets in equity. secondly, volatility increase in 2015 accounts for such major factor as stagnation in world economy figure 1. dynamic of global market volatility, global market capitalization and global portfolio assets in equity notes: 1. respective figures are computed and the graphs are composed by the authors using the data on global equity market capitalization (wfe, 2021), global portfolio assets in equity (imf, 2021-1) and data on indices (msci, 2021). 2. for the purposes of simplification and facilitating results perception underlying calculations are not provided. 3. volatility data is reflected on the primary (left) axis, capitalization and assets data is lain off on secondary (right) axis. 4. for better visualization capitalization and assets are expressed as percentage changes as to the previous year.   baltic journal of economic studies 102 vol. 7, no. 3, 2021 accompanied by the global gdp decline by more than 5.5 %. some of the basic underlying factors were the decrease in oil prices, low inflation and respective central banks measures, china financial crisis including renminbi depreciation and high unemployment in europe. global market cap and world portfolio liabilities also responded to these fundamentals as well as during the previous period. third, the 2018 volatility rise is also backed by decrease of global equity market cap and global portfolio assets. basic reasons for this are the slowdown of industrial production and world trade that resulted from introduction of tariffs by major countries in the aftermath of trade tensions between main global players. this in turn brought about the sharp decrease of general business confidence and increase of uncertainty about trade policy and investment decisions. one substantial factor for this period was the usd appreciation that resulted in a so-called emerging market sell-off. that was because the general level of dollar measured return decreased thus reducing the level of risk investors were ready to bear via investing in emerging markets. finally, the most up-to-date covid crisis falls at 2020 mostly. for this year, we observe the highest absolute level of volatility 7.19 (6.94 in 2008). global portfolio assets dropped by 12.96 % while the capitalization generally increased but the rate fell from 21.30 in 2019 to 18.52 in 2020. it however responded heavily in 2021 – falling by 26.53 %. moreover, there are three specific years that do not fall under the present analysis directly. the year 2021 is not represented by the complete statistics set thus we can regard it as the crisis year only verbally. the 2011 demonstrated the decrease of global cap as well as global equity liabilities though it did not show the increase in volatility as such. however, volatility absolute level was 4.99 that was high enough to identify it as substantial. negative events in 2011 were mostly connected with european debt crisis together with the decrease in the us credit rating and earthquake in japan. table 1 also shows that in 2011 returns were negative for all market groups which was typical for crisis periods. considering this we shall include this year to the increased volatility set. the very similar case is for 2002. we can thus identify our criteria as follows: increased volatility period is defined as such when the volatility is higher that the median (3.48) except for the cases when volatility has decreased compared to the previous year. this formal criterion completely meets verbal description of the crisis periods observed. basic considerations for volatility increase in 2002 are connected with three main factors. firstly, the terrorist attacks in the usa hit a blow to the global economy in general. as a result, expectations of major market participants regarding the world economy restoration in 2002 remained weak. secondly, the number of foregoing financial scandals negatively influenced financial markets and added weakness to general expectations regarding the global economy restoration and corporate governance. one well known scandal was connected with enron multinational giant and arthur andersen consulting company. third, some momentum in financial markets still remained after the “dot.com” crises. results of risk and return calculation using the abovementioned methodology are presented in table 1. there might be several ways how to identify the risk / return pattern. herein we are going to utilize the standard methodology implying computation of a so-called risk-adjusted return using the traditional sharpe ratio. the latter is just the relation of risk premium (difference between return and risk-free rate) to standard deviation. having risks and returns we shall thereto utilize the average for annual returns of the us treasury bills that is traditionally used as a risk-free rate of return. respective calculations appear in table 2. model specification in order to prove the stated hypothesis right or wrong we are going to model the impact of risk and return on foreign portfolio assets and liabilities for specific market groups. for this purpose, we shall construct a regression model with risk and return being independent variables and portfolio assets / liabilities being dependent variable. actually, we are going to explore two groups of models. first group implies analyzing liabilities as dependent variable during periods of increased volatility. we are considering foreign portfolio liabilities for the global market as well as for three particular market groups during years of increased volatility that will be analyzed altogether. liabilities will be regarded in terms of their absolute values as well as shares (shares of equity liabilities of particular market group in the total figure of equity liabilities). this data is presented in table 3. thus de facto we shall construct and study 7 models in the first group since every mentioned case will be individually treated for dependent variable measured in absolute figures (4 models) and measured as a percentage (3 models). for the latter percentages are not relevant. second group implies the same “duplicated” dependent variable but for periods of regular volatility level – 7 models altogether again. we are not going to study assets for a quite simple reason: risk and return are pull but not push factors of portfolio investments implying that only liabilities matter. as for the percentage shares of different market groups we consider this piece of data to be substantial since crisis period impacts not only absolute investment level but the relative attractiveness of different markets uppermost. the analysis like this might be even more meaningful than the traditional approach with absolute values. baltic journal of economic studies 103 vol. 7 no. 3, 2021 model results main results of the constructed model are presented in table 4. their general estimation tells us that by and large risk and return impact international portfolio investments in the same direction as basic theories suggest. most parameters that stand for return positively influence international portfolio liabilities and respective conclusion about risks shows the opposite direction. however, these relations should be analyzed individually for crisis periods and periods of increased volatility. periods of regular market regimes demonstrate the reverse impact of risk on international portfolio liabilities. all respective parameters of the model are negative while for developed markets and thus for the world market as a whole the relation is much more substantial compared to other market groups. at the same time the impact of return is either positive table 1 dynamics of risks and returns for the global market and particular market groups, t-bill average annual return (2002 – 2021) year acwi fm world em fm rf year acwi fm world em fm rf 2002 -2.39 -2.46 -2.04 1.59 1.61 2012 1.37 1.35 1.58 0.77 0.09 6.34 6.47 6.59 2.94 3.73 3.56 5.43 2.34 2003 2.50 2.51 3.88 3.11 1.01 2013 1.80 2.07 -0.14 2.02 0.06 3.36 3.41 4.18 3.14 2.57 2.55 3.26 3.36 2004 1.24 1.21 2.04 1.75 1.37 2014 0.42 0.48 -0.08 0.64 0.04 2.28 2.25 4.33 2.67 2.43 2.36 3.76 3.52 2005 0.94 0.82 2.65 4.91 3.15 2015 -0.09 0.05 -1.19 -1.21 0.05 2.39 2.27 5.42 7.27 3.82 3.85 4.87 3.11 2006 1.65 1.60 2.51 -0.66 4.72 2016 0.73 0.70 1.04 0.31 0.32 2.14 2.00 5.16 4.63 3.11 3.05 4.92 3.02 2007 1.01 0.80 2.96 3.01 4.41 2017 1.86 1.75 2.72 2.38 0.93 2.72 2.61 5.09 2.78 0.78 0.79 1.81 1.81 2008 -4.16 -3.98 -5.54 -5.92 1.46 2018 -0.71 -0.64 -1.18 -1.38 1.94 6.94 6.59 10.36 7.99 3.72 3.77 4.27 3.95 2009 2.77 2.47 5.27 1.34 0.16 2019 2.09 2.16 1.55 1.43 2.07 6.61 6.49 7.98 9.04 3.48 3.39 4.55 1.93 2010 1.20 1.13 1.64 1.94 0.13 2020 1.56 1.55 1.71 0.47 0.38 5.66 5.66 5.83 4.71 7.19 7.30 7.21 7.72 2011 -0.47 -0.31 -1.43 -1.63 0.06 2021 1.54 1.67 0.79 0.28 4.99 4.85 6.77 3.23 1.40 1.89 1.87 0.11 notes: 1. figures are calculated by the authors using msci data on indices (msci, 2021). 2. returns are reported in the upper row for respective year, risks – in the bottom row. 3. years of increased volatility are filled in with grey. 4. treasury bills average annual returns are marked as rf (imf, 2021-2). table 2 dynamics of sharpe ratio for particular market groups (2002 – 2021) year acwi fm world em fm year acwi fm world em fm 2002 -0.40 -0.40 -0.33 0.50 2012 0.37 0.38 0.29 0.33 2003 0.72 0.71 0.91 0.96 2013 0.70 0.81 -0.04 0.60 2004 0.49 0.49 0.44 0.61 2014 0.17 0.20 -0.02 0.18 2005 0.28 0.25 0.44 0.64 2015 -0.02 0.01 -0.25 -0.39 2006 0.59 0.60 0.41 -0.23 2016 0.23 0.22 0.21 0.09 2007 0.24 0.17 0.51 0.95 2017 2.29 2.12 1.46 1.27 2008 -0.62 -0.62 -0.55 -0.76 2018 -0.23 -0.21 -0.31 -0.39 2009 0.42 0.38 0.66 0.15 2019 0.55 0.59 0.30 0.65 2010 0.21 0.20 0.28 0.41 2020 0.21 0.21 0.23 0.06 2011 -0.10 -0.06 -0.21 -0.51 2021 1.10 0.88 0.42 2.55 note: figures are calculated by the authors using imf coordinated portfolio investment survey data (imf, 2021-1). baltic journal of economic studies 104 vol. 7 no. 3, 2021 (for the global market and for developed markets group) or negative (for emerging and frontier markets). as in the case with risks the significance of this impact is much higher for developed markets than for other market groups. as for the share of a particular market group respective risk parameters are negative for developed markets and positive for emerging markets, while for frontier markets it is actually approaching zero. it means that increase in risk brings about decrease of the share of equity liabilities in developed markets and their increase in emerging markets. this can be explained by the fact that low returns in developed markets are attractive for foreign investors since they imply low risks, and as soon as the latter increase developed markets lose their attractiveness in favor of emerging markets. the case for returns implies positive impact for developed markets and negative for emerging and frontier market groups. to our mind besides purely statistical coincidences such quantitative pattern can be explained by investors subjective perception of risks and returns. increase table 3 dynamics of international portfolio liabilities for different market groups, bln. usd and % (2002 – 2020) year total, bln. usd developed markets emerging markets frontier markets other markets bln. usd % bln. usd % bln. usd % bln. usd % 2001 5199 4130 79.44 274 5.27 2.9 0.06 792 15.23 2002 4808 3629 75.48 270 5.61 2.7 0.06 906 18.85 2003 7023 5290 75.33 502 7.14 4.9 0.07 1226 17.46 2004 8794 6459 73.45 665 7.56 8.5 0.10 1661 18.89 2005 10633 7701 72.42 1010 9.50 10.9 0.10 1912 17.98 2006 14284 10121 70.85 1527 10.69 22.5 0.16 2614 18.30 2007 17201 11361 66.05 2252 13.09 37.9 0.22 3550 20.64 2008 9876 6518 66.00 1079 10.92 23.6 0.24 2256 22.84 2009 13669 8885 65.00 1889 13.82 30.6 0.22 2866 20.96 2010 15621 9942 63.65 2336 14.96 38.9 0.25 3303 21.15 2011 14442 9170 63.49 1894 13.11 41.1 0.28 3337 23.11 2012 17028 10747 63.11 2361 13.87 45.5 0.27 3874 22.75 2013 20778 13805 66.44 2327 11.20 50.0 0.24 4596 22.12 2014 22274 14247 63.96 2486 11.16 67.1 0.30 5474 24.57 2015 23330 15269 65.45 2219 9.51 64.4 0.28 5778 24.77 2016 24705 15854 64.17 2438 9.87 65.5 0.27 6348 25.70 2017 31792 20152 63.39 3358 10.56 88.3 0.28 8194 25.77 2018 28253 17840 63.14 2962 10.48 78.2 0.28 7373 26.10 2019 33766 21612 64.00 3498 10.36 90.00 0.27 8567 25.37 2020 29389 18345 62.42 2820 9.59 70.2 0.24 8154 27.75 notes: 1. figures are calculated by the authors using imf coordinated portfolio investment survey data (imf, 2021-1). 2. shares for different market groups represent the weight of each group absolute figure in the total volume of equity liabilities. 3. years of increased volatility are filled in with grey. 4. data for 2020 is available as of june only. table 4 regression model results market group y regular periods increased volatility k1 k2 r2 k1 k2 r2 acwi fm usd 447.24 -1463.70 6.78 3793.76 -1250.15 65.33 world usd 700.19 -1067.04 9.64 2393.54 -825.22 67.00 % 1.6397 -0.8827 11.43 -1.284 0.5695 33.72 em usd -194.03 -71.48 14.61 227.93 -97.38 41.90 % -0.4799 1.0113 28.90 -0.0156 0.1460 1.85 fm usd -4.6758 -5.6242 26.89 1.4493 1.7692 1.91 % -0.0232 -0.0073 25.12 -0.0176 -0.0029 24.33 notes: 1. figures are calculated by the authors. 2. model parameters are represented by k1 and k2 ratios that respectively stand for return and risk. baltic journal of economic studies 105 vol. 7, no. 3, 2021 of returns in developed markets is not accepted by investors as the sign of volatility increase. however, for less developed markets it can be treated as the direct result of increase in risks. the regular periods pattern can be also described by positive returns in almost all cases with the absolute level for developed markets (and for the global market) being lower than for emerging and frontier markets. there are only three exceptions for frontier markets in 2006, 2009 and 2012 that can be regarded as purely statistical especially considering extremely low level of frontier market capitalization. they in fact do not produce any effect on the global market. concerning volatility, its description comes from the basic criteria – relatively low levels of risk (below the median) except the cases when the volatility decreases compared to the previous year. volatility for emerging and frontier markets is in most cases higher compared to developed markets, with some exceptions being for frontier markets only. the sharpe ratios are all positive for the global market as well as for developed markets. only few cases of the negative sharpe ratios can be observed for emerging markets (in 2013 and 2014) and for frontier markets (in 2006). periods of increased volatility can be characterized by a specific pattern of risk/return tradeoff. according to the model risk factor also demonstrates reverse impact on portfolio liabilities for the global market and for developed and emerging market groups, while for frontier markets it is direct and pretty small. return variable influences liabilities directly for all market groups with the impact being much more substantial for developed markets and the global market. parameters responsible for impact on the shares are all negative and not very substantial. absolute returns in crisis periods are mostly negative except for the 2020 only. the last crisis year can be singled out as a separate pattern that essentially differs even from other crisis years. it will be discussed later. there are only two exceptions: frontier markets in 2002 (1.59) and developed markets in 2015 (0.05). these are purely statistical points. all crisis years except 2020 are attributed to the negative sharpe ratios that are the direct results of negative returns. at the same time, we can say that the higher the volatility the lower the sharpe ratio. as for the absolute volume of liabilities it decreases in all crisis years except in 2015. the same behavior is observed for developed markets and frontier markets except in 2011. emerging markets demonstrated the cut in liabilities in all crisis years. the pattern for other market groups is not so evident, since in some years liabilities increase and in some years they decrease. however, the share of this market group is increasing in all crisis years. that can be explained by the structure of this group. it includes off-shore markets that become more attractive during periods of increased volatility. respective share of developed markets does not change substantially but in major years it slightly decreases. the average share for regular period is 67.95 % while for increased volatility it is 66.00 %. respective averages for other market group are 21.21 % and 23.90 % and for emerging markets they are 10.65 % and 9.87 %. however, considering much lower investment position level of the two latter groups mentioned changes should be regarded as more substantial compared to developed markets. summarizing finally the model reliability in terms of its determination ratio we should note that the model objective is not to confirm the impact of risk and return on international portfolio flows, assets and liabilities. this impact does not raise any doubts. instead, we would like to identify the relative significance of the impact under question for different market regimes and for different market groups as well as to define particular quantitative estimates of such impact. in terms of existing theory risk and returns are traditional factors of portfolio investing either domestically or internationally. notwithstanding the model results show that during periods of increased volatility pattern of risk and return impact on portfolio liabilities for the global markets is much more reliable compared to regular periods, respective values of determination ratio are 6.78 and 65.33. the cases for developed and emerging markets are very similar. only for frontier markets the opposite relation is observed. the impact on particular market group share is less reliable for developed and emerging markets during crises and more reliable during regular periods. for frontier markets respective difference for regular periods is not substantial but for periods of increased volatility the reliability is higher for the share rather than for liabilities themselves. as we mentioned above the 2020 crisis year can be singled out into a specific pattern that actually does not match main features of the crisis model. that is primarily due to the fact that extremely high levels of risk for all market groups and for the global market positive returns were fixed. in terms of contemporary portfolio theory this fact can seem to be hardly explained. however, to realize the causes of such increase in returns we need to study the structure and stages of the covid crisis and related events of 2020. major negative returns in equity markets occurred only in the first quarter of 2020. even in january and first half of february the global market kept on with little but positive returns despite the covid pandemic in china. then the main drop down occurred in the end february and lasted for almost a month. this so-called sell-off was due to the overwhelming panic that started after disease covered italy. this very period accounts for major portion of high risks in 2020 and the negative returns are estimated on the level more than -30 % for a month. then almost half of the year accounted for increase in returns at almost 51 % level. that was due to specific measures baltic journal of economic studies 106 vol. 7 no. 3, 2021 introduced by governments and central banks as well as to the ease of lockdowns. the second wave of covid in september and october was not so destructive although is resulted in negative returns at approximate 5-6 % level. the year-end resulted in relatively high positive returns explained by vaccine development and presidential elections in the usa. major installment in return of the global market is considered to account for the usa equities. still such important factors of 2020 as brexit and oil crisis require more detailed study. their impact on equity markets can be also notable, though most researchers agree that the pandemic crisis together with related expectations and effects appeared to be much more substantial and blocked off the influence of other factors. as a result, the precise decomposition of all factors effects for this case is hardly possible. 5. conclusions we have identified two patterns of risk / return tradeoff that differently impact international equity portfolio liabilities during crisis periods and periods of regular market regimes. herein we define crisis periods as periods when risk is above the median unless it is not decreasing compared to the previous year. thus, the more precise term that should be used is periods of increased volatility since we are not inquiring on the crisis type, its depth etc. the pattern attributable to regular market regimes or regular pattern is characterized by positive returns which is 1.51 % in average for the global market, 1.48 % for the developed markets and 2.03 % for the emerging markets. frontier markets account for extremely small share in the global capitalization thus being not representative when we talk about any sustainable pattern. therefore, they are excluded from both patterns features. risks in regular pattern are relatively small or moderate at the average level of 3.05 for the global market and are all below the median (3.48). respective risks for developed and emerging markets are 3.02 and 4.54. sharpe ratios in regular pattern are positive at the average level of 0.60 for the global market, 0.57 and 0.45 for developed and emerging market groups. the crisis pattern implies negative returns at the mean of -1.04 for the global market, -0.97 for the developed group and -1.35 for the emerging markets. high risks are all above the median and in average compile 5.5 for the global market, 5.47 for the developed markets and 6.68 for the emerging group. the sharpe ratios for this pattern are negative being equal to -0.19 in the mean. for developed markets the average value is -0.18 and for emerging markets it is -0.24. what concerns international equity portfolio liabilities they mostly decline during periods of increased volatility in terms of their absolute value: this behavior is typical for the global market as well as for developed and frontier markets. specific case stands for other markets that could not be analyzed in the full manner since the market data is not available. however, in terms of their liabilities we have defined an important point. the share of this market group always goes up during periods of increased volatility, in some years liabilities increase even in their absolute values. the average share for crisis pattern is 23.9 % while for regular pattern it is only 21.2 %. respective shares of developed and emerging markets slightly decrease. as for the developed markets our study confirms the idea that risks and returns are lower compared to emerging market group when they are positive (regular pattern), whilst in crisis pattern returns (negative values) in developed markets are not so low. risks for developed markets are always lower. generally, most conclusions about developed markets are similar to those regarding the global market since all studied indices are weighted and developed markets account for most their changes resulting from their huge capitalization, being thus very representative for the global market. considering the sharpe ratio developed markets demonstrate higher attractiveness for international portfolio investments compared to emerging markets either during crises or in regular periods. emerging markets perform better in regular pattern and worse in crisis pattern in terms of their return. all in all, they suggest higher level of not only return but risk being more attractive for more risk tolerant investors. developed regression model confirms the direct impact of return and indirect impact of risk on global as portfolio liabilities. the influence of risk for regular and crisis patterns does not differ substantially while the impact of return is much stronger during periods of increased volatility (respective model parameters are 3793.76 and 447.24). however, the discovered impact is much more reliable in crisis pattern that is supported by much higher determination ratio. developed markets experience similar effects. emerging markets also account for much more reliable effect of risk and return during periods of increased volatility. in regular pattern the impact of return even appears to be reverse though with poor reliability level. however, we should note that statistically the defined impacts can be generally evaluated as not substantial though the model main objective was to discover relative quantitative estimates. 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(2018). size matters everywhere: decomposing the small country and small industry premia. the north american journal of economics and finance, 43 (3), 1–18. baltic journal of economic studies 53 vol. 2, no. 4, 2016 corresponding author: 1 department of finance, monetary and credit, pereyaslav-khmelnytskiy state pedagogical university named after grygiriy skovoroda. e-mail: kovernuk13@mail.ru efficiency financial resources in vocational education nataliia kovernuk1 pereyaslav-khmelnytskiy state pedagogical university named after grygiriy skovoroda, ukraine abstract. the purpose of writing is to research and analyze the effectiveness of financial resources in vocational education in ukraine and develop practical recommendations for their improvement. to research and analyze the practices of formation and use of financial resources in vocational education. research conducted by the methods of empirical knowledge, analysis, clustering, comparison, observation, synthesis, graphical analysis. the measures effective use of financial resources in vocational education in ukraine. methodology is actual work of scientists and researchers. results are exploring of the practice of planning expenditures of state and local budgets for vocational education concluded that in planning expenditure dominates the normative method of budget planning. this discrepancy established approaches to the development of standards of employee’s vocational institutions and expenditures of staff, on the one hand, and the required planning spending on vocational education. when planning educational grants for training labor to local budgets is determined by the amount of expenditures that are relevant to the intergovernmental transfers, which include, in particular, spending on vocational education. although the legislation stipulates the independence of local budgets and calculation of expenditures that are relevant to the intergovernmental transfers should be done only to determine the amount of educational grants for training labor, in practice there is a significant limitation of the autonomy of local governments in the planning of local budgets. thus, the deterioration of the efficiency of spending on vocational education due to increasing labor costs and labor charges. the reason for this was the dynamics as increased wages and a change in the number of employees engaged in technical and vocational education. value. the analysis of public expenditure planning practices and local budgets for vocational education concluded that in planning expenditure dominates the normative method of budget planning. this discrepancy established approaches to the development of standards of employee’s vocational institutions and expenditures of staff, on the one hand, and the required planning spending on vocational education. when planning educational grants for training labor to local budgets is determined by the amount of expenditures that are relevant to the intergovernmental transfers, which include, in particular, spending on vocational education. although the legislation stipulates the independence of local budgets and calculation of expenditures that are relevant to the intergovernmental transfers should be done only to determine the amount of educational grants for training labor, in practice there is a significant restriction of local autonomy governments in local budget planning. key words: financial resources, the state budget, local budgets, expenditures on education, funding the educational sector, education. jel classification: i22, i25, z13 1. introduction development of vocational education of ukraine requires considerable upgrading to meet the needs of a modern economy, targeting this important sector to achieve european and world levels of educational standards, taking into account national circumstances, transformation of vocational education and training, as in almost all developed countries. problems of high labor updated dynamic changes in production technologies and sustainable demand for workers highly skilled, able to independently carry out complex work owning several related professions may be responsible for the results of their labor. requires qualitative changes in interaction of central and regional executive authorities and local governments, employers, customers training workers, is the social partners of vocational education institutions to enhance their economic stability, attract investment in their development, both motivating employers to create contemporary modern material-technical base of educational institutions, the selection of experienced baltic journal of economic studies 54 vol. 2, no. 4, 2016 engineering and teaching staff to train future workers' qualifications. the society is growing concern that the quality of workers in a significant number of vocational schools do not meet the requirements of production, because the world is relevant profession skill generalists. incomprehensibility scientific forecasts of the labor market with current world trends becoming economy causes distortions in the formation of human resources, generates staffing crisis: lack of skilled workers and increased training in universities unclaimed experts. due to an underestimation of the human factor in the production and field services, the role of human capital in the establishment of a competitive economy, the importance of training, retraining and professional development of the production staff, their need for full development, lifelong learning reduces potential skilled workers compared with developed countries, there is a decline in the prestige of working professionals, lack of information about the demand for skilled workers. operation of the system of vocational education in ukraine is complicated by the imperfect management, which does not use the possibilities of science. content management activities are often based on inefficient forms, methods and means available to it a certain conservatism, professional unpreparedness of leaders at all levels to address strategic and tactical issues and development of education. the determining factor in the success of modern vocational education is an effective system of funding. the modern practice of financial provision of vocational education inherent significant shortcomings that prevent full realization of the existing potential of social development. european integration of ukraine creates new prerequisites for effective modernization of the system of financing vocational education. the real improvement financing vocational education, so that will increase cost-effectiveness and will improve the availability and quality of services is not possible without adequate scientific justification appropriate measures to optimize financial instruments spending considerable amounts of financial resources for vocational education driven by the desire to ensure social and individual benefits from such activities. ultimately measure precisely meet the needs of the public determines the effectiveness of the use of funds, especially in vocational education. evaluating the effectiveness is crucial for deciding on the appropriateness or unreasonableness of such expenditures. in the context of limited financial resources and unboundedness social needs, whenever necessar y to isolate the costs that have a positive affect the countr y from those that do not generate the necessar y benefits. in our opinion, the presence of a negative assessment regarding certain expenditures is primarily a causative factor for finding reser ves in order to improve cost efficiency through active mechanism reform spending , adjusting their volume and structure, introduction of new approaches to the provision of public ser vices and so on. at present state ukraine problem of low efficiency of expenditures refers to a number of problems that pose the greatest threat to social and economic development. in vocational education expenditure performance problems leading to the crisis in education, because lack of proper education of young people causes negative effects in future periods in life of man. man, not having received the appropriate knowledge and proper training, acquire knowledge much more difficult in the future, and difficult adapting to a developed civil society. because these people have no moral compass stable, easily manipulated by people and for a fee to involve illegal activities. under certain conditions, it even affects the security of the state and undermines the prospects of civilized development. therefore, important to study the effectiveness of spending on vocational education, which will help to clarify the existing problems in this area and identify the reserves optimizing funding for vocational education. 2. systematic analysis of the quality of vocational education in vocational education expenditure performance problems leading to the crisis in education, because lack of proper education of young people causes negative effects in future periods in life of man. man, not having received the appropriate knowledge and proper training, acquire knowledge much more difficult in the future, and difficult adapting to a developed civil society. because these people have no moral compass stable, easily manipulated by people and for a fee to involve illegal activities. under certain conditions, it even affects the security of the state and undermines the prospects of civilized development. therefore, important to study the effectiveness of spending on vocational education, which will help to clarify the existing problems in this area and identify the reserves optimizing funding for vocational education. exploring issues of efficiency above all necessary to assess the value of the results to the committed expenditure. in the field of vocational education, concept results are quite voluminous and includes several elements the number of customers of vocational education and ensuring its availability and quality of services providing vocational education. the number of young people who are studying in vocational schools and the level of coverage of vocational education determine the number of consumers of educational services. alongside 2010-2014. state budget expenditures per pupil vet steadily increased from 6.5 thousand. uah. baltic journal of economic studies 55 vol. 2, no. 4, 2016 to 10.1 thousand. uah. which was 55.4%. it should be noted that the inflation rate for this period was 17.7%. thus, the growth in spending per customer services far exceeded the rate of inflation in the country, indicating a decrease in efficiency spending on vocational education. it is worth noting that the increase in spending occurred largely at the expense of labor, as evidenced by the growth of their share in the structure of spending on vocational education. thus, the deterioration of the efficiency of spending on vocational education due to increasing labor costs and labor charges. the reason for this was the dynamics as increased wages and the change in the number of workers employed in vocational education. conducting systematic analysis of the quality of vocational training in the context of funding requires a set of criteria that are used in the program-target method of budgeting. it should be noted that the analysis of any of the authorities with certain indicators inevitably faced with the problem of the adequacy of their choice. the situation for the use of quality indicators of vocational education in the comprehensive analysis of the effectiveness of local budgets is complicated by the fact that in ukraine at the local level are not usually used program-target method of budget planning and execution. in such circumstances, no approved quality criteria of vocational education, which indicate the effectiveness of expenditure. therefore, the research funding of vocational education and its quality advisable to limit the most important quality criteria. experts in the field of vocational training substantiate the thesis that in the determination of functioning quality vocational education in the region should take into account three aspects national, social and educational. in terms of quality of the national system of vocational education can determine the extent of compliance with the socio-economic conditions of society. in the social aspect of the quality system – a line of educational services available needs of the population, parents. the quality of education in the pedagogical aspect of compliance is measured by the content of vocational education to the current needs of the individual, the state and society based on variability, pedahohichky development-centered approach to education and training of young people training to working professionals. thus, the effective quality of vocational education can be based on a subjective basis (results of the study thought their parents vet students and others.) in addition, objective basis (up licensing vet). given the lack of comprehensive studies of the quality of vocational education at the national level and the fact that ukraine apply common approaches to planning and implementation of state and local budgets for vocational education, it is advisable to use the results of monitoring in a separate area to determine results of financing vocational education at the level of quality in the country. as the survey results as vocational education, its level is estimated to key stakeholders providing services of vocational education is quite high. fundamental importance for evaluating the effectiveness of state and local budgets have quality assessment services to their consumers. the results of a survey of parents, young people are enrolled in vocational schools generally correspond with the objective study of the quality of vocational education. create professional educational institutions of a new type of (multi-regional centers), the transfer of administrative and financial powers of the ministry of education at the regional level – these are the prospects for the evolution of the national system of vocational training. the above position reflects, in particular, the new draft law "on amendments to the law of ukraine" on vocational technical education ", which has filed for approval of the government. so today, we have 1200 general vocational education. they were created in soviet times and were "tied" to the industry. many factories is not, at the same time started working successful new business. therefore, you need a network of vocational training to match the needs of a modern economy. the practice of regional centers of vocational education used in many eu countries, because they do not overcrowd the regional market experts of one profile and reduces the risk of unemployment. also, increased flexibility regarding establishment of training according to the needs of the labor market and ensured availability of vocational education for citizens. the bill, in addition to the regional centers of vocational training shall be determined following types of vocational schools, vocational college, vocational school and the center of training. one of the advantages of decentralized implementation mechanisms should be multi-channel financing vet. the concept of reforming the system of national vocational education laid and an appropriate step – amendments to article 4 "scope of application of the public-private partnership" law of ukraine "on public-private partnership» in terms of supplementing the list referred to in article spheres – education. in the education department acknowledged that today vocational training institutions are not separate issues in the disposal of material and financial resources. then, of course, would be a logical output accounts special fund vet service of the state treasury, as well as amendments to the budget code on the possibilities of directing funds from economic activities of educational facilities for the needs of "core" activities. vet clarify: we are not talking only about the repairs, modernization or purchase of agricultural machinery, fuel and lubricants, but the purchase of software, multimedia equipment, computerization of laboratories and offices and so on. baltic journal of economic studies 56 vol. 2, no. 4, 2016 3. scientific novelty of the results scientific novelty of the results is to deepen theoretical positions essence funding allocations for vocational education and developing recommendations to improve the system of financing expenditure on vocational education. the most important results of the survey, describing its novelty is that for the first time theoretically singled components multifaceted services vocational education that show signs of public goods and private goods, as well as the content of positive externalities and the impact of services on the economy and justified on this basis, conceptual foundations focus on funding allocations for vocational education budgetary resources and money service users. proved that optimal combination of these two sources of funding allocations for vocational education directly affects the quality of services vocational education and the needs of society and social justice in the country. this made it possible to identify areas to improve the structure of sources of financing vocational education; improved set of measures to enhance the impact of financial instruments to stimulate providers of vocational training to more efficient implementation of the urgent tasks of the state, including increased financial autonomy of vocational schools, increasing the list of paid services, narrowing the terms of free provision of services student vocational schools, increasing the share of fathers compensation cost of food, predictions exemption from fees for services to socially vulnerable people, the right to dispose of their own income, a ban on receiving donations from parents and the transparency of financial resources. the approach, as opposed to the current, enables more comprehensively solve the problem of financial provision of vocational schools while excluding the negative impact on availability of vocational education and training with a positive impact on the economy; scientific approaches to ensure the effective impact of financing costs of vocational education to achieve national economic development by implementing a set of measures that coordinate the formation of local spending on vocational education programs of socio-economic development of the region and identified the country 's social policy priorities. on this basis, the expediency of sharing these documents performance criteria, the harmonization of planning horizons, unification of responsible measures provided for synchronization and monitoring the use of funds for vocational education and the program of socio-economic development of the region; were further interpretation of the concept of "system of financing expenditure on vocational education" as a set of interrelated elements and intrinsic properties, which are in relationship to each other and which form a holistic education providing financial resources, technical and vocational education in general, individual components of vocational education, enterprises, institutions and organizations and other economic entities that provide vocational education as well as programs and activities in the field of vocational education in order to achieve the planned economic results and / or social impact. unlike existing treatments proposed definition of financing vocational education allows you to find all the components of this phenomenon; systematization forms of financing expenditure on vocational education to include program budgeting, which enables to optimize the use of limited budgetary resources to the highest priority programs and activities. on this basis, reasonable application features program performance in funding allocations for vocational education, identified the potential benefits and possible risks. the recommendations for the introduction of program-targeted approach to spending on vocational education, implementation of which will contribute to the full implementation of the socioeconomic development; interpretation of the principles of financing costs in terms of singling out specific principles funding allocations for vocational education: completeness meet the needs of people who because of insufficient age alone cannot pay for and participate in the budget process; optimal combination of budgetary and non-budgetary sources of funding; along with providing vocational education to meet the needs of related services; the need for compliance with national standards and meet the different needs of service users. the principles of funding allocations for vocational education enable to objectively determine priorities for improvement. 5. conclusions in summary, analyzing the deficiencies found funding of vocational education, manifested decrease in the number of vocational schools. this is due to the optimization of the network of educational institutions. the analysis of the practice of planning expenditures of state and local budgets for vocational education concluded that in planning expenditure dominates the normative method of budget planning. this discrepancy established approaches to the development of standards of employee’s vocational institutions and expenditures of staff, on the one hand, and the required planning spending on vocational education. when planning educational grants for training labor to local budgets is determined by the amount of expenditures that are relevant to the intergovernmental transfers, which include, in particular, spending on vocational education. although the legislation stipulates the independence of local budgets and calculation of expenditures that are relevant to the intergovernmental transfers should be done only to determine the amount of educational grants for training labor, in practice there is a significant limitation of the autonomy of local governments in the baltic journal of economic studies 57 vol. 2, no. 4, 2016 planning of local budgets. thus, the deterioration of the efficiency of spending on vocational education due to increasing labor costs and labor charges. the reason for this was the dynamics as increased wages and a change in the number of employees engaged in technical and vocational education. references the budget code of ukraine № 2456-vi of 12.02.2015. retrieved from: http://zakon4.rada.gov.ua/laws/ show/2456-17/print1393162468751735 law of ukraine "on public-private partnership". retrieved from: http://zakon2.rada.gov.ua/laws/show/2404-17 draft law of ukraine "on professional education". retrieved from: http://oblrada.cv.ua/downloads/по.pdf bogolib, t.m. (2006). financial support for the development of higher education in the transformation period kyiv: education of ukraine, p.324 demyanyshyn, v. (2007). state funding and its features in modern conditions, world finance, № 2, p. 34-48. consumer price indices in 1993-2013. retrieved from: http://www.ukrstat.gov.ua/ levchuk, n. (2005). inequality of access to education in ukraine: social determinants and consequences. demography and social economy, № 2, p. 148-158. polozenko, d. (2009). problems of financing vocational education institutions in ukraine. finance of ukraine – kyiv, №2, p. 22-31. sokolov, i. (2013). programme-oriented budget management. experience and prospects in russia: monograph. publishing home "business" ranhyhs, p. 246. chuchkova, g. (2004). quality of education – the key problem of preservation and development of the region's education system. quality preschool education: status, problems, prospects – moscow, publishing "gnom & d." p. 63-69. george, s. (2008). in search of a compromise between state paternalism and financier, world finance, № 4, p. 7-12. наталья коверник оценка эффективности использования финансовых ресурсов в учреждениях профессионально-технического образования аннотация. целью работы является проведении исследований и анализа эффективности финансовых ресурсов в области профессионального образования в украине и разработать практические рекомендации по их совершенствованию. исследования, проведенные методами эмпирического познания, анализа, кластеризация, сравнение, наблюдение, синтез, графический анализ. методикой является фактическая работа ученых и исследователей. результатами статьи является исследование практики планирования расходов государственного и местных бюджетов для профессионально-технического образования пришли к выводу, что при планировании расходов преобладает нормативный метод планирования бюджета. это несоответствие установленных подходов к разработке стандартов работников учреждений профессионального и расходов сотрудников, с одной стороны, и необходимые расходы на планирование в области профессионального образования. при планировании образовательных грантов для подготовки рабочей силы местным бюджетам определяется количеством затрат, которые имеют отношение к межбюджетным трансфертам, которые включают в себя, в частности, расходы на профессиональное образование. хотя законодательство предусматривает независимость местных бюджетов и расчет расходов, которые имеют отношение к межбюджетным трансфертам, что должно быть сделано только для определения количества образовательных грантов для подготовки рабочей силы, на практике существует значительное ограничение автономии местных органов власти в планирование местных бюджетов. таким образом, ухудшение эффективности расходов на профессиональное образование произошло в связи с увеличением расходов на оплату труда и расходы на работу. причиной этого была динамика повышение заработной платы и изменение численности работников, занятых в области технического и профессионального образования. значение. актуальность темы исследования обусловлена поиском фактора успешности современного профессионально-технического образования, а именно эффективной системы ее финансирования. в современной практике финансового обеспечения профессиональнотехнического образования присущи значительные недостатки, препятствующие полноценной реализации имеющегося потенциала общественного развития. европейская интеграция украины создает новые действенные предпосылки модернизации системы финансирования профессиональнотехнического образования. реальное совершенствование финансирования профессиональнотехнического образования, в результате чего произойдет повышение эффективности использования baltic journal of economic studies 58 vol. 2, no. 4, 2016 средств и улучшаться доступность и качество услуг, невозможно без должного научного обоснования соответствующих мероприятий по оптимизации финансового инструментария. на основе исследования предпочтений и ограничений различных форм финансирования профессионально-технического образования выяснено, наиболее оптимально соответствуют целям и задачам, предъявляемым, а также учитывают экономические условия. доказано, что разнообразие различных форм финансирования создает предпосылки для развития системы профессионально-технического образования в соответствии с современными потребностями различных ее участников. установлено, что наибольший положительный эффект можно получить в результате оптимального сочетания различных форм, способно наиболее полно обеспечить выполнение функций профессионально-технического образования. baltic journal of economic studies 78 vol. 8 no. 3, 2022 1 oles honchar dnipro national university, ukraine (corresponding author) e-mail: ol-zinchenko@ukr.net orcid: https://orcid.org/0000-0002-5414-7839 researcherid: d-2863-2016 2 oles honchar dnipro national university, ukraine e-mail: privarnikova.irina@gmail.com orcid: https://orcid.org/0000-0001-7022-7946 researcherid: d-4826-2016 3 kyiv national economic university named after vadym hetman, ukraine e-mail: samoilenko.alla.o@gmail.com orcid: https://orcid.org/0000-0001-9696-985x researcherid: u-1589-2017 doi: https://doi.org/10.30525/2256-0742/2022-8-3-78-85 adaptive strategic management in a digital business environment olha zinchenko1, irina privarnikova2, alla samoilenko3 abstract. the authors of the article hypothesize the positive impact of the global digitalization of business on the development of adaptive management of the company in a changing business environment. based on a thorough analysis of recent publications on the subject of adaptive strategic management, it was found that under the conditions of digitalization of business relationships, indicative tools and flexible methods of management decisions are activated. the purpose of the article is to develop conceptual and applied foundations of adaptive strategic management in the context of digital transformation of business. to implement this goal, the authors justified the principles and approach of adaptive strategic management in the digitalization of business, systematized the actual methods of diagnostics of prerequisites for the implementation of the strategy, the choice and implementation of its optimal variant, defined the tools of adaptive management. methodological basis of research are system-structural and dialectical methods to substantiate the essence of the processes of digitalization of the business environment and determine their impact on strategic decision-making; modeling to develop a mechanism for implementing adaptive strategies of companies; method of algorithmization, integrated approach and system analysis to develop a mechanism as a complete system and determine the sequence of its action. scientific novelty of the study consists in the development of adaptive management mechanism of strategy implementation in an activated digital environment, promoting the spread of situational approach in management, updating of indicative tools, more flexible methodologies for management decisions. the mechanism of realization of the adaptive strategy assumes functioning of three subsystems: diagnostics of preconditions of realization of strategy, selection of an optimum variant of strategy and introduction of the strategic scenario. the authors have developed tools for subsystems, proposed methods to achieve the objectives, disclosed the functions in the overall mechanism. at the input to the mechanism are the interests of the client, determining the positioning of the company in the foreign and domestic market. as a result of the mechanism, the company adapts to the changing external environment, providing a stable competitive market position and operational action of all structural units, adequately and quickly responding to market conditions and changes. the authors also investigated the applied aspects of the mechanism's action, and listed its functions and tasks in the digital environment, as well as the resources for its functioning. the authors consider the complexity of counteracting the high risks of digitalization of business to be significant limitations of the mechanism, which determines new directions for further research and opportunities for improvement of the mechanism. the authors consider the risk management of adaptive strategies, the dissemination of indicative methods for diagnosing the digital environment, and the development of strategic adaptive management models to be promising directions for scientific developments in this area. the practical significance of the study lies in the possibility of using its results in the practice of management of modern companies in order to ensure sound management decisions and strategic development in the context of global digitalization of business. key words: adaptive management, situational approach, strategy, digital environment, digitalization of business, globalization. jel classification: f20, m19 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 79 vol. 8 no. 3, 2022 1. introduction today 's business realities mean more and more digitalization of business relationships occurring on a global scale. the new forms of interaction between partners, the development of e-commerce, the active functioning of marketplaces, and the spread of the sharing economy require a rethinking of business principles and a focus on more flexible approaches to decision-making. under such conditions, the concept of adaptive management, based on constant monitoring and maximum adaptation to changes in the external environment, is particularly relevant. adaptive management is implemented at both the tactical and strategic levels of decision-making. if specific solutions to respond to market changes are developed and implemented precisely at the tactical level, the strategic adaptive management involves the systematic use of adaptive methods and tools, indicative planning, sustainable and regular procedures for monitoring and diagnostics of the business environment. this is a new business philosophy based on evolutionary development and constant updating of management approaches and principles, depending on economic, social and technological changes. the product of adaptive strategic planning is a strategy that provides the main priorities, methods and forms of adaptation of companies, their sequence of application, as well as clearly defined tools of response to changes in environmental indicators. in scientific terms, the concept of adaptive management began its development with the spread of the situational approach in management. the most consistent development of the foundations of adaptive control was in the work of p. r . lawrence, j. w. lorsch "organization and environmen" (lawrence & lorsch, 1969). its starting point is the assertion that there is no single or only one way of organizing and that different approaches to organizational forms of business are necessary at different stages of the development of a particular company. this discourse was continued in the works of a leading researcher of industrial and organizational psychology – the founder of the situational theory of management, f. e. fiedler, who first established the dependence of the effectiveness of leadership style on the specific circumstances (fiedler, 1994). one of the irrational management concepts developed within the situational approach can be considered the existential concept of management proposed by g. s. odiorne in "the management theory jungle and the existential manager". the original postulate of the concept is the denial of the ability to bring management activities under certain laws, rules, and norms. according to the author, it is fundamentally impossible to create a permanent system of management, since the realities of business determine "...'situationality ' of the manager, who, not having time to get out of one critical situation, immediately finds himself in another, since he lives and acts in a constantly changing environment with many uncertainties" (odiorne, 1966, p. 110). the ideas of the leading representatives of the situational approach in management do not lose relevance in the xxi century. the article "does a strategic planning process that combines rational and adaptive characteristics pay off ? evidence from european firms" by mohamed laid ouakouak is interesting from the perspective of conceptualizing adaptive management processes. based on the systematization of best practices of 365 european companies, the author proposes a conceptual model of strategic management, combining rational planning with adaptive mechanisms of decision-making. the author proves that the combined approach of strategic planning, which involves the constant alignment of the external parameters of the business environment and organizational capabilities, has a positive impact on the financial results of the company (ouakouak, 2018). however, what the author neglects is the impact of the processes of digitalization of business on the successful implementation of the proposed approach, which limits the understanding of its adaptability. more detailed issues of the impact of the digital transformation of the business environment on the spread of adaptive approach in strategic management are considered in the article "adaptive strategies of external environmental effects in digital entrepreneurship in the strategic management perspective" (fauzi, harits, danial & komariah, 2020). the results of the study of the above authors show that unlike conventional companies, which respond to technological progress, require technological progress as a surplus value of their products and services, digital entrepreneurship uses technological progress as a major part of product development and value creation. the authors of the study recognize the important role of adaptive strategies for digital entrepreneurship and prove that the transition from technological effects to integrated digital entrepreneurship can digitize value creation and business management opportunities based on digital technologies. however, the authors do not explain the essence of the processes of adaptation to the digital environment. the processes of adaptation of the company to the changing environment are considered in the article "how adaptive strategy is adapting" (o’donovan, kasper & may, 2018). the authors give special importance to innovations, both technological and managerial, in these processes. according to the authors, by integrating the results of innovation into strategic management, companies can begin to continuously adapt in such a way as to turn strategy baltic journal of economic studies 80 vol. 8 no. 3, 2022 into an active process, as much as possible focused on changes in the business environment. this opinion is shared by the author of the article "an adaptive strategy for managing knowledge in organizations" k. sherif, which proves the connection between adaptive management strategy, innovation and dynamic capabilities (sherif, 2006). the centerpiece of the article is that organizations that follow adaptive, complex knowledge management processes compete better in the marketplace today. the dynamic capabilities gained by the organization as a result of adaptive management is the subject of another article, namely "configuring dynamic capability architecture for understanding changes" (singh & burhan, 2018). however, it should be noted that these authors, like the previous ones, do not consider those triggers of innovation processes, which are caused by the digitalization of business. the impact of digitalization on strategic decisionmaking is considered by many scientists in the context of the development of individual areas of company management and given the conditions of specific markets. for example, an article by a team of italian scholars (pereira, de oliveira, portela santos & frazzon, 2018) entitled "predictive and adaptive management approach for omnichannel retailing supply chains" focuses on developing a reference model of adaptive management approach for a multichannel retail chain. using new information and communication technologies. applied aspects of adapting the marketing management system in the tourism market segment are considered in the article "conceptual model of adaptive management of strategic marketing: a system approach" (osovtsev, przhedetskaya & sagidullaeva, 2018). adaptive capabilities of strategic management of the construction company are investigated in the article "organisational strategy making and firstline manager challenges: a building and dwelling perspective" (gjоsаter & kyvik, 2021). thus, the issue of adaptive management is relevant in the scientific discussion, but the impact of digital transformations of modern business relationships on the system of strategic decision-making has been studied fragmentarily. the lack of unified approaches of adaptive strategic management in an intensified digital business environment determines the timeliness of this study. the aim of the article is to develop conceptual and applied frameworks for adaptive strategic management in the context of digital business transformation. in order to realize this goal the following tasks were set: – formulate the principles and approach of adaptive strategic management in the context of digitalization of business; – develop a mechanism for implementing adaptive business strategies in the digital environment; – investigate applied aspects of the mechanism in a changing environment. methodological basis of research includes systemstructural and dialectical methods to substantiate the essence of the processes of digitalization of the business environment and determine their impact on strategic decision-making; modeling to develop a mechanism for implementing adaptive strategies; method of algorithmization, integrated approach and system analysis to develop a mechanism as a complete system and determine the sequence of its action. 2. conceptual foundations of adaptive strategic management in the digital transformation of business adaptive strategic management implies an indicative assessment of the external environment, based on agile management and focused as much as possible on customer satisfaction. the basic principles of adaptive management are agile principles borrowed from software development methodology. this is a new focus on the management system, implying cyclical interactions between the stages of decision-making, decentralization of responsibility, liberalization of the relationship between management and executives, and self-organization. in the era of digital business transformation, this flexibility of the strategic management system is very important because it allows you to respond quickly to market challenges, to change not when there is an opportunity, but when there is a need. adaptive management is implemented through strategies that are developed in the process of performing the task and have an arsenal of tools for rapid adjustment of decisions based on the accumulation of new information about the possible results of their implementation. implementation of conceptual approaches to adaptive management is possible through the mechanism of implementation of adaptive strategy (figure 1), which allows to diagnose the current state of the business, to ensure the implementation of adaptive strategy to attract the latest opportunities as the market, and the company itself to create its positive image, to activate the potential towards customer satisfaction in a digital environment. digitalization of business complements traditional methods of strategic management with new tools. modern companies increasingly use cloud technologies, mobile first, big data and artificial intelligence tools, scenario approach, crm technologies, scrum and kanban methods in their activities. their combination into a single mechanism allows you to consider today 's business needs and to mobilize all the possibilities of strategic management to achieve results in a very dynamic environment where, thanks to the spread of digitalization, the baltic journal of economic studies 81 vol. 8 no. 3, 2022 figure 1. mechanism for implementing adaptive business strategies in the digital environment subsystem of diagnostics of prerequisites for strategy implementation methods: indicative assessment; strategic analysis; sociological surveys; customer segmentation; scenario approach; index method; big data. functions 1. assessment of the potential for strategic development due to the digitalization of business 2. diagnosis of the prerequisites for the formation of an adaptive strategy 3. аnalysis of contact audiences 4. еvaluation of the business environment, the state of digitalization of business relations and monitoring of stakeholder interests. toolkit: scripts; indices; indicators; forecasts; ratings; questionnaires; swot-, pest-, step-, spacematrices; software framework. functions 1. determination of business priorities 2. selection of the strategy scenario 3. development of models of adaptation to market conditions 4. formation of tools and stages of strategy implementation 5. definition of indicators which will be used to evaluate the effectiveness of its implementation 6. formation of a strategic action plan 7. assessment of the risks of implementing the strategy methods: prioritization methods; detailing; modeling; project approach; matrix method; marketing mix; mobile first. subsystem for selecting the best strategy option toolkit: prioritization matrices; business interaction model; the project; program; brand; roadmap. functions 1. development of measures to achieve the set goals 2. implementing business priorities in the digital environment 3. minimizing the risks of adaptation failure 4. implementation of projects to create an attractive image 5. formation of favorable prerequisites for business activation 6. analyzing the effectiveness of using the company's potential methods: positioning; project approach; distancing from negative characters; risk management; comparison method; branding; scrum and kanban. toolkit: project; event technology; pr-technologies; crm-technologies; ml-algorithms. subsystem for the implementation of the strategic scenario customer interests adaptive strategy goals and priorities f ac to rs o f di gi ta li za ti on o f bu si ne ss a da pt in g to th e di gi ta l e n vi ro n m en t a tt ra ct iv e br an d r esources: m aterial and technical, financial, hum an, intellectual, inform ation, corporate values, organizational and m anagerial adaptive strategy scenario principles: objectivity of completeness and verification of information of a comprehensive approach principles: planning, predictability, stages, managerial efficiency, effectiveness, sequence principles: adaptability; efficiency; orientation to meet the needs of target audiences; the formation of a culture of consumption; rationality; cyclicality. subjects of adaptive strategy formation: company management, representatives of the consulting business baltic journal of economic studies 82 vol. 8 no. 3, 2022 interaction with customers is as personalized as possible. 3. applied aspects of implementing adaptive strategies in the digital environment the mechanism of realization of adaptive strategy of the company assumes functioning of three subsystems: a subsystem of diagnostics of preconditions for realization of strategy, a subsystem of selection of an optimum variant of strategy and a subsystem of implementation of the strategic scenario. each of subsystems has the toolkit, methods of achievement of tasks, functions in the general mechanism. at the input of the mechanism are the interests of the client, determining the positioning of the company on the external and internal market. as a result of the mechanism, the company adapts to the changing external environment, ensuring a stable competitive market position and prompt action of all structural units, adequately and quickly responding to market conditions and changes. all resources of the mechanism can be divided by the nature of their origin and application into: – material and technical – resource potential, production base, technical equipment, energy resources, infrastructure, characterizing the production capabilities of the company and ensuring the implementation of its strategy; – financial – cash income and receipts that are at the disposal of the business and can be used to implement strategic objectives; – human resources – qualified personnel involved in the process of developing and implementing the strategy and who are the drivers of systemic change; – corporate values – the company 's history, business philosophy, the system of traditions, the image formed, which will be the basis for the perception of the strategy by both external audiences and its own staff; – informational – a set of documented and undocumented information in information systems and databases of the company, as well as methods and approaches to work with it; the category is very broad, because it covers not only the totality of data, but also the technological component; – intellectual – a set of accumulated knowledge, ideas, competencies that have scientific and commercial value and can be used in strategy development; this type of resources, although informational in nature, is related to human resources, but because of the importance of company development in a digitalized business and the specificity of management approaches, they constitute a separate group; – organizational and managerial abilities and capabilities of company management to initiate, organize, direct business development in a changing environment, motivate all participants in these processes, control and analyze the results of this activity. the subsystem of diagnostics of prerequisites for implementation of the adaptive strategy provides such functions as assessment of potential opportunities for strategic development, diagnostics of prerequisites for formation of the adaptive strategy, analysis of contact audiences, assessment of the business environment, the state of digitalization of business relations and monitoring of stakeholders' interests. diagnosis of the prerequisites of an adaptive strategy involves analysis of the factors influencing the processes of selecting the most favorable option for business development in a digital environment. the management system is considered separately, and the internal resource of power, the degree of its mobilization, the motivation of the company 's development, readiness for structural changes, competence and awareness are evaluated (finagina, prodanova, buriak, gavrylovskyi, khoroshun, zinchenko, 2021). the analysis of the contact audience is aimed at identifying and segmenting potential customers. the attitude of these groups to the company is assessed, the problem of positive perception is established, and conclusions about reputation are drawn. in this way the image of the company is created, thanks to a successful adaptive strategy it turns into a positive image. stakeholders, the degree of their interest, the main motives and incentives, the possibility of involvement in the actions of the strategy implementation are defined. it is important to assess the potential of digital drivers to activate business: electronic business interaction platforms, marketplaces, digital payment systems, the possibility of effective positioning of the company in social networks. among the limitations of adaptive strategic management is the system of business regulation in the context of the development of e-commerce in the world and in the country in particular. it is about such areas of regulation as customs and tax law, logistics, currency control, the use of electronic money, and measures to protect consumer rights (nikolaiev, 2021). a special place in the diagnostic subsystem is occupied by the assessment of market potential from the position of its attractiveness for the company. it implies the analysis of financial and credit potential, material and technical base, economically active labor resources, and market infrastructure (nikolaiev, 2021). the effective tools of the mechanism subsystem are formed under the influence of the spread of the scenario approach, indicative planning, rating assessments, as well as strategic analysis technologies. in the context of digitalization of business, big data or artificial intelligence technologies, which allow the accumulation and processing of large flows of information, baltic journal of economic studies 83 vol. 8 no. 3, 2022 on the basis of which options for strategies are developed, adapt them to specific market requirements and predict the behavior of customers, should be highlighted in particular. for example, the means of mass-parallel data processing systems category nosql, algorithms mapreduce, software frameworks simplify the processing of large arrays of data, facilitate the development of complex systems, contribute to fast decision-making. the selection subsystem involves the justification of the optimal strategy option and the development of a scenario for its implementation. its main functions are: the choice of a scenario strategy to identify business priorities, development of models for adapting to market conditions, the formation of tools and stages of implementation of the strategy, the definition of indicators on which to evaluate the effectiveness of its implementation, the formation of a strategic action plan, the selection of approaches and methods to assess the risks of implementing these measures. based on the results of the analysis, certain strategic priorities are set, linking the subsystem of diagnostics and the subsystem of strategy implementation. strategic analysis in this context serves as the main diagnostic tool, and further on the basis of strategic priorities specific activities are developed. priority is a kind of reflection of the goal in a certain space, taking into account the perception of a particular audience, forms a system of business objectives, laying the foundation for the basic characteristics of the strategy (lepeyko & kryvobok, 2015). on the basis of priorities scenarios of development of the company under specific market conditions are developed. scenario forecasting involves the use of methods of expert evaluation of strategic directions of development, finding market breakthroughs with a long-term perspective of radical influence on the positioning of the company in the market. the scenario includes a plan of action for all components of the marketing mix: product, price, place, promotion. as a result of a comprehensive analysis, the choice of the most optimal scenario is made. based on the scenarios, a "roadmap" is formed that presents a future-oriented view of the company 's chosen range of priorities and the activation of its potential. the roadmap provides a comprehensive, interconnected view of the company 's development prospects, allowing you to mutually link strategic plans, research and marketing activities, as well as showing their relationship to the planned goals of the company 's strategic development (finahina, pavlovska, mylnichenko, 2019). analysis of the effectiveness of the strategy involves assessing the potential of the company, the conditions and results of the strategy, the level of competition in the markets, the performance of the company (zinchenko, malyshko, 2016). based on this assessment, decisions will be made on how to create and promote value, and models of interaction with customers and branding of the company will be determined. the subsystem of the implementation of the strategic scenario defines specific measures to achieve the goals set, the implementation of business priorities in a dynamic environment. channels of distribution of products (services) are selected, their workload is determined by market requirements, the production program is developed, the current priorities of management system requirements are formed, the existing marketing and logistics system is adapted to the requirements of the chosen strategy. the subsystem for implementing a strategic scenario translates the desired image of the company into the category of "attractive image", which can be commercialized and serves specific management goals. the subsystem of the implementation of the strategic scenario involves the following functions: minimizing the risks of adaptation (non-perception of the company 's actions by the market), implementation of projects to create an attractive image, the formation of favorable conditions for the revitalization of business, analysis of the effectiveness of the use of existing potential. an important component of this subsystem is the evaluation of the effectiveness of both external and internal implementation of the strategy, where the first is the ratio between planned decisions and available resources, and the second is the difference between expected and actual reactions in the external market, arising from the adaptation of the company to market requirements. an important component of this subsystem is the evaluation of the effectiveness of both external and internal implementation of the strategy, where the first is the ratio between planned decisions and available resources, and the second is the difference between expected and actual reactions in the external market, arising from the adaptation of the company to market requirements. customer relationship management (crm) technologies are being actively implemented. their implementation takes place on unified digital platforms. thanks to this, companies can not only manage business processes, but also automate sales, marketing, and service. in the context of a revitalized digital environment, companies can adopt different positioning strategies aimed at creating content focused on creating a unique brand. an important component of international branding in the digital space is choosing the right consumer culture positioning strategy. digitalization of business gives impetus to the development of project technologies. agile project baltic journal of economic studies 84 vol. 8 no. 3, 2022 management methods scrum and kanban become relevant. scrum methodology allows for a clear allocation of roles in the development and implementation of strategies and teamwork in both the development and implementation of adaptive strategies. it is based on continuous learning and adaptation to changing factors. kanban methodology involves visualization of project tasks, their structuring, effective distribution between performers. this technique allows to synchronize the work of the project team, to ensure the implementation of tasks "just in time", and to implement cyclicality in the processes of implementing adaptive strategies. formation of communications in the promotion of the strategy is aimed at creating relevant appeals to consumers, the choice of ways to promote the image of the company, the creation of effective channels of information distribution in the process of implementing the strategy, assessing the possible extent of their workload, the identification of data sources on the adaptation to external market requirements. on the effectiveness of the design of information exchange will depend on the success of the entire process of implementing the strategy. the final function of the mechanism, which streamlines the activity of all its systems and implements the feedback of its elements, is the analysis of the effectiveness of the adaptive strategy, which is carried out according to the results of achieving certain goals, implementing priorities, comparing the results with the resources spent to ensure effective adaptation to market conditions. it is important to organize ongoing control at all stages of the implementation of the strategy. it is necessary to ensure its regularity and independence from the influence of company management. the mechanism for implementing adaptive strategies should be embedded in a system of digital business transformation and provide for the functioning of electronic platforms b2b, b2c, d2c – interaction. effective functioning of the mechanism requires effective infrastructure of e-commerce and e-business (e-contract, e-logistics, e-invoicing, e-docflow), transactional support (online payments, fintech services, cashless tools) and interoperability (api, european isa standards), interactive services (blockchain, legaltech, insurtech, fintech), industrial digitalization (industry 4.0), linking digital data to spatial objects (geographic information systems), information security. 4. conclusions the mechanism of implementation of adaptive business strategies developed by the authors allows to comprehensively assess the state of the market and evaluate the prospects for the company 's development in the digital environment. the flexible tools of the mechanism allow choosing the most favorable scenario for external conditions of the strategy and quickly adjusting it in case of market changes. and the strategy implementation subsystem, based on agile principles, helps the company achieve its priorities in the digital environment. each separate subsystem of the mechanism can operate autonomously, because it is equipped with its own tools, decision-making techniques, algorithms for action. however, as a part of the mechanism, a multiplier effect is achieved, when on the basis of constant monitoring of the external environment, which allows the mechanism diagnostic subsystem, the strategy scenario is promptly selected and the market requirements are constantly adjusted. thus, the speed of decision-making increases, and feedbacks between subsystems of the mechanism ensure the cyclicality of its action. among the functional limitations of the mechanism is the complexity of counteracting such risks of digitalization of business as a high level of cybercrime, shadowing of transactions, digital divide. this determines new directions for further research and opportunities to improve the mechanism. consider as promising research in the field of risk management of adaptive strategies, dissemination of indicative methods of diagnostics of the digital environment, development of models of strategic adaptive management. references: fauzi, t. h., harits, b., danial, d. m., & komariah, k. 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(2018). conceptual model of adaptive management of strategic marketing: a system approach. european research studies journal, vol. xxi, special issue 2, pp. 666–677. doi: https://doi.org/10.35808/ersj/1293 pereira, m. m., de oliveira, d. l., santos, p. p., & frazzon, e. m. (2018). predictive and adaptive management approach for omnichannel retailing supply chains. ifac-papersonline, vol. 51, issue 11, pp. 1707–1713. doi: https://doi.org/10.1016/j.ifacol.2018.08.210 sherif, k. (2006). an adaptive strategy for managing knowledge in organizations. journal of knowledge management, vol. 10, issue 4, pp. 72–80. doi: https://doi.org/10.1108/13673270610679372 singh, a. k., & burhan, m. (2018). configuring dynamic capability architecture for understanding changes. international journal of strategic change management, vol. 7, issue 2, pp. 109–138. doi: https://doi.org/10.1504/ ijscm.2018.091598 zinchenko, o. a., & malyshko, u. d. (2016). rozvytok metodyk analizu mikroseredovyshcha pidpryiemstva na prykladi zakladu aptechnoi haluzi [development of methods for analysis of microenvironment of an enterprise on the example of establishment in the pharmacy industry]. european journal of management issues, vol. 7, pp. 280–286. doi: https://doi.org/10.15421/191631(in ukrainan) received on: 3th of august, 2022 accepted on: 7th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 29 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-29-36 factors of digitalization of the marketing activity of tourist enterprises of ukraine in the conditions of global digitalization marta barna1, iryna melnyk2, rostyslav baran3 abstract. the main purpose of the article is to determine the main current trends and factors of digitalization of the tourism industry, which have a significant impact on the efficiency and increase the performance of economic entities in the tourism industry of ukraine. the theoretical and methodological basis of the study consisted of the publications of the economists, who analyzed the problems of formation and prospects for the development of internet marketing. a monographic method was used to cover the scientists’ views on the research issue. correlation and regression methods of analysis were tested in determining the factors of digitization. the article systematizes the dynamics of the development of the tourism industry and indicators of the economic activity of tourist enterprises in the global and national context. it is determined that due to the intensification of crises and quarantine measures caused by the spread of сovid-19, the number and expenditures of tourists on entertainment, the income of tourist enterprises, the number of people employed in the tourism industry have significantly decreased. at the same time, the process of digitalization of the studied industry has accelerated in terms of the growth of investments aimed at the development of marketing startups of a digitalization nature. the evolution of marketing approaches to the digitalization of tourism industry enterprises is theoretically comprehended. the main stages include traditional individual tour operators, e-business, e-commerce, smart tourism. it is concluded that domestic enterprises of the tourism industry lag significantly behind similar business entities in terms of the process of digitalization of economic processes and marketing mix. the factors of digitalization of the marketing activity of tourist enterprises are generalized. the results of factor analysis on the importance of using elements of digitalization in the marketing activities of tourism enterprises of ukraine are analyzed and visualized. it is determined that the most significant influence on the effectiveness of marketing activities using elements of digitalization in the tourism industry of ukraine is exerted by such factors as: chatbots based on artificial intelligence, voice search and voice control, virtual reality, augmented reality, internet of things, robots, contactless payments, cyber-security measures, recognition technology, large data sets, artificial intelligence. key words: internet marketing, digitalization, tourist enterprises, tourism, globalization. jel classification: m31, z32, z33 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: martabarna@ukr.net orcid: https://orcid.org/0000-0001-5248-9774 2 lviv university of trade and economics, ukraine. e-mail: gaveshta@gmail.com orcid: https://orcid.org/0000-0002-3132-6500 3 ivano-frankivsk educative and research institute of management of west ukrainian national university, ukraine. e-mail: baranr32@gmail.com orcid: https://orcid.org/0000-0002-3275-489x 1. introduction the development of marketing activity and effective use of modern information technology is an integral part of the successful operation of tourist enterprises. the symbiosis of certain factors formed a basis for the emergence of a new direction of the modern concept of internet marketing. the need for people to travel faster, safer, and more efficiently has led to the emergence of breakthrough innovative solutions. in recent decades, the impact of technology on the travel industry has become even more appreciable due to the use of new it services, which has led to a significant increase in the size of the online travel market and increased digitalization of the tourism industry. on the other hand, the intensification of crises has increased the risks of the effective development and operation of certain industries. in general, the baltic journal of economic studies 30 vol. 7 no. 3, 2021 impact of the covid-19 pandemic has brought some industries to the verge of bankruptcy (for example, hotel and restaurant establishments) and created the preconditions for a sharp jump and development of others (including the sector of information technology). therefore, there is a need to analyze the statistics of international tourist flows for the last period, which can help understand general trends, identify factors of the digitalization of tourist enterprises and develop a strategy for further steps of the digitalization of the tourism industry in ukraine in the conditions of global uncertainty. the purpose of the article is to determine the main current trends and factors of digitalization of the tourism industry, which have a significant impact on the efficiency and increase the performance of economic entities in the tourism industry of ukraine. 2. literature review several publications of the economists, who analyzed the problems of formation and prospects for the development of internet marketing, have become a theoretical basis of the study. in particular, l. weber (2009) emphasizes the need to introduce new ways of finding customers through social networks, which should create the conditions for the formation of a community of potential customers and maximize profits in the face of global uncertainty. p. copley (2004) substantiates the conceptual approaches to the management of marketing communications in the context of the digitalization of society, while x. font and s. mccabe (2017) systematize the methodological principles of forming an internet marketing system for tourist enterprises. from a scientific point of view, the studies of o. mulska, o. levytska, v. kutsyk (2020); t. vasyltsiv, o. klipkova, l. lupak, n. mitsenko, i. mishchuk (2019); t. vasyltsiv, r. lupak, m. kunytska-iliash (2019) are noteworthy, in which the authors point to the leading role of the information and communication technology sector in the sustainable growth of the national economy and justify public policy measures in the context of the global digitalization of society and economy. on the other hand, e. matthnai (2019), berlow, j., stuart, p. (2007) in their works consider practical features of the use of marketing technologies while managing the tourist enterprise in the context of strengthening their digitalization. at the same time, the scientists did not pay attention to the issues related to the assessment of the factors of the digitalization of tourist enterprises, which in the conditions of covid-19 have acquired a new sound and significance. 3. statistical data in general, it can be noted that the number of international tourists in 2020 amounted to 381 million people, which is 26% less than in 2019 and corresponds to the data fixed 30 years ago. the income of the travel and tourism industry in 2020 amounted to 348.8 bln usd, which is 52% less than in the previous year. at the same time, the volume of the global market of tourist services in 2020 decreased from 1691 to 1541.0 bln usd (wto, 2020). such trends are associated with strict quarantine measures implemented in almost all countries of the world. however, as it can be seen in figure 1, according to the forecast data of 2021, this figure is expected to be even exceeded as of 2019 to 1701.8 bln usd (positive dynamics based on the extrapolation of the trend is expected in 2022, provided other things being equal), which the authors first of all associate with the intensive use of tools for marketing activity digitalization in the tourism sector. continuing the analysis of the dynamics of the studied industry on a global scale, the authors note that at the beginning of 2021 the share of the world gdp due to constant restrictions on mobility was only 10.4%, i.e., decreased by 5.5% in 2020. an extremely negative consequence lay in the fact that in 2020, 62 million jobs were lost, which is 18.5% less than in the previous year. as a result, there are only 272 million employees left in the industry, compared to 334 million in 2019. the authors point out that the expenditures of domestic tourists decreased by 45%, while international − by an unprecedented 69.4%. the tourists’ expenditures on entertainment decreased by 49.4%, while the expenditures of business tourists decreased by as much as 61.0%. air carriers were also significantly affected. the number of flights operated by airlines globally in 2019 was 38.9 million, and in 2020, there was an unprecedented decline in this figure to 16.4 million (wttc, 2020). however, despite the significant losses in the world gdp described above, the tourism industry also received significant investments last year. most of them were aimed at marketing startups based on the digitalization of processes. first of all, the authors mean the growth of the volume and number of virtual tours. in total, about 2.4 bln usd were invested in the travel and tourism industry, which, however, is 58.11% less than in 2019. only in the first quarter of 2020, 1.4 bln usd were invested in the implementation of 57 startups in the field of tourism, almost all of which were associated with the digitalization of various processes (foreign direct investment statistics, 2020). the authors note that in search engines, the monthly search for virtual trips increased by 28.5 times − from 8,981 search queries per month in february 2020 to 25,661 in april of that year (compare the market, 2020). besides, the size of the global market of virtual reality was estimated at 15.81 bln usd in 2020 and is expected to grow by another 30.9% by 2028. at today’s stage of the development of the world society, it is clear that the global economy continues baltic journal of economic studies 31 vol. 7 no. 3, 2021 to digitalize intensively. this is caused first of all by the fact that a significant proportion of people work remotely and adhere to security measures on social distance, therefore the use of the internet and similar networks has increased many times. most businesses use online marketing technologies to increase their presence in global networks. given this and other factors, the volume of digital marketing has grown. it should be noted that the average amount of time spent by potential consumers in digital networks was about 7 hours per day in 2020, i.e., twice as much as in 2019 ( j. brandon, 2020). at the same time, the daily time spent on social networks by internet users worldwide in 2020 was 145 minutes. the number of social media users increased by more than 10.5% (over 376 million people) in the period from july 2019 to july 2020, having reached 3.96 bln usd. in total, in 2020, more than 2 billion people purchased goods or services on the internet. moreover, for the same year, the volume of electronic retail trade exceeded 4.2 trillion usd worldwide (daily infographics, 2020). despite the initial decline in the global economy due to the pandemic, the expenditures on digital advertising increased by 12.2% compared to the previous year in the united states in 2020, having reached 139.8 bln usd per year. for example, in the united states in 2020, the income from advertising figure 1. dynamics of the volume of the global market of tourist services, bln usd, 2011-2022 (2021-2022 − forecast data) source: based on wttc 1436,7 1460,1 1540,7 1596,6 1522,2 1534,8 1631,8 1710,1 1691,5 1541 1701,8y = -0,0148x4 + 0,3555x3 4,8468x2 + 54,674x + 1386,6 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 m ar ke t vo lu m e, b ln , u sd years 0 50 100 150 200 250 2020 2021 2022 2023 2024 2025 2026 2027 bl n u sd north america europe asia pacyfic south america middle east and africa figure 2. dynamics of the volumes of the global market of virtual reality, 2020-2027 (2021-2027 − forecast data) source: based on data bridge baltic journal of economic studies 32 vol. 7 no. 3, 2021 in social networks reached 41.5 bln usd, which accounts for almost 30% of all the income from online advertising. in the year under review, the expenditures on digital advertising in the tourism industry in the united states, according to the experts, reached 3.24 bln usd, which is 41.0% less than last year (cnbc, 2020). despite some destructive factors that affected the global economy last year, the tourism industry is finally showing signs of recovery. however, the long-awaited leap depends mainly on the pace of vaccination, the ease of travel restrictions, the favorable development of the global economy, the further digitalization of the tourism industry, and the resumption of air transport. the analysis of recent trends in the short term, which have a direct or indirect impact on the recovery of the tourism industry, gives grounds for the following conclusions. in 2020, more than 944 million doses of the coronavirus vaccine were introduced in 170 countries; in 2021 about 15.9 million vaccines are administered daily in the world. at this rate, it will take years to achieve a significant level of global immunity. however, this figure is growing steadily, and new vaccines are appearing in the market around the world (bloomberg, 2021). however, unfortunately, in such conditions, 66% of all the destinations worldwide are fully or partially closed to international tourism (w to, 2020). according to the experts, domestic tourism is expected to fully recover under the most favorable conditions by the second half of 2022, which is 1-2 years ahead of similar trends on foreign travel. at the same time, the analysts also predict that the total income of the tourism industry will reach about 540 bln usd in 2021 (approximately 54% growth per year) (bloomberg, 2021). 4. evolution of marketing approaches to digitalization regarding marketing startups using digital technologies in the tourism industry, it is worth noting the following trends in the leading tourism brands. for example, the multinational company kook, the world’s leading travel and leisure booking platform, raised 200 mln usd in this area in early 2021 (pr newswire, 2021). thus, new opportunities through digital marketing in the tourism industry depend on the ability of tour operators to adapt their business to the current travel scenario in the context of digitalization. historically, the digitalization of marketing activities both globally and in ukraine has gone through the following main stages (figure 3): (1) traditional individual tour operators (late 90s − early 2000s) − internal database, the low level of digitalization, and the use of computer technology; (2) e-business (2000-2009) – the creation of an e-business environment, an increase in the volume of internet operations, the introduction of certain functions of internet marketing; (3) e-commerce (2010-2018) – an increase in the level of global interconnectedness and interdependence of tourism businesses, the introduction of innovations in global sales chains, the implementation of online strategies b2b, b2c, c2c; (4) smart tourism (2019-present) – the formation of smart visualization of the tourist product, contact with the customer online in real-time; the application of high technologies, including elements of industry 4.0, the development of new innovative products, the formation of global chains of added value. due to this, the number of travel companies did not decrease even during the covid-19 pandemic, including in ukraine, as evidenced in particular by the dynamics of collective accommodation. thus, in 2019 the mentioned indicator increased by 616 units compared to the previous year (from 4719 to 5335 units), even though the number of people who used the mentioned accommodation facilities decreased slightly − from 7006 thousand people in 2018 up to 6960 thousand. unfortunately, domestic tourism companies lag far behind similar businesses on the digitalization of business processes and marketing mix. however, in the digital agenda, the government has stated the need to promote the implementation of the principles of industry 4.0, which will help to withstand fierce competition from enterprises in the industry, especially in the context of continuing certain quarantine restrictions because of covid-19, which are global. the authors note that, according to the experts, on a global scale, the digitalization of travel and tourism, in general, can bring the world economy and society more than 1 trillion usd of additional income directly or indirectly in the next decade (world economic forum, 2018). in addition, social benefits include saving costs and time for consumers and reducing environmental transaction costs. figure 3. global evolution of marketing approaches to the digitalization of tourist enterprises source: developed by the authors traditional individual tour operators (late 90s-early 2000s) e-business (2000-2009) e-commerce (2010-2018) smart tourism (2019-present) baltic journal of economic studies 33 vol. 7 no. 3, 2021 5. factors of the digitalization of marketing activity of tourist enterprises cloud technologies used to access, manage and store large databases on the internet play an extremely important role among technological trends in the development of marketing of tourist enterprises. according to the 2020 survey, more than half of european travel agencies and tour operators purchased cloud technologies used via the internet, while in 2016 only 29% used this practice. in addition, the global sociological survey of the travel services market conducted by the wto in december 2020 showed a sharp increase in the use of chatbots in the travel and hospitality industry. at the same time, the majority of respondents (64.2%) surveyed in ukraine suggested that this type of software may also play a significant role in the future. this marketing tool is used mainly in the field of tourism to accumulate queries or bookings in realtime. it is also expected that virtual agents and chatbots will become one of the main services implemented or planned by airports around the world by 2022. as the coronavirus pandemic disrupted the organization and implementation of traditional travel, the interest in using the latest technologies and innovative solutions to restore travel and tourism has risen sharply since 2020. for example, more than 58.4% of the respondents (consumers of travel services) support the introduction of digital passports of the vaccination from covid-19 for international travel. the mentioned global wto survey in 2020 showed that tourists from thailand were most convinced of this need (74.1% of the respondents). in ukraine, 49% of the respondents said that technology would be extremely important for global security during the covid-19 pandemic. at the same time, german tourists were much more skeptical about this (only 23.5% of the respondents answered affirmatively). in terms of travel-enhancing technologies, according to the survey conducted in september 2020, mobile marketing applications that provide real-time information and travel alerts on pandemic aspects, as well as contactless payments (world tourism organization, 2021), are identified as important marketing tools. it is clear that digital travel, or digital tourism, refers to the use of digital tools by travelers during the overall tourist experience. for example, booking travel products online can be considered part of this digital process. according to the data of the statista global consumer survey (2020), hotels, car rental, and rental tickets were among the main tourist products booked online in 2020. the number of hotel rooms and tickets booked online also increased significantly (by 38% compared to the previous year). in addition to online booking, online travel directions, travel destinations, and food reviews have become another important aspect of the overall digital tourism experience. from 2014 to 2020, the total number of user reviews and opinions on tripadvisor, one of the most famous travel websites, more than quadrupled. the tourist interest in posting and reading travel tips and comments on the internet was confirmed by the fact that tripadvisor was the most visited travel and tourism website in the world in january 2021 (statista global consumer survey, 2020). at the present stage, social networking websites also play an important role in the tourism industry, as tourists use these platforms to share online content related to travel planning and trip implementation. meanwhile, travel companies use them as a marketing tool, offering vacation spots and advertising travel products. according to the above study, approximately 31% of the ukrainian travelers surveyed used social networks as a source of information for domestic travel planning (world tourism organization, 2021). as for social network profiles, national geographic travel has become the most popular source influencing the organization and promotion of travel on instagram in the world as of may 2020 (travel − national geographic, 2020). the authors note that due to the coronavirus pandemic, the income of one of the world’s largest companies providing reservation services for hotels, apartments, cars, and air tickets – booking holdings – worldwide decreased significantly in 2020 compared to the previous year. in 2019, the company’s total income amounted to more than 15 bln usd, and in 2020 the table 1 potential transactional income and benefits for society from the digitalization of the tourism industry at the global level in 2016-2025 (expert estimates) components of the tourism industry / sphere of influence impact on business (bln usd) impact on the social sphere (bln usd) reduction of harmful emissions (bln usd) impact on labor resources (bln usd) travel sector 100 165 270 tourist ecosystem 105 380 170 940 high-tech enterprises 190 20 143 100 security and safety 10 140 10 total 405 705 313 1320 source: based on world economic forum, 2018 baltic journal of economic studies 34 vol. 7 no. 3, 2021 income fell to about 6.8 bln usd. in total, booking holdings’ net income worldwide was about 59 mln usd in 2020, which is the lowest figure recorded since 2007. the income of one of the main competitors of booking holdings – expedia in 2020 also decreased more than twice due to the crisis in the health care sector (annual reports and proxies – expedia group, 2020). using the data of the global survey of tourists conducted by the wto for ukraine in 2019 and 2020 and the data of the authors’ expert survey of the top managers of the tourist companies in western ukraine based on factor analysis tools, the authors have outlined the factors that most influence the effectiveness of the use of elements of the digitalization of marketing mix in the tourism sector (table 2). 6. conclusions the research results using factor analysis data suggest that the quarantine measures caused by сovid-19 have significantly accelerated the technological process of digitalization of marketing activity in the field of tourism, as social distancing and hygiene requirements and restrictions have forced consumers to use digital rather than personal offline services. the most significant impact on the effectiveness of marketing activity using the elements of digitalization in the tourism industry of ukraine is exerted by such factors as: 1. chatbots based on artificial intelligence have a significant impact on the effectiveness of marketing activity in the travel industry because with this technology customers can be provided with quick answers to their questions around the clock 7 days a week, regardless of staff availability. this can be important in the context of maximizing the needs of modern consumers of tourism services. as a rule, chatbots answer high-quality questions with standard answers. modern chatbots are constantly being improved based on large-scale interaction. in addition, their use is extremely effective in counteracting the spread of the covid-19 pandemic and global safety and hygiene measures. 2. voice search and voice control. smartphones, smart speakers, and assistant guides help increase the efficiency of voice search and improve technological solutions in the tourism industry. in particular, more and more travel customers are using voice search to book tickets, hotel rooms, and choose tourist destinations and general travel arrangements. therefore, travel companies need to develop their website based on voice search to increase the profitability of marketing activity. moreover, the voice menu also plays an increasingly important role in the real (physical) travel experience. in a hotel room, voice-controlled devices can be used to control lighting and heating in rooms or to obtain tourist information without having to talk to the staff. this technology is also important for socially disabled people. 3. virtual reality. virtual reality has become a new widespread technology in many different sectors, but its role in the tourism industry is particularly important because it allows tourists to emotionally experience physically remote places (tourist destinations) without leaving their home, and may eventually become a stimulus to booking a visualized tour, hotel room, car, etc. with the help of tours using virtual reality technology, customers can experience everything from virtual tours of hotels and restaurants to attractions, national parks, or even certain types of tourist activities. interactivity and immersion of the client in the tourist product can also help provide the company with competitive advantages in the market through a significant expansion of the potential target audience of consumers. most table 2 results of factor analysis on the importance of the implementation of elements of digitalization in the marketing activity of tourist enterprises of ukraine 2019-2021 factors of digitalization resulting variables competitiveness sales volumes consolidated returns ranking position of the tour operators voice search and voice control 0.843* 0.643 0.621 0.932 robots 0.573 0.512 0.670 0.809 contactless payments 0.642 0.932 0.956 0.816 virtual reality 0.896 0.416 0.512 0.765 chat bots 0.734 0.824 0.781 0.967 cyber-security measures 0.794 0.513 0.698 0.747 internet of things 0.698 0.738 0.613 0.744 augmented reality 0.548 0.573 0.598 0.839 artificial intelligence 0.486 0.610 0.714 0.567 large data sets 0.654 0.791 0.683 0.412 * note: factors affecting at the level > 0.642 are highlighted in bold source: based on the results of the authors’ calculations and expert assessments. baltic journal of economic studies 35 vol. 7 no. 3, 2021 tours of this type today are compatible with major browsers, which also increase the efficiency of marketing services in the industry. 4. augmented reality. augmented reality is similar to virtual, but involves increasing the real environment of people, not replacing them. one of the main advantages of this particular technological trend is that it is cheaper than the virtual one, as users only need a smartphone or other smart devices with internet access to receive the relevant information and use the virtual product. with graphical additions, travel agencies can significantly improve customer engagement by providing consumers with valuable information or even exceptional entertainment. for example, applications can allow photos to be supplemented with a variety of filters and effects, and detailed features of local travel destinations can be displayed when customers point their smartphone at them, providing information at a specific time when it is most relevant to customers. 5. internet of things (ip). one of the most interesting trends in the spread of travel technology is the internet of things, which involves the interconnection of everyday devices over the internet, as well as allows them to send and receive certain data. for example, the ip technology can be used in a hotel room to provide customers with a device that connects to everything from lights, heaters, and air conditioners to automatically closing doors and using plumbing that allows to control all components from one place or via mobile devices. in addition, for example, many airports already have luggage storage facilities equipped with sensors that alert passengers when they pass their luggage. 6. robots. robotics technology is one of the most exciting forms of tourism technology, which is also constantly improving. for example, in hotels, robots are used as concierges to help meet new guests and provide comprehensive information on the check-in. in some hotels, they are used for cleaning and baggage handling. in some restaurants, robots prepare and serve food. at airports, they are used to detect weapons and other potentially dangerous items. moreover, some travel agencies use robots to pre-communicate with customers, increasing the efficiency of waiting time for customers. like in many other technological trends in travel, the use of robots has increased significantly in response to the spread of covid-19, as they have the potential to reduce human contact, which in no way threatens robots in operation. 7. contactless payments. another important form of travel marketing technology is the ability to accept contactless payments, which allow travel companies to process financial flows much faster, including in situations where customers do not have access to cash or their credit or debit card. this improves the interaction with customers, as it significantly saves time for both parties. the use of contactless financial technologies is a key component of the marketing mix after the spread of the coronavirus pandemic and in the conditions of the reluctance of a significant proportion of customers to use cash due to the risk of spread of viral infections and other biological threats. the use of contactless payments also allows to increase the level of security of the enterprise’s staff. 8. cyber-security measures. cyber-security is one of the key areas in the operation of tourist enterprises, which have a substantial database of customers. the biggest threats in this context include “phishing attacks” and “cyber-terrorist attacks”. to successfully combat these destructive phenomena, tourist companies need to invest heavily in training staff on cyber-security issues and a variety of hardware and software solutions to strengthen the economic security and cyber-security of the enterprise. however, the analytical and legal departments of companies need to monitor changes in the regulatory and legal framework in the field of personal data protection of customers. 9. recognition technology. recognition technology is particularly interesting in the context of key technological trends due to its potential to remove barriers to customer interaction and the purchase and use of travel goods and services. the technology itself involves fingerprint recognition, face recognition, retinal scanning, and various other biometric identifiers. this technology is already used in some hotels to allow access to rooms or check-outs with fingerprints. in the future, it is also expected that this technology will allow customers to pay for food by going through a special identification framework. 10. large data sets. in modern tourism management, large databases are commonplace, and almost all successful companies use their data collection methods. one of the most effective applications of this data is to improve personalization when travel companies use the information which they accumulate to make certain adjustments to their travel products. another important area of using primary and secondary databases is the analysis of current business activity. financial managers of travel agencies can use large data sets to manage income, using the dynamics of key indicators of travel agencies’ performance. they are also used to develop marketing strategies, including the optimization of pricing and promotional policies. 11. artificial intelligence. in addition to robotics, artificial intelligence is used in other areas of marketing and other activities of the tourism industry as a 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no. 5, 2016 financing of science advancement in ukraine: existent problems and prospects of their solution tetiana bogolib1 pereiaslav-khmelnytskyi state pedagogical university named after hryhorii skovoroda, ukraine abstract. science plays an important role of development of national economies of developed countries. postindustrial society, society of knowledge is a society where scientific discoveries, scientific research results ensure economic growth, economic stability, economic exuberance. in such a society not goods, not movable and real property and not natural resources, including power, put together the main society wealth, but scientific discoveries, new knowledge. countries, which gain primary income from scientific discoveries and high technologies, are prosperous in the modern world. the purpose of study. a solution of science problems in the modern world should become an important direction of a state’s attention to providing national security. weakening of academic and technological as well as technological potential of the country, research reduction, mass closure of research institutes and centres, several-ford reduction in the volume of funding of science, outflow of specialists and intellectual property abroad for the last three years menace ukraine with a loss of advanced positions in the world, degradation of knowledge-intensive industries, strengthening of external technological dependence and undermining of its defensive capacity. such a situation predetermined the topic of our research, its main purpose – identification of problems of science financing and determination of ways to solve them. research methods. when writing the article, a set of methods and approaches was used that allowed realizing a conceptual unity of the research. dialectical, system, structural methods are used for the analysis of financing of the science advancement in ukraine, existent problems of the science financing are generalized with the help of comparative and factorial methods; ways for improving financing of the science advancement are determined by using methods of scientific abstraction, synthesis, functional analysis. the results of the study. in ukraine, a process of reforming of the public sector of science in conjunction with support of new organizational forms, which correspond to market conditions of economy, is declared. it centre around a reduction in this sector, concentration of resources for supporting restricted number of operating research establishments, accelerated liquidation of research institutes, research centres, scientists’ reduction, limitation of financial support. national academy of sciences of ukraine is surviving today; there is no link between science and state, science and business, science and enterprises. scientists are oriented toward grant schemes, cooperation with foreign research centres. the low level of labour remuneration of scientists, outdated equipment, lack of mechanisms to manage scientific research, managerial functions are performed by those who have never done scientific discoveries. an important is keeping scientific organizations, strengthening of links state – science, business – science, enterprise – science; grant of administrative and financing autonomies to scientific structural departments and bodies, developing the system of national research centres, promotion of technological infrastructure of research organizations through the realization of competitive programs for financing of acquisition of modern scientific equipment, increase in wages of scientists according to the european level. conclusion and discussion position. a foregrounding of financing of the science advancement of ukraine is possible through the solution of tasks of integration with scientific and innovative space of the european union, where the strategy “europe 2020” and main directions of the fourth industrial revolution are being realized successfully. ukraine has financial resources for the science advancement, there is required a goodwill of politicians who could make effective the links as state – science, business – science, enterprise – science, as well as commercialize new technological solutions. key words: financing of science advancement, new technological solutions, scientific research results, integration, scientific equipment, corporate sector of science, research organisms. jel classification: g32, h52, h72 corresponding author: 1 finance-humanitarian faculty, pereiaslav-khmelnytskyi state pedagogical university named after hryhorii skovoroda. e-mail: bogolib60@bk.ru baltic journal of economic studies 23 vol. 2, no. 5, 2016 1. introduction in modern globalized world, science plays a key role and, in order to build an efficient economy, ukraine should develop science industry under the influence of high competitiveness, which strengthens in terms of integration processes. it becomes clear that the country’s economy would not be able to compete both on internal and external markets if one do not implement scientific discoveries and developments and thus it becomes more efficient and meets new challenges. scientific novelty. the purpose of the article is to determine the role and importance of science for successful economic development of the country, necessity of increase in a volume of scientific developments financing, upgrade of equipment of scientific laboratories, increase in remuneration of labour of scientists. actuality of scientific solutions. the world experience shows that building a developed, successful economy, free from export resource dependence, with a high dynamics of economic growth require the economy rebuilding, which will be based on creative technology, introduction of scientific developments into practice, new knowledge creation, learning to use energy efficiency and other advanced technologies. to do this, it is needed not to destroy the science industry, but to increase volumes of financing, invest scientific developments. a realization of the strategy 2020 in ukraine completely depends on successful development of science – theory – practice; the basic chain is state – business – enterprise – science. ukrainian scientific system will ensure a stability of the economic growth by means of application of new technological knowledge, the basis of which is financial resources. the purpose of the research. in ukraine, over the past three years in dozens of times reduced the financing of science, scientific developments, reduced the number of research institutes and centres, thousands of scientists went abroad, day by day the country destroys its scientific and technological basis, deprives itself of the future. we have proposed ways out of the situation, sources of the science advancement financing. methodology of researches. in the research, a set of methods and approaches was used that allowed realizing a conceptual unity of the research. dialectical, system, structural methods are used for the analysis of financing of the science advancement in ukraine, existent problems of the science financing are generalized with the help of comparative and factorial methods; ways for improving financing of the science advancement are determined by using methods of scientific abstraction, synthesis, functional analysis. scientific results. a consideration of existent approaches and theoretical provisions of financing of the science advancement, analysis of pseudoscientific reforms of science industry allowed grounding a scientific position, according to which the main factors of structural reforms in ukraine, economic growth, realization of the strategy “ukraine 2020” are science, scientific knowledge, scientific discoveries. there are these components, which provide a creation of models of smart development of national economies, economic growth, and national competitiveness. it is possible to develop science, ensure worthy financing by way of four-in-one model: state – business – enterprise – science. according to most of economists, in modern terms a global economic development is determined by a combination of two contradictory trends: the world economy dependence on interests of transnational capital, on the one hand, and competition of high tech manufacturing, scientific developments, on the other. a development of new, progressive productions, realization of the fourth industrial revolution are possible only on the basis of scientific research results, intellect, ideas of scientists, but at the same time its basis are financial resources. conclusions and discussion position. the financing of the science advancement, creation of new modern scientific centres, rise of scientist, creation of modern facilities and resources of scientific establishments – are the main priorities of ukrainian society. sham reforms of scientific sphere are the way towards the feudal system, moving backwards rather than forwards. the situation on the financing of scientific establishments, academic research – are a step forward and a hundred steps backward in the development of the national economy of ukraine, dead-end road, loss of scientific potential, technological downfall of ukrainian economy. 2. ukrainian science under the structural economic crisis a powerful boost of research of science importance for the economic growth of countries was works of n. kondratev, especially considered by him major cycles of the conjuncture (long waves). there are three types of waves: n. kondratev’s long waves (average duration of 50-60 years), they are concerned with appearance of new sectors and technology; medium waves (7-11 years’ periodicity), they related to investment in machines and equipment; short (40 months) waves within the cycle of conjuncture, when new developments are implemented in the manufacturing (kondratiev, 1993). there are scientific results of n. kondratev and j.  schumpeter that served as a peculiar foundation for further evolutionary development of scientific views in the context of cyclical development of economy, which is based on scientific discoveries (kondratiev, 1993; schumpeter, 1982). an important theory of r . solow who studied a so-called “production function” envisages that economic output depends on labour and capital expenditure, which, according to r . solow, is based on technological advance (solow, 1957). baltic journal of economic studies 24 vol. 2, no. 5, 2016 famous scientists c. freeman, c. perez, j. millendorfer, g. dosi have developed the famous technical and economical paradigm, which is based on introduction of scientific discoveries in the manufacturing, further ensuring economic growth (freeman, 1995; perez, 2002; dosi, freeman and nelson, 1988). english scientist and public person j. d. bernal’s monumental work science in history shows a genesis of the theory of technological development, where a link between scientific technological, social innovations at all the stages of society development is revealed. j. bernal states that the periods of golden age of science coincide with the periods of strengthening of economic activity and technological advance (bernal, 1956). under modern conditions, the world system of economy is increasingly strengthening in the field of new, network-based mode that ensures technological growth. according to most of economists, in modern terms a global economic development is determined by a combination of two contradictory trends: the world economy dependence on interests of transnational capital, on the one hand, and competition of high tech manufacturing, scientific developments, on the other. on its basis, a rational determination of priorities in the concentration of national resources for learning to use technologies of the fifth technological mode allowed breaking away the peripheral dependence on such countries as japan, south korea, china, india, brazil, learning directions not only of fifth, but also sixth technological mode. the fourth industrial revolution successfully develops in the modern world. in the world, the fourth industrial revolution is known as scientific revolution and revolution of establishment of post-non-classical scientific type of rationality. many scientists consider that the fourth industrial revolution has already taken place in the past 30 years of xx century. it occurs due to the appearance of peculiar study subjects, which has led to radical change of science. in february, 2016 the world economic forum in davos announce that “the fourth industrial revolution” began. ten trends changing modern society and stipulating the fourth industrial revolution were determined: 1. development of technologies of customer experience management. 2. transition from mass production of equal goods to mass customization – mass production of industrial orders. 3. globalization is replaced by glocalization. this means “think globally, act locally”. 4. development of the internet of things – internet of items and even internet of anything. 5. possibility of remote control of all, including manufacturing. 6. 3d printing. 7. start-objects, start-devices, start-sensors. 8. production returns home, i.e. development of automation and robot automation bring to naught advantages of cheap labour resources. 9. keeping to the global standards is becoming the necessity and is required even by local markets. 10. sustainable development and growth of anything: population, economy, science, technologies on the one hand and stably growing problems of ecology – on the other (davos-2016: the revolution of the future and the challenges of the present, 2016). the fourth industrial revolution is connected with new technologies, biotechnologies and artificial intelligence. the world forum described the fourth industrial revolution as a digital era, as tsunami of technological achievements, which will transform the global economy. however, ukraine does not conceive the fourth industrial revolution as an opportunity to use it for overcoming the crisis and progress, ensuring of the economic growth. ukraine does not determine the development of science as a priority of development of the national economy of ukraine. in the president’s annual message to the verkhovna rada of ukraine “on the internal and external situation of ukraine” we can find only one sentence about the assimilation of new technology and development of industrial base for modern weapons and importance of timely funding of these programs. the strategy “ukraine 2020” absolutely does not stipulate for support of development of science industry. in the laws of ukraine “on state budget of ukraine” in 20142017 global cuts in expenditures on the development of science can be observed. as a result, there is liquidation of sectoral research institutes, research centres, scientific potential reduction. 3. analysis of financing of the science development in ukraine we have analyzed budget expenditures on financing of science and scientific and technical activities in gdp (table 1). if analysing the structure of these expenditures, a dominant component of expenditure is used for labour remuneration, payment for energy resources, heat and water services, funds are not allocated at all for upgrading material and technical resources for scientific studies. in 2015 a new law of ukraine “on science and scientific and technical activity” was adopted, where the provision is made for financing of the science development from the state budget at the level of 1.7% of gdp, but even in the days of successful economic development of ukraine this indicator did not exceed 1.06% of gdp (the law of ukraine «on scientific and scientific-technical activities», 2015). baltic journal of economic studies 25 vol. 2, no. 5, 2016 in 2016, 5.3 billion hryvnia were allocated for the development of science and distributed among 25 administrators of monetary funds, mainly to the ministry of education and science of ukraine and national academy of sciences of ukraine. more than 185 billion hryvnias were allocated among different ministries and departments for paying applied and fundamental research and scientific inquiries. the money goes nowhere and influences on cuts in public expenditure on science. in ukraine, the ratio of scientific and technological works in gdp in 200-2017 is constantly reducing. in 200 the share of scientific and technological works in gdp amounted to 1.2%, in 2014 it became twice as little – 0.66%, in 2015 amounted to 0.33%, 2016 – 0.26%, and in 2017 it will amount to 0.22%. these indicators are not significant in comparison with the oecd countries and their further reduction will negatively affect the country’s economic development. as a comparison, average gross expenditures for scientific and technological works in the oecd countries in 2013 amounted to 2.36% of gdp, in the eu countries – 1.91% of gdp, and in 2016 in the oecd countries they amounted to 2.7%, and in the eu countries – 2.2% of gdp (herewith it is necessary to take into account inequivalence of volumes of gdp) (key figures for the 2006-2016 financial condition (the first half ) years, 2016). in ukraine, about a half of expenses for scientific works and development works are financed by the state, up to 30% – by private sector and more than 15% – by foreign sources. the ratio of public funds plays the main role in the distribution of financing of scientific and technological works by sources where the money comes from in ukraine, whereas business sector occupies the second place. as a comparison, according to data of eurostat, as an average in the eu countries in 2016 business financed more than half (57.6%) of expenses for scientific and technological works, 32.8% – state, and 9.4% – financial sources of other states. in developed countries the ratio of expenses for scientific and technological works from the side of business is higher. for example, in japan (2015) – 78.6%, in china – 76.2% (2015), in the usa (2014) – 61.7% (key figures for the 2006-2016 financial condition (the first half ) years, 2016). in 2017 provisions in the state budget for the national academy of sciences of ukraine are made in the amount of 2943583.2 thousand hryvnias (2.9 billion hryvnias), by general fund – 2270302.7 thousand hryvnias (2.2 billion hryvnias), by special fund – 673280.5 thousand hryvnias. an inclusion of finances of the special fund into expenditures of the state budget was not in compliance with the existent world practice and artificially increases budget expenses for science (the law of ukraine «on state budget of ukraine for 2017», 2017). expenses of the presidium of the national academy of sciences of ukraine are described in the amount of 73591.4 thousand hryvnias, expenses on the budgetary program “fundamental and applied scientific researches” are 2821284.8 thousand hryvnias. expenses for the activities of the national academy of educational sciences of ukraine will amount to 160123.3 thousand hryvnias according to the program “fundamental and applied scientific researches” – 110416.9 thousand hryvnias. expenses for the activities of the national academy of medical sciences of ukraine will be 480760.7 thousand hryvnias (the law of ukraine «on state budget of ukraine for 2017», 2017). according to the program “fundamental and applied scientific researches” – 196950.6 thousand hryvnias (the law of ukraine «on state budget of ukraine for 2017», 2017). according to the program “diagnosis and treatment of diseases” – 235600.7 thousand hryvnias. national academy of arts of ukraine will have expenses to the value of 18261.2 thousand hryvnias, according to the budgetary program “fundamental research and training of scientific personnel in the field of arts” – 7708.1 thousand hryvnias. national academy of legal sciences of ukraine will have expenses to the value of 31845.4 thousand hryvnias, according to the budgetary program “scientific and organizational activity of the presidia of the national academy of legal sciences of ukraine” – 10481.0 thousand hryvnias, according to the budgetary program “fundamental studies, applied scientific researches” – 21364.4 thousand hryvnias. national academy of agrarian sciences of ukraine will be financed to the value of 682284.5 thousand hryvnias, according to the budgetary program “scientific and organizational activity of the presidia of the national academy of agrarian sciences of ukraine” – 22627.4 thousand hryvnias, according to the budgetary program “fundamental studies, applied scientific researches” – 642998.3 (the law of ukraine «on state budget of ukraine for 2017», 2017). table 1 amount of financing of the development of science of ukraine in 2009-2017 indicators 2009 2010 2011 2012 2013 2014 2015 2016 2017 financing of science and scientific and technical activities 0,86 0,83 0,73 0,70 0,77 0,66 0,62 0,45 0,53 funds of the state budget and local budgets 0,37 0,34 0,29 0,27 0,33 0,26 0,22 0,18 0,20 *source: data of the state statistics service of ukraine (scientific and innovative activity in ukraine in 2015, 2016) baltic journal of economic studies 26 vol. 2, no. 5, 2016 for activities concerning the support of scientific and research establishments – 1527.5 thousand hryvnias, according to the budgetary program “preservation of the nature reserve fund in the askania-nova biosphere reserve” – 15131.3 thousand hryvnias (the law of ukraine «on state budget of ukraine for 2017», 2017). ministry of education and science of ukraine will be funded by the budgetary program “fulfilment of obligations of ukraine in the field of international cooperation in the areas of science and technology” – 39312.5 thousand hryvnias, according to the budgetary program “researches at vernadsky research base” – 58303.6 thousand hryvnias, according to the budgetary program “horizon 2020” – 312214.4 thousand hryvnias (the law of ukraine «on state budget of ukraine for 2017», 2017). all expenditures include funds of general and special funds, which essentially increase volumes of financing. the analysis has shown that the volumes of the science financing in the period of 2010-2017 decreased by 0.8% of gdp, which will lead to the shutdown of about 25 scientific institutes and centres and laying off about 30% of scientific personnel, say nothing of low wages, at the level of doctor of sciences, professor – 5400 hryvnias (200 us dollars), which provides ukraine the 146th place in the world by the level of scientific personnel labour remuneration. 4. survival of ukrainian science in 2016, the budget for development of science was reduced by 20%, in 2017 a reduction will amount to 25%. underfunding of ukrainian science can be shortly explained: “country without science – country without future”. many ukrainian scientists are forced to apply for foreign grants. it is prestigious, fashionably. but, what it gives to ukrainian economy? nothing. all the scientific research results, scholarly results belong to grantors, ukraine even cannot sell this research result, research finding. if the state be a customer of research and development projects, they will help to modernize ukrainian economy, provide overcoming of crisis. in 2017 it is planned to lay off each third scientist of sri. who will be laid off is also the relevant question here. there is no need in smart people and thus intellectual potential is the first that will be reduced. in these conditions, the lack of knowledge, inactivity, and farm mentality overruled common sense. in ukraine, the program “horizon 2020” is obstinately advertised – it is the biggest eu research programme, its budget is about 80 billion euro, it is designed for 20142020. ukrainian scientists filled about 400 applications, 40 applications went through. it is not over the bad projects, but poor financing, for 2017 in ukraine it amounts to 312214.4 thousand hryvnias (scientific and innovative activity in ukraine in 2015, 2016). a real necessity is caused by the underrun of the national academy as a developer of fundamental scientific problems. nas of ukraine conducts research by scientific priorities and they must be kept, not destroyed. an important direction should be working-out of programs of institutional development of the academy of sciences aimed at providing use of potential of fundamental and applied science for the purposes of modernization of systems of education, health care, agricultural development. at the same time, there must be ensured the closest integration of institutes of the national academies with corresponding higher educational establishments, activated cooperation with foreign scientific centres and interested organizations that operate in the field of education, medicine and agriculture. the state should develop a program of integration of academic institutes with leading universities of the regions of ukraine in the part of providing heredity of scientific schools, first of all, at the expense of introduction of multi-level system of stimulation of the young people attraction to the field of science and fastening in this sphere (demonstration of advantages of scientific creativity; ensuring of targeted funding of researches and developments of young scientists; promotion of achievements of the young scientists). an influence of academic science on the acceleration of a process formation takes place at providing and through an understanding by government authorities of all levels that the establishment of operating nis, where the science occupies the central place and where is realized a strategic discoveries, is a strategic map on the way of ukraine to the civilised world. a strategic task in the aspect of science development is a return of our country to the number of leading world scientific states able to make groundbreaking fundamental and applied researches on relevant for the world economy and science as well as industrial for ukraine directions. there is necessary further concentration of resources on priority directions and formation of a network of scientific research centres, research universities and centres of advantages that have a global competitiveness and are provided with material and technical as well as informational resources for conducting investigations at the level of the best world centres in the corresponding area. all this will allow ukrainian science to survive in the situation as it has developed. 5. corporate science the improvement of cooperation of academic science and business should be based on the creation of conditions for overcoming a closed nature of development of scientific research institutes and other establishments of science on the basis of integration within the strategy of structural-scientific transformations of the science development, innovative technological sector of industry and entrepreneurship by means of realization of a complex of mutually baltic journal of economic studies 27 vol. 2, no. 5, 2016 agreed institutional factors, first of all, formation of corresponding innovative technological development due to effective support of the state; determination and substantiation of favourable conditions of effective mechanism concerning the stimulation of commercialization of research and development in the science sector, creation of mechanisms of transferring a scientific product into production. the state should not shorten, but develop the network of national research centres (nrc) in the fields of technology advances of the world level, which are preserved (aircraft engineering, new materials, biotechnology), and providing in their framework of a full technological cycle from research to commercialization. among other things, it requires a support of development of technological infrastructure of research organizations through the realization of competitive programme of financing of their bought modern scientific equipment, access to which will be provided for interested organizations within the organization of common use centres. the necessity to increase the ratio of non-governmental sources of financing of research and development works is specified not only and not so much by tasks of budget savings as by unwillingness to make science the basis for economic development, thus it is necessary to a greater extent to build more strong and flexible orientation of the science development, first of all, applied for economic development. a growth of the ratio of private sector in the field of science should take place due to this segment’s growth rates. a target of changes in this direction can be an increase of the ration of private sector to 2020 to the level medium for the countries of oecd. the solution of this task envisages using various levellers and instruments existing in the state. in order to extend private sector to 2020, generation of knowledge and stimulation of higher-thananticipated growth of financing, fundamental and applied researches from private sources should be legislated in terms of access right of scientific and educational forms of ownership, which have necessary qualification, to all kinds of public finance of fundamental and applied researches that will be carried out on a competitive basis. at the same time, the ratio of competitive financing of researches in general volume of budgetary funds allocated to support science should be gradually increased. one of the most important directions is the development of a corporate science upon condition of further development: use of the main stockholder in the largest state companies and companies with prevalence of the state for increasing in the medium term of volume of expenses for financing r&d to the level peculiar to the companies of corresponding sectors of economy and range of activity in the countries of oecd, including promotion of internal development of corporate science and scientific research organizations within the largest companies; growth of co-financing of applied r&d and developmental works, which are performed by enterprises through subsidies, including within the framework of state target programs, programs of support for small and medium-sized business, as well as programs of co-financing of enterprises’ expenses on applied research, the main executors are universities; providing access of interested enterprises and organizations to the performance of infrastructure of centres of technology transfer, centres of common use of scientific equipment and extreme installation, and also using equipment of other state scientific and educational organizations on a commercial basis. among important events in this context – support for development of business plans of commercialization of new technologies for creating a favourable investment climate, target informing of potential investors concerning perspective r&d and developmental works created by scientific establishments. 6. conclusion the research has shown that in ukraine there is a policy aimed at destroying scientific establishments, scientific centres; the state for the period of 2014-2017 is reducing budget financing of science, and business plays not an important role in financing of the science development. in 2016, the volumes of financing of science decreased by 20%, in 2017 the decrease is planned at the amount of 25%, this leads to the shutdown of scientific institutes, scientific centres, laying off scientific personnel. the labour remuneration of scientists is absolutely brought to nothing. the chain state – business – enterprise – science is broken. science is not the basis for economic development of the state. the declared form of scientific institutions has led to their destroying. this situation can be characterized as a step forward – a hundred steps backward. the step forward – is the adoption of progressive law of ukraine “on science and scientific and technical activity” (scientific and innovative activity in ukraine in 2015, 2016), which does not come into force. an orientation toward foreign grants – is a rejection of scientific discoveries and of a possibility to make them to serve the national economy of ukraine. the state should determine science as a priority of development, develop a corresponding strategy, which will be based on main provisions of the strategy “europe 2020” and the fourth industrial revolution. ukraine must use is chance of technological breakthrough. the economy modernization on the basis of domestic technologies requires a significant growth of investment in science – only for the development of technologies it is necessary to invest in the science development at least 5% of gdp during five years. a concentration of resources within the framework of determination of the list of critical technologies of ukraine and priorities of scientific and technological development is needed that will ensure an implementation of competitive advantages of ukrainian sector of research activities in the world market. baltic journal of economic studies 28 vol. 2, no. 5, 2016 references: bogolib, t.m. (2014). commercialization of scientific developments of universities. economy of ukraine, no. 4, pp. 33-51. davos-2016: the revolution of the future and the challenges of the present (2016). retrieved from: http:/ ru.evronews.com/2016/01/19/what-is-the-4th-industri-al-revolution. europe 2020. smart growth (2016). retrieved from: http://rpp.nashaucheba.ru/does/index-44576. key figures for the 2006-2016 financial condition (the first half ) years (2016). retrieved from: http:/minfin.gov. ua/control/uk/publish. the new european strategy «europe 2020» (2016). retrieved from: http://eulaw.ru/content/. the law of ukraine «on state budget of ukraine for 2017» (2017). kyiv: the verkhovna rada, 132 р. the law of ukraine «on state budget of ukraine for 2016» (2016). kyiv: parliament, 124 р. kondratiev, n.d. (1993). dissenting opinion. book 1, 2. moscow, 284 р. schumpeter, j.a. (1982). the theory of economic development (study of business profits, capital, credit, interest and cycle conditions). moscow: progress, 356 p. solow, r . (1957). technical change and the aggregate production function. review of economics and statistics, pp. 312-320. freeman, c. (1995). the national system of innovation in historical perspective. cambridge journal of economics, vol. 19, no 1. perez, c. (2002). technological revolutions and financial capital. the dynamics of bues and golden ages, ed. elgar pbl., 402 p. bernal, d. (1956). science in history. moscow: izd-vo inostr. lit., 735 p. dosi, g., freeman, c. and nelson, r . (1988). technical change and economic theory, london: pinter publichers, 316 p. scientific and innovative activity in ukraine in 2015 (2016). kyiv: state statistics committee, 316 p. the law of ukraine «on scientific and scientific-technical activities» (2015). kyiv: the verkhovna rada, 42 p. татьяна боголиб финансирование развития науки в украине: существующие проблемы и перспективы их решения аннотация. наука играет важную роль развития национальных экономик развитых стран. постиндустриальное общество, общество знаний является обществом, в котором научные открытия, научные разработки обеспечивают экономический рост, экономическую стабильность, экономическое процветание. в таком обществе не вещи, не движимое и недвижимое имущество и не природные, в том числе энергетические, ресурсы составляют главные богатства общества, а научные открытия, новые знания. страны, которые получают основные доходы от научных открытий и высоких технологий процветают в современном мире. цель исследования. решение проблем науки в современном мире должно стать важным направлением внимания государства к обеспечению национальной безопасности. ослабление научно-технологического и технологического потенциала страны, сокращение исследований, массовое закрытие научно-исследовательских институтов и центров, сокращение в разы объемов финансирования науки, отток за рубеж специалистов и интеллектуальной собственности за последние три года угрожают украине потерей передовых позиций в мире, деградацией наукоемких производств, усилением внешней технологической зависимости и подрывом ее обороноспособности. такое положение и определило тему нашего исследования, его главную цель – определение проблем финансового обеспечения науки и определение путей их решения. методы исследования. при написании статьи использовано совокупность методов и подходов, что позволило реализовать концептуальное единство исследования. диалектический, системный, структурный методы использованы при анализе финансирования развития науки в украине, при помощи сравнительного и факторного методов обобщены существующие проблемы финансирования науки; при помощи методов научной абстракции, синтеза, функционального анализа определены пути улучшения финансирования развития науки. результаты исследования. в украине задекларировано процесс осуществления реформы государственного сектора науки в соединении с поддержкой новых организационных форм, которые соответствуют рыночным условиям хозяйствования. ее содержание заключается в сокращении этой отрасли, концентрации ресурсов на поддержку ограниченного количества действенных научно-исследовательских организаций, ускоренной ликвидации научных институтов, научных центров, сокращении ученых, ограничении финансового обеспечения. национальная академия наук baltic journal of economic studies 29 vol. 2, no. 5, 2016 украины сегодня выживает, отсутствует связь науки и государства, науки и бизнеса, науки и предприятий. ученых ориентируют на грантовые программы, сотрудничество из зарубежными научными центрами. низкий уровень оплаты труда ученых, устаревшие оборудования, отсутствие механизмов управления научными исследованиями, управленческие функции исполняют те, кто никогда не делал научных открытий. важным является сохранение научных организаций, укрепление звеньев государство – наука, бизнес – наука, предприятие – наука; предоставление административной и финансовой автономии научным структурным подразделениям и коллективам, развитие системы национальных исследовательских центров, поддержка развития технологической инфраструктуры исследовательских организаций через реализацию конкурсных программ финансирования приобретения современного научного оборудования, увеличение заработных плат ученых до уровня европейских. выводы. актуализация процессов финансирования развития науки украины возможна через решение задач интеграции с научным и инновационным пространством европейского союза, где успешно реализуется стратегия «европа 2020» и основные направления 4 индустриальной революции. в украине есть финансовые ресурсы для развития науки, нужна добрая воля политиков, которые могли бы сделать действенными цепи государство – наука, бизнес – наука, предприятие – наука, а также осуществлять коммерциализацию новых технологических решений. baltic journal of economic studies 50 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 sumy national agrarian university, ukraine (corresponding author) e-mail: bohdan.hnatkivskyi@lnu.edu.ua orcid: https://orcid.org/0000-0001-5146-9077 2 state biotechnological university, ukraine e-mail: poltavetsanatolii949@gmail.com orcid: https://orcid.org/0000-0002-3310-3271 3 sumy national agrarian university, ukraine orcid: https://orcid.org/0000-0002-0624-2938 doi: https://doi.org/10.30525/2256-0742/2022-8-4-50-57 analysis of the current state of organization of land use management in agricultural enterprises bohdan hnatkivskyi1, anatolii poltavets2, olena havrylchenko3 abstract. the subject of the research is to study the current state of organization of land use management in agricultural enterprises. methodology. in the course of the study, general scientific methods were used, in particular, theoretical generalization; methods of analysis and synthesis and statistical analysis, the method of swot-analysis of opportunities and threats was applied, and the graphical method was used to visualize the results of the study. the aim of the article is to analyze the current state of organization of land use management in agricultural enterprises. conclusions of the study. thus, having systematized the factors that determine the peculiarities of the organization of land management in agricultural enterprises, three groups were identified: natural-climatic and geographical, organizational-economic, agrotechnical and agrochemical. based on the swot analysis of land resources as an object of management, it is determined that the purpose of land resources management of agricultural enterprises is to ensure the efficient use of land as the main factor of agricultural production in the long term on the basis of reproduction of productive land and increase the sustainability of agricultural landscapes, taking into account the balance of public and private interests. it should be noted that all subjects of land relations have the opportunity to minimize the negative consequences caused by the manifestation of weaknesses of land resources identified on the basis of swot analysis. first of all, such opportunities are related to the increase of state support for agriculture and rural development; strengthening of state control over the targeted use of agricultural land and its reproduction; improvement of the financial condition of agricultural enterprises and intensification of their innovation activities; development of adaptive landscape farming systems; appearance on the market of innovations in the form of new breeding-genetic, technical-technological and organizational-managerial solutions that ensure the preservation and improvement of the consumer qualities of productive lands, as well as the prevention of their degradation. key words: land resources, land relations, agricultural enterprises, management of land resources, management organization of use. jel classification: e20, h56, o10 1. introduction an indispensable condition for the comprehensive improvement of agricultural production, based on a variety of forms of ownership and management, is the effective and rational use of land resources, which brings to the fore the formation of land relations adequate to the market economy as the basis of production relations in agriculture regarding the implementation of land ownership. in the course of agrarian reforms, the problems of land use have become more acute: soil depletion and productivity of agricultural land are increasing, farming systems and production technologies are being disrupted, reclamation and soil protection works have virtually ceased. in modern theory and practice of land resources management a special role belongs to a group of economic methods. their essence is to determine the ways of influencing the material and property interests of land use entities aimed at the efficient use and preservation of the resource potential of land with the use of rent assessment tools, comparison of costs and results in the process of stimulating active and more productive economic activity. the application of economic methods of land resources management in the agricultural sector of the economy has a number of specific features. baltic journal of economic studies 51 vol. 8 no. 4, 2022 their purpose is the fastest possible adaptation of agricultural producers to qualitatively new conditions of management, as well as minimization of negative processes that worsen the possibilities of land use. management methods should be adapted to regional conditions. the main methods are differentiation of land payments depending on the quality of land, location, type of use and composition of land. in addition, fines are sometimes applied for loss of soil fertility, erosion, violation of land and environmental legislation. in addition, in the theory and practice of land resources management there are various methods that differ in approaches and specific features of management, the degree of impact on the object of management, such as technical, technological, political, organizational, managerial, socio-psychological, etc. the research of solving the problems of managing the use of land resources of agricultural enterprises is devoted to the work of many scientists, but the current situation in agriculture requires new ideas, assessment of ongoing processes, updating methods of economic recovery and its stabilization, improving the efficiency of land use. in this regard, a number of scientific, theoretical, methodological and practical problems need to be solved. particularly acute are the issues of objectively necessary priorities in the implementation of measures to manage the use of land resources, the principles and conditions for the implementation of these measures, the creation of a mechanism that will ensure the efficient use of land resources, and other organizational issues. 2. current state of organization of land use management in agricultural enterprises land relations are a special economic category not only because of the specifics of land as an object of common interest, but also because of its dual nature, that is, it participates in the reproduction process as a natural factor and as a commodity. in this regard, the aspects characterizing land resources can be divided into two groups: technological aspect (effective use of the natural potential of land) and socio-economic aspect (cost parameters) (korobska, 2020; popov, 2018). when distributing land resources, the first group of interests is aimed at the functional and economic properties of the land fund: the scale, proportions and priorities of its distribution in accordance with the level of economic development; types of their intended use; intensity of exploitation, productivity, as well as environmental conditions. table 1 distribution of the land fund of ukraine by types of land in 2020 (agropolit.com, 2020) оblast (region) agricultural land, thousand ha of them: arable fallow haymakers pastures perennial plantations vinnytsia 2012 1730 1 49 184 48 volhynia 1048 672 0 162 202 12 dnipro 2512 2127 0,03 17 314 53 donetsk 2044 1654 1 43 289 58 zhytomyr 1504 1144 41 119 178 22 transcarpathian 451 200 0 94 129 27 zaporizhzhia 2238 1901 0 83 216 38 ivano-frankivsk 621 401 2 82 121 15 kyiv 1609 1321 13 101 117 57 kropyvnytskyi 2032 1769 0 23 216 24 luhansk 1907 1275 45 94 462 30 lviv 1240 771 0,2 192 251 23 mykolaiv 2000 1708 4 3 252 34 odesa 2588 2077 27 51 351 82 poltava 2167 1817 2 142 183 23 rivne 922 658 3 126 124 11 sumy 1695 1235 0,04 273 165 23 ternopil 1035 851 3 24 145 14 kharkiv 2361 1937 8 109 286 42 kherson 1962 1780 0 10 150 23 khmelnytskyi 1561 1326 0,7 91 105 38 cherkasy 1450 1272 8 64 78 27 chernivtsi 470 331 0 41 68 30 chernihiv 2060 1456 22 297 262 24 total in ukraine 41329 32698 190 2294 5263 864 baltic journal of economic studies 52 vol. 8 no. 4, 2022 the most important type of land resources is agricultural land, which serves as the main means of production and subject of labor. they are subject to special protection and their transfer to other categories for non-agricultural needs is allowed only in exceptional cases. the distribution of the land fund of ukraine by types of land is shown in table 1. currently, ukrainians cultivate about one third of arable land in europe, or 32.7 million hectares. also, according to statistics, there are twice as many people per one inhabitant of ukraine than per one european. in the structure of land holdings, the bulk of land is privately owned, about 31 million hectares, and 10.4 million hectares are in state and communal ownership. at the same time, about a third of the land, 32.7 million hectares, is under arable land. the largest amount of agricultural land is cultivated in odesa, zaporizhzhia and kharkiv regions – more than 2 200 thousand hectares. the least land is owned by residents of transcarpathian and chernivtsi regions – less than 500 thousand hectares (agropolit.com, 2020). in ukraine, land use is subject to payment. the purpose of the land payment is to stimulate the rational use, protection and restoration of land, increase soil fertility, formation of special funds to finance these measures, as well as filling local budgets. the forms of payment for land are land tax and rent. the introduction of land tax is caused by the need to increase the efficiency of agricultural production through more rational use of land and other factors. local budgets in european countries are mostly filled with revenues from the taxation of real estate (including land), the share of which reaches one third, or even exceeds half of all tax revenues of local budgets. in ukraine, it is relatively low – only 13% (including almost 10% of the land payment) (figure 1) (tsina derzhavy, 2019). the cost of land lease depends on the demand, the level of competition, the type of agricultural land, whether it is arable land, hayfields, pastures or perennial plantations, the quality of the land, as well as the level of awareness of potential buyers. in the system of payments for land, rent is a market indicator to a greater extent than land tax. this is logical, since the practice of annual adjustment of rent rates for the use of land plots allowed most landlords to bring them in line with the level of demand for them. for the state authorities that determine the amount of land taxation and other indicators of land value (cadastral value, market value), rent can serve as an indicator of the market value of land plots of different purpose and location in accordance with supply and demand. it should be emphasized that in foreign economic literature the concepts of rent are essentially perceived as identical. indeed, all types of rents are essentially modified forms of land rent extraction, and fluctuations in land rent rates reflect trends in rent changes. according to the results of research by scientists of the institute of agrarian economics, the highest cost of renting one hectare of state-owned agricultural land is recorded in kropyvnytskyi region – 8.4 thousand uah, and the lowest – 0.9 thousand uah – in transcarpathian region (figure 2) (agropolit.com, 2019; agropolit.com, 2020). 6 2,1 2,5 77 13 20,4 63,4 51 24 4 9 13 57 65 30 18,8 18,5 44 13,6 41,4 33 10 5,1 44,5 35,6 0 10 20 30 40 50 60 70 80 90 100 ukraine czech republic slovakia poland hungary italy france vat and excise duties рersonal income tax profit tax real estate tax, including land tax other taxes figure 1. structure of revenues to local budgets of european countries (in 2020), % (tsina derzhavy, 2019) baltic journal of economic studies 53 vol. 8 no. 4, 2022 thus, in ukraine, the average annual rent for state-owned land plots leased at land auctions is 3431 uah/ha, while the average annual rent for shares is 1613 uah/ha. agricultural production involves the use of both productive land (agricultural land) and land on which objects related to the activities of agricultural entities are located. ensuring the reproduction of productive lands is one of the priority tasks in the organization of management of the use of agricultural land resources. reproduction of agricultural land resources is carried out in the process of their economic use. withdrawal of land from economic turnover, as a rule, leads to its degradation associated with the loss of consumer qualities and increased costs necessary for their reintroduction into the production process. the close intertwining of the processes of reproduction of agricultural land resources with the processes of agricultural production determines the dependence of the efficiency of reproduction processes on a set of various factors that affect their quality in different ways. it is proposed to systematize the factors that determine the peculiarities of land resources management of agricultural enterprises by the following groups: natural-climatic and geographical, organizationaleconomic, agrotechnical and agroche-mical (table 2). the organization of land use management in agricultural enterprises is considered as one of the functions of the farming system, which includes the introduction of crop rotations, soil cultivation, application of fertilizers and plant protection products, seed production, technological and technical support, land reclamation and environ mental protection measures. particular attention in the management of land resources of agricultural enterprises has recently been paid to the systems of adaptive landscape farming, which allow to take into account the characteristics of each land plot involved in economic circulation, and to ensure the growth of agricultural landscapes sustainability and preservation of soil fertility. obviously, these factors have a complex impact on the reproduction of land resources, which makes it extremely difficult to reliably assess the individual level of impact of each of them. to assess the efficiency of land resources reproduction, it is proposed to use indicators that reflect changes in soil fertility, productivity of arable land and natural forage lands, the share of land subject to wind and water erosion, the proportion of land involved in economic turnover, the number of land disputes that arise and the effectiveness of their resolution, etc. kr op yv ny tsk yi vo lhy nia figure 2. average annual rent for state-owned land plots leased out at land auctions for the sale of land shares (units) by regions of ukraine (2020), thousand uah/ha baltic journal of economic studies 54 vol. 8 no. 4, 2022 3. analysis of opportunities and threats to the organization of land use management in agricultural enterprises the state, using a wide range of administrative and economic management methods, promotes the formation of an adequate institutional environment of land relations, which regulates the processes of land management, including their reproduction. the practically uncontrolled growth of land concentration in the hands of large agricultural enterprises, combined with the growing intensity of productive land use, necessitates a review of issues related to the organization of land use management of agricultural enterprises aimed at ensuring a balance of interests of the state, landowners and land users of agricultural land. land as a strategic resource of agricultural production has a number of features that determine its strengths and weaknesses as a factor of production, and requires an objective assessment of the possibilities of improving the efficiency of reproductive processes and identifying threats to the loss of land reproduction and its degradation. the development of the national economy is impossible without the formation and implemen tation of an effective policy in the field of distribution and use of land resources. formation of strategic directions of land use and land ownership is possible only with the help of modern research tools. the search for tools for strategic analysis of the formation, distribution and use of land resources makes it possible to assert that a wide range of analytical tools can be used to study the development of land relations and develop strategic goals for the long term: business advantage models, mcnair's performance pyramid, benchmarking, swot analysis, discriminant analysis, cluster analysis, pestel analysis, etc. (dankevich, 2018). swot analysis is one of the most common analytical methods that allows to comprehensively assess the strengths and weaknesses of the company, as well as the opportunities and threats affecting it. conducting a swot analysis is important because identifying opportunities and threats related to the organization of land management in agricultural enterprises should be the basis for turning opportunities into strengths and preventing the realization of threats by taking appropriate measures to prevent them (table 3). the strengths of agricultural land as an object of land resources management of agricultural enterprises are as follows: productive lands have natural reproductive potential, which can be increased in the process of their rational use in economic activity; in ukraine, soils are characterized by a high level of natural fertility; diversity of soils and natural climatic zones allows to grow a wide range of crops; rural areas of zones with a high level of soil and agro-climatic potential are characterized by a high level of agricultural development; increasing the efficiency of agricultural production has provided an increase in the quality of the material and technical base of agricultural enterprises and an increase in investment in the reproduction of productive land; the tendency to involve previously unused agricultural land in economic circulation (sharyi, tymoshevskyi, mishchenko, yurko, 2019; kovaliv, 2016) at the same time, land resources as a factor of production give rise to a number of problems related table 2 systematization of factors that determine the features of the organization of land use management at agricultural enterprises natural-climatic and geographical organizational and economic agrotechnical and agrochemical temperature regime intensity of use of productive land following the scientifically proved agricultural system topography and threats of wind and water erosion level of efficiency of land users functioning land processing technologies soil fertility level of development of technical and technological base of land users level of use of fertilizers and plant protection products moisture supply level of economic development of territories scale and effectiveness of environmental protection measures level of active solar radiation level of development of infrastructure and personnel support technologies for growing agricultural crops type of agricultural landscape level of investment attractiveness of agricultural production level of biologization of agriculture location relative to places of processing and sale of products availability of target programs for preserving soil fertility improving the productive qualities of natural fodder lands location relative to transport network locations quality of state control over land use and protection level of farming culture baltic journal of economic studies 55 vol. 8 no. 4, 2022 to the organization of land use management in agricultural enterprises, which can be defined as weaknesses. these include the diversity of soils and climatic conditions that require diversification of farming systems and constant adaptation of agricultural technologies to changing economic conditions; the uniqueness of each land plot, which requires consideration of specific features in the organization of use and reproduction, implementation of measures for the conservation and development of agricultural landscapes; limited capacities of agricultural enterprises to develop and implement a strategy for the transition to adaptive landscape farming systems; the presence of certain contradictions between the ecological and economic efficiency of reproductive processes, which require a compromise between the possibilities of increasing the intensity of land use and increasing the sustainability of agroecosystems by reducing the level of anthropogenic pressure; lack of an effective system of state regulation of reproduction of productive lands and stimulation of land users and landowners to increase their fertility; underdevelopment of the land market and land mortgage system, which significantly reduces the consumer properties of land as an element of the subsystem of financial support of economic activity (dankevich, 2018). it should be emphasized that all subjects of land relations have the opportunity to minimize the negative consequences caused by the manifestation of the above-mentioned shortcomings of land resources. first of all, such opportunities are related to the increase of state support for agriculture and rural development; strengthening of state control over the targeted use of agricultural land and its reproduction; improvement of the financial condition of agricultural enterprises and intensification of their innovation activities; development of adaptive table 3 matrix of swot analysis of opportunities and threats to the organization of land use management in agricultural enterprises strengths weaknesses – productive lands have natural reproductive potential, which can be increased in the process of their rational use in economic activity; – in ukraine, soils are characterized by a high level of natural fertility; – the diversity of soils and climatic zones allows to grow a wide range of crops; – rural areas of zones with high soil and agroclimatic potential are characterized by a high level of agricultural development; – increase in the efficiency of agricultural production is ensured by the growth of the quality of the material and technical base of agricultural enterprises and the increase in investments in the reproduction of productive lands; – the tendency to involve previously unused agricultural land into economic circulation – diversity of soils and climatic conditions that require diversification of farming systems and constant adaptation of agricultural technologies to changing economic conditions; – uniqueness of each land plot, which requires consideration of specific features in the organization of use and reproduction, implementation of measures for the conservation and development of agricultural landscapes; – limited capacity of agricultural enterprises to develop and implement a strategy for the transition to adaptive landscape farming systems; – the presence of certain contradictions between the environmental and economic efficiency of reproductive processes, which require a compromise between the possibilities of increasing the intensity of land use and increasing the sustainability of agro-ecosystems by reducing the level of anthropogenic pressure; – lack of an effective system of state regulation of reproduction of productive lands and stimulation of land users and landowners to increase their fertility; – underdevelopment of the land market and land mortgage system, which significantly reduces the consumer properties of land as an element of the subsystem of financial support of economic activity. opportunities threats – increasing the volume of state support for agriculture and rural development; – strengthening state control over the targeted use of agricultural land and its reproduction; – improving the financial condition of agricultural enterprises and intensifying their innovative activities; – development of adaptive landscape farming systems; – appearance of innovations in the market in the form of new breeding and genetic, technical, technological, organizational and managerial solutions that ensure the preservation and improvement of consumer qualities of productive lands, as well as prevention of their degradation. – almost uncontrolled concentration of agricultural land in the hands of large agricultural enterprises; – the presence of a significant number of land plots that are not registered in the cadastre, which leads to the existence of the shadow sector of land use and lack of proper control over the reproduction of land resources; – the possibility of reducing state support for agriculture; – imbalance between large, medium and small forms of agricultural production leads to a decrease in the efficiency of reproduction of land resources of farms and households; – reduction of the rural population and its labor potential baltic journal of economic studies 56 vol. 8 no. 4, 2022 landscape farming systems; appearance on the market of innovations in the form of new breeding-genetic, technical-technological and organizational-managerial solutions that ensure the preservation and growth of consumer qualities of productive lands, as well as the prevention of their degradation. there are also a number of systemic problems that threaten the reproduction of land resources. among them, the following threats should be highlighted: almost uncontrolled concentration of agricultural land in the hands of large companies; the presence of a significant number of land plots not registered in the cadastre, which leads to the existence of the shadow sector of land use and lack of proper control over the reproduction of land resources; the possibility of reducing state support for agriculture; imbalance between large, medium and small forms of agricultural production leads to a decrease in the efficiency of reproduction of land resources of farms and households; reduction of the rural population and its labor potential (ibatullin, stepenko, sakal, 2012). the organization of land use management in agricultural enterprises should be focused on the fullest use of their strengths and available opportu nities to improve the efficiency of their use, which minimize the negative impact of conditions and threats that adversely affect the reproduction of productive land (miroshnychenko, 2010; dekhtyarenko, drapikovskyi, ivanova, 2009). most scholars study the changes in the impact of governance in the context of war and globalization (pryshchepa, kardash, yakymchuk, 2020; irtyshcheva, et etc., 2022; vyshnevska, et al., 2022). on this basis, the purpose of land use management of agricultural enterprises is to ensure the efficient use of land as the main factor of agricultural production in the long term on the basis of reproduction of productive land and increasing the sustainability of agricultural landscapes, taking into account the balance of public and private interests. it is proposed to highlight the following as priority tasks for the organization of land use management in agricultural enterprises: – conducting a comprehensive inventory of agricultural land with the definition of real boundaries of land plots, their registration in the cadastre and delimitation of property rights; – completion of re-registration of land shares into specific forms of ownership of specific land plots; – formation of land market infrastructure, strengthening state control over the level of concentration of productive land in individual owners, ensuring transparency of all land transactions; – development of institutional environment for regulation of land relations and public control over land turnover and efficiency of its use; – development of a system of motivation of landow ners and land users in preserving soil fertility and consumer properties of productive lands; – identification of land plots that require immediate environmental protection measures and minimization of anthropogenic load, as well as development of measures to improve agricultural landscapes; – development of a wide range of scientifically based modern farming systems, taking into account the natural and climatic characteristics of specific territories and the production direction of economic entities; – development of recommendations on the location of agricultural production by territories and categories of economic entities, which ensure the increase of efficiency of productive land use. the implementation of these tasks requires the concentration of efforts and resources of all subjects of land relations, but it should be noted that certain functions of the organization of land use management in agricultural enterprises also belong to the competence of the state, which within the framework of land policy determines the strategy of productive land use and their reproduction. 4. conclusions thus, having systematized the factors that deter mine the peculiarities of the organization of land management in agricultural enterprises, three groups were identified: natural-climatic and geographical, organizational-economic, agrotechnical and agrochemical. based on the swot analysis of land resources as an object of management, it is deter mined that the purpose of land resources management of agricultural enterprises is to ensure the efficient use of land as the main factor of agricultural production in the long term on the basis of reproduction of productive land and increase the sustainability of agricultural landscapes, taking into account the balance of public and private interests. it should be noted that all subjects of land relations have opportunities to minimize the negative consequences caused by the manifestation of weaknesses of land resources identified on the basis of swot analysis. first of all, these opportunities are associated with an increase in state support for agriculture and rural development; strengthening of state control over the targeted use of agricultural land and its reproduction; improvement of the financial condition of agricultural enterprises and intensifi cation of their innovative activities; development of adaptive landscape farming systems; appearance of innovations in the market in the form of new breeding and genetic, technical, technological, organizational and managerial solutions that ensure the preservation and improvement of consumer qualities of productive lands, as well as prevention of their degradation. baltic journal of economic studies 57 vol. 8 no. 4, 2022 references: korobska, a. o. (2020). state regulation of agricultural land use in ukraine (phd thesis). kamianets-podilskyi. popov, a. s. (2018). development of agricultural land consolidation: world experience and ukrainian perspectives: monograph. kharkiv: fop panov a. m. agropolit.com (2020). land directory of ukraine 2020. available at: https://agropolit.com/storage/2020/ zemelniy_dovidnyk_2020.pdf ?utm_source=mailchimp&utm_campaign=0300ccc2e1f0&utm_medium=page (accessed august 21, 2022). tsina derzhavy (2019). how do local budgets in european countries and ukraine earn money? available at: https://cost.ua/744-na-chomu-zaroblyayut-mistsevi-byudzhety-v-krayinakh-evropy-ta-v-ukrayini/ (accessed august 21, 2022). agropolit.com (2019). the highest cost of land rent was recorded in kirovohrad oblast. available at: https://agropolit.com/news/13269-nayvischa-vartist-orendi-zemli-zafiksovana-na-kirovogradschini (accessed august 21, 2022). dankevich, v. e. (2018). swot and pestel analysis of the current state of land relations in ukraine. economy of agro-industrial complex, vol. 7, рp. 93–103. sharyi, g. i., tymoshevskyi, v. v., mishchenko, r . a., & yurko, i. a. (2019). management of land resources: a study guide. poltava: poltntu. kovaliv, o. (2016). implementation of land reform in ukraine: a new paradigm: monograph. kyiv: dia. martyn, a. g. (2011). regulation of the land market in ukraine: monograph. kyiv: agrar media group. ibatullin, sh. i., stepenko, o. v., & sakal, o. v. (2012). mechanisms of management of land relations in the context of ensuring sustainable development. kyiv: state institution "institute of environmental economics and sustainable development of the national academy of sciences of ukraine". miroshnychenko, a. m. (2010). conflicts in legal regulation of land relations in ukraine. (2nd ed.). kyiv: alerta. dekhtyarenko, yu. f., drapikovskyi, o. i., & ivanova, i. b. (2009). regulation of land relations in the modern city: monograph. in vakulenko v. m., orlatogo m. k. (ed.). kyiv: nadu. pryshchepa, o., kardash, o., yakymchuk, a., et al.(2020). optimization of multi-channel queuing systems with a single retail attempt: economic approach. decision science letters, vol. 9(4), рp. 559–564. irtyshcheva, i. and etc. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, vol. 8, рр. 78–82. irtyshcheva, i., et al. (2022). development of socialization of the economy on the conditions of financing sports and health activities. international journal of health sciences, vol. 6, рp. 2819–2826. vyshnevska, o. et al. (2022). the influence of globalization processes on forecasting the activities of market entities. journal of optimization in industrial engineering, vol. 15(1), рp. 261–268. received on: 21th of september, 2022 accepted on: 27th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 9 vol. 8 no. 1, 2022 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine e-mail: serg.bardash@gmail.com orcid: https://orcid.org/0000-0001-5711-5229 researcherid: f-4116-2018 2 odessa i.i. mechnikov national university, ukraine e-mail: tatiana@osadcha.com orcid: https://orcid.org/0000-0003-4258-0907 researcherid: f-4110-2018 doi: https://doi.org/10.30525/2256-0742/2022-8-1-9-20 tourist rent in the system of rent theory concepts: the accounting aspect sergiy bardash1, tatiana osadcha2 abstract. urgency of the research is conditioned by the critical state of the tourism industry. one of the ways to revive the industry is to find additional sources of funding. considering the fact that considerable budgetary resources are spent to fight the global pandemic, the issues of formation, accumulation, distribution and redistribution of rents, including tourist rents, are actualized. for strategic development of national tourism systems it is necessary to create a mechanism of rent relations, which not only satisfies the interests of state authorities, but allows business entities, including tourism industry, to determine in full the income from operating activities, net profit, as well as the volume of self-financing sources, the component of which should be considered the tourist rent. it is not possible to achieve the required result without defining and further creating the conditions for rent accounting. the purpose and the objective of the research. the purpose of the research is to determine the conditions of the valuation estimates of the tourist rent and its accounting for the needs of effective management of tourist enterprise incomes. in accordance with the defined purpose, the research objectives are as follows: critical evaluation of the results of justification of theoretical foundations of tourist rent; definition of conditions of tourist rent identification in the context of further accounting and clarification of the concept "tourist resources" as a source of tourist rent formation; definition of possibility of identification/allocation of tourist rent in tourism, essence and place of tourist rent in the classification model of rent; definition of economic and legal conditions of tourist rent accounting. the methodological framework of the research is dialectical method of cognition of the essence of tourist resources and tourist rent; bibliographic method and general scientific methods of scientific cognition (analysis, abstraction, synthesis, generalisation) applied for critical evaluation, clarification of concepts "tourist rent" and "tourist resources", substantiation of basic theoretical provisions of economic and legal regulation of identification and accounting of tourist rent and tourist resources, formulation of conclusions. the scientific novelty of the research results consists in clarification of the concepts of "tourist rent", "tourist resources", definition of economic-legal grounds for accounting of tourist rent and tourist resources. the practical significance of the research results is that the stated recommendations can be taken into account in further development of recommendations on identification, evaluation, accounting of tourist rents as additional income of the tourist activity entities, as well as creation of information base for collection of rent payments and their further distribution for the needs of national tourism development. the prospects for further research will consist in developing a set of scientific and methodological provisions and recommendations on attracting tourist rents in the system of self-financing, regional and nation-wide financing of tourist industry entities. significance/originality. the obtained results can be considered as forming the concept of tourist rent accounting in the sphere of tourist entrepreneurship and create new grounds for revision of the mechanism of rent relations in the tourism industry. key words: tourism, rent, tourist rent, tourist resources, accounting of tourist rent. jel classification: m10, m40 baltic journal of economic studies 10 vol. 8 no. 1, 2022 1. introduction the events of the early 20s of the 21st century have convincingly proved that the rapid and sometimes uncontrollable spread of the effects of globalisation can have a very negative impact on the world's most powerful economies. against the background of economic stagnation caused by the covid-19 pandemic, in many countries of the world the risks of a systemic economic crisis are increasing due to the imbalanced development of different sectors of the economy, caused by the high level of variation in their earning yield. the global tourism industry suffered the most damage. according to the latest tourism data from the world tourism organization (unwto), destinations welcomed 900 million fewer international tourists between january and october when compared with the same period of 2019. this translates into a loss of us$ 935 billion in export revenues from international tourism, more than 10 times the loss in 2009 under the impact of the global economic crisis. based on the current evidence, unwto expects international arrivals to decline by 70% to 75% for the whole of 2020. in this case, global tourism will have returned to levels of 30 years ago, with 1 billion fewer arrivals and a loss of some us$ 1.1 trillion in international tourism receipts. this massive drop in tourism due to the pandemic could result in an economic loss of us$ 2 trillion in world gdp (unwto, 2020). the vast majority of researchers draw attention to the fact that the revival of the tourism industry should begin with the revival, and in some cases, the creation of additional conditions for the comprehensive development of domestic tourism. accordingly, one of the sources of financing and self-financing should be rent payments, part of which should be returned to the tourism industry, as well as tourist rent, which should become a powerful source of self-development of the entities of tourist activity. rent is one of those categories that started to be studied and researched among the first, but has not been definitively explained to this day. in addition, the scope of its application, the list of resources with which its emergence and manifestation is associated, is constantly expanding. this has led to the emergence of types and forms of rent (osadcha, 2016), which generates the need to define and analyse the circumstances of such popularity of the rent category among scientists, having determined the objective and subjective factors-causes. researches of the development of scientific thought of the leading economists, starting from w. petty, j. locke, d. norse, f. canet, a. turgot, a. smith, j. b. say, d. ricardo, j. s. mill, k. marx, w. pareto, j. robinson, a. marshall, j. a. worcester, a. pezenti (bardash, osadcha, 2019), continuing by publications of a.o. krueger (krueger, 1974), j. m. buchanan (buchanan, 1980), g. tullock (tullock, 1988) and others testify that knowledge of the rent phenomenon goes on. in particular, according to some researchers, the publications that attempt not only to give a modern scientific interpretation of rent, but also to explain its economic and legal content, to classify it and form the necessary prerequisites for its accounting in the information system of managerial decision making of a business entity are especially noteworthy (osadcha, bardash, 2017; bardash, osadcha, 2018; bardash, osadcha, 2020). foreign as well as domestic scientists have been making considerable efforts to comprehensively address one of the most pressing and complex issues of modern times – the formation, distribution and redistribution of rent, but it is too early to put an end to the research. economic theory explains the essence and importance of rent relations at the state level, but there is no any information on the accounting reflection of rent as one of the types of income of a business entity, except for separate publications, in particular monographs (osadcha, 2016, bardash, osadcha, 2019). this leads to a deliberate reduction in the relevance of information on the income from the use of rent resources, because no form of existing types of reporting provides any information on any type of rent. there are positive developments in almost every aspect of the impact of rent on the socioeconomic development of systems at any level, but a full understanding of the real impact of rent cannot be formed without a substantiation of the theoretical and methodological foundations of its recognition, valuation and reflection in the accounting system. to be fair, it should be recognised that in modern economic science, the rents generated in the tourism industry have not been sufficiently researched and the problems in terms of their distribution and use have not been solved. there are still a number of controversial issues regarding the implementation of rent relationships between the state and economic entities in the tourism industry. some aspects of scientific substantiation of processes of formation, use of tourist rents are considered in publications of i. ansoff, i. balabanov, m. boiko, v. branchev, z. gorbyleva, i. demyanova, i. zorin, g. kazachkovska, v. kvartalnova, v. kozyrev, t. tkachenko and others. highly appreciating the results of research on the problems of tourist rent, in particular i. demyanova (demyanova, 2009), v. kozyrev (kozyrev, 2012), other researchers, it should be noted the existence of a number of unresolved issues. baltic journal of economic studies 11 vol. 8 no. 1, 2022 thus, studying the level of theoretical substantiation of tourist rent issues, m. boiko draws attention to the fact that since tourist resources are differentiated, quantitatively restricted and limited, they act as an economic good, a commodity, therefore, to define the regularities and features of rent formation in tourism, a methodology of determination of the size of rent is necessary, as the mechanism of accounting, distribution and use of tourist rent is not developed in the economic literature (boiko, 2013). the given statement of m. boiko is a fundamental question without solution of which any statements about tourist rent as a factor income of tourist enterprise are only the general theoretical constructions demanding the evidence base. accordingly, the need for a study of tourist rent is conditioned by the fact that: – in the modern world economy, services have gained exceptional importance: they account for about half of all consumer expenditures of the population, and the service industry itself has become one of the main industries of social production; – the search for additional sources of funding is actualised, as almost 100% of tourism entities operate on the basis of private ownership; – the efficiency of income management, and, consequently, the sustainable development of the tourism business directly depends on the possibility of accounting for tourist rent and its use for selffinancing of economic activity. 2. modern interpretation of the theoretical foundations of tourist rent at present, most researchers realise that inbound and domestic tourism will play a truly important role in the socio-economic development of any country in the world, because it is not only the receipt of foreign currency, but also improvement of social infra structure, creation of additional jobs, improvement of the well-being of the country population, increase of revenues to budgets of different levels, systematic and constant concern for the environment preservation. inbound and domestic tourism should turn the national tourism industry into a socially oriented, environmentally friendly business. the potential of the tourism business, which realises the national tourism product, depends directly on the tourism resources, the factors of production of the tourism product, which in their vast majority, as opposed to material production, do not belong to the entity of tourism activity. i. demyanova (demyanova, 2009), v. kozyrev (kozyrev, 2012), g. kazachkovska (kazachkovska, 2009), t. tkachenko (tkachenko, 2006), m. boiko (boiko, 2013) and other scientists almost do not pay attention to this important feature. the vast majority of researchers of tourism problems argue that tourist resources are a source of tourist rent. thus, in the opinion of v. kozyrev (kozyrev, 2012), t. tkachenko (tkachenko, 2006), m. boiko (boiko, 2013) tourist resources are a special type of resources, qualitatively and quantitatively different from absolutely natural factors (land and its subsoil) and are independent economic factors. exactly in view of the mentioned above tourist rent should be considered as factor income, which is created by tourist enterprises that use tourist resources as an object of economy, as a factor of tourist services production and which is subject to appropriation by the owners of these resources (boiko, 2013). according to i. v. demyanova, tourist rent as an economic category reflects the relationship of production, distribution and use of a special type of income associated with tourism business (demyanova, 2009). such interpretation of economic essence of tourist rent, according to m. boiko, is considered quite correct, because it is based on neoclassical and institutional theories, in particular, the marginal utility theory in the analysis of demand formation and market value formation (boiko, 2013). according to g. kazachkovska, m. boiko, tourist resources are a form of capital – an asset, the use of which causes a stable flow of income (kazachkovska, 2009; boiko, 2013). it is difficult to agree with this statement, because identifying tourist resources as an asset, the authors of publications (kazachkovska, 2009; boiko, 2013) forget about the need to own such an asset, as well as the possibility of valuation of such an asset. with respect to the vast majority of tourism resources, such questions are still unanswered. based on the results of the content analysis of the studied publications, it has been established that the views of their authors on the essence of tourist rent are almost identical, but researchers identify tourist rent in different ways, considering it to be: – a kind of land-natural rent, at the same time differing from the land-natural rent (demyanova, 2009); – such, which is divided into natural resource rent and economic quasi-rent according to the sources of its origin (boiko, 2013); – recreational and tourist, recreational, which is a type of natural rent (hrazhevska, 2015; kuzyk, 2004). according to i. v. demyanova, tourist rent is a kind of natural resource rent with peculiarities conditioned by the nature of tourism business, where historical, social and cultural values and unique phenomena of nature and society are used along with natural resources (demyanova, 2009). i. demyanova, defining tourist rent as a kind of land-natural rent, notes that it is simultaneously different from land-natural rent (demyanova, 2009). such statements only complicate the search for truth on the given question. baltic journal of economic studies 12 vol. 8 no. 1, 2022 there are also other scientific views on the place of tourist rents in the general classification of rent. according to m. boiko, tourist rent is divided according to the source of origin into: – natural resource rent (absolute, monopoly, differential, anti-rent); – economic quasi-rent (technological (innovation), organizational and managerial (manager's rent), informational, social, transport, branding rent, event rent) (boiko, 2013). deepening the scientific theory concerning the essence of rent in tourism, t. tkachenko describes the economic nature of branding rent, goodwill rent, time rent, event rent, social and image rent (tkachenko, 2006), which, according to m. boiko, is the evidence of relevance of researches of tourist rent formation and variety of its kinds, formed according to certain internal laws depending on resources (boiko, 2013). some researchers, in particular i. demyanova, note that tourist resources occupy a significant place in the market of recreational services (boiko, 2013). we cannot agree with this, because the main elements of any market are demand, supply, economic interest, economic behaviour, commodity producer, intermediary, consumer, and, of course, goods. the vast majority of tourism resources are not commodities, so they cannot act as a component of the market. we agree with some statements of i. demyanova (demyanova, 2009), g. kozachkovska (kazachkovska, 2009), m. boiko (boiko, 2013) that the main features of tourist resources, forming tourist rents, are their limitedness and non-reproducibility. as g. kozachkovska notes, it is the limitedness and non-reproducibility that are the causes of rent formation, and, consequently, profit in the process of production and sales of tourist services at the tourist market (kazachkovska, 2009). also, some scientists include among the main factors of tourist rent the following: – more favourable static and dynamic conditions of carrying out tourist activity by entities of economic activity formed by tourist resources; – formation of conditions for dominance in the market, through which the entity of activity can manage market demand and prices. there are also false, in our opinion, statements on features of tourist resources, forming tourist rent. in particular, these are complete physical immobility, impossibility of resource accumulation, perpetual life/life cycle of tourist resources (demyanova, 2009; boiko, 2013). the first two factors are in no way connected with the rent incomes, and the last factor is not correlated with anthropogenic tourist resources, the objects having the limited lifetime and, consequently, requiring certain capital investments for their maintenance in proper condition. consequently, not all generating factors of tourist resources, according to i. demyanova, as well as other researchers, are the reasons for the formation of additional income in the process of formation and sale of tourist services. yes, we can agree that tourist resources are the primary factor of production, because if there was no sea, there would be no rest on the coast. we can also agree that the amount of operating income of a firstline hotel will be greater than that of a third-line hotel precisely because of its proximity to the sea. however, whether or not the hotel will earn rent – a super income, because the costs of its construction in said proximity, its transaction costs may also be greater. the only thing that can generate tourist rent is the increased comfort and the corresponding demand, which will lay down a higher level of profitability. consequently, the issue of rent definition is rather complex. also, according to i. demyanova, the reasons for the emergence of rent are greater efficiency of tourist resources use, the difference in costs of tourist organizations for customer service due to different conditions of tourist services provision (demyanova, 2009). almost the same notes m. boiko, in whose opinion the quantitative limitation and qualitative differentiation of tourist resources at the regional level entails differences in costs and results of economic activity of tourist enterprises (boiko, 2013). it is worth to agree with these statements, however the most challenging issue in definition of tourist rent will be free access to information base about operating expenses and operating incomes of competitors for carrying out comparative, including factor analysis. it is our belief that without perfect systems for accounting and transparency of the performance results, this will not be possible. the scientists who have studied theoretical and practical aspects of tourist rent note that, similarly to natural rent, tourist rent is divided into monopoly, differential and absolute one. the monopoly tourist rent is based on the unique quality of tourist resources used in the process of tourist services provision. it is the uniqueness of such tourist resources, according to some researchers, that will form a real possibility of establishing the highest form of modern market imperfection on these resources – absolute or pure monopoly. in this case, access to the use of such unique tourist resources, or a limited right to exploit them, becomes of great importance. it is clear that exclusive rights to visit, for example, the residences of monarchs in countries with a corresponding state structure, would indeed form a monopoly tourist rent. consequently, the monopoly tourist rent is entirely based on the uniqueness and exceptional utility of the tourist resource, which has an extremely high market demand, significantly exceeding the market baltic journal of economic studies 13 vol. 8 no. 1, 2022 supply due to its absolute inelasticity. this is found in the monopolistically high price of the unique tourist product. the main factor in the emergence of differential tourist rent is the use of tourist resources of unequal quality in the provision of tourism services. such resources are characterised by varying degrees of functional suitability for recreation, treatment, satisfaction of tourists' needs. the market mechanism of formation of differential tourist rent is based on differences in quality (utility levels) and limitedness of the best and average tourist resources whose supply in the market is either inelastic or not elastic enough, which will form the difference between the market and individual prices for tourist product of those enterprises which use them. in our opinion, differential tourist rent can be of the 1st and 2nd kind: differential tourist rent of the 1st kind will depend on the property of the tourist resource, differential tourist rent of the 2nd kind will be formed taking into account the amount of additional costs to improve/maintain/ reproduce the quality of the tourist resource for further efficient use. according to some researchers, absolute tourist rent will arise when the supply of a tourist resource is inelastic over a long period of time, which will condition the demand for a tourist product whose consumption will be accompanied by the exploitation of the respective tourist resource. the market mechanism of formation of absolute tourist rent will constitute the amount of rent payment for the use / exploitation of the rent resource, accordingly its recipient will be the owner of tourist resources – state, territorial community, an individual natural entity. if a tourism organisation will own or operate a tourist resource, then it will acquire the status of the recipient of the corresponding rent, the rent payment. an absolute tourist rent may occur for a short period of time at the provider of tourist services, which attracts tourist resources in the process of their formation and provision, its size will gradually decrease, and the procedure of its definition will be extremely complicated. theoretical bases of tourist rent are supplemented with the results of research of value analysis of its composition. thus, according to i. demyanova (demyanova, 2009; kozyrev, 2012), the tourist rent consists of: – initial, basic value, formed by the quality of natural resources, their location, etc., and is independent of human activity; – a part of the value created by human activity, by social effort, that is generated by improving the conditions for the use of tourist resources, which occurred not through the efforts of the resource owner or of the tourism organisation, but through other economic agents (construction of a highway, an airport, a sports arena, etc.); – the added value generated by the capital expen ditures of the owner of the tourist resource, or of the entity exploiting it. i. demyanova proposes to put the indicated composition of tourist rent in the basis of rent distribution – the first two parts are suggested to be withdrawn for development of tourist industry, because the tourism organization has not incurred any expenses to get such parts of rent. the third part of tourist rent, according to i. demyanova, belongs to the user by all appearances and corresponds to his labour and capital costs (demyanova, 2009). the definition of its legal aspects is also important for solving the problem of tourist rent. we agree with the statement of v. kozyrev, who notes that modern economic theory of property rights and social nature of tourism require polymorphism and clear division of property rights between authorities and tourism organizations. ultimately, the specification of property rights should be implemented: each tourist object (resource) gets its own specific owner (authority) entrusting the use of these resources to a specific firm on contractual terms. with such approaches, tourism becomes a socially controlled sphere (kozyrev, 2012). the lack of a real mechanism for the creation, distribution and use of tourist rent in ukraine was also noted by other researchers, according to whom the situation significantly slows down the development of the tourism industry. according to g. kazachkovska, it is possible to achieve significant positive shifts through the development and implementation of a number of fundamental economic and legal provisions (kazachkovska, 2009). currently, proposals to: – define the forms of rent payments for the use of tourist resources, their size and methods of collection (payments related to the volume and quality of tourist resources used by a given tourism organization; payments at a fixed rate on profit (total or net remaining after taxes); payments at a fixed percentage rate on profit or with a rate of return; payments at a fixed rate on gross proceeds from sales of tourist services); – to carry out an inventory and evaluation of tourist resources, to create a nationwide inventory of tourist resources; – develop a methodology for calculating the volume of tourist rent and to establish a base for calculating rent payments; – do not lose their relevance. thus, the overwhelming majority of specialists studying the problems of tourism theory and practice argue that the tourism business generates tourist rents, the main source of which is tourist resources. the quality and conditions of tourist resources use, according to specialists, will generate three types baltic journal of economic studies 14 vol. 8 no. 1, 2022 of tourist rent: monopoly, differential and absolute. tourist rent consists of three parts: basic; formed by third parties; generated by activity of a tourism business entity. however, almost none of the researchers touch upon the issue of monetary estimates of rent as an additional income of the entity of tourism activity. the vast majority of specialists, who prefer accounting tools in the issues of determining the results of economic activity, believe that the definition of the amount of rent is possible only if it is reflected in the accounting system of the business entity. with certain research findings on tourist rent, we have outlined certain comments that once again prove the relevance of further research into the phenomenon of tourist rent. a certain increment of scientific knowledge about nature, formation and possibilities of monetary estimates of tourist rent can be achieved due to: 1) identification of correlation of research results on the fundamentals of rent with the existing worldview picture of tourist rent; 2) specification of concept of tourist resources as a source of tourist rent; 3) specification of a place of tourist rent in the classification model of rent; 4) definition of economic and legal conditions of recognition, valuation, accounting and distribution of tourist rent. 3. development of notions of tourist rent based on recent researches for economists of the second half of the 20th century, especially for economists of the subjective school, rent became the most widely uncertain category, because rent has become identified with any differential income in general, especially when this income is generated by a cause or factor which cannot be increased or produced at will (for example, the owner of a good voice cannot pass it on to others, an outstanding artist cannot be replaced by another, and accordingly, they receive "rent"). in such a case, according to a. pezenti, rent would be the income received by any owner of the goods available in a quantity naturally or artificially limited in comparison with the demand (pezenti, 1976). according to a. pezenti, the economists of the later period purposely, in order to leave this category of its public character, forcing to forget the fact that the social categories correspond to the economic categories, mixing the concepts, declared any differential income as rent. thus, for example, they talk about conjunctural rent (pezenti, 1976). the representatives of institutionalism, in particular g. tulloch (tullock, 1967), e. krueger (krueger, 1974), j. buchanan (buchanan, 1980), consider rent to be the result of restriction of competition in order to obtain monopoly rights. in particular, according to g. tullock, any improvement of resources by an entrepreneur makes them relatively rarer. such improvement has a positive effect on social welfare, and the additional rent (quasi-rent) arising from the use of more efficient resources or technologies is temporary in nature. in the absence of artificially created barriers, market competition inevitably dilutes it, reducing it to a normal level (tullock, 1967). it should be taken into account that modern neoclassical theory has resolutely refused to separate rent from other types of non-competitive income (worcester, 1946). the normal level of income began to be determined solely by the conditions of competition in the resource market, and perfect competition was proposed as the norm. this, according to the founders of modern neoclassical theory, made it impossible to distinguish rent income as such in each individual case. the existence of many, sometimes incompatible views on the essence of rent was also noted by d.a. worcester (postupna, 2020). in particular, it was found that different interpretations of rent are applied in scientific circulation, namely: 1. payments made by an entrepreneur for certain factors of production. 2. part of entrepreneurial payments paid to certain factors of production. 3. the income received by the owners of certain production resources. 4. part of the income received by the owners of certain production resources. d. worcester positioned his concept of opportunity cost as a third solution, describing a discussion of two positions: ‘the rent combines elements of both surplus and costs’ (classical theory) and ‘the rent is part of total payments covering the surplus’ (paretian rent). theoretical elaboration of classical scientific theories (classical theory of political economics, marxist theory, theory of property rights, institutionalism), in which the formation of different types of rent is considered, allows stating that the theory of rent relations is characterized by different points of view on the understanding of this issue. this is associated with the fact that the historical background and economic-subject field of conceptual substantiation of rent evolves together with socioeconomic relations and institutional environment. accordingly, we note that specific types of rent are the product of a certain period of socio-economic development, while the core of the scientific theory remains unchanged – resource limitedness – no possibility of resource reproduction – importance of economic activity – monopoly. other components of the rent theory, in particular the institutional environment and socio-economic relations are transformed to a certain extent and introduce certain clarifications into the concept of "rent". baltic journal of economic studies 15 vol. 8 no. 1, 2022 we have found that the development of economic thought and socio-economic relations has provoked the existence of many, sometimes polar, opinions regarding the essence of rent. thus, from the first day of the introduction of the concept of "rent" to the present day, rent has been regarded as: – value added; – profit component; – transformed profit; – form of value added; – payment for the use of resources; – excess profit (additional profit) or surplus profit resulting from the efficient use/exploitation of the rent-generating resource; – passive income that does not require its recipients to engage in entrepreneurial activity (bardash, osadcha, 2019). as a result of the research carried out, we found that the consideration of the economic essence of rent without defining its economic and legal foundations, as well as the definition of the entities of rent relations to a certain extent determines the established variability of the researchers’ views. thus, in a broader context, modern rent relations emerge as a set of economic, legal and psychological (economic and extra-economic) relations between the parties to the agreements on the formation and use of rent resources and revenues. at present, one should agree with the statement that one of the specific features of modern rent relations is: "...dependence on the institutional foundations of the exercise of property rights to rent-producing resources. modern rent relations appear as a complex system of interactions of market economy agents associated with the appropriation of special forms of income from the exercise of exclusive ownership rights to rent resources (hrazhevska, 2015). considering that an important prerequisite for the effectiveness of rent relations is the control of access to these resources on the basis of clearly specified and protected property rights, the accounting of the consequences of rent relations acquires the signs of a non-alternative tool to achieve this goal". to determine the prerequisites for rent accounting – one of the results of rent relations, identification of their entities is important. according to articles 731, 733 of the civil code of ukraine, which should be applied in conjunction with other articles of chapter 56 of the civil code of ukraine, such entities are as follows: – rent recipient on the one hand – the owner of the property, who transfers the property to another person in exchange for receiving periodic rent payments in cash or in kind; – rent payer on the other hand – a person who acquires ownership of the property transferred by the rent recipient in exchange for the obligation to pay the rent to the recipient in the form of a certain amount of money or other provision. from the legal point of view it is essential for implementation of the rent relations under the contract of rent that the rent recipient must be the owner of the property, which is transferred under the rent payment, as this contract is aimed at transferring the ownership right to the property. in the case of transfer of property rights under the rent payment, the alienator must be endowed with these rights (i.e. have the right to exercise them) (bardash, osadcha, 2019). this position is based on the fact that article 732 of the civil code of ukraine does not specify which of the parties specifically may be individuals and legal entities under a contract of rent. this allows arguing that both the payer of the rent and its recipient can be legal entities and individuals, as well as the state and territorial communities. in view of the above, it has been established that the formation of the rent relations mechanism in terms of distribution and redistribution of tourist rent should take place on the basis of specification of property rights and determination of the full composition of the entities of rent relations, in particular: – of the state (concerning state-owned tourist resources, for the exploitation of which rent must be paid by tourism entrepreneurs (on the basis of contracts entered into, permits, licences, etc.)); – of territorial communities (concerning communityowned tourist resources, for the exploitation of which rent shall be paid by tourism entrepreneurs (on the basis of contracts entered into, permits, licences, etc.)); – natural and legal persons – owners/managers of tourism resources, who have authorised the tourism industry entities to use them temporarily; – of the entities of tourism activity – the rent recipients; – excess profits due to the use of tourist resources as a factor of production in the process of selling the tourist product, individual tourist services. hence, rent has two appearances: 1) it is a part of total income, which can be either passive or active, formed by owning or using in economic activity the resources – the factors of production – that form a competitive advantage; 2) it is a payment for the use of resources that form a competitive advantage and is payable to the owner of such resources on a contractual basis. in the context of the identification of tourist rent, the definition of tourist resources as a rent-generating factor acquires uncommon importance. we agree with the opinion that tourism activity as the main form of recreation belongs to the types of social practice with a pronounced resource orientation. the vast majority of countries of the world – leaders in tourism business, have significant resource potential baltic journal of economic studies 16 vol. 8 no. 1, 2022 of tourism, the rational use of which can provide not only full satisfaction of cognitive, health and sports needs of domestic and foreign tourists, but also bring significant economic benefits to the state (postupna, 2020). it is not our aim in this research to examine the results of the scientific debate on the interpretation of the concept of "tourist resources". in our opinion, it is extremely problematic to do so, as tourist resources are the most undefined resources in terms of their composition. among a large pleiad of researchers such as p. defer, v. kvartalnov, i. tverdokhliebov, v. kozyrev, a. liubitseva, t. tkachenko, m. malska, m. boiko and others, none of them could unite existing knowledge into a unified system of knowledge about tourist resources. almost each of the researchers tried and is trying to specify the concept of "tourist resources" and to build a classification of tourist resources, which primarily correlates with the subjective worldview on this issue. at the moment, according to article 3 of the law of ukraine "on tourism" tourist resources of ukraine are considered to be tourist proposals offered or such that may be offered, based on and using the facilities of state, communal or private property (law of ukraine, 2020). in our opinion, the indication that these are tourist resources of ukraine makes such a definition extremely subjective, because from a scientific point of view the essence of any resources should not be influenced by their location. also, the given definition does not form the slightest idea of the form of such resources, respectively, or the methods of their inventory, which is assumed by the resolution of the cabinet of ministers of ukraine "on approval of the state tourism development programme for 2002-20210", paragraph 15 "conducting an inventory and evaluation of natural and historical and cultural resources" (state program, 2002). it is worth noting that with the previously established understanding of the essence and types of tourist resources, the conduct of an inventory looked like a project doomed to failure. the same, even to an even greater extent, applied to the evaluation of tourist resources. at present, in our opinion, the scientific community has made little progress in addressing the issue of identifying the polymorphic essence of tourist resources. nowadays, the analysed definitions of tourist resources tend to highlight a number of factors influencing their condition and development. in scientific works, the authors characterize in detail the content of the concept "tourist resources" by the signs of use value, interaction, tourist product, tourist potential, comprehensiveness, recreationality, human intervention. this is by no means a complete list of attributes underlying the definition of the concept "tourist resource" accordingly, the procedure of its refinement will continue. currently, the definition of the content of "tourist resources" is based on three approaches: 1) ecological-economic, which is based on an assessment of the use value of tourist benefits and resources; 2) functional, which is based on the need to satisfy the needs of tourists; 3) territorial, which consists in identification and territorial localization of tourist resources. the definition of the essence and full composition of tourist resources is so complicated that tourist resources also include current events (liubitseva, 2003). on the said polyphony of the essence and composition of tourist resources, some researchers form a system of claims that tourist resources are a rent-forming factor and therefore generate additional income. in our opinion, tourist resources should be understood as objects and phenomena of anthropogenic and natural origin that are used to meet the needs of tourist services. thus, objects of anthropogenic origin are architectural monuments, museums, constructions of religious purpose, objects of other cultural, sports, medical and other recreational purposes, infrastructure objects. intangible objects or phenomena such as culture (customs, rites, songs, etc.) of certain ethnic groups should also be included in anthropogenic objects. accordingly, natural objects are any natural objects whose appearance has minimal anthropogenic interference, the contemplation of which or the stay in which satisfies the tourist's needs. they can be a waterfall, a mountain river, a tropical forest, a mountain landscape, seashore, marine fauna, desert dunes, the sea and its waves, etc. with such a definition, going back to the consideration of tourist rent, the question arises whether the facilities in question can generate additional income – rent – and how can it be identified? it should be taken into account that the abovementioned objects are recognized as tourist ones only in the context of the formation and consumption of a tourism product. in many other cases, outside economic activity, they are not such. for example, for coastal dwellers, the sea is in the vast majority an ordinary object of contemplation, as a mountain pass is for an inhabitant living in a mountainous area. consequently, the source of tourist rent, the economic essence of which cannot differ from the previously formed definition, are all tourism resources directly involved in the process of satisfying tourists' needs, forming a competitive advantage, used in accordance with established legal regimes on a contractual basis (leased land resources, water baltic journal of economic studies 17 vol. 8 no. 1, 2022 and forest resources with the right to make capital investments for their improvement and exclusive use, rights to visit anthropogenic tourism resources). in our opinion, the identification of the essence and place of tourist rent in the classification model should be based on the sphere of its origin – implementation of tourist activities – formation and provision of tourist services. the research on possible construction of the general classification of rent as additional income (bardash, osadcha, 2019) gave sufficient grounds to state that tourist rent is a type of economic rent, which can be distinguished according to two features: 1) by the type of resources involved in economic activity; 2) by the type of economic activity. in substantiating the assertion that tourist rent is a type of economic rent, we were guided by the elaborations of the representatives of neoclassical theory who introduced the concept of "economic rent" as the net product of a factor of production – additional income from a factor of production obtained due to the unavailability of such a factor elsewhere or for another economic agent. taking into account the results of the scientific literature review given in the monograph (bardash, osadcha, 2019), we found that the attributes of economic rent is the sphere of economic activity/ economic activity, – the environment in which rent arises, – income as a consequence of the implementation of economic activity. another attribute is the resource used in such activities. it should be noted that natural resources (land (soil), air, minerals, forest and water resources) are also such resources. accordingly, all kinds of rent, including natural rent as a manifestation of rent relations – a component of the system of economic relations, should be considered as economic rent. considering economic rent, it should be noted that the identification of its overwhelming majority of types, as well as the assessment of its impact on the financial condition and development prospects of the vast majority of economic entities is in the initial stage of study. this situation extends to certain postsoviet countries, in particular those in which the institution of property rights has not been established, the economic interests of all groups of civil society are ignored, the exhaustibility of natural resources is not taken into account and the principle of strategic planning for the country 's socio-economic development is ignored. considering tourist rent as a type of economic rent generated by tourism activities, it should be taken into account that: 1. the rent is a component of value added, but value added is not accounted for in the accounting system. attention should be paid to the fact that: at the macroeconomic level, value added is a social form of the surplus product created by employees. value added can only be determined by applying the system of national accounts. when defining it at the microeconomic level, there are serious complications, because in terms of applied economics, value added is an economic indicator that measures the value created by an enterprise in the process of producing a product. in fact, value added includes the cost of production, labour and social security costs, depreciation, and income tax. however, value added is not an object of accounting and, even with the existing calculation methods, is not reflected in the statement of financial results of an enterprise. 2. rent is a component of income from operating activities carried out using or exploiting factors of production, the possession of which forms a competitive advantage. 3. rent arises only from the existence of differences in costs of production or different costs of labour and capital. it is only possible to determine the difference in costs of production or capital expended by the same economic entity based on the results of a certain production cycle, quarterly or annual financial statements. 4. the complexity of the monetary estimates of rent makes it impossible to recognise it as income. it should be mentioned that incomes are recognised when the funds are collected or received. 5. the amount of rent depends on the demand for the product (finished goods, commodities, work performed, services rendered). if the sales take place at or below cost, there will be no rent. the higher the sales price is, the higher the share of rent in the sales income will be. 6. knowledge of the volume of rent will form a competitive advantage, because at actually lower costs and market price, the income will be higher than that of competitors. knowing the amount of rent will reduce the sales price, maintain the level of profitability, increase the sales volume and therefore the income and profit (bardash, osadcha, 2019). accordingly, for tourist rent, as well as for any economic rent and source of self-financing of the entity of tourism activity, its accounting becomes relevant, which should be based on legal grounds, in particular, identification of: the entity to which the object (resource generating the rent) belongs; the entity using the object (resource generating the rent); legal regulations of operation of the mechanism of rent relations; the unconditional basis for the settlement for the rent-generating factor (resource) – the contract of rent or other legal act regulating the rent relationship. the economic prerequisites necessary and sufficient for the organisation and maintenance of rent accounting by a business entity should include the establishment of: the object – resource generating baltic journal of economic studies 18 vol. 8 no. 1, 2022 rent, which is used (exploited) by the business entity – rent payer; the economic benefit for the use (operation) of such a facility; the economic advantage for the use (operation) of such a facility; the income of the entity using (operating) such a facility, which includes the rent; the valuation of the rent to determine the rent income; the share of the rent in the income from a particular activity and the subsequent implementation of the rent payment; the documentary support to account for the rent (rent income) and the rent payment and their subsequent reflection in the financial statements of the entity (this is probably an article on economic and legal frameworks). in addition to the above, the formation and development of practices of tourist rent receipt and distribution depends on a large number of endogenous and exogenous factors determining the economic behaviour of participants of rent relations – entities of tourism activity and regulators of relations in the sphere of tourism industry, influence the process of creation and procedure of income distribution from the use of tourist resources, generating tourist rent. exogenous factors such as the legislative and regulatory activities of the state, which result in a market infrastructure that creates a system of rent accumulation and appropriation, allocation and withdrawal of excess profits through the payment of rent, will have a decisive influence. the endogenous factor that will play one of the decisive roles in the formation and development of tourist rent receipt and distribution practices should be considered to be the improvement of the accounting system, which will fulfil the tasks as follows: – formation and provision of complete, timely and reliable information on rental income for further improvement of management of incomes of the entity of tourism activity and its rental payments to the budgets of different levels; – ensuring control over the use/exploitation of tourist resources, the rent income received by the entity of tourist activity; – creation of sufficient information support for the analysis of tourist rent. 4. conclusions based on the results of the research carried out, it has been established that one of the important internal additional sources of tourism industry development is tourist rent, which creates real conditions for tourism financing at the level of specific territories and implementation of the main social objectives of tourism as an economic sector. tourist rent can become a real economic lever of enhancement of tourism development, as rent mechanisms not only condition replenishment of the revenue part of the budgets of territorial communities, but also provide equalization of conditions of competition of tourism business entities. the source of tourist rent is tourist resources – objects and phenomena of anthropogenic and natural origin that are used to satisfy a variety of needs of consumers of tourism services, the right to use which should be assigned to a tourism industry entity and identified in the accounting system as an fixed asset or an intangible asset. the lack of ownership, operational management or any other form of economic management of the tourist resource makes it impossible for tourist rent to arise. tourist rent appears in two forms: 1) the part in total income formed by the ownership or use of the tourist resources in tourism activities – the factors of production that form a competitive advantage; 2) the payment for the use of the tourist resources forming a competitive advantage by the entity of tourism activities on a contractual basis, payable to the owner of such resources. tourist rent as a form of additional income of a tourism entity should be one of the sources of selffinancing of entrepreneurial activity. rent payments should have a single socio-economic purpose – to form the financial support for the nationwide, regional and local development of tourism destinations and tourism infrastructure. the transformation of relations with regard to the formation and distribution of tourist rent must take place in a systematic manner, with necessary improvements of: – statistical accounting of tourist resources and the development of a methodology for calculating rent income; – a system of excess profits taxation taking into account the specific sources and conditions of tourist rent; – institutionalisation of the forms of appropriation and withdrawal of tourist rent by ensuring a clear specification of property rights in order to enhance the competitiveness of tourism business entities and their social responsibility. the implementation of the relationship in terms of the distribution of tourist rent can only be realised on the basis of the formation of conditions for the accounting of tourist rent. tourist resources owned by tourism entities should be recorded as fixed assets with a corresponding subaccount and analytical accounting. the rights to use tourist resources should be recorded as intangible assets, with an appropriate sub-account and analytical accounting. the rent as excess profit from the sale of tourist products should be recorded in the off-balance sheet account "rent", with allocation of sub-accounts according to the type of tourist rent received. the entry in the corresponding off-balance sheet account will be made after analysing the financial baltic journal of economic studies 19 vol. 8 no. 1, 2022 statements, in particular the reporting of costs and revenues of competing tourism entities. the indication of the resulting rent from the previous financial year will provide information for management on possible management options in the current financial year, namely: – determining the maximum allowable reduction in the selling price of the tourist product while maintaining an acceptable level of profitability in order to increase demand, expand the market and, consequently, increase the amount of profit; – allocating the whole or part of the tourist rent to the implementation of environmental measures, reconstruction, restoration of anthropogenic tourist resource facilities, activation of innovative activities, etc. rent payments are proposed to be charged to the operational costs, because their inclusion in the costs of production contradicts the economic nature of such costs, unreasonably increases the cost of production and contradicts the principle of fair rent distribution. prospects for further research will consist in developing a set of scientific and methodological provisions and recommendations on attracting tourist rent in the system of self-financing, regional and national financing of tourism industry entities. references: bardash, s. v., & osadcha, t. s. 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(1946). reconsideration on the theory of rent. american economic review, vol. 36 ( june), pp. 258–277. baltic journal of economic studies 220 vol. 8 no. 3, 2022 1 national university "odesa law academy ", ukraine (corresponding author) e-mail: yakovlevdenys@gmail.com orcid: https://orcid.org/0000-0003-2828-4669 researcherid: gno-9727-2022 2 international university of economics and humanities named after academician stepan demianchuk, ukraine e-mail: milabogush@mail.com 3 odesa i.i. mechnikov national university, ukraine e-mail: odyachenko10@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-3-220-227 the voice of the middle class and economic democracy in ukraine denys yakovlev1, liudmyla borovyk2, olha diachenko3 abstract. the purpose of the article is to determine the role of the middle class in political democracy and economic democracy in ukraine. the role of the ukrainian middle class in the revolutionary events of 2004 and 2013–2014 – the ukrainian maidans, the influence of the middle class on the results of the parliamentary elections in ukraine and its presentation in the verkhovna rada of ukraine are noted. the pendulum-like oscillation of self-identification of the middle class between "service to the oligarchs" and "resistance to democracy," the basis of civil society, is noted. the emphasis is placed on the fact that democracy is the rule of the middle class, and the principle of equal freedom is at the core of economic democracy. the compromise between capitalism and democracy is the need to distribute the public good under the supervision of political democracy in the interests of the middle class. methodology. the theory of economic democracy was used to study the essence and characteristics of the middle class in ukraine. by means of sociological methods of empirical research middle class identification by indicators of income, education, labor (employment), consumer behavior is given. differences of "european" middle class from ukrainian middle class are marked. in connection with the fact that the level of income of the ukrainian middle class does not correspond to the indicators of eu countries, the necessity of application of subjective indicators to determine self-identification of middle class representatives in ukraine is substantiated. the definition of the middle class from the opposite, i.e., what the middle class is not (not the oligarchs, not the authorities, not the working class, etc.) is also applied. results. the trajectories of the middle class in ukraine have been defined – from active participation in the ukrainian revolutions to the role of a servant of the oligarchic regime. the middle class is well positioned to establish a regime of political democracy and to oppose the oligarchic-lumpen alliance. what hinders this is the insufficient activity of the middle class during election campaigns and especially after them. the oligarchs' established monopoly in the economy and media space allows for effective election campaigns in the mass media and the financing of political parties. this nullifies attempts of the middle class to establish political democracy in ukraine. the growing role of the new middle class – intellectuals and representatives of the creative industries – has been noted. the self-identification factors of the middle class include a sense of justice, responsibility for the future and the practice of democratic values. according to sociological research, representatives of the ukrainian middle class strive for democratic changes, overcoming corruption, deconstruction of the oligarchic regime, and implementation of market reforms. they have higher education, are interested in art, go to restaurants, and can sometimes afford vacations abroad. the political parties that declared support for the middle class and defined it as a target group in the elections included the "team of winter generation," "veche," "self reliance", and "voice". the first two were perceived as oligarchic projects, while the last two parties made it to parliament, respectively, in the eighth and ninth convocations. separately, the 2019 elections, in which the voice of the middle class became truly powerful, are examined separately. the "old faces," representatives of the post-soviet oligarchy, and bureaucrats lost in the majoritarian districts. the middle class refused to support those politicians and parties that had become "servants of the oligarchs" in parliament, taking an important step in building not only a political democracy, but also an economic this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 221 vol. 8 no. 3, 2022 democracy. practical implications. the results of the study can be used in the process of european integration of ukraine, the implementation of reforms to develop political democracy as the rule of the middle class and economic democracy as a democratic system of redistribution of public resources. value/originality. this study of the middle class and economic democracy allows us to understand the economic factors that influence politics, the role of the middle class and its characteristics in the process of establishing political democracy and economic democracy in ukraine. key words: middle class, economic democracy, political democracy, oligarchy, political revolution, principle of equal freedom, elections. jel classification: d72, f59 1. introduction the middle class in ukraine is probably the most enigmatic social phenomenon since independence in 1991. gradually realizing itself in the economy as a small and medium business, in politics it, like a cheshire cat's smile, now appears, playing a decisive role at the next historical crossroads, then disappears right before one' eyes. studies of economic democracy point out that under current conditions there is ample room for redistribution of economic power between the rich, the poor, and the middle class (ringen, 2004). this requires the establishment of a regime of political democracy – putting economic power under the control of the middle class. the compromise between capitalism and democracy is as follows: "…those who own instruments of production consent to the institution of the private ownership of capital stock while productive instruments consent to political institutions that permit other groups to effectively press the claims to the allocation of resources, the distribution of output" (przeworski & wallerstein, 2021). one of the main prerequisites for the rise of the middle class, and consequently of political and economic democracy, is the spread of the principle of equal freedom. since the enlightenment, the principle of equal freedom has become the basic moral reference point by which the legitimacy of social and political institutions has been judged (archer, 2002). although today we lack empirical data regarding the starting conditions and genesis of the middle class in ukraine. the gradual overcoming of totalitaria nism and the introduction of equal freedom is associated with the process of the collapse of the ussr . probably, at the beginning of the 90s the middle class was formed as an heir of the intelligentsia and the soviet bureaucracy, shadow speculative business and power structures. in ukraine, the middle class has gone from semi-legal businesses, impoverished intellectuals, and "serving the oligarchs" to the driving force behind the maidans, a class of volunteers, activists, and volunteers who provide resistance to russian full-scale military aggression. the middle class in ukraine emerged with the beginning of "restructuring" and "publicity ". political democracy is associated with the policy of "restructuring" and "publicity ", the first shoots of which could be observed in ukraine in the late 80s of the twentieth century – early 90s, starting as an initiative "from above", led not only to the development of national identity, and formed the preconditions for the middle class (yakovlev, 2015). it is largely thanks to the middle class that ukraine has been at the forefront of the post-soviet democratic transformation. yes, one should not underestimate the role of the middle class in the ukrainian political maidans – the "orange revolution" (2004) and the "revolution of dignity " (2013–2014). these events twice radically changed the political course of the state in the direction from authoritarianism to democracy, at least to electoral democracy. after overcoming the political crisis and the opposition coming to power (in 2005 – president v. yushchenko, and in 2014 – p. poroshenko), the activity and cohesion of the middle class was not enough to put pressure on the government to implement market economic reforms. the middle class has always made a democratic political choice. for ukraine, it is a choice in favor of a proportional electoral system, a parliamentary-presidential model, and democracy as the rule of the middle class (yakovleva & yakovlev, 2020). what about economic democracy? having made political revolutions and won political democracy (at least in its electoral dimension), the middle class did not ask for a social revolution and the estab lishment of economic democracy. rather, it fell back into disrepute. or, more precisely, pushed out of the field of public politics was an effective alliance of oligarchs and the "lower" classes from the point of view of retaining power. this alliance was called "oligarchic-lumpen" in ukrainian publicity. political democracy is impossible without a middle class. economic democracy is understood as the redistribution of economic power among individuals, as the involvement of the people in economic power directly rather than through elected representatives (ringen, 2004). baltic journal of economic studies 222 vol. 8 no. 3, 2022 in a democracy, the decision is made by a majority of citizens, which limits the political choices of others. the middle class, thanks to its activism, has played a significant role in times of dramatic change. in elections, and especially after them, the middle class is still losing the competition for economic democracy – the establishment of a fair distribution of public resources. during election campaigns in ukraine, oligarch candidates with populist rhetoric always win. it is about face-changing oligarchic parties, not about the essence of politics (kroytor & yakovlev, 2020) and the political discourse that is supported by the oligarchic media (yakovlev, amirov & stoliarova, 2021). oligarchs nominate candidates who, thanks to populist rhetoric, receive the support of the majority of voters. this fully applies not only to political competition, but also to economic competition. although the free market is able to distribute products and services, taking into account the preferences of small groups or individuals, even in conditions of free competition, political and economic choices are available to the citizen, limited by collective choice. economic democracy limits the choice of any individual. this provision of economic science can in no way justify the fact that in ukraine the oligarchy, through media influence and lobbyism in parliament, pushes the middle class to the margins of economic policy. it should be noted: "the distorted system of the ukrainian economy, where the lion's share of production is concentrated in the hands of large and very large businesses, and most of the population works either for them or for the state, which pays miserable salaries to its employees, also determines the distorted system of distribution of society into classes." (zanuda, 2013) increasing the participation of the middle class in a just economic distribution, which ukraine so desperately needs in the present conditions, is directly dependent on its role in politics. political democracy creates the conditions for the middle class to be represented in politics. note that the middle class can become a driving force not only to overcome oligarchy, but also to revive economic democracy in the global dimension (ringen, 2004). why hasn't the middle class in ukraine taken advantage of this opportunity so far? 2. in search of the middle class in ukraine: from "servants of the oligarchs" to the creative class there is no unity among researchers in defining the essence of the middle class and its social and economic characteristics. on the one hand, the middle class is seen as resistance to oligarchy and authoritarianism, resistance to democracy and the market economy, the foundation of civil society. on the other hand, the middle class in post-soviet ukraine is identified as "serving the oligarchs". the middle class is referred to as an "undefined" class (zanuda, 2013). one of the markers of the need to form a middle class and to expand the circle of opportunities for middle-class representatives in the economy and politics is the fixation of public opinion on the large income gap between the rich and the poor. the income gap has created a social divide. thus, in 1993, 79% agreed with the statement that there was a big difference in income, in 1995 – 82%, in 1998 – 92%. the situation has not changed for decades, because in 2019 the figure was 95% (oksamytna & symonchuk, 2020). these attitudes suggest that citizens perceive this unequal distribution as unjust, and that the political order that promotes it is illegitimate. to the direct question "how fair or unfair is the distribution of income in ukraine?" the vast majority of ukrainians (94.1%) in 2019 described this distribution as "unfair" or "extremely unfair," still often choosing both answers. according to experts of the razmukov center, "the process of formation of the middle class in modern ukraine is fundamentally different from western standards. if in the west the typical representatives of this layer are lawyers, doctors, teachers, middle managers, in ukraine the middle class (according to the property criterion) includes the so-called "oligarchs' service" – biased employees of mass media, corrupt officials, corrupt lawyers and managers of various foreign companies, elite entertainment facilities, beauty salons and fitness clubs. and this stratum has neither the educational nor the moral level to be a carrier of state ideology, to act as a basis for political and economic development." (bychenko, mishchenko, pyshchulina, rachok & shanhina, 2016) the problem lies in the application to the ukrainian middle class of such criteria as "education," "work," "income," and "status". in ukraine, the level of education does not mean the level of income that corresponds to the middle class, and the status of teachers and doctors, who should certainly be classified as middle class, in society is far from the ideals of political democracy and economic democracy, because representatives of these professions must resort to additional employment and/or shady practices to improve their financial situation, which negatively affects their status in society. "according to estimates by marketing companies that are interested in calculating how much this middle class can spend, buying apartments, cars, refrigerators, our middle class is between 5 and 15% of the population. we could conventionally call middle class those who work mostly for multinational baltic journal of economic studies 223 vol. 8 no. 3, 2022 companies or big ukrainian businesses in positions related to the financial and information sector." (zanuda, 2013) by the way, the presence of the shadow economy also adds uncertainty, as official statistics on the middle class require considerable refinement. because of the obvious difficulties with the identification of the middle class in ukraine some sociologists suggest the following. first, to distinguish between the "european middle class" (about 2% of ukrainian citizens belong to it in terms of income) and the "ukrainian middle class," identified on the basis of the real income of the middle class in ukraine. in the process of defining the ukrainian middle class there is a core. this is the part of the population that meets all the criteria of the ukrainian middle class. the "core" is about 12% of the population. the periphery of the ukrainian middle class includes those who meet at least one of the criteria. according to o. balakireva, the following criteria should be used to identify the middle class: 1 – the population whose material and property status corresponds to the interpretation of the middle class in ukraine (about 35%); 2 – the population with a high professional and educational status (about 40%); 3 – the population that identifies with the middle class (about 45%); 4 – the population that meets almost all the criteria of the middle class, i.e. constitutes its "core" (about 12%) (chernova, 2014). the instability of the middle class periphery is exacerbated by economic, political and social crises, and in times of war the middle class periphery is threatened with extinction. this will have extremely negative consequences, since it is the middle class that is not only the backbone of volunteers going to the front, but also the volunteers and activists providing the rear. it is clear, however, that the study of the middle class under conditions of war is yet to come. secondly, to identify the middle class not by what it is, but by what it is not. it is possible to identify the middle class by identifying those social groups with which representatives of the ukrainian middle class do not identify themselves. in other words, the middle class is not aristocracy, not power, not working class, not business, etc. (chernova, 2014). at the same time, in modern society it is possible to talk about a "new middle class" – intellectuals, representatives of the creative class (experts, representatives of the creative industries and creative professions, etc.). here higher education and the creation of intellectual products are indispensable. alongside the new middle class is the "old middle class. this refers to entrepreneurs, owners of small and medium-sized businesses. one possible approach is also to study the self-definition of the middle class, the so-called "subjective middle class". an important factor in the subjective selfidentification of the middle class is a sense of justice and responsibility for the future. it should be noted: "explaining the difference between how many ukrainians consider themselves to be middle class and the much lower estimates of experts, we suggest adding to the purely material attributes – income, education, ability to buy a house and a car, give education to their children, have access to quality medicine, rest – also a social and psychological factor – responsibility for the future." (zanuda, 2013) one of the main criteria for the identification of the middle class is the practice of democratic values. this was fully demonstrated during the ukrainian squares. democratic values are one of the most important attributes of the middle class: "...the most common motive for going to maidan was the brutal beating of protesters in the capital on the night of november 30 repression (70% of respondents). in second place was viktor yanukovych's refusal to sign the association agreement with the eu (53.5%). in third place is the desire to change life in ukraine (50%)." (press conference, 2013). according to the next wave of research on the maidan in 2014, a significant part of it was made up of the middle class: "...by occupation in the modern maidan-seed ... there are most of all specialists with higher education – 27%, significantly increased the number of entrepreneurs (17%). at the same time there are workers (15%), pensioners (7%) and those with no permanent job (13%) (from maidan camp to maidan-sich: what has changed? 2014). to self-identify as middle class, sociologists suggest that citizens determine their family 's level of well-being on a five-step self-assessment scale: 1) " we can barely make ends meet, we don't even have enough money for necessary foodstuffs"; 2) " we have enough to eat and buy the necessary inexpensive things"; 3) "on the whole, there is enough to live on, but it is difficult to buy durable goods"; 4) " we live well, but we are not yet able to make some purchases (e.g., buy an apartment)"; 5) " we can afford to buy almost anything we want" (chernova, 2014). the middle class is identified if the respondent chooses positions 3 and 4. objective economic indicators of the middle class include income level (which allows for an acceptable standard of living for the family and savings), availability and nature of material assets (availability of at least housing, a car and a summer house), consumer behavior, education at least specialized secondary, employment in non-physical labor, and availability of a permanent job or own business (chernova, 2014). this methodology is used by the razumkov center. according to it, the citizens of ukraine consider stable income, providing a high standard of living; comfortable housing; work, which baltic journal of economic studies 224 vol. 8 no. 3, 2022 corresponds to qualification and accordingly is paid; durable consumer goods; high level of education; insurance policies, etc. to be mandatory signs of the middle class (bychenko, mishchenko, pyshchulina, rachok & shanhina, 2016). the position of the ukrainian, i.e., "relative" middle class regarding the political and economic choice of ukraine in favor of european integration, democracy and market economy differs significantly from the positions of other classes: the oligarchs, as the upper class of ukrainian society and the poor, as the lower class. here are some figures: "...26% of the poor – and 55% of the relative (ukrainian) middle class and 61% of the absolute (european) class would vote for ukraine's accession to the eu. internet users: among the relative middle class – 65%, among the absolute – 85%, and among the poor – only 27%, among those who only have enough to eat – 36%." (bychenko, mishchenko, pyshchulina, rachok & shanhina, 2016) while the list of oligarchs in ukraine has remained virtually unchanged since the 2000s, the middle class, on the other hand, is the most unstable class. the "european" middle class includes 1.5-2% of the ukrainian population, while the rest – about 35% to 45% – constitutes the "ukrainian" middle class. this class earns much less income than the european middle class, but has other characteristics that allow it to be referred to this class. members of the ukrainian middle class have higher education, are interested in art, go to restaurants, can sometimes afford vacations abroad, and are politically active. and most importantly, regarding the values of political and economic democracy – they identify themselves as a middle class, seeking democratic changes in politics, over-coming corruption and the thickening of bureaucracy, deconstructing oligarchic artificial monopolies, establishing the rule of law, and introducing economic reforms. 3. the promotion of the middle class in ukraine: from political to economic democracy and back again the political revolutions that led to a change in power due to the conflict of elites and the transformation of the political regime through mass mobilization during the protest movements in ukraine did not lead to profound social and economic changes. j.goldstone believed that a new wave of politicians, that is, the emergence of new faces in politics could greatly enhance the revolutionary movement and bring about change (goldstone, 2001). the middle class played the role of a catalyst for political change in the revolutions of 2004 and 2013–2014 and certainly contributed to the "reset" of power, bringing more "new" faces to parliament each time. it did not become an independent player in either politics or economics. does this mean that the middle class in ukraine has turned into a servant of the oligarchs? to answer this question, it is necessary to refer to economic democracy and determine the influence of economic factors on revolutions. yu. matsiievskyi believes that the conflict between the elites and mobilization were almost the only common factors in both ukrainian maidans, the economic situation was different: "in 2004 the economic situation contributed to the record growth of ukrainian gdp (12%). after the recession of 2009 (by 15%), the recovery was very slow. according to the results of 2013, gdp showed zero growth. for the entire period of yanukovich's presidency, there was talk of a possible default. against this background, the situation in 2014 stands in stark contrast to that of 2004. although the protests in both cases were not due to material problems, it is the latter that consistently garnered more percentages in responses to what might push people into the streets." (matsiievskyi, 2014). according to sociologists, in 2014 the majority of participants in the dignity revolution can be attributed to the middle class. at the beginning of the revolution, 64% of the protesters had higher education, 40% were specialists with higher education, and 9% were entrepreneurs. 92% came to the maidan on their own, meaning they had enough money to support themselves (ilko kucheriv "democratic initiatives", 2013). by manipulating the opinion of the majority through media scandals, the oligarchy promotes its representatives to elected office. political democracy without the middle class has become a regime of support for the oligarchy. in my opinion, after thirty years of authoritarianism and oligarchic domination, the middle class has realized the danger. this explains the role of the middle class in the protests of 2004 and 2013–2014, their participation in armed resistance to russian aggression, and their volunteer activities. the middle class does not yet have a political party that defends its interests. although many political projects have sought to garner support from the middle class in elections, from the purely oligarchic "team of winter generation" (2002) and "veche" (2006) to "self reliance" (2014) and "voice" (2019). the latter two forces successfully made it to the verkhovna rada of ukraine in the eighth and ninth convocations, respectively. however, despite the presence of the "voice" faction in the verkhovna rada, the voice of the middle class is still not loud and powerful enough. it is enough for a temporary political crowd, not for systematic daily political work to defend its own interests: "in elections, the notional middle class (or those who count themselves among them) may well vote for baltic journal of economic studies 225 vol. 8 no. 3, 2022 a party that convincingly promises to act in its interests. but it is not yet able to create and finance its own political force... the ukrainian middle class is heterogeneous. moreover, the goals and objectives of different groups belonging to it often contradict each other. in practice it turns out that many of those who today have a high level of income in ukraine and nominally can be considered "middle class", embedded in various corruption schemes, are representatives of the army of officials or law enforcement officers or associated with oligarchic companies." (kazanskyi, 2018) in ukraine, the role of the middle class in politics is gradually growing, although it is still minimal. this is partly due to the influence of the oligarchs. more precisely, the political alliance between the oligarchs, who have created monopolies in the economic and information spaces, and the poor pensioners and wage earners. such an alliance has been dubbed the "oligarchic-lumpen regime". "it is about a distorted system of resource distribution and influence in the political-economic system, where the key players are a few oligarchs who concentrate capital, ownership of enterprises, and therefore control over politics, media, etc. they are interested in depending on them for the rest of the citizens, who would work in their enterprises, have low wages, and obediently support their decisions. such a model is inefficient, incapable of development, wastes the country 's opportunities and potential, making it weak... the way out of this circle is in the state of a powerful middle class: people with property, income, and a civic position that will make them independent of the oligarchs and capable of free decisions and actions. in particular, to participate in decision-making and control power." (halaichenko, 2017) at the same time, it should be noted a certain imbalance between the declarations of democratic values and the real behavior of the middle class. their decisions can often be called pragmatic, they act in their personal interests, reproducing negative practices and serving the oligarchic system. during elections, the middle class always supports oligarchic projects, new faces, populist forces, etc. however, in the ukrainian context, according to statistics, the "lumpen" could also include officials who in reality led a luxurious life as a result of corruption. only in post-maidan ukraine at the legislative level (law of ukraine "on amendments to certain legislative acts of ukraine regarding the peculiarities of declarations of property, income, expenses and financial obligations in 2016", 2016) the requirement to declare income by high-ranking officials was established. their difference from the middle class is the predominance of selfishness over public interest: "lumpen is a state of mind, not a social status. i believe that most of our government and the verkhovna rada now are lumpen. because i consider lumpen people to be those who know only two things instead of four arithmetical ones – to take and to divide. and adding and multiplying remain unknown to them." (zanuda, 2013) the political activity of the middle class manifests itself not only during political revolutions – the ukrainian maidans. the composition of the ukrainian parliament is evenly transformed. in particular, the defeat of many millionaires and representatives of oligarchic groups in the early elections of the verkhovna rada of ukraine in 2019 shows the growing influence of the middle class on the voting results and politics in general. the first convocations of the verkhovna rada of ukraine could be attributed to the predominance of the middle class, but the problem is that this was a soviet and post-soviet middle class that had no predominant democratic values, did not believe in the market economy and relied more on leaders and heads rather than on themselves. the average deputy was over 45 years old, had a higher education, used to work as an engineer, and among the most common professions were also teachers and agronomists. starting from the third convocation, economists and lawyers (also professions that fall under the middle class) became predominant. and although in the eighth convocation there were already fewer deputies with higher education, but the profession of manager was popular – from top managers to chairmen of supervisory boards (krymeniuk & ott, 2019). the results of the 2019 parliamentary elections allow to assume that the role of the middle class in ukraine is growing, although it is still far from the level of european democracies. thus, under the majoritarian system, middle-class representatives of the "servants of the people" confidently defeated the parliamentary scales – the millionaires. the losers included representatives of big business and the ruling post-soviet class, such as v. bohuslaiev (owner of the zaporizhzhia company "motor-sich", people's deputy of ukraine, etc.), k. zhevaho (executive director of "ferrexpo", beneficiary of "finance and credit" bank, people's deputy of ukraine, etc.), o. hranovskyi (chairman of the board of directors of "assofit holdings limited", 8th convocation people's deputy of ukraine, etc.), o. tretiakov (president of atek-95, co-owner of "hlavred-media" holding, people's deputy of ukraine of iv, v, vi, viii convocations, etc.), ye. chervonenko (president of the concern "orlan", people's deputy of ukraine of the 4th convocation, in 2005 – minister of transport of ukraine, etc.), в.b. kolesnykov (former secretary of the presidium of the party of regions, people's deputy of ukraine of v, vi, vii convocations, former deputy prime minister and former minister baltic journal of economic studies 226 vol. 8 no. 3, 2022 of infrastructure in the government of mykola azarov (2010–2012), chairman of the board of zat "konti"), d. dobkin (former mayor of kharkiv and chairman of the kharkiv regional council, people's deputy of ukraine of several convocations). at the same time, other representatives of the oligarchic class – v. novynskyi, o. hereha, i. rybakov, etc., won in the districts. at the same time in the previous parliament, which was elected in 2014 after the revolution of dignity, there were 90 official millionaires out of 423 deputies. regarding the composition of the ninth parliament, representatives of the media and business culture ("creative class") prevail (ukrainska pravda, 2019). according to the results of snap elections in 2019, the ukrainian parliament has been renewed by more than 80% (legislative initiatives lab., 2019). the average age of the deputies of the council of the ninth convocation is 40 years old. voters once again bet on middle-class representatives: "this time more newcomers came to parliament with the 'servant of the people' and the 'voice' party. of the two dozen members of parliament of the "golos" party, only the leader of this political force, sviatoslav vakarchuk, had previously held a parliamentary mandate. serving the oligarchs – there are many show business stars, tv anchors, famous bloggers, athletes, journalists, and community activists in the new parliament. in particular, the employees of the "1+1" tv channel and kvartal 95 studio became deputies – both employers recently had common business interests with volodymyr zelenskyy. a well-known restaurateur, wedding photographer, as well as a toastmaster, a singer, and others are also present on the new board." (polishchuk, 2019) by refusing to support politicians and parties who have become "servants of the oligarchs" rather than representatives of the interests of the middle class in parliament, the citizens of ukraine have taken an important step toward building not only a political but also an economic democracy. 4. conclusions political democracy implies that power is in the hands of the middle class. the struggle for political democracy in ukraine confirms this maxim of political science. the ukrainian middle class tries to actively participate in politics by supporting the revolutionary events – the orange revolution in 2004 and the 2013–2014 revolution of dignity – and by standing up for ukraine's european integration process. in modern conditions, the middle class is in the front line of resistance to russian armed aggression. under the conditions of post-martial law, one of the main challenges that ukraine must overcome is the choice of a further model of development. the choice between two alternatives (between the lumpen-oligarchic eurasian model and european democracy) in favor of political and economic democracy necessarily involves the active participation of the middle class, a policy aimed at protecting the interests of the middle class and expanding its economic and political opportunities. what prevents this is the oligarchic regime in ukraine, or rather the alliance between the highest and lowest economic classes. given that the state of the economy does not allow us to determine the presence of the european middle class by income level, in order to identify the middle class in ukraine the following is proposed. first, the further use of a five-step income scale for self-identification of the middle class and the study of the level of education and value characteristics allows us to distinguish the core of the middle class (10-12% of ukrainian citizens) and the periphery (35-45% of citizens). second, the middle class in ukraine is an "uncertain" class because of its constant oscillation of selfidentification between "serving the oligarchs" and being a pillar of democracy and civil society. that is why a "new" middle class – the creative class (intellectuals, representatives of creative industries and creative professions, etc.) deserves special attention. the future of democracy depends on their behavior. third, identification of the middle class from the opposite is "not oligarchy ", "not power", "not working class", etc. one of the main criteria for identification of the middle class in ukraine is subjective identification – confession of democratic values. this was fully manifested during the ukrainian political revolutions – the squares of 2004 and 2013–2014. for the development of the middle class in ukraine it is necessary to establish and consolidate a regime of political democracy based on the principle of equal freedom, moving from electoral democracy to expanding opportunities for the middle class to participate in politics. this will allow economic and financial resources to be redistributed from the oligarchs in favor of the middle class. in turn, economic democracy will strengthen the role of the middle class and establish political democracy in ukraine in the process of european integration. references: bychenko, a., mishchenko, m., pyshchulina, o., rachok, a., & shanhina, l. (2016). the middle class in ukraine: perceptions and realities. kyiv: razumkov center, 258 p. baltic journal of economic studies 227 vol. 8 no. 3, 2022 halaichenko, i. (2017, march 3). when a "powerful middle-class party " emerges. the ukrainian week. available at: https://tyzhden.ua/society/186646 zanuda, a. (2013, june 4). the middle class in ukraine: small and uninfluential. bbc news ukrainian. available at: https://www.bbc.com/ukrainian/entertainment/2013/06/130604_ukraine_middle_class_az kazanskyi, d. (2018, july 7). the middle class in politics: why it still hasn't worked. the ukrainian week. available at: https://tyzhden.ua/politics/216359 krymeniuk, o. & ott, m. (2019, august 29). since the beginning of time: what were the eight convocations of the verkhovna rada like? voxukraine. available at: https://voxukraine.org/spravi-davno-i-ne-duzhe minulih-dniv/ maidan-2013: who stands, why and for what? 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(2019, august 8). verkhovna rada of the 9th convocation: young and persistent. ukrinform. available at: https://www.ukrinform.ua/rubric-polytics/2769623-verhovna-rada-9go-sklikanna-vjo-do-roboti.html press conference: "maidan-2013: social structure, motives, demands" (2013, september 12). ukrinform. available at: https://www.ukrinform.ua/rubric-presshall/1588051-anons_1890195.html on the introduction of changes to some legislative acts of ukraine regarding the specifics of submission by officials of declarations of property, income, expenses and obligations of a financial nature in 2016: law of ukraine dated 03.15.2016 no. 1022-viii. official website of the verkhovna rada of ukraine. available at: https://zakon.rada.gov.ua/laws/show/1022-19#text chernova, a. (ed.) (2014). the middle class in ukraine: identification criteria. positions of experts, perceptions and self-determination of citizens. kyiv: razumkov center, 64 p. yakovlev, d. v. 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(2021). debate on foreign policy choice in the media landscape of ukraine. advances in social science, education and humanities research. proceedings of the international conference on social science, psychology and legal regulation (spl 2021), kyiv, ukraine, december 23. atlantis press, vol. 617, pp. 81–87. doi: https://doi.org/10.2991/assehr.k.211218.014 yakovleva, l., & yakovlev, d. (2020). institutional interaction and political choice in a transitional society. what role for the social sciences? nationalism and ethnic politics, vol. 2(4), pp. 582–608. received on: 14th of july, 2022 accepted on: 29th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 148 vol. 8 no. 1, 2022 corresponding author: 1 national university of water and environmental engineering, ukraine e-mail: i.h.khanin@nuwm.edu.ua orcid: https://orcid.org/0000-0002-4221-2314 researcherid: aam-7043-2021 2 university of customs and finance, ukraine e-mail: bvs910@gmail.com orcid: https://orcid.org/0000-0003-1269-7207 researcherid: v-9965-2018 3 national university of water and environmental engineering, ukraine e-mail: sopinyevhen@gmail.com orcid: https://orcid.org/0000-0001-5012-0332 researcherid: abg-5560-2021 doi: https://doi.org/10.30525/2256-0742/2022-8-1-148-158 improving the level of economic effectiveness of electronic payment services in a global digital economy igor khanin1, volodimir bilozubenko2, yevhen sopin3 abstract. digitalization ensured a revolutionary change in the ways of delivering and consuming financial services, in particular payment services. one of the key prerequisites for the sustainable operation and development of e-payment systems is the achievement of a high level of effectiveness of e-payment services (eps), which occurs in the global context of building a digital economy. the goal of the research is to develop the conceptual framework and identify the key areas for improving the economic effectiveness of e-payment services in a global digital economy. the theoretical framework of the research includes: the best practices in the sphere of digital technology, digitalization and digital transformations; a concept of digital economy, determining its structure, technological "core" and contours, and functional features. an enhanced role of the internet as a general economic infrastructure, being the key for the global quality of digital economy, has been taken into consideration. the methodology of the research is based on an evolutionary approach and includes: historical, systemic and structural, functional, and comparative analysis. the results of the research are represented by a number of theoretical, conceptual and practical provisions. above all, the essence of fintech was clarified and the key areas of its development were identified; the crucial importance of the problem of economic effectiveness for this sphere of digital technology was substantiated. the paper identified the essence and specific features of paytech, which transformed the ways to carry out payment transactions and provide the respective services. the purpose and key components of e-payment systems were clarified as well as the specific features to ensure eps in various aspects. the attention was drawn to the issues of effective eps in terms of the provider (related to ensuring mass retail payments using internet and mobile technologies). taking into consideration different description models of payment operation, the emphasis was laid on the technological model and functionality of e-payment systems, which demonstrated an integrated approach to achieving the high quality and effectiveness of eps. taking into account the external and internal prerequisites to accomplish this, the following strategic areas for improving the economic effectiveness of eps were identified: 1) enhancing the risk management quality; 2) innovation development; 3) development of the ecosystem of eps delivery. practical recommendations on the intensification of e-payment systems include: governmental support activities for eps providers; proposals on enhancing the innovative function of regulatory "sandboxes" and expanding the use of the technologies which ensure the compliance with regulatory standards (suptech and regtech). value/originality: the paper specified and identified the focus areas and activities to improve the economic effectiveness of eps delivery, which is of strategic importance in the global digital economy, being of particular value for future studies. key words: digital technologies, digital economy, globalization, electronic payment systems, electronic payment services, effectiveness. jel classification: e42, f01, f30, g14, l86 baltic journal of economic studies 149 vol. 8 no. 1, 2022 1. introduction building a digital economy is one of the main trends in the social and economic development, which embraces all spheres of human life. the introduction of digital technologies (digitalization) leads to profound transformations of economic systems, changes the forms of economic organization, market mechanisms, business models, ways of delivering various services. this requires considering the issues of their economic effectiveness in conditions of a new technological pattern that is digital economy, which influences the level of meeting the social needs. the application of digital technologies in financial sector, which has been termed "fintech", ensured faster and cheaper access to a wide range of financial services, removing physical barriers and eliminating the need for traditional mediators, and deeply transforming the financial sector. digital payment technologies (paytech), which acquired infrastructural quality, particularly in the context of the development of other digital economy branches, became one of the major trends in fintech. a surge in demand for electronic payment services (eps – in singular and plural forms) created a demand for electronic payment system (e-payment system), which turned into an integral element of modern payment infrastructure. apart from the bank cards, an increased use is being made of electronic currencies, contactless payment tools, payment means using internet and mobile technologies, which operate based on special services and applications. electronic payment systems connect multiple participants and ensure sophisticated technological operations related to the movement of huge flows of payment information and data. at the same time, electronic payment system operation is imperatively regulated at the national and international levels, which involves the compliance with a wide range of regulatory standards supplemented by the increasing security requirements. furthermore, a pressing concern of the new market of eps is fraud, various types of which can result in significant losses. on the other hand, along with an increasing demand for eps, consumers have increasingly higher expectations of the quality of such services, which includes reliability, high speed, timeliness, full scope and security when effecting the payment as well as minimization of risks. all of these things put "pressure" on expenditures incurred by eps providers; however, in the environment of increased competitiveness, a rise in the cost of such services is limited. therefore, one of the critical problems of the sustainable operation and development of electronic payment system is to raise the level of economic effectiveness of eps, which encompasses not only its benefits to eps providers (paytech companies), but also ensuring a high quality of eps for the consumers and compliance with all regulatory standards and requirements in the sphere of security and risk minimization. addressing the problem of the effective delivery of eps becomes more complicated as the payment industry more and more enters the international market in the context of the formation of the global digital economy. the effectiveness should be considered as a precondition for further development and unleashing the potential of electronic payment systems in the global economy. 2. literature review the digitalization of the sphere of financial services and development of fintech raise great interest among the scientific community, which is demonstrated by the increasing number of studies covering a wide spectrum of areas (e. milian, m. de spinola, m. de carvalho, 2019). digital economy is globalizing and is considered as e-globalization (g. zekos, 2021). fintech is being developed in line with the global trends in digital transformations and it becomes a new foundation for economic globalization ( j. hill, 2018). like other areas of digital economy, fintech is characterized by a high level of internationalization and globalization, which provides the necessary context for its development (o. manta, 2021). along with an unprecedented growth, the formation of the scientific concept of fintech takes place; there is a great discussion about its essence, components, specific features, operation, advantages, disadvantages, development trends and opportunities for consumers and business entities (p. schueffel, 2016; e. milian, m. de spinola, m. de carvalho, 2019). fintech provided new opportunities not only for the population, but also for business in multiple economic branches; therefore, it is increasingly regarded as a standalone industry (sector) (h. knewtson, z. rosenbaum, 2020). the application of digital technologies transforms the approaches to the delivery and obtaining of financial services, models and mechanisms for the access to financial resources by business entities and individuals (h. bollaert, f. lopez-de-silanes, a. schwienbacher, 2021). fintech expansion made it a powerful force for the transformation of the financial sector, which forced financial institutions to adapt to technological changes ( j. hill, 2018). fintech does not destroy the financial industry, but streamlines it on account of wider use of digital technologies to provide financial services (y. wang, s. xiuping, q. zhang, 2021; a. thankor, 2020). naturally, it raises concerns about financial institutions and stability (d. fung, w. lee, j. yeh, f. yuen, 2020). however, they only emphasize the need to adapt regulation systems and create the adequate legal and financial conditions baltic journal of economic studies 150 vol. 8 no. 1, 2022 as well as to monitor fintech (s. omarova, 2021). the approaches to the regulation of this sphere are still being developed, particularly in terms of the requirements to cybersecurity, privacy, anti-fraud policies. in order to develop fintech, the governments might apply "regulatory sandboxes", which are also related to business incubation (a. alaassar, a.-l. mention, t. aas, 2021) and fostering the innovations (s. wang, x. tu, h. chai, q. sun, , j. wu, h. cai, f.-y. wang, 2020). at the same time, fintech itself should also be considered as a promi sing trend in entrepreneurship and innovations (a.-l. mention, 2019). the transition from paper forms of money to noncash electronic ones is a global trend. electronic payment systems become a part of market mechanisms, providing huge opportunities for sellers and consumers. the recognition of paytech is growing with an increase in the level of user friendliness, reliability and security (e. w. k. see-to, e. w. t. ngai, 2019). in recent years, an introduction of mobile technologies into paytech sphere has gained greater momentum, which has proven their usefulness and benefit to consumers (i. r . de luna, f. liébanacabanillas, j. sánchez-fernández, f. muñoz-leiva, 2019). the use of the modern electronic payment system provides opportunities for new business types and models. new payment mechanisms are being embedded into companies’ websites and turn into a must-have element of business (s. meng, x. he, x. tian, 2021). the application of electronic (digital) payments enables business entities to expand their activities and increase market share, save time and resources as well as to diversify a range of the services delivered to consumers. therefore, this raises the question of the effectiveness of electronic payment systems themselves (m. nasr, m. farrag, 2020). paytech are spreading rapidly under the influence of e-commerce development, displacing banks or spurring innovative transformations of traditional payment systems and mechanisms (m. yao, h. di, x. zheng, x. xu, 2018). the growing importance of electronic payments for the population and business entities imposes high requirements for the effectiveness, which concerns the cost and quality of eps. there is an increasing trend towards the establish ment of holistic ecosystems of eps delivery, supplementing them with various services, which also makes it more difficult to ensure effective electronic payment system delivery (i. lee, y. j. shin, 2018). the development of paytech faces a lot of challenges. electronic payment systems take a great deal of e-commerce risks, particularly those related to fraud, breach of security and sensitive data (m. braun, j. mcandrews, w. roberds, r . sullivan, 2008). the elimination of threats and minimization of risks make risk management more critical (l. trautman, 2013). the development of paytech requires profound changes in regulatory systems, which turned to be much larger in scale than in other fintech areas ( j. julapa, j. kose, 2018). the national regulation of paytech as well as international one is currently being actively developed, particularly to ensure the international payments (a. b. radnejad, o. osiyevskyy, o. scheibel, 2021). however, the establishment of regulatory environment leads to the increased business expenditures on compliance with the requirements. therefore, government support is very important. the world experience shows that it is reasonable to use such its forms as "regulatory sandboxes" (m. polasik, a. huterska, r . iftikhar, š. mikula, 2020). despite considerable attention to the development of paytech and electronic payment systems, the academic community has not yet proposed clear conceptual principles for improving the level of economic effectiveness of eps delivery; and its primary strategic areas in conditions of the global digital economy have not been identified. it is particularly important in the context of the increased international payments and intensified competition on the market of eps delivery. 3. the research objective the goal of the research is to develop the conceptual framework and identify the key areas for improving the economic effectiveness of eps delivery in a global digital economy. taking into account different varieties of electronic payment systems, it should be noted that this paper is focused on electronic payment systems which ensure mass retail payments using internet and mobile technologies, and the issues of the effectiveness are considered in terms of eps providers. 4. theoretical framwork and methodology the theoretical framework of the research, above all, includes the bulk of the study pertaining to the digital technology, digitalization and digital transformations in the economy and its specific sectors. the next element of the theoretical framework is the concept of digital economy which emerged in the mid-1990s along with the use of the following concepts: concept of information, internet (web), postindustrial, network economy and knowledge economy. the research takes into account a complex structure of digital economy related to the migration of multiple processes, types of business on the internet and development of its new forms and trends. the digital infrastructure (predominantly websites, and digital platforms), digital service markets (encompassing software and hardware), new activities related to the internet of people and internet of things, and new technological baltic journal of economic studies 151 vol. 8 no. 1, 2022 trends (blockchain, artificial intelligence, etc.) emerged around the technological "core" (computer hardware, network hardware, and data centers). further, an outline of industries appeared, where the use of the internet resulted in the emergence of new forms and models of organizations, including: e-trade (e-shops, e-malls), e-trading, e-procurement, e-auctions, e-banking, e-insurance, e-logistics, e-health (e-medicine), e-education, e-tourism (e-travel), e-media, etc. that are described using the concepts of e-business and e-commerce, providing an insight into the structure of digital economy, which, however, is not limited to the sphere of using the internet, but is also associated with the forth industrial revolution, the use of "smart" things, transport, etc. a new infrastructure (e-infrastructure) emerges in multiple spheres, as well as ancillary activities (e.g., e-marketing); there is an intensive digitalization of individual industrial sectors (e-agriculture, e-farming, e-factory, etc.), scientific activities (e-science), social services (e-social), and government activities (e-government). the paper considered specific fields of using digital technologies, for example, fintech, medtech, edtech, etc. therefore, the research took into account the functional features of digital economy (forms of communication, automation of processes and procedures, application of intelligent technologies, dissemination of digital platforms, growing amount of data and flow of information, etc.), and its technological trends, which led to further development of digital forms of the organization of economic systems and ensuring the processes. the internet turned into a global infrastructure of the economy, which enabled to innovatively develop social communications and relations, create new economic mechanisms, share data and information. it is the evolvement of the internet that became an impetus for the formation of digital economy in the spatial, transactional and organizational aspects, which covered many things in the context of the process globalization. this formed a basis for building the global markets, production, supply and innovation chains. taking into account a new quality of information space, digital economy should be considered as global economy, because it: became a basis for the formation of the worldwide virtual environment; transformed the global markets of goods, services, labor, capital, and information; encompasses global and multinational industries, where the influence of the global environment becomes a determining factor; became a basis for the integration of various national systems, particularly in the financial sector. this is mainly due to the development of international payment infrastructure. the research is methodologically grounded on the evolutionary approach, historical, system-structural, functional and comparative methods of analysis. the empirical base of the research was to study the global trends in the development of digital economy, fintech, electronic payment systems, as well as the trends in the development of national and interna tional markets of eps, regulatory requirements in different countries, consumer demands, innovative technologies, payment ecosystems, best practices of individual paytech companies in the sphere of risk management and innovations. 5. general explanations therefore, the financial sector is being rapidly transformed on account of fintech, the development of which is fostered by boosted e-commerce and e-business that create demand for financial services, especially payment ones. consequently, it creates prerequisites for the expansion of digital economy, saturating it with the required services and attracting investments. fintech is understood as: 1) cross-sectoral industry which ensures financial transactions on various markets of goods, services and capitals; 2) a set of digital financial technologies which are supple-mented with the relevant infrastructure; 3) a system of the markets of specific financial services and information products; 4) a sphere of entrepreneurship and innovations (technological, service, and product). the main purpose of fintech is to change the method of financial service delivery and the ways of financial resource obtaining to enhance their consumer value. this determines the key objects of digital transformation (organizational models, processes and procedures, etc.), and forms new value chains. the value is created using the specific technological base (web and mobile technologies, artificial intelligence, blockchain, big data, internet of things, cloud computations, biometric techno logies, etc.), digital infrastructure (networks, data centers, digital platforms, etc.) and institutions (national and international legislation). fintech encompasses a wide range of financial services and access to financial resources in different segments (b2b, b2с, p2p, p2в, в2p). the key areas of the application of financial technologies are: payments and transfers (paytech); remote bank services; web banking (neobanking); financial marketplaces; crediting; investment (asset) management; insurance (insurtech); personal finances (electronic wallet); digital (electronic) currencies, in particular cryptocurrencies; digital crowdfunding. such a variety of areas brings together a wide range of fintech subjects (providers), as follows: traditional financial institutions (banks, insurance companies); fintech companies (startups); bigtech companies (search engines, online platforms, social networks, media and messengers, hardware producers). making fundamental baltic journal of economic studies 152 vol. 8 no. 1, 2022 changes, fintech "undermine" traditional markets, which is particularly related to the implementation of innovative technologies, emergence of electronic currencies, customization of financial services, democratization of financial resources, and it brings about new business models of fintech and other companies and regulatory environment. digital finances have significant advantages, but also have certain problematic aspects, particularly those associated with risks. the importance of financial services determines social and economic implications of fintech, the assessment of which highlights its enhancing functions in the economy (infrastructural, transformational, promotional, etc.). an expansion of fintech is mostly international and related to trade and capital flows as well as a globalization of financial resource markets. along with an adaptation of the national systems for the regulation of digital finances, there is a formation of international regulation. the problem of economic efficiency is central to the development of fintech. this is primarily because it became a part of value chains, which depend on the economic parameters of financial service delivery. the value of the services themselves results from this factor. the effectiveness determines: 1) digital advantages and satisfaction of the demands of consumers and business entities that use fintech; 2) the level of the pursuance of interests of fintech companies; 3) an amount of positive effects of fintech on the economy and possible minimization of the adverse effects of its development. one of the largest segments of digital finances is paytech, aimed to transform the ways of carrying out payment transactions and delivering payment services (covering payments and transfers of funds). an increase in the number, scope and varieties of electronic payment transactions, owing to paytech, is an evidence of its growing importance. the traditional payment tools are rapidly replaced by digital or electronic (e-payment) ones, which creates a new payment mechanism in the economy. this is more and more the case of cross-border payments, and it evolves in the context of the globalization of digital economy. despite the reduction of payments caused by the decline in the economy due to the covid-19 pandemic, mckinsey predicted sustainable growth by 2025. the predicted dynamics of the scope of global payment revenues is as follows (trillions of us dollars): 2011 – 1.2; 2015 – 1.5; 2019 – 2.0; 2020 – 1.9; 2021 (assessment) – 2.0; 2025 (forecast) – 2.6 (bruno, denecker, niederkorn, 2021). bcg predicts that the market of electronic payments will have positive dynamics, particularly in retail trend (table 1) (sénant, ampenberger, mathur, etc., 2021). table 1 income from global payments (forecasts), trillions us dollars 2015 2019 2020 2025 2030 totally 1.1 1.5 1.5 2.1 2.9 wholesale trade 0.3 0.4 0.4 0.5 0.7 retail trade 0.8 1.1 1.1 1.6 2.2 source: boston consulting group a transfer from the noncash electronic payments has been going on for a long time in the global payment activity, and covid-19 pandemic also fosters it. in the structure of global income from fintech, the scope of payment segment for the period of 2016–2019 grew by 100% and amounted to about 8% (6% – non-bank and 2% – bank) (palandrani, 2019). the scope of the world market of electronic payments in 2020 was estimated at 58.30 billion us dollars. it is expected that, within the period from 2021 till 2028, it will grow at an average annual rate of 19.4%, which will be facilitated by the increased internet penetration, spread of smartphones, and growth of e-commerce (freshfields bruckhaus deringer llp, 2021). the number of paytech companies, payment services and their users are steadily increasing. over 80% of financial institutions, dealing with payment transactions, cooperate with fintech companies. in particular, non-monetary financial institutions (non-mfis) expand their activities. it is clearly demonstrated by the example of eu (table 2) (statistical data warehouse, 2021). the main thing that electronic payment systems ensure is timely, rapid, reliable, secure and full transfer of funds (value, equivalent) from one subject to the other one for settlements on liabilities. meeting the social needs, electronic payment systems ensure the delivery of eps and the related services, including non-financial services, and they also organize payment processes (inter-account transfers). based on the table 2 number of payment transactions involving non-mfis in eu 2016 2017 2018 2019 2020 total number of payments (millions) 95,404.5 103,080 112.311 122.089 127.093 increase in the number of payments (annual percentage changes) 8.1 9 8.7 4.1 number per capita 214.3 231.2 251.5 272.8 283.7 number per overnight deposit held by non-mfis 137.2 147.3 160.6 171.3 174.2 source: european central bank baltic journal of economic studies 153 vol. 8 no. 1, 2022 recreated tools and mechanisms, they implement the set-out procedure for the transfer of funds. technically speaking, it includes a transfer of payment information, processing and storage of the relevant data based on the complex of special software solutions and digital infrastructure, which ensures the transfer of funds. therefore, the market of eps is closely linked to the markets of technologies, digital services, data, etc., and it also creates huge opportunities for innovations. electronic payment systems can be of different types (by purpose, level, entities who use them, payment tools, etc.), functionality and industrial focus, which determines the composition of their elements and infrastructure. apart from the traditional financial institutions, there emerged new independent eps market participants – providers of payment services, being non-financial institutions, in particular payment processors and gateways. the electronic payment involves a transfer of funds from the payer’s bank account to the payee’s bank account using electronic payment systems, which replace all other mediators. the payment transaction is considered as a stage of commodity-money exchange, which consists in the transfer of monetary value using certain tools in return for the liability. the tools which ensure the electronic payments – the guidelines exchanged between the providers of payment services and bank with no need to process paper-based payments. eps is considered as the performance by its provider of the transaction with the application of payment tools, which is carried out using electronic payment systems and results in the transfer of monetary funds from the payer to the payee. electronic payment systems ensure different types of payment services (card payments, online and mobile payments, direct debiting, standing order, etc.). the comparison between the electronic payment transactions and the traditional ones makes it possible to determine the specific features of their carrying out and significant advantages (high speed, remoteness, low cost, transparency, convenience, etc.); but, at the same time, there are certain challenges, particularly related to risks. however, the level of reliability and security of electronic payments is rapidly increasing. the issues of effectiveness is mostly considered in terms of the payment processor, which is an independent (non-banking) licensed institution that provides eps. the following entities take part in the payment transaction: buyer of the certain goods (payer, card owner), seller (merchant), issuing bank (payer’s bank, which issued the card), acquiring bank (seller’s bank), payment gateway, which ensures payments under online card-not-present transactions (the gateway encrypts and transmits online payment data to the processor) and payment processor, which ensures the transaction by routing and transmitting the infor mation on the transaction (payment data). the electronic payment transaction is described by different models, in particular: legal model, which takes into account the specifics of a certain jurisdiction or international regulatory system; functionally-transactional model, which describes the functions and interaction between the participants; economic model, which clarifies the participants’ interests; technological model, which clarifies the peculiarities of the use of digital technologies. the application of these models enables to give full consideration to the problems of ensuring the economic effectiveness of eps. in order to carry out the transactions, electronic payment system interacts with the external systems of different level (national or international), including: card, clearing, credit, and settlement systems which create common payment infrastructure. their parameters and parameters of interaction have a significant impact on the effectiveness of eps delivery, taking into account regulatory factors. various technologies (data repositories; distributed data processing; transaction managers; technologies in the field of cybersecurity, identification, analysis and verification of data; artificial intelligence, etc.), electronic forms of payment tools, application software (data storage systems, document management systems, bank applications, data analysis software packages, etc.) are used within the framework of electronic payment system that ensures their functionality (procedures to identify persons, establish communication with banks, verify accounts, transmit transaction data, comply with security requirements, generate reports, etc.). therefore, technological model of electronic payment systems enables to identify the areas of improving the effectiveness of eps, including on the basis of innovations, encompassing various technological components: special software (to issue invoices, process payments, carry out analytics, verification, consulting, etc.); web application and mobile applications as well as mobile services; digital models of certain payment tools; various information products; data management infra structure. within the range of electronic payment system functionality to ensure different ways of payment, technical (speed, reliability, etc.), institutional (quality of procedures) and economic (yield income, losses from risks, costs on the implementation of procedures and compliance with requirements, etc.) parameters are taken into consideration, as well as various factors of effectiveness (impact of regulatory standards, level of requirements, standards in the sphere of security, fraud level, etc.). the economic effectiveness of eps is an integrated entity and it encompasses the procedures to carry out the transaction itself as well as to comply with various baltic journal of economic studies 154 vol. 8 no. 1, 2022 requirements, rules, and provision of security in all its aspects. the primary goal of electronic payment system defines the basic criteria for achieving and assessing the effectiveness of eps delivery, and the integrity of its understanding gives rise to a myriad of criteria, the assessment of which can be used to speak about the quality of such services. the effectiveness of eps delivery can be assessed absolutely as total results and relatively (income to expenses), and also taking into consideration an impact of various profitability and costs (losses) factors. the issues of improving the economic effectiveness of eps delivery are of strategic importance for their providers. the increased competition, higher quality demands of consumers and business entities, growing level of regulatory requirements, the rise in fraud, etc. – all this puts "pressure" on the profitability, especially when electronic payment systems become an element of the global digital economy. in terms of the provider, we should highlight the aforementioned external prerequisites for ensuring the economic effectiveness of eps delivery (overall payment infrastructure) as well as the internal ones (management, technological, organizational, social, intellectual, and innovative factors of paytech companies). the basic principles of achieving the effectiveness are: complete fulfillment of regulatory requirements, rules and standards, taking into consideration the specific features of different jurisdictions and international regulatory environment; the focus on the increasing demand requirements and better technological, service and product achievements; taking into consideration the global trends in the development of digital economy and fintech; an increase in the level of technolo gization and intellectualization of eps delivery. the strategic areas of improving the effectiveness of eps delivery take into account an impact of the external prerequisites and the need to adapt the companies to them on account of internal changes. these areas are the subject to the overall strategy of the company’s development and are being developed within the framework of the selected business model. in terms of the strategy, it is necessary to envisage different scenarios of the change in market conditions, regulatory environment, technological advances, trends in digitalization and transformations within the framework of the global digital economy. marketing is of particular relevance in the context of improving the effectiveness of eps delivery, encompassing analytical activities and leadership in the development of innovations. ensuring the high level of cybersecurity and data protection as well as adapting to the updated regulatory requirements became imperative and permanent for electronic payment systems, which is enhanced by the internalization of the providers’ activities. taking into consideration the need to properly meet the requirements which are altered, the measures taken to minimize the costs on satisfying this need are critical, as follows: implementation of special technological solutions; targeted training of specialists; development of external partnership, in particular with other providers of eps; proactive introduction of higher cybersecurity standards, etc. the key areas of improving the effectiveness of eps delivery are focused on the intensification of the payment transaction itself as well as an increase in the value for the consumer, which is also related to the diversification of services and products (figure 1). apart from the payment processors, the trends in the development of other spheres of digital economy and fintech improving the quality of risk management: mitigation of risks in all components of the activities carried out by eps provider. development of innovations: improved range of services and electronic payment system infrastructure, expansion of its functions. development of eps delivery ecosystem: expanded range of services and opportunities for the consumers. role of government, regulatory impact areas to improve the economic effectiveness of eps delivery figure 1. strategic areas to improve the economic effectiveness of eps delivery source: developed by the authors baltic journal of economic studies 155 vol. 8 no. 1, 2022 recommendations proposed will be also useful for others, in particular payment gateways. due to objective reasons, electronic payment systems constantly face a wide range of various risks, and their minimization is a part of the value for the consumer and factor in the maximization of profit for the provider. therefore, risk management is of paramount importance and becomes central to improving the effectiveness of eps delivery. risk management encompasses all aspects of the activities of paytech companies; it is aimed at mitigating the impact of risks and reducing the costs incurred in connection with them when optimizing the costs on the respective activities, which requires systemic approach at the company level. in particular, it should cover various threats and types of risks of financial as well as non-financial nature (transactional, technical, reputational, compliance, credit, fraud, chargeback, and cybersecurity risks), which depend on a wide range of factors (special solutions, software, staff competencies, partnership, etc.), that also require systemic concept, taking into account market specifics of eps and industries that are serviced. risk minimization is a competitive advantage of the companies, which links risk management to marketing. the low level of risks should be associated with a high quality of eps delivery ecosystem, and their minimization becomes a mandatory area for the introduction of innovations. the rapid development of paytech is associated with a high-speed emergence of a large amount of innovations, including financial and auxiliary services, procedures for carrying out payment transaction, information products, various software solutions, digital technologies and infrastructure of electronic payment systems. innovations become imperative, and their development is one of the strategic areas to improve the effectiveness. the innovations can be aimed at increasing the profit on account of the creation of new value as well as at the optimization, minimization of costs, elimination of problems and defects, which has a direct impact on the effectiveness. innovations become more and more powerful tool for enhancing the activities and attracting new clients, which is related to the companies with different market strategies. the provider of eps operates in a complex system of relationships with partners, which requires taking into consideration cluster interactions and chain nature of innovations. envisaging an expansion of the range of services provided to the consumers, the development of innovations is a basic way of developing the eps ecosystem, and it also includes such a critical component of the companies’ activities as risk minimization. the improvement of the effectiveness of eps should take into consideration the effectiveness of the innovative activity itself, which becomes increasingly complex due to the dynamism of the market and technologies. the internal and external aspects of the development of innovations require the respective strategic management, which should include all stages of the creation of innovation, organization of these processes as well as comprehensive development of the companies’ innovative capabilities and ensuring the promotion of innovations. due to the too high innovative risk, the innovative activities should include risk management. under modern conditions, it is expedient to use the models of open innovation, which provides for an active interaction with the consumers of eps that can be associated with a high quality of their ecosystems and mitigates the innovative risk. paytech moves towards the platform approach, which allows for the development of integral ecosystems of eps delivery, expanding the range of financial and auxiliary services provided to the consumers as well as offering additional information products and tools which are customized according to their requests (including business entity’s requests as a user). it is a new approach to the creation of value, and it requires an expansion of functional capabilities of electronic payment systems and cluster partnerships. the creation of more complex multifunctional electronic payment system provides for the relevant innovative activity. an introduction of a wide range of services and tools for the user (for example, online shop) requires the appropriate support from eps provider (development of technology, provision of facilities, maintenance support, upgrading, compliance, etc.), at the same time, such comprehensive financial and technological service should meet market requirements for a range of services, capabilities, quality and prices, while complying with even more complex set of regulatory standards. it not only transforms the company’s business model, but also requires the appropriate strategic management and marketing, and needs to be considered in terms of effectiveness, which depends on the purposes and configuration of the ecosystem. building the payment systems requires consideration to be given to the trends in the development of digital economy and demands for eps. the proposed areas to improve the effectiveness of eps delivery enable to improve the methodology for creating new or enhancing the existing electronic payment systems, while allowing for their complication in terms of functions, resources, business processes, etc. regulatory policy naturally has a great impact on the strategic areas of improving the effectiveness of eps delivery. the government plays an important role in developing paytech, promoting innovations, and minimizing external risks. in order to address multiple challenges faced by electronic payment systems, the market of which is still under baltic journal of economic studies 156 vol. 8 no. 1, 2022 development, it is reasonable for the government to create special modes, for example, in the form of regulatory "sandboxes", within which the companies obtain favorable conditions and are able to adapt to regulatory requirements. 6. discussion and practical recommendations the intensification of electronic payment systems should be considered in the broad context, taking into consideration the development of other industries of digital economy and fintech spheres. within the framework of the proposed strategic areas of eps, it is critical: 1) to identify the potential sources of risk increase and trends in the altering regulatory requirements; 2) to prioritize the innovative activities aimed to enhance payment and auxiliary services, electronic payment system infrastructure, risk management tools and regtech; 4) to develop technological systems to support the development and promotion of large-scale innovations, taking into account the specific features of the industries of digital economy; 5) to determine possible configurations of the ecosystem of eps delivery in relation to specific industrial markets. the specified areas to improve the economic effectiveness of eps delivery are a basis for the development of government activities to support paytech companies (table 3). the proactive national position in respect of the development of electronic payment systems will enable to achieve greater participation in the development of this industry and create integrated structural solutions to regulate it, which is required to adapt the existing systems of government regulation, encompassing all its components (legal basis, licensing, overcoming market "gaps", elimination of risks, etc.). in terms of the government support to enhance the effectiveness of eps delivery, it is proposed to focus on the application of regulatory (normative) "sandboxes", development of suptech (the use of technologies by the government for supervisory purposes) and regtech (the use of technologies by the government for regulatory purposes, and by business – to comply with the requirements). concerning the regulatory "sandboxes", the emphasis should be laid on the need to take into consideration not only their capabilities and advantages, but also the defects and restrictions, as well as on ensuring their special purpose in some individual cases. in particular, it is related to fostering various innovations, at the same time, searching for the new approaches to the regulation of electronic payment systems, learning to minimize potential risks (especially those related to regulation), and ensuring an introduction of international standards. in order to enhance the innovative function of regulatory "sandboxes", it id proposed: to supplement them with special modes of government support for technological innovations; to establish communication between startups in paytech and other areas of fintech, which develop and test their products, as well as communication between universities; to create technological platform and knowledge bases aimed to create innovations in eps sphere; to provide additional counseling and training for business. government support through the regulatory "sandboxes" should be supplemented with other kinds of benefits and r&d support. taking into account that government regulation, control and standards impose an additional burden on business, new means to facilitate the collection and processing of normative data is an economically reasonable response to the complication of regulatory systems on account of the process automation in dif ferent aspects (report submission, transaction table 3 possible government activities to support paytech companies to improve the economic effectiveness of eps delivery areas activities impact on effectiveness 1. development of ecosystem of eps delivery supporting the promotion o digital platforms, enhancing the profitability of auxiliary financial and information services; development of digital infrastructure and clusters for paytech; penetration to the new markets; expansion of the sources of obtaining the profit; enhancing the consumer service quality; sustainable development of enterprises. 2. development of innovations creation of the targeted technological platforms; publicprivate partnership for the development of innovations, particularly in social sphere; government grants, innovative patents; special platforms for startups aimed to attract venture investments and raise other funds; expansion of the range of services and information services which are proposed; advancement of technological base; opening new spheres of activities; reduction of costs on innovations and an increase in the profitability of activities. 3. enhancing the quality of risk management supporting the cooperation in the risk management sphere; promoting the development of specific technologies and software tool; sharing data on frauds and other risks; assistance in introducing international standards in the sphere of risks; enhancing the consumer service quality; reduction of costs and losses; stability of obtaining the profit; reduction of costs on security; expanding the opportunities for partnership. source: developed by the authors baltic journal of economic studies 157 vol. 8 no. 1, 2022 monitoring, compliance control, audits, risk management, etc.). the advantages of suptech and regtech can be considered in terms of the government as a tool for regulation, and in terms of business entities – as a way to optimize mandatory processes. it is critical to expand the application of suptech and regtech in this sphere as well as: 1) to promote partnership between business entities and government to advance such technologies; 2) to facilitate innovation-driven activities of business entities related to the creation of their own regtech; 3) to preventively create suptech and regtech for the innovations promoted on the market; 4) to create conditions for easier adaptation by business entities of national suptech and regtech, especially those related to the international standards, in particular on account of testing modes; 5) to disseminate the global and national progressive experience in the use of suptech and regtech, to facilitate the expansion of best practices and training. unleashing the potential of electronic payment systems in the global digital economy is impossible without the promotion of international suptech and regtech, as well as enhanced international cooperation in the area of building the institutional and technical infrastructure of eps delivery. 8. conclusion digital economy turned to be one of the key trends in social and economic transformations. one of its major trends is fintech, which encompassed various financial services, payments, crediting, etc. the development of electronic payment systems, which create the appropriate infrastructure of the global digital economy, becomes especially important for е-commerce. taking into account the increasing consumer demands for electronic payment systems, high level of competition and regulatory requirements, the problem of improving the economic effectiveness of eps delivery becomes the most critical, especially at the international level. from the standpoint of the providers, three strategic areas to improve the effectiveness of eps delivery have been identified: enhancing risk management quality; development of innovations; development of the ecosystem of eps delivery. all of them are closely related to the company development strategy and marketing, which acquires new social and economic quality. while implementing the abovementioned areas, its relation to the development of other spheres of digital economy and fintech should be taken into consideration, in particular in terms of potential risks and priorities for innovations. it also enables to determine special government 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https://doi.org/10.30525/2256-0742/2021-7-2-101-109 the challenges for the implementation of a gender-oriented approach to budgeting in ukraine: what can be improved? anna karpych1, nataliia miedviedkova2 abstract. the purpose of this article is to identify the obstacles which emerge on the way of the implementation of a gender-oriented approach to budgeting in ukraine and hinder the promotion of this approach within the public financial system as well as to give recommendations on the possible ways to eliminate them from ukrainian public financial management. methodology. the article is based on a review of existing academic literature and on the analysis of secondary sources (mainly, government and non-government reports and publications). the results of the research show that the main barriers for the application of a gender-oriented approach to budgeting in ukraine are, among others, dominance of gender stereotypes, the lack of funds for gender initiatives, insufficient understanding of the relationship between gender equality and public policy, the low level of awareness of civil servants and officials regarding the policy of gender equality. the overview of the best international practices in the integration of gender aspects in budgeting helped authors identify prior tasks for ensuring effectiveness of a gender-oriented approach to budgeting in modern conditions. based on the obtained findings, the recommendations were provided; they include the measures to reduce gender gaps and suggested methods for modification of a gender-oriented approach to budgeting. research limitations/implications. the authors did not study the underlying reasons for the emerging problems for the application of a gender-oriented approach to budgeting. also, the research was based only on the review and analysis of secondary sources, thus, primary data collection techniques were omitted. practical implications. the findings are likely to be useful for researchers and public sector practitioners both in ukraine and abroad to gain knowledge on the implementation of a genderoriented approach to budgeting. the developing countries may investigate the case of ukraine and prepare for the similar challenges and problems adjusting the practice of implementation of a gender-oriented approach to budgeting according to their conditions and model of public management system. value/originality. the article contributes to the discussion about the challenges for the effective implementation of a gender-oriented approach to budgeting in order to strengthen the public financial management in modern ukraine. key words: gender budgeting, gender-oriented approach to budgeting, public financial management, governance, public sector, ukraine. jel classification: h60, h61, h72 1. introduction in the public financial management, the budget is a precise reflection of the needs of the different groups or individuals to whom it is designed and adopted. according to a. wildavsky and n. caiden (2001), the budget is a forecast of future events, while the budgeting process is a transformation of financial resources into human goals. at the same time, the effective assessment and balancing of the financial resources of the national, regional and local levels of the budgetary system are possible only by means of high-quality approaches to budgeting. as the plans and priorities of government are reflected through the budgets, the sources of their revenues and items of budgetary expenditures are exactly the indicators which demonstrate the degree of social orientation of the state and loc al policies. it may be admitted that public budgeting is also a political process, but the interests of only certain categories of citizens should not be promoted when the state pursues baltic journal of economic studies 102 vol. 7 no. 2, 2021 a policy of guaranteeing equal rights and opportunities for different groups of the population. there is evidence that a vital component of human rights is social equality between women and men. an academician of the national academy of sciences of ukraine v. heiets (2020) highlights the high significance of socialization as an instrument of state policy of ukrainian socio-economic development. equality in rights plays a substantial role in the development of society, domestic and international economy, the formation of humanity, as well as in building a progressive future with prosperous moral and psychological principles. currently, in ukraine, the key actor in the regulation of gender equality is the state government with its gender policy, where the leading role is given to budgetary policy. a budget that is based on the principles of taking into account the needs of both women and men is often referred to as a “gender-oriented budget” (“gender budget”, “gender-responsive budget”). the first gender-oriented budget was introduced and adopted in australia in 1984. at present, about 90 countries around the world apply a gender-oriented approach to budgeting. two decades ago, ukraine also became among the countries that integrate the gender component in budgets. ukraine faced its first case of the implementation of a gender-oriented approach to budgeting in 2003, when the women’s fund of the city of kharkiv conducted the gender analysis of the city budget (years 1998–2001) (taukesheva & daudova, 2018). the outcome for this analysis was a development and adoption of a targeted subprogramme “development and support of women’s entrepreneurship” which became a part of the programme for economic development of of kharkiv for years 2003–2005. in 2011, the representative office of the friedrich ebert foundation in ukraine started the project titled as “gender budgeting at the local level”. the implementation began from the city of chernivtsi and khmelnytskyi oblast (region). from 2014 up to the end of 2020, a systemic work by the “gender budgeting in ukraine” project was being done in order to promote a gender-oriented approach to budgeting in ukraine. the project was financed by the swedish government and implemented by niras sweden and cpm international. currently, the un women project and the usaidfunded dobre programme (“decentralization offering better results and efficiency”) partly propagate and facilitate the establishment of a genderoriented approach to budgeting in ukraine. noteworthy to highlight that a gender-oriented approach to budgeting has become an element of the public finance reform in ukraine (“strategy for reforming public finances for years 2017–2020”). according to the strategy (2017), “the integration of a gender-oriented approach into the budget process will increase the efficiency and quality of public services provided, taking into account the needs of social groups, including on the basis of gender, will increase the accountability of organizationsbeneficiaries of the budget assets as well as budget transparency” (translated from ukrainian by authors). furthermore, since 2019, this budgeting practice has been officially entrenched by the decree of the ministry of finance of ukraine in methodical recommendations for the implementation and application of a genderoriented approach in the budget process. despite the support from the government, international organizations and active leaders who are willing to promote minor as well as radical changes, the path of integration a gender-oriented approach to budgeting into public financial management of ukraine is not without barriers. therefore, the research aim of this article is to illustrate the current problems of the implementation of a gender-oriented approach to budgeting in ukraine and provide the recommendations on how to eliminate them from ukrainian public financial management. 2. literature review 2.1. the outline of public governance and management theories the gender-oriented approach to budgeting might be considered as a constituent unit in the public governance system of a state. the meaning and definition of governance have been discussed by a number of authors from various fields. according to daly (2003), governance is about change processes. the concept of public governance is not stable since the development of economic and social relations transforms the governance models and provokes the review of how the governance is defined and considered by politicians, scholars and the general public. there has been a change to governance where the authorities (governing units) are not considered the only actors in steering a country. such transition in the comprehension of governance is reflected with different theories of public management. previously, governance was seen as the ability and capacity of government to develop policies and implement them (kjaer, 2004). therefore, according to the traditional public management theory, a top-down approach of governance and the power of authorities were dominant. within the given approach, the influence of the civil society and private institutions was not considered. as a result, the term of governance was used interchangeably with government (state, regional and local authorities) while bureaucratic systems along with political and administrative dichotomy served as a theoretical basis (xu et al., 2015). baltic journal of economic studies 103 vol. 7 no. 2, 2021 with the emergence of the new public management theory (since 1980s), new meanings to public governance have been brought where the private sector and the society play a more significant role in the coordination of social life (heywood, 1997). still democracy was not a central issue according to the new public management theory. the role of a citizen was rather as a customer not a participant in decisionmaking processes (xu et al., 2015). at the same time, the new public management theory was based on the enterprise management model (“entrepreneurial” government) and could not be characterised as civil society-oriented (guowen & shuangshuang, 2012; xu et al., 2015). therefore, the new public service theory has been developed in order to increase democracy; it puts the public interests first, provides the foundations for social trusts (guowen & shuangshuang, 2012). the most recent theory called “the new public governance theory” has risen to promote both democracy and efficiency within the public management as it is based on contractualism, integrity theory and collectivism while considers citizens as full actors in political and social life (xu et al., 2015). at present, more and more people take part in decision making on both local and national level, thus boundaries between public and private sectors and the spheres of government have become vague (kjaer, 2004; newman, 2005). taking all this into consideration, the definition of governance provided by kaufmann et al. (2010) can be considered the most holistic for the reason that the authors consider the governance as those traditions and institutions which influence the way the authority in a state is exercised. today, it is considered that the concept of governance and public management process are equal as the former includes the latter and requires citizen involvement and participation (kapucu et al., 2009). it can be stated that the implementation of a genderoriented approach to budgeting depends on the public management model each country choses separately. for this reason, the consideration of this approach to budgeting within the context of public management theory may be noteworthy. 2.2. the essence of a gender-oriented approach to budgeting and a research gap considering a gender-oriented approach to budgeting, attention is to be paid to its origin in economic theory. this approach comes from the feminist branch of macroeconomics (çagatay et al., 2000). at the same time, çagatay et al. (2000) claim that the very existence of a gender-blind economic policy, which is an antipode to a gender-oriented one, has led to social changes that forced the integration of gender aspects into budgets. a gender-oriented approach to budgeting includes an analysis of the budget in terms of how it reaches and impacts women and men, as well as girls and boys (budlender, 2006). an economist and sociologist d. elson (1997) argues about gender neutrality in budgeting as “gender blindness”, because in the process of budgeting the established social roles of women and men are usually ignored, and this can worsen the position of both genders within society. neoliberal economic guidelines and negative effects on the socio-economic security of women in combination with feminist movements strengthened the implementation of a gender-oriented approach to budgeting as a practical key strategy for the integration of gender aspects in the economic policy of the state (o’hagan & klatzer, 2018). t. koliada (2019) claims that the application of a gender-oriented approach optimizes the expenditure of budget resources by determining the level of demand among consumers of guaranteed public services received from the implementation of budget programmes. previous research has established that the most common challenges are monitoring and evaluation of the approved budget documents, prioritisation of gender aspects in reforms, the lack of specialists who would have the knowledge and skills necessary for gender analysis, the scarcity of sex-disaggregated data, and weak coordination between different stakeholders on the comprehensive integration of a gender approach into strategies and policies (vatuliov, klymenko & kuznetsov, 2020; ostrіshchenko & kornіienko, 2015; kyseliova, 2020). so far, however, there has been a limited number of publications devoted to the detailed study of these problems and, most importantly, – to the discussion of the possible solutions for them. therefore, this article attempts to address two research questions: 1) “what are the modern challenges and barriers to the implementation of gender-oriented approach to budgeting in ukraine?” 2) “how might the existing obstacles be eliminated in order to promote the practice of gender-oriented approach to budgeting within public financial management of ukraine?” the investigation of the challenges for effective implementation of a gender-oriented approach to budgeting in ukraine is crucial for an adequate reaction and development of preventing measures. 3. method to conduct the research, the ontology of internal realism was chosen because we adhere to the position that we cannot observe concepts directly but they do have implications in reality. the epistemology of our baltic journal of economic studies 104 vol. 7 no. 2, 2021 study is social constructivism where the qualitative methods were adopted for the investigation of the challenges for the implementation of a gender-oriented approach to budgeting in ukraine. the research presented in this article was based on the analysis of secondary data with the review of academic articles, governmental and non-governmental organizations sources. 4. results 4.1. the contributing factors to the effective implementation of a gender-oriented approach to budgeting in ukraine today, there is no single generally accepted effective model of a gender-oriented approach to budgeting in the world since different countries have their own specific socio-economic and politicalcultural conditions. therefore, a gender-oriented approach to budgeting should be adapted for each state separately. however, it is still possible to systematize factors which are common around the globe that contribute to the effective implementation of a gender-oriented approach to budgeting. according to downes & scherie (2020), three areas can be identified where the main factors for the successful application of a gender-oriented approach to budgeting can fall in: (1) a strategic framework, (2) tools of implementation, and (3) an enabling environment. as for the strategic framework, it is vital to mention the state policies, the strategic goals of a country, the legislative framework and the institutionalization of a gender-oriented approach to budgeting in order to ensure its systemic application. nowadays, there is a legislative framework which facilitates the promotion of gender equality in ukraine (including through budgetary mechanisms), but it needs to be updated with new documents on this issue. considering ukrainian strategic framework, it is necessary to highlight the constitution of ukraine, international treaties of ukraine, the laws of ukraine “on ensuring equal rights and opportunities for women and men”, “on the principles of preventing and combating discrimination in ukraine”, “on preventing and combating domestic violence”, the state social programme for ensuring equal rights and opportunities for women and men for the period up to 2021 (approved by the order of the cabinet of ministers of ukraine dated april 11, 2018 no. 273), the implementation of the beijing declaration adopted at the fourth world conference on women on september 15, 1995, the un sustainable development goals, etc. however, special attention should be paid to the methodical recommendations for the implementation and application of a gender-oriented approach in the budget process, which have been approved by the order of the ministry of finance of ukraine in 2019. the tools for implementation of a gender-oriented approach budgeting refer to gender budgetary initiatives. at the initial stage of budgeting, such tools measure how different policies can affect gender equality, and include gender equality analysis and ex ante gender impact assessment. then this information is used in a gender equality needs assessment which identifies the main gender gaps in various policies and promotes a gender perspective in the allocation of public financial resources. at the stage of consideration of draft budgets and their adoption, these tools involve a report on the gender budget and social audit of the budget. in turn, ex post assessments of gender impact, a gender approach in performance audits and expenditure reviews, and a systematic audit of gender equality are used in preparing the budget execution report. in accordance with the methodical recommendations approved by the ministry of finance of ukraine (2019), a gender-oriented approach to budgeting “... is advisable to carry out in the following sequence: to inspect the normative legal acts and other documents containing information on gender equality; to conduct gender analysis of budget programmes; to make decisions based on the results of gender analysis of budget programmes; to monitor gender-sensitive budget programmes” (translated from ukrainian by authors). the enabling environment for the application of a gender-oriented approach to budgeting includes the use of sex-disaggregated data, the training and capacity development programmes, guidelines and recommendations for the application of a genderoriented approach to budgeting, structured interaction with the general public, and the creation of an expert group to advise on the implementation of such budgeting. but the most important thing here might be the presence of supreme bodies of supervision and control over the implementation of a gender-oriented approach to budgeting, such as the supreme audit institute or parliament (downes & scherie, 2020). considering ukraine, it can be stated that public and non-governmental organizations, as well as the ministry of finance of ukraine, support the implementation of a gender-oriented approach to budgeting at the local, regional and national levels. the situation with the available official sex-disaggregated statistics is also gradually improving (although, not very rapidly). to conclude this section, it can be stated that today in ukraine there are the factors for the effective use of a gender-oriented approach to budgeting, while it is extremely important that civil society supports gender budget initiatives and actively participates in the public and political life of the state. however, despite the baltic journal of economic studies 105 vol. 7 no. 2, 2021 existence of positive contributing factors, the path of the implementation of a gender-oriented approach to budgeting remains rather complicated and requires more support from the government. 4.2. why the integration of gender aspects into public budgeting is not straightforward it is important to note that the world is interested in the ukrainian experience of introducing and applying a gender approach to the budget process. in 2019, a giz (deutsche gesellschaft für internationale zusammenarbeit) study tour was held for representatives of such countries as armenia, georgia and azerbaijan. at the same time, a genderoriented approach to budgeting in ukraine faces certain barriers for its implementation. in the british council research (2018), it is stated that a common challenge for eastern partnership countries (armenia, georgia, azerbaijan and ukraine) is their soviet past, which preserves gender inequality in cultural and creative industries, as well as a generation gap, and an outdated educational system that encourages a gender biased way of thinking. it may be added that such state of affairs is observed not only within mentioned industries. the gender barrier is an obstacle that does not give an opportunity to achieve an equal position in the labour market despite the availability of high levels of education and abilities of both women and men. the terms “glass ceiling”, “sticky floor”, “glass basement” are used to denote gender obstacles in the labour market. the situation called the “sticky floor” happens when women, in contrast to men, stay longer in low positions, and the “glass ceiling” describes stereotypes that do not create noticeable barriers to advancement, but at the same time do not allow moving for ward. thus, women are stuck between the “glass ceiling” and the “sticky floor” and cannot earn a promotion and reach the top. the “glass basement” means that men get the most risky but highly paid jobs. currently in ukraine, the main obstacles for the implementation of a gender-oriented approach to budgeting at national, regional and local levels refer to weaknesses which outweigh the contributing factors identified in the section 4.2 of this article (figure 1). among other things, the following barriers are crucial to consider while implementing a gender-oriented approach to budgeting: – the rejection of changes by civil servants and officials of local authorities (in contrast to active civic leaders) who are very reluctant to change the established approaches, procedures and formats when developing documents used in the budget process; – the high staff turnover that leads to weakening of the viewpoints for previously made decisions; – the weak coordination between all stakeholders on integrating a gender approach into strategies, policies, programmes, and projects (kyseliova, 2020). 4.3. the successful foreign practices for institutionalization of a gender-oriented approach to budgeting the world practice shows the effectiveness of three ways for institutionalization of a gender-oriented approach to budgeting: 1. the submission of reports on a gender-oriented approach to budgeting, which provide information on public policy, the amount of budget support and how gender inequalities between women and men are reflected in economic terms (sweden, australia and canada). challenges for genderoriented budgeting prevalence of gender stereotypes scarcity of sexdisaggregated data and gender statistics limited understanding of gender-oriented budgeting by ministry of finance of ukraine underestimation of gender aspects in reforms insufficient understanding of the relationship between gender equality and public policy low level of awareness of civil servants and officials regarding the policy of gender equality low level of transparency and openness of power structures lack of funds for gender initiatives figure 1. the main barriers for the implementation of a gender-oriented approach to budgeting in ukraine source: developed by authors based on (vatuliov, klymenko & kuznetsov, 2020; ostrіshchenko & kornіienko, 2015; kyseliova, 2020; khodakova, 2020) baltic journal of economic studies 106 vol. 7 no. 2, 2021 2. the promotion of a gender-oriented approach to budgeting through the application of laws, norms and regulations. therefore, this budgeting is incorporated into the country’s constitution, its budgetary legislation or administrative instructions (austria, albania, canada, belgium, iceland). 3. the publication of a budget circular, which contains relevant gender-sensitive instructions for ministries and departments to submit budget requests for gender activities, goals, indicators (finland, albania, spain). also, the foreign experience of a gender-oriented approach to budgeting provides the use of best practices, which have the following directions: 1. the creation of strategic documents to ensure an enabling environment for equal employment opportunities for women and men. in kazakhstan, the strategic development plan until 2025 aims to create favourable conditions for equal employment opportunities for women and men. albania has taken important legal and policy steps to introduce gender budgeting at the central and local levels. in the context of public financial management reform, albania has moved towards a medium-term system of expenditures and performance-based budgeting. the importance of a gender-oriented approach to budgeting for achieving gender equality in albania is clearly outlined in the public financial management strategy (kselo, 2020). 2. government funding for capacity building. in italy, political parties are required to allocate 5% of the government funding they receive on activities that promote women’s political participation. since 2009, public funds received by political parties in ireland must be used for specific purposes, including promoting the participation of women and youth in political activities. 3. the consideration of gender aspects in the annual legislation. regardless of where a gender-oriented approach to budgeting is introduced, it is accompanied by legal support measures. at the same time, the nature and scope of legislative provisions on a gender-oriented approach to budgeting varies from country to country. in austria, the principle of achieving gender equality through the budget management system is enshrined in the constitution, which has contributed to the development of a comprehensive a gender-oriented approach to budgeting and reporting system that has been integrated into the performance budgeting system. in spain, the gender impact report is included in the annual budget bill, and in france, the annual budget bill contains an annex on the impact of fiscal policy on gender equality, as well as disaggregated budget expenditures (kselo, 2020). 4. the introduction of gender-sensitive reporting. in morocco, since 2014, under their new law, the budget takes into account goals, results and indicators of performance related to gender equality. in addition, the annual budget bill contains a gender report. it provides a gender profile for each agency, an analysis of sectoral gender-related issues, and key genderrelated priorities, goals and achievements with ministries (kselo, 2020). also, when developing new financial policies and measures, pauel & ferrando (2020) advise authorities to pay attention to gender issues intensified in the context of financial and social crises caused by the covid-19 pandemic: 1. salaries and access to social protection. due to persistent structural reasons, women earn less than men while also working part-time. conversely, lower earnings and job insecurity weaken women’s ability to cope with the economic shocks caused by the covid-19 implications (oritz-ospina, 2018). 2. unemployment and underemployment. social distancing measures have a greater impact on women who have lost their jobs during this crisis more often than men. for example, in the uk, in sectors that have ceased operations to contain the spread of covid-19, the major part of employees (mostly women) has lowpaid jobs (close the gap, 2020). 3. healthcare. among medical workers, administrative positions are predominantly held by men, which does not allow for the necessary changes that take into account gender aspects. therefore, when planning financial activities for medical officials, it is important to represent and attract women, to ensure the validity of such activities. 4. significant impact on women. as the covid-19 pandemic shows, quarantine measures dramatically weaken the economic opportunities for women, thereby increasing the level of their poverty (un women, 2020). 5. discussion in accordance with the present results, previous studies have demonstrated that the main challenges for the implementation of a gender-oriented approach to budgeting in ukraine lie within the weak coordination of different levels of government units, scarcity of official sex-disaggregated data and still lack of specialists who can support authorities in the introduction and application of this approach in the budget process. since budgeting can be considered a political process and not just a tool, it may help achieve social and gender equality (e.g., the redistribution of budget expenditures can reduce the gap between the positions of women and men in public life areas). however, these findings are not very encouraging in terms of the governmental support of institutionalization of a gender-oriented approach to budgeting. it is important to admit that ukrainian legislation needs improvements and there should not be just recommendations but requirements to include gender aspects in the budgeting at all levels. baltic journal of economic studies 107 vol. 7 no. 2, 2021 although women have been actively involved in economic and political life since the last century, in many countries as well as in ukraine, they still have limited access to resources such as material goods, social contacts and their networks, income, natural resources, education and knowledge etc. in addition, cultural, ethnic and, to some extent, religious values, as well as the established division of labour in ukrainian society have a significant impact on women’s opportunities for self-realization and their realization as citizens and contributors to the whole society. the government along with lawmakers plays a significant role in promoting gender equality as they develop and enact laws, set policies, and, what is also important, conduct educational and training activities to improve the situation of vulnerable and marginalized social groups. this study has been able to demonstrate that a gender-oriented approach to budgeting is a powerful managerial approach that contributes to the implementation of gender equality policies, improving the quality and accessibility of services, and increasing the focus, efficiency and transparency of budget spending. the analysis of the best foreign practices for the successful implementation of a gender-oriented approach to budgetary process allows us to identify the prior tasks for ensuring the effectiveness of a gender approach in modern conditions. thus, the first task might be to strengthen political support for gender initiatives, which will make it possible to adjust programmes for the development of various sectors of the economy, taking into account the gender aspect and, as a result, to increase the efficiency of public financial management, improve the general economic and social situation in the country. there is also a need to coordinate the efforts of different departments to address the issues of transition to a gender-oriented approach to budgeting. the findings demonstrate that social policy issues, along with gender inequality considerations should be included in the training programmes for public financial officials and managers. another important recommendations are the following: (1) to promote the active cooperation between the state and civil society in order to solve gender problems; (2) to conduct a gender analysis not only of expenditures, but also of budget revenues; (3) to raise gender awareness among major stakeholder groups; (4) to provide decent-paid jobs and equal opportunities for promotions for men and women; (5) to create an opportunity to implement changes that can protect women from severe shocks in the future; (6) to improve educational and training opportunities for women in order to move from precarious work to stable and better protected employment positions; (7) to ensure a gender-sensitive policy in the professional sphere, opening up new opportunities for women as entrepreneurs; (8) to expand the provision of social services that will provide women with more time for paid work and recreation. in addition, it should be highlighted that gender inequality has been exacerbating during the current covid-19 crisis all over the world, and if ukrainian government do not take gender into account when preparing fiscal and financial responses to the pandemic, then the effectiveness of all efforts to mitigate the impact of the covid-19 pandemic will be diminished. in all the situations, the support from government institutions is an indispensable element of facilitating the implementation of this approach at all levels. the study demonstrates that the way a genderoriented approach is implemented in ukraine does not share the postulates presented with the new public governance theory, however it has rather weak representation of such characteristics as democracy and efficiency within the public management. it can be noted that the findings of the research may be somewhat limited by the chosen method for the study where only secondary sources were analysed. therefore, further research should be undertaken to investigate the chosen challenges using primary data collection techniques and, on this basis, it might be possible to provide more sophisticated recommendations. 6. conclusions in this research, the aim was to identify and study the modern obstacles for the implementation of a genderoriented approach to budgeting in ukraine and to suggest the possible solutions on how to prevent and overcome them. the results of this study indicate that there are a number of issues which make it difficult to promote the practice of a gender-oriented approach to budgeting in ukraine. among the main challenges for the implementation of the studied approach are the existence of gender stereotypes, still a limited understanding of gender-oriented approach to budgeting by ministry of finance of ukraine and the scarcity of sex-disaggregated data. our recommendations for the improvement of the implementation of a gender-oriented approach to budgeting in ukraine consist of two parts: the first one includes measures to close gender gaps in society that have appeared as a result of stereotypes; the second part of the suggested ways is aimed at improving strategic framework, tools of implementation, and enabling environment for a gender approach to budgeting at national, regional and local levels. to conclude, further work needs to be done to provide more ground recommendations for the implementation of a gender-oriented approach to budgeting in ukraine. baltic journal of economic studies 108 vol. 7 no. 2, 2021 references: budlender, d. 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(2015). the third wave of public administration: the new public governance. canadian social science, 11(7), 11–21. doi: 10.3968/7354 baltic journal of economic studies 107 vol. 3, no. 2, 2017 the concept of the polarized space formation in the economy of the region with resource potential nadiia pysar1 vasyl stefanyk precarpathian national university, ukraine abstract. the article analysed and systematized the theory and the paradigm of regional development. opportunities for the optimum development of the regional economy in ukraine are identified because the functioning of the market system is accompanied by crisis phenomena and requires deep scientific study of the contemporary economic theory and practice of going out of the crisis using the latest concepts of region development. polarized space concept in the economy of the regions of ukraine with the identifying of measures for its implementation is an important and insufficiently developed scientific research. the result of the transformation of economic transitions in the national economy is the dominance of so-called “point development”. despite the positive effect of the presence of the growth poles in a separate area, this situation reinforces the asymmetry in economic development in comparison with the other regions. a result of this is the differentiation of the main economic and social indicators of regional economic development. in this regard, the study of regional concepts and theories of regional economic development is urgent theoretical and practical task, because the lack of a unified approach to the foundations of the theory of economic space, and especially its regional component, does not allow to start solving some of the practical issues of systematic formation of common economic space of the country. these issues raise many questions of applied character, which economic theory may not always give a definite answer. such questions are certainly of theoretical interest but, most importantly, their answers can contribute to the formation of an effective competitive economy in the region. the object of the study is the regions of ukraine, with their resource potential and absence of a polarized space. the main objective is the formation on this basis of anti-crisis measures of region development. the subject of research is theoretical principles and methodology of formation of a polarized space with the low quality of economic space. the methodological base of this research is the dialectical method of cognition, systemic approach, fundamental provisions of economic theory and the theory of the polarized space. the following research methods are applied: logical generalization, systemic and structural analysis, comparison, statistical, expert, etc. the aim is to study the imperatives for the effective development of the locally-spatial system, taking into account its resource potential, determination of possible ways of its implementation with the aim of regional economic space development and ensuring strategic guidelines and goals for socio-economic development. the obtained results gave a possibility to determine necessary methodological bases of the improvement of regional development, to focus on the most influential directions in the theory of the economic development of a region, to substantiate the conceptualization of an optimal model of economic development of the region. key words: region, theory, concept, economic process, economic space, resource potential, socio-economic system, region, spatial localization, group of the imperatives. jel classification: l51, q42, r13 1. introduction since the second half of the twentieth century, the development of the national economy depends on the processes of integration and regionalization. the increasing role of regions in the evolution of the international community and in the life of many modern states highlights the importance of the processes of regional development. these processes are manifested in the form of further development of regional integration, expansion of cross-border regional relations, and the emergence of regional areas of high development, where large financial, technological, and intellectual resources are concentrated. f. perroux and j. boudeville who developed the regional interpretation of growth poles and allocation of economic spaces made a great contribution to the theory of economic space. scientific corresponding author: 1 department of theoretical and applied economics, vasyl stefanyk precarpathian national university. e-mail: n-pysar@mail.ru baltic journal of economic studies 108 vol. 3, no. 2, 2017 works of s.  s.  artobolevsky, o.  v.  gritsay, v.  n.  leksin, a.  i.  treivish, a.  n.  shvetsov and others are widely known. such scientists-economists as o.  i.  amosha, e. j. blakely, z. s. varnalii, m. i. dolishnii, ya. a. zhalilo, v.  i.  zakharchenko, i.  i.  lukinov, v.  i.  muntiian, v.  v.  tretiak, l.  a.  yaremko, and others dealt with the problems of the regional economy. studies of these scientists are focused on the resuscitation and development of the potential of the regions. however, these studies do not take into consideration market aspects of the development of regional economic space. therefore, in the context of economic transformation, there is a need to clarify some theoretical positions of spatial development of economy and directions of forming an optimal model of development of the resource potential of the regional economy, and scientific development of these problems requires generalization, systematization and further development. therefore, the aim of scientific work is to explore the imperatives for the effective development of the locally-spatial system, taking into account its resource potential, to determine possible ways of its implementation in the development of regional economic space and to ensure strategic guidelines and goals for socioeconomic development. the research task is to identify the necessary methodological foundations of improving regional development, to focus on the most influential directions in the theory of economic development in the region, to substantiate the conceptualization of an optimal model of economic development of the region. the methodological basis of this research is the dialectical method of cognition, systemic approach and fundamental provisions of economic theory and the theory of polarized space. the following research methods are applied: logical generalization, systemic and structural analysis, comparison, statistical, expert and others. the region represents the natural and socioeconomic system of unprecedented complexity. these systems are subject to natural and economic laws, are exposed to many diverse random factors, and are at risk to lose the balance of equilibrium. therefore, for the study of complex systems, appropriate tools are required: the method of system analysis, economic and mathematical analysis, modelling, etc. the news of the above-mentioned problems of the theory of productive forces and regional economy development, and the application of economic regulation of regional development and extending the scientific research range in this important area became the basis for the selection of research topics, identified the target and the list of priority tasks of the study, provided the expected results, scientific and practical achievements and elements of scientific novelty. 2. the definition of polarized space the theory of spatial poles of economic growth and the theory of diffusion of innovations in a systematic interaction solve a problem of holistic and effective development of the regional economy: new technologies of the growth pole are a retranslator of innovations, diffusion of which contributes to the revitalization of underdeveloped areas. the concept of spatial poles of economic growth takes the central place in the system of theories of regional development. the concept of spatial polarization has different interpretations, however, in general, it is "...a universal phenomenon in the regional economy that is a combination of objective and subjective factors that lead to excessive territorial variations in resource availability, methods and results of economic activity " (ketova, 2006). the need to develop theoretical and applied aspects of scientific problems of the development of socioeconomic system of the region in terms of spatial segregation and uneven economic processes can be supported by a set of interrelated arguments, one of which is the need for scientific substantiation of selection and identification of the resource potential that can play a role of an accelerator of the socioeconomic system development of the region, identify existing contradictions, and solve them. an analysis of the development of the socioeconomic system of the carpathian economic region in terms of spatial localization and unevenness of economic processes shows that a characteristic feature of the region is the presence of energy potential of the region. the region directly borders with the eu countries, other regions of ukraine, it is crossed by several important highways that provide transit and connection with many countries. paying attention to the geographical position of the carpathian region, namely, the advantageous border location, it is shown that the carpathian economic region needs a restructuring of those economy industries that have the most rapid turnover of funds, as well as export industries and agriculture. therefore, in the short term, it is appropriate to conduct reconstruction, technical re-equipment of operating enterprises of light and food industry and the agro-industrial complex of the district. the carpathian region is one of the largest in the provision of mineral and energy resources. an important task of integrated development is the increase in efficiency of fuel and energy and mineral complexes due to re-exploration and expansion of the resource base. the carpathian region has forest resources in ukraine. analysis of barriers on the way to the development of spatial local systems of the carpathian economic region allowed the identification of resource potentials with the aim of identif ying and addressing the key priority problems of the regional socioeconomic system as a whole, which can be grouped under the following headings: economic, social, institutional. baltic journal of economic studies 109 vol. 3, no. 2, 2017 3. possibilities for introducing the region polarization principles for the introduction of the region polarization and the use of development potentials of the region are: compliance with economic efficiency of the use of regional resources for complex development of the region; balance of the parameters of economic development and life quality level of the population, a synchronous level of development of the real sector of the economy of the region, escalation of social infrastructure; adequacy of the applied methods and tools of regional management within the paradigm of adaptive and selective control; ensuring the dominance of social components over the desire to catalyse the processes of capital accumulation as the main efficiency criterion of the mechanisms of regional economic system management. the use of these principles in the system of regional development allows updating several groups of immanent features of the development potentials of the region: system-modelling functions  – facilitating in the formation and development of territorial and industrial complexes, clusters, units; optimal socio-economic zoning; and the development of ownership relations; formation of the effective mechanism of control; formation of rules, regulations, and standards etc. system-approving functions  – development of local markets; wide application of the regional strategic programmes; development of infrastructural support; ensuring a positive image and reputation of the territory; compliance with policies of environmental and social responsibility etc. system-reproducing functions  – rational distribution of economic resources; active use of spatial polarization smoothing tool; efficient use of natural resources and factors of production; regeneration of social and economic subsystems; protection and promotion of competition and entrepreneurship, etc. system-diagnostic functions  – establishment of an effective monitoring system; search for "growth points" and "points of inefficiency " of the economy; forecasting and planning of the development of the region; creation of information-analytical system for bringing data and information on the market state to the final consumer; use of corrective control mechanisms, etc. (zhukov, dianova, 2012). in general, it should be noted that each territory, regardless the composition of the natural resource base, overcomes several stages of development, with the inherent characteristics at each of them. searching for the optimal combination of resources is carried out in a limited region of the allowed values and combination of them, while one of the factors will always be at the minimum, and other resources can be unused. the elements of resource potential that can be transformed into investment capital must be directed to increase the element that is the minimum that will lead to the emergence of new optimal combinations of resources and increase the balance of the entire system. balanced resource potential is considered perfect when all resources can be involved in the process of economic activities of the region. if the optimal balance is not achieved, it is possible to talk about the space potential. to ensure a perfect balance of resource potential, resource approach to the development strategy of socio-economic system of the region in terms of spatial segregation and uneven economic processes is required. 4. the need for activation of the points of regional development activation of regional growth points will increase the efficiency of the organization of the regional management, efficient use of financial resources and focus regional resources on priority areas. consideration of the forms of realization of the theory of growth poles and the conditions for the formation of the growth points in ukraine has allowed identifying the main problems of activation of the regional growth points. most often, the success of realization of the activation forms of growth points depends on the conditions, in which this implementation is: the border position of the region contributes to the successful formation of special economic zones and infrastructure contributes to the development of clusters and technology parks. most regions of ukraine do not have above-mentioned conditions and, consequently, cannot successfully implement different forms of activation of growth points with the existing regional management structures. in general, there are possible obstacles to effective implementation of activation forms of regional growth points: organizational: inefficient use of activation forms of regional growth points; investment: lack of opportunities to attract significant investment (the need to upgrade in the regions of outdated production assets of territorial and industrial complexes, lack of established infrastructure); financial: the absence of large financial flows (slow development of cluster formations, absence of major players in the regional market); innovation: lack of an effective mechanism for involving small business in innovation sphere (inability to promote the creation of small innovative entities, lack of an effective mechanism for the distribution of innovations among small businesses). in modern conditions of economy functioning taking into account the specifics of regional development, an obvious need in search for, identification of primary key opportunities of the areas, and full use of their resource potential will ensure the economic sustainability of the region and competitiveness. baltic journal of economic studies 110 vol. 3, no. 2, 2017 the solution to the problem of complex assessment of the selected indicators in the search for new points of economic growth areas have to include the assessment of the basic resource potential: natural resources, geographic, recreational, socio-demographic, research and innovation; human, industrial, infrastructure and investment budget potential, and potential assessment of the regional readiness to implement a new strategic choice to conduct in the territory of the envisaged socio-economic transformations and activation of new economic growth points. 5. development concept of the spatial economic system development concept of the spatial economic system of the region through the prism of the use of resource potentials is identified as a promising aim to overcome current limitations of the regional system and the presence of subjects-participants of the tactical tools system to achieve this ambitious goal. perspective resource and factor fullness of the carpathian economic region and the concentration of the most valuable factors and resources at points of innovative growth are the imperatives of the process of formation and development of this commercial space organization form, and retrospective development aimed at production, transit, and sale of raw materials and energy resources and should change with prospective orientation on achievement of the following strategic goals: intensive development of financial markets and human capital in the area of the macroregion; creating necessary general conditions for approval of this innovative type of reproduction, energy independence development in case of more efficient and effective use of available resources. the main directions of improvement of the spatial structure and territorial organization are: accelerating the implementation of state regional policy with the allocation of priorities of the territorial organization of economy of regions; restructuring of the economic base of individual regions and creation of conditions for recovery based on new technology; acceleration of the transformation on the basis of investment activities activation; improvement of legislative and normative base of regional development, which today is imperfect and fragmentary; monitoring introduction, system of control over financial flows to the regions of public funds (intergovernmental transfers, targeted subsidies, state investments, tax incentives, financing of target programs); improving the financial capacity of local public authorities and local governments for solving problems related to development areas; enhancing the efficiency of aggregate resource potential of the regions strengthening the role of the factors of economic growth; creating favourable conditions for the development of entrepreneurship, small and medium business, etc. implementation of these areas will ensure the optimization of the territorial organization of regional economic systems, improving the efficiency of social production; accelerate the processes of the european integration and entering the country into the world community. key features of the concept of socio-economic growth poles (artobolevsky, 2005): creating a socio-economic growth pole is not just a goal but a means of economic growth in the region, where the main goal of development is the moderation of territorial disparities in the life quality level of the population; growth pole can be effective only in the system of the same growth poles; growth pole must have close relationship with other settlements of the region to use its resources and transfer innovations and other impetuses; have to communicate between the country and the region; economic and social growth poles can be of different values and scale from international to local; the main aim of creating the socio-economic growth pole is to encourage self-development of regions and population centres. 6. conclusions on the basis of a generalization of the results of the analysis of the development of spatial economic systems of the regions, the best for them concept for the development of a spatial economic system, the strategy of diversification potentials, aimed at achieving the following long-term goals and results can be offered: improving the efficiency of use of available resources and factors of economic process; formation of new competitive types of businesses in the region; complex use of the opportunities of the national and international division of labour; acceleration of the socio-economic development of the region. the main point in justifying the application of the underlying factors of diversification is highlighted. they allow making the socio-economic system of the region more open to outline a full range of potentials for its development. this circumstance is of primary importance in the solution of strategic objectives of overcoming spatial isolation and asymmetries in the economic process. the core of the strategic guidelines for the effective development of locally-spatial systems may be the concept of socio-economic development of the region. it is as imperative for long-term development, will be able to lead to a balanced level of spatially separate areas and implement strategic plans. conceptualization of modern regional development ability to provide systemic research of regional baltic journal of economic studies 111 vol. 3, no. 2, 2017 problems and possible methods of their solution is proposed. a consideration of theoretical foundations describes the features of regional development, allows penetrating deeply into the essence of economic phenomena and processes at the regional level. this will help to develop regional economy in accordance with major socio-economic trends, to build the console of the mechanisms of regional development at macro and microeconomic level, to regulate the development of the productive forces under the influence of factors of the information economy, to bring an element of the behaviour of economic agents into the development planning process. further research will be focused on the development of an effective mechanism of innovation development of the economy of regions of ukraine. the study established the essential characteristics of economic regulation of regional development, in relation to the region as a territory, economic system, and economic space. further development of theoretical provisions on the basic requirements of the effectiveness of economic regulation of regional development of the regions is based on the account and use the basic properties of the region as territory, economic system and economic space that allows giving the whole system properties such as complexity and integrity. practical value of the study is in the fact that theoretical provisions and conclusions obtained on the basis of theoretical 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[in ukrainian]. надежда писарь концепция формирования поляризованного пространства в экономике региона с ресурсным потенциалом аннотация. в статье систематизированы и проанализированы теории и парадигмы регионального развития. определены возможности оптимального развития региональной экономики в украине, так как функционирование рыночной системы сопровождается кризисными явлениями и требует глубокого научного изучения современной экономической теории и практики выхода из кризиса с применением инновационных концепций развития региона. концепция поляризованного пространства в экономике baltic journal of economic studies 112 vol. 3, no. 2, 2017 регионов украины с определением мер по ее внедрению является важным и недостаточно разработанным научным исследованием. результатом трансформационных экономических преобразований в национальной экономике стало доминирование так называемого “точечного развития”. несмотря на положительный эффект от присутствия на отдельной территории полюсов роста, эта ситуация усиливает асимметричность в экономическом развитии по сравнению с другими территориями. следствием этого становится дифференциация основных экономических и социальных показателей экономического регионального развития. в связи с этим изучение региональных концепций и теорий экономического регионального развития составляет актуальное теоретическое и практическое задание, ведь отсутствие единого подхода к основ теории экономического пространства, и особенно ее региональной составляющей, не позволяет приступить к решению ряда практических проблем системного формирования единого экономического пространства страны. данные проблемы ставят множество вопросов прикладного характера, на которые экономическая теория не всегда может дать однозначный ответ. подобные вопросы имеют, безусловно, теоретический интерес, но главное – ответы на них могут способствовать формированию эффективной конкурентоспособной экономики региона. объектом исследования являются регионы украины с их ресурсным потенциалом и отсутствующим поляризованным пространством. основной задачей является формирование на этой основе антикризисных мер развития региона. предметом исследования являются теоретические положения и методология формирования поляризованного пространства с низким качеством экономического пространства. методологической базой исследования является диалектический метод познания, системный подход, фундаментальные положения экономической теории и теории поляризованного пространства. применяются следующие методы исследования: логического обобщения, системно-структурного анализа, сравнения, статистические, экспертные и т. д. цель заключается в исследовании императивы эффективного развития локально-пространственной системы с учетом ее ресурсного потенциала, определение возможных путей его реализации в целях развития регионального экономического пространства и обеспечения стратегических ориентиров и целей социально-экономического развития. полученные результаты дали возможность определить необходимые методологические основы совершенствования регионального развития, сделать акцент на наиболее влиятельных направлениях в теории развития экономики региона, обосновать концептуализацию оптимальной модели развития экономики региона. baltic journal of economic studies 44 vol. 8 no. 2, 2022 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: maryna.volosiuk@gmail.com orcid: https://orcid.org/0000-0002-0612-6988 2 admiral makarov national university of shipbuilding, ukraine e-mail: larysa.vdovychenko@nuos.edu.ua orcid: https://orcid.org/0000-0002-1162-4041 3 admiral makarov national university of shipbuilding, ukraine e-mail: igor.sirenko@nuos.edu.ua orcid: https://orcid.org/0000-0003-2947-4632 doi: https://doi.org/10.30525/2256-0742/2022-8-2-44-50 maritime clusters as an innovative form of development of coastal regions of ukraine maryna volosiuk1, larysa vdovychenko2, ihor sirenko3 abstract. the subject of the research is the scientific substantiation of the theoretical foundations and development of recommendations for the creation and functioning of maritime clusters in ukraine as an innovative form of development of coastal regions. methodology. general scientific methods used in the study, in particular: theoretical generalization; methods of positive and normative analysis, statistical analysis. the aim is the scientific substantiation of the theoretical principles and development of recommendations for the creation and functioning of marine clusters in ukraine as an innovative form of development of coastal regions. the conclusion of the study. the analysis showed that the dynamics of profitability indicators against the background of a gradual increase in gross profit of enterprises in 2010–2013, 2016–2018 and 2019–2020. it should be noted that in 2014, 2015, 2017 and 2018 the enterprises of transport and logistics industry of ukraine were unprofitable, which indicates an increase in the growth rate of costs over profits. however, russia's war against ukraine has made significant adjustments to the efficiency of transport and logistics companies. due to the blockade of ports, the economy loses about $170 million every day. ukraine has currently lost control of four ports: mariupol, berdyansk, skadovsk and kherson (concessionaire – risoil and georgian industrial group). as the results of the study showed, the coastal regions of ukraine currently need a separate public policy. for this purpose it is necessary to mobilize the scientific potential of ukrainian marine biologists, geographers, specialists in the field of maritime and environmental law and economics, as well as to initiate cooperation of central, regional and local authorities in the cluster development of the maritime complex in coastal regions. the development of clusters is a distinctive feature of the modern innovation economy. the topic of clusters is becoming increasingly relevant for both theory and business practice all over the world. clusters have become an effective tool for the development of individual areas and regions, which has contributed to improving overall national competitiveness for many countries. in this regard, further research can be aimed at developing a comprehensive mechanism for the functioning of marine clusters (classified in this study) in specific coastal regions as an innovative form of sustainable development of these regions, as well as the implementation of this mechanism in the domestic practice of national economic management. key words: coastal region, maritime cluster, maritime ship repair and shipbuilding cluster, maritime transport and logistics cluster, maritime fish cluster, maritime tourism cluster, maritime research and education cluster. jel classification: f29, o18, r58 1. introduction various aspects of innovation processes and factors influencing them develop unevenly in different regions of ukraine. probably this tendency has formed because socio-economic conditions of innovative activity in one or another region mainly depend on the activities of local authorities, which build their policy on the principle of leveling conditions and opportunities in different regions. at the same time the innovation policy carried out by the local authorities is primarily formed under the influence of the resources available in the region. it is obvious that the reduction of measures to stimulate regional innovation processes will increase the differentiation of territorial baltic journal of economic studies 45 vol. 8 no. 2, 2022 formations of ukraine by the level of their innovation development. modern regional policy of the eu member states focuses on the aspects of implementation of the policy of regional development of coastal areas, using the principles of economic growth based on innovations. given the strategic importance of coastal regions for the development of the country, the use of their innovation potential becomes especially relevant in the conditions of european integration of ukraine. some aspects of innovation development of the coastal regions of ukraine have been considered by the researchers polyakova yu.v. (2016), mokiy a.i., polyakova yu.v., vlasenko l.v. (2017). however, these studies do not mention the maritime and coastal potential, that is, the specific resources available in coastal regions, which constitute an important factor for the implementation of innovation policy in these territorial units of ukraine. results of the present research, undoubtedly, have theoretical and practical value. they illuminate actual problems and prospects of innovative development of coastal regions of ukraine, estimate the level of innovative activity at the enterprises of coastal regions in comparison with the enterprises of other regions of the country. at the same time there are still unresolved questions of cluster development of maritime complex in coastal regions of ukraine, although it is a distinctive feature of modern innovation economy. the aim of the article is the scientific substantiation of the theoretical principles and development of recommendations for the creation and functioning of marine clusters in ukraine as an innovative form of development of coastal regions. accordingly, the study sets the following tasks: – to systematize conceptual approaches to interpretation of the term "maritime cluster"; – to study the principles, major stages and measures of the formation of a maritime cluster in a coastal region; – to propose a functional classification of maritime clusters; – to substantiate the feasibility of their creation and operation in the coastal regions of ukraine with the purpose of intensification of innovation activities. the regional development policy of eu member states' coastal territories is closely integrated with innovation and research policy. it involves the general principles of economic growth based on innovation. 2. analysis of the effectiveness of the transport and logistics industry of ukraine during the war the development of these indicators in dynamics will indirectly characterize the directions of implementation of economic, social and environmental priorities in the transport sector of ukraine. figure 1 shows the dynamics of profitability and profitability of enterprises of transport and logistics sector of the country for the period 2010–2020. the dynamics of profitability indicators show that against the background of a gradual increase in gross profit of enterprises in 2010–2013, 2016–2018 and 2019–2020. it should be noted that in 2014, 2015, 2017 and 2018 the enterprises of transport and logistics industry of ukraine were unprofitable, which indicates an increase in the growth rate of costs over profits. thus, one of the main priorities of sustainable development, namely the transition of the industry to a break-even point by reducing costs and increasing the efficiency of resource use, is not performed at the proper level. the main causes of losses in the industry are, first of all, the state of transport infrastructure, which prevents the development of fuel-efficient speeds, high rates of duties and taxes, which encourages individual entrepreneurs to reduce profits, underutilization, especially of port and railway infrastructure, reduced business activity and reduction of the transit territory of ukraine. improving the economic efficiency of the transport and logistics industry requires, above all, the formation of clear, understandable and transparent conditions for doing business by minimizing bureaucratic pressure, creating mechanisms to encourage investment in the industry, including innovation, increasing public investment in important infrastructure projects, increasing the effectiveness of decision-makers and ministries in the implementation of international agreements and the responsible use of foreign investments and loans. it is no coincidence that russian attacks are increasingly targeting transportation infrastructure. as a result, thousands of wagons and trucks carrying grain and metal cannot leave for the european union (eu), and diesel tankers and gasoline tankers, weapons, and humanitarian aid cannot leave europe for ukraine. ukraine's seaports are normally used to export more than 70 percent of all cargo worth about $47 billion. however, since february 24, these seaports have been blocked by the russian navy and anti-ship mines. as a result, hundreds of thousands of tons of cargo have been trapped in ports and on ships in ukraine. some of this cargo has been removed by road and rail, while the bulk has been shelled or seized by the russian military (kyiv post, 2022). ports are more important for the trade balance than for gross domestic product (gdp). due to the port blockade, the economy loses about $170 million every day. ukraine has currently lost control of four ports: mariupol, berdyansk, skadovsk and kherson (concessionaire – risoil and georgian industrial group). currently, transshipment is only possible on the danube river, via the ports of izmail, reni and ustbaltic journal of economic studies 46 vol. 8 no. 2, 2022 dunaisk. to date, these sites have accumulated cargo belonging to ukrainian farmers, waiting to be shipped. since the beginning of the war, general freight traffic by rail has changed dramatically. previously, a large share of export cargo was transported to the ports of the black sea. at present, it remains possible to transport export cargo only to the ports remaining at the mouth of the danube (izmail, reni, kiliya, ust-dunaisk) or the western border crossings. unfortunately, only about 55% of this available capacity is used. daily transshipment of cargo from all connections is just over 1,900 cars (124,000 tons), covering a range of commodities. as for grain, only 43% of the potential is used per day (314 grain wagons carrying about 21,000 tons). but cross-border infrastructure projects require large infrastructure investments and eu funding in the form of grants and financial assistance from the european commission. that is why the formation of logistics clusters as a form of innovative development in wartime is crucial. 3. formation of sea clusters as an innovative form of development of coastal regions of ukraine marine shipbuilding and ship repair cluster. at present, the shipbuilding industry of ukraine is in a critical condition, and the negative phenomena have even intensified recently. russia's aggression against ukraine has led to significant structural changes in the industry, as well as to acute social problems in coastal regions, where shipbuilding is to some extent city-forming. establishment of a shipbuilding and ship repair cluster is primarily aimed at improving the competitiveness of coastal regions, development of their maritime and export-oriented industry, as well as improving coordination within the cluster. for example, the maritime cluster of hamburg, germany, is one of the world's shipbuilding and ship repair centers. the german government has turned the port of hamburg into a major transport and logistics center of northeast europe. a financial center was created within the cluster to support the shipbuilding industry. germany supports cluster initiatives at the federal and regional levels. at the federal level, a maritime coordinating council was established under the federal ministry of economics and technology to promote cooperation among german maritime industry sectors. at the regional level, a number of studies have been carried out with the support of the hamburg government to develop policies and frameworks for cluster initiatives. the first practical result was the establishment of the hamburg school of logistics in 2003. norway 's maritime cluster is considered a cluster of global importance. it includes ship owners, shipbuilders, ship equipment manufacturers, brokers, financial experts, insurers and consultants. the 5,6 6,1 5,4 3,5 -1,7 1,1 5,1 -1,0 –1,6 4,1 4,4 1348,7 2839,8 3127,7 -1423,5 -22591,6 -17847,8 7408,7 -16796,7 -24265,4 8421,8 9054,8 -3,0 -2,0 -1,0 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -30000,0 -25000,0 -20000,0 -15000,0 -10000,0 -5000,0 0,0 5000,0 10000,0 15000,0 profitability of operating and all activities of enterprises,% net profit (loss) of enterprises, uah million figure 1. dynamics of profitability and profitability of enterprises of the transport and logistics industry of ukraine in 2010–2020 source: state statistics service of ukraine (2022) baltic journal of economic studies 47 vol. 8 no. 2, 2022 cluster specializes in shipping. the total number of members is 600 people. the member organizations include the norwegian shipowners' association, the federation of norwegian manufacturing industry, the metallurgical industry association and the norwegian maritime officers' association. the general body of the norwegian maritime cluster is the maritime forum, founded in 1990. it is open to norwegian companies and organizations related to the maritime industry and includes both employers and employees. the norwegian maritime forum brings together hundreds of participants and provides a framework for joint projects in the maritime sector and cooperation with the norwegian research centre, which develops innovation as norway 's main competitive advantage and coordinates eu maritime research. the function of service and maintenance of maritime activities is performed by the maritime service cluster in oslo (development in the norwegian maritime cluster, 2004). maritime transport and logistics cluster. at present there are enough prerequisites for the formation of maritime transport and logistics clusters (also called port clusters) in the odessa, mykolaiv and kherson regions and on the sea of azov. they will increase the competitiveness of ukrainian ports by attracting investment, building new terminals and providing port facilities to private enterprises on the right of concession. by the way, singapore's maritime cluster is based on port activities, shipping, shipbuilding and ship repair. as a port, it is on par with rotterdam, handling about 300 million tons of cargo annually. the cluster is known as a ship registration center. many shipping companies based in singapore contribute to a higher concentration of service companies around them. such companies provide agency, logistics, financial, marine insurance, legal and arbitration services. from the beginning, the government's goal has been to make singapore the world's leading integrated logistics center with huge air and land transportation (the maritime and port authority of singapore, 2022). seaside cluster of fish and seafood. the formation of a cluster for the production of fish and seafood in coastal regions of ukraine will enable the effective development of available resources. the potential of the black sea and azov sea gives an opportunity to involve in the economic turnover additional 300400 thousand tons of undeveloped marine biological resources. this will allow: – loading up the capacities of coastal fish-processing enterprises; – increasing the volume of production of deepprocessed products (fillets, klipfish) upon enterprise modernization; – expanding the product range on the basis of innovative technologies. an active increase in the volume of deep processing products from marine biological resources will become the dominant contributor to the gross domestic product of the fishing industry (the maritime and port authority of singapore, 2022). the publication considers the fish cluster as the integration of the basic production corporation engaged in the catching and processing of marine biological resources with the corporate entities of related industries. such a meso-economic cluster system of the fishery complex includes three main subsystems: – mechanisms for interaction of state and regional authorities, local government, public and professional organizations; – a complex of basic elements, including shipbuilding and ship repair, fishing and seafood production, seafood processing, storage, packaging and sale, as well as innovation infrastructure; – a complex of uninterrupted supply and sale of fish products (the maritime and port authority of singapore, 2022). a similar structure of the fish cluster is presented in (markova, 2017). it includes the same three main subsystems: 1) a set of basic elements, including production and experimental fish farms, mariculture enterprises (marine farms), integrated industrial processing of aquatic biological resources, storage, packaging and sale of seafood, shipbuilding and ship repair, and innovative infrastructure; 2) mechanism of interaction between national and regional authorities, local government, public and professional organizations; 3) complex uninterrupted supply and sale of fish products. regional clusters based on fishing and seafood complexes of the black sea and azov sea regions of ukraine have the following distinctive features: – they are based on the region-specific branch, the share of which exceeds the average share of the region’s economy (grp) on appropriate national and world markets; – the growth rate of the cluster’s product output exceeds the average growth rate of the grp; – taking into account specific costs and quality of products, the clusters are as competitive as appropriate economic sectors of other countries and regions; there are scientific and educational foundations, transport and energy infrastructure for its development; – there is sustainable cooperation of cluster industries, which serves as a basis for the formation of network organizations utilizing cutting-edge information technologies, value chains, common production, supply and management standards, and cluster brands; – it is possible to establish state and/or public cluster management bodies comprising the middle level of economy (the maritime and port authority of singapore, 2022). baltic journal of economic studies 48 vol. 8 no. 2, 2022 sea tourism cluster. among european states, the cluster model of tourism organization is already being implemented by italy, france and norway. for example, norway has tourism clusters developing in the maritime industry. in france, the nice tourist cluster is annually visited by several million tourists, which corresponds to almost 1% of the world tourist turnover. similar high-efficiency models operate in belgium, greece, ireland, spain, scotland and sweden. the cluster organization of tourism in italy has a high level of scientific justification. for example, some regions of the country have special conditions, such as prerequisites for the development of several types of tourism, significant tourist resources, the value of the tourist area, etc. examples of the italian clusters include tourist systems lake trasimeno in umbria, salina hot springs in sicily, adriatic sea and coast, and cities of arts, culture and business both in emilia-romagna (kovalva & alysheva, 2014). considering the sphere of development of marine recreation in coastal regions of ukraine, we can note the great prospects of the kinburn spit cluster in the mykolaiv region. other tourist clusters can also be created with the help of public-private partnership. scientific and educational institutions, private enterprises and government agencies should cooperate to promote sustainable tourism development, provide high-quality tourist services, stimulate and retain demand, as well as promote employment of local people in this area. cluster of maritime research and education. this cluster cannot do without qualified personnel and the accumulation of a critical mass of unique maritime knowledge. for example, the government of singapore is taking steps to strengthen the competitiveness of this maritime center by supporting the training of relevant professions, the introduction of advanced information technology and e-commerce, and significant investments in scientific research. in 2003, 100 million singapore dollars were allocated to develop a maritime technology cluster strategy; a fund of another 80 million was established to promote the cluster. four specialized training courses have been established at universities in singapore: maritime law, maritime economics, shipping, shipping management and maritime business (the maritime and port authority of singapore, 2022). the educational system of mykolaiv also provides training for the professions required in maritime clusters. for half a century, the faculty of maritime economy (known as the faculty of engineering and economics until 2013) of the admiral makarov national university of shipbuilding (nuos) has been providing students with appropriate knowledge and practical skills. currently, the faculty offers higher education in the following specialties: business economics, international economics, management and administration of enterprises, logistics and supply chain management, management of hotel and tourist business, finance, banking and insurance, accounting and auditing in accordance with international standards. as the maritime education cluster is formed and developed, the faculty’s seminars, conferences and workshops at the nuos may touch on further cluster development of the maritime complex, quality management, strategic planning, introduction of latest technologies, legislative and regulatory support, financial activities, etc. systematic information and methodological support for cluster participants, whose activities are related to the regional maritime complex, will greatly contribute to their professional development. as professor v.n. parsyak (parsyak, 2014) notes, the maritime economy of the country is unthinkable without higher education institutions with the research and educational services they provide. in turn, universities must make changes in response to the needs of the business environment, not just adapting to its current state, but anticipating its progress (parsyak, 2014). this scheme is usually used by countries that are heavily dependent on the development of the maritime complex. multibranch maritime cluster. ukrainian scientists advocate an approach to creating cluster systems that involves enterprises from various sectors of the economy, social sphere, and research organizations. a similar approach is noted in the creation of the maritime cluster of bulgaria (marine cluster bulgaria, 2022) (areas of activity of the companies involved: transport and logistics, navigation and embedded systems, shipbuilding, coastal and maritime tourism) and the cluster delta danube (clusterul delta dunarii, 2022) (areas of activity of the companies involved: hospitality and tourism, food additives, ingredients, functional food, food processing, ecotourism, accommodation (hotels, campsites)), which include universities, governmental and local business support organizations, shipping, tourism and recreation, and food companies. the goals of such a cluster can be the following: achieving sustainable development of the coastal region through cooperation of enterprises, organizations, educational and research institutions, regional and national authorities for economic growth using specific regional resources and opportunities, technological modernization, innovation and integration of the cluster into the global economy. indeed, coastal regions are complex systems that include geographical, economic, ecological and social subsystems. their attractiveness is associated with the intensification of their economic development and requires a comprehensive study of the possibilities of their sustainable development. thus, the maritime baltic journal of economic studies 49 vol. 8 no. 2, 2022 potential of a coastal region is the most accurate characteristic of its economic significance. by maritime potential we mean the aggregate ability of economic sectors and industries that make up the maritime complex of the coastal region to carry out production and economic activities, meet the needs of the population and ensure the sustainable development of the country 's maritime activities – and all this with the help of the principle of cluster organization. the basic principles of warehouse logistics are presented. these include: consistency, coordination and integration, optimization, sustainability and adaptability, cost reduction, tqm, use of modeling and automation. it is proved that these principles of warehouse logistics allow to provide timely and quality services for storage, processing and shipment of inventory, provide interconnection of the warehouse with the services of supply, storage, transportation and shipment of inventory. it has been proved that the decisive role in the management of warehouse logistics belongs to planning. the main objectives of integrated logistics planning include: the allocation of work areas and equipment on them, minimizing costs, increasing the level of cargo handling and warehouse capacity, increasing throughput capacity. organizational and functional model of innovative transformation of regional transport and logistics systems, which together will contribute to the intensification of innovative development, engineering and re-engineering of warehouses and transport and logistics entities in general and the construction of modern logistics centers that provide high quality services using the latest technology, was substantiated (irtyshcheva, voit, & nosar, 2021). until recently, most ukrainian reformers paid little attention to the coastal regions of ukraine. however, modern conditions make these regions a subject of sustainable development of the country within the framework of a completely new national economic space, which has been formed over the past two years. sustainable development of coastal regions depends on effective state management of regional development and realization of the economic potential of these territories. 5. conclusions the analysis showed that the dynamics of profitability indicators against the background of a gradual increase in gross profit of enterprises in 2010–2013, 2016–2018 and 2019–2020. it should be noted that in 2014, 2015, 2017 and 2018 the enterprises of transport and logistics industry of ukraine were unprofitable, which indicates an increase in the growth rate of costs over profits. however, russia's war against ukraine has made significant adjustments to the efficiency of transport and logistics companies. due to the blockade of ports, the economy loses about $170 million every day. ukraine has currently lost control of four ports: mariupol, berdyansk, skadovsk and kherson (concessionaire – risoil and georgian industrial group). as the results of the study showed, the coastal regions of ukraine currently need a separate public policy. for this purpose it is necessary to mobilize the scientific potential of ukrainian marine biologists, geographers, specialists in the field of maritime and environmental law and economics, as well as to initiate cooperation of central, regional and local authorities in 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(2021). strategy for the development of warehouse logistics as a component of transport and logistics systems in the focus of economic transformation. baltic journal of economic studies, 7(5), 49–58. doi: https://doi.org/10.30525/2256-0742/2021-7-5-49-58 kyiv post, (2022). logistics war in ukraine. retrieved from: https://www.kyivpost.com/ukraine-politics/ logistics-war-in-ukraine.html state statistics service of ukraine (2022). retrieved from: http://www.ukrstat.gov.ua/ baltic journal of economic studies 99 vol. 2, no. 3, 2016 international financial institutions system as a factor of transformation of national currency system andrii oliinyk1 kyiv national university of trade and economics, ukraine abstract. the purpose of the paper is to analyze theoretical and practical aspects of the features of the ifi influence on transformation of national currency systems of such organizations’ member states. defining features of interaction policy among national economies and ifi in the monetary sphere, considering countries’ socio-economic parameters of development, will allow monetary authorities to achieve the optimum level of development of its economy. methodology. theoretical base of the study are the provisions of general scientific theory of knowledge studied phenomena and processes, in particular: methods of induction and deduction (in determining classification criteria of ifis impact on national currency system), analysis and synthesis (in determining the features and priorities of national currency system), comparisons, associations and analogies (the justification of characteristics of advantages and disadvantages of ifi). the information base for scientific research is scientific papers and publications of domestic and foreign scientists-economists, materials of scientific-practical conferences, legislative and normative documents, the imf, world bank and asian infrastructure investment bank materials. results. theoretical approaches to the definition of the national currency system and international financial organizations, including its classification, are proposed. it is proved that the imf makes active impact on national currency policy formation through regulation and supervision, while the world bank and aiib are related in a passive way. the ifi regulation trends are to implement floating exchange regime, liberal currency transactions, cancel currency restrictions in member countries. although it refers to all countries, some of them with large population, trading, underdeveloped institutions of democracy could avoid some ifi pressure. practical implications. the study accents attention on the specifics of the ifi activity in terms of changing the currency policy of member countries. comparison of priorities among national currency policy and ifi recommendations could be applicable for national authorities in performing national currency policy. value/originality. despite the existing studies in the field of international monetary policy, there is a gap in theoretical definition of interaction between ifi and national monetary authorities in the field of national currency policy forming at present. this article brings new approaches to the ifi classification and approaches to the definition of ifi characteristics in terms of impact on currency policy of member country. key words: international financial institution, national currency system, exchange rate regime, international monetary fund, world bank, asian infrastructure investment bank. jel classification: e52, f30, f31, g20 corresponding author: 1 department of international economic relations, kyiv national university of trade and economics. e-mail: oliynik12@gmail.com 1. introduction in today 's context of globalization, an important role is brought to international financial institutions (ifi) in regulation of financial and foreign exchange environment of countries. globalization and regionalization are opposed vectors of economic development and determine the direction of national economies in choosing their own concepts of currency policy. it is clear that these processes do not take place without the intervention of international regulation of financial institutions. scientific interest is related to conditions and vectors of impact of ifi (including the imf, world bank and asian bank for infrastructure investments) on national currency system, theoretical definitions of national currency system structure, priorities, ifi policy. 2. national currency system and national currency policy priorities considering the ifi cooperation with countries on forming their own national currency system, it should be decided on the nature of the national currency system, its structure and priorities for the currency policy. baltic journal of economic studies 100 vol. 2, no. 3, 2016 money is one of the main component of the monetary system, which is considered to be analyzed both from a narrow and broad point of view. from a narrow point of view, money is identified with coins and notes that in the particular country are legal tender, and function as world money abroad. from a broad point of view, money is not just coins and banknotes, but also claims that take the form of promissory notes, checks, bank deposits. some ukrainian scientists, combining these two definitions, describe the concept of „currency ” as the funds that are directly or indirectly related to external relations (slavuk, 2006). as a money unit, the currency must also perform the same function as the money, but the main difference between the two is their scope of application. currency operates outside the state and creates international monetary relations, and money operates within the state. as l. krasavina suggests, „currency” as a category provides relationship and interaction among participants in the global economy (krasavina, 2010). since currency outside the country enters into a relationship with the currencies of the world through convertibility, it provides the basis for the globalization of financial markets, efficient international trade and development of international monetary relations. „system” is a second category and is defined as a set of objects whose interaction causes new integrative qualities, which is not inherent for separate elements (orekhova, 2007). the main feature of the system is the interconnection and interdependence of its elements together that are stable and the operation of the system can make the transitions from one state to another. this feature reveals the essence of the currency system at the most accurate way. from economic point of view, currency system is a combination of monetary and economic relations historically based on the internationalization of economic relations. from organizational and legal points of view, currency system is a state-legal form of currency relations of the country, which was developed historically on the basis of economic relations internationalization and it is enshrined in national legislation according to the norms of international law (mozgovyi, 2005). it should be noted that national currency system is a part of the monetary system of the country and can perform an independent function in the country 's participation in the implementation of international monetary relations (borynets, 2004). for example, scientists examine national currency system from the perspective of economic relations for international settlements, creation and use of a basket of currencies that are a part of the national monetary system. that is because all these systems are linked closely and together reflect the situation in the financial sector of a certain environment (national or international). thus, from our point of view, currency system is one of the main components of the financial system, as shown in fig. 1. monetary system currency system banking system tax system budget system fig. 1. financial system structure due to the systems relationship, there is a considerable interdependence not only between systems and between different elements of different systems. for example, one element of the currency system – the exchange rate – affects not only the elements of the currency system (gold reserves, foreign exchange market, monetary policy, etc.), but the elements of monetary, credit and banking systems (issue of currency, interest rates loans and deposits, established norms of bank reserve, stability of banking and financial institutions and others). in the context of the subject it is proposed to consider national currency system as a set of economic and monetary relations, which provide currency functioning for foreign economic relations of the country, the creation and use of monetary resources that legally are enshrined by the state legislative acts, including regional standards, international rights and ensuring the competitiveness of the national economy under the influence of factors of globalization and institutionalization of the international financial and monetary relations. the main structural elements of the national currency system are (dzyublyuk, 2007): currency, convertibility of currency, exchange restrictions, exchange parity and exchange rate regime, international currency liquidity and reserves, foreign exchange market and gold market, international payments regulation and international currency relations, national authorities that are entrusted to develop and implement currency policy. each of the elements of the national currency system is always at some stage of development or transformation. for example, a change of national means of payment into foreign, restrictions on foreign exchange transactions or currency market liberalization, changes in the exchange rate regime. in general, such a transformation depends on the priority of currency policy of the country to achieve certain macroeconomic indicators of the economy. today, most governments of the world are developing such objectives of currency policy that would: maintain a balance of payment operations or receive a payments surplus to stimulate the economy; ensure the stability of the exchange rate; form the monetary stability of the economy. in the final case, the main purpose is the creation of conditions for effective functioning of the economy based on the formation of market players’ trust towards monetary authorities, which ultimately improve the investment climate in the country. baltic journal of economic studies 101 vol. 2, no. 3, 2016 3. institutionalization of world monetary system regulation: causes and genesis proposals on the creation of the ifi, which would be involved in the regulation of exchange relations, appeared in the late 20's of the 20th century. before that time issues in economic relations were resolved by each state, any universal multilateral regulation was absent (neshataeva, 1993). the need for universal regulation of economic relations was justified by the following reasons: firstly, the negative effects of imbalances of one economy on another caused by the global economic crisis in 1929-1930; secondly, the constant growth of foreign trade turnover among individuals and legal entities in different states; thirdly, the close interdependence between world market prosperity and national economies. the obvious connection between slowdown of international economic cooperation and a decrease in the european market after the world war ii turned western economists and lawyers to argue about the necessity of uniform, universal international legal regulation of international economic relations. the first international financial institution – the bank for international settlements was established in 1930. its work filled monetary and financial segment of versailleswashington system of international relations, in which the interaction of states was governed by the rules of genoa monetary system. in 1933 according to the initiative of the league of nations an international economic conference was convened to search for measures that would as soon as possible remove barriers from international trade and facilitate the necessary measures to stabilize the currency and restore lending (tsygankova, 2001). however, the significant differences between member states did not allowed reaching the stated goals. the crisis of the international monetary and credit relations during the second world war found its expression in the introduction of currency restrictions. money turnover of most countries had inflationary feature because of chronic government deficits. global economic ties were broken. it was necessary to normalize international economic relations of states, especially enhance international trade and adequate development of the international monetary and financial relations. however, there were currency restrictions on its way. thus, at the end of the world war ii the leading countries of the world began to find ways to stabilize the international monetary and financial relations, based on the need for multilateral monetary agreements between states (khoroshkovsky, 1999). at the bretton woods conference there was produced a compromise and defined organizational structure of the international economy after the world war ii. delegates approved the decision to establish the institutional foundations of the world financial system, namely the international monetary fund to recreate and stabilize the international and national monetary and financial systems and the world bank (international bank for reconstruction and development, hereinafter – ibrd) to promote private capital to expand investment lending. the creation of these two international organizations (the so-called „bretton woods sisters”) launched a new phase of international economic relations, which since have acquired the character of a supranational regulation and management. in modern terms, they establish „game rules” in the monetary and financial sector for most countries. internationally, organizations serve as the primary regulator for the implementation of the single currency policy of the member states. 4. international financial institutions systems: theoretical approaches and classification considering the approaches to the definition of the ifi, one could argue that they are an integral part of the institutional structure of the world economy. on the one hand, these organizations regulate the international monetary and financial relations based on their power and resources. on the other hand, it is a forum for intergovernmental discussion of monetary, credit and financial policies, and it provides storage and systematization of information on current monetary and financial problems and the economy as a whole. in economic science ifi is an international economic organization based on international agreements to regulate currency and financial relations between the member countries, promoting economic development and providing credit assistance (krasavina, 2010), as well as for research in monetary and financial areas of the world economy, providing recommendations and proposals. hence, the activities of these organizations are aimed at achieving the following objectives: joint efforts of the international community to stabilize international finance and the global economy; implementation of interstate exchange, credit and financial regulation; joint development and coordination of strategy and tactics of the world monetary and credit and financial policy. ifi are created by combining the financial resources of the member states to solve problems of the global economy. these tasks can include: 1) transactions on the foreign exchange and stock markets to stabilize and regulate the global economy, support and promote an international trade; 2) provision of international credits, particularly in the implementation of public projects and budget deficit financing; 3) investment activities and financing in the „internal” projects which makes a positive impact on international business; 4) financing international aid programs and fundamental research. some states use ifi to conduct their own policy; others use them as donors, and others – as recipients, and work with them to raise funds for investment and solving deficits problem. baltic journal of economic studies 102 vol. 2, no. 3, 2016 classification of the ifi is based on many criteria. in particular, i. gerchikov classifies international economic organizations, which are in charge for regulation in the world economy, relying on the organizational principle and he distinguishes: a) organizations of the un system; b) organizations that are not part of the un; c) regional organizations (gerchikov, 2001). classification, that is more detailed, is offered by a.  rogach (rogach, 2003), who groups ifi by a number of criteria, including: number of members: 1) general organization potentially designed to the participation of all states; 2) restricted organization, which involves only group of countries; nature of competence: 1) organizations which have the overall competence; 2) organizations with special competence; ratio of volume competencies: 1) intergovernmental organizations, which perform coordinating functions, where competence is shared and is redistributed among states and organizations; 2) organizations that perform certain supranational functions and have exclusive competence in a number of functions and limit member states; 3) supranational organizations established to create the rules for member states and mechanisms for compliance monitoring; sphere of international regulation: 1) international economic organizations, which govern economic and industrial cooperation and areas of world economy; 2) international economic organizations that govern global trade; 3) international monetary and financial organizations; 4) international and regional organizations that regulate business activity; 5) international nongovernmental organizations and associations that promote economic relations. according to the classification of m. pebro, international organizations can be divided into four main categories (pebro, 1994): 1) organizations, which are designed to deal with worldwide problems and were created after the world war ii; 2) organization, established by initiative of the western countries, which unite developed market economies; 3) organizations involved in the european development; 4) various institutions for regional or bilateral cooperation. t. tsygankova, t. gordeeva et al. (tsygankova, 2001), distribute ifi on global and regional ones. so-called „bretton woods institutions” which include the international monetary fund (imf) and world bank group (wb) referred to global institutions. regional ifi, which sometimes referred to „regional development banks”, include the european bank for reconstruction and development (hereinafter – ebrd), the inter-american bank of development (idb), asian development bank (hereinafter – adb), the african development bank (hereinafter af br). as part of the subject, the classification of ifi based on the following criteria is proposed: 1. according to the existence of impact on a national currency policy formation: 1) containing the required currency regulations, 2) provide an explanation recommendatory, 3) neutral to regulate the national currency system or the transformation of its elements. 2. according to the feature of influencing on national currency system: active influence, which is characterized with the formation of normative principles of national currency policy, overseeing the functioning of the currency system, the provision of borrowed resources under certain measures of currency policy; passive impact associated with input/output of foreign currency to the national economy and, thus, the spread of the foreign currency in a country occurs under the pressure on the balance of payments, especially, if the funds are used inefficiently. while specific requirements to change the mode of the elements of the national currency system are absent, however, it creates the foundation for the liberalization of payments. in addition, some ifi coordinate their monetary policies with others ifi, which exercise an active influence on the formation of member country currency policy. 5. ifi activity features in national currency policy formation the current institutional structure is characterized with an extensive system of international organizations and institutions, which includes both global and regional monetary and financial institutions. significant role in the concentration of financial resources and regulation of the modern world economy play such ifi as the bretton woods institutions, the bank for international settlements (bis) and the bank of regional specialization (the african development bank, asian development bank, inter-american development bank, asian infrastructure investment bank etc.). the main ifi, which will be considered in this study, are the imf, the world bank group (ibrd, ifc, ida, the regional affiliates, such as ebrd, adb, af br) and abii. the imf (fund) is an intergovernmental organization created to regulate monetary relations between member states and provide them with financial assistance in exchange difficulties, caused by balance of payments deficit with the help of loans in foreign currency. today, this ifi has a key role in the global financial system and performs essentially the function of lender of last resort. providing loans, the imf must be sure that this country has a policy designed to eliminate the problems of external payments. in exchange for financial support of the fund, the country undertakes to accomplish the correct measures to ensure that the country is able to repay its debt to the fund and provide, thus, fulfilling of its credit. therefore, unlike other sources of external financing, the imf and the world bank branches have a special place in the external relations of credit borrowers. baltic journal of economic studies 103 vol. 2, no. 3, 2016 in its credit policy the imf is governed by the following basic principles: borrowing country should be ready to apply measures to overcome problems with its balance of payments; policy of the country should be compatible with the objectives of the imf and help prevent the introduction of trade and currency restrictions; policy of the countries should be aimed at overcoming the problem of payments for an extended period; policy of the country should lead to an increase in its foreign exchange reserves so that it could repay its own national currency to repay the imf loans. thus, the national currency policy of the borrowing country should be compatible with the principles of the temporary use of imf resources, and this principle, according to the fund, is in favour for all countries. the doctrine of the conventions, which constitute the above principles, acts as an instrument of interstate regulation, which allows the fund to use credits for active influence on the whole complex of social and economic relations of countries that use its resources. loans provided by the fund to many countries are particularly important because they act as a catalyst in attracting other financial resources can significantly exceed the size of financial assistance of the imf. the main role of the imf is to strengthen monetary cooperation and maintain financial stability. to achieve these goals, the imf has the right to oversee the exchange rate policies of members. in practice, the fund performs particularly multilateral surveillance, or advising on economic policy of each member state, analyzes economic policies, collects data and announce them. the presence and supervision of the imf over exchange rate policies of member countries is related to the imposition of liability, which are determined in accordance with the recommendations of the fund experts (demkivskyy, 2014). it appears a significant political pressure on monetary authorities, as data of member country on foreign exchange reserves and policy interventions are published regularly. some politicians do not have enough experience in managing monetary and interest rate, and may not fully take into account the risks of changes in monetary policy. thus, in this context, the imf can act as a union of states and a common forum to address such problems. as a part of the study it is found the degree of influence of the imf and indicators of socio-economic development in following the announced exchange rate policy by member countries. the results indicate the presence of the inverse relationship between the number of announcements and publications about imf member country and possibility of deviation from the floating exchange rate regime (r = -0,09). the „fear of pegging” is positively correlated with the supervision of the fund (0.061). this is explained by the doctrine of the imf for liberalization of currency relations and a greater favour to floating exchange rates. according to statistics of g. minne (minne, 2013), the probability of deviation from the floating exchange rate decreases by 2.18 percentage points averagely with the release of a publication about imf members. moreover, the deviation threshold for probability decrease is higher for countries with small economies that are not under fund’s scrutinize surveillance. thus, the influence of the imf on exchange rate policies of member countries is quite significant, although it can be negated with largest economy, the share of country’s trade in world’s gdp. the population has a positive effect on the propensity to use in fact the fixed exchange rate regime instead of floating one. this explains, for example, the ability of china, india and russia to conduct its own currency policy. the level of democracy has a negative correlation with the fear of floating for exchange rate regime, as democratic countries have an incentive to reduce the uncertainty to attract foreign investment better. increased capital flows adjustability reduces the likelihood of deviation from the chosen exchange rate regime. an economic growth rate stimulates to preserve exchange rate parities and consequently causes a negative impact on the probability on deviation from the fixed exchange rate and positive on the probability on rejection of the floating exchange rate. that is, it is necessary to stabilize the country 's exchange rate volatility if the undervalued exchange rate is a source of national economy growth. one of the main factors that determine susceptibility to deviations from the officially announced exchange rate regime is the level of institutional quality authorities. thus, countries with high levels of corruption and low protection of property rights are less able to comply with commitments to fixed exchange rate. it shows their inability to support macroeconomic stability. it also explains the existence of dual exchange market in the country, which increased demand for foreign currency „presses” on the course and creates a temporary „black market”. while countries with developed institutions experience „fear of floating”, as they seek to ensure the stability of development and reverse the volatility of the exchange rate. international bank for reconstruction and development was established in 1944 to ensure international flow of long-term investments to assist in restoring the economy of countries devastated by war. after 1952 when the countries of western europe acquired a certain economic independence the bank’s focus gradually shifted towards measures specifically designed for developing countries. these changes were caused by the release of significant number of young independent states; by a change of the former colonies and dependent countries in the world economy; by the struggle of various forces in the world around the issue of selecting ways of development, especially for countries, which gained independence. all this was reflected in the statutory purposes of the international financial organizations, contained in bretton woods. according to the statute, the bank has the following objectives: encouraging investment in member countries baltic journal of economic studies 104 vol. 2, no. 3, 2016 for productive purposes; encouraging private foreign investment and supplement them, if necessary, by its own loans; providing guarantees for private foreign investment; promoting the balanced development of international trade and balance of payments support; encouraging economic development in the poorest countries; assistance to member countries in the reconstruction and development of their territories; assistance to developing countries through longterm financing of projects and development programs; giving special financial assistance through the international development association to the poorest countries; support of the private enterprises in developing countries through its location – international finance corporation. but the bank is not only a source of external funding for developing countries, but it is also an important center of development, support and implementation of the development strategy of the „third world.” the world bank has a unique opportunity to promote greater awareness of the member states on the most advanced practices in the field of economics and effectively distribute the necessary knowledge among whom it assists. at the beginning of the 20th century, there was an ibrd membership of 180 countries. membership in the ibrd is interconnected with membership in the imf. hard binding of ibrd charter (sec. 1, art. 2, sec. 3, art. 6 of the statute) with membership in the imf is related to the fact that member countries of the world bank are required to conduct monetary policy in accordance with the provisions of the imf. therefore exclusion from one financial institution entails loss communications with another. one of the main forms of monetary system growth of the people's republic of china (prc) in the xxi century was the creation of a new regional international formation – asian infrastructure investment bank (abii). according to many economists, this project is aimed to the implementation of the „silk road” for the development of transit countries infrastructure with the aim of closer china’s economic cooperation as with the eu, so with neighbouring countries. it also entails the prevalence of the use of the yuan in international calculations, particularly among the member countries of the project. this concept of development is important from the perspective of avoiding of chinese economy „overheating”, and promoting the free flow of chinese capital to neighbouring countries via comprehensive use of the chinese currency. according to scientists (rogovyk, 2015), abii creation is a continuation of the chinese policy on strengthening the yuan as a reserve currency. back in 2013, the chinese authorities announced the organization of the „silk road”. on october 24, 2014 21 asian countries (led by china), 7 arab countries, 17 eu member states joined the memorandum of understanding on the establishment of a multilateral intergovernmental financial institution (aiib). thus, the share of asian members accounts for 75% of voting shares. as of 07.25.2016 the bank has received applications for funding infrastructure projects totalling $ 742.77 million dollars of the us, of which endorsed 301.74 million dollars of the usa. in our opinion, the abii project is not so affected significantly the exchange rate policies of member countries, such as the imf. according to the analysis, aiib works more as the world bank. according to recent statements by top management of the aiib, projects funding will be entirely in us dollars. the abii concept can reduce the share of the imf in the asian region, which will allow china to take global leadership, promote china as a country that supports the internationalization of the rmb and increase its contribution to the global financial system. the trade development will require stability in the monetary policy; therefore china will reach mutual countries understandings regarding transition to its own national currency. in addition, a broader use of national currencies of member countries in international exchange with china is facilitated with large number of agreements among the central bank of china and the central banks of member countries. yuan is becoming more common in use in vietnam, kazakhstan, mongolia, uzbekistan and thailand. in addition, factors that will facilitate the spread of the yuan will be: improving the integration of neighbouring economies to trade and industrial chain of china, increasing trade turnover with china's neighbouring countries and the eu; table 1 transformation of national currency system elements under the impact of ifi № national currency system elements active impact ifi passive impact ifi character of impact 1. currency imf, wb, абіі dollarization of the national currency system 2. convertibility of currency imf promoting free currency conversion 3. exchange restrictions imf imf, wb absence or presence of only a partial term 4. exchange parity and exchange rate regime imf imf, wb priority to floating or regulated floating exchange rate regime 5. international currency liquidity and reserves imf imf, wb promoting an active formation of foreign exchange reserves 6. foreign exchange market and gold market imf imf, wb limited monetary authorities intervene in the currency market 7. international payments regulation and international currency relations imf imf, wb liberalization of foreign exchange settlement and relations baltic journal of economic studies 105 vol. 2, no. 3, 2016 increasing funding for asian developing countries, through transfusions of chinese investments; absence of imposed requirements in currency policy for member countries in terms of obtaining investment from abii. abii has a considerable potential to increase the use of chinese currency in the member states through the efficiency and the importance of investment to neighbouring economies and the absence of the need to observe specific currency requirements. thus, having analyzed the main functions of the ifi activities it is offered the following distribution according to the area of impact on the elements of the national currency system (table 1). 6. conclusions national currency system is a set of economic and monetary relations, which provide currency functioning for foreign economic relations of the country, the creation and use of monetary resources under the influence of factors of globalization and institutionalization of the international financial and monetary relations. the national currency system transformation is displayed in the form of its element adjustment. the need for universal regulation of economic relations is justified by the reasons of the negative effects of imbalances of one economy on another, the constant growth of foreign trade turnover among individuals and legal entities in different states; the close interdependence between world market prosperity and national economies. the classification of the ifi due to the possible impact on national currency policy and the nature of this impact demonstrate distinction between active and passive ifi, which depends on the features or the instruments, applied to member’s country policy. the research demonstrates the ambiguity of the objectives and tasks of the national currency system, facing the monetary authorities and the ifi. key features in implementing of national currency policy of the country and priorities of the ifi are similar: 1. ensuring a stable balance of payments; 2. stability of the national currency of the member country; 3. free convertibility of the national currency; 4. no restrictions on foreign currency transactions. it remains problematic to conduct an independent currency policy for member country with a fixed exchange rate regime; large numbers of currency interventions, as a pressure of ifi, particularly the imf to implement the agreements are significant. but for countries with a significant size of the economy, amount of people, even such pressure cannot force to implement imf standards. most of the activities offered by the imf and world bank are advisory in nature. however, it should be emphasized that while ifi provide financial resources, these could be accompanied by imposed requires in national currency 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(2001). international organizations. – kyiv: kyiv national economic university, 340 p. андрей олейник система международных финансовых организаций как фактор трансформации национальной валютной системы аннотация. целью работы является анализ теоретических и практических особенностей влияния международных финансовых организаций на трансформацию национальных валютных систем государствчленов этих организаций. определение особенностей политики взаимодействия между национальной экономикой и мфо в валютной сфере, учитывая показатели социально-экономического развития станы, позволит монетарным органам власти достичь оптимального уровня развития своей экономики. методика. теоретическими основами исследования являются положения общей научной теории познания изучаемых явлений и процессов, в частности: методы индукции и дедукции (при определении критериев классификации воздействия международных финансовых организаций на национальную валютную систему), анализа и синтеза (при определении функций и приоритетов национальной валютной системы), сравнений, ассоциаций и аналогий (обоснование характеристик преимуществ и недостатков мфо). информационной базой для проведения научного исследования стали научные статьи и публикаций отечественных и зарубежных ученых-экономистов, материалы научно-практических конференций, законодательных и нормативных документов, материалы мвф, всемирного банка и азиатского банка инфраструктурных инвестиций. результаты. предложены теоретические подходы к определению национальной валютной системы и мфо, в том числе его классификацию мфо. доказано, что мвф активно влияет на формирование национальной валютной политики путем регулирования и надзора, в то время как всемирный банк и aiib осуществляют пассивное влияние. тенденциями регулирования мфо являются внедрение режима плавающего валютного курса, либеральные валютные операции, отсутствие валютных ограничений в странах-членах. хотя это относится ко всем странам, некоторые из них с большим количеством населения, объемами торговли, слаборазвитыми институтами демократии могут избежать некоторого давления мфо. практическое значение. исследование акцентирует внимание на специфике деятельности международных финансовых институтов с точки зрения изменения валютной политики стран-членов. сравнение приоритетов между национальной валютной политики и рекомендациями международных финансовых организаций могут быть применимы для национальных органов в проведении национальной валютной политики. значение/ оригинальность. несмотря на существующие исследования в области международной денежно-кредитной политики, существует пробел в теоретическом определении взаимодействия между мфо и национальными органами монетарной власти в области формирования национальной денежно-кредитной политики, в настоящее время. эта статья открывает новые подходы к классификации международных финансовых институтов и определению характеристик мфо с точки зрения влияния на валютную политику страны-члена. baltic journal of economic studies 88 vol. 7 no. 5, 2021 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 state enterprise "production association yuzhny mashinbuilding plant named after a.m. makarov", ukraine. e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0001-9566-3090 3 ceo at movingcalifornia.com, ukraine. e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0001-6225-5277 doi: https://doi.org/10.30525/2256-0742/2021-7-5-88-96 formation of the organizational and functional model of innovative transformation of transport and logistics systems inna irtyshcheva1, sergii voit2, anatoly nosar3 abstract. the subject of the study is the theoretical and methodological aspects of the formation of organizational and functional model of innovative transformation of transport and logistics systems. methodology. general scientific methods used in the study, in particular: theoretical generalization; methods of positive and normative analysis, statistical analysis. the purpose of the study is to substantiate the formation of the organizational and functional model of innovative transformation of transport and logistics systems. results. the article provides a basis for the formation of organizational and functional model of innovative transformation of transport and logistics systems. the substantive and critical characteristics of the development of transport and logistics systems are investigated. the main factors and motives for the functioning of warehouse logistics in ukraine were revealed. the main factors and reasons for the development of warehouse logistics in ukraine were revealed. it has been proved that the reasons and factors for the development of logistics in ukraine change over the years, and this leads to the emergence of new types of logistics to meet all subjects of logistics services. it has been determined that the development of warehouse logistics is influenced by both permanent and temporary factors. permanent factors include political, economic and consumer factors. it is proved that the pandemic coronavirus disease (covid-19) had a significant impact of temporary factors on the development of warehouse logistics in modern conditions. the temporary and permanent reasons for the development of warehouse logistics in ukraine have been identified. the principles of warehouse logistics are presented. tasks and levels of warehouse logistics are defined. the basic principles of warehouse logistics are given. these include: consistency, coordination and integration, optimization, sustainability and adaptability, cost reduction, tqm, the use of modeling and automation. it is proved that these principles of warehouse logistics allow to provide timely and quality services for storage, processing and shipment of inventory, provide interconnection of the warehouse with the services of supply, storage, transportation and shipment of inventory. it is proved that the decisive role in the management of warehouse logistics belongs to planning. the main objectives of integrated logistics planning include: the distribution of work areas and equipment on them, minimizing costs, increasing the level of cargo handling and warehouse capacity, increasing throughput capacity. organizational and functional model of innovative transformation of regional transport and logistics systems, which together will contribute to the intensification of innovative development, engineering and re-engineering of warehouses and transport and logistics entities in general and the construction of modern logistics centers that provide high quality services using the latest technology, was substantiated. key words: organizational and functional model, transport and logistics systems, innovative transformations. jel classification: f01, r14, q28, q29 baltic journal of economic studies 89 vol. 7 no. 5, 2021 1. introduction the post-industrial stage of development of the world economy and the gradual transition of most countries to the next stage, namely the information society, imposes its imprint on the forms, processes and means of creating competitive advantages and forms a new market reality, in which logistics have a significant role. modern warehouses are one of the most important integrative components of logistic lanes and are a complex technical structure that includes a number of interacting elements, which together provide the functions of processing, accumulation and distribution of goods between end users. storage functions account for about 40% of the logistics costs of enterprises, so their optimization in accordance with the main global technological, informational and business trends is an important condition for business profitability and contributes to the creation of three interrelated competitive advantages, namely: speed of delivery of goods to the final consumer, safety of delivery and quality of goods, which depends on the peculiarities of their transportation and storage. innovative technologies that are implemented in warehouse logistics are aimed at increasing the resulting competitive advantages, as well as ensuring economic and social security of the territories of distribution. that is why identifying the main innovative trends in the development of world warehouse logistics, their systematization and assessment of the main advantages is an important condition for the effective development of transport and logistics centers in ukraine, including in the context of potential integration into the european and other transport and logistics systems. with the globalization of the logistics market there is a need for ukrainian companies to improve their activities, improve the quality of logistics services, to win new customers and expand its share. economic indicators of the development of the logistics market in ukraine have a positive trend. however, the influence of both internal and external factors on the variability is a component in assessing the effectiveness of warehouse logistics management. it has been researched that the majority of scientific works on assessing the effectiveness of management of warehouse logistics are carried out for a particular type of economic activity, since there are its own specifics. it has been established that when assessing the effectiveness of management of warehouse logistics, in addition to the system of indicators, the methodology and stages of their implementation are important. therefore, the substantiation of the formation of the organizational and functional model of innovative transformation of transport and logistics systems is very relevant. 2. investigation of the content and system characteristics of the development of transport and logistics systems of particular importance today is the development of logistics in ukraine. the number of studies conducted in this subject area confirms this fact. however, the processes of globalization and instability associated with various factors increase the interest of scientists in determining the directions, trends in the development of logistics warehousing. to identify and improve the components of the development we consider it advisable to study the substantive and symbolic characteristics of logistics warehousing. this will allow to understand in more detail the essence of the concept and principles, factors and reasons for the formation of warehouse logistics in ukraine. the authors agree with the opinion of burdyak o. m. and kilipenko v. v. "since logistics services for customers in the logistics market in ukraine has not yet acquired sufficient development, and wholesalers in this market have no experience in organizing logistics, it is important to first bring the need for its use and identify key ways of creating and developing logistics systems in the industry " (burdyak & kilipenko, 2010). currently, there are significant gaps in the logistics market in ukraine, which leads to delays in cargo shipments and losses of a significant number of customers. the unsatisfactory level of infrastructure forces business entities to look for new ways to deliver goods, and properly built warehouse logistics, in such circumstances, can be an alternative. to disclose the essence and characteristics of the mechanism of development of warehouse logistics offer to explore the main theoretical approaches to defining the essence of the concept of "warehouse logistics"; disclose its principles; find the factors and causes of the formation of warehouse logistics in ukraine. in fact, warehouse logistics is closely related to transportation logistics; most scientists even study transportation and warehouse logistics itself as a complex system that completely satisfies suppliers through a closed logistics line. ivanishcheva a. v. also notes that "one of the new useful areas of logistics is intralogistics. intralogistics or internal logistics is a term covering all products, components and processes related to the implementation, management, control and optimization of such internal production processes as storage, transportation and labeling of materials in the warehouses of industrial enterprises. in all of these areas, intralogistics is searching for non-universal, yet easily adaptable, technologies. intralogistics also optimizes information flows between the various "logistics nodes" within an enterprise (e.g., production departments, distribution centers, etc.)" (ivanishcheva, baltic journal of economic studies 90 vol. 7 no. 5, 2021 2016) it should be noted that modern conditions of logistics development require a corrective approach to the meaning of all its types. a significant number of researchers in their studies give preference to a completely closed logistics line "from supplier to customer or door to door". indeed, this is a significant advantage for customers, but also a large set of problems that accompany this process. that is why today we are exploring internal logistics, the goal of which is to find problems in the internal logistics processes for each individual function. however, over the years, the reasons and factors for the development of logistics in ukraine are changing, which leads to the emergence of new types of logistics to meet all subjects of logistics services. table 1 presents the main factors and motives for the development of logistics in ukraine. the authors agree with the opinion of zaburanna l. v. (zaburanna, 2010) that both permanent and temporary factors influence the development of logistics warehousing. the permanent ones include political, economic and environmental factors. in the current context of the coronavirus pandemic (covid-19), it is possible to see the influence of temporary factors on the development of storage logistics. in fact, no one could have predicted the impact of the pandemic on the development of warehouse logistics not only in ukraine, but even in developed countries. in fact, all countries were forced to close their borders, which delayed the depreciation of material values and the need to preserve them. and there were weaknesses in warehouse logistics: the lack of large storage facilities, weak logistical base, low level of infrastructure. the author v. katsma (katsma, 2016) among the temporary and permanent factors influencing the spread of warehouse logistics in ukraine, highlights both subjective and objective motives. subjective motives require significant financial resources, namely the lack of state and regional programs for the development of warehouse logistics, the old material and technical base, inadequate infrastructure. for objective reasons, you need first of all the desire, and then the financial resources. in fact, the real reason for the development of warehouse logistics is the lack of highly qualified specialists in this field, even if due to the lack of highly qualified specialists in this field higher education institutions increase the number of applicants to this specialty, state-owned enterprises feel the pressure. when characterizing warehouse logistics, it is important to consider its principles. the author believes that "applying the principles of logistics management will allow the enterprise to ensure high competitiveness of its products and services by optimizing the costs associated with the production and sale of goods, accelerating the turnover of total capital, the fullest satisfaction of consumers in the quality of products and services. this effect is achieved by significantly reducing inventories of material resources and finished products in the areas of production, supply and sales, reducing the duration of the production cycle and the customer order fulfillment cycle. the introduction of flexible automated and table 1 the main factors and motives for the operation of warehouse logistics in ukraine causes main content time factors this is due to both the transitional nature of the ukrainian system of government and the longer period. ongoing factors size and geographic location of the country; type, amount, quality and availability of natural resources; availability of intellectual potential and qualified labor resources; size, specialization and distribution of industrial complexes and centers across the country; level of integration into the world economic space. objective reasons imperfection of methodological foundations for the introduction of logistics in the real sector of ukraine's economy; lack of awareness of logistics interfaces in existing state systems; unstable legal field of business entities, as well as ill-conceived taxation system; lack of necessary structuring of business systems required for the implementation of logistics; significant obsolescence and physical deterioration of production equipment; underdeveloped transport infrastructure that does not meet modern requirements (high level of physical and moral wear of vehicles and, consequently, low efficiency of their functioning); low level of development of production and technical base of warehousing; low level of development and use of modern systems of electronic communications, electronic networks, communication and telecommunication systems. subjective reasons lack of qualified specialists in the field of logistics and the potential unwillingness of managers to change work stereotypes based on a general low legal and managerial culture. supply, delivery and sales managers, who are used to performing their traditional functions, inhibit the introduction of a branched out scheme of managing the material flows of the company, because the goals of logistics do not correspond to the goals of individual functional units. moreover, an individual enterprise optimized in terms of logistics may not be optimal in the overall logistics balance due to the fact that the logistics approach involves the production company and its related suppliers, intermediaries and customers indirectly involved in the workload. the coordination of a logistics team consisting of different companies is the most important when using logistics management methods. source: compiled by authors (zaburanna, 2010; katsma, 2016) baltic journal of economic studies 91 vol. 7 no. 5, 2021 robotic production, allowing rapid transition to the production of new types of products, the creation of marketing channels, etc" (katsma, 2016). the paper agrees with the author's opinion, the need to implement all the principles of warehouse logistics will allow for meaningful and high-quality logistics services. figure 1 shows the principles of warehouse logistics. among the main principles of warehouse logistics: consistency, coordination and integration, optimization, sustainability and adaptability, cost reduction, tqm, use of modeling and automation. these principles of warehouse logistics enable the smooth and accurate provision of storage, handling and disposal services, ensuring that warehouse operations are interconnected with the services involved in the supply, storage, transportation and shipment of inventory. it is important to determine the main task and level of warehouse logistics (figure 2). so, the main task of logistics is to manage the logistics of warehousing. also kornietsky o. v. (kornietsky, 2012) distinguishes three levels of logistics management, they function depending on the volume of logistics services. in our opinion, it is advisable to reduce the number of levels to a simple value, which we propose to do in the next paragraph, this will highlight the logistics functions separately for the subjects of the logistics process. leonova y. o. also notes that "the logistical process in the warehouse requires full synchronization of work in the areas of inventory supply, processing, and actual processing of vantage distribution of orders. logistics in the warehouse practically covers all the main working areas, which are considered at the micro level. the logistics process is much broader than the technological process and includes such areas as: ensuring supplies, supply control, receiving and unloading of defects, transportation and internal processing of defects, warehousing and storage of defects, formation of customer orders and defects, forwarding and transportation of defects. the work of all elements of the logistics process must be considered in interdependence and interconnection" (leonova, 2012). 3. formation of organizational and functional model of innovative transformation of transport and logistics systems ensuring compliance of domestic warehouse logistics and bringing it to a global level of quality requires improving primarily the state and regional policies on investment and innovation, creating conditions for attracting foreign investment and unimpeded transfer of technology, effective mechanisms of state guarantee and protection of innovation, further development of public-private partnerships and the development of the stock market. equally important is the continuation of the movement toward the introduction of european standards and norms in logistics, the simplification of conditions for crossing the customs border, and the fight against corruption. the authors agree with kopishinska k. that the active introduction of innovations in the field of logistics in enterprises requires the support and creation of appropriate conditions at the highest levels, including international, national, regional and industry. figure 3 presents the main objectives of logistics management at the meta-, macroand meso-levels, the implementation of which will facilitate the active implementation of modern innovative trends in the principles of warehouse logistics attitude towards the system total costs global optimization tqm the principle of development of logistics services the use of trade-off theory in overspending modeling and informationcomputer support stability and adaptability at the industry level logistic coordination and integration figure 1. principles of warehouse logistics source: compiled by the author into the main: (melnik, 2013) baltic journal of economic studies 92 vol. 7 no. 5, 2021 development of transport and logistics companies in ukraine. the figure shows the distribution of functions and priorities, the system implementation of which will contribute to the innovative development, engineering and re-engineering of warehouses and transport and logistics entities in general and the construction of modern logistics centers that provide high quality services using the latest technology. modern organizational trends in the development of warehouse logistics can also include the transition of logistics operators to comprehensive services that can be offered to customers. ukraine is currently undergoing a gradual transformation of logistics operators from the freight transport system to the expansion of service, in particular, using digital technology. table 2 shows the main characteristics of logistics operators in ukraine by level of transport and logistics services. the data in the table shows that logistics activities in ukraine are gradually developing, there are operators who improve business processes and offer a wider range of logistics services, and competition is increasing. at the same time, the market potential of transport and logistics systems in the context of transformational processes taking place in the economy, geopolitics and social sphere is significant and requires more active innovative transformations. the development of warehouse logistics in the regions involves the introduction of organizational innovations levels first second third door-to-door service to ensure optimal costs and an appropriate level of logistics service. ensuring the provision of logistics services at minimal costs for logistics services and logistics infrastructure through the cooperation of transport and logistics companies that provide a specialized set of logistics services. interaction of subjects of transport and logistics in the service of cargo traffic in a particular region, using its specificity and potential. concentrates transport and logistics infrastructure of border areas and individual regions, transport and logistics companies, manufacturing companies, etc. coordination of organizational, economic, technical and technological interaction between the subjects of the market of transport and logistics services and objects of transport and logistics infrastructure of the country to ensure the optimal movement of cargo "from door to door"; improve the efficiency of the economic system of the state and take a competitive position in the global market of transport and logistics services. fourth fifth the task of logistics management is the management of several components that make up the so-called "logistics mix": warehouses (individual warehouses, distribution centers, warehouses connected with the store); stocks (total amount of stock for each denomination, location of stock); transportation (type of transport, terms, types of packaging, availability of drivers, etc.); packaging (simplicity and ease of logistical service with one). figure 2. tasks and levels of warehouse logistics source: compiled by author (kornietsky, 2015) baltic journal of economic studies 93 vol. 7 no. 5, 2021 that require the integration and coordination of the efforts of local authorities, businesses and government support. in this context, it is worth referring to the experience of developed economies, where organizational innovations in the field of transport and logistics are an important tool for ensuring the competitive advantages of regions and individual territories. transport and logistics centers are important organizational formations, tied to separate territories and serving to ensure the smooth delivery of goods, information and financial flows between economic entities. according to kirlik n. yu, "in european countries transport and logistics centers are quite common and can be designed in the form of freight centers, activity centers, logistics platforms; logistics hubs; intermodal terminals and other forms however, transport and logistics centers may differ not only in name, but also in the purpose of creation and functioning. for example, in italy the main purpose of creating transport and logistics centers is to organize the transportation of goods by sea, and in germany – to use the mechanism of interaction between all modes of transport" (kirlik, 2016). studies show that in different parts of europe organizational forms and mechanisms of financing m et ale ve l m ac ro -l ev el r eg io na lle ve l st ab ili ty a nd a da pt ab ili ty at th e in du st ry le ve l integration into international logistics corridors harmonization of the legal field in accordance with international law in the field of digitalization of transport and logistics services integration of ukraine into international programs of transport and logistics development, introduction of electronic identification, integrated data, etc. improvement of normative-legal regulation in the sphere of innovation, customs procedures and transport development of transport and communications infrastructure building effective relationships with business (b2g) adaptation of legislation in the field of digitalization to the new needs of business development; legal regulation of the market of electronic commerce, payment systems; support for the development of 5g, the program of innovative development of the services sector e-governance, procurement, land allocation schemes, administrative support, simplified registrationsorganizational support and patronage of logistics centers development projects building effective channels (b2b), (b2c) formation of information platforms formation of effective horizontal linkages; intersectoral clusters, innovation platforms, logistics platforms; development of payment and insurance systems; information integration of business process technologies, internet of things figure 3. organizational and functional model of innovative transformation of regional transport and logistics systems source: systematized by the authors baltic journal of economic studies 94 vol. 7 no. 5, 2021 and investing in the development of transport and logistics infrastructure depend on the economic characteristics of the territory, its geographical location, the prevailing types of business. however, the creation of transport centers, hubs of freight villages and other forms of territorial logistics is recognized as one of the priorities of spatial development and an important component of competitive development. as noted by tkach o. v. and voloshchuk i. a., "a promising area for cooperation in the development of euro-logistics is the attraction of additional volumes of transit cargo flows through the customs territory of ukraine. it is advisable to concentrate terminals, warehouses, transshipment complexes and other transport infrastructure necessary for comprehensive processing under customs control of significant volumes of export-import and transit cargo within the checkpoint in ukraine. efficiency of the use of transit potential" (tkach & voloshchuk, 2014). in this context, regional authorities should be interested in creating so-called transport and logistics centers in each region, especially in areas where major transport hubs are concentrated. "transportation and logistics centers / freight villages", as defined by the europlatform association, "are certain infrastructures that are equipped with all public facilities to provide a range of services related to all types of transportation activities. the freight village is a specific region of the country within which various market operators provide a full range of services related to the transportation and logistics distribution of goods for both compatriots and international transit" (bonyar & korniyko, 2012). table 2 levels of logistics services in ukraine level name characteristic name of companies in ukraine 1pl logistics insourcing a type of logistics service where all logistics processes are carried out directly by the company 's own carrier on its own transport, i.e., the entire logistics of the enterprise is autonomous. the vast majority of domestic enterprises 2pl partial logistics outsourcing type of logistics activities when warehousing, transportation occurs with the involvement of third-party companies, but the management of the supply chain is carried out independently. at the present stage in ukraine, most companies prefer this type of logistics services. intime, delivery, nova poshta, mistexpress 3pl comprehensive logistics outsourcing 3pl providers are multidisciplinary logistics providers with highly professional personnel. they are engaged in the delivery of goods, customs clearance, packaging, packing of goods, etc. grand logistics, uvk, dhl, neolit, black sea shipping service ltd. 4pl integrated logistics outsourcing type of logistics service when a client company not only hires an outsourcer to perform transportation logistics functions, but also delegates him the tasks of designing and managing supply chains and logistics business processes at the enterprise. metro cash & carry – metro mgl logistik gmbh 5pl virtual logistics logistics service, which covers the entire range of logistics services of the global information technology space. transnational 4pl and 5pl providers in ukraine, logistics centers are not distinguished as separate objects of transport and logistics infrastructure, but in most cases are identified with a set of professional warehouses, distribution centers, terminals, etc. the lack of well-established economic ties, unified software, and the diversity of terminal and space owners create barriers to active innovation and competition within the facilities themselves. in addition, the majority of transport and logistics centers (70%) are concentrated in kiev and large cities (odessa, lviv, kharkiv, dnipro and partially mykolaiv). in the regions, logistics operators work mainly locally, trying to serve existing logistics chains in accordance with the contracts concluded. the authors agree with the opinion of gritsina l. a. and harun o. a., "new market requirements can be met by creating a system of transport and logistics centers, which minimize logistics costs and increase the efficiency of business entities. however, in world practice, two basic approaches to the development of transport and logistics infrastructure, which can be conventionally called the european and american. the first involves an active public policy aimed at improving the efficiency of freight transport and the development of logistics centers by providing tax incentives, government subsidies or grants. the second approach is based on the mechanism of market regulation of the logistics sector, which minimizes the need for government intervention and encourages private companies and investors to invest in the development of logistics infrastructure" (gritsina & harun, 2019). baltic journal of economic studies 95 vol. 7 no. 5, 2021 the study shows that the introduction of major innovative directions in the development of regional logistics systems is not only a prerequisite for the competitiveness of domestic logistics operators, but also the regional economy and the national economy as a whole, as it significantly reduces the logistics costs of all economic entities. and manageability of logistics processes, increasing the economic and food security of the region. during the transformation of ukraine's economy based on market relations, considerable attention was paid to the study of food security issues of the country as a whole (irtyshcheva, ponomarova & dolzhykova, 2019). the system of interconnections determines the necessity of detailed assessment of infrastructure elements in order to find and substantiate the directions of formation of effective levers of influence on the development of agricultural products market with regard to globalization transformations (vyshnevska, kaliuzhna & irtyshcheva, 2019). despite the assertion that the development of warehouse logistics is primarily a business problem, state and regional policies in the field of transport, logistics, innovation and investment have a significant impact on the development and innovative development of warehouse systems. that is why mechanisms are being developed to introduce international standards and norms in the field of customs control, technical and service standards, information security, technology transfer and other regulatory documents, their unification with those in force in the eu, which will accelerate the integration of transport and logistics systems and facilitate the rapid introduction of innovation. at the regional level, important tasks are to build effective communications with representatives of business, simplify and optimize regulatory activity, improve the business climate and develop mechanisms to encourage investment in the development of transport and logistics systems, especially in depressed areas. thus, the improvement of financial mechanism of socially-oriented development model requires a comprehensive justification and establishment of clear and transparent financial relations in the areas of formation of revenues and allocation of costs of regional budgets at all levels, creating conditions for additional attraction of financial resources from extrabudgetary sources aimed at the implementation of regional social programs, and the creation of an effective system for monitoring the functioning of the financial mechanism, primarily on the part of territorial communities (stehnei, irtyshcheva & gurina, 2018). 4. conclusions the main factors and reasons for the development of warehouse logistics in ukraine were revealed. it has been proved that the reasons and factors for the development of logistics in ukraine change over the years, and this leads to the emergence of new types of logistics to meet all subjects of logistics services. it has been determined that the development of warehouse logistics is influenced by both permanent and temporary factors. permanent factors include political, economic and consumer factors. it is proved that the pandemic coronavirus disease (covid-19) had a significant impact of temporary factors on the development of warehouse logistics in modern conditions. the temporary and permanent reasons for the development of warehouse logistics in ukraine have been identified. the basic principles of warehouse logistics are presented. they include: consistency, coordination and integration, optimization, sustainability and adaptability, cost reduction, tqm, application of modeling and automation. it is proved that these principles of warehouse logistics allow to provide timely and quality services for storage, processing and shipment of inventory, provide interconnection of the warehouse with the services of supply, storage, transportation and shipment of inventory. it has been proven that the decisive role in warehouse logistics management belongs to planning. the main tasks of integrated logistics planning include: distribution of work areas and equipment on them, cost minimization, increasing the level of cargo handling and warehouse capacity, increasing throughput capacity. organizational and functional model of innovative transformation of regional transport and logistics systems, which together will contribute to the intensification of innovative development, engineering and re-engineering of warehouses and transport and logistics entities in general and the construction of modern logistics centers that provide high quality services using the latest technology, was substantiated. references: burdyak, o. m., & kilipenko, v. v. warehouse logistics in the field of logistics of agro-industrial complex. available at: http://www.chtei-knteu.cv.ua/herald/content/download/archive/2010/v4/nv-2010-v4_39.pdf (accessed 15.04.2021); ivanishcheva, a. v. (2016). modern directions of development of logistics technologies in ukraine. market economy: modern theory and practice of management, 15, 3(34), 96–115. zaburanna, l. v. (2010). logistic management of the enterprise: the essence and prerequisites for development. sustainable economic development, 7, 120–123. baltic journal of economic studies 96 vol. 7 no. 5, 2021 katsma, v. i. (2016). the essence and role of logistics management in the enterprise management system. economic analysis: coll. science. work, 23.2, 60–65. melnik, о. v. (2013). new conceptual approaches in logistics. efficient economy, 2. available at: http://www.economy.nayka.com.ua (accessed april 15, 2021). transport and logistics centers: foreign experience (2021). available at: http://www.mainw.elc!ua.com/ru/ news/60 kornietsky, o. v. (2015). the concept and essence of logistics. agrosvit, 14, 13–16. leonova, y. o. (2012). optimization of warehousing activities of llc "fidlife". business information, 7, 88–91. khrutba, yu. s., paranich, p. g., & idziev, t. b. (2020). the current state and features of the development of the logistics services market in ukraine. the current state of research and technology in industry, 4(14), 129–136. irtyshcheva, i., ponomarova, m., & dolzhykova, i. (2019). conceptual fundamentals of development of the food security system. baltic journal of economic studies, 5(2), 57–64. khrutba, yu. s., paranich, p. g., & idziev, t. b. (2020). current state and features of the market of logistics services in ukraine. the current state of research and technology in industry, 4(14), 129–136. kirlik, n. yu. (2016). formation of a single logistics system: an important component of european integration processes. scientific bulletin of the international humanities university. series : economics and management, 22, 98–101. weaver, o. v., & voloshchuk i. a. (2014). formation of a unified logistics system: an important component of european integration processes. scientific bulletin of kherson state university, 9(1), 208–212. bonyar, s. m., & korniyko, j. r . (2012). international experience in creating multimodal transport and logistics centers. economy and state, 3, 32–35. stehnei, m., irtyshcheva, i., & gurina, o. (2018). financial mechanism of the socio-oriented economic development of the black sea region. baltic journal of economic studies, 4, 202–208. doi: https://doi.org/ 10.30525/2256-0742/2018-4-4-202-208 vyshnevska, o., kaliuzhna, o., & irtyshcheva, i. (2019). infrastructure provision of the agrarian market in the globalized environment. baltic journal of economic studies, 5(5), 39–46. doi: https://doi.org/10.30525/22560742/2019-5-5-39-46 gritsina, l. a., & harun, o. a. (2019). comparative analysis of the development of transport and logistics systems of leading countries. bulletin of khmelnytsky national university, 2, 143–146. baltic journal of economic studies 48 vol. 2, no. 3, 2016 corresponding author: 1 department of marketing and business administration, pryazovskyi state technical university. e-mail: gonchar.mariupol@gmail.com 2 department of marketing and business administration, pryazovskyi state technical university. e-mail: uzun.mychail@gmail.com development of assessment methods of effectiveness of innovative staff activity motivational mechanism viktoriia honchar1, mychailo uzun2 pryazovskyi state technical university, ukraine abstract. the aim of the science work is to develop methods to assess the innovative activity of the personnel that will provide motivation for employees to be active in the direction of research and introduction of internal reserves for its improvement. methods. in the study were used: system method and methods of logical analysis – to justify theoretical and practical recommendations on the development of conceptual bases of the formation of the motivational mechanism of personnel management, economic-mathematical modelling and forecasting methods – to assess the influence of motivation factors on the level of labour activity of the personnel. results. in the work the notion “motivation”, considering the innovative changes of the modern economy, is clarified. in order to foster innovative activity in the enterprise it is proposed to improve organizational structure by controlling the center of innovation activity management, which includes economic, technical and social division. proposed an establishment of the project teams under the terms of accounting costs, which contributes to more active workers’ involvement in the formation of innovative development plans. the main points that determine their effectiveness are: growth of volumes of output, diminution of expenses of materials and energy resources, timeliness and relevance to the product market, improvement of the quality of work performed. a profit, derived by project teams, is recommended to distribute on: increment of the payroll, innovative development, stimulation and motivation fund. the research of the activity of the enterprises showed that one of the effective methods to stimulate staff is a motivational system based on the use of kpi. bonuses for the implemented project, which are adjusted to the output of the basic stage, or kpi project as a whole, fixed bonuses as a percentage of the profits, and bonuses in stages of the project are the forms of motivation of project teams. practical significance. key performance indicators of innovation activity are distributed into levels and groups of staff that is responsible for carrying kpis out, which makes it possible to ensure control over the current and longterm performance indicators, to evaluate the personal performance of each employee, to orient staff to achieve the necessary results, and to provide collective and individual responsibility for the results of enterprise activity. value/originality. the proposed incentive system will be characterized by an address attachment in relation to each individual employee, clarity for executors, measuring simplicity, the interconnectedness of indicators, as well as by individual motivation of each employee. thus, such system will contribute to the certainty of labour functions and will improve the quality of personnel management organization. key words: innovation and invention: processes and incentives, business objectives of the firm, personnel management jel classification: о32, l21, m12 1. introduction in crisis conditions that are happening in the global economy with increased competition on market goods and services, all enterprises, regardless of the type of ownership (public, private), large or small, are increasingly facing the problem of the rise of production efficiency. many enterprises, along with the implementation of the new equipment and technology, try to solve the problem of increase in production efficiency by reducing the number of workers, either by fluctuating amount of wage. this path leads to the exacerbation of conflicts, negative consequences, which will result in lower production quality, increased accidents, worsening relations between workers and so on. expenses for repayment of such conflict can be greater than the effect of reducing the number of workers or reduced wages. one of the most effective ways baltic journal of economic studies 49 vol. 2, no. 3, 2016 to improve efficiency is to increase level of innovation in all areas of such activity: implementation of modern machinery and technology, improvement of organizational forms and salary distribution, enhancement of quality of goods (services), more rational use of material, energetic, financial and other resources. it is necessary to provide incentives for workers for active work towards a search and implementation internal reserves for its improvement in production in order to achieve the desired effects of innovation activity. motivation should be of diverse nature: both material and spiritual. 2. development of motivation system improvement the forms of organization and wages is one of the ways to increase production efficiency. by this time the basic principle, which was based on provisions on the regulations of payment, was an increased interest to the volume of production with fewer workers. in the current circumstances, when, on the one hand, the increase of production is mostly impossible because of the orders restrictions, and on the other hand reducing the number of employees contradicts the labour safety rules, such principle of work organization becomes ineffective. under current conditions, the effect can be achieved when there is a direct interest in the company not only to reduce labour costs, but above all, the costs of materials and energy. analysis of existing practices of domestic enterprises has shown that employees who receive a fixed salary as payment – do only the formal part of their duties and are not motivated to develop and improve the quality and efficiency of their work and to increase the quantity of operations. at the same time growth, improvement of products the quality and services, increasing of efficiency, and all that is expected of its employees according to the development strategy of modern enterprise. it is logical in this case to develop a system of motivation in which it is possible to link wages to employee’s results. the system of motivation is one of the most important issues. so development and implementation of such a system in practice is a very complex project. it is also necessary to pinpoint key terms. synthesizing different interpretation of the "motivation” definition and clarifying its content on the basis of innovative changes in the modern economy allowed formulating the following definition of motivation of innovation activity as a set of needs and motivations that encourages staff and management to active creative activity in order to create innovative products, services and forms of their usage of production new technologies in order to increase the quality and competitiveness of the labour force work. based on the analysis and taking into account the definition given in the context of this study, can reach the following conclusions: motivation is a process or set of related administrative decisions necessary to form the motives and actions of employees. stimulation is meaningful impact on the individual, creating an environment that encourages working in the given way. stimulation of labour or management of the enterprise motivation is tactic problem of increasing labour efficiency, which encourages employees to work to meet their needs. motivation system of company means installation at the plant workers compensation procedures for effective work and the types and amount of remuneration depending on the personal contribution of each employee in achieving the objectives of the company, its skills and competencies. financial incentive is a motivational hr management with additional (over the salary) payments for the work specific performance achievements within the certain period of time (month, quarter, and year). intangible incentive is motivation of hr management by increasing staff loyalty to the company by improving the quality of work conditions and the formation of corporate culture. staff assessment is the process of determination the effectiveness of the staff to achieve the objectives set by the company by specific indicators that provides information for making future management decisions in the area of motivation. assignment of any system of motivation is to: encourage employees to work for the result; implement the growth strategy of the company; enable more effective employees earn more; increase production efficiency through performance of staff; a clear objective system for evaluating each employee (kibanov, 2013). to increase the level of innovation the creation of two innovation management centers, economic-technical center and social center, is proposed. in the normal course of business, these centers should interact and supplement each other. economic-technical center analyzes the weaknesses of the company and provides a proposal for the problems solution, taking into account their own and those companies’ experiences, including foreign ones. as well, the development of new types of goods (services), or increase in the volume of goods (services) production, which are in demand in domestic and foreign markets. at the same time a social center, through the organization of a “social boxes: and poll workers, reveals their vision of existing weaknesses and collects offers concerns about their elimination. current organizational needs transformation to the department structure, which tends to encourage innovations development. for the more active involvement of the workers before the formation of the enterprise innovation development plan and its implementation into practice is possible to organize. with the creation of “best practices” schools it is proposed to involve workers to the formation of the enterprise innovation development plan and its implementation into practice. modern organizational structures need to be developed in the direction of creating units that are directly involved in the implementation of innovative measures in the baltic journal of economic studies 50 vol. 2, no. 3, 2016 practical activities of the company. there was a proposition of creation project groups to work out the conditions of economic calculation. for their effective work the following items should be: 1. ability to separate accounting for produced products (services) of separate project teams. 2. being able to separate accounting for used materials, energy, services related to the project teams worked out the products (services provided) by particular project team. to do this, it is needed to assess the availability of real accounting system (weight tools and gadgets excluding energy costs, accounting documents of transfer and acceptance of services provided by the adjacent portions). 3. introduction of a part of a separate off-balance sheet accounting calculation of income and expenses of project teams that work under the conditions of economic calculation. formation of income and expenditure of project teams, which work under the selfsupporting conditions, is calculated on the basis of the calculation and includes: • cost of materials costs per unit of product (pm); • cost of energy costs per unit of production (re); • costs of related departments for services provided for economic calculation by the design team to develop products (pn); • cost of repairs and maintenance of equipment (rpr); • labour costs (sn). expenses are taken without regard to social contribution. thus the sum of net income earned by the project team, which works on the terms of economic calculation, will be equal to: qh = d – pm – re – pn – rpr, (1) where qh – the amount of net income received by a project team from the production (services); d – total income. if there is the fault of the team, which works on economic calculation conditions, the company has suffered losses (fines, penalties, etc.), the amount of net income should be correlated to the amount of such losses. in this case, the sum of net income will be equal to: qh = d – pm – re – pn – rpr – z, (2) where z – the amount of losses caused by the fault of the enterprise project team, which works under the conditions of economic calculation. the main items that should be considered during the assessment of the project groups proposed innovation effectiveness should be: additional volumes of produced products (services). revenues and expenses are displayed on a separate offbalance account in the financial report. generated income is based on the volume of specific types of products (services), confirmed by the production planning department (or a separate department of the enterprise authorized by this control). if some type of the product (service), or an additional amount of the products (services) are not taken into account in the production plan, which has been proven to note “brigade” (the project team) on the passing month, and has no marketing opportunities to be sold, it is not counted in the amount income determination. thus, the company stimulates the activity of the project team to the production of goods (services) within the planned scope and range in order to prevent the resumption of working capital; costs of materials, energy, accounted for on the basis of accounting data gadgets. the costs can be displayed on the reception of transmission overhead. for example, wood materials which are used as a lining (or packing) materials during the metal loading on the vessel; the amount of products (services) is not accepted as income because their quality was not approved by technical control department (or other structural subdivision of the enterprise authorized by the quality control of production (services)). defective products (services) could be considered as a part of income in case of corrections if it is not the ultimate lack. the correction should be provided by the brigade (the project team) at no extra charges. project teams that work under the conditions of economic calculation must conclude a relationship agreement with related entities with respect to the order of relationship (supply of materials, energy, services, etc.), the order of mutual payments and responsibility for the failure (improper fulfilment) provisions of the agreements. if the company operates a general provision on the procedure of interrelations of structural units in the process of production (services) and relatively economically self supporting responsibility for failure (improper fulfilment) of existing provisions, such an order is the basis for the conclusion of contracts. if such an order does not exist in the enterprise, the draft agreement is being developed separately, with links to the process authorized control units in the enterprise. in any case, a relationship agreement between economically self supporting projects team and other departments is approved by the company management. if the sum of the net income determined in accordance with the formula for the calculation 2 exceeds the amount planned for the reporting period, wages, then the excess is proposed to distribute the articles for which are given in table 1: table 1 distribution item profits from innovation item share, % 1. on the increase of sum of labour payment fund 40 2. on innovative development of project group (purchase of technique, on financing of the experienced works and others like that) 20 3. in the fund of innovative activity stimulation on an enterprise 10 4. in the reserved fund of project group 30 on the whole 100 this calculation system has to orient employees to innovation in business. it should ensure the baltic journal of economic studies 51 vol. 2, no. 3, 2016 implementation of the growth strategy and pay only for what really makes a contribution to the achievement of strategic objectives, without unduly increasing labour costs – in fact, as a rule, the strategy provides for more reducing unit costs. 3. principle of the formation of motivation on the basis of kpі the results of the analysis of the scientific views of domestic and foreign experts provide an opportunity to highlight the main principles of the motivation system: objectivity – the size of employee compensation should be based on an objective assessment of the results of his labour; predictability – the employees must know what reward they will receive depending on the results of their labour; value – should be adequately rewarded labour contribution of each employee in the performance of the entire team, his experience and skill level; timeliness – the reward should be followed for achieving results as quickly as possible (in the current period); importance – the reward should be significant for the employee; fairness and transparency – determination of the remuneration rules should be clear to everyone in the organization and to be fair, including from his point of view (grineva, 2007). compliance with these principles in motivating activities of project teams that work under the conditions of economic calculation will enhance innovation processes in the enterprise. all the changes in the system of incentives – newly introduced internal regulations and ones aimed at increasing the value of each employee at his workplace. all the mechanisms and tools should provide effective motivation of employees; purposefully influence the quality and productivity. basing on the experience of enterprises it can be argued that one of the effective methods to stimulate the motivation of staff have a system based on the use of kpi (key performance indicators). this incentive scheme can be applied to any company, provided its competent development and maximizes compliance within all the principles of the above construction of the motivational system. the motivation of the project teams can be in the following forms: 1. the system consists of motivation ahead of time specified bonuses for the implemented project, which adjusted for the result of the main kpi stage or the whole project. 2. defined fixed bonuses as a percentage of the project and the costs for implemented project. the bonuses are paid for the results of the kpi stage or the whole project and distributed within the group (project manager and the working group). 3. motivation based on in fixed increments to the basic salary for participation in the project. 4. it is used mainly in development, which sets the value of each operation that is performed by an employee within a project. the convenience of this embodiment is that if you change the project participants, the distribution and the premium payment does not cause difficulties. this option is suitable if the company carries out the same type of projects with clear detail and the ability to work out undisputed distribution of their cost, that is, this method is an analogue of "piece-work" principle. performance indicators of innovation that can be used at the enterprise for the evaluation of personnel in this field and the implementation of the incentive system are provided in table 2: table 2 key performance indicators for the levels and groups level of index group of staff index efficiency of enterprise administrative and managerial staff general production volume, sale volume, net income, profitability efficiency of basic productive processes productive areas laboratories technical subdivisions commercial subdivision production volume, sale volume, quality of products, volume of charges, terms of production efficiency of the basic ancillary proceeding book-keeping service of personnel security service service of repair amount of the realized offerings that is related to the innovative activity, salary, studies of employees key performance indicators and methods of calculation are specified for certain categories of workers. in today 's practice, the domestic enterprises is often used the direct method of wages formation, which takes into account the total amount of time worked by workers in passing month and the average tariff (rate) per hour according to the approved labour curriculum. such distribution of net income between workers is not effective because it does not take into account the specific contribution of the individual worker in the overall results of the work unit. it is therefore proposed to allocate the net income between workers based on the coefficient of innovation contribution (cic) each worker in overall performance. these factors could be: the work of related professions. the employee performs work rigger, but has experience and produces electric welder his work in the absence of electric welder; the provision of proposals for innovative methods of work organization, the introduction of which provided opportunities to improve the efficiency of the whole. among reducing factors can be: • low-quality execution of work; • failure to perform activities; • action working that encourage the creation of unhealthy conflict with the accompanying negative effects, and more. baltic journal of economic studies 52 vol. 2, no. 3, 2016 in terms of, for whom it is difficult to transport calculations (for example, the introduction of selfrealization and proposals for innovation) has a value: 1 – proposals for the staff optimization have been received; 1.05 – received proposals for optimization, which would have significantly increased the performance and convenience of improved information processing, but decided not to implement them; 1.1 – received proposals for optimization, implementation of which slightly increased performance and made easier the process of the information; 1.3 – received proposals for optimization, implementation of which has significantly increased productivity. accounting for this indicator should encourage employees to optimize business processes in the enterprise. thus, the proposed innovation incentives will be targeted affiliation with respect to each individual indicator, as well as the individual motivation of each employee, which generally lead to the certainty of labour functions and improvement of innovation. 4. findings the motivation system that is based on kpi enables management of the enterprise: to provide control over the current and long-term performance of the organization; to evaluate the personal performance of each employee, departments and enterprises as a whole; encourage staff to achieve the necessary results; to manage the budget for salary fund and reduce the time for its payment; provide collective and individual responsibility for business results. implementation of kpi system will help to optimize the activity achieving "high" purposes, would increase the portfolio by accelerating their implementation and quality improvement, as well as significantly increase in the level of motivation, accountability and efficiency of your employees. 5. conclusions there is determined the theoretical and methodological background of development of the system of motivation of personnel innovative activity. in order to foster innovation in the enterprise there is proposed the improvement of the organizational structure at the expense of the center of innovation management, which includes the economic and social maintenance unit. establishment of the project groups under the conditions of economic calculations is proposed. there are developed indexes, which conducted the formation of income and costs of their activities. there was a proposition of income distribution items aimed at stimulating innovation. there is focusing to the need to development and implementation of the economic activity motivation systems practice using kpi. the forms of project teams’ motivation are recommended. performance indicators of innovation that can be used in the enterprise for the evaluation of personnel in this area are formulated. references grineva, v.m, & gruzina, i.a. (2007). problems motivation of personnel. kharkiv: inzek: monograph, 184 p. kibanov, a.j., & durackova, i.b. (2011). the management staff of the organization: strategy, marketing, internationalization. moscow: infra-m, 301 p. klochkov, a. k. (2010). kpi and motivation. the complete collection of practical tools. moscow: eksmo, 103 p. виктория гончар, михаил узун разработка методов оценки эффективности мотивационного механизма инновационной деятельности персонала аннотация. целью работы является разработка методов оценки инновационной деятельности персонала, что обеспечит мотивацию работников к активной деятельности в направлении поиска и внедрения в производство внутренних резервов по ее повышению. методика. в ходе исследования использовались методы логического анализа и системный – для обоснования теоретических и практических рекомендаций по разработке концептуальных основ формирования мотивационного механизма управления персоналом; экономико-математического моделирования и прогнозирования – для оценки влияния факторов мотивации на уровень трудовой активности персонала. результаты. уточнено понятие «мотивация» с учетом инновационных изменений современной экономики. для активизации инновационной деятельности на предприятии предлагается усовершенствование организационной структуры за счет центра управления инновационной деятельностью, который включает в себя экономико-техническое и социальное подразделения. предложено создание проектных групп на условиях хозяйственных расчетов, что способствует более активному привлечению работников к формированию планов инновационного развития. основными статьями, которые определяют их результативность являются: рост объемов произведенной продукции, снижение затрат материалов и энергоносителей, своевременность и востребованность на рынке продукции, повышение качества выполненных работ. прибыль, полученная проектными группами, рекомендовано распределять на: увеличение фонда оплаты труда, инновационное развитие, фонд baltic journal of economic studies 53 vol. 2, no. 3, 2016 стимулирования и мотивации. исследование деятельности предприятий показало, что одним из эффективных методов стимулирования персонала является система мотивации, основанная на применении кpi. формами мотивации проектных групп являются: бонусы за реализованный проект, которые корректируются на результат выполнения основных kpi этапа или проекта в целом; фиксированные бонусы в виде процентов от прибыли; бонусы по этапам реализации проекта. практическое значение. ключевые показатели эффективности инновационной деятельности распределены на уровни и группы персонала, ответственные за их выполнение, что дает возможность обеспечить контроль за текущими и долгосрочными показателями деятельности; оценить личную эффективность каждого сотрудника, ориентировать персонал на достижение необходимых результатов; обеспечит коллективную и индивидуальную ответственность за результаты деятельности предприятия. значение/оригинальность. несмотря на наличие существующих исследований в области мотивационного механизма на сегодняшний день существует потребность в его усовершенствовании за счет более детальной проработки показателей оценки эффективности инновационной деятельности персонала в зависимости от стадии жцо. предложенная система мотивации будет характеризоваться адресной принадлежностью по отношению к каждому отдельному сотруднику, ясностью для исполнителей, простотой измерения, взаимосвязанностью показателей, а также индивидуальной мотивацией каждого сотрудника, что в целом приведет к определенности в трудовых функциях и улучшению качества работы персонала управляющей организации. baltic journal of economic studies 136 vol. 7 no. 4, 2021 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: rector@knute.edu.ua orcid: https://orcid.org/0000-0001-5283-8444 researcherid: https://publons.com/researcher/1961938/anatolii-mazaraki/ 2 kyiv national university of trade and economics, ukraine. e-mail: n.kalyuzhna@knute.edu.ua orcid: https://orcid.org/0000-0003-0513-705x researcherid: https://publons.com/researcher/2229717/nataliya-g-kalyuzhna/ 3 kyiv national university of trade and economics, ukraine. e-mail: l.sarkisian@knute.edu.ua orcid: https://orcid.org/0000-0003-3030-5000 researcherid: https://publons.com/researcher/3343763/larysa-sarkisian/ * this work was supported by the national research foundation of ukraine [grant number 2020.02/0245]. (scientific fair "support for research of leading and young scientists") within project "trade and economic policy of country in the conditions of hybrid war". doi: https://doi.org/10.30525/2256-0742/2021-7-4-136-144 multiplicative effects of hybrid threats* anatolii mazaraki1, nataliya kalyuzhna2, larysa sarkisian3 abstract. the purpose of this article is to develop methodological approaches to assess the likelihood of multiplicative effects of hybrid threat combinations based on their systematization according to the key areas of hybrid confrontation. methodology. methods of analysis and synthesis are used to identify the key areas of hybrid confrontation; methods of abstraction and generalization – to justify the multiplicative effects of implementing combinations of hybrid threats; method of mathematical modeling – to formalize the criterion of effectiveness of various hybrid aggression tools. the research is based on scientific publications, materials of the state statistics service of ukraine and european analytical services. results of the study. it has been proved that the transformation of modern interstate conflicts takes place in the direction of acquiring by them signs of hybridization, provided that it is understood as a process of using various means of pressure, predominantly of non-military nature. it is argued that the urgent task in the context of counteracting hybrid threats is to assess the probability of multiplicative effects from the implementation of their combinations. the military, economic and information spheres have been identified as key dimensions of the hybrid confrontation. the specifics of hybrid threats in the economic sphere are those that would allow the country initiating the aggression to disguise its participation in the conflict, and the target country to obtain critical resources for the development of its economic system. the essence of synergy and cumulation effects is considered and their interpretation in the coordinates of hybrid warfare is given. the relevant effects are defined as multiplicative, that is, those that have a multiplier effect, providing accumulation (accumulation) and synergy (amplification) from the implementation of threats in different areas of hybrid confrontation. practical implications. assessing the likelihood of the multiplier effect of a variety of hybrid threats will focus on countering those combinations of threats that can have a significant impact on the political and economic system of the state of hybrid aggression. value/originality. justification and formalization of conditions for obtaining multiplicative (cumulative and synergistic) effects from the use of various hybrid confrontation tools. key words: hybrid threat, spheres of hybrid confrontation, cumulation, synergy, multiplier effect, probability, forecasting. jel classification: f51, f52, o38, h12 1. introduction the number and intensity of undisguised military conflicts around the world tends to decrease, giving way to the modern hybrid form of interstate and inter-bloc confrontation. the country initiating the hybrid war seeks to destabilize the internal (political, economic, legal, social, etc.) environment of the other country, using mainly non-military means of influence. covert actions and non-military measures are carried out by almost all influential geopolitical players of today as tools to achieve their goals, taking advantage, among other things, of the uncertainty of the baltic journal of economic studies 137 vol. 7 no. 4, 2021 treatment of hybrid (hidden) tools by international law enforcement. hybrid threats are difficult to identify because they have their own logic of emergence and escalation, unlike direct threats posed to national sovereignty by military confrontation. the probability of such threats is difficult to assess, while the damage from their occurrence can be catastrophic. the maximum destructive potential of hybrid threats is ensured if the aggressor country implements a comprehensive hybrid war strategy, focused on obtaining negative multiplier effects in various areas of hybrid confrontation. the formation of an effective policy of countering hybrid warfare requires a comprehensive assessment of the impact of various interdependent threats to the development of the national political and economic system of the country targeted for aggression based on their systematization. 2. analysis of the latest studies and publications according to the 2010 nato strategic concept, the threat of hybrid warfare is defined as an adversary 's demonstrated ability to use both traditional and unconventional means, depending on the need to achieve its objectives. as noted in the european external action service working paper (2015), hybrid threats are easier to describe than to define terminologically. they describe it as the centralized and controlled use of a variety of overt and covert tactics implemented by military and non-military means. the european parliamentary research service (2015) views hybrid threat as a phenomenon resulting from the confluence and interconnection of different elements that together form a more complex and multidimensional risk. the joint communication to the european parliament and the council (2016) defines hybrid threats as a combination of traditional and non-traditional methods used by actors to achieve specific objectives while remaining below the threshold of officially declared war. an important feature of hybrid threats, according to the multinational capability development campaign (2019), is the synchronous use of military and nonmilitary means and their targeting of the enemy 's weakest assets. the use of hybrid methods and tools by state or non-state actors aims to realize their own interests, strategies and goals (saarelainen, 2017). ukraine's position in a protracted hybrid conflict suggests a wide range of publications dedicated to exploring the preconditions of hybrid threats to the national economy and their systematization (martynuk et al., 2018; hbur, 2018; akimova, 2018; tryhub & misiats, 2019; fedyna, 2017; hryshchuk, zhovnovatiuk & nosova, 2019; busol, 2020). moreover, as thoroughly noted (fedyna, 2017, p. 57), methodological approaches to the regulation of hybrid threats in the works of national scientists differ from those applied by european analytical services. in particular, identifying the most vulnerable spheres of influence of hybrid threats is the focus for systematization according to a notional "european" approach. thus, analysts at the european parliamentary research service (2015) identify hybrid threats such as terrorism, cyber security, organized crime, maritime disputes, space, resource scarcity and covert operations. the joint report to the european parliament and the council (2016) identifies areas for countering such threats: information, energy, transport and infrastructure, space, military, medical and food security, cyberspace, the financial sector, the manufacturing sector, and the social dimension. the approaches of ukrainian scholars and analysts focus mainly on establishing the areas of application of hybrid warfare and/or factors influencing the nature of hybrid threats. thus, hryshchuk, zhovnovatiuk & nosova (2019, p. 54) classify historical, legal, political, economic, informational, technological and social processes in society to factors influencing the hybrid nature of threats in cyberspace. a research team led by v. martynuk (2018) organizes hybrid threats in the following areas of origin: national; military; law enforcement; information; cybersphere; economy; energy; human rights, national minorities, indigenous peoples and interfaith relations; historical politics. in the papers (hbur, 2018; akimova, 2018) identified hybrid threats to ukraine's economic security in the following areas: military, law enforcement, information, cybersecurity, human rights and national minorities. the lack of a unified approach to the regulation of hybrid threats is understandable, given their diversity and the comprehensive nature of hybrid aggression as an effective method of destabilizing the domestic environment of the target country in all possible directions. at the same time, defining the key areas of hybrid confrontation according to the criteria of necessity and sufficiency will make it possible to predict the amplifying (multiplicative) negative effects of the implementation of a variety of hybrid threats. accordingly, the purpose of this article is to develop methodological approaches to assess the multiplier effects of combinations of hybrid threats based on their systematization according to the key areas of hybrid confrontation. 3. discussion and research results while accepting the descriptiveness of hybrid threats concept (kofman & rojansky, 2015; working document of the european external action service of 13.05.2015; multinational capability development campaign project, 2019) and based on the understanding of hybridity as the result of a combination of different forms, the following baltic journal of economic studies 138 vol. 7 no. 4, 2021 characteristics of hybrid threats can be identified: combination of traditional and non-traditional methods, flexibility of strategy application, dynamic and inclusive, synchronization and systematization of actions, diversity of forms and methods (diplomatic, military, economic, technological, informational, etc.), simultaneous implementation at different levels, coverage of all spheres and processes of functioning of the target country subject to concentration on the most vulnerable aspects. researchers justifiably recognize the information sphere as a key dimension of hybrid warfare (tryhub & misiats, 2019; fedyna, 2017; hryshchuk, zhovnovatiuk & nosova, 2019), as propaganda and disinformation are classic tools for waging asymmetric war and achieving aggressor country goals by nonmilitary means. at the same time, scholars sometimes unnecessarily overlook (hbur, 2018; akimova, 2018) such an important area of hybrid conflict as economic. economic warfare, as a component of hybrid warfare, contributes to the political objectives of the aggressor country by imposing restrictive measures on the target country with different measures of trade and economic policy stringency (sanctions, embargoes, fines, trade disputes, etc.). a long-term policy of retaliatory discrimination can both deplete the economic system of the target country and cause significant damage to the economy of the country initiating the aggression. as research (tryhub & misiats, 2019; kulytskyi, 2016) fundamentally points out, unlike classic warfare, economic relations during hybrid warfare are usually not completely suspended, allowing the aggressor country to disguise its involvement in the conflict and the target country to obtain resources critical to its economic development. the trade and economic relations between ukraine and the russian federation, as parties to the hybrid conflict, can be considered representative in this case. despite the constant decline in trade turnover between the countries, both in absolute terms (figure 1) and in relative terms (figure 2), russia remains one of the main trade partners of ukraine in 2020 (table 1, table 2). overall, the russian federation accounted for 8.5 % of foreign trade in goods and services in 2020. it should also be noted that ukraine's traditional dependence on russian energy resources has persisted for a long time. according to the results of 2019, russia will continue to be among the main suppliers of fuel and energy resources in ukraine (table 3), and in 2020, after a long break, additional imports of russian gasoline were restored. despite efforts to diversify sources, which is critical in the context of domestic production deficits, three quarters of imported petroleum products in the first half of 2020 were purchased by ukraine from belarus and russia. the existence of trade and economic relations with russia confirms the high level of hybridization of the conflict in the economic sphere with an unconditional decrease in the volume of bilateral foreign trade. the economic sphere can be seen as an important operational space for aggression, since the use of discriminatory instruments of financial, economic and trade pressure can almost always be justified by the protection of national economic interests, import substitution policies, economic expediency and competition for the purposes of hybrid warfare. thus, the economic sphere should be considered as a key bridgehead of hybrid confrontation and a source of hybrid threats. meanwhile, equally severe hybrid threats to the country 's sustainable development and economic security arise in the information sphere. disinformation and propaganda measures are the main factor of hybrid influence in the sociopolitical context, and their rapid and precise application, unlike figure 1. volumes of foreign trade in goods between ukraine and the russian federation in 2005–2020, billion usd source: own study based on data of state statistics service of ukraine baltic journal of economic studies 139 vol. 7 no. 4, 2021 figure 2. share of trade turnover with the russian federation in ukraine’s foreign trade in goods in 2005–2020, % source: own study based on data of state statistics service of ukraine table 1 main foreign trade partners of ukraine in exports of goods in 2020 country (group of countries) export in goods, mln. usd 2020 to 2019, % share of total merchandise exports of ukraine, % eu (28) 18612,1 89,7 37,8 china 7112,7 198,0 14,5 russian federation 2706,0 83,4 5,5 turkey 2436,3 93,0 5,0 india 1972,1 97,4 4,0 egypt 1618,2 71,8 3,3 belarus 1335,3 86,2 2,7 usa 983,9 100,5 2,0 indonesia 735,6 100,1 1,5 saudi arabia 719,0 96,6 1,5 source: own study based on data of state statistics service of ukraine table 2 main foreign trade partners of ukraine in imports of goods in 2020 country (group of countries) imports in goods, mln. usd 2020 to 2019, % share of total merchandise imports of ukraine, % eu (28) 23859,7 95,4 43,9 china 8318,4 90,4 15,3 russian federation 4541,8 65,0 8,4 usa 3068,7 93,4 5,6 belarus 2874,5 76,6 5,3 turkey 2418,8 102,7 4,5 japan 1076,4 111,8 2,0 switzerland 876,0 55,0 1,6 great britain 734,2 95,4 1,4 india 721,8 97,4 1,3 source: own study based on data of state statistics service of ukraine long-term financial and economic tools, will cause unpredictable emergence and escalation of internal conflicts on religious, ethnic and historical grounds. despite the fact that nonmilitary means and measures (diplomatic, legal, economic, ideological, humanitarian, etc.) form the basis of the hybrid conflict, the military factor continues to be an important component of the hybrid confrontation. the fact that military power is a necessary condition for the realization of the geopolitical and geo-economic baltic journal of economic studies 140 vol. 7 no. 4, 2021 ambitions of the main actors of world politics cannot be eradicated by the transition of modern interstate conflicts to the use of non-military means of destabilization. strong states implement hybrid initiatives to expand geopolitical influence, including territorial expansion by asymmetric military capabilities against weaker and more vulnerable countries. the military actions of the aggressor state acquire fundamental characteristics that simultaneously demonstrate an advantage in military power and make it difficult to identify the conflict as an open armed confrontation in the case of hybrid aggression. irregular forces and non-state armed groups become involved actors against independent states with a wide range of destabilizing instruments (guerrilla movement, terrorist actions, subversion, extremism, recidivism, sabotage, etc.). the rational combination of military and non-military means of hybrid warfare (recognizing the leading role of non-military instruments in achieving its objectives) provides a high level of so-called hybrid uncertainty, which requires maintaining the intensity of the conflict in the target country at a level that makes it impossible to legally justify the intervention of other countries in its resolution. the various instruments applied simultaneously by the initiator of hybrid warfare can have devastating effects on the political and economic system of the target country, by creating a synergistic and cumulative effect. the cumulative effect (latin: cumulatio – increase, accumulation) is the result of a concentration of actions in one direction and characterizes processes that have life cycles with a set of distinctive characteristics at each stage of development. hybrid war, as a cumulative process, is characterized by the recognition of a single goal, to which all tools and effects are subordinated – the force formation of the initiator of political and economic loyalty of the object of aggression. the process of achieving it is determined by the laws of the life cycle, as the potential for efficiency tools is different. it depends on transformations taking place in the social, political and economic life of the target country (change of government, aggravation of internal conflicts, signing of preferential trade agreements, etc.), as well as at the global level (post-pandemic crisis, loyalty of leading geopolitical actors, competition, protectionist trends, etc.). the cumulative effect is achieved by the gradual concentration of integrated factors in one place, amplification of their action by homogeneous pressure and further "explosive" demonstration at a specific moment. the cumulative effect of hybrid confrontation for the initiating country is ensured through the application of complex and interrelated military and nonmilitary means, taking into account their impact in specific socio-political and economic conditions. the controversial "nord stream-2", construction of which is almost finished, could be considered as real hybrid threat to ukraine and an example of a cumulative process. the russian energy project had seemed more or less probable at the different phases of its realization from the perspective of the periodic changes in the balance of stakeholders’ power and the levers of influence they used. thus, european countries (primarily germany) lobbied for the successful completion of construction, given their own economic interests, while the u.s. simultaneously imposed, expanded economic sanctions as a third party and created the greatest obstacles to its implementation. the accumulation of efforts by the european and russian sides at the moment tilts the balance in favor of the successful completion of table 3 the structure of ukraine's imports of fuel and energy resources in 2019 resource type importing country share in imports, % coal russian federation 62,39 usa 31,76 kazakhstan 4,22 row 1,63 crude oil azerbaijan 96,83 kazakhstan 1,57 latvia 1,40 row 0,20 petroleum products russian federation 42,92 belarus 35,98 lithuania 10,80 row 10,30 natural gas slovak republic 59,6 hungary 27,9 poland 12,5 row 19,2 source: based on data on energy imports to ukraine in 2019 baltic journal of economic studies 141 vol. 7 no. 4, 2021 "nord stream-2", and it will become an important source of hybrid threats to ukraine. there is a high probability that ukraine will lose its status as a gas transit country after its contract with gazprom expires in 2024, which can be extended or terminated by agreement of the parties. this can become an additional lever of influence on the country in the economic sphere and a tool of hybrid confrontation. synergetic effect (greek synergetikos – general, coordinated, active) is the total effect, which lies in the fact that in the interaction of two or more factors, their effect significantly outweighs the effect of each individual component as their simple sum. achieving a positive synergistic effect can be seen as the goal of any system, because it demonstrates the usefulness of combining its elements and the results of their interaction: e es i i n > = ∑ 1 , (1) where еs is the positive synergistic effect obtained as a result of interaction of system elements; еi means the effect obtained from the separate functioning of the i-th element of the system; n means amounts of system elements. when studying hybrid wars, the synergistic effect can be interpreted as follows: the complex (system) of threats projected simultaneously in the key areas of hybrid confrontation has a much greater destructive power than the simple sum of its components, which usually creates a particular risk for the political and economic system of the target country. as highlighted by busol (2020, p. 10) the focus is in using highly efficient, combined, integrated action to build up social protest potential, including: critical infrastructure sabotage, cyber-attacks and high-profile assassinations. the classic combination of hybrid threats in different spheres with high destructive potential the onset of synergistic effects may be illustrated by the following example: the military threat refers to the presence of illegal armed groups disguised as patriotic organizations in the target country; the economic-based threat means the control of important economic assets (primarily in critical infrastructure sectors – electricity production and supply, petroleum products, finance and banking, information and telecommunications, etc.) by residents of the aggressor country or provocative entrepreneurs of the target country; the information threat refers to the active use of media platforms to broadcast propaganda and fake news. the emergence of a sense of discrimination and insecurity among citizens of a particular regional (ethnic, linguistic, religious, etc.) identity is the result of targeted pressure in the information environment. information manipulation is intensified by the threat of a military nature, which can destabilize the internal socio-political situation and disrupt the functioning of state authorities under the pretext of protecting certain groups of the population. new mechanisms of economic dependence are created by maintaining external influence in critical infrastructure sectors of the economy, reinforced in the long term by instruments of military and information manipulation. large groups of employees can be manipulated, under the influence of these mechanisms change the direction of economic development and foreign policy integration of the target country. presumably, the high probability of a synergistic (amplifying) effect is a characteristic of the implementation of a combination of certain threats that can have a destructive impact on the socio-political and economic development of the target country. it should be emphasized that the simultaneous generation of cumulative and synergistic effects not only does not contradict the requirements of sustainable functioning of any system, but, on the contrary, is a necessary condition for its transition to a qualitatively new level of development we can consider the above effects as multiplicative (latin: multiplicatio – reproduction, increase, growth), that is, multiplicative effect, providing cumulation (accumulation) and synergy (execution) from the implementation of threats in different areas of hybrid confrontation. the identification of key areas of hybrid threats is required to formalize the conditions for generating multiplicative (cumulative and synergistic) effects from the implementation of hybrid confrontation tools including the military and defense sector; information (including cyberspace as its virtual component) area and economic (including energy as its vital part) sphere. to sum up, we have three sets of hybrid threats – military (w), economic (e) and information (i): w w k x e e l y i i m z k l m = = = = = =             { }, ,.., { }, ,.., { }, ,.., 1 1 1 (2) where k, l, m are the index of military, economic and information threats in the range of hybrid threats of a given type; x, y, z are the total number of military, economic and information hybrid threats. figure 3 illustrates that at a certain point in time t may be detected a threat in each of the specific areas of hybrid confrontation, could result in a multiplicative effect of hybrid aggression. binary function may be denoted as fklm, reflecting the presence or absence of multiplier effects from the implementation of a combination of hybrid threats of different types. fklm = 1, if combination of hybrid threats {wk, el, im} results in multiplicative effects from the use of hybrid confrontation tools in various baltic journal of economic studies 142 vol. 7 no. 4, 2021 spheres, and fklm = 0 if the corresponding effects are absent. let z be the number of different types of combinations of hybrid threats of different types, the implementation of which leads to multiplicative effects: z fklm m z l y k x = === ∑∑∑ 111 (3) if each of the possible combinations of hybrid threats is capable to produce multiplicative cumulative and synergistic effects, all such combinations meet the condition accordingly: fklm = 1 (4) as follows from (3) and (4), if each combination of hybrid threats of different types leads to multiplicative effects, then the total number of such combinations can be described by the expression: z x y z* = ∗ ∗ (5) then one of the efficiency criterions of hybrid aggression measures is defined as the requirement to obtain multiplier effects from any combination of hybrid threats of different types from the perspective of the initiating country: f x y zklm m z l y k x === ∑∑∑ = ∗ ∗ 111 (6) formula 6 could be linguistically interpreted as leading to the onset of multiplicative effects by combination of military threat wk with every economic threat el and every information threat im (total, respectively x, y та z), making destructive effect far greater than the separate implementation of different types of threats. table 4 demonstrates key threats to ukraine in areas of hybrid confrontation summarized in the work (martynuk et al., 2018). figure 4 shows that the implementation of combinations probably will have multiplier effects unfavorable to the country. taken together, these findings suggest that when a large number of hybrid threats come together, the increase (synergy) and accumulation (cumulation) of negative effects leads to an unstable situation and can have disastrous consequences for national political and economic development. therefore, the strategy to counteract the initiating country should be aimed at early identification of combinations of hybrid threats that have the maximum potential for negative impact with a high probability of a multiplier effect from their implementation. e(t) {wk, el, im} w(t) i(t) im el wk figure 3. combinations of threats in different spheres of hybrid conflict source: own study table 4 key threats to ukraine in areas of hybrid confrontation (fragment) hybrid threats military sector economic sphere information area {wk, k =1,..x}, x = 2 {el, l =1,..y}, y = 2 {im, k =1,..z}, z = 2 w1 – presence of illegal armed groups in the territory of ukraine under the guise of patriotic organizations e1 – pro-russian ownership of important economic assets in ukraine i1 – active use of media platforms to broadcast propaganda and disinformation streams w2 – targeted measures to discredit the armed forces of ukraine, the security forces and public authorities in general e2 – russia’s interruption of gas transit through ukraine after nord stream-2 launches i2 – creation of an isolated socio-cultural and information reality in the occupied territories of ukraine source: own study based on martynuk et al. (2018, pp. 23–27) e1 i1 i2 w1 f(w1e1i1) = 1 f(w1e1i2) = 1 i1 f(w1e2i1) = 1 e2 i2 f(w1e2i2) = 1 e1 i1 w2 e2 f(w2e1i1) = 1 i2 i1 i2 f(w2e1i2) = 1 f(w2e2i1) = 1 f(w2e2i2) = 1 figure 4. combinations of threats in different spheres of hybrid conflict source: own study baltic journal of economic studies 143 vol. 7 no. 4, 2021 4. conclusions the presence of multiplicative effects of cumulation (accumulation) and synergy (amplification) from the complex use of destabilization tools in various spheres of hybrid confrontation should be considered a characteristic feature of hybrid war and as key it is proposed to define the military, economic and information threats. our work has led us to the conclusion that anticipatory prediction of the probability of hybrid aggression by cumulative and/ or synergetic effects arising from combinations of different types of hybrid threats (military-economicinformation threats) is an important task for countering them in coordinates "0" – "no probability ", "1" – "probability exists". the results show that a binary approach can be developed to predict the impact of possible combinations of hybrid threats on the target country. this approach can be applied to create a grading scale to assess the probability of a negative multiplier effect in a wider range – for example, from "0" "no probability " up to "5" "probability is extremely high", using intermediate estimates ("low", "moderate", "high", etc.). it is necessary to identify and organize possible combinations of hybrid threats in accordance with the degree of vulnerability of the target country, corresponding to certain areas of hybrid confrontation. the formation of comprehensive list of potential military, economic and informational threats will make it possible to assess the possibility of a multiplier effect from their implementation and focus on countering combinations of threats that will potentially have the most devastating impact on the political and economic system of the country targeted by hybrid aggression. references: active engagement, modern defense. nato’s strategic concept 2010. available at: https://www.nato.int/ cps/en/natohq/topics_82705.htm countering hybrid treats. food-for-thought paper. working document of the european external action service of 13.05.2015. available at: https://www.statewatch.org/media/documents/news/2015/may/eeas-csdphybrid-threats-8887-15.pdf understanding hybrid treats. briefing european parliamentary research service of june 2015. available at: https://www.europarl.europa.eu/regdata/etudes/atag/2015/564355/eprs_ata(2015)564355_en.pdf joint communication to the european parliament and the council joint framework on countering hybrid treats. a european union response 2016. available at: https://eur-lex.europa.eu/legal-content/en/ txt/?uri=celex%3a52016jc0018 countering hybrid warfare. a multinational capability development campaign project (2019). available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/784299/concepts_mcdc_countering_hybrid_warfare.pdf saarelainen, m. 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(2016). ekonomichna skladova hibrydnoi viiny rosii proty ukrainy [the economic component of russia's hybrid war against ukraine]. ukraina: podii, fakty, komentari [ukraine: events, facts, comments], 20, 44–57. (in ukrainian) state statistics service of ukraine. available at: http://www.ukrstat.gov.ua import enerhoresursiv v ukrainu za i pivrichchia 2019 roku [imports of energy resources to ukraine in the first half of 2019]. available at: https://kosatka.media/uk/category/neft/analytics/import-energoresursov-vukrainu-za-i-polugodie-2019 baltic journal of economic studies 81 vol. 3, no. 2, 2017 corresponding author: 1 department of logistics and production management, sumy national agrarian university. e-mail: almaslak@ukr.net the status and prospects of the organic agricultural products market in ukraine oleksandr maslak1 sumy national agrarian university, ukraine abstract. the modern agricultural market is characterized by an increasing demand for higher quality agricultural products and food. thus certified organic production was launched in ukraine, which prohibited the use of chemically synthesized components, genetically modified organisms, etc., and labelling requirements for such products were established. however, experiencing both external and internal demand, the market for organic products in ukraine is developing slowly. the subject of study focuses on the theoretical, methodological, and practical aspects of forming the organizational-economic basis of organic agricultural products market development in ukraine. methodology. methodological support for the study is based on dialectical and systemic approaches to the study of economic phenomena and processes of formation of the organizational-economic bases of organic agricultural products market development. general scientific and special methods are used, in particular: methods of analogies and comparisons, systematization, statistical and economic, calculation-constructive, program-oriented. the aim of the research is to identify the state of organic agricultural products market in ukraine and prospects of its further development. the defined goal led to the following tasks: a study of the current state of organic production in ukraine is carried out; set of problems that hinder its further development are defined; the possible scenarios of this market are identified; prospective tasks, solution of which will contribute to the further development of the market of organic agricultural products in ukraine, are outlined. according to the results of the conducted research, the following conclusions are made: the tendencies of organic market development in ukraine are investigated; it is found that the lack of a proper legislative and regulatory framework, a lack of modern market infrastructure, and effective mechanisms of its functioning are holding back the further development of this market; one of the more acceptable scenarios for the society of possible development of this market is chosen; the priorities that need to be dealt with are identified. as a result, it is necessary to develop an appropriate regulatory framework and carry out its implementation according to the eu requirements, to create an efficient business environment, to provide training on the requirement of this market, to promote the dissemination of information to potential consumers and producers about the benefits of organic products for the further development of organic market in ukraine. key words: organic products, organic products market, problems, perspective development. jel classification: q13, q17, q18 1. introduction the modern agricultural market is characterized by an increasing demand for higher quality agricultural products and food. increasing demands for the quality of food has arisen due to the strengthening of the application of synthetic agrochemicals in the production of traditional products, environmental pollution, improving environmental awareness of the population. thus certified organic production was launched in ukraine, which prohibited the use of chemically synthesized components, genetically modified organisms, etc., and labelling requirements for such products were established. however, experiencing both external and internal demand, the market for organic products in ukraine is developing slowly. therefore, there is a need to undertake a research and identify limiting factors in the development of this market and the priorities that require urgent solutions. the purpose and objectives. the aim of the study is to identify the condition of the organic agricultural products market in ukraine and prospects of its further development. the defined goal determined the formulation and the need to solve the following tasks: a study of the current state of organic production in ukraine; the determination of problems that hinder its further development; definition of possible scenarios of the market development; the outlining of perspective tasks, solving of which will contribute to the further organic agricultural products market development in ukraine. baltic journal of economic studies 82 vol. 3, no. 2, 2017 methodology. methodological support for the study is based on dialectical and systemic approaches to the study of economic phenomena and processes of formation of the organizational-economic bases of organic agricultural products market development. while studying the status and trends of the domestic market for organic products, methods of analogies and comparisons, and statistical-economic, calculation and constructive methods are used. in determining the scenarios of the possible development, the priorities of this market program-oriented method are additionally applied. information base of research are legislative and regulatory acts, statistical and economic materials, and reports of the state statistics service of ukraine, ministry of agrarian policy and food of ukraine, federation of organic movement of ukraine, scientific information from the internet, information bulletins and analytical surveys, scientific works of domestic and foreign researchers, results of the author’s own observations. 2. analysis of recent research and publications the features of domestic and world organic products market were researched by such scientists-economists as v.  artysh, g.  bezus, n.  borodachev, h.  willer, j.  gorchakov, d.  gorshkov, t.  dudar, t.  zaichuk, n.  zinovchuk, i.  kirilenko, l.  kelcher, m.  kobets, a.  mazurova, i.  milovanov, pisarenko, a.  rudnitskaya, a.  sahota, a.  skidan, n.  fedorov, a.  khodakovskaya, a.  khodus, k.  holger, a.  shubravska, m.  yusefi and others. however, the constant changes in the world and domestic agricultural markets, the existence of problems that hinder further development of the market of organic agricultural products in ukraine require further research in this field. 3. market trends for organic products traditional food dominates the domestic ukrainian market while organic products play a secondary role. it is confirmed by the research of the federation of organic movement of ukraine and the data of the state statistical service of ukraine. by the end of 2015, the cost of the domestic consumer market of organic products reached almost 18 million euros or 3 euros per capita. for comparison, total retail trade turnover of food products during this period amounted to 426,1 billion hryvnias or at the average exchange rate of the nbu 2422,87 hryvnias, for 100 euro 17,6 billion euro. that is, the share of organic products in the domestic market of ukraine is about 0.1 percent. however, in recent years, the consumption of organic products is constantly growing, especially in large cities. in 2010, the ukrainian market of organic products was estimated at 2.4 million euros; in 2016 it rose to 21.2 million euros, i.e. 8.8 times, or every year, almost by 2.4 million euros (organik v ukrayini, 2016; derzhstat ukrayiny, 2016). (fig. 1). the filling of the internal market in organic products was due to the increase in operators in this market and expansion of certified areas required for growing organic crops. in 2002, in ukraine there were 31 organic farms, cultivating 164,4 thousand hectares of arable land (fig. 2) (organik v ukrayini, 2016). in subsequent years, there was a gradual increase in the number of domestic organic farms and lands in their cultivation. according to the federation of organic movement in ukraine in the period from 2005 to 2015, the total number of organic farms has increased to 210, fig. 1. domestic consumption of organic products in ukraine (organik v ukrayini, 2016) 0,4 0,5 0,6 1,2 2,4 5,1 7,9 12,2 14,5 17,5 21,2 -5 0 5 10 15 20 25 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 m ln . € year baltic journal of economic studies 83 vol. 3, no. 2, 2017 or almost 3 times. the area of certified agricultural land in ukraine used for the cultivation of organic products reached almost 411 thousand hectares in 2015. in comparison with 2010, it is by 1.7 times bigger amount. overall, the share of ukrainian certified organic area is about 1% of the total agricultural land. this fact gave ukraine an opportunity (with the availability of certified organic acreage of arable land) to take first place in the eastern european region and to strengthen its position in the top twenty of the world's leading countries in organic production (organik v ukrayini, 2016). the size of organic farms varies from tens of hectares to several thousand hectares. now the average size of a certified organic farm in ukraine is less than 2 thousand hectares, which is significantly more compared to similar households in other countries. however, with the spread of labour-intensive areas of organic products production, small farms began to develop. it is confirmed by trends in the development of organic producers over the last ten years. in 2005, the average size of organic farms amounted to 3.4 thousand hectares while in 20132014 it decreased to 2.2 thousand, in 2015 to 2.0 ha. in future, growth in the number of organic producers is expected at the expense of small and medium farms (organik v ukrayini, 2016). grain crops, legumes, and oilseeds occupy the largest share in the structure of the organic cultivation of agricultural products (fig. 3). vegetables, fruits, herbs, grapes, melons are grown in smaller areas. besides, at the beginning of 2016, 540 thousand hectares of wild plants were certified in ukraine (organik v ukrayini, 2016). among the organic products vegetables and fruits, juices, cereals, flour, milk and milk products, meat and meat products are in greatest demand among domestic consumers. product sales occur through supermarket chains, specialty stores, and, more recently, via the internet (maslak, 2016). ukraine has significant potential for export of organic products. experts estimate the annual opportunity from the sale of such products in foreign markets up to eur 50 million. now the main buyers of ukrainian "organics" are germany, austria, poland, italy, france, netherlands, denmark, switzerland, usa, and canada. demand is growing every year. grain, oilseeds, beans, berries, fruits and wild plants are mainly exported to these countries. besides, the range of organic products is constantly expanded and updated with sunflower and essential oils, concentrated apple juice, nuts, jams, syrups, and birch juice (organik v ukrayini, 2016). however, ukraine has not yet formed the appropriate legislative and regulatory framework that will provide for the protection of producers and consumers of fig. 2. dynamics of the main indicators of organic production in ukraine (organik v ukrayini, 2016) 164 242 270 270 273 393 401 411 31 72 142 155 164 175 182 210 5,3 3,4 1,9 1,7 1,7 2,2 2,2 2,0 -10 -8 -6 -4 -2 0 2 4 6 0 100 200 300 400 500 600 700 2002 2005 2010 2011 2012 2013 2014 2015 th sd . h a th sd . h a / u ni t year area, thsd. ha number of organic farms, unit average area, thsd. ha fig. 3. structure of organic production in ukraine (organik v ukrayini, 2016) grain crops 48% legumes crops 5% fruits 1% oil crops 16% vegetables crops 2% other crops 28% baltic journal of economic studies 84 vol. 3, no. 2, 2017 these products, the regulation of the state. the modern infrastructure of the organic products market in ukraine is characterized by the absence of a sufficient number of certified warehouses for storage of products, the processing enterprises for the production of organic food products, as well as intermediary structures for logging and supplying of organic products on domestic and foreign markets. 4. scenarios of further development in the future, development of ukrainian organic products market will happen according to one of three possible options. according to the first variant, the main production of organic agricultural products will be concentrated in medium and large enterprises and sold mainly in the foreign market. the selling of raw materials will dominate in this case, not food fit for consumption. besides, small companies interested in organic production for the domestic market will be created. the state will play a minor role in supporting the development of organic production. in such case, organic production will grow at an average annual rate of the past five years. the second variant will increase the volume of state support of organic agriculture development and development of appropriate infrastructure; the main attention will be paid to the development of organic production in the small-scale farms, in particular, the establishment of specialized family farms and the creation of service cooperatives on their basis. mentioned facts will contribute to filling the domestic market with organic products, will increase employment in rural areas, however, will not allow full expansion of the potential for organic production in ukraine. the third variant is to create the conditions to ensure the integrated development of the organic market, providing for the rational development of a competitive, diversified organic agriculture, favourable investment environment through a partnership of government and business. this will create the proper legal framework of activities harmonized with the eu legislation, will develop the processing industry and market infrastructure. the following phenomena will provide the opportunity to increase organic production, its sale in the foreign market and filling the domestic market. to solve the existing problems and determine the priorities for the further development of this segment of the market, it is better to choose the third variant as one that best meets the interests of society as a whole. 5. priority directions of development for the further development of organic production in ukraine, it is necessary to solve individual tasks. first, to develop an appropriate regulatory framework for the state regulation of development of this market. this requires the implementation of the organic legislation of ukraine to the european union legislation, ensuring clear and transparent rules for the functioning of the organic sector, considering state support for such production and sales. besides, it is necessary to create and support public authorities for the institutional development of organic agricultural products market at the national and regional levels. secondly, to create an efficient business environment and promote the development of organic trade. this requires the implementation of socio-economic incentives for the growth of trade volumes and quality of organic products in domestic and foreign markets, protection of consumer rights from unfair competition, and formation of a positive image of ukraine on an international level. third, to provide training specialists of organic production and sales. it is necessary to develop and implement an appropriate program of training specialists in a bachelor degree, master's degree and granting of the state support for their implementation. fourth, to promote the dissemination of information about organic products and their promotion in the potential segment of the domestic market. this requires raising awareness about organic products among consumers and producers through the introduction of a systematic approach and state support in the sphere of communications. in addition, it is necessary to spread the knowledge among agricultural producers about the peculiarities of organic production by providing consultations, conducting seminars, conferences and other outreach events. the solution of these tasks will contribute to the increase in the number of enterprises for the production of organic products; expansion of the certified land suitable for maintaining such a production, sales growth of organic products in the domestic and foreign markets. 6. conclusions according to the research results, the following facts should be noted. the market for organic products in ukraine is developing slowly. it is confirmed by the annual increase in the number of operators in this market, the area of certified land suitable for the cultivation of such products. a consequence of it is the annually growing volumes of consumption of organic products in the domestic market; increasing the range of such products. however, further development of the organic market in ukraine is constrained due to the lack of address specific problematic issues. among them, there is a lack of proper legislative and regulatory framework, a lack of modern market infrastructure and effective mechanisms of its functioning. therefore, the possible scenarios of further development of organic products market in ukraine baltic journal of economic studies 85 vol. 3, no. 2, 2017 are defined; the more acceptable among them is a comprehensive development of this market in the interests of society that involves the formation of a competitive, diversified organic agriculture, favourable investment environment through a partnership of government and business. for the further development of organic market in ukraine, it is necessary to develop an appropriate regulatory framework, to guide the implementation of the eu requirements, to create an efficient business environment, to provide training on the requirement of the market, to contribute information to potential consumers and producers about the benefits of organic products. further research and development should be aimed at improving the legislative base of production and circulation of organic products, the development of models and mechanisms of organic production at the regional and national level. references: organik v ukrayini (2016). [electronic resource]. retvitered from: http://organic.com.ua. struktura oborotu rozdribnoyi torgivli u 2015 roci: dopovid (2016) kyiv: derzhavna sluzhba statystyky ukrayiny. [electronic resource]. retvitered from: http://www.ukrstat.gov.ua. maslak o.m. (2016). formuvannya rynku organichnoyi silskogospodar`koyi produkciyi v ukrayini. globalni ta nacionalni problemy ekonomiky, №10. [electronic resource]. retvitered from: http://global-national.in.ua/issue10-2016. александр маслак состояние и перспективы рынка органической сельскохозяйственной продукции в украине аннотация. современный аграрный рынок характеризуется ростом спроса на более качественную сельскохозяйственную продукцию и продовольствие. в связи с этим в украине было начато сертифицировано производство органической продукции, при котором запрещено использование химически синтезированных составляющих, генетически модифицированных организмов и т.д., а также установлены требования к маркировке такой продукции. вместе с тем, при наличии внешнего и внутреннего спроса, рынок органической продукции в украине медленно развивается. предметом исследования избраны теоретические, методические и практические аспекты формирования организационно-экономических основ развития рынка органической сельскохозяйственной продукции в украине. методологическое обеспечение исследования основывалось на диалектическом и системном подходах к изучению экономических явлений и процессов формирования организационно-экономических основ развития рынка органической сельскохозяйственной продукции. при проведении исследований использованы общенаучные и специальные методы, в частности: методы аналогий и сравнений, систематизаций, статистико-экономический, расчетно-конструктивный, программно-целевой. цель исследования предусматривала выявление состояния рынка органической сельскохозяйственной продукции в украине и перспектив его дальнейшего развития. определенная цель обусловила решение следующих задач: проведение исследования современного состояния рынка органической продукции в украине; установление проблем, которые сдерживают его развитие; определение сценария возможного развития этого рынка; обозначение перспективных задач, решение которых будет способствовать дальнейшему развитию рынка органической сельскохозяйственной продукции в украине. по результатам проведенных исследований получены следующие выводы: исследовано тенденции развития рынка органической продукции в украине; установлено, что отсутствие надлежащей законодательной и нормативно-правовой базы, современной рыночной инфраструктуры и действенных механизмов ее функционирования сдерживают дальнейшее развитие этого рынка; выбран один из сценариев возможного более приемлемого для общества развития этого рынка; обозначены приоритетные задачи, требующие первоочередного решения. как результат для дальнейшего развития рынка органической продукции в украине необходимо разработать надлежащую нормативно-правовую базу и проведения ее имплементации с требованиями ес, сформировать действенное бизнес-среду, обеспечить подготовку специалистов согласно с требованиями этого рынка, способствовать распространению информации для потенциальных потребителей и производителей о преимуществах органической продукции. baltic journal of economic studies 134 vol. 2, no. 3, 2016 the regulation of methodical implementation by equity accounting on enterprises with foreign investment iurii iakymov1 university of the state fiscal service of ukraine, ukraine abstract. purpose is to specify on the accounting methodic of transactions with equity and based on it’s ways of their effektive and resultative improvement in the enterprises with foreign investments. methodology: in the context of such a scientific research the economic substance and methodical support of the equity accounting in enterprises with foreign investment comparison methods were used: research, synthesis, system approach, mathematical methods, formalization, induction, deduction and other methods. the scientific article is compiled on the basis of research results the main provisions of the legal regulation of these processes, the analysis of the literature of scientists and experts, that investigate this perspective, and other official sources from the internet. results. this article is devoted to the economic essence and peculiarities of the accounting equity in the context of accounts, the methodology for formation of equity, recognition procedures and the equity in enterprises with foreign investment. also, the methodical approach of equity accounting in enterprises with foreign investment was analyzed by the author. as a result of research and detailed testing of transactions with equity for enterprises with foreign investments formed the results and recommendations: specification of accounting method the transactions of equity based on the scientific research of it’s economic nature and characteristics of accounts, capital formation techniques, procedures, recognition and measurement of equity on the basis of comparative characteristics the international experience; in order to display the mapping technique in the accounts of transactions with equity, is considered the procedure of object accounting in the program 1c and sap, which based on a comparison of it’s benchmarks; proposed the model of comparative accounting automation through the use of accounting software 1c and sap, confirmed the need for a gradual transition to international standards. to display the results of the differentiation procedures and methodical support of transactions with equity in enterprises with foreign investment is made a comparative analysis of accounts and reporting on these operations. practical implications. the search of more effective methods and the order of formation of own capital and its registration with the position of its normative regulation are perspective issue, during the reformation and standardization of all spheres of public life in ukraine. in terms of legislative changes, the important is the realization of priority tasks and describe the scientific basis of the rules of accounting methodology equity, as well as its formation. using a systematic approach, while displaying the accounts of transactions with their own capital and their accounts promotes their detailed characterization in the context of changes in the structural components of the equity for enterprises with foreign investments. therefore, the use in practice formed proposals for enterprises with foreign investments contribute to the improvement of the accounting for transactions with equity in the context of methodological for their support, and also, can be used as based scientific materials on foreign investment enterprises, because these subject is the main identifiers promises more effective economy, in general, and resultation of each subject, separately. value/originality. these results confirm the need for a gradual transition to european standards of accounting operations with its own capital and can be used as a theoretical basis for the unification and harmonization of the main provisions of international requirements in the future. to do this, you need their promises more effective methodological support, which should be studied in the framework of this scientific article, particularly suggested: improve the procedure for accounting of transactions with equity in enterprises with foreign investment through studies, from a scientific point of view, methods, and procedures for their methodological support; the model of comparative accounting automation based on the use of accounting software 1c and sap. it should corresponding author: 1 department of management of organizations, uman national university of horticulture. e-mail: svitovyy@rambler.ru baltic journal of economic studies 135 vol. 2, no. 3, 2016 be noted that, since the enterprise with foreign investments are foreign investments, the investigative keep records, usually on the basis of ias and ifrs, respectively software must be built on this basis, for this purpose more than an acceptable use of the sap program. at this point, the majority of enterprises with foreign investment in ukraine is carried out with a gradual transition to the sap 1c, there are economically justified. key words: accounting, equity, methodic approach, europian standarts, foreign investment, correspondence of accounts. jel classification: м41, н54, м00, е22, f21, d92, f32. 1. введение актуальность темы. в условиях реформационных изменений экономики украины, исследование, с научной точки зрения, вопросов методического обеспечения учета операций с собственным капиталом для предприятий с иностранными инвестициями, есть особенно актуальным, потому что иностранные инвестиции являются современными индикаторами эффективности рыночной экономики. фундаментальное исследование нормативной регламентации и особенностей методического обеспечения бухгалтерского учета собственного капитала, именно для этой категории хозяйственных субъектов, позволяет улучшить порядок ведения их учета, что ведет к повышению результативности работы, в целом. безусловно, каждый объект учета не является статическим, потому он требует постоянного усовершенствования с целью повышения эффективности и признания его в рамках международного пространства. использования европейских норм на практике в украине дает возможность усовершенствовать методику и процедуры формирования, признания, оценки и отображения на счетах бухгалтерского учета капитала. поиск эффективных методов и порядка формирования собственного капитала и его учет с позиций его нормативной регламентации есть перспективным вопросом в условиях реформирования и стандартизации всех сфер жизнедеятельности общества украины. постановка проблемы. в условиях законодательных изменений, важным является осознание приоритетных заданий и описания правил научного обоснования методики бухгалтерского учета собственного капитала, а также его формирования. использование системного подхода, во время отображения на счетах операций с собственным капиталом и их корреспонденция способствует детальной их характеристике в контексте внесения изменений в структурные составляющие собственного капитала на предприятиях с иностранными инвестициями. цель научной статьи заключается в конкретизации методического обеспечения учета через отображения на счетах операций с собственным капиталом и выделение на его основе путей эффективного и результативного их усовершенствования на предприятиях с иностранными инвестициями. анализ последних исследований и публикаций. подробное описание результатов научных исследований ученых дает возможность сгруппировать их позиции с целью отображения более значимых. следует отметить, что количество научных исследований методики учета по операциям с собственным капиталом для предприятий с иностранными инвестициями ограничено, что не позволяет составить полную картину, но при этом является открытым пространством для проведения эффективных научных исследований. в.г. васильева детально описала сущность иностранных инвестиций и их использование в учете с целью формирования собственного капитала, выделила этапы внесения иностранных инвестиций в уставной капитал (оформление уставных документов, осуществление иностранных инвестиций и их государственная регистрация), а также рассмотрела порядок отображение на счетах задолженности иностранных учредителей и внесение денежных средств в уставной капитал на основе использования счетов класса 4 (vasylieva, 2009). сагова  с.в. подтвердила отсутствие единого подхода к организационно-методическому обеспечению учета операций с иностранными инвестициями, что реализовывается на основе отображения на счетах операций после регистрации капитала, а также предложила дополнительные счета для отображения расходов по формированию капитала, описала аналитический и синтетический учет капитала (sahova, 2006). л.с. стригуль описала сущность собственного капитала с позиций основного бухгалтерского уравнения: а=к+о (stryhul, 2014). на основе такой информации, автором проанализировано структурные элементы собственного капитала и порядок их отображения на счетах (stryhul, 2014). дмитренко а.в. проведены исследования особенности ведения бухгалтерского и налогового учета уставного капитала на предприятиях с иностранными инвестициями через обоснование сущности собственного капитала, поскольку уставной капитал является его структурным элементом (dmytrenko, 2010). ученым было описано виды иностранных инвестиций в уставной капитал предприятия и процедуры их оценки (dmytrenko, 2010). нестеренко с.с. провел сравнительный анализ нормативного регулирования составляющих собственного капитала на предприятиях разных форм собственности (nesterenko, 2014). таким образом, проведенный анализ научных позиций сущности собственного капитала, иностранных инвестиций, а также особенности ведения их учета на основе использования методического обеспечения, служит основой для проведения дальнейших научных исследований. baltic journal of economic studies 136 vol. 2, no. 3, 2016 2. результаты исследования анализ нормативной регламентации методического обеспечения операций с собственным капиталом для предприятий с иностранными инвестициями научно обоснован, в разрезе их уровней (рис. 1). анализ данных рис. 1 фиксирует уровни регулирования нормативно-правовой базы, которые отображают нормы формирования собственного капитала и ведения учета операций, что связаны с иностранными инвестициями и собственным капиталом. 2.1. анализ статистической информации по операциям с собственным капиталом осуществлено подробное тестирования статистических данных, которые касаются собственного капитала за видами деятельности и его структурными составляющими в украине (рис. 2). таким образом, если проанализировать результаты исследования рис. 2, можно утверждать, что собственный капитал в 2015 году составлял 1480658, в разрезе видов деятельности самую большую долю имеет промышленность (579218,9), что касается структурных элементов собственного капитала, то: уставной капитал равен 1256285, дополнительный капитал 866086,2, резервный капитал 57225,9, изъятый – 119149, непокрытый убыток 579900,5. следует также отметить, что в сравнении с предыдущим 2014 годом, базовые показатели собственного капитала уменьшились в 2015 году. международный уровень: • мсбу 1 "представления финансовой отчетности"; • мсфо 11 "совместная деятельность"; • мсфо 28 "инвестиции в ассоциированные предприятия"; • мсфо 1 "первое использование финансовой отчетности" и проч. национальный уровень: • зу "о режиме иностранного инвестирования"; • нпсбо 1 "общие требования финансовой отчетности"; • налоговый кодекс украины; • инструкция об использовании плана счетов; • положение о документальном обеспечении записей в учете и проч. уровень предприятия с иностранными инвестициями: • уставные документы; • приказ об учетной политике в разрезе данных о капитале; • отчет о собственном капитале; • внутрифирмовые стандарты; • рабочий план счетов; • програмы и стратегии развития рис. 1. нормативная регламентация методики учета собственного капитала источник: составлено автором -1000000 -500000 0 500000 1000000 1500000 2000000 статистические данные собственного капитала в 2015 году в украине за видами деятельности всего сельское хазяйство промышленность строительство торговля транспорт финансовая и страховая деятельность наука охрана здоровья искуство прочие виды услуг рис. 2. собственный капитал за видами деятельности в украине за 2015 г. источник: составлено за данными сайта государственной службы статистики украины 2.2. научные исследования особенностей методического обеспечения учета операций с собственным капиталом для отображения результатов дифференциации процедур и методического обеспечения учета операций с собственным капиталом на предприятиях с иностранbaltic journal of economic studies 137 vol. 2, no. 3, 2016 таблица 1 характеристика счетов, форм и кодов отчетности по операциям с собственным капиталом и его структурными элементами счет (план счетов №291) форма отчетности (нпсбо 1) код отчетности клас 4 «собственный капитал и обеспечение обязательств» 40 «зарегистрированный капитал» пасив баланса, роздел і 1400 41 «капитал в дооценках» пасив баланса, роздел і 1405 42 «дополнительный капитал» пасив баланса, роздел і 1410 43 «резервный капитал» пасив баланса, роздел і 1415 44 «нераспределенная прибыль (непокрытый убыток)» пасив баланса, роздел і 1420 45 «изьятый капитал» пасив баланса, роздел і 1425 46 «неоплаченный капитал» пасив баланса, роздел і 1430 сальдо счетов 40-46 отчет об изменениях собственного капитала 4000-4300 источник: составлено автором за данными [инструкция по применению плана счетов бухгалтерского учета активов, капитала, обязательств и хозяйственных операций предприятий и организаций, 1999] счет 40 за дебетом 40 с кредитом счетов 30,31,44,67 за кредитом 40 с дебетом счетов 10-16,2022,28,30,31,43,44,67,63,68 счет 43 за дебетом 43 с кредитом счетов 40,44,67 за кредитом 43 с дебетом счетов 44 счет 44 за дебетом 44 с кредитом счетов 40,44,67,68,79 за кредитом 44 с дебетом счетов 40,44,79 рис. 3. кореспонденция счетов по операциям с собственным капиталом источник: составлено автором за даными [инструкция по применению плана счетов бухгалтерского учета активов, капитала, обязательств и хозяйственных операций предприятий и организаций, 1999] рис. 4. сравнительная характеристика бухгалтерских программ на основе отображения операций с собственным капиталом источник: составлено автором хазяйственная операция автоматизация учета на основе программы 1с на основе программы sap бухгалтерские проводки обороты счетов класса 4 (главная книга) оборотно-сальдовая ведомость по счету 40,43,44 за период анализ счетов по датам и субконто карточка счетов ведомость по счету оборотно-сальдовая ведомость отчетность отчет по проводкам журнал-ордер по субконто сводные проводки сальдо по счетам анализ счета с записями по проводкам просмотр основной записи карточка счетов итоговая ведомость ведомость движения первичный документ есть основой любой операции существуют 4 типи хазяйственных операции первичный документ baltic journal of economic studies 138 vol. 2, no. 3, 2016 ными инвестициями выполнен сравнительный анализ счетов и отчетности по данным операциям (табл. 1). следует отметить, что предприятия с иностранными инвестициями имеют следующие структурные элементы собственного капитала, как правило, это: уставной капитал (счет 40), резервный капитал (счет 43) и нераспеределенная прибыль (непокрытый убыток) (счет 44). согласно инструкции о заполнении плана счетов № 291 от 30.11.1999 г. (с изменениями и дополнениями) на рис. 3 отображена базовая корреспонденция счетов, что свойственна именно предприятиям с иностранными инвестициями. сальдо субсчета 401 должно соответствовать уставному капиталу, который указан в уставе предприятия с иностранными инвестициями [инструкция по применению плана счетов бухгалтерского учета активов, капитала, обязательств и хозяйственных операций предприятий и организаций, 1999]. 2.3. сравнительная характеристика программного обеспечения для учета операций с собственным капиталом с целью отображения методики отображения на счетах операций с собственным капиталом, рассмотрено порядок ведения учета данного объекта в программе 1с и sap на основе сравнения его базовых показателей (рис. 4). таким образом, если проанализировать данные рис. 4 можно утверждать, что между данными программами есть много общих знаменателей отбора и оценки (возможность просмотреть карточку счета, сделать анализ счета, ведомость по счету и прочее), единственная разница заключается в том, что в программе sap любая команда формируется за специальными кодами, которые есть уникальными для каждого субъекта и формируются программистами. в программе sap сохранение и транспортировка регистров уникально и формируется индивидуально в зависимости от программного обеспечения на субъекте. необходимо заметить, что, так как предприятия с иностранными инвестициями имеют иностранные вложения, то следственно ведут учет, как правила, на основании мсбу и мсфо, соответственно программное обеспечение должно быть построено на их основе, для этого более приемлемое использование программы sap. на данный момент, большинство предприятий с иностранными инвестициями в украине осуществляют постепенный переход с 1с на sap, что есть экономически обосновано. 2.4. порядок признания и оценки собственного капитала, согласно норм действующего законодательства украины в завершении методики учета по операциям с собственным капиталом произведено исследования особенностей признания и оценки собственного капитала основываясь на национальных и международных стандартах (табл. 2). данные табл. 2 отображают специфику признания и оценки капитала в региональном разрезе. именно эти данные являются важными связующими элементами идентификации и эффективности использования методики ведения учета операций с собственным капиталом. предложено усовершенствовать порядок ведения учета операций с собственным капиталом на предприятиях с иностранными инвестициями через обоснованные способы и процедуры методического их обеспечения на основе корреспондирующих счетов, а также особенностей признания и оценки собственного капитала. 3. выводы в результате проведенных научных исследований и детального тестирования операций с собственным капиталом для предприятий с иностранными инвестициями сформированы итоги и рекомендации: 1. конкретизация методики ведения учета по операциям с собственным капиталом осуществлена на основе изучения экономической сущности и особенностей таблица 2 признание и оценка собственного капитала критерии нпсбо мсбо 1. признание признание капитала осуществляется через признание его элементов: активов и обязательств. актив=капитал+обязательство (доходы – расходы). уменьшение экономических выгод ведет к уменьшению активов и увеличения обязательств ведет к уменьшению собственного капитала (расходы), тогда как увеличение экономических выгод ведет к увеличению активов и уменьшению обязательств ведет к увеличению собственного капитала (доходы) в условиях первоначального признания инвестиций в инструменты капитала существует возможность принимать решение предоставлять в ином совокупном доходе дальнейшие изменения справедливой стоимости инвестиций в инструменты капитала не для торговли. должна раскрываться информация для пользователей финансовой отчетности для оценки целей, политики и процессов, которые относятся к управлению капитала 2. оценка стоимость чистых активов, реальная рыночная стоимость и деловая репутация справедливая рыночная стоимость источник: составлено автором за данными (международный стандарт бухгалтерского учета 1 (мсбу 1), 2012; международный стандарт финансовой отчетности 7 (мсфо 7), 2012; об утверждении национального положения (стандарта) бухгалтерского учета 1 «общие требования к финансовой отчетности», 2013) baltic journal of economic studies 139 vol. 2, no. 3, 2016 осуществления учета в разрезе корресподирующих счетов, методики формирования капитала, процедур признания и оценки собственного капитала на основе сравнительной характеристики отечественного и международного опыта. 2. предложено сравнительную модель автоматизации учета на основе использования бухгалтерских программ 1с и sap, подтверждено необходимость постепенного перехода на международные стандарты. 3. предложено усовершенствовать порядок ведения учета операций с собственным капиталом на предприятиях с иностранными инвестициями через обоснованные, с научной точки зрения, способы и процедуры методического их обеспечения. references vasylieva, v.h. osoblyvosti obliku otrymannia investytsii v inozemnii valiuti ta napriamy yoho vdoskonalennia. 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[electronic source]. – retrieved from: http://www.irbis-nbuv.gov.ua/cgi-bin/ i r b i s _ n b u v / c g i i r b i s _ 6 4 .e x e ? i 2 1 d b n = l i n k & p 2 1 d b n = u j r n & z 2 1 i d = & s 2 1 r e f = 1 0 & s 2 1 cn r = 20&s21stn=1&s21fmt=asp_meta&c21com=s&2_s21p03=fila=&2_s21str=vcpitp_2014_65_5 юрий якимов нормативная регламентация методического обеспечения учета собственного капитала на предприятиях с иностранными инвестициями аннотация. цель работы заключается в конкретизации методического обеспечения учета через отображения на счетах операций с собственным капиталом и выделение на его основании путей эффективного и результативного их усовершенствования на предприятиях с иностранными инвестициями. методика. в условиях проведения подробного научного обоснования экономической сущности и методического обеспечения учета операций с собственным капиталом на предприятиях с иностранными инвестициями были использованы методы сравнения, исследования, обобщения, системный подход, математические методы, формализация, индукции, дедукции и прочие методы. научная статья составлена на основании обобщения результатов исследований основных положений нормативно-правовой регламентации данных процессов, анализа литературных источников ученых и практиков, что исследуют данную проблематику, и прочих официальных источников с интернета. результаты. подлежали изучению и научному обоснованию следующие вопросы: экономическая сущность и особенности осуществления бухгалтерского учета собственного капитала в разрезе корреспондирующих счетов, методики формирования собственного капитала, процедур признания и оценки собственного капитала на предприятиях с иностранными инвестициями. в статье конкретизировано особенности методического обеспечения ведения учета собственного капитала на предприятиях с иностранными инвестициями. в результате проведенных научных исследований и детального тестирования операций с собственным капиталом для предприятий с иностранными инвестициями сформированы итоги и рекомендации: конкретизация методики ведения учета по операциям с собственным капиталом осуществлена на основе изучения экономической сущности и особенностей осуществления учета в разрезе корресподирующих baltic journal of economic studies 140 vol. 2, no. 3, 2016 счетов, методики формирования капитала, процедур признания и оценки собственного капитала на основе сравнительной характеристики отечественного и международного опыта; с целью отображения методики отображения на счетах операций с собственным капиталом, рассмотрено порядок ведения учета данного объекта в программе 1с и sap на основе сравнения его базовых показателей. предложено сравнительную модель автоматизации учета на основе использования бухгалтерских программ 1с и sap, подтверждено необходимость постепенного перехода на международные стандарты; для отображения результатов дифференциации процедур и методического обеспечения учета операций с собственным капиталом на предприятиях с иностранными инвестициями, выполнен сравнительный анализ счетов и отчетности по данным операциям. практическое значение. поиск эффективных методов и порядка формирования собственного капитала и его учет с позиций его нормативной регламентации – перспективные вопросы в условиях реформирования и стандартизации всех сфер жизнедеятельности общества украины. в условиях законодательных изменений, важным является осознание приоритетных заданий и описания правил научного обоснования методики бухгалтерского учета собственного капитала, а также его формирования. использование системного подхода, во время отображения на счетах операций с собственным капиталом и их корреспонденция способствует детальной их характеристике в контексте внесения изменений в структурные составляющие собственного капитала на предприятиях с иностранными инвестициями. поэтому, использование на практике сформированных предложений на предприятиях с иностранными инвестициями способствуют усовершенствованию бухгалтерского учета по операциям с собственным капиталом в контексте методического их обеспечения, а также могут быть использованы в качестве методических материалов на предприятиях с иностранными инвестициями, поскольку именно эти субъекты являются главными идентификаторами эффективности рыночной экономики, в целом и результативности каждого субъекта, по отдельности. значение/оригинальность. полученные результаты подтверждают необходимость постепенного перехода на европейские стандарты ведения учета операций с собственным капиталом и могут использоваться, в виде теоретической базы, для унификации и гармонизации их основных положений с международными требованиями в перспективе. для этого, необходимо эффективное их методическое обеспечение, которое подлежит изучению в рамках данной научной статьи, в частности предложено: усовершенствовать порядок ведения учета операций с собственным капиталом на предприятиях с иностранными инвестициями через обоснованные, с научной точки зрения, способы и процедуры методического их обеспечения; сравнительную модель автоматизации учета на основе использование бухгалтерских программ 1с и sap. необходимо заметить, что, так как предприятия с иностранными инвестициями имеют иностранные вложения, то следственно ведут учет, как правила, на основании мсбу и мсфо, соответственно программное обеспечение должно быть построено на их основании, для этого более приемлемое использование программы sap. на данный момент, большинство предприятий с иностранными инвестициями в украине, осуществляют постепенный переход с 1с на sap, что есть экономически обосновано. baltic journal of economic studies 179 vol. 7 no. 2, 2021 corresponding author: 1 odessa polytechnic state university, ukraine. e-mail: imt@te.net.ua orcid: https://orcid.org/0000-0002-1268-6009 researcherid: https://www.researchgate.net/profile/mikhaylo_oklander 2 odessa polytechnic state university, ukraine. e-mail: alevtynakudina@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-2-179-187 channels for promotion of fashion brands in the online space mykhailo oklander1, alevtyna kudina2 abstract. the article’s purpose is to substantiate scientific and applied recommendations for the using of modern digital marketing tools to promote fashion brands. the subject of research is the theoretical foundations of the formation and operation of a system of priority channels for the promotion of brands of light industry enterprises in terms of increasing business risks. methodology. the methods of scientific abstraction, analysis and synthesis, systemic, dialectical, expert, analogies and structural-functional research methods are used. results. the study has shown that most of the world’s brands in the fashion industry determine e-commerce the main vector of their development. this is due to changes in consumer behaviour and due to the significant impact of the pandemic on the retail sector. there are highlighted adverse factors of development of ukrainian fashion brands. it has been identified promising channels for promoting fashion brands in the online space. the use of user journey map and user flow is justified to ensure the convenience of using the online store and reduce the amount of time spent on shopping. the key elements of the information architecture of the site are highlighted: cognitive load and mental models. the set of brand measures to encourage users to expand interaction with content (official advertising from the social network) (for facebook, instagram, youtube, tiktok, pinterest), advertising with well-known bloggers whose audience is similar to the brand’s audience (facebook, instagram, youtube), mass following and mass liking (instagram); mutual pr (facebook, instagram, youtube, tiktok); giveaway (instagram)). brand accounts must be fully consistent with the brand’s corporate identity and complement each other. there are shown the advantages of marketplaces in the promotion of goods of the fashion industry and the criteria for their selection in this market. there are determined the specifics of the use of social networks in the promotion of clothing and footwear brands. there are given characteristics of content in social networks facebook, instagram, youtube, tiktok, and pinterest. there are proposed options for the development of stages of the sales funnel for fashion brands in social networks. it is determined that the strategy of brand development should be based on the specifics of the range in social networks, the portrait of the target audience, the character and dna of the brand. it is based on the capabilities and goals of social networks. it is stated that with the correct use of resources and opportunities of social networks it is possible to ensure the growth of brand awareness and increase loyalty to it. practical implications. the results of the study can be used to develop strategies and tactics for promoting fashion brands of ukrainian companies in the internet. value/originality. the value of the article is due to the presence of recommendations for choosing the most effective channels for promoting fashion brands in the online space. there are proposed the functionality of the online store for fashion brands, the criteria for choosing marketplaces, the relevant social networks for the promotion of brands and the direction of their coordination with the company’s website. key words: fashion industry, fashion brands, branding, digital technologies, marketplaces. jel classification: m31 1. introduction despite the fact that the concept “ brand” is a common and often used term, so far marketers and researchers have not come to a consensus on what a brand is. there are two different approaches to defining a brand. the first approach is to define the concept “brand” “through the company”. the american marketing association suggests the following concept “brand”: baltic journal of economic studies 180 vol. 7 no. 2, 2021 “brand is a name, term, design, symbol or any other feature that identifies one seller’s good or service as distinct from those of other sellers” (common language marketing dictionary). a similar definition is given by the american researcher p. kotler. his interpretation of the term “brand” is as follows: “brand is a name, term, design, symbol or any other feature that identifies one seller’s good or service as distinct from those of other sellers” (kotler, wong, armstrong, 2010). the second approach is to define the brand “through the consumer”. this approach considers the concept of brand not from the point of view of the company and its ideas, but from the point of view of the consumer and his or her understanding of a particular brand, manufacturer, product or service. thus, the main indicator that determines the brand as the qualitative characteristics of the product that differentiate the product on the market. david m. ogilvy defines a brand as an image of a product that has developed and is stored in the minds of consumers: “a brand is an intangible sum of product attributes: its name, packaging and price, history, reputation and method of advertising. the brand is also a combination of the impressions it makes on consumers and the result of their experience in using the brand” (pertsiya, 1999). the novelty of the research topic is to take into account the specifics of the marketing environment of light industry enterprises and justify the choice of relevant channels for promoting fashion brands. the relevance of scientific solutions allows to form the foundation for increasing market share, the profitability and competitiveness of ukrainian enterprises in the fashion industry. the purpose of the article is to substantiate the scientific and applied recommendations for the selection of promising channels for the promotion of fashion brands in the online space. there were used the methods of scientific abstraction, analysis and synthesis, systemic, dialectical, expert, analogies and structural-functional research methods, which gave the opportunity to develop scientific and methodological approaches to increase sales of light industry enterprises of ukraine. it is necessary to solve the following tasks to achieve the purpose: – to formulate the characteristics of sites with quality customer service for fashion brands; – to highlight the advantages and disadvantages of marketplaces in the promotion of fashion brands; – to clarify the criteria for selecting marketplaces for the development of fashion brands using e-commerce; – to identify the criteria for selecting social networks that should be used to promote fashion brands; – to justify the format and content of social networks for the development of fashion brands; – to offer options for the development of stages of the sales funnel for fashion brands in social networks; – to develop and substantiate a map of interaction of digital resources of fashion brands. the ukrainian fashion industry has been actively developing since 2014. during this time, many young and promising brands appeared and began to develop their own retail network. during 2014-2016, some of the brands were able to consolidate their positions in the market, the weaker had to retreat (rau, 2020). according to the ukrainian association of light industry enterprises as of 2019, there are 2518 enterprises in the light industry in ukraine, in particular 1669 of them are engaged in producing finished clothing (ukrlegprom, 2020). only a few of them become really strong brands with their stable loyal audience. the main reasons for this situation are: 1) the presence on the market of a large number of strong western tm. 2) the cost of finished products. 3) low solvency of the population. 4) lack of sufficient funds for brand development. 5) narrow assortment. 6) widespread use of second-hand clothes. in 2020, the pandemic and closing of physical outlets were another problem for ukrainian brands. all retailers, including international ones felt the impact of quarantine. the net profit of inditex, owner of the world-famous clothing brands such as zara, bershka, pull & bear and others, fell by 70% due to closing of brand stores. at the same time, revenue from online sales increased by 77% compared to 2019. given these figures, the company decided to close 1,200 physical stores and invest 1 billion eur in online transactions (kunytskyi, 2021). according to experts, currently ukrainian enterprises operating in the field of light industry consider online space to be a priority vector of development. this applies both to the promotion of the brand through marketplaces, and the development of their own online stores. this direction is predictable, because according to the nasdaq international securities exchange, by 2040, 95% of all purchases will be made online (rau, 2021). brand development in e-commerce should be based on digital trends (sadchenko, khumarova, 2020), habits and needs of consumers, as well as the use of effective tools to promote fashion brands in the online space. there should be the main channels of development for fashion brands in e-commerce: own website and mobile application, placement of your brand on marketplaces and promotion on social networks. 2. website and mobile application it is estimated that by 2023, e-commerce purchases will increase from 14.1% to 22% (ecommerce guide, 2020). e-commerce is an environment that is baltic journal of economic studies 181 vol. 7 no. 2, 2021 constantly changing under the influence of technology, and therefore requires constant analysis and tracking of trends. this applies to consumer buying habits, the emergence of new ways of delivering goods, the introduction of artificial intelligence, trends in ux-design and others. the development of an online store includes the following stages (web-systems.solutions, 2021): 1) analysis of the target audience of the brand. 2) functional analysis of competing brands’ websites. 3) defining the goals and objectives to be performed by the online store. 4) drawing up a technical task for the development of the site, which should take into account the necessary structure. the structure of the site, in turn, must be agreed with the seo-specialist for further promotion of the site in organic production. 5) development of ui-design that corresponds to the corporate style of the brand. 6) layout and programming of the site. 7) online store testing. 8) website promotion. when designing an online store, you should take into account the fact that people want physical contact with other people. unfortunately, e-commerce cannot provide such an opportunity. so, many companies are trying to bring the experience of consumers in physical stores online, making online stores more personalized and design-friendly. one way to achieve this effect is the “recommended” feature, which offers users products based on site searches or pre-orders. the brand’s online store should be intuitively userfriendly. most stores have a similar structure, the same distribution by category, placement of “buy” buttons and shopping cart icons in the same places. this is due to the fact that the internet users are already accustomed to a certain structure of the site interface, which allows them to quickly shop on the internet resources they visit for the first time. the development of digital technologies has led to inflated consumer expectations. relevance, convenience and ease of use have become essential components for any online store. according to a new survey of approximately 2,000 consumers in the united states conducted by digital intelligence platform provider coveo, 90% of respondents expect the online shopping experience to be the same or better than in-store. half of the respondents say that they always have problems when shopping online. 43% of respondents said they were willing to pay more if they could find the right thing in a few clicks (berthiaume, 2021). thus, one of the tasks facing the brand is to ensure the ease of use of the online store and reduce the amount of time it will spend on the purchase of a product. for this purpose, there are used some tools such as user journey map and user flow. they help recreate the path that users take to meet their goals. these tools help to understand whether all the processes in the product (in this case in the online store) have a logical conclusion (pong, 2018). particular attention should be paid to information architecture (ia), which is the structure of the site and the organization of its content. information architecture is the creation of a structure for a site, mobile application or other project that allows us to understand where we are as users and where about our position is the information we need (hillel, 2017). information architecture relies on some elements of cognitive psychology to influence how we structure information. the key elements are: 1) cognitive load is the amount of information that a person can process at any time. 2) mental models are assumptions that people make before interacting with a website or application. information is easier to detect when it is in a place that corresponds to the mental model of the user about where it should be (ux box, 2015). the main types of structures for sites are linear, linear with deviations, block, tree and tag. for online stores of fashion brands, the best options are tree-like and tag structure (andrusenko, 2019). the tree-like structure implies the nesting of one category in another, for each product a separate branch is formed (figure 1). tagged structure involves the creation of individual pages of tags based on parameters: price, promotions, features of use, properties, specific characteristics and so on. models (by design) of the product can also act as tags for fashion brands. the advantage of tagging is an increase in the number of pages that can attract additional traffic. this result is achieved by expanding the semantic core: the use of more low-frequency queries. the tagged structure can also be superimposed on the tree. but keep in mind that the site can never be duplicate pages and duplicate products in different categories. this can lead to problems with: – indexing: the overall size of the site increases, when searching the search bot skips important pages; – substitution of pages in results: the search engine algorithm can make a duplicate page relevant. the result shows the page which shoule not be promoted; – if users start linking to a duplicate, the actual promotion page will lose the link weight. in order for the brand to be able to provide quality customer service through the e-commerce platform, the site must meet the following requirements and recommendations: 1. adaptation of the site. the online store should be displayed correctly on mobile devices and tablets, as 62% of smartphone owners made purchases through it (smith, 2021). baltic journal of economic studies 182 vol. 7 no. 2, 2021 2. there must be an access to the shopping cart at each page. usually, the shopping cart is in the upper right corner of the page. 3. the search bar should be as visible as possible. this will save the user time searching for the product he or she needs. 4. navigation menu. this menu helps the client to better navigate the site and easily return to the category he or she needs. 5. warranties for consumers. the brand must convince its potential customers of the safety and convenience of shopping on their site, providing information on privacy policies, terms and conditions of delivery of the order, warranties and conditions of return. product reviews are also important. this can persuade the visitor to buy the product if he has a quality doubt. reviews can only be in verbal form, and can be marked with points, which are determined by those who purchased the product. amazon notes that a large proportion of customers buy the product mostly paying attention to its average rating (dumaine, 2020). 6. calls for action if the brand conducts promotions or sales, information about them should be posted on the main page of the site and encourage (using the appropriate buttons) to go to the section with the promotional product. the most popular option is a button labeled “shop now ”. 7. attractive photos the quality and emotionality of photography is especially important for fashion. photos posted on the main page should not only be high quality and show the product. they must reflect the dna of the brand and broadcast a certain way of life that consumers lead or aspire to. 8. availability of filters and sorting these features help customers find the product they need as quickly as possible, which in turn improves the customer experience. colour, size and price filters are a must for clothing brands. 9. the presence of the button “add to wish list” this allows the buyer to “put aside” the product and buy it later. 10. goods for additional sale. a large number of brands use this technique to increase the number of positions in the check. at the bottom of the product card page there are several products that may be similar to the one currently viewed by the customer, or those that may complement the image with this thing (shoes, accessories, etc.). such products are marked as “products that you may like”. 11. availability of product description the product card on the site must indicate the materials the product is made of, the availability of sizes, colours, features of care. 12. photos from different angles/videos the client must be sure how the clothes will fit on different sides and whether it fits him or her in all respects. the video adds confidence that the product will look exactly as the brand represents it in real life. 13. availability of dimensional grid or online fitting one of the advantages of offline stores over online is that the customer has the opportunity to wear the thing and make sure that it suits him or her. with the development of technology, a similar opportunity has appeared in online stores. the company can install a certain extension on its website, which will allow customers who have entered their parameters (height and body measurements) to understand how a thing of a certain size will fit them. this will not only provide a tax basis for the purchase, but also significantly reduce the number of returns. you should also optimize your site so that all pages load as quickly as possible. this will increase the possibility of the online store visitor stay and perform the target action. the optimal loading time is 2-3 seconds (ashmanov and partners, 2020). optimizing the loading of a web page affects not only figure 1. tree-like structure of the online store baltic journal of economic studies 183 vol. 7 no. 2, 2021 consumer behaviour, but also its ranking by search engines. in addition to the fact that the site in the browser must be adapted for the mobile version, companies should already think about developing their own mobile applications. industry giants such as nike and adidas have already invested more than 1 billion usd in the company’s digital transformation. they have already created a whole ecosystem of applications where you can buy their products and learn about new products (bain, 2021). the company also creates its own applications related to running and home training, thus providing useful content for users and increasing brand loyalty. the promotion of the brand’s website and its individual products can be done through seooptimization and advertising campaigns in search networks. it should be noted that seo-optimization is a long-term process and bringing the online store to the top of organic production can take from 4 to 6 months. search campaigns should be conducted through a wide search for high-frequency queries, and the best option for promoting individual products is google’s trading companies, which allow the user to immediately determine whether a product suits them in appearance and price (support. google ads). 3. marketplaces one of the ways to promote a brand, increase its visibility and attract new customers is marketplaces. marketplace is an e-commerce platform, an online e-commerce store that provides information about a product or service of third parties (wikipedia, 2021). marketplaces can be of different nature: highly specialized, i.e., to sell one specific type of product (e.g., clothing), or have many areas and categories of products, such as amazon. placing the brand’s products on marketplaces has the following advantages: 1. the speed of creating a store. the brand does not need to create an online store from scratch. all you have to do is download the goods, add the necessary information about the company and follow the policy of the marketplace. 2. access to a wide audience. large platforms are well known and popular with consumers. according to research, the approximate number of visitors to amazon.com, one of the largest marketplaces in the world, is about 2.4 billion per month (rbk, 2020). at the same time, the ukrainian analogue of prom.ua is visited by approximately 32 million users every month (portnoy, 2018). 3. security guarantees for consumers. well-known trading platforms are trusted more than little-known brands, and therefore consumers are more willing to shop there. because of this, marketplaces can be a great start for small brands in gaining their target audience. in addition to the advantages, marketplaces have disadvantages, such as: – high competition on the site; – dependence on the rules set by the marketplace; – fewer opportunities to communicate with the client, in contrast to their own online store or social networks; – the need to coordinate promotions and sales. despite the disadvantages, well-known brands of clothing and footwear place their products on various marketplaces: nike and puma – on amazon and ebay, ralph lauren, levi’s, calvin klein, love moschino and many others – on asos, fashion brands of the premium segment – on farfetch, netaporter etc. the choice of marketplace depends on its direction and pricing policy of the brand. after all, on the aliexpress platform, consumers go for low-priced products, and on sites such as mytheresa or yoox – for clothes of well-known brands operating in the ready-to-wear and ready-to-wear segments. when choosing a marketplace, one should pay attention to the following: 1) relevance of the target audience. the brand must clearly determine whether the target audience of the brand coincides with the audience of the marketplace. for companies working in fashion, platforms that sell goods exclusively in this area are perfect. in ukraine, there are such sites as kasta. ua (2.86 million visits per month) and lamoda.ua (700 thousand visits per month) (retailers, 2021). 2) terms of cooperation: – the size of the commission; – frequency of payments to the seller; – delivery terms; – the possibility of selling goods at other marketplaces. 3) conditions and cost of product promotion at the marketplace. the brand does not spend money on advertising to lead the customer to the marketplace. but inside the site, there are the same rules as in search engines applied. when opening a section with the desired product, customers often view only the first pages. the place where a certain brand product will be placed is influenced by such factors (depending on the characteristics of the marketplace) as: the number of purchases of the item, reviews and evaluations of the product exhibited by buyers. but the brand can also pay for the opportunity to place their products as high as possible in the issue. the cost depends on the marketplace itself and its tariff plans for advertising. one of the advantages of marketplaces is the large number of users of their mobile applications. amazon and ebay have been downloaded more than 100 million times on google play. as for the applications of ukrainian marketplaces, rozetka and prom were downloaded more than 5 million times, lamoda – baltic journal of economic studies 184 vol. 7 no. 2, 2021 more than 10 million times, kasta – more than 1 million times. the brand increases its audience and finds new customers more easily, and expands the geography of sales (when placing goods on international marketplaces) by placing the goods of its brand on such platforms. 4. social networks today, one of the most effective ways to promote a brand is social networks. they are used by approximately 3.5 billion internet users (ukrainian spectrum, 2020). it is important to understand that each of these social networks has its own concept and is targeted to a specific audience. to actively promote fashion brands, you should choose those social networks where you can tell about the company, note your uniqueness and show your range. for clothing and footwear brands, the best options are social networks such as facebook, instagram, youtube, tiktok and pinterest. these social networks are ideal platforms for promotion for the following reasons (figure 2): 1) ability to place visual content; 2) ability to run targeted advertising; 3) a significant number of users. to promote in each of these social networks, the brand must have its own page, where it will post relevant content with fashion campaigns, brand products, information about events and promotions. the quality and frequency of content are the main drivers for the user of the social network to subscribe to the brand account and then go to the company’s website for shopping. types of content on social networks are presented in table 1. the content of the enterprise should be carefully planned, diverse, interesting, motivating for specific actions and regular. that is why smm specialists develop a content plan for the account. keep in mind that every social network has algorithms that are responsible for who and when to show brand content. if the subscriber of the account does not interact with the content of the brand (including views, comments, likes and messages in direct), he gradually ceases to see his content at all. thus, the brand should encourage users to interact more with the content. this is due to the usefulness of the content and “games”, where the subscriber is asked to answer questions (for example, what color dress he ir she likes best). in order for as many users as possible to subscribe to the account, brands use: 1) official advertising from the social network (for facebook, instagram, youtube, tiktok, pinterest); 2) advertising from famous bloggers, whose audience is similar to the audience of the brand (facebook, instagram, youtube); 3) mass following and mass liking (instagram); 4) mutual pr (facebook, instagram, youtube, tiktok); 5) giveaway (instagram). the development of accounts in social networks is directly related to the sales funnel (figure 3). the main task of the marketer and smm-specialist is to strengthen each of its stages (table 2). the company based on the recommendations mentioned above should build its own strategy for brand development in social networks, taking into account its range, portraits of the target audience, the nature and dna of the brand, etc. in addition, despite the different concepts of social networks, brand accounts should be fully consistent with the corporate style of the brand and complement each other. we obtain a map of the interaction of digital resources of the brand and given the capabilities and goals of social networks (figure 4). 2 498 2 000 1 000 800 366 0 500 1 000 1 500 2 000 2 500 3 000 facebook youtube instagram tiktok pinterest figure 2. popular social networks by the number of active users per month relevant for the promotion of fashion brands, million users (ukrainian spectrum, 2020) baltic journal of economic studies 185 vol. 7 no. 2, 2021 table 1 types of content on social networks social networks types of content facebook news feed. photos and videos of the brand in a 1:1 ratio, describing the product or event, with the possibility of placing an active link to the brand’s website or to a specific product. stories. photos and videos in a vertical format, where you can present news, new arrivals, promotions, etc. stories are available for 24 hours. shops on facebook. products placed in the same way as in the online store, specifying the name, price and description of the product. instagram feed. photos (up to 10 pcs.), videos (up to 1 min.). stories. photos and videos in a vertical format. if the account has more than 10,000 subscribers, it is possible to place a link to the site or product of the brand in the online store. igtv. long-term vertical video. can be used by fashion brands to publish advertising campaigns, review collections, fashion shows, etc. shopping. allows you to mark specific photos in the brand commodity units, which indicate the article and the price of the goods. when you click on them, the user gets to the product page in the online store. youtube video with the possibility of a detailed description of the product or event without restrictions on links to the online store and specific products. tiktok vertical short videos. used by fashion brands to increase brand awareness. pinterest photos and videos. format: horizontal or 1:1. ability to link to the product page in the online store. table 2 options for the development of stages of the sales funnel for fashion brands in social networks sales funnel stage options for the development of the stage market volume – expansion of the product line; – expanding the audience; – entering new markets; – access to new social networks. advertising campaign coverage – expansion of targeting the interests of consumers, their social position, etc. interested in – increase the advertising budget on social networks; – engaging the audience in social networks through offline; – work with the media; – collaboration with bloggers. subscribed – quality content in a single style; – use of a “personal brand”; – placement of all types of content that is possible in a particular social network. engaged audience – usefulness of content; – frequency of publications and time of publications; – communication with the audience through comments; – polls and “games” in stories. made an order – providing maximum information about the brand’s products (size, colour, materials, etc.); – publication of product reviews; – providing answers to subscribers’ requests in the shortest possible time (up to 15 minutes). paid for the order – high level of service; – convenience of placing orders; – availability of several types of payment. baltic journal of economic studies 186 vol. 7 no. 2, 2021 the main purpose of marketing is made a profit by meeting the needs of consumers. the main purpose of using modern technologies and resources for fashion brands is increasing brand promotion and online sales. social networks not only provide interest in the brand. their main goal is to bring the customer to the brand’s online store to buy goods. with the proper use of resources and opportunities of social networks, it is possible to increase brand awareness and loyalty to it, through the provision of useful and quality content, quality guarantees and maximum simplification of the process of buying goods. 5. conclusion the research shows that global light industry brands such as zara, nike, puma and others are investing billions of dollars in e-commerce to ensure consumer loyalty and increase online sales. this applies not only to the development of online stores, but also personal mobile applications and active activities in social networks. the article considers three areas of work for fashion brands in the online space: online store, marketplaces, social networks. there are proposed recommendations for: 1) the functionality of the online store for fashion brands; 2) criteria for selecting marketplaces for sales of brand goods; 3) the most suitable social networks for brand promotion and ways of their interaction with the company’s website. the results of the research can be used to develop a strategy for the emergence of fashion brands in e-commerce and a tactical marketing plan to promote the brand on the internet. figure 3. sales funnel on social networks (fashion factory, 2020) figure 4. interaction of digital resources of the brand references: andrusenko, a. 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institution of higher education "khortytsia national educational and rehabilitational academy " of zaporizhzhia regional council, ukraine е-mail: 1278kn@gmail.com orcid: https://orcid.org/0000-0002-3993-0948 3 municipal institution of higher education "khortytsia national educational and rehabilitational academy " of zaporizhzhia regional council, ukraine е-mail: korneljukbogdan@ukr.net orcid: https://orcid.org/0000-0003-4162-0495 researcherid: https://publons.com/researcher/4150118/bohdan-korneliuk/ doi: https://doi.org/10.30525/2256-0742/2022-8-2-173-182 market and administrative regulators of health and wellness tourism market in ukraine yulia yukhnovska1, nina kureda2, bohdan korneliuk3 abstract. the purpose of the article is to analyze the segments and specific factors of the development of health (medical), rehabilitation, wellness and recreational types of tourism in ukraine and the demand for their services. the authors studied the health status of the population of ukraine during 2015–2021, as well as indicators of morbidity among the population, which allowed to conclude about the society's need for the services of sanatoriums and resorts. methodology. theoretical and methodological basis of this study are the provisions of economic theory, which are presented in the fundamental works of domestic and foreign scientists on market and administrative regulators of the market of recreational tourism in ukraine. results. the article examines the current state of the transport infrastructure, information and communication technologies, standards of medical and health tourism services that contribute to the competitiveness of the national market of health (medical), wellness and recreational tourism. calculations were made on the basis of official statistical data on the number of tourist flows in ukraine by purpose of trips organized by domestic tour operators and travel agents. on the basis of these data the authors identified trends in realized demand for health and wellness (medical) services of travelers in health and recreational tours to foreign countries, where their funds go not only to health facilities, but also to the foreign tourism industry as a whole. the authors analyzed the trends in the number of sanatoriums and health resorts in ukraine during 1990–2017, which showed a significant decrease in their number, and identified the reasons for this trend. the authors investigated the legal basis for the administrative regulation of the market of health (medical) tourism in ukraine, namely the powers of state administration of the central executive authorities, local state administrations, executive bodies of local self-government in the field of tourism. practical implications. also, the typical international models of public administration in the development of tourism and resorts have been studied and determined that in the context of market reforms of the ukrainian economy, a model for the formation of the state institution of tourism management and the emergence of this model in the country has been investigated. the article also focuses on the process of privatization of health resorts located or created in the territories of resorts of local importance and using the natural healing resources of these territories. value/originality. it would be advisable to coordinate the activities of different levels of administration in the development of regional health tourism in order to rationally and efficiently use regional resources and eventually achieve a synergistic effect. key words: public administration, health and wellness tourism, regulators, market, development, health resort facilities, strategy. jel classification: l83, o50, p52, r10 baltic journal of economic studies 174 vol. 8 no. 2, 2022 1. introduction the development of the market of medical and health tourism as part of the country 's economy occurs under the influence of objective laws and subjective regulatory activity of administrative managers of various levels. thus, it is a unit and producer of market relations and regulatory measures of relevant institutions, economic entities and citizens. a number of important prospects for the country 's development depend on the efficiency of the health tourism market, namely the health of the nation, labor productivity, business efficiency, rational use of natural healing resources, competitiveness of national health services, etc. in this regard, it is relevant to study the current manifestations of market models in the market of health and wellness tourism, as well as directions, content and evaluation of the effectiveness of administrative regulators of its development in ukraine. the purpose of this article is to identify the directions of market models and administrative regulators, the contradictions between them and the directions of cooperation on the market of health and wellness tourism in ukraine. the authors turned to scientific and methodological publications used for the study of the digital economy for the period from 2017 to 2021 to identify trends in market and administrative regulators of the medical and health tourism market in ukraine. the study of socio-economic processes in the ukrainian market of medical and health tourism began relatively recently, since only in the 90's of last century began market reforms of the domestic economy, which continue to evolve, ideologically and in practice by introducing a market model of management. segments of health (medical), rehabilitation, wellness and recreational tourism were formed in the modern domestic market of medical and health tourism. they implement objective economic laws inherent in each of these market segments, in particular: demand (with specific motives and conditions of implementation), supply (with an appropriate range, quantity and quality of health services, as well as resources required for their production), competition and other regularities. analysis of the results of research of ukrainian scientists in the context of the stated topic shows that the issues of effective consideration of objective patterns of development of the market of health and wellness tourism in the implementation of administrative regulation and economic activity in this area in ukraine are not studied enough. further research in this direction will have a practical orientation, aimed at the formation of effective management of the domestic market of health and wellness tourism. 2. a review of relevant publications the diversity of these processes in the development of wellness tourism in ukraine is reflected in the research of a number of domestic scientists. for instance, h. brusiltseva researched into the features of strategic management of health and wellness tourism development at the regional level (brusiltseva, 2015); l. holovkova and yu. yukhnovska focused attention on the development of the tourism industry of ukraine and its regions (golovkova, yuhnovska, 2019); o. halachenko analyzed the formation and implementation of regional policy for the development of health resort services (halachenko, 2016); ye. hnedyk looked into legal regulation of economic activity in the field of medical tourism (hnedyk, 2019); v. humeniuk researched into mechanism of state regulation of the resort and recreational sphere (humeniuk, 2016); n. kureda and yu. yukhnovska analyzed the systems of economic actors, their interests and levels (kureda, yukhnovska, 2018); i. samoilova looked into the government’s position in this area (samoilova, 2018); m. subota investigated the areas of economic regulation and social orientation of resort activities (subota, 2014); z. shatska and v. bylinina studied strategies for the development of regional medical tourism (shatska, bylinina, 2019); v. holiavka, kh. leshko, o. mochulska and a. kukhtii examined the factors of its development (kholiavka, leshko, mochulska, kukhtii, 2019). the issues of financial and economic development of resort industry were expolored by m. cheng and d. edwards (cheng, edwards, 2019); r . štefko, s. jenčová and p. vašaničová (štefko, jenčová, vašaničová, 2020) as well as m. košíková and v. loumová (košíková, loumová, 2019). v. čabinová, p. gallo, p. pártlová, j. dobrovič and m. stoch (čabinová, gallo, pártlová, dobrovič, stoch, 2021) as well as g. saravana kumar and n. geetha soni (saravana kumar, geetha soni, 2020) used in their research a multi-criteria approach to assessing business performance, the effectiveness of health and wellness (medical) tourism and customer satisfaction among domestic tourists at resorts. development issues, problems and the significant impact of medical tourism on the well-being of society were studied by t.g. birader, a. öztüren (birader, öztüren, 2019); l. rokni, a. turgay and s. h. park (rokni, turgay, park, 2017) as well as c. suess, s. baloglu and j. a. busser, (suess, baloglu, busser, 2018). the issues of the enterprise resource planning system for efficient services in the tourism industry and hospitality was brought out by v. chauhan and j. singh (vinay chauhan, jasvinder singh, 2017). fiscal decentralization of the local public sector was addressed in the studies of m. halaskova, baltic journal of economic studies 175 vol. 8 no. 2, 2022 r . halaskova, b. gavurova and m. kubak (halaskova, halaskova, gavurova, kubak, 2021), ensuring the effectiveness of management in the tourism industry was analyzed by k. nazarova, v. hordopolov, s. sakhno, m. nezhyva and t. furman (nazarova, hordopolov, sakhno, nezhyva, furman, 2019). problems of regulation and management of the tourism industry were analyzed by a. kniazevych (hrynokh, dmytruk, diachenko, kniazevych, 2019), i. shkola (shkola, 2003), o. trehubov (trehubov, 2013), s. ilkevych (ilkevich, 2018), v. chauhan and j. singh (vinay chauhan, jasvinder singh., 2017), r . badola, s. a. hussain, p. dobriyal, u. manral and a. k. gill (ruchi badola, syed ainul hussain, pariva dobriyal, upma manral, amanat kaur gill., 2018) and others. 3. survey methodology the following general and special research methods were used to achieve the objectives of the article: analysis and synthesis of the logical structure (for the logical structuring of the scientific article and the formation of its conclusions); generalization and systematization (to systematize the views of scientists and summarize the conceptual framework, identify approaches to market and administrative regulators of the market of health tourism in ukraine, to substantiate new conceptual provisions); analysis and synthesis (to determine the features and problems of the development of the market of health tourism in ukraine, to consider the factors affecting it); diagrammatic and graphical representation (for visual presentation of the results of the study and visual presentation of statistical materials and analytical data); statistical analysis and calculations (when studying the main trends in tourism: the distribution of tourists in ukraine served by tour operators and travel agents, the distribution of tourism destinations and purposes of travel, the number of health resorts and recreational facilities in ukraine); comparison (to analyze the international and domestic experience of market and administrative regulators of the market of recreational tourism in ukraine). theoretical basis of the article are practical research, scientific and methodical developments, as well as educational materials of leading ukrainian and foreign scientists and experts in the field of medical and health (medical) tourism, health resort business and public administration. in this article the authors analyze publications and research on the development of socio-economic processes in the market of health tourism in ukraine; issues of financial and economic development of the resort industry; business performance evaluation, efficiency of health (medical) tourism and customer satisfaction assessment among domestic tourists in the resorts. the authors also analyzed studies on the regulation and management of the tourism industry. the scientific paper investigates the methodological approaches of western researchers such as v. čabinová, p. gallo, p. pártlová, j. dobrovič and m. stoch, (čabinová, gallo, pártlová, dobrovič, stoch, 2021), m. halaskova, r . halaskova, b. gavurova, m. kubak (halaskova, halaskova, gavurova, kubak, 2021), a. turgay and s. h. park (rokni, turgay, park, 2017), r . badola, s. a. hussain, p. dobriyal, u. manral and a. k. gill (ruchi badola, syed ainul hussain, pariva dobriyal, upma manral, amanat kaur gill., 2018), c. suess, s. baloglu and j. a. busser (suess, baloglu, busser, 2018), v. chauhan and j. singh (vinay chauhan, jasvinder singh., 2017) and others. information base of research includes legal norms; monographs and didactic researches of leading economists, specialists in tourism and civil servants; publications of foreign and ukrainian specialists in management; materials of periodicals and conferences; collections of scientific works, abstracts, electronic sources and databases, actual statistical materials. 1. at the first stage, the authors analyzed existing theories and methodological approaches to the definition of segments of health (medical), rehabilitation, wellness and recreational types of tourism. 2. at the second stage, the authors investigated the health status of the population of ukraine for 2015–2021, as well as indicators of morbidity among its citizens; the current state of transport infrastructure, information and communication technologies, standards of health tourism services that contribute to the competitiveness of the national market of health (medical), wellness and recreational tourism. calculations were made on the basis of official statistics on the number of tourist flows in ukraine by purpose of travel. trends in the number of health resorts and recreational facilities in ukraine were investigated. 3. at the third stage, the authors analyzed the administrative regulation of the development of medical and health tourism in ukraine, its theoretical and practical aspects and made conclusions that systematize the results obtained. 4. the research results each segment of the health tourism market is characterized by specific factors of its development: – in the segment of health (medical) tourism demand is mainly focused on treatment prescribed by doctors, elective surgery; supply of services is due to the use of high-tech medical equipment and medicines, special baltic journal of economic studies 176 vol. 8 no. 2, 2022 treatment technologies, the involvement of specialists of high professional level; – in the segment of rehabilitation tourism the demand of citizens is aimed at restoring impaired or lost functions of the body, preventing complications and relapses of the disease. to achieve these goals, providers of medical and health-improving services use natural therapeutic resources with appropriate properties, as well as medical equipment and medicines; – in the segment of health tourism the demand of citizens is associated with obtaining services for disease prevention and recovery, and for this purpose often uses a wide alternative selection of natural therapeutic resources; – in the segment of recreational tourism demand is aimed at removing nervous and physical fatigue, restoring strength and energy, which is achieved through resorts offering a variety of recreational and other types of tourist resources. market processes of these segments in the domestic market of medical and health tourism are multifaceted. the demand for its services is primarily formed as a derivative of general morbidity indicators (disease prevalence, primary morbidity and disability rate). studies of the state of health of the population of ukraine showed that in 2015 the primary morbidity of the population of ukraine for all categories of diseases was 62.8 thousand patients per 100 thousand people, and the prevalence of diseases among the population – 171.1 thousand patients per 100 thousand people (mezentseva, batychenko, мezentsev k.v., 2018). as of 2021, 2.703 million citizens with disabilities need sanatorium treatment as a vital service. about 4.7 million ukrainians have recommendations for recovery and treatment of diseases of musculoskeletal, sexual and nervous systems, as well as gynecological diseases using sanatoriums and resorts of azov region. market realities (including commercialization of domestic medicine) are also convincing an increasing part of the population of the economic benefits of disease prevention and health preservation. the perception of human health as the most important value is formed to a greater or lesser extent among different segments of the ukrainian population. however, the market status of medical and health services as a commodity implies receiving payment for them. as for the incomes of ukrainian citizens, official statistics indicate a low level of income of a large part of the population and a significant differentiation of effective demand. thus, in 2020 there was the following distribution of the population of ukraine by the level of average per capita equivalent income per month (as a percentage of the total population): 68.5% of the population received from 3 to 6 thousand uah, and only 3.4% – over 12 thousand uah (official website of the state statistics service of ukraine). modern transport infrastructure, information and communication technologies, unification of health tourism service standards create favorable conditions for competition between national health (medical), wellness and recreational tourism markets of different countries, eliminate barriers for inbound and outbound tourist flows. ukrainian citizens turn to clinics in israel, germany, france, turkey and india for treatment of critical forms of cancer, heart disease, complicated obstetric and gynecological diseases and childbirth, psoriasis, plastic surgery, hair transplants and transplants of vital organs. motivated by lower prices and high quality of medical and health services, foreign citizens meet their needs in the ukrainian market of health and wellness tourism in dentistry and prosthetics, treatment of eye diseases (including surgical treatment of retinal detachment and cataracts), plastic surgery, rehabilitation of patients with problems of musculoskeletal system after injuries and due to cerebral palsy in adults and children, joint arthroplasty and rehabilitation after surgery, reproductive services (due to the high level of artificial insemination services and no strict legislation on surrogacy and egg donation). for example, the average cost of varicose vein removal in ukraine is 28 thousand uah (abroad – 90 thousand uah), gall bladder removal – 22 thousand uah (abroad – 33 thousand uah), hysteroscopy – 13-14 thousand uah (abroad – 29 thousand uah). calculations made on the basis of official statistics on the number of tourist flows to ukraine for travel organized by domestic tour operators and travel agents revealed the following trends in demand for health and wellness services in 2020 (table 1): – the outbound tourist flow significantly exceeds the number of inbound tourists, which means the outflow of solvent demand of domestic travelers to foreign markets of health and wellness tourism; – in all directions of tourist flows (inbound, outbound, domestic) the lion's share of travel motivation was leisure and recreation; – health (medical) tourism is only a small part of tourist flows, because of the high cost, as a rule, this type of demand is initiated by the vital need and the inevitable solution to health problems. the analysis of the resulting calculations shows a clear preference for domestic travelers' demand for health and recreational tours in foreign countries, where their funds go not only to health facilities, but also to the foreign tourism industry as a whole. after the first visit, domestic travelers are attracted to foreign resorts due to the quality of services, high organizational level of their provision, high-quality transport logistics, the presence of interesting and famous historical, cultural and tourist sites, as well as security measures. along with these channels of promotion of tour packages (through tour operators baltic journal of economic studies 177 vol. 8 no. 2, 2022 and travel agencies), citizens of ukraine on their own and without intermediaries apply to sanatoriums and resorts for appropriate services. although official statistics on these tourist flows are not kept, but according to local information sources of domestic resorts, we can conclude about a significant increase in seasonal demand for medical and health tourism. the other side of market relations is the supply of producers. the mechanism of economic management through the laws of market supply objectively directs suppliers of medical and health tourism services to the economic expediency of business (reimbursement of business costs, use of profits to modernize the production of services, improving their quality, expanding the range and stimulating the salaries of the best specialists, etc.) and, therefore, to the solvent demand, as well as to competition or monopoly. official statistics on the quantitative indicators of service providers in the domestic health tourism market shows the following dynamics (table 2). the downward trend in the indicators of sanatoriums and recreational facilities in ukraine gradually began in all types of institutions, mainly since 2000, significantly – since 2014 (due to the temporary occupation of the crimea, donetsk and luhansk regions). according to the authors, this trend may be due to the following reasons: – since the 1990s, health tourism in ukraine has developed and continues to function mainly on the basis of available natural healing resources, created mainly in the middle of the last century, using the physical infrastructure, which is now outdated both physically and morally. such a deplorable condition of the objects led them to bankruptcy; – the beginning of privatization in the sphere of medical and health tourism took place without sufficient accumulated capital of entrepreneurs, in the absence of knowledge and practice of market activities, often in situations of conflict of interest (which manifested itself in unfair competition, raiding, misuse of resort and recreational land, etc.), without an orderly legal framework; – with the reform of property relations and the emergence of various forms of ownership there was a transition from state funding to self-financing of medical and health tourism, which is still proble-matic because of the low solvency of the population; – in order to ensure sustainable financial income and in response to the demand of different groups of population, providers of therapeutic and recreational services differentiate their offer depending on the range and quality of services in tour packages, service and leisure offers, their prices, thus becoming a multipurpose health resort facilities; – new formats of health and wellness facilities (resort hotels, spa, wellness hotels) are introduced; – increase of economic shadowing in the tourism industry; table 1 distribution of tourists in ukraine, served by tour operators and travel agents, by destination and purpose of travel, 2020 (calculated according to data official website of the state statistics service of ukraine) in total including the extent of tourist flows according to travel motivation leisure, recreation treatment number of tourists (persons) 2360278 2269271 17921 including: 100% the share of tourist flows by travel motivation (%) inbound tourism 0,5 % 0,4 1,5 outbound tourism 90,1 % 92,9 4,1 domestic tourism 9,4 % 6,7 94,4 table 2 dynamics of the number of health resort and wellness facilities in ukraine, 1990–2017 (compiled according to official website of the state statistics service of ukraine. тourism in ukraine) year providers of health and wellness services health resorts and guesthouses providing treatment sanatoriumpreventorium holiday houses and boarding houses recreation centers and other recreational facilities health and recreational facilities for children in total (capacity, thousand) in total (capacity, thousand) in total (capacity, thousand) in total (capacity, thousand) in total (capacity, thousand) 1990 505 (154) 556 (55) 332 (115) 2213 (302) 15687 (467) 2017 284 (71) 55 (10) 67 (12) 1235 (133) 9745 (106) change in the indicators as of 2017 in comparison to 1990 44% decrease (54% decrease) 10 times reduction (5.5 times reduction) reduction by almost 5 times (decrease by almost 5 times) reduction by almost half (60% reduction) 48% decrease (77% decrease) baltic journal of economic studies 178 vol. 8 no. 2, 2022 – the production of health and wellness services is carried out in an extensive way, i.e., by attracting new resources, often with an inefficient level of their use; – ineffectiveness of administrative measures to regulate the development of the health and wellness tourism market; – integration of ukraine’s economy into the world market has objectively strengthened the impact of competition from foreign providers of health and wellness services; – there are a number of unfavorable factors for business in the ukrainian and world economy during this period: annexation of highly productive recreational territories in crimea and military actions in the eastern regions of ukraine, deterioration of natural resources due to global warming, environmental pollution, financial crisis, the covid-19 pandemic, etc. administrative regulation of the development of health and wellness tourism in ukraine (this type of tourism is defined by the law of ukraine "on tourism", article 4) is carried out at the following levels (on tourism: law of ukraine of 15.09.1995 № 324/95-вр): – state (through legislative and executive bodies); – territorial (through structural subdivisions of local executive bodies). the period of formation of statehood in ukraine since 1991 coincides with the adoption of the concept of transition of the country 's economy to a market mechanism of economic management. administrative regulation of the health and wellness tourism market in ukraine is implemented on the basis of a significant number of legislative norms, in particular the law of ukraine "on tourism" (1995), which defines the powers of public administration in health tourism, namely (on tourism: law of ukraine of 15.09.1995 № 324/95-вр): 1. the central bodies of executive power, providing the formation of state policy in the field of tourism and resorts (organize and ensure the implementation of state policy in the field of tourism; within their competence develop and approve normative legal acts, summarize the practice of legislation in the field of tourism, resort and recreational sphere (article 10). 2. local state administrations, executive bodies of local government in the field of tourism within their powers (perform executive, organizational and administrative functions in the organization and development of resort and recreational sphere and tourism activities, create and approve local tourism development programs, allocate local budget funds to finance these programs) (articles 8, 11). conceptually, the law of ukraine "on local self-government" (on local self-government: law of ukraine of 21.05.1997) creates conditions for changing the status, role and capabilities of executive bodies of local self-government in the field of tourism and resorts in the structure of socio-economic development of communities. in world practice, there are several typical models of development of tourism and resorts, for example: 1. there is no central state administration of tourism, the activities of a small number of economic entities in the tourism sector (including health tourism) are regulated by the general economic legislation of the country and market regulators. 2. regulation of tourism activities by the state ministry of tourism and resorts. 3. regulation of tourism and resorts by a specialized structural unit of a particular ministry, whose activities are consistent with the objectives of the development of national tourism and resorts. in the context of market reforms in the economy of ukraine the third model of formation of institutions of public administration has been developed in tourism in general and in health tourism as part of it. the formation of the institutional framework of public administration in the field of health tourism in ukraine had the following dynamics: from 2006 to 2010 the ministry of culture and tourism with the state service of tourism and resorts became the central governing body in the field of tourism; from 2011 to 2015 the state agency of ukraine for tourism and resorts, which was the central body of state executive power in the field of tourism, worked in the structure of the newly created ministry of infrastructure; since 2016 the department of tourism and resorts was created under the ministry of economic development and trade of ukraine; in 2019, the cabinet of ministers approved the regulations of the state agency for tourism development of ukraine, which was under the ministry of culture and information policy and carried out state policy in the field of tourism and resorts (except for state supervision (control) in the field of tourism and resorts); since 2021, further coordination of the state agency for development of tourism of ukraine is carried out by the minister of infrastructure. by order of the ministry of health of ukraine the state cadastre of natural therapeutic resources, these resources are used in health and wellness tourism. direct state regulation of the spa and recreational sphere is performed by the ministry of health of ukraine. the order of this executive body approved the list (valid for 2021) of regulated entities – medical and preventive care facilities under the relevant subordination, namely: health resort facilities: balneological hospitals (including ones for children), mud baths (including ones for children), children's health centers, resort clinics, international children's medical centers, health resorts (including children's, single-profile, multiprofile and specialized health resorts), health resorts baltic journal of economic studies 179 vol. 8 no. 2, 2022 for children with parents, sanatorium-preventoriums (order of the ministry of health of ukraine dated october 28, 2002 № 385). the activities of these institutions are regulated by the standards (clinical protocols) of sanatorium and spa treatment of the state institution "ukrainian research institute of medical rehabilitation and balneology of the ministry of health of ukraine" (standards (clinical protocols) of sanatorium and spa treatment). these institutions provide specific services that characterize the specialization of health, rehabilitation and wellness tourism. today, within this functional area there are various organizational forms of institutions, such as recreation centers, preventive clinics with treatment, spa and wellness centers, hotel and resort complexes. within the framework of health tourism in ukraine, the direction of medical tourism (dentistry, ophthalmology, reproductive medicine, neurology, cardiology, cell therapy, rehabilitation) was formed. at the level of administrative-territorial units, the powers of state regulation of spa and recreational activities should be transferred to the departments of health and tourism, exercising authority within the local state administrations. however, the provisions on the health departments of regional administrations lack guidance and measures to manage the development of resorts, even taking into account the availability and intensive use of natural healing resources, as well as the functioning of resort destinations (official website of odessa regional state administration; official website of zaporizhzhia regional state administration). evolution of the management mechanism of the ukrainian economy as a whole and the sphere of medical and health tourism as part of it occurs in a short time and in a competitive external environment. the main element in the mechanism of market governance are the property relations of subjects of different institutional and legal forms (private, collective, state, joint with foreign capital). the realization of their interests is a condition for business efficiency and progress of socio-economic development. implementation of the conceptual approach in this direction of market reform of the economy of ukraine by administrative regulators began with the creation of a legal environment for the privatization of state property, including assets in the field of medical and health tourism. thus, article 5-1 "classification of privatization objects" of the law of ukraine "on privatization of state property " includes health resorts, holday homes and camps, preventative clinics in the group of socio-cultural facilities with state-owned land plots on which they are located, excluding those that are not subject to privatization (on privatization of state property: law of ukraine). the law of ukraine "on resorts" (article 26) (on resorts: law of ukraine) prohibits privatization of health and wellness facilities located in the resorts of state importance, special health resorts for children, for treating cardiological, pulmonological and gynecological deseases, for the treatment of citizens who are chernobyl disaster victims, for treating tuberculosis patients, patients with injuries and diseases of the spinal cord and spine. it is also prohibited to privatize health resorts of local importance, as well as those that use the natural healing resources of these territories and which at the time of adoption of this law were in state or municipal ownership. privatization of other medical and health institutions located or created on the territories of local resorts and using natural therapeutic resources of these territories may be carried out in the manner prescribed by the legislation on privatization, provided that the profile of the privatized objects. restrictions on privatization of health and wellness facilities mentioned in the laws at the time of their adoption reflected the difficulties of transition from command-and-control to market methods of regulating ukraine's economy (insufficient knowledge, lack of practice, unfavorable economic conditions for starting a business – lack of accumulated capital, inflation, low effective demand, insufficient methodological, institutional and personnel readiness for public administration in market conditions and other factors). privatization of health and wellness facilities is carried out taking into account the requirements of the law of ukraine "on resorts" (on resorts: law of ukraine). after the collapse of the soviet union for the specialized use of the property of trade union health resorts, the federation of trade unions of ukraine created jsc "ukrprofozdorovnytsia", whose shareholders were the federation of trade unions of ukraine and the social insurance fund for temporary incapacity. the development of market methods of management has intensified legal and illegal changes in the structure of municipal property through the management of privatization processes by local authorities, especially in relation to health resorts, rest homes and recreation camps, preventive clinics (on approval of the regulations on privatization of communal property of the kharkiv territorial community). a number of state sanatoriums have been transferred to the jurisdiction of various departments. for example, as of 2021, the armed forces of ukraine have 6 sanatoriums. ownership of resort lands is determined by article 49 of the land code of ukraine (land code of ukraine): since resorts are classified as recreational lands, such lands may be in state, municipal and private ownership. at the same time, in accordance with articles 83-84 of the land code of ukraine, baltic journal of economic studies 180 vol. 8 no. 2, 2022 recreational lands with special health-improving value may not be transferred to private ownership. the resolution of the cabinet of ministers of ukraine and the order of the ministry of health of ukraine approved the procedure for the creation and maintenance of the state cadastre of natural territories of resorts (the order of creation and maintenance of the state cadastre of natural territories of resorts). public administrative regulation of economic activity of economic entities of various forms of ownership is carried out through a system of legal instruments and laws, in particular, the economic and tax codes of ukraine, law of ukraine "about fundamentals of the state regulatory policy in the field of economic activity ", law of ukraine "on protection against unfair competition" and others; the state classifier of various legal and institutional forms of economic entities has been put into operation. in 2017, the cabinet of ministers of ukraine approved the strategy for the development of tourism and resorts until 2026 (on approval of the strategy for the development of tourism and resorts for the period up to 2026). this state strategy sets the following strategic objectives for the development of this sphere, namely: ensuring effective and comprehensive (economic, social, environmental and innovative) use of the available tourist, resort and recreational potential by addressing the issue of recreational land management, improving the environmental and territorial structure of tourism and resorts to develop tourist areas, creating or modernizing the branding of areas; systematic improvement of the quality of infrastructure of resorts and recreational areas by implementing a comprehensive program of phased development of physical infrastructure using the possibilities of cluster models, public-private partnerships and social demand; development of national standards for tourist services in accordance with international standards. 5. conclusions the above issues and tasks of effective development of the domestic market of health tourism requires further institutional improvement of state regulation of the market of health tourism, especially in the direction of determining its executive structure and maintaining the stability and professionalism of its activities. in modern conditions of increased competition in the world market of health (and especially medical) tourism and in the framework of the chosen model of state administration of tourism and resorts in ukraine may be relevant introduction of tax incentives or increase state participation in targeted programs of development of resort regions of the country. analysis of these conceptual documents of development of tourism and resorts leads us to the conclusion about the need for a more thorough use of methodology for the preparation of such documents. first, it requires a thorough methodological and statistical justification of the system of directions and goals of the strategy of development of tourism and resorts in ukraine. thus, the main element in the structuring of all its sections should be the analysis of quantitative and qualitative indicators of the starting resources with an emphasis on their rational use, the justification of the possibilities of producing goods and services in this area with a focus on demand. for this purpose, it is necessary to use the longestablished state cadastre of natural therapeutic resources. effective management of long-term development of tourism and resorts must take into account the objective economic law of scarcity. the long-term strategic planning period does not always require an estimate of costs, revenues or other expected quantitative indicators due to objective changes in market conditions. therefore, strategic plans must be accompanied by tactical programs (describing the successive stages) of strategy implementation, indicating stages, measures, quantitative and qualitative indicators and expected results. it is likely that at these stages there will be both favorable and negative conditions for the implementation of the strategy. analyzing their causes and consequences, it is possible and necessary in the context of the program to adjust management measures for further development of tourism and resorts. secondly, in the administrative activity in the market of medical and health tourism it is advisable to organize educational trainings, especially on the subject of market mechanism of management. thus, understanding that service providers, intermediaries and consumers are the main actors in the market of medical and health tourism, will focus the administrative activities on the formation of a system of monitoring their 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(2018). perceived impacts of medical tourism development on community wellbeing. tourism management, 69, 232–245. vinay chauhan, & jasvinder singh (2017). a enterprise resource planning systems for service performance in tourism and hospitality industry. international journal of hospitality and tourism systems, 10(1), 57–62. baltic journal of economic studies 17 vol. 2, no. 3, 2016 organic grain production market of ukraine: prospects and trends viktoriia bondar1 odessa national academy of food technologies, ukraine abstract. the purpose of the paper is to determine the prospects of the market of organic products in ukraine. the article studies the market for organic produce dynamic area of organic farmland, number of organic farms in volume production of organic products. identified key factors influencing the market for organic products ukraine, outlined areas of the market based on its current state. grain industry serves as a source of sustainable development of agriculture, determines the socio-economic condition of society and is the basis of agricultural exports. therefore, the development of the organic market of grain and its products are of particular importance and led to the goal and objectives of bottom investigation. methodology. the theoretical and methodological basis of the study are works of economists on the development of ecology management, general scientific methods and approaches in the field of business management: historical, dialectical, abstract logical methods of system-structural analysis and synthesis of scientific research and provision of economic theory, management. results. proved that ukraine has considerable potential as a producer of agricultural products, including organic farming, export, consumption in the domestic market. to determine the market trends of organic products studied the dynamics of agricultural surfaces of ukraine, reserved for growing organic products. to further study the characteristics and trends of the market for organic products in ukraine, examined the dynamics of the number of organic farms. for determining the main trends and the prospects of the organic products market, and in addition for researching proposals, examined demand for market research of market demand for organic products in terms of production of organic products in ukraine. practical implications. the main problem of ukraine of organic production is exported domestic products as organic production of agricultural products. analysis of key market trends of organic products allowed coming to the conclusion that the market is developing and if current trends continue, it will lead to its development in the future; however, organic market ukraine is now at the initial stage of development over the lack of effective legislative framework for regulation areas of organic production. value/originality. so, for proper legal regulation and implementation of a balanced policy towards organic production, namely uniform requirements and rules for organic production, unified system of certification, certification and labeling of organic products will increase growth of organic products market and it ranks will high in the food security of ukraine, and with the agricultural potential of the country ukraine will reach the leading position in the global market of organic products. key words: organic products, organic market, organic production, organic production prospects in ukraine jel classification: l66, о13, q1 corresponding author: 1 department of management and logistics, odessa national academy of food technologies. e-mail: kaf-ml@mail.ru 1. introduction grain is one of the most important sources of wealth of any state. in the global agriculture and in ukraine grain always dominated and now grain has a special place in agricultural production as guarantee of food safety value of grain production as a strategic industry predetermined constant supply and high demand of people in the consumption of foods made from grains. grain industry serves as a source of sustainable development of agriculture, determines the socio-economic condition of society and is the basis of agricultural exports. therefore, the development of the organic market of grain and its products are of particular importance and led to the goal and objectives of this investigation. in the issues of development of the market of organic products in ukraine are engaged scientists: v. artysh, n. zinovchuk, o. rudnytska, p. skrypchuk, t. seagull, g. shevchuk, i. sedikova and e. korenman, who analyzed the performance evaluation of organic production. the economic performance of organic farms authors studied on the example of winter wheat and spring barley. however requires further study on the functioning and establishment of market organic grain production. the main goal of this study is to determine the prospects of the market of organic products in ukraine. baltic journal of economic studies 18 vol. 2, no. 3, 2016 2. presenting main material according to the international federation of organic movement, the total turnover of organic products worldwide reached 60 bln. dollars, the total area of land used for organic production reached almost 37 million. ha and the total number of employees  – 1.8 million farmers. leaders of organic production were the us (26,8 billion dollars), germany (7,9 billion dollars), france (4,5 billion dollars). ukraine has significant potential as a producer of agricultural products, including organic farming, export and consumption in the domestic market because its territory of agricultural land area is about 42,4 million ha. thus, the area of organic farmland in ukraine is about 270 thousand hectares, their share in total agricultural land is about 0,7 % organic products. however, the market of organic production in ukraine is still in its infancy over the lack of existing normative acts regulating the field of organic production, which does not contribute to its development. to determine the market trends of organic products: to study the dynamics of agricultural lands of ukraine, reserved for growing organic products (fig. 1). fig. 1. dynamics of the area of organic farmland in ukraine, ha source: author is built according to the organic federation of ukraine during 2002–2012 years there was a steady upward trend in the area of organic farmland in ukraine. based on sample data for 2002–2015 years is built logarithmic trend in the area of organic farmland in ukraine. the correctness of the applied model is confirmed by a high value of coefficient of determination, which is 0,64. the trend shows that if current trends continue dynamics of organic farmland, their area will continue to increase. to further study of the characteristics and trends of the market for organic products ukraine, the dynamics of the number of organic farms is considered (fig. 2). from 2002 to 2015 the number of organic farms is increasing. so in 2002, 31 were functioning enterprises, in 2015 – 164 organic farms. based on sample data for 2002– 2015 years is built a linear trend of the number of organic farms in ukraine. the correctness of the applied model is confirmed by a high value of coefficient of determination, which is 0,98. the trend shows that if current trends continue dynamics of organic farms ukraine, their number will continue to grow. compared the growth of organic farmland area and the number of organic farms with the aim of deeper trends of the organic products market of ukraine (fig. 3). 1,460 1,002 1,008 1,000 1,032 1,080 1,001 1,000 1,000 1,000 1,001 1,000 2,23 1,014 1,029 1,111 1,15 1,283 1,025 1,74 1,092 1,058 1,064 1,015 0,000 0,500 1,000 1,500 2,000 2,500 2003/02 2004/05 2005/06 2007/06 2008/07 2009/08 2010/09 2011/10 2012/11 2013/12 2014/13 2015/14 growth area of organic farmland growth rate of organic farms fig. 3. growth rates of organic agricultural land area and number of organic farms in ukraine source: built by the author according to the organic federation of ukraine during the study period growth rate of organic farms exceeds the growth of area of organic farmland that can be indicated by the following: – newly organic farms are generally small companies that grow organic production in a small area, which are slightly enrich the basic foundation of organic farmland; – slight increase in area of organic farmland in comparison with the big increase in the number of organic farms can indicate a certain redistribution of the market in this area; – in the same time, a slight increase in area under cultivation of organic products and the growing number of organic farms can indicate intensive processes as closing and opening of businesses in this area. for isolating the main trends and determining the prospects of the organic products market, in addition to research proposals should be explored market demand study showing market demand for organic products made in terms of production of organic products in ukraine (fig. 4). the volume of organic products is growing, so in 2006 the market volume was 250 thousand euros, in 2015 it is 8,25 million euros. based on sample data for 2006–2015 years there is built exponential trend in production of organic products in ukraine. the trend shows that if current trends continue dynamics of organic products of ukraine, its volume will continue to grow. 31 69 70 72 80 92 118 121 142 155 164 175 186 198y = 12,253x + 27,604 r2 = 0,9808 0 50 100 150 200 250 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 fig. 2. changes in the number of organic farms in ukraine source: built by the author according to the organic federation of ukraine baltic journal of economic studies 19 vol. 2, no. 3, 2016 250 430 600 1200 2400 5100 6400 7200 8100 8250 y = 213,78e0,4256x r² = 0,9249 0 2000 4000 6000 8000 10000 12000 14000 16000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 fig. 4. dynamics of production of organic products of ukraine for 2006-2015 source: built by the author according to the organic federation of ukraine based on the comparison of growth area of organic farmland, number of organic farms and production of organic products in ukraine for 2006–2015 years the following conclusions are made: growth in production of organic products is much higher than the growth rate of the area under organic farmland and the number of organic farms, indicating increase in the number of organic consumers, increasing demand for organic products in foreign markets and annual price increase for these products. given the absence of a significant increase in the number of organic farms, the emergence of own brands or manufacturers that produce organic products, there is likely higher prices for organic products with increasing demand and lack of supply growth. the organic movement in ukraine involved: organic federation of ukraine, association «pure flora» association «poltava organic», international public association of organic production stakeholders «biolan ukraine», club of organic farming, the union of organic agricultural production «naturprodukt», the organic standard of «ukragrofin», ukrainian public organization «living planet». the majority of organizations position themselves as members of the organic movement in ukraine perform services certification and labeling of organic products and are members of internationally recognized organizations: global ecolabelling network (gen) and international federation of organic agriculture movement (ifoam). ukrainian public organization «living planet» is a member of global ecolabelling network (gen), a member of the international federation of organic agriculture movement (ifoam), which includes the organic federation of ukraine, public association of organic production stakeholders «biolan ukraine» organic standard, llc «ukragrofin» which are based on associate membership of ukrainian public organization «living planet». main market operators, service providers and certification of organic farms capture the rapid development of the market for organic products and high potential development. however, based on the dynamics of the processes of the area under cultivation of organic products and the number of organic farms, we can conclude that the organic market is only in its infancy and its growth rates are negligible. it should be noted that all organizations involved in the research market for organic products and the development of organic production, regardless of whether they are members of international organizations supporting organic production or operating in the domestic market, providing services and certification of products as organic. accordingly, a certain degree of research on the development and prospects of the organic products market is subjective. today in ukraine there are no existing regulations that determine what kind of products are products of organic production, which organizations can provide certification of organic products, certification procedure for organic products and certification institutions have the right to implement it and what kind of labeling is apply to organic products. at the same time according to the draft law «on the production and turnover of organic agricultural products and raw materials» number 979 on 12/12/2012, the «organic product  – a product obtained from the production certified according to the requirements». common to all types of organic products under the law are methods and requirements for organic production. the need for a single state labeling project is included to the law «on the production and turnover of organic agricultural products and raw materials» number 979 on 12/12/2012, which states that «the use of the state logo and labeling of organic products to indicate organic products is a necessity». however, while indicating the need for a state the drafted law "permitted the use of nongovernment (private) logos introduced directly to entities engaged in the production, sale of organic products, raw materials or their associations." the main directions of development of the organic products are contained in the state program of organic production in ukraine. the criterion for the success of the program will be value of the share of land under organic production as a percentage of the total agricultural land of the country. during the implementation of the program planned to achieve the following indicators (percentage of land certified by organic farms) should be: the end of 2012  – 2%; by the end of 2020  – 7 %. as of year 2012 planned program indicators have not been fulfilled, there is the need to develop a mechanism for achieving results. leaders of organic agricultural production in ukraine is pe «agroecology» (poltava region), the group of companies «etnoprodukt» (chernihiv region), llc «haleks-agro» (zhytomyr region), «organic farming «maharishi»» (kherson and mykolaiv regions), pe «miller» (vinnytsia region), llc «clean product-c» (donetsk region) and many others. high profitability of organic agroproducts for small volume production is explained by higher prices of organic products implementation. despite unformed demand and unexecuted target audience, product prices on organic production have always been higher than the prices on the products of conventional production method. similar baltic journal of economic studies 20 vol. 2, no. 3, 2016 findings also demonstrate the performance of farm enterprise «otradivske» of odessa region, which grows organic agricultural products. thus, comparing the cost of organic production in the above sector averages and data on agricultural area in 2013 (table 1), it should be noted that only the production of spring barley production costs for organic technology exceed the average cost of holdings (by 8,51%). table 1 production cost of 1 kg of crops for conventional and organic production technology in odessa region culture fe «otradivske» on average, the district uah deviation absolute, uah relative, % winter wheat 92,0 113,58 21,58 7,36 heads boring 130,0 118,94 -11,06 -8,51 soy 156,45 208,86 52,41 33,50 buckwheat 75,02 279,92 204,9 273,13 cost of production of 1 kg of organic winter wheat, soy and buckwheat are significantly lower the cost of production of these products by traditional technology. overall, the ratio of production cost of traditional products and organic production in ukraine differs by product. these findings confirm and research u. gavaza in 2012, among the crops is studied only the production cost of organic winter rye, oats and vegetables open ground instead of the cost of production of these crops on conventional technology (gavaza, 2014). in other cultures organic production costs are much lower. according to the research market for organic products, organic grain prices depending on quality and demand, exceed the price of the traditional zero production by 50–200%, while prices of fruits and vegetables  – by 20–100%. today, the world price of wheat tons (under fob) is about $180, barley – $140. the status of «organic products» price increases respectively to 252 and 196 dollars per tonne (potapenko, 2011). today ukraine is at the third stage of the market of organic foods – market. developed network marketing of organic products: organic shops opening («natur boutique», kyiv), inclusion of organic foods in domestic supermarkets range («bill», «metro», «west line»). during the year the number of stores of organic products has tripled and reached 60. a growing number of organic certified raw materials and processing organizations («step» spd «ishchuk», llc «kdp wise» canning plant illinetskyi ndh, llc «сereal house», ltd. «grinding house» and others) has established a number of environmentally friendly production of cereals under tm «handful» of the biolan. also, with the efforts of the marketing department of the association were sold 4.5 tons of clean vegetables. out of environmentally friendly products of biolan on the shelves of ukrainian stores it contributed to the fact that the standards «biolan» passed one of the largest organic farms in ukraine  – 1111 «agroecology» (8300 ha, ca.) and the vedic organic agriculture «maharishi» (40 000 ha, kherson region). today another 180 households are willing to join the organic movement and organic foods grown without the use of chemicals (bulletin of the association «biolan ukraine», 2013). among the well-known domestic brands of organic foods are tm «hercules», «mr. eko» (the first domestic producer of organic jams), tm «нandful» (organic cereals). certified environmentally friendly products, represented at international exhibitions european ukrainian companies  – a grain, dried / frozen berries, herbs, teas, mushrooms, cereals, vegetables (cabbage, carrots, potatoes, beets). research of the demand for organic food shows that about 70% of potential customers are familiar with the environmentally friendly production of food, but it meant by products grown in gardens and gardens of individual households that do not undergo industrial processing. after the explanation of the term «organic food» all without exception respondents agreed to pay them a higher price, subject to availability of quality assurance, while 36,8% agreed to pay for it in 1,5–2 times more than for conventional products. for 72,6% of consumers such as the guarantee can be appropriate certified sign. several consumers (5,3%) expressed doubts about the possible existence of environmental cleanliness products guarantee in general (zaichuk, 2015). the data also confirmed by studies conducted in other regions (schapak, 2014). the main consumers, unlike the stereotypical idea about availability of organic products only to wealthy people, are young mothers or those who are preparing to become them; students who profess the idea of healthy eating and retirees who prefer more expensive, but more healthy and useful product. it should be noted that the solvent buyers are concentrated mainly in large cities. the main competitors of ecologically clean food products are, first, the conventional products now sold in stores and market, the quality of which (mainly in terms of safety) is questionable. secondly, certified imported organic products that have appeared in a number of supermarkets and have indisputable advantage  – tested certified mark that guarantees the ecological purity of the product, all of its components, raw materials, processing technology and packaging. done in poltava region attempt to ensure that consumer demand for organic foods labeled product of domestic production, carried out under the project «in harmony with nature» was not successful, mainly over the fact that producers had to bear additional costs for «ecologically clean and safe» trademark advertising of their products, to inform consumers about the benefits of clean food products and the safeguards provided by this sign, and so on. farms not profitable to switch to organic methods of management offset additional costs by additional benefit where it is possible. strategy to ensure the competitiveness of organic foods domestic production in the domestic market should be baltic journal of economic studies 21 vol. 2, no. 3, 2016 based on the chances offered by today. this should take the following steps. first, we should establish environmentally friendly raw materials processing, because the processing plants is mixed with another, as finished products domestic food production is not environmentally friendly. the solution to this problem is possible by adjusting for farm enterprises complete production cycle, which makes it possible to manufacture finished products, primarily milk and meat, which exists in the world's largest deficit, and in ukraine they never started production. second, the full production cycle will reduce the cost of finished organic foods and will meet the social demand for them to master this consumer segment, the market organizations, as hospitals and other health institutions, school and pre-school institutions, by reason of their financing and procedures tender procedures have to buy up food at the lowest price subject to compliance with existing quality standards. in a crisis, to establish a system of state subsidies for organic producers and promote the usefulness of organic products at the national level is almost impossible. providing producers of organic foods with any tax benefits in imperfect tax legislation needed to be changed is too very problematic. but now profitable to attract investment, and developed asian countries are ready to implement a profitable investment. production of organic foods in ukrainian black soil involves technology investor refers specifically to them. formation of economically-economic mechanism of implementation of complete production cycle in farms, studying ways to implement and defining the role of the state in this process are the tasks of further research in this direction. 3. conclusions and suggestions the main problem of organic production market in ukraine is exported domestic products as organic production of agricultural products. analysis of key market trends of organic products allowed coming to the conclusion that the market will develop if current trends continue its development in the future; however, organic market ukraine is now at the initial stage of development over the lack of effective legislative framework for regulation areas of organic production. so, for proper legal regulation and implementation of a balanced policy towards organic production, namely uniform requirements and rules for organic production, unified system of certification, certification and labeling of organic products will increase growth of organic products market and it ranks high in the food ukraine's security, and with the agricultural potential of the country ukraine will reach the leading position in the global market for organic products. references gavaza, u. v. (2014, may). marketplace orhanycheskoy production and infrastructure ego: modern status and prospects of development. aic economy, 5, 131. potapenko, v. g. (2011, may). organic agriculture as a factor of economic security. aic economy, 5, 58–65. zaichuk, т. о. (2015, april). assessment of demand for organic food. aspects of sustainable economic development, 4, 150–152. bulletin of the association «biolan ukraine» (2013). retrieved from: http://www.biolan.org.ua/download. php?articleid=2 bulletin of the association «biolan ukraine» (2014). health watch  – «biolan ukraine» retrieved from: http://a7d.com.ua/1284-na-varti-zdorovya-biolan-ukrayina.html. schapak, v. о. (2014, march). on the cultivation of environmentally friendly vegetable production in ukraine. modern trends in production and marketing of organic products, 3, 30–33. виктория бондарь рынок органического зернопроизводства украины: перспективы и тенден ции развития аннотация. целью работы является определение перспектив рынка органических продуктов в украине. в статье проведено исследование тенденций развития рынка органических продуктов в разрезе сельскохозяйственных площадей, количества органических хозяйств, объемов производства органических продуктов. выявлены ключевые факторы, влияющие на рынок органических продуктов украины, предложены направления развития рынка. зерновой рынок служит источником устойчивого развития сельского хозяйства, определяет социально-экономическое состояние общества и является основой экспорта. таким образом, развитие органического рынка зерна и продуктов его переработки имеют особое значение и определило цели и задачи данного исследования. методика. теоретической и методологической базой исследования стали работы экономистов в области экологического менеджмента и управления бизнесом: исторические, диалектические, абстрактные логические, методы анализа и синтеза, системного похода к научным исследованиям. результаты. доказано, что украина имеет значительный потенциал в производстве сельскохозяйственной продукции, в том числе органической, экспорта, потребления на внутреннем рынке. baltic journal of economic studies 22 vol. 2, no. 3, 2016 для определения тенденций рынка органических продуктов изучена динамика сельскохозяйственных площадей украины, отведенных для выращивания экологически чистых продуктов. исследована динамика развития органических предприятий. исследован спрос и предложения на органические продукты. практическое значение. анализ основных тенденций на рынке органических продуктов позволили прийти к выводу, что рынок находится на начальной стадии развития, в связи с отсутствием эффективной законодательной базы для регулирования областей органического производства. значение/оригинальность. сделанные выводы и предложенные мероприятия позволят реализовать сбалансированную политики в отношении органического производства и занять лидирующие позиции на мировом рынке органических продуктов. baltic journal of economic studies 83 vol. 8 no. 1, 2022 corresponding author: 1 national university “zaporizhzhia polytechnic”, ukraine e-mail: lyfarvlada@gmail.com orcid: https://orcid.org/0000-0003-2758-9575 researcherid: s-7600-2018 2 national university “zaporizhzhia polytechnic”, ukraine e-mail: sjalex2015@gmail.com orcid: https://orcid.org/0000-0003-1352-0147 researcherid: x-4813-2019 doi: https://doi.org/10.30525/2256-0742/2022-8-1-83-93 the inclusive development of the region according to the current economic conditions vladyslava lyfar1, yuliia sokolova2 abstract. purpose. the study aims is to determine the components of the region’s inclusive development and its results through the analysis of population welfare. methodology. to achieve the goal of the study, the general methods (analysis, deduction), methods of abstraction for building models, empirical methods (comparison, measurement, questionnaire) were used. findings. analyzing studies devoted to the inclusive development of the economy, the authors put forward a personal vision of the basis for the inclusive development of an industrial region, consisting of the economy of the region, the community living in a given territory and the environment, and their interrelationships, which made it possible to propose a conceptual model for the involvement of members of the territorial community in inclusive development. originality. the author's inclusive business model for the development of the region is proposed. it is aimed at attracting investments through the existing positive image, brand of the territory and additional value, which, unlike the existing ones, does not focus on factor conditions (minerals, land) of economic development, but focuses on human resources, that constituted an element of scientific novelty of the study. one of the main prerequisites for the implementation and development of the inclusive business model – the well-being of the population – was detected. therefore, a study, which assessed and compared the welfare of the population of different regions of ukraine, based on clearly defined indicators of living standards and quality of life was conducted. the inequality of development of different regions of ukraine was also assessed, and its causes were identified. the conducted research the principles of regional justice contributed to the formulation of recommendations for overcoming the gaps in the welfare of the population of the ukrainian regions. practical value. the results obtained can be used as a scientific substantiation of reforms in the internal regional, social, and economic policy of ukraine aimed at ensuring qualitative structural changes in the domestic economy. key words: economics, inclusive development, living standards, population welfare, quality of life. jel classification: r11, r13, i31, j01 1. introduction as practice shows, economic growth is not enough to talk about effective development of the country. the country 's macroeconomic indicators may be normal, but, at the same time, a significant part of the population is "not included" in the process of economic development, as it does not participate in the creation of gdp and, consequently, in the distribution. the result is stratification of the population and the emergence of related problems: declining purchasing power, the spread of informal employment, instability in labor relations and insecurity of social guarantees. the global inequality rate, calculated using the gini index, is currently 0.65, compared to 0.3 in 1980, indicating that population stratification is growing steadily in terms of income level and opportunities. to solve these problems, scientists have begun to study inclusive development and elaboration of an inclusive development model, which will help create maximum opportunities for personal development, economic activity, decent work and quality of life. until 2017 indicators such as gross domestic product per capita and the human development index were used to assess the country’s economic development level. however, they do not accurately reflect the level of development and society welfare, especially in the context of the concept of inclusive growth. therefore, in early 2017, the world economic forum baltic journal of economic studies 84 vol. 8 no. 1, 2022 in davos (switzerland) proposed the calculation of the inclusive growth and development index (idi) for an overall assessment of the country 's economic development. the priority of inclusive development is to improve the quality of people’s life through the formation of an economy with high employment of society with minimal stratification and interaction of all entities. regarding ukraine, it is important to study not only the possibilities of its inclusive development as a country but also the inclusive development of the regions through their sectoral specialization and uneven economic development. in addition, the consideration of these questions is clearly correlated with the sustainable development strategy of ukraine until 2030, which is based on the principles of inclusiveness and social responsibility (verkhovna rada of ukraine, 2018). 2. literature review mainly foreign scientists have dealt with the basics of the theory of inclusive development: d. acemoglu, j. robinson; s. hollander; j. podesta; z. m. bedos and others. among ukrainian scientists it should be noted bazyliuk a. v., zhulyn o. v.; khodzhaia  a. a., ignatyuk a. i., korneev v. v., khodzhaian a. r .; fedulova l. i.; yemel'ianenko l. m., dzenzeliuk k. v. and others. the main theses of the theory of inclusive development were also developed in the report "the growth report strategies for sustained growth and inclusive development" (commission on growth and development, 2008). however, these studies are devoted primarily to the development of countries, and issues related to the formation of the theoretical basis for inclusive development of regions remain unresolved. therefore, the research on inclusive development should be conducted both at the country’s level and at the level of administrativeterritorial units of these countries. 3. findings most scientists are currently convinced that normal economic growth is not enough for the effective social development of the state. thus, a new concept has emerged – the concept of inclusive development or growth, which today is the basis of economic policy of many european countries governments. the meaning of the concept "inclusiveness" is to involve all members of society in the processes of reproduction (without exceptions and restrictions). such comprehensive involvement implies equal access to opportunities, fair distribution of work results, as well as everyone's awareness of their involvement in the country 's development. nowadays, scientists are considering inclusive development, primarily at the international level – at the national level, comparing them on the basis of the index of inclusive development. to compare inclusive growth, a comprehensive indicator is calculated – the index of inclusive development, which determines how much the country is short of gross domestic product (gdp) due to inefficient use of its potential. at the global level, there are two approaches to the definition of "inclusive growth": the first, as sustainable economic growth, the main purpose of which is to reduce poverty and inequality (supporters of this approach are experts from the world bank and imf); the second, as a process of increasing the involvement of the population in gdp, giving people equal opportunities to realize their human potential regardless of socio-economic conditions, gender, place of residence and ethnic roots (supporters of this approach are experts from the un development program, asian development bank). however, despite the differences, both approaches pay much attention to the social component, human development and society. economic growth and social development must complement each other, be regarded as a holistic result. this is also confirmed by the practice when the stable high rates of economic growth of the country do not lead to the reduction of inequality and poverty reduction. for example, according to the authors of report "the inclusive growth and development report 2017", the united states ranks the 9th place in terms of gdp per capita, but only 23rd place in terms of inclusive development index (wef, 2017). this indicates a lack of productive employment for all groups of population and a fair distribution of labor results. considering the inclusive development of an individual country, it is advisable to consider indicators of inclusive development at the regional level (in relation to ukraine – it is oblast – region) to better understand the problems and prospects of each territory, its involvement in inclusive growth. this will give a clearer understanding of the problems and development prospects of each region, the degree of its involvement in the process of inclusive growth. the concept of "inclusiveness" is close in meaning to the concept of "integration". therefore, it is appropriate to talk about a certain basis of interconnected elements, which is the key to the inclusive development of region. the basis includes three elements – "economy ", "territorial community ", "environment" (figure 1). the element "economy " assumes the involvement in the gross regional product’s creation of all enterprises of large, small and medium-sized businesses, as well as the creation of favorable conditions for their development. the use of modern concepts of marketing and logistics through the formation of logistics supply chains, clusters, digitalization and baltic journal of economic studies 85 vol. 8 no. 1, 2022 greening of society is relevant today. opportunities for enterprise development and economic infrastructure, in turn, open up the opportunities for job creation and productive employment. thus, there is a relationship between the elements of "economy " and "territorial community ". the elements "economy " and "environment" are interconnected through the use of principles and concepts of socially responsible marketing, "green" logistics for the careful use of natural resources, greening of production processes. the relationship between the element "economy " and the element "territorial community " is manifested through the employment of economically active population of the region and, accordingly, the involvement of territorial community members in the creation of gross regional product (grp). the element "territorial community " assumes the development of human capital, social infra structure and social protection of population. this is solved through equal access to education, medicine and other social services, solving problems with crime, corruption, discrimination. a person must have the opportunity not only to make the maximum contribution to the creation of grp, but also the opportunity to reproduce their human potential through increased prosperity and investment in human capital. accordingly, the inclusive development of the region is impossible without the interaction of the element "territorial community " and the element "environment". people need to understand the value of the area in which they live, to protect and preserve the environment as much as possible. in turn, the element "environment" includes the territory together with natural resources, which is inhabited by the territorial community and the processes of economic activity. preserving the environment enables the community to live in an unpolluted environment, maintain health and increase life expectancy. the relationship between the elements "environment" and "economy " is manifested in the rational extraction and use of natural resources, socially responsible economic activities using the concepts of environmental marketing and logistics. this provides an opportunity to use the region's natural resources more efficiently, to attract alternative energy sources in the processes of production and economic activity. figure 2 proposes a conceptual model of involving the territorial community members in inclusive development through equitable access to opportunities and results of work, as well as possible results of inclusive socio-economic development of the region. an inclusive environment provides not only equal access to opportunities (opportunities to satisfy their needs, employment, leisure, education, medicine service) but also equal access to labor results. fair distribution of labor results implies equal and sufficient distribution between the employee, the employer and the state through a balanced wages, income and taxes. it should be noted that access to opportunities and labor results are directly proportional. the more opportunities a member understanding the value of the territory, its protection economy territorial community involvement of community members in the creation of grp inclusive development of region environment holistic marketing environmental marketing “green logistics” sustainable socioeconomic growth figure 1. basis of the region’s inclusive development source: authors research baltic journal of economic studies 86 vol. 8 no. 1, 2022 of the community has to realize his potential for the economic development of the region, the more opportunities he has to receive the appropriate part of the labor results. if a member of the community has a decent salary, then he and his family have access to opportunities, which in turn create the conditions for better education, work and higher wages. thus, a preliminary analysis of different approaches to the interpretation of inclusiveness and inclusive growth concepts (d. acemoglu, j. robinson, 2012; bazyliuk, zhulyn, 2015; prohnimak, 2018; yermak, 2017) allowed proposing the authors’ definition: inclusive development of the region is a process of the region socio-economic growth provided that all economic entities, objects of economic and social infrastructure, all members of the territorial community are involved in this process through the creation of favorable opportunities, fair distribution of labor results and environmental protection. it can be argued that the region inclusive development is a multifactorial and multilevel process, as it is based on the economy of maximum employment and interaction of all members. inclusive development assumes the active involvement of all members of society in various activities, respect everyone’s rights and freedoms, ensuring security and equality. since the region’s inclusive development is a multifactorial concept, its implementation is ensured by certain components. the following can be suggested as components of the region’s inclusive development: 1) socio-demographic; 2) economic; 3) natural. the socio-demographic component is central to determining the inclusive growth of the region, as man is the main productive force, the basis of economic and social development. the economic component of inclusive development involves attracting more resources to achieve economic development. however, inclusion is not an end in itself, it cannot constantly include new resources due to their limitations, it must accumulate them. in turn, the natural component involves the careful use of natural resources also due to their scarcity and reduction of environmental pollution. therefore, it is necessary to change the philosophy of using natural resources through the involvement of environmental and social factors for their reproduction: the use of secondary resources, energy recovery technologies, waste recycling. the problems of zaporizhzhia region development identified during this research showed the need to apply innovative approaches based on inclusive business models. by relying on the analysis of different approaches (united nations, 2008; united nations, 2014) to the definition of "inclusive business model", the thesis was confirmed that such a model is based on the component "population of the region". moreover, according to the un determination, it's not just population but poor people, because they are the main chain of value added of grp, as well as consumers of products, investors, producers of labor. the foundation of creating an inclusive business model for the region development is the intensification of investment, innovation and environmental, social, entrepreneurial activities in order to cooperate with like-minded people among community members, business structures, local governments (figure 3). the proposed inclusive business model, in contrast to the existing ones, does not focus on the factor conditions (minerals, land) of economic development, but focuses on human resources. it also involves following the business orientation of invest-in, aimed equal access to opportunities fair distribution of labor results inclusive socio-economic development directly proportional dependence results even growth of welfare of all the territorial community members small and medium-sized business development human capital development (reproduction) reducing inequality and poverty members of territorial community figure 2. conceptual model of involving the territorial community members in the inclusive development of region baltic journal of economic studies 87 vol. 8 no. 1, 2022 at attracting investment through the positive image, brand of the territory and added value. the main task of this business model realizing is the inclusive development of the region, and one of the main results of the region inclusive development is the welfare growth, which provides a high level and quality of life. in other words, there is a causal link between the inclusive socio-economic development of the region and the population welfare: on the one hand, the growth of welfare is the result of regional development, and on the other – a prerequisite for this development, because if people are satisfied, they stay in the region, work, contributing to the creation of grp and region development. summarizing the different approaches to determining the population welfare, we present the main components of living standards and quality of life (figure 4), through which it is advisable to develop a criteria system for assessing the population welfare. the authors investigated the population welfare of few ukrainian regions during 2007–2020 with a step of 6 years. there were considered: kyiv city (as the capital region with the highest indicators of grp, infrastructural development, etc.); lviv and kharkiv regions (as poles of sustainable economic growth in the western and eastern regions of ukraine); chernivtsi region, – the least developed region of ukraine in terms of grp; and dnipropetrovsk region, the central region of ukraine, and the closest neighbor of zaporizhzhia region, which was the basis of the study. in 2021, more than 1,000 people were interviewed: communities’ members, administration and local government officials, representatives of industry, retail, and services sector. respondents, who provided expert assessments of living standards and quality of life in the selected regions and assessed the importance of individual indicators of these two components, were selected using the method of deterministic quota sampling. the study used a 10-point rating scale, as it allows to assess the indicators analyzed with a higher degree of accuracy. some of indicators have an unambiguous assessment (income, wages), but most of them are integral, so their value was determined by the formula: k a i n i= = ∑ 1 , (1) ai – is the i-th component of the welfare indicator, and n is the number of components. the indicators "household income" (k1) and "wages" (k2) were taken from statistics, the values of the relevant indicators for 2007 and 2013 years were aligned with statistical information of 2020 year, considering changes in the national currency for the same period. the other indicators were also calculated influence of government and international environment influence of unpredictable factors (covid-19) regional officials and local governments population of region (involvement of all sections of the population capable for work) industrial enterprises of profile industries in the region enterprises of small and medium-sized businesses enterprises of the supporting industries in the region infrastructure of the region (transport and logistics, social, service, information) business environment activation of investment, environmental, social, entrepreneurial activity on the principles of business orientation “invest-in” figure 3. inclusive business model for the region development source: authors’ research baltic journal of economic studies 88 vol. 8 no. 1, 2022 table 1 expert assessments the indicators of population welfare* welfare indicators (w) indicator’s weight indicator’s characteristics (quantitative and qualitative) assignment of points / qualitative assessment 1-3 4-7 8-10 living standards (sl) household income (k1) 0,2 thsd. uah per year. less than 99 – low 100-149 – medium more than 150 – high wages (k2) 0,2 thsd. uah per month (average wages). up to 9,9 – low 10-14,99 – medium more than 15 – high medical security (k3) 0,2 number of modern medical institutions, quality, and timeliness of providing high quality medical services (according to respondents and statistics). low medium high social security (k4) 0,2 social protection of families, pensioners, unemployed, ets. low medium high access to education (k5) 0,1 number of preschool education institutions, secondary and vocational schools, universities. demographical situation (k6) 0,1 total population, average annual population, formation of the increase/decrease population number, natural and migration population movement. negative medium positive total 1,0 quality of life (ql) conditions and character of work (k7) 0,25 the industrial structure, the presence of highly intelligent and innovative industries in the region's economy, occupational safety, compliance with the law by employers, legal protection, unemployment, the number of officially employed. disadvantage, high unemployment national average favorable conditions, low unemployment ecological conditions (k8) 0,25 level of air and water pollution, quality of drinking water, indicators of radiation, level of morbidity due to ecological component. high medium low migration activity (k9) 0,15 the level of decrease economically active population number due to migration high medium low development of transport infrastructure (k10) 0,2 regional indicators by transport types: quality, density and length of roads; density and length of railway tracks; quantity and quality of bridges over rivers, availability of airports, river and seaports; availability of service infrastructure (stops, parking lots) low medium high providing recreation and leisure (k11) 0,15 number of parks, leisure’s institutions, recreational areas, cinemas, concert halls, sports complexes, etc. low medium high total 1,0 * – compiled by the authors based on primary research and (derzhstat ukrainy, 2021) baltic journal of economic studies 89 vol. 8 no. 1, 2022 ta bl e 2 w ei gh te d es ti m at es o f p op ul at io n w el fa re o f c er ta in r eg io ns o f u kr ai ne in 2 00 720 20 y ea rs w el fa re in di ca to rs in di ca to r’s w ei gh t e st im at es th e po pu la tio n w el fa re ( po in ts ), o bt ai ne d fr om th e re su lts o f e xp er t’s su rv ey z ap or iz hz hi a k yi v lv iv k ha rk iv d ni pr o c he rn iv ts i ye ar 20 07 20 13 20 20 20 07 20 13 2 02 0 20 07 20 13 20 20 20 07 20 16 20 20 2 00 7 2 01 3 20 20 2 00 7 20 13 2 02 0 l iv in g st an da rd s к 1 0, 2 5 6 3 9 9 8 3 4 2 4 4 2 5 6 3 2 2 2 к 2 0, 2 6 6 6 10 10 10 5 4 4 6 4 3 6 6 6 2 2 2 к 3 0, 2 3 3 3 10 10 10 6 8 10 6 5 5 6 6 6 1 1 1 к 4 0, 2 4 6 4 9 9 8 5 6 8 7 6 6 5 5 4 2 4 1 к 5 0, 1 5 6 8 10 10 10 8 10 10 9 10 10 7 8 8 4 4 3 к 6 0, 1 5 4 1 10 10 10 8 9 10 8 9 10 6 7 7 3 2 4 w ei gh te d av er ag e of l iv in g st an da rd s 1, 0 4, 8 5, 2 4, 1 9, 6 9, 6 9, 2 5, 4 6, 3 6, 8 6, 3 5, 7 5, 2 5, 7 6, 1 5, 3 2, 1 2, 4 1, 7 q ua lit y of l ife к 7 0, 25 4 3 3 8 8 10 7 8 10 9 9 8 9 8 8 6 5 5 к 8 0, 25 1 1 1 6 5 4 9 9 9 4 5 5 5 6 6 10 10 10 к 9 0, 15 6 6 1 8 8 10 7 8 10 7 7 7 8 7 7 4 2 1 к 10 0, 2 6 6 2 8 9 8 8 8 9 8 8 8 7 7 8 8 8 8 к 11 0, 15 4 4 3 9 10 10 10 10 10 7 8 9 6 7 8 8 9 10 w ei gh te d av er ag e q ua li ty o f l if e 1, 0 3, 55 3, 7 2 7, 65 7, 75 7, 1 8, 15 8, 55 9, 55 6, 95 7, 35 7, 25 7, 0 7, 25 7, 35 7, 4 7, 0 7, 0 w el fa re in di ca to r as a fu nc ti on o f l iv in g st an da rd s an d q ua li ty o f l if e (o ut o f 1 00 p oi nt s) 17 ,0 4 19 ,2 4 8, 2 73 ,4 4 74 ,4 65 ,3 2 41 ,8 9 53 ,8 6 64 ,9 4 43 ,7 8 41 ,8 9 37 ,7 39 ,9 44 ,2 2 38 ,9 5 15 ,5 4 16 ,8 11 ,9 based on statistical data of their components, as well as on the assesses of respondents. the general indicator of population welfare (w – welfare) can be considered as the function of its two components – living standards (ls) and quality of life (ql): р f ls ql= ( ), � , (2) the obtained quantitative estimates of indicators and their qualitative characteristics are shown in table 1. the results of assessing population welfare in selected regions are shown in table 2. welfare indicators in different regions of ukraine are uneven, the highest welfare rates, calculated as a product of weighted averages of living standards and quality of life, are found in kyiv (65.32) and lviv region (64.94), the lowest – in chernivtsi region (11.9) and zaporizhzhia region (8.2). the dynamics of welfare indicators by region is shown in figure 5. thus, as we can see from the calculation of population welfare in the selected regions of ukraine, there is a growing trend of socio-economic inequality in the development of the territories. within ukraine, such inequality can manifest itself due to the imbalance of the region’s economic development, which, in turn, leads to social inequality. regional inequality in economic development can be measured using the multiplicity factor of regional development inequalities, based on a comparison of gross regional product (kin). the multiplicity factor of regional development inequality is calculated as the ratio of the region with the highest gross regional product (grp) to the region with the lowest value, in the considered year: к grp grp in max min = (3) in our opinion, the multiplicity factor of regional development inequalities in ukraine should be evaluated in the period from 2004 to 2020 years, with a step of 3 years, namely 2004, 2007, 2010, 2013, 2016 and 2020. the period from 2004 to 2007 years is one of the most successful periods in terms of economic growth: revival of business, intensification of baltic journal of economic studies 90 vol. 8 no. 1, 2022 region population welfare household income amount of wages medicine service social security access to education conditions and character of work ecological conditions migration activity development of transport infrastructure demographical situation providing recreation and leisure living standards quality of life figure 4. components of the region population welfare figure 5. trends in the indicator of population welfare in the selected regions of ukraine baltic journal of economic studies 91 vol. 8 no. 1, 2022 mergers and acquisitions enterprises of heavy industry, retail, agriculture. there was an economic recovery after the global economic crisis of 2008 in 2010. in 2013, it was the last time when economic indicators were determined for all regions of ukraine, including luhansk and donetsk regions, as well as autonomous republic of crimea. table 3 shows the multiplicity factor of regional development inequalities in ukraine during 2004–2020: the total for ukraine and zaporizhzhia region, calculated according to the state statistics service of ukraine (derzhstat ukrainy, 2021). as can be seen, the multiplicity factor of regional development inequalities between the regions with the highest level of grp (kyiv) and the lowest level of grp (before 2013 sevastopol, after 2014 – chernivtsi region) is almost 28, which shows a significant differentiation in all indicators: economics, social, table 3 multiplicity factors of regional development inequalities in ukraine and zaporozhzhia region (2004–2020 years) year grp max (kyiv), million uah grp min, million uah grp zaporizhzhia region, million uah кin (total ukraine) кin (zaporizhzhia region) 2004 61357 2213 (sevastopol) 15255 27,72 4,02 2007 135900 4916 (sevastopol) 33158 27,64 4,09 2010 196639 9359 (sevastopol) 42736 25,25 4,6 2013 312552 11066 (sevastopol) 54352 28,24 5,7 2016 559140 21239 (chernivtsi region) 104232 26,32 5,36 2020 922978* 38785* (chernivtsi region) 145300* 23,79* 6,35* * – calculated by authors based on grp’s physical volume in previous year's prices index figure 6. dynamic of changes of the multiplicity factor of regional development inequalities in ukraine and zaporizhzhia region (in 2004–2020 years) baltic journal of economic studies 92 vol. 8 no. 1, 2022 infrastructural, investment, etc. in 2020, the difference decreased to 23.79 points, but remains quite large, as the value of this coefficient, for example, for the united states is 5; germany – 2.3; italy and spain – 2; china – 10. the multiplicity factor of zaporizhzhia regional development inequalities with the most developed region of the country, kyiv, has increased per 1.5 times in sixteen years: from 4.02 in 2004 to 6.15 in 2020 (figure 6). thus, it confirms the slowdown of zaporizhzhia region economic development, which, in turn, worsens the indicators of its social development and reduces its investment attractiveness. uneven development of regions also leads to uncontrolled chaotic migration of the economically active population. it causes a rapid and disproportionate growth of the "most successful" regions (in ukraine – the capital, as well as lviv region). instead, in other regions, the population is decreasing rapidly, which leads to a further reduction of economic and social indicators. at the same time, in the "overcrowded" regions, the cost of housing, food, and household services is growing significantly. the further worsening economic situation is due to the global pandemic of the covid-19. the epidemic has further widened the economic and social gap between the regions, highlighting the problem of health care (the number of hospital beds, oxygenequipped places; the number of medical staff at all levels, the level of salaries of medical staff ). quarantine restrictions affected businesses, especially small businesses. in 2021, more than 50% of small businesses in the tourism, hotel and restaurant, beauty industries and retail disappeared. as a result, regions are losing their grp, and studies have shown that less developed regions are losing it faster than more developed ones. thus, several principles of regional justice can be formulated: – people living in different regions of the country must have equal rights to satisfy their needs. they must have equal access to quality medical services, education, and environmentally friendly products. at the same time, cost of resources for residents of the territories where they are produced should be lower, than for residents of other regions. there must be environmental and other coefficients that will reduce resources cost. thus, zaporizhzhia region produces more than 80% of total electricity production in ukraine, both at thermal power plants and nuclear power plants, which affects the environment and population health. at the same time, the cost of electricity for residents of zaporizhzhia region is the same as for other cleaner and more economically developed regions, and industrial consumers often pay much more than industrial companies in other regions do; – the level of population welfare in different regions of the country should be determined by the worst economically and socially developed region and the poorest social group. today, the standard of living in different regions of the country differs several times, so it is necessary to reduce the inequality of development of the regions of ukraine. overcoming regional disparities at the level of public welfare requires: 1) bring to a logical conclusion the decentralization reform and review, at the legislative level, the redistribution of taxes between the center and the regions to provide an opportunity, especially for the industrial regions, that contribute the most to the country’s gdp, leave a significant portion of their own revenue for social, environmental and investment infrastructure; 2) medical reform, which has been going on for more than five years, should provide affordable modern high-tech health care for the population in all regions with medical facilities evenly distributed throughout the country, as now such centers are concentrated only in the capital region and a few regional cities (e.g. kyiv, lviv); 3) work out, at the state level, programs to promote a healthy lifestyle, development of sports infra structure, which will belong to local communities and, therefore, will be available to all segments of the population, both in terms of income and age. programs should be funded from both national and regional budgets; 4) for industrial regions, it is necessary to create environmental foundations, that will solve local environmental problems; 5) continue the development of digital economy in accordance with modern requirements. thus, there are some recommendations for zaporizhzhia region based on the study: – gradually change its industry profile from heavy industry to "green energy ", retail, digital technologies, engineering services, etc.; – create such logistics infrastructure elements as modern a-class transport and logistics centers; – develop digital infrastructure in case to create new opportunities, technologies and business models of customer service in the b2c, b2b and b2a markets; – restore and expand existing road and rail networks; – develop social infrastructure facilities; – intensify e-commerce. 5. conclusions the study results in the author's definition of "inclusive development of the region", based on a comparative analysis of approaches to the concepts of inclusiveness and inclusive growth, is proposed; the basis of inclusive development of the region, baltic journal of economic studies 93 vol. 8 no. 1, 2022 which includes three interrelated elements – economy, territorial community and environment, is determined; a conceptual model of involving territorial community members in the inclusive development of the region through fair access to opportunities and results of work is proposed. the possible results of inclusive socio-economic development of the region have been identified, among which the growth of public welfare is the main one. the logic of further study allowed determining the population welfare components and indicators. following the survey of the community members in the selected regions of ukraine, an assessment of the population welfare in these regions is given. it showed the existence of increasing socio-economic inequality trends in the territory’s development, which, in turn, negatively affects their economic development. the conclusion about the existence of gaps in the progress of ukrainian regions is confirmed by the calculations of a multiplicity factor of regional development inequality. the ways of overcoming the gaps at the level of population welfare, which are based on regional 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derzhstat ukrainy (2021). demohrafichna ta sotsial'na statystyka. available at: http://www.ukrstat.gov.ua baltic journal of economic studies 159 vol. 7 no. 5, 2021 corresponding author: 1 national aviation university, ukraine. e-mail: ostapenco@ukr.net orcid: https://orcid.org/0000-0003-2032-1365 2 state higher vocational school memorial of prof. stanislaw tarnowski in tarnobrzeg, poland. e-mail: ibritchenko@gmail.com orcid: https://orcid.org/0000-0002-9196-8740 3 university of security management in košice, slovakia. e-mail: peter.losonczi@vsbm.sk orcid: https://orcid.org/0000-0003-3944-8462 doi: https://doi.org/10.30525/2256-0742/2021-7-5-159-168 research of the intelligent resource security of the nanoeconomic development innovation paradigm tetiana ostapenko1, igor britchenko2, peter lošonczi3 abstract. the resources and resource potential of the innovative component of nanoeconomics are analyzed. the factors of production – classical types of resources such as land, labor, capital and technology – are described. ways of influencing the security resources of nanoeconomics within the innovation paradigm are evaluated. the purpose of the study is to identify the factor of nanoeconomics in the formation of resource security potential in the innovation paradigm. to achieve this goal, the following tasks were set: to characterize the importance of the land resource as a factor in the potential of economic nanosystems; to highlight the importance of capital as a factor of nanoproduction and an indicator of the innovation paradigm; to determine the labor resource in the development of innovative nanosystems; to analyze the intellectual potential of nanoeconomic development of the innovation paradigm; to identify clusters of innovative nanopotential in the regions of countries with transition economies. each resource is examined separately with the first analysis of a resource security assessment such as land. the other resource under consideration is labor. demographic factors become decisive in describing the development of labor resources. the capital factor allows the formation of independent economic systems, when the state budget affects the possibility of developing science, education and health care. a number of methods were applied during the study: methods of induction and deduction (to assess the importance of the innovation paradigm for the development of nanoeconomics); system analysis and structural approach (to determine the aggregate state of production factors); method of comparing the quality of production factors in market economies and in developed countries; an observation method (for assessing the state of resources in different countries); method of cluster analysis (to determine the existence of innovation-territorial regions in countries with economies in transition). the analysis is carried out to identify the conditions of the impact of production factors on the innovative paradigm of nanoeconomics. it reveals theoretical approaches to the formation of nanoeconomics and its active development. as a result of the study of intellectual and resource potential of security, a cluster analysis was carried out to assess the conditions for the formation of innovation-territorial regions. this study allows to understand the role of production security factors in the formation of the innovation paradigm and the efficiency of the development of nanoeconomics. the way of providing the basis for the development of nanoeconomics in the form of efficient use of production factors is considered as a perspective. key words: intellectual-resources security, innovation paradigm, nanoeconomiсs, factors of production, innovation clusters. jel classification: d11, f63, i31, l60, o10 1. introduction in the modern conditions of economic science development, the human factor plays a decisive role in the development of economic systems of different levels. the lowest system is nanoeconomics, which is defined as a human economy. its innovative basis is the innovation paradigm with the determinants of intellectual and resource security. the determinants baltic journal of economic studies 160 vol. 7 no. 5, 2021 of resource supply are vital for the development of any production system. factors of production are the primary resource endowment for the creation of goods and services within the production processes of the real sector. the nature of the nanoeconomy is defined along with the characteristics of the factors of production. thus, it implies the identification of the individual as owner, producer, and consumer. the owner is the bearer of factors of production, the producer is their user, and the consumer is the modifier of factors of production in finished goods and services. the factors of production in the nanoeconomy allow the creation of goods by individuals (scientific and technological personnel) for technology development; production personnel (for the use of technology in flow production); and sales personnel (for the purchase and sale of finished goods and services). in the process of expanded reproduction (from scientific development to realization to the final consumer) of the nanoeconomy certain persons are involved, who conduct this process and ensure production at its various levels. to determine the quality of production factors in ukraine, it is necessary to compare them with the availability of resources in the countries of the european continent as the main partners of the economy in transition. the land factor is crucial for the development of the agro-industrial complex and the solution of the food problem. most of the industrialized countries of the world are fully self-sufficient in agricultural products. at the very beginning of their joint existence, eu countries formed a common agricultural policy (cap) aimed at 100% self-sufficiency in food. throughout the 1960s and 1970s, agricultural production gradually adjusted. the land factor in ukraine is comparable to that of france, since agriculture is the most important sector of the transition economy in a country like ukraine. meanwhile, france is the leader of agribusiness in the eu. when it comes to civil engineering, land is used for construction. the territory of former plants and factories is used for housing, and new industrial enterprises are built on the outskirts of settlements with the conversion of existing facilities. the land resource is defined in nanoeconomics as the basis for wealth management. capital as a factor of production is necessary for the safe development of production at the national and nanoscale. this factor of production makes it possible to acquire other necessary resources and form working capital. the capital factor in transition economies (such as ukraine) is compared to the situation in great britain, the country with the highest quality of capital in the world and western europe in particular. workforce is also a security resource for the production of certain goods. this security resource is directly related to the nanoeconomy because it is human. human labor becomes the basis for the development of the production of goods and services. on the other hand, humans are their main consumers. the labor resource differs from the nanoeconomy in that the former is analyzed as labor. it is also viewed as the cost of producing certain goods, while nanoeconomics is a whole system, reflecting both production and consumption from the moment a person is born until retirement. the intellectual security resource (or technology) is also critical to economic growth. the more innovative production is, the more opportunities for economic systems to develop and grow. all types of factors of production are the basis of innovative development, and the latter is the basis for long-term growth prospects within the national economy and the nanoeconomy. thus, the problem of security of intellectual-resource impact of innovation paradigm on the development of nanotechnology economy becomes the key to activate national innovation systems. the relevance of this issue is due to the fact that the individualization of economic processes outlines the merging of economic systems of different levels and forms the dependence of economic and innovative subjects on the subjective factor. 2. analysis of recent researches and publications various scholars around the world have paid attention to the question of shaping the innovation paradigm. thus, the researcher (rylach, 2016) notes that innovation is one of the most important categories of the modern economic paradigm. there are some authors (schumpeter, 2011) who have begun to use this category in science and practice. other authors (bazhal, 2015), (tugan-baranovsky, 1894) have outlined the stages of formation of the innovation paradigm since the early 20th century, enriching these studies with such components as long waves (tuganbaranovsky, 1894) and scientific and technological structures (bazhal, 2015). the technical and economic structure is characterized by certain key factors and the nature of the development of industries during the life cycle of this structure. mixed economy is important (bazhal, 2015). a theory has also been developed in which education is a growth factor. such authors have found that one of the factors of economic growth is special education (bazhal, 2015); emphasizing the availability of highly educated professionals as a major factor in economic development (bazhal, 2015). technological progress is an exogenous factor of economic development. baltic journal of economic studies 161 vol. 7 no. 5, 2021 regarding the types of resources that are used to expand knowledge, the author (rylach, 2016) identifies the following: research and development, technology development and production, learning, human development activities, learning by doing. in general, models of endogenous economic growth and the innovation paradigm fall into several groups (rylach, 2016): a) models in which the production of innovation is represented as a product produced in the red process; b) activities directed at the individual which increase human capital; c) learning-by-doing models; d) models of international trade and technology diffusion; e) models of technological progress and population; f ) models of inequality and economic growth. various authors note that a systematic analysis, which originated in the 1990s, is used in the study of the innovation paradigm. innovation networks and innovation systems are also studied separately. another author (zabarna, kozakova, 2019) defines the paradigm of innovative development in a market transformation. the following issues are also identified: innovative development at the meso level, theoretical and methodological principles of innovation, processes of formation and development of innovative activity, development of innovation as a component of the innovation process, as well as the strategic direction of innovation activity. the researcher (kotko, 2016) defines the innovation ecosystem as a new paradigm of innovative economic development. the author forms approaches to the relationship of environmental, economic and social factors in the development of the ecosystem with the innovation paradigm as the basis of the ecosystem. the analyst (zhyhalkevych, 2014) notes that the paradigm is the original system of views, in particular on the formation of clusters. the paradigmatic basis of cluster formation is determined by the following components: – geographic concentration; – the multitude of economic agents; – the functional interconnection and interaction of the participants; – specialization of companies (cluster subjects); – the competition within the cluster; – availability of highly qualified staff. these issues are crucial for the influence of nanoeconomics on the creation of an innovation paradigm within national economic systems. it should be noted that recently the nano-agent has been seen more as a priority in the system of "human – society " relations. the individualization of such relations subjectively affects the development of national economic and innovation systems. the author (arrow, 1974) was the first to introduce the term "nanoeconomics" as an economic category. at this stage of the development of economic science, this category is increasingly becoming the object of research in various fields. the influence of nanoeconomics on the formation of the innovation paradigm is an issue not fully disclosed in the scientific sources. the relevance of its research is the basis for the development of an individualized factor in the formation of innovative approaches to the national economic system. 3. purpose and objectives of the study the purpose of the study is to determine the factor of nanoeconomics in the formation of the resource potential of security within the innovation paradigm. in order to achieve this goal, the following tasks were set: – to characterize the significance of the land resource as a factor in the security potential of economic nanosystems; – to emphasize the importance of capital as a factor of nanoproduction and an indicator of the innovation paradigm; – to determine the labor resource in the development of innovative nanosystems; – to analyze the intellectual potential of the nanoeconomic development of the innovation paradigm; – to identify clusters of innovation nanopotential in the regions of countries with economies in transition. 4. sources and methods of research a number of methods were applied during the study: methods of induction and deduction (to assess the importance of the innovation paradigm for the development of nanoeconomics); system analysis and structural approach (to determine the aggregate state of production factors); comparison method (to compare the quality of production factors in market economies and in developed countries); method of observation (to assess the state of resources in different countries); method of cluster analysis (to determine the existence of innovative and territorial regions in countries with economies in transition). 5. the results of the study of the influence of the quality of production factors on the innovative paradigm of nanoeconomics 5.1. the study of the land resource as a factor in the potential of economic systems having identified the main components of nanoeconomics, its subject matter can be characterized as nanoeconomics. it is a human economy, which stipulates that its productive force is man, the interconnection is the process of acquiring the skills of baltic journal of economic studies 162 vol. 7 no. 5, 2021 economic behavior by children and adults. it is aimed at ensuring high competitiveness and dissemination of experience in the economic environment of the country. nanoeconomics is different from nanotechnology economics, where the latter means the development, processing and introduction of nanotechnology into the production process. nanotechnology economics is a component of nanoeconomics. the latter consists of child economics, human economics and nanotechnology economics. first of all, the leading link in the nanoeconomy is the human being. the child economy covers the whole period from birth to graduation. it is a new person who uses certain resources for his or her maturation and subsistence, which takes place with the help of the household in which the person lives and develops. it is a whole industry of childhood that produces goods and services for children and the rising generation. it is also a system of educational process and upbringing. the second component of the nanoeconomy is the human economy. this component implies an effort to achieve a high quality of life. thus, human capital is a resource for improving life. for some, it is entrepreneurial capital, where ownership becomes the key to improving quality of life. free capital becomes the basis for the formation of entrepreneurship, and the latter becomes the basis for increased profits. when it is not entrepreneurship, a person is usually a wage laborer who sells his labor to provide a high quality of life for himself and his family. in this case all resources are used: labor, land, capital and technology. the third component of the nanoeconomy is the economy of nanotechnology, which is a type of innovation economy. a person, who is an entrepreneur or an employee, is engaged in the development of nanotechnology solutions. this process also requires production factors. thus, nanotechnology develops on the basis of previously invented technologies, forming a new nanostructure. it is well known that appropriate financial support is necessary for such developments, since without capital it is impossible to carry out expensive research. in order to create the basis for the production of new materials, processes, and goods, appropriate raw materials must be available. in addition, the human factor of production implies that only highly qualified specialists can produce appropriate nanotechnology. some authors (porter, 2018) emphasize that factor parameters are a determinant of national economic competitiveness development. these factors of production are land, labor, capital and technology. it is known that all factors are divided into basic and developed, general and specialized. the basic ones are those that are used inefficiently. for example, in the early 1990s and 2000s, land was used inefficiently in some transition countries, as 30 centners per hectare were harvested, despite the fact that this land is the most fertile in the world. meanwhile, on brown soils of france harvested up to 70 quintals per hectare, which is an effective use of this production factor, taking into account the resource being developed (dziubanovska, 2019). common factors are used in many areas. for example, in the 1990s, labor could be seen as a common resource in transition countries because there were specialists and no jobs for them. people retrained and moved to areas where they could find work. unlike in the u.s., where there is a narrow specialization of specialists, moving into a new field requires retraining, which is a specialized resource (nosachevska, afanasyeva, 2019). the analysis of the factors of production in selected countries with economies in transition is worth making a model country with a transition economy and a system of development of nanoeconomic principles. agricultural areas in these countries are used quite effectively. thus, cereals and legumes occupy the largest areas and provide the largest volume of production, but the volume of yields is not high enough and amounts to almost 30 quintals per hectare. the volume of the potato crop is high and shows a positive trend year after year. the volume of fruits and vegetables is also increasing, so more and more of these products are being exported. entrepreneurs in the agricultural sector are quite active, and individual entrepreneurs have a significant share in the production of various crops. it can also be seen that the total number of enterprises engaged in the cultivation of grain and legume crops is 34,673 units. this is a high figure with a significant share (61%) of small agricultural businesses occupying up to 100.00 m2. accordingly, a small number of large agricultural enterprises harvest significant crops and form their grain profile (oliynyk-dunn, wasilewski, 2020). thus, the harvest volume of large agricultural enterprises varies from 50 to 65 centners per hectare, and small agribusiness collects 35.8 quintals per hectare. the smaller the agribusiness enterprise, the less crop is harvested with the smallest harvest volume indicator. the nanofactor of agricultural business development is also important when analyzing approaches to security resources within the innovation paradigm. thus, the number of organizations performing research in the field of agriculture, forestry and fisheries was 14 institutions in 2017 and 7 institutions in 2019. as can be seen, there has been a decrease in the indicators by half. this is a negative trend, which indicates a decrease in the role of the agricultural sector for innovative development of the economy as a whole. the nanofactor provides the distribution of the number of workers engaged in the implementation of scientific research. there are only 79,262 people in baltic journal of economic studies 163 vol. 7 no. 5, 2021 transition countries, of whom 6,508 are employed in agriculture, which is 8.21%. innovation in agriculture must be supported by the number of researchers with phds. their number is indicated only 35 people, including 18 women (51.4%). however, this number is decreasing year by year. in 2017, there were 136 researchers with phd degrees in agriculture. clearly, there is a negative trend of little nanofactor influence on agricultural innovation and land endowment (pokojski, 2020). to compare the conditions for the use of land resources in countries with economies in transition, it is worth considering the state of the agricultural complex in france, which is currently the breadbasket of europe. in 2019, france sold 39,124 million euros worth of agricultural products, a significant figure that implies a multi-billion-dollar profit in this area. cereal production accounts for 14.8% of the country 's total. arable land in the country is 329,457 km2. these are the agricultural regions. the intermediate regions cover 258389 km2 the cities cover 50629 km2. a large part of the territory is occupied by agricultural land. most agricultural enterprises in france are either small or large (24.3% and 21.9%, respectively). thus, small enterprises are run by family farms and large ones by holding companies such as tncs or large national companies. the structure of agricultural workers in france is as follows: the total number is 456,000, of whom 29.7% are women, 339,110 are owners, 116,690 are family members, and the permanent labor force is 403,750. it is obvious that agricultural labor in france is mainly a family business, in which hired workers are intensively involved. land use is a very important security factor in the development of the national economy and in the system of nano-economic relations. along with this factor of production, capital is actively used and formed. 5.2. evaluation of capital as a factor of production and an indicator of the innovation paradigm the consolidated budget of the transition country has grown almost tenfold in 12 years. security expenditures have consistently exceeded revenues due to the budget deficit, but the latter is gradually decreasing, which could be a positive trend (melnyk, leshchukh, 2020). lending also increased manifold. the data show that lending in different forms and modes of repayment increased from 71.3 million euros to 128.1 million euros in 2010. if we talk about loans issued by depository corporations (banks) to residents, in 2017, 19020.9 million euros were issued in national currency, as well as 14867.7 million euros in foreign currency. capital is circulating, and residents are using borrowed funds for business or household life. loans were issued more than deposits received by banks. thus, in 2017, household deposits were made in local currency for a total of 8,414.6 million euros and 8,095.8 million euros in foreign currency. another indicator of capital development in a country is investment. the nano-factor of such development is human capital. capital investment by asset type in transition countries in 2017 amounted to 14,948.7 million euros, the largest share of which came from machinery, equipment and inventory, in particular 34.5% of the total, while engineering structures accounted for 17.5%. there has long been a debate in scientific publications about how to attract more funds for industrial development. at present, statistics show that investors in national production are domestic investors who contribute to the modernization of various industries and their safety. such production should be supported by the development of human capital as a nanoeconomic factor. capital investment in professional, scientific, technical activities in 2017 amounted to 265.5 million euros, while 4,776.6 million euros were invested in the industrial sector and 116.4 million euros in education. education should be self-sufficient and funded by the state, as universities, in addition to the educational system, should develop a component of scientific security with the involvement of promising students and young researchers. the situation in one of the transition countries should be compared to great britain, since it is the country with the most stable currency and a high level of security capital development. thus, statistics show that in this state budget expenditures exceed revenues. in 2017, revenues were 769 billion pounds and expenditures were 809 billion pounds. the government budget deficit (as a percentage of gdp) was 0.1 in fy 2019–2020 and 0.2 in fiscal year 2020–2021. public sector net investment (as a percentage of gdp) was 2.2 and 2.6, respectively. it should be noted that the figures are rising, which is a negative trend. the structure of the expenditure portion of the budget in fiscal year 2019–2020 was as follows: health care – 7,1 %; education – 4,6 % housework – 0,7 % jurisprudence – 0,5 % defence – 10,5 % international development – 2,0 % local government – 0,0 % transport – 14,6 % business, energy complex, industrial strategy – 11,2 % digital economy, culture, media, sport – 0,6 % it can be seen that most of the money is spent on transportation and business. health care and education baltic journal of economic studies 164 vol. 7 no. 5, 2021 are well-funded, which means government support for the social sectors of the security economy. the nanoeconomy has made significant progress in this island country, where special attention is paid to education (from pre-school to university). people are known to come to britain from all over the world to get an education. they are children of all ages, from schoolchildren to graduate students. another production factor influencing the formation of the innovation paradigm is the availability of human resources (workforce). it is this resource that determines the development of the nanoeconomy. however, while this factor is quantitative, nanoeconomics is mainly characterized by qualitative characteristics. 5.3. evaluation of labor resources in the development of innovation systems the population of ukraine as a country with a transitional economic system in 2018 is 42.4 million people, of which 69.3% are urban and 30.7% are rural. there are 19558180 men and 22658586 women. women outnumber men, indicating the fertility potential of our population. it is known that the population of many transition countries is aging, so in 2018 there were 11,725 thousand pensioners. the number of pensioners per 1,000 people in 2018 was 278, сompared to 301 in 2011 (libanova, 2020). the population is not getting younger because of declining birth rates and rising mortality. in 2017, for example, the natural increase in the population of transition countries was 210.1 thousand people, so it decreased by two hundred and ten thousand inhabitants. the number of live births that year was 364.0 thousand, and the number of deaths was 574.1. life expectancy at birth in 2017 was 72.0 years, 67.0 years for men and 76.8 years for women. obviously, men live less than women. the reasons for this statistic are stress, reluctance to go to doctors, etc. it has been proven in nanoeconomics that life expectancy depends on quality of life. moreover, married people live longer. for example, in 2017 there were 249,500 marriages with 128,700 divorces. thus, about 50% of marriages tend to break up. this is a negative trend, which can significantly affect the performance of the nanoeconomy in the future. the quality of the labor force is also determined by labor market conditions. the economically active population in a country in transition is declining: from 22,830,800 in 2000 to 17,854,400 in 2017, with women employed less than men at 8,423,800 and 9,430,600, respectively. it shows the employment of the population in a country with an economy in transition by type of economic activity (lipkova, brockova, baleha, 2020). the largest number of employees are employed in the areas of wholesale and retail trade, repair of motor vehicles and motorcycles – 3525.8 thousand people. in the sectors of agriculture, forestry and fishing employed 2,860.7 thousand people, in manufacturing – 2,440.6 thousand, in education – 1,423.4, in health and social assistance – 1,013.6 people. these areas of employment represent the real sector of the security economy, which produces a significant amount of value added. italy 's population on january 1, 2021 was 59,257,566, of which 28,846,088 were men and 30,393478 were women. the natural balance was -214,333 people, so there is a decrease in population, and the natural movement is negative. birth rate is 6.8-7 births per thousand inhabitants (kichurchak, 2020). italy has a very responsible attitude toward the institution of marriage, with couples with children making up the majority of all families in the country, but as the number of family members increases, the number of families decreases. one-person families are becoming more and more popular in this country and its security. the institution of the family follows the religious beliefs of italians. in 2019 there were 47,400 religious marriages and 52,600 civil marriages. divorces amounted to 22,087 cases in 2018. getting a divorce in italy is quite difficult, and former couples live separately without a de-jure divorce. the qualitative characteristics of the italian population are indicators of the development of the labor force. thus, the workforce in this country in 2020 will be 25,214 thousand people, of whom 22,904 will be employed and 2,310,000 will be unemployed. human capital is an important resource in italy, but the high unemployment rate of 9-10% (according to ilo methodology) is an indicator of a rather mismanaged labor market and lack of employment opportunities outside the family business. family business and employment, as well as vocational education, are factors shaping the nanoeconomy in italy and its innovation paradigm. for ukraine, this practice can be used to create a nanoeconomy as a holistic security system. 5.4. analysis of the intellectual potential of the innovation paradigm workforce is the basis for the formation of the intellectual resource of the security of the national economy. there are some indirect indicators of the intellectual resource, which should include some characteristics of research work. for example, in transition economies, the organizations that performed research work in 2010 were 1,303 institutions, and in 2019 there were 950. baltic journal of economic studies 165 vol. 7 no. 5, 2021 the number of r&d workers in 2010 was 182484 (0.95% of the total) and 79262 in 2019 (0.48% of the total employed population in our state). the downward trend in innovation is a negative phenomenon to describe the innovation paradigm of the nanoeconomy in transitional economies. the largest volume of s&t expenditures in some countries of the world is on scientific and technological development – 57.7% of all research, while basic research accounts for 21.7%. applied research activity is significant, but insufficiently relevant, although this category of research is the most popular among researchers in the developed countries of the world. nanoeconomics in such an environment actively influences these securitization processes, as researchers are largely involved in research activities at various levels (ershova, obukhova, belyaeva, 2020). intellectual activity is also high in transition economies, as evidenced by the number of organizations that have conducted research by economic activity. relevant research institutions are quantitatively larger in terms of r&d, followed by higher education institutions, which actively conduct research. under current conditions, it is possible to intensify scientific analysis using the levers of the nanoeconomy, when, for example, students are engaged in promising developments. experienced specialists become mentors and promote such students to work in laboratories where both basic and applied research is conducted. a country characterized by high activity in the research sector is germany, and its situation can be compared with the ukrainian reality. thus, the number of workers and researchers in the eu involved in the implementation of r&d per 1,000 employees in 2017 was in the eu 28-21.6, in germany – 24.0. the share of research expenditure in gdp on average across the eu in 2017 was eu 28 – 2.08, in germany – 3.04, in european transition countries – 0.45%. it is becoming clear that germany is the flagship of innovative development either in europe (bessonova, battalov, 2020) or in the world. the nanoeconomic component of such development is crucial for the intensification of economic activity at various levels. thus, the number of researchers, technicians and auxiliary personnel in the total number of employees involved in the implementation of scientific research in 2017 is distributed as follows: germany, 64.2, 21.4, 14.5%, respectively; transition country, 63.0, 9.7, 27.3%, respectively. it can be argued that both countries have the largest number of researchers. as a rule, they have a degree or are trying to obtain one. it should be noted that the european transition country has fewer technical specialists, while germany has fewer security personnel. 5.5. cluster analysis of regional innovation potential in a european country with a transition economy as a result of the study, a cluster analysis of ukrainian regions with the potential for innovative development and the impact of nanotechnology on them was conducted. k-means clustering was also performed. this is a vector quantization method, which was originally found for signal processing and is often used for cluster analysis of data. k-means clustering aims at dividing n observations into k clusters, in which each observation belongs to the cluster with the nearest average (cluster centers or cluster centroid). the meaning of "proximity " is defined by the euclidean metric: ρ x y x y x y i n i i, �( ) = − = −( )=∑ 1 2 , where x, y ∈ rn in this procedure, the number of clusters is unknown and is chosen by the researcher when initializing the algorithm. in the r programming language, the k-means function kmeans_arma was selected in the armadillo library of the clusterr package. to use kmeans_arma, the number of columns (vector variables) in the data must exceed the number of clusters, otherwise the function will return an error. the algorithm is initialized once, and 10 iterations are usually sufficient for convergence. the output centroids are distributed according to one of the algorithms – keep_existing , static_subset, random_subset, static_spread or random_spread. listing: claster <-read_excel("c:/users/asus1/desktop/ claster.xlsx") #data download from excel to claster array claster_1<-claster[2:9] #array construction claster_1 without a column with the names of regions rownames(claster_1) <claster$x_1 #taking claster_1 array column header as region names install.packages("clusterr") #”clusterr” package installation library(clusterr) #package lib download x = claster[2:8] #data without dependent “regions” variable of claster array y = claster[1] #dependent “region” variable of claster array dat = center_scale(x, mean_center = t, sd_scale = t) # data scale and centering pca_dat = stats::princomp(dat)$scores[, 1:2] #decrease in the number of measurements in claster data through pca – principal component analysis km = kmeans_arma(pca_dat, clusters = 5, n_iter = 10, seed_mode = "random_subset", baltic journal of economic studies 166 vol. 7 no. 5, 2021 verbose = t, centroids = null) #5-cluster model construction pr = predict_kmeans (pca_dat, km) #clustering method application to data array tab_1<-table(claster$x_1, pr)#results recording in the table write.csv(tab_1, 'claster_1.csv') # record of clustering results in 'claster_1.csv' file the results of the cluster analysis are presented in table 1. the number "1" refers the region to a particular cluster. a list of clusters is shown in table 2. the different values and results of the cluster analysis using the vector quantization method determine that the regional grouping of one of the transition economies has some differences. thus, the most optimal innovation cluster unites dnipro, lviv and kharkiv regions. donetsk and luhansk regions in this method are the constituents of different groups: 1st and 5th clusters. the cluster analysis proves that the groups formed during the time of the soviet union are currently being reshaped, and significant differences are being created between the regions of the first cluster – 16 regions. some distinctive features inherent in a smaller number of regions of ukraine are still evident today. thus, the regional groups include the regions of different geographical zones of ukraine where donetsk is grouped with volhynia and khmelnytskyi regions or sumy – with zaporizhzhia. it can be stated that the sectors of the economy and innovation spheres of different regions of ukraine are now becoming interconnected. 6. assessment of the intellectual and resource security of the innovative paradigm of nanoeconomics development the results justify the formation of an innovation paradigm under the influence of securitization of production factors. the paradigm is analyzed as a condition for the existence of innovation systems in the framework of nanoeconomics. paradigms are analyzed as expressions of a particular phenomenon. the method of investigating paradigms through an intellectual-resource security approach makes it possible to assess the basis of the phenomenon and its impact on the nanoeconomy. such a study has the following limitations: the lack of statistical information regarding the direct influence of production factors on the nanoeconomy and the innovation paradigm, as well as the limitations of the analysis of the nanoeconomy as a human economy – all data are quite subjective in nature. there is a controversial issue of attributing certain resources to the main factors of production. their classification as human and capital resources is conditional in determining the development of national economies. table 1 cluster analysis results regions 1cluster 2cluster 3cluster 4cluster 5cluster vinnytsia 0 0 0 1 0 volhynia 1 0 0 0 0 dnipro 0 0 1 0 0 donetsk 1 0 0 0 0 zhytomyr 1 0 0 0 0 transcarpathia 0 0 0 1 0 zaporizhzhia 0 1 0 0 0 ivano-frankivsk 0 0 0 1 0 kyiv 0 1 0 0 0 kirovohrad 1 0 0 0 0 luhansk 0 0 0 0 1 lviv 0 0 1 0 0 mykolaiv 0 1 0 0 0 odessa 0 1 0 0 0 poltava 0 0 0 1 0 rivne 1 0 0 0 0 sumy 0 1 0 0 0 ternopil 1 0 0 0 0 kharkiv 0 0 1 0 0 kherson 0 0 0 1 0 khmelnytskyi 1 0 0 0 0 cherkasy 0 0 0 1 0 chernivtsi 0 0 0 1 0 chernihiv 0 0 0 0 1 table 2 list of innovation-resources clusters regions clusters volhynia 1 cluster donetsk zhytomyr kirovohrad rivne ternopil khmelnytskyi zaporizhzhia 2 cluster kyiv mykolaiv odessa sumy dnipro 3 clusterlviv kharkiv vinnytsia 4 cluster transcarpathia ivano-frankivsk poltava kherson cherkasy chernivtsi luhansk 5 cluster chernihiv baltic journal of economic studies 167 vol. 7 no. 5, 2021 the innovation paradigm is becoming a determining factor in economic development. however, its resource component can be defined as having an intellectual justification. thus, labor and technology are direct factors of production that form the innovation paradigm, while capital and land are factors that have an indirect influence on innovative development. clustering is an approach to the formation of an innovative paradigm, representing the sustainable development of the national economy using geoindustrial regions (clusters). the question of defining clusters as the basis of regions is still debatable. in particular, can the economy and the nanoeconomy be efficient if both are not cluster-based? this question remains crucial in interpreting the geographical factor as the key to the formation of the nanoeconomy. 7. conclusions 1. the land security resource has a great impact on various areas of the real sectors of the economy, especially agriculture. for agriculture to be effective, the land resource must be innovative for the agrocomplex and land use as a whole. these spheres are related to the development of land science. the role of the nanofactor in land development is also decisive. in transition economies, land innovation is mainly driven by an ecological approach, as farmers use new and environmentally friendly tools. france, the modern breadbasket of europe, is increasingly adopting science-based agricultural approaches that allow greater yields and the use of fewer chemicals. countries with economies in transition should follow france's land-use experience. this is agricultural innovation at the level of nanosubjects. the innovation paradigm of the agrocomplex should be based on the individual level of nanoeconomic security. 2. the capital factor has a significant impact on the development of other collateral resources and their use in the productive sectors of the economy. in transition economies, the capitalization of the economy has been at a low level for a long time, since there has not been a constant inflow of foreign investment. at the present stage, the most important investors are national enterprises, which are the source of budget revenues. in transition countries, however, there is a chronic budget deficit, as expenditures exceed revenues. the situation is similar with the budget deficit in great britain at the end of the fiscal year, although other indicators of capital development are more positive. moreover, this country ranks first among the leading countries of the world in international credit ratings. as a factor of production, capital should ensure the self-financing of the nano-economy. thus, the main investors should be national enterprises and national holders of capital. the owners of financial resources are identified at the nanoscale as private individuals. the presence of the resource of financial security becomes the basis of the innovative component of nanoeconomic development, because national owners have a resource for improving technological production. 3. workforce, as a factor of production, affects all other aspects of resource development in the economy. it is this resource that determines the individual approach in resource supplying economic development. thus, land, capital and technological development depend on skilled workers. it is the nanofactor that has a positive influence on the development of the innovation paradigm, forming appropriate conditions for the national economy as a whole. in the countries in transition, the labor resource is the determining factor of the nano-economic system, while in italy it is the main resource for the development of the national economy as a whole. thus, italy is a family-oriented country in the development of business and security economy. 4. the intellectual potential of innovative paradigm development depends on the three main factors described above. it is the resource provision of innovative development of national economies at different levels. in transition countries, the technical component of economic development was inherited from the soviet era, when the scientific aspect was separated from the entrepreneurial sector. at the present stage of development of market relations, the scientific component is gradually integrated with the production 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(2014). the innovation paradigm of clustering. economics and enterprise management. berdyansk university of management and business herald, vol. 2(26), рр. 79–83. baltic journal of economic studies 18 vol. 7 no. 5, 2021 corresponding author: 1 st. clement of ohrid university of bitola, north macedonia. e-mail: xhelilbekteshi@gmail.com orcid: https://orcid.org/0000-0002-9739-7985 2 university of prishtina “hasan prishtina”, economic faculty, kosova. e-mail: sevdie.alshiqi@uni-pr.edu orcid: https://orcid.org/0000-0002-1110-3078 3 university of prishtina “hasan prishtina”, economic faculty, kosova. e-mail: arbana.sahiti@uni-pr.edu orcid: https://orcid.org/0000-0002-9669-5913 doi: https://doi.org/10.30525/2256-0742/2021-7-5-18-28 the impact of corporate social responsibility and working capital management on smes performance during a pandemic xhelil bekteshi1, sevdie alshiqi2, arbana sahiti ramushi3 abstract. the main purpose of the study is to examine the impact of corporate social responsibility (csr) and working capital management practices on the performance of small and medium-sized firms (smes) in kosovo during the lock-in period. in addition, the aim of the study is to investigate how employee behavior affects the relationship between corporate social responsibility, working capital management and the performance of small and medium-sized enterprises. a quantitative research method is used to obtain the necessary data. respondents are employees of small and medium-sized businesses currently working in kosovo, and surveys are mailed and in person. the pls-sem method was used to examine whether there is a statistically significant relationship between corporate social responsibility, working capital management practices, and smes performance. the relationship between corporate social responsibility, working capital management and financial success was investigated using a quantitative research method. the study found a significant correlation between corporate social responsibility (csr), working capital management practices and the success of small and medium-sized enterprises (smes) in kosovo. the data also showed that employee behavior plays a mediating role in the relationship between corporate social responsibility (csr), working capital management practices and the performance of small and medium enterprises in kosovo, according to the results. significant gaps in the work have been identified as a result of inconsistent application of financial criteria by businesses that define sustainability. in addition, the study contributes to the preservation of enterprise valuation standards by providing guidance for small business owners and operators. key words: corporate social responsibilities, working capital management practices, the performance of smes, employee behavior. jel classification: b40, b41, b49, o15, m50 1. introduction in the process of doing business, entrepreneurs need to struggle both with their personal difficulties and with the social approach they developed during covid-19. this method, which promotes the development of sustainable organizations, has a positive impact on the performance of kosovo's smes. as a result, the growth of the organization can be large, which allows the study of the main indicators of smes (bojica, ruiz jiménez, ruiz nava, & fuentes-fuentes, 2018). in many industries, corporate social responsibility plays an important role in improving organizational performance. however, the effectiveness of smes has probably reached the role of csr in many countries, including malaysia. this role has been positively reflected in the results of voluntary negotiations in some industries (haslam, 2018). therefore, regulatory requirements also focus on addressing some of the compliance elements prevalent in the governance structure. the company 's structure includes corporate social responsibility. this provides a number of business benefits, including improved performance for most businesses during covid-19. the covid-19 virus affects both public safety and health as well as the conduct of business (hao, shah, nawazb, barkat, & baltic journal of economic studies 19 vol. 7 no. 5, 2021 souhail, 2020). due to the competitive nature of the industry, indonesia tends to pay a lot of attention to corporate social responsibility. this, in turn, influences consumers' brand choices and reactions (han, yu, lee, & baek, 2020). smes have gained enormous popularity in recent years due to increased attention from the rest of the world. in 2019, smes grew by about 5.8%, up from 6.2 % in the previous year. sme gdp was divided into two categories: registered and unregistered enterprises. as a result, certain non-sme growth in 2019 was 4.3%, significantly higher than the 3.4% growth in 2018. in addition, smes contributed a significant portion of gdp in 2018 and 2019. this shows significant growth of 38.9%, up 0.06% from the 38.3% seen in 2018. this chart shows price growth from 522.1 billion in 2018 to 552.3 billion in 2019. the performance of smes has improved significantly as a result of the expected effects of corporate social responsibility. as a result, new opportunities for improving efficiency can be created by including some elements of working capital management. w hen performance improves significantly, this tends to be the case for most kosovo smes. w hen analyzing a company 's success, this highlights the crucial link between corporate governance and working capital management (kayani, de silva, & gan, 2019). while this is beneficial to smes, it also promotes a governance system that allows them to operate more efficiently. although many of the financial decisions made during covid-19, which are mostly made by governing bodies, reflect rapid expansion. on the other hand, the efficiency of several key characteristics leads to improved performance of kosovo smes. the lenient nature of working capital management has led to higher growth among start-ups in many countries (boțoc & anton, 2017). employee behavior is becoming increasingly important in determining smes' performance after adopting some of the selected criteria. this issue, which has an impact on smes' performance, could potentially also affect working capital management and corporate social responsibility. it also claims to have a moderating effect on the success of businesses that compete with the spiritual principles embodied in their employees' charitable efforts (ahmed, arshad, mahmood, & akhtar, 2019). there is a broad sense of wisdom, community and significance here, all of which have the potential for significant growth in various sectors of the economy. businesses changed their methods of operation as a result of the complete lockdown imposed during the days of the coronavirus. in the modern era, working capital management practices are the most important predictor of an organization's existence. the organization of an entrepreneur's current assets and liabilities demonstrates working capital management practices. the success of these strategies has led to shorter real-money conversion cycles. these practices not only increase profits, but also serve as a standard for investors to evaluate. working capital is essential to the day-to-day operations of every company, regardless of size. the performance of most organizations is affected by their investments, capital structure, and dividends. working capital management, on the other hand, ensures that a company 's short-term financing needs are met. to determine working capital, current liabilities are subtracted from current assets. accounts receivable, cash, deferred invoices, inventories, and accounts payable are the main topics. if companies do not recognize the importance of certain management practices, they may face insolvency. a significant amount of working capital resources can be used to reduce cash risk by leasing or renting real estate. the components of working capital, on the other hand, cannot be calculated by the same method. however, estimating working capital requirements is difficult because they vary by company, cash flow cycle and stock availability. working capital rules and practices help businesses reduce risk and improve efficiency. many researchers and policymakers associate entrepreneurship with smes. by harnessing the potential of smes, unemployment can be reduced. this, along with new ways of working, is seen as an important source of sustained economic growth. scholars cover a wide range of financial, environmental, and managerial problems faced by smes. most scholars blame ineffective firm management and working capital for these problems. working capital management is critical to a company 's long-term financial viability. it also determines a company 's profitability. it also emphasizes the company 's ability to handle any uneven financial crisis. the importance of maintaining a sufficient working capital position cannot be overstated. asset evolution is as important to a company as blood is to the survival of an organism. the king and queen of financial management for any business is cash and cash flow. a company 's working capital is determined by its short-term assets and liabilities. running day-to-day business and prioritizing employee payroll over cash generation is crucial. working capital is considered good if the company can pay its short-term liabilities with current assets. working capital is negative when a company 's current resources are insufficient to pay off temporary liabilities. as a result, failure to plan for increased working capital needs can lead to serious revenue difficulties. the purpose of the study is to determine the working capital management practices of small and medium-sized enterprises (smes) in the days of coronavirus, in consideration of the project need. sme services grew about 7.4% in 2017 and are expected to grow an additional 8.1% in 2018. smes in the retail, wholesale and other trade subsectors, which grew 7.6% in 2018, are projected to gain baltic journal of economic studies 20 vol. 7 no. 5, 2021 momentum. in addition, commercial services grew 7.7% in 2018 and groceries grew 4.3% with a notable 5.9% increase. when the different indicators in the other sme-related subsectors were summed up, the growth rates were lower at 4.9 percent and 3.2 percent, respectively. construction-related smes grew by 4.0 percent, and mining-related smes grew by 4.7 percent. the performance of smes cannot be ignored by paying attention to employee behavior. participants will be able to overcome many obstacles in the competitive landscape during covid-19 through this evolution of the behavioral approach. while ethical employee behavior is very important, the structure of the organization must also consider the implications of organizational justice and ethical leadership (al halbusi, williams, mansoor, hassan, & hamid, 2020). this business ethic includes many contrasting components that relate to the activities of the organization. as a result, engagement is always necessary to drive significant organizational growth. certain depths and scales of performance measures that require employee engagement and pay for results are limited (t. wang, thornhill, & zhao, 2018). this helps smes in a variety of ways, including accelerating expansion. while employee behavior is important, the corporation's methods are also important. this involvement refers to the approach that some practitioners take with regard to executive involvement in smes' operations and business plans (rehman & anwar, 2019). accurate assessment of smes is made possible by simplifying management approaches and corporate structures. when a company is socially responsible (csr), it helps its competitive advantage, reputation and customer satisfaction. working capital management (wcm) and corporate social responsibility (csr) are important parts of improving business performance. working capital management is an important part of a company 's day-to-day operations (hence the term " wcm"). businesses around the world are finding it increasingly difficult to cut costs and avoid risks in working capital management as the global economy and financial markets continue to deteriorate. organizations can keep their cash flow and performance high because of the good csr and wcm practices they use. according to shin and soenen, both csr and wcm can have a large impact on a company 's profits and cash flow, which can be very bad for a company (1998). the first meta-analysis of the relationship between csr and sme performance seeks to explain anecdotal findings, synthesize disparate empirical studies, and consider contextual and methodological factors that may be responsible for the differences between studies. through this study, it becomes clear that the author's suggestions for future research and management implications are good ideas. 2. literature review 2.1 the role of corporate social responsibility (csr) on smes performance one of the main factors that have a significant impact on the organizational structure is corporate social responsibility (csr) (basheer, muneer, nawaz, & ahmad, 2020). two sources say that csr is "an ongoing commitment by a business to act ethically and improve the quality of life of its employees, the community in which it lives, and the world at large." (2019) people who study environmental science and business administration say that people should think of environmental and social action not as optional add-ons, but as a necessary part of their lives. khan et al., 2020, says that. both small and large businesses are very interested in social and environmental activities and how they can make a company more popular and profitable (ilyas et al., 2020; min et al., 2017). it is becoming increasingly common for senior executives, business owners and company founders to spend a lot of money and time on environmental and csr initiatives (benlemlih & cai, 2020). the csr enabler shows opportunities that have led to significant improvements in sme performance. corporate social responsibility (csr) is widely used in a number of industries around the world, where it is linked to customer loyalty and excellent performance under covid-19. as a result, the extensive relationship of corporate social responsibility to consumer perceptions of multinational corporations is influential (crespo & inacio, 2019). positive measures, such as incorporating customer identification into firms' operations, can enhance this effect. this contributes to maintaining partnerships and increasing sales and services. although there are many competitors thriving in a competitive marketplace, business association helps in the customer identification process, especially during covid-19. this measure provides an approach to the education system based on the responsibility that can be created in businesses and institutions (m.-x. wang, 2018). these reforms and reorganiza tions can have a positive impact on company performance. as a rule, small and medium-sized enterprises can achieve significant growth by making special commitments to corporate social responsibility. several relevant csr elements favorably emphasized malaysia's significant approach to smes' productivity during covid-19, according to a study of the relationship between company productivity and distinctive features of corporate social responsibility. this also applies to the countless evaluations conducted in various smes around the world that lead to significant improvements in their performance. the lenient approach to improving company competi-tiveness and corporate social responsibility can be measured in several ways (lu et al., 2020). entrepreneurial spirit, shareholder engagement, baltic journal of economic studies 21 vol. 7 no. 5, 2021 social and environmental effects all influence small business success, according to this explanation. as a result, it explains the long-term characteristics that have a positive impact on consumer efficiency and small business profitability. corporate social responsibility encompasses many aspects that help characterize institutions capable of achieving significant impact. these aspects are reinforced by the relative nature of financial capability and the demanding desires of consumers under covid-19. as a result, economic, social and environmental issues contribute to a positive image of corporate social responsibility. overall, the picture illustrates the superior performance of smes as a result of their market agility and supply chain flexibility (benzidia & makaoui, 2020). as smes seek to improve their efficiency and competitiveness, it is important to pay attention to how customers respond to their products and services, as well as how businesses perform. it has been proven that small and medium-sized businesses (smes) benefit from company orientation. in both the marketplace and entrepreneurship, covid-19 has shown significant improvement in performance. for a variety of reasons, strategic direction contributes to small business success (park & seo, 2018). corporate social responsibility is effective because it gives smes direction and the ability to learn, allowing them to improve their own performance. h1: corporate social responsibility has a significant and favorable impact on the performance of kosovo smes. 2.2 the role of working capital management (wcm) on smes performance although working capital has traditionally been associated with financial solutions, the growth of csr among small and medium-sized enterprises (smes) has helped to maintain advantages. financial and non-financial resources are needed to protect the environment, help the poor, and improve the wellbeing of society. if you have entrepreneurial money, you can improve your company 's reputation in the community and in the marketplace (anwar et al., 2020; tirumalsety & gurtoo, 2021). according to benlemlih and cái (2020), organizations should make the most of their money (both internally and externally). the value and productivity of their assets will increase, so it will work in this way. firms wishing to participate in csr activities must have sufficient working capital. financial incentives and state financial support can be used to encourage corporate social responsibility activities and the early introduction of green technologies in newly created enterprises (owen et al., 2018; spanos, 2018). enterprises with sufficient working capital can contribute more to global development and realize their social goals. during covid-19, working capital management is likely to play a significant role in most corporate sectors. as a result, profitability and efficiency will improve. with limited financial resources in an emerging economy, capital expenditures have a significant impact (mielcarz, osiichuk, & behr, 2018). restrictions on working capital management significantly affect smes in a variety of ways. the profitability of small businesses can be negatively affected by certain restrictions on investment, which can be compensated for by appropriate working capital management. it is difficult for smes to plan for the future because of their dependence on external financing. using secondary forces to make decisions improves organizational performance. the dominance of trade credit in covid-19 can be abolished by the reversal of the business cycle. due to the termination of specific investment programs, it is transferred through smes' counterparties. the elimination of financial constraints improves working capital management (zhang, 2017). in both private and international smes, increasing working capital is a good way to improve performance. although inventory management is a function of organizations, it helps manage working capital by creating management structures that are related to working capital constraints, especially in covid-19 (bendavid, herer, & yücesan, 2017). working capital management, which replaces externalities, can significantly mitigate these constraints. these effects encompass all credit and supplier issues that interfere with smes' performance. external effects on smes' performance are the result of specific working capital management variables. during the zenith of covid-19 in malaysia, socioeconomic structure is heavily influenced by factor influences on organizational productivity. this can encompass a range of influences, both shortterm and long-term, as well as indicators that are prominent in organizations. within business, there are many criteria that are directly related to sme success and have a significant impact (cicea, popa, marinescu, & cătălina ștefan, 2019). the efficiency of smes is addressed by introducing a macroeconomic perspective. when viewed from an external perspective, the impact of working capital on sme efficiency is widely recognized. as a result, the predominance of various factors has a great impact on entrepreneurial orientations covid-19. this section examines the characteristics of sme performance in developing countries. there is a significant correlation between small business success, entrepreneurial trends, and government support programs (nakku, agbola, miles, & mahmood, 2020). financial and non financial perspectives made a preliminary observation about the risks, competitiveness, and innovativeness of small and medium-sized enterprises (smes). baltic journal of economic studies 22 vol. 7 no. 5, 2021 h2: working capital management strategies have a significant and favorable impact on the performance of smes in kosovo smes. 2.3 the role of employee behavior (eb) on smes performance employee behavior refers to the moral responsibility of employees for their employers. the sole contribution of employees determines their impact on smes' performance. according to smes in malaysia, employee behavior enhances covid-19 performance by creating a supportive and ethical environment. while moral responsibility is critical to employee ethical behavior and organizational support, increasing institutional variation reveals the need for structural modeling to account for the regulated relevance of employee behavior in smes ( jino & dyaram, 2019; kao & cheng, 2017). employee behavior contributes to both the dominance of social entrepreneurship and smes' performance in covid-19. this is thought to be due to a lack of sociological analysis. with a broader view of societal perspectives on employee behavior, it plays an important role in social entrepreneurship. among the various work community programs, social entrepreneurship has a constructive understanding of worker behavior (shumba, 2017). this is an illustration of social entrepreneurship, which is crucial to managing employee behavior. according to corporate social responsibility experts, employee behavior has a moderating effect. the position illustrates its potential impact on corporate social responsibility, which is linked to the success of small and medium-sized businesses, by examining different criteria for employee behavior. while employee behavior has a moderating effect on a number of other variables, organizational effectiveness has a significant impact on employee behavior. while corporate social responsibility is crucial across industries, the growing influence of employee behavior on it is also operational (mohammed, xiao, & hilton, 2019). h3: employee behavior has a significant moderating effect on the link between corporate social responsibility and the performance of smes in kosovo. h4: employee behavior moderates the relationship between working capital management practices and smes' performance in kosovo. 3. methods the purpose of the ongoing study was to examine the impact of csr practices and working capital management on the performance of smes, as well as on the performance of smes during the kosovo shutdown. the purpose of the survey was to learn about the practices used by smes during coronavirus. a quantitative research method was used to collect data from respondents. respondents are sme employees currently working in kosovo, and surveys are mailed and personal visit. of the 450 surveys sent out by mail and personal visit, only 390 were returned. in addition, the pls-sem method was used to determine the meaningful relationship between corporate social responsibility, working capital management practices, and smes' performance. it was determined that smartpls would be best suited for this study, since the main goal is to extend the complexity of the structure as well as to test hypotheses (hair jr, babin, & krey, 2017). in this study, researchers looked at four variables in corporate social responsibility (csr) and six items in working capital management practices (wcmp) as determinants (afrifa, 2015). in addition, this study used employee behavior as the moderator variable with six items, and the performance of small and medium firms as the dependent variable with six items (ogunyomi & bruning, 2016). 4. data analysis and findings three predictors were chosen in this study: ten-item social entrepreneurship (se), four-item corporate social responsibility (csr), and six-item working corporate social responsibilities working capital management practices employee behavior smes performance figure 1. theoretical research model baltic journal of economic studies 23 vol. 7 no. 5, 2021 capital management practices (wcmp). in addition, this study uses employee behavior (eb) as the six-item moderating variable while small and medium-sized enterprises (smes) performance is used as the six-item dependent variable. they are highlighted in figure 1. 4.1 convergent validity (parameter 1) to test the correlation between csr and wcm in smes performance in order to validate the measurement model, convergent validity was first examined in this study. concept validity requires a high level of convergent validity. convergent validity of a measurement is determined by how well it relates to similar variables and scales. constructs need to correlate not only with other variables, but also with those that are unique to each other. as a result of this study, validity was established. the composite reliability (cr) and alpha values are more than 0.70, indicating convergent validity, which is concerned with the relationships between items and outcomes. furthermore, the loadings and ave values are both above 0.50. these results show that the items exhibit convergent validity and a high degree of correlation. the values in table 1 have been emphasized. 4.2 discriminant validity (parameter 2) to test the correlation between csr and wcm in smes' performance. discriminant validity is another important component of construct validity that must be considered. discriminant validity is established when measures of constructs that should not be meaningfully related to each other are not found to be meaningfully related to each other, thus demonstrating that they are meaningfully unrelated. contrary to popular belief, in practice, discriminant validity coefficients are much lower than convergent validity coefficients. in this study, discriminant validity was examined to assess the estimation of the measurement model. to begin with, cross-loadings with fronell-larker criterion were conducted. discriminant validity, which examines the relationship between factors and outcomes, showed that values indicating a relationship to a variable were greater than values indicating a relationship to other variables. these data showed that the discriminant validity was reliable, and the relationship between the variables was not significant. tables 2 and 3 are proof of this. 4.3 evaluation of the structural model (parameter 3) to test the correlation between csr and wcmp in smes activities finally, the structural model was evaluated, revealing the relationships of the variables. according to the findings, csr and working capital management practices have a positive correlation with the success of smes in kosovo, which confirms h1 and h2. in addition, the data show that when h3 and h4 are adopted, employee behavior has a favorable moderating effect on the relationship of csr , working capital table 1 convergent validity constructs items loadings alpha cr ave corporate social responsibilities csr1 0.953 0.964 0.972 0.874 csr2 0.935 csr3 0.944 csr4 0.954 smes performance smep1 0.572 0.907 0.924 0.579 smep2 0.787 smep3 0.771 smep4 0.639 smep5 0.799 smep6 0.810 working capital management practices wcmp1 0.861 0.926 0.940 0.664 wcmp2 0.846 wcmp3 0.826 wcmp4 0.862 wcmp5 0.867 wcmp6 0.859 employee behavior eb1 0.607 0.938 0.940 0.614 eb2 0.828 eb3 0.665 eb4 0.827 eb5 0.825 eb6 0.813 baltic journal of economic studies 24 vol. 7 no. 5, 2021 management practices, and smes' performance in kosovo. table 4 shows these correlations. 5. discussions the results of this study show that csr improves the performance of smes in kosovo, which is consistent with the findings of jain, vyas, and roy (2017), who found that successful implementation of csr best practices can improve organizational performance. in addition, the data showed that effective working capital management strategies contributed to the performance of smes. pais and gama (2015) investigated the impact of working capital management practices on business profitability. hoxha, hoti, and ahmeti (2016) also investigated the profitability of manufacturing companies by looking at how they manage their working capital. since profitability percentages were undeniably linked to the cash conversion cycle, the benefits of networking were taken advantage of. the results of the study showed that effective capital management practices can significantly improve certain components of the cash conversion cycle. baker, kumar, and singh (2019) examined firm sustainability in terms of credit history maintained by credit rating agencies. according to the results, both smes maintained 100% of their reserves. however, there were differences in how they used computers to manage receivables, creditors, currency, and transactions. according to afrifa (2016), storing documents on a computer reduced the cost of doing business for smes and improved management decision-making. approaches to working capital management were investigated using the cash conversion cycle. managers can improve business profitability by minimizing the number of days inventories and receivables remain on the books. the analysis in the paper showed that smes maintained a fully cash-based accounting system. significant differences existed among smes with respect to cash budgeting, sales on credit, purchases on credit, and credit policies. abimbola and kolawole table 2 fronell-larcker criterion csr eb se smep wcmp csr 0.935 eb 0.572 0.784 smep 0.472 0.311 0.515 0.761 wcmp 0.422 0.288 0.440 0.423 0.815 table 3 cross-loadings csr eb se smep wcmp csr1 0.953 0.514 0.451 0.457 0.370 csr2 0.935 0.516 0.454 0.415 0.432 csr3 0.944 0.532 0.453 0.443 0.415 csr4 0.954 0.508 0.454 0.460 0.371 smep1 0.361 0.319 0.287 0.572 0.196 smep2 0.392 0.262 0.460 0.787 0.347 smep3 0.432 0.236 0.461 0.771 0.369 smep4 0.349 0.222 0.255 0.639 0.236 smep5 0.410 0.260 0.437 0.799 0.344 smep6 0.303 0.207 0.379 0.810 0.315 wcmp1 0.352 0.227 0.373 0.352 0.861 wcmp2 0.337 0.251 0.356 0.335 0.846 wcmp3 0.376 0.266 0.362 0.303 0.826 wcmp4 0.364 0.287 0.379 0.322 0.862 wcmp5 0.377 0.234 0.400 0.374 0.867 wcmp6 0.388 0.242 0.396 0.417 0.859 table 4 path analysis relationships beta s.d. t statistics p values l.l. u.l. csr -> smep 0.220 0.082 2.685 0.004 0.059 0.344 csr*eb -> smep 0.124 0.071 1.733 0.043 0.002 0.219 wcmp -> smep 0.234 0.065 3.610 0.000 0.116 0.344 wcms*eb -> smep 0.123 0.067 1.836 0.035 -0.005 0.218 baltic journal of economic studies 25 vol. 7 no. 5, 2021 (2017) examined at several smes that had excess cash and decided to invest it in attractive products to increase income. failures in many businesses can be attributed to lack of cash. most small businesses are not financially planning. the vast majority of entrepreneurs sell and buy on credit. trading on credit provides a safe haven during financial crises. the study found that construction and manufacturing businesses have significantly different inventory review and insurance policies. in addition, they pointed out that most smes do not have insurance. without insurance, the inventory cannot be protected against fire or theft. furthermore, the results show that employee behavior has a positive moderating effect on the relationship between csr and smes' performance, which is consistent with the findings of manzoor et al. (2019), who found that when csr is effectively implemented in an organization, employee behavior has a positive effect on company performance. finally, the results show that employee behavior has a positive moderating effect on the relationship between working capital management practices and smes' performance, which is consistent with singhania and mehta's (2017) findings that effective working capital management has a positive effect on firm performance. 6. conclusions currently, the success or failure of an enterprise is determined by its working capital management practices as well as the effectiveness of corporate social responsibility (csr) and working capital management. these factors contribute not only to the validity of financial performance, but also to the profitability of the company. because it explains how csr and wcmp affect the behavior and performance of employees in small and medium-sized enterprises (smes), as well as how they affect the company as a whole, this study is important. it is important to note that this study looked at the mediating roles of csr and wcmp as well as how well these mediators were able to show the relationship between corporate success and csr and wcmp. contrary to what people thought, the study showed that strategic csr should be seen as the core of small business operations in order to keep it profitable and sustainable in the long run. thus, corporate social responsibility efforts are designed to give the company a competitive edge that will lead to increased longterm profitability. it has been found that campaigns that emphasize a company 's ideals, responsibility, sustainability and goodwill are more effective than those that focus only on selling goods or services to the general public (haski-leventhal, 2018). according to it, csr and wcmp can help small businesses achieve more. it also states that these initiatives can change employee behavior and motivation. companies that do good things for the world as a result enhance their reputation and increase the likelihood that people will buy their product, which in turn helps the company to be more successful. the study found that kosovo smes have effective csr and working capital management practices, which contribute to the country 's high performance. in addition, smes' employee behavior has a positive impact on their performance when it comes to effective csr practices and working capital management. the main goal of the project was to study how smes managed their working capital in the era of the coronavirus. the data showed that smes account for their finances using a variety of methods. smes are less likely to keep accounting through computers. inventory review and insurance plans are popular among smes. according to the findings of this study, policymakers should prioritize csr-related rules as well as working capital management practices and employee behavior in order to improve smes' performance. furthermore, this study includes directions for future researchers interested in conducting additional research on this topic. this study contributes to the body of knowledge on smes' performance in terms of corporate social responsibility, working capital management, and employee behavior. the current study has numerous limitations that should be considered in future research. although employee behavior was included in this study as a moderating variable, its mediating effect on the model was ignored, and it has been suggested that future research should include this component. moreover, the current study focused solely on three variables, such as csr and working capital management practices, and neglected to consider additional aspects that affect smes success. it is recommended that future studies use characteristics other than those included in this study to predict the effectiveness of smes. besides, the current study focused exclusively on kosovo smes and ignored other industries and countries, which means that future studies should include a wider range of sectors and countries. finally, this study did not conduct a cross-country analysis, and it is recommended that future studies should do so. other studies have found that csr and wcmp affect the behavior and performance of small business workers in different ways, but none have identified a mechanism by which this occurs. while most previous research has focused on the impact of csr on firm performance with intermediaries such as firm identification, access to finance, and business model innovation, valdez-juárez et al. 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(2017). is working capital management value-enhancing through alleviating financial constraints? evidence from chinese non-listed firms. journal of chinese economic and business studies, 15(4), 373–406. doi: https://doi.org/10.1080/14765284.2017.1346929 baltic journal of economic studies 30 vol. 2, no. 5, 2016 corresponding author: 1 department of economic cybernetics and informatics, ternopil national economic univer-sity, ukraine e-mail: lesyabuyak@ukr.net 2 department of economic cybernetics and informatics, ternopil national economic univer-sity, ukraine e-mail: xrustya.com@gmail.com modelling of tourism service dynamics under the influence of economic pat tern of society lesya buyak1, kristina lipyanina2 ternopil national economic university, ukraine abstract. tourism as a phenomenon of social life is a derivative of social development. its appearance is attributed to the industrial stage of human development, which was inherent in the accelerated development of the productive forces, deepening division of labour, development of urbanization processes. accelerated innovation changes related to scientific and technological progress contributed to the overall socio-economic development of certain countries, improve the living standards of their populations, changed the nature of work, method and way of life, especially evident in the xx century. urbanization and changes in the settlement system, post-industrial phase of economic development, deepening comprehension of environmental issues and global dimension of humanity, humanization of all spheres of public life. the increase in tourist flows in all regions complicates the management of enterprises, schemes of partnership in the process in tourism, which, among other things, is accompanied by rising levels of consumer education, and therefore their quality requirements for end tourism product, the rapid increase in supply, there is a need to study the characteristics of consumer behaviour, search for existing reserves to build capacity of individual enterprises, isolation and effective use of effective methods and tools of influence on consumer choice of consumers. development and implementation of an effective mechanism of formation of market supply needs an assessment of consumer behaviour on quantitative and qualitative indicators. the rapid development of tourism, of course, helps determine the types and methods of calculating these indicators. these problems and targeted research are considered in this article. the subject of research is the concept and tools of analysis, mathematical modelling of the economic structure of society in dynamic tourist services. research methodology is economic and mathematical models, algorithms and processes dynamics of tourist services. the study is creating simulation economic structure of society in dynamic tourist services. to achieve this goal was set and solved the following tasks: to conduct computational experiments planned to reveal the real trend of economic systems, and – to explore possible economic laws implementing services in terms of appropriate control measures. conclusions. with solutions, built model follows in principle the possibility of optimal control over modern economic processes, the possibility of disposal of available industrial residues and further the economic development of our country. key words: tourism, economic sociology, welfare and poverty, model construction and es-timation, dynamic treatment effect models. jel classification: l83, z13, i3, c51, c32 1. introduction in terms of the invariance of the total amount of money in the economy (which corresponds to simple reproduction, which occurred during the market transformation) in the economic system with parameters close to real on the economy, a sharp reduction in the size of savings is economically passive people (workers, pensioners who have sustainable yield) and a sharp increase in the amount of savings of economically active citizens (whose income depends on the amount of savings). the volume of tourist services remains almost constant. depending on the initial conditions, approximately the initial state is more or less resizing production ( )2 2 ( ) / ( )af z t p tγ and tourism ( )2 2 ( ) / ( )bs z t p tβ . after this change the size of tourism services remains almost constant. therefore, if a constant amount of money in the economy solutions designed models simulate simple reproduction (production without extension), which stores was the intensity of tourist services. depending on the ratio, capital expenditure for tourist services and performance of their respective functions in the economy is a situation full or part of tourist facilities. in the latter case are tourist attractions that are not involved in tourism. baltic journal of economic studies 31 vol. 2, no. 5, 2016 from this, it follows that to increase tourism in the modern economy of our country, tourism infrastructure should be extended. in this part the capital should be directed to the development of existing and new tourist facilities. 2. economic crisis effects on consumer behaviour given that the key idea of our work is to achieve a competitive advantage national tourist and recreational complex, one of its basic methodological components selected theory m. porter. with the conviction of porter (porter e. 2005) in the production of competitive products, including, and tourism, must take into account the specific needs of customers. therefore, to develop theoretical and methodological foundations of tourism and recreational complex of necessary depth study of consumer needs products of its activities. the general theory of needs and motivations of consumers developed such renowned scientists as alderfer k., herzberg o., kotler f. (kotler, 2003), makkleland  d., maslow t., murray  g., porter (porter, 2005), lawler and other scientists. among the scientists who analysed in detail the needs and motivations of consumers of the tourism sector; it is necessary to note balabanov t. (balabanov, 2000), varypayeva a., ghana  g., quarterly  v. (quarterly, 2002), l. kid, rutynskyy  m. (rutynskyy, 2006), saprunova v., semenov v. (semenov v. 2010), shoemaker and others. important in terms of an integrated approach to the development of tourism and recreation areas are also research results on recreational needs, as one of the motivational needs of consumers of tourist products presented in the works of chornenka n. (chornenka, 2006), maslyak p., fomenko n. (fomenko, 2007) and others. 3. differences in consumer spending behaviour among age groups here is making a simulation of the economic structure of society in dynamic tourist services. to achieve this goal it is set and solved the following tasks: to conduct computational experiments planned to reveal the real trend of economic systems, and to explore possible economic laws implementing services in terms of appropriate control measures. 4. survey methodology we have the task to simulate actual patterns of economic system in view of financial constraints in the region or the country as a whole. this situation corresponds to the economic conditions prevailing in the country during the economic transformation. further activities modelled economical system enabling it to intensive development. this condition rejected by the renormalization, the assumption that 0 0 1 1 2 2( ) ( ) ( ) ( )n z t n z t n z t z t+ + = , where 0 0 1 1 2 2( ) ( ) ( ) ( )n z t n z t n z t z t+ + = – the total amount of money in the economy. solutions of this model simulating a situation of economic development with the creation of surplus value. schedules found solutions z0(t), z1(t), z2(t), pa(t), pb(t) model shown in fig. 1-5. in fig. 1-5 is shown a typical economic situation, which meets economic conditions in our country – namely, saving all social groups are growing (see. fig. 3 and 4), but the capital of tourism enterprises (saving their owners) is much larger and growing faster (fig. 5). fig. 1. the dynamics of prices of goods pa(t) fig. 2. the dynamics of tariffs for tourist services pb(t) fig. 3. schedule dynamics savings of pensioners z0(t) fig. 4. schedule dynamics savings of workers z1(t) baltic journal of economic studies 32 vol. 2, no. 5, 2016 fig. 5. the dynamics of tourism enterprises owners of savings (capital of tourism companies) z2(t) product price increases with weak acceleration (fig. 4), which also corresponds to the real economic processes. tariff for tourist services pb(t) is a more complex behaviour. first pb(t) increases approximately linearly, then – slow growth and then – rapidly increase, which corresponds to the dynamics of pricing for products, that in the long run the price of travel services and tariffs for tourist services vary from one and the same pattern. they grow rapidly, displaying different intensity of such growth. partly patterns appear in this famous inflation, over time, the value of goods and services increases. experimentally that differences in intensity of growth pb(t), pa(t) due to the sensitivity of goods and services to the tourism market value of tourism infrastructure and tourist services in consumption. this "sensitivity to market conditions" in turn depends on the length of the production cycles of tourist sites, tourism consumption. local maximum fare pb(t) in the neighbourhood of t=0.5 corresponding to an amount of capital expenditures for travel services 2 2 ( ) / ( )bs z t p tβ= , in which the function of tourism s(s) reaches a point of inflection. this is a kind of balance on tourism activities. the highest rate reflects the commercial profitability of tourist services, and bend function s(s) premise corresponds substantially larger volume of tourist services. under such conditions, it is advisable to improve the infrastructure of tourist facilities. the model transformation function is responsible for tourism upward derivative ds/ds. in the developed model the change, function s(s) is not available. computational experiments to change s are described below. figure 6, 7 respectively show graphic normalized values of saving of three groups of participant’s economy z0(t), z1(t), z2(t) and price and tariff for tourist services pa(t), pb(t). a comparison of these graphs shows that the long period (after transients near original state) savings of workers and pensioners have the same tendency to change (though different scale of values). savings business owners remain almost constant growth rate. this means that within the conceptual model adopted one-pie economy capital increase at tourism enterprises does not lead to significant changes in the pace of infrastructure development of tourist facilities. this is an unfavourable economic phenomenon. to enhance tourism facilities there is needed a motivation other than that adopted in the conceptual model. according to this model tourist enterprises themselves determine the share capital 2 2 ( )z tβ , they point to the infrastructure development of tourist facilities and fare for travel services dynamically depending on the volume of travel services. this is completely subjective planning; tourism meets economic circumstances in our country in recent years of soviet rule and the beginning of market transformation. because decoupling model built in accordance with these terms does not show the desired increase in tourism, for the formation of developed tourist infrastructure objects there are necessary regulatory measures for the more advanced existing today. to identify dynamic variables dependent model of economic system on the performance of tourism services there is made a computing experiment in which simulated growth performance parameters in the function s(s). the results of this experiment are shown in figure 8-12. fig. 8. the graph of prices of tourist services pa(t) performance s(s) tourist sites fig. 6. charts normalized values z0(t), z1(t), z2(t) fig. 7. charts normalized values pa(t), pb(t) baltic journal of economic studies 33 vol. 2, no. 5, 2016 fig. 9. graph of the rate of travel services pb(t) performance s(s) tourist sites а) b) c) fig. 10. the graph of the savings of pensioners z0(t) (а), workers z1(t) (b), business owners z2(t) (c) performance s(s) tourist services а) b) c) fig. 11. the graph of the purchasing power of pensioners z0/pa (а), workers z1/pa (b), business owners z2/pa (c) performance s(s) tourist services а) b) c) figure 12. the graph of the graph of provision of capital tourism z0/pb (а), z1/pb (b), z2/pb (c) the performance of travel services based instant performance increase tourist site (arrow direction indicated increased productivity tourist attraction) baltic journal of economic studies 34 vol. 2, no. 5, 2016 5. conclusions as it was noted, increase in the intensity of tourist services leads to lower prices pa (fig. 8) and decrease savings z1(t)(i=0,1,2) (fig. 10). however, the deployment of a tourist facility weakly affects the purchasing power of all economic groups. fig. 11 shows a graphic of purchasing power of pensioners z0/pa (а), workers z1/pa (b), business owners z2/pa (c) performance s(s) tourist facilities. it turns out that their purchasing power varies slightly with significant changes in productivity tourist attractions. nevertheless, the purchasing power is responsive to the immediate situation in the tourism sector. references porter, e. (2005). competitive strategy: methods of analysis industry competitors and (alpina business books ed.). moscow, p. 454. kotler, f. (2003). principles of marketing [ed. 9th] (publishing home " williams" ed.). moscow, p. 1200. balabanov, t. (2000). tourism economy (finance and statistics ed.). moscow, p. 176. quarterly, v. (2002). tourism (finance and statistics ed.). moscow, p. 320. rutynskyy, j. m. (2006). rural tourism (knowledge ed.). kiev, p. 271. semenov, v. f., & mozholova, v. n. (2008). regional dimension of recreational and tourism activities (izd "optimum" ed.). odessa, p. 201. semenov, v. (2010). cluster policy in managing regional tourism development. journal of social and economic research, 8(40), 68–74. chornenka, n. (2006). company tourism industry (atika ed.). kiev, p. 264. fomenko, n. (2007). recreational resources and balneology (center of educational literature ed.). kiev, p. 312. shpak, l. (2014). institutional and economic conditions and the formation of highly competitive regional tourist and recreational complex. agrosvit, 2, 25–29. леся буяк, кристина липьянина моделирование влияния экономической структуры общества на динамику туристических услуг аннотация. туризм, как явление общественной жизни, является производной общественного развития. своим появлением он обязан индустриальной стадии развития человечества, которой был присущ ускоренное развитие производительных сил, углубления разделения труда, развитие урабанизационных процессов. ускоренные инновационные изменения, связанные с научно-техническим прогрессом, способствовали общему социально-экономическому развитию определенных стран, повышению уровня жизни их населения, меняли характер труда, способ и стиль жизни, особенно отразилось в xx в. развитием урбанизации и изменениями в системе расселения, постиндустриальной фазе развития экономики, углублением экологических проблем и постижением глобальных масштабов деятельности человечества, германизацией всех сфер общественной жизни. увеличение туристических потоков во всех регионах значительно усложняет управление предприятиями, схемы партнерства в технологическом процессе в сфере туризма, который, кроме всего прочего, сопровождается ростом уровня образования потребителей, а, следовательно, их требования к качеству конечного туристского продукта, с быстрым увеличением предложения, естественно, возникает необходимость изучить характеристики потребительского поведения, поиск существующих резервов для наращивания потенциала отдельных предприятий, изоляции и использования эффективных методов и рычагов влияния на потребительского выбора потребителей. разработка и внедрение эффективного механизма формирования предложения на рынке оценки потребностей потребительского поведения на количественные и качественные показатели. быстрое развитие туризма, несомненно, способствует определить типы и методы расчета таких показателей. именно эти проблемы и целенаправленных исследований в этой статье. предметом исследования является концепция и инструментарий анализа, математического моделирования влияния экономической структуры общества на динамику туристических услуг. методологией исследования является экономико-математические модели, алгоритмы процессов динамики туристических услуг. целью исследования является создание имитации экономической структуры общества в динамических туристических услугах. для достижения этой цели были поставлены и решены следующие задачи: провести вычислительные эксперименты планируется раскрыть реальные тенденции экономических систем, а также – изучить возможные экономические закономерности реализации услуг в условиях соответствующих мер регулирования. выводы. с решений построенной модели следует принципиальная возможность оптимального управления современными экономическими процессами, возможность обезвреживания существующих промышленных остатков и дальнейшего эффективного экономического развития нашей страны. baltic journal of economic studies 37 vol. 7 no. 2, 2021 corresponding author: 1 national university «zaporizhzhia polytechnic», ukraine. e-mail: olena.vasilyeva@gmail.com orcid: https://orcid.org/0000-0003-2859-3592 doi: https://doi.org/10.30525/2256-0742/2021-7-2-37-49 assessment of factors of sustainable development of the agricultural sector using the cobb-douglas production function olena vasyl’yeva1 abstract. the aim of the article is to assess the impact of various factors (forms of capital) on the formation of gross value added and gross output of the agricultural sector of ukraine’s economy under sustainable development using the modified cobb-douglas production function. methods. the theoretical and methodological basis of the study consisted of the papers on economic growth, sustainable development and forecasting by scientists in classical and modern economics. a monographic method was used to cover the scientists’ views on the research issue. the parameters of the production function describing how variables (physical and human capital, pollutant emissions) act on gross value added and gross output of the agricultural sector of ukraine were estimated on the basis of the modified cobb-douglas production function. statistics for agriculture covering the period 2008–2018 were used for the assessment. the correlation and regression analysis was used to determine and verify the parameters of the production function. equations of balance and construction of isoquants were used to foresight the optimal combinations of factors of the production function. results. using the cobb-douglas production function, econometric analysis with eco-socio-economic factors has shown that economic growth in agriculture is associated with improved quantitative and qualitative characteristics of labour potential, growing capital investment and reducing pollutant emissions. estimation of the elasticity coefficients of the constructed cobb-douglas function (the sum exceeds 1) justifies that the economic development of agriculture mainly contains the features of a largescale economy: modern level of science and technology provides advantageous expanding production to increase output. practical significance. the constructed models allow to forecast assessment of the development of the agricultural sector’s components and can be used to develop the basic directions of the state agricultural policy to manage the formation and use of resource potential. value/originality. modelling how the resource factors act on output using the method of construction and calculation of parameters of the production function allows to predict the sustainable development of agricultural production under quantitative and qualitative changes in the use of labour and capital, as well as environmental factors. further research ensures obtaining a dynamic multi-factor model of sustainable development of the agricultural sector and determining the main mechanisms of influence on the levers of economic growth. key words: sustainable development, agriculture, economic growth, labour potential, cobb-douglas function, elasticity coefficients, isoquants. jel classification: c23, e13, o11, o13 1. introduction the conceptual change of understanding the priorities of social and economic goals of development, the search for ways to move to the principles of sustainability are urgent for global development. according to modern scientists, it is possible to achieve sustainable development in three scenarios (hopwood, 2005): 1) reducing the government regulation, increasing the role of informatization and implementation of new technologies will help achieve sustainable development goals without significant changes in government relations (liberal approach); 2) increasing the role of government regulation, technology and science through public administration reform (reformist approach); 3) transforming society’s interaction with the environment through radical changes (transformist approach). the sustainable development mechanism for the agricultural sector should be considered through the interconnected structural components: economic, environmental, social, institutional and legal. baltic journal of economic studies 38 vol. 7 no. 2, 2021 sustainable development of the agricultural sector not only guarantees food security as one of the components of general economic security of the state but also provides economic growth, rural development, stimulates the progress of other industries through a multiplier effect. the agricultural sector of ukraine demonstrates positive dynamics due to the significant natural and human potential, as well as favourable climatic conditions. the objective construct “agricultural sector” is a system of agricultural production, environment and rural population; therefore, the agricultural sector is as close as possible to environ mental and food challenges. the agricultural sector combines social, production, and environmental functions, sectoral and territorial aspects: the basic agricultural sector which generates the rural environment with the appropriate resource base (spatial, natural, and labour). ukrainian agricultural products occupy a significant share in the gross value added, which gives grounds for arguing about the prospects of increasing the volume of exported agricultural products under the optimal combination of production factors (vasylieva, 2017). the transition to sustainable development principles, a new paradigm of social development, mainstreams the issue of effective interaction of production factors in the process of making a product in the economy. sustainable economic growth is based on the involvement of endogenous factors that depend on human economic activity; their interaction within the endogenous theory can be described using the apparatus of the production function. the article is aimed at assessing the impact of various factors (forms of capital) on the formation of gross value added and gross output of the agricultural sector of ukraine’s economy under sustainable development using the modified cobb-douglas production function. 2. theoretical framework and related studies scholars consider sustainable development from the standpoint of preserving and increasing all types of capital for future generations (human, natural, and material) (khvesyk, 2012). the three-pronged concept of sustainable development originated from the provisions in the proclamation of teheran, final act of the international conference on human rights in 1968; here, economic and social development was declared as imperatives for sustainable progress, as “ensuring human rights to life, consistent with freedom and dignity, contributing to physical, social and spiritual well-being” (proclamation of teheran, 1968). for the first time, development was additionally considered a means to ensure human rights and freedoms, including peaceful and secure existence. originating of the modern concept of sustainable development is associated with the declaration of the un conference on the human environment (stockholm, 1972), which emphasizes the relationship of economic and social development with environmental issues, and the famous report to the club of rome “the limits to growth” (1972) prepared by dennis meadows, which addresses the impact of global environmental constraints on resource use and emissions in the 21st century on global development. d. meadows’ study concludes that humanity needs to make a “controlled orderly transition from growth to global equilibrium” (meadows, 1991). “the limits to growth” formulates the ideas of the transition of civilization from quantitative growth to “organic” (qualitative) and “new world economic order” with deep, proactive social innovation through technological, cultural and institutional changes to avoid the growth of negative environmental impact without respecting the earth’s ecological limits (meadows, 2018). accelerated degradation of the natural environment as a result of human activities poses a global threat to humanity. in 1987, the un world commission on environment and development, in a report by the chairman of the world commission on environment and development, prime minister of norway gro harlem brundtland “our common future”, justified the need to find a new model of civilization development. the model indicated that the needs of modern generations should not jeopardize the interests of future generations in the realization of their needs and opportunities. according to g. h. brundtland, the history of humankind reached a level at which a change in political priorities was inevitable: savings from arms reduction can be used to finance environmental security measures. g. h. brundtland introduced the term “sustainable development”, which implied a “model of development, where the satisfaction of the vital needs of the present generation was achieved without depriving future generations of such an opportunity” (koptug, 1997). the brundtland commission defined the concept of sustainable development under globalization, technological and social factors from the standpoint of overcoming poverty through respecting ecological limits to meet the needs of present and future generations. consequently, g. h. brundtland’s anthropocentric approach to sustainable development, in which the environment was a means of human existence, comprised a relationship of needs and constraints (slavgorodska, 2016). the participants of the un conference on sustainable development “rio+20” (2012) in the rio de janeiro earth summit recognize that fair and sustainable use of resources is the key factor in choosing a path to a safer, cleaner and more prosperous world for all (united nations conference on sustainable development, 2012). the resolution “the future we want” adopted by the general assembly (resolution adopted by the general assembly, 2012) emphasizes the following baltic journal of economic studies 39 vol. 7 no. 2, 2021 aspects: the recognition of the need to further promote the idea of sustainable development at all levels; integration of its economic, social and environmental components; taking into account the relationship of the latter in order to achieve the goals of sustainable development in all the aspects. consequently, sustainable development should not focus exclusively on environmental aspects; it is considered in terms of harmonization of resource use, innovation and investment processes, institutional change with the needs of present and future generations. the positive dynamics of the economic potential of the agricultural sector as a set of all available means, opportunities, productive forces, resources, stocks, competencies that can be used in production and realize market opportunities to achieve socio-economic development is a necessary condition for sustainable development (vasylieva, 2019). the production potential of agricultural production can be determined in terms of a hybrid approach, which includes resource (as a set of production resources) and effective (as the creation of a certain amount of material goods) approaches: the ability to produce a certain amount of material goods through the use of limited interconnected resources (suvorov, 2020). for forecasting in macroeconomics, the apparatus of production functions describing complex production processes is used. the production function is a complex model of economic dynamics that characterizes the economic and mathematical dependence of output (quantity of products) on the factors of production used (resources, technology). the classical equation of the production function for agricultural production includes factors of economic growth: production assets k (area of agricultural land, the number of fixed and production assets in value form), total living labour costs l (number of employees in agriculture, working time) and other factors that take into account technical progress n: y = f (k ,l,n) (1) in the macroeconomic analysis, ces-function (yankovyi, 2015) with constant elasticity of substitution of resources is used for economic and mathematical modelling: y = a[αk-ρ + (1-α) l-ρ]-γ/ρ, (2) where y is the production in monetary terms, k is a cost of capital, l is labour costs, a is a scale factor, α is a weighting coefficient of the production factor, γ is an indicator of the degree of uniformity, ρ is a production function parameter. at ρ = -1, ces-function has the form of a linear equation (elasticity of substitution is unlimited): y a k a l= +1 2 , (3) where a1, a2 are parameters that characterize the qualitative impact of each factor. at ρ → 0, ces-function becomes the cobb douglas production function (elasticity of substitution tends to 1): y = a0 ka1 la2, (4) where a0 is a parameter that characterizes the level of technology, a1 and a2 are coefficients that characterize the contribution of capital and labour to output growth. a1, a2 parameters of the estimation model characterizes the production elasticity by resources, i.e., the quantitative relationship between production volumes in accordance with resources in relative (percentage) terms. at ρ → ∞, ces-function becomes the leontief production function with constant proportions of production factors (zero elasticity of substitution): y a k k l l = min( ; ) 0 0 (5) for the classical solow growth model that considers the influence of key production factors on output dynamics, solow (1961), barro (2010), and lyashenko (2013) propose to use the cobb-douglas production function with the possibility and limitation of substitution, which is the most adequate model in terms of identifying potential sources of growth. the twoinput cobb-douglas production function is considered classic; here capital and labour are considered resources (cobb, 1928). further research leads to the creation of a modified production function that takes into account the exogenous neutral factor (solow, 1957; arrow, 1961), entrepreneurial skills and innovation (schumpeter, 1934), human capital (romer, 1986; lukas, 1988), intellectual and social capital (kramin, 2016). in the model of economic growth, the american economists mankiw, romer and weil (1992) focuse on the quality of the workforce and introduce a factor of intellectual capital which includes the cost of education and science. romer (1996) believes that the emergence of new ideas and technologies (intangible resources) leads to the creation of more valuable material resources. oliner and sichel (2000) consider information technology an important factor in economic growth and technological progress. solow (solow, 1956, 1957) proposes to take into account technological progress, which is the main reason for productivity growth and development of the us economy in the first half of the 20th century by changing the quality characteristics of labour potential and improving labour organization (training, improving production etc.). in this case, the endogenous production function may include three main factors: labour (l), physical capital (k) and skill level (h) (moreno-hurtado, 2018, p. 172). in the economic literature there is a general consensus on innovations that play an important role in increasing the competitiveness of firms, industries, regions, and countries (asheim et al., 2011, p. 1133–1139; tödtling baltic journal of economic studies 40 vol. 7 no. 2, 2021 & grillitsch, 2015, p. 1741-1758; zygmunt, 2019, p. 292), and contribute to sustainable development (klewitz & hansen, 2014; zygmunt, 2020). it is the availability of intellectual assets as important indicators of innovation efficiency that is crucial for economic growth (zygmunt, 2019). novakova (2020, p. 11) also concludes on the importance of increasing investment in human development, improving cognitive skills as a prerequisite for sustainable economic development. marynych (2017) confirms the positive effect of education as a factor of human capital and the untapped potential of the technological factor in ensuring sustainable development of the region. to determine the growth model of the russian economy glinskiy et al. (2018) uses the modified cobb-douglas production function that includes an innovation factor. for forecasting the economic growth of ukraine’s agricultural sector, odintsov et al. (2020, p. 153) propose to expand the typical cobb-douglas production function due to the “exponential factor of land resources, the cost of innovation and the parameters of state regulation of the tax system (the function includes salary, capital investments, land resources, financing of innovation activities in the agricultural sector of the economy and the tax burden on the industry)”. sustainable development involves the relationship between economic benefits and environmental impacts. lyashenko (2012, p. 187) proposes to use the ecological and economic balance taking into account the efficient use of resources and minimization of pollutant emissions. the agricultural sector produces 90% of nitric acid emissions, 70% of methane and 20% of carbon dioxide emissions worldwide (çetin, 2020). in this case, we believe that to study the factors of sustainable development it is advisable to use environmental and economic production function, including an indicator of environmental pollution as an exogenous factor that negatively affects the results of agricultural production. yang et al. (2020, p. 166) use both the quantitative and qualitative parameters of labour and environmental impact in the cobb-douglas production function to study the sustainable development of china’s economy. the authors believe that the main drivers of china’s economic growth are physical and human capital, as well as the minimization of environmental pollution to achieve sustainable development. in “the core function of sustainable development” (2015), tkach proposes a basic function of sustainable development under the information economy, a partial case of which is the modified cobb-douglas function, which includes different types of capital: physical, natural, human and information. dedrick (2003) and gosinska (2020) use gross value added, which is the main indicator for assessing the performance of the industry and the economy as a whole, as a performance indicator. 3. methods to obtain maximum profit in terms of sustainable development we should apply the methodology of construction of the production function, which allows to determine the optimal combination of resources taking into account economic, social and environmental factors. based on previous studies, we propose to use the four-input cobb-douglas production function in terms of sustainable development of agriculture to take into account not only the quantitative parameters of labour potential but also its qualitative indicators (integral coefficient of intellectual assets), as well as environmental impact: y a k a l a i a e a = 0 1 2 3 4 (6) where y is the performance indicator (output), k is a fixed capital or fixed assets used (capital investment), l is the living labour costs (number of employees in agriculture), i is an integral coefficient of intellectual assets, e is the pollutant emissions, а0 is a technological coefficient that characterizes the efficiency of production, takes into account the complex influence of qualitative determinants of labour potential, the influence of factors that cannot be quantified (a technical progress indicator); ai are the coefficients of elasticity that characterize the contribution of capital, labour, intellectual assets and pollutant emissions to growth of the output y (i.e., ai are fractions of factors). the sum of the elasticity coefficients а1 + а2 +…+ an characterizes the economies of scale (kuzmin, 2020, p. 787): – increasing returns to scale if а1 + а2 +…+ an > 1 (intensive economic growth), the function grows disproportionately, product growth outpaces the growth of factor costs; – constant returns when changing the scale of production if а1 + а2 +…+ an = 1 (extensive economic growth), the cobb-douglas production function is linearly homogeneous, the level of resource efficiency does not depend on the scale of production; – returns to scale decrease if а1 + а2 +…+ an < 1 (lack of economic growth), the function decreases disproportionately, the increase in the factor costs is accompanied by a slowdown in output growth. kuzina (2018, p. 73) defines the main characteristics of the cobb-douglas production function: it is increasing, has no extremes, the rate of output slows down with increasing resources, output increases indefinitely with unlimited growth of one of the resources. the advantages of the cobb-douglas production function include the following aspects: – the form of the cobb-douglas production function is relatively simple to use, which allows you to easily determine the indicators of productivity and return baltic journal of economic studies 41 vol. 7 no. 2, 2021 on assets, the output elasticity for all parameters, the marginal rates of substitution; – the cobb-douglas production function is able to describe the state of returns to scale, regardless of they increase, are stable or decrease; – practical universality and adequacy: the cobb douglas production function coefficients directly describe the elasticity of each input factor used; – macroeconomic orientation: it is based on real economic indicators of official statistical reporting and can be easily parameterized using correlation and regression analysis; – realism: the functional dependence of the result on costs is nonlinear and does not contain the shortcomings characteristic of linear production functions that describe the processes of an ideal economy. despite these advantages, the production function also has a number of disadvantages: – the production function with the constant economies of scale may inadequately reflect the production process (in conditions of intensive growth of factors, the economies of scale are greater than 1); – this is based on the assumption of full interchangeability of production resources; – determining the parameters of the production function is based on marginal prices of factors equal to average prices and calculated on the basis of market prices; this is possible in conditions of perfect competition and market, not in the real economy; – the principle of complementarity that takes into account the capital structure is ignored. 4. results and discussion 4.1. the construction of the cobb-douglas production function for agricultural production in ukraine for conducting an empirical study of the agricultural sector of the economy and the construction of the production function, the relationship between the basic production resources (labour, capital, intellectual assets and emissions of pollutants) and output was used. in a market economy, the main indicator of the degree of development of the industry is gross value added, which reflects the possibility of expanding production. in this case, gross value added and gross output of agriculture are considered performance indicators. the model considered in the work uses the data of the annual reports of the state statistics service of ukraine (2020): gross value added, gross output of agriculture y(t), the amount of fixed capital k(t), the number of employees in agriculture l(t) and pollutant emissions e(t); indicators of the integral coefficient of intellectual assets i(t) given in the paper by karpenko (2018). the statistics shown in table 1 were used to calculate the cobb-douglas production function with the performance indicator “gross value added”. correlation and regression analysis is used to determine and verif y the parameters of the production function. the approximation of wellknown power functions in the cobb-douglas production function helps mitigate mistakes and close in on real values. for the calculation, the logarithm of both parts of the equation of the production function is taken: ln ln * ln * ln * ln * lny a a k a l a i a e= + + + +0 1 2 3 4 . after appropriate replacements, a linear function is obtained: y a a x a x a x a x1 0 1 1 2 2 3 3 4 4= + + + +* * * * , where a a0 0= ln . after calculations using linear regression analysis by the method of least squares, the values of the coefficients of the cobb-douglas production function are determined. the production function obtained takes the form: y k l i e= −422388 0 34474 2 63344 1 60806 2 86638, , , , (7) table 1 statistics for calculations of the production function (y(t) is the gross value added) t, year y(t), mln uah k(t), mln uah l(t), thous persons i(t) e(t), thous t y1=lny x1=lnk x2=lnl x3=lni x4=lne 2008 65148 16682 3322.1 0.5 7210.3 11.1 9.7 8.1 -0.6 8.9 2009 65758 9295 3152.2 0.5 6442.9 11.1 9.1 8.1 -0.7 8.8 2010 82948 11311 3115.6 0.6 6678.0 11.3 9.3 8.0 -0.4 8.8 2011 109961 17981 3410.3 0.6 6877.3 11.6 9.8 8.1 -0.6 8.8 2012 113245 18564 3506.7 0.6 6821.1 11.6 9.8 8.2 -0.5 8.8 2013 132354 18175 3389 0.6 6719.8 11.8 9.8 8.1 -0.5 8.8 2014 161145 18388 3091.4 0.6 5346.2 12.0 9.8 8.0 -0.5 8.6 2015 239806 29310 2870.6 0.5 4521.3 12.4 10.3 8.0 -0.7 8.4 2016 279701 49660 2866.5 0.5 4498.1 12.5 10.8 8.0 -0.7 8.4 2017 303949 63401 2860.7 0.5 3879.1 12.6 11.1 8.0 -0.8 8.3 2018 360757 65059 2937.6 0.4 3866.7 12.8 11.1 8.0 -0.8 8.3 baltic journal of economic studies 42 vol. 7 no. 2, 2021 to assess the calculated production function (7), the parameters of regression analysis are studied. the multiple correlation coefficient is r = 0.983, the standard approximation error is 0.148. fisher’s f-criterion calculated is 46.71 and is greater than fisher’s f-criterion tabular (99% confidence, reliability), which is 8.45 (table 2). therefore, the regression equation obtained can be considered significant. this means that with a 99% probability the found cobb-douglas production function (3) corresponds to the initial data of the problem. table 2 regression analysis parameters for y(t) (gross value added) multiple correlation coefficient r 0.983 coefficient of determination r2 0.966 standard approximation error 0.148 fisher’s f-criterion calculated fcalc 46.71 fisher’s f-criterion tabular ftab 8.45 number of observations 11 thus, the constructed production function has reliable statistical characteristics. the value of the multiple correlation coefficient indicates a high close relationship between the performance indicator and the selected factors, the variation of gross value added by 98.3% depends on the fluctuations of the factors included in the equation and only 1.7% depends on factors that are not taken into account. the value of the coefficient of determination r2 (0.966) is quite close to 1, so the regression model is successful, and the relationship between the resulting indicator of the production function and the input factors is strong. variance of the output y(t) is due to the regression of the selected levers of influence (k , l, i, e) by 96.6 %. this confirms that the model takes into account the most important factors. in addition to the multiple correlation coefficient, the adequacy of the equation is evidenced by the small value of the average approximation error, which characterizes the average relative deviation between the actual and theoretical values based on the equation constructed (figure 1). thus, equation (7) meets all the requirements and can be used for economic analysis. the analysis shows that the growth of quantitative and qualitative indicators of labour potential of the agricultural sector has a direct impact on the growth of gross value added of agricultural products, as there is a direct relationship between them. the economic analysis of the cobb-douglas production function can be performed on the basis of elasticity coefficients that reflect the nature of the influence of factors on performance. for example, the elasticity coefficient a1 = 0.34474 (7) shows the elasticity of agricultural production relative to capital investment with a constant number of employed persons in rural areas, the integral coefficient of intellectual assets and pollutant emissions. if capital investment increases by 1%, the gross value added of agriculture should be expected to grow by 0.34474%. the elasticity coefficient a2 = 2.63344 (7) indicates the output elasticity relative to the number of employed persons in rural areas with constant capital investment, the integral coefficient of intellectual assets and pollutant emissions, i.e., with an increase in the number of employed persons in rural areas in agriculture by 1% gross value added of agriculture should increase by 2.63344%. the elasticity coefficient a3 = 1.60806 (7) reflects the elasticity of production relative to the integral coefficient of intellectual assets with a constant amount of capital investment, the number of employed persons in rural areas and the number of pollutant emissions, i.e., if the integral coefficient of intellectual assets increases by 1%, an increase in gross value added by 1.60806% should be expected. the elasticity coefficient a4 = -2.86638 (7) shows the elasticity of production relative to pollutant emissions with constant capital investment, employed persons in rural areas and the integral coefficient of intellectual assets, i.e., with an increase in pollutant emissions by 1%, reduction of agricultural output by 2.86638% should be expected. the value of the technological coefficient a0 obtained (422388) is much more than 1. we can justify a significant impact of technical progress on the growth of gross value added in agriculture. this means that the increase in gross value added is, firstly, due to an increase in the number of employees (a2>a1); secondly, this is possible due to improving the quality characteristics of labour potential (a3>a1). this type of economic growth cannot be called labour-saving; according to solow, the transition to a model of the production function with scientific and technological progress requires qualitative changes in production processes, improving the efficiency of labour resources and productivity. thus, the most significant in the economic growth of agricultural production are quantitative and qualitative indicators of labour potential: the number of employed persons (l) and the integral coefficient of intellectual 0 50000 100000 150000 200000 250000 300000 350000 400000 2008 2010 2012 2014 2016 2018 y(t) ycalc figure 1. results of the approximation of the cobb-douglas production function for gross value added baltic journal of economic studies 43 vol. 7 no. 2, 2021 assets (i), while the capital factor is less influential. this reveals the need to update the issue of priority of development of labour potential of the agricultural sector. aggregate influence of factors ( )a a a a1 2 3 4+ + + exceeds 1: ( ) ,a a a a1 2 3 4 1 72 1+ + + = > . this indicates the positive strength of their influence; the resulting production function describes the growing economy (pshenychnykova, 2017) within the endogenous model of growth. the economic development of agriculture mainly has the characteristics of a large-scale economy: at the current level of science and technology, it is advantageous to expand production for increasing output. similarly, there is conducted a study of the cobbdouglas production function, which considers the gross output of agriculture ukraine a performance indicator (y(t) is the gross output of agriculture, in constant prices of 2010) (table 3). after performing the calculations using the method of least squares, the desired cobb-douglas production function takes the following form: y k l i e= −341 0 08353 1 70970 0 32224 0 98789, , , , (8) the multiple correlation coefficient is r=0.892, the standard approximation error is 0.107. fisher’s f-criterion calculated is 9.26 – this is greater than fisher’s f-criterion tabular (99% confidence, reliability), which is 8.45. this gives a 99% probability that the found cobb-douglas production function (8) corresponds to the initial data of the problem. therefore, the constructed production function has satisfactory statistical characteristics (table 4). the value of the multiple correlation coefficient indicates that the variation in the volume of gross output by 89.2% depends on the fluctuations of the factors included in the equation and depends by 10.8% on the factors that are not taken into account. coefficient of determination r2 has a satisfactory value (0.796), the variance of the output y(t) is due to the regression of the selected levers of influence (k , l, i, e) by 79.6 %. based on the actual values of gross output and their calculated values, a graphical model of the results of the cobb-douglas production function approximation is obtained (figure 2). in addition to the multiple correlation coefficient, the high degree of accuracy of the regression equation is evidenced by a slight deviation of the calculated values from the actual ones. thus, in equation (8) the elasticity coefficients a2 = 1.70970 and a4 = -0.98789 reflect the influence of factors on performance. because of a2 far exceeds 1, the main role in the growth of agricultural production is played by the number of the employed persons. in the case of an increase in the number of employees in agriculture by 1%, an increase in gross output of agriculture by 1.70970% should be expected. the elasticity coefficient a4 is negative; therefore, the quantity and quality of labour are influenced by environmental factors, namely – pollutant emissions deteriorate the quality of life of the rural population and have a negative impact on crop yields. the sum ( ) ,a a a a1 2 3 4 1 13 1+ + + = > shows the increasing effect of the economies of scale (value f(xi) increases more than value xi), the growth of production outpaces the increase in cost factors, with the expansion table 3 statistics for calculations of the production function (y(t) is the gross output) t, year y(t), mln uah k(t), mln uah l(t), thous persons i(t) e(t), thous t y1=lny x1=lnk x2=lnl x3=lni x4=lne 2008 101451 16682 3322.1 0.5399 7210.3 11.5 9.7 8.1 -0.6 8.9 2009 96274 9295 3152.2 0.5120 6442.9 11.5 9.1 8.1 -0.7 8.8 2010 90792 11311 3115.6 0.6479 6678.0 11.4 9.3 8.0 -0.4 8.8 2011 117111 17981 3410.3 0.5566 6877.3 11.7 9.8 8.1 -0.6 8.8 2012 110072 18564 3506.7 0.6072 6821.1 11.6 9.8 8.2 -0.5 8.8 2013 133683 18175 3389 0.5956 6719.8 11.8 9.8 8.1 -0.5 8.8 2014 139058 18388 3091.4 0.5793 5346.2 11.8 9.8 8.0 -0.5 8.6 2015 131919 29310 2870.6 0.5031 4521.3 11.8 10.3 8.0 -0.7 8.4 2016 145119 49660 2866.5 0.5093 4498.1 11.9 10.8 8.0 -0.7 8.4 2017 140535 63401 2860.7 0.4632 3879.1 11.9 11.1 8.0 -0.8 8.3 2018 158307 65059 2937.6 0.4363 3866.7 12.0 11.1 8.0 -0.8 8.3 table 4 regression analysis parameters for y(t) (gross output) multiple correlation coefficient r 0.892 coefficient of determination r2 0.796 standard approximation error 0.107 fisher’s f-criterion calculated fр 9.26 fisher’s f-criterion tabular fт 8.45 number of observations 11 baltic journal of economic studies 44 vol. 7 no. 2, 2021 of production, the average cost of resources per unit of output decreases. the significant deviation of the elasticity coefficients (8) from 1 can be explained by the fact that other factors, such as political, social and administrative, can have an impact on the situational variable. 4.2. the geometric interpretation of the model obtained the production functions obtained can be represented by the isoquant curve, which demonstrates different combinations of factors of production function (capital, labour, intellectual assets, environmental factor) in a particular state of technological development, i.e., it illustrates the elasticity of factor substitution, the intensity of various factors in the production process. the resulting output indicator y (gross output of agriculture) and the value of levers of economic growth (k , l, i, e), for example, at the level of 2015, are recorded for the analysis of the production function (8). the equation of the balance of fixed capital (k) and labour (l) at fixed values of other factors (i, e) for the production function (8) has the following form: k y a l i ea a a a= + + + ( ) 0 1 2 3 4 1 (9) the isoquant that meets these conditions is shown in figure 3. the curve indicates the substitution by capital (k) within certain limits of labour (l) and vice versa. the slope of the tangent to the isoquant (isocost), plotted at the point of the optimal ratio of capital and labour (yankovyi, 2018, p. 374), gives evidence of the capital-intensive technical progress – the technological choice is shifted to capital as a more productive factor. there is the equation of isoquant at fixed values of fixed capital (k) and pollutant emissions (e): l y a k i ea a a a= + + + ( ) 0 1 1 3 4 2 (10) figure 4 shows the curve of the balance of labour (l) and the integral coefficient of intellectual assets (i). the shape of the isoquant indicates a perfect substitution of the production function l and i (insufficient amount of labour potential can be substituted by higher indicators of education, qualifications, abilities of workers), constructed tangent determines the qualitative indicators of labour potential (i) a more productive factor in technical progress. the isoquant described by equation (9) is shown in figure 5 also confirms the advantage of qualitative characteristics of human capital over material resources: insufficient amount of fixed capital can be partially offset by the growth of intellectual assets. the shapes of the isoquants in figures 4 and 5 are close to linear isoquants. this demonstrates the perfect substitution of the factors of labour (l) and capital (k) with the factor i and vice versa. this also confirms the importance of intellectual assets in production. the equation of isoquant at fixed values of fixed capital (k) and the integral coefficient of intellectual assets (i) is described by formula (10). figure 6 shows the curve of the balance of labour (l) and pollutant emissions (e), which reflects zero probability of substituting these two factors with each other. the shape of the balance curve of the capital (k) and pollutant emissions (e) built on equation (9) also confirms the impossibility of substitution (figure 7). therefore, the isoquant variations shown in figures 6 and 7 reflect the impossibility of combining figure 3. balance of fixed capital (k) and labour (l) at fixed values of factors (i, e) figure 4. balance of labour (l) and the integral coefficient of intellectual assets (i) at fixed values of factors (k , e) 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 2008 2010 2012 2014 2016 2018 y(t) ycalc figure 2. results of the approximation of the cobb-douglas production function for gross output baltic journal of economic studies 45 vol. 7 no. 2, 2021 since the four-factor cobb-douglas production function (8) is used for analysis, it is expedient to consider isoquants in the form of 3d surface (balance of three factors with one fixed factor) for a more detailed assessment of its adequacy. balance function of fixed assets (k), labour (l) and the integral coefficient of fixed assets (i) at a fixed value of pollutant emissions (e) takes the form of the equation (9). the isoquant that meets these conditions is shown in figure. the isoquant surface indicates the importance of the factors l and i. equation of the balance of fixed capital (k), pollutant emissions (e) and the integral coefficient of intellectual assets (i) at the fixed value of employees (l) is described by formula (9), and is represented in figure 9 as a surface. the shape of it shows a significant negative impact of increasing pollutant emissions (e) and the positive effect of the growth of the integral coefficient of intellectual assets (i). figure 5. balance of labour (k) and the integral coefficient of intellectual assets (i) at fixed values of factors (l, e) figure 6. balance of labour (l) and pollutant emissions (e) at fixed values of factors (k , i) figure 7. balance of labour (k) and pollutant emissions (e) at fixed values of factors (l, i) figure 8. balance of the fixed assets (k), labour (l) and the integral coefficient of intellectual assets (i) at fixed values of pollutant emissions (e) factors of production with the factor “pollutant emission (e)”, we believe that the environmental factor makes a significant negative contribution and must be taken into account in the model of economic growth described by the production function. baltic journal of economic studies 46 vol. 7 no. 2, 2021 figure 10 shows the surface of the balance of fixed capital (k), labour (l) and pollutant emissions (e) at fixed values of the integral coefficient of intellectual assets (i) described by the equation (9). comparative analysis of the parameters of production functions for gross value added (7) and gross output (8) (table 5) indicates a more efficient use of labour potential for processing agricultural raw materials and the creation of finished products, where technical progress (a0) and quality indicators of human capital (a3) have much more influence. thus, the coefficients of elasticity are functions of factors that include the production function. this is shown in the studies of agricultural economics by artyukh (2016) and litvin (2017). we also agree with shumska’s (2007, p. 123) conclusions about the sensitivity of the coefficients of the production function to the political and institutional processes that take place in different periods of time. ukraine is on the path to an efficiency driven economy that depends on key competitiveness factors: institutions, infrastructure, macroeconomic stability, health care and primary education (vasylieva, 2018); these factors also affect the values of elasticity of coefficients. figure 9. balance of the fixed assets (k), pollutant emissions (e) and the integral coefficient of intellectual assets (i) at a fixed value of the employees (l) figure 10. balance of the fixed assets (k), labout (l) and pollutant emissions (e) at a fixed value of the integral coefficient of intellectual assets (i) baltic journal of economic studies 47 vol. 7 no. 2, 2021 table 5 results of modelling the production function parameters y(t) gross value added y(t) gross output a0 422388 341 a1 0.34474 0.08353 a2 2.63344 1.70970 a3 1.60806 0.32224 a4 -2.86638 -0.98789 (a1 + a2 + a3 + a4) 1.72 1.13 using the cobb-douglas production function, econometric analysis with eco-socio-economic factors has shown that economic growth in agriculture is associated, firstly, with improved quantitative and qualitative characteristics of labour potential, and secondly, with growing capital investment and reducing pollutant emissions. 5. conclusion economic growth of agricultural production in ukraine (gross output) is labour-intensive, not capitalintensive, because (a2>a1). this significantly depends on the quantitative indicators of the labour potential of rural areas (a2), which are gradually declining. this is due to negative demographic trends, which, in turn, has resulted in the degradation of rural areas, reduced employment and income. the share of labour contribution to output is higher than the share of capital. this is justified by the presence of a significant private sector in agricultural production. households mainly use manual labour, there are no opportunities to attract investment in technical and technological modernization of production; access to state support is limited due to low production volumes per farm. the prospects for economic growth of agricultural production are not to increase the number of resources, but to improve their quality. it is advisable to implement state support measures aimed at increasing the resource capacity of agricultural producers: subsidies for technical upgrades, investment loans for new capacity, reimbursement of capital expenditures for modernization of production, compensation for investment in land reclamation system, implementation of scientific and technical policy in the agricultural sector. to ensure sustainable growth of agricultural production, it is necessary to introduce innovative developments, resource-saving technologies, increase the use of intellectual capital (potapov, 2020). efficient use of labour potential is the basis 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(2020). do human resources and the research system affect firms’ innovation activities? results from poland and the czech republic. sustainability, 12(6), 2519. doi: 10.3390/su12062519 baltic journal of economic studies 115 vol. 8 no. 2, 2022 1 state trade and economics university, ukraine (corresponding author) е-mail: n.mazaraki@knute.edu.ua orcid: https://orcid.org/0000-0002-1729-7846 2 state trade and economics university, ukraine е-mail: y.goncharova@knute.edu.ua orcid: https://orcid.org/0000-0003-4679-3715 doi: https://doi.org/10.30525/2256-0742/2022-8-2-115-120 cyber dimension of hybrid wars: escaping a ‘grey zone’ of international law to adress economic damages nataliia mazaraki1, yulia goncharova2 abstract. the subject of the article is the international and national legal aspects of compensation for economic damages caused by cyber attacks. the purpose of the article is to contribute to the ongoing debate on attribution and liability for malicious and destructive cyber activity. cyber attacks have become a global problem facing the international community, posing enormous risks to the stability of international security, economic and social development, and the safety and well-being of individuals. cyber attacks have proven to be numerous problems for domestic and international law – international humanitarian law, human rights law, the law of armed conflict – how to counter the actions of hybrid warfare by legal means, what are the remedies for losses due to cyber attacks. this article examines cyber attacks to show how the international community is moving toward responsible behavior by states in cyberspace, protecting civilians and critical infrastructure. the article's methodology is based on doctrinal legal research in this area, as well as international legal instruments, in order to examine how economic damages should be paid to victims of malicious acts in cyberspace. the difficulty of attributing cyber attacks has been analyzed to show that perpetrators evade responsibility, a separate problem for international law. it is concluded that international law, as it currently stands, provides little legal basis for substantive guidance on responsible state behavior in cyberspace, the necessary levels of attribution to establish state or non-state responsibility for cyber attacks. economic losses from cyber attacks can be covered by insurance schemes, although analysis has shown that they do not work because insurers argue that cyber attacks exclude military risk insurance clauses that exclude coverage, which is reasonable, although it leaves victims of cyber attacks without the ability to recover damages. the paper supplements current research with a comprehensive analysis of legal and economic issues and calls for the development of an appropriate strategic environment, legal and infrastructural framework. the need for a joint international framework is emphasized, as civil liability under national law is hardly possible because cyber attacks are predominantly transnational in nature. a joint structure is also needed to prevent, deter and respond to state-sponsored cyber attacks. key words: hybrid war, international law, cyber war, cyber threats, cyber attribution. jel classsification: k10, k30 1. introduction sophisticated aggressors have long since abandoned conventional warfare, but actively engage in the full spectrum of actions directed at the statehood and state security of their adversary. a hybrid threat or war waged by overt or covert action by states, state agents, or non-state actors in peacetime, crisis, or armed conflict will affect the full spectrum of society of the targeted state(s). in particular, it will test the resilience of civil society and citizens, the strength of civilian authorities, agencies, civilian police, and the armed forces of states and alliances, including the strategic political cohesion of alliances (fogt, 2021). both military and civilian researchers have delved deeply into the nature and essence of hybrid warfare, with the aggression of the russian federation serving as a major source of examples and evidence. the general approach to hybrid war involves political, military, economic, social, infrastructural and informational elements. the last element, and surely not the last, and one of the most troubling obstacles baltic journal of economic studies 116 vol. 8 no. 2, 2022 is cyber attacks. it is a form of sabotage that has far-reaching consequences for international trade and relations. it disables commercial services, including health care, banking and communications, paralyzes industrial operations, defense facilities and educational activities. in addition, cyber attacks drain scarce resources or divert them to unproductive activities and impede research and development (ali, 2013). malicious information and communication technology (ict) activities by persistent threat actors, including states and other actors, can pose significant risks to international security and stability, economic and social development, and human security and wellbeing (gge report, 2021). hybrid warfare has raised many problems for domestic and international law – international humanitarian law, human rights law, the law of armed conflict – how to counter the actions of hybrid warfare by legal means, what are the remedies for losses due to cyber attacks. in this article, the authors will address cyber attacks, examining how the international community is moving toward responsible behavior by states in cyberspace, protecting civilians and critical infrastructure. in addition, the authors will address the vital question of how economic damages should be paid to victims of malicious acts in cyberspace. this paper aims to be a valuable complement to current research with integrated analysis of latest events, including the 2021 report of the united nations "group of governmental experts on advancing responsible state behaviour in cyberspace in the context of international security " (gge report, 2021). 2. сasuistry: cyberwarfare, cyber operations, cyber attacks malicious computer or network intrusions are quite common, notorious and destructive. perhaps the most common and well-known cases involving cyber-attacks against a state include the large-scale cyber operations against estonia in 2007, the stuxnet cyber-attack on iran's nuclear program in 2010, and the 2017 cyber-attack on the united kingdom's national health service, the wanna cry attack that affected 300,000 computers across 150 countries, notpetya, that brought losses of usd 300 million. the covid-19 pandemic has been marked by a significant increase in malicious cyber operations against states' health infrastructure. these include operations against hospitals treating covid-19 patients, intelligence-gathering operations against research centers developing covid-19 vaccines, and operations against public health services dealing with covid-19 (interpol, 2020). causing great losses – both tangible and intangible – and being too problematic to investigate and prosecute, cyber attacks have become a center of research and analysis for military and civilian experts and academics. before turning to the central part of this article, a brief review of terminology is in order, since there are a number of terms used in various sources to define malicious intrusions into a computer or network. according to the u.s. position, "cyberwarfare" is the action of a state against a state, equivalent to an armed attack or use of force in cyberspace, that could trigger a military response with a proportionate kinetic use of force (cyberwarfare and cyberterrorism, 2015). russian military theorists generally do not use the terms cyber or cyber warfare. instead, they view cyber operations within the broader framework of information warfare, a holistic concept that includes computer network operations, electronic warfare, psychological operations and information operations (russia’s approach to cyber warfare, 2016). eu law defines cyber attacks as actions involving any of the following: (a) access to information systems; (b) information system interference; (c) data interference; or (d) data interception, if such actions are not duly authorized by the owner or other right holder of the system or data or part thereof, or are not permitted by union law or the member state concerned (council regulation (ec) 2019/796). the concise definition of cyber attacks has been laid down in the tallinn manual 2.0: "a cyber attack is a cyber operation, whether offensive or defensive, that is reasonably expected to result in injury or death, damage or destruction of facilities" (tallinn manual 2.0). another view of the definition of a cyber attack focuses on its implications for vital state information, then "cyber attack" refers to cases involving international cyber operations where deliberate actions are taken against state interests to "disrupt, deceive, degrade, manipulate or destroy information residing in the target information system or computer networks of the systems or networks themselves" (national research council, 2009). along with questions of definition come aspects of categorization of cyber attacks: should malicious intrusion be considered a crime, an act of vandalism, an act of terrorism, or the use of force from the perspective of international humanitarian law? the report "cyberwarfare and cyberterrorism: in brief " provides a detailed picture of the cyberwarfare ecosystem distinguishing cyberterrorists, cyberspies, cyberthieves, cyberwarriors and cyberactivists. this broad range of actors points to the need for certain criteria to determine whether a cyber attack is criminal, an act of hacktivism, terrorism, or a use of baltic journal of economic studies 117 vol. 8 no. 2, 2022 state force equivalent to an armed attack (cyberwarfare and cyberterrorism, 2015). the authors believe that correct classification leads to correct answers about proportionate and lawful response, as well as responsibility for cyber attacks. in the course of this article, the authors will consider a cyber attack as an element of hybrid warfare, hence as a deliberate act against state security using icts. 3. hybrid wars, cyber attacks and international law hybrid warfare is never officially declared and so far, has not ended with conventional warfare. it implies a permanent state, similar to war, with variable intensity. hybrid warfare is often a covert and concealed activity (radin, 2017). these features of hybrid wars presume they lay in a "grey zone" of international law, that is entitled to borderline peace and war. analyzing the relevance on international law instruments to hybrid wars, o. korhonen points out three main difficulties: 1) sustainment of distinguishing feature of the law in the context of a hybrid war, e.g., "distinguish public from private, state officials from non-state actors, combatants from civilians, and military from nonmilitary engagement"; 2) recognizing compliance with international law in particular cases. "certain incidents in the russianukrainian relations over the past decade, such as cyber attacks, espionage, hostile corporate takeovers, or wintertime gas-cuts, can be interpreted either as systematic acts of hybrid war or as merely unsavory, but nonetheless legal, incidents in the interaction among sovereign states. different interpretations place them under different legal regimes and render different outcomes when it comes to judging compliance with international law"; 3) the shortcomings of the doctrine of international law, which cannot promote the interests of the international community as a whole, but only the interests of the heavyweight states of the world (korhonen, 2015). with regard to cyber attacks, these difficulties become even more complex because of the rapid development of cyber warfare, the problematic attribution of cyber attacks, their covert nature, the intensive involvement of nonstate actors, etc. the latter aspect underscores the limited effectiveness of international law in cyber age, when international institutions have no authority to regulate nonstate actors. schmitt and watts stress that "while cyber operations by a state may violate the sovereignty of the state where the non-state actors are located, cyber operations by non-state actors that are not attributable to a state as described below do not constitute a violation of sovereignty " (watts, 2016). the huge academic debate on the application of international law to cyberspace has led to profound and well-reasoned conclusions that international law, and especially the un charter, should apply fully to cyberspace, and that international humanitarian law should apply in cases of armed conflict. the gge report admits "international law, and in particular the charter of the united nations, is applicable and is essential to maintaining peace and stability and promoting an open, secure, peaceful and accessible ict environment" (gge report, 2021). the focus of much scholarly debate has been to highlight the criteria when a cyber attack constitutes a use of force or an act of war, giving rise to a right of self-defense under international law. experts in international humanitarian law are now convinced that cyber attacks fall under this body of law in times of armed conflict, and we cite the latest position of the international committee of the red cross: "certainly, international humanitarian law applies to and therefore limits cyber operations during armed conflict – just as it regulates the use of any other weapons, means and methods of warfare in armed conflict, whether new or old. this is true regardless of whether cyberspace is viewed as a new domain of warfare, similar to air, land, sea, and space; as a different type of domain because it is man-made, while the former is natural; or as not a domain as such" (icrc position paper, 2020). the assumption that international law applies to cyberspace directs the debate to questions of state jurisdiction and state responsibility for cyber activities, attribution of cyber attacks, and the legality of countermeasures. 4. cyber attack attribution one of the problems encountered in cyber attacks is attribution, as it is extremely difficult to clearly identify the perpetrators and determine whether their actions are attributable to a particular state. although technical attribution capabilities have improved considerably in recent years, the political and legal issues surrounding ultimate attribution to state actors remain unsettled and contentious (eichensehr, 2020), and common approaches and understandings have not been established. attribution of a cyber attack, which establishes the source, facts, and circumstances of a cyber attack, is the basis for proper enforcement of the rights and responsibilities of victim states. art. 51 of the un charter lists two requirements for the attribution of the use of force falling within art. 2(4) in order for the exercise of self-defense: 1) the attributed attack imposes an "imminent threat" to the attacked state: baltic journal of economic studies 118 vol. 8 no. 2, 2022 2) the attack is attributed to a state actor (the individuals, groups, or organizations related to state government. the tallinn manuals 1.0 and 2.0 broaden the interpretations of both the "imminent threat" and the "state actor" underlying the u.n. charter art. 51. the gge report points out that attribution is a complex undertaking and that a broad range of factors should be considered before establishing the source of an ict incident (gge report). international law does not preclude the standards, forms, and amount of evidence needed to attribute cyber attacks, although national practice is sparse, limited to the united states, and the international court of justice's position remains debatable. public attributions by the u.s. government take one of four forms: (1) criminal indictments; (2) economic sanctions; (3) technical alerts; and (4) official statements or press releases with a range of state bodies are involved (eichensehr, 2020) eichensehr also provides examples of combination of abovementioned methods: "the u.s government frequently deploys more than one mechanism to attribute a particular cyber attack, including rolling out different attribution methods over the course of months or even years. for the sony hack, the u.s. government first attributed the attack to north korea in the fbi statement, and followed with attributionby-sanctions a few weeks later. nearly four years later in september 2018, the united states also engaged in attribution by-indictment, unveiling criminal charges against a north korean citizen, park jin hyok, for allegedly participating in a ‘government-sponsored hacking team’ responsible for the sony hack, among others." (eichensehr, 2020) the international community has made a collective effort to establish certain standards for attributing cyber attacks. the gge report also spells out the elements of cyber attack attribution, namely: "the technical characteristics of the incident; its scale, scope, and impact; the broader context, including the impact of the incident on international peace and security; and the results of consultations among the states involved." due to the aforementioned difficulties in attributing cyber attacks, it can be assumed that the process of creating some kind of framework can be quite lengthy, nevertheless, the victim states must resort to legal remedies, eliminate economic losses. aravindakshan acknowledges, "on the other hand, the use of remedies in an international legal forum can lead to tangible benefits, such as injunctions and damages, as well as serve as a strong reminder to states that cyber abuse has real consequences" (aravindakshan, 2021). 5. remedies the victim state may resort to non-judicial measures such as retorsion, countermeasures, and sanctions. by taking retorsion measures, the state expresses its disagreement with the activities of another state within the limits of the law. such measures can take a variety of forms, including: severing or interrupting diplomatic relations or other forms of contact; expelling diplomats, journalists, or other nationals of target states; travel restrictions; restrictive monitoring of foreigners; reducing or interrupting economic assistance programs; various forms of economic and commercial restrictions; and embargoes (delerue, 2020). countermeasures as an extrajudicial response to a cyber attack seem a rather appropriate response, aimed at forcing the accused state to comply with its obligations under the law of state responsibility. the doctrine of countermeasures was set forth in the tallinn manual 2.0, and its rule nine prescribes the principle of proportionality for countermeasures against cyber attacks: "a state affected by an internationally wrongful act may resort to proportionate countermeasures, including cyber countermeasures, against the responsible state" (tallin manual 2.0.). self-defense in the case of cyber attacks may be available when it amounts to an armed attack, although states' reluctance to recognize and attribute, as discussed above, would diminish the ability to use such a defense. gge report encompass that states may engage in full range of diplomatic, legal and other consultative options as a response to cyber attacks (gge report, 2021). economic losses, often measured in enormous sums of money, are one of the most problematic consequences of cyber attacks because they are often irreversible. victims of cyber attacks suffer the destruction of cyber infrastructure and data, incur remediation costs, and suffer millions in lost profits. and what can be seen today is that cyber attacks are becoming increasingly sophisticated and destructive, hitting the sharpest and most vulnerable targets, and the international legal framework is evolving too slowly. the latter aspect is also true for domestic remedies. the damages of civilian victims of cyber attacks may be hardly covered by insurance, the cases of mondelez and merck companies (hit by nonpetya cyber attack) being the vivid example as their insurers denied to cover damages assessing cyber attacks as war-risk and hostile act exclusionary clauses that exclude coverage (the court proceedings of both cases are underway in the us courts). there are two sides to this coin: insured victims of cyber attacks can resort to their insurance to cover the damage, being virtually unaffected baltic journal of economic studies 119 vol. 8 no. 2, 2022 and incurring huge losses otherwise risking their solvency. although insurance companies are justifiably careful to avoid covering damage from cyber attacks, because such unpredictable compensation risks the insurer's solvency. chopra argues the need for a new federally supported cybersecurity insurance program, specifically tailored to cover losses that can arise from cyber-attacks (chopra, 2021) though we believe such a proposal may be viable only for economically fit states. although cyber-related insurance mechanisms seem like an inevitable future for the global reinsurance industry, as cyber threats will pose high-priority problems for states and businesses. nevertheless, every state will seek redress from cyber intruders, and this must be backed by a viable international legal framework, which is now "under construction". 6. conclusions cyber attacks are an evolving, complex and global threat to the security of states and civilian organizations, but the challenges of addressing these challenges range from attribution to accountability for malicious and destructive cyber activity. the most vulnerable victims of cyber attacks are civilians, individuals and businesses who literally have no way to cover their economic losses because the attackers remain undetected or beyond the reach of litigation. insurance schemes do not work because insurers claim that cyber attacks exclude military risks by excluding coverage, which is reasonable, although it leaves victims of cyber attacks without the possibility of redress. states, though, in maintaining their security and cybersecurity, must develop an appropriate strategic environment, legal and infrastructural framework. public international law in modern conditions has a number of problems that make it difficult to fully protect cyberspace from attacks, assaults and threats. all this makes it necessary to review the provisions and rules of global internet norms within the framework of public international law. only by strengthening cooperation between countries, working closely together to develop common standards and regulations, and clarifying the mechanism for responding to cyber attacks can there be a chance to create a secure cyber infrastructure. international law as it currently stands provides a meager legal basis for critical guidance on responsible state behavior in cyberspace, the necessary levels of attribution to establish state or non-state respon sibility for cyber attacks. economic losses from cyber attacks can be covered by insurance schemes, although analysis has shown that they do not work because insurers argue that cyber attacks exclude military risk insurance clauses that exclude coverage, which is reasonable, although it leaves victims of cyber attacks without the ability to recover damages. the article complements current research with a comprehensive analysis of legal and economic issues and calls for the development of an appropriate policy environment, legal and infrastructural framework. the need for a joint international structure was stressed, since it is hardly possible to impose civil liability under national laws, since cyber attacks are predominantly transnational in nature. a joint structure is also needed to 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(2020). notpetya, not warfare: rethinking the insurance war exclusion in the context of international cyber attacks. washington law review, 95(3), 1595–1620. cyberwarfare and cyberterrorism: in brief (2015, march). congressional research service. available at: https://fas.org/sgp/crs/natsec/r43955.pdf baltic journal of economic studies 64 vol. 3, no. 1, 2017 corresponding author: 1 department of accounting, audit and management of financial and economic security, dnipropetrovsk state agrarian and economic university. e-mail: odnoshevnayaolga@mail.ru optimization of salary calculations and employees’ labour productivity stimulation at the enterprise olha odnoshevna1 dnipropetrovsk state agrarian and economic university, ukraine abstract. the purposes of the paper are: the detailed analysis of salary calculations, the evaluation of the effectiveness of employees’ work, the development of optimizing mechanisms of salary calculations by increasing productivity and implementation of the methods of employees’ labour stimulation. methodology. the study is based on an analysis of different groups of enterprises, including agricultural ones. it is analysed that for today the efficiency of labour at some enterprises drops due to low wages and the lack of employees’ motivation mechanism. results. the study found that the process of salary calculations has a lot of problematic aspects, such as a deficient work organization, insufficient stimulation of workers, poorly composed documents, etc. to improve such a situation, it is suggested an introduction of automation in order to reduce the wasting of working time for data processing of an accounting department and to improve significantly the quality and speed of information transfer to the head of an enterprise and external users. it is offered to use a labour ball to improve employees’ motivation, which is a form of accounting for the work varying on quality and quantity that was contributed to production. according to the scoring results, a mechanism of bonuses for employees is suggested. practical implications. we suggested entering new documents to control the number of issued orders – “registration book of issued orders”. to provide a high level of quality control of executed works, it is suggested to display data in a special primary document “record sheet of performance quality”. it is offered to use partial salary payment for unprofitable enterprises through payment in kind. value/originality. at first, the results will allow increasing the firm’s performance quality without losing employees, and subsequently – allow increasing the profitability of the enterprise. key words: optimizing mechanisms, labour productivity, development, development, stimulation. jel classification: c41, c83, d20, d23 1. introduction the labour productivity is an important economic category characterizing the effectiveness of the labour force. the labour productivity shows the rationality of a company’s financial activity and each employee’s activity. the higher labour productivity is, the higher the income of enterprises and salaries. this shows up the general economic pattern of production development. the transition to a market economy has made changes in the forms of the labour relations’ regulation. now the direct form of legal regulation of labour relations is the tariff agreements and collective bargaining agreement. enterprises have the right to choose the system and form of remuneration independently, based on the specifics and problems that have arisen at the enterprise. a major role in the development of the production and increasing its efficiency is played by labour resources. the labour resources are the main productive forces of agricultural production. their correct and complete registration, a study of their structure and motion at the enterprises, their rational use are essential for improving the efficiency of production. human manufacturing abilities are the main factor of production in the society, at each enterprise and its divisions. an employee brings all the factors of economic activity and leads to their interaction to achieve the ultimate goal. on the rationality of employee’s actions depend the results of worker production, its intensity, and effectiveness. the labour and wages accounting is one of the main areas in the whole system of accounting at the enterprise. its major objectives are: the deadline to make the buyout to pay, collect and group rates of the wages for the preparation of necessary reports and make calculations with the social insurance, pension fund and fund of employment in the new economic conditions. considering the problems of the wages, you will notice that only one definition of wages’ size can cause significant complications for all participants of the labour relations, as employee always wants to have the highest level of income while the employer seeks to reduce costs. baltic journal of economic studies 65 vol. 3, no. 1, 2017 the main factor influencing the effectiveness of using the labour is the wage system. it is salary, and often it is only one reason that leads the worker to his workplace. therefore, the significance of this problem is hard to overestimate. the labour and wages accounting should ensure operational control over the number and the quality of work, the use of tools that are included in salary and social payments fund. the new systems of the labour and the wages’ organization should provide financial incentives for the employees. this is due to the dependence of the salary level on living standards. for the most people, the salary is the main source of income. therefore, issues related to the salary (its size, shape of charges and payments, etc.), are among the most pressing for the workers and for the employers. 2. problematic aspects of the calculations of wages the issue of the rational use of the labour forces plays an important role in further enhancing the production efficiency. the results of the company are largely dependent on the availability of its labour force, the efficiency of its use. insufficient availability of the labour force can lead to a failure of the planned volume of the production and its surplus can lead to partial use and to the reduced productivity (vachevska, 2005). the tension in maintenance of the enterprise workforce can be reduced through a better use of the labour, a productivity growth, an intensification of the production, a comprehensive mechanization and an automation of the production processes, an introduction of the new productive machines, an improvement of the technology and an organization of the production. during the analysis should be identified reserves of reducing the need for the workforce as a result of the above measures (kolot, 2003). the improving of labour force’s productivity is a pressing problem, the solution of which depends on the rate of the expanded reproduction in agriculture and completes the needs of the country in its products. according to many leading scientists and economists in the present socio-economic conditions, we have a lot of economic problems related to motivation, namely: small amounts of the cash flow from business enterprises during the year and the impossibility of the obtaining loans lead to a lack of sufficient working capital to pay salaries every month, all the more so twice a month; inflation and the constant threat of "collapse" of the currency do not allow using the money to objectively evaluate and compare labour costs at various stages of a long production cycle. in such a situation, money is no longer a measure of the labour costs and their evaluation; lack of the communication between outcomes and the level of the salary as the result of almost all major agricultural enterprises pay for the amount of the performed work or received goods, without incurred costs; workers’ salary charged at a certain declared level (tariff rates, etc.) and the actual financial capabilities of many companies do not allow to pay that amount of money because only the material and the cash production costs (cost minus salaries) often exceed the price of the products. as a result of the mentioned is carried a constant accumulation of arrears wages without any economic support of its maturity; violation of the settlement principle. thus, if the company installed the required level of payroll and the amount of the advance paid within a year is less than its actual size, at the end of the financial year a surcharge is made. if the volume of performed work exceeds the required advance of fund of the payment, it will be a cost overrun; replacement of monetary payment by kind. there are cases when all wages are issued in the form of products, goods and services, which is not the wages in fact. it is a complete replacement of the monetary payment by the natural issues. this way of the payments for the employees is not legally regulated or provided in the collective agreements and regulations of the pay. in addition, it leads to budget losses (vachevska, 2005). the organization of the work is based on legislation and other regulations, the general agreement at the national level, an industry, regional agreements and the collective labour agreements. every citizen the right to work realizes by entering into an employment contract. the employment contract is an agreement between the employee and the owner of the enterprise, the institution, the organization or the empowered body where the employee agrees to perform the work specified in the agreement, with the subordination of the domestic labour regulations, and the business owner or the authorized body is obliged to pay the employee the wages and provide working conditions to the employment provided by the labour legislation, the collective agreement and the agreement of the parts (kolot, 2003). the enterprise uses the material and human resources for its activities. the amount and composition of the staff depend on its size, level of mechanization, direction of the specialization, structure and organization of production and other factors. the demand for the labour is defined in terms of economic and social development. the development of productive forces and the steady growth of the needs of the society determine the need for the increasing productivity. at all stages of the human history, an economic law of the productivity growth operates. the achieved level and the pace of the productivity growth is an important indicator of the efficiency, a source of real income growth and welfare. baltic journal of economic studies 66 vol. 3, no. 1, 2017 to our opinion, the wage is advisable to call a fee, which is calculated in the monetary terms, which the authority has to pay to the employee for his work. it can be concluded that scientists have studied the meaning of the wage for a long time. there are as many definitions of the salary, as many opinions about the dependence of the wages from the company’s type of activity. 3. terms of payments of wages the organization of the work is based on the legislation and other regulations, the general agreement at the national level, an industry, regional agreements and the collective labour agreements. the owner or his representative comes with the employee in the labour relations when he receives the employee for the work. the main document, which establishes the relationship, is a contract of the employment. the employment contract is an agreement between the employee and the owner (or authorized body, person). according to the labour contract, the employee agrees to perform the work specified in the contract, observe internal regulations of the company, and the owner of the company or its authorized body or person is obliged to pay the employee the wages and provide the necessary conditions for the job. according to the law, the wages are paid regularly in working days in the terms laid down in the collective agreement, but at least twice a month through the period of time that does not exceed sixteen days. the payment for the employees is carried out on a priority basis after paying the required fees. the wages of employees consists of the main (permanent) and additional (variable) units, as well as incentive payments. the purpose of the rationing of the work at the enterprises is based on the introduction of new technology, the improvement of the production and the labour organization, the improving of its conditions to reduce the cost of the output, the increasing productivity, which is essential to expand the production and to increase the real incomes of the employees. the rationing as a quantitative measure of the labour influences the qualitative differences. disadvantages of the rationing, which are expressed in different intensity standards, the level of their performance, determine the violation of the ratio of pay, depending on the complexity of the work. labour standards contribute to equal pay for equal work only when they reflect its equal intensity (mayorenko, kalyghnuyi 2000). the organization of the wages largely depends on the quality of the legal enactments, as the use of the rules of time and understated norms of the work in the evaluation of the value of the worker’s labour leads to a violation of the principle of payment depending on a number of the labour. the connectivity of earning of the workers with quantitative and qualitative results of their work is carried out through the forms and wages. their rational choice and building help to provide the material interest of the workers in growing the productivity, improving the quality of the products, increasing its competitiveness, saving raw materials, etc. (mayorenko, kalyghnuyi 2000). the form of extra pay for the performance of the indicators is a bonus. there is a necessity of the bonuses due to the fact that the wages for the worked hours and the number of products does not let to take into account the results of the labour, to combine personal material interest with the collective one, to stimulate increased productivity, improved utilization of assets, improve the quality of the product at the same time. 4. optimization of the calculation of salary and stimulation of the employees’ work the chief accountant must carry out operational meetings concerning the accounting of all links of production and analyse the quality of submitted original documents and give the workers a rating of the work quality in order to strength the labour discipline among employees of all accounting and to monitor the workflow. the simplification of accounting and reporting reductions are equally important. the agrarian enterprises continue to report about the production and the production costs, volumes, sales channels and revenue as for departmental reporting. one of the main ways to improve accounting is the transition to modern computer technology. it should be noted that majority of accounting programs that apply in the country, repeats the technology that expanded in the hand forms of accounting and does not include fundamentally new approaches. the computer helps the accountant to perform calculations more quickly and accurately, to produce accounting books, payment, accounting documents and so on. in general, the level of automation of accounting in ukraine is high, but enterprises of the agricultural sector should significantly improve the material and technical equipment and train staff to carry out accounting services in order to prepare the framework for the implementation of the automated form of accounting. we propose to use a labour ball to improve motivation, which is a form of accounting for the work varying on quality and quantity that was contributed to production. as labour is different in quality and in quantity, then the indicators of estimation of the labour costs per working day are different too. there are prices per unit of worked time, the amount of completed work and rendered services in the labour points. the ball equal to 1 estimates a simple job that does not require training. all other activities are equal according to the coefficients of the indicator of estimation. the more complex the job, the more skills it needs, and more labour points it baltic journal of economic studies 67 vol. 3, no. 1, 2017 has. the proposed method of scoring skill level of the employee is presented in table 1. it is possible to address cumulative labour costs of each individual worker and all together during the production period by using the labour points. at the end of the period, when the enterprise’s business results become known, it is recommended to determine the actual level of payment (in cash and in kind) for a labour point. the specific employee receives compensation in a proportion of invested amount and the quality of the work, i.e. the number of the labour obtained points. table 1 the proposed method of scoring skill level of the employee labour point characteristics of workers 1-3 an employee who has no skills in performing their work that does not require it. they are auxiliary and service (loaders, cleaners, etc.). they have no special training. 4-5 the employees, low-skilled, who are engaged in a simple work, such as repairs, metalwork, building and so on. they have an experience for a few weeks. 6-7 skilled employees who are engaged in challenging work (metal and woodworking, repair, locksmith, construction, etc.). they have considerable experience for a period of 1-2 years. 8-10 employees who are highly qualified. they are employed in particularly difficult and responsible work (repair and adjustment of complex equipment, electrical work, etc.). employees who have extensive practical experience, more than 2-3 years, and periodically probation. the sequence of awarding employees in accordance with the rating list in fig. 1. the use of the proposed approach to the construction of labour relations at the enterprise provides a solution of certain economic problems, namely: it lets to compare and adequately assess the labour costs during the period of agricultural production; it promotes cessation of further growth of arrears of the wages, which is very important in the current environment; it helps to eliminate levelling in the wages of employees of enterprises of different economic efficiency; among the participants of the process, only such amount of money and volume of the products, food and feeds is distributed, which may be allocated for the salaries based on the results of the business period. the amount of payment for each employment’s point is not a fixed quantity. the better results and lower labour costs, the more the amount of money for labour point, and vice versa. so, this helps to make an absolute connection between the salary and the work’s result. it is proposed to use the “registration book of issued orders” to control the number of issued orders at the company. its purpose is to register orders, to control the assignments, outputs and worker’s salary fund in the whole area. this will prevent the cases of uncontrolled orders issued and unreasoned payments. we offer data on the critical areas of the work to reflect in a special primary document “record sheet of performance quality” to ensure a high level of control over the quality of work performed at the studied company. the results of the quality of products can adjust the level of the wages of employees, raise the level of the labour discipline in units, apply financial incentives. therefore, the primary documents to accounting products consider appropriate to reflect its quality characteristics. at present, it is practiced in the agricultural areas to make the partial payment in kind. with the development of market relations and due to the lack of cash, it is advisable to make the payments in kind, using free products or sold at bargain prices. there is no developed document on payments in kind yet, so freeform documents are used for this purpose. the employees sometimes want to receive the partial payment in kind for using in the private household. although the issue of wages in kind to employees is still relevant for many farms because of their loss and insecurity of the working capital, but at the studied enterprise the improvement is needed. however, we believe that the introduction of stimulation actions will allow the companies, including agricultural ones, to optimize their work and to establish a fair process of workers’ wages. the increasing of profits determination of rating of each employee individually according to the proposed grade drafting of rating list distribution of the amounts allocated for bonuses by rating of each employee fig. 1. the scheme of employees’ awarding according to the rating list baltic journal of economic studies 68 vol. 3, no. 1, 2017 by stimulation employees’ work will increase their productivity. 5. conclusions the study found that the process of salary calculations has a lot of problematic aspects, such as the deficient work organization, insufficient stimulation of workers, poorly composed documents, etc. to improve such a situation, there is suggested an introduction of automation in order to reduce the wasting of working time for data processing in an accounting department and to improve significantly the quality and speed of information transfer to the head of an enterprise and external users. it is offered to use a labour ball to improve employees’ motivation, which is a form of accounting for the work varying on quality and quantity that was contributed to production. according to the scoring results, a mechanism of bonuses for employees is suggested. also, we suggest entering new documents to control the number of issued orders – “registration book of issued orders”. to provide a high level of quality control of executed works, it is suggested to display data in a special primary document “record sheet of performance quality”. it is offered to use partial salary payment for unprofitable enterprises through payment in kind. at first, this will allow increasing the firm’s performance quality without losing employees. references: vachevska, n.l. (2005). theoretical aspects of wages in a market economy. actualni problemu economicu (recent economic problems), 1 (43): 177-178. kolot, l.m. (2003). motivation of staff: a textbook. kyiv: kney. 345. mayorenko, v., kalyghnuyi, v. (2000). the new methodology adjustment of wages in a market economy. economist (economist), 11: 83-91. ольга одношевная оптимизация расчетов по оплате труда и стимулирование продуктивности работы служащих на предприятии аннотация. целью работы детальный является анализ состояния расчетов по заработной плате. оценка эффективности работы сотрудников, а также разработка механизмов оптимизации расчетом за счет повышения продуктивности роботы и внедрения мотивации роботы служащих. методика. исследование основано на анализе работы разных групп предприятий, в том числе и сельскохозяйственных. проанализировано, что на сегодняшний день эффективность работы в некоторых из них падает, за счет низкой оплаты труда и отсутствия мотивационного механизма сотрудников. результаты. в результате проведенного исследования, выявлено, что процесс расчетов по оплате труда имеет много проблемных аспектов. из-за несовершенной организации работы, недостаточное стимулирование работников, некачественно составленные документы. для улучшения данной ситуации, было предложено внедрение автоматизации, что позволит сократить затраты рабочего времени бухгалтерии на обработку учетной информации и позволит значительно повысить качество ведения учета и оперативность передачи информации как руководителю предприятия, так и внешним пользователям. для улучшения мотивации труда предложено использовать трудовой балл, является формой учета различной по качеству и количеству труда, которая вложена в производство. по результатам балльной оценки предлагаем механизм премирования работы сотрудников. практическое значение. предлагаем ввести новые документы, с целью контроля за количеством выданных нарядов – журнал регистрации выданных нарядов и для обеспечения высокого уровня контроля качества выполненных работ отображать данные в специальном первичном документе «учетный лист качества работ». для предприятий, получающих убытки, предлагаем перейти на частичную выплату заработной платы частями, через оплату продукцией. значение/оригинальность. полученные результаты позволят на первых этапах повысить качество работы фирмы, при этом не потеряв работников, а в дальнейшем и повысить прибыльность предприятия. baltic journal of economic studies 214 vol. 7 no. 4, 2021 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: kharytonov888@gmail.com orcid: https://orcid.org/0000-0002-2425-1758 2 admiral makarov national university of shipbuilding, ukraine. e-mail: slo71nuos@gmail.com orcid: https://orcid.org/0000-0002-2439-074x 3 admiral makarov national university of shipbuilding, ukraine. e-mail: podaienkomarina@gmail.com orcid: https://orcid.org/0000-0002-3729-6226 doi: https://doi.org/10.30525/2256-0742/2021-7-4-214-225 development of models of technology transfer for public works yuriy kharytonov1, serhii slobodian2, marina podaienko3 abstract. the aim of the study is to improve the efficiency of technology transfer management in public works by developing a model for the reasonable definition of transfer objects and their components. the subject of the study are models of reasonable definition of technology transfer objects and their components. the basis of the methodology of research are the principles and models of technology transfer, methods and models of the theory of project management, as well as system analysis. the paper shows that for the formation and implementation of public works for various purposes, the goal of using technology transfer processes should be considered the achievement of the highest level of technological development. under the conditions of the technological development processes analysis of the individual economic sectors, possible models to achieve different levels of technological development and technical-technological indicators of public works are defined. these include the "gradual" transition model, the "jumps" model, and the "big jump" model. these models are characterized by the following: the model of "gradual" transition assumes that its main feature should be considered a gradual transition from the actual level of technological development to the one following it; for the model of "jumps" the main feature should be considered the possibility of transition to a higher level of technological development bypassing the next in order from the actual level; the "big jump" model differs from the "jumps" one in that a significantly low initial level of technological development immediately reaches the maximum level, which takes place for a certain time. the chosen model of processes to achieve different levels of technological development significantly affects the planning of qualitative and quantitative indicators of public works. identification of potential objects of transfer and their components is proposed to solve through the development of classification features of public works and programs, as well as the formation of their information models. the main classification attributes of public works should be considered: organizational, technological, as well as equipment and materials. as the main indicators to ensure effective management decisions in the planning of public works should be used the cost of transfer, as well as the timing of delivery of objects. the conditions for selecting the object of transfer and its components in terms of cost and time for different models of acquisition of the appropriate technological level are defined. a model of technology transfer object distribution and an algorithm for planning public works using technology transfer was developed. the implementation of the research results on a number of public works for the development of municipal heating and water supply systems has proven their effectivenesstaking into account the significant resources needed for public works and programs, the research findings should be considered important for various sectors of the economy. key words: technology transfer, public works, potential technology transfer objects, models for achieving an appropriate technological level. jel classification: n70, o33 baltic journal of economic studies 215 vol. 7 no. 4, 2021 1. introduction the development of various sectors of modern ukrainian economy involves the implementation of a number of projects and programs, among which a special position belongs to public works, characterized by the significant amount of resources involved, their social importance, etc. [1–4]. one of the directions of improving the efficiency of the formation and implementation of public works and programs for various purposes should be considered the use of innovative components in them. innovative components give the project's products competitive qualities and ensure their owners a competitive position in international, regional and industry markets. examples of such innovative components are innovative technological platforms shipbuilding 4.0 (germany), smartport (netherlands), bimtechnologies, energy technologies and equipment, advanced management models, etc. [5−15]. the most important and fundamental issues that must be resolved during the period of initiation and planning of infrastructural projects and programs, which will ensure the efficiency of their implementation in the final result, should be the organization of technology transfer processes particular attention should be paid to the choice of transfer objects (knowledge, experience, industrial property, etc.). at the same time, it is especially important for public works to determine the models and mechanisms of technology transfer and directly innovative components that can be used in projects and programs, requires separate research. first of all, this is due to the significant nomen clature of structural and parametric indicators of innovative components and their cost, as well as the need to address issues regarding the effectiveness of their application and so on. the necessity of tasks' effective solution, which are associated with technology transfer in infrastructural projects ensures the relevance and applied scientific relevance of the research. 2. literature analysis and problem statement a significant number of publications by domestic and foreign researchers are devoted to modeling the processes of technology transfer and their components in various sectors of economic activity, in the context of the existing specifics inherent in individual states and regions [16−27]. thus, in (technology transfer desk reference) there is a review of certain aspects of the current federal policies, processes, mechanisms and standard model of technology transfer. the publication covers transfer technologies, provides information about federal and non-federal organizations that support such transfers. particular attention is paid to methods of resource usage, practical recommendations are given on mar-keting processes in the field of technology transfer. the structure of the office in the federal laboratory (t2) provides the connection between the laboratory and the technology transfer applicant. the main processes of technology transfer (according to one of the given standard models) are considered: identification of technologies (including intellectual property), technology assessment, identification of potential partners, determination of appropriate transfer technologies, implementation of the transfer and carrying out activities on its completion. in (uspenskiy, kuzmin, denisenko, zemtsov, uspenskiy, dolgopolova, (2013) the methodological aspects and business model of technology transfer processes, which is used in the republican technology transfer center of the republic of belarus, are considered. the business model of technology transfer processes is divided into four stages: determining the client's potential for technology transfer, identifying technology profiles, finding partners and search tools, negotiating and signing the contract. the main results of the technology transfer business model are considered to be the r&d contract, the supply contract, the cooperation agreement, the license agreement or the investment agreement. the purpose of the research (hanen kooli-chaabane, vincent boly, bernard yannou, 2014) was to adapt the project management methodology for monitoring technology transfer projects. the main goal of the proposed model is to achieve a better understanding of the basic phenomena of technology transfer, so that it can be effectively managed. particular attention was paid to the detailed description of the stages of the technology transfer project. to fill the gap between the proposed model and the real complexity of the technology transfer process, the research relied on five case studies in which each event or action is tracked and analyzed. the organization and duration of the five stages of the model allow you to control the project's success. the suggested model serves two main functions: it provides a better understanding of the observed phenomena (with a descriptive and explanatory role) and it improves the efficiency of the monitored impact on the system through better process visibility. the study (landry, amara, cloutier, halilem, 2013) expands and integrates elements of the conceptual framework for the creation of the value of knowledge and business. it is shown that knowledge and technology transfer organizations located in canada are solution centers that bring together knowledge providers and recipients. the results of the research indicate that managers of knowledge and technology transfer organizations can improve their business models and baltic journal of economic studies 216 vol. 7 no. 4, 2021 increase the value for client companies by improving the level of personality. the concept of innovative ecosystems has become popular during the last 15 years, which led to a debate on its relevance and conceptual steadiness (ove granstrand, marcus holgersson, 2020). the purpose of the study has become a review of the definitions of innovation ecosystems and related concepts, on the basis of which the definition of "innovation ecosystem" is proposed. the innovation ecosystem is an assemblage of subjects, activities and artifacts that change, as well as institutions and relations, including mutually supportive and interdependent relations. this definition is combined with the corresponding conceptualizations of innovation systems. the research was devoted to the evaluation of innovations, especially at the beginning of the development of new products (marisa dziallas, knut blind, 2019). the study analyzes scientific publications (1980–2015) on innovative indicators. the result of the study should be considered the obtained classification of certain indicators by contextual measurements specific to the company. an analysis of scientific publications found that current publications emphasize qualitative and indirect indicators, but neglect indicators in the early stages of the innovation process. the review identifies 82 unique indicators for evaluating innovation, including 26 indicators for the early stages of technology transfer. the results of the study cited in (silva, feldmann, spers, bambini, 2019) analyze and describe the technology transfer processes of embrapa's agrobiology division. (empresa brasileira de pesquisa agropecuária – brazilian agricultural research corporation). the paper examines classical and diffuse models of technology transfer in brazilian agriculture and shows the role of the government in promoting innovation. processes of technology transfer in the oil industry of libya are shown in (mohamed, sapuan, ahmad, 2010). the article examines the current problematic factors that determine the efficiency of technology transfer. these include the following factors: infrastructural, the factor of state support for technology transfer processes, the factor of training opportunities. the elements of technology transfer support are described: information technologies, research and development, production culture, availability of local subcontractor, etc. a study is devoted to the analysis of current trends in international technology transfer (huk, 2013). the purpose of the work (obodets, krasnov, 2012) is to analyze the current state of technology transfer in ukraine, as well as to identify problems of transfer development and find ways to improve the situation. it is shown that in ukraine through weak interaction of science and business technology transfer has not found its proper development, and promising scientific developments are often not commercialized. it is noted that the problem for enterprises in need of technology transfer is often a lack of competence in the purchase of technology, and for the developer of the technology – the problem of marketing their own intellectual product. based on the analysis of a significant number of scientific publications, (sazali, raduan, suzana, 2012) considers various aspects of the problem of technology transfer as an important catalyst for corporate success and national economic growth. shows the role of foreign investment and multinational corporations as major sources of technology to improve technological capabilities and competitiveness. the models of technology transfer through the official market channel and through non-market channels are considered. the purpose of the study (bozeman, barry, heather rimes, and jan youtie, 2015) was to review the literature on technology transfer. this article focuses on an empirical study of technology transfer processes in the united states over the past 15 years. "out-thedoor", "market impact", "economic development", "scientific and technical potential", and the like criteria for technology transfer effectiveness are considered. according to the results of the research presented in (instytutsiini aspekty mizhnarodnoho transferu znan i tekhnolohii v ukraini) the main problems in ukraine in the field of technology transfer were identified: the lack of a geoeconomical strategy, the ineffectiveness of methods of active innovation activities of enterprises, the problem of integration of science and business, etc. all this hinders the country 's participation in the international exchange of technology. it is noted that the lack of institutional support for international transfer of knowledge and technology in the economy can be compensated by the involvement of higher education institutions. universities must play a primary role in building the country 's innovation infrastructure and deepening the international transfer of knowledge. among other things, universities should ensure the training of highquality personnel with higher education to develop and implement innovations in production. the analysis of publications has shown that currently the issue of technology transfer regarding public works does not solve the needs of the practice of their formation and implementation, which determined the purpose and main objectives of the study. 3. objectives of the research the aim of the study is to improve the efficiency of technology transfer management in public works by developing a model for the reasonable definition of transfer objects and their components. baltic journal of economic studies 217 vol. 7 no. 4, 2021 in order to achieve the goal of the study the following tasks were set: – define processes' models of transition to different technological levels of the projects' infrastructure components through transfer of technologies; – develop models for the substantiated determination of the objects of transfer technologies and their components in public works; − create a model for the dissemination of technology transfer objects; – design an algorithm for determining the objects of technology transfer and their components in public works. 4. research materials and methods identification of the main objects of technology transfer of public works need, above all, to perform research of the subject area of the projects. the following basic principles, methods and models were used as the basis for the research performed: geoinformation technology, energy management, system analysis, determination of basic structural and parametric characteristics and indicators. in the methodological aspect, the definition of the main objects of technology transfer of public works needs to perform research into the subject area of the projects. the basic principles and models of geoinformation technologies were used as the basis for the conducted research, which made it possible to perform these studies in conjunction with the methods and models of system analysis, as well as energy management. 5. results of research on technology transfer models 5. 1. models of transition processes to different levels of technological development modeling of the processes of technology transfer takes place within the framework of regulatory and legal documents, which are dynamically updated and aimed at ensuring the effective use of scientific, technical and intellectual potential of technology [29–31]. regulatory documents provide for the solution of issues of property rights, as well as the expansion of international scientific and technical cooperation and regulate the organizational, legal, economic and financial framework of state regulation of activities in the field of technology transfer. in general terms, the level of technological development of a particular branch of the economy can be characterized by its technological and organizational indicators: u = <p, o>, where u – the level of technological development; p – technical and technological indicators; o – organizational indicators. the purpose of using technology transfer processes should be considered the achievement of the highest level of technological development, i.e. the level existing in the industry (in world practice): u = <p, o> → max. the process of technological development of individual economic sectors can be represented as a process of achieving the corresponding p and o indicators (figure 1). 1 uo=f(p0,o0) u1=f(p1,o1) ui=f(pi ,oi) ur=f(pr, or) u t figure 1. the process of achieving different levels of technological development: t – time baltic journal of economic studies 218 vol. 7 no. 4, 2021 thus, taking into account the transfer's effects of technologies, it is possible to define the following models of transition processes which can provide nonlinear character of achievement of separate levels of technological development (figure 2−4). the proposed models of processes to achieve different levels of technological development of the industry are characterized by the following. the model of "gradual" transition suggests that its main feature should be considered a gradual shift from the actual level of technological development to the one following it. for the model of "jumps" the main feature should be considered the possibility of moving to a higher level of technological development bypassing the next in order from the actual level. the "big jump" model differs from the "jumps" model in that a significantly low initial level of technological development immediately reaches the maximum level, which takes place for a certain period of time. similarly to the accepted models of transition to different levels of technological development it is possible to define models of transition of design and engineering and also organizational indicators (figure 5−7). determined models of the processes of transition to different levels of technological development of the components of public works allow us to take into account the possibility of non-linear nature of the achievement of indicators in the formation of technology transfer processes. the choice of the model of transition to different levels of technological development is based on the conditions of certain criteria. 5.2. models for the substantiated definition of technology transfer objects in public works the basis for determining the potential objects of transfer and their components is proposed to solve 1 uo. .. .u1 ui ur . uo . u1 .ui . ur uo u1 ui ur. . . . po .. .p1 pi pr . po . p1 .pi . pr po. . . .p1 pi pr figure 2. the "gradual" transition model 1 uo. .. .u1 ui ur . uo . u1 .ui . ur uo u1 ui ur. . . . po .. .p1 pi pr . po . p1 .pi . pr po. . . .p1 pi pr figure 3. the "jumps" model 1 uo. .. .u1 ui ur . uo . u1 .ui . ur uo u1 ui ur. . . . po .. .p1 pi pr . po . p1 .pi . pr po. . . .p1 pi pr figure 4. the "big jump" model 1 uo. .. .u1 ui ur . uo . u1 .ui . ur uo u1 ui ur. . . . po .. .p1 pi pr . po . p1 .pi . pr po. . . .p1 pi pr figure 5. sequential transition model of indicators 1 uo. .. .u1 ui ur . uo . u1 .ui . ur uo u1 ui ur. . . . po .. .p1 pi pr . po . p1 .pi . pr po. . . .p1 pi pr figure 6. the "jumps" model of indicators 1 uo. .. .u1 ui ur . uo . u1 .ui . ur uo u1 ui ur. . . . po .. .p1 pi pr . po . p1 .pi . pr po. . . .p1 pi pr figure 7. the "big jump" model of indicators baltic journal of economic studies 219 vol. 7 no. 4, 2021 through the development of classification features of projects and programs, as well as the formation of their information models. the main classification attributes of public works can be offered organizational, technological, equipment and materials. an example of the definition of transfer objects and their components on the basis of the classification attributes of the project is shown in figure 8. w hen planning public works, an important stage of work should be considered the creation of matrices of indicators of the levels of design and engineering and organizational development, which allows you to determine the initial technological level of the project: u f p o0 0 0= ( , ), p p p i p i p r 0 1 1= + ... ... , o o o i o i o r 0 1 1= + ... ... . in the conditions p0 = pr and o0 = or the technological level of the project corresponds to the high level of u = umax, which exists on the implementation of the planning processes of the project. each of the indicators p and o are multiple of design and engineering and organizational indicators, taking into account previously implemented public works for modernization or reconstruction. at the time of determining the real level of technological development, the structure of indicators may have different values, which are inherent in different levels of technological development: real n p n p ai t p ai t n p az t p ai y n p ai y τ τ τ τ τ τ = = = = + = = = + 0 0 1 0 1 , , .... , , , ..... , ................... .................... τ τ = = n p az y p ai 0 ,, , .... , , m p ai m p az m τ τ= + =0 1 0 1 the main classification features of the elements of technology transfer in projects of development of municipal heating systems 1. organizational 2. technological 3. technological equipment and materials 1.1. models of organizational structures 1.2. project formation models 1.3. models of project financing 1.4. project management models 1.4.1. models of initiation 1.4.2. planning models 1.4.3. models of project product creation and control 1.4.4. project completion models 2.1. design technologies 2.2. technologies for the development of elements of energy consumer systems 2.3. technologies for the development of elements of energy transportation and transmission systems 2.4. technologies for the development of elements of energy generation systems by type of energy resources 2.4.1. traditional 2.4.2. non-traditional 3.1. equipment for construction work 3.2. materials for construction work 3.3. computer hardware and software 3.4. measuring and control systems and their elements 3.5. other potential technology transfer objects figure 8. an example of the definition of transfer objects and their components on the basis of classification features of the project baltic journal of economic studies 220 vol. 7 no. 4, 2021 real n o n o ai t n o ai t n o an t i o ai y i o ai y τ τ τ τ τ τ = = = = + = = = + 0 1 1 , , .... , , , ..... , ................... .................... τ τ = = i o an y o ai 1 ,, , .... , , m o ai m o an m τ τ= + =1 1 1 where real n p τ = 0 – actual level of design and engineering indicators; real n o τ = 0 – valid level of organizational performance. potential opportunities to influence the formation and planning of public works by different models and different levels of technological development on certain indicators require design decisions. these decisions can be resolved on the basis of the developed model of reasonable definition of technology transfer objects and their components. as the main indicators that ensure the adoption of effective in the planning of public works can be used the cost of transfer – с and the terms of delivery of the objects of transfer – т (figure 9). the cost of the transfer includes the cost of all expenses associated with the procedures of transfer, as well as the direct cost of the object and the components: c cii d = =∑ 1 , t tii d = =∑ 1 , where c – includes the cost of all expenses associated with the procedures of transfer, as well as the direct cost of the object and the components; t– transfer object delivery times. the conditions for selecting the object of transfer by value for different models of acquisition of the appropriate technological level should be considered: ui = umax when cadd ≥ сr – for the "big jump" model; ui = ui+1 when cadd ≥ сi+1; – for the "gradual transition" model; ui = ui+m when cadd ≥ сi+m; – for the "jumps" model, where ui – level of technological development; ui+1 – the next level of technological development after the existing one; ui+m – random level of technological development; cadd – the acceptable, under planning conditions, expenses related to transfer procedures and the direct cost of the object and components; сr – the cost of expenses associated with transfer procedures and directly the cost of the object and the components of the transfer at the transition to the highest level; сi+1 – the price of the expenses associated with the transfer procedures and the cost of the object itself and the components of the transfer at the transition to the nearest level; сi+m – the value of the expenditures associated with the transfer procedures and directly the price of the object and the components of the transfer at the transition to the random level. the conditions for selecting the object of transfer by time for different models of reaching the technological level should be considered:: ui = umax when tadd ≥ tr – for the "big jump" model; ui = ui+1 when tadd ≥ ti+1 – for the "gradual transition" model; 1 uo=f(p0,o0) u1=f(p1,o1) ui=f(pi , oi) ur=f(pr, or) ci , ti c1,t1 (cr,tr) (ci , ti)n u t,c figure 9. main indicators of technology transfer of different levels of technological development baltic journal of economic studies 221 vol. 7 no. 4, 2021 ui = ui+m when tadd ≥ ti+m – for the "jumps" model, where tadd – acceptable time of transfer objects delivery; tr – acceptable period of transfer objects delivery during the switching to a high technological level; ti+1 – allowable delivery time of transfer objects during the transition to the nearest technological level; ti+m – permissible delivery time of transfer objects during the transition to the random technological level. according to the given conditions for determining the objects of transfer and their components, a list of potential objects of transfer is formed: st={sti ,esti}, sc={sci , esci}, where st – multiple objects of technology transfer, selected by time; sti – the object of technology transfer, which is selected by time; sc – multiple objects of technology transfer, selected by value; esti – component of the object of technology transfer, selected by time; sci – technology transfer object, selected by value; esci – component of the technology transfer object, selected by value. considering the circumstances that may affect the selection of technology transfer objects, their list is clarified and becomes the subject of planning processes of the components of public works by building an appropriate hierarchy. 5.3. model for the dissemination of technology transfer objects an important aspect of technology transfer processes should be considered the conditions of their dissemination, which are sufficiently reflected in existing scientific publications. given the significant number of typical public works and programs for various industries, it seems possible to propose the following model for the distribution of technology transfer objects (figure 10). the model does not contradict the existing ones, which are 1 transfer object developers stakeholders of transfer object development projects owners of the transfer objectsdw dw 5 kw kw 4 kw 6 the market for "outdoor" transfer objects customers for the development of transfer objects dw 1 kw 2 the market for "confidential" transfer objects transfer object traders subjects of technology transfer public authorities bodies of local self-government project developer project stakeholders experts others рublic works kw 3 unified information space the project team subjects of publicprivate partnerships figure 10. model for the dissemination of technology transfer objects baltic journal of economic studies 222 vol. 7 no. 4, 2021 built on the basis of normative documents and complements them. the developed model is based on the idea of creating a single information space for projects. due to this the problems of dissemination of technology transfer objects, reducing the total cost of transfer procedures, the introduction of unification of elements of transfer technologies within the framework of public works for their intended purpose, etc. are solved. owners of transfer objects in the form of customers and developers of transfer objects, as well as stakeholders of technology transfer object development projects create appropriate information data and knowledge banks. they are conventionally divided into transfer objects for "outdoor" (dw, kw) and "confidential" (dw 1, kw 1) markets. with traders' participation, owners of transfer objects realize the potential of their innovations. one of the key issues that should be addressed when transferring technology, especially from abroad, is the issue of providing appropriate resources. the solution to this issue for public works can be proposed through the joint participation of the state and enterprises of various forms of ownership and subordination through the use of a platform of publicprivate partnerships. as a result of such cooperation, a unified information space is formed (dw 3 and kw 4), access to which is used by subjects of technology transfer, public authorities, local governments and others. project teams that are responsible for technology transfer planning, with access to relevant knowledge and data warehouses, implement project and program strategies. in terms of technology transfer issues, these include strategies related to achieving the highest possible technological level of the project. target tasks of technology transfer can be achieved by using the proposed models and certain conditions of reasonable choice of transfer objects and their components. 5.4. algorithm for identifying technology transfer objects this research allowed us to develop an algorithm for planning public works using technology transfer (figure 11). in general terms, the algorithm sequentially defines the processes that ensure the definition of technology transfer objects and their components. it should be noted the processes that precede the creation of the information project model, namely: the definition of the real level of technological development, the formation of a preliminary list of transfer objects and the construction of a hierarchical structure transfer objects. 6. discussion of the results of models implementation in the management of public works the research results were integrated into existing methods and models of public works management, namely in planning processes. thus, during the formation of projects for the development of municipal heating systems, using the developed methodology, the objects of technology transfer were identified. these objects were elements of the heat transmission system: heat networks, elements of heat points systems. the foundation for the development of the potential transfer objects list was the information model, which was developed on the basis of certain structural and parametric indicators of the heat supply systems elements (a fragment of the information model is shown in figure 12). according to the results of research, including statistical, technological indicators and the level of technological development of the heat transportation system of the municipality were determined in relation to the current level. determination of real indicators for pre-insulated pipelines of the existing system and indicators that can be obtained through the transfer of technology has shown the feasibility of their appli-cation in projects based on certain values of c and t. similarly, according to the methodology outlined, such objects of technology transfer as innovative systems of heating the coolant, boiler room equipment and the like were identified. testing of the developed models and algorithm allowed to determine their impact on the effectiveness of project management. the practice of using the developed models and algorithm makes it possible to claim an increase in the efficiency of project planning and technology transfer management processes. the results of the research and their testing in the implementation of numerous public works for various purposes allow us to draw the following conclusions. 7. conclusions 1. the models of "gradual" transition, "jumps" and " big jump" are defined as patterns of transition processes to different levels of technological development of the components of infrastructure projects, and with their help the possibility of non-linear nature of achieving the indicators of technological development is also proved. the chosen model of the processes of transition to different levels of technological development significantly affects the planning of qualitative and quantitative indicators of infrastructure projects. 2. the developed model of reasonable definition of technology transfer objects and their components in public works determines the list of potential transfer baltic journal of economic studies 223 vol. 7 no. 4, 2021 1 defining the mission and goals of the project formation of the information project model statistical research performing research on key indicators carrying out research on organizational models and mechanisms determination of technological indicators defining organizational indicators determining the real level of technological development calculation of cadd, cr, ci+1, ci+tmeasuring of ui by valuedetermination of тadd, tr, ti+1, ti+t determining of ui by time formation of a preliminary transfer object listrestrictions formation creating a list of transfer objects defining a model for achieving the technological level determination of p, o indicators in the transfer market transfer objects are definedforming the hierarchical structure of transfer objects figure 11. algorithm for determining the objects of technology transfer and their components in public works 1 druzhby narodov 17 druzhby narodov 20 tc № 701 tc № 702 tc № 704а tc № 704 tc № 703 hdr № 7 mbr № 17 tc – thermal chamber hdp – heat distribution point mbr – modular boiler room druzhby narodov 15 figure 12. fragment of the information model in the form of a heat supply system schematic map objects and their components in the conditions of determining the cost of transfer and timing of delivery of transfer objects. the reasonable definition model of transfer objects provides a basis for the further process of determining the optimal qualitative and quantitative indicators of transfer objects. 3. the developed model of dissemination of technology transfer objects is based on the creation baltic journal of economic studies 224 vol. 7 no. 4, 2021 of a unified information space and provides the definition and meaningful content of technology transfer processes from their owners to the stake holders of public works. application of the model significantly reduces the time for the formation of public works due to the existing ability to automate the processes of dissemination of technology transfer objects. 4. the algorithm for determining technology transfer objects and their components in public works is the basis for automating technology transfer management processes. the proposed algorithm involves determining the quantitative and qualitative indicators of the objects of transfer, as well as the formation of their hierarchical structure that ensures effective planning of public works in terms of time, cost and quality. acknowledgements the authors express their gratitude to the staff of the center for applied research in admiral makarov national university of shipbuilding for participation in approbation of research results in the process of implementation of public works of municipal heating and water supply systems development. references: plan zakhodiv z reformuvannia zaliznychnoho transportu: rozporiadzhennia kabinetu ministriv ukrainy vid 27.12.2019 № 1411-r. reforma infrastruktury. available at: https://www.kmu.gov.ua/diyalnist/reformi/ekonomichne-zrostannya/ reforma-infrastrukturi pro skhvalennia enerhetychnoi stratehii ukrainy na period do 2035 roku "bezpeka, enerhoefektyvnist, 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(2012). exploring the technology transfer mechanisms by the multinational corporations: a literature review. asia social science journal, 8(3). bozeman, barry, heather rimes, and jan youtie (2015). the evolving stateof-the-art in technology transfer research: revisiting the contingent effectiveness model. research policy, 44, 34–49. instytutsiini aspekty mizhnarodnoho transferu znan i tekhnolohii v ukraini: realizatsiia kompleksnoho pidkhodu. available at: http://www.economy.nayka.com.ua/?op=1&z=4583 zakon ukrainy "pro naukovu i naukovo-tekhnichnu ekspertyzu". vidomosti verkhovnoi rady ukrainy, 1995 r., № 9, st. 56. zakon ukrainy "pro derzhavne rehuliuvannia diialnosti u sferi transferu tekhnolohii". vidomosti verkhovnoi rady ukrainy, 2013 r., № 47, st. 644; 2015 r., № 52, st. 482; 2019 r., № 46, st. 295. proiekt zakonu ukrainy vid 21.01.2021 r. № 4623 "pro vnesennia zmin do deiakykh zakoniv ukrainy shchodo stymuliuvannia diialnosti u sferi transferu tekhnolohii". baltic journal of economic studies 243 vol. 7 no. 5, 2021 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: kutsykpetro@gmail.com orcid: https://orcid.org/0000-0001-5795-9704 researcherid: g-9204-2019 2 lviv university of trade and economics, ukraine. e-mail: bmshevchyk@gmail.com orcid: https://orcid.org/0000-0002-0004-325x 3 lviv university of trade and economics, ukraine. e-mail: olenaspr@gmail.com orcid: https://orcid.org/0000-0001-5784-1490 doi: https://doi.org/10.30525/2256-0742/2021-7-5-243-249 economics as culture: synergy of advanced development petro kutsyk1, bohdan shevchyk2, olena perepolkina3 abstract. economic systems are viewed as sociocultural phenomena of an ontological order. the hypothesis of a trialectic-dual and attractional-level nature of the implementation of cultural-paternalistic projects in the institutional sphere of economic relations is put forward. attractive high-order noumena shape/define lowerorder phenomena in paternal practices of economics. attractive space is a bipolar space of regression. the algorithm of the actualization of the noumenon into a phenomenon is a triadic structure: axiological narrative – paradigmatic project – praxiological pattern. each paternal project is realized by means of a trialectical mechanism: organizational pattern – amplifier/intensifier pattern – homeostatic pattern. the configurations of the paternal triads of the economic system manifest themselves in a quadra of hierarchical levels: micro-, meso-, macroand mega-levels. the micro-level represents the basic paternal business triads; the meso-level represents the trialectic configurations of state structure; the macro-level represents the paternal trialectic of sociocultural fluctuations of economic systems; the mega-level represents the trialectic of the projects of the cultural dominant paradigm. the seven-phase cycle of sociocultural dynamics in the paradigmatic-father plane of static and economic efficiency at the macroand mega-levels of civilization "west" is considered. a notion of the formation of a nooeconomy of ideative type culture was created, in which human cognitive abilities will act as the main economic evolutionary resource, and knowledge workers as carriers of the ideative cultural mentality will be the meritocratic social class. the concept of the sixth technological structure of nbis-convergence is seen as the first phase of the culture of the ideological type of cognitive economic systems. the noosphere is interpreted as an attraction-fluctuation manifestation of the phase of transition to the ideative cycle of cultural development by the paternal matrix of the cognitive resources of the dominant culture's core. the added value of cognitive resources within the marginal cost of intellectual capital will lie in the expanding potential of the filter of individual consciousness to unpack the compressed meanings of the semantic vacuum and create texts – innovative and paradigmatic projects of expanded opportunities for life enrichment based on the ontological novelty noumenon-concept of the highest measure of reference and mediator-marker in institutional advanced evolutionary space as cognitive strategic resources of the "advantage of immaturity". key words: paradigm, pattern, attractor, axiological narrative, sensuous culture, ideative culture, cognitive resources, conscience filter. jel classifications: a13, b49, o39, p16, p49, z10 1. introduction the logic of the search for the foundations of economic well-being has consistently reached such a parameter as "culture". if economic institutions are models of economic relations, what precisely determines institutional complementarity and fills the content of industrial paternalistic practices and distributions? that is, there is a social factor of biodiversity, which simultaneously determines the specifics of the way of comprehending wellbeing – culture – an individual feature of the historical existence of each people, reflecting and determining baltic journal of economic studies 244 vol. 7 no. 5, 2021 the unrepeated interconnections of man and the world. the object of this study is culture as an integral factor of well-being. the subject of the study is the process of socio-cultural dynamics of economic systems, where paternal projects are actualized and ontological preconditions for alternative projects of innovative development are formed in economic practices through a triadic algorithm in the poly attractive space. 2. analysis of the recent researches and publications the theoretical basis of the study is as follows: v. nalimov probability theory of senses (nalimov, 2011); sj. beugelsdijk and r . maseland concept of economy as culture (beugelsdijk, r . maseland, 2016); p. mason notion of zero marginal costs under nooeconomic conditions (mason, 2016); k. kantor historical-philosophical concept of projectism (kantor, 2002); j. shumpeter evolutionary economic theory (shumpeter, 2011); a. toffler conception of the paternal triads of the forms of governance (toffler, 2003); l. gumiliov idea of the transition phases in the cycle dynamics under the influence of entropy and attractiveness (gumiliov, 2001); p. sorokin conception of socio-cultural fluctuations (sorokin, 2006); m. kizim and i. matyushenko theory of techno-convergences and innovative evolutionary waves of economic systems (kizim, matyushenko, 2011); an attractive paradigm of energy progress by the ukrainian school of physical economy (podolyansky, 2000; rudenko, 2015). 3. purpose and objectives of the research significant influence of culture on the economy, by virtue of which holistic patterns of socio-economic interaction arise on the basis of awareness through cognitive resources of the dominant cultural attractiveness that allows the introduction and implementation of innovative projects at the micro-, meso-, macroand mega-levels of social development, is the purpose of our study. main tasks: demonstration of entropic nature of economic dynamics cycle in static efficiency mode; demonstration of non-entropic nature of consciousness filter able to produce innovative ordered texts; revealing influence of culture on selected potential of consciousness filter due to axiological attractiveness of dominant culture; to reveal the hierarchical nature of attractiveness in the casual-beneficial referential noumen on phenomenon; to subordinate the nature of innovative projects to the phases of the cycle of sociocultural dynamics; to clarify the possibility of outpacing economic development due to the axiological narrative attractiveness of alternative culture, whose paternal projects are not mediated by the simulacrums. 4. primary results of the research the analysis of culture as a determinant of economic evolution has not been considered in economic research. moreover – as a driver of outstripping development. modern analysts are gradually becoming more and more unanimous about the idea that culture itself will relatively soon become determinant in the nature and pace of economic evolution, ceding secondary importance to material resources. in the process of the noosphericization of economic relations the cultural factor will come to the fore. economics as a science as a whole acts as the sum of the results of the study of human life in a world of scarcity. the possibility of living in a deficit-free regime looks meaningless from the point of view of the subject of the economy, because there is no other alternative in the conditions of material production and discrete forms of social reproduction (already aristotle argued that the material is only possible as sporadic, and therefore limited). thus, everything discrete in physical forms of actualization is rare, and for that reason, valuable; and in the case of limited access, costly, then worthy. accordingly, the idea of well-being emerges from schumpeter's technological insider ability of "new combinations", through which innovation multiplies existence, reflected in quantitative macroeconomic indicators, to further acquire a mode of static efficiency in accordance with the pareto optimum – homeostasis as a goal. and so on until the subsequent bifurcation in the form of an innovative project, the actual acquisitive implementation of which in the sphere of material production serves as a driver of economic development. on the other hand, the theoretical discourse on the proportionality of economy and culture in the existence of society has both its history and its particularities. the narrative homo economicus initially incorporates contextual characteristics: back in the days of 17th and 18th-century mercantilism, the cultural was considered a logical-rational thinking polymath with techno-pragmatic knowledge of improving natural chaos to create utilitarian comfort and maximize individual gain. the cultural description of an economic person's pattern of behavior itself represents a "normative standard" (beugelsdijk, maseland, 2016), that separates the white western individual from the flexible, culturally backward "naked savages" (smith, 2001) of the rest of the world. however, subsequent analysis of the culture of the economic individual reveals a discrepancy between the holistic context of collective cultural identity and the atomized individualism of the rational economic actor. economists continued to delve into the search for universal laws of economic life that would, on the basis of a few generalizing hypotheses, explain human nature in all reasonable cases of life-supporting baltic journal of economic studies 245 vol. 7 no. 5, 2021 activity. in contrast, culture, which was seen as a given discrete behavioral paternal reconstruction of a predetermined model of existence in accordance with a particular value imperative of collective identity, inhibiting the creative abilities of the individual in the search for broad opportunities to meet needs, is beyond the scope of professional economists. culture has come to be interpreted in two contexts: 1) as a limited pattern of collective identity that prevents rational choice of freedom of the broad possibilities of maximizing individual utility; and 2) as a narrative of a single identity based on the pervasive principles of the utilitarian nature of each person as a whole – maxutility. in today 's world, culture not only determines the civilizational zones of possible clashes (hantington, 2006). conversely, it serves as a volitional synergistic continuum of economic development, as evidenced by the realized practice of the "flying geese" model (reinert, 2014) of the "asian tigers". few researchers pay attention to the fact that the "flying geese" model is not just an offshore-outsourcing diffusion of technology based on pre-approved and specifically defined areas and boundaries of mutual market space. these are, above all, integral processes in the sphere of cultural identity – and this is the primary reason for their success (which analysts are silent about intentionally or not). but culture should not be understood as a static set of behavioral patterns that recreates the traditional conservative way of life and is the main obstacle to innovative transformations. culture is a dynamic system (sorokin, 2006) of a certain constellation of phase transitions in cycles of sociocultural oscillations between bipolar megaattractors of sensual and ideological worldview types. consequently, the behavioral praxeological patterns of the dominant culture have their own algorithm of modifications, which boils down to the apologetics of westernization – the ecumenical unification of the utilitarian comfort of everyone around. this algorithm of modifications has a clear evolutionary sequence of behavioral patterns: ascetic-ideological type of cultural identity – pseudo-ideological type – active-sensitive type – cynical-sensitive – active-ideological – passivesensitive – idealistic type of cultural identity (sorokin, 2006). sociocultural dynamics proceed in a dichotomous space of attraction, where each attractor is ontologically and relatively constituted by a purely sensual and purely ideative axiological narrative. the very mechanism of sociocultural dynamics of economic systems has a trialectic structure of paternal configurations: organizational pattern → intensifier pattern → homeostatic pattern. the structure of attractive values of the changing types of dominant culture is also trialectic: axiological narrative → paradigmatic project → praxeological pattern. as noted above, the fundamental dialectic of the discourse of economy and culture runs in the range of interpretation of the contradictions between the restrictive role of cultural patterns of economic reproduction and the innovative nature of economic development, which is necessarily reduced to overcoming the limitations of the cultural pattern, preferably – to its complete replacement by the multicultural pattern of nationally anonymized being. is this really the case? does mephistopheles of material prosperity require obligatory sacrifices of the national soul? the individual is an intelligent human being capable of unpacking the compressed meanings of a semantic vacuum and creating texts through a conscious filter (nalimov, 2011). man is a creative being capable of creating texts – a formalized existence through words. the fact of existence multiplied by the word is defined as value. the individual is a spiritual being, down to his own verbal creation, forming a coherent continuum of the total picture of the world reflected in the minds of others and thus enabling through the holotropic volitional range to achieve everyone's desired goal, the referential goal of the majority and the least. this is the way in which the cognitive resource of the collegial will to live, first and foremost, the national idea, is formed. as a spiritual being, the individual intellectually destructively comprehends the ontological meanings of life and correlates the degree of cognitive capacity with the axiological narratives of the dominant culture. as an intellectual being, humans relate the conceived as logically possible, so meanings, being qualitative, acquire quantitative characteristics of possible actualization (nalimov, 2011). at this ideational stage, the imaginative reality of the conceived possibility of multiplying existence as innovation requires sifting through the actual filters of the positive experience of the dominant culture of cognitive systems-so paradigmatic projects of economic development are formed. as a creative being, the individual stylizes his text-image, endowed with axiological-positive meaning of ontological novelty and logically-rational projective potentiality, eventually into a "pattern of existence" (nalimov, 2011), that is a program of praxeological realization of things in being in order to multiply the actual unprecedented. that is, the paradigmatic project of innovative development is modified into a paternal project of economic reproduction, subsequently consolidated through institutions in the finality of paternal practices of economic reality (kantor 2002). at this stage, the subject of cognition becomes the subject of creative activity, the implementer of its own praxeological pattern of the new modality of socio-economic reality. the trialectical mechanism of socio-cultural dynamics of economic systems in the bipolar attraction space baltic journal of economic studies 246 vol. 7 no. 5, 2021 operates at the micro-, meso-, macroand mega-levels of social reality. at the micro-level in the bipolar diapason "bifurcation-homeostasis" in the catalytic space function business triads of entrepreneurial activity: "new combination" insider (organizational pattern) – venture "market ephor" (pattern intensifier) – marketer (homeostatic pattern). the schumpeter's innovation, having realized through credit new purchasing power, through the introduction of innovative technology triggers cumulative cycles of increasing profitability and net profit, where the final link in the chain of movement of costs to the consumer is the marketer, who personifies the goal of the leading equilibrium process – appropriation of a share of income from the market value of sales. the capacity of the market, deepening through the process of diffusion of innovation, is continuously accompanied by an equalization of the rate of profit until the marginal productivity of resources becomes equal to the marginal utility of the marginal product they create. the surplus value of production is absorbed by the commodity value of commercial purpose and is reduced to the sum of the price of labor and the price of nature in the form of wages and rents (schumpeter, 2011). a metamorphosis occurs in the structure of the business triad: the homeostatic pattern (the marketer) acts as an ex-insider of "new combinations" in a new organizational status, bringing the latter to the margins of industrial relations. the system starts to operate in a static efficiency mode according to the pareto optimum (huerta de soto, 2011). while the marketer is not an insider of "new combinations" (he can only offer a new possibility of access to commercial services, but not a project of production of qualitatively new consumer value), so he only ensures the manipulation of simulacra: "option architecture," asymmetric information, nudging technologies, the priority of financial speculation on stock exchanges over real investment in material production, offshore migration of money to low-cost labor enclaves and in underdeveloped countries, etc. thus, profitability becomes a function of entropy: the polarization of property, the intensification of exploitation and ecological threats, the introduction of "shell" institutions as simulacres of production relations, the search for a new way of extracting rents in an extra-economic way, using the resources of political power, etc. there has been an escalation of fighting between business and labor unions and an increase in government overregulation of economic processes with challenges to the quasi-rental of mediocre public servants, whose numbers are growing, fueling corruption in the administration. the struggle for control moves from the micro to the meso level of the economic system, where the dynamic is the movement of the power triad pattern "power – wealth – knowledge" (toffler, 2003) in a bipolar space of extractive and inclusive social institutions. at the meso-level, "knowledge" stands out as an organizational pattern, and "wealth" as a homeostatic pattern. a knowledgeable worker – an intellectual capable of launching projects of economic evolution not just on the basis of a private type of local market of "new combinations", but of launching new technologies of teleological activation of cumulative circles of increasing profitability, at least at the branch level, represents the subject of the "knowledge" pattern. the knowledge worker puts forward the adoption of innovation and information technologies that contribute to the production of surplus value in a cost-saving environment toward achieving zero marginal cost (mason, 2016). in this way, information technology displaces labor from material production and distorts pricing mechanisms through fluctuations between labor and cost (because it is impossible to reflect in the cost structure the potential moment in time when an innovative idea comes to a scientist's mind) (toffler, 2003). under a possible zero marginal cost, the model of the capitalist system ceases to self-reproduce. in order for the model of "wealth" to further function as a homeostasis of the economic system, it is necessary to find alternative sources of profitability that compensate for the leveling effect of innovation on labor costs – direct labor that creates surplus value. in this regard, there are two ways: either a total commercialization of all spheres of life, which seems problematic and absurd, or the migration of capital to sectors where energy-, laborand material-intensive industries prevail, that is, to the third world countries. if the micro-level paradox is that an economic system in its most perfect state of equilibrium should operate without profit (schumpeter, 2011), the meso-level paradox is that the development of nbic-techno-convergence is accompanied by unprecedented property polarization of the modern world according to programmed entropic patterns: "poverty traps" (sachs, 2011), "resource curse" and "the price of inequality " (stiglitz, 2011; 2012), "the riddle of capital" (de soto, 2009), "the blind corner" and "killing the winner" (reinert, 2014), etc. to the homeostatic capacity of the "wealth" pattern is added the "power" pattern, which acts as a protectiveelective resource of rent extraction, relating to the profitable energy-intensive sectors of mining and agriculture. the system aspires to self-sufficiency in the homeostatic regime of the "iron law of oligarchy " (acemoglu, robinson, 2016), a pattern of selfreproduction of the ruling power system under any rotation of the power elite. the homeostatic-entropic micro-trap is resolved by attractive meso-level narratives, above all by the introduction of socioeconomic institutions that allow not only the solution of the "riddle of capital" – by applying representative baltic journal of economic studies 247 vol. 7 no. 5, 2021 property documentation-to translate "garbage into commercial profit" (de soto, 2009), and propose innovative paradigms of economic development (for example, the paradigm of the ukrainian podolinskyrudenko school of physical economics) (podolinsky, 2000) (rudenko, 2015). contemporary scholars (acemoglu, robinson, 2016) consider the introduction of inclusive economic institutions a spontaneous function of the economic order, random events of "turns of history " (gumilov, 2001). this has dramatically complicated the mimesis of inclusive institutions into the production relations practices of the host countries, since it is technology, not mentality, that can be borrowed. this means that the pattern of "knowledge" must have the closest ties to the historical experience of freedom-the precedent of institutional inclusiveness enshrined in the patterns of national culture that have been used as a resource for the development of particular people in the past. the axiological narrative of the emergence of the paradigm-innovation project with "open windows possibilities" is in the macro-level attractive environment of predominantly cultural dynamics. the innovation-paradigm of the alternative order of the "knowledge" pattern is the result of oscillating sociocultural dynamics between the poles of rational and ideative types of culture. our time is the final phase of the passive-sensual type of culture. the sensual type of culture began its expansion as an alternative to the ideological project of social being, beginning with the italian renaissance. it must be emphasized that the core of every paternal culture adapts and assimilates external challenges through the resources of its protective shells: religious, cognitive, and aesthetic (kantor, 2002). the modern cycle of sensus culture has passed through the triadic phases of its formation, where the bifurcation first took place in the aesthetic sphere – the art of the italian renaissance. then the processes of containment of mental-sensual models of culture gradually took place in the religious sphere from the cynical-sensual to the active-sensual phase – the german reformation, in the cognitive sphere – the french enlightenment, but the final transformation of the paradigmatic project into the paternal one occurred in the form of the english industrial revolution. thus, if the past cycle of the formation of ideological culture was realized by the core religious shell of paternal culture, through which the western christian civilization of the medieval period was formed; if the modern cycle of sensual culture has been realized by the aesthetic shell, like the art of the italian renaissance, then the future cycle of ideative culture will be simultaneously realized by the cognitive sphere of the core of paternal culture through scientific and technological progress, and to describe these irreversible processes there is a term – noosphere. moreover, there is a future synergistic project of the so-called sixth technological mode of nbicconvergence (kizim, matyushenko, 2011) in the midst of the still dominant sensual culture. the interpre tation of this project from the narrative-axiological positions of the sensuous cultural mentality seems ridiculous: by applying nanotechnologies of atomicmolecular construction and control to a biological organism made of inorganic materials, and then "embedding" integrated circuits into this hybrid material with the intention of creating artificial intelligence, which will act as a powerful duplicate of the human brain – all designed to erase the difference between a human and a robotic device, to cause an uprising of post-android bio-cyborgs, who through bio-nano-manipulations with living and non-living matter will be endowed with the potential for immortality. that is, nbic-techno-convergences will so improve the conditions of human existence that it will turn into a post-human, who will live relatively forever (kizim, matyushenko, 2011). as is evident, the axiological narratives of sentient cognitive resources focus on "improving the conditions of the individual", but not on the evolution of the individual himself. no one talks about what a biocyborg android "great ape" (buchman, 2003) will do with its immortality? what content will the posthuman life have in its earthly eternity? the subject of a rational cultural mentality does not see the prospects of such challenges, because it does not distinguish simulacrum – entropic patterns of meaningless existence – in the axiological dimension of its own consciousness, where it is cadaveric death rather than immortality of the soul that serves as the ultimate parameter of existence. cardinally wrong sounds the narrative of the sixth technological mode in the aspect of ideative culture – the goal of technoconvergence is not the criterion of biological immortality, but the maximum possible liberation of the individual from the need for material production and strict orientation of human cognitive potential on the ontological causes of existence, the creation of such texts, which will carry knowledge of the higher purpose of human existence on earth. the use of nano-, bio-, infoand cognitive technologies will make it possible to produce economic values in the mode of maximum approximation to zero marginal cost, and then socially necessary labor, freed from the composition of costs, will be applied where no machine can replace man – in the artistic creation of spiritual multiplication of being, in the evolving ability of the conscience filter to unpack such semantic vacuum meanings, where the word-image texts will contain the holotropic content of the possibilities of existence in the synchronic-referential dimension of the creator and the universe. in this case, economic activity will become synonymous with artistic creativity, and exchange transactions will depend only baltic journal of economic studies 248 vol. 7 no. 5, 2021 on the degree of ontological novelty of the use value of the word in the direction of the growth of this holotropic metaphysical referentiality in the consciousness of the user of the word. a macro-level attractive source of sociocultural fluctuations of economic systems is the mega-level of civilizational dominants. at the mega-level, the idea of time in its historical meaning as chiliastical and eschatological serves the subject of being (bulgakov, 2006). the urgic type of sensual cultural mentality is subjected to a chiliastical understanding of the world. a chiliastical axiology of history envisions an evolutionary and linear paradigm of time – eternal becoming without higher practicality. being as genesis is provided by the urgic patterns of mentality, a combination of utilitarian narratives of organizing the artificially shaped world as mechanical equipment. here there is no holotropic comprehension of being, and integration is reduced to a quantitative semblance of essentially impersonal being, that is, the simulacrum acts as the vital principle. apocalyptic axiology is not reduced to the concept of the end (the end of history, the end of the world, the apocalypse of civilization, etc.), but to the idea of an eternally new beginning of infinite perfection, the search for the primary unity of all things, which is achieved by the gonic way, the worldview – because all created things are generated from one original source, and each particle is inherently a fractal of the whole, hence each individual being has absolute value, so time has the cyclic nature of the "great conversion" of each "mustard seed," realizing possibility-calling in the direction of godless perfection of being. 5. conclusions and recommendations the cultural content of economic relations reveals features that remain beyond the vision of traditional economic methods. culture is not only a component of the metrological analysis of economic systems, which reveals possible external effects, a peculiar locality of time and place. although culture determines the qualitative characteristics of human and social capital, including its synergy-integrative potential, it reflects the archetypically narrative circumstances of institutional complementarity, which ensures the success of economic projects, above all – innovation. so, since culture defines the axiology of paradigmatic design, on the one hand, and the synergetic potential of the identity realized by the will – on the other hand, it serves as a fundamental condition for the realization of the advanced development on the basis of those "advantages of backwardness", which in sociocultural fluctuations processes represent the cognitive resources of formation of the organizational scheme project of innovative economic order. the concept of advanced development of economic development in the socio-cultural context is resolved into a hierarchy of coherent attractiveness at the micro-, meso-, macroand mega-levels of socioeconomic being, where the higher level serves as an attractive environment for the lower level, accumulating in itself the values and goals. the prospect of the formation of ideological culture samples, as an organizational culture, in the near future will provide such gaps of economic opportunities, where the production technologies of innovation will be focused on the identification of ontological meanings of higher referential degree of metaphysical ideal concept of being and images-mediators of its praxeological 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(2006). social’naya i kulturnaya dynamika [social and cultural dynamics]. moscow: "izdatel’stvo astrel’". soto de h. (2009). zahadka kapitalu. chomu kapitalizm peremahaie lyshe na zahody i nide bilshe [the mystery of capital. why capitalism triumphs in the west and fails everywhere else]. kyiv: "nika-tsentr". stiglitz, j. (2011). kak izbezhat resursnogo prokliatija [escaping the resource curse]. moscow: "izdatelstvo instituta gaidara". stiglitz, j. (2017). tsina nerivnosty [the price of inequality]. kyiv: "tempora". toffler, a. (2003). nova paradyhma vlady: znannya, bahatstvo, syla [powershift: knowladge, wealth, and violence at the edge of the 21 st century]. kyiv: "akta". baltic journal of economic studies 63 vol. 7 no. 4, 2021 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: maryna_dielini@nubip.edu.ua orcid: https://orcid.org/0000-0003-1016-2305 2 national pedagogical dragomanov university, ukraine. e-mail: marja@nesterova.com.ua orcid: https://orcid.org/0000-0001-6703-7797 3 taras shevchenko national university of kyiv, ukraine. e-mail: dobronra@ukr.net orcid: https://orcid.org/0000-0002-8767-4045 doi: https://doi.org/10.30525/2256-0742/2021-7-4-63-71 social responsibility and social cohesion as drivers in the sustainable development of universities maryna dielini1, marja nesterova2, iryna dobronravova3 abstract. the purpose of this article is to theoretically, methodologically and practically explore social responsibility and social cohesion and justify their role as driving forces in the sustainable development of universities. this paper focuses on the rationale for various aspects of the development of social responsibility and social cohesion, and specifically in higher education. the article defines the importance of the values of social cohesion and social development and their implementation in the education of socially responsible youth. listed the main categories in which the social responsibility of the higher education can be determined and applied for the educational management effectiveness. this article aims to show the role of social cohesion and social responsibility in the implementation of the principles of sustainable development, and to reveal the relations between the values of social cohesion and social responsibility and the 17 un sustainable development goals (sdgs). methodology. scientific analysis is carried out with the help of an interdisciplinary system of methods, namely, system analysis, interviewing, statistical data analysis, comparison, etc. social synergetics and system approach are applied to the issues of education management. results. the methodological approaches to the formation of modern educational and management models for universities are considered. the model of the social cohesion of the university community is analyzed. the university management strategy based on the values and principles of social responsibility and social cohesion is described. ways to improve the economic and managerial efficiency of universities and society, respectively, are considered. the process of self-organization in education management and parameters of its ordering are defined. the most significant scientific results: the attitude and development of such values as social responsibility and social cohesion in the ukrainian educational community were investigated; the sustainable development of universities as the best practice and factor of influence on socio-economic development was determined; the role of social responsibility and social cohesion as parameters of order in enhancing the sustainable development of universities and society respectively was substantiated. the practical significance of the study lies in the actualization of the need to develop social responsibility and social cohesion in the ukrainian educational community, which is confirmed by statistical data, as well as the possibility of their application in the educational process and value-based management of education. the use of these results in the practice of education management allows us to create a model of social responsibility of universities and outline the directions of its implementation, to develop and implement a mechanism for monitoring the implementation of social responsibility, to study the actual level of social cohesion of the university community, to suggest ways for its further development, aimed at improving the competitiveness of universities in a globalized environment. value/originality. the originality of the study lies in the combination of the two key values of the eu and their correspondence to the sdgs and the sustainable development of universities on the basis of value-based education management. a social synergetic approach is applied to issues of educational governance. key words: educational management, self-organization, social responsibility, social cohesion, sustainable development, synergetics, synergy, university, values. jel classification: a22, b41, b49, i21, i25 baltic journal of economic studies 64 vol. 7 no. 4, 2021 1. introduction nowadays, it can be considered sustainable development as one of the important development strategies because of its importance for socio-economic development. synergetics is an important theory that studies an open complex system (haken, 1996; jingyan, 2010). from a synergetic perspective, this article analyzes and discusses synergy and evolution in a sustainable development system, and offers solutions for educational management with some formations from synergetics for reference. in the face of the complexity of current and future global challenges, higher education has a social responsibility to improve our understanding of, and ability to respond to, multifaceted problems involving social, economic, scientific and cultural aspects. it must lead society to create global knowledge that responds to the global challenges, including food security, climate change, water allocation, intercultural dialogue, deployment of renewable energy, and healthcare. higher education should not only provide solid skills for present and future generations, but also contribute to the education of socially responsible citizens who seek to create peace, protect human rights and defend the values of democracy. thus, such an issue is part of sustainable development because it concerns future generations. social responsibility, which can be seen as a valuable thing, can be formulated as the responsibility of individuals for their actions to society. this responsibility can manifest itself in the form of one's own behavior, attitudes toward others, and actions aimed at raising a socially responsible generation. this effect is characteristic of all types of systems with a human aspect, in particular of university communities. therefore, it can be assumed that social responsibility and social cohesion, respectively, are the key factors in the sustainable development of education, as it provides care for future generations and thus forms a worldview through the prism of responsibility for one's actions. the concept of "sustainable development" works only in the context of nonlinear theories of selforganization created on the basis of synergetic methodology. this means that it is worth considering universities as open systems which are maintained by constant change within the environment. the environment for the university is society. the university as a scientific social institution needs to receive resources from society, namely financial, material, human, cultural, and so on. what kind of resources should universities provide for society to be an open system? it should be primarily human resources, specifically young educated people. in addition, the scientific achievements of research are necessarily part of the spiritual output of universities. the connection of these two tasks is one of the conditions that make the state of university life nonlinear. it is non-linearity that is the most important condition for the self-organization of new complex systems (dobronravova, 2001). it seems obvious that for non-linearity as a condition of its self-organization, universities should receive sufficient resources from society. however, it is not always clear what it means for universities to be open to society. the main point of this paper is to be socially responsible. spontaneous self-organization of collectives with social cohesion can become autopoiesis based on the joint actions of teachers and students (dobronravova, 2021). the governing parameters of self-organization are the values of society as an environment for which the university is open. 2. theoretical background of the research sustainable development should be conditioned by the parameters of the social order. it can be assumed that it must be a process of social self-organization, namely the process of the development of social synergy. in this context, it can be assumed that social cohesion is directly related to the level of social synergy. in scientific discourse, the term synergy was used in neuromuscular physiology by charles scott sherrington to describe the integrative action of the nervous system in 1916. the concept as a process related to self-organization was further developed by theoretical physicist hermann haken (haken, 1995, 1996), the biologist, director of the institute for the study of complex systems peter corning(2011), and klaus jafffe ( jaffe, 2010, 2021). social synergy is deeply related to connection and cooperation (some of the most important attributes of social cohesion and social self-organization). social selforganization is based on cooperation as well as social cohesion and social responsibility. in a general sense, cooperation is important in behavioral interactions, biological evolution, sociobiology, cultural dynamics, education, and collective intelligence, but the features that allow it to be successful are not well known (montoreano, jaffe, 2013). this aspect of cooperation and some other social aspects of synergetic theory, in particular, selforganization, are reflected in the studies of domestic (l. bevzenko, l. gorbunova, i. dobronravova, m. nesterova, o. voznyuk, etc.) and foreign (v. arshinov, p. bourdieu, v. budanov, p. checkland, h. haken, k. jaffe, l. jingan, e. knyazeva, a. nazaretyan, i. prigozhin, et al.) scientists who use the synergetic paradigm to analyze social, economic and, specifically, educational and managerial processes. synergetics began with the study of natural processes (h. haken's laser radiation, i. prigozhin's autocatalysis phenomena, etc.). later synergetic studies of selfbaltic journal of economic studies 65 vol. 7 no. 4, 2021 organization phenomena were applied to the study of socio-economic processes. one example was the article "self-organizing society ", which investigated societies with high social synergy (characterized by consensus) (haken, 1996). a similar idea of social energy was discovered by r . benedict in further studies of social cooperation in primitive commu nities. there is a connection between high social energy (which develops in people such social attitudes as altruism and mutual assistance) and high levels of synergy (which manifests itself in low levels of aggression and high levels of cooperation) (benedict, r ., 1970). such societies are characterized by a high degree of trust, a sense of responsibility, and minimal centralization. therefore, they can be considered as stable social systems. 3. unsolved part of the problem taking social responsibility as the university 's social responsibility, it can be distinguished different directions in which it can manifest itself. firstly, the upbringing of socially responsible young people. secondly, social responsibility to the students of the university. and it is on this basis that the university 's social program will be formed. however, activities in both of these areas will be more effective and identify a truly socially responsible university. the authorities, university management, and society should realize the importance of higher education in the formation of socially responsible young people. which can be done in many ways and in the same areas as in business. this will improve the quality of university education, promoting socially responsible values, mandatory teaching of csr disciplines, student and university participation in community and volunteer activities, etc. this will create an important layer of socially responsible youth, which is not only a subject of society, but also a subject of business (getting a job or forming their own business structure) and the state (if the work is related to this area). in this case, socially responsible values are automatically transferred from the university to other structures, which confirms the relevance and importance of this area of research. in addition, integrity is the basis for responsible action by universities. for several years it has been possible to observe increased attention and real action by the ministry of education and science of ukraine and universities individually to build a strong system of academic integrity and to improve the level of our science. it is hoped that this is a big step toward the sustainable development of universities. 4. methodology of research the most effective methodology in the field of sustainability is synergetics, and it is the best method for complex non-linear systems and processes. this gives a general framework for consideration of the problem. this approach allows to identify the key factors (parameters of control and order) of social self-organization that make a social system sustainable. presumably, one of these parameters of order for the university is the social cohesion of the university community. to conduct research on social cohesion in the university community, the social cohesion model developed by the bertelsmann stiftung was used. originally the methodology of bertelslmann stiftung was published in the report “the social cohesion radar – an international comparison of social cohesion” (2013). a team of researchers from jacobs university bremen, germany, measured the level of social cohesion in 34 developed societies in order to demonstrate to the general public the origins and trends of social cohesion (bertelsmann stiftung, 2013). the bertelsmann stiftung model works at different levels of social systems. therefore, this model has been successfully adopted and applied to the university community of national pedagogical dragomanov university (nesterova, dielini, zamozhskyi, 2019). this model is described in table 1. to assess social cohesion, a survey was conducted at the npdu, where 112 people, both employees and students, were interviewed. the interview consisted of 27 questions (3 questions for each aspect). the rating scale was 1 to 5, where 1 represents low, 2 represents below average, 3 represents average, 4 represents table 1 the model of social cohesion by bertelsmann stiftung (bertelsmann stiftung, 2013) domain aspect guideline social relations social networks people have strong, resilient social networks. trust in people people have a high level of trust in others. acceptance of diversity people accept individuals with different values and lifestyles as equal members of society. connectedness identification people feel a strong connection to and identity with their country. confidence in institutions people have a high level of confidence in social and political institutions. perception of justice people believe that society’s goods are fairly distributed and that they are being treated fairly. focusing on the common good solidarity and benevolence people feel responsible for others and are willing to help them. respect for social rules people abide by the fundamental rules of society. civic participation people participate in public and political life, engage in public discussions. baltic journal of economic studies 66 vol. 7 no. 4, 2021 above average, and 5 represents high. this study was conducted in 2019. a year later, the level of confidence in this university was investigated and 116 people were interviewed. it was assumed that trust is a consequence of social cohesion and therefore it was proposed to measure confidence in the following categories: trust as a personal characteristic, credibility with a close circle of colleagues, confidence in the organization, trust in leaders, contractual trust, communication trust, competent trust, moral and ethical trust, and ecological trust. in this case, it is possible to consider confidence not only as a socio-philosophical phenomenon, but also as a parameter of the order of social synergy in the process of social self-organization the key factor of social cohesion, its cognitive mechanism and methodological foundation (nesterova, dielini, yatsenko, 2020). this questionnaire consisted of 25 questions and was graded on a scale of 1 to 7, where 1 was a negative answer and 7 was a strongly positive answer. another social phenomenon is social responsibility, and this phenomenon is closely related to social synergy and social cohesion and can be seen as an implementation of these. all of the above phenomena lead to sustainable development. it is possible to consider them as parameters of the order of social selforganization in open non-linear social systems. a survey of european values in education was used to analyze social responsibility as a motivator for the sustainable development of universities, with participants answering which values are typical for them, which are incomprehensible or not shared, which are used by their colleagues or not shared by them, etc. explored such value as "the responsibility of society for higher education and the responsibility of higher education itself ", which can be seen as a social responsibility, as it means the responsibility of employees, the management of the university for their actions and the educational process. social responsibility can also include such value as "integrity," which means responsibility for one's academic achievements, honesty in the educational process, and consideration of other people's interests in one's university activities. there were 130 participants in this research. this questionnaire consisted of 12 questions that asked respondents and their colleagues to choose no more than 5 values that are shared or, conversely, not shared by them and other questions that help to conduct a quantitative analysis of the spread of european values of the educational system of higher education. 5. results in order to present results and substantiate the main idea of the research, to achieve the goal and to draw conclusions, the following figures were constructed. figure 1 shows the results of a study of social cohesion by domain. as can be seen from figure 1, the highest result was in the domain of social relations, reflecting the 3,91 3,02 3,17 3,95 3,09 3,29 3,93 3,06 3,24 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 domain "social relations" domain "connectedness" domain "focusing on the common good" employees students all respondents figure 1. evaluation of social cohesion by domain baltic journal of economic studies 67 vol. 7 no. 4, 2021 importance of social connections for respondents, the level of trust in other people, and the acceptance of diversity. the latter is also very important in the context of ukraine's european integration path and the dissemination of the value of tolerance, which is absolute for the european community. this domain has the best result among the others, its score is almost equal to 4, which is higher than the average. the domain “connectedness” has slightly worse indicators, namely the lowest among all the groups and domains studied, although they are still above average. the domain “focusing on the common good” makes it possible to see that it has a better position than the previous one, and reflects people's orientation toward society, to help each other and to comply with social norms and rules. the results for the studied groups do not differ significantly. it is noteworthy that the university staff has slightly lower rates compared to students. for a more in-depth study of social cohesion in practice, it is possible to construct figure 2, which shows the results of the study of social cohesion by aspects. analysis of social cohesion by aspects shows that social networks are equally important for both groups of the educational community studied, with slight differences downward for employees and upward for students. it can be concluded from this that it is slightly more important for students to have strong networks than for university staff. but in general, this parameter is quite important and can be regarded as one of the order parameters. the trend of trust in people is almost the same, students have a higher level of trust, although the difference is not significant. the trust result is higher than the social networks result. although the highest is the acceptance of diversity result. this aspect has a score above 4, and confidence in institution is almost 4.5. also here there is a noticeable predominance of solidarity and benevolence in employees. the students have a much lower index. analysis of the domain “connectedness” shows lower performance than the previous one. the co nfi de nc e i n i ns tit ut ion s pe rc ep tio n o f j us tic e so lid ar ity an d b en ev ole nc e figure 2. evaluation of social cohesion by aspects baltic journal of economic studies 68 vol. 7 no. 4, 2021 "identification" aspect is slightly greater than the perception of justice, but significantly lower than confidence in institutions. moreover, students' confidence in institutions is higher than that of employees, and the perception of justice is the opposite. students are less likely to perceive justice in relation to themselves. an in-depth analysis of the latter area reflects results important to this article, taking into account the study of responsibility, since this area refers not only to cohesion, but also to responsibility. thus, solidarity and benevolence derive from the value of responsibility to others. adherence to norms and rules is a direct consequence of social responsibility as well as civic participation. the following results were obtained in this study: "solidarity and benevolence" and "respect for social rules" have almost identical scores among both employees and students. and civic participation differs in its outcome downward, and this difference is still noticeable. which may indicate an insufficient level of readiness of our society to participate in public life. in general, it can be concluded that the level of social cohesion in this university is at a sufficient (average) level, although there are small differences. this lays the foundation for a values-based sustainability strategy for the university. to see the implications of the described level of social cohesion, it has been investigated trust as a value of a sustainable society (figure 3). since the object of this article is the field of education, it is reasonable to focus this sense on the values of higher education that are necessary for the sustainable development of universities. as figure 3 shows, the level of trust in the analyzed sample is above average, but not high enough. all of the trust categories in the respective fields had ratings ranging from 4.23 to 4.96, although the measurement scale had a score of 7. that is, despite the above average figure, they have not reached the level that can be characterized as a high level of trust. the highest level of trust is environmental trust (et) with a score of 4.96 (students' score of 5.06). this category of trust suggests that it is a necessary condition for stability in society. transferring our study, it can be assumed that trust in the environment is a prerequisite for the sustainable development of the educational community. also above the other indicators is trust in communication, as well as the result of trust in competence, and the lowest result is trust in leaders. thus, it cannot be said that trust among the analyzed educational community is high, despite the fact that the level of social cohesion in this sample is higher than trust. for a more in-depth analysis of the values of the european community and the field of higher education, figure 4 was formed, which shows the 4,46 4,49 4,49 4,23 4,70 4,82 4,76 4,48 4,96 4,69 4,54 4,15 4,28 4,45 4,39 4,68 4,29 4,68 4,23 4,47 4,62 4,21 4,79 4,98 4,79 4,55 5,06 0,00 1,00 2,00 3,00 4,00 5,00 tc tcc to tl ct cmt comt met et all participants employeers students figure 3. the level of trust in npdu (where tc is trust as personal characteristic, tcc is trust to close circle of colleagues, to is trust to a organization, tl is trust to leaders, ct is a contract trust, cmt – communication trust, comt – competent trust, met – moral and ethical trust, et – environmental trust) baltic journal of economic studies 69 vol. 7 no. 4, 2021 results of the survey of educators on values such as "responsibility " and "integrity ". figure 4 shows that respondents currently share the value "integrity " (57% of respondents), and "responsibility " is significantly fewer (20%). the reason for this may be the answer to the following question about the incomprehension or unacceptability of this value. the results of these questions are drastically different, to be more precise, 51% of respondents do not comprehend and do not share "responsibility " and only 9% "integrity ". this suggests that this value is not widespread due to its incomprehensibility for our educators. the next question about the distribution of values among colleagues reflected results identical to the first question, namely, 56% shared the value of "integrity " and only 17% shared the value of "responsibility.” the situation is the same with question 4, regarding the incomprehension of values by colleagues, with 33% of respondents believing that the value of "responsibility " is incomprehensible or unacceptable to colleagues, and 18% believing that this applies to the value of "integrity " as well. regarding which of these values the university recognizes or declares, respondents reported that 73 percent considered it "integrity " and 23 percent "responsibility”. similarly, the majority (61%) note that the value of "integrity " is not only a declared value, but one that is practically realized in the ndpu, and only 15% gave the same answer regarding "responsibility.” 20% 51% 17% 33% 23% 15% 38% 57% 9% 56% 18% 73% 61% 63% 0% 10% 20% 30% 40% 50% 60% 70% 80% which values do you share? which values are incomprehen sible or not shared? which values are incomprehensible or not shared by your colleagues? which values are unclear ot not shared by your colleagues? which values are officially declared by the ndpu? what values have been realized at the ndpu? which values are priorities for the sustainable development of higher education? responsibility integrity figure 4. the survey of values of "responsibility" and "integrity" in the university concluding this survey, it can be noted that university representatives indicated that "integrity " is a priority value for sustainability in higher education (63%) and a smaller number, 38%, identified "responsibility " as a priority value. thus, it can be concluded that the value "integrity " is quite developed and comprehensible in university community, which is a positive characteristic. on the contrary, the value "responsibility " is less common, which may be due to its incomprehensibility for educators. the studies are informative and reliable for extrapolation to present educational realities. trust can be not only a result of social cohesion, but also a consequence of responsibility. because responsible behavior forms the basis of trust in various institutions, including the university as an institution of higher education. 6. conclusions a synergetic view of the conditions for selforganization processes highlights two different roles for social responsibility and social cohesion as factors in the sustainable development of universities. social responsibility is a value that functions as a controlling parameter of self-organization processes in the university community, directing it toward understanding social interests and serving them. social cohesion is a parameter of order as an indicator of synergy (joint action) of educators and students, members of collectives becoming to solve important scientific baltic journal of economic studies 70 vol. 7 no. 4, 2021 and practical tasks. the university administration, in cooperation with the ministry of education and science, should ensure the conditions for the formation of such communities and the maintenance of their activities. this means ensuring the sustainable development of universities. this theoretical and practical research makes it possible to draw several conclusions. first, social responsibility and social cohesion are the driving forces of sustainable university development, since they imply joining efforts, uniting for a common goal, and taking responsibility for one's actions to society now and to future generations. interviews conducted over the past 3 years have shown that the level of social cohesion is above average with slight variations by aspects, but, in general, this level is satisfactory. the analysis of trust, on the other hand, has less positive results, although the results of the survey are above average, but significantly lower than the possible maximum positive value. an analysis of the value of responsibility, which in this study consists of two components, namely integrity and responsibility for higher education and higher education itself, showed that integrity is prevalent and recognized as important for the sustainable development of higher education. and the value of "public responsibility for higher education and higher education" leads to different results because it is not understood or acceptable to our colleagues in the educational community. 7. aknowledgements the authors gratefully appreciate all research participants. the research is the part of the project’s implementation in the national pedagogical dragomanov university of jean monnet project ”european values of diversity and inclusion for sustainable development” (evdisd) 620545-epp-12020-1-ua-eppjmo-project (erasmus + program granted by european commission). the european commission's support for the production of this publication does not constitute an endorsement of the contents, which reflect the views only of the authors, and the commission cannot be held responsible for any use which may be made of the information contained therein. references: aleksandrova, o., batchenko, l., dielini, m., & lavryk, u. 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(2019). application of system and synergetic paradigm of management of social-economic, educational processes in ukraine. pedagogical discourse, 26, 19–26. available at: http://ojs.kgpa.km.ua/index.php/peddiscourse/ article/view/563/519 baltic journal of economic studies 86 vol. 8 no. 3, 2022 1 national university odessa law academy, ukraine doi: https://doi.org/10.30525/2256-0742/2022-8-3-86-91 disciplinary perspective of the theoretical and legal profile of the legitimacy of law olga ivanchenko1 abstract. the subject of the study is the definition of the disciplinary perspective of the theoretical-legal profile of the legitimacy of law. methodology. the methodological basis of the study are methods of induction and deduction, dialectical-materialistic method, the method of analysis and synthesis, the historical method, which allowed to objectively understand the content and essence of the issues under study. the aim of the article is to investigate the theoretical concept of legitimacy of law in the context of its correlation with the concept of legitimacy in the modern state of law. the results of the study showed that the disciplinary perspective of the theoretical-legal profile of the legitimacy of law is defined. namely: proposed a modern theoretical and philosophical genesis of the legal understanding of the legitimacy of law and legality; investigated the relationship of legality, legitimacy of law and legal consciousness in the theory of state and law; identified conceptual directions in the study of the phenomenon of legitimacy of law. conclusion. legitimacy is both a constructive and a destructive concept. in its strict form, this concept characterizes a certain moment of attitude toward the law and the problems of its effective functioning. however, in philosophy or legal theory, for example, legitimation should thus mean communicating a legitimate-legal character to the law. it appears that this concept, which has a purely legal etymology – legitimate, excludes from the law its value essence, shifting the center of gravity to the practical assimilation of the law in the public and individual consciousness. this gives rise to a rather peculiar construction. law can be anything, the main thing is that it corresponds to a formal procedure. the right thus legitimized enters a new stage – assimilation and acceptance in the public and individual consciousness. if it is not accepted voluntarily, it does not cease to be a right, but suffers from a lack of legitimacy. in essence, legitimacy captures two essential points: the first is the orientation toward dialogue with society and with each of its members individually, that is, the final sanction in the minds of the people or its majority; but, on the other hand, it is not the law itself that possesses some internal attribute of supreme legitimacy, but only its collective psychological perception and justification. in other words, the central issue in this approach is, on the one hand, the role of individual consciousness and, on the other hand, it creates a very wide scope for technological, in the sociological and political sense, influence on collective consciousness. key words: legitimacy of law, legitimation, legality, theory of law, legal nature, logical-conceptual construction, socio-practical construction, legal norms. jel classification: k10, k39 1. introduction research interest in the concept of legality traditionally increases during periods of radical transformations and revolutions, when society seeks to free itself from the fetters that hinder its development, and the idea of law begins to experience the influence of the political factor. under these conditions, society begins to actively appeal to the idea of "pure law," capable of establishing true legal principles in society. these trends can also be observed in modern ukraine during the formation of civil society and the rule of law. the study of theoretical problems of legality and legitimacy of law is repeatedly updated and complicated by the fact that for domestic legal science is characterized by a purely positivist dogmatic approach to the consideration of the problems of legality. traditionally, the legality is considered solely from the external, formal side and is interpreted as a strict compliance and enforcement of the law. the this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 87 vol. 8 no. 3, 2022 internal, substantive aspect of legality is left out of the brackets of the above formula, which leads to the use of legality as an instrument of the will of the state, expressed in the law. the vulgarization of the category of legality in legal science is vividly illustrated by the unjustified narrowing of its content exclusively to "prohibitive prescriptive norms". new approaches to law, the modern "transition from the logic of equality to the logic of freedom" urgently require a broader perspective on the rule of law. once basic inalienable human rights are recognized, the concept of "mere legality " is no longer sufficient. in this regard, the rule of law, including vast layers of normative acts, is primarily designed to "speak of rights," oriented toward the authorization and perception (acceptance) of laws by the population (legitimacy) (berger, 1998). the relevance of the problem from a practical point of view is due to a combination of objective and subjective prerequisites. in ukraine, which turned into a "reform state" at the end of the 20th century, strengthening the rule of law has become one of the main directions of further development. however, formal legality, legality not filled with legal content, is not able to serve as a reliable mechanism for limiting state power and a means of protecting human rights. it is necessary that, not only in name but also in content, the laws and the lawfulness corresponding to them should express the ideas of a state governed by the rule of law and not violate legal principles and requirements (primova, 2013). legal nihilism, conflicts of laws, the development of "decree" law, difficulties in law enforcement, the imperfection of judicial activity actualize the development of the problem of legality as a "tool" for the practical implementation of the legal principles that form the rule of law state. primitivization of the construction of legality actually deprives ukrainian citizens of the right to demand change or cancellation of "infringing" laws that restrict or violate human rights. the formal concept of legality contributes to the preservation in ukrainian society of the stereotype of a "culture of complaint," according to which any attempt to appeal to a court is seen as something useless. a simplistic understanding of the rule of law within a dogmatic positivist framework greatly complicates the administration of justice. faced with an "infringing" law when deciding a particular case, judges have no effective leverage to overturn it, resulting in a formal "infringing" decision. thus, from a theoretical and practical point of view, the problem of legitimacy is of great importance and relevance. 2. theoretical and philosophical genesis of the legal understanding of legitimacy and legality the problem of legality is one of the cross-cutting themes for the entire history of legal thought and political and legal practice, over the explanation, understanding, clarification and development of which many generations of philosophers and lawyers have worked. at its core, it is related to the awareness and realization in the joint life of people of the beginning and the requirement of order, perceived as a necessary component of human sociality, his social essence. at the same time, at different stages of historical development the problem of legality has acquired a variety of interpretations, due primarily to the understanding of the original principle of order in the framework of mythological, religious, philosophical, political-legal, moral, everyday and other ideas about the rules of relations between people. the diversity of approaches to the understanding of law in the modern world, including various disciplinary perspectives of philosophical-legal, theoretical-legal, socio-legal and psychological-legal profiles, has significantly complicated the logicalconceptual and socio-practical construction of legality. thus, traditionally in the philosophy of law the requirement of legality appears as legitimate justice or in the context of the distinction between legality and morality. however, in the modern perception the transfer of the center of gravity on individual, often very remote, manifestations of this essence, turning the latter into something distinct and independent, substitutes the problem of the essence of legality (kovalchuk, 2013). for example, the attempt to distinguish in law as a text and as a fact, characteristic of some variants of legal realism, revealed and illuminated important facets of the problematics of the concept of law and its practical empirical action. at the same time, however, it limited the problem of the essence of law to its original setting and significantly influenced the understanding of legitimacy. on the one hand, legitimacy in the structure of the formula "law as text" is limited to the analytical or hermeneutical technique, and on the other hand, the empirical component – "law as fact" reproduces only the factual side of legitimacy, which removes the problem of the proper, in this case legitimacy as requirement. in sociological approaches to law, especially in connection with the works of m. weber, the distinction between legality-legality and legality-legitimacy prevails. in the legal and political science literature, the works of k. schmitt are of similar importance (weber, 1998). the new trend in western legal thought, dubbed "new legal realism," typically articulates an attitude of radical pragmatism about the irrelevance of the rule of baltic journal of economic studies 88 vol. 8 no. 3, 2022 law (maksimov, 2010). in the context of this tendency, legality is not proper or even empirically uniform, but only factual, characterized only through descriptive techniques by pointing to the factors that influenced legally significant behavior in a particular case, i.e., the extremity of relativism. in other words, if any solution is just, only in its own way, the problem of legitimacy is completely removed; in the context of such a paradigm, there is not and cannot be any place for the demand for legitimacy or the rule of law. since there is no general or unified scale of justice, or at least no general requirement of legality, there can accordingly be no question that law means some universal criterion, even if reflected through the generalization of the sociocultural experience of mankind. that is, the actual behavior of the judge or other official relevant in the relevant paradigm, far from even a decision, is a random and disordered expression of some uniquely predictable empirical substratum of law (yuriychuk, 2010). today, the problem of legitimacy is often translated into a discussion of the problem of legitimacy, which is presented as the highest legality or legitimacy. it, meaning legitimacy, should, as it were, precede legality. at the same time, the root of these words is the same – "law", legality and legitimacy create confusion in the modern legal lexicon. the concept of legality, which is actively used in legal science, in its main development has a socio-political nature and in relation to the legality, as a legal concept, forms a legal, socio-political image of legality (nevidomiy, 2011). d. zadykhaylo outlined the problem of "legitimation of legal norms", which he considered as an essential part of the disclosure of the problems of the social foundations of law and which, in his opinion, has not received due attention in legal science. according to d. zadykhaylo, the problem of the legitimacy of legal norms becomes more relevant in connection with the implementation of so-called "regulatory strategies". the essence of the latter lies in the fact that they, as a program "guided by the subjects of lawmaking, wishing to achieve with the help of law the main results of social development," "provide a more or less smooth transition of facts from one of their states to another, ... proceed to the breakthrough of reality." such transformative intentions and the programs that embody them have a legitimizing character, that is, they contain as a matter of course "something substantiated, ontologically and ethically justified, corresponding to the meanings of politics, law and morality." d. zadykhaylo adhered to the distinction between legality and legitimacy, widely known in foreign legal literature. legality is, according to d. zadykhaylo, "a category that expresses the compliance of any act, action, event with the law and its norms. it refers entirely to the legal sphere, expressed in a well-known legal concept of legality." "legitimacy is a broader category that goes beyond jurisprudence; it allows certain acts, actions, and events to be recognized as justified from the standpoint of the proper... to recognize something as legitimate, i.e., to recognize the conformity of a certain object with higher laws and higher principles, social, moral and legal values." hence the legitimacy of the legal norm (the law itself ), which states that the latter must be moral, expedient, widely endorsed in society (zadykhaylo, 2007). 3. correlation of legality, legitimacy of law and legal consciousness in the theory of state and law problems of legality and legal consciousness were considered in the works of s. zykova. according to s. zykova, legality is "a complex and multifaceted phenomenon, the essence of which can be revealed through a whole system of definitions, through the analysis of various aspects of its social purpose." the explanation of the essence of legitimacy from the position of s. zykova should take into account or focus on four essential aspects: – firstly, legality is understood as "a special method of state management of society”; – secondly, as "a certain regime established as a result of the application of this method"; – thirdly, as a "principle of legal consciousness"; – and, finally, fourthly, as a "legal value" (zykova, 2013). legality as a method of public administration of society is the organization of social relations through the publication and strict, steady execution of a system of legal norms, expressing the will of the people and aimed at achieving the goals of social construction. legal consciousness contains an understanding of the objective necessity of lawfulness in society, scientifically validated views and ideas about the ways and means of establishing lawfulness, about its guarantees. it acts as a necessary ideological and socio-psychological precondition for the creation of legal norms and institutions. regulatory action of law, the law, its impact on the development of social relations is objectified only through the consciousness and will of people. in this sense, legal consciousness gives life to the legal system, as if it sets in motion the entire system of legal norms. the clear functioning of the system of legal regulation creates in society a certain legal regime – the regime of legality. legality acts as an objective result of all elements of the system of legal regulation: legal consciousness, the system of legal norms and various ways of their implementation. hence the organic connection between legal consciousness and legality. legality is the result of purposeful activity of millions of workers, flowing in legal forms, based on the creation and implemen-tation of state-legal norms (novachenko, 2016). baltic journal of economic studies 89 vol. 8 no. 3, 2022 the interpretation of legality proposed by s. zykova's interpretation of legality and its correlation with legal consciousness reveals a broad set of characteristics and properties of legality as a method, regime, principle and value. at the same time, it seems that s. zykova's in-depth analysis can be supplemented (zykova, 2013). first, as a method and regime, legality refers entirely to the activities of official bodies and officials; as a principle of consciousness and value, it can refer both to officials and bodies and to individuals. in this totality, legality does not act as a general (universal) socio-practical or socio-political requirement for all members of society, i.e. as a certain social task that logically and practically follows from the consciousness of the social (socially necessary) value of law. the fact is that the recognition of legality as a principle or value in the mainstream of modern social theory, and any legal theory is also social, does not mean that they automatically, by virtue of some internal regularity, become an integral element of practical activity and social action. in the sociological context, it is possible to say that in the conditions of modern society, the requirement of legality is imposed mainly on officials, which in itself is certainly correct, but not on society itself. consequently, according to the author, there is a stark gap between official legality and "living" (actual, real) legality, which for various reasons is not recognized and not used by society as a whole as a necessary guide in practical activity and coexistence. in addition, officials, who are also part of modern society, reflect the general views and attitudes dominant in society. at the same time, legitimacy should not be understood as "working" solely for the good of the state and the general social interest. on the contrary, it should be recognized and realized as a socially necessary condition for the stability and sustainability of human sociality, the existence and development of society (matveev, 2014). the presence of a legitimate norm is a prerequisite of legality, a condition of law and order. legitimization of new legal norms consists in the voluntary acceptance by people of these norms for execution, in the formation of the obligation to obey the law. y. obertov held to an understanding of legitimation derived from social-eudemonic ideas, that law and law should serve society as a whole, not individual groups. in doing so, he proceeded from the fact that for each participant of legal communication the problem of legitimacy of the norm is put separately, only the individual himself intellectually and emotionally accepts it as due, is aware of all the grounds and motives of his own duty formed by him (obertov, 2010). in y. obertov's understanding, the problem of legitimacy is reconstructed as a special expedient technology of successful application in society of a normative strategy – a guiding program developed by a legislator and implemented by state power in accordance with the best socio-cultural achievements of mankind, conditioned by conditions of a particular historical period, for improving the quality of life, social and individual existence (obertov, 2010). in other words, legitimation is the setting for effective legal policy. a necessary element of legitimation is the moment of feedback, the voluntary acceptance by society of the norms established by the state as due, as an internal duty. in this dialogue of social structures and actors involved in the development and adoption of legal norms, and every individual as a social being, the legitimacy of legal norms is realized. 4. conceptual trends in the study of the phenomenon of legitimacy of law the definition of legitimacy as an interrelated process, on the one hand, of the legislator, and on the other hand, of each individual, is a crucial characteristic of the effective functioning of law. however, it seems that the concept of legitimacy of legal norms needs certain clarifications. first, the legal norm in this conception is neither legitimate nor illegitimate. it acquires this quality only in its "process of life," its two-way path. thus, legitimacy is a right in life. if a right is voluntarily acquired and accepted by its addressees, then it can become legitimate. this is already a moment of collective psychology or a socio-legal characteristic of the norm. at the same time, since acceptance of a norm, i.e., its legitimization, is an individually conditioned process that depends on the totality of an individual's cultural, ideological and other attitudes, both psychological and sociological factors become significant. in a. mishchenko's interpretation, legitimation, quite in the spirit of weber's sociology of law, has the character of a purposeful action, both at the level of the original instance, the legislator, and at the level of the addressee of the norms (mishchenko, 2010). at the same time, the requirements ("higher principles") to be met by a legitimizing regulatory strategy remain completely unclear. and besides, the individual, as an indispensable participant in legitimation, is endowed by the author with a set of important, yet very high requirements that imply a completely conscious choice of the imperative norm as a way of proper behavior, that is, the question is not of the individual as such, but of a highly developed and highly moral individual. similar points can be found in the legal theory of g. hart, who proceeded from the understanding of a "healthy legal psyche" and formulated in this connection the task of forming, on the one hand, the politics of law as a new disciplinary form of legal science, and on the other hand, legal pedagogy, baltic journal of economic studies 90 vol. 8 no. 3, 2022 which should contribute to the development of the individual (hart, 2005). second, on the one hand, a legal norm as part of a regulatory strategy must meet a number of high requirements, and on the other hand, its legitimacy is conditioned on its recognition as such by members of society. hence, several questions immediately arise: how should the situation be assessed when a legal norm meets the highest standards of its development, moral and legal criteria, i.e., is it a kind of work of art, but practically not applied, not recognized by society as a legal norm due to excessive difficulty of understanding or non-compliance with the needs of the historical moment, and so forth? or, in the absence of a formulated norm, is it actually recognized in society as a right and applied as a proper rule in social relations? third, the moment of recognition is often already contained in the concept of law itself, especially when it comes to the types of legal theories that are based on the use of psychological arguments. for example, o. bandura wrote: "law is a mental factor of social life, and it acts mentally. its action consists, firstly, in excitation or suppression of motives for various actions and abstinence (motivational or incentive action of law), secondly, in strengthening and development of some inclinations and features of human character, in weakening or eradication of others, in general, in education of national mentality in accordance with the nature and content of the direction of the existing legal norms (pedagogical action of law)" (bandura, 2000). another authoritative jurist, a. baumeister, wrote that law is that which people "living together in a community mutually recognize as the norm or rule of their life together" (baumeister, 1998). y. kalyuzhnaya wrote: "law is rooted in conviction. its provisions are, by their very nature, statements of reason about the limitations of the will that are necessary for a just order of life" (kalyuzhnaya, 2012). these examples show that, for representatives of the psychological school of law, the moment of recognition or belief is already immanently included in the very notion of law. therefore, from this perspective, only that which is recognized as such can be considered a right. moreover, in this context, the notion of legitimacy loses its meaning altogether. the formula "legitimizing the right" or "legitimation of the right" would mean, in terms of a psychological approach to law, justifying as a right what is already a right, regardless of any external circumstances. various sociological versions of the understanding of law often do the same (kelsen, 2004). they see law as a social fact or as a socially conditioned phenomenon. moreover, in this sense, the legal norm emanating from the legislator is only a reflection, more or less successful, of what is recognized or established as law in society. in other words, legislative norms are only a logical and conceptual form of reflection or expression of law. in this case, the formula "legitimation of law" is also overloaded and contradictory (kozlov, 2014). in other words, in sociological versions of interpreting law, law either exists or it does not, it is born in society. it is possible to speak of the recognition of law or of its expression in legal concepts, legislative norms, judicial practice, but law is already present before its normative formulation and objectification, as an established order or an expedient way of resolving conflicts, etc. in addition, the voluntarily formed obligation to obey the norm represents the morality of law, of which o. skakun wrote (skakun, 2008). morality as a valuable moral and spiritual characteristic of humankind means recognizing the value of human beings as rational beings. 5. conclusions legitimacy is both a constructive and a destructive concept. in its strict form, this concept characterizes a certain moment of attitude toward the law and the problem of its effective operation. however, in philosophy or legal theory, for example, legitimation must thus mean communicating to the law a legitimate-legal character. it appears that this concept, which has a purely legal etymology – legitimate, excludes from the law its value essence, shifting the center of gravity to the practical assimilation of the law in the public and individual consciousness. this gives rise to a rather peculiar construction. law can be anything, the main thing is that it corresponds to a formal procedure. the right thus legitimized, that is, formally legitimized, enters a new stage of assimilation and acceptance in the public and individual consciousness. if it is not accepted voluntarily, it does not cease to be a right, but suffers from a lack of legitimacy. in essence, legitimacy captures two essential points: the first is the orientation toward dialogue with society and with each of its members individually, i. e., the final sanction in the minds of the people or its majority; but, on the other hand, it is not the law itself that possesses some intrinsic attribute of supreme legitimacy, only its collective psychological perception and justification. in other words, the central issue in this approach is, on the one hand, the role of individual consciousness and, on the other hand, it creates a very wide scope for technological, in the sociological and political sense, influence on collective consciousness. at the same time, the question remains open, for example, how a right that is not expressed in formal legal norms (customary law or de facto law, "living" baltic journal of economic studies 91 vol. 8 no. 3, 2022 or special psychological experiences, imperativeattributive emotions) should be assessed. it has gained recognition in society, but it has not become part of the regulatory strategy or part of the rulemaking. obviously, it must be recognized as illegitimate. moreover, the problem of legitimacy devalues the very notion of law, which is no more than a formal requirement. what counts is not the quality of the law or its legal nature, but the conviction of the addressees, for which there is obviously a wide range of possibilities, especially in the modern era of high technology. in the context of legitimacy, the role of the concept of law as a whole also remains completely unclear. that is, some empty form of law is recognized, which must be legitimized – to acquire content, but only that which will be reflected and voluntarily assimilated in the mind of the addressee. however, this interpretation is only appropriate in strictly defined versions of legal theories. thus, a right can be legitimate but illegal. on the contrary, it may be legal but illegitimate. however, at the same time, in both cases this does not affect the essence of the right. law in this paradigm is, as a rule, a set of norms, imperative dictates or logicalconceptual constructions in the form of judgments about the proper, but in any case, in this paradigm for legal science as a central question is offered not about the essence of law, but, first, about the formal technology (procedure) of its development and adoption, and second, about the degree of its justification in the minds of people. at the same time, as a rule, legitimacy is never complete, but is implied a priori as a graded value, more or less legitimate. references: bandura, o. (2000). unity of values and truth in law: monograph. kyiv: national academy of internal affairs of ukraine. baumeister, a. (1998). philosophy of law: textbook. kyiv: publishing and printing center "kyiv university ". berger, j. (1998). the legitimation and delegitimation of power and prestige orders. american sociological review, vol. 63, no. 3, pp. 379–405. hart, g. l. a. (2005). positivism and the differentiation of law and morality. jurisprudence, vol. 5, pp. 230–237. kalyuzhnaya, y. i. (2012). search for new theoretical and methodological keys to the concept of "legitimacy of power". modern society: political sciences, sociological sciences, cultural sciences, vol. 7, pp. 33–38. kelsen, g. (2004). pure legal awareness. kyiv: yunivers. kovalchuk, v. b. (2013). legal bases of interaction between civil society and state power in the process of democratic legitimation: monograph. ostrog: publishing house of the national university. kozlov, s. v. (2014). on the conceptual analysis of the concept of "legitimacy ". vestnik tvsu. the philosophy series, vol. 1, pp. 26–34. maksimov, s. (2010). duality of law. the law of ukraine, vol. 4, pp. 36–43. matveev, s. (2014). legitimacy and legality as signs of state power. legal bulletin, vol. 3, pp. 20–23. mishchenko, a. b. (2010). trust as a component of legitimation of power in the conditions of modern democracy (abstract of the phd thesis). kyiv. nevidomiy, v. (2011). self-organization of legal reality that legitimacy of the basic law: monograph. kyiv. novachenko, t. v. (2016). the authority of the manager as a type of legitimacy of power. bulletin of the nagu under the president of ukraine. the series "political sciences", vol. 2, pp. 62–67. obertov, y. (2010). legal understanding as an axiomatic principle (postulate) of law. law of ukraine, vol. 1, pp. 40–56. primova, e. (2013). to the question of the legitimacy of power. power, vol. 8, pp. 112–116. skakun, o. f. (2008). theory of state and law: textbook. kharkiv: consum publ. weber, m. (1998). sociology: historical analysis, politics. kyiv: osnovi. yuriychuk, e. p. (2010). electoral legitimacy and legitimation of power: terminological aspects. actual problems of politics: a collection of scientific papers. odessa: feniks publ. zadykhaylo, d. d. (2007). systemic legal values as a guarantee of executive power efficiency. state construction and local self-government, vol. 14, pp. 158–166. zykova, s. v. (2013). actual problems of legal theory of the state. unity-dana: zakon i pravo. received on: 29th of july, 2022 accepted on: 2th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 66 vol. 2, no. 4, 2016 corresponding author: 1 department of economic theory, ivan franko national university of lviv. e-mail: martella.slavitych@gmail.com 2 department of economic theory, ivan franko national university of lviv. e-mail: o_gupalo@ukr.net promising financing scheme of health insurance in ukraine martha slavitych1, oleg gupalo2 ivan franko national university of lviv, ukraine abstract. the promising financing scheme of health insurance in ukraine should be found at the present stage of its development. the health care system in ukraine is cumbersome and outdated. it is based on the semashko model with rigid management and financing procedures. the disadvantages accumulated in the national health care system due to lack of modernization, disregard of the population needs, non-use of modern global trends, the inefficient operation of the system and the high level of corruption cause the underlying situation. the decision of new government policy in the sector is introduction of new financial mechanisms, in order to ensure human rights in the health sector. methodology. the study is based on a comparison of systems of financing of medicine in ukraine and in other countries, provided advantages and disadvantages of each model. results showed that the availability of medical services is the key problem in any society. the availability of health care services is primarily determined by the proportion of services guaranteed by the government (government guarantees). in some countries such as the united states, practically the whole medicine is funded by voluntary health insurance (vhi). in europe the mandatory health insurance (mhi) and government funding are the most significant source of funds. practical importance. the improvement of the demographic situation, the preservation and improvement of public health, improvement of social equity and citizens' rights in respect of medical insurance. value/originality. premiums for health insurance are the source of funding. based on the new model requirements it is necessary to create an appropriate regulation, which would determine its organizational and regulatory framework. this process is primarily determined by identification and setting rules governing the relationship between patients, health care providers and insurers, creation of the conditions and the implementation of quality assurance mechanisms and the availability of medical care in accordance with the available resources and the expectations of patients. for the further development of the health care system in ukraine, of the introduction of multi-channel financing will be appropriate. key words: healthcare system, healthcare model, bismarck model, beveridge model, semashko model. jel classification: g28, h21, i11 1. введение по состоянию здоровья граждан украина занимает одно из нижних рейтинговых мест в европейском регионе. украина занимает второе место в европейском регионе по уровню смертности, которая увеличилась на 12,7% в период с 1991 по 2012 гг. в то время как в европейском союзе этот показатель снизился на 6,7%. в 2015 году показатель смертности увеличился на 183012 человека (derzhstat ukrayny). к тому же, одну четверть от общей смертности составляет смертность среди трудоспособного населения. при этом одной из таких причин низкого качества медицинского обслуживания и неровности граждан в доступе к услугам здравоохранения является хронический финансовый дефицит в системе здравоохранения (mnykh, 2009). уровень финансового обеспечения здравоохранения в украине достаточно низкий, что влияет на неудовлетворительную организацию лечебного процесса, низкий уровень качества подготовки и квалификации специалистов не создают условия для здорового образа жизни и труда, в результате чего происходит уменьшение продолжительности жизни населения, увеличение заболеваний и сокращения численности населения в стране. одним из ключевых факторов такой ситуации является низкое экономическое развитие страны. ввп украины в 2013 году составил 1460 млрд. грн. (177,4 млрд. долларов сша), более низкие показатели на душу населения, чем даже самые низкие значения в европейском союзе (bilyk, 2012). ситуация в 2014-2015 годах только ухудшилась из-за экономического кризиса и военного конbaltic journal of economic studies 67 vol. 2, no. 4, 2016 фликта. улучшить положение в этой отрасли страны может лишь страховая медицина. 2. понятие «страховая медицина» следует различать понятия “страховая медицина” и “медицинское страхование”. страховая медицина представляет собой один из способов финансирования здравоохранения. подразумевается, что в качестве источника финансирования выступают страховые взносы по медицинскому страхованию (kotova, 2010). в свою очередь медицинское страхование – это более узкое понятие, которое представляет собой вид страховой деятельности. при платной медицине данный вид страхования является инструментом для покрытия расходов на медицинскую помощь, при бесплатной медицине  – это дополнительный источник финансирования медицинских расходов. страхование медицинских расходов является страхованием ущерба и защищает состояние клиента от внезапно возникающих расходов. по мнению экспертов всемирной организации здравоохранения, основными причинами перехода к страховой медицине являются: недостаточность финансирования здравоохранения; увеличение обращаемости за медицинской помощью (до 60%) при “бесплатном” здравоохранении; возрастание объема и стоимости медицинских услуг параллельно росту числа врачей; дефицит квалифицированной медицинской помощи; расцвет “теневой” экономики в медицине; сверхцентрализация и монополизация финансирования и управления здравоохранением. 3. общие принципы формирования модели здравоохранения в большинстве стран фундаментом национальной политики в области здравоохранения является соответствующая правовая база, разработана в соответствии с международными нормами и стандартами изложенных в правовых актах: организации объединенных наций (оон), совета европы (се), всемирной организации здравоохранения (воз), международной организации труда (мот), страны члены организации экономического сотрудничества и развития (оэср) при разработке стратегии финансирования и организации здравоохранения придерживаются трех основных принципов: обеспечение равного доступа к медицинскому обслуживанию для всех граждан, основанного на солидарном участия бедных и богатых, больных и здоровых, молодых и пожилых людей, независимо от места проживания; макроэкономическая эффективность: максимально допустимая доля национальных ресурсов, которые должны быть направлены на удовлетворение потребностей здравоохранения; высокое качество медицинской помощи при оптимальных расходах. формирование модели управления здравоохранением происходит согласно социально-экономической политики, проводимой в государстве. все существующие модели отличаются как минимум по одному из следующих показателей, что является признаками организации управление: объем государственных гарантий; источник финансирования медицинской помощи; заказчик исполнитель (поставщик) медицинских услуг и его статус; характер взаимоотношений между заказчиком и поставщиком медицинских услуг; государственное управление здравоохранением; схема финансирования здравоохранения; структуры, обеспечивающие права пациентов; структуры, обеспечивающие права производителя медицинских услуг. наличие в той или иной стране соответствующей системы здравоохранения определяется многими обстоятельствами, но при всех различиях в системах здравоохранения разных стран экономические модели формируются по определению роли и функции государства в этих процессах. в мировой практике общественного здравоохранения и медицинского обеспечения на сегодняшний день существуют четыре основные модели системы здравоохранения. хотя национальные системы здравоохранения базируются на сочетании различных источников формирования совокупного бюджета, в каждой стране преобладает какой-то один из механизмов финансирования. в зависимости от того, какой механизм превалирует в системе здравоохранения той или иной страны, его относят к одной из четырех моделей. 4. частная система здравоохранения модель предпочтения потребителей (частная система здравоохранения) характеризуется значительными рисками. все субъекты в такой модели (страховые компании, представители и потребители медицинских услуг) взаимодействуют как свободные субъекты рынка. медицинское страхование осуществляется на частной основе, хотя и обеспечивается через работодателей путем добровольных взносов. страхование здоровья части населения, которая не застрахована по месту работы, обеспечивается правительством. премия частного медицинского страхования рассчитывается исходя из средней стоимости предоставления услуг. различные страховые компании имеют различные перечни оплачиваемых baltic journal of economic studies 68 vol. 2, no. 4, 2016 услуг для различных категорий застрахованных. медицинскую помощь оказывают в основном частные врачи и больницы. в частных системах медицинского страхования обычно используется шкала индивидуальных показателей риска. это самый ненадежный вид страхования, который противоречит системе социальной солидарности. в таких случаях страховые взносы каждого отдельного человека корректируются на фактор риска, отражающий состояние ее здоровья. характерным примером такой модели является система здравоохранения сша. к ее преимуществам следует отнести: 1) наличие стимулов для развития профессионализма медицинских работников; 2) обеспечение высокого качества медицинской помощи; 3) мобильность ресурсов; 4) интенсивное развитие новых медицинских технологий. существенными недостатками модели является, прежде всего, огромные социально-экономические потери (по крайней мере, 35 млн. американцев не имеют адекватного медицинского страхования) и безудержный рост общественных расходов. 5. модель бисмарка модель бисмарка (социально-ориентированная система здравоохранения) базируется преимущественно на обязательном социальном страховании всех жителей страны в соответствии с определенным уровнем дохода. при такой модели система здравоохранения финансируется через целевые взносы работодателей и работников, а также через бюджетные субсидии из общих или целевых поступлений. размер взносов определяется исходя из возможности их оплаты населением, а доступ к услугам – исходя из потребности в них. преимуществом этой модели является независимость страховых фондов. управление происходит через государственные или частные страховые компании, деятельность которых строго регламентирована. то есть осуществление медицинского страхования является функцией самоуправляющихся независимых организаций, которые имеют свой собственный бюджет, автономное управление и юридический статус, обеспечивающий им независимость от правительства и государственного бюджета. в некоторых странах (например, во франции) организации, которым поручено оказание социальных услуг, являются частными, но они находятся под жестким контролем со стороны правительства. фактически они квази-государственные и в большинстве стран некоммерческие организации. по модели бисмарка одним из главных принципов медицинского страхования является социальная солидарность и субсидиарность, то есть риски отдельных групп населения распределяются на все население. в социальном страховании обычно практикуется детальный перечень видов услуг, компенсируются, а размеры взносов устанавливаются на доступном для населения уровне. в европейские страны, системы здравоохранения которых финансируются за счет страховых взносов, относятся австрия, бельгия, франция, германия, нидерланды и швейцария. конечно, системы здравоохранения этих стран отличаются друг от друга из-за имеющихся исторических, социальных, экономических, организационных и идеологических различий (iakovleva, 2008). европейская система социального страхования в основном основывается на социальном партнерстве. социально-ориентированная система обеспечивает: • эффективное предоставление медицинских услуг; • стабильное финансирование сектора здравоохранения; • регулирование прав пациентов как потребителей услуг; • объединение рисков и взаимной поддержке; • предоставление услуг в соответствии с потребностями населения, а распределение финансового бремени в соответствии с возможностями населения; • реализацию целей государственной политики здравоохранения, сохраняя при этом определенный уровень независимости от правительства. недостатками такой системы есть проблемы по сокращению расходов, возможность роста стоимости медицинских услуг, высокий уровень административных расходов. 6. модель бевериджа в модели бевериджа (государственная система здравоохранения) финансирование осуществляется преимущественно за счет государственного бюджета, то есть взносы собираются через общую налоговую систему – на центральном, региональном или местном уровнях. при этом используются не только стандартное администрирования, но и современные методы управления. решение относительно общего объема финансирования принимается в процессе планирования расходов государственного бюджета в целом. страховые фонды в рамках системы здравоохранения, функционирующие в соответствии с этой моделью, в общем является нецелевыми. однако все граждане охватываются страхованием, которое обеспечивает им получение унифицированного объема медицинских услуг. ответственность за справедливое географическое распределение бюджета между поставщиками медицинских услуг несут преимущественно региональные органы здравоохранения в модели бевериджа могут применяться различные подходы к финансированию системы здравоbaltic journal of economic studies 69 vol. 2, no. 4, 2016 охранения, но главная роль в обеспечении фондами принадлежит государственному сектору. эта модель характерна для систем здравоохранения скандинавских стран, ирландии и великобритании, стран южной европы – греции, португалии и испании. однако системы здравоохранения, финансируемые из общих налоговых поступлений, в разных странах имеют свои особенности. скажем, в ирландии и дании только наименее обеспеченные граждане получают всю помощь по медицинскому страхованию без дополнительной оплаты, в то время, как остальное население должно оплачивать некоторые дополнительные расходы наличными. что касается таких стран как финляндия, великобритания, то их системы здравоохранения имеют два источника финансирования: основная часть финансовых поступлений формируется за счет налогов, а остальное поступает от фондов социального страхования. кроме того, в финляндии взносы на социальное страхование используются главным образом для оплаты частного медицинского обслуживания, медико-санитарного обслуживания на предприятии, лекарств и вспомогательных услуг. в великобритании сохранилось распределение взносов на социальное страхование между работодателями и работниками, а в некоторых скандинавских странах (финляндия, норвегия и швеция) от взносов работников отказались (soldatenko, 2010). существует мнение, что существенным недостатком государственной системы здравоохранения является бюрократия администрирования. другим ее недостатком является значительная зависимость от структуры и объема средств государственного бюджета, выделяемого на здравоохранение. такая система характеризуется отсутствием: 1) заинтересованности в экономии всех видов ресурсов; 2) стимулов к повышению качества медицинской помощи и удовлетворение потребностей потребителей. с другой стороны, система общих налогов может быть очень эффективной в ограничении общих расходов и, в случае надлежащего управления ею, иметь меньшие административные расходы чем страховая система. 7. модель семашко система здравоохранения, построенная по модели семашко, финансируется исключительно из государственного бюджета, базируется на общих налогах, контролируется государством через систему централизованного планирования и характеризуется отсутствием частного сектора. недостатками этой модели является бюрократические и административно-командные методы управления здравоохранением и отсутствие экономических рычагов управления. модель семашко была принята в странах центральной и восточной европы, в том числе и в украине. на сегодня системы здравоохранения большинства этих стран находятся на разных этапах перехода к системе социального страхования или в комбинированной системе. в период перехода украины к рыночной экономике отечественная отрасль здравоохранения претерпела определенные изменения и ощутила упадок. реформа здравоохранения требует детального анализа существующей системы и четкого видения новой концепции, исходя из реальных экономических, культурных и политических особенностей украины (the royal netherland embassy, 2006). нужно также учесть мировой опыт и положительные стороны существующей системы. 8. различные подходы анализа систем здравоохранения подход, который предложили милтон ромер (мilton i. roemer) и некоторые другие ученые, предполагает описание с последующим сравнением систем здравоохранения многих стран мира. система здравоохранения определяется из показателей ресурсов, в том числе количество больничных коек, медицинских работников, другие количественные показатели (заболеваемость, смертность, средняя продолжительность жизни), а также из-за особенностей правительственных программ. такой подход к анализу предоставляет значительное количество описательных деталей отдельных систем здравоохранения, но не формулирует четкие выводы и рекомендации относительно того, как изменить систему, как понимать политические процессы, влияющие на деятельность здравоохранения, как выработать общественно необходимые принципы для оценки текущих проблем или будущих действий. подход к анализу системы здравоохранения, предложенный джереми харст ( jeremy hurst) основан на источниках финансовых ресурсов. харст изучал системы здравоохранения с точки зрения притока финансовых ресурсов и методов оплаты медицинских услуг между группами населения и медицинскими учреждениями. он рассматривал систему здравоохранения как закрытую систему, в которой объем медицинских услуг соответствует финансовым поступлениям. современное развитие этого подхода в форме национальных счетов здравоохранения обеспечивает сложный анализ и часто придает дополнительную характеристику движения потоков финансовых ресурсов от источников доходов через посредников к поставщиков медицинской помощи. однако, существенным недостатком этого подхода является сосредоточение на описании. экономическая теория выработала другую концептуальную модель для понимания системы здраbaltic journal of economic studies 70 vol. 2, no. 4, 2016 воохранения. но сложность заключается в том, что система здравоохранения, даже в пределах одной страны, представляет собой сочетание множества различных рынков для различных товаров и услуг в разных географических зонах. поскольку отдельные рынки редко изучались подробно, то в таком анализе не хватает понимания их взаимодействия. более того, экономическая парадигма оперирует схемой спроса и предложения, где уровень цен является ориентиром как для потребителя, так и для производителя. рынок медицинских услуг стимулирует развитие рынка страхования на случай болезни и создает стимулы, которые управляют производством – от современных медицинских технологий в новых лекарствах и оборудовании. одновременно необходимо учитывать существенное влияние предложения на спрос и на поведение пациентов. кроме того, во многих странах большая часть системы здравоохранения не организована согласно рыночным принципам. а если и существуют такие рынки, они часто конкурентно несовершенны. учитывая указанные сложности и ориентируясь на конкурентную модель, очевидно, что микроэкономическая теория предлагает недостаточно рекомендаций по совершенствованию систем здравоохранения на макроуровне и, в частности, улучшения общего состояния здоровья граждан и показателей увеличения национальных расходов на здравоохранение и тому подобное. одним из последних подходов является сравнительный анализ функционирования систем здравоохранения отдельных стран мира, предложенный всемирной организацией здравоохранения (воз, 2000). согласно этому подходу национальные системы здравоохранения классифицируются на основе определенных показателей с использованием обобщающей комплексной структуры для проведения сравнительного анализа. анализируются главные цели финансирования системы здравоохранения: сбор или накопления (collection), объединения (pooling) и покупка (purchasing). такой подход не содержит расширенного анализа причин неадекватного функционирования систем здравоохранения в отдельных странах мира, детальной дискуссии относительно того, что могут сделать разработчики государственной политики и чиновники для улучшения деятельности системы на основе существующих традиций, общественных потребностей и международных норм и стандартов. в настоящее время украинские эксперты спорят о двух моделей омс – единый страховой фонд (русская модель) (8,9) или услуги будут предоставлять несколько страховых компаний (ск) (грузинская модель). при этом полностью ввести грузинскую модель невозможно, поскольку у нас другие исходные условия – например, гораздо большее количество населения. обе модели имеют свои преимущества и недостатки. российская модель предусматривает контроль государства – мы в украине получили бы еще один социальный фонд минсоцполитики. а когда эти услуги отдать страховым компаниям, это может привести к конкуренции, но она может быть недобросовестной и компания обанкротится. здесь должны действовать жесткие критерии отбора ск (apteka, 2015). 9. выводы в настоящее время структурно и экономически близкой к украине является модель бевериджа, особенно меры переходного этапа. реформирование системы здравоохранения украины на основании формирования новой модели требует создания соответствующей нормативно – правовой базы, которая будет определять его организационноуправленческие основы. этот процесс заключается прежде всего в определении и на законодательном уровне закрепления правовых норм, регулирующих отношения между пациентами, медицинскими работниками и страховщиками, в создании условий и внедрении механизмов обеспечения качества и доступности медицинского обслуживания в соответствии с имеющимися ресурсами и ожиданиями пациентов. для дальнейшего развития системы здравоохранения целесообразным будет введение многоканального финансирования, в виде: гарантированных платежей из местного бюджета; обязательного государственного медицинского страхования работающих и малообеспеченных граждан; создание инициативных фондов на уровне учреждений и районов; добровольного медицинского страхования для граждан, желающих получать дополнительные медицинские услуги, за отдельные страховые компании; формирование накопительных фондов на уровне семей (типа пенсионного страхования); государственного медицинского займа (инициатором может быть как непосредственно медицинское учреждение, так и органы местного самоуправления); непосредственных платежей населения, будут осуществляться в частном секторе медицины. важным источником финансирования здравоохранения являются средства государственного и местных бюджетов. учитывая значимость этого источника финансирования, оно, к сожалению, не может в полном объеме обеспечить все потребности сферы здравоохранения. не меньшего внимания требуют и дополнительные финансовые ресурсы, которыми являются средства, полученные из других источников, – добровольное медицинское страхование и благотворительность. обеспечение в национальной системе здравоохранения многоканальной финансоbaltic journal of economic studies 71 vol. 2, no. 4, 2016 вой политики, является тяжелой научно-теоретической, нормативной, правовой, социально-экономической и практической задачей. с целью обеспечения непрерывности оказания медицинской помощи, не ухудшение достигнутого ее уровня, омс предлагается внедрять в три этапа: i этап – подготовительный, предусматривает персонификацию населения, разработку и утверждение стандартов лечения, перечень медицинских услуг и их стоимость, реструктуризацию государственных и коммунальных учреждений здравоохранения и принятия закона украины «об обязательном медицинском страховании». ii этап – переходный, предусматривает заключение договоров омс, сохранение без изменений системы финансирования станций первой неотложной помощи, детских поликлиник, родильных домов и тому подобное; а также сохранения частичного финансирования за счет государственных и местных бюджетов постоянных расходов учреждений здравоохранения второго и третьего уровней. iii этап – полноценное функционирования омс, предусматривает одновременное прекращение финансирования системы здравоохранения за счет государства, кроме специализированных учреждений введения новых размеров страховых платежей с учетом страхового покрытия таким образом, только после введения концепции обязательного медицинского страхования в украине, которая дополниться также добровольным медицинским страхованием, возможно реформирования здравоохранения. такая система здравоохранение будет иметь социальную направленность, которая приведет к росту сильной и здоровой нации, и соответственно к эффективной экономики украины. references apteka (2015). natsionalna stratehiia reformuvannia systemy okhorony zdorovia v ukraini na period 2015-2020 rokiv, №11, s. 18-21. baieva o.v. (2013). strakhova medytsyna i medychne strakhuvannia: navch. posib. dlia stud. vyshch. navch. zakl. – k.: dp «vyd. dim «personal», 432 s. bilyk o.i. (2012). medychne strakhuvannia u finansovomu zabezpechenni systemy okhorony zdorovia v ukraini – natsionalnyi universytet «lvivska politekhnika» №739, s. 195-201. diachenko ye.v. (2011). suchasnyi stan medychnoho strakhuvannia v ukraini. – teoretychni ta prykladni pytannia ekonomiky: zbirnyk naukovykh prats. vyp. 25, s. 270-276. kotova s. (2010). problemy zaprovadzhennia zahalnooboviazkovoho derzhavnoho medychnoho strakhuvannia v ukraini – ekonomichnyi analiz. vyp. 6, s. 91-95. mnykh m.v. (2009). medychne strakhuvannia ta neobkhidnist yoho zaprovadzhennia v ukraini – ekonomika ta derzhava. №2, s. 40-41. soldatenko o. (2010) yevropeiskyi dosvid finansuvannia vydatkiv na okhoronu zdorovia –yurydychna ukraina. № 4, s. 53–58. shulyk yu.v. (2013). perspektyvy vprovadzhennia zahalnooboviazkovoho sotsialnoho medychnoho strakhuvannia v ukraini – naukovi zapysky. seriia «ekonomika». vyp. 22, s. 97-100. iakovleva t. (2008). sotsialno-pravovi peredumovy zaprovadzhennia oboviazkovoho medychnoho strakhuvannia – pidpryiemnytstvo,hospodarstvo i pravo. №11, s. 71-74. the royal netherland embassy (2006). health insurance system, ministry of health, welfare, and sport. the world bank, (2015). how is it working?; a new approach to measure governance in the health system in ukraine. problemy ta perspektyvy vprovadzhennia medychnoho strakhuvannia v ukraini [elektronnyi resurs]. – retrieved from: http://www.economy.nayka.com.ua/?op=1&z=2905 derzhstat ukrayny [elektronnyi resurs]. – retrieved from: http://www.ukrstat.gov.ua/ марта славитич, олег гупало перспективные схемы финансирования страховой медицины в украине аннотация. на современном этапе развитие страховой медицины в украине должна быть найдена, перспективная схема для финансирования страховой медицины. система здравоохранения в украине является громоздкой и устаревшей и базируется на модели семашко с жесткими процедурами управления и финансирования. такую ситуацию обусловливают глубинные недостатки, накопленные в национальной системе здравоохранения из-за отсутствия модернизации, игнорирование потребностей населения, неиспользования современных мировых тенденций, неэффективной работы системы и высокого уровня коррупции. решением для формирования новой государственной политики в отрасли, является внедрения новых финансовых механизмов, с целью обеспечения прав человека в сфере здравоохранения. методика. исследование основано на сравнении систем финансирования медицины в украине и в других странах, baltic journal of economic studies 72 vol. 2, no. 4, 2016 наведенные преимущества и недостатки по каждой модели. результаты показали, что ключевая проблема в любом обществе это доступность медицинских услуг. степень доступности медицинских услуг в первую очередь определяется долей услуг, гарантированных государством (государственными гарантиями). в некоторых странах, таких, как сша, фактически вся медицина финансируется за счет добровольного медицинского страхования (дмс), в то время, как в европе наиболее весомым источником средств является обязательное медицинское страхование (омс) и государственное финансирование. практическое значение. улучшение демографической ситуации, сохранения и укрепления здоровья населения, повышение социальной справедливости и прав граждан на страховую медицину. значение/оригинальность. подразумевается, что в качестве источника финансирования выступают страховые взносы по медицинскому страхованию. на основании формирования новой модели требует создания соответствующей нормативноправовой базы, которая будет определять его организационно-управленческие основы. этот процесс заключается, прежде всего, в определении и на законодательном уровне закрепления правовых норм, регулирующих отношения между пациентами, медицинскими работниками и страховщиками, в создании условий и внедрении механизмов обеспечения качества и доступности медицинского обслуживания в соответствии с имеющимися ресурсами и ожиданиями пациентов. для дальнейшего развития системы здравоохранения в украине целесообразным будет введение многоканального финансирования. baltic journal of economic studies 154 vol. 8 no. 3, 2022 1 cherkasy state technological university, ukraine; cherkasy city council, ukraine (corresponding author) e-mail: andrew.pol85@gmail.com orcid: https://orcid.org/0000-0001-8984-4098 researcherid: aaa-3356-2021 2 cherkasy state polytechnic university, ukraine e-mail: kntu.inintex@gmail.com orcid: https://orcid.org/0000-0003-2037-7510 3 cherkasy state technological university, ukraine e-mail: licorn1963@gmail.com orcid: https://orcid.org/0000-0002-8941-9427 doi: https://doi.org/10.30525/2256-0742/2022-8-3-154-165 methodological approach to assessing the level of development of the economic space of the regions andrii polishchuk1, tetiana kotenko2, larysa chepurda3 abstract. the purpose of the article is to summarize and present the differences between the regions of ukraine on the level of development of the regional economic space from 2010 to 2020. the clustering of the regions is performed on the basis of the author's methodical approach to assessing the level of development of the economic space of the regions. methodology. the methodological approach consists of five consecutive stages of assessing the state of the regional economic space on the basis of official statistical data. the k-means algorithm is used to cluster the regions. the implementation of the proposed methodological approach is carried out on the basis of statistical data of the regions of ukraine for the period 2010–2020. comparison of the array of statistical data for the period 2010–2020 for the regions of ukraine is carried out by regions and territories for which statistical data are available. due to the russian invasion in 2014, there is no statistical information about the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and part of the temporarily occupied territories in donetsk and luhansk regions. the results of the study showed that the regions of ukraine are divided into six separate clusters, depending on the level of development of the regional economic space, in particular, the intensity of processes in the economic space. most regions of ukraine change the cluster only once during the period 2010–2020. at the same time, for example, donetsk region changed its position in the clusters six times during this period. regions of ukraine in 2010–2014 formed three clusters with more than three regions, then three years later there were two clusters with more than 5 regions, indicating a redistribution of regions between clusters. practical implications. the division of regions into clusters allows to unify regional development policy in the context of regions with similar characteristics and at the same time does not imply the use of a single template for the development of all regions. the grouping of regions by groups of indicators allows to distinguish stable entities (such as lviv, odessa and kharkiv regions), slowly changing regions (with processes of development or regression) and unstable regions (such as donetsk). for each group it is necessary to develop a separate regional policy, depending on the characteristics of the cluster. the implementation of the developed methodology will improve the classification of ukrainian regions by groups of indicators of regional economic space development for further improvement and unification of regional development policy. value/originality. the proposed methodology provides an assessment on the basis of 67 indicators characterizing the level of development of the regional economic space and forming six groups of indicators, determining for the economic space intensity of economic processes; transparency; intensity of demographic processes; labor market functioning; business diversification; ecology and infrastructure condition. key words: economic space, region, regional economy, cluster analysis, regional cluster, strategic management. jel classification: a10, r12, r58 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 155 vol. 8 no. 3, 2022 1. introduction interand intra-regional contrasts are a significant obstacle to the formation and implementation of effective state and regional management decisions and plans. differentiation is especially dangerous when economic inequality between regions and local territories within a region is exacerbated by political, religious, cultural, ethnic and other differences (kasser, 2008). growing regional inequality, as well as the growing number of depressed territories and their financial dependence lead to social and economic instability in society and limit the possibilities of quality regional governance. all this, in the case of the worst scenarios, can lead to a significant deterioration of the socio-economic condition of the regions, their economic space, a decrease in regional competitiveness, deterioration of the quality of life and impoverishment of the population (olsen, osmundsen, 2003). a balanced regional policy that provides a consensus between economic efficiency and social justice is a means of addressing regional inequalities. thus, strategic management and planning of territorial development is one of the most important activities of regional top management. formation of the strategy of spatial development of regions, first of all, requires a retrospective assessment of the effectiveness of their functioning, determining the similarity of management objects (at the regional and local levels) in terms of volume, dynamics and trends of socio-economic processes, etc. in the future it allows to unify management processes at the regional level and to develop unified solutions and approaches for strategic and tactical work within individual clusters (or groups) of territories. this, in turn, provides the most appropriate and efficient use of the potential of spatial resources, ensuring their competitiveness, and to achieve positive dynamics in regional development as a result of the implementation of strategies. 2. the problem of assessing the level of the economic space development at present, given the negative impact of the covid-19 pandemic on the level and dynamics of socio-economic development of countries and regions, governments are facing unprecedented new challenges to find new ways, tools and mechanisms of post-pandemic economic recovery. specific regional conditions, pre-crisis problems and limited resources increase the level of complexity of this task. at the same time, these crisis conditions make it possible to understand the importance of economic space of each territory, its compliance with urgent needs, saturation, quality (in terms of resources, infrastructure, logistics solutions, openness, administrative transparency and ease of doing business, etc.) for the survival, sustainability and development of regional business and the regional economy as a whole (schwab, zahidi, 2020). the formation of new ways and solutions for regional development should be based on fundamentally new forms of cooperation, transfor ming conflicts of interest into concerted interaction based on common features of socio-economic development and specialization of territories. this will allow the transition from inter-regional competition to constructive cooperation and the development of common, mutual mechanisms of development and strengthening the competitiveness of regions and local territories, to a model of regional economic development through improving the quality of the economic space. 3. indices and ratings to assess the level of economic space development international rankings and indices are used to assess and compare the level of development of the economic space of a particular country or group of countries at the global level. they are based on a methodology that integrates the latest statistical data from international organizations and surveys of business executives. typically, such ratings are created by international organizations and consulting agencies and based on the evaluation of a large array of statistics, including those summarized and published in reports and studies of internationally recognized organizations such as the united nations (un), the united nations industrial development organization (unido), united nations educational, scientific and cultural organization (unesco), organization for economic cooperation and development (oecd), world trade organization (wto), world economic forum (wef), world bank (wb), international labor organization (ilo), international energy agency (iea), international telecommunication union (itu), and others. the most famous and used by scientists, governments and businesses are the following annual indices, which are the basis for ranking the economic space of the world. 1. the doing business index has been calculated by the world bank group for 190 countries since 2002. the doing business project provides an objective assessment of the state of business regulation and its compliance. the first doing business report, published in 2003, covered five sets of indicators and 133 economies. the final study, published in 2019, covered 11 sets of indicators and 190 economies (doing business, 2020). 2. global competitiveness report, developed by the world economic forum since 1979. these baltic journal of economic studies 156 vol. 8 no. 3, 2022 aggregate indices are categorized into 12 components: institutions; infrastructure; ict adoption; macroeconomic stability; health; skills; commodity market; labor market; financial system; market size; business dynamism; innovation capabilities. 3. the globalization index (kof globalization index), calculated since 1970 by the swiss institute of economics (kof swiss economic institute). this is the aggregate index, the calculation of which is based on 3 pillars of globalization: economic (trade & financial), social informational, interpersonal & cultural), and political. 4. the global cities index, calculated by a.t. kearney since 2008. the methodology of evaluation allows measuring the economic space and its impact on the biggest cities' global development in five spheres. these include human capital, business activity, cultural experience, information exchange, and political activity. twenty-six indicators in these five dimensions are used to rank more than 150 megacities around the world and measure how engaged they are in the global economy (kearney analytics, 2021). 5. globalization index a.t. kearney (a.t. kearney/ foreign policy globalization index), calculated annually since 2000 and examines the underlying international trends that reveal whether the world’s leading nations are becoming more or less globally connected (kearney analytics, 2021). this index is based on four sub-indexes: economic integration (incl. foreign direct investment, international trade etc.); personal contact (incl. travel, telephone, and remittances); technological connectivity (incl. number of secure servers, hosts, internet users etc.); political engagement (incl. participation in organizations, treaties, and peacekeeping). 6. readiness for the future of production index, calculated since 2008 by wef aimed at the evaluation of the global involvement of national economics and development insights about how a city can become more global. the index is based on 59 indicators that capture pertinent concepts that are fundamental to a country 's readiness for the future of production. these indicators are grouped into two large groups – structure and drivers of production (world economic forum, 2018). thus, when assessing the economic space, international organizations and academic institutions primarily determine its openness and accessibility for economic activity of both internal and external economic agents of various organizational and legal forms, sizes and directions of economic activity. as a rule, along with the economic characteristics of the space, which prevail in the assessment, its political, technical, technological and social characteristics are studied. however, despite the fact of the constant attention of developers to the relevance of the rankings methodology, nowadays challenges require a review of methodological approaches and decisions on their feasibility (world bank, 2021). moreover, the use of these methodological approaches is overwhelmingly impossible for comparisons at the level of the regional economy of a single state, since some of the indicators proposed in these approaches are unchangeable for individual areas within the country. a small exception to this list are countries with a federal structure. at the same time, the establishment of inter-regional differences and similarities is a task to ensure effective regional and state governance and strategic planning. in the case of ukraine, all these challenges were added to the full-scale invasion and war by russia. at the state level, economic space is usually assessed by authorized bodies of governments according to legally approved methodologies and/or by consulting agencies, as well as by academic institutions according to their own developed methodologies. it is worth noting the wide range of indicators used, the large number of ratings and results, which are often not comparable due to the variety of approaches and indicators used in the assessment process. thus, in ukraine, the assessment of the level of socioeconomic development of regions and their ranking at the state level is carried out since 2008, according to the resolutions of the cabinet of ministers no. 833 dated 20.06.2007 (during 2007–2011), 650 dated 9.06.2011 (during 2012–2014); 856 dated 21.10.2015 (from 2016 to the present). the assessment is conducted in two stages: 1) analysis of the dynamics of regional indicators in the relevant areas; 2) evaluation of the rating of regions in each area and calculation of the overall rating and the corresponding ranking of regions from the 1st (best indicator value) to the 27th (worst indicator value) place. the number of indicators used for evaluation varied from 55 (2008–2011) to 81 (2012–2014) and 64 (2016–2022). despite a significant number of indicators (up to 47%) proposed for ranking the regions over the entire period (2008–2022), they belong to different groups (7, 11 and 12 groups of indicators in 2008–2011, 2012–2014 and 2016–2022, respectively), the addition of the list of indicators and removal of certain indicators from the list does not allow a reliable comparison of regional rankings over the entire period. despite the high evaluation of the current methodology, today it needs to be clarified and supplemented with new indicators for qualitative full-fledged evaluation and ranking of the regions in modern conditions. new strategic priorities of development of ukraine and its regions confirmed the relevance of the development of new approaches to assessment. that is why the development of methodological approaches to assessing the level of socio-economic development of regions, as well as baltic journal of economic studies 157 vol. 8 no. 3, 2022 the level of development of the regional economic space requires further scientific research. 4. methodological approach to assessing the level of economic space development and clustering of regions a balanced policy of regional development is a prerequisite for the successful development of the country. a single approach to the formation of regional policy for all regions is not suitable, it is necessary to identify several (for example, from 3 to 7) groups of regions with similar characteristics. only for such groups of regions the approaches to the construction of regional policy and strategies of regional development can be uniform. in this study, the programming language python 3.7.13, the environment (virtual machine) – google colaboratory was used to assess the level of development of the regional economic space. the following libraries were also used: numpy, pandas – for calculations and data representation; sklearn – for normalization and k-means algorithm; matplotlib – for figures; geopandas – for maps; google spreadsheet – for collecting and summa rizing statistical data. the proposed methodological approach consists of five stages. stage 1 – definition of the goals and priorities of assessing the development of the regional economic space and clustering of regions; stage 2 – formation of a set of indicators and their grouping (alternatively – selection of indicators from the proposed set and grouping of indicators under the evaluation goals and priorities). generalization of the existing methodological approaches, as well as the results of our research allow us to propose six main groups of indicators, formed from the most important indicators that determine the level of development of the regional economic space. in the future they will be used to assess and rank the regions, table 1. three groups of indicators: the first "the main indicators of the intensity of economic processes in the economic space", the second "indicators of the economic space transparency " and the sixth "environmental and infrastructural indicators that determine the quality of life in the economic space" divided into two subgroups. the first subgroup consists of the intensity indicators determined due to the population of the region, and the second – is due to the area of the region. this will allow for the formation and compare regional clusters in terms of the development of their economic space according to two main criteria of intensity. table 2 lists fifteen indicators from the first subgroup of the first group that characterize the intensity of economic processes (at the expense of the region's population) in the economic space. stage 3 – collection and synthesis of statistical information. calculation of indicators with subsequent analysis of the dynamics of indicators in the relevant areas for each region without inter regional comparison. stage 4 – clustering of regions for each of the six groups of indicators by comparing the deviations of indicator values for each region from their best values for the region in the corresponding (reporting) period and the formation of appropriate clusters. the grouping of regions makes it possible to reduce regions into separate groups based on similarity of indicators, which will further simplify the procedures and mechanisms for regional policy development, its revision and improvement for regional governments. analysis of existing approaches to data clustering used in the methodology of economic research (murty, 1999), (estivill-castro, 2002), (frey, dueck, 2007), (garbade, 2018), (panapakidis, christoforidis, 2018), (petkova, ryabokon, vdovychenko, 2019) et al. and their evaluation following the objectives and conditions of this research, argued the necessity to build a centroid model for regional clustering in the study of spatial economic processes based on the table 1 regional development indicator groups group name group number subgroups group codes number of indicators in a group or subgroup the main indicators of the intensity of economic processes in the economic space 1 2 11; 12 15 indicators of the economic space transparency 2 2 21; 22 12 basic demographic indicators of economic space 3 0 30 6 indicators of the labour market functioning in the economic space 4 0 40 9 indicators of entrepreneurial diversification of the economic space 5 0 50 18 environmental and infrastructural indicators that determine the quality of life in the economic space 6 2 61; 62 7 total 6 6 65 source: developed by the author according to the data of (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 158 vol. 8 no. 3, 2022 k-means methods of clustering. also, the k-means method was chosen because of its prevalence (panapakidis, christoforidis, 2018), (codecademy, 2021), the availability of libraries for its use and implementation in conventional libraries for data analysis. the sklearn library is used (scikit, 2021). to determine the optimal number of clusters, an index of inertia (sse) is calculated for each year and or each group of indicators (figure 1). the optimal number of clusters will be one in which the sse will no longer decrease significantly for all years and groups of indicators garbade m. j (2018). since the k-means algorithm assumes initialization of cluster centers with random or defined values, it is proposed to use random values for the first year and to use cluster centers of the previous year for all subsequent years. this will distribute regions into clusters that are as close to the clusters of the previous year as possible. the correspondence of the region to a particular cluster can then be investigated in dynamics. using the k-means clustering algorithm, which aims to find clusters among the indicators, then extend it to analyze indicators that change over time. table 2 regional indicators by groups 1, sub-group 1 indicator description i 1.1.1 gross regional product per capita, uah i 1.1.2 foreign direct investment (share capital) per capita, uah i 1.1.3 the volume of sold products (goods, services) per capita, thousand uah i 1.1.4 number of operating business entities per 1000 population i 1.1.5 number of enterprises per 1000 population i 1.1.6 number of individual entrepreneurs, per 1000 population i 1.1.7 household income per capita, uah i 1.1.8 industrial production indices by region (up to the previous year) i 1.1.9 construction production indices by region (up to the previous year) i 1.1.10 agricultural production indices by region (up to the previous year) i 1.1.11 share of capital investments from the state budget i 1.1.12 household expenditures per capita, uah i 1.1.13 capital investments per capita, thousand uah i 1.1.14 financial result before tax, per capita, thousand uah i 1.1.15 net profit (loss), per capita, thousand uah source: developed by the author according to the data of (state statistics service of ukraine, 2010–2020) figure 1. calculation of the number of clusters by year source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 159 vol. 8 no. 3, 2022 sometimes 5-7 clusters are already considered sufficient, while in other cases (like group 21) it is 6-7 clusters, figure 1. the sse behavior is similar for 6 clusters, so we will consider this number below. the indices of the clusters (from 1 to 6) depended on the distance of the indicators of the regions in the cluster from its centroid, in ascending order, where 1 cluster is the smallest distance, 6 cluster is the largest. 5. findings the conclusions in this article demonstrate the results of the first group of indicators – indicators of intensity of processes in the economic space, subgroup 1 (according to the accepted classification – group 11, see tables 2, 3). the implementation of the proposed methodological approach was carried out on the basis of statistical data of the regions of ukraine for the period 2010–2020 (state statistics service of ukraine, 2010–2020). the results are presented in table 3. comparison of the array of statistical data for 2010–2020 by regions of ukraine is carried out by regions and territories for which statistical data are available. due to the russian invasion in 2014, there is no statistical information on the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and part of the temporarily occupied territories in donetsk and luhansk regions. most regions of ukraine change the cluster only once during the period 2010–2020. for example, the odessa, lviv, and kharkiv regions consistently form one – third cluster. the exception is the change of cluster 6 for the kharkiv region in 2011 and the odessa region in 2010, see table 4. at the same time, for example, donetsk region changed its position in clusters six times during 2010–2020. in addition, for clarity and clarity, the results of clustering can be displayed on a map. thus, figure 2 shows regional clusters for group 11 for 2010–2020. kyiv and dnipro regions in 2020 were included in one, the first cluster, figure 2. poltava region in 2020 differed from the others and was in a separate cluster 2. and lviv, odessa and kharkiv regions were consistently included in one cluster № 3 (see table 4, figure 2). the fourth and fifth clusters are the largest in terms of the number of regions. the fourth cluster includes volhynia, khmelnytskyi, vinnytsia, cherkasy, chernihiv, and sumy regions, and the fifth cluster includes zakarpattia, ivano-frankivsk, chernivtsi, ternopil, rivne, donetsk, and luhansk regions. the sixth cluster includes zhytomyr, kropyvnytskyi, mykolaiv, kherson, and zaporizhzhia regions. similar table 3 ukraine’s region in clusters by years region code 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 vinnytsia ua.vi 5 5 5 4 4 4 5 4 4 4 4 volhynia ua.vo 1 5 4 5 4 5 4 4 4 4 4 dniprо ua.dp 2 2 2 2 1 1 1 1 1 1 1 donetsk ua.dt 6 6 6 1 3 2 5 5 4 5 5 zhytomyr ua.zt 4 1 1 4 5 4 5 5 4 5 6 zakarpattia ua.zk 1 4 4 5 5 4 4 5 5 5 5 zaporizhzhia ua.zp 6 5 3 3 6 6 6 6 6 6 6 ivano-frankivsk ua.if 4 1 4 4 4 5 4 5 5 5 5 kyiv ua.kv 6 6 6 6 1 1 1 1 1 1 1 kropyvnytskyi ua.kh 5 5 5 4 4 4 4 4 5 4 6 luhansk ua.lh 3 1 3 3 2 2 2 2 2 2 5 lviv ua.lv 3 3 3 3 3 3 3 3 3 3 3 mykolaiv ua.my 5 5 5 4 4 5 5 4 5 4 6 odessа ua.od 6 3 3 3 3 3 3 3 3 3 3 poltavа ua.pl 6 6 6 6 6 6 6 6 6 6 2 rivne ua.rv 5 4 4 4 5 4 4 5 4 5 5 sumy ua.sm 3 4 4 4 4 4 4 4 5 5 4 ternopil ua.tp 5 4 4 5 5 4 4 5 5 4 5 kharkiv ua.kk 3 6 3 3 3 3 3 3 3 3 3 kherson ua.ks 4 4 5 4 4 4 4 4 5 4 6 khmelnytskyi ua.km 4 5 4 4 4 4 4 5 4 5 4 cherkasy ua.ck 4 4 4 4 4 4 4 4 4 6 4 chernivtsi ua.cv 5 4 4 4 4 4 4 5 5 5 5 chernihiv ua.ch 3 4 4 5 5 4 4 5 4 4 4 source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 160 vol. 8 no. 3, 2022 2010 2011 2012 2013 2014 2015 2016 2017 figure 2. clustering of regions of ukraine by the intensity of economic processes in the economic space (group 1, 1 subgroup), 2010–2020 baltic journal of economic studies 161 vol. 8 no. 3, 2022 trends in the number of clusters by region have been observed in previous periods, table 4. regions of ukraine in 2010–2014 formed three clusters with more than three regions, then three years later there were two clusters with more than 5 regions, indicating a redistribution of regions between clusters, table 4. the structural shifts in the distribution of regions between clusters are shown in figure 3. the next step involved analyzing the differences between clusters, which requires analyzing the differences between the centers of the clusters (centroids), which are based on the normalized values of the indicators, and therefore can be used for visualization (figure 4). accordingly, cluster indicators and the clusters themselves change over time, so the region may move 2016 2017 2018 2019 2020 figure 2. clustering of regions of ukraine by the intensity of economic processes in the economic space (group 1, 1 subgroup), 2010–2020 source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 162 vol. 8 no. 3, 2022 table 4 the number of ukraine’s regions in clusters by years cluster regions per cluster 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1 2 3 1 1 2 2 2 2 2 2 2 2 1 1 1 1 1 2 1 1 1 1 1 3 5 2 5 5 4 3 3 3 3 3 3 4 5 8 10 11 10 12 12 7 8 7 6 5 6 6 4 4 5 3 4 9 8 8 7 6 5 4 3 2 2 2 2 2 2 3 5 source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) figure 3. structure of clusters of the regional economic space of ukraine depending on the intensity of economic processes, 2010–2020 source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) figure 4. differences between cluster's centroids, 2017–2020 source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 163 vol. 8 no. 3, 2022 to another cluster because of deep in the country as a whole, rather than in a single region. some regions form permanent clusters (lviv, odessa, kharkiv), others migrate from one cluster to another (figure 2, figure 4, table 3). usually this does not happen quickly. however, as a result of significant upheavals, it can happen, as in the case of the donetsk region. but this is the exception rather than the rule. moreover, due to significant changes in the socio-economic state of the regions and their economic space, not only clusters change, but also signs of the region's belonging to one or another cluster. regions migrate from one cluster to another infrequently, unless some serious shocks occur. thus, the grouping of regions according to certain characteristics allows to determine the regional policy for each group of regions, as well as to compare the "profile" of the cluster of depressed regions (according to the six groups of indicators of the methodology) allows to determine which aspect should be developed. further, a separate indicator rank was used to rank the regions according to the level of economic space development from the highest to the lowest level. it can be determined annually separately by the arithmetic average value of the cluster regions' target indicator. the regional cluster with the highest level of development has the highest value of the target indicator (rank 1), table 5. the results show the leaders of the rating by the level of development of the regional economic space (in cluster 11 – the intensity of economic processes in the economic space). dnipro region was the leader of the rating during 2010–2019 (cluster 2, during 2010–2013; cluster 1 during 2014–2019). kyiv region was among the leaders in 2014–2019 (cluster 1). however, in 2020 the situation changed, and the second cluster with one participant – poltava region – took the lead. the final, fifth stage of assessing the level of development of the regional economic space involves the creation of unified clusters and regions' in the main areas (groups of indicators) that characterize the level of development of the regional economic space. 6. conclusions the division of regions into clusters allows the unification of regional development policy in the context of regions with similar characteristics and, at the same time, does not imply the use of a single template for the development of all regions. grouping regions by groups of indicators allows to identify stable entities (such as lviv, odessa and kharkiv regions), slowly changing regions (with processes of development or regression) and unstable regions (such as donetsk). a separate regional policy should table 5 clusters’ ranking due to the level of regional economic space development 2010 2011 2012 2013 cluster centroid rank cluster centroid rank cluster centroid rank cluster centroid rank 1 13.1 6 1 20.56667 4 1 19.6 6 1 37.8 3 2 34.7 1 2 42,1 1 2 44,7 1 2 46,3 1 3 18,18 3 3 23,1 3 3 27,64 3 3 28,02 4 4 14,92 4 4 17,1 6 4 19,8 5 4 22,08 5 5 14,42 5 5 20.5 5 5 21,28 4 5 19.05 6 6 26.2 2 6 33.5 2 6 39.27 2 6 40 2 2014 2015 2016 2017 cluster centroid rank cluster centroid rank cluster centroid rank cluster centroid rank 1 49.9 1 1 63 1 1 74.8 1 1 93.55 1 2 14.1 6 2 18.85 6 2 14.3 6 2 13.9 6 3 30.7 8 3 3 41,6 3 3 50,9 3 3 63,47 3 4 25,77 4 4 31,77 5 4 36,43 5 4 54,39 4 5 22,88 5 5 35,03 4 5 41,88 4 5 42,98 5 6 42,65 2 6 58.5 2 6 70.4 2 6 90.75 2 2018 2019 2020 cluster centroid rank cluster centroid rank cluster centroid rank 1 113.65 1 1 122.75 1 1 114.1 2 2 16,3 6 2 18,7 6 2 135,1 1 3 76,6 3 3 86,83 3 3 82,93 3 4 61,67 4 4 72,4 4 4 73,25 5 5 54,61 5 5 58,89 5 5 47.6 6 6 6 104.8 2 6 103.53 2 6 75.22 4 source: calculated by the author according to the data of (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 164 vol. 8 no. 3, 2022 be developed for each group, depending on the peculiarities of the cluster. the implementation of the developed methodo logy will improve the classification of ukrainian regions by groups of indicators of regional economic space for further improvement and unification of regional development policy. the proposed methodology provides, unlike the existing ones, an assessment based on 67 indicators that characterize the level of development of regional economic space and form six integral indicators that determine the intensity of economic processes; transparency of economic space; intensity of demographic 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publication "regions of ukraine – 2020". state statistics service of ukraine. kyiv, 2020. part іi. 675 p. available at: http://www.ukrstat.gov.ua/ world bank, international bank for reconstruction and development (2015). ukraine. urbanization review, world bank report №: acs15060, 218 p. available at: http://city2030.org.ua/sites/default/files/documents/ urban%20review%20ua_0.pdf world economic forum (2018). the readiness for the future of production report 2018. world economic forum’s system initiative on shaping the future of production. available at: http://wef.ch/fopreadiness18 received on: 20th of july, 2022 accepted on: 18th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 21 vol. 8 no. 1, 2022 corresponding author: 1 dnipro state agrarian and economic university, ukraine e-mail: bondarchuk-nv@ukr.net orcid: https://orcid.org/0000-0002-0418-5239 researcherid: s-7492-2019 2 dnipro state agrarian and economic university, ukraine e-mail: natan23@ukr.net orcid: https://orcid.org/0000-0002-9414-4210 researcherid: aac-8568-2022 3 dnipro state agrarian and economic university, ukraine e-mail: kriuchko.l.s@dsau.dp.ua orcid: https://orcid.org/0000-0002-7490-3523 researcherid: aah-6301-2021 doi: https://doi.org/10.30525/2256-0742/2022-8-1-21-27 update of marketing and kpi approaches to improving staff motivation in agricultural businesses to insure financial and economic security nataliia bondarchuk1, aljona minkovska2, lesia kriuchko3 abstract. the objective of this article is to summarize theoretical provisions and develop practical recommendations for improving staff motivation in agricultural businesses to insure financial and economic security (including cooperative farms). methodology. the following scientific methods and techniques were used in addressing this objective: analysis and synthesis (to study the essence of theoretical categories of "motivation"and "competency profile"), the calculation and constructive method (to define work performance of agricultural business employees); and the monographic method (to summarize the conclusions). practical implications. the article states that the main management objective of agricultural businesses at their current development stage is to motivate employees to work effectively in order to organize high-quality and efficient work and insure their financial and economic security. existing personnel motivation models and systems do not allow for a complete use of all the possibilities of labor resources of agricultural businesses and need to be reviewed. the main issue in the implementation of motivational mechanisms by agricultural businesses is low wages and a lack of interest of labor resources in achieving high performance both in production and product sale. personnel marketing is a special type of management activity aimed at the most effective planning of staffing needs, provision of staffing, development and use of staff, and employee motivation in order to achieve business goals and meet staffing needs. this article suggests using the following algorithm in agricultural businesses (including cooperative farms) to develop a staff motivation system based on the marketing approach: studying the human resources of the business and identifying qualitative and quantitative staff needs; conducting a personnel audit; monitoring the labor market; streamlining the job profile; identifying competitors in the labor market; researching ways to attract staff; implementing professional development programs etc. the article furthermore considers the use of the kpi method, which will allow applying a differentiated approach to wages and identify employees with the lowest efficiency and performance, and optimize the number of labor resources of agricultural businesses, and suggests their use by such businesses. for agricultural businesses, the use of 3–7 kpis per employee is suggested. the article offers indicators that demonstrate personal performance. the article uses the kpi methodology together with the employee’s competency profile. the combination of kpis and the competency profile can provide an opportunity to assess the quantity and quality of work of each employee. a competency profile is defined as follows: a list of characteristics that correspond to each position in an agricultural business that comprises key and professional competencies. a five-point scale has been developed to assess the competencies of labor resources. value/originality. the combination of a kpi system with an assessment of the competency of an individual employee and the marketing approach will ensure transparency in using labor resource stimulation mechanisms; form a baltic journal of economic studies 22 vol. 8 no. 1, 2022 new high-quality motivation system in which the end result expressed as the salary amount will depend on the quantity-quality labor force performance indicators; and allow for the differentiation of bonuses for each individual employee depending on the quality of performance of his/her job responsibilities and changes in his/her labor competencies. key words: labor resources, agricultural businesses, financial and economic security, cooperative farms, staff motivation, marketing staff. jel classification: m12, m21, j21, j54, q13 1. introduction modern agricultural businesses of any form of ownership operate under very dynamic changes in the external environment, which require them to respond accordingly. both agrarian production equipment and technologies are evolving so that the role of a human as the main productive force recedes into the back ground while the use of modern technology becomes a condition for a high-performance production. at the same time, the importance and role of education and existing competencies of labor resources, which have to ensure the option of using advanced technologies and modern equipment, are growing. the role of sustainable agriculture (careful treatment of the environment and minimization of harmful effects during the implementation of agricultural production) is increasing. currently, the efficiency of agricultural businesses (including cooperative farms) depends not only on their production volumes but also the efficiency of sales in the market. such companies have an opportunity to export their products abroad. all this necessitates a revision of the conditions of using labor resources of the business and an improvement of personnel motivation mechanisms. thus, the main management objective of agricultural businesses (including cooperative farms) at their current development stage is to motivate their employees to work effectively in order to organize high-quality and efficient work. unfortunately, existing personnel motivation models and systems do not allow for a complete use of all the possibilities of labor resources of agricultural businesses and need to be reviewed. the main issue in the implementation of motivational mechanisms by agricultural businesses (including cooperative farms) is low wages and lack of interest of labor resources in achieving high performance both in production and in product sale. in our opinion, the salary needs to be a key element of any motivational mechanism. at the same time, the increase in the level of remuneration must be justified and depend on the performance of each employee. modern personnel management issues require the use of innovative solutions and the adaptation of foreign experience to domestic conditions. constant changes in the market environment make marketing an organic component of a personnel management system for businesses. therefore, the application of marketing and kpi approaches to personnel management should ensure the achievement of strategic goals of agricultural businesses and serve as a tool to increase their competitiveness. the objective of this article is to summarize theoretical provisions and develop practical recommendations for improving staff motivation in agricultural businesses. 2. improving personnel efficiency in agricultural businesses to ensure financial and economic security: motivating factors incentives are leverages that provoke the action of certain motives. an efficient motivation of activity and a stimulation system help strengthen the labor potential of any business and create favorable conditions for employees who are further able to perform their functional responsibilities. this contributes to the creation of an adequate and effective motivational mechanism for highly productive work the primary objective for forming market relations (9). agricultural businesses (including cooperative farms) face the issue of security and development of the labor resource reproduction process so as to involve such resources in their production activities, as well as the issue of resource motivation to achieve high results. the motivation process is a complex and ambiguous one. there are many different motivation theories that seek to explain this phenomenon. some of such theories focus on the analysis of the factors that underlie motivation rather than on the motivation process itself (maslow’s hierarchy of needs, alderfer’s erg theory, herzberg’s two-factor theory, etc.). other theories reduce everything to a process of motivation, description, and prediction of motivational process results but do not cover the content of motives (the expectations theory, the theory of justice, the risk choice model, and douglas mcgregor’s x and y theory). there is no doubt that labor activity motivation cannot be effective without the satisfaction of material needs and the emergence of material interest in labor resources. material motivation of labor activity should baltic journal of economic studies 23 vol. 8 no. 1, 2022 be considered a derivative of the complex action of a complex of macroand microeconomic factors: a) salary levels; b) the presence of a direct dependence of the salary level on the quantity, quality, and results of work; c) salary differentiation in the business and society as a whole; d) personal income structure; e) material security of cash income (kolot, 2000). at the same time, material motivation is not limited to manipulations with the main and additional salary; they can include the provision of health insurance or paid leaves of absence to sanatoriums. this motivation method solves the issue of physiological stress on employees and gives a strong incentive to "hold onto" the job in question. the only disadvantage of such measures is their high implementation costs, which makes them available only to large highly profitable businesses (shashina, tulchinsky, fedotov, 2019). the main defect of the current remuneration practice of agricultural businesses (including agricultural cooperatives) is that the salary amount is generally not related to the final results of activities in a particular production area where the employee can actually influence them. agricultural businesses are unable to create centralized incentive funds; therefore, the units that work better cannot implement the motivational mechanisms for their employees. this means that no person will be interested in working in an agricultural business to the fullest, show initiative, and take care of the means of production. therefore, the study of the way various factors influence the possibility of material motivation of labor resources of agricultural businesses never loses its relevance and significance. 3. staff motivation approaches in agricultural businesses the management’s ability to correctly identify personnel needs is at the heart of an effective staff motivation system. of course, timely identified and formulated needs of employees of agricultural businesses (including cooperative farms) must be backup up by effective motivation programs and activities. it is also necessary to realize that staff needs tend to transform and update new needs. ignoring the needs of employees ultimately leads to high turnover and mass layoffs. in practice, there are three main approaches to motivating business staff: the marketing approach, the resource-functional approach, and the kpi approach (motivation: google books ngram viewer). 1. the marketing approach is based on the gradual implementation of the corporate policy of the business. the main motivating factor for the employee are teamwork, an opportunity to be involved in the implementation of a common mission, ideology, and relations for which the agricultural business operates. within the framework of the studied approach, the correct formation of the company’s mission is the foundation of its personnel management system. 2. the kpi approach, or the management by objectives approach, is a structured methodological approach that helps focus the management of agricultural businesses on the strategic objectives of the organization and their effective achievement. in this context, the objective should be defined as a clearly articulated optimal state of economic entities. in this case, the tool used to measure the objective achievement degree is an indicator called kpi (key performance indicator), which is a key indicator of an activity. kpi-based management allows forecasting business activity results and forming the events promoting their improvement. kpi-based management is based on the following principles: – employee objectives must be correlated with the objectives of the business; – objectives are formed starting with the general purpose and ending with the private one; – business objectives are developed in a combination of the management and employees; – the motivational program and the material incentive system are based on identified employee objectives in the business (dʹoloh, 2013). 4. using the marketing approach to staff motivation in agricultural businesses modern marketing is a methodology of market activity that is used to create production and organize sales. increasing its role in business management is associated with objective trends of increased competition, the dynamic nature of the external environment, frequent changes in tastes and needs of consumers (lizanets, rusin, 2010). the advantage of staff marketing to businesses is the timely identification of staffing needs, as well as trends in the development of the labor force in the labor market; for employees, the advantage is the timely identification of their needs and interests and, therefore, the formation of the correct staff motivation system. one of the founders of this approach was kevin thompson, who raised the question of interaction between marketing and staff in his 1989 work. thompson formulated his theory as follows: a business employee is an internal part of the organization and must fully share the principles, philosophy, and values of the business. personnel marketing is a special type of management activity aimed at the most effective planning of staffing needs, provision of staffing, development and use of staff, and employee motivation in order to achieve business goals and meet staffing needs. baltic journal of economic studies 24 vol. 8 no. 1, 2022 personnel marketing activities should include both an analysis of the situation in the sectoral labor market and influencing factors (the external business environment) and an analysis of the corporate job market and the corporate labor market (the internal business environment). for example, the work (sardak, 2010) states that the following key points should be accounted for when using the marketing approach to staff motivation: – there can be no incentive system that motivates all employees equally; – any incentive system should be designed to fit a specific employee or a specific group of employees with similar basic needs (or the general system should be individualized); – constant monitoring of the basic staff needs and motivations is necessary. accordingly, the use of the following algorithm in agricultural businesses (including cooperative farms) to develop a staff motivation system based on the marketing approach is suggested: – studying the human resources of the business and identifying qualitative and quantitative staff needs; – conducting a personnel audit; – monitoring the labor market; – streamlining the job profile; – identifying competitors in the labor market; – researching ways to attract staff; – implementing professional development programs; – analyzing the effectiveness of the implemented staff marketing activities. in order to ensure the effectiveness of the developed algorithm of the personnel motivation system, agricultural businesses should ensure the provision of maximum information to their employees about new opportunities to meet their needs and management’s measures aimed at their implementation. 5. the kpi methodology and staff motivation in agricultural businesses staff motivation is one of the most important functions of business managers and owners. after all, the results of their work, and hence the success of the entire business, largely depend on the morale of their employees. therefore, encouragement is one of the ways to motivate and inspire. in order to increase the level of motivation, we will consider the possibility of using the kpi method, which will allow us to apply a differentiated approach to remuneration, to identify employees who demonstrate the lowest performance, and to optimize the number of employees of agricultural businesses. the application of the kpi method will increase the level of control over labor force activities and differentiate the assessment approaches for each individual employee. based on kpis, agricultural businesses (including cooperative farms) will be able to build their own employee remuneration system / dominated by the additional salary instead of the main one. at the same time, the additional salary level should be economically justified. kpi provides an opportunity not only to differentiate labor resources according to the remuneration level but also to assess the share of participation of each individual employee in the overall results of the agricultural business. the use of 3–7 kpis per employee of an agricultural business is suggested (namely: no more than 7 kpis for the director; and 3–5 kpis for employees). the main requirement for indicators is their measurement capability. different kpis need to be developed for different personnel categories. for example, directors’ indicators should reflect the performance of the entire agricultural business table 1 kpi-based system for agricultural businesses employee category general characteristics of indicators indicators senior managers kpis should reflect the efficiency of the entire agricultural business profits of the business. ebitda. market share. net present value or net discounted income. occupational safety. middleand lowlevel managers kpis should be related to the work (success) of the relevant branch, subdivision, or department productivity. sale/purchasing plan performance. department cost budget savings. roi in production. receivables. staff turnover level. specialists (ordinary employees) kpis should demonstrate personal performance implementation of planned sale/production indicators. compliance with quality and terms of resolution of set objectives. satisfaction of internal clients with the work of a particular employee source: developed by the author baltic journal of economic studies 25 vol. 8 no. 1, 2022 and be related to the work (success) of the relevant branch, subdivision, or department. on the other hand, employees’ indicators should demonstrate their personal performance (table 1). at the same time, indicator performance deadlines are set (month, quarter, half-year, or year); and the necessary actions of the employee to achieve the objectives are determined. monthly bonuses are paid to employees of such subdivisions as sales, marketing, and logistics, as it is their work that directly affects the results of the business. quarterly and semi-annual bonuses are used to motivate department heads (middle managers) and employees of service departments. annual bonuses are paid to senior managers (directors of subdivisions). the amount of the kpi-based bonus (the variable part) can range from 50 to 200% of the permanent part (salary) and depends on the position of the specific employee and the affiliation with a specific subdivision (table 2). this coefficient system can be modified depending on the strategic objectives of each individual agricultural business and depending on the conditions and circumstances of economic activity. if the business does not intend to increase production, the coefficient can be capped at "1". at the same time, a coefficient of 1.2–2 will motivate each individual employee to significantly exceed the targets. using the coefficient system requires the development of quantitative and qualitative indicators for each staff unit with reference to specific management conditions rather than the normative ones set by the state. to this end, an appropriate matrix of planned indicators should be developed for each job position based on the data of the agricultural business (including cooperative farms) for previous years and accounting for current changes in the business. when setting share values for kpis, it is important to consider the following: the more important a criterion for achieving a more global objective, the greater its share; the share of kpis should be set to account for kpi priority (i.e., starting with the most important ones); the share of a single kpi may not exceed 50% nor be less than 5%. the kpi system is created from the top down (i.e., from the large-scale objectives of the agricultural business as a whole to the tasks facing the individual employee). in order to ensure their relevance, kpi indicators are reviewed and adjusted on a quarterly basis due to the changes in agricultural business processes, strategic objectives, and the external environment. in such cases, an unscheduled change in the kpi system and establishment of new coefficients (indicators) may be carried out. such changes must also be accompanied by a change in the functional responsibilities of the individual employee and by the optimization of existing performance indicators. when implementing the kpi method and the coefficient system, it is necessary to take into account not only quantitative indicators of the implementation of planned indicators but also qualitative ones. this approach should ensure a balance of interests of the individual employee and the management of an agricultural business in achieving the common objectives, namely: the production of high-quality goods and the improvement of performance of the business. the application of the kpi method is based on the use of another motivational tool, namely: the competency profile. the combination of kpis and the competency profile can provide an opportunity to assess the quantity and quality of work of each employee. the use of the competency profile by agricultural businesses will allow singling out the most active, responsible, and purposeful resources, which share the strategy of the business and are prepared to participate in its development, from among total labor resources. a competency profile is defined as follows a list of characteristics that correspond to each position in an agricultural business that comprises key and professional competencies. furthermore, management competencies should be developed for middle and senior managers. these profiles must be approved by the management of agricultural businesses, who must be guided by them when selecting and distributing labor resources. key competencies apply to all positions without exception and should reflect the level of disciplinary qualities of each individual employee with respect to compliance with internal labor policies, occupational safety rules etc. such competencies include the presence of interest in the workplace and the profession, the ability to qualitatively perform the set tasks, the level of propensity towards conflict and table 2 the coefficient-setting system for the kpi method application in agricultural businesses planned indicator performance (%) coefficient value coefficient meaning ≤50 0 an unacceptable situation from 51 to 89 0.5 a low level of employee’s work from 90 to 100 1 the baseline performance scenario for planned indicators from 101 to 120 1.2 plan over-fulfillment ≥120 1.5–2 the best worker source: developed by the author baltic journal of economic studies 26 vol. 8 no. 1, 2022 team spirit, ability to cope with stress etc. they are revealed, as a rule, during the interview when hiring an employee and during the performance of his/ her official duties. professional competencies should reflect the degree of mastery of the means of work, the presence of specialized education, work experience etc. management competencies are inherent in the different levels of managers of agricultural enterprises (including agricultural cooperatives) and comprise the ability and skills required to work with employees; the ability to resolve conflict situations, assign tasks to employees, and control their implementation; and the ability to adopt, and bear responsibility for, management decisions. we suggest assessing competencies based on each employee’s certification results, which are used to compile the employee’s competency profile. certification results in the determination of a certain number of points to be calculated as follows: к = k1 × ∑m1a + k2 × ∑m2b + k3 × ∑m3c, (1) where k is the total number of points for each employee; k1, k2, k3 are the adjustment factors for each competency group (set at each individual agricultural business depending on its activity profile); ∑m1a, ∑m2b, ∑m3c are total amounts of points for each competency group. in order to assess the competencies of labor resources, a five-point scale is suggested: "1" corresponds to the lack of skills and abilities (a critical level); "2", to the presence of skills and abilities that do not fully correspond to the position and work performed (an unsatisfactory level); "3", to the presence of skills and abilities that fully correspond to the work performed (an intermediate level); "4", to the presence of skills and abilities that exceed the required level (an optimal level); and "5", to the presence of knowledge, skills, and abilities that significantly exceed the level of work performed (a high level). therefore, the main benefits that can be obtained by agricultural businesses (including cooperative farms) upon the successful use of the kpi tool in combination with the competence assessment system are as follows: 1. construction of a transparent and objective system of staff work assessment and coordination of their objectives with the business’s strategy. a transparent and objective performance assessment system increases the motivation of labor resources to increase their productivity and to achieve strategic objectives of the agricultural business. the defined indicators should be specific, measurable, achievable, result-oriented, and time-limited. requirements for labor resources for which the kpi method is used should be as follows: understanding of specifics and strategy of the business, as well as production processes; knowledge of both the basis of the economy and the overall management of the company; and knowledge of office-specific functional responsibilities. 2. establishment of a feedback system that allows each employee to receive an assessment of their own activities based on objective criteria. in turn, the feedback system will allow the labor resources of the agricultural business to understand how the remuneration system will change. 3. ability to adjust the activity of labor resources during the year. to this end, the indicator calculation method must be signed off by the management and the financial service of the business when establishing the kpi, and responsibility for the calculation of each indicator must be assigned to a functional subdivision or to a specific specialist. this can be done by using the kpi map that specify the weight and levels of each of them, as well as deadlines and required measures; or by using a management accounting information system that allows for an automatic calculation of kpis. 6. conclusions therefore, the stability of highly qualified labor collectives, the increase of labor productivity, and the moral and material condition of each employee and the collective as a whole all depend on an effective system of motivation of labor resources. the implementation of the marketing approach to staff motivation into activities of agricultural businesses should increase personnel management efficiency and their competitiveness. the application of the kpi method in agricultural businesses will provide an opportunity to apply a differentiated approach to remuneration, to identify employees with the lowest performance, and to optimize the number of labor resources of agricultural businesses and insure their financial and economic security. we believe that the combination of a kpi system with an assessment of the competency of an individual employee and the marketing approach will ensure transparency in using labor resource stimulation mechanisms; form a new high-quality motivation system in which the end result expressed as the salary amount will depend on the quantity-quality indicators of labor force performance; and enable the differentiation of bonuses for each individual employee depending on the quality of performance of his or her job responsibilities and changes in his or her labor competencies. baltic journal of economic studies 27 vol. 8 no. 1, 2022 references: ball, b. (2012). a summary of motivation theories. available at: http://www.yourcoach.be/blog/wp-content/ uploads/2012/03/a-summary-of-motivation-theories1.pdf (accesed 28 january 2022). dʹoloh, t. i. (2013). upravlinnya motyvatsiyeyu u vitchyznyanykh pidpryyemstvakh: motyvatsiynyy mekhanizm, motyvatsiyni faktory i kryteriyi efektyvnosti motyvatsiyi [motivation management in domestic enterprises: motivation mechanism, motivational factors and criteria for motivation effectiveness]. ekonomika ta derzava, vol. 10, pp. 16–18. kalyuzhna, ju., pisarenko, d., & nesterenko, s. (2018). strategic maagement of labor resources of agricultural enterprises on the basis of marketing. agricultural and resource economics: international scientific e-journal, vol. 4, no. 2, pp. 55–68. available at: www.are-journal.com (accesed 28 january 2022). kolot, a. 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(2019). formuvannya motyvatsiynoyi skladovoyi kadrovoyi polityky pidpryyemstva v umovakh vysokoho rivnya mobilʹnosti robochoyi syly [formation of motivational composition of personnel policy of the enterprise in the conditions of high level of labor mobility]. agrosvit, vol. 3, pp. 48–52. available at: http://www.agrosvit.info/pdf/3_2019/8.pdf (accessed 28 january 2022). yadransky, d., latypov, r ., & chumak, e. (2020). personnel-marketing as a direction of development of personnel agricultural complex. available at: https://www.researchgate.net/publication/347857469_personnelmarketing_as_a_direction_of_development_of_personnel_agricultural_complex (accessed 28 january 2022). baltic journal of economic studies 109 vol. 7 no. 3, 2021 corresponding author: 1 khmelnytskyi national university, ukraine. email: dumanskaiy@gmail.com orcid: https://orcid.org/0000-0003-2449-0633 researcherid: z-1244-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-3-109-117 methodology of foresight-analysis in forecasting the development of international trade ilona dumanska1 abstract. the purpose of the article is to substantiate the systemic principles of implementation of foresight-analysis of international trade as a method of strategic forecasting at the macro level, the formation of its methodological tools and implementation models. methodology. the article used general and special research methods. classification of types of foresight-analysis of the development of international trade and their characteristics, the formation of a set of factors influencing it was based on grouping, synthesis and formalization. economic modeling, scientific abstraction, systems analysis were used in building a model of foresight-analysis of international trade and identified the factors of negative impact on it. using the method of coefficients, structural analysis and analytical comparison offers groups of economic indicators of foreign trade to analyze the development of international trade in the preparatory stage of foresight-analysis. results. it is established that the system of classifications of foresight-analysis allows its application not only at the national level of forecasting the development of trade, but also internationally. it is revealed that when applying the methodology of foresight-analysis of international trade development it is necessary to take into account the purposeful influence of endogenous and exogenous factors. the model of providing the methodology of foresight-analysis of the development of international trade is structured, which includes the following components: system methodology, strategic guidelines, information and analytical support, implementation process and a set of methodological tools. it is found that the combined application of methods (quantitative, qualitative, mixed) in the foresight-analysis of the development of international trade provides maximum efficiency. the addition of the structure of economic methods of foresight-analysis by a group of economic indicators that assess the level of development of foreign trade of a country is substantiated and proposed. practical implementation. formation of methodological tools and models for the implementation of foresight-analysis of the development of international trade, taking into account the specifics of foreign trade policy of states based on a consolidated group of economic indicators. value/originality. the proposed groups of economic indicators can be used in the decomposition of methods of foresight-analysis of international trade to confirm the effectiveness of strategic directions of foreign trade policy and sound forecasting of its effectiveness in the future. key words: foresight-analysis, international trade, method, forecast, scenario, impact factor, model, economic indicators. jel classification: f17, f47, o24 1. introduction governments in many countries recognize the need to plan their future outcomes by formulating national or regional long-term forecasts. thus effective management of foreign trade policy in dynamic uncertain conditions is possible only on the basis of application of effective mechanisms of forecasting which provide an opportunity to form the strategy of development and an estimation of consequences of the accepted decisions. global foresight group, the world’s leading organization for foresight, notes on its official website that the days of statistical forecasts are over. for a successful decision, it is necessary to significantly expand the boundaries of information processing, to look at the process more comprehensively (foresight group, 2021). foresight-analysis is the leading technology for choosing future development. foresight is distinguished from other tools by four main characteristics: consideration of various development alternatives, which is based on the uncertainty of the future; focus on taking specific measures that will allow to shape the baltic journal of economic studies 110 vol. 7, no. 3, 2021 future as they want to see it; interdisciplinary complex nature, covering the maximum number of factors that may affect future processes; involvement of a wide range of interested diverse groups of experts (yanch, 1974). the term “foresight” was first used by science fiction writer herbert wells in 1930 during a speech on the bbc (wells, 1932). as a technology for the practical application of sound prediction, foresight was developed and applied in the 1950s in the american corporation rand, where the problem of identifying advanced military technologies was solved. rand specialists developed the delphi method, which became the basis of foresight research. from the 1970s, foresights of scientific and technological progress began to be conducted abroad and at the national level. numerous examples of foresight are given by all advanced countries in europe, the united states and southeast asia (habegger, 2010 and popper, keenan, miles, butter, sainz, 2007). foresight has gradually become one of the most effective tools for the innovative organization of society. since the 1990s, foresight has been widely used in advanced countries in public administration, as well as in the development of strategies, projects and programs of regional and local government (cuosa, 2011). foresight-analysis, in contrast to traditional forecasting, acquires special significance at crucial moments when, for some reason, the trends of the previous development of the economic system are broken. this is exactly the crisis that international trade experienced and is currently experiencing during the covid-19 pandemic, which has exacerbated the need to define a strategy for further development of the world’s socio-economic system and intensified attempts by experts to predict its possible scenarios. 2. research methodology it should be noted that the methodology of foresight has absorbed dozens of traditional and new methods and has its own national specifics. typically, each of the foresight projects aimed at solving the problems of strategic management, uses a combination of different approaches, including logical-structural approach (lsa), kpi (key performance indicators), project management and their various combinations. in general, foresight is primarily focused on identifying possible options for seeing the future, with the basis for assessing these options is expert analysis, i.e., the main vector of this methodology is aimed at more active and targeted use of expert knowledge (kuzyk, kushlin, yakovets, 2006). according to ben martin (1995), one of the leading ideologues of this technology, foresight is a systematic effort to study the long-term prospects of science, technology, economics and society in order to identify strategic areas of research and emerging technologies that are highly degree of probability will bring a significant economic and social effect. this definition is quite capacious and has already entered the category of classics. in turn, french professor of economics jean harrow and german economist kerstin kuls (1999) present foresight as a process of building a common perception of trends in the long run, which is characterized by systematicity. unido’s fundamental two-volume book (2005) explains: “foresight is a systematic attempt to look into the long-term future of science, technology, economics and society to identify areas of strategic research and generic technologies that can deliver the greatest economic and social benefits.” representatives of the russian school (sokolov, 2007 and gretchenko, 2010) believe that foresight is a scenario of forecasting of socio-economic development of the economy, industry in 10-20 years, which can be agreed in terms of using scenario methods, but not with the definition as a variety forecasting, because the purpose of foresight is not prediction but understanding. western economists (eurasian higher business school, 2021) and li ss, kang mh, lee lc (2009) write that foresight in the broad context of “strategic, cautious thinking” is not something new or particularly exotic, but natural and important characteristics of activities related to strategic planning and policy development, which are usually carried out by corporations or government agencies. an interesting approach is the triangle of vectors of research by the foresight method (foresight group, 2021) presented on the official page of european foresight. it points to elements such as thinking about the future, discussing it, shaping the future with open assumptions about future development options, stakeholder participation, and proactiveness by supporting future creation. all researchers emphasize that foresight is a process of constantly refining the vision of the future, which is carried out taking into account the activity of stakeholders involved in its formation. the development and use of the foresight concept is directly related to modern requirements for strategic management. currently, there are methodological developments of researchers ongroups of indicators and parameters for assessing the quality of business strategy in international trade, which can be used in management to confirm the effectiveness of strategic directions of business development and counteract intuitive decision-making by senior management in this area (dumanska, 2021), but they are not the basis for forecasting. instead, only methods of foresight-analysis can effectively prioritize and mobilize participants to develop forecasts in areas such as science and technology, economics, government, and society. baltic journal of economic studies 111 vol. 7, no. 3, 2021 several dozen methods have been developed for modern foresight, and despite their significant number, there is no ideal method. each foresight project uses a combination that is appropriate for the specific practice. the choice of methodology (as a set of methods) is made taking into account the goals, objectives of the project and budgetary resources, qualified experts, political support, the necessary infrastructure and time in accordance with the subject of the study. today, the methodology of foresight-analysis of international trade is poorly studied, which determines the urgency of substantiating the systemic principles of foresightanalysis of international trade as a method of strategic forecasting at the macro level, the formation of its methodological tools and implementation models. 3. specifics of foresight-analysis of international trade development long-term forecasting of international trade in such developed countries as the usa, great britain, germany, france, japan and many others at the national level is based on the foresight methodology (kizim, matyushenko, shostak, danova, 2015), which has proven to be an effective tool for setting priorities in this segment of the economy. obtaining the most objective picture of the future, which meets the interests of all participants in trade relations at the international level, is ensured by the involvement in the foresight process of government officials and intergovernmental world and regional organizations, management of multinational corporations, science and society, which allows historical, political, social-economic and mental features of the organization of trade relations. the development and use of foresight-analysis is directly related to modern requirements for strategic management, which define it as a process of constantly refining the vision of the future, which is carried out taking into account the activities of stakeholders involved in its formation. given the existence of a significant number of types of foresight-analysis, an important point is its division and classification, as well as the choice of criteria for this purpose. the following types are most often distinguished (luther, 2004): 1) international: allows to define the mission of development at the interstate level; 2) national: interprets development at the country level; 3) regional: definition of desirable directions of development of the region; 4) sectoral: focuses on the development of a particular industry; 5) corporate: covers the development of business entities. thus, the system of classifications of foresight-analysis allows its application not only at the national level of forecasting the development of trade in the country, but also internationally. at the same time, a distinctive feature of foresight from other approaches and methods is that its active component is not only to obtain options for the probable future, but also the formation of methods to achieve the optimal of these options, in several scenarios international trade. foresight has common features with forecasting. a forecast is a scientifically based judgment about the possible states of an object in the future or about alternative ways and terms of achieving these states. what combines foresight and forecasting is that both methods take into account objective trends and forces that influence development; forecasting methods are used: the delphi method (expert assessments), scenario planning, expert discussions (focus groups, brainstorming); critical technologies are determined. at the same time, foresight differs significantly from forecasting, as it involves all key participants in development: science and technology, business, government, the public. scientist (fedulova, 2008) carry out traditional forecasting. in addition to this main difference, the following are noted: foresight develops cooperation and collaboration between business, government and scientists; develops the ability and culture of foresight in society; provides the ability to choose a course of action depending on the “vision of the future”; contains elements of active influence on the future, by defining areas of research and the emergence of technologies that can bring the greatest economic and social benefits from the concentration of resources in these areas. thus, the report of the un commission on science and technology for development (2014) provides a brief overview of foresights by region, presented in table 1. thus, foresight-analysis methodology is widely used in countries around the world as a key tool for the development and implementation of research and innovation policies, including in the field of international trade. at the international level, in the field of international trade, the focus is on foresight, when governments set priorities based on them, create links between science and practice, and in some cases change the system of research organization and management culture. 4. building a model of international trade development based on foresight-analysis the foresight study of the development of international trade raises the question of the starting point for determining the totality of all internal and external factors in the forecasting and analytical system at the beginning of the study, which determine the algorithm for building its model. when applying the methodology of foresight-analysis of international trade development, it is necessary to take into account the targeted influence of endogenous and exogenous factors presented in figure 1. baltic journal of economic studies 112 vol. 7 no. 3, 2021 each group of endogenous and exogenous factors directly or indirectly influences decision-making when applying the foresight methodology for the development of international trade. the effectiveness and harmony of the methodology depends on the effective identification of influencing factors and relevant targeted motives, i.e., the causes of actions and consequences that affect the functioning of international trade. figure 2 structures the author’s vision for building a model for providing a methodology for foresightanalysis of international trade. the first segment of the methodology of foresightanalysis of the development of international trade defines the principles, objectives and functions that will achieve a certain goal of the study. the multicomponent set of strategic guidelines includes the appropriate standards, table 1 top 10 most common foresight methods and frequency of their use by regions of the world foresight methods north-west europe (511) southern europe (71) eastern europe (52) latin america (107) north america (109) asia (89) africa (18) formation of expert panels h vh vh vh h a h scenario development h a h h l a h trend extrapolation h a a a l a a development of the future a l a a a l h brain storm a h h a l a h delphi method l a a h l a l interviewing a l l a l l a identification of key technologies l h l l a a l questionnaire / poll a l a a l l h swot analysis a a h l l l l frequency level: vh – very high; h – high; a – average; l – low. number of analyzed foresights: (…) source: united nations commission on science and technology for development strategic (2014). foresight for the post-2015 development agenda, geneva, switzerland figure 1. the set of factors influencing the methodology of foresight-analysis of international trade source: supplemented by the author’s levels of factor selection and adaptation to international trade factors influencing the methodology of foresight analysis of international trade development by levels of influence global international national regional by factor of production human financial material intangible by direction organizational functional technological systemic by sphere of influence information socio-political economic force-majeure baltic journal of economic studies 113 vol. 7 no. 3, 2021 parameters, criteria and constraints of the study, which are defined in the second segment. information and analytical support of the foresight-analysis methodology and methodological tools, respectively, in the third and fourth segments. regarding the information-analytical support of the foresight-analysis methodology, according to figure 2, it is analytical and synthetic information that is diagnosed, accumulated and transmitted to the relevant stakeholders on a systematic basis. the process of implementing the methodology of foresight-analysis of the development of international trade is carried out in the final segment, where we obtain the relevant results that will provide a strategy for the development of international trade in the future. we draw attention to the fact that the process of building scenarios for the development of international trade is often subject to obstacles associated with negative environmental factors and problematic aspects in the mechanisms of building such scenarios, some of which are shown in figure 3. thus, the scenarios used in the methodology of foresight-analysis should show possible alternatives to changes in the development of international trade, as well as the reverse impact of such developments on the international economy. note that such scenarios are effectively complemented by the results of swotanalysis, brainstorming, patent analysis, the study of cross-interactions, etc. it should be emphasized that the construction of scenarios is the basis for forecasting future consequences of the specifics of international trade and serves as an appropriate, timely and qualified foundation for the application of methods for predicting their consequences. at the same time, the structured system of methodological tools of the methodology of foresightanalysis is constantly changing, so it is advisable to accumulate experience in their practical application in research on international trade, including in the face of pandemic challenges and financial crises. 5. adaptation of the system of economic indicators to the needs of foresight-analysis of the development of international trade the variety of foresight methods poses an important task for the organization of this type of research, i.e., choose the most appropriate of the available, in terms of a particular study, the methods of optimal combination of such methods. in scientific literature, the following approaches to the formation of a combination of research methods are widespread: “triangle of foresight” or “diamond of foresight” (popper, georghiou, miles, keenan, 2010). near each of the vertices of the corresponding figures there are depicted the methods that best meet the characteristics of this vertex, in particular, in the “foresight triangle” vertices correspond to the following features: expertise, creativity, figure 2. model of foresight-analysis of international trade development source: formed by the author and adapted to the needs of the methodology of foresight-analysis of the development of international trade on the basis of (rogachevskii, 2020) system methodology goal principles task functions strategic guidelines standards criteria task restriction implementation process format regulation procedures control information and analytical software pragmatic semantic methodical tools economic and mathematical methods in the field of research / retropolation / brainstorming / public panel, surveys / conferences / seminars / genius forecasting / morphological analysis / relevance tree / logic diagrams / role-playing games / swot-analysis / weak signals / wild cards / benchmarking / indicators / time series analysis / simulation / patent analysis / trend extrapolation / business impact analysis / factual interaction analysis / delphi method / key technologies / multicriteria analysis / roadmaps / stakeholder analysis model of foresight analysis of international trade development baltic journal of economic studies 114 vol. 7 no. 3, 2021 interaction. the combined application of methods with appropriate characteristics, as methodically provided, helps to ensure the most effective foresight of the study. in accordance with the requirements of the “foresight triangle” method, the study should combine, for example, interview methods, essays, influence matrices. the combination of several forecasting methods makes it possible to use their advantages and form the most accurate forecasts possible. to conduct it, it is important to consider the main methods of financial forecasting and choose those that will help build a forecast of international trade (table 2). thus, today there are many forecasting methods that have different advantages and disadvantages, so in the preparatory stage of a specific study on the development of international trade, you need to choose the ones that best meet the requirements of the study. typical economic indicators within the foresight-analysis of the development of international trade are specific and require their own composition and structuring. it is worth noting that the prerequisite for the successful positioning of any country in the world market and gaining tangible benefits from globalization effects is the use of economic and mathematical methods for forecasting the development of its foreign trade. in conditions of international instability, the traditional economic and statistical apparatus loses its relevance and requires the involvement of a modern arsenal of mathematical tools. particular attention should be paid to substantiating trends and patterns of economic processes under the influence of unexpected factors of non-economic nature, in particular such as socio-political, informational (shown in figure 1), which increasingly determine the structure and dynamics of world economic processes. at the present stage of development, international trade clearly demonstrates its dependence on both objective figure 3. negative factor influencing the scenario building process development of international trade source: author’s generalization (georghiou, 2008) poor quality original information external influence scenario development of international trade complexity of the studied objects subjective views and motives qualification experts imperfect methodology research table 2 classification of types of foresight-analysis of international trade development and their characteristics type kind characteristic qualitative retropolation / brainstorming / public panel, polls / conferences / seminars / genius forecasting / morphological analysis / relevance tree / logic diagrams / role games / swot analysis / weak signals / wild cards they attach special importance to events and perceptions. such an interpretation tends to be based on subjectivity or creativity, which is difficult to confirm. quantitative benchmarking / bibliometrics / indicators / time series analysis / modeling / patent analysis / trend extrapolation / business impact analysis apply variable and statistical studies using or generating reliable data. mixed economic and mathematical methods in the field of research / analysis of the mutual influence of factors / delphi method / key technologies / multicriteria analysis / road maps / analysis of stakeholders mathematical principles are used to determine the number of subjective, rational judgments and points of view of experts. source: updated by the author based on (georghiou, 2008) baltic journal of economic studies 115 vol. 7, no. 3, 2021 factors in the formation of the state’s export potential and on factors of a subjective non-economic nature – primarily socio-political. it is advisable to find adequate tools for modern international instability analysis and forecasting of the dynamics and structure of ukraine’s foreign trade. given the lack of experience in using foresight-analysis to forecast the development of international trade and, accordingly, developments in this area, we propose to supplement the structure of the methods presented in table 1, the following group of economic indicators that assess the level of foreign trade (trade) statistical guide, 2017) based on statistical methods (1-8): – openness of the economy (oe): eo export grossdomesticproduct = � � � ×100 �% ; (1) – terms of trade (tt): tt export priceindex import priceindex = � � � � � ; (2) – coefficient of import dependence (cid): cid == − −� � � � � � � � � � � �thevolumeof importsof thei thgoodsof j th country iimport pconsumptionof i productinthe j thcountry� � � � � � �− − ; (3) – import quota (iq): iq import grossdomesticproduct = � � � ×100 �% ; (4) – export diversification index (ied): i h h ed i n ij i = = −∑ 1 2 � , (5) where hij is the i-th share of goods in total exports of the country j; hi is the share of the i-th commodity in total world exports. net trade index (int): i e i e i nt i i i i = −( ) +( ) � , (6) where ei is the export of goods i; ii is the import of goods i. – index of geographical concentration of exports (or imports) of goods (igc): i x x gc i n i k k =       = ∑ 1 2 , (7) where xi k is the volume of exports (imports) of goods k to the country i; xk is the world exports (imports) of goods к; n is the number of exporting countries (importers). – index of physical volume (iph) i q p q p ph = ∑ ∑ � 1 0 0 0 , (8) where q1 is the price of goods in the base period; q0 is the price of the goods in the period under study; p0 is the quantity of goods in the base period. a consolidated analysis of this group of indicators (1-8) will allow for both comparative and summary analysis of international trade based on individual indicators of its development in the studied countries and will serve to improve the quality of foresightanalysis in the study data set for further forecasting. 6. conclusions foresight-analysis is an effective method of strategic management in the field of macroeconomics to analyze the development of international trade, as its qualitative application can solve a number of issues related to forecasting. foresight has common and different features with forecasting, they are not identical concepts. the peculiarity of foresight-analysis is the focus on the development of practical measures aimed at approximating the desired scenario and involving a wide range of specialists. in addition, the foresight methodology helps not only to see the forecasted future, but also to adjust it in time. the system of classifications of foresight-analysis allows its application not only at the national level of forecasting the development of trade, but also internationally. foresight methodology is widely used in countries around the world as a key tool for developing and implementing research and innovation policies, including in the field of international trade and information base to justify strategic decisions for government and intergovernmental global and regional organizations, management of multinational corporations, science and the public. w hen applying the methodology of foresightanalysis of the development of international trade, it is necessary to take into account the purposeful influence of endogenous and exogenous factors, classified by levels of influence: global, international, national, regional; by factor of production: human, financial, material, intangible; by orientation: organizational, functional, technological, system; by sphere of influence: informational, socio-political, economic, force majeure. the structured model of providing the methodology of foresight-analysis of international trade development includes the following components: system methodology (purpose, tasks, principles, functions), strategic guidelines (standards, criteria, assignments, restrictions), information and analytical support (pragmatic and semantic), implementation process (format, regulations, procedures, control) and a set of methodological tools. methodological tools include: economic and mathematical methods in the field of research, retropolation, brainstorming, public panel, surveys, conferences / seminars, genius forecasting, morphological analysis, relevance tree, logic diagrams, baltic journal of economic studies 116 vol. 7 no. 3, 2021 role-playing games, swot-analysis, weak signals, wild cards, benchmarking, bibliometrics, indicators, time series analysis, modeling, patent analysis, trend extrapolation, business impact analysis, the following factors can have a negative impact on the process of building a scenario for the development of international trade: poor initial information, external influence, complexity of the studied objects, qualification of researchers and experts, imperfect research methodology, subjective views and motives. the combined application of methods (quantitative, qualitative, mixed) in the foresight-analysis of the development of international trade provides maximum efficiency. the selection of methods is carried out at the preparatory stage of a particular study and must meet its requirements. typical economic indicators within the foresight-analysis of the development of international trade are transformed into specific ones and require their own composition and structuring. the addition of the structure of economic methods of foresightanalysis by a group of economic indicators that assess the level of development of foreign trade of a country is substantiated and proposed. such indicators are as follows: openness of the economy, terms of trade, coefficient of import dependence, import quota, export diversification index, net trade index, index of geographical concentration of exports (or imports) of goods, index of physical volume. references: foresight group (2021). un global compact: communication on progress. avaible at: 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(2015). forsait-prohnozuvannia priorytetnykh napriamiv rozvytku nanotekhnolohii i nanomaterialiv u krainakh svitu y ukraini [foresight-forecasting of priority strains in the development of nanotechnology and nanomaterials in the lands of the world of ukraine]: monograph. kherson: vd «inzhek». (in ukrainian) luther, w. (2004). international strategy and foresight report on nanoscience and nanotechnology, vdi technologiezentrum gmbh, dusseldorf. fedulova, l. (2008). forsait: suchasna metodolohiia tekhnolohichnoho prohnozuvannia [foresight: the current methodology of technological forecasting]. economics and forecast, 3, 106–120. (in ukrainian) united nations commission on science and technology for development strategic (2014). foresight for the post-2015 development agenda, geneva, switzerland. baltic journal of economic studies 117 vol. 7 no. 3, 2021 rogachevskii, o. (2020). kontseptualna model zabezpechennia metodolohii forsaitu u stratehichnomu rozvytku natsionalnoi haluzi okhorony zdorovia [conceptual model of safeguarding the methodology of force and strategic development of national health protection]. ukrainian journal of applied economics, 5 (3), 304–310. (in ukrainian) georghiou, l. (2003). evaluating foresight and lessons for its future impact., paper presented at the second international conference on technology foresight, 27–28 february, tokyo. popper, r ., georghiou, l., miles, i. and keenan, m. (2010). evaluating foresight: fully-fledged evaluation of the colombian technology foresight programme (ctfp), cali: universidad del valle. 2010. available at: http://community.iknowfutures.eu/pg/file/popper/view/2204/evaluating-foresight-fullyfleded-evaluation-of-ctfp (accessed june, 28, 2021) european commission (2017). dg trade statistical guide. luxembourg: publications office of the european union, 2017. baltic journal of economic studies 97 vol. 7 no. 5, 2021 corresponding author: 1 lviv polytechnic national university, ukraine. e-mail: lev.h.kloba@lpnu.ua orcid: https://orcid.org/0000-0003-0223-6802 2 state institution “institute of regional research named after m.i. dolishniy of the national academy of sciences of ukraine”, ukraine. e-mail: solomiia@klioba.com orcid: https://orcid.org/0000-0003-4697-4866 doi: https://doi.org/10.30525/2256-0742/2021-7-5-97-103 ensuring the competitiveness of amalgamated hromadas (territorial communities) under conditions of decentralization of power using modern information technology lev kloba1, solomiia kloba2 abstract. modern it today is used in various spheres of public life, including in the management of the amalgamated hromadas, which will ensure the competitiveness of the amalgamated hromadas in the context of decentralized power. the purpose of this article is to improve the use of the latest information technology to ensure the competitiveness of amalgamated hromadas in the context of decentralized power. methodology. the article considers the directions of using information technology to strengthen the competitiveness of amalgamated hromadas. functional features of amalgamated hromadas’ attractiveness, which will significantly increase the attractiveness of amalgamated hromadas in comparison with standard sites, are proposed. the authors considered the optimization of the infrastructure of the processes of interaction of government/local government with the residents of the regions, which will solve many significant problems of the development of amalgamated hromadas. the authors proposed an algorithm for the use of it technologies in the operation of the amalgamated hromadas, which is carried out in 4 stages. the organizational scheme of development of recommendation models based on artificial intelligence, thanks to which it is possible to optimize the work of the management office of the hromada, namely, the formation of its budget is considered. results. it is established that it directly affect public communications, having a solid managerial potential. it was revealed that the peculiarity of the development of amalgamated hromadas is the need for a comprehensive application of modern forms and methods of information support of their activities. in particular, it is the use of models based on artificial intelligence to ensure the competitiveness of amalgamated hromadas in order to function effectively. amalgamated hromadas' effectiveness in the decentralization of power depends on the level of interaction with citizens and enterprises, the quality of work of each institution, and the exchange of authorities with each other. the development of an appropriate technical base will not solve all the problems in the system of local government. but it can significantly increase the effectiveness of its work at different levels. practical consequences. the use of recommendation models based on artificial intelligence will allow for more effective budgeting in amalgamated hromadas and ensure a high level of transparency in the work of local authorities. value/originality. modern it makes it possible to build a system that would quickly and timely respond to all dangerous events in real time and alert to the likelihood of threatening events in the community. key words: information technologies, competitiveness, amalgamated hromada, infrastructure optimization, algorithm. jel classification: l86, о18, о32 1. introduction in today 's information society, the idea of e-government as a way of organizing government activities through internal and external information networks is rapidly spreading and gaining momentum. the website of the authority is the main communication link that connects it with the recipients of administrative services, i.e., with the community (bondarenko, 2009). baltic journal of economic studies 98 vol. 7 no. 5, 2021 today, with the formation of the information society, modern information technology is required for the functioning of any sphere of activity. consequently, intelligent technologies are actively used in various spheres of public life. artificial intelligence is a purposeful organized set of information processes using computer technology that provides high-speed data processing, rapid information retrieval, data dispersion, access to information sources regardless of location. for example, artificial intelligence technologies are used to establish medical diagnoses, drive automated cars, trade financial instruments on exchanges, analyze large amounts of data, recognize and generate images, household chores are created, etc. investment in the development of artificial intelligence technology is constantly growing, as it creates significant opportunities to improve production efficiency, reduce costs, and improve the quality of goods and services. furthermore, the use of information systems and artificial intelligence technologies to meet the needs of hromadas meets the demands of the times and can be considered their competitive advantage. moreover, developed countries actively use the latest technology in the organization of hromadas. the system of electronic government, first of all, provides openness and transparency of government at all levels, offers productive interaction of all branches of government among themselves and with the society, simplifies procedures for obtaining services (myna, baiko, solomon, 2015). given this, the use of information technology in the management of hromadas should be seen as a promising direction for their development, which will improve the efficiency of management, the organization of individual areas of its activities and the safety of the community as a whole. a re as o f i t us ag e optimization of internal tg systems increasing the speed of decisionmaking without loss of quality of service strengthening control over the operations carried out by the administration of amalgamated hromadas practical cooperation of srs and the population with governing bodies optimization of work in the field of socio-economic services improving the work of the hromada website, creating a mobile application automating the provision of services to hromada residents ensuring transparency of service provision optimization of the infrastructure of amalgamated hromadas informatization of public utilities use of modern monitoring tools within tg, etc. figure 1. areas of using it to strengthen the competitiveness of amalgamated hromadas source: author's development baltic journal of economic studies 99 vol. 7 no. 5, 2021 2. areas for using it to improve the competitiveness of amalgamated hromadas information technology is a fairly broad concept that includes methods, processes and ways of using computers and communication systems to create, collect, transmit, search, process and distribute information. the purpose of the introduction of information technology is to solve specific problems of their development: – improvement of information and analytical support of territorial management functions; – reducing the time to obtain the necessary information and summarize it; – making data more accessible to community residents and external consumers. mass types of modern information technology are aimed at accomplishing the following tasks: – information processing technology; – management information technology; – information technology support includes a set of information processes for solving specific problems (regional development and cohesion policy, 2018; roll-call voting of dnipro deputies). to date, it is necessary to identify specific areas for the use of modern it-technologies to improve the competitiveness of amalgamated hromadas (figure 1). the use of information systems and technologies is an important element in strengthening the competitive advantage and competitiveness of territorial communities (hromadas). the areas of it use are interrelated, but the proposed division allows us to identify the main beneficiaries of specific it tools, taking into account the interests of various actors in hromadas and the goals of achieving the strategic effects of their implementation. the first direction is the allocation of optimization of amalgamated hromadas' internal systems, that is, improving the processes and procedures of the system of internal support of local government, i.e., the administration. it is obvious that without the use of modern it technologies, the performance of any functions of the hromada management apparatus (accounting, personnel, land management, utilities, etc.) can be extremely slow or even inefficient. the main challenges that need to be met when optimizing the management of the amalgamated hromadas using modern it solutions include the following: – increase the speed of decision-making without loss of quality of service; – strengthening control over the operations carried out by the administration of amalgamated hromadas; f un ct io ns o f a m al ga m at ed hr om ad a at tr ac tiv en es s a search engine (e.g., ring) selects information about events, businesses, places, streets, etc. in public databases. such data will allow users or interested parties, organizations to find the information they need more quickly and efficiently; a catalog of electronic tg services with a hyperlink to each of them, including other areas of tg, which, if necessary, will allow to quickly find the necessary medical institutions, educational institutions nearby; a directory providing information about the deputies' composition, draft decisions, results of the roll call vote, decisions and materials to them, information about the council management and deputies with personal pages of each deputy and possibility to place activity reports (for example, "city council deputies roll call voting portal", "database of information about the city council deputies", etc.); necessarily, the user should be able to go to the corresponding page of the administrative services center, where citizens are registered in the queue, such as the so-called "transparent offices". figure 2. functions of amalgamated hromada attractiveness source: compiled by authors based on (deputy corps; roll-call voting of dnipro deputies; search in state registers; transparent office) baltic journal of economic studies 100 vol. 7 no. 5, 2021 1) informatization of utilities is to make repairs and provide shared services. therefore, according to the authors, it is necessary to provide specialized equipment with trackers, which will allow online display of information on the availability of special equipment on the infrastructure of emergency amalgamated hromada. furthermore, information on the number of funds allocated for this repair, displayed on the amalgamated hromada website, will allow public control over its effectiveness. • to a higher level of security; • to the improvement of traffic – detected gridlock can be eliminated by quickly changing the lighting, street equipment, and drivers will determine the optimal route to bypass traffic jams, etc.; • to the improvement of the environmental situation – objects that significantly pollute the environment will be identified, and the results of the observations can become the basis for a decision in a lawsuit against the polluters; • to increased social stability, as it will allow continuous monitoring and control of illegal actions of participants or third parties in places of gathering of people, children, etc. 2) cctv cameras inamalgamated hromadas are an important tool to improve competitiveness, especially as the structure of local government changes, because it contributes: 3) automation of the access regime in administrative offices (with the regular generation of reports on the amalgamated hromada's website) will allow to control the regularity of visits by officials to workplaces. 4) installation of display boards (information boards), which will display the waiting time of buses and other necessary information for residents, will increase the comfort and attractiveness of the amalgamated hromada in the eyes of residents. – practical cooperation of srs and the population with governing bodies, etc. as for the optimization of work in the sphere of socio-economic services, it should be noted that the main tool of interaction between the apparatus of the amalgamated hromada with the population and business is its web-representation, i.e., the website. note that the common website in today 's environment has insufficient functionality, so it is necessary to develop a mobile application with the functionality available on the full version of the website. it is also believed that automated bots will speed up response times for hromada residents, systematize frequently asked questions, and thereby provide insight into critical elements of the hromada's infrastructure. in addition to the mandatory elements defined by the current rules (e.g., budget, hromada composition, etc.), the main page of the amalgamated hromada should provide additional functionality that would greatly enhance the attractiveness of the amalgamated hromada compared to unified sites. figure 2 shows the functionality of the amalgamated hromada’s attractiveness. these recommendations broadly coincide with the government's vision for the "state in a smartphone" project. the launched "diia" app is a fairly effective tool for optimizing the interaction between state/local authorities and regional residents. along with this, expanding the functionality specific to it services in a particular merged hromada will allow residents to keep a "finger on the pulse" of events. optimization of amalgamated hromadas infrastructure is shown in figure 3. figure 3. optimization of amalgamated hromada infrastructure source: author's development baltic journal of economic studies 101 vol. 7 no. 5, 2021 each of the described uses of information systems and technologies is undoubtedly significant and will solve significant problems in the development of territorial communities. however, the authors note that it is necessary to form an algorithm for the use of it in the local community and, following it, to choose the areas that need to be improved and optimized. 3. algorithm of the use of it-technologies in the functioning of the amalgamated hromada the implementation of it-services and assessment of their effectiveness is carried out in 4 stages according to the decision-making algorithm (figure 4). the first stage is the planning and analysis of the development strategy of the amalgamated hromada to determine the areas of optimization, calculate the possibility of implementing it services (financial, human, technical, etc.), and directly determine the technology used to work with. table 1 suggests a list of technologies that can be implemented in the activities of the amalgamated hromada. the second stage involves the formation of the necessary budget procedures, procurement and the actual implementation of new technologies in the amalgamated hromada. the third stage is the implementation of the project, namely the creation of infrastructure for the use of information and analytical data on the development of the amalgamated hromada. in this step, there is a choice of one or more of the above technologies to work with and the optimization process itself. the fourth stage monitors the implementation of it services in amalgamated hromada (from the planning stage to project implementation). this stage will allow to rationally assess the capabilities of the local community in working with information technology, to choose the direction of optimization that needs to be updated or to create a competitive advantage for the amalgamated hromada and its residents, as well as to effectively plan the budget. according to the above algorithm, it is proposed to choose a specific direction of optimization and one of the modern information technologies, namely artificial intelligence, and to show how, using this technology, it is possible to increase the competitiveness of the amalgamated hromada. 1 1 5 5 8 9 14 14 0 2 4 6 8 10 12 14 16 100m-500m euro more than 500m euro 20m-50m euro 50m-100m euro 5m-20m euro less than 1m euro not indicated 1m-5m euro number of programs figure 4. algorithm for the use of it technologies in the operation of amalgamated hromada source: author's development table 1 a list of technologies that can be implemented in the work of the amalgamated hromada areas of use of it technology tools optimization of amalgamated hromada's internal systems – web technologies; – search engine technology; – machine learning and artificial intelligence; – internet of things; – data warehouses; – crm, erp, hrm systems; – automated bots; – blockchain technology and others. optimization of work in the sphere of socio-economic services optimization of the infrastructure of the amalgamated hromada source: author's development baltic journal of economic studies 102 vol. 7 no. 5, 2021 4. systematic operation of ai-based recommendation models the most important tool of it technologies are recommendation systems, which work with a certain type of information, a system of filters that recommend items of information that may be of interest to the user. recommender systems compare data from users and create a list of items that are recommended to the user. this technology allows users to spend minimal time searching for relevant information or making effective decisions. it is proposed to consider an organizational scheme for the development of recommendation models based on artificial intelligence, with the help of which it is possible to optimize the work of the amalgamated hromada's management apparatus, namely the formation of the community budget. the first stage is the preparation of the information and technical infrastructure for the development of the recommendation model. it should be noted that the prerequisites for creating a machine learning model already exist, namely, the leading budget indicators and their values in previous periods are freely available (figure 5). this data is the basis for learning and testing recommendation network models, and the available api protocols provide reliable and up-to-date information in real time. the next step is to identify the key factors that positively affect the indicators of sustainable development of the amalgamated hromada. the third stage is to train and verify the quality of artificial intelligence models (figure 5). training and test data sets are usually used to train ai models. it is generally accepted that the distribution is assigned to 2/3 of the training set and 1/3 of the test set. the training set is part of the budget data used in the training process of recommendation models. the test set is data that was not used during model training, so checking the results of the recommendation network against this data can serve as an effective tool for assessing the quality of the results. in the future, it is advisable to cluster the amalgamated hromada according to similarity parameters (similar population, location, availability of certain natural resources, financial indicators, etc.) to provide the most relevant recommendations. during the formation of the budget of the territorial community, requests are sent to create expenditure headings and receive appropriate recommendations based on data from previous years of similar territorial communities. the following steps are the implementation of the proposed solutions and assessing of the results obtained by implementing the recommended solutions. the use of recommendation models will allow for a more effective formation of territorial community budgets and ensure a high level of transparency in the work of local self-government bodies. 4. conclusions an important use of it technologies is to create conditions to ensure the safety of communities and their population. in recent years, the number of photo and video sensors used by the amalgamated hromada that capture public safety information has increased significantly. processing and promptly responding to real-time information is the main task of using ai technologies. these technologies will make it possible collecting and summarizing data on the amalgamated hromada of ukraine identification of critical factors and indicators for improvement training ai models based on collected data clustering of amalgamated hromada by similarity parameters providing appropriate recommendations based on historical data from similar amalgamated hromadas implementation of proposed solutions evaluation of the results obtained by implementing the recommended solutions figure 5. order of operation of recommendation models based on ai source: author's development baltic journal of economic studies 103 vol. 7 no. 5, 2021 to build a system that will quickly and timely respond to all dangerous events in real time and warn of the probability of dangerous events in the community. this requires mass notification systems, which are an effective method of unilaterally distributing or transmitting messages to one or more groups of people to inform them of an existing or potential emergency situation. for example, an amalgamated hromada can use such systems to notify the public of common problems or issues (such as blackouts at certain times), and to inform community residents in case of emergencies (such as a missing child and help in searching, etc.) or industrial and other emergencies. therefore, the use of mass notification systems in amalgamated hromada is a critical element in shaping a safe environment, which is one of its competitive advantages. an important area of application of ai technology is the protection of amalgamated hromada's data and control systems from unauthorized interference. it is worth noting that such a system works on the basis of a database of community residents (their addresses, phone numbers, other data for communication). references: bondarenko, a. (2009). information technologies as a mechanism of government interaction with the public. available at: http://www.dridu.dp.ua/vidavnictvo/2009/2009-01(1)/bondarenko.pdf deputy corps. available at: http://zor.gov.ua/deputat/all myna, zh., baiko, l., & solomon, a. (2015). using the usa experience in implementing e-government in ukraine. proceedings of the 4th international scientific conference ics "information, communication, society 2015". lviv: lviv polytechnic publishing house. regional development and cohesion policy 2021–2027. available at: http://ec.europa.eu/regional_policy/en/ newsroom/news/2018/06/06-08-2018-regional-development-and-cohesion-policy-2021-2027 roll-call voting of dnipro deputies. available at: http://edeputat.dniprorada.gov.ua/ search in state registers and projects of the office hundred. available at: https://ring.org.ua/ the organisation for economic co-operation and development (oecd). available at: https://data.oecd.org/ transparent office. vinnytsia city council. available at: https://transparent.vmr.gov.ua/default.aspx vakhovych, i. m., & kaminska, i. m. (2008). financial capacity of the region: diagnostics and support mechanisms. lutsk: lutsk nat. tech. un-t. vasylchenko, h., parasiuk, i., & yeremenko, n. (2015). territorial community development planning. training manual for local government officials. association of ukrainian cities. kyiv: vna enterprise llc. baltic journal of economic studies 54 vol. 2, no. 3, 2016 corresponding author: 1 department of humanities, kyiv state maritime academy named after hetman petro konashevich sahaydachnyi. e-mail: ekaterinagoroshko@mail.ru problems of transport complex staffing of ukrainian ssr in 1960-1980 anatoliy gorban1 kyiv state maritime academy named after hetman petro konashevich sahaydachnyi, ukraine abstract. in the article the staffing problems of transport complex in the period of its fundamental technical change and intensive development of 1960–1980-ies are described. the main purpose of this article is to analyze the peculiarities of personnel potential development of transport complex of the ukrainian ssr in the years of the intensive development of transport sectors, figure out the social component of the measures to improve the efficiency of transport networks. methodology. in this article we used the method of analysis. the qualitative personnel structure, training of skilled workers in the educational institutions and other forms of improvement of personal skills of transport workers are analyzed. the causes of staff turnover and low labour discipline are studied. practical implementation. this article shows the possible opportunities for the modern transport complex of ukraine, how to be successful and competitive in the market. the historical background of this article can be very useful for present managers of the transport complex. results. the author makes a general conclusion that the main causes of personnel fluctuation in transport brunches are low wages, pour conditions of work and lack of accomodations for the staff. the social and practical measures to improve effectiveness of work with personnel of all brunches of transport system are characterized. key words: transport complex, different kinds of transport, providing staff, training of skilled workers, staff turnover, improve effectiveness. jel classification: a10, a13, l23 1. introduction fulfillment of the tasks of efficiency increase of the transport complex work of the ukrainian ssr on the basis of radical technical reconstruction of all transport industries in the 1960-1980-ies crucially depended on the solution of personnel problems. training of qualified specialists for transport sectors at higher and secondary professional schools and other educational institutions with various forms of training didn’t solve the problem and staff turnover remained high. the main reasons of it were low wages, poor conditions of work and life and lack of housing. this situation caused the search of ways to increase efficiency of work with personnel of all parts of the transport system. the closeness of these problems to the modern ones actualizes the necessity of a comprehensive study of the experience of these problems’ solving to use this experience in modern conditions. 2. analysis of researches and publications the problem of staffing sectors of the transport complex of the ukrainian ssr in 1960-1980-ies, their social and material security remained outside the attention of researchers of the soviet period. in the publications devoted to the development of transport main attention was focused on the coverage of positive dynamics of the transportation work. only recently there appeared a research of s. lesyk, where the author describes the training and the usage of qualified engineer-technical staff of railway transport, including several aspects of social and material supply of the personnel (lesyk, 2013). 3. statistical indicators of transport complex at the beginning of 1960-ies the number of specialists with higher and secondary special education for transport organizations increased markedly. so, in 1965 76,1 thousand people with higher and secondary special education worked on the transport but in 1957 only 28.9 thousand people worked in this sector. annually the higher educational institutions of the republic produced about 5 thousand specialists for the transport sector, and secondary professional schools prepared more than 10 thousand specialists (national economy in ussr , 1966). totally, in 1965 more than 1.3 million people worked in the transport sector. each year the number of employees in transportation industries was growing, as it is evidenced by the data (table 1) (olsen, 2003). baltic journal of economic studies 55 vol. 2, no. 3, 2016 table 1 dynamics of the growth of number of workers and employees of the transport complex in ukraine (by sectors, in % by 1940) 1965 1970 1975 kind of transport 197 225 255 railways 118 119 132 water 311 397 445 automobile 288 345 395 totally in the national economy 204 248 279 in the 1970s more than 1.5 million people worked at transport organizations. (national economy in ussr , 1971). the average monthly wage of employees in various transport sectors was a little higher than the average for the national economy (table 2) (olsen, 2003). development of transport system mostly depended on the stability and coherence of the railway transport, which entered a period of technical upgrade and reconstruction. technical school of locomotive operators played an important role while staffing the transfer of the railways to diesel and electric traction. they were created in 1956 by joining and reorganization of the road schools and schools of locomotive operators with a three-year study (history of rail transport in the soviet union, 1970). the best among them were lviv technical school of lviv railway, kharkiv technical school of southern railway (central state arheve of higher organs of power and management, 1970). the process of training was complicated by the reasons of objective and subjective character. thus, workers often did not want to go for re-training because during full day time training they usually were not provided with accomodation for the period of training. for example, a hostel of the technical school of railway transport in kiev could provide accommodation only for 19 students of an educational consulting office for training, and remaining 80 learners had to settle on their own, which created additional inconvenience (central state arheve of higher organs of power and management, 1970). one of the forms of re-training became «schools of excellence» in departments of railways, which became widespread in the 1960-ies. about 4 thousand people were annually trained there (national economy in ussr , 1971). the training was facilitated by an extensive network of library collections. in 1960-ies, road scientific-technical library had more than 92 thousand books, and network libraries had 667 thousand books. there were not enough workers with higher and secondary special education. in 1984 the need for specialists with higher education in «ukrzalizprom» was granted only to 40%, with secondary special education to 49%. there was high turnover of staff. in 1984 the company «ukrzaliztrans» recruited 2232 people and dismissed 2167 people (without internal displacement) including 1188 resigned people on their own desire and 228 people were fired for truancy and violations of labour discipline (lesyk, 2013). in 1987 the association employed 1900 people and 2295 were dismissed including 1094 people – on their own desire and 194 people for violation of labor discipline (lesyk, 2013). the main reasons of high turnover of staff in the association «ukrzaliztrans» as well as throughout the industry there were working conditions, low wages and poor living conditions, especially the housing problem. the resignation in most of the cases occurred in connection with dissatisfaction with the profession (20%), including 35% of loaders and 25% of shunters, 17.5% of the dismissed ones were not satisfied with the salary, 13,5% resigned because of heavy physical labour. the highest turnover rate was observed among technicians for repair of locomotives, it was 20.4% (lesyk, 2013). the rate of wages of station shunters, road workers, weighers, fitters of points of technical inspection was extremely low (olsen, osmundsen, 2003). among women the reasons of the resignation were poor conditions of work, transfer to the place of work closer to the residence, low wages, lack of kindergardens and absence of accommodation (national economy in ussr , 1971). wages of workers of urban and regional enterprises with the same qualifications were 10-15% higher than that of the workers of enterprises of railway transport. for example, in 1966 at the station tiotkino of south-western railway the station master received a salary of 130 rubles and the head of the transport department from the neighboring sugar factory was 150 rubles (olsen, osmundsen, 2003). measures to solve the housing problem used by the railway department were not enough. therefore, at the expense of funds of enterprises in an economic way the construction of houses was carried out, loans and building materials to individual developers were given out. in particular, in 1962 in the south-western railway 1598 workers were provided with accommodation, however, more than 5 thousand workers were in need of housing (national economy in ussr , 1985). table 2 average monthly salary of employees in transport (by industry in 1965-1984 years (in rubles) 1965 1970 1975 1980 1984 kind of transport 95,6 120,9 147,4 168,2 182,1 railways 91,4 112,5 142,5 158,1 176,4 water 117,5 145,3 165,9 187,3 201,1 automobile 96,3 121,1 148,1 171 182,8 totally in the national economy 93,9 115,2 133,5 155,1 168,5 baltic journal of economic studies 56 vol. 2, no. 3, 2016 the problem with the personnel was encounted by automobile transport no less than by railway transport. in the mid-1970-ies from 0.8 to 0.9 million people worked for this kind of transport including about 0.5 million people in the system of the ministry of transport of ukraine. compared to the 1950-ies the number of employees was more than doubled (384 thousand people in 1955). in the mid-1970-ies about 8% of all employed workers were occupied in automobile transportation [3, 353]. among them the drivers constituted 62 %, maintenance – 20%, designers  – 4%, employees  – 5%, and technical employees – 8% (lesyk, 2013). kharkov and kiev automobile and road institutes prepared specialists of the highest category for automobile transport. in 1970  – 1980-ies the material base of higher educational institutions was strengthened, curriculum was improved, manufacturing practice was improved. although, as the audit showed there was not full realization of the allocated funds for materials, devices, equipment (tires, fuel) because of the lack of control over transit (national economy in ussr, 1966). despite the difficulties, during 1970-1980 years in the institutions of higher education there were prepared and sent only to the enterprises of automobile transport of general use about 14 thousand specialists. specialists of average qualification were prepared at 8 colleges, which sent to automobile transport almost 70 thousand specialists in 1970-1980 years. during the period of 1960-1980 years out of 1 thousand specialists operating in automobile transport the number of specialists with higher education has increased from 16 to 41, and with secondary education increased from 42 to 112 people. however, supply of professionals of the automobile transport sector in 1970 accounted only 63% of general needs (olsen, osmundsen, 2003). young professionals were reluctant to work at the place of destination. so, in 1973 47% of graduates of higher and secondary special institutions did not arrive at the place of work after training (national economy in ussr , 1985). the staff turnover was high both at automobile transport and at railways. according to the data from january 1, 1971 the number of workers in the sector was 96563 people. during the reporting year 36607 people were hired and 28938 people were dismissed including 17867 people at their own desire and 306 people at the initiative of administration (national economy in ussr , 1971). that shows that the total turnover rate was 25% and the turnover of workers was even higher – 31%. admitting the seriousness of the problem of personnel providing in the automobile transport system more attention was payed to the improvement of social conditions of workers in the industry. for example, in 1970 at the enterprises of the ministry of construction and operation of highways of ussr there were built and commissioned 26,000 sq meters of living space, 103 showers, 80 rooms for taking meals, 90 rooms for heating workers working outdoors and 33 rooms with washbasins, 77dressing rooms and 72 mobile carriages. the total number of sociocultural objects is listed in table  3 (national economy in ussr , 1971). table 3 number of social facilities at motor transport enterprises of ussr as of january 1, 1971 number number of seats hostels 320 4894 canteens 69 2472 buffets 30 800 clubs 28 3970 red corners 774 21670 recreation 47 1034 kindergartens 5 265 clinics 32 however, the measures undertaken were clearly inadequate because every year only 3% of workers out of the list of turn for getting an apartment got accommodation. shortcomings and deficiencies in the organization of work, the irresponsibility of individual managers of the various branches led to an increase in number of labour discipline violations, absenteeism, theft, financial fraud. the rate of immergency because of driving vehicles while intoxicated, violation of road traffic and public regulations by the employees of the automobile transportation enterprises was growing (national economy in ussr, 1985). staff problems have existed in water transport where the number of employees was growing. so, the number of employees of the fleet of the dnieper basin in 1970-ies was more than 26 thousand people and in 1980-ies it exceeded 30 thousand people. in the early 1980-ies the scope of parttime professions on the transport fleet expanded. in 19801981years the crews of all high-speed vessels started to work part-time jobs. the crews of more than 1000 vessels worked this way and it was about 91% of the total river fleet. wage of workers of river transport was relatively high. in 1980 it was 11% higher than the average wage in the transport industry and 21% higher than the average wage for the national economy. however, as in the whole transport sector, social conditions of workers were unsatisfactory. at the beginning of 1959 in the dnipro shipping company there were 3,000 families, which needed better housing conditions, but funds for housing construction were almost not allocated. only later in 1960 the situation was improved and it was spent 38.5 million rubles for housing construction or 10% of total capital investment. in general, during 1971-1983 years it was built 59 houses with a total area of over 190 thousand square meters, with 2 hospitals, 6 kindergartens for workers of river transport of the republic (lesyk, 2013). the problem of personnel at the aviation enterprises of civil aviation was urgent where in the mid-1970-ies more than 39 thousand people were working [33, 3]. like the other kinds of transport, civil aviation suffered lack of qualified staff  – the engineering team was staffed by 86%, technical  – by 87%. therefore, the airline took baltic journal of economic studies 57 vol. 2, no. 3, 2016 measures to improve recruitment and retention. positive experiences in 1970-ies was acquired in the simferopol united squadron where for three years of the 9th fiveyear plan there were re-trained in the class and the category specialists in all fields  – 346 people, including flight crews  – 116 people. at this airline 62% of senior management personnel had work experience more than 3 years. for 3 years the team added 134 young professionals (national economy in ussr , (1971). the industry 's share of young specialists decreased. in 1970-ies 900–950 young professionals were sent to work annually but in 1979 only 694 graduates of higher educational institutions came to work to the industry, thus practically we didn’t add new pilots – there are totally only 46 people. labour discipline among the workers was low. in 1971 the number of personnel misconduct has increased, 2829 against 2663 in 1970. only in 1979 30 people were summarily dismissed, 25 of them for truancy, 3 men for drinking alcohol during working hours. in addition, 65 people were demoted, 25 of them were pilots transferred to ground work. in 1979 33.9% of command aircrew was dismissed for the deficiencies in the discipline (central state arheve of higher organs of power and management, (1970). attempts were made to improve the situation with training. funds were allocated for the creation of visual aids, equipment, instructional navigation cabinets. at the factories of the ministry of aviation industry, at the training divisions, at the aviation-technical bases there were held 885 re-training of specialists for work on the new aircraft (lesyk, 2013). there was a high turnover of staff. although in general, concerning main professions it decreased slightly from 3.9% in 1976 to 3.8% in 1979, but also among specialists – from 9.2% to 8.1 %. however, in many departments of civil aviation of the republic staff turnover remained high. the high turnover of key specialists took place in boryspil united squadron  – 13.5 %, in odessa  – 13.3% and in nikolaevsk – 11.9 %. 4. conclusion in the condition of reconstruction and technical re-equipment of all transport industries the problem of providing the transport sector with the personnel is still quite urgent. insight into the history of solving staffing problems of the transportation sector brings best practices into morden stage of its development. it is found out that lack of trained skilled workers in 1960  – 1980-ies was supplemented by the common to all transport sectors negative factors, which caused a significant turnover of staff, not full complement of many transport links. among these factors were low wages, unsatisfactory level of working conditions, and lack of basic social conditions, which are primarily connected with housing problems. measures for the solution of the problems of personnel and human resources of the transport complex are taken. they were such as opening new and improving existing educational institutions of all levels, re-training of personnel directly at the workforce. we consider these measures to be best practices of the studied period in the transport sector development. references lesyk, s.m. (2013). pidgotovka ta vykorystannia kvalifikovanyh inzhenerno-tehnichnyh kadtiv zaliznychnoho transportu (1945–1980 roky). visnyk cherkaskoho universytetu. seria: istorychni nauky, p. 72–81. national economy in ussr in (1966). kyiv: derzhstatvydav, p. 88. olsen, t.e., osmundsen, p. (2003). spillovers and international competition for investments. journal of international economics, vol. 59, issue 1, p. 211–238. national economy in ussr (1971). kyiv: statystyka, p. 113. national economy in ussr (1985). kyiv: tehnika, p. 828-289. history of rail transport in the soviet union, vol. 3. 1945-1991. (1970). part 7. retrieved from: https: //wiki.nashtransport.ru central state arheve of higher organs of power and management. (1970) f. 4924, d. 19, p. 67. анатолий горбань проблематика кадрового обеспечения транспортного комплекса украин ской рср в 1960–1980-х годах анотация. в статье рассматриваются проблемы кадрового обеспечения отраслей транспортного комплекса ссср в период радикальной технической реконструкции и быстрого развития (1960-1980 гг). основная цель этой статьи состоит в том, чтобы проанализировать особенности развития кадрового потенциала транспортного комплекса украинской сср в годы интенсивного развития транспортного сектора, выяснить социальную составляющую мер по повышению эффективности транспортных сетей. методология. в этой статье был использован метод анализа, а именно был проанализирован качественный состав персонала, подготовка квалифицированных рабочих в учебных заведениях и других форм повышения личных навыков baltic journal of economic studies 58 vol. 2, no. 3, 2016 работников транспорта. причины текучести кадров и низкой трудовой дисциплины изучаются. практическая реализация. в данной статье приведены все возможности для современного транспортного комплекса украины, как быть успешным и конкурентоспособным на рынке. исторический фон этой статьи может быть очень полезным для нынешних руководителей транспортной системы. результаты. автор делает общий вывод, что основными причинами текучести кадров в транспортных отраслях являются низкая заработная плата, условия труда и отсутствие помещений для персонала. обозначены социальные и практические меры по повышению эффективности работы с персоналом всех отраслей транспортной системы. baltic journal of economic studies 83 vol. 2, no. 5, 2016 causes and nature of economic and social contradictions of the agricultural sector in transitional economies olga shulga1 kyiv national economic university named after vadym hetman, ukraine abstract. today the state of the agricultural sector in most economies in transition is disappointing and caused by unresolved social and economic contradictions in its development, which in the transformations only worsened. therefore, to develop effective agricultural policies to address the existing contradictions in the agricultural sector, it is needed to find their nature and causes and development. this is what will resolve current contradictions and predict the natural course of development of agrarian relations in the future. the subject of the investigation  – nature and causes of economic and social contradictions of the agrarian sector in transitional economies. to clarify these issues there were used methods such as dialectic, systemic and structural, analysis and synthesis, unity logical and historical approaches, induction and deduction, etc. the aim is to find out the nature of economic and social contradictions of the agricultural sector, their causes and development in transitional economies. based on these methods, it is found that a contradiction is an internal source of development, and causes of changes and development of the contradictions are inherent within it. that means that the contradiction is a process that is changing, evolving itself, as its domestic activity and through interaction with the struggle of opposites. accordingly, the economic and social contradictions in the development of the agricultural sector are of objective nature. mistakes in the actions of agrarian relations do not generate new conflicts, but only reinforce the negative side of contradictions inhibiting its solution. this is due to the fact that every contradiction has its objective course of development and natural solutions through new quality reproduction with the peculiar contradictions of development. the subjective factor can only help or hinder solving contradictions, lead to a partial solution of contradictions. errors are mostly subjective and complicate the process of identifying and resolving contradictions. reasons for contradictions in the agricultural sector can be divided into two groups: objective (generated by the struggle of opposites) leading to the solution of contradictions of the previous system and the emergence of new contradictions inherent in the future system; objective and subjective, which because of the dominance of the subjective factor at the stage of resolving contradictions lead to the preservation of the previous system contradictions, increase their negative side, and to the emergence of problems and difficulties in resolving existing contradictions. the development of the agricultural sector is determined by imperatives (conditions and directions of action of agrarian relations), which can be divided into the following groups: social, economic, national, historical, technological, informational, cultural, international, religious, political. development of contradictions is inextricably linked with the development of economic systems and elements of the structure. after all elements of the economic system and its structure are the opposite, being in contradiction with itself and with each other. in developing economies, as well as the development of contradictions, stages of development are taken place. there are two common stages in the development of economic systems caused by cyclicity – rising stage of development (from the emergence to the peak) and the descending phase of development (from the peak to its decay). rising stage of the life cycle stage of the economic system includes the origin, formation stage and stage performance. the downward phase is defined by stages of destruction of an integrated economic system, collapse and disappearance. these stages of development of economic systems are in close contact with the stages, phases of contradictions. transitions from one state to another economic system are based on the transformation processes that change the internal state of the system. transformation processes can occur both evolutionary (accumulating changes that are in the process of transformation) and revolutionary (under the influence of subjective factors) through reforms, which are the adjustment of individual elements of the system without changing its foundations. key words: contradictions, agricultural sector, transformation economy, nature of contradictions, causes of contradictions, imperatives. jel classification: j100, q100, p410, a100 corresponding author: 1 department of political economy, kyiv national economic university named after vadym hetman. e-mail: shulga_olga_a@ukr.net baltic journal of economic studies 84 vol. 2, no. 5, 2016 1. problem and its connection with important scientific and practical tasks the importance of the agricultural sector in the national economy of any country is evident. it is a part of the backbone of the national economy, which ensures the development of technology-related sectors of the national economy and creates social and economic framework of rural development, the principles of food and in fixed terms of economic, environmental and energy security. however, today the state of the agricultural sector in most economies in transition is disappointing and poor. the reasons for this situation have deep roots, as related to social and economic contradictions in the development of agrarian sector, which in the transformations only worsened. 2. formulation of research objectives the purpose of the article  – to clarify the nature of economic and social contradictions of the agricultural sector, their causes and development in transitional economies. this is what will resolve current contradictions and predict the natural course of development of agrarian relations in the future. in order to clarify these issues will apply techniques such as dialectic, systemic and structural, analysis and synthesis, unity logical and historical approaches, induction and deduction, etc. disclosure and analysis of the nature of different types of social and economic contradictions will determine their nature and stages of consideration of contradictions will determine their causes and development. the study found that the imperatives determine the development of the agricultural sector in transitional economies. 3. analysis of recent publications on the problem a significant contribution to research and resolve contradictions of social and economic systems are devoted works of such scientists, as yu. k. zaitsev, v.  s. savchuk, o. m. moskalenko, s. v. mochernyі, a.  a.  chukhno etc. however, the question of the nature, functions, nature and causes of social and economic contradictions agricultural sector remains almost unexplored. there are only a few articles devoted primarily to the clarification of the contradictions of ownership in the agricultural sector and contradictions of environmental policy. 4. the presentation of the main results and their justification in order to explain the nature of social and economic contradictions of the agricultural sector, considered the existing scientific literature classification of contradictions. it will consider the conflict with the various parties and thus more deeply penetrate into their essence to ensure proper choice of forms, methods and ways to solve them by society. the nature of economic and social contradictions most disagreements are classified according to several criteria. this is due to the fact that the contradictions that occur in different types of economic systems, with different conditions of the nature, duration. there are three main groups of social contradictions, depending on their scope, sociological, economic and so on. sociological controversies affect the relationship between the elements of social structure. there are, for example, the contradiction between social being and social consciousness, between material production and other aspects of social life, between the base and superstructure, between society and the individual. they are defined as objective and subjective contradictions, in which one side of the object (nature, productive forces, material production), and the other  – a social entity (person, class, society). superstructure contradiction – a contradiction in policy, law, beliefs, family and domestic relations, etc., and they are subjective. however, the contradictions are always subjective, deep internal social contradictions of the objective nature, which express the contradictory specific objective reality. thus, the policy is subjective, but also objective, because it depends on the level of economic and social spheres. it is based on the contradiction between the objective requirement to improve living standards and achieve this objective inability due to the lack of material conditions for such alignment at some stage of social development. regarding economic contradictions, they are divided into two main groups: general and specific. general are those that characterized all socioeconomic formations (such as the contradiction between use value and cost between concrete labour and abstract labour, etc.). however, they occur because of the specific contradictions. this is illustrated by the evolution of forms of value. there are several classifications of specific economic contradictions. in particular, depending on the nature and the essential role conflicts  – the essential and neatness, required and optional, initial and nonessential; its significance  – major and minor, major and other, indigenous and non-indigenous; systemic symptom: system and non-system; depending on the systemic or non-systemic nature, objective or subjective conditionality of historical development of society  – the contradictions of growth, or brake, of progress or regress; focus on contradictions ascending or descending development; on spheres of manifestation in society – the contradictions in the sphere of economic, social, political, spiritual (ideological) life; volume of coverage of contradiction  – inclusive (which appear in society as a whole) and partial (which manifest themselves in certain spheres of public life); the amount of historical actions  – those that occur in all sociobaltic journal of economic studies 85 vol. 2, no. 5, 2016 economic formations, in a number of socio-economic formations (antagonistic or non-antagonistic), in one formation (formation, general informational), and in relation to the communist socio-economic formation – a phase (socialism or communism) this formation or both; on genetic grounds – new and old; permanently – permanent and temporary: periodic (acting in a particular period), short-term, the contradictions large, medium, small and of short duration; depending on functional roles  – major and private; the nature of the ties on phase and interphase; from the self-antagonistic and nonantagonistic; related to this phenomenon  – internal and external; from the origin on the objective and subjective, necessary and accidental; by territorial coverage – at the national and international etc. (arroyo; semenov). of course, this classification is conditional, because the same contradiction can be attributed to different groups. however, it has important methodological significance in the study of contradictions, because it allows performing the same contradictions with the various parties and thereby more in-depth exploring the dialectics of social development. according to the above classification, the contradictions that are inevitable, obligatory, and act as a source of self-development of all things defined as essential. all the others that are not inevitable, obligatory, and not objectively inherent in the phenomena and processes both internal sources, the driving forces of their self-development are non-essential. nests contradictions, according to the scientists, are created by the weakness in the organization and management of the various branches of the economy and require timely decisions. at the same time, essential and nests, compulsory and optional, contradictions serve as the source and nonessential, because the contradiction is not only a source but also the main driving force of self-development companies. however, not all manifestations of contradictions, according to scientists, are the source and driving force of self-development companies. in these economic contradictions and forms of their manifestation they include, for example, those caused by failures of optimal proportions in the national economy, the shortcomings in the system of material incentives for workers, such phenomena as speculation, theft of state property; in the sphere of social relations is the contradiction engendered by bureaucracy, violations of legal norms and democratic standards, the national or religious hatred, etc. importance of the contradictions is divided into core and non-core, principal and non-principal. the basic contradiction is always the same and plays a crucial role among all the other contradictions, as the most deeply reveals the nature of social system, determines its characteristics on all phases and stages of development, explains the content and direction of its development, and has a dominant function in relation to other contradictions. the main economic contradiction refers to the individual phases or stages of development of a society on which its development is crucial. for private contradictions, it can develop into the main depending on the conditions in which society develops. systems of symptoms of the contradictions are divided into the systematic (inherent in the economic system) and non-systemic (transient, residual, introduced, alien). the separation of the contradictions in phase and interphase occurs horizontally and vertically. for example, social reproduction sequentially passes through four main phases: production, distribution, exchange and consumption. at these phases and between them there are contradictions, the solution of which promotes the development of each phase and the transition from one to the other. economic contradictions inherent in socialism are non-initial since the economic basis of the relations of production under socialism is the public ownership of the means of production. the solution of such contradictions does not require a violent, revolutionary destruction of one of the opposite sides. antagonistic contradictions are characteristic for the different stages of the development of capitalism and in the transition from capitalism to socialism. division of contradictions are internal and external, associated, usually, with the state-national borders. internal contradictions are those that take place within individual countries (or systems), and this contradiction between the individual country (system) and other states (or systems). the origin of the contradictions is divided into objective and subjective, necessary and accidental. subjective, random contradictions are the contradictions generated by the activity subject and basically have casual character. these contradictions may not occur, because they are the result of errors of management subject, which is not taken into account in the management of the requirements of economic laws. therefore, according to the scientists, such contradictions are not necessary for the development of the economy and not have an objective character for society. relatively objective contradictions, they are generated by the action of economic laws and are necessary for the further development of the economy. in our opinion, there is inappropriate allocation of non-essential, optional, non-initial and subjective contradictions. first, because of the contradictions inherent in all phenomena and processes, they cannot be non-initial. secondly, all the contradictions in the result and in the process of their struggle of opposites, is the source and driving force of development, therefore they are output. the examples of contradictions that are as non-essential is the result of equating the negative side of the contradiction, the growth of the epidemic (which is perceived as a brake on development) by contradiction baltic journal of economic studies 86 vol. 2, no. 5, 2016 in general. otherwise, then you need to assume that social development is caused by external factors. but in this case, we will come to the conclusion that if you eliminate the action of an external factor, then it should stop development. and it is nonsense from the point of view of dialectics, since the development of matter is continuous and infinite. thirdly, despite the fact that without the consciousness and activity of the subject is impossible to identify and to resolve the contradiction, we must not forget that at first the controversy was objectively inherent in the phenomenon or process, regardless of the will or wishes of the people. objectivity existing in the society, economic laws and regularities and is caused by the fact that their inner source and driving force is inherent in the contradictions, which are objective. through their decisions and appearance in public laws, there is social development. so they can't be optional or subjective. errors in the actions of subjects, as we noted above, does not give rise to new contradictions, and only reinforce the negative side of the contradiction, hindering its solution. this is because each contradiction has its own objective and reasonable solution through the reproduction of a new quality with its inherent contradictions of development. the subjective factor, in particular, the level of consciousness, organization of social groups, competence of leading cadres, can only promote or inhibit the resolution of conflicts, lead to a partial resolution of the contradiction. the allocation of scientists group of subjective contradictions and justification of their subjective nature may be caused, in our opinion, not only by formal-logical approach to the knowledge of the nature and causes of the controversy, but the dominant idea of the scientists of the period of socialism that under socialism no conflict of opposites, because the interests of the classes in terms of public ownership of the means of production are the same, that is, there is a unity of interests. accordingly, the conflict is seen as something accidental, temporary, transitory, caused by errors and failures of control subjects, or are remnants of the previous economic system. therefore, such contradictions being generated by external subjective factor may be deliberately, systematically overcome. however, in this formulation of the question was not considered that the unity of opposites is relative, and does not exclude contradiction. but the lack of struggle of opposites, which is the absolute excludes, its cause. so it had to go, first, about the absence under socialism antagonistic contradictions, and not contradictions at all, and, secondly, it is not always taken into account the fact that internal contradictions are the source of all selfdevelopment and self-movement, not external, caused by mistakes in management. in addition, as you can see, under socialism, the contradictions often associated with antagonism. however, such attitude is improper. though, because of antagonistic or antagonistic opposite sides depends on the nature of ownership as the economic basis of society. in this regard, the antagonism between the opposing sides may disappear, and contradiction as the inner source of all motion and development, cannot disappear, for there will stop the movement and development. however, to more clearly and more deeply distinguish between these concepts, it is necessary to disclose the content and essence of the contradictions that underlie the antagonism and determine it is a form of existence of the struggle of opposites. antagonism is a universal form of struggle of opposites, which corresponds to a form of unity, which is a combination of positive and negative opposites. opposites, each of which tries to preserve the existing conflict, are inherently positive. their struggle corresponds to the positive unity of opposites. opposites, each of which tries to resolve the existing conflict is inherently negative. their struggle corresponds to a negative unity of opposites. while antagonism of the resolution of the contradiction becomes possible only when the negative contrast dominates over the positive. thus, the antagonism is due to the nature of those contradictions, in which the leading, defining aspect is the root, the polar difference and discrepancy (sukhanov, 1976). social antagonisms appear with the emergence of mankind. in a primitive society  – this antagonism is between people, clans, tribes, unions of tribes. in slave, feudal and capitalist societies where there is private property and exploitation of man by man, there is a new form of social antagonism, which is called the class. characterized by polar opposite interests of social classes, political parties, etc. it is a fundamental mismatch of interests leads to class struggle and determines the class nature of this struggle. the content of class antagonism lies in the fact that the actions of one class are aimed at the preservation of existing contradictions, and other class – at their decisions. on the basis of class antagonisms, there are other types of antagonisms, such as competition, rivalry, social struggle, social and labour conflicts, etc. at the same time, class antagonisms related to individual antagonisms, which in capitalist societies is one of the forms of manifestation of class antagonisms. this is because each person in a class society, is a representative of a particular class, and therefore has a class. it may seem that class antagonism is a historical phenomenon, which arises or exists in a capitalist society, but disappears under socialism, through the solution of class antagonism between the bourgeoisie and the proletariat as the result of class struggle and socialist revolution. at the same time, keep in mind that not every contradiction under capitalism leads to class antagonisms. for example, the contradiction between technique and science (the technical training requirements of scientific and technological progress) baltic journal of economic studies 87 vol. 2, no. 5, 2016 leads to the development of public relations, but it does not give rise to social antagonism. from this it follows that if opposites express the internal contradictions of the essential condition of some phenomenon, the antagonism expresses that arose on the basis of such a conflict (the confrontation of opposing social classes, political forces, etc.). that is, the antagonism is an external form, a concrete historical manifestation of the contradictions in the mode of production. thus, the internal dialectical contradiction takes the form of external social antagonism. at the same time, under socialism, there persist individual antagonisms, which are based on contradictions, the main side of which is a mismatch between interests of individuals between themselves and discrepancy of interests of individuals and interests of society (individualism, selfishness, drunkenness, theft of state property). such people resist the establishment of a new and thus come into conflict with people who drive in life something new. the most acute form of antagonism is the conflict, which is an acute condition of the struggle of opposites. this form is mainly characteristic for social antagonisms – class, group or individual. from the above we can draw the following conclusions. first, antagonism is social in nature and manifests itself as a form of development of social production; second, it has a historically transitory character; third, social antagonism is a narrower concept than social conflict (the latter, in addition to opposition and confrontation of social classes, includes also relations of cooperation or alliance between them); fourth, between contradiction and social antagonism, there is a relationship of intrinsic and derived, internal reason, and social consequences (semenov, 1987). given the relationship of the contradictions antagonisms, v. i. sukhanov gives the following definition of the concept of antagonistic economic contradiction – the contradiction in which leading, defining aspect is fundamental, polar opposites’ mismatch that causes opposites to clash, conflict. on the antagonistic social contradictions in society, it is the defining aspect, a fundamental mismatch, incompatibility of interests of social opposites (sukhanov, 1976). however, antagonism is not the only form of struggle of opposites. the society also has a struggle of a special sort, which promotes mutual support in the implementation required to store each of opposite changes and conditions. it is non-adversarial in nature, because when this struggle is the alliance of opposites’ activities into a single activity aimed at the preservation or resolution of contradictions. at the heart of this struggle are the contradictions in which the leading side is defining the indigenous identity, the matching of opposites. indigenous identity is the impetus that prompts for a joint struggle, provides a further saving of opposites, leads to the qualitative changes that will approach them in the future, in the new system. as mentioned above, in addition to antagonistic economic contradictions, there are also nonantagonistic in which leading, defining aspect is the indigenous identity, matching opposites, which lead to joint, complementary struggle. in the non-adversarial social conflicts, leading, defining aspect is fundamental conformity, compatibility of interests of social opposites (sukhanov, 1976). however, nonantagonistic contradictions can be played on the basis of the antagonistic contradictions, and vice versa. for example, the interests of employees of agricultural enterprises and enterprises of other industries in many respects similar, so the contradiction between them is non-initial. however, as the aggravation of social contradictions between the city and the village, nonantagonistic contradictions can become antagonistic. therefore, it is necessary to joint action of the parties to social cohesion, aimed at solving the existing contradictions between them. such actions under socialism were implemented in the form of aid, mutual aid and cooperation. today, these actions can be implemented through the creation of clusters or in the form of social partnership (for example, to attract employees to the management, employee ownership part of the company shares and the like). based on the analysis of the nature of antagonistic and non-antagonistic contradictions, it follows that the development of the agricultural sector is caused by struggle of opposites, which give rise to cause controversy. in the process and on the basis of the struggle of opposites it is the development of contradictions, in which the modified unity and there is a transition from one form of existence of matter to another. it follows that contradiction, being internal to the active state of all things, accompany all things during the whole period of its existence. that is, they are objective and universal. however, despite this, the scientific literature argued that some contradictions, though, are subjective in nature and for subjective reasons. an example of such contradictions leads to contradictions arising from noncompliance with requirements of economic laws and mistakes of management subjects. however, practice shows that this position is wrong. it is quite often in the history of the development of economic systems that there are the subjects of agrarian relations not having sufficient information about the nature of contradictions, conditions, methods and ways of their solution, spontaneously directed actions to resolve most conflicts, and only a negative side. and since these negative effects manifested through the activity of individuals, social groups, political parties, the impression was that with the "elimination" of these subjects it will be held on the controversy. evidence of this is the uprising, revolutions and political upheavals. similar errors in the resolution of contradictions can be observed in conditions of administrative-command economic system, when the resolution occurs not baltic journal of economic studies 88 vol. 2, no. 5, 2016 spontaneously, but systematically, deliberately. under these conditions, the actions of the subject of management, which may incorrectly determine the nature, stage of development of the contradictions or methods of its solution, can lead to an exacerbation of contradictions, and discrepancies are identified not by the essence and content. and in the case when it was a social conflict, it can escalate with nonantagonistic in antagonistic. that is, the notion of "contradiction" is associated with such concepts as "problems" and "difficulties", believing that contradictions are a result of their accumulation in the socio-economic development of the country. therefore, it is important to figure out how interrelated contradictions correlate with the emerging problems and difficulties. usually, there are problems or the result of errors of the administrative apparatus during the implementation of the objective laws of social development, or because some questions were not timely, the decision (concealed, concealment). however, the presence of problems can be a sign, at the same time, the actions of the internal contradictions that were not timely, and led to negative trends in the development of certain industries or the national economy as a whole. in this case, a problem is an indication that the controversy is "ripe" and must be addressed. that is, the problems can have both subjective and objective nature. as for difficulties, it is most disappointing situations, in which you have to solve problems or resolve conflicts. for example, the strengthening of the military threat leads to the diversion of significant financial, human and other resources to protect national borders. and it diverts funds, for example, from the technical and technological modernization of agricultural enterprises. however, the difficulties can be a result of the not entirely successful solution of the problems or solutions in general, the result of which may cause a crisis situation (for the purpose of saving budget funds for the maintenance of rural schools was conducted by their union, which led to a loss of some villages). thus, between the contradictions, problems, difficulties, and error patterns emerge. some of the problems and difficulties reflect the effect of the existing internal contradictions that have not been a timely decision. however, they are only one of the forms of development of the contradictions, and cannot fully reflect their essence. concerning mistakes, they are predominantly subjective and complicate the process of identifying and resolving contradictions. the position of the scholars about the subjective nature of the contradictions can also be related to the fact that the opposite sides of the contradiction manifests itself in the contrast of indigenous objective interests of the social groups concerned, and then translated in their purposeful actions. however, it does not take into account the fact that economic interests and economic needs, economic incentives exist for people as an objective reality and determine their actions. but, like all economic processes, they manifest themselves through the minds of people. according to this individual, the subject of management through its practical activities do not generate controversy, but only reinforce or weaken the negative direction until the contradiction is resolved. "the subjective factor can only modify the manifestation of the essence of the law of unity and struggle of opposites, however, cannot change the objective essence" (sukhanov, 1976). for example, considered the contradiction between production and consumption, a form of manifestation which is, for example, the crisis of underproduction. under the influence of scientific and technical progress and the growth of technological capabilities, the crisis of underproduction can be overcome, and the contradiction resolved. as you can see, the subjective factor (the development of technological capabilities influenced the development of science and technology) within a certain period of time weakens the negative side of the contradiction, yet a contradiction, which manifested itself in the form of a crisis of underproduction, was solved through the transition to another form, such as the crisis of overproduction. it follows from this that contradiction is an internal source of development, and the causes, changes and development of the contradictions inherent in it. these causes can be determined by considering the stage of development of the contradiction (sukhanov, 1976). the causes of the economic and social contradictions the initial stage in the development of the contradiction is the stage of the formation of contradictions. aspect ratio at this stage is characterized by insignificant difference, mismatch and indigenous identity opposite sides. this insignificant difference may be due to the nature of the opposites, and to be transient, external or random factors. as the contradiction at this stage contains a contrast, it is expressed as the ratio between external opposites. indigenous identity and unimportant difference cause the unity and struggle of positive opposites, which mutually stimulate each other. the positive unity of opposites leads to the lack of clear boundaries that divide the opposites, and the difference is only in the concrete form of unity. in its outward manifestation the opposites are not assigned to certain phenomena, and easily pass into one another, but they differ from internal opposites, not the same with them. because the inner opposites reflect the nature, and the external phenomenon; the internal opposites are in one phenomenon, and different phenomena. aspect ratio at this stage stimulates the contrary to the joint fight, which can be a struggle of positive and negative opposites. however, such a fight combined with external factors leads to the fact that each the opposite of the baltic journal of economic studies 89 vol. 2, no. 5, 2016 growth differences become more defined and isolated. transformation of identity in difference, the compliance mismatch leads to a change in aspect ratio. the difference, the discrepancy becomes more significant, then polar, and identity is irrelevant. as a result, the development is entering a stage of exacerbation. in the acute stage there is a further transformation of identity in difference, the growing differences of quantitative changes that lead to the buildup of qualitative change, qualitative discrepancies. the number of differences increases, there are new differences. these incremental differences are caused by changes in each contrary, movement of the inconsistencies in their interaction and struggle of opposites. quantitative and qualitative changes in identity lead to changes in it, with the result that the difference between the opposing sides has only increased. it is possible to trace the evolution of the productive forces and private ownership at different stages of the development of capitalism. in the acute stage of contradiction, the unity and struggle of opposites, positive and unity and struggle of opposites, the negative turns into such a unity and struggle of opposites, where one of them is a positive contrast in relation to the current, and the second becomes negative in the opposite, denying existing. since the exacerbation of the contradictions is accompanied by the increase of differences and inconsistencies, there is a separation of opposites that is their polarization. the inner unity of opposites becomes the external unity of opposites, an internal conflict becomes external. the emergence of negative opposites on the outer-level contradictions leads to the emergence and strengthening of the struggle of opposites. depending on them side opposites (positive or negative) will have an advantage, this will lead to either exacerbation of the disease or weakening of the trend. usually, the resolution of the contradiction occurs when negative opposite is dominant. the acute phase is not mandatory for all differences. it occurs only in those contradictions, which develop gradually, because without the presence of the negative counterpart and its dominance over the positive they can't be resolved (because a negative opposite occurs and is formed only in the process of aggravation of contradictions) (sukhanov, 1976). thus, with the transition from the phase of the formation of the contradictions into a phase of exacerbation there is a transition of the internal contradictions in the outdoor. essence is divided into polar separated relative to each other opposites. in addition, if the phase of the formation of contradictions dominated by self-assertion and mutual approval of the opposites, the acute phase is dominated by their selfdenial and mutual rejection (sukhanov, 1976). in the phase of resolution of conflicts there is the transformation of external contradictions in a qualitatively new internal inconsistency that is a process of "convergence" (the formation of a new unity) of opposites through their struggle, which is resulted in the one opposite transforming into something else. thus, there are two forms of motion of the contradictions at the stage of decision – time and gradual "fusion" of opposites. if there is a "merge" of separate, polar opposites, it looks like a single act, and if the convergence of opposites takes place in the trend, then there is a gradual "merger" of opposites. in addition, with the gradual solution of the contradictions it can be identified in each stage of their partial stages of dispute resolution. from the latter it follows that in the development and resolution of conflicts, especially social, a significant role is played by the subjective factor, which actions can both accelerate and hinder the development and resolution of contradictions. however, the fact that resolution of conflicts by reproducing on the basis of its other contradictions does not mean the subjective nature of its occurrence. after the appearance, formation, escalation and resolution of contradictions there is a consistent change of its occurrence, negation and negation of negation, which form a cycle in the movement of contradictions. the final phase of the development cycle of contradiction is the initial phase of the next cycle of development of the contradictions. as it is mentioned above, depending on the value in the development of the contradictions of objective and subjective factors, the reasons of contradictions of the agricultural sector can be divided into two groups: 1) objective (generated by the struggle of opposites), leading to resolution of differences between the previous system and the emergence of new contradictions inherent in the future system; 2) objective-subjective, which through the dominance of the subjective factor at the stage of conflict resolution lead to the preservation of the contradictions of the previous system, increase their negative aspects and the problems and difficulties in their solution. the imperatives of development of agrarian sector of economy since contradictions are the driving force of development, and the development gives rise to new contradictions, it is important to find out what affects the development of the agricultural sector, the logic of activity of subjects of agrarian relations. one of the components of the description of actions of subjects of agrarian relations is the imperative. the imperative is a statement that describes the schema of human behaviour; using the imperative subject that proclaims, trying to impose a certain action to another entity. an important component of the imperative is the appeal to norms and possible consequences of the performance (reward) or failure (punishment), a particular action (arutyunov, 2005). that is, the imperatives define the conditions and directions of development of the agricultural sector that give rise to such development of contradictions. baltic journal of economic studies 90 vol. 2, no. 5, 2016 you can select these groups of imperatives: 1) social (social status of people  – free or dependent, working conditions, living conditions of people). for example, the feudal mode of production, which was based on the dependence of peasants from the landowner, for their non-economic coercion to work, causes low productivity of the serfs and the development of agricultural production on an extensive basis; 2) economic (action of economic laws; laws of development of agrarian relations  – the concentration, the specialization of production; the availability of land, water resources, climatic conditions, topography, manpower, education and training of employees; development of related agricultural industries; level of economic development of the country, dominant technological mode of production, form of ownership, nature of land use and the like). for example, in economically developed countries farming is dominated, which is conducted on advanced technical database, and the developed countries dominate by crop and extensive livestock production that takes an advantage of pastures and little connected with other branches of agriculture. in tropical africa and the island territories of oceania is dominated by prefeudal ways, communal land tenure, and in south-east asia  – landlord economy sheikhs in south america  – plantain economy (the large estates, the latifundia); 3) technology (level of technical equipment, level of chemicals, introduction of achievements of agricultural science in production, and the like). for example, the use of multifunctional machinery and agricultural production with genetically modified organisms in developed countries, and the use of morally and physically worn-out equipment and actually manufacture environmentally friendly products in ukraine, but in a much smaller quantity; 4) information (dissemination of information about new technologies for agriculture, processing of agricultural products, agricultural production, etc., that allows countries who are developing these technologies and countries that have the means to get "information" about these technologies to increase production of agricultural products); 5) international (participation in the international division of labour, international trade, etc., which leads to the specialization of countries in the cultivation of one or more types of agricultural products). for example, the netherlands  – meat-dairy products brazil  – coffee, china – rice, ukraine – grain etc.; 6) historical (the historical destiny of self – government, colony or island country, geographical location, etc.). for example, japan, russia sells fish and fish production, and asian states are engaged in agriculture; 7) political (agrarian policy of the government in relation to the vision of the place and role of the agricultural sector in the national economy). for example, collectivization in the soviet union or the policy of supporting prices and farmers' incomes in the eu; 8) national (the spirit of the nation, its patriotism, mindset and the like). for example, the spread of kubsu in china and family (individual) farms in western europe; 9) cultural (lifestyle, traditions of farming, level of tilled soil, etc.). in the historical past in russia a communal land ownership dominated, and in ukraine – household; high levels of tilled soil in asia, north america, ukraine; 10) religious (the spread of a particular religion). islam forbids eating pork and hindus to kill cows. the development of contradictions is inextricably linked with the development of economic systems and elements of their structure because all the elements of the economic system and its structure represent opposites, at odds with themselves and their others. in the development of economic systems, as in the development of contradictions, is the place the stages of their development. there are two general stages in the development of economic systems, due to the cyclical nature, the rising stage of development (from inception to the peak of development) and the stage of development of descending (from its peak to its collapse). the rising phase of the life cycle of the economic system includes the stage of emergence, the stage of formation and operation phase. the downward phase is determined by the stages of destruction of the whole economic system, the disintegration and disappearance. throughout the history of mankind constantly undergoing transitions from one economic system to another, when one system is at the formative stage, another is at the stage of collapse. such transitions occur on the basis of the transformation processes that change the internal state of the system. transformation processes can occur both evolutionary (accumulating changes that occur in transformation processes) and revolutionary (under the influence of the subjective factor) through reforms, which are a process of adjusting individual elements of the system without changing its foundations. these stages of development of economic systems are in close connection with the stages, phases of development of a conflict, as the emergence of an economic system means the solution of certain existing contradictions, the existing gap of the unity of opposites through their struggle, and the emergence of new contradictions, the transition to a new unity of opposites, and consequently to a new higher level, on a more perfect basis. system that occurs at the first stage of its development has a considerable potential of its accelerated development, the implementation of which depends on several points. first, the speed of solving the contradictions of the previous economic system. the sooner they are resolved, the faster will be the baltic journal of economic studies 91 vol. 2, no. 5, 2016 development of a new economic system and qualitative changes in it ("shock therapy " in poland). secondly, the contradictions that arise together with the new economic system are the source of its development. thirdly, the intensity of development of the economic system external factors (other systems), whose influence can be both positive and negative (for example, liberalization of prices and trade for the development of the agricultural sector and the economy as a whole). in addition, the intensity of development of the economic system on the upward stage of its development is expressed in the accumulation of quantitative changes lead to qualitative changes. however, qualitative changes keep quantitative changes, resulting in the development of the economic system going into a downward phase. on the descending stage stand external against each other opposites that have a common basis. the aggravation of contradictions between the existing quality and quantitative changes leads to a slow process of development of economic system, qualitative changes occurring on the basis of another system. the result is a transition to the new system (sukhanov, 1976). thus, during the whole period of existence of the economic system during the movement of its contradictions, there are changes in all its subsystems, components and elements. each of these components of the system is self-contradictory, which leads to quantitative and qualitative changes in the system components and their structures. these changes lead to the emergence of new elements and new elements (for example, instead of collective and state farms having economic companies, rental companies, etc.) who exercise influence on their connections and relationships, i.e. there are new relationships between elements (there are intermediary structures, now on a contractual basis, there is the supply of resources, equipment from the raw agro-industries, etc.). changes in the connections between the elements affect the elements themselves. however, depending on what it changes and what is their nature, the impact can be both negative and positive. therefore, the development of the contradictions of the system is the source of development of the system itself and all its structural elements. 5. conclusions and prospects for further research despite the fact that the unconscious activity of the subject is impossible to identify and to resolve the contradiction, we must not forget that all social and economic contradictions objectively inherent in the phenomena and processes. that is, the contradictions are objective. errors in the actions of subjects do not produce new contradictions, and only reinforce the negative side of the contradiction, hindering its solution. this is because each contradiction has its own objective and reasonable solution through the reproduction of a new quality with its inherent contradictions of development. the subjective factor can only promote or inhibit the resolution of conflicts, lead to a partial resolution of the contradiction. the reasons of contradictions in the agricultural sector can be divided into two groups depending on the values in the process of development of objective and subjective factors: objective (generated by the struggle of opposites) that lead to the resolution of the contradictions of the previous one and to the emergence of new contradictions, which are characteristic of the future system; objectivesubjective, which through the dominance of the subjective factor at the stage of conflict resolution lead to the preservation of the contradictions of the previous system, increase their negative side and the problems and difficulties in resolving existing disputes. one of the components of the description of actions of subjects of agrarian relations is the imperatives that define the conditions and directions of development of the agricultural sector, and generate contradictions for such development. you can select these groups of imperatives: social, economic, information, technological, religious, cultural, political, national, historical, international. further research in this direction will address to clarify the contradictions in different types of economic systems. references arroyo, zh. (1984). economic contradictions under socialism. essence, manifestation, resolution  – moscow, polytyzdat, 223 p. arutуunov, v. kh., mishyn, v. m., svintsitskyi, v. m. (2005). the methodology of the socio-economic knowledge – kiev, kneu, 353 p. dudel, s. p., shtraks, h. m. (1967). the law of unity and struggle of opposites – moscow, “visshaia shkola”, 248 p. sabluk, p. t. (2011). organizational and economic modernization of the agricultural sector: scientific report  – kiev, nnts iae, 342 p. semenov, v. s. (1987). the dialectics of socialism – moscow, “misl”, 429 p, [1] p. sukhanov, v. y. (1976). іtem contradiction, its structure and mechanism of action – saratov, yzd-vo saratovskogo unyversyteta, 167 p. baltic journal of economic studies 92 vol. 2, no. 5, 2016 ольга шульга причины и природа экономических и социальных противоречий аграрного сектора в трансформационных экономиках аннотация. на сегодня состояние развития аграрного сектора в большинстве трансформационных экономиках является неутешительным, и обусловлено нерешенными социальными и экономическими противоречиями в его развитии, которые в условиях трансформационных преобразований лишь обострились. поэтому, чтобы разработать эффективную аграрную политику по решению существующих в аграрном секторе противоречий, необходимо выяснить их природу и причины возникновения и развития. именно это позволит разрешить нынешние противоречия и спрогнозировать закономерный ход развития аграрных отношений на перспективу. предмет исследования  – природа и причины экономических и социальных противоречий аграрного сектора в трансформационных экономиках. для выяснения этих вопросов были применены такие методы, как диалектический, системно-структурный, анализа и синтеза, единства логического и исторического подходов, индукции и дедукции и другие. цель исследования – выяснить природу экономических и социальных противоречий аграрного сектора, их причины возникновения и развития в трансформационных экономиках. на основе этих методов удалось установить, что противоречие является внутренним источником развития, и причины возникновения, изменения и развития противоречия заложены в нем самом. то есть противоречие является процессом, который меняется, развивается сам по себе, в меру своей внутренней активности и через взаимодействие с борьбой противоположностей. в соответствии с этим, экономические и социальные противоречия в развитии аграрного сектора имеют объективную природу. ошибки же в действиях субъектов аграрных отношений не порождают новых противоречий, а лишь усиливают негативную сторону противоречия, тормозящие ее решение. это обусловлено тем, что каждое противоречие имеет свой объективный ход развития и закономерное решение через воспроизведения нового качества с присущими ей противоречиями развития. субъективный фактор может лишь способствовать или тормозить разрешения противоречия, вести к частичному разрешению противоречия. ошибки имеют преимущественно субъективный характер, и усложняют процесс выявления и разрешения противоречий. причины противоречий в аграрном секторе можно разделить на две группы: объективные (порождены борьбой противоположностей), что ведут к разрешению противоречий предыдущей системы и к появлению новых противоречий, которые свойственны будущей системе; объективно-субъективные, которые через доминирование субъективного фактора на стадии разрешения противоречий, приводят к сохранению части противоречий предыдущей системы, нарастание их негативной стороны, и появления проблем и трудностей в решении существующих противоречий. развитие аграрного сектора определяют императивы (условия и направления развития действий субъектов аграрных отношений), которые можно разделить на следующие группы: социальные, экономические, национальные, исторические, технологические, информационные, культурные, международные, религиозные, политические. развитие противоречий неразрывно связано с развитием экономических систем и элементов их структуры. ведь все элементы экономической системы и ее структуры представляют собой противоположности, находясь в противоречии с собой и со своим другим. в развитии экономических систем, как и в развитии противоречий, имеет место стадийность их развития. можно выделить две общие стадии в развитии экономических систем, обусловленных цикличностью,  – стадию восходящего развития (от возникновения до пика развития) и стадию нисходящего развития (от пика развития до ее распада). восходящая стадия жизненного цикла экономической системы включает стадию возникновения, стадию формирования и стадию функционирования. нисходящая стадия определяется стадиями разрушения целостной экономической системы, распада и исчезновения. эти стадии развития экономических систем находятся в тесной связи со стадиями, фазами развития противоречия. переходы от одного состояния экономической системы к другому происходят на основе трансформационных процессов, которые изменяют внутреннее состояние системы. трансформационные процессы могут происходить как эволюционно (накапливая изменения, которые проявляются в трансформационных процессах), так и революционно (под влиянием субъективного фактора) через проведение реформ, которые являются процессом корректировки отдельных элементов системы без изменения ее основ. baltic journal of economic studies 12 vol. 3, no. 2, 2017 budgetary safety passport as a tool for improving an analytical component of ensuring country’s budgetary safety oksana bolduieva1, olena bogma2 zaporizhzhia national university, ukraine abstract. the purpose of the paper is to explore the feasibility of using the budgetary safety passport as a tool for improving the analytical component of ensuring country’s budgetary safety and fiscal planning. methodology. in the research, there are used general scientific methods of learning economic facts and the use of processes in their steady development and correlation: logic analysis, methods of scientific abstraction, induction, deduction, optimization, grouping, economic modelling, comparison, as well as tabular methods. results. the work identifies the budgetary safety passport as a document that contains information on the quality of budget process and an integrated assessment of the country’s budget potential with regard to internal and external threats. the passport is presented as structured into 15 sections, which are combined into five groups according to their contents: revenue potential of the state budget; core indicators of the state budget; monitoring the state budget performance; forecasting revenue from national taxes and duties; monitoring threats to budgetary safety of the country, and assessing the efficiency of threat prevention and neutralization programs. practical implications. the article presents a systematization of the main results aimed at the practical application of the suggested budget safety passport. value/originality. it is concluded that budget safety passport is an illustrative, systemic and fundamentally new tool for comprehensive evaluation of the state and prospects of the country’s budgetary system, which allows us to raise the responsibility of government and administrative bodies for the budgetary safety of ukraine and efficiency of budget performance, improve the quality and accessibility of public information. key words: budgetary safety, budget process, budgetary safety passport, threat, budget system. jel сlassіfіcatіon: h61, h69 corresponding author: 1 department of finance, banking and insurance, zaporizhzhia national university. e-mail: vlada.ox@ukr.net 2 department of finance, banking and insurance, zaporizhzhia national university. e-mail: bogma_e_s@ukr.net 1. introduction ensuring budgetary safety is one of the basic priorities for any country as a sufficient level of budgetary safety guarantees an implementation of the national interests in fiscal system in particular and financial system as a whole, provides the government with the possibility to fully accomplish its functions using budget funds and address important socio-economic, political, environmental and other issues, raises the efficiency of the national income allocation and enhances the influence of state institutions on expanded reproduction processes. thus, budgetary safety, ensured by the appropriate budget system and process, is essential for the country’s macroeconomic stability and sustaining rates of economic growth. accordingly, under current circumstances, it is increasingly important to take adequate actions to strengthen countries’ budgetary safety on the basis of stabilizing the budget system and improving budget process, including the development of proper means and tools of information analysis. 1.1 brief literature review theoretical fundamentals of ensuring country’s budgetary safety were laid by outstanding international scholars including, j. buchanan (1967), j. golden and l. olvey (1984), l. codogno (2007), and others. theoretical, methodological, and applied principles of ensuring budgetary safety on the macro level are explored in the works of our national scholars including, o. baranovsky (2004), o. vlasiuk (2008), v. heiiets (2006), v. yermoshenko (2001), v. muntiiani (2006). 1.2 unsettled components of the general problem while giving credit to scholars for their significant scientific achievements, it should be noted that comprehensive solutions have not been offered for many problems arising in the framework of analytical support for the process of ensuring the budgetary safety of the country. in particular, much in-depth research is required to develop practical tools for budgetary safety ensuring which are based on a quantitative and qualitative assessment of the country’s budgetary baltic journal of economic studies 13 vol. 3, no. 2, 2017 potential taking into account existing threats to its budgetary safety. 1.3 the purpose of this article is to prove the feasibility of using budgetary safety passport as a tool to improve and enhance the analytical component of ensuring budgetary safety in the country; systemize the main sections of arranging information in the passport, and consider their contents; define expected result of using the suggested budgetary safety passport in practice. 2. the essence of the passport of the budgetary safety of the country in order to improve the analytical component of ensuring budgetary safety in ukraine and enhance budget planning, we suggest using a budgetary safety passport of the country in the work of state bodies responsible for the national (including economic and financial) security. the passport is based on the macroeconomic approach to identifying budget potential of the country, which takes into account current threats to budgetary safety. the passport itself should be seen as the primary aggregate summarizing document on the work of state bodies ensuring the country’s budgetary safety, which provides a comprehensive description of the budget potential with an account of internal and external threats. budgetary safety passport is a document that, along with the overall macroeconomic information that reflects the state of socio-economic development, provides information on the quality of the budget process. the set of indices in every section of the passport is analysed and displayed in the passport dynamically, which provides an opportunity to identify the trends in influence and weight of separate factors that affect the country’s budgetary safety. consequently, it allows for high reliability in detecting emerging risks and threats to budgetary safety as well as enhanced quality and effectiveness of budget planning, higher validity in developing a system of measures on threat prevention and response. structurally, the passport sections are arranged into five groups according to their contents: income potential of the state budget of the country (pp. 1, 12); basic indices of the state budget of the country (pp. 2, 4, 6, 8); monitoring the implementation of the state budget of the country (pp. 3, 5, 7, 9, 10, 11); forecasting revenues from national taxes and duties (p. 13); monitoring threats to budgetary safety and assessing the effectiveness of implementing various programs aimed at their prevention and neutralization (pp. 14–15). 3. basic maintenance of sections of passport of the budgetary safety of ukraine the analysis of the budgetary safety passport indices enables us to establish the weight of impact that certain factors have on budgetary characteristics of the country. let us have a closer look at the sections of budgetary safety passport of ukraine. we suggest grouping the passport data in the following sections: 1. main indicators of the country’s socio-economic development. 2. revenues of the state budget. 3. monitoring of the state budget administration. 4. incoming taxes, duties, and payments to the state budget disaggregated by administrative units of the country. 5. financing of the state budget. 6. monitoring of the financing of the state budget. 7. allocation of the state budget expenditures. 8. monitoring of the expenditures of the state budget. 9. repayment of loans to the state budget and distribution of loans from the state budget. 10. monitoring of the loan repayment to the state budget and distribution of loans from the state budget. 11. arrears on taxes, duties, and payments to the state budget disaggregated by the major economic activities. 12. indices of tax burden by economic activities. 13. forecasting revenues from national taxes and duties. 14. aggregated data on checking whether the bodies of state financial control keep within budget income and expenditures. 15. monitoring of threats to budgetary safety and assessing the effectiveness of implementing the programs for their prevention and response to them. in the first section of the budgetary safety passport  – main indicators of the country’s socioeconomic development  – there are indicators that reflect the geography and the level of productive forces development in the country. these are, first and foremost, the gross domestic product, the level of secondary segment development, the volume of sales by economic activities and foreign trade turnover of the country. in addition to the aforementioned indicators, the section will also show respective indices such as the physical volume of the gdp, industrial production, sales (of goods and services) by economic activities, the consumer price index etc. considering the fact that labour market indices are the primary tool in devising both social policy in general and policy on personal income, this section should also include the data on the economically active population, the number of economically employed and unemployed, the volume of people’s real monetary income and employees’ payroll budget. the first section also contains indicators of investment in fixed assets, consolidated financial results of enterprises performance, profits for the companies that received it, which allows us to relate these indicators with the amounts received from taxes on income and profits. moreover, this section provides information baltic journal of economic studies 14 vol. 3, no. 2, 2017 on the number of legal entities and individual entrepreneurs, which is available on the united state register of legal entities, individual entrepreneurs and public organizations of ukraine. the second section of the budgetary safety passport – revenues of the state budget – provides budget figures on income items envisaged by the law on the state budget of ukraine for the fiscal year. for example, such income in ukraine includes: official transfers, tax revenues, nontax revenues, income from capital transactions. note that grouping items of income must be conducted in accordance with the revenue codes. therewith, the third section of the budgetary safety passport provides for the monitoring of the state budget revenue administration in the country in the context of law articles. therefore, the second and the third sections of the passport are among the most important ones as they not only provide the opportunity to assess the process of replenishing the ukrainian budget revenue base in individual quarters on a cumulative total from the beginning of the year but also help to follow the impact of certain economic factors and changes in the current legal framework of ukraine related to the procedures of budget performance, the scope, and structure of its revenues. in its turn, the fourth section of the passport  – incoming taxes, duties, and payments to the state budget disaggregated by administrative units of the country – reflects the contribution of individual regions of ukraine in the performance of the revenue of the state budget. the information in this section provides for the timely exposure of problems in the economic development of the administrative units of the country in terms of their ability to replenish the state budget. the fifth section – financing the state budget – contains information on the quarterly budget performance under all items of funding to cover the budget deficit, including the repayment of internal and external debts of the state, envisaged by the law on the state budget of the budget of ukraine for the current year. the sixth section of the passport is devoted to the monitoring of the financing of the state budget. the budget deficit is an important economic category derived from the state budget, which reflects the situation when revenues do not cover all expenditures of the budget as a result of increased level of marginal costs of production in society, leading to a negative budget balance. there may be different reasons for this, including inefficient production, high level of shadow economy, inadequate (in terms of economic situation) increase in budget expenditures, inflation processes, cash flow and cash payments problems, inefficient investment, taxation or loan policy of the state, political factors, downturn in certain industries in the country etc. (mashko, 2012). the reason why we assign a separate section to budget deficit is due to the fact that the deficit serves as an indicator of imbalances in the economic system, poor efficiency of tax policy, deteriorating financial and operational performance of businesses and other evidence showing the need to take appropriate stabilization actions on the national level, including introduction of institutional changes in the budget sphere. the seventh section of the budgetary safety passport – allocation of the state budget expenditures – provides quarterly information in terms of expenditure items on the state budget of ukraine. the need for such information to be presented is due to the fact that the state budget, based on the formation of a centralized monetary fund of the state and its subsequent use, reflects social and economic processes in the country. the composition and structure of the state budget expenditures characterize the purpose of the state budget according to the allocation of the gross domestic product and the national income. the results of monitoring the expenditures of the state budget in order to see whether they are performed on time and in full are presented in the eighth section of the budgetary safety passport, which is directly related to the budget’s efficiency level and potential to perform its functions. the section provides an opportunity to identify main threats to the budgetary safety of the country in terms of fulfilling its financial obligations to society. the ninth section of the budgetary safety passport (repayment of loans to the state budget and distribution of loans from the state budget) along with the tenth one (monitoring the loan repayment to the state budget and distribution of loans from the state budget) contain information on the planned and actual situation concerning conducting operations to provide funds from the state budget on conditions of intended use, repayment, interest payment, and fixed term, which imply obligations to the state budget (providing loans from the state budget) and operations to repay such funds to the state budget (repaying loans to the state budget), as well as information on budgetary lending and financial assistance from the state budget on condition of repayment. analysis of the abovementioned data allows us to detect in advance possible threats in terms of financial discipline and solvency of budget fund borrowers. it also provides an opportunity to finance through loans important programs of social and economic development, as well as timeliness and proper volume of cash flow. the eleventh section characterizes the situation with debts to the state budget of ukraine on the part of taxes, duties, other mandatory payments in relation to economic activities. this section shows the structure of the debt: the amount of arrears, deferred or extended payments, restructured debt, suspended payments, fines, and penalties. thus, the section contains full information about the total tax payable. baltic journal of economic studies 15 vol. 3, no. 2, 2017 the twelfth section  – indices of the tax burden by economic activities  – contains data on tax burden on businesses, income from every type of taxes and charges to the budget of ukraine as well as social security tax for obligatory state social insurance. we find it expedient to include in the calculation of the tax burden not only the taxes and charges paid by the business itself but also those withheld by employers from employees’ wages because these payments represent a form of the implicit tax burden on the corresponding tax subject. when hired, a person agrees to receive a certain level of remuneration for his work, which is a net amount after all subtractions. therefore, employees should include into the payroll the full sum of future deductions provided for by the current legislation of ukraine. we believe this approach could provide more adequate information on tax burden on ukrainian business entities. a special attention in the process of drafting the budgetary safety passport should be given to an informed and representative representation of data in the thirteenth section  – forecasting revenues from national taxes and duties  – which requires using techniques of integrated forecasting of tax revenues to the budget system of the country. in our view, the process of forecasting revenues from taxes and charges should include three main blocks of analysis: forecasting changes to the institutional environment of the national economy functioning, forecasting macroeconomic parameters of ukrainian national economy, forecasting revenues from taxes and charges to the budget of ukraine. it should be noted that every stage of the process of forecasting revenues from taxes and charges to the budget of ukraine allows for its implementation under several scenarios. the fourteenth section  – aggregated data on checking whether the bodies of state financial control keep within budget income and expenditures  – implies grouping data on the amount of payments, which were additionally received/returned to the budget as a results of audits done by the bodies of state financial control, the number of on-site inspections, results of inspections of budgetary discipline in the context of targeting and efficiency of spending budget money, and other data, which make it possible to assess the effectiveness and performance of the state financial control bodies in ukraine. a comparative analysis of the results of control over the state budget performance during the reporting period against the figures received during the corresponding period of previous years makes it possible not only to analyse the efficiency of state control bodies performance but also to detect threats to the budgetary safety of the country (their scope and dynamics of development), which have internal origin and are generated by the presence of shadow economy and violations of the laws of ukraine. section 15  – monitoring threats to budgetary safety and assessing the effectiveness of implementing the programs for their prevention and response to them  – is the resulting part of the budgetary safety passport. this basic section includes comprehensive information required for monitoring the scope of threats (both present and potential) to the budgetary safety of ukraine, ensuring their early detection with subsequent outlining and implementing a set of relevant measures to prevent and react to them. the section also includes summary data as to assessing the efficiency of implementing relevant government target programs. full coverage of the above specified information load is achieved through its classification and representation in several analytical units, such as: name of the threat; identification number of the threat; the year of threat detection; the level of the threat (probability of its actualization) as of the date of its detection; availability of a target threat response program (program name, no, date of adoption) (in case the threat is not provided with a relevant program of prevention and response to threats to budgetary safety of ukraine, it must be noted whether there are any steps taken to draft the program and specify the stage of the process); implementation level of the program is supposed to achieve according to its implementation schedule; the actual implementation level of the program as of reporting date; actual expenses incurred by program implementation; planned result to be achieved by the reporting date according to the schedule of the program implementation (threat level); the level of the threat (probability of its actualization) as of the reporting date; decisions made by the competent authority as to further implementation of the program. 4. possibilities of the offered format of passport of the budgetary safety of ukraine we believe that the suggested format of the budgetary safety passport of ukraine provides a great assistance in conducting comparative analysis of estimated factors dynamics in the context of different time intervals and defining on this basis statistical trends, assessing budget potential, and possible threats to budgetary safety of the country in terms of individual components of budgetary process and budget item structure. to ensure the timely submission and updating, comprehensiveness, and high quality of analytical information to be provided, we offer to present the budgetary safety passport in an automated way within a relevant analytical complex with mandatory timely quarterly placing on the official website of the relevant authorized government body. it is essential for the budgetary safety passport analytical complex to provide possibilities of forecasting and simulation for all elements of the state budget both in the current socioeconomic situation in the country and with an account of potential changes. baltic journal of economic studies 16 vol. 3, no. 2, 2017 feasibility of using the country’s budget safety passport as a tool to enhance the analytical component of the process of ensuring budgetary safety is confirmed by the fact that under the current circumstances many developed european economies recognize the increasing importance of effective control and surveillance mechanisms (codogno, nucci, 2008), such as the suggested passport. it is for a good reason that research by international monetary fund highlights the fact that today governments should, as a part of their fiscal strategy, consider the adequacy of the structures, rules, and procedures that govern the formulation, passage, and execution of their budgets (gupta, ylaoutinen, 2014). 5. practical use of the budgetary safety passport it is also worth noting that practical application of the budgetary safety passport is consistent with the technocratic approach to understanding politics in the budget process, which at a practical level is aimed at focusing efforts on producing recommendations for a range of procedural measures in fiscal area based on the analysis of a certain data set, which makes budget process more transparent. bringing the suggested budgetary safety passport into practice has the following objectives: – form an integrated system of sharing information between state bodies responsible for implementing the budget process in the country; – form a common database/information framework that allows for a timely detection of threats to the budgetary safety of the country and understanding their risk level; – create opportunities for the fullest possible collection and spreading information (through appropriate information resources) on budget potential, budget process in ukraine, the efficiency of government measures towards preventing threats to the country’s budgetary safety and response to them; – introduce an organizational and economic mechanism of response to the threats to budgetary safety in ukraine based on creating a sensible institutional environment and institutional system aimed primarily at potential threat prevention and response instead of overcoming their consequences; – minimize the number of possible deviations in the process of forecasting and drafting projects of the state budget of the country for the following fiscal year through using authentic information from the participants of the budget process and taking in account the dynamics of changes in detected threats to the budgetary safety of ukraine of both internal and external origin; – provide ongoing monitoring over income and expenditures of the state budget as a basis for a collective drafting and adoption of required measures; – as a result, increase revenues to the state budget and maximize the efficiency of budget expenditures; – ensure maximum transparency and openness in the work of government and administration in terms of budget, full accessibility of relevant information to members of the public; – ensure a wider use of the result oriented method in managing the budget process in particular and the country as a whole. 6. conclusions thus, budgetary safety passport is an illustrative, systemic and fundamentally new tool for comprehensive evaluation of the state and prospects of the country’s budget system, which allows us to raise the responsibility of government and administrative bodies for the budgetary safety of ukraine and efficiency of budget performance, improve the quality and accessibility of public information. budgetary safety passport is primarily aimed at satisfying information needs of state government bodies in terms of ensuring a stable budget system and sustainable economic development of the country. by offering accurate and up-to-date information, the passport enables people to carry out a comprehensive assessment of ukrainian budget framework and use the results of the assessment as a basis for making informed and well-grounded decisions to prevent a downturn in the country’s economy, its budgetary system, reduce social tension, and enhance efficiency and performance of government and public administration bodies. in addition, the suggested passport will be of much interest to members of general public who are the main recipients of public goods, taxpayers, investors (including foreign ones) who will be able to conduct assessment of budgetary and financial potentials of the country while making investment decisions, plan, and forecast income and spending in terms of their own finances and investments, engage in strategic planning and forecasting in general. references: baranovsky, o.i. (2004), finansova bezpeka v ukraini (metodologiya otsinky ta mehanizmy zabezpechenya) [financial security in ukraine (methodology and evaluation mechanisms to ensure)], knteu, kyiv, 759 p. buchanan, j.m. (1967). public finance in democratic process. chapel hill: university of north carolina press, 217 р. codogno, l. & nucci, f. (2008). safety margins in eu budgetary surveillance: an assessment. fiscal policy: current issues and challenges; papers presented at the banca d'italia workshop held in perugia, 29-31 march, 2007, pp. 89-113. baltic journal of economic studies 17 vol. 3, no. 2, 2017 geiets, v.m. chernyak, o.i. (2006), modelyuvannya ekonomichnoyi bezpeky: derzhava, rehion ta pidpryiemstvo [modeling of economic security: state, region and enterprise], inzhek, kyiv, 240 р. gupta, s. & ylaoutinen, s. (2014). budget institutions in low-income countries: lessons from g-20. imf working paper. washington, international monetary fund, 35 р. mashko, a. (2012) deficy`t byudzhetu: sutnist`, pry`chy`ny` vy`ny`knennya ta problemy` upravlinnya [budget deficit: the nature, causes and problem management], sotsial'no-ekonomichni problemy i derzhava, vol. 2 (7), pp. 308-314. muntiian, v.i. (2006) problemy natsionalnoi bezpeky v protsesakh derzhavotvorennia [problems of national safety in the processes of the state develpment]. k. : kvits, 756р. olvey, l.d., golden j.r ., & kelly r .c. (1984). the economics of national security. – new york: avery publishing group, 404 р. vlasyuk, o.s. (2008), teoriya i praktyka bezpeky v systemi nauky pro ekonomiku: naukova dopovid' [theory and practice of safety in the system of the science of economics: scientific report], nipmb pry rnbou, kyiv, 48 р. yermoshenko, m.m. (2001) finansovaya bezopasnost' gosudarstva : natsional'nyye interesy, real'nyye ugrozy, strategiya obespecheniya [the financial safety of the state : national interests, real dangers and the strategy of ensuring]. m. : knteu, 309 р. оксана болдуева, елена богма паспорт бюджетной безопасности как инструмент совершенствования аналитической составляющей обеспечения бюджетной безопасности страны аннотация. целью работы является обоснование целесообразности использования паспорта бюджетной безопасности как инструмента совершенствования аналитической составляющей обеспечения бюджетной безопасности страны и бюджетно-налогового планирования. методология. в работе использованы общенаучные методы познания экономических явлений и процессов в их непрерывном развитии и взаимосвязи: логический анализ, методы научной абстракции, индукции, дедукции, оптимизации, группировки, экономического моделирования, сравнения, синтеза, а также табличный метод. результаты. определена сущность паспорта бюджетной безопасности как документа, содержащего информацию о качестве бюджетного процесса и комплексную характеристику бюджетного потенциала страны с учетом внутренних и внешних угроз. предложено выделять в структуре паспорта 15 разделов, которые по их содержанию объединены в пять групп: доходный потенциал бюджета страны; базовые показатели государственного бюджета страны; мониторинг выполнения государственного бюджета страны; прогнозирования поступления общегосударственных налогов и сборов; мониторинг угроз бюджетной безопасности страны и оценки эффективности реализации программ их предупреждения и нейтрализации. практическое значение. систематизированы основные результаты, достижение которых имеет целью практическое использование предлагаемого паспорта бюджетной безопасности. значение/оригинальность. сделан вывод, что паспорт бюджетной безопасности является наглядным, системным и принципиально новым инструментом комплексной оценки состояния и перспектив развития бюджетной системы страны, что дает возможность увеличить ответственность органов государственной власти и управления за состояние бюджетной безопасности украины, эффективность исполнения бюджета, повысить качество и уровень доступа общественности к публичной информации. baltic journal of economic studies 1 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 lviv institute, interregional academy of personnel management, ukraine e-mail: limaup@iapm.edu.ua orcid: https://orcid.org/0000-0002-7826-8256 2 lviv institute, interregional academy of personnel management, ukraine (corresponding author) e-mail: lg_k@ukr.net orcid: https://orcid.org/0000-0001-5248-544x 3 lviv institute, interregional academy of personnel management, ukraine e-mail: loo86@ukr.net orcid: https://orcid.org/0000-0002-7184-1830 doi: https://doi.org/10.30525/2256-0742/2022-8-4-1-7 the role of the concept of "good governance" in the management of hromadas artem ahekyan1, lyubov kvasnii2, olesya lobyk3 abstract. the article emphasizes that decentralization is aimed at significantly improving the quality of services in territorial communities through the use of new management methods. it is substantiated that the following areas require additional support and initiatives: medicine (secondary and higher levels), education (support for basic educational institutions), economy (creation of industrial parks, scientific and technical laboratories, support for startups), housing and communal services (waste management system). the article substantiates the relevance of the work on the development of united territorial communities, based on the implementation of effective anti-corruption measures and modern principles of good governance in the daily practice of management, as these are the priorities set today for local governments. special attention is paid to the system of "good governance" as the newest form of communication between the public and the authorities. the aspects of improving the governance system are identified. the main management approaches used by successful local governments are described. in order for territorial communities to achieve the results of their activities not only today, but also in the future, modern approaches and practices for the development of dynamic organizations based on trust in government, effective communication, continuous learning and openness to change are proposed. it is proved that in order to bring the system of organization and functioning of public sector institutions closer to business approaches, it is advisable to apply a more business-oriented paradigm of the new public management and the principles of good governance. the essence of "good governance" as the newest form of interaction between public authorities and civil society is revealed. recommendations in the field of management of territorial communities in the light of the concept of good governance are proposed. the aim of the work is to study the role of the newest concept of public administration in the management of territorial communities through a comparative analysis of the postulates related to the process orientation of local government and recommendations for the functioning of public administration in the light of the concept of good governance. the article proposes the use of the good governance cycle and the creation of project offices, which can become the basis for formulating recommendations in the field of process orientation in the functioning of the local government apparatus. key words: management of territorial communities, good governance, process management, decentralization, cycle of good governance. jel classification: m10, o10, r58 1. introduction nowadays, the management of territorial communities declares itself as a new science. practice shows that as a result of historical events, the knowledge accumulated in the system of managerial thought began to be systematized in the form of theories in the late 19th century. in the mid-20th century, society began to face the problem of power relations – the classical model of politics, governance and power increasingly did not satisfy the actively developing society. the results of research and domestic practice show that the following areas require additional support and initiatives: medicine (secondary and higher level), education (support of basic educational baltic journal of economic studies 2 vol. 8 no. 4, 2022 institutions), economy (creation of industrial parks, scientific and technical laboratories, support of startups), housing and communal services (waste management system). thus, the efforts of scientists have launched the era of modern management related to local governance. various theories put forward in the modern period of management development can be classified as approaches to management based on such common positions as starting points, emphases, goals and changes. the widely recognized management approaches are classical management approaches, neoclassical management approaches, modern management approaches and postmodern management approaches. the study examines the adopted process approaches to the management of territorial communities in the period of decentralization, which is called the modern period of management. 2. literature review there are various studies in the economic literature that use new management methods. the problem of applying the process approach to public administration management has been present in the theory, law and practice of management since the first half of the 90s of the last century. the legality of its use in public administration is emphasized by such researchers as: t. r . gulledge and r . a. sommer (2002), t. christensen, p. lægreid (2001), jr. gulledge, r . a. sommer (2002). it should be noted that the issue of the process approach in public administration is extremely utilitarian. this leads to the fact that legislative decisions implemented in many countries force state institutions to apply elements of the process approach. at the same time, it should be borne in mind that the recommendation to use the process approach in management is directly related to the postulates of the new public management, the concept of which is increasingly criticized, pointing to the excessive role of the market approach and the excessive role of the client's point of view, which can lead, firstly, to the inappropriate segmentation of consumers, and secondly, can lead hromada residents to believe that the actions of the authorities are aimed at their maximum satisfaction, and not at the participation of citizens in solving the problems of hromadas (clarke j., 2005). t. bezverhnyuk considers good governance through the possibility of transformation of the entire public sphere, understanding it as a mechanism for ensuring the functioning of society as an integral self-regulating system, a way of exercising public power, thanks to which the following aspects are achieved: compliance of public policy with the needs of social development; real participation of citizens in the development and implementation of public policy; combining the potential of all three sectors (government, business, public); constant control of various segments of society by public authorities, etc. (bezvernyuk, 2008). clarke j. (2005) defines good governance as a method of governance with public participation that is carried out in an accountable and transparent manner, based on the principles of efficiency, legitimacy and consensus, in order to promote the rights of individual citizens and the public interest. it means the political will to ensure the material well-being of society, sustainable development and social justice. christensen t., lægreid p., stiger i. m. (2006) notes that good governance means creating an effective policy framework that facilitates private economic activity through a stable system, the rule of law, effective public administration, coordinated administration with the will of democratically elected governments and a strong independent civil society. on the other hand, rothstein and teorell identify good governance with a way of exercising state power (legislation, policy implementation) in which leaders comply with the law (rothstein, teorell, 2008). b.jessop argues that good governance" is a response to the ineffectiveness of central (state) and market coordination mechanisms and we can perceive them as a theoretical paradigm associated with a self-reflexive, organizational, institutional and constitutional form ( jessop, 2007). dunleavy p., margetts h., bastow s. and tinkler j. (2016) explored governance in the digital age, namely feasibility and benefits electronic government. uddin m., haque c., khan m. (2021) explored local governance and policy implementation to reduce potential risks: real, perceived and contested perspectives in territorial communities. the world experience shows that the dynamic development of the market of goods and services, constant changes in the external environment and increasing competition necessitate the search for new tools and methods of managing territorial communities, taking into account the new information flows that arise between territorial communities and the external environment. therefore, it is important to study the implementation of the concept of "good governance" through the application of a process approach to the management of territorial communities in ukraine. 3. methodology the methodological basis of the study is the methods of comparative analysis to substantiate the postulates related to the process orientation of local government and recommendations for the functioning of public administration in the light of the concept of good governance; system-structural and dialectical methods to substantiate the essence of the transformation processes of the public sphere baltic journal of economic studies 3 vol. 8 no. 4, 2022 and determine the role of the concept of "good governance" in the management of territorial communities; an integrated approach and system analysis to formulate recommendations in the field of process orientation in the functioning of the local self-government apparatus. 4. findings turning former industrial areas into creative spaces is a modern trend of urban revitalization (roberts et al., 2017). the main tasks of the leadership of hromadas are to improve the regulatory and competition policy within the amalgamated hromada, the use of new online services based on open data by local governments, the implementation of programs to support entrepreneurship and local development projects. the state strategy for regional development of ukraine for the period of 2021–2027 (resolution of the cabinet of ministers..., 2020) indicates that certain types of territories require special attention from the state and the use of special mechanisms and tools to stimulate their progress. in addition, the process approach interprets governance as a series of direct interrelated actions. these actions ("management functions"), each of which is a process in itself, largely determine the success of the hromada. therefore, according to the authors, "good governance" is an effective form of human participation in the exercise of public power on the basis of a process approach, through the use of information technologies that ensure the establishment of interaction with the public at all stages of decision-making and the ability to control the activities of public authorities in order to defend the rights of individual citizens and solve public issues. the strategy for regional development of ukraine (minregion, 2020) is dominated by sustainable development goal 11, which provides for ensuring the openness, safety, livability and environmental sustainability of cities and other settlements of ukraine. the authors believe that the strategy of "good governance" will play an important role in this. good governance can be seen as a concept that has been mainstreamed into public administration (lynn, 2006). at the same time, attention should be paid to the possibility of operationalizing this concept, which is often the basis for creating sets of indicators that characterize the quality of governance at the level of states and regions. good governance is defined through the prism of core principles, namely: openness, participation, accountability, efficiency, effectiveness and consistency. a general understanding of the above principles is presented in the table 1. taking into account the above and the defined principles, it is possible to formulate recommendations for local governments in the field of process management in accordance with the principles of independent governance and good governance. table 1 principles of good governance the principle of proper management definition of the principle openness and transparency ensuring public access to information and promoting understanding of the mechanism of local public activities. participation involvement of citizens and stakeholders in the activities of public institutions. this activity can be understood, for example, as the act of involving people in expressing their opinions; giving them the right to influence decisions that affect them and increasing their representation, which is expected to contribute to the efficiency of public service delivery. competence and capacity ensuring proper performance of their duties by local (elected) representatives and officials. approaching the goal the degree of approaching the goal, and in the case of local self-government, the question of correctly setting the goal, that is, one that meets public needs, is additionally important. efficiency ensuring the achievement of objectives with the most optimal use of resources. effective administration is therefore an administration that uses the best possible resources and seeks to optimise the costs incurred. innovation and openness to change ensuring benefits from new solutions and best practices. sustainable development and strategic (long-term) orientation taking into account the interests of future generations. accountability the possibility of holding officials accountable for their decisions, which leads to the existence of a complex system of standards and external control. accountability also means the establishment of criteria for assessing the performance of civil servants, which make it possible to objectively evaluate performance. cohesion internal consistency of the state policy (strategy) with the activities aimed at its implementation. in principle, the implementation of this principle serves to strengthen the strategic capacity of the administration, improve communication both internally and externally, reduce social inequalities and coordinate the policies of local authorities. baltic journal of economic studies 4 vol. 8 no. 4, 2022 "good governance" is a model of public administration that provides for decentralization of power relations, ensures an appropriate level of coordination and cooperation of such elements as state power, municipal power, economic power and people or community. governance has a specific local dimension, because it is in a particular city, town, village that the life of each individual person takes place, their interests are realized, everyday problems are solved (torres, pina, royo, 2005). article 3.1 of the european charter of local self-government states that good governance is essential for all levels of public administration (european charter of local self-government 2017). the authors believe that this is especially important at the local level, as local governments are the level of government that is closest to the people and provides them with basic services. it is at this level that people can feel most involved in public activities. the scheme of the management cycle of territorial communities on the basis of management is presented in figure 1. in order to formulate specific recommendations for local governments, the authors made the following assumptions about the principles of good governance. first, these rules should not be considered contradictory, as they follow a logical sequence where they can be seen as successive feedback phases. the starting point for building the above operational cycle is the principles of cohesion and efficiency. efficiency is the measure of achieving a goal, which depends on the ability to set goals correctly. according to the idea of good governance, proper goal setting is setting goals in accordance with the needs of the local hromada, and the way to achieve effectiveness in this sense is partnership, and the condition of partnership is openness of public administration. information plays an important role. no organization can carry out its activities without information. in the process of normal functioning of the hromada, its management, all its inhabitants, from a simple worker to the director, need different kinds of information. therefore, it is important to correctly formulate the ways of information transfer. the ways of information transfer play an important role (figure 2). the second rule in the presented system, in addition to efficiency, is the principle of effective administration, which means maximizing the achieved effects while minimizing the costs of achieving them. the principle of accountability associated with civilian control scheme of the administrative cycle of the territorial community management cycle management circle decision-making analysis of the situation control organization of implementation of decisions motivation control operational cycle informationorganization setting a goal decision planning figure 1. scheme of the cycle of proper management baltic journal of economic studies 5 vol. 8 no. 4, 2022 determines the assessment of the effectiveness of actions and the provision of information to the local population about the results of activities, the degree of achievement of the set goals, as well as the costs incurred and the responsibility of the administration in this regard. thus, the authors return to the principle of openness of local self-government, closing a certain logically organized cycle of actions. in the proposed model, the principle of consistency complements it and can be considered in two meanings – as the consistency of the activities carried out by the hromada (related to the mutual coordination of actions and their compliance with the defined strategy) and as internal consistency, that is, the consistency of the management system in the local self-government apparatus. daily economic challenges in the state require expertise and prompt decisions not only from the central authorities, but also from the direct creators of decentralisation on the ground: local self government bodies, representatives of the expert and scientific environment, business associations, and the public sector. in this regard, within the framework of the implementation of the program activities, it is proposed to create platforms for dialogue between local and national leaders in the hromadas in order to develop proposals for changes in the state policy in the field of decentralization and effective management of each hromada in accordance with the current challenges. according to the good governance program, an example is the creation of project offices (project management coordination centers) at the economic policy departments of regional state administrations. the main tasks of the project offices should be to improve the regulatory and competition policy of amalgamated hromadas, create and launch new online services based on open data for use by local governments, and implement programs to support entrepreneurship and regional development projects. the proposal for the cycle of good governance and the establishment of project offices can become the basis for formulating recommendations in the field of process orientation in the functioning of the local government apparatus for the effective management of hromadas. in this approach, process management includes both change management in the organizational system and continuous monitoring and control of processes. thus, the management of the processes of functioning of the hromada includes: – organization of design and implementation works; – development of an implementation template, known as the execution process method and associated supporting processes; – creation of conditions for the implementation of executive processes, known as the process implementation system, in accordance with the previously developed methodology; – ensuring the effective implementation of the following specific processes, in accordance with the developed methodology, in the created implementation system. when implementing recommendations on good governance in process management in hromadas, the starting point should be the full identification of the hypothesis is not correct the hypothesis is not correct relevant information observation (collection and analysis of information) formulation of hypotheses and establishment of dependencies checking the correctness of the formulated implementation of decisionmaking hypothesis figure 2. ways of transmitting information baltic journal of economic studies 6 vol. 8 no. 4, 2022 stakeholders within certain pre-defined processes. according to the principles of good governance, in particular the principle of openness and participation, this is a prerequisite for further activities in the field of process management, as these activities require interaction with stakeholders. first of all, it will be: informing specific stakeholders about the planned activities that are carried out within the framework of the processes implemented by the local self-government apparatus, and conducting activities aimed at activating the stakeholders of the hromada in order to obtain their opinion on the planned goals of the processes and ways of their implementation. the condition for participatory process management will be to take into account the opinions of stakeholders and employees when planning goals, implementation methods and process flows. after the description of the implementation model, the next step will be to provide stakeholders, primarily residents of the hromada, with information on the progress of the processes, which corresponds to the prerequisite of the principle of openness. in order to ensure the implementation of the principles of efficiency and effectiveness, it is necessary to implement such measures that can lead to the improvement of the process efficiency parameters. first of all, it will be the creation of a system for measuring efficiency and receiving proposals from stakeholders on the methods of performing tasks and customer service by local governments, as well as accounting by the executors of the processes of the achieved results, which can be reflected, for example, in the bonus system. in addition, systematic evaluation of the implemented processes and reporting on the results achieved to stakeholders will ensure the implementation of the accountability principle. these proposals on the processes to be implemented should be taken into account in order to continuously improve the methods of hromada management. 5. conclusions good governance, being a peculiar pinnacle of the evolution of public administration, has absorbed all the best and most effective of the previous theoretical and practical achievements of democratic reforms in foreign european countries, and the implementation of the principles of good governance will contribute to the effective implementation of the provisions of the european charter of local self-government. leadership as a modern approach to ensuring the growth of the efficiency of hromada management based on the use of modern standards of work allows to respond to the challenges and needs of today. in order to introduce the paradigm of good governance in the management of hromadas, it is advisable for the state authorities of ukraine and its local self-government bodies to provide, from the legal point of view and effective foreign practice of hromada management, regulation and legalization of the process of making managerial decisions, as well as their implementation with the joint participation of representatives of not only the authorities, but also business and the public; implementation of standards and principles of good governance in order to restore those hromadas that have suffered the devastating impact of russian aggression in ukraine and their further development. of course, the implementation of the principles of good governance does not exclude the procedural approach in the activities of administrative institutions. however, it can be concluded that the principles of good governance expand the scope of recommendations for local governments. here it is necessary to emphasize the principles of openness, participation and accountability, which, of course, within the framework of the current legislation, require access to information in the framework of the implemented processes and taking into account the opinion of stakeholders in the planning and management processes. the main difference stems from different assumptions in the trends of new public management, and hence the application of the process approach in local and public administration. in the case of the process approach, the customer remains in the centre of attention, while the application of recommendations related to good governance changes this assumption, indicating that the starting point for process management is the identification and participation of stakeholders (not only residents or customers of the hromada). in the case o f applying the principles of good governance to process management, the method of designing the process model also deserves attention. the process approach in itself does not imply any specific approach, but, if properly managed, involves stakeholders in the project work. this is due to the emphasis on openness and participation, not just on efficiency and effectiveness. it is worth paying attention to certain convergent elements of the process approach and good governance arising from different prerequisites. it is about creating a system for measuring the effectiveness of management processes in hromadas. in the case of process orientation, this serves (in addition to improving the efficiency of reconstruction and development of hromadas) to create a basis for continuous improvement, while in the case of recommendations on good governance, the main prerequisite is the implementation of the principle of accountability. thus, the concept of "good governance" as a new type of governance ensures a change in the nature of power relations, creates accessibility and openness of power, the possibility of its control, reduces the baltic journal of economic studies 7 vol. 8 no. 4, 2022 expenditure of resources and funds from the state budget, establishes effective relations between the government and society, democratizes public power, makes the state attractive for investment, and therefore economically viable. in a broad sense, the implementation of the "good governance" system is a way to modernize ukraine, a new, but maximally adapted to modern requirements form of citizen participation. references: bezverhnyuk, t., sakhanenko, s., & topalova, e. (2008). yevropeiski standarty vriaduvannia na rehional nomu rivni [european governance standards at the regional level]. odesa: oridu nadu. (in ukrainan) christensen, t. (2001). administrative reform: changing leadership roles. governance, 14/4: 457–480. christensen, t., & lægreid, p. (eds.) (2001). new public management: the transformation of ideas and practice, aldershot, ashgate. christensen, t., lægreid, p., & stiger, i. m. (2006). performance management and public sector reform: the norwegian hospital reform. international public management journal, 9(2): 113–139. clarke, j. (2005). performing for the public: doubt, desire and the evaluation of public services. oxford university press, 211–232. dunleavy, p., margetts, h., bastow, s., & tinkler, j. (2006). digital-era governance: it corporations, the state and e-government. oxford university press. europeane charter of local self-government (2017). available at: https://rm.coe.int›european-charter-for local-self gow, j., & dufour, c. (2000). is the new public management a paradigm? does it matter? international review of administrative sciences, 66(4): 573–593. gulledge jr., t. r ., & sommer, r . a. (2002). business process management public sector implications. business process management journal, 8: 364–376. hood, c., & peters, g. (2004). the middle aging of new public management: into the age of paradox? journal of public administration research and theory, 14(3): 267–282. jessop b. promoting good governance, disguising governance failure... available at: https://www.academia.edu/ kuhlmann, s., bogumil, j., & grohs, s. 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(2017). urban regeneration. 2nd ed. sage publications ltd. doi: https://dx.doi.org/10.4135/9781473921788 rothstein, b., & teorell, j. (2008). what is quality of government? a theory of impartial government institutions. available at: https://www.researchgate.net sustainable development goal 11, which provides for the provision of openness, security, livelihoods, and ecological stability of cities and other populated areas of ukraine. we believe that the strategy of "good governance" will play an important role in this. torres, l., pina, v., & royo, s. (2005). e-government and the transformation of public administrations in eu countries: beyond npm or just a second wave? online information review, 29(5): 531–553. uddin, m., haque, c., & khan, m. (2021). good governance and local level policy implementation for disaster risk-reduction: actual, perceptual and contested perspectives in coastal communities in bangladesh. disaster prevention and management, vol. 30, no. 2, pp. 94–111. doi: https://doi.org/10.1108/dpm-03-2020-0069 verhoest, k. (2005). effects of autonomy, performance, contracting and competition on the performance of a public agency: a case study. policy studies journal, 33:2: 235–258. received on: 25th of september, 2022 accepted on: 21th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 228 vol. 8 no. 3, 2022 1 national university "odesa law academy ", ukraine (corresponding author) e-mail: yakovlevalilia2016@gmail.com orcid: https://orcid.org/0000-0002-0942-485x 2 admiral makarov national university of shipbuilding, ukraine e-mail: dubinskiy_oleg@ukr.net 3 main department of the national police in kirovohrad region, investigation department, ukraine e-mail: kyv1994@ukr.net doi: https://doi.org/10.30525/2256-0742/2022-8-3-228-234 legitimacy on the frontline. public policy in ukraine bet ween public good and private interests liliya yakovleva1, oleg dubinskiy2, yaroslav kotenko3 abstract. the purpose of the article is to determine the legitimacy of public authorities under martial law in ukraine. the oscillation of public policy in ukraine between the private interests of representatives of oligarchic groups and the public good is noted. the need to direct public policy toward the realization of the public good was noted. methodology. the study is based on the provisions of the theory of public choice concerning the two levels of interaction in the process of political exchange – constitutional and institutional. the dependence of the legitimacy of public power on constitutional conditions (which are a reflection of the social contract) and institutional interaction, designed to reduce the transaction costs of society, is defined. rational choice institutionalism allows us to look at the legitimacy of public power as a result of the effectiveness of institutions for realizing the public good, reducing transaction costs and overcoming opportunistic behavior. results. the emphasis is placed on the need to choose between democracy and dictatorship and to overcome oligarchy as a regime of political corruption. the limitation of electoral legitimacy, which in conditions of oligarchy entails a change in the personal composition of power, rather than its choice in favor of democracy, is noted. the innovative term "institutes of legitimacy" is proposed. it is defined that the institutions of legitimacy include the media, political parties and ngos, which in a democracy provide and further support the legitimacy of public authority. institutions of legitimacy evaluate the actions of public authorities and form public opinion. it is substantiated that for the post-soviet ruling class, given the rutting effect, there remains a danger of following private interests rather than the public good. this is an oligarchic system of relations, identified as a system of political corruption. this applies in full measure to the institutes of legitimacy, which are now partially dependent on the oligarchs. under martial law, public policy in ukraine is aimed at protecting the country from large-scale armed aggression and attracting maximum international military and financial support. these are the main markers of legitimacy. the results of sociological research testify to the high level of legitimacy of the authorities in ukraine: a growth of trust in individual political institutions and in the course of the state as a whole is being recorded. according to sociological group rating in may 2022 the level of support for the actions of the ukrainian government was 79%, and 54% of citizens recognized the actions of the state as quite effective. practical implications. the legitimacy of the ukrainian government depends on its effectiveness in two areas: winning the war and overcoming the oligarchy. it should take advantage of unprecedented international support for this. this will significantly reduce transaction costs and increase the efficiency of both individual institutions and institutional interaction, opening the way for ukraine's european integration. value/originality. this study of public policy in ukraine as a balancing act between private and public interests allows for a better understanding of the economic factors of legitimacy formation under martial law and the impact of international support on the provision of legitimacy. key words: economic theory, public policy, public good, transaction costs, rational choice institutionalism, legitimacy of public power, institutions of legitimacy. jel classification: z18, h41, d23 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 229 vol. 8 no. 3, 2022 1. introduction the legitimacy of government, in addition to its sociological and political dimensions, has a clear economic marker. only a legitimate government is capable of ensuring economic growth, since it relies on the trust of citizens and has a margin of safety for implementing unpopular decisions. the implementation of rational economic policies requires legitimacy as a long-term relationship of trust between public authorities and citizens. legitimacy is provided at two levels of political exchange, the constitutional and the institutional, and is respectively conceptualized at two levels of public choice theory: "(1) 'economic theory of the constitution' (legal enshrinement of the existing social contract) and (2) 'political institution theory ' (which includes voting and voting rule theories, electoral and inter-party competition theories, and bureaucratic theories." (buchanan, 2003) legitimization or delegitimization of power is the result of a clash of public and private interests in the implementation of public policy. in ukraine, the mutual dependence of the level of legitimacy of government and economic policy was manifested throughout the years of independence, from attempts by the communist nomenklatura to retain power and property to the oligarchization of the economy, politics and the mass media. the foundation of the legitimacy of public authority in ukraine was laid on december 1, 1991, when more than 90% of citizens supported the "act of declaration of independence of ukraine" in a referendum. subsequent legitimacy crises showed that electoral legitimacy is a necessary but not sufficient condition for economic growth and development of the "welfare state". given the experience of ukraine, it should be emphasized that "electoral democracy alone cannot be a source of legitimacy and guarantee the stability of the political order. crises of legitimacy accompanying the activity of institutions of power in ukraine, leading to early parliamentary elections (1994, 2007, 2014), presidential elections (1994, 2014), as well as with some periodicity creating revolutionary situations (2004, 2013, 2014) and even unprecedented re-vote the second round of the presidential campaign in 2004, is a prime example and confirmation." (yakovleva, 2019) widespread armed aggression has exacerbated the problem of the legitimacy of power in ukraine. on the one hand, international aid is growing thanks to the striking level of domestic support for the government (especially compared to prewar times). on the other hand, the post-soviet bureaucracy and oligarchy remain well-organized, powerful groups that have always put private interest ahead of public interest, hindering democratization, the rule of law, and anti-corruption policies. 2. legitimacy in the focus of economic theory the focus of research on public choice theory and rational choice institutionalism is a wide range of problems related to the institutional legitimacy of public power, as it has been written about before (yakovleva, 2021). the following aspects, which are important in determining the role of the legitimacy of power for economic growth and societal development, are highlighted: 1) the meaning of the constitution as a social contract ( j.m. buchanan, g. tullock, g.brennan, j. elster, r . hardin, b. weingast); 2) the role of the legislature (g. cox , m. mccubbins, m. fiorina, d.r . kiewiet); 3) the role of the bureaucracy (r . noll, t. moe); 4) the role of elections (f. rosenbluth, d. baron, g. snyder). in the context of the study of the legitimacy of public power in ukraine, interpretations of democratic transitions using the theory of public choice and elements of game theory deserve special attention (a. przeworski, b.geddes, g. marks, y. cohen). rational choice institutionalism remains an influential theory of the neoclassical paradigm in the study of the legitimacy of power, even though the concept of "homo economicus" has been revised and supplemented. some authors consider it inadequate and incomplete, while others emphasize that even theories guided by methodological individualism are forced to construct the "social" and the "political. especially in times of war (cramer, 2002). at the same time, the assumption that government agents act in accordance with scheme of individualistic rational optimization (urbina, 2019), as well as the definition of transaction costs, opportunistic behavior, etc. allows to discuss the possibilities of rational collective action as a basis for the legitimacy of public power. institutional interaction is important for the legitimacy of public power, capable of reducing transaction costs, overcoming the opportunism of certain individuals and well-organized groups, and defining and implementing the public good (yakovleva & yakovlev, 2020). under wartime conditions, ukrainian society cannot afford the luxury of ineffective institutions. also, according to the current legislation (law of ukraine "on the legal regime of martial law", 2015, 2022) it is impossible to conduct extraordinary election campaigns under martial law. that is why representatives of the ukrainian government have to solve existing problems by going beyond the limits of electoral legitimacy. for the ambitious project of european integration of ukraine to be realized, it is necessary to finally overcome the pathologies of post-soviet society and choose the path of real reforms, not the half-hearted "flight from choice" baltic journal of economic studies 230 vol. 8 no. 3, 2022 model of "restructuring," to which post-soviet elites are so accustomed (yakovlev, 2015). the heart of the legitimacy of public power in ukraine is the "big" choice between democracy and dictatorship. it is really big, because ukrainians have to choose not only between forms of government, but also come out of a long submission to imperial and soviet dictatorship, choosing european integration. in this regard, the threats of dictatorship and anarchy, which always arise during wars, can be significantly reduced by international assistance from democratic countries. first of all, it is about granting eu candidate status to ukraine. it is a natural process when democratic countries build up support for a country that is on the border with the eu and suffers from widespread military aggression. it should be noted: "in the context of globalization and the development of information technology, the importance of external sources of legitimacy of power is growing dramatically. ukraine has become a field for searching and testing relatively new for the post-soviet space technologies of legitimization/delegitimization of power – from color revolutions and strengthening of foreign policy factors of political regime legitimization to purposeful information campaigns (with the construction of media scandals) and military aggression to delegi timize the political regime." (yakovleva, 2019) but to make a choice between the dichotomous types of political regime – democracy and dictatorship, given the challenges of wartime, has only the ukrainian ruling class (yakovlev, & yeremenko, 2020). as josé antonio cheibub, jennifer gandhi & james raymond vreeland proved in their study "democracy and dictatorship revisited", the choice of regime matters (cheibub, gandhi & vreeland, 2010). after all, it is not just a question of the presence or absence of elections. election campaigns, as ukraine's experience shows, can regularly take place under conditions of competitive or electoral authoritarianism. the authors believe that dictatorships are divided into monarchical, military, and civilian ones (cheibub, gandhi & vreeland, 2010). among the reasons for the delegitimation of democratic public power are the inability of the democratic government to ensure a high level of economic growth and investment, the conflict of elites (the inability to form a "pact of elites"), the lack of prospects for representatives of certain social groups under democracy, the insufficient level of democratic consolidation of society, etc. obviously, with the war in ukraine, the influence of the military is growing, and the majority of society relies on and trusts them. this could potentially create a danger of establishing a military dictatorship regime. according to the proposed classification, democratic regimes are divided into presidential (if the govern ment is not accountable to parliament), semipresidential (if the head of state is elected in national elections for a fixed term) and parliamentary (the government is elected in parliament and is accountable to it). in a democracy, an important role is played not only by the institutions of public authority, which ensure the reduction of transactional costs for society. the importance of civil society institutions – ngos, mass media, political parties – is growing. consider them "institutes of legitimacy ". it should be noted that "the institutions of public power are created to reduce the transactional costs of society, but because they follow the selfish interests of individual politicians and civil servants, they can on the contrary increase public costs. then institutions lose effectiveness, and their activity is directed towards the achievement of individual or narrow group interests, rather than the public good. the same research optics can be applied to analyze not only the legitimacy of institutions of public authority, but also modern institutions of legitimacy – civil society, mass media, political parties. private and public interests also clash in them. it is the latter that is aimed at securing the public good." (yakovleva, 2021) the institutions of legitimacy (mass media, parties and ngos) in ukraine have also partially become an element of "virtual" or facade democracy, embedded in an oligarchic system of political corruption and distribution of public goods among several oligarchic clans. oligarchic television supported oligarchic parties, and conflicts over shady financial flows and means of production between oligarchs in public space looked like inter-party competitions for public opinion and pluralism in the mass media. now let us imagine that, under the influence of exogenous and endogenous factors, the oligarchic system of political corruption has been overcome. in the conditions of war or the post-war situation of ukrainian society, the expansion of the military elite into the institutions of public power and the full-fledged entry of the military into the ruling class seems most likely. this can be accomplished either through changes to the constitution of ukraine or through elections. the legitimacy of public power in ukraine is determined by economic markers. in conditions of war, these economic markers are divided into external and internal. external ones include the amount of financial aid attracted from international donors and foreign investors. internal markers of economic efficiency are more diverse, ranging from the exchange rate to the level of social protection of the population and the state's fulfillment of its social obligations. legitimacy of public power requires economic efficiency: reduction of transaction costs, orientation of public policy to serve the public baltic journal of economic studies 231 vol. 8 no. 3, 2022 interest, overcoming opportunistic behavior, etc. consider this in more detail. first of all, increasing the efficiency of public authority institutions is associated with the reduction of the state apparatus. a certain optimization of the bureaucracy in post soviet ukraine is certainly necessary. it should take place on two fronts: integration into the eu and the focus of administrative reform on military needs. at the same time, studies by n. berggren, c. bjørnskov, d. lipka "legitimacy and the cost of government" convincingly demonstrates that the reduction of the apparatus does not always lead to a reduction in transaction costs (berggren, bjørnskov & lipka, 2015). "great government" can better ensure economic growth on one condition: it must be legitimate. consequently, it is not about the number of officials, but about the legitimacy of public power. in order to define the effectiveness of government as serving the public interest, it is necessary to shift the focus from methodological individualism to collective behavior, public choice, and the public interest. here there is a synthesis of macroand micro-approaches: individual and collective action. collective action, however, is more complex, requiring appropriate preconditions – the legality of actors and institutions and a constitutionally defined framework for their interaction. according to the "post-constitutional" collective interaction, the boundaries of state regulation are defined – from the developmental state to the night watchdog state. 3. legitimacy of public power in ukraine: challenges of martial law under martial law there is a mutual dependence between the legitimacy of public authority and the effectiveness of public policy. the effectiveness of power during martial law depends entirely on its legitimacy. only legitimate authorities are able to decisively implement public policies necessary for victory. conversely, effectiveness (i.e., the ability of power to solve specific problems with measurable results in time of war) becomes one of the main criteria of legitimacy. the paradox of public good arises in divided societies during war. under the pressure of an external threat, the public good is realized by all of society, regardless of existing divisions along economic, cultural, regional lines. these divisions persist, but temporarily recede into the background. the effectiveness of public policy is measured by the military criteria of defeat/victory, offensive/retreat, and the ability to sustain the economy by attracting international support. beginning february 24, 2022, the ukrainian government and society are taking a test of legitimacy in a time of war. thanks to the actions of the "governmental triangle" (parliament, president, government), the afu, the self-organization of the population and the use of unprecedented interna tional financial, political and military support, the public authorities in ukraine, led by president volodymyr zelenskyy, were able not only to fight back the aggressor country in the battlefield, but also to consolidate society around resisting anger and supporting european and euro-atlantic integration. only a legitimate government that turns the trust of its citizens into a powerful resource for fighting, attracting international aid, and ensuring economic growth can win a war. according to sociological research, as of may 2022 the level of support for the actions of the ukrainian government is 79 percent, and 54 percent of ukrainian citizens recognize the government's actions as quite effective (sociological group "rating", 2022). by comparison, at the end of 2021, it was only 5% (sociological group "rating", 2022). as a comparison, here are the data of sociological research on trust in the president of ukraine for 2019 and 2020. trust in the president of ukraine was expressed in 2019 – 70% (razumkov centre, 2019), and in 2020 already 59% of respondents (razumkov centre, 2020). v. zelenskyy was trusted by 70.5% of respondents in 2019 (razumkov centre, 2019), and in april 2020 it was already 57% (razumkov centre, 2020). in june 2020, according to the sociological survey of the razumkov center, the majority or relative majority of respondents assessed the fulfillment of v. zelenskyy pre-election promises as "not fulfilled at all", and the general situation in the country during his year as a president worsened in the opinion of 33% of respondents (razumkov centre, 2020). despite the martial law, the majority of ukrainians are optimistic about the future. the correlation of optimists and pessimists about the development of the ukrainian state in may 2022 was approxi mately ten to one: respectively 76% believe that the situation will improve and 7% think that it will get worse. in the process of sociological research four indicators (effectiveness of the state, achievements and failures, living conditions, social expectations) were determined, which allowed to build a generalized image of the ukrainian state (gsr-5 methodology), to which respondents are inclined (sociological group "rating", 2022). for comparison, here is the data for the year 2021. thus, in november 2021, 41% of respondents were inclined to a definitely negative image, and another 22% – to a moderately negative one. about a third (32%) were intermediate (neither good nor bad), and only 5% were moderately or definitely positive. as of may 2022, the situation has changed significantly. more than half of citizens report a distinctly (32%) or moderately (21%) positive image of the state (sociological group "rating", 2022). the number of respondents inclined baltic journal of economic studies 232 vol. 8 no. 3, 2022 toward an intermediate image was almost unchanged (29%). correspondingly, the number of those observing a moderately (14%) or distinctly negative image (4%) decreased significantly (sociological group "rating", 2022). the situation with the assessment of the actions of the authorities has changed dramatically. in the eyes of citizens, the image of a legitimate government has been formed, confidently attracting international support and resolutely defending the country, fighting back against the aggressor. this state of legitimacy "on the frontline" proves that creating legitimacy under martial law requires that public authorities act rationally and calculate reasonably. this implies a functional understanding of the institutions of public authority, a rational calculation of the benefit-cost ratio. the legitimacy of public authorities in time of war is not only the level of support from citizens and the absence of mass protests. unfortunately, public opinion in mediatized and virtualized politics in divided societies with a high concentration of media ownership by the oligarchy can be subject to manipulation. the legitimacy of public power "on the frontline" is a question of the effectiveness of its actions for the public good. in ukrainian realities, given the "post-soviet path effect," legitimacy implies a significant restriction of narrow-group or private interests of the oligarchy and bureaucracy. since the 1990s, the institutional design of the ukrainian political system has been the embodiment of the worst nightmares of rational choice institutionalists. all institutions and the interactions between them have contributed to limiting or "shutting down" access for citizens (north, wallis, webb & weingast, 2007) to the distribution of public goods, increasing the transaction costs of society, working for the corrupt interests of bureaucracy and oligarchy, and illustrating m. olson's thesis regarding "rational individuals" and "irrational societies" (olson, 2009). the choice of the ukrainian post-soviet ruling class in favor of a "soft" dictatorship meant that the institutions of power were directed toward protecting private and corporate interests, when the "guarantor of the constitution" created and protected the oligarchs, and the oligarchic mass media were completely loyal to the president. thanks to the support of oligarchic money and media, each successive president of ukraine received a credit of trust from voters – electoral legitimacy. however, electoral legitimacy never turned into effective public policy, and trust was quickly lost. this was fully true of l. kuchma after 1999, v. yushchenko, v. yanukovych, and p. poroshenko. their electoral legitimacy (poroshenko won the first round of the early presidential election in 2014 with 54.7% of the vote (the central election commission of ukraine, 2014), almost never converted into legitimate governance. note that "electoral campaigns (especially early and extraordinary ones) allow the authorities to gain new credibility, reload certain political institutions and/or get rid of leaders who have lost the trust of society. electoral legitimacy is a direct consequence of the obvious, recognized by the majority of participants in the electoral process and officially approved election result, which is expressed in numbers of support for individual (candidate) or collective (party, bloc) political actors. through voting (electoral participation) the shaky political trust and rather ephemeral support of citizens turns into a concrete result – the electoral legitimacy of power democratically obtained. however, this does not cancel other types of conventional participation of citizens and risks of further delegitimization of power... thus, for all the differences in the political and economic situation, unscheduled presidential elections (or a runoff, as in the orange revolution) in ukraine were needed to restore legitimacy to power in 1994, 2004 and 2014." (yakovleva, 2019) the formation of public power institutions "from above" in the interests of a relatively small group and the establishment of artificial restrictions for the majority of citizens was a sign of the post-soviet state of the ukrainian political system. legitimacy crises resulting from the implementation of the oligarchic model were solved by holding snap elections or resulted in revolutionary outbursts. a special information-manipulative system of legitimization/ delegitimization of public power, characterized by the domination of private interests over the public good, was established. a fragmentation of legitimacy took place. under martial law, the opportunistic behavior of the oligarchy must be overcome. it is not only a question of direct investment in defense, but also of changing institutional design. public confidence in public power, which creates a space of legitimacy that allows the necessary rational decisions to be made in favor of the public good and, accordingly, against the private interests of the oligarchs. thus, ensuring the legitimacy of public authority requires a clear definition of the public interest (for modern ukraine it is obviously the victory over the aggressor and continuation of european integration) and its consolidation in the text of the social contract – the constitution. in the process of interacting to define the essence of the social and to achieve it, individuals and communities, having a fixed set of preferences, require mutual assurances of the behavior of others. after all, one of the main obstacles to the legitimization of public power and the rationalization of public policy is the absence of baltic journal of economic studies 233 vol. 8 no. 3, 2022 democratic institutions: "as a rule, what prevents actors from performing collective actions is the absence of institutions (rules) that guarantee the behavior of others." (hall & taylor, 1996) 4. conclusions the legitimacy of public authorities is defined on two levels – constitutional (enshrining in the legal field the social contract between the government and citizens) and institutional (facilitating political and economic exchange by reducing transaction costs). the legitimacy of public authorities allows decisions to be made quickly and confidently, to implement effective and rational public policies. for ukraine, which is at war, legitimacy means the power's ability to define the public good as defending the country against widespread military aggression and attracting international military and financial support. legitimacy crises in ukraine, caused by the ineffective institutions of the oligarchic system, have been solved by holding snap elections, both presidential and parliamentary. electoral legitimacy in war is important, but not sufficient. in times of war one of the main choices is between democracy and dictatorship. it is determined that this choice in favor of democracy, ensuring and supporting the legitimacy of public authority in modern conditions is carried out by the institutes of legitimacy. they include the media, political parties and ngos in ukraine. they assess the actions of public authorities, form public opinion. at the same time, for the post-soviet ruling class, given the "path effect," there remains the danger of following private interests rather than the public good. this danger is called "oligarchy " as a system of political corruption. this applies in full measure to the institutes of legitimacy, which are now partially dependent on the oligarchs. the legitimate ukrainian authorities must take advantage of unprecedented international support to win on the front lines and in the fight against the oligarchy. this will significantly reduce transaction costs and increase the efficiency of both individual institutions and institutional interaction. only this will open the way for ukraine's european integration. references: citizens' evaluation of the first year of the president and the new government (april 2020 sociology). razumkov center. date of publication: june 26, 2020. available at: https://razumkov.org.ua/napriamky/sotsiologichnidoslidzhennia/otsinka-gromadianamy-pershogo-roku-diialnosti-prezydenta-ta-novoi-vlady-kviten-2020r citizens' evaluation of the situation in the country and the activities of the authorities, the level of trust in social institutions and politicians (october 2019). razumkov center. publication date: october 11, 2019. available at: https://razumkov.org.ua/napriamky/sotsiologichni-doslidzhennia/otsinka-gromadianamy-sytuatsii-v-kraini-tadiialnosti-vlady-riven-doviry-do-sotsialnykh-instytutiv-ta-politykiv special election of the president of ukraine on may 25, 2014. official website of the central election commission. available at: https://cvk.gov.ua/vibory_category/vibori-prezidenta-ukraini/pozachergovi-vibori-prezidentaukraini-25-travnya-2014-roku.html on the legal regime of martial law: the law of ukraine of 12.05.2015 № 389-viii, revision of 15.06.2022, № 1882-ix. official website of the verkhovna rada of ukraine. available at: https://zakon.rada.gov.ua/laws/ show/389-19#text yakovleva, l. 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(2002). homo economicus goes to war: methodological individualism, rational choice and the political economy of war. world development, vol. 30(11), pp. 1845–1864. doi: https://doi.org/ 10.1016/s0305-750x(02)00120-1 hall, p. a., & taylor, r . c. r . (1996). political science and the three new institutionalisms. mpifg discussion paper, 96(6). available at: http://hdl.handle.net/10419/43185 north, d.s c., wallis, j. j., webb, s. b., & weingast, b. r . (2007). limited access orders in the developing world: a new approach to the problems of development. policy research working paper. 4359. available at: https://openknowledge.worldbank.org/handle/10986/7341 olson, m. 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(2020). institutional interaction and political choice in a transitional society. what role for the social sciences. nationalism and ethnic politics, vol. 2(4), pp. 582–608. received on: 16th of july, 2022 accepted on: 30th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 37 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-37-45 scientific and methodological approach to a comprehensive assessment of the economic stability of a telecommunications company svitlana birbirenko1, galina tolkachova2 abstract. the covid-19 pandemic has ultimately changed the course of global economic functions, including the ukrainian ones. the consequences caused by the pandemic significantly affected companies’ economic sustainability and reflected the urgent need to assess economic sustainability in order to determine its level and further develop theoretical and methodological aspects of strategic enterprise management. this article is aimed at developing a scientific and methodological approach to comprehensively assess the economic stability of a telecommunications company that operates under modern market conditions. methods. a study was conducted within the scope of existing techniques used to assess economic stability and, thus, the lack of generally accepted assessment methods was observed. a set of indicators to assess the economic stability of the telecommunications company was formed through financial analysis, taking into account the industry practices of communications service provider’s functioning. comprehensive assessment of the economic stability of telecommunications companies was carried out using a statistical data analysis technique – regression analysis. 2016-2020 financial reports and statistical data provided by examined communications service providers from the state statistics service of ukraine and the national commission of ukraine for the state regulation of communications and informatization were used as outcoming data. study results. as part of the study, the existing assessment methods were analyzed, which made it possible to organize, systematize, and identify their advantages and disadvantages. a set of indicators to assess economic stability of a telecommunications company was formed, indicating the selection criteria and identifying dependence on the presence of a communications service provider at a certain stage of its business development. a scientific and methodological approach to a comprehensive assessment of the economic stability of telecommunications companies taking into account their industry characteristics has been developed. conclusions. the created scientific and methodological approach to assess economic stability of the telecommunications company comprehensively makes it possible to determine the level of economic stability depending on the stage of business development of a company. the assessment performed is a key factor that must be taken into account when developing strategic management of a company that operates in the context of market transformations. key words: economic stability, integrated assessment, balanced indicators, strategic management, telecommunications company. jel classification: d81, l25, l96, o40, o12 corresponding author: 1 state university of intellectual technologies and communications, ukraine. e-mail: sveta_novickaya@ukr.net orcid: https://orcid.org/0000-0003-2355-4949 researcherid: aar-3305-2021 2 state university of intellectual technologies and communications, ukraine. e-mail: dront2009@ukr.net orcid: https://orcid.org/0000-0002-4374-5737 1. introduction current instability of the market economy is aggravated by the crisis triggered by the spread of covid-19 caused by sars-cov-2. therefore, in order to implement economic activities by any company (particularly a telecommunications company), it is necessary to have a quick and reasonable response to business changes that may violate its stable and profitable existence. the maximum profit orientation is definitely no longer a key driver since development ensuring economic stability should be carried out. generally speaking, this applies both to social development and national economy’s development, its individual sectors, and particularly a telecommunication sector which, along with other sectors, forms the development potential of the state. baltic journal of economic studies 38 vol. 7 no. 3, 2021 communications, informatization, and telecommunications sector in particular, play an important part in shaping national economy since they integrate the results of a large number of related sectors of the national economy and are indicators of the scientific and technological development and potential for any country. thus, the level of economic stability of telecommunications companies basically determines the economic development of a state, its information and communications potential, scientific and technological progress, and competitiveness in domestic and foreign markets. therefore, in the context of the coronavirus crisis, when the ukrainian economy suffered significant losses and, nevertheless, was integrated into the global economic space, questions arise on the development of new concepts of strategic management, methods and approaches to the economic stability of telecommunications companies. a comprehensive assessment is determined, which is a set of actions that can be used to identify the dynamics of indicators and trends in their changes over time, on the basis of which the effectiveness of a company has been studied. this study aims to develop a scientific and methodological approach to assess the economic stability of a telecommunications company comprehensively. comprehensive assessment was carried out using regression modeling, a statistical data analysis technique. three leading ukrainian telecommunications companies were selected to conduct the analysis: kyivstar pjsc, vf ukraine prjsc and ukrtelecom pjsc. 2016-2020 financial reports and statistical data provided by examined communications service providers from the state statistics service of ukraine and the national commission of ukraine for the state regulation of communications and informatization were used as outcoming data. 2. analysis of the existing assessment methods the study of the existing methods to assess economic stability of a company proved the lack of a unified approach to the assessment procedure. pursuant to (afonichkin, zhurova, 2015; revenko, dyba, 2014) there are three methods to arrange an integral indicator of economic stability of a company, which are most often used during the assessment: 1) sum method (additive method). the integral indicator of economic stability is defined by calculating the weighted average assessment of components using weight coefficients: p s q i p i i n = × = ∑ 1 , (1) where ps is an integral indicator of economic stability of a company; pi is a level of economic stability of i-th component of economic stability of a company; qi is weight ratio of i-th component of economic stability of a company; n is the number of components in economic stability of a company. 2) functional method. the overall level of economic stability of a company is determined through a set of variables: p a f x a f x a f xf m m= + + +1 1 2 2( ) ( ) ... ( ) , (2) where pf is a general level of economic stability of a company; a1, a2 … am are weight coefficients of each indicator of economic stability of a company; x1, x2 … xm are main performance indicators of a company; f(x1), f(x2) … f(xm) are local dependence functions of the general level of economic stability of a company on the corresponding indicators of its activity; i is the number of performance indicators of a company. 3) rating method. this method is applied when rating assessment of the integral indicator and comparing company’s indicators with industry average values. the functional components of the economic stability of a company are calculated using the dynamic rating method: p z n kp i i i i z = × × = ∑ 1 1 , (3) where pp is an aggregated factor of the company’s economic stability separate component; zi is the number of indicators used to assess the level of economic stability for a separate component; ni is a regulation value for i-th coefficient; ki – i-th coefficient. the obtained aggregated factors for each component of economic stability are added in order to determine the overall level of economic stability based on the reference value, which is the sum of units of the number of complex indicators. many scientific papers are devoted to the problems of substantiating methodological tools and algorithms to assess the economic stability of a company. thus, brahinets a.m. considers indicators of economic stability components of the financial solvency of a company (brahinets, 2009). ulianchenko o.v. considers profitability to be a generalizing indicator of the economic stability of a company (ulianchenko, 2006). tridid o.m. identifies 16 stability indexes, including the degree of financial leverage, leverage ratio, return on equity, equity maneuverability, etc. (tridid, 2002). foreign scientists also pay a lot of attention to the study of the essence and assessment of economic stability. to be more specific, m. siegrist et al. believe that the economic justification for stability can be based on reducing the costs, increasing the revenues, and managing the risks and intangible assets (siegrist, 2019). t. fetzer et al. systematically evaluated the rate of occurrence and causal determinants of economic anxiety as a prototype of economic stability when the coronavirus pandemic was just unfolding, when the baltic journal of economic studies 39 vol. 7 no. 3, 2021 extent of its economic impact was uncertain. the authors also focus on the perception of pandemic risk factors that form the so-called “economic concerns” (fetzer, 2020). german scientist klaus-jürgen gern and his colleague draw attention to the indirect economic consequences that result from measures to direct the pandemic or changes in consumer behavior (gern, 2020). f. carlson-schlesak et al. hold to the opinion that to get an idea of the recovery path, companies’ ceos should carefully consider market signals between different asset classes, develop a sustainability model, as well as look beyond the markets at recession and recovery models, and study the history of pandemics and collapses (carlsson-szlezak, reeves & swartz, 2020). a common and well-known method to assess the economic stability of a company is based on the principles of evaluating financial results, which include profit, profitability, cost, solvency, etc. various options combining indicators that act as an indicator for different operating conditions and industry affiliation of companies have also been used. the total number of financial analysis indicators used in modern practice exceeds 150. based on the study and analysis of scientific achievements to determine the level of economic stability, we have identified the following groupings of methods to assess the economic stability of a company: 1) assessment methods based on the analysis of the financial condition of a company and calculations to determine the probabilities of its bankruptcy; 2) assessment methods based on calculations of a summarizing indicator calculated using the principles of a systemic approach (arithmetic mean, geometric mean, rating assessment indicators, etc.) to determine the level of economic stability. this generalizing indicator is based on the assessment of individual structural elements (components) that reflect certain areas of activity of a company (burlaka, 2014; hordiienko, 2011; kobets, 2015); 3) assessment methods using relative indicators and weight coefficients which are calculated on the basis of expert methods (yurchenko, 2018; kravchenko, 2016; voronkova, 2008); 4) methods to assess the comprehensive level of economic stability of a company, based on the use of quantitative and qualitative methods of the analysis (kobets, 2015; ishchenko, 2011). the most common methods from the general set of methods that have been analyzed are those that were calculated using an integral indicator, which fundamentally is a formalized method that combines arrays of analytical characteristics. based on the analysis of the above methods to assess the economic stability of a company, we can summarize that: 1) the economic stability of a company is characterized by complexity which dictates the need to take the most important structural and functional components into account; 2) the vast majority of the methods examined make it possible to diagnose the economic stability of a company, however, without specifying recommendations how to develop the measures to control the process of formation, coverage and improvement of the level of the economic stability of business entities that carry out their activities in crisis conditions (which are now quarantine restrictions caused by the spread of covid-19); 3) most methods are based on the use of a large number of identical indicators or similar indicators; 4) the recommended criteria indicators do not look to the specific features inherent in individual industries; 5) the methods proposed are practically devoid of taking into account disturbing influences from the external environment, especially when they transform frequently. we believe that scientific and methodological approaches to integrally assess the economic stability of the telecommunications company should be formed on the basis of pre-defined priorities when studying the entity, namely, when analyzing operational performance indicators (otchenashenko, 2011). while forming a reasonable conclusion about the development trends of a certain economic category, some difficulties emerge when processing a large amount of information that is crucial study interrelated indicators individually. consequently, the modern system analyzing theoretical and practical part of economic categories and indicators provides for the use of a formalized method to combine large arrays of analytical indicators that can be synthetic, generalizing, aggregated or integral forms. therefore, determining the level of economic stability of the telecommunications company is mostly widespread when quantitatively assessing the key indicator of company’s functioning based on the definition of a generalizing assessment of economic stability. undertaking integral assessment of economic stability, it is possible to assess not only its common level based on the use of the developed scale, but also to assess individual structural elements of stability. this method is characterized by the use of existing methods when assessing a certain set of indicators. updating and increasing the capabilities of a traditional analysis take place, as well as comparing the obtained indicators with various standards, objectives, criteria inherent in the field of communications and informatization. the calculated results of integral assessment can be used while evaluating the effectiveness of management decisions, their justification for further implementation at the necessary hierarchical levels of economic management. thus, the obtained conclusions referring to the forms and content of indicators assessing the economic baltic journal of economic studies 40 vol. 7 no. 3, 2021 stability of a company indicate that modern practice has no single generally accepted assessment method. almost every researcher who studies the methods to assess economic stability recommends applying his or her version when formalizing the indicator, providing certain arguments when practically justifying its content and possibilities of applying it. the above considerations reveal that a scientific and methodological approach to assess the economic stability of a company (on the example of telecommunications companies) based on a comprehensive coverage of all the main functioning aspects in the modern market space are crucial. 3. formation of a set of indicators to assess the economic stability of a telecommunications company the process to study the activity of a company, namely, the formation of the level of its economic stability is characterized by the problem of substantiating the criteria for selecting indicators that are components of a balanced assessment array. these criteria should include the industry practices and specifics of the company analyzed, taking into account the conditions of a certain stage of the life cycle. in our opinion, the formation of a set of indicators to evaluate the performance of the telecommunications company justifying the sufficiency of its economic stability should be based on the use of such selection criteria: – formulation of all processes that will determine the indicators and their permissible application; – coherence of indicators with the transformation of the external environment and its strategy; – selection of indicators based on the stages of business development; – predominance of the quantitative indicators over the qualitative ones; – prevention of indicator multicollinearity; – complete reflection and logical linking of tasks performed by various structural divisions and the company particularly; – the ability to integrate into the generally accepted document management scheme in the company. certain criteria to select the indicators, taking into account their characteristics, are substantial when organizing a set of balanced indicators to assess the economic stability of a telecommunications company. the set of balanced indicators is based on four components that make it possible to achieve a balance between long-term and short-term goals, between desired results and factors, as well as between hard objective criteria and soft subjective indicators. finance, subscribers, internal business processes, as well as staff training and development, are the components for a telecommunications company. we believe that the indicators of the financial component of the formation of a set of balanced indicators are characterized by a key role and their selection should be carried out taking into account the stage of business development of a telecommunications company. we established that the initial stage when setting up a telecommunications company, accelerated growth, sustainable development and stagnation are the stages of business development. the initial stage of the telecommunications company formation is characterized by its gradual penetration into the communications and informatization market. nevertheless, its technical and economic setting up and assets accumulate intensively. a company needs high potential, maximum mobilization of financial resources to develop and promote its services to the market, as well as sufficient investment in fixed assets and infrastructure, in order to improve the quality of services provided, and introduce the new ones. that is why it is urgent to expand the subscriber base. the amount of investment in development often exceeds the income of a company. at this stage of telecommunications company business development, liquidity, financial stability, and property status indicators require careful analysis. special attention to the financial leverage ratio (if the telecommunications company shares borrowed funds) should be payed, which makes it possible to control dependence on external sources, increase the probability of financial risks and comply with guarantees to repay the obligations by the company. furthermore, at this stage of development, telecommunications companies should carefully analyze the indicators for assessing their position in the stock market, monitor the relation between the dividend policy and the corporation law market rate. the completion of the initial stage of development by the telecommunications company should be characterized by a steady growth in liquidity, financial stability, business activity and profitability ratio. characteristic features of a telecommunications company’s entry and long-term period at the stage of accelerated growth imply the increase in the volume of services provided, recognition by subscribers and counterparties. the process of providing services at this stage is determined by intensive modernization, and the quality of the services provided significantly improves. the telecommunications company is in dire need of investment and reinvestment, and a significant increase of its potential with an increase in demand for communication services becomes predictable. in addition to keeping it, a significant expansion in the communications and informatization market section occurs. this stage of business development is determined by the stability of liquidity, financial stability, and property status indicators. when these indicators are destabilized, we can conclude that the baltic journal of economic studies 41 vol. 7 no. 3, 2021 company has not achieved the proper level of economic stability, which encourages a review of key aspects of strategic management and their adaptation to potential opportunities. it becomes necessary to focus on operating profit and gross profit, the growth rate of which should be satisfactory. an increase in economic stability reflects sufficient investment in fixed assets, accompanied by an increase in the income received. the performance criterion that helps to remain on the securities market should also have a positive dynamics. as a result of the telecommunications company’s planning to further attract financial resources through an additional issue, it is necessary to develop a dividend policy, the main purpose of which will be to increase the corporation law market rate. the stage of telecommunications company’s sustainable development should be characterized by achieving stability in terms of profitability when providing services and striving for consistently high return on equity. this stage is characterized by an increase in return on investment and an increase in return on invested capital. a sufficient level of economic stability at this stage is confirmed by the stability of business activity, property status and profitability indicators. if a decrease in these indicators is observed, it is urgently advisable to increase the effectiveness of strategic management of economic stability in order to avoid falling into the stage of stagnation. the stage of stagnation of the telecommunications company is characterized by value aging (production primarily), a decrease in the quality and competitiveness of services. this stage is characterized by destabilization of all financial indicators. indicators of liquidity, profitability, property status in this case, as well as indicators that determine the position of a company in the stock market are the key indicators. therefore, it is possible to determine the feasibility of continuing activities at the rate of the developed strategic management. this stage is caused by a recession, which most often leads to bankruptcy, and that requires emergency implementation of anti-crisis management. thus, the main indicators for each component of the combination of balanced indicators were formed and justified, which made it possible to analyze the state of economic stability of telecommunications companies in such components as finance, subscribers, internal business processes, as well as training and developing personnel. 4. scientific and methodological approach to assess economic stability the above information specifies that to assess the economic stability of a telecommunications company, a set of balanced indicators is applied; it combines four most important components of the company’s functioning: finance, work with subscribers, internal business processes and training, and development of personnel. the final establishment of the level of economic stability of the analyzed telecommunications companies requires the implementation of analytical studies of the indicators of the specified set in accordance with certain stages. the first stage of the scientific and methodological approach includes forming a set of balanced indicators. in order to assess the financial and economic condition (financial component of the set of balanced indicators) of three leading ukrainian telecommunications companies (ukrtelecom pjsc, kyivstar pjsc, vf ukraine pjsc) for five years (2016-2020), the analysis of liquidity, efficiency (profitability) of activities, financial stability (independence), business activity and property status, namely, the key indicators of the financial components, is carried out. individual key indicators of the assessment (x µi, µ=1, �n ) are calculated for each integral indicator (icbsc, i=1 4, ) of the separate component of the balanced scorecard. regression modeling is used to calculate integral indicators for each component of the balanced scorecard. the second stage when assessing the economic stability of the telecommunications company is the calculation of effective indicators for each component of the balanced scorecard and their interpretation. based on the principles of regression modeling, linear regression equations were compiled and presented in table 1 for each effective indicator. the next stage includes calculating the overall integral indicator of economic stability (ioes) of the telecommunications company and establishing its compliance (depending on the stage of business development of the telecommunications company) with a certain level of economic stability. calculation of the overall integral indicator of economic stability (ioes) is carried out by evaluating four components, taking into account their weight: financial ( ifcsc); subscriber (isubbsc); internal business processes (iibpbsc); personnel training and development (iptdbsc). overall integral indicator to assess economic stability (ioes) is calculated as follows: � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �і k ioes i i cbsc i= × = ∑ 1 4 �� � � � � � � � � � � � 4( ). (4) where ki is weight of i-th integral indicator of each individual component of the balanced scorecard of economic stability of a company; iicbsc is an integral indicator of each individual component of the balanced scorecard of economic stability of a company. for this purpose, ki is determined by an expert method and is reduced to: � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � і ik = ∑ = 1 4 1 �� � � � � � � � � � � � � � � � � � � � � � � � 5( ). (5) baltic journal of economic studies 42 vol. 7 no. 3, 2021 the degree of consistency by the experts is determined on the basis of calculating kendall’s coefficient of concordance (birbirenko, zhadanova & banket, 2021). normalization of individual indicators of each individual component of the balanced scorecard is reduced to the following: � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �ii i x i i i і і min max min = ( )− − � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � � � � � � � � � � � � � � 6( ), (6) where 0 1″ ″ii . this procedure is designed to ensure comparability of characteristics that are part of the overall integral indicator of economic stability of a telecommunications company. the normalized indicators must comply with zero dimension, a single variation interval. the value of economic stability and its level increases if the overall integral indicator (ioes) is up to one. the interpretation of the indicator can be obtained using harrington’s frustration discomfort scale (lahutin, 2007), a meaningful description of which is given in table 2. the scientific and methodological approach to integrally assess economic stability with positioning depending on the stage of business development of the telecommunications company is shown in figure 1. therefore, ensuring the economic stability of the telecommunications company is formed on the basis of its assessment at each level and a separate component of the balanced scorecard assessment indicators, based on the analysis of factors influencing the economic environment of the communications service provider, on the study of patterns of formation and effectiveness of strategic management mechanisms. the results of a comprehensive assessment of the economic stability of the telecommunications companies that were analyzed are shown in table 3. all three telecommunications companies that were analyzed are developing sustainably. however, the indicators of their level of economic stability differ. during the entire reporting period (2016-2020), ukrtelecom pjsc was characterized to have a lower level of economic stability than other communications table 1 regression data to calculate performance indicators for each component of the balanced scorecard performance indicator linear regression model equation financial component integral liquidity indicator і tl і ( ) = 7.16201 + 0.64093×xl1-0.57285×xl2+ 0.17591×xl3-2.80777×xl4 + 0.07226×xl5 (xl1... xl5 – key liquidity indicators) integral indicator of activity efficiency (profitability) і tr і ( ) = 46.154668+33.559512×xr1+10,646328×xr2+10,433401×xr3+ 4,240264×xr4-8,460438×xr5 +0,920808×xr6-29,461838×xr7 (xr1…xr7 – key indicators of activity efficiency (profitability)) integral indicator of financial stability (independence) і tfs і ( ) =0,4070851+0,0194922×xfs1+ 0.013377×xfs2-0.0875679×xfs3+ + 0.1029323×xfs4-0.0218667×xfs5+ 0.0040895×xfs6+ 0.0101263×xfs7-0.0115091×xfs8 (xfs1... xfs8 are key indicators of financial stability (independence) integral indicator of business activity і tb а і . . ( ) = 0.4797345+0.0006811×xb.a.1+ 0.0413736×xb.a.2-0.0053645×xd. a.3-0.0027783×xb.a.4+ 0.0022412×xb.a.5 (xb.a.1... xb.a.5 are key indicators of business activity) integral indicator of property status і tp s і . . ( ) = 0.436099-0.0058417×xp. s.1+ 0.0634452×xp. s.2+ 0.2251834×xp. s.3-0.0228016×xp. s.4+ 0.0001843×xp. s.5 (xp. s.1... xp. s.5 are key indicators of property status) performance indicator of financial component expert assessment of the impact of financial component integral indicators subscriber component performance indicator of subscriber component к tsub і ( ) = 0.07106-0.07431×xsub1+18.46858×xsub2-7.52569×xsub3+ + 27.24122×xsub4 (xab1... xsub4 are key indicators to evaluate the subscriber component) domestic business process component performance indicator of domestic business process component і tbp ( ) = 0.145922+0.049686×xbp1+ 0.075852×xbp2+ 0.36897×xbp3+ 0.043512 ×xbp4 (xbp1... xbp4 are key indicators of internal business processes) personnel training and development component performance indicator of personnel training and development component і tptd ( ) = 0.4362803 + 0.2019133×xptd1+ 0.0011965×xptd2-0.0012965×xptd3+ 0.0944455×xptd4-0.1283662×xptd5 (xptd1... xptd5 are key assessment indicator components of personnel training and development) source: author's calculations baltic journal of economic studies 43 vol. 7 no. 3, 2021 table 2 interpretation of overall integral indicator of economic stability of a company according to harrington’s frustration discomfort scale assessment intervals qualitative level assessment description 0…0.2 (very bad) destabilization of all business processes of a company, which promotes a catastrophically low level of economic stability. 0.2…0.37 low (bad) significant decrease in business efficiency, decline of one or more business processes, which decreases the level of economic stability. 0.37…0.63 average (satisfactory) activity of a company is characterized by relative efficiency, the value of which approaches the limit, and the economic situation is unstable. 0.63…0.8 high (good) functioning of a company is characterized by good performance indicators and a sufficient level of economic stability. 0.8…1 very high (excellent) the absolute level of economic stability which is not affected by any destabilizing influence retains and increases its importance. source: drafted by the author, based on individual information processing (lahutin, 2007) figure 1. scientific and methodological approach to assess economic stability of the telecommunications company comprehensively source: author’s solution formation of balanced scorecard (bsc) to assess the economic stability of a telecommunications company bsc financial assessment indicators bsc subscriber assessment indicators bsc internal business process assessment indicators bsc personnel training and development assessment indicators formation of bsc effective indicators to assess the economic stability of a telecommunications company performance indicator of financial bsc (іfbsc) performance indicator of subscriber bsc component (іsubcbsc ) performance indicator components of domestic business processes (іdbpbsc) performance indicator components of bsc personnel training and development (іptdcbsc) overall integral indicator of economic stability (ioes) of a telecommunications company stage of business development of a telecommunications company stage of accelerated growth initial stage stage of sustainable development stage of stagnation compliance of the overall integral indicator of economic stability of a telecommunications company with the level of its economic stability baltic journal of economic studies 44 vol. 7 no. 3, 2021 service providers, whereas kyivstar pjsc has the highest. according to harrington’s frustration discomfort scale, kyivstar pjsc and vf ukraine prjsc have a high level of economic stability, while ukrtelecom pjsc has an average level. kyivstar pjsc was launched in 1997. the provider has more than 25 million of subscribers, and the coverage area includes the largest cities and more than 10,000 towns across the country, offering 3g, 4g and lte. vf ukraine prjsc was previously owned by mts, but in 2019, it moved to neqsol holding, after which it was rebranded. the customer database is 19.8 million subscribers. the provider offers extensive network coverage – 86% of 3g coverage in all territories and 66% of 4g coverage. the company is also actively deploying networks for web-enabled nb-iot. kyivstar pjsc and vf ukraine prjsc are major players in the mobile communications market, while ukrtelecom pjsc is the leader of the fixedline telephony network in ukraine. however, in 2020, ukrtelecom pjsc received 2.087 billion uah from fixed internet subscribers, which is 7% more than in 2019. this growth was facilitated by the modernization of infrastructure and the construction of an optical network. meanwhile, in 2020, kyivstar pjsc advanced ukrtelecom pjsc in terms of the number of users (up to 1.1 million subscribers) and became the market leader in fixed broadband access. 5. conclusions the functioning of modern telecommunications companies is conditioned by the crisis caused by the spread of covid-19, which definitely has a negative impact on the economic stability of communications service providers in general and their business processes in particular. these impacts are diverse and directly depend on the stage of business development of the company. therefore these crisis conditions show the level of economic stability of a telecommunications company, it is proposed to use the developed scientific and methodological approach to comprehensively assess economic stability with consistent justification of indicators, taking into account their positioning (significance) at a certain stage of business development: initial, accelerated growth, sustainable development or stagnation. the practical significance of the obtained research results lies in the formation of a scientific and methodological approach to assess the economic stability of a company, taking into account its industry features (in particular, the features of the telecommunications sector), which provides certain advantages in the development of anti-crisis measures and programs. the development of theoretical and methodological approaches, methodological foundations and practical recommendations for strategic management of the economic stability of the telecommunications company are the prospects for further scientific study. table 3 general integral indicator of economic stability of the telecommunications companies (ioes) 2016-2020 name of telecommunications company 2016 2017 2018 2019 2020 ukrtelecom pjsc 0.77717 0.65921 0.60649 0.62914 0.63382 kyivstar pjsc 0.89114 0.82656 0.88533 0.87197 0.84815 vf ukraine pjsc 0.88224 0.83516 0.81577 0.85214 0.83866 source: author’s calculations references: afonichkin, a. i., & zhurova, l. i. 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(2020). influence of pandemic of coronavirus infection covid-19 on economic resilience of ukrainian enterprises. economic annals-xxi, 183 (5–6): 66–78. doi: https://doi.org/10.21003/ea.v183-07 lahutin, m. b. (2007). visual mathematical statistics. moscow, 472 p. baltic journal of economic studies 91 vol. 1, 2015 economic essence of modern investment processes in the grain processing industry inna kanashkina1, odessa national academy of food technologies, ukraine abstract. the subject of the research is theoretical and methodological bases of formation of effective investment in priorities feed processing industry in ukraine. the object of research is the investment process in feed processing ukrainian industry, the main direction and the way to increase the efficiency of the investment process in the industry. the aim is to develop an integrated approach to the study of the economic substance of investments to improve the methods to determine their effectiveness, the study of factors of investment environment, study methodology for determining business risk, development of proposals of the priority areas of investing in feed processing industry, the formation of effective investment strategies for its development in the conditions of market transformation. methods. we used the following methods: dialectical, abstract logic, economics and statistics and the systemic-functional methods of knowledge of economic processes. the dialectical method has allowed the author to analyze the development of research in the last five years, identified reserves and propose ways for its further development. abstract-logical method of waste classification of the factors influencing the efficiency of the investment process in the industry, the methodological approaches to the formation of the components of the conceptual apparatus studied category. economic-statistical method used in the study and synthesis of trends and patterns of the dynamics of the industry at the present stage. systemic-functional method allowed to generalize the theoretical and methodological foundations of development effectiveness feed processing industry. the study also used methods: a comparative analysis  – for comparing actual data reporting and previous years; model approach – to determine the entrepreneurial risk in the enterprises of the industry; expert assessments and cost approaches to identify key trends and ways to improve the country’s industrial development feed processing industry in the transformation of the economy. results. based on the analysis of modern approaches to conditions of increased in-vestment and innovation, continuous improvement of its effectiveness concluded that the creation of fair competition. civilized competitive environment ensures that each share of investment in innovation combined with a positive effect – increases the number of jobs and the amount of product reduces the cost per unit of output. significant investment resources for the industry can be attracted by privatization, provided that it will be transparent and competitive. to attract investment in such an important sector for ukraine, it is necessary to understand and improve the motivation of investors, taking into account the european integration process: the main promising markets for products and services; favorable geographic location of investment targets; increase their competitiveness through the organization of production on the territory of a party that receives the in-vestment; low labor costs in its qualifications. key words: investment, investment efficiency, investment potential. jel classification: o31, p47, q13, q14 1. введение в литературе существуют разные понятие инвестиций, инвестиционной деятельности, инвесторов и др. но частое упоминание понятия теряет его сущность. поэтому, для решения проблем, которые связаны с финансированием инвестиционной деятельности предприятий как способа реализации конкурентных экономических задач, нужно чётко определится с сущностью данных понятий. 2. инвестиции и инвестиционный процесс на предприятиях данной отросли понятие «инвестиции» имеет чётко значение с юридической точки зрения. закон украины «про инвестиционную деятельность» определяет инвестиции как все виды имущественных и интеллект уальных ценностей, вложенных в объекты предпринимательской и других видов деятельности, в результате каких создается прибыль (доход) или corresponding author 1 department of accounting and audit, odessa national academy of food technologies. e-mail: inna.kanashkina@mail.ru baltic journal of economic studies 92 vol. 1, 2015 достигается социальный эффект (constitution of ukraine, 1996). категории «производство» и «инвестиции» тесно связаны между собой. при этом категория «производство» является шире от категории «инвестиции», так как она включает последнюю в виде важнейшего фактора расширения и обновления производства. особенность категории «инвестиции» заключается в том, что как сами инвестиции, так и продукция и прибыль, получаемые от них, реализуются только в долгосрочном временном интервале. считаем необходимым ввести еще одно уточнение: инвестиции  – это отложенное потребление. это приводит к необходимости учета в оценке их эффективности: во-первых, фактора времени, во-вторых, фактора вероятности рисков. это вызывает необходимость разработки в некоторой степени самостоятельных показателей и методов оценки экономической эффективности инвестиций. при этом в странах с развитой рыночной экономикой на уровне государства не принимают любые официальные, директивные методики оценки эффективности инвестиций: каждая корпорация, фирма, предприниматель, банк, кредитор используют показатели и методы, которые соответствуют их целям. предложенное нами определение инвестиций имеет некоторые особенности: в отличие от развитой рыночной экономики в переходных условиях наряду с инвестициями, ради получения прибыли, особое значение имеют вложения в развитие производственной, социальной и научно – технической инфраструктуры, рассчитаны не на непосредственную прибыль, а на перспективный социальный, экологический и структурной эффект; в переходной экономике наряду с инвестиционными проектами негосударственных инвестор особое значение имеют инвестиционные программы  – совокупность взаимосвязанных проектов развития отрасли, в финансировании которых участвуют государство, местные органы власти, международные некоммерческие организации и фонды; в отличие от капитальных вложений, имеется в виду три формы вложений  – финансовая (национальная валюта, иностранные валюты, ликвидные ценные бумаги), материальная (земельные участки, здания, сооружения, природные ресурсы и т.д.) и нематериальная (патенты, промышленные образцы, товарные знаки, «ноу-хау», промышленные права и т.д.); ключевые слова определения соответствуют действующей законодательной базе. с точки зрения направленности инвестиции можно разделить на следующие виды: инвестиции, осуществленные при создании или покупке предприятия; инвестиции на расширение (экстенсивные инвестиции), направляемые на увеличение производственного потенциала; инвестиции на рационализацию, направляемые на модернизацию или реконструкцию технологического оборудования или процессов; инвестиции на диверсификацию, связанные с изменением номенклатуры продукции, созданием новых видов продукции и организацией новых рынков сбыта; инвестиции в научные исследования, связанные с исследованиями и разработками, подготовкой кадров, рекламой, охраной окружающей среды; инвестиции, которые обеспечивают использование заказу государственного или иного крупного заказчика; инвестиции, которые направляются на удовлетворение требований государственных органов; инвестиции, которые направляются на пополнение оборотных активов. вследствие того, что инвестициями считают средства, за счет которых формируется предприятие, они становятся неотъемлемыми от самого процесса их вложения, который и называют инвестиционным процессом или инвестиционной деятельностью. под инвестиционным процессом понимается процесс вложения инвестиций  – выбор наилучшей альтернативы, проектирование, создание и эксплуатация объекта инвестирования (financial management, 1998). субъектами инвестиционной деятельности являются юридические и физические лица, которые принимают решения и осуществляют вложения собственных, заемных или привлеченных средств в форме инвестиций в инвестиционный проект и обеспечивают их целевое использование. в качестве инвесторов могут выступать органы, уполномоченные управлять государственным и муниципальным имуществом или имущественными правами; граждане, предприятия, предпринимательские объединения и другие юридические лица; иностранные юридические и физические лица, государства и международные организации (the law of ukraine «on investment activity», 1991; 1998). принципиально важной сутью есть, вложения в понятие «инвестиционный комплекс». попробуем подробнее раскрыть ее. инвестиционный комплекс принято трактовать как совокупность отраслей экономики, обеспечивающих ее потребность в основных фондах. главной отраслью инвестиционного комплекса следует считать строительство, потому что продукцией капитального строительства является, подготовлены к введению в действие основные фонды и производственные мощности. вокруг строительства формируется комплекс сопряженных отраслей и производств, которые охватывают главные обрабатывающие предприятия (the law of ukraine «on leasing», 1998; 1999). основными факторами воспроизводства инвестиционного комплекса есть ресурсы на-накопление и инновационное обеспечение. поддержка на определенном уровне источников накопления служит основным условием функционирования и развития всех факторов экономики. в свою очередь, источники накопления нормально воспроизводятся при соблюдении обязательного baltic journal of economic studies 93 vol. 1, 2015 условия: рост масштабов производства должен сопровождаться относительной экономией ресурсов, совершенствованием и повышения эффективности технических систем. если инвестиционный комплекс, материализуя финансовые ресурсы накопления в средства труда, обеспечивает в процессе нового строительства и модернизации действующих предприятий достижения этих результатов, он наряду с другими секторами экономики зарабатывает средства для расширенного воспроизводства. таким образом, саморазвитие инвестиционного комплекса возможен только при наличии мощной инновационной сферы, постоянно обновляет его техникой и технологией все новых и новых поколений. если же рост показателей новой техники оказываются недостаточными, чтобы компенсировать объективную тенденцию к росту издержек производства в целом, то для выживания инвестиционного комплекса не остается другого выбора, кроме опережающего, по сравнению со средними по народному хозяйству темпами повышения цен на свою продукцию. именно последний вариант и получил законченное воплощение в последние годы функционирования планово распределительной экономики. инвестиционный процесс определяется в литературе (gitman l., junks m., 1997) как механизм сведения вместе тех, кто предлагает деньги (имеет временно свободные средства), с теми, кто предъявляет спрос (нуждается в них). обе стороны обычно встречаются в финансовых институтах или на финансовом рынке. иногда, в частности при сделках с имущественными ценностями (например, с недвижимостью), продавцы и покупатели вступают в соглашение напрямую. финансовые институты  – организации (банки), которые принимают вклады и дают привлеченные деньги в кредит, или инвестируют в других формах. финансовые рынки – это механизм, который для заключения сделок сводит вместе тех, кто предлагает финансовые ресурсы, с теми, кто их ищет, как правило, с помощью посредников  – финансовых рынков: рынок акций, рынок облигаций. их общей особенностью является то, что цена финансового инструмента в любой момент находится в равновесии спроса и предложения. таким образом, отличительная черта инвестиционной сферы в промышленно развитых странах состоит в том, что формирование инвестиционной стратегии происходит на уровне корпораций. механизм принятия и реализации инвестиционных решений напрямую связан с финансовой ответственностью самих предприятий. это обстоятельство превращает инвестиционную деятельность в инструмент реализации нововведений, с которых начинается разработка проектов на альтернативной основе в конкурентной рыночной среде. инвестиционную политику корпораций главных капиталистических стран в последние десятилетия определяли поиски принципиально иных технологических решений для выхода из кризиса, а не привлечения дополнительных ресурсов. если не вдаваться в рассмотрение этой проблемы, диссертанту хотелось бы подчеркнуть, что ограничение притока капитальных ресурсов при повышении их качества, эффективности их распределения и использования  – важнейшая особенность современных инвестиционных процессов в развитых странах. для оценки возможных объемов и приоритетных направлений в инвестировании особое значение имеет точное определение состояния инвестиционного потенциала страны или региона. для этого используем анализ инвестиционного климата. инвестиционный климат – это совокупность политических, социально-экономических, финансовых, социально-культурных, организационно-правовых и географических факторов, характеризующих страну, регион с точки зрения преимущества и эффективности размещения капитала (karandakova i., 1998; matviychyk g., 1999). но, поскольку инвестиции региона или государства формируются по инвестициям отдельных предприятий, здесь не рассмотрены факторов инвестиционного процесса. поэтому мы предлагаем ввести понятие «инвестиционная среда», которое будет включать как систему внутренних факторов (субъективных, которые зависят от организации производства и менеджмента предприятия) и внешних (объективных, которые формирует естественное, политически-экономическом, научно-техническом, демографическое среды страны). под инвестиционной средой понимают совокупность действующих субъектов и сил, влияющих на изменение эффективности инвестиционной деятельности. наряду с понятием «инвестиционный климат» мировая практика знает и термин «инвестиционный риск», который указывает на степень отталкивания инвесторов от вложения средств в данную страну или регион. иногда инвестиционный риск, не имея структурных различий, служит показателем, обратным инвестиционному климату. иногда он включает в себя только негативные факторы инвестиционного климата, отталкивающих потенциального инвестора. термин «потенциал» (от латинского слова potentia) обычно трактуется как «сила», «мощность». этот термин употребляется для обозначения средств, запасов и источников, имеющихся в наличии, которые могут быть использованы для достижения определенной цели, решения определенной проблемы, а также возможностей отдельного лица, общества, государства в соответствующей отрасли. понятие потенциала тесно связано со структурой целей и определяется как «совокупность возможностей» предприятия. под потенциалом предприятия (отрасли) принято понимать совокупность показателей или факторов, характеризующих его (ее) силу, источники, возможности, средства, способность, ресурсы, которые могут быть использованы в экономической деятельности (a large economic dictionary, 2002). соглашаясь в принципе с вышеприведенным подходом трактовки понятия «потенциал», по нашему мнению, неправомерно сужать его к характеристикам только baltic journal of economic studies 94 vol. 1, 2015 производственных резервов. в работе рассматривается инвестиционный потенциал в контексте резервов всех направлений деятельности предприятия (отрасли). под инвестиционным потенциалом будем понимать интегрированную совокупность всех имеющихся материальных и нематериальных активов, используемых для осуществления инвестиционной деятельности. в  рыночных условиях к инвестиционному потенциалу могут быть отнесены все ресурсы, которые обеспечивают достижение конкурентных преимуществ предприятия путем внедрения инвестиций (рис. 1). учитывая стратегический характер решений, инвестиционный потенциал важно оценивать с учетом особенностей внешней среды и выявлением в нем стратегических возможностей исследуемого объекта. по результатам мониторинга инвестиционного потенциала предприятия (отрасли) можно разработать приемлемую стратегию инвестиционного развития, с помощью которой при реализации инвестиционного потенциала достигаются цели и миссия объекта. 3. оценка инвестиционного потенциала предприятий данной отрасли обеспечение устойчивого экономического роста любого предприятия требует, среди прочего, постоянного осуществления инвестиций в его развитие. в частности это касается отечественного аграрного сектору, большинство предприятий которого требует существенного технического перевооружение на базе внедрения новых технологий и замены устаревших основных средств. вместе с тем, ограниченность объемов собственных инвестиционных ресурсов и затрудненность доступа к кредитным источникам финансирования, обусловливает необходимость выбора приоритетных направлений инвестирования развития аграрных предприятий и обоснование рациональных размеров инвестиций по каждому инвестиционном проекте (hryshko v., 2010). в то же время, чтобы быть привлекательным для потенциальных инвесторов, пред-приятие должно характеризоваться наличием внутренних и внешних возможностей привлекать и использовать инвестиционные ресурсы для своего развития и обеспечивать максимизацию экономического эффекта субъектам инвестирования за минимального инвестиционного риска (boyarko i., 2008). то есть инвестиционный потенциал определяет совокупную способность предприятия осуществлять инвестиционную деятельность, а эффективность этой деятельности детерминируется уровнем и объемом использование этого потенциала (berezhnaya i., 2010). инвестиционная привлекательность аграрного предприятия характеризуется совокупностью показателей его финансово – экономического состояния, на основе анализа которых потенциальный инвестор может принять управленческое решение по целесообразности вложения свободных средств в развитие этого предприятия без значительного риска их потери или неполучения ожидаемого дохода на инвестированный капитал (mordvintseva t., 2010). актуальность оценки уровня инвестиционной привлекательности предприятий определяется рядом условий, важнейшим среди инвестиционный потенциал материальных ресурсов интеллектуальный потенциал основных средств основное и вспомогательное оборудование; компьютерный парк; транспортные средства; здания и сооружения, передаточные устройства; библиотечный фонд. нематериальных активов патент; авторское право, права на дизайн; производственные секреты (ноу-хау); товарные знаки, знаки обслуживания. оборотных активов запасы, товары; векселя полученные; дебиторская задолженность; текущие финансовые инвестиции; денежные средства и их эквиваленты; прочие оборотные активы. маркетинговых ресурсов маркетинговый опыт; репутация предприятия; клиентурная база; приверженность потребителей; портфель заказов; франшизные соглашения; лицензионные соглашения. земли с учетом ресурсов, которые могут добираться управленческоинфраструктурных ресурсов организационная структура; концепции управления; коммуникационные сети; информационные технологии; партнерские отношения с поставщиками и посредниками филиалов основных средств; оборотных активов; земли трудовых ресурсов образование; уровень квалификации; профессиональные способности; профессиональные навыки; психометрические характеристики рис. 1. потенциалообразовывающие составляющие инвестиционного потенциала промышленного предприятия baltic journal of economic studies 95 vol. 1, 2015 которых является интенсивность изменения факторов внешней инвестиционной среды, а именно высокая динамика основных макроэкономических показателей, связанных с инвестиционной активностью предприятий, темпы технологического прогресса; частые колебания конъюнктуры инвестиционного рынка; непостоянство государственной инвестиционной политики и форм регулирования инвестиционной деятельности. исследуя инвестиционную привлекательность субъектов хозяйствования, целесообразно рассматривать ее с позиции обеспечения возможности реализации инвестиционного потенциала предприятия. инвестиционная привлекательность и инвестиционный потенциал являются своеобразными формами взаимодействия инвестиционного интереса и инвестиционной потребности. если учесть, что инвестиционные потребности и инвестиционный интерес находятся у определенном противоречии (желание получить существенные доходы при минимальных вложениях), то самое взаимодействие между инвестиционной привлекательностью и инвестиционным потенциалом раскрывает внутренний механизм осуществления инвестиционной деятельности как движущей силы развития производства. при этом инвестиционная привлекательность является общей характеристикой преимуществ и недостатков инвестирования отдельных направлений и объектов с позиции конкретного инвестора (boyarko i., 2008). также целесообразно выделять понятие инвестиционной привлекательности группы предприятий, которая представляет собой средневзвешенную оценку уровня инвестиционной привлекательности предприятий, входящих в группу, с учетом их относительной величины, масштаба деятельности и степени значимости. современные методики оценки инвестиционной привлекательности групп предприятий представлены преимущественно отраслевым анализом или на основе территориальной принадлежности (zhukov m., 2010). основные структурные элементы инвестиционной привлекательности субъектов хозяйствования и их взаимосвязи представлены на рис. 2, который объясняет логику аналитических подходов, использованных в данной разработке методики оценки инвестиционной привлекательности субъектов хозяйствования. при этом тесно связанными с инвестиционной привлекательностью такие понятия: 1) инвестиционный потенциал субъекта хозяйствования  – совокупность финансово  – экономических ресурсов, которые могут быть привлечены за счет всех ( внешних и внутренних ) источников финансирования, и факторов, которые создают необходимые условия для обеспечения желаемого уровня его инвестиционной активности, оптимального использования этих ресурсов с целью достижения стабильного финансово  – экономического функционирования данного субъекта хозяйствования и роста эффективности его деятельности (epifanov a., 2007); 2) инвестиционная активность субъекта хозяйствования – интенсивность привлечение долгосрочных инвестиций в капитал предприятия (epifanov a., 2007); 3) инвестиционный риск субъекта хозяйствования  – вероятность неполной реализации инвестиционного потенциала, следствие действия объективных неблагоприятных условий инвестиционной деятельности, формирующих вероятность финансовых потерь дохода от инвестиций или уменьшение капитала (narolina y., 2009). 4. вывод в связи с отсутствием четкого формирования понятия «инвестиции» и относительной новизной данного срока для современной отечественной науки, автором предлагается альтернативное определение инвестиций как экономических ресурсов, изымаемых из текущего оборота одного субъекта хозяйствования и направляются на формирование в необоротных и оборотных активов другого с целью получения различного рода выгод. таким образом, оценка инвестиционной привлекательности аграрного предприятия является необходимым условием для выбора дальнейшей финансовой стратегии его развития, обоснование целесообразности осуществления капитальных вложений. рациональные управленческие решения при этом должны быть направлены на повышение качества инвестиционного потенциала предприятия путем согласования улучшение пропорций между его компонентами, динамичного и гибкого развития внутренней структуры и усиление проблемной ориентации по системе стратегических целей развития. инвестиционная привлекательность – факторный признак (х = ƒ(х1;х2)) инвестиционная активность субъекта хозяйствования – результативный признак (y = ƒ(х)) инвестиционный риск х2 инвестиционный потенциал х1 уровень реализации инвестиционной привлекательности субъекта хозяйствования – отношения инвестиционной активности к инвестиционному потенциалу (е = y/x) рис. 2. механизм взаимодействия инвестиционного потенциала и инвестиционного риска субъекта хозяйствования 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(1998). forming the investment climate in ukraine and ways of its improvements forgiveness // economy. finance. right. – № 5. – p. 42-48. инна канашкина экономическая сущность современного инвестиционного процесса на предприятиях зерноперерабатывающей промышленности аннотация. предметом исследования является теоретическая и методологическая основы формирования приоритетов эффективного инвестирования в зерноперерабатывающей промышленности украины. объектом исследования является инвестиционый процесс в зерноперерабатывающей промышленности украины, основные направление и путь повышения эффективности инвестиционного процесса в отрасли. целью работы является развитие комплексного подхода к исследованию экономической сущности инвестиций, совершенствование методики определения их эффективности, исследование факторов инвестиционной среды, обоснование методики определения предпринимательского риска, разработке предложений из приоритетных направлений инвестирования в зерноперерабатывающей промышленности, формирование эффективной инвестиционной стратегии для ее развития в условиях рыночных трансформаций. методика. в работе использованы следующие методы: диалектический, абстрактно-логический, экономико-статистический и системно-функциональный методы познания экономических процессов. диалектический метод позволил автору проанализировать развитие объекта исследования в течение последних пяти лет, выявить резервы и предложить пути его дальнейшего развития. абстрактно-логическим методом отработанные классификация факторов, влияющих на повышение эффективности развития инвестиционного процесса в отрасли, методические подходы к формированию составляющих понятийного аппарата исследуемой категории. экономико-статистический метод применялся при изучении и обобщении тенденций и закономерностей динамики развития предприятий отрасли на современном этапе. системно-функциональный метод позволил обобщить теоретико-методологические основы повышения эффективности развития зерноперерабатывающей промышленности. в исследовании также использовались методы: сравнительного анализа – для сравнения фактических данных отчетного и предыдущих лет; модельного подхода – для определения предпринимательского риска на предприятиях отрасли; экспертных оценок и стоимостных подходов при определении основных направлений и путей повышения эффективности развития зернопереробной промышленности страны в условиях трансформации экономики. baltic journal of economic studies 97 vol. 1, 2015 результаты исследования. на основе анализа современных подходов к условиям активизации инвестиционной и инновационной деятельности, постоянного повышения ее эффективности сделан вывод о создании добросовестной конкуренции. цивилизованная конкурентная среда способствует тому, что каждая доля инвестиций в сочетании с инновациями дает положительный эффект  – увеличивает количество рабочих мест и объём продукции, снижает стоимость единицы продукции. значительные инвестиционные ресурсы для отрасли могут быть привлечены путем приватизации, при условии, если она станет прозрачной и конкурентной. для привлечения инвестиций в такую важную для украины отрасль, необходимо понимать и повышать мотивацию инвесторов с учетом евроинтеграционных процессов: основных перспективных рынков сбыта продукции и услуг; благоприятное географическое положение объектов инвестирования; повышение своей конкурентоспособности путем организации производства на территории стороны, которая принимает инвестиции; низкая стоимость рабочей силы при ее высокой квалификации. baltic journal of economic studies 4 vol. 2, no. 4, 2016 theoretical approaches to assess efficiency of the transformation of the key business processes in the publishing and printing activities in the region volodymyr bazyliuk1 ukrainian academy of printing, ukraine abstract. the purpose of the paper is the theoretical study and the analysis of the basic methodological approaches to assess the effectiveness of the transformation of key business processes in the ppa (publishing and printing activity) in the region in order to choose the best option. methodology. the overview of the main assessment methods of the effectiveness of business processes: eva (economic value added); abc (activity-based costing); tableau of bord and bsc (balanced scorecard) is provided. in order to ensure the formalization of the intergrated assessment of the effectiveness of the business process in the publishing and printing activities in the region it is suggested to apply to the methodological apparatus of the fuzzy sets. statistical analysis, comparison and synthesis are necessary to study the efficiency of the transformation of the key business processes in the ppa in the region. results. the review and analysis of the most common methods for evaluating the effectiveness of the transformation of key business processes were conducted; the basic advantages and disadvantages of each of the proposed methods in the light of ppa were studied. it was proved that a single business process involves the use of a scorecard that is specific and peculiar for it only whereas completeness of its analysis depends on the kind of the business process: basic, developmental, managing or providing one. the approach to the formalization of the integrated assememnt of the effectiveness of business process in ppa in the region, based on the theory of fuzzy sets was formulated. practical significance. the mathematical formulation of the problem, an integrated assessment of the efficiency of the business process for each of the possible options for its implementation was developed, and the algorithm of assessing the effectiveness of the business process in the ppa in the region was generated by the apparatus of fuzzy sets. value/originality. implementing the proposed approach allows to formalize and numerically evaluate the effectiveness of each of the options of the transformed business processes. key words: business process, assessment, efficiency, publishing and printing activity, region. jel classification: o11, l82, r10 corresponding author: 1 department of enterprise economics and marketing in military industrial complex, ukrainian academy of printing. e-mail: bvb.uad@ukr.net 1. introduction problems of the quantitative assessment of the effectiveness of a certain business process, that is the local criterion of its adaptation to institutional changes have not been finally solved in the scientific literature. therefore, the main area in solving this problem is to analyze the theoretical and methodological approaches to the identification and the development of the modern tools for evaluating the effectiveness of the business process. to determine the feasibility of transforming a certain business process in the ppa in the region as well as to select one of the possible options for these changes, an approach that would give an opportunity to evaluate its effectiveness quantitatively is required. the summary of the gained experience in the design and applying the approaches to the quantitative assessment of the level of business process efficiency indicates that no common methodology is present nowadays as not only a list of performance but also the methods of their quantitative measurement indicators vary. 2. methods of assessing the effectiveness of business processes before conducting an analysis of the current approaches to evaluation it is noteworthy to underscore the essence of the business processes transformation, which is a set of measures aimed at optimizing, that is, improvement of efficiency, productivity and competitiveness of the existing business processes and ensuring the general sustainable development of ppa in the region. the feasibility of the assumptions made by us is also proved in the papers of other researchers who point out that the purpose of improving the efficiency baltic journal of economic studies 5 vol. 2, no. 4, 2016 of business processes is improving the functioning of a system of business processes in the business entities and, consequently, improvement of their competitiveness and strategic development, (harrington, esseling & van nimvegen, 1997). however, this approach is quite limited as we find that it does not take into account such important aspects as time and technical aspects. there is a number of methods for evaluating the effectiveness of business processes, which are widely used in the world. we consider that the following ones should be paid special attention at: eva (economic value added); methods of cost analysis of business processes abc (activity-based costing); tableau of bord methodology and the balanced system of indicators bsc (balanced scorecard). we study the pecualirities of applying each of them. thus, the eva methodology focuses on the fact that all business processes can be divided into two components: the first one adds the value for the product cost, and the second one does not increase its use value, (mäkeläinen & roztocki, 1998). it is adding value by the business process that is generally used as the main incentive for its implementation. in correspondence with the presented approach, there is an assessment of the business process that adds value by means of a specific indicator, defined by the ratio of market value and incurred costs of producing goods. however, under such circumstances, the proposed method is effective for the assessment of key business processes and development processes only, and applying this approach for the evaluation of providing business processes in ppa in the region that do not relate to the processes which add value directly is impractical. another widely-spread method of evaluating the efficiency of business processes is a method of cost analysis of the abc processes, which includes planning and calculation of the cost of a business process based on the definition and preparation of the costs for activities that ensures this process, (kaplan & cooper, 1997). abc method is an effective way to evaluate the use of resources and processes and can be used separately from the comprehensive assessment of qualitative and quantitative indicators. however, a significant drawback of this approach is that the process is usually implemented in several different units, so that gaining information on the spent income and the resources for each of them is a complicated task. the next method that is considered by us is tableau of bord, which is one of the oldest integrated methods of managing the efficiency of the complex socioeconomic systems and is based on the approach of building a hierarchical tree of indexes through their decomposition, (epstein & manzoni, 1997). the main advantage of this method lies in the possibility of forming a tree of target and functional indexes. thus, target indexes are primatily applied at the upper levels of the tree, and functional ones are used at the lower and middle ones. despite the advantages of the possibility of the evaluation of business processes at every level of the complex socio-economic system and the formation of various groups and flexible performance, this technique has some drawbacks, namely, difficulties in ensuring a certain equilibrium in the system parameters. this problem could be partly solved by bsc, another well known and more frequently used technique, formulated by d. norton and r . kaplan, (kaplan & norton, 1996). the main principal feature of bsc compared to other approaches was the division of the entity activity in four areas: finance; customers; internal processes and staff. however, due to the peculiarities of ppa in the region there is complexity for the application of this technique to evaluate the effectiveness of business processes. it is primarily predetermined by the complexity of assessing such direction as customer efficiency. therefore, a part of subjects of ppa in the region is engaged in the implementation of the business process associated with the production and sale of packaging and labels, whereas the consumers of such products is mainly processing industry. under such conditions, the relationship between producers and consumers of products are usually long-term, and the change in product sales channel is rare. in its turn, it will lead to the fact that client assessment will be based on an analysis of a small number of consumer labels and packaging and, accordingly, its outcomes can not find out the noneffective business processes as a result of the analysis. nowadays, the methodology for assessing the efficiency of business processes formed to determine the key performance indicators is widespread. therefore, in this area, one of the most common evaluation techniques of a business process is kpi (key performance indicator), which consists of a set of indicators that help to determine the degree of success as a result of the business process implementation or the level of achieving its objectives. in correspondence with this technique, the approach to lean production lies in the basis of ranking business processes, (oliver, delbridge & barton, 2002), and the efficiency of business processes is evaluated according to four criteria: the degree of completeness of customer service (speed of business process, content of the work on its implementation, etc.); performance of the business process; the cost of the business process; quality of the business process. 3. the system of indicators to measure the efficiency of business processes experience as well as represented approaches show that effective assessment of the business process can be ensured only on the basis of a system of indicators; baltic journal of economic studies 6 vol. 2, no. 4, 2016 we believe that it should consist of a set of indicators that will provide a comprehensive and complete characterization of the analyzed business process in ppa in the region. in this case, this assessment will be local, because its function is analyzing activities under a single business process. we consider that every single business process involves the use of a scorecard that is specific and peculiar to it only, and completeness of its analysis depends on the type of a business process: basic, developmental, managing and providing one. therefore, we believe that the system of indicators to measure the efficiency of transformation as a basic business process, and its lower levels of the hierarchy should be as much complete as possible. however, regardless of the specific assessment of each of the effectiveness of the business process under consideration, and efficiency criteria should be the basis of a local assessment system for absolutely all business processes. consequenly, within the quantitative indicators of business processes efficiency, the use of the following indicators is suggested to be taken into account in the regional ppa: • cost indicator, which means that figures show the value of the cost of resources used in the business process and profit earned on the sales of products that are manufactured in this process, (spieß, nguyen, weber, markovic & beigl, 2008). indicators of this group are considered to be the most important because they directly reflect the efficiency of business processes in the terms of value. the abovementioned abc method became widespread in the analysis of cost indexes. as a rule, under the application of the method, the following indicators are applied: the amount of the resources needed for the process; resources received by the output process (ready-made products) and the value of resources used for the specific functions of the process. we find that a large number of resulting indicators for each group determines inconsistency in determining the importance of an indicator in comparison with others that has a negative impact on quality assessment. thus, for the purpose of the formation of an effective evaluation system of the ppa business processes in the region, we consider the combination of indicators noteworthy. therefore, the cost evaluation of the business process can be carried out based on the index, which is calculated by the ratio of the output in the specific business process to the resource costs incurred in its implementation; • technical indicator includes indexes that characterize the equipment and technologies used in the implementation of a business process. technical parameters serve as a basis for the formation of specific technical indicators to assess business process (eg, production per worker, the degree of automation of the process and the cost of using new technologies, etc.). it should be notified that because of the technological features, different groups of indicators that meet the requirements of the current analysis of the business process effectiveness can be formed. so, given the outlined promising areas of business transformation process of production and sales in the ppa in the region, it was found out that under the changes in the institutional environment, considerable interest to change lies in the technological plane (the use of new types of printing (digital, electrographic types and significant impact on the development of information technology). taking it into consideration, we believe that since the assessment of the business process of production and marketing is carried out, the indicator that would combine the implementation of publishing and printing products and the costs of implementing new technologies should be applied. therefore, this indicator is proposed to be calculated by the ratio of sales (both the one that was produced by means of new technology and equipment and the one that was sold in e-commerce) to the cost of implementing new techniques and technologies; • time indicators that show time efficiency in the business process, reveal the odd functions of the process and determine the downtime. in order to analyze the performance of the proposed system it is necessary to form a system of time tracking as performance of each business process must be regulated and compared with the established norms. it should be noted that for ppa and business process in the production and sale of publishing and printing products, in particular, a system of norms and standards for the regulation of this process is valid, and a significant reserve for improving the efficiency of production is the reduction based on the application of innovative approaches of working time (including unproductive one) and reducing the time of the cycle of production and sales. thus, the measure, which would assess the effectiveness of the business process in the time aspect is the time of the cycle of production and the sales of publishing and printing products. as a rule, in a variety of valuation techniques of different economic phenomena, quantitative indicators are applied because the qualitative ones are not considered accurate and are largely subjective, so that they receive less attention. however, w. deming argued that managing an economic entity only on the basis of actual figures without paying enough attention to quality indicators that are not measurable means catching a "deadly disease" of management, (deming, 2007). therefore, we believe that a balanced system of evaluating the effectiveness of business process in ppa in the region, qualitative indicators should be taken into account along with the quantitative ones. besides the abovementioned quantitative indicators, we propose to consider taking into account the following quality indicators in the methodology: • the quality of the process, that is, meeting the production requirements of customers; it reflects the baltic journal of economic studies 7 vol. 2, no. 4, 2016 level of conformity of the product and the reference product with market expectations. thus, we consider process quality as the property of products obtained through the implementation of business process to meet customer requirements, printing and publishing market; • adaptability, a feature of the process to meet the future, constantly changing and specific customer requirements. we believe that this criterion should be viewed more broadly, taking into account not only consumers but also the entire operation of the ppa environment. at this point, the importance of this criterion in adapting ppa in the region to institutional changes is suggested. it is predetermined by the fact that it does not matter how much perfect the process is in terms of efficiency and prospects; if it can not adapt to the existing institutional framework, it undergoes further transformations and ceases to function in the previous form. the basis of the proposed methodology for assessing the efficiency of business processes is the following: conceptual apparatus, performance evaluation, evaluation methods and algorithms for the calculation of performance based on design. regarding the first two points, they are sufficiently developed in the scientific literature that makes us resolve the last two tasks, which are characterized by considerable uncertainty. 4. method of forecasting complex social and economic systems an effective tool for solving problems concerning the prediction of complex social and economic systems with a significant level of uncertainty is the theory of fuzzy sets, (zadeh, 1965). in the dynamic environment, the theory of fuzzy sets is widely used to solve applied problems in the economy and suggests promising and appropriate use of fuzzy sets in solving some of the problems to assess the effectiveness of business processes. in order to study the usefulness of this approach we cite the main tenets of the theory of fuzzy sets. suppose that v is a complete set that consists of a certain class of objects, and c is a fuzzy subset of the set of v, which is calculated by the n function [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= (1) and displays all the elements t of the totality c on the set of real numbers of the interval [0,1] that indicate the degree of affiliation of each element of the fuzzy sets (aggregate) c; [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= – fuzzy assessment of the j-th object of study, [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= , (2) [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= . (3) evaluation of the functions that belong to the j-th criterion is based on the formula: [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= , (4) where tji is the value of j-th local parameter of the estimation of the i-th variant of the business transformation process, and the symbol "/" means the property of belonging of the element that is after the symbol. for the purpose of the proposed approach for the formalization of an integrated assessment of the efficiency of the business process in the ppa in the 1. choosing and preparing a list of local indicators to measure the efficiency of business processes (ti) 2. numerical evaluation of the indicators the performance criteria of the business process (tij) for each of the proposed options of business process transformation in the regional ppa 3. formation of membership functions for each of the proposed evaluation criteria 4. numerical evaluation of membership functions for each of the proposed criteria 5. operation clotting 6. calculation of total numerical value of assessing the effectiveness of the business process 7. interpretation of the results fig. 1. algorithm for evaluating the effectiveness of business process in the regional ppa based on the fuzzy sets baltic journal of economic studies 8 vol. 2, no. 4, 2016 region we propose a mathematical formulation of the problem, an integrated assessment of the efficiency of the business process for each of the possible options for its implementation. assume the existence of a number of options for implementing business process and a list of evaluation criteria. thus, the evaluation criteria are local (qualitative and quantitative) indicators of the business processes efficiency that characterize some of the concepts and the assessment of alternatives is the degree of compliance with the concept. estimates of the options of the business process for each j-th criteria are fuzzy sets cj. then, folding rule will be the following: [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= , (5) where d is the intersection of the fuzzy sets, which is calculated by the formula: [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= . (6) bi index is calculated by the formula: [ ]1,0)( ∈= tc cµ с∈v, { }jcc = )( jcj tc jµ= { }/)( jijicj ttc jµ= jnjncjijicjjcjcj ttvvttvvtttc jjjj /)(.../)(.../)()( 11 µµµµ == )(min)( ijcijd tt jµµ = mciticicd 21= )(min ijdi tb jµ= . (7) therefore, the implementation of the proposed approach allows to formalize and numerically evaluate the effectiveness of each of the options for the transformed business processes. we find that the fulfillment of the set task is necessary to make the following algorithm (fig. 1). another advantage of applying this approach is the possibility of modeling the situation development. in addition, on the basis of the conducted research and analysis on the articles by the leading experts on optimization and evaluation of business processes, the level of consistency of thoughts which was assessed and defined as very high, the parameters that characterize the main directions of efficiency, namely, cost, technical, time quality and adaptability must be selected from the totality. in future, in order to conduct a full assessment under the proposed areas on the basis of the parameters, it is necessary to form a system of performance evaluation that should be a subject of the further research. 5. conclusions the summary of the existing methods that are widely used in practice allows us to offer our own vision on such parameters as assessment as a modern tool of solving problems in assessing the efficiency of business processes; later, it will lay the basis for our proposed methodological approach. the suggested system of evaluating the effectiveness of key business processes in the regional ppa should consist of two groups of indicators: quantitative indicators that include the quantities that can be measured directly and qualitative indicators, that is, the measurement that is ensured indirectly through peer reviews, which increases their subjectivity in most cases. thus, the presented approach to the application of fuzzy set theory to formalize an integrated assessment of the efficiency of the business process in the regional ppa and formed mathematical formulation of the problem, an integrated assessment of the efficiency of business process allows us to conduct this assessment and choose the best option from the set of represented variants of transformation. references deming, u. e. (2007). novaya paradigma upravleniya lyudmi, sistemami i protsessami – moscow, alpina business books, 370 p. epstein, m. j. & manzoni, j.-f. (1997). the balanced scorecard and tableau de bord: translating strategy into action. management accounting, vol. lxxix, no. 2, p. 28-36. harrington, j., esseling, e., van nimvegen, h. (1997). business process improvement workbook: documentation, analysis, design and management of business process improvement – new york, mcgraw-hill publishing, 314 p. kaplan, r . s. & norton, d.p. (1996). the balanced scorecard: translating strategy into action – boston, hbs press, 269 p. kaplan, r .s. & cooper, r . (1997). cost and effect: using integrated cost systems to drive profitability and performance – harvard business school press, 357 p. mäkeläinen, e. & roztocki, n. (1998). economic value added (eva) for small business. retrieved from: http://www.evanomics.com/download/evaspres.pdf oliver, n., delbridge, r ., and barton, h. (2002). lean production and manufacturing performance improvement in japan, the uk and us 1994-2001. esrc centre for business. retrieved from: www.netec.mcc.ac.uk/wopec/ data/papers. spieß, р., nguyen, d., weber, i., markovic, i. & beigl, m. (2008). modelling, simulation, and performance analysis of business processes involving ubiquitous systems. caise, р. 579-582. zadeh, l.a. (1965). fuzzy sets. information and control, v. 8, p. 338–353. baltic journal of economic studies 9 vol. 2, no. 4, 2016 владимир базилюк теоретические подходы к оценке эффективности трансформации ключевых бизнес-процессов в издательской и полиграфической деятельности в регионе аннотация. целью работы является теоретическое обоснование и анализ основных методологических подходов к проведению оценки эффективности трансформации основных бизнес-процессов ипд (издательско-полиграфической деятельности) в регионе с целью выбора наиболее оптимального варианта. методология. проведен обзор основных методик оценки эффективности бизнес-процессов: eva (economic value added) abc (аctivity-based costing) tableau of bord и bsc (balanced scorecard). с целью формализации интегрированной оценки эффективности бизнес-процесса издательско-полиграфической деятельности в регионе предложен методологический аппарат теории нечетких множеств. статистический анализ, сравнение и обобщение – для изучения эффективности проведения трансформации бизнес-процессов ипд в регионе. результаты. обобщены наиболее распространенные методики оценки эффективности трансформации основных бизнес-процессов, рассмотрены основные преимущества и недостатки применения каждой из предлагаемых методик через призму ипд. доказано, что отдельный бизнес-процесс предусматривает применение специфической и присущей только ему системы показателей, а полнота его анализа будет зависеть от того, к какому виду относится бизнес-процесс: основной, развития, управления или обеспечивающий. сформирован подход формализации интегрированной оценки эффективности бизнеспроцесса ипд в регионе, основанный на теории нечетких множеств. практическое значение. осуществлена математическая постановка задачи – интегрированной оценки эффективности бизнес-процесса для каждого из возможных вариантов его реализации и разработан алгоритм оценки эффективности бизнес-процесса ипд в регионе на основе применения аппарата теории нечетких множеств. значение/оригинальность. реализация предложенного подхода позволяет формализовать и численно оценить эффективность каждого из вариантов бизнес-процессов что трансформировались. baltic journal of economic studies 55 vol. 1, 2015 main trends of derivatives’ market development in central and eastern europe kostiantyn vozianov1, kyiv national economic university named after vadym hetman, ukraine abstract. the aim of the study is to examine the factors of formation and development of the derivatives market in central and eastern europe (cee), to analyze the features of the organization and functioning of these markets, as well as to identify modern trends of development of the derivatives markets of cee. the methodological basis of the study are historical and logical and systematic approach to the analysis of economic phenomena and processes in national and global environment. the study was conducted using the methods: qualitative and quantitative comparison, factor and structural analysis. results. the development of the cee derivatives market is characterized by: rapid growth of derivatives trading for the past two decades; high concentration of trading volumes on the stock market; offering a wide range of derivative products allowing investors to effectively hedge risk or get exposure; exchange consolidation; tendency to increased use of modern telecommunication technologies etc. the key problems of cee derivatives market are low liquidity and international profile of exchanges and the lack of domestic investors for achieving the desired depth of the market. practical implications. research of the derivatives market makes it possible to understand more about the mechanism of functioning of the modern financial sector. in our opinion, special attention should be paid to cee countries, where the development of the derivatives market began in the 1990s. to date, they are understudied, although they have considerable growth potential and in the future can compete on equal terms with western european and american markets. moreover, the starting conditions of development of the derivatives market in the cee countries are more similar to the market of ukraine and could be useful in terms of adapting good practices. key words: derivatives market, futures, options, stock exchanges in central and eastern europe, exchange-traded derivatives, exchange consolidation, trading system. jel classification: f30, f29, g100 corresponding author 1 department of international finance, kyiv national economic university named after vadym hetman. e-mail: kostya8282@gmail.com 1. introduction derivatives markets have become an important part of the global market in general and the international monetary and financial relations in particular. with the participation of the derivatives market, the process of risk management has become more sophisticated, it will bring the world’s monetary and financial relations to a higher level of development. world trade in derivative financial instruments provides the integration of regional capital markets and, consequently, helps participants of the world economy to reduce existing risks and to focus on further development of international trade and monetary relations. this reduces risk and balances international capital flows. traditional instruments of international investment, such as loans, bonds, stocks and foreign direct investment can be potential sources of foreign exchange, interest rate, market and credit risks for both lenders and borrowers. derivatives make foreign investment attractive and thus contribute to the international movement of capital and create more opportunities for diversification of investments. globalization processes, which not only quantitatively but also qualitatively change the system of international economic relations, significantly influence the structure of the european stock market and its individual segments. given the integration and investment priorities of economic development of ukraine, studies of modern trends of development of the derivatives market in central and eastern europe (cee) are becoming increasingly important, since fixed-term contracts rank first among the various risk management tools in financial markets. research of the derivatives market makes it possible to understand more about the mechanism of functioning of the modern financial sector. in our opinion, special attention should be paid to cee countries, where the development of the derivatives market began in the 1990s. to date, they are understudied, although they have considerable growth potential and in the future can compete on equal terms with western european and american markets. moreover, the starting conditions of development of the derivatives market in the cee countries are more similar to the baltic journal of economic studies 56 vol. 1, 2015 domestic market and could be useful in terms of adapting good practices. the aim of the study is to examine the underlying factors of formation and development of the derivatives market in central and eastern europe, to conduct a comparative analysis of the characteristics of the organization and functioning of these markets, as well as to distinguish modern trends of development of the derivatives markets of cee countries in terms of globalization. 2. features of cee derivatives market functioning the central and eastern european region is rightly considered to be a rapidly developing one. the derivatives market in these countries started to develop due to several factors, which have equally contributed to its popularization in the recent past. among these factors, the following should be highlighted: a focus on risk management; an increase in the range of small and institutional investors’ awareness of derivative securities and all possible benefits associated with their use; thorough and effective legal framework (schröder, köke, 2003). exchange derivatives trading is popular in the cee countries. the stock market, in contrast to the otc, provides greater standardization of trade, better coherence of settlement mechanisms that reduce the degree of financial risk, and a developed interbourse system of electronic communication. together with the developed markets of the world, stock exchanges in the show a tendency to increased use of modern telecommunication technologies. just 25 years ago, it was impossible to imagine a growing derivatives market in central and eastern europe, because stock markets were mothballed. upon return to the market economy, the countries of central and eastern europe (poland, romania, slovakia, czech republic) immediately began to implement structural reforms and therefore have made significant progress. this group of countries is characterized by rapid overcoming of the economic recession of 1992-1994 and gradual economic growth at a steady pace. one of the fundamental factors of creation of the derivatives market in these countries was the government policy. government policies in the countries of the central and eastern europe after the emergence of derivatives markets have been well thought-out and coherent, carried out in several stages, addressing specific, clearly defined tasks within the overall strategy to promote the development of the market and in the context of the overall reform of the financial sector. a feature of the derivatives markets of cee countries is that they have developed under constant supervision and control of the state, which used the experience of other countries. shortly after the resumption of the stock exchanges, derivatives have appeared. in hungary, futures trading began on the budapest stock exchange in 1996. the first instruments were futures on currencies and interest rates. poland began derivatives trading on the warsaw stock exchange (wse) in 1998, launching futures on the wig20, the calculation of which includes the 20 largest and most liquid companies (so-called blue chips) listed on the stock exchange. to date, these two exchanges continue to dominate in derivatives trading in cee, while warsaw remains the leader. many economists believe that the warsaw stock exchange is the only market characterized by liquidity. in its region this market leads both in the development of the derivatives market, and in attracting a significant number of retail investors. the warsaw stock exchange is the only place in central and eastern europe, which offers investors a wide and diversified range of derivatives. starting with one product only in 1998 the wse offers now a wide range of derivative products allowing investors to effectively hedge risk or get exposure. the offer includes index, single-stock, currency and interest rate futures, index options. wse keeps broadening its offer in an effort to meet investors’ needs (warsaw stock exchange. (2012). derivatives, structured products, etfs short selling on the warsaw stock exchange). the rapid growth of derivatives trading for the past two decades proves the potential of the cee region. resistance of the etd (exchange-traded derivatives) market amid the global economic downturn is also a confirmation of the potential of the region as a whole. however, if the derivatives market in cee wants further dynamic development, it is necessary to work on the harmonization of the regulatory policy and new product development and innovation in the work of exchanges. despite the fact that all exchanges are regulated by the markets in financial instruments directive, and the european union provides a framework regulation, the legal systems of each country are different from each other and each market develops its own set of rules and regulations. the key problems of cee exchanges are low liquidity and international profile. the only exception is the polish market. stock exchanges experience a lack of derivatives market instruments, so participants most often concentrate their operations on ordinary shares. another problem is the lack of domestic investors in order to achieve the desired depth of the market. this aspect repels large institutional investors. 3. exchange consolidation one of the trends that swept the region in the early 21st century is a wave of mergers and acquisitions on the stock exchanges of the cee region, the growing interest on the part of west european exchanges in the region, holding of a controlling stake of several exchanges in the region by one holding company. thus, the vienna stock exchange began its expansion in the cee market in 2004. together with the austrian banking consortium it acquired shares of the budapest stock exchange, thereby laying the foundation of cee stock exchange community. in june 2008, wiener börse baltic journal of economic studies 57 vol. 1, 2015 ag (the company owning the vienna stock exchange) acquired the shares of ljubljana stock exchange, and shares of the prague stock exchange were purchased in november. thus, the existing strong alliance of stock exchanges in central and eastern europe was finally formed in 2008. it includes: vienna (100% stake), budapest (50.45% stake), ljubljana (100% stake) and prague (92.74% stake) stock exchanges. in september 2009, the brand «cee stock exchange group» (ceeseg, group of stock exchanges in central and eastern europe) was officially launched. this policy strengthens the position of all four exchanges, takes them on a different level of development, and in the future will help occupy an internationally acceptable niche (cee stock exchange group. (2015). the holding company ceeseg ag) especially from a derivatives perspective, wiener börse’s creation of the cee stock exchange group has gone a long way to consolidate the landscape in eastern europe. of the four exchanges combined under the umbrella, all but ljubljana offer derivatives. along with the acquisitions, wiener börse has been integrating the data feeds from budapest, ljubljana and prague into its own data feed. in september 2009, vienna launched the ceeseg traded index (ceetx) of the 25 most actively traded shares across its markets, and the ceeseg composite index, which includes all the stocks in each market’s index (futures & options world. (2010). cee: rivals vie for the space between frankfurt and moscow (2010, november 30). in january 2010, the four exchanges were transformed into subsidiaries of the holding company cee stock exchange group, which is dominated by vienna. also in 2010, the project of joint data dissemination of all ceeseg members thus has been fully completed. in september 2011, four ceeseg sector indices and three ceeseg top dividend indices were launched. in december 2013, the budapest stock exchange launched the trading platform xetra and thus became the fourth ceeseg member, alongside ljubljana, prague and vienna, to be operating on this internationally recognized trading platform. xetra is now the uniform trading platform for the cee stock exchange group. this marks another milestone in the harmonization of the group’s technical infrastructure. the market capitalization of the group, consisting of the four exchanges, reached 132.9 billion eur in july 2015. this is almost half of the total market capitalization in the cee region. vienna accounts for the largest share of the group capitalization: about 87,7 billion eur (cee stock exchange group (2015), budapest – ljubljana – prague – vienna. key figures june 2015). the primary objective of cee stock exchange group is to strengthen and provide domestic positioning of the capital markets at all ceeseg member exchanges. the mediumand long-term goal is to raise liquidity and to strengthen international profile of all stock exchanges of the group. 4. derivatives market development in cee (by exchanges) the history of the budapest stock exchange’ (bse) derivatives segment began in 1996 with the trades in index futures and some foreign exchange futures. in 1998, there appeared futures on single stocks. soon, the bse offered a full range of equity options and futures and currency futures. the most popular, accounting for about 30% of trading, is bux index future. another third comes in single stock futures, while 40% currency futures (budapest stock exchange. (2015). annual statistics 2014). the number of contracts on the bse has grown from 0.07 million in 1996 to 11.8 million in 2011 (see figure 1). 0 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 14 000 000 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 volume source: budapest stock exchange fig. 1. budapest stock exchange derivatives annual volume 1996-2014 (no. of contracts) as defined previously, cee stock markets have a common problem of activity of exclusively national retail investors in the market. foreign investors are simply not interested in the market, so the capabilities of the derivatives market are rather limited. the depth of the market is not sufficient, so the activity is due to speculative operations of retail investors. management of the bse hopes that the participation in the ceeseg will help it to achieve the scale economy, although it understands the tremendous inner work that should be done. despite the current lack of liquidity, the bse’s ambition is to draw on its market not only members of wiener börse, but also the european investment community in general. in december 2013, on the occasion of the exchange’s new trading platform launch the stock exchange trading was ceremonially opened by mr. mihály varga, minister for national economy. that day the new xetra trading system replaced the system that has been in use for 15 years (mmts, multi-market trade system). with the introduction of the new platform companies listed on the hungarian exchange are linked to the traders and investors of 18 european countries while hungarian investment providers and investors have direct access to thousands of new instruments, thereby the possibility of further market baltic journal of economic studies 58 vol. 1, 2015 expansion opens up (budapest stock exchange. (2015). brief history of the exchange). the prague stock exchange (pse) introduced futures in september 2006. they include futures on single stocks and px index, which includes 14 shares of the main market. yet, it is worth noting that trade in derivatives on an exchange is not very active. in general, according to the exchange’s management, the market is not used to the derivatives. trade in prague is carried out by national institutions. the prague stock exchange (pse) wants to increase activity in the derivatives market through marketing and awareness-raising activities, but agrees that liquidity on the stock exchange is inadequate and domestic investors, who know about the tools of the derivatives market, are too conservative to use them in trading on the exchange. in background of insufficient liquidity the prague stock exchange has no plans of any further product development in derivatives in the near future. in terms of technological development, since 1998, the pse has used its own internal trading system, spad. in november 2012, the prague stock exchange successfully launched the new trading platform xetra, joining other members of the cee stock exchange group running the same trading system. the introduction of the new trading platform will give members of the ceeseg access to the market and vice versa. in connection with the change of the prague stock exchange trading system to the xetra, pse in august 2012 has decided not to list any further futures, considering the fact that products listed in june 2012 would expire after the scheduled transition to xetra, which does not support derivatives trading. all listed products (with maturities in june 2012 and september 2012) were expired according to their standard maturity dates. new products will be listed on the eurex vienna platform in line with the intention to consolidate ceeseg derivatives trading within a single market (prague stock exchange. (2015). termination of futures trading on pse (august 06, 2012). management of the pse notes that the key benefit of participation in the cee stock exchange group for members of their exchange and other member exchanges will be interrelation between all markets. as of march 2014, the vienna stock exchange (wiener börse ag) will no longer offer trading in derivatives. this decision was taken at meeting of the supervisory board of wiener börse ag in september, 2013. the vienna stock exchange reached the decision to discontinue trading in derivative market products for economic reasons. options and futures on austrian stocks have been traded since 2006 on the eurex exchange  – one of the world’s largest markets for derivatives. the austrian exchange will now focus on its equity and bonds markets going forward, along with continuing its services in index development. wiener börse calculates and publishes 89 indices with 66 related to cee (central and eastern europe) and cis (commonwealth of independent states) markets (futures & options world. (2014). vienna stock exchange exits derivatives trading (march 24, 2014). the warsaw stock exchange (wse) is a leading financial instruments exchange in central and eastern europe (cee) and one of the fastest growing exchanges in europe. the markets operated by wse list stocks and bonds of nearly a thousand local and international issuers. the exchange also offers trade in derivatives and structured products, as well as information services. close to 25 years of experience, high safety of trading, operational excellence and a broad range of products make wse one of the most recognized polish financial institutions in the world. the capitalization of wse at the end of 2014 was 15,1% bigger than the total capitalization of all ceeseg exchanges put together.wse is the cee leader by the number of listed companies (domestic and international). the main market listed 471 issuers and new connect listed 431 issuers at the end of 2014. post-trade services including depository, clearing and settlement services are offered by wse’s associate, the central securities depository of poland (kdpw), and its subsidiary kdpw_ccp (warsaw stock exchange. (2015). about gpw). as of 15 april 2013, the warsaw stock exchange operates a system (utp) which meets top global standards, addresses growing expectations of market participants and ensures organization of trading in line with global trends. utp developed by nyse technologies is well known to international investors and brokers on the world’s biggest markets – this trading platform is used by the nyse euronext stock exchanges in new york, paris, lisbon, amsterdam and brussels, as well as many stock markets. warsaw pulls plug on vienna merger talks (september 24, 2014). compared to the legacy system, utp is much faster, more efficient and scalable, and offers much enhanced performance: it can handle several dozen times more orders in the same time. with utp, the polish capital market opens up to new groups of investors including large global investment firms engaged in algorithmic trading. algorithmic trading already accounts for 40 to 60 percent of all trade globally and its share is most likely to grow further. this presents an opportunity for growth and gives local exchange members a chance to increase their 0 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 14 000 000 16 000 000 1998 2000 2002 2004 2006 2008 2010 2012 2014 volume source: warsaw stock exchange fig. 2. warsaw stock exchange derivatives annual volume 1998-2014 (no. of contracts) baltic journal of economic studies 59 vol. 1, 2015 revenues with the implementation of innovative solutions (warsaw stock exchange. (2015). utp – new trading system on the warsaw stock exchange). the polish story has attracted substantial interest from abroad. since january 1998, the derivatives market in poland has shown an incredible leap in the development and is the most reliable and dynamic market in its region (see figure 2). the number of contracts on the wse has grown from 0.02 million in 1998 to 15.1 million in 2011. cee market investors show interest in the events on the warsaw stock exchange (wse). they constantly monitor the dynamics of derivatives based on the polish stock index wig index and equity futures. the strong points of the derivatives market in poland, according to players, are large population, strong economy, domestic demand and financial community of the country. it is believed that poland has reached a certain depth of the market and gained the necessary experience that enables further market growth. even the management of the stock exchange does not consider it a national one, because the very strategy of its development goes beyond the national boundaries. in matters of the market liquidity, poland has succeeded in comparison with other cee exchanges. regulatory environment in terms of derivatives in poland is developing, but remains more conservative than its western neighbors. although, if you look at the total turnover of the stock exchange and the total open position, warsaw is head and shoulders above austria, hungary and the czech republic. one of the problems faced by poland, is that its regulatory framework largely prevents pension funds from derivatives trading. despite recent progress of the wse, net profit of the exchange decreased by 13.2% in the first quarter of 2012 compared to the same period last year. the fact that investment firms, asset management companies and pension funds are not involved in derivatives trading due to lack of proper legislative regulation, became a factor limiting the growth of the derivatives market as a whole. however, the wse’s strategy covers not only national borders; it also beyond the cee region. the management of the exchange states that the wse sees ukraine and belarus as the two most important regions for itself. given that these countries have inefficient capital markets, warsaw wants to offer everything of interest for the region under one roof, i.e. at the wse. future on the wig 20 index is the stock index future that is sold most actively in europe. the exchange offers the widest range of instruments of the derivatives market throughout the cee region and it sees many benefits in combining several markets trading in stocks, bonds and derivatives, under one roof. later, the exchange plans to cover the options market as well. the wse’s strategy is aimed at attracting companies in cee and their listing on its exchange, not on other stock exchanges in the region. today, there are 23 foreign companies included in the list of the wse’s main market and 3 listed on the stock market new connect, two of which from the czech republic and one from bulgaria. 5. exchanges cooperation in cee thus, cee stock exchange group does not consider the warsaw stock exchange as a competitor and shows its interest in cooperation with it. thus, the management of the budapest stock exchange believes that the project of the cee stock exchange group is not a challenge to warsaw, but rather an attempt to reach a higher level in terms of liquidity, risk level and international profile for all member exchanges. it is rather improvement and development of the markets of individual countries and the cee region as a whole. economically, poland is a very mature market, which will be increasingly reflected on its own derivative market. hungary offers little real potential for growth by itself but as part of the ceeseg it could have an impact on how the markets in this region develop. a merger or cooperation agreement between the warsaw stock exchange and ceeseg could boost volumes and drive growth by making investment in the cee region a more lucrative proposition. in april 2013, the warsaw stock exchange and cee stock exchange group were entered into preliminary discussions to explore a partnership. the merger with the vienna stock exchange was a fundamental aspect of wse’s 2020 strategy. but in september 2014 the warsaw stock exchange has drawn a line under its proposed merger with vienna’s cee stock exchange group to form a regional powerhouse, saying the wse management has opted instead to focus on “organic growth” (futures & options world. (2014). warsaw pulls plug on vienna merger talks (september 24, 2014). a merger or cooperation agreement between the warsaw stock exchange and ceeseg may be a perspective of derivatives market development in central and eastern europe. 6. conclusions globalization processes, which not only quantitatively but also qualitatively change the system of international economic relations, significantly influence the structure of the european stock market and its derivatives market. the development of the cee derivatives market is characterized by: high concentration of trading volumes on the stock market; developing under constant supervision and control of the state; rapid growth of derivatives trading for the past two decades (budapest and warsaw stock exchanges continue to dominate in derivatives trading in cee, while warsaw remains the leader); baltic journal of economic studies 60 vol. 1, 2015 conscious support of the demand for resources of the stock market through regulation of institutional investors’ activities and creating conditions for participation of households in the market; provision of an appropriate legislative framework for the functioning of the market, which guarantees the protection of the rights of players; offering a wide range of derivative products allowing investors to effectively hedge risk or get exposure; tendency to increased use of modern telecommunication technologies. the key problems of cee derivatives market are low liquidity and international profile of exchanges and the lack of domestic investors (for achieving the desired depth of the market). especially from a derivatives perspective, wiener börse’s creation of the cee stock exchange group (vienna, budapest, ljubljana and prague stock exchanges) has gone a long way to consolidate the landscape in eastern europe. the main aim of cee stock exchange group is to raise liquidity and to strengthen international profile of all stock exchanges of the group. cee stock exchange group does not consider the warsaw stock exchange as a competitor and shows its interest in cooperation with it. a merger or cooperation agreement between the warsaw stock exchange and ceeseg could boost volumes and drive growth by making investment in the cee region a more lucrative proposition. it may be a perspective of derivatives market development in central and eastern europe. references budapest stock exchange. (2015). annual statistics 2014. retrieved from http://bse.hu/topmenu/trading_data/ stat_hist_download/periodical_statistics/stat_fig.html?pagenum=15 budapest stock exchange. (2015). brief history of the exchange. retrieved june 17, 2015 from http://bse.hu/ topmenu/about_us/history cee stock exchange group (2015), budapest – ljubljana – prague – vienna. key figures june 2015. retrieved from http://www.ceeseg.com/static/cms/sites/ceeseg/en/media/pdf/facts-figures.pdf cee stock exchange group. (2015). the holding company ceeseg ag. retrieved june 17, 2015 from http:// www.ceeseg.com/about/organization-structure/ futures & options world. (2010). cee: rivals vie for the space between frankfurt and moscow (2010, november 30). retrieved from http://www.fow.com/2723404/cee-rivals-vie-for-the-space-between-frankfurt-and-moscow. html.html?keywords=poland futures & options world. (2014). vienna stock exchange exits derivatives trading (march 24, 2014). retrieved from http://www.fow.com/3322644/vienna-stock-exchange-exits-derivatives-trading.html. html?keywords=vienna+stock+exchange+exits+derivatives+trading+ futures & options world. (2014). warsaw pulls plug on vienna merger talks (september 24, 2014). retrieved from http://www.fow.com/3383505/warsaw-pulls-plug-on-vienna-merger-talks.html prague stock exchange. (2015). termination of futures trading on pse (august 06, 2012). retrieved from https:// www.pse.cz/novinky/detail.aspx?ka=2696 schröder, michael and jens köke (2003), the prospects of capital markets in central and eastern europe, eastern european economics 41, no.4, 5-37. warsaw stock exchange. (2012). derivatives, structured products, etfs short selling on the warsaw stock exchange. retrieved from http://www.gpw.pl/pub/files/pdf/artykul/derivatives_structured_products_etf_2012.pdf warsaw stock exchange. (2015). about gpw. retrieved august 10, 2015 from http://www.gpw.pl/o_spolce_en warsaw stock exchange. (2015). utp – new trading system on the warsaw stock exchange. retrieved august 10, 2015 from http://www.gpw.pl/trading_system_utp константин возианов основные тенденции развития рынка деривативов центральной и восточной европы аннотация. целью исследования является изучение факторов становления и развития рынка деривативов в странах центральной и восточной европы (цве), анализ особенностей организации и функционирования данных рынков, а также определение современных тенденций развития рынков производных ценных бумаг стран цве. методологической основой исследования являются историко-логический и системный подходы к анализу экономических явлений и процессов в национальной и глобальной среде. исследование проведено с использованием методов: качественного и количественного сравнения, факторного и структурного анализа. результаты показали, что развитие рынка деривативов цве характеризуется: стремительным ростом торговли деривативами на протяжении последних двух десятилетий; высокой концентрацией объемов торгов на биржевом рынке; расширением числа инструментов, которые позволяют инвесторам эффективно хеджировать риски; консолидацией бирж; тенденцией к переходу baltic journal of economic studies 61 vol. 1, 2015 бирж на использование современных телекоммуникационных технологий и др. ключевыми проблемами рынка деривативов цве являются низкая ликвидность и международный профиль, а также недостаточное количество внутренних инвесторов для достижения необходимой глубины рынка. практическое значение. исследование рынка производных ценных бумаг дает возможность понять механизм функционирования современного финансового сектора. особого внимания, на наш взгляд, заслуживают страны цве, где развитие рынка деривативов началось в 90-х годах прошлого века. на сегодняшний день они остаются недостаточно изученными, хотя имеют значительный потенциал роста и в будущем могут конкурировать на равных с западноевропейскими и американским рынками. более того, условия, в которых начиналось развитие рынка деривативов в странах цве, являются несколько схожими с рынком украины и могут быть полезными с точки зрения адаптации положительного опыта. baltic journal of economic studies 110 vol. 7 no. 2, 2021 corresponding author: 1 yuriy fedkovych chernivtsi national university, ukraine. e-mail: v.kyfyak@chnu.edu.ua orcid: https://orcid.org/0000-0002-6104-6403 researcherid: d-3608-2016 2 yuriy fedkovych chernivtsi national university, ukraine. e-mail: a.antochov@chnu.edu.ua orcid: https://orcid.org/0000-0003-3887-9666 researcherid: d-1664-2016 3 yuriy fedkovych chernivtsi national university, ukraine. e-mail: s.todoriuk@chnu.edu.ua orcid: https://orcid.org/0000-0003-4399-5952 researcherid: c-6830-2016 doi: https://doi.org/10.30525/2256-0742/2021-7-2-110-117 business model as a value management tool viktoriia kyfyak1, andrii antokhov2, serhii todoriuk3 abstract. urgency of the research. in the crisis conditions of quarantine, business modelling has become the subject of scientific debate and demand from businesses. applying conservative approaches to business models has caused significant financial losses and depreciation of business value. thus, value models that reflect the assessment of various business processes in monetary terms are becoming especially relevant. therefore, managers understand the synergetic effect of the procedural approach to business processes construction and the component contribution of business processes in achieving the goals of the enterprise. the research purpose is the improving of the scientific principles and development of a methodical approach to improvement of scientific bases and the formation of a business model from a value point of view, which has practical significance for the formation of a vision of business development. uninvestigated parts of general matters defining. in the conditions of social crisis and fluctuations, many tools of business development and its business modelling have lost their relevance. businesses need to find the latest approaches to business structuring and development. research methodology. the basis of the study is a systematic analysis and a comprehensive approach to the formation of methods for building a cost-effective business model of the enterprise. analysis and synthesis were used to characterize approaches to business modelling and determine their features, and the dialectical method was used to formulate the essence of the category “business model”. using statistical methods allowed to get trends in the business and its modelling analysed. for a complex representation of the model, a graphical method was used (for visualization of the model) and economic mathematical modelling for the representation of the model, which has practical significance in the trends of digitalization of business processes. results. the article substantiates that the formation of a value business model is a prerequisite for a radical rethinking of business approaches, creating the potential for its development and a starting point for innovation and change. after analysing different approaches to business modelling and to estimating the value of business on the basis of a systematic approach, a value business model is proposed, which consists of a value rhombus and a square of potential. this model includes all business processes of the enterprise and assesses the potential of business development. practical implications. the business model and clear well-defined mechanisms of its formation are a necessary requisition for business development. scientists are often inclined to think that a business model is a complex mathematical or econometric expression. however, in practice, it is the graphic visualization of the business structure that is important in terms of forming a deep understanding of business as a system and areas for improving its components. value/originality. the proposed approach to business modelling can be used in the following areas: evaluation of business efficiency as an individual enterprise, and in comparison as well; assessment of investment attractiveness of the business; assessment of business potential and directions of its development; analysis of the market potential of the enterprise; strategic analysis of business development and determination of its competitive advantage; a basis for the software or systems of the workflow class development. key words: business model, valuation, development potential, business development, system approach. jel classification: m21, c18, l22, o21, c02 baltic journal of economic studies 111 vol. 7 no. 2, 2021 1. introduction uncertainty and new social challenges require business structures to seek and apply the latest management approaches. to maintain a competitive position, most businesses implement innovative tools that have proven their effectiveness in the business. in modern conditions, such tools that are effective in conditions of fluctuations have become a process approach, digitalization and flexible forms of management. in order to maintain profitable positions, entrepreneurs must form a new business model based on a comprehensive approach to internal and external factors. the approach to business valuation, which takes into account both the financial and economic results and the ability of the enterprise as a system to operate in conditions of fluctuations, also needs to be reconsidered. most studies focus on the modernization of business processes of the enterprise, delaying the core business – the business model. as practice shows, most business structures that operate without being aware of the business model and not paying enough attention to setting up a business system, do not occupy a leading position in the market and their profitability is unstable. conversely, companies that focus on system connections, mission definition, and business structure make a profit and are market leaders. due to the growing level of uncertainty, the business modelling process has become much more complicated, and the business value dynamics analysis has become an important component of management. the enterprise management system in crisis conditions should be based on cost approaches to management decisions. a sound business model is a tool for research and business development at the same time. underestimation of the validity of business models has led such companies as nokia, motorola, kodak, lehman brothers, etc. to the crisis. and the constant focus on the effective construction of business processes based on cost management, aimed at increasing the value of the business offer is the key to the success of all well-known companies that operate today. therefore, the formation of a business model based on a systems approach is an applied tool for achieving goals by business structures. and in the fluctuating conditions of management, the developed business model is a competitive position holding tool, which is relevant for enterprises in modern conditions. 2. analysis of recent research and publications in times of crisis caused by quarantine, business modelling has become the subject of scientific debates and business structures demand. today, the business model is a central link in business fashion trends such as digitalization, business engineering and reengineering. the increase in interest is due to both the changes that have taken place in society due to quarantine restrictions, and the development of a systematic approach in scientific circles and in practice. scientists study the business model from different perspectives, for example: – conceptual aspects of business modelling (maucuer, renaud, 2019; stephan von delft, yang zhao, 2020); – business model as a tool for doing business (badenfuller c., mangematin v., 2013), and a strategic vision of the business model (casadesus-masanell, enric ricart, 2010); – business model as a description of the organization and analysis of its activities (george, bock, 2011; johnson, christensen, kagermann, 2008); – business model as a starting point of business engineering, reengineering and transformations (nelson, winter, 1982; schneider, spieth, 2014). – business model in terms of creating business value (zott, amit, 2007; costa climent, darek m. haftor, 2021). the canvas business model (osterwalder, pigneur, 2013) is the most popular today. it is characterized by clear visual representation and ease of understanding. stof, csoft, visor models are also well-known and used in practice. their distinguishing feature is a procedural approach to business modelling. in the stof model (bouwman h., de vos h., haaker t., 2008), the object of study is the service provided by the enterprise. the model includes such components as supply cost, service, technology, organizational structure and financial component. the csoft business model (heikkilä, tyrväinen, heikkilä, 2010) is based on the analysis of customers, service, organizational structure, technology and finance. this methodological approach evaluates alternative business models within one business structure. the main components of the visor business model (pateli, giaglis, 2004) are business elements that include an innovative approach and flexibility of solutions (cost proposition, interfaces, service platforms, organization model and revenue model). the article is based on the hypothesis that the purpose of any activity and transformation (including modelling) is to increase and maximize the growth of the value of the enterprise. thus, copeland t., koller t., murrin j. (2000) argue that the main task of managers is to manage value through the evaluation of business components. arnold g. (1998) defines the elemental structure of the concept of value management. skott m. (2005) offers a method for determining the main components of value. damodaran a . (2012) identifies the relevance and practical approaches to valuing companies. baltic journal of economic studies 112 vol. 7 no. 2, 2021 however, there are a number of studies of sustainable development modelling of the enterprise (a combination of economic, social and environmental components of business). in the context of sustainable development, which is a necessary prerequisite for the enterprises functioning, business model constructing is made by (abdelkafi, täuscher, 2016; boocken, nmp, rana, short, 2015; boons, laasch, 2019; lüdeke-freund, rauter, pedersen, nielsen, 2020). modern literature reviews should include the development of companies for business modelling, such as deloitte and pwc. the business model is seen as a way to structure business processes. in the conditions of social crisis and fluctuations, many tools of business development and its business modelling have lost their relevance. enterprises need to find the latest approaches to business structuring and development. the purpose of the study is to improve the scientific basis and develop a methodological approach to the formation of a business model in terms of value, which is of practical importance for the formation of a vision of business development. 3. research methodology the basis of the study is a systematic analysis and a comprehensive approach to the formation of methods for building a cost-effective business model of the enterprise. analysis and synthesis were used to characterize approaches to business modelling and determine their features, and the dialectical method was used to formulate the essence of the category “business model”. using statistical methods allowed to get trends in the business and its modelling analysed. for a complex representation of the model, a graphical method (for visualization of the model) and economic mathematical modelling for the representation of the model, which has practical significance in the trends of digitalization of business processes, were used. 4. materials and methods rapid changes in consumer demand and the development of competitors necessitate the consideration in the business model of long-term forecasts of the status and market conditions and resource opportunities of the business, its qualitative and quantitative parameters. a reasonable assessment of the business will provide an opportunity to establish effective communication with partners, investors and other counterparties, to form a competitive advantage of the business and consumer value. in a crisis, synthetic models that combined different methods of business management and evaluation were particularly effective. the flexibility of business management as a competitive advantage in the crisis was especially acute. applying conservative approaches to business models has caused significant financial losses and depreciation of business value. thus, cost models that reflect the assessment of various business processes in monetary terms are becoming especially relevant. therefore, managers understand the synergetic effect of the procedural approach to business processes construction and the component contribution of business processes in achieving the goals of the enterprise. according to the resource practical ecommerce (armando, 2014), 8 out of 10 online stores cease operations. at the top of the main reasons there is the lack of strategy, vision or competence. that is, a business model and clear precise mechanisms for its formation are a necessary condition for business development. business model development is a conceptual description of the enterprise’s activity and its value. it is a constant process of measuring resource, labour and social capital. that is, this process involves two stages: model formation and adjustment. in business modelling, a methodical approach, consistency and understanding of basic analytical methods are important. what is really difficult is to find effective ways to present abstract concepts on paper, such as data flows, metrics, the sequence of operations in processes and the relationship between. researchers are often inclined to think that a business model is a complex mathematical or econometric expression. however, in practice, it is the graphic visualization of the business structure that is important in terms of forming a deep understanding of business as a system and areas for improving its components. the formation of a business model in terms of valuation has a number of features: – the monetary dimension of the business reflects the potential for development; – valuation of business processes shows which of them are the most important and how to develop it; – this model shows the value of relationships, – assessment of the value of the business on the proposed components allows you to structure the data in electronic format (for example, in excel and 1c); – forms the investment attractiveness of the business. there are two approaches to assessing the value of a business: procedural and functional. the founder of the process approach is m. hammer and j. champy (1993), who described the construction of business processes focused on the consumer (the external aspect of the enterprise). therefore, the value of a business is largely assessed by the extent to which the business structure meets consumer demands and takes into account the market potential of its development. such models emphasize the creation of entrepreneurial value for consumers. baltic journal of economic studies 113 vol. 7 no. 2, 2021 the functional approach focuses on the analysis of the internal structure and cost of technologies and resources. here the schemes of increase of value of the enterprise are considered. based on this, most definitions of the term “business model” can be divided into two categories focused on: 1. market value for consumers and partners namely focused on the environment. according to this approach, a business model is an idea of how an enterprise makes (or intends to make) money. the business model describes the value that the company offers to different customers, reflects its competencies, the list of partners needed to create, promote and supply this value to customers, the capital ratio needed to obtain sustainable income flows. 2. resource potential – assessment of internal resources and capabilities, namely focused on the internal environment. the first approach corresponds to the procedural model of building business processes, the basis of which is the focus on consumers and the formation of consumer value of products in each business process. the second is a systems design approach, according to which the enterprise is a set of elements in the interaction, communication and structure of which are the object of modelling. from the above approaches to the business model, it can be seen that the set of features that make up the meaning of this term can be quite wide. at the same time, all researchers identify the key elements of the business model that are specific to any enterprise and determine its main content (soolyatte, 2010): – value for external customers, which the company offers on the basis of its products and services; – a system of creating this value, which includes suppliers and target customers, as well as value chains; – assets that the company uses to create value; – financial model of the enterprise, which determines the structure of its costs and ways to make a profit. we believe that it is worth using a comprehensive approach that includes both the value of the enterprise and its consumer value. according to the orientation of time assessment, a distinction is made between the actual value of the business and the potential. actual determines the total value of the business: capital, resources and assets. this methodological approach is traditional. potential assessment includes the cost of development and development potential. despite the importance of these characteristics, these components are not evaluated in practice in terms of value, only on an intuitive level and oral justification. but an integrated approach should include both its real value and business prospects (market potential). we propose to combine all types of approaches to the business valuation model on the basis of systematic and integrated approaches, that is to take into account the resource potential and market value, the actual state and prospects of business development. however, in reality, business models are important only in the case of increasing financial results and achieving a significant economic effect. according to our methodology, in addition to the complexity and comprehensive assessment of business processes, the result of business modelling should be an assessment of the business and its components value. the scheme of complex assessment of the enterprise is shown in figure 1, which shows two components of business value: a value rhombus and a square of potential. the value rhombus reflects the components that have the traditional value expression: intangible assets, capital, profit, and income. the square of potential reflects the basis of business development, i.e., it is a kind of addition to the classic components of value. an integrated approach to business modelling can be used as a tool for the following purposes: 1. evaluation of business efficiency as an individual enterprise, and in comparison. 2. assessment of investment attractiveness of the business. 3. assessment of business potential and directions of its development. 4. analysis of the market potential of the enterprise. 5. strategic analysis of business development and determination of its competitive advantage. 6. market value and the system of formation of this value. let us define a way of cost expression of components of the offered business model by mathematical tools and advanced techniques. 5. cost expression of business model components after analysing the different approaches to the valuation of the components of the model, we propose to apply the following: the value of intangible assets. the accumulation of intangible assets is a steadily growing function that has an autoregressive character. in particular, the determining factors of this process are the current values of assets, the volume of attracted investments and their shocks, return on investment and the amount of depreciation of intangible assets. under such conditions, the market value of assets can be expressed as follows: a a i at t t+ = ( )+ −( )1 1� � β θ (1) where аt+1 is the amount of accumulated intangible assets for the next period; α is a return on investment coefficient; it is volume of investments; θ is an asset depreciation ratio. baltic journal of economic studies 114 vol. 7 no. 2, 2021 the labour costs. from the point of view of the process approach, the labour cost is assessed as a synergistic result of the interaction of members of the workforce. therefore, the model of labour costs will be analysed from the standpoint of team building, taking into account interpersonal relationships in the organization, based on research (dotsenko, sabadosh, chumachenko, 2015). р р р рn= …{ }1 2, , .� � is a quantity of applicants. next, consider a set of functional units, whose employees meet the criteria of this project. f f f fm= …{ }1 2, , .� � is a set of functional departments. let us make the target function of the staff (business team): f v pj maxj k pj p= ∑ ( )→= =1 (2) where v(pj) is the applicant’s pj contribution in group interaction, k is the total number of employees to be involved in the project. s s sєр j mj ={ } =| , , ;� � � �1 (3) u s p nj m j j m = == =1 1 0; � (4) where sj � is the set of candidates represented by one department. the cost of capital will be considered from a systemic point of view, where a necessary aspect in the formation of a business model will be taking into account the factors influencing the capital structure. the econometric linear model of capital structure can be represented in the following general form (hurnak, pryimenko, 2007): k a x a x a xi i i n n i= + +…+ +1 1 2 2 1 ω (5) where a1 , a2 , … � �an is a capital structure of the enterprise at time 1 (dependent variable); х11, х21, ..., хп1 is a set of factors influencing the capital structure of the enterprise at time 1 (explanatory variables); a1 , a2 ,…., an are parameters of the regression of the capital structure; ωi is a stochastic component of the model, respectively. the coefficient of concentration of loan capital (ωi) was used to quantify the dependent variable (capital structure of the enterprise). this indicator reflects the share of loan capital in the total amount of capital used by the enterprise. the selection of factors influencing the capital structure was carried out on the basis of generalization of existing theories of capital structure and practical activities of domestic industrial enterprises (table 1). profit gross, clean market experience based on results strategic map (number of planned years of activity) capital = fixed + working capital own / borrowed market share: revenue / turnover intangible assets: – brand – real estate – databases – licenses – patents business value labour cost: – qualification; – team building, etc. erp information technologies crm, 1c… potential value figure 1. business valuation baltic journal of economic studies 115 vol. 7 no. 2, 2021 market experience. most approaches to business valuation do not take into account such a component as market experience. we believe that this element is important because it determines the competitiveness of the enterprise, qualifications and dedication of staff, image, etc. of course, the effectiveness of the years in which the company operated is important. but, of course, this experience should be taken into account in the business model. the value of market experience is estimated as the number of years multiplied by the discounted profitability of the enterprise in those years. v pr n= * k (6) where pr is the annual net income (profit); nk is the capitalization rate. market share can be considered through the design of future cash flows. the current economic situation and prospects of the enterprise are taken into account when determining the discount rate. methods of discounting future cash flows (net profit flows, dividend payments) v cf r vn n n n =∑ +( ) +=� 1 1 1 (7) where v is the book value of the company; cf is cash flows (net profit, dividend payments) of the company for one time interval; r is discount rate; vz is the residual value of the company in the postforecast period; n is the quantity of time intervals; n is the number of the time interval. the advantages of this technique are the ability to estimate the company’s revenues in the near future. and the main limiting factor is the difficulty of determining the discount rate and the factors that will determine it. the company’s profit is estimated by the method of eva [1]: eva ebit t wacc= −( )−� 1 (8) where eva is an economic value added; ebit is the earnings before interest and taxes; c is the amount of capital; t is income tax rate; wacc is weighted average cost of capital. the indicator of profit before taxes and interest is taken from the “statement of financial performance”. the amount of capital is reflected in the liabilities of the balance sheet (it includes own and borrowed funds). the income tax rate today is 25 percent. the weighted average cost of capital is the average cost of equity and debt capital, weighted by their shares in the overall capital structure (martin j., petty j., wallace, j., 2009): wacc w c t w c w cd d p p e e= −( )+ +� � � � � �1 (9) where wd, wp, we are the share of borrowed funds, preferred shares, equity (ordinary shares and retained earnings) respectively; cd, cp, ce are the value of each of the relevant parts of the capital; t is income tax rate. strategic map. a business model is often identified with a strategy, mistakenly substituting one category for another, or including strategy as one of the components of a business model. this is because the business model is closely linked to strategy. this relationship between the business model and strategy can be illustrated by the “value equation” proposed by m. levy (laudon k . c., traver c. g., 2003): v m s= * , (10) where v is a value; m is a model (a business model); s is a strategy. in the model we offer a valuation of the strategic map to be calculated as the number of planned years of activity multiplied by the discounted profitability of the enterprise for the future planned period. the level of business innovation. the value of the business must take into account, on the one hand, the table 1 factors influencing the enterprise capital structure № factor indicator alternant in the model expected relationship with the dependent alternant (u) 1 profit variability the standard deviation of the company’s net profit per hryvnia of assets х11 negative 2 the efficiency of the enterprise return on assets of the enterprise х21 negative 3 the size of the enterprise the value of the assets of the enterprise х31 positive 4 dynamics of enterprise assets the growth rate of the company’s assets compared to the previous period х41 positive 5 the structure of enterprise assets the share of tangible non-current assets in the total assets of the enterprise х51 positive 6 management’s position on the use of loan capital the share of bank loans in the loan capital of the enterprise х61 positive 7 tax factor the ratio of income tax to net income х71 negative source: (hurnak, pryimenko, 2007) baltic journal of economic studies 116 vol. 7 no. 2, 2021 level of innovation, and the degree of technological structure, on the other hand. a innov tt t= + , (11) where innovt is the level of innovation of the economy; tt is the degree of technological structure. information technology as a value for the company is reflected in the following mathematical expression: i f i p b hrf= ( )− +( ) + +( )1 1 lr (12) where f(i) is the information function of the firm, which determines the volume of its sales depending on the amount of promotion costs. p is the rate of regular maintenance costs of crmsystems; bf is the cost of crm-system of the enterprise; hr is additional economic benefits from the implementation of crm-systems are related to personnel management and speed of execution of decisions; l is value expression of the working time of employees. such tools allow to use software to calculate the component structure of the value of the enterprise and construct its cost model. and effective modelling is the basis for designing innovations, implementing new approaches or applying other changes to improve business processes or business structure. competent business modelling can change the business culture and process management in the company. as a result, the process model becomes a live, relevant and real part of the business and daily activities of the organization (bouwman h., de vos h., haaker t., 2008). 6. conclusions as a result of the study we came to the following conclusions: 1. the formation of a cost-effective business model is a prerequisite for a radical rethinking of business approaches, it creates the potential for its development and a starting point for innovation and change. 2. after analysing different approaches to business modelling and to estimating the value of business on the basis of a systematic approach, a cost business model is proposed, which consists of a value rhombus and a square of potential. this model includes all business processes of the enterprise and assesses the potential of business development. 3. the mathematical expression of model components which correspond to the process approach and cost estimation and can serve as the tool of formation of a software product is offered. 4. the use of such a methodological approach to business modelling creates the following advantages: – a holistic vision of the business as a whole and its structure is formed; – a comprehensive database system about business, its development and necessary changes is created; – use of different types of approaches to modelling: graphic (visual), mathematical and software approach. – is the basis for the development of software or systems of the workflow class; – the chain of causal relations is traced; – such a model forms an understanding of the value of business processes and their relationships; – the model allows to calculate and analyse a number of indicators of economic efficiency of business; – the model allows to analyse the competitive advantages of the business; – the model identifies contradictions and shortcomings of the business structure. prospects for further researches should be the application of the proposed business model using specialized software, understanding of which requires professional featured knowledge. in addition, the model can be modified depending on the areas and types of the activity. references: osterwalder, a., & pigneur, y. 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[the business model is the key to business development based on innovation]. innovation management, no. 1, pp. 6–15. baltic journal of economic studies 51 vol. 8 no. 2, 2022 1 engeneering educational and scientific institution, zaporizhzhia national university, ukraine orcid: https://orcid.org/0000-0002-0719-1546 researcherid: t-2057-2017 2 engeneering educational and scientific institution, zaporizhzhia national university, ukraine (corresponding author) e-mail: vitalina2006@ukr.net orcid: https://orcid.org/0000-0001-9588-7836 3 zaporizhzhia national university, ukraine orcid: https://orcid.org/0000-0002-6757-3124 researcherid: s-9699-2017 doi: https://doi.org/10.30525/2256-0742/2022-8-2-51-58 agile-economy as a factor in improving the digital society valentina voronkova1, vitalina nikitenko2, natalya metelenko3 abstract. the subject of the study is the stabilization of the digital society as a complex social phenomenon, which is dynamically evolving. the purpose of the study is to analyze the theoretical and practical principles of agileeconomy as a factor influencing the stabilization of the digital society, combined with the leverage of managerial influence on its development. to form the concept of agile-economy as a set of methods of nonlinearity, the authors use the theory of complex systems, flexible approaches, self-organization and demonstrate the influence of various factors – stochastic information, instability and uncertainty, which must be overcome to achieve its stability. the methodology of the study includes a set of methods and principles of agile methodology as a type of flexibility and adaptability to the complex conditions of economic development as a complex system under conditions of instability and identifying mechanisms of managerial impact on its changes to improve the digital society. methodology also includes general philosophical methods such as analysis and synthesis, generalization, systematics, structure, historical-logical and comparative analysis. research result. it is defined that the essence of agile-economy is to become flexible, mobile, smart and to help overcome the problems of modern society in today's unstable and crisis conditions. it is revealed that nonlinear thinking leads to flexible approaches to contemporary problems – economic, environmental, social, cultural and requires the development of the concept of agile-philosophy, which was created by the club of rome and is based on a holistic approach to understanding society and addressing the deep crisis of values. the basis of agile-economy is the reorientation of management from hierarchies to network structures, because the 21st century is the era of network structures and network economy, which requires flexible approaches to complex social systems. the practical significance of the study is that agile-economy as a factor in stabilizing society under conditions of instability will contribute to sustainability based on the programming of society based on the balance between man, nature, society on the basis of frugality and inclusiveness. the concept of an agile economy as a stabilizing factor will help unleash the energy of innovation and creativity to stabilize the economy and further its digital development. key words: agile-economy, complex system, nonlinear thinking, digital society, concept of natural resources restoration. jel classifications: a13, b49, o39, p16, p49, z10 1. introduction the relevance of the study lies in the fact that the conditions of crisis development of the economy require comprehension of various problems of entropy, information stochasticity, unpredictability of its development, the significant influence of the environment, which requires adaptation of both organizations and individuals. the current challenges of the fifth industrial revolution (industry 5.0) and the transition to the sixth technological mode in the developed countries of the world show the need to prepare an intelligently developed economy based on digital breakthrough intelligent technologies. employees should already have new digital baltic journal of economic studies 52 vol. 8 no. 2, 2022 competencies, as 80% of professions will be updated in the next decade, skills will change by 42%, and the direction of the it industry will be updated dozens of times. all this requires the formation of the agile economy as the basis for the development of a digital society and the conditions for understanding the current crisis economy associated with the covid-19 pandemic crisis. the latter has affected not only the economy, the pace of which is slow, but also society and the individual, including the preservation of mental health, the satisfaction of basic human needs. agile-economy as a set of new norms, principles, views and values of digital life takes into account the prospects of digital development of the modern economy, the technological breakthrough of the world 4.0, based on the impact of flexible management methods on the digitalization of all spheres of life and sustainable development of society. most researchers recognize the importance of human capital in the new economy, which is the main, intensive force and productive factor of socio-economic development of modern society and the individual. agile-economy as a concept of understanding the modern economy includes changes with respect to modern management based on intellectualization, digitalization, taking into account the environmental crisis and solving all challenges. agile-economy cannot develop without the formation of a flexible management mechanism at all levels, determining the optimal motivation to bring society to a level of stability. the concept of agile-economy is based on an interconnected system of ideas, principles, modern approaches, including the theory of complex systems, flexible approaches to software development, selforganization as a complex social system, determining the impact of various factors – stochastic information, instability and uncertainty, which requires the formation of a roadmap for the agile-economy concept and is becoming increasingly important in advanced countries, which are implementing a methodological approach to the redistribution of investment projects in the enterprise according to established criteria (cherep a., cherep o., et al., 2019). the concept of agile-economy as a factor in stabilizing society under conditions of instability must be based on a mechanism of effective impact on society. it will be flexible, mobile, smart, intelligent, adaptable and will promote stability and readiness to overcome crises in today 's unstable environment, describes ha-yun chang, a well-known economist on developing countries who says that capitalism is a bad economic system, but everyone else is even worse (chang, 2018). the countries' economic prosperity will depend on whether government officials are willing to take a sober look at the problems of this system and improve it. at the heart of the effective mechanism of agileeconomy as an effective achievement of its selforganization – is a new generation of methods, techniques and algorithms of action in the context of achieving the harmonization of society. to fully accomplish this task, business leaders use modeling and programming techniques, software product design and analysis, which seemed to be in perfect harmony with the predominant directive management approaches of the time (a. fayol to apello jurgen). the agile approach to shaping the agile economy has gained popularity in the last decade; its proponents reject the idea that the architecture of complex systems can evolve in a purely linear fashion, following a hierarchical, deterministic "from complex to simple" approach. thus, appelo jürgen argues that the environment in which software products change in the process of software development (software), so it is necessary to develop an orderly (structured) approach to software development management, based on solving complex systems. it should be noted that today there has been an evolution from the classical management of taylor, fayol, follett to modern management, which is called the concept of flexible agile-management 3.0, and it is the basis for the development of agile-economy. the hierarchical management style "from complex to simple", which corresponded to the hierarchical structured approach to the analysis of society, is called the concept of "management 1.0", which is outdated and needs to be updated. linear thinking has led to flawed approaches and results, the use of which is inappropriate today. models of organizations that worked in the context of the concept of "management 1.0 and 2.0" were focused on managing the organization from above, which did not always work. the stage of development, which is called the concept of "management 2.0" and is based on the principles represented by the newfangled concepts of "business process re-engineering", "six sigma", etc., has already been overcome. in today 's world, the classic concepts of management 1.0 and 2.0 are becoming a thing of the past, as complexity concepts that can penetrate the foundations of the digital society and find solutions for the current situation are on the agenda. the concept of "agile-economy " is a direction of topical philosophy of the xxi century, based on the theory of complex systems, aimed at overcoming internal disorder, destructiveness, dissatisfaction with the situation, unpredictability. agile-economy as a practical philosophy perceives the difficulties and paradoxes of human life, tries to form the conditions of exit from the crisis state of the economy and to form the mechanisms of improvement, to form compe tencies for their sustainability. to do this, the leader at all levels should promote the use of agile approaches for planning or controlling the activities of organizabaltic journal of economic studies 53 vol. 8 no. 2, 2022 tions, so that performers build their activities on the scientific approach of complex systems theory, use agile methods as a practical application of the theory of complex systems and promote the formation of team building. the concept of agile-economy is a theory of applying agile methods to social systems, because the main thing for organizations is people and their relationships, rather than departmental structure or profit generation. agile-economy promotes the perception of the organization as a living organism, and the activities of people not as spinners or machines, but as subjects and the treatment of people as a human resource. agile economics shows that organizations need to change, so their implementation requires changing the concept of management 1.0 and 2.0 to 3.0, and for this it must get a sound scientific basis. diamandis peter & kotler stevens, "the future is closer than it looks. how technology changes business, industry and our lives" (2021) emphasizes that the only way not to get lost in this thick forest is constant, continuous education. mentally, a significant increase in productivity makes it possible not to fall behind in progress. it is not possible to lag behind for a second today (dixon patrik, 2021). the nonlinear thinking underlying the agileeconomy concept requires an agile approach to solving current problems – economic, environmental, social and cultural. scientists who promote the interaction of agile-economy and agile-management 3.0 are trying to realize the development of this concept in the context of enlightenment 2.0 ideas, formed by representatives of the club of rome, which are based on a holistic approach and harmonization of relations between society, state, individual, nature, which are formed on the basis of humanistic management. the concept of interaction between agile-economy and agile-management as a determinant of social stabilization is based on the reorientation of management from management hierarchies to network structures. xxi century era is the era of network structures, network economy and network people, which requires flexible approaches to the implementation of complex network systems and organizations, as well as their evolution. that is why it must redefine the concept of classical philosophy, which would influence the way we look at the world, the patterns of behavior, the behavior of people and leaders, and contribute to the well-being and sustainability of society. "it is necessary to train ourselves to look far ahead, to adapt better and to think more intelligently – there is no other way ", says donnelly meadows, denis meadows, jørgen randers in their paper "the limits of growth. 30 years later" (medouz d., medouz d., randers y., 2018). in order to identify patterns, relationships and trends, we can simulate scenarios using the concepts of agile-economy and simulate its development scenarios to achieve sustainable development of society, economy, society, people. 2. theoretical background and literature review due to the work of donnelly medouz, denis medouz, and jorgen randers "the limits of growth. 30 years later" (medouz d., medouz d., randers y., 2018). 30 years because" (medouz d., medouz d., randers y., 2018). the club of rome was one of the first organizations to raise the issue of unsustainable economic growth due to the inability of classical management to solve modern problems. "the limits of growth" is an attempt to outline the prospects for solving the problems of 50 to 100 years, using new agile-management (appelo jürgen, 2019). in addition, the club of rome report focused on increasing the physical impact of economic growth through humanity 's impact on the environment, rather than growth per se. the book "the limits to growth" resonated worldwide and was a huge success. in "the limits of growth", martin robert's work "pure agile" shows that the attitude to innovation was insufficiently adaptive, and also the concept of agilemanagement 3.0 appeared to be unviable (martin robert, 2021). the world3 computer model used in the mit study was rather inflexible and allowed for discontinuous relationships between various parameters, including such parameters as industrial output and pollution. moreover, traditional economic models, linear in nature, cannot solve the problem of the non-linearity of natural systems, such as the climate system. nor are they capable of controlling the development of economies, societies, and people in this direction. during the 1980s-1990s, the message to the club of rome, stated in the "growth trends", was not widely acknowledged and respected. the research of g. maxton j., randers (2017) "in search of goodwill. controlling economic development to reduce unemployment, inequality and climate change" showed that a radical rethinking of the globalized economic system is necessary, posing important questions that have long been ignored (what is the economy for? what is well-being? aren't there any restrictions? how much will be enough? will people be happy when they get everything created by today 's economy?). moreover, today global trends of human development – globalization 4.0, development of techno logical world 4.0, digital society and digitalization, industry 4.0 and even the emergencies 5.0, the new enlightenment 2.0, agile-management 3.0, which greatly increased the development of modern world, modern economy, modern philosophy, baltic journal of economic studies 54 vol. 8 no. 2, 2022 modern democracy. recently, in 2009, a group of 28 internationally recognized scientists led by johann rockstrom and wille steffen introduced a new concept. based on the results of scientific research, the concept stated that human activity has become the main driver of global environmental change, which requires new, flexible management, so the world must transform its production and consumption systems quickly and efficiently. the market cannot solve human problems on its own; government, financial institutions, civil society organizations, and religious communities must be involved in solving them (maxton graham, randers jørgen, 2017). established in 2012, the center for the study of existential risks (cser) at cambridge university in the uk has quickly attracted the world's attention by presenting a number of threats, including existential ones, which may even lead to the extinction of humanity. the group in the voice of sean o'gegertti confirms the development of human-made technologies, which they call "technological surprises." these include: 1) the creation through synthetic biology of viral and bacterial organisms with lethal characteristics and properties that can infect people and spread throughout the world; 2) geoengineering, aimed at "engineering" our climate to reduce or even reverse the most serious effects of its fluctuations; 3) new developments in piece intelligence, which can reach or even surpass the level of human intelligence in a wide range of fields and problems. o'relly t. in his work (" who knows what the future will be", 2018) offers a glimpse into the world of innovators, breakthrough technological ideas, and understanding where modern technology will lead and where people will experience "surprise, sadness, or embarrassment." the solution to these problems can be achieved through the formation of the concept of agile-philosophy, agile-methodology and agile-economy. particular attention should be paid to assimilating the order of the day 17 of the sustainable development goals. ernst ulrich von weizsäcker, anders wijkman, "come on! capitallism, short-sightedness, population, and the collapse of the planet. the club of rome report" (2019) notes that the current world trends are not yet sustainable, our collective home is now threatened by a mortal danger caused by a philosophical crisis, resulting in the need for a "new enlightenment 2". at the heart of these goals is the creation of a world in which development and the application of technology show their flexibility, taking into account climate change, respecting biodiversity, in which wildlife and biodiversity will be protected. recent research confirms that a compromise between socio-economic and ecological goals is indeed necessary, as it is important to create a balance between humans and nature. this requires coming together to create a systematic approach that seeks to rethink the planet's ecological performance and bring it to sustainable development. it is necessary to act now, the world will not wait until all 7.6 billion people can finally reach the new enlightenment, and the agile economy as a factor in improving the digital society will help in this (ross a. the industries of the future, 2017). indeed, the world today has changed along with the ideas that emerged from the familiar phenomena of everyday life: from batteries, cameras and portable devices, the first video games, the creation of microsoft and apple and the growing importance of social media, from the industrial revolution to the present day, people have constantly created and implemented new ways to improve their lives, and this path will go down in history as the path of science and technology, forming new thinking from einstein to the artificial intelligence that changed the world. (oltrade dago, 2021). the new mentality. 3. research objectives the aim of the study is to develop a conceptual model of agile-philosophy as a determinant of social stabilization, affecting the sustainability of the economy in an unstable environment. agile philosophy is based on: 1) the concept of digital society and digitalization; 2) the concept of green philosophy as the basis of green democracy; 3) the development of enlightenment 2.0; 4) the concept of globali zation 4.0; 5) the concept of technological breakthrough 4.0; 6) the concept of industry 4.0 and 5.0. in order to achieve the goal, the following tasks were set: – to analyze the system characteristics of the conceptual model of the relationship between agilephilosophy and agile-economics as a philosophy of change; – to examine agile-economics as a factor in restoring the broken relationship between people and nature, which is the basis of solving all of the problems of nonstate development; – to formulate the concept of renewal of natural resources in a digital society. research methodology – includes a systematic methodology. 4. results a conceptual model of the relationship between agile-philosophy and agile-economics as a philosophy of transition. the basics of the conceptual model of their relationship include: 1) the concepts of digital society; 2) new enlightenment 2.0; 3) globalization 2.0; 4) technological breakthrough 4.0; baltic journal of economic studies 55 vol. 8 no. 2, 2022 5) industry 4.0. agile-economics is formation of creative people and creative elite, which is based on intellectualization, development of human social capital, and cultural transfer of knowledge and information. the concept of agile-economy is the concept of philosophy of change, the basis for the development of agile organizations and agile democracy. the concept of agile-economy is the latest concept and theoretical system capable of changing the world, which is based on: – philosophy of change as the basis for development and change through agile management, which includes a set of ideas, principles, methods, approaches, algorithms of action on the development of modern society in the new millennium on the principles of agile-methodology; – determination to achieve the spiritual goals of world civilization through the prism of philosophy, which is based on the vital evaluation by society of the leading force of agile-philosophy, the managerial elite with a flexible worldview, a way of thinking in the context of the principles of agile-philosophy – the fight against corruption and oligarchization; – the arrival at all levels of government of a new intellectual and creative elite, the trend toward global and historical transformation and change, namely historical truth, morality, the revival of the new enlightenment 2.0 as a new embodiment of ideas and principles in life; – absolutization of the development of industry 4.0, which contributes to the technological breakthrough 4.0, the basis of which is the development of technology, which balances between dreams and a serious scientific approach, when technological availability becomes the value of municipal services, when, based on great data, additions become convenient for the citizens as an implementation of the "economy of the future" of municipal management, which requires investing money in physical infrastructure, the software is used to analyze the great data reported to this infrastructure; – development of people as the supreme value of agile-philosophy, which will contribute to the formation of new agile principles of organizations based on the novelty of the powerful human nature inherent in them; the development of agile philosophy as a philosophy of the future, where intelligence, smart machines and innovative solutions will rule, which will shake the whole world, where programming of money, markets and trust will happen, data will become the basis of the information revolution, and the introduction of innovation and electronic control "power in the smartphone" will crush the world in the next 5-10 years. the relationship between agile-philosophy and agile-economics as a philosophy of change is based on the balance between the whole and the parts, which serve the purposes of a worldview of analytical, systemic, algorithmic, expert and philosophical thinking. the components of agile-philosophy serve as the main basis for economic growth: 1) development of a digital society; 2) evolution of flexibility of organizations as complex social systems and the basis for their development; 3) a new enlightenment 2.0; 4) the concept of globalization 4.0 and considering its trends; 5) the concept of technological breakthrough 4.0 and impact 5.0; 6) the concept of industry 4.0. at the heart of sustainable agile-management are the effective mechanisms of effective, transparent and intellectual management and reception of the human dimension in the context of anthropological discourse of humanistic management (voronkova, 2016). that's why people have to develop in the future: 1) the concept of enlightenment 2.0 development; 2) the globalization concept 2.0; 3) the technological breakthrough concept 4.0; 4) the industry context 4.0 and 5.0; 5) the agile-management construct 3.0. agile-economy as a factor in renewing the broken interaction between people and nature in the digital society everyone knows that the world is in crisis. based on the results of scientific research, the concept of agile-economy as a factor of renewal of the disturbed interaction between man and nature in the digital society proceeds from the fact that since the industrial revolution, human activities have gradually become the main cause of global environmental change, as the anthropogenic changes on the planet today are threatening. once human activity exceeds certain limits or reaches a point of no return (referred to as "planetary limits"), there is a risk of abrupt and irreversible ecological change. it has been scientifically proven that over the past 150 years, more than half of the earth's topsoil has been depleted, and up to 90% of fisheries are being taken away or completely depleted. the stability of the climate is at risk and the land is currently going through a period of mass extinction for the majority of its history, admits klein in his work "everything changes. capitalism versus climate". today, people's capacity for action has far exceeded their capacity for reflection. as a result, civilization faces a perfect storm of problems caused by over population, overconsumption, the use of environmentally destructive technologies, and unprecedented nervousness. the rapid deterioration of the biophysical situation is unfortunately not recognized by the world community, which unwaveringly believes that the physical economy can grow continuously. the current crisis is the crisis of global capitalism (voronkova, baltic journal of economic studies 56 vol. 8 no. 2, 2022 nikitenko, teslenko, bilohur, 2020). interfaces have become evident and visible in all human activities, and changing trends depend on changing consciousness (pikker stiven. enlightenment today. arguments for reason, science, and progress, 2019). economic growth and technological progress can be accompanied, if not accelerated, by savings and efficiency in the use of natural resources. but now virtually all trends in resource consumption, climate change, biodiversity loss and land degradation reflect inadequate public policy vectors, business strategies and underlying social values. on a more general level, these dominant trends in digital society also reflect the distancing of the educational system and the crisis of the metaphysical foundations of human life as a global problem of postmodernity requiring new managerial solutions (nikitenko, 2020). the cumulative conclusions that can be drawn from such trends compel us to radically change the direction of progress and make every effort to forge a new enlightenment 2.0 vision that places much greater emphasis on the future renewal of natural resources in the long term. the growth interval is an attempt to define a 50to 100-year perspective through humanity 's impact on the environment and the use of innovation in an innovation-informed society. they concern overfishing, depletion of groundwater or forest viruses, ecosystem degradation, and pollution. the general problem is that once the most valuable species have been depleted, further extraction requires more and more energy and at the same time leads to large-scale emissions of pollutants. traditional economic models, linear in nature, cannot solve the problem of the non-linearity of natural systems, such as the climate system. scientists constantly remind about "points of no return" when the ecosystem at the output loses its balance or becomes highly destabilized, which requires a systematic approach (voronkova, 2019). the concept of renewal of natural resources in a digital society the concept of renewing natural resources in a digital society includes addressing the negative trends that have led to the destruction of the planet: 1) stratospheric ozone layer collapse; 2) the loss of biological diversity and the extinction of biological species; 3) chemical contamination and release of new chemical objects (new chemicals of artificial origin, in particular, radioactive materials, genetically modified organisms, nanomaterials with the potential for undesirable geophysical and/or biological effects); 4) climate changes; 5) ocean acidification; 6) landscape changes; 7) consumption of fresh water and the global hydrological cycle; 8) nitrogen and phosphorus releases to the biosphere and oceans; 9) concentration of aerosols in the atmosphere (ernst ulrich von weizsaecker, anders wijkman, 2019). in fact, the rapid growth of consumption, especially in the last 50 years, has caused great changes in the atmosphere and biosphere. the climate system is inherently non-linear, which can reach a point of irreversibility even with a warming of 1.5-2.0 degrees celsius. the world can transform its production and consumption systems quickly and decisively. more than 1,000 cities around the planet already use 100% renewable energy. preventing climate change will require such massive and rapid action that any new or future information technology will not solve the problem. the problem is the inadequate and timely implementation of a set of energy and other technologies that have already been developed or are under development. in "creative city: its power and possibilities," landry charles notes that a critical mass of diverse activities is needed to realize a viable selfsustaining creative economy (landry, 2020). the greatest innovation has been the rapid reduction in the cost and spread of clean energy – mostly solar and wind – around the world. soil erosion and degradation, droughts, floods, and the spread of invasive species (alochthonous species with considerable ability to expand, which spread naturally or with human help) pose a significant threat to the flora and fauna of certain ecosystems, can massively increase the danger that will threaten future generations. already today, the earth is in the process of the "6th cycle of extinction", which is caused solely by man. industrial agriculture using "systemic pesticides" such as neonicotinoids poses a deadly threat to bees and other pollinators. in addition, the presence of pesticide residues in various foods is increasingly being confirmed. without bacteria and fungi, the soil is degraded as soil structure is threatened. inevitably, an urbanized world full of cities and megacities, which is constantly growing, is dramatically increasing its ecological footprint. the new trend of the digital society "disruptive, breakthrough technologies" based on innovation with positive connotations in connection with the development of new directions of clustering tourism and finding ways out of the covid-19 pandemic is used to solve the problem (rybalchenko nina, 2021). today, people can observe a tremendous acce leration of technological innovation, supported by appropriate information and communication technologies, the availability of which is all-consuming on the road to a comfortable and secure life. the concept of natural resource renewal in the information society includes a redefinition of economics as a subsystem of society and nature, as a tool for achieving a socially just and environmentally baltic journal of economic studies 57 vol. 8 no. 2, 2022 stable future in which nature updates its evolutionary path and society changes its social measure. the great good of today is the "blue economy ", where everything has value, even waste and storms, products are primarily renewable, always organic, and production and consumption systems are based on the properties of nature. the circular economy, defined by ict, requires a new philosophical logic, a new transformation based on natural resources, which can be the basis for prosperity, well-being and development of the concept of services, creating a new model of production and consumption, the transition to a circular economy. icts have a great positive effect as a tool for achieving new development in a digital society whose potential has not yet been fully exploited to stimulate complex reactive living systems. the transition to the "embedded economy " that is developing requires the formation of the concept of noosphere development of modern society in a digital society (voronkova, 2016). 5. conclusions in order to adapt to the intense changes in today 's globalized, unstable world, which is rapidly becoming more complex, creativity is increasingly important. this is why education must cultivate creativity by teaching students (pupils) systematic, adaptive, flexible thinking. students (schoolchildren) should try new things, the opportunity to work on the topics of agileeconomics, agile-management, agile-methodology. education should train "competent revolutionaries", because full automation and computer algorithms change people's lives (christopher, 2018). it is concluded that agile-economy as a factor of social sustainability contributes to the formation of economic stability in an unprotected, technological breakthrough economy, based on which the balance between people, nature, society on the basis of generosity, inclusiveness and equilibrium will be achieved. the concept of agile-economy will help unleash the energy of enterprise, innovation and creativity for a stable and balanced development of the economy in an unstable and critical environment. for the development of non-linear thinking, requiring the use of flexible approaches to solve the current problems – economic, environmental, social, cultural, requires the development of the concept of agile-philosophy in the context of the new vision of enlightenment 2.0, formed by representatives of the club of rome, based on a holistic approach and harmonization of relationships. the basis of agile-economy is the reorientation of management from hierarchies to transformational structures, because the twenty-first century is the era of transformational structures, transformational economy. this requires the use of flexible approaches to the analysis of complex social systems, which are society, people, organizations. references: benko, n. 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(2019). methodological approach to the redistribution of investment projects within a company according to formal criteria. financial and credit activityproblems of theory and practice, vol. 28, issue 1, рp. 256–263. baltic journal of economic studies 23 vol. 2, no. 3, 2016 corresponding author: 1 department of management, international university of business and law. e-mail: borodin-my@utg.ua challenges and prospects for development of ukrainian oil and gas complex entities mikhail borodin1 international university of business and law, ukraine abstract. the aim of the paper is to analyze the current state of the oil and gas complex of ukraine, upon which to identify the challenges and to justify the development prospects of the effective activities of complex entities. comprehensive introduction of the advanced mechanisms for the development of oil and gas complex entities’ development will contribute to the economic growth of other industries and the ukrainian economy as a whole, as well as decrease in the energy dependence and security of the state interests. methods. the following methods were used in research: systematic, economic and mathematical, balancing, judgment-based and abstract-logical. in addition, methods of statistical analysis, analytical spread sheet tabulation method, and method of scientific hypothesis modelling for studied processes. results. the effectiveness of introduction of the proposed perspective trends of the entities of ukrainian oil and gas complex is estimated. it is proved that their comprehensive implementation will improve the competitiveness of their operations, and energy independence of ukraine. the necessity of introduction of the innovative technologies and new approaches to solution of the management problems at oil and gas complex entities is proved. implementation of prospective mechanisms for the development of effective activity of oil and gas entities shall be based on economic competition between the entities with simultaneous implementation of the measures of state support for the promising modernization technologies reflecting the public interest to the energy security improvement. practical significance. a study of the current state of oil and gas complex of ukraine and challenges of development of the complex entities contributes to the identification of areas for balancing and substantiation of the development prospects of the oil and gas sector of economy in order to ensure its energy security, taking into account the strategic orientations of ukrainian economy development. implementation of the promising modernization mechanisms referred in study into practice is one of the priorities of oil and gas entities for increase in their production activities and profitability. the main sources of funds for the functioning of economic mechanisms for encouragement of the modernization programs and projects can be: funds of the state and local budgets received from the established taxes, penalties and increased payments for energy resources; own funds of the entities; credit facilities; internal and external investments. the implementation of the strategic objectives of development of oil and gas entities, introduction of large-scale measures for the development, technical upgrading and modernization of the fixed assets, as well as the consistent introduction of competitive relations on the domestic and external markets shall be fulfilled through improving the pricing and tariff policy by the introduction of the economically justified level of prices and tariffs for energy resources. value/originality. the current state of the oil and gas complex of ukraine is analyzed and its problems are identified, upon which its development prospects are substantiated. the main challenges inhibiting the stable development of oil and gas entities and their solutions are considered. the challenge of modernization and technical re-equipment of the oil and gas complex entities and the possibility of their organizational and economic reforming are covered. key words: oil and gas complex, investments, innovations, modernization, energy security. jel classification: l71, e22, o31, o32, q47 1. introduction theme of this article is very relevant, since the production and transportation of oil and gas are the most competitive sectors of the ukrainian economy from the standpoint of the country 's integration into the system of the world economic relations. currently, results of oil and gas complex activities are one of the main components for the formation of the ukrainian balance of payments, support of the national currency exchange rate, and play the pivotal role in overcoming the crisis. the world practice has shown that in the case of implementation of major oil and gas projects, approximately baltic journal of economic studies 24 vol. 2, no. 3, 2016 80% (dunayev, shpakov, yepifanova, 2008) of the total volume of works falls on the share of the suppliers for the oil and gas complex: metalworking, servicing, transportation, and other companies; suppliers of equipment and metal structures, building materials, overalls, as well as research and educational institutions and many others. the “mining”, “processing”, “engineering” regions, power generation, construction complex of the country experience are the main effect of the oil and gas complex development. a consequential additional effect is obtained in the form of growth in the tax base, creation of new jobs, increase in the solvency of the population, etc. and we must add that in today's economy the oil and gas complex stands as an equal generator of demand for high-tech and science-intensive products. the article is structured as follows: introduction; analytical section, which analyzes the current state of the oil and gas complex of ukraine; research section, which identified current challenges of development of the oil and gas complex entities; recommendation section, which substantiated the possible prospects of the effective activity of oil and gas complex entities; conclusion; bibliography. the aim of research is to analyze the current state of the oil and gas complex of ukraine, to identify the challenges and to justify the prospects of development of the effective activities of the complex entities based on set aim, the following tasks were solved in the article: to characterize the current state of the oil and gas complex of ukraine; to identify the relevant challenges of development of the oil and gas complex entities; to substantiate the prospects of effective activity of the ukrainian oil and gas complex entities. the following methods of research were used in the course of writing: analytical and statistical method for analysis and estimation of the current state of the ukrainian oil and gas complex, as well for substantiation of the relevant challenges of development of the oil and gas complex entities; scientific hypothesis method in the practical recommendations regarding the prospects for the development of effective activity of the ukrainian oil and gas complex entities. 2. general characteristic of the oil and gas complex of ukraine it is well known that the oil and gas complex is a significant sector of the ukrainian industry. effective functioning of its entities contributes to socio-economic development of the regions of the country, as well as other industrial branches. oil and gas complex is a part of the fuel and energy sector, which is seen as a complex inter-branch system of extraction and production of fuel and energy, their transportation, distribution and use. ukraine is one of the countries, which by using own resources meets only a little part of the demand for fuel and energy resources, which indicates the significant dependence on imported energy supplies. thus, the consumption of gas and oil remains persistently high and satisfaction of the needs in hydrocarbons by domestic production is very low. on average, ukraine produces about 21 billion cubic meters of gas with an annual demand of 75-80 billion cubic meters. thus, ukraine can independently provide itself with gas only by a quarter. a similar situation is observed in oil production. with the need for 30 million tons, ukraine produces only 2.3 million tons, which is only 8%. currently, there are 350 fields operating in ukraine: oil – 78; gas – 89; gas condensate – 111; oil condensate – 59; gas-oil and oil-gas  – 13 (official website of njsc “naftogaz of ukraine”, 2015). in terms of the magnitude of reserves: large  – 5; medium – 26; small – 319. in other words, in spite of the large number of fields, most of them are quite small and their share in the total volume of hydrocarbon production is low. the costs of construction and commissioning of small fields is not much different from the cost of commissioning of the large deposits. for this very reason, very often it is impractical from an economic point of view to explore and equip new oil or gas fields. most of the fields are at the final stages of development. oil and gas industry produced 85% of proved oil reserves and 77% of natural gas reserves (gorobets, 2011). for instance, the two largest gas fields  – shebelinskoye and zapadno-krestischenskoe  – are developed by 90% and 83%, respectively. analysis of the statistical data of “naftogaz of ukraine” has shown that in 2015 19.9 billion cubic meters of gas were produced in ukraine (in 2014  – 20.5 billion cubic meters.). the decrease in gas production was 0.6 billion cubic meters or 3% (table 1) (official website of njsc “naftogaz of ukraine”, 2015). table 1 volumes of natural gas production in ukraine in 2014-2015 (billion cubic meters) oil and gas entities 2014 2015 private companies 3,3 3,9 state joint-stock company “chornomorneftegaz” 0,3 0 pjsc “ukrnafta” 1,7 1,5 pjsc “ukrgazdobycha” 15,1 14,5 total: 20,5 19,9 the volume of gas production by the state company “ukrgazdobycha” decreased by 4%  – from 15.1 to 14.5 billion cubic meters. these volumes also include production in the framework of the joint venture agreements and the produced gas is used by the company baltic journal of economic studies 25 vol. 2, no. 3, 2016 for its own production and processing consumption (needs). decrease in the volumes of gas production by “ukrgazdobycha” enterprise occurred, in particular, over a temporary loss of control over the assets placed in the area of the ato (anti-terrorist operation) (185 million cubic meters), and also over a significant shortfall in the exploration of new areas and development of fields within several consecutive years. the resource base of the company was exhausted: during eight years, from 2007 to 2014, only 4 special permits for the exploration of new areas had been received, instead of the 100 required permits. at the same time, in the previous three years the entity produced about 45 billion cubic meters of gas, and the increment in reserves only by 29 billion cubic meters as compared to the required level of 150 billion cubic meters. in 2015, “ukrgazdobycha” company received 20 special permits and reached fivefold increase in the volumes of seismic works. due to increase in the revenues and measures to improve the financial performance, the company has managed to intensify the development and exploratory drilling works, as well as to put into operation three booster compressor stations. the implementation of this program of actions enabled to avoid a large reduction in production capacity in 2015. “ukrgasdobycha” company has announced about its plans to increase gas production to 20 billion cubic meters per year by 2020 under the program “strategy20/20” (burlaka, 2012). in 2015 pjsc “ukrnafta” has reduced the volume of gas production by 13% – from 1.7 to 1.5 billion cubic meters. at the same time, the private producers have increased production by 17% – from 3.3 to 3.9 billion cubic meters. because of the loss of ar of crimea, last year ukraine did not receive gas from the state joint-stock company “chornomorneftegaz”. during the first two months of 2014, 0.3 billion cubic meters of gas were produced (in 2013 – 1.7 billion cubic meters). all marketable gas produced by oil and gas entities is purchased by njsc “naftogaz of ukraine” and supplied for the needs of ukrainian consumers at a price set by the state. a significant reduction in the volume of oil and gas production in ukraine for the analyzed period could affect the energy security of ukraine's regions. in this connection there is need for an integrated research of the oil and gas complex and development of promising areas of its development as a strategic sector that provides economic and energy security of each state. energy transit potential of ukraine is represented by the oil transportation and gas transportation systems, which is a strategic vector of development both of fuel and energy complex and the economy as a whole. ukrainian gas transportation system is the second-largest system in europe in terms of production capacity, next to russian system, consisting of the main gas pipelines with a total length of 39.8 thousand km; about 50-60  billion cubic meters of gas are annually transported to ukrainian consumers and to the countries of western and central europe  – 110-120 billion cubic meters of natural gas. currently, it is technically possible to increase the gas transit to the countries of central and western europe to 142 billion cubic meters per year without the expansion of the gas transportation system (official website of njsc “naftogaz of ukraine”, 2015). it has been established that ukraine has a powerful energy transit potential, which should become a strategic goal of oil and gas industry development in order to reduce energy dependence and promote the national interests. 3. challenges of development of ukrainian oil and gas complex entities a typical feature of the ukrainian oil and gas complex is the lack of competition among enterprises of this industry. virtually all oil and gas production is controlled directly by the state in the person of njsc “naftogaz of ukraine” and it is sells petroleum products to the consumers. njsc “naftogaz of ukraine” is a vertically integrated oil and gas company engaged in full cycle of operations in exploration and development of the deposits, exploitation and exploratory drilling, transportation and storage of gas, supply of natural and liquefied gas to consumers. on the one hand, it is a positive point, since the state holds the strategic sector of the economy, enabling it to control and regulate all relations in this field fully, ranging from the development of individual projects of new deposits and preservation of the old fields to the sale of products to the population. however, on the other hand, such control is not always conducive to the development of these entities, since they are restricted in decision-making, in particular concerning the modernization, investments and so on. thus, it is possible to group the challenges of oil and gas entities to be addressed for improvement of the operation of the entire oil and gas industry. firstly, ukraine takes one of the last places in the world in terms of oil refining. the plants require major reconstruction, degree of depreciation of the fixed assets exceeds 80%, some of them were built in the early 1940s, the other ones – after the war. the plants have few secondary processes deepening oil refining, which occupy 10% with respect to the primary processes, and hence there are more wastes and low yield of light products (burlaka, 2012). secondly, the period of technical and technological potential of the oil and gas industry is nearly over, there is a mass decommissioning of the facilities. the average depreciation of the fixed assets in the oil industry is 60%, in the gas industry  – more than 57%. the most significant technological problems include a high degree of deterioration of the oil and gas pumping equipment and backward production technologies, which often leads to breakages of the equipment. some producing wells are operated at an accelerated rate, with gross violations. disadvantages of the technological nature concern not only the production of hydrocarbons, but also exploration baltic journal of economic studies 26 vol. 2, no. 3, 2016 works. and here the difficulty lies in the backwardness of domestic technologies and technical capability. thirdly, the exploration works are chronically underfunded, so the ratio of stocks growth and production is 60%. among the geological problems of the oil and gas complex at the stage of hydrocarbons production, the most important are natural depletion of mineral resources and easily accessible reserves, as well as the emergence of a significant number of hardly accessible deposits. fourthly, the economic problems that directly affect the efficiency of economic activities. one of the most significant economic challenges is the outflow of foreign investments and the "escape" of domestic capital abroad. ukrainian oil and gas complex is becoming less attractive for the investors due to the tightening of state control, introduction of restrictions for foreign businesses in the sector and sanctions from some government agencies. the outflow of ukrainian capital is associated with the economic and political crisis, globalization of economic processes, corruption and bureaucracy in the country (sherstuk, 2006). a number of economic challenges in the oil and gas complex entities are also stipulated by existing tax system, frequent changes in the tax legislation. fifthly, the lag of our country from countries with welldeveloped oil and gas complex by all major indicators of innovation activities. the innovation challenges, in turn, are associated with the lack of funding of the research and development centers and laboratories, as well as research and development works. in ukraine, there are few centers that would be actively engaged in development in the oil and gas complex, therefore there is a reduction in the quality of exploration and production of fields, insufficient attention is paid to the improvement of drilling technologies. the consequence is an increase in costs for the construction of wells and net cost of the produced hydrocarbons. from all has been said it follows that the current state of the oil and gas industry of ukraine needs a major modernization: it is necessary to introduce innovative technologies, new approaches to the solution of urgent problems, but without science  – fundamental, industry, university, adjacent  – it's pointless to start (evpanov, 2011). leading areas of these problems’ solutions include: an increase in exploration works on the natural gas and oil fields, modernization and technical re-equipment of oil and gas refineries, increased capital investments (figure 1). 4. prospects of development of the ukrainian oil and gas complex entities in order to solve the above described challenges, the following main practical recommendations can be distinguished for prospective development of oil and gas complex entities, which should provide the economic stability and energy security of the country: expansion of exploration works, discovery of new deposits, creation of reserves and the development of mineral resources in the areas of hydrocarbon production; application of new efficient technologies for the extraction of oil and gas, development of new methods of enhanced oil recovery, intensification of the development of deposits; introduction of a flexible taxation system, differentiated tax depending on the profitability of the company or differentiated rates of mineral extraction tax on certain criteria; development of deposits of international importance, search for partners, foreign companies with advanced technologies of exploration and production of oil and gas, etc. currently, the oil and gas entities operate with underload, and some are idle. therefore, the issues related to the construction of an integrated system of innovative development of the ukrainian oil and gas complex are of key importance. it is necessary to develop an effective organizational and economic mechanism that would facilitate the introduction of innovative technologies, possibly resulting in increase in the volumes of processing perspectives for development of the ukrainian oil and gas complex increase in exploration works on the natural gas and oil fields modernization and technical re-equipment of oil and gas refineries increased capital investments decrease in energy dependence strengthening of energy security of the state fig. 1. long-term model of development of oil and gas complex of ukraine baltic journal of economic studies 27 vol. 2, no. 3, 2016 and transportation of oil and gas products by the ukrainian oil and gas complex entities. and the results of their operation will be of higher quality and more economical, that will make them competitive in the domestic and foreign markets. most scientists believe that the increase in oil and gas production on existing fields through the introduction of new technologies and innovations is more effective trend of oil and gas complex development. the introduction of new technologies should provide a multiple increase in hydrocarbon production efficiency, as opposed to 10-15%. the main directions of innovative development of oil and gas complex should be the use of modern technology and information, science-driven and energy-saving technologies. all this shall primarily reduce the cost of oil and gas production by at least 20-30%. currently, the oil recovery rate in average in ukraine is only 0.224, while in the western region – 0.164. therefore, the more promising trend of development of the ukrainian oil enterprises is an introduction of the innovations that will improve the hydrocarbon recovery factor from existing sources. this can be achieved through enhanced oil recovery, which will provide an increase in the resource base and growth in oil and gas production. increase in the gas extraction rate in old fields can be achieved by geological and engineering tools such as hydraulic fracturing, infill drilling, increase in the development of objects, reduction of the operating pressure in gas-industrial systems, intensification of the gas flow to the foreheads of operated wells, removal of fluid from the well bottom, selection of the produced water, which entered the deposit (burlaka, 2012). in carrying out these activities, the oil and gas entities are faced with the problem of search for financial resources for the innovations introduction. the possible sources of investment in the development of oil and gas entities are: foreign investments, joint ventures, own funds of entities, credit and budget resources. the main source of funding for innovation should be own funds of the entities. this practice exists in many foreign companies. in such a way, the experience of the world's mining companies shell, british petroleum can be cited as an example. they annually spend from 3% to 5% of their pre-tax profit for research and advanced development. practice has proved that each extra hryvnia invested in the oil and gas complex provides a further 1.5-1.6 hryvnias. thus, it is necessary to reconsider the organizational and economic mechanism of business process management in the oil and gas industry entities, which will enable complete realization of the benefits of new technologies and human resources. first of all, it concerns the search for ways to improve the operating effectiveness of the oil and gas industry entities at the expense of internal reserves. this is the lever, by which industry entities have the opportunity to influence on their own production performance in any of the circumstances of economic development of ukraine. solution of the challenges of oil and gas complex entities, improvement of their operation efficiency will contribute to the economic growth of other industries and the ukrainian economy as a whole. 5. conclusion currently, the oil and gas industry of ukraine definitely plays a key role not only in the structure of fuel and energy complex, but in the economy as a whole. ensuring a sufficient level of development of the oil and gas complex entities is a necessary condition for sustainable development of any country, since apart from purely commercial activities, the entities of this complex play an important social role, providing the population, institutions and municipal consumers with the natural gas. among others, the main problems of development of the ukrainian oil and gas complex entities are: depletion of oil and gas fields, obsolescence of material and technical base of the oil and gas production, high net cost of oil and gas production, low level of innovation and investment activities, and so on. analysis of the main directions, mentioned strategic objectives will enable to develop ways to improve the economic development of the ukrainian oil and gas complex entities. given the strategic importance of oil and gas industry for the economy of the state, the problems of ukraine’s resource-dependence, solving of these problems is urgent. in order to achieve positive results in this area it is required to solve important tasks. they include stimulating the innovation processes and the search for sources of their funding. in the future, the oil and gas industry shall become one of the industries with an extremely high degree of capital and production concentration. a  necessary condition for strategic innovative breakthrough in ukrainian oil and gas complex is building of the appropriate mechanism for its implementation, which is formed on the long-term forecasts of socio-economic, and innovation and technological development, long-term innovation policy and energy strategy. in the case of the creation of a favourable investment climate in the country, by 2030 ukraine will be able to reach the level of complete selfproduction of own gas by energy efficiency and increase in the production of conventional and unconventional resources. references evpanov, e. (2011). modernization of the economy should be started with the oil and gas complex  – moscow, russian business newspaper. – no. 783/1 dated 11.01.2011. dunayev, v.f., shpakov, v.a., yepifanova, n.p. et al. (2008). the economy of oil and gas industry entities. 3rd edition, revised. – moscow, tsentrlitneftegaz, 305 p. baltic journal of economic studies 28 vol. 2, no. 3, 2016 gorobets, v. (2011). estimation of the development trends of oil and gas complex in ukrainian regions. retrieved from: http://nbuv.gov.ua burlaka, v.g. (2012). ukrainian oil sector development strategy – kiev, nau, 356 p. sherstuk, r .v. (2006). ways for modernization of the oil refinery of ukraine – kiev, oil refining and petroleum chemistry, no. 11, p. 5-10. official website of njsc “naftogaz of ukraine”. (2015). retrieved from: http://www.naftogaz.com михаил бородин проблемы и перспективы развития предприятий нефтегазового комплекса украины аннотация. целью работы является анализ современного состояния нефтегазового комплекса украины, на основе которого выявить проблемы и обосновать перспективы развития эффективной деятельности предприятий отрасли. комплексное внедрение перспективных механизмов развития деятельности предприятий нефтегазового комплекса будет способствовать экономическому росту других отраслей и украинской экономике в целом, а так же уменьшению энергетической зависимости и обеспечению государственных интересов. методика. в исследовании использовались методы: системный, экономикоматематический, балансовый, экспертный, абстрактно-логический. также использовались методы статистического анализа, методы построения аналитических таблиц, моделирования научной гипотезы изучаемых процессов. результаты. осуществлена оценка эффективности реализации предложенных перспективных направлений развития предприятий нефтегазового комплекса украины. доказано, что их комплексная реализация позволит улучшить уровень конкурентоспособности их деятельности и энергетической независимости украины. доказана необходимость внедрения инновационных технологий и новых подходов к решению управленческих задач на предприятиях нефтегазового комплекса. реализация перспективных механизмов развития эффективной деятельности предприятий нефтегазового комплекса должна происходить на основе экономической конкуренции между предприятиями с одновременным внедрением мер государственной поддержки перспективных технологий модернизации, отражающие общественный интерес по повышению уровня энергетической безопасности. практическое значение. исследование современного состояния нефтегазового комплекса украины и проблем развития предприятий отрасли способствуют выявлению направлений сбалансирования и обоснования перспектив развития нефтегазового сектора экономики с целью обеспечения ее энергетической безопасности с учетом стратегических ориентиров развития украинской экономики. внедрение указанных в исследовании перспективных механизмов модернизации в практику является одним из приоритетных направлений работы нефтегазовых предприятий по увеличению их производственной деятельности и обеспечению прибыльности. основными источниками поступления средств для функционирования экономических механизмов стимулирования программ и проектов модернизации могут быть использованы: средства государственного и местных бюджетов полученные от установленных налогов, штрафов и повышенной платы за энергоресурсы; собственные средства предприятий; кредитные ресурсы; внутренние и внешние инвестиции. реализация стратегических задач развития предприятий нефтегазового комплекса, внедрения масштабных мероприятий по развитию, технического обновления и модернизации основных фондов, а также последовательное внедрение конкурентных отношений на внутреннем и внешних рынках должно осуществляться путем совершенствования ценовой и тарифной политики путем внедрения экономически обоснованного уровня цен и тарифов на энергоносители. значение/оригинальность. проведен анализ современного состояния нефтегазового комплекса украины и определены его проблемы, исходя из которых, обоснованы перспективы его развития. рассмотрены основные проблемы, препятствующие стабильному развитию предприятий нефтегазовой отрасли и пути их решения. затронута проблема модернизации и технического переоснащения оборудования предприятий нефтегазовой отрасли и возможности их организационно-экономического реформирования. baltic journal of economic studies 226 vol. 7 no. 4, 2021 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: liliia_khorishko@ukr.net orcid: https://orcid.org/0000-0002-0618-976x doi: https://doi.org/10.30525/2256-0742/2021-7-4-226-230 poland's energy security in the context of eu environmental initiatives liliia khorishko1 abstract. the current conditions of global development actualize the need for political actors to form a high level of energy security. it expands the state's ability to ensure the sustainability of economic development and the ability to withstand likely threats. the issue of energy security and sovereignty are key on the agenda of the eu, which seeks to implement a strategy of global leadership. the environmental modernization of the eu energy sector and each member state must comply with the main goal of «the european green deal», which is to reduce carbon emissions by 55% before 2030. the subject of the study is the substance and peculiarities of the formation of energy security in poland. the aim of the study is to analyze the mechanisms of energy security of poland in the context of eu environmental initiatives. research methodology: systematic approach, method of analysis and comparison. the issue of energy security is recognized as key in achieving sustainable economic development in poland. the content and basic principles of state energy security are presented in the national security strategy and detailed in the energy policy. among the main directions of ecological modernization of the energy sector the following have been identified: efficient consumption of national energy resources; modernization of the energy sector and infrastructure; diversification of natural gas, oil, liquid fuel supplies; optimization of energy market functioning; construction of nuclear power plants; expansion of alternative energy sources; modernization of heating and co-generation energy systems; increasing energy efficiency. polish officials have emphasized the need for a three-phase energy transition, involving a reduction in the production and use of coal, a gradual increase in the share of natural gas and the expansion of opportunities to use energy from alternative sources. the modernization of poland's energy sector correlates with the implementation of «the european green deal» and other eu environmental initiatives. energy sovereignty is secured through domestic and foreign financial assistance. the national fund for environmental protection and water management of poland attracts investments in environmental projects related to the development of geothermal energy and improvement of infrastructure energy efficiency. eu special funds (european regional development fund/european social fund, cohesion fund, just transition fund and modernization fund) provide funding for national or regional projects aimed at the comprehensive modernization of the polish energy sector and the implementation of commitments to achieve climate neutrality. poland pursues an active policy of cooperation in the energy sphere with other states – denmark, lithuania, latvia, and estonia. projects such as "baltic pipe" and "the baltic synchronisation project" are in the active implementation phase. the results of the study: energy security is a key factor in the sustainability of economic development of poland, the implementation of the modernization of the national energy complex correlates with the eu environmental initiatives, which contributes to the attraction of domestic and foreign investment, as well as the resources of public diplomacy. key words: energy security, energy sovereignty, energy efficiency, environmental modernization, energy policy, climate neutrality. jel classification: f52, q42, q48, q54 1. introduction in the context of modern global development, energy security is an important component of national security of the state, its ability to withstand possible threats. the energy security of society is the key to sustainable economic development, as well as to increase the level of the state's subjectivity in the international political space. the issue of energy baltic journal of economic studies 227 vol. 7 no. 4, 2021 security is key to the eu's global leadership strategy. in this context, eu institutions pay considerable attention to the conceptual and practical aspects of defining the basic principles of energy policy formation, involving the resource capacity of national governments in its implementation. at the same time, the issue of energy security is seen by eu leaders as an integral part of the implementation of the ambitious program "the european green deal", which provides for a reduction of carbon emissions by 55% until 2030, that is, to achieve climate neutrality. against this background, member states face the challenge of implementing environmental modernization aimed at improving energy and resource efficiency and introducing "green technologies" to ensure sustainable economic development and resilience to the global challenges of our time. the main purpose of the scientific exploration is to identify the peculiarities and to specify the mechanisms of poland's energy security in the context of the eu's environmental initiatives. the state has had some success in achieving energy sovereignty, contributing to the sustainability of economic development and adapting to the challenges of our time. at the same time, the energy sector needs further modernization, which will help improve energy security and fulfill poland's obligations to the eu to achieve climate neutrality. the complexity of the study lies in the disclosure of the main aspects of poland's energy security and mechanisms of its implementation in the current political reality. the determination of the structural components of energy security and the level of their correlation with eu environmental initiatives will be facilitated by a systematic approach. the use of the comparative method will allow us to compare current and projected trends in the development of the energy sector in poland. the method of analysis will help to clarify the essence of the state energy security, the main directions and mechanisms of implementation. 2. basic principles of poland's energy security general aspects of energy security are defined in the national security strategy of poland (national security strategy, 2020). in particular, we are talking about the use of traditional energy sources and the creation of opportunities for the development of alternative ones. among the main objectives of government agencies are identified as follows: 1) expansion and modernization of production facilities in order to provide uninterrupted electricity supply; 2) diversification of sources and increase of capacities in oil and gas transportation; 3) continuation of diplomatic, legal, administrative efforts to restrain construction of transport infrastructure, which increases the dependence of the central european region on russian gas supplies. these goals are synchronized with the content of the energy policy of poland until 2040, aimed at increasing the level of energy security and competitiveness of the national economy, optimizing the use of resources, energy efficiency in the context of environmental protection. it is based on three areas – just transformation, a zero-emission energy system, and quality air. successful implementation of these directions is conditioned by achieving the following goals: 1) optimization of national energy resources use; 2) modernization of energy sector and infrastructure; 3) diversification of supplies and expansion of natural gas, oil and liquid fuel transportation infrastructure; 4) development of energy market; 5) construction of nuclear power plants; 6) development of alternative energy sources; 7) optimization of heating and cogeneration systems; 8) improvement of energy efficiency (ministry of climate and environment of poland, 2021). in this context, the government has defined certain indicators, the achievement of which will increase the level of energy security of the state and resilience to possible threats. analysis of the data in table 1 confirms poland's readiness to gradually reduce the use of coal both table 1 current and projected indicators of the modernization level of poland's energy sector indicators 2018 2030 share of coal in electricity generation 76 % ≥ 56 % share of renewable sources of energy in final consumption 11,3 % 23% share of renewable energy in transportation 5,6 % 14% carbon dioxide emissions 300.5 million tons ≥ 241 million tons proportion of public transport (cars) with zero carbon emissions in cities with populations over 100,000 2% 100% number of free recharging points for electric vehicles 900 49000 amount of households using coal for heating. 24,7% 0% number of households in cities connected to heating networks 5,3 million +1,5 million quanttity of natural gas end users 7,2 million +1,5 million the level of energy poverty 9,4 % 6% source: (ministry of climate and environment of poland, 2021) baltic journal of economic studies 228 vol. 7 no. 4, 2021 in electricity production and in heating individual households, through diversification and growth in the share of energy production from renewable sources. significant attention will also be paid to reducing carbon emissions, especially in transportation, by shifting to electric vehicles and renewing the public transport fleet. the final result of the practical implementation of the energy policy 's main principles should be a gradual transformation of the energy sector, modernization of key sectors of the national economy, achieving a high level of energy sovereignty. this document also states that the formation of a national strategy in the energy sector is in line with the eu's key environmental initiatives. first, it is about the implementation of the program "the european green deal", aimed at reducing carbon emissions by 55% until 2030, as well as achieving climate neutrality. at the december eu summit, member states pledged to contribute to the goal based on sovereignty, justice and solidarity, taking into account the development of national economies. it should be noted that the polish delegation supported the program "the european green deal", noting the need to take into account the historical development of state energy sector, its high level of focus on traditional energy sources, especially coal, requires a solidarity approach to cost sharing and collective responsibility for the implementation of lowcarbon energy transition. second, the implementation of the eu recommendations on climate and energy (2020–2030). they note the need to intensify low-carbon development of national economies in order to ensure energy sovereignty; reduce greenhouse gas emissions; and attract investment in the development of lowcarbon technologies. in this context, the following commitments of the eu member states are specified: 1) decarbonization of the energy sphere, while maintaining the sustainable development of national economies and energy sovereignty; 2) deepening of regional cooperation to coordinate efforts in addressing current climate and energy problems; 3) development of renewable energy sources; 4) strengthening energy security through integration of markets, diversification of imports, optimization of the use of traditional sources of energy, attracting investments in the development of the energy sector (communication, 2014). third, the main goals and objectives of poland's energy policy are synchronized with the paris climate agreement (united nations, 2015). they are aimed at reducing the rate of global warming, developing low-carbon technologies, and optimizing funding for climate change programs and projects. those who agree voluntarily commit themselves to "nationally determined participation," defining each state's contribution to the fight against global warming. consequently, the main goals and objectives of poland's energy policy concretize the level of its environmental responsibility and readiness to cooperate in solving the global pressing problems of our time. 3. mechanisms to ensure energy security in poland poland's ruling elite focuses the attention of eu leaders on the need to consider the following factors of influence on the national economy: 1) the current level of dependence of the fuel and energy complex on traditional sources; 2) the planned three-phase energy transition, which provides for a reduction in coal consumption, while increasing the share of gas, the construction of nuclear power plants, the development of renewable energy; 3) projected increases in energy costs, which could affect the welfare of the population; 4) the effects of the economic crisis caused by the covid-19 pandemic. consequently, the pace of the low-carbon energy transition depends heavily on domestic and foreign investment. according to officials' calculations, in 2021–2040 ecological modernization of polish economy requires investments of about 1600 billion zlotys, out of which – 867-890 billion requires fuel and energy complex, and 320-342 billion are necessary for construction of nuclear power plants and development of renewable energy (ministry of climate and environment of poland, 2021). a large part of the cost of implementing a comprehensive modernization of the energy sector will come from special eu funds. the european commission has approved the allocation of funding to member states for the years 2021–2027 as part of the cohesion policy implementation (european council, 2021). its main goal is to ensure economic, territorial and social consolidation of the eu, to reduce disparities in the development of states and regions, as well as to support national economies in the implementation of ecological modernization. according to the approved plan, poland receives financing from several funds (see table 2). table 2 financing of poland by eu funds for 2021–2027 fund name planned funding, million euros european regional development fund / european social fund 62.329.8 cohesion fund 9.283.1 just transition fund 3.847.4 source: european council (2021) it should be noted that financial assistance from the european regional development fund / european social fund can be partially directed to projects related to the modernization of the energy sector, baltic journal of economic studies 229 vol. 7 no. 4, 2021 for example, within the framework of cross-border cooperation. the cohesion fund directs funding to national projects related to achieving climate neutrality. the just transition fund finances environmental initiatives and projects in regions with a high level of dependence on traditional energy sources. its main goal is to create the necessary conditions for a gradual transition to "green" technologies, moder nizing national economies in order to minimize the negative socio-economic effects on the population of achieving carbon neutrality. in addition, the eu created the modernization fund to provide special financial support to 10 member states, including poland. its main goal is to create the necessary opportunities and minimize the possible negative effects of national economies in the transition to carbon neutrality through the modernization of energy systems and the implementation of energy efficiency programs. it should be noted that poland will receive 43% of the total amount of funding, given the high level of dependence on traditional sources of energy production (european council, 2021). the polish government also plans to cooperate with the industrial energy conversion fund, which provides grant funding for industrial projects aimed at ensuring energy efficiency and reducing carbon emissions. the main internal mechanism for financing the modernization of poland's energy sector is the national fund for environmental protection and water management (action strategy, 2012). priority areas for investment include modernizing municipal heating systems, developing geothermal energy, increasing the efficiency of power generation at small hydropower plants, and optimizing city infrastructure in the context of energy efficiency. in addition to these funding mechanisms, the resources of public diplomacy are actively used to intensify mutually beneficial cooperation in the energy sphere with other states. poland and denmark are implementing the "baltic pipe" project aimed at building infrastructure for the transportation of norwegian natural gas (ministry of climate and environment of poland, 2021). its successful implementation will improve the competitiveness of gas prices in the european market as a whole, and poland will get an additional source of gas supplies, which will allow the realization of the three-phase energy transition program and reduce the level of economic dependence on russian gas supplies. the executive agency for innovation and networks has signed a grant agreement of 719,700,000 euros for the implementation of "the baltic synchro nisation project" involving poland, estonia, latvia and lithuania. (innovation and networks executive agency, 2020). the main goal of the project is to synchronize the power grids of the baltic countries with continental europe. it is planned to build the so-called "harmony link" across the baltic sea between poland and lithuania, which will become the basis for the formation of a renewable energy system. they will ensure the energy sustainability of the entire region and enhance the ability of participating states to implement "the european green deal". 4. conclusions the issue of energy security is relevant in ensuring the sustainability of poland's economic development and ability to respond to the challenges of the global environment. the basic principles of state energy security are outlined in the national security strategy and the energy policy. as a member of the eu, poland has committed itself to achieving climate neutrality by 2050. in this context, a three phase energy transition aimed at minimizing the extraction of fossil fuels and then maximizing the use of natural gas and renewable energy sources to ensure the functioning of production facilities and meet the needs of citizens is envisaged. the modernization of poland's energy sector correlates with the implementation of "the european green deal" and other eu environmental initiatives.. the state is focused on internal (national fund for environmental protection and water management) and external (eu special funds) mechanisms to ensure energy sovereignty. these funds provide financing for national or regional projects aimed at the environmental modernization of poland's energy sector. significant attention is paid by state authorities to partnering with other entities to address pressing issues of energy sovereignty and sustainable economic development. references: innovation and networks executive agency (2020). inea signs €720 million grant agreement for the baltic synchronisation project. available at: https://ec.europa.eu/inea/en/news-events/newsroom/inea-signs720-million-grant-agreement-baltic-synchronisation-project (accessed 23 july 2021). national fund for environmental protection and water management (2012). action strategy of the national fund for environmental protection and water management for 2013–2016 with a view to 2020. available at: http://nfosigw.gov.pl/en/nfepwm/strategy/ (accessed 27 july 2021). national security strategy of the republic of poland (2020). available at: https://www.bbn.gov.pl/ftp/ dokumenty/strategia_bezpieczenstwa_narodowego_rp_2020.pdf (accessed 23 july 2021). baltic journal of economic studies 230 vol. 7 no. 4, 2021 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions (2014). a policy framework for climate and energy in the period from 2020 to 2030. available at: https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri= celex:52014dc0015&from=en (accessed 23 july 2021). european council (2021). cohesion policy 2021–2027. available at: https://ec.europa.eu/regional_policy/ en/2021_2027/ (accessed 23 july 2021). european council (2021). 2021–2027 cohesion policy eu budget allocations. available at: https://cohesiondata.ec.europa.eu/stories/s/2021-2027-eu-allocations-available-for-programming/2w8s-ci3y/ (accessed 23 july 2021). european council (2021). modernisation fund. available at: https://ec.europa.eu/clima/policies/budget/ modernisation-fund_en (accessed 27 july 2021). ministry of climate and environment of poland (2021). energy policy of poland until 2040. available at: https://www.gov.pl/web/klimat/polityka-energetyczna-polski-do-2040-r-przy jeta-przez-rade-ministrow (accessed 23 july 2021). united nations (2015). the paris agreement. available at: https://unfccc.int/process-and-meetings/the-parisagreement/the-paris-agreement (accessed 29 july 2021). baltic journal of economic studies 29 vol. 8 no. 2, 2022 1 odessa state university of internal affairs, ukraine (corresponding author) 2 yuriy fedkovych chernivtsi national university, ukraine e-mail: ig.kovbas@chnu.edu.ua orcid: https://orcid.org/0000-0001-7039-1586 doi: https://doi.org/10.30525/2256-0742/2022-8-2-29-35 state registration in the mechanism of administrative and legal regulation oleg bolgar1, igor kovbas2 abstract. the subject of the study is administrative and legal relations in the field of state registration. methodology. the methodological basis of the study are methods of induction and deduction, dialecticalmaterialistic method, the method of analysis and synthesis, the historical method, which allowed to objectively understand the content and essence of the issues under study. the purpose of the article is the development of theoretical and methodological provisions, as well as the development of practical recommendations to improve the process of providing state registration services. the results of the study showed that the current state of the public services sector is characterized by uneven development and use of modern forms and methods of their management. administrative-procedural legal relations in the field of state registration are social relations regulated by administrative-procedural law, which develop in connection with the realization of a subjective right to material or non-material goods (objects) and the participants of which are, on the one hand, a legal or physical person, on the other hand – a state subject of registration. conclusion. it should be noted that the legislation regulating the procedure for registration of legal entities is largely imperfect and makes the regulation of the relations in question ineffective. this also applies to other normative legal acts regulating other types of state registration. improvement of legislation will improve the level of legal protection of constitutional rights and obligations of citizens and organizations. thus, the ways and methods of solving problems that have developed in the sphere of state registration should become an integral part of the whole, based on the priority directions of modern administrative reform. such directions, in our opinion, are: limitation of state interference in economic activities of business entities, including termination of excessive state regulation; elimination of duplication of functions and powers of state executive authorities; development of self-regulatory organizations in the sphere of economy; organizational separation of functions related to the regulation of economic activity, supervision and control, management of state property and the provision of state organizations of services to citizens and legal entities; completion of the process of separation of powers between state executive bodies of ukraine, optimization of territorial bodies of executive power. key words: administrative law, administrative legislation, state registration, legal institution, public admini stration, legal entities, entrepreneurs, legal mechanism, administrative procedures, registration authority, registration acts. jel classification: m31, i20, h82, g21, p51 1. introduction the implementation of the priority of individual rights and freedoms proclaimed in the constitution required the creation of an effective mechanism for their realization and protection, which determined the most important directions of state-legal transfor mations. with the proclamation of the welfare state in society, a decisive step is being taken toward the transition from the principle of "equality of opportunity " to the principle of "equality of results". the creation of conditions for the implementation of the rights and freedoms of the individual proclaimed by the constitution requires its active participation in social and economic processes, which calls for a radical systemic update of the legal forms mediating the influence of state power on the institutions of civil society. administrative and legal reform carried out in the context of the transformation of economic and political systems cannot be reduced to the optimization and adaptation of existing legal mechanisms of public administration in relation to the new conditions, because it is based on fundamentally different baltic journal of economic studies 30 vol. 8 no. 2, 2022 approaches to building a new system of relationship between the executive power and the individual, based on the idea of ensuring a reasonable balance of public and private interests. a sharp reduction in the spheres that allowed the use of direct administrative methods with a significant enrichment of the functional role of the state led to the emergence of new legal forms of public administration. against the background of the structural and functional reform of the system of executive power, one of the forms of its implementation – state registration, which found its application in all spheres of public administration (economy, social and administrative and political spheres) became especially relevant. despite this, the essence and legal nature of state registration as a form of implementation of executive power has not yet been the subject of a detailed study in the legal literature. under the conditions of socio-economic reforms taking place in ukraine, the institute of state registration has developed greatly: in the 90s of the twentieth century – the registration of acts of civil status, vehicles, registration (registration) of citizens at the place of residence, the end of last and beginning of this century – registration of real estate and transac tions with it, registration of public and religious associations, legal persons and natural persons – entrepreneurs, registration of property pledge, etc. however, legal regulation of this institution is carried out, as a rule, at the level of various normative acts, including subordinate legislation, which are characterized by fragmentation and inconsistency. registration is a complex socio-legal phenomenon, which is considered in the legal literature from different sides, with no unified understanding of it. in the literature, attempts are made to clarify the essence and legal nature of the institution in question, designed to protect the rights of individuals and legal entities. 2. scientific approaches to the definition of the phenomenon of "state registration" registration legal relations are part of administrative and procedural relations, since they are associated with the implementation of substantive norms of various branches of law (for example, constitutional law, which determines the status of public associations; civil law, which establishes the legal regime of immovable property; administrative law – providing administrative registration services, etc.). as d. stewart rightly points out, state registration is aimed at the protection by authorized executive authorities of one of the most important objects of state importance, namely, the protection of the rights and freedoms of citizens (stewart, 2004). these include the right of citizens to freedom of movement and choice of residence, the right to private property, including real estate, the right to form public associations and political parties. state registration expresses the public interest of the state, which seeks to protect the rights of citizens and legal entities for any benefit. d. forsythe, examining the concept and features of administrative and procedural legal relations, noted the features of administrative and procedural legal relations, which are the legal relations provided for by a legal norm between specific subjects, endowed with certain powers and responsibilities. these legal relations always arise based on legal norms, and the implementation of administrative and legal relations is ensured by measures of state influence. however, these are common signs of any legal relationship, so d. forsythe notes special features of administrativeprocedural legal relations (forsythe, 2011). the first feature is that administrative-procedural legal relations arise in the field of public admini stration. consequently, administrative-procedural legal relations, as well as substantive administrative-law relations, are of managerial nature. the second feature is that these relations are procedural. if the first feature allows separating administrative-procedural legal relations from all other, except for material administrative-legal relations arising in the field of public administration, then the second feature allows drawing a boundary between material and procedural administrative-legal relations. managerial nature of substantive and procedural relations turns out to be a factor that brings them closer. on the one hand, it allows separating both types of administrative-legal relations, on the other hand – determining the scope of administrativeprocedural legal relations. the concept of "registration" comes from the latin "registrum" (list) and means a record of facts, documents of legal significance. administrative scientists speak differently about the essence of registration. thus, t. brown believes that through registration, public authorities, as a rule, executive authorities recognize a person's right to a certain social good (place of residence, real estate, entrepreneurial activity, etc.) and legalize the use of it (brown, 2016). according to r . draft, registration is a verification of official facts and their accounting (draft, 2012). in many ways, i. ferreira (ferreira, 2009) and d. monro (monro, 2003) express a similar point of view. according to s. martin, registration is the activity of executive authorities, regulated by the rules of administrative-procedural law, in the course of which issues of official recognition of the legality of the existence of certain material objects and legal facts are resolved (martin, 2015). t. poister takes an even broader view of registration, who believes that state registration should include not only the activities of registration authorities in reviewing specific documents, but also the state in organizing the system of state registration, establishing baltic journal of economic studies 31 vol. 8 no. 2, 2022 the principles of its implementation, methods of protection and reflection of information, as well as procedures for providing information on registered rights (poister, 2003). c. needham rightly pointed out "that state registration is one of the elements of public legal regulation of property relations, a form of designation, ensuring and protecting public interests in the sphere of civil law" (needham, 2011). unfortunately, ukrainian legislation does not contain a legal definition of the term "registration proceedings". the legislation operates with the concepts of "state registration of legal entities, entrepreneurs", "state registration of rights to immovable property ", "state cadastral registration", "registration of a place of residence", etc. or terms such as "state registration of a normative legal act", while defining its components and establishing rules for implementation (kotylko, 2022). the analysis of these points of view shows that the essence of registration is considered from different positions: – as a fundamental method of administrative-legal regulation; a certain way of impact on social relations arising during the implementation of various rights by citizens and organizations; – as an independent administrative procedure regulating the procedure of implementation; – as a specific type of activity of executive authorities vested with special powers, that is, in fact, as one of the management functions performed by public authorities. it appears that registration is, firstly, a method of administrative-legal regulation, through which the state officially recognizes certain rights belonging to individuals and legal entities, as well as legal facts relevant to the development of social relations related to the implementation of the rights and obligations imposed on them by these subjects. 3. registration as a method of administrative and legal regulation registration, like any activity, has a form of external expression. such is the established by the norms of administrative-procedural law order of actions, which determine its essence. state registration, as m. spendolini rightly points out, is aimed at solving two tasks – legal and law enforcement. the first one implies that by officially recording certain facts, state bodies create conditions that provide citizens with the opportunity to realize their rights. the second means the implementation of administrative oversight over the legality of recorded actions and facts (spendolini, 2013). thus, through registration the constitutional rights of citizens of ukraine to freedom of movement and choice of residence, to form public associations, to private property, including tools and means of production, etc. are ensured. registration of motor vehicles allows not only their registration, but also the supervision of compliance of design, technical condition and equipment with the established safety requirements. thanks to this, there is a counteraction to offenses related to the use of vehicles. consequently, registration, as a method of administrative-legal regulation, allows for a balance of private and public interests. state registration is often considered among the special methods of administrative authorization, along with licensing, since it is also aimed at legitimizing certain legal relations arising in the process of exercising subjective rights. thus, according to r . nyhan, both registration and licensing refer to licensing procedures aimed at granting special powers to individual entities (nyhan, 2009). however, despite some similarity of tasks, they also have significant differences. indeed, licensing is a state confirmation of the ability to engage in certain types of activities and is closely related to the emergence of legal capacity of subjects in terms of entrepreneurship on the basis of a special permit (license) issued by the executive authorities. state registration is aimed at the establishment, recognition of certain legal facts or recognition of a certain right and the possibility of its implementation for the subjects. at the same time legal facts themselves may entail certain consequences, but may not entail, but only create conditions for their occurrence. registration is carried out in various spheres of public life. in particular, state registration of public associations, normative-legal acts issued by state executive authorities, motor vehicles, foreign citizens staying on the territory of ukraine, real estate, etc. is carried out. licensing applies only to certain types of entrepreneurial activity, the uncontrolled implementation of which could harm the interests of individuals, society and the state. their list is contained mainly in the law of ukraine "on licensing of types of economic activity " dated march 2, 2015 no. 222-viii. registration and licensing have their own legal regulation. licensing implies compulsory control not only when considering the issue of a license, but also in the process of doing business. at the same time, the licensing authorities have broad powers to apply administrative coercive measures to entities that violate licensing requirements. the bodies performing state registration have no such authority. if the documents submitted for registration do not meet the requirements, they have the right to refuse registration. thus, registration and licensing should be considered as independent methods of state regulation used baltic journal of economic studies 32 vol. 8 no. 2, 2022 by public authorities; each of these methods has its own nature. at state registration, an appropriate entry is made in a specialized register (of objects, rights, states), which is maintained by the relevant executive authority. based on this, we can say that registration is one of the methods of state regulation, which is aimed at creating conditions for the implementation of certain rights and obligations of the subjects of administrative and legal relations. j. calhoun names the purposes of state registration: – recording of legally significant facts and their accounting; – control in the industry in which state registration is carried out; – certificate of registered facts (calhoun, 2014). the tasks of registration proceedings are as follows: – observance of the rights, freedoms and legitimate interests of individuals and legal entities; – unity and unification of accounting of subjects and objects of state registration; – ensuring and protecting the property and personal non-property rights of citizens and legal entities; – authorization of persons as subjects of civil legal relations; – the assignment of the right of ownership of an object of civil rights to property to a certain person; – legalization of business activities; – establishment of grounds for the emergence, modification or termination of legal relations regarding real estate; – implementation of measures to prevent legal torts (kotylko, 2022). along with the constitutional principles of the rule of law, legality, priority of the individual and its interests, publicity, national language, mutual responsibility, the general principles of state registration are the principles of unity of state registration (general provisions of registration of subjects of civil legal relations and property rights, the same for different objects), verification of legality of grounds for registration, publicity of the register, presumption of reliability of the declared and registered information. among the new fundamental provisions of registration proceedings, dictated by modern realities, are the following: – organizational principle of the possibility of filing applications for state registration and providing information to applicants in the "single window" mode and according to the rules of electronic document flow; – maintaining state registers on electronic media in accordance with unified organizational, methodological, software and technical principles that ensure compatibility and interaction of state registers with other information systems and networks. 4. some aspects of the administrative and legal regulation of state registration in ukraine in this article, the authors will dwell only on some issues of legal regulation and practice of such a type as the registration of legal entities and individual entrepreneurs, determining the limits of their constitutional right to use their abilities and property for entrepreneurial activity. the legal basis of this type of registration is the law of ukraine "on state registration of real rights to immovable property and their encumbrances" dated july 1, 2004 no. 1952-iv; the law of ukraine "on state registration of legal entities, individual entrepreneurs and public formations" dated may 15, 2003 no. 755-iv, as well as departmental legal acts of the state fiscal service issued on their basis. from their analysis it follows that registration is a fact of recognition and confirmation by the state of the legal personality of organizations or individuals who have expressed their desire to engage in entrepreneurial activities. only after registration they are recognized as existing and have the right to exercise civil rights and obligations on their own behalf. in addition, state registration gives constituent documents and other information about a person legal significance, that is, it makes them publicly credible to third parties (kotylko, 2022). both commercial and non-commercial legal entities, as well as citizens carrying out entrepreneurial activities without forming a legal entity, are subject to state registration. in some cases, the legislation may provide conditions for citizens to carry out such activities without state registration as an individual entrepreneur. the registration procedure involves entering information provided for by law into the unified state register of legal entities (individual entrepreneurs). for legal entities: – full and (if any) abbreviated name, corporate name for commercial organizations in the ukrainian language. if in the constituent documents of the legal entity the name of the legal entity is indicated in a foreign language, the unified state register of legal entities shall also indicate the name of the legal entity in these languages; – organizational and legal form; – address of the legal entity within the location of the legal entity; – e-mail address of the legal entity (if such information is specified in the application for state registration); – the method of formation of a legal entity (creation or reorganization); – information on founders (participants) of the legal entity, in relation to joint stock companies also information on holders of registers of their shareholders, in relation to limited liability companies – information on size and nominal value of shares in baltic journal of economic studies 33 vol. 8 no. 2, 2022 the authorized capital of the company owned by the company and its participants, on transfer of shares or parts of shares in pledge or under other encumbrance, information on the person managing the share transferred by way of inheritance; – original or notarized copy of the constituent document of the legal entity or information that the legal entity operates on the basis of the model statute, approved in accordance with the legislation of ukraine; – surname, first name, patronymic and position of the person who has the right to act on behalf of the legal entity without power of attorney, as well as passport data of such person or data of other identity documents in accordance with the legislation of ukraine, and taxpayer identification number, if any; – information about licenses obtained by a legal entity; – information about branches and representative offices of a legal entity, etc. much the same information is provided when registering individual entrepreneurs. these registers are information resources open to the public, which are maintained on paper and/or electronic media. responsibility for the accuracy and correctness of the information entered is borne by the officials of the registering body who made the relevant entries. on this basis, persons relying in good faith on the information contained in such a registry are entitled to believe that it corresponds to the actual circumstances. as a rule, the registration authority does not check the documents submitted by the applicant for their compliance with the current legislation, but this provision does not apply to the application for state registration, which has rather strict requirements for compliance with the established form, as evidenced by court practice. thus, by a decision of the tax inspectorate of one of their cities, citizen b. was denied registration of a legal entity on the grounds that his application for registration did not include a zip code. in this connection, the registering body declared the application invalid. citizen b.'s arguments that the indicator is specified in an additional document (letter of guarantee) and the tax authority could have independently entered the missing information were found to be unfounded. the decision of the district administrative court, which considered the case by way of administrative proceedings, recognized the decision of the tax inspectorate as lawful, and the decisions of lower courts on b.'s complaints were left unchanged. verification of authenticity of other documents submitted to the registering authority may be carried out only in cases expressly provided for by law, for example, if there are objections from interested parties regarding the upcoming registration of changes made to the charter of the legal entity. in terms of ensuring the reliability of information submitted during the state registration of legal entities and individual entrepreneurs, the law defined methods of verification, which can be used by the registering authority to determine the degree of reliability of the submitted documents and the information contained in them. this can be done by: – examining the documents and information available to the registering authority, as well as documents and explanations submitted by the applicant; – obtaining the necessary explanations from persons who may be aware of any circumstances relevant to the audit; – obtaining certificates and information on issues arising during the audit; – conducting an inspection of real estate objects; – involvement of a specialist or expert to participate in the audit. in this case, on behalf of the cabinet of ministers of ukraine, the authorized body was to determine the grounds and procedure for the use of the results. however, to date, this procedure has not been defined. the state registration of legal entities in connection with their liquidation, which entails the termination of the legal capacity of legal entities, has its own significance. liquidation of a legal entity is a rather lengthy procedure, which consists of two stages and ends with the making of an appropriate entry in the state register. at the first stage, the founders of the legal entity or the body that made the decision on liquidation must immediately (within three days) notify the registering body in writing. on this basis, the state body makes a record in the register that the legal entity is in the process of liquidation. this entry indicates a change in the scope of civil legal capacity of the legal entity; in particular, the legal entity cannot participate as a founder of another legal entity, make changes to its own constituent documents, etc. at this stage, a liquidation commission is created by the legal entity (kotylko, 2022). at the second stage, at the end of the commission, the legal entity submits to the registering authority an application for state registration, which confirms compliance with the procedure of liquidation of a legal entity, the fact of settlements with creditors and coordination of the liquidation with the relevant state bodies and local authorities. together with the application, the liquidation balance sheet and other documents stipulated by law are submitted. on the basis of the submitted documents, the registering authority makes an appropriate entry in the unified state register of legal entities and publishes information on the liquidation of the legal entity. baltic journal of economic studies 34 vol. 8 no. 2, 2022 the same procedure applies to the registration of individual entrepreneurs. given that the forms of many documents submitted to the registration authority are not legally defined, it would be advisable to legislate the obligation of the registration authority to conduct mandatory verification of the authenticity of all submitted documents for compliance with current legislation. this approach will avoid disputes between the founders of legal entities and increase the effectiveness of preliminary control over the activities of business entities. the information technologies used in public administration make this possible. state bodies perform registration not only at creation of a legal entity, but also at its reorganization, as well as in case of introduction of changes into constituent documents of a legal entity or information about it. in all cases, the applicant must submit a document confirming the payment of the state duty. however, if registration is denied, even on formal grounds, the amount of the fee paid is not refundable, and the fee must be paid again if corrected documents are submitted. that is, the fee is charged for something that is not done. therefore, it is necessary to introduce a rule in the tax code of ukraine providing for the refund of the amount of the state fee to its payer in case of refusal of registration. the rights registrar can terminate the registration relationship: – to clarify the circumstances preventing the implementation of state registration, within the time and in the cases prescribed by law; – at the request of the copyright holder or a person authorized by him to do so. the registration relationship may also be terminated by order or court decision, which the applicant or other interested person has the right to challenge. at that, it should be noted that in registration legal relations the registration body is endowed with power powers, but they are not absolute, as certain duties are assigned to executive bodies. when participants of legal relations are endowed with subjective rights and legal duties, it characterizes such a notion as the content of legal relations. in this case, the following should be noted: subjective rights and legal duties arise in accordance with the rules of law, which define the range and scope of subjective rights and duties. if a rule of law gives one subject of law a certain subjective right, it imposes on the other subject a legal duty corresponding to the subjective right, and, conversely, the subjective right of the other subject corresponds to each legal duty of one subject. 5. conclusions administrative-procedural registration relations, having in common with substantive administrativelegal relations managerial nature, differ from them by a number of features expressing the corresponding specificity. the classification criteria of registrationlegal relations are three criteria: object; legal status of a normative act; status and legal status of participants of relations. administrative-procedural legal relations in the field of state registration are social relations regulated by administrative-procedural law, which develop in connection with the realization of a subjective right to material or non-material goods (objects) and the participants of which are, on the one hand, a legal or physical person, on the other hand – a state subject of registration. today, the rules of state registration are widespread, in particular concerning: the inclusion in the subject of regulation of relations between persons engaged in entrepreneurial activities, or with their participation, persons registered in this capacity in the manner prescribed by law, including the right of a citizen to engage in entrepreneurial activities without forming a legal entity from the moment of state registration as an entrepreneur; state registration of property rights; registration of acts of civil status; state registration of legal entities; state registration of real estate; state registration of easements (the right of limited use of another's land plot); state registration of transactions (in cases prescribed by law), as well as the conse quences of evasion from notarization or state registration of such transactions; state registration of contracts; state registration and accounting of pledge; state registration of issue or issue of securities in cases prescribed by law; state registration of results of intellectual activity and means of individualization, etc. it should be noted that the legislation regulating the procedure for registration of legal entities is largely imperfect and makes the regulation of the relations in question ineffective. this also applies to other normative legal acts regulating other types of state registration. improvement of legislation will improve the level of legal protection of constitutional rights and obligations of citizens and organizations. thus, the ways and methods of solving the problems that have developed in the field of state registration should become an integral part of the whole, based on the priority areas of modern administrative reform. such directions, in our opinion, are: limitation of state interference in economic activities of business entities, including termination of excessive state regulation; elimination of duplication of functions and powers of state executive authorities; development of selfregulatory organizations in the sphere of economy; organizational separation of functions related to the regulation of economic activity, supervision and control, management of state property and the provision of state organizations of services to citizens and legal entities; completion of the process of separation of powers between state executive bodies of ukraine, optimization of territorial bodies of executive power. baltic journal of economic studies 35 vol. 8 no. 2, 2022 references: brown, t. (2016). learning from experience and managing the transaction costs of internal and contract service delivery. paper presented at 2016 appam fall conference in madison, 310 р. calhoun, j. w. (2014). administrative office management: complete course. cengage learning, 125 р. daft, r . l. (2012). management. south-western, cengage learning, 122 р. ferreira, e. j. (2009). administrative management. 2nd ed. lansdowne: juta academic. 316 р. forsythe, d.w. (2011). pitfalls in designing and implementing performance management systems. quicker? better? cheaper?: managing performance in american government. the rockfeller institute press, 150 р. kotylko, y., & ignatenko, a. (2022). state registration of religious organizations in ukraine. scientific journal of polonia university, vol. 50(1), pp. 171–179. martin, s. (2015). multiple public service performance indicators: toward an integrated statistical approach. j. of public administration research and theory, vol. 15, pp. 599–613. monro, d. (2003). the role of performance measures in a federal-state context: the examples of housing and disability services. australian j. of public administration, vol. 62(1), pp. 70–79. needham, c. (2011). personalizing public services: understanding the personalization narrative. bristol: the polity press, 282 р. nyhan, r . c. (2009). comparative performance measurement: a primer on data envelopment analysis. public productivity and management review, vol. 22, no. 3, pp. 348–364. poister, th. h. (2003). measuring performance in public and non-profit organizations. jossey-bass, 213 р. stewart, j. (2004). performance measurement: when performance can never be finally defined. public money and management, pp. 45–49. spendolini, m. j. (2013). the administration books. 2nd ed. n.y.: amacom books, 202 р. baltic journal of economic studies 35 vol. 2, no. 5, 2016 corresponding author: 1 department of finance named after s.i. yuriy, ternopil national economic university. e-mail: vatslavskyi.oleh@gmail.com question of improvement of budget control at the local level oleg vatslavskyi1 ternopil national economic university, ukraine abstract. the aim is to analyse the current practice of budgetary control to develop its areas of improvement at the local level. the subject of the research is theoretical and methodological principles of functioning of budgetary control at the local level. the methodological basis of the study comprises research approaches, general theoretical principles of scientific knowledge, system of methods and techniques. the paper clarifies the nature of budgetary control at the local level. the main bodies that implement budget control, namely the state audit office, the accounting chamber, the state treasury, the state fiscal service, financial and management departments are singled out. it is found that the leading part among all of the special budgetary control bodies in the rational and efficient use of local financial resources is performed by the state audit office. analysis of the state audit office in three regions of ukraine for the period 2013-2015 has been carried out. we distinguish two main types of violations that the state audit service reveals during its work at the local level: 1) shortfall in the financial resources of public enterprises, institutions and organizations; 2) violations that lead to illegal, non-target costs and shortages. it is proved that the efficiency of budgetary control is low. the paper states basic problems of budget control at the local level, namely, low income funds and reimbursements from violations revealed by regulatory agencies; insufficient work with the public to explain the problems of budget control and eliminate violations in the public sector; lack of a consolidated legal act, which would have regulated all the major components of budgetary control; insufficient use of controlling and auditing methods aimed at determining the effectiveness of budget funds; low preventive function on the part of budget control bodies. we offer ways to improve budget control at the local level through: standardization system of budgetary control in accordance with international standards in connection with the integration of ukraine into the eu and the transition to international accounting standards and reporting system to form unified control procedures; create a system of unified procedures of developing a clear concept of budgetary control, which should be both scientific and political document to enforce, as determined by the law; creating for all budgetary control bodies an integrated database related to the certification of audit results; developing cooperation strategy with budgetary control bodies of foreign countries and specialized international organizations, including participation in joint training sessions and parallel control expert and analytical measures. as a result, the proposed measures will make it possible not only to eliminate these shortcomings but also to increase efficiency, effectiveness and efficacy of budgetary control at the local level. key words: budget control, local budgets, violations of budget legislation, budget control authorities, municipal budget control. jel classification: g 28, h 83 1. introduction the economic crisis brings forth the issue of limited budget funds and its efficient use. each year the number of disclosed budget violations increases, indicating the excessive loss of state material and financial resources. reducing the risk of misuse can be achieved by increasing the efficiency of budgetary control. measures in this area can also lead to the reduction of scopes of budget violations by state enterprises, budgetary institutions and organizations that significantly increase the efficiency of budget funds. with this aim in mind, it is considered that the improvement of budgetary control itself should be ensured by coordinated activities of the bodies which are part of the relevant system at all branches of government, which generally meets its purpose to strengthen budgetary discipline, ensure the economy of material and financial resources, as well as full, timely and appropriate use of funds in the community to achieve effective results. baltic journal of economic studies 36 vol. 2, no. 5, 2016 2. philosophy of budgetary control at the local level budget control at the local level is a combination of control measures, carried out by special state bodies, dealing with the verification of legality, appropriateness and effectiveness of the formation, distribution and use of funds of state and local governments. the special budget control authorities in ukraine include: the state audit service, the accounting chamber, the state treasury, the state fiscal authorities, financial and management departments. activities of fiscal services are focused primarily on the proper execution of budget revenues, namely, monitoring the timeliness, accuracy and completeness of calculation and payment of taxes and other mandatory payments to local budgets; providing application and timely recovery of financial sanctions amounts to local budgets under existing legislation for tax laws violations, and collection of administrative fines; inspecting concealment of facts and understatement of taxes and other mandatory payments to local budgets. tasks include the accounting chamber to control: the financing of national programs in the part concerning the use of the state budget of ukraine, legality and efficiency of financial resources allocated from the state budget of ukraine for the implementation of national programs; spending of government agencies and organizations operating abroad and financed from the state budget of ukraine quarterly distribution revenues and expenditures according to the parameters of the budget spending of earmarked funds (on behalf of the verkhovna rada of ukraine); intended use of funds by the executive state trust funds (on behalf of the verkhovna rada of ukraine); financing of national programs of economic, scientific, technical, social and cultural development, environmental protection and other programs approved by the verkhovna rada of ukraine (on behalf of the verkhovna rada of ukraine and its committees). the state audit service, the accounting chamber, the state treasury, financial and management departments are accountable for the efficient and responsible use of public funds. the tasks of the state audit service in budgetary control intersect with those of the accounting chamber, namely in terms of monitoring the use of the state budget. the accounting chamber mainly controls the central state administration whereas the state audit service control area starts at budgetary institutions in villages and goes up to the ministries and departments. financial management and departments monitor the targeted use of funds allocated from the local budget. from the above it follows that the state audit service ranks top among all the special budget control bodies in the rational and efficient use of local financial resources. the state audit service is authorized to audit, inspect and perform checkups both in local budgets and the municipal sector. the main tasks of the state audit service in the area of local finance are: – monitoring the legal, targeted and efficient use of local budgets and other financial and material resources of local governments; – control over the preservation and use of public property; – monitoring of the condition and reliability of accounting and reporting in local governments, public institutions as well as companies and organizations that receive funds from local budgets; – developing proposals to eliminate shortcomings and violations; – carrying out systematic analysis of the circumstances and reasons that contribute to budget violations and measures to prevent them (malaieva, 2011). also, the state audit service controls, in particular, the following: performing the functions of state property management; targeted use of state and local budgets, loans received under the state guarantees and their timely return; drawing up the budget reporting, budget programs and reports on their performance, estimates and other documents used in the implementation of the budget; state and conditions of internal control and audit of budget funds administrators (kopen', 2012). 3. the activities of the state audit service during its work, the state audit service finds most violations concerning the shortfall in the financial resources of public enterprises, institutions and organizations, as well as violations that lead to illegal, non-target costs and shortages. thus, according to the analytical data of the state audit service in 2013 in ternopil region it revealed violations that led to the shortfall in the financial resources of enterprises, institutions, organizations, amounting to 27.158 million uah. the revenue level of these funds was only 31%. similar violations were detected in kirovohrad and dnipropetrovsk regions amounted to 12.517 million uah and 317.058 million uah respectively. the level of income they made was 55% and 12% (table 1). in 2014, rates of disclosed violations on shortfalls of financial resources in ternopil, kirovohrad and dnipropetrovsk regions decreased as compared to 2013 and amounted to 8.016  million uah, 11.331  million uah and 35.552  million uah respectively. the level of revenues from these breaches was 46%, 35% and 19%. this is primarily due to poor quality control measures and imposition of governmental bans on auditing and inspection activities of this service. in 2015, the amount of detected violations concerning the shortfalls in financial resources in ternopil, kirovohrad and dnipropetrovsk regions kept on declining and amounted to 5.222  million uah, 4.755  million uah and 40.217 million uah respectively. the level of revenues from these breaches was 62%, 50% and just baltic journal of economic studies 37 vol. 2, no. 5, 2016 8%. this situation is explained by the fact that in 2015 the number of inspected enterprises, organizations and institutions declined several times over the previous years. another major indicator of the state audit service activities disclosed financial irregularities that led to the illegal, non-target costs and shortages. as for 2013, the amount of detected violations in the territories of ternopil, kirovohrad and dnipropetrovsk regions was 23.378 million uah, 59.411 million uah, and 260.017 million uah. the level of compensation was 80%, 51% and 20% respectively. in 2014, the state audit office in ternopil, kirovohrad and dnipropetrovsk found violations amounted to 19.285 million uah, 37.745  million uah and 237.498  million uah. the level of compensation was 67%, 57% and 48%. in comparison with 2013, the amount of violations decreased due to significant increase of checks, which in turn made them ineffective. in 2015, there was an increase in the amount of detected financial irregularities that led to the illegal, non-target costs and shortages in relation to 2014. these sums in ternopil, kirovohrad and dnipropetrovsk regions totalled 33.991 million uah, 46.771 million uah and 177.877 million uah respectively. but the level of compensation reduced to 48%, 41% and 14% (tab. 2). this can be explained by employees' inefficient work towards reimbursement of revealed violations, as a control measure is not complete then when the breach is revealed, but when this offence is fully refunded. 4. problems and ways to improve budgetary control at the local level from the above it should be noted that the effectiveness of budgetary control is low. this is primarily due to several problems in the implementation of budgetary control at the local level, namely: – low level of financial resources revenue and reimbursements of violations revealed by regulatory agencies; – insufficient work with the public to explain the problems of budget control and eliminating violations in the public sector; – numerous unsuccessful audits and inspections that, in turn, prevent the normal operation of inspected sites; – lack of a single consolidated legal act, which would have regulated all the major components of budgetary control; – low qualification of employees of budgetary control bodies; – insufficient use of methods in control and auditing operations aimed at determining the effectiveness of using budget funds; – low preventive function on the part of the budget control bodies; – lack of a clear state policy in budget control sphere. the main methodological drawback is the lack of methodological support of basic forms of budgetary control. one should also note the lack of use by the state audit office its powers to improve the efficiency of budgetary control, including the local level budget violations. table 1 key indicators of work of the state audit service ternopil kirovohrad dnipropetrovsk 2013 2014 2015 2013 2014 2015 2013 2014 2015 checked enterprises, institutions and organizations 208 658 160 186 665 90 307 1087 182 found violations of the shortfall in financial resources (thousand uah) 27158 8016 5222 12517 11331 4755 317058 35552 40217 provided of financial resources (thousand uah) 8500 3666 3256 6816 3946 2393 38467 6831 3051 the level of financial resources (%) 31 46 62 55 35 50 12 19 8 compiled by the author based on the following sources (annual report of the state audit office ukraine, 2013, 2014, 2015) table 2 key indicators of the work of the state audit service ternopil kirovohrad dnipropetrovsk 2013 2014 2015 2013 2014 2015 2013 2014 2015 checked enterprises, institutions and organizations 208 658 160 186 665 90 307 1087 182 revealed financial irregularities that led to the illegal, non-target costs and shortages (thousand uah) 23378 19285 33991 59411 37745 46771 260017 237408 177877 refunded illegal and inappropriate costs, shortage (thousand uah) 18730 12821 16198 30086 21505 19372 52385 113091 24584 the level of financial resources (%) 80 67 48 51 57 41 20 48 14 compiled by the author based on the following sources (annual report of the state audit office ukraine, 2013, 2014, 2015) baltic journal of economic studies 38 vol. 2, no. 5, 2016 another problem to consider is an insufficient organization of interaction of authorities exercising control in the public sector. based on the functions, tasks and their respective powers, budget control authorities and law enforcement agencies have to operate in constant interaction to effectively coordinate their actions (malaieva, 2011). after analysing the problems in the system of legal, methodological and organizational support of budget control, we can offer the following directions of its reformation: • develop a clear concept of a unified system of budgetary control, which should be both scientific and political document to enforce, as determined by law. as a scientific paper the concept should reflect the theoretical and methodological foundations of control, while as a political one it has to formulate the requirements for the legal framework to public policy in the budget control sphere (kopen', 2012). starting position of this concept should be a clear division of functions and powers of external and internal budgetary control and the creation of the supreme budgetary control with the assignment of its appropriate powers and its status independent of branches of power; • it is necessary to standardize the system of budgetary control in accordance with international standards in connection with the integration of ukraine into the eu and the transition to international accounting and reporting standards, and to form a unified procedure control system. undoubtedly, every agency of budgetary control system has its specific goals and objectives, but it is reasonable to perform the inspection, testing and audit, following standardized programs and methodology; • higher budgetary control authority should develop a system of external control standards taking into account intosai auditing standards and international standards on auditing (isa); • develop and adopt a number of regulations (amendments to laws), clearly regulating cooperation of budgetary control bodies with those of the interior ministry, security service, prosecutor general of ukraine, etc., which in turn will reduce duplication of relevant authorities control functions, as well as the pressure on objects of control and minimize misunderstandings and obstacles that reduce efficiency; • it is necessary to create for all budgetary control agencies an integrated database related to the certification of the results of control measures. this procedure is not simple and requires certain costs, but without it you cannot perform a deep and comprehensive analysis of the results of the control body to determine the quality of control measures and vectors of their improvement; • design a strategy for cooperation with the budgetary control agencies of foreign countries and specialized international organizations, with participation in joint training sessions and parallel control expert and analytical activities; • adopt the law of ukraine "on budget control", which would regulate all important components of this very important process for the life of the state, clearly distinguish between parliamentary and government budgetary control bodies, define range of budget control subjects, the hierarchy of agencies which carry it out, the form of their organization and interaction etc.; • increase the professional attitude of employees of budgetary control agencies, namely, increase the high level of their knowledge and training through modernization of education and reforming the civil service institutions. attention should also be paid to the fact that staffing of the state financial inspectors and auditors should be done not on political grounds but purely on the professional basis. in order to build an effective system of budgetary control it is necessary to comply with the following requirements: – activities of supervisory bodies should be based on the principles of legality, unity, independence, objectivity, planning, competence, efficiency, demonstrability, transparency and compliance with professional ethics; – independence of supervisory authorities should be secured at the constitutional level by providing them special status; – all public authorities, regardless of affiliation, should assist supervisory authorities in carrying out their activities; – supervisory authorities should have the right to access all materials of inspections conducted by other government agencies, as well as during internal and external auditing of public financial resources and public property; – based on the results of control measures to prevent and suppress violations, to eliminate them and bring perpetrators to justice, super visor y authorities should be legally endowed with a set of administrative and executive powers to implement their decisions taken as a result of control measures, and to appeal to any public authority and law enforcement agencies, including court and prosecutors (malaieva, 2011). 5. findings budget control is an important function of the state administration and budget system regulation. the system of budgetary control is facing serious problems of legal, organizational and methodological nature impeding the implementation of its functions, thus creating a need for its immediate reformation. therefore, we believe that the proposed measures will make it possible not only to eliminate these shortcomings but also to increase efficiency, effectiveness and efficacy of budgetary control at the local level. baltic journal of economic studies 39 vol. 2, no. 5, 2016 6. conclusions in recent years the role of budgetary control as one of the key elements of governance has not been fully used, and only the economic and political crisis of public finances forced the society to pay attention to the budgetary control practices. special attitude to budgetary control and its underestimation is also due to the fact that it is carried in the area of interlocking state, local, corporate and personal interests. it should be noted that with a significant decrease in the number of audits nationwide the amount of detected budget violations increased significantly, indicating both the professional level of budgetary control agencies employees and improvement of methodological work, and also problematic aspects of current budgetary control system, which did not create the right conditions for improving the budgetary discipline at national, regional and local levels. based on the priority of the state policy of ukraine to join the eu, a key aspect in this process is the adaptation of budgetary control to european standards. it is about ukraine's compliance with the provisions of the lima declaration of guidelines on control, namely, to change approaches to the concept of "control" and bring it closer to the european interpretations. controls should aim to correct the violations and prevent them in the future. to build an effective system of budgetary control in ukraine that provides steady state of fiscal discipline in the region is possible only in the presence of effective internal control systems in local authorities at all levels, which is the system of municipal budget control. after a thorough analysis of the legal framework, it should be noted that in order to reform the budget control and increase its effectiveness, the main efforts should be focused on upgrading the base and the development and adoption of regulations that would discriminate functions of budgetary control agencies and subjects, set budgetary control issues and the range of its objects and subjects, fiscal discipline and budget violations, as well as the structure of budgetary control and the basic principles of its methodological support. after all budget control is an integral and important part of the state regulation of the economy. references annual report of the state audit office ukraine in 2013. (2014). retrieved from: http://www.dkrs.gov.ua/kru/uk/ publish/article/102409 annual report of the state audit office ukraine in 2014. (2015). retrieved from: http://www.dkrs.gov.ua/kru/uk/ publish/article/115346 annual report of the state audit office ukraine in 2015. (2016). retrieved from: http://www.dkrs.gov.ua/kru/uk/ publish/article/122325 malaieva, t. (2011). problems in the areas of budgetary control and overcome them. journal of economic reform. scientific production journal, vol. 1. kopen', n. (2012). conceptual bases of formation of system of financial control in terms of economic reform. the formation of market relations in ukraine. the scientific journal, vol. 8. олег вацлавский вопросы совершенствования бюджетного контроля на местном уровне аннотация. целью работы является осуществление анализа действующей практики бюджетного контроля для разработки направлений совершенствования его на местном уровне. предметом исследования выступают теоретико-методологические основы функционирования бюджетного контроля на местном уровне. методологической основой исследования является исследовательские подходы, общие теоретические принципы научного познания, система методов, способов. в работе выяснено сущность бюджетного контроля на местном уровне. выделены основные органы осуществления бюджетного контроля, а именно: государственная аудиторская служба, счетная палата, государственная казначейская служба, государство фискальная служба, финансовые управления и отделы. выяснено, что ведущее место среди всех специальных органов бюджетного контроля в сфере рационального и эффективного использования местных финансовых ресурсов принадлежит государственной аудиторские службе. проведен анализ деятельности государственной аудиторской службы в трех областях украины за период 2013-2015 гг. выделены два основных вида нарушений, которые в ходе своей работы обнаруживает государственная аудиторская служба на местном уровне: 1) недополучением финансовых ресурсов государственными предприятиями, учреждениями, организациями; 2) нарушения, приводящие к незаконным, нецелевых расходов и недостач. доказано, что эффективность бюджетного контроля находится на низком уровне. определены основные проблемы функционирования бюджетного контроля на местном уровне, а именно: низкий уровень поступлений финансовых ресурсов и возмещение от выявленных контрольными органами нарушений; недостаточная работа с общественностью по разъяснению задач бюджетного контроля и baltic journal of economic studies 40 vol. 2, no. 5, 2016 обеспечения устранения нарушений в бюджетной сфере; отсутствие консолидированного нормативноправового акта который бы нормировал все важнейшие составляющие бюджетного контроля; недостаточное использование в контрольно-ревизионной работе методик, направленных на определение эффективности использования бюджетных средств; низкий уровень превентивной функции со стороны органов бюджетного контроля. предложено усовершенствовать бюджетный контроль на местном уровне путем: стандартизации системы бюджетного контроля в соответствии с международными стандартами в связи с интеграцией украины в ес и переходом на международные стандарты учета и отчетности, сформировать систему единых процедур контроля; разработки четкой концепции единой системы бюджетного контроля, которая должна быть одновременно и научным, и политическим документом обязательного исполнения, определяется нормами права; создание для всех органов бюджетного контроля интегрированной базы данных, связанной с паспортизацией результатов контрольных мероприятий; спроектировать стратегии сотрудничества с органами бюджетного контроля зарубежных стран и профильным международными организациями, проведение с ними совместных обучающих тренингов и параллельных контрольных экспертно-аналитических мероприятий. в результате, предложенные меры позволят не только устранить указанные недостатки, но и повысить эффективность, действенность и результативность бюджетного контроля на местном уровне. baltic journal of economic studies 1 vol. 7 no. 4, 2021 corresponding author: 1 klaipeda university, lithuania. e-mail: juliuss.ramanauskas@gmail.com 2 klaipeda university, lithuania. mykolas romeris university, lithuania. smk university of applied social sciences, klaipeda, lithuania. e-mail: sbanevicius07@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-4-1-7 principles of organizational wisdom in the health tourism industry julius ramanauskas1, sarunas banevicius2 abstract. health tourism is when patients travel to another state (or within a country) to improve or restore health (hudson and li, 2012). recent studies show that health care spending is on the rise, averaging around 9 percent of gdp in oecd countries, and that the right balance needs to be struck between spending on disease prevention and treatment. assessing the problem field of the health tourism industry and the current situation, the following key problems are identified: lack of communication and support between health tourism policy makers and health tourism organizations; lack of a culture of cooperation and organizational partnership between the public and private sectors; lack of strategic planning; gaps in the targeted distribution of responsibilities between actors in the health tourism network; resistance of the public and private sector to change. thus, the article solves the problem – how to ensure the effective application of the principles of organizational wisdom in the health tourism industry? according to the authors, it is expedient for the organizations involved in this complex field of tourism to base their activities on the principles of organizational wisdom. the aim of the article is to propose the application of the principles of organizational wisdom in the health tourism industry. for the systematic review, scientific articles were searched in databases: cambridge journals online; ebsco; emerald publishing; sage journals online; science direct; taylor & francis. the scientific articles included in the systematic review cover the period 1999–2020. the following methods are used to present the results of the research: comparative analysis, synthesis, graphical representation and generalization. the study identified the following essential principles of organizational wisdom that are appropriate to adapt in the health tourism industry: transformational leadership; organizational culture, management structure and teamwork; recognition of environmental change and rapid and effective response to it; systemic thinking; interaction between different organizations that can lead to high-quality solutions (innovation); the ability to accumulate organizational memory to compare past and present situations and decisions made. the authors in the article substantiate the opinion that the sustainability of the application of these principles depends on the mechanism of organizational partnership in organizing/ creating health tourism cooperative. such an organization has: a balanced structure and clearly defined roles and responsibilities of participants; long-term commitments are matched by specific short-term objectives that can be measured; periodic evaluation of the effectiveness of the role played by each partner; accurate and effective communication between partners and all stakeholders. key words: cooperative, health tourism, organizational wisdom, organizational partnership. jel classification: i11, l83, m10, h83 1. introduction health tourism is driven by: over-complicated problems in health care and public insurance systems (nearly 50 million people in the u.s. do not have health insurance, but even insured people have to pay extra for medical services out of pocket); accessibility (health tourism can reduce the total cost of medical procedures in the us by up to 94 percent); long waiting time for surgery; unequally developed health care systems and their efficiency (ormond and lunt, 2019). the state of national health care systems, the quality/ diversity of services provided, the (under-) developed infrastructure of the health sector, the traditions of organizational partnership and the culture of cooperation – are the most important aspects of the development of health tourism. baltic journal of economic studies 2 vol. 7 no. 4, 2021 health tourism researchers: m. franco and c. estevã (2010); a. medhekar (2013); s. ganguli and a.h. ebrahim (2017); z.a. semenova, a.i. chistobaev, n.a. grudtcyn (2020), etc., note that in the health tourism industry, private and public service providers should take a collaborative approach to ensure systematic and sustainable development. in the health tourism industry, the development of partnership networks must be encouraged by developing: infrastructure; health and wellness services and their quality – in order to attract local and international health tourists, but health tourism organizations must base their activities on the principles of organizational wisdom. the problem of research – how to ensure the effective application of organizational wisdom principles in the health tourism industry? the object of research – principles of organizational wisdom in health tourism. the goal of research – to propose the application of the principles of organizational wisdom in the health tourism industry. objectives: to examine the essence of organizational wisdom; to provide an application of the principles of organizational wisdom in the health tourism industry. research methods: systematic review, comparative analysis of scientific literature, synthesis and generalization, graphical representation. 2. the essence of health tourism health tourism, also known as international medical migration, patient migration, and medical travel, is a new term, but not a new idea. patients have long traveled in search of better care: medical tourists are looking for modern health care at affordable prices in countries with different levels of economic development (horowitz et al., 2007). in traditional health tourism, affluent patients, especially from less developed countries, traveled to developed countries for treatment when there were few or no high-quality institutions in their country. with rising health care costs, long waiting lists, unequal levels of medical health technology, and limiting the availability of some treatments, health tourism has become more attractive to even broader patient demographics (fisher and sood, 2014). the components of health tourism were closely related to the development of tourism activities and infrastructure. in this context, it is no coincidence that the first of all forms of tourism, directly or indirectly affecting human health, began to be actively distinguished by medical tourism, which was driven by increased interest in recreational resorts, cultural and historical sites. as noted by b.k.m. wong and s.a. sa’aid hazley (2020) and n. yusof et al. (2020) the term "health tourism" or "medical tourism" has been used since the 17th century. however, in order to understand these concepts, it is first necessary to define what "health" is. according to d. benhacine et al., (2008) and unwto (2018), health is "a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity ". this definition fits the broad nature of the health tourism market, which includes not only elements of post-disease recovery but also the full spectrum from disease to health and wellness and from curative to preventive (hall, 2011). as noted by m. ormond and n. lunt (2019), an international medical trip is a temporary movement of patients across national borders to solve health problems abroad that cannot be solved in countries of residence. although health tourism is defined as the receipt of health services during a time spent away from home or in the home country, it was noted that this period should be longer than 24 hours (baukute, 2012). however, in the current literature, the terms "health tourism", "medical tourism", "health/spa tourism" (also distinguished: tourism for the elderly and tourism for the disabled (cohen, 2008)) are still used very loosely and unsystematically (padilla-melendez and delaguila-obra, 2016; fetscherin and stephano, 2016). it is appropriate to define and differentiate these concepts. chronologically analyzing the concepts of health tourism, there is a tendency that the types of health tourism, and at the same time the concepts overlap, the activities integrate, therefore the concepts are more applicable to the theoretical analysis. according to c.m. hall (2011); a.m. reynaers and g. de graaf, (2014); s. hodžić and h. paleka (2018); s. kim et al., (2019); d. dragičević and h. paleka (2019); m. vega-vazquez et al., (2020) note that health/spa tourism occurs when people who enjoy their well-being travel for health-promoting/preventive purposes; on the other hand, medical tourism means travel activities involving a medical procedure; in other words, medical tourism is the practice of cross-border travel to receive health care in other countries that is equivalent to or better than that provided in one’s own country (heung, kucukusta, & song, 2010; connell, 2013; guntawongwan, 2017, etc.). as m. smith (2015) notes, finns do not have the word "health" and have been using the term "welfare tourism" for more than 10 years and pay special attention to the healthenhancing properties of nature and the landscape. health tourism is not considered a tourist/patient when it is transferred from one's own country to another country 's healthcare system at the doctor's discretion. unlike this patient/tourist, health tourists choose to participate in health tourism consciously. thus, health tourism can be described as a purposeful visit by a person to a host country for preventive, therapeutic, rehabilitative purposes, and medically oriented health tourism can be called "medical health" as a combination of traditional health and rehabilitation care and health tourism (hofer et al., 2012). baltic journal of economic studies 3 vol. 7 no. 4, 2021 the field of health tourism services is wide, as the health and tourism needs and expectations of modern consumers are increasingly individualized. the definition of a medical service should be based on the generally accepted statement that it is a holistic activity designed to preserve, save, restore, and improve health, as well as other medical activities derived from the treatment process or the separate provisions governing their principles. thus, medical services are all types of health care services provided with the participation of a health care professional. in terms of tourism services, these are: guide services, hotel services and all other services provided to tourists or visitors. a. bukowska-piestrzyńska (2008); m. olkiewicz, 2016; v.g. klimin et al., (2019) and k.e. yurevna (2020) divides medical services provided to foreign tourists into the following categories: diagnostic research services; high-tech medical services; health promotion, maintenance and rehabilitation services following an injury or illness; alternative medicine services (india, china, asia pacific); interventional medical services for the treatment of existing/chronic diseases. there is a problem in defining tourism and medical services, as these services are the "invisible" activities that characterize them (lukowicki-vikuk, 2012): 1. abstraction – they cannot be seen or tested. 2. volatility and immateriality – tourist and medical services may not be stored, transported or relocated. there are also difficulties in shaping the level of supply and demand that may arise due to the emergence of risk factors. 3. additionality, for example, when visiting a specialist doctor, the medical tourist usually goes to the pharmacy to fill the prescription. 4. substitutability, for example, instead of using dental services in a berlin doctor's office, a medical tourist may opt for a similar but provided dental clinic in poznań. 5. seasonality – the demand for tourism and medical services is concentrated in time and place. 6. indivisibility, which means the simultaneous "production" and consumption of tourism and medical services (such as guide services); there is direct or indirect contact between the supplier and the recipient (e.g. a "prescription" update); 7. diversity and uniqueness – this type of service will be provided differently each time, as its quality depends mainly on the specific service provider, time and place. 8. stress and anxiety – related to the use of medical services. treatment can range from highly invasive surgeries (heart surgery, hip replacement, plastic surgery, etc.) to less invasive procedures (dentistry) and wellness procedures (reddy et al., 2010). summarizing the range of health tourism services, it is possible to classify/systematize according to the nature of the implementation of medical procedures, which includes the following subtypes: medicine and health/spa tourism medical cryptocurrency, the purpose of which is to maintain normal body functioning under progressive choice; preventive direction of medical tourism, which aims to prevent possible diseases and increase the risk of disability due to the development of occupational diseases; medical and health/spa tourism rehabilitation directions related to primary physical conditions returning after surgery, infectious disease or trauma, which include elements of physical activity and physiotherapy exercises; medical and health/spa tourism rehabilitation, including strengthening mental health and psychosomatic balance through a combination of medication and emotional relief; health/spa tourism direction related to body strengthening waste for a certain balanced physical activity; aesthetic direction of health/spa tourism, correcting human appearance without surgery. 3. the essence and principles of organizational wisdom in health tourism the complex environment of the health tourism industry affects the decision-making process, the development of organizations, and so on. adapting to this ever-changing complex environment, it is expedient for organizations to organize a cooperative based on the principles of organizational wisdom. e. h. kessler (2006) believes that wisdom reflects the synthesis of knowledge-based potential with a higher level of vision and practical implementation. however, there is a fundamental difference between knowledge and wisdom (bierly et al., 2000). while knowledge indicates the ability to find a better answer to a particular problem, wisdom is the ability to solve complex problems, obtain complex results and create stable governance structures, and adapt to market challenges by taking advantage of and seizing opportunities. wisdom basically means right behavior (hays, 2007; pinheiro and raposo, 2012). at the organizational level, organizational wisdom is the ability, given what is known, to put into practice the most appropriate behavior for an organization and to meet the legitimate expectations of various stakeholders (rowley, 2006). thus, wisdom has a significant impact on success and impact at the individual, organizational, and community levels. k. north and a. pöschl (2003) defined organizational wisdom as the ability to solve problems and perform new tasks efficiently and quickly, manifesting itself in different components of the external and internal environment. the wisdom of any organization does not uniquely depend on its own characteristics because there is an external influence of the environment. thus, organizations need to deepen their knowledge baltic journal of economic studies 4 vol. 7 no. 4, 2021 and skills in managing talent, as the employees of the organization are the most important factor in value creation (bueno campos, 2003). the principles of organizational wisdom include the collection, transfer, and integration of individual wisdom and the use of institutional and social processes (e.g., structure, culture, and leadership) for strategic action (kessler, 2006; zaidman and goldstein-gidoni, 2011). a.e., akgün and s.y. kirçovali (2015) summarized organizational wisdom as a solution that takes into account a variety of realities and broader social and ethical aspects and is used in decision – making and implementation. in detailing the principles of organizational wisdom presented in the table, it should be noted that the distinguished p.e. bierly’s (2000) principles can be considered fundamental, which have survived over time but have been modified or supplemented. the principles of organizational wisdom were supplemented by the inclusion of the external and internal environment, most importantly the ability to adapt to change, which also led to the maintenance of the process of continuous learning/improvement (organizational and individual); the expansion of organizational partnerships as one of the components of the innovative knowledge generation process, through teamwork and the increase of organizational memory by being open and actively involved in social and technological networking processes. the processes of knowledge transfer and organizational learning are the main mechanism for the development of organizational wisdom. simply put, organizational wisdom can be gained through an effective organizational communication system that encourages learning. the rationale is that knowledge is transferred from person to person, from unit to unit, and by management levels (from highest to lowest), so there is not only an opportunity to expand the overall knowledge base of the organization, but at the same time knowledge is useful. over time, wisdom becomes institutionalized; it remains for the organization, even if the original "wise" individuals no longer participate in the organization. gaining knowledge is not easy for any organization (huber, 1991). it can be transferred from external sources such as new employees (matusik and hill, 1998), acquisitions, alliances, and joint organizations (hamel, 1991; powell et al., 1996). knowledge can also be created or transferred from within, for example, from research and development to production. in any case, one of the key features of successful knowledge transfer is the perceived usefulness of that knowledge. uncertainty about the applicability and usefulness of knowledge is a major barrier to its transfer. but knowledge itself is not wisdom. there is a need for a mechanism that activates the knowledge available to the company so that it can be used cleverly to absorb valuable knowledge from external sources. such a mechanism is called absorption capacity (pierscieniak and stelmaszczyk, 2020). "absorbency " the need for knowledge transfer occurs when members of an organization understand and evaluate knowledge before it can be used. knowledge transfer is particularly difficult when it must be integrated with other knowledge (kogut and zander, 1992). transformation, in turn, is a combination of basic knowledge (stored in organizational memory) and newly acquired external knowledge, and exploitation should be understood as their application in practice (stelmaszczyk and jarubas, 2019). as a. rimdžius (2011) points out, it is necessary for organizations to manage knowledge for several reasons. essential or strategic competencies are based on the skills and experience of the people working in table 1 principles of organizational wisdom author principles p.e. bierly iii, (2000) 1) transformational leadership; 2) organizational culture and structure; 3) knowledge transfer. k. north and a. pöschl, (2003) 1) recognition of changes in the environment and rapid and effective response to them; 2) ability to learn, that is, the ability to solve problems as effectively as possible or with the least probability of error in the second or third attempt; 3) interface between various organizations that can encourage the development of high quality solutions (innovations); 4) the ability to accumulate organizational memory in order to compare past and present situations and decisions made; 5) emotional intelligence. j.m. hays, (2007) 1) focus on learning and adaptation; 2) domain/content training and education; 3) teamwork and cooperation; 4) assessment of complexity; 5) knowledge; 6) general approach to problem solving; 7) experience; 8) learning and thinking styles; 9) systemic thinking; 10) biases, beliefs and assumptions; 11) understanding of the context; 12) learning; 13) reflection; 14) wise thoughts; 15) effective actions and strategies; 16) successful results; 17) what works and what doesn't; 18) perceived reflection value; 19) opportunity; 20) competence; 21) trust; 22) motivation; 23) incentives; 24) values. m. bansal et al., (2019) 1) group learning and adaptation; 2) training and education; 3) teamwork and cooperation; 4) systemic thinking; 5) openness and dialogue; 6) social networking technologies; 7) motivation; 8) mental model; 9) common vision; 10) thought leadership; 11) organizational culture and values; 12) kinship of the group; 13) group reflection; 14) group competence; 15) knowledge creation and sharing; 16) collective wisdom. baltic journal of economic studies 5 vol. 7 no. 4, 2021 the organization, they are usually unexpressed and therefore rarely exist in physical form. for this reason, it is important for an organization to be able to manage these core competencies and the knowledge that they consist of in order to expand its organizational knowledge base and consolidate and develop its strategic competencies. in addition, as organizational knowledge is taken to share, it becomes complex, begins to accumulate. they become part of the organization's existing processes, products, and services. the goal of knowledge management must not be to capture what each member of the organization knows, but to use existing knowledge to create new knowledge, new competencies. this can be achieved by creating various networks of specialists, improving communication channels, increasing cooperation between individual departments of the organization and creating an environment for informal targeted knowledge sharing. the process of knowledge generation and transfer through the development of organizational wisdom must be implemented through partnership and collaboration mechanisms. s.u., bajwa et al. (2018) singles out the components of an effective partnership, such as: ensuring the flow of communication (cooperating organizations must develop a platform to support the flow of information in horizontal and vertical directions of organizations); apply a low-achievement approach (it is appropriate to divide work into small tasks that allow members of the organization to see concrete results in a shorter period of time, thus creating positive feedback in the collaborative process, thus increasing employee commitment, involvement and confidence); an even balance of power (in a partnership, one or more key partners or stakeholders must have an even distribution of power; otherwise, the collaborative process will be vulnerable to manipulation by actors who have relatively high power in the organization); integration of the coordination function (the high need for interdependence of the organization requires coordination, which is a key element of the organization’s functionality and performance); building trust (trust becomes the most important factor determining the cooperation process in the face of conflict and disagreement). the identified essential principles of organizational wisdom and partnership can be effectively applied in the health tourism industry. according to a. douglas (2009), in order for health tourism organizations to effectively carry out relations with partners and properly target joint capacities, certain operational dimensions are necessary: 1) joint commitments to achieve goals and objectives; 2) mutually beneficial results; 3) clarity of roles and cross-cultural correspondence; 4) focus on quality and innovation; 5) strong mutual cooperation; 6) mutual trust and respect. j.n. lee and y.g. kim (1999); according to e.j. boyer (2019), critical performance factors in managing health tourism organizations include: 1) expert experience; 2) reasonable goals; 3) partnership development structure; 4) the effectiveness of partnership actions. s.u. bajwa et al., (2018) pointed out the following factors in managing a health tourism partnership: balance of power – if one or more key partners have too much power and influence at the beginning of the partnership compared to other partnership members, then the partnership process will be vulnerable to manipulation of actors/ significant influence over participants; facilitating leadership – establishing key rules that build trust in a culture of mutual benefit (in addition, leadership is also important for empowering and involving different individuals and groups in organizations; thus partially addressing this issue of power imbalances); coordination – principles of effective organizational wisdom and partnership communication mutual responsibility leadership focus on the process clear decision making process faith and recognition interdependence and complementarity sharing problems to be solved vision the right power trust and commitment figure 1. a symbiosis of the principles of organizational wisdom and partnership baltic journal of economic studies 6 vol. 7 no. 4, 2021 the great need for interdependence of the organization requires coordination, which is a key element of the organization's functionality and performance. 4. conclusion the application of organizational wisdom principles in health tourism organizations can be implemented through partnership mechanisms that are based on: a shared vision; transformational leadership; teamwork and cooperation; recognition of and rapid and effective response to environmental change; supported ability to accumulate organizational memory; knowledge creation and sharing; focus on learning and adaptation; general approach to problem solving. the essential aspects of an effective partnership in the health tourism industry can be distinguished: coordination, balance of power; clearly articulated: objectives – expectations – operational procedures and responsibilities, appropriate evaluation mechanisms, long-term financial support (especially for health tourism organizations/partners) and a strong commitment from policy makers to see the partnership. summarizing the results of the research, it can be stated that the most important principles of organizational wisdom in ensuring the sustainable development of the health tourism industry will be implemented through: a balanced structure and clearly defined roles and responsibilities of the participants; the sharing of leadership between the participating sectors (public and private) by developing clear, realistic and defined goals/expectations and identifying benefits for both parties; flexible approach of partners understanding each other's needs (partners must understand that the development of health tourism must be sustainable from both an economic – social – environmental point of view); long-term commitments combined with specific short-term objectives that can be measured; periodic evaluation of the effectiveness of each partner's role; accurate and effective communication between partners and all stakeholders. references: akgün, a. e., & kirçovali, s. y. 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(2020). the future of health tourism in the industrial revolution 4.0 era. journal of tourism futures, vol. ahead-of-print no. ahead-of-print. doi: https://doi.org/10.1108/jtf-01 2020-0006 baltic journal of economic studies 69 vol. 3, no. 1, 2017 corresponding author: 1 institute “higher school of public administration” of the national academy for public administration under the president of ukraine. e-mail: rosand@i.ua 2 state research institute of informatization and economic modelling of the ministry of economic development and trade of ukraine. e-mail: studinska.galina@gmail.com the country brand as a form of the state administration serhii romaniuk1 institute “higher school of public administration” of the national academy for public administration under the president of ukraine, ukraine halyna studinska2 state research institute of informatization and economic modelling of the ministry of economic development and trade of ukraine, ukraine abstract. resolving urgent social and economic problems in ukraine requires a special approach, choosing large-scale integration instruments of government measures implementation that can reproduce and guide the development of the country in the right direction, which include territory branding. the subject of the study is a system of management of the set of brands of the national economy, its subjects, objects and public connections between them. the purpose of the article is to define the architecture of a national brand with appropriate levels of a hierarchy and justification of the impact vector of the management system of brands at each level of the hierarchy. research methodology. during the research, systematic general principles of communication and development are used, which allowed disclosing the dialectic relationship between management methods at every level of the hierarchy. to achieve the goal, there are used: a synergetic approach to the integrated use of commercial, noncommercial brands and regional brands of the country; management approach to the country brand management process in specific market conditions; situational approach to the consideration of a brand as a tool for solving complex social, economic, environmental and political problems of the country. the object of the research is ukraine. conclusions of the research. the success of the establishment and functioning of a brand-oriented national economy and corresponding management system depends primarily on the joint efforts of government, private business and a wide public; the integrated approach to the management process organization, as well as consideration of the current situation in the country and its potential. practical implications. the implementation of a brand-oriented model of the national economy is able to overcome the current socio-economic problems of the country, ensure its economic and political security, greatly improve the welfare of citizens through the optimization of the system of its elements management at all levels of architecture. key words: national brand architecture; country brand management system; commercial, non-commercial, territorial brands. jel classification: м38, о38, р24 1. introduction problem and innovation. the world experience of branding territorial formations of a countrywide scale and the first steps in this direction of ukraine confirmed the historical capacity and effectiveness as a brand format of the national economy management. successful management of all objects of a territory depends on effective management of these objects and the territory within which they operate. the modern science has gained some experience in the development of the theory of national branding, and various approaches to determine the brand of the country shape its integrated vision. at the same time, not enough attention is paid to the research of a hierarchy of management links between elements of a brand management-oriented national economy, which is today the relevance and novelty of the topic chosen. the purpose of the article  – the study of the country brand architecture, management of its elements, relationships between subject and object of the management system must be achieved by addressing the following research objectives: 1.  determination of elements of the management system of the brandoriented national economy; 2.  establishing links and their character between defined elements; 3.  justification of a number of the hierarchy of the baltic journal of economic studies 70 vol. 3, no. 1, 2017 country brand architecture. the methodological approach to the study is based on the logical principle of the philosophy of the learning process – from private to general. 2. the branding potential in the structure of the national economy branding of the territory is a continuous process that occurs in a particular environment that envisages the close economic links between the objects of management in general economic space within the state that is characterized by a single economic law, financial, monetary and credit system. considering the economic conditions are the same for all objects of the territory, their success depends on effective management of territory within which they operate, which is an effective brand tool. branding of economic objects are studied in detail in other works of authors, in this context, levels of hierarchy and regional brand management links between elements of the brand management-oriented national economy are analysed, the structure of which is shown in fig. 1: institutional business sector combines the nonfinancial (enterprises) and financial companies (financial institutes) belonging to both the public sector of the national economy and its private sector. at fig. 1 components, which represent the business sector, are highlighted. it is this sector of the national economy, which branding is primarily; brand-oriented reference point should apply not only to economic objects, but also subjects that manage them, relations between subjects and objects of management, as well as the territory within which these processes occur. the brand-oriented relations between subjects and objects of management mean their conformity with international standards of management, efficiency, durability. the result of a successful branding is a brand association in the complex territorial system that contributes to solving current socio-economic, environmental, demographic problems of the region and requires an appropriate management system. strengthening the role of the brand in the development of the national economy and the undisputed economic potential, which brand makes possible for each object economic activity, as well as for the country as a whole, are preconditions of brand research of such a format as economic governance. the management system of the set of brands of the national economy includes three components: a)  management subjects, i.e. agencies that send impulses of the influence that carry information on the conditions of functioning of administration at different levels; b)  objects of management, i.e. all forms of brand under the organizing influence of the appropriate level; c)  management activities (process) that is a certain kind of social relations, through which numerous connections between subjects and objects of management are realized. 3. determination of the national brand architecture a conceptual elaboration of an integrated model of economic transformation that will promote the development of a competitive, innovative, socially and environmentally oriented national economy is optimally realized in the form of a national brand that combines trends listed in a single vector of brandoriented development. presented management system of five interconnected and mutually influencing dynamic elements that form the architecture of regional brand with appropriate levels of the hierarchy, namely nano, micro, meso, macro and mega levels. the hierarchical structure of brand-oriented national economy envisages connections between the various levels: forward and backward, coordination and function, as shown in fig. 2: in this context, the brand system of the national economy is a complex system of management at each of the above levels. taking into account globalization, government sector private sector state enterprises and industries state authorities and local government household sector sector business units (enterprises, companies) national economy fig. 1. potential of branding in the structure of the national economy source: compiled by the authors for (kravets, 2009) baltic journal of economic studies 71 vol. 3, no. 1, 2017 the brand-oriented management system of the national economy has been formed taking into account global trends, standards and legislation. counter influence of other elements of the national system brands in the world so far is weak because of the low level of branding in ukraine but international experience shows such influence. in particular, with the acceleration of information exchange, ensuring the effectiveness of management decisions, highspeed internet promotes cybercrime, which corrects the appearance of new state management structures. so, this relationship is inverse and coordinated. links between brands and private companies, where they are produced, may be reversed or functional, depending on the parties and the purpose of initiating communication. 4. nanolevel the object of management at the nanolevel are actually the commercial brands of goods, services, events, and non-commercial brands; subjects  – companies, local governments and the state; the management of the brand is called brand management. nanolevel is characterized as the most dynamic brand influenced by all other levels of the system, in fact, the brand can be changed because of a decision of the owner, i.e. the internal changes of the system. commercial brands must adapt to the economic environment and comply with its requirements, so changing environmental conditions automatically impact on corresponding changes in the development, promotion and brand management. for example, changes in a development strategy of the company directly impact on a change in commodity brand development strategy; adoption of legislative decisions (economic, social, etc.) by local or state authorities can also promote a change of the brand. communication between commercial brands and other elements of the system is mutual because their development and promotion contribute to the economic development of the city, region and country, forming corresponding budget tax deductions, creating conditions for attracting more investment flows to the development of not only the brand but also the city, region of the country. in addition, the success of commercial brands directs impact on solving social problems of the company, the city through the creation of new jobs, finances a number of social and environmental issues. the positive dynamics of the development of the commercial brands will increase consumer power, leading to gdp growth in the scale of the national economy. the system of brand management of the national economy at the nanolevel, in our vision, includes the following vectors of influence: 1. administrative, which provides for the development of commercial strategies of the brand, its control systems, evaluation and adjustments; brand choice models; 2. marketing, responsible for branding systematic promotion of the brands through an optimal architecture, distribution and brand communications system; 3. economic, which is aimed at providing maximum efficiency through the optimization of brand spending on each direction of development. city, region brand company country world mutual influence of the company and commercial brand mutual influence of the world and other elements of the system mutual influence of the country and other elements of the system mutual influence of cities and other elements of the system nano micro meso macro mega level level level level level fig. 2. hierarchy of connections of the brand-oriented national economy source: compiled by the author baltic journal of economic studies 72 vol. 3, no. 1, 2017 5. micro level the second level of system management of brands of the national economy is the microlevel of a company, firm, company (hereinafter – the company) regardless of their size and cost. fig. 2 shows that the development of the commercial brands has an inverse effect on the company. thus, the success of the commercial brands can ensure the success of the company and vice versa, errors in the development of a commercial brand can have negative consequences for the company until its collapse. at this level, it is possible to form a brand of the company through the creation of back-office and frontoffice, harmonious development, which provides relative stability, long-term, positive image of the company in the environment. the objects of management at the macro level are companies, subjects  – corporations, local governments and the state. the success of the brand company could attract talented individuals, conducting brand events. the dynamism of the brand company remains quite high, although lower than the commercial brand. the system of brand management of the national economy at the microlevel includes the following vectors of influence: 1. administrative-communicative, which provides for the development strategy of the company, its control systems (swot analysis) and adjustments; selection of hierarchy of management (organizational structure); creation of an internal corporate culture and foreign policy of the company; establishing contacts with local authorities and community; 2. marketing, responsible for branding through the company 's choice of brand communication; 3. economic, which is aimed at maximizing the efficiency of the company 's brand through the optimization of its costs; 4. social, which provides a solution for social problems of the company and its employees by providing additional medical, educational, legal and other services; solves local environmental issues and so on. 6. meso level considering the brand-oriented national economy as structured in sectoral and territorial space of economic activity covered by the relevant institutional system management on mesolevel city and region provides management of commercial brands and brand companies and non-commercial brands, including territorial brand, by creating legislative and administrative, financial and economic (tax) conditions and actions that facilitate the mutual benefit of increasing the efficiency of economic performance, solving social, economic and environmental issues of the city, the region, stability of their development. the object of management at the mesolevel acts as brands of the public and private companies’ tangible and intangible production, brand of regional areas (city, region) and the management subject  – the regional administration and the state itself. the system of brand management of the national economy at the meso level provides the following vectors of influence: 1. administrative-communicative, which involves the strategies form of the development areas (city, region) as a whole, its control systems (swot analysis) and adjustments; setting of relations with the private sector, civil society and development of joint actions and programs of promotion of the territory; 2. marketing, responsible for creating the image of the region, its control and promotion system in the environment by selecting an optimal brand communication; 3. economic, which is aimed at providing maximum efficiency through the territory of the brand to attract additional tourism and investment flows, qualified personnel; economic restructuring territory and its infrastructure; 4. social, which provides a solution for social problems of the territory and its people by raising social standards, environmental conditions, job creation and so on. the perception of the city, the region as a management object of relevant government authorities and uniting efforts the local government with private business and the local community will help create an optimal strategy for the effective development of the area to address its current socio-economic, environmental and other problems. 7. macro level macrolevel management of the system of brands in brand-oriented national economy envisages the management of a list of the commercial brand, brand companies, brand personalities, events and territorial brand of the country; the mutual influence of these objects and the single economic policy of the government. we distinguish the following problems to be solved at the macro level of management of the system of brands of the national economy as steady growth in national output (gdp) and economic security of the country; ensuring a high level of employment of the population and social standards; support for the balance of payments of the country and the priority development of high-tech industries. each of these tasks requires the use of aggregated macroeconomic management tools such as fiscal and monetary policy, foreign policy, the policy of income adjustment and so on. the system of brands of the national economy contributes to solving each problem through synergy relationships between the objects and subjects and integrated approach to the system management. thus, the creation, development, and promotion of commercial brands, evaluation of their value, their accounting in intangible assets allow baltic journal of economic studies 73 vol. 3, no. 1, 2017 strengthening economic stability of manufacturers, distributors, sellers, increasing capitalization of the national economy in general and the state to rise in relevant international rankings. creation, development, and promotion of commercial brands will increase the level of employment of the population, its solvency, and provide a surplus balance of payments, which will increase the reserves of the national bank of ukraine. note that a little list of domestic brands, which overcame national boundaries, do not play a significant role in exporting countries, where the majority are raw materials and natural resources and recall that the tourist industry of ukraine as a component of private sector business units of the national economy is the first example of branding in scale of domestic industry. another sector that can become a brand is the transport, based on the geographical location of ukraine and passing on its territory four continental transport corridors. the system of brand management of the national economy at the macro level includes the following vectors of influence: 1. legislative is responsible for the operation and implementation of a number of laws and regulations that promote the creation, development, promotion of brand systems in the country; guaranteeing its protection and support for access to the international space; ensure compliance with international standards and international law; 2. administrative-communicative, which involves the operation of the strategy of development of the national brand of ukraine, its control systems (swot analysis) and adjustments; establishing relations with the territories, the private sector and the development of joint actions and programs of promotion of the state in the international space through strengthening diplomatic, economic, political, scientific and technical connections with other countries and intergovernmental formations; 3. marketing that is responsible for creating a positive image of ukraine and its control system and promotion of the environment through images of the country and the best selection of brand communications; 4. economic, which is aimed at ensuring economic security, maximizing the effectiveness of its national brand through the creation of investment conditions, the development of innovative technologies and industries, attracting additional tourist flows, qualified personnel; restructuring and modernization of the economy; 5. social, which provides an increase of social life of ukrainian citizens to the european and world by raising social standards (living wage, average wage, pension payments, health care, etc.), environmental conditions. 8. mega-level the global or international economy as a complex system of interrelated national economies, international and supranational economic processes, phenomena and institutions, which serve them, form a mega-level management. a special role is played by the mega-level brand personalities, image and authority of which strengthens the positive image of the country, helps build the necessary links in the field of culture, art, education, health, science and technology, environmental protection, sports and most importantly, the economy and national security. the presence of strong political brand personalities in society affects the efficiency of its development and establishes the necessary links with the country environment. the same role belongs to brand events of the national and international scale. considering the system of the national economy brands and the appropriate elements of the management system, one could argue about the availability of the integration of communication and synergistic effect on its capacity. each form performs brand's basic role in relation to the business management and supportive role with respect to other facilities management, building a brand-specific architecture of the city, region and country. selection of an optimal architecture of the brand system of the national economy is in the hands of the subject of management of the corresponding level, i.e. the state. commercial brand architecture determines the company optimal brand architecture of the city or region could be proposed by joint authority, which would consist of representatives from local government, private business sector and the public. the national brand architecture of the country should be the subject of discussion in a wide variety of specialists: brand managers, marketers, scientists, politicians, economists, all stakeholders and understanding branding process, its tools and features. it is important that the state has become an active participant in creating a brand system of the national economy, because, without support from the state, autonomous and isolated attempts by some stakeholders to form a complete image of the territory are doomed to failure. equally important in this regard is the absence of a formal approach to the brand creation system that can cancel the joint efforts of government, business and the public. work on the system of brands in the national economy should not substitute propaganda campaign. it must be taken as a philosophy, to demand orientation of the entire system power management and the needs of each target consumer group’s area. first steps in this direction have already been implementing: adopted the “state program on positive international image of ukraine” (state target program creating a positive international image of ukraine till 2011); created a national tourist brand of ukraine as a result of the implementation of the social contract between the government, business and civil society; baltic journal of economic studies 74 vol. 3, no. 1, 2017 in order to stabilize the socio-political situation in ukraine and to counteract the negative impact of information on the population of ukraine and its international image of ukraine, according to the presidential decree № 398/2014 on 04.12.2014, the information and analytical centre was established (decree of the president of ukraine № 398/2014); according to the decree of the president of ukraine № 5/2015 on 01.12.2015, adopted the sustainable development strategy of ukraine 2020, which provides for the development of the program of “ukraine” brand creation within the pride vector (decree of the president of ukraine № 5/2015). 9. conclusions creation of the brand-oriented national economy and an appropriate management system are a largescale, complex problem that has social grounds, among which the most relevant aspects must be: cooperation of the administration, business and citizens, and its economic, political, social efficiency. system approach to the process of management of a set of commercial, non-commercial and territorial brands optimizes the relationship between elements of the national brand architecture, will overcome the current socio-economic problems of the country and will build a positive trend of future development of our country. references: state target program creating a positive international image of ukraine till 2011 // cmu from 03.06.009 p. n 554. [electronic resource]. – retrieved from: http://zakon1.rada.gov.ua/ kravets v., zavhorodnya a., & lebedev v. (2009). national economy. center of educational literature, 280 p. decree of the president of ukraine № 398/2014 from 04.12.2014 «on establishment of information-analytical center» [electronic resource]. – retrieved from:http://www.president.gov.ua/ decree of the president of ukraine № 5/2015 from 01.12.2015 «on strategy of sustainable development ukraine 2020». [electronic resource]. – retrieved from: http://zakon4.rada.gov.ua сергей романюк, галина студинская бренд страны как формат государственного управления аннотация. решение насущных социально-экономических вопросов в украине требует особого подхода, выбора широкомасштабных интеграционных инструментов внедрения государственных мероприятий, способных воспроизвести и направить развитие страны в нужном направлении, к которым относится брендирование территории. предметом исследования является система управления совокупностью брендов национальной экономики, ее субъекты, объекты и общественные связи между ними. целью статьи является определение архитектуры национального бренда с соответствующими уровнями иерархии и обоснование векторов влияния системы управления брендами на каждом уровне иерархии. методология исследования. в процессе исследования использовались принципы системности общего, связи и развития, которые позволили раскрыть диалектику взаимосвязи между методами управления на каждом уровне иерархии. для достижения цели были использованы: синергетический подход к изучению интегрированного использования системы коммерческих, некоммерческих брендов и территориального бренда страны; управленческий подход к процессу управления брендом страны в конкретных рыночных условиях; ситуационный подход к рассмотрению бренда, как инструмента решения комплекса социальноэкономических, экологических и политических проблем страны. объектом исследования является украина. вывод исследования. успех создания и функционирования бренд-ориентированной национальной экономики и соответствующей системы управления зависит, прежде всего, от объединения усилий правительства, частного бизнеса и широкой общественности; от комплексного подхода к организации управленческого процесса, а также от учета текущей ситуации в стране и ее потенциала. практическое значение. реализация бренд-ориентированной модели национальной экономики способна преодолеть текущие социальноэкономические проблемы страны, обеспечить ее экономическую и политическую безопасность, существенно повысить благосостояние граждан через оптимизацию системы управления ее элементами на всех уровнях архитектуры. baltic journal of economic studies 58 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national academy of managerial staff of culture and arts, ukraine e-mail: ceo@superheroes.ua orcid: https://orcid.org/0000-0002-6789-8228 2 national pedagogical dragomanov university, ukraine (corresponding author) e-mail: s.s.rusakov@npu.edu.ua orcid: https://orcid.org/0000-0002-8494-9445 researcherid: k-8747-2018 doi: https://doi.org/10.30525/2256-0742/2022-8-4-58-69 cultural heritage in the context of digital transformation practices: experience of ukraine and the baltic states taras gorbul1, serhii rusakov2 abstract. the purpose of the article is to analyze digitization as a global trend of the early 21st century and to develop a cultural model for studying the scope of application of digital transformation practices as a new way to preserve and promote cultural heritage based on the experience of the baltic states and ukraine. the study of the impact of digital transformation practices in the field of cultural heritage in estonia, latvia, lithuania and ukraine has demonstrated the need to deepen ties between these countries by establishing a cultural dialogue, exchanging information and experience on the use of technological innovations in the field of cultural heritage, as well as increasing the value and content of joint cultural projects. methodology. the theoretical basis and methodology of the study is the historical and cultural method, which contributed to the study of the historical dynamics of digitization; typological and comparative methods – for the study and analysis of cultural heritage objects as phenomena and artifacts. a special role is played by the cultural method, which is meaning-forming through the study of interdependent cultural processes – representation, identity, etc. results. the authors, involving the professional community, which emphasizes the problem of the lack of a general electronic register of cultural heritage sites in ukraine, as well as the lack of a strategy for digitizing such sites, draw attention to the fact that the situation began to change rapidly in 2022. it has been proved that the experience of estonia (museum information system muis, five-year action plan for the digitization of cultural heritage for 2018–2023), latvia (project "digitization of cultural heritage content"), lithuania (creation of the council for the digitization of lithuanian cultural heritage, virtual electronic information system of cultural heritage vepis, museum information system limis) will contribute to the strengthening of technological and cultural innovations in the field of protection and promotion of cultural heritage of ukraine. digitization is a task that requires significant financial and intellectual investments, but the authors prove that this direction can become a source of income for creative industries (economic value) and a resource for creating new meanings (symbolic value). practical implications. the analyzed experience of the baltic countries will be a valuable source of information for intensifying digital transformation in ukraine. deepening ukraine's cultural ties with estonia, latvia and lithuania in order to exchange experience in the field of cultural heritage is of practical importance, as a number of implemented baltic projects will help ukrainian specialists to increase the efficiency of using modern technological tools in the field of culture. the article pays attention to european and ukrainian public and private cultural projects and initiatives that are being implemented to digitize the preservation and promotion of historical and cultural heritage. value/originality. it is advisable to study the prospects of cultural heritage tokenization and nft as a tool for preserving, supporting and promoting cultural heritage. key words: digital culture, digital transformation, cultural heritage, museum information system, digital museum, cultural policy. jel classification: i23, d83, f68, z13 baltic journal of economic studies 59 vol. 8 no. 4, 2022 1. introduction the potential of cultural development in the context of digital transformation is of great interest to researchers. in our opinion, the cultural heritage deserves special attention, which requires a thorough study of scientific sources of various directions. understanding the essence of this phenomenon in the new digital environment requires analysis of cultural, historical, sociological, economic and it literature, as well as official reports of relevant government agencies. it should be noted that despite the increased interest of modern researchers to this issue, the problem of digitization of cultural heritage is currently at the stage of active professional discussions in the scientific environment, which will eventually contribute to the formation of relevant theories. this state of scientific development of this topic is due to continuous technological innovations that contribute to the regular emergence of new meaningful and valuable aspects arising from the introduction of new digital practices in the field of cultural heritage. researchers regularly receive new data (e.g., new technical possibilities that expand the boundaries of interaction with cultural heritage and cultural projects that affect the changing experience of specialists and visitors to memory institutes) to understand and form new scientific concepts. exploring the current sociocultural situation through the prism of professional cultural studies, we note that digital technologies increasingly cover a number of interdependent cultural processes, such as representation, identity formation, production, consumption, etc. (rusakov, 2020) the "digital transition" from the systems and processes of industrial and post-industrial (information) culture to the "digital culture" and "digital society ", which occurs due to the spread of digital transformation practices, should be more actively explored. such changes contribute to the formation and establishment of unique systems and processes that create new opportunities for cultural experience when interacting with cultural heritage objects in digital format, through a combination of scientific, technological, value, social, economic aspects. the purpose of the article is the digitization analysis as a global trend of the beginning of the 21st century and the development of a cultural model for the study of the scope of modern practices of digital transformation as a new way of preserving and popularizing cultural heritage based on the experience of the baltic states and ukraine. the theoretical and methodological basis of the research is the historical and cultural method, which made it possible to analyze the historical dynamics of the development of digitization; typological and comparative methods (for the study of objects of cultural heritage as phenomena and artefacts); culturological approach (the theoretical basis of the study of culture as a meaning-making system in the context of digital transformation due to the analysis of interdependent cultural processes – representation, identity, etc.). this article will examine the phenomenon of cultural heritage in the context of digital transfor mation practices, analyze a range of current problems related to the preservation and popularization of historical and cultural heritage in digital format according to the normative and legal documents of unesco and the european union, and study the experience of creating the integrated informational digital resources of cultural heritage in estonia, latvia and lithuania regarding what can serve as a source of experience in the context of the european integration processes of ukraine. 2. review of relevant publications the study of cultural heritage by estonian, lithuanian, latvian and ukrainian scientists has a long history, but the focus will be made on contemporary cultural studies. in such studies, cultural heritage has broader aspects of consideration, not just as the result of spiritual and material activity of the previous generations, but also as a source of creation of new meanings in modern culture. in addition, in modern research more and more often the aspect of digitization of the cultural heritage field is being studied. the topic of cultural heritage finds a prominent place in the monograph by the culturologist olha kopiyevska, who has examined state institutions and organizations in the culture field as a component of the state mechanism through the prism of political, cultural, economic and social transformations of ukraine. analyzing the state of preservation of cultural heritage, the author concludes that "the state of protection of ukrainian historical and cultural heritage, has not yet responded to requirements of the international communities and those commitments that ukraine undertook by signing the international convention on world cultural and natural heritage protection." (kopiyevska, 2010) considerable contribution to the development of the topic of cultural heritage was made in numerous scientific articles by a researcher of the institute for cultural research of the national academy of arts of ukraine marina mishchenko, whose work with professional scientific editions leads to rely on in this research (mishchenko, 2020). the topic of digital transformation needs an emphasis on cultural and sociocultural aspects of digital culture, after all its phenomenon indicates the dominant form of modern socialization baltic journal of economic studies 60 vol. 8 no. 4, 2022 society – informational and virtual [26]. interconnection of digitization and digital transformations with cultural heritage studied by marina mishchenko, as well as researchers in the professional journal "digital platform: innovative technologies in sociocultural sphere", where in the framework of the permanent rubric "preservation of cultural heritage and access to digital resources" thematic articles are regularly published (trach, 2020; volynets, 2021). simultaneously, one can state an insufficient number of publications which comprehend the prospects of digitization spheres of cultural heritage in general. it is worth noting that ukrainian experts mostly focus on digital transformation of memory institution, and museums (lelyk, 2019). summarizing a number of materials about museums' digital transformation the authors note that "today museums are looking for innovative ways for solving social problems and conflicts," (hlushchuk, karpets, 2019) and therefore relationships between informative technologies and museum space become increasingly tighter. keeping the main function of museums toward preservation of cultural heritage, informational technologies strengthen the main destination and at the same time popularize collections and museums, that helps to attract the additional flow of visitors, increase budgets of museums and create better conditions for protection and exhibition of historical and cultural objects. in the monograph "transformative processes in the social and sociocultural spheres of ukraine" is allocated attention to digitization of cultural and historical heritage in ukrainian libraries. the authors believe that "important strategic directions for library activities in modern stage are integration of information databases of historical and cultural funds, development of representation of cultural heritage in international digital projects." (yavorska, 2021) estonian researchers conducted interviews with employees of memory institutions to define their roles as users and creators of digital cultural heritage due to the need to adapt to communication models of the new generation. according to this paper, such research may successfully supplement the culture of gaining cultural experience in the modern world. the authors write that "it is important to realize the necessity of digitization at the institution and at the national level; that it does not focus only on data storage and availability, but the goal of digitization will be to draw attention to the needs of the audience and also to the information exchange, provision of interpretation opportunities." (aljas, pruulmannvengerfeldt, 2009) it should be noted that estonian researchers, having significant theoretical and practical groundwork regarding cultural heritage and digitization, currently consider not just the benefits of digitization or scanning, but also perspectives of cultural heritage in the context of digital humanities for the field. such a direction, according to this paper, requires the attention of cultural experts, since it combines technological and worldview aspects. for example, in the article "cultural heritage and digital reading: between the book and the platform" the authors emphasize the importance of transmedia texts and offer new methods (e.g., digital reading) to save cultural memory and identity (ojamaa, torop, 2020). scientific articles and monographs of latvian specialists are full of organizational and theoretical studies, as well as philosophical and cultural studies. for example, uldis zariņš proposes the creation of conceptual models for strategic planning of digitization of cultural heritage (zariņš, 2012), and zinaida manzuch, who has been practicing the development of the topic of digitization of cultural heritage for a long time, believes that it is worth considering the processes of digitization of cultural heritage in a broader worldview context. the author noted that digitization is not only related to computerization and technology of memory institutions, but also "enriches the study of digitization with philosophical, social, cultural, managerial, political and economic aspects" (manžuch, huvila, aparac-jelušić, 2005) that forms a new direction of development of the research and educational models which should provide libraries, museums, archives. in a more contemporary study, the author actualizes the ethical issue of digitization of cultural heritage, which reflects "fundamental changes in the understanding of the role of memory institutions and how they fit into higher-level social processes of memory." (manžuch, 2017) the researcher believes that ethical issues are likely to influence the overall structure as well as the duration and cost of digitization issues in the future. 3. generalization of the main provisions 3.1. cultural heritage as a meaning-making resource the introduction of digital technologies into the sphere of culture and art began in the 20th century and contributed to the formation of several new artistic trends. thus, in 1958, the artist wolf vostell laid the foundations of media art in the installation "black room cycle", using computer codes for the first time. however, in the second half of the 20th century, world cultural institutions, which are memory institutions (archives, libraries, museums), began to use computers and other technical means to organize, catalog and coordinate historical and cultural sources and artifacts. the period of 1980–1990 can be called the conditional first wave of mass creation baltic journal of economic studies 61 vol. 8 no. 4, 2022 of electronic catalogues by the largest international archives, museums and libraries due to digitization of sources. however, quickly enough, this activity was separated into a separate independent direction, which began to focus not only on providing "user access to diverse information of documentary treasures and physical preservation of original documents by creating their electronic copies, but also on the implementation of international and national projects, programs of digitization of cultural heritage objects." (prykhodko, 2019) the end of the 20th and the beginning of the 21st century brought further transformational processes in culture which was a result of digital innovations and encouraged theorists and practitioners to increasingly turn to cultural heritage, digitizing its most valuable objects. lyudmyla prykhodko notes that in the late 1990s of the 20th century. the topic of preservation of cultural heritage in digital form began to actively develop in the european union in connection with the development of the information society, the creation of information infrastructure of the european continent, "digitalization" and the spread of digital technologies in all spheres of european society (prykhodko, 2019). based on these and other globalization processes, starting from the 90s of the 20th century, the conceptual principles of unesco's cultural heritage protection are based on the strategies of using digital information technologies for the formation of documentary resources. the founding programme "memory of the world", adopted in 1992, became the starting point for the emergence of a number of international and national projects aimed at the registration of digital resources of historical and cultural heritage and was embodied in the portal "unesco – heritage" (official website of the world heritage list, 2005), dedicated to the protection of cultural, natural and documentary heritage (dychkovskyi, 2019). in the 2000s, one of the main tasks of libraries, archives and museums was the digitization of exhibits, so this period is marked by the creation of both public and private projects that declared different objectives of their activities, but the primary goal remained the preservation and promotion of cultural heritage in the context of modern lifestyle. according to the latest key european directives, cultural heritage is considered as a public resource of the future (official journal of the european union, 2014). "it is a unique non-renewable resource that is undergoing cultural, environmental, social, economic and technological transformations that affect all aspects of modern life." (musiienko, 2019) within the framework of the cultural understanding of this topic, which is becoming increasingly relevant due to globalization and digital transformation, cultural heritage can also be considered as a meaning-making resource that represents our values, worldview, lifestyle and shapes one' daily life. that is, cultural heritage contributes to giving greater meaning to human life, so it should be studied through the prism of cultural studies. within this approach, cultural heritage is considered as a means of identity formation and correlation with the value-semantic dimension. 3.2. comparative analysis of ukrainian and baltic projects on digital cultural heritage researcher yuliya trach draws attention to the long-term absence of a list of cultural heritage items in ukraine, which are subjects to digitization, as well as standards for the creation of a digital resource to ensure its accessibility, active and effective use, compatibility and data exchange at the local and international levels, preservation of created resource and its updating (trach, 2020). kateryna kotsiubivska also notes that "in ukraine, we can say, there are no fully integrated digital technologies, a system of online presentations of digital heritage and user service, as well as the level of modernity, informativeness, attractiveness and relevance; the available technologies, unfortunately, are difficult to compare with the main world models." (kotsiubivska, baranskyi, 2020) only in july 2022, the ministry of culture and information policy of ukraine officially announced the creation of a digital platform for the management of national cultural heritage, which is defined as the core of cultural policy. the activation of this area is due to the understanding of the need to create a modern ecosystem of cultural heritage in ukraine and to provide legislative and it infrastructure in accordance with eu standards (official facebook page of the ministry of culture and information policy of ukraine, 2022). the ministry of culture and information policy of ukraine has identified six points on the positive role of digital transformation in the field of cultural heritage: 1) key state registers will interact with each other to provide electronic services; 2) increasing trust in public e-services through the creation of a secure infrastructure; 3) integration into the global space through data exchange and compliance with platform requirements; 4) professional development and job creation in the digital industry; 5) digitized process provides anti-corruption effect; 6) innovation for the country in the field of cultural heritage. deputy prime minister of digital transformation mykhailo fedorov is convinced that using the experience of the baltic states will help accelerate the digital transformation of ukraine (ukrinform, 2019). therefore, it is appropriate to consider the experience baltic journal of economic studies 62 vol. 8 no. 4, 2022 of digital transformation practices in the field of cultural heritage on the example of lithuania, estonia and latvia. the emergence of powerful european digital projects in the field of culture implemented at the state level was preceded by the development of a common eu strategy. it was determined that digitization and preservation of cultural memory should be carried out by digitizing printed materials, photographs, museum objects, archival documents, music and audiovisual materials, monuments and archaeological sites (trehub, 2019). according to the authors, it may be effective for ukrainian specialists to study the experience of lithuania, which began in 2005 with the approval of the concept of digitization of the cultural heritage of lithuania. in the same year, the council for the digitization of lithuanian cultural heritage was formed and work began on the creation of the virtual electronic heritage information system (vepis), which united the collections stored in libraries, museums and archives into a single digitized cultural heritage infrastructure on the portal www.epaveldas.lt. currently, the digitized database of lithuanian cultural heritage contains more than 4.8 million items, including pages of extremely valuable digitized old prints, newspapers, works of art, manuscripts, church books, audio recordings and classic works of lithuanian literature (lietuvos nacionalinė martyno mažvydo biblioteka, 2021). in 2021, the cloud information system www.naujas.epaveldas.lt was created, which ensures the long-term preservation of digital cultural heritage content, its security, uninterrupted operation and integration of various standards, as well as the correct maintenance of previously created data. lithuania has also implemented the museum information system limis, which aims to consolidate the data of museums and other memory institutions located in the country into one register. a similar system was developed in estonia in 2004 under the name muis. estonian museums are obliged to describe and digitize their collections for this system. the history of digital transformation in estonia, as well as in lithuania and latvia, began immediately after the collapse of the ussr . it is worth noting that then the three baltic countries gained independence at the same time and today these countries can be confidently called the respective leaders in the field of digitalization, especially in comparison with other post-soviet states. in estonia, more than 900 million heritage objects are stored in various state cultural and art institutions, but only about a tenth of this amount is digitized. therefore, in 2018, the ministry of culture of estonia prepared a five-year action plan for the digitization of cultural heritage. the goal of the plan is to digitize one third of the cultural heritage stored in museums, libraries and archives by 2023, to provide access to it in digital format, as well as to update the infrastructure of information storage in memory institutions. thus, the action plan focuses mainly on the heritage from 1900 to 1940. according to the estonian ministry of culture, "the goal of the action plan is that by 2023, 3% of documentary heritage, 32% of artifact heritage, 60% of film and photo heritage and 28% of printed heritage will be available in digital format, i.e., a total of approximately 33% of our cultural heritage." (ministry of culture of estonia, 2022) the total cost of the project is 9.02 million euros, of which 8.19 million euros is planned at the expense of investments from the european union structural funds. in latvia, since 2019, a project called "digitization of cultural heritage content" has been implemented at the state level. the main task of which is to provide wide access to the cultural heritage of latvia for public consumption in the digital environment, which serves as a basis for strengthening national identity, development of culture, science, knowledge society and creative industries, as well as ensuring sustainable long-term preservation of the national cultural heritage in digital form; and the possibility of its reuse in new products and services, as well as inclusion in the unique digital space of european and world culture. the project is scheduled for completion in 2022 and envisages the digitization of 976,000 pages of textual materials, 150,000 units of descriptions of various images and cultural values, including maps, photographs, reviews of cultural monuments and descriptions of things, 350,000 minutes of audio and video materials, 660 minutes of film materials, 50,000 museum objects, as well as 3d digitization of 30 cultural monuments, recording of 30 cultural events and 15 intangible cultural heritage objects (latvijas nacionālā arhīva, 2019). separately, it should be noted the consultations held by specialists of ukrainian institutions and active exchange of experience with baltic colleagues on the digitization of cultural heritage. for example, in the framework of the diplomatic initiative "lublin triangle", which unites ukraine, lithuania and poland for in-depth cooperation in political, economic, social and cultural spheres. on february 28, 2022, the ministers of culture of lithuania, poland and ukraine signed a declaration of intent on trilateral cooperation in the format of the "lublin triangle", which commits to pay more attention to the dissemination of information about the cultural heritage and history of the countries, to promote the development of cultural institutions and cooperation of experts in order to stop russia's military aggression in ukraine and protect the cultural and historical heritage. therefore, in may 2022, a trilateral meeting was held, during which the project of digitization of ukrainian baltic journal of economic studies 63 vol. 8 no. 4, 2022 cultural heritage was presented and the prospects for its implementation were discussed. "lithuania, together with poland, is ready to provide financial, expert and other necessary assistance to the project of digitization of the ukrainian cultural heritage in the format of the lublin triangle, as well as to mediate in possible support from the european union," said the minister of culture of the republic of lithuania simonas kairis (lietuvos respublikos kultūros ministerija, 2022). latvia is also actively involved in the preservation and restoration of ukraine's cultural heritage. in june 2022, with the support of the ministry of culture of latvia and riga technical university, a group of specialists visited ukraine and carried out 3d scanning of four cultural heritage sites. latvian experts together with ukrainian colleagues conducted a three-dimensional scanning of cultural heritage sites, recorded the damage and obtained data for planning the strengthening and restoration of cultural monuments affected by the war, transfer of experience and training of ukrainian specialists. specialists worked on 3d scanning of two monuments in chernihiv (museum of ukrainian antiquities "house of vasyl tarnovsky ", youth cultural center and the cinema building), as well as two monuments of sacred architecture in the lviv region (church of the holy virgin, lviv region) and in kyiv (st. cyril's monastery, which is planned to be included in the unesco world heritage list). it should be noted that this project of support to ukraine is similar to the technical assistance to iraq in 2005–2006, which was provided by the government of latvia for a similar procedure for the preservation of prestigious cultural sites in the middle east, which are included in the unesco world heritage list (riga technical university, 2022). digitization and preservation of information is a very expensive task, especially when it comes to digitization of european cultural heritage. for example, in latvia the cost of the project is 3,900,000 euros, of which 3,315,000 euros (85%) are erdf funds and 585,000 euros (15%) are state co-financing. at least 50% of eligible project costs are the costs of digitization of cultural heritage content. in estonia, the total cost of the project is 9.02 million euros, of which 8.19 million euros is planned at the expense of investments from the european union structural funds. however, digitalization is not only an investment in the preservation of cultural heritage, but can also become a source of income for many creative industries – an economic segment that contributes 3.3% of the annual gdp of the european union and creates thousands of jobs. therefore, ukraine can get a unique opportunity to introduce the latest technologies in the field of preservation of cultural heritage and construction of new commercial and symbolic meanings. it is worth repeating the opinion of theorists and practitioners that ukraine still lacks a strategy and policy for the systematization and processing of cultural heritage, but at the same time it is worth noting the existence of various initiatives that have been supported by new cultural institutions, for example, the ukrainian cultural foundation and the ukrainian book institute. head of the analytical department of the ukrainian cultural foundation iryna chuzhynova noted that digitalization is one of the cross-cutting themes of many projects supported by the new ukrainian cultural institution. "among the 12 proposed priorities of the ucf, there are two priorities directly related to the digitization and development of digital media. it is about promoting the introduction of innovations, digital technologies and digitization in the field of culture and arts, the development of an electronic information resource of cultural heritage and artistic values, the use of modern information technologies in the field of museum activities." (trehub, 2019) the ukrainian cultural foundation was established in 2017 as a state institution that proposed a new model of providing state support on a competitive basis and promoting initiatives in the field of culture and creative industries. over the years, the foundation has supported several important projects on digitization of cultural heritage in different regions of ukraine. for example, in 2020, the borys voznytsky lviv national art gallery in lviv announced that it had started the process of digitizing its collections to create a digital archive. at the first stage, priority exhibits from the 64 thousandth collection were identified. it is reported that more than 300 works of art were selected by the project experts from the collection of the gallery, which is stored in the olesko castle (a branch of borys voznytsky lviv national art gallery), including ceremonial and representative portraits from the early works to the 18th century and sculptures from the 16th and 18th centuries, among them the authorship of pfister and olenskyi, many of which are widely unknown. in 2021, with the financial support of the ukrainian cultural foundation, the creation of the first digital archive of mykola yaroshenko, one of the key figures in the history of poltava and ukrainian fine arts of the 19th century, began. the project envisages the digitization of 55 canvases and 100 graphic works of the artist, as well as the creation of a separate section on the website of the poltava art museum, through which each visitor will be able to virtually get acquainted with the artist's work (artifact magazine media platform, 2021). in the same 2021, with the support of the ukrainian cultural foundation, a large-scale project of the museum of theater, music and cinema art of ukraine called "open kurbas: digital collection" was launched. baltic journal of economic studies 64 vol. 8 no. 4, 2022 as a part of the project, 12,000 museum objects have been digitized and a bilingual ukrainian-english site was created with open access to the collection of monuments related to the activities of the outstanding director of the 20th century les kurbas (official website of the open kurbas: digital collection, 2021). 3.3. digital representation of cultural heritage at the beginning of the 21st century, the concept of "cultural heritage" underwent a semantic and substantive expansion, due to the expansion of the possibilities of using the latest technologies. a new concept of "digital heritage" is being formed, which has a double meaning – cultural heritage in digital form or digitized (electronic) cultural heritage (prykhodko, 2019). consider the second option when it comes to creating electronic (digital) copies of cultural heritage objects – valuable documents and artifacts. the modern information age is characterized by various opportunities to transmit and receive information, especially it affects the availability and speed of knowledge transfer. the basis of these opportunities is digital transformation, which we consider as a modern way of applying digital technologies and digital strategy in various spheres of human activity, including culture. lithuanian researchers note that "strategically managed digitalization of cultural heritage is becoming an important tool that ensures the development of society and creates added value of social, cultural, innovative and financial capital." (laužikas, varnienė-janssen, 2015) in the process of creating these values, new ways of representing cultural heritage play a significant role, expanding the worldview through the process of popularizing the cultural heritage of mankind by finding new ways of applying digital technologies in the field of art and culture. in order to be able to fill the virtual space with museum content, it is necessary to carry out a significant amount of research, scientific, restoration and other types of work on the preservation and presentation of historical and cultural heritage. the main areas of it use in restoration, conservation and preservation of cultural heritage are virtual reconstruction, 3d scanning, restoration of paintings, digitization of works of art (hlushchuk, karpets, 2019; kotsiubyvska, baranskyi, 2020). virtual reconstruction involves the use of computer technology that allows scientists to collect and process a large number of image sequences, thus improving the photorealistic display of texture when creating their 3d models. creation of a virtual model of a cultural heritage object is a visual representation of a cultural heritage object. this will make it possible to preserve it in the digital dimension. usually, virtual reconstruction is carried out by means of 3d modeling, which allows collecting, interpreting, analyzing and, most importantly, visualizing data thanks to special digital technologies. the created 3d models make it possible to develop a variety of multimedia and virtual reality products to stimulate interest in cultural heritage and its condition, as well as to stimulate visits to the original physical site. 3d models have also been prepared to provide an opportunity to view them using 3d navigation tools – to zoom in, zoom out, rotate and view from different angles and sides; to perform measurements (distances, areas, volumes) and publish them on the internet with 3d navigation capabilities. the use of 3d technologies in the field of modelling of three-dimensional technologies is associated with the creation in the 90s of the 20th century of specialized software. it is mainly about 3d-engine technology, which is still one of the most promising in three-dimensional graphics. this technology gives interactivity to a pre-created three-dimensional space, allowing you to take a virtual walk through it, interact with objects, characters, etc. "3d scanning is a promising direction not only for those industries in which it has been traditionally used for a long time. people can use this technology quite effectively to modernize the methods of protection of immovable objects of cultural heritage and museum sphere." (mishchenko, 2020) in latvia, for example, the plan of the project "digitization of cultural heritage content" stipulates that the intangible cultural heritage administration should digitize 30 cultural monuments using 3d laser scanning and photogrammetric methods, geophysical survey of the underground part of cultural monuments by radar method and bathymetric survey of the underwater part of koknese. thanks to modern technologies of documenting cultural monuments of national and regional significance, as well as those under state protection, it is possible to obtain accurate data on the content, volume, form and materiality of cultural monuments, which can be used to clarify the state of preservation, restoration and documentation of history (national heritage board, 2021). in modern museum restoration practice, technical and technological research is an integral part of an integrated approach to the study of works of art. every year there are new methods of such research and new devices that allow more and more accurate analysis of works of art without damaging them. of course, technical and technological expertise cannot give answers to all questions. but the best results are formed from comprehensive research conducted in cooperation with technologists and art historians (andrianova, 2019). for example, in baltic journal of economic studies 65 vol. 8 no. 4, 2022 2019, with the support of the ukrainian cultural foundation, a manual was published, which reviews the most common optical and physicochemical methods. it was used to study five paintings selected for the project from the bohdan and varvara khanenko national museum of art. "unfortunately, only one of them turned out to be original. however, the most important result of the project is that restorers, technologists and art historians have gained new, much deeper knowledge about the studied works and learned to interpret them more accurately and preserve them better." [p. 3] in a scientific article, lithuanian researcher loreta meshkelievichin examines the preparatory processes, procedures and initial results of the project, as well as the technical possibilities of digitization, which took place in the lithuanian art museum as a participant in the program "creation of an integrated virtual library information system". the author writes that "as part of the initial efforts, a digitization center for the collection was established and the necessary digitization equipment was purchased with funds from the museum and project sponsors. the center has two digitizing cameras and a unique cruse cs 185st fas artifact scanner that can produce 2d base images of the highest quality. with the help of additional equipment, it is possible to obtain three-dimensional images. the material selected for digitization is grouped into six main categories: exhibits of paintings on paper; collections of historical and artistic photography; documents, maps and drawings; collections of bonistics, sphragistics, numismatics; exhibits of textiles; paintings." (meškelevičienė, 2009) digitizing of artworks is one of the best and, in some cases, the only way to ensure that heritage is adequately preserved and made accessible to as many people as possible. according to culturologist and art historian diana klochko, the process of digitization of all our museum collections will significantly change the perception of our heritage and, accordingly, the attitude to culture. "if the state allocated (and not so much) funds for the total digitization of the funds of all art museums, it would be done now. so that all museums would have full digital catalogues. in order to be able to go to the full website of the museum, read annotations, the history of each item, its nationalization and exhibition and, finally, to imagine what a visual fund of artistic values is – this should be a normal state support. real digitization and digitalization." (dnistrovyi, 2021) in 2020, in the v. vereshchagin mykolaiv art museum the collection of graphics, which had not previously been exhibited to the audience, was digitized. specialists focused on the most valuable works of the 18th, 19th and the first half of the 20th centuries – paintings by danylo krainev, roman semashkevych, vasyl shukhaev, borys kustodiev, ivan shishkin, nicholas roerich, vasyl vereshchagin and other artists were selected for digitization among 500 graphic museum exhibits. previously, museum visitors did not have the opportunity to get acquainted with these works. digital copies are planned to be presented in the format of a web resource and a separately printed catalog. at the same time, the project involves the creation of 3d models based on five digitized works. these will be animated models that can be read with a smartphone by pointing at the code or image of this particular work. the implementation of such a project will allow users to remotely get acquainted with the museum graphics of the mykolaiv museum. during the implementation of the project "digitization of cultural heritage content" in latvia, text documents, as well as audio and video materials are being digitized. and the only copies of books published in the country, fiction literature by latvian authors to support digital research, as well as periodicals will be digitized to ensure as full as possible availability of newspapers in the digital environment in the period up to 4 decades of the 20th century. text materials stored in latvian museums will also be digitized. in addition, it is planned to digitize a collection of audio and video cassettes produced in the 1990s and early 2000s from the lnb collection. a separate area worth considering is the tokenization of cultural heritage. in ukraine the it sphere is one of the most dynamic. according to hacker-rank, ukraine takes the 11th place among 50 countries with the best software developers. therefore, ukraine is rapidly adapting new models to various fields of activity, including culture and art. an example of cultural heritage in digital format can be both an electronic copy of paper documents, monuments, paintings, etc. and the original, which exists only in digital form. for example, in the last few years in ukraine there is a growing interest in such a phenomenon as nft – a unique digital asset built on blockchain technology. nft tokens provide artists and content creators with a unique opportunity to monetize the results of their creative activity, which is why the digital art sphere has become the first to massively use the new technology. such interest is due to the ability of blockchain technology to provide a unique signature and ownership of nfts. with the beginning of a full-scale war in ukraine in 2022, the role of such a phenomenon as nft is changing significantly. for example, ukrainian artists use it to raise funds for urgent military and humanitarian needs. recently, the meta history war museum was created, which sells a collection of nft art called warline – a set of digital works chronologically representing every critical event of the russian-ukrainian war. baltic journal of economic studies 66 vol. 8 no. 4, 2022 according to the authors, tokenization of cultural heritage can be one of the promising, although currently little implemented areas. currently, blockchain projects are becoming increasingly popular around the world, including in the arts, although these trends have not yet been reflected in the digitalization of cultural heritage. one of the world's first examples of such an application is cryptojewish, which seeks to demonstrate the promise of developing valuable multidimensional content using a new and innovative digital language, bringing elements of millennial culture to the digital revolution. 25 of the rarest items in the crypto-jewish collection are housed in the fourth-largest synagogue in the world – "rather, in its digital version in decentraland, which chief rabbi peter deutsch and rabbi daniel channen, along with the entire cryptojewish nft collection, have already declared kosher". in 2022 two significant events took place in the ukrainian cultural and artistic environment, which may indicate the beginning of the tokenization of cultural heritage. this is a new experience for the national museum of art of ukraine (kyiv) and andrey sheptytsky national museum in lviv. at the beginning of the year, the capital's museum, having started selling licensed nft tokens, became the first museum in ukraine to create an nft collection based on works from its art collection. it should be emphasized that programmers, designers and art critics, who worked for more than three months, focused exclusively on the masterpieces of ukrainian artists – the digital collection will include works by vsevolod maksymovych, oleksandr murashko, oleksandra ekster, and petro rybka. the lviv museum continued to expand the horizon of the vision of ukrainian museums by announcing the creation of the nmt collection "alternative dimensions" in 2022, which will include works by prominent ukrainian and european artists that have never been included in the permanent exhibition of the museum due to their physical properties, in particular, excessive sensitivity to moisture and light, as well as insufficient protection of museum premises. in particular, digital versions will receive rembrandt's etchings, drawings by italian artists of the 17th-18th centuries, and ukrainian folk engravings in the woodcut technique of the 18th-20th centuries. the ukrainian heritage hub project (https://www.heritagehub.org), which proposes the preservation of ukrainian cultural heritage through the reliable data storage algorithms of blockchain technology, is an ambitious project that has no analogues. in addition to preservation, the project aims to record ukraine's rights to cultural heritage in the digital world on the blockchain. thus, in the modern world there are new trends for art in general and museums in particular. nft allows these works to travel virtually from museum collections to the world. in addition, the museum has the opportunity to receive certain funds that it can use for its development, to digitize collections, to show these collections to the world, and, as far as possible, to help ukrainian cultural institutions that suffered during the war. 4. conclusions one of the promising areas of research on the digitization of the cultural sphere and the introduction of digital practices in the field of cultural heritage is cultural studies, which, offering an interdisciplinary approach (involving theoretical and practical developments of economics, philosophy, cultural studies, psychology, visual studies), considers cultural heritage as a meaning-making resource in the context of modern culture. this approach expands the disciplinary and ideological boundaries of the study of cultural heritage from the aggregate of material and spiritual heritage of mankind to consideration as a special type of capital – economic, cultural, creative. analysis of the implemented technological and cultural projects on digitization of cultural heritage in the baltic states shows that this process requires significant financial costs. at the same time, studies show that these investments are necessary for longterm strategies for the implementation of the cultural policy of any modern state, as they are converted into economic capital (growth of the share of the creative economy in the country 's gdp), human capital (new jobs for a number of specialists in both humanitarian and technological fields) and cultural capital (formation of identity in the modern digital world, growth of tourist attractiveness of cultural institutions and the country as a whole). obviously, digital practices in the field of cultural heritage do not guarantee the physical protection of original cultural objects, which can be confirmed by the fact that 186 cultural heritage sites of ukraine were destroyed or damaged during the russian invasion in 2022 (information as of september 5, 2022 according to unesco open information). the developed digital tools of the baltic states for work in the field of cultural heritage show that modern technologies can be an effective way to preserve reliable information in case of its destruction, damage or theft. for example, specialists of riga technical university are already actively cooperating with ukrainian colleagues on the restoration of historical and cultural heritage in ukraine. the ongoing war on ukrainian territory demonstrated the insecurity of cultural heritage objects in the 21st century, which became the reason baltic journal of economic studies 67 vol. 8 no. 4, 2022 for the revision of the cultural policy of a number of european countries and contributed to the active exchange of experience and information between ukraine and other countries. thus, the study of electronic museum, archival and library information systems (prerequisites, methods of implementation, user experience) of estonia, latvia and lithuania will help to accelerate the digitization of these areas for the protection and promotion of ukrainian cultural heritage, and the consideration of legislative acts of these countries will help in the implementation of legal norms and standards of the european union in ukraine. the authors believe that the sphere of cultural heritage is characterized by high digital potential, and one of the promising directions of digitization of cultural heritage can be tokenization. in the context of the technologies of the future, this format of preserving the characteristics of valuable cultural objects will help not only to further adapt to the requirements of, for example, metaspace, but also to protect data and create additional financial and symbolic value. however, this topic requires further research, as it raises a number of issues: legal, economic, 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(2012). nacionālo digitalizācijas stratēģiju mērķi un uzdevumi (national digitalization strategy goals and objectives). available at: http://dspace.lu.lv/dspace/handle/7/26555 (accessed september 12, 2022). received on: 14th of october, 2022 accepted on: 11th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 73 vol. 2, no. 4, 2016 corresponding author: 1 department of world economy and international economic relations, institute of international relations of taras shevchenko national university of kyiv. e-mail: roman.stakanov@gmail.com influence of immigrants on the entrepreneurship development in the host countries roman stakanov1 institute of international relations of taras shevchenko national university of kyiv, ukraine abstract. research subject. in the economic literature the question under discussion is whether the migrant entrepreneurs are more active in business and self-employment than native, as well as what role government should play when receiving entrepreneur migrants. this paper should provide answers to the abovementioned questions, and give recommendations to the governments of the host countries on migration policy taking into account the results obtained. the purpose of this article is to investigate the entrepreneurial activity of immigrants in the host countries, and to analyze the migration policy of the host countries concerning migrant entrepreneurs. survey methodology. we used theoretical and empirical research methods; provided analysis of recent publications of scientists on the discussed subject, comparing the results obtained with statistical data, and provided practical recommendations based on survey results. results. migrants are often seen as those who have a considerable propensity for entrepreneurial activity. proponents of this point of view suggested the case of migrant entrepreneurs’ success in china and the united states, arguing that workers may not need work with a formalized salary because of theirs entrepreneurial independence. despite the theoretical basis of higher business activity, empirical studies of entrepreneurial activity of migrants are not clear. one of the arguments, which determine the attitude towards migrants, as more capable of entrepreneurship, based on the selectivity. the fact that a person has taken a relatively risky decision to migrate, ensure its stronger business activity and, consequently, the share of businessmen in this category of the labor force must be greater than the average for the country of immigration. host governments often use both specific and general business support programs. specific programs include the expansion of linguistic knowledge, business skills, and professional contacts of migrants’ labor force importer countries. migrant entrepreneurs, especially when they work in the field of innovation or in sectors with high added value, play a great potential role in economic growth and competitiveness of host countries. such migration can make a significant contribution in supporting economic activity and contribute to the social adaptation of migrants in destination countries. conclusion. entrepreneur migrants can help to stabilize the labor market, which will benefit both migrant workers and local residents. given the fact that not all immigrants have the appropriate skills, ability, desire and opportunity to be entrepreneurs in the host countries, the introduction of a single incentive policy for immigration only entrepreneurs and investors, without taking into account the needs of the labor market seems to be counterproductive. key words: international migration, entrepreneurship, migrants, migration policy, oecd. jel classification: f22, l26, f22, f22, f02 1. вступление принимающие мигрантов страны всегда заинтересованы в наиболее качественном человеческом ресурсе. большинство развитых стран испытывают потребность в импорте иностранной рабочей силы в силу демографических причин или же несоответствия спроса и предложения на национальном рынке рабочей силы. однако если иммиграция малоквалифицированной рабочей силы является постоянным предметом рестрикционной миграционной политики, то адмиссия работников высокой квалификации, инвесторов и предпринимателей традиционно поощряется принимающими странами. в данной статье будет проанализировано эффективность использования предпринимательского ресурса иммигрантов в странах пребывания, имеют ли объективные преимущества мигранты по сравнению с местными жителями в бизнес среде, а также какие инструменты используются странами иммиграции для оптимизации эффекта деятельности предпринимателей иммигрантов. baltic journal of economic studies 74 vol. 2, no. 4, 2016 в экономической литературе дискутируется вопрос о том, являются ли мигранты предприниматели более предрасположенными к бизнесу и самостоятельной занятости в силу своей большей экономической активности, а также какую роль должно играть правительство при приеме иммигрантов. проведенное исследование должно дать ответы на вышеприведенные вопросы, а также дать рекомендации правительствам принимающих стран с учетом полученных результатов. целью данной статьи является исследование предпринимательской активности иммигрантов в странах пребывания, а также анализ миграционной политики принимающих стран касательно предпринимателей мигрантов. в работе использованы теоретические и эмпирические методы исследования, которые предусматривают анализ последних публикаций ученых по теме статьи, сравнение полученных результатов с данными статистики, а также обобщение полученных данных в виде практических рекомендаций. 2. анализ последних публикаций международная трудовая миграция, глобальный и региональные рынки труда, а также миграционная политика отдельных стран и регионов, в том числе и стран оэср, исследовались рядом ученых, среди которых, в первую очередь, следует выделить дж.  борхаса, а. гайдуцкого, с. дринквотера, и. ивахнюка, э. либанову, а. малиновскую, с. метелева, д. рата, а. румянцева, а. старка, а. уинтерса, а. филиппенко, дж. флореса, р. чами. отдельно вопросами взаимосвязи миграции, предпринимательства и экономического развития в странах иммиграции и эмиграции занимались м. дезидерио, в. науде, к. марчанд, м. сигел. также значительное внимание данной проблематике было уделено в отчетах международных организаций, таких как моп и оэср, а также отдельных институтов региональных интеграционных объединений, в частности европейской комиссией. иммиграционный приток имеет потенциально положительное влияние на принимающие страны. в то же время, не все страны автоматически выигрывают от миграционных процессов. в связи с этим, г. де хаас (de haas, 2010) предостерегает от упрощающих предположений об автоматическом влиянии миграции на экономическое развитие. большое значение для эффективности такой взаимосвязи имеет экономическая политика государства. мигранты зачастую рассматриваются, как такие кто имеют значительную склонность к предпринимательской деятельности. сторонники этой точки зрения отмечают успех предпринимателей мигрантов в китае и сша, утверждая, что мигранты могут не нуждаться работе с формализованной оплатой труда. например, с. гиулиетти (giulietti, 2011) отмечает, что в таких успешных развивающихся как китай, 25% мигрантов самозанятыми. а. саксениан (saxenian, 2006) выделил значительную роль иммигрантов в развитии силиконовой долины в сша, где около одной трети технологического бизнеса находилось в собственности иммигрантов. дж. хант и м. гаузиер (hunt, 2009) обнаружили, что иммигранты были владельцами 24% патентов в сша, что в два раза превышает их долю в структуре населения страны. с другой стороны, работа д. херта (hart, 2009) показала, что в сфере высокотехнологического предпринимательства сша мигранты не являются более активными в регистрации патентов, чем местные жители, а предыдущие исследования, по мнению херта, переоценивали значение иммигрантов для данного сегмента экономики. аналогично, ф. невилл [w113] исследуя ситуацию со стартапами в канаде не нашел подтверждения тому, что такие показатели как объем продаж и объем прибыли новых предприятий зависят от того владеют ими иммигранты или местные жители. 3. результаты исследования автора несмотря на теоретическое обоснование более высокой предпринимательской активности, эмпирические исследования предпринимательской активности мигрантов не однозначны. исследование оэср (oecd, 2011) указывает на то, что мигранты являются более активными по сравнению с местным населением всего в 13 из 25 исследуемых стран. также в странах со значительными объемами иммигрантов, таких как германия, италия, испания, швейцария или нидерланды мигранты имеют значительно меньшую склонность к самостоятельной занятости, чем местные жители. в случае с иммиграцией в германии, у. брикси (brixy, 2013) отмечает, что мигранты в меньшей степени склонны считать, что они имеют необходимые качества для открытия бизнеса. также м. янсен, исследуя случай нидерландов ( jansen, 2003) обнаружил, что уровень предпринимательской активности среди местного населения, как и турецких иммигрантов, вдвое выше аналогичных показателей иммигрантов из марокко, суринама и антильских островов. один из аргументов, который определяет отношение к мигрантам, как к более склонным к предпринимательству по сравнению с местными жителями, базируется на селективности. тот факт, что лицо приняло относительно рисковое решение о миграции, говорит о более высокой ее деловой активности, а, следовательно, склонность к предпринимательству в данной категории трудовых ресурсов должна быть больше, чем в среднем по стране иммиграции (neville, 2014). с другой стороны, иммигранты в большей степени представлены среди самозаняbaltic journal of economic studies 75 vol. 2, no. 4, 2016 тых поскольку они могут быть исключены из более формальных возможностей трудоустройства, таким образом, они вынуждены переходить в сегмент самозанятости поскольку испытают потребность в более креативном решении проблемы поиска финансовых ресурсов (brixy, 2013). одним из преимуществ мигрантов предпринимателей является их более развитые социальные международные связи, что позволяет предприятиям мигрантов быть более успешными при осуществлении внешнеэкономических операций (naude, 2015). в рамках проведенного в 2012 г. исследования глобального мониторинга предпринимательства (vorderwuelbecke, 2012) было обнаружено, что общий уровень стратапов среди иммигрантов и местного населения находится на одном уровне, хотя он и варьируется в разных странах, как для мигрантов, так и для местной рабочей силы. исследование показало, что лишь 1,8% мигрантов в первом поколении в африке к югу от сахары были задействованы в учреждении бизнеса. в то же время данный показатель в сша и западной европе колеблется в районе 10-11%. однако, а. вордервуелбекке (vorderwuelbecke, 2012) также обнаружил, что в среднем предприятия, которые находятся в собственности мигрантов, должны создать 10 и более рабочих мест в течение 5 лет. в то время как аналогичный показатель среди местных жителей составляет лишь 14%. около 16% высокотехнологичных фирм в сша находились в собственности мигрантов (naude, 2015). а. саксениан (saxenian, 2006) утверждал, что развитие высокотехнологичного сектора и инновационных кластеров в таких странах как китай, индия и тайвань происходили вследствие реэмиграции транснациональных предпринимателей из сша. к типичным проблемам предпринимателей мигрантов добавляется сложность в получении кредитов официальных финансовых институтов. для того чтобы побороть эти преграды правительства принимающих стран часто используют одновременно специфические и общие программы поддержки бизнеса. специфические целевые программы для предпринимателей иммигрантов предусматривают расширение языковых знаний, бизнес умений, а также профессиональных контактов. также довольно распространенным являются меры по улучшению кредитоспособности иммигрантов и их бизнеса, а также облегчение доступа к капитальным ресурсам для создания и развития предприятий. такие инициативы могут положительно повлиять как на самих мигрантов, так и на развитие регионов их концентрации, а также соседних регионов (desiderio, 2014). еще одной проблемой для предприятий мигрантов является тот факт, что их бизнес в среднем демонстрирует более низкие показатели длительности функционирования после основания по сравнению с местными предприятиями. кроме того, в большинстве стран оэср предприятия мигрантов концентрируются в секторах с низкой добавленной стоимостью. специфические препятствия в деятельности таких предприятий имеют тенденцию сокращаться с ростом срока проживания мигранта в принимающей стране (desiderio, 2014). недостаток уровня финансирования является главным препятствием для развития малого и среднего предпринимательства, как для предприятий иммигрантов, так и для местных владельцев. однако для иммигрантов данная проблема усугубляется наличием менее длительной кредитной истории в принимающей стране, а наличие кредитной истории в стране происхождения, в силу отсутствия механизмов обмена такой информацией, не может им помочь в стране пребывания. также довольно часто доступ к бизнес среде является обусловленным требованием к капиталу. таким образом, ограниченный доступ к кредитам официальных финансовых институтов стимулирует предприятия иммигрантов оставаться в секторах экономики с низкой добавленной стоимостью, где барьеры для доступа на рынок существенно ниже. к таким секторам, в частности, относятся строительство, розничная торговля, общественное питание и др. предприниматели мигранты в большей степени, чем местные жители полагаются на собственные, семейные ресурсы и средства своего сообщества. это, в свою очередь, формирует условия для локализации бизнеса иммигрантов в рамках их диаспор и ограничивает возможности для развития и расширения деятельности за ее пределы. с целью устранения такого финансового барьера, одним из видов целевых программ помощи мигрантам-предпринимателям являются меры по содействию доступа к кредитам. такие меры предусматривают предоставление гарантий и знаков качества. например, в испании муниципальный институт экономики и рынка труда города террасса ставит печати качества на бизнес-планы, которые были написаны мигрантами в сотрудничестве с институтом (desiderio, 2014). с 2000 г. страны оэср активно вводили новую или реформировали существующие политики привлечения мигрантов предпринимателей и инвесторов. такая целевая политика была в первую очередь направлена на адмиссию иммигрантов со значительным человеческим и финансовым капиталом, таким образом, повышая конкурентоспособность и стимулируя экономический рост принимающих стран. в отдельных странах такая политика имела целью стимулировать мигрантов поселяться и инвестировать в отдельные зоны, способствуя экономическому развитию депрессивных регионов, а также развитию деловых и технологических кластеров. например, австралия и канада имеют программы, которые передают отдельные полномочия по иммиграции владельцев бизнеса свои штатам, территориям или baltic journal of economic studies 76 vol. 2, no. 4, 2016 провинциям. однако, среди стран оэср лишь незначительная часть иммигрантов попала в страну назначения, пользуясь специальными разрешениями для миграции с целью осуществления предпринимательской деятельности. большинство мигрантов, которые основали предприятия в принимающих странах, сначала въехали через другие миграционные потоки, такие как занятость или учебы (desiderio, 2014). ключевые страны иммиграции, такие как канада, австралия, сша, были одними из первых, кто начали принимать меры по привлечению талантливых иностранцев с предпринимательскими способностями и продолжали это делать и в кризисный период после 2008 (desiderio, 2014). в рамках ес мигранты составляют значительный объем потенциальных предпринимателей, которые, однако, в большей степени подпадают род разные виды ограничений в своей деятельности (законодательные, культурные, лингвистические). это, в свою очередь, снижает эффективность их деятельности и требует стимулирующего вмешательства со стороны государственных и надгосударственных органов (european commission, 2016). содействие предпринимательству предусмотрено стратегией европа-2020, целью которой является создание условий для разумного, устойчивого и инклюзивного роста в ес. в рамках стратегии был принят план действий предпринимательство-2020. целью данного плана является стимулирование создания нового бизнеса, а также формирование значительно более благоприятной среды для функционирования уже существующего. отдельное обязательства в рамках плана действий предусматривается по содействию предпринимательства среди мигрантов, которые уже присутствуют на территории ес. документом предусмотрено проведение бизнес тренингов и наставничество, а также открытие доступа для иммигрантов ключевых структур поддержки. европейская комиссия определяет лучшую практику с целью содействия и поддержки предпринимательской деятельности мигрантов и финансирует пилотные проекты с целью ее распространения (european commission, 2016). отдельными странами ес была введена политика, специально направленная на привлечение в страну мигрантов предпринимателей, в том числе через введение специального визового регулирования для данной категории мигрантов. такие мигранты рассматривались, например, такими странами как нидерланды и германия (oecd, 2011), в качестве потенциального драйвера местной экономики и соответственно они получали режим максимального благоприятствования со стороны правительств. такая политика является селективным отбором, в основе которого лежит принцип принятия именно тех мигрантов, которые прибывая в страну, приносят вместе с собой достаточное количество финансового или человеческого капитала, таким образом, обеспечивая достаточный вклад в экономику принимающей страны (naude, 2015). общие программы поддержки предпринимателей являются доступными для всего населения, проживающего в стране, они также могут способствовать развитию предпринимательства мигрантов, в том случае, если иммигранты имеют к ним свободный доступ. такие программы ориентируются на предоставление более совершенных услуг поддержки бизнеса, таких как инкубаторы для высокотехнологичных стартапов, а не целевой поддержки иммигрантов. оба способа поддержки могут выступать взаимодополняющими механизмами. такие программы также должны быть стать составной частью более широких стратегий по созданию среды благоприятной для предпринимательства (desiderio, 2014). в феврале 2016 состоялась европейская конференция по предпринимательской деятельности мигрантов. на ней отмечалось, что мигрантам зачастую не хватает знаний и информации о культуре бизнеса, регуляторной среде в стране назначения. административные и социокультурные сложности могут нивелировать потенциальные перспективы роста новосозданного бизнеса, что, в свою очередь, уменьшает положительное влияние деятельности мигрантов предпринимателей на экономическое развитие страны-импортера рабочей силы. таким образом, на конференции была поддержана позиция о необходимости развития схем по целевой поддержке мигрантов предпринимателей в европе (european commission, 2016). 4. выводы иммиграция предпринимателей, в первую очередь, когда они работают в сфере инноваций или в отраслях с высокой добавленной стоимостью, имеет большое потенциальное значение для экономического роста и обеспечения конкурентоспособности принимающих стран. такая миграция может сделать значительный вклад в поддержку экономической активности, а также способствовать социальной адаптации мигрантов в странах пребывания. несмотря на то, что значительная часть стран-импортеров рабочей силы все еще не поборола последствия экономического кризиса, предприниматели мигранты могут помочь в стабилизации рынка труда, что принесет пользу, как рабочим мигрантам, так и местным жителям. однако проведенные исследования указывают на то, что нельзя полностью отождествлять прирост иммиграции с ростом предпринимательства во всех принимающих странах. вполне очевидным представляется, что предпринимательство и самозанятость мигрантов не всегда происходит от их желания, а достаточно часто является вынужденной необходимостью. в то же время, ряд данных указывают на то, baltic journal of economic studies 77 vol. 2, no. 4, 2016 что мигранты проявляют существенно более высокую инновационную активность в отдельных странах, в частности в сша. роль иммигрантов также является весомой для развития высокотехнологичных, биотехнических, венчурных компаний. при этом проведенные исследования четко не указывают на то, что количество новых товаров или услуг в большей степени производятся инновационными предпринимателями мигрантами по сравнению с местными жителями. целевые программы поддержки иммигрантов-предпринимателей являются весомым способом обеспечения равных возможностей для иммигрантов, которые начинают, продолжают или расширяют свой бизнес, поскольку они помогают нивелировать неравные условия, в которые они попадают, конкурируя с местными предпринимателями. благодаря таким программам достигается широкая экономическая интеграция, что, в конце концов, позволяет мигрантам получить доступ, в том числе и к общим программам поддержки предпринимателей в принимающих странах. наиболее эффективным способом поддержки бизнеса мигрантов является объединение усилий различных субъектов рынка. к таким институтам можно отнести национальное правительство, местные органы власти, государственные учреждения ответственные за различные аспекты национальной экономической политики (в частности в сфере образования, науки, экономической, налоговой и миграционной политик), отдельные негосударственные учреждения, такие как торгово-промышленные палаты, профсоюзы, неправительственные организации, а также представителей бизнес среды. такое частно-государственное партнерство способствует уменьшению государственных расходов на поддержку бизнеса, а также на специальные программы по интеграции мигрантов. с учетом того, что не все иммигранты обладают соответствующими способностями, умениями, желанием и возможностями быть предпринимателями в принимающих странах, введение отдельной стимулирующей политики для иммиграции исключительно предпринимателей и инвесторов, без учета потребностей рынка труда (в том числе и структурных потребностей в низкоквалифицированной рабочей силе в долгосрочной перспективе) представляется автору контрпродуктивным. references brixy, u., sternberg, r ., vorderwlbecke, a. (2013). business start-ups by migrants. iab brief report 25. nrnberg: institute for employment research. desiderio, m. (2014). migrant entrepreneurship: an overview retrieved from http://www.immigrationresearchinfo.org/report/migration-policy-institute/policies-support-immigrant-entrepreneurship giulietti, c., ning, g., zimmermann, k. (2011). self-employment of rural-to-urban migrants in china. iza discussion paper no. 5805. bonn: institute for the study of labor. european commission (2016). migrant entrepreneurs. retrieved septmber 21, 2016, from https://ec.europa.eu/growth/smes/promotingentrepreneurship/we-work-for/migrants_en de haas, h. (2010). migration and development: a theoretical perspective. international migration review, 44(1):227–264. hart, d. (2009). high-tech immigrant entrepreneurship in the us: a preliminary report. industry studies annual conference, 20 may, chicago. hunt, j. and gauthier-loiselle, m. (2009). how much does immigration boost innovation? iza discussion paper no. 3921. bonn: institute for the study of labor. jansen, m., de kok, j., van spronsen, j., willemsen, s. (2003). immigrant entrepreneurship in the netherlands. research report h200304, scales naude, w., siegel m., marchand k. (2015). a critical review. migration, entrepreneurship and development. retrieved from http://ftp.iza.org/dp9284.pdf neville, f., orse, b., riding, a., jung, o. (2014). do young firms owned by recent immigrants outperform other young firms? journal of business venturing, 29(1):55–71. oecd (2011). divided we stand: why inequality keeps rising. paris: organization for economic development and cooperation. saxenian, a. (2006). the new argonauts. cambridge ma: harvard university press vorderwuelbecke, a. (2012). global entrepreneurship monitor – 2012 global report, chapter entrepreneurship and migration, pages 42–50. global entrepreneurship consortium. baltic journal of economic studies 78 vol. 2, no. 4, 2016 роман стаканов влияние иммигрантов на развитие предпринимательства в странах пребывания аннотация. предмет исследования. в экономической литературе дискутируется вопрос о том, являются ли мигранты предприниматели более предрасположенными к бизнесу и самостоятельной занятости в силу своей большей экономической активности, а также какую роль должно играть правительство при приеме иммигрантов. проведенное исследование должно дать ответы на вышеприведенные вопросы, а также дать рекомендации правительствам принимающих стран с учетом полученных результатов. целью данной статьи является исследование предпринимательской активности иммигрантов в странах пребывания, а также анализ миграционной политики принимающих стран касательно предпринимателей мигрантов. методология исследования. в работе использованы теоретические и эмпирические методы исследования, которые предусматривают анализ последних публикаций ученых по теме статьи, сравнение полученных результатов с данными статистики, а также обобщение полученных данных в виде практических рекомендаций. результаты исследования автора. мигранты зачастую рассматриваются, как такие кто имеют значительную склонность к предпринимательской деятельности. сторонники этой точки зрения отмечают успех предпринимателей мигрантов в китае и сша, утверждая, что мигранты могут не нуждаться работе с формализованной оплатой труда. несмотря на теоретическое обоснование более высокой предпринимательской активности, эмпирические исследования предпринимательской активности мигрантов не однозначны. один из аргументов, который определяет отношение к мигрантам, как к более склонным к предпринимательству по сравнению с местными жителями, базируется на селективности. тот факт, что лицо приняло относительно рисковое решение о миграции, говорит о более высокой ее деловой активности, а, следовательно, склонность к предпринимательству в данной категории трудовых ресурсов должна быть больше, чем в среднем по стране иммиграции. правительства принимающих стран часто используют одновременно специфические и общие программы поддержки бизнеса. специфические целевые программы для предпринимателей иммигрантов предусматривают расширение языковых знаний, бизнес умений, а также профессиональных контактов. иммиграция предпринимателей, в первую очередь, когда они работают в сфере инноваций или в отраслях с высокой добавленной стоимостью, имеет большое потенциальное значение для экономического роста и обеспечения конкурентоспособности принимающих стран. такая миграция может сделать значительный вклад в поддержку экономической активности, а также способствовать социальной адаптации мигрантов в странах пребывания. выводы. несмотря на то, что значительная часть стран-импортеров рабочей силы все еще не поборола последствия экономического кризиса, предприниматели мигранты могут помочь в стабилизации рынка труда, что принесет пользу, как рабочим мигрантам, так и местным жителям. с учетом того, что не все иммигранты обладают соответствующими способностями, умениями, желанием и возможностями быть предпринимателями в принимающих странах, введение отдельной стимулирующей политики для иммиграции исключительно предпринимателей и инвесторов, без учета потребностей рынка труда представляется автору контрпродуктивным. baltic journal of economic studies 50 vol. 7 no. 2, 2021 corresponding author: 1 mykolaiv national agrarian university, ukraine. e-mail: ihoncharenko305@gmail.com orcid: https://orcid.org/0000-0001-9670-9812 researcherid: d-2222-2018 2 kyiv national economic university named after vadym hetman kyiv, ukraine. e-mail: honcharenko15olha@gmail.com orcid: https://orcid.org/0000-0002-6860-9862 doi: https://doi.org/10.30525/2256-0742/2021-7-2-50-56 evaluation of the regional public authorities’ activities: key theoretical and practical aspects iryna honcharenko1, olha honcharenko2 abstract. activity of public administration is one of the most evaluated aspects involving hundreds of stakeholders across ukraine. it is an important topic, as evaluation is one of the main ways for collection of the useful evidence for policymaking. evaluation can be defined as the collection of evidence for formulating a judgement on the merits of an intervention, programme or policy. there is an unsolved task to provide an in-depth analysis with up-todate information on the role of the evaluation of regional public authorities and local self-government institutions’ activities. the article shows a number of evaluation methods for the public authorities’ activities and reveals the factors that explain the current situation. the authors propose indicators that meet current trends, in particular the concept of sustainable development, within which the world community is moving. the system of balanced indicators allows to link strategic goals and key indicators that measure the degree of their achievement in the regions. the formation of a perfect evaluation system for the public authorities’ activities includes monitoring of the obtained results, their comparison with the forecast and plan under the condition of clearly defined costs in advance. this involves the use of a set of indicators, in particular: indicators that characterize economic and financial sustainability, those which assess institutional development, social transformation, environmental responsibility and energy efficiency. the influence of the public opinion makes any management process more or less public, so it is necessary to intensify the process of the public monitoring of the services provided by the public authorities, with further response or accumulation of the information for further consideration. key words: evaluation, management, public authorities, region. jel classification: c13, h70, r58 1. introduction in general, citizens aspire to see concise results in exchange of their financial and development support regional public authorities and local self-government institutions. a systematic and objective assessment of the public authorities’ activities is one of the main conditions for increasing their socially useful activities and responsibilities, as well as accelerating the pace of socio-economic development of the regions. therefore, in recent decades, discussions on the use of quality and efficiency indicators for objective assessment of the performance of public administration have intensified. evaluation is an applied inquiry process that makes a judgement on the merits of an intervention, programme or policy (kubera, 2017). evaluation has a variety of operational goals, namely, to measure an effect, to understand mechanisms. the question of the evaluation of the management effectiveness in general is reflected in the works of p. drucker, who emphasized that “these days, practically all of us work for a managed institution, large or small, business or non-business. we depend on management for our livelihoods. and our ability to contribute to society also depends as much on the management of the organization for which we work as it does on our own skills, dedication, and effort” (drucker, 2001). t. peters, r . waterman reveal the concept of successful management through continuous innovation (2010). the theory and methodology of public administration evaluation is actively developing in the united states. the country received the experience of evaluation in education, public health and hygiene before the first world war. the most turbulent period came in the 1960s (tanaka hiraki, 2009). at this time, the johnson administration baltic journal of economic studies 51 vol. 7 no. 2, 2021 of the us federal government pursued a policy using the slogan “war on poverty.” this led to the creation of the measurement of efficiency as a scientific method of governance, which was traditionally developed in the study of public administration in the united states, and its spread since the 90s on the background of the socalled “new public administration”. now this approach is being implemented in administrative institutions all over the world. moreover, various institutions are involved in its implementation both in the central and local governments. the evaluation of the effectiveness and efficiency of public administration is based on the fact that management activities, which focus on achieving certain strategic goals by solving tactical tasks, from the point of view of public administration refocuses on the end result in the form of individuals and society satisfaction of services consumed by them, the consequences of their activities, as well as the volume and quality of public services provided by public administration, which improve the living conditions and livelihoods of citizens (vedung, 2003). 2. paradigms of evaluations the competing paradigms of evaluations include positivism, realism and constructivism (bachtler and wren, 2006; hoerner and stephenson, 2012). positivism considers that objective knowledge can be obtained through empirical observation. it is strongly linked with the operational goal to measure the effects or impacts of an intervention, which can serve the purposes of accountability (evaluations as proof that funds are used as intended to deliver effects) and advocacy (evaluations as arguments for debates or negotiations). consequently, this paradigm tends to give birth to so-called impact/result-oriented evaluations, which are explicitly designed to estimate the consequences of an intervention. positivism is also related to monitoring/progress-oriented evaluations, which track the progress of an intervention towards set targets, without necessarily distinguishing the contribution of the intervention from other factors. this paradigm is usually operationalized through predominantly quantitative methods (statistical analysis, econometrics, etc.). realism has an intermediate position regarding how knowledge can be derived – i.e., as an interplay between objective reality and its social construction by stakeholders. its operational goals typically involve understanding the mechanisms of an intervention and learning during design and implementation. its primary purpose is thus to promote policy-learning (i.e., improvement of an intervention or policy; but also building the skills and capacity of policymakers, which can be transferred to other tasks and policies). realism can be applied to all types of evaluations, but especially to process/implementation-oriented ones, which examine how funds are managed and interventions are implemented. it rests on a combination of qualitative and quantitative methods. constructivism rejects objective knowledge and involves several stakeholders in evaluations to understand their different views and interdependence. it emphasises the development of participation and ownership, with a clear operational goal of understanding and learning from evaluations. its purpose is mainly to build participation and engagement among stakeholders. beyond these theoretical perspectives, there are also practical aspects affecting evaluation, which include the work of evaluators but also the broader organizational context. for instance, evaluations are strongly dependent on the division of responsibilities between stakeholders. indeed, as evaluations include a normative judgement, deciding who conducts an evaluation and who benefits from its results can be challenging. the timing of an evaluation is also critical in facilitating the opportunity for it to inform the decision-making process. delays in evaluations can represent an important problem in the process of taking stock of the generated knowledge. 3. the current trend in assessing the quality of public authority the current trend in assessing the quality of public authority is to build quality management systems in accordance with the requirements of international standards iso 9001:2015. the basis of the quality management systems standards is formed by seven principles: customer orientation; leadership; staff involvement; process approach; improvement; making decisions based on factual data; relationship management. the requirements of the standard on the responsibility of management, analysis and control of business processes, actions to improve this activity, development of management system documentation create a basis for the formation of local government, which is focused on the customer (citizen). in ukraine, local governments were the first among the authorities to introduce the iso system. implementation and certification of quality management systems in accordance with this standard leads to increased efficiency and consistency of work, more rational use of resources, focus on consumers and, consequently, increase of the customer satisfaction (se “ukrmetrteststandart, 2021). since 2000, the common assessment framework (hereinafter referred to as the caf model) has been widely used in the eu member states as well as in the eu candidate countries (eupan, 2021). the caf model is an adaptation of the well-known business model for self-assessment of the european foundation for quality management – the efqm model of excellence. the overall caf evaluation scheme is baltic journal of economic studies 52 vol. 7 no. 2, 2021 being developed for the public sector and the public and municipal administration of europe under the auspices of the european commission. the caf model has proven to be a simple and effective tool for evaluating, analysing and improving the efficiency of the civil service, as evidenced by the experience of more than 900 organizations in the field of public and municipal government. between 2003 and 2006, about 30 european countries included caf in their national strategic programs to improve the quality and efficiency of public administration. in 15 countries, the application of caf is a recommendation for public authorities, and it is mandatory in three countries – the czech republic, slovakia and romania. the caf model is positioned as a mechanism for examining the activities of public authorities and local governments on the basis of diagnostic self-assessment, as a tool for comparative analysis of institutional systems of european countries, which includes identification of the best practices, and as part of public and municipal governance reform programmes. the general evaluation scheme is designed specifically for the public sector, taking into account its specifics and in order to achieve the following objectives: – to introduce the principles of quality management in the field of public administration and promote their deployment through the method of self-assessment. to facilitate the transition from the “plan – do” chain to the “plan – do – check – act” cycle (pdca continuous improvement cycle); – to provide a mechanism for self-assessment for diagnosing the strengths and weaknesses, identifying areas for improvement; – to become an element between different approaches to quality-based management; – to ensure the exchange of experiences and the study of the best management practices for the public sector. the caf model includes two groups of evaluation indicators: the “opportunities” group characterizes the approaches used by the organization to achieve results and increase efficiency; group “results” characterizes the achievements of the organization. the nine key caf indicators, which meet the criteria of the common assessment framework (caf), combine 28 components and about 150 evaluation areas. today, the development of caf is facilitated by the cooperation of users of the model within the european network of public administration eupan, created at the caf resource center. for example, in the countries of the european union, the practice of introducing “smart city” technology, which provides, in particular, governance with the broad participation of citizens, is widespread. the list of already implemented services allows citizens to monitor and control around the clock: electronic auctions, electronic market analysis, electronic bidding, electronic auction card, mayor’s diary, details of the city budget and assets, city grants, a single emergency control center (fire service, patrol police, ambulance); online processing of various appeals of citizens (european smart cities 4.0, 2015). such tools as electronic opinion polls or online citizens’ notes / appeals make it possible to study citizens’ opinions and take them into account when planning local development. the best value system was developed in the uk as a programme for improving the quality of local government activities, and it is the most important aspect is the cooperation of local authorities with the public, as public consultation is a key element in many issues of improving the quality of services. not only the quality of services is discussed with citizens, but also the list of services, their goals and quality standards, according to which services are provided. in addition to discussions, the form of citizen involvement is cooperation in the process of providing services. as a result, a significant number of services are provided to local businesses on a contractual basis (not by local authorities, but by community residents). consulting with the local businesses is an officially approved requirement of the best quality programme. the need for feedback between the community and the government is identified as one of the most important aspects of success in achieving the best quality of services. public consultation is important at the budget planning stage of the service delivery process, as the financial responsibility for the services provided rests with the local government and, consequently, with the community as a whole (kovbasuk u., 2014). since 2001, canada has used a model called the community-based monitoring system. such monitoring is defined by experts as a process of cooperation between the public, government agencies, industry, academics, community groups and local institutions to adequately respond to local development processes, address existing problems and promote full cooperation between citizens and government, strengthen citizen involvement in the adoption process of the management decisions at the local level (quіnn, 2005). balanced scorecard has become a promising rating system for the new generation, the result of many years of work led by robert kaplan, a professor at harvard business school, and david norton, founder and president of balanced scorecard collaborative. the balanced scorecard system developed for business companies is gaining popularity among public administration institutions and takes into account four “perspectives” of the organization: traditional financial (financial) indicators and factors that directly or indirectly affect them, the success of customer service (customer), optimality of internal business processes (internal business) and general competence of the company’s staff in its field (innovation and learning perspective). taken together, these perspectives provide a holistic picture of the organization’s current strategy and dynamics. if necessary, additional kits baltic journal of economic studies 53 vol. 7 no. 2, 2021 of own development can be introduced and used, for example “ecology” and others (norton, kaplan, 1996). periodic measurements of indicators provide feedback and appropriate regulation of the organization’s actions. the degree of achieving goals, the efficiency of business processes and the perfomance of the entire company, its departments and each employee is determined by the values of the so-called “key performance indicators” (kpi). if they are related to the employee motivation system, it is expected that the latter will be interested in achieving the company’s goals on a daily basis. thus, balanced scorecard becomes a kind of “framework” for transforming the strategy of the organization into a set of operational goals that determine the company’s behaviour and, consequently, its financial well-being. 4. criteria and indicative approaches for evaluating the regional government system activities an evaluation becomes increasingly important for the activities of public administrations in ukraine. the current monitoring practice does not provide complete unbiased information for an objective assessment of the activities of public administrations. for example, focusing on the strategy of development of the mykolaiv region for the period till 2020 (strategy of the mykolaiv region, 2015), we should note that section 5. – implementation and monitoring of the strategy – contains subsection “monitoring of the strategy implementation”. the proposed procedure has several shortcomings: there is no independent monitoring of the development strategy implementation, no participation in the monitoring carried out by government officials, experts, initiative groups, ngos, and public councils. the imperfection of the monitoring methodology allows the authorities to formulate the results of the monitoring according to their needs and tasks. monitoring and evaluation of the regional development strategies are carried out on the basis of information provided by the documents of central authorities. the quality of the monitoring system of the regional development strategy does not allow to manage the implementation of these documents effectively. using criterion and indicative approaches for assessment of the regional government system activities, based on information from the report about the implementation of the state strategy for regional development of ukraine for 2019, for which the mykolaiv regional state administration is responsible (report, 2019), the authors calculated specific criteria (ki, n) and generalized criterion (k) (table 1). the specific criterion for the evaluation of the activities of public authorities in the field of regional development was determined by certain evaluation indicators specified in the system of indicators for evaluating the activities of a particular government body. the specific criterion for evaluating the activities of public authorities is calculated by the formula (1): ki = fi/pi, (1) where ki is a specific criterion for the evaluation of the activities of public authorities; fi is the actual achieved value of the i-th indicator; pi is the predicted value of the i-th indicator. if the desired result is a decrease in the value of any indicator (for example, the level of registered unemployment), the calculation of a specific criterion is carried out according to the formula (2): ki = pi / fi, (2). the final evaluation of public authorities was based on calculation generalized criterion (k). the calculation was carried out according to the formula (3): k = the sum of ki/i, (3). after the initial processing of information and obtaining the values of the generalized criterion (k) for each of the evaluated subjects, these values were compared with 1. w hen the obtained k is more than 1.1, the activity of the subject of assessment is considered highly effective, when k = 1 +/0.1 – effective, when k = 0.8 +/0.1 – inefficient, when k is less than 0.7– ineffective. the calculation of the aggregate index showed that the activity of the subject of evaluation should be considered as effective. the analysis of the development strategy of the mykolaiv region for the period 2021–2027 (development strategy of the mykolaiv region, 2021) revealed the absence of a separate section where the features of monitoring and evaluation were disclosed, but the necessary information was included in section 6. in accordance with its powers and structure, regional state administration determines consistency of the strategy with programme and strategic documents, which stipulates that monitoring reports are open documents and are used for clarification of the tasks and budget programmes of the region for the next budget year, and also that the form of the monitoring report, responsible authority for its preparation as well as submission deadlines. when comparing the strategy of development of the mykolaiv region for the period till 2020 (strategy of the mykolaiv region development, 2020) and the development strategy of the mykolaiv region for the period of 2021-2027, absence of accurately formulated purposes and indicators which would correspond to smart parameters specific (concrete); measurable; achievable; relevant; time bound (weakness of time) is traced, as well as weakness of the information collection system, lack of procedures for monitoring and analysis of the information. it is necessary to create an integrated information and communication system for region, the main components of which will be: developed infrastructure for access to information; the information systems of local self-government bodies; the informational monitoring systems; e-commerce and baltic journal of economic studies 54 vol. 7 no. 2, 2021 marketing systems; the informational and consulting electronic services; distance learning and retraining systems (honcharenko, 2018). the development of informatization and telecommunications of regions will enable to achieve significant results in social and economic activity of society at the expense of a clearer organization, economical spending of all kinds of resources (material, energy, labour, financial, etc.), improvement of working conditions and life of the population. the task of assessment of the public authorities’ activities seems to require great attention from scholars and practitioners of public administration. currently in the world practice of strategic management, the most effective tool for implementing the strategy is a system of balanced scores. obviously, it is impossible to achieve what cannot be measured. therefore, in order to implement the set strategic tasks, the main target indicators of sustainable socio-economic development of the community must be identified and targeted. the system of balanced scores allows you to link strategic goals and key indicators that measure the degree of their achievements, to identify and track cause and effect relationships between key financial and nonfinancial indicators. the name of the system reflects the balance or equilibrium that can be achieved between: – long-term and short-term goals of the development strategy; – financial and non-financial indicators; – indicators of the upper and lower hierarchical levels of the strategy; – internal and external sources and factors of strategy implementation. key performance indicators in the system should be measurable and formalized in a single reporting system according to the following criteria: – be relatively simple and unambiguous in interpretation; – have optimal, threshold, critical values for comparison and control over their implementation; – be able to make a comparative assessment in time dynamics; – be updated on a regular basis; – be representative for comparisons; – be able to be included in economic and mathematical models, information systems and forecasting systems. the number of key performance indicators selected should be limited. it is impossible to make effective management decisions based on the analysis of too many indicators. to achieve the strategic goals and objectives of the regional development, the following indicators are proposed: economic and financial stability (growth rate of the labour productivity, number of created and modernized work places, index of economic innovation); institutional development (level of competitiveness; terms of doing business, quality of the local government, development of e-government); social transformations (the share of the population with incomes below the subsistence level, unemployment rate, minimum income level); table 1 the evaluation of regional public authorities’ activity according to the indicators of the mykolaiv region in 2019 specific evaluation criteria forecasted value actual value index increasing of the region competitiveness level gross regional product (actual prices) per capita, uah 37 391 60 549 1.6 volume of sold innovative products,% of the total volume of sold industrial products 0.6 1 1.7 number of small enterprises per 10 thousand of the available population, units 92 98 1.1 disposable income per person, hryvnia 37 995 55 544 1.5 the volume of foreign direct investment per capita, usd 232 223 1.0 the volume of exports per capita, usd 1 667 1 913 1.1 territorial socio-economic integration and spatial development demographic burden of the population aged 16-59 per 1 thousand permanent residents, ppm 641 659 1.0 total coefficient of the outflow of rural population (outflow from rural areas per 1 thousand of available rural population), ppm 6 6 1.0 total mortality rate (deaths per 1,000 population), ppm 13.9 15 1.1 the unemployment rate of the population aged 15-70, determined by the ilo methodology, % 8.2 9 1.1 density of public roads of state and local importance with a hard surface, kilometers of roads per 1 thousand square meters. kilometers 194.5 195 1.0 the share of recycled waste, % of total waste generated 5 3 0.5 the share of the area of the nature reserve fund, % of the area of the administrative-territorial unit 7 3 0.4 generalized criterion 1.08 source: сompiled by the authors on the basis of: (report, 2019) baltic journal of economic studies 55 vol. 7 no. 2, 2021 environmental responsibility and energy efficiency (number of pollution sources, reducing of the energy intensity of the economy, reducing the energy intensity of the economy). economic and financial indicators are quite simple to define and widely used (posner, fantone, 2010; soininen, 2013). but if we focus only on them, it is not necessary to even be interested in ensuring that investments improve the welfare of citizens. therefore, development strategies need to be assessed both by the degree of achievement of previously set goals and by the extent to which the set goals are justified in terms of the existing social problems. 5. conclusions society expects from the public authorities an effective and responsible management aimed at meeting both its needs and the needs of individual citizens. in ukraine, achieving the progress towards the formation of a perfect system for evaluating the activities of public authorities includes monitoring of the obtained results, their comparison with the forecast and plan at clearly defined costs. it involves the use of a set of indicators, in particular: indicators that characterise economic and financial sustainability, which assess institutional development, social transformation, environmental responsibility and energy efficiency. public assessment of the local self-government effectiveness is common. such assessment includes evaluation and control, in particular on such issues as, for example, the adoption of certain management decisions by public authorities, as well as the progress of their implementation; targeted and economical spending of resources and public funds; ensuring environmental safety, as well as preserving human life and health; quality and volume of public services provided, implementation of priority national programmes and projects, etc. the impact of the public opinion and its evaluation on the process of determining the effectiveness of public administration is carried out by implementing a system of its monitoring and taking into account its effects and their consequences. it is necessary to intensify the process of the public monitoring of the public services delivery, public activities, institutions and civil society organizations for constant, periodic or one-time monitoring of the strategies implementation by public authorities with further response or accumulation of information for further consideration. references: bachtler, j., & wren, c. (2006). evaluation of european union cohesion policy: research questions and policy challenges. reg. stud. 40, 143–153. doi: 10.1080/00343400600600454 berriet-solliec, m., labarthe, p., & laurent, c. (2014). goals of evaluation and types of evidence. evaluation, 20, 195–213. doi: 10.1177/1356389014529836 eupan (2021). caf – common assessment framework. available at: https://www.eupan.eu/caf/ development strategy of mykolaiv region for the period 2021–2027. available at: https://www.minregion.gov.ua/ wp-content/uploads/2021/02/strategiya-rozvytku-mykolayivskoyi-oblasti-na-period-do-2027-roku.pdf drucker, peter f. (2001). the essential drucker. available at: https://1lib.eu/book/781796/a83811?dsource= recommend&regionchanged=&redirect=7203773 european smart cities tu vienna european smart cities 4.0 (2015). available at: http://www.smart-cities.eu/ ?cid=2&ver=4 hoerner, j., & stephenson, p. (2012). theoretical perspectives on approaches to policy evaluation in the eu: the case of cohesion policy. public adm., 90, 699–715. doi: 10.1111/j.1467-9299.2011.02013.x honcharenko, i., kozachenko, l., & moroz, t. (2018). informational support of the rural areas’ development. baltic journal of economic studies, vol. 4, no. 4, pp. 93–100. doi: 10.30525/2256-0742/2018-4-4-93-99 kovbasuk, u. v. (2014). local self-government in ukraine: current state and main directions of modernization. nadu, p. 128. kubera, p. (2017). a new approach to policy evaluation in the european union. przegląd politol, 35. doi: 10.14746/pp.2017.22.4.3 norton, d., & kaplan, r . (1996). using the balanced scorecard as a strategic management system / harvard business review. peters tom, & waterman jr. robert (2010). the quest for excellence: lessons from america’s most successful companies. alpina publishers, p. 528. posner, p. l., & fantone, d. (2010). performance budgeting. available at: https://books.google.com.ua/ books?hl=en&lr=&id=c9sqndwmld0c&oi=fnd&pg=pa92&ots=liqodmhzny&sig=rv21phpcgtksgxrt3dgmzi133g0&redir_esc=y#v=onepage&q&f=false quіnn mіchael s., & duboіs jennіfer e. (2005). communіty based monіtorіng: engagіng and empowerіng / forest servіce proceedіngs rmrs-p-36; faculty of envіronmental desіgn, unіversіty of calgary. calgary, ab, canada: alberta ranchers usda, pp. 212–218. baltic journal of economic studies 56 vol. 7 no. 2, 2021 se “ukrmetrteststandart” (2021). quality management systems according to iso 9001. available at: http://www.certsystems.kiev.ua/uk/iso-9001/sistemi-upravlinnya-yakistyu-za-iso-9001.html strategy of mykolaiv region development for the period till 2020. available at: http://smartmk.bissoft.org/uk/ page/strategiya-rozvitku-mikolaivskoi-oblasti-na-period-do-2020-roku soininen, t.  (2013). mechanisms of change in public management projects – sage open. available at: https://journals.sagepub.com/doi/full/10.1177/2158244013486490 tanaka hiraki (2009). evaluation in local governments in japan. available at: http://citeseerx.ist.psu.edu/ viewdoc/download?doi=10.1.1.526.4606&rep=rep1&type=pdf vedung, e. (2003). an assessment of the state policy and programs. “everything is wrapped”, p. 350. report on the tasks implementation of the state strategy of regional development of ukraine for 2019 for which mykolaiv regional state administration is defined as a responsible authority. available at: https://economy-mk .gov.ua/index.php/ua/component/content/article/115-napriamky-diialnosti/rehionalnyi-rozvytok/sotsialno-ekonomichnyi-rozvytok/stratehichne-planuvannia/187-stratehichne-planuvannia?itemid=437 baltic journal of economic studies 94 vol. 8 no. 1, 2022 corresponding author: 1 poltava university of economics and trade, ukraine e-mail: manzhura11@ukr.net orcid: https://orcid.org/0000-0003-4840-9238 researcherid: s-5958-2017 2 yuriy fedkovych chernivtsi national university, ukraine e-mail: g.pochenchyuk@chnu.edu.ua orcid: https://orcid.org/0000-0002-9994-636x researcherid: d-1542-2016 3 borys grinchenko kyiv university, ukraine e-mail: k2205n@ukr.net orcid: https://orcid.org/0000-0001-8610-3980 researcherid: w-1814-2017 doi: https://doi.org/10.30525/2256-0742/2022-8-1-94-102 innovative changes in financial and tax systems in the conditions of digital transformation oleksandr manzhura1, galyna pochenchuk2, nataliia kraus3 abstract. the purpose of the research is to present the features of innovative changes in financial and tax systems in terms of digital transformation as a foundation to build a new quality of economic system in terms of virtual mobility and financial technologies that change business in the direction of its electronic direction. the object of the scientific research is the process of digitizing innovative changes in financial and tax systems in terms of virtual mobility, which has every chance to become a decisive step in implementing digital development strategy of ukraine through the development of digital financial instruments, digitized financial development institutions, smart services and efficient defining a new quality of management of financial and tax systems. methodology. by relying on comparative-retrospective analysis, synthesis, and system method, the digitalization of innovative changes of financial and tax systems is investigated. it determines the new quality and format of work of financial development institutions in the times of deepening virtual mobility. comparative analysis was used to study the content of regulatory and supervisory financial technologies, namely: regtech, suptech; the functions of financial system that reveal its role are indicated. the result of the article. factors contributing to the development of financial system are presented; the authors give their vision of the content of non-financial companies that provide traditional financial services in virtual reality. the content of some innovative and digital changes in the ukrainian tax system has been identi-fied and disclosed. practical implications. it is argued that key innovative changes that need to be addressed in the context of reforming and digital transformation of financial system have been revealed. factors contributing to the development of financial system are presented. the peculiarities of digital initiatives that take place in the taxation system are indicated. value/originality. in order to timely inform taxpayers in the media and on the web portal of the tax service, it is proposed to systematically covers main issues regarding the procedure for filing tax returns, categories of taxpayers required to file reports, deadlines for such reporting, list of costs included as part of tax rebate. payer service center should implement this awareness. author’s vision of the content of practical work of non-financial companies providing traditional financial services in the conditions of virtual mobility is presented and thoroughly revealed. key words: innovative changes, digital financial technologies, financial system, digital transformation, digitalization of tax system. jel classification: e44, e62, o31, o38 1. introduction the main task of the financial system as a whole is to ensure the controlled implementation of economic processes important for the maintenance of life and development of society. this is due to the fact that all economic resources are limited, and therefore, the financial system should promote their rational use. institutions of the financial system, on the one hand, create a restrictive framework for the functioning of economic entities in terms of baltic journal of economic studies 95 vol. 8 no. 1, 2022 financial management and, on the other hand – participate in the allocation of resources, influencing their efficiency and intensity (pochenchuk, 2015a). current trends in financial development – financialization, dissemination of digital technologies, virtualization of financial resources, development of financial innovations – cause and necessitate institutional changes in financial system. the fourth industrial revolution has several major consequences for all areas, including financial: changing consumer expectations and behavior; product quality improves as data and asset productivity increases; new partnerships are formed as companies become aware of new forms of cooperation; operating models are transformed into digital models. institutional transformations of the financial system of ukraine concern changes at the level of formal and informal institutions at the micro and macro levels: improvement of regulatory and legal support for the functioning of financial system taking into account new development trends; re-forming the system of state regulation of financial system; formation of a new quality of the country’s tax system; development of a new infrastructure of the financial system, comprehensive implementation of innovative solutions (pochenchuk, 2016). in the conditions of innovation of the economy of ukraine, there is a significant but unequal tax burden on business entities, which leads to disproportion at the stage of formation of digital economy. that is whythe development of the tax system of ukraine in the conditions of formation of digital economy plays an important role in the formation and distribution of financial resources of the state. the digital taxation system has the most effective influence on the functioning and business activity of digital business structures. the development of financial technologies causes the emergence of new financial infrastructure; affects the competition of financial institutions; causes the blurring of the boundaries of spheres of economic activity, the emergence of new markets and new forms of their functioning; promotes the introduction of new business models (marketplaces, ecosystems), new forms in which financial products are offered and sold; allows you to create new channels of interaction with customers and new models of accelerated transformation of customer experience (digital customer experience); provides new regulatory tools and ways to comply with financial institutions and companies. thus, changes due to the introduction of innovations in the collaboration of technology-finance-institutions cover the entire reproduction process and create opportunities for all countries with timely and adequate response. 2. literature review modern understanding of the processes of formation and development of financial institutions was strongly influenced by the works of v. bilotserkivets, s. golubka, o. zavgorodnya, t. yefimenko. names of g. bortis, g. pochenchuk (pochenchuk, 2016), o. bilorus, v. geits, k. klaus, p. leonenko, d. north, b. paton, s. stepanenko, o. stryzhak, v. tarasevych, a. tkach and o. yaremenko, which study institutional aspects of the formation of financial institutions. the works of these scientists, based on the application of an interdisciplinary approach, deal with the scientific search for historical, financial and economic, moral and psychological, political and cultural factors of institutional transformations of ukraine’s economy. theoretical and practical studies of tax planning of business entities were covered in the contributions of domestic and foreign scientists: e. vylkov, a. yelisyeev, a. zagorodnyi, o. kirsh, a. podderogin, m. pidluzhnyi, v. chernenko, etc. issues of tax policy and tax burden were dealt with by z. varnaliy (varnaliy, 2017), l. dikan, a. kizyma, d. melnyk, y. prokopenko, etc. the consideration of general problems and ways to improve the system of direct taxation in ukraine and the conceptual foundations of tax planning of enterprises in the context of the fourth industrial revolution was conducted by v. isaacson (isaacson, 2017), a. ariyenchuk and m. sadovenko (sadovenko & ariyenchuk 2019), n. andrusiak (andrusiak & kraus, 2020), ya. glushchenko, t. moiseyenko, o. korogodova and n. chernenko (glushchenko & korogodova, 2021), yu. mosolova, n. loboda, o. chabanyuk (loboda & chabanyuk, 2021), k. kaverina (kaverina & sholom, 2021), o. kryvoruchko (kryvoruchko & kraus, 2018), n. kraus (kraus, 2018), k. kraus (kraus & kraus, 2019), m. odnorog, v. osetskyi, and others. however, a significant number of questions, such as: what innovative changes did the financial system undergo? what are the trends in the digitization of the tax system? in addition, there is a need to study new features of financial system and clarify the innovative tools of its development to have an idea of the peculiarities of working within the existing national financial and tax systems. the purpose of the publication is to present the features of innovative changes in financial and tax systems in the new virtual reality, which has every chance to be a decisive step in implementing digital development strategy of ukraine through the development of digital instruments, digitized financial development institutions, implementation of smart services and their effective work, which determines the new quality of financial system management. baltic journal of economic studies 96 vol. 8 no. 1, 2022 among the tasks set in the article are: reveal key innovative changes that need to be addressed in the context of reform and digital transformation of financial system; present the factors that contribute to the development of financial system; provide an author’s vision of the content of non-financial companies that provide traditional financial services in virtual reality; to reveal the content of regulatory and supervisory financial technologies, namely: regtech, suptech; indicate the functions of financial system that reveal its role; identify and disclose the content of some innovation and digital changes in ukrainian tax system; indicate the features of digital initiatives that take place in tax system. 3. conditions and factors of the development of financial and tax systems given the understanding of the financial system and development, financial development can be defined as a multidimensional process of qualitative and quantitative changes in the financial system characterized by increasing its complexity, dynamics of functions, status, structure, organizational forms and tools. key advantage of the digital economy over the traditional one is the implementation of the ability to automatically manage the entire tax system (or individual components), as well as its virtually unlimited scaling without loss of efficiency, which allows significantly increasing the efficiency of tax management of the economy (economic activity and resources of the country in various industries) at the micro and macro levels (markevych, 2021). we are convinced that the economic effect of the digitalization of industry can be multifaceted: digitalization of technological processes, ways of organizing production; digitization of means of labor (equipment, devices, machines) with the best quality characteristics. but it will be high quality and effective if there is a reasonable transformation of tax policy in digital age. taxation is the collection in favor of the state of a fixed part of the income of economic entities and is designed to perform two main functions – fiscal and incentive. in the latter case, the state by changing tax rates and providing (cancellation) of tax benefits creates favorable or unfavorable conditions for producers, stimulating or limiting their activities. the tax system performs an incentive function in the case when the total amount of all tax payments does not exceed the threshold value of profit incentives for enterprises and organizations, equal to 35%. the current system in ukraine is quite cumbersome. great importance is attached to the implementation of fiscal function, the essence of which is to form the revenue side of the state budget at all levels. the imperfection of the current tax system, which delays the formation of civilized industrial entrepreneurship and promotes the growth of shadow sector of the economy, should include the irrational ratio of direct and indirect taxes. the allocation of two subsystems in the tax system (direct and indirect taxes) helps to achieve a relative balance between two different functions of taxes: fiscal and regulatory. the development of the financial sector is important not only to stimulate economic growth but also to reduce its volatility. financial systems can ease liquidity constraints for firms and facilitate long-term investment, which ultimately reduces investment volatility and growth (aghion & george-marios, 2010). in addition, well-developed financial markets and institutions can help mitigate the negative impact of volatility on the exchange rate and thus investment potential (aghion & ranciere, 2009). it should be noted that the difference between financial and real shocks is important, as a result of which the latter can be strengthened by financial systems with significant financial depth. financial development also increases the effectiveness of monetary policy, expands the space of fiscal policy and provides a wider choice of exchange rate regimes (board paper, 2012). the rapid development of financial systems is due to several factors, which are presented in figure 1. 4. transformational changes in taxation in the context of digitalization transformational changes in tax policy in the conditions of virtual reality and digitization of economic relations are evidenced by the large-scale reform of the international tax system, which ended on august 10, 2021 oecp. it is expected that from 2023, multinational companies will be taxed at the minimum corporate tax rate, which is 15%. according to yevgen kurilov, chief state auditor-inspector at the controlled operations monitoring division of the transfer pricing department of tax audit department of state tax service of ukraine, "the agreement was concluded between 136 countries and jurisdictions multinationals to countries around the world, ensuring that these firms pay a fair share of taxes wherever they operate and make a profit. ukraine has also joined the statement on the establishment of a new basis for the implementation of inter-national tax reform on a two-component solution to tax problems arising in digitization of the economy " (kurilov, 2021). table 1 presents some innovative and digital changes that are already taking place in ukrainian tax system today. at present, national legislation does not clearly define e-commerce, internet commerce, and other relevant definitions, although the terms themselves are widely used in official documents, including baltic journal of economic studies 97 vol. 8 no. 1, 2022 transition to the post-industrial type of economic system development, which determines the development of services. a new type of management requires a transition to intangible production, which leads to the expansion of financial innovation. the disproportionate development of financial sector, which is manifested in the gap between the real and financial sectors, leads to the dominance of financial sector over the real, which causes a paradigm shift between causation in modern socio-economic systems. financial relations, which shape financial economy, are beginning to play a primary role, and financial innovations are becoming one of main factors in the dominance of financial sector over the real sector by creating new financial products and services. the globalization of world economic relations leads to the formation and active development of a system of world finance (geofinance), which is becoming global. the consequence of this is the spread of the latest financial and credit technologies as a result of the application of financial innovations. there is an active formation and spread of virtualization technologies that allow you to create financial products that contain a virtual component through the use of financial engineering. changing approaches to corporate governance, focusing on maximizing the value of assets rather than profits, resulting in a change in the structure of financing of firms and the convergence of different types of structures of financial systems. figure 1. factors determining the rapid development of the financial system in the context of digital transformation sources: author’s development table 1 innovative and digital changes in ukrainian taxation system digital initiatives in tax system characteristic features changes payer service center created at each state tax inspection on the ground. main task of the cpc is to organize the provision of administrative services and additional services during the performance of taxpayers’ obligations to the state. in their activities, cpcs use foreign experience of "service supermarkets" and "single offices", aimed at maximizing the use of modern information technology, including elec-tronic queue management system, the formation of unified databases, remote access to tax information. in order to timely inform taxpayers in the media and on the web portal of the tax service on the internet, main issues of the procedure for filing tax returns, categories of taxpayers required to file reports, deadlines for such reporting, the list of costs included in the composition are constantly covered. tax rebate. service "electronic office of the taxpayer of the state fiscal service" since 2015, electronic administration of value added tax has been introduced at all levels. citizens can submit a tax return on property and income to the sfs of ukraine in electronic form. submission of electronic reporting significantly simplifies the work and has many benefits for taxpayers, including savings in working time, financial costs, efficiency of processing and confidentiality of information, notification of existing budget and tax arrears. sources: summarized by the authors based on sources (state fiscal service of ukraine, 2022; bodrov, 2018) the concept. there is no classification of digital products in the legislation, i.e., it is not defined to refer them to goods or services. in order to regulate the taxation of digital goods, it is necessary to amend the relevant articles of tax code, which concern the objects of taxation in general and the objects of vat collection in particular. e-commerce is difficult to control – the identity and location of the buyer can now be established only by bank card, and if payment is made through an electronic payment system such as web-money, it is impossible. the problem of the inability of tax authorities to trace baltic journal of economic studies 98 vol. 8 no. 1, 2022 electronic transactions in this case remains unresolved for all states. lack of proper technology creates a situation where the possibilities for tax evasion seem endless. therefore, without the development of new technologies that would allow tax authorities to identify and track transactions in cyberspace, cannot do (bodrov, 2018). 5. problematic aspects of financial and tax policy in ukraine the tax system’s imperfection is complemented by shortcomings of the mechanism for implementing tax reforms, which is manifested in the imperfect system of control over taxpayers, reinforcing the repressive nature of tax legislation. therefore, we believe that the interaction between the payer and the tax authorities should be carried out according to the following rules: – firstly, all differences in the texts of tax laws are interpreted only in favor of the payer; – secondly, equal responsibility of the state and the payer in their financial and tax interactions. the role of the financial system is revealed in its functions: – consolidation of capital, transfer of financial resources from those who save, to those who need them, which allows to expand the economic opportunities of the real sector; – selection of effective projects in the economy; – corporate control; – risk management, pooling and diversification, which encourages investment in more profitable projects; – reduction of circulation costs (pochenchuk, 2015b). however, if institutions of the financial sector perform their functions poorly, they tend to hamper economic growth, reduce economic opportunities, and destabilize the economy. the financial system is a reflection of socio-economic processes in the state. it should ensure their positive dynamics and demonstrate the ability to reduce the impact of numerous challenges and risks that are exacerbated at the stage of transformational changes (varnalii, 2017). public confidence in financial institutions depends on the functioning (economic potential, stability, quality of corporate governance) and regulation (control of compliance, prevention of abuse, prudential supervision) of financial corporation’s sector. the level of savings is determined by general macroeconomic dynamics and propensity to save. thus, the development of financial system and the efficiency of its functioning should take into account both the characteristics of demand (the availability of effective demand for financial services) and the characteristics of supply. virtualization of value and change of essential characteristics of capital. in terms of financing there is a radical shift from real to virtual value. inertial finance and traditional financing based on own and borrowed sources with investments in classic assets mean in practice relatively slow growth. irrationality and subjectivity in the actions of economic agents underlie financial pyramids and financial bubbles, which show that value can be generated even at the stage of future ruin. financial pyramids and financial bubbles are the result of speculative logic, which is able to create virtual value in the short term (chernykova, 2009). also, the virtual value is formed on the stock market in the form of the exchange rate value of securities. this confirms the dependence of quotations on political statements, loud declarations, dubious rumors, economic disagreements, litigation and other noneconomic relations, which in the meantime often provoke not only adjustments in the share price of individual issuers but also the market as a whole. developing in non-financial areas, financial institutions not only invade other segments of the economy but also implement their "rules of the game". as a result, the real economy becomes a participant in stock speculation, transforming productive and trade capital into financial, and producers (sellers), who are not banking organizations, traditionally take over banking functions and lend to customers in b2c (consumer business) and b2b (business to business). in addition, due to the rapid development of technological and financial innovations, non-financial companies are emerging that provide traditional financial services – industry "fintech" (short for financial technology, i.e., "financial technology "). in a broad sense, this concept means the sphere of financial system of the economy, which unites companies that use the latest developments to provide better financial services (pochenchuk, 2018). in a narrower sense, fintech is the name of the companies that belong to this industry. 6. fintechdecisions in the financial sector the founder and permanent president of the world economic forum k. schwab, in his book "the fourth industrial revolution" notes: " we are at the very origins of the fourth industrial revolution, and the perception of its full significance requires the existence of fundamentally new economic and organizational structures… the rules of competition in the economy of the fourth industrial revolution are different from those of previous periods. to be competitive, companies and countries must innovate in all their forms, which means that strategies, mainly aimed at reducing costs, will be less effective than strategies based on more innovative ways of offering products and services" (shvab, 2017). baltic journal of economic studies 99 vol. 8 no. 1, 2022 in ukraine, fintech is developing electronic payments and payment systems, alternative financing – crowdfunding (sometimes translated into ukrainian as a common cost) and direct p2p lending. analysis of the current state and prospects of the fintech sector showed that in ukraine, as well as around the world, the evolution of fintech took place first in response to the banking crisis of 2008–2009, and then as a result of the crisis of 2013–2014. fintech is in its infancy: there are about 80 companies with varying degrees of maturity, most of which appeared in 2015–2017. the regulatory operation of many new financial services remains unregulated. in ukraine, there are virtually no neobanks (with the exception of monobank) within which fintech solutions could exist. all nonbanking institutions are forced to open accounts that does not give financial companies autonomy from banks. financial development through innovation necessitates changes in the regulatory infrastructure of financial markets and types of economic activity, due to the emergence of new activities, complicating economic relations, the emergence of financial instability and crises. an effective accelerator of institutional change is the collapse and recession in financial sphere, when the government must pursue policies aimed at easing economic cycles. financial innovations involve the creation and dissemination of new financial products, services, processes, methods and organizational forms. from the standpoint of institutional theory, financial innovation is a process of change, change in the type and variety of available financial products, changes in financial intermediaries (types, activities), as well as markets in general. that is, financial innovation is main force in the transformation of not only financial system but also the economic structure. as in many economic processes, the process of creating and implementing financial innovations is characterized by dualism: on the one hand, financial innovations are created to reduce uncertainty and reduce its negative effects, and on the other hand the functioning of financial innovation causes or deepens uncertainty (pochenchuk, 2013). the study of the fintech sector of ukraine conducted in the framework of the usaid financial sector transformation project provided an opportunity to notice the following trends: – 40% of fintech companies that participated in the study were founded by 2015, while 60% appeared in the last three years. about 84% of fintech companies have already started offering products and services; funding is a major issue. 45% of fintech companies use equity to finance operating activities (without attracting foreign investment); – 49% of companies have financing from outside investors or are looking for it; the investment needs of ukrainian fintech sector are estimated by market players at $ 40-75 million usa; – areas of specialization of ukrainian fintech companies are payments and remittances (31.6% of all companies), investment in technology and infrastructure (19.3%), lending (14%), marketing (7%), other (5.3%), digital banks (data.unit.city, 2018). the development of the fintech industry as a global trend in financial sector necessitates the cooperation of financial regulators with financial companies and traditional financial institutions. in ukraine, in 2017, with the support of national bank of ukraine, fintech master program was launched – an incubation program for technology startups to develop financial and socio-economic innovation services based on open data from financial institutions, including available nbu data and mastercard technology solutions. fintech startups around the world are creating a digital future. they offer different approaches to improve user choice and experience. working with these startups helps to combine new technology with reliable, secure financial networks and processes to create an even more productive and seamless shopping experience. financial innovations, on the one hand, improve the risk management of financial market participants, contribute to the redistribution of risks from issuers or investors to other parties who have the opportunity and 193 willingness to accept them; creation of new sources of financing, reduction of cost of financing; reduction of transaction costs; reducing the tax burden, on the other hand, contribute to the redistribution of business in favor of speculative financial transactions, the creation of "financial bubbles", little related to real production. the use of innovations by financial institutions for rapid growth of profits through speculative activities gives grounds to classify them as innovations in rent-seeking procedures. innovations destabilize the economic system, intensify competition, change the structure of financial flows and the economy. financial innovation can cause financial instability. 7. use of information technologies in the field of finance: regtech, suptech a separate area of use of financial technologies is the emergence of specialized regulatory and supervisory technologies – regtech, suptech. regtech technologies are information technologies in the field of finance, as they ensure compliance with regulatory requirements for financial market participants. such technologies help financial institutions meet the requirements of regulatory authorities by providing verification and protection baltic journal of economic studies 100 vol. 8 no. 1, 2022 of data, automation of reporting, risk management, customer identification. regtech companies help customers meet standards, ensure proper management of risk protocols and implement controls that actively mitigate risks. the emergence of regtech is due to: post-crisis changes in regulation that require mass disclosure; development of technological solutions in the field of informatics, which allow structuring unstructured data; economic incentives for participants to minimize rapidly growing compliance costs; the efforts of regulators to increase the effectiveness of supervisory instruments to increase competition and maintain financial stability (both macro and micro) and market integrity. regtech technology helps meet regulatory requirements by bringing together all fiscal, financial and trade regulations. in fact, these technologies are a mechanism for informing the formal institutions of financial system. advantages of using regtech technology: control of payments (financial institutions receive and process huge amounts of payments every day, control of these transactions will help to obtain information that will reduce costs, strengthen fight against money laundering and terrorist financing); systematization of risk data (financial institutions are constantly dealing with increasing requirements for reporting, capital, liquidity, including stress test scenarios, and regtech may offer solutions to integrate internal reporting systems, clean data collection from incompatible and/or outdated systems); identification and implementation of new requirements (regtech can offer tools to assess the consequences of changes in regulatory requirements, compare the applied control measures, analyze data requirements and identify areas of increased risk); modeling, forecasting and analysis of specific scenarios (the use of risk management methods requires modeling and detailed risk analysis – regtech offers a wider choice of tools for analyzing scenarios, risks and projected changes); kyc (know your client); cybersecurity (multi-factor customer identification, data transfer control, analysis of employee behavior, test-driven cyber-attacks). suptech supervisory technologies are technologies for financial regulators, they automate and optimize administrative and operational procedures, digitize data and working tools, improve data analytics, especially in real time, improve the reliability and quality of reporting information, and improve the system decision support. technological change is forcing regulators to reconsider their supervisory approach to avoid falling behind those they oversee and the approach to creating and implementing regulatory frameworks, as regulation must be flexible, innovative, and collaborative. further development of financial technologies can potentially affect insurance, payments, investment, capital raising, deposits and lending. already today, insurtech (insurance technology) has ceased to be just part of fintech and stood out in an independent direction. insurtech is a segment of fintech that provides tools and mechanisms to solve existing problems and implement new insurance opportunities. social and technological trends that shift customer needs and expectations are a source of opportunity for technology-savvy insurers. those market participants who make decisions and adapt their proposals to change customer requirements will be able to maintain their position in the market. insurtech has a key influence on responding to the challenges of matching new insurance companies' offerings to changing service needs and expectations. technological solutions in insurance provide an opportunity to identify new needs and expectations of consumers and develop appropriate product offerings, develop businesses with complex operational capabilities; provide new approaches to risk prevention and loss forecasting, increase interactions and build lifelong relationships; contribute through the introduction of new insurance practices to expand the insurance market and increase the number of insured. thus, the potential of insurtech can be realized in such forms as reviewing the categories and management of insurance products, rethinking and transforming a holistic model of insurance business. there are platforms aimed directly at the development of technology in insurance: startupbootcamp in london, global insurance accelerator in the usa and mundi lab in madrid. venture investment in insurtech has exceeded $2.5 billion in 2015, in 2014 – only $700 million. usa. thus, main areas of insurance optimization include: automation of administration, new channels and methods of sales, reducing the risk of underwriting through the use of big data and machine learning (finvizor.com, 2021). ukraine has a sectoral, three-tier model of financial sector regulation – three main institutions regulate: 1) national bank of ukraine – the functions of banking regulation and supervision; 2) national commission on securities and stock market – controls and regulates the activities of stock market participants; 3) national commission for regulation of financial services markets – regulation and supervision of non-bank financial institutions. 8. conclusions in conclusion, it is worth noting that financial development can increase the benefits and reduce the cost of ensuring the quality of property institutions and thus stimulate demand for these institutions: there are significant fixed costs in establishing property rights and institutions and developing mechanisms for their implementation. the level of baltic journal of economic studies 101 vol. 8 no. 1, 2022 financial development can provide a turning point in which the benefits only outweigh these fixed costs. in the context of the digital transformation of economic systems, relevant technological advances implemented by the rapid leaps in the financial sector, modifying the composition, structure and principles of financial institutions, and through changes in financial system affect structural components of the economic system as a whole. amidst global challenges, digitalization dictates new challeng-es and opportunities for fiscalization and, at the same time, aggressively generates risks and potential threats. summing up the research, we see that in the very the context of new opportunities for the development of the theory of optimal taxation and improvement of existing tax systems, the issue of digitization of fiscal policy and space arises. digitization facilitates the work of fiscal institutions in terms of systematization of available information in different parts of the tax system and hence better detection of tax evasion and avoidance. in this context, digitalization can be seen as an improvement in tax regulation and control technologies. the digitalization of tax system forms the technological basis, lays the groundwork for the legislative introduction of a new quality tax policy. in addition, we are convinced that the reform of the fiscal space in the framework of innovative tax planning will contribute to the stable filling of local and state budgets, increase the efficiency of funds in enterprises and focus on the priorities of financial stabilization and economic growth of ukraine. a stable financial system can limit and eliminate imbalances through self-adjustment mechanisms before they lead to a crisis. this is clearly due to supervision, as financial innovation is somewhat opportunistic. they are part of a more open financial system, which gives possibly greater instability and allows more 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(in ukrainian) baltic journal of economic studies 121 vol. 8 no. 2, 2022 1 state institution "south ukrainian national pedagogical university named after k.d. ushynsky ", ukraine (corresponding author) e-mail: svetlana.naumkina@gmail.com orcid: https://orcid.org/0000-0002-2268-5181 2 state institution "south ukrainian national pedagogical university named after k. d. ushynsky ", ukraine e-mail: alex-popova@ukr.net orcid: https://orcid.org/0000-0002-6244-5473 3 lviv polytechnic national university, ukraine e-mail: gorbachon@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-2-121-126 political absenteeism in "liberal democracies" as an academic and normative problem svitlana naumkina1, oleksandra popova2, oleksandr horbach3 abstract. the relevance of the study is determined by the significant and steady decline in the level of citizen participation in political and public life in recent decades in so-called liberal democracies, which cannot guarantee a fair value of political freedoms for all their members. in this light, the purpose of our study is to identify and reveal the problem areas of the study of "political absenteeism" in so-called liberal democracies. the study is based on a systemic and interdisciplinary approach, as well as on a critical approach, the use of which allowed to determine the relevance and originality of our research. special scientific methods were also used: content analysis and the method of reconstruction. they allowed us to critically rethink the existing approaches to the study of "political absenteeism" and "electoral absenteeism". it turns out that so-called liberal democracies do not currently guarantee a fair price for political freedoms for their poorest (and usually less enlightened and younger) members. "liberal democracies" may no longer be able (or, indeed, willing) to provide the necessary conditions for citizens to articulate their demands in a way that others can understand and accept and feel as citizens united in one coherent political team. there is not only a concentration of power and influence among the newest associations, but also a strengthening of the ruling "political" class, whose members tend to have a higher socioeconomic status, participate more actively in various formal and informal political activities, and have higher levels of political knowledge and influence, along with an "apolitical" class whose members have lower socio-economic status, participate less actively in politics and have lower levels of political knowledge and influence. key words: political absenteeism, electoral absenteeism, political participation, liberal democracy, electoral participation, national elections, political parties, trade unions, political institutions, social reforms, elite. jel classification: p20, p26 1. introduction currently, one of the most pressing theoretical and practical problems associated with the functioning of states (especially so-called liberal democracies) is the low and increasingly unequal participation of citizens in the political and social life of these states. the active participation of citizens in political and public life is believed to be at least a deterrent to the uncontrolled power of elites. among other things, it prevents the growth and consolidation of oligarchy and the takeover of democratic institutions by privileged groups, and ultimately ensures that non elites cannot be systematically excluded. it is not surprising, therefore, that the number of theoretical and empirical studies devoted to the problems of political absenteeism among citizens of various (but primarily "liberal-democratic") states has increased significantly in recent decades. in particular, these issues have been studied by these western scholars: l. bouza (bouza, 2014), s. björch, n. blomley, r . dalton, r . lawrence, ph. parvin (parvin, 2018), r . putnam (putnam, 2002), ch. patti (patti, et al., 2004), p. seyd, th. skocpol (skocpol, 2003), g. stoker, p. whiteley, k. scholzman, and l. jacobs. at the same time, in the post-soviet space, similar issues were investigated by k. arinina (arinina, 2014), o. baranchikov, m. buchin (buchin, 2011), d. havryliuk (havryliuk, 2011), о. galkin (galkin, 2004), o. gorodnina, o. grabar, a. gryazev, v. kryzhanivska, o. kuzin, o. kuleba (kuleba, 2011), t. pryadko, m. rosenko, l. russkikh, а. sumina, baltic journal of economic studies 122 vol. 8 no. 2, 2022 m. folomieiev, t. frantsuz-yakovets, o. tsarenko, i. shchebetun and others. however, the vast majority of the work presented is burdened by essentially normative attitudes that supposedly require no evidence and/or meaningful explanation. and while critical, less ideological studies on the subject have recently (especially in the west) begun to appear, they tend to be "captive" to some of the most entrenched normative ideas. 2. methodology therefore, the study aims to identify and uncover problem areas related to the study of "political absenteeism" in so-called liberal democracies. research methods are used in accordance with the specifics of the study, which is based on systemic and interdisciplinary approaches, as well as a critical approach, which largely determined the relevance and originality of our research. some general scientific methods of cognition were used, in particular, the methods of induction and deduction, analysis and synthesis, comparison and analogy, generalization and abstraction, as well as special scientific methods, such as content analysis and deconstruction method. this allowed us to critically rethink the existing approaches to studying "political absenteeism" and "electoral absenteeism". 3. results and discussion to better understand the phenomenon "political absenteeism", let us turn to dictionary sources first. the word "absenteeism" is associated with: – frequent or habitual absence from work, school, etc. (dictionarycom); – chronic absence (as from work or school) (merriam webster dictionary); – the fact or habit of frequently being away from work or school, usually without a good reason (collins dictionary). when it comes to political absenteeism, it refers to absence from political events, such as national elections, social and political conventions, without any adequate reason. it is worth noting that the so-called political absenteeism is considered by both western and post-soviet researchers to be an ambiguous political phenomenon that has not yet been fully elucidated and requires further scientific research. such western scholars as g. almond, s. verba (almond & verba, 1965), r . wolfinger, s. rosenstone (wolfinger & rosenstone, 1980), j. campbell (campbell, 1993), a. downs (downs, 1957), a. cohen (cohen, 2009), p. lazarsfeld (lazarsfeld, et al. 1967), s. lipset (lipset, 1959), r . merton (merton, 1938), d. riesman (riesman, 2010), w. mishler, r . rose (mishler & rose, 2001), t. parsons (parsons, 1957), m. fiorina, et al. identify various motives and factors underlying political (primarily electoral and conventional) absenteeism. on this basis, there are different approaches to the study of political absenteeism and different groups of factors that significantly affect the level of political absenteeism in the state. at the same time, post-soviet researchers, including o. galkin (galkin, 2004) and m. rosenko (rosenko, 2011) distinguish between fundamentally different groups of absentees: those who have a negative attitude to the existing order in society and/ or do not believe in the possibility (personally) to change something for the better, and those who do not have serious claims to the current situation in society and/or do not seek any radical (political) changes in it. it is considered quite appropriate that postsoviet authors emphasize various motives for political absenteeism, but they (the scholars) usually do not substantiate these motives, but "season" them with an obvious oriental flavor (which does not even provide a (sufficient) evidentiary basis). for example, k. arinina (arinina, 2014) and d. havryliuk (havryliuk, 2011) associate political absenteeism in the post-soviet space mainly with people’s despair in the political system as a whole, and political absenteeism in the so-called western liberal democracies – with people’s satisfaction with the current state of affairs in society (which is not true). numerous empirical studies show that the level of political (including electoral) participation in the so-called western liberal democracies is currently low and continues to decline on many important indicators and indices. in the european union (european economic community), there has been a steady decline in popular participation in national elections since the mid-1980s (with the exception of national elections in belgium, cyprus, luxembourg and greece – those countries where voting is compulsory). in principle, the situation in local and european elections is not the best (if not the worst). accordingly, membership in political parties and trade unions is also becoming less attractive to european citizens. this concerns, above all, young people and the most vulnerable segments of the population, those who show an even greater level of distrust of traditional political parties and institutions (both national and european) than the citizens of the respective states as a whole (arinina, 2014, p. 6–11). similar trends have generally been observed in other member countries of the organization for economic cooperation and development (oecd), particularly in the united states and the united kingdom of great britain and northern ireland. despite some short-term setbacks and exceptions, in these countries the turnout in national and local elections, baltic journal of economic studies 123 vol. 8 no. 2, 2022 as well as membership in political parties and trade unions decreases quantitatively (and qualitatively) (parvin, 2018, p. 34). as in the countries of the european union, this is related to the youngest age group (up to 24 years of age) and social groups representing lower levels of wealth and income possession (arinina, 2014, p. 5, 9; parvin, 2018, p. 34). finally, the ukrainian researchers o. kuleba and m. buchyn divide all the factors that significantly affect the level of political absenteeism in the country into these categories: 1) subjective, which are direct characteristics of the voters themselves. subjective factors include demographic (age, gender, place of residence, income level and social status, and in heterogeneous societies also religious, ethnic, linguistic factors, etc.) and mental-psychological (education and level of political culture) factors; 2) objective (social, economic and political), characterizing the situation in the country as a whole and the peculiarities of the political and electoral process in particular; 3) market-related that have arisen as a result of a particular set of circumstances (e.g., weather conditions, seasonal work, certain personal or family matters, etc.); 4) initiative, which is understood as the purposeful influence on the electors of other subjects of political and electoral process. such factors include various appeals to boycott elections, pressure, intimidation, direct appeals or actions to strengthen the mobilization of "their" or demobilization of "foreign" electorate, etc. (buchyn, 2011, p. 178; kuleba, 2011, p. 99–101). according to the analysis of the european parliament elections, all major socio-demographic factors, such as age, gender, place of residence, income and social status, as well as mental and psychological factors, especially educational and professional, directly or indirectly affect the likelihood of citizens voting. in this case, the main subjective factors influencing the level of political absenteeism are as follows: 1. age: young people between the ages of 15 and 34 are significantly more likely than the national average not to vote in elections, and the under-25 age group is significantly more likely to vote than the 25-34 age group. 2. gender: young women abstain from voting more often than young men. this inequality is more acutely felt in the younger subgroup than in the older subgroup, where the rates of absenteeism among men and women are generally similar. 3. place of residence: absenteeism among young voters is higher in medium-sized cities and lower in small towns, rural areas, and large cities. 4. income level and social class: absenteeism is more common among young people who identify themselves as belonging to lower social classes. absenteeism is higher among students, the unemployed, and those employed in physical labor than among young professionals. thus, the sociological profile of a typical absentee is a woman under 25, who classifies herself as belonging to the lower social strata, has only a secondary education, has a low salary or is unemployed and lives in a medium-sized city (bouza, 2014, p. 9–10). however, numerous empirical studies suggest that subjective and objective factors are closely intertwined and have a decisive influence on the level of political and civic participation in so-called liberal democracies. as ph. parvin rightly points out, the scientific literature already has a well-established correlation between socioeconomic status and political (especially electoral) participation in the so-called liberal democracies, as well as the correlation between their existing socioeconomic inequality and the general level of political (primarily electoral) participation. in general, the more socially and economically unequal a society is, the less its civic community is involved in politics; and the lower the socioeconomic status of a citizen compared to other members of society, the less he/she will participate in politics compared to others. thus, "social democracies" with relatively low levels of social and economic inequality, such as norway, sweden and denmark, have one of the highest and most stable levels of political and civic participation among all oecd member countries. conversely, market-oriented and unequal countries, such as the united states, the united kingdom of great britain and northern ireland, canada, and new zealand, show significant inequalities in political and civic participation, as well as an overall decline in political and civic participation in society as a whole. the corresponding configurations and trends can be traced not only in electoral participation, but also, for example, in the involvement of citizens of the aforementioned states in traditional membership associations, among which the most influential are political parties and trade unions (parvin, 2018, p. 34). on the other hand, one must take into account the covid-19 pandemic, which has affected all civil, economic and political spheres throughout the world. the ukrainian scholars m. spivak, m. pluhatyr, l. kochubei, a. nekriach, s. matchuk note rightly that even if people make up their minds to take part in presidential, parliamentary or local elections or referenda, their dates are postponed or, in some countries which keep to severe restrictive measures, there is hardly ever any opportunity to hold relevant elections and referendums (spivak, pluhatyr, et al., 2021). consequently, it is possible to broaden the spectrum of causes of political absenteeism in "liberal democracies" by adding a pandemic component. baltic journal of economic studies 124 vol. 8 no. 2, 2022 it may be noted that the nature of political participation in liberal democracies has changed in recent decades (from formal and traditional to informal and non-traditional). in particular, citizens of liberal democracies are more active in signing petitions, demonstrations, and boycotts of goods or companies, as well as various npos (non-profit organizations) and interest groups, in contrast to the decrease in traditional membership associations, such as political parties and trade unions. but despite current trends, the level of citizen participation in informal forms of political participation is still quite low, and the nature of this participation is essentially elitist. numerous empirical studies show that citizen involvement in informal political participation corresponds to broader patterns of inequality among citizens, since not only is the proportion of citizens involved very low, but socially and economically advantaged members dominate. in britain, for example, informal political participation prevails, especially among middle-aged people, professionals and managers, the rich and highly educated, residents of london and the (rich) southern counties. they are less common among the elderly, employed in the field of manual labour, the poor and the low-skilled, the (peripheral) scottish and welsh (pattie, seyd, & whiteley, 2004, p. 85–89). at the same time, existing inequalities not only persist but are intensifying, despite initiatives ostensibly involving greater use of electronic petitions and various targeted campaigns ostensibly aimed at "getting the vote" of youth and other disadvantaged groups. in fact, these actions only marginally increased middle-class participation, with little or no socioeconomic "outsiders. ultimately, this further deepened the inequality of political and civic participation, and thus the unequal distribution of power and influence, instead of their expected equalization among citizens. after all, the problem is much deeper than just a lack of time and/or opportunity, and has to do with broader trajectories of change in the structure of liberal democracy and civil society (parvin, 2018, p. 37–38). the continuing decline of civil society and traditional membership associations has contributed to the emergence and consolidation of various interest groups and lobbying organizations that have little or no direct contact with people at the grassroots level. as a result, "mass" civic associations have shrunk in number, size, and influence, and have been supplanted by new, more hierarchical organizations that operate at a distance from civil society and its members. as a result, traditional membership associations have been forced to choose between becoming "cartels", professionally managed lobbying organizations capable of interacting with other such organizations at the elite level, or losing their influence in the democratic debate (katz, & mair, 2018, p. 124–150). according to t. skocpol’s research, professionally managed, centralised elite organizations, which eventually "pushed traditional mass membership associations to the side-lines", are much less suitable for mobilising activists from less prosperous, less literate environment, and, no less, for protecting their interests in political debates. thus, the decline of traditional membership associations has a disproportionate impact on poorer citizens and further entrenches their displacement from (mainstream) politics (parvin, 2018, p. 203–221). moreover, as r . katz and p. mair note, "the governance of the leading parties [in liberal democracies] becomes so similar to each other (in terms of structural characteristics, political proposals, type of staff and self-interest) that it becomes appropriate to consider them as a single group, not as separate groups that should be considered independently " (katz, & mair, 2018, p. 127). this process represents a shift from a model of democracy in which elected representatives make their decisions in consultation with citizens to a model in which they are made by elected representatives in consultation with insider organizations. governance is becoming increasingly centralized in elite institutions and conducted in language and according to rules that "ordinary " citizens, for the most part, do not understand. as a result, decision-making becomes disconnected from civil society as a whole and disproportionately disconnected from the poorer sectors of the population, whose representatives do not use even the minimal opportunities formally provided to them by the political system (katz, & mair, 2018, p. 124–150). thus, as ph. parvin rightly points out, the problem facing modern liberal democracies is not only that poorer people do not want to be involved in politics. the fact is that modern liberal democracies have reconfigured themselves to devalue the participation of their poorer members. in liberal democracies, lowincome citizens are no longer given the opportunity to develop their democratic potential and political knowledge through participation in "democratic politics". as a result, poorer citizens lose both their desire to participate in politics and their ability to participate effectively and consciously. the problem is, above all, that many people of low socio-economic status do not feel like citizens (in anything other than a purely legal sense) and do not participate in "democratic politics." and what they do participate in is, for the most part, uncoordinated and ineffective. these people are not interested in and do not participate in "democratic politics" because, by their baltic journal of economic studies 125 vol. 8 no. 2, 2022 own explanation, these politics are too disconnected from life. they feel that mainstream politicians do not listen to them because the debates taking place in political institutions hardly touch the fundamental interests of the people. after all, they do not trust either traditional politicians or the political system. mostly they talk about feeling isolated from the political process and being insulted by it. therefore, it is not surprising that many of these people are aware of the need for a radical change in the status quo, either in the form of brexit or the presidency of donald trump (parvin, 2018, pp. 36–38). one way or another, these people support anti-systemic political slogans, parties, and politicians, especially those deemed "populist". according to cas mudde, they are based on the belief that "corrupt elites have seized the political system and silenced the voice of the people by concluding backstage agreements and conspiring to silence" (mudde, 2012, p. 7). thus, the process understood as the degradation of liberal democracy, and the associated rise of right-wing and left-wing populism, is seen by most researchers as a threat that must be eliminated. but both those who see the need for new mass "progressive" parties and blocs and those who propose to go beyond electoralism and make greater use of the possibilities of "direct democracy " are, according to the authors, in a "logical trap" (for example (a collective of anarchist geographers, 2017; putnam, 2002)). they acknowledge the decline of civil society in liberal democracies, but make recommendations for "rebuilding" liberal democracies as if "civil society " in them were still strong and productive. at the same time, those who believe that the process of "healing" liberal democracies must begin "from above" rather than "from below," according to the authors, are in a "logical trap" (for example (katz, & mair, 2018; parvin, 2018)). they recognize that the metamorphosis (which liberal democracies have undergone in recent decades) was planned and occurred in the interests of the ruling socio-economic (and ultimately political) class. it is believed that this policy was in the fundamental interests of the elites, so it is unclear why the socio-economic (and with it the political) elites would begin to pursue a fundamentally different policy. thus, in the view of the authors, current trends are likely to continue, regardless of to whom and how "social reformers" might address their programs aimed at "restoring" liberal democracies (no matter how much they criticize the "critical approach"). 4. conclusions so-called liberal democracies do not currently guarantee a fair value for the political freedoms of their poorest (and usually less educated and younger) members. "liberal democracies" can no longer (and in fact do not want to) provide the necessary conditions for citizens to formulate their requests in a way that others can understand and accept, and, last but not least, to feel like citizens united as a whole political team. the reconfiguration of civil society and its associations has closed the main avenues for poorer citizens to obtain political representation and social capital. and as traditional associations with mass membership are displaced by newer associations that mobilize citizens of predominantly higher socioeconomic status, social capital continues to be concentrated among wealthier people. as a result, there is not only a concentration of power and influence among the newest associations, but also a strengthening of the ruling "political" class, whose members tend to have a higher socio-economic status, who participate more actively in various formal and informal political activities and have a higher level of political knowledge and influence, and the "apolitical" class, whose members tend to have a lower socioeconomic status, are less actively involved in politics, and have a lower level of political knowledge and influence. nevertheless, the authors firmly believe that current trends will continue regardless of to whom and how "social reformers" may address their programs aimed at "restoring" liberal democracies. the authors hope that none of the pandemics associated with covid-19 will ever affect the political activism of citizens in both liberal and illiberal countries. references: almond, g., & verba, s. (1965). the civic culture: political attitudes and democracy in five nations. arinina, k. i. (2014). political absenteeism: causes and consequences. proceedings of kazan university. humanities series, 156(1), 214–220. (in russian) buchyn, m. a. (2011). absenteeism as a type of electoral behavior. political science studies, 2, 174–182. (in ukrainian) cohen, e. (2009). semi-citizenship in democratic politics. cambridge university press. campbell, j. e. (1993). the presidential pulse of congressional elections. lexington: university of kentucky press. collins dictionary (n. d.). absenteeism. available at: https://www.collinsdictionary.com/dictionary/english/ absenteeism dictionarycom. (n. d.). absenteeism. available at: https://www.dictionary.com/browse/absenteeism downs, a. (1957). an economic theory of political action in a democracy. journal of political economy, 65(2), 135–150. baltic journal of economic studies 126 vol. 8 no. 2, 2022 fiorina, m. p. (1992). divided government. new york: macmillan. galkin, a. a. (2004). about the sensation that didn’t happen. polis, 1, 6–9. (in russian) havryliuk, d. yu. (2011). political research on the causes of the phenomenon of absenteeism in political practice. scientific journal of national pedagogical dragomanov university [series 22], political sciences and teaching methodology of socio-political disciplines, 6, 106–112. (in ukrainian) kuleba, o., & buchyn, m. (2011). absenteeism as the form of low political activity. ukrainian national idea: realities and prospects of development, 23, 98–102. (in ukrainian) rosenko, m. (2011). absenteeism and its influence on the formation of parliamentarism. public administration: theory and practice, 3, 99–105. (in ukrainian) a collective of anarchist geographers (2017). beyond electoralism: reflections on anarchy, populism, and the crisis of electoral politics. acme: an international journal for critical geographies, 16(4), 607–642. bouza, l. (2014). addressing youth absenteeism in the european elections. european youth forum. brussels, 48 p. katz, r . s., & mair, p. (2018). democracy and the cartelization of political parties. oxford university press, xiv+219 p. lazarsfeld, p. f., berelson, b., & gaudet, h. (1967). the people’s choice. 3a ed. nova york: columbia university press. lipset, s. (1959). some social requisites of democracy: economic development and political legitimacy. the american political science review, 53(1), 69−105. merriam webster dictionary (since 1828). absenteeism. available at: https://www.merriam-webster.com/ dictionary/absenteeism merton, r . k. (1938). social structure and anomie. american sociological review, 3(5), 672–682. mishler, w., & rose, r . (2001). political support for incomplete democracies: realist vs. idealist theories and measures. international political science review / revue internationale de science politique, 22(4), 303–320. mudde, c. (2012). three decades of populist radical right parties in western europe: so what? european journal of political research, 52, 1–19. parsons, t. (1957). the distribution of power in american society. world politics, 10, 123−143. parvin, ph. (2018). democracy without participation: a new politics for a disengaged era. res publica, 24, 31–52. pattie, ch., seyd, p., & whiteley, p. (2004). citizenship in britain: values, participation and democracy. cambridge: cambridge university press, xvii+364 p. putnam, r . a. (ed.) (2002). democracies in flux: the evolution of social capital in contemporary societies. new york: oxford university press, vi+516 p. riesman, d. (2010). from law to social criticism. 58 buff. l. rev. 1005. skocpol, th. (2003). diminished democracy: from membership to management in american civic life. norman, oklahoma: university of oklahoma press, xviii+366 p. spivak, m., pluhatyr, m., kochubei, l., nekriach, a., & matchuk, s. (2021). features of public electoral administration in situation of pandemic. amazonia investiga, 10(47), 54–61. doi: https://doi.org/10.34069/ ai/2021.47.11.6 wolfinger, r . e., & rosenstone, s. j. (1980). who votes? new haven, yale university press. baltic journal of economic studies 101 vol. 3, no. 2, 2017 corresponding author: 1 department of personnel management and administration, national university «lviv polytechnic». e-mail: yarpanas@gmail.com 2 sector of spatial development, si «institute of regional research named after m.i. dolishniy of the national academy of sciences of ukraine». e-mail: t.solomija@gmail.com the features of innovation management at ukrainian and european enterprises yaroslav panas1 national university «lviv polytechnic», ukraine solomiia tkach2 si «institute of regional research named after m.i. dolishniy of the national academy of sciences of ukraine», ukraine abstract. the purpose of the paper is to define peculiarities of innovation management at enterprises in ukraine and eu countries. methodology. based on european innovation scoreboard data a comparative assessment of innovation management have done through three aspects: 1) resource capacity, 2) prospects of business entities innovation activity; 3) innovation activity effectiveness. analyse for ukraine has done in comparison with average eu data and also with poland and germany. results. in the article, the place of ukraine in europe by innovation development has identified. retrospective changes of innovation development in ukraine, poland, germany and eu during 2008-2015 have analysed. despite a big gap between ukraine and eu in terms of resource capacities and innovation activity prospects of business entities, the level of ukrainian economy effectiveness sin innovation sector stays stable. the authors have defined substantial differences between systems of innovation management at ukrainian and european enterprises. taking into consideration strategic priorities of growth areas of ukraine and also its integration in eu economy, and based on a comparison of data presented in the european innovation scoreboard it was possible to single out a range of discrepancies characteristic of innovation activity management system of ukrainian and european business entities: managers at ukrainian enterprises prefer to spend on innovations that are not connected with researches and elaborations; in ukrainian management system there is almost no experience of cooperation with foreign partners within innovation activity sector; in european countries there are more enterprises which introduce innovation but do not develop them themselves; ukrainian enterprises’ managers lack experience in patenting according to the international patent cooperation treaty and in registering trademarks, projects and designs according to the requirements of european union intellectual property office. practical implications. the case study results make possible to innovation activity enterprises of ukraine and european investor, which work in ukraine, to develop more successful innovative development strategies of enterprises. value/originality. the study has identified the necessary improvement direction of innovation management system of ukrainian enterprises in the context of the specific features of innovation sector of the eu economy functioning. key words: innovation, management, innovation activity effectiveness, resource capacity. jel classification: m10, o30 1. introduction the question of scientific support of transformation of management system for business innovation activity in post-informational society is strategically significant in the context of knowledge economy development and preparation to applying in business practices artificial intelligence as an element of cognitive technologies, which will underlie the seventh technological paradigm. under these conditions, there are such urgent issues as carrying out fundamental transformation, diversification and innovation orientation of ukrainian economy. this aim cannot be reached without quality changes of innovation activity management at industrial enterprises, which constitute a key link in the chain of creating added value. the efficient management system cannot be created without qualitative assessment of stage and prospects of innovation activity development. in the majority of scientific researches, this issues is considered from the point of view of retrospective approach. however, experience shows that this approach has a range of major drawbacks under the conditions of rapid change of technological paradigms. a considerable amount of gathered and processed retrospective data becomes irrelevant due to the rapid transformation of key factors baltic journal of economic studies 102 vol. 3, no. 2, 2017 and their influence on results of business activity of an industrial enterprise and its potential competitiveness. taking into consideration the aforementioned, research of innovation activity management at enterprises in ukraine should be done based not only on ukrainian businesses but also with regard to relevant foreign experience and the world’s innovation development tendencies in general. the aim of the article is to define peculiarities of innovation activity management at enterprises in ukraine and eu countries. 2. the place of ukraine in europe by innovation development ukrainian realia of the couple recent years clearly indicate the obvious choice of european course of development. the free-trade zone agreement with eu has come into effect. in 2016 the share of export of goods from ukraine to eu countries was 37.1% (by 2.8% more compared to 2015). the share of export of goods from ukraine to cis countries is 16.6% including 9.9% to the russian federation (state statistics service of ukraine, 2017). in comparison with 2013, the share of export of goods to eu countries increased by 10.6% and to cis countries decreased by 18.2% (ministry of economic development and trade of ukraine, 2017). a drastic change of ukrainian vector of economic cooperation as well as of innovation activity is obvious. taking this into account, let us analyse the peculiarities of ukrainian innovation activity condition, effectiveness, and management in contrast to the performance indicators in eu and neighbouring countries on the basis of data from the european innovation scoreboard (eis) (picture 1). eis provide a comparative assessment of research and innovation activity in the states and also defines relative strengths and weaknesses of their research and innovation systems according to indicator sets: 1) resource capacity, 2) prospects of business entities innovation activity and 3) innovation activity effectiveness. the eis index helps the states to assess the areas where they have to channel their efforts in order to increase innovation activity effectiveness (european innovation scoreboard 2016). eis divides the country into four groups: 1) innovation leaders (according to the list 2015 this country from switzerland to the netherlands); 2) strong innovators (ireland slovenia); 3) moderate innovators (norway turkey); 4) modest innovators (bulgaria ukraine). with the normalized index 0.178 as of 2015 ukraine takes the last position and obviously belongs to the group of countries with modest innovation capabilities. in comparison with the countries which are innovation leaders, ukrainian performance indicator is 4.43.6 times lower, with strong innovators – 3.4-2.7 times lower and, accordingly, with moderate innovators – 2.51.5 times lower. innovation leaders in this list are mostly the countries from northern and central europe. the majority of the countries from eastern europe, which until recently were characterized by a close to ukrainian structure of the economy, belong to moderate innovators. the pic. 1. the summary innovation index by european innovation scoreboard in 2015 baltic journal of economic studies 103 vol. 3, no. 2, 2017 only economy of slovenia is characterized by strong innovation capabilities, which are very close to the average index of eu countries in general. many countries of southern europe such as italy, spain, portugal and other also have weak innovation capabilities. 3. retrospective changes of innovation development in ukraine, poland, germany and eu let us analyse in more detail retrospective changes of the given index for ukraine in comparison with average eu data and also with poland and germany. comparison with the polish data will allow analysing condition and effectiveness of conducting innovation activity in ukraine against the neighbouring country similar in terms of territory and population. moreover, as far as 20 years ago the practice of conducting business in these two countries was little different. it is also important for the research to assess capabilities of the ukrainian innovation potential in comparison to the characteristics of the german economy. it is one of the most technologically developed economies in the world. in addition, germany is a leader in terms of using controlling as a management tool in economic practices of industrial enterprises. the data in the picture 2 shows that a consolidated index for ukraine has been quite stable for the last eight years. however, it reached its minimum in 2015. according to the eis data, innovation development in ukraine reached its maximum in 2008, 2010 and 2013. maximum amplitude during the studied period was 0.011. the level of innovation index in ukraine is approximately 1.5 time (or is 60-66% of ) smaller than polish one. during 2008-2015 ranking of both countries did not show any significant changes. instead, the innovation index of germany has been steadily going up till 2012 (0.043). in its turn, it decreased by 0.035  during the last three years. with this figure innovation of german economy in 2015 is 3.5 times higher than an analogical ukrainian one. in contrast to ukraine, poland and germany where innovation index was stable or slightly decreased, the average eu index displays steady increase during 2008-2015 by 0.026. such tendency was first and foremost reinforced by resource capacity, prospect innovation potential and results of innovation activity of malta (+0.112 point), the netherlands (+0.082 point), the great britain (+0.077 point) and other eu countries. rather fast pace of increase is shown by serbia (+0.099  point) and turkey (+0.079 point). the most negative tendency in the change of eis index amplitude belongs to romania. its index went down from 2010 to 2015 by 0.084 point. also more negative than in ukraine decreasing amplitude of innovation index belongs to spain (-0.02 point), croatia (-0.019 point) and some other smaller eu countries. 4. resource capacities and innovation activity effectiveness in ukraine and european countries let us analyse more deeply some particular subindexes for ukraine, poland, germany and eu based on eis data from 2012-2015, which are displayed in picture 3. the data presented indicates that resource capacities of germany do not differ at all from average data from all the eu countries. however, management approaches they apply provide much better prospects of innovation activity for german business entities and allow achieving a better result from innovation activity of their companies. the respective data from ukraine and poland indicates them being considerably behind almost in all group parameters of innovation activity monitoring during the last four years. only two subindexes of ukraine and the neighbouring country with respect to human resources and companies’ investments can be comparable with eu characteristics during 20122014. in 2015 the sub-index “companies’ investments” considerably decreased for ukraine owing to an almost double drop of innovation expenses share (which are not connected with researches and elaborations) in the total amount of the companies turnover from 0.9% to 0.5%. the sub-index of intellectual activity for ukraine did not undergo major changes during 2012-2015. its value is measured based on a number of registered patents, trademarks, and design according to the requirements 0,189 0,186 0,189 0,186 0,179 0,189 0,182 0,178 0,624 0,636 0,654 0,655 0,667 0,661 0,655 0,632 0,290 0,298 0,299 0,291 0,296 0,286 0,291 0,292 0,495 0,502 0,511 0,514 0,519 0,521 0,523 0,521 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 ukraine germany poland eu pic. 2. the summary innovation index for ukraine, german, eu by european innovation scoreboard in 2008-2015 baltic journal of economic studies 104 vol. 3, no. 2, 2017 of the world intellectual property organization (wipo) and european union intellectual property office (euipo). in 2012-2014 its value was equal to 0.161. in 2015 due to triple increase (from 0.03 to 0.10) of a number of projects and designs registered in accordance with eu requirements it was possible to increase the sub-index “intellectual activity” by 0.002. disregarding a slight decrease of the respective indicator in eu ukraine managed to reduce lagging behind germany by the number of registered projects and designs from 345 times in 2012 to 64 times in 2015. it also worth paying attention to the fact that in 2015 in terms of a number of registered patents according to the international patent cooperation treaty (pct) ukraine lags 3.68 times behind germany only and 2.07 times behind eu. despite a big gap between ukraine and eu in terms of resource capacities and innovation activity prospects of business entities, the level of ukrainian economy effectiveness sin innovation sector stays stable. in 2015 in terms of “economic effect” sub-index ukraine lagged behind poland only by 0.05, however from the eu countries – by 0.332 and, consequently, from germany – by 0.379. moreover, the share of employed staff in a scientific sector (production and services) in the total employment in the economy is not different in all the studied countries. however, the efficiency of their work is different. the share of knowledge-intensive services export in the total volume of export services in ukraine has increased by 14% during the last four years, besides the share of foreign-source license and patent profit in gdp of ukraine increased by 0.02%. overall in eu countries the share of knowledge-intensive services export in the total volume of export almost has not changed, and in germany, it decreased by almost 3%. opposite tendencies can be observed between ukraine and eu in terms of the share of mediumand high-tech products in the total volume of products export and in terms of the share of innovation products in business entities turnover. in 2012 the share of mediumand high-tech products in the total volume of products export in ukraine was 1.4 time smaller than in eu countries, and in 2015 – 1.8 time smaller. the gap between ukraine and germany is even bigger – 1.8 time in 2012 and 2.1 times in 2015. in 2015 the share of innovation products in business entities turnover in ukraine is almost 4 times smaller than the average one in all eu countries including germany. pic. 3. sub-indexes for ukraine, poland, germany and eu based on european innovation scoreboard data baltic journal of economic studies 105 vol. 3, no. 2, 2017 5. substantial differences between systems of innovation management at ukrainian and foreign enterprises comparison of particular eis indicators which define innovation activity prospects of business entities and effectiveness of their innovation activity gave the opportunity to single out a range of substantial differences between systems of innovation management at ukrainian and foreign business entities. thus, in germany and overall in eu countries the share of small and medium enterprises which introduce innovation products and processes (42.44% in 2015), marketing and organization innovations (46.23%) is bigger than the share of respective business entities which develop them (38.6). in its turn, the share of small and medium enterprises in ukraine, which develop themselves and introduce innovations is approximately during the researched period. however, only 7.4% of the respective business entities managed to really introduce innovation products and/or processes, and 10.5% – marketing of organization innovations. another problem of small and medium ukrainian enterprises is not being able to establish cooperation in innovation sector with other business entities. in 2012-2015 their share was between 1.5-1.7%, what is by 7-8 times less than in eu countries. major differences can be also observed in the management of financial flows for innovation activities at national and european enterprises. according to data indicating technical knowledge creation at enterprises (expenses on researches and developments in the business sector in % from gdp), ukraine falls more than 4.5 times behind germany, and 3 times behind eu. in its turn, the level of investments in equipment and machinery against the background of small and medium ukrainian enterprises’ turnover was almost the same as in germany and 1.5 time higher than in eu countries. in 2015 ukraine has started to fall 2.7 times behind germany in terms of this indicator as a result of double expenses drop and considerable increase of these expenses in the country, which is one of the european and the world’s innovation activity leaders. 6. conclusion the majority of sub-indexes of germany and eu countries overall, which are displayed in eis, can serve for ukraine and poland only as exemplary strategically characteristics and not as the comparison basis for formulating shortor even medium-term plans of innovation development. it is possible to drastically change resource capacities for innovation activity of ukrainian business entities by means of state managerial levers. first of all, mechanism of financing innovation activity has to undergo urgent changes. if the share of state investments in innovation sector in relation to gdp is 2-3 time less in ukraine than in eu, then the share of venture capital in gdp is 0.002%. according to the data from 2015, it is 24 times less than in germany and 31 times less than in eu countries in general. these measures do not require considerable financial investments from the state, but they only require research, adaptation, and application of european managerial experience in ukrainian business practice. their implementation only needs the change of regulatory framework and methods of regulatory influence. thus, taking into consideration strategic priorities of growth areas of ukraine and also its integration in eu economy, and based on comparison of data presented in the european innovation scoreboard it was possible to single out a range of discrepancies characteristic of innovation activity management system of ukrainian and european business entities: managers at ukrainian enterprises prefer to spend on innovations that are not connected with researches and elaborations; in ukrainian management system there is almost no experience of cooperation with foreign partners within innovation activity sector; in european countries there are more enterprises which introduce innovation but do not develop them themselves; ukrainian enterprises’ managers lack experience in patenting according to the international patent cooperation treaty and in registering trademarks, projects and designs according to the requirements of european union intellectual property office. further studies will be used to study ukrainian practice of controlling of innovation activities implementation at the industry enterprises. references: european innovation scoreboard 2016 (2017). the european commission. retvitered from: http://www.know ledgetransferireland.com/about_kti/repor ts-publications/european-innovationscoreboard-2016.pdf ministry of economic development and trade of ukraine (2017). ministry of economic development announced the results of export in 2016. retrieved march 23, 2017, from http://www.me.gov.ua/news/detail?lang=ukua&id=2d7f80e7-7185-4b08-8e87-2e21bb922b9a&title=minekonomrozv itkupidbilopidsumkieksport uza2016-rik state statistics service of ukraine (2017). ukraine's foreign trade of services with countries of the world. retrieved may 24, 2017, from http://www.ukrstat.gov.ua/ baltic journal of economic studies 106 vol. 3, no. 2, 2017 ярослав панас, соломия ткач особенности управления инновационной деятельностью отечественных и европейских субъектов хозяйствования аннотация. целью работы является определение особенностей управления инновационной деятельностью субъектов хозяйствования украины и стран ес. методика. основываясь на данных европейского инновационного табло проведена сравнительная оценка управления инновациями по трем аспектам: 1) ресурсный потенциал, 2) перспективы инновационной деятельности субъектов хозяйствования; 3) эффективность инновационной деятельности. анализ для украины сделал по сравнению со средними данными ес, а также с польшей и германией. результаты. в статье показано место украины в европе по инновационному развитию. проанализированы ретроспективные изменения инновационного развития в украине, польше, германии и ес в 2008-2015 годах. несмотря на значительное отставание украины от стран ес в ресурсных возможностях и перспективах инновационной активности субъектов хозяйствования уровень экономической эффективности отечественной экономики в инновационной сфере остается стабильным. авторы определили существенные различия между системами управления инновационной деятельностью на украинских и европейских предприятиях. принимая во внимание стратегические приоритеты развития украины, а также ее интеграцию в экономику ес, и на основе сопоставления данных, представленных в европейском инновационном табло, удалось выделить ряд расхождений, характерных для системы управления инновационной деятельностью украинских и европейских субъектов хозяйствования: руководители украинских предприятий предпочитают проводить инновации, не связанные с исследованиями и разработками; в украинской системе управления практически нет опыта сотрудничества с зарубежными партнерами в сфере инновационной деятельности; в европейских странах существует больше предприятий, которые внедряют инновации, но сами не развивают их; руководители украинских предприятий не имеют опыта патентования в соответствии с международным договором о патентной кооперации и регистрации товарных знаков, проектов и проектов в соответствии с требованиями ведомства интеллектуальной собственности европейского союза. практическое значение. результаты исследований позволяют инновационно активным предприятиям украины и европейским инвесторам, которые работают в украине, разрабатывать более успешные стратегии инновационного развития предприятий. значение/ оригинальность. результаты исследования определили необходимые направления совершенствования системы управления инновационной деятельностью предприятий украины с учетом особенностей функционирования инновационной сферы экономики ес. baltic journal of economic studies 45 vol. 3, no. 1, 2017 corresponding author: 1 department of international economic analysis and finance, ivan franko national university of lviv. e-mail: roksolana.zapotichna@gmail.com banking on multinationals: the determinants of cross-border credits to central and eastern europe, 1990-2015 roksolana zapotichna1 ivan franko national university of lviv, ukraine abstract. taking into account the rising dependence of central and eastern europe on multinational banks’ credits, the main purpose of the article is to identify and examine the determinants of cross-border credits through a methodology based on “push” and “pull” factors. the author presents the results of a regression analysis on the determinants of cross-border credits provided by multinational banks from eu-15 to central and eastern europe over the period of 1990-2015 by using the statistical data compiled and published by the bank for international settlements. the obtained results suggest that global as well as home and host country level determinants influence cross-border credits but to a different extent. according to our results, higher stability and predictability of global economic environment contribute to higher cross-border credit growth. the results of the host country determinants analysis indicate that more effective and profitable economies receive more credits from multinational banks. we also find that multinational banks provide more credits to countries with small markets, low inflation rate, high external debt burden, high capital account deficit, fixed exchange rate regime, and developed institutional environment. regarding home level determinants, we find the existence of a negative correlation between home country economic cycle and the amount of cross-border credits received by the host country, which can be explained by low economic growth in continental europe over the period under consideration that stimulated european banks to expand lending on foreign markets with higher profit opportunities. thus, cross-border credits appear to have been countercyclical to growth in home countries and procyclical to growth in host countries. finally, it is found that host country level determinants play the most important role in explaining changes in cross-border credits on host countries in central and eastern europe during 1990-2015 period, which means that host countries have a control over their own destinies and the amount of received credits depends on their economic and political performance. value/originality. the results of the research make it possible to provide a better understanding of the determinants of cross-border credits and practical importance of multinational banks’ lending as an important source of external finance for the catching-up process and a major component in the ongoing process of financial deepening in central and eastern europe, and clarify whether these determinants differ in periods of financial stability and crisis. key words: multinational banks, cross-border credits, central and eastern europe, push factors, pull factors, regression analysis. jel classification: f23, f37, g21, n24 1. introduction one of the key peculiarities of global financial market activity over the 1990s was the dramatic growth in multinational banks’ credits to emerging markets, including the countries of central and eastern europe. essentially, multinational banks provide credits to host countries via two different ways: directly, from their parent banks abroad (so-called cross-border credits) or indirectly, through local subsidiaries or branches in host countries (kamil & rai, 2010). given that most of the 1990s increase in multinational banks’ credits to central and eastern europe was related to the establishment of branches and subsidiaries, most existing studies were focused on the indirect credits: their determinants and impact on the host countries. the literature on direct cross-border credits has received comparatively less attention so far, mainly because of data limitations. although cross-border credit is an important source of external finance for the catching-up process and a major component in the ongoing process of financial deepening, understanding the driving forces of these credits in central and eastern europe is of particular importance. the determinants of cross-border credits should be accurately considered when examining the transmission mechanism of financial distress from baltic journal of economic studies 46 vol. 3, no. 1, 2017 advanced to emerging markets, their consequences for the financial stability of the host countries. cross-border credits can be characterized by periods of rapid growth followed by a sharp decline. this so-called “boom and bust cycle” may have devastating consequences for countries highly dependent on cross-border credits. this is especially the case for the countries of central and eastern europe, which are significantly exposed to the banks from eu-15. researches ( jeanneau & micu, 2002, khattak, 2011) classify the determinants of cross-border credits by employing traditional “push vs pull” framework. the changes in the amount of credit provided by multinational banks in response to changes in economic conditions in home country and global environment are termed as “push factors” (in other words, external factors outside the control of a specific borrowing country), and the variation in the amount of credit in response to host country conditions of economic and non-economic nature referred to as “pull factors”. depending on the study, push and pull factors are sometimes branded as “supply-side” and “demand-side” (amiti, mcguire & weinstein, 2016). the objective of the article is to identify the main determinants of cross-border credits in central and eastern europe relying on the regression analysis. the implemented regression model is based on the existing researches on multinational banking and on the extensive literature on capital flows, which is too numerous to review here. central and eastern europe have been chosen for the objective of our analysis for at least three reasons. first, the choice was made based on the existence and availability of comparative data base. second, this group of countries was deliberately chosen because of its heterogeneity. the region of central and eastern europe includes countries with fixed and floating exchange rate regimes, with various levels of financial liberalization and economic development, which differ from each other in the amount and importance of crossborder credits. our choice of home countries was driven by their relative importance as lenders to central and eastern europe. we consider separate credits from multinational banks based in eu-15, which account for nearly 77% of all credits provided by bis-reported banks to the region, and when taken together are the most important lenders to central and eastern europe. the period of 1990-2015 was chosen because during this time frame foreign financing rose sharply in the region. moreover, during this time countries of central and eastern europe have liberalized their financial systems, which led to the reorientation of multinational banks from almost purely cross-border lending to a mix that also included indirect lending. our contribution to the existing literature on crossborder credits is as follows: we examine the determinants of cross-border credits on longer time period than in some of the previous studies; we investigate whether the explanatory power of different groups of determinants has changed over the time period under consideration by splitting it into two subperiods. this, in turn, will help to clarify whether these determinants differ in periods of financial stability and crisis. 2. data and methodology our data on cross-border credits come from consolidated banking statistics compiled and published by the bank for international settlements. to the best of our knowledge, data published by the bank for international settlements is the most comprehensive data available that is well suited to an analysis of the determinants of cross-border lending since it provides information about the nationality and location of the lending banks and borrowers. consolidated banking statistics include cross-border credits, local credits of the foreign affiliates in foreign currencies, and local credits of these affiliates in the local currency. cross-border credits and local credits in foreign currencies are reported by the bank for international settlements as a single inseparable series only. local credits in local currency are reported as a separate series. given that consolidated banking statistics is biannual until 2000 and quarterly thereafter, data availability makes us focus on annual, end-of-year statistics. the data for explanatory variables come from different sources: international financial statistics (imf), political risk index data (prs group), world development indicators (world bank), the joint bisimf-oecd-world bank statistics on external debt. panel data techniques were used instead of separate time series and cross-border sections in order to collect more information and to overcome potential estimation biases resulting from possible correlations between regressors and residuals. following the approach used by weller (2001), we chose the ratio of cross-border credits to gdp as the dependent variable. while using the “push vs pull” framework, we divided the independent variables into three groups: global level, home country level, host country level. the host country level determinants were further divided into determinants of economic and non-economic nature. the expected sign of the coefficients of variables, their indicators and abbreviation are presented in table 1. hence, the basic regression equation has the following specification: mnbloansit gdpit = α + �β1 hostit + �β2 homejt + �β3 globalt + εjit , (1) where mnbloansit/gdpit – is the ratio of cross-border credits to gdp; hostit – is a matrix of host country macroeconomic and non-economic variables; baltic journal of economic studies 47 vol. 3, no. 1, 2017 homejt – is a matrix of home country macroeconomic variables; globalt – is a matrix of the global level variables; j – identifies home countries; i – indicates each individual central and eastern european host country; t – refers to the time period considered; εijt – are stochastic disturbances. all variables are expressed in percentage points, except s&p500 index and population, which are expressed in logarithms. reinhart–rogoff index ranges from 1 to 3: higher, more flexible exchange rate regime (reinhart & rogoff, 2004). chinn-ito index takes on higher values the more open the country is to cross-border capital transactions (chinn & ito, 2007). political stability indicators range from 0 to 1, where a higher value indicates more stable political environment. it is also essential to examine if there is evidence that the determinants of cross-border credits have changed over the period under consideration. to this purpose, we estimated our basic equation over two subperiods: 1990-2002, when a number of cross-border credits were in general low and the credit activity of foreign banks was in some cases forbidden; and 2003-2015, when central and eastern european economies experienced credit boom. specifically, we explore whether credits’ sensitivity to global, host and home conditions has changed over time. as mentioned by aysun and hepp (2016), if host country factors are more important, this could suggest that a host country with high and sustainable growth would receive more credits from multinational banks and that these credits would decrease in an economy, which is performing poorly. as a consequence, countries would be in charge of their own destinies. and vice versa, if global and home country factors are more important, the state of an economy may be less related to the credits it receives and economies may be more responsive to external developments in order to carry out this study, the research questions were broken down into several empirically testable hypotheses. taking into account the theoretical background the following hypotheses were formulated: 1. cross-border credits provided to a specific host country are expected to have a negative correlation with home country economic performance. 2. cross-border credits are expected to have a positive relation to global developments as well as economic and non-economic conditions in a host country. 3. cross-border credits’ sensitivity to different groups of determinants has changed over time. 3. empirical results the results of our baseline regression equation are presented in table 2. we estimated the impact of three groups of explanatory variables on cross-border credits both jointly and separately, because estimated determinants may not be completely independent of each other. after that, we compared these models in terms of their significance by looking at the coefficients of determination r2 and the f-statistics. the estimated variables are robust with respect to different model specifications, so we presented the results of one large model in order to avoid double notation. altogether, most estimated variables have the expected signs and are statistically significant. the regression analysis shows that global as well as home and host country level determinants are significant driving forces of cross-border credits. our estimations are in line with the results obtained in previous studies. for example, table 1 description of the explanatory variables variable indicator and abbreviation expected sign global level uncertainty in global financial markets s&p500 index (s&p500) + home country level economic growth gdp growth level (gdp home) +/real interest rate (interest home) host country level non-economic nature political stability voice and accountability (va); political stability and absence of violence (pv); government effectiveness (ge); regulatory quality (rq); rule of law (rl); control of corruption (cc). + economic nature economic growth/demand for mnbs’ credits gdp growth (gdp) + economic efficiency gdp per capita growth (gdppercap) + future economic growth foreign direct investment to gdp ratio (fdi) +/market size population (population) + interest rate (interest) + inflation (inflation) exchange rate (er) exchange rate regime reinhart–rogoff index (exregime) external debt external debt to gdp ratio (debt) +/financial openness of the banking sector chinn-ito index (open) + current account balance current account to gdp ratio (cab) +/source: created by author baltic journal of economic studies 48 vol. 3, no. 1, 2017 table 2 the results of the regression analysis on the determinants of cross-border lending indicators time period 1990-2015 1990-2002 2003-2015 log(s&p500) 18,816(9,876)*** 18,861 (6,700)*** 17,856 (5,956)*** gdp home -3,387(-3,473)*** -2,468 (-2,813)** -1,998 (-2,351)** interest home -6,654(-8,298)*** -5,296 (-4,657)*** -4,961 (-4,184)*** va 94,208(2,678)** 36,469 (0,575) 21,145 (0,286) pv -38,511(-2,145)* -38,002 (-1,082) -24,721 (-0,525) ge 57,386(3,597)*** 34,218 (1,004) 28,501 (0,708) rq 20,253(1,717) 17,305 (1,321) 14,091 (0,823) rl 55,085(3,358)*** 94,701 (4,257)*** 93,314 (3,691)*** cc 2,263(1,316) -35,556 (-1,386) -41,378 (-1,486) gdp 0,155(2,711)** 1,866 (2,592)* 1,798 (2,531)* gdppercap -1,316(-3,308)** -2,091 (-0,655) -1,952 (-0,566) fdi 0,417(4,407)*** 0,582 (3,969)*** 0,642 (3,412)*** log(population) -15,599(-6,636)*** -15,666 (-3,491)*** -16,962 (-2,943)** interest 0,224(1,521) 0,325 (1,559) 0,321 (1,389) inflation -0,445(-3,081)** -0,757 (-3,098)** -0,6886 (-2,301)* er 0,063(1,999)* 0,025 (0,595) 0,039 (0,784) exregime -11,375(-4,689)*** -18,486 (-4,283)*** -15,574 (-2,654)** debt 0,232(3,976)*** 0,346 (5,029)*** 0,359 (2,732)** open 2,488(1,787) 2,648 (1,134) 2,138 (0,781) cab -1,103(-3,634)*** -0,914 (-2,643)** -0,814 (-2,013)* number of observations 250 130 120 r2 0,86 0,951 0,952 adjusted r2 0,83 0,923 0,917 f-statistics 28,18 33,97 27,85 source: the authors’ calculations notes: standard errors are robust. t-statistics appear in parentheses and ***, **, * correspond to the 1%, 5%, and 10% level of significance, respectively baltic journal of economic studies 49 vol. 3, no. 1, 2017 like takáts (2010) and ghosh (2011), we find that higher stability and predictability of global economic environment, measured by s&p 500 index, promotes cross-border credit growth. we also experimented with alternative global level indicators, such as world real gdp, real us interest rates, and trade volumes growth, but the results to a great extent remained unchanged. regarding home level determinants, our estimations confirm the results of the researches by molyneux and seth (1998), haas and lelyveld (2008) who find the existence of a negative correlation between home country economic cycle and a number of cross-border credits received by the host country. the countercyclical behaviour of cross-border credits provided by the banks from eu-15 could largely be explained by the fact that economic growth in continental europe was generally low over the period under consideration, lending opportunities and returns in domestic markets were probably limited, driving european banks to expand lending on foreign markets with higher profit opportunities. indeed, banks based in eu-15 were the most active lenders to central and eastern europe in the 1990s. all in all, the findings from splitting the sample into the periods of preand post2002 suggest that in recent years the behaviour of banks from eu-15 tends to be less countercyclical to home country economic growth. the results of host country determinants analysis are in line with the studies, which find out that more effective and profitable economies with higher growth perspective receive more credits (focarelli and pozzolo, 2004, for instance). among the subset of host country determinants, we find that the coefficient on host country gdp growth is positive and significant, showing that multinational banks respond to host country growth, increasing and decreasing credits over the cycle. multinational banks also direct their credits to countries with optimistic growth perspective, which is measured by foreign direct investment to gdp ratio. besides, the positive sign of the coefficient indicates that cross-border credits and foreign direct investments are rather complementary than substitutable sources of external financing. the results of the regression analysis indicate that multinational banks provide more crossborder credits to countries with small markets, low inflation rate (which is consistent with the findings obtained by focarelli and pozzolo, 2004, derviz and podpiera, 2007), fixed exchange rate regime (which is in line with results obtained by jeanneau and micu, 2002). additionally, countries with capital account deficit receive more cross-border credits. thus, higher current account balance in the past means that less borrowing is required to finance the current account. we also find that multinational banks provide more credits to countries with higher external debt to gdp ratio: the higher the debt of a country relative to the size of the economy, the greater the need to borrow from abroad. with regard to determinants of non-economic nature, the only significant variable for all periods under consideration is regulatory quality. the positive coefficient on this determinant indicates that countries with better regulatory quality receive more credits from multinational banks. using the methodology developed be goldberg and saundres (1981), we also experimented with the combinations of host and home level variables, as crossborder credits may not so much respond to home or host country conditions, but rather to the difference between them. accordingly, we included two indicators: host minus home country gdp and host minus home country interest rate. however, the coefficients on those determinants appeared to be insignificant, and as the result were not included in the final regression equation. as a next step, we analysed the explanatory power of three groups of explanatory variables. this analysis goes beyond the identification of statistically significant determinants of cross-border bank credits and provides additional information on the economic significance of estimated parameters. the contribution of each variable is calculated by using the methodology applied by martinez peria, powell, and vladkova-hollar (2005), zhu, and decady (2007) who calculate the percent variance explained as (r2 _full–r2 _constrained)/r2 _full *100. in other words, for each group of variables, they compute the increase in the r2, as a proportion of the total variance of the percentage change in credits explained by all variables. the results of our calculations are presented in table 3. table 3 explanatory power of global, home and host country level determinants of cross-border credits group of determinants time period 1990-2002 2003-2015 global level 18,49% 17.29% home country level 14,07% 14,28% host country level 67,44% 68,43% source: authors’ calculations the figures in table 3 show that host country level determinants explain almost twice as much change in cross-border credits as global level and home country level taken together. additionally, the explanatory power of all three groups of determinants has remained largely unchanged in both periods under consideration. these findings confirm that host countries are responsible for the amount of credit they may receive from multinational banks. 4. conclusions given that tendency toward multinational banks’ credit expansion in emerging markets is likely to continue, it is important to study the determinants and baltic journal of economic studies 50 vol. 3, no. 1, 2017 the consequences of this expansion for the host countries. in this article, we considered the bank for international settlements statistics and regression analysis techniques to investigate the aforementioned issues on the example of central and eastern europe, a region that witnessed a substantive increase in multinational banks financing during the transition period of the 1990s. our results confirm two out of three hypotheses, which have been formulated in the previous section of the article: cross-border credits appear to be countercyclical to growth in eu-15, which have been chosen as home countries for the objectives of our research, and procyclical to growth in central and eastern europe, which have been chosen as host countries. additionally, the obtained results suggest that all three groups of determinants influence cross-border credits but to different extent. it is found that host country level determinants play the most important role in explaining changes in cross-border credits on host countries in central and eastern europe during 1990-2015 period, which means that host countries have a control over their own destinies and a number of received credits depends on their economic and political performance. this conclusion has important policy implications which may be the subject for further researches. it is also important to mention that treating multinational banks as a homogenous group might be misleading; therefore, multinational banks’ heterogeneity should be taken into account while examining their cross-border lending in future studies. moreover, the data used in this article have some restriction. for example, the bank for international settlements statistics does not provide separate data on “pure” cross-border credits and local credits in foreign currency, which may bias the results of our research. although, the analysed time period is longer than in some of the 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(2004). the modern history of exchange rate arrangements: a reinterpretation, the quarterly journal of economics, vol. cxix, issue 1, 48 p. takats, e. (2010) was it credit supply? cross-border bank lending to emerging market economies during the financial crisis, bis quarterly review, pp. 49-56. baltic journal of economic studies 51 vol. 3, no. 1, 2017 thomas, d. r ., zhu, p., decady y. (2007). point estimates and confidence intervals for variable importance in multiple linear regression, journal of educational and behavioral statistics, 32, pp. 61-91. weller, c. (2001). the supply of credit by multinational banks in developing and transition economies: determinants and effects, desa discussion paper, no. 16, 30 p. world data bank, world development indicators. electronic resource. retrieved from: http://databank.worldbank.org/data роксолана запотична деятельность транснациональных банков: детерминанты трансграничного кредитования стран центрально-восточной европы аннотация. принимая во внимание растущую зависимость стран центральной и восточной европы от кредитов транснациональных банков, основная цель статьи – выявить и изучить детерминанты трансграничных кредитов с помощью методологии, основанной на “пуш” и “пулл” факторах. приведены результаты регрессионного анализа детерминантов трансграничных кредитов, предоставленных транснациональными банками из 15 стран ес странам центральной и восточной европы за период 19902015 гг., с использованием статистических данных, собранных и опубликованных банком международных расчетов. полученные результаты позволяют предположить, что глобальные детерминанты, детерминанты на уровне страны происхождения, так и на уровне принимающей страны влияют на международные кредиты, но в разной степени. согласно нашим результатам, более высокая стабильность и предсказуемость глобальной экономической среды способствуют более высокому росту трансграничного кредитования. результаты анализа детерминантов на уровне принимающей страны свидетельствуют о том, что более эффективные и прибыльные экономики получают больше кредитов от транснациональных банков. мы также сделали вывод о том, что транснациональные банки предоставляют больше кредитов странам с небольшими рынками, низкой инфляцией, высоким бременем внешней задолженности, высоким дефицитом счета операций с капиталом, режимом фиксированного обменного курса и развитой институциональной средой. что касается детерминантов на уровне страны происхождения, мы обнаруживаем наличие отрицательной корреляции между экономическим циклом страны происхождения и количеством трансграничных кредитов, полученных принимающей страной, что можно объяснить низким уровнем экономического роста в континентальной европе за рассматриваемый период, что стимулировало европейские банки расширяют кредитование на внешних рынках с более высокими возможностями получения прибыли. таким образом, трансграничные кредиты, как представляется, являются антициклическими к росту в странах происхождения и проциклическими к росту в принимающих странах. наконец, было установлено, что детерминанты на уровне принимающей страны играют самую важную роль в объяснении изменений в трансграничных кредитах в странах центральной и восточной европы в период 1990-2015 годов, а это означает, что страны пребывания контролируют свои судьбы, и сумма полученных кредитов зависит от их экономических и политических показателей. значение/оригинальность. результаты исследования позволяют лучше понять детерминанты трансграничных кредитов и практическую важность кредитования транснациональных банков в качестве важного источника внешнего финансирования и основного компонента текущего процесса финансового углубления в центральной и восточной европе и уточнить, отличаются ли эти детерминанты в периоды финансовой стабильности и кризиса. baltic journal of economic studies 75 vol. 1, 2015 strategic partnership of ukraine: declarations and realities nataliya demchenko1, olena kozyryeva2, national university of pharmacy, ukraine abstract. the strategic partnership of cooperation is a higher step than conventional relationships. conditioned by specific interests of the parties, such cooperation is possible between those partners who have mutual territorial claims and have mutual commitment to the territorial integrity. at the same time with many partners (it’s quantity is about 20), ukraine has no simple partnership and cooperation, a lot of them reseived the status of "strategic partners, but often they are not the states, whose national interests in strategic areas correspondes to the current interests of ukraine. it should be noted that today among the countries that have been declared as the strategic partners of ukraine, not all of them support national interests in the present. ukraine, appeared as an independent state, began use new methods of international cooperation, without adequately developed strategy for their use. some problems facing the country, can be solved, other must be taken into account in determining its development strategy. therefore, the subject of the research is global and specific problems that consider issues of economic security and partnership in ukraine in modern conditions. the objective of the paper is to study options for a strategic partnership in ukraine by improving the institutional mechanism to coordinate the integration processes. the article is based on studies of foreign and domestic scientists. practical implications. formation of effective international cooperation of ukraine in the context of globalization, the choice of strategic partners on the basis of mutually beneficial cooperation. results. the analysis of ukraine’s cooperation with russia; the features of the largest modern regional associations; reasonably objective need for ukraine’s integration into the regional associations; recommendations on the necessary measures to accelerate the process of deepening ukraine’s integration with the eu. key words: globalization, strategic partners, global market, economic, political and military spheres, cooperation, integration, competitiveness. jel classification: f02, f63, f69 1. introduction globalization as one of the most significant processes in modern world economy is manifested not only in the expansion of the scope and substantive forms of international cooperation, involved into global system of countries, but also increased their interdependence. the result of the deepening internationalization process are interdependence and interaction between national economies. it can be perceived and interpreted, as the country’s integration into the structure, which becomes close to the single international economic system. although great part of the global product is consumed in the producing countries, national development increasingly linked to global structures and become more versatile and diverse than it was in the past. the process of globalization runs in a highly polarized world system in terms of economic power and opportunities. this situation is a potential source of risks, problems and conflicts. in these circumstances, countries are looking for some new forms of business cooperation, one of the form of which  – is long term strategic partnership relations (kizim, m.o., dodger p.v., omarov s. a ., 2010, p. 75; geets, v.m., 2006, p. 43; pivovarov, a ., 2008). the relevance of this work lies in the fact that the strategic partnership today has an important role in the formation of ukrainian foreign policy. ukraine, like other countries in the world, chooses its strategic partners, and its selection is based on the strategic vision of its own way of development, clear recognition of national interests and ways to implement them. that relationship with key strategic partners identified as the priority directions of ukraine’s foreign policy strategy, they determine stable positions on the international political scene, and, accordingly, internal political and economic development as well. corresponding author 1 department of management and economics enterprise, national university of pharmacy. e-mail: demchenata@ukr.net 2 department of management and economics enterprise, national university of pharmacy. e-mail: kos_74@bk.ru baltic journal of economic studies 76 vol. 1, 2015 2. general principles of strategic partnership strategic partnerships, as a rule, is based on the following principles: common interests of partners in fruitful cooperation, mutual recognition of strategic relationships; willingness to consider the interests of other parties to achieve strategic objectives, even when such action is ambiguous in terms of appropriate personal gain; mutual renunciation of discriminatory actions against one another; long-term nature of the partnership, as it is set for a long time; availability of effective mechanisms to implement this relationship format; consolidation of the legal content and mechanisms in bilateral strategic partnership documents cooperation as strategic objectives should not change depending on the change in leadership in both countries; discipline, consistency and predictability, implementation partners of their obligations; high efficiency strategic partnership; impact of such cooperation should feel both sides, not only public and political elite, but also economic actors, ordinary citizens of both countries. it should be noted that the analysis related to comparing ukraine to other countries in the world rankings, allowed to define such global problems what affect it and that should be consider when drawing up the strategic development objectives of the country: а. the social sphere: а.1. the demographic component: depopulation and population aging by reducing life expectancy. а.2. income component: income polarization within the country; the backlog of ukraine from the world’s leading countries in terms of incomes of the population; lack of self-supply of the population for certain types of food. b. the economic sphere: b.1. natural-resource component: the exhaustion of domestic fuel and energy resources; dependence of the economy on the rise in price of fuel and energy resources. b.2. scientific and technological component: the gap from the world’s leading countries in moving to a new technological structure; slowing down scientific and technical progress. c. environmental sphere: climate change and global warming; waste and recycling; atmospheric pollution; depletion of freshwater resources. d. political sphere: c.1. the possibility of partners significantly promote the interests of ukraine in the international arena; c.2. their attitude towards ukraine as a strategic partner; c.3. the active development of relations with ukraine in the context of regional integration. in addition, ukraine’s economy inherent following specific national issues: the economic sphere: low competitiveness of the economy; low levels of economic freedom; low levels of free enterprise; high tax burden, lack of reforms and the complexity of the tax; low level of attractiveness for foreign direct investment; low level of creditability and high probability of default. the environmental sphere: low level of renewable energy; lack of purposeful policy in the field of ecology. the sphere of government: political instability; low quality and efficiency of public administration; high levels of corruption. 3. actual issues of the stategy partnership in ukraine sustainable development in every country depends on ensuring its economic security. the main problems of economic security in ukraine in the order of priority of their decision are the following (artemov, i.v., 2008, p. 24): demographic security: a negative balance of natural population growth; high infant mortality; depopulation; low birth rate of the population; high demographic burden on the working-age disabled population; scientific and technological security: a low proportion of the state budget expenditures on science; low share of enterprises introducing innovations; a small number of specialists who perform scientific and technical work; poor value for the share of basic research, applied research, scientific and technical development, scientific and technical services performed on its own; a small amount of industrial property embedded objects; macroeconomic safety: a significant negative balance of the current account balance; low level of relations gdp per head to the average value in the eu; a small proportion of disposable income of non-financial corporations in the gross disposable income; low level of relations gdp per head in the world average; food security: a population of under-consumption of vegetables, fruits, berries, nuts and grapes, milk and dairy products, meat and meat products; financial security: low share of long-term insurance; a large amount of cash; small volume of premiums; large amounts of trade balance deficit; energy security high energy intensity of gdp; small volumes of oil transit; insufficient investment in the fuel and energy complex; small volumes of coal mining; industrial safety: small volumes of liquidation of industrial assets; high degree of depreciation industry; low share of machine building in industrial production. so, ukraine, like any other country in the world has internal problems that are global, but specific to each state. therefore, foreign policy should contribute the solving of pressing domestic problems and achieve the strategic goals of the country. one of the effective tools for implementing foreign policy is to establish strategic partnerships with partners that allow to combine efforts to achieve the vital internal and external strategic objectives. the relations of strategic partnership involving their special status, that is a higher interstate relations in several baltic journal of economic studies 77 vol. 1, 2015 important areas. strategic partnership is the geopolitical interdependence, sometimes  – geographical, cultural and historical closeness of the two states. in some cases, the search for strategic partners, driven by the desire of the state, become a regional or world leader. strategic partnerships can be built only after the formulation of their own strategic goals without it the country cannot define its strategic partners over the past six years, the strategic partners of ukraine announced at least 20 countries in europe, asia, north and south america. among them  – azerbaijan, belarus, bulgaria, georgia, israel, canada, china, moldova, germany, poland, russia, romania, slovakia, usa, turkey, hungary, uzbekistan, finland (ministry of foreign affairs of ukraine, 2012). unbalanced declaration of strategic partnership relations transforms this form of effective instrument of foreign policy of ukraine for abstract political rhetoric, questioned the consistency of its foreign policy. strategic goals of cooperation within the strategic partnership should not change depending on the change in leadership in both countries. the strategic partnership is based on the following principles (shamraeva, v.m., 2012; izha m., kaduk n., ovchar a., 2013): 1. mutual partners interest in effective cooperation, strategic nature definition of the partnership. 2. the willingness of the partners to consider the national interests of each other, creation of compromises to achieve common strategic goals. 3. it is desirable that strategic partnerships were equal. 4. the long-term nature of the partnership. 5. the presence of mechanisms for implementing the strategic partnership. 6. legal consolidation of the content and strategic partnership mechanisms in mutual documents. 7. consistency and predictability of partnership, strict implementation of obligations. 8. high efficiency of strategic partnership. the current practice of the declaration of strategic partnership relations causes the mostly skeptical attitude of parliamentarians and experts in ukraine. near two thousands respondents were interviewed in all regions of ukraine. the theoretical sample error – 2.3% (m. pashkov, v. chaliy, 2000). the consensus in opinion of citizens, experts and leaders of deputy groups consisting of around four strategic partners of ukraine – russia, usa, germany and poland – before the military conflict in the south-west of ukraine (table. 1). key areas of strategic partnership, and in the opinion of the public and professionals, and leaders of parliamentary factions and groups, are: trade and economic, political and security spheres (table. 2). the key areas of strategic partnership of ukraine: economic, political and state spheres security. the signs of the vital importance of partnership in the economic sphere are: a significant proportion of partner countries in the export / import of goods and services, significant amounts of foreign investment, the presence of large joint projects in priority branches in ukraine. from the combination referred to indicators to strategic partners of ukraine in trade can be attributed russia and europe (fig. 1, 2). table 2 the most important spheres of ukraine’s cooperation with strategic partners according to surveys the scope of cooperation citizens, % of respondents experts % of polled trade and economic 65,0 74,0 security (military and law enforcement) 36,0 41,0 political 22,0 54,0 financial 16,0 4,0 scientific and technical 14,0 14,0 environmental 8,0 4,0 humanitarian 3,0 4,0 table 1 priority of ukraine’s relations with other states in the polls country citizens, % of respondents experts % o f polled russia 86,9 80,0 usa 65,5 66,0 belarus 64,5 9,0 germany 62,0 62,0 kazakhstan 59,9 – poland 50,8 52,0 canada 50,5 7,0 uzbekistan 48,8 9,0 sourse: state statistics committee, 2015 fig. 1. import of goods in ukraine (1998-2014) sourse: state statistics committee, 2015 fig. 2. export of goods from ukraine (1998-2014) baltic journal of economic studies 78 vol. 1, 2015 however, the current state of bilateral relations in this area cannot be considered a strategic partnership with russia a reliable and mutually beneficial. 4. main directions of development of strategic partnership between ukraine motion for european parlament resolution nowadays identify: “at present russia as a result of actions in crimea and eastern ukraine, can no longer be considered as, or considered" strategic partner”  – the document says. in addition, members of the europarliament require from russia to “stop destabilizing effect on the eu borders”, and also expressed concern over russian support and funding of radical and extremist parties in the eu member states.” (committee on foreign affairs, 2015). a lot of bilateral agreements on cooperation and friendship, intergovernmental, interdepartmental, agreements within the cis between ukraine and russia are still in force. thus, ukraine international politics is quite acquired attributes of duality. on the one hand, the verkhovna rada passed a resolution that it recognizes russia as the aggressor, and the other  – leaving the current the agreement on friendship, cooperation and partnership between ukraine and russia (treaty on friendship, cooperation and partnership between ukraine and russia). in the first paper of this document is written that ukraine and russia  – strategic partners (verhovna rada, 1998). denounced in june 2015 five interstate russian-ukrainian agreements on military cooperation – a drop in the bucket in comparison with the number of acting. ukrainian diplomats are trying to explain to his foreign colleagues why we have chosen this way and consider it the best, but that experts can not understand. for ukraine, the energy component of external relations is particular importance. signs of the importance of partnership in the energy sector can be a considerable part of the partner country in the exports / imports of energy and services; significant amounts of foreign investments and credits allocated to the development of the energy sector; participation in international large-scale energy projects, the possibility of new energy technologies. when choosing a strategic partner of ukraine it is necessary to take into account the need to diversify energy sources. the economy has recently significantly strengthened attractiveness of energy cooperation. ukrainian specialists may be involved in the development of nuclear energy in poland. current plans include construction of the first nuclear power plant by 2020. for today signed the framework agreement on construction in 2016 on the border gas interconnector length of 110 km and a capacity of 10 billion cubic meters. per year. for ukraine, the implementation of such project is a strategic victory: first, the ukrainian state will have access to gas from polish lngterminal; secondly, using the interconnector, kyiv will have access to the german gas market; thirdly, the construction of 110 km of pipeline will positively affect the regional economy, ensuring growth of new working places and more. it should be emphasized that the expansion of technical capacity through the construction of interconnector will allow ukrainian state in the short term, substantially reduce purchases of russian gas (international centre for policy studies, 2015). the strategic partner of ukraine also became australia. at a meeting with the director general of the australian bureau of safeguards and non-proliferation (asno) robert floyd representatives of the ministry energy and coal industry, and underlined the importance of strategic significance the diversification of energy sources to ukraine, in particular in the field of nuclear energy (ukraine expands international cooperation to diversify energy sources., 2015). the growth of ukraine’s cooperation in the energy sector to the level of strategic opportunities, provided the implementation of major international energy projects, which will ensure the diversification of energy sources. in such a case, the real opportunity to become a strategic partner of ukraine in this sphere have following states: azerbaijan, georgia, germany, poland, usa, turkey and uzbekistan. "it is natural that in the modern ukraine new content gets strategic partnership between ukraine and the united states, which is manifested in different forms and at different levels  – from the president, the supreme commander of the soldiers," – he said at the open ceremony of ukrainian and american military exercises “fiarles guardian-2015” on the range in yavoriv lviv region (poroshenko, p., radio svoboda 2015). in the sphere of political relations between ukraine and countries, announced its strategic partners, an important criterion is the potential of the real support of ukrainian interests in the international arena. in this regard, the united states can be identified, as a country, the most noticeable impact on the development of the situation in the world, and has a strong position in international organizations. in turn, for the implementation of the foreign policy interests of ukraine are also important and contacts with russia and china  – influential states, permanent members of the un security council. to promote ukraine into the eu is vitally important deepen contacts with germany, britain and france. it is very important that the individual strategic partners of ukraine have competing objectives and ukraine is often at the crossroads of conflicting interests. moreover, such "problem situations", even when they decide to concessions by the ukrainian side, often complicate her relationship with one partner, and does not improve with others. this is especially significant of such sensitive areas as the arms trade, peacekeeping operations, the construction of nuclear power plants, energy transit exports of high technology, cooperation within international organizations, whose interests intersect (nato, the tashkent treaty, eu, cis, guuam, and others). ukrainian-polish relations over the past twenty years certainly have acquired the features of this strategic partnership. poland is deservedly considered the main lobbyist of ukraine in europe, and in ukraine, the polish baltic journal of economic studies 79 vol. 1, 2015 experience is seen as an example of reform and european integration. military cooperation between ukraine and canada and germany is deepening. important strategic partners of ukraine are uk, germany, france and poland, and partners – canada, australia, japan, the baltic countries, sweden, norway and romania. in the military sphere can be considered an important partnership that provides for its adequate military assistance in case of aggression or actually contributes to strengthening the defense capability of the state and create the conditions under which ukraine could locate its own military conflict. main directions of the strategic decisions in ukraine are the defense capability increasing; the armed forces reform, intelligence, counterintelligence and law enforcement agencies; public administration reform and the fight against corruption; integration into the european union and the distinctive partnership with nato; providing national security in foreign policy (the rejection of non-alignment, cooperation with nato, the us, china, the un, g7 and g20); ensuring economic, energy, environmental and information security. the complex nature of relationship and poses the interests of ukraine in the military sphere in dependence on the development of contacts between the two countries. in the case of military aggression ukraine can count on political, economic, diplomatic, informational nature by almost all countries, the announced strategic partners (probably more significant, based on the capacity of countries, would support the united states, china, germany, canada). but, no state can give ukraine really crucial military assistance. in the field of military cooperation, ukrainian side most actively cooperates with countries, willing to provide financial support for such cooperation. this is primarily the us, uk, canada, netherlands, germany. 5. conclusions the question of "strategic partnership" is closely linked to the issue of ukraine’s geopolitical choice. during the independence years political and scientific elite of ukrainian state worked out several models of geostrategic foreign policy of ukraine, and in the context of these models the question "strategic partnership" is quite relevant, because it helps to identify and understand the main priorities of ukraine in the international arena and the main goals that put forward the strategy of ukraine’s foreign policy to its national interests. in ukraine strategic partnership tool does not work in favor of its interests and used haphazard and chaotic. strategic partnership with ukraine loses value to those countries from which ukraine could get real benefit. most of the announced partnership are declarative. the shape of the existing memorandums, declarations and charters  – the general documents that do not define specific areas of cooperation and contain detailed plans for implementation. the official list of countries who are strategic partners of ukraine, does not exist. twentyproclaimed partnerships correspond to only eight real bilateral documents signed with azerbaijan, bulgaria, georgia, canada, poland, united states and uzbekistan. all other partnerships are either purely rhetorical verification – such as with china, israel, finland, argentina, slovakia, germany and india  – or collectively considered as a group with a common feature – such as geographical neighbors ukraine, links to which are served in the order verkhovna rada of ukraine "on main directions of foreign policy of ukraine." this approach is equally absurd like "oral" passing laws and, as a result, devalues strategic partnership as a tool of foreign policy. the main strategic directions of state authorities activity to strengthen the position of european integration ukraine – is accelerating the pace of reform, fighting corruption, building civil society, improve economic legislation. thus, the problem of strategic partners selection and revision is important for ukraine and needs further consideration. it is therefore necessary to adopt legislative documents, taking into account the common interests of partners; a list of areas of cooperation, common approaches to international problems; responsibilities and obligations of the parties; factors that may be contrary to the interests of the partner countries; institutional mechanisms for implementing the strategic partnership. references kizim, m.o., dodger, p.v., omarov, s.a. (2010). challenges and goals of ukraine in the world of global problems of the world community: monograph. kharkov: ph «inzhek». geets, v.m. (2006). simulation economic security: state, region, enterprise: monograph. kharkov: ph «inzhek». pivovarov, a. (2008). instrument of strategic partnership in foreign policy of ukraine. bukovynskiy journal, 4, 63-70. artemov, i.v. (2008). cross-border cooperation in european integration of ukraine: monograph. uzhgorod: lira. ministry of foreign affairs of ukraine (2012). free trade agreements in ukraine. retriveved from http://mfa.gov.ua/ ua/about-ukraine/economic-cooperation/trade-agreements shamraeva, v.m. (2012). strategic partnership as an instrument of foreign policy (historiography of the problem). state building.1, 16-20. izha, m., kaduk n., ovchar, a. (2013). current trends and prospects of development of interregional cooperation. actual problems of state administration. 4 (56), 3-6. pashkov, m., chaliy, v. (2000, december 2). realities and prospects of strategic partnership. razumkov centre (sociological research). retriveved from http://www.razumkov.org.ua/ukr/article.php?news_id=104 baltic journal of economic studies 80 vol. 1, 2015 state statistics committee (2015). export and import of goods in ukraine. retriveved from https://ukrstat.org/ operativ/operativ2015/zd/ztt/ztt_r/ztt0615_r.htm committee on foreign affairs (2015, may 13). the state of eu-russia relation. retriveved from http://www. europarl.europa.eu/sides/getdoc.do?type=report&reference=a8-2015-0162&language=en verhovna rada (1998, january 4). treaty of friendship, cooperation and partnership between ukraine and the russian federation. retriveved from http://zakon1.rada.gov.ua/laws/show/643_006 international centre for policy studies (2015, april 7). briefing “ukrainian-polish strategic partnership: challenges and opportunities». retriveved from http://icps.com.ua/mtspd-proviv-kruhlyy-stil-ukrayinsko-polske-stratehichnepartnerstvo-vyklyky-ta-mozhlyvosti/ ukraine expands international cooperation to diversify energy sources. http://mpe.kmu.gov.ua/minugol/control/ uk/publish/article;jsessionid=27315eef14af299aa1f1b992d74f1ed9.app1?art_id=245038611&cat_ id=3510908.09.201 5 poroshenko, p. (2015). radio svoboda. in war in donbas strategic partnership between ukraine and the us takes on new meaning. retriveved from http://www.radiosvoboda.org/content/article/26967872.html наталия демченко, елена козырєва стратегическое партнерство украины: декларации и реалии аннотация. стратегическое партнерство является приоритетной ступенью сотрудничества по сравнению с обычными отношениями. обусловлена конкретными интересами сторон, такое сотрудничество становится возможной между теми партнерами, которые не имеют взаимных территориальных претензий, зато имеется взаимная приверженность принципам территориальной неприкосновенности и нерушимости границ. среди стратегических партнеров украины, согласно заявлениям и документам, было около 20 стран, при этом отношения со многими из них не выходят за рамки простого партнерства. это связано с тем, что в число "стратегических партнеров" зачислялись не те государства, чьи национальные интересы по стратегическим направлениям совпадают с интересами украины, а только те, с которыми у нее были просто хорошие отношения. следует отметить, что сегодня среди стран, которые были объявлены стратегическим партнером украины, не все из них поддерживают современные национальные интересы. предметом исследования является глобальным и конкретные проблемы, которые рассмотрены вопросы экономической безопасности и партнерства в украине. целью работы является изучение вариантов для стратегического партнерства в украине путем улучшения институционального механизма для координации интеграционных процессов. статья основана на исследовании произведений зарубежных и отечественных ученых. практическое значение. формирование эффективного международного сотрудничества украины в контексте глобализации. результаты. анализ сотрудничества украины с россией и странами европейского союза (ес); особенности крупнейших современных региональных объединений; разумно объективная необходимость интеграции украины в региональных ассоциаций; рекомендации по необходимым мерам, чтобы ускорить процесс углубления интеграции украины с ес; наличие общих взглядов и подходов к ключевым проблемам международной политики, глобального и регионального развития; существования соответствующего межгосударственного соглашения с определением обязанностей сторон в достижении целей. baltic journal of economic studies 86 vol. 1, 2015 estimation of the innovative projects investment potential at the machine builders (evidence from llc "turbomash") sergii illiashenko1, oleg olefirenko2, sumy state university, ukraine abstract. the object of the article is to investigate methodic approach to modeling and formalized estimation of the innovative projects investment potential at the machine builders at different stages of innovative cycle. methodology. the suggested methodic approach foresees integration: adaptive model of the detailed multifactorial operative analysis concerning innovative project efficiency, features priority of which is determined by relative dispersion formal method, allowing to estimate project efficiency probability; trinomial model of the costs formation at the innovative projects stages, observed in view of pessimistic, average and optimistic approaches. scientific results. the practically oriented methodic of the innovative projects deep analysis is developed generally and at separate stages in its realization. it allows to estimate probability of their realization efficiency considering alternative actions development. the suggested methodic approach use gives ability to evaluate investment attractiveness of the innovative project introduced both by machine building and other economic branches enterprises, considering specific and structure of costs through expected financial result calculation. the calculated factors with its help allow to evaluate quantitively reasonability to introduce concrete innovative projects, to control innovative activity of the enterprises, particularly at the stage of decision making in their realization. and this in its turn, allows to decrease risk to make inadequate managerial decisions, to increase efficiency of the investmentinnovative activity management. practical importance. approbation of the suggested methodic approach at the machine builder llc “turbomash” during analysis of the innovative project investment attractiveness confirms its practical importance and adequacy. authors’ investigations can be introduced into practice to control enterprises investment-innovative activity. key words: innovations, investment attractiveness of the project, machine building, industry, life cycle. jel classification: o31, o32, m31 1. introduction machine builder efficient activity providing in conditions of the increasing competition both on the side of native and foreign producers causes modern actions and means to grow profitability as the given economy subject factor for further development. introduction of the innovative projects is one of the important directions to use such modern actions and foresees to achieve several tasks, including: to keep constant buyer; to develop new sales markets; to bring new good to the market; to optimize enterprises costs. the given tasks realization is oriented to grow enterprise competitiveness at the market and to improve its financial results factors. however, one should pay attention to the fact that amid financial resources limitation at the native financial market there is a question of the innovative projects investment reasonability. involvement of costs to finance some projects has problems. for example, own capital strengthening leads to great costs for stock issues (if it is corporation), in case of their partial realization enterprise can have losses. in addition to it, as a rule, emitting paper holdings, issuer is oriented on one large investor, who is able to buy all stock, however the proper investor’s aims provide not maximization of the company profits and some payments from them, but control over enterprise, that complicates to make some independent managerial decisions. mobilization of credit resources for industrial enterprises also has some problems, because such enterprises scales and their activity complicate searching of such bank, which can fully finance enterprises needs, owing to the little resource capitalization and national bank of ukraine normative limitations. involving of costs from other corresponding author 1 marketing and management of innovative activities department, sumy state university; marketing department, university of economics and humanities, poland. e-mail: illiashenko.s@gmail.com 2 marketing and management of innovative activities department, sumy state university. e-mail: oolefirenko@turbomash.sumy.ua baltic journal of economic studies 87 vol. 1, 2015 sources, for instance, bounded debts, are less used by ukrainian enterprises through problem of the native fund market insufficient development. problems of the analysis concerning innovatively active industrial enterprises activity, and also introduced by them innovative projects, are revealed in works of the leading foreign and native scientists, among which there are (rubenstein, chakrabarti, okeefe, souder, young, 1976), (hall, lerner, 2009), (page, 1993), (kotler, 2004), (roizman, grishyna, 1998), (illyashenko, 2010), (marketing, 2010), (bezrukova, dobrosotsky, 2010), (krylov, vlasova, zhuravkova, 2003), (innovative management, 2010), etc. analysis of publications and economy practice testifies that problems of the reasonability to introduce innovations in production are studied full enough. at the same time, in terms of dynamic shifts both in world and native economy, followed with disbalances of the financial flows move concerning enterprise ability to provide personal competitiveness through innovatively active activity financing is essentially decreased and the problem of innovative projects investment attractiveness adequate estimation is not totally solved. object of the article is to formalize innovative project investment attractiveness estimation model at the machine builder at different stages of its life cycle. 2. methodic grounds of the multifactorial innovative process analysis main task of the industrial enterprise, while choosing the innovative development strategy, is the process to make such innovative decisions, which will assist to minimize costs and risks on the way to achieve the set targets. the practice testifies that most innovative projects are accepted to be introduced without coordination with marketing service, although innovative marketing allows to evaluate reasonability of such innovations development and introduction. in the context of innovative project investment attractiveness research it is necessary to investigate the methodic approach which allows quantitively to estimate impact of the costs investment in the innovative projects on the proper enterprise financial results getting. this estimation will give additional information about reasonability to introduce suggested innovative projects and assists to make effective managerial decision. besides, as a result of the received positive effect economy subject will be able to uphold the status of the innovatively active enterprise that is competitive advantage at the industrial market. thus, let’s observe author’s approach concerning model to estimate investment attractiveness of the concrete innovative project. essence of the given model consists in calculation of the financial result after proper project realization by enterprise, based on the combination: adaptive model of the innovative project efficiency operative analysis, features priority of which is determined with relative dispersion formal method, providing estimation of the project efficiency probability; trinomial model of the costs formation at the innovative project stages, observed in view of pessimistic, average and optimistic approaches. practical approbation of the model is proposed to carry out while analyzing the innovative project llc "turbomash" (sumy, ukraine), which foresees the production of the new good – granulating mill. considering the mentioned aspects, the efficient factor to estimate investment attractiveness of the concrete enterprise innovative project, is suggested to calculate: tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { },max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση ; 3 3 1 1 1 ∑ == i iynvitr ynvitr { };min 1311 ii ynvitrynvitr ÷== , (1) where tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { },max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση ; 3 3 1 1 1 ∑ == i iynvitr ynvitr { };min 1311 ii ynvitrynvitr ÷==   – financial result after introduction of the innovative project by the enterprise in t-month of its life cycle; inc  – income from introduction of the innovative project by the enterprise; p prt   – probability of the innovative project efficiency in t-month of its life cycle; ynvitrt – explicit and implicit costs of the enterprise from innovative project introduction in t-month of its life cycle. the constituents of the ratio (1) are complicated functional dependencies on some variables. thus, one suggests to observe methodic to form every constituent of formula in details (1). the first stage is to calculate enterprise innovative project introduction income (table 1). table 1 incoming and calculated data to define innovative project introduction income by llc "turbomash", uah №  factor before innovative project introduction after innovative project introduction 1 clear profit (clear profit (earnings) from production realization (goods, works, service) and other operational incomes) 18015546,00 22845146,00 2 variable expenses, including: 13115317,49 15885961,10 2.1 costs of sales (goods, works, service) within variable costs 13115317,49 15885961,10 3 gross margin (1-2) 4900228,51 6959184,90 4 constant costs, including: 3424825,45 3974825,45 4.1 costs of sales (goods, works, service) within constant costs 1297119,31 1347119,31 4.2 administrative costs 989844,77 1289844,77 4.3 selling outlays 463907,67 583907,67 4.4 other operational costs 673953,71 753953,71 5 financial result after operational activity (3-4) 1475403,06 2984359,45 baltic journal of economic studies 88 vol. 1, 2015 if one analyzes main income and cost-intensive financial flows, which enterprise has before innovative project realization and which it expects to get in future from sales amounts, it is reasonably to notice their absolute growing by all article data. the second stage of the model is to determine efficiency probability to introduce innovative project by the company, and its conduct requires implementing several steps. first of all, it is necessary to define factors of the enterprise operational analysis, i.e. features of efficiency to introduce project before and after innovations realization by the company: operational activity income (е1); gross margin (е2); break even point (е3); financial strength supply (е4); financial strength supply coefficient (е5); power of the operational leverage impact (е6). having determined the factors of operational analysis, one has to estimate quantitively priority of the efficiency features to introduce innovative project by the company, using the formal method of the relative dispersion, which foresees the formula: tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { },max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση ; 3 3 1 1 1 ∑ == i iynvitr ynvitr { };min 1311 ii ynvitrynvitr ÷== , tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { },max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση ; 3 3 1 1 1 ∑ == i iynvitr ynvitr { };min 1311 ii ynvitrynvitr ÷== , (2) where w i   – weighing coefficient of і-factor to estimate innovative project introduction efficiency by the company; max e i   – maximal value of і-factor to estimate innovative project introduction efficiency by the company; min e i   – minimal value of і-factor to estimate innovative project introduction efficiency by the company. after mathematic transformations formula (2) will be: tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { },max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση ; 3 3 1 1 1 ∑ == i iynvitr ynvitr { };min 1311 ii ynvitrynvitr ÷== . (3) considering practical calculations by the formula (3), there is necessity to make the following steps: to choose maximal value in view of every factor, to choose minimal value in view of every factor, to calculate ratio of swing to the maximal value, to calculate efficient factor  – weighing coefficients of factors to estimate innovative project introduction efficiency by machine building company (table 2) according to results, showed in the table 2, weighing coefficients are distinguished in the following way: operational activity income  – 0,2992, financial strength supply – 0,2641; financial strength supply coefficient and та power of the operational leverage impact – per 0,1763; gross margin – 0,0634; break even point – 0,0207. such distinguish of the weighing coefficients is explained by their priority in the impact on final efficient factor formation  – profit. that’s why, the most significant impact on the final effect keeps operational activity profit and financial strength supply. determination of the introduced innovative project efficiency probability provides transition from absolute to the binary values of innovative projects introduction efficiency factors by the company. if the factor growing positively influences the investment project efficiency, indicator is identified as stimulator and is given the binary characteristic "1". if the factor growing makes backward effect, it is identified as disincentive and is given binary characteristic "0" (in this case it is break even point). due to the formalization results of this stage the following conclusions are received. the probability of the innovative project realization efficiency during the realization year is increased from 0,0207 to 0,9793, however it is necessary to mention that such growing has uneven character at the proper project stages. probability of the realization efficiency is low during some time  – during first five months its value doesn’t exceed 0,1, since 6-th till 9-th month probability value grows from 0,11 to 0,34. practically, during three last months, project realization probability is increased in three times (table 3). table 2 average calculations to determine efficiency probability before and after introduction of the innovative project by the enterprise project characteristic weighs maximal value minimal value (max-min) / max standard defection normative value binary factors (before and after project introduction) а 1 2 3 4 5 6 7 8 е1 0,2992 2984359,45 1475403,06 0,5056 1066993,29 1917366,15 0 1 е2 0,0634 0,30 0,27 0,1071 0,02 0,28 0 1 е3 0,0207 13048290,73 12591270,05 0,0350 323162,42 12914432,47* 1 0 е4 0,2641 9796855,27 5424275,95 0,4463 3091880,49 6704974,78 0 1 е5 0,1763 0,43 0,30 0,2979 0,09 0,34 0 1 е6 0,1763 3,32 2,33 0,2979 0,70 3,03* 0 1 efficiency probability of the innovative project implementation 0,0207 0,9793 notice: *  – factor-disincentive; е1  – operational activity income, thousand uah; е2  – gross margin, %; е3  – break even point, thousand uah; е4 – financial strength supply, thousand uah; е5 – financial strength supply coefficient, %; е6 – power of the operational leverage impact, unit table 3 dynamics of the innovative project introduction efficiency probability factor change during the year month 1 2 3 4 5 6 7 8 9 10 11 12 w i 0,02 0,03 0,04 0,06 0,08 0,11 0,17 0,24 0,34 0,49 0,69 0,97 baltic journal of economic studies 89 vol. 1, 2015 3. scenario analysis of the innovative project expenses next step to create conceptual model is to calculate explicit and implicit costs of the enterprise from innovative project introduction (table 4). trinomial model of the costs formation from innovative project introduction depending on its life cycle stage foresees identification of three scenario concerning costs increase depending on life cycle stage: 1 month: – pessimistic approach: tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { }max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση 3 3 1 1 1 ∑ == i iynvitr ynvitr { }min 1311 ii ynvitrynvitr ÷= , (4) where tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { }max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση 3 3 1 1 1 ∑ == i iynvitr ynvitr { }min 1311 ii ynvitrynvitr ÷= (5) – average (nominal) approach: tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { }max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση 3 3 1 1 1 ∑ == i iynvitr ynvitr { }min 1311 ii ynvitrynvitr ÷= ; (6) – optimistic approach: tprtt ynvitrpinczfin −⋅=re ∑ = = 6 1i i i iw δ δ , max min 1 max minmax i i i ii i e e e ee −= − =δ ∑ ∑∑ = ==       −      −= − − == 6 1 6 1 6 1 max min 1/ max min 1 max minmax max minmax i i i i i i i ii i ii i i i i e e e e e ee e ee w δ δ . { }max 1311 ii ynvitrynvitr ÷== ; ,2exp ,2exp 1313 1212 1111 ynvitrmynvitrynvitrynvitr n t ynvitrdynvitrynvitrynvitr n t ynvitruynvitrynvitrynvitr =⋅=⋅=       ⋅⋅−⋅=⋅=⋅=       ⋅⋅⋅=⋅=⋅= η ση ση 3 3 1 1 1 ∑ == i iynvitr ynvitr { }min 1311 ii ynvitrynvitr ÷= ; (7) analogically to the approach described above, costs from innovative project introduction for 2-12 stages of its life cycle. at the final stage of the model creation, let’s calculate financial result after innovative project introduction by the enterprise foe each forecast. presenting graphically financial results after innovative project introduction by llc "turbomash" at different stages of its life cycle (fig. 1), we point out that profitability can be seen since 7th month for optimistic approach; therefore total sum of the investment attractiveness factor in the project is 1233673 uah. lower, but profitable results (63833 uah) allow to get average approach, by which income increase is started from 8th stage of the innovation life cycle. the worse situation, peculiar for pessimistic approach, by which positive money flows are expected only since 10th month; therefore generally observed innovative project is unprofitable in sum 1344911 uah. -600000 -400000 -200000 0 200000 400000 600000 800000 1000000 1200000 1400000 1 2 3 4 5 6 7 8 9 10 11 12th ou sa nd s, u a h stages of innovation, months pessimistic approach аverage approach optimistic approach fig. 1. dynamics of the innovative project investment attractiveness depending on its life cycle stage the average (real) forecast provides profit, however in terms of the financial instability while making decision concerning the proper project realization one has to take a ply to pessimistic scenario. that’s why in order to realize the given innovative project as line extension and new market segment gain, risk-management of the enterprise must take measures concerning leveling of the studied project risks. 4. conclusions the practically oriented methodic of the innovative projects deep analysis is developed generally and at separate stages in its realization. it allows to estimate probability of their realization efficiency considering alternative actions development. the suggested methodic approach use gives ability to evaluate investment attractiveness of the innovative project introduced both by machine building and other economic branches enterprises, considering specific and structure of costs through expected financial result calculation. the calculated factors with its help allow to evaluate quantitively reasonability to introduce concrete innovative projects, to control innovative activity of the enterprises, particularly at the stage of decision making in their realization. and this in its turn, allows to decrease risk to make inadequate managerial decisions, to increase efficiency of the investment-innovative activity management. approbation of the suggested methodic approach at the machine builder llc “turbomash” during analysis of the innovative project investment attractiveness confirms its practical importance and adequacy. authors’ investigations can be introduced into practice to control enterprises investment-innovative activity. the received quantitative factors may be used as objective source to make managerial decision concerning innovative project realization reasonability. table 4 explicit and implicit costs of llc "turbomash" from innovative project introduction expenses type expenses constituents sum of expenses, uah explicit expenses (eicpi) l – license cost to use innovative project technologies 25200,00 ie – expenses for project technology introduction 217160,24 st – personnel training acts 9356,00 de – additional equipment 8150,00 implicit expenses (iicpi) we – employees’ wages, involved to introduce project technologies for a time 34740,87 ap – additional payments (bonus) for employees for extra-normative work 84211,76 cm – cost of the adaptations, conducted by developer or renewing 5734,00 pv – non-production expenses 5100,00 total 389652,87 baltic journal of economic studies 90 vol. 1, 2015 references bezrukova, т.l., dobrosotsky, т.l. (2010). formation of the investment attractiveness in the innovative project control process. innovative economics, 9(9): 27-31. illyashenko, s.m. (2010). strategic management of the innovative activity at the enterprise, based on the innovations marketing. urgent problems of economics. 12: 111-119. innovative management: conceptions, multilevel strategies and mechanisms of the innovative development: teaching guide (2010) / edited by v.m. anshyn, а.а. dagayev. – 3d issue, modified and added – м. : delo: 584 p. hall, b.h., lerner, j. (2009). the financing of r&d and innovation. nber working papers # 15325. – national bureau of economic research, inc. – 55 p. kotler, f. (2004). marketing-management: express-course : tramsl. from eng. edited by yu.n. kapturevsky.  – spb.: peter, – 496 p. krylov, e.i., vlasova, v.м., zhuravkova, i.v. (2003). analysis of the investment and innovative activity efficiency at the enterprise: teaching guide. – м.: finances and statistics.– 608 p. marketing. management. innovations: monograph (2010) / edited by dr of economics, s.m. illyashenko. – sumy : llc “publishing house “papirus”,– 624 p. page, a.l. (1993). assessing new product development practices and performance: establishing crucial norms. journal of product innovation management. 10. – р. 273–287. roizman, i.i., grishyna, i.v. (1998). existing and perspective investment attractiveness of the large branches in native industry. investments in russia. 1: 37-39. rubenstein, a.h., chakrabarti, a.k., okeefe, r .d., souder, w.e., young, h.c. (1976). factors influencing successat the project level. research management. 19(5): 15-19. сергей ильяшенко, олег олефиренко оценка инвестиционной привлекательности инновационных проектов машиностроительных предприятий (на примере ооо «турбомаш») аннотация. целью статьи является разработка методического подхода к моделированию и формализованной оценке инвестиционной привлекательности инновационных проектов машиностроительных предприятий на разных стадиях инновационного цикла. методика. предложенный методический подход предусматривает комбинирование: адитивной модели детализированного многофакторного операционного анализа эффективности инновационного проекта, приоритетность характеристик которого определяется формальным методом относительного разброса, что позволяет оценить вероятность эффективности проекта; триномиальной модели формирования расходов на этапах инновационного проекта, рассмотренных в разрезе пессимистического, среднестатистического и оптимистичного подходов. научные результаты. разработана практически ориентированная методика углубленного анализа инновационных проектов – как в целом, так и на отдельных этапах их реализации, которая позволяет оценить вероятность эффективности их реализации с учетом альтернативных сценариев развития событий. использование предложенного методического подхода дает возможность оценить инвестиционную привлекательность инновационного проекта внедряемого предприятиями машиностроения и других отраслей экономики, учитывая специфику и структуру расходов каждого из них, путем расчета ожидаемого финансового результата. рассчитанные с его помощью показатели позволяют количественно оценить целесообразность внедрения конкретных инновационных проектов, целенаправленно управлять инновационной деятельностью предприятий, в частности, на стадии принятия решений об их реализации. а это, в свою очередь, позволяет снизить риск принятия неадекватных управленческих решений, повысить эффективность управления инвестиционно-инновационной деятельностью. практическое значение. апробация предложенного методического подхода на машиностроительном предприятии ооо "турбомаш" в ходе анализа инвестиционной привлекательности инновационного проекта подтвердила его практическую значимость и адекватность. авторские разработки могут быть непосредственно внедрены в практику управления инвестиционно-инновационной деятельности предприятий. baltic journal of economic studies 188 vol. 7 no. 2, 2021 corresponding author: 1 chernihiv polytechnic national university, ukraine. e-mail: popelo.olha@gmail.com orcid: https://orcid.org/0000-0002-4581-5129 researcherid: i-8572-2016 2 chernihiv polytechnic national university, ukraine. e-mail: maksim-32@ukr.net orcid: https://orcid.org/0000-0002-5305-7815 researcherid: f-3291-2014 3 chernihiv polytechnic national university, ukraine. e-mail: nateco@meta.ua orcid: https://orcid.org/0000-0003-2951-7233 researcherid: n-1229-2019 doi: https://doi.org/10.30525/2256-0742/2021-7-2-188-199 world experience in the introduction of modern innovation and information technologies in the functioning of financial institutions olha popelo1, maksym dubyna2, nataliia kholiavko3 abstract. the article reveals the essence of the concept of “financial innovations” and their features. the classification of financial innovations is given. the innovative models of the ukrainian banking business development are analysed. the innovative developments of the world’s leading banks are systematized according to the version of the annual competition for the bai-finance global banking innovation awards held in las vegas. the innovative and information technologies in the work of financial institutions in the following areas are analysed: product and service financial innovation, channel financial innovation, financial innovation in social and community impact, financial innovation in internal process improvement. foreign experience and features of the development of the newest innovative information technologies in the financial services market are analysed. the subject of research is theoretical and applied aspects of the development of innovations and information technologies in the functioning of world-class financial institutions. the purpose of the article is to analyse and systematize foreign experience in the development of new innovative and information technologies in the financial services market. in the research, the authors used general scientific and specific methods, including: historical-logical, dialectical, deductive, analysis and synthesis, grouping, abstraction and formalization, benchmarking, generalizations and systematization. the article concludes that in modern rapidly evolving digitalization processes, financial innovations play an extremely important role and contribute to the economic development of countries. the authors point out that banking institutions need to focus their potential as much as possible on identifying priority digital and innovative initiatives, taking into account current challenges and threats. finally, the effective use of specific financial innovations requires in-depth knowledge of the features of their operation and careful analysis of their consequences. the authors recommend the use of a cross-functional approach, which provides flexibility and the ability to transform change over time and is an important element in the process of implementing financial innovations. taking into account the experience of leading banking institutions that actively implement innovative developments, the authors note that along with the benefits, financial innovations can cause new challenges and threats for all participants in this process. researchers have shown that radical innovation can displace a dominant business model or technology and create a new market. according to the results of the analysis of innovative developments of banks around the world for the period 2015–2019, the authors found that financial innovations have changed their nature and are based on the latest digital technologies. key words: financial institutions, financial market, financial innovations, in-novation, information technologies, fintech, digital technologies, bank, credit institu-tions, business models. jel classification: o31, g21 baltic journal of economic studies 189 vol. 7 no. 2, 2021 1. introduction in today’s rapidly evolving digitalization processes, traditional approaches to the provision of banking services and banking business no longer meet the growing demand and expectations of customers, do not meet the requirements of the efficiency and profitability. in the context of digitalization and active implementation of financial innovations, it is necessary to constantly look for advanced solutions and work on developing new business models that will best meet the changing needs of customers. growing competition both from financial institutions, high-tech companies and “fintech” startups, which with their innovative solutions seek to become the leaders in highly profitable segments of the banking sector, requires the formation of an innovative strategy to respond to the new trends in the economy digitalization. considering approaches to the classification of financial innovations, scientists distinguish innovations by sources of origin, motives, types, effect of application, factors influencing the process of creation and implementation, the moment of creation, elements of the financial system where innovations take place. however, regardless of the type of innovation, the question arises: when does a banking product or service acquire signs of innovation and cease to be an innovation? as soon as a banking product becomes mass, it is used by almost all banks and is available to most of its consumers, it ceases to be new and becomes traditional. the banking operation, in contrast to the banking innovation, has a significantly longer service life. it is the mass use of a new product that makes it non-innovative. the banking innovation has time constraints. it operates only within a certain period, which is determined by the starting and ending points of the life cycle of the innovation, but not the banking product. this means that banking innovations cannot be generally accepted transactions that are widely used. the banking innovation cannot be considered a banking product or operation that is new only to this bank, but which has long been implemented in other banks either (loiko v., bashkyrtseva t., 2018). innovative development is a hallmark of successful economies in many highly developed countries. the ever-growing connection between science and business, the widespread introduction of innovative information technologies in all spheres of activity, the constant renewal or improvement of products and services, the introduction of modern forms and methods of management can increase competitiveness and are an integral part of the innovative economic development. despite a significant amount of works of domestic and foreign scientists in the direction of studying the peculiarities of the financial institutions functioning, the existing scientific works are incompletely analysed, and foreign experience in the development of new innovative information technologies in the financial services market is analysed. the purpose of the article is to analyse and systematize foreign experience in the development of new innovative and information technologies in the financial services market. 2. literature review many many scientists devote their papers to the study of modern innovative and information technologies, including their introduction into the work of financial institutions, namely al-kaber m. (2010), anderloni l., bongini, p. (2009), błach joanna (2011), butko m. (2019), chien-chiang lee, chih-wei wang (2020), chrystalla kapetaniou (2018), daniel ruiz-palomo (2021), domingo garcía-pérez-de-lema (2021), ebubekir mollaahmetoğlu (2019), ekkert m. (2019), ellis l. c. osabutey (2020), fabozzi f. j. (2003), fedyshyn m. f. (2019), frame w. s. (2009), hui an, ruibo yang (2021), ivanova n. (2020), katrin hahn (2019), kostohryz v. g. (2021), leonardo fernando cruz basso (2018), loiko v. (2018), maliarova v. о. (2021), shkarlet s. (2019), vovk v. y. (2019), yangyang chen (2021), zhezherun yu. v. (2021) and others. using the example of the established german industrial companies, katrin hahn from the netherlands examine the extent to which financialization and financial market actors steer innovation strategies and practices. in-depth interviews with companies, cluster managers and banks and reviews of financing data do not reveal a direct influence of financial investors on innovation activities. on the contrary, companies’ managements still have the power to decide how much financial control and standardization they allow for their companies’ innovation practices. the pressure on these german companies to innovate comes from their strong market orientation rather than from financialization (katrin hahn, 2019). the research by the chinese scientists evaluates the impact of financial innovation on the banks growth and how their growth is affected by various dimensions of institutional environments’ interaction with financial innovation. to address these relationships, they use different measures of financial innovation and bank growth from a panel dataset of 40 countries (chien-chiang lee; chihwei wang; shan-ju ho, 2020). the paper by chrystalla kapetaniou, marios samdanis, soo heelee (cyprus, the uk) extends the literature on national innovation systems, arguing that innovation policies should incorporate the particular needs of a nation’s innovation system and the current conditions of that nation’s financial environment. this development is important because the financial baltic journal of economic studies 190 vol. 7 no. 2, 2021 environment is malleable and subject to exogenous events, such as recent global financial crisis. the relationship between a national innovation system and the financial environment is presented through an analytical framework, which can be used to assess and instigate national innovation policies (chrystalla kapetaniou; marios samdanis; soo hee lee, 2018). the study of the chinese and australian scientists proves that financial regulation and financial innovation tend to show a dynamic game process of ‘regulationinnovation-re-regulation-re-innovation’. this paper constructs an evolutionary game model to simulate the above phenomena for analysing the stable equilibrium strategies between financial institutions and regulation institutions (hui an; ruibo yang; xuejiao ma; siqi zhang; sardar m. n. islam, 2021). drawing on human capital and upper echelons theories, the study of the spanish scientists analyses how the ceo’s financial literacy influences a firm’s technological innovation and investigates the mediating role of alleviating financial constraints of small and medium-sized enterprises (smes) in the former relationship (domingo garcía-pérez-de-lema; daniel ruiz-palomo; julio diéguez-soto, 2021). authors of the paper pk senyo, ellis l.c. osabutey (uk) argue that understanding antecedents to the actual use of fintech innovations will lead to deepening financial inclusion. using mobile money, a type of fintech innovation, this study adopts the unified theory of acceptance and use of technology 2 (utaut2) and the prospect theory. the findings show that performance and effort expectancy have significant relationship with the intention to use mobile money services (pk senyo; ellis l.c. osabutey, 2020). the paper by the turkish scientists investigates the relationship between financial development, financial innovation, and economic growth using a panel data analysis. the sample covers fifteen countries. financial development has been considered as a composite variable consisting of four components: financial access, financial depth, financial efficiency, and financial stability. the distinguishing feature of the paper is that it includes financial innovation as another component of financial development in addition to the cited four. the paper concludes that both financial development and financial innovation have significant impact on economic growth (ebubekir mollaahmetoğlu; burçay yaşar akçalı, 2019). gang-jin wang, yang-yang chen, hui-bin si, chi xie, julien chevallier (china, france) propose the multilayer information spillover networks, including a return spillover layer, a volatility spillover layer, and an extreme risk spillover layer in the variance decomposition framework for comprehensively investigating the information spillovers and connectedness among 30 chinese financial institutions (i.e., banks, securities, and insurers). they analyse the topological characteristics of static and dynamic multilayer networks at the system and institution levels (gang-jin wang, yang-yang chen, hui-bin si, chi xie, julien chevallier, 2021). the brazilian scientists analyse the relationships among innovation efforts, the impacts of these innovations, and the financial performance of brazilian companies. they hypothesize that innovation efforts do not directly transform into financial performance. due to the inherent uncertainty of innovative projects, such efforts must first lead to effective innovation results or impacts before they are capable of contributing to a company’s financial performance ( juliana albuquerquer saliba de oliveira; leonardo fernando cruz basso; herbert kimura; vinicius amorim sobreiro, 2018). 3. definitions and features of financial innovations financial innovations are not a new phenomenon, as they have been accompanying the technological innovations from the very beginning. it is commonly known that financial and technical innovations are bound together and they evolve together over a time. on the one hand, the financial innovations provide a mechanism to finance innovative technological projects when traditional sources of funds are unavailable due to the high investment risk. on the other hand, the technological and economic progress resulting in the higher complexity of business processes and new types of risk forces the financial system and financial markets to adapt to the changes, to be modernized according to the new requirements of the business entities and to the challenges of the modern world. this leads to the conclusion that without financial innovations, the technological and economic development would slow down and the wealth of nations would be lower. at the same time, the application of the financial innovations would be limited without the demand arising from the technical progress (błach, joanna, 2011). as there are no unified definitions of the financial innovations, like in the case of the technological ones, the systematization of this term is required. in most of the applied definitions, the financial innovations are presented in the narrow meaning, as mainly the product innovations are described (some of the most popular definition of financial innovations are presented in: al-kaber, 2010, p. 135–136; anderloni and bongini, 2009, p. 41–43; fabozzi and modigliani, 2003, p. 27–28; frame and white, 2009, p. 3). by the analysis of these definitions, the main features of the product of financial innovations can be listed as follows: 1) they can be entirely new solutions or just traditional instruments in which new elements of construction have been introduced improving their liquidity and baltic journal of economic studies 191 vol. 7 no. 2, 2021 increasing the number of their potential applications as they are better suited to the circumstances of the time; 2) they can be used as substitutes to the traditional financial instruments improving the financial situation of the business entities using them; 3) they cannot be easily assigned to one particular segment of the financial market; 4) they can be used to hedge against the intensive volatility of the market parameters; 5) they can be used in a form of complex instruments including several simple, traditional financial instruments; 6) they can be used in a form of new financial processes or techniques or new strategies that primary use these new products. thus, to summarize the conclusion – the term “financial innovations” can be applied in two meanings: 1) according to the narrow approach, the financial innovations are defined as any new developments in financial instruments (entirely new instruments, combination of traditional instruments, modification of traditional instruments, new application of existing instruments, etc.), 2) according to the broad approach, the financial innovations include any new developments in any elements of the financial system (markets, institutions, instruments and regulations) (błach, joanna, 2011). the interpretation of the essence of financial innovations is presented in figure 1. there are many approaches to the classification of financial innovations. among the most common classification criteria are the following: sources of innovations, motives of using the financial innovations, types of innovations, the effect of the financial innovation application, factors influencing the process of creation and implementation of innovations, the moment of creation, elements of the financial system where the innovations occur (figure 1). both banks and seven professional world banking laboratories are engaged in the development of banking innovations (loiko, bashkyrtseva, 2018): 1. standard bank (south africa) – playroom innovation center (operating since january 2015) is developing modern banking technologies. 2. laboratories of the capital one bank (usa) consist of three laboratories located in washington, new york and san francisco. the main activity of these laboratories is aimed at developing pilot banking products and accelerating all digital activities of the bank. 3. commonwealth bank’s innovation laboratory (australia) develops new products, services and solutions together with customers, partners, startups and industry experts. 4. citi’s innovation lab (usa) has established a global network of innovation centers located in cities such as tel aviv, dublin, singapore, san francisco and new york, which provide opportunities for innovation training for all employees at all levels. 5. visa innovation center (usa) develops innovations in the field of banking software. 6. chase bank development and innovation center (usa) specializes in the development of atm technology, as well as new ways of interacting with customers. 7. bbva innovation center (spain) develops and implements a number of technological solutions. banking innovations may not include minor changes that do not change the content and nature of the banking product or operation, such as changes in interest rates on loans and deposits, the term of the deposit and loan agreement, etc. (loiko, bashkyrtseva, 2018). n arrow definition of financial innovations fi na nc ia l s ys te m financial institution financial system regulations financial instruments financial markets new forms and types of financial institution new segments of financial markets new developments in financial instruments new regulations b road definition of financial innovations figure 1. interpretation of the essence of financial innovations source: developed by the authors baltic journal of economic studies 192 vol. 7 no. 2, 2021 4. innovative models of the ukrainian banking business development for example, ukrainian banks offer to use smartphones not only to pay for goods and services, but also to accept payments. mobile application for business is offered by two ukrainian banks – raiffeisen bank aval (pay-me ukraine) and privatbank (ipay). both banks produce card readers that connect to the smartphone via a headphone jack. completed with a special application, the devices allow couriers, taxi drivers and small outlets to accept plastic cards for payment. thanks to the mini-terminals of privatbank together with the startup poster it was possible to create a full-fledged cash register on a smartphone or a tablet. all information about trade transactions is stored in the cloud, and non-cash payments are made through a mobile pos-terminal. the cash register can replace traditional accounting systems in restaurants and shops (ekkert, nestorenko, szynk, 2019). a state-of-the-art direction of improving the management of banking services was the decision on the national level to create, at the initiative of pjsc “state savings bank of ukraine”, oschadbankid platform, which is a means of identifying and verifying bank card users by government agencies, a digital signature for registration of permits, including for opening and conducting own business. this will improve the investment climate in the country and minimize the corruption component in the communication of citizens and businesses with government agencies. in the conditions of financial shocks and instability of financial markets, the key to maintaining the bank’s position in the market is, first of all, to reduce costs, to increase the speed of transactions and to minimize credit risks. therefore, it is important for banks to find a new innovative model that would meet today’s requirements. in this regard, a number of ukrainian banks are working on the transition to the blockchain technology, based on which, it is possible to build the type of financial institution banking innovationsinnovations of non-banking financial institutions creation process revolutionaryevolutionary sources of innovations factors of innovations motives of innovations elements of the financial system types of innovations effect of innovations supply-driven innovations demand-driven innovations external factors driven innovations intimal factors driven innovations adaptive innovations aggressive innovations defensive innovations protective innovations responsive innovations financial market innovations financial institutions innovations financial instrument innovations financial regulations innovations product innovations process innovations risk-shifting innovations sustainable innovations harmful innovations c ri te ri a t ypes of financial innovations figure 2. classification of the financial innovations source: developed by the authors baltic journal of economic studies 193 vol. 7 no. 2, 2021 whole operation process of the bank, including the core of the bank (core banking system) and work with customers. blockchain is a decentralized database for recording and verifying transactions. in this case, network users are divided into two groups, namely: the regular users who create new records, and the miners who create blocks. ordinary users create and distribute records over the network, for example, about money transfers or transfer of ownership. several ukrainian banks are also planning to connect to ripple technology. this technology is focused on financial institutions and is already actively used in three western banks. it is both a payment system, a currency exchange and a network of money transfers. its use will allow banks to transfer funds around the world instantly and almost free of charge. innovations in payments can greatly simplify payment for goods and remittances. moreover, modern technologies have a positive effect on the image of the bank and customers. it should be noted that the national banking system has a strong innovation potential for active implementation of financial innovations, but the overall digitalization process needs to be accelerated (ekkert, nestorenko, szynk, 2019). 5. innovative financial developments of the world’s leading banks radical innovations can displace the dominant business model or technology and create a new market. analysis of innovative developments of banks around the world for the period 2015–2019 proves that financial innovations have changed their nature and are based on the latest digital technologies. las vegas holds an annual bai-finance global banking innovation awards competition, in which the world’s leading banks compete and demonstrate their innovative developments in various areas. the most innovative financial services organizations for the period 2015-2019 were awarded the bank of east asia, limited (hong kong, china), denizbank (turkey), emirates nbd bank (united arab emirates), usaa (san antonio, tx, usa), city ventures (usa) (table 1) (the bai global innovation awards, 2021). according to the bai global innovation awards, we can explore the rapid and successful development of innovative financial institutions. the bank of east asia, limited (bea) has a long tradition of innovation. dating as far back as 1969, bea was one of the first chinese banks in hong kong to introduce advanced technology to their operations with the installation of a state-of-the-art computer system. always striving to provide bestin-class financial services, bea upholds five core values: professionalism, customer-focus, integrity, progressiveness, and innovation. this ethos is the foundation stone, on which the culture of innovation within bea is built, and over the years has enabled bea to hold a strong track record as a market leader and pioneer in online banking. through different channels, customers are invited to share opinions and suggestions, additionally; bea is also dedicated to originality and in-house development. to source the best ideas and encourage creative thinking, bea welcomes suggestions from nearly 6,000 employees in hong kong. ideas and suggestion can be submitted quarterly and a generous cash prize is awarded for the best entry. denizbank’s success in innovation lies in the composition of multiple factors. special innovation teams and innovation committee structures are formed to focus on the customer’s problems and innovative solutions together with the business and technology teams, which accelerate and encourage the innovation process. to improve its open innovation network, denizbank continuously cooperates with intelligent business partners and works to develop new business models. emirates nbd is proud to be a global leader in innovation by developing smart and user-friendly products every year. with the mission of making its customers’ lives simpler by providing solutions that help them fulfill their financial aspirations, innovation is a core value at emirates nbd – driven from the chairman, ceo and executive board to all levels of employees. having already witnessed exceptional achievements, emirates nbd promised to invest 500 million aed (~140 million usd) over the next three years in digital innovation. the bank’s continued growth is a testimony to the exceptional dedication overall that makes enbd a factory of innovation. innovation at usaa is purpose-driven. the purpose is their mission, facilitating the financial security of the military community, and delivering excellent service. their focus starts with their members, how they can continue to serve them better than anyone else, and how they can maintain usaa’s legacy for the next 100 years. their innovations help make members’ lives easier and enable them to be more financially secure. through innovation, they seek to deliver tangible value to members, employees and usaa. their 2017 innovations enabled 1.7 billion usd in value back to usaa and 5.3 million usd in cost savings were confirmed by their line of business partners. over 92 percent of their employees participate in the innovation process. citi ventures accelerates the adoption of the new business models and discovers new sources of value by exploring, incubating, and investing in new ideas in collaboration with citi colleagues, our clients, and the innovation ecosystem. information about the winners and their innovative developments in the category “product and service financial innovation” according to the bai global baltic journal of economic studies 194 vol. 7 no. 2, 2021 table 1 most innovative financial services organization of the year year innovator innovation 2015 the bank of east asia, limited (hong kong, china) taking a customer-centric approach, bea continues to innovate to enhance the customer experience. this is evident from the revitalization of supremegold which was a new direction for the bank and part of bea’s ongoing commitment to constantly develop and search for advanced solutions to best suit their customers’ changing needs. 2016 denizbank (turkey) besides organizational positioning, denizbank is committed to diffusing an innovative culture throughout the company where every employee believes in collective wisdom and synergy. as customers are more connected than ever, all denizbankers devote themselves to innovative thinking and creative values. in addition, denizbank adopted an eco-system banking approach and puts significant effort towards building a digital ecosystem with all crucial players. 2017 emirates nbd bank (united arab emirates) the bank continuously aims to infuse the innovative culture with periodic training programs, special events, internal ‘edge’ innovation programs, external innovation with open banking initiatives and fintech hangouts within the bank. the futuristic way of banking, namely the ‘future lab’, is the center of innovation management where the jury ‘innovation champions’ evaluate ideas and map innovative solutions. 2018 usaa (san antonio, tx, usa) at usaa, everyone is an innovator! our mission and culture provide our purpose, and our employees bring their passion to serve our members better than anyone else. the goal of employee innovation is to empower all employees to creatively innovate to best serve members and to prepare usaa for the future. we use a toolkit of various innovation programs (challenge-based innovation, hackathons, coding competitions, education/training) to engage employees to help solve strategic challenges. 2019 city ventures (usa) citi ventures accelerates the adoption of the new business models and discovers new sources of value by exploring, incubating, and investing in new ideas in collaboration with citi colleagues, our clients, and the innovation ecosystem. source: systematized by the authors on the basis of (the bai global innovation awards, 2021) table 2 product and service financial innovation year innovator innovation 2015 fidor bank ag (germany) a free bank account built around an application programming interface (api), the fidor smart current account supplements classic account services with internet payments and innovative banking products. the integrated api platform allows customers and partners to directly connect their computer systems with those of fidor bank. 2016 wells fargo ceo mobile® biometrics is wells fargo’s latest security innovation. ceo mobile biometrics sets a new standard for mobile banking security and makes banking easier by giving customers a fast, secure way to access their mobile banking services without using passwords or tokens. 2017 metromile pay-per-mile car insurance. metromile is revolutionizing car insurance through the use of technology with its pay-per-mile insurance model. by offering affordable car insurance, transparent pricing based on the miles customers actually drive, data to optimize how customers use their car, and instant access to detailed vehicle diagnostics via the driving app. 2018 novopayment, inc. (miami, usa) embedding finserv in gig value chain. novopayment’s innovation leverages emerging technologies to seamlessly deliver in-context services to the client, and an excellent experience to their end customer. novopayment’s api-powered technology allows banco pichincha colombia to dynamically deliver financial services and frictionless user experiences to their gig economy clients, without the need to alter their core systems or sacrifice security and compliance. this innovation allows the client’s platform-driven business to pull important instant issuance and mass payout services on demand and with the scalability they require. 2019 oneconnect financial technology co., ltd (china) fimax trade finance blockchain network is a blockchain solution that aims to organically connect different parties in trade finance. on this reliable, secure and efficient network, different parties in trade can directly finance and exchange data while preserving full data privacy, all of which is enabled by blockchain architecture and cryptography solutions. source: systematized by the authors on the basis of (the bai global innovation awards, 2021) baltic journal of economic studies 195 vol. 7 no. 2, 2021 innovation awards are systematized and presented in table 2. consider their innovative achievements in more detail. the open financial ecosystem fidor smart current account provides app partners the ability to continuously increase the range of products and service that enable customers to select products and services they want from either fidor bank or third-party providers. the steadily growing range of products guarantees a modern banking experience that helps deepen existing customer relationships and attract new customers. the features include credit transfers via twitter, social lending, social trading in virtual currencies and a wide range of cutting-edge products that go well beyond traditional banking services. the ceo mobile service is unique in that, it offers customers a choice in how to sign on. customers can sign on using the ceo mobile eyeprint feature, or their id and password. the ceo mobile eyeprint feature uses a customer’s mobile device to create a template of their eye veins that can be used to identify them when they sign on, which saves time and eliminates the need to remember passwords and carry tokens. metromile is revolutionizing car insurance through the use of technology with its pay-per-mile insurance model. metromile is transforming car insurance – and car ownership – to be more intelligent, seamless and accessible than ever before. novopayment’s api-powered technology allows banco pichincha colombia to dynamically deliver financial services and frictionless user experiences to their gig economy clients, without the need to alter their core systems or sacrifice security and compliance. the innovation solves two broader problems and several specific pain points. the first problem is banks and fi’s general difficulty in serving modern, platform-driven businesses, such as gig economy companies, which often feature real-time it platforms and exponential scaling operations. the second problem has to do with the undesirable impacts that cash-intensive processes have on these businesses and their ability to scale (compete for capital, workers, and market share) and operate in the fully digital fashion on which the best in their field are modeled. this problem is exacerbated in cash-intensive markets such as latin america where large shares of the population lack formal banking relationships and electronic payment instruments. fimax trade finance blockchain network is a blockchain solution, by onboarding data from different participants, the network forms a healthy, closed-loop data flow within the ecosystem. enterprises can more easily prove the validity of their trades and better apply for financing. banks can conduct more accurate credit assessments, lowering financial risk. the winners in the nomination “channel financial innovation” in 2015–2019 were the bank of east asia, limited (hong kong, china), mizuho financial group, inc., hdfc bank limited, ping an technology (shanghai, china), royal bank of canada (table 3). table 3 channel financial innovation year innovator innovation 2015 the bank of east asia, limited (hong kong, china) digital branch: a new way to bank. the bank of east asia, limited (bea) launched a highly flexible and mobile digital branch that operates as a paperless, straight-through model. the digital branch has a footprint of just half the floor space of a traditional branch, and takes only 13 days to renovate and install. the branch contains a much smaller back-office area and requires reduced manpower, enabling bea to open in high-footfall luxury shopping malls. 2016 mizuho financial group, inc. mizuho financial group, inc. has launched an innovative branch solution with the deployment of “pepper” the emotional humanoid robots that act as a concierge, in the traditional formal japanese bank branches. the primary impacts anticipated from this original innovation are to improve service to customers using ai and big data, and to provide a unique ux through digital omotenashi*. 2017 hdfc bank limited hdfc bank on chat is a chat-based platform on facebook messenger which provides commerce services like bill payments, travel bookings, event bookings, etc. since hdfc bank onchat is built on an intuitive natural language processing (nlp) based artificial intelligence platform, it understands its user’s intent based on free text input. a user just needs to chat with hdfc bank onchat on facebook messenger to complete any transaction. 2018 ping an technology (shanghai, china) emotion recognition based financial risk management system. combining psychology and ai to assist credit analysts in credit review. solution utilizes the results of psychological study, adopts ai methods, and extracts the abnormal performance of people when they tell lies to provide assistant judgment for the credit review process. it lowers the professional threshold of credit analysts, improves the efficiency of credit review, reduces the bad debt ratio. 2019 royal bank of canada (canada) drive, a mobile and web app, keeps canadian car owners on top of maintenance and essential car services – from booking service appointments, to staying up to date on safety recalls, to storing essential ownership details and documents, and more. source: systematized by the authors on the basis of (the bai global innovation awards, 2021) baltic journal of economic studies 196 vol. 7 no. 2, 2021 another relevant and important nomination is “human capital innovation”. the finalists of the bai global innovation awards were: – citizens financial group jamie virtual career assistant (united states) enables an impactful, personalized, and modern candidate experience to all prospects and delivers efficiencies and new capabilities throughout the recruitment process. jamie uses intuitive, conversational language, and can understand the natural language of the user. she even uses emoji’s in her responses! external job seekers have leveraged their chat with jamie to search for open jobs and kick-off the application process. jamie has interacted with more than 18,000 candidates answering 60,000 inquiries on benefits, company culture and interview process, plus topical questions on citizens’ approach to covid-19 and diversity, equity and inclusion. – sberbank, employee digital care program (russia), the employee digital care program of sberbank identifies and seeks to prevent undue stress for employees at all stages of their career path within the bank. by using a host of digital tools and technologies, gamification, as well as offering psychological support, this programme has positively impacted the level of employee engagement and satisfaction as well as employee efficiency. it has also resulted in improved customer satisfaction scores. – ziraat bank, hidden power of communication (turkey), with the help of analytics, ziraat bank identified various factors of the increased employee dissatisfaction and bottlenecks in communication. based on the data, they created an innovation designed to strengthen the communication network among employees and to recognize and take precautions in case of any communication problem. the main purpose of the innovation is to establish connections in workplace, to build a culture that aligns with people’s demand and to increase the level of the workplace communication. among the winners in 2015-2019 in the nomination “financial innovation in social and community impact”, the following nominees were determined: nusenda credit union (united states), teb women banking (turkey), taqanu, rukula (pvt) limited (colombo, sri lanka), usaa (san antonio, tx, usa), jumo (south aftrica). the main innovative ideas of the award winners are systematized and presented in table 4. the next nomination worth paying attention to is “financial innovation in internal process improvement”. the innovative banks in this direction in table 4 financial innovation in societal and community impact year innovator innovation 2015 nusenda credit union (united states) co-op capital: widening access points to financial products. nusenda credit union created co-op capital, a collaborative financial product that combines micro-lending and community sponsors. this is the only product on the market that allows the target population to access capital through a trusted community organization versus a financial institution. uniquely, member organizations (co-ops, networks, unions, etc.) sponsor the loan application for their affiliates and provide the loan underwriting, while nusenda credit union does the originating. 2016 teb women banking (turkey) turk ekonomi bankasi (teb)’s establishment of a separate department to provide women’s banking services that provide solutions to the obstacles women face in business. teb is the first and only bank in turkey which has set up a separate department and has begun providing women’s banking services. 2017 taqanu taqanu opens the financial ecosystem for anyone by using a blockchain-based digital id to enable financial inclusion and create equal opportunities. the core goal is to enable anyone with a smartphone access to a simple banking solution without the burden of a local regulatory regime, while also managing anti-money laundering (aml) risks. 2018 rukula (pvt) limited (colombo, sri lanka) credit for small consumer durables for the financially excluded in sri lanka. using sri lanka’s first non-financial attribute based alogorithm, rukula seeks to help the most financially vulnerable citizens of sri lanka obtain small consumer goods. although customers are encouraged to keep up with their payments, we acknowledged that these communities would have significant and multiple financial hardships during the course of their credit period. consequently, there are no interest costs or penalties for late payments. usaa (san аntonio, tx, usa) aerial imagery tool. the aerial imagery tool utilizes before and after images to assess damage so anyone can type in an address and see the images of the address before the hurricane and after. this allows members the ability to remotely search and view damage to their homes, regardless of if they were able to return to their homes to assess damage. 2019 jumo (south africa) jumo platform. jumo offers traditionally hard-to-reach customers a range of instant, affordable, high-quality borrowing choices via mobile phonejumo uses individual data to structure and fit products to suit the customer’s needs. sophisticated data prediction and credit scoring methods allow jumo to leapfrog prohibitive operational and risk costs. source: systematized by the authors on the basis of (the bai global innovation awards, 2021) baltic journal of economic studies 197 vol. 7 no. 2, 2021 2015–2019 were: denizbank (turkey), alior bank s.a., live oak bank (wilmington, nc, usa) and citi ventures (usa) (table 5). according to the results of the finals of the bai global innovation awards, the finalists in the nomination “financial innovation in internal process improvement”, 5 banks were identified with the following innovative developments: – caixabank s.a. (spain) – this innovation seeks to offer customers agile mobility through different products available at caixabanknow. the mobility project mainly has an impact on the environment and on the contracting of products through 100% digital channels, which are very necessary at this time. – deniz bank (turkey) – the digital scorecard is a broad monitoring system used to evaluate employees’ performance at promoting the use of digital channels to customers. digital scorecard is helping the employees to analyse their customers’ daily-weeklymonthly transactions and helping them to direct customers to the right digital channel vs. having them use physical branches. this only helps customers reduce time and money spent, but also helps the branches improve profitability due to increased use of low cost digital channel. – icici bank (india), optimus – payment invoicing and id card issuance system is an online web-based platform for online invoicing for payment disbursement, esigned invoices submission, ndc submission, id card issuance request, two-way digital communication for our outsourced agencies, online profile updating, submission of kyc documents and a declaration collection medium from vendors. online id card issuance is an industry first and is go green initiative. – oneconnect smart technology co., ltd. (shen zhen bank) (china) – the smart contract cloud platform builds a real-time risk prediction model based on the contract risk concern tag, which forecasts the probability of contract clause default and defines the clause risk level. simultaneously, it interfaces with external data sources, constructs a portrait of the contract subject, establishes mapping rules, generates risk alerts, and provides risk warning. – sberbank (russia), contact center internal improvement process – an intelligent quality management system that helps to provide the highest quality of service to customers. this system was built using advanced technologies and proprietary ai-based modules, which help the bank to gather insights and to make decisions. processing and storage of all data takes place in the bank’s internal circuit, ensuring a high level of security. 6. conclusions in today’s rapidly evolving digitalization processes, financial innovations play an extremely important role and contribute to the economic development of table 5 financial innovation in internal process improvement year innovator innovation 2015 denizbank (turkey) powerful teller-dashboard: enhancing customer experience at every contact point. denizbank developed powerful teller-dashboard to place greater emphasis and importance on the customer experience at every contact point. the platform aligns the customer relationship management (crm) strategies, predictive analytics and data mining analytics with a user friendly intelligent interface. 2016 alior bank s.a. smart collect – intelligent automated and scenario-based process of debt collection. with smart collect, alior bank introduced a sophisticated strategy of debt collection that is supported by data analysis tools, automated generation and management of client-based campaigns; and employing multiple contact channels tailored to each customer, including ai agents used for contact-center campaigns. 2017 denizbank (turkey) intelligent workforce management. instead of the siloed centralization of operations, intelligent workforce management effectively prioritizes based on crm techniques. it makes calculations based on comprehensive mathematical models, creates automated and competency-based task assignments, and forecasts workload balances based on a variety of data sources. 2018 live oak bank (wilmington, nc, usa) cloud service operations for boundary-less anytime-anywhere employee enablement. over the course of 18 months, live oak bank completely transitioned its internal it infrastructure and all applications to a pure microsoft azure cloud environment, empowering all employees to serve customers anytime, anywhere, with highly secure yet intuitively accessible cloud applications. employees can sign up new customers and service existing ones anywhere, anytime using only laptops, smartphones and the power of the cloud to originate and process loans, process deposits and provide other banking products and services. 2019 citi ventures (usa) proxymitysm is a new digital proxy voting platform for corporate shareholders. the platform directly connects and authenticates equity issuers and investors and makes the voting process more efficient, accurate and transparent. proxymity provides real-time transparency into the voting process, allowing instant amendment of instructions and much sought-after confirmation that votes have been recorded at the annual general meeting. source: systematized by the authors on the basis of (the bai global innovation awards, 2021) baltic journal of economic studies 198 vol. 7 no. 2, 2021 countries. banking institutions need to concentrate their potential as much as possible on identifying priority digital and innovative initiatives, taking into account current challenges and threats. after all, the effective use of specific financial innovations requires extensive knowledge of the peculiarities of their operation and careful analysis of their consequences. an important element in the process of implementing financial innovations is the use of a cross-functional approach, which allows for flexibility and the ability to transform changes over time. given the experience of the leading banking institutions that actively implement innovative developments, it should be noted that along with the benefits, financial innovations can bring new challenges and threats to all participants in this process. the authors prove that radical innovations can displace the dominant business model or technology and create a new market. the innovative developments of banks around the world for the period 2015–2019 are analysed within the article. particularly according to the bai global innovation awards the leading position in the ranking “most innovative financial services organization” in 2019 was occupied by city ventures (usa) that accelerates the adoption of the new business models and discovers new sources of value by exploring, incubating, and investing in new ideas in collaboration with the innovation ecosystem. in 2019 the chinese oneconnect financial technology co., ltd has implemented the fimax trade finance blockchain network – a blockchain solution that aims to organically connect different parties in trade finance (the blockchain architecture and cryptography solutions within this network allows to all parties to finance and exchange data safely and reliable while preserving full data privacy). modern financial innovation have societal and community impact, for instance, in 2019 jumo (south africa) offered a range of instant, affordable, high-quality borrowing choices via mobile phone to the group of customers who are traditionally determined as hard-to-reach (wherein the prohibitive operational and risk costs are leapfrogged by the jumo through implementation of sophisticated methods of data prediction and credit scoring). the most widespread application of financial innovations is traditionally in the internal process improvement. as an example it could be noted the citi ventures (usa) that developed the proxymitysm – the digital proxy voting platform for corporate shareholders (advantages of this innovation: directly connection and authentication of equity issuers and investors; 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(2021). development of the banking sector of ukraine in the space of formation of destructive consequences of the influence of the global financial and economic crises: economic and legal aspects. bulletin of the national academy of sciences of the republic of kazakhstan, 1(389), 137–145. doi: 10.32014/2021.2518-1467.19 xin long xu, tao shen, xi zhang, & hsing hung chen (2020). the role of innovation investment and executive incentive on financial sustainability in tech-capital-labor intensive energy company: moderate effect. energy reports, 6, 2667–2675. baltic journal of economic studies 59 vol. 2, no. 3, 2016 trends of the global market for venture funding: comparative analysis* yuriy drachuk1 international humanitarian university, ukraine elena stalinskay2 donetsk national university, ukraine natalia trushkina3 institute of industrial economics of national academy of sciences of ukraine, ukraine abstract. the purpose of the paper is to explore of the global venture capital market and to reveal of its development trends. methodology. to achieve this goal used methods: statistical analysis, forecasting method autoregression model, the calculation of the coefficient of variation, spearman rank correlation coefficient and linear pearson correlation coefficient. results. the analysis of the development of the global venture capital market for the years 2007-2015 executed. the coefficients of variation of the volume of venture capital investment and the number of venture capital deals are designed. according to the calculations, variations in the volume of venture capital investment rate is 11.8%, which is almost 2.1 times higher than the value of the coefficient of variation in the number of venture capital deals in the global market of venture capital investments (5.7%). it means: the actual data volume of venture capital investment and the number of venture capital deals are homogeneous collections, because the values of the coefficients of variation of these indices is less than 33%. a characteristic feature of these indicators is a low level of variability and minor fluctuations, that is, a tendency even venture investments of innovative development in the world. to determine the closeness of the connection between the amount of capital raised in the ipo, and the number of transactions spearman rank correlation coefficient is calculated, as well as the strength of correlation between the volume of investment and the number of transactions in the global market transactions m&a – linear pearson correlation coefficient. between the amount of capital raised in the ipo, and the amount of venture capital transactions revealed a strong positive correlation (spearman's rank correlation coefficient close to 1). this indicates positive trends in the development of the global market of venture ipo, because by investing venture capital in innovation is a process to conclude the venture capital transactions. according to the calculations of linear pearson correlation coefficient revealed a moderate correlation between the volume of venture capital investment and the number of transactions in the global market for m&a transactions (value of the linear correlation coefficient is 0.68). practical implications. to enable the development of the market of venture investments advisable to implement measures of state support for the development of venture capital: direct action: specific mechanisms of state support to increase the venture capital proposals (tax incentives, state riskier equity investments and state loans); indirect action: development of competitive capital markets for small companies, expanding the range of products offered by financial institutions, the development of long-term sources of capital, to simplify the formation of venture capital funds procedure, stimulating interaction between large and small enterprises and financial institutions, promotion of entrepreneurship. value/originality. on the basis of generalization of foreign experience mechanisms to encourage venture capital financing of innovative development of industry identified and the use of these mechanisms in terms of ukraine. in the future, the development of proposals to attract venture capital funds to enhance the innovative development of domestic industrial production is planned. key words: venture investment, innovation development, international experience, global market, venture capital, analysis, forecasting. jel classification: d92, o31, f01, f02, g24, c40, c53. corresponding author: 1 department of business administration and corporate security, international humanitarian university. e-mail: tek1_iep@mail.ru 2 department of economics of enterprise, donetsk national university. e-mail: stalinskaya.elena@gmail.com 3 section of problems of perspective development of energy sector, institute of industrial economics of national academy of sciences of ukraine. e-mail: nata_tru@ukr.net * исследование выполнено в рамках научно-исследовательской работы института экономики промышленности нан украины «развитие публично-частного партнерства в процессе модернизации угольной промышленности и тепловой энергетики» (№ госрегистрации 0115u001638) и кафедральной научно-исследовательской работы международного гуманитарного университета «совершенствование механизмов управления эффективностью деятельности и интенсификации бизнес-процессов производственного и непроизводственного секторов экономики» (№ госрегистрации 01150001935). baltic journal of economic studies 60 vol. 2, no. 3, 2016 1. введение одним из важнейших факторов развития экономики в условиях глобализации и интеграции является венчурное финансирование. управление финансовыми и информационными потоками, формирование каналов коммуникаций и распределения продукции с использованием информационных технологий, принципов развития предпринимательской деятельности в мировом масштабе и обслуживания потребителей невозможно без прорывных инноваций. в современных условиях активизации институционального развития главной задачей государства является формирование основ инновационной экономики на основе реализации модели публично-частного партнерства. особое внимание при этом должно уделяться созданию и развитию механизмов венчурного инвестирования, выступающего в качестве не только источника капитала и бизнес-компетенций, но и одного из главных факторов инновационной системы. в центре внимания ученых и практиков находятся вопросы привлечения инвестиций, поскольку адекватное финансирование жизненно необходимо для хозяйственной деятельности субъектов экономики, определяя тем самым процесс экономического роста страны в целом: – зарубежный опыт венчурного инвестирования инновационной трансформации экономики, модели развития венчурной деятельности и инструменты государственной поддержки венчурных фондов (sabirov, 2013; shatyrko, 2014; adamenko, 2011; dmitrov, 2014; ilyina, 2013); – особенности венчурного финансирования в странах с транзитивной экономикой (sidorenko, khomyk, 2014) и государственного регулирования венчурного инвестирования в зарубежных странах (drachik, 2011; lobas, 2013; klimenko, 2012); – основные показатели развития глобального рынка венчурных инвестиций (vlasov, 2014; stanislavyk, filippov, 2009); практический опыт создания инновационных структур и содействия развитию инновационного предпринимательства на основе привлечения различных источников финансирования (soloviev, koreniako, golovatyuk, 2008); научно-практические предложения по совершенствованию действующего законодательства для внедрения венчурных фондов (slobodyan, 2013); – расширенный перечень источников финансирования целевых программ и модернизации экономики на основе венчурных фондов, предложения по формированию государственной программы и концепции развития сектора венчурных фондов, созданию центров венчурного предпринимательства (arhiyereyev, tarasenko, 2011; mozhaykina, sahakyan, 2014; babaryka, 2011); – целесообразность формирования модели институционального механизма использования венчурного капитала, заключающаяся во взаимодействии инновационных предприятий и венчурных инвесторов; методический подход к определению структуры венчурного цикла; усовершенствованный механизм венчурного финансирования (polyak, 2012). венчурный капитал, как один из источников финансирования развития компаний с высоким показателем добавленной стоимости, является неотъемлемой частью управления корпоративными финансами. на основе анализа научных источников выявлено, что поиск и определение механизмов стимулирования венчурного финансирования инновационной деятельности промышленности остается актуальной проблемой, требующей углубления научных исследований. цель данной работы состоит в исследовании глобального рынка венчурного финансирования и выявлении тенденций его развития. для достижения поставленной цели определены и решается следующий комплекс задач: анализ показателей развития глобального рынка венчурных инвестиций за 2007–2015 гг.; расчет коэффициентов вариации объема венчурных инвестиций и количества венчурных сделок; расчет коэффициента ранговой корреляции спирмена, корреляционной связи между объемом инвестиций и количеством сделок на глобальном рынке сделок м&a – линейным коэффициентом корреляции пирсона – для определения тесноты связи между объемом капитала, привлеченного в ходе ipo, и количеством сделок; определение механизма стимулирования венчурного финансирования инновационного развития промышленности на основе обобщения зарубежного опыта. для решения отмеченных научных задач использованы методы исследования: статистический анализ, метод прогнозирования – авторегрессионная модель, расчет коэффициента вариации, коэффициента ранговой корреляции спирмена и линейного коэффициента корреляции пирсона. 2. тенденции развития глобального рынка венчурных инвестиций в последние годы на глобальном венчурном рынке наблюдаются структурные изменения. в результате медленного восстановления мировой экономики и нестабильной ситуации на фондовых рынках усиливается глобализация венчурного капитала, которая проявляется либо в виде привлечения компаниями источников зарубежного финансирования и выхода на иностранные фондовые биржи или продажи зарубежному стратегическому инвестору, либо в виде открытия фондами представительств за рубежом и содействия своим портфельным компаниям в работе на новых рынках. из анализа статистических данных следует, что объем инвестиций на глобальном венчурном рынке снизился за 2007–2015 гг. на 17,1%, а количество венчурных сделок – на 10,9% (табл. 1). baltic journal of economic studies 61 vol. 2, no. 3, 2016 таблица 1 динамика показателей развития глобального рынка венчурных инвестиций годы показатели объем инвестиций, млрд долл. сша количество венчурных сделок 2007 49,6 5797 2008 50,7 5424 2009 35,1 4732 2010 46,1 5311 2011 54,2 5756 2012 46,8 5612 2013 44,3 5348 2014 42,7 5254 2015 41,1 5163 темпы изменений к 2007 г., % 82,9% 89,1% источник: dow jones venture source на основе фактических данных объема венчурных инвестиций и количества венчурных сделок рассчитан коэффициент вариации этих показателей (v) как отношение среднеквадратического отклонения (σ) к средней арифметической величине показателя (xср.) (табл. 2). коэффициент вариации является характеристикой однородности совокупности, по его величине можно судить о степени вариации признаков, об однородности состава совокупности. чем больше его величина, тем больше разброс значений признака вокруг средней и менее однородна совокупность по составу, то есть чем больше значение коэффициента вариации, тем больше изменчивость признака. если коэффициент вариации меньше 33%, то такая совокупность считается однородной. по расчетам, коэффициент вариации объема венчурных инвестиций составляет 11,8%, что почти в 2,1 раза превышает значение коэффициента вариации количества венчурных сделок на глобальном рынке венчурных инвестиций (5,7%), что означает: фактические данные объема венчурных инвестиций и количества венчурных сделок являются однородными совокупностями, поскольку значения коэффициентов вариации этих показателей меньше 33%. характерным признаком этих показателей является низкий уровень изменчивости и незначительные колебания, то есть наблюдается тенденция равномерного венчурного инвестирования инновационного развития в мире. таблица 2 показатели вариации объема венчурных инвестиций и количества венчурных сделок показатели объем венчурных инвестиций, млрд долл. сша количество венчурных сделок xср. 45,6 5377 σ 5,4 309 v, % 11,8% 5,7% источник: авторские расчеты сша и европа являются наиболее устойчивыми рынками венчурного инвестирования. на долю этих двух рынков в 2015 р. в среднем приходилось 82% общего объема инвестиций и 86% общего количества венчурных сделок. при этом удельный вес сша в общем количестве венчурных сделок повысился в 2015 г. по сравнению с 2007 г. на 9%, а европы снизился на 7% (табл. 3). таблица 3 динамика удельного веса сша и европы в общем объеме венчурных инвестиций и количестве венчурных сделок на рынке венчурного капитала, % годы показатели объем инвестиций, млрд долл. сша количество венчурных сделок сша европа сша европа 2007 69 15 54 30 2008 66 16 56 27 2009 69 16 58 27 2010 63 15 59 26 2011 66 13 60 22 2012 67 13 62 22 2013 69 14 61 25 2014 68,9 13,8 62 24 2015 68,8 13,6 63 23 источник: dow jones venture source расчеты, полученные на основе авторегрессионной модели, свидетельствуют о том, что на глобальном рынке венчурного капитала в 2016 г. возможна тенденция снижения объема венчурных инвестиций на 20,2% (39,6 млрд долл. сша), количества венчурных сделок – на 12,5% (5072). при этом по прогнозам, удельный вес сша в общем объеме венчурных инвестиций в 2016 г. сократится на 0,3% по сравнению с 2007 г. и составит 68,7%; европы – на 1,6% и составит 13,4%. удельный вес сша в общем количестве сделок увеличится в 2016  г. по сравнению с 2007 г. на 10,6% и составит 64,6%, европы – уменьшится на 7,8% и составит 22,2%. 3. глобальные тенденции отраслевого распределения венчурных инвестиций из анализа глобальных тенденций отраслевого распределения венчурных инвестиций, которые сложились на современном этапе, значительный удельный вес венчурных инвестиций приходится на сектора информационных технологий, здравоохранения, потребительских услуг, деловых и финансовых услуг. за 2007–2015 гг. объем венчурных инвестиций в секторе информационных технологий сократился на 45,2%, а количество венчурных сделок – на 31,7%; в секторе здравоохранения, соответственно, на 39,9% и 28,7%. объем венчурных инвестиций в секторе потребительских услуг вырос за этот период на 34,4%, а количество венчурных сделок – на 30,4%; в секторе деловых baltic journal of economic studies 62 vol. 2, no. 3, 2016 и финансовых услуг, соответственно, на 29,2% и 35,1% (табл. 4). совокупный удельный вес этих секторов в общем объеме венчурных инвестиций составил в 2015 г. 83,7% (в  2007 г. – 87,9%), в общем количестве венчурных сделок – 89,6% (в 2007 г. – 87,5%). при этом за 2007–2015 гг. наблюдалось сокращение удельного веса сектора информационных технологий на 11,4% в общем объеме инвестиций и на 8,2% в общем количестве венчурных сделок; сектора здравоохранения, соответственно, на 7,9% и 4%. в секторах потребительских и деловых и финансовых услуг, наоборот, произошел рост удельного веса. так, удельный вес сектора потребительских услуг увеличился в 2015 г. на 7,7% в общем объеме венчурных инвестиций и на 7,1% в общем количестве венчурных сделок; удельный вес сектора деловых и финансовых услуг, соответственно, на 7,4% и 7,6% (табл. 5). при этом, в 2016 г. возможна тенденция снижения объема венчурных инвестиций и количества венчурных сделок в секторах информационных технологий и здравоохранения. а в секторах потребительских и деловых и финансовых услуг и в дальнейшем прогнозируется рост значений этих показателей. так, по расчетам с использованием авторегрес сионной модели, в секторе информационных технологий общий объем инвестиций уменьшится в 2016 г. на таблица 4 динамика объема глобальных венчурных инвестиций и количества венчурных сделок по секторам годы сектора информационных технологий здравоохранения потребительских услуг деловых и финансовых услуг (1) (2) (1) (2) (1) (2) (1) (2) 2007 16735 2046 14290 1267 6073 892 6541 861 2008 14293 1812 12120 1190 7407 910 7244 786 2009 9533 1488 10539 1126 5116 778 4575 716 2010 11607 1608 10920 1153 9432 972 5961 840 2011 12000 1725 12121 1139 12602 1244 8485 964 2012 13377 1795 9990 1005 9712 1282 7317 850 2013 11181 1561 9959 984 8385 1113 8240 1080 2014 10126,6 1477 9247 943 8271,8 1138 8343,8 1121 2015 9171,7 1397 8586 903 8160 1163 8448,9 1163 темпы изменений к 2007 г., % 54,8 68,3 60,1 71,3 134,4 130,4 129,2 135,1 обозначения: (1) – общий объем инвестиций, млн долл. сша; (2) – общее количество венчурных сделок источник: dow jones venture source таблица 5 удельный вес сектора в общем объеме инвестиций и количестве венчурных сделок, % сектор показатели удельный вес в общем объеме инвестиций, % удельный вес в общем количестве венчурных сделок, % 2007 г. 2015 г. 2007 г. 2015 г. информационные технологии 33,7 22,3 35,3 27,1 здравоохранение 28,8 20,9 21,9 17,5 потребительские услуги 12,2 19,9 15,4 22,5 деловые и финансовые услуги 13,2 20,6 14,9 22,5 источник: dow jones venture source таблица 6 прогнозные значения объема венчурных инвестиций и количества венчурных сделок в 2016 г. (в разрезе секторов) сектор показатели объем инвестиций количество венчурных сделок млн долл. сша 2016 г. к 2007 г., % ед. 2016 г. к 2007 г., % информационные технологии 8306,8 49,6 1321 64,6 здравоохранение 7972,0 55,8 865 68,3 потребительские услуги 8049,9 132,6 1189 133,3 деловые и финансовые услуги 8555,4 130,8 1206 140,1 расчеты полученные на основе авторегрессионной модели baltic journal of economic studies 63 vol. 2, no. 3, 2016 50,4% по сравнению с 2007 г., количество венчурных сделок – на 35,4%; в секторе здравоохранения, соответственно, на 44,2% и на 31,7%. общий объем инвестиций в секторе потребительских услуг увеличится в 2016  г. на 32,6% по сравнению с 2007 г., количество венчурных сделок – на 33,3%; в секторе деловых и финансовых услуг, соответственно, на 30,8% и на 40,1% (табл. 6). 4. растущая роль корпоративных венчурных инвестиций в настоящее время репутация венчурного фонда очень важна. фонд, имеющий лучшую репутацию, может диктовать свои условия и платить меньше (на 10–14%) за приобретение долей в компаниях, чем менее известные фонды. фонды способствуют росту стоимости портфельных компаний за счет менторской деятельности, например, участия в работе советов директоров, корпоративном управлении, управлении кадрами, координации деятельности и разработке стратегий. как показывает анализ, за 2003–2013 гг. глобальными венчурными фондами было привлечено 15% капитала, или 56,7 млрд долл. сша . всего венчурными фондами привлечено капитала на сумму 378,1 млрд долл. сша . в текущих рыночных условиях институциональных инвесторов привлекают правильно позиционируемые сделки. за последние 2 года 82% институциональных инвесторов вкладывали средства в акции компаний перед проведением или в ходе ipo (первичное публичное размещение). такие инвесторы, как правило, предпочитают компании, которые выходят на рынок подготовленными, с конкретной оценкой, имеют квалифицированный персонал и хорошую инвестиционную историю. бизнес-ангелы (частные венчурные инвесторы, обеспечивающие финансовую и экспертную поддержку компаний на ранних этапах развития) и краудфандинговые платформы (коллективное сотрудничество людей (доноров), которые добровольно объединяют свои деньги или другие ресурсы вместе, как правило, через интернет, чтобы поддержать усилия других людей или организаций (реципиентов), продолжают расширять свое присутствие и компенсировать нехватку инвестиций в компании, находящиеся на начальной стадии развития. причиной недостатка инвестиций в этом сегменте является переориентация венчурных фондов на финансирование быстрорастущих компаний на более поздних стадиях развития. рост числа сделок, закрываемых фондами при участии бизнес-ангелов, ведет к снижению уровня риска для венчурных фондов. анализ статистических данных за 2007–2015 гг. свидетельствует, что удельный вес венчурных сделок с участием бизнес-ангелов в сша вырос на 4%, в европе – на 4,8%, китае – на 0,3%, индии – на 1,7%, а в израиле уменьшился на 1% (табл. 7). таблица 9 динамика объема венчурных инвестиций в разрезе стран, млрд долл. сша годы страны сша европа израиль китай индия 2007 34,3 7,5 1,9 3,8 1,0 2008 33,2 7,8 2,2 5,0 1,7 2009 24,5 5,6 0,9 2,8 0,9 2010 29,2 7,0 1,8 6,0 1,0 2011 35,8 7,2 1,9 6,4 1,6 2012 32,1 6,2 1,0 5,0 1,6 2013 30,8 6,8 1,6 2,4 1,4 2014 29,8 6,6 1,4 2,1 1,36 2015 28,9 6,4 1,2 1,9 1,33 темпы изменений к 2007 г. 84,3 85,3 63,2 50,0 133,0 источник: dow jones venture source таблица 7 удельный вес венчурных сделок с участием бизнес-ангелов (в разрезе стран), % годы страны сша европа израиль китай индия 2007 3,2 2,7 1,7 2,7 3,2 2008 4,8 4,5 1,3 2,6 3,6 2009 4,3 4,3 2,7 1,4 2,1 2010 5,6 4,1 3,4 0,8 0,9 2011 7,4 4,8 7,4 0,5 3,0 2012 6,5 5,4 1,2 0,9 11,1 2013 6,4 6,1 1,7 3,7 7,0 2014 6,8 6,8 1,1 3,3 5,9 2015 7,2 7,5 0,7 3,0 4,9 источник: dow jones venture source таблица 8 динамика количества сделок на мировом венчурном рынке (в разрезе стран) годы страны сша европа израиль китай индия 2007 3129 1755 281 393 100 2008 3076 1473 286 360 119 2009 2781 1282 177 310 96 2010 3154 1398 160 372 116 2011 3577 1300 165 393 181 2012 3601 1270 140 239 224 2013 3283 1327 148 233 213 2014 3295 1247 128 212 236 2015 3308 1172 111 193 261 темпы изменений к 2007 г. 105,7 66,8 39,5 49,1 261,0 источник: dow jones venture source за этот период на мировом венчурном рынке наблюдалось сокращение количества венчурных сделок. так, количество венчурных сделок снизилось в европе baltic journal of economic studies 64 vol. 2, no. 3, 2016 на 33,2%, в китае – на 50,9%, в израиле – на 60,5%, а в индии наоборот увеличилось на 161%, в сша – на 5,7% (табл. 8). при этом объем венчурных инвестиций снизился в 2015 г. по сравнению с 2007 г. в сша на 15,7%, в европе – на 14,7%, израиле – на 36,8%, китае – на 50%, а в индии вырос на 33% (табл. 9). как видно из анализа, сша и европа являются лидерами на глобальном венчурном рынке. за 2007–2015 гг. их совокупный удельный вес в общем объеме венчурных инвестиций вырос на 1,6%, а в общем количестве венчурных сделок – на 1,9% (табл. 10). расчеты, полученные с использованием авторегрессионной модели, показывают, что удельный вес венчурных сделок с участием бизнес-ангелов увеличится в 2016 г. по сравнению с 2007 г. в сша на 4,5%, европе – на 5,6%, индии – на 0,9%. при этом в израиле прогнозируется снижение удельного веса венчурных сделок с участием бизнес-ангелов на 1,3%, а в китае этот показатель останется на том же уровне, что и в 2007 г. за 2007–2016 гг. объем венчурных инвестиций возрастет в индии на 29%, в сша уменьшится на 18,7%, европе – на 17,3%, израиле – на 47,4%, в китае – на 55,3%. количество венчурных сделок за этот период увеличится в таблица 10 удельный вес стран в общем объеме инвестиций и количестве венчурных сделок на глобальном венчурном рынке показатели / годы страны сша европа китай израиль индия удельный вес в общем объеме венчурных инвестиций, % 2007 69,2 15,1 7,7 3,8 2,0 2015 70,3 15,6 4,6 2,9 3,2 удельный вес в общем количестве венчурных сделок, % 2007 54,0 30,9 6,8 4,8 1,7 2015 64,1 22,7 3,7 2,1 5,1 источник: dow jones venture source таблица 11 прогнозные значения показателей развития венчурного рынка в разрезе стран в 2016 г. показатели страны сша европа израиль китай индия удельный вес венчурных сделок с участием бизнес-ангелов, % 7,7 8,3 0,4 2,7 4,1 объем венчурных инвестиций, млрд долл. сша 27,9 6,2 1,0 1,7 1,29 темпы изменений к 2007 г. 81,3 82,7 52,6 44,7 129,0 удельный вес в общем объеме венчурных инвестиций, % 70,5 15,7 2,5 4,3 3,3 количество венчурных сделок 3321 1101 97 175 289 темпы изменений к 2007 г., % 106,1 62,7 34,5 44,5 289,0 удельный вес в общем количестве венчурных сделок, % 65,5 21,7 1,9 3,5 5,7 расчеты, полученные на основе авторегрессионной модели таблица 12 динамика показателей развития глобального рынка венчурных ipo и сделок m&a с участием компаний, получавших венчурное финансирование годы глобальный рынок венчурных ipo глобальный рынок сделок m & a объем капитала, привлеченного в ходе ipo, млрд долл. сша количество сделок ipo объем инвестиций, млрд долл. сша количество сделок 2007 14,9 163 69,1 909 2008 1,4 33 42,8 762 2009 5,5 56 34,2 698 2010 26,3 212 54,8 894 2011 22,1 163 65,4 834 2012 16,1 115 56,3 722 2013 6,9 87 50,9 639 2014 5,0 62 45,9 598 2015 3,6 44 41,3 559 темпы к 2007 г., % 24,4 26,9 59,8 61,5 источник: dow jones venture source baltic journal of economic studies 65 vol. 2, no. 3, 2016 индии на 189%, в сша на 6,1%, в европе, наоборот, уменьшится на 37,3%, израиле – на 65,5%, в китае – на 55,5% (табл. 11). объем капитала, привлеченного в ходе венчурных ipo, сократился за 2007–2015 гг. на 75,6%, количество сделок – на 73,1%. объем венчурных инвестиций на рынке глобальных сделок m&a (сделки слияний и поглощений) при участии компаний, которые получают венчурное финансирование, уменьшился за это период на 40,2%, количество сделок – на 38,5% (табл. 12). по общему объему капитала, привлеченного в ходе ipo, и количеству венчурных сделок на глобальном рынке венчурных ipo на основе коэффициента корреляции ранга спирмена определяется теснота (сила) и направление корреляционной связи между двумя переменными. по расчетам, значение коэффициента корреляции спирмена составляет 0,95. таким образом, между объемом капитала, привлеченного в ходе ipo, и количеством венчурных сделок выявлена сильная теснота связи, поскольку коэффициент ранговой корреляции спирмена приближается к 1. при этом знак «+» означает, что между показателями существует прямая корреляционная связь, то есть большему значению объема венчурных инвестиций соответствует большее значение количества венчурных сделок. это свидетельствует о положительной тенденции развития глобального рынка венчурных ipo, поскольку при вложении венчурного капитала в инновации происходит процесс заключения венчурных сделок. сила связи между двумя признаками определяется линейным коэффициентом корреляции карла пирсона (основатель математической статистики, один из основателей биометрии). коэффициент корреляции пирсона (обозначается «r») в статистике, показатель корреляции (линейной зависимости) между двумя переменными x и y, который принимает значения от -1 до +1 включительно. он широко используется в науке для измерения степени линейной зависимости между двумя переменными. знак коэффициента показывает «направление» связи. положительный коэффициент корреляции (r> 0) свидетельствует о «прямой» связи между признаками (такой, когда увеличение значения одного признака увеличивает значение другого признака), а отрицательный (г <0) – об «обратной» связи (такой, когда рост одного признака ведет к уменьшению другого признака). по расчетам линейных коэффициентов корреляции пирсона, выявлена умеренная корреляционная связь между объемом венчурных инвестиций и количеством сделок на глобальном рынке сделок m&a (значение линейного коэффициента корреляции составляет 0,68). прогнозируется, что объем капитала, привлеченного в ходе ipo, снизится в 2016 г. на 82,6% и составит 2,6 млрд долл. сша, а количество сделок на глобальном рынке венчурных ipo – на 80,4% и составит 32. объем инвестиций на глобальном рынке сделок m&a сократится в 2016 г. на 46% (37,3 млрд долл. сша), а количество сделок – на 42,5% (523 венчурных сделок). для активизации развития рынка венчурных инвестиций целесообразно реализовывать мероприятия государственной поддержки развития венчурного капитала: – прямые мероприятия: конкретные механизмы государственной поддержки, направленные на увеличение предложений венчурного капитала (налоговые стимулы, более рисковые государственные инвестиции в акционерный капитал и государственные кредиты); – косвенные мероприятия: развитие конкурентных фондовых рынков для малых фирм, расширение спектра предлагаемых финансовыми институтами продуктов, развитие долгосрочных источников капитала, упрощение процедуры формирования фондов венчурного капитала, стимулирование взаимодействия между крупными и малыми предприятиями и финансовыми институтами, поощрение предпринимательства. на основе анализа научной литературы систематизированы формы государственных инструментов, используемых для стимулирования венчурного инвестирования инновационного развития промышленности в разных странах мира: – прямое предоставление капитала венчурным фондам или малым предприятиям – капитал предоставляется как прямые инвестиции или кредиты под низкие проценты (в бельгии – это прямые государственные инвестиции, в дании – государственный кредит); – финансовые льготы для инвестирования венчурных фондов или малых предприятий – налоговые льготы или освобождение от налогообложения (великобритания); – государственные гарантии по кредитам венчурным фондам или новым малым компаниям (франция); – обеспечение вложений в акционерный капитал (финляндия); – правила, определяющие круг инвесторов, которым разрешается вкладывать средства в венчурные фонды (сша). все вышеперечисленные механизмы стимулирования венчурного финансирования инновационного развития промышленности целесообразно применять в условиях украины. 5. выводы государственные инвестиции в инновации и венчурную индустрию стали ключевым фактором успешной стабилизации и быстрого восстановления экономики после кризиса, а также возвращения на путь устойчивого развития. объемы государственной поддержки являются одним из ключевых факторов оценки привлекательности венчурного рынка страны с точки зрения инвесторов. капиталовложения в наукоемкие отрасли экономики способствуют увеличению инвестиций в целом, проведению инноваций и экономическому росту. исследование показывает, что наблюдается усиление роли крупных корпораций на мировом baltic journal of economic studies 66 vol. 2, no. 3, 2016 рынке венчурных инвестиций. корпорации стремятся финансировать и приобретать портфельные компании венчурных фондов для поддержания собственного стратегического и инновационного развития. если корпоративные венчурные инвесторы принимали участие в сделке (как правило, они предпочитали инвестировать в предприятия на поздних стадиях развития на американском рынке), то оценка приобретаемой компании обычно оказывалось выше, чем оценка аналогичной компании, не имеющей корпоративного инвестора. добавленная стоимость участия корпоративных инвесторов в капитале компании за последнее десятилетие в сша составляет 54%. таким образом, венчурные фонды вынуждены конкурировать как друг с другом, так и с альтернативными источниками финансирования. фондам необходимо показать, на что они способны в качестве институтов, стимулирующих рост и создающих добавленную стоимость для собственных портфельных компаний, предлагающих хорошие условия финансирования и последующую экспертную поддержку. по мере расширения опыта фондов повышается себестоимость инвестиций, что необходимо будет компенсировать увеличением доходности на вложенный капитал. в связи с этим важнейшим элементом стратегии венчурных фондов становится формирование конкурентных и комплексных предложений для потенциальных объектов инвестирования. тенденция к глобализации и привлекательность рынков стран брикс (бразилия, россия, индия, китай, южно-африканская республика) повлияли на стратегию фондов как в отношении привлечения средств из других стран, так и в плане выхода на иностранные фондовые рынки, продажи портфельных компаний иностранным стратегическим инвесторам, открытия зарубежных представительств фондов и содействия портфельным компаниям в освоении новых рынков. при недостатке частного капитала в период кризиса роль государства в поддержке национальной инновационной инфраструктуры существенно возрастает, особенно в капиталоемких и требующих долгосрочных инвестиций отраслях, например, в сфере здравоохранения и чистых технологий. государство становится активным участником венчурного рынка и оказывает помощь в привлечении средств частных инвесторов, разрабатывая новые формы поддержки бизнеса в изменяющихся условиях. период сокращения количества и размера венчурных фондов оказал существенное влияние на объемы средств, доступные для стартапов. в связи с недостатком финансирования со стороны частных венчурных фондов в этот период усилилась роль бизнес-ангелов и супербизнес-ангелов, инвестирующих в компании на ранних стадиях, роль корпоративного венчурного капитала на более поздних стадиях развития предприятий, а также роль государственных льгот и программ поддержки. к примеру, для поддержания венчурной экосистемы и компенсации недостатка посевного финансирования в 2011 г. правительством израиля принят закон о бизнес-ангелах, которым предоставлено им существенные налоговые льготы. в этот период государство становится все более значимым участником рынка как потенциальный lp-инвестор, или как соинвестор, разделяющий риски частного бизнеса, а также как инициатор программ поддержки фондов и их портфельных компаний. в качестве lp и активного участника венчурного рынка государственные структуры и банки заинтересованы в получении доходов на вложенные средства, стимулировании предпринимателей и развитии венчурного рынка. из практики, наиболее эффективными для поддержки компаний на раннем этапе развития оказываются следующие виды венчурных программ: государственные прямые инвестиции; льготы, предоставляемые инвесторам на ранних этапах развития малого и среднего предпринимательства; обеспечение акционерного капитала венчурных фондов, вкладывающих средства в эти компании; поддержка некоторых расходов фондов на ранних стадиях (например, расходы на экспертизу или текущие расходы), что позволяет увеличивать доход от портфельных инвестиций. перспективы дальнейших разработок в данном направлении заключаются в определении путей активизации венчурного инвестирования инновационного развития промышленности в разных странах мира и их применении в нынешних условиях украины. references adamenko, i. p. (2011). foreign experience in innovation policy. innovation policy and legislation in the european union and ukraine: formation, experience, approach areas: kiev international xxiv symposium on science of science and scientific and technological forecasting, kyiv, 2-3 june. kyiv, phoenix, pp. 10–11. arhiyereyev, s. & tarasenko t. (2011). state support production of high-tech and innovative products: foreign experience and lessons for ukraine. retrieved from: http://old.niss.gov.ua/monitor/ september08/6.htm. babaryka, o. v. (2011). state support innovation sphere: ukrainian and foreign experience. bulletin berdyansk university of management and business, 4(6), pp. 27–31. vlasov, i. v. (2014). global venture capital market: state and development trends. akademіc look around, 1(40), pp. 129–134. dmitrov, v. i. (2014). international experience financial regulation of investment and innovation. efficient economy, 7. retrieved from: http://www.economy.nayka.com.ua/?op =1&z=3214. baltic journal of economic studies 67 vol. 2, no. 3, 2016 drachik, n. v. (2011). problems of development of venture financing of innovative projects in russia. foreign experience. young scientist, 9(32), pp. 92–94. study of russian and international venture capital market for 2007–2013 (2014). moscow, rbk, 66 p. ilyina, k. a. (2013). international experience financial support innovative development of the economy. scientific bulletin of national forestry university of ukraine, 23.1, pp. 195–203. klimenko, v. (2012). venture financing innovative development: international experience and ukraine. retrieved from: http://jml.nau.edu.ua/index.php/jmv/article/viewfile/2875/2864. lobas, i. (2013). foreign experience of state support of venture investment innovation. bulletin of the national academy of public administration under the president of ukraine, 2: 196–203. mozhaykina, n. & sahakyan, k. (2014). problems of venture capital in the country utilities city, 113, pp. 117–125. polyak, m. (2012). features institutional structure of the mechanism of venture financing. economic journal university. pereyaslav-khmelnitsky, 19/2, pp. 254–258. sabirov, m. (2013). foreign experience of venture investment and internationalization. retrieved from: http://www.tisbi.ru/assets/site/science/documents/422-sabirov.pdf. sidorenko, i. & khomyk, d. (2014). the functioning venture capital market in transitive economies such as. bulletin of the chernihiv state technological university, 1(72), pp. 183–189. slobodyan, o. (2013). a venture investment fund, ukrainian phenomenon of collective investment or «kvazivenchurnyy» institution? bulletin of the supreme council of justice, 3(15), pp. 134–144. soloviev, v., koreniako, g. & golovatyuk, v. (2008). innovative development of regions: theory and practice. kyiv, phoenix, 224 p. stanislavyk, o. & filippov, v. (2009). place and role of venture capital in the innovation process. proceedings of the odessa polytechnic university, 1(33)–2(34), pp. 236–242. shatyrko, d. (2014). foreign experience of regulation of venture capital investment. retrieved from: www. ecfor_2014_4_12.pdf. юрий драчук, елена сталинская, наталия трушкина тенденции развития глобального рынка венчурного финансирования: сравнительный анализ1 аннотация. целью работы является исследование мирового рынка венчурного капитала и выявление тенденций его развития. методология. для достижения этой цели используются методы: статистический анализ, метод прогнозирования авторегрессионной модели, расчет коэффициента вариации, коэффициент ранговой корреляции спирмена и линейный коэффициент корреляции пирсона. результаты. выполнен анализ показателей развития глобального рынка венчурных инвестиций за 2007– 2015 гг. рассчитаны коэффициенты вариации объема венчурных инвестиций и количества венчурных сделок. по расчетам, коэффициент вариации объема венчурных инвестиций составляет 11,8%, что почти в 2,1 раза превышает значение коэффициента вариации количества венчурных сделок на глобальном рынке венчурных инвестиций (5,7%). это означает: фактические данные объема венчурных инвестиций и количества венчурных сделок являются однородными совокупностями, поскольку значения коэффициентов вариации этих показателей меньше 33%. характерным признаком этих показателей является низкий уровень изменчивости и незначительные колебания, то есть наблюдается тенденция равномерного венчурного инвестирования инновационного развития в мире. для определения тесноты связи между объемом капитала, привлеченного в ходе ipo, и количеством сделок рассчитаны коэффициент ранговой корреляции спирмена, сила корреляционной связи между объемом инвестиций и количеством сделок на глобальном рынке сделок м&a  – линейным коэффициентом корреляции пирсона. выявлено, что между объемом капитала, привлеченного в ходе ipo, и количеством венчурных сделок существует сильная прямая корреляционная связь, поскольку коэффициент ранговой корреляции спирмена приближается к 1. это свидетельствует о положительной тенденции развития глобального рынка венчурных ipo, поскольку при вложении венчурного капитала в инновации происходит процесс заключения венчурных сделок. по расчетам линейных коэффициентов корреляции пирсона, выявлена умеренная корреляционная связь между объемом венчурных инвестиций и количеством сделок на глобальном рынке сделок m&a (значение линейного коэффициента корреляции составляет 0,68). практическое значение. для активизации развития рынка венчурных инвестиций целесообразно реализовывать мероприятия государственной поддержки развития венчурного капитала, основными среди которых являются развитие конкурентных фондовых рынков для малых фирм, расширение спектра предлагаемых финансовыми институтами продуктов, развитие долгосрочных источников baltic journal of economic studies 68 vol. 2, no. 3, 2016 капитала, упрощение процедуры формирования фондов венчурного капитала, стимулирование взаимодействия между крупными и малыми предприятиями и финансовыми институтами, поощрение предпринимательства. значение/оригинальность. на основе обобщения зарубежного опыта определены механизмы стимулирования венчурного финансирования инновационного развития промышленности и применение этих механизмов в условиях украины. baltic journal of economic studies 28 vol. 8 no. 1, 2022 corresponding author: 1 administrative court of cassation in the supreme court, ukraine e-mail: irina05072015@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-1-28-35 conflict in the sphere of tax relations as a precondition for the emergence of a tax dispute iryna vasylieva1 abstract. in the article, the author notes that the relations arising between the subjects of public and private law in the process of financial activity of the state, are multidimensional in nature and in their social, political and legal content are conflicting. and these conflicts are caused primarily by contradictions between private and public property interests. conditioned by the implementation and enforcement of public-law interests, the desire of an authority subject to seize the financial means of a private subject becomes a consequence of the objectively existing contradiction between public and private interests. the taxpayer counteracts his subjective right – the right of ownership, which mediates the realization of his legitimate interest – the interest of owning, using and disposing of his property – to the demands of public authorities. resolution of such conflict is possible through legalization of financial claims of public authorities on the basis of legislative consolidation of strictly defined conditions, grounds and procedure for the recovery of private funds. the law for objective and subjective reasons is not free from gaps, which the legislator is objectively unable to provide. in addition, the reality is that in the ukrainian conditions the process of building a tax system is largely haphazard, with the absence of a definite program and direct dependence on the needs of the state budget. application of tax legislation in practice reveals the presence of contradictions with previously adopted acts of tax legislation. due to these circumstances, the conflict of interests in the sphere of tax legal relations lays the basis for the transition of a controversy to another stage, characterized by the emergence of different initial positions of the parties in the legal assessment of the essence of disputed tax-legal norms and, accordingly, the scope of their rights and obligations. the occurrence forms the basis for the emergence of a tax dispute, because it requires a solution, the implementation of which is impossible without recourse to the competent authorities of the state. in this regard, before the application of an interested person to a jurisdictional body, it is impossible to talk about the presence of a dispute. a tax dispute is a certain situation in the development of a conflict in the sphere of tax legal relations, or rather one of its stages – a stage aimed at resolving a conflict. key words: tax dispute, balance of interests, taxpayer, tax authority, tax law, public and private interests, conflict. jel classification: h20, k34 1. introduction interest in taxation as one of the institutions of social life was manifested practically at all stages of the development of human civilization. it is noteworthy that with the development of social relations and the strengthening of the role of taxes as one of the essential sources of public revenue, the question of the right of the state to levy taxes has lost its relevance and debatability. the question of the right of the state to levy taxes and the obligation of citizens to pay them can be left without consideration; we are left with the rationale for taxes which derives from the sovereignty of the state. development of market relations in ukraine is aimed at building an independent and autonomous state. they require socio-economic and legal reforms to create an effective tax system capable of ensuring the tax security of the state. given the particular importance for the state of compliance with the public interest in the field of taxation and the need to protect the rights and legitimate interests of taxpayers in the field of publiclaw relations, the issue of establishing the causes and resolution of conflicts in the field of tax relations requires proper attention. it should be noted that a special place among legal conflicts is occupied exactly by conflicts in the sphere of tax relations, as they relate to the defining for the state and private subjects sphere – financial. tax legal relations, by all accounts, are the most conflictual baltic journal of economic studies 29 vol. 8 no. 1, 2022 among others. implementation of tax-legal norms is accompanied by a significant number of legal conflicts due to different reasons. so, in particular, due to inefficient administration of taxes and fees, there are conflicts between tax authorities and taxpayers. timely identification of the causes of tax conflicts, forecasting their development and the use of effective ways of legal regulation can significantly reduce social tension in the tax sphere and the burden on the administrative courts to resolve tax disputes. proper execution by taxpayers of duties on payment of taxes and appropriate implementation by tax authorities of their powers ensure the balance of private and public interests in the tax sphere and prevent the emergence of conflicts. unfortunately, the practice of tax law enforcement in recent years shows the growth of tax conflicts. the above arguments show that today there is a need for rethinking the essence of tax conflicts and the development on this basis of new scientific-theoretical and practical provisions aimed at preventing and reducing them. 2. analysis of recent research and publications the issue of resolving tax disputes is relevant and studied in the literature of the country, in particular by such lawyers as o. m. bondarenko, o. o. dmytryk, v. o. kurylo, m. p. kucheriavenko, k. v. minaieva, a. o. monaienko, ye. a. usenko. the ratio of rights and obligations of taxpayers and the state, represented by the tax authorities, is the criterion that determines not only the legal status of the taxpayer, but also the freedom and openness of doing business in the state as a whole. unfortunately, there is an obvious imbalance of rights and obligations of taxpayers and the state in favor of the latter. the tax system reflects the contradictory nature of the country 's economic and political development. on the one hand, the tasks facing the public authorities need to maximize tax revenues. besides, there is an obvious need to develop the priority branches of economy, to support private business, which implies a liberal tax policy; reduction of tax rates, first of all, in the real sector of the national economy. taxation is predominantly aimed at current increases in tax revenues, resulting in an actually inflated aggregate burden of assessed taxes that average taxpayers cannot bear. it is true that the right to levy taxes is a partial manifestation in the state's power over its citizens. however, the fact that taxes are necessary in a modern state in no way means that each tax is justified in content, proportionality, and scope, nor that the overall tax burden imposed on taxpayers is justified. it is this circumstance that leads to many contradictions arising in the sphere of relations related to the calculation and payment of taxes and fees. as rightly points out yu. a. krokhina, relations and public relations arising between private and public entities in the process of financial activity of the state, are multidimensional, complex in nature, and in their social, political and legal content – at first, a conflictual nature. and these conflicts are caused primarily by contradictions between private and public property interests. the state as an exponent of public interests expresses group interests, always coinciding with the interests of an individual (krokhina, 2003). according to m. v. karasova, if existing at the level of society as a whole, the objective need for financial support of the state is transformed into a political interest and is realized by the whole society, then at the level of an individual such transformation is objectively absent. that is why each individual is not interested in paying taxes to the state budget, as it is associated with a direct restriction of his personal interests (karasova, 2003). 3. regulatory and legal framework for tax relations public interest, which directly determines the degree of normative regulation of these tax relations, forces the state to introduce these relations in a rigid legal framework in order to eliminate the discretion of the parties or to minimize it in the payment of obligatory payments. objectives of legal regulation are achieved by enshrining positive obligations and legal prohibitions. however, it is important to note that in a state governed by the rule of law, this method of legal regulation, in turn, dictates the need to provide certain legislative conditions for the implementation of the requirements of public authority, as well as define and legislate mechanisms to make tax collection arbitrary. in this connection, one of the important guarantees for taxpayers against unjustified deprivation of their property, developed at the present stage of development of the theory of tax law, is the establishment by law of the types and bases of mandatory payment, the order of its payment, the limits of legitimate requirements of the state, as well as the limits of power competence of the state represented by the relevant authorized government bodies. in the process of formation and development of tax legislation, it can be argued that legally established tax can be considered only when its collection is provided by the relevant general legal bases of legislation by an act of tax legislation, adopted and enacted in the prescribed manner, which defines all the essential elements of taxation and provides legal guarantees to taxpayers against arbitrary deprivation of their property. thus, in particular, according to item 4.1.9 of article 4 of the tax code of ukraine, the principle of baltic journal of economic studies 30 vol. 8 no. 1, 2022 stability of legislation, according to which changes in any elements of taxes and fees cannot be introduced later than six months before the beginning of a new budget period in which new rules and rates will be in effect, is enshrined. taxes and fees, their rates as well as tax benefits may not be changed during the budget year (tax code of ukraine). according to the decision of the supreme court of cassation administrative court of march 17, 2021 in case no. 816/846/16, the special principles of tax law are aimed, among other things, at specifying one of the aspects of the principle of legal certainty – the requirement of reasonable stability of law, which predetermines the need for permanence of legal prescriptions over time. similar legal conclusions have already been made by the supreme court in its ruling of september 7, 2018 in case no. 826/18755/15. in the context of the established circumstances of the case and disputed legal relations of the parties, the supreme court considers it necessary to note that subparagraph 4.1.9 of paragraph 4.1 of article 4 of the tax code of ukraine stability principle clearly states that changes in any elements of taxes and fees may not be introduced until six months before the new budget period in which the new rules and rates will be valid. taxes and fees, their rates, as well as tax exemptions may not be changed during the budget year. according to the same decision of the administrative court of cassation in the supreme court, the principle of stability of tax law provides for the mandatory observance of two prohibitions: 1) prohibition of changes to any elements of taxes and fees later than six months before the start of the new fiscal period in which the new rules and rates will apply; 2) prohibition of changes in taxes and fees, their rates, and tax incentives during the fiscal year. thus, the historical (in historical development) and normative approach to understanding the provisions of article 252 of the tax code of ukraine, in particular paragraph 252.20, gives reasons to argue that the changes in the tax (fee) rates, introduced by the laws no. 1621-vii and no. 71-viii in 2014 less than six months before the new budget period (2015), can be applied in accordance with the principle of tax stability only for the new budget period – that is from 2016. it is in this case the condition of subparagraph 4.1.9 of paragraph 4.1 of article 4 of the tax code of ukraine, according to which changes to any elements of taxes and fees may not be introduced later than six months before the beginning of a new fiscal period in which the new rules and rates will operate, that is, the principle of stability of tax relations will be met. the specified principle not only determines the rules of norm-setting in the sphere of taxation, but also determines the scope of rights and obligations in this sphere. in particular, based on the principle of stability, the taxpayer has the right to the invariability of the tax regime, elements of the tax and predictability of the introduction (establishment) of the tax obligation by the state, due, among other things, to the advance introduction of appropriate changes clearly defined time limits. on these grounds, the appellant's arguments for deviation from the legal position of the supreme court in the rulings on cases no. 804/1473/17, no. 806/622/16, no. 820/1198/16 are unfounded, because the subject of the dispute in these cases was the definition of real estate tax. at the same time, the courts in these cases proceeded from the application of the principle of tax stability due to the invariability of the taxation regime and the establishment of tax rates beyond the six-month period before the beginning of the new fiscal period. the supreme court states that the stability principle stated in article 4 of the tax code of ukraine as one of the key principles on which the tax legislation is based is applicable regardless of the type of tax (levy): national or local. this principle is recognized by the legislator as one of the basic principles of tax legislation. the provision of paragraph 4.1.9 of paragraph 4.1 of article 4 of the tax code of ukraine, defining the general basis for the stability of tax legislation, resulting from the need to ensure legal certainty in the performance of a person's tax obligations has a general meaning in the regulation of tax legal relations by acts of tax legislation. however, the legislative form of regulation of relations in the tax-legal sphere is not able to timely and adequately reflect the changes taking place in public life. 4. the legal nature of conflict in tax relations the process of improving the system of tax legislation cannot completely eliminate collisions of legal norms or contradictions between separate normative-legal acts. moreover, the desire of state authorities to increase the volume of public financial activity and, as a consequence, the natural response of the subject of private law, seeking to preserve their property, inevitably leads to conflict situations in the sphere of tax legal relations. the taxpayer opposes the demands of public authorities to his subjective right – the right of ownership, which mediates the realization of his legitimate interest – the interest of owning, using and disposing of his property. generalization and study of the features of the conflict from the standpoint of law is carried out by legal conflictology. in this case a legal conflict should be recognized as any conflict in which the dispute is somehow connected with the legal relations of the parties (their legal significant actions or states) and, therefore, the subjects or motivation of their behavior, or the object of the conflict have legal characteristics, and the conflict entails legal consequences. baltic journal of economic studies 31 vol. 8 no. 1, 2022 the specified system of signs shows that arising conflicts in the sphere of relations, regulated by tax legislation, by their legal nature are legal conflicts. the sphere of emergence of these conflicts is the financial activity of the state, and the content of conflicts are different interests of participants and their confrontation on realization of their interests. however, the presence of opposing interests of the subjects of tax legal relations does not yet mean the transformation of social-legal connection between them into a legal conflict. legal conflict will take place in case of committing by its parties diametrically opposed actions (or inaction of one of the parties), the main motive of which is unwillingness to respect the rights and interests (or requirements) of the opposite subject. however, despite the fact that contradictions in the tax-legal sphere are of potential nature, they do not always entail the emergence of conflict situations. the initial possibility of contradictions to develop into legal conflicts, according to yu. a. krokhina, determines the need for imperative influence of the state on the behavior of subjects of financial law through appropriate legal means (krokhina, 2003). v. v. tylchyk notes that a tax dispute is a form of conflict resolution (conflict of interests) in the field of tax legal relations, which is public in nature, occurs between the state and taxpayers or other participants of tax legal relations on the application of tax law norms, resolved by an authorized jurisdictional body in a procedural order (tylchyk, 2010). in the proper performance by the obliged subjects of their duties and the appropriate implementation by the state of its financial competence, the conflict does not develop into a conflict, because adequately chosen legal mechanisms will maintain the necessary level of financial discipline. however, with the unwillingness of one party to comply with the legal prescriptions of the other and disagreement of the other party with the inaction of the first, there is a legal conflict in the financial and legal sphere. it is interesting to note the inverse relationship that exists between the legal conflict as a clash of contradictions and the effectiveness of legal regulation of relations in which the conflict occurs. timely identification of contradictions arising in the law enforcement activity, analysis, forecasting of their development should contribute to the choice of adequate legal means and optimization of legislation. it is in this regard, the studies devoted to the problems associated with the study of conflicts point to the positive nature of the latter, consisting in the function of stimulating the adaptation of the social system or its individual elements, including actors in a changing environment. conflicts are seen as a driving mechanism of social change, the processes of development, modernization and disintegration of exhaustible formations, and on this basis, in stable situations, conflicts identify problems, contribute to the formation of new needs and development trends, play an important role in the formation of interests. the positive role of conflicts is noted in legal science. so a. m. kurinnyi and v. i. myronov on the problem of conflicts point out that the conflict is a kind of springboard on which the effectiveness of legal norms and the ability of the state and society to really guarantee the implementation of human rights (kurinnyi, myronov, 1997). indeed, the conflict in law, being closely connected with the processes of lawmaking and law enforcement, thus, in the words of v. m. kudriavtsev, reflects its kind of internal cycle and life of law, the technology of its development and functioning (kudriavtsev, 1995). arising in relation to different legal acts and legal norms, contradictions are exacerbated due to the unequal attitude of subjects of law to one and the same legal norm, their different understanding of the meaning of the norm, the scope and limits of its action, the circle of persons to whom it applies. often there is selectivity in the choice of the norm of law to apply in a particular situation, related to those or other advantages, false starting position of one of the parties. the desire of one subject to seize financial means contrary to the wishes of the other party, conditioned by the implementation and ensuring of public-law interests, becomes a consequence of objectively existing contradiction between public and private interests. at the same time, the conflict of interests in the field of tax legal relations lays the foundation for the transition of the contradiction to another stage, characterized by the emergence of different initial positions of the parties in the legal assessment of the essence of disputed tax-legal norms and, accordingly, the scope of their rights and obligations. at this stage, the tax conflict acquires a so-called cognitive nature, due to the presence of a legal dispute and based on different understanding and interpretation of the relevant legal norm. at that, it is necessary to agree with the opinion of yu. a. krokhina, who believes that a cognitive conflict develops simultaneously with the conflict of financial interests or somewhat later – in the process of implementation of financial responsibility; however, in any case a cognitive conflict accompanies and develops a conflict of interests (krokhina, 2003). 5. causes of tax conflicts the essence of this type of conflict is the desire of each of the parties to the disputed tax-legal relationship to justify their own, often diametrically opposed position. conflict as a reality of social life is a consequence of a number of causes and conditions, and causality baltic journal of economic studies 32 vol. 8 no. 1, 2022 in the social sphere is characterized by considerable complexity and confusion. it is hardly possible to agree with the opinion of v. m. kudriavtsev that every social action entails a variety of different and even contradictory consequences; a conflict can ultimately be caused by completely innocent actions of individuals or groups in a fairly distant relationship with the opposing parties (kudriavtsev, 1992). however, the most complete picture of the causes of a particular legal conflict can be given by assessing the sphere of relations in which the corresponding conflict arises. such a feature of tax-legal relations as a high level of normative-legal regulation, based on the prevalence of legal prescriptions and prohibitions and due to the need to ensure both stable economic conditions for taxpayers, and guarantees against unreasonable requirements of public authorities. given this, the legal norm, being, on the one hand, a guide to the action of the subjects of legal relations, on the other hand, acts as a kind of source of contradiction. laws and regulations and the process of their implementation are constant indicators of legal conflicts. some conflicts are caused by regulations of poor quality, untimely or hastily adopted. conflict is also evident in the case of latent or apparent contradictions in one legal act or several acts regulating a certain issue. at the same time, the conditions with which a conflict may be associated can be both subjective and objective in nature. any legal conflict based on a norm of law is generated by a legal understanding – erroneous, ambiguous, etc. at the same time, for objective reasons, imbalances arise in the legal system due to either a delay in the adoption of a particular normative legal act, or a violation of the competence of the subjects of norm formation, or different legal regulation of the same issue. these reasons were most clearly identified at the beginning of the formation of the tax system. the tax law of ukraine was created hastily, in the new conditions of economic management, without any proper quality of the legislative and practical base. it was necessary to respond quickly to the revolutionary economic processes, to urgently replenish the respective budgets, and this could not but affect the level of legal technique of the adopted tax legal acts. as a result, the ukrainian tax system received the following legal problems: – contradiction of the tax legislation to the constitution of ukraine (decision of the constitutional court of ukraine of february 27, 2018 no. 1-p/2018 on the case of constitutional submissions of 48 people's deputies of ukraine on compliance with the constitution of ukraine (constitutionality) of provisions of paragraphs 13, 14 of paragraph 32 of section one of the law of ukraine "on amendments to the tax code of ukraine and some legislative acts of ukraine on tax reform" and the supreme court of ukraine on the compliance with the constitution of ukraine (constitutionality) of the first paragraph of subparagraph 164.2.19 paragraph 164.2 article 164 of the tax code of ukraine (the case of taxation of pensions) and monthly maintenance and principles of tax law (the decision of the constitutional court of ukraine of february 27, 2018); – contradictions of certain provisions of the tax code of ukraine. for example, the decision of the constitutional court of ukraine of june 5, 2019 no. 3-p(i)/2019 on the case on the constitutional complaint of limited liability company "metro cash & carry " on the compliance with the constitution of ukraine (constitutionality) of the provisions of paragraphs twenty-fourth, twenty-p' fifth, twenty-sixth section i of the law of ukraine "on amendments to the tax code of ukraine" to clarify certain provisions and eliminate contradictions arising from the adoption of the law of ukraine "on amendments to the tax code of ukraine on improvement of the investment climate in ukraine" of march 23, 2017 no. 1989-viii. the court finds that although the prescription concerning the nonapplication of limitation periods to these amounts of overpaid monetary obligations contributes to the continued maintenance of taxpayers' legitimate expectations of the possible return of overpaid land payment amounts, the provisions of the first sentence of paragraph twenty-six of section i no. 1989 prohibit the return of such land payment amounts. the constitutional court of ukraine concluded that there is a contradiction between the first and second sentences of paragraph twenty-six of section i of law № 1989, which led to legal uncertainty (the decision of the constitutional court of ukraine of june 5); – violation of the procedure for the adoption and entry into force of a legal and regulatory tax act; – inconsistency of subordinate acts with the tax code of ukraine. at the same time, to date, tax law, as noted by many experts in the field of tax law, remains one of the conflicting branches of the ukrainian system of law. 6. problems of law review and law enforcement in the sphere of tax legal relations the number of tax disputes arising between the state and taxpayers indicates, in particular, the unequal interpretation of tax law norms, which is the main cause of conflict situations in the sphere of tax legal relations. so, for example, 2020 was marked as the year without documentary tax audits, but the courts have considered thousands of tax disputes. in 2020 the courts considered 24.3 thousand cases totaling 79.1 billion uah. general statistics shows that about 58% of cases have been considered in favor of the state tax service. however, the statistics of the baltic journal of economic studies 33 vol. 8 no. 1, 2022 statements of claim for the recognition of illegal and the cancellation of tax notifications-decisions are still in favor of taxpayers, since from 9.8 thousand cases examined, in 5.7 thousand cases the decisions were made in favor of the taxpayers in the total amount of 22.52 billion uah (liga zakon). in addition to various other reasons, the effect of the introduction of a codified tax legal act was reduced by the fact that such an important basic document was adopted hastily, and along with it continued to operate both the previous tax laws and other sectoral acts containing the norms of tax legislation. further reform of the tax legislation was also carried out in a hurry, as a result of which the legislator often directly violated the principle of stability of the tax legislation, enshrining the temporary requirements for the adoption of acts of tax legislation. the mentioned circumstances led not only to internal contradictions and unwieldiness of the tax legislation, but also resulted, simply, in the irrelevance of some provisions of the tax code of ukraine. unfortunately, the current tax legislation is characterized by such phenomena as instability, complexity and inconsistency. contradictions in the acts of tax legislation between themselves or within the document are manifested both in the substance of tax requirements and formal features, which may provoke disagreement. a number of key concepts in tax and legal regulation have either received a truncated definition compared to other sectoral legislation that uses these concepts, or have different legal regulation by text. significant contradictions in the tax legislation are inherent in the provisions relating to the establishment of objects of taxation, extremely unacceptable, since it is these provisions that secure the emergence of tax debt. problems of legal understanding and law enforcement in the sphere of tax legal relations are also worsened by a rather high volume of departmental non-regulation. the ministry of finance of ukraine, the state tax service of ukraine as interested parties disputable norms are interpreted not in favor of taxpayers. at the same time, often departmental acts of these subjects of power from the clarification of the acts of tax legislation often establish rules of conduct, providing a binding obligation for taxpayers. and according to paragraph 4.1.4 of article 4 of the tax code of ukraine, the presumption of legitimacy of decisions of the taxpayer in the case, if the norm of the law or other regulatory legal act issued on the basis of law, or if the rules of different laws or different regulatory legal acts suggest ambiguous (multiple) interpretation of rights and obligations of taxpayers or regulatory authorities, due to which there is an opportunity to decide in favor of both the taxpayer and the controlling body (tax code of ukraine). in addition, in overcoming the conflicting nature of the current tax legislation a significant role can be played by the rule on the priority of the norm with the most favorable for the person interpretation, applied by the european court of human rights in its practice. here the final judgment of the ecthr of 14 january 2011 in the case "shchokin vs. ukraine" is telling, in which the court found a violation of the applicant's rights guaranteed by article 1 of the first protocol to the convention, firstly, due to the fact that the relevant national legislation was not clear and consistent and therefore did not meet the requirement of "quality " of law and did not provide adequate protection against arbitrary interference in the property rights of the applicant; second, the national authorities have not complied with the legal requirement to apply the approach that would be most favorable to the applicant – a taxpayer, when in his case the national law implied ambiguous interpretation. unfortunately, the taxpayers do not always give proper legal assessment of such acts. often, the regulatory instructions of the tax authorities are disguised in documents not formally addressed to the taxpayers (methodological recommendations), such as the order of the state tax service of ukraine "on approval of methodological recommendations on organization and conduct of counter-checks by controlling authorities, on exchange of tax information during the tax control" of january 29, 2020 no. 47 (order of the state tax service of ukraine). if in its relations with the taxpayer the tax authority its refusal to meet the requirements of the taxpayer when appealing, for example, tax notice-decision can be justified by reference to methodological recommendations, the judicial practice goes by the recognition that the relevant part of the recommendations acquires the features of normativity and can be appealed in court under the rules of the code of administrative procedure of ukraine. however, often the tax authorities justify their claims on such methodological recommendations, and taxpayers often accept this position of the tax authorities. the formation of such a trend is largely due to the position of taxpayers, which is based on an error in the legal nature of methodological recommendations. inconsistency, inconsistency, gaps, vagueness of the tax legislation are now noted by many experts in the field of tax law. this is due to the fact that among the priorities of the tax reform its developers see only economic effect by reducing the tax burden. meanwhile, the tax reform has an important legal component, the development of which has been delayed. the state of legal tools in tax law is characterized by an extremely low level, which ultimately affects the economic results of the tax reform, because the problems of law enforcement require additional baltic journal of economic studies 34 vol. 8 no. 1, 2022 involvement of material, labor, organizational resources. these circumstances dictate the urgent need for the intervention of law, due to its normativity and ability to be a binding measure of freedom for all and everyone is able to express the coordinated will of various social groups of society, to establish, maintain, protect and defend a certain balance of interests of the individual, society and the state. the task of the law is to enshrine legal procedures for overcoming conflicts in the sphere of tax legal relations, because without their presence legal relations are without guarantee of implementation, and the arisen disagreements will not receive a mechanism for legal implementation. moreover, the lack of conflict resolution mechanisms makes it impossible to implement the legally granted rights of one of the parties to legal relations, in particular of a publicly obliged person – taxpayer, since the use of means of self-protection of the right in the field of public legal relations is significantly limited, and failure to comply with the legitimate requirements of the tax authority is associated with the possibility of liability measures in the form of penalties and/or fines. therefore, when the potential danger of violation of the rights of taxpayers is inevitable, the task of the state is to provide guarantees for the protection of rights on the basis of mechanisms to ensure compliance with the law by subjects of authority. 7. conclusions relations arising between the subjects of public and private law in the process of financial activity of the state are of multidimensional nature and in their social, political and legal content are conflicting. and these conflicts are caused primarily by contradictions between private and public property interests. the desire of a powerful subject to seize the financial means of a private subject, caused by the implementation and enforcement of public law interests, becomes a consequence of the objectively existing contradiction between public and private interests. the taxpayer counteracts his subjective right – the right of ownership, which mediates the realization of his legitimate interest – the interest of owning, using and disposing of his property – to the demands of public authorities. resolution of such conflict is possible through legalization of financial claims of public authorities on the basis of legislative consolidation of strictly defined conditions, grounds and procedure for the recovery of private funds. the law for objective and subjective reasons is not free from loopholes, which the legislator is objectively unable to provide. in addition, the reality is that in the ukrainian conditions the process of building a tax system is largely unsystematic, with the absence of a definite program and direct dependence on the needs of the state budget. application of tax legislation in practice reveals the presence of contradictions with previously adopted acts of tax legislation. due to these circumstances, the conflict of interests in the sphere of tax legal relations lays the basis for the transition of a controversy to another stage, characterized by the emergence of different initial positions of the parties in the legal assessment of the essence of disputed tax-legal norms and, accordingly, the scope of their rights and obligations. the occurrence forms the basis for the emergence of a tax dispute, because it requires a solution, the implementation of which is impossible without recourse to the competent authorities of the state. in this regard, before the application of an interested person to a jurisdictional body, it is impossible to talk about the presence of a dispute. a tax dispute is a certain situation in the development of a conflict in the sphere of tax legal relations, or rather one of its stages – a stage aimed at resolving a conflict. references: karasova, m. v. (2003). financial law of russia: new problems and new approaches. state and law, 12, 12–14. krokhina, yu. a. (2003). legal conflict in the financial sphere: causes, essence and overcoming procedures. journal of russian law, 9, 68–73. kudriavtsev, v. n. (1992). social deformations (causes, mechanisms and ways to overcome them). moscow, 145 p. kurinnyi, a. m., & myronov, v. i. (1997). practical commentary on the legislation on labor disputes. moscow: case, 156 p. order of the state tax service of ukraine "on approval of methodological recommendations on organizing and conducting of counter-checks by controlling authorities, exchange of tax information in the implementation of tax control" of january 29, 2020 № 47. available at: https://tax.gov.ua/diyalnist-/podatkoviyaudit/nakazi/75346.html tax code of ukraine from december 2, 2010 № 2755-vi. available at: https://zakon.rada.gov.ua/laws/show/ 2755-17#text the decision of the constitutional court of ukraine of june 5, 2019 № 3-p(i)/2019 on the case on the constitutional complaint of limited liability company "metro cash & carry " on the compliance with the constitution of ukraine (constitutionality) of the provisions of paragraphs twenty-fourth, twenty-p' fifth, baltic journal of economic studies 35 vol. 8 no. 1, 2022 twenty-sixth section i of the law of ukraine "on amendments to the tax code of ukraine" to clarify certain provisions and eliminate contradictions arising from the adoption of the law of ukraine "on amendments to the tax code of ukraine on improvement of the investment climate in ukraine" of march 23, 2017 № 1989-viii. available at: https://zakon.rada.gov.ua/laws/show/va03p710-19#text the decision of the constitutional court of ukraine of february 27, 2018 no. 1-p/2018 on the case of constitutional submissions of 48 people's deputies of ukraine on compliance with the constitution of ukraine (constitutionality) of provisions of paragraphs 13, 14 of paragraph 32 of section one of the law of ukraine "on amendments to the tax code of ukraine and some legislative acts of ukraine on tax reform" and the supreme court of ukraine on the compliance with the constitution of ukraine (constitutionality) of the first paragraph of subparagraph 164.2.19 paragraph 164.2 article 164 of the tax code of ukraine (the case of taxation of pensions) and monthly maintenance and principles of tax law. available at: https://zakon.rada.gov.ua/ laws/show/v001p710-18#text tylchyk, v. v. (2010). the concept and essence of tax disputes between state tax authorities and taxpayers. journal of kyiv university of law, 3, 110–114. kudriavtsev, v. n. (ed.) (1995). legal conflictology. moscow, 230 p. liga zakon. available at: https://cutt.ly/yfag4fw baltic journal of economic studies 36 vol. 8 no. 3, 2022 1 interagency scientific and research center on problems of combating organized crime under the national security and defense council of ukraine, ukraine (corresponding author) e-mail: lenbusol@gmail.com orcid: https://orcid.org/0000-0002-4713-4546 2 v.m. koretskiy institute of state and law of the national academy of sciences of ukraine, ukraine e-mail: socnaturalist@gmail.com orcid: https://orcid.org/0000-0002-8480-3729 3 national transport university, ukraine e-mail: bogdanroman@ukr.net doi: https://doi.org/10.30525/2256-0742/2022-8-3-36-41 the "crisis-type" phenomenon of corruption in ukraine оlena busol1, oleksandr kostenko2, bogdan romanyk3 abstract. the article substantiates and proves, using a socio-naturalistic scientific approach, that corruption in ukraine today is not an isolated phenomenon, but an organic consequence and symptom of a fundamental social crisis in the country. this means that today's ukrainian corruption is a "crisis-type" corruption, that is, it is caused by a social crisis, which it itself deepens. the authors use the phenomenological method of studying the phenomenon of corruption. to explain social phenomena, the concept of the "sociogenic factor" is used, which is necessary for the existence of human society, namely the social culture of people as a measure of consistency of their will and consciousness with the laws of social nature. people's social culture consists of the following types: political, economic, legal, moral, religious, scientific and technical, rehabilitative, ecological, etc. crisistype corruption is also a phenomenon of "crimes caused by social anomalies". corruption is a real phenomenon, but unnatural, because it manifests a violation of the laws of social nature with which people's social life should be coordinated. the authors present the concept of "anti-corruption vices," according to which anti-corruption measures can be effective only if they combine the following: 1) administrative (repressive) means; 2) reforms aimed at creating conditions in which it becomes profitable to live and work honestly. the concept is based on the fact that corruption in ukraine today has a completely unique character, which distinguishes it from corruption in western countries not only in quantitative characteristics, but also in qualitative. the results of the study of the unique ukrainian corruption phenomenon and their consideration in improving anti-corruption policy in ukraine can be very useful for other countries suffering from "crisis-type" corruption. key words: crime, "crisis type" corruption, uniqueness of the phenomenon, social crisis, the concept of "anticorruption vices", sociogenic factor. jel classification: в55, k19 1. introduction the current corruption in ukraine is special – it is a "terrible symptom of a severe disease" that has struck society. only by identifying the causes of this phenomenon can it be effectively countered. when studying corruption crime, criminologists do not always pay attention to the study of society, the processes and phenomena occurring in it, and focus their efforts mainly on the criminal law aspects of the problem. that is why the study of corruption in post-soviet countries is so necessary for legal science and practice. the authors are grateful to the researchers who created the basis for the further development of criminological foundations of corruption prevention and the minimization of corruption related crime. among the scholars who partially responded to the topic of this study are the following: dryomin v.m., who puts forward an institutional theory of crime and criminalization of society (dryomin, 2010); mykhailenko d.g. presents his own concept of criminal-legal counteraction to corruption crimes (mykhailenko, 2018); zharovska h.p. in particular, highlights the roots of corruption through the prism of combating transnational organized crime in ukraine (zharovska, 2019), and this is the next, higher level of research on this issue in modern criminology. the book "corruption: economic analysis and international law" by the late marco arnone and this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 37 vol. 8 no. 3, 2022 leonardo s. borlini (2014) refutes the arguments made by some economists that corruption is profitable because it oils the wheels of business, reduces transaction costs and reduces the cost of capital. the authors show that the damage from corruption is enormous and agree with n. roubani (2008) that when corruption pervades the public and private spheres, uncertainty in the financial system increases, undermining the proper functioning of the market mechanism in this volatile sector as well as leading to potentially devastating consequences for the entire economy. empirical analysis performed by m. arnone and l.s. borlini on the positive relationship between effective regulation of competition, competitiveness and lower levels of corruption, is original and it correlates with recent initiatives of some international institutions, including the organization for economic cooperation and development, as well as it estab lishes a link between corruption and anti-competitive behavior (global forum, oecd, 2016), (gerry ferguson, 2017). the scientists' conclusions seem very convincing. however, the aim of this article is to substantiate and prove, using a socio-naturalistic scientific approach, the fact that corruption in ukraine today is not just an isolated phenomenon, but an organic consequence (and a symptom) of the fundamental social crisis in the country. this means that today 's ukrainian corruption is crisis-type corruption, i.e., it is caused by the social crisis, which it itself deepens. 2. the illusion of an effective anti-corruption factor corruption exists in any country, but in ukraine it has its own peculiarity, namely its ability to nullify any attempts to free itself from the systemic social crisis that has engulfed the entire society. it is possible to note the growth of social tension and social conflicts in ukraine on the background of unhealthy economic situation, which, if it is not solved in time, can lead to a standstill in the development of our society. the methods of research are chosen depending on the object, subject and purpose of the study. the study used general scientific and special methods of legal science. thus, the method of analysis and synthesis, as well as the logical method were used to formulate a holistic view of corruption and corruption of "crisis type", as well as to study their features and specifics. the logical-semantic method helped to establish the meaning of the concept of "anti-corruption vices". comparative legal method was applied in the analysis of the relevant legislation of ukraine and some other european states, regulating the issue under consideration, as well as the opinions of scientists on this scientific problem. the article is based on the application of a set of the following methodo logies: philosophical-legal and synergetic. the authors use a phenomenological method to study the phenomenon of corruption. the concept of "sociogenic factor" is used to explain social phenomena. this factor is a property inherent in people, which is necessary for the existence of human society. such a property is social culture of people as a measure of consistency of their will and consciousness with the laws of social nature. according to the socio-naturalistic approach, there is the following pattern: the human factor reflects the social life of people. in order to prevent and combat corruption ukraine has ratified the civil convention against corruption (law of ukraine, 2006), the criminal convention against corruption (law of ukraine, 2007), the un convention against corruption (law of ukraine, 2006), etc. thus, the existence of anti-corruption legislation and its implementation in all states creates the illusion of an effective anti-corruption factor. comparing the plans of certain measures of anticorruption activities of successful european states, in particular the kingdom of denmark, the republic of finland, the kingdom of sweden, with the actions of ukraine taken in the field of combating corruption, we can say that they are to some extent identical, but the results of their implementation do not coincide, and, unfortunately, not in favor of ukraine. it can be assumed that this is due to shortcomings in the conceptual framework of anti-corruption policy in ukraine. for example, in the kingdom of denmark there is no state anti-corruption strategy, but the state adheres to high ethical standards. ukraine, unlike the kingdom of denmark, even has the supreme anti-corruption court, the highest specialized court in the judicial system of ukraine, but, unfortunately, "corrupt behavior" among citizens has become a forced "norm" for them. given the many years (since ukraine gained its independence in 1991) of total corruption in the country, ukrainian citizens are still unable to abandon corrupt practices and expose corruption for fear of being involved in corruption investigations as well. the peculiarity of the global socio-economic crisis in ukraine is that it was projected on the protracted systemic crisis of ukrainian society. quite a long internal crisis at different stages was expressed in different forms: energy, oil, amber, forest, water, environmental, etc. but these crises were constantly accompanied by political and, accordingly, moral crisis of society. the combination of internal crises with a global one has created a threatening situation where the sovereignty of the state has come into question (crisis in ukraine, 2010). modern corruption crime in ukraine has its own specific national characteristic, which it has inherited from the economic crime of the soviet model, and baltic journal of economic studies 38 vol. 8 no. 3, 2022 which it further improvises in relation to criminal activity and criminal schemes. while ascertaining the growth of criminal operations, it should be noted that in its underlying principles, corruption has remained the same mercenary form of crime, oriented toward foreign markets. the scale of corrupt activities is global. the main feature of modern transnational crime is its politicization. having corrupt ties with certain representatives of the state, transnational criminal organizations actually rob the state, which in the current economic situation is a factor that brings ukraine closer to economic collapse. global transnational crime deepens the crisis situation in the socio-political and economic life of ukraine, forms the vectors of foreign trade and creates the basis for a radical stratification of ukrainian society on the basis of financial opportunities. funds obtained by criminal means and then legalized through the use of various financial schemes have formed in ukraine an oligarchic class and people close to it, who actually run the state. the rest of the population has become a kind of donor to transnational criminal organizations, since huge financial resources do not go for social needs and economic development, but are overspent through the state budget and go directly to the accounts of the criminal-political elite (zharovska, 2013). 3. ukrainian social crisis it would be wrong to blame the subjects of the actual so-called "captivity " of ukraine for what is happening on a global scale. here it is necessary to emphasize such specifics of corruption in ukraine as the "ukrainian social crisis". according to this study, crisis-type corruption can be minimized only by eliminating the social cause that generates the social crisis itself, one manifestation of which is this type of corruption. this reason is the state of society, in which it is simply unprofitable to live and work honestly. and vice versa, it is profitable to live and work only unfairly. as the historical experience of different countries shows, even the death penalty does not stop one from committing a corrupt crime, which is especially noticeable in the people's republic of china. ukrainian society has not yet formed the social strata and groups that will become the driving force and cultural basis of social change. oligarchic groups in the process of redistribution of property have seized enormous resources, which are used to influence social processes in ukraine only in the interests of the oligarchs themselves. although the current dominance of oligarchic groups is ensured by unstable social institutions and a blurred social structure, their dominance has lasted for decades. the authors believe that this is a consequence of the crisis of sociogenesis in ukraine, which led to the defeat of ukrainian society by soviet totalitarianism. in particular, a manifestation of this crisis is the absence in society of a social order that would ensure that citizens could "live honestly," that is, meet their needs in accordance with the norms of morality and law. according to the worldview of social naturalism, the rule of "living honestly " is a law of social nature, in other words, a social norm. criminals lead lives in constant violation of the laws of social nature on which society should be based. in addition, this state of society, in which it is unprofitable to live and work honestly, is actually a social anomaly. this deviation generates criminal excesses, including crimes of corruption. these are the kinds of "crimes caused by social anomalies" that are taking place in ukraine today. for example: "amber criminal anomaly " in areas where there are deposits of amber, or "customs criminal anomaly," which affects residents of ukrainian border regions. the actions of high-ranking officials and politicians on the pep list in placing international financial resources in offshore zones, which in fact were directed as financial aid to the state, are also unnatural. the world bank notes the following phenomenon, the reasons for which are not yet precisely established, namely the direct correlation in some states, when the increase in financial assistance to the state, respectively, increases the financial flow to the offshore zones of about the same amount. occrp ceo paul radu and transparency international have found that more than 36,000 objects of property in london now belong to offshore companies while preserving strict trade and banking secrecy wherein. some of this real estate was purchased legally when offshore was used to protect the privacy of buyers. however, a certain amount of real estate was bought in such a way as to conceal the illegal origin of the money, and with this all contributes to the boom in london's real estate market. according to fincen, the organization will monitor cases where there is a high probability that corrupt officials or international criminals may use luxury real estate in the united states to secretly invest millions. today, individuals who do not wish to reveal their name can buy real estate anonymously through offshore companies and pay for it in cash. the screening will primarily be for both high-end home buyers in manhattan, new york and miami-dade county, florida (stella roque, 2019). it is possible to note the situation when crime goes beyond the local national character and takes organized forms. through corrupt interactions, legal institutions can become a chain of criminal organizations. since relations between states are regulated by bureaucracies, their interaction is inevitable. that is, a state where corruption is highly developed is likely to introduce the "virus" of corrupt practices into any democratic baltic journal of economic studies 39 vol. 8 no. 3, 2022 state that declares and adheres to non-corrupt norms. this is facilitated by liberalization of customs and border relations, creation of unified banking systems, offshore zones, universalization of national currencies, formation of global financial networks, global markets, global use of modern information technologies and much more. the fight against "crimes caused by social anomie," including corruption, cannot really be effective without reforms that will eliminate the anomaly itself, that is, without changes that will make life and work fair and profitable. instead, as the analysis of the anti-corruption strategy for 2021–2025" shows. (law of ukraine, 2022) and the law of ukraine "on prevention of corruption" (law of ukraine, 2014), there is an "anti-corruption" illusion in ukraine, according to which to eliminate the problem it is enough to improve administrative tools – anti-corruption legislation and anti-corruption bodies, without eradicating the very social cause of crisis-type corruption, that is not changing the state of society, in which to live and work honestly is not beneficial. the above-mentioned documents do not even attempt to identify the social cause of domestic corruption. and the concept of "corruption prevention" is reduced to responding not to the cause of the phenomenon, but to the conditions conducive to it. one gets the impression that the authors of these documents conflate the concepts of "causes of corruption" and "conditions conducive to corruption". but without distinguishing between these things, one cannot hope to effectively counteract this phenomenon. for example, in ukraine, the phenomenon of survival is a specific way of life, which is based on extremely low life resources. in the conditions of scarcity of life resources, a person is forced to allocate and distribute all the resources available to him only to satisfy his basic needs, namely: food, clothes, housing, etc. that is, there is no opportunity to satisfy other needs, in particular, such as cultural, leisure, creative, cognitive, health needs (crisis in ukraine, 2010). 4. тhe concept of "anti-corruption vices" such a cursory look at the factors that give rise to corruption (including confusion about the causes and conditions conducive to it) can lead to rather dramatic mistakes in anti-corruption policy. the result is a hypertrophy of applied administrative (repressive) tools, which is inherent in the "police type of state". coincidentally, the national agency for the prevention of corruption (napc), established in ukraine in accordance with the law of ukraine "on the prevention of corruption" (law of ukraine, 2014), has a "preventive" function, which is to check the property declarations of civil servants and their lifestyle, as well as drawing up protocols on administrative corruption offenses, in particular the conflict of interests. in fact, nothing at all is said here about the elimination of the social "root" (in fact, the "social cause") of the phenomenon generated by the social crisis in the state. in the media, the napc has become famous for its selective verifi cation of declarations, using the function given to it by law only to put pressure on the political opponents of the authorities. in 2019, ukrainian courts closed a quarter of corruption cases, with only half of the accused getting sentences. thus, in 2019, courts received 3,949 criminal proceedings on corruption and corruption crimes, which is 5% less than in the previous year. only three-quarters of these proceedings were heard by the courts. there is a significant cumulative effect, which is based on the fact that each year the number of proceedings before the courts in this category increases. as of december 31, 2019, there were already 9,054 proceedings pending in the courts. the volume of court proceedings in 2019 is almost identical to the volume of 2018. according to the napc, in 2018–2019 the courts made decisions in just over half of the criminal proceedings, i.e., 53% and 57% respectively. among the reasons for such indicators the agency cites, perhaps, the low quality of pre-trial investigations and "disinterestedness" of the courts in considering corruption proceedings. in 2019, every fourth case (25%) was closed by the court. a year earlier, the figure was even higher at 31%. a total of 1,479 people were convicted last year for corruption or corruption-related crimes (+10% compared to last year), 526 were acquitted (+33% respectively), and a significant number of people (702) had their cases dismissed (national report, 2020). this is, in particular, due to the fact that corruption crimes within organized criminal groups are often committed by heads of state bodies. legal commercial structures that are not involved in criminal business cannot compete with organized criminal groups. that is why ukrainian legislation in all spheres of public life is not so effective. this applies to almost all state bodies, such as the national bank of ukraine, the antimonopoly committee, the state property fund, the state fiscal service, the state control and revision service, the customs authorities of ukraine and other state bodies that have the right to monitor compliance with ukrainian legislation by organizations and citizens to combat organized crime. that is why civil servants who act in a corrupt manner in close connection with some criminal business structures and judges are not legally penalized as much. other state executive authorities, which have an anti-corruption function, are in baltic journal of economic studies 40 vol. 8 no. 3, 2022 practice engaged in counteracting high-level political corruption, while addressing the interests of oligar chic clans. the rampant crime and immorality in ukraine is so widespread that criminal practices have become habitual for people, so they do not react acutely to news about the facts of corruption crimes. thus, the phenomenon of "trivialization of corruption" in the legal culture of citizens is forming in ukraine, in particular because citizens can satisfy their legal needs and exercise their rights only through corruption. corruption is becoming a means of achieving not only an illegitimate but also a legitimate goal. for example, in ukraine it has become almost the norm that citizens must bribe a judge to obtain a legitimate court decision, and the vast majority of ukrainians simply cannot afford to hire a lawyer for financial reasons. it seems that in contrast to the concept of "pure repressions", which is the basis of the current anti-corruption policy in ukraine, the concept of "anti-corruption vices" is more effective, according to which a combination of the following measures (which should have as strong a grip as between the jaws of vices) is necessary: 1) administrative (repressive) means; 2) reforms aimed at creating such conditions in society, under which it will become profitable to live and work honestly. the first measure without the second (i.e., the application of "pure repression" to corrupt individuals) is doomed to ineffectiveness. the concept of "anti-corruption vices" is fully consistent with the rule formulated by the famous criminologist cesare beccaria: "it is better to prevent a crime than to punish it later." a good example of successful anti-corruption reforms is the republic of singapore. analysts say that today ukraine has made significant progress in eradicating corruption. according to transparency international's corruption perception index 2021, ukraine ranked 122nd out of 180 countries, next to countries such as zambia, gabon and mexico, while countries such as denmark and finland were at the top. in the same year, ukraine ranked second in europe in terms of corruption (transparency international, 2021). today ukraine faces the following dilemma: either by trying to overcome the crisis type of corruption, that is, the so-called "abnormal corruption" through online "pure repression," to become a "police-type state," or by eliminating its social cause, to overcome this phenomenon by means inherent in a democratic state. for example, in 2019, the fbi received an official request from the ukrainian government to help train employees of the national anti-corruption bureau of ukraine. it should be noted that there is a high risk that the fbi will be used by ukrainian politicians in their political games (yanevsky, 2015). 5. conclusions the concept of "anti-corruption vices" should be based on the fact that corruption in ukraine today has a completely unique character, which distinguishes it from corruption in western countries not only in quantitative characteristics, but also in qualitative. the qualitative difference of this corruption lies in the fact that as a crisis-type corruption, it is generated by the social crisis in ukraine and, in turn, contributes to this crisis itself. in this connection, the problem of an adequate policy of international cooperation in the fight against "crisis-type" corruption in ukraine becomes relevant. in particular, it concerns the policy of providing financial assistance to our country by the european union and the development of a "grant policy " to combat corruption in ukraine. assistance to ukraine from other countries in the fight against corruption should be used to implement the concept of "anti-corruption vices" within the framework of anti-corruption policy, but not within the concept of "pure repression". the results of the study of the unique ukrainian corruption phenomenon and their consideration in improving anti-corruption policy in ukraine can be very useful for other countries suffering from "crisistype" corruption. rеferences: criminal convention against corruption: council of europe convention (1999), ets173. information of the verkhovna rada of ukraine, 2007, 47–48. on ratification of the civil convention against corruption (2005). law of ukraine of march 16, 2005, 2476-iv. information of the verkhovna rada of ukraine, 16, 266. ratification of the united nations convention against corruption (2006). law of ukraine. information of the verkhovna rada of ukraine, 2006, 50, 496. dryomin, v. m. (2010). institutional theory of crime and society criminalization. manuscript. thesis to obtain the doctor of law degree on the specialty 12.00.08 – criminal law and criminology, criminal procedure law. odesa national law academy. odessa. mykhailenko, d. h. (2018). the concept of criminal legal counteraction to corruption crimes in ukraine. manuscript copyrighting. a thesis submitted to the national university "odesa law academy " for a degree of doctor of law (grand phd) in specialty 12.00.08 – "criminal law and criminology, criminal enforcement law". odesa. baltic journal of economic studies 41 vol. 8 no. 3, 2022 arnone, m., & borlini, l. s. (2014). corruption: economic analysis and international law. cheltenham, uk : edward elgar publishing. european journal of international law, vol. 28, issue 1, 1 february, 343–348. available at: https://academic.oup.com/ejil/article/28/1/343/3097824 roubani, n. (2008). the shadow banking system is unravelling, financial times (21 september 2008). see organisation for economic co-operation and development (oecd) (2014). oecd global forum of competition discusses the fight against corruption. available at: www.oecd.org/competition/fightingcorruption-and-promoting-competition.htm the crisis in ukraine: areas affected: the view of sociologists (2010). kyiv: business polygraph. zharovska, h. p. (2013). modern realities of transnational organized crime in ukraine. scientific bulletin of chernivtsi university, vol. 724, pp. 120–125. available at: http://lawreview.chnu.edu.ua/visnuku/st/714/20.pdf roque, s. in the united states will check anonymous buyers of luxury housing. available at: https://www.occrp.org/ ru/home/27-ccwatch/cc-watch-briefs/4801-us-to-monitor-secret-luxury-real-estate-purchases anti-corruption strategy for 2021–2025. law of ukraine, june 20, 2022. 2322-ix. available at: https://zakon.rada.gov.ua/laws/show/2322-ix#n93 on the prevention of corruption. law of ukraine of october 14, 2014, 1700-vii. information of the verkhovna rada of ukraine. 2014, 49. 2056. national report on the implementation of the principles of anti-corruption policy in 2019 (2020). available at: https://nazk.gov.ua/wp-content/uploads/2020/05/proyekt-natsdopovidi-2019.pdf yanevsky, o. (2015). fbi: people need to trust their officials (interviews). available at: https://ukrainian.voanews.com/ a/fbi-lyudy-mayut-doviryty-svoim-chynovnykam/3114413.html сorruption perceptions index. transparency international (2021). available at: https://ti-ukraine.org/research/ indeks-spryjnyattya-koruptsiyi-2021/ received on: 2th of august, 2022 accepted on: 15th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 92 vol. 8 no. 3, 2022 1 shupyk national healthcare university of ukraine, ukraine e-mail: svet.lana.koshova@gmail.com orcid: https://orcid.org/0000-0002-7637-4311 researcherid: gln-3255-2022 2 higher school of insurance and finance, bulgaria e-mail: ibritchenko@gmail.com orcid: https://orcid.org/0000-0002-9196-8740 researcherid: h-9866-2018 3 national aerospace university "kharkiv aviation institute", ukraine (corresponding author) e-mail: m.bezpartochnyi@khai.edu orcid: https://orcid.org/0000-0003-3765-7594 researcherid: f-4876-2017 doi: https://doi.org/10.30525/2256-0742/2022-8-3-92-100 investment in the space industry: a comparative analysis of ukraine and the eu svitlana koshova1, igor britchenko2, maksym bezpartochnyi3 abstract. the identity and institutional capabilities of the european union (eu) have changed over the years. as a global player in international politics, the eu has recognized the need to develop a comprehensive space policy perspective. this perspective is shaped by changes in the dynamics of the space ecosystem, the "new space", and this phenomenon consists of new business models, new technologies, new markets, new value chains and new actors. new space actors (private investors) have fundamentally changed the dynamics of space activities. the subject of the research is the peculiarities of the influence of investment processes of the eu and ukraine on the development of space industries. the methodological basis consisted of general scientific and special methods of knowledge, based on a systematic approach to the consideration of economic processes. the article aims to examine investment in the context of space management in the eu and ukraine, and to examine in detail the trends in such funding of space companies. in order to better understand the european space system. the article concludes that, recognizing the indisputable importance of space applications and safety of space systems, the eu attaches great importance to taking into account the trend of "new space" in its governance structure and stimulating changes in this sector. unfortunately, ukraine lags far behind in this respect. in the eu, in the initial stages of space research and use, space programs are financed from the general budget, and as individual activities reach a level of profitability, their public funding is reduced. therefore, the sphere of commercial space activities and the share of private investments in their total financing are rapidly growing. the reduction of state expenditures is compensated by investments of private business in commercial projects. thus, the article emphasizes the particular importance of private investments in the development of the ukrainian space industry and points to the need to develop the commercialization of space activities, especially given the potential in the absence of budget financing. it is impossible to compare the sufficiently powerful and effective investment system of the eu and the lack of even state financing of the space industry in ukraine. against the backdrop of hostilities in ukraine, there is a significant need to reconsider investments in this area on the basis of public-private and international partnerships. conclusion. the main tasks for ukraine are revision and change of the state policy, right accents on investments into the space industry, qualitative overcoming of bureaucratic obstacles, approval of a new strategy of space industry development. as an example, one could use the experience of the eu and refer to its previous experience in this sphere to have an opportunity to stay among the world space powers. key words: investment, space industry, financing, commercialization of space activities, public-private and international partnerships, ukraine-eu. jel classification: f36, l93, o33 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 93 vol. 8 no. 3, 2022 1. introduction space has always been a source of inspiration for explorers and scientists. from physics to chemistry, from materials science to engineering, the pursuit of space has created revolutionary technologies and greatly expanded humanity 's scientific knowledge. it has also greatly improved people's daily lives – according to the european space agency (esa), every euro spent in this sector brings six euros to society. until recently, space was synonymous with government spending: the huge costs and risks made the sector inaccessible to private players. however, huge technological advances and a new entrepreneurial spirit are rapidly shaping the new space economy. this industry, according to elon musk's experience in the united states, requires the emergence of new private players who create effective commercial opportunities in space exploration through advanced technology and the data revolution. attracting private capital into space activities increases the investment attractiveness of the industry. the development of commercial space through startups and space companies is one of the most notable trends in space. influenced by early initiatives related to space tourism, access to space, and the growing use of small satellites, space activities are attracting new entrepreneurs, both startups and large network players with significant investment potential. however, investing in the space industry is still a pressing issue for countries around the world today. 2. analysis of recent research and publications many articles consider the "new space" in a particular area of space activities (earth observations, launchers, etc.). o. v. anisenko and d. o. babina point out that it is more profitable to attract funds from investors and partner countries who themselves use the achievements of space development and are interested in their implementation (anisenko et al., 2018). they argue that the implementation of promising large-scale space projects depends directly on the participation of private aerospace companies and corporations. the unrealistic funding provided in the space programs in ukraine was, as noted in a study by g. v. dmitrenko (dmitrenko, 2010). the mechanism of stimulating investment activity of ‘space industry enterprises’ through the attraction of financial assets under state guarantees is proposed by a. b. ogurtsov, o. v. polishchuk (ogurtsov et al., 2014). in the space industry, important aspects are the corporatization of enterprises in this area, which will help attract private capital (bukhun, 2015). the monographic study by s. p. koshova analyzes statistical data for the period of 2011–2021 of investments of developed countries in the space industry, according to which the conclusion about the stable high level of investment activity in space and the predominance of private investments in finance is made (koshova et al., 2021). an assessment, of the current state, of financing for the, development, of the space industry in ukraine was made by yu. v. bukhun (bukhun, 2013). however, one of the problems researchers face is the scattering of data on the launch capacity of individual countries, as well as the lack of a unified statistics and methodology of private investment in the space industry. 3. methodology the aim of the article is to compare the investment processes of the eu and ukraine in the space industry. during the study the theoretical and methodological basis was made by general scientific and special methods of knowledge, based on a systematic approach to the consideration of economic processes. to solve these problems we used the following methods: methods of analysis and synthesis – to study the economic essence of the space industry; system approach – to determine the methodological foundations for the formation of the enterprise management system; general methods of analysis and others. in addition, a set of additional methods of scientific research of economic processes and phenomena using statistical and analytical materials, as well as the results of their own research. 4. investing in the space industry: advantages and disadvantages investing in space is no different than investing in other industries, and now that space activities have expanded, there are many space companies open for investment. space activities should not be seen as isolated from the global ecosystem by other solutions (such as terrestrial communications). the so-called "new space" covers five main components: 1) market and customers; 2) space industry, including major enterprises and supply chain, and start-ups; 3) service operators; 4) sources of funding, five (5) countries, defense agencies, and international organizations (itu, iadc). investments in a complex field, which the space industry is, as in any other business, are associated with relatively high risk. since the space business is new, and investors are interested in investing in companies that have been on the market for ten years, there are few issuers. there are no companies in the space sector that are considered "blue chips"; small volumes of securities baltic journal of economic studies 94 vol. 8 no. 3, 2022 trading, the latter are not hedging assets and such high-risk investments; low investor awareness of the activities of space companies. investors come to the industry following the exploits of famous people such as elon musk, richard branson and others. with the exception of the space communications market, space activities are usually associated with government customers or government activities with long-term projects. the basic assumption of new space is that there is untapped potential for com mercial space activity (to infinity and beyond, 2018). the so-called "democratization of space" implies that commercial interests play a leading role, or at least that the resources of governments and commercial enterprises must be combined to improve efficiency. the main driving forces behind the new appetite for space activities are new needs: global communications, digital transformation of society, and so on. other markets, including isru (in situ resource utilization), are brand new with long term return on investment and high uncertainty about market size and availability. in contrast to the cold war space race and the notso-distant stage of increased commercial competition in space, venture-backed startups are emerging, activating a new wave of affordable space products and services. a relatively new phenomenon is the growing entrepreneurship in space, also called new space. more and more start-ups, backed by private venture capital funds, are developing very small satellites or groups of small satellites for operational missions. the big players in the web industry are increasingly interested in space and can invest enough money either directly or through new companies. when it comes to launch vehicles, the new space trend is to make access to space more affordable. elon musk of space x and the success of his falcon 9 with several first stages certainly is a major symbol of the entrepreneurial space. the most significant change is the growing role of private investors and venture capital in the space industry. new space investors have different profiles, and the investment objectives are very different if they are created by business angels, venture capitalists, large industrial groups (corporate ventures), young internet billionaires or space enthusiasts. business angels are more likely to support a startup's space activities over the medium to long term, while venture capitalists are looking for quick financial returns (e.g., exit opportunities). investors in the space industry are usually venture capital funds as the largest group, followed by business angels. table 1 shows the main forms of interaction between investors and startups in the space industry. in practice, investments in space startups are also realized through private companies and corporations (stock purchases, full buyouts, takeovers), crowdfunding and altruistic activities, and ipo public offerings. the general difficulty in finding investors for such a specialized field as space entrepreneurship is exacerbated by the underdeveloped mechanisms of the ukrainian financial market compared to the eu. 5. peculiarities of investment in space in the eu new space is primarily a u.s. trend, since it was there that space activities, the propensity to innovate and invest in innovative projects, and the culture of risk began to play an important role in public policy. even if the development of new space and startups started later and remains relatively low compared to what happened in the u.s., the new space phenomenon now affects other countries involved in space. table 1 categories of investors in the space industry types of investors characteristics range of investments in space activities form of investment investor angel (business angel) research or accredited investors investing in young growth companies 50,000 – 1 million dollars equity venture company the company is an intermediary that raises capital at the expense of investors by investing in high-risk projects 2 – 75 million dollars preferred tranche shares private investment company (investment fund) a private organization whose main task is to form a pool (fund) of material, financial and intellectual resources for their further investment in assets that can bring profit by increasing their value 100 million – 1 billion dollars equity corporations corporations that use capex both to implement new projects and to invest in existing ones 100 million – 1 billion dollars equity banks private and public banks providing debt financing in excess of equity 100 million – 1 billion dollars debt converts into shares capital markets raising capital through initial public offering (ipo) 100 million – 1 billion dollars equity source: compiled according to (start-up space, 2019) baltic journal of economic studies 95 vol. 8 no. 3, 2022 the european space agency (esa) was historically established in europe to develop and manage space science programs. the emergence of new industrial competition in the united states prompted esa member states to reorganize the european landscape, placing more responsibility on industry (which led to the creation of the ariane group). the european union (eu) also has an ambitious space policy. focusing on space applications, the eu now has two main systems, namely galileo, the european navigation program, and copernicus, a group of optical and radar satellites designed to provide information for environmental monitoring. initially, eu space programs were aimed at supporting public policy, but now they are aimed at economic development and the private sector. there are several innovation financing schemes in the eu, which include special tools or elements of financing for the space sector. the initiators of the funding schemes are public institutions and their institutes. through its executive bodies, the european commission manages the eu framework program for research and innovation (horizon 2020) and the competitiveness of enterprises and small and medium-sized enterprises (cosme) program, and oversees the implementation of the european structural and investment funds (esif) through national and regional authorities across europe. the european investment bank (eib) group consists of the eib itself and the european investment fund (eif). among other things, the eib group implements the european strategic investment fund (esfi), which is the basis of the investment plan for europe and a joint initiative of the european commission and the eib group to stimulate the european economy by mobilizing private financing for strategic investments. national ministries and regional/local authorities and their agencies provide additional funding for research and development in europe. there are many different funding schemes, some based solely on national funds and others supported by european institutions. the european space agency (esa) is another major player when it comes to investments in space research and development in europe. esa funds a wide variety of research programs aimed at developing a high level of competence in the european space sector. some of these programs are mandatory for member states and financed from the general esa budget, while others are optional and financed from additional financial resources provided by member states. next the multiannual financial framework of the eu (mff) proposes to simplify the landscape of financial instruments under the single umbrella of investeu. investeu was expected to mobilize more than €650 billion of additional investment in europe thanks to a €15.2 billion contribution from the proposed eu budget (the future of the european space sector). the eu's flagship research and innovation program, horizon 2020, is the largest program of its kind, with €75 billion allocated to innovation projects over seven years (2014–2020). in just three years (2018–2020), horizon 2020 has invested about €30 billion in research and innovation. horizon 2020 funding comes mainly in the form of grants, but also through purchases and bonuses, as well as financial instruments such as loans, shares, quasi-shares, and guarantees. specifically, as part of the innovfin – eu funding for innovators, which is part of the horizon 2020 program, the commission, in cooperation with the eib group, has allocated about €2.7 billion from the horizon 2020 budget. innovfin tools include loans, guarantees and equity financing that can be tailored to innovators, whether an sme, a large company or a research institution. specialized financial products are provided either directly to the recipient or through financial intermediaries such as development banks, private banks and investment funds. one tool is the innovfin thematic investment platforms, which catalyze third-party financing for thematic areas and provide access to financing through debt or equity products through financial intermediaries and asset managers (innovfin). the tool that the eif will introduce to support space small and medium-sized enterprises (smes) and medium-sized companies is the innovfin space equity pilot (isep) under the eu single financial instrument. the isep will provide access to risk financing for innovative enterprises in the space sector through a special financial instrument aimed at attracting a contribution of €50 million from the 2018–2020 eu budget. the €410 million ventureeu venture capital program was recently launched and debuted on april 10, 2018. as a pan-european venture capital funds program, it aims to ensure rapid innovation growth by increasing the amount of venture capital available to promising european companies. the six venture capital funds will participate in up to €410 million in initial eu funding, which they will use to launch their mission to raise €2.1 billion in private investment. using €2.1 billion to attract up to €6.5 billion in investments from institutional investors, such as pension funds, intend to significantly increase the amount of venture capital funding available to european startups and large companies. each of the six funds will have 12 months to raise €2.1 billion. the cornerstone fund they will share consists of €200 million from the horizon 2020 innovfin equity baltic journal of economic studies 96 vol. 8 no. 3, 2022 initiative, €105 million from cosme and €105 million from the juncker plan european fund for strategic investments. horizon 2020 also finances projects through special sme instruments, which are designed for activities close to the market. the sme instrument has €1.4 billion available for financing from 2018 to 2020 and is divided into three phases, each with different forms of financing and mentoring support. the ninth framework program, which replaces horizon 2020 horizon europe and began in january 2021 with a proposed budget of €97.9 billion, is the largest research and innovation funding program. it evolves around three pillars: open science, global challenges, and open innovation (horizon europe). in addition to horizon 2020, the eu has a special financing program for smes. the cosme scheme aims to support smes to improve access to finance as well as market access and business support (cosme – european program). with a budget of €2.3 billion, cosme uses two main financial instruments to provide access to funding through intermediaries. the loan guarantee fund (lgf) guarantees financial institutions that they can provide more loans and leases to smes, and the equity facility for growth (efg) provides venture capital to equity funds investing in smes. the use of both instruments greatly increases the number of smes that can receive funding. cosme also participates in the recently created ventureeu program. the cosme macro tools are used both by the eif itself and through intermediaries such as banks or fund managers. in november 2014, the eu announced the investment plan for europe as an innovative response to the ongoing economic downturn caused by low demand across the eu. the plan is designed by the commission as a method of removing barriers to investment and making better use of financial resources. its main instrument is the european strategic investment fund, which is implemented in cooperation between the european commission and the eib group. first launched in 2015, the efsi was initially a €16 billion guarantee from the eu budget, complemented by a €5 billion eib equity allocation. in september 2017, the efsi was, strengthened and extended until 2020. total funding of €43 billion was available from 2015 to 2020 through the efsi infrastructure and innovation window and its window for smes, mobilizing at least €500 billion in additional investment in the economy by mid-2020. in september 2017, the eu published its latest policy strategy outlining the eu’s economic strategy. it was called "investing in smart, innovative and sustainable industries: an updated eu industrial policy strategy ", and focused on building a holistic package to strengthen and make the eu industry more competitive. the eu has redefined investment in innovative smes as a critical vector for achieving the eu’s main goal of growth and jobs. besides the eu, esa offers funding instruments to support space research and development companies in addition to the purchase of satellite missions. much of the eu and esa space funding is related to three european space programs: galileo, copernicus and egnos; funds for research and innovation activities are provided to support them. the combined funding of the three programs 67 was more than €11 billion between 2014 and 2020. 6. the importance of national, local grants and venture capital for investment in space research national and local grants, as well as countryand sector-specific initiatives in eu member states, complete the picture of the funding available in europe. for example, esa 68 estimates that national european space programs allocate about €180 million annually in grants and subsidies for research and development in space technology, with germany accounting for more than half of that budget. the €320 million european angel fund (eaf) is an initiative recommended by the eif with national funds. the eaf provides capital to business angels and other non-institutional investors to co-invest in innovative companies. the two main players in the field of space research and space technology funding are the eu and esa. they are complemented by private financiers who provide financing in the form of equity, debt or hybrid products. there are many public and private funding instruments available in europe. for example, the copernicus incubation program supports the market entry of the most promising business applications based on copernicus data. the program provides €50,000 annually to twenty (20) european startups to fund up to 85% of the total incubation costs of their chosen organizational support program (esa bic or any other incubation or acceleration program). there are currently eighteen (18) esa bics in fifteen (15) european countries that support an average of one hundred forty (140) startups per year. there are no debt financing instruments in the eu to finance companies in the space sector. however, in the private capital markets, space companies obtain business loans from commercial banks and project financing satellites from commercial lenders or institutional investors, and borrow money in the capital markets through bond issues. in 2020, the european commission formally approved the union security strategy, which aims to protect every eu citizen and identifies four (4) key strategic priorities, including space and infrastructure (commission communication). baltic journal of economic studies 97 vol. 8 no. 3, 2022 in 2016, the european commission launched a "space strategy for europe". this strategy document focused on "strengthening europe's autonomy to access and use space in a safe and secure environment." to ensure europe's autonomous, reliable and cost-effective access to space, the european commission needs to work with esa, member states and a number of stakeholders, including the private sector. another important factor in making the eu a great space power is an understanding of the dynamics of new space and the role of the united states and china. given that the eu parliament's first resolution on european space policy was adopted on september 17, 1981, the eu has long made space a priority. traditionally, european space management has a tripartite structure. it consists of the eu, esa and the national space agencies of member states (including the national agencies of germany, france, italy and the uk). the new space has spawned new actors. the most critical developments for european space management occurred in the 21st century. in 2003, the commission issued the white paper on space, a document that clearly articulated the main directions of eu space policy and emphasized the need for cooperation with other actors (christensen, 2019). today, the directorate-general for defense industry and space (defis) is the eu’s leading agency for the space sector and defense industry. defis is responsible for the eu’s space program, which consists of copernicus (european earth observation program), galileo and egnos (european geostationary navigation overlay service). for the period 2021-2027, the commission proposed a budget of €16 billion in current prices, equivalent to €14.2 billion in constant 2018 prices, broken down as follows: €9.7 billion for galileo and egnos; €5.8 billion for copernicus; and €0.5 billion for ssa and govsatcom (eu space program). to take into account the dynamics of new space, the european commission – in cooperation with the european investment bank and the european investment fund – provides investment in start-ups, early and mature space companies through innovfin – space equity pilot (2014–2020) investeu (2021–2027), european council innovation and competitive space start-ups for innovation initiative (cassini) programs. in addition, under the new multi-annual financial program for the period 2021–2027, horizon europe, the european defence fund and invest eu are also, designed to support companies and space research (espi report). in addition, the esa implements many support programs that have benefited three hundred and forty (340) new companies. these companies specialize in various categories, such as, material and new manufacturing, electronics, information and communication technology, aeronautics, automotive, marine transportation, etc. along with eu and esa initiatives, there are national programs that support investment and entrepreneurship in space activities. in recent years, germany, france, italy, spain, and the uk have implemented significant initiatives to encourage private efforts in the new space ecosystem (espi report). however, the european space ecosystem lacks entrepreneurs with knowledge of space and knowledge of how to invest in space (the future of the european space sector). according to the european commission's report on the space sector, investments in new space accounted for two-thirds of all space-related investments between 2011 and 2017. thanks to the new space approach, production costs have been reduced and new business models have emerged. from 2000 to 2017, space companies attracted more than €14.8 billion in investments (the future of the european space sector). in 2019, initial investment reached $5.7 billion. in 2020, that figure was $3.5 billion, the highest level of investment prior to that year (bryce start-up space). in addition, investments in new space companies are estimated at $7.6 billion. according to the commission, the amount of venture capital companies and angel investors is two-thirds of the investment in space companies. venture capital firms account for 46% of startups in space companies, and angel investors – 25% (the future of the european space sector). a european council document published in 2021 clearly states that the eu supports development and the entrepreneurial ecosystem in space (regulation (eu) 2021/696). esa’s activities are, divided into two categories – "mandatory " and "optional". programs implemented within the general budget and space. the budget of the scientific program is "mandatory "; they include the main activities of the agency (research of future projects, technological research, joint technical investments, information systems and training programs). all member states contribute to these programs on a scale based on their gross national product (gnp). other programs, known as "optional", are of interest only to some member states, which have the right to decide the level of their participation. the most common source of future funding in the eu space sector is venture capital/private equity, due to the fact that these funding instruments are available, flexible and fast. in 2022, the eif will raise €300 million to support the innovation and growth of europe’s small and medium-sized space technology companies through the innovfin space equity pilot project into two baltic journal of economic studies 98 vol. 8 no. 3, 2022 space-focused funds, orbital ventures and primo space. the european commission has also launched a new program to provide investment to european startups to keep these companies on the continent. specifically, the european investment bank and the european investment fund are allocating at least €1 billion ($1.12 billion) over five years to the cassini program, which will provide early-stage funding for european space companies. thus, the eu has a very powerful and developed toolkit for investment in the space industry, especially at the supranational level. this should become a driver of reforms in the space industry of ukraine, which until recently was a space state with great scientific and technical potential in this sphere. after all, in recent years, what was there before has been practically destroyed. 7. the consequences of investment in the space industry for the development of ukraine the level of funding determines the state of the technological base of the space industry, and innovations in this area ensure the efficiency of production, product quality during expanded reproduction, which in turn affects its competitiveness. high capital intensity and long payback periods of the space industry result in low profitability and inefficiency of space activities. it is for this reason that powerful scientific research in this area has not been conducted in ukraine for quite a long time. in addition, the problem of assessing the efficiency of such budget programs remains. the plight of the space industry in ukraine was also alleviated by the fact that commercialization of space activities was impossible for a long time, and corporatization began only recently. russia's aggression against ukraine in 2014, when in fact the main consumer of this industry was lost, had a significant impact. therefore, increasing the market value of space industry assets and increasing its competitiveness in world markets, counteracting the moral and physical deterioration of fixed assets, as well as improving the technical level of production in the space industry; improving the quality of space industry products as the main function of investment should be activated in ukraine. government investment in the space industry can promote scientific and technological progress, create new jobs, and thereby reduce unemployment (buhun, 2015; buhun, 2013; horbulin et al., 2008). article 11 of the law of ukraine "on space activities" of 15.11.1996 № 502-96-vr stipulates that foreign loans and investments in space activities related to the implementation of the national targeted scientific and technical space program of ukraine are guaranteed by the state in accordance with current legislation of ukraine. in 2014–2017, ukraine's space activities were carried out under difficult economic and political conditions in relations with the russian federation, as the share of industry products for russian customers ranged from 60 to 80% of the total volume. the national targeted space program has not become an effective and efficient instrument of state aid, because there is a mismatch between the degree of actual funding and the planned indicators of the program, which does not allow to achieve the goals set. as can be seen from table 2, financing of space programs has not been carried out in the necessary amounts, and the modern program project will remain a project also because of russia's aggression against ukraine due to the catastrophic state of the state budget. currently, the main investor in the space industry in ukraine, unlike the eu, is the state. due to the financing of budget, programs of the main administrator of budget funds (sca of ukraine) from the state budget funds are, also allocated, including for the support and operation of enterprises and institutions of the space industry (table 3). for comparison, the esa budget in 2018 was $6.5 billion, already in 2021 – $7.78 billion (according to a report euroconsult – government space programs 2021), in 2020 the eu government spending on space programs was $2.43 billion, in 2021 – $2.57 billion (according to the state statistics service of ukraine). in early 2018, the head of the sca of ukraine announced the preparation of a bill that would allow private companies to do business in the rocket and space industry. in the long term, the commercialization of the space sector can attract the necessary investments to unite innovation and intellectual capital of ukraine. it was only in 2019 that a bill was passed removing restrictions on private capital participation. this is despite the fact that the development of space entrepreneurship has been a significant trend in the international space sector since the early 2000s. since 2020, ukraine has allowed private business to work in the field of space technology, forming the basis for private investment in space. thus, a comparison of budgetary investments of the eu and ukraine in the space industry according to their gdp shows that europe spends at least $5 billion (0.03% of gdp), ukraine has stopped financing the space program since 2017. polyakov, a ukrainian who is the third largest investor in the u.s. space sector, was forced to sell his stake to meet national security requirements. ukraine did not join the five-year era-planet project in 2016 because of noncompliance with horizon 2020 funding conditions. therefore, ukraine needs baltic journal of economic studies 99 vol. 8 no. 3, 2022 to reconsider its approaches to investing not only digitally, but also organizationally. the general situation in the ukrainian economy, the lack of confidence in its stability and the absence of official regulation of various operations leads to the fact that private investment is almost non-existent. venture financing and the institute of business angels are still not easily involved in projects that do not belong to the traditional it sector or the consumer goods sector. however, it is very important to take into account and provide conditions for participation, the presence of representatives in the international trend of new space. forecasting the future development and the role of space startups (especially in the upstream segment) is a very multifaceted task. at present, if the state authorities of ukraine do not plan to purposefully and actively develop private space entrepreneurship in the country by investing and concluding long-term contracts with private companies, another measure to support private initiatives may be the organization of modernization of national legislation regulating the sector of space activity. most domestic businessmen – potential space entrepreneurs and investors – consider investments in the space industry risky not only because of the peculiarities of space activities, high entry threshold and long payback period, but they are also hindered by gaps and unresolved regulatory issues or existing legislation that limits the development of entrepreneurial activity in the industry. foreign investors, when deciding to finance a private space project, also take into account the regulatory framework in the space industry of the country where the startup is located. 8. conclusions the conditions for space investment in europe and ukraine are not so comparable. in the new space ecosystem, traditional european space authorities have adapted their programs to support and encourage european space companies. much depends on national policies. at present, ukraine is gradually losing its place among the space powers of the world. according to this study, this is the result of bureaucratic obstacles, corruption and weak state policy in this area, including investment. there is no legislation that would stimulate the development of private space exploration. this leads to a lack of commercial programs and projects involving ukrainian private companies and/or launched space startups. the projected economic downturn as a result of military actions in ukraine will significantly affect the direct allocation of planned funding for the space program in the state budget, which has not even been approved yet. therefore, it is advisable for ukraine to intensify investment in the space industry in the framework of public-private and international partnership. prospects for further scientific research include the intensification of entrepreneurial activity in the space industry, attracting private investment, etc. based on the study of trends in space and the study of experience in this aspect of space countries. references: anisenko, o. v., & babina, d. o. 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(2015). ways of forming the mechanism of investment support of reproduction processes in the space industry. ekonomichnyy visnyk natsionalʹnoho tekhnichnoho universytetu ukrayiny "kyyivsʹkyy politekhnichnyy instytut", vol. 12, pp. 121–128. buhun, yu. v. (2013). features of financing the space industry in ukraine. visnyk ekonomiky transportu i promyslovosti, vol. 42, pp. 206–210. horbulin, v. p., & shevtsov, a. i. (2008). preserving the status of a rocket and space state is a national task of ukraine. stratehichni priorytety, vol. 7(6), pp. 144–152. received on: 21th of june, 2022 accepted on: 31th of july, 2022 published on: 30th of september, 2022 baltic journal of economic studies 29 vol. 7 no. 5, 2021 corresponding author: 1 kyiv national university of construction and architecture, ukraine. e-mail: bielienkova.oiu@knuba.edu.ua orcid: https://orcid.org/0000-0002-1142-5237 2 kyiv national university of construction and architecture, ukraine. e-mail: moholivets.aa@knuba.edu.ua orcid: https://orcid.org/0000-0002-8138-2041 3 kyiv national university of construction and architecture, ukraine. e-mail: loktionova.yaf@knuba.edu.ua orcid: https://orcid.org/0000-0001-5634-4900 doi: https://doi.org/10.30525/2256-0742/2021-7-5-29-40 measurement of the level of economic security of enterprises by the indicator of the at tractiveness for hostile takeovers olha bielienkova1, anton moholivets2, yana loktionova3 abstract. the article deals with the assessment of economic security by a number of factors that reflect the probability of proxy battle. in recent decades, the number of such acquisitions in ukraine has increased significantly, which seriously reduces the level of economic security of economic entities both at the microeconomic level, and at the level of sectors of the economy, as well as the entire economic system of the country. the purpose of the study was to determine the possible impact on the economic security of the enterprise (which is proposed to be determined by a multifactor indicator of the attractiveness of enterprises for raiders) factors of financial stability, reputation, business model efficiency and attractiveness to potential buyers. the methods used in the study are as follows: generalization, grouping, systematization, and content analysis (to identify factors that could potentially signal the threat of a hostile acquisition); correlation and regression analysis (to determine from the totality of factors that have the greatest impact on economic security), the method of theoretical generalization (to identify the approaches of various scholars and scientific schools to issues of economic security and raiding); comparative (to determine the state of economic security of the enterprises under study in different years). as a result, the authors propose an integral indicator of the economic security of the enterprise, which makes it possible to identify the potential attractiveness of the enterprise for raiders. it consists of the following components: profitability (determines the effectiveness of the business model), autonomy ratio (determines the financial stability), ownership of real estate in the city center (resale), reputation (delays in fulfilling contractual obligations). content analysis of economic security factors of enterprises was conducted according to the data on the raiding seizures of ukrainian enterprises of all industries and activities, and the economic security indicator was created on the basis of materials of ukrainian construction companies. however, the methodological approach proposed in the article can be used to identify threats to the loss of economic security by enterprises of any sector of the economy, subject to the adaptation of the model to industry specifics. the use of the created indicator cannot replace the full-fledged system of monitoring the economic security of the enterprise and identifying threats to further activities, but it can be used as an indicator of express-diagnostics of economic security of the enterprise and making decisions on in-depth study of economic security to identify adverse factors delight. key words: economic security, enterprise, raiding, economic security assessment model, anti-crisis management, economic security factors, anti-crisis potential, business model, financial independence, business reputation. jel classification: b41, g30, k22, m21 1. introduction raiding is one of the most discussed economic problems of the new century. politicians talk about the need to fight raiding, while government agencies and public organizations fight it. almost every month the ukrainian press reports about an attempt to seize one of the enterprises. raiding is not a purely ukrainian problem. all countries suffer from this extremely destructive phenomenon. countries with developed market baltic journal of economic studies 30 vol. 7 no. 5, 2021 economies and strong market and state institutions have also gone through destabilizing raiding, but have already developed a system to counter raiding. however, raiding especially flourishes in countries characterized by imperfect, constantly changing legislation and constantly shifting priorities in the political, economic and social spheres. in the united states, japan, and european countries, hostile behavior toward companies usually constitutes a takeover of an enterprise against the will of management, while in post-soviet countries raiding is common as an extreme form of hostile behavior. acquisitions and seizures flourished in the united states in the 1980s (tingting, liu & mulherinb, j. harold, 2018). thus, mitchell, mark. l., & j. harold mulherin (1996) state that 57% of the 1,000 largest u.s. corporations have attempted takeovers and/or engaged in significant asset restructuring. but in the 1990s, the legal framework changed so much that companies were able to successfully resist unwanted takeovers (comment, robert, & schwert, g. william, 1995; ryngaert, michael, & ralph sholten, 2010). in japan, the surge in hostile market behavior that increased dramatically in the 1990s has been attributed to investors' adoption of american traditions (hamao, yasushi & matos, pedro, 2018), but companies successfully resisted takeover attempts in the 2000s. today in ukraine, the targets of raider seizures are not small and medium-sized enterprises, but often powerful large companies. all of them resist raider seizures rather poorly. this poses a real danger to the entire economy. that is why the fight against raiding should be conducted at all levels of the economic system: at the state, sectoral and microeconomic levels. the critical situation with the seizure of enterprises was the reason for the adoption in 2019 of the law of ukraine "on amendments to certain legislative acts of ukraine on combating raiding", on which there are high hopes to change the situation for the better. but enterprises, strengthening their competitive adversarial position, may become a target for raider attacks, despite the stable growth of indicators and sustainable development. therefore, it is now extremely important to complement the tools of crisis management and the system of preventive monitoring of the economic security of the enterprise with methods for assessing the risk of raider seizure and determining the attractiveness of enterprises for hostile takeover or raider seizure, which are widely used in world practice. 2. literature review analysis of scientific research on this issue shows that the problem of hostile takeovers and seizures of enterprises, which first became a subject of research in the 80's, is still relevant at the present time and requires a solution. in his classic work (palepu, 1986) highlighted the following theories explaining the reasons for acquisitions, mergers and acquisitions of businesses, including hostile ones. these reasons include substitution of inefficient management, undervaluation of the firm, free cash flow, firm size, availability of real estate, and imbalance of growth resources. most authors who study the causes of corporate takeovers rely on this classification, refuting some theories or supplementing them. developing these hypotheses, (powell, 2004) highlights certain factors that may indicate how likely a company is to become the target of a hostile takeover. for example, the inefficiency of a company 's management in the article is measured by the return on capital employed (roce), which is calculated and averaged over a period of two years to a year of observation. the undervalued nature of a company is measured by the marketability ratio, free cash flow is measured by the ratio of operating cash flow to total assets, and the amount of total assets is used as a measure of the size of the firm. the availability of real estate, a factor that in (eddey, 1991) is referred to as the key factor in raiding, in (powell, 2004) is measured as the ratio of tangible fixed assets to total assets, which is calculated and averaged over a period of two years to the year of observation. growth and resources imbalance is measured as average sales growth over the two years preceding observation. liquidity is measured as the ratio of cash and marketable securities to total assets and leverage and is measured as the ratio of debt to total equity and reserves. tunyi, abongeh (2019) investigates the size of the optimal target for firm acquisition as a function of market conditions – capital liquidity and market performance. meghouar, hicham & ibrahimi, mohammed (2020) examined the financial characteristics of large french companies to be acquired between 2001 and 2007 and identified the following features: greater imbalance in terms of growth resources, less liquidity than competitors, untapped debt capacity, greater growth opportunities than control group firms, low level of value creation. (n.k. chidambarana dipali krishnakumar, madhvi sethic, 2018) examine such factors in the growth of acquisition and takeover agreements as firm size, time of market activity, availability of available funds, availability of debt, level of founders' participation, affiliation with business groups, level of competition, etc. (donald m. de pamphilis, 2018) draws attention to the "wave-like" nature of changes in the number of mergers and acquisitions, which are cyclical, and tries to identify the reasons for this (tunyi, abongeh & ntim, collins, 2017) argue that factors such as market size, human capital, efficiency opportunities, management quality, and stock market development baltic journal of economic studies 31 vol. 7 no. 5, 2021 influence m&a growth, while high resource availability and firm size in african realities do not affect deal volume as much as global trends. the level of resources did not show a significant impact on the volume of mergers and acquisitions in the sample, while the acquisition targets were mostly large companies. mitchell, mark l., j. harold mulherin (1996) identified sectoral characteristics of corporate takeovers in 51 sectors of the economy that are directly affected by macroeconomic factors and shocks in individual sectors, which explains the ripple nature of the process. cornaggia, jess & li, jay yin (2019) investigate the impact of access to bank financing on the attractiveness of companies for mergers and acquisitions. a significant contribution to the study of the causes of raider seizures of ukrainian enterprises made by gorovyi d. a., nesterenko v. iu. (2009). they developed a methodology for assessing the risk of corporate raiding. based on this methodology, this study identified the main factors that increase the risk of raider seizure of construction companies and assessed several development companies using a model adapted for construction companies. kabaciński bartosz (2019) identifies additional factors that may affect the likelihood of hostile takeovers, including lower profitability, smaller size, and financial resources that are not adjusted for income growth. in many cases, companies are characterized by lower financial liquidity. fidrmuc, jana p. & axia, chunlingb (2019), looking at the role of enterprise management in mergers and acquisitions using a case study of 1,098 u.s. listed companies from 2005 to 2011, concluded that about 44% of acquisitions were initiated by the target company itself for acquisition. in this case, the management of companies does not oppose the enthusiasm, but tries to participate in the process. the reason for this may be the threat of financial crisis or bankruptcy of the company. here, the company 's management chooses a resistance strategy or even initiates a takeover in an attempt to keep the company afloat and avoid the costs of liquidation. otherwise, there is active resistance to the takeover. in ukrainian reality, since securities markets have a rather low level of development, researchers pay more attention to the raider seizure as a form of hostile behavior in the market. pohorielov yu.s., leshchenko yu.v. (2012) characterize raiding as an illegal seizure of an enterprise with the aim of seizing its assets and using illegal methods and means (criminal raiding) or a hostile takeover of an enterprise using legal means for the same purpose, andrushkiv v.m., vovk yu.ia., dudkin p.d. (2008) define it as the unlawful seizure of property and using it for one's own benefit, varnalii z.s., mazur i.i. (2007) give the definition of raiding as a hostile, beyond civil law, directed against the owner's will seizure of another's property in favor of another person, the establishment of complete control over the property of the new owner in legal and physical terms with the use of corruption of officials and (or) the use of force. recently there have been frequent raider attacks aimed not at individual construction or development companies, but at attractive construction sites or real estate located in the city center. this problem became so acute that on september 2, 2016, the holding company "kyivmiskbud" organized a press conference demanding that the authorities pay attention to raiding in ukraine (yastremskaia, 2016). to ensure the safety of the construction industry, now more than ever, it is important to study the concept of "raiding", to analyze the prerequisites of raider attacks and identify threats of attacks on construction companies. therefore, the object of the study are construction companies operating in ukraine. the tasks of development companies and construction contractors is to find effective mechanisms to counteract raiding in the construction industry, to form recommendations for participants of the construction market, to study effective methods of enterprise management under the threat of raiding, to introduce anti-raiding protection in the system of strategic competitiveness of the participants of the investment and construction process. currently, there is a gap in the literature on the issue of raiding seizures of construction companies, as well as the lack of comprehensive studies needed to improve the state system of anti-raiding in ukraine, the role in the formation of anti-raiding protection of self-regulatory organizations (industry associations, trade unions and associations). there is little data on the factors and reasons why raiders choose a construction company, as well as on measures to counteract raiding by small and medium-sized construction companies, which for financial reasons cannot afford to create a strong economic security service. 3. methodology the use of risk assessment methodology proposed by gorovyi d.a., nesterenko v.iu. (2009) as the first stage of preventive management strategy against raider seizure as a component of sustainable development of construction enterprises allows to identify the main threats and determine further actions in the overall competitiveness strategy. using the approach proposed by the authors, companies with a high risk of a raider takeover should accumulate and use funds to reduce the risk of a raider seizure, while companies with a low risk may not spend unnecessary resources. to achieve the goal of the study, the following methods were used: generalization, grouping, baltic journal of economic studies 32 vol. 7 no. 5, 2021 systematization and content analysis (to identify factors that could potentially signal the threat of a raider takeover), correlation and regression analysis (to determine from the totality of factors those that have the greatest impact on economic security), method of theoretical generalization (to identify the approaches of various scientific and scientific schools to the issues of economic security, raiding), comparative (to determine the state of economic security of the enterprises under study in different years). the factors used in the model were selected as follows. initially, by the method of content analysis of open sources for 2005–2019, the factors that could be indicative of the effectiveness of the business model of the enterprise, its financial independence, ownership and reputation were selected. the next step was to use in the subsequent calculations one of the factors that were most frequently mentioned in the content analysis. if the selected factor could not be quantified, or was absent among the sample enterprises, the factor next in the list was selected (the highest frequency of mention among factors other than the first). if the second factor could not be used, the next one was selected, and so on. as a result, four factors were selected and used to create the model. the set of data used for the analysis covers a totality of 38 ukrainian enterprises of the type of economic activity f "construction", working at the construction market for the period from 2013 to 2019. data on some enterprises are used for a shorter period of time. the sample covers all forms of economic activity, except for individual entrepreneurs, and includes 146 observations. 4. analysis of the methods and causes of raiding seizures of ukrainian enterprises the most common ways to seize companies are takeovers through stock capital, through accounts payable, company management, fraud, and hostile takeovers. another method of raiding, common in all post-soviet countries, is to challenge the results of privatization or registration of legally acquired property. analyzing the directions in which the violent seizure of an enterprise takes place, it can be seen that it can take place both legally and illegally. as a result of such actions there is a negative impact on the business climate, destabilization of domestic enterprises, destruction of labor collectives, business relations and social conflicts, formation of an unfavorable investment climate and the international image of the country as a whole. hostile acquisition damage not only business owners, but also the entire construction industry, which is now in crisis. constant raider attacks on businesses form a negative image of ukraine on the international market. given the macroeconomic and political processes in the world, the negative investment image not only prevents the inflow of investments into the country, but is also a serious obstacle to ukraine's accession to the european economic area. hostile acquisitions not only damage the real owners, but also undermine the investment image of the state. loss of image is a very serious threat to the country 's development, since it restrains the inflow of investment into the economy, especially foreign investment. legislation is not enough to solve or at least reduce the scale of raider attacks on businesses in ukraine. this requires the combined efforts of the state, the corporate sector, public organizations and citizens. nevertheless, the adoption of the law has contributed to the fact that in 2020 ukraine ranked 64th out of 190 countries in the doing business in the "protection of investors" category, rising by seven positions compared to last year (doing business 2020). raiding, depending on the degree of compliance with the law, is divided into (vasylenko, 2007): " white" raiding is the use of exclusively legal mechanisms to take over the assets of the seized object and is actually a process of legitimate competition, which, according to some experts, is a positive phenomenon that stimulates economic development; "gray " raiding is carried out by methods that formally bear signs of legality, but with the active use of forged documents, shareholders' meetings are held or judicial decisions are made in violation of established legal norms, etc; "black" raiding is the most criminalized and in addition to the methods of "gray " raiding uses forceful methods to enforce favorable illegal court decisions, forced change of management of the seized enterprise. analyzing the directions in which enterprises are raided in ukraine, it can be seen that it may occur using both legal methods (the so-called "white" raiding – very rarely) and illegal ("black" and "gray " raiding – most often). given the changes in legislation, it can be predicted that the share of "black" and "gray " raiding in ukraine will gradually decrease and "white" raiding will increase. but all of them will have a negative impact on the business climate, damaging domestic enterprises, destroying business ties, creating social conflicts, as well as an unfavorable investment climate and the international image of the country as a whole. highlighting raiding as one of the main threats to companies in the construction sector (especially real estate developers), it is possible to identify ways to assess the threat of a raider seizure for developers: – determination of directions and ways of acquisition of enterprises; – determination of the reasons for the acquisition of ukrainian construction companies (based on open sources); baltic journal of economic studies 33 vol. 7 no. 5, 2021 – analysis of the factors that influenced the takeovers of construction companies in 2005–2019; – determining the importance of each of the factors; – inspection of the control group of construction companies on the criterion of the risk of raider seizure; – development of recommendations to reduce the risk of proxy battle. domestic scientists have dealt with this range of issues and identified the main factors inherent in the ukrainian reality. these factors are presented in table 1 (cherevko, 2013; zaitseva, 2009). according to numerous sources, the factors influencing the probability of the risk of hostile acquisition are almost the same for all countries table 2). 5. indicators and risk factors for businesses to be raided babina n. o. (2016) notes: "the main sign that signals the attractiveness of a company to raiders is the collection of economic, legal and social information about the company. raiders are interested in: (1) documents (founding, privatization, internal regulations), documents about the company's assets, its debts, etc.); (2) information (on the market position of the company; on its social policy; on the proximity of management to administrative resources; on lawsuits and judgments against employees of the company previously fired); (3) rumors (about conflicts in the company, especially between owners, management and subordinates; about the personal lives of top managers and other key people in the company)". d.a. gorovyi and v.iu. nesterenko (2009) made a significant contribution to the study of the causes of hostile acquisitions of ukrainian enterprises. according to these scientists, the main risk factors of hostile takeover of the enterprise are the following: – potential financial attractiveness; – the insignificant popularity of the enterprise for the average citizen; – the company is a monopolist or occupies a certain market segment; – the number of shareholders of the company (the more of them, the higher the risk of hostile takeover); – the possibility of reselling the company; – the capability of stable operation of the enterprise. table 1 external and internal factors of a joint-stock company, taken into account by the raider external factors internal factors – gaps in the legal framework that allow violations of generally accepted rules of doing business without administrative or criminal prosecution – the presence or absence of administrative support that would expedite the procedures for issuing formal decisions and such documents – prompt handling of cases in courts – high share of enterprises in the industry – attractive geographical location – availability of expensive land plots – ownership of unique technologies, expensive machinery, equipment, etc. tangible and intangible assets – prospects for business development, its investment attractiveness, availability of subsidiaries and affiliates, branches and representative offices – reputation, level of corporate culture share capital structure – presence or absence of corporate conflict between shareholders, investors or managers of the company – the level of professionalism, the business reputation of the governing bodies of the company – availability of information about the company, the possibility of obtaining it through the registrar of the company, shareholders or managers of the company source: (cherevko, 2013) table 2 common raiding schemes in ukraine raiding scheme actions taken while realizing the scheme raiding by unfair realization by shareholders of their rights change of company management in violation of corporate governance procedures; blocking of the company 's operations; blocking of a controlling block of shares; questioning the results of the privatization of the company. raiding by taking over a company 's shares embezzlement of shares by collusion with a professional participant; forcing legitimate shareholders to sell shares; exercising voting rights on preferred shares; securing a decision to invalidate the issue of additional shares; acquisition of shares that did not pass state registration; change of company management in violation of corporate governance. acquisitions by withdrawal of company assets the organization of the deliberate bankruptcy of a company; takeover as a result of exaggerated corporate conflicts. source: (cherevko, 2013) baltic journal of economic studies 34 vol. 7 no. 5, 2021 construction companies need to adapt this methodology to the conditions of activity, which have their own specifics, and to identify the main factors that increase the risk of hostile takeover; assessment of several construction companies according to an adapted methodology; development of measures to form effective mechanisms to combat hostile takeovers in ukraine; study of effective enterprise management methods under the threat of hostile takeover. having analyzed the hostile acquisitions of construction companies that are mentioned in public sources, consider the factors that have the greatest impact on the possibility of a hostile takeover (raider seizure) of construction companies. these include: – profitability of the enterprise (profitability indicators, sales revenue, cost-effectiveness); – financial independence (a set of financial and economic indicators of financial independence, debts to the budget, bank and other creditors); – the possibility of further resale of the enterprise (assessed by the value of assets, the presence of land, construction in progress, real estate owned by the company, the possibility of further resale of property); – the possibility of stable operation of the enterprise in the future (assessed by the dynamics of the enterprise for several years). the procedure for calculating these indicators is presented in table 3. according to the results of the analysis of raider seizures of construction companies (according to the press), the main factors that lead to the capture of construction companies are the possibility of further resale of assets (real estate) or the entire property, the withdrawal of funds. less important is the factor of the possibility of stable operation of the company, because domestic raiders are not interested in the company continuing to function. it is more profitable from their point of view to alienate and quickly sell the assets. most raiders are interested in getting "quick" money from the resale of the company, real estate and all other available assets. the contribution and significance of the factors listed in table 4 to the integral indicator of assessing the possibility of a takeover of an enterprise are not the same. to determine the importance of this or that factor for raiders, the method of content analysis of publications on the topic of "raiding" is used (gorovyi, nesterenko, 2009). based on the materials of the article-review on hostile takeovers of construction companies, the frequency of occurrence of this factor among other causes of seizure is identified. on this basis, the weight of this factor in the possibility of seizure of an enterprise is calculated. compared to 2011 and 2016, when a similar analysis of raiding opportunity factors was conducted (bielenkova, matsapura, 2012; sorokina, hoiko, 2017), in 2019 the weight of the "stable operation opportunity " factor decreased slightly and the weight of the "resale" factor increased. this indicates that modern raiding companies in ukraine are not interested in the development of the business acquired by them, and are aimed at the liquidation of the company and the quick sale of assets. table 3 indicators of the risk of raider seizure of the enterprise profitability of the enterprise = profit (gross, from operating activities) / assets = enterprise income during the reporting period = net profit / assets the financial independence of the enterprise = equity / liabilities = the amount of long-term liabilities, the share of long-term debt in liabilities = the amount of debt to the budget, the share of debt to the budget in the liabilities = enterprise bankruptcy risk according to the test of bielienkova, о.yu. & antropov, yu.v. (2013) (for small businesses) and izmailova, k.v., molodid, o.o. and lytvynenko, i.v. (2020) (for large and medium enterprises) = equity / liabilities the possibility of further resale of assets of the enterprise = market value of the company 's property (including land, unfinished construction projects, real estate / assets = market value of enterprise assets = ownership of real estate and its market value = ownership and market value of land plots = availability and market value of unfinished construction projects the possibility of stable operation of the enterprise = net income from sales for the reporting period / net income from the sale of products in the previous reporting period = the amount of long-term contracts / liabilities = market value of the enterprise source: the list of factors offered by (gorovyi, nesterenko, 2009) is supplemented by authors baltic journal of economic studies 35 vol. 7 no. 5, 2021 the next step is to calculate the dynamics of the risk indicator of proxy battle, taking into account the obtained weighting factor. 6. modeling the risk of raider takeover to assess the threat of raider seizure of ukrainian construction companies were selected six different in size, speed of development, number of employees and property values of construction companies, and therefore different in attractiveness to raiders. to assess the threat of hostile acquisition of ukrainian construction companies, it was selected construction companies of different size, speed of table 4 the importance of certain risk factors for raiders indicator keyword (phrase) the number of occurrences of the word (xij) frequency of word occurrence (ηij) the total number of occurrence of the factor words (xi) frequency of occurrence of factor (ηi) weighting coefficient (ki is determined on the basis of correlation and regression analysis) business model efficiency (x1) return 9 0.02 33 0.0651 -0.016 income 8 0.02 profitability 6 0.01 stability of income 3 0.01 long-term contracts 1 0.00 business attractiveness 6 0.01 financial independence (x2) coefficient of autonomy 1 0.00 95 0.1874 0.344 long-term liabilities 22 0.04 debt to the budget 10 0.02 bankruptcy, reorganization 30 0.06 debt to the bank 32 0.06 the possibility of resale (x3) property 69 0.14 321 0.6331 0.548 enterprise assets 69 0.14 building, office center 66 0.13 land plot 69 0.14 construction site 48 0.09 reputation of the developer (x4) reputation 12 0.02 58 0.1144 -0.09 illegal buildings 36 0.07 delays in commissioning 8 0.02 production quality 2 0.00 source: compiled by the authors based on (gorovyi, nesterenko, 2009) table 5 results of correlation and regression analysis of the possibility of a raider takeover r 0.696203 r-square 0.484698 normalized r-square 0.47008 standard error 0.292685 observation 146 r 0.696203 analysis of variance df ss ms f regression 4 11.36136 2.8403 33.156 remainder 141 12.07871 0.0856 total 145 23.44007 coeffi-cients standard error t-statistics p lower 95% upper 95% lower 95.0% upper 95.0% y 0.07281 0.113647 0.6407 0.5227 -0.151 0.297 -0.1518 0.2974 x 1 0.548 0.0523 10.475 0.0000 0.4444 0.651 0.44448 0.651 x 2 -0.0085 0.0107 -0.790 0.4308 -0.029 0.0127 -0.0298 0.0127 x 3 -0.015 0.0126 -1.248 0.2140 -0.04 0.009 -0.0409 0.0092 x 4 0.3437 0.1478 2.325 0.0214 0.051 0.635 0.05151 0.6359 source: calculated by the author baltic journal of economic studies 36 vol. 7 no. 5, 2021 ta bl e 6 a ss es si ng th e ri sk o f p ro xy b att le , t ak in g in to a cc ou nt th e w ei gh ts o f f ac to rs en te rp ri se r et ur n fi na nc ia l i nd ep en de nc e th e po ss ib ili ty o f f ur th er re sa le th e po ss ib ili ty o f s ta bl e op er at io n 20 16 20 17 20 18 20 19 20 16 20 17 20 18 20 19 20 16 20 17 20 18 20 19 20 16 20 17 20 18 20 19 p rj sc "e k o -d im " 0. 08 43 0. 30 99 0. 31 92 0. 31 01 0. 31 77 0. 57 20 0. 59 30 0. 55 37 0. 53 10 0. 00 31 0. 00 36 0. 00 36 0. 00 37 0. 08 65 0. 30 60 0. 31 51 p js c h c k yi vm is kb ud 0, 08 59 0. 43 54 0. 50 97 0. 51 29 0, 48 43 0. 91 43 0. 89 87 0. 91 28 0, 87 97 0. 04 33 0. 04 33 0. 04 33 0, 04 20 0. 08 79 0. 43 00 0. 50 33 p js c " u kr bu d" 0. 44 89 0. 52 25 0. 61 16 0. 61 55 0. 25 60 0. 87 60 0. 88 71 0. 90 02 0. 24 81 0. 05 20 0. 05 20 0. 05 20 0. 03 45 0. 10 55 0. 51 60 0. 60 40 p js c "i nt er ga lb ud " 0, 12 63 0. 58 29 0. 57 11 0. 62 72 0, 59 33 0. 56 17 0. 57 09 0. 49 95 0, 49 33 0. 00 26 0. 00 27 0. 00 27 0, 00 26 0. 12 92 0. 57 55 0. 56 40 p js c " t m m " 0, 19 80 0. 72 52 0. 72 52 0. 79 11 0, 68 73 0. 68 49 0. 67 84 0. 64 87 0, 62 88 0. 01 09 0. 01 16 0. 01 16 0, 01 27 0. 20 26 0. 71 61 0. 71 61 p rj sc "f un da m en t" 0, 12 58 0. 41 98 0. 40 54 0. 40 87 0, 42 22 0. 71 00 0. 68 86 0. 64 79 0, 62 08 0. 00 85 0. 00 85 0. 00 85 0, 00 82 0. 12 87 0. 41 45 0. 40 03 ta bl e 7 in te gr al in di ca to rs fo r as se ss in g th e att ra ct iv en es s of e nt er pr is es fo r ra id in g en te rp ri se 20 16 20 17 20 18 20 19 d eg re e of ri sk p rj sc "e k o -d im " 0. 01 93 0. 00 7 0. 08 21 8 0. 00 40 3 lo w p js c h c k yi vm is kb ud 0. 55 30 9 0. 57 78 9 0. 57 91 6 0. 62 33 av er ag e p js c " u kr bu d" 0. 53 72 0. 54 65 0. 61 23 0. 72 11 * av er ag e p js c "i nt er ga lbu d" 0. 56 96 7 0. 61 17 7 0. 56 85 9 0. 58 63 * av er ag e p js c " t m m " -0 .0 29 5 -0 .0 23 9 -0 .0 02 4 0. 00 87 1 lo w p rj sc "f un da m en t" 0. 12 68 3 0. 13 86 1 0. 09 63 6 0. 06 92 4 lo w * f or ec as t c al cu la tio ns baltic journal of economic studies 37 vol. 7 no. 5, 2021 development, number of employees and value of property, and therefore different in attractiveness to raiders. these are enterprises of the construction industry operating in kyiv (the place of company registration is indicated in brackets). the calculation was performed for the following enterprises: 1. prjsc " eko-dim"(lviv). 2. pjsc holding company "kyivmiskbud"(kyiv). 3. pjsc "intergal-bud"(lviv). 4. pjsc "tmm"(kharkiv). 5. prjsc "fundament"(kyiv). 6. pjsc "ukrbud"(kyiv). the integral indicator of the risk of raiding was calculated by correlation and regression analysis (table 5). this made it possible to obtain a result with a single unit of measurement and to compare indicators. analysis period 2013–2019. to assess the attractiveness of an enterprise for a hostile acquisition, the following model is derived: kr = -0,016 ∙ x1 + 0,344 ∙ x2 + 0,548 ∙ x3 0,09 ∙ x4 (1) where кr is the coefficient of assessment of the attractiveness of the enterprise for a raider seizure; x1–x4 – factors in italics are shown in the тable 4. the dynamics of the selected factors (assessment of the attractiveness of the acquisition of construction companies) is presented in table 6. determine the cumulative rate for the selected factors (table 7). we can conclude that such companies as hc kyivmiskbud, pjsc "ukrbud", pjsc "intergal-bud" are subject to the greatest risk of hostile acquisition, due to the large number of assets attractive to raiders. three of the six construction companies studied may be of interest to raiders, but overall in the group the level of probability of raider seizure is close to average, so they should pay attention to the system of economic security. 7. discussion the formation of an effective system of corporate protection at both the macroand micro-level is an urgent economic problem, an important component of the successful development of the construction industry and the country as a whole. one cannot disagree with sorokina l.v., hoiko a.f. (2016), who argue that "given the priority of destabilizing effects of macro-level factors, the only way to strengthen the investment and economic security of construction companies is a favorable state economic policy...". bhargava, rahul faircloth, sheri zeng, hongchao (2017), studying u.s. companies have determined that in states with high levels of regulatory protection against takeovers, the risk of future stock price declines is reduced, and in the case of strong competition and asymmetry of information about companies, this relationship is intensified. this proves the importance of forming and improving the regulatory framework in ukraine to ensure the sustainable development of enterprises and reduce the risks of hostile takeovers and seizures. a number of articles, along with government measures to combat raiding and hostile takeovers, emphasize the importance of building an effective corporate defense system, including the impact of measures such as "poison pills"(hamao, yasushi & matos, pedro, 2018), staggered boards (tingting, liu & mulherinb, j. harold, 2018), use of "golden parachutes"for managers who do not have a stake in corporate governance (fidrmuc, jana p. & xia, chunling, 2019), restructuring and separate accounting of the property complex, constant analysis 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 2016 2017 2018 2019 prjsc "eko-dim" pjsc "intergal-bud" pjsc hc "kyivmiskbud" pjsc "tmm" pjsc "ukrbud" prjsc "fundament" figure 1. integrated indicators for assessing the attractiveness of enterprises for hostile acquisition baltic journal of economic studies 38 vol. 7 no. 5, 2021 of financial and economic activities, inclusion in the board of directors of authorities, risk protection financing kuzmynchuk n., kutsenko t., strygul l., terovanesova o., klepikova s. (2021). self-regulatory organizations (berkuta, osynska, halinskyi, vakhovych, 2010) (associations, unions, societies, etc.), should play an important role in the process of forming a system of anti-raider protection, which can be entrusted with such functions as monitoring the macroeconomic situation (for example, quarterly) and providing information on the current security situation of enterprises in the sector, legal and informational support for enterprises faced with raider attacks. for this purpose it is necessary to develop a system of preventive anti-raider protection, to create a set of relevant indicators that would assess the current state of economic security of enterprises, their attractiveness for hostile takeovers or seizures, taking into account the specifics (activities, size, ownership form, etc.). 8. conclusion managing competitiveness, the management of enterprises should also analyze the impact of internal and external threats affecting the stability of the enterprise, track indicators that reflect the attractiveness of the enterprise for raiders. in practice, there is a whole system of measures used to prevent the acquisition of companies. at the state level, the system of counteraction to raiding is constantly being improved, which will sooner or later lead to a decrease in the number of hostile acquisitions. however, construction companies are extremely interested in creating their own system of combating raiding, the first stage of which should be the development of an effective methodological approach to identifying vulnerabilities to external and internal destructive influences, as well as improving the models of preventive crisis management and early identification of vulnerabilities of enterprises, based on the specifics of their activities. the way to solve the problem is to unite the systems of anti-raiding protection of individual construction companies into one, implemented at the level of self-regulatory organizations, associations, societies, which can be delegated functions of legal support, arbitration, economic and legal risk assessment, which is possible with a clear program of action and the wishes of participants. the adoption by the verkhovna rada of the law of ukraine № 5067 "on the implementation of european norms for the protection of property rights and interests of citizens and investors" and the law of ukraine "on amending certain legislative acts of ukraine on improvement of state registration of rights to immovable property and protection of property rights" and a number of by-laws create a basis for countering corporate raids on successful, investment attractive enterprises. however, it is too early to talk about a complete victory over raiders. year by year, the schemes and methods of raider seizures are constantly improving, modifying, becoming more elaborate, less noticeable, veiled and almost legal in their actions. further research should focus on the analysis of new raiding schemes from the legal and economic points of view and the search for ways to counteract this process. the attention of many scholars lies in the legal field of anti-raiding measures, but the enterprise security system should include a number of economic measures (aimed primarily at preventing attacks and monitoring the situation for threats), as an integral part of the process of protecting corporate property. every enterprise should create a system of economic security, corresponding to the real socio-economic and political processes of the country, which will not only help to combat corporate raiding, but also help to function in an environment of increased risk and threats, economic growth and financial independence and security. references: ambrose, b. w., & megginson, w. l. 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(2009). osnovni metody nedruzhnikh pohlynan v ukraini, vykorystovuvani suchasnymy reideramy [the main methods of unfriendly takeovers in ukraine used by modern raiders. economics: problems of theory and practice]. ekonomika: problemy teorii ta praktyky, 3(252), 675–683. baltic journal of economic studies 118 vol. 7 no. 3, 2021 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: yemelyanova_lidiya@ukr.net orcid: https://orcid.org/0000-0002-9276-3624 doi: https://doi.org/10.30525/2256-0742/2021-7-3-118-126 relationship bet ween the stock market development, banking sector development and economic grow th in the cee countries lidiya yemelyanova1 abstract. the stock markets of most cee countries have been actively developing and improving over the past decades but they still do not belong to the developed markets according to msci classification, the financial systems of these countries tends towards the bank-oriented type. does the level of stock market development affect economic growth in cee countries and do these countries need to develop their stock markets accordingly? the purpose of this article is to identify the direction of the causal link between stock market development, banking sector development and economic growth in central and eastern european (cee) countries. the subject of the research is the relationship between the stock market development, banking sector development and economic growth in the cee countries. methodology. the research is based on the annual data for two time periods 1999-2012 and 1999-2015 for the 8 and 5 cee countries, respectively. the study is based on the granger causality test and linear regression models. according to results of the research the stock market development plays an important role in attracting foreign direct investment and economic growth in cee countries in the long-run period. there are revealed the channels of indirect influence of the stock market capitalization on the economic growth. stock market capitalization has impact on the banking sector and gross capital formation, which in turn have impact on the economic growth of cee countries. there is the impact of both the stock market and the banking sector development on the economic growth in cee countries during 1999-2015. however, the impact of the stock market size on the economic growth is positive and the impact of domestic credit to private sector is negative. practical implications. the study proves the reasonable need for the cee countries to move towards further development of the stock market, improving the market infrastructure and institutional environment in order to expand the size of the stock market and thereby contribute to the economic growth of this countries. value/originality. the obtained conclusion about the role of the stock market in economic growth and attraction of fdi is of great importance both for ukraine and other countries with similar trajectory of economic development in general and similar historical aspects of the origin of stock markets in particular and should be taken into account by state leaders when making decisions on the need to create conditions for development of such element of the country’s financial system as the stock market. key words: stock market development, banking sector development, economic growth, stock market capitalization, stock market liquidity, foreign direct investments. jel classification: e44, f21, g10, o11 1. introduction the goal of any country is to achieve higher rates of economic growth. important components of a favorable environment for growth in production are the level of financial market’s development, the availability of financial resources and the quality of the institutional environment for doing business. these factors take into account both foreign and domestic investors by making investment decisions. the stock market is an integrant part of the market economy that facilitates the efficient capital allocation, directs free funds to those sectors of the economy that it need most, providing opportunities for economic growth. developed stock market is also a major component of the country’s investment attractiveness. on the other hand, higher economic growth means a rise in output and income, which is a key prerequisite for the development and growth of the stock market. it should be noted that economists have different opinions on the direction of the relationship between stock market development, banking sector development and economic growth, which makes the study actual. baltic journal of economic studies 119 vol. 7, no. 3, 2021 according to some scientists, the development of the stock market contributes to the inflow of foreign direct investment, which in turn is one of the drivers of economic growth. according to other scientists, the impetus for the development of the stock market is foreign direct investment, which, by providing economic growth, thereby contribute to the development of the stock market. it is commonly believed that cee countries have a bank-oriented model of the financial system, characterized by a financial market in which debt securities and domestic credit predominate over the equity market. these countries are characterized by a much lower level of stock market liquidity and, consequently, a low level of its development than in the countries with a market-oriented model of the financial system. in this context, how important is stock market development for cee countries? does the level of stock market development have influence on economic growth, and how does the level of stock market development correlate with the level of development of the banking sector in these countries? 2. the relationship between the stock market development and banking sector development there are different perspectives on the relationship between the banking sector and stock market development. since both the stock market and the banking sector contribute to the transformation of savings into investment, they can both complement each other and substitute for each other. from the “money demand” point of view, the modigliani-miller theorem states that in a condition of perfect market with symmetric information, the market value of all securities issued by a firm does not depend on the funding sources of the firm and, accordingly, firms can raise capital through both the stock market and the banking sector. however, asymmetric and imperfect information prevails in the real world. some countries distort funding sources through taxes, subsidies, and certain rules. thus, debt or equity financing is irrelevant. from a “money supply” perspective, the relationship between the stock market and the banking sector may be negative in the short run because of the arbitrage between interest rates and stock market returns but in the medium to long-run investors are likely to want to diversify their financial assets and allocate them between the banking sector and the stock market. question of supplement or replace the banking sector and the stock market depends on the debt or equity financing incentives specific to each individual country (garcia, liu, 1999). the question of “complementing or replacing” the banking sector and the stock market has been studied by many economists. for example, boyd and smith (1996) believe that stock markets and the banking sector can complement, rather than replace, each other as sources of finance. demirguc-kunt and levine (1996) showed that countries with well-developed financial intermediaries as a rule have well-developed stock markets. accordingly, they concluded that stock markets and the banking sector complement each other and exhibit simultaneous growth (demirguc-kunt, levine, 1996). stock markets tend to complement, not replace, bank lending and bond issuance. with stock market liquidity growth in developing countries also increase the sum of capital raised through bond issues and bank loans (levine, 1996). according to yartey (2008), a well-developed banking sector is an important element in the development of the stock market in developing countries. in its initial stages, the stock market is a complement to, not a substitute for, the banking sector. accordingly, the development of the banking sector can contribute to the development of the stock market. however, when stock markets become sufficiently developed, they tend to compete with the banking sector. yartey concluded that a significant level of banking sector development can lead to interchangeability between bank credit and equity issuance (yartey, 2008). 3. the relationship between the stock market development and economic growth economists also have different approaches to explaining the relationship between the development of the financial sector in general, the stock market and economic growth in particular. gurley and shaw (1955, 1960), and goldsmith (1969) have shown that economic growth stimulates financial development. the constant expansion of the economy requires additional financial services and new tools. economic development leads to the development and improvement of the financial system. at low levels of development commercial banks are the dominant financial institutions. as economies grow, however, specialized financial intermediaries and equity markets develop and prosper. (gurley, shaw, 1955, 1960). goldsmith (1969) established a positive relationship between the level of financial development and the level of economic activity, but he failed to establish a causal relationship between these indicators. later on, mckinnon (1973), shaw (1973), king and levine (1993) concluded in their researches that the creation of financial institutions and markets increases the supply of financial services. the financial sector increases savings and channels them into more productive investments. accordingly, financial development can stimulate economic growth. according to the point of view, which is currently held by an increasing number of modern economists, financial development and economic growth influence each other (garcia, liu, 1999). baltic journal of economic studies 120 vol. 7, no. 3, 2021 there are also different views on the causal relationship between economic growth and the development of the stock market, which, in our opinion, can be divided into three main groups. the first group, economists, concluded that there is a bilateral relationship between stock market development and economic growth. this group includes atje and jovanovic (1993), garcia and liu (1999), and ishioro (2013). according to the conducted studies, the developed stock market is a significant factor in economic growth, technological progress, increasing the welfare of the population. the growth of transactions mediated by the stock market leads to the growth of real incomes of the population. and vice versa, a significant growth of income leads to the development of the stock market. accordingly, from economist’s point of view, with the growth of income, its cyclical component should influence the growth of stock market volume and indices (garcia, liu, 1999). the existence of a large correlation between economic growth and stock market development has been proven using a stock market liquidity indicator for a sample of 40 countries for the period from 1980 to 1988 (atje and jovanovic, 1993). the bilateral relationship between stock market development and economic growth has been investigated using measures of stock market size as well as stock market volatility (ishioro, 2013). the second group of economists made the conclusion that the stock market has influence on economic growth. this group includes levine and zervos (1996; 1998), masoud (2013), regmi (2012), bayar, kaya and yildirim (2014), azam, haseeb, samsi and raji (2016). based on an analysis of data from 41 countries from 1976 to 1993, levine and zervos (1996) found a positive correlation between stock market development and long-term economic growth. in addition, the economists found a strong connection between the predetermined component of stock market development and economic growth in the long-run (levine, zervos, 1996). the important role of stock market liquidity is also substantiated in levine and zervos research (1998). economists studied 47 countries of the world during the period from 1976 to 1993. according to economists, firstly, stock market liquidity is positively correlated with current and future levels of economic growth, even considering the presence of other political and economic factors in the model. according to economists, a liquid stock market reduces the risks and costs of projects that pay off over the long term, thereby ensuring long-term investment. such projects are potentially more profitable, thus the stock market improves capital allocation and long-term growth prospects. secondly, the liquidity of the stock market and the development of the banking system sufficiently anticipate future growth rates. accordingly, economists conclude that stock markets provide important financial services, but these services are different from banking services (levine, zervos, 1998). according to masoud (2013), there is a relationship between an efficient stock market and economic growth, both in the short and long-run. the stock market can indirectly influence economic growth through the impact of stock market development on investment (masoud, 2013). regmi (2012) examines causal relationship between stock market development and economic growth in nepal for the period 1994-2011, using unit root test, co-integration, and vector error correction models and developing nepse composite index as an indicator of stock market development. the finding suggests that stock market development has significantly contributed to the economic growth in nepal (regmi, 2012). bayar, kaya and yildirim (2014) examined the relationship between stock market development and economic growth in turkey during the period 1999-2013 by using the johansen-juselius cointegration test and the granger causality test. the empirical results indicated that there is a long-run relationship between economic growth and stock market capitalization, total value of stocks traded, turnover ratio of stocks traded and also there is unidirectional causality from stock market capitalization, total value of stocks traded and turnover ratio of stocks traded to economic growth (bayar, kaya, yildirim, 2014). azam, haseeb, samsi and raji (2016) examined the role of stock markets in economic growth for asian countries (bangladesh, india, china and singapore), using annual time series cross country data over the period 1991 to 2012. the empirical findings of the study revealed that stock market development and fdi inflows play vital roles in the process of economic growth and development in these selected countries (azam, haseeb, samsi, raji, 2016). the third group of economists made ambiguous conclusions about the relationship between stock market development and economic growth. in particular, their conclusions depend on the study period and level of the stock market development. this group includes boubakari and jin (2010), arčabić, globan and raguž (2013), faisal, muhamad and tursoy (2016), prats and sandoval (2016). boubakari a. and jin d. (2010) noted that the relationship between the stock market and economic growth exist in countries where the stock market is liquid and active. in countries with low liquidity and underdeveloped stock markets, such a link does not exist. prats and sandoval (2016) investigated the link between the stock market development and economic growth in six countries in eastern europe (bulgaria, slovakia, hungary, poland, the czech republic and romania) from 1995 to 2012 in order to explain the transition processes. the results show evidence of the baltic journal of economic studies 121 vol. 7, no. 3, 2021 granger causality between economic growth variables and financial market variables. the direction of causality link depends on the country. faisal, muhamad, tursoy, (2016) revealed the positive impact of fdi on the stock market in the long-run period, while in the short-run period, the economists proved the positive impact of the stock market on economic growth and, as a consequence, on the fdi inflow (faisal, muhamad, tursoy, 2016; arčabić, globan, raguž, 2013). so, in our opinion, it is important to consider the role and place of private capital flows in the stock market development and economic growth. the impact of fdi and economic growth on the stock market was described by errunza (1983), adam and tweneboah (2009), shahbaz, lean and kalim (2013). private capital flows are considered important macroeconomic factors in the development of stock markets. this indicator represents the flow of direct and portfolio investments, calculated as a percentage of gdp. thus, in particular, errunza (1983) argued that the longterm impact of foreign capital inflows on stock market development is much broader than the benefits of initial flows and increased investor participation in the project. private capital flows are extremely important for the development of the stock market, as foreign investment is associated with institutional and legal reforms, adequate disclosure and appropriate listing conditions, and fair trading practices. increased information and operational efficiency, as a rule, should cause greater investor confidence in the national stock market, which, in turn, leads to greater capital flows (errunza, 1983). adam and tweneboah (2009) examined the impact of fdi on the stock market development in ghana. their results indicate that there exists a long-run relationship between fdi and stock market development in ghana. the economists have found that a shock to fdi significantly influence the development of stock market. shahbaz, lean and kalim (2013) have proved the complementary role of fdi to the stock market development in pakistan. moreover, domestic savings, income and inflation are the other macroeconomic variables that affect the development of stock market in pakistan. the important role of investments, savings and private capital flows in the stock market’s development was proved in researches of errunza (1983), garcia and liu (1996), yartey (2008). on the other hand, chousa, vadlamannati and tamazian (2008) have found a strong positive impact of growth and quality of capital markets on cross border mergers & acquisitions deals and values. the interesting finding is that the quality of markets is said to have a much greater impact than growth. this proves that the more efficient the markets are, the higher the encouragement for attracting cross border mergers & acquisitions. in earlier research we have found, that the initial level of stock market’s development has played an important role in attracting foreign direct investment in cee countries during 1999-2012 (yemelyanova, 2015). according to the existing of different opinions on the direction of relationship between stock market development, banking sector development and economic growth, the main purpose of the study is to identify the direction of the relationship between these indicators in the cee countries. 4. research methodology in the research there are used the annual data of 8 cee countries (poland, hungary, the czech republic, slovakia, slovenia, lithuania, latvia, and estonia) for the period from 1999 to 2012, and the data of 5 cee countries (poland, hungary, the czech republic, slovakia, slovenia) for the period from 1999 to 2015. unfortunately, we were not able to collect the necessary statistics for lithuania, latvia, and estonia for 20132015, so that is why we divided our study into two parts. the study is based on the granger causality test and the linear regression models. the granger causality test is a statistical hypothesis test for determining whether one time series is useful for forecasting another. the interpretation of the results of granger causality test is as follows: if the probability against a particular hypothesis is sufficiently high (i.e., its value < 0,05), we can reject the formulated null hypothesis and accept an alternative one. the general view of the linear regression model is as follows: y = β0 + β1 x1 + β2 x2 + … + βn xn +ε, y is a dependent variable; x1, x2, …, xn are independent variables; β0 is the intercept constant, the value of y in absence of all predictors (i.e. when all x terms are 0); β1, β2, …, βn are coefficients, that indicate the impact of independent variables on dependent variable; ε is the random error, which describes the random component of the linear relationship between the dependent variable and independent variables (the disturbance of the model, the part of y that x is unable to explain). that is multiple linear model because we use more than one (two or more) independent variables in our model. 5. research results in our study we researched the relationship between the stock market development, the banking sector development, economic growth, gross capital formation, fdi inflows and stocks, and portfolio equity inflows and stocks. to measure the level of the stock market development we used the indicators of the size and stock market liquidity, such as stock baltic journal of economic studies 122 vol. 7 no. 3, 2021 market capitalization and stock traded respectively. to measure the level of the banking sector development we used domestic credit to private sector and also we used gdp per capita growth to measure economic growth. for a better perception of the results, it was used the following legend: cap – stock market capitalization as a percentage of gdp; st_traded is the stock traded as a percentage of gdp; dcps is the domestic credit to private sector as a percentage of gdp; gdp_pc_growth is gdp per capita growth; gcf is the gross capital formation as a percentage of gdp; fdi_inflows is the net inflows of foreign direct investment as a percentage of gdp; fdi_stocks is the foreign direct investment stocks as a percentage of gdp; pe_inflows is the net inflows of portfolio equity as a percentage of gdp, pe_stocks is the portfolio equity stocks as a percentage of gdp. the results of the granger causality test are summarized in tables 1-2. table 1 highlights the results that directly relate to the relationship between stock market’s development indicators, banking sector development and macroeconomic indicators, and table 2 highlights the results that relate to relationships between macroeconomic indicators. note that there are only the pairs of indicators for which the relationship has been established in at least one of the studied periods. according to the results (table 1), we can make a conclusion about the important role of stock market development in the economic growth of cee countries in both time periods. so, in particular, with a probability of 0.0000 (which is < 0.05) we reject the null hypothesis “stock market capitalization does not granger cause gdp per capita growth” and accept the alternative one “stock market capitalization is cause of gdp per capita growth”. in the same way we analyze the other pairs of indicators. for more visual perception of information, the results of analysis are submitted in tables 3-4, where “→” denotes the direction of the relationship, “+” denotes the presence of the specified direction of influence of one variable on another, and “-” respectively, the absence of such influence. table 1 analysis of the relationship between the level of stock market development, banking sector development and the macroeconomic indicators in cee countries in 1999-2015 hypotheses number of observations probability 1999-2012 1999-2015 1999-2012 1999-2015 fdi_inflows does not granger cause cap cap does not granger cause fdi_inflows 107 75 0.6027 0.0147 0.5343 0.2122 fdi_inflows does not granger cause st_traded st_traded does not granger cause fdi_inflows 107 75 0.3799 0.0162 0.3685 0.0000 pe_inflows does not granger cause st_traded st_traded does not granger cause pe_inflows 99 75 0.0109 0.5462 0.0001 0.0829 gdp_pc_growth does not granger cause cap cap does not granger cause gdp_pc_growth 110 75 0.6261 0.0000 0.5815 0.0000 gdp_pc_growth does not granger cause st_traded st_traded does not granger cause gdp_pc_growth 110 75 0.9230 0.0354 0.6147 0.0129 gdp_pc_growth does not granger cause dcps dcps does not granger cause gdp_pc_growth 104 75 0.4478 0.0013 0.5747 0.0006 gcf does not granger cause cap cap does not granger cause gcf 97 75 0.4407 0.0001 0.7570 0.0000 gcf does not granger cause st_traded st_traded does not granger cause gcf 97 75 0.6657 0.1572 0.9646 0.0255 st_traded does not granger cause cap cap does not granger cause st_traded 110 75 0.9246 0.0203 0.5919 0.6623 dcps does not granger cause cap cap does not granger cause dcps 104 75 0.0746 0.0054 0.1699 0.0253 fdi_stocks does not granger cause cap cap does not granger cause fdi_stocks 88 75 0.4943 0.0362 0.2472 0.0262 fdi_stocks does not granger cause st_traded st_traded does not granger cause fdi_stocks 88 75 0.2744 0.0188 0.9765 0.0067 st_traded does not granger cause pe_stocks pe_stocks does not granger cause st_traded 88 75 0.5628 0.0000 0.0162 0.0000 note: the calculations are based on 2 lags because the results were the most significant. source: calculated by the author based on wdi (2013), wdi (2017). baltic journal of economic studies 123 vol. 7 no. 3, 2021 table 3 the direction of the relationship between the stock market development, banking sector development and the macroeconomic indicators in cee countries the direction of the relationship 1999-2012 (сее-8) 1999-2015 (сее-5) cap → fdi_inflows + cap → fdi_stocks + + сар → gdp_pc_growth + + st_traded → fdi_inflows + + st_traded → fdi_stocks + + st_traded → gdp_pc_growth + + st_traded → gcf + cap → dcps + + cap → gcf + + cap → st_traded + dcps → gdp_pc_growth + + pe_inflows → st_traded + + pe_stocks → st_traded + + source: based on results from tables 1-2. table 4 the direction of the relationship between the macroeconomic indicators in cee countries the direction of the relationship 1999-2012 (сее-8) 1999-2015 (сее-5) gcf → gdp_pc_growth + fdi_stocks → gcf + fdi_stocks → gdp_pc_ growth + + pe_stocks → gdp_pc_growth + + pe_stocks → gcf + + pe_stocks ↔ pe_inflows +* + source: based on results from tables 1-2. *pe_stocks → pe_ inflows only. we can conclude that the stock market development and the banking sector development had impact on the economic growth in cee countries in both time periods for both groups of countries. according to the granger causality test, the size of the stock market influences the development of the banking sector. in addition, it should be noted that the level of the stock market development affects the inflow and volume of fdi, and not vice versa. also it is important to understand the nature of the impact of the stock market and banking sector development on the economic growth. is the impact positive or negative and how intense is it? to get the answer on this question we constructed a linear regression model for 5 cee countries (poland, hungary, the czech republic, slovakia, slovenia) on the basis of data from 1999 till 2015. dependent variable is gdp per capita growth. independent variables are stock market capitalization, stock traded, domestic credit to private sector, fdi stocks, portfolio equity stocks and gross capital formation. we included these independent variables in our model, because they had impact on gdp per capita growth according to the granger causality test (table 3, 4). we made four models to investigate the role of the stock market development and banking sector development in economic growth by including various combination of independent variables in each model (table 5). the significance of all our models = 0.000. the highest adjusted r2 is 0.356 (model 2), this means that our model 2 is the best for describing the behavior of our dependent variable. vif for each of the independent variables in all models is < 10, this means that the multicollinearity effect is not observed and the models are suitable for further interpretation. according to the results in model 2 (table 5) we can make a conclusion, that stock market capitalization has a significant positive impact on the gdp per capita growth (β1 = 0.077), gross capital formation has also a significant positive impact on the gdp per capita growth (β2 = 0.249) and domestic credit to private table 2 analysis of the relationship between the macroeconomic indicators of cee countries in 1999-2015 hypotheses number of observations probability 1999-2012 1999-2015 1999-2012 1999-2015 gdp_pc_growth does not granger cause gcf gcf does not granger cause gdp_pc_growth 97 75 0.3125 0.0451 0.1301 0.1468 fdi_stocks does not granger cause gcf gcf does not granger cause fdi_stocks 88 75 0.2307 0.6992 0.0299 0.2267 gdp_pc_growth does not granger cause fdi_stocks fdi_stocks does not granger cause gdp_pc_growth 88 75 0.3418 0.0138 0.4133 0.0093 gdp_pc_growth does not granger cause pe_stocks pe_stocks does not granger cause gdp_pc_growth 88 75 0.8567 0.0003 0.8116 0.0013 gcf does not granger cause pe_stocks pe_stocks does not granger cause на gcf 88 75 0.6479 0.0242 0.7179 0.0414 pe_inflows does not granger cause pe_stocks pe_stocks does not granger cause pe_inflows 79 75 0.1495 0.0011 0.0010 0.0090 note: the calculations are based on 2 lags, because the results were the most significant. source: calculated by the author based on wdi (2013), wdi (2017) baltic journal of economic studies 124 vol. 7 no. 3, 2021 sector has a significant negative impact on the gdp per capita growth (β3 = -0.495). the role of stock traded is insignificant (sig. = 0.061, that is > 0.05). insignificant is also the impact of fdi and portfolio equity stocks (model 1). the main conclusion from the model 2 (table 5) is the positive impact of stock market capitalization on the economic growth of cee countries during 19992015. we should also note we have negative impact of domestic credit to private sector on economic growth. this can be explained by the impact of financial crisis 2007-2008. during 2007-2010 there was an increase of the share of domestic credit to private sector in gdp against the significant decrease in gdp per capita growth rates in cee counties. 6. conclusions the relationship between financial market development and economic growth is the subject of study by many economists. from a theoretical point of view, the financial market, in the form of both the banking system and the stock market, turning savings into investment, is a source of economic development and, accordingly, economic growth. however, this is not always the case, as exemplified by the numerous economic crises triggered by the boom in either the credit or stock markets. opinions of economists also differ on the direction of the relationship between financial market development and economic growth. the results of numerous studies emphasize, in particular, the importance of economic growth in the development of the financial sector of the economy. in addition, different countries have different models of the financial system. it is logical to assume that in countries with a banking-oriented model of the financial system, the development of the banking sector will have a greater impact on economic growth, while in countries with a market-oriented model of the financial system, economic growth will be more affected by stock market development. the purpose of this study was to identify the direction and strength of the relationship between the development of the stock market, the banking sector and economic growth in cee countries, which are characterized by a bank-oriented model of the financial system. given the rather low level of the stock market’s development in the cee countries, it was interesting to analyze whether these markets play a positive role in economic growth and whether cee countries need to develop them accordingly? the study also decided to take into account the role of fdi, because they are, on the one hand, an indicator of the quality of the institutional environment, in the stock markets in particular, and on the other hand another important determinant of economic growth. in the research there are used the annual data of 8 cee countries (poland, hungary, the czech republic, slovakia, slovenia, lithuania, latvia and estonia) for the period from 1999 to 2012, and the data of 5 cee countries (poland, hungary, the czech republic, slovakia, slovenia) for the period from 1999 to 2015. table 5 factors of influence on economic growth in the cee countries in 1999-2015 independent variables model 1 model 2 model 3 model 4 cap 0.089 (2.538)** 0.077 (2.608)*** 0.042 (1.795) st_traded -0.077 (-1.129) -0.084 (-1.900) dcps -0.105 (-5.341)*** -0.104 (-5.378)*** -0.095 (-4.981)*** -0.091 (-4.765)*** gcf 0.242 (3.323)*** 0.249 (3.654)*** 0.246 (3.561)*** 0.247 (3.525)*** fdi_stocks 0.013 (0.629) pe_stocks -0.072 (-0.402) constant 0.178 (0.078) 0.486 (0.235) 0.120 (0.057) 0.786 (0.376) significance of the model 0.000 0.000 0.000 0.000 f-statistics of the model 8.320 12.631 15.149 20.555 r2 0.390 0.387 0.359 0.334 adjusted r2 0.343 0.356 0.336 0.318 durbin-watson 1.675 1.670 1.596 1.551 number of obs. 85 85 85 85 notes: t-statistics are in parentheses. ***, ** and * indicate significant at 0.1, 1 and 5 percent level respectively (p-value < 0.001, 0,01 and 0.05). source: calculated by the author in spss on the basis of data from wdi (2013), wdi (2017). baltic journal of economic studies 125 vol. 7 no. 3, 2021 on the basis of the conducted analysis we are able to prove that: – firstly, in the long-run period, the stock market development plays an important role both in attracting foreign direct investment and in the economic growth of cee countries. the similar conclusions made levine (1996), levine and zervos (1996; 1998), yartey (2008), chousa, vadlamannati and tamazian (2008), garcia and liu (1996), atje and jovanovic (1993); – secondly, the stock market capitalization can impact economic growth indirectly through such channels as the banking sector and gross capital formation; – thirdly, there is the impact of both the stock market and the banking sector development on the economic growth in cee countries during 1999-2015. however, the impact of the stock market size on the economic growth is positive and the impact of domestic credit to private sector is negative. thus, despite the fact that the stock markets of cee countries do not belong to the group of developed markets according to the msci classification, they are really an important component of economic growth in the studied countries. accordingly, the task of cee countries is to promote the development of stock markets in the context of improving infrastructure and market regulation, increasing the level of information availability, which in turn will contribute to the entry of more investors, increase liquidity and market size and, consequently, economic growth of cee countries. according to the significant role of financial markets in the economic growth in such cee countries as poland, 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(in ukrainian) world development indicators 2013. available at: http://datatopics.worldbank.org/world-developmentindicators. world development indicators 2017. available at: http://datatopics.worldbank.org/world-developmentindicators. baltic journal of economic studies 177 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-177-185 empirical analysis of exports of organic agricultural food products of ukraine svitlana tkalenko1, tetyana melnyk2, liudmyla kudyrko3 abstract. the main goal of the study is to identify endogenous and exogenous factors that determine the scale and dynamics of ukraine’s exports of organic agricultural food products (oap). the formulated goal caused assessment of a number of potential factors influencing the development of the export potential of the ukrainian agro-industrial complex in terms of production and sales of organic agricultural products on foreign markets. the authors conducted economic and mathematical modeling based on the software product e-views. the observation interval covers 2008-2019. multifactorial regression model has been constructed and tested for heteroscedasticity, as well as causal relationships have been identified between the main indicators of supply and demand and the exports volumes of related organic products. this makes it possible for further forecast on ukraine’s exports in the short and medium term. methodology. the study has been based on statistics from international and ukrainian institutions specializing in organic farming and trade, including fibl (research institute of organic agriculture), the federation of organic movement of ukraine. databases of the state statistics service of ukraine, unctad for the period 2008-2019 were also involved, which made it possible to conduct a full cycle of research procedures in order to identify the most significant factors influencing ukraine’s export activity within related segment of the global market. the results of the conducted modeling show the following: achievement and increase of ukraine’s relative advantage in international trade of organic agro-food products for the outlined years; the existence of strong connection between the volume of exports of organic agro-food products and the level of comparative country’s advantages in international trade; identifying a significant impact on exports of endogenous factors, namely the level of wholesale and retail sales on the domestic market of ukraine as a factor that creates additional demand from the population and business of ukraine (b2b and b2c markets) for organic products and enhances the attention of agricultural manufacturers to activities that combine the criteria of high profitability and public demand. another endogenous factor is the volume of areas allocated for organic farming has shown insignificant impact, however, it allows to create resource conditions for increasing production and export activity of national business in a particular sphere on various directions, from meat and dairy products to production of organic fruit, vegetables, etc. practical implications. conceptual provisions, conclusions formulated by the authors based on the conducted econometric modeling, allow to optimize the measures of regulatory policy in terms of institutional support of conditions and factors contributing to promising activities of the national agro-industrial complex. this will ensure the implementation of the national strategy on sustainable development with its emphasis achieving environmental criteria of production and consumption, reduce the level of import dependence upon a number of strategically important food groups and, at the same time, increase economic efficiency of ukrainian agricultural business. value/originality. prospects for further research in this area may assess the potential of international production and marketing cooperation between ukrainian agricultural companies and non-resident companies in terms of limiting the latter’s access to the land market in ukraine while finding flexible mechanisms to stimulate joint production and sale of organic agricultural products on international markets according to quality and safety standards. key words: exports, comparative trade advantages, organic production, food security, import dependence, standardization, neo-protectionism, covid-19. jel classifications: f14, f17, f52 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: sv.tkalenko@gmail.com orcid: https://orcid.org/0000-0003-0385-846x researcherid: https://publons.com/researcher/1924024/svitlana-tkalenko/ 2 kyiv national university of trade and economics, ukraine. e-mail: t.melnyk@knute.edu.ua orcid: http://orcid.org/0000-0002-3839-6018 researcherid: https://publons.com/researcher/1673478/tetiana-melnyk/ 3 kyiv national university of trade and economics, ukraine. e-mail: l.kudyrko@knute.edu.ua orcid: http://orcid.org/0000-0002-9089-7223 researcherid: https://publons.com/researcher/1688352/liudmyla-kudyrko/ baltic journal of economic studies 178 vol. 7, no. 3, 2021 1. introduction the relevance of the issue under study, which is exports of organic agricultural food products in modern conditions, has several aspects. firstly, currently there is a strong trend within the global market, especially among high-income importing countries, regarding the need to pay more attention to food safety and quality issues that are the object of international trade (tsvitko, 2018). at the same time, latent neo-protectionist tools are increasingly being used to protect national farmers in conditions of global development crises caused by foreign competition through sophisticated and effective system of national standardization. secondly, the global demand for quality organic agricultural food products leads to intensification of countries-manufacturers, aggravation of competition between them and the search for effective mechanisms to strengthen their position within highly profitable segments of the global agro-food market. thirdly, taking into account the fact that the conditions for achieving competitive advantage in this promising and dynamically growing market for each exporting country vary, and along with it the following question arises logically: what forms and strengthens the ability to increase export expansion with organic food from ukraine, being the country which is actively declaring about its ambitions and claims to create, and it has already created a significant competition for other participants? thus, in 2019, ukraine took 2nd place among importers of organic agro-food products to the eu countries, which are one of the world’s largest importers of these products, being second only to suppliers from china (willer et al., 2020). the international prospects of ukrainian agro-industrial sector look even more convincing if it becomes the object of more active interest from foreign investors (makhnovets, 2020). currently, bearing in mind the international comparisons, the investment potential looks huge (nagachevska et al., 2021). 2. literature review theoretical research on international production and marketing of organic food has intensified since the early 2000s, mainly in the eu and the us, primarily in several directions: marketing aspects, crosssectoral interaction of manufacturers, processors and distributors, institutional regulators. thus, the peculiarities of imports of organic products to the us market have been investigated in terms of domestic and international market dynamics, import assessment as the way to resolve the imbalance between domestic supply of organic food and demand, having determined the role of certification when regulating import procurement (oberholtzer et al., 2013). new aspects on standardization of organic products have been also considered from the standpoint of meeting consumer demand; however, raising the issue of adjusting the volume of exports and imports (schäufele and hamm, 2017). new challenges as for economic problems of the relationship between the sectors of production and processing of organic products, retail trade are becoming the focus of scientific research (greene et al., 2009). the investigations confirm that the marketing characteristics and properties of organic products have indisputable impact onto the competitive advantages of producers (mykhaylenko, 2017), their market status and economic efficiency (dudar, 2019). the discovery of connection between ecological values and production, sale and consumption of organic products has become an urgent scientific problem (muñoz-sanchez et al., 2021). institutional and organizational instruments that influence both domestic and international trade in organic food cannot be considered without overcoming information uncertainty for consumers through food quality labeling, including protected geographical indications (aitken et al., 2020), which gives overall understanding of food safety and guarantees their protection from unscrupulous manufacturers. greater demand for transparency over organization of production itself is generated by research on the development of new alternative network formats of production and marketing ( jaouen et al., 2020). more and more actively, the export of organic food onto international markets is seen as the way to modernize national systems of agricultural production (varia et al., 2021) and its efficiency increase (ganush et al., 2021). the results of econometric analysis of the factors for development of organic production and trade become the basis for substantiation of proposals for state regulation (bazaluk et al., 2020). there is no way to ignore the new aspect of sectoral studies of global and national development of agricultural sector, which may compete with the issue of food organics. they are about finding answers to the pressing questions: what exactly is going to be the impact of covid-19 on income, nutrition and, ultimately, food security? preliminary forecasts have been quite disappointing: by 2020 the number of people staying in conditions that do not meet acceptable level of food security reached 761 million people, or 19.8 percent of the total population (that is 76 lowand middle-income countries); it is projected that the shock to gdp from covid-19 will rise the number of people whose living conditions are far from food security criteria, i.e., it has grown by 83.5 million in 2020 up to 844.5 million and increased this share to 22 percent (baquedano et al., 2020). a retrospective review of scientific research indicates that the issue of international trade in agricultural food products is multifaceted indeed, that needs further research, achieving the balance of economic, environmental, security and institutional levers of control and promotion. baltic journal of economic studies 179 vol. 7 no. 3, 2021 3. methodology the conducted research deals with the usage of databases from international and ukrainian specialized institutions, organizations and the national statistics service in ukraine for the period of 2009-2019. authors formulated preliminary assumption that volumes of oap production and export depend on a number of factors, featuring endogenous (domestic, national) and exogenous (international) origin. some of them relate to direct and indirect indicators of market supply, in particular world exports of oap (in mln eur); the number of operators and exporters of oap on the world market (units), the area for oap production in ukraine (hectares), the number of certified enterprisesmanufacturers of oap in ukraine (units), the index of relative advantage of ukraine’s oap exports; others – market demand, in particular wholesale and retail sales of oap in ukraine (in mln eur), gdp per capita in ukraine (eur). in addition, authors considered it expedient to check the probability of the influence of monetary levers of the institutional environment through the weighted average hryvnia exchange rate for 100 eur . all indicators, except for the index of relative advantage of ukraine's oap exports are obtained from public sources. (rxaij) is a calculated value, and has been determined by the authors through the following formula: rxaij = e e e e ij sj iw sw �� √ , where eij is an export of i of country product j; esj is the total exports of country j; eiw is the world exports of i products; esw is the global exports. the most relevant and significant factors influencing the export of oap on the basis of the conducted analysis as for dependence of qualitative variables on many factors based on the normal distribution (prob.) with the help of e-views showed the following: – index of relative export advantage of ukraine’s oap (market supply factor that reflects effectiveness of national business participation within international trade on the relevant segment; due to combination of endogenous and exogenous factors); – wholesale and retail sales of oap in ukraine (factor of market demand for organic agricultural products of ukrainian and foreign origin, identifies volumes of final and intermediate consumption by the population and business of ukraine (b2b and b2c markets)); – area for oap production in ukraine (endogenous factor that creates resource prerequisites for increasing production and export activity of ukrainian business in a particular sphere on its various directions). a multifactor regression model has been built for comprehensive investigation by using the software product of e-views; the hypothesis of the impact on exports of organic food products of exogenous and endogenous factors has been tested as follows: y = f (fen, fex), where fen are internal factors, fex are external factors. 4. research results among the tested internal factors, the most significant, when taking into account the time range, was the indicator of wholesale and retail sales of oap and the indicator of the area allocated for production of oap in ukraine. the most significant external factor, which at the same time is formed on the grounds of internal sources and preconditions, is the index of relative advantage of domestic exports of the oap. statistical data for analysis are taken through the period of 2008-2019, and therefore, the model includes 12 observations (table 1). the general view of the model on factors influencing external variables for export of oap was described by the equation: e = c (1) * rxaij + c (2) * x2 + c (3) * x3 + c (4), table 1 statistics data of a multifactor regression model obs e (y) rxaij (х1) wrsoap (x2) soap (x3) 2008 14.53 1.1022424 0.6 269984 2009 37.65 3.07397965 1.2 270193 2010 39.73 2.704579 2.4 270226 2011 41.8 2.207459 5.1 270320 2012 44.83 1.935292 7.9 272850 2013 47.76 1.947208 12.2 393400 2014 67.89 2.3425489 14.5 400764 2015 50.15 1.84531 17 410550 2016 59.05 2.056656274 21.2 381173 2017 98.62 3.693409 29.43 289000 2018 103.98 3.059986578 33 309100 2019 271.67 7.402071 36 497980 source: calculated by the authors using data from unctad, research institute of organic agriculture (fibl), the international federation of organic agriculture movements (ifoam) and the federation of organic movement of ukraine baltic journal of economic studies 180 vol. 7 no. 3, 2021 where e is the export of ukraine oap, mln eur; rxaij is ukraine’s index of relative export advantage of oap; wrsoap are wholesale and retail sales of oap in ukraine, mln eur; soap is the area for production of oap in ukraine, hectare. in the process of model analysis, correlations between the selected variables were identified and a correlation matrix was constructed that explains them (table 2). table 2 correlation matrix e rxaij wrsoap soap e 1 0.9522 0.7849 0.66764 rxaij 0.9522 1 0.6495 0.5171 wrsoap 0.78495 0.6495 1 0.5880 soap 0.6676 0.5171 0.5880 1 source: based on authors’ calculations basing on the matrix data, a strong positive correlation is inherent between all endogenous and exogenous factors and oap exports: the relationship between rxaij and e is being quite tough 95%, 78% between wrsoap and e, and 68% between soap and e. the connection among all variables is within acceptable limits, which indicates the absence of multicollinearity. it can be argued that the more competitive domestic organic agricultural food products are, the more exports will grow. the results of selected factors influencing within 12 periods are represented in table 3. the first step is aimed at analyzing the results of multifactor regression of oap export growth. in this model we use 10% level of significance. analysis of table 3 has led to the following results: 1. all selected factors have positive effect on the export of oap. with the growth of index of the relative advantage of domestic exports of the oap by 1%, exports of organic agricultural food products increase up to 30%; growth of wholesale and retail sales of oap leads to an increase in exports of these products up to 1%. the dimensions of the area allocated for the production of oap has no special effect, but their effective use leads to increased crops and, accordingly, to an increase in exports. 2. the value of regression r2 shows how many selected exogenous and endogenous variables are related to the ukraine’s export of oap. according to regression calculations, 97% growth of e depends on these factors. this indicates strong enough connection, since there are other factors, both quantitative and qualitative that affect e. the probability of accepting the null hypothesis is close to zero prob. (f-statistic) = 0.00, which confirms the alternative hypothesis indicating the significance of the equation in the whole. according to fisher's f-statistics, not all coefficients of the regression equation are equal to zero at the same time. in addition, all the selected factors are significant in terms of the impact on e: the index of relative advantage of domestic oap exports – 0.00%; wholesale and retail sales of oap – 3.5%, and the area for oap manufacture – 6%, which corresponds to marginal value less than 10%. as a rule, there are no strict requirements for the constants, but in our case it is also statistically significant, because it is less than 1%, i.e., all three indicators are statistically significant. 3. using the durbin-watson criterion, we check the equation on for the availability of high-priority autocorrelation: this criterion (durbin-watson stat) is 1.86. we determine significant (critical) points dl and du. for the number of observations of table 3 the results of multifactor regression of oap export growth dependent variable: е method: least squares sample: 2008 2019 included observations: 12 variable coefficient std. error t-statistic prob.   rxaij 30.43697 3.367611 9.038150 0.0000 wrsoap 1.161601 0.457623 2.538338 0.0348 soap 0.000144 6.60e-05 2.180745 0.0608 c -77.38451 19.19558 -4.031371 0.0038 r-squared 0.971549     mean dependent var 73.13833 adjusted r-squared 0.960879     s.d. dependent var 67.42526 s.e. of regression 13.33601     akaike info criterion 8.280015 sum squared resid 1422.794     schwarz criterion 8.441650 log likelihood -45.68009     hannan-quinn criter. 8.220172 f-statistic 91.06033     durbin-watson stat 1.863769 prob(f-statistic) 0.000002 source: based on authors’ calculations baltic journal of economic studies 181 vol. 7 no. 3, 2021 12 and 3 variables at a significance level of α = 5%, 0.658 <dw <1.864; α = 1%, 0.449 <dw <1.373. this means that if α = 5%, the indicators are on the edge of the uncertainty zone and the zone when we have no reason to reject the null hypothesis; if α = 1%, we do not unequivocally reject the null hypothesis, and confirm no availability of high-priority autocorrelation. the second step is to check on for autocorrelation of the second and higher levels using the breuschgodfrey test (table 4). the results of this table show that autocorrelation does not exist (in the equation of provided prob. more than 10% of the significance level and equals to 32%). also at 5% of significance level resid (-1) = 0.3065 and resid (2) = 0.5360, which is more than 5% that confirms the absence of autocorrelation. the third step is to check other information criteria. some other criteria in the table, such as akaike, schwarz, hannan-quinn, are small, confirming the success of the model. the fourth step is to test the model for its success, namely for the presence of heteroscedasticity. we check this model for heteroscedasticity using tests: white, harvey, glejser, breusch-pagan-godfrey, and arch. the test results are shown in table 5. the constructed equation has passed a number of tests for autocorrelation, the availability of heteroscedasticity, which confirmed the correctness of the constructed equation, so the model is adequate. however, polynomials can be also used to improve quality. the fifth step is to check the model for explanatory ability because the constructed model should quite accurately reflect the growth of ukrainian exports of oap using the available independent variables (table 6). as it can be seen from the table, the simulated fitted values accurately reflect the valid actual values, therefore, according to this criterion, the model is completely acceptable. descriptive characteristics of the model variables are given in table 7. the maximum standard deviation is e and soap which confirms their general trend towards variability and means that both external and internal factors affect these variables. all skewness coefficients are positive, indicating right-sided asymmetry, and have sharper apical distributions than the normal distribution. table 4 breusch-godfrey serial correlation lm test f-statistic 0.714686     prob. f(2,6) 0.5267 obs*r-squared 2.308736     prob. chi-square(2) 0.3153 test equation: sample: 2008 2019 included observations: 12 presample missing value lagged residuals set to zero. variable coefficient std. error t-statistic prob.   rxaij -0.202335 3.601548 -0.056180 0.9570 wrsoap -0.342246 0.574760 -0.595460 0.5733 soap 4.20e-05 7.84e-05 0.536428 0.6110 c -9.388575 22.03306 -0.426113 0.6849 resid(-1) -0.306460 0.454760 -0.673893 0.5255 resid(-2) -0.536071 0.462786 -1.158356 0.2907 r-squared 0.192395     mean dependent var 1.07e-14 adjusted r-squared -0.480610     s.d. dependent var 11.37299 s.e. of regression 13.83869     akaike info criterion 8.399666 sum squared resid 1149.056     schwarz criterion 8.642120 log likelihood -44.39800     hannan-quinn criter. 8.309902 f-statistic 0.285874     durbin-watson stat 1.931916 prob(f-statistic) 0.904653 source: based on authors’ calculations table 5 the heteroscedasticity test heteroscedasticity test: white obs*r-squared 5.034470 prob. chi-square(9) 0.4163 heteroscedasticity test: harvey obs*r-squared 2.040894 prob. chi-square(3) 0.2931 heteroscedasticity test: glejser obs*r-squared 3.449446 prob. chi-square(3) 0.1962 heteroscedasticity test: breusch-pagan-godfrey obs*r-squared 2.200232 prob. chi-square(3) 0.2054 heteroscedasticity test: arch obs*r-squared 1.059496 prob. chi-square(1) 0.2675 source: based on authors’ calculations baltic journal of economic studies 182 vol. 7 no. 3, 2021 let us analyze the index of kurtosis, which shows the amplitude of deviations of variables. this figure is more than zero, which also indicates an acute apical distribution. in our model all indicators of excess are more than zero, so the distribution is sharply acute. let us check the model for predictive quality: we pay attention to the mape criterion. for each integrated risk indicator an approach is defined that allows to correct the minimum forecast error. in our case, the criterion mape (in actual y = e) = 25.33, which means acceptable (but not high) accuracy of the forecast (figure 1) the equation is statistically significant with a high coefficient of determination. the general form of the dependence model of foreign trade upon independent variables can be described by the following equation: e = 30.4369 * rxaij + 1.1616 * wrsoap + + 0.0001 * soap 77.3845 the constructed model has been checked for autocorrelation and tested for heteroscedasticity, as well as verification applied for explanatory and predictive quality. the results of the authors’ model proved its adequacy and high quality. this equation shows the dependence of oap exports (e) upon the index of relative advantage of domestic oap exports (rxaij), wholesale and retail sales of oap in ukraine (wrsoap), and the area of land allocated for the oap production (soap). the coefficients of the equation show the influence of each factor on the performance indicator along with the constancy of other indicators. in this case, the export of the oap increases by 30.4 units with growing index of the relative advantage of domestic oap exports by 1 unit while the other two indicators remain unchanged. a 1% increase in wholesale and retail sales of oap in ukraine will enlarge oap exports up to 1.16%. the area for oap manufacturing does not significantly table 6 explanatory ability of the model obs actual fitted residual residual plot 2008 14.5300 -4.27778 18.8078 2009 37.6500 56.4630 -18.8130 2010 39.7300 46.6182 -6.88821 2011 41.8000 34.6372 7.16276 2012 44.8300 29.9699 14.8601 2013 47.7600 52.6792 -4.91919 2014 67.8900 68.4438 -0.55381 2015 50.1500 57.6219 -7.47194 2016 59.0500 64.7049 -5.65495 2017 98.6200 110.816 -12.1956 2018 103.980 98.5762 5.40384 2019 271.670 261.408 10.2622 source: based on authors’ calculations table 7 characteristics of model variables е rxaij wrsoap soap mean 73.13833 2.780895 15.04417 336295.0 median 48.95500 2.275004 13.35000 299050.0 maximum 271.6700 7.402071 36.00000 497980.0 minimum 14.53000 1.102242 0.600000 269984.0 std. dev. 67.42526 1.609809 12.53617 77208.81 skewness 2.324105 2.096382 0.441001 0.751656 kurtosis 7.542405 6.894447 1.844507 2.355304 jarque-bera 21.11965 16.37299 1.056545 1.337789 probability 0.000026 0.000278 0.589623 0.512275 sum 877.6600 33.37074 180.5300 4035540. sum sq. dev. 50007.82 28.50633 1728.711 6.56e+10 observations 12 12 12 12 source: based on authors’ calculations breusch-pagan-godfrey heteroscedasticity test: arch obs*r-squared 1.059496 prob. chi-square(1) 0.2675 source: based on authors’ calculations | . | . *| |* . | . | | . * | . | | . | * . | | . | * | | . * | . | | . * . | | . * | . | | . * | . | | .* | . | | . | * . | | . | * . | baltic journal of economic studies 183 vol. 7 no. 3, 2021 affect the oap export; this indicates that the extensive way of expanding the area for organic agricultural production is not crucial for increasing exports. using the latest technologies for intensification of agricultural production, it is possible to achieve significant increase in the volume of oap, and accordingly its exports. the results of the obtained econometric model allow to determine the necessary focus of state policy, taking into account the variability of factors importance to increase the oap export. 5. implications the conducted research and retrospective review of the literature indicates the importance of the chosen problem both for the agrarian business of ukraine and world trade in general. claiming to strengthen the role of the oap exporter, ukraine will have to carry out number of structural reforms, starting with the opening of the agricultural land market, which is currently closed to non-residents, and the institutional compatibility of national standards of quality and safety of organic food to international requirements. an important task for ukrainian exporters of organic agro-food products to solve in the nearest future is to ensure information transparency on conditions of creating, processing, transportation and, in fact, trade in it. after all, importers-consumers of organic food products are increasingly concerned about food security and food safety. moreover, the demand for the ability to provide such informational openness for the producers/exporters themselves is almost the only condition for access to this special segment of the world market, which is organic agricultural products. the issue of information support is not only ukrainian concern but also has an institutional dimension on global and national levels. the collection of structured information throughout the supply chain, including the level of primary production, processing, distribution, and the level of trade-related international processes, imports and retail trade, should be considered within the framework of agro-food trade just to achieve inclusive and sustainable development of the global economy. in the case of organic agro-food products, against the background of the intensification of neoprotectionist slogans as for the safety of national business and restriction of imports in the context of the covid-19 pandemic, a balance needs to be struck between reasonable security concerns and trade facilitation. in this sense, the solution, in our opinion, is maybe more active application of an integrated approach to information management throughout the value chain, rather than just monitoring transactions among the participants in foreign economic activity, which is already actively implemented in mutual “digital” trade between 32 asian countries of the pacific (escap 2021). global unique identification is one of the key principles needed to manage agro-food chain information. although any food traded globally requires unique identification, being crucially significant for organic products, where they allow the entire evolution of measures and processes to be traced in order to avoid any risk/jeopardy (for example, ones associated in particular with cross-contamination). another problem is that currently there is no predominant identification provider for the agricultural component of agro-food chains, or in general for the figure 1. forecasting source: based on authors’ calculations 320 forecast: yf 280 actual: y forecast sample: 2008 2019 240 included observations: 12 root mean squared error 10.88881 200 mean absolute error 9.416106 mean abs. percent error 25.33016 160 theil inequality coefficient 0.055985 bias proportion 0.000000 120 variance proportion 0.007216 covariance proportion 0.992784 80 40 0 -40 08 09 10 11 12 13 14 15 16 17 18 19 baltic journal of economic studies 184 vol. 7 no. 3, 2021 early stages of the food supply chain. so far, at certain stages, in particular at the stage of distribution and retail trade, the leading provider of identification schemes is gs1. on early stages, non-global identification systems are mainly used. all this complicates the removal of information uncertainty jeopardy and bears destructive effect onto the entire international trade of organic agrofood products. digitization of ukrainian exports of organic agricultural products should be a logical step in its further expansion in order to ensure information transparency on conditions of creation, processing, transportation and international trade. preliminary assessments of the digital transformation of ukraine's economy effect upon the macro level have already been conducted, and conclusions have been drawn on its impact in accelerating economic growth and increasing global competitiveness (tkalenko et al., 2021). 6. conclusions as a result of modeling, the following issues have been found: – ukraine’s achievement and increase of relative advantage within international trade in organic agrofood products for the outlined period of time; – the existence of strong connections between the volume of exports of organic agro-food products and the level of comparative advantages of the country in international trade; – identification of significant impact upon exports of endogenous factors, namely the level of wholesale and retail sales on domestic market of ukraine as a factor that creates additional demand from the population and business of ukraine (b2b and b2c markets) for organic products, and enhances the attention of agricultural manufacturers onto species activities that combine the criteria of high profitability and public demand; – another endogenous factor is the amount of land allocated for organic farming, that has shown insignificant impact, however, it allows to create resource conditions for increasing production and export activity of national business within a particular sphere in its various directions, from meat and dairy products to production of organic fruit, vegetables, etc. prospects for further research in this area may assess the potential of international production and marketing cooperation between ukrainian rural companies and non-resident companies in terms of limiting the latter’s access to the land market in ukraine and finding flexible mechanisms for stimulation of joint manufacture and sale of organic agricultural products on international markets, in accordance with quality and safety standards. acknowledgements the article is prepared within the framework of the scientific research work “the potential of import substitution in ukraine on conditions of postindustrial economy formation” (state registration number 0119u100625) and “the strategy of structural reorientation of the ukrainian economy in conditions of pandemic” (state registration number 0121u109608). references: aitken, r ., watkins, l., williams, j. and kean a. 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(2021). transitioning towards organic farming: perspectives for the future of the italian organic wine sector. sustainability, 13, no. 5: 2815. retrieved 04 april, 2021 from: https://doi.org/10.3390/su13052815 willer, h., schlatter, b., trávníček, j., kemper, l. and lernoud, j. (eds.) (2020). the world of organic agriculture statistics and emerging trends 2020. 21st edition. research institute of organic agriculture (fibl) and ifoam – organics international, frick and bonnhttps. retrieved 15 march, 2021 from: https://orgprints.org/ id/eprint/37222/ baltic journal of economic studies 72 vol. 7 no. 4, 2021 corresponding author: 1 state university of telecommunications, ukraine. e-mail: evtushtnko.13.nat@gmail.com orcid: https://orcid.org/0000-0001-8865-8365 2 state university of telecommunications, ukraine. e-mail: tnx@ukr.net orcid: https://orcid.org/0000-0002-9194-4108 doi: https://doi.org/10.30525/2256-0742/2021-7-4-72-84 consulting in the ukrainian market of services and its competitive advantages natalia yevtushenko1, tatiana halimon2 abstract. the article summarizes the arguments and counterarguments about the peculiarities of formation of competitive advantages on the services market in ukraine on the example of consulting. assessment of the development of consulting services market in ukraine was conducted for ten years (2010; 2011; 2012; 2013; 2013; 2014; 2015; 2016; 2017; 2018; 2019, 2020). methodology. the use of methods of analysis, synthesis and graphical representation allowed for a theoretical study of the formation of competitive advantages. the use of methods of economic, heuristic and strategic analysis became the basis for estimating the market of consulting services in ukraine and working out practical recommendations for its development. results. the author's understanding of the concept of "competitive advantages of the company", the factors of their formation and described the relationship of competitive strategies with the process of their formation. analysis of the market of consulting services in ukraine revealed its immaturity, exacerbated by the economic crisis, as well as the institutional vulnerability of consulting. the reasons of unstable demand for consulting services are described. according to the results of the expert assessment the top 15 ukrainian consulting companies (2020) out of 102 were determined. the leadership matrix of these companies is built depending on their role in the target market, taking into account the typology of competitive strategies of f. kotler. the analysis showed the transformation of consulting in ukraine under the influence of the covid-19 pandemic and the broad interest in digital and hr consulting. practical recommendations for the development of the market of consulting services in ukraine are presented. practical implications. it is proposed to include the following factors in the formation of the competitive advantages of the consulting company: the quality of services, competence of consultants and productivity of the company. the main competitive advantage is the competence of consultants, the level of which affects the quality of services, the results of the company and its customers. to strengthen the competitive advantage it is recommended to use the standard of consulting services in the activities of ukrainian companies. value/originality. the results of the study can be useful for any consulting company wishing to improve its competitiveness and expand the market for its services. key words: consulting, competitive advantages, competencies, consulting interaction, service, company. jel classification: g29, o17, о30 1. introduction the progressive development of the world economy is associated with transformational processes and is characterized by the orientation of production on innovation and high science intensity. the transition to new economic relations of entities contributed to the development of various forms of ownership and methods of management of business processes, finance, material resources and human capital. consulting is an alternative tool in this process. thus, between 2015 and 2020, the average annual growth rate of consulting in the global market was 10%. the demand for consulting is driven by economic growth in emerging markets, regulatory reforms in the financial sector, outsourcing of support operations in low-cost economies and public investment. professional consultants of large excellent consulting companies are involved in solving the problem situations of client companies, helping them to respond quickly to changes in the external environment and to adapt to them. the services of management consulting are in great demand, and include solutions for improving: administrative management, strategic and organizational planning; business processes baltic journal of economic studies 73 vol. 7 no. 4, 2021 using innovative technologies, competitive position, productivity, product quality and human resources. a key driver and fast-growing segment of the management consulting market is digital consulting, whose activities have made it possible to integrate analytics, cloud technology and social media into existing business models of client companies with their subsequent optimization. digital consulting has gained even more momentum since the covid-19 pandemic crisis, allowing for an even greater variety of it solution options. thus, the global consulting market, on the one hand, annually increases its turnover and contributes to the formation of other service markets (cybersecurity, it transformation, crm systems, social media marketing, etc.). on the other hand, the services of global consulting companies lead to qualitative changes in the activities of client companies, which increases their level of competitiveness. ultimately, the development of economic entities in a particular country affects the growth of gdp and the level of well-being of the population. consulting in ukraine is also designed to help companies solve a number of complex economic and management problems. however, in most cases, the activities of ukrainian consulting companies themselves do not provide a sustainable competitive advantage. this leads to the development of aggressive competition in the market of consulting services, where ukrainian companies tend to provide onetime low-quality consulting services at high prices. that is why companies-customers often resort to the services of international consulting companies. as a consequence, the study of peculiarities of formation of competitive advantages of consulting companies in the market of services in ukraine is relevant. 2. literature review 2.1. competitive advantages of the enterprise: a theoretical aspect technologies of formation of competitive advantages of economic entities at different levels of economic system development are considered and developed in the works of many foreign and domestic scientists. analysis of the scientific literature on the content of the definition of "competitive advantage of an enterprise" revealed a variety of views of scientists on this issue. most scientists support the view of classical economists, including the famous foreign expert in the field of strategic management and marketing jean-jacques lamben (lamben, 2008), who defines competitive advantage as a feature or property (attributes) of the product or brand, which gives an enterprise an advantage over direct competitors. the famous foreign scientist m. porter (porter, 2005) argues that competitive advantage is a combination of factors that determine the success or failure of the enterprise in the competitive struggle, as well as the productivity of its use of resources. it is necessary to agree with this definition, because the productivity of the use of resources, depends on the ability of the enterprise to implement an effective system of personnel management. some researchers describe the essence of competitive advantages through characteristics that do not fully reveal the content of this economic category. within the classical concept, l. balabanova (balabanova, 2002) defines competitive advantages as the strengths of a company that provide superiority over competitors and are important for the target market. in the same direction, z. dolzhansky and t. zagorna (dolzhansky & zagorna, 2006) characterize the concept of "competitive advantages of the enterprise" as the level of efficient use of all types of resources available to the firm (as well as for future consumption). according to g. fathudinov (fathudinov, 2004), competitive advantage is any exceptional value that a system possesses and which gives it an advantage over competitors. however, the author does not disclose the structure of the enterprise value and the nature of its existence in relation to competitors, does not specify the characteristics of the exceptional value. according to a. voychak and g. kamushnikov (voychak & kamushnikov, 2005), competitive advantages refers to characteristics or properties that provide an enterprise with an advantage over direct competitors. however, the authors do not provide a meaningful description of competitive advantages and do not indicate the attributes of properties that can provide competitive leadership. s. bondarenko and m. lisovskyy (bondarenko & lisovsky, 2017) reveal competitive advantage as a relative category, which is inherent in the ability to adapt to changes at a certain level of stability and efficiency, together determining the possibilities for successful functioning of the enterprise in a competitive environment. however, the authors do not explain the content of the category that determines the competitive advantage, and do not give the forms of its manifestation. in the works of other scientists the concept of "competitive advantages" is described through economic characteristics, measured by financial indicators (quantitative), and such indicators (qualitative), which demonstrate the results of the enterprise in functional areas. thus, researchers k. elin (elin, 2012) and a. levitska (levitska, 2012) interpret competitive advantages as a factor (or a set of factors) that directly or indirectly determines a stable or growing choice of market participants in favor of the company, allows baltic journal of economic studies 74 vol. 7 no. 4, 2021 obtaining a certain economic effect, increases or stabilizes profits. a similar point of view noted by l. azoev and a. chelenkov (azoev & chelenkov, 2000), presents competitive advantages as a manifestation of superiority over competitors in economic, technical and organizational spheres of enterprise activity, can be measured by economic indicators (additional income, higher profitability, market share, sales volume). famous ukrainian scientists е. gudz (gudz, 2013) and n. teslyuk (teslyuk, 2005) indicated qualitative or quantitative indicators of its position in the market, which ultimately provide the enterprise with income that exceeds the industry average, as well as the corresponding indicators of competitors. despite the different points of view on the formation of the concept of "competitive advantage" on the model of their management, these studies remain relevant, especially in the global transformation of the economies of many countries with the active introduction of information technologies. 2.2. developmental counseling theory in the literature review the consulting industry dates back to the late 19th century, when the world's first modern consulting firms were founded. mit chemist arthur dehon little is considered the founder of the first production management consulting company. in 1886, he and his colleague roger b. griffin founded a consulting company, arthur d. little, inc., which flourished as an independent company for more than a century. in 2002, it became part of the paris-based consulting firm altran. (science history institute, 2017) a new field of management consulting emerged in american universities more than a century ago to support the commercial world struggling with the unprecedented growth of the industrial revolution. so james o. mckinsey (seo solution, 2016), a professor at the university of chicago, founded mckinsey and company in 1926, which has entered the history books as the world's first "clean" management consulting company. this consulting company still holds a leading position in the world consulting, and it is almost impossible to find an equal competitor for it. the increasing role of management consulting in the global economy is associated with the extreme complexity of management decision-making conditions as a result of increased uncertainty in the business environment and increased asymmetry of information. a significant contribution to the study of modern consulting, its theoretical, methodological and practical aspects was made by well-known foreign researchers such as: e. shane (shane, 1969), l. greiner, r . metzger (greiner & metzger, 1983), r . yuksvyarav (yuksvyarav, khabakuk & leimann, 1988), t. clark (clark, 1995), m. kipping (kipping, 1999), v. aleshnikova (aleshnikova, 2000), m. kubr (kubr, 2002), g. marinko (marinko, 2005), s. macdonald (macdonald, 2006), p. block (block, 2007), j. o'mahony (o'mahony, 2010), a. blinov (blinov & dresvyannikov, 2013) and others. scientists presented the conceptual foundations of management consulting, identified the features of functioning and development, identified the weaknesses of management consulting and its impact on the economic development of client enterprises, proposed promising areas of external and internal consulting, taking into account the professionalism of the consultants. at the beginning of 2000, such ukrainian scientists as o. trofimova (trofimova, 2002), v. verba (verba, 2012), t. reshetnyak (verba & reshetnyak, 2000) presented the research format of management consulting in the ukrainian service market. these scientists substantiated the methodological, organizational and economic aspects of the interaction of consulting company interaction in the client service process. they formed the conceptual apparatus of consulting and types of its services. later, ukrainian scientists described either general issues of the consulting services market in ukraine (s.v. kozachenko, v.e. novitskyi, o.s. dovgy) or separate directions of consulting such as: implementation of a consulting project (ryba kova, 2010), formation and implementation of consulting support for enterprises (davidenko, 2006), behavior of subjects of the consulting services market: goals and principles (o.a. marchenko) and more. the study by n. yevtushenko (yevtushenko, 2019) presents a modern perspective on the formation and implementation of the organizational and economic mechanism of internal and external consulting. she substantiated the need to introduce the concept of "consulting interaction" in the consultation process, which is considered as a professional communicative process between the subjects of economic relations in the communicative space on the solution of problem situations of enterprises-customers of consulting services in accordance with the improvement of their capacity for management, functioning and development. n. yevtushenko said that under such conditions, consulting is a process agreed with the client to create intellectual products by professional consultants with their subsequent implementation in the activities of clients. in the course of the research it was found that today the most important problem for ukrainian consulting companies is the problem of their survival in the service market, where the leading positions occupied by international consulting companies. we believe that one of the main directions for solving this problem is the study of theoretical and methodological aspects baltic journal of economic studies 75 vol. 7 no. 4, 2021 of the formation of competitive advantages of consulting companies, as well as the development of practical recommendations for their formation, which confirms the relevance of this study. the purpose of the article is to study the theoretical and methodological aspects of the formation of companies' competitive advantages, to develop on this basis, practical recommendations for the formation of competitive advantages on the example of consulting companies in the ukrainian service market, taking into account their functioning and development trends. 3. methodology the analysis of the economic category "competitive advantage of the company "indicates the ambiguity of scientists' views on the content of this concept. we propose to define the concept of "competitive advantage" as a system of factors that will help the company to take and hold the best competitive position in the market compared to other companies in accordance with the specifics of the organization of competitive behavior, which together will ensure the successful functioning of the company in the long term. it is proposed to understand the system of factors of the company as any sources or unique values that give it an advantage over competitors and opportunities to attract potential customers and retain regular customers. there are three directions in economics, according to which competitive advantages of any company are formed in modern conditions: 1. institutional (the source of competitive advantage is the integration of an enterprise into the business environment, its information field and the system of industry and market relations). 2. market (the specifics of the industry, the type and scale of competition, the behavior of the enterprise itself in the market). 3. resource (combination of enterprise resources, both tangible and intangible, and their management system). the ukrainian scientist t. halimon (halimon, 2017) in his research highlights the modern world experience of successful functioning of well-known corporations that have achieved a competitive advantage through the active use of a number of innovative methods of transforming their business (lean production, 6σ, 4re, bpr) as sources of competitiveness advantages. measures to ensure the competitive advantage of the enterprise to achieve the necessary level of competitiveness can be: the formation of the flow of value creation, extensive development of innovation, customer focus, the development of innovative communications for customers, synchronization of technological and managerial processes. v. vasilenko and t. tkachenko (vasilenko & tkachenko, 2004) note that the most typical factors for creating competitive advantages are: new technologies; changes in the structure and cost of individual elements of the technological chain of production and sale of goods; new consumer demands; the emergence of a new market segment; changing the rules of the game in the market. according to l. shekhovtsova (shekhovtseva, 2001), it is reasonable to refer such factors of production as: natural resources; favorable conditions for the production of goods; qualified workforce; effective investments in educational technologies and licenses; creation of new products, production processes and other innovations; use of created wealth to ensure economic growth to the factors of competitive advantage of the company. we believe that the main means of achieving competitive advantage for consulting companies are competitive strategies. they are based on and implemented on approaches related to the management and strengthening of the long-term competitive position of the company on the services market. well-known foreign scientists g. hamel, k. prahalad (hamel & prahalad, 2002) note that the formation of a company 's competitive strategy is to create a future competitive advantage faster than competitors copy what the company uses today. in the works of j.-j. lamben (lamben, 2008), m. porter (porter, 2005) emphasized the presence of a systemic connection between the components of market-oriented enterprise management and competitive strategies, which substantiates the organizational and economic principles of the development of business structures and their competitors in accordance with the industry format. the relationship between the competitive strategy and the process of formation of competitive advantages of the company in the ukrainian market of services is shown in figure 1. we believe that competitive strategies implement the objectives outlined by company management in the corporate and business strategy, which will be reflected in the activities of the company at the functional and operational levels. in these circumstances, the competitive strategy includes the process of forming competitive advantages, the strategy of ensuring the competitive position of the enterprise in accordance with the set strategic goals and objectives, and the strategy of competitive behavior in accordance with a set of interrelated measures of competitive struggle. in the process of providing competitive strategies, business managers must clearly identify all the activities that will enable the enterprise to make better use of available resources, such as through the introduction of technology, better modernization, baltic journal of economic studies 76 vol. 7 no. 4, 2021 employee motivation or effective management of the enterprise, among the existing strategic alternatives. scientists have proposed various options for the use of competitive strategies for specific areas. so in the works of m. porter (porter, 2005) universal competitive strategies (cost leadership, differentiation, focusing) are presented. japanese analyst and consultant k. ohmae (ohmae, 2007) created his own classification of competitive strategies, which divided into success factors: relative advantages; aggressive initiative; strategic level of freedom. within this model, he identifies the key success factors of the company in the so-called "strategic triangle" ("corporation", "customer", "competitors"). in contrast to m. porter's classification, k. ohmae's classification is aimed at finding new opportunities. the study by w. chan kim and g. mauborgne (kim & mauborgne, 2005) "competitive strategies of the blue and red ocean" is interesting, the main purpose of which is to provide leadership among other players in the chosen field of competition. chang kim and g. mauborgne propose to view the market universe as two oceans, red and blue. the "red ocean" symbolizes the now well-known industries, whose boundaries are defined and the rules of the game are known to all. the blue ocean is an untapped market that offers unlimited growth and high profits. these are industries that do not yet exist, where no one is threatened by competition because the rules of the game have not yet been formulated. f. kotler (kotler & keller, 2012) identified four competitive strategies based on the assessment of market share owned by the organization: 1) the "leader" of the market. he occupies a leading position; it is natural for him to strive to expand sales. the leader may also pursue a defense strategy (to protect his market destiny) by creating high barriers to market entry. 2) the "challenger" (contender for leadership) challenges his competitors and seeks to take the place of the leader himself. he can organize a frontal (who is stronger) or flank attack (attack on weaknesses). usually the challenger secures a price advantage. provocations are possible in order to identify the "pain threshold" and weaknesses. 3) the "follower" (following the leader) sees advantages in "peaceful coexistence" with the market leader. he works in those segments where he can better use his capabilities and the advantages of small business. 4) "nichevik" (specialist) aspires to become "the biggest fish in a small river" and links its future to a strategy of specialization. practical aspects of the formation of competitive advantages taking into account competitive strategies are offered by the example of companies providing consulting services in ukraine. 4. case studies in ukraine, researchers have tried to segment the market for consulting services by various criteria: industry affiliation of enterprises-customers, the functional purpose of consulting services, by territorial location of consulting companies, the size of consulting companies and the like. despite the sufficient number of proposals on segmentation and evaluation of consulting services functional strategies of the company operating strategies of the company business (business) strategy of the company competitive strategy of the company competitive advantages competitive position of the company competitive behavior corporate strategy of the company figure 1. the relationship between competitive strategy and the process of forming the company's competitive advantage source: built by authors baltic journal of economic studies 77 vol. 7 no. 4, 2021 market, it is still difficult to estimate the size of this market in ukraine using statistical data. in this regard, in 2017 ukrainian scientist n. yevtushenko (yevtushenko, 2017) assessed the degree of maturity of the domestic consulting market according to the state statistics service of ukraine within the code of economic activity (kved) m "professional scientific and technical activities", in which types of services are structured into groups of similar areas: i group: activities in the field of law, accounting, architecture and engineering, technical testing and research, activities of head offices (head offices), management consulting; ii group: advertising and market research, other professional, scientific and technical activities, veterinary activities; iii group: research and development. let's analyze the dynamics of the realized volume of consulting services in ukraine (figure 2). according to the data presented in figure 1, it found that periods of rise and fall of the consulting market reflect the results of economic and political stability in ukraine. thus, the high demand for consulting services for the period 2010–2020 was recorded in 2013 – 49084.9 million uah, and the lowest – in 2015, when the volume of sold consulting services decreased by 35959.2 million uah and amounted to 13125.7 million uah at the end of 2015. in the period 2015–2020, the demand for consulting services is 21231.8 million uah. however, in 2020, during the global pandemic covid-19, the demand for consulting services in ukraine slowed down, which can be seen in the dynamics of the volume. thus, the volume of services sold by consulting companies in ukraine in the period 2018–2019 increased by 6578.2 million uah, while the volume of these services increased in 2020 only by 2368.5 million uah relative to 2019. today, during the crisis in the ukrainian economy, it is not so easy for consulting companies to return the desired demand for consulting services where the main customers are industrial and engineering enterprises, as well as other large enterprises (figure 3). economic analysis of consulting services market in ukraine revealed its immaturity and instability in relation to the world market of consulting. it 49084,9 13125,7 31989 34357,5 0 10000 20000 30000 40000 50000 60000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 figure 2. dynamics of realization of consulting services in ukraine (2010–2020), mln. uah source: built by authors based on (yevtushenko, 2017; 2019), (state statistics service of ukraine, 2010–2020) 0 10000 20000 30000 40000 50000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 services provided to enterprises services provided to the population figure 3. dynamics of the services of consulting companies to enterprises and the population of ukraine (2010–2020), mln uah source: built by authors based on (yevtushenko, 2017; 2019), (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 78 vol. 7 no. 4, 2021 was revealed that the share of consulting services market is insignificant and fluctuates within 11-13% of total market volume (figure 4), while in the economies of developed countries consulting is a separate branch of activity, which services are in demand. economic analysis of the consulting market in ukraine has revealed its immaturity and instability in relation to the global consulting market. the reasons affecting the development of the consulting market in ukraine and the demand for consulting services include (yevtushenko, 2019): – the difficult macroeconomic situation, exacerbated by the political and socio-economic crisis, as well as military actions in the east of the country; – low level of solvency of customers of consulting services; – insufficient popularization of consulting services and insignificant demand for them; – lack of legislative acts on the regulate consulting activities; – lack of methodological support for service quality criteria and assessment of the usefulness of consulting; – distrust of consulting companies due to limited data on the effectiveness of their activities; – low percentage of guarantees of a specific result and a positive effect from consulting; – lack of experience of enterprises in working with professional consultants; – failure to fully comply with the confidentiality conditions by the consultants. checking of forecast of consulting services market development shows that in short-term perspective 357068,1 123250,4 264195,9 49085,0 13125,8 34357,5 0,0 50000,0 100000,0 150000,0 200000,0 250000,0 300000,0 350000,0 400000,0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 volume of services provided by enterprises in the service sector by type of economic activity, mln. uah the volume of services provided by consulting companies, mln. uah figure 4. dynamics of consulting services in the total volume of services in ukraine (2010–2020), mln uah source: built by authors based on (yevtushenko, 2017; 2019), (state statistics service of ukraine, 2010–2020) y = 1,7111x + 94,928 0,00 20,00 40,00 60,00 80,00 100,00 120,00 140,00 160,00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 figure 5. growth rate of consulting market in ukraine (2010–2020), % source: built by authors based on (yevtushenko, 2017; 2019), (state statistics service of ukraine, 2010–2020) baltic journal of economic studies 79 vol. 7 no. 4, 2021 positive stabilization of external economic and political factors gives results of tendencies of ukrainian consulting industry development (figure 5). consulting in ukraine, as well as in other countries around the world, was not protected from the economic consequences of the global crisis covid-19. the growth rate of consulting market in ukraine decreased by 18.5% in 2020 compared to 2019. according to research, the global consulting market during the pandemic also declined by 8% in 2020 (ibisworld, 2021). despite its immaturity, the situation in which the ukrainian consulting market at the end of 2020 showed the role of management consultants, responsible for leading companies to overcome disruptions. therefore, management consulting is becoming more important type of services in ukraine than ever before, especially its segment – digital consulting (it consulting). 5. research results in 2020 clutch experts evaluated 102 ukrainian consulting companies whose services are in demand. the following indicators were used as evaluation criteria (clutch, 2021): 1) customer reviews. 2) clients and company experience (the type and quality of clients the company works with, cases demonstrating the company 's experience in different areas: projects, services, industries were taken into account. 3) market presence and awards: – marketing efforts: "how clearly and professionally is the company presented on the internet?” – reputation: "does the company have a solid reputation in its industry?” – geographic presence: " where is the company located?” – awards: "has the company received any awards?" – social media presence: "does the company have a social media page?" – leadership: "does the company demonstrate efforts to innovate in its industry?" in the process of evaluation, the experts selected the 15 best consulting companies in ukraine, the data for which are presented in table 1. based on the results of the expert assessment the leadership matrix was formed, taking into account the typologies of competitive strategies of f. kotler. the matrix is an interactive graph of consulting companies' capabilities in relation to their competitive positions on the market (focus) (figure 6). the leadership matrix allowed to determine the place of each of the 15 consulting companies in one of the presented squares "leader", "challenger", "follower", "nichevik" and to form their capabilities in accordance with the competitive strategies of f. kotler. in the square of the matrix "leader" of the surveyed companies only one – "reprezent" (1), the types of its services are diversified: business consulting – 35%, custom software development; graphic design – 30%; corporate training – 35%. this company has a high focus on desired service, provides clients with services at a high professional level, receives a lot of positive feedback from clients, and accompanies its business with competitive strategies to expand the market and protect its share in it. the "challenger" quadrant includes two companies: "rosedome" (2) and "finmodelslab" (6). in the activity of "rozdoum" it-consulting services are carried out 80%, and in the activity of "finmodelslab" dominate the services of financial consulting – up to 90%. these companies provide professional services table 1 top 15 consulting companies in ukraine (2020) ukrainian companies reviews clients & experience market presence location, 1. reprezent 16,3 8,8 7 kiev 2. rozdoum 16,6 8,2 8,5 kharkov 3. salestech 17,4 5 6,9 kiev 4. addition advisory 16,9 5 6,8 kiev 5. the arbridge 17,2 5 6,8 kiev 6. finmodelslab 16,3 7 8,4 lviv 7. pragmatic dlt 16,3 5 7,1 kiev 8. creative cooperative 16,7 6,6 6,3 odessa 9. fiddle.digital 16,9 6 7,3 kiev 10. azon5 17,2 5 6,8 lviv 11. a-hr 16,4 5 6,9 kiev 12. keplercode 16,4 5,7 7,4 lviv 13. indigo tech recruiters 16,3 5 7,2 kiev 14. nullgravity 16,8 5 7 kiev 15. pragmaspace 16,3 5,9 6,8 kharkov source: built by the authors based on data (clutch, 2021) baltic journal of economic studies 80 vol. 7 no. 4, 2021 in a narrow direction of consulting, receive good reviews, but have a low level of focus on the desired service. to strengthen their competitive position in the market, these companies use any active competitive strategy, most often a flank strategy, although they can afford a guerrilla competitive strategy as well. square – "nishevik" includes three companies: "sales tech" (3), "addition advisory " (4), "arbridge" (5). all of these companies provide it-consulting and management consulting services. for example, "sales tech" sells up to 50% of business consulting services and up to 40% of marketing and digital strategy development services. "addition advisory " provides up to 40% of business consulting and up to 40% of digital marketing. the "arbridge" provides up to 70% of it consulting and it strategy services, and only 30% of management consulting. "nishevik" companies have a moderate ability to provide consulting services, have a high focus on the desired service, and receive good feedback from clients because they have a long-standing specialization in their chosen service areas. the last square of the leadership matrix "follower" includes most of the consulting companies in the top 15 rating in ukraine: "pragmatic dlt" (7), "creative cooperative" (8), "fiddle.digital" (9), "azon5" (10), "a-hr" (11), "keplercode" (12), "indigo tech recruiters" (13), "nullgravity " (14), "pragmaspace" (15). these are the so-called newcomers, companies that have recently entered the service market, provide it consulting services demanded by time and events, and have a moderate ability to provide their services, a low level of attention to the desired service and strong customer feedback. most of these companies use a competitive strategy of following in the footsteps of the leader, but there are also those that try to outperform their competitors by creating their own competitive advantages. to increase the level of competitiveness of ukrainian consulting companies and the distribution of their services in the domestic and foreign markets, it is necessary to solve the following tasks (yevtushenko, 2019): 1. agreeing at the legislative level the standards of consulting services (unified classification of consulting services) and methodological foundations for the formation and implementation of the mechanism of consulting interaction, as well as criteria for the quality of consulting services and methods for their assessment. 2. increasing the interest of the state in the participation of consulting companies in state and regional strategic programs for socio-economic development, as well as in public-private partnership programs. 3. support for the development of human capital as the main intellectual resource of a consulting company, taking into account an agreed system for managing its potential. 4. use of effective organizational and management structures in the process of implementing consulting interaction based on the organizational model of corporate culture and the strategy of human capital behavior of the consulting company. 5. taking into account the system of criteria for evaluating and encouraging personnel to improve the quality of the provision of consulting services in the process of consulting interaction. c om pa ny c ap ab ili ti es focus «follower» «leader» «nishevik» «challenger» 1 2 3 4 5 6 10 9 14 12 15 13 11 7 8 figure 6. leadership matrix of top-15 consulting companies in ukraine, taking into account the typology of competitive strategies by f. kotler (2020) source: built by authors based on (clutch, 2021) baltic journal of economic studies 81 vol. 7 no. 4, 2021 6. coordination of consulting interaction processes in accordance with the quality management system and the effectiveness of functioning because of a synergistic effect. 7. application of a system for evaluating the results of consulting interaction using knowledge management programs. 8. effective use of management tools to promote consulting services. 6. recommendations we agree with the opinion of scientists about important groups of factors that create a competitive advantage for each individual company in the market. however, we support the viewpoint of j.-j. lamben, who identified three factors that form the competitive advantage of the company (lamben j-j, 2008): 1) product quality (excellent product quality with increased value for the consumer); 2) production costs (benefits of price and cost control, administration and product management); 3) key competencies (special skills or technologies that create a unique uniqueness for the consumer). in his works, the scientist n. yevtushenko (yevtushenko, 2019) recommended to refer to the sources of formation of the competitive advantages of a consulting company: key competencies of consultants; quality of consulting services; the productivity of the consulting company and its results (figure 7). to strengthen existing competitive advantages and to carry out procedures to update them, it is advisable to take into account the following information: – life cycles of competitive advantages, which will reveal the moment of the need to strengthen the competitive advantage in case one of the existing ones has already expired, is in decline and should be restored; – market requirements, because consumers dictate their terms and win the competition, and the company tries to take into account these needs as much as possible; – competitive advantages of competing companies, other consulting companies and their weaknesses, which allows the company to make effective decisions on how to take into account variable characteristics in the process of updating existing competitive advantages that have not yet been used by competitors. in the works of n. yevtushenko it is given that the main competitive advantage of any consulting company is the key competencies of consultants. consultants are the intellectual resource of a consulting company. she offered a set of consultant competencies in the form of an "intellectual resource" package based on the "effective consultant" model for a management consultant, an expert consultant, and a specialist consultant. this will effectively affect the growth of company productivity (yevtushenko, 2017; yevtushenko, 2019). the efficient consultant model is an abstract analysis of the process of transforming knowledge into an intellectual product – consultant competence. this model substantiates the direct dependence of consultants' knowledge structure on their competencies. (yevtushenko, kuzminska & kоvalova, 2021). due to the absence of the concept of "standard of consulting services" in the state regulations of ukraine, as well as given the foreign experience of managing consulting companies, its necessity is justified. formation of competitive advantages of the consulting company the emergence of special characteristics that increase the effectiveness of the consulting company approval of the authorities of a specific consulting service competitive advantages of consulting: −key competencies of consultants; −quality of consulting services; −productivity company. benefits that closely related to the life cycle of the consulting service taking into account variable characteristics taking into account the constant changes in the market of consulting services taking into account the temporary nature of competitive advantages figure 7. factors in the formation of the competitive advantages of consulting companies source: (yevtushenko, 2019) baltic journal of economic studies 82 vol. 7 no. 4, 2021 the standard of consulting services as a set of mandatory rules for the provision of consulting services to the company's clients consulting service consulting product consulting interaction in the company's management system consulting company consulting project figure 8. the place of the standard of consulting services in the process of providing consulting services source: (yevtushenko, 2019) the content of the concept "standard of consulting services" n. yevtushenko proposes to consider as a set of mandatory rules for the provision of consulting services that will guarantee a high level of quality and professionalism of consultants at all stages of the implementation of the consulting project (yevtushenko, 2019) (figure 8). the formation of the quality of consulting services should be based on criteria. they will be spelled out in the internal documents of the company and approved by the company management. in the rules that are prescribed at the state level in the normative-legal acts of ukraine in the sphere of consulting services market regulation. to the basic rules for the provision of consulting services is proposed such as (yevtushenko, 2019): 1) communicative interaction with clients; 2) quality of services; 3) corporate behavior; 4) ethical standards of the consultant; 5) certification of consultants; 6) improving the professionalism of consultants; 7) application of forms and methods of public relations in order to increase the popularity in the market of consulting services; 8) cooperation (partnership) within the professional association of consulting companies. the standard of consulting services is necessary for ukrainian consulting companies in order to form and maintain a high level of quality of consulting services, which will contribute to the professional activity of consultants and increase the demand for such services. 7. conclusions according to the results of the study, it was found that despite the large number of players, the consulting services market in ukraine in the period 2010–2020 has not yet been finally formed, the demand for consulting services is unstable, and the level of competitiveness of ukrainian consulting companies does not meet the requirements of world leaders. the main reasons are macroeconomic and political factors during the strategic analysis of consulting companies in the ukrainian market of services in 2020 the top 15 were selected, of which one company was in the "leader" segment, and among the stable "niches" only three, the rest entered the market recently, but already have the desire to follow the leader. the main activities of these companies are it consulting (or digital consulting) and hr consulting. despite this narrow focus, consulting companies today have the important task of spreading digitalization among clients and implementing innovative digital technologies in their operations. this is especially true during the global covid-19 pandemic. we believe that the market of consulting services in ukraine has prospects for development in the near future due to the tangible flexibility of leading consulting firms with their freedom from fixed capital and high dependence on resources. stabilization of the service market in ukraine is also possible with the growth of economic activity of industrial enterprises, the participation of consulting in the formation of public-private partnerships and investment attractiveness of the country. at the same time, the main advantages of consulting companies include the competence of consultants. clients expect consultants to have specialized knowledge, and this perceived market gap in niche knowledge will be easily exploited by newcomers. we argue that consulting in ukraine requires institutional improvements and the introduction of a standard for consulting services. this will entail the revision of the management system in companies to maintain their competitive advantage. in the long term it will help consulting companies in ukraine to increase both their own profits and profitability of their clients. baltic journal of economic studies 83 vol. 7 no. 4, 2021 references: aleshnikova, v. i. 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(1988). management consulting : theory and practice. moscow: economics. baltic journal of economic studies 104 vol. 7 no. 5, 2021 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: kovalenko45@ukr.net orcid: https://orcid.org/0000-0003-0235-7823 2 admiral makarov national university of shipbuilding, ukraine. e-mail: rusnak_av@meta.ua orcid: https://orcid.org/0000-0002-3198-2866 researcherid: aac-7821-2019 3 admiral makarov national university of shipbuilding, ukraine. e-mail: dmytro.lomonosow@gmail.com orcid: https://orcid.org/0000-0003-4394-1807 researcherid: v-4880-2017 doi: https://doi.org/10.30525/2256-0742/2021-7-5-104-113 ways of ensuring the compliance of the activities of higher education institutions with modern challenges mykola kovalenko1, alla rusnak2, dmytro lomonosov3 abstract. the purpose of the article is to identify ways to ensure that the educational process in higher education institutions meets the modern requirements of social development. the methodology of the comprehensive study allowed to identify priority areas of adaptation of universities to changes in the external environment; to summarize the main comprehensive measures to ensure the quality of education; to substantiate the feasibility of organizing continuous monitoring of the market of educational services to promptly provide the educational institution with the information necessary to make effective decisions; to generalize and supplement the principles of the adaptive process in higher education institutions; to develop recommendations for the formation of a support system for the adaptive process in higher education institutions. methodology. the study is based on a systematic approach to the substantiation of the nature and directions of adaptation of the hei to changes in the external environment, to the formation of a system to support the adaptation process of the hei. it is shown that the priority directions of adaptation of the hei are determined in relation to a particular educational institution and should include: reforming of the educational institution in accordance with modern requirements; implementation of market ideology; innovative development of the educational process; provision of modern education; development of interaction with employers – customers of educational services; diversification of funding sources. the scheme of information support for hei adaptation to the requirements of the external environment was developed. the study of adaptive activities of successful heis allowed to complement the principles of reform and transformation of the organizational and economic foundations of heis with the principles of adaptive process organization, such as the practical experience of purposeful modernization of other heis to solve similar problems; analysis of the current situation of the hei, the market of educational services and the prospects for their development; reliance on the corporate culture of the team; integrated systematic approach to economic and social problems; project approach to the formation and implementation of measures to ensure the adaptation program. the results of the study show that the system to support the process of adaptation in higher education is a set of management tools, which are based on the principles of adaptation process organization; adaptation strategy is aimed at improving the quality of education, competence of graduates; policy of adaptive management and reform of the educational process; development of market logic; development and implementation of programs to improve educational and scientific activities and their organic combination; diversification of educational activity; internal institutional restructuring; application of collective and individual forms and methods of economic, social, moral, psychological and other types of stimulation to intensify the adaptive process. practical implications. an algorithm for forming a system to support the adaptation process in higher education institutions, including organizational and economic tools of institutional support for continuous adaptation process to coordinate the activities of the hei with the dynamic conditions of the external environment, was developed. value/originality. determination of ways to ensure compliance of the educational process in the university with modern requirements of social development should baltic journal of economic studies 105 vol. 7 no. 5, 2021 be based on understanding the essence of the concept of adaptation of the university to changes in the external environment as a process of purposeful change in the educational and scientific activities of the university and its units to the current and future changes in the external environment to ensure effective functioning, addressing certain goals and objectives of development, compliance of graduates' competencies with the requirements of the current and prospective labor market, competitiveness of the institution on the market of educational services; the essence of adaptive management as a process of creating conditions for the implementation in the educational process of society's requirements for quality, up-to-date knowledge received by graduates of the educational institution, compliance with the requirements of the current and future economy. key words: higher education institution, adaptation, external environment, adaptation process support system, monitoring, educational services market. jel classification: h12, i21, i23 1. introduction the external environment of higher education institutions (heis) can often experience unpredictable and unexpected changes. this increases the requirements for the hei in terms of efficiency and adequacy of response to them. upcoming foreseeable changes in the external environment require special attention on the part of higher education institutions. the educational institution should train specialists with competencies that will be required by society in the distant future or at the time of graduation, or for some perspective for the graduate. hence the specificity of adaptive management of the hei, i.e., focusing on the predicted future requirements of educational consumers to ensure that the competencies of graduates meet the poorly predicted future needs of society. modern society is constantly evolving. the pace of its development is accelerating. trends in global and national economic and social development are constantly being studied by foreign and domestic scientists. in particular, the publications of m. castells (on the peculiarities of the formation of the society of the information age); v. leontiev (on the ways of future development of the world economy); l. myasnikova (on the paradigm shift of the new global economy); a. vergun (on the concept of sustainable development in the context of globalization); v. geets (on the nature of the transition to a knowledge economy); v. onikienko, l. yemelyanenko and i. teron (on the innovative paradigm of socio-economic development of ukraine) and other researchers established that the processes of informatization in all spheres of the economy and social life; increasing the role of man and the requirements for his competences in production; the formation of a knowledge economy are the most noticeable and characteristic of modern society. new challenges, organizational and managerial issues require higher education institutions (heis) to solve a number of problems in the transition to a new logic in their activities. the novelty of the study lies in the development of an algorithm for forming a system to support the adaptive process in higher education institutions to ensure compliance of the educational process with modern requirements of social development, including organizational and economic tools of institutional and organizational support of continuous adaptive process of adaptation of the institution to the dynamic conditions of the environment. the aim of the study is to identify ways to ensure the consistency of the educational process in heis with the requirements of social development. the study is based on a systematic approach to determining the priority areas of adaptation of universities to changes in the external environment, comprehensive measures to ensure the quality of education, principles of adaptation process organization in universities, organizational and economic instruments of institutional and organizational support of the continuous process of adaptation of heis to changes in the external environment. the main objectives are: determination of areas of adaptation of universities to changes in the external environment; justification of measures to ensure the quality of higher education; the main objectives: studying the role of monitoring the market of educational services and marketing research of heis for a guaranteed rapid response to changes in the external environment; generalization and addition of principles of organization of the adaptive process in heis; developing an algorithm for the formation of the support system of the adaptive process in heis. 2. analysis of recent research and publications on the topic society and its ever-evolving economy need educated professionals capable of making responsible decisions in a rapidly changing environment and in uncertain situations. accordingly, society is forming new requirements for high school graduates. features of modern requirements of society and consumers of educational services (population and employers) are studied in the works of o. amosha (modern approaches to the interaction of academic science, baltic journal of economic studies 106 vol. 7 no. 5, 2021 education and industrial production); a. afanasieva (formation of professional competence of a future specialist); b. wolfson (educational strategy in the west in the xxi century); m. golovan (the theory and experience of forming specialist competencies); o. dannikov (the development of digital competencies in the context of the informatization of society); m. kovaliov (education for the digital economy); o. ovcharuk (competence approach in modern education, its world experience and ukrainian prospects); a. sbrueva (theoretical and methodological principles of the student-centered learning paradigm in the context of the implementation of the bologna reforms); l. semiv (university education in the transition to a knowledge economy) and others. 3. directions for heis adaptation to changes in the external environment at the all-ukrainian forum "ukraine 30. labor resources" it was emphasized that ukraine needs two types of initiatives in the labor sphere: formation of creative economy and high-quality and competitive professional education. speaking at the forum, president of the kyiv school of economics t. milovanov emphasized: "if education does not change and does not meet the challenges of today, preparing specialists with high labor productivity, if the level of their training does not meet the requirements of the employer, we will continue to harm people and delay development" (ukrinform, 2021). the economy is constantly forming new, higher requirements for specialists, which necessitates the modernization and change the final results of their training and ensure that the acquired competencies (knowledge, abilities, skills and other qualities) meet modern requirements. the need for these internal changes becomes a condition for the survival of the educational institution in the new determinants of functioning, its successful operation in the highly competitive market of educational services. these conditions are formed and dictated by the external environment of the hei, which is understood as a set of elements of material (natural or artificial origin) or informational form that are not part of the organization and generating factors that directly or indirectly affect or can affect its condition, functioning and development, as well as external to the organization elements on which it affects itself or can affect (lomonosova, 2020). the study of o. lomonosova (lomonosova, 2020) identified changes in the external environment of the hei, justified their impact on the educational institution and showed that the modern reform of higher education is aimed at achieving a new quality of educational services. management of process of adaptation of the university demands presence of system of development of organizational-economic maintenance of adaptation. the basic scheme of organizationaleconomic support of adaptation of heis to changes in the external environment provides the choice of type, structure, and constituent elements that determine the architectonics of the adaptation system (kovalenko, lomonosova, rusnak, 2021). adaptation of hei to changes in external environment is a complex, multifaceted, continuous process, which requires making reasonable and reasoned strategic decisions, taking into account specifics, current state and prospects of educational institution, capable of overcoming external challenges and becoming more effective and competitive. accordingly, the priority directions of heis adaptation are determined relative to the specific educational institution and should include: – reforming the institution in accordance with modern requirements; – introduction of market ideology; – innovative development of the educational process; – ensuring modernity of education; – development of interaction with employers – customers of educational services; – diversification of funding sources, etc. the directions of heis' adaptation to changes in the external environment are determined in accordance with the current state policy in the sphere of education. the state regional policy also plays a fundamental role in the modernization of the educational sphere. the focus on the creation of conditions for the development of each region in its economic, social, cultural and national aspects stimulates positive changes in education, determines the interest of the state in improving the level of education of the younger generation, taking into account regional and local characteristics (zablotskyi, palant, diegtiar, glibko, bielska, rusnak, 2019). analysis of the theory and practice of heis adaptation to changes in the external environment suggests that the internal educational policy of heis should reflect national interests in the sphere of higher education and take into account general trends of global, national, regional, economic and socio-cultural development, personality changes and characteristics of the modern generation of students. the strategic goals of education in general and higher education in particular derive from the general purpose of education, which is declared in the law of ukraine "on education", which is "the holistic development of the individual as a person and the highest value in society, the development of his talents, intellectual, creative and physical abilities, the formation of values and competencies necessary for successful self-realization, the upbringing of baltic journal of economic studies 107 vol. 7 no. 5, 2021 responsible citizens, capable of making informed choices and directing their activities for the benefit of other people and society, and the enrichment on this basis the intellectual, economic, creative, cultural potential of the ukrainian people, raising the educational level of the people in order to ensure the sustainable development of ukraine and its european choice" (verkhovna rada of ukraine, 2017). thereby providing the national economy with qualified specialists. thus, education is faced with two main tasks: – human development and the fulfillment of human educational needs (a social problem); – training of specialists needed by the national economy (an economic problem). in order to determine the priorities of heis in modern conditions, it is necessary to take into account both aspects. the first is that higher education has become one of the components of universal values and has an independent value for human development as a person; for the satisfaction of educational and spiritual needs. in the second aspect, education is of secondary importance, since the realization of economic and social challenges will last a long time and requires young qualified, well-developed specialists, ready to cope with crises and capable of making intelligent decisions in a market economy. 4. quality assurance activities in higher education ensuring the quality of education is crucial to the economic and social development of the country, which, according to researchers, involves the implementation of the following comprehensive measures: 1. training specialists meeting the demands of the labor market, capable of independently acquiring and building the necessary knowledge, skills and experience to adapt to new changes in knowledge in the future, should be the main goal of quality assurance in higher education. 2. continuous updating of the content of training. as part of the standards of education (educational and professional programs, curricula for specialties), the content of training should be constantly adjusted to reflect the latest advances in science, technology, economics, organization of production, etc. 3. rapid changes in production, acceleration of social development, sharp increase in the flow of scientific and other information require a transition from reproductive to constructive teaching methods. the educational process should be based less on the activities of the teacher. it is necessary to increase the amount of independent work of students, to introduce the latest educational technologies, forms of learning, management and role-playing games, student participation in the implementation and research of scientific and technological developments. lecturers should devote more time to individual professional and personal development of students, manage their creative growth. this will radically improve the quality of education, to form specialists with a new type of thinking, capable of intensive learning in a new rapidly changing environment. 4. activities 2 and 3 are directly related and relevant to the innovative development of education, the introduction of educational technology and information technology. 5. individualization of education is necessary to create the most favorable conditions for the professional and personal development of students and to ensure the variability of education. this requires the development and implementation of new modern programs, methods and forms of learning, focused on the most prepared and capable students. the general scheme of information support of the process of adaptation of the hei to the information about trends in the external environment current available information projected socialeconomic information fundamental research results ability to consciously choose alternative actions sensitivity to alternatives, the possibility of targeted restructuring of the system the process of adapting the system, its elements figure 1. scheme of information support for the process of adaptation of the hei baltic journal of economic studies 108 vol. 7 no. 5, 2021 requirements of the external environment is shown in figure 1. 5. the role of monitoring the market for educational services to ensure rapid response to changes in the external environment studies by many authors point out that the contradictory changes in the environment of educational institutions require them to change internally in different directions (bespalko, 2002; dannikov, 2018; zimnyaya, 2003; kovalev, 2018; ovcharuk, 2004; tatur, 2004; kovalenko, lomonosova, shvorob, 2019; ecoosvita, 2016; manilich, 2005; rybin, 2012). in the activities of domestic heis, providing a prompt response to changes in the external environment is more important than detailing long-term strategies. according to the authors, such approaches to internal adaptive changes in heis are exceptional. taking into account the specific nature of educational activity, the prospective nature of education, the need for its forecasting for the future, the planning of internal transformations of heis should be carried out on a long-term basis, and operational measures for constant adaptation to changes in the external environment should be considered as a response to the constant clarification of previously predicted changes in the market of educational services, regulatory requirements of legislative and regulatory acts of state or local governments and the corresponding adjustment of the adaptation process. this ensures that the process of adaptation is not of a catching-up nature, which a priori puts the hei in a state of lagging behind the requirements of the market of educational services, but is preventive, which allows you to anticipate the fundamental changes in market requirements, timely prepare for their implementation and ensure that the competence of the hei graduates and its competitiveness. at the initial stage of the internal modernization of the educational process the importance is given to market research of the educational services market, the results of which should form the basis of the program of adaptation of the educational institution to the identified actual and expected changes in the external environment. according to marketing research on the regional, national, and global market for educational services, identifying the specialties that businesses and organizations in the region and country will need in a few years is a complex task. training specialists in particular specialties, sometimes explained by the needs of the market, in the future will cause problems with the employment of such specialists in the rapidly changing structure of the economy and labor market. therefore, when developing various educational programs, it is advisable to strengthen the fundamental training. fundamental training is carried out in the first years of education, when the career prospects of future specialists are unclear. by laying a solid foundation of education, fundamental training with opportunities for self-education will allow graduates to quickly build up knowledge in the future, which will help them adapt to the new needs of the labor market, if necessary – to retrain. in general, fundamentalization will contribute to the implementation of the principle enshrined in the national doctrine for the development of education – "lifelong learning" (verkhovna rada of ukraine, 2002). the transition of heis to market conditions takes place in the process of radical reform of the domestic sphere of education, which is associated with significant institutional changes in the educational environment. the process of reforming requires heis to adapt and implement new rules of activity in the market of educational services. at a time of transformational change in the domestic education system, the external institutional environment has changed dramatically, becoming one of the driving forces of change in universities. institutional changes require timely reconfiguration of heis to implement their provisions, namely a set of legal and economic rules and informal norms that form the conditions of interaction in the market of educational services and structure the relationship between market participants. the current process of informatization of society requires modern teachers and applicants for higher education to understand the epochal information changes taking place in one or another professional sphere, to be prepared to implement their requirements, to form high digital literacy in graduates and the ability to update it regularly, corresponding to the high rate of updating information technology and software, development of artificial intelligence. informatization and innovative development, intellectualization of labor cause structural changes in the labor market, require highly qualified, educated specialists, formation of intellectual elite of economic entities. the necessary response of the hei to them is to increase the level of education and improve the training of the workforce. new information technologies require a new quality of education and better ways of providing it. the process of informatization of society also requires heis to restructure computer technology and teaching methods (bespalko, 2002; dannikov, 2018; zimnyaya, 2003). there is an urgent need for students to develop competencies such as the ability to think creatively, critically, innovativeness, flexibility in dealing with functional responsibilities, etc., demanded by the economy (kovalev, 2018; ovcharuk, 2004). informatization of the economy became the basis for the gradual transformation of traditional forms baltic journal of economic studies 109 vol. 7 no. 5, 2021 of economic management in the economic system of a new type (knowledge economy), in which knowledge becomes the main element of economic development and creates opportunities for more effective use of other factors of production. the essence of the knowledge economy is knowledge-based innovation. intellectual capital based on science and education becomes the main source of wealth, the key to profitability and competitiveness of an enterprise. in the knowledge economy people are the main resource. intellectual capital of the organization is formed on the intellectual abilities of personnel, the intellectual potential of the organization, which has a value assessment and is used over a long period of time to carry out the operational activities of the organization to create new value and profit. one of the directions of restructuring the educational programs of the hei is the formation of innovative competencies of specialists (tatur, 2004). professional knowledge due to changes in technological practices is rapidly becoming obsolete. the optimal period of effectiveness of acquired knowledge and qualifications has been reduced to 5-7 years, and in high-tech industries to 2-3 years. the employment structure is also changing rapidly: about 500 professions disappear every year and more than 600 new ones appear (kovalenko, lomonosova, shvorob, 2019). this requires universities to take new approaches to defining prospective curricula. higher education institutions determine the needs of society in professional training of citizens on the basis of analysis of the current situation, research of features and trends, forecasting and determining possible directions of development. features of the development of various spheres of social life determine the requirements for the knowledge and competencies of university graduates, thereby determining the directions of higher education development. the emergence of the concept of sustainable development changed the principles of traditional economics by requiring universities to develop environmental thinking in their graduates, regardless of their major (ecoosvita, 2016). the modern paradigm of higher education focuses heis on their transformation from a transmitter of knowledge and generator of specific skills and abilities into a direct producer of innovation and an active participant in the process of their introduction into new products, technologies and services, adaptation to postindustrial development and the needs of innovative economy requires improvement of the educational process of training specialists for tomorrow's economy, new approaches to teaching (manilich, 2005; rybin, 2012). the successful functioning of heis in the context of a change in the paradigm of higher education is ensured, in particular, by the rapid adaptation of educational institutions to these changes. in order to research its own problems, the institution of higher education needs to systematize and classify them. in this case, you can use the formulated basic problems of domestic higher education and their comparison with similar problems in other countries, the proposed options for systematization of problems and conceptual map of the main socio-economic problems and contradictions of higher education in ukraine (lomonosov, lomonosova, nadtochii, 2019, vol. 5, no. 4). socio-economic problems of higher education, some of which were inherent in higher education in ukraine even before its independence, were amplified by the immaturity of economic relations in the market of educational services. the main problems are: the reduction of state funding for higher education and the difficulty of diversifying the sources of higher education funding due to the difficult situation of the vast majority of businesses, the lack of industrial demand for the results of scientific research and the low solvency of the population; imbalance of supply and demand in the market of educational services and the mismatch between the market of educational services and the labor market; poor development of theoretical and methodological foundations of pricing for paid services in higher education; decline in the quality of education; low competitiveness of the higher education system and insufficient export of educational services; growth in the provision of educationalservices, mainly due to higher tuition prices; lack of reliable regional monitoring of the market of educational services (lomonosov, lomonosova, nadtochii, 2019, vol. 5, no. 2). in order to provide the educational institution with the information necessary to make decisions both in the educational system as a whole, and in a particular hei, it is advisable to organize a continuous regional monitoring of the educational services market. market monitoring should primarily make it possible to determine the needs of enterprises in specialists that will be needed in the future, the level of their training and the number of specialists in each specialty and degree of training. the implementation of marketing monitoring will allow: – to identify the long-term needs of enterprises and institutions in specialists, based on the prospects for the development of enterprises, as well as the analysis of regional and state socio-economic programs; – to determine the disproportions between the capabilities of heis and the needs of enterprises and the population; – to provide in a timely manner the information necessary to make adjustments to the lists of training specialties; baltic journal of economic studies 110 vol. 7 no. 5, 2021 – to create and maintain a bank of job and education seekers, ensure their selection for targeted training, maintain ongoing ties with businesses, etc. organization of such monitoring will give the opportunity to respond quickly to the demands of the labor market, to create prerequisites that ensure the stability of the demand for educational services of heis, to form comprehensive programs for the development of necessary specialties. every year ukraine spends about 40 billion hryvnias of budget funds on higher education. state policy in higher education is aimed at meeting the needs of the economy for qualified specialists and defining priorities, the training of which specialists should be financed by the state. one of the tasks of marketing monitoring of heis is to take into account the state priorities in the training of specialists. positive experience of coordinating the role of public authorities and market agents of educational services is accumulated in many developed countries. for example, in great britain, the employment research institute makes a 5-10-year forecast of the demand for specialists, changes in the structure of industries, changes in employment in the economy, distribution of employment by occupation and type of employment, and supply in the skilled labor market (karpenko, 2013). the german institute for economic research regularly studies changes in the economic structure and makes employment forecasts in terms of occupations and qualifications (levels of competence) and labor market offerings. another organization, the employment research institute, develops projections of labor demand and labor supply; projections of economic growth and changes in the economy for employment in 22 industries and changes in the occupational structure of employment in each industry for 21 occupational groups. the federal ministry of education and research, the federal institute for vocational education and training, the institute for labor market and occupational research at the federal employment research institute, and other organizations also conduct research on changes in occupations and skills. government agencies in belgium, canada, denmark, france, ireland, the united states, and other countries have also accumulated experience in monitoring and forecasting labor markets (karpenko, 2013). market research on local labor markets conducted by universities should be supplemented by the results of labor market demand studies at regional employment centers, research centers for monitoring higher education, and other structures. for a number of external reasons heis cannot independently monitor the market of educational services (lomonosova, 2020). this determines the organization of regional scientific and methodological centers for monitoring the educational market, which is advisable to create under the local public authorities. to adapt the hei to the changes in the external environment, it is extremely important to coordinate the activities of local government and self-government, namely to determine the needs of the economic complex of the community in personnel whose competencies meet the requirements of the new economy (lomonosova, 2020). monitoring of labor markets and educational services should be based on the interaction of local heis and state and local authorities. the role of the latter is, first of all, to determine the directions of development of the local economic complex, timely implementation of necessary relevant projects and forecasting the situation on the regional labor market. this allows the regional market of educational services to meet the needs of the local labor market, taking into account the prospects for socio-economic development of the region, to meet regional needs for specialists with higher education in the required degrees and specialties. the nature of the external environment of the hei and the typology of scientific approaches to its definition are investigated, the modern features of the external environment of the hei and the factors of its formation are revealed and systematized (lomonosova, 2021). in particular, the main economic, institutional and demographic factors actualizing the adaptation of the hei to the changes in the external environment were identified. one of the most significant phenomena that influenced the activities of higher education institutions was the formation of the market of educational services, which led to a further gradual transformation of socio-economic relations in the field of higher education. the search for answers to the questions "how to adapt to the new challenges?", "how to survive?", " what to do?" always begins with an in-depth analysis of the situation and identifying current or future problems of the hei. a fundamental approach to solving the problems identified involves the development of an action program (strategy) to adapt the institution to the challenges of the external environment, which includes adequate organizational and economic adaptation measures, providing a full range of actions (from mobilizing all factors of competitiveness, financial, human and other resources to retraining personnel, etc.). 6. principles of organizing the adaptation process in higher education institutions reform and transformation of the organizational and financial foundations of heis should be carried out according to the principles tested by many effective foreign and domestic institutions of higher education. generalization of their experience allowed baltic journal of economic studies 111 vol. 7 no. 5, 2021 yu. rusina to define the principles of reforming: scientific validity; readiness for systemic change; realism; consistency; human-centeredness (rusina, 2016). research by the authors of the adaptive activities of successful universities shows that this list can and should be supplemented by the following principles of organizing the adaptive process: 1. consideration of the practical experience of other heis on targeted modernization in solving similar problems. 2. analysis of the current situation of the hei and the market of educational services and prospects for their development. 3. reliance on the corporate culture of the team. 4. a comprehensive systemic approach to solving economic and social problems. 5. project-oriented approach to the formation and implementation of measures to ensure the adaptation program. the implementation of these principles of the adaptation process should be supported: – involvement of leading scientists, university professors with experience in scientific, pedagogical and organizational work in the organization of the adaptation process; – a combination of collegial and managerial approaches to managing the adaptation process; – involvement of stakeholders in the key processes of adaptation in the hei; – an objective assessment of the quality of the university 's educational services; – concentration of financial and human resources to implement priority areas of hei adaptation to changes in the external environment. 7. formation of a support system for the adaptation process in higher education institutions the system to support the process of adaptation in higher education is a set of management tools, which is based on: – the adaptation process organizing principles; – adaptation strategies aimed at improving the quality of learning and competencies of graduates; – adaptive management and reform of the educational process; – development of market logic in activities, a combination of state and market regulation of educational activities, the development of entrepreneurship, the introduction of the principles of academic capitalism in the activities of the educational institution; – development and implementation of programs to improve educational and scientific activities and their organic combination; – diversification of educational activities, unification of curricula; – internal institutional restructuring, bringing the regulatory framework in line with the objectives of modernization of educational and scientific activities; – introduction of collective and personal forms and methods of economic, social, moral-psychological and other types of intensification of the adaptation process. the project approach to the development and implementation of adaptation measures is an effective means of implementing the hei's adaptation program. project management, project approaches to solving various problems of the organization are widely covered in the literature. this approach solved the problems of developing and implementing, based on foreign experience, optimal organizational and financial models, different types of models and adaptation mechanisms, etc. the quality of graduates' training, compliance of the competencies acquired by them with the social order, the current stage of economic development of the country can be criteria of effectiveness (efficiency) of programs (measures) to adapt the educational institution to the changing requirements of the external environment. – the algorithm of formation of the adaptive process support system in higher educational institutions includes the following organizational and economic tools of institutional and organizational support of the continuous adaptation process to adjust the educational institution and bring its activities in line with the dynamic conditions of the external environment: – monitoring of the external environment, the situation in the regional, national and global markets of educational services, forecasting and anticipation of marketing research; – organizational design of ways to improve and implement methods of internal organizational, economic activities to ensure educational and scientific activities; – differentiation of educational services in accordance with the new requirements of customers, consumers of educational services, the creation of infrastructure elements due to the process of adaptation to them; – information support for improving the methods of teaching students and shaping their competencies that meet the social order for education, the requirements of the population, enterprises-employers, the economy of the region and the country; – creation of a system of institutional support to improve (modernize) the management structure, methods of planning, analysis of educational and financial activities, social development of the institution; – control over the implementation of the institution's adaptation strategy to changes in the external baltic journal of economic studies 112 vol. 7 no. 5, 2021 environment, the focus of the adaptation process on improving the quality of education; – prompt adjustment of the adaptation process, adaptive management structure and parameters of the adaptation process; – encouraging the continuing professional development of academic staff. in determining the directions and specific ways of development of the educational institution, the study of the problems of professional motivation of students associated with the transition to a new model of education, shifting the emphasis from specialist knowledge to his professional, personal qualities is inseparable from the study of the market of educational services. education should be guided by the following: – the main external factors of motivation to knowledge of a particular generation of people are the peculiarities of the period corresponding to this generation and the situation in the socio-economic sphere of society; – peculiarities of the stage of development of the socio-economic sphere determine the conditions of economic entities and requirements for the professional competence of their specialists; – the educational-scientific sphere of society creates conditions for members of society to obtain modern knowledge, forms an organizational system for the provision of educational services and through a system of ensuring the levels and quality of education creates a socially significant system of stimulating knowledge; – internal motivation of a person to cognition develops under the influence of the information received regarding the imperatives and determinants of development of society, its socio-economic sphere, the current needs of production, jobs, understanding of the directions of their future progress and taking into account their preferences and inclinations for a certain type of activity; – the task of motivating people to learn means, above all, realizing how to create conditions in which people will want to learn, develop their natural thirst for knowledge, and turn it into an acquired need that they will seek to satisfy. features, personal characteristics of the current generation of students require new approaches to the organization of their training, the transition from the principle of sufficient knowledge of graduates to the principle of competence and the corresponding reform of the educational process in the hei, continuous selfimprovement of teaching staff, mastering their teaching methods, information delivery technologies that are adequate to the characteristics of the student audience. in the process of reforming, heis in ukraine must apply the latest approaches to the organization of the educational process – the competence-based approach to learning, student-centered approach, distance education. 8. conclusions determination of ways to ensure compliance of the educational process in universities with modern requirements of social development should be based on the understanding of the essence of adaptation of universities to changes in the external environment of their functioning as a process of purposeful change in the parameters of educational and scientific activities of the university, its other properties, its units to the current and future changes in the external environment. this ensures its effective functioning, solving certain goals and objectives of development, compliance of graduates' competencies with the requirements of the current and future labor market, competitiveness of the educational institution on the market of educational services; the essence of adaptive management as a process of creating conditions for the implementation of public requirements for the quality of the educational process, the modernity of knowledge received by graduates of the educational institution, compliance of competencies with current and future requirements of the economy. the system of support of the adaptation process in heis should provide the development of action program (strategy) on adaptation of heis to the challenges of the external environment, contain adequate organizational and economic measures of adaptation, providing the whole range of actions – from mobilization of all available competitive factors, financial, labor and other resources to retraining, etc., formulated with the following principles of the adaptation process: – taking into account the practical experience of targeted modernization activities of other heis to solve similar problems; – analysis of the current situation of the hei and the market of educational services and the prospects for their development; – dependence on the corporate culture of their team; – a comprehensive approach to solving economic and social problems; – a project-based approach to the formation and implementation of measures to ensure the adaptation program. practical implementation of the proposed recommendations may be complicated by the unsolved theoretical issues of the adaptive management process, in particular, the set of graduates' competencies formation; evaluation of the results of educational institution adaptation to the requirements of consumers of educational services, etc. these issues may be an area for further research on improving the performance of higher education institutions in today 's environment. baltic journal of economic studies 113 vol. 7 no. 5, 2021 references: bespalko, v. p. 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(2019). the current state and necessity of transformation of the management system of educational establishments in ukraine at the local level. public policy and administration, vol. 18, no. 2, pp. 225–240. zimnyaya, i. a. (2009). kljuchevye kompetencii – novaja paradigma rezultata obrazovanii [key competencies – a new paradigm of educational outcomes]. experiment and innovation in school, no. 2, pp. 7–14. available at: https://cyberleninka.ru/article/n/klyuchevye-kompetentsii-novaya-paradigma-rezultata-obrazovaniya (accessed 11 october 2021). baltic journal of economic studies 15 vol. 2, no. 4, 2016 study the problems of optimizing the capital structure of the company olga gaydarzhyy'ska1, victoriia riaboshapka2, nataliia hajdamaka3 national aviation university, ukraine abstract. the aim of this work is to study the problem of optimizing the capital structure of the company. optimization of capital structure is a necessary condition of adaptation the enterprises regardless of the branch of economy to which a company belongs, to changes in the economy in its development. methods and criteria of optimisation of the capital structure of the enterprise. the method of determining the optimal capital structure of the enterprise according to the criteria of maximizing financial profitability. technique. the study is based on the theoretical analysis of scientific works and practical activity of enterprises. results. it is proved that in the process of optimizing the capital structure necessary to take into account the predictable result of economic activity of the enterprise, that is, financial result from usual activity before taxation. the study of problems of optimization of capital structure aimed at opening opportunities for the effective organization of business enterprises, providing conditions for disclosure for businesses achieving the goals of any order, and the creation of opportunities for enterprise maximum level of profit. the principle of optimization is to select the solution that best would take into account internal possibilities and external terms of activity of the enterprise. optimization is the choice of a certain economic indicator that would allow to compare the effectiveness of any solutions. also it is advisable to pay attention to the use of different types of loan capital to business enterprises, to know that helps to speed up circulation of funds and increase returns on invested capital, increase the efficiency of financial activities of a business entity. value. today, the economic activities of enterprises has a significant impact on the development of trade and economy. the achievement of dynamic growth of the basic indicators of work of enterprises of any sector of the economy, is the basic condition for the solution of domestic enterprises tasks for the organization of effective economic activity, meet the needs of national economy and population, reaching the european standards of service. the conditions that confront the enterprises in modern conditions of development of economy is impossible without attraction of means, and therefore without management of the capital structure. key words: enterprise, optimization, structure, capital, equity, loan capital. jel classification: g31, m2, o16 1. introduction the need for a comprehensive system of enterprise property management and sustainable positive results in terms of periodic occurrence of the economic crisis requires a deep study of causation and mechanism of formation of performance indicators of the entity, the improvement of existing and development of new approaches to the problem of adequacy financial and property functioning undertakings and balanced definition, the optimal structure of a property company, and sources of funding. addressing efficiency management decisions on structuring capital needs rethinking the theoretical concept of "capital structure of the company," the analysis factors in the formation of a capital structure and practical development of an optimal capital structure to certain criteria of optimality. achieving optimal capital structure realized by means of an adequate management system management company. each company advisable to design policies based capital formation strategy. however, the maximum management efficiency of its capital structure can be achieved provided that a systematic approach, rational combination of strategic and tactical measures. in this connection, synthesis of theoretical foundations and justification of specific practical recommendations corresponding author: 1 departments of finance, accounting and audit, national aviation university. e-mail: 0970607292@ukr.net 2 departments of finance, accounting and audit, national aviation university. e-mail: vika-dashiv@rambler.ru 3 departments of finance, accounting and audit, national aviation university. e-mail: h.n.v.54_1993@meta.ua baltic journal of economic studies 16 vol. 2, no. 4, 2016 on improvement of methodological approaches to solving this problem in the present conditions of economic development is an important task of research. the effectiveness of the enterprise depends on proper capital management strategy, an important component of which is to optimize the capital structure. therefore, the task of leadership formation should be the most appropriate capital structure of the company to ensure the efficiency of economic activity. 2. analysis of recent research and publications theoretical and methodological aspects of optimizing the capital structure of enterprises are reflected in the works of foreign and domestic scientists. among local scientists and economists question of optimizing capital structure dedicated to the works of scientists: i.a.  blanca, v. glushchenko, a.b. goncharov, v.a. podolski, s.v. sago, a.v. yarisha and others. however, despite the presence of a significant number of scientific developments, problems optimizing the capital structure of companies in the current conditions of national economy are not sufficiently investigated. the article is to determine the role of optimizing the capital structure in the management of capital, the formation of the main tasks and stages of optimization of capital structure, improving the method of optimizing the capital structure of the company. 3. capital value in the process of economic development in ukraine need in the capital of each company is growing. study the economic substance and its capital structure, capital characteristics, its necessity and practical significance proved that capital is the basis for the development of enterprises in ukraine. the value of capital lies in the fact that when you use favorable trend for the economy of the state, more efficiently carried out financial and economic activity of enterprises. at the present stage of development of the economy, the liquidity crisis stability and economic growth enterprises depend on its financial capacity, which also ensure competitiveness and its capacity for renewal of fixed assets. in the process of economic development in the enterprise there is a need in the growth of capital formation funds provided by both own and borrowed funds. in our view, the need for borrowed funds also occurs when expanding share of the enterprise market, acquiring another company (another type of business), modernization of production, development of new products and more. that is, in the company of its maturing financial obligations there is a need to raise funds. for the implementation of the target company requires a minimum of permanent funding. dc minimum funds may be borrowed capital. often in practice, short-term loan capital, which is a temporary source of current assets, a large proportion of the source of constant minimum current assets, especially in businesses that do not have sufficient equity and are unable to obtain long-term loans. this minimum current assets the company may need for various temporary or accidental circumstances. the financial position of the company is satisfactory if it has a sufficient amount of most mobile assets, ie assets that have very high turnover at the expense of bring significant revenue. forming the minimum required funds using borrowed capital plays a crucial role in maintaining high profitability and liquidity of the company. lack of capital leads to the inability to support an appropriate level of ongoing business enterprise, lack of available funds restricts business transactions, inward investment and so on. for companies not immediate possession of a certain amount of funds necessary available funding sources for future action, the use of which, if necessary, will help the company to sustain itself and to prevent the negative consequences of recession because it is the insecurity of funding sources, according to ri kennedy, the main cause of failure in economic activity (fedonina, 2006). using different kinds of debt in business enterprises helps accelerate the process of turnover funds, increase return on invested capital, improve the efficiency of the financial entity. traditional sources of debt in the developed system of commodity-money relations associated with the peculiarities of circulation of capital in the reproduction process: some units of the economy released temporarily free money capital, which is the source of debt, and the rest – there is a need for borrowing. today the economic activities of enterprises has a significant impact on trade and the economy. achieving dynamic growth of key indicators of enterprises of any sector of the economy is essential for solving problems concerning domestic enterprises of efficient economic activities, the needs of the economy and population and achieving european standards of service. fulfillment of the conditions faced by enterprises is impossible without raising funds, and hence no control capital structure. 4. optimization of capital structure analysis of the capital structure is one of the most important and complex problems to be solved in the financial management of the enterprise (glushchenko, 2012). therefore there is a need to understand the concept of "optimizing capital structure." according to the definition given in the explanatory dictionary of economic terms, optimization – a search for the most appropriate solution is a compromise on many different baltic journal of economic studies 17 vol. 2, no. 4, 2016 optimality criteria fixed. found the solution is most suitable from many points of view (criteria) at the same time, though likely not the best for each of optimality criteria alone (konoplytskyy, 2000). the essence of the principle of optimization consists of a selection of such a decision that the best way to take into account internal capabilities and external conditions of the enterprise. optimization is a selection of some economic indicator that lets you compare the effectiveness of any decisions. for example, according to i. a. blanca (blank, 2002), the optimal capital structure is to use a ratio of equity and debt, subject which ensured effective proportionality between financial profitability ratio (ratio of equity) ratio and viability, that maximized its market value. it seems the definition of capital structure optimization enable t. v. golovko and s. v. sago (golovko, 2002). v. a. podolsky and o. yarish (podolska, 2007) believe: "optimizing capital structure is a ... a ratio between equity and debt, which is provided by the most effective proportionality between profitability and financial stability of the enterprise." at present the most widely developed western theorists financiers are two main theories that compete among themselves – static and hierarchical theory of capital structure. the static theory of capital structure associated with the establishment of a target ratio of debt to assets, and the company is gradually moving in this direction. the hierarchical theory of capital structure is presented in the form of financial hierarchy, where enterprises prefer internal financing of external and debt  – equity. in this theory has no clear structure target ratio of debt to assets value (tereshchenko, 2004). the analysis of existing theories to substantiate that none of the theories does not meet the actual financial practice, the choice of capital structure. in practice, managers prefer not to use the theories and models, and simple heuristic approaches by which to understand the algorithms for solving the problem that has no rigorous studies, but provides an acceptable solution in most practically important cases. the optimal capital structure is the use of a ratio of equity and debt, which ensured effective proportionality factor between financial profitability ratio and the financial sustainability of the enterprise, that maximized its market value (glushchenko, 2012). in forming the optimal capital structure the company should consider the impact of a number of subjective and objective factors. the combination of these factors ranked us at the place of origin (factors external and internal environment) and the nature of the impact (institutional, legal, financial, economic, social and governance). it is also advisable to note that environmental factors are not affected by the company and should be perceived as a given. factors internal environment amenable to adjustment by the adoption and implementation of various management decisions. thus, the optimization of the capital structure is an important step in the strategic planning of capital structure, which is to determine the value of the ratio between equity and enterprise value of funds raised from returning in the future at which maximizes the efficiency of the company. the objective of capital structure is the process of minimizing the cost of attracting long-term funding sources and thus ensure maximum equity holders of market assessments invested their funds. based on the fact that the main purpose of optimizing the capital structure is to search for an optimal balance between equity and debt, can form the basic problem of optimizing the capital structure: – formation of the necessary capital structure that would ensure sustainability of the company; – providing conditions under which the company will receive a maximum amount of profit (bryhhem, 2009). the main methods of managing capital structure of enterprise should include the following: 1) optimization of capital structure by the criterion of maximizing the level of return on equity, which includes various calculations using the financial leverage. 2) optimization of the capital structure, minimizing cost of capital, based on a preliminary assessment of the cost of equity and borrowed capital in different conditions of its engagement and the implementation of the various calculations of the weighted average cost of capital. 3) optimization of the capital structure, minimizing financial risk associated with the process of differential choice of sources of financing of various components of assets, depending on the relationship between business owners or managers to financial risks. the process of optimizing the capital structure of the enterprise carried out by stages, which graphically shown in fig. 1. it is advisable to note that the process of selecting the capital structure at the present stage of economic development in predicting the performance of enterprises used a model that does not allow to correctly predict the dynamics of financial leverage, fixed assets are worn out and require large investments to replace existing methods of investment and financial decisions are not full account of the interests of the state, business owners and related parties; much of the shareholders do not feel fully owned (shumylo, 2010). in our opinion, the only effective capital structure can not be determined. however, you can determine the most efficient ratio of capital calculated on the basis of impacts, risks, and practical experience. this will bring the maximum target capital structure to its optimum value. methods for adjusting the capital structure of the enterprise, depending on the approach to optimization baltic journal of economic studies 18 vol. 2, no. 4, 2016 can be classified in the following groups: normative coefficient, one criterion, lot criterion (goncharov, 2007). by normative methods of coefficient adjusting the capital structure include methods based on the use of financial ratios. often in the economic literature and financial practice of capital structure optimization problem is solved on the basis of the search value of equity and debt the company, in which achieved regulations or reference value of financial ratios. reference is calculated proportions are usually based on long statistical surveys as a proportion of the capital and other basic financial performance. with the formation of capital is most often used by financial indicators: coefficient of financial independence, industry average ratio of debt and equity ratio debt burden, interest coverage ratio (table 1). in each case, you can use a particular criterion optimization of capital structure. among scientists there are different views on this problem. some of them feel the need to maximize the level of financial profitability, along with the level of financial stability, but this provision is difficult to achieve in practice (blank, 2002). there is a contrary view of economists. they offer a consistent use of all three methods and capital structure formation rate in view of their limit values, which is also a time consuming process and does not give a clear answer (tereshchenko, 2003). there are also opinions about these methods add indicators of creditworthiness and solvency, leverage in the capital structure the property, etc. (vykydanets, 2009). thus, in the economic literature there are different views on methods of optimizing capital structure, but to address this issue, in our view, requires an integrated approach. therefore there is a need for the optimization of capital structure research agenda setting target capital structure of the company, taking into account the economic environment, the scope and field of activity. through the process of optimizing capital structure, we should consider the impact of many of both internal and external factors. the internal factors include: 1. the level and dynamics of profitability. a high and stable level of profitability allows you to use more of their analysis of the capital of the company assessment of the main factors that determine the capital structure optimize capital structure to maximize the criterion of financial profitability optimizing capital structure by criterion minimization of financial risks optimizing capital structure by criterion minimization equal of financial risks formation rate target structure fig. 1. the main stages of optimizing the capital structure of the enterprise table 1 legal and performance coefficient adjustment of capital structure characteristics restrictions debt ratio the ratio of debt to equity coefficient financial independence the ratio of equity to total capital sector average ratio of debt and equity the ratio of debt to equity netseniordebt / ebitda target the debt and profit before depreciation, interest and tax coefficient coating percent the ratio of earnings before deducting interest on loans and interest payments to tax baltic journal of economic studies 19 vol. 2, no. 4, 2016 own domestic financial resources, on the one hand, and on the other – makes it possible to find interested investors; 2. the scale and pace of sales growth. the increase in sales stimulates the process of attracting both own internal sources of capital and external; 3. major industrial and economic activities. industry and production activity in the agricultural sector focused on the prevalence of equity and in the retail sector, construction business – it is advisable to attract external funding; 4. the structure of assets. the availability of highly liquid assets enables enterprises to attract external funding sources. 5. the need to significantly expand the size of the business or the implementation of large-scale investment project. for this purpose, attracting financial resources that can not be obtained from its own sources. the external factors affecting the optimization of the capital structure, include: 1. tax policy in the country. this policy affects the use of both own and borrowed sources of capital; 2. state of the stock market. with the sophistication of the stock market, the availability of financial resources available to it, the enterprises there are more possibilities of forming an optimal capital structure; 3. the threat of bankruptcy. with the threat of bankruptcy company must give priority to their own domestic capital sources. formation of the optimal structure of financial capital required to carry out separately for enterprises of different ownership, different legal status of the light industry sector, size and production structure. it should be noted that the method of optimizing capital structure inherent disadvantage that prevents explicitly consider the impact of external (market) conditions and related uncertainties, reflecting the possibility of the enterprise as favorable market conditions and unfavorable. therefore we can say that the formation of an optimal capital structure should be subject of uncertainty. 5. conclusions in summary it can be argued. optimization of capital structure is an important step in the strategic analysis of capital that is determining this ratio between the value embodied in the means of businesses that he owned and make a profit, and value invested in the funds, attracted on the basis of their return, which maximizes the efficiency of the company. in the process of optimizing the capital structure it is necessary to consider the end result of enterprise activity, i.e. the financial result from usual activity before taxation. today the economic activities of enterprises has a significant impact on the development of trade and economy. the achievement of dynamic growth of the basic indicators of work of enterprises of any sector of the economy is the main condition for the solution of domestic enterprises tasks for the organization of effective economic activity, meet the needs of national economy and population and to achieve the european standards of service. the conditions faced by the enterprises is impossible without attraction of means, and therefore without management of the capital structure. scientific generalization and justification in the role of managing capital structure of enterprise in the system to ensure its effective functioning, have proved the necessity and importance of optimizing the capital structure of enterprises of all sectors of the economy. the problem of optimization of capital structure requires further research possibilities of the enterprises at the expense of optimal capital structure to achieve the purpose of any order, including to ensure the maximization of profit. references glushchenko, v.v. 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(2003). financial activities of business entities. – kyiv, 554 p. vykydanets, i.v. (2009). methods of optimizing the capital structure of the company. retrieved from: http://www. nbuv.gov.ua/portal/soc_gum/vdnuet/econ/2009_3/27.pdf. tereshchenko, s. (2004). crisis financial management of the enterprise: the monogram. – kyiv: kyiv national economic university, 268 p. baltic journal of economic studies 20 vol. 2, no. 4, 2016 fedonina, a. (2006). company management, current trends, monograms. – kyiv: kyiv national economic university, 282 p. yaremko, i.j. (2006). money management company: economic and financial instrument: monograms. – lviv: mason, 176 p. ольга гайдаржийская, виктория рябошапка, наталия гайдамака исследование проблемы оптимизации структуры капитала предприятия аннотация. целью работы является исследование проблемы оптимизации структуры капитала предприятия. оптимизация структуры капитала является необходимым условием адаптации предприятия, не зависимо от отрасли экономики, к которой принадлежит предприятие, к изменениям в экономике при ее развитии. исследованы методы и критерии оптимизации структуры капитала предприятия. рассмотрена методика определения оптимальной структуры капитала предприятия по критериям максимизации финансовой рентабельности. методика. исследование основано на анализе теоретических научных работ, а также практической деятельности предприятий. результаты. доказано, что в процессе оптимизации структуры капитала необходимо учитывать прогнозируемый результат хозяйственной деятельности предприятия, то есть финансовый результат от обычной деятельности до налогообложения. изучение проблемы оптимизации структуры капитала направлено на раскрытие возможностей для эффективной организации хозяйственной деятельности предприятия, с обеспечением условия раскрытия возможностей для предприятия достижения целей любого порядка, а также создание возможности получения предприятием максимального уровня прибыли. принцип оптимизации заключается в выборе такого решения, которое наилучшим образом учитывало бы внутренние возможности и внешние условия деятельности предприятия. оптимизация представляет собой выбор некоего экономического показателя, который бы позволил сравнивать эффективность любых решений. также целесообразно было, обратить внимание на использование различных видов заемного капитала в хозяйственной деятельности предприятий, узнать, что способствует ускорению оборота финансовых средств, увеличению отдачи на вложенный капитал, повышению эффективности финансовой деятельности субъекта хозяйствования. значение. на сегодняшний день, хозяйственная деятельность предприятий оказывает значительное влияние на развитие торговли и экономики. достижение динамичного роста основных показателей работы предприятий любой отрасли экономики, является основным условием для решения отечественными предприятиями задач по организации эффективной хозяйственной деятельности, удовлетворения потребностей народного хозяйства и населения, достижения европейских стандартов обслуживания. выполнение условий, которые ставятся перед предприятиями в современных условиях развития экономики, невозможно без привлечения средств, а соответственно и без управления структурой капитала. baltic journal of economic studies 46 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-46-55 approaches to urban revitalization policy in light of the latest concepts of sustainable urban development1 serhii horbliuk1, iia dehtiarova2 abstract. the article substantiates the essence and necessity of the use of innovative approaches to the formation and implementation of public policies of urban revitalization in the context of the latest concepts of urban development, namely: compact city, green city, smart city, creative city, inclusive city, cittaslow, happy city, learning city. the relevant proposals on the innovation policy of revitalizing cities are brought forward based on the analysis of the provisions of each of the chosen concepts. it is determined that there does not exist a single city where only one of the latest concepts of city development was implemented. in practice, we observe the multivectorness and combination of urban policies, which came to replace traditional sectoral views. regarding the policy of urban revitalization, innovative approaches focus on the transformation of degraded areas into urban environments favourable for human life and activities in line with the needs and interests of their inhabitants. revitalization should be considered both in terms of its impact on a specific degraded area and as having long-term synergetic effects on the city as a whole. it was found that the basis for innovative policies of urban revitalization is laid by human-oriented programmes of sustainable renewal of areas. the programmes are premised on taking into account a variety of concepts and combining a number of activities, specifically: organization of a compact multifunctional environment (compact city); formation of an ecologically friendly environment for human life and activities (green city); arrangement of urban space taking advantage of modern technologies and innovations (smart city); creating conditions for life, activities and cooperation of creative people (creative city); ensuring a full-fledged multidimensional inclusion of all the inhabitants (inclusive city); realization of the internal potential of an area depending on local identity (cittaslow); raising the level of public and individual happiness (happy city); promotion of the culture of lifelong learning of all the inhabitants (learning city). it is noted that innovative solutions for overcoming the crisis phenomena of degraded urban areas should be individualized depending on the local specificity and potential, the state of economic, physical, human and other capital of a particular city. in this case, the development of human capital of an area is increasingly becoming the key factor of its renewal, which presupposes organization of the inhabitants’ training, improving their qualifications and skills. it was substantiated that the revitalization policy is expedient to develop from the perspective of ensuring multiplicative impact on the development of a city as a whole. the efficiency of the policy implementation depends on the leveraging of resources (financial, intellectual, etc.) from different sources through partnerships. the main criterion of policy effectiveness is the ability of a revitalized urban area to develop sustainably, satisfying the needs of all stakeholders. indicators of the policy success is not only the living standards and quality of life of the inhabitants, but also the condition of the natural environment, levels of tolerance, trust, empathy, social cohesion, education, happiness, etc. key words: urban revitalization, sustainable development, compact city, green city, smart city, creative city, inclusive city, cittaslow, happy city, learning city. jel classification: o18, o31, r11 corresponding author: 1 national academy for public administration under the president of ukraine, ukraine. e-mail: serhii.horbliuk@gmail.com orcid: https://orcid.org/0000-0002-5031-2497 2 national academy for public administration under the president of ukraine, ukraine. e-mail: iyadeht@gmail.com orcid: https://orcid.org/0000-0002-0807-961x 1 this research was supported by the international visegrad fund within the scope of the visegrad scholarship program in the academic year 2020/2021. baltic journal of economic studies 47 vol. 7, no. 3, 2021 1. introduction the modern understanding of a public policy of urban revitalization is focused on sustainable development of urban areas, which requires integrated actions in all spheres of city life (community, economics, space, and environment). the evolution of the policy in question was marked by a low efficiency of public-administrative decisions which had a fragmented impact, being developed for the short term. nowadays, the need for comprehensive programmes of revitalization of urban areas is becoming more relevant. implementation of such programmes would inevitably lead to longterm changes on the basis of consensus of sustainable development goals and ways to attain them. besides, it is necessary to take into account the complexity of an urban organism, the role of each part of the city in its general structure, as well as correlation between urban problems and capabilities. the integrated measures for revitalizing degraded areas must comply with the concept of urban development and be innovative. thus, the success of urban revitalization increasingly comes to depend on non-standard approaches to overcoming the crisis phenomena of territorial development. building sustainable communities and ensuring a high quality of their life are becoming urban revitalization priorities, while the latest concepts of urban development define the ways to achieve this by forming a smart, creative, and happy urban environment. when developing innovative approaches to the formation and implementation of public policies of urban revitalization, it is necessary to consider the specifics of the relevant concepts. in addition, this should serve the purpose of better evaluating and using the potentials of degraded areas during their renewal. therefore, the aim of the article is to substantiate approaches to the formation and implementation of the public policy of urban revitalization based on the latest concepts of urban development, as well as the framework conditions for their application. in order to achieve the aforementioned aim, the following tasks were formulated: to analyse the state of the art in urban development concepts; to establish a set of measures for the revitalization policy, based on the vision of a city’s development in general; to develop innovative practical proposals for degraded areas revitalization. 2. previous research review the past decade decisively consolidated the understanding of urban revitalization as a tool of the urban policy of a balanced development of crisis territories. p. roberts (2017) notes that when applying the tool, coordinated action of public administration and private partners should be taken in compliance with the economic, social, environmental and political principles laid down in the sustainable development concept. the growing attention to the sustainability of cities influenced the policies and practice of their renewal. the search for new methods to revitalize degraded urban areas in a sustainable way has led to the creation of the concept of a sustainable revival of cities (korkmaz, balaban, 2020). after all, it is mistaken to think that while revitalizing a city one can neglect the balancing of economic, social and environmental interests, focusing solely on the achievement of short-term results. thus, the concept of urban revitalization has become the key driver of cities’ sustainable development (akotia, opoku, 2018). however, as j. kusiak (2019) emphasizes, most of urban revitalization programmes still lack a holistic systemic dimension. the economic, environmental, and social aspects of the existing revitalization programmes will always remain interconnected, often being contradictory, though. in addition, poor coordination between different tiers of public administration results in that the revitalization programmes are essentially stuck in the framework of a unilateral approach. consequently, this can lead to negative effects of urban areas development that might cause the emergence of new crisis phenomena or deepen the existing ones. a successful city renewal requires a multifaceted strategic approach that includes elaboration of both local and regional legislative instruments, to be designed within multi-sector and interdepartmental partnerships (yi, liu, lang, shrestha, martek, 2017). in the context of revitalization, participation of the key actors in the development and implementation of a relevant policy is a factor, fundamental for achievement of the planned results and the sustainability of revitalization projects (akotia, opoku, 2018). it is necessary to balance the interests of all stakeholders in urban revitalization, so that the developed measures would increase their capacity (zheng 2017). this applies, among other systematic thinking aspects, to foresight of sustainability and social learning processes, whereas collective vision, mediation, expansion of community capabilities can become immediate drivers of a sustainable revitalization of urban areas (wolfram, 2019). s. lehmann (2019) emphasizes the relevance of new knowledge and justification of the best ways to implement the urban revitalization policy, while avoiding common mistakes (disregard of public transport, improvement in the life of a limited category of residents, excessive gentrification and loss of urban identity, etc.). urban revitalization varies depending on the city size, type of problems, and socio-ecological context in every particular case. although revitalization projects which have been realized in world-famous places are well described, there is still a gap in characterizing revitalization processes aimed at improving the quality of life in smaller settlements, such as medium-sized baltic journal of economic studies 48 vol. 7, no. 3, 2021 cities ( jaszczak, kristianova, pochodyła, kazak, młynarczyk, 2021). at the same time, according to k. ruming (2018), it is worth focusing on the impact of the revitalization of a degraded urban area on the development of the city as a whole, and the possibility of replicating the territorial management innovations introduced in other urban areas. at the present stage, urban revitalization tends more often to unleash the potential of territories, taking into account the latest trends in urban development. d. boussaa in his scientific work (2018) examines the problems of cities’ historical centres in the course of their renewal, including the way they can be used to enhance urban identity. a. garcia-fuentes, a. quijano, de torre, r . garcia, p. compere, c. degard, i. tome (2017) presented models of sustainable urban revitalization that determine an integrated holistic process of urban ecosystem transformation on the smart city principles, including stable urban mobility and integrated infrastructure facilities and processes. the issue of using creative industries for urban areas revitalization was investigated by o. oyekunle (2017), in particular the policy of developing creative diversity and social integration in cities, the potential of creative projects for expanding the opportunities and involvement of the community. alongside with that, there are various visions and practices of sustainable urban development with regard to modern adaptation to climatic changes. in this sense, it is worth mentioning a scientific study of d. tubridy (2021), who considers the relationship between urban revitalization and the development of green economy. these and other scientific results indicate the need to improve the instruments of the urban revitalization policy, when devising a strategic vision of urban development and the role which degraded areas can play in future. the conducted analysis proved that there exists a range of scientifically grounded urban development concepts which reflect the main approaches to urban policies. the modern vision of urban development is based on the concepts of compact, green, smart, creative, inclusive, slow, happy, etc. cities, which is confirmed by numerous scientific publications (table 1). note should be made of several well-known scientists whose thorough works have had a fundamental value for the formation and development of the relevant concepts, in particular: j. jacobs (compact city), m. bryx (green city); r . giffinger (smart city); сh. landry, r . florida (creative city); a. v. anttiroiko, m. de jong (inclusive city); h. j. jang, t. jung (cittaslow); ch. montgomery (happy city); as well as representatives of the unesco institute for lifelong learning (learning city). however, the issue of forming an urban revitalization policy built on the above concepts requires a separate study. in the result, the innovative urban development concepts should lay the basis for planning innovative approaches to urban renewal. table 1 the coverage of the latest urban development concepts in scientific articles, according to googlescholar platform data of 2011-2020 (author’s development) concept of urban development approximate number of scientific articles compact city 16700 green city 16400 smart city 42000 creative city 16200 inclusive city 4680 cittaslow 2900 happy city 2120 learning city 2630 sourсe: googlescholar, https://scholar.google.com.ua 3. results and discussion compact city this concept is to ensure a high housing density of an urban area, avoiding monofunctional zones. it is an alternative to a gradual urban sprawl. the concept is based on the vision of a city of short distances between the places of living, work, rest, public spaces, which is convenient for the inhabitants. features of a compact city were a subject of research conducted within the project “compact city policies: a comparative assessment” (oecd 2012). as a result, the following general characteristics of a compact city policy were identified: density and close proximity; public transport systems connecting urban areas; availability of public services and jobs. for a better understanding of the compact city concept, it is worth drawing attention to the work of j. jacobs, the author of a famous book “death and life of big american cities” ( jacobs, 2016). regarding the city as a complex organism, she claimed that urban elements are closely connected and interact with each other. her vision of urban development was based on planning viable streets where “social eyes” are their natural owners, guards of order and public security. in accordance with the recommendations formulated by j. jacobs, revitalization of degraded urban areas should provide for: – a comprehensive planning of an urban area, aimed at combining various functions and infrastructure facilities, without separating, for example, a residential zone from the areas of recreation or work; this functional differentiation is to ensure the living of various categories of people in the area, permanent street movement, and the presence of “social eyes”; – ensuring the density of small-size quarters with crossroads, where residents mainly walk, or cycle; in this case, a mass transfer of residents to the outskirts of cities and suburban areas is undesirable, since it is necessary to raise the density of the urban space and baltic journal of economic studies 49 vol. 7, no. 3, 2021 provide the presence of “social eyes” in the area at any time; – the need to preserve, among other things, old buildings (not only monuments of cultural heritage), which is stipulated by the intention to ensure the presence in the urban space of residential facilities adjusted for coexistence of people with unequal levels of income; because in urban areas consisting of modern buildings only, soon there appear commercial and office premises, designed for wealthy inhabitants, which significantly reduces the functional diversity of the area and entails spatial segregation. thus, revitalization of a city should enhance its attractiveness, forming stable interconnections between the inhabitants of a particular territory. the priority objectives are: concentration of infrastructure facilities of different functionality, street traffic planning, and organization of an effective public transportation system. ultimately, it is supposed to create benefits for the residents of a degraded area and ensure its future self-sufficiency. the introduction of the compact city concept requires significant financial expenses (in case it is necessary to redesign and reconstruct the existing infrastructure, build new facilities, etc.), and substantial organizational changes in the use of urban space and distribution of its functions. green city improving the quality of life in contaminated and deteriorated urban areas presupposes their transformation into greener and environmentally resistant territories. currently, the green city concept relates to building a compact city, rather than expansion of urban areas, aiming to save energy resources and reduce adverse impact on the environment. creation of a green city requires a targeted sustainable urban development policy which provides a wide range of pro-ecological activities related to the four major components of the urban environment (bryx, lipiec, rudzka, 2015; pp. 42-43): – air (the city authorities take action to prevent or minimize air pollution, since the negative situation in this sphere leads to a higher morbidity rate, prevents job creation and organization of leisure activities); – water (pure water is one of the foundations of life, therefore, it is necessary to meet the needs of inhabitants and business entities in this resource; at the same time, the use of water always leads to the sewage treatment problem in the city); – space (public spaces are areas where people have the opportunity to spend their time, communicate with others and form communities; these places create adequate conditions for quality recreation and business activity of the inhabitants); – green plantations (normally they form such public spaces as parks and miniparks, gardens, etc.; these areas are crucial in the struggle for fresh and unpolluted air, which is also valuable for the inhabitants’ mental health). the essence of the green city concept is revealed in the european commission project “green cities – fit for life”. in the framework of the project, a european green capital is determined annually (european green capital award), based on the following criteria: local actions to prevent the effects of global climatic changes, local transport, urban green zones and sustainable use of land, nature and biodiversity, quality of city air, noise level, waste generation and management, water consumption, sewage treatment, eco-innovation and stable employment, energy characteristics of the territory, and urban environmental management. in recent years, the award was granted to several european cities – ljubljana (2016), essen (2017), nijmegen (2018), oslo (2019), lisbon (2020), lahti (2021) (european green capital secretariat, 2021) which demonstrated the attainment of high environmental standards and set an example of sustainable development. in the context of a green urban policy, urban revitalization should be considered in two dimensions. in the case of drastic degradation of the environment (post-industrial areas, former port territories, etc.), radical revitalization measures are needed. they require significant investment for environmental construction, the development of a circular economy, and re-designing of areas by implementing large-scale projects of nature management. on the other hand, in a situation of a satisfactory environment, moderate revitalization measures are put in place. these measures should improve the environmental condition of an area through expansion of green plantations, arrangement of pedestrian and bicycle paths, restriction of road transport, implementation of energy-saving solutions, proper waste management, etc. some urbanists point out that the distance from any residential place to the nearest green zone should not exceed 500 m, regardless of the direction in which a pedestrian is moving (a. brdulak, h. brdulak, 2017; p. 12). the planning of actions depends on local challenges; however, it is logical, while revitalizing a degraded area, to combine pro-ecological educational activities with economic and social measures in order to achieve a synergetic effect. smart city the construction of a smart city is based on the application of new knowledge, technologies and innovations to arrange a multifunctional urban space with low energy consumption. also, smart cities are aimed at attracting human and social capital for urban development, pursuing the goal of ensuring high living standards. based on the benchmarking of medium sized european cities, a team of experts under the leadership of prof. r . giffinger from the technical university of vienna presented a model of a smart city. according to the model, a city is considered to be smart, when it meets the following 6 characteristics (giffinger, pichler-milanović, 2007; pp. 11-12): baltic journal of economic studies 50 vol. 7, no. 3, 2021 – smart economy which involves innovative entrepreneurial spirit, development of industries with a high added value, a flexible labour market, and international cooperation; – smart people who are characterized by a high level of qualification, lifelong learning, social diversity, creativity, openness and participation in public life; – smart governance, characterized by accessibility and proper quality of public services, public participation in management decision-making, implementation of effective urban development strategies; – smart mobility which is measured in terms of the presence of the latest information and communication infrastructure, innovative and safe transport and logistics systems; – smart environment which consists in sustainable management of natural resources and environmental protection, modern methods of a rational natural resource use; – smart living due to the activities of cultural institutions, quality living conditions (healthcare, security, housing), educational opportunities, tourist attractiveness of the area, and social cohesion. the policies of urban revitalization must take into account the above elements. ensuring the functioning of a smart city is a long-term process that requires rethinking of all spheres of the city life. when overcoming the crisis phenomena of degraded urban areas, attention should be focused on: the development of modern facilities of urban infrastructure, in particular environmentally friendly types of transport and institutions promoting business (business incubators, industrial parks, entrepreneurial zones, etc.); introduction of energy-saving technologies and the use of renewable energy sources; creation of integrated systems of public security and information networks that collect, process and analyse data and respond automatically to events; organization of public spaces with the use of information and communication technologies; extending green plantations, improvement of waste management systems; realization of other projects of environmental value. the implementation of the smart city concept through revitalization of degraded areas depends on the introduction of management innovations, and coordinated actions of all stakeholders to form an urban environment that is competitive, attractive for business and inhabitants, and capable of addressing future challenges. creative city this approach to urban development is based on culture, intellectual property, and creativity. accordingly, developed cities are characterized not only by innovations, but, above all, by the uniqueness of the environment where social capital is formed around culture and art. therefore, the objective of urban policy is to form favourable conditions for residence, recreation, professional activities and cooperation of creative people. r . florida (2012) believes that the “creative class” is a key urban resource that defines the city’s competitiveness and plays the leading role in the processes of development and revival of its areas. the scientist interpreted the creative city as the living environment for the creative class. the creativity of cities is evidenced by availability of qualified creative workers (the creative class) who stimulate the development of the city and for whom the city authorities create an adequate atmosphere, promote creativity and cultural diversity. according to r . florida, the city will be attractive to the creative class subject to the development of three components (the 3 ts): technology, talent, and tolerance, which are the drivers of the creative city’s growth (florida 2012). ch. landry was the first to scientifically substantiate the importance of creativity and its impact on urban development. he also introduced the term of ‘creative city’ as a response to sharp economic and social changes that took place in cities. during the crisis of industrial cities, it is the culture industry that has been a salvation for many of them, using its specific niches, local advantages and cultural heritage. the scientist defined the features of the creative city (landry, 2012) as follows: political will and leadership in the vision of the creative city as a living organism, taking into account the needs of the local community, the general situation and urban development trends; social diversity and access to the talent base, which positively affects the city’s creative potential; organizational culture that should be trustworthy, promoting establishment of horizontal social ties and knowledge sharing; local cultural identity which is a prerequisite for civic activity, the sense of community and concern for the city environment; urban space and infrastructure which allow residents to expand their social circle; dynamics of networking which indicates the ability of the city to form partnerships, to learn and generate innovations. the formation of a creative city is closely linked to the urban space revival and development, since the creative sector is often found in abandoned and degraded city areas. a comprehensive approach to the development of a creative environment has a great potential for urban revitalization. its introduction requires combining a cultural policy with socio-economic measures, and spatial planning. at the same time, the crucial point for building a creative city is investment in human and social capital, the sphere of culture. in this regard, revitalization measures are directed to the formation of hard and soft infrastructure. the hard infrastructure presupposes a proper functioning of public institutions, housing facilities, street-road and engineering networks, etc., which reflect the physical characteristics of an area. the soft infrastructure consists of projects of support to talented people and creative industry enterprises (audiovisual works, tourism, sports, literature and baltic journal of economic studies 51 vol. 7, no. 3, 2021 publishing, cultural heritage, performative and visual art, design, programming, etc.). during revitalization, it is important to develop public creative spaces, set up platforms for cooperation and dialogue between creative people, and stimulate the emergence of creative clusters. inclusive city this concept involves focusing of urban policy on all segments of the population and their needs, countering, in the first place, social exclusion. the european commission regards exclusion as a process, during which individual members of the community are ousted to the margins of public life due to the lack of basic skills of functioning in society or education (eurostat 2010; p. 7). this pulls them away from jobs, income, opportunities for personal development, and limits their social interrelations. however, the urban inclusion need should not be considered from a social perspective alone. in terms of monetary income and employment, inclusion is an economic problem, and it is materially unsecured people who need support to fully participate in the economic life of an inclusive city. in case inclusion centres around access to natural resources, it is possible to distinguish its wider environmental interpretation. in addition, when religious, gender, cultural or age aspects are considered, inclusion acquires social and moral characteristics. in its turn, political inclusion is indicative of participation of all population groups in public and management processes of the inclusive city (antiroiko, de jong 2020; p. 16). however, inclusion should not be limited solely to disadvantaged or marginalized groups; it should include other social layers which are usually not taken into account when developing urban policies (e.g., students of local educational institutions, families with children, older people). in accordance with the urban revitalization priorities, multidimensional urban inclusion is not a mere prerequisite for justice, availability and quality of public services, and well-being for all the inhabitants, but also an opportunity to find untapped local potential for territorial development. thus, it is necessary to support the unemployed and socially excluded population groups through arrangement of various professional development activities, social integration events, motivation and psychological assistance. improvement of the living environment and accessibility of public spaces (including elimination of barriers that complicate the movement of persons with disabilities), stimulating the growth of the local economy, ensuring safety in a degraded area, development of public transport can enhance urban inclusion, improving the interaction among the inhabitants and business entities. on the other hand, the expansion of the inclusive city can be associated with the projects of support to small business within various communities (in the first instance, ethnic groups, students, people of pre-retirement and retirement age, young parents), crowd funding of public projects or business ideas of freelancers. in summation, revitalization activities of inclusive cities should be directed to all categories of inhabitants of degraded areas, including their involvement in public life and motivation to self-organization and cooperation. cittaslow the concept relates to small cities that seek to provide their inhabitants with quality living in harmony with nature, the environment, and local cultural traditions. the cittaslow movement aims to preserve the unique nature of every city, develop the internal potential of territories based on local identity. due to a slowdown in the intensity of urban life, a friendly atmosphere in the city is formed as an alternative to the urbanized environments of large cities where a fast rhythm of life does not allow people to enjoy their lives. in order to become a member of the international network of cities of the good life cittaslow (cittaslow international head office 2021; jang, jung 2015), it is necessary to develop the following areas of urban policy: protection of the environment by providing green spaces and introducing renewable energy sources; maintenance of the monuments of historical and cultural heritage and their aesthetic renewal; establishing conditions for sustainable urban mobility that meets the needs of individuals and businesses; organization of recreation of the inhabitants and building of the appropriate infrastructure; facilitating the development of local tourism and hospitality industry; promoting local products, including the support for organic agriculture, traditional crafts and cuisine; raising general and pro-ecological awareness of the inhabitants; strengthening social cohesion and partnership. this concept can show along which lines degraded urban areas should be revitalized, with a focus on the quality of life of the inhabitants and the creation of preconditions for sustainable urban development. also, its major preoccupations are the authenticity of local landscapes, traditions, healthy foods, peace and quiet, closeness to nature, self-employment, and leisure. the bottom line is that cities should be concerned about local identity and enhance its significance in their policies. therefore, urban revitalization programmes rely on local marketing strategies, fostering the uniqueness of a particular area. the city inhabitants become active participants in urban changes, because the slowed pace of life implies, first of all, an abundance of measures that promote personal fulfillment and formation of social capital (educational and cultural programmes; support of traditional crafts, folk art and trades, etc.). these activities contribute to the development of tourism, oriented to acquaintance with local culture and traditions. however, without incentives for a sustainable growth of the local economy and infrastructure, it is impossible to ensure continuity of development, cultural baltic journal of economic studies 52 vol. 7, no. 3, 2021 diversity, and maintaining distinctive character of areas. combining within the revitalization programmes of cultural, economic, spatial and other projects is supposed result in a decline in the unemployment rate and a decreased migration of people to large cities. especially since the renewal of degraded urban areas is to serve the purposes of social cohesion, promotion of values, educational development, and maintaining a balance between traditions and innovations. happy city according to this concept, the main benchmark of urban development is the city inhabitants’ subjective sense of happiness, their satisfaction with what is happening to them in the city. therefore, urban policies should be concerned about the positive psycho-emotional state and moral conscience of the city inhabitants. happy cities are also centres of creativity, innovation and social entrepreneurship. ch. montgomery (montgomery 2013; p. 48) notes that a modern city is to make its inhabitants happy through an inspirational environment of empathy and cooperation. to that end, in his opinion, after satisfaction of basic human needs in food, housing and safety, it should: – seek to maximize the enjoyment and minimize the hardships of the inhabitants, and take care of their health; – give the inhabitants a real freedom to live, move around, and build their lives as they want; – form the inhabitants’ resistance to all types of economic and environmental shocks; – be fair in distribution of space, public services, mobility opportunities, entertainment, as well as challenges and charges (e.g., parking fees); – create conditions for building and strengthening all types of interpersonal relations (friendship, family, professional activity, leisure) which give meaning to the inhabitants’ lives. the pursuit of happiness under the conditions of degraded areas revitalization demands from the city authorities a continuous monitoring of the needs of various social groups (existing and desirable), researching the inhabitants’ level of satisfaction with the quality of their lives and their sense of happiness. at the same time, this requires to develop a system of measurement and quantitative assessment of social and individual happiness in a particular urban area in crisis. due to a detailed diagnostics of misfortune causes, it is possible to design revitalization measures which can better meet the inhabitants’ needs. in this case, it is also important not to lose sight of the issues of the general well-being, employment, security, trust in the community, citizens’ participation in city management, etc. the revival of areas on the basis of the happy city concept must ensure both the implementation of the principles of sustainable territorial development, and the formation of networks and emotional ties in the community. public spaces should play a leading role in establishing intercultural and inter-generation communications. they should be: innovative (amusement and recreation parks equipped with modern installations, access to wi-fi, and comfortable street furniture); stimulating intellectually (knowledge centres, libraries, and open-air theatres); eagerly sought (sports and children’s play areas, courtyards, pet playgrounds). their functioning should be complemented with all sorts of activities (street performances, concerts, picnics, open debates) designed for the inhabitants of all ages (from children to the elderly), professions, and economic status. in addition, it is worthwhile to form an ecologically friendly environment with provision of quality public services in various spheres of human life. in this regard, educational activities that form an atmosphere of mutual respect and empathy in the city are of special importance. learning city this concept is premised on the assumption that continuous education of inhabitants lays the basis for sustainable development of areas. under knowledge economy, citizens who use extensive opportunities of lifelong learning, constantly develop their professional, social and other competencies, are more successful and better prepared for changes in the urban environment. consequently, it is expedient for the city authorities to organize, in partnership with all stakeholders, an effective system of formal and informal lifelong learning for the inhabitants, regardless of their age, and encourage them in this activity. this should be reflected in the city’s strategic vision of attainment of all the sustainable development goals, predominantly: 4 – provision of a quality inclusive and fair education, providing the opportunities of lifelong learning for all; 11 – ensuring inclusiveness, safety, life stability and sustainability of cities and communities. as defined by unesco, a learning city uses its resources in all spheres of life effectively in order to: promote inclusive education of all levels (from basic to higher education); bring back family training and training in the community; develop professional training and inservice training; enhance the use of modern educational technologies; improve the quality of training and provide increased level of educational outcomes; favour the culture of lifelong learning (unesco institute for lifelong learning 2017). unesco global network of learning cities unites the cities of the world specializing in the field of lifelong learning. the network is intended to strengthen the capacity of cities in forming lifelong learning systems through the development of political dialogue, establishing ties, partnerships and exchange of best practices between cities. it devises tools for encouragement of activities in this field and recognition of the progress in creating learning cities (unesco institute for lifelong learning 2021). degraded urban areas are faced with numerous problems caused mostly by social deprivation. baltic journal of economic studies 53 vol. 7 no. 3, 2021 the driving force of urban revitalization is a desire to improve human capital of an area, enriching the inhabitants with new knowledge and developing their qualifications and skills. city authorities, educational and scientific organizations, business entities all have a stake in this. building the infrastructure for educational services based on modern technologies is an important task of degraded areas revitalization. essentially, the learning city concept is closely linked to other urban development concepts that were considered in this work, for it substantiates an approach to solving the tasks of forming a green, smart, creative, inclusive urban environment. in turn, it actualizes measures intended to expand access to quality education for children and adults; to facilitate the transformation of municipal and private institutions into learning organizations; to establish partnerships with local employers aimed at professional training and retraining of inhabitants, organization of inservice training; to use the existing infrastructure facilities as educational spaces (libraries, cultural centres, museums) for residents of all generations; to introduce modern information and communication technologies in the educational process (educational online platforms, informal educational networks, digital literacy programmes); to realize educational initiatives as for a number of socially important issues (healthy lifestyle, waste management, rights and obligations of road users, gender equality, intercultural tolerance, etc.); to create incentives and opportunities for the inhabitants’ active participation in public life of the city. these measures, being incorporated into urban revitalization programmes, will give them a more integral nature. table 2 characteristics of the elements of public urban revitalization policy in terms of the latest urban development concepts # innovative urban development concepts elements of urban revitalization policy concern of the policy policy objective as regards people policy focal points predominant indicators 1. compact city organization of a compact multifunctional environment people in a comfortable environment providing high density of housing in an area; quality and affordable public services standards and quality of life 2. green city formation of an ecologicallyfriendly environment for human life and activities well-off and healthy people expansion of green plantations, creation of pedestrian and cycling paths, pro-ecological educational activities quality of life, environmental condition 3. smart city arrangement of urban space, applying modern technologies and innovations people in a comfortable environment priming of innovative economy and stable mobility; security management; rational use of resources standards and quality of life, safety level 4. creative city establishing conditions for life, activity and cooperation of creative people creative people development of public spaces for creativity; support of talented people and creative industry entities quality of life, level of tolerance in the community 5. inclusive city providing a full-fledged multidimensional inclusion of all the inhabitants people in an environment of accessible public goods counteraction to social exclusion, ensuring availability of public services and spaces, participative measures quality of life, level of social inclusion 6. cittaslow realization of an area’s internal potential based on local identity satisfied, calm people support for local culture and traditions; promotion of healthy eating, tourism, and hospitality industry quality of life, level of trust, social cohesion 7. happy city increasing the level of public and individual happiness happy people organization of activities and public spaces; promoting formation of networks and emotional ties; environmental protection level of happiness, empathy in the community 8. learning city promoting the culture of lifelong learning for all the inhabitants learning people development of educational infrastructure; ensuring high-quality lifelong learning of children and adults quality of life, level of education source: author’s development baltic journal of economic studies 54 vol. 7 no. 3, 2021 4. conclusions summarizing the impact of the chosen urban development concepts on the policy of urban revitalization, it is expedient to consider how each policy addresses various problems of life support, and to formulate its purpose as regards the inhabitants (table 2). programme solutions must be individualized depending on the local specifics and state of economic, physical, human and other potentials of the city. the core of the modern urban revitalization policy should comprise people-oriented programmes of sustainable renewal of areas, aimed to form an urban environment which is: multifunctional, with places of residence, work, and recreation placed close to one another (compact city); environmentally friendly as a result of expanding green plantations, sustainable nature management, pro-ecological educational measures (green city); available to all inhabitants without exception (inclusive city); comfortable due to the introduction of innovations and modern technologies (smart city); harmonious with nature, surrounding environment, and local traditions (cittaslow); favourable for the life of creative people (creative city); and providing a comprehensive lifelong learning (learning city). at the same time, it is important to seek to ensure a happy life to the inhabitants (happy city), which requires, among other things, support for networks and emotional ties within the community. in view of the above considerations, the developers of urban revitalization policies are faced with a complicated problem of choosing specific spheres, on which it is appropriate to focus to achieve a quality urban revitalization. it is important to act in such a way as to cover all the dimensions of 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(2017). a multi-scale decision support framework for sustainable urban renewal in high-density cities: a case of hong kong. hong kong: the hong kong polytechnic university, 227 p. baltic journal of economic studies 145 vol. 7 no. 4, 2021 corresponding author: 1 international university of business and law, ukraine. e-mail: nenkofamily@ukr.net orcid: https://orcid.org/0000-0003-2473-2823 2 kherson state university, ukraine. e-mail: tuhtenko1@gmail.com orcid: https://orcid.org/0000-0003-4634-9139 3 national university “odessa law academy”, ukraine. е-mail: krasnopolskaya@onua.edu.ua orcid: https://orcid.org/0000-0001-5936-5889 doi: https://doi.org/10.30525/2256-0742/2021-7-4-145-152 administrative and legal support for the management of integrated economic structures in a globalized business processes serhii nenko1, nataliya tyukhtenko2, tetiana krasnopolska3 abstract. the subject of the study are organizational and economic relations arising in the process of administrative and legal support of management of integrated economic structures in a globalized business processes. methodology. instrumental and methodological apparatus of the study consists of the applied methods of organizational economic analysis, statistical methods, sample observation, economic and mathematical modeling method, grouping, generalization, expert evaluations, methods of economic theory, marketing, etc. the aim of the article is to study the basics of administrative and legal support of integrated economic structures management in the globalization of business processes. the results of the study consist in the development of specific provisions and recommendations aimed at improving the management of the formation and integrated economic structures functioning in the context of business processes globalization. the proposed recommendations will improve the level of administrative and legal support of corporate governance and efficiency of companies' groups. conclusion. the following conditions of effective management of integrated economic structures in the context of business processes globalization are highlighted: compliance with the target unity in the activities of integrated economic entities; orientation of participants to achieve a synergetic effect of integration interaction; creation and maintenance of economic motivation for joint activities; orientation to reduce corporate risks of integration interaction; compatibility of resource potentials of the main interacting organizations; ensuring the controllability of integration interaction processes in the interests of the owner. organization of rational economic relations within them and with external structures is of great importance to improve the efficiency of economic activities of integrated economic structures. these are relations with public authorities (gr-management), suppliers and customers, banks, insurance organizations, employees of enterprises, owners. the effectiveness of the group of companies largely depends on the availability and level of system development of internal regulatory management of consolidated finances. the purpose of internal regulations system is to fill gaps in the norms of existing administrative and legal legislation in the regulation of economic, managerial and financial activities of integrated economic structures. key words: administrative and legal support, macroeconomic policy, globalization, business processes, management, gr-management, economy, integrated economic structures, competitiveness, production efficiency, international market, administrative law. jel classification: e69, f15, f20, k22, k23 1. introduction the development of business processes globalization in the economy involves increasing the independence of subjects in the choice of directions, forms and methods of management and causes an increase in their responsibility for the results of the relevant management systems. in this regard, the development and formation of new economic structures that can improve the efficiency of the economy at all levels is of particular relevance. an example of such structures could be integrated economic ones. baltic journal of economic studies 146 vol. 7 no. 4, 2021 integrated economic structures are created to increase the competitiveness and efficiency of production, and the formation of rational technological and cooperative ties, as well as to enhance capacity and investment attractiveness. currently, integrated economic structures are actively involved in the implementation of national programs and large-scale innovation projects, as well as carrying out activities in strategically important areas of the economy. in addition, they protect the interests of the national economy in the international market, the regional economy at the level of the country and form to a large extent the state and regional budgets. they, as a rule, unite enterprises of various industries located on a separate territory, which determines the specifics of the formation of technological, financial and cooperative ties. unification of material, financial, information and labor resources, diversification of activities, centralization of management processes – all these factors contribute to increased stability in the domestic and international markets, as well as reduce business risks, obtain synergistic effects and sustainable economic development. integration of enterprises allows you to move to a qualitatively new management level, which makes it possible to apply different forms of action coordination, interests and managerial motivations of group members, thereby opening up real prospects for improving the efficiency of production. the spread of integrated structures in the economy is growing. the number of business associations and the number of organizations participating in the groups is constantly increasing. as a result, there is growing interest in the managerial aspects of the creation and operation of companies' groups, including the problems of managing consolidated resources. at the same time, it should be noted that the development of globalization and integration processes in the economy of many countries is hindered by the lack of clear administrative and legal norms regulating the processes of creation and operation of integrated economic structures (calhoun, 2014). 2. the essence of integrated economic structures in the modern world, their forms, types and structure in general, integration is understood as the creation of the whole by combining the parts. in the modern economic dictionary integration is defined as the association of economic actors, deepening their interaction and the development of ties between them. based on the modern economy analysis in the context of business process globalization, the following conclusions can be made: – integration is a universal phenomenon that applies to various objects and phenomena, including economic ones, such as national economies, regions, and enterprises; – economic integration is manifested both in the expansion and deepening of production and technological ties, the joint use of resources, the pooling of capital, and in the creation of favourable conditions for each other's economic activity and the elimination of mutual barriers; – integration should be considered both as a process and as a result. as a process – it is the union of economic subjects to achieve a common goal (the creation of a certain product that meets the requirements of the final consumer) in satisfaction of private interests of subjects; as a result – the formation of a complex structure consisting of a set of interrelated and interacting economic subjects, with new qualities and connections, which are absent in separate entities (forsythe, 2011). group members, regardless of their legal independence loss, become an integral part of a common structure. they are united by a common goal of development, production and financial ties. integrated economic structures are created and function in different forms and types, depending on the objectives of the group, the economic content of the association, legal status, and so on. the groups vary in the degree of centralization of production and management functions, as well as by models of building the organizational structure (grief, 1993). however, there are also common features inherent in all associations, which determine the functioning of the group as an integrated structure. such characteristic peculiarities of integrated structures should include: – the association of two or more legal or natural persons, in other words, business entities; – integration of resources (raw materials, financial, intellectual, information, labour and others); – the pursuit of a unified developmental goal to achieve the interests of the group as a whole; – the presence of economic dependence (production, financial, other); – implementation of coordinated activities; – centralization of certain management functions (with varying degrees of centralization); – the presence of a structure. members of the group can be any legal entities – commercial and non-commercial organizations, as well as natural persons – individual entrepreneurs. a number of authors, considering the status of members of integrated groups, include branches in this list (fernandez, 2016). but since branches are separate subdivisions of an organization and do not have the status of a legal entity, while they do not bear property liability for their debts, including tax debts, their baltic journal of economic studies 147 vol. 7 no. 4, 2021 inclusion in the single group of business entities seems to us unreasonable. depending on the purpose of the association, the composition of participants varies greatly in the types of activities that they carry out. if the goal of inte-gration is to achieve an economic effect by centra-lizing the sales function, then organizations producing similar goods or products are included in the group. if a group is created to reduce production risks through diversification, then it is formed of participants operating in different areas of business. this group often includes financial institutions, namely banks, insurance companies and investment firms (machlup, 1962). with the exception of several forms of integrated structures, whose activities are regulated by special administrative and legal norms, the group' composition is formed on the basis of the goals and objectives of the associations. the quantitative composition of the integrated structure is not limited. the creation of one affiliated undertaking in an organization is already enough to form a holding association, that is, the minimum composition of the group is two participants. there is no maximum number of participants. there can be many, depending on the goals and scope of the association (porter, 2003). the organizational-legal form of the participants of the group can be any, but the most commonly used forms are joint-stock companies, limited liability companies, partnerships. for example, it should be noted that the current administrative and legal norms in ukraine limit the formation of subsidiaries and affiliates to several organizational and legal forms, which does not correspond to the current business practice and the realities of economic life. one of the main features inherent in groups of economic actors is the integration of resources belonging to its individual participants. participants combine raw materials, financial, intellectual, information, labour and other types of resources. this factor is fundamental for achieving a synergistic effect, for increasing the efficiency of activities as a result of the merger. the pursuit of a unified goal in the activities of the group is the most important feature of an integrated structure. prioritizing the interests of the group as a whole is a principled position. each participant of the integrated structure, as an independent legal entity, has its own goals and objectives of activity. at the same time, they should be subordinated to a single goal of the group’s development, common interests. tasks for each participant are set on the basis of the general goal statement, in accordance with the goals of the group's activity and those resulting from them (north d., 1990). any association is impossible without the dependence of the participants of this association on each other, the system of close links between them. the content and form of dependence can be different: legal dependence of subsidiaries in relation to the parent company; production dependence in the formation of a single process chain "supply of raw materials – production – sales of products"; financial dependence arising from the centralization of financial flows and investment management functions, and so on. in integrated structures builds a complex system of relationships and interdependencies, covering all areas of life of the group – the constituent, production and technical, financial and managerial. these relations are mediated through the authorized capital (fixed in the constituent documents), as well as through the system of contractual relations between the group members (gasanov, 2008). the most common form of people' mutual dependence is considered to be a property relations. they are based on participation in the authorized capital of a particular legal entity. the connections secured through the system of participation in the capital of the enterprises belonging to the group are the most stable. ownership of a controlling stake in subsidiaries ensures a unified corporate policy and control over the activities of group members by the parent (parent, central) company. the implementation of coordinated activities follows from the goal of achieving the common interests of the group. without coordinating the various productive, economic and social activities of all participants, it is impossible to achieve a single development goal. coordination makes it necessary to synchronize the actions of individual enterprises and the entire structure as a whole, as well as centralizing the management functions of the group. due to the scale and complexity of coordinating different types of activities, as well as the mandatory separation of the owner and management functions, it is necessary to organize the allocation of corporate governance specialized function. the degree and levels of centralization may vary. depending on the purpose and economic content, associations of business entities may be created: – a rigidly centralized structure with unified management of all group processes; – partial centralization, in which centralization covers only a part of the processes. for example, centralization of scientific and production development functions is typical for integrated groups created in the form of concerns, in syndicates commercial activities are centralized – sales management functions, in financial and industrial groups and holdings, as a rule, all functions of corporate property management, finance, personnel are centralized. the degree of centralization depends largely on the organizational structure and management model used in the group of companies. the coordinated activity of any group is conditioned by its structuring. the structure of the group implies baltic journal of economic studies 148 vol. 7 no. 4, 2021 the organization of the key decision-making center and the possibility of the member enterprises' operational control. the organizational structure of the group can be: – simple or single-level – for example, the parent company and its subsidiaries; – branched or multilevel – if there are subsidiary undertaking of a subsidiary undertaking; – complex – if there are several control centres (rosenberg, 1982). the formation of the structure depends on the legal form of the association of economic entities into a group. for example, there is currently no clear legal basis for the creation and functioning of integrated groups in the ukrainian legislation. the legislation contains only the legal basis for the activities of subsidiaries and dependent companies, associations (unions) and organizations united under a simple partnership agreement. a number of legislative acts regulate the formation of financial-industrial groups and holding associations. antimonopoly laws regulate certain aspects of integrated groups. in this regard, the group's organizational structure is based both on certain provisions of the legislation governing its activities and on developed internal regulations. it takes into account the global experience of large corporate associations in the context of business processes globalization (ortina, 2014). 3. integrated economic structures: growth and friendliness the creation of integrated economic structures is a process of consolidation of the company’s activities, which indicates its growth. in the process of forming integrated economic structures, the following main types of integrated growth are distinguished: – internal growth or expansion from within. this is the process of creating subsidiaries, dependent or other member companies of the group at the expense of own or borrowed sources. this group growth type is considered organic; – external growth. this is the process of joining existing companies to the group as its members. – consolidation of existing integrated groups among themselves. – division of large companies during restructuring. forms of accession may be different – for example, the purchase of shares or stakes in the company, the signing of a simple partnership agreement, the contract with the management company with the transfer of certain management functions and others. the essence of the strategy of internal (organic) growth is that the accumulated profits and borrowed funds are invested in the existing business. there is an increase in production capacity, an increase in production and sales. internal growth is inherent in young companies with a high internal potential for improving business efficiency, growth in product innovations, entering new geographical markets. external growth is typical for companies that have exhausted the opportunities and potential of internal growth and seek external expansion and development. the most common forms of external growth are mergers and acquisitions (m&a). m&a is a common definition for transactions that are instruments of corporate control transfer, including the purchase and exchange of assets. the "division" of large companies formed a significant number of integrated structures during their restructuring. this method was typical for many ukrainian enterprises in the early 90s during privatization and the transition to self-sufficiency. as a result, a large number of subsidiaries with 100% participation of the parent company were established from the ex-production structures (varshavsky, 2019). external growth of companies can be provided by horizontal, vertical, regressive vertical, progressive vertical and conglomerate integration. horizontal integration is an association of economic entities producing similar goods, types of products and using similar technologies. horizontal integration is carried out by technologically independent enterprises interested in increasing sales of products. vertical integration is the merger of business entities of a single technological cycle from raw materials to finished products (companies participating in the same technological chain "supplier – producer – seller", when one of the participants is a supplier or consumer in relation to the other). this type of association is also called "product lifecycle association". regressive (reverse) vertical integration is aimed at the growth of the company through the acquisition or strengthening of control over suppliers. a firm can either create subsidiaries to handle supplies or acquire companies that already do supplies. this is the method by which the company creates (integrates) its own input stages of the technological chain. the advantages of reverse vertical integration are reduced dependence on fluctuations in component prices and supplier requests. in addition, supplies, which are a cost center for the company, can turn into a revenue center. progressive (direct, forward-going) vertical integration is expressed in the growth of the company through the acquisition or strengthening of control over structures located between firms and the end user, that is, distribution and sales systems. in this case, the output stages of the technological chain are integrated. the advantages of this type of integration are manifested in the expansion of intermediary services. vertical integration can also be complete and narrow. when complete, all inputs and outputs are combined. an example of a narrow one is the purchase by a company of only a part of the incoming elements and the production of the rest on its own (shats’ka, 2018). baltic journal of economic studies 149 vol. 7 no. 4, 2021 conglomerate integration is an association into a group of economic entities from different industries that are not related to each other by type of activity. the economic advantages of such associations are achieved by diversifying activities and reducing risks. associations differ in the degree of voluntariness (friendliness) as follows: voluntary and compulsory associations. a defensive association can distinguish a kind of voluntary association (kodama,1995). a friendly association is when all the conditions of the process are agreed between the owners of the interested companies. compulsory association is a form of integration in the absence of consent of the absorbed company. defensive merger – designed to make the company less vulnerable to "hostile takeover". in essence, it is an association by agreement of the parties. however, the purpose of such an alliance is not so much business development as its protection. it should be noted that hostile takeovers in ukraine occupy a larger market share of corporate association transactions than in countries with developed economies. the main reasons for this are: 1. economic weaknesses in business and opportunities for political and administrative pressure on it. 2. imperfection of legislation and the possibility of its abuse. we highlight the following main methods of hostile takeover: – aggressive purchase of shares of the target company in the secondary market – from employees, brokers, financial organizations and others; – lobbying for transactions with blocks of shares remaining with the authorities, carried out in the form of residual privatization, trust management, etc; – buying up debts or transforming them into propertyequity interest; – assets acquisition of companies liquidated in bankruptcy.; – abuse of court decisions to invalidate earlier transactions or issues of securities, restrictions on the rights to own blocks of shares, to hold general meetings, and so on. – theft of shares by manipulating the register of shareholders, making illegal transactions regarding the disposal of shares, etс (gronroos, 1990). 4. administrative, legal and economic means of improving the management of integrated structures in in a globalized business processes to organize the management of integrated economic structures is important to analyze the peculiarities of economic relations in them. in theory, there are several major groups of relations, depending on their economic content, which enter into business entities in the process of economic activity on the formation, distribution and use of financial resources. these are financial relations with public authorities, suppliers and customers, banks, insurance organizations, employees of enterprises, owners. to analyze the totality of financial relations formed by the participants of an entrepreneurial group with other market participants and among themselves, subjects and types of interaction can be divided into groups. there are external and internal types of financial relations. external financial relations are formed between the members of the group of companies and other subjects of the economic process (external to the group) (greener, 2009). when implementing external financial relations, each member company of the group interacts: – with state authorities represented by tax, customs, law enforcement, antimonopoly, judicial authorities, securities market control bodies, state and local authorities; – with credit and insurance organizations, investment and non-state pension funds, and other financial institutions (not included in the group); – with suppliers, customers, buyers, sellers and other counterparties related to the production and sale of products, services, works (not included in the group); – with non-profit organizations (which are not members of the group). internal financial relations are formed between the participants of the business association (within the group): – the enterprises of the group interact with the shareholders (participants) of the association; – the group’s enterprises, through their representatives (managers), enter into financial relations with the employees (labor collective) of these enterprises; – the organizations belonging to the group participate in financial relations with each other; – subsidiaries and dependent organizations interact with the main (parent, central) company (shevchuk, 2019). due to the legal and economic dependence of the enterprises participating in the group on the parent (central, managing) companies, internal financial relations play a decisive role in the formation of the entire system of financial relations in integrated structures (ferreira, 2019). another grouping of the totality of financial relations is due to the main feature of integrated structures, which is that they are both a set of individual companies-business entities; and a single economic complex, an independent unit of entrepreneurship, a "single business". there is a combination of the interests of the group as a whole and the interests of an individual member of the group. this factor determines the formation of a two-level system of financial interaction between the group and market participants. baltic journal of economic studies 150 vol. 7 no. 4, 2021 the first level. the group as a whole, as a single economic entity, enters into relations with the state, suppliers, customers, financial institutions and other counterparties through its authorized representative (parent, central or management company). the totality of financial relations of this level is aimed at the realization of the overall business development goals of the group of companies as a whole. the second level. each company participating in the group interacts with the same persons as an independent legal entity. at the same time, the goals and objectives of the business development of this participant are realized (within the framework of the group’s general objectives). thus, it is possible to distinguish three classifications of types of financial relations that are formed in integrated economic structures: – on the subjects of interaction and the economic content of financial relations; – external and internal types of financial relations; – according to the level of the subject of financial relations from the integrated structure (two-level system of relations). financial management of any organization is carried out using a financial mechanism. in financial management, the fiscal mechanism is part of the economic system and is a set of forms and methods of financial management of the organization in order to achieve maximum profit (daft, 2012). the structure of the financial mechanism as one of the elements includes auxiliary systems: legal, regulatory, informational, program. their role in the financial management system should not be underestimated. they are not auxiliary to financial instruments and methods. it is within the framework of administrative, legal and regulatory support is determined by the possibility of applying these or those methods and tools of financial management, as well as the construction of certain organizational management models. in this regard, the study of financial management processes in integrated economic structures in the context of business process globalization is impossible without analyzing the peculiarities of regulatory and legal support of the activities of companies groups. in addition, these features are determined by the norms of current legislation governing the creation and operation of companies groups, as well as their practice of application. the system of administrative and legal support of the financial management process of integrated economic structures consists of: – legislative and other acts; – internal documents and local regulations. legislative regulation is a priority, basic, it determines the legal status of business entities and forms the basic principles of the creation and functioning of the group, the formation of financial relations, as well as establishes the boundaries of legislative acts and internal regulations. according to many experts, the current legislation in the developing market economy of ukraine is not able to provide sufficient completeness of the legal regulation of entrepreneurial activity. in relation to the regulatory support of the functioning of integrated economic structures, this conclusion is even more relevant. such factors as the group' s complex structure, the diversity of activities, the participation of enterprises with different organizational and legal norms, and imperfect legislation make it necessary to develop internal documents regulating the management process as a whole, and financial management as its most important part (shevchuk, 2019). the effectiveness of a group's financial activities largely depends on the presence and level of system development of internal normative regulation of consolidated finances management process. the internal regulatory support system for group financial management is developed by the group members (as a rule, this function is performed by the parent, central or management company) in accordance with the principles and rules established by applicable law, taking into account the goals and objectives of the group. the system includes: – documents directly provided for by the legislation; – documents created based on the needs of the group’s activities. the internal documents created in the group are binding on all participants in the financial relationship. in addition, they are taken into account and have force in legal proceedings. a problem in the management of integrated structures is the fact that the legal form of the board of directors, supervisory board or other group' s supreme management body in general does not exist, since the current administrative and legal norms do not consider an integrated group as a single legal entity. in a group with a simple organizational structure, where the parent company owns controlling stakes in subsidiaries, the director board (supervisory board) of the parent company may take on the functions of the group' s supreme governing body. in groups with a complex structure, without a clear system of dependence through equity participation, the issues of top management of the association as a whole, the coordination of the organization should be resolved through a system of intra-corporate normative regulation. the tasks of internal regulations system in the financial management of integrated economic structures are as follows: – filling gaps in the norms of the current legislation in the field of regulation of the economic, managerial and financial activities of the group; – coordination and regulation of group members' financial relations; baltic journal of economic studies 151 vol. 7 no. 4, 2021 – resolving issues related to conflicts of all participants in financial relations; – establishment of the procedure for the formation and use of funds and reserves (including centralized ones), profit distribution; – consolidated accounting system formation, financial analysis, planning and control; – distribution and consolidation of functions, powers and responsibilities of each participant; – ensuring document flow between the participants of the structure. as a basic document of the system of internal normative support of financial management in the group of companies, it is advisable to develop a general (conceptual) provision, which will determine the following: – principles of the organization and functioning of the integrated group; – functional distribution of powers and responsibilities among the group members; – a list of centralized functions performed by the parent (central, managing or other authorized) company; – basic requirements for the procedure of development, coordination and approval of draft internal documents; – types of internal regulations by the scope of their application (martin, 2015). to characterize the types of internal documents, it is advisable to highlight the following of the regulation: 1. internal normative regulation of the group’s management bodies. the section may include provisions on the supreme management body of the group, on the management board (management company), on the audit commission and others. 2. local acts regulating relations with the founders (shareholders, participants) of organizations belonging to the group (regulations on the procedure for forming the group’s capital, consolidating resources; on the procedure for the formation, distribution and use of centralized funds; on profit distribution, directions of its use and payment of dividends). 3. documents regulating financial relations with employees are regulations on the system of remuneration and incentives, on social security, on training and professional development, and others. 4. internal documents establishing the procedure for financial reporting within the group (for accounting, tax and management accounting purposes, provisions on the document management system, preparation of consolidated financial statements, etc.). 5. regulatory documents defining the procedure for financial analysis and planning (regulations on the budgeting system, on the formation of strategic, current and operational plans, on the system of financial indicators). 6. provisions establishing the basic principles for the formation of the investment, financial, tax and credit policy of the group. 7. internal acts regulating the process of internal financial control (le grand, 2019). thus, a set of internal regulatory documents can serve as an effective tool for organizing and regulating the process of managing consolidated finances in integrated structures. 5. conclusion economic integration is the unification of economic entities, the deepening of their interaction, the development of links between them. it is manifested both in the expansion and deepening of production and technological relations, the joint use of resources, the pooling of capital, and in the creation of favourable conditions for each other's economic activity and the elimination of mutual barriers. as a process, it is the association of economic subjects to achieve a common goal (the creation of a certain product that meets the requirements of the final consumer) while satisfying the private interests of the entities; the result is a set of interrelated and interacting economic actors with new qualities and relationships that are absent from the disconnected subjects. integrated economic structures are proposed to be understood as a set of economically related business entities that share resources and coordinate their activities to achieve a common goal (creating a product that meets the requirements of the end user) and the sustainable functioning and development of each entity. the following conditions for effective management of integrated economic structures in the context of globalization of business processes are highlighted: compliance with the target unity in the activities of integrated economic entities; orientation of participants to achieve a synergetic effect of integration interaction; creation and maintenance of economic motivation for joint activities; orientation to reduce corporate risks of integration interaction; compatibility of resource potentials of the main interacting organizations; ensuring the controllability of integration interaction processes in the interests of the owner. it is established that to improve the efficiency of economic activities of integrated economic structures, a major important aspect is the organization of rational economic relations within them and with external structures. these are relations with public authorities, suppliers and customers, banks, insurance organizations, employees of enterprises and owners. the specificity of relations is due to the main feature of integrated structures, which is that they are both a set of individual companies-business entities, and a single economic complex, an independent unit of entrepreneurship. there is a combination of group interests as a whole and the group's individual member's interests. the group's efficiency largely depends on the presence and development level of the internal regulatory management system for consolidated baltic journal of economic studies 152 vol. 7 no. 4, 2021 finances. the system of internal regulations is aimed at filling gaps in the existing norms of administrative and legal legislation in the field of economic, managerial and financial activities of integrated business structures. features of economic analysis, planning and control in integrated economic structures are due to the need to perform these functions at different levels: of the individual enterprise; of a particular direction, implemented by several companies; of the structure as a whole. from the need to coordinate the collection and processing of primary information for its generalization and analysis, the organization of coordinated activities for the formation and implementation of planning tasks follows the expediency of centralization of these functions. in this regard, the financial service of the parent company or a specialized management firm is engaged in analysing the economic activity of integrated economic structures, making forecasts, longterm and medium-term plans. setting up management systems begins with a system of high-quality collection and processing of management information. it is the information of management accounting, which relates to the tactical and operational levels of management that is the basis for making competent management decisions at all levels. the main users of this information are founders, senior, and middle managers. building an effective accounting system in integrated economic structures in modern conditions is impossible without automation of accounting operations. the use of modern automated system will allow to solve such problems of bookkeeping organization as provision of connection between accounting and management reporting, organization of bookkeeping by a large number of analytical attributes, elimination of duplication when entering information and reduction of complexity of management reporting, integration with other information systems. to build a unified bookkeeping system at the enterprises of integrated economic structures, it is necessary to develop and approve the relevant regulations and forms required for use by all participants. references: calhoun, j. w. 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(2019). reorganization of the company by merger and acquisition (algorithm). ubr. available at: https://blog.ubr.ua/finansy/reorganzacia-pdprimstva-shliahom-zlittia-ta-pridnannia-algoritm-2-1236 (accessed september 17, 2021). baltic journal of economic studies 59 vol. 3, no. 2, 2017 theoretical aspects of the predictional instrumentation for application in the state regulation of the participants relationships in the electricity market anastasiia koliesnichenko1 national technical university „kharkiv polytechnic institute”, ukraine abstract. the article presents the problems of current trends in the development of the electric power industry in conditions of increasing capital concentration, informing the economy and increasing the dynamics of the movement of significant amounts of cash flows which require a permanent analysis of the current situation and the necessary adjustment and / or modification of the parameters for the regulation of energy markets. from this article it can be concluded that the task of constructing forecasts acquires high relevance in many subject areas. it is an integral component of the daily work of modern social and economical systems. the interrelations of the subjects of the electric energy market are the one of the its most important institutions. the purpose of this article is to study the theoretical basis for the adaptive application of forecasting methods in the functioning of energy markets. in order to avoid the dominance of commercial interests of certain groups of participants in the energy market, the emergence of price distortions in the market that have a destructive effect on obtaining potential benefits from the introduction of competitive mechanisms, the key to finding the most effective and economical way to solve these problems is the use of systemic regulation of emerging deviations in achieving target milestones especially in the context of reform. the informational and analytical support formation for the performance of the functions assigned to the regulatory apparatus requires the use of forecasting methods and approaches to preserve the dynamic development of the electric energy market and to maintain the balance of interests of all its subjects in the conditions of reform. the article uses a number of methods: classification and systematization in the analysis of scientific methods for forecasting and planning social and economic processes, logical generalization when reviewing existing modeling methods and assessing their effectiveness in the energy markets, the use of a constructive approach in the study of factors affecting the resulting index. finally the obtained theoretical and scientifically applied results of the research make it possible to formulate the necessary theoretical and methodological basis for improving the instrumental basis for modeling the relationships between the subjects of the electric energy market, which can be used in forecasting in the field of regulation of phenomena and processes in the energy markets. key words: the regulation, energy market, energy market participants, forecasting methods. jel classification: c3, c53, p18, q4, q48 corresponding author: 1 department of accounting and analysis, national technical university „kharkiv polytechnic institute”. e-mail: anastasihpi@gmail.com 1. введение концепция государственного регулирования основывается на комплексе методических мероприятий, направленных на построение эффективного механизма обеспечения внутренних и внешних функций государства по всем направлениям национального хозяйства. ключевыми инструментами, позволяющими формировать ресурсно-управленческую систему и сохранять баланс интересов субъектов на рынке, которые характеризуются разной структурой капитала и неодинаковой чувствительностью к регуляторному влиянию в контексте неравномерного распределения прав собственности, выступают плановые и прогнозные технологии и процедуры. выбор соответствующей стратегии и реализация процесса принятия конкретных конструктивных решений органами законодательной власти, органами местного самоуправления по регулированию социально-экономических процессов должны не только опираться на результаты ретроспективного анализа, но и в значительной степени учитывать прогнозы и их корректировки, составленные с целью достижения целевых ориентиров развития, модернизации или реформирования. это обусловливает необходимость baltic journal of economic studies 60 vol. 3, no. 2, 2017 обеспечения качественного и квалифицированного подхода к прогнозированию текущей экономической ситуации и перспективных показателей в различных отраслях народного хозяйства. одними из перспективных путей решения проблемы электроэнергетической зависимости страны остаются развитие альтернативной энергетики и наращивание экспорта электрической энергии. 2. обзор текущей ситуации на рынке электроэнергии украины общий объем технически возможного энергетического потенциала возобновляемых источников энергии (далее  – виэ) в украине ветра, солнца, воды, биомассы – в современных условиях эквивалентный 81 млн т условного топлива, что составляет около 40% годового спроса на электроэнергию (gonta, 2015). однако, несмотря на общедоступный характер виэ, благоприятные природно-климатические предпосылки для активизации их использования и имеющуюся тенденцию количественного роста в совокупном товарном отпуске электроэнергии в оптовый рынок, их доля в структуре генерации электроэнергии в нашей стране остается несущественной, в частности, в 2016 г. суммарный объем электроэнергии, произведенной из альтернативных источников, составил 1,3% всего производства (otchet, attachmen 2.3.8, 2016). после некоторого роста экспорта электроэнергии в 2012-2013 гг. одновременно с объемами общего производства, в 2014 г. данный показатель снизился на 13% по сравнению с 2013 г. и в 2015 г. украина сократила экспорт электроэнергии на 54,8%, что составляло 4 млрд 411,3 млн квт*ч, по сравнению с 2014 г. до 3 млрд 641,6 млн квт*ч (otchet, attachmen 2.2.4, 2016). такая ситуация сложилась главным образом из-за прекращения поставок электрической энергии в молдову и республики беларусь с конца осени 2014 г., что было обусловлено острым дефицитом энергетического угля. кроме того, с целью сбалансирования работы оэс украины в условиях дефицита топлива и гидроресурсов по состоянию на начало 2015 г. был ограничен экспортный потенциал «бурштынского острова», через который осуществляется экспорт электроэнергии в страны ес (ekonomika. energetika, 2015). в 2016 г. украина увеличила экспорт электроэнергии на 11% по сравнению с 2015 г. на протяжении 2015-2016 гг. экспорт осуществлялся в страны entso-e. оценивая недостатки и преимущества внедрения конкретных направлений совершенствования системы регулирования современных энергорынков, целесообразно взвешивать внутренние условия и соотношение долей электроэнергии, поступающей в оэс от различных типов электростанций с учетом динамики их внутриструктурных трансформаций. традиционно для украинской оэс стратегически формирующей основой остается атомная энергия, которая в количественном выражении по результатам 2016 г. составила более половины всей генерации. при этом необходимо отметить, что важным фактом стало уменьшение доли электроэнергии, производимой аэс, в структуре всей отпущенной электроэнергии в орэ при общем уменьшении производства. так, в 2016 г. всеми электростанциями рис. 1. динамика изменения структуры генерации электроэнергии в украине источник: otchet o rezultatah deyatelnosti natsionalnoy komissii, osuschestvlyayuschey gosudarstvennoe regulirovanie v sferah energetiki i kommunalnyih uslug , v 2016 godu baltic journal of economic studies 61 vol. 3, no. 2, 2017 страны было сгенерировано электрической энергии на 1,9% меньше, чем в 2015 г. при сокращении доли «атомной» энергии с 56,9% в 2015 г. до 53,9% в 2016 г. (otchet, attachmen 2.3.8; 2.3.10, 2016). 3. актуальные вопросы и релевантные задачи прогнозирования работы рынков электрической энергии эффективность государственного регулирования деятельности субъектов рынка электрической энергии зависит от анализа структуры генерации и потребления данного товара и должна не только учитывать факторы, которые определяют системные изменения и поведение участников рынка, но и проводить мониторинг их влияния на внутренние закономерности и взаимодействие с взаимосвязанными институтами в плоскости аналогичных отраслевых проблем на макроуровне. то есть, актуальным остается вопрос идентификации и применения действенных методов и моделей в реальных условиях функционирования энергорынка, что будет способствовать налаживанию механизма государственного регулирования хозяйственной деятельности его субъектов с учетом колебаний и нестабильности внешней среды. анализ последних исследований и публикаций. проблематика построения стратегических планов и выбора наиболее эффективной комбинации инструментов с целью осуществления перспективного анализа функционирования мировых энергорынков, выделения отдельных аспектов и определения закономерностей влияния государственных решений на социально-экономические и внутриотраслевые процессы, которые основываются на результатах разработанных прогнозов, широко раскрыта в исследованиях отечественных ученых. наиболее значительных достижений в этой сфере добились в своих работах: grachova, 2013, danilov, leonenkov, 2005, muratova, 2009, tihonov, 2006 и др. так, грачева е. и. (grachova, 2013) использует регрессионный анализ при определении и прогнозировании потерь электроэнергии при ее транспортировке с целью повышения точности расчетов. в рамках данного подхода автором была построена вероятностно-статистическая модель, которая позволяет учитывать динамику изменений электрических сетей путем увеличения количества описательных характеристик, обусловливает роль первых при многократном использовании. изучению проблем планирования и прогнозирования работы рынков электрической энергии, мощности и вспомогательных услуг с применением различных методов и эконометрических моделей, а также регулирования и координации поведения участников таких рынков посвящено много научных трудов зарубежных авторов, среди которых: catalão, 2005, 2007, cuaresma, 2004, c. fezzi 2007, kristiansen, 2012, mazengia, 2008, murthy, 2014, szkuta, 1999 и др. необходимо отметить, что моделирование цен в сфере электроэнергетики  – одно из наиболее распространенных направлений прогнозирования показателей функционирования мировых энергорынков (cuaresma, 2004; draper & smith, 1981; escribano, pẽna, & villaplana, 2002; jingfei yang, 2006; kristiansen, 2012; nan, 2009; panagiotelis & smith, 2008). в частности, авторы работы (cuaresma, 2004) подчеркивают, что лучшие результаты и точность прогнозов при моделировании стратегий повременного учета электрической энергии по спотовым ценам обеспечивают линейные одномерные модели временных рядов. автор в работе (kristiansen, 2012) раскрывает алгоритм и доказывает эффективность применения регрессионных и авторегрессионных моделей с определением величины средней абсолютной ошибки при анализе и прогнозировании почасовой цены на электроэнергию, которая формируется на рынке nord pool. практическое применение метода искусственных нейронных сетей при построении прогнозов ценового выражения и оценке потребления электроэнергии освещены исследователями в работе (szkuta, 1999). учитывая степень раскрытия перечисленных проблем в научно-экономической литературе, необходимо отметить, что комплекс вопросов, связанных с методикой воспроизведения регулирующей функции государства в контексте взаимоотношений участников энергорынка, требует дальнейшего рассмотрения. целью статьи выступает систематизация методического инструментария составления планов и прогнозов экономических процессов, обзор ключевых вопросов и анализ теоретических аспектов применения метода корреляционно-регрессионного анализа для выявления факторов, которые оказывают наибольшее влияние на структуру электроэнергетики, что позволит увеличить степень конкретизации и обоснованности дальнейших исследований в области методики и рычагов государственного регулирования взаимоотношений субъектов электроэнергетического рынка. 4. теоретические основы моделирования взаимоотношений субъектов энергорынка как фундамент построения практического прогностического инструментария в области государственного регулирования под государственным прогнозированием социально-экономического развития понимают научно обоснованное предвидение приоритетных направлений и векторов развития страны, отдельных отраслей экономики или административно-территориальных единиц, возможного состояния экономики и социbaltic journal of economic studies 62 vol. 3, no. 2, 2017 альной сферы в перспективе, а также определение альтернативных путей и сроков достижения обозначенных параметров социально-экономического развития (zin, 2007). экспериментальные исследования процессов на рынке электрической энергии получили широкое распространение на различных этапах становления взаимоотношений его субъектов: от разработки стратегий обновления отдельных секторов электроэнергетики до проектирования и фактической эксплуатации электроэнергетической инфраструктуры. математическая обработка массивов текущей информации обусловливает необходимость подбора эмпирических формул, которые позволят установить связь динамики одного параметра с другим. в настоящее время насчитывается более ста классов моделей, предназначенных для прогнозирования. количество общих классов моделей, которые повторяются в разных вариациях, меньше. одна часть моделей и и соответствующие им методы образуют комплекс отдельных процедур прогнозирования; другая часть представляет собой набор определенных приемов, которые отличаются от базовых или друг от друга количеством частных способов и последовательностью их применения (tihonov, 2006). процессы дерегуляции, которые происходят в последние годы на значительной части рынков электрической энергии по всему миру, обусловливают возрастание роли моделирующих инструментов при составлении операционных и стратегических прогнозов их функционирования. деятельность участников энергорынков изучается с помощью многочисленных моделей, которые охватывают как линейные временные ряды и многофакторные регрессионные модели, так и комплексные нелинейные модели. однако, опыт построения прогнозов свидетельствует о применении на практике смешанных подходов к моделированию (nan, 2009). критериями обеспечения точности прогнозов могут выступать различные факторы, к ключевым из них относятся: специфика модели, алгоритм реализации и прогнозный период (nan, 2009). наиболее часто в научной литературе, посвященной анализу процессов, происходящих на электроэнергетических рынках, по временному признаку прогнозирование делят на долго-, среднеи краткосрочное. так, при составлении прогнозов в ценовой плоскости формирования взаимоотношений между участниками рынка выделяют три вида прогнозирования, которые представлены на рис. 2 (murthy, 2014). на основе аналитического обзора научных работ авторов в области моделирования (grachova, 2013, danilov, leonenkov, 2005, muratova, (2005), zin, 2007) были систематизированы методы прогнозирования и планирования, широко применяемые в исследовании социально-экономических явлений и процессов. их классификация представлена на рис. 3. формализованные, или математические методы прогнозирования основаны на получении количественных результатов вычислений, используемых при решении хорошо структурированных и частично слабоструктурированных проблем для оценки вариантов решений, выбора и обоснования наиболее оптимального из них. неформализованные методы, или эвристические применяются при решении сложных слабоструктурированных и неструктурированных проблем для генерирования вариантов решений, их анализа и оценки с целью выбора и обоснования наилучшего. на практике раскрытие многих вопросов, стоящих перед исследователями в различных отраслях экономики, требует установки и анализа соотношения между двумя и большим количеством переменных. для этих целей часто используют регрессионный анализ (draper, 1981). регрессия получает широкое распространение при решении задач прогнозирования и управления. целью регрессионного анализа выступает определение зависимости между исходной переменной и множеством внешних факторов (регрессоров). при этом коэффициенты регрессии могут быть определены по методу наименьших квадратов (далее  – мнк) или методом максимального правдоподобия (draper, 1981). рис. 2. характер прогнозирования в области ценовой политики формирования взаимоотношений субъектов рынка электрической энергии baltic journal of economic studies 63 vol. 3, no. 2, 2017 рис. 3. систематизация научных методов прогнозирования и планирования социально-экономических процессов примечание: составлено автором на основе (gonta, 2015, grachova, 2013, danilov, zin, 2007) к преимуществам таких моделей следует отнести простоту, гибкость, а также единый подход к их анализу и проектированию (draper, 1981). в частности, использование линейной регрессии позволяет получить результат прогнозирования значительно быстрее, чем при применении других моделей. кроме этого, преимуществом данного метода выступает прозрачность процесса моделирования (mazengia, 2008), что выражается в доступности для анализа всех промежуточных вычислений. среди недостатков линейных регрессионных моделей необходимо отметить низкую адаптивность и отсутствие возможности моделирования нелинейных процессов (catalão, 2007). при исследовании факторов, влияющих на структуру электроэнергетики государства, можно использовать несколько подходов, среди них наиболее распространенными выступают (kalyuzhnaja, 2015, korikov, 2005, surmin, 2003): дескриптивный – метод, позволяющий описательно определить факторы, которые оказывают наибольшее влияние на структуру всей электроэнергетики. в рамках этого подхода отрасль рассматривается как система; конструктивный  – направление, руководствуясь которым можно построить модель факторов влияния на структуру электроэнергетики страны как системы. то есть, структура данной отрасли будет определена как система на основе функционально-целевого подхода. данный объект исследования необходимо рассматривать как комплексную модель, состоящую из соответствующего перечня факторов развития электроэнергетики. кроме того, на конструктивный подход дает возможность определения и обоснования показателей, которые больше всего влияют на совершенствование работы отрасли. применение данных методик позволяет провести типологизацию элементов системы путем включения их в соответствующий тип с целью дальнейшего исследования. в основу конструктивного метода положена регрессионная (многофакторная) модель, на основе которой можно дать комплексную оценку факторам влияния на структуру электроэнергетики государства и определить наиболее значимые из них. регрессионный анализ проводится на основе построенного уравнения регрессии и позволяет оценить вклад каждой независимой переменной в вариацию исследуемой (прогнозируемой) зависимой переменной величины. основная задача регрессионного анализа заключается в определении влияния факторов на результативный показатель. для этого необходимо подобрать и обосновать уравнения связи, соответствующей характеру аналитической стохастической зависимости между исследуемыми признаками. уравнение регрессии показывает, как baltic journal of economic studies 64 vol. 3, no. 2, 2017 в среднем изменяется результативный признак (yx) под влиянием изменения факторных признаков (xi). цель государственного регулирования электроэнергетики, как составляющей макроэкономической политики в контексте структурно-отраслевой стратегии развития национальной экономики, определяется с помощью показателей, которые выступают индикаторами общего экономического состояния хозяйственных процессов в электроэнергетической сфере страны. одним из основных показателей макроуровня, который определяет структуру электроэнергетики и представляет результирующую оценки экономической деятельности субъектов электроэнергетического рынка, выступает количество произведенной электроэнергии для промышленных и бытовых целей. 5. выводы на основании проведенного обзора научной литературы доказано, что задача построения прогнозов приобретает высокую актуальность во многих предметных областях и выступает неотъемлемой компонентой повседневной работы современных социально-экономических систем. решение текущих и стратегических вопросов государственного регулирования и поиск информационно-аналитического обеспечения выполнения возложенных функций на аппарат регулирования требует применения прогностических методов и подходов для сохранения динамического развития рынка электрической энергии и соблюдения сбалансированности интересов всех его субъектов в условиях реформирования. дальнейшие исследования будут посвящены изучению особенностей применения корреляционно-регрессионного подхода для выявления ключевых факторов, определяющих результативный показатель – объемы производства электрической энергии в стране, y, а также анализу их взаимного влияния на основе результатов моделирования. references: otchet o rezultatah deyatelnosti natsionalnoy komissii, osuschestvlyayuschey gosudarstvennoe regulirovanie v sferah energetiki i kommunalnyih uslug, v 2016 godu [the report on the activity results of the of the national commission implementing state regulation in the energy and utilities sectors in 2016], utverzhden postanovleniem nkreku ot 30.03.2017 № 460. retriever from: http://www.nerc.gov.ua/data/filearch/catalog3/richnyi_zvit_ nkrekp_2016.pdf. – 292 p. ukrayina poky ne zbirayetsya vidnovlyuvaty eksport elektroenergiyi do bilorusi ta moldovy (2015) [ukraine is not going to resume electricity exports to belarus and moldova]. unian. ekonomika. energetika. retriever from: http://economics.unian.ua/energetics/1031690-ukrajina-poki-ne-zbiraetsya-vidnovlyuvati-eksportelektroenergiji-do-bilorusi-ta-moldovi.html. gonta, i. 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(1999). electricity price short-term forecasting using artificial neural networks. ieee trans. power syst., issue 14(3), pp. 851 857. анастасия колесниченко теоретические аспекты применения прогностического инструментария в области государственного регулирования взаимоотношений субъектов рынка электроэнергии аннотация. современные тенденции развития электроэнергетики в условиях нарастания концентрации капитала, информатизации экономики и повышения динамики движения значительных объемов денежных потоков требует перманентного анализа текущей ситуации и необходимой корректировки и/или модификации параметров регулирования энергорынков. задача построения прогнозов приобретает высокую актуальность во многих предметных областях и выступает неотъемлемой компонентой повседневной работы современных социально-экономических систем, одним из важнейших институтов которых выступают взаимоотношения субъектов рынка электрической энергии. целью данной статьи выступает исследование теоретической базы касательно адаптивного применения методов прогнозирования в области функционирования энергорынков. во избежание доминирования коммерческих интересов определенных групп участников энергорынка, появления ценовых перекосов на рынке, которые оказывают деструктивное воздействие на получение потенциальных выгод от внедрения конкурентных механизмов, ключом к поиску максимально эффективного и экономичного пути решения данных проблем выступает применение системного регулирования возникающих отклонений при достижении целевых ориентиров, особенно в условиях реформирования. формирование информационно-аналитического обеспечения выполнения возложенных функций на аппарат регулирования требует применения прогностических методов и подходов для сохранения динамического развития рынка электрической энергии и соблюдения сбалансированности интересов всех его субъектов в условиях реформирования. в статье использован ряд методов: классификации и систематизации при анализе научных методов прогнозирования и планирования социально-экономических процессов; логического обобщения при обзоре существующих методов моделирования и оценке их эффективности в области энергорынков; обосновано применение конструктивного подхода при исследовании факторов, влияющих на результирующий показатель моделирования. полученные теоретические и научно-прикладные результаты исследования позволяют сформировать необходимую теоретическую и методическую базу для усовершенствования инструментальной основы моделирования взаимоотношений субъектов рынка электрической энергии, которую можно использовать при прогнозировании в области регулирования явлений и процессов энергорынков. baltic journal of economic studies 169 vol. 7 no. 5, 2021 corresponding author: 1 private higher educational establishment-institute "ukrainian-american concordia university ", ukraine. e-mail: oleksandr.romanovskyi@uacu.edu.ua orcid: https://orcid.org/0000-0002-3618-2999 2 national pedagogical dragomanov university, ukraine. e-mail: yuliia.romanovska@uacu.edu.ua orcid: https://orcid.org/0000-0002-0207-3348 3 private higher educational establishment-institute "ukrainian-american concordia university ", ukraine. e-mail: internship_wiuu@hotmail.com orcid: https://orcid.org/0000-0003-3614-544x doi: https://doi.org/10.30525/2256-0742/2021-7-5-169-183 the impact of academic capitalism on the formation of innovation policies in higher education and science oleksandr romanovskyi1, yuliia romanovska2, oleksandra romanovska3 abstract. innovation policy in the field of higher education and science is one of the main components of the state socio-economic policy of social development and is aimed at creating favorable conditions for the market launch of new ideas created in this sphere. the purpose of the study is to analyze the decisive influence of academic capitalism on the formation of innovation policy in higher education and science, contributing to the creation of an innovative environment for transformational change in this sphere. the methodology of the research is based on an objective standardized approach to the analysis of factual data on the development and implementation of innovation policy in higher education systems and leading universities of the world, the latest published results of experiments, materials of scientific literature on innovation policy and innovation management. research results. the main directions of innovation policy of entrepreneurial university and innovation relations in the sphere of higher education and science are investigated. it is shown that innovative transformations in the sphere of higher education and science, as a rule, take place within the framework of the innovative policy determined by the leaders of this sphere. it is noted that innovation policy in higher education is a link between the policy of research and scientific (scientific and technical) activities, search and dissemination of knowledge, education and training of qualified specialists in the field of technological development, industrial policy and environmental policy. the authors studied the following: the types of activities promoted by innovation in higher education and innovative environment of this activity; the main directions and main components of innovative policy of entrepreneurial university; innovative relations in higher education and science; innovative environment; the importance of having the necessary competencies, their formation and development; internal and external sources of competencies for universities, etc. practical implications. the authors suggest that innovation policy in higher education is a link between the policy of research and scientific (scientific and technical) activities; search and dissemination of knowledge; education and training of qualified specialists – on the one hand, and technological development; industrial policy and environmental policy – on the other. this can be used in the creation of the theory and practice of innovation policy development in higher education. the article as a whole is devoted to the further development of the theoretical foundations of higher education innovatics. key words: academic capitalism; higher education innovatics; innovative policy; innovative environment; management of innovation activities. jel classification: a23, i21, i25, o31, o32 i. introduction numerous studies and scholarly literature provide useful information about the positive impact of academic capitalism on the socio-economic and sociohumanitarian spheres of human activity. analyzing the impact of academic capitalism on innovative transformational changes in higher education and science, on the development of academic or university entrepreneurship, and on the further promotion of innovation in higher education and science, it is baltic journal of economic studies 170 vol. 7 no. 5, 2021 necessary to investigate the impact of innovation policy on these processes. the authors devoted this article to the study of the main directions of innovation policy of entrepreneurial university and innovation relations in the sphere of higher education and science. the article considers innovative transformations in the sphere of higher education and science, which, as a rule, take place within the innovation policy determined by the leaders of this sphere. innovation policy in higher education is studied, which acts as a link between the policy of research and scientific (scientific and technical) activities, search and dissemination of knowledge, education, training of qualified specialists in the development of technology, industrial policy, environmental policy. the object of the study is the activity promoted by innovation in higher education and innovative environment of this activity; the main directions and main components of the innovation policy of the university of entrepreneurship; innovative relations in higher education and science, as well as innovative environment. the important tasks of innovation policy are determined by the availability of necessary competences, their formation and development. internal and external sources of competencies for universities, etc. are considered. consider some publications that contain the fundamentals of the theory of academic capitalism, theory of innovation, innovation management, academic or university entrepreneurship, innovation activity, innovation policy, innovation environment – the main factors of innovation management in higher education and innovation transformation of science. these works formed the basis of the theory and practice of the interdisciplinary direction of higher education innovatiсs (romanovskyi & romanovska, 2020). according to s. slaughter and l. leslie, the essence of "academic capitalism" is the transformation of research and teaching into a kind of entrepreneurship: the implementation of research projects depends directly on receiving cash subsidies from individual corporations (slaughter & leslie, 1997). "academic capitalism" sets new directions for the development of modern higher education and manifests itself at three levels: institutional, departmental, and individual. academic capitalism at the institutional level is realized against the background of changes in the financing of higher education institutions, the reduction of state funding and the need to find sources of additional funds. the study of academic capitalism at the department level is of interest because it is where a variety of activities take place and staff members adapt to new values. at the individual level, within academic capitalism, there is a redefinition of the distribution of time between the core activities of faculty: teaching, research, service (leslie, oaxaca & rhoades, 2001). in its essence, the environment of academic capitalism, which has embraced the sphere of higher education and science (as well as all other social, social and humanitarian spheres of human activity) by market and market-like relations, is also a new phenomenon in the general system of capitalism. it was in the environment of academic capitalism that the powerful innovative development of both the socialhumanitarian and industrial spheres of human activity began. the acceleration of innovation gave rise to the digital revolution and has become the objective reality of today 's globalized world. a complete description of innovation processes was made by j. schumpeter: he analyzed "new combinations" of changes in the development of economic systems. he added a definition of innovation as "new combinations" of new or existing knowledge, resources, equipment, and so on (schumpeter, 1934, p. 65). also j. schumpeter and g. mensch introduced the term "innovation," which was defined as the translation of a scientific discovery into a new technology or product (schumpeter, 1976; mensch, 1979). a number of works are devoted to the definition of the concept of "innovation" (for example: baregheh, rowley, & sambrook, 2009; edison, ali, & torkar, 2014; rogers, 2003; drucker, 2002), etc. the theoretical foundations of innovation, innovative development, and innovation management, include the 2006–2016 global study of innovation management in the book (the quest for innovation, 2006), in the article (chen, viardot, & brem, 2019), and in the works of l. bouwer (bouwer, 2015; 2017). in his comprehensive book f. damanpour synthesizes the research of the last 50 years in the field of innovation, reviewing the basic elements of innovation and providing an interconnected perspective on innovation in organizations. the author provides an overview of key concepts, terms and theory, explores processes of generation and adoption of technological and non-technological innovations, examines innovation activities and internal mechanisms and procedures in organizations (damanpour, 2020). this research is based on the following conceptual foundations of innovative development of higher education: – h. etzkowitz's concept of innovative development of society by the triple helix model (etzkowitz, 2003; 2008; 2019; viale & etzkowitz, 2010; dzisah & etzkowitz, 2012; cadorin et al., 2019), which is successfully used in many developed countries (usa, uk, canada, australia, japan, germany, sweden and many other countries of the eu) and in the developing world (china, russia, brazil, some other south american countries, etc.); baltic journal of economic studies 171 vol. 7 no. 5, 2021 – b. clark's concept of transforming conventional universities into innovative universities focused on internal entrepreneurial activity (business universities) (clark, 1998; 2000; 2004), which has been confirmed in the higher education systems of many countries of different continents (north and south america, the usa, western europe, japan, africa). – the innovation policy platform (ipp), developed by the world bank group and the organization for economic cooperation and development, is an interactive web-based space that provides easy access to knowledge, learning resources, indicators, and communities for innovation policy design, implementation, and evaluation. the platform helps users learn how innovation systems work, identify best practices in different countries, conduct statistical comparative analysis, and develop and implement effective policy solutions. more broadly, it facilitates knowledge sharing and cooperation between countries and regions (the innovation policy platform, 2013). for more than 50 years, the sphere of higher education and science has been subject to various innovative changes, the direction of which depends on the goals set by innovators. since practically all areas of social, economic and social-humanitarian activity of mankind are connected with the sphere of higher education and science, it is reasonable to investigate, identify and group innovations according to the spheres of application and the tasks set before them. 2. analysis of recent studies and publications among recent publications devoted to innovation in higher education, the following works seem interesting. in "innovation in higher education; will there be a role for ‘the academe/university’ in 2025?" eddie blass and peter hayward present five scenarios for the future of higher education based on factors such as funding, ownership and use of "research", ensuring good "teaching," and the potential missing link: developing social innovation. the authors emphasize that by refocusing on fostering social innovation, the university can find a new means of adding value to society that will sustain it after 2025 (blass, & hayward, 2014). in his article, dustin swanger examines the current state of higher education and the pressures facing colleges. he also explores innovation and some of the challenges facing innovation in higher education, as well as some successes. the article recommends some changes that can be implemented on any campus to improve outcomes and efficiency (swanger, 2016). p. serdyukov's article is devoted to the problem of innovation in american higher education. analyzing the publications of american specialists in the field of higher education and innovation, studying the real situation with the use of innovation in higher education institutions, he notes the following (serdyukov, 2017). unbundling is the process by which products previously sold together are separated into their component parts. in (mccowan, 2017), the author argues that there has been a dynamic separation of teaching and research in higher education. this dynamic has been primarily financially motivated and driven by the for-profit sector, but has also had a pedagogical motivation in the form of an emphasis on personalization and employability. this article presents a theoretical analysis of this trend and proposes new conceptual tools with which to chart the regulatory implications. the article ( jakovljevic, 2018) deals with institutional innovation and some models of innovation in higher education. the author concludes that modern research on innovation informs us about the models and nature of innovation and their main facets: a) tar model; b) stakeholder model; c) structural model; d) structured governance models and e) triple helix and quadruple helix innovation models. in the book (branch, hørsted, & nygaard, 2018) presents key examples of innovative teaching and learning practices in higher education. the book is truly international, with contributions from australia, england, denmark, hong kong, italy, qatar, scotland, south africa, tasmania, vietnam, and the united states. although the educational settings in these countries are very different, there are striking similarities in approaches to innovative teaching and learning. the following works ( jessop, 2018; somers et al., 2018; münch, 2020) are devoted to a critical study of the problems of academic capitalism. the oecd's mission-oriented innovation policies (moip) is an online toolkit that provides an easyto-follow guide to help policymakers develop and implement mission-oriented innovation policies. " with the support of policymakers and through partnerships with individual institutions, the toolkit is intended to be a reference platform for all those who develop, implement or research and advise on mission-driven innovation policies. faced with growing societal challenges of unprecedented scale and scope, several governments are experimenting with a new policy approach of pooling effort, resources, and knowledge across disciplinary, sectoral, and political blocs to collectively address clear, bold, and inspiring goals. building on the lessons learned from these early experiments, this online policy toolkit is designed to provide policymakers with analytical knowledge and practical information on designing, managing, and implementing moip initiatives" (mission-oriented innovation policies, 2020). the author of the following paper, s. otten concludes that it is generally agreed that innovative and inclusive approaches to policy development include the baltic journal of economic studies 172 vol. 7 no. 5, 2021 following methodologies, such as: a) collaborative design with stakeholders; b) user/customer-centered design – an iterative design process in which users and their needs are central to each stage; c) design thinking – a methodology of discovery/design/ prototyping/testing/repetition; d) understanding the customer journey from start to finish, including pain points; e) public interaction – open communication with citizens and stakeholders; f ) seeking and considering different opinions and experiences. these points are closely related to the others, and there is quite a bit of overlap. they have quite a bit to do with maintaining the role of the user in the process, stakeholder collaboration, and community engagement (otten, 2018). the author analyzes the experience of innovation policy development in countries such as australia, denmark, mexico, new zealand, singapore and the united kingdom. 3. purpose of the article the aim of the study is to analyze the decisive influence of academic capitalism on the formation of innovation policy in higher education and science, contributing to the creation of an innovative environment for transformational change in this sphere. this study is also a further development of the theory and practice of university innovation, defining the tasks, directions and features of innovative transformations in higher education and science. an important issue of the study is the effective organization of management in the field of innovation transformation, innovation policy and innovation relations in the subjects of higher education and science – universities and research institutes. 4. research methods and methodology the authors used the following research methods: – dialectical approach to analyzing and understanding the content and features of innovative development of higher education under the influence of market relations of academic capitalism and university entrepreneurship; – analysis of innovative transformations as economic categories in the system of socio-economic relations and interrelations of the integral economic system of the modern knowledge society; – methods of abstraction, system-structural and information-theoretical approaches are used to study the conditions for the formation of new innovative forms of university entrepreneurship, the features and essence of entrepreneurial activity of the university; – a critical study of the impact of innovation transformation and academic entrepreneurship on the financial sustainability of higher education institutions; – methods of analysis and synthesis are used to study various innovative approaches and technologies in higher education and form a complete picture of the complex innovative activities of subjects, objects and the higher education system as a whole. the methodology of the research is based on an objective standardized approach to the analysis of factual data on the development and implementation of innovation policy in higher education systems and leading universities of the world, the latest published results of experiments, materials of scientific literature on innovation policy and innovation management. the research methodology includes: – methods of empirical research of innovations in higher education, (including observation, experiment, comparison, measurement and comparison); – statistical methods of scientific description and study of various innovative phenomena in the system of higher education that allow quantitative (numerical) expression; – critical examination and awareness of the concept of innovation in higher education; – analysis of literary sources, including electronic and computer-based tools; comparison and verification of the feasibility or necessity of implementing various types of innovation, analysis of their effectiveness and the possibility of spreading and implementation on objects and subjects of higher education system; forecasting ways of forming new innovation policy, innovative approaches, methods and technologies; integration of research results and the formation of scientific-theoretical, methodological and practical provisions of the new direction – innovation of higher education. 5. presentation of the main research material innovatics of higher education is a branch of knowledge aimed at the study, creation of explanation and effective implementation of innovations in higher education and science. the authors will consider the main results of the study of innovation policy in higher education and science and directions of its implementation. further development of the sphere of higher education and science directly depends on the quality of innovation policy and intensity of innovation in this area. the main role is played by the human factor, which creates an innovative environment and uses the necessary innovative technologies, methods, techniques and approaches. analyzing the publications on this topic, the article (cai & qiongqiong, 2020) addresses some issues of innovation policy of higher education and university leaders in the process of building innovation ecosystems as an environment for the development of higher education and science. baltic journal of economic studies 173 vol. 7 no. 5, 2021 the work (borrás & edquist, 2015) on how governments and leaders pay (and should pay) attention to building competencies (including education, training, skills, and practical experience) when designing and implementing innovation policies is significant. the article proposes a typology of internal and external, individual and organizational sources of innovation-related competencies. this is necessary to examine the most common initiatives taken by governments in this direction. the paper identifies three common weaknesses and imbalances in innovation systems in terms of education, training, and skills: a) insufficient levels of competencies in the system; b) the time lag between the short-term needs of firms for specific competencies; c) the long time required to develop them, and the imbalance between internal and external sources of competencies in firms. the authors developed a set of general criteria for restructuring policy instruments to address these tensions and imbalances. in (tierney & lanford, 2016), the authors believe that higher education in the 21st century faces global forces that require innovative research, innovative pedagogy, and innovative organizational structures. a theoretical understanding of innovation is essential to the continued development of higher education and science. the authors outline such a conceptual framework based on the innovative literature in various academic disciplines. thus, there are four inevitable trends in higher education that can lead to innovative responses. working definitions of creativity, innovation, and entrepreneurship are given by clarifying a number of terms related to innovation. the concepts of sustained and disruptive innovation are discussed. this shows that change and innovation have been a constant feature of higher education since its inception. three aspects of innovation are considered – diversity, intrinsic motivation, and autonomy. these aspects have a positive impact on the ability of people in higher education to innovate. three complementary concepts – time, efficiency, and trust – are then examined, which are important for scrutinizing innovation in an institutional setting. further, turning to the united states, there is evidence that the american system of higher education is considered an important factor in national economic, scientific, and social progress. more than four thousand public and private institutions of higher education, awarding degrees and professional qualifications, significantly improve the quality of their educational and scientific activities, using innovative technologies, methods, techniques, approaches and solutions. due to the increasing complexity of production processes in all spheres of human activity, the demand for higher, vocational and specialized technical education is constantly growing. according to experts published before the covid-19 pandemic, the number of full-time students is expected to reach more than 23 million by 2025 (brewer & shirley, 2017). over the past 20 years, growth in college enrollment has come mainly from non-traditional students (i.e., those who did not attend college right out of high school and those who do not attend college full-time), who now make up about 40 percent of all students. the serious problem of expanding access comes after decades of skyrocketing tuition fees. the reasons for these increases range from unprecedented competition for outstanding faculty and talented students to a bloated administrative apparatus, changing students' tastes and status from diligent consumers of knowledge to market consumers demanding more services, and declining teaching loads of full-time faculty. despite rising student tuition revenues, many colleges and universities are under severe financial pressure as operating costs rise faster and government support for public institutions declines. in this sector, innovation is critical to meet u.s. needs in the coming years. innovation in u.s. higher education can be defined as the introduction of new methods and practices to improve production efficiency (brewer & tierney, 2011). for most teaching and learning-oriented sectors, this means recruiting students and providing them with opportunities to earn a degree (ultimately, in the hope of producing productive and successful citizens) that result from some process of learning combined with a range of operational support services. innovation is possible with both instructional and operational support and involves creativity, risk-taking, and experimentation at the institutional level. innovation by an institution of higher education or other organization depends on a number of factors, including the availability of new technological capabilities and the market and social context in which they operate. labor-intensive industries are innovating using a number of approaches, including a) the use of information technology; b) different work strategies, such as greater job differentiation, use of contingent workers and creative compensation schemes; c) re-engineering key processes, such as through subcontracting; and d) a focus on the core mission and separation of supporting activities. federal policy plays a crucial role in driving innovation in higher education through levels of funding and regulation, as well as a broader regulatory environment that affects learning and operations. the authors made recommendations in three main areas: redesigning student financial aid, creating regulatory frameworks that facilitate institutional experimentation, and creating new designs for broader implementation (brewer & shirley, 2017). analyzing data from many scientific sources and summarizing the results of their own research, the authors propose to consider the activities promoted baltic journal of economic studies 174 vol. 7 no. 5, 2021 by higher education innovatics (romanovskyi, romanovska & romanovska, 2021) and the innovative environment of these activities (figure 1). all of the activities promoted by higher education innovatics take place in such an innovative environment: one of the tools of innovation management in the sphere of higher education and science is the innovation policy (innovation policy). as it is known, the innovation policy is the state policy directed on control and maintenance of balance between the rights of owners of the information and necessity of innovations and technical progress. on the other hand, innovation policy is a link between the policy of research and technological development and industrial policy. it aims to create favorable conditions for bringing ideas to market. the authors suggest that innovation policy in higher education is a link between the policies of a) research and scientific (scientific and technical) activities; b) search and dissemination of knowledge; c) education and training of qualified specialists – on the one hand, and d) technological development; e) industrial policy and f ) environmental policy – on the other. in general, innovation policy in the sphere of higher education is one of the main components of the state socio-economic policy of society development and is aimed at creating favorable conditions for the introduction of new ideas created in this sphere to the market. innovation systems are divided into national innovation systems, regional innovation systems, local innovation systems, technological innovation systems and sectoral innovation systems. at that, the following levels can be considered: state; branch (sphere of higher education and science); regional or local; subjects of branch subordination (universities, colleges, various educational institutions or scientific institutions, other organizations of higher education and science system, etc.). o. granstrand and m. holgersson define the innovation system as "a set of components and causal relationships that influence the creation and use of innovation and innovation activities" (granstrand & holgersson, 2020). when considering a university or research institute, it is necessary to distinguish between external and internal innovation policies. external innovation policy is a joint, team-coordinated line of behavior of a university or research institute in the market of educational and scientific services, defining priority innovative projects and leading to an increase in the level of development of the university or research institute. internal innovative policy is a regulation of behavior of the personnel directed on innovative type of development of university (research institute). the essence of personnel behavior is determined by relations that develop between employees in the innovative sphere of university or research institute activity. in general, the innovation policy of higher education institution or research institute is a guide to the choice of priority areas of the innovation process, development and implementation of innovative plans and projects, formation of the necessary relations between employees in the university (research institute). by its type the innovation policy of higher education institution or research institute can be different: narrowing (reduction); stable functioning; growth (expansion). the policy of contraction (reduction), steady functioning or growth (expansion) is based on an analysis of the goals of the university or research institute, which are defined as the specific end state (final position) of the university or research institute, or the desired result. in determining the purpose decrease (reduction) of the final state (position) of the university or research innovative environment in the sphere of higher education innovatics internal and external innovation relationships innovative microclimate/ innovative aura competency building (including: education, training, skills and practical experience), with a special focus on academic (university) entrepreneurship and business competencies innovative individual and corporate culture innovative policy innovative thinking, consciousness, and behavior, including business qualities, entrepreneurial mentality, knowledge, skills, and experience innovation ecosystem figure 1. innovative environment in the sphere of higher education innovatics baltic journal of economic studies 175 vol. 7 no. 5, 2021 institute is seen in the maintenance, preservation of the production of scientific and educational services, the share of the mastered market of such services, wages and number of employees or in a gradual slowdown in the growth of scientific and educational services, hoping for the opportunity of promotion in the future. the goals of contraction (reduction) are chosen by universities and research institutes working under unfavorable conditions. investments in innovative projects in this case are either absent or incidental. this is the policy of survival. innovative policy of stable functioning provides for comprehensive improvement and enhancement of the quality of educational and scientific activities through the introduction of innovative methods and technologies. at the same time there are no plans to increase or decrease the volume of statutory activities. growth (expansion) goals imply a positive trend, the difference between them depends on their content, and they can be aimed at: – achieving a high level of educational, scientific, methodological and technological development, which is manifested in the state of the implemented educational and scientific processes and learning technologies – in the degree of their novelty, quality, efficiency, productivity, progressiveness; – achieving a high level of economic development of the university or research institute, which is manifested in an increase in the competitiveness of educational and scientific products and services, increasing market share, expanding volumes, improving financial results and financial condition; – achieving a high level of social development of the university or research institute, which is manifested in the socialization of the results of activities and increasing the role of the individual – the humanization of the management process. investments in innovations in the framework of growth policy are regular and have a clear direction, which characterizes the innovation policy. innovative growth policy is characterized by external (socialization of activity results) and internal (humanization of management process) social orientation. the policy of innovative growth can be extensive or intensive, risky or moderate, and allow the use of alternative sources of funding and investment. the main principles of the external innovation policy of the sphere of higher education and science and its structural subdivisions (universities and research institutes) are: – the unity of scientific and educational processes, administrative and managerial activities and their focus on the economic, social and spiritual development of society; – optimal combination of state regulation and budgetary financial support with self-government and means of self-sufficiency; – formation of innovative projects in priority areas of research, defined by state and regional innovation and scientific-technical policy; – support of leading scientists, scientific teams, research and scientific-pedagogical schools, capable of providing the advanced level of education and scientific research, development of scientific and technical creativity of young people; – conducting a full cycle of research and development, ending with the introduction of ready-made services and products, the formation of start-ups (spin-off and spin-out); – support of entrepreneurial activity in the scientific sphere, broad commercialization of r&d results; – internationalization of education, followed by the integration of science and education into the international community; – formation of network structures in the organization of innovative and scientific and technical activities; formation of the world base of scientific knowledge. internal innovation policy should be formed and implemented on the basis of the following principles: – continuous development of the innovative capacity of the university or research institute required to implement innovations; – comprehensive implementation of innovations, in which all types of innovations are closely interrelated and mutually contribute to each other; – creation of a structural unit responsible for the formation and implementation of innovation policy and strategy; – mobilization of personnel, maximum use of financial, material and intellectual resources to implement innovations; – material, moral and social encouragement of innovation activity; – risk accounting and assessment. innovation policy of entrepreneurial university, as a tool for managing its development, is a decisive factor of innovation activity, one of the important elements of the innovation process in the university, research institutes, etc. this policy should contribute to the disclosure of innovative potential, the creation of innovative-active, effective behavior of the personnel. the innovation policy of entrepreneurial university should take into account the peculiarities of the activity of an educational institution focused on academic entrepreneurship. the main components of the innovation policy of entrepreneurial university are: 1. environment: – external-favorable, neutral, unfavorable: regional (municipal) level; national level; international level; – internal. 2. the goal of university development: – narrowing (decreasing); – growth (expansion): extensive; intensive. baltic journal of economic studies 176 vol. 7 no. 5, 2021 3. the attitude to risk: – risky; – moderate (moderate). 4. field of activity: – educational; – scientific (scientific and technical); – cultural and educational activities; – administrative and managerial support; – financial; – academic and entrepreneurial; – related business (provision of various paid services); – economic, commercial, auxiliary, and other types of university activities; – sports, leisure, everyday life, extracurricular activities of the university. 5. the nature of innovation selection: – selective; – indicative; – comprehensive. 6. sources of funding for universities: – budget; – extra-budgetary; – your own; – multi-channel system for finding, attracting and accumulating funds. 7. the method of forming the innovation policy of universities: – traditional; – intuitive; – scientifically based. 8. the nature of the implementation of the innovation policy of universities: – stable; – unstable. 9. the degree of entrepreneurship implementation: – low (medium); – high. 10. expected results of the implementation of the innovation policy of universities: – innovative development of higher education institutions; – innovative development of the region; – local, regional and national economic growth. external and internal policy of universities is under stood in the same way as for enterprises (organizations). the peculiarity of modern external innovation policy of the university is the introduction of the best foreign experience of the world's leading universities in international education, internationalization of higher education, the introduction of distance learning, partnerships with foreign universities and exchange them with students and faculty. the same applies to exchanges with entrepreneurial universities. extensive innovation policy is a policy of change in the direction of quantitative development of certain characteristics of universities that are amenable to innovation. intensive innovation policy is a policy of change in the direction of qualitative improvement of relevant characteristics. in terms of risk, universities are characterized by a moderate innovation policy. given the specifics of universities, risk taking can only take place in scientific activities (research and implementation of the results of the latest scientific and technological developments and technologies). but the university needs to develop a risk management program. among risk management methods, preference should be given to risk insurance and the distribution of responsibility of the participants (main executors) of the innovation project. indicative innovation policy means that the university should develop in accordance with civil and public indicators (standards, norms) established by society. selective innovation policy means development in priority directions, determined by external innovation and industrial policy of the state and the region. traditional approach to the formation of innovation policy means that it does not take into account the requirements of the external environment, qualitative changes in the internal environment, the level of development of the university itself. intuitive approach implies the development of innovation policy by one person on the basis of intuitive feelings. scientifically grounded innovation policy is a collective social process of improving the activities of universities based on established traditions, best international practices, trends in the development of the university and the country with the obligatory consideration of national peculiarities. the innovation policy of an entrepreneurial university may include the following main directions: – educational (organization of the educational process, provision of statutory educational services, development of educational technologies, organization of methodological work, etc.); – scientific, research and technology (organization of scientific research in priority areas of science and technology, automation and informatization of all spheres of university activities, implementation of design work, development of new equipment and high technology); – cultural and educational (children's upbringing, education, parental, cultural and educational work with students, organization of social and humanitarian and socially useful activities of students and teachers, patronage of schools, participation in charitable projects, etc.) – administrative and managerial (making administrative and managerial decisions at different levels of university management: rectorate → deans → departments → executors; councils → implementation of council decisions); baltic journal of economic studies 177 vol. 7 no. 5, 2021 – financial (new forms of use of financial savings; expansion of sources of financial resources, funds; new methods and measures to preserve and increase the financial resources of the university); – academic-entrepreneurial (patent and licensing activities, technology transfer and dissemination of new knowledge, commercialization of r&d results, creation of new technologies and startups); – economic (administrative and economic activities), commercial (obtaining additional income through: commercial use of real estate and material and technical means of the university; the organization on commercial terms related and additional educational and scientific services, professional advice and expertise; provision of premises and equipment for forums, conferences, seminars on lease terms; production and sale of university souvenirs; organization on contractual terms of publishing activities for internal and external customers, etc.), auxiliary and other (by type of university activities); – sports (organization of sports competitions, leisure time of students and teachers, strengthening health and improving the lives of students and lecturers); – cooperation with the "outer world" (business contacts with customers and consumers of educational and scientific services, commercialized r&d results, representatives of the state (government), industry (business), presence in the markets of educational and scientific services, participation in competition with other universities and scientific (research) institutes); – extracurricular activities of the university (organization of various competitions, cultural events, humanitarian and international programs). budgetary innovation policy is a policy that is fully financed from the budget of all levels: state, regional, municipal. extrabudgetary innovation policy is financed at the expense of financial resources of extrabudgetary funds, firms, enterprises, organizations and institutions, population, sponsors, foreign sources. having its own funding, the university carries out innovative activities at the expense of earned funds (financial resources). multichannel innovation policy assumes that funding comes from all of the above sources, financial resources (loans) of banks can also be attracted. by the nature of the implementation of innovation policy can be stable, that is implemented in accordance with the adopted program and plans for innovation, or unstable, that is implemented to the extent of objective and subjective necessity. innovation policy can be based on low (average) or high degree of implementation of entrepreneurship in higher education institutions. budget (state, municipal) higher educational institutions with substantial state support can afford to use only some types of entrepreneurship (marketing, advertising, search for customers of educational and scientific services and potential employers for graduates). for private educational institutions entrepreneurship is the main tool for the implementation of statutory activities. in practice, it is possible to conduct an external intensive, moderate degree of sustainability of innovation policy, based on multi-channel (multiresource) model of financing and effective statutory entrepreneurial activity. the internal policy should correspond to the external one. otherwise, the university will not only fail to develop, but may even cease its activities. it is expected that the results of the implementation of innovation policy of universities can be both internal innovative development of universities and innovative development of the region, local, regional and national economic growth. innovation in industry (business) can be implemented through the transfer of innovative technologies, the transfer (transplantation) of new industries, the opening of new firms and companies (start-ups), the improvement and innovative transformation of existing industrial facilities and so on. along with excellence in academic entrepreneurship to commercialize r&d results, innovative development at the local, regional and national levels is a significant contribution of universities to the social and economic improvement of society. any process corresponds to certain relations developing between its participants. innovation policy is characterized by innovative relations, which must be implemented by the subjects and objects of management. the subject of managerial relations is an active link, influencing these relations; the object of managerial relations is a passive part of relations, perceives influence and is subjected to it. in this sense, any subject (carrier) of managerial relations is both active and passive in one way or another. the subjects (carriers) of innovative relations of higher education are all members of society, social groups, social structures connected in one way or another with the sphere of education, science and production. they can be individual and associated (collective). the university can also act as a subject and object of interaction with the external environment at the macro-, mesoand micro-levels (in terms of innovative attitude to the environment and the importance of action, as well as on the spatial scale and the effect of action). from the point of view of macroeconomics, universities themselves, being the institutional links of the formal education system, can also act as subjects of innovative relations. at the same time they act as objects of management. the university can act as an economic entity in the research and production complex, in the regional educational system, in the system of continuing education, entering into both internal (intra-university, intra-institutional, baltic journal of economic studies 178 vol. 7 no. 5, 2021 intracorporate) and external management relations with the external environment. at the micro level the subjects of innovative actions are heads of universities – structural subdivision responsible for innovation policy. the objects of management are, on the one hand, innovative activity, on the other hand, the entire team of the university. actually, innovative relations arise between people regarding the formation and implementation of innovations. in this case, the processes associated with the production and recreation of the new (new knowledge, new products or services, new managerial combinations, new social relations) or simply with the introduction of changes to the already known, existing, must not be spontaneous, unconscious, but necessarily consciously put on a scientific basis and have the character of specialization. from this point on, when innovative relations become such that they are constantly reproduced, we can talk about a special type of managerial relations – innovative relations, which are present in any sphere of human life, including higher education and science. in higher education there are innovative relations of both objective and subjective nature (figure 2). they are realized through the interests of subjects and objects of higher education. objective innovative relations in education are socio-economic in nature, directed by the interests of society and dependent on it. such relations include the following: – innovation and economic, including innovative and market (innovative entrepreneurial); – innovative and pedagogical; – innovative and managerial, including innovative and organizational; – innovative and financial; – innovative operations with property. subjective innovative relations include innovation and psychological, and innovation and moral, affecting feelings, emotions and subjective ethical assessments of people. they also include relations of innovative corporate culture. innovation and psychological, in particular, is the psychological contour of the relations expressing the psychology of the economic entities and the university. for example: the expectation, patience and continuing trust in the authorities on the part of the scientific and pedagogical body about the equitable distribution of rich in their potential and at the same time limited resources. they are an important part of the sociopsychological relationships that last in education when everything else is disappearing. a teacher, a scientist are those professions in which vocation, talent, giftedness, desire to create and serve mankind are of paramount importance. these professions will be alive as long as human beings are alive. the relations of innovative corporate culture or innovative-moral relations are such relations between people, which can be evaluated in terms of good and evil (for example, it is honesty, reliability of social relations of economic entities). the innovative corporate-entrepreneurial culture of the university is important (see below). innovative moral and ethical norms of relationships in educational institutions are also very important, which can act as a protection against abuse and corruption. all types of innovative relations in education (see figure 2) are carried out in the system of reproduction of goods and resources, branch, regional and intersectoral relations: between spheres of economy and society, between education and society. innovative relations in the sphere of higher education and science objective innovation relations innovation-economic, including innovative market (innovative entrepreneurial) innovative pedagogical innovative financial innovative operations with property subjective innovation relations innovative psychological innovative moral innovative corporate culture innovative managerialical, including innovative organizational figure 2. innovative relations in the sphere of higher education and science baltic journal of economic studies 179 vol. 7 no. 5, 2021 changes in innovation and economic relations in higher education, carried out on a systematic scientific basis, accelerate social progress. other types of innovative relations, especially innovative-financial and innovative-managerial ones, can and should contribute to such progress by synchronizing innovative changes. these types of relations are characteristic both for external and internal innovative policy of higher education institution. the central issue of innovation policy in higher education and science is how government officials and decision makers in higher education and science should focus on developing competencies (education, training, and skills) in developing and implementing innovation. here is a brief look at the typology of internal and external, as well as individual and organizational sources of competence related to innovation in this area. identify "three common weaknesses and imbalances in innovation systems in terms of education, training and skills: a) insufficient levels of competencies in the system; b) the time lag between the short-term needs of firms for specific competencies and c) the long time required to develop them, and the imbalance between internal and external sources of competencies in firms" (borrás & edquist, 2015). in addition, they define "competencies as the set of knowledge, skills, and experiences that people and organizations possess. they can be seen as a set of acquired abilities and dispositions to perform a particular activity, often including a specific set of (analytical, physical, etc.) techniques and methods; and based on a certain level of past experience. consequently, competencies are the result or outcome of a process to which people or organizations are exposed (a pattern of learning and/or a series of new tasks)." in general, different types of competencies can be distinguished: managerial competencies or skills; scientific, educational, technological, engineering and mathematical competencies; or more general social, economic and communication competencies. the authors define that "competence formation, for its part, is the actual process of formal or informal development or acquisition of specific competencies by individuals and organizations. it should be noted that we proceed from the perspective of the learning economy ... as an appropriate first step in this topic of competence formation. according to this view, innovation performance in the economy is highly dependent on the learning of organizations and individuals, understood as their continued ability to adapt to and change in relation to a rapidly changing external context based on their competencies and their ability to build on those competencies." thus, it is logical to conclude that in the field of higher education and science a) competences are a set of professional knowledge, skills and experience possessed by individuals and universities; b) competence development is a process of formal or informal development, training and acquisition by individuals and universities of specific competences in a given field. from the perspective of the innovation system, one of the most important aspects is the process by which competencies are created, maintained and developed. there is a close connection between a university 's internal capabilities and its ability to draw on external sources of knowledge. universities interact with other universities, firms, companies, and other types of organizations in different ways and with different goals in terms of knowledge and skills. there are some forms of external interaction that are critical for two reasons; first, because they are one of the most common forms of external university interaction in innovation systems; and second, because they demonstrate a high level of learning, experience, and/or skill development in ways that universities can potentially benefit from external knowledge sources. such forms of external interaction are as follows: a) university-industry relations aimed at developing human resources; b) university-to-university relationships aimed at advancing science and technology for human needs; c) leading users of free economic services as key external sources of knowledge for innovation processes; d) artificial intelligence, based on a human-centered method of computer modeling in which part of the research is outsourced, as well as crowdsourcing, as a new form of collective pooling of knowledge resources in the innovation system. consider the essence of internal and external sources of competence for universities (figure 3). in many countries there are various types of state activities related to the creation, maintenance and development of competencies, which have a direct and indirect impact on the innovative activities of heis, firms and other organizations in the system. the traditional cornerstones of state activities to support competencies, formation and development of competencies in the innovation system are: – regulation, organization and financing of education systems (primary, secondary, higher and post graduate – both public and private); – support and incentive schemes for vocational training systems. s. borrás and c. edquist identify the following three common types of deficiencies, tensions and imbalances in the innovation system: – insufficient level of competence in economics and/or complete loss of competence. – the time gap between the short-term needs of firms and the long time needed to develop competencies. baltic journal of economic studies 180 vol. 7 no. 5, 2021 an imbalance between internal and external competencies, leading to excessive isolation from or dependence on external sources. the first is related to a lack of competencies in the economy. this may be because the economy is unable to create the competencies its firms need for a stable level of innovation, or because there is a complete loss of competencies due to negative migration flows in the country or region. the development of competencies in economics is not only related to the level of academic achievement or training. competence in economics is also highly dependent on the continuous development of skills and experience in the organization of work. it is now widely recognized that this type of know-how, based on skills and experience, is important for the level of competence in the economy. as a result, the impact of offshore production activities on the level of competence in the economy has been debated worldwide for many years. the relocation of firms' production activities in recent decades to lower-wage countries is a loss of jobs and competencies in the home country. skills and experience are based on mid-level employees and managers with practical experience in production organization. internal and external sources of competence for heis definition: competences that remain outside the university, but can be acquired by the university through exchange/ cooperation content: interaction of university (or research institute) and industry for human resources development interaction of the university and its leading users outsourcing and crowdsourcing (as components of artificial intelligence) external sources of competence for heis definition: organizational university competencies developed at the university or acquired from outside. they are an integral part of the university, and are often called "structural capital". individual competencies (human capital) acquired through employment. they are less firmly integrated into the competence of the university content: information and competences of knowledge in free economic zones, which are embodied in knowledge bases and databases, catalogs for clients, organizational regulations (business administrative documents) and procedures, as well as scientific and educational developments, trademarks, patents, copyrights, trade secrets and etc. individual competencies (human capital) acquired through employment. they are less firmly integrated into the firm. human capital: formal primary, secondary, higher and post-higher education of employees. scientific and professional training and continuous development of skills in the statutory activities of the university. reverse brain drain and immigration of highly skilled workers. internal sources of competence for heis figure 3. internal and external sources of competence for heis baltic journal of economic studies 181 vol. 7 no. 5, 2021 workers involved in product and process innovation require in-depth knowledge of the product and its production process, which cannot be achieved in research laboratories alone. in addition, advanced forms of production depend not only on a significant level of scientific and technical knowledge, but also on skilled and experienced workers, that is, on competence. the second question concerns the time lag between the needs of firms for specific competencies in the short term and the long time required to develop them. the third group of potentially problematic issues in the innovation system is the imbalance between internal and external competencies, which leads to either isolation from external competencies or overdependence on them (borrás & edquist, 2015). it is the innovative policy in the sphere of higher education and science that should help to eliminate this imbalance. universities and colleges should develop innovative programs, technologies and methods of advanced training for timely formation and development of necessary competencies for all spheres of social and economic activity of the world community. 6. conclusions academic capitalism makes the innovative development of higher education and science real and inevitable. both theoretical research and practical experimentation, as well as the creation of fundamental knowledge in this area, are needed to better understand the promising directions of such development. it is innovatics of higher education is designed to combine theoretical research and practical experience to better understand the essence of innovation in the sphere of higher education and science. the study examines some basic issues of innovation policy in the sphere of higher education and science as one of the main components of the state socio-economic policy of social development and is aimed at creating favorable conditions for bringing new ideas created in this sphere to the market. considered further development of the theoretical foundations of higher education innovatics, including: activities promoted by higher education innovation; innovative environment of activities promoted by higher education innovation; the main directions of innovation policy of an entrepreneurial university; the main components of the innovation policy of an entrepreneurial university; innovative relations in higher education and science; innovative environment; the importance of having the necessary competencies, their formation and development; internal and external sources of competencies for universities, etc. the authors suggest that innovation policy in higher education is a link between the policy of research and scientific (scientific and technical) activities; search and dissemination of knowledge; education and training of qualified specialists – on the one hand, and technological development; industrial policy and environmental policy – on the other. the main directions of innovation policy of entrepreneurial 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(2010). the capitalization of knowledge. a triple helix of university–industry– government. edward elgar publishing, 368 p. baltic journal of economic studies 8 vol. 8 no. 4, 2022 doi: https://doi.org/10.30525/2256-0742/2022-8-4-8-18 economic grow th and total factor productivity in central and eastern european countries bet ween t wo global crises and beyond yuriy bilenko1 abstract. the aim of the article is to assess the factors of economic growth of the cee countries over the 30-year history, the productivity of capital and human resources, the resilience of these countries to the negative impact of the global financial crisis. methodology. the solow growth model was used to estimate the growth rates of capital, labor and total factor productivity (tfp). the impact of macroeconomic indicators on gdp and tfp growth is assessed. the group of central and eastern european countries that joined the european union was chosen for the analysis: bulgaria, romania, poland, hungary, czech republic, slovakia, slovenia, estonia, lithuania, latvia, as well as post-soviet european countries: ukraine, belarus, russia and moldova and albania in the period from 1991 to 2019. results. tfp makes a significant contribution to the economic growth of cee countries. during the period of market reforms, tfp significantly decreased, and during the boom of 2000–2008 it fully ensured the growth of the cee economies, after the crisis of 2008, the contribution of tfp decreased by 2 times. in the conditions of recovery, tfp growth is positively influenced by inflation, negative ca balance, and unemployment reduction. in the post-crisis period, a decrease in inflation, a positive ca balance, and an increase in unemployment had a positive impact on tfp growth. during a depression, the influence of capital becomes dominant. restrictive monetary policy contributes to the efficiency of cee economies. in the short run, unemployment increases, but in the long run it decreases significantly due to the growth of investment and exports. practical implications. the analysis makes it possible to identify effective macroeconomic policies to stimulate the productivity of the economies of central and eastern europe during the period of economic recovery and depression. value/originality. a long-term study of the economic performance of cee countries using the solow methodology has revealed the behavior of total factor productivity in different periods of modern economic history and its contribution to economic growth. key words: economic growth, total factor productivity, crisis, internal and external balance, cee. jel classification: o47, o57, f43 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 ivan franko national university in lviv, ukraine (corresponding author) e-mail: yuriy.bilenko@lnu.edu.ua orcid: https://orcid.org/0000-0002-5877-0564 1. introduction the thirty-year development path of post-socialist countries requires serious reflection and new understanding of further movement in the conditions of economic and geopolitical turbulence observed on the european continent. the struggle of economic models of development of states, their successes and failures, their potential in ensuring stable economic development are becoming decisive in the modern world economy. the soviet model of economy with its authoritariantotalitarian institutional environment left a deep imprint on the economic life of the countries of central and eastern europe, especially on the attitude to the working person and the formation of value orientations. all this is very clearly projected on the social capabilities of the economy, its productivity. resource-rich russia, which has significant problems in economic efficiency and distribution of national wealth, wants to compensate for its backwardness in productivity with an aggressive war of aggression against ukraine, terrifying the free peoples of europe. the global crisis of 2008, as well as the pandemic, had a significant impact on the economies of cee countries, which is associated with significant capital outflows, volatility in world resource prices, and rising unemployment. in this analysis, an attempt will be made to assess the factors of economic growth baltic journal of economic studies 9 vol. 8 no. 4, 2022 in cee countries over the 30-year history, how fully and efficiently capital and human resources are used, and how resilient these countries are to the negative impact of the global financial crisis. all this affects the future capacity of the countries to counter the pandemic, as well as geopolitical challenges. the crisis of 2008 has certain common features with the crisis of the early 1930s, which ended with the second world war, when european countries were economically weakened and the process of protectionism in international trade and the collapse of the genoa monetary agreement began. germany, which lost the first world war, wanted to take revenge and implement a new territorial division of europe, which is very similar to the actions of russia, which is trying to restore the collapsed soviet union, and even 6 years after the global financial crisis. productivity of the economy in the definition of such famous economists, nobel laureates as r . solow, p. krugman, j. stigler, who first introduced the concept of total productivity of production factors (stigler, 1947), is a determining factor in the economic life of the country, which ensures long-term stability and prosperity. so, p. krugman in his book "the age of diminishing expectations" wrote that "productivity is not everything, but in the long run it is almost everything" (krugman, 1997, p. 11). the high productivity (efficiency) of the economy shows how much it has adapted, whether technological changes have taken place that have laid a stable foundation for sustainable economic growth, as well as the insulation of the economy from internal and external shocks. in this study, the period of economic development of the cee countries was divided into three stages: i stage – 1991–1999 – the stage of radical market reforms, liberalization of economic life; ii stage – 2000–2008 – economic recovery, acceleration of economic growth rates, which were the highest in the world, huge inflow of foreign capital; iii stage – 2009–2019 – the beginning of the crisis, recession, outflow of private foreign capital, high unemployment, the beginning of the russian-ukrainian war. in comparison of the last two periods the main economic trends of post-crisis development of the cee countries are determined. 2. analysis methodology growth accounting helps to explain economic growth by decomposing output growth into the contributions of capital, labour and residuals as a measure of improvements in the efficiency of capital and labour use. the residual is an estimate of changes in total factor productivity (tfp), which reflects a wide range of factors that affect the efficiency of resource use. labour productivity is affected by the level of education and work experience. capital productivity is affected by the age of the equipment, the level of technology embodied in it, and whether the capital good is publicly or privately owned (iradian, 2007). in the twentieth century, the model formalization of the mechanism of economic growth was carried out in the works of robert solow (2, 3), written in 1956 and 1957, respectively. using the cobb douglas production function, the trajectory of economic growth is calculated: y ak l� �� �1 (1), where y is the total income of the economy, k is the amount of capital, l is the amount of labor, a is the level of technical progress or total factor productivity, α is the parameter that determines the share of capital. the author decomposed this formula in a dynamic form, differentiating (2, 3): ∆y = ∆a + α∆k + (1 – α )∆l (2) ∆a = ∆y – (α∆k + (1 – α )∆l) (3) variable δa (rate of growth of total factor productivity) is set externally or exogenously, and it is impossible to influence its value. the economy grows steadily up to a certain steady state of capital per capita, after which only technological progress is the main source of growth. this model is called the neoclassical theory of exogenous economic growth. the group of central and eastern european countries that joined the european union was chosen for the analysis: bulgaria, romania, poland, hungary, czech republic, slovakia, slovenia, estonia, lithuania, latvia, as well as post-soviet european countries: ukraine, belarus, russia, moldova and albania and conducted a study of economic growth in the period from 1991 to 2019, which covers 420 observations. the capital was calculated on the basis of the pim method (perpetual inventory method) with a capital depreciation rate of 5%, and for the period from 1990 to 2019 in usd at constant 2005 ppp prices. the amount of capital for 1990 was estimated according to the capital to gdp ratio of 3. according to the pim method (4), the amount of capital in a given year is equal to the amount of capital in the previous year plus investments minus depreciation for the year of the initial capital for the year. k k i kt t t t� � � �1 � �� � � (4), where kt+1 – the amount of capital, it – investment rate, δ – rate of depreciation of capital. according to the pim method, the amount of capital in a given year equals the amount of capital for the previous baltic journal of economic studies 10 vol. 8 no. 4, 2022 year plus investments minus depreciation for the year of the initial capital for the year. the author collected share of capital α from un data national accounts (unsd, 2021), using data on compensation of employees. a preliminary analysis of capital per worker shows a significant increase in the new eu member states: poland, slovakia and the baltic states more than doubled, in contrast to the post-soviet european countries, where the growth of capital per worker does not exceed a few percent, and in ukraine has not reached the levels of 1991, and given the significant reduction in employment in these countries, the total amount of capital in the economy has changed very little. in general, it can be concluded that over the past thirty years the differentiation in the provision of post-socialist countries with physical capital has increased significantly. some authors have interpreted economic growth through direct effects of human and physical capital (sweat factors) and through tfp growth (inspiration). inspired growth can raise the technological frontier, thereby increasing the maximum possible output with a given amount of human and physical capital; alternatively, it can increase the efficiency of human and physical capital, bringing output closer to the maximum possible given the existing technological frontiers (van leeuwen et al., 2015). total factor productivity can be interpreted as technological improvement or factor efficiency improvements, as the acquisition and introduction of new technologies, structural reallocation or simply a shift to the efficient frontier, sustainable tfp growth is the key to long-term economic development (burda & severgnini, 2009). the first accounting of economic growth was carried out by r . solow, who found that the accumulation of physical capital accounted for about 12% of the increase in output per hour worked in the united states from 1900 to 1949, and the remaining 88% was due to the growth of tfp (solow, 1957). in more recent study for 145 countries baier, s., dwyer, g., & tamura, r . found that weigted-average tfp growth is only about 8% of growth of ouput per worker. they attribute this decline in tfp to institutional regression and armed conflict. their study of tfp growth shares for different regions shows the following results: 25% growth in output per worker for western countries, 20% for southern europe and 18% for newly industrialized countries (baier et al., 2002). a new study by these authors in 2016 over a longer period of time and a new methodology for measuring human capital found that in the unweighted case, output per worker in a typical country had an annual growth rate of 1.32%, 0.90% for inputs and 0.42% for tfp, with growth in inputs explaining almost 60% of the growth in output per worker, with a range from 55% for asia to 94% for central and eastern europe over the period 1970 to 2010, with negative growth rates in tfp (tamura et al., 2016). with the new human capital measure, more than 90 percent of the variation in long-run growth can be explained by variation in the growth of expenditures per worker, and less than 10 percent by variation in tfp growth. furthermore, between 55% and 70% of the variation in the logarithm of output per worker can be explained by the variation in the logarithm of the level of inputs, and less than half of the variation in the logarithm of output per worker can be explained by the variation in the logarithm of tfp. these results are robust to different time periods and different values of human capital accumulation technology parameters. the longer the study period, the smaller the share of tfp growth in output per worker (tamura et al., 2016). for central and eastern european countries, special growth accounting studies have been conducted (alam et al., 2000; brada, bah el-hadj, 2009; de broek, koen, 2000; dobrinsky et al., 2006; iradian, 2007; schadler et al., 2006; van leeuwen et al., 2015; levenko et al., 2017), in which tfp growth was measured for different periods. 3. growth accounting for cee and its explanation in the soviet economic model, economic growth was an imperative, but the introduction of an extensive rather than intensive growth strategy led to the collapse of the socialist system (campos and corricelli, 2002). why did this happen? the answers are: low productivity and various rigidities in the economic structure, which are well reflected in the low elasticity of substitution between factors of production (easterly and fisher, 1995). during the last fifteen years of the soviet union (1978–1993), gdp growth was -1%, physical capital growth was 3%, and tfp growth was negative -4% (van leeuwen et al., 2015). the beginning of market reforms, which was associated with price liberalization and smallscale privatization, as well as the creation of new independent states after the collapse of the soviet union, was accompanied by a significant decline in economic growth. in fact, all countries showed a decline, except poland and slovenia, where it was short-lived. the dominant factor behind the fall in gross domestic product was a sharp decline in the efficiency or overall productivity of the factors of production. capital degraded, labour was artificially delayed, and technology became obsolete, especially in large baltic journal of economic studies 11 vol. 8 no. 4, 2022 industrial enterprises. according to the authors, the lack of structural adjustment led to low unemployment, which in turn increased inefficient employment. in the first period, cee countries showed a significant decline in economic growth, with the worst performance in the post-soviet republics: moldova, russia, ukraine, where the annual decline ranged from 5 to 7%. in the baltic states, the decline was also significant – from 1.65 to 4.1%. the lowest rates of decline were observed in albania, czech republic and hungary. economic growth was observed only in poland, slovenia and estonia (table 1). decomposition of economic growth indicators shows a significant drop in employment growth in all countries except romania and slovenia. the highest annual rate of employment decline was observed in estonia -3.5%, on average this indicator was -0.83% (table 1). as for capital, its growth was observed during this period, as countries carried out technological reconstruction and formed the foundation for future economic growth (table 1). among the countries with high growth rates of physical capital are: albania, czech republic, poland, slovakia, slovenia. a drop in capital accumulation was observed in bulgaria, latvia, lithuania, moldova and ukraine. if to project this process to the aftermath of the 2008 crises, an interesting pattern emerges: the higher the rate of capital accumulation observed in 1991–1999, the lower the volatility of economic growth, measured by standard deviation, with a correlation coefficient of -0.75. thus, a high level of capital is the basis for the sustainability of economic growth and its low volatility. the rate of decline in total factor productivity during this period was extremely high, especially in moldova, ukraine, russia, romania and lithuania (table 2). only in poland tfp grew by 3.24% during this period, indicating significant technical change. the analysis shows that the drop in economic growth was largely caused by a decline in economic efficiency. although there is a rather interesting phenomenon, when in some countries (czech republic, hungary, slovakia, slovenia) with a very significant loss of economic efficiency there was a parallel accumulation of capital. this is a wise economic policy aimed at future economic achievements and sustainable development of the state. it was noted that the transformational recession has become a large-scale growth crisis in most countries of eastern europe and the cis, in which two main factors of production and aggregate production efficiency have made a negative contribution to gdp growth (dobrinsky et al., 2006). this period also accompanied by a sharp drop in tfp, largely reflecting the "disorganization effects" (blanchard and kremer, 1997). the study (de broeck and koen, 2000) notes that the drop in output at the beginning of the transition period is explained by a decline in tfp growth, which indicates a rapid deterioration of the growth potential of the soviet-style economy (campos and corricelli, 2002). in general, during the transformation of the plannedadministrative economy into a market economy, according to our estimates, the decline in gdp during this period is 96% explained by the fall in total factor productivity (table 2). quite sporadic and chaotic moves to liberalize economic life in many cis countries ended in the table 1 contribution of capital and employment to economic growth in cee countries country capital growth employment growth 1991–1999 2000–2008 2009–2019 1991–1999 2000–2008 2009–2019 albania 3,01 14,60 4,46 -1,05 -0,38 0,77 belarus 0,84 4,98 7,00 -1,09 1,44 0,28 bulgaria -0,34 5,66 2,61 -1,03 2,15 -0,66 czech republic 2,70 3,77 2,32 -0,30 0,73 0,71 estonia 0,97 9,26 6,11 -3,50 1,51 0,12 hungary 0,74 2,88 1,66 -0,37 0,12 1,61 latvia -1,86 4,87 1,84 -2,60 1,69 -1,28 lithuania -0,50 4,28 1,96 -0,86 0,09 -0,30 moldova -0,47 1,44 2,25 -1,19 -0,45 -0,48 poland 2,07 4,13 3,88 -0,65 1,57 0,84 romania 1,13 4,59 3,00 1,85 -2,44 -0,15 russian federation 0,40 1,48 1,95 -0,68 1,08 -0,15 slovak republic 3,37 3,04 2,26 -1,04 2,00 0,61 slovenia 2,02 5,54 1,98 1,41 1,34 -0,06 ukraine -0,92 0,16 -1,27 -1,39 -0,06 -0,87 average 0,88 4,71 2,80 -0,83 0,69 0,07 source: author's assessment baltic journal of economic studies 12 vol. 8 no. 4, 2022 1998 financial crisis (the so-called "russian winter"), which was accompanied by a significant devaluation of national currencies and, in fact, the formation of an authoritarian regime in russia, which is still in force today. the recovery of growth in the 2000s, preparations for eu accession, and foreign capital inflows led to accelerated economic growth. such a high dynamics of economic development was due to improved terms of trade, high quality of institutional reforms for the countries that integrated into the european union, as well as export orientation and commodity boom in the world economy for the cis countries. the second stage of economic development covers the period 2000–2008. since 2000, the economic growth of the cee countries began to boom. gdp growth rates ranged from 5 to 11%. the highest rates of economic growth were in the baltic countries, as well as in the european post-soviet republics – ukraine, belarus and russia. capital growth in all countries is positive, averaging 4.7% (table 1), with the highest rates in estonia and albania, which have undergone a transition from agrarian to industrial economies. the lowest indicators were observed in the economies of ukraine and russia. common to this group of countries was rapid financial integration, increased inflow of foreign capital and dominance of foreign banks in the financial markets of post-socialist european countries. analysis of investments and savings shows that central and eastern european countries have chosen the path of economic development at the expense of foreign capital and external savings. the gap between savings and investments in favor of the latter has increased significantly over the period 2002–2008. total foreign financing of eastern european countries increased from 96 billion usd in december 2003 to a peak of 550 billion usd in september 2008. foreign liabilities of the banking sector of the cis countries increased nine times in five years and reached usd 280 billion. the baltic countries are the most dependent on foreign banks (almost 50% of banks' liabilities belong to foreign creditors) (flows to eastern europe, 2009). the pace of economic reforms in general slowed down during this period, and high growth rates were based on a rapid increase in domestic demand, credit booms contributed to consumption growth and investments in construction and real estate. the flip side was the emergence of very large external imbalances as production capacity did not keep pace with demand. financial flows from the eu increased sharply after accession, from less than 1% of gdp on average before accession to almost 2.5% of gdp within three years in the form of structural funds, agricultural support and other subsidies (roaf et al., 2014). in general, it can be said that external debt has been growing in all central and eastern european countries during these years, especially after 2002. the average external debt of the central and eastern european countries in 2008 was usd 1165.3 billion. eu membership spurred economic and financial integration, leading to rapid economic growth and large capital inflows. it also created a "halo effect", shielding some countries from paying more to borrow external funds in spite of growing vulnerabilities (čihak, mitra, 2009). during this period, the growth rates in transition countries were significantly higher than in the euro table 2 contribution of total factor productivity to economic growth in cee countries country 1991–1999 2000–2008 2009–2019 gdp growth tfp growth tfp share gdp growth tfp growth tfp share gdp growth tfp growth tfp share albania -0,01 -1,19 131,2 5,59 -2,27 -0,41 3,09 0,30 0,10 belarus -2,37 -2,12 0,89 11,03 7,68 0,70 1,83 -2,03 -1,11 bulgaria -2,42 -1,74 0,72 7,58 3,14 0,41 1,31 -0,02 -0,01 czech republic -0,33 -1,46 4,45 4,95 2,49 0,50 2,19 0,54 0,25 estonia -1,65 0,33 -0,20 8,21 2,86 0,35 2,24 -1,01 -0,45 hungary -0,75 -0,79 1,06 3,73 2,20 0,59 1,58 -0,06 -0,04 latvia -4,10 -1,79 0,44 8,59 5,07 0,59 3,39 2,94 0,87 lithuania -3,68 -2,99 0,81 8,62 6,08 0,71 2,26 1,32 0,58 moldova -8,68 -7,80 0,90 7,98 7,29 0,91 3,79 2,69 0,71 poland 3,96 3,24 0,82 4,94 1,77 0,36 3,99 1,26 0,31 romania -2,07 -3,50 1,70 7,22 5,38 0,75 1,84 -0,01 -0,01 russian federation -5,26 -5,10 0,97 8,37 7,07 0,84 0,79 -0,16 -0,21 slovak republic 0,07 -0,70 -9,74 7,58 4,93 0,65 2,40 0,77 0,32 slovenia 1,11 -0,48 -0,43 5,00 1,60 0,32 0,67 -0,27 -0,40 ukraine -7,38 -6,21 0,84 8,96 8,90 0,99 -1,28 -0,19 0,15 average -2,24 -2,15 0,96 7,22 4,28 0,59 2,01 0,40 0,20 source: author's assessment baltic journal of economic studies 13 vol. 8 no. 4, 2022 area and exceeded the world average. this is because they are middle-income countries that are catching up with more advanced economies in terms of both capital investment and knowledge acquisition. they grow faster because it is usually easier to imitate existing technologies that have been pioneered in other countries than to innovate (aghion et al., 2010). employment in almost all countries, except moldova and romania, grew at an average annual rate of 0.69% (table 1). during this period, extremely high growth rates of economic efficiency were observed. the growth due to technological progress was 59% (table 2). the same results were obtained in surveys (dobrinsky et al., 2006; iradian, 2007; schadler et al., 2006). the most important factor contributing to the acceleration of the post-crisis recovery was the sharp increase in tfp in the later stages of transition. moreover, in a number of countries the average annual tfp growth rates during 2000-2003 exceeded the corresponding average annual gdp growth rates. at the same time, capital accumulation during this period contributed to positive technological change as new investments were directed to modern and highly productive capital equipment. thus, positive tfp growth likely reflected a combination of productivity gains and technological change (dobrinsky et al., 2006). tfp growth in the cee region was almost twice as high as in other groups of emerging market countries. this is not surprising given the inefficiencies inherited from central planning, which left much room for improving management, freeing up labour and benefiting from intersectoral reallocation of resources (schadler et al., 2006). burda, m. & severgnini, b. using solow-törnqvist residuals estimated of total factor productivity (tfp) growth in a sample of 30 european economies for the period 1994–2004, they conclude that tfp growth was consistently higher in central and eastern relative to western europe. consider the economic consequences of the external shock caused by the global financial crisis of 2008. between 2000 and 2008, cee countries changed the structure of their capital account in favor of debt, the share of direct investment became smaller, but investment inflows are more stable than those that generate debt. o. blanchard emphasized that one of the channels through which the crisis moved from developed economies to emerging markets was the reduction of credit lines from financial institutions of developed countries to their foreign subsidiaries, which forced them, in turn, to sell assets or reduce lending to domestic borrowers. securitisation and globalisation have led to increased interconnectedness between financial institutions both within and between countries. foreign claims of banks from the five largest developed countries increased from usd 6.3 trillion in 2000 to usd 22 trillion in june 2008. in mid-2008, these banks' claims on emerging market countries alone exceeded $4 trillion. think about what this means if for some reason these banks decide to reduce their foreign investments, as is happening now (blanchard, 2009). capital inflows can increase banks' risks, while capital outflows can have serious macroeconomic consequences if they lead to a domestic bank liquidity crisis. research on country financial vulnerabilities in the context of financial integration shows that emerging market countries (southeast asia, latin america, and eastern europe) are more susceptible to crises in the face of an unexpected reduction in capital inflows if their debt obligations (lane, milesiferretti, 2006). debts are denominated in foreign currency because the cost of debt servicing in national currency increases depending on the level of devaluation of the national currency. thus, for the growth of the national economy it is more efficient to attract foreign capital in the form of foreign direct investment. in contrast, most central and eastern european countries quickly accumulated large net external liabilities, but relied heavily on equity financing, which improves risk sharing by more closely linking the return on external liabilities to domestic economic performance. at the same time, increased international financial integration naturally increases vulnerability to external financial shocks (lane, milesi-ferretti, 2006). debt flows are much more volatile, as they are cyclical and highly volatile and, in case of negative shocks, can have a negative impact on the economic growth of the borrowing country. foreign capital in cee countries has been used to finance nontradable sectors of the economy and contributed to overheating of the economy, causing a boom in consumer demand and widening the current account deficit. the fixed currency regime contributed to the deepening of gdp decline with high external borrowing. the currency and financial crisis of 2008 is a clear example of such consequences for ukraine, hungary and latvia. the crisis of 2008 radically changed the economic situation, and in the following years the average economic growth rate in the eu member states decreased by about 3 times, in russia – by 11 times, and in belarus there was a six-fold drop. at the same time, the share of capital increased by 1.5-2 times, especially in rich eu countries. after the crisis and until 2019, the average economic growth rate fell by more than 3.5 times, while the capital growth rate decreased by 1.6 times baltic journal of economic studies 14 vol. 8 no. 4, 2022 and employment growth fell by 10 times (table 1). only poland, hungary, the czech republic and slovakia have positive employment growth due to stable capital accumulation and moderate growth in total factor productivity (table 2). the conclusion is that the contribution of capital and labour has been gradually increasing, especially after the financial crisis of 2008 and the sharp decline in the impact of total factor productivity (efficiency loss) on economic growth in central and eastern europe. the growth rates of the total productivity of factors became negative in belarus, russia, ukraine, hungary, estonia, bulgaria, slovenia, and romania. the highest share of totalfactor productivity is observed in latvia, lithuania, poland and moldova, the efficiency of these economies has decreased, but not so radically, than in other central european countries (table 2). since 2009, cee countries have been recovering from the crisis with varying degrees of success. some have reached the pre-crisis level within 3-5 years, others are stagnating to this day, and economic and political conflicts have added to the economic turmoil and imbalance (cis countries). in times of crisis, the volatility of economic growth can increase significantly. in this paper, the volatility of economic growth and tfp growth is measured using standard deviation. measurements were made for each country during the economic boom of 2000–2008 and after the crisis of 2009–2019. the results show that, on average, the volatility of economic growth increased by 1.7 times and the volatility of tfp growth by 1.5 times. there is a significant differentiation of these indicators between countries. the greatest volatility of economic growth indicators increased in the baltic states, in particular, in lithuania – 3 times, latvia – 2 times. the most stable economies are estonia, poland and the slovak republic. where the highest tfp growth rates were during the economic upturn, after the crisis there is an extremely high volatility of economic growth rates. thus, latvia, lithuania, ukraine and moldova demonstrated very high tfp growth rates (in the range of 5-8%). instead, in countries where physical capital grew steadily and tfp grew moderately, the volatility of economic growth is stable and low. it is interesting to determine the period that countries needed to restore the level of gdp per capita that was in the pre-crisis period. it should be noted that in albania, belarus and poland there was no fall in gdp per capita. it took 3-4 years to restore the well-being of people in bulgaria, slovakia, lithuania, russia and moldova; 6-7 years – in the czech republic, estonia, hungary and latvia; 9 years – in slovenia, while the ukrainian economy has not yet recovered. a significant jump in unemployment was observed in almost all cee countries. most countries overcame labour market imbalances in the first few years after the crisis. however, in the baltic states, this process was delayed, so in estonia and latvia the pre-crisis level of employment was reached in 2018, in albania – in 2019, in latvia – in 2020. 4. internal and external balance and economic growth in cee countries the economic boom of 2000–2008 was associated with significant internal and external imbalances (table 3). especially countries with high gdp and tfp growth rates experienced very high inflation (belarus, moldova, romania, russian federation, slovak republic and ukraine). as economic growth was supported by a significant inflow of foreign capital in the form of debt, which caused a significant deterioration of the current account balance (in albania -8.7%, bulgaria -9.5%, estonia -10.6%, latvia -11.6%, lithuania -8.5%, romania -7.17%). in countries with moderately growing economies, the budget deficit was quite high compared to countries with high gdp and tfp growth rates, but during the economic boom the consolidated fiscal deficit was about 2 times lower (table 3). after the financial crisis in these countries (czech republic, hungary, poland, slovakia) the budget deficit decreased, while in the countries with fast-growing economies the budget deficit increased by 1.5 times. current account balances (ca) improved dramatically in all countries, especially in the baltic states, but also in hungary, slovenia, the czech republic and slovakia. only in albania, belarus and ukraine the ca balance deteriorated in the post-crisis period. on average, the ca deficit in all countries decreased by more than 3 times. the dominant feature of the economic development of cee countries after the 2008 financial crisis was a significant increase in public debt. public debt increased significantly in belarus, hungary, ukraine, slovenia and the baltic states. on average, in the group of countries studied, public debt increased by more than 1.3 times. the influence of various macroeconomic factors on the growth of aggregate productivity of production factors is investigated. the identification of macroeconomic factors, indicators of internal and external equilibrium that influenced economic growth after the 2008 crisis allows us to draw some conclusions. the impact of public debt on the ca balance and especially on the budget deficit is growing compared to the pre-crisis period. the correlation coefficient is -0.23 and -0.79 respectively, compared to -0.04 and -0.23 before the crisis. growth of public debt reduces negative current account balance and budget deficit. baltic journal of economic studies 15 vol. 8 no. 4, 2022 before the pandemic in 2020, the cee economies achieved extremely high internal balance, low unemployment of 3-5% and low inflation, and, in turn, external balance: the current account balance became positive, and at most did not exceed -3%. in fact, the countries have achieved macroeconomic stabilization and very moderate economic growth: 2-3% per year, although the efficiency of the economy in the post crisis period has decreased very significantly (11 times). thus, the cee economies approached the pandemic crisis in conditions of macroeconomic equilibrium. the impact of various macroeconomic factors on the growth of aggregate factor productivity was investigated (table 4). as for the factors that influence tfp growth, the magnitude of their impact has changed significantly compared to the period of economic recovery. thus, unemployment growth after the crisis has a positive impact on tfp growth, while in the previous period it was negative. the growth of tfp in 2000–2008 was associated with inflation. the post-crisis period demonstrates a significant reduction in the impact of the external debt and public debt. rising inflation and budget deficit have a negative impact on tfp growth (table 4). the impact of tfp on gdp growth decreases from 0.76 to 0.57, capital growth from negative to positive from -0.17 to 0.46, the impact of employment increases by 2 times. it can be concluded that macroeconomic indicators in the post-crisis period begin to influence economic growth, as defined in classical economic theory. to complete our study, we have developed a variance decomposition analysis of growth to assess the contribution of each factor of economic growth: factors of production and tfp growth. in essence, given a posteriori averages of growth parameters, this approach provides a systematic study of the distribution of configurations of fundamental determinants and their combined ability to explain differences in growth (durlauf et al., 2008). express the decomposition of gdp growth variancegy, in terms of the partial contribution of each growth component; respectively, tfp growth – ga, growth in physical capital – gk, and growth in labor – gl. var g cov g var g cov g g var g cov g y y g y y k y ya� � � � � � � � � � � � � ��, , , � � �� �1 ��� � � � g var g l y � � (5) the contribution of total factor productivity to economic growth was calculated using this methodology (5) for the two periods 2000–2008 and the table 3 internal and external balance before and after the global financial crisis of 2008, % of gdp (average) country budget deficit, % current account, % government debt, % inflation, % 2000–2008 2009–2019 2000–2008 2009–2019 2000–2008 2009–2019 2000–2008 2009–2019 albania -5,09 -3,67 -8,75 -10,0 58,86 66,90 2,73 2,18 belarus -7,69 -1,74 -3,87 -6,48 13,59 44,77 39,93 19,16 bulgaria 1,23 -1,26 -9,56 0,49 40,32 20,02 7,22 1,26 czech republic -3,61 -1,65 -3,87 -0,68 25,99 38,67 2,98 1,58 estonia 0,97 -0,09 -10,6 1,38 4,82 8,59 4,83 2,44 hungary -6,12 -3,01 -7,26 1,96 59,79 76,55 6,35 2,64 latvia -1,51 -2,22 -11,6 -0,05 13,66 40,09 6,12 1,58 lithuania -1,93 -3,02 -8,59 -0,32 19,21 37,93 2,93 2,05 moldova -0,34 -2,02 -6,39 -6,20 36,97 25,40 13,31 5,29 poland -4,07 -3,78 -4,40 -2,34 43,37 52,09 3,52 1,72 romania -2,77 -3,37 -7,17 -3,25 20,49 35,66 17,57 3,00 russian federation 4,25 -1,52 8,89 3,63 25,26 13,52 14,23 7,34 slovak republic -4,71 -3,57 -6,11 -1,70 38,52 48,53 5,73 1,48 slovenia -0,92 -4,34 -2,05 3,56 26,27 62,75 5,35 1,18 ukraine -2,46 -3,62 2,55 -3,69 25,94 55,78 12,87 12,88 average -2,32 -2,59 -5,26 -1,58 30,20 41,82 9,71 4,39 source: author's calculations based on the imf economic prospects database table 4 correlations between changes in gdp, tfp and macroeconomic variables types of interactions between variables coefficients of correlation coefficients of correlation 2000–2008 2009–2019 tfp↔gdp 0,760 0,571 tfp↔capital -0,752 -0,420 tfp↔labor -0,095 -0,314 tfp↔unemployment -0,441 0,404 tfp↔inflation 0,588 -0,495 tfp↔budget deficit 0,194 -0,175 tfp↔current account 0,406 -0,064 tfp↔government debt -0,525 -0,024 gdp↔capital -0,179 0,465 gdp↔labor 0,107 0,216 source: author's assessment baltic journal of economic studies 16 vol. 8 no. 4, 2022 post-crisis period 2009–2019 (based on annual changes in tfp and gdp growth) and the following results were obtained: for the first period, the share of tfp was 89%, and for the second period – 43%. this means that the shock received by the cee countries from the financial crisis has resulted in a decrease in economic productivity by more than half. in general, the whole world has suffered from this crisis, especially the european continent, which has a lower level of productivity compared to the united states. n. crafts views social capabilities as a key deter minant of success or failure in productivity growth. social capabilities can be seen as the incentive structures, such as regulation and taxation, that influence investment and innovation decisions that allow enterprises to effectively absorb technologies developed by leaders (e.g., the us) and eliminate inefficiencies. in service-oriented economies, the forces of creative destruction have been even more critical, replacing less efficient firms and old technologies with new and more efficient ones (crafts, 2017). the problem of slowing economic growth in cee countries raises the question of whether tfp growth can be sustainable, and if not, what can replace it as a basis for rapid catch-up development (schadler et al., 2006). recently, new growth theory has linked productivity growth to innovation. innovations, in turn, are motivated by the prospect of excess returns that successful innovators can realize (aghion et al., 2010). the theory suggests that innovation, and hence productivity growth, should always be facilitated by: better protection of intellectual property rights, financial development and macroeconomic stability. thus, faster growth tends to imply higher firm turnover rates, as the process of creative destruction generates the entry of new innovators and the exit of old ones due to high levels of competition (aghion & howitt, 2006). according to the author, the monetary and financial crisis has shown the vulnerability of the cee economies to external shocks due to a significant dependence on external savings, so it is necessary to develop the domestic economy on the basis of an innovative paradigm, stimulate domestic investment and savings, introduce new energy-efficient technologies to isolate the economy from external shocks. 5. conclusions the analysis of thirty years of economic development of central and eastern european countries allows to draw certain conclusions about the efficiency of their economies, economic growth rates, internal and external balance. for the study the methodology of growth accounting based on the classical model of economic growth by r . solow was used, which allowed to determine the contribution of capital, labor and total factor productivity to the economic growth of countries. in the first phase – 1991–1999 – most cee countries implemented radical market reforms and actively liberalized economic life, although with varying degrees of success. during this period, cee countries demonstrated a significant decline in economic growth, with the worst performance in the post soviet republics: moldova, russia, ukraine, where the annual decline ranged from 5 to 7%. in general, during the transformation of the planned-administrative economy into a market economy, 96% of the gdp decline was associated with a decrease in tfp. the second stage, which covers the period from 2000 to 2008, can be defined as a period of rapid economic growth. the economic growth rates of cee countries were the highest in the world compared to other regions. since 2000, the economic growth of cee countries has been booming. gdp growth rates ranged from 5 to 11%. the highest rates of economic growth were in the baltic countries, as well as in the european post-soviet republics – ukraine, belarus and russia. capital growth in all countries is positive, averaging 4.7%. employment in almost all countries, except moldova and romania, grew at an average annual rate of 0.69%. during this period, extremely high growth rates of economic efficiency were observed. the growth due to technological progress amounted to 59%. the crisis of 2008 radically changed the situation, and in the following years the average economic growth rate fell by more than 3.5 times, while the capital growth rate decreased by 1.6 times and employment growth decreased by 10 times. only in poland, hungary, czech republic and slovak republic there is a positive employment growth due to stable capital accumulation and moderate growth of total factor productivity. the conclusion is that the contribution of capital and labour has been gradually increasing, especially after the financial crisis of 2008, i.e., a sharp decline in the impact of total factor productivity (efficiency loss) on economic growth in central and eastern europe, with average tfp growth over this period of only 0.4% annually. in times of crisis, the volatility of economic growth can increase significantly. where the highest tfp growth rates were during the economic upturn, after the crisis there is an extremely high volatility of economic growth rates. thus, latvia, lithuania, ukraine and moldova have demonstrated very high tfp growth rates (in the range of 5-8%). on the contrary, in countries where physical capital grew steadily and tfp grew moderately, the volatility of economic growth is stable and low. after the financial crisis in these countries (czech republic, hungary, poland, slovakia, czech republic) the baltic journal of economic studies 17 vol. 8 no. 4, 2022 budget deficit decreased, while in fast-growing economies the budget deficit increased by 1.5 times. current account balances (ca) have improved dramatically in all countries, especially in the baltic states, but also in hungary, slovenia, the czech republic and slovakia. only in albania, belarus and ukraine did the ca balance deteriorate in the postcrisis period. on average, in all countries the negative ca balance decreased by more than 3 times. as for the factors that influence tfp growth, the magnitude of their impact has changed significantly compared to the period of economic recovery. thus, unemployment growth after the crisis has a positive impact on tfp growth, while in the previous period it was negative. tfp growth in 2000–2008 was associated with inflation. the post-crisis period shows a significant reduction in the impact of ca and public debt. rising inflation and budget deficit have a negative impact on tfp growth. the impact of tfp on gdp growth decreases from 0.76 to 0.57, capital growth from negative to positive from -0.17 to 0.46, the impact of employment increases by 2 times. it can be concluded that macroeconomic indicators in the post-crisis period begin to influence economic growth, as defined in classical economic theory. in this paper, the contribution of total factor productivity to economic growth was calculated based on variance decomposition for two periods 2000–2008 and the post-crisis period 2009–2019 (based on annual changes in tfp and gdp growth) and the following results were obtained: for the first period the share of tfp was 89%, and for the second period – 43%. although there is a rather interesting phenomenon, when in some countries (czech republic, hungary, slovakia, slovenia) with a very significant loss of economic efficiency there was a parallel accumulation of capital. if to project this process to the aftermath of the 2008 crises, an interesting pattern is observed: the higher the rate of capital accumulation observed in 1991–1999, the lower the volatility of economic growth, measured by standard deviation, with a correlation coefficient of -0.75. this is a wise economic policy aimed at future economic achievements and sustainable development of the state. thus, a high level of capital is the foundation of sustainability of economic growth and its low volatility. according to the author, the monetary and financial crisis has shown the vulnerability of the cee economies to external shocks due to a significant dependence on foreign savings, so it is necessary to change the debt model to an innovative model of economic growth, stimulate domestic investment and savings, introduce new energy-efficient technologies to isolate the economy from external shocks. references: aghion, p., & howitt, p. 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(2015). inspiration vs. perspiration in economic development of the former soviet union and china (ca. 1920–2010). economics of transition, vol. 23(1), рp. 213–240. received on: 8th of september, 2022 accepted on: 11th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 75 vol. 3, no. 1, 2017 corresponding author: 1 department of management, private higher educational establishment “european university”. e-mail: diswork2016@mail.ru the conceptual framework of forming the product quality control strategy of road-building engineering enterprises mariia sadova1 private higher educational establishment “european university”, ukraine abstract. the purpose of the work is the need of the theoretical justification and the development of relevant scientific and methodological approaches to the management of the road production quality of machine-building enterprises; it led to the choice of research topics. methodology. taking into account the value of existing methods of quality management of road production engineering companies, currently a particular attention requires improvement of the quality control functions: analysis, evaluation, planning and quality control during the operation of road-building equipment, because existing economic practices and quality management approaches are built on classical principles of iso 9001, and in the practical application do not solve all of the drawbacks of traditional management models, but only smooth them a little. therefore, the formation of the quality management strategy for the road production of mechanical engineering is essential to ensure the competitiveness of products and enterprises of the road-building complex in the period of development of market relations in the economy. the results showed that the current market conditions impose strict requirements to all production areas of the society. especially stringent are requirements for the road construction, because the quality of the construction of the subgrade, covering roads and curbs, grading and soil compaction under different conditions of terrain and driving safety depends on people's lives. this factor determines the exceptional quality requirements for roadbuilding equipment, which must be reliable, functional and able to meet the totality of the design and operational characteristics of the road. further european integration of ukraine, deepening of external economic relations with the european countries are responsible for the growing needs of the national economy in the development and expansion of the transport network. however, large-scale road construction and repair of roads is impossible without the organization of effective operation of the road for mechanical engineering – heavy construction and earthmoving machinery. currently in our country present its own engineering manufacturers of road construction equipment (among large  – jsc "kredmash"), however, the domestic production of road is significantly inferior in terms of domestic consumption of products of foreign manufacturers of the road. despite the fact that the price of domestic producers less than of imported ones an average in three times, including bulldozers, scrapers, cranes, crawler cars more than 50% (komatsu, hitachi, mitsubishi and others.). practical implications. the practical significance of the results of the study identifies opportunities to improve the efficiency of traffic control products quality enterprises construction and road engineering. value/originality. implementation of the proposed methods and approaches to the formation of the quality of the machine-building enterprise management strategy for road construction will improve the efficiency of quality control processes and the level of enterprise competitiveness. key words: organization of production, firm strategy, production management, quality. jel classіfіcatіon: l23, l10, m11, l15 1. введение акт уальность исследования. современные условия рынка предъявляют жесткие требования ко всем производственным сферам деятельности общества. особенно жесткими эти требования предъявляются к области дорожного строительства, ведь от качества возведения земляного полотна, покрытия дороги и бордюров, профилирования и уплотнения грунтов в различных условиях рельефа местности зависит безопасность вождения и жизни людей. именно этот фактор определяет исключительные требования к качеству дорожно-строительной техники, которая должна быть надежной, функциональной и способной отвечать совокупности конструктивных и эксплуатационных свойств дороги. baltic journal of economic studies 76 vol. 3, no. 1, 2017 дальнейшая евроинтеграция украины, углубление внешнеэкономических связей с европейскими странами обусловливают растущие потребности национальной экономики в развитии и расширении транспортной сети. однако, масштабное дорожное строительство и ремонт дорог является невозможным без организации эффективной эксплуатации дорожной продукции машиностроительных предприятий  – тяжелой строительной и землеройной техники. в настоящее время в нашей стране представлены собственные машиностроительные производители дорожно-строительной техники (среди крупных  – оао «кредмаш»), однако, отечественная дорожная продукция существенно уступает по объемам потребления на внутреннем рынке дорожной продукции зарубежных производителей. несмотря на то, что цена собственных производителей ниже импортной в среднем в три раза, среди бульдозеров, скреперов, кранов на гусеничном ходу иномарок более 50% (komatsu, hitachi, mitsubishi и др.). данный факт объясняется низким уровнем качества и эксплуатационных характеристик отечественной дорожной продукции. как правило, такая продукция имеет большой вес, меньшую мощность и кпд. а такой показатель как остаточный ресурс машин для обеспечения безаварийной работы в заданный промежуток времени строительства дороги ниже на 30%, чем у дорожной продукции зарубежных машиностроительных производителей. поэтому проблемы повышения качества дорожной продукции машиностроительных предприятий актуальны. особую актуальность эти вопросы приобретают в условиях единого на сегодняшний день варианта выигрыша в конкурентной борьбе с зарубежными производителями за потребителя – это предоставление высококачественного послепродажного обслуживания. именно период эксплуатации дорожной техники следует рассматривать как систему управления показателями качества, на основе методов анализа, оценки, прогнозирования и контроля, обеспечивающих эффективное использование техники, поддержание ее в работоспособном состоянии с наименьшими затратами, а также уменьшение времени на вынужденные простои по техническим причинам и транспортировки дорожно-строительной техники к месту работы. методология исследования. принимая во внимание ценность существующих методов управления качеством дорожной продукции машиностроительных предприятий, в настоящее время особого внимания требует совершенствование функций управления качеством: анализ, оценка, планирование и контроль качества в период эксплуатации дорожно-строительной техники, ведь существующие экономические методы и подходы управления качеством построены по классическим принципам стандарта исо 9001, и в практическом применении не решают всех недостатков, присущих традиционным моделям управления, а лишь несколько их сглаживают. несмотря на то, что существует достаточное количество работ по проблемам управления качеством продукции, научные труды траченко л.а., мартыновой а.в., семчук ж.в., ставской ю.в., дубинина е., грозного и.с., толпежников р.а., фридмана к., кристенсена к., некоторые аспекты этой категории остаются недостаточно изученными. поэтому формирование стратегии управления качеством дорожной продукции машиностроительных предприятий является важнейшим условием обеспечения конкурентоспособности дорожной продукции и предприятий дорожно-строительного комплекса в период развития рыночных отношений в экономике страны. цель исследования. необходимость теоретического обоснования и развития соответствующих научно-методических подходов к управлению качеством дорожной продукции машиностроительных предприятий, обусловила выбор темы исследования. 2. предпосылки разработки концептуальных положений формирования стратегии управления качеством дорожной продукции машиностроительного предприятия как свидетельствуют результаты проведенного анализа уровня обеспеченности качества продукции на оао «кредмаш» в 2010-2015 гг. (табл. 1), особое внимание привлекают показатели уровня квалификации работников (среднее значение колеблется в пределах 30-40%), достаточно высоким в течение анализируемого периода является коэффициент сопротивляемости персонала организационным изменениям (более 60%), напротив низким является коэффициент вовлеченности работников в решении вопросов обеспечения качества процессов (не более 30%) и др. эти показатели являются одними из основных в управлении качеством продукции предприятия. достаточно низкий уровень анализируемых показателей качества продукции на примере оао «кредмаш» указывает на существование нерешенных в течение многих лет проблем в системе управления качеством, отсутствия действенных управленческих инструментов и концептуальной стратегии. однако, прежде чем перейти к процессу разработки стратегии, ее составляющих элементов, необходимо провести анализ существующих моделей управления качеством продукции машиностроительного предприятия для дорожного строительства, и с учетом выделенных преимуществ и ограничений в их использовании предложить авторский концептуальный подход. проблема управления качеством продукции решалась на протяжении многих лет. за последнее десятилетие значительный вклад внесли и отечественные baltic journal of economic studies 77 vol. 3, no. 1, 2017 ученые в исследовании данного вопроса. в частности, с точки зрения системного подхода, в работе (trachenko, 2008) траченко л.а. была разработана технология эффективного управления качеством, что нашло внедрение в производство на предприятиях различных под отраслей промышленности. так, автором с помощью метода статистического моделирования и прогнозирования по квартальным показателям в динамике на исследуемом предприятии было спрогнозирован брак продукции по разным его видам, а именно: производственный брак; экспедиционный брак; возврат продукции из торговли. данный подход позволил выработать стратегию по уменьшению брака продукции и повышения эффективности управления ее качеством. впервые проведены экспериментальные исследования на предприятиях пищевой промышленности с использованием технологии эффективного управления качеством продукции. идентифицировано параметры качества на первоочередные и второстепенные с определением степени влияния каждого параметра на ее уровень (trachenko, 2008). траченко л.а. предлагает идентифицировать факторы, влияющие на качество двумя способами: первый  – по стадиям технологического процесса; второй  – экспертным путем. не отрицая преимуществ предложенного подхода, по таблица 1 расчет показателей, которые характеризуют состояние обеспечения качества продукции оао «кредмаш» за 2010-2015 гг. № п/п показатель значение, % 2010 2011 2012 2013 2014 2015 1 уровень рациональности трудовых процессов 3 5 8 6 5 4 2 средний уровень квалификации сотрудников 35 32 36 40 35 31 3 уровень компетентности сотрудников в области качества 41 39 42 35 43 38 4 коэффициент вовлеченности работников в решении вопросов обеспечения качества процессов 29 31 30 28 34 29 5 удельный вес дополнительных выплат в общем заработка работников 38 32 36 40 37 31 6 уровень развития творческого потенциала 24 23 26 23 24 25 7 уровень прогрессивности труда 51 46 48 52 53 51 8 уровень качества труда работников 69 65 68 64 63 68 9 уровень автоматизации и механизации труда 49 51 52 50 47 50 10 уровень обслуживания рабочих мест 57 50 56 54 54 57 11 уровень оптимальности производственной структуры 42 40 41 43 42 44 12 коэффициент надежности работы оборудования (инструмента, оснастки) 39 38 36 35 37 38 13 уровень ремонтного обслуживания технических элементов производственных процессов 47 47 45 41 44 46 14 уровень специализации инфраструктуры 58 56 57 58 55 53 15 коэффициент пооперационного контроля 56 54 55 58 56 51 16 коэффициент обновления производственных процессов 46 47 46 49 51 48 17 уровень метрологического обеспечения 49 49 52 48 53 54 18 уровень мониторинга производственных процессов 59 63 62 64 65 61 19 уровень ритмичности 47 46 48 51 45 44 20 уровень технологичности процессов 64 62 63 64 66 65 21 уровень стандартизации процессов 62 63 65 64 61 59 22 уровень оптимальности организационной структуры управления 45 46 41 49 45 47 23 уровень культуры труда 53 52 56 54 61 58 24 уровень оптимальности структуры информационного обеспечения 64 64 68 62 67 61 25 уровень интеграции процессов 61 63 61 62 68 64 26 коэффициент своевременности корректировки процессов 60 58 57 63 61 59 27 коэффициент сопротивляемости персонала организационным изменениям 58 64 62 59 63 60 baltic journal of economic studies 78 vol. 3, no. 1, 2017 нашему мнению, существенным ограничением в его использовании будет сложность в идентификации именно каких корректирующих мероприятий требует система управления качеством и способа их актуализации. в другом исследовании (martynova, 2008), мартыновой а.в. был предложен адаптивный подход к управлению качеством продукции предприятия. в частности, автором было установлено, что качество продукции влияет на результаты деятельности предприятия, на выручку от реализации, затраты на исправление дефектов и качества. с целью определения эффективности управления качеством, мартыновой а.в. предложено использовать индекс качества, который учитывает уровень расходов предприятия на обеспечение качества и исправления дефектов в динамике за определенный период, динамику ценности и стоимости продукции для потребителя (martynova, 2008). для определения адаптивного подхода к управлению качеством продукции автором выделен уровень адаптации управления качеством продукции на предприятии. предложен цикл адаптивного управления качеством продукции, который включает следующие этапы: обеспечение системного управления качеством продукции; соответствие системы нормативно-правовому регулированию; разработка внутренних стандартов и технических условий; обеспечение надлежащего образовательноквалификационного уровня персонала; мотивация персонала к повышению качества; технологическая и техническая составляющая обеспечения качества; лабораторное и метрологическое сопровождение производственного процесса; организация системы контроля соответствия показателей качества установленному уровню; проведение анализа статистического массива данных по уровню качества продукции; соответствия требованиям стандартов, контрактов, потребителей; определение степени адаптации по соотношению «соответствие качества / затраты на реализацию адаптационных процессов»; разработка корректирующих воздействий на систему управления качеством продукции (martynova, 2008). к достоинствам предложенного подхода можно отнести способность системы управления качеством продукции приспосабливаться к изменениям, происходящим во внешней среде, что становится возможным в рамках разработанного адаптивного подхода. однако, использование в «чистом виде» предложенного подхода становится сложным в силу отсутствия алгоритма распознавания изменений, происходящих во внешнем окружении предприятия, приоритетность этих изменений и др. в работе (burdelna, 2010) бурдельной г.а. разработаны концептуальные основы формирования модели системы управления качеством продукции предприятия с учетом отраслевых особенностей, включая продолжительность циклов разработки продукции, необходимость привлечения долгосрочных банковских кредитов, современные методы и инструменты государственного регулирования отрасли, которые позволяют обеспечить комплексный подход к использованию системы менеджмента качества процесса планирования, организации и контроля качества на основании применения информационных технологий, основанных на принципах непрерывного поддержания качества на всех стадиях жизненного цикла изделий (burdelna, 2010). в частности, автором было проведено обоснование содержания и составляющих механизма управления качеством продукции промышленного предприятия, включая восемь основных блоков: маркетинговых исследований; разработки политики в сфере управления качеством; планирование качества; учет внешних условий влияния на качество; принятие решений по управлению качеством; учет факторов на качество в процессе производства; блок сбора, обработки и хранения информации о фактическом качестве; блок контроля качества, что позволит достичь максимального удовлетворения требований покупателей и будет способствовать повышению конкурентоспособности изделий и спроса на них. следует заметить, что предложенный бурдельной г.а. подход к управлению качеством продукции по содержанию относится к более классическим традиционным методам управления качеством, актуальность которых в современных условиях вызывает противоречия. комплексный подход к управлению качеством продукции промышленного предприятия предложен семчук ж.в. в работе (semchuk, 2011), основу которого составляют отдельные аспекты процессного, системного и ситуационного подходов и принципа всеобъемлющего менеджмента, призванного объединить процедуры оптимизации персонала с общей системой управления деятельностью машиностроительных предприятий (semchuk, 2011). также автор акцентирует особое внимание на методе оптимизации системы управления качеством, которая основана на компетентности и повышении роли работников измерительных лабораторий, а также на существенное уменьшение вероятности возникновения конфликтных ситуаций в подразделениях машиностроительных baltic journal of economic studies 79 vol. 3, no. 1, 2017 предприятий (semchuk j., 2011). преимуществом в использовании предложенного подхода является метод, позволяющий аккумулировать кадровые ресурсы в достижении стратегической цели организации  – повышение уровня качества выпускаемой продукции. однако, существенным ограничением во внедрении данного подхода является дефицит квалифицированных кадров, способных к управленческим нововведениям в области качества. настаивает на методе стандартизации в качестве основного в системе менеджмента качества продукции ставская ю.в. в работе (stavska, 2011), где автором обоснована необходимость перехода от стандартизации разрозненных объектов к созданию комплекса взаимосвязанных стандартов, что позволит обеспечить возможность для повышения качества продукции предприятия с учетом требований международного рынка. так, автором предложено создание единой полнотекстовой электронной базы стандартов, доступ к которой будут иметь все производители через телекоммуникационные сети, для обеспечения постоянной актуализации фонда стандартов в сельскохозяйственных предприятиях, удаленных от областных центров, и внедрение систем управления качеством сельскохозяйственной продукции (stavska, 2011). преимуществом в использовании предложенного подхода является возможность снижения себестоимости выпускаемой продукции за счет уменьшения количества брака, однако существенной сложностью в практической реализации данного подхода является управление качеством продукции только по стандартам, без учета таких функций управления как анализ, прогнозирование и контроль качества продукции. с точки зрения маркетингового подхода к управлению качеством, в работе (tolpezhnikov, 2004) толпежниковым р.а. была разработана концепция маркетингового взаимодействия, которая предусматривает взаимодействие маркетинговой службы не только с потребителем, но и со всеми подразделениями предприятия, которые формируют качество продукции. автором предложена комплексная модель маркетингового управления качеством, составными элементами которой являются: стратегический маркетинг качества продукции; проактивное и реактивное усовершенствование качества продукции; оценка результатов деятельности по качеству продукции (tolpezhnikov, 2004). далее в исследовании толпежниковым р.а. предложены усовершенствованные методические рекомендации по: определению и анализу маркетинговых целей в области качества; предоставлено методику планирования качества, которая предусматривает определение показателей качества, которые являются неподходящими с точки зрения потребителя; разработана методика определения уровня маркетинговой составляющей качества и др. (tolpezhnikov, 2004). в условиях усиления рыночных отношений и конкурентной борьбы за потребителя, применение маркетингового подхода к управлению качеством продукции является актуальным. поддержание обратной связи с потребителем в процессе эксплуатации изготовленной продукции по назначению и определения уровня качества отдельных ее характеристик способствует расширению информационной базы для качественных критериев, которые необходимо учитывать при производстве. именно некоторые аспекты предложенного маркетингового подхода могут быть использованы в рамках нашего исследования. 3. концептуальные положения формирования стратегии управления качеством продукции предприятий дорожно-строительного машиностроения концептуальные положения формирования стратегии управления качеством продукции предприятий дорожно-строительного машиностроения для дорожного строительства приведены на рисунке 1. таким образом, для формирования стратегии управления качеством продукции машиностроительного предприятия для дорожного строительства, которая может быстро реагировать на изменяющиеся факторы необходимо провести следующие мероприятия: 1. провести анализ и оценку реального состояния системы управления качеством продукции машиностроительного предприятия для дорожного строительства. определить основные проблемы, влияющие на эффективность управления качеством предприятия, причины и природу их возникновения. на основе полученных результатов анализа и оценки состояния системы управления качеством предприятия, выявить потенциальные возможности ее совершенствования и пересмотреть цели предприятия в области качества. 2. розработать методический подход к прогнозированию влияния внутренних и внешних факторов на достижение установленных целей качества продукции машиностроительного предприятия для дорожного строительства. 3. проводить контроль качества на каждом этапе жц дорожно-строительных работ, контроль подготовки и принятия конструктивно-технологических и организационных решений. 4. розработать организационное и информационное обеспечение реализации стратегии управления качеством продукции машиностроительного предприятия для дорожного строительства. baltic journal of economic studies 80 vol. 3, no. 1, 2017 с учетом предъявляемых требований к разработке стратегии управления, специфики деятельности предприятий дорожного строительства, на рис. 1 представлена авторская разработка формирования стратегии управления качеством продукции машиностроительного предприятия для дорожного строительства. 4. выводы таким образом, формирование стратегии управления качеством продукции машиностроительного предприятия для дорожного строительства зависит от многих факторов и условий: степени прогрессивности конструкторских разработок и качества исходных материалов; совершенства планирования и соблюдения технологической дисциплины; механизма стимулирования, рационального подбора и расстановки кадров; организации труда, качества работы исполнителей; метрологического обеспечения производства; аттестации продукции, организации службы контроля. стратегия управления качеством продукции машиностроительного предприятия для дорожного строительства основывается на следующих положениях. 1. управление качеством продукции машиностроительного предприятия для дорожного строительства осуществляется на всех стадиях жизненного цикла: ее уровень закладывается на стадии проектирования и разработки (на основе передовых достижений науки и техники), достигается в процессе производства (на основе прогрессивной технологии и принципов бездефектного изготовления и бездефектного труда) и поддерживается на стадии эксплуатации (на основе регламентированных условий и форм обслуживания). 2. формирование стратегии происходит на основе принципов общей теории управления. она представляет собой замкнутый контур. основные элементы контура  – планирование уровня качества; сбор, обработка информации, оценка на ее основе фактического уровня качества и сравнения его с заданным; разработка управляющих мероприятий, направленных на обеспечение заданного уровня. реализация предложенных методов и подходов по формированию стратегии управления качеством продукции машиностроительного предприятия для дорожного строительства позволит повысить эффективность процессов управления качеством и уровень конкурентоспособности предприятия. рис. 1. концептуальные положения формирования стратегии управления качеством продукции предприятий дорожно-строительного машиностроения baltic journal of economic studies 81 vol. 3, no. 1, 2017 references: trachenko, l. (2008). improved quality control in the food industry: extended abstract of cand. sci. (eng.) dissertation: 08.00.04. odes. state. econ. univ. – 19 p. martynova, o. (2008). formation of adaptive system of quality control wool processing companies: extended abstract of cand. sci. (eng.) dissertation: 08.00.04. kiev. nat. university of technology and design. – 20 p. burdelna, g. (2010). quality management industry: extended abstract of cand. sci. (eng.) dissertation: 08.00.04. azov. state. sc. univ. – 20 p. semchuk, j. (2011). development of quality management engineering companies: extended abstract of cand. sci. (eng.) dissertation: 08.00.04. l’viv. university of business and law. – 24 p. stavska, y. (2011). quality management poultry production enterprises in globalization: extended abstract of cand. sci. (eng.) dissertation: 08.00.04. nat. university of life and environmental sciences of ukraine. – 21 p. tolpezhnikov, r . (2004). marketing quality control of industrial enterprises: extended abstract of cand. sci. (eng.) dissertation: 08.06.01. azov. state. sc. univ. – 18 p. мария садова концептуальные положения формирования стратегии управления качеством продукции предприятий дорожно-строительного машиностроения аннотация. целью работы является необходимость теоретического обоснования и развития соответствующих научно-методических подходов к управлению качеством дорожной продукции машиностроительных предприятий, обусловила выбор темы исследования. методика. принимая во внимание ценность существующих методов управления качеством дорожной продукции машиностроительных предприятий, в настоящее время особого внимания требует совершенствование функций управления качеством: анализ, оценка, планирование и контроль качества в период эксплуатации дорожно-строительной техники, ведь существующие экономические методы и подходы управления качеством построены по классическим принципам стандарта исо 9001, и в практическом применении не решают всех недостатков, присущих традиционным моделям управления, а лишь несколько их сглаживают. поэтому формирование стратегии управления качеством дорожной продукции машиностроительных предприятий является важнейшим условием обеспечения конкурентоспособности дорожной продукции и предприятий дорожностроительного комплекса в период развития рыночных отношений в экономике страны. результаты исследования показали, что современные условия рынка предъявляют жесткие требования ко всем производственным сферам деятельности общества. особенно жесткими эти требования предъявляются к области дорожного строительства, ведь от качества возведения земляного полотна, покрытия дороги и бордюров, профилирования и уплотнения грунтов в различных условиях рельефа местности зависит безопасность вождения и жизни людей. именно этот фактор определяет исключительные требования к качеству дорожно-строительной техники, которая должна быть надежной, функциональной и способной отвечать совокупности конструктивных и эксплуатационных свойств дороги. дальнейшая евроинтеграция украины, углубление внешнеэкономических связей с европейскими странами обусловливают растущие потребности национальной экономики в развитии и расширении транспортной сети. однако, масштабное дорожное строительство и ремонт дорог является невозможным без организации эффективной эксплуатации дорожной продукции машиностроительных предприятий  – тяжелой строительной и землеройной техники. в настоящее время в нашей стране представлены собственные машиностроительные производители дорожно-строительной техники (среди крупных  – оао «кредмаш»), однако, отечественная дорожная продукция существенно уступает по объемам потребления на внутреннем рынке дорожной продукции зарубежных производителей. несмотря на то, что цена собственных производителей ниже импортной в среднем в три раза, среди бульдозеров, скреперов, кранов на гусеничном ходу иномарок более 50% (komatsu, hitachi, mitsubishi и др.). практическое значение. практическую значимость результатов исследования определяют возможности повышения эффективности управления качеством дорожной продукции предприятий строительно-дорожного машиностроения. значение/оригинальность. реализация предложенных методов и подходов по формированию стратегии управления качеством продукции машиностроительного предприятия для дорожного строительства позволит повысить эффективность процессов управления качеством и уровень конкурентоспособности предприятия. baltic journal of economic studies 43 vol. 3, no. 2, 2017 corresponding author: 1 department of business economics and human resource management, yuriy fedkovych chernivtsi national university. e-mail: i.zrybneva@chnu.edu.ua 2 department of theoretical economics, management and administration, yuriy fedkovych chernivtsi national university. e-mail: t.zavolichna@chnu.edu.ua perspectives to the liberalization of the agricultural land market in ukraine iryna zrybnieva1, tatyana zavolichna2 yuriy fedkovych chernivtsi national university, ukraine abstract. the liberalization of ukrainian agricultural land market does not lose their relevance in the process of the european integration. ukraine’s transition to the free market of agricultural land requires a theoretical substantiation. the scientific research of modern european approaches to the regulation of the agricultural land market is needed. the purpose of this research is an analysis of the formation and development prospects of the agricultural land market, identifying the possible consequences of the moratorium removal on the purchase and sale of agricultural land, and the search for an acceptable variant of further development land reform policy in ukraine. the theoretical basis and features of the functioning of the agricultural land market of some european countries that will provide the ability to extrapolate these data into ukrainian practice are explored in this research. it is expected that many trends are common to the markets of the land of ukraine and neighbouring countries. fundamentals of forming effective and transparent agricultural land market require the creation of understandable and clear mechanisms for the regulation of land use systems at various levels. methodology. in this research are used historical-comparative and logical-dialectical methods for investigating the theoretical foundations and the main determinations of the agricultural land market in ukraine. features of circulation of agriculture land plots in ukraine are submitted. the authors used a system-structural method and a comparative analysis method to justify and compare the indicators of agricultural land use efficiency in ukraine and some of the european countries. results. the economic effect of the prospects of liberalization of the agricultural land market in ukraine is assessed. the determinate hypotheses about perspectives of agricultural land liberalization in ukraine are argued. practical implications. the conducted research allows stating that to date, all risks and fears of land market liberalization are insignificant in comparison with the benefits that ukraine may have in the coming years. an analysis of international experience shows that the reform of the land market was often conducted during the period of economic crises and it was the liberalization of land markets that facilitated the restoration of economies. this should be an incentive for modern ukraine, to choose finally an approach to market liberalization of agricultural land as a promising way to effectively implement its resource potential. key words: liberalization of agricultural land market, land relations, land circulation, land evaluation, cumulative effect, ukraine. jel classification: e02, h83, q15 1. introduction the post-industrial shift has significantly influenced the development of productive forces and production relations in the economic systems of the world, implicitly having changed the ideological guidelines of the peasantry, government, and society on the development of land relations in the direction of the idea of economic and ecological and social efficiency of agriculture. in the european countries that are eu members, hosted a shift in public agricultural policy on diversification of economic and legal mechanisms of the functioning of the market-based circulation of agricultural land in order to meet the new agro investors. for ukraine, the same land is the most valuable national wealth and powerful potential competitive resource. in terms of the quality level of the land  – the presence of black soil  – ukraine takes the fourth place in the world: russia  – 145.4 million hectares (46.3%); the united states  – 55.1  million hectares (17.6%); china is 38 million hectares (12.1%), ukraine  – 27.8 million hectares (8.7%); all other countries  – 15.2% (petrychenko, 2013). taking into account the fact that the total area of the world’s black soil is only 314 million hectares or 2.4% of all soils and the fact that, in many countries, baltic journal of economic studies 44 vol. 3, no. 2, 2017 there is no black soil altogether (such as norway and the netherlands) or its area of scant (as in neighbouring poland is about 1% of the territory) then after the expiration of the moratorium in ukraine, there will be a new potentially powerful free market of agricultural land in europe. therefore, the study of the actual state of the land market in ukraine is causing great interest in both domestic and foreign investors. 2. analysis of recent research and publications the problems of the theory, methodology, and practice of the land transformation to the market found their reflection in the treatises of dudych m., zayats v., zinchuk t., zos-kiora m., martin a., mesel-veseliak v., pronina o., skydan o., tretiak a., fedorov m., khodakivska o., sharoh h., ahner d., gliessmann  s., swinnen j., ciaian p., kancs a., van herck k., vranken l. however, by this time, the unity of thoughts concerning the problems of a complex formation and functioning of the liberal land market was not achieved in terms of geopolitical changes both in ukraine and in the countries of the post-industrial economy. 3. the statement of the problem modern agricultural transformation in ukraine’s economy is focused on the removal of the moratorium and the launch of the free agricultural land market which, according to scientists, is able to feed 300 million people. it is a powerful resource for the restart and the development of the agricultural sector and the economy as a whole that involves attracting investment, creating jobs, stabilizing the banking system, the growth of profits. in general, in the agricultural sector today, you can already invest more than in the whole of europe, which is currently checked. on the correctness of the chosen model of the free agricultural land market in ukraine, the effectiveness of the implementation of this diverse land resource potential will depend. despite the high fertility and the world’s highest degree of land resources involvement in the economic circulation in ukraine, it is still unable to carry out the transfer of land in the possession of effective landowners and turn it into a key factor of economic growth. the question of property and land prices is sharp and speculative since it simultaneously represents both conflicting public fears and business interests. that is why the moratorium on the sale of agricultural land has been around for over 16 years, despite the fact that the introduction of a free agricultural land market can improve the well-being of tens of millions of ukrainians. in the overview perspective of the strategy of forming a liberal land market in ukraine, it cannot be considered as an end in itself but should be determined as a combination of the requirements of the market and the environment, maintain their dynamic equilibrium, respond to external and internal challenges, and reflect the interests of all participants in the land. in the context of the positive example, it is worth to explore international experience and different ways of creating and functioning of agricultural markets. therefore, the search for approaches to the liberalization of the agricultural land market belongs to the most urgent of the scientific view of the tasks that have to confirm or deny the existing hypothesis: 1. are the agricultural land market and circulation of lands of identical categories? 2. the price of agricultural land in ukraine after the termination of the moratorium will terribly increase. will the ratio of rents and prices be the same as in the eu? 3. whether to allow the free sale to foreign investors, domestic holdings? after the abolition of the moratorium on land, will they buy it from the peasants for next to nothing? 4. will liberalization of an agricultural land market turn the raw appendage? increase the shadow sector of the national economy? based on these positions, the main problem of scientific discussions and practical action is to find the methods, mechanisms, and instruments for the combination of positive international experience of the agricultural land market functioning of the historical features of the ukrainian civilization development and national traditions to create an incentivized, effective landowner. 4. the theoretical foundations and main determinations of the agricultural land market for the study of liberalization of the agricultural land market issues in ukraine, first, we must give a clear division of categories, which will operate: “land relationship”, “agricultural land”, “agricultural land market”, “circulation of agricultural lands”. today, the concept of “land relationship” continues to cause an active debate in the scientific circles. in most cases, the land relations are associated with the category of “property”, analysing the aspects of the assignment of the land as the economic benefits of those or other subjects. in particular, bochkov m. defines the land relations as relations in the field of ownership, disposal, and use of the land as the “means of production”, and zhylenko k. determines land relations as “public relations”, composed of subjects of economic activity as a result of the management of the land fund, through the use, disposition, and possession of land as object and subject of economic activity that are influenced by the regulatory organizational and economic mechanisms, nosik v. focuses on the “management approach” to the definition, shulha m. emphasizes the “ecological component” of the contents of the land, and according to hutsuliak h. land relations are “an element baltic journal of economic studies 45 vol. 3, no. 2, 2017 of industrial relations, society, and a social nature belong to the economic base of society”. broader views respected hlistun v. and uliukaev v. who interpret land relations in the “functional approach”, arguing that with land ownership forms an important aspect of land relations is a form of land management, which largely depend on the form of ownership on the ground but are characterized by a system of political, socioeconomic, legal, and administrative measures aimed at organizing the land (zavolichna, 2016). the modern definition of land can be found in the writings of tretiak a.: “land relations are public relations between state authorities, local authorities, citizens, and legal entities regarding the possession, use, and disposal of land plots and state management of land resources of ukraine” (tretiak, 2011). the land code of ukraine (verkhovna rada ukrainy, 2001) defines agricultural lands purposes as lands granted for the production of agricultural produce, agricultural research, and training activities, the corresponding production infrastructure or intended for these purposes. thus, agricultural lands include farmland (arable land, perennial plantations, grasslands, pastures, and fallows) and non-agricultural land (commercial ways and purlins-protecting forest strips, and other protective plantings, other than those assigned to the forestry land destination, the ground under the farm buildings and houses, temporary preservation). note that the object of our research is only a farmland. in scientific discussions and in accordance with the existing ukrainian practice, notions of “market” and “circulation” of land are very often mixed together, unlike the practice of the old eu countries. because the reform of the agricultural land market in ukraine began only in 1990, and, for example, the history of the development of the open liberalized land market in the uk is more than 200 years old. a part of domestic scholars interprets the concept of “agricultural land market” as more widespread than the circulation of land because, in addition to the system of agreements (operations), it also includes the mechanisms and infrastructure. it is considered that the circulation is a set of operations, and the market is the operation mechanisms and infrastructure. the rest of the scholars on the contrary consider that the land market is a part of the land, which includes only certain operations, such as the purchase and sale of land (shares), letting them rent and mortgage loan, receiving compensation when land is ejected for the state and public needs (zaiats, 2012). regarding the economic entity of land market, we are close to the idea of economist carl polanyi (polanyi, 1944) that the land market is a set of real interactions between sellers and buyers of land plots, lease rights, also institutions and organizations that provide and limit the freedom of such interactions. accordingly, we believe that the organizational structure of the land market consists of 3 components: 1) peer interactions (sale, lease, exchange, mortgage, and inherit land); 2) objects (land, property rights and securities, the basis of whose lying plots or rights); 3) subjects of the market (sellers (owners), buyers). under the land circulation, we understand the totality of transactions with land plots that are performed in accordance with the norms of civil and land laws by entering into civil-legal transactions and registered by the competent state authorities. moreover, the circulation of land can be both market and non-market. the market circulation is when the transition of land rights between the subjects of the action takes place according to the law of supply and demand and makes sure the contract of sale or lease agreement. nonmarket circulation of land-ownership is the transaction of rights by inheritance, gift or easement without regard to demand and supply. therefore, we believe that the category of “land circulation” is wider than the category of the agricultural land market. according to the draft of law of ukraine “on turnover of agricultural land” (verkhovna rada ukrainy, 2016): the land market is a system of relations between the owners of land (the rights to them), and people who acquire the right to land, public authorities, government privatization, and local governments relating to the conclusion, execution, change, and termination of civil-legal agreements, which include the alienation of land or rights to them. in turn, the circulation of land (their rights) is the switch of rights to land from one person to another on the basis of contracts, including those concluded by the results of the land trades. 5. features of circulation of agriculture land plots in ukraine based on the specified definitions and aggregated statistical data (table 1), we can conclude that, in ukraine, the circulation of land plots, especially its non-market part, has existed since 2000 and is one of the largest in europe  – 7 million citizens entitled to privatization of 28 million hectares of land shares, a transaction, which draw mainly through inheritance. and market of agricultural land is still being formed because the owners of the agriculture land plots remained the owners only on paper, and they cannon dispose the land as the property due to the introduction on 1 january 2002 of the moratorium on the sale of agricultural land. therefore, it is reasonable to conclude that in ukraine in 2002-2016 years, agricultural land was given but the rights to dispose it as valuable property as real estate, transportation, privatization vouchers, any other private assets were not given. from a legal point of view, this is a pure discrimination, restrictions on the constitutional rights of citizens of ukraine to be stewards of their private property on the ground. privatization of this baltic journal of economic studies 46 vol. 3, no. 2, 2017 asset in ukraine, unlike neighbouring states in eastern europe, caused the emergence of a new market. the moratorium was introduced as a temporary measure until the regulatory-legal base of the alienation of the land converts it into a fully-fledged market asset and it will not be sufficiently balanced. the moratorium is valid for 16 years and hampered the economic development of both ukraine and every potential seller-buyer in europe. taking into account the natural-resource potential, the growth of world demand, cheap labour, and proximity to potential markets, ukrainian producers of agricultural products are rubble competitive in the world market. according to experts of the world bank in an innovative approach to the use of agricultural land, ukraine may increase export of products already in 2020 up to $27 billion that is, double the figure by 2015. after all, ukraine occupies the first place in europe in the area of arable land, which is 41.5 million hectares, that is 30% and 2.4% in the world. in the structure of ownership of private property dominated by the state  – 74% and 26% respectively. more than 50,000 firms leading economic activity in the agricultural land market. according to the international monetary fund (imf) estimates, the cancellation of moratorium in ukraine will lead to the creation of a robust land market that will generate a $14-40 billion of the money supply in circulation, expected aggregated income of the population in the next 10 years from the sale will be $8-25 billion and from rental – $7-15 billion. this will lead to the average annual growth of ukraine’s gross domestic product (gdp) to 7.1% (easybusiness, 2015). so, a moratorium on the sale of agricultural land development is emphasized by changes in ukraine. note that ukraine is not the only country in europe where the following the moratorium was introduced but it did not last long and the country managed to move on to better market methods of land tenure. 6. assessment of the status and effectiveness of the use of agricultural land the experience of the forming of free agricultural land market of european countries can be divided into two groups: countries with a similar model of management to ours (bulgaria, poland, romania, hungary), and countries similar to classical westernmarket model (united kingdom, denmark, spain, germany, netherlands, france, sweden). making an analysis of approaches and results of the formation of the agricultural land market in europe, we have pulled together these indexes (table 2), sample calculations based on the economic entity ratio “cost of sale” and “the price of rent” of the land. the price for sale in well-developed markets reflects the “capitalization of the rental value of the land”. thus, countries with low-interest rates and more accessible markets loans will have higher prices on the ground. in addition to the interest rate, better protection of the rights of land ownership (for example, the formal registration and control over the execution of the law) also contribute to higher prices. but the distortions (e.g., restrictions on the size of land in ownership or use, restricted access to purchase land, taxes) will reduce the price. the possibility to rent the land and use it as collateral, as well as subsidies to producers, can also increase the value of the land and the price. all these factors affect the ratio of rent to prices (martyn, 2011). an analysis of indicators of the first group showed that all states that had close to ukrainian economic model that was based on collectivization, held the land reform in the early 1990s by restitution or an allocation of lands with eventual liberalization to foreign capital. all of these economies are gradually introduced or fully open land market, or market with partial restrictions. this transformation has led to a decrease in the share of agriculture in gdp but caused the growth of profitability and performance of the agro sector. we believe that an alternative example among the countries of central and eastern europe are the balkans and the baltic states. as a consequence, in these countries, the price of land (which is worse than the quality compared to ours) is governed by the basic principles of the market and exceeds the ukrainian figure several times. accordingly, the rates are much higher for the rent of land. so, we have $37 in ukraine, where the land market is frozen by actions of the moratorium  – against $300 in the countries of the former social unit, where there is a mechanism of liberalization and open markets. table 1 transactions of ownership on the agricultural land plots are certified indicators 2001 2005 2010 2014 the number % the number % the number % the number % notarized change of ownership 425894 100 924533 100 1257462 100 1373780 100 including inherited 324898 76.29 813956 88.04 1145073 91.06 1261129 91.80 presented 87565 20.56 95157 10.29 95503 7.59 95606 6.96 exchanged 754 0.7 2393 0.26 2760 0.22 2864 0.21 sold 12677 2.98 13027 1.41 14126 1.12 14181 1.03 data concerning the number of certified transitions of ownership of the agricultural land plots are cumulative since 2001 (national report on the completion of land reform, 2015) baltic journal of economic studies 47 vol. 3, no. 2, 2017 in the developed countries of western europe, land reform lasted a few decades but has not been associated with the provision of a full range of landowners’ rights to ownership of private property. the main problem was there to create a balanced market in a post-industrial, attraction of direct investments in the agricultural sector, and the motivation of farmers to produce products with high added value. as it can be seen from table 2, the ratio of rent to the price of land in the eu varies from 0.06% to 5.99% (average  – 2.01%), which is a positive result. we may conclude that developed countries of the eu coped with this in using the libertarian way by removing all the restrictions on the participation of foreign capital or price regulation. even in the countries where traditionally influential “keynesian lobby” was decided not to be an experiment with agriculture and shifted partial regulatory control to local self-government units (the report of the world bank and the united states agency for international development, 2014). 7. perspectives to the liberalization of the agricultural land market in ukraine taking into account the european experience, we can predict that the development of the market for the sale of agricultural land in ukraine after the removal of the moratorium will be determined by two main factors: the availability of capital and the list of constraints that will be spelled out in the law on circulation of land. based on this statement, we can deny the myths of fear and make some hypotheses about the prospects for the liberalization of agricultural land in ukraine: 1. according to the study by the kiev international institute of sociology, only every sixth ukrainian supports the moratorium. main fears of shares owners are low prices of land, the pressure on the sale of land, and fraudulent schemes to purchase but the paradox lies in the fact that more than ½ respondents in general and ⅓ shares owners expect the moratorium will bring benefits to the economy of the state (nivievskyi & nizalov & kubakh, 2016). in fact, it is a moratorium, the high cost of servicing the land bank and difficult access to capital annually “steal” from the 7 million owners of shares up to 90% of potential income. there is a myth that the ukrainian land market will be passive because of the low income of the owners of agricultural land, who mostly are retirees. the argument of the objections to this hypothesis is that a feature of the market is that a large part of ukraine is handled not by the owners but tenants. so there are reasons to argue that the land market in ukraine will not be inert. probably, the percentage of land that will be the subject of agreements will be higher than in most european countries (perhaps about 5% after the initial stabilization, a liberal regulation after the removal of the moratorium). on the other hand, most of the land deals in other countries are funded by the banks. and in ukraine, land loans are actually there. this factor will restrain demand for land. it is advisable to wait for a large number of transactions in the first 23 years after the opening of the market sales (5-7% depending on the availability constraints). the reason will become a speculative demand and attempts to legalize previously made informal agreement. table 2 assessment of the status and effectiveness of the use of agricultural land in europe country total area (thousand hectare) the area of arable land (thousand hectare) the share of agriculture in gdp (%) land in private property (%) the share of rented land (%) the average price of the sold land ($/hectare) rents, ($/ hectare) the ratio of rent and sale price (%) regulation of rents bulgaria 11100 3300 5.2 98 90 4650 187.5 4.03 market united kingdom 24290 6200 0.7 90 41 31400 275 0.86 on arbitration denmark 4310 2400 1.4 98 24 26650 725 2.72 market spain 50600 12400 2.5 70 33 16100 225 1.39 local law netherlands 4150 1000 1.1 89 38 63700 625 0.98 law germany 35700 11800 0.4 49 68 32300 219 0.67 law poland 31270 10900 3.2 81 28 10300 314.6 3.05 market russian federation 1707540 119800 2.4 39 88 1150 37 3.21 law romania 23840 8800 5.4 94 46 6150 120 1.95 market ukraine 60350 41500 12.0 73.5 62.3 moratorium 37 law hungary 9300 4400 4.3 86 64 4500 125 2.77 market france 55150 18300 1.1 80 84 7450 205 2.75 law sweden 45000 2600 1.4 91 44 9800 157.3 1.60 7-9% of the cost of sales source: formed by the authors based on: (easybusiness, 2015; the report of the world bank and the united states agency for international development, 2014; сiaian & d’artis kancs & swinnen & van herck & vranken, 2012; eurostat, savills, national statistical institute of republic of bulgaria, central statistical office of poland, the german agricultural society (dlg), teagasc, 2016) baltic journal of economic studies 48 vol. 3, no. 2, 2017 2. there are two opposing hypothesis regarding the rapid growth/decline of prices for land and its lease after the removal of the moratorium in ukraine. as for prices on agricultural land in the neighbouring countries of the eu, they are very different: the highest price recorded in the netherlands (more than $60 000 per hectare); in most west european countries, prices range from $15 000 to $30 000 per hectare, while in eastern europe from $1 000 to $5 000 per hectare. accordingly, it is expected that the price of land in ukraine will be significantly lower than in western countries, however, on the same level of prices as in eastern europe. for example, in romania, which has only recently (at the beginning of 2014) liberalized its market and is very similar to ukraine for the fertility of the land, today the average price of a hectare is more than $6150. if the ratio of rental rates for land in ukraine it will be the same as in the eu, we can make a prediction that if for the next 5 years we will be at least at the level of $3500–$5000 per hectare, we will create an asset worth $125 billion (nivievskyi & nizalov & kubakh, 2016). such a possible economic effect discards all inert fears the owners of the shares. 3. after the abolition of the moratorium, foreign investors and domestic agroholdings will buy the land from peasants for next to nothing. as evidenced by the experience of neighbouring countries, this myth is a great exaggeration. first of all, the pain is in the first 5-10 years of liberalization as the market is only opened to citizens and legal entities and residents in poland, romania, estonia, the czech republic, and slovakia. in ukrainian bills, the similar reservations about the participation of foreign capital in the sale of agricultural land are also planned. second, it is a bad idea not to let foreigners into the market because it can adversely affect the value of the land and losses the owners of the shares. just in the same way it happened in the canadian province of saskatchewan in 1974, when a province limited the maximum amount of farmland that can be non-resident, the price of land fell by $10-85 per hectare (voxukraine, 2017). for hypotheses about the benefit of large domestic holdings, everything is contrary. the experience of neighbouring countries  – poland, the czech republic, and slovakia shows that the free market is an incentive to the development of small and medium-sized agribusiness. one way that promotes the development of farms is to limit the area of land that can be owned by one person. in poland, the law limits the size of land parcels up to 500 hectares; in hungary  – up to 300  hectares; in slovakia, the average size of plots is 0.45 hectares. in ukraine, the situation is fundamentally different because the price of land sets no market and it is formed on the basis of the standard evaluation, which can be both lower and higher than the market. the low price of the lease allows the agroholdings to accumulate large areas of land bank. because of the lack of liberal land market, mechanisms are quite monopolized, that is the 100 largest companies accounted for 6.5 million hectares rented arable land (20% of the land), the range of arable lands in the possession of the loan top-10 companies ranges from 150 to 654 thousand hectares, whereas only 1% of land resources on areas of less than 20 hectares (easybusiness, 2015). 4. actually, the shadow of the land market, associated with the sale of land, exists today. most often it is evident in the design of “contracts for 50 years and emphyteusis”. according to the latest estimates of the association “ukrainian agribusiness club”, the volume of the market is from 10 to 12 billion uah a year. and then adopted in 2015 restrictions on the minimum term of the lease at a level of 7 years relocated shortterm lease relations in the shadow sector. in addition, over 2 million hectares of land collective ownership and heritage is generally used on the conditions at the time. the presence of contradictions and conflicts of interests of state bodies and bodies of local self-government at different levels of the administration of land relations promote the distrust to them and to the bribery. the results of an independent nationwide survey indicate that a significant number of respondents for solving land issues, paid bribes when they received services in law enforcement agencies (49%), land services (25%), registration and licensing services (22%), courts (21%), tax (18%), municipal enterprises (6%) (transparency international, 2013). therefore, it is believed that one of the most important consequences of the introduction of a transparent land market will be exactly the settlement rights of ownership and use. firstly, the owners and users will no longer need to “circumvent paying bribes” moratorium and increase the shadow market. secondly, those owners who will not be able to handle the ground or will be unprofitable will be able to sell the land to a more effective farmer. the hypothesis that the moratorium on the trade of agricultural land will transform ukraine into a raw appendage of developed eu contradicts the economic theory. in a market economy, agricultural land does not have a fixed cost, their price changes under the influence of a large number of factors, the main of which is the profit on the land (actual or expected) or annuity; the alternative costs of capital; inflation. therefore, a rational land user or investor who is considering buying a land compares the cash flow of expected residual income from land with alternative capital costs or alternative income from real estate or financial investments. a potential investor usually optimistically estimates the perspectives of their own economy to increase productivity and yields, so goes on the intensive methods of managing and expanding the range of additional investment. according to imf, it is estimated that the cancellation of moratorium may already happen in the next 5-10 years, direct investment only lead to purchase of land in the $25-50 billion. baltic journal of economic studies 49 vol. 3, no. 2, 2017 approximately the same amount may be granted in the form of financing under the security of land, 85% of which can go to the development of the ukrainian small and medium business in the village. it is important to focus on the fact that when such investment volumes and the corresponding correction of tax issues will appear, tax on agricultural land could annually bring in ukraine during this period 50-60 billion uah, tax on transactions with the ground 5-10 billion uah, taxes from economic activity of related businesses and overall growth of the economic activity of the rural population is still 10-20 billion uah. as the experience of europe, free agricultural land market leads to another effect that is the creation of new jobs. the increase in direct investment has a direct effect on increasing the number of employees. there is no standard dependence for all sectors but in the case of the opening of the market, the following formula will operate: $1 million of additional direct investment brings in about 20-30 additional jobs. therefore, the cumulative effect in the agro sector for the next 10 years may bring about 1-1.5 million jobs. 8. conclusions there are reasons to state that today ukraine is the only democratic country in the world where the owners of agricultural lands do not have the right to dispose them at their discretion, cannot give the land on bail and receive funding for farming or any other activities; cannot sell their land shares and invest money in another activity or assets. the authors do not attempt to impose any definite model for the development of the land market for ukraine because, in no one of the countries, whose experience has been studied, someone’s experience is used by copypaste ways. we have only presented a general trend in the development of the economies of countries that are moving towards high social standards and efficient production methods by liberalizing and releasing the land market from regulatory constraints. the conducted research allows stating that to date, all risks and fears of land market liberalization are insignificant in comparison with the benefits that ukraine may have in the coming years. the analysis of international experience shows that the reform of the land market was often conducted during the period of economic crises and it was the liberalization of land markets that facilitated the restoration of economies. this should be an incentive for modern ukraine, finally to choose the approach to the liberalization of the agricultural land market as a promising way to effectively implement its resource potential; as the main impetus to overcome the current crisis and gradually form its own model of its functioning, which will be the subject of further research. references: pavel ciaian, d’artis kancs, jo swinnen, kristine van herck and liesbet vranken, (2012). institutional factors affecting agricultural land markets. ceps, centre for european policy studies (belgium). brussels: centre for european policy studies, 22 р. retrieved from: 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(2016). features of “land relations” in the field of economic theory. naukovyj visnyk chernivets'koho universytetu. ekonomika. vol. 773-774. p. 8-11. retrieved from: http://econom.chnu.edu.ua/wp-content/ uploads/2016/11/visnyk-773-774.pdf (in ukr.). ирина зрибнева, татьяна заволична перспективы либерализации рынка земли в украине аннотация. в процессе европейской интеграции либерализация украинского рынка сельскохозяйственных земель не утрачивает своей актуальности. переход украины на свободный рынок сельскохозяйственных земель требует теоретического обоснования. необходимы научные исследования современных европейских подходов к регулированию рынка сельскохозяйственных земель. целью данного исследования является анализ перспектив формирования и развития рынка сельскохозяйственных земель, выявление возможных последствий отмены моратория на покупку и продажу сельскохозяйственных земель и поиск приемлемого варианта дальнейшей политики земельной реформы в украине. в этом исследовании исследуются теоретические основы и особенности функционирования рынка сельскохозяйственных земель некоторых европейских стран, которые позволят экстраполировать эти данные в украинскую практику. ожидается, что многие тенденции являются общими для рынков земли украины и соседних стран. основы формирования эффективного и прозрачного рынка сельскохозяйственных земель требуют создания понятных и четких механизмов регулирования систем землепользования на различных уровнях. методология. в этом исследовании используются историко-сравнительные и логико-диалектические методы исследования теоретических основ и основных категорий рынка сельскохозяйственных земель в украине. представлены особенности обращения сельскохозяйственных земель в украине. авторы использовали системно-структурный метод и метод сравнительного анализа для обоснования и сопоставления показателей эффективности использования сельскохозяйственных земель в украине и некоторых европейских странах. результаты. сделана оценка экономического эффекта от перспектив либерализации рынка сельскохозяйственных земель в украине. аргументируются детерминированные гипотезы о перспективах либерализации сельскохозяйственных угодий в украине. практическое значение. проведенные исследования позволяют утверждать, что на сегодняшний день все риски и опасения по поводу либерализации рынка земли незначительны по сравнению с выгодами, которые украина может иметь в ближайшие годы. анализ международного опыта показывает, что реформа земельного рынка часто проводилась в период экономических кризисов, и либерализация земельных рынков способствовала восстановлению экономики. это должно стать стимулом для современной украины, наконец, выбрать подход к либерализации рынка сельскохозяйственных земель как перспективный способ эффективного использования своего ресурсного потенциала. baltic journal of economic studies 41 vol. 2, no. 5, 2016 corresponding author: 1 department of management organizations, dnipropetrovsk state agrarian and economic university. e-mail: vmarenichenko@mail.ru mechanisms of state regulation of small and medium businesses valerii marenichenko1 dnipropetrovsk state agrarian and economic university, ukraine abstract. subject of research is the mechanisms of state regulation of small and medium businesses in ukraine. the purpose of the research is effective mechanisms development of state regulation of small and medium enterprises (smes). methodology. the article uses general and special methods of investigation: empirical research methods (observation, comparison); methods used empirically and theoretically study (abstraction, analysis and synthesis); methods of theoretical research (ascent from the abstract to the concrete, systemic and structural approach). the article highlighted the priority areas of activity in ukraine, such as agriculture, it-sector and tourism. in particular, we have analyzed data of the state statistics service of ukraine and international surveys such as enabling the business of agriculture, dou, deloitte (global survey of r&d incentives 2015), international sos and control risks, wttc, ups, consulting integrated, organic monitor and other. we determined that agriculture must use consistent increasing areas under food crops; introduction of modern technology and innovation; gradual increase in the level of mechanization of agricultural production. scientific research preparation and training of local staff employed in the agriculture and food industry must become the main aspects of quality development. the article defines that it market requires quality of the state regulation in readiness for a permanent dialogue with government and comprehensive support for sector as a strategic development of the country; development strategy and projects for development of the sector; effective fight against corruption at all levels. the relevance of government regulation in the development of green international tourism is determined. modern historical and cultural features of ukraine can allow providing a range of services for international tourism community. there is analyzed an impact of export orientation for small and medium business in the article. export agribusiness areas that are not yet wide developed are identified: the supply of organic products (use of fertilizers over many years significantly reduced the possibility of growing organic products in the eu, ukraine has a a lot of land that is not processed); bean cultures export (for example, provision of population with bean cultures is only 8%, 92% – import in turkey. the production of bean cultures have high indicators in ukraine); selling of honey (ukraine takes 3rd place in europe on manufacture of of honey, and only a small part is realized abroad). as a result of research we have created own index of business quality development (ibqd), which includes the negative tendencies of development in international rankings and current state of socio-economic environment in ukraine. index of business quality development considers the practical significance and is formed directly on the smes questionnaire and includes the following blocks: general information about the company; contemporary business issues (the study of actual practical problems of business); providing state functions to support the business development. thus, the index of business quality development shows efficiency of mechanisms of state administration in the smes sphere in dynamics. key words: state regulation, small and medium businesses, direction of activity, mechanisms, quality development jel classification: m10, m16, m19 1. introduction an important aspect of the state regulation is a determination of priority areas of activity and establishment and improvement of the state regulation mechanisms of small and medium businesses quality development. a relevance of the research in this field is confirmed taking into account global trend of active development of smes and its inactive development in ukraine. scientific and practical novelty of the work is based on the development of modern mechanism of state regulation – the index of business quality development. the objective of the study is the development of effective mechanisms of state regulation in smes. within the framework of objective we have the following tasks: identification of priority areas of activity, study of the current state and development prospects, creation of mechanisms for business quality baltic journal of economic studies 42 vol. 2, no. 5, 2016 development. the article uses general and special methods of investigation: empirical research methods (observation, comparison); methods used empirically and theoretically study (abstraction, analysis and synthesis); methods of theoretical research (ascent from the abstract to the concrete, systemic and structural approach). 2. agriculture as a priority area of activity one of the key directions of ukraine's economy development is agriculture, because there is a high concentration of smes. agriculture sector is indicative and taken for consideration and research. agriculture solves not only economic but also social problems and tasks because it uses mostly local resources (natural, labor, material and technical) and it is working for the needs of the local market. small and medium businesses take about 85% in the overall structure of sales by all enterprises in agriculture. thus, the figure is around 40% in industry, 68% in wholesale and retail trade, 47% in transportation and storage activities (statistics, 2014). international surveys show that ukraine has a large volume of agricultural production in the world. thus, ukraine takes 8th place in the world with production of 24 m tons for wheat at the beginning of 2016 (3,3%). ukraine takes 6th place for feed grain crops (production is 34,9 m tons or 2,7%). for example, it is more than in such developed agricultural countries like canada, mexico and turkey. ukraine is close to russia in the production of forage crops (39,4 m tons). there is production of oil crops in 18,3 m tons in ukraine, providing 3,4% of global turnover. ukraine ranks 7th on the list and is the largest manufacturer among former soviet countries. in addition, it should be noted that a lot of ukrainian lands or are not used, or used inefficiently. agriculture solves problems of unemployment and depressed regions. small and medium agricultural business needs stable relations with local authorities, scientific and educational development of young people, reduce the tax burden, providing access on reasonable terms to credit, obtaining lease rights areas and land and eliminating administrative barriers. it is necessary to describe the need for measures to modernize the agricultural sector, namely: – consistent increasing the area under food crops; – introduction of modern technology and innovation; – gradually increasing of the level of agricultural production mechanization. it is appropriate to consider its investment attractiveness ratings for analyzing the efficiency of modern agriculture. world bank studies show the investment attractiveness of the agricultural sector in ukraine in 2016 as a result of the enabling the business of agriculture index calculation (eba, 2016). the influence of the main factors for doing business in the agricultural sector in 40 countries is analyzed on this index. evaluation of each country is performed in 6  areas: seeds, fertilizers, machinery, finance, transport and risks. top regulatory conditions for agriculture are fixed in poland, denmark, greece, colombia and spain, among the 40 countries. most countries have current problems in agriculture according to the index. for example, bosnia and herzegovina, a country with an urbanized economy, has mechanisms to protect plants and fertilizers, but is facing problems in the regulation of credit unions and electronic money. morocco and mozambique, where agriculture accounts for over 50 % of gdp, have well functioning mechanisms of registration, certification and development of new seed varieties, but there are problems in the regulation of finance. vietnam, where agriculture accounts for about 20 % of gdp, has strengths in quality control of fertilizers and plant protection products, but negative trends in safety standards for agricultural machines. results of ukraine by the index are above average, but greatest value belongs to figures in the market of fertilizers and agricultural products (table 1). according to the study, improvement of rating of the country should be associated with changes in those areas, in which ukraine's rating below average – agrofinance, transports and logistics. table 1 development of the agricultural sector of ukraine in the enabling the business of agriculture index in 2016 indicator ukraine the average rate in the world the maximum rate 1. markets of seeds and propagating material 74,1 64 100 2. fertilizer market 80,6 63 100 3. market of agricultural machinery 62,7 45 100 4. agrofinance 41,6 46 100 5. markets of agricultural products 86,6 75 100 6. transport and logistics 65,7 67 100 ukraine already applies some measures for the development of agrofinance. the european bank for reconstruction and development (ebrd) continues to lend to ukrainian business. but the last three years show the amount of credit in 2016 for more than 25 m euros than in 2015, but 50 m euros are less than in 2014. there are ways to develop logistics component business in ukraine. since 2016, the project of food and agriculture organization is functioning, which is associated for food safety and food security, development of agrofood chain with access to international markets. according to the project, norway has invested funds in the amount of 362 thousand dollars on implementing baltic journal of economic studies 43 vol. 2, no. 5, 2016 the initial elements of a project plan in ukraine in 2016: preparation of documents, conducting technical and economic evaluation of the forestry and fisheries that are critical in cooperation with norway and organization technical training. 3. it-sector as a priority area of activity an attention should be paid not only to the manufacturing sector. progressive area is it-sector taking into account international experience, for example, of singapore. due to the it industry ukraine have exported services worth 2,5 bn dollars in 2015. it sector has the third place in the economy after agriculture and metallurgy by volumes of export. metallurgy is not demonstrative for smes research, because the number of smes in this area is negligible. however the it sector has very few large enterprises in the total sphere, so we should conduct a detailed analysis. the researches have shown that the it sector in ukraine is growing annually by approximately 25%, and this figure increased to 10 times in 10 years. considering such trends, it-sector could reach leadership by exports in the economy of ukraine to 2025. experts predict that by 2020 it industry in ukraine could grow from 2,5 bn to 7,7 bn, and the share of it in gdp could reach 5,8 % in ukraine. it will create more than 100 thousand new working places, which would stimulate the creation of 400 thousand working places in other supporting industries. however, there is a transfer of it-sector representatives abroad, curtailing legitimate business activity in the absence of an effective system of judicial protection, corruption and fiscal power structures. the number of of it specialists who leaves our country is growing. according to a survey portal dou in the last year 75% it-specialists in ukraine (3109 respondents) wanted to have activities abroad, while the year before last the figure was 43% (dou, 2016).the desire of foreign countries to attract highly qualified it-population supports this negative factor. deficiency of it-specialists is amounted to 900  thousands only in the eu in 2015. thus, ukraine is losing the opportunity to capitalize its investment in training of highly qualified personnel. it is expedient to indicate the potential loss of the state in the case of it-specialists departure abroad. each it-specialist can produce about 50 thousand dollars of gdp per year or 1,75 m for 35 years of employment. potential loss of the state is 2,5 bn dollars annually, or 87,5 bn for 35 years considering approximate number of specialists who have left our country for activity abroad during the years of independence (50 thousand). for comparison, this amount is higher than the national debt of ukraine about 28,5 bn dollars in 2016. an important stage of state regulation of it-sector in the developed countries is providing special tax regimes. according to the report deloitte (global survey of r&d incentives 2015) there is using a combination of tax incentives in the it-sphere in the world (figure 1). there is only exempt from vat for the supply of software of all the benefits in ukraine, which means that a wide range of state action in these areas. it market requires high-quality of state regulation in: – readiness for a permanent dialogue with government and comprehensive support for sector as a strategic development of the country; – development strategy and projects for development of the sector; – effective fight against corruption at all levels. it business gained wide scope through an agreement with the eu on the development of information and communication technologies in ukraine. it should be noted that a key issue is the protection of intellectual property rights as the product produced in ukraine, and the one used by ukrainian consumers. strengthening of different grants tax incentives in it-sector tax deduction tax credit preferential rates accelerated amortization reduce taxes on the amount of costs reduce the tax for payment on the value of investments on income tax, from vat or as exemption from customs duties fig. 1. tax incentives in the it-sphere in the world baltic journal of economic studies 44 vol. 2, no. 5, 2016 intellectual property rights protection means increasing security for business investment. however, it-sector in our country can not solve all the economic problems, but this area represents the middle class in the world. rising living standards of other sections of the population in ukraine to the representatives of it-sector should start with reforms and uniform development of other sectors of the economy, but it-industry must be impulse for quality development. 4. tourism as a priority area of activity considering global tendencies of the development of smes and economy as well as the internal potential of ukraine, there should be allocated such activities like tourism. tourism is a source of gdp growth, budget revenues and creating additional jobs in the world. it should be noted for mechanisms to ensure tourist image of ukraine in severe conditions of competition in the global tourism market. according to research of international sos and control risks, ukraine is a country with an average risk for tourists. russian federation, kazakhstan, belarus, india, saudi arabia, brazil are in one row with it. the safest countries for tourists are france, spain, italy, poland, canada and the usa. the geographical position and climate conditions of ukraine allow obtaining a low risk for tourists in research international sos and control risks, but other criteria need effective reorganization, primarily under the framework of state regulation of tourism. outbound tourism has decreased almost by 40% in 2015. the reduction of tourist flows included a chain reaction in the market of tourism and related services, including hotel business, which led to a reduction in personnel, marketing and other costs and closing of small and medium tourism business. large tour operators have been saved in the tourism market through its volume reduction. ukraine has all the prerequisites for intensive development of international tourism. increasing level of quality of local travel services to the european standards would significantly accelerate the development of tourism in ukraine. foreign tourists, who come to paying for goods and services, provide inflow of foreign currency in the budget. in this connection, the problem of increasing active international tourism is an important way to increase economic growth as each region, as country. ukraine has managed to create a positive image of an attractive tourist direction after the success of the european football championships in 2012. by results of 2012-2013 years ukraine first came to international ratings and travel guides – globe spots, tripadvisor, the national geographic traveler, the lonely planet and others. ukrainian tour operators waited for a gradual increase of tourist flow for several years after the sporting event. however, the political situation and economic position in ukraine changed substantially tourist market. the number of tourists in ukraine reached 24,6 mln, foreign exchange earnings from which were – 5,85 bn dollars according to the world council of travel and tourism (wttc) in 2013, in 2014 – 13 m and 166 thousand tourists and 2,73 bn dollars. according to the results in 2015 ukraine was visited by 13.1 million foreign tourists from over 110 countries, 46.7% less than in 2013 (wttc, 2016). tourist activity has low risk and great potential from the standpoint of embedding investment. for example, investment in tourism in the united states amounted to 148,8 bn dollars, and contribution to gdp stood at 488 bn dollars in 2015. in germany, investment amounted to 27.8 bn dollars and contribution to gdp was bn dollars, in japan – 32,8 and 106,7 bn dollars respectively. in ukraine these figures constitute 0,2 and 1,3 bn dollars. thus, the effectiveness of state regulation of skillful financial investment component of the tourism sector leads to dynamic growth of gdp and the economy. we should not lose opportunities for the development of green tourism including domestic natural potential of ukraine. state regulation should be focused to attracting and supporting smes that provides green international tourism. modern historical and cultural features of ukraine can afford to provide a range of services for international tourism community. modern trend of tourism is an online tourism. today two-thirds of tourists in the world use online channels to book accommodation, tickets and tours. according to data of private american research firm emarketer, the number of us tourists who book tickets via smartphones is 78,6 % (38,1 million people). this indicator is 12% but has prospects for development in ukraine. effective state regulation of the tourist activity, including global experience, allows: – providing foreign exchange earnings to the country, and, therefore, filling of state budget; – developing related industries that are directly or indirectly connected with tourism activity; – providing the increase of local budgets revenues. 5. the export orientation in the context of priority activities currently there is no clear policy on the export or import orientation in ukraine in the context of indicated priority activities. in our opinion, these sectors need an effective state regulation of export orientation. this view is confirmed by consumer confidence survey in ukraine. ukraine has a consumer confidence index, which is determined through a random survey of domestic households (gfk, 2016). baltic journal of economic studies 45 vol. 2, no. 5, 2016 ukrainian consumer confidences are deteriorated in 2016. consumer confidence index was 50,2, which is by 2,9 points less than in the last year. according to the index, ukrainians tuned to purchase products of national origin, which requires the development of national producer and, thus, of the national product, followed by export-oriented economy. according to the survey ups, germany remains the leader in this field. the country has more than 120 thousand smes exporting their products. however, france, italy and the uk have large export sectors. also, research has shown that most european companies "passive" come to a decision on export development. in belgium, france, germany and the uk consumer demand served as the main reason to start export from them. ups research has shown that exports played an increasingly important role in the european economy and smes. 49% of the companies surveyed have increased their turnover in the last three years. exporters are finding new technologies, looking for unique ways of doing business that promotes the export sector smes across europe (ups, 2016). however, only a small number of smes is engaged in export activities or want to do it in ukraine. among the main problems exporters of smes consider nonfinancial factors. about 70% of smes exporters tied for first place the problem of finding a partner abroadsearch of markets, promotion of products and their certification abroad. interest of small and medium-sized ukrainian companies to western markets is growing, confirming the permanent address for the target business grants ebrd. research in ukraine of «consulting integrated» shows prospects for western markets in domestic ukrainian producers of food, drink and clothing. there is a demand for ukrainian water filters, lighting, furniture and toys in the world. in the structure of ukrainian export to the eu agricultural products take 27,8 %. this figure is formed primarily by large enterprises. attention is drawn to the areas of agribusiness export that are not yet extensively developed. these areas are: – supply of organic products (in the eu fertilizer use over the years significantly reduced the possibility of growing organic products, while in ukraine a lot of land is generally not processed); – export of legumes (such as turkey provision of population with legume crops is only 8%, 92% – is import. production of legumes has high performance in ukraine); – selling honey (ukraine takes 3rd place in europe for the production of honey, with only a small portion sold abroad). according to research of «organic monitor», specializing in organic products, the global organic market is 80 bn dollars, and for the past 20 years, its volume has increased almost in 5 times. the demand for such products is greater than the supply. the eu imports organic products from more than 130 countries. a great demand for imports of organic products offers promising possibilities for ukrainian exporters smes. currently ukraine has about 260 thousand hectares of certified organic farmland. more than a hundred certified organic producers are operating in ukraine. however, there are some problems to be solved smes, including through state regulation. there are getting aid in certification and expansion of access to markets for organic products (elena berezovska, 2016). ukrainian it-industry shows high indicators in the export. but ukrainian it-industry takes a raw materials niche in the export. to achieve the leading position, we need to move to grocery it-industry, in which ukrainian entrepreneurs will create products for global markets. 7. creation of the mechanisms for small and medium businesses’ development state regulation requires the creation of new instruments and, on this basis, effective mechanisms for business development in ukraine. this mechanism is the creation of the index of business quality development (ibqd), which will include all the negative trends in international rankings and the current state of socioeconomic environment. formation of the system of ibqd includes: – collection of statistical information about the company, analysis of current business issues and ensuring the state functions to support business development within the survey on the basis of the expert profiles of sme; – processing of results (separation of the most important business issues and grading to ensure the state functions to support business development); – definition of quality business development zones (forming solution for the problem and evaluation of expected results). the index takes into account the practical significance and is formed directly on the questionnaire sme expert, which includes the following components: – general information about the company; – contemporary business issues; – providing of state functions to support business development. block «general information about the company» includes the following items: – year of establishment of the enterprise; – ownership; – main economic activities; – source of fixed assets in the creation of the enterprise; – main sources of funding enterprise; – financial and economic conditions (recession, stability, development); – priority using of company profits; – spending on innovation projects (% of total); – main objectives on a short period of time; baltic journal of economic studies 46 vol. 2, no. 5, 2016 – number of staff; – motivation system (no / exist – to describe elements of the system); – higher education of staff (% of total). block «contemporary business issues» includes the following: – problems in the political sphere; – problems in the economic sphere; – problems in the social sphere; – problems of investigational company that were in the construction phase; – current problems of the studied c company. block «providing of state functions to support business development (from 1 to 100, 100 – is the biggest indicator)» includes: in the political sphere: – property rights; – anti-corruption activities; – ensuring quality conditions for the creation, management and liquidation of the business; – tax policy; – transparency of government institutions. in the economic sphere: – state support for small and medium enterprises; – attracting enterprises to innovative projects and programs; – support of foreign economic activity; – dissemination of new technologies; – development of the financial market; – support of competition. in the social sphere: – ensuring civil liberties; – freedom of entrepreneurship; – implementation of the social functions of the state – freedom of investment and protection of investors. thus, the sme expert questionnaire includes 32 questions divided into 3 blocks of input information (general information about the company), information for processing (contemporary business issues) and output information (providing of state functions to support business development). indicators of the sme expert questionnaire are based on statistical information of international indexes. thus, ibqd has an international basis, taking into account international indices, as well as a national basis, taking into account the practical survey of modern entrepreneurs. according to the questionnaire providing indicators of state functions to support development smes is 15. thus, the maximum value of the index (ibqdmax) is 1500 points; the minimum value (ibqdmin) is 0. the situation in the country requires systemic changes. to achieve high rates of agriculture, it-sector and tourism activities should focus on building support system for exports, expanding the range and quality of goods and services the priority areas of activity, the skillful application of mechanisms of state regulation. these measures should be combined with changes in the law on the principles of simplicity and transparency. 8. conclusions 1. the article highlighted the priority areas of activity in ukraine, such as agriculture, it-sector and tourism. in particular, we have analyzed data of the state statistics service of ukraine and international surveys such as the enabling the business of agriculture, dou, deloitte (global survey of r&d incentives 2015), international sos and control risks, wttc, ups, consulting integrated, organic monitor and other. 2. we determined that the agriculture must use consistent increasing areas under food crops; introduction of modern technology and innovation; gradual increase in the level of mechanization of agricultural production. scientific research preparation and training of local staff employed in the agriculture and food industry must become the main aspects of quality development. 3. the article defines that it market requires quality of state regulation in readiness for a permanent dialogue with government and comprehensive support for sector as a strategic development of the country; development strategy and projects for development of the sector; effective fight against corruption at all levels. the relevance of government regulation in the development of green international tourism is determined. modern historical and cultural features of ukraine can allow providing a range of services for international tourism community. 4. there is analyzed impact of export orientation for small and medium business in the article. export agribusiness areas that are not yet wide development are identified: the supply of organic products (use of fertilizers over many years significantly reduced the possibility of growing organic products in the eu, ukraine has a a lot of land that is not processed); bean cultures export (for example, provision of population with bean cultures is only 8%, 92% – import in turkey. the production of bean cultures have high indicators in ukraine); selling of honey (ukraine takes 3rd place in europe on manufacture of of honey, and only a small part is realized abroad). as a result of research, we have created own index of business quality development (ibqd) which includes the negative tendencies of development in international rankings and current state of socio-economic environment in ukraine. 5. index of business quality development considers the practical significance and is formed directly on the smes expert questionnaire and includes the following blocks: general information about the company; contemporary business issues (the study of actual practical problems of business); providing state functions to support the business development. thus, the index of business quality development shows efficiency of mechanisms of state administration in the smes sphere in dynamics. baltic journal of economic studies 47 vol. 2, no. 5, 2016 references statistics (2016). volume production 2014. [electronic resource]. – retrieved from: http://www.ukrstat.gov.ua eba (2016). eba appreciated investment attractiveness of the agrarian and industrial complex of ukraine [electronic resource]. – retrieved from: http://www.agrotimes.net/agrarnaya-politika/eba-ocenil-investicionnuyuprivlekatelnost-apk-ukraini dou (2016). emigration of it-specialists deals damage to the economy [electronic resource]. – retrieved from: http://internetua.com wttc (2016). market review. tourism 2016: cheap and fast [electronic resource]. – retrieved from: http://www.companion.ua/articles/content?id=303745 gfk (2016). consumer confidence in ukraine [electronic resource]. – retrieved from: http://www.gfk.com ups (2016). ups research found that export is a key factor in the growth of small and medium-sized businesses [electronic resource]. – retrieved from: http://www.logistics.ru/management/news berezovska, e. (2016). «organic forum 2016 ukraine» [electronic resource]. – retrieved from: http://forum.organicukraine.org.ua/events/forum-rivne.html валерий марениченко механизмы государственного регулирования малого и среднего бизнеса аннотация. предметом исследования являются механизмы государственного регулирования малого и среднего бизнеса в украине. целью исследования является разработка эффективных механизмов государственного регулирования малого и среднего бизнеса. методология. в статье использованы общие и специальные методы исследования: методы эмпирического исследования (наблюдение, сравнение); методы, используемые как на эмпирическом, так и на теоретическом уровнях исследования (абстрагирование, анализ и синтез); методы, используемые на теоретическом уровне исследования (восхождение от абстрактного к конкретному, системный и структурный подход). в статье выделены приоритетные направления деятельности в украине, такие как сельское хозяйство, it-сектор, туризм. в частности, проанализированы данные государственной службы статистики украины, а также такие международные исследования, как enabling the business of agriculture, dou, deloitte (global survey of r & d incentives 2015), international sos и control risks, wttc, ups, consulting integrated, organic monitor и другие. определено, что в сельском хозяйстве следует применять: последовательное наращивание площадей под продовольственные культуры; внедрение современных технологий и инноваций; постепенное увеличение уровня механизации сельскохозяйственного производства. главными аспектами качественного развития должны стать научные исследования, подготовка и обучение местных кадров, занятых в области сельского хозяйства и пищевой промышленности. определено, что рынок it требует качественного государственного регулирования в готовности к постоянному диалогу с властью и комплексной поддержки отрасли как стратегической для развития страны; разработке стратегии и проэктов развития отрасли; эффективной борьбе с коррупцией на всех уровнях. в статье проанализировано влияние экспортной ориентации на малый и средний бизнес. определена актуальность государственного регулирования в развитии зеленого международного туризма. современные исторические и культурные особенности украины могут позволить предоставлять целый спектр услуг для международной туристической сообщества. выделены сферы экспортного агробизнеса, что еще не получили широкого развития поставке органической продукции (в странах ес использование удобрений в течение многих лет существенно снизило возможности выращивания органической продукции, а в украине много земель еще вообще не обработано); экспорт бобовых культур (например, в турции обеспеченность населения бобовыми культурами составляет лишь 8%, 92% – это импорт. в украине производство бобовых культур имеет высокие показатели); продажа меда (украина занимает 3 место в европе по производству меда, при этом лишь небольшая часть реализуется за границу). в результате исследований создан собственный индекс качественного развития бизнеса (ibqd – index of business quality development), включающий негативные тенденции развития в международных рейтингах и современное состояние социально-экономической среды в украине. индекс качественного развития бизнеса учитывает практическую значимость и формируется непосредственно по анкете эксперта-представителя мсб, включающая следующие блоки: общая информация о предприятии; современные проблемы бизнеса (изучение актуальных практических проблем бизнеса); обеспечение функций государства по поддержке развития бизнеса. таким образом, индекс качественного развития бизнеса показывает в динамике эффективность деятельности механизмов государственного управления в сфере малого и среднего бизнеса. baltic journal of economic studies 29 vol. 2, no. 3, 2016 corresponding author: 1 department of finance and credit, yuriy fedkovych chernivtsi national university. e-mail: anna2227@ukr.net conceptualization of financial resources of local authorities аnna briazkalo1 department of finance and credit, yuriy fedkovych chernivtsi national university, ukraine abstract. aim of the article is to study and generalize scientific approaches to the determination of essence, content and components of financial resources of local authorities. the methodology is the use of various general scientific and special methods of research. so, during the study the following methods were used: dialectic method, with the help of which the essence of financial resources of local authorities was determined; methods of comparative analysis of scientific thoughts about the category “financial resources”, “financial resources of local authorities”; systematization of main characteristics of financial resources at the level of state and local authorities; structuralfunctional method in order to classify financial resources. study results are represented by determination of economic essence of financial resources, their main features, and it is proposed an improvement of the concept “financial resources”, “financial resources of local authorities”. financial resources are an aggregate of resources (monetary and non-monetary), which are creating and forming owning to distribution and redistribution of gross domestic product by economic entities, households, state and local authorities and are in fund and non-fund form with the aim to ensure their purposeful productive use for the benefit of natural and legal persons as well as society in general. thus, the financial resources of local authorities – are an aggregate of monetary resources created as a result of the distribution and redistribution of the gross domestic product (some of which are in the appropriate funds), required by local authorities to perform their functions and tasks in order to ensure economic and sociocultural development of the local community. taking into attention the features of functioning of the main subjects of local finance for thorough study of the essence of local authorities’ financial resources, their main components are considered, namely: revenues of local budgets, financial resources, municipal enterprises, local loans and charitable, sponsorship contributions, donations. practical importance of the study lies in the fact that in terms of deficit of financial resources of local authorities and instability of their revenue sources, special importance is acquired by a thorough study of the financial resources essence, their classification, structure, possible sources and methods of resources attracting that will allow building of an effective system of local community’s financial security. value/originality. presented research has detailed and systematic character, which helps to clarify the concepts of financial resources and financial resources of local authorities. main components of financial resources of local authorities, which will promote their further research, are distinguished. key words: resources, financial resources, financial resources of local authorities, monetary resources, local authority. jel classification: н70, h72, в26 1. introduction one of the most urgent problems in ukraine, which necessity is declared by all levels of government, is the search for financial resources to ensure vital activity and development of regions and separate local communities as well as society in general. the impact of local government on the formation of new social relations is possible only if it will have at its disposal a sufficient amount of financial resources. the main feature of financial autonomy is the possession and effective management of financial resources, which correspond to the functions and powers of local authorities. in terms of deficit of financial resources of local authorities and instability of their revenue sources, special importance is acquired by a thorough study of the financial resources essence, their classification, structure, possible sources and methods of resources attracting that will allow building of an effective system of local community’s financial security. economic nature and essence of the financial resources of local authorities are investigated in the works of local and foreign economists: o.  vasylyk, s.  varha, o.  kyrylenko, o.  danilov, d.  serebrianskyi, p.  stetsiuk, p.  bechko, o.  rolinskyi, n.  chuiko, i.  petrovska, o.  romanenko, baltic journal of economic studies 30 vol. 2, no. 3, 2016 i. chunytska, a. smith, d. ricardo, j. b. say, j. m. keynes, o.  bierman, p.  vakhrin, a.  neshytoi, s.  khachaturian, h. poliak. aim of the article is to study and generalize scientific approaches to the determination of essence, content and components of financial resources of local authorities, which is necessary in terms of search for additional financial resources to ensure the independence of local communities. achieving of the aim involves the following tasks: determine the economic essence of the terms “resources”, “financial resources”, “financial resources of local authorities”; distinguish features of fund and non-fund theories about the nature of research of financial resources; identify main features of financial resources; propose a definition to “financial resources”, “financial resources of local authorities”; identify main components of the financial resources of local governments that will further their research. to solve the problems posed in the work, various general scientific and special methods are used. so, with the help of dialectical method of cognition, which gives the opportunity to study economic phenomena in the process of development and interconnection, the essence of the financial resources of local governments was determined. also in the study are used: comparative analysis of scientific views on the category of “financial resources”, “financial resources of local authorities”; systematization of the main features of financial resources at the level of the state and local governments; structural and functional method in order to make a classification of financial resources. using the methods of analysis and synthesis made it possible to analyze not only financial resources, place of them as a part of resources of local authorities, but the main components of financial resources of local authorities. 2. theoretical foundations of local government resources to study the essence of the concept of “financial resources of local authorities”, it is advisable first of all to explore the meaning of “resources of local authorities.” the rapid development of civil society and promoting democratic governance are necessary and possible on the condition of existence of independent local governments, because it is through them in the first place is the attraction of citizens to solving social problems. to ensure the independence of local governments it is necessary to work actively towards identifying and attracting additional sources and reserves of resource potential of local budgets. it should be noted that today there is no clearly defined approach to the interpretation of the term “resource”. most of scientists understand resource as the available tools or supplies that can be used to obtain a specific result (genov, 2013). category of “resources” includes means of production, monetary funds, objects of labour, labour force, information arrays, and anything that can be used to produce or obtain benefits. according to the financial and economic dictionary “resources” (from the french  – aid)  – are cash, reserves, opportunities, sources of something (e.g., financial, economic, material, natural, raw materials, labour (human), etc.) (zahorodnii, 2007). in the same direction it is possible to clarify resources of local government as material, natural, financial, human, legal, information and intellectual (fig. 1). resources of local government should be divided into the resources of functioning and the resources of local government’s development. local government resources can be understood as a set of resources (material and natural), located on the territory of powers of local governments, which are used in resources of local authorities fi na nc ia l r es ou rc es l ab ou r r es ou rc es l eg al re so ur ce s in fo rm at io na l r es ou rc es n at ur al re so ur ce s m at er ia l r es ou rc es functioning resources development resources in te lle ct ua l r es ou rc es fig. 1. classification of resources of local authorities baltic journal of economic studies 31 vol. 2, no. 3, 2016 the process of social production to meet the material and cultural needs of the local community. resources of local government development are territorially permissible and at legislative level assigned to local authorities resources, which are used in the organizational and economic activity in a specific area and lead to the improvement of economic and social status of the territory (genov, 2013). it is resources of the local government development that owns the decisive role, namely financial, labour, legal, informational and intellectual, because just they determine the efficiency of local government as an institution of government by assessing the level of socio-economic development of the territory covered by its powers. we are inclined to the idea that the most important for the development of local governments are financial, human and legal resources. it is parallel reflected in the basic principles of self-administration – financial, organizational and legal autonomy. financial autonomy of local authorities means that these authorities have the right to collect and distribute their own financial resources. these resources must be sufficient to enable them to efficiently perform their functions and powers at the local level. the principle of organizational autonomy means that high-quality public services and administration of the territory are necessary to determine its own structure and availability of highly qualified workers. the principle of legal autonomy means that the local authorities should have their own, but peculiar only to them, powers that are determined by the constitution and relevant laws. most modern authors who study the state of local authorities in ukraine, namely, o.  vasylyk, o.  kyrylenko, v. kravchenko, i. lunina, ts. ohon, k. pavliuk, s. slukhai, d.  klynovskyi, p.  bechko, o.  rolinskyi, o.  chuiko, o.  rohalskyi state that the effectiveness of local government is determined primarily by material and financial resources, which are in local community’s power and which together constitute the material and financial basis of local authority. 3. financial resources of local authorities the value of each kind of resources to ensure effective operation of local authorities is significant, but the most important and difficult, in our opinion, are financial resources. interesting is the fact that up to the present day in financial science there is no universally accepted definition of the essence of the local authorities’ financial resources. this definition is missing in the legislation of the country too. for the scientifically-based definition of the financial resources of local authorities such criteria should be clearly defined, as forms of identification, creation source and the purpose, to which it must respond. ambiguous interpretation of the term “financial resources” is mainly caused by different points of view on identifying forms and their creation sources. in the study of the works of local and foreign economists it is observed that financial resources among some researchers are understood as funds of monetary resources, others – monetary resources, cash accumulation and income, and the third group of scientists argues that it is cash operating in fund non-fund forms. in determining the essence of financial resources, according to ukrainian scientist o.d. vasylyk, they cannot be equated with monetary resources, as the concept of “monetary resources” is much wider, though financial resources are always in monetary form. monetary resources are financial resources when they are concentrated in the relevant funds, for which procedure of creation and use is established, with what we has to agree. an important feature of financial resources is that they in spite of cash express not changing the form of value, but the financial result of the reproduction process. at the same time they show the opportunities for economic and social development. economic encyclopedia describes the financial resources as “monetary funds, established in the process of distribution, redistribution and use of gross domestic product.” i.e. financial resources are considered from the standpoint of funds, which are the objective prerequisite of the process of expanded reproduction; and the source of funds is the gross domestic product. with regard to the financial resources of local authorities, the o.p. kyrylenko defines them as “a set of funds of monetary funds, which according to current legislation place at the disposal of local authorities for the performance of tasks and functions of these authorities” (kyrylenko, 2006). i.o. petrovska and v.d. klynovyi characterize financial resources of local authorities as “funds of monetary resources, which are created and used by local authorities in the process of realization of functions imposed on them by law.” scientists have similar views on data interpretation and emphasize the legality of financial resources use by local authorities for the performance of functions and tasks by these bodies. the majority of scientists, including k.m. vladymyrov, o.f. rohalskyi and n.h. chuiko characterize the financial resources of local authorities as “a set of funds formed in the process of distribution of gross domestic product and sent to the economic and social development of administrative and territorial units" and point to the location of the previous establishment and purpose of local financial resources, but do not noted legality of their formation (yurii, 2008). thus, in accordance with this theory, financial resources are monetary funds, which are created in the process of cost allocation and redistribution of gross domestic product and designed to meet the public interests and needs. representatives of non-fund theory, native scientists v.i. ospishchev, l.i. lachkova, o.p. blyzniuk, give an extended definition of the essence of financial resources baltic journal of economic studies 32 vol. 2, no. 3, 2016 as “an aggregate of funds that are at the disposal of the state and entities, characterize financial state of economy and at the same time are a source for their development; formed by different types of financial income, earnings, payments, and used for expanded reproduction, material incentives, satisfaction of social and other needs of society” (kosarina, 2010). this definition reveals the essence of financial resources according to such criteria as forms of identification, sources for creation of financial resources, their managers and goal destination. so, s.i. varha determined the nature of the financial resources of local authorities as an aggregate of all funds that can be used for the needs of self-governing local community. the author takes into account existing as well as potential volumes by means of resources of enterprises of all sectors of the local economy, household income and other financial resources that are in local economic circulation. in our view, this definition is more abstract and does not reflect the real capacity of territorial communities to solve issues of local importance. the essence of the financial resources of local authorities according to the fund and non-fund theories is investigated by o.r . romanenko, o.v. tymoshenko. scientists say that the financial resources of local authorities that they mobilize, distribute and use are formed in fund and nonfund forms, and are the material basis of local finance; noted that “major financial funds of local government are: local budgets, reserve and trust funds, funds of monetary resources of municipal enterprises. the resources used by local authorities in the form of bank loans, local loans and others usually are not in fund form” (romanenko, 2009). yurii s.i. noted that the financial resources – are monetary funds that are established in the process of distribution and use of gross domestic product in a specific time period (macrolevel). he also identifies the financial resources as accumulated from different sources money coming in its circulation and intended to cover needs of the enterprise (microlevel) (kyrylenko, 2006). entities use resources not only in the form of fund. thus, the use by entities monetary funds for performance of financial obligations to the budget and off-budget funds, banks, and insurance companies is carried out not in fund form. in non-fund form entities also receive grants and subsidies, sponsorship contributions. thus, we see that the financial resources of the entity are both in fund and non-fund form, while actually being funds of an enterprise, which have no goal destination. therefore, in the functioning of the category “financial resources of local government” a movement of two financial categories is embodied  – “local budget revenues”  – macrolevel and “financial resources of institutions, organizations and municipal enterprises”  – microlevel. the study showed that fund form of financial resources is peculiar only to local budget revenues, i.e. to “macrolevel”; at the “micro level” budget organizations, enterprises and organizations of municipal ownership form and use financial resources of both fund and non-fund form. 4. main features of financial resources financial resources of local authorities is the object and the real expression of local finance, and subjects of economic relations, during which they are formed, distributed and used, are local community and local authorities, which acting on its behalf and interests, state authorities, legal entities and individuals. for the definition of concepts of “financial resources”, “financial resources of local authority” scientists proposed various characteristics that can be systematized as follows: 1) sources for creation and formation of financial resources. the basis for the creation and formation of financial resources in the socio-economic system of the state is the value of gdp. secondary financial distribution or redistribution of already created financial resources allows forming of financial resources at the level of the state and its regions, local and territorial communities. 2) forms of financial resources. as we already mentioned financial resources can be both in fund and non-fund form. households often form and use financial resources without creating appropriate funds. entities for the purpose of quality management form the financial resources in fund and non-fund forms. for state institutions it is dominated a fund character of formation and use of financial resources (budgets, trust centralized funds of financial resources) in order to ensure timely planning, distribution, use and control the circulation of financial resources at the level of the state, regions and local authorities. 3) purposive character of financial resources. financial resources for their productive use should encourage the formation of new capital and to provide a basis for its effective use in the future. households formed financial resources for their future use in order to increase the value of entrepreneurial skills, labour force, i.e. focus on investing in the development of both the individual person and the group of people united in the household. financial resources of the state are formed and used to perform more significant functions for the whole society: socio-economic development, defence support and law enforcement, execution of uniform laws and norms in society and interaction with other states and international institutions. regional and local authorities form and use financial resources to perform most of the social functions that is caused by the proximity of local government to the individual. 4) subjects of creation, development, ownership, disposal and use of financial resources. subjects of formation of financial resources can be any entities that provide the establishment of value of gross domestic product or national product, i.e. business entities and households. formation, disposal and use of financial resources are the prerogative of businesses, households, state, regional and local authorities. subjects of possession of the absolute majority of financial resources are business entities, individuals or households and the state, its machinery baltic journal of economic studies 33 vol. 2, no. 3, 2016 of government, on the basis of country’s financial and economic legislation in force (vorobiov, 2009). 5) methods of financial resources formation. methods of financial resources formation depend on the subjects and the level of financial resources formation. for business entities and households the methods of financial resources are the primary financial allocation of newly created value, due to which their own financial resources are formed. for the state, regions and local authorities basic methods of financial resources are their redistribution through the use of tax and non-tax methods that are the basis for a redistribution of funds among business entities and households on the one hand and the state on the other. the use of financial redistribution in socio-economic system of the state is a common approach to ensure the movement of financial resources, as a result of which they are made available to all economic subjects through operating in the country and the global economy system of formation of funds necessary for extended reproduction. 6) priority of formation and use of financial resources. financial resources are formed and used at all levels, all branches and links of financial system. the highest priority level in the formation and use of financial resources has a microlevel, i.e. entities and households, as the lack of financial resources at this level shall not give an opportunity to provide extended reproduction that in the future will negatively affect the development of all areas and links of the financial system, including public finances. thus, the increase in financial resources at the micro level leads to increased financial resources at the macro level. 7) the inner part of financial resources. theoretical analysis allows asserting that financial resources have a monetary nature, i.e. basically have the form of cash. however, at the level of enterprise financial resources can take not the money, but material form, which is related to the fact that in practice it is not always possible to use money to create financial resources. also, as a result of the use of various securities as instruments of cash flow, financial resources have the opportunity to be in the form of securities (stocks, bonds). so the material form of existence of financial resources has a right to be and occupies a small share of all of financial resources operating in the socio-economic system of the state. for the convenience of studying financial resources are expedient to classify conventionally according to the following criteria: the place of creation, sources of formation, ownership, accumulation methods, service sector, management level and application areas. depending on the formation of financial resources, they can be divided into: own financial resources, resources formed in the territory of local government during creation of value added; financial resources created in other areas of the country, which through redistributive processes directed to local governments in case of the lack of own funds (kyrylenko, 2006). according to sources of formation  – into created based on the net income, from the fund of consumption or charges included in the cost of production. by form of ownership – into the public, private, collective (joint-stock, mixed) and resources of foreign countries. by methods of accumulation – into those that are created by fiscal methods, and voluntarily formed on a charitable basis. for the service sector – the financial resources that serve the state budget, endowment funds, public credit, finances of public sector of economy, finances of non-state business entities, international finances, financial market. by the management level – into public financial resources (national, local government, public endowment funds), resources of enterprises, and individual (public). for directions use  – into such that aimed at replenishment of fixed and working capital (capital repairs, donations to planned unprofitable business structures, replenishment of shortage of working capital), the formation of the consumption fund (payments from the fund of social protection, expenditure on socio-cultural events, satisfaction of social needs of employees of the production sector, social support for certain sectors of the population, defence and management expenditures), the formation of the fund of accumulation (investments, purchase of equipment and inventory in budgetary institutions, increase in normal standards of current assets, loss on foreign economic relations, reserves creation). thus, taking into account these characteristics and determination of the nature of financial resources from a practical point of view, stated by professor y. vorobiov (vorobiov, 2009), we formulated the following definition of the essence of financial resources. financial resources  – an aggregate of resources (monetary and non-monetary), which are created and formed as a result of distribution and redistribution of gross domestic product by economic entities, households, state and local authorities and are in fund and non-fund form in order to ensure their targeted productive use for the benefit of natural and legal persons as well as society in general. thus, the financial resources of local authorities  – an aggregate of funds created as a result of the distribution and redistribution of the gross domestic product (some of which are located in the appropriate funds), required by local governments to perform their functions and tasks (according to law) in order to ensure economic, social and cultural development of the local community. 5. components of financial resources of local authorities taking into account the peculiarities of the main subjects of local finance, research of the essence of financial resources of local authorities, in our view, is impossible without a clear understanding and definition of their constituents. baltic journal of economic studies 34 vol. 2, no. 3, 2016 thus, i.o. petrovska and d.v. klynovyi consider as components of financial resources of local authorities the following: local budgets, finance and credit resources and financial resources of municipal enterprises. another group of researchers, including o.p. kyrylenko, p.k. bechko and o.v. rolinskyi, among the financial resources of local authorities distinguish: revenues of local budgets, funds of the trust funds, charitable and sponsorship contributions, donations, financial resources of municipal enterprises and other resources (kyrylenko, 2006). according, k.m. vladymyrova, n.h. chuiko and o.f. rohalskyi, the constituent elements of local financial resources are: local governments and financial resources of enterprises, organizations and institutions of communal ownership (tymoshenko, 2010). there is no single point of view regarding this issue among scientists, so we are inclined to believe that the main components of the financial resources of local authorities are: revenues of local budgets, financial resources of municipal enterprises, local loans and charitable, sponsorship contributions, donations. the inclusion to the financial resources of local authorities of trust funds’ monetary resources as an independent component, in our opinion, is inappropriate. law of ukraine “on local government in ukraine” provides the right to formation by local authorities of the trust funds, but it also indicates that they are parts of a special fund of the relevant local government. consequently, the funds of the trust funds can be considered as a part of the local central budget rather than separate components of the financial resources of local authorities (briazkalo, 2014). the leading place in the financial resources of local governments is taken by revenues of local budgets, absolute volumes of which are constantly increasing. the main sources of revenue base of local budgets are their own incomes and income from fixed under the relevant local budgets in accordance with determined by law order of national taxes, fees and other mandatory payments. funds of municipal enterprises as a part of total financial resources of local authorities do not play a significant role. most communal properties are nonprofit enterprises and are financed from the local budgets. besides envisaged by the legislation taxes and obligatory payments, they usually do not provide for local authorities any other income. it is our deep conviction the weakest link in the system of financial support of local government is the financial and credit and investment activity of local authorities, although in the context of budget decentralization, local governments intensified in this area and carry out more effective investment policy. great importance in this respect has planning to use municipal borrowing as a source of investment resources for the territories development, which in fact is one of the most effective sources of funds to improve the infrastructure of villages, towns and cities in the region. considering the favourable conjuncture of ukrainian financial market, municipal borrowing is one of the most effective tools to attract capital. compared with other financial instruments, emission of municipal bonds has obvious advantages: lower cost of debt servicing; positive impact on the credit rating; extension of the loan; wide range of potential lenders. among the positive trends of recent years should be noted the growth of charitable, sponsorship contributions and donations received by budgets of territory of local government, and particularly institutions financed from local budgets. an example of charitable aid, which is widely used in the world practice to support social sector (medicine, education, culture), is the use of endowment. however, the practice of using the endowments potential in ukraine is not widespread, although the need for the development of this institution as opportunities, in particular, of educational institutions to raise additional funds is provided by social orientations of state development and identified as one of the tools of strategy of civil society development. thus, the selection and research of the main components of the financial resources of local authorities contributes search for additional financial resources to ensure the financial independence of local government. 6. conclusions generalization of researches of the essence of local authorities’ financial resources gave reason to come to such conclusions: 1. studied the essence of the concepts of “resources”, “local government resources” and determined the place of financial resources in general aggregate of local authorities’ resources. among resources of local authorities distinguished functioning resources and resources of local government development. 2. in the study of the works of domestic and foreign economists it is observed that under the financial resources some researchers understand the funds of monetary means (fund theory), others  – monetary means, cash accumulation and income (non-fund theory), and the third group of scientists argues that it is funds operating in fund and non-fund forms. 3. scientifically based definition of the essence of financial resources and the financial resources of local government needs to take into account in addition to such criteria as a form of existence, source of creation and targeted use also the following: the methods of formation, the priority of formation and use, the internal component, subjects of formation and use of financial resources. considering stated criteria, financial resources  – an aggregate of resources (monetary and non-monetary), which are created and formed as a result of distribution and redistribution of gross domestic product by economic entities, households, state and local authorities and are in baltic journal of economic studies 35 vol. 2, no. 3, 2016 fund and non-fund form in order to ensure their targeted productive use for the benefit of natural and legal persons as well as society in general. thus, the financial resources of local authorities  – an aggregate of funds created as a result of the distribution and redistribution of the gross domestic product (some of which are located in the appropriate funds), required by local governments to perform their functions and tasks (according to law) in order to ensure economic, social and cultural development of the local community. 4. for a deeper understanding of the nature of financial resources of local authorities, the main components of the financial resources of local authorities are distinguished, namely: revenues of local budgets, financial resources of municipal enterprises, local loans and charitable, sponsorship contributions, donations, which will promote their further investigation. references briazkalo, а. (2014). osoblyvosti formuvannya finansovykh resursiv orhanamy mistsevoho samovryaduvannya. naukovyy visnyk finansy, banky, investytsiyi, vol. 1 (26), p. 31-36. genov, a. (2013). theoretical basics of resources of local government. economics of civil engineering and municipal economy. – [electronic resource]. – retrieved from: file:///c:/users/1/downloads/ebimg_2013_9_1_6%20(4).pdf kosarina, v.p., tymoshenko, v.o. (2010). ekonomichna pryroda i sutnist' finansovykh resursiv orhaniv mistsevoho samovryaduvannya. finansy ukrayiny, vol. 1, р. 118-125. kyrylenko, o.p. (2006). mistsevi finansy. znannia, kyiv, ukraine, 677 р. romanenko o.r ., (2009). finansy. pidruchnyk. tsentr uchbovoyi literatury, kyiv, 312 р. tymoshenko, v.o. (2010). finansovi resursy orhaniv mistsevoho samovryaduvannya v umovakh finansovoyi nezalezhnosti terytorial'nykh hromad. ekonomika ta derzhava, vol. 1, p. 72-74 vorobiov, y.n. (2009). teoretychni zasady formuvannya i vykorystannya finansovykh resursiv v sotsial'noekonomichniy systemi derzhavy.  – [electronic resource].  – retrieved from: http://www.nbuv.gov.ua/old_jrn/ soc_gum/nvfbi/2009_4/magazine_04_09_st3_pp16-24.pdf yurii, s.i., fedosov, v.m. (2008). finansy. pidruchnyk. znannya, kyiv, 611 р. zahorodnii, a.h., vozniuk, h.l. (2007). finansovo-ekonomichnyy slovnyk. znannya. kyiv, 1072 p. анна брязкало концептуализация финансовых ресурсов органов местного самоуправления аннотация. целью работы является исследование и обобщение научных подходов к определению сущности, содержания и составляющих элементов финансовых ресурсов органов местного самоуправления. методологической основой работы является использование различных общенаучных и специальных методов исследования. так, в ходе исследования использованы: диалектический метод познания с помощью, которого определена сущность финансовых ресурсов органов местного самоуправления. методы сравнительного анализа научных взглядов на категорию «финансовые ресурсы», «финансовые ресурсы органов местного самоуправления»; систематизация основных признаков финансовых ресурсов на уровне государства и органов местного самоуправления; структурно-функциональный метод – для осуществления классификации финансовых ресурсов. результаты исследования представлены определением экономической сущности финансовых ресурсов, их основных признаков и предложено уточнение понятия «финансовые ресурсы», «финансовые ресурсы органов местного самоуправления». финансовые ресурсы  – это совокупность средств (денежных и не денежных), которые образовываются и формируются в результате распределения и перераспределения стоимости валового внутреннего продукта субъектами хозяйствования, домохозяйствами, государством и местными органами власти и находятся в фондовой и не фондовой форме с целью обеспечения их целенаправленного продуктивного использования в интересах как физических, юридических лиц, так и общества в целом. таким образом, финансовые ресурсы органов местного самоуправления это совокупность денежных средств созданных в результате распределения и перераспределения валового внутреннего продукта (часть которых находится в соответствующих фондах), необходимые органам местного самоуправления для выполнения возложенных на них функций и задач с целью обеспечения экономического и социально-культурного развития территориальной общины. учитывая особенности функционирования главных субъектов местных финансов, для основательного исследования сущности финансовых ресурсов органов местного самоуправления рассмотрены основные их составляющие, а именно: доходы местных бюджетов, финансовые ресурсы предприятий коммунальной собственности, местные займы и благотворительные, спонсорские взносы, пожертвования. практическое значение исследования заключается в том, что в условиях дефицита собственных финансовых ресурсов baltic journal of economic studies 36 vol. 2, no. 3, 2016 органов местного самоуправления и нестабильности их доходных источников особое значение приобретает основательное изучение сущности финансовых ресурсов, их классификации, состав, возможных источников и способов привлечения ресурсов, что позволит построить эффективную систему финансового обеспечения территориальной общины. значение/оригинальность. представленное исследование имеет основательный и систематизированный характер, предложенное уточнение понятия финансовые ресурсы. выделены основные составляющие финансовых ресурсов органов местного самоуправления, что способствует дальнейшему их исследованию. baltic journal of economic studies 70 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa district administrative court, ukraine (corresponding author) orcid: https://orcid.org/0000-0002-6387-0199 doi: https://doi.org/10.30525/2256-0742/2022-8-4-70-76 establishment of constitutional guarantees of openness of the administration of justice as the basis of the right to a fair trial in conditions of economic turbulence due to military actions ihor zavalniuk1 abstract. the subject of the study is social relations in the field of establishing constitutional guarantees of openness of the administration of justice as the basis of the right to a fair trial in conditions of economic turbulence due to military operations. methodology. the methodological basis of the study is the methods of induction and deduction, dialectical-materialistic method, method of analysis and synthesis, historical method, which allowed to objectively comprehend the content and essence of the issues under study. the purpose of the article is to study the constitutional guarantees of openness of the administration of justice as the basis of the right to a fair trial in the conditions of economic turbulence due to military operations, and then to propose mechanisms for their effective functioning. the results of the study showed that there are two main types of procedures for the application of constitutional norms in the field of ensuring the right to a fair trial. it seems that the optimization of the application of constitutional norms in the field of ensuring the right to a fair trial involves achieving a balance between these two types of procedures, which ultimately ensure the proper implementation of the constitutional right to a fair trial. based on the results of the application of the constitutional norm in the field of the right to a fair trial by the courts, two groups of legal consequences of the adoption of acts of application were identified. conclusions. the idea of justice has been enshrined in the constitutional text as a legal idea rather than a principle of law. at the same time, in modern ukrainian jurisprudence there is a paradoxical situation when the formally subjective right to a trial has a greater internal content than the principle of "justice" used in various, including procedural, branches of ukrainian law. modern ukrainian legislation rarely operates with the category of "right to a fair trial", but in this case we are dealing with the legitimization at the level of sectoral ukrainian legislation of the legal construction already established in domestic science and practice, which came from international law, and not an attempt to give the principle of fairness of judicial activity a real formal legal nature. the fact that the modern ukrainian legislator failed to systematically and conceptually reflect its attitude to the idea of judicial justice in the conditions of the militaryeconomic crisis also has a negative impact on the relevant judicial practice. key words: constitutional law, constitutional norms, justice, the right to a fair trial, judicial proceedings, economic turbulence, military actions. jel classification: k10, k38, k40, k41 1. introduction in recent years, researchers have increasingly used the technical term "turbulence" to describe the current economic situation. it is used along with such terms as "post-industrial society ", "knowledge economy ", "innovation economy ", "new reality ", "economy of rapid change" (brown, 2006). globalization and strengthening of interconnection between countries, scientific and technical progress and new technological base transform the economic system into a diversified and competitive one, with increasing innovation activity, increasing the share of high-tech and intellectual production. in this special, new, knowledge-based economy, knowledge plays a key role. it is the main productive force. an economy based on social and legal relations is an economy that allows transforming knowledge into income, and not only in high-tech industries. baltic journal of economic studies 71 vol. 8 no. 4, 2022 a characteristic feature of such an economy is that relations have become an independent powerful factor of production that cannot be replaced by other factors. the economy based on social and legal relations is characterized by a higher level of risks faced by the subjects of this economy. the increasing pace of change in the modern economy leads to the fact that the emergence of new knowledge not only depreciates tangible elements and factors of production more and more rapidly, but also makes many intangible factors of production unnecessary, investments in which may not pay off in full or lead to losses. the risks associated with the high pace of technological and managerial change are thus becoming higher. risk in modern society is becoming an all-encompassing phenomenon also due to the increase of innovativeness, which is set as a goal of development, as innovations can be used in actions that are traumatic for society and individuals. thus, in the author's opinion, the change of technological modes, development of innovations and economy based on social relations generates a large number of new risks, mobility and mobility of economic processes, their growing uncertainty and unpredictability, contradictory trends. the combination of these characteristics of the economy can be called "turbulence" ("turbulence" – from latin – "troubled", "disordered") (brown, 2006). at the present time the role and importance of military scientific substantiation of decisions of public administration bodies in all spheres of the economy and law is significantly increasing in the course of solving the challenges they face to ensure the military security of the state. the development of the judiciary, like the judicial process itself, is not immune to these trends. the judiciary is adapting to the prevailing conditions, making every effort to do so and clearly requiring the use of the latest applied scientific approaches in the relevant direction. one of the most pressing constitutional and legal issues in today 's reality is ensuring the right to a fair trial, which is a funda mental element of the set of human and civil rights. 2. constitutional and legal characteristics of economic turbulence resulting from military actions in economic literature, turbulence is understood as a situation in the economy characterized by the following features: – uncertainty and the impossibility of a clear description, prediction of events; – complexity, interconnectedness and heterogeneity of factors affecting the economy, variability of their impact; – unpredictability of consequences and risks of technological achievements of mankind; – high speed of ongoing changes, etc. (burlachkov, 2009). the study of turbulence takes place in different aspects: – in relation to global economic systems, for example, where its impact on the country 's economy and society as a whole is considered (macro level); – at the micro level, for example, as a certain characteristic of the external environment in which enterprises and organizations operate. here the emphasis is on the classification of environmental factors, measuring the level of turbulence, developing strategies for the behavior of bodies depending on the level of turbulence, the adaptability of organizations and its subsystems to the ever-growing turbulence. almost all authors are of the opinion that the increase of turbulence in the economy is a trend and is caused by many factors, including military actions (yanickij, 2011). thus, the change of technological modes, the development of the knowledge economy and the innovation sector produce many risks that affect the state of all economic systems. according to the author, turbulence becomes an integral characteristic of the surrounding space, which transforms and changes the usual course of things, requires society to make adequate changes to the current situation. all this determines the relevance of the study, including constitutional and legal, of various systems in conditions of economic turbulence. the ongoing changes directly put forward a number of requirements to the quality of justice. to begin with, it must be adaptive and able to change rapidly in response to the dynamics of the external environment, while maintaining strict compliance with constitutional and legal requirements. all this, in turn, requires clarification and definition of the main categories that allow the most adequate description of the development of the phenomena under study (yanickij, 2011). the study of the institute of constitutional and legal status of man and citizen under martial law occupies one of the leading places in the field of theoretical and legal research from the point of view of direct action of the constitution of the state as a normative legal act that has the highest legal force in its territory. during martial law, restrictions on the rights and freedoms of citizens must be carried out in strict accordance with the constitutional norms and legislation. according to the author, the improvement of the regulatory framework in the field of constitutional and legal affirmation of human and civil rights and freedoms, and most importantly – the corresponding implementation, under martial law, should take place within the framework of specifying the norms baltic journal of economic studies 72 vol. 8 no. 4, 2022 of international law relating to certain issues, including the right to a fair trial. in a broader context, it should be noted that the lack of access to basic quality services, government policy, legislation and practice of judicial and law enforcement bodies should not negatively affect the rights of the conflict-affected population, in particular freedom of movement, access to pensions and social benefits and, of course, the right to a fair trial. 3. constitutional and legal consolidation of the right to a fair trial in modern economic and political conditions justice is often considered as one of the basic principles of law and legislation. the principles of law are a dynamic phenomenon. they are improved in the process of development of human civilization and, in particular, the development of political and legal thought. the latter circumstance does not contradict the statement that by their nature the principles of law are much more stable and durable than "ordinary " legal provisions. principles of law reflect the view of law and the nature of legal phenomena both at the universal (international) and domestic levels. at the same time, law can be considered in a broad sense and include both specific areas of legislative regulation of social relations and general approaches to the organization of public power, ensuring rights and freedoms, etc. different legal principles may be characteristic of different stages of development of human civilization, state and society. the principles of law should be disclosed on the basis of an integrated approach to understanding the essence of legal processes both at the basic and specifying levels. this approach makes it possible to distinguish general and sectoral (intersectoral) principles of law characteristic of certain branches of law or certain branches of legislation (marochkin, 2010). objective difficulties in developing a common understanding of the principles of law are explained by the large proportion of subjective in their content. the latter circumstance does not prevent the formation of a relatively well-established system of legal principles. at the same time, we should not forget about the traditional "basic" division of law into natural and positive law (an extremely simplified view of a large number of different types of law understanding), that is, the conceptual approach to the principles of law, if they are understood as natural law and positive law, will be significantly different. the principle of justice is enshrined in the text of the constitution of ukraine, in particular, in its preamble. the question remains whether it is enshrined as a principle of law (legal principle, constitutional principle) or as an initial system forming constitutional idea. the right to a fair trial (court verdict), traditional for international law, was indirectly obtained at the level of the basic law. and even if this wording was not formally mentioned in the text of the constitution of ukraine, however, most of the principles and powers that fill this legal construction were presented at the level of the basic law (fritsky, 2004). unlike constitutional norms, constitutional principles may compete with each other. as for the substantive differences between the categories of "constitutional norms" and "constitutional principles", the latter serve as an objective or subjective criterion for the adequacy of the application of the former, i.e., a way of purposeful correlation with the moral requirements recognized in society, for example, justice. for similar reasons, we can distinguish constitutional principles in the sense of "general" and "sectoral" principles enshrined in the text of the basic law. in the practice of constitutional justice of ukraine, the principle of justice is considered both as a constitutional and as a general legal principle. this confirms the assumption that, firstly, justice is a general legal principle. secondly, fairness is also a constitutional principle, despite the fact that it is not explicitly stated as such in the text of the basic law of the country (macdonald, 2021). in its legal positions, the constitutional court also uses the phrase "constitutional right to judicial protection and fair trial", thereby designating the latter as "constitutional", despite the fact that it is not directly enshrined in the constitution of ukraine. in the scientific literature, one can find a proposal to enshrine the latter in the second section of the constitution of ukraine, however, given the pronounced unwillingness of the political elite to resort to the procedure of revision of the basic law, which was manifested during the last constitutional reform, it is clearly not to be expected in the near future. it should be noted that with regard to fair trial the constitutional court of ukraine prefers to use such a legal construct as "subjective right", i.e., speaks about "the right to a fair trial" or "constitutional right to a trial". according to i. timchenko, the right to a fair trial is closely interrelated with the right to judicial protection (timchenko, 2018). on the one hand, the right to judicial protection is specific to the right to a fair trial. on the other hand, a proper understanding of the right to judicial protection is possible only on condition of an adequate understanding of the essence and content of the right to a fair trial, i.e., the latter serves as a guideline for the former. one can disagree with this point of view. after all, the right to judicial protection outside the context of fairness of the trial loses any meaning. once again the attention is drawn to the excellent baltic journal of economic studies 73 vol. 8 no. 4, 2022 semantic content of the constitution of ukraine – everyone is guaranteed judicial protection of his rights and freedoms, access to justice for victims. in the second case, justice is understood not literally as access to judicial protection, but in a broader sense of the category "fairness", close to the concept of justice. in fact, it is about the victim's right to justice. the question of the place of the right to a fair trial as a relatively independent legal construct among other subjective rights, similar concepts and categories is of undoubted interest. the relevance of the problem increases in view of the fact that modern ukrainian legislation rarely operates with the category of "right to a fair trial", unlike, for example, representatives of science. in cases where this term is used, it refers to the right to a fair trial based on the principle of competition and equality of rights of the parties. today it is impossible to say that the legislator at least tried to reveal the semantic content of the relevant legal construction. most likely, it is about legitimization at the level of sectoral ukrainian legislation of the legal structure already established in domestic science and practice, which came from international law. recall that subjective rights, freedoms and obligations, as is commonly said, embody the core of the legal status of a person, form its core. however, the structure of the legal status itself, that is, a specific list of elements that should be included in it, each author (scientist) determines individually. there is no consensus among scholars on the inclusion in the legal status of a set of procedural rights (legal guarantees of rights, rights that characterize the legal status of a person in the judicial process). in particular, m. entin points out that the inclusion of the principles of judicial procedure in the legal status of an individual is unjustified. and even if the legal status consists, among other things, of procedural rights, for example, the right to appeal to the court, the "objective legal principles" of these procedures (administrative, judicial, constitutional) go beyond the legal status and are guarantees of its provision (entin, 2003). it is not difficult to notice that a significant part of the so-called legal guarantees reveals the "right to a fair trial" in the interpretation of the proposed convention for the protection of human rights and fundamental freedoms (convention for the protection of human rights and fundamental freedoms, 2010). in other words, even if the constitution of ukraine does not formally contain the "right to a fair trial", some of its components that fall within the competence are quite voluminously or partially (at the choice of the researcher) presented in the text of section two of the basic law (savchin, 2009). it should also be noted that not all the components of the right to a fair trial, which are enshrined in the text of the constitution, are formulated as subjective rights, which gives grounds to consider them, including as principles (in this case – sectoral principles). indicative in this sense is the provision that no one is obliged to testify against himself, his spouse and close relatives, the circle of which is determined by law. the absence of an indication that this is a "subjective right" allows interpreting this provision as a principle of judicial activity, a principle of justice. for comparison, in the criminal procedure legislation this principle is presented as a subjective right – the right not to testify against oneself, one's spouse and other close relatives. thus, at least in the above example, the difference between the sectoral principle and the subjective right is extremely insignificant (weissbrodt, 2020). once again, not all "human rights" that are traditionally considered as such are enshrined as "rights" in the text of the constitution. the question of whether it is appropriate to call those constitutional provisions that are not designated as such rights remains open. for example, the "right to judicial protection", which is often used in domestic jurisprudence, is derived from the constitutional "everyone is guaranteed judicial protection of his rights and freedoms." on the other hand, for example, the right to access to justice – from "the state provides victims with access to justice. the constitutional provision that "all are equal before the law and the court" is often transformed into the right to equality before the law and the court. the provision that the accused is not obliged to prove his innocence is also often transformed into the right not to prove innocence. there are many such examples, and in some cases the necessary prefix "law", as already noted, is proposed by the legislator itself in the process of sectoral regulation. thus, it can be concluded that even if the legislator does not use the phrase "right", it can be subjective rights. the same logic applies to the basic and sectoral principles of jurisprudence. the latter fact actualizes the problem of delimitation of subjective rights, legal principles, procedural requirements, etc. for example, the legislator's indication that the sentence must be fair is often regarded as the right to a fair trial. in conclusion, the following should be noted. the modern scientific debate on the principles of law is characterized by the problem of the primary and secondary nature of legal principle and formal law: legislation is based on the principles of law or the principles of law should be distinguished on the basis of the analysis of the current legislation. such a statement of the problem, of course, touches upon the problem of different types of legal understanding. the idea of justice should be considered as a general legal principle (general principle of law); constitutional principle (as such it is enshrined in baltic journal of economic studies 74 vol. 8 no. 4, 2022 the legal positions of the constitutional court of ukraine); inter-branch principle, which was mediated in the form of the right to a fair trial and the block of its powers; branch principle characterizing justice in various, including procedural branches of law of ukraine (constitution of ukraine 1996). a careful analysis of the special literature and relevant legislation also shows that the principle of justice is often the basic principle (the main idea), through the prism of which, in turn, the rule of law, legality, equality are considered. the right to a fair trial, in its turn, as a legal guarantee of the right to liberty and security of person, characterizing the negative aspect of freedom, formally does not belong to them. in theoretical and practical terms, constitutional principles, unlike constitutional norms, can compete with each other, as well as act as an objective or subjective criterion for the adequacy of the application of constitutional norms, that is, a way to purposefully correlate the latter with the requirement of justice. according to the author, the idea of justice was enshrined in the constitutional text as a legal idea, not a principle of law. at the same time, in modern ukrainian jurisprudence there is a paradoxical situation when the formally subjective right to a trial has a greater internal content than the principle of "justice" used in various, including procedural, branches of ukrainian law. modern ukrainian legislation rarely operates with the category of "right to a fair trial", but in this particular case one is dealing with the legitimization at the level of sectoral ukrainian legislation of the legal construction already established in national science and practice, which came from international law, and not an attempt to give the principle of fairness of judicial activity a real formal legal nature. the fact that the modern ukrainian legislator has failed to reflect its attitude to the idea of judicial justice in a systematic and conceptual way also has a negative impact on the relevant judicial practice. 4. application of the constitutional and legal idea of fair trial in the conditions of unstable economy caused by military actions a significant number of scientific events and published scientific works now confirm the relevance of the issue of applying the constitution of ukraine in the field of ensuring rights and freedoms, especially the right to a fair trial. the implementation of the provisions on the supremacy and direct effect of the constitution of ukraine in judicial practice shows that in order to make a constitutional, lawful, reasonable and fair decision in a case, it is necessary to carry out its mandatory assessment primarily from the standpoint of constitutional norms. inaction in this direction may affect the implementation of constitutional rights and freedoms, as they must be applied directly – by virtue of their supremacy and direct effect. almost all procedural codes oblige courts to decide cases based on the constitution of ukraine. at the same time, the legislation states that if a normative legal act does not comply with a normative legal act that has greater legal force, for example, the law does not comply with the constitution of ukraine or the decree of the president of ukraine does not comply with the law, the court applies the norms of the act that has greater legal force. ensuring the implementation of these provisions can be a significant factor that will protect the right of citizens to a fair trial and effectively implement the principles of the constitution of ukraine (gardashuk, 2003). the courts, fulfilling their duties to protect rights, effectively protected rights and freedoms and created preconditions for the development of the practice of applying the constitution of ukraine. according to the constitution of ukraine, it has the highest legal force, direct effect and is applied throughout the territory of the state, and laws and legal acts adopted on its territory must not contradict the constitution of ukraine, in addition, the legislation emphasizes the need for direct application of the constitution of ukraine in judicial practice (constitution of ukraine, 1996). however, the scope of application of constitutional norms should not be absolutized. in constitutional law enforcement there are also paradoxes when the frequency of application of the norm is undesirable, in any case, the effectiveness of the relevant norm is questionable. for example, is it worth rejoicing that voters will often recall deputies of representative bodies of local self-government? is it worth to be happy that the president of ukraine will regularly remove from office senior officials? it seems that in all such cases, the law enforcement, which is not defective in itself, gives a signal of a defect in the application of another norm – in the selection and nomination of candidates for deputies or for the position of a senior official. in practice, the direct application of constitutional norms in the field of rights and freedoms is not always possible or even impossible in the absence of a law that directly relates to the constitutional right to a fair trial. in certain situations, a court cannot resolve a dispute without a law regulating the legal relations that have arisen (simmons, 2021). summarizing the above, it seems important to emphasize the following. the application of constitutional norms in the field of ensuring the right to a fair trial is carried out using two main types of procedures: baltic journal of economic studies 75 vol. 8 no. 4, 2022 – in an imperative (strictly established) procedural order; – in the discretionary regime, where judges have a relative freedom of discretion in the exercise of procedural actions or in the interpretation or interpretation of constitutional norms. it seems that the optimization of the application of constitutional norms in the field of rights and freedoms involves achieving a balance between these two types of procedures, which ultimately ensure the proper implementation of the constitu tional right to a fair trial. as a result of the application of the constitutional norm in the field of rights and freedoms by the courts, the following two groups of legal consequences of the adoption of acts of application can be distinguished: – recognition of a legal norm as constitutional or unconstitutional (constitutional court of ukraine); – recognition of the decision as lawful, establishing the need for its revision or cancellation (courts of general jurisdiction). the differences in legal consequences allow to understand, on the one hand, the differentiated role of ukrainian courts in the application of constitutional norms in the field of ensuring the right to a fair trial, and, on the other hand, actualizes the task of improving the coordination of the activities of various parts of the judicial system of ukraine to achieve a common goal – the proper implementation of constitutional rights and freedoms of citizens in wartime and the resulting economic turbulence. 5. conclusions the growth of turbulence in the economy is a trend and is caused by many factors, including military actions. thus, the change of technological modes, the development of the knowledge economy and the innovation sector produce many risks that affect the state of all economic systems. judicial authorities are adapting to the current conditions, making every effort to do so and obviously need to use the latest applied scientific approaches in this area. one of the most acute constitutional and legal issues in modern realities is ensuring the right to a fair trial, which is a fundamental element of the complex of human and civil rights. the study of the institute of constitutional and legal status of man and citizen under martial law occupies one of the leading places in the field of theoretical and legal research from the point of view of direct action of the constitution of the state as a normative legal act that has the highest legal force in its territory. in the author's opinion, the idea of justice has been enshrined in the constitutional text as a legal idea rather than a principle of law. at the same time, in modern ukrainian jurisprudence there is a paradoxical situation when the formally subjective right to a trial has a greater internal content than the principle of "justice" used in various, including procedural, branches of ukrainian law. modern ukrainian legislation rarely operates with the category of "right to a fair trial", but in this case it is about legitimization at the level of sectoral ukrainian legislation of the legal construction already established in national science and practice, which came from international law, and not an attempt to give the principle of fairness of judicial activity a real formal legal nature. the fact that the modern ukrainian legislator has failed to reflect its attitude to the idea of judicial justice in a systematic and conceptual way also has a negative impact on the relevant judicial practice. the application of constitutional norms in the sphere of ensuring the right to a fair trial is carried out using two main types of procedures: in a mandatory (strictly established) procedural order; in a discretionary mode, when judges have a relative freedom of discretion in the implementation of procedural actions or in the interpretation or interpretation of constitutional norms. it seems that the optimization of the application of constitutional norms in the field of rights and freedoms involves achieving a balance between these two types of procedures, which ultimately ensure the proper implementation of the constitutional right to a fair trial. as a result of the application of the constitutional norm in the field of rights and freedoms by the courts, the following two groups of legal consequences of the adoption of acts of application can be distinguished: acknowledgment of the norm of law as constitutional or unconstitutional (constitutional court of ukraine); recognition of the decision as justified, establishing the need for its revision or cancellation (courts of general jurisdiction). differences in legal consequences allow us to understand, on the one hand, the differentiated role of the courts of ukraine in the application of constitutional norms in the field of ensuring the right to a fair trial, and on the other hand, it actualizes the task of improving the coordination of the activities of different parts of the judicial system of ukraine to achieve a common goal – the proper implementation of constitutional human rights and freedoms in wartime and the turbulence of the economy caused by it. baltic journal of economic studies 76 vol. 8 no. 4, 2022 references: burlachkov, b. (2009). turbulence economic processes: theoretical aspects. problems of economics, vol. 11, рр. 90–97. brown, c. (2006). economic turbulence: is a volatile economy good for america? university of chicago press. available at: ttps://press.uchicago.edu/ucp/books/book/chicago/e/bo4156799.html constitution of ukraine (1996). law no. 254k/96-bp of 28.06.1996. vidomosti of the verkhovna rada of ukraine. no. 30. article 141. convention for the protection of human rights and fundamental freedoms (2010). international convention for the protection of human rights and fundamental freedoms. doc. from 04.11.1950. council of europe. government courier. november 17. no. 215. entin, m. (2003). fair trial under the law of the council of europe and the european union. constitutional law: an eastern european review, vol. 3(44), pp. 85–97. fritsky, o. (2004). constitutional law of ukraine. kyiv: yurinkom. inter., 455 p. gardashuk, t. (2003). the idea of justice in modern society. philosophical thought, vol. 1, pp. 102–122. macdonald, r . (2021). the european system of the protection of human rights. martinus nijhoff publishers, pp. 59–60. marochkin, i. (2010). problems of ensuring the independence of the judicial power. problems of legality, vol. 112, pp. 167–177. savchin, m. (2009). constitutionalism and the nature of the constitution: monograph. uzhgorod: polygraph center "lira". timchenko, i. (2018). constitutional justice in ukraine – formation and development. bulletin of the academy of legal sciences of ukraine, vol. 2 (33) – 3 (34), pp. 286–290. weissbrodt, d. (2020). international human rights: law, policy, and process. (1st edition ed.) anderson publishing. yanickij, o.n. (2011). turbulent times as a problem of risk society. social sciences and modernity, vol. 6, pp. 155–164. simmons, с. (2021). whose perception of justice? real and perceived challenges to military investigations in armed conflict. available at: https://international-review.icrc.org/articles/military-investigations-in armed-conflict-914 received on: 11th of october, 2022 accepted on: 17th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 36 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 baku state university, azerbaijan (corresponding author) e-mail: s.suleymanli@hotmail.com orcid: https://orcid.org/0000-0002-3397-953x doi: https://doi.org/10.30525/2256-0742/2022-8-5-36-48 international legal fight against the illegal circulation of cultural heritage objects in the conditions of economic integration sima a. suleimanli1 abstract. the subject of the study is the conceptual, theoretical, empirical, methodological and applied foundations of the international legal fight against the illegal circulation of cultural heritage objects in the conditions of economic integration. methodology. general scientific and special legal methods were used in the research process. quantitative and qualitative characteristics of illegal circulation of cultural heritage objects in conditions of economic integration as a social phenomenon were determined with the help of the analysis. the synthesis provided the formation of common features of negative and positive factors that hinder and facilitate the illegal circulation of cultural heritage objects. the comparative legal method allowed to identify the common and distinctive features of the international agreements in this area, as well as with regard to the implementation of their provisions in the national legislation of ukraine and the republic of azerbaijan. the formal-legal method created the conditions for formulating conclusions on the effectiveness of measures defined by international and national legislation in combating the illegal circulation of cultural heritage objects. the purpose of the article is to identify the characteristics of the international legal fight against the illegal circulation of cultural heritage objects in the conditions of economic integration. the results of the study showed that the international legal fight against the illegal circulation of cultural heritage objects is reflected within the universal international legal, regional international legal and national levels, which are mediated by the legislation of general, special and national legal regimes. conclusion. characteristic signs of the deformation of the legal market for the circulation of cultural values have been revealed, taking into account the socio-political and economic conditions of the country in which it exists, the culture of the relevant people, and the level of regulatory and legal support that determines the rules for the civilized circulation of such objects. it has been established that the characteristic conditions under which the illegal circulation of cultural heritage objects takes place as a social phenomenon in today's conditions are: 1) interpenetration of the cultures of existing peoples within the framework of economic, political, legal and other spheres of society; 2) establishment of various forms and methods of exchange of similar goods in social life; 3) occupation of a corresponding niche by such objects in the spiritual, legal, social and economic content of such relations; 4) creation of conditions for access to such objects not only by representatives of the countries of origin, but also by other representatives of the world community, in particular through the means of the global internet network; 5) as a result of the increase in value of such objects due to demand in society, especially due to illegal procedures; 6) in connection with the radicalization of social relations within certain countries or geopolitical formations, creation of conditions for illegal export of such objects from countries where armed conflicts are spreading. in terms of economic integration, the first level is significant, which is mediated by normative prescriptions of international legislation within the framework of the unesco convention 1970 та unidroit convention 1995, the first of which has a more declarative and generalized nature on issues of normalization of rules of circulation of cultural heritage, and the second ensures the creation of legal structures for the return of illegally transferred cultural values in circulation using private law means. it is established that the instruments of the unesco convention of 1954 with its attached protocols unesco convention of 1954 with its attached protocols unesco 1954 protocol to the convention та unesco 1999 second protocol to the convention make it impossible for criminal groups to finance their activities precisely at the expense of the sale of objects of cultural heritage, mediate the introduction of the category of crime under such circumstances as acts in the form of denial of the right to culture and baltic journal of economic studies 37 vol. 8 no. 5, 2022 consideration of the latter as a method of waging war. the cultural value approach of the given regulations is supported. the ways of implementation of the international standards of the fight against the illegal circulation of cultural heritage objects in the national legislation of ukraine and the republic of azerbaijan are analyzed. key words: cultural values, restitution, return, objects of cultural heritage, international legal struggle, illegal trafficking, convention. jel classification: f53, k14, z10 1. introduction the processes taking place in the modern world community are characterized by a number of features that directly or indirectly reproduce the essence of all such phenomena, namely, ensuring the internationalization of economic activity through the convergence and deepening of the interaction of national economies. that is, the classical development of the economy through the provision of all production links, taking into account the development of established relations between states at various levels and in various forms through the distribution of labor and other resources between national economies, is decisive in the globalization of the entire world community. among such resources, cultural heritage, as the most valuable achievement of mankind, occupies almost the most important place and, therefore, is a determining factor in the formation of both the international economy and the national economy of each country. the law, as a means of ensuring the civilized circulation of such objects, creates socio-political, legal and, indirectly, economic conditions for the proper functioning of the market of the given category of objects, which includes both property and non-property essence of the relevant human rights and public interests. this is reflected both in the global international legislation and in the regional international and national level, which is subject to a certain revision taking into account the change of geopolitical realities in today 's conditions, caused, among other things, by the radicalization of international relations taking place in the modern world. all this creates the conditions for the existence of such a shameful phenomenon as the illegal circulation of cultural heritage objects, which indirectly affects not only the non-property assets of humanity, but also the global economy of the world community. these processes cannot be outside the limits of civilized forms of struggle against the given phenomenon, therefore they form the appropriate legal basis in the form of normative legal acts and relevant scientific points of view of jurists in this sphere of social life. taking into account the existence of a long time within the framework of a single legal field and the achievements and development prospects that ukraine has in matters of cultural heritage protection, the peculiarities of the implementation of inter national legislation on the prevention of illegal circulation of objects of cultural heritage into the legislation of this country, it was necessary to study the following range of issues along with the relevant regulatory framework of azerbaijan. the international legal fight against the illegal circulation of cultural heritage objects has been the subject of research by a number of scientists. thus, the issue of cultural values as an object of civil rights was considered by v. zverhovska (zverhovska, 2015), and s. panova singled out among them architectural monuments with corresponding characteristic features and defining criteria for the classification of their legal regime and certain means of legal protection (panova, 2019), a retrospective study of the formation of legal protection of cultural heritage in the field of international and ukrainian legislation was carried out by t. mazur (mazur, 2021), o. rybachok carried out a historical and sociological study of international integrated digital resources of the documentary heritage of relevant archives, libraries, museums in a retrospective plane (rybachok, 2018). issues of law enforcement activities, including those of an international legal nature, in the field of combating the illegal circulation of cultural heritage objects were considered by: a. angelovska from the point of view of normalization of relations with the movement of cultural values across the customs border (angelovska, 2021), v. paragaylo from the point of view of the administrative-legal regime of export, import and return of cultural values (paragaylo, 2021), l. arkusha, m. korniienko, a. berendieieva with regard to the place of illegal circulation of cultural heritage as a part of crime in modern conditions (arkusha et al, 2019). the works of s. kot (kot, 2020), s. suleymanli (suleymanli, 2018), m. perez (perez, 2019), s. manacorda (manacorda, 2011) are directly devoted to the issue of international cooperation in the fight against the illegal circulation of cultural heritage (redchits, 2016). in the plane of the last approach to researching the subject of this work, the issue of counteracting the circulation of cultural values that were moved or destroyed during military conflicts is quite in demand today, which is addressed by v. soloshenko (soloshenko, 2018), c. ehlert (ehlert, 2014), baltic journal of economic studies 38 vol. 8 no. 5, 2022 jjf. hernandez (hernandez, 2018), k. chamberlain (chamberlain, 2016). the existence of a number of scientific works in this field does not negate the relevance and need for further study of the problems of the international legal struggle against the illegal circulation of cultural heritage objects in all its manifestations. 2. illegal circulation of cultural heritage objects in the conditions of economic integration as a social phenomenon the existing trends of global integration of the world community find appropriate expression in various spheres of social life, both within the borders of a particular country, relevant economic and political entities, and in the world as a whole. the study of the available statistics shows the important place of cultural values in the structure of the modern capital market. only the total value of large private collections of works of art in 2018 amounted to almost 2 trillion. us dollars, which mediates a significant passive mass of capital of the richest strata of humanity (bardon, 2020). at the same time, no less significant is the circulation of these values within the framework of various legal and illegal procedures, which, unlike the previous phenomenon, represents the static nature of such capital. the above studies show that in 2019, the volume of sales of works of art on the world market amounted to 64.1 billion us dollars, which was directly transformed into the following components of geographically separated sites, which are shown in figure 1. the analysis of the given structure of the legal market of circulation of cultural values shows its certain deformation in view of the socio-political and economic conditions of the country in which it exists, the culture of the relevant people and the level of regulatory and legal support that determines the rules of civilized circulation of such objects. that is why the united states and great britain were among the first countries to legalize the market for the circulation of cultural values. at the same time, it is necessary to note the radical rethinking of the above, given the small layer of works of art provided by legal trade, compared to the mass of such static capital, given the figures given. in fact, no one has abolished the fundamental law of any economic system, which is an analog of the physical model of equilibrium, according to which demand creates supply. that is to say, the non-legalized demand, which is connected with a number of factors of objective and subjective nature within the cultural, socio-political, legal and economic level of development of society, generates the same non-legalized supply, which actually harms the interests of a specific nation and humanity as a whole. at the same time, all countries are actually involved in the market of illegal circulation of cultural values, some of which acquire the status of donor countries where such objects come from, others ensure the transit of these goods, and the rest are countries where private collectors actually settle them. the concept of cultural heritage as an object of relevant social relations has found legislative regulation both at the international unified and regional level, and at the national level, within the framework of the relevant legal systems. the convention on the protection of the world cultural and natural heritage (world heritage convention, 1972) defines the concepts of "cultural heritage" and "natural heritage", which are equally protected by the provisions of this normative legal document in addition to the legal mechanisms established by national legislation, as well as in connection with the unity of the legal regime in terms of ensuring the preservation of the characteristic features of such an object during its inheritance to future generations. to the main characteristics, according to which in the content of art. 1 of the convention on the protection of the world cultural and natural heritage, the separation of the cultural heritage from the natural heritage is carried out, it is necessary to attribute: 1) the connection of the creation of the object of cultural heritage with human activity; 44 20 18 18 0 10 20 30 40 50 usa united kingdom china other countries percent figure 1. baltic journal of economic studies 39 vol. 8 no. 5, 2022 2) the endowment of the vast majority of such objects with the characteristics of a work as a result of creative, intellectual activity, i.e. an object of intellectual property rights; 3) the value of such a result of human activity for future generations due to the consolidation of achievements in one or another sphere of social existence or a certain significance for the given historical period; 4) the connection of the mechanism of creation, existence or transformation of such objects with historical, aesthetic, ethnological or anthropological features valuable for the world community or a certain part of it (people, nation, group). objects of natural heritage are not inherently linked to human activity, since they are a creation of nature, but the anthropological factor has an indirect reflection through the consideration of their value specifically for humanity in the relevant retrospective. undoubtedly, the differentiation of such objects by the convention on the protection of the world cultural and natural heritage into sights, complexes or ensembles and places of interest is aimed at their maximum coverage by legal protection. at the same time, the general conference of the united nations educational, scientific and cultural organization (unesco) in 2003 adopted a decision to expand the range of objects that belong to cultural heritage and require appropriate legal regulation, creating conditions for ensuring respect for the intangible cultural heritage of relevant communities, groups of people and individuals, forming systematic measures to educate the world population and individual countries, ethnic groups in the spirit of respect for intangible cultural heritage. this was embodied in the convention on the safeguarding of the intangible cultural heritage (unesco convention, 2003), the objects of the latter include: 1) objects of an intangible nature that have a certain manifestation of objectification (customs, forms of display and expression, knowledge and skills); 2) objects of a material nature related to the previous group (tools, objects, artifacts and cultural spaces), that is, in fact, in the vast majority, they are their material embodiment. both groups of objects of intangible cultural heritage are covered by such common features that adequately outline the legal regime of their conventional legal protection: 1) recognition by communities, groups and in some cases by individuals as part of their cultural heritage; 2) transmission of such objects from generation to generation in both forms using various methods of communication between them; 3) the stability of the characteristic features of objects of this kind precisely as a type of cultural heritage; 4) the formation of such objects and their acquisition of appropriate features under the influence of the relevant community, its part in the real existence or retrospective development, or nature; 5) promotion of the formation of respect for cultural diversity and human creativity. the spheres of their manifestation are significant for the classification of the given category of objects as cultural heritage: oral traditions and forms of expression; performing arts; customs, ceremonies, celebrations; knowledge and practices related to nature and the universe; traditional crafts. for the purposes of this study, in the field of prevention of illegal circulation of cultural heritage objects, it is more appropriate to pay attention to the second group of objects of intangible cultural heritage, i.e. those that have a corresponding material embodiment and provide an opportunity to consider the corresponding circulation in civil (economic) turnover. using ukraine as an example, it is possible to trace the implementation of the above-mentioned international legal norms, which ensure the legal regime of cultural heritage objects, taking into account the described quantitative and qualitative characteristics. thus, for the development of the convention on the protection of world cultural and natural heritage, the law of ukraine "on protection of cultural heritage: law of ukraine as amended on june 8, 2000, no. 1805-iii" normalized the concept of cultural heritage as a set of inherited humanity from previous generations of cultural heritage objects, the latter include the same three conventional groups (types) that have been detailed in the national legislation of this country, taking into account the general and special legal regime, type, nature of origin, significance for humanity, connection with other objects, etc. for the purposes of this study, the classification of conventional types of cultural heritage objects is quite significant, including objects: 1) archaeological; 2) historical; 3) monumental art; 4) architecture; 5) urban planning; 6) garden and park art; 7) landscape; 8) science and technology. in accordance with the convention on the protection of the world cultural and natural heritage, this law supports the legal regime of the world heritage site, as well as the cultural heritage site, the legal protection of which is provided only within the framework of the national legal regime. the implementation of the intangible cultural heritage objects took place within the framework of the law of ukraine "on the accession of ukraine to the convention on the protection of the intangible cultural heritage: law of ukraine as amended on march 6, 2008, no. 132-vi), for the implementation of which the procedure for maintaining the national list of elements of the intangible cultural heritage of ukraine was established (on approval of the procedure for maintaining the national list of elements of the intangible cultural heritage of ukraine: order of the ministry of culture of ukraine baltic journal of economic studies 40 vol. 8 no. 5, 2022 as amended on december 11, 2017, no. 1319). such objects of cultural heritage directly include corresponding objectified forms of expression of intangible cultural heritage, which are transmitted from generation to generation, constantly reproduced by communities and groups and manifested in particular in oral traditions, performing arts, customs, rites, celebrations, knowledge and practices related to nature and the universe, skills related to traditional crafts (folk art crafts), educational and training traditions, etc. the study of the nature of cultural heritage objects at the level of their international and national legal regime reveals the following characteristic features that determine their significance in the composition of the corresponding spiritual and material capital of mankind: the increase in value with the passage of time in the historical plane, the inclusion of the achievements of mankind in various spheres of social life, the partial embodiment of the intellectual nature during creation, the implementation of additional costs for storage and restoration. all this becomes a guarantee of formation of all parameters inherent in objects that act as a means of capital preservation and increase, i.e. objects of cultural heritage appear, in addition to the above-mentioned purpose of spiritual, general social property, also as objects for formation of wealth of rich representatives of humanity. the given figures of legal circulation of objects of cultural heritage are quite modest, and the vast majority of such objects cannot be legally in private ownership or are in the countries of origin and legal conditions for their legal export, quite often from poorer countries, and satisfying the demand of individuals who live in developed countries, there are none. all this leads to the formation of an illegal market of cultural heritage objects for huge sums of money, as evidenced by the figures of seizure of only two police operations carried out in bulgaria and italy, about 4,600 and 10,000 objects of art, which are cultural heritage objects (renold, 2020). the characteristic conditions under which the illegal circulation of cultural heritage objects takes place as a social phenomenon in today 's conditions are: 1) interpenetration of the cultures of existing peoples within the framework of economic, political, legal and other spheres of society; 2) establishment of various forms and methods of exchange of similar goods in social life; 3) occupation by such objects of a corresponding niche in the spiritual, legal, social and economic content of such relations; 4) the creation of conditions for access to such objects not only by representatives of the countries of origin, but also by other representatives of the world community, in particular through the means of the global internet network (mashberg, 2020); 5) as a result of the increase in the value of such objects due to demand in society, especially due to illegal procedures; 6) in connection with the radicalization of social relations within certain countries or geopolitical formations, the creation of conditions for the illegal export of such objects from countries where armed conflicts are spreading (kaci, 2020). as a result of the study of the nature of cultural heritage objects, as well as the illegal circulation of cultural heritage objects as a social phenomenon in the conditions of economic integration of the world community, it is necessary to study the international legal principles of combating this form of human activity in today 's conditions. 3. international legal standards to combat the illicit trafficking of cultural objects in the context of economic integration the international legal mechanism to combat the illegal circulation of cultural heritage objects is established at three levels: 1) universal international law; 2) regional international law; 3) national. the universal international legal regime for the implementation of measures to combat the illegal circulation of objects of cultural heritage began to be fully formed on the basis of the policy of granting independence to colonial countries and peoples, which was initiated in the early 60s of the last century. such transformations in scientific sources are associated with the phenomenon of formation of a new international order in the field of culture in terms of granting the peoples the right to selfdetermination, including in this component of social life (négri, 2020). this became the impetus for normative novelties at the international level, which would determine the rules for the implementation of such a right, which was transformed into the adoption of the recommendation on the means of prohibiting and preventing the illicit export, import and transfer of ownership of cultural property (unesco recommendation, 1964), and the development of the last document – the convention on the means of prohibiting and preventing the illicit import, export and transfer of ownership of cultural property (unesco convention, 1970). according to négri, the purpose of this international legal treaty is to establish the fundamental principles of collective responsibility and equality of cultures as a guarantee for the realization of the content of the right of peoples to their cultural heritage or, in the context of the above, the right to cultural selfdetermination. indeed, such an approach has a right to exist, since the development of the cultural identity of any people and of the world community as a whole is directly related to the cultural heritage of these people, embodied in the corresponding cultural values received from previous generations. baltic journal of economic studies 41 vol. 8 no. 5, 2022 no less reasonable is the opinion that the unesco convention of 1970 aims at creating a compromise between the developed countries, which are the vast majority of the sources of demand for such objects, and the developing countries, from whose territory the listed cultural values originate (kot, 2020). according to another point of view, the specified international legal act is intended to ensure the legal order of import, export and transfer of ownership of cultural values (angelovska, 2021). this position is complemented by the consideration of granting a privileged legal status to cultural objects in the unesco convention of 1970, the establishment of comprehensive measures to combat illegal actions against them, particularly in the form of theft or robbery, and, above all, the recognition of the right of a country to cultural values originating from its territory through the formation of international legal custom (paragaylo, 2021). the analysis of the provisions of the unesco convention of 1970 in the light of the above considerations testifies the following this interna tional legal act clearly defines its purpose – to establish the legal procedure for the circulation of cultural heritage objects in the international space and the rules of international cooperation in this area. achievement of the stated purpose of the unesco 1970 convention mediates the solution of the following tasks: 1) implementation of the provisions of the declaration of principles of international cultural cooperation (unesco declaration 1966, 1966); 2) expansion of knowledge about human civilization; 3) education of mankind in the spirit of respect for other peoples; 4) formation of the true material and spiritual value of objects of cultural heritage; 5) imposition of a legal obligation on the state to take measures to protect cultural values located on its territory from the danger of theft, secret excavations and illegal removal; 6) formation of a moral obligation of each of the signatory countries regarding its own cultural heritage and the cultural heritage of other nations; 7) creation of appropriate funds of cultural and educational institutions on the basis of generally accepted moral principles and legal regulations; 8) unesco's obligation to involve the countries of the world community in cooperation in the field of combating the illegal circulation of cultural heritage objects on the way to eliminating misunderstandings in international relations; 9) implementation of activities to prevent the illegal circulation of cultural heritage objects at the national and international levels in close cooperation between countries. the unesco convention of 1970 clarifies, within its content, several is-sues that are important for the legitimate circulation of cultural heritage objects with respect to 1) terminology; 2) rules of circulation (organizational and techno-logical); 3) consequences of violation of these rules; 4) directions and means of cooperation between countries within the framework of implementation of the provisions of this convention. within the terminological definitions, a clear definition of the list of cultural values that require legalization of circulation is proposed, taking into account the purpose of this international legal act, as well as highlighting the characteristics of the latter in order to include them in the circle of cultural heritage objects of each country. among them the following are proposed: 1) creation by individuals or collectives of citizens of the respective state; 2) creation by a foreigner or stateless person of cultural values important for the people; 3) discovery on the national territory of the country; 4) acquisition of cultural values by archaeological, ethnological and naturalistic expeditions with the permission of the authorized body of the country of origin; 5) acquisition as a result of voluntary exchange between states; 6) receipt as a gift or purchase with the permission of the authorized body of the country of origin of cultural values. it provides a defined list of legitimate ways of intro-ducing cultural values belonging to cultural heritage objects into civil circulation, which ensures the recognition of the given legal regime at the international level. within the framework of organizational measures for the introduction of rules for the circulation of cultural heritage objects, it is proposed to create a system of state administrative bodies, national services for the protection of cultural heritage with appropriate organizational, legal, personnel and material and financial support, based on such defined articles. 5 of the unesco convention of 1970, functions which, of course, should be interpreted in a broader sense in the context of the above-mentioned objectives of the international legal treaty in question. technological issues related to the implementation of these rules are covered by the measures referred to in art. 6 of the 1970 unesco convention. first of all, it is the introduction of a legitimate document (certificate), which represents the will of the country of origin (exporting country) of a particular cultural object to export it in accordance with the established rules and determines the ability of such an object to circulate in a civilized way on the world market of cultural goods. second, the prohibition of export of cultural values not accompanied by the specified legal documents. thirdly, the publication in all possible forms of information about the prohibition of export and import of cultural values without the specified certificate. special attention should be paid to issues that are also of a technological nature in the mechanism of baltic journal of economic studies 42 vol. 8 no. 5, 2022 ensuring the rules of circulation of cultural heritage objects, but are appropriately assigned to a separate group, namely measures of a preventive nature, which are referred to in art. 7, 9, 10, 12, 13 of the 1970 unesco convention. according to some researchers, such measures contribute to the formation of ethical rules of behavior towards cultural heritage objects among museum institutions (négri, 2020); according to others, they create conditions for the implementation of the procedure for the return and restitution of illegally exported cultural values (kot, 2020). for the purposes of this convention, the procedure for the return and restitution of illegally exported cultural property is of great importance, since it plays the role of both a preventive and a punitive measure. at the same time, it would be appropriate to agree with the opinion of s. kot, who, among the specified normative prescriptions, casually singled out the provisions that generally determine the rules for the application of restitution, as well as the direct procedural means of its implementation in the form of an appropriate lawsuit, the filing of which must be ensured within the national legislation of the signatory country. the unesco convention of 1970 obliges the participating countries to introduce administrative and criminal liability for violators of the above rules, and also provides for the considered mechanism of civil liability in the form of restitution. a number of provisions of this international legal treaty pay special attention to directions and means of cooperation of the participating countries within the framework of prevention of illegal circulation of cultural heritage objects, in particular, both in terms of cooperation between countries and through unesco in the field of 1) exchange of information; 2) education; 3) advisory services; 4) expert services. in the events taking place, it is appropriate to pay attention to art. 11 unesco convention of 1970 attention to the issue of protection of cultural values in conditions of armed conflict, which defines the presumption of recognition of illegal forced export or transfer of ownership of cultural values, which is a consequence of direct or indirect occupation of the country of origin of cultural values by a foreign state. if the unesco convention of 1970 became rather a fundamental international legal act, which set the general principles of normalization of the rules of circulation of cultural heritage objects, then the new international legal agreement, which was embodied in the unidroit convention of 1995, directly established the legal mechanism for the implemen tation of restitution in as a means to restore the private rights of owners of cultural heritage objects, and indirectly the public interests of the society of the country of origin of cultural values that have such legal regime. unidroit is an international organization with a long history of establishment and existence, whose purpose is to ensure the development and implementation of measures for the unification of private law in the world. the legality of the development and adoption of the unidroit convention 1995 within the framework of the functioning of this organization is explained by the private law nature of the restitution mechanism as a means of restoring the status of private rights and interests of persons who have been violated due to deprivation, damage and other forms of oppression of the corresponding right and interest. such a position fully corresponds to the essence of removing the cultural heritage object from civil circulation, which was pointed out at the beginning of this study. in addition, some researchers draw attention to the limitations of the content of unesco 1970, which does not provide the authorized entity with legal means to demand a cultural heritage object put into circulation outside the defined rules (kot, 2020). however, it should be noted that this international legal agreement actually introduces private law mechanisms for the restoration of the violated right to the satisfaction of the public interest, which consists in respecting the appropriate order of circulation of cultural values, which in part represents not only private, but also public demand. at the same time, in connection with the implementation of a comprehensive mechanism for the protection of the rights and interests of the owners and holders of cultural heritage objects, it is customary to distinguish such legal structures as restitution and compensation for the damage caused. the unidroit 1995 convention has created both possibilities for the entitled person, both alone and in a corresponding relationship. among the positive aspects of this convention, the following should be noted. it recognizes the complexity of measures for the protection of cultural values, where, in addition to restitution, it fully recognizes the development and application of relevant registers, the protection of archaeological reserves, technical cooperation and others. in addition to the mechanism of restitution, the return of illegally exported cultural property is offered as a remedy under private law. the difference between them is the obligation of the owner of stolen cultural objects to return them to the country of origin, according to the first method, and the right of such a country to return illegally exported cultural objects, according to the second method. that is, in both cases, the unidroit 1995 convention uses the special legal terms "stolen" and "illegally exported" cultural property. obviously, the essence of theft is perceived in a general criminal aspect, but the convention additionally clarifies baltic journal of economic studies 43 vol. 8 no. 5, 2022 the legal regime of cultural values originating from unauthorized excavations or illegally removed from authorized excavations, which are recognized as stolen if this meets the requirements of the legislation of the country of excavation. illegally exported cultural values are objects of cultural heritage that have been removed from the territory of their country of origin in violation of the rules defined by the legislation of that country. the number of illegally exported cultural objects also includes those that were legally exported but not returned within the framework of the issued permits, which is considered quite positive by researchers (kot, 2020). the unidroit 1995 convention contains a list of cultural values which are covered by its legal protection and which correspond to the following characteristics: 1) perceived in secular or religious spheres; 2) important for archaeology, anthropology, history, literature, art or science. moreover, in accordance with the annex to this international treaty, the differentiation of similar objects into categories is proposed, taking into account the scope of use and creation. the defining features of the legal mechanisms of restitution and return of cultural heritage objects are: 1) the presumption of good faith behavior; 2) the protection of the bona fide acquirer of such objects through the implementation of the fair and reasonable compensation mechanism; 3) the establishment of time limits for the realization of the right to restitution and return of cultural values; 4) the recognition of the optional nature of the national legal regime of the above-mentioned legal constructions for combating the illegal circulation of cultural values; 5) the definition of a special legal regime for a public collection, a cultural value that has a sacred character or collective significance, or belongs to or is used by a community of indigenous inhabitants or tribes. in view of the fact that throughout the existence of mankind there have been various factors causing conflicts both within a particular people and between peoples, the question of creating additional mechanisms for the protection of cultural heritage has always arisen precisely at such times or as a result of the course of similar events. 11 of the unesco convention of 1970 and indirectly in the content of the considered legal constructions defined by the unidroit convention of 1995. however, the provisions of the unesco 1954 convention (unesco 1954 convention, 1954) and its protocols (unesco protocol to the convention, 1954), (unesco second protocol to the convention, 1999) proved to be special in this area. it is suggested to the researchers that within the framework of the implementation of the latest international legal agreements on the protection of cultural heritage, in particular, through the prevention of illegal circulation, the following measures should be emphasized: 1) administrative; 2) legal; 3) military; 4) informational; 5) technical (akulenko, 2010). for the purposes of this study, the main achievements of these special regulatory acts are as follows. enhanced protection is introduced for cultural heritage objects in the presence of three circumstances: 1) they belong to the cultural heritage of outstanding importance for humanity; 2) they are not used for military purposes, which is guaranteed by the country where they are located; 3) implementation of comprehensive organizational, administrative and legal measures at the national level in relation to them, which testifies to their exceptional cultural and historical value. the participating countries undertake to introduce at the national level criminal responsibility for committing an act in the form of an attack on such objects, using them to support military operations, destruction or appropriation on a large scale, theft, robbery, illegal appropriation, acts of vandalism against them, as well as administrative or disciplinary responsibility for any use of cultural values in violation of the procedure defined by these normative acts, or any illegal export, other removal of cultural values from the occupied territory or transfer of ownership in violation of the established procedure. in the context of the scope of application of the unesco convention of 1954 with its annexed protocols unesco 1954 protocol to the convention and unesco 1999 second protocol to the convention, the provisions establishing the legal responsibility of military personnel and the obligation of participating states to take appropriate measures with respect to them are of particular importance. in the context of the scope of the 1954 unesco convention and its annexed protocols, the 1954 unesco protocol to the convention and the 1999 unesco second protocol to the convention, the provisions establishing the legal responsibility of military personnel and the obligation of participating states to take appropriate measures with respect to them are of particular importance. scholarly sources emphasize the importance of unesco's 1999 second protocol to the convention for the protection of cultural heritage objects in armed conflicts of an internal nature (chamberlain, 2016). a positive feature of these international agreements is the establishment of a fund for the protection of cultural values in the event of armed conflict, with a corresponding objective, which also makes adjustments to the issue of the legality of the circulation of cultural heritage objects in such circumstances. in addition to ensuring the existence of the fund for the protection of cultural property baltic journal of economic studies 44 vol. 8 no. 5, 2022 in the event of an armed conflict, the legal movement of cultural property through the mechanism of its restitution is allowed when implementing the legal procedure of denunciation of the protocol to the convention. however, the question of the application of the institution of restitution under such specific conditions is not defined, which returns the parties to the general provisions of the 1970 unesco convention and the 1995 unidroit convention. according to researchers, the most dangerous issues in the conditions of armed conflicts are those related to the need of criminal groups to finance their activities precisely at the expense of the sale of cultural heritage objects (kaci, 2020). at the same time, the legal constructions defined within the framework of the above-mentioned international normative acts, moreover, are supplemented, for example, by the united nations security council resolution 2199 (s/res/2199, 2015), but do not provide adequate technological procedures for the protection of cultural heritage, in particular in terms of attracting to the full responsibility of the buyers of such things. in fact, the recent international legal document creates the conditions for bringing to justice individuals and legal entities involved in the trafficking of cultural goods originating from areas where armed conflicts are taking place or have taken place. however, it does not specify the legal procedure to be followed, leaving such a possibility to national legal systems. some researchers propose to introduce the category of crime under such circumstances as acts in the form of denial of the right to culture, and consider the latter as a method of waging war, which mediates the privileged nature of international criminal law in relation to such crimes (perez, 2019). in connection with the above, it is appropriate to consider the comparison of the position of the rome statute of the international criminal court (rome statute icc, 1998), which is characterized as the approach of civil use of the object of cultural heritage, and the second protocol to the unesco convention of 1999, which reflects the so-called cultural value-oriented approach (frulli, 2011). in view of the above, it is quite possible to agree with the given point of view. therefore, the international legal standards for combating the illegal circulation of cultural heritage objects are traced at three levels: universal international law, regional international law, and national law. in the conditions of economic integration, the first level is significant, which is mediated by normative prescriptions of international legislation within the framework of the 1970 unesco convention and the 1995 unidroit convention, the first of which is more declarative and generalized in terms of normalizing the rules of circulation of cultural heritage records, and the second ensures the creation of legal structures with return of illegally displaced cultural values using private law means. in addition to the above, the unesco convention of 1954 with its annexed protocols unesco 1954 protocol to the convention and unesco 1999 second protocol to the convention, where actions with illegal circulation of cultural values in conditions of military conflicts of national and international nature are reflected. 4. implementation of international legal standards for combating illicit traf-ficking in cultural heritage objects in the national legal system – the example of ukraine and azerbaijan the second or regional international legal level of implementation of international standards to combat the illicit circulation of cultural heritage objects is an intermediate level between the first and the third and is mediated by a number of features of a geographical, geopolitical and economic nature. such legal documents include the european convention on offences relating to cultural property (european convention, 1985), which supplemented the international legal norms with provisions on determining the legal status of pretrial investigation bodies and the court, the european convention on the protection of archaeological heritage (european convention, 1992), which defines the legal regime of cultural values illegally obtained during archaeological excavations, regulation of the council of the european union no. 116/2009 on the export of cultural values (council regulation, 2008), which recognizes the export license for such objects as a single identifi cation document, and others. for the consequences of the application and implementation of the content of the above mentioned conventions, the processes of implementation of international standards of a universal nature on the issues of combating the illegal circulation of cultural heritage objects into national legislation are more significant in terms of economic integration. it's necessary to trace such processes on the example of ukraine and azerbaijan. as a matter of fact, the ukrainian legislation has been enriched by the achievements of the international legal regulation of the protection of cultural heritage, which, as already mentioned, was marked by the adoption of the law of ukraine "on the protection of cultural heritage" and the law of ukraine "on the accession of ukraine to the convention on the protection of intangible cultural heritage" and in accordance with them a number of other subordinate legal acts. baltic journal of economic studies 45 vol. 8 no. 5, 2022 however, for the purposes of this study, the issue of implementation of international legal documents on prevention of illegal circulation of cultural heritage objects is more important. for example, ukraine ratified the unesco convention of 1970 in 1988, that is, during its stay in the ussr . within the framework of the implementation of the contents of the convention, in the first stage, in 1993, the national commission on the return of cultural objects to ukraine was established (on the approval of the regulation on the national commission on the return of cultural objects to ukraine: resolution of the cabinet of ministers of ukraine as amended on june 18, 1993, no. 464), within the framework of which the powers were provided for 1) to identify and facilitate the return to ukraine of displaced cultural property and to take measures to compensate for losses caused by its illegal circulation; 2) to protect it in connection with the specified national interests; 3) to coordinate international cooperation in the field of combating the illegal circulation of cultural heritage objects; 4) to participate in the development and implementation of measures to fulfill ukraine's obligations in this area; 5) to provide scientificmethodical and informational support for activities in this area. in the second stage of implementation of the provisions of the unesco convention of 1970, the law of ukraine "on export, import and return of cultural property: law of ukraine as amended on september 21, 1999, no. 1068-xiv". and the national commission for the return of cultural property to ukraine was reformed into the state service for the control of movement of cultural property across the state border of ukraine, and later into the state service for the protection of cultural heritage and the state inspection of cultural herit-age. in general, this law reproduces the main developments of the unesco convention of 1970 through: 1) definition of the procedure for import, export and return of cultural property; 2) normalization of the legal status of the state control body over the export, import and return of cultural property; 3) examination and registration of cultural heritage objects; 4) introduction of a mechanism of protection of the bona fide owner; 5) establishment of forms and means of international cooperation in this field. the state service for protection of cultural heritage was established with the purpose of providing licensing and administrative services in the field of protection of cultural heritage, management of cultural institutions, such as museum complexes, implementation of the policy of return of cultural values to ukraine, and the state inspection of cultural heritage – to carry out supervision and control in the field of protection of cultural heritage. in the final version, the ministry of culture and information policy of ukraine concentrated these functions from january 2022 (some issues of the ministry of culture and information policy: resolution cabinet of ministers of ukraine as amended on october 16, 2019, no. 885). the unesco convention of 1970 was also ratified by the republic of azerbaijan in 1997 and implemented in the legislation of azerbaijan by incorporation, that is, by inclusion in the content of the relevant legal acts (suleymanli, 2018). the most important among them in connection with the subject of this study are the rules on import, export and transit of cultural property through the territory of the republic of azerbaijan (on approval of the "rules on import, export and transit of cultural property through the territory of the republic of azerbaijan": resolution of the cabinet of ministers of azerbaijan in the version of august 29, 2014, no. 294). the following institutions of the unesco convention of 1970 have been recently implemented: 1) terminology and list of cultural values; 2) administrative procedure of import, export, transit; 3) procedure of issuing a certificate; 3) examination of cultural values. the comparison of the means of implementation of the unesco convention of 1970 in ukraine and the republic of azerbaijan indicates a more perfect mechanism in this matter in the first country, where, in addition to administrative procedures, other institutions were reflected at the level of law, such as the introduction of a mechanism of protection of bona fide owners, and the establishment of forms and means of international cooperation in this sphere. the 1995 unidroit convention proved to be more controversial in terms of implementation by these countries, which is also mediated by its certain dispositiveness in this part, which allows even signatories to apply national legislation in the presence of certain conflicts. both countries are not members of the international organization unidroit itself, and ukraine has not signed this agreement. azerbaijan has been a party to this international convention since 2003, which served to develop the mentioned rules of import, export and transit of cultural values through the territory of the republic of azerbaijan. at the same time, since the legislation of this country does not contain the legitimization of the institution of restitution and return of cultural values, the provisions of the unidroit convention of 1995 are fully applicable. that is, the provisions of this convention are actually implemented on the basis of the following principles: 1) recognition of the priority of universally recognized principles and norms of international law; 2) prevention of violation of public order in this country. as for the implementation of the provisions of the unesco convention of 1954 with the annexed protocols of the unesco protocol of 1954 to the baltic journal of economic studies 46 vol. 8 no. 5, 2022 convention and the unesco second protocol of 1999 to the convention, ukraine has fully acceded to these agreements only in 2020, and the republic of azerbaijan in 2001. the implementation of the provisions of these international legal acts is carried out by incorporation into the existing acts of national legislation, although for ukraine, in the light of recent events, additional prerequisites for the improvement of the national legislation in this sphere have arisen. 5. conclusions thus, the characteristic signs of the deformation of the legal market for the circulation of cultural values were revealed, taking into account the socio-political and economic conditions of the country in which it exists, the culture of the relevant people, and the level of regulatory and legal support, which determines the rules for the civilized circulation of such objects. the nature of cultural values and objects of cultural heritage among them, as well as their place in the structure of spiritual and material capital of mankind have been studied. it has been established that the characteristic conditions under which the illegal circulation of cultural heritage objects takes place as a social phenomenon in today 's conditions are: 1) interpenetration of the cultures of existing peoples within the framework of economic, political, legal and other spheres of society; 2) establishment of various forms and methods of exchange of similar goods in social life; 3) occupation of a corresponding niche by such objects in the spiritual, legal, social and economic content of such relations; 4) creation of conditions for access to such objects not only by representatives of the countries of origin, but also by other representatives of the world community, in particular through the means of the global internet network; 5) as a result of the increase in value of such objects due to demand in society, especially due to illegal procedures; 6) in connection with the radicalization of social relations within certain countries or geopolitical formations, creation of conditions for illegal export of such objects from countries where armed conflicts are spreading. international legal standards for combating the illicit trafficking of cultural heritage objects are traced at three levels: universal international law, regional international law, and national law. in the conditions of economic integration, the first level is significant, which is mediated by the normative prescriptions of international legislation within the framework of the unesco convention of 1970 and the unidroit convention of 1995, the first of which is more declarative and generalized in terms of normalizing the rules for the circulation of cultural heritage records, and the second ensures the creation of legal structures with the return of illegally displaced cultural values by means of private law. in addition to the above, the unesco convention of 1954 with its annexed protocols unesco 1954 protocol to the convention and unesco 1999 second protocol to the convention, in which actions with illegal circulation of cultural values in conditions of military conflicts of national and international nature are reflected. the instruments of these international regulatory acts make it impossible for criminal groups to finance their activities precisely at the expense of the sale of cultural heritage objects, mediate the introduction of the category of crime under such circumstances as acts in the form of denial of the right to culture and consideration of the latter as a method of waging war. the cultural value-oriented approach of the relevant regulations is supported. in the national legislation of ukraine and the republic of azerbaijan, the implementation of the above-mentioned international legal acts in the field of combating the illegal circulation of cultural heritage objects has been traced. in both countries, the unesco convention of 1970 has been implemented, however, in ukraine at the level of the law, and in the republic of azerbaijan through incorporation into the framework of a number of secondary regulatory acts. at the same time, according to the legislation of the republic of azerbaijan, the implementation was carried out more within the framework of administrative procedures, and in the ukrainian legislation were also reflected other institutions, such as the introduction of a mechanism of protection of bona fide owners and the establishment of forms and means of international cooperation in this field. unlike ukraine, the republic of azerbaijan has implemented the provisions of the unidroit convention of 1995 on the basis of the following principles 1) recognition of the priority of universally recognized principles and norms of international law; 2) prevention of violation of public order in the country. the implementation of the provisions of the unesco convention of 1954 with the attached protocols unesco 1954 protocol to the convention and unesco 1999 second protocol to the convention began to be fully implemented by ukraine in 2020, and the republic of azerbaijan ratified in 2001, but the incorporation of its provisions is still being carried out. although for ukraine, in the light of recent events, additional conditions have arisen for the improvement of national legislation on this issue. therefore, the issue of international legal struggle against the illegal circulation of cultural heritage objects in the context of economic integration has found legal regulation at various levels, however, a number of problems remain unresolved, which actualizes the development of new changes in international and national legislation in this area. baltic journal of economic studies 47 vol. 8 no. 5, 2022 references: zverhovska, v. f. 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ministry of culture and information policy: resolution cabinet of ministers of ukraine as amended on october 16, 2019, № 885. available at: https://zakon.rada.gov.ua/laws/show/885-2019-% d0%bf?lang=en#text (accessed november 27, 2022). on the approval of the "rules for the import, export and transit of cultural property through the territory of the republic of azerbaijan": resolution cabinet of ministers of azerbaijan as amended on august 29, 2014, № 294. available at: https://e-qanun.az/framework/28340 (accessed november 27, 2022). received on: 6th of october, 2022 accepted on: 19th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 93 vol. 2, no. 5, 2016 corresponding author: 1 department of audit, national academy of statistics, accounting and auditing. е-mail:stshylga@ukr.net 2 department of accounting, taxation and auditing, chernihiv national university of technology. е-mail: yacherny@ukr.net non-linearity of audit prices and reputation in developing countries: shift to or from? svitlana shulha1 national academy of statistics, accounting and auditing, ukraine iaroslav petrakov2 chernihiv national university of technology, ukraine abstract. the purpose of the paper is to analyse the origins of audit prices non-linearity in developing countries. we assume riskand industry-sensitiveness of audit firms there due to the low institutional capacity, weak market forces development and questionable both auditors and clients ethical behaviour affecting market sustainability and implying additional challenges on stakeholder confidence. methodology. we combine economic geography approach and reputation-averse phenomenon to explain endogenous volatility of average audit prices in ukraine for the period of 2008-2015. analysis of recent publications partially explains audit pricing non-linearity determinants that have both qualitative (brand and specialization) and quantitative (risks, manipulations, bribery) nature in developing countries. first, we qualify determinants of audit fees by inherent origin (endogenous, exogenous), stakeholder side (demand, supply), and market structure (concentrated, fragmented). second, we summarize reputation challenges of audit business in developing countries. third, we run empirical analysis of average prices in ukraine for the period of 2008-2015 based on annual chamber of auditors of ukraine reports data. practical implications. audit pricing models in developed countries are mainly exogenous and based on the auditor’s risk assessment. vulnerability of markets and clients’ unethical behaviour makes audit pricing models more endogenous in developing countries. value/originality. this is the first paper providing a better understanding of audit prices declination in ukraine as a consequence of dysfunctional audit firms’ behaviour, institutional and market fragility, inherent to developing countries. key words: audit pricing, risks, developing countries, reputation, fee premium. jel classification: m41, m42 1. introduction audit fees, traditionally, are among regularly discussed issues between the regulators, businesses and professional society. audit pricing remains very important also for researchers in general (barkess & simnett, 1994, beatty, 1989) discussions on determinants (ward, elder & kattelus, 1994) and basic models (giroux & mclelland, 2008, pong & whittington, 1994, raluca, 2011). traditionally, main arguments in pricing debates favour such factors as size (carson & fargher, 2007, sundgren & tobias svanström, 2013), industry (ballas & fafaliou, 2008), and risk (bell, dooger & solomon, 2008, jubb, houghton & butterworth, 1996). our recent findings in this area suggest that pricing models shift from endogenous to exogenous factors, what can be explained by growing pressure of main stakeholders – clients and regulators through their control of the ethical, quality, social and public governance issues (shulha, 2016). they are supported by other findings for developed countries (francis & wang, 2005, willenborg, 1999). instead, lower institutional capacity, weaker market forces development and questionable behavioural issues in developing countries pose additional challenges for local audit markets (petrakov, 2013, shulha & petrakov, 2015, schatzberg, 1990). unquestionably, quality of audit services should be regarded as a keystone of any report (sundgren & svanström, 2013) but such statement sounds uneven for developing countries (korotkiy & petrakov, 2009). audit fee premiums are traditionally correlated with reputation (carson & fargher, 2007, chaney & philipich 2002, kreps & wilson, 1982, moizer, 1997, francis, reichelt & wang, 2005, shapiro, 1983) and auditor independence (barkess & simnett, 1994,) which in developing countries are under pressure due to corruption, unethical behaviour and limited client’s payability. although there are some evidences baltic journal of economic studies 94 vol. 2, no. 5, 2016 on an impact of perceptions (figueroa, 2013) and dysfunctional behaviour (immordino & pagano, 2012, yuen, law, lu & guan, 2013) on auditing pricing. we think that audit pricing non-linearity in developing countries origins from weaker markets’ sustainability and stakeholders’ distrust. in case of ukraine this hypothesis can be analysed through average audit prices during the last decade. in order to check this idea we will combine economic geography approach (el ghoul, guedhami, ni, pittman & saadi, 2013, el ghoul, guedhami & pittman, 2014) and reputation-averse phenomenon (choi, kim, liu & simunic 2008), to explain endogenous volatility of average audit prices in ukraine during 2008-2015. first, we qualify determinants of audit fees by inherent origin (endogenous, exogenous), stakeholder side (demand, supply), and market structure (concentrated, fragmented). second, we summarize reputation challenges in developing countries. third, we run empirical analysis of average prices in ukraine during 2008-2015 based on chamber of auditors of ukraine annual reports. 2. determinants of audit pricing in developing countries analysis of recent publications partially explains the determinants of audit prices non-linearity arising both from qualitative (brand and specialization) and quantitative (risks, manipulations, bribery) issues in developing countries. client’s payability (to cover highquality audit) and auditor’s reputation (as independent and experienced entity) are particularly important for market stability: financially constrained clients may pose additional pressure on an auditor to limit the number of substantive procedures (affecting sufficiency of gathered information) while an auditor with “low balling” reputation may potentially curb financial statements’ signals to investors and other stakeholders. non-linearity of audit fees in developing countries can be explained with asymmetric distribution of competent auditors within active entities – they are often attracted with big4 or second-tier companies that are present at contestable markets widening the price gap between low-balling and premium-consistent contracts. as unhealthy competition strives market participants, general economic conditions play an important role in sustaining its capacity to generate high-quality services. in stagnant economy depressed market obviously narrows an auditor’s ability to use the scale effect in pricing. thus, by the criteria of inherent origin fee determinants are shifted from endogenous to exogenous (see table 1). the same we can state concerning prevailing demand-side as seen in market side analysis of the determinants. 3. reputation challenges in developing countries challenges for audit entities and engagements in ethical area in developing countries originate from several sources: 1) low quality of basic accountancy and auditing education of team assistants and staff as a consequence of weak ties between auditors and universities; 2) “brain-drain” of young professionals, trained within big4 in developing countries, to advanced economies; thus leaving “homeland” with “second-best” supply-side options; 3) slow and lagging transition to the international audit standards and code of ethics, imposing institutional laggings and phenomenon of dysfunctional behaviour of auditors. besides traditional challenges there could be mentioned force-majeure issues such as international conflicts, unfear sectorial competition (aggressive m&as), political crises (affecting fdi inflows and free trade conditions). all above-mentioned factors affect audit market in long-term perspective and its lagged table 1 determinants of audit pricing in developing countries type a ud ito r s iz e c lie nt si ze in du st ry sp ec ia liz at io n a ud ito r s w itc hi ng e ffi ci en cy o f a ud ito r st aff sh or tte rm d eb t, fin an ci al ly -s tr es se d n a s pr ov is io n e ar ni ng s m an ip ul at io n ri sk s c or po ra te g ov er na nc e r is ks , i nt er na l c on tr ol a ss et s & s al es , t he ir st ru ct ur e t yp e of a ud it b ra nd se le ct iv ity if r s ad ju st m en t, ta x sh ar e inherent origin endogenous + + + + exogenous + + + + + + + + + market structure concentrated + + + + + fragmented + + + + n/a n/a + n/a market side demand + + + + + + + + + + supply + + + notes: * not applicable. source: the authors’ compilations. baltic journal of economic studies 95 vol. 2, no. 5, 2016 recovery. thus, regulatory position and impact can either support professionals or create additional barriers to auditors. empirical analysis of average prices in ukraine during 2008-2015 based on chamber of auditors of ukraine annual reports (see pic. 1 and pic. 2) provides us with some important data: 1) average fee per contract in uah demonstrates strong increase within the time framework from 15,27  thousands hryvnias to 49,4 thousands hryvnias for one contract. at the same time total amount of deals declined almost by the half. we could suggest that such non-linear dynamics may result from industry concentration and increase of unit costs or complexity of a subject company. though average fee per contract in usd remained constant what means prices were inelastic (not market determinants driven); 2) usd-based fees per contract peak in 2013 and further decline by 30% in 2015 demonstrated negative market trend for industry marginalization under challenging country conditions and mass bankruptcies in corporate and banking sectors during 2014-15 making it less attractive to foreign industry professionals and investors. 15,27 36,8 49,4 3,10 2,26 3,723,172,942,712,732,90 29,7 25,3 23,44 21,521,3 0 10 20 30 40 50 3000040000500006000070000 contracts average fee, 000 per contract usd-based uah-based pic. 1. average audit fees (uah, usd based on current prices) in ukraine, 2008-2015 pic. 2. dynamics of ukrainian audit market average fee 73,147 35,642 35,104 44,21850,125 53,68556,471 60,229 3,17 3,72 3,10 2,26 2,94 2,712,732,90 20 30 40 50 60 70 80 2008 2009 2010 2011 2012 2013 2014 2015 contracts, 000 2 3 4 average fee, usd 000 contracts usd-based baltic journal of economic studies 96 vol. 2, no. 5, 2016 4. conclusions practical implications. audit pricing models in developed countries are mainly exogenous and based on an auditor’s risk assessment. vulnerability of markets and clients’ unethical behaviour makes audit pricing models more endogenous in developing countries. value/originality. this is the first paper providing a better understanding of audit prices declination in ukraine as a consequence of dysfunctional audit firms’ behaviour, institutional and market fragility, inherent to developing countries. references abdulmalik, o.s. and a. che ahmad (2016). boardroom diversity and audit fees: diectory ethnicity, independent and nationality, audit financiar, 14(4):413-423. ballas, apostolos a., and irene fafaliou (2008). market shares and concentration in the eu auditing industry: the effects of andersen’s 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(1989). are audit fees sufficiently risk adjusted? advances in accounting 7 (supplement): 3–37. ward, d. d., r . j. elder, and s. c. kattelus (1994). further evidence on the determinants of municipal audit fees. the accounting review, 69 (2): 399–411. willenborg, m. (1999). empirical analysis of the economic demand for auditing in the initial public offerings market. journal of accounting research, 37 (1): 225–39. yuen, desmond c.y., philip k.f. law, chan lu, and jie qi guan (2013). dysfunctional auditing behaviour: empirical evidence on auditors' behaviour in macau, international journal of accounting & information management, 21(3): 209–226. светлана шульга, ярослав петраков нелинейность цен на аудит и репутации в развивающихся странах: движение к или от? аннотация. целью работы является анализ источников нелинейности цен на аудиторские услуги в развивающихся странах. мы предполагаем, что аудиторские фирмы чувствительны к рискам и отраслевой принадлежности (нелинейно) ввиду низкой институциональной способности, слабости рыночных сил и сомнительного поведения со стороны как аудиторов, так и клиентов. это значительно ухудшает устойчивость рынков и порождает дополнительные вызовы для доверия их основных участников. методика. мы соединили экономическую географию с феноменом обратной репутации для объяснения эндогенной волатильности средних цен на аудиторские услуги в украине в 2008-2015 годах. анализ недавних публикаций частично поясняет детерминанты нелинейности ценообразования, возникающие под воздействием как качественных (бренд и специализация), так и количественных (риски, манипуляции, мошенничество) факторов в развивающихся странах. во-первых, мы квалифицируем факторы, влияющие на аудиторский гонорар по критериям первичного происхождения (эндогенные, экзогенные), групп заинтересованных лиц (стороны спроса и предложения), структуры рынка (центрированный, фрагментированный). во-вторых, мы обобщаем репутационные вызовы аудитов в развивающихся странах. в-третьих, мы проводим эмпирический анализ среднего размера гонорара аудиторов в украине в 2008-2015 годах на основе ежегодных отчетов аудиторской палаты украины. результаты. практическое значение исследования заключается в том, что модели ценообразования в развитых странах преимущественно экзогенны и базируются на оценке рисков аудитором. уязвимость рынков и неэтическое поведение клиентов в развивающихся странах делает модели ценообразования в аудите более эндогенными. значение/оригинальность. данная публикация впервые объясняет причину снижения средних цен сравнительных цен на аудиторские услуги в украине как следствие дисфункционального поведения аудиторских фирм, а также институциональной и рыночной слабостей, присущих развивающимся странам. baltic journal of economic studies 118 vol. 7 no. 2, 2021 corresponding author: 1 kherson branch of the admiral makarov national university of shipbuilding, ukraine. e-mail: kovalenko45@ukr.net orcid: https://orcid.org/0000-0003-0235-7823 2 kherson branch of the admiral makarov national university of shipbuilding, ukraine. e-mail: alvirginis@gmail.com orcid: https://orcid.org/0000-0003-4760-8542 researcherid: v-4858-2017 3 kherson branch of the admiral makarov national university of shipbuilding, ukraine. e-mail: rusnak_av@meta.ua orcid: https://orcid.org/0000-0002-3198-2866 researcherid: aac-7821-2019 doi: https://doi.org/10.30525/2256-0742/2021-7-2-118-128 strategies and technologies of adaptive management of higher education institutions in a rapidly changing external environment mykola kovalenko1, oksana lomonosova2, alla rusnak3 abstract. the purpose of the research is to analyse management models and development strategies of higher education institutions (heis), to describe ways, methods and technologies of their adaptation to the rapidly changing conditions of the external environment of operation. the method of complex research allows to analyse existing strategies of development of ukrainian universities and to elaborate recommendations on organizational and economic support of adaptation of the heis to changes in external environment. the methodological basis of the research is based on a systematic approach to the substantiation of the essence and types of development strategies of higher education institutions, the processes of their adaptation to changes in the external environment of their functioning. the concept of adaptive management of heis is proposed to be considered a synergistic combination of regularities, organizational principles in the process of applying effective methods, algorithms, management model for the implementation of the most important directions of solving multifaceted problems of adaptation of heis to changes in the environment in order to ensure its effective functioning, competitiveness in the market of educational services. scientific results. the results of the research show that the continuous process of adaptation of heis to changes in the external environment requires the formation (clarification, improvement) of organizational and economic mechanism of adaptation, implementation in the overall management system of the institution, ideology of adaptive management, bringing the regulatory framework in line with the objectives of modernization of the educational process. adaptive management should comprehensively cover all subsystems of the hei’s management: operational, educational, scientific, technical, financial and investment, innovation, marketing, personnel, which do not function in isolation. practical significance. the system of adaptation process support in the heis should provide for development of action programme for institution adaptation to external environment challenges, which includes adequate organizational and economic adaptation measures, providing the whole complex of actions – from mobilization of all available competitive factors, financial, labour and other resources to staff retraining, etc., taking into account principles of adaptive process. value/originality. the scientific and methodological bases of the organization of support of the adaptation process in a higher education institution formulated in the article take into account the specifics of educational activity, the need to forecast it for the medium and long term, provide for planning adaptation transformations of heis on a longterm basis. the results of implementing the adaptive management strategy can be determined by the criterion of improving the quality of education, the individual educational outcome of the graduate as the ratio between the actual level of competencies acquired by him or her and the normative competencies, established by the regulatory educational documents for this educational specialty, specialization. key words: higher education institution, development strategy, adaptation, external environment, management model, adaptive management technology. jel classification: i21, i23, h12 baltic journal of economic studies 119 vol. 7 no. 2, 2021 1. introduction the system of higher education in ukraine is undergoing radical reform. the institutional operational conditions for educational institutions are changing. in the external environment of operation, conditions are formed at a high rate, which determine the features of current and future activities. the most important of them include: informatization of society, digitalization in all spheres of life; formation of market relations, including the transition of higher education institutions (heis) to a market logic of operation; reforming the economic complex of the country; formation of the knowledge economy, increasing the role of the human factor in modern production; globalization of economic relations and internationalization of the education sector. discretion, instability of operating conditions require from heis constant attention to current changes in the external environment. the development of technical progress, socio-economic relations in society and the associated growth of requirements for the competence of graduates, dynamic changes in the labour market, emergence of new professions require from educational institutions new approaches to planning their activities, forecasting the future needs of the economic complex of the country, region in specialists with high compliance with current and future demands of the population and economic entities in relevant knowledge demanded in the labour market. these environmental determinants require that the heis make balanced decisions on the institution’s development strategy and adapt to a new, rapidly changing operating conditions. nowadays, it has become obvious to develop a survival strategy for the heis in today’s economic and social environment. however, as the analysis of practice shows, this raises a number of methodological and practical issues, the solution of which will contribute to improving the efficiency of heis in the educational service market. the methods of choosing the model of activity of an educational institution in the conditions of the dynamic market of educational services and adaptation to its challenges become especially relevant. the novelty of the study consists in the improvement of the scheme of organizational and economic support for the adaptation of heis to changes in the external environment; defining the role and place of adaptive management technologies in the system of strategic management of heis. the purpose of this article is to analyse management models and development strategies for higher education institutions and to formulate ways, methods and technologies of adapting them to the rapidly changing external environment in which they function. the research is based on a systematic approach to defining the essence and types of development strategies of higher education institutions and the processes of their adaptation to changes in the external environment of their functioning. the main tasks are: justification of the essence and types of development strategies for higher education institutions; research on the essence and processes of adaptation of higher education institutions to changes in the external environment; generalization of the essence and characteristics of adaptive management of higher education institutions; analysis of existing development strategies for universities in ukraine. 2. actual scientific researches and related issues the issue of managing the heis in modern conditions of their functioning is raised by foreign researchers, in particular z.n. avilova (the role and place of heis in the process of recovery of intellectual capital of the region), f.j. altbach (formation of world-class research universities), t.i. afasizhev and v.a. teshev (adaptation of heis in conditions of budget financing crisis), m.a. bolgova (socio-economic analysis of strategies of heis in the russian federation), z.n. gelmanova (issues of improvement of the management system of a modern educational institution), m. gibbons (new knowledge production), g. itskowitz (ways to entrepreneurial university), b. clark (creating entrepreneurial universities: organizational ways of transformation and problems of higher education), a.k. kliuev (institutional strategies of universities and methodological guidelines for educational institution strategy development), t.a. kliachko (economic and social aspect of the adaptation strategies of higher education institutions), s. marginson (public and private in higher education: synthesis of economic and political approaches), p. mendoza (academic capitalism and socialization of candidates for obtaining a degree of doctor of sciences), p. naletova (modern socio-cultural models of universities), f. newman (higher education policy in a competitive world), m. olsen (neoliberal competition in higher education today: research, accountability and impact), r . rodes (university reform in a global time), a.v. siganova (general issues of strategic management in higher education institution), p. scott (academic values and organization of academic activities in the era of globalization), s. slaughter and l. leslie (politics of academic capitalism and entrepreneurial university), c. walkman (entrepreneurial learning in higher education), i.d. frumin (problems forcing russian universities to change), p. schulte (strategy of institutional development of entrepreneurial university), j. youtie and p. shapira (creating an innovation centre on the example of transforming the role of universities in regional technological and economic development). baltic journal of economic studies 120 vol. 7 no. 2, 2021 domestic scientists also pay considerable attention to these issues in their publications: l.i. antoshkina (the scientific and methodological foundations of state regulation of higher education), v.i. astakhova (role of state and non-state heis in the education system), t.m. bogolib (principles of hei’s management), a.yu. yushchenko (global trends and problems of educational development and their consequences for ukraine), l.v. kryvenko and l.i. dmytrychenko (strategy of development of the national system of education and science in the context of the european choice), а.о. maliukina (analysis of the market of educational services in ukraine), s.a. matiukh (methods of integrated assessment of the effectiveness of heis), v.n. parsiak (management of university development in modern conditions), l.v. pshenichna (state assistance in adapting the higher education system in ukraine to the requirements of the bologna process), yu.o. rosina (strategy for reforming higher education in ukraine), i.v. stankevych (innovative strategies and tactics for ensuring the quality of higher education in ukraine), t.v. siomkina (adaptation of domestic heis to functioning in the conditions of modern institutional environment), o.v. chernysh (strategic management of educational activities in heis), p.a. yakubek, i.v. shaposhnikov and k .s. shaposhnikov (directions of adaptation of world experience of development of higher education in ukraine in the period of formation of information economy), m.ya. yastrubskyi (activity of heis in ukraine: harmonious development, state regulation, investment and innovation support), t.a. yashchuk (market of educational services: essence and development tendencies) etc. however, the publications of these and other authors do not sufficiently reveal the issues of adapting the educational institution to modern and predictable changes in the external environment, choosing the model and methods, technologies of management of the institution in order to ensure its competitiveness, successful operation in the market of educational services in a rapidly changing environment. 3. essence and types of development strategies of heis sustainable development of ukraine, its integration into the european and world educational space causes the need for radical rethinking of the system of organization and content of education, which provides for, first of all, the creation of a democratic strategic model of management in education, which should comply with european standards of education and contribute to the intellectual and spiritual development of personality, training a competent, competitive specialist, able to solve the problems of our time (zablotskyi, palant, diegtiar, glibko, bielska, rusnak, 2019). the modern market logic of domestic heis provides for the necessity of strategic approaches to institution management. their use has become an adequate, effective means to organize the achievement of goals and implementation of tasks under conditions of rapid and poorly predictable changes in the educational service market and the environment. researchers of the problems of management of higher education institutions have practically come to the predominant conclusion that the strategy of higher education is a comprehensive, long-term plan of systemic actions and their actual implementation based on a comprehensive study of all regularities, external and internal circumstances, set goals and tasks, which ensure efficiency of an educational institution activity (titova, 2008). the strategic approach provides for an opportunity for integrated use of all various tools of adaptive management and obtaining a synergistic effect of their implementation. n.l. titova (titova, 2008) believes that under the conditions of superfast and poorly predictable changes in the external environment, as well as a sharp reduction in the usual sources of funding, the strategies of heis are adaptive in nature. the same point of view is held by t.l. kliachko (kliachko, 2002). these strategies vary widely, from conservative to expansionist. the choice of strategy is determined not only by the results of the analysis of the regional educational market, which is changing, but also by the managerial potential of higher education institutions, which is often insufficient for making a decision on restructuring an educational institution, necessary for long-term success (titova, 2008). at the same time, the important factor of choice – resource factor – practically does not play a significant role and the reason is obvious: general underfunding in the 1990s – the 2000s (kuzminov, semenov, frumin, 2013). in foreign and domestic practice of modelling strategies of functioning and development of heis, taking into account the current and predictable situation in the world market, in the economic complex of the country, region, depending on the features of corporate culture and personalities of the higher managers of the institution, different ways of implementation of the chosen strategy are used. for example, by results of the analysis of a set of heis, researchers (bolgova, podlegaev, 2015) referred to this or that of the strategies allocated as a result of modelling, have made the following conclusions: 1. “maximum quality” is a strategy of intensive development, which is basically aimed at improving the core activities of heis with a high level of quality of education and average financial condition. baltic journal of economic studies 121 vol. 7 no. 2, 2021 2. “financial benefits” is also a strategy of intensive development of the heis. this strategy is based on maximizing the current financial results of the core activity of the institution. in heis, adhering to this strategy, the level of financial income is high, the scale of activities is expanding. 3. “diversification” is a strategy, according to which, on the one hand, non-core activities of heis start to increase for various reasons. on the other hand, the reason for this direction of development was the small capacity of that market of educational services, which they were initially focused on. 4. “globalization” is a strategy for the quantitative growth of the core activities of heis. this can include universities from small cities, as well as peripheral heis of architectural and construction profiles. 5. “conservative” is a strategy with a stable policy, which is not characterized by significant changes in any parameters of activity. this strategy is followed by classical universities, as well as technical, pedagogical, architectural and construction heis, which are located in large and medium-sized industrial cities. 6. “stagnation” is a strategy, which can be characterized by the deterioration of most of the resultant indicators of heis. this set includes, first of all, regional heis and classical universities located far from the capital. m.a. bolgova and a.v. podlegaev note that the absorption of peripheral higher and secondary vocational education institutions (conversion of the latter into their branches) by some heis resembles the strategy known in business as “umbrella”, in which the mergered business entities begin to develop using the image of large and well-known companies. the creation of branches and representative offices in different regions by such heis is close to the use of “umbrella” business strategy (bolgova, podlegaev, 2015). 4. essence and processes of adaptation of higher education institutions to changes in the external environment studyportals’ experts highlight such institutional archetypes of higher education that can ensure successful educational activities in the future (ministry of education and science of ukraine, 2020): – a niche research institute – a generator of knowledge from curricula that focuses on being “the best in the world” in specific disciplines, ideally tied to an industry centre; – elite, general education university – a generator of interdisciplinary knowledge. in the future, there will be a narrowing of opportunities for such institutions in the world, increasingly they have to specialize and become niche; – “higher education club” – an implementer of training programmes that focuses on gaining experience by students, the main learning technologies: mentoring and facilitation; – a scalable digital university – an implementer of training programmes that focuses on flexibility, learning platforms, automated support, improved access, a prerequisite for success is the digitalization of all educational processes and large scales of activity, internationalization; – a vocational training institute – an implementer of training programmes that focuses on the value of career development, which is achieved through strong ties to industry. the changes taking place in higher education marked the so-called “second university revolution”, as a result of which the main task of the university, along with educational and scientific activities, became to provide a contribution to the economic development of a new type of society – the knowledge society (douglas, 2009). the reduction of state funding pushed universities to commercialize their activities, which was reflected in the growth of the contingent of foreign students, the attempt to obtain additional funds from grants, income from patent activity, sponsorship, the creation of specially allocated funds (endowments), etc. in the context of internationalization of higher education, international education has become a promising direction. international education began to be considered as a commodity, and the possession of it as a benefit rather than a social obligation. today even issues of accessibility and obtaining vocational education are increasingly considered in terms of ensuring national or regional competitiveness (douglas, 2009). john goddard argues that “a modern university should understand the importance of building ties with local business, supporting local clusters, creating an international network of connections, and all these actions should be the centre of the region’s development strategy” (foray, goddard, beldarrain, landabasso, mccann, morgan, nauwelaers, ortega-argiles, 2012). this topic is also developed in the works of such famous scientists as e. carayannis (carayannis, barh, campbell, 2012). т. saunders (saunders, 2007), m. makkula (makkula, 2013). foreign experience points to specific and effective forms of cooperation between industry, public administration and local government in ensuring the region development (the model of innovation system in the form of a triple helix). the above defines the directions and strategies for further development, internal restructuring, and the content of reforms in the future educational activities of heis. these are processes of adaptation of an educational institution to changes in the external environment. analysis of existing definitions of adaptation of organizations to changes in external environment, formulation of the author’s interpretation of the essence of adaptation of higher education institutions baltic journal of economic studies 122 vol. 7 no. 2, 2021 on this basis and determining the main factors of the external environment affecting the heis, is given in (lomonosova, 2020). in particular, it is shown that in economics, when interpreted broadly, adaptation is understood as “the adjustment of the economic system to real conditions” (azrilian, 1999). an example of a more complete definition could be that given in the “economic encyclopaedia” (mochernyi, 2017). according to it, adaptation is “the adjustment of the economic system and its individual entities, employees to the conditions of the changing external environment, production, labour, exchange, and the vital needs of the population ... new relations”. taking into account the specifics of higher education institutions, as a result of their own research, the authors determine that the adaptation of a higher education institution is its response, which is a purposeful process of forced adaptation to the current and projected changes in the external environment in order to ensure effective fulfilment of the demands of consumers of educational services and its own competitiveness in the market. the adaptation of the heis to changes in the external environment is a complex, multi-aspectual process, which requires not one-time, short-term measures, but balanced strategic decisions capable of overcoming challenges and becoming more effective, competitive. therefore, the expediency of developing a strategy for heis’ survival in the modern environment in our time is obvious. educational organizations depending on the state and directions of the society development, macro, meso economics, and entrepreneurial organizations in the region, in accordance with the real and expected requests of consumers (customers) of educational services, in each period of time elect the strategy of activity that is most suitable in accordance with the situation in which they are. that is, the hei chooses the direction of its activities, depending on the environment in which it acts, and from the presence of resources that it possesses. 5. adaptive management of a higher education institution it is expedient to consider the essence of adaptive management of a higher education institution as a process of creating conditions for the implementation of social requirements for quality, up-to-date knowledge received by graduates, compliance of their competencies with modern and future economy in the personnel training process; appropriate transformations in all structural units of hei taking into account their functions, basic state, direct or indirect relation to implementation of adaptive goals and tasks of organization; as a process of adaptation of the hei to socio-economic and institutional changes in society, to the growing needs of people in knowledge. the concept of adaptive management of the hei is proposed to be considered as a synergistic combination of regularities, organizational principles in the process of applying effective methods, algorithms, models of management of implementation of the most important directions of solving multiaspectual tasks of adaptation of hei to changes the external environment to ensure the effectiveness of its functioning, competitiveness in the market of educational services. the continuous process of adaptation of heis to changes in the external environment requires the formation (clarification, improvement) of an organizational and economic adaptation mechanism, the implementation of adaptation management ideology into the general management system of the institution, bringing the regulatory framework in line with the objectives of modernization of the educational process. adaptive management should comprehensively cover all of the management subsystems of hei: operational, educational, scientific, technical, financial and investment, innovation, marketing, human resources, which do not function in isolation. considering the continuity and extremely high speed of changes in economy and society, the principles and technologies of adaptive management should become a permanent tool to ensure that the educational institution meets the requirements of the present and future economy and its competitiveness on the educational service market. adaptation of hei to changes in the external environment should be a key objective (although not the main objective) of each of the organization’s management functions. each part of the overall management structure has a specific role in the implementation of the institution’s adaptation programme. the defining characteristic of a modern adaptive organization can be the institution’s marketing service. the organizational and economic mechanism should be regarded as a set of interrelated elements that ensure the operational restructuring of all the subsystems of the hei for the management of activities to achieve maximum efficiency under changes in the external environment that arise or are projected to arise. it is a set of principles, tools and techniques for making and implementing adaptive management decisions. the multivariance, diverseness, complexity of the adaptation process requires the development of an adaptation strategy for hei, which in turn requires the development of a concept to build an appropriate organizational and economic mechanism. the concept of an adaptation process should be based on a clearly defined objective and be based on substantiated and practically proven principles. the management of the adaptation process of heis needs a system for developing organizational and economic support for adaptation. the stages of its baltic journal of economic studies 123 vol. 7 no. 2, 2021 formation are as follows (sokolova, 2006): analysis of the existing state of adaptation management, choice of system objectives by management levels, identification of functional subsystems, organization of personnel, information, logistical, regulatory and financial support. the synthesis of the adaptation system must take place – choice of the type, structure, constituent elements and defining the architectonics of the system (figure 1). it is also necessary to determine how the adaptation system should function. the process of adaptation is aimed at solving three main tasks: ensuring the viability and further sustainable development of the organization in the long-term on the basis of establishing a dynamic balance with the external environment; increasing the level of competitiveness of the heis on the market of educational services. in order to achieve the goal set, it is necessary to organize the process of solving a set of tasks and ensure their implementation. the system of support for the adaptation process in heis should provide for the development of an action programme (figure 2) on the adaptation of the institution to the challenges of the external environment, which includes adequate organizational and economic measures for adaptation, providing for in te rn al e nv ir on m en t e xt er na l e nv ir on m en t population results of futuristic market research social mandate labour market competitorsproviders of education services market research of the educational services stakeholders principles for formation of an adaptation mechanism development resources the heis’ educational service policy the heis’ development strategy state policy in the field of education concept of an adaptation mechanism organization and implementation of changes to the internal educational process change management tools changes in the educational process the heis’ management model vocational guidance work figure 1. scheme of the organizational and economic support for the adaptation of heis to changes in the external environment baltic journal of economic studies 124 vol. 7 no. 2, 2021 the whole range of actions – from mobilization of all available competitive factors, financial, labour and other resources to re-training of personnel, etc., formulated taking into account such principles of the adaptive process as follows: – consideration of the practical experience of targeted modernization activities of other, primarily domestic, heis in dealing with similar problems; – analysis of the current situation of heis and the education market and the prospects for their development; – reliance on the corporate culture of their team; – comprehensive approach to solving economic and social problems; – project-based approach to forming and implementing activities to ensure an adaptation programme. the main content of organizational and economic measures to ensure the adaptation of heis to changes in the external environment is the creation of conditions for improving the quality of graduate education, proficiency enhancement of teachers, their training in methods and ways of teaching, adequate to the new requirements of society, the features of modern student audience, the personal qualities of students. an important element of this mechanism should be a subsystem of motivation and encouragement of active participation of personnel in the process of hei’s adaptation to changes in the external environment. under present-day dynamic operating conditions, hei is obliged to become an adaptive organization that is self-learning, responding to real and expected changes in the external environment by changing its systems, structures and procedures, on the one hand, and by changing the skills, knowledge, skills and attitudes of its personnel, on the other hand. personnel training, self-training and motivation is one of the most important areas of management improvement in times of internal changes within an organization and its adaptation to external changes. scientific and methodological basis for substantiation of managerial decisions on formation of adaptive transformation processes scenario, providing for the choice of the desired scenario based on the principles of unity of education with science and production, compliance of graduate competencies with the requirements of the transformation process taking place in ukrainian heis, formation of students’ ability to navigate the virtually limitless information field of speciality, specialization, for learning throughout his or her professional life. depending on the role, scale and importance of adaptive elements, as well as the readiness of heis to implement an adaptive response, the following mission of hei vision of hei analysis of the operating environment development strategy of hei futuristic research of the external environment programme of educational process modernization e xt er na l e nv ir on m en t in te rn al e nv ir on m en t strengths (internal advantages) potential external opportunities weaknesses (internal disadvantages) potential external threats strategic management technologies adaptive management technology activities to ensure the implementation of the development programme current adjustment of the development programme tools for use neutralization and elimination figure 2. role and place of adaptive management technologies in the heis’ strategic management system baltic journal of economic studies 125 vol. 7 no. 2, 2021 adaptive management tools are distinguished (zhdamirov, 2010): modernization, restructuring, re-engineering. in our opinion, the specifics of an educational institution’s activity and its need to focus on mediumand long-term prospects of educational services market development stipulate mandatory use of such tools as foresight (volkov, kuzminov, remorenko, rudnik, frumin, yakobson, 2008), market research (verkhovna rada of ukraine, 2017), market monitoring, etc. 6. analysis of existing heis’ development strategies in ukraine the documentary analysis of the current development strategies of 22 ukrainian universities for the period until 2025 found that 59.1% of them chose the innovative development model. another 13.6% envisaged the transition to an entrepreneurial model of activity, 22.7% operated according to the model of the research university. two of the research universities (national technical university of ukraine “kyiv polytechnic institute named after igor sikorsky ” and national university “ostroh academy ”) implemented the principles and programmes of academic leadership. taras shevchenko national university of kyiv, lviv polytechnic national university and v.n. karazin kharkiv national university presented themselves as the basic classical universities, the leaders in the education area of ukraine. as the research has shown, the development of conceptual provisions for the strategic development of educational, scientific and innovation activities of universities is usually based on the main principles of modern higher education development, enshrined in article 6 of the law of ukraine “on education” (verkhovna rada of ukraine, 2017), article 3 of the law of ukraine “on higher education” (verkhovna rada of ukraine, 2014). some universities also define new, additional principles, on which they have to rely in order to achieve certain development strategies of vision and their own mission. thus, the activities of sumy state university (sumy state university, 2019) are also based on the principles as follows: – democracy, fairness and honesty, which is the basis of a corruption-free university; – collegiality, collective and individual responsibility, the rule of law in university life, in particular as it is understood at the level of the intra-university regulatory framework of activity; – compliance with the norms of corporate ethics of the university, mutual respect, tolerance, observance of the right to free expression of one’s own opinion; – priority for ensuring high standards of quality of all aspects of activity; – systemic motivation for innovative, forward-looking self-development, encouraging creativity, collective and personal leadership; – organic unity of the research and education process, based on the best modern and future technologies; – ensuring that all aspects of the university’s multifaceted and multidimensional activities are selfsustaining and successful, on an equal footing with priorities, and that they are strategically oriented towards the achievement of common goals; – the “client-oriented” activities in relation to the requirements and demands of the consumers of university services, the priority of the principle of student-centredness with the formation of an appropriate culture of teacher-student relations at the same time; – implementation of the philosophy of an “open-type” university for all stakeholders, territorial, professional and other social groups, population, youth; a university open for cooperation, respecting legal norms regarding political neutrality and irrespective of national and religious differences; – social responsibility for development of the region; – continuous modernization and internationalization of educational activities, the establishment of close partnerships, primarily with world-class universities, and the study and effective adaptation of the best domestic and international experience. the basic principles of orientation towards global standards of educational quality and other university values, and alignment with the region’s development priorities are also noted in the development strategy (borys grinchenko kyiv university, 2017). as we can see, the formulated principles for improving the activities of universities largely reflect an understanding of the peculiarities of the subsequent stage of their development, the directions of adaptation to the new requirements of the consumers of educational services. an analysis of the content of educational institutions development strategies has shown that in many cases the developers of strategies have approached them from the perspective of an in-depth analysis of the current state and future development of the educational services market and the university’s place in it. in particular, the development strategy of the national technical university of ukraine “kyiv polytechnic institute named after igor sikorsky” (kpi) (national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, 2020) notes that in recent years, both the global world and ukrainian society are passing through a sludge-like stage of development. national interests of the world countries increasingly dominate the benefits of globalization, the fourth industrial revolution is changing the nature and structure of work, new needs and demands of young people for career building through education and vocational training are emerging. the analysis baltic journal of economic studies 126 vol. 7 no. 2, 2021 of external environment factors has shown that they do not allow the university to linearly transfer the achievements of past years to its future development, and it is concluded that kpi, in the next stage of its evolution, in accordance with the new challenges and requirements of society, has to transform the content and forms of work, placing special emphasis on quality characteristics, to continue integration into the european and world educational and scientific space, introducing standards and criteria of worldclass universities. to this end, the strategy formulates the need to ensure the development of the kpi in such interrelated directions: – improving the research university model; – developing the sikorsky challenge innovation ecosystem as a model for ukraine’s future high-tech economy; – fundamentality of training; – harmony and multi-dimensional nature of educating a new generation of professionals; – a comprehensive system of pre-university training; – ensuring interdisciplinarity, consistency and comprehensiveness of training; – rapid response to changes in the nature and structure of the labour market in the context of the fourth industrial revolution; – strengthening the direct interaction of the kpi with the high-tech labour market; – informatization of university management; – democratization of university life, decentralization of management and widespread introduction of selfgovernance. our research, benchmarking methods showed that only a third of the universities studied took a similar fundamental approach to substantiating the direction of their future development. and 36.4% of universities applied well-known methods for this purpose to analyze their strengths, weaknesses, opportunities and threats to their development (swot-analysis). taking into consideration its universally recognized brand, the national university “lviv polytechnic” (lviv polytechnic national university, 2020) provides for the development of its own unique educational environment, the established system of motivating the performance of scientific and scientific-pedagogical staff etc. at the same time, weaknesses of the university are also seen: insufficient development of innovation infrastructure, an imperfect system of student motivation, and so on. the university sees opportunities for its development, for example through increased participation in grant activities (within the horizon 2020 framework programmes, erasmus plus, national research foundation, etc.). the university sees threats to its development in the decreasing level of knowledge of university entrants, unstable demand for graduates of certain specialties on the market, increasing competition between domestic heis on the educational service market, imperfect mechanisms for the commercialization of human resource developments, and so on. virtually all of the strategies of the universities studied provide for measures to ensure development in certain areas. they take into account the peculiarities of each university, their current state, corporate culture and therefore vary in number, detail, manner and depth of substantiation – from the “traditional” set, which usually goes from document to document, to programme measures – ways to implement the strategic objectives of the university. the research allowed us to conclude that university development strategies are programme documents formed with the consideration of the principles of adapting university activities to the requirements of the environment, its threats, taking into account the opportunities for development in this uncertain environment, and relying on its own preferences. that is, adaptive management is seen as a basic technology for forming strategic documents (strategic plans, projects, and programmes) as a response to current and future threats to the external environment. this vision of the role and place of adaptive management in the strategic management system of heis is supported by the elaboration and substantiation of measures to ensure the implementation of the development strategies of the studied universities. in particular, this can be seen in the ways in which universities are addressing the strategic challenge of improving the education quality of graduates. thus, the formation of a modern model, a “portrait” of a graduate has become one of the most important components of the ideology of sumy state university (sumysu). in forming the new ideology of educational activities, the university took into consideration (sumy state university, 2019) the speed of updating professional knowledge, the rate of information growth, the reorientation of production, the difficulties of finding employment for a “narrow” speciality, and the vision of the specialist model by the personnel. the university has set the task of providing the graduate primarily with the ability to self-study and a foundation on which one can build the necessary professional knowledge and be able to adapt quickly to change. the university recognises that in today’s socio-economic conditions, the criteria for effective higher education are not only professional knowledge and skills, but also certain individual and psychological personal qualities that contribute to one’s successful socialization and further professional development. in the substantiation of the tasks to form a new model of the sumy state university graduate as one of the most important ideologies of the university activities (sumy state university, 2019) it is declared that the meaningful component of the implementation of this model should take into consideration the evolution and baltic journal of economic studies 127 vol. 7 no. 2, 2021 rapid changeability of the labour market requirements and social development as a whole. the research component of a graduate’s training is intended to develop critical and creative thinking. regardless of the professional orientation, his or her competencies in energy efficiency philosophy, environmental safety and the like must be ensured. in the substantiation of the competence-based approach to student training, it is noted that the above requires painstaking longterm work, organization of the educational process in accordance with the requirements for the quality of educational services, rethinking the structure of education and ensuring its flexibility, constant updating, modernization of educational programmes and the content of curricula in academic disciplines. the analysis of existing development strategies of 22 ukrainian universities also revealed that 86% of the studied strategies are characterized by the lack of analysis of trends in the development of educational space, peculiarities of the current educational service market and the place and prospects of the institution in it, shallow analysis of strengths and weaknesses, opportunities and threats to the institution, replacing the content of strategic management by a detailed set of measures to ensure its current functioning, and so on. an important reason for this state of affairs is the lack of managers’ awareness of the methodology, content and technology of adaptive management of a higher education institution, its adaptation to current and projected changes in the environment of functioning and the lack of sufficient methodological support for these aspects of the institution’s management. 7. conclusions adaptation of heis to the requirements of the external environment is not a one-time action, but a continuous and long-lasting process that in the end should ensure the institution’s competitiveness in the regional and national markets of educational services and its high image among the population and entrepreneurs that are consumers of educational services. the scientific and methodological bases of adaptation process support organization in higher education institutions, formulated in the article, take into consideration the specificity of educational activity, the need for its forecasting for the medium and long term, provide for planning of adaptation transformations of heis on a long-term basis. in other words, under conditions of dynamic changes in the external environment and the need to take into consideration the prospective nature of specialist training, a systematic, continuous process of adaptation based on forecasts of the external environment development, which is preemptive in nature, should be a necessary principle of the educational institution’s activity strategy. the results of the adaptive management strategy implementation can be determined by the criterion of educational quality improvement, individual educational result of a graduate as a ratio 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(2010). sutnist adaptatsii upravlinnia funktsionuvanniam pidpryiemstv [the essence of adaptive management of business operations]. bulletin of sumy national agrarian university: scientific magazine. series “economics and management”. sumy: sumy nau, еdition 6/1(41), pp. 93–101. baltic journal of economic studies 90 vol. 2, no. 4, 2016 corresponding author: 1 international marketing manager, global spirits, kiev. email: val.khokhlov@gmail.com alpha-beta separation portfolio strategies for islamic finance valentyn khokhlov1 global spirits, ukraine abstract. the purpose of this paper is to develop a mathematical alpha-beta separation model that can be used to create a core-satellite portfolio management strategy that complies with the principles of islamic finance. methodology. core-satellite portfolio construction methodology is used to implement the alpha-beta separation approach, where the core part of the portfolio is managed using the tracking error minimization strategy, and the satellite part of the portfolio is managed using the mean-variance optimization strategy. results of the portfolio dynamics clearly show that a significant amount of value was created by alpha-beta separation. the typical alpha ranges from 4% to 5.7%. the most aggressive portfolio strategies that allow short positions in the satellite portfolio work best with frequent rebalancing and benefit from the active bets. smoothing technique that was introduced to decrease the portfolio turnover and stabilize its composition works better when active bets are less efficient, particularly with less frequent rebalancing. the best risk-return combinations are achieved with modest (3% to 10%) allocation of the total portfolio to the satellite, and the remaining part (90% to 97%) being managed in order to minimize the tracking error. practical implications. the alpha-beta separation framework suggested in this paper can be used to enhance the portfolio management techniques for the hedge funds that operate under tight restrictions, particularly under the islamic finance principles. the mathematical models developed in this paper allow practical implementation of the alphabeta separation concept. originality/value. while the idea of alpha-beta separation existed in hedge fund management before, there was no comprehensive mathematical model under it, so its implementation was based on the ad hoc approach. this paper introduces such a mathematical model and demonstrates how portfolio managers can create value for their clients using it. key words: portfolio management, hedge funds, alpha-beta separation, core-satellite portfolios, islamic finance. jel classification: g11, g15, f36 1. introduction this paper started with a practical problem – in the summer of 2013 the author was approached by a newly created hedge fund from dubai for the development of investment strategies that both comply with islamic finance and introduce some techniques of active portfolio management. it was a challenging task since short-selling, a practice commonly used by hedge funds to implement the long/short or market-neutral strategy, is prohibited under the principles of shari’ah. thus, the alpha-beta separation strategy was my suggestion with the overall portfolio being built in such a way it always complies with islamic principles while sub-portfolios may deviate from them. several recent studies have been dedicated to islamic finance. for instance, patel (2008) in-vestigates the limitations that are posed by the principles of shari’ah on the business models, industries and the permitted portfolio management techniques. ismail and tohirin (2010) analyze the fundamentals of the islamic law from the legal perspective and conclude that charging interest and using “unjust” financial practices are prohibited. jawadi (2014) also notes that the principles of shari’ah prevent from investing into some industries, such as alcohol, pork-related products, ammunition. therefore, some stock screening should be implemented in order to be compliant with islamic finance. one of the approaches to the problem of creating a shari’ah-compliant portfolio management strategy is alpha-beta separation. this approach was pioneered by treynor and black (1973) who suggested splitting the portfolio into two parts, the passively managed core and the actively managed satellite. the authors developed a mathematical model (the treynor-black model) that was aimed at the sharpe ratio maximization, but it doesn’t solve the problem we face with the islamic finance compliance. leibowitz and bova (2005) developed a related “alpha core” approach that allows separation of alpha and beta on the portfolio level, baltic journal of economic studies 91 vol. 2, no. 4, 2016 however their research focused on adding alternative asset classes to the traditional portfolio and does not suit our purpose. a more relevant framework was suggested by chin (2010) who developed an intuitive solution without providing a mathematical model under it. the purpose of this paper is to develop a mathematical alpha-beta separation model that can be used in order to create a core-satellite portfolio structure that complies with the islamic finance principles. we start with developing this model based on existing models of tracking error volatility (tev) and mean-variance optimization (mvo). then we outline our portfolio construction procedure and test the portfolio developed under these strategies. we conclude our paper with the findings we got during this research. 2. alpha-beta separation model the key idea of alpha-beta separation, starting with treynor-black (1973), relates to splitting the portfolio into two parts, one of which (referred to as the core) is passively managed in order to track the benchmark, i.e. generate beta, and another is actively managed in order to add value by generating alpha. this idea is widely used by hedge funds, however it also can be used to overcome the limitations that islamic finance poses on the portfolio management techniques. let’s start with the basic framework to illustrate this idea. the portfolio can be represented as a combination of the core and the satellite parts as follows: ( )1a ci i iw w w= + −λ λ , (1) where wi is the weight of i-th asset in the combined portfolio, λ is the weight of the actively managed (satellite) part of the portfolio, wi a is the weight of i-th asset in the actively managed (satellite) portfolio, wi c is the weight of i-th asset in the benchmark-tracking (core) portfolio. in the simplest case we create two independent portfolios, both of which are managed according to its own investments policy. ideally, the core portfolio can be built by replicating the benchmark or investing the entire amount into the benchmark-tracking etf. however, in practice it may pose a significant problem, because the benchmark may not be directly investable or no corresponding etfs may exist. in that case, the tracking portfolio may be created using one of the mathematical optimization models, for example by roll (1992), rudolf (1999), jorion (2003). we will use the quadratic optimization model developed in khokhlov (2011). in order to derive the optimal asset weights for the core portfolio we minimize the tracking error volatility (tev): ( )2 1 var var min n c p b i i b i r r w r r =   = − = − →    ∑ω , (2) where π is the tev, which is the standard deviation of the tracking error, rp, rb, ri are the expected returns on the portfolio, benchmark and i-th asset respectively. as demonstrated in khokhlov (2011), formula (2) can be transformed into the objective function for a standard quadratic programming problem: 2 2 2 , 1 1 2 min n n c c c i j ij b i i b i j i w w w = = = − + →∑ ∑ω σ σ β σ , (3) subject to constraints 1 1 n c i i w = =∑ , (4) 0ciw ≥ , (5) where wi c is the weight of i-th asset in the core portfolio (the optimization variable), σij is the covariance between the returns of i-th and j-th assets, σb is the standard deviation of the benchmark, βi is the beta of i-th asset with respect to the benchmark. long-only satellite portfolio. the satellite portfolio can be created by any absolute return strategy, ranging from the stock picking to the mean-variance optimization (mvo). we use the classic mvo technique by solving the markowitz (1952) quadratic programming problem ( )2 1 , 1 1 1 max n n a a a a a p p i i i j ij i i jt t u r w r w w r r= = = − = − →∑ ∑σ σ , (6) subject to constraints 1 1 n a i i w = =∑ , (7) 0aiw ≥ , (8a) where wi a is the weight of i-th asset in the satellite portfolio (the optimization variable), rt is the risk tolerance (a subjective value that reflects the investor’s risk aversion), rp, ri are the expected returns on the satellite portfolio and i-th asset respectively, σp a is the standard deviation of the satellite portfolio, σij is the covariance between the returns of i-th and j-th assets. satellite portfolio with short positions. as we can see, problems (3)–(5) and (6)–(8a) are two quadratic programming problems, each of them can be solved independently, and both solutions comply with the islamic finance limitations. that presents a viable scenario, however from the perspective of the entire portfolio we can try to reach a better combined outcome. note that constraint (8a) in fact doesn’t represent an actual limitation, since we are only required to restrict the short selling on the combined portfolio basis, and as far as we have some allocation to i-th asset in the core portfolio we can have a negative weight in the satellite portfolio: ( )1 0a ci iw w+ − ≥λ λ , baltic journal of economic studies 92 vol. 2, no. 4, 2016 therefore we can relax the constraint (8a) as follows: 1a c i iw w − ≥ − λ λ . (8b) it should be noted that in the prober alpha-generating case the model (6)–(8b) should be superior to the model (6)–(8a), because it expands the feasible solutions set. however, in practice the model largely depends on the ability to forecast the expected returns, and failure to do so leads to the negative-alpha solution, in that case the model (6)–(8b) can potentially lead to a greater value destruction. finally, another practical trick that can be added to the portfolio management strategy relates to the rebalancing. as the times passes the asset prices change, so the actual asset weights in the portfolio deviate from the optimal solutions generated at some date in the past. moreover, the optimal solution at the new date is not the same as it was before, so the manager needs to periodically solve problems (3)–(5) and (6)–(8) to derive the new optimal weights and rebalance the port-folio. however, frequent rebalancing may lead to the excess trading volume, and even to buying-selling the same asset over and over again. a practical trick mentioned above is smoothing, i.e. re-balancing only a part of the portfolio on each rebalancing date, for example at date t the actual port-folio weights can be calculated as follows: ( ) * 11t ti i ir r r −= − +δ δ , (9) where ri t , ri t–1 are the i-th asset weights in the combined portfolio at dates t and (t – 1) respectively, ri * is the weight calculated with (1) based on optimal solutions of (3)–(5) and (6)–(8), δ is the smoothing factor, where δ≤0≤1 and δ=0 means no smoothing. 3. portfolio construction procedure the inception date for the portfolio construction is september 1, 2013, and all the portfolios considered later are created at that date. it’s assumed that the fund has been already invested by that date, and the initial investment is assumed to be $1,000,000 (for our purposes we can assume that the results presented in this paper can be scaled to any reasonable fund size by multiplying them by the actual fund size in million u.s. dollars). we consider 32 large-cap u.s. stocks that comply with the islamic finance principles, notably the companies not involved in alcohol, tobacco, gambling, defense, as well as we exclude financial firms since they are likely to be involved into interest-based transactions. the resulting set consists of the following stocks, which are used to create the core portfolio: aapl, avp, bax, bhi, bmy, cl, cvs, cvx, emc, fdx, goog, hal, hd, ibm, intc, jnj, low, mcd, mmm, mrk, nke, pep, pfe, pg, qcom, orcl, sbux, txn, ups, wba, xom. the satellite portfolio is created using a smaller set: aapl, cvx, goog, jnj, nke, pep, pfe, pg, ups, and xom. the benchmark is the dow jones islamic market u.s. index (^imus on yahoo! finance). the core portfolio is created by solving problem (3)–(5) and the satellite portfolio is created by solving problems (6)–(8a) or (6)–(8b) with rt=0.2, after that two parts are combined using formula (1). in our base care we use λ=0.2 in (1), and later we will investigate the impact of a different values of λ. a more sophisticated approach would be to adjust it dynamically as suggested in caliman (2013). during subsequent rebalancing we consider both smoothing (δ-=0.5) and no smoothing cases, which results in four portfolios being considered: • portfolio p0 – long-only satellite and no smoothing; • portfolio p1 – long-only satellite and smoothing; • portfolio p2 – satellite with short positions and no smoothing; • portfolio p3 – satellite with short positions and smoothing. the portfolios created as specified above are held during the pre-specified period (1 or 3 calendar months), after which the portfolio is rebalanced, i.e. the new target portfolio composition is determined by solving problems problem (3)–(5) and (6)–(8a) or (6)–(8b), for portfolios p1 and p3 the old and the new weights are combined using (9), and after that buy and sell transactions are per-formed in order to bring the portfolio composition in compliance with the new asset weights. 4. portfolio management results portfolios p0–p3 with monthly rebalancing track the benchmark quite well during the first two years (september 2013 to august 2015) but start to deviate from the benchmark during the third year (see figure 1). it seems that almost no alpha was generated during the initial years, and the more aggressive portfolios (p2 and p3) even destroyed some value, however during the final year they recovered, and started to dominate the less aggressive portfolios p0 and p1. the portfolio management results for the portfolios with monthly rebalancing are summarized in table 1 (annual risk-free rate was assumed to be 4%). all the strategies presented in this paper resulted in significant amount of value added by portfolio management, with alpha ranging from 4.1% to 5.2%. moreover, most of the portfolios were less risky than the benchmark. we can conclude that the satellite portfolio with short positions clearly makes sense when no smoothing is performed (p2 vs. p0 case), whereas in the smoothed case (p3 vs. p1) there was no additional gain in returns, only the volatility increased. the least risky portfolio turned out to be p1 (long-only satellite, smoothing), which has the lowest standard deviation and tracking error. the most risky portfolio that offered the highest baltic journal of economic studies 93 vol. 2, no. 4, 2016 reward to the risks taken was p2 (satellite with short positions, no smoothing). shifting from monthly to quarterly rebalancing leads to entirely different outcomes (see figure 2). all the portfolios track the benchmark with much lower accuracy from the very beginning, and the less risky smoothed portfolios p1 and p3 tend to dominate portfolios with no smoothing until the final year. therefore, strategies developed in this paper are much more accurate with frequent rebalancing. the portfolio management results for the portfolios with quarterly rebalancing are summarized in table 2. as before, all the strategies presented in this paper do create value, and the alphas range from 4.0% to 5.7%. however, only portfolios p0 and p1 are less risky than the benchmark, while portfolio p2 and p3 expose investors to higher volatility without offsetting it by higher re-turns. we can conclude, therefore, that quarterly rebalancing doesn’t make much sense for the satellite portfolio fig. 1. portfolio dynamics for the portfolios with monthly rebalancing fig. 2. portfolio dynamics for the portfolios with quarterly rebalancing baltic journal of economic studies 94 vol. 2, no. 4, 2016 that includes short positions, and the simplest of our strategies – long-only satellite with no smoothing – results in the best outcome. comparing portfolios with different rebalancing periods we can clearly see the different in tracking error that is introduced by including short positions in the satellite portfolio – it adds about 2% to the tracking error. smoothing, on the other hand, always lowers the tracking error, and the most dramatic decrease is experience in case of the satellite with short positions. therefore, we al-ways face the risk-reward dilemma – either shift towards the more aggressive active bets (which implies no smoothing and short positions in order to amplify the benefits from active management) or track benchmark more accurately (which benefits from lower portfolio turnover and discourages short positions). 5. the impact of the tactical choices so far we have considered the base case of our strategy (λ=0.2) with two variants of smoothing (δ=0 and δ=0.5). those two parameters – λ and δ – along with the risk tolerance rt in (6) and the frequency of rebalancing table 1 portfolio results for the portfolios with monthly rebalancing portfolio ^imus p0 p1 p2 p3 total return, annualized 9.57% 13.37% 13.68% 14.29% 13.68% standard deviation 13.63% 13.61% 13.39% 14.02% 13.61% alpha 0.00% 4.14% 4.48% 5.22% 4.60% beta 1.0000 0.9380 0.9345 0.9100 0.9133 sharpe ratio 0.4084 0.6880 0.7229 0.7339 0.7113 tracking error (tev), annualized 0.00% 4.35% 3.77% 6.38% 5.32% (source: calculated by the author) table 2 portfolio results for the portfolios with quarterly rebalancing portfolio ^imus p0 p1 p2 p3 total return, annualized 9.57% 14.88% 14.57% 13.12% 13.26% standard deviation 13.63% 13.53% 13.48% 14.43% 14.02% alpha 0.00% 5.70% 5.37% 3.96% 4.10% beta 1.0000 0.9299 0.9345 0.9271 0.9278 sharpe ratio 0.4084 0.8043 0.7838 0.6321 0.6605 tracking error (tev), annualized 0.00% 4.43% 4.09% 6.78% 5.83% (source: calculated by the author) table 3 portfolio results for various smoothing parameters no short positions in the satellite short positions in the satellite allowed smoothing, δ 0 0.1 0.2 0.3 0.4 0.5 0 0.1 0.2 0.3 0.4 0.5 panel a. monthly rebalancing total return 13.37% 13.47% 13.54% 13.59% 13.64% 13.68% 14.29% 14.28% 14.20% 14.08% 13.89% 13.68% st. deviation 13.61% 13.56% 13.51% 13.46% 13.42% 13.39% 14.02% 13.91% 13.82% 13.74% 13.67% 13.61% alpha 4.14% 4.25% 4.33% 4.38% 4.43% 4.48% 5.22% 5.21% 5.13% 5.00% 4.82% 4.60% beta 0.9380 0.9373 0.9365 0.9357 0.9350 0.9345 0.9100 0.9104 0.9109 0.9114 0.9121 0.9133 sharpe ratio 0.6880 0.6985 0.7064 0.7125 0.7181 0.7229 0.7339 0.7392 0.7385 0.7335 0.7237 0.7113 tev 4.35% 4.20% 4.07% 3.96% 3.86% 3.77% 6.38% 6.12% 5.90% 5.69% 5.50% 5.32% panel b. quarterly rebalancing total return 14.88% 14.86% 14.81% 14.74% 14.74% 14.57% 13.12% 13.26% 13.30% 13.29% 13.27% 13.26% st. deviation 13.53% 13.50% 13.48% 13.47% 13.47% 13.48% 14.43% 14.33% 14.23% 14.15% 14.08% 14.02% alpha 5.70% 5.68% 5.63% 5.55% 5.55% 5.37% 3.96% 4.10% 4.14% 4.13% 4.10% 4.10% beta 0.9299 0.93 0.93038 0.93119 0.93119 0.9345 0.9271 0.9271 0.9270 0.9272 0.9274 0.9278 sharpe ratio 0.8043 0.8041 0.8016 0.7969 0.7969 0.7838 0.6321 0.6460 0.6534 0.6568 0.6583 0.6605 tev 4.43% 4.35% 4.27% 4.20% 4.20% 4.09% 6.78% 6.56% 6.35% 6.16% 5.98% 5.83% (source: calculated by the author) baltic journal of economic studies 95 vol. 2, no. 4, 2016 represent the tactical choices that could significantly affect the outcomes of our strategies. first, we will investigate the impact of smoothing using different values for δ ranging from 0 to 0.5. as we can conclude from table 3, increasing δ may or may not result in better returns, however it always reduces the standard deviation and the tracking error. so, smoothing makes sense purely for the reduction of risk, and sometimes it may also enhance returns (which can be the case when active bets prove to be counterproductive). second, we will investigate the impact of λ, which determines the weight of the satellite in the total portfolio. as we can see from table 4, with no short positions allowed in the satellite the impact on returns is linear and depends on the success of the active bets – if they are adding value the total return increases and vice versa. that can be explained by the fact that the total portfolio is a linear combination of the core and the satellite. however, it’s not the case when short positions are allowed – since the negative weights in the satellite depend on the core allocations, the total portfolio becomes a non-linear combination. for instance, λ=0.05 is superior to other core-satellite combinations when no smoothing is allowed, whereas λ=0.1 generated the highest alpha with smoothing. moreover, the risk profile is significantly nonlinear both for portfolios with short positions and without them. we can note that based on both absolute risk and the tracking error, the optimal risk-return combinations correspond to a relatively small allocation to the satellite (3% to 10%) and quickly decline when the allocation to the satellite grows over 10%. 6. conclusions the principles of islamic finance pose severe limitations on the portfolio management techniques that are typically utilized by hedge funds. in this paper we show how some of these constraints can be relaxed if the portfolio is split into the core and the satellite parts, where the core portfolio tracks the benchmark and the satellite portfolio is actively managed to generate alpha. in this case the existing assets allocation in the core part can be used to offset some short positions in the active part. it allows, among others, to implement the beta-neutral strategy. we show how tracking error volatility minimization can be combined with the active management on practice and develop a comprehensive mathematical model for the portfolio management under this framework. our findings are based on managing several coresatellite shari’ah-compliant portfolios on the investment horizon of three years (september 2013 to august 2016). all the portfolios created with our approach have delivered significant value and generated alphas from 4% to 5.7%. the actual results substantially depend on the rebalancing frequency. with frequent (monthly) rebalancing we got the most accurate tracking of the benchmark and the lowest amount of risk. moreover, active bets tend to create value on short horizons, so it’s with the monthly rebalancing we were able to generate the highest alpha from the most aggressive portfolio (satellite includes short positions, no smoothing introduced). as our modeling has demonstrated, the best results are achieved when 3% to 10% of the portfolio is allocated to the satellite with active management, and the remaining 90% to 97% is managed to minimize the tracking error. as we shift towards less frequent rebalancing, active bets start working worse. even with quarterly rebalancing it seems that no additional value can be created by allowing for short positions in the satellite portfolio. so our findings show that it’s better to refrain from the aggressive portfolio management and use a table 4 portfolio results for various satellite weights (monthly rebalancing) no short positions in the satellite short positions in the satellite allowed weight, λ 0 0.03 0.05 0.1 0.2 0.3 0.03 0.05 0.1 0.2 0.3 panel a. no smoothing total return 14.29% 14.16% 14.07% 13.83% 13.37% 12.88% 15.34% 15.43% 15.15% 14.29% 12.67% st. deviation 13.66% 13.62% 13.60% 13.57% 13.61% 13.80% 13.55% 13.58% 13.72% 14.02% 14.47% alpha 4.97% 4.85% 4.77% 4.56% 4.14% 3.71% 6.12% 6.25% 6.02% 5.22% 3.65% beta 0.9558 0.9531 0.9513 0.9469 0.9380 0.9290 0.9381 0.9309 0.9210 0.9100 0.9015 sharpe ratio 0.7530 0.7456 0.7405 0.7248 0.6880 0.6436 0.8365 0.8421 0.8129 0.7338 0.5989 tev 3.67% 3.65% 3.66% 3.78% 4.35% 5.23% 4.15% 4.53% 5.31% 6.38% 7.53% panel b. smoothing with factor 0.5 total return 14.26% 14.18% 14.12% 13.97% 13.68% 13.38% 14.10% 14.00% 14.07% 13.68% 13.07% st. deviation 13.47% 13.43% 13.41% 13.38% 13.39% 13.49% 13.35% 13.35% 13.42% 13.61% 13.89% alpha 4.99% 4.91% 4.86% 4.73% 4.48% 4.21% 4.89% 4.82% 4.95% 4.60% 4.03% beta 0.9480 0.9459 0.9446 0.9412 0.9345 0.9277 0.9355 0.9295 0.9211 0.9133 0.9068 sharpe ratio 0.7621 0.7578 0.7544 0.7450 0.7228 0.6951 0.7567 0.7487 0.7509 0.7112 0.6533 tev 3.33% 3.31% 3.31% 3.39% 3.77% 4.40% 3.56% 3.87% 4.47% 5.32% 6.18% (source: 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(1973). how to use security analysis to improve portfolio selection. the journal of business, volume 46, issue 1, p. 66–86. валентин хохлов портфельные стратегии с альфа-бета разделением на примере исламских финансов аннотация. целью статьи является разработка математической модели альфа-бета разделения, которая может использоваться для создания портфельных стратегий типа «ядро-спутник», соответствующих принципам исламских финансов. методология. используется методология создания портфеля «ядроспутник» и подход альфа-бета разделения, при этом ядро портфеля управляется по стратегии минимизации ошибки слежения, а спутник – по стратегии оптимизации доходности и риска. результаты динамики созданных портфелей ясно показывают, что разделение альфа-бета привело к созданию существенной стоимости. типичные значения альфа находятся в диапазоне от 4% до 5.7%. наиболее агрессивные стратегии, которые допускают короткие позиции по активам в портфеле-спутнике, работают наилучшим образом при частой перебалансировке и выигрывают за счет активных ставок. техника сглаживания, которая была предложена для уменьшения оборачиваемости портфеля и стабилизации его состава, работает лучше при менее эффективных активных ставках, особенно в случае нечастой перебалансировки. наилучшее соотношение доходности и риска получено при небольшой (3-10%) части всего портфеля, которая выделяется в спутник, и управлении оставшейся частью (90-97%) в соответствии с минимизацией ошибки слежения. практическое значение. модель альфа-бета разделения, предложенная в этой статье, может использоваться для расширения арсенала инструментов управления портфелем хедж-фондов, которые работают в условиях жестких ограничений, например, в случае исламских финансов. разработанные нами математические модели позволяют построить практическую реализацию концепции альфа-бета разделения. значение/оригинальность. хотя идея альфа-бета разделения существовала в практике управления портфелями хедж-фондов и ранее, не было разработано целостной математической модели, а ее реализация базировалась на интуитивном подходе. в этой статье предложена такая математическая модель и продемонстрировано, как с ее помощью портфельные менеджеры могут создавать стоимость для своих клиентов. baltic journal of economic studies 8 vol. 7 no. 4, 2021 corresponding author: 1 harbin engineering university, china. e-mail: winerdx@163.com orcid: https://orcid.org/0000-0002-4523-5212 2 university of state fiscal service of ukraine, ukraine. e-mail: t.a.koliada@gmail.com orcid: https://orcid.org/0000-0002-1574-4446 3 south ukrainian national pedagogical university named after k.d. ushynsky, ukraine. e-mail: gannamuzychenko@gmail.com orcid: https://orcid.org/0000-0002-7890-9615 doi: https://doi.org/10.30525/2256-0742/2021-7-4-8-17 assessment of the impact of budget decentralization on sustainable development of territorial communities in ukraine ding xin1, tetiana koliada2, ganna muzychenko3 abstract. peculiarities of territorial community (hromada) development management are revealed and theoretical approaches to budget decentralization in ukraine are substantiated. based on the analysis of the composition and structure of local budgets, as well as the calculation of financial independence of territorial communities (hromadas), it is proved that the current budget system of ukraine is characterized by a high degree of budgetary resources centralization, which does not provide real independence. building an efficient model of fiscal decentralization consists in determining the tax potential of a separate administrative-territorial unit (territorial community). for further success of decentralization, it is necessary to determine the optimal amount of government functions that are appropriate and cost-effective to delegate to the appropriate local level on a permanent basis, thereby converting them into the local government's own functions. purpose of study. the aim of the study is to assess the impact of budget decentralization on the sustainable development of territorial communities (hromadas), to determine its relationship with changes in the administrativeterritorial structure of ukraine and to strengthen the financial independence of newly established institutions (amalgamated hromadas). methodology. in the course of the research the following methods were used: analogy and comparative analysis to identify the features of the implementation of fiscal decentralization in different countries of the world and in ukraine; settlement and constructive – used in determining the indicators of territorial communities' financial independence in the process of budget decentralization implementation in ukraine; abstract-logical to reveal the main threats to the financial security of territorial communities and justify proposals and recommendations to ensure their sustainable development. results of the study. the study showed the presence of certain features in the implementation of budget decentralization reform in ukraine in modern conditions due to a number of macroeconomic and institutional factors with a long-term and globalization nature of manifestation. they led to the emergence of clearly defined trends and patterns of change in the choice of regional development financial instruments, which will further improve the process of development management of ukrainian administrative-territorial units in terms of decentralization to achieve the priorities of socio-economic development. peculiarities of territorial community development management are revealed and theoretical approaches to budget decentralization in ukraine are substantiated. based on the analysis of the local budget revenues composition and structure, as well as the calculation of the territorial community financial independence indicators, it was proved that the modern budget system of ukraine is characterized by a high degree of centralization of budgetary resources. it has been substantiated that the difficulties arising in the financing of state budget expenditures under both unitary and federal systems are largely due to the imperfection or inconsistency of certain provisions of the basic law (the constitution) with the current state of interstate relations and the domestic political situation. conclusion. it is emphasized that the main problem to be solved to build an effective and efficient model of fiscal decentralization is to determine the tax potential of a particular administrative-territorial unit (territorial community) baltic journal of economic studies 9 vol. 7 no. 4, 2021 and the optimal volume of state functions that are expedient and cost-effective to delegate to the local level as own functions of local self-government. key words: budget decentralization, community (hromada), amalgamated hromadas, sustainable development, hromada financial support, financial security. jel classification: g28, h30, h41, h50, h72, h77, r12 1. introduction in modern conditions, a global trend in the sphere of public finance and state building is the strengthening of the institution of local self-government and the strengthening of its influence on social, economic and political processes in society. ongoing reforms in ukraine to decentralize power and strengthen the financial independence of local governments require an assessment of their effectiveness and efficiency in achieving these goals and long-term priorities. socio-economic development of the ukrainian regions in conditions of integration with the european union is modernized through the introduction of budget decentralization and granting greater autonomy to local authorities in addressing issues of their competence in accordance with european requirements. the reasons for the reforms are: low level of financial independence and economic and financial security of territorial communities (hromadas), disproportionate distribution and redistribution of funds between the state and regions, imperfect management of the formation and use of financial resources by territory. this leads to a slowdown in the balanced development of ukrainian regions, which is especially reflected in the dynamics of hromadas development indicators, which are the main actors of socio-economic growth of the regions and the country as a whole. budget redistribution, which is accompanied by horizontal unification of hromadas throughout ukraine, requires the development of an effective strategy to improve the financial situation in the country through the use of promising modernized instruments of the economy state regulation. it should be noted that the process of hromadas amalgamation should be in the interests of citizens, not just the state, thus ensuring positive changes in financial security indicators. the research is theoretical and cognitive in nature and contains an analytical part. the authors use critical analysis of the thematic literature, metaanalysis, deductive and inductive reasoning, and comparative analysis using elements of time-series analytics (dynamics and structure change analysis). due to objective obstacles to quantitative analysis, the assessment is qualitative in nature, with elements of inductive reasoning. the analysis of recent publications on regional development, budget support of territorial communities and the formation of regional research methodology was carried out by scientists, in particular: d. palma, g. richardson, f. perrault, m. storper, r . walker, b. burkinsky, z. gerasymchuk, v. chuzhikov and others. methodological problems of socio-economic development of regions in the context of decentralization are reflected in the works of such foreign scientists as: a. alcian, r . barro, t. veblen, e. zolta, r . coase, r . musgrave, w. oates, d. romer, r . solow, c. tibou. the problems of improving the regional policy of regional socio-economic development in the context of decentralization and administrative-territorial reform are discussed in the works of z. varnaliy, t. bondaruk, b. danylyshyn, v. kravtsiv, m. melnyk, v. miklovdy, and i. storonyanska, o. tishchenko, m. khvesika, s. schultz, and others. 2. decentralization as one of the key reforms for creating capable territorial communities (hromadas) in ukraine the process of hromadas amalgamation in ukraine began in 2014 due to the relevant amendments to the tax and budget codes of ukraine, which allowed in 2015 to demonstrate the first positive changes in the development of territorial communities as a result of their financial resources increasing. the way to implement decentralization is a very complex and long process to achieve a high level of economic development. there are many problems and acute moments on this path of implementation that seem strange to the population, but they are effective in the european value system. it is impossible to copy everything, as in the eu, but we must always remember that when choosing your own model of socio-economic development, you need to be more delicate and prudent. the chronology of hromadas amalgamation for 2015–2019 is as follows (figure 1). in 2015, their number was 159 amalgamated hromadas (ahs), in 2016 – 366 ahs, in 2017 – 665 ahs, in 2018 – 806 ahs, with each passing year the indicators increased. at the end of 2019, there were already 1,002, which includes 490 districts, indicating a significant breakthrough in the development of territorial communities (hromadas). because budget funds are spent not only on the welfare of the state as a whole, but also directly on the prosperity and development of a large number of hromadas. looking at population trends (figure 2), we can see that in 2015 there are 159 ahs accounted for 1.4 million baltic journal of economic studies 10 vol. 7 no. 4, 2021 people, the number of ahs grew and the population increased in this area, in 2019 in 112 ahs lived 11,2 million people. this suggests that not all of ukraine's population is moving to cities or abroad for a better life, and as their locality develops, they can work within their settlement. the dynamics of area indicators also increased (figure 3), in 2015 it amounted to 36.8 thousand km2 of the total area of the country, in 2016 – 89.6 thousand km2, 2017 – 167.5 thousand km2, 2018 – 193.5 thousand km2, and today it is as much as 238.8 thousand km2. 3. local budget development trends for the period from 2014 to 2019 in ukraine based on the results of the monitoring of power decentralization and local government reform, let us analyze the local budget indicators dynamics and determine the trend of change for the period from 2014 to 2019. as the revenue base of local budgets expands, the share in the gross domestic product (gdp) appears and increases. the share of local budgets' own revenues (general fund) to gdp in % (figure 4) grew at a fast pace, from 2015 to 2016 by 1.1%, in other years growing slightly and decreasing each year by 0.1% from 0.3%, but steady growth is progressing. own revenues of the local budgets general fund (figure 5) also tend to increase. from 2015 to 2016 the growth was 48.4 billion uah, and from 2018 to 2019 the growth decreased to 32.9 billion uah, which is a satisfactory figure, the main thing is that this growth trend is working. that is, local authorities have sufficient financial resources to use effectively for community development. analyzing the performance of local budgets' own revenues for january-november 2019 compared to january-november 2018 (figure 6), we see that there was an increase of 18-19%, namely in the local budget by 37.8 billion uah, and in the budgets of cities of regional significance by 15 billion uah. we believe that this is significant progress in development, although in 2019 prices continued to rise with low official inflation in the country, but the competent distribution of funds provided by the decentralization reform of territorial communities (hromadas) shows a positive trend in territorial growth. thus, by increasing the revenues of local budgets and increasing budget funding, it is possible to stimulate the development of infrastructure and more fully meet the needs of local communities (hromadas). looking at the per capita distribution of local budget expenditures (figure 7) compared to 2018 and 2019, it is found that the main components of the distribution are: capital spending (by 11.1% increase), construction and regional development (by 40, 4% increase), and housing and utilities (by 13.3% increase). as figure 8 shows, even with existing revenues and expenditures of local budgets, there is a balance. 159 366 665 806 1002 0 500 1000 1500 2015 2016 2017 2018 2019 figure 1. number of amalgamated hromadas source: own studied on the base on https://decentralization.gov.ua 1,4 3,1 5,6 8,3 11,2 0 2 4 6 8 10 12 2015 2016 2017 2018 2019 figure 2. number of inhabitants in amalgamated hromadas source: own studied on the base on https://decentralization.gov.ua baltic journal of economic studies 11 vol. 7 no. 4, 2021 36,8 89,6 167,5 193,5 238,8 0 50 100 150 200 250 300 2015 2016 2017 2018 2019 figure 3. quadrature of amalgamated hromadas (thousand km2) source: own studied on the base on https://decentralization.gov.ua 5,10% 5,10% 6,20% 6,50% 6,60% 6,80% 0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00% 7,00% 8,00% 2014 2015 2016 2017 2018 2019 figure 4. share of local budgets own revenues (general fund) in gdp, in % source: own studied on the base on https://decentralization.gov.ua 68,6 98,2 146,6 192,7 234,1 267 0 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 figure 5. own revenues of the local budgets general fund, billion uah source: own studied on the base on https://decentralization.gov.ua this indicates that the data on the financial capacity of amalgamated hromadas are trying to make it as transparent as possible and show that there is a balance on the accounts. the balance of local budgets of ukraine (figure 8) decreased by half in the period from 11/1/2019 to 12/1/2019. at the same time, the balances of 806 amalgamated hromadas (figure 9) decreased slightly, by uah 0.4 billion. thus, it can be supposed that there are too many funds for the population' needs and community support, but this is a false assumption. in fact, there baltic journal of economic studies 12 vol. 7 no. 4, 2021 212,7 250,5 190 200 210 220 230 240 250 260 2018 2019 local hromadas budgets 79,9 94,9 70 75 80 85 90 95 100 2018 2019 budgets of regional significant cities figure 6. execution of local budgets own revenues, billion uah (%) source: own studied on the base on https://decentralization.gov.ua 1690 388,1 637,4 1877 545 722,8 0 500 1000 1500 2000 capital contributions construction and regional development utilities expenditures per capita 2018 2019 figure 7. dynamics of local budget expenditures for 2018–2019 source: own studied on the base on https://decentralization.gov.ua 0 20 40 60 80 100 120 01.11.2019 01.12.2019 54,6 25,5 54,8 25,1 balances of local budgets, bn. uah treasury accounts, general fund treasury accounts, special fund figure 8. balances of local budgets, bn uah source: own studied on the base on https://decentralization.gov.ua baltic journal of economic studies 13 vol. 7 no. 4, 2021 is a discrepancy between each period's expenditures for the same needs, so a balance is formed. regarding the amount of state support for territorial communities (hromadas), indicators show that the state has increased the amount of financial support for ahs (figure 10). thus, if in 2014 support for socioeconomic development amounted to 0.5 billion uah, in 2018 the amount of support was 19.37 billion uah, and in 2019 – 20.75 billion uah, which is 41 times more than in 2014. as for the volume of public aid to regions in order to support socio-economic development, a rating of state financial assistance to local and regional development was compiled, in which 24 regions (except for the autonomous republic of crimea). the first 5 oblasts are: donetsk – 1,064 million uah, lviv – 907 million uah, dnipropetrovsk – 881.1 million uah, odessa – 809.4 million uah, ivano-frankivsk – 738.7 million uah. these funds supplement the local budget and are designed to improve and renew the infrastructure of the local community. particular attention is paid to the donetsk oblast, as there are military operations and the local community needs more help. 0 5 10 15 01.11.2019 01.12.2019 8,6 8,2 2,2 2 budget balances of 806 ahs, bn uah treasury accounts, general fund treasury accounts, special fund figure 9. balances of 806 amalgamated hromadas budgets, bn uah source: own studied on the base on https://decentralization.gov.ua 0 5 10 15 20 25 2014 2015 2016 2017 2018 2019 0,8 3,3 6,2 5 4,72,9 3 3,5 6 7,7 1 1,5 1,9 2,1 0,27 0,37 0,75 4 5 5 0,65 1,1 0,5 funds to support the sectoral regional economy subsidy for the development of medicine in rural areas funds for the construction of sports facilities subvention for ahs infrasrtucture state fund for regional development subsidy for socio-economic development figure 10. state financial support of local and regional development, billion uah source: own studied on the base on https://decentralization.gov.ua baltic journal of economic studies 14 vol. 7 no. 4, 2021 to meet a certain level of territorial security needs, a clear list of priorities and objectives is calculated to achieve it, in order to avoid threats of financial resources loss that may arise in the process of implementing the objectives. the search for ways to increase financial resources is for local governments to find alternative sources, sides of the local communities in which to invest in order to increase profits from this area. under the conditions of turbulent economic development caused by the spread of the covid-19 pandemic in most countries of the world and the introduction of restrictions on border crossings for both people and goods, such factors as the balanced development of ukrainian regions, the main actors of socio-economic development of regions and the country as a whole are slowing down. 4. hromadas’ financial independence level there is a need to assess the impact of budget decentralization on the hromadas’ financial independence level by calculating the relevant indicators. analytical calculations will make it possible to determine the dynamics and trend of development of hromadas with regard to the financial independence of local budgets from the volume and types of transfers from the state budget of ukraine. in particular, the financial dependency ratio was calculated, which is defined as the share of subventions from the state budget of ukraine in the revenues of local budgets; the budget decentralization ratio; the expenditure decentralization index as the share of local budgets in the expenses of the unified budget; the modified expenditure decentralization coefficient as the share of local budgets in the expenses of the unified budget (not including military spending). the results of the calculations are given in table 1. these calculations show that in 2016 local budgets were the most financially dependent on the state budget. in the conditions of the ongoing process of budget decentralization in ukraine, there is a trend to increase the financial independence of local budgets. as you can see, in 2018 local budgets were more financially independent of the state budget, but in 2019 the trend changed to the opposite (koliada, 2018). as for the coefficient of budget decentralization, it is one of the most important indicators which shows the ratio of local budget expenditures (excluding intergovernmental transfers) to gdp. the values of this indicator reflect the part of financial resources that is distributed among local governments. according to the normative indicators, if the indicator is below 10%, the level of decentralization is low; 15-10% – average; 15% – high. that is, in 2016 – the level of budget decentralization was average; in 2017–2018 – high, but in 2019 – low. in addition, during 2017–2018 there is an increase in the modified coefficient of budget decentralization by expenditure. however, in 2019 the ratio returns to the level of 2016. the lowest coefficient of decentralization by expenditures was in 2019 (41.2%). the subjects of the financial system, determining the needs of communities in accordance with their interests, design a development strategy that ensures their self-improvement and independence, taking into account the interests of not only the state, but also the population. at the same time in ukraine there is a significant differentiation in the volume and quality of public goods at the level of settlements, regions, cities, etc. some regional centers have much more useful and necessary infrastructure than cities with small populations. we can examine the public goods of a particular territorial community (hromada) according to the rating of state financial support for local and regional development. thus, the living conditions in districts and villages are being improved by age categories from the youngest to the oldest inhabitants. this is only because priority needs ranking is used and financial security metrics are monitored. although there has been misuse of budgetar y funds over the years because corrupt schemes still work , we are already making progress in understanding the people of the countr y that it is necessar y for their good. corrupt practices are a type of threat to financial security that affects not only the local community (hromada) itself, but also local businesses and the state as a whole. this is why financial literacy needs to be introduced and taught to different age groups in order to improve their well-being and living conditions in the countr y. table 1 dynamics of territorial communities' financial independence indicators in the process of decentralization budget implementation in ukraine for 2016–2019 indicator 2016 2017 2018 2019 coefficient of financial dependence, % 51,5 49,9 48,7 41,8 index of budget decentralization, % 14,5 16,4 15,8 8,1 modified multiplier of decentralization of expenditures, % 44,6 49,9 48,8 44,7 quotient of expenditures decentralization, % 41,4 46,4 45,1 41,2 source: calculated by the author according to the state treasury service of ukraine www.treasury.gov.ua baltic journal of economic studies 15 vol. 7 no. 4, 2021 to better understand the financial interests of local communities (hromadas), we suggest characteristics such as: – сompliance with the collective bargaining agreement to prioritize community needs and modernize old needs to improve the economic condition of the territorial community (hromada); – the factor of provision is financial security in the manifestation of the reproduction of goods in the form of social and economic indicators; – due to the distribution of financial resources between territories, there is a threat of high competition, which should be minimized by indicators of improving the lives of the population and increasing the territorial community 's (hromada) own income; – minimizing the negative impact of threats while ensuring the financial interests of the community. the mechanism of protection against threats in the implementation of certain goals requires not only control over the execution of specific tasks, but also the targeted use of financial resources with the involvement of a professional specialist in financial control and security. for this purpose, the concept of local government and territorial organization of power reform in ukraine was created, which aims to provide quality and public services, the fruitful work of government and local self-government in general. to achieve all the objectives of this concept, it is allowed to expand the boundaries of financial independence of local self-government in order to improve their own economic situation. such innovations will protect and act not only in the interests of a particular territorial community (hromada), but also public finances in general. we believe that it is necessary to set strategic goals for 5 years, and at the end of each year to summarize and modernize the goals in accordance with changes in the economy. this will have a positive impact on the development of the territory, the state and will highlight significant improvements. this is exactly the term for setting goals, because over 5 years you can gradually introduce new ideas, methods and techniques, track their development and the trend of changes in certain indicators. reporting should be a prerequisite, as it is only through monitoring that work is constantly progressing. any financial and economic development of an enterprise has risks and threats to sustainable growth. to avoid or minimize these threats, it is necessary to calculate the degree of impact and the probability of possible losses, so that there are no uncontrollable fluctuations in sustainable development. if the responsibility for the financial performance of a local government body is delegated to state power, then the principle of power and competence division between the levels of government will not be respected and certain goals for the development of territorial communities will not be achieved. when local government representatives are aware of the seriousness of their actions, then there is a real potential to create something better than in other local communities (hromadas), and the method of competition continues to work. the main thing at this stage is not to forget about financial security, the result and quality of public services. as for budget decentralization, it has clear goals for improving the work of local governments and transparent accounts of local and regional funding. we have indicators for which there are people who are trying to fulfill their direct responsibilities and improve the lives of the population and the state as a whole. note that there is no separate body (unit) that oversees only financial security, with the result that responsibility for financial resources and interests is taken over by local governments, which are forced to make changes to the legal framework or take over responsibility. these changes create imbalances and destroy financial security, as there is a lack of transparency in the provision of information to consumers of public services and a low level of financial literacy of the population. due to the significant differentiation of territorial communities' financial potential, the central executive authorities must objectively prevent by law the emergence of horizontal fiscal imbalances, with the strengthening of some communities' financial security occurring at the expense of others or weakening the financial security of the country as a whole. the key in this process is that the mechanism of inter-territorial redistribution of financial resources works, which was not envisaged in the first stages of the creation of territorial communities. 5. the interdependence of local hromadas and state financial security the interdependence of population and territory financial security affects the countries' financial security. the last years of the future vertical construction of financial security is provided at the expense of this and horizontal construction of this system, because it requires a rational and independent vertical construction. currently, economic entities use only those scales and tools that are specified in the legislation. if necessary, allow "to manage the situation, to influence the situation" (which is etymologically contained in the change of the term "security ") is absent in local communities when it comes to the principles of customs policy, the functioning of financial, monetary, credit risks. this conclusion follows from article 92 of the constitution of ukraine, which provides for a single influence on certain areas of state law. therefore, we cannot agree with those scientists who consider monetary, currency and banking, stock, customs baltic journal of economic studies 16 vol. 7 no. 4, 2021 and tariff, and inflationary security in the structure of the region's financial security (medvid 2007; karpinsky, 2008). there are objective limitations on the influence of individual financial security entities, namely territorial communities, on determining the priorities of national economic policy. at the same time, we believe that the formation of priorities for certain components of financial security, namely fiscal, investment and debt security, depends on the actions and decisions of local communities (hromadas) and local governments. article 143 of the constitution of ukraine states that territorial communities through local selfgovernment have the power to manage communal property; approve the programs of socio-economic and cultural development and control their implementation; formation, reorganization and liquidation of municipal enterprises and organizations, etc., these are all principles of the investment market, which are defined by law. in other words, territorial communities can participate and influence investment processes, despite the lack of investment market principles stipulated by ukrainian legislation (constitution of ukraine). threats and risks to financial stability need to be anticipated for the future forecast of sustainable development. this minimizes their negative manifestation in the future or identifies ways to minimize the loss of their impact. therefore, the main thing in the mechanism of financial security is to identify and structure events, phenomena, processes that may be a threat to sustainable socio-economic development of the state and, accordingly, to meet the social needs of territorial communities. threats need to be identified quickly so as not to trigger an intensification of the process. the threat of financial imbalance to the territorial community testifies, among other things, to the insufficient level of legal support for the functioning of local government in the country. there are criteria by which you can identify the risks that arise in the legal field, namely: 1. the uncertainty of mechanisms for organizing the activities of territorial communities and clear economic rights. therefore, it is difficult to fully realize their economic rights. 2. inconsistencies in the provisions of various legal and regulatory acts. for example, local governments have such risks as: poor execution of powers, underfunding of territorial needs, improper redistribution of budgetary resources, hidden deficits of funds, and credit indebtedness of local budgets. 3. contradictory legal norms, namely the financial support of territorial communities (hromadas). a striking example is the administration of the single tax paid by local communities (hromadas), charged on: – the special fund of local budgets (in 2014); – the special fund of the state budget of ukraine (in 2017); – the general fund of local budgets (other periods). territorial communities function as subjects of a single economic system, so they are characterized by a different type of threats to financial security. in particular, the following threats can be distinguished: 1. the dependence of funding for the current development of the territorial community on the volume of transfers in the local budgets' revenues. 2. social instability among the population due to political events. 3. depopulation of the territorial community. 4. weakening of the investment climate. 5. significant probability of natural and man-made threats. the source of threats to the territorial community financial security are external factors that regulate the economic policy of central authorities. the specialty of community functioning is to minimize the threats of internal factors. such threats include: 1. ineffective structure of the territorial economy. 2. independent state of communal infrastructure, which exists in all regions of the country. 3. insufficient resources for the development of territories and regions in general. in ukraine there are no public registers of communal property belonging to individual communities, for most settlements their territorial boundaries are not defined, the mechanism of communal property inheritance is not ensured. this situation, along with the lack of effective mechanisms of control over the activities of local authorities by local communities, leads to irrational use of communal property, inefficient economic activities of local councils, raiding and mass illegal alienation of communal property (territorial community 2016: 42). 4. low level of financial literacy, social activity, public consciousness. 5. lack of a strategic plan for the activities of local self-regulatory bodies. the need to confront threats to the financial security of local communities is undeniable. the success of implemented measures depends on the completeness and timeliness of their implementation, as well as on a clear awareness of such threats among financial security subjects. note that the list of threats to the economic and financial security of the state is contained in the national security strategy of ukraine (strategy 2015). with regard to financial security, regulations have not been considered, although this would reduce the number of threats. to improve performance and efficient use of funds was calculated assessment of the development strategy, namely through swotanalysis. this indicator makes it possible to calculate the strengths and weaknesses of economic entities and identify threats to financial security. if the above baltic journal of economic studies 17 vol. 7 no. 4, 2021 actions are followed, the territorial communities (hromadas) will function effectively and fully perform their functions and tasks, and financial resources will be used for their intended purpose without corruption schemes and other threats. 6. conclusion thus, decentralization is a key reform and mechanism for creating affluent territorial communities (hromadas) and ensuring sustainable regional development in ukraine. priority issues that need to be addressed in the decentralization process are – determining the list of tasks (scope of functions) to be performed by the central government and assigned to local authorities, as well as the legislative consolidation of revenue sources necessary to form their own budgetary resources for their implementation. therefore, we emphasize the need for all responsible persons to fulfill their functional duties in order to improve the life not only of their territorial community (hromada), but also of the state' s population as a whole. it is not for nothing that local communities (hromadas) have created local self-government bodies to make it easier to assess the needs of a certain territory and monitor their implementation. in connection with the implementation of the budgetary decentralization policy, the division of responsibilities for control and monitoring of financial security, not only at the local, but also at the national level, is relevant. financial security is characterized by threats of various phenomena, events and processes that hinder the effective functioning of local governments, as well as the development of territorial communities (hromadas). apply strategic plans and calculations of possible threats, using the swot analysis evaluation method, which shows the strengths and weaknesses of the strategic development of financial security and possible threats. thus, there is a need to study and research this topic in order to improve the functioning of the system for monitoring the financial security and economic condition of the state and united territorial communities even in difficult political conditions. such measures will make a rational choice of the real needs of the territorial community (hromada), set realistic priorities, contribute to a certain level of financial security and sustainable economic development in general. further research in this area consists in determining the tax potential of a particular administrative-territorial unit and the optimal volume of state functions that are expedient and economically profitable to delegate to the appropriate local level on a permanent basis, thereby transferring them into the own functions of local government and ensuring the real independence and financial security of territorial communities. acknowledgement this research is supported by chinese-ukrainian cooperation fund of harbin engineering university. references: encyclopedic dictionary of public administration (2016). kyiv: napa. monitoring of the process of decentralization of power and reform of local self-government (2019). available at: https://decentralization.gov.ua/uploads/library/file/494/10.11.2019.pdf development of budget decentralization in ukraine: scientific report (2016). available at: http://ief.org.ua/docs/ sr/292.pdf annual report on the execution of the state budget of ukraine for the relevant year (2020). available at: https://www.treasury.gov.ua/ua/file-storage/vikonannya-derzhavnogo-byudzhetu muzychenko, g., koliada, t., & churkina, i. (2017). impact of european integration processes on the necessity of long-term budget planning introduction in ukraine. baltic journal of economic studies, 3(5), 329–333. available at: http://www.baltijapublishing.lv/index.php/issue/article/view/303/pdf constitution of ukraine (1996). available at: http://zakon.rada.gov.ua/laws/show/254%d0%ba/96-%d0% b2%d1%80. medvid, m. m. (2007). financial security of the regions of ukraine. poltava. karpinsky, b. a. (2008). an integrated indicator of the balance of the financial system of ukraine in terms of financial security. scientific bulletin, 18.2, 131–145. territorial community as a basic link of the administrative-territorial structure of ukraine: problems and prospects of reform (2016). kyiv: nisr . national security strategy of ukraine (2015). available at: http://zakon.rada.gov.ua/laws/show/287/2015 koliada, t. a. (2014). features and prospects of budget decentralization in ukraine. journal of corporate management and economics “maneko”, 2, 229–238. baltic journal of economic studies 57 vol. 7 no. 2, 2021 corresponding author: 1 khmelnytskyi national university, ukraine. e-mail: dumanskaiy@gmail.com orcid: https://orcid.org/0000-0003-2449-0633 researcherid: z-1244-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-2-57-64 quality assessment of business strategy in international trade: indicators and parameters ilona dumanska1 abstract. the purpose of the paper is to develop a system of indicators and parameters for assessing the quality of business strategy in international trade based on analysis of the effectiveness of export-import operations, which are evaluated and analysed by managers in developing and implementing business strategies for effective management decisions to expand foreign markets. methodology. there were used general scientific and special research methods. assessing the quality of the company’s business strategy in international trade when planning to enter or expand foreign markets was based on economic comparative analysis and grouping, synthesis and formalization. using the method of coefficients, structural analysis and analytical comparison, groups of indicators are proposed for analysis and evaluation of the effectiveness of business strategy in export and import operations. economic and mathematical modelling, scientific abstraction, systems analysis contributed to the development of economic parameters for assessing the quality of business strategy in international trade. results. it is established that the assessment of the quality of the business strategy of the enterprise in international trade should be calculated not only taking into account absolute, relative, structural indicators, but also efficiency indicators. groups of indicators for analysis and evaluation of the effectiveness of export and import operations that can be used in management activities are proposed. to determine the quality of business strategy in international trade, the feasibility of using the main block of efficiency indicators such as: direct effect of exports/imports, comparative effect of exports/ imports, the level of efficiency of exports/imports, and supplementing the block of indicators characterizing economic efficiency (end result) of the business strategy in international trade. an individual approach to the formation of each enterprise’s own system of economic parameters for assessing the quality of business strategy in international trade, taking into account such basic parameters as assessing the scope of achieving business strategy goals, the importance of information data on business strategy assessment, timing of business assessment – strategies, technical and methodological level of evaluation, novelty of the received information for adjustment of business strategy. practical implications. formation of a methodological approach to the assessment of such qualitative characteristics of business strategy in international trade as efficiency and effectiveness, determination of basic economic parameters of its evaluation system. value/originality. the proposed groups of indicators and parameters for assessing the quality of business strategy in international trade can be used in management to confirm the effectiveness of strategic directions of business development and to counteract the making of intuitive decisions by top management in this area. key words: business strategy, international trade, quality indicators, system of indicators, system of parameters, economic effect, efficiency, foreign trade operations, export, import. jel classification: m16, co2, f14 1. introduction domestic and foreign experience shows that most often the implementation of business strategies in international trade is carried out intuitively, based on empirical experience. at the same time, to make the right decisions, it is extremely necessary to systematize this process, identify its structure and qualitatively assess the effectiveness of actions. steve jobs said, “you can’t just ask consumers what they want and then try to give it to them. by the time you get it built, they’ll want something new” (david, b. yoffie and michael a. cusumano, 2015). against the background of this statement there is understood the fluidity of quantitative aspects of strategic management, while indicators of the relevance of business strategy become appropriate due to quality parameters that are appropriate at all times. baltic journal of economic studies 58 vol. 7 no. 2, 2021 evaluation as a stage of establishing the quality of business strategy in international trade is based on comprehensive information and consists in determining the possible consequences of the implementation of the chosen vector of action. only one general indicator cannot evaluate business strategy, as it covers various areas of foreign economic activity. evaluate the strategy on the quality of planned actions and the success of their implementation in each of the markets and supply centers of the sector “abroad”. sometimes the development of a business strategy for international trade requires a detailed assessment but its implementation does not yield the expected results (for example, poor management violated the term contracts for the supply of goods to a new country, resulting in financial sanctions and losses). in addition, the assessment of the chosen strategy is mainly carried out in the form of an analysis of the fidelity and adequacy of the factors that determine the feasibility of implementation and implementation of the strategy. the main criterion for the quality of the chosen business strategy in international trade is the economic results of the organization in international markets for the sale of goods, and ultimately there is one procedure for evaluating the chosen strategy: whether the chosen strategy will achieve its goals. this is the main criterion for evaluating the chosen strategy, which is reflected in the performance of export and import operations. thus, to make effective management decisions, managers should analyse and evaluate business strategy in the field of international trade not only at the level of quantitative indicators: absolute, relative and structural, but also qualitative – performance indicators. it is important that the company has a system of indicators of quality assessment of business strategies in international trade, which would take into account the economic potential of the company, the specifics of its activities and the impact of internal and external factors (including market capacity) in order to achieve business strategy in the international trade. 2. methodology of research among economists, scientists and managers, scientific interest in the concept, content of strategies, processes arose in the early 1960s, with a. chandler’s work “strategy and structure” (2001), which initiated the development of scientific thought and practice. the harvard school responded to a. chandler’s ideas with the works of its professors, j. bover and k. christensen (1995) and others. it was at harvard that one of the first strategic models, swot, was developed. the work of i. ansoff (1989) contributed to the development of strategic management. influenced by the work of m. porter (1980), many researchers made their own developments in order to analyse the room for maneuvering the company without deviating from the outlined strategy. the process of formation and implementation of competitive strategies of the organization aroused the interest of such foreign scholars as f. wirsem and m. tracy (1995), g. mintzberg (1992), k. prahalad and g. hemel (1994) etc. these researchers proposed various definitions of the term “business strategy” and types of basic competitive strategies, described methods of their development and implementation in a developed economy. strategy theory has had a significant impact on international trade. due to the fact that today there are no uniform methodological approaches to assessing the quality of business strategies in the field of international trade and the growing impact of integration processes, this issue requires more in-depth research. it is necessary to study the main economic parameters of international trade, which are evaluated and analysed by managers in the development and implementation of business strategies in this area and other functional units of the business entity to make effective management decisions to expand foreign markets. 3. system of indicators for assessing business strategy in international trade the business strategy in the field of international trade of any business entity is a key means of gaining competitive advantage, as it creates an opportunity to use resources more efficiently and effectively, and to allocate investments by establishing new foreign economic relations. the whole system of assessing the quality of business strategy in international trade should be divided into four groups: 1. absolute indicators: volume of exports; volume of imports; the amount of overhead costs for export/ import; average balance of funds; the number of complaints received; the amount of complaints; number of complaints satisfied; the volume of exports of new goods. 2. relative indicators: dynamics index; cost index; physical volume index; price index; quantity index (for example, the dynamics of the share of world and european markets, the share of new goods in exports that have appeared in recent years, the share of cost reductions obtained due to the use of new technologies, etc.); coefficients of fulfillment of export/import obligations at cost, actual volume, price; average duration of turnover of export / import operation; return on funds from export/import operations. 3. structural indicators: commodity structure of export/import; geographical structure; structure of overhead costs. 4. performance indicators: currency efficiency of export/import; export/import efficiency; profitability baltic journal of economic studies 59 vol. 7 no. 2, 2021 of export/import; economic effect of exports/imports; integrated economic effect; efficiency of sales of export products on the domestic market; efficiency of purchase and use of imported equipment; efficiency of purchase and sale of licenses (khomenko, krush, 2019). thus, international trade, like any component of foreign economic activity, is evaluated through the values of quantitative indicators: absolute, relative and structural, and qualitative efficiency indicators. economic efficiency is one of such indicators; it is defined as the efficiency of business strategy, which is characterized by the ratio of the economic effect obtained from its implementation to the cost of resources that led to this result (shkvarchuk, byrka, 2013). determining the effectiveness of business strategy in international trade determines the degree of interest of the company in entering the world market, allows to justify certain positions on the purchase and sale of certain products within the strategic actions of top management. the obtained data can be used in the development of export and import plans of the enterprise in assessing the structure and directions of foreign trade. thus, schematically, the system of indicators of business strategy in international trade of the enterprise in the subsystem of strategic management can be divided into four groups (figure 1). the system of indicators for evaluating business strategy in international trade is determined by the existing strategic guidelines of the business entity. if the company is only an intermediary in trade in products on foreign markets, the system of efficiency indicators will have a much smaller number of them, compared to the company that manufactures products and is actively involved in export and import operations. efficiency refers to those economic parameters, the level of which is determined by certain criteria, and the efficiency indicator itself allows you to determine the approximation or already achieving the goals set by the company for the strategy of international trade. based on the fact that today there are a large number of possible indicators used to assess the level of effectiveness of business strategy in international trade of enterprises, it is necessary to identif y the problematic aspects facing managers when systematizing groups of indicators of business strategy in international trade: – significant differentiation of types of international trade leads to the presence of a significant number of indicators of processes in this area; – defining the concept of efficiency of business strategy in international trade of the enterprise is quite controversial and there is no single paradigm for interpretation; – there are different methods of calculating the effectiveness of business strategy in international trade; some are based on the definition of several economic parameters (indicators), others involve the use of economic and mathematical modeling with appropriate software; – for the purpose of comparative analysis of the effectiveness of business strategy in international trade of individual enterprises there are no uniform guidelines and approaches to the formation of a subsystem of indicators to assess the effectiveness of business strategy in international trade of economic entities. 4. performance indicators in assessing the quality of business strategy in international trade at each enterprise, based on the peculiarities of its operating activities at the level of the parent unit and the vector of international trade in foreign markets, a system of indicators should be formed to determine the effectiveness of export and import operations of the entity in international trade. a clear substantiation of the effectiveness of international trade will create an opportunity to prevent unprofitable activities and timely make corrective management decisions within the established business strategy. today, there is no single system of economic efficiency indicators in the management of international trade business strategy; there is no consensus on the methods of calculation and methods of analysis of a number of indicators of the effectiveness of foreign trade operations. the groups of indicators selected by us for the analysis and evaluation of the effectiveness of the quality of business strategy in international trade are shown in figure 2. thus, we can generalize that the economic efficiency of business strategy in international trade is a complex economic category; you can use a number of indicators to measure it. to determine the effectiveness of business strategy in international trade in the main block used general performance indicators of foreign trade operations of the enterprise: – direct effect of exports (the difference between net sales rev enue for export and the cost of products intended for export; reflects the profit received from the implementation of the export transaction); – comparative effect of exports (the difference between profits from export activities and profits from sales of similar products in the domestic market; shows the difference between profits from domestic and foreign markets, other things being equal); – comparative effect of imports (the difference between the value of goods purchased in the domestic market and the value of goods purchased in the same amount in foreign markets; reflects the savings that the company receives through the purchase of goods in foreign and domestic markets); baltic journal of economic studies 60 vol. 7 no. 2, 2021 – the level of export efficiency (the ratio of profits from export activities to the cost of products intended for export; demonstrates the profitability of export activities). it is proposed to supplement it with indicators of the following block, which characterize the economic efficiency (result) of the business strategy in international trade: 1. profitability of sales, which characterizes the level of profit derived from the currency of export sales (prs): prs = profit from sales for export net revenue from sales for proffit ⋅100%, (1) 2. the ratio of growth in export earnings (ip) with growth in export sales (ies) and costs (ic): ip> ies> ic, (2) where ip is a profit index; ie is an export sales index; ic is a cost index. business activity of the subsystem of strategic management of the enterprise in business strategy in international trade is manifested in the dynamics of enterprise development, achievement of objectives, effective use of economic potential, expansion of markets. group of economic indicators group of economic parameters commodity structure of exports or imports; geographical structure of exports or imports; structure of overhead costs for export or import performance indicators absolute indicators relative indicators volume of exports; volume of imports; the amount of overhead costs for export / import; average balance of funds; the number of complaints received; the amount of complaints; number of satisfied complaints; the amount of use of the company's trademark; the volume of exports of new goods dynamics indices: value index; physical volume index; price index; quantity index, for example, the dynamics of the share of world, european markets, the share of new goods in exports that have appeared on the markets over the past 5 years, the share of cost reductions obtained through the use of new technologies, etc.); coefficients of fulfillment of obligations on export and import: by value, by actual volume, by price; average duration of turnover of export (import) operation; return on funds from export / import operations structural indicators currency efficiency of export / import; export / import efficiency; average duration of turnover of export (import) operation; return on funds from export / import operations; export / import efficiency figure 1. indicators for determining the efficiency of business strategy in international trade of the enterprise in the subsystem of strategic management source: author’s interpretation of performance indicators baltic journal of economic studies 61 vol. 7 no. 2, 2021 in particular, indicators of the level of efficiency of business strategy in international trade and the effectiveness of the used resource and financial support are offered: – the level of exports in sales of the enterprise (le): le = export sales volume ⋅100% , (3) – level of imports in the total volume of deliveries to the enterprise (li): li = import volume of deliveries ⋅100% , (4) – the ratio of the cost of export products and the cost of products intended for sale in the domestic market (reс): reс = cost of exported products соst of products that will ennter the domestic market (5) – the ratio of efficiency of sale of export goods (ref ): ref = net revenue from exported products соst of exported products (6) – the level of cost of products exported in the total cost of goods sold (lc): lc = cost of exported products соst of goods sold ⋅100% (7) – the ratio of the cost of export products and export earnings (rc): rc = соst of exported products net revenue of exported prodducts (8) when assessing the strategic management of the enterprise in business strategy in international trade, along with generalizing indicators, the indicators characterizing the efficiency of certain types of costs (labour, energy, material, capital, etc.) can be calculated and differentiated. therefore, it is necessary to evaluate the efficiency of the business strategy of the enterprise in international trade using a tool that can simultaneously calculate the effectiveness of the strategy depending on the significance of the goals, compare it with the benchmark and the level of economic risk and finally choose the most effective way to enter the foreign market. the use of this technique involves the assessment of current indicators in the following promising areas: production process (cost of goods sold; profitability of sales; transportation, tax costs, etc.); investments (research, planning and development of enterprise projects); innovations (improvement of innovation and operational processes at the enterprise); marketing aspects (market share, expansion and preservation of the customer base, the level of customer satisfaction); personnel (opportunities for workers and opportunities to use information systems); risks (assessment and minimization of possible risks) (vasyuk, 2015). 5. the efficiency of exports and imports as key indicators of the quality of business strategy in international trade the indicator “export efficiency” is determined by the ratio of net foreign currency earnings for goods sold converted to hryvnia at the official exchange rate on the day of receipt of foreign exchange earnings, to the value of exports in domestic prices. the value of the indicator is considered more than one and indicates that the sale of goods on the foreign market will be more profitable than within the country. the indicator of the economic effect of exports is calculated by subtracting from the net revenue in foreign currency for goods sold converted to hryvnia at the official exchange rate on the day of receipt of foreign exchange earnings, the amount of total costs of the enterprise for export. in essence, this indicator is the financial and economic commercial industrial effective return on capital (assets) coverage ratio coefficient of autonomy financial leverage ratio coefficient of profitability of sales the average maturity of accounts payable the average maturity of receivables return on assets capital armament productivity material return direct effect from export / import comparative effect of exports / imports level of export / import efficiency level of assessment evaluation indicators figure 2. indicators of efficiency in assessing the quality of business strategy in international trade source: supplemented by the author’s indicators of efficiency and selection of levels baltic journal of economic studies 62 vol. 7 no. 2, 2021 company’s profit from export activities before taxation, respectively, the greater its value, the more efficient export activities. in order to determine the dynamics of efficiency of sales in the reporting period, the indicators of export efficiency should be compared with similar indicators for the previous period. to determine the economic efficiency of export activities at the enterprise level, we propose to calculate three indicators of economic efficiency. analysing the efficiency of import operations, you must first know its currency efficiency. as for the indicator of foreign exchange efficiency of exports, as a rule, the exchange rate is the basis of comparison. the indicator of economic (absolute) efficiency of imports is calculated by dividing the value of imported products in the domestic market by the cost of purchasing imported products. among other goals of international trade there is the need to attract foreign goods in its own production. that is why the definition of economic efficiency of import activities of the enterprise involves the use of indicators of efficiency of imports of industrial goods for its own production activities. in the modern scientific literature in determining the effectiveness of imports of industrial products focuses on the effectiveness of the involvement in the production of imported equipment and facilities (fedoronko, 2016). most often, indicators such as the absolute market share of the enterprise and the relative market share of the enterprise (defined as the ratio of the market share of the firm to the market share of the strongest market competitor) are used to assess the effectiveness of the current business strategy in international trade. if we are talking about forecasting the effectiveness of the business strategy of export activities, then indicators such as the absolute market share of the enterprise and the relative market share of the enterprise will have a forecast interest if the company has already carried out export activities in this market. the relative market share and its dynamics characterize the competitive position of the enterprise more objectively than the indicator of absolute market share. in strategic management, responsible professionals need to process a fairly large array of information data. at the same time, it is important to establish cooperation between top management and other functional units of the enterprise. having formed the company ’s own system of economic parameters to assess the quality of business strategy in international trade, management staff will be able to streamline the current and strategic actions for the development of export potential. clearly defined priorities in the international trade of the enterprise, taking into account the specifics of its operation in the market and the limits of coverage of foreign markets, will guide top management to make effective management decisions. to make the right decisions in strategic management to implement the right business strategy in international trade, it is important to study the financial and credit situation in the country, which indicators are interest rates, inflation, budget deficits, exchange rates, income distribution among certain social groups. analysis of foreign market conditions involves the calculation of forecast indicators: production of goods (supply); consumption (demand) (wholesale and retail trade, market capacity); currency and credit situations (exchange rates, discount rates, stock prices); prices as integrated indicators. strengthening integration in the development of international trade necessitates the consideration of globalization processes in strategic management, as one of a set of factors to improve the efficiency of foreign economic activity. in general, the most important parameter of international trade in foreign economic activity of the enterprise, in our opinion, is the implementation of strategic goals to expand markets, the organization of international cooperation on favourable terms for the company. 6. system of parameters for assessing the level of quality of business strategy in international trade in our opinion, the main thing is to determine the functional principles of strategic control, the effectiveness of business strategy in international trade and the parameters that best determine the level of development of this activity in the strategic management system taking into account integration processes and the impact of globalization on international cooperation. enterprises need to ensure an appropriate level of product competitiveness, find ways to grow it, implement strategies that will promote the development of financial and economic activities in modern conditions of operation and counteract adverse market factors. in times of crisis, ensuring the implementation of certain strategic goals for the development of international trade is a difficult process for all enterprises without exception. the business entity that carefully approaches the formation of an appropriate effective mechanism of strategic management with a reliable justification of the tasks for the implementation of the chosen strategy is able to take a leading position in the competition not only in the current period, but also in the future. accordingly, to assess the level of quality of business strategy in international trade, it is necessary to choose a system of parameters that should characterize the compliance of research results with the objectives. this system of parameters is presented in table 1. in our opinion, the basic parameters are chosen in the system of parameters for assessing the level of quality of business strategy implementation in international baltic journal of economic studies 63 vol. 7 no. 2, 2021 trade, but in the process of strategic management, they can be supplemented by top management of the enterprise, depending on the level of international trade intensification. it should be noted that management decisions made based on quality information obtained from strategic research, increase the level of certainty of the decision, minimize the risk of loss. by analysing the financial and economic activities of the enterprise and determining the quality indicators of business strategy in international trade, taking into account the parameters of efficiency, top management will be able to form fundamental directions to strengthen competitive advantages, improve product quality to expand market external segments. 7. conclusions it is established that the assessment of the quality of the business strategy of the enterprise in international trade should be calculated when planning the exit or expansion of foreign markets not only taking into account absolute, relative and structural indicators, but also efficiency indicators. based on the fact that today there are a large number of possible indicators used to assess the level of efficiency of business strategy in international trade of enterprises outlined the problematic aspects faced by managers during the systematization of groups of indicators of business strategy in international trade: significant differentiation types of international trade leads to the presence of a significant number of indicators of processes in this area; the concept of the effectiveness of business strategy in the international trade of the enterprise is quite debatable and there is no single paradigm for interpretation; there are different methods of calculating the effectiveness of business strategy in international trade, based on the definition of several economic parameters (indicators) or involve the use of economic and mathematical modelling with appropriate software; there are no uniform table 1 the system of parameters for assessing the level of quality of business strategy in international trade the name of the parameter the importance and scope of assessing the level of quality of business strategy assess the achievement of business strategy goals all planned goals achieved / main planned goals achieved / not all planned goals achieved the importance of information data from the evaluation of business strategy very high / high / significant / low / very low / virtually absent (critical) terms of business strategy evaluation early / on time / delayed technical level of assessment compliance with technical parameters / used in research / technological innovations methodological level of assessment correspondence of methodical approaches used in conducting research with modern achievements of science novelty of the received information for adjustment of business strategy high (new results) / medium (some results are not new) / low (much of the results are not new) source: author’s generalizations methodological recommendations and approaches to the formation of a subsystem of indicators to assess the effectiveness of business strategy in international trade of economic entities. given the lack of a unified approach to determining the quality of business strategy in international trade on the basis of efficiency indicators, groups of indicators are proposed to analyse and evaluate the effectiveness of foreign economic activity that can be used in management; indicators of the level of efficiency of international trade and the effectiveness of its used resource and financial support, which should be calculated in the implementation of export-import operations. to determine the quality of business strategy in international trade, the feasibility of using the main block of efficiency indicators such as: direct effect of exports / imports, comparative effect of exports / imports, the level of efficiency of exports / imports, and supplementing the block of indicators characterizing economic efficiency (end result) of business strategies in international trade, in particular such as: profitability of sales, which characterizes the level of profit derived from the currency of export sales and the ratio of growth of export earnings to the growth of export sales and costs. in order to overcome information asymmetry and minimize time for processing large arrays of input data, it is proposed to form the company’s own system of economic parameters to assess the quality of business strategy in international trade, which will allow management to streamline current and strategic actions to develop export and import potential. the following basic parameters include: assessment of the scope of achieving business strategy goals, the importance of information data from the assessment of business strategy, timing of assessment of business strategy, technical and methodological level of assessment, novelty of information obtained to adjust business strategy. baltic journal of economic studies 64 vol. 7 no. 2, 2021 references: david, b. yoffie, & michael a. cusumano (2015). strategy rules. five timeless lessons from bill gates, andy grove, and steve jobs. new york: harperbusiness, 254 p. chandler, a. 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(2019). methodical approaches to the assessment of the effectiveness of foreign economic activity management. current problems of economics and management: a collection of scientific works of young scientists, vol. 11. available at: http://ela.kpi.ua/handle/123456789/22596 shkvarchuk, l., & byrka, i. (2013). estimation of economic efficiency of foreign economic activity of the enterprise. bulletin of the national university «lviv polytechnic», vol. 769, pp. 196–201. vasyuk, t. (2015). methods of research and determination of economic efficiency of foreign economic activity of economic entities. current economic problems, vol. 3, pp. 131–136. fedoronko, n. (2016). analysis of the effectiveness of export and import operations. global and national economic problems, vol. 10, pp. 120–123. baltic journal of economic studies 113 vol. 3, no. 2, 2017 corresponding author: 1 department of management of organization and administration, taras shevchenko national university of kyiv. e-mail: opidmurnyak@gmail.com 2 department of management of innovative and investment activity, taras shevchenko national university of kyiv. e-mail: lyuda231@ukr.net business processes optimization within ukrainian automobile enterprises in terms of eu entering period oleksandr pidmurniak1, lyudmila anisimova2 taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to summarize and present the most common principles and management methods to seek the most efficient and profitable exit way for automobile enterprises during the period of economic recovery in ukraine. in the course of the research, we have analysed what is soa (service oriented architecture) and advantages of its implementation, the differences between bpms and ibpms (intelligent business process management suite) and other. methodology. the survey is based on a comparison of different business and management approaches whereby the efficiency of business process sufficiently increases. in total, more than 30 methods are precisely analysed, around 15 most frequent management systems considered, which led us to identify 5 main recommendations. results of the survey showed that ukraine has very ignorant social and political environment, human capital is undeveloped and less meritocratic than our neighbours in eu have. a shortage in domestic car manufacturing, lack of new plants and technologies, as the resulting amount of workplaces remains the same or going down because of emigration, all that conduce to the growth of a number of imported cars. trying to recognize the most recent threatens, we have detected there are no government programs, grants, laboratories, and science-plants for the young generation. practical implications. since ukraine become in war, the economic and political crisis, downturn with national currency etc., domestic households faced with the huge amount of problems: inflation, collapsing currency rate, political uncertainty. all of that drives domestic business to a corner, where the growth of management efficiency and organizational transformation were the only way out. value/originality. an agile is a method when the company's management comes in touch with the latest business process optimization apps like ibm, softwareag, pegasystems. key words: business process, automobile, enterprise, optimization, economic recovery, management. jel classification: l22, m12-14, o20-40 1. introduction being struggled as much as confused with current economic and political situation ukrainian business has faced off with the situation, which has no precedent in the past. in this paper, we will try to build recommendations and offerings for domestic automobile enterprises to achieve business process improvement by embedding existing tools and opportunities for business optimization. facing the wide scale commoditization of goods and services, today’s business leaders are turning to process improvements to differentiate from competitors. optimizing outdated processes help organizations reduce costs, increase efficiency, enhance customer service, make smarter decisions from better data, minimize risk, adapt more quickly to regulatory change, and strengthen compliance (kpmg, 2016) as the world becomes more diversified and a number of tools and methods simultaneously with problems and issues grow rapidly, the solutions for resolving problems are increasing also. business process management provides organizations with their continuous improvement and optimization. there are a wide variety of process management tools, approaches, and methods, which have been built up to improve business processes. in modern process management, there are two conceptual approaches to improve business processes: 1) gradually (step by step) approach to process improvement (in deming) within the existing organizational management structure that requires minor investments or do not need them at all; 2) cardinal (fundamental) approach (by hammer and champy), leading to significant changes in the process baltic journal of economic studies 114 vol. 3, no. 2, 2017 and fundamental changes in the organizational structure of management. 2. management tools, approaches and methods considering gradually approach, we would like to begin with an agile approach, which is a very highusage tool, therefore, we will try to look at this tool more precisely. the term agile (flexible, dynamic) appeared in 2001 with a manifesto, in which people, product, and readiness for change were placed above coordination, paper work , and the original plan. but the organizations that worked on this principle arose in the 60s of the 20th centur y, and without even suspecting that they were agile. now agile is associated primarily with software development, with advanced technologies. in fact, agile organizations can be found in different areas, and the pioneers of this approach met in completely unexpected areas. in the 60s in the us, there was such a pilot, military strategist john boyd. he came up with the theory of ooda , according to which the aerial combat wins not the best aircraft in terms of technology but the pilot, who takes the maximum number of decisions for a certain period of time and instantly reacts to changing circumstances. in general, the fastest and the most flexible thinker win. boyd’s theory was actively used in those times in the military sphere. but this is just one of many episodes showing where agile was in demand. agile is an umbrella concept (when it is needed), and not a specific technology or any specific solution. this concept combines many different methods and approaches, which together make the organization different. the core of agile, its main component, is a small team. and there is a clear scientific justification for its optimal size – from six to twelve people. the team should be cross-functional and include people of different specializations: product producers, marketers, lawyers, designers, it professionals, and so on. they all form a single organism and ideally should work in the same room. be a holistic mechanism that controls the rest of the process. in large organizations, there are many tasks and products that you need to work on at the same time. therefore, the whole team is divided into many small teams – sometimes tens or even hundreds. they, in turn, are united in so-called “tribes”. the number of teams that can form a “tribe” is limited to ten, a maximum of twenty. as a result, each of the large groups includes up to a hundred or two hundred people. this is also a scientifically based number: while using it, you can still maintain social connections without sacrificing work. agile and flexible business processes workflow architecture plays an important role in the success of any enterprise. in the new era, most of the processes are automated and they are supported by it-services in the form of service-oriented architecture (soa) components. due to mobility and scalability, as well as high-performance computing and distributed working environment, it is crucial to focus on an architecture, which is agile, optimized, cost-effective, and easy to implement. the main contribution of the research study is to propose an agile, cost-effective, and scalable solution framework (research publish, 2016). a business process (bp) is a set of many business activities within the organizational environment or outside organizations achieving a business goal (weske, 2012). soa is a business-driven architectural model of it services and business process management (bpm) services are usually supported and operated through it infrastructure (liu, yang 2008). modelling workflows based on it services make more sense as they are supported by it technologies and they can be easily reengineered or modified (matjaz, 2008). bpm and soa combination helps business process experts to make agile, flexible and easy to implement architecture fulfilling their strategic goals (brunswick, 2008). intelligent business process management suites provide real-time insights to achieve better business outcomes and help business transformation leaders, business process directors, and solution architects improve business outcomes through the process reinvention and transformation. the intelligent business process management suite (ibpms) market is the natural evolution of the earlier business process management suite (bpms) market, adding more capabilities for a greater intelligence within business processes. capabilities such as validation (process simulation, including “what if ”) and verification (logical compliance), optimization, and the ability to gain insight into process performance have been included in many bpms offerings for several years. ibpmss have added enhanced support for human collaboration such as integration with social media, mobileenabled process tasks, streaming analytics and realtime decision management. for a more detailed description of business process management (bpm) platforms, see “select the right type of bpm platform to achieve your application development, business transformation or digital business goals.” for a more detailed description of technologies that help make processes more intelligent, see “practical ways to make business operations more intelligent” (gartner, 2016). nine capabilities that differentiate products within the ibpms market are indicated below. baltic journal of economic studies 115 vol. 3, no. 2, 2017 factors affecting the activities of the company in modern conditions can be divided into external and internal. let us explain the vision of these ones. the fundamental problem of management is the problem of complexity. in addition, it is important to recall that the head manages an enterprise as some kind of information model, therefore, an important aspect of management should be considered as the availability of prompt and adequate information about the managed facility. the 1998 crisis forced post-soviet union countries as well as ukraine with its one of the most powerful production sector and prompted to rethink the conception of the market. this led to the following production ideology: – the simplest principle is confessed: “no sale – no business”; – production is not considered strategically, i.e. gradual degradation of planning; – in the field of quality, an emphasis is placed on procedures and rules that in practice do not lead to the desired results. world experience shows that success is achieved by those firms that: – consider themselves as a single system, integrating such areas as marketing, creating new products, supplying, manufacturing, marketing, delivering products to the consumer, it, and servicing; – used industrial erp standards to achieve technological efficiency as their main business model. the discussion so far has looked at how individuals, groups, or organizations become skilful knowers, that is, move from unskilful knowing to skilful knowing within a type of capability meaning of capability interaction management the ability to orchestrate multiple types of activities and interactions at runtime to support the work that people, systems, and “things” (as in the iot) do to produce specific business outcomes. high-productivity app authoring enables citizen and it developers to quickly and easily build a process-centric application. applications built on the platform use a metadata model to manage the complete lifecycle of business processes and manipulate data related to the process. monitoring and business alignment ibpms platform’s support of business activity monitoring (bam) to continuously track the state of process instances, cases and other behaviours in near real time. rules and decision management software facilities – such as inference engines, recommendation engines, and decision management capabilities – that provide guidance for making human or automated operational decisions according to business directives or policy statements. analytics applies logic and statistics to data to provide insights for making better decisions. an ibpms may incorporate or have connections to, predictive analytics such as scoring services or prescriptive analytics such as optimization engines. interoperability interoperation with external application services and systems that an ibpms’ adapters and adapter development tools enable. such services and systems include custom and commercial-off-the-shelf packaged applications and cloud-based saas applications, and their databases. intelligent mobility the ability to access applications from a variety of mobile devices, including smartphones and tablets. as well as providing access from anywhere, the platform optimizes the mobile device’s native capabilities, including its camera and other sensors. process discovery and optimization the platform’s capability that shortens the time it takes to discover and optimize behaviours (such as processes, tasks, and policies) needed to improve business outcomes. this may include analysing past execution history or simulating proposed behaviours. context and behaviour history ibpms’ maintenance of an archival history of events that have occurred during the interactions under its control. the ibpms may also manage other kinds of context data – from external applications, databases or event streams – to enhance the intelligence and decisions made by the system. source: compiled by the author on the basis of (gartner, 2016) internal can be classified as: 1. increase in complexity and capital intensity of products or services; 2. increasing the requirements for quality, quantity and range of products or services; 3. reducing the life cycle of products or services; 4. ineffective management system, including automating its support; 5. imperfect technology of bp implementation and organizational structure; 6. lack of standard solutions and methodological support. external can be classified as: 1. dynamic development and stringent market requirements; 2. expansion of the scope and objectives of the enterprise; 3. requirements for the certification of quality management systems for a compliance with international standards of the iso 9000: 2015 series. baltic journal of economic studies 116 vol. 3, no. 2, 2017 process. the technology and personalization views provide contrasting ideas about how this is carried out. we will try to explain our vision of modern management processes with iso. iso international standards ensure that products and services are safe, reliable, and of good quality. for business, they are strategic tools that reduce costs by minimizing waste and errors and increasing productivity. iso 9000:2015 describes the fundamental concepts and principles of quality management, which are universally applicable to the following below (iso, 2017). as well as iso is one of the most respectful organizations, which indicates the vision of future while countenancing what to assent and what does not, the main reason remains the same – to establish futureproof commitments for socially responsible companies. we should try to make purposes for everyone (in our case, it is employees) and create the enterprise where each will catch its professional and social destination. we are living in an era where technology evolves and business goals are becoming dynamic. these goals are quality management principles rationale customer focus sustained success is achieved when an organization attracts and retains the confidence of customers and other interested parties on whom it depends. every aspect of customer interaction provides an opportunity to create more value for the customer. understanding current and future needs of customers and other interested parties contribute to sustained success of an organization. leadership creation of the unity of purpose, direction, and engagement enable an organization to align its strategies, policies, processes, and resources to achieve its objectives. engagement of people to manage an organization effectively and efficiently, it is important to involve all people at all levels and to respect them as individuals. recognition, empowerment, and enhancement of skills and knowledge facilitate the engagement of people in achieving the objectives of the organization. process approach the quality management system is composed of interrelated processes. understanding how results are produced by this system, including all its processes, resources, controls, and interactions allows the organization to optimize its performance. improvement improvement is essential for an organization to maintain current levels of performance, to react to changes in its internal and external conditions, and to create new opportunities. evidence-based decision making. decision-making can be a complex process, and it always involves some uncertainty. it often involves multiple types and sources of inputs, as well as their interpretation, which can be subjective. it is important to understand cause and effect relationships and potential unintended consequences. facts, evidence, and data analysis lead to a greater objectivity and confidence in decisions made. relationship management interested parties influence the performance of an organization. sustained success is more likely to be achieved when an organization manages relationships with its interested parties to optimize their impact on its performance. source: compiled by the author on the basis of (iso, 2017) management platforms short description agilepoint agilepoint ibpms is a microsoft-centric platform that consists of an integrated core set of components (appbuilder, eforms builder, data sources and reports) used to create mission-critical business applications. together, these components provide an integrated application development platform that enables business and it to collaborate throughout the development life cycle. appian appian is a model-driven application development platform that enables it and citizen developers to construct process-centric and case-centric applications, continually improve processes, support intelligent business processes and dynamically alter processes in response to digital business moments. the following analysis refers to appian v.7.11. bizagi bizagi is one of the new entrants in this year’s magic quadrant, positioned as the only vendor in the challengers quadrant. bizagi, one of the oldest bpm vendors around, can claim this position because of its global customer base, excellent execution capabilities and its disruptive business model based on “freemium” software. this analysis pertains to bizagi modeler 3.0 and bizagi studio 10.7. pegasystems pegasystems is the largest, best-known pure-play ibpms vendor. its ibpms supports all usage scenarios analysed in this magic quadrant. in the past two years, pegasystems has ramped up its focus on digital business transformation and mobile application development. this analysis is based on pega v.7.1.9 and pega express. ibm ibm is enhancing the intelligence of its smarter process products through the use of complementary watson technologies, resulting in what it calls cognitive business operations. it also improved cloud-based deployments by enhancements in blueworks live and a licensing approach that allows customers to apply purchase credits to either on-premises or cloud versions of bpm. software ag software ag historically placed a strong emphasis on bpm and application integration. in 2015, it combined its high-end webmethods bpms product with its broad and deep middleware stack and newer analytic capabilities to produce an integrated digital business platform. this suite addresses a wide variety of on-premises and cloudbased intelligent process and iot business situations. source: compiled by the author on the basis of (gartner, 2016) baltic journal of economic studies 117 vol. 3, no. 2, 2017 results of different business activities, which require continuous resource-alignment, workflow analysis, process optimization and budget control. in past days, business processes were supported by human resources due to the lack of technology such as machines, which were not interconnected together as there was no internet. in contrast, these days almost all devices are becoming smart and “internet of things” makes it possible to interconnect different sensors, smartphones, and workstations to a centralized access point or a central information system (research publish, 2016). here we will try to analyse the most progressive technological systems. while ibpmss can coordinate short-lived, transactional system-oriented processes, they are best used to manage long-lived business processes that span as people and systems, as well as functional boundaries. while some vendors use similar process execution engines, pure service-oriented architecture (soa) orchestration is not a focus of an ibpms. further, the mobile, social, cloud and analytics features in ibpmss are more capable and better integrated than they were in 2015. those solutions that balance ease of use and time to solution alongside greater intelligence capabilities are seeing the most success. also essential are strong partner networks for business transformation capabilities (gartner, 2016). the rest of the paper is organized in the following way. firstly, we shall consider in detail current situation in ukrainian automobile market, and then we would contemplate the strength and weaknesses of ukrainian economy for domestic automobile enterprises in terms of the european union (eu) entering a period. in conclusion, we would try to provide references for future prospects and development of ukrainian automobile market overall. 3. the current situation in ukrainian automobile market since the beginning of the year, sales in ukraine were at the level of 16,5 thousand units of the car. according to the acea, in march 2017, the auto market of the eu recorded an increase in sales of new cars by 11,2% in an annual comparison. a total of 1 981 583 cars were sold. according to the results of the first quarter of this year, the volume of sales of cars on the eu market grew by 8,4% compared to the same period last year to 4 141 269 units (acea, 2017). the rate of the european automobile market growth (first quarter, 2017 year) indicated below. country rate italy 12,6% germany 6,7% great britain 6,2% france 4,8 source: compiled by the author on the basis of (acea , 2017) a number of cars sold by the european automobile giants in march 2017 indicated below. automobile giant amount, units rate volkswagen 403 289 +6,5% renault 180 481 +14,4% psa 178 810 +6,9% ford 156 523 +16,7% fca 129 126 +17,7% opel 128 702 +3,1% bmw 126 015 +7,7% daimler 111 922 +12,7% source: compiled by author on the basis of (acea , 2017) for a comparison, according to auto-consulting, in march 2017 in ukraine were sold 7 thousands of new cars with a dynamics of + 43% by march 2016. since the beginning of the year, the car market amounted to ~16,5 thousand new cars (+ 35%). in april, all the operators managed to sell 6,6 thousands of new cars, which is 17,25% more than a year ago. according to auto-consulting, sales of new cars in ukraine are growing for the 15 months in a row. before that, a continuous increase in sales was observed from october 2010 to march 2012 – 18 months in a row (auto-consulting, 2017). according to auto-consulting, since january 2016, when sales for the first time showed a positive trend of +19%, in ukraine, more than 80 thousand new cars were sold. at the same time, the maximum growth rates were observed in march 2016 – +96%, while the minimum growth of 5% was recorded in july 2016. for the three months of 2017, the growth in sales of new cars was 35%. the highest growth this year was demonstrated by january – +54,5% compared to january last year. (autoconsulting, 2017). it should be noted that other segments of the ukrainian car market also provide positive signals. in particular, the market for new lcvs (light commercial vehicles) has been growing since the beginning of the year – +43%. the market for new buses is growing for the 19 months in a row – from september 2015 to march 2017. 781 316,8 308,6 222 185,2 179,3 167,8 147,8 113,9 112,2 0 100 200 300 400 500 600 700 800 900 a m o u n t, t h o u sa n d s automobile brand top-10 brands of sold cars in ukraine 2000-2016 years source: compiled by the author on the basis of (auto-consulting , 2017) baltic journal of economic studies 118 vol. 3, no. 2, 2017 in the first quarter of this year, 39 046 vehicles were imported to the territory of ukraine under the import regime for $588,5 million (ukrautoprom, 2017). the largest share in this import was a passenger car, the association “ukrautoprom” reports. for three months importers spent $416,9 million for the purchase of 28,9 thousand of passenger cars. thus, compared to the same period last year, imports of cars increased by almost 80%, and the outflow of currency for its purchase increased by $145,7 million. at the same time, the average customs value of one imported car decreased by more than $2 thousand compared to last years’ indicator of $14,4 thousand (ukrautoprom, 2017). 4. strengths and weaknesses of ukrainian economy for domestic automobile enterprises the urgency of reforming ukraine’s automotive industry is connected with political and economic challenges, which threaten the economic and social growth of the ukraine, as well as with the need to implement the key provisions of the eu-ukraine association agreement for facilitating erasing borders. reforming this involves the introduction of a new ideology in the state administration for the development, local self-government and territorial organization of power in ukraine based on the principle of small and middle business growth (pysarenko, 2016). while the recession, ukraine’s production declined more than sales. some manufacturers have gone bankrupt (for example, the kremenchug automobile plant in 2014, assembles and ssangyong great wall), and the rest have significantly reduced production volumes. automotive manufacturing is one of europe’s most enduring industrial activities, and it accounts for millions of jobs, billions of euros in investment, and represents a large portion of the continent’s exports. keeping track of the extent of the automotive industry’s activities, by providing regular and up-todate statistics is a key part of acea’s mission. accordingly, in this section, you will find data on global and european production, monthly registration figures for europe, figures for employment and much more (acea, 2017). as we can see on image below, ukraine is the country with the lowest number of produced car in the world in 2016. certainly, there were a lot of factors blocking domestic manufacturing, nevertheless, that is a real big problem. source: compiled by the author on the basis of (oica , 2017) on the other rank below, we should observe the percentage rank going down by dynamic between 2016 and 2015. in this list, ukraine ranks #2 country with the highest negative exponent with -36,1% boost, after uzbekistan with -52,5% boost. for reference, the #1 growth rate is iran with +18,6%, and ukraine’s neighbours – czech rep. (8,3%), poland (3,2), russia (-5,4%). source: compiled by the author on the basis of (oica , 2017) 5. conclusions as we mentioned before, there are some pieces of advice how to make ukrainian automobile market more competitive and to achieve business process improvement by embedding existing tools and opportunities for business optimization. the first one is to establish ecoinnovation entrepreneurship. on ownership structure, the ukrainian auto companies are a mostly private enterprise (there are only 2 plants, one of them is a commercial automobiles plant), which makes entrepreneurs have most or even all of the enterprise property rights. an entrepreneur, who is both the owner of the business political: legislative framework; tax policy; labour law lobbyism; trade restrictions with the eu; political stability; social: purchasing power; population growth rate emphasis on safety more-willing workforce. economic: banking climate; fixed interest rates; stable exchange rates; inflation rate reduction; technological: raw stuff; production capacity; r&d activity; automation processes; technology incentives; source: compiled by the author on the basis of personal research baltic journal of economic studies 119 vol. 3, no. 2, 2017 capital and decision-makers, attitude determines the effect of enterprise innovation activities. on the one hand, must strengthen the entrepreneurial innovation consciousness. on the other hand, entrepreneurs should strengthen the guidance of employees. the second one step is to sufficiently grasp the government policy. in the process of auto transformation, the government’s policy is a very important external resource. at present in ukraine, the national policy is conducive to the development of the ukrainian economic belt automobile industry; automobile enterprises should fully grasp the government's policy to enhance their technological innovation capacity. ecological economic policy requirements with industry ecological development and industrialization of ecological construction as the means, in order to renovation and advancement of traditional industries, development of new eco-industries, requiring the auto industry’s traditional industries must be effectively transformed and upgraded. the third one is to strengthen the input of science and technology talents in auto industry. with the increasing sophistication of technology and the development of competition for auto technology talent, especially senior personnel of more stringent requirements, not only to master the basic theory and professional knowledge in related fields but also master the relevant policies, proficient regulations and standards in their field, along with some technical tracking ability, practical ability, organizational skills, and coaching skills. an emphasis on investment of human resources, building bold innovation personnel is particularly critical. done to improve the incentive mechanism and optimize the environment for the growth of talent; improve the training system, strengthening the effectiveness of training; build an innovative auto technology training model. the fourth one is to strengthen the industryuniversity-institute cooperation automobile industry’s independent innovation enterprise efforts alone are not enough, also need to universities and scientific research institutions involved. first, it should be the formation of strategic alliances of industry-university-research. according to the current development level of economic and social of the ukrainian economic belt, the number of universities and automobile specialties, the number of research institutions, and the level of innovation, to establish a scientific and reasonable benefits balanced mechanism and form a strategic alliance of industry-universityresearch. second, industry-university-research parties clear division of labour. universities do well in transport personnel and some basic research, research institutions do well in improving technological research, to provide theoretical and technical support, complete product trial; the company offers research and training funds to universities and research institutions, complete product development, bring the fruits of cooperation to the market (liu, yang, enzhao hu, 2016). references: acea – the european automobile manufacturers' association [electronic resource]. – retrieved from: http://www.acea.be/statistics auto-consulting – since the beginning of the year, sales in europe have exceeded 4 million new cars [electronic resource]. – retrieved from: http://www.autoconsulting.com.ua/article.php?sid=38630 feng wei, wei-xiao zhang1, a, and yong-yi qin – research on transformation and upgrading of the xijiang economic belt automobile industry based on the eco-innovation perspective [electronic resource]. – retrieved from: http://www.dpi-proceedings.com/index.php/dtssehs/article/viewfile/3499/3149 integra-co – magic quadrant for intelligent business process management suites [electronic resource]. – retrieved from: http://www.integra-co.com/sites/default/files/bizagi%20on%20gartner%20quadrant%20 %20reprint.pdf iso – quality management systems -fundamentals and vocabulary [electronic resource]. – retrieved from: https://www.iso.org/standard/45481.html john brunswick, "extending the business value of soa through business process management," oracle, september 2008. [electronic resource]. – retrieved from: http://www.oracle.com/technetwork/articles/bpmand-soa-097534.html. [accessed 14 march 2016]. juric, matjaz b., and kapil pant, usiness process driven soa using bpmn and bpel: from business process modeling to orchestration and service oriented architecture, packt pub, 2008. kpmg 2016 llp, turn business processes into business advantages [electronic resource]. – retrieved from: https://home.kpmg.com/content/dam/kpmg/us/pdf/kpmg-and-ibm-smarter-process-solutions10-17.pdf liu, yang, enzhao hu, and xudong chen, "architecture of information system combining soa and bpm," information management, innovation management and industrial engineering, vol. 1, no. iciii'08. international conference on, 2008. organisation internationale des constructeurs d’automobiles (oica) – production statictics [electronic resource]. – retrieved from: http://www.oica.net/category/production-statistics/ pysarenko – main directions of reforming the regional policy in ukraine [electronic resource]. – retrieved from: http://rcin.org.pl/content/61354/wa51_80457_r2016-t30_europa-xxi-pysarenko.pdf baltic journal of economic studies 120 vol. 3, no. 2, 2017 research publish – business process optimization through soa and cloud [electronic resource]. – retrieved from: http://www.researchpublish.com/download.php?file=business%20process%20optimization-3536. pdf&act=book. ukrautoprom – according to the results of the first quarter, imports of passenger cars increased by almost 80 percent [electronic resource]. – retrieved from: http://ukrautoprom.com.ua/en/po-itogam-i-kvartala-importlegkovyx-avto-vyros-na-80-procentov weske, mathias, "introduction," in business process management: concepts, languages, architectures, second ed., springer science & business media, 2012, p. 5. александр пидмурняк оптимизация бизнес-процессов на автомобильных предприятиях украины в условиях интеграции с ес аннотация. целью работы является обобщить и представить общие принципы и методы управления менеджментом для поиска наиболее эффективного и выгодного выхода для автомобильных предприятий в период экономического подъема в украине. в ходе исследований мы проанализировали, что такое soa (service oriented architecture) и преимущества ее реализации, различия между bpm и ibpm (intelligent business process management suite) и другие. методика. исследование основано на сравнении различных подходов к бизнесу и управлению, благодаря чему эффективность бизнес-процесса достаточно возрастает. всего было проанализировано более 30 методов, в которых рассмотрено около 15 наиболее часто используемых систем управления, в результате чего было предложено 5 основных рекомендаций. результаты исследования показали, что в украине очень «туманная» социальная и политическая обстановка, человеческий капитал неразвит и менее меритократический, чем у наших соседей в ес. недостаток отечественного производства автомобилей, отсутствие новых заводов и технологий, в результате чего количество рабочих мест остается неизменным или снижается из-за эмиграции, что приводит к росту количества импортируемых автомобилей. в попытках выявления самых актуальных угроз, мы обнаружили, что нет никаких государственных программ, грантов, лабораторий и научных заводов для молодого поколения. практические значение. поскольку украина находится в состоянии войны, экономического и политического кризиса, обвала национальной валюты и другого, внутренние домохозяйства столкнулись с огромным количеством проблем: инфляция, нестабильный валютный курс, политическая неопределенность. все это приводит к тому, что у отечественного бизнеса есть только один выход – это, искать варианты повышение роста эффективности управления и организационных преобразований на микроуровне. значение/оригинальность. метод управления компанией agile – один из новейших методов оптимизации бизнес-процессов, который может осуществляться через такие приложения как: ibm, softwareag, pegasystems, agilepoint. baltic journal of economic studies 103 vol. 8 no. 1, 2022 corresponding author: 1 international university of business and law, ukraine e-mail: nenkofamily@ukr.net orcid: https://orcid.org/0000-0003-2473-2823 2 national university "odessa law academy ", ukraine e-mail: fedotov_ap@ukr.net orcid: https://orcid.org/0000-0001-7659-3023 3 higher educational institution "alfred nobel university ", ukraine e-mail: dh.psh@duan.edu.ua orcid: https://orcid.org/0000-0003-1884-0799 doi: https://doi.org/10.30525/2256-0742/2022-8-1-103-110 economic and legal bases of administration of the customs-tariff mechanism serhii nenko1, oleksii fedotov2, halyna shchedrova3 abstract. the subject of the study is public relations in the field of administrative and legal regulation of the customs and tariff mechanism of foreign economic activity. methodology. the instrumental and methodological apparatus of the research is formed by the applied methods of economic analysis of the activities of organizations, statistical methods, selective observation, the method of economic modelling, grouping, generalization, expert assessments, methods of economic theory, marketing, etc. the aim of the article is to analyse the administrative and legal aspects of the mechanism of customs and tariff regulation in modern conditions in ukraine and the world. the research results in a comprehensive consideration of the system of administrative and legal regulation of the customs tariff mechanism in ukraine and the world, within which: the impact of the customs tariff mechanism on foreign economic activity is assessed; the modern foundations and principles of tariff benefits and protectionism policy are highlighted; the analysis of the administrative legislation of the studied area is carried out; weaknesses and problems of administrative and legal support of the customs tariff mechanism are identified, and ways of their solution are proposed. conclusion. customs and tariff regulation acts, on the one hand, as an effective regulator that promotes greater openness of the market, on the other – as the most common foreign trade instrument of protectionism. therefore, improving the problems of customs and tariff regulation in modern conditions is simply necessary to overcome the crisis phenomena in the domestic economy and ensure the economic security of the state. after all, it requires the determination of the maximum level of tariff rates of import duties, which, under the normal functioning of the economy, will not increase and may be reduced in the future. such plans may shock many sectors of the domestic economy. these primarily include agriculture, the food industry, the pharmaceutical industry, and the leather and shoe industry. customs and tariff regulation is designed to promote the goals and objectives of foreign economic activity, as well as ensuring the security of the country and protecting national interests. the methods of customs and tariff regulation are more consistent with the nature of market relations and therefore play a major role in regulating foreign economic activity. in modern conditions, customs and tariff regulation can and should become an effective tool for mitigating and gradually overcoming crisis phenomena in the economy. key words: customs regulation, tariff regulation, administrative and legal regulation, customs tariff, customs post, foreign economic activity, national economy, international economy, international law, administrative law. jel classification: e69, f15, f20, k22, k23 1. introduction the state, as a subject forming the general conditions of economic management, has a powerful tool of customs regulation to stimulate innovation and investment processes and support structural shifts in the economy in the required direction. with effective customs regulation, international exchange allows the state to increase gdp than it is possible exclusively on the national reproductive base, to transfer the national economy to an innovative development trajectory, to deepen the state's participation in world economic relations, depending on the goals of foreign trade policy. at the same time, customs regulation affects both national interests and the interests of the state's baltic journal of economic studies 104 vol. 8 no. 1, 2022 trading collaborate countries, and therefore always has a compromise character. first, this concerns the main instrument of foreign trade policy – customs and tariff regulation of foreign economic activity, the implementation of which is directly related to the nature of trade, economic and political interstate relations (bityak, 2000). customs tariff regulation is a method of state regulation of foreign trade in goods, carried out by applying import and export customs duties. consequently, the regulation of customs and tariff performs the following functions: regulatory, protective, fiscal. through the performance of these functions, the following main tasks of foreign trade policy are solved: – levelling the competition conditions for imported and domestically produced goods, without creating advantages for one or the other; – restriction of admission to the domestic market of imported goods; – replenishment of the revenue part of the state budget. the main instrument of customs and tariff regulation of foreign trade activities are customs duties. the combined rates of customs duties are called the customs tariff. customs tariff – a set of customs duty rates applied to goods transported across the customs border and systematized in accordance with the law. import duties play the largest role in customs and tariff regulation (customs duty, 2022). the value of the import customs duty rate is influenced by such elements of customs and tariff regulation as the product code, country of origin and customs value. depending on the country of origin of the goods, basic, maximum and preferential rates of import customs duties can be distinguished. basic rates of import customs duties apply to goods originating from states to which the country provides the most favourable treatment in trade and political relations. the maximum rates of import customs duties are for goods originating from states that have not been granted such a regime. preferential customs duty rates in a certain amount from the base rate are applied to goods originating from developing countries – users of the country 's national system of preferences. according to the method of determination, ad valorem, specific and combined rates of customs duty are distinguished. the ad valorem rate is set as a percentage of the customs value of taxable goods. the specific rate of customs duty is charged on the weight, volume, piece of goods. the combined method of customs taxation involves the simultaneous use of both ad valorem and specific rates of customs duty. one of the main functions of the customs authorities is the collection of customs duties; therefore, in order to implement the fiscal function of the customs duty, the customs authorities carry out the following operations: – control of the correctness of the definition of the classification code; – control of the correctness of determining the country of origin for goods; – customs value control; – control of correctness of calculation and timeliness of payment of customs duties. customs posts constitute a single system of customs authorities of the country. the list of functions, the implementation of which is entrusted to the post, includes functions to ensure that participants in foreign trade activities comply with customs and tariff regulation measures, such as: – control over the correctness of calculation and payment of customs duties; – adoption, within its competence, of a decision on the determination and control of the customs value of goods; – making decisions within its competence to determine the country of origin of goods; – making decisions on the classification of goods within its competence. the structure of the customs post is designed in such a way as to effectively perform all the functions assigned to it and be an active link in the customs system of the state. the performance by the customs post of the functions assigned to it to monitor compliance with the measures of customs and tariff regulation is characterized by the performance indicators of the post for the collection of customs payments (komzyuk, 2013). in modern conditions, customs and tariff regulation of foreign trade plays an extremely important role in the trade and political mechanism, as it is used to protect the economy, fulfil international obligations, and maintain the stability of the foreign trade system. therefore, an effective system of customs and tariff regulation is the main condition for the state to conduct an effective and holistic customs policy, as well as for the customs authorities to solve the tasks of ensuring the economic security of the state. 2. customs and tariff regulation of foreign trade activity as an administrative tool customs and tariff regulation of foreign trade activity is a set of administrative, legal and economic methods of state regulation of foreign trade activity based on the application of customs duties, customs procedures, rules. in the process of developing world economic relations, a rather diverse list of instruments of state influence on export-import commodity flows has been baltic journal of economic studies 105 vol. 8 no. 1, 2022 developed, which are characteristic of all countries of the world. one of them is the system of customs and tariff regulation of foreign economic activity. on the territory of ukraine, customs and tariff regulation is carried out within the framework of international customs legislation, taking into account the legislation of ukraine. customs regulation actually consists of the formation of the order and rules of regulation of customs affairs on the territory of ukraine within the framework of concluded international treaties and current laws. in ukraine, customs regulation is a set of means and methods aimed at ensuring compliance with customs and tariff regulation, including the imposition of prohibitions and restrictions on the import of goods into the territory of the country and on the export of goods beyond its borders (demin, 2016). customs and tariff regulation of foreign economic activity is one of the most important economic management methods. the entry into force of the law of ukraine "on customs tariff " dated 04.06.2020 no. 674-ix strengthened the importance of customs tariff regulation and its elements (dodin, 2013). currently, customs and tariff regulation serves not only as an instrument of general economic policy at the national level, but also as an object of regulatory activity of economic organizations, primarily the world trade organization. the activities of the world trade organization are aimed at creating common principles, methods, rules of customs and tariff regulation in order to prevent obstacles to the development of international foreign trade. the basis of customs and tariff regulation of foreign trade activity is the solution of significant tasks and the desire to achieve the interests of the individual, society and the state (customs duty, 2022). the system of customs tariff regulation includes the use of customs duties and other customs payments, the payment of which is an essential condition for the import of goods into the customs territory of the state and export from this territory, that is, customs tariff measures are based on the use of the price factor influencing foreign trade turnover. the main principle of customs tariff regulation is the principle of the establishment of customs duties, prohibiting the participants of customs tariff relations to conclude any agreements on the amount, grounds, terms of payment of the duty (kolpakov, 1999). the implementation of tariff regulation emtails the application of an adequate internal mechanism for the preparation and argumentation of decisions in the interests of the domestic economy. for the successful implementation of the system of customs and tariff regulation of the country in order to ensure its economic security, the following areas of customs administration can be determined: the introduction of simplified clearance procedures and the use of vat refund procedures for export transactions. customs and tariff regulation is designed to promote the goals and objectives of foreign economic activity, as well as to ensure the security of the country and the protection of national interests. despite the liberalization of world trade and simplification of customs procedures, customs tariff regulation continues to have a great impact on the dynamics and structure of trade turnover, since customs tariffs are applied by almost all countries, import duties cover most of the commodity nomenclature and are the most transparent type of trade restrictions. methods of customs and tariff regulation fruitfully perform their functions only with high-quality organization of customs affairs: reliable statistical accounting and strict control aimed at ensuring the payment of due payments, combating smuggling and import of low-quality and counterfeit products. customs and tariff regulation of various groups of countries has its own specifics, which reflects objectively existing differences in national interests. in contrast to the low level of customs taxation in developed countries, most developing countries apply an average duty rate in the range of 15-20%. the high level of customs taxation allows you to diversify the structure of the economy, create your own industry, as well as significantly replenish the revenue side of the budget. having joined the world trade organization, many developing countries have set duty rates at a very high level, but in fact apply lower rates, while retaining the possibility of a significant increase in import duties (bakaeva, 2015). customs tariff regulation is an important and timeconsuming process that includes several interrelated operations: determining the country of passage of goods; determining the customs value of goods; payment of customs duties. the objectives of the application of customs and tariff regulation measures may be: – the protectionist function is the protection of national producers from foreign competition; – the fiscal function is to ensure the receipt of funds to the budget. the main objectives of customs and tariff regulation of foreign economic activity in ukraine in order to ensure economic security are currently: – improving the competitiveness of ukrainian industry, protecting the economic interests of domestic producers in domestic and foreign markets; – maintaining the level of investment attractiveness of production; – removing barriers to the development of competition, as well as creating conditions for the replacement of backward technologies; baltic journal of economic studies 106 vol. 8 no. 1, 2022 – improving the effectiveness of the implementation of customs and tariff policy; – improvement of the mechanism of customs and tariff regulation. 3. current trends in customs and tariff regulation in ukraine the modern process of globalization is characterized by the intensification of international trade and the integration of national enterprises and institutions into the world trading system. the incentive is a significant economic benefit from export-import operations based on the specialization of countries. therefore, it is important to establish favorable conditions for cooperation to facilitate the interaction of international economic relations. the basic aspect of the functioning of the country 's foreign trade is the creation of a system of regulation and control over it. the establishment of the customs system is a process that is achieved by combining national economic interests and international trade, taking into account the conditions of liberalization of world trade and forms an optimal structure of customs regulation. that is why two levels of customs control are used. the international level provides for the adoption of such operations based on uniform principles and with the help of specialized agencies: the world trade organization, the international monetary fund and the like. at the national level, the relevant laws legislatively approve the country’s customs policy. in ukraine, such legislative bases are the customs code of ukraine, the law of ukraine "on the customs tariff of ukraine", and the law of ukraine "on foreign economic activity " (korneva, 2015). customs policy is a significant tool for controlling foreign trade activities and achieving an optimal balance of interests of the world community. customs policy includes payments, customs clearance procedures, the elimination of smuggling and the fight against violations of these requirements, classification and coding of goods, a single form of declaration of exports and imports of goods, other international norms and standards. a feature of the customs system in ukraine is an expanded product range compared to other countries (mazur, 2008). customs control is carried out in several stages: registration of customs documents, the procedure of inspection of products for import-export, making customs payments and receiving goods. information, declarations and documents in accordance with the available cargo, the functioning of customs brokers and shops in the duty-free zone are especially carefully checked. the main document is a customs declaration certifying information about goods crossing the border of the country. this information makes it possible to conduct customs control, statistics and accrual of payments. in our country, the cabinet of ministers of ukraine established this procedure for customs clearance (nozdrachev, 2017). foreign economic activity is regulated by tariff methods. this tool makes it possible to improve the position of the national producer, to fix the terms of trade cooperation with foreign countries, to receive budget revenues from customs operations. an important trend is the introduction of international norms and standards, which will simplify the passage of customs procedures, resolve the issue of joint transit, comply with the provisions of international conventions, and deepen foreign trade relations with other countries of the world. the transition to international standards will provide favorable conditions for the adaptation of the national economy to global international competition precisely due to the freer movement of resources and adaptation to common economic processes. the mechanism for making payments on export import transactions in leading countries with a stable economy has a clear and regulatory procedure that coincides with the principles of international organizations. the developed countries of the world follow the trend of taxation only of the import component of foreign trade activity. in many countries, export duties are excluded at the legislative level (stelmaschuk, 2011). such measures were introduced to stimulate the entry of domestic producers into the world market, as well as to protect the country 's economy from excessive imports. a significant unification of tax legislation between the participating countries has already taken place in the european union. the goal of this community is to balance world trade. the methods of achieving the goal are the creation of a unified regulatory customs base, the elimination of restrictions in international economic relations, and the reduction of customs barriers by reducing payment rates, and the like (chernyavsky, 2018). in addition to jointly resolving issues regarding changes in external tariff rates, concluding trade and economic agreements, introducing common means of liberalization and export-import policy, the european union relies on the customs union in its activities. it provides for the avoidance of any customs duties and other barriers in the trade interaction of the member states of the european union, as well as joint foreign trade policy on behalf of the single economic agent. not so long ago, the ukraine-eu free trade zone was established. it provides for easier access of domestic producers' products to the european union market. to do this, the quality standards of ukrainian goods must comply with european standards and freely pass product safety examinations in the laboratories baltic journal of economic studies 107 vol. 8 no. 1, 2022 of the european union. the advantages of creating such a zone are the abolition of about 98% of customs duties, increasing the competitiveness of ukrainian goods by reaching a new level of quality and cheaper through the elimination of customs tariffs, the possibility of finding new strategic partners, reforming domestic legislation to the legal norms of the european union, using the tools of the european union for the development of small and medium sized businesses (berezhnyuk, 2019). the european union is ukraine's main trading partner. it is with this organization that the volume of foreign trade of ukraine as of 2021 is 48.7% of the total volume. the total volume of trade in goods and services from the european union in 2021 is 57,562.7 million us dollars. the largest trading partners of ukraine among the countries of the european union in 2022 were germany, poland, italy, hungary, the netherlands, france, and lithuania (statistics service, 2022). in its customs policy, ukraine has experience in using protectionist methods. a huge problem of the customs system of ukraine is a significant lag in the capabilities of customs control from the needs of throughput. the increase in the volume of goods traffic allowed us to identify the problem of significant time costs during customs inspection and further documentation. the shortcomings of the existing customs system in ukraine are evidenced by the following facts: cases of illegal movement of products, settlements on export-import operations with the help of offshore zones, artificial understatement of customs duties on the import of goods, illegal sale of the results of intellectual labor in the form of patented devices (priymachenko, 2007). another area requiring specific and urgent changes is the outdated structure of the state apparatus, which is no longer able to effectively solve various issues of customs policy. an attempt to reform this instance took place in 2012 through the formation of the ministry of revenue and duties of ukraine from the then separate tax and customs services. however, in 2014, the state fiscal service of ukraine was created on their basis, which has a tax and customs audit department regulating customs issues in its structure (gutsu, 2015). the most rational option for solving organizational issues of the customs system is the transition of customs to an independent structure that has the right to protect the customs security of the country and its interests. this body will ensure the harmonization of foreign trade, the protection of the national market, will make customs offenses impossible, regulate the process of ukraine's integration into the world economic space. the actual issue of the functioning of the customs institution is the determination of the balance of the customs tariff for the regulation of export-import operations. the elimination of this problem will contribute to the elimination of economic barriers to the creation of a transparent system of customs service activities. these measures will significantly reduce corruption in the customs authorities, the number of smuggling transactions and transactions with inappropriate declaration of imported products. the task of reforming customs legislation to strengthen cooperation with important global economic agents is urgent. in addition to implementing the principles of the european union and the world trade organization, a strategy should be developed to protect important sectors of the economy (batychko, 2015). to do this, it is necessary to carry out the following actions: create a unified control system for export-import and transit operations, develop a standard for checking goods, introduce automated analysis of customs inspection, provide parties to foreign economic activity with access to electronic registration of documents for customs operations, create a platform for submitting electronic customs declarations and the possibility of using it in customs procedures (galaka, 2012). taking into account the specifics of the customs policy in ukraine, the priority areas of its reform in the coming years should be: assistance to the protection of national producers; facilitation of customs procedures; introduction of international standards; application of flexible customs tariff; establishment of customs value for milestones of foreign economic activity regimes; transition to an electronic customs system; ensuring constant monitoring of the main aspects of customs affairs; development of methods to minimize negative phenomena associated with the customs border; reforming the information base of customs operations (andrew, 2014). significant areas of development of customs legislation are ensuring the stability of customs cooperation on the basis of existing laws, monitoring compliance with social justice in the management of the customs system, the introduction of international standards and trends in the customs activities of countries in the national customs policy, simplification of customs procedures and control over them, the creation of a single regulation of customs procedures. 4. problems and ways to improve the administration of the customs tariff mechanism currently, the competitiveness of domestic goods and services has become a comprehensive indicator that determines our future. in order to increase the competitiveness of domestic producers and protect their national interests, the economy in the field of customs and tariff regulation should be aimed at: baltic journal of economic studies 108 vol. 8 no. 1, 2022 – strengthening the regulatory function and improving the structure of the single customs tariff while maintaining the fiscal function; – creation of opportunities to protect economic interests in foreign trade by combining the tools of customs and tariff regulation and non-tariff regulation; – providing export support through the use of tariff and economic instruments, as well as finding new methods of promoting domestic goods to foreign markets (nastyuk, 2018). recently, significant changes in the field of customs have been observed in ukraine. this is due to a number of problems in the system of customs and tariff regulation. the main ones are: – inadequate legal support. after all, the condition for the effective functioning of customs legislation is its simplification, its accessibility, non-infringement of the rights and interests of participants in foreign economic activity; – incorrect application of customs and tariff regulation measures; – the inflow of investments into the country is not carried out in full; – non-permanent monitoring and analysis of the consequences of changes in customs tariff rates; – lack of analysis of the current state of the state's industries; – weak system of granting tariff preferences (panko, 2017). when solving the problems of improving the administrative mechanism of customs and tariff regulation, it is necessary to take into account: – the development of the economy on the basis of sectoral programs and modernization strategies, as well as increasing competitiveness; – correlation of the interests of the development of domestic industries with the interests of similar industries of other members of international treaties and organizations; – reduction of import customs duties on imports in order to increase the competitiveness of domestic products. as for the improvement of additional means of customs and tariff regulation, it is necessary to pay attention to the following factors: – activation of the use of special tools for import regulation; – improvement of the system of tariff preferences and the system of customs privileges; – improvement of the rules for determining the country of origin of goods. qualitative changes in the conditions for the implementation of customs and tariff regulation necessitates the adoption of institutional, organizational, and procedural management decisions (averyanov, 2010). first, it is necessary to ensure the effectiveness and efficiency of the mechanism of functioning of supranational bodies that fully meets the challenges facing both the partner countries as a whole and each of them individually. this requires the introduction of appropriate rules, procedures and norms that effectively coordinate the positions of the parties within the framework of concluded contracts. secondly, it is necessary to develop and implement cost-effective mechanisms for promoting ukraine's position, strengthen the sound basis of solutions proposed by the ukrainian side, and forecast their socio-economic, trade and political consequences. it is necessary that ukraine's role in international trade organizations be supported by concrete results regarding compliance with the economic, trade and political interests of the ukrainian side. thirdly, the new challenges of the ukrainian economy make it necessary to more closely integrate the system of customs and tariff regulation with the processes of diversification, ensuring economic security and introducing innovations into the domestic production complex. this requires, in addition to strengthening the structural and stimulating functions of customs and tariff policy, its coordination and close alignment with the priorities of industrial policy. specific proposals for improving customs tariff regulation, which performs mainly fiscal functions, and the customs tariff acts as an additional tax are as follows: – to subordinate the structure and rates of the customs tariff to the goals and objectives of the developed strategy of socio-economic development of the country until 2030 and the national industrial policy formed on its basis. first, we are talking about a more thorough consideration of the state and specifics of individual industries and industries, in relation to which customs and tariff regulation can perform protectionist or fiscal functions to varying degrees. the position of specific industries and industries in the domestic market of the country is determined mainly by the level of their competitiveness. – more consistently implement the principle of escalation of the customs tariff, reducing the level of taxation of imported materials, components and components used for the production of finished products, as well as more actively apply special customs regimes. – to focus on the use of the import customs tariff as a tool for reasonable protection of segments of the domestic market vulnerable to imports, increasing the competitiveness of domestic producers, including giving greater flexibility and targeting to the customs tariff. – to regulate the existing systems of tariff preferences and tariff benefits in order to increase the effectiveness baltic journal of economic studies 109 vol. 8 no. 1, 2022 of the regulatory function of the customs tariff, including reviewing existing preferences in favour of developing countries, correlating the range of recipients of preferences and their size with the level of economic development of these states. – to improve the quality of customs administration, primarily through the implementation of more complete customs control of imported goods, simplification of customs clearance technology, carrying out procedures for passing goods across the border in accordance with unified international standards. an extremely important point is to accelerate the transition to electronic declaration and electronic document management during customs clearance, which will reduce the costs of this process and reduce the time of passage of goods. the successful application of meaningful institutional, organizational, and procedural management measures to improve customs and tariff regulation will increase the attractiveness of the domestic business environment, the competitiveness of the domestic manufacturer; will also serve as an impetus for the development of high-tech products, the formation of integrated inter-country production complexes within a single customs territory. 5. conclusion the competence of the customs clearance and customs control department involves ensuring that the participants in foreign trade activities comply with the measures of customs and tariff regulation when importing goods in the region where the customs post operates. as part of the implemen tation of this function, the inspector of the department, based on the documents submitted by participants in foreign trade activities for customs clearance, performs control operations: – the correctness of the indicated product code in order to determine the rate of import customs duty payable; – the correctness of the declared country of origin of goods for the application of tariff incentives; – correctness of the calculated customs value as a tax base for calculating customs duties; – correct calculation and completeness of the collection of the amount of import customs duty. under the conditions of the global economic and financial crisis, the volume of revenues to the state budget decreased due to the collection of customs duties due to a decrease in foreign trade turnover. the main directions for the implementation of the customs tariff policy of the customs in the conditions of the global financial, political and military crisis should correspond to the goals of socioeconomic development. therefore, the activities of the customs authorities to ensure compliance with the measures of customs and tariff regulation should ensure: – macroeconomic stability of the country; – increasing the competitiveness of enterprises in the foreign market; – development of international economic cooperation. in this regard, the main strategic goal of the activities of the customs authorities is to increase the level of compliance with customs legislation, ensuring the completeness and timeliness of payment of customs duties, taxes and customs fees. to mitigate the impact of the global financial, political and military crisis on the national economy, the customs authorities are expected to solve the following tactical tasks: – ensuring the reduction of debt to the state budget for the payment of customs duties; – improvement of customs legislation; – taking measures to increase the level of legality of decisions made by the customs authorities in the field of customs and tariff regulation. in addition, to ensure that the customs authorities comply with the measures of customs and tariff regulation provided for by the legislation by the participants in foreign trade activities, the improvement of the organization of customs control is of great importance. in particular, this refers to the optimization of the sequence of customs control operations related to monitoring compliance by participants in foreign trade activities with customs tariff regulation measures: control of the correct classification of goods, the country of origin of goods, customs value and the correct calculation and timeliness of payment of customs duties. thus, the effective provision by the customs authorities of compliance with the measures of customs and tariff regulation of foreign trade activities in the current economic conditions will ensure the implementation of the fiscal function of the customs duty, as well as strengthen its regulatory impact on national production. in addition, the solution of this problem will ensure effective and reasonable protection of domestic producers from unfair competition from foreign producers and the economic security of the country, and most importantly, the stabilization of the economy in the short term. therefore, the system of customs and tariff administrative regulation has shown that despite the possibility of using various measures of state influence on the financial and economic sphere of the country, the customs and tariff mechanism continues to play an extremely significant role in the economy of a modern state. customs and tariff regulation acts, on the one hand, as an effective regulator that promotes greater openness of the market, on the other – as the most common foreign trade instrument of protectionism. consequently, the improvement customs and tariff baltic journal of economic studies 110 vol. 8 no. 1, 2022 regulation in modern conditions is required to overcome the crisis phenomena in the domestic economy and ensure the economic security of the state. after all, it is necessary to determine the maximum level of tariff rates of import duties, which, with the normal functioning of the economy, will not increase and may be reduced in the future. such plans may shock some sectors of the domestic economy. this primarily concerns agriculture, the food industry, the pharmaceutical industry, and the leather and shoe industry. customs and tariff regulation is designed to promote the goals and objectives of foreign economic activity, as well as ensuring the security of the country and protecting national interests. the methods of customs and tariff regulation are more consistent with the nature of market relations and therefore play a major role in regulating foreign economic activity. in modern conditions, customs and tariff regulation can and should become an effective tool for mitigating and gradually overcoming crisis phenomena in the economy. references: averyanov, v. b. 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(in ukrainian) baltic journal of economic studies 42 vol. 8 no. 3, 2022 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: vitvitskyi_ss@ukr.net orcid: https://orcid.org/0000-0002-4884-1883 2 department of education, science and sports, ministry of internal affairs of ukraine, kyiv, ukraine e-mail: my.post7@protonmail.com 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: tatianaponomarova@ukr.net orcid: https://orcid.org/0000-0002-5924-614x doi: https://doi.org/10.30525/2256-0742/2022-8-3-42-47 peculiarities of corruption risk management in economic activity serhii vitvitskyi1, anton syzonenko2, tetiana titochka3 abstract. the purpose of the article is to study the essence of corruption risks that may arise in the process of ensuring the economic security of the state; to consider the main ways of managing such risks as a method of improving the interaction between the economic and legal components of modern ukrainian society. the scientific discussion on the problem of legal regulation of economic security in ukraine is presented. the concept of legislative provision of economic security of the state is proposed. this concept is defined as a set of normative legal acts and documents that determine the priorities of the state, aimed at increasing the level of competence and responsibility of public authorities in ensuring safe conditions for the functioning of the national economy of the state (as a component of national security) by identifying the main risks and ways to eliminate them. the scientific approaches to the definition of economic security are characterized. the author's vision of the essence of economic security is presented. this essence is understood as the interaction of public authorities to ensure the conditions necessary to protect the national interests of the subjects of socio-economic relations at all levels in order to ensure stable growth of the economic indicator, meet the economic needs of society and simplify state control over the use of economic resources. the main corruption risks that may arise in the process of ensuring the economic security of the state and the peculiarities of their management are considered. results. the main corruption risks that may arise in the process of ensuring the economic security of the state are highlighted: risks caused by the discretionary powers of the subjects of ensuring the national economic security of the state; risks caused by the conflict of interests of the subjects of ensuring the national economic security of the state; institutional risks caused by the presence of a number of determinants that contribute to the development of the criminal intent of an official to commit a corruption offense; system-wide risks caused by the general instability of functioning and other shortcomings of the economic sphere of the state. it is established that the main methods of managing corruption risks in economic activity are: elimination of formalism by expanding/improving the boundaries and ways of interaction of economic entities; preventing the existence of discretionary powers of economic entities; provision of individuals and legal entities with procedural guarantees of influence on the development of the state economy; prevention of conflicts of interest of economic entities; regular analysis of possible losses from risk; modeling of potentially corrupt situations in the economic sphere of the state; forecasting the growth of corruption and elimination of its determinants by means of criminal law and criminology. key words: corruption, risk, economic security, state administration, national safety, conflict of interests. jel classification: d73, g32, d74 1. introduction modern development of society requires from the legislator dynamism and determination in the construction of new norms aimed at protecting citizens from existing forms of socially dangerous activities. this is especially true in the economic sphere, due to the fact that any transformations within the economy can have irreversible consequences that will lead to destabilization of a number of social relations in the state. economic security is a guarantee of stabilization this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 43 vol. 8 no. 3, 2022 and realization of social needs of the citizens of the country. in this regard, determining the peculiarities of managing criminal risks in the economic activities of financial institutions operating in ukraine is a priority task of a modern legal, european state. nowadays, the peculiarities of ensuring state economic security, including means of criminal law, have been considered in the works of such scholars as v. geyets, z. varnaliy, o. baranovskyi, ye. oleinikov, o. vlasyuk, ya. zhalilo, o. korystin, etc. however, the study of the problem of corruption risk management in economic activity requires additional attention, which determines the relevance of the content of the article. the purpose of the article is to study the essence of corruption risks that may arise in the process of ensuring the economic security of the state; to consider the main ways of managing such risks as a way to improve the interaction between the economic and legal components of modern ukrainian society. 2. legal regulation of economic security in ukraine the main program document regulating the development of the system of ensuring national and economic security of ukraine is the national security strategy of ukraine. the study of the general conceptual provisions of the national security strategy of ukraine allowed to determine that it assesses internal and external threats to national security and strategic risks, as well as defines the principles of national security. among the sources of economic security, laws should be singled out. a special place in the system of regulatory legal acts is occupied by the laws of ukraine "on national security of ukraine", "on the principles of domestic and foreign policy ", which state that security in the economic sphere of ukraine is a component of the national security of ukraine as a whole (on the fundamentals of national security of ukraine: law of ukraine of june 21, 2018 no. 2469-viii; on the principles of domestic and foreign policy: law of ukraine of july 1, 2010 no. 2411-vi). the above-mentioned laws of ukraine define the essence of external and internal threats to the economic security of ukraine, systematize the tasks of determining the criteria and parameters that characterize national interests in the sphere of economy, and determine the directions of economic policy formation. it should be noted that the state security policy is implemented by public authorities and local self-government bodies on the basis of the national security strategy of ukraine and other conceptual documents developed by the national security and defense council. it defines the main directions of the state security policy (on the national security and defence council of ukraine: law of ukraine of march 5, 1998 no. 183/98-vr). in determining the priorities of economic security, it is necessary to pay attention to the principles of the micro level, among which it is advisable to highlight the following: 1) planning as a guarantor of the application of a consistent, holistic mechanism to ensure resilience to internal and external threats to the self-reproduction of national economic security; 2) legality as a normatively defined procedure for regulating social relations in the economic sphere; 3) competence as ensuring the involvement of highlevel specialists with special knowledge in the field of economics and law in the protection of economic security; 4) regularity as a guarantor of the continuous functioning of the mechanism of protection of the national economy of the state; 5) confidentiality as a guarantor of the protection of personal data of subjects of the national economy, which in accordance with the current legislation of ukraine are not subject to disclosure. the state policy aimed at ensuring economic security should be based on the principles of the legal field with the establishment of quantitative and qualitative parameters and criteria of economic security of ukraine. therefore, it is logically necessary to form a legislative guarantee of economic security. scientists understand it as the establishment of the competence and responsibility of the state authorities of ukraine, subject to an interdependent and coordinated set of goals, objectives, principles and concepts of economic security, the main directions of their functioning as the main elements of the system of economic security. currently, the main task is to establish the correlation of all legislation in the field of economic security with the tasks set by the state in the field of sustainable development. to this end, it is advisable to systematize and codify the regulatory framework, avoiding contradictions contained in legal norms, and establish priorities for legal regulation in the field of economic security (pavlichenko, guzenko, 2020). according to the authors, it is necessary to understand the legal ensuring economic security of the state as a set of normative legal acts and documents that determine the state's priorities, aimed at improving the level of competence and responsibility of state authorities in part of ensuring safe conditions for the functioning of the state's national economy (as a component of national security) by determining the main risks and ways to eliminate them. in the context of the integration of ukraine and the european union, the analysis of the current legal framework shows the increasing role of international legal acts in ensuring economic security, as the role of cooperation between states in the economic sphere baltic journal of economic studies 44 vol. 8 no. 3, 2022 is constantly growing. the stages of historical development of economic relations are directly related to ensuring economic security. the problems of ensuring economic security arose simultaneously with the formation and development of state interests in the economic sphere. the issues of ensuring economic security have been constantly arising at the international level since the adoption of the united nations general assembly resolution (pavlichenko, guzenko, 2020). thus, the regulatory and legal regulation of economic security in ukraine is carried out taking into account the principles and approaches of the international legal community, which actualize / define the integral guidelines of the state aimed at increasing the level of national security of the state within its financial component. 3. features of scientific approaches to the definition of economic security of the state economic security of the state is considered mainly as a component of national security, without which the normal functioning of other state institutions and organizations becomes impossible. scientists note that economic security should be understood as the possibility of developing the state's economy in order to ensure stable socio-economic development and proper protection of the economic interests of citizens, business entities, regions and the state. economic security of the state should be considered from the standpoint of ensuring the protection of vital interests of all people of the state, society in the economic sphere from external and internal threats. economic security is a state of the economy that ensures sufficiently high and stable rates of economic growth, effective satisfaction of economic needs, state control over the movement and use of national resources, protection of economic interests of the state at the national and international levels. economic security involves ensuring the balance of the economic system (pavlichenko, guzenko, 2020). thus, economic security should include such mandatory components as the following : 1) dynamism – a component that determines the systematic positive growth of the state's economy, its worthy place in the world economic activity; 2) predictability – a component that allows to predict the limits of changes in economic indicators, taking into account size and time factors; 3) stability – a component that allows to count on insignificant limits of fluctuations of economic indicators during a certain time period; 4) resourcefulness – a component that allows to effectively meet the economic needs of society and the state. due to administrative and legal regulation, security should be understood as bringing the state policy aimed at creating and maintaining the necessary level of security of the object to adequate security conditions. scientists have determined that, according to the legislation, economic security includes such a state of social relations, which is the subject of legal regulation, in which the behavior of subjects of law complies with the established legal norms, as well as such a state of legislation that does not contradict the requirements of economic security. according to the scientific point of view, economic security as a legal category should be defined as the state of the national economy, which is characterized by the presence of protection against all types of threats resulting from activities to protect the economic interests of the state. in legal form, ensuring economic security should be presented as the activities of state bodies to meet security requirements in order to ensure national economic interests. ensuring economic security can be presented as a legal phenomenon that has a specific nature and is characterized by a multifaceted approach to the interpretation of this phenomenon. the main task of ensuring economic security is to determine the means of providing needs aimed at the status of public interests’ protection (pavlichenko, guzenko, 2020). thus, economic security should be understood as the interaction of state authorities to ensure the conditions necessary to protect the subjects’ national interests of social and economic relations at all levels with the aim of ensuring stable growth of the economic indicator, providing the economic needs of the society and simplifying state control over the use of economic resources. 4. the main corruption risks that may arise in the process of ensuring the economic security of the state as part of the protection of economic security, the most negative risks are criminal risks, the main of which is the risk of corruption. the institution of corruption as a socially dangerous phenomenon today continues to develop steadily, despite the regular legislative work in the field of prevention of illegal activities. a significant step was the strengthening of the limits of criminal liability for corruption, which almost did not give any results. the existence of a corruption risk entails the need to analyze all possible alternatives for the development of economic security (the author's note). depending on the content of the activity and the immediate risk situation, the choice of a solution based on the optimality criterion has a different degree of complexity. therefore, special analysis methods are often used to solve multifactorial economic problems in order to make a rational decision. conducting an objective assessment of baltic journal of economic studies 45 vol. 8 no. 3, 2022 corruption risks is a necessary step in preventing violations of anti-corruption legislation. the assessment provides an opportunity to ensure the compliance of anti-corruption measures with the specifics of the activity and rational use of resources allocated for the implementation of measures to prevent corruption. based on the results of the identification of corruption risks and in accordance with the procedure, their definition and description, classification by categories and types is carried out. corruption risk assessment is a diagnostic tool aimed at identifying weaknesses in the entire system that may create opportunities for corruption offenses. the purpose of identifying and assessing corruption risks is to identify specific business processes and business operations in the activities in which there is a high probability of corruption offenses by persons (zhammal, 2017). committing corruption acts by economic entities entails the violation of a number of processes that are integrated into the substantive essence of the national security of the state. in fact, corruption risk is a multidirec tional phenomenon, which, combining related social relations, can destabilize secondary areas of public administration. it is recommended to assess corruption risks both at the stage of developing an anti-corruption program and regularly after its approval. the process of assessing corruption risks in the activities of business entities includes the following main stages. at the first stage, it is proposed to identify and outline the areas and risks inherent in corruption that will be assessed. they may include the general area, i.e., management of the organization, human resources management, financial management, public procurement, document management, security management of the institution; the area of ethical conduct, that is, conflict of interest, gifts, bribery, whistleblower protection; special area. the latter area may include the specific functions of business entities for which it is established, as well as the identification of sources of risk (regulatory, human and practical (operational) deficiencies). the next stage of the assessment is devoted to the study of the company 's activities through individual business processes and the assessment of these processes for the probability of committing a corruption offense (zhammal, 2017). the development of anti corruption programs should take into account the needs of both economic and legal spheres of state development, forming a symbiosis that can prevent such actions at the stage of formation of a person's criminal interest. overcoming corruption at all levels of government, identifying potential conflicts of interest are among the priorities on the way to improving the level of economic security of the state. thus, the business processes with increased corruption risks include the selection of counterparties, certification of dealers and distributors, opening and closing bank accounts, sponsorship and charity, representation expenses, pricing policy, interaction with government agencies, payments, procurement, sale of non-core or unnecessary property, activities of branches, subsidiaries or joint ventures. for each sub-process related to corruption risks, a description of possible corruption offenses should be drawn up, including: – description of illegal benefits or advantages that may be received by the enterprise or its individual employees as a result of committing a corruption offense; – positions in the enterprise that are "key " for the potential commitment of a corruption offense, that is, whose participation is necessary for the commitment of a corruption offense to become probable; – possible forms of committing corruption offenses. the next stage of corruption risk assessment is to identify persons who implement each specific business process and sub-process, as well as persons who independently monitor the implementation of such processes. in addition, it is necessary to form a list of positions associated with high corruption risks. employees holding such positions may be subject to special requirements in connection with the anti-corruption procedures, for example, conducting a check during the hiring process for previous corruption offenses, regularly filling out a conflict-of-interest form (declaration), establishing requirements for regular reporting on compliance with anti-corruption legislation and on cases of extortion or incitement of an employee to commit corruption offenses (zhammal, 2017). therefore, the main corruption risks that may arise in the process of ensuring the state economic security can be differentiated into the following : 1) risks caused by the presence of discretionary powers of the subjects of the implementation of the national economic security of the state; 2) risks caused by the presence of a conflict of interest in the subjects of the implementation of the national economic security of the state; 3) institutional risks caused by the presence of a number of determinants that contribute to the development of criminal intent to commit a corruption offense; 4) systemic risks caused by the general instability of functioning and other shortcomings of the economic sphere of the state. 5. corruption risk management in the process of ensuring economic security of the state the first step towards the formation of an algorithm for managing corruption risks in the baltic journal of economic studies 46 vol. 8 no. 3, 2022 process of ensuring the economic security of the state is the identification of corruption risk, which allows to assess the environment of functioning of economic entities of the state and their compliance with the principle of non-discrimination. the methods of risk assessment and management include: expert methods based on subjective assessment of expected parameters, the most common of which is the method of expert assessments, the essence of which is to obtain the necessary information about risks based on the processing of expert responses. the advantages are simplicity of calculation, the possibility of using for making effective decisions, which is provided by the experience of specialists and experts. the disadvantage is that risk parameters are set by experts, so they may be mathematically incorrect, their results may not be confirmed experimentally. that is, there is a high level of subjectivity in the assessment by experts. the method of rating or ranking is to take into account the individuality of a particular situation where the choice of a solution is associated with risk. it can be considered as a kind of expert evaluation method by involving experts. this method involves the following elements: a system of evaluation coefficients and, if necessary, a weighting scale of these coefficients; a scale for evaluating the values of the obtained indicators; a methodology for calculating the final rating. the advantages are the availability of certain reference values for comparison, which provide for the calculation of the rating by the method of distances or differences between actual and reference values. when determining the final rating, distances are determined rather than values. the disadvantages are that when using this method, the wrong choice of the benchmark is possible, the evaluation coefficients have limits, all factors are not taken into account, which generally limits its scope and can lead to erroneous results (breus, 2018). thus, when applying these methods of corruption risk management, it is necessary to pay attention to the correctness of the data selected for comparison in order to avoid errors that may complicate the process of countering illegal encroachments on economic security. in the framework of corruption risk management, the checklist method is also relevant, which consists in the use of pre-compiled lists of risks. each of them is given a quantitative assessment and then ranked according to the given value. a sufficient number of risks and the objectivity of determining the numerical value of the weighting coefficients are the main requirements of this method. the advantage of the method is that it can be used to analyze past mistakes. the disadvantages of this method include: the complexity of forming the list and its interpre tation; the possibility of expanding the list may lead to a loss of control over it; the possibility of using it only when identifying risks; it is not an independent method, but only a supplement to other methods (breus, 2018). therefore, the main methods of managing corruption risks in economic activity are as follows: 1) elimination of formalism by expanding/improving the boundaries and ways of interaction of economic entities of the state; 2) prevention of the existence of discretionary powers of economic entities in the state economic sphere; 3) provision of procedural guarantees for individuals and legal entities to influence the development of the state economy; 4) prevention of conflict of interest among subjects of the state economic sphere; 5) carrying out a regular analysis of the possible losses risk; 6) modeling of potentially corrupted situations in the state economic sphere; 7) forecasting the growth of the corruption level and eliminating its determinants by means of criminal law and criminology. 6. conclusions thus, the study allowed to conclude that today the protection of economic security is the main priority of the state, which will contribute to its further development and european integration. as a result of the study, it was possible to establish a clear relationship between the spread of corruption risks and the destabilization of the state economy, which made it possible to determine the importance of creating effective methods and means of managing corruption risks in the process of increasing the level of economic security of the state. the main of them should be legal and criminological, which will prevent the commission of corruption offenses by persons before the implementation of the intention. when creating a corruption risk management algorithm, it is also necessary to take into account the peculiarities of a socially dangerous act, which can be positively influenced by eliminating the determinants that contribute to the spread of corruption as a legal phenomenon. baltic journal of economic studies 47 vol. 8 no. 3, 2022 references: breus, s. (2018). zahrozy ta ryzyky: dotsilnist vykorystannia metodiv otsiniuvannia ryzykiv u protsesi zabezpechennia ekonomichnoi bezpeky zakladiv vyshchoi osvity [threats and risks: the expediency of using risk assessment methods in the process of ensuring the economic security of higher education institutions]. prychornomorski ekonomichni studii, vol. 32. available at: http://bses.in.ua/journals/2018/32_2018/9.pdf zhammal, zh. (2017). shliakhy minimizatsii koruptsiinykh ryzykiv v systemi zabezpechennia ekonomichnoi bezpeky sub’iektiv hospodariuvannia [ways of minimizing corruption risks in the system of ensuring economic security of economic entities]. naukovyi visnyk khersonskoho derzhavnoho universytetu, vol. 27. available at: http://www.ej.kherson.ua/journal/economic_27/1/28.pdf zavora, t. m., & lebedyn, a. h. (2015). metodychni osnovy otsiniuvannia ryzykiv v konteksti zabezpechennia finansovo-ekonomichnoi bezpeky pidpryiemstva [methodological bases of risk assessment in the context of ensuring the financial and economic security of the enterprise]. ekonomika i rehion, vol. 1(50), pp. 80–88. available at: http://nbuv.gov.ua/ujrn/econrig_2015_1_15 litnarovych, r . m. (2009). teoretyko-metodolohichni aspekty i bazovi pryntsypy funktsionuvannia naukovoi shkoly v ramkakh profesiinoi osvity. monohrafiia [theoretical and methodological aspects and basic principles of the functioning of a scientific school within the framework of professional education]. rivne: mehu, 383 p. pavlichenko, ye., & huzenko, o. (2020). normatyvno-pravove rehuliuvannia ekonomichnoi bezpeky ukrainy [regulatory and legal regulation of economic security of ukraine]. pidpryiemnytstvo, hospodarstvo i parvo, vol. 7. available at: http://pgp-journal.kiev.ua/archive/2020/7/30.pdf pro zasady vnutrishnoi i zovnishnoi polityky: zakon ukrainy vid 01.07.2010 r. № 2411-vi [on the principles of domestic and foreign policy: law of ukraine dated july 1, 2010 no. 2411-vi]. vidomosti verkhovnoi rady ukrainy. № 40. available at: https://zakon.rada.gov.ua/laws/show/2411-17#text pro natsionalnu bezpeku ukrainy: zakon ukrainy vid 21 chervnia 2018 roku № 2469-viii [on national security of ukraine: law of ukraine dated june 21, 2018 no. 2469-viii]. available at: https://zakon.rada.gov.ua/laws/ show/2469-19#text pro radu natsionalnoi bezpeky i oborony ukrainy: zakon ukrainy vid 05.03.1998 r. № 183/98-vr [about the council of national security and defense of ukraine: law of ukraine dated 05.03.1998 no. 183/98-vr]. available at: https://zakon.rada.gov.ua/laws/show/183/98-vr#text received on: 5th of august, 2022 accepted on: 16th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 18 vol. 3, no. 2, 2017 managing economic effectiveness of marketing in transnational companies oksana bulkot1, lidia pashchuk2 taras shevchenko national university of kyiv, ukraine abstract. the purpose. the purpose of the study is a generalization of international experience with regard to marketing efficiency control and development of qualitative and quantitative methods to be implemented in the estimation of marketing activity of tncs. methodology. the survey is based on research, conducted for 60 companies in the spring of 2015 (32% of which were ukrainian and 68% – offices and affiliates of international companies), namely bayer, coca-cola, pepsi co, mondelez, mars, mintel, cargill, and many others. the practical results of monitoring the effectiveness of annual plans of named companies done by authors through implementing original author’ methodology based on presenting key performance indicators (kpi). results. the theoretical approaches to the estimation of marketing efficiency are analysed. the conditions, under which the organization is working by analysing external environment and internal company’s potential, are determined. it is substantiated by the authors that direct development of marketing plans should be based on marketing objectives, developed as a result of the situational analysis. it is proved that monitoring the effectiveness of annual plans may be done by implementing key performance indicators that enable to develop quantitative evaluation system of the organization’s strategy, based on control of its goals. the results of the research allowed authors to distinguish two major groups of effectiveness indicators for tncs, which are financial and marketing indicators. in this standpoint, financial indicators are divided into costs’, productivity and profitability indicators and to the marketing effectiveness indicators belong market indexes, competitiveness indexes, and client’s indicators. practical implications. the proposed methodology can be implemented for the qualitative and quantitative estimation of marketing effectiveness not only in tncs but in small and medium business companies as well. value/originality. the authors proved that marketing effectiveness indicators provide a weighty addition to traditional indicators of financial stability estimation of tncs. key words: management of company’s effectiveness, economical effectiveness, transnational company, marketing management. jel classification: m310, m11, m19 1. introduction marketing plays an important role in international companies as means of achieving commercial success in the process of attracting consumers; however, the efficiency of marketing efforts is often being ignored. considering crisis conditions, the problem of economic advisability and efficiency evaluation of marketing are becoming of particular importance in the economies of different countries and transnational companies’ activities since marketing function can be perceived at the corporate level as consuming and as non-profitable. it is extremely important to develop a unified approach towards the evaluation of marketing efficiency and control in the companies, working in multiple countries. therefore, development and generalization of current approaches toward the marketing efficiency control are extremely relevant. formulation of objectives. search for theoretical approaches and development of practical recommendations regarding implementation of marketing control in international companies on all marketing stages. the purpose of the study. the purpose of the study is the generalization of international experience with regard to marketing efficiency control. 2. literature review g. armstrong, p. kotler, w. kennet, j.-e. mason all relate to famous scientists in the marketing sphere that raised in their works the issue of marketing complex and evaluation of marketing efficiency. in ukraine, works of the following scientists are devoted to the issue of marketing efficiency: l. balabanova, a. balabanyts, a. dlihach, y. mytrokhina, y. romat, r . kanayan, corresponding author: 1 department of international economics and marketing, taras shevchenko national university of kyiv. e-mail: o.bulkot@gmail.com 2 department of international economics and marketing, taras shevchenko national university of kyiv. e-mail: lidia_paschuk@yahoo.com baltic journal of economic studies 19 vol. 3, no. 2, 2017 o. kanishchenko, m. kotliarenko, a. starostina, b. ivanchenko, and others. the problem of control over marketing efficiency has not received a proper attention; therefore, it needs further research and recommendations development for ukrainian market. unsolved parts of the problem. nowadays, most of the international studies on the mentioned topic can be used in developed and developing countries. however, the issue of unified systematic approach towards the efficiency control in different countries in different areas still remains open. moreover, considering political instability of ukraine’s economy, internal factors need to be objectively taken into account since they can influence the selection of consumer behaviour management’s methods. 3. research key points marketing is one of the key functions in any company that ensures satisfaction of economic needs of market relations’ parties (kotler, armstrong, 1997), namely consumers’ needs in terms of profitability (haldane, 2009). first of all, marketing is management function. p. kotler suggests considering management based on apic approach where a stands for analysis, p – for planning, i – for implementation, and c – for control (kotler, 1988). the systematic and logical approach is meant here. first of all, we need to determine conditions, under which the organization is working by analysing the external environment and internal company’s potential. the results of the conducted marketing audit should be summarized in swot-analysis. the next stage is the direct development of marketing plans based on marketing objectives, developed as a result of the situational analysis. developed plans fall under the implementation during the next stage, evaluation of implementation efficiency and analysis of management mistakes are the final stage. herewith marketing within the organization should be cyclic and control results should be taken into account for further marketing planning, as illustrated in fig. 1 taken into account the fact that marketing can be characterized by cyclical nature, it is worth mentioning that control plays an important role in marketing since it provides a basis for further decision-making. reaching results is only possible if problematic spheres of organization’s activities are detected timely. therefore, regular and systematic control is extremely necessary. moreover, a majority of transnational companies, namely, bayer, coca-cola, pepsi co, mondelez, mars, mintel, cargill, and many others, have a unified approach that verification of developed plans implementation and achieved results needs to be made once a year. the results of research, conducted for 60 companies in the spring of 2015 (32% of which were ukrainian and 68% – offices and affiliates of international companies) demonstrated that in the majority of companies (85%), a control over marketing performance is applied, however, with no single approach. companies’ or affiliates’ managers in cooperation with marketing specialists are responsible for control. also, it is worth mentioning that 80% of ukrainian companies need assistance in conducting control because they do not have their own understanding of how to conduct the process of control over marketing activities. however, 96% of foreign companies use globally accepted approaches and consider them successful and those that contribute to further success for the company and brands. summarizing a positive experience of domestic and foreign companies, the major types of analysis planning implementation control − marketing audit: analysis of external and internal marketing environment − swot-analysis − marketing purposes development − designing marketing strategies − marketing complex modification − marketing and competitive strategies implementation − development of key performance indicators − marketing performance measurement fig. 1. apic – marketing management activities basis source: designed by the authors based on (kotler, 1988) baltic journal of economic studies 20 vol. 3, no. 2, 2017 marketing control that can be used by organizations can be distinguished. these types are: controlling of annual plans, sales control, control of marketing objectives, monitoring performance, and strategic control. at fig. 2 below, the objectives of each type of control, as well as responsibilities and objectives of control based on p. kotler work, and the results of research conducted by the author, are summarized. monitoring the effectiveness of annual plans may be done by implementing key performance indicators (kpi). such indicators enable to develop quantitative evaluation system of the organization’s strategy, based on control of its goals. key performance indicators can be quantitative and qualitative. quantitative will have a numerical value and quality will mainly relate to brand or company attitude and perception of consumers and key stakeholders. the majority of companies (78%) that have been surveyed, agreed with the expediency of development of key performance indicators based on marketing objectives, as shown in table 1. the next type of marketing control that should be considered is marketing control of profitability. determination of income that derived from marketing activities is rather controversial and not all marketers are able to define it. determination of the effectiveness of marketing is one of the most difficult elements of marketing activity. according to the business dictionary, effectiveness means “the degree to which objectives are achieved and the extent to which targeted problems are solved.” in contrast to efficiency, effectiveness is determined without reference to costs. the costs arising from the implementation and development of marketing activities are fairly easy to calculate but measurement of the implementation effect seems to be impossible sometimes. this is due to the fact that marketing activity annual plans control senior management, middle-level managers planned results in sales, market share, cost, sales and analysis of the plans profitability control financial department, invited or internal marketing inspector determining the use of funds, profitability by product, territories, segments of the market, and distribution channels performance monitoring functional managers, marketers, marketing inspector determining the use of funds, profitability by product, territories, segments of the market, distribution channels strategic control senior management, invited marketing auditor find out if the company uses every opportunity in market and distribution channel fig. 2. types and purposes of marketing control source: designed by the authors based on (kotler, 1988) table 1 development kpis of marketing activities marketing goal kpi control method success failure to gain the 60% level of brand awareness (45% in 2014) sportswear for mountain climbing classes for men and women 20-45 years old that live in kiev during 2015. 60% brand awareness among men and women 20-45 years living in kiev and involved climbing poll representative sample 60±2% less than 60% increase the number of corporate customers at more than 15 cleaning companies in september 2015 15 new customers internal reporting 15 companies less than 15 increase sales of face cream at ukrainian market at 5% (from x tons in 2014) by the end of 2015 sales volume in tonnes internal reporting х tons +5% less than х tons +5% launch new cookies and ensure sales of 10,000 packages for 2015 in ukraine. sales volume in packages internal reporting 10,000 packages and more less than 10000 packages source: designed by the authors based on own research baltic journal of economic studies 21 vol. 3, no. 2, 2017 involves two groups of achieving goals: market return, financial payback. based on the research results, the authors decided to consider two major groups of effectiveness indicators for tncs, which are financial and marketing indicators. financial indicators encompass tree main groups: (1) costs’ indicators (cost-price of goods, marketing costs, current costs); (2) productivity indicators (stocks goods turnover, sales per worker, and bills receivables); (3) profitability indicators (sales profitability, assets profitability, and investments profitability). marketing effectiveness indicators provide a weighty addition to traditional indicators of financial stability estimation of tncs. they allow marketing managers to understand and monitor the effectiveness of the market and to manage it with the help of marketing strategy (kaplan, norton, 1992). the marketing effectiveness indicators are divided into three subgroups: (1) market indexes (market expansion factors, market share, market demand potential); (2) competitiveness indexes (quality of goods and services, relative price, and value); (3) client’s indicators (client’s satisfaction, saving client’s maintenance and loyalty) (chen, hess, 1999). as we can see, indicators of marketing effectiveness can be internal, i.e. refer to the internal environment of the company, and external, i.e. refer to the external environment of the company. in turn, the internal and external indicators are divided into current – ever-changing indicators – that require continuous monitoring that is often carried out with the help of marketing information system, and final – indicators that are used as marketing objectives of the company and are estimated, as a rule, on the basis of quarter, year. that is why we can affirm that the main aim of implementation of marketing indicators is the current estimation of its efficiency. and as a lot of its indexes anticipate the financial result of tnc’s activity, that group of indicators is of the high importance for achieving that result. we can define four main methods of estimation of marketing efficiency: 1. sociological methods of evaluating the effectiveness of marketing tools aimed at the use of applied sociology – a program of sociological research and, according to it, the conduct of the study. moreover, evaluation of the effectiveness of marketing communications is focused on the use of the tools of applied sociology. 2. scoring methods for evaluating the effectiveness of marketing “isolate” its effectiveness for each action to comply with eligibility criteria of the list of structures and processes of marketing concepts with setting a score for each criterion. 3. qualitative methods involve the use of marketing audit, during which performed a comprehensive analysis of the external environment of the organization, as well as all threats and opportunities. it is possible to distinguish two areas of marketing control: resultsoriented marketing control, and marketing audits, i.e. analysis of the qualitative aspects of the tnc. 4. quantitative methods of estimation of the marketing effectiveness require comparing the costs of marketing with the resulting gross margin and advertising costs to sales. actually, they characterize the final financial results of the tnc. because of the tight interrelation between the effectiveness of marketing and the final financial result of tnc’s activity, the quantitative methods of estimation of the marketing effectiveness now became very popular and applied. that is why further we will focus our attention on analysing different types of quantitative methods for the estimation of the marketing effectiveness in tncs. thereof, the main seven groups of quantitative methods in marketing research could be proposed for applied use: 1. multivariate methods (primarily factor and cluster analysis). they are used to support marketing decisions, which are based on many interrelated variables. for example, the determination of the volume of sales of a new product depending on the technical level, price, advertising costs, and other elements of the marketing mix. 2. regression and correlation models. used to establish the relationship between groups of variables, describing marketing activities. 3. simulation methods. they are used when the variables affecting a marketing situation (for example, describing the competition) are not amenable to analytical solution. 4. methods of statistical decision theory. used to describe the stochastic response of consumers to changes in the market situation. 5. deterministic models of operations research (primarily linear and nonlinear programming). these methods are used when there are many interrelated variables, and it is necessary to find the optimal solution, for example, a variant of delivery of the product to the consumer, ensuring the maximum profit, one of the possible channels of goods allocation. 6. hybrid methods, combining deterministic and probabilistic (stochastic) characteristics. they are used primarily to study distribution problems. 7. models of network planning. of course, the quantitative methods are not exhausted only by named above seven groups. the marketing effectiveness of tnc impacts also macro and micro environmental factors, as well as direct marketing mix (“4p”). in applied use, we can demonstrate those linkages through the interrelation of the sales revenue and sales volume of tnc. baltic journal of economic studies 22 vol. 3, no. 2, 2017 to determine the marketing effectiveness in tnc, it is necessary while developing a marketing plan to define the criteria, accordingly to which there will be the measurement of the implementation of the marketing plan (monitoring results of marketing activities). defining expenses related to the marketing (estimation of costs for marketing budget) and the marketing effectiveness indicator itself is determined by comparing the effect achieved as a result of marketing activities (which is often but not necessarily expressed in the form of profits or revenue) to the costs caused by this effect. to determine the marketing effectiveness, it is also necessary to determine the effect (result) of this activity. the economic effect of marketing can be expressed in figures: an increase in sales (in value and volume terms), an increase in income from sales of products, increase market share of a particular company. using the quantitative method of estimation of marketing effectiveness results by constructing a mathematical model, we can assess the cost-effectiveness of marketing activities. in general, the formula for calculating the efficiency is as follows: e=b⁄c (1) where e – efficiency; b – benefit; c – cost. through such an equation, we can express the effect of marketing in tnc: me =∆p(m)⁄c(m) (2) where me – marketing effectiveness; δ p(m) – an increase in profit due to the marketing event; c(m) – expenditures for the marketing event. it worth to be said that under the effect of marketing in tnc, there can be understood its goal, expressed quantitatively. but in practice, the set of marketing purposes range of different activities have different goals. so we think it would be better to choose one main indicator, and through it to calculate the efficiency of each event. for example, the effectiveness of marketing costs could be estimated using the rates of return on invested capital (sometimes – working capital), which is calculated by the following formula: pic=(nr⁄s)×( s⁄ci) (3) where pic – profit on invested capital; nr – net return; s – sales; ci – invested capital. in this aspect, the methodology of complex estimation of tnc’s competitive range by estimation of marketing measures effectiveness seems for us very interesting. analysis of managing the marketing effectiveness in tnc is advisable to be based on the calculation of the dynamics indicators that characterize profitability of the commercial activity of tnc and its competitiveness: – the proportion of income from commercial activities of the tnc; – the volume of shipped products; – the volume of demand for the company 's products (market size); – costs of marketing service; – the coefficient of competitiveness of tnc (sudnik, 2004). profitability of commercial activities of tnc is advisable to carry out by determining the coefficient of competitiveness that is represented as aggregated amount of the following groups of coefficients: product competitiveness, price competitiveness, promotion competitiveness, distribution/sales competitiveness (it should be mentioned that each group includes subgroups of coefficients to be calculated). to calculate the final coefficient of competitiveness of tnc, it also needs to be taken into account the overall financial ratios, calculated on the basis of the analysis of the balance and financial statements of tnc. the ratio of mentioned coefficient allows defining the type/position of tnc in the market that is divided into market leaders, market contenders, market followers, market nichers, bankrupts (sudnik, 2004). nevertheless, the implementation of quantitative methods for the estimation of marketing effectiveness is limited for the following reasons: – the complexity of the object of study, the nonlinearity of the marketing process, the presence of threshold effects, such as a minimum level of sales promotion, time lags (e.g., consumer response to advertising is often not carried out immediately); – the effect of the interaction of marketing variables that for the most part are interdependent, such as price, range, quality, production volume; – the complexity of the measurement of marketing problems; difficult to measure consumer reaction to certain stimuli, such as advertising, so there are often used indirect methods of assessment; – instability of marketing linkages, due to changes in tastes, habits, assessments et al., the incompatibility of personnel involved in the marketing and use of quantitative methods in its assessment. first priority is given to informal methods, second – to mathematical modelling. the above it is largely due to the fact that the marketing deal with human behaviour, and not to technical phenomena. 4. conclusion the implementation of marketing plans of the tnc in practice may have many unforeseen circumstances. that is why one of the tasks of the marketing department is the ongoing assessment of the economic efficiency baltic journal of economic studies 23 vol. 3, no. 2, 2017 of marketing in the tnc. the timely and qualitative assessment of the results of marketing activities undertaken by the tnc influences its position in the market and future development. estimation of economic efficiency of marketing is an essential part of the control of marketing. marketing control is an assessment of progress in the implementation of marketing strategies and plans and the implementation of corrective actions to achieve their goals. estimation of economic efficiency of marketing activities is very important, especially at the stage of decision-making on specific activities. this raises the question about the procedures of determining the effectiveness of marketing activities at the planning stage. implementation of marketing activities will be certainly accompanied by certain financial investments. it is from the standpoint of the effectiveness of these investments are often assessed the effectiveness of marketing. the tnc shall estimate the profitability of transactions (in relation to certain categories of consumers, distribution channels etc.). this information will identify the need for expansion or contraction of markets, assortment, marketing activities. the research showed that the problem of determining the economic efficiency of marketing activity has two objectives: 1. the efficiency of marketing activities under development or decision; selection of the optimal variant. 2. determination of the ultimate effectiveness of marketing activities after the end of a period of time based on actual results. determining the cost-effectiveness of marketing activities, it is also necessary to identify the factors that influence the rate of efficiency of marketing activity, their interdependence, if it is the nature of their impact on the efficiency index, identify the reserves increase efficiency. evaluating the effectiveness of marketing activities is very challenging, and not always given the opportunity to quantify the effect produced by marketing activities. there are a lot of others, not described above approaches for the estimation of the marketing efficiency and their applicability in tncs that could give new impulses for researching these issues. references: haldane, g. (2009). professional diploma in marketing. study text. project management in marketing. london : bpp learning media, aldine place, 218 p. kotler, p., armstrong, g., saunders, j. and wong, v. (2005), principles of marketing: fourth european edition, prentice hall, harlow, 954 p. kotler, p. and armstrong, g. (1997) marketing an introduction. fourth edition. new jersey. prentice hall international, 585 p. kotler, p., (1988) marketing management: analysis planning and control, prentice-hall, 776 p. kaplan, r ., and norton, d. (1992).the balanced scorecard — measures that drive performance, harvard business review ( january-february 1992), 71–79. chen, y., hess, j., wilcox, r ., and zhang, z. j. (1999). accounting profits versus marketing profits: a relevant metric for category management. marketing science, 18, no. 3, 208–229. sudnik, v. (2004) estimation of marketing efficiency of the enterprise. guide for economist, №8, marketing (in rus.) оксана булкот, лидия пащук управление экономической эффективностью маркетинга в транснацио нальных компаниях аннотация. целью работы является обобщение международного опыта оценивания эффективности маркетингового контроля, а также разработка качественных и количественных моделей системы контроля маркетинга в деятельности транснациональных корпораций. методология. исследование является результатом авторского изучения и анализа 60 компаний, произведенного весной 2015 (32% из которых украинские, и 68% – филии и дочерние предприятия иностранных транснациональных корпораций), а именно bayer, coca-cola, pepsi co, mondelez, mars, mintel, cargill и прочие. практические результаты анализа эффективности годовых отчетов упомянутых выше компаний, обобщены путем использования авторской методики, которая базируется на применении ключевых результативных индикаторов к анализу эффективности деятельности тнк. результаты. анализируются теоретические подходы к оценке эффективности маркетинга. определяются условия, в которых организация работает, анализируя внешнюю среду и потенциал внутренней компании. авторами обосновано, что прямая разработка маркетинговых планов должна основываться на маркетинговых целях, разработанных в результате ситуационного анализа. доказано, что мониторинг эффективности годовых планов может быть осуществлен путем внедрения ключевых показателей эффективности, которые позволят разработать количественную систему оценки baltic journal of economic studies 24 vol. 3, no. 2, 2017 стратегии организации, основанную на контроле ее целей. результаты исследования позволили авторам выделить две основные группы показателей эффективности для тнк – финансовые, которые делятся на показатели затрат, производительности и рентабельности и маркетинговые, к которым относятся рыночные индексы, индексы конкурентоспособности и клиентские показатели. практическое значение. предложенная авторами методика может быть практически применена для качественного и количественного оценивания эффективности маркетинговой деятельности не только в крупных тнк, но и на предприятиях малого и среднего бизнеса. значение/оригинальность. авторское исследование подтвердило гипотезу, что использование специфических индикативных показателей для оценивания эффективность маркетинговой деятельности обеспечивает существенный непосредственный эффект, который влияет на оценку и конечную финансовую результативность деятельности тнк. baltic journal of economic studies 77 vol. 2, no. 3, 2016 corresponding author: 1 department of taxation and insurance, national university of life and environmental sciences of ukraine. e-mail: elena.lemishko@gmail.com improving the mechanism of preferential lending to agricultural enterprises of ukraine elena lemishko1 national university of life and environmental sciences of ukraine, ukraine abstract. basic tools of the mechanism of preferential lending to agricultural enterprises of ukraine are considered in the article. the analysis of state and dynamics of lending to agricultural enterprises for the period 2001–2014 are done. the accent of attention on the need of state regulation intensification of the formation of an effective mechanism of preferential crediting to agricultural enterprises is marked. methods. in the article are used tabular, graphical and statistical methods for economic research. information base of research are legislative and legal acts, which regulate activity of agricultural enterprises, report data from the ministry of agrarian policy and food of ukraine, the annual report of the national bank of ukraine, the state statistics service of ukraine, taxed financial statements of agricultural enterprises, the results of own research. results. in the process of research, it was found that effectiveness of crediting, primarily, determined by the validity of credit policy, effectiveness of the key factors of credit mechanism and macro-financial stability of the state. it is found that the mechanism of preferential lending to agricultural enterprises in ukraine was not optimized and perfected at the appropriate level throughout the study period, the volume of direct support to agricultural production, which is also preferential loans to agricultural enterprises, were insufficient. practical meaning. it is proved that improve of the mechanism of preferential lending to agricultural enterprises should be based on optimizing the needs of the state, borrowers (subjects of the agricultural sector), lenders (banks and non-bank institutions) and financial market regulators. value/originality. ways to improve the mechanism of preferential lending to agricultural enterprises by creating appropriate institutional framework to support agro-industrial complex, intensification of cooperation of agricultural enterprises and banking institutions to solve mutual interests, ordering a credit quality for agricultural enterprises and through improving the legal component of the preferential lending mechanism is provided. it is stated in conclusions that there is need for further research of these problems. key words: mechanism of preferential lending, agricultural enterprises, banks, organizational and legal part of the loan mechanism, macro-financial stability of the state, lending efficiency. jel classification: g210, g320, h810, q140 1. introduction agricultural dialogue between ukraine and the eu on cooperation was initiated in 2006. it is still extremely important to expand access of ukrainian agricultural producers through the future association agreement and a free trade zone with the eu market. but ukraine's aspiration for integration into the european union should be based on the development of measures and mechanisms for sustainable development of agriculture sectors, increasing agricultural production and adaptation of its quality to international standards (as the main factor of competitive ability), which requires additional investment of material and financial assets. a significant source of financial assets and financial resources is credit support. however, considering that in fact the agricultural sector is resource intensive sphere, which, moreover, is characterized by considerable duration of the production cycle and a significant period of funds rotation, there is an urgent need to allocate stable sources of resources defined to ensure the production cycle on qualified, high technology level (popov, 2012). the source of such resources is a bank lending, whose stability can be achieved by implementation of an effective mechanism of financial support of agricultural enterprises by the state through the use of preferential lending. 2. state and dynamics of preferential lending to agricultural enterprises of ukraine effectiveness of agricultural enterprises in western europe and the us are caused by symbiosis of commercial crediting institutions (commercial banks, associations, credit unions, insurance companies, etc.) and balanced system of state financial support of the agricultural economics sector. free access of farmers to sources of baltic journal of economic studies 78 vol. 2, no. 3, 2016 capital, specifically, to credit resources, furthers apparent progress in providing economic interests of subjects of agricultural sector of leading countries. the objective availability of high needs of loans by farmers in ukraine (compared to other sectors of the economy) is not fully covered by imperfect credit facilities and high cost of credit resources. search for the trends of cheaper loans defined partial compensation of interest rates due to the budget as the main tool for effective financial and credit mechanism to support the agricultural sector of ukraine. since 2000, ukraine has implemented a state program to support the income of agricultural enterprises through compensation from the state budget of interest rates on loans of commercial banks obtained by agricultural producers. agricultural enterprises have acquired the right to freely choose the lending bank, which agreed to provide a loan under the passport of banking products and terms of compensation from the state budget of a part of interest rates on of commercial banks’ loans. in 2001 the state compensated commercial lending rates at the rate of 70% discount rate of the national bank of ukraine. state support for credit support of agricultural sector significantly increased the interest of banking to agriculture; the flow of credit from commercial banks to agricultural producers has increased significantly, which positively affected the efficiency of agricultural production. analysis of state and dynamics of lending to agricultural enterprises (table 1) shows that during 2001– 2014 there is a constant growth of rates of loans to the agricultural sector of ukraine – from 5.9 to 14.7 bln. uah. however, this trend was volatile and should be divided into the following three periods: 2001–2008, 2009– 2012, 2013–2014. first period of 2001-2008 is characterized by economic transformations, creation of market principles of functioning and development of the state economy and the agricultural sector in particular. gradually increased the gross output of agricultural sector, which was a result of ownership change with the organizational restructuring of enterprises, formation of new rural organizational and legal structures of market type (because of the principles of agrarian reform realization, which, in particular, was adopted on 03.12.1999 by decree of the president of ukraine "on urgent measures to accelerate reform of agricultural sector"). positive dynamics of profitability was accompanied by an increase in the efficiency of agricultural production, increased the level of financial stability and creditworthiness of agricultural enterprises. the cooperation of banks and agricultural sector has been strengthening, and using the budget as an effective tool of financial and credit support mechanism made possible to obtain preferential loans of 15.1 bln. uah to the agricultural sector in 2008, which exceeded the level of 2001 in 5,4 times. in 2009 the world economy was in a state of recession, which prevented the creation of a post-crisis ukraine basis for sustainable economic recovery. the period of 2009– 2012 for ukraine's economy in general and the agricultural sector, in particular, can be described as a slow economic recovery after the financial crisis of 2008, increasing the table 1 state of lending to agricultural enterprises of ukraine for 2001–2014 bln. uah indicators year 2001 2005 2008 2009 2010 2011 2012 2013 2014 volume of loans – total 5,9 10,4 20,1 6,7 10,1 14,9 13,5 16,2 14,7 among them: short-term 5,6 6,6 10,3 4,9 7,0 10,3 9,6 9,9 10,8 including specific weight, % 94,9 63,5 51,3 73,2 69,3 69,1 71,1 61,1 73,5 medium-term 0,3 3,8 6,5 1,2 1,4 2,8 2,3 3,1 2,2 including specific weight, % 5,1 36,5 32,3 17,9 13,9 18,8 17,1 19,2 14,9 long-term 3,3 0,6 1,7 1,8 1,6 3,2 1,7 including specific weight, % 16,4 8,9 16,8 12,1 11,8 19,7 11,6 received preferential loans – total: 2,8 7,6 15,1 2,6 6,2 4,1 1,3 1,1 1,4 among them: short-term 2,8 4,8 9,1 2,3 4,5 3,3 0,8 0,6 0,9 including specific weight, % 100,0 63,2 60,3 88,5 72,6 80,5 61,5 54,5 64,3 medium-term 2,8 3,7 0,2 0,6 0,7 0,4 0,4 0,3 including specific weight, % 36,8 24,5 7,7 9,7 17,1 30,8 36,4 21,4 long-term 2,3 0,1 1,1 0,1 0,1 0,1 0,2 including specific weight, % 15,2 3,8 17,7 2,4 7,7 9,1 14,3 transitive preferential loans 6,1 12,8 6,5 6,7 9,8 4,1 6,1 funds in state budget for cheaper loans 0,1 0,4 1,3 1,1 0,6 0,6 0,4 0,2 0,3 in fact compensated by state budget 0,1 0,4 1,1 0,4 0,6 0,6 0,3 0,1 0,2 number of enterprises which involved loans (units) 5 024 13 044 9 409 2 231 2 238 2 668 2 603 3 142 2 547 source: calculated by the author according to the ministry of agriculture and food baltic journal of economic studies 79 vol. 2, no. 3, 2016 role of credit mechanism in the lending system of economic agents, and increasing the productivity of using credit resources as capital of enterprises. despite the depressed trend in industry (industrial output fell by 21.9% in 2009 compared to 2008) and construction (amount of work is declined by 48.2%), slowing credit growth annualized in these sectors of economy was significantly slower pace than in agriculture, where production did not decrease over the previous year. unfortunately, the downward dynamics of lending was the most fleeting thing in the agrarian sector, if in the previous period (2001-2008) annual lending increased; in 2009 they decreased almost 3 times on the level of 2008 and amounted to 6.7 bln. uah. this trend has been due to the increased requirements for loans against the background of reducing the creditworthiness of farmers and low investment agricultural sector. deceleration of inflation in the country had been moderated and the effect transfer from the devaluation of hryvnia to catastrophic prices had been created (in 5.8 times) reduced government funding of credit programs of agricultural sector. besides, if while the period of 2001–2008 the amount provided in the state budget for compensation of interest rates were fully spent, in 2009 their actual payment was only 36%. as a result – the number of enterprises that attracted loans in the current year decreased 4 times (to 2,231 units) and for the entire study period, including 2014, never reached the level of 2008 (9408 units) and kept at the level of 2009. at the beginning of 2012 ukraine was not yet capable for real anti-crisis stability in the global environment and independent of global trends of development. thus, a significant openness of the national economy and subordination of the leading sectors (including agriculture) to foreign market, against the background of high-level crisis expectations, renovation of recession trends in some european countries and slowdown of the global economy during the year, significantly influenced the decline in economic growth of our country. the volume of preferential lending to agricultural enterprises of ukraine in 2012 (1.3 bln. uah) was only a tenth of the total volume of loans. the third phase (2013–2014) for ukraine is characterized as stage deployment of political and another economic crisis: increasing of debt financing, growing budget deficits, no recovery of main capital, import growth prevailed in exports and factor of not payback of investment costs in euro 2012 were the main crisis factors of 2013. however, it should be emphasized that the increase in financial support to farmers by banking sector was one of the main factors of sustainable dynamic development of agriculture in 2013: 19.3% increase in the volume of loans (to 16.2 bln. uah) granted by banks to business management in agriculture (against 6.9% in 2012); 13.7% increase in the volume of agricultural production (to it reduce 4.5% in 2012) to 308.1 bln. uah; it has been received 1.1 bln. uah of preferential loans. 2014 was a breaking point for political and economic changes in our country and simultaneously launched the most serious test for ukrainian society. the credit activity of banks collapsed in 2014 that influenced the following factors: firstly, the political tension in the country; secondly, the reduction of state funding, a significant reduction of the solvency and creditworthiness of borrowers, reducing the resource and the deposit base of banks; thirdly, significant destabilizing fluctuations of hryvnia to foreign currencies. against the background of decline of basic industries of ukraine (9.6% per year), only the agricultural industry increased production and export of its products and finished 2014 with a gain, which amounted to 2.8% per year. in the context of forced (through external aggression against ukraine) closing up of foreign economic activity, decline in exports of goods and services by 14.6% in 2014 was marked by a revolutionary event, which had a positive impact on ease of complex macroeconomic situation in ukraine and its significant improvement in agriculture sector, particularly: 23 april of 2014 as effective date for ukraine of unilateral cancellation fees regime with the eu, which liberalized access, primarily of agricultural products of ukraine to european markets. the dynamics of lending to agriculture in 2014 was determined by the general state vector of credit facility: the volume of loans to agricultural enterprises in 2014 totalled 14.7 bln. uah, preferential loans – 1.4 bln. uah. 3. efficiency of lending to agricultural enterprises of ukraine to maintain revenue of agricultural enterprises of interest rates by loans to commercial banks obtained by agricultural producers were compensated by the state budget. for the period of 2001  – 2014 interest rates that were compensated to state agricultural enterprises at preferential loans in ukraine, average 9.5% (fig. 1). active providers of credits to agribusinesses at the end of 2014 became the following banks: pjsc "credit agricole bank", pjsc "procredit bank", ojsc "alfa-bank", ojsc "raiffeisen bank aval", pjsc "ukrsotsbank» (unicredit bank), pjsc "ukrsibbank", pjsc "privatbank", ojsc "state savings bank of ukraine" (oshchadbank). according to various estimates, the share of bank lending in ukraine occupies less than 20% of working capital of agrarian sector, while in developed countries it is 70%; rate on loans to agriculture at the end of february 2016 was 19.8%, exceeding the average interest rate on loans to the economy (16.4%) (danylyshyn, 2016). efficiency of lending is primarily determined by the validity of credit policy, effectiveness of key factors of credit mechanism and macro-financial stability of the state. considering that in 2014 in ukraine political crisis led to financial, economic and banking crisis during 2014 and next 2015, access to lending to agricultural enterprises had been limited. also, accumulated in previous years, macroeconomic imbalances destabilized financial base and negatively influenced the state budget. that is why, the amount of budgetary funds on financial support to measures in the agrarian sector through cheaper loans for 2015 and baltic journal of economic studies 80 vol. 2, no. 3, 2016 2016 remains at almost 2014 level (by the law on the state budget of ukraine for 2016 provided for the event 300  mln. uah, in 2015 actual budget of funding in this area amounted to 290.6 mln. uah). however, it should be emphasized that ukraine is on the one of the last places among european countries on the total support of the agricultural sector: the figure in the european union in 2013-2014 was nearly 60 bln. euros annually, which is about 525 euros/ha or 20% of gross agricultural output, while in ukraine this figure poised between 10-20 euros/ha (danylyshyn, 2016). gross output per unit of credit resources invested in the agricultural sector is characterized by a steady decline of this indicator during the study period (from 99.05 to 4.54  uah of the value of the produced gross output for 1 uah of credit resources) (table 2). research of lending efficiency of agricultural enterprises (net profit) showed better effectiveness: dynamics of growth of this indicator was positive, which impact exceeding the growth rate of net income of agricultural enterprises on the rate of growth in bank lending. thus, in 2014 hryvnia for each credit received 1.46 uah net profits. the effectiveness of state support of agricultural enterprises’ credit support characterizes by coefficient of multiplier that shows the ratio of issued preferential loans to the amount of compensation for interest rate from the budget; its highest value (54.8%) was in 2012, the lowest – in 2011 (6.7%). to further analysis of the impact of the budget funds allocated to reduce the cost of loans to the volume of preferential lending to agricultural enterprises is used anna isayan’s method that proves the hypothesis about linear dependence of lending of the amount of budgetary funds (isayan, 2013, p.69). according to this method, the rate of effectiveness of each budget hryvnia spent on cheaper loans is calculated as the ratio of annual volume of preferential lending to the budget. the average value of this indicator over the period 2001  – 2014 is, according to our calculations, 10,17 uah, but the volatility is quite high: if in 2001 every hryvnia allocated from the state budget provided to obtain credit facilities in the amount of 28.0 uah, in 2014 –total – 4,7 uah. thus, the mechanism of preferential lending to agricultural enterprises of ukraine was not optimized and perfected at the appropriate level throughout the study period, the volume of direct support to agricultural production, which, including preferential loans are agricultural enterprises, were insufficient. among the reasons for this negative situation must be specified the following: chronic budget deficit and imperfect legal framework of procedures for preferential loans; financing of state programs to support the agricultural sector is a residual; banks typically provide funding only to those agricultural enterprises that have more than 100 hectares of land, smaller companies are unable to obtain loans and preferential financing. we believe that the mechanism of preferential lending to agricultural enterprises, firstly, has no clear targeting of channelling funds and exclude counter cash flows; secondly, the absence of guarantee of stability at the national level and predictability of agricultural policy leads to unjustified change of the preferential lending support mechanism almost every year; thirdly, by intervention of the administrative factor to budget allocation have been cases of corruption, which caused the 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 interest rates, compensated by state on preferential lending, annual interest average interest rates of banks for credit use in national currency, % fig. 1. relative indicators of state of lending to agricultural enterprises of ukraine source: calculated by the author according to the ministry of agriculture and food, the bulletin of the national bank of ukraine table 2 efficiency of lending to agricultural enterprises of ukraine for 2001–2014 indicators year 2001 2005 2008 2009 2010 2011 2012 2013 2014 indicators of lending efficiency loan return 99,05 21,93 7,0 7,61 7,34 6,85 6,12 5,81 4,54 lending efficiency 0,12 0,34 0,29 1,13 1,71 1,70 1,98 0,92 1,46 indicators of efficiency of state support of lending to agricultural enterprises share of preferential loans to total loans, % 47,5 73,1 75,1 38,8 61,4 27,5 9,6 6,8 9,5 coefficient of multiplier 20,8 18,4 14,8 6,8 9,9 6,7 54,8 15,7 23,3 efficiency of budget funds, spent on cheaper loans1 28,0 19,0 11,6 2,4 10,3 6,8 3,25 5,5 4,7 source: calculated by the author according to the ministry of agriculture and food, the bulletin of the national bank of ukraine 1 calculated by the method of anna isayan baltic journal of economic studies 81 vol. 2, no. 3, 2016 efficiency of key factors of agricultural producers’ support mechanism to nothing. 4. conclusions the mechanism of preferential lending to agricultural enterprises still remains today the main tool for increasing the availability of credit resources to the agricultural sector. we believe that improving the mechanism of preferential lending to agricultural enterprises should be based on optimizing the needs of the state, borrowers (of the agricultural sector of economy), lenders (banks and non-bank institutions) and financial market regulators. to improve the mechanism of preferential lending to agricultural enterprises we propose the following: first, an institutional framework to support agriculture must be created, namely, banks (and perhaps non-bank institutions) with industry specialization in service of agricultural enterprises and required state share of property. considering that the implementation of this proposal into practice requires global finance and fairly long period of time, we propose in the near future to create in banks, which currently have a positive experience of cooperation with farmers, separate units to address the key financial issues related to the agricultural sector of economy. the cogent condition for this should be constructive cooperation of bank employees and specialists of agricultural sector for the most thorough account of the specific characteristics of the industry and in the performance of lending procedures. second, help of agrarians in accession of banks' resources base: cooperation of agricultural enterprises and banking institutions should be based on solving mutual interest, in particular, considering that external problems of 2014 still negatively affects the resource base of banks (as evidenced by the analysis of liabilities of the banking system of ukraine), a comprehensive program to attract cash balances of enterprises of agrarian sphere on deposit banks’ accounts must be developed. in this case, we consider it appropriate to provide the status of special assistance in obtaining loans by those entities of agriculture that have deposit accounts in this bank. third, systematization of credit quality for agricultural enterprises: clear continuous periodization of the agricultural production process, the slow circulation of capital required to attract credit resources for long periods, that is, long-term lending. but considering that agricultural sector refers to the high-risk area (through natural factors that are closely associated with the process of reproduction in agriculture and natural phenomena), there is an increased risk for banking institutions to delayed repayment or failure to return the loan. we believe that in this case, partial mechanism (not less than 50%) must be fully involved or optimally full state guarantee of the repayment of long-term loans for agricultural enterprises. fourth  – to improve the legal component of the mechanism of preferential loans and, again, given that agriculture is a high risk (there is the risk of delayed repayment or loan default) requires banking institutions, which will apply to the national bank of ukraine to refunding, allow agricultural enterprises, which of objective circumstances are unable to timely repay the loan on short-term credits, by short term attraction to extend the credits no less than for one year, and on long-term (five years) – not less than for two years. furthermore, there is a need to optimize the procedure for obtaining preferential lending procedure; today for reimbursement of the interest on the loan farmer must provide a competitive commission up to15 documents that greatly complicates the entire organizational cycle of getting preferential loans. an important condition for intensification of bank lending to the agricultural sector is cooperation between ukraine and the eu member states to exchange of experience on stage associated membership in the eu, including through the introduction of a system of agricultural subsidies and preferential loans to support production, improve competitiveness and efficiency of agricultural production. considering that today in ukraine there is a need to limit public deficits and synthetic cuts in public spending on recovery programs and economic development, the introduction of subsidies and preferential loans, including in agriculture, to expand the range of credit sources, depending on the creditworthiness of the borrower, increase agricultural cooperation with market financing. it is especially emphasized that the mechanism of preferential lending is only a tool for achieving the strategic goal – the formation of creditworthy, competitive, financially sustainable, profitable borrower – the entity of agrarian sector of ukraine. references danylyshyn, b. new state support of agroindustrial complex  – way to nowhere. retrieved from: http://economics.lb.ua/state/2016/04/07/332278_nova_derzhavna_pidtrimka.html. decree of the president of ukraine (1999). on urgent measures to accelerate reform of agricultural sector. golos ukrayiny. 227 (7 dec). ministry of agrarian policy and food of ukraine. retrieved from: http://minagro.gov.ua/ national bank of ukraine (2014). bulletin, 1. national bank of ukraine. official website. retrieved from: http://bank.gov.ua oliynyk, o.o. (2014). financial and credit system of the agricultural sector of ukraine’s economy: theory, methodology, practice. kyiv: pc «komprint». popov, v.m. (2012). modern features of financial security of agriculture. scientific efforts of kirovograd national technical university. economics, 22 (2), 163–169. baltic journal of economic studies 82 vol. 2, no. 3, 2016 isayan, a.m. (2013). preferential lending of enterprises of agroindustrial complex: theory and practice. journal of university of banking of national bank of ukraine, 1(16), 66-70. r core team. (2014). r: a language and environment for statistical computing. vienna, austria: author. siudek t. (2010). polish cooperative banking sector in the face of systemic transformation and european integration in agriculture. czech. state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua елена лемишко совершенствование механизма льготного кредитования аграрных предприятий украины аннотация. в статье рассмотрены основные инструменты механизма льготного кредитования аграрных предприятий украины. проведен анализ состояния и динамики кредитования аграрных предприятий за период 2001–2014 рр. акцентировано внимание на необходимости активизации государственного регулирования формирования эффективного механизма льготного кредитования аграрных предприятий. методика. в статье использовались табличный, графический и статистический методы экономических исследований. информационную базу исследования составляют законодательные и нормативноправовые акты, регулирующие деятельность аграрных предприятий, отчетные данные министерства аграрной политики и продовольствия украины, годового отчета национального банка украины, государственной службы статистики украины, данные финансовой отчетности сельскохозяйственных предприятий, результаты собственных исследований. результаты. в процессе проведенных исследований было выявлено, что эффективность кредитования, в первую очередь, определяется обоснованностью кредитной политики, действенностью рычагов кредитного механизма и макрофинансовой стабильностью государства. было установлено, что механизм льготного кредитования аграрных предприятий украины не было оптимизировано и отработано на должном уровне на протяжении всего исследуемого периода, объемы прямой поддержки сельскохозяйственного производства, которым, в том числе является льготное кредитование аграрных предприятий, оказались недостаточными. практическое значение. доказано, что усовершенствование механизма льготного кредитования аграрных предприятий должно базироваться на оптимизации потребностей государства, заемщиков (субъектов аграрного сектора экономики), кредиторов (банковских и небанковских институтов) и регуляторов финансового рынка. значение/оригинальность. предложены пути совершенствования механизма льготного кредитования аграрных предприятий на основе создания соответствующей институциональной основы для поддержки агропромышленного комплекса, активизации сотрудничества аграрных предприятий и банковских учреждений для решения взаимных интересов, систематизации качества кредитов для аграрных предприятий, а также на основе улучшения организационно-правовой составляющей механизма льготного кредитования. в итоге констатируется, что существует необходимость дальнейших исследований в области выявленных проблем. baltic journal of economic studies 127 vol. 8 no. 2, 2022 1 scientific "institute for modernization of educational content"; state higher educational institution kyiv national economic university named after vadym hetman, ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 state higher educational institution kyiv national economic university named after vadym hetman, ukraine e-mail: vivayoung70@gmail.com orcid: https://orcid.org/0000-0002-0938-400x 3 state scientific institution "institute for modernization of educational content", ukraine e-mail: 1spartak@ukr.net orcid: https://orcid.org/0000-0003-0117-294х doi: https://doi.org/10.30525/2256-0742/2022-8-2-127-136 digital transformations of education policy yurii safonov1, vira usyk2, ievgen bazhenkov3 abstract. the relevance of the digitalization process for policymaking is increasing every year, and it is the covid-19 coronavirus pandemic that has highlighted the need for digital transformation, especially in education. governments around the world are trying to minimize the negative effects of the covid-19 pandemic and the forced transition to online learning. the global ambition to establish a continuous educational process. the digitalization process has its advantages and disadvantages, the process is scalable, and the field of education and policymaking covers virtually the entire population. the object of the study is the process of digital transformation of educational policy. the purpose of the study is to analyze and justify the directions of digitalization, modeling policy in education and science in ukraine and abroad. the organization for economic cooperation and development of the european union pays special attention to the digitalization of education. this process is being transformed through reflection in documents, policies, strategies, and more. the focus areas are the development and implementation of national digital skills strategies and the formation of national digital skills and digital jobs coalitions, according to the european union digital skills and jobs coalition. in ukraine, the development of digital skills of the population is one of the government's priorities in the process of digital transformation and is crucial for efficiency, stimulating the economy, creating jobs, and ensuring social progress. over the past 5 years, several important documents have been adopted, projects and programs have been implemented to accelerate the digitalization process, and institutions responsible for the efficiency of digitalization have been created. today, the main stakeholders in the implementation and implementation of the process of digitalization of educational policy are the ministry of education and science of ukraine and the ministry of digital transformation of ukraine – these are the founders and reformers in the formation of relevant programs, new directions in the education system, which are aimed at improving the digital literacy of the population. key words: digitalization, education, public policy, digital transformation, digital skills. jel classification: i28, h75 1. introduction "digital transformation of education and science is the formation of an ecosystem of digital solutions, including the creation of a secure electronic educational environment, providing the necessary digital infrastructure of institutions, increasing digital competence, digital transformation of processes and services, and automation of data collection and analysis" (information of the ministry of education and science of ukraine, digital transformation of education and science). digitalization, particularly the policymaking process, has been around for a long time, but it was the covid-19 coronavirus pandemic that sharpened and highlighted the importance of digital transformation, especially in educational settings. governments have sought to mitigate the effects of the shift to online learning and promote educational continuity for all. the progress of digital technologies in recent decades has led to significant changes in the economy, society, ways of performing daily activities (institute for government, 2020). policy options are developed mostly in institutions, usually with limited public consultation, and with superficial monitoring and evaluation of the impact of policies after implementation. outdated in the digital age, the model does baltic journal of economic studies 128 vol. 8 no. 2, 2022 not justify high policy effectiveness. the use of new tools and technologies in politics is effective through the implementation of digitalization. digitalization has three main directions: 1. knowledge and people management. digital technology improves politicians' access to up-to-date information, cooperation at all levels. 2. data analysis. information and technology seeks to positively transform policymakers to understand issues, as well as empower them to test options, evaluate outcomes, and assess impact. 3. external engagement. more communication facilitates the use of knowledge and expertise outside of government, for validity and reliability, and increases the level of cooperation between government and other actors in society. digital technologies have unlimited potential for policymakers to effectively manage knowledge and improve interactions; fully analyze problems and possible solutions; and interact with external actors to model public opinion and harness the "collective intelligence" of society. the policy development process must adapt quickly so as not to slow down technological change, ethics, confidentiality, etc. remain important issues. digital transformation is the biggest driver of productivity growth in the public sector, which means that citizens have wide access to efficient and highquality public services. automated decision-making systems, software, artificial intelligence or machine learning, data-driven policies, increased cooperation and integration can improve the efficiency of the entire system (tomovska, 2021). digital transformation involves the gradual automation of public services and internal processes, as well as the digitization of resources (warsaw digital transformation policy, 2020). the object of the study is the process of digital transformation of educational policy. the main purpose of the study is to analyze and justify the directions of digitalization, modeling policy in education and science in ukraine and abroad. the following general and special methods and approaches were used in the article: – morphological analysis – when clarifying the conceptual and categorical apparatus of the study; – system-structural approach – in the study of theoretical and methodological foundations of digital transformation of policy in education; – methods of observation – in the study of methodological approaches to provide analysis and justification of the directions of digitalization, modeling policy in education and science in ukraine and abroad; – comparative analysis to compare processes, objects, phenomena, identifying the common and the special, studying the causes of change, identifying trends in the digital transformation of educational policy. 2. literature review issues of digitization of policy development are presented by many researchers. in research work "smart governance through bigdata: digital transformation of public agencies" (sarker, et al., 2018) noted, that using volumetric information for intelligent management in the public sector can increase the efficiency and speed of public service delivery by increasing public sector transparency and reducing societal problems. the authors believe that the implementation of volumetric information for intelligent management plays an important role in the timely, error-free, appropriate and costeffective delivery of services to citizens, leading to the sustainable economic development of the country. research results of "digital transformation challenges: strategies emerging from a multi stakeholder approach" (brunetti, et al., 2020) emphasize that digital transformation consists of three main pillars: 1. "culture, education and skills". 2. "infrastructure and technology ". 3. "ecosystems" (availability of strategies, cooperation and collaboration of different stakeholders, quality of life, etc.). this study confirms that individual measures are not sufficient to overcome the digital transformation from a systemic point of view. moreover, the study emphasizes that digital transformation depends on the participation and potential contributions of all categories of stakeholders. this conclusion is confirmed by researchers in "co-production in the digital transformation of public administration and public value creation: the case of denmark", it is about the effectiveness of cooperation, with a particular emphasis on the need for co-financing of digital policy transformation. the financing scheme for the digital transformation of public policy in denmark was created with the help of the government, which provided the initial funds, and gradually the budgets were replenished by the financial resources of all parties involved. thus, public authorities at all levels of government are responsible for digitalization. as an example, the creation of broadband communication, which aims to reach the population with broadband at the national level. the implementation of this policy is co-financed by central, regional and municipal governments (authorities) (ada, et al., 2022). on digital government transformation in the european union "shaping digital government transformation in the eu" (2020) notes that covid-19 revealed the unpreparedness of society to meet the challenges, but also confirmed the potential for real digital transformation of the public sector. thus, the digital transformation of government is a dynamic, non-linear process, which in the short and baltic journal of economic studies 129 vol. 8 no. 2, 2022 medium term can increase rather than decrease the cost of public administration. after the launch of new services, programs, projects in the country, there is a need for new investments and new iterations for improvement. the authors emphasize that legitimacy and trust are extremely important in the digitalization process. given the positive effects of using technology to deliver public services and improve government efficiency, questions of trust and legitimacy arise. analyzing the results of the study, we confirm the thesis that legitimacy and trust are important prerequisites for the process of digitalization, the digital transformation of governance systems and policymaking mechanisms. the thesis of an active civil society is relevant when using new technologies, but civic isolation and reduced political participation is a notable trend in developed democracies, because it is impossible to change through information and communication technologies – based on decisions or public data. 3. generalization of the main statements 3.1. modeling education and science policy abroad digital technologies have changed the way people interact, work, and learn (shaping digital government transformation in the eu, 2020). before the covid-19 crisis, the education sector was somewhat resistant to widespread digital transformation for a number of reasons: lack of funding, absence of technology and technological solutions; lack of ongoing technological support and quality additional education for teachers; negative attitudes toward technology, caused by inexperience or negative experiences with technology; concerns about increased screen time and its health implications; concerns about the possible influence of technology companies on curriculum and educational policy; the need to focus on student-centered education, distance learning reduces the level of control teachers have over applicants and the learning process, increases applicants' responsibility for their learning, which requires a new approach to teaching (azorín, reimer, schleiche, 2020). the complete shift to online activities during covid-19 is especially pronounced in institutions of higher education. the transition to digital education for higher education institutions has confirmed the possibility of ensuring continuity of activities, as well as changes in the educational process, digitization of technology, the direction of efficiency to improve quality. developed countries pay special attention to the digitalization of education and policy. the hungarian government pays special attention to the digitalization of higher education, which is reflected in national strategies, including the digital education strategy and the medium-term higher education strategy (2016–2030). strategies position digitalization as a key factor in the development of a modern, competitive and attractive higher education system. the hungarian government is investing in digital infrastructure, especially in expanding access to high-speed internet. higher education institutions, staff, and applicants make the most of digital methods, but gaps remain in access to appropriate digital infrastructure and equipment (oecd, 2021). in estonia, since the restoration of independence in 1991, the digital transformation of all state processes has played a key role (kushpit, balashov, 2021). today, estonia is one of the most digitalized countries in the world: the country ranks third in the world according to the e-government 2020 index, and first according to the e-participation index. the national education system has a special role to play in such a massive digital transformation, including the responsibility to prepare society for digitalization by teaching citizens the principles of digital literacy. according to the latest pisa study in 2018, in addition to its high digitalization scores, the state has the highest quality of secondary education in europe; among countries in the world, estonian students are second only to students in china and singapore. however, digitalization is not only the focus of education, but also a tool for its improvement. this is reflected in the introduction of information technology both in educational processes and in the mechanisms of state regulation of education. an important stage in the development of education in the country is the introduction of ehis – estonian educational information system, created in 2005 on the initiative and with the assistance of the ministry of education and science of the republic of estonia. ehis is an electronic database containing information about the education system, managed, financed by the state and owned by the ministry of education and research of the republic of estonia. the main purpose of the ehis is to systematize factual data for easy use by the ministry of education and research of the republic of estonia and other executive authorities and local governments. the information contained in the ehis is used in the formation of educational policy and management decisions (monitoring funding, quality control of education, calculation of allocations to municipalities and public educational institutions, calculation of budgets by municipalities of secondary schools, planning the development of the school network, etc.). data from the system can be accessed by service agencies and researchers from the organization for economic cooperation and development and eurostat, who can be granted extended access to detailed information for research purposes at the request of the ministry of education and research of the republic of estonia. some of the ehis information is in the public domain. the public can access the data baltic journal of economic studies 130 vol. 8 no. 2, 2022 through educational eye, a publicly available online platform containing data on all aspects of education covered by the ehis. the public has access to information about the number of students, teachers, researchers, and scholars. "education eye" contains detailed information about every school in estonia. the introduction of digital technology in the education system not only improves management efficiency, but also creates additional mechanisms to improve the quality of secondary education, and allows the introduction of other forms of learning, such as distance learning. even before the covid-19 pandemic, most estonian schoolchildren were using digital tools on a daily basis and their teachers had a high level of digital literacy. the development of digital skills and the necessary it infrastructure for distance learning has been a national priority of the republic of estonia for many years. that is why estonian schools were able to adapt quickly and efficiently to the changes during the pandemic. in ireland (oecd), 2021, the government developed 32 digital learning standards, including digital tools to improve teaching and learning, leadership, and governance. schools choose a standard and develop a clear digital learning plan. in wales, the government began providing free, centralized, universal access to digital tools and resources back in 2012. the government created the hwb platform with over 2,800 educational resources from a wide range of providers (ngos, media organizations, museums, etc.) that can be used both in and out of the classroom by students and faculty. a government pilot project was created to study the need for resources for higher education institutions. with the onset of the covid-19 coronavirus pandemic, hwb has become a reference platform for distance learning and student support, as it also includes, for example, guidance on digital literacy, security, and pedagogy. 3.2. modeling education and science policy in ukraine in ukraine, in december 2016, a project entitled "digital agenda – 2020" was created and presented, (chamber of commerce and industry of ukraine, 2016) which identified the main areas of digitalization as public administration and education. in particular, it is said that "world experience confirms that significant economic effect as well as increased transparency and efficiency of public institutions can be achieved through the unification and standardi zation of business processes, as well as the outsourcing of non-core business functions". the project notes that the "digital economy " and the rapid spread of "digital" technologies make digital skills (competencies) relevant to citizens among other skills. “leadership of ukrainian politicians and state profile institutions in this area, creation and coordination of initiatives, provision of resources – are a sign of active policy in the industry. "digital" literacy (or "digital" competence) is recognized by the european union as one of the 8 key competences for a full life and work. the authors of the project emphasized that the sphere of "digital" skills and competencies in ukraine is developing piecemeal, chaotic, and separate from academic (so-called formal) education. outdated teaching methods, lack of teaching standards, trained teachers, and the unavailability of digital technologies for the educational process have led to extremely low levels of digital literacy in all existing segments of the state education system (preschool, primary, secondary, higher) … today there is no state initiative, program, strategic document, vision aimed at creating a comprehensive national system for the development of digital literacy. this component is present in some legislation, but it is not properly implemented... the key solution is a combined strategy, in which there are long-term measures and scale inherent in the public education system, and short-term rapid measures, which are more relevant for implementation in the segment of commercial education". in 2018, the government approved the concept and action plan for the development of the digital economy and society of ukraine for 2018–2020 (the verkhovna rada of ukraine, 2018). digital trans-formation in ukraine has been identified as a priority policy. recognitions in the implementation of prozorro and e-health systems, in the introduction of 4g mobile coverage and the launch of electronic services in the public and private sectors are recognized among the european expert community (polissya foundation for international and regional studies, 2020). in 2019, the ukrainian government presented a rather ambitious plan for the development of the country 's digital economy, which provides for accelerated development to convert the ukrainian economy to digital format. the ministry of digital transformation sets priority goals until 2024. the first steps included passing a legislative framework for basic digital rights for citizens, including the right to access broadband internet, making technology more affordable for consumers to reduce the cost of software, computers, and other equipment. the concept states that "sectors of the economy that use digital technology develop faster, cheaper and better. areas of life such as education, medicine and transportation, which are modernized through digital technologies, become much more efficient and create new value and quality ". the concept focuses on the digitalization of public administration, various baltic journal of economic studies 131 vol. 8 no. 2, 2022 spheres, including education. "increasing the level and quality of knowledge, the formation of modern skills and competencies, the ability to obtain information, learn foreign languages, individual programs of study, preparation for the professions of the future – this is the main task of education reform in a competitive country and society. digital technologies modernize the learning process, mobilize, differentiate, and individualize. the formation of a sound national policy of digitalization of education as a priority part of education reform is a priority ". the main stakeholders that currently implement and realize the process of digitalization of educational policy are the ministry of education and science of ukraine and the ministry of digital transformation of ukraine. they play a decisive role in shaping the relevant curricula and shaping new trends in the education system aimed at improving digital literacy of the population. the development of digital skills of the population of ukraine is now identified as one of the govern ment's priorities in the process of digital transformation, which is crucial for increasing the efficiency and stimulation of the economy, creating jobs and ensuring social progress in ukraine. the law of ukraine "on education" recognizes information and communication competence as one of the key competencies necessary for every modern person for successful life. one of the tools is the digital literacy platform "diia: digital education". the goal of the project is to teach digital literacy to 6 million ukrainians in 3 years. the project includes an online component – a platform for free online digital literacy courses, and an offline component – a network of partner hubs of digital education, where one can get access to the internet and digital gadgets. currently, hubs are being created based on libraries and youth centers. in addition to the project "diia. digital education" launched and implemented a number of initiatives aimed at developing this area (polissya foundation for international and regional studies, 2020). 1. smb hub ukraine (2020) – free and interactive online learning center for small and medium enterprises. the project was launched by the ministry of digital transformation of ukraine together with facebook. the training program was developed by facebook experts and covers the topics of effective presentation of business projects online, brand building in social networks, building relationships with clients, creating content using free mobile applications. the platform covers a range of videos and writing to help entrepreneurs in a time of digital transformation. 2. "university of entrepreneurship" (2020), covers the discipline "innovative entrepreneurship and startup project management", which is integrated into the bachelor's or master's degree program and introduced in 76 universities of ukraine. the goal of the initiative is to create universities with a strong business culture and startup infrastructure. the program is implemented by the network of startup incubators yep together with the ministry of digital transformation of ukraine, the ministry of education and science of ukraine, the ukrainian startup fund, with the support of the usaid program "competitive economy of ukraine". 3. it-nation educational program (2020), aimed at increasing the number of qualified it specialists in the eastern region of ukraine. the program was implemented under a memorandum between the ministry of digital transformation of ukraine and the global compact network in ukraine with the support of the united states agency for international development within the usaid project "economic support for eastern ukraine". 4. in the context of developing digital competencies of the it industry, the ministry of digital transformation of ukraine, the state employment center, the it ukraine association, and the it academy have launched a pilot project in kyiv – the pathfinder test (official website of the state employment service, 2021). its goal is to help choose a profession in a promising field. based on the user's information, the pathfinder artificial intelligence chooses the most suitable profession from the list of current it directions (earlier, the project developers collected information on what specialists ukrainian it companies need). at the second stage, project participants must pass a second test, which determines the general abilities and potential of candidates. based on the results of the second test, candidates who will be able to study at the it academies participating in the project are determined. the training must be paid for by the state employment center. 3.3. digital transformations of education policy in european union in the context of cooperation with ukraine "digital" literacy (or "digital" competence) is recognized by the eu as one of the 8 key competences for a full life and activity. in 2016, the eu introduced an updated digital competence framework (eu science hub. digcomp 2.0), consisting of the main 5 blocks of competencies containing 21 competencies, namely: – information literacy and data literacy; – communication and interaction; – digital content; – security; – problem solving. eu policy on digital skills development in the eastern partnership countries (armenia, azerbaijan, belarus, georgia, moldova, ukraine) is reflected in the joint working document "eastern baltic journal of economic studies 132 vol. 8 no. 2, 2022 partnership – 20 expected achievements by 2020: focusing on key priorities and real outcomes", developed by the european union in december 2016 and updated in june 2017. the document proposed another attempt to define development vectors that would be based on the real progress of reforms and democratic transformations in the partner countries, supported by the european union. among the goals set until 2020 for the harmonization of digital markets related to digital skills, the following were highlighted: – formulation and implementation of national strategies for digital skills (in line with similar strategies of the european union); – formation of national coalitions for digital skills and creation of digital jobs based on the coalition for digital skills and jobs of the european union. these steps have already been partially implemented in ukraine: the coalition of digital transformation (which focuses more on the full range of areas of development of the digital market in ukraine) and began work on the development of the concept of digital competencies in ukraine for 2020–2027. at the beginning of 2021, the directorate of digital transformation was created in the ministry of education and science of ukraine, which is responsible for policy making in this area. in 2021, the following steps were planned to implement the digital transformation of public policy in the field of education (ministry of education and science of ukraine, 2021): – approve the concept of digital transformation of education and science of ukraine; – provide participants in the educational process with electronic educational resources; – create conditions for professional development of pedagogical staff of educational institutions in information and digital competence; – ensure the functioning of the software and hardware complex "automated information complex of educational management" (pjsc "aicom"); – launch an information system for the management of vocational (technical) education (emis); – modernize the unified state electronic database on education (edebo); – create an online platform for communication between participants in the innovation process ("science and business"); – launch of the selfie project in pilot schools and vocational education institutions – a platform for educational institutions to self-assess the state of their digital readiness; – join the process of creating and building the european open science cloud (eosc); – improve and fill the content of the platform "all-ukrainian school online". 3.4. the concept of digital transformation of education and science in ukraine the concept of digital transformation of education and science in ukraine until 2026 was published in may 2021. the draft states that "the creation of a single digital environment uniting all subjects of educational and scientific activities, providing a space for communication and data exchange, wll significantly reduce the bureaucratic burden on the education and science system and simplify management processes. the education and science system must undergo radical digital changes and comply with global trends in digital development in order to successfully realize the potential of every individual. more and more professions require a high level of digital skills and mastery of new technologies. this need is exacerbated by the effects of the covid-19 coronavirus pandemic, which has exacerbated the challenge of developing and adopting technology in the education system to ensure the rights of citizens to a quality education. acquisition of digital competencies is becoming a basic need for everyone, so the ukrainian education system should ensure the formation of digital com-petencies of students, teachers and scientificpeda-gogical workers, the development of digital infra-structure, electronic services in educational insti tutions in general. the implementation of the concept enables the digital transformation of educational institutions in which teaching and research staff, as well as students, have digital competencies, are equipped with digital, modern workplaces, and have access to digital content for personal development, lifelong learning. the formation and implementation of public policy, in particular the distribution of state security, is based on real personal data, which will be centralized and protected. scientists will have access to research infrastructures, fair access to competitive funding". the concept contains 2 areas "effective use of digital technologies in the educational process" and "optimization of management, regulation and monitoring processes", which, respectively, have 3 and 2 strategic goals: 1. digital educational environment is accessible and modern. 2. education workers have digital competencies. 3. the content of education in the field of ict meets modern requirements. 4. services and processes in the field of education and science are transparent, convenient and efficient. 5. data in the field of education and science are accessible and reliable. the concept contains both proposed and planned ways to achieve the goals. proposals for the project have been sent by several different institutions and stakeholders, and it has been submitted for further work, but this concept has not yet been adopted. baltic journal of economic studies 133 vol. 8 no. 2, 2022 in 2021, the ministry of education and science of ukraine, the ministry of digital transformation of ukraine with the support of the swiss-ukrainian project decide, the international renaissance foundation, and unicef created a web platform for distance and blended learning "all-ukrainian school online". it consists of video lessons, notes, and test assignments for students in grades 5-11. in 2022 the ministry of education and science of ukraine together with the ministry of digital transformation of ukraine and the pension fund of ukraine for the first time monitored the employment of graduates of higher and vocational higher education. monitoring is carried out by establishing information exchange between the unified state electronic database on education and the state register of compulsory state social insurance. an accessible list of digital projects in education and science is available on the website of the ministry of education and science of ukraine. in particular, 1) selfie (self-reflection on effective learning by fostering the use of innovative educational technologies) is a free, easy-to-use online tool for self-assessment of educational institutions, aimed at helping to assess the effectiveness of innovative digital technologies in education process, to find out at what stage of digital development is the educational institution; 2) all-ukrainian online school is a web platform for distance and blended learning of students and methodological support for teachers; 3) unified state electronic database on education (hereinafter – edebo) – an automated system, the functions of which are the collection, verification, processing, storage and protection of information about the education system; 4) software and hardware complex "automated information complex of educational management" (pjsc "aicom") – emis class system (education management information system, electronic education management system), which is a modernized system diso, designed to process state electronic information resources and personal data in the field of education within a single integrated environment; 5) the national electronic scientific information system (uris) (hereinafter – the system) was to become a center for combining data on the results of professional scientific and scientific-technical activities of ukrainian scientific institutions, institutions of higher education and directly scientists; 6) unified interdepartmental information system (unified system) on the recruitment of foreign entrants to higher education institutions of ukraine. 4. discussion the widespread digitalization of education during the covid-19 crisis confirmed that at this scale, the process poses a number of significant risks, including unequal access to education due to the digital divide; differences in applicant skills and available support systems; the limited resources available to educational institutions in general and educators in particular to provide a quality distance learning process; the readiness of educational institutions and educators to move to an entrant-oriented learning process, which is the foundation of distance learning; the standardization of curricula and the potential influence of technology companies on education; security risks, such as data breaches, copyright, grades, etc. however, the digitalization of education also has undeniable benefits: the ability to individualize the learning experience, the ability to develop independent learning and digital skills, providing access to learning when it would not be possible, etc. (rubene, et al., 2021). for education and science digitalization policy to be effective, it is necessary to create a systematic mechanism for monitoring and evaluating data on digitalization in educational institutions, and to form a digitalization strategy and other regulatory documents on digitalization in education. data collection is extremely important for policymakers to improve the quality and accessibility of educational services. in the uk (oecd, 2021), information about the use of digital tools for teaching and learning during the pandemic was collected and analyzed to create a ten-year strategy for higher education based on digital technologies. this digital quality roadmap is based on the experiences of thousands of faculties and alumni. it can be used to develop a common understanding of how digital technologies are used in higher education, respectively, to help inform the digital education strategies of institutions (maguire, et al., 2020). in ireland, the national forum for the improvement of teaching and learning, supported by government and public funding, developed a national survey on the digital experience in higher education, with the active participation of higher education stakeholders in the design and implementation of the survey. more than 30,000 responses were collected from students, faculty, librarians, and other stakeholders. the infor mation from the survey provided a common understanding of the needs and challenges and formed the basis for the development of a shared vision for digital higher education by state agencies and all higher education stakeholders (national forum on improving teaching and learning in higher education, 2020). it is important to strengthen the financial base for digitalization of education and create a strong digital infrastructure. the spread of information and digital technologies leads to qualitative changes in all important areas, baltic journal of economic studies 134 vol. 8 no. 2, 2022 including education and science. in order to maximize the potential of information and digital technologies, it is necessary to clearly formulate the tasks of developing digital solutions and services, to adapt technological support to the tasks of the participants in the educational process – scientists, scientific and pedagogical workers, administrative staff, applicants and others. the digital transformation of education and science in this direction should provide a coordinated solution of all key tasks (kilchenko and shynenko, 2021). researchers believe that the digitalization of education depends on the objective conditions and current trends in the information society, which include the following (bykov et al., 2020): – development of artificial intelligence, machine learning, artificial neural networks; – ensuring the mobility of information and communication activities of users in the information space, further development of mobile-oriented tools and ict access to electronic data; – maximum introduction of blockchain and cryptocurrencies technologies; – development of cloud computing and virtualization, private, public and hybrid clouds, ict infrastructures, fog computing technology; – development of telemedicine; – development of new functions of added reality and availability of equipment for virtual reality and devices of mixed reality; – widespread introduction of chat bots and virtual assistants; – accumulation and processing of significant amounts of digital data, formation and use of electronic information databases and systems (big data, data mining, data bases), in particular, electronic libraries, repositories and scientmetric data bases; – development of characteristics of internet of people (ior) users, deployment of broadband communication channels, systems of formation of ict spaces of wireless access of users to electronic data (cordless access to digital data, wifi, bluetooth, cellular networks); – formation of the internet of things (iot), development of its software and hardware, including micro-processor and integration platforms, to ensure the configuration, management and monitoring of electronic devices using modern telecommunications technologies; – development of robotics, robotic systems, in particular, 3d printers and 3d scanners; – development of the software development industry, in particular the publication of electronic educational resources; – ensuring the compatibility of ict tools and ict applications created on different software and hardware platforms; – development of market of ict outsourcers, primarily cloud services, and the computing center network; – development of data security and counteraction of cybercriminality. 5. conclusions the digital transformation of education involves the formation of a systematic approach to the creation and implementation of educational policy, involving experts both in education and from among it specialists, as well as students, teachers, and management personnel. the effectiveness of digital transformation can be tested through three main approaches – the availability of appropriate digital technologies and public policies that support 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(2018). smart governance through bigdata: digital transformation of public agencies. international conference on artificial intelligence and big data (icaibd), 62-70. shaping digital government transformation in the eu (2020). available at: https://joinup.ec.europa.eu/sites/ default/files/document/2020-10/jrc_policy_brief_digigov.pdf social network facebook. vebinar "diznaitesia, yak zmitsnyty svoiu kompaniiu" [webinar "learn how to strengthen your company "]. available at: https://www.facebook.com/business/boost/webinars-online-learning https://itnationhacks2020.com/ (in ukrainian) the verkhovna rada of ukraine (2018). rozporiadzhennia kabinetu ministriv ukrainy vid 17 sichnia 2018 r. № 67-r "pro skhvalennia kontseptsii rozvytku tsyfrovoi ekonomiky ta suspilstva ukrainy na 2018–2020 roky baltic journal of economic studies 136 vol. 8 no. 2, 2022 ta zatverdzhennia planu zakhodiv shchodo yii realizatsii [order of the cabinet of ministers of ukraine of january 17, 2018 № 67-r "on approval of the concept of development of the digital economy and society of ukraine for 2018-2020 and approval of the action plan for its implementation]. available at: https://zakon.rada.gov.ua/laws/show/67-2018-%d1%80#text (in ukrainian) tomovska, m. a. (2021). the future of government: serbia’s growing bet on digital transformation pays off. available at: https://blogs.worldbank.org/governance/future-government-serbias-growing-bet-digitaltransformation-pays tsyfrova transformatsiia osvity i nauky [digital transformation of education and science]. ministry of education and science of ukraine. available at: https://mon.gov.ua/ua/tag/cifrova-transformaciya-osviti-ta-nauki (in ukrainian) warsaw digital transformation policy (2020). available at: https://um.warszawa.pl/documents/56602/ 25543090/warsaw-digital-transformation-policy+%282%29.docx/d6fe726c-a8c0-bf9f-02e7-830354a4e62 b?t=1624627319823 yep! pidpryiemnytskyi universytet [entrepreneurship university]. available at: http://www.yepworld.org/ ua/uni/ (in ukrainian) baltic journal of economic studies 36 vol. 8 no. 1, 2022 corresponding author: 1 taras shevchenko national university of kyiv, ukraine e-mail: serhii.horbliuk@gmail.com orcid: https://orcid.org/0000-0002-5031-2497 2 simon kuznets kharkiv national university of economics, ukraine e-mail: olehbrovko@gmail.com orcid: https://orcid.org/0000-0001-9186-4194 3 ivan franko national university of lviv, ukraine e-mail: solomiya.kudyn@lnu.edu.ua orcid: https://orcid.org/0000-0002-0411-4000 doi: https://doi.org/10.30525/2256-0742/2022-8-1-36-42 approaches to the revitalization of degraded industrial zones in cities of ukraine serhii horbliuk1, oleh brovko2, solomiya kudyn3 abstract. the subject of the study is organizational and economic relations arising in the process of revitalization of degraded industrial zones in ukraine. the cities face the problems of the degradation of territories caused by the decline of facilities of the local economy, low living standards and low level of residents’ social capital, social exclusion, migration of economically active population, unsatisfactory environmental conditions, etc. methodology. the study used a set of general scientific and specialized methods that are based on interdisciplinary and systematic approaches. the research envisaged a semantic analysis of the content of the key regulatory and legal acts in the field of the state regional policy of ukraine, as well as urban strategic planning. in the course of the study the following methods were also used: selective observation, analogy, comparative analysis, expert assessments to identify the features of the implementation of projects on the revitalization of degraded industrial zones in the cities of ukraine; abstract-logical, grouping, generalization to reveal the main characteristics of revitalization of degraded industrial zones in ukraine. purpose of the study is to identify strategic priorities, focus areas and targets of the policy on the revitalization of degraded industrial zones on the basis of analysis of the existing projects in the cities of ukraine. results of the study. by relying on the analysis of the development strategies of the ukrainian cities of regional significance, the following revitalization directions are established: degraded industrial zones; parks, recreation zones and other public spaces; objects of culture and historical and architectural heritage. the prerequisites, goals and tasks of revitalizing inactive industrial zones are highlighted. the article analyzes the implementation of specific projects aimed at: development of creative industries in reconstructed post-industrial premises, arrangement of coworking, support of entrepreneurial and social initiatives (ivano-frankivsk, lviv, kharkiv, odesa, kyiv); creation of unique platforms for various cultural events, communication of representatives of the creative sector and quality recreation (lviv, kharkiv, kherson, zaporizhzhia, kyiv); formation of an environment for restaurant activity, wholesale and retail trade (kyiv, kherson); construction of innovative infrastructure, providing support for high-tech industries (kyiv, dnipro). conclusion. based on the generalization of experience, the characteristic features of the revitalization of degraded industrial zones in ukraine are outlined. it is noted that projects on city revitalization focuses on giving new features to territories and facilities and emphasizing their uniqueness; most projects on the revitalization of degraded industrial zones in the cities of ukraine are grounded on creative ideas, the embodiment of which often requires large investment. key words: city revitalization, degraded industrial zone, sustainable development, cities of ukraine. jel classification: o18, o31, r11 1. introduction ukrainian cities are faced with the problems of degradation of territories caused by the decline of facilities of the local economy, low living standards and low level of residents’ social capital, social exclusion, migration of economically active population, unsatisfactory environmental conditions, etc. these territories need city revitalization policy as a complex of targeted measures to overcome crisis phenomena (spatial, economic, social, cultural, environmental) and create prerequisites for their sustainable development. in the leading countries of the world, this policy baltic journal of economic studies 37 vol. 8 no. 1, 2022 showed its effectiveness as a strong instrument for the revival of abandoned territories. the concept of urban revitalization has become the key driver of cities’ sustainable development in the world (akotia, opoku, 2018). in ukrainian cities, the policy of the revitalization of degraded territories is at the stage of origin. the main focus of the policy is on projects for revitalizing former industrial zones. projects for the revitalization of city blocks, streets, squares, parks, embankments, housing facilities and culture objects are less common. revitalization requires a change in the traditional approach to the restoration of urban economy elements – previously it was based exclusively on repair and construction works (horbliuk and dehtiarova, 2021). formation of public spaces, changing the functions and purpose of facilities, introduction of innovations in territorial development are important tasks of city authorities, businesses, and the public. the purpose of the article is to identify strategic priorities, focus areas and targets of the policy of the revitalization of degraded industrial zones following the analysis of the existing projects in the cities of ukraine. while the cities of the eu and the united states started the revitalization of abandoned industrial facilities in the middle of the last century, ukraine has mastered this city policy instrument recently. a detailed analysis of the implemented projects for the revitalization of degraded industrial zones is important both in view of the need to disseminate better practices in this field, and for the theoretical generalization and substantiation of the methodological principles of policy-making, relying on the available experience. 2. strategic priorities of city revitalization in ukraine the state strategy for regional development of ukraine for the period of 2021-2027 (resolution of the cabinet of ministers…, 2020) indicates that certain types of territories require special attention from the state and the use of special mechanisms and tools to stimulate their progress. these include: agglomerations; large, middle-sized and small cities; monofunctional cities, rural areas in unfavorable conditions; mountainous areas of the ukrainian carpathians; macroregion "azov-black sea"; zones of impact of international transport corridors; border regions; border territories in adverse conditions; temporarily occupied territories of ukraine; natural conservation areas and objects. the strategy declares a territoriallyoriented development policy based on stimulating the use of territories’ own potential, providing support to individual territories characterized by special challenges of socio-economic development, high historical and cultural potential, and environmental protection needs. strategic priorities of regional development are established in accordance with the sustainable development goals of ukraine for the period up to 2030, approved by the decree of the president of ukraine (2019). the regional development strategies of ukraine (minregion, 2020) are dominated by the sustainable development goal 11, which envisages ensuring the openness, safety, life-sustaining and environmental stability of cities and other settlements. to achieve the goal 11, projects were developed for: restoration of infrastructure (most particularly highways); improving the quality and availability of public services, including in the field of education, medicine, social protection; protection and reproduction of natural resources. a sustainable develop ment of cities and communities will be facilitated by regional measures for territories’ revitalization, specifically: the revival of the economy of territories in the northern part of kyiv region affected by the chernobyl catastrophe; support for small monofunctional cities and revitalization of territories contaminated with explosive objects (donetsk region); revitalization (restoration) of the central part of the historical cities of ternopil region; revival of the historical and architectural heritage of volyn region; revitalization of castles of cherkasy region; re-arrangement and development of public spaces in kyiv; protection, restoration and preservation of cultural heritage objects (zhytomyr, kherson, chernivtsi, chernihiv region), etc. a wider range of priorities of degraded territories revitalization is defined at the local level. based on the analysis of the development strategies of the ukrainian cities of regional significance (without regard to the regional significance cities of the temporarily occupied territory of the autonomous republic of crimea and part of the temporarily occupied territories in donetsk and luhansk regions), the following revitalization directions are established: – degraded industrial zones (vinnytsia, dnipro, ivanofrankivsk, korosten, melitopol, rivne); – city centers (vinnytsia, nizhyn, odesa, podilsk, poltava, truskavets); – parks, recreation zones and other public spaces (vinnytsia, izium, melitopol, mykolaiv, novodnistrovsk, podilsk, truskavets); – objects of culture and historical and architectural heritage (bucha, volodymyr-volynskyi, poltava, ternopil). prerequisites for the emergence of a large number of industrial zones in ukrainian cities was industrial growth in the time of the soviet union, with the allocation of territories for industrial purposes mostly for free. accordingly, when developing those territories, little care was taken of the effectiveness of decisions or polyfunctionality of development (tiupka, 2021). after ukraine had gained its independence, baltic journal of economic studies 38 vol. 8 no. 1, 2022 as a result of a number of economic transformations, a significant part of the industrial territories degraded due to the stopping of economic activity. therefore, the revitalization of abandoned industrial zones becomes increasingly important for the development of cities in ukraine. table 1 shows the strategic goals and tasks of revitalizing former industrial zones, which are outlined in the selected development strategies of cities of regional significance. the comprehensive approach to the revitalization of old industrial zones is demonstrated by dnipro. a phenomenon widespread in the south east of ukraine is the presence of degraded territories of "semi-abandoned giants": hectares of broken dusty roads, abandoned shops, and a total atmosphere of desertedness. thus, many large enterprises have actually shut down, existing as legal entities under their own inertia, whereas others house individual small production units. the main industrial facilities have fallen into disrepair, with little but facades left of the shops. of all the developed urban lands, lands used for industry make up 3650 hectares (every fifth square meter of the developed urban lands in dnipro is industrial) (dnipro city council, 2020). the strategy 2030 defines the task – to introduce a program of revitalization of the old industrial zones of dnipro, which would aim to revitalize 515.5 hectares (45 territories) in the space of 10 years by creating industrial parks, innovation quarters with an all inclusive ecosystem of innovations, creative industry quarters, etc. what is meant here is planning a polycentric functional city structure, not limited to the impact on industrial zones, but seeking to multiply positive effects throughout the territory. community development strategy 2030 – vinnytsia 3.0 also focuses on creating conditions for the development of the territorial community’s problem areas. the city has a heterogeneous spatial structure comprising various types of land use: on the one hand, open natural territories (forests, river valleys, agricultural land), on the other hand – developed territories of various purpose and intensity of use (vinnytsia city council, 2021). these factors, caused by historically contingent processes, allowed the strategy to identify urban areas that are relatively homogeneous and require different measures of public intervention for their revival. in the course of revitalization of degraded industrial zones, outlined in the map-scheme of the landscape-planning city structure, it is planned to provide new life to each territory, re-thinking its role in the city’s livelihoods. 3. implementation of projects for the revitalization of degraded industrial zones in ukrainian cities the transformation of former industrial territories into creative spaces is a modern trend of cities’ revitalization (roberts et al., 2016). developing new features of facilities and creating the relevant public spaces, it is important to preserve the architectural legacy of the city. the most famous project of revitalizing industrial zones in ukraine is "promprylad.renovation" in ivano-frankivsk. it is realized by impact investment, i.e., alongside with financial commitment of businesses, it aims to have a measurable societal impact on the region. the revitalization target is the territory of a plant, which in the soviet period specialized on manufacturing table 1 goals and tasks of the revitalization of industrial zones in the selected development strategies of ukrainian cities # city strategy goals and tasks 1. vinnytsia community development strategy 2030 – vinnytsia 3.0 (https://bit.ly/3qw464h) revitalization of abandoned territories of former industrial enterprises. 2. dnipro strategy dnipro – 2030 (https://bit.ly/3ydgqew) revitalization of old industrial zones. development of program for revitalization of old industrial zones (45 territories, 515.5 ha) 3. ivano-frankivsk the ivano-frankivsk city development strategy until 2028 (https://bit.ly/3a3k7ug) devising of a new format of educational and creative platform on the basis of “promprylad” factory, which is to bring together cultural, educational and practical business-elements. 4. korosten strategic plan of korosten development until 2025 (https://bit.ly/3w0y9oc) revitalization of selected old industrial zones with participation of owners of enterprises. 5. melitopol melitopol city development strategy 2030 (https://bit.ly/3jk5nkp) revitalization of public spaces by way of creating thematic, art, club public places; adaptation of depressed territories and unclaimed industrial zones. 6. rivne rivne development strategy for the period up to 2040 (https://bit.ly/3a9q1du) revitalization of abandoned industrial zones and their priority use as sites for new businesses. source: prepared by the author baltic journal of economic studies 39 vol. 8 no. 1, 2022 instruments and consumer goods, produced automatic devices and industrial rotary-type gas meters. however, from the early 1990’s, the plant experienced a prolonged crisis, part of its territory being filled with residential real estate (shabanin, 2020). the project "promprylad.renovation" has transformed the former plant into a modern space for realization of commercial and social initiatives aimed at developing a new economy, urbanism, contemporary art and informal education in the region. at present within the walls of the plant, there are offices and a coworking space, a children’s center, a dance school, a bar zone, a conference room, a robotics center, a craft workshop, a barber school, a multimedia laboratory, an urbanism center, an exhibition hall, and more. there are successful cases of revitalizing abandoned industrial facilities in many ukrainian cities. in particular, in lviv, such facilities are replaced with creative industry developments: – "rezavod", where the abandoned area of the radioelectronic medical equipment plant (rema) in the territory of the old industrial zone in pidzamche became the space for engineering, design and art experiments; the locations of the plant are used by manufacturers of brand clothes, ceramists, tattoo designers, urbanists, artists, a theater, a bakery, and sound recording studios (mykolaienko, 2019); – "!festrepublic" as an alternative location for leisure near the central part of the city, created in the former premises of "galychsklo" factory; the project concept is aimed at building public spaces for exhibitions, cultural events, various actions and recreation grounds for visitors with children (lisna, 2016); – "jam factory art center", which provides for the opening of an interdisciplinary center for contemporary art in the revitalized space of the former fruit paste factory, which through its exhibition, educational and research activities will reflect the actual processes in the ukrainian and international art and culture, and will open opportunities for a public dialogue; – "lem station" as a creativity and innovation hub in place of a former tram depot, which promotes implementation of entrepreneurial, social and cultural initiatives of the city’s residents; on the basis of the depot, a startup incubator, a coworking space, a maker-space, an art gallery, an event hall, a children’s development center, a food court and other spaces for training and leisure are created (tverd, 2017). in kharkiv, revitalization projects of this kind include the art factory "mekhanika. insha zemlia" and "fabrika.space". the creative space of the art factory of 25 thousand square meters, located in the former shops of a steam locomotive works, is a unique platform for municipal and international events. this space is intended for bringing together creative and talented people of various professions: musicians, artists, designers, photographers, theater professionals, sculptors, artists, athletes. in the territory of the art factory, there are offices of creative entrepreneurs, a food court, a park zone, various studios and centers; here, cultural events, concerts, festivals, parties, etc. are held regularly. for more than half a century, a four-storey building of a kharkiv factory for sorting and storing elite agricultural crops "soyuzsortnasinnieovoch" was in extremely bad condition, without heating and communications. in 2015, the former factory was transformed into a modern center "fabrika.space". on the first floor, there is a restaurant, with a courtyard open in summer. on the second and third floors, various events are held (on the average, the factory hosts monthly over 90 events: conferences, strategic sessions, trainings, corporate events). on the fourth floor, there is a coworking space, where about a hundred people, mostly it-freelancers, work daily (mykolaienko, 2019). the destroyed shops of a ship repair facility in odesa have become a site for construction of the training and manufacturing center "synii krab". on the first floor, a hall, an engineering workshop, a library and a storage for personal belongings are located; on the second, a cafe, a sound recording studio, a stained-glass studio and a pottery are opened; on the third, there is a multifunctional event hall, a nightclub, a lecture hall, a coworking space and several thematic creative studios (avdieiev, 2020). in this way, spaces for creative workshops, exhibitions, events were created, allowing for a closer interaction of the city’s cultural community. during 2016–2017, one of the shops of kherson combine harvester factory turned into a public space "urban cad". presently, this is a creative art site that hosts a variety of festivals, thematic events, concerts, charitable actions, conferences, theatrical productions, exhibitions, master classes, etc. the objectives of this revitalization project are: to create an art platform "turbina"; to adapt the industrial building according to municipal requests; to get the public, scientists, and authorities involved in the development of creative industries; to actively engage artists and provide them with opportunities to realize their creative ideas in the city. the building of the old mill of herman nibur in zaporizhzhia, built in 1895, impresses with its architecture. there, local art experts opened an art space "loft mlyn", where locations for a variety of creative activities were gathered under the same roof. among them, there is a gallery, a showroom (space for holding conferences, performances, lectures, etc.), a film club, an art workshop, a photo studio, and a zone for open communication (mori, 2021). baltic journal of economic studies 40 vol. 8 no. 1, 2022 the capital of ukraine is not standing by idle in the matter of implementing the projects of former industrial zones revitalization. for instance, "art zavod platforma" is the largest creative cluster in ukraine, located in the left bank of kyiv. the space is situated in the territory of the former darnytskyi silk plant. this ecosystem brings together business, festivals, coworking, art, it-sphere, fashion, education and other industries of creative economy. "port creative hub" is a multifunctional space in podil area designed for modern cultural initiatives: exhibitions, lectures, master classes, art studios, cinema shows, public events, etc. the revitalization project was implemented on the basis of an industrial building, which used to be a warehouse of the ukrainian river port in the soviet period. nowadays, the second floor of this building serves as a platform for the development, representation and interaction of the creative community of kyiv. another place of this kind is the art center "closer", which is located in the premises of a former ribbon factory, one of the oldest light industry enterprises in ukraine. in addition to the space for exhibitions, conducting master classes, films and concerts, coworking and communication with creative people, there is a night club where parties involving popular european djs are arranged at the weekends. in podil area, there is also a cultural cluster "izone" located in the premises of the former ship-repair yard. the revitalized premises are turned into multi functional zones: a gallery, educational halls, an exhibition space, a ground for performances and concerts, creative workshops, cafes, a shop and a terrace. the project objectives include association and promotion of the natural growth of conscious ecological businesses, including by offering modern coworking and location for entrepreneurship, and the access to organic raw materials through a network of organic farming partners. the projects for revitalizing former industrial zones have different focuses. as a result of revitalization, the shops of the arsenal plant (in the past, one of the largest ukrainian manufacturers in the field of instrument engineering), "kyiv food market" was created as the first foodhall in kyiv. here, more than 20 best restaurants in the capital are assembled in one location. on the second floor there is a separate zone with a show kitchen, where it is planned to open a culinary school and give master classes. also, there are ideas to arrange coworking, create a trading complex, a business center and other public spaces in another area of the plant (tsarenko, 2020). in kherson, the wholesale market "bazar" – an agricultural trading hub – has been opened in the empty buildings of a former combine harvester plant. in its covered areas, local agrarians can sell their products without intermediaries or any obstacles; for buyers, there is a parking place. for checking the quality of products, the market will run a laboratory of the state service of ukraine on food safety and consumer protection. the project of the plant revitalization also envisages the opening of a hostel for sellers who have not had enough time to sell their goods, and an open-type customs warehouse for large manufacturing exporters (avdieiev, 2020). "unit.city ", located in the territory of the kyiv motorcycle plant, belongs to more extensive projects of degraded areas revitalization. however, nothing but a brick chimney reminds of this territory’s industrial heritage. this is the first innovative park in ukraine, where an ecosystem and infrastructure for developing business in high technologies and creative industries are created. for this purpose, a community of successful entrepreneurs is formed, regular events and thematic meetings are conducted, quality tools for cooperation and strengthening business are developed. there are 4 business campuses and a coworking space, 4 labs, 8 accelerators, and 3 investment funds operating in the park. in 2020, "unit.city " includes 108 resident companies, 70% of which have launched joint projects with other residents (unit.city has entered…, 2020). in the old industrial territory of dnipro, an industrial park "innovation forpost" is created, which is included in the register of industrial parks of ukraine. the territory of the industrial park will be divided into 35 sites, of which 21 sites are intended for the development of industry, and 12 – for innovation and education (dnipro development agency, 2018). the industrial park is designed to comprise offices and r&d centers, an exhibition complex with an innovative museum of science, business incubators, educational campuses, apartments and a nursery school, a hotel, and green zones. grouping of the reviewed projects for revitalization of the degraded territories of ukrainian cities by directions is presented in table 2. thus, the projects of the revitalization of former industrial facilities are becoming commonplace in ukraine. in their territories, various types of activities are developing successfully, in particular creative industries, entrepreneurial and social initiatives. these are good places for various events, coworking, communications and high-quality leisure activities. practice shows that the ukrainian cities which managed to establish coordinated work in this field, have achieved significant results, and their imple mented projects are worthy examples to follow in ukraine and abroad. 4. conclusions the analysis of the implementation of projects for revitalization of degraded industrial zones baltic journal of economic studies 41 vol. 8 no. 1, 2022 in ukrainian cities allows making the following conclusions: 1) based on the specific character of crisis phenomena that led to the degradation of territories, as well as considering the local capacities for their revival, projects of city revitalization are aimed at the resto ration of nonfunctional industrial zones, among other issues, giving new features to territories and facilities and emphasizing their uniqueness; the initiators of such changes are mainly representatives of private and public sectors; 2) the designed purposes of revitalization projects encompass: development of creative industries in reconstructed premises, arrangement of coworking, support for entrepreneurial and social initiatives; creation of unique platforms for various cultural events, communication of representatives of the creative sector and high-quality recreation; formation of an environment for restaurant activities, wholesale and retail trade; construction of innovative infrastructure, support for high-tech industries, etc.; 3) regardless of the direction of revitalization, the relevant projects include measures of integrated impact, that is, they aim to introduce spatial and infrastructure transformations that would protect the environment and contribute to the social activity of the inhabitants and guests of the city, and in the long run – stimulate business activity in the degraded territory itself, or in the entire city; 4) most projects for revitalization of degraded industrial zones in the cities of ukraine are based on creative ideas, the embodiment of which often requires large investment. however, eventually they have a significant marketing impact, since revitalized public spaces improve the attractiveness of the city for local inhabitants, tourists, investors and other stakeholders. table 2 directions of revitalization of degraded industrial zones in the cities of ukraine # directions of implemented changes revitalization projects 1. development of creative industries in reconstructed premises, arrangement of coworking spaces, support for entrepreneurial and social initiatives. "promrylad.renovation" (ivano-frankivsk); "rezavod", hub "lem’s station" (lviv); center "fabrika.space" (kharkiv); center "synii krab" (odesa); cluster "izone" (kyiv) 2. creation of unique platforms for various cultural events, communication of representatives of the creative sector and highquality recreation. location "!festrepublic", "jam factory art center" (lviv); art factory "mekhanika. іnsha zemlia" (kharkiv); art-space "urban cad" (kherson); art-space "loft мlyn" (zaporizhzhia); "аrt zavod platforma", "port creative hub", art-center "closer" (кyiv) 3. formation of the environment for restaurant activities, wholesale and retail trade "kyiv food market" (кyiv), wholesale market "bazar" (kherson) 4. construction of innovation infrastructure, support for high-tech industries innovation park "unit.city " (kyiv), project of industrial park "innovation forpost" (dnipro) source: prepared by the author references: akotia, j., & opoku, a. 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(semi)revitalized: 4 examples of re-thinking industrial spaces in ukraine. available at: https://mistosite.org.ua/ru/articles/napivrevitalizovani-4-pryklady-pereosmyslennia-industrialnykh-prostoriv-vukraini baltic journal of economic studies 42 vol. 8 no. 1, 2022 president’s decree no. 722/2019 of september 30, 2019, "on the sustainable development goals of ukraine for the period up to 2030". available at: https://www.president.gov.ua/documents/7222019-29825 resolution of the cabinet of ministers of ukraine no. 695 of august 5, 2020, "on approval of the state strategy for regional development for the period of 2021–2027". available at: https://zakon.rada.gov.ua/laws/ show/695-2020-п#text roberts, p., sykes, h., & granger, r . (eds.) (2017). urban regeneration. 2nd ed. sage. shabanin, d. (2020). promprylad. renovation that changes ivano-frankivsk. available at: https://ukrainer.net/ promprylad-renovatsiia tiupka, ya. (2021). new life instead of devastation and depression: how to revitalize kyiv industrial zones. available at: https://apostrophe.ua/ua/article/kyiv/infra/2021-11-10/novaya-jizn-vmesto-razruhi-i-depressiikak-ojivit-kievskie-promzonyi/42826 tsarenko, і. (2020). art centers and food markets: how to breathe new life in the industrial zones. available at: https://rubryka.com/article/druge-zhyttya-promzon tverd, о. (2017). lem station – revitalizing an abandoned tram depot. available at: https://lviv.com/urban/ ozhyvyty-napivpolyshene-tramvajne-depo unit.city has entered top 5 landmark projects of ukraine of modern architecture (2020). available at: https://ufuture.com/uk/unit-city-uvijshov-v-top-5-znakovih-ob-yektiv-ukrayini-suchasnoyi-arhitekturi vinnytsia city council (2021). community development strategy 2030 – vinnytsia 3.0. available at: https://www.vmr.gov.ua/siteassets/lists/strategy2030/default/стратегія%20розвитку%20вмтг%20до%20 2030%20року%20-%20стратегія%203.0.pdf baltic journal of economic studies 250 vol. 7 no. 5, 2021 corresponding author: 1 researcher, ukraine. e-mail: grabovich.tatiana@mail.ru orcid: https://orcid.org/0000-0001-6819-0486 doi: https://doi.org/10.30525/2256-0742/2021-7-5-250-259 international legal aspects of economic responsibilities of states tatiana grabovich1 abstract. the subject of the article is international legal aspects of economic responsibility of states. the aim of the article is to find an answer to the problematic issues of economic responsibility of states and its international legal aspects. different concepts of economic responsibility are analyzed due to the lack of a unified approach to it both in economics and in related branches of law. it is noted that the institution of economic responsibility is designed to stabilize the relations of socio-economic development, the interests of participants in social exchange and to achieve the goals of sustainable development. from the international legal point of view of understanding economic responsibility, the state bears two types of responsibility – material (economic) and non-material (political). and international legal responsibility of the state is considered as an institution of the law of international responsibility. it is from this point of view the economic responsibility of the state is considered by international lawyers and specialists in the field of international relations. the methodology of the article is based on the fact that there are three basic mechanisms of liability – derivative of property rights, contracts, and torts. contract law deals with breaches of duty, tort law deals with accidental or intentional injury to persons or property, and property law deals with misappropriation or interference with property rights. it is concluded that the state is the same economic entity in terms of economics as all equal economic entities. however, the applicability of the means of economic responsibility in the international legal aspect is complicated by the immunity of the state with regard to its property. therefore, there are signs of liability not for all property, but only for that which has certain signs of applicability – use for commercial purposes, connection with the subject matter of the claim. in the aspect of economic responsibility, there is a distinction between immunity from jurisdiction and immunity from enforcement. the problem of differentiation of commercial and state property is outlined, attention is focused on the existence of certain categories of state property, the public nature of which is not in doubt and which are not considered possible for economic (property) responsibility for the conduct of diplomatic and consular activities of their missions, consulates, special missions, etc., whose immunity is enshrined in the vienna convention on diplomatic relations of 1961; military property, as well as property used for military purposes; property that is part of the cultural heritage of a foreign state or part of its archives, as well as property that is part of an exhibition of items of scientific, cultural or historical significance. it is also concluded that economic responsibility in international law is not always associated with the negative consequences of unlawful behavior, because it can also be applied as a result of lawful behavior, leading to the infliction of harm to other subjects. thus, the economic responsibility of the state is on the verge of regulation of public and private law. this is its peculiarity and complexity of its application to the state. key words: economic responsibility, functions of responsibility, expropriation of property, state immunity, coercive measures, commercial property, public property. jel classification: m14, p14 1. introduction in science there is no unified approach to the understanding of economic responsibility. as a rule, in the classical understanding economic responsibility refers to economic entities, whose choice of behavior with respect to the rational use of resources determines the economic result as a set of key economic indicators, the so-called "independence". in this sense, the institute of economic responsibility is designed to stabilize the relations of socio-economic development, the interests of participants of social exchange and to achieve the goals of sustainable development. to this extent, baltic journal of economic studies 251 vol. 7 no. 5, 2021 economic responsibility can arise only in the process of implementation of property relations and is carried out through forms of socio-economic control and awareness of the responsibility of economic subjects. since economic responsibility is possible only with the realization of property rights, under socialism economic responsibility of subjects was never considered as an independent institution, but was considered only as an integral element of social responsibility, aligning the interests of economic subjects in the interests of society. in a market economy, economic responsibility is a form of social responsibility. the very public interest is to achieve economic stability; the state is not interested in the loss or decline of the taxpayer, employer, part of the state economy, etc. this was not always the case, though, because there was not always the conviction that the goal of economic activity was not just to make a profit. however, the relevant social framework – such as trade unions, social control, contributed to the development of the model of socially responsible business. today, business entities, including states, among the basic principles of their activities are justice, utilitarianism, and respect for human rights, which is expressed in the obligation to take into account the interests of social groups (in the case of the domestic dimension) and the interests of other members of the international community (in the case of the international dimension). the paper considers that the effective owner is a socially responsible organization that is economically responsible not only to its own formation, but also to other market participants. the formation of the foundations of the "new economy " and the acceleration of globalization at the beginning of the xxi century require a revision of the thesis of the responsible owner only within state borders, since the state in this sense is also an economic actor and also bears economic responsibility. therefore, from another point of view, economic responsibility can mean providing economic benefits both for the region of origin of a particular good or service and for the region for which it is intended. another understanding of the economic responsibility of the state is based on the international legal point of view, according to which the state bears two types of responsibility – material (economic) and non-material (political). and international legal responsibility of the state is regarded as an institution of the law of international responsibility. it is from this point of view that the economic responsibility of the state is considered by international lawyers and specialists in the field of international relations. formation and development of international responsibility of states, understanding of the essence, grounds and consequences of which significantly changed during the history of social development in parallel with the general humanization of international relations in the second half of the xix century and in the first half of the xx century the topic of international responsibility of states began to be considered as one of the most important in the international context, directly connected with the formation of international law. a prerequisite for effective implementation of the functions of international law is a developed and perfect system of international responsibility of subjects of international law, primarily states. but this extremely important area of international legal relations is characterized by the most contradictory achievements in the development of doctrine and practice. state responsibility is central to international law because its underlying idea guarantees the effectiveness of international law. nevertheless, the field of international responsibility requires detailed research in order to solve many theoretical discussions and practical problems related, in particular, to the determination of the grounds for holding states responsible, to the application and clarification of the circumstances precluding the offence, the use of forms of compensation, and especially to the peculiarities of the implementation of responsibility that causes harm. the lack of conceptual coverage and legal regulation of state responsibility under international law makes it necessary to address the issue of international state responsibility in order to develop agreed positions on controversial aspects and present a coherent concept of international legal responsibility. 2. literature analysis the constant development of the rules and principles of international responsibility calls for an in-depth analysis of the doctrinal developments concerning international responsibility and an understanding of the changes that have taken place to date in this area of international law. foreign international legal doctrine devotes considerable attention to issues of international state responsibility, in particular by such specialists as a. abbas, r . ago, s. f. amerasing, d. antsilotti, e. arechaga, r . r . batrshin, b. sh. bellalova, f. o. vertlib, s. verhoeven, r . wolfrum, k. o. deikalo, d. jinx, m. evans, a. seibert-four, a. cassese, m. w. keshner, j. s. kozheurov, b. conforti, j. crazhen, j. crawford, d. b. levin, i. i. lukashuk, d. mcgoldrick, f. maxim, t. nissel, a. nollkamper, s. olleson, a. pellet, o. a. proshina, r . rothberg, t. ruiz, m. sassoli, m. spinedi, d. m. hager and others. problems of international legal responsibility of the state are reflected in the works of ukrainian scientists: v. f. antipenko, s. s. andreichenko, m. o. baimuratov, baltic journal of economic studies 252 vol. 7 no. 5, 2021 y. y. blazhevich, v. g. butkevich, k. a. vazhna, v. a. vasylenko, v. n. denisov, n. v. dryomina-volok, o. v. zadorozhny, n. a. zelinskaya, o. v. malovatsky, l. d. timchenko, g. o. hristova and others. it should be noted that most civil disputes involve liability. a defendant is liable if the law requires him or her to compensate the plaintiff for the harm caused. in jurisprudence, there are at least three purposes of liability law: to compensate victims, to deter wrongdoers, and to reduce risk. economic theories, by contrast, tend to understand the law of liability as seeking the effectiveness of incentives and accepting risk. 3. research methodology there are three main mechanisms of liability – those arising from property rights, contracts, and torts. contract law deals with breaches of duty, tort law deals with accidental or intentional damage to persons or property, and property law deals with misappropriation or interference with property rights. from these mechanisms of application of international responsibility we can formulate its goals: deterrence of a potential offender (preventive function); promotion of the proper performance by the offender of his duties (law enforcement function); compensation to the injured party for the material and moral damage caused (compensatory function); impact on the future behavior of actors in the interest of the good faith performance of their duties (prevention and maintenance of law and order). state responsibility for internationally wrongful acts has the corrective function of international legal regulation, since it contributes to the restoration, strengthening and protection of the international legal order (blazhevych, 2006). there is no doubt that state responsibility is a fundamental principle of international law, stemming from the nature of the international legal system and the doctrines of state sovereignty and the equality of states (shaw, 2003). it should be noted that there are various points of view in the legal literature on the definition of legal relations arising as a result of internationally wrongful acts. there are three main positions on this issue. according to the first, the legal results of an internationally wrongful act are described on the basis that such results constitute a binding bilateral relationship arising between the offending state and the injured state, in which the obligation of the first state to provide reparation corresponds to the subjective right of the other state to claim reparation. the other view is that the rule of law is coercive, and considers the authorization given to the injured state to impose coercive sanctions against the responsible state to be the primary legal consequence directly derived from the wrongful act. according to the third, most accepted approach, the consequences of internationally wrongful acts cannot be limited to reparation or "sanctions" (draft articles on the responsibility of states for internationally wrongful acts with comments on them, 2001). the un commission on international law has defined state responsibility as "all kinds of new legal relationships that may arise under international law as a result of the internationally wrongful act of a state, whether such relationships are limited to legal relationships between the perpetrator state that committed the wrongful act and the directly affected state, or they also extend to other subjects of international law, and whether they focus on the obligation of the guilty state to restore the rights of the affected state and to compensate it for the damage (losses) caused, or also cover the right of the affected state itself or of other subjects of inter national law to apply to the guilty state any sanction permitted under international law" (yearbook of the international law commission, 1973). the understanding of responsibility in international law has evolved with the emergence of international law as a whole, since responsibility is no longer confined to states and recognizes the legal personality of other subjects of international law; it has lost its conceptual unity as a result of the cessation of the recognition of harm as a condition of responsibility for violation. the law must be upheld regardless of the consequences of the violation, and any violation entails liability, with the content of such liability and its specific consequences varying according to whether the damage was caused by such actions and according to the nature of the violation (pellet, 2010). in this regard, let us focus on the international legal aspects of the implementation of economic (material) responsibility of states. the issue of economic responsibility is closely related to the principle of state sovereignty and at the international level touches upon the problem of jurisdictional immunities of states, which agreed in 2004 to the un convention on jurisdiction of states and their property. therefore, decisions on state liability, which are increasingly being made in civil cases where the defendant is a foreign state, to compensate for damage caused by the activities of the state and its officials in another state, face the problem of execution of these decisions, since most often the property of the state is under immunity from interference by persons and authorities in the territory of the receiving state. thus, such issues are subject to ambiguous interpretation by courts, executive authorities of different states and require theoretical research and generalization. baltic journal of economic studies 253 vol. 7 no. 5, 2021 4. presentation of the main material thus, consider whether a foreign state's immunity includes immunity from coercive measures. in international agreements on state immunity and in the judicial and legislative practice of various countries, a limitation of a foreign state's jurisdictional immunity does not imply the automatic application of coercive measures (detention, arrest, recovery) against its property, since immunity from coercive measures and jurisdictional immunity are considered separate elements of the principle of immunity of a foreign state. due to the immunity of the defendant state from coercive measures, individuals cannot protect their legal rights and interests, because the foreign state may refuse to enforce the court's decision. cases when it is possible to apply coercive measures to the property of a foreign state after a court decision are listed in article 19 of the un convention on jurisdictional immunities of states and their property of 2004, they are listed in the decision of the un international court of justice in the case "on jurisdictional immunities of the state" on the application of germany against italy (with the participation of greece). immunity from execution was considered by the international law commission during the preparation of the draft articles to be the "last frontier" (draft articles on jurisdictional immunities of states and their property, with commentaries, 1991), since the question of its existence does not arise until the question of recognition of judicial immunity is considered and in the absence of such a decision against it. in recognizing a foreign state's immunity from execution, states proceed either from the theory of absolute immunity or from the theory of limited immunity, assuming execution on state property used for commercial purposes. moreover, while in some states it may be sufficient to declare that the property is not used for commercial purposes, in other states courts are increasingly requiring the foreign state to substantiate such a declaration, with verification of its authenticity already being considered a violation of state sovereignty (kröll, 2015). the problems associated with the application of the jurisdictional immunity of a state are complicated by the fact that often interim measures and then enforcement actions in a foreign state affect primarily the "diplomatic real estate" of another state (it is the diplomatic real estate that is affected, for example, by the enforcement measures applied in france and belgium in the case of former yukos shareholders against the russian federation). in this regard, it should be noted that state property subject to such exceptions should be limited to that which is used for public nonprofit purposes. the execution of a judgment in its territory against a foreign state is a form of jurisdiction, and the state is obliged to respect the jurisdictional immunity of the foreign respondent state, regardless of whether it was respected by the court that rendered the judgment. this was the conclusion reached by the international court of justice in the case "jurisdictional immunities of the state" on the application of germany v. italy (with the participation of greece) ( jurisdictional immunities of the state). a foreign state' waiver of judicial immunity does not automatically entail a waiver of immunity from execution. this is justified by the fact that the property of the affected state located in the territory of another state may be necessary for state non-commercial purposes and therefore cannot be confiscated. this principle is now part of customary international law, despite differing views as to its content and the possibility of its limitation (kröll). it is contained in article 20 of the 2004 un convention: when consent to take coercive measures is required, consent to the exercise of jurisdiction by the court is not implied. the international court of justice has also stated that state immunity from coercive measures exists independently of judicial immunity and often applies in cases where the state is found not to have judicial immunity ( jurisdictional immunities of the state). however, the judicial and legislative practice of most states in applying coercive measures against foreign property is more restrained than in exercising jurisdiction at the trial stage. this is due to the fact that coercive measures against a foreign state constitute a more serious infringement of its sovereignty than the exercise of judicial jurisdiction, and may affect the essential interests of the foreign state, which may lead to various misunderstandings and deterioration of relations between states (sinclair, 1980; bouchez, 1979). for this reason, many courts in various countries have recognized a foreign state's immunity from coercive measures, even though, under the principle of limited immunity, they have waived immunity from jurisdiction and initiated legal proceedings against the foreign state. for example, belgian jurisprudence, which was one of the first to apply the principle of limited immunity by exercising jurisdiction over acts of jure gestionis of a foreign state, until 1951 recognized absolute immunity of foreign property from coercive measures (verhoeven, 1979). the same can be said about the case law of the united states, germany, austria and france (for a detailed analysis of court cases). at the same time, a tendency to limit a foreign state's immunity from coercive measures against its property is emerging and gradually intensifying in state practice, which is a natural and logical extension of the limitation of a foreign state's jurisdictional baltic journal of economic studies 254 vol. 7 no. 5, 2021 immunity. today, the limitations on a state' immunity from coercive measures are reflected in the case law of many states, in the legislation of several countries and in international agreements on the immunity of the state. however, in all the above cases, immunity from jurisdiction and immunity from coercive measures are considered as separate components of the general principle of immunity of a foreign state (the exception is the case law of switzerland...). immunity of the property of a foreign state from enforcement action is a generally recognized principle. however, as in the case of jurisdictional immunity, in the course of many years of practice certain exceptions to this rule have been made, making it possible to apply coercive measures to the property of the foreign state in the event of its refusal to enforce a judicial decision. without these exceptions, all efforts to ensure equal conditions for all participants in civil relations would be in vain. first of all, measures to enforce the judgment can be applied in the case of voluntary consent of a foreign state to the implementation of coercive measures expressed in an international agreement, in a written treaty or in a statement on a particular case (art. 23 of the european convention on state immunity, 1972). it should be noted that the mere consent of a foreign state to the exercise of jurisdiction does not mean its consent to the application of coercive measures to its property by court order (art. 12 (3) of the english state immunity act). in other words, in order to apply measures to enforce or secure a court decision, the court must obtain the separate consent of the foreign state. this view was also expressed by special rapporteur s. sucharitkul, who in his report to the international law commission stated: "a waiver of jurisdictional immunity does not mean consent to the enforcement of a claim. the court of the territorial state may decide to exercise jurisdiction over a foreign state on various grounds, such as the commercial nature of the claim, the consent of the foreign state, voluntary submission or waiver of immunity. however, the court will have to reconsider and examine its jurisdiction to enforce its decision..." (crawford, 1981). the last sentence of s. sucharitkul's opinion quoted above brings the second reason for applying coercive measures to the property of a foreign state. despite all the assertions that jurisdictional immunity and immunity from coercive measures are two separate elements of the principle of immunity of a foreign state, they share a common basis. therefore, having named the basic criterion for limiting a foreign state's jurisdictional immunity, it is easy to assume that it is the basis for limiting a foreign state's property immunity from coercive measures. it is the criterion of commercial use of property. to limit immunity from coercive measures, almost all of the above-mentioned international agreements and national laws, as well as judicial practice, use the criterion of the use of property for commercial purposes. the only exception is the european convention on state immunity of 1972, which prohibits coercive measures against foreign property without its consent (article 23). however, the convention obliges contracting states to recognize and enforce judgments rendered against them. if this condition is not met, the plaintiff is given the opportunity to appeal to the judicial authorities of the state against which the judgment was rendered. in addition, the additional protocol provides for the possibility of filing an action before a special european court of state immunity (explanatory report on the european convention on state immunity and the additional protocol). thus, the system established by the 1972 european convention is based on the obligation of member states to voluntarily obey judgments rendered against them, and provides for a rather complicated procedure in case a state refuses to execute a judgment. apparently, this is due to the restrained position of many countries in those years on the application of measures of enforcement of a judgment against a foreign state. application of coercive measures against property of foreign state, in particular state ships and cargoes on them, in case of their use for commercial purposes, is provided by brussels convention of 1926 on unification of some rules concerning immunity of state ships (articles 1 and 2), geneva convention of 1958 on the high seas (articles 8 and 9), geneva convention of 1958 on territorial sea and adjacent areas (articles 18-22), un convention on the law of the sea (articles 28 (3), 32, 95, 96). limitations on immunity of foreign property from coercive measures based on the use of property for commercial purposes are provided for in the 2004 un convention on jurisdictional immunities of states and their property (article 18) and in the foreign immunity laws of some states (american foreign immunity act 1976). at first glance, the simple formulation of the criterion for applying coercive measures to property in practice faces a rather difficult problem of its implementation, since in certain situations it is very difficult to distinguish objectively and accurately between commercial and non-commercial property. for example, what about a government bank account intended for government functions that was also used for commercial purposes? can coercive measures be applied to government property, one part of which was used for commercial purposes and the other part for government purposes (so-called mixed funds or accounts)? equally important is the question of baltic journal of economic studies 255 vol. 7 no. 5, 2021 whether enforcement measures should apply to any foreign commercial property located in the territory of the court, or should enforcement of the judgment be limited to property directly related to the subject matter of the suit? despite the possible difficulties in some situations in distinguishing between commercial and state property, there are several categories of state property whose public nature is not in doubt by virtue of peremptory or customary norms of international law. these include: (a) diplomatic and consular premises and other property of a state used for the diplomatic and consular activities of their missions, consulates, special missions, etc., whose immunity is set forth in the vienna convention on diplomatic relations of 1961 (article 22(3)), the vienna convention on consular relations of 1963 (article 31(4)), the convention on special missions of 1969 (article 25(3)). immunity of this category of property, including bank accounts, is also provided for in article 21(1)(a) of the 2004 convention. the absence of a separate reference to the immunity of bank accounts of diplomatic and consular missions in the aforementioned conventions has led to contradictory court decisions; (b) property of a military nature, as well as property used for military purposes. this includes the immunity of naval warships as well as government ships used for public purposes and other military property. articles providing for immunity of the above property from coercive measures are contained in the 2004 un convention (article 21(1)(b)) and in many national laws on immunity of a foreign state (canadian foreign state immunity act 1982); (c) unlike other state immunity instruments, the 2004 un convention distinguishes two additional categories of property to which coercive measures may not be applied: property "forming part of the cultural property of a foreign state or part of its archives" shall not be offered for sale (article 21(1)(d)), and property "forming part of an exhibition of objects of scientific, cultural or historical importance" shall not be offered for sale (article 21(1)(e)). in all applicable national laws and in almost all international agreements on state immunity, as well as in the case law of many countries, coercive measures may be applied to foreign property intended for commercial use. however, there is a certain category of property for which there is no uniform approach, both in the jurisprudence of states and in the national laws on state immunity. the differences mainly concern the possibility of applying coercive measures to the bank accounts of diplomatic missions of a foreign state and the accounts of the central bank of a foreign state. in addition, states and jurists have expressed opposing views on the legality of the application by the courts of coercive measures against any commercial property of a foreign state located in the territory of the forum state, regardless of the subject matter of the claim. therefore, the question arises when implementing the economic responsibility of the state by enforcing a judgment rendered against one state on the territory of another state, about the categories of property that can be foreclosed. in this connection, we consider it appropriate to take into account the provisions of the un convention on jurisdictional immunities of states and their property of 2004 as provisions of customary international law. of particular importance from the point of view of protecting the interests of a foreign state are those categories of state property that are considered to be used or intended to be used exclusively for non-commercial purposes, and therefore cannot be compulsorily disposed of. first, it concerns the bank accounts of diplomatic missions. in the judicial practice of a number of countries in different years there have been attempts to seize the bank accounts of foreign diplomatic missions. the main reason for such attempts was the absence of an express provision in the vienna convention on diplomatic relations of 1961 and the vienna convention on consular relations of 1963 on immunity of bank accounts of diplomatic and consular missions. recall that article 22(3) of the 1961 convention provides for inviolability of diplomatic missions, immunity of missionary property and means of transport, correspondence and archives, stating that they "shall enjoy immunity from search, requisition, seizure and execution". in 1977, the german constitutional court, discussing the possibility of seizing the philippine embassy 's bank account, ruled that international law prohibited any coercive measures against the embassy 's bank account (case x v. rep. of philippines, 1977). according to the court, although article 22(3) of the vienna convention of 1961 does not specifically mention the immunity of the bank account of a diplomatic mission, coercive measures are also inadmissible in relation to the bank account of a diplomatic mission, since its use is necessary for the unimpeded exercise of the diplomatic functions of the mission. a similar decision was made in 1983 by the court of first instance in england in the case of alcom v. colombia. the court based its decision on the fact that the embassy 's bank account was used for noncommercial purposes, namely to ensure its operation, even if part of it was used in commercial transactions to purchase goods and services for the embassy (fox, 1985). that decision was reviewed by the court of appeals, which based its decision to take enforcement action on the colombian embassy bank account on the fact that some of the money in the account was baltic journal of economic studies 256 vol. 7 no. 5, 2021 used in commercial transactions, and therefore, within that portion of the money, according to the court, enforcement action could have been taken (fox, 1985). the court held that the use of the money was essentially a commercial transaction. for the court in this case, the nature of the embassy 's use of the bank account was prioritized. a similar decision was made by a u.s. court in 1980, according to which enforcement measures could be imposed on the accounts of foreign states (including diplomatic missions), some of which were used for commercial purposes, because otherwise the state would have the opportunity to use some money for commercial purposes, at the right time referring to the partial use of the bank account for government purposes (case of birch shipping c. v. embassy of ur of tanzania, 1980). although the courts have largely refused to enforce the bank accounts of diplomatic missions (x c. rep. of philippines, 1977), however, due to gaps in the vienna convention of 1961, the bank accounts of diplomatic missions have not always remained intact. therefore, the inclusion in the un convention on jurisdictional immunities of a provision providing for immunity of bank accounts of diplomatic and consular missions is justified, as it eliminates double interpretation of article 22 (3) of the vienna convention on diplomatic relations and ensures unhindered implementation of diplomatic or consular missions in the host country. second, the ownership of central banks. as is well known, foreign accounts of central banks are used not only for government purposes, often states use them in commercial operations. the central bank is a public institution, and it would seem that coercive measures against central bank property should be applied depending on the purposes for which it is used. however, under the uk immunity act, for example, foreign central bank property enjoys complete immunity from coercion (article 14 (4) of the english act). the 1976 u.s. law also provides for immunity from the property of a foreign central bank "held in an account in the name of that bank" (section 1611(b)). according to the commentary to the law, the application of coercive measures to the property of the central bank of a foreign state is possible in the case of the use of funds to finance commercial contracts of other state bodies, institutions and enterprises (see: commentary on article 1611(b)). canadian law limits the immunity of central bank accounts from enforcement action if the accounts are used for commercial purposes. the international law commission, following the path of the english act of 1978, has chosen the option of full immunity for central bank accounts, regardless of the purpose of their use, which, in our view, is not entirely justified. in particular, article 21 (1) (c) of the 2004 un convention prohibits coercive measures against the property of a central bank or other foreign financial institution. the australian law reform commission's view that british and american lawmakers, in prohibiting enforcement action against central bank property, were motivated primarily by economic interests, since london and new york are major global financial centers, is quite persuasive. and since australia has no such interest, the commission found no reason to grant a foreign central bank greater immunity than the foreign state itself. according to it, the property of central banks and other financial institutions of foreign states should be treated in the same way as the property of the foreign state itself for the purpose of coercive measures (see: the law reform commission, report n 24). in other words, the use of coercive measures depends on the purposes for which the property of the central bank was used or intended to be used. as far as case law is concerned, it should be noted that courts in various countries have taken enforcement action against the property of central banks when in their opinion the property was not being used for public purposes. for example, in the united kingdom, before the foreign immunity act came into force, the court of appeal ruled on two enforcement proceedings against the central bank of nigeria, stating that the specific amounts were not used for government purposes, but to finance commercial transactions ( judgment of the court of appeal in trendtex trading corp. v. central bank of nigeria, 1977). similar decisions were made in germany (case of the central bank of nigeria, 1975), france (case of englander v. statni banka ceskoslovenska, 1969), switzerland (case of the banque centrale de la rep. of turkey v. weston comp. of finance and invest. sa) and the united states (the weston co. case de finance et d’inwestissement, sa v. la rep. de l’ecuador, 1993). this paper considers that article 21(1)(c) of the 2004 un convention, by completely prohibiting the enforcement of central bank property, gives the latter unwarranted privileges, since it means extending immunity from enforcement measures also to money held in central bank accounts and used by the state in commercial transactions. however, given the specific functions of central banks, which are of particular importance to sovereign states, a balanced approach is necessary. in the case of mixed use of foreign central bank accounts (i.e., using one part of the funds for commercial and the other for government purposes), it is probably necessary to limit immunity from enforcement to funds used for commercial purposes, because otherwise the foreign state, its agencies, institutions, and the central bank itself can always avoid enforcement action by partially using a baltic journal of economic studies 257 vol. 7 no. 5, 2021 particular account for government purposes, thereby "saving" the rest of the funds used for commercial purposes from being enforced. third, the relationship between the commercial property of the foreign state and the subject matter of the action. legislative and judicial practice lacks a uniform approach as to whether enforcement measures may be applied to any commercial property of a foreign state located in the territory of the court, or whether the enforcement of a judgment should be limited to the commercial property related to the subject matter of the suit. the immigration laws of great britain, south africa, pakistan, singapore, canada, and australia do not make enforcement action contingent on the connection between the subject matter of the action and the commercial property of the foreign state. instead, they provide for enforcement action against any commercial property of a foreign state located in the territory of a state court and directly used or intended for commercial use1. this means that the foreign state is responsible for all of its commercial property located in the territory of the forum state. in contrast, under the u.s. immunity act (section 1610(a)(2)) and the 2004 un convention (section 19(1)(c)), commercial property can only be enforced if there is a nexus between the commercial property and the subject matter of the claim. in particular, article 19(1)(c) of the 2004 un convention authorizes the use of coercive measures against property located in the forum state and "directly used or intended for use by a foreign state for commercial (non-state) purposes and having a connection with the subject matter of the action or with the institution or institution against which the proceedings are directed". although the united states immunity act of 1976, like the 2004 un convention, allows coercive measures to be applied only to commercial property of a foreign state related to the subject matter of the claim, after an amendment to the 1996 act, article 1610 (a) provides for the application of coercive measures in respect of any commercial property of a foreign state to enforce a judgment on a claim for damages resulting from acts related to "torture, extrajudicial killings, hostage-taking, air terrorism, as well as providing material assistance ... to such actions (ajil, 1997)". the amendment only partially affects u.s. law arising in litigation where the subject matter of the suit is not related to specific property of a foreign state. for example, how does one find a connection between the subject matter of a claim and the commercial property of a foreign state in a suit brought by an individual for physical or property damage caused by a collision with the vehicle of a foreign diplomatic agent? if the foreign state refuses to comply with the court's award of damages, enforcement of the judgment under the 2004 un convention and, in part, under u.s. law will be difficult because they require that the foreign state's commercial property be connected to the claim. the damages award will simply remain on paper, because it is impossible to establish a connection between the subject matter of the suit and the commercial property in this case because the latter is not involved in the particular situation. in similar cases in countries where national law or jurisprudence does not require a mandatory connection between the subject matter of the action and the commercial property of the foreign state, enforcement of the judgment is quite possible because enforcement action will be taken against any commercial property of the foreign state located in the forum state. due to the fact that the requirement of a mandatory connection between the subject matter of the claim and the commercial property of a foreign state located in the state of the court prevents the enforcement of judicial decisions on claims for damages, as well as the view that the state represented by various government agencies, institutions, organizations, etc, which applies in a foreign territory certain acts of a commercial nature or causes injury to persons or entities must be liable for all of its commercial property located in the territory of the court, the paper believes that article 19(c) of the 2004 un convention needs to be revised to eliminate the requirement that the commercial property must be connected to the subject matter of the action2. 5. conclusions when considering the economic responsibility of the state, it should be remembered that from the perspective of private international law, the state is the same economic entity as all equal economic entities. however, the applicability of the means of economic responsibility in the international legal aspect is complicated by the immunity of the state in respect of its property. therefore, there are peculiarities of liability not for all property, but only for that which 1 article 13 (4) of the english law; article 14 of the south african law; article 14 of the pakistani law; article 15 of the singapore act; article 11 of the canadian law; art. 32 of the australian law. 2 this view is shared, in particular, by morris v. the international law commission’s draft convention on the jurisdictional immunities of states and their property // the denver journal of international law and policy. v. 17. 1988–89; trooboff pd foreign state immunity. course report. vv 1986. p. 370–372; coad w. d. the canadian state immunity act // law and poticy in international law. v. 14: one thousand one hundred and ninety-seven. 1983. p. 1209; schreuer ch state immunity: some recent developments. cambridge, 1988. p. 128–132; the law reform commission. report n 24. foreign state immunity. canberra, 1984. p. 76. baltic journal of economic studies 258 vol. 7 no. 5, 2021 has certain signs of applicability – use for commercial purposes, connection with the subject matter of the claim. it is also important to remember the difference between jurisdictional and executive immunity. given the difficulties associated with the separation of commercial and state property, there remain several categories of state property, the public nature of which is not in doubt and to which economic (property) liability cannot be applied – diplomatic and consular premises and other state property that is used for diplomatic and consular activities of their missions, consulates, special missions, etc., whose immunity is enshrined in the vienna convention on diplomatic relations of 1961; military property, as well as property used for military purposes; property that is part of the cultural heritage of a foreign state or part of its archives, and property that is part of an exhibition of items of scientific, cultural or historical significance. in addition, economic responsibility in international law is not always associated with the negative consequences of unlawful behavior, because it can also be applied as a result of lawful behavior, causing harm to other subjects. thus, the economic responsibility of the state is on the verge of regulation of public and private law. this is its peculiarity and complexity of its application to the state. references: blazhevych, yu. yu. (2006). responsibility of states for internationally illegal actions: dis. … candidate of law. science. kyiv, 205 p. shaw, m. (2003). international law. 5th edition. cambridge: cambridge university press, 1288 p. draft articles on the responsibility of states for internationally wrongful acts with comments on them. yearbook of the international law commission. 2001. volume ii. part two. a / cn.4 / ser.a / 2001 / add.1 (part 2). p. 35. yearbook of the international law commission. 1973. vol. ii. a / cn.4 / ser .a / 1973 / add. l, p. 175. pellet, a. (2010). the definition of responsibility in international law. in j. crawford, a. pellet, s. ollesson (eds). the law of international responsibility. oxford: oxford university press, рр. 3−16. draft articles on jurisdictional immunities of states and their property, with commentaries, 1999. ilc report on jurisdictional immunities of states and their property // yearbook of international law commission. 1991. part 2. p. 56. kröll s. enforcement of awards / bungenberg / griebel / hobe / reinisch // international investment law. a handbook. chapter 11, sectionvii. ch beck – hart – nomos. 2015. p. 1502, para. 67. jurisdictional immunities of the state (germany v. italy: greece intervening). op. cit. p. 152, paras. 131–132. kröll s. enforcement of awards. op. cit. p. 1 499, para. 54. jurisdictional immunities of the state (germany v. italy: greece intervening). op. cit. p. 146–147, para. 113. sinclair i. the law of sovereign immunity // recueil des cours. 1980. ii. p. 218; badr gm state immunity. an analitical and prognostic view. the hague, 1984. p. 107–112; bouchez l.j. the nature and scope of state immunity from jurisdiction and execution // nyil, 1979. vol. x. p. 19. see.: verhoeven j. immunity from execution of foreign states in belgian law // ntil, 1979. vol. x. p. 73–84. for a detailed analysis of court cases, see.: sinclair i. op. cit. p. 221–241; crawford j. execution of judgments and foreign sovereign immunity // ajil, 1981. vol. 75. p. 835–858; seidl-hohenveldern i. state immunity: austria // nyil, 1979. vol. x. p. 106–109. an exception is the case law of switzerland, whose courts did not distinguish between the two types of immunity, but considered that immunity from enforcement measures did not differ in nature from jurisdictional immunity. see opinion of the swiss government on this issue, as described in the special rapporteur's second report on "jurisdictional immunities of states and their property ". report (second) of the special rapporteur of the ilc at its 40th session // doc. a / cn.4 / 422. p. 37. one of the federal court's judgments states: immunity from enforcement measures, unless coercive measures relate to property intended to carry out sovereign actions. " arab rep. of egypt v. cinetelevision international, 1979 (ilr 65, 1984. p. 425–430). see: art. 23 of the european convention on state immunity, 1972; art. 19 (1) of the 2004 un convention; art. 11 (1) (a) of the canadian state immunity act; art. 1610 (1) of the united states immunity act; art. 12 (3) of the english state immunity act. see: art. 12 (3) of the english state immunity act. crawford j. execution of judgments and foreign sovereign immunity // ajil, 1981. vol. 75. p. 861. explanatory report on the european convention on state immunity and the additional protocol. strasbourg, 1985. american foreign immunity act 1976, article 1610 (b) (2); british act 1978, article 13 (4); singapore act 1979, article 15 (4); pakistani law of 1981, article 14 (2) (b); south african law 1981 article 14 (3); canadian law of 1982, section 11 (1) (b); australian law 1985, article 32. canadian foreign state immunity act 1982, section 11 (3); american law of 1976, article 1611 (b) (2). baltic journal of economic studies 259 vol. 7 no. 5, 2021 case x v. rep. of philippines, 1977. see: materials on jurisdictional immunities of states and their property. ny 1982. p. 297–321. fox h. enforcement jurisdiction, foreign state property and diplomatic immunity // iclq, 1985. vol. 34. р. 117. case of birch shipping c. v. embassy of ur of tanzania, 1980. see.: trooboff. foreign state immunity // recueil des cours, 1986. p. 366. rep. of philippines, 1977 (materials on jurisdictional immunities of states and their property, ny 1981. p. 297–321); alcom v. colombia, judgment of the house of lords of great britain in 1984 (trocboff. op. cit. p. 365); mk v. state secretary of justice, 1986 (ruth donner. some recent case law concerning state immunity // finnish yil, 1994. p. 419); rep. of zaire v. duclaux. decision of the appeal. court, 1988 (ruth donner. op.cit. p. 420); foxworth. permanent mission of the rep. of uganda to the un. new york district court judgment, 1992. ilr . r . 99. 1994. r . 139. article 14 (4) of the english act. similar articles are contained in the south african law, article 15 (3); in pakistani law, article 15 (4); in the singapore act, article 14 (4). see: commentary on article 1611 (b) (house report n 94-1487, materials on jurisdictional immunities of states and their property. ny, 1982. p. 121). see: the law reform commission, report n 24. foreign state immunity. canberra, 1984. p. 81. this view is embodied in section 35 (1) of the australian foreign state immunity act. judgment of the court of appeal in trendtex trading corp. v. central bank of nigeria, 1977 and hispano americana mercantil sa v. central bank of nigeria, 1979 (ilr . v. 64. 1983. p. 221). case of the central bank of nigeria, 1975 (ilr 1984, v. 75. p. 34). case of englander v. statni banka ceskoslovenska, 1969. s. n. schreuer. op. cit. p. 157. case of the banque centrale de la rep. of turkey v. weston comp. of finance and invest. sa, 1978 (shvydak ng jurisdictional immunities of a foreign state in the judicial practice of france and switzerland // review. inform. bhіic3. № 49. s. 119-121); banco de la nacion (lima) c. banca cattolica del veneto (vicenza), 1984; libye c. actimon sa, 1985 (schreuer sn, op. cit. p. 157). the weston co. case de finance et d’inwestissement, sa v. la rep. de l’ecuador, 1993 (danner r . op. cit. p. 424). article 13 (4) of the english law; article 14 of the south african law; article 14 of the pakistani law; article 15 of the singapore act; article 11 of the canadian law; art. 32 of the australian law. ajil 1997. vol. 91. № 1. p. 187–188. morris v. the international law commission’s draft convention on the jurisdictional immunities of states and their property // the denver journal of international law and policy. v. 17. 1988-89; trooboff pd foreign state immunity. course report. vv 1986. p. 370-372; coad w. d. the canadian state immunity act // law and policy in international law. v. 14: one thousand one hundred and ninety-seven. 1983. p. 1209; schreuer ch state immunity: some recent developments. cambridge. 1988. p. 128-132; the law reform commission. report n 24. foreign state immunity. canberra 1984. p. 76. baltic journal of economic studies 85 vol. 7 no. 4, 2021 corresponding author: 1 state institution "luhansk taras shevchenko national university ", ukraine. е-mail: mila280176@ukr.net orcid: https://orcid.org/0000-0002-9388-5500 2 volodymyr dahl east ukrainian national university, ukraine. е-mail: serebriakki@ukr.net orcid: https://orcid.org/0000-0002-7025-2399 doi: https://doi.org/10.30525/2256-0742/2021-7-4-85-90 development of an approach to determining the level of capitalization of corporate enterprises on the basis of the evaluation mechanism lіudmуla zaіtseva1, kseniia sieriebriak2 abstract. the purpose of the article is to substantiate the approach to determining the level of capitalization of corporate enterprises on the basis of the evaluation mechanism. in accordance with the set goal the following tasks were solved: to evaluate the possibility of applying the existing approaches to the capitalization assessment, to substantiate the approach to the capitalization assessment of the enterprise taking into account the factors of assessment quality, and to determine the ways of increasing the capitalization of corporate enterprises. methodology. the methodological component of the study is the cost approach to assessing the capitalization of an enterprise. the proposed approach is based on the integration of private assessments of the enterprise value, including the use of financial statements, which makes it possible to identify areas to increase the level of capitalization at the expense of the enterprise's own efficiency. the method of dialectical approach in understanding the economic essence of enterprise capitalization through its general and specific functions, determining the directions of efficiency and tools to increase the capitalization of the enterprise. the results of assessing the level of corporate companies' capitalization serve as an information base for making managerial decisions on the choice of sources of increasing the market value in the future. practical implications. the study used the method of comparison and generalization in assessing the level of capitalization of the enterprise. the information base of the study are scientific developments of ukrainian and foreign authors on the assessment of the level of capitalization of the enterprise, the materials of ukrainian stock exchanges and official publications of financial statements of pjsc "ukrnafta", pjsc "turboatom". value/ originality. the proposed capitalization assessment model takes into account the factors of quality assessment and makes it possible to form an information platform for investors on forecasts of return on invested capital and risk on their shares. key words: сapitalization, market value, cost approach, corporate enterprises, enterprise value, valuation quality. jel classification: g12, g31, e22 1. introduction the process of globalization, characteristic of modern business, has determined the orientation of companies on the principles of sustainable development. currently, more and more ukrainian companies are moving towards the development of corporate transparency, social responsibility and environmental efficiency. the trends mentioned allow business entities to implement rational consumption and production models in order to effectively manage material risks and costs, facilitate access to new markets by strengthening competitiveness and improve reputation, relationships with stakeholders and investment attractiveness, which results in increasing companies’ capitalization. capitalization is a reflection of the market value of shares and an integral assessment of the company 's stability, profitability and competitiveness. the capitalization process is a diverse and dynamic phenomenon, the result of purposeful creation and management of companies' value. in the system of strategic and financial goals of enterprise development, preference is given to the growth of market capitalization as a key indicator of investment attractiveness by increasing the value of enterprises. the importance baltic journal of economic studies 86 vol. 7 no. 4, 2021 of this research direction is confirmed by the need to select the sources of capitalization and the factors that affect it. with the current state of the economy in ukraine and other countries where the financial market is in its infancy, the issue of assessing the level of capitalization becomes particularly relevant. there is a need for information on the future development of the company, which is used to monitor and analyze the expectations of investors and stakeholders in the value creation processes. however, the formation of a comprehensive system of capitalization assessment based on the cost approach and the identification of factors affecting the quality of assessment require further justification and development. the study is devoted to substantiation of theoretical provisions and development of recommendations for determining the level of companies' capitalization on the basis of the evaluation mechanism. the new model of capitalization valuation is based on the cost approach and the integration of private valuations of the enterprise by the methods of expenses, income and market methods, taking into account the quality factor of valuation. the practice of using the evaluation mechanism was demonstrated on the example of the activities of pjsc "ukrnafta" and pjsc "turboatom". the financial records of the companies for 2016–2020 were used as initial data. 2. analysis of the current state of the level of enterprises' market capitalization with the help of the exchange mechanism the analysis of modern scientific sources devoted to the problems of capitalization assessment allows us to form certain generalizations about the essence of capitalization, approaches and methods of enterprise capitalization assessment. works of many scientists are devoted to the study of capitalization as an economic category, as well as the classification of criteria and approaches to the assessment of the value and capitalization of the enterprise, but the uncertainty increases the relevance of this definition. the economic literature presents such directions of understanding of "capitalization": the process of transforming resources into value, which brings additional value (gritsenko, 2009), (mocherny, 2000), (buleev & bryukhovetskaya, 2011); the process of transformation of income into the total capital of the enterprise (rosenberg, 1997), (kozoriz, 2007), (davydenko, 2016); category of financial management (blank, 2004), (melnyk, 2009); basic indicator for assessing the value of the enterprise in the stock market (shevchenko, 2008), (pronko, kolesnik & samborskaya, 2021). in modern economic development the importance of the process of corporate enterprises capitalization is increasing, the task of which is to provide a return on invested capital in the form of an increase in the market value of shares on the stock market by improving their efficiency, the quality of corporate governance, openness and transparency. based on the strategic goal of the company, i.e., the growth of its market value, the study and analysis of changes in market capitalization is a priority. capitalization is manifested through its functions: general (evaluation, forecasting, strategic, informational, social, stimulating, innovative, investment) and specific (personal for each species, for real – mobilization, reproduction, distribution, for marketing – image, protective, identification; for market – commercial, generating, integration), emphasizing the functional features of the above types (pronko, kolesnik & samborskaya, 2021), (kryvovyazyuk, pushkarchuk & volynchuk, 2017), (lishchikova, nikulina, orlova & chistnikova, 2015). particular attention needs to be paid to assessing the level of market capitalization, which is manifested through the exchange mechanism. market capitali zation means the market value of all shares of an enterprise. that is, the market capitalization of enterprises is inextricably linked to the level of development of the stock market, changes in regulation and the efficiency of issuers. however, the growth of corporate capitalization in ukraine is constrained by the low level of stock market development, high risk of capital accumulation and its use. the ukrainian stock market is insufficiently connected with the real processes in the economy, as evidenced by the dynamics of gdp and the volume of trade in shares during 2010–2019 in ukraine (figure 1). the vast majority of ukrainian issuers have a low percentage of free float shares. the level of free float is shown on the example of companies that make up the index basket of the ukrainian stock exchange (table 1). table 1 level of free float companies of the index basket of the ukrainian stock exchange as of february 2021 тіcker ux enterprise, pjsc index weight, % free-float, % bavl raiffeisen bank aval 20,16 2,0 ceen centerenergo 24,43 22,0 doen donbasenergo 2,37 14,0 msich мotor sich 20,82 20,5 tatm turboatom 4,29 3,5 unaf ukrnafta 27,93 7,0 thus, the level of free float of 2 out of 6 index participants is less than 5%, which indicates a tendency towards price speculation and low liquidity of corporate securities, a low level of free float. baltic journal of economic studies 87 vol. 7 no. 4, 2021 the data from the analysis of the index basket of the ukrainian stock exchange indicate the high cost of attracting funds through the issue of shares and the lack of economic incentives to increase free float by ukrainian companies. the costs associated with servicing a stock offering are higher than the costs of debt, even allowing for the possibility of offering shares at a higher price during periods of favorable market conditions (zaitseva, 2021). in ukraine there is practically no real attraction of capital through shares on the stock market, it is cheaper and easier for issuers to raise funds on foreign markets, through bonds, loans, direct investments, etc. attracting capital through shares is almost exclusively an over-the-counter method, in ukraine not a single ipo was carried out. the stock market in ukraine was virtually destroyed, the volume of exchange trading in 2019 was only 32 billion uah (17 times less than in 2010, (figure 1)). the liquidity of the stock market in ukraine is negatively affected by the unfavorable investment climate, as well as the lack of proper investor confidence. however, the reforms in ukraine in 2014–2020 restored investor confidence. the volume of trades on stock exchanges as of the end of 2014 amounted to uah 816834 million, including: for shares – uah 34516.5 million, and at the end of 2019 the volume of trades on stock exchanges decreased to uah 277034 million, including: for shares – up to uah 332 million, ie by 99.3%. the limited nature of the domestic stock market (figure 2) and low efficiency of issuers reduce the role of the market value of shares as an indicator of the companies' capitalization. the efficiency of an enterprise indirectly affects the level of market capitalization. this is confirmed by the high dynamics of the market capitalization of enterprises, which does not allow an objective assessment of its level. 3. comprehensive approach to assessing the capitalization of enterprises capitalization, as a process, is related to the various mechanisms and methods of moving the value of an enterprise, which are evaluated through its internal potential and the value of its shares. in modern practice, to 0 1000 2000 3000 4000 1 2 3 4 5 6 7 8 9 10 1082,57 1302,01 1411,24 1454,93 1566,73 1979,46 2383,18 2982,92 3558,7 3974,56 556,25 636,07 591,86 171,1 415,5 462,28 482,00 126,61 79,62 32,5 ye ar s, 2 01 0 – 20 19 uah billion volume of exchange trading gdp figure 1. comparative dynamics of trading volume of issuers' shares and level of gdp in ukraine in 2010–2019 in billion uah 13,66 19,66 21,43 29,21 3,2 0,82 0,55 0,22 0,04 0,04 0 5 10 15 20 25 30 35 1 2 3 4 5 6 7 8 9 10 % % years, 2011–2020 figure 2. dynamics of capitalization level of listed companies as % of gdp of ukraine from 2011 to 2020 baltic journal of economic studies 88 vol. 7 no. 4, 2021 determine the size of the capitalization of the enterprise there used exchange, over-the-counter, evaluation and research mechanisms. the exchange mechanism is based on the actions of speculators in buying and selling shares traded on the exchange. the otc mechanism is based on agreements on the purchase and sale of shares of the company, which are not traded on the stock market and have no liquidity. evaluation and research mechanisms calculate the potential value of the company 's capitalization, which can be realized in the case of a purchase and sale transactions of the company or its share (sabadireva, 2017). actual problem of capitalization level assessment is the justification of cost approach, which allows to estimate the level of capitalization of enterprise in the context of the target vector of management, taking into account the development of the ukrainian stock market and performance parameters of corporate enterprises. the valuation mechanism of capitalization of corporate enterprises is considered through the integrated use of the following methods: cost (property) (value of assets and liabilities) (balitska & pyskun, 2020), profitable (by analogy) and market (in terms of future income), which are based on factors that generate added value. the practice of using the evaluation mechanism is demonstrated by the example of pjsc ukrnafta and pjsc turboatom (figure 3). the graphical interpretation of the results of capitalization level assessment (figure 1) shows the greatest discrepancy between the indicators calculated by different approaches, in particular, the capitalization assessment by the market approach is overestimated. this is due to the following: – the capitalization ratio of the cost approach is static and characterizes the past value, does not take into account the market situation at the valuation date and has no relationship with the activity results. in essence, it determines the availability of investment resources of the enterprise, i.e., the minimum level of capitalization. under this approach, the capitalization of an enterprise is calculated as the sum of the values of all assets minus the value of liabilities. accounting data and financial statements are the main source of information. the use of the cost method is justified if the book and market value of assets do not differ significantly. however, the book value of assets often does not correspond to their market value. therefore, the calculated cost of the enterprise should be adjusted for the cost of goodwill; – the capitalization ratio according to the profit approach is a dynamic value that characterizes the value of future cash flows and takes into account the time horizon, the discount rate and varies depending on the results of the enterprise. however, it does not take into account market conditions; – market capitalization ratio is calculated on the basis of real market data and takes into account the influence of industry factors on stock prices, risk adjustments, comparisons with similar companies, but it is acceptable in a developed stock market. it should be borne in mind that to assess the capitalization, the discount rate is taken in the amount of the cost of raising equity: (expected by investors rate of return), as a result, for the same company discount rates may be different. analysis of the strength of the correlation between the quantitative values of the level of capitalization of pjsc "ukrnafta" on the cost and profit approach (r = -0.45), and the profit and market approach (r = -0.27) indicate a negative relations, the relations between cost and market (r = -0.63) demonstrates the pjsc turboatom pjsc turboatom pjsc turboatom pjsc ukrnafta pjsc ukrnafta pjsc ukrnafta 0 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 2016 2017 2018 2019 2020 figure 3. dynamics of changes in the level of capitalization of pjsc "ukrnafta" and pjsc "turboatom" in terms of cost, income and market approaches from 2016 to 2020 in millions of uah baltic journal of economic studies 89 vol. 7 no. 4, 2021 average level of correlation of indicators of capitalization, which is evidence of the need for applications of these approaches in the complex. based on the above, a conclusion is made about the feasibility of applying a comprehensive cost approach to estimating the capitalization of the enterprise, which is based on the procedure of integration of private estimates of its value. a comprehensive approach to assessing the value of the enterprise based on a combination of cost (property), income and market methods makes it possible to exclude a one-sided evaluation and practically assess the market capitalization of the enterprise and obtain a reliable source of information for its forecasting. in the proposed approach, the sequence of capitalization assessment of the enterprise is represented by the following stages: 1. formation of information based on the indicators of corporate integrated and financial reporting, taking into account the evaluation priorities and its inherent limitations. 2. determining the quality criterion for assessing the capitalization of the enterprise on the basis of the integrated error of the evaluation results by different methods (kostyrko, 2012) is presented in the form of functional dependence (ib): ib = + + min,а аm d m d m1 1 2 2 2 3 2 2 2 2 ( )β δ β δ β δ δ δ →( ) ( ) ( ) ( ) + ( ) � � (1) where ib – functional dependence value of the enterprise; α α1 2, , β β β1 2 3, , – significance coefficient (α α1 2 1+ = ; β β β1 2 3 1+ + = ); δm, δd –deviation from the actual value of the enterprise, calculated on the basis of property, income and market approaches. comprehensive assessment of the capitalization of the enterprise is carried out on the basis of the cost approach by different methods through the use of weights: v wcv wcv wc vm c c i m m  = + +� , (2) where wc wc wcc i m, , weight coefficients (wc) of value calculated according to cost (c), income (i) and market approaches (m) depending on priorities; v v vc i m, , – the enterprise value (v) is calculated on the basis of cost (с), income (i) and market approaches (m). calculation of a comprehensive assessment of the capitalization of pjsc "ukrnafta" (table 2). 3. comprehensive assessment of the capitalization of the enterprise taking into account the coefficient of quality of assessment by different methods: ce b cec p q= * , (3) where ceec – is the complex estimation of enterprise capitalization (ceec), cq – evaluation quality coefficient (cq). the presented calculations of pjsc "ukrnafta" capitalization indicate the greatest differences between the value indicators calculated in accordance with the income and market approaches. the market value of the enterprise according to the market approach is too high, so a comprehensive approach based on the procedure of integrating private estimates of its value is the most effective approach to estimating the company 's capitalization. the use of the proposed approach to the assessment of enterprise capitalization makes it possible to objectively determine the tendencies of its change for further consideration when forecasting the market value. fluctuations in the dynamics of the level of capitalization of pjsc "ukrnafta" indicate the need to increase its level at the expense of the internal value potential. the main directions of increasing the level of capitalization are the introduction of financial methods to increase the capitalization of enterprises, the stimulation of innovative development, the introduction of innovative methods of financial management. of particular importance in the context of sustainable development is intellectual capital, which is the key to the intensive development of the enterprise and the growth of its market value. this is confirmed by international and european standards, which provide for the assessment of both the enterprise as a whole, and its individual parts. table 2 the results of the comprehensive assessment of the capitalization of pjsc «ukrnafta» for 2016–2020, million uah approach to evaluation 2016 2017 2018 2019 2020 cost 3 090 728 6 919 6 290 9 752 profitable (-1073) 3 1 146 (-637) 1 341 market 560 993 765 326 569 399 732 084 1 057 455 comprehensive cost assessment 4020 649 3816 5301 1140 deviations from the comprehensive assessment cost 930 -79 -3102 -989 -8611 profitable 5093 646 2670 5938 -201market -556972 -7646762 -56558 -726782 -1056314 baltic journal of economic studies 90 vol. 7 no. 4, 2021 4. conclusion actualization of the issue of assessing the capitalization level of domestic enterprises is related to the wide recognition of this process in international practice through the possibility of characterizing the competitiveness, profitability and investment attractiveness of the economic entity. in modern practice, the following mechanisms are used to determine the level of enterprise capitalization: exchange mechanism, otc or over-the-counter mechanism, valuation mechanism and research mechanism. the exchange mechanism is based on the actions of speculators who buy and sell shares traded on the exchange. the otc mechanism is based on agreements to buy and sell shares of companies that are not traded on the stock market and have no liquidity. the еvaluation and research mechanisms calculate the potential capitalization ratio of the company, which can be realized in the case of the sale of the enterprise or part of it. the assessment mechanism is implemented through such approaches: the cost approach (property), the income approach and the market approach – which are based on value-added factors. it has been substantiated that for a more objective and complete assessment of enterprise’s capitalization it is appropriate to use the evaluation mechanism, which is based on the use of a costs-oriented approach and takes into account the factors of evaluation quality. it has been proved that the market value is an indicator of capitalization. the comprehensive assessment of enterprise capitalization is based on the use of an integral index, which takes into account the quality of assessment by different methods. as part of the study of market value dynamics of corporate enterprises, it is important to compare capitalization with changes in internal and external factors affecting the potential for increasing capitalization. the developed model of the complex assessment of the capitalization of corporate enterprises is based on the cost-based approach and the integration of private indicators of value calculated by different methods, taking into account the quality factors of assessment. the results of capitalization assessment allow forming objective information for making managerial decisions concerning the choice of capitalization increase sources and forecasting the profitability of invested capital. references: balitska, v., & pyskun, l. (2020). diagnostics of capitalization of economic agents of ukraine based on assets and equity funds. investytsii: praktyka ta dosvid, 24, 26–33. blank, i. (2004). financial management. kyiv: elga, 665 р. buleev, і., &  bryukhovetskaya, n. (2011). capitalization of enterprises: theory and practice. donetsk: donuep, 328 р. davydenko, n. (2016). conceptual approaches to capitalization of enterprises. economic journal of the lesia ukrainka east european national university, 1, 62–67. gritsenko, a. (2009). capitalization and socialization of the economy in retrospect and perspective. methodology, theory and practice of sociological analysis of modern society, 15, 191–195. kostyrko, l. (2012). financial mechanism of sustainable development of enterprises: strategic guidelines, support systems, adaptation. lugansk: knowledge publishing house, 474 р. kozoriz, m. (2007). the role and functions of capitalization in ensuring the economic development of economic entities. regional economy, 2, 42–48. kryvovyazyuk, i., pushkarchuk, yu., & volynchuk, v. (2017). capitalization as the basis for dynamic development of enterprises. economic forum, 1, 135–144. lishchikova, yu., nikulina, yu., orlova, a., & chistnikova, i. (2015). capitalization assessment as a tool for managing the economic development of the region. mediterranean social science journal, 6 (3 s5), 93. melnyk, l. (2009). concretization of the concepts of capitalization of the enterprise. visnyk of khmelnytsky national university, 4(3), 24–29. mocherny, s. (2000). economic encyclopedia: in 3 volumes. kyiv: publishing center academy, 864 р. pronko, l., kolesnik, t., & samborskaya, o. (2021). the essence and concept of the capitalization of companies, its types and methods of assessment. european journal of sustainable development, 10(1), 551. rosenberg, j. (1997). investments: glossary. moscow: infra-m, 472 p. sabadireva, a. (2017). capitalization of enterprise potential. mechanism of economic regulation, 1, 48–59. shevchenko, n. (2008). features of the study of the essence of capitalization of industrial enterprises. regionalna ekonomika, 3, 175–181. zaitseva, l. (2021). o influence of free-float on market capitalization of companies. young scientist, 3, 100–106. baltic journal of economic studies 41 vol. 7 no. 5, 2021 corresponding author: 1 administrative cassation court within the supreme court, ukraine. e-mail: irina05072015@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-5-41-48 balancing the interests of taxpayers and tax authorities as the method of minimizing tax disputes iryna vasylieva1 abstract. the author notes in the article that an increase in the number of tax disputes is influenced by many factors, including the constantly changing tax laws of ukraine, low legal culture of taxpayers, the lack of professional training of representatives of tax authorities involved in tax audits, as the tax authority must correctly assess the circumstances, available facts and correctly apply to the facts of the current legal provisions, while preventing the abuse of power in making the relevant decision, which must be based on the public interest. a qualitative legislative regulation of the indisputable procedure for the collection of financial penalties will occur when financial penalties will be charged incontestably only in the absence of reasonable objections of the taxpayer, filed within the prescribed legal deadlines, that is, in the absence of a tax dispute. finding a reasonable balance between the rights of taxpayers and the powers of the tax authorities should come to the fore when making changes to the tax legislation. the basis for achieving a balance between the interests of taxpayers and tax authorities can be served by proper explanatory and informational work. the state should develop a set of special measures to adapt taxpayers and employees of the tax authorities themselves to the action of the new tax legislation, regarding the corresponding change in their mentality, improvement of business cooperation and mutual understanding between them, increasing their responsibility for the performance of their tax obligations to the state and the realization of the rights provided by law. the institution of preliminary conclusions of tax authorities is proposed, which will simplify the assessment of tax losses by taxpayers in the planning of economic activities. the taxpayer submits an inquiry about the tax consequences of planned transactions and transactions with future counterparties for their riskiness. the tax authority then prepares and gives an opinion within two weeks. key words: tax dispute, balance of interests, taxpayer, tax authority, tax law, preliminary finding, public and private interests. jel classification: h20, k34 1. introduction payment of taxes is seen as an appropriate payment for the benefits and conditions created by society and used by the taxpayer to obtain property benefits or to provide a variety of vital needs. this is only possible if there is a fair balance between the interests of the taxpayer and the state, which is achieved by having clear and transparent "game rules" and paying great attention to protecting the rights of the taxpayer as a weak party in tax legal relations. the principle of a fair balance between the interests of the taxpayer and the state has not received formal written enshrinement in the normative legal acts of ukraine, but is considered to be effective because it is an extension of the component of the rule of law – the principle of proportionality. the european court of human rights has repeatedly pointed out in its decisions that the requirement of a fair balance between the general interest and the fundamental rights of the individual is inherent in all the articles of the convention for the protection of human rights and fundamental freedoms. in addition, the echr notes that the balance will not be met if individuals bear an excessive burden. in considering disputes, the echr always makes an assessment of the balance between public and private interest, with the main such assessment being the real balance of interests of the authorities with respect to enterprises, institutions, organizations and individuals. the principle of fair balance in the relationship between taxpayers and the state, despite the lack of enshrined in the legal acts, is no longer something unusual for law enforcement practice, although it remains an uncommon argument for arguing the legal position of taxpayers. baltic journal of economic studies 42 vol. 7 no. 5, 2021 in recent years, there has been an increasing trend in the number of tax disputes in ukraine. in previous years, given the number of cases considered by the administrative cassation court within the supreme court, it is possible to see how the dynamics of resolving tax disputes in court has changed. it should be noted that the increase in the number of tax disputes occurs against the background of an increase in the total number of appeals of individuals to administrative courts and an increase in the number of public-law disputes in general. the increase in the number of tax disputes is affected by many factors, including the constantly changing tax laws of ukraine, the low legal culture of taxpayers, the lack of professional training of representatives of tax authorities involved in carrying out tax audits, as the tax authority must correctly assess the circumstances, the available facts and correctly apply to the facts of the current legal provisions, not allowing the abuse of power in making the decision, which must be based on the public interest. by balancing private and public interests in the tax sphere, the presumption of legitimacy of the taxpayer's decision will reduce the number of court cases in which the parties are the taxpayer and the supervisory authority. 2. analysis of recent research and publications the issue of tax dispute resolution is a topical and studied issue in the domestic literature, in particular by such scholars as o. m. bondarenko, o. o. dmytryk, v. o. kurylo, m. p. kucheriavenko, k. v. minaieva, a. o. monaienko, ye. a. usenko. in a market economy, taxes as a component of the system of public finance are one of the most effective and almost the only way to influence economic processes. at the same time, economic and social goals are pursued (for example, duties on imported cars, as a rule, are introduced to support domestic producers, and the reduction of income tax on bank deposits should attract funds of citizens to commercial banks). apart from taxes, the state has essentially no other methods of raising revenue for the state budget. the state can also use government loans to cover expenses, but they must be repaid and interest must be paid, which also requires additional revenues. under special circumstances, the authorities resort to putting money into circulation, but this is associated with the country's dire economic consequences – inflation. as a result, taxes remain the main income of the country. in market relations the dominant role in ensuring the balance of socio-economic development of the state belongs to fiscal instruments. the balance of the state economy is an integral concept, which includes such components as consistency of interests of different categories of participants of economic relations, optimal proportions between the sizes of all parts of the economic system, a reasonable ratio of its qualitative characteristics, the consistency of the pace of development of individual subsystems. the topic of violations of the balance of the tax system remains insufficiently developed. of course, there is a need in science to study the processes, phenomena and problems that violate the balance of the tax system of the state and thereby create a threat to the economic security of the country. the imbalance of the tax system creates unequal tax burdens and, as a result, leads to an increase in the shadow sector of the economy, tax evasion, and a decrease in tax revenues. this increases the real and potential threats to the economic security of the state. causes and conditions resulting in the imbalance of the tax system not only make it difficult to provide budget revenues in the planned volumes, but also make it impossible to fulfill the strategic objectives of the state as a whole. such reasons include: uneven distribution of the tax burden; complexity and inefficiency of the tax administration system, which leads to tax disputes. a notable problem of the domestic tax system remains the instability and ambiguity of tax legislation. a clearer and more comprehensible formulation of legal provisions in the tax legislation would contribute to the "correct application of law," which would comply with the practice of the european court of human rights (paragraph 54 of the judgment of the echr of november 2, 2004 in the case "tregubenko v. ukraine"). the increase in the number of cases in the sphere of tax legal relations is also caused primarily by the growth of cases related to the incorrect application of tax legislation. in ukraine, most tax disputes are initiated by the tax authorities themselves, in particular – these are disputes on the collection of obligatory payments and the application of financial penalties for violation of tax legislation. at the same time, the ratio of disputes initiated by the tax authorities and taxpayers should give rise to the view that taxpayers are not active in protecting their rights and interests violated by the tax authorities. thus, taxpayers have recently been trying not to bring their tax disputes to court due to the fact that it will lead to a longer time of their resolution, the payment of court fees, as well as the cost of legal aid. 3. ways to reduce the number of tax disputes ways to reduce the number of tax disputes can be different. but first of all, these should be measures aimed at improving the current tax legislation by making qualitative and clearer changes to it, which would further contribute to the correct application of tax legislation. in the decision of january 14, 2011 in the baltic journal of economic studies 43 vol. 7 no. 5, 2021 case "shchokin v. ukraine," the echr noted that the national legislation of the state must be clear and coherent, as well as the requirement of the national authorities to apply an approach that would be most favorable to the applicant. in addition to the need to clarify the principles of taxation, directly related to the formation of the psychology of conscientious taxpayers, and thus improve tax culture in society, when making changes to the tax code of ukraine it is necessary to clarify the tax legislation in matters of more complete definition of the rights and obligations of the main subjects of tax legal relations – taxpayers and tax authorities. improvement of the legal status of the taxpayer and the powers of the tax authorities may have an impact on reducing the number of tax disputes. according to article 23 of the constitution of ukraine, every person shall have the right to free development of his personality, provided that the rights and freedoms of other persons are not thus violated, and shall have duties to society, in which free and comprehensive development of his personality shall be guaranteed. therefore, the tax code of ukraine, on the one hand, establishes the limits of permitted behavior of taxpayers and certain guarantees of protection of their rights in relations related to the execution of the constitutional duty to pay taxes, on the other hand, establishes the limits of powers for the tax authority. the problem of establishing the balance of interests and opportunities of the main participants of tax legal relations, although it was the focus of attention during the development of the tax code of ukraine, but not solved sufficiently. the ecthr is guided by the principle of a fair balance between the private and public interest, as there is always a wide margin of appreciation in the tax sphere in states. deprivation of property, interference in the use of property, control over the use of property by the state must be justified by the relevant purpose pursued by the state in implementing control measures, as well as be consistent with the principle of a fair balance between private and public interests (echr judgment in sporrong and lonnroth v. sweden, 1982). the state has wide discretion both in choosing the method of taking control measures and in determining whether the effects of such measures are justified in view of the public interest in achieving the purpose of the law (echr decisions in zvolský and zvolská v. the czech republic, 2002). the task of the tax code of ukraine no. 2755-vi of december 2, 2010, is to ensure a reasonable balance between the interests and rights of taxpayers and the powers of the tax authorities. this, in turn, is the main reason for the effective and fair functioning of the fiscal system of the state. moreover, fairness of tax legislation should play a decisive role in overcoming the negative attitude of taxpayers to the tax system. as noted by a. p. balakina, the area of tax relations is an area of close collision and interaction of private and public subjects. in a democratic social state, public subjects in the establishment of regulatory requirements addressed to private subjects, must take into account and respect their interests (balakina, 2005). in tax law, the relationship between the subjects of private and public law is based on the principles of inequality of participants of tax legal relations, their subordinate nature. at the same time it is necessary to contrast the subjects of private and public law. it is more constructive to find an optimal combination of their interests, development of effective ways of their interaction. the state through the mechanism of taxation provides its fiscal interests on formation of funds in the centralized monetary fund to implement its own tasks and functions. establishment of tax burden contributes to the realization of the common good, the implementation of public functions by the state, as it realizes the public interest of all members of society. thus, to date, one of the main objectives to reduce the number of tax disputes should be the development of conceptual foundations for reforming tax relations in order to achieve the maximum balance of interests of the parties involved in the process of taxation. finding a reasonable balance between the rights of taxpayers and the powers of the tax authorities means the need to limit the coercive measures applied to the taxpayer to the extent necessary to ensure that the state performs its functions. this principle should be fundamental in the further development of the provisions of the tax code of ukraine. 4. measures to ensure the fulfillment of the tax obligation in this regard, one of the main issues that should be emphasized in terms of the power of the tax authorities is the possibility of using an indisputable order to address only some issues of tax administration (in particular, on the application of measures to ensure compliance with tax obligations). this has become especially relevant recently in connection with the application of administrative seizure of funds and property of taxpayers. thus, according to part 94.1 of article 94 of the tax code of ukraine the administrative seizure of property of the taxpayer is an exceptional way to ensure the execution of the taxpayer of his obligations defined by law (tax code of ukraine from december 2, 2010 № 2755-vi). seizure of property may be applied if one of the following circumstances is found: the taxpayer violates the rules of alienation of property that is in tax pledge; baltic journal of economic studies 44 vol. 7 no. 5, 2021 an individual with a tax debt goes abroad; the taxpayer refuses to conduct a documentary or actual inspection when there are legitimate grounds for it or to allow officials of the supervisory authority; there are no permits (licenses) to carry out business activities, as well as in the absence of registers of settlement transactions and/or software registers of settlement transactions registered in the manner prescribed by law, except in cases specified by law; there is no registration of the person as a taxpayer with the controlling authority, if such registration is mandatory under this code, or when the taxpayer, who received a tax notice or has a tax debt, performs actions to transfer property outside of ukraine, conceal it or transfer it to other persons; the taxpayer refuses to conduct an inspection of the state of storage of property in tax pledge; the taxpayer does not allow the tax manager to draw up an act of description of the property transferred to tax pledge (tax code of ukraine from december 2, 2010 № 2755-vi). the tax code of ukraine in article 20 establishes the rights of supervising bodies. below are only part of them (tax code of ukraine from december 2, 2010 № 2755-vi): – to invite taxpayers, levies, payments or their representatives to check the accuracy of accrual and timely payment of taxes, charges, payments, compliance with legislation on other issues, including legislation in the field of prevention and counteraction to legalization (laundering) of proceeds of crime or terrorist financing, control over compliance with which is assigned to the regulatory authorities; – analyze the financial condition of a taxpayer who has a tax debt and the condition of securing such debt with a tax lien; – receive free of charge information, documents and materials on taxpayers from state bodies, local authorities, enterprises, institutions and organizations of all forms of ownership and their officials, including bodies that maintain relevant state registers (cadastres), and in cases specified in this code – with respect to heads of legal entities or permanent representations of non-resident debtors; – request and examine during inspections primary documents used in accounting, registers, financial, statistical and other reports related to the calculation and payment of taxes, fees, payments, compliance with the requirements of the legislation, control over compliance with which is entrusted to the supervisory authorities; – receive from taxpayers, single contribution payers and provide, to the extent provided by law, documents in electronic form; – when conducting inspections of taxpayers – individuals, as well as officials of taxpayers – legal entities and single contribution payers to check identity documents, as well as documents confirming the position of officials and/or persons actually carrying out settlement operations; – require during audits of taxpayers under audit, to conduct an inventory of fixed assets, inventories, funds, withdrawal of balances of inventories, cash, using the information and documents from such an inventory on the results of such audits or during subsequent tax control measures; – apply to court, including filing lawsuits against enterprises, institutions, organizations and individuals regarding the invalidation of disputed transactions and the application of certain legislative measures related to the invalidation of transactions, as well as the recovery of funds received for null contracts to the state. the problem of minimization of tax disputes, primarily resolved by administrative procedure, the state is trying to solve through the adoption of the law of ukraine "on administrative procedure", thereby regulating the process of making the appropriate decision and procedural features of the application of a person to the subject of authority. however, the adoption of tax notices-decisions is regulated by the tax code of ukraine, which is a special act to apply compared to the law "on administrative procedure". some authors justify the provision that the resolution of tax disputes should not be carried out otherwise than through the courts. for example, i. v. panova believes that the tax authorities should violate administrative proceedings and within the prescribed statutory time limits to submit to the judicial authorities a statement of claim for the application of penalties for violation of tax legislation (panova, 2000). s. a. herasymenko believes that the indisputable procedure for the recovery of arrears is a consequence of the fact that the legislator proceeds from the presumption of bad faith and bad faith of taxpayers. in this case, on the contrary, the legislator idealizes the level of competence, integrity and impartiality of tax officials (herasymenko, 1994). there is also a discussion that measures to enforce taxpayers' tax obligations violate their rights and interests, limit their economic activities in terms of the use of funds for payment for goods and semi goods, as well as property that can be alienated in the process of activity, resulting in the eventual narrowing of rights of taxpayers. however, according to the decision of the constitutional court of ukraine of june 12, 2012 № 13-rp/2012 on the case on the constitutional representation of 53 people's deputies of ukraine on compliance with the constitution of ukraine (constitutionality) of certain provisions of the tax code of ukraine full administrative seizure of property of the taxpayer is a ban on the realization of rights of disposal or use of his property; in this case, the risk associated with the loss of functional or consumer baltic journal of economic studies 45 vol. 7 no. 5, 2021 qualities of such property is borne by the body that made the decision on such a ban (decisions of the constitutional court of ukraine of june 12, 2012). according to paragraph 94.10 of article 94 of the tax code of ukraine, the seizure of property may be imposed by decision of the head of the state tax service (his deputy), the validity of which should be verified by the court within 96 hours. section 119.2 of article 119 of the code provides for the imposition of fines for failure to submit, submitting within the prescribed period, not in full, with incorrect information or errors in the tax returns on the amount of income accrued (paid) in favor of the taxpayer, the amount of tax withheld from them. the constitutional court of ukraine in its decision recognized the provisions of the tax code of ukraine as compliant with the constitution of ukraine (being constitutional), namely (decisions of the constitutional court of ukraine of june 12, 2012): – subparagraph 94.2.2 of paragraph 94.2 of article 94, according to which administrative seizure of property of the taxpayer is applicable if it turns out that an individual with tax debt is going abroad; – subparagraph 94.2.5 of paragraph 94.2 of article 94, according to which an administrative seizure of property of the taxpayer may be applied if it is found that the registration of the person as a taxpayer in the body of the state tax service, if such registration is mandatory under this code, or when the taxpayer, who received the tax notice or having tax debt, committed actions to transfer property outside of ukraine, its concealment or transfer to other persons. given the above views, it should be noted that it is certainly not advisable to transfer to the judiciary the full control over the activities of the tax authorities. 5. ways to harmonize relations between taxpayers and tax authorities there is also a discussion in the science of tax law about the need to amend the tax code of ukraine and the introduction of a mechanism of indisputable collection of financial penalties for certain types of violations of tax laws, but, in the author's opinion, such a procedure should be clearly regulated by tax law to avoid contradictory situations in practice. if such actions the tax authorities will be entitled to perform, it will violate the sphere of interests of the taxpayer. therefore, under such conditions, the ways to protect the taxpayer's rights in the collection of taxes and financial penalties from him in an incontestable manner are of particular importance. taxpayers should be explicitly given the opportunity to appeal the tax notification-decision of the supervisory authority to recover financial penalties from him in the case of his disagreement with such a notification-decision, and the time frame must be sufficient for the implementation of this right. according to part 2 of article 124 of the constitution of ukraine, the jurisdiction of the courts extends to any legal dispute and to any criminal charge. in cases stipulated by law, the courts also hear other cases. in other words, the indisputable procedure for the collection of financial penalties will violate the taxpayer's right to appeal against the relevant decision of the tax authority. according to the author, a qualitative legislative regulation of the indisputable procedure for the collection of financial penalties will take place, provided that financial penalties will be charged incontestably only in the absence of reasonable objections of the taxpayer, filed within the prescribed legal period, that is, in the absence of a tax dispute. in this case, restrictions on the right to judicial protection will meet the requirements of necessity and sufficiency, valid for the given period and ensuring a balance between public and private interests. at the same time, as long as the tax authorities are not interested in settling tax disputes out of court – by entering into conciliation agreements, the situation will not change, but there will only be changes in the structure of tax disputes resolved in court – instead of claims of tax authorities to recover financial penalties, a large number of taxpayer lawsuits on the appeal of such decisions will appear. thus, the search for a reasonable balance between the rights of taxpayers and the powers of the tax authorities should come to the fore when making changes to tax legislation. it is about the need to harmonize tax relations, which is understood as the maximum convergence of divergent and in some cases directly opposite interests of all parties to these relations involved in the taxation process (the state represented by the tax authorities, on the one hand, and taxpayers, on the other hand). harmonization of tax relations is one of the main conditions for successful implementation of any tax reform. the state, accordingly, should develop a set of special measures to adapt taxpayers and employees of the tax authorities themselves to the action of the new tax legislation, concerning an appropriate change in their mentality, improvement of business cooperation and mutual understanding between them, increasing their responsibility for the performance of their tax obligations to the state and the realization of the rights provided by law. the taxpayer must not see tax officials as adversaries, but as partners in the tax process. that is why any tax service must be strictly guided and guided not only to conduct periodic information campaigns of explanatory nature, dedicated mainly to the latest changes in tax law, reports and tax returns, and therefore having a purely situational nature, but to create a compre hensive, flexible and mobile system of quality baltic journal of economic studies 46 vol. 7 no. 5, 2021 information service, providing the necessary methodological and advisory assistance to taxpayers. 6. foreign experience of obtaining information from tax authorities active use by the taxpayer of his rights to obtain information from the tax authorities, for example, in connection with the taxation of income from agreements to be concluded in the future will allow to solve the problem before it arises, which will eliminate the need to resolve the dispute with the tax authority. in this case, it is advisable to use the experience of developed countries in this area. thus, in foreign tax law, there are special mechanisms that allow a bona fide taxpayer to protect himself from illegal requirements of tax authorities. for example, to exercise the right to obtain information necessary to fulfill tax obligations, the ministry of economy, money and industry of france has organized 11 information service centers for taxpayers. these centers provide services to inform taxpayers and provide them with necessary instructions on tax and financial services. similar taxpayer service centers operate in ukraine as well. in addition, in france, there is a procedure called fiscal rescript, which gives any taxpayer the opportunity to ask the administration about the legality of a certain economic operation that he intends to carry out in the future. that is, any taxpayer can obtain written advice from the tax administration before entering into a contract or agreement, providing it with all the necessary documents. the administration must respond by stating whether it believes the transaction was an abuse of rights. the deadline for the administration's response is six months. if the taxpayer is not provided with a response within this period, the taxpayer has grounds to believe that the agreement in question is legitimate. if the administration has not raised any objection or if it has not responded in time, it is deprived of the opportunity to qualify the transaction in question as an abuse of right. it is clear that such a period of consideration of the said request in the ukrainian reality is too long, which will slow down all business processes of taxpayers, but the period of a week is quite acceptable for ukrainian taxpayers, because business processes in ukraine are too dynamic. in the united states there is a procedure of a similar nature (ruling), which manifests itself in two aspects: 1) the interpretation of tax regulations published by the administration (revenue ruling) and similar administrative instructions; 2) the administration's written response to a taxpayer (private ruling) who had previously requested an agreement that he intended to enter into with his counterparty. the recommendations contained in the administration's written responses actually apply to all similar circumstances of taxpayers. in ukraine, according to paragraph 52.1 of art. 52 of the tax code of ukraine at the request of taxpayers in paper or electronic form, the regulatory authority specified in subparagraph 41.1.1 of paragraph 41.1 of article 41 of this code, provides them with free individual tax advice on the practical application of certain provisions of tax and other legislation, monitoring compliance with such a regulatory authority within 25 calendar days following the day of receipt of such treatment by the regulatory authority (tax code of ukraine from december 2, 2010 № 2755-vi). in germany, the rescript procedure is limited to advising taxpayers on payroll taxes, customs duties, or assessing actual situations in connection with the implementation of fiscal controls. in sweden, a fiscal rescript is the issuance by the tax law commission of a preliminary opinion on the tax consequences of an agreement, which may be requested by both the taxpayer and the tax administration. the preliminary opinion is binding on the tax authorities and applies to taxation provided that the taxpayer concerned so wishes. thus, explanatory and informational work can be the basis for the implementation of such an approach in ukraine. the preliminary findings of the tax authorities will allow taxpayers to simplify the assessment of tax losses when planning business activities. 7. obtaining the conclusions of the tax authorities the following procedure for obtaining an opinion from the tax authorities can be suggested. the taxpayer submits an inquiry about the tax consequences of the planned transactions and dealings. the tax authority then prepares and gives a conclusion within two weeks. subsequently, such a conclusion cannot be revised by the tax authority on its own initiative and will be valid for several years. at the same time, it is necessary to establish mandatory payment of state duty for consideration of such requests, as well as to provide protection from official abuse of tax officials. at the same time, the provision of such findings should be made at a level no lower than the main departments of the state tax service of ukraine in the regions and the city of kyiv, which can be a guarantee against abuse by the tax authorities. at the same time, the tax authority must be given the opportunity to revise its conclusion in certain cases. for example, if collusion has been proven in court or if tax officials have been misled about the actual circumstances. these proposals are aimed at achieving a reasonable balance between the interests of taxpayers and tax authorities. according to the paragraph 52.6 of article 52 of the tax code of ukraine, the central executive authority, which ensures the formation and implementation of baltic journal of economic studies 47 vol. 7 no. 5, 2021 state financial policy, conducts a periodic summary of individual tax advice, as well as analyzes the circumstances indicating the ambiguity of certain norms of tax and other legislation, control over compliance with which is assigned to regulatory authorities, by providing summarizing tax advice, approved by order of this body (tax code of ukraine from december 2, 2010 № 2755-vi). summarizing tax consultations shall be subject to publication on the official website of the central executive body, which ensures the formation and implementation of state financial policy, within five calendar days from the date of their submission. according to paragraph 2 of the procedure for providing generalized tax advice, approved by order of the ministry of finance of ukraine dated septem ber 27, 2017 № 811, generalized tax advice is provided: – based on the results of periodic summarization of individual tax advice provided by regulatory authorities to taxpayers; – in the presence of circumstances indicating the ambiguity of certain norms of tax and other legislation, the control of compliance with which is entrusted to the supervisory authorities. if the court cancels the order of the ministry of finance approving the summary tax advice, a new tax advice is provided, taking into account the findings of the court. however, under current tax law, the ministry of finance of ukraine does not provide for amendments to the generalized tax advice, which makes it impossible to further deviate from the previous legal position set out in this generalized tax advice and explain the relevant legal provisions in a different way. thus, according to paragraph 2 of the procedure for providing generalized tax advice, approved by order of the ministry of finance of ukraine dated september 27, 2017 № 811, the taxpayer (tax agent and/or its official), who acted in accordance with the generalized tax advice, cannot be held liable, including financial (penalties and/or fines) for actions that contain signs of a tax offense, in particular on the grounds that later such tax advice was changed or canceled. consequently, only in this paragraph of the said procedure is the question of changing the generalized tax advice. but the current legislation of ukraine does not provide for a direct rule on the possibility of making changes to such advice. thus, a bona fide taxpayer, acting in accordance with generalized tax advice, is not immune from changes in law enforcement practice, the actual circumstances in which it operates and changes in the tax consequences of certain transactions in economic activity. at the same time, very often in practice the taxpayer, having individual tax advice received from the tax authorities, in case of their contradiction, does not know which individual tax advice should be followed. in accordance with subparagraph 112.8.2 of paragraph 112.8 of article 112 of the tax code of ukraine circumstances that exempt from financial respon sibility for tax offenses and violations of other legislation, control over compliance with which is the responsibility of regulatory authorities, is the commission of the act (action or inaction) by a person acting in accordance with individual tax advice provided to such a taxpayer in paper or electronic form, provided that such advice is registered in the unified registry of individual tax advice or to the summary tax advice and/or to the opinion of the joint chamber, grand chamber of the supreme court on the application of the law, from which it was subsequently derogated (tax code of ukraine from december 2, 2010 № 2755-vi). consequently, if the taxpayer, having committed a tax offense as a result of individual tax advice, cannot be held financially liable for the tax offense committed. for these reasons, the tax code of ukraine should also provide for the rule of priority of one individual tax advice over another. 8. conclusions currently, one of the main tasks to reduce the number of tax disputes should be the development of conceptual frameworks for reforming tax relations in order to achieve the maximum balance of interests of the parties involved in the process of taxation. this, in turn, is the main prerequisite for effective and fair functioning of the fiscal system of the state. finding a reasonable balance between the rights of taxpayers and the powers of the tax authorities means the need to limit the coercive measures applied to the taxpayer to the extent necessary to ensure that the state performs its functions. the state, in turn, should develop a set of special measures to adapt taxpayers and tax officials to the new tax legislation, regarding an appropriate change in their mentality, improvement of business cooperation and mutual understanding between them, increasing their responsibility for the performance of their tax obligations to the state and the implementation of the rights provided by law. the basis for achieving a balance between the interests of taxpayers and tax authorities can serve as an appropriate explanatory and informational work. the following procedure for obtaining conclusions from the tax authorities is proposed: the taxpayer submits an inquiry about the tax consequences of planned agreements and transactions. then the tax authority within two weeks prepares and gives an opinion. subsequently, such a conclusion cannot be revised by the tax authority on its own initiative baltic journal of economic studies 48 vol. 7 no. 5, 2021 and will be valid for several years. at the same time, it is necessary to establish the mandatory payment of state duty for the consideration of such requests, as well as to provide protection against abuse of office by officials of the tax authorities. at the same time, the provision of such findings should be carried out at a level not lower than the main departments of the state tax service of ukraine in the regions and the city of kyiv, which can be a guarantee against abuse by the tax authorities. at the same time, the tax authority must be given the opportunity to revise its conclusion in certain cases. active use by the taxpayer of his rights to obtain conclusions from the tax authorities, for example, in connection with the taxation of income from future agreements on the riskiness of a transaction with a counterparty, which could lead to the blocking of tax bills, will solve the problem before the appearance, thus eliminating the need to resolve a dispute with the tax authority in the future. references: balakina, a. p. (2005). chastnyie i publichnyie subektyi v nalogovom prave: voprosyi vzaimodeystviya [private and public entities in tax law: issues of interaction] // problems of financial law in market conditions in the xxi century: proceedings of the international scientific and practical conference / o.n. horbunova, ed. мoskow: tc wellby. (in russian) herasymenko, s. a. (1994). zaschita prav nalogoplatelschikov v arbitrazhnom sude [protection of the rights of taxpayers in arbitration court]. мoskow. (in russian) panova, i. v. (2000). administrativnoe proizvodstvo nuzhdaetsya v skoreyshey yuridizatsii [administrative proceedings need to be juridized as soon as possible]. journal of russian law, vol. 2, pp. 72–76. (in russian) tax code of ukraine from december 2, 2010 № 2755-vi. available at: https://zakon.rada.gov.ua/laws/show/ 2755-17#text decisions of the constitutional court of ukraine of june 12, 2012 no. 13-rp/2012 on the case of the constitutional representation of 53 people's deputies of ukraine on the constitution of ukraine (constitutionality) of certain provisions of the tax code of ukraine. available at: https://zakon.rada.gov.ua/laws/show/v013p710-12#text baltic journal of economic studies 127 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-127-133 transformation of the local budgets’ role: the experience of ukraine in the context of globalization olena zelenko1, liudmyla denyshchenko2 abstract. the purpose of this study is to determine the peculiarities of the development of local budgets in ukraine in the frame of decentralization reform in the context of established trends in local budgeting in other countries. the research methodology is based on the theory of financial globalization and involves methods of dialectics, methods and principles of scientific knowledge, tools of analysis and synthesis, expert evaluation, generalization and analogy. as a result of the research, the foreign experience of forming local budgets is highlighted and the peculiarities of this process in different countries of the world are determined; a review of existing publications and an analysis of the dynamics of the structure of local budgets and ukraine are done; qualitative characteristic of the current situation and recommendations for further development of the local budgeting process in ukraine in the current conditions of globalization are provided. among the main recommendations for increasing the revenue part of local budgets there are the following: creation of additional conditions by the state and local governments to improve the business climate in communities; inventory and arrangement of community land funds; creation and arrangement of the real estate register; audit of the communal enterprises activities of the community in order to find additional opportunities to increase the efficiency of their activities; support and motivation of local business for further activity and development; intensification of the centers of administrative services and search for opportunities which will improve the provision of paid services of any complexity in the short term; promoting the development of domestic tourism. the practical value of the results of this research is that the proposed recommendations are general, relevant and can be used for all territorial communities of ukraine with no exception. the analysis of trends in the context of local budgeting development processes in other countries and the current situation regarding decentralization reform allowed us to conclude that ukraine has chosen the right direction, which has a positive impact on the financial capacity of local communities. ukraine’s path towards transforming the role of local budgets, despite the similarity of the general features of local budget restructuring, should be unique. the implementation of the presented proposals will contribute to the successful completion of the decentralization reform and the full implementation of the role of local budgets – ensuring sustainable financial capacity and meeting all the needs of the inhabitants of a particular area. key words: local budget, financial capacity, structure, source of income, international experience. jel classification: e62, f01, h61 corresponding author: 1 volodymyr dahl east ukrainian national university, ukraine. e-mail: zelenko.olena@gmail.com orcid: https://orcid.org/0000-0003-4880-246x researcherid: v-9966-2017 2 volodymyr dahl east ukrainian national university, ukraine. e-mail: ludadenishenko@gmail.com orcid: https://orcid.org/0000-0002-8160-7343 1.introduction every inhabitant of an urban or rural community has the right to modern medicine and education, accessible and high-quality administrative, communal, social services, good roads, clean and lighted streets. everyone will be able to influence the quality of these benefits only when it is possible to establish direct contact with those responsible for providing all benefits. the closest government representatives to the community are local governments: village, settlement, city councils and their executive committees. therefore, they must have broad powers and sufficient financial resources to be able to solve all the necessary local issues, problems and be responsible for it. that is why ukraine has begun the process of decentralization, which involves the transfer of powers baltic journal of economic studies 128 vol. 7, no. 3, 2021 and financial resources from state to local authorities. a key aspect in this process is the financial resources that are mobilized in the local budget and spent in the relevant area. today, among scholars, the concept of “local budget” is defined as a system of formation, distribution and use of financial resources to provide local authorities with the functions and tasks assigned to them, both their own and delegated (denyshchenko, 2018). the problem of the adequacy of the process of filling the revenue side in local budgets to meet the needs of the community and its compliance with modern world trends in the context of globalization is relevant today, this is about it and will be discussed in this paper. thus, the purpose of the research is to determine the peculiarities of the local budgets’ development of ukraine in the decentralization reform frame in the context of established local budgeting trends for other countries. the tasks of this research are: highlighting the foreign experience of local budgets and identifying the features of this process in different countries; review of available publications and analysis of the dynamics of the local budgets’ structure in ukraine; qualitative description of the current situation and providing recommendations for further development of the local budgeting process in ukraine in the current conditions of globalization. 2. world experience in local budgets’ forming the formation of the budget system is in accordance with economic and legal regulations and the state system. the three-tier system is formed in countries with a federal system (usa, germany, canada, switzerland). in such countries, the peculiarities of the formation of local budgets are determined by both legislative documents at the state level and the legislation of the federation. the two-tier budget system is formed in unitary countries (italy, france, japan) and there all the norms of formation are determined only at the national level. in countries where there is a large difference in budget support, there is usually a high level of centralization of the budget system. conversely, where the difference in the budget support of individual territorial units is small, a decentralized system is usually formed. according to it, local budgets are a separate component of the budget system that is not included in the state or regional budgets of the highest level. the experience of functioning of budget systems in different countries of the world demonstrates greater efficiency of the decentralized type, because the financial resources accumulated on this principle are more mobile, more quickly distributed according to the available needs of the community. the main forms of building budget systems in the world were qualitatively analyzed by buryachenko a., who identified four groups of countries (buryachenko, 2014): 1. countries with a high level of independence of regional and local government, based on broad tax powers (australia, canada, the usa, the uk, japan). 2. countries with a significant share of funding for social spending at the regional and local levels (denmark, norway, sweden, finland). 3. countries with significant independence of budgets of different levels that actively interact with each other (austria, germany, switzerland). 4. countries with a high level of dependence on the central budget (belgium, france, greece, italy, the netherlands, portugal, spain). the process of formation and use of local budgets also has its own specifics in different countries (chorna, 2013), for example: 1) in germany, local budgets for next year are planned at the rate of 2-3% more than last year; the main expenses are education, social work with various vulnerable groups of the population; 2) in the uk, the main source of replenishment of local budgets is the municipal tax (its size is calculated depending on the value of property and the number of adult family members); main areas of expenditure: housing, education, judiciary, police, ecology; 3) in france, the share of taxes in the local budget – 40%, subsidies – 30%, own revenues and loans – 30%; moreover, most local budgets in this country are in deficit; the main expenditures are directed to the police, civil and fire protection, education, culture and infrastructure. following the general principles of local budgeting, each country chooses its own path of development, and so far there is no single recipe for creating a balanced and efficient structure of local budgets; each of the available is unique in its own way, adapted to the needs of the population of a particular country and territory. 3. actualization of the local budgets’ role in ukraine most scientists consider the budget system of ukraine to be two-tier and centralized (the level of centralization until 2014 was approximately 65-70%) (denyshchenko, 2018; chorna, 2013). however, it should be noted that the structure of local budgets had three levels: regional; district; budgets of individual cities, towns and villages. during the 24 years of operation, the current budget system did not pay off, and the results of inefficient redistribution of funds prompted its reform. since april 2014, local self-government reform has been implemented in ukraine, which has several areas, including: territorial-administrative, which aims to optimize the number and size of administrative territories (oblasts, districts, amalgamated territorial communities), and financial and capacity of local budgets). for six full years now, local budgets have been planned and implemented in accordance with baltic journal of economic studies 129 vol. 7 no. 3, 2021 the concept of reforming local self-government and territorial organization of power in ukraine (on approval…., 2014), which provides an opportunity to conduct first reviews and evaluate the effectiveness of the reform of local finances. their use. a significant number of scientists pay attention to the optimization of local budget processes in ukraine, including lutsenko i. (lutsenko, 2020), bogatyreva e. (bogatyreva, 2018), maistrenko o. (maistrenko, 2009), baranovska n. (baranovska, 2018), duma v. (duma, 2017) and others. most scholars provide the results of their own research on certain specific issues of the local budgeting segment, which help to feel and understand its progress, problems and successes. some authors pay more attention to the theoretical basis of local budgeting, others research foreign experience in order to determine the possibility of implementing best practices in ukrainian self-government. but the financial activity of local self-government in ukraine is constantly moving in time, new circumstances and conditions of functioning appear, the coverage of which gives an opportunity to consider and analyze the results of activities to fill local budgets in recent years. 4. analysis of local budgets in ukraine the revenue part of the local budget, according to the law, consists of general and special funds, as well as the development budget, each of which has features of filling and use. the general fund contains funds intended for the implementation of general or priority functions of local governments, namely: salaries with accruals, payment of utilities and other services, purchase of necessary equipment, materials, items and more. that is, it is the part of the local budget that provides a financial opportunity for local governments to perform their direct functions in the interests of the community. the structure of revenues of the general fund includes revenues from personal income tax (60% of the total amount), rent for special use of forest and water resources (50%), rent for subsoil use in the community (25%), state duty at the place of action (100%), excise tax on the sale of excisable goods and the community (100%), income tax of state (10%) and utilities, property tax (100%), single tax (100%), fees for parking spaces, tourist tax (100%), rent and license fees (100%), administrative fees, fines (100%), etc. (budget code…, 2010). during the seven years since the beginning of the financial decentralization reform, according to the ministry of finance of ukraine, there has been a steady increase in general fund revenues approved by local councils and from 2014 to 2020 these figures increased almost 3.4 times. the dynamics of growth of revenues to the general fund is presented in figure 1. the indicators of the general fund for recent years presented in figure 1 show that the redistribution of funds from state to local budgets towards the latter has significantly increased the financial capacity of local governments, which is a motivating factor for further revenue growth and use in community needs. in addition, it should be noted that during this period, the revenues of the general fund each year exceeded the planned. in terms of the most budget-generating taxes for 6 years of financial decentralization reform, the general picture of revenues to the general fund of local budgets is presented in table 1. according to the data in table 1, the largest part, which forms more than half of the general fund of local budgets, is the personal income tax (18% of accrued income). during the research period, its size increased from 53.6 to 177.8 billion uah, i.e., 3.3 times, and the share increased from 53.71% to 61.33%. the main figure 1. revenues of general funds of local budgets of ukraine 2014-2020, billion uah source: based on data (execution of local budget…, 2021)   86 99,8 146,6 191,9 233,9 275 289,9 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 2020 bi lli on u a h baltic journal of economic studies 130 vol. 7 no. 3, 2021 factors that influenced the significant increase in the value of personal income tax are the growth of the minimum wage and the average wage, which, according to the pension fund of ukraine, increased by the same indicator – 3.3 times (official site of the pension fund…, 2021). based on this, we can conclude that in ukraine as a whole the number of jobs has not changed, and the increase in personal income tax was facilitated only by an increase in wages. the second level of income and share of the tax that fills the general fund of local budgets is the land fee. this is a mandatory payment made by legal entities and individuals in the form of land tax or rent for the use of land of state and communal property (tax code…, 2010). the actual amounts received by local budgets during the research period increased from 14.5 to 31.5 billion uah, and their share in local budgets, on the contrary, decreased from 15.89% to 10.87% (execution of local budget…, 2021). similar conclusions are made by i. lutsenko, explaining the increase in payments by increasing the inventory and land provided for use, and the decrease in the share of land tax in the structure of local budget revenues is explained by regulatory problems regarding the tax base (lutsenko, 2020). bogatyreva e. explains the reduction of the share of land fee by the unsatisfactory condition of the lands provided for use, the introduction of inefficient tax benefits for the local budget, as well as the unsatisfactory level of tax payment by land users (bogatyreva, 2018). excise tax is a tax on the consumption of excisable goods (products), which is included in the price of such goods. the list of such goods is provided in article 215 of the tcu (tax code…, 2010). revenues from excise tax are also a significant component of the revenue side of the general fund of local budgets, namely, in their structure from 2015 to 2020 occupies an almost constant share – from 5.89% to 7.91%, and the amount of revenues from it for this period increased 2.9 times (execution of local budget…, 2021). taking into account the growth of the general level of prices for consumer goods, we can assume that the filling of local budgets from it is a constant value. the flat tax is the next important component that significantly fills local budgets. it is a business tax paid by businesses when they choose a simplified taxation system and those who run their business in the community. the number of payers of such a tax reflects both the number of entrepreneurs in a given area and the amount of their contribution to local budgets. that is, the level of revenues from the flat tax can be concluded about the favorable business climate in the community or region. this tax also helps to fill the community development budget, and this increases its budget-generating role. in the period from 2015 to 2020, the amount of payment of the flat tax in ukraine increased from 6 to 37.9 billion uah (6.1 times), and its share in the total fund of local budgets increased almost 2.2 times (execution of local budget…, 2021). both indicators show an overall increase in entrepreneurial activity operating on a simplified taxation system (mainly small business) and an increase in the share and role of small business in ukraine and its impact on enriching local budgets and the well-being and quality of life in communities. according to analytical data (how did the number of …, 2020) in the period from 2015 to 2020, the number of “simplified entrepreneurs” decreased from 2268 to 1886 thousand people or by 20%. at the same time, the number of small business legal entities conducting business on the simplified taxation system increased by 5.5% (from 1,278 to 1,351 thousand people). thus, we can recognize a threatening fact – a general decrease in the level of small business in ukraine. revenues from real estate tax occupy a small share in local budget revenues, namely from 0.53% to 2% (execution of local budget…, 2021). this indicates table 1 structure of tax revenues to the general fund of local budgets during 2015-2020, billion uah years total рersonal income tax land fee real estate tax excise tax flat tax other revenues 2015 99.8 53.6 14.5 0.53 7.7 6 17.47 53.71% 14.53% 0.53% 7.72% 6.01% 17.51% 2016 146.6 79 23.3 1.4 11.6 10 21.3 53.89% 15.89% 0.95% 7.91% 6.82% 14.53% 2017 191.9 110 26.4 2.4 11.3 15.4 26.4 57.32% 13.76% 1.25% 5.089% 8.03% 13.76% 2018 233.9 138.1 27.3 3.1 18 29.8 17.6 59.04% 11.67% 1.33% 7.70% 12.74% 7.52% 2019 275 165.4 32.8 4.9 21 35.2 15.7 60.15% 11.93% 1.78% 7.64% 12.80% 5.71% 2020 289.9 177.8 31.5 5.8 22.4 37.9 14.5 61.33% 10.87% 2.00% 7.73% 13.07% 5.00% source: based on data (execution of local budget…, 2021) baltic journal of economic studies 131 vol. 7 no. 3, 2021 a small amount of state-owned real estate, which remained at the disposal of communities after years of privatization. in addition, a significant proportion of real estate is unsuitable for rent. it is also worth listening to the opinion of maistrenko o. (maistrenko, 2009), who explains the small level of such revenues by the lack of a single real estate register and clear standards that should provide criteria for assessing the condition and determining the rental price of buildings. in such conditions, the use of available premises is almost impossible. other revenues to the general fund of local budgets are a set of a number of local taxes and fees in monetary terms for the specified period vary from 17.47 to 14.5 billion uah (execution of local budget…, 2021), and their share in the structure of the general fund has a steady downward trend. this indicates a general decrease in the total share of the remaining local taxes and fees listed in the article, including income from profits of state and municipal enterprises, administrative services, fines, tourist tax, rent, etc. thus, a review of the structure and dynamics of revenues to the general fund of local budgets, comments of scholars, analysis of current legislation allows us to conclude that ukraine today is still in a state of reforming the public financial system, consisting of public and local finances. at this time, 6 full years have passed, during which local finances were planned, formed and used under the new rules. during this period, the share of local budgets in the general indicators of the state budget has significantly increased. according to the official website of local government reform, it is possible to determine a steady increase in the share of own revenues in the total fund of local budgets, but the growth rate is declining from year to year (figure 2). despite the constant increase in the amount of own tax revenues, their size is insufficient for local budgets to reach full financial capacity. this is a problem that ukraine still has to solve during the current reform. the largest part of tax revenues for the research period were: personal income tax, land fee, excise, flat and property taxes. the share of these taxes in the general fund was determined from 82.5 to 95% (execution of local budget…, 2021), so the research of the amount of revenues from them and finding ways to further increase their own tax revenues is extremely important for any community in ukraine. personal income tax revenues to the community budget are growing mainly due to the increase in the minimum and average wages over the 6 years of reform, rather than due to an increase in the number of enterprises and an increase in the number of jobs. land is a powerful source of community revenue from its use. a quality land fund is a guarantee of such profits that are still insufficiently understood by local leaders. in search of sources to increase the revenue side of local budgets, it is impossible to ignore even small ones in terms of revenue. one of them is community real estate tax revenues. a significant part of the revenues of the general fund should be revenues from the profits of state and municipal figure 2. dynamics of the own revenues’ share in the general fund of local finances for the period from 2014 to 2020. source: (official site of local government…, 2021) the share of own revenues of local budgets (general fund) in gdp, % own revenues of the general local budgets’ fund, billion, uah 4,0% 5,0% 6,0% 7,0% 2014 2015 2016 2017 2018 2019 5,1% 5,1% 6,2% 6,5% 6,6% 7,0% 0 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 2020 68,6 98,2 146,6 192,7 234,1 275,2 290,1 +1,1% +0,3% +0,1% +0,4% +14,9 (5,4%) +41,4 (21,5%) +46,0 (31%) +48,4% (49%) +29,6 (42%) +41,1 (17,6%) the share of own revenues of local budgets (general fund) in gdp, % own revenues of the general local budgets’ fund, billion, uah the share of own revenues of local budgets (general fund) in gdp, % own revenues of the general local budgets’ fund, billion, uah 4,0% 5,0% 6,0% 7,0% 2014 2015 2016 2017 2018 2019 5,1% 5,1% 6,2% 6,5% 6,6% 7,0% 0 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 2020 68,6 98,2 146,6 192,7 234,1 275,2 290,1 +1,1% +0,3% +0,1% +0,4% +14,9 (5,4%) +41,4 (21,5%) +46,0 (31%) +48,4% (49%) +29,6 (42%) +41,1 (17,6%) baltic journal of economic studies 132 vol. 7 no. 3, 2021 enterprises of the community, funds from administrative services, fines, advertising and tourist fees, and so on. their presence, size and share in the structure shows the community’s own ability to use its resources, earn and create a development budget. unfortunately, during this period, in ukraine as a whole, there was a negative trend both in the amount of funds and in its share in the structure of the general fund (more than three times). this indicates a general crisis of entrepreneurial and administrative activity of local self-government, inefficiency of utilities, inability or unwillingness to earn independently for the benefit of the community. it is also necessary to point out the objective circumstances that in some way affected the amount of tax revenues, namely the land fee and the flat tax in 2020. in march of that year, due to the quarantine that took place in ukraine due to the covid-19 pandemic, the government of ukraine decided to allow certain categories of taxpayers not to pay the above taxes for this month. thus, local budgets underreceived at least 1/12 of tax revenues, which affected the overall reduced result (on amendments to certain legislative acts…, 2020). according to the structure of expenditures, local budgets of ukraine have a social orientation (figure 3). according to the data presented in figure 3, the largest share of expenditures in 2020 was labor costs (and, compared to 2019, this figure increased by 15.5% (official site of local government reform in ukraine)), the second largest were capital expenditures, the third – subsidies and current transfers. 5. ways to increase the revenue side of local budgets therefore, based on the conclusions made about the sources and efficiency of filling the general fund of local budgets, we can determine the following recommendations to local governments to increase the amount of filling this fund: 1. the need to create additional conditions by the state and local governments to improve the business climate in communities. the same recommendations can be applied to the possibility of increasing revenues from the flat tax. local businesses, especially small ones, are the foundation of a community’s well-being and the key to its future prosperity. 2. carrying out an inventory and arrangement of land funds of communities, bringing the land fund to a level sufficient for its profitable use, will certainly contribute to the receipt of permanent income from land lease and their growth. 3. creating and organizing a register of real estate owned by the community, bringing it, if necessary, to a proper condition for use or lease, return to the community of abandoned premises, will provide opportunities to increase income from their own real estate communities. 4. conducting an audit of the activities of communal enterprises of the community in order to find additional opportunities to improve the efficiency of their activities, modernize and improve the quality of their work to provide additional services. 5. support and motivation of local business for further activities and development, involvement of business structures and the public in public dialogue will contribute to further strategic economic and social development. 6. intensification of the administrative services’ centers and search for opportunities will improve the provision of paid services of any complexity in the short term. 7. promoting domestic tourism in the community will increase revenues from tourism tax, increase figure 3. the structure of expenditures of local budgets of ukraine in 2020 source: (official site of local government…, 2021) other current expenses,  68.9 billion uah  14.4%  capital expenditures,  98.6 billion uah,  20.6%  social welfare  10.3 billion uah,  2.2%  subsidies and current transfers 79.7 billion uah,  16.7%  payment for utilities and energy  13.8 billion uah,  2.9%  wages with charges  206.7 billion uah,  43.2%  baltic journal of economic studies 133 vol. 7 no. 3, 2021 the profitability of enterprises in other sectors of the community: transport, hotel and restaurant business, entertainment centers, trade, etc., as well as have educational and patriotic social effects, return youth and will help attract investment. 6. conclusions the state and peculiarities of filling the general budget in each community can differ significantly. local governments have all the opportunities and information to analyze and identify both strengths and weaknesses of the budget, draw conclusions and determine their own priorities for further activities to find and attract reserves to increase the own profitability of local communities. the proposed recommendations are general and relevant for all regions of ukraine without exception. the analysis of trends in local budgeting processes in other countries and the current situation regarding decentralization reform allows us to conclude that ukraine has chosen the right direction, which has a positive impact on the financial capacity of local communities. ukraine’s path towards transforming the role of local budgets, despite the similarity of the general features of local budget restructuring, should be unique. it is impossible to implement the experience of other countries without taking into account the specific properties of the national financial and economic system. awareness and adherence to these two aspects will contribute to the successful completion of decentralization reform and the full implementation of the role of local budgets – ensuring sustainable financial capacity and meeting all the needs of the inhabitants of a particular area. references: denyshchenko, l. v. 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(2020). word and deed. analytical portal. retrieved 20 june, 2021 from: https://www.slovoidilo.ua/2021/01/27/infografika/biznes/yakzminyuvalasya-kilkist-fopiv-ta-yurydychnyx-osib-ukrayini-2013-2020-rokax official site of local government reform in ukraine. retrieved 20 june, 2021 from: https://decentralization.gov.ua/ finance/gallery on amendments to certain legislative acts of ukraine aimed at providing additional social and economic guarantees in connection with the spread of coronavirus disease (covid-19). law of ukraine. № 540-ix. 2020. march, 3. retrieved 20 june, 2021 from: https://zakon.rada.gov.ua/laws/show/540-20#text baltic journal of economic studies 200 vol. 7 no. 2, 2021 corresponding author: 1 educational-scientific institute of economics and law of bohdan khmelnytskyi national university at cherkasy, ukraine e-mail: k23k@ukr.net orcid: https://orcid.org/0000-0002-6691-3182 researcherid: https://publons.com/researcher/4355116/radzikhovska-yuliia/ doi: https://doi.org/10.30525/2256-0742/2021-7-2-200-209 digital transformation and its influence on changing the marketing orientation of business structures and consumer behaviour yuliia radzikhovska1 abstract. purpose of scientific research. the purpose of the research is to present the features of digital transformation and its impact on changing marketing orientation of business structures and consumer behaviour in particular, and to determine main value in digital economy, which is the customer, as well as to indicate marketing initiatives to enhance consumer behaviour y, z. the object of scientific research. the object of the scientific research is the process of digital transformation of business structures and changes in marketing orientation, which can be traced and understanding consumer behaviour in terms of generations of baby boomers, x, y, z. methodology. based on dialectical, systemic and matrix methods, the influence of digital transformation on consumer preferences and behaviour, as well as the change in marketing orientation, which determines new quality and format of business structures, has been studied. a comparative analysis of the types of generations of consumers that determine the further content of marketing initiatives in business is used. the result of the article. marketing initiatives to enhance consumer behaviour are presented, taking into account the preferences and behaviour of online consumers. it is determined that the advantages of digital transformation for business structures are the improvement of the customer base, increased flexibility and acceleration of business processes, innovative opportunities for business development. practical implications. digital transformation of business structures and the changes traced in them in three stages are revealed, namely: automation (transfer of business processes to electronic systems for storage and exchange of data in the existing form and in the way in which they work at the enterprise); digitalization (optimization of individual business processes with adaptation to tools and technologies of digital economy); digital transformation (involves a qualitative change of the entire business model of the enterprise, starting from the strategy and ending with the digitalization of all (management, core and supporting) business processes). marketing initiatives influencing values, priorities, ways of communication of different generations of consumers are specified. value/originality. matrix structure of preferences and behaviour as online consumers, representatives of generations of baby boomers, x, y, z in terms of priorities in online shopping, frequent purchases, reasons for buying online, reasons for dissatisfaction with purchases, additional information is proposed. key directions of strategic transformations are defined, among which there are customer service, values, work with data, introduction of innovations. key words: digital transformation, marketing orientation, business structures, consumer behaviour, generations of people, millennials, buzzers. jel сlassification: o32, g14, m10, d11 1. introduction digitalization processes are increasingly influencing the socio-economic development of countries around the world, changing approaches to solving problems at different levels and in different spheres of life. first of all, the changes affected the processes of generation, transmission, storage, management and analysis of information, which makes the latter an important production resource. this, in turn, changes the paradigm of society, reducing the dependence of economic growth on the country’s extensive factors, including natural resources, working population, fixed capital, etc., which are characterized by the greatest entropy. the development of information technology becomes a key condition for ensuring the competibaltic journal of economic studies 201 vol. 7 no. 2, 2021 tiveness of both individual enterprises and countries as a whole, leading to the restructuring of all economic and production processes, improving the quality and reducing the cost of goods and services. digitalization is creating fundamentally new opportunities to improve well-being and address pressing social issues from health to education and the environment. the beginning of 2020s has shown that the trajectory of e-commerce development and marketing orientation of business structures has changed significantly. until recently, those who worked in the field of online commerce focused primarily on the intentions of buyers, tried to track the interest of online visitors and use it to their advantage. thus, marketing orientation of e-commerce entities is aimed at the desire to “catch” the existing demand, which can be met in the most convenient way for buyer and the least expensive for the seller. earlier in the online store, buyer has been shown the product he or she wants to buy. it is easy to do: to track goods that buyer puts in the e-cart. however, not all products left in the basket meet the wishes of the buyer, and not all of them are bought. as a result, the business philosophy changes under the influence of digitalization, as well as the behaviour of e-commerce participants. it is not enough to simply track existing intentions; we need to think more broadly – how to create a completely new demand that will contribute to further growth. it is important that the product itself finds buyers in e-commerce. this new approach to e-commerce is called discovery commerce. its essence is that successful in the market are those e-commerce entities that seek not only to meet customer demand, but also have the desire to create demand and inspire people to get acquainted with a new product. it is assumed that discovery commerce includes attempts to predict people’s desires through the peculiarities of their behaviour, active use of modern tools to demonstrate to customers a relevant offer, seamless experience for all e-commerce participants, creating a secure environment that ensures data preservation (facebook, 2021). however, the effectiveness of new e-commerce concept largely depends on who it targets. this means that it is not possible in the course of digital transformation to ignore the style of behaviour of different generations of buyers in global e-commerce market. we are well aware of generations of baby boomers, x, y, z. w hat makes each generation special? w hat are the effects of digital transformation observed today on the change of marketing strategy of business structures? w hat will be the behaviour of consumers during digital transformation? we will try to answer all these questions during the disclosure of the content of this article. 2. literature review the issue of digital transformation of business, the formation of digital entrepreneurship is just beginning to attract the attention of foreign and domestic researchers, including isaacson v., azzam m., sami n., khalil t., klaus s., shantarenkova m. based on the analysis of experience, it is established that the concept of digital transformation has three main advantages relevant to any type of business: improving the efficiency of existing infrastructure; emergence of qualitatively new business models; increase revenue or reduce costs in existing business models. these results are presented in scientific works and articles by andrusiak n., burlakova i., kradich v., chmeruk g., grybanova yu., rudenko m., konyk l., prokhorova a., makarova a., nechepurenko m., ouchi w., pogorelova yu., pisano g., teece d., shuen a., tapscott d., toralo m., chernykh e., chechina o. among the domestic researchers engaged in the disclosure of the content of the preferences of different generations in the digital economy there can be mentioned gomonova d., goloborodko o., kraus n., kraus k., marchenko o., manzhura o. the analysis of these recent studies has shown the need for a comprehensive approach to substantiate features of digital transformation and identified the impact of changes in marketing policy of enterprises, taking into account the tastes and preferences of today’s generations. the purpose of the paper is to present the features of digital transformation and its impact on changing the marketing orientation of business structures and consumer behaviour, in particular, which has all chances to become a decisive step in accelerating the launch of the digital strategy of economic development of ukraine and determining the main value in the digital economy, which is the customer and marketing initiatives to enhance consumer behaviour of generations of baby boomers, x, y, z. among the tasks set in the article there are the following : to reveal digital transformation of business structures through the prism of value chain; to present digital transformation of business structures and changes that can be traced; to provide an author’s vision of marketing initiatives to enhance the consumer behaviour of generations of baby boomers, x, y, z; to indicate the benefits of digital transformation for business structures and change of marketing orientation; to identify and reveal the content of preferences and behaviour as online consumers, representatives of generations of baby boomers, x, y, z. 3. digital transformation of business structures the transformative power of “digital” technologies allows to change traditional business models, marketing policy, production chains and causes baltic journal of economic studies 202 vol. 7 no. 2, 2021 the emergence of new products and innovations. digitalization brings the sphere of production to a new level, forcing enterprises to make digital transformation the main task of development strategy. based on the analysis of literature sources, it is established that digital transformation of business structures is the introduction of modern technologies into their business processes. this approach implies not only the installation of modern hardware or software, but also fundamental changes in approaches to management, marketing orientation, corporate culture, external communications. as a result, the productivity of each employee and the level of customer satisfaction increase, and the company gains a reputation for progressive and modern. the latest digital technologies of “digitalization” process lead to innovative transformations in all spheres of enterprise activity and encourage the creation of new business models. the owner can be both the head and the executor of all stages of work in business structure. main value in digital economy is the customer – who becomes main in the process of economic activity, because without it there is no point in it itself. customer chooses product based on advice, personal experience and advertising; seller does not have the opportunity to personally contact the buyer. at the same time, advertising still has its weight, only it is already internet advertising, internet fashion, internet friends, internet hobbies, etc. (nechepurenko, 2006). a characteristic feature of digital economy is its connection with the on-demand economy, which involves not selling goods and services, but gaining access to them at the very moment when it is needed. orders are received online and executed offline. the advantages of on-demand economics are: high speed of obtaining the required service or product; reducing their cost to the end user by reducing the number of intermediaries; simplifying the access of suppliers of goods and services to users. digital transformation is accompanied by changes in economic business processes: from the robotization of the production of goods (goods and services) for mass consumption to new industries for the creation of goods with individual characteristics for each consumer. in modern business in ukraine there are widely used technologies of information retrieval systems on the internet, advertising and sale of goods on the internet, electronic payments, electronic tenders, electronic card payments (including payroll), automated systems of salary accounting, accounting and reporting processes, electronic systems of protection and fire safety, electronic systems of information collection of control and measuring devices, mobile and selector communication, etc. the concept of digital transformation has three main advantages relevant to any type of business: increase the efficiency of the existing infrastructure; emergence of qualitatively new business models; increase revenue or reduce costs in existing business models. digital transformation of business structures goes far beyond the ict industry, it has an impact on the entire value chain. in particular, we can consider three areas presented in table 1, in which new digital technologies can be used (chechin, 2014). the gradual process of digital transformation of business structures, in our opinion, can be represented in the form of 3 stages, which are presented in table 2. table 1 digital transformation of business structures through the prism of the value chain directions general characteristics business models digital transformation makes it possible to develop completely new forms of creating and obtaining value customer search firms can use digital information and social networks to attract their customers in new ways. for example, they can create digital user communities to add value operating processes digital technologies make it possible to achieve great results in operating activities at all stages of the value chain source: development of author table 2 digital transformation of business structures and traceable change stages the name of the stage the content of the process of digital transformation of business structures 1 stage automation it is the transfer of business processes to electronic systems for storage and exchange of data in the existing form and in the way in which they operate in the enterprise 2 stage digitalization the stage at which there is an optimization of separate business processes with adaptation to tools and technologies of digital economy. digitalization reduces the number of steps required to perform a specific task, reduces the amount of work with documents and the impact of human factor, avoiding mistakes 3 stage digital transformation provides a qualitative change in the entire business model of the enterprise, from strategy to digitalization of all (managerial, core and supporting) business processes source: development of author baltic journal of economic studies 203 vol. 7 no. 2, 2021 4. digital transformation and marketing orientation of business structures the basics of the benefits of digital transformation for business structures and changes in marketing orientation are presented in figure 1. it has already happened that in the context of generations today it is possible to clearly trace the differences in priorities, values, traditions, stereotypes and preferences of different age groups of consumers, which determines the change in the marketing orientation of business structures. therefore, it is not surprising that in order to consolidate their leading positions in the market, modern business structures compete not only for market share or consumer attention, but also fight fiercely for supremacy in the use of the latest marketing tools. however, the choice of the latter nowadays largely depends on the target audience, which focuses on the business entity, and this is a certain age group of consumers. in the last few years, generation z has become increasingly important in global market, as its representatives not only strengthen their purchasing power (purchasing power and financial stability). it is buzzers today who set market trends that quickly become “viral”, move into the genre of “challenge” and are easily picked up by predecessor generations – x and y. generations of baby boomers, as their respectable age today is 57-75 years, are rarely subjected to “waves of change”, but often experiment and strengthen digital world to strengthen ties with younger generations. in this context, the choice of the most acceptable and effective marketing tools for business activities will largely depend on the generation to which target audience belongs. this becomes critical during global spread of the covid-19 pandemic, which significantly shifts the focus of business development and “transferred” many business processes to the world of internet and virtual reality. undoubtedly, the isolation of countries (closing borders, declining transport traffic, declining tourism, rising unemployment, declining purchasing power) during the spread of the covid-19 pandemic, somewhat “slowed down” the dynamics of globalization and integration, intensified competition, and those win who restructure their marketing and business processes and adapt to new conditions. 5. marketing initiatives to enhance the consumer behaviour table 3 presents the generations marked by somewhat “ blurred”, “conditional” time boundaries between them, due primarily to the different and unique socio-cultural, economic and educational circumstances in different countries around the world that influenced their formation. therefore, we can state that the only universally recognized classification of generations of people still does not exist – the boundaries are shifted a few years for ward or backward, and this is normal. w hen we talk today about increasing customer loyalty, especially those who are focused on the online market, then of course we are talking about generations of people who are active online users, and in accordance with modern digital technologies, they are “to you”. the reason for this is that such generations of people have grown (and this is primarily generation z) and formed as individuals (generation b) during the spread of high-speed internet in the early 21st century, the emergence of smartphones in 2010. these factors have become main driver of such a rapid penetration digitalization technologies allow you to organize the most personalized interaction, which is preferred by most customers digital transformation opens up opportunities for innovative ways of enterprise development. cloud technologies allow several teams to work on one project simultaneously and efficiently use the company’s resources business process flexibility is needed for the ability to change quickly. digital transformation of business processes is aimed at ensuring that companies make decisions quickly, adapt work to the requirements of the current moment and meet customer needs improving the customer experience increase flexibility and accelerate business processes innovative opportunities for business development figure 1. advantages of digital transformation for business structures and change of marketing orientation source: development of author baltic journal of economic studies 204 vol. 7 no. 2, 2021 table 3 marketing initiatives to enhance the consumer behaviour of generations of baby boomers, x, y, z generation type baby boomers (1946–1964) х (1965–1979/80) у, millennials (1981–1994/6) z, buzzers (1997–2012/15) ev en ts th at la id fo un da tio ns fo r t he fo rm at io n optimism after world war ii, the cold war, hippies in fashion the end of cold war, the popularity of rock music, the spread of personal computers, the development of information technology great recession, the technological “explosion” of internet and social media, the spread of postmodern culture, the collapse of the ussr smartphones, tablets, social media and networks see their parents’ financial difficulties (generation x) va lu es , p ri or iti es everything is possible, equal opportunities for all, personal satisfaction, work makes a person noble, family always comes first independence, pragmatism, entrepreneurship, the tendency to rely solely on their own strength, unwillingness to be as dependent on work as their parents global thinking, tolerance, focus on today, desire for self-development, balance between work and life outside work clip perception, graphic visualization, teamwork, creating something new, realism, focusing on the future ba sis o f m ar ke tin g te ch no lo gi es formed as individuals and acquired their first profession without the internet; do not trust advertising on the internet; buy on the advice of relatives and friends; the vast majority do not perceive information by ear they know the world without the internet well because they were born in it; most understand modern ict, use them in work and life; spend a lot of time online symbiosis of civil and social responsibility with skepticism; life here and now; sense of satisfaction with the present; choose an interesting (and even low-paid) job, rather than promising for career growth poorly perceive text messages, prefer photo and video formats, voice messages; use hi-tech technologies that determine their future professional orientation; set trends that are fast becoming popular m ed ia co ns um pt io n consumers of traditional media (television, radio, magazines, newspapers); 90% have a facebook account; use technology to stay in touch with family and friends read newspapers, magazines, listen to the radio and watch tv; digitally savvy and spend about 7 hours a week on facebook (highest among generations) 95% watch tv, but netflix removes traditional television; use of network services and mobile devices, but 32% still buy through a computer; have multiple social media accounts the average buzzer received his or her first mobile phone at the age of 10.3; grew up in a hyperconnected world, and a smartphone is the best way to communicate; on average spend 3 hours a day with a mobile device offl in e o r o nl in e? buy offline, because shopping for them is a holiday and a tradition that does not waste time; before buying they prefer to test, taste, try on, etc.; operate on the principle of “measure ten times, cut once” prefer offline stores and banks; trust more traditional, “live” advertising; to “be in trend” actively master online shopping; choose online platforms where you can buy everything at once; being online value their time have gone from online games to the internet of things; are characterized by information literacy and caution; search for the necessary information in internet sources; prefer direct advertising and advertising that does not sell, but entertains for them, the opinion of their peers, experts and bloggers is more important than the name of company; most of their lives are spent online, so instagram and tiktok are main source where they “consume” advertising about goods/services; they like to act as advertisers, bloggers and experts, giving advice to others ba nk in g ha bi ts visit the bank for transactions; use mainly cash; internet banking is used with distrust and is forced in extreme cases; buy today – pay tomorrow digitally “savvy”, so conduct certain financial transactions on the internet, but still prefer to make transactions in banks; conservative in financial matters; believe that banking is a personal business and demonstrate brand loyalty prefer to buy goods first and have no patience for poor service; trust brands with a great history (apple, google); looking for digital tools to help manage your debt; earn to spend the least solvent generation (due to their age – most are still students); want to avoid debts and evaluate the accounts or services that help in this matter; debit cards take first place among priorities, followed by mobile banking; looking for easy ways to make money se cu ri ty security is paramount for them, and they feel vulnerable because the internet is an “open space” without borders and boundaries, increased requirements for online security both when making purchases and when ordering services; one in three does not trust any social network trust the advice and recommendations of bloggers and regular internet users; use a sophisticated security system to protect the internet need media literacy training and information security development baltic journal of economic studies 205 vol. 7 no. 2, 2021 of e-commerce into human life and the “rooting” of streaming content on online platforms. thus, in particular, generations y and z are now mostly focused on the use of all available technical innovations, benefits of e-commerce and this is what distinguishes baby boomers and generation x, most of whom still prefer to shop offline and consume traditional media and advertising (television, newspapers, radio, etc.). the groups of people listed in table 3 are not only culturally different, they are now at different stages of financial life. if the young generation z is just beginning to form its purchasing power, then the representatives of baby boomers have a fairly broad financial history (kasasa, 2021). the contrast between priorities, values, needs and interests of these generations is sharp. knowledge of the characteristics of these generations and their differences in stereotypes, behaviour, views on the present and the future is important for further understanding of the impact of mega trends on our lives. of course, the division of groups of people into generations is not something stable, the age range is quickly complicated, adjusted, and, accordingly, requires review and marketing tactics of e-commerce, which is aimed at mass online buyers. the data in table 3 show that the younger generations often contribute today to the adoption and use of modern technologies by older people, and this is largely true. the speed with which baby boomers are expanding the use of internet technology is accelerating significantly. thus, in 2019, 68% of baby boomers owned a smartphone, while in 2011 there were only 25% (gomonova, 2021). 6. the impact of digital transformation on customer preferences knowledge of trends and priorities of different generations is now important because it allows you to easily identify the preferences of e-commerce participants and project their future behaviour. understanding the differences between these age groups allows you to choose effective marketing tools because the segmentation of target audience in one way or another includes age as one of the factors. the generations of people studied have different financial histories and have their own “financial fears”. each generation earns and saves for different stages of life – retirement, university, car purchase and more. these generations of people grew up in the developing technological world, but each age group has its own unique preferences for financial relations management (holoborodko & kraus, 2018). all studied generations of people were formed in different financial climates with their own financial positions. however, the covid-19 pandemic was a great equalizer, as all generations had to adapt to a new way of working and living. thus, in particular, people’s banking behaviour is changing. according to a recent study by adobe analytics, 44% of generation z people and 31% of millennials use bank chatbots to answer their questions and believe that such a communication experience is even better than talking to a real person (kasasa, 2021). however, for more complex banking tasks, even the younger generation prefers to get additional help from a bank employee. modern digital technologies, which are the basis of e-commerce, have long ceased to affect only the younger generation type baby boomers (1946–1964) х (1965–1979/80) у, millennials (1981–1994/6) z, buzzers (1997–2012/15) w ay s t o st ay in to uc h traditional printed cards, discount coupons, loyalty cards, phone calls, e-mail, sms subscription with company history; internet forums; sending useful materials; email with thanks after purchase; personal discounts that emphasize the uniqueness of the client and a special attitude to him omnichannel: meet on online platforms or social networks and create close links between different channels; the buyer must revolve around the brand ecosystem so that each communication channel interacts harmoniously with others, increasing sales interact with brands on social networks and advertising aff ec t formation of a stable and stable group of supporters of a certain company or product brand formation and its positioning in the market convert regular internet users to online shoppers on any communication channel consumer behaviour of their older relatives, because parents, grandparents trust the opinion of the buzzers, and give them the final choice source: development of author (end of table 3) baltic journal of economic studies 206 vol. 7 no. 2, 2021 generations. each succeeding generation more easily masters the services of digital and mobile banking, and more. but the covid-19 pandemic has led to a new wave of “latecomers” who are now actively “banking” in digital format. of course, only time will tell how long the full transition to digital tools and services will last, but the positive digital experience already gained today will expand the probability of total digital coverage of all generations (manzhura & kraus, 2019). as world’s major e-commerce players improve their sales methods, small retailers also have to take into account a number of current trends. accordingly, in 2019, only 6 out of 10 baby boomers in the usa bought products online, but the younger buyers, the higher percentage. almost 85% of millennials by goods online, they increase their purchasing power, and hence their influence every year. more than 60% of generation z consumers choose a brand that offers options for buying online and receiving goods in store. generations of baby boomers shop online much less often than generation z and millennials. at the same time, the female part of the internet audience aged 55-64 is more likely to make online purchases than men aged 16-24. young people are more likely to use mobile phones for online shopping, while most baby boomers shop online from computer. paula hansen, director of revenue management at sap customer experience, states that “the future success of a brand will depend on how exceptional the shopping experience it can offer to each generation. it is necessary to adapt marketing activities taking into account the age of consumers and the best way of shopping – this will help develop the necessary flexibility to overcome possible crises in the future and more actively recover from a coronavirus pandemic” (rau, 2021). representatives of different generations in their own way perceive modern digital transformations and the rapid and dynamic development of digital technologies, which have already entered the life of society. for buzzers, these are all everyday phenomena and habitual processes, they easily accept changes and adapt to them. however, for baby boomer generation, realizing the need to engage in digital transformation takes time and considerable effort. preferences and behaviour as online consumers, in terms of generations, we presented in table 4. consumers from generation z, which are 18-24 years old today, form and develop their professional competencies and abilities, gain their first professional experience and enter the active phase of work. buzzers are active, digital (digital native), they cannot imagine their lives without information technology and the global internet; because they set most of the current trends, it is not surprising that business structures in their activities are forced to focus on the peculiarities of their education (distance learning, education on online platforms such as mooc and coursera, learn quickly and prefer to gain practical experience as opposed to gaining university knowledge, compensate for the lack of experience with implemented projects), involvement table 4 preferences and behaviour as online consumers, representatives of generations of baby boomers, x, y, z preferences for online shopping generation baby boomers х у, millennials z, buzzers priority in online shopping convenience, price, free shipping, brand reputation convenience, loyalty reward or discount, ease of return convenience, free shipping, site experience, price, speed, convenience, free shipping buy most often offline store, online brand store, a physical store facebook, a physical store and an online brand store facebook, instagram, snapchat, ebay instagram, snapchat, ebay, amazon main reason why buys online and not offline ability to touch or try on the item, ability to ensure the item does not have any defects ability to touch or try on the item, convenience speed, accessibility price, convenience key reason for dissatisfaction with online shopping product being out of stock paying shipping costs difficult return process waiting for the product payment system for online shopping credit card financing (buy now, pay later) paypal mobile wallet % goods purchased online that are returned 37% 45% 50% 75% tracked information salary range, relationship status parental status, profession personal preferences, phone number email, browsing history what can be offered to get more information none, they are not interested vip membership, early access to new products faster delivery, free shipping personalization, product discount source: development of author baltic journal of economic studies 207 vol. 7 no. 2, 2021 in work (remote work, freelance, entrepreneurial ambitions, are “universal soldiers” in the workplace, are not tied to the workplace or to fixed working hours), consumption (active consumers of online video, ethical consumption), communications (advanced, progressive, digital; use new online tools as easily as they lose concentration), business management (positive motivation, optimism, the ability to present their own business ideas and be able to implement them, the tendency to rethink corporate values such as sustainability and gender equality, open communication in the team, they are attracted by great influence – big projects – big ideas – big profits). the generation of buzzers “lives”, cannot sit still for a long time, seeks globalization and become part of big business, then start their own business and change the world for the better. the best that previous generations can do for buzzers is to support them, believe in them, and give them the opportunity to be themselves. given the above, it is not surprising that not only changes the person with his views and preferences, but also changes the philosophy of doing business – developing leadership skills, self-management of the organization, marketing technology. 7. conclusions as a result, it is worth noting that today the world is changing so rapidly and dynamically that it cannot but affect the trade, which is increasingly becoming “online” in the e-commerce sector. being able to shop anywhere, anytime is main reason why people of all generations choose online shopping. therefore, in the near future, commercial success will directly depend on how exceptional the buying experience can be offered by the seller for each generation. it is necessary to adapt marketing activities taking into account the age of consumers and the best way of shopping, because it will help develop the necessary flexibility to overcome possible crises in the future. we are witnessing various consequences of digital transformation in business models. for example, digital technologies make it possible to reorient the boundaries of firms to more global levels. common digital business models tend to lead to a higher level of interaction between different participants. such enterprises tend to compete on a larger scale than traditional enterprises due to low geographical boundaries and the need for resources to satisfy customers. as search and communication costs have dropped significantly, operating costs are generally much lower than for traditional businesses. internet technologies have increased competition, reduced barriers to entry, led to more substitutes, and increased consumer power. consequently, profit opportunities have decreased in most industries. as a result, digital business structures stimulate the economic development of an environment that is often characterized by dynamic competition and high consumer surpluses. we believe that key areas of strategic transformation for the future should be: – customer centricity. omni-channel, analytics, variable, scoring, adaptability and forecasting tools should be introduced to find the consumer. this will adequately respond to market changes. today, the client is where he will be provided with a product or service in a timely, convenient, comfortable and fast manner. – value. the way of consuming services is changing – from banking and retail to the internet of things. it becomes fundamentally important for client to buy products and services fully and remotely, to receive operational support around the clock and without visiting offices. – data governance. definition and 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(2020). adindex. available at: https://adindex.ru/publication/ opinion/internet/2020/10/28/286400.phtml (accessed 25 march 2021). baltic journal of economic studies 90 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 admiral makarov national university of shipbuilding, ukraine e-mail: irinamk86@gmail.com orcid: https://orcid.org/0000-0002-0417-0918 3 south ukrainian national pedagogical university named after k. d. ushynsky, ukraine е-mail: ss.romanenko9@gmail.com orcid: https://orcid.org/0000-0002-4446-9244 doi: https://doi.org/10.30525/2256-0742/2022-8-4-90-95 systematic approaches to ensuring the strategic development of the sports and recreation sector inna irtyshcheva1, iryna kramarenko2, serhii romanenko3 abstract. the subject of the study is systematic approaches to ensuring the strategic development of the sports and recreation sphere. methodology. general scientific methods were used in the research, in particular: theoretical generalization; methods of positive-normative analysis and statistical analysis. the aim is to substantiate systematic approaches to ensuring the strategic development of physical culture and recreation activities in ukraine. conclusions of the study. particular attention in the context of strategic development of physical culture and recreation is focused on the creation of an effective system of financial and economic support of the industry as a basic factor in the functioning of other subsystems. the financial and economic subsystem of the development of physical culture and recreation in the work is understood as a set of structural and dynamic characteristics of economic relations within the industry (between all participants in the processes of physical culture and recreation) and beyond (with government agencies, scientific organizations, foreign partners), which includes a set of certain property relations, systems of financial resources flow and management methods regulated by the relevant legal norms, embodied in organizational and economic mechanisms that allow to function effectively in a changing environment. in the context of improving the mechanisms of financial support for the development of physical culture and sports in the strategic perspective, the following elements need to be finalized and improved: the formation of state and regional financial preferences for extra-budgetary funding of physical culture and sports; settlement of issues related to the formation of funds for the development of physical culture and sports at the expense of part of the profits of domestic and foreign producers of tobacco and alcohol products; stimulation of investments (especially foreign ones) in the development of sports infrastructure; development of public-private and municipal-private partnership projects; improvement of sponsorship and patronage institutions; development of modern financial instruments that facilitate the attraction of public funds to the development of sports of higher achievements and joint investment institutions. key words: sports and health activities, financing, national characteristics, world health organization. jel classification: g18, h30, h51, h61, i10 1. introduction the development of physical culture and recreation in ukraine in recent years has been significantly underfunded, as evidenced by the dynamics of reducing the total amount of funding for physical culture and sports. the imperfection of the modern system of management of physical culture and recreation activities is explained primarily by the fact that the existing (built for non-market conditions) financial and economic system is applied to the subjects of this sphere. in the conditions of budget financing deficit, the problem of attracting additional resources to all spheres of physical culture and sports development (including those that carry out exclusively social activities) becomes quite obvious. the solution to this problem, according to the authors, lies in the formation of certain economic relations between the subjects of this sphere, which is facilitated by granting them certain economic rights. economic rights of business entities are the right to establish external (with suppliers, consumers, baltic journal of economic studies 91 vol. 8 no. 4, 2022 customers, other organizations, the state, financial structures) and intra-industry relations, to balance them according to the criteria of efficiency, to form relevant contracts, to provide services and to influence their price. determination of strategic guidelines for sustainable development of the physical culture and recreation sphere in the regions requires its comprehensive assessment. the use of a comprehensive analysis for these purposes allows to compare and contrast the potential capabilities and results of the functioning of the physical culture and recreation sphere in the regions, to identify the main shortcomings and to substantiate the possibilities of improving the organizational and economic support of its sustainable development. the physical culture and recreation sphere is recognized as a priority area of socio-economic development of the state and in the context of decentralization should take its rightful place in the policy of local governments through financial, resource, organizational and infrastructural support. the main work on stimulation and coordination of physical culture and recreation activities is carried out at the local level and is entrusted to the territorial authorities. in ukraine, as a result of the reform, a broad legislative framework has been formed that provides local governments with sufficient powers to develop this sphere. at the same time, financial support and the need to find additional funds for the development of high-quality sports infrastructure remains a problematic issue, due to the significant differentiation of the newly formed hromadas in terms of their financial capacity (tsymbalyuk, pavlikha, tsymbalyuk, 2022). the purpose of the article is to substantiate systematic approaches to ensuring the strategic development of physical culture and recreation activities in ukraine. 2. financing of physical culture and health sphere as a factor of strategic development according to o. v. ivanova, "the state should ensure diversification of sources of financing of the industry in two main directions. the first is the activation of commercial and non-governmental non-profit structures in providing physical culture and sports services to various categories of consumers (from professional athletes and athletes of international level to services for the population to maintain physical fitness and active longevity). the second is to transfer the functions of management and support of physical culture and sports to the regional and local levels of government. that is, diversification of managerial powers both within the state vertical: federation – region – municipality, and in the direction of the sectoral structure of the economy (economic entities): public (state and municipal forms of ownership) sector – non-governmental non-profit sector (public organizations and foundations)." (ivanova, 2006) the dynamics of the total amount of funding for the development of physical culture and sports in ukraine is shown in figure 1. 6907,3 5733,8 4410,4 5643,0 5710,9 3855,5 1077,8 964,3 983,6 0,0 1000,0 2000,0 3000,0 4000,0 5000,0 6000,0 7000,0 8000,0 2012 2013 2014 2015 2016 2017 2018 2019 2020 aggregate amounts of funding for the development of physical education and sports, million hryvnias. figure 1. dynamics of total financing of physical culture and sports development in ukraine source: (sports ukraine, 2020) baltic journal of economic studies 92 vol. 8 no. 4, 2022 according to the information directory "sport ukraine", the dynamics of financing of physical culture and recreation activities in 2012–2020 decreased by 7 times. in 2012, the amount of funding for sports and recreational activities amounted to uah 6,907.3 million, and in 2020 it decreased to uah 983.6 million, while it should be clarified that the amount of funding has decreased not due to the coronavirus pandemic. when forming subsystems of financial support for the development of physical culture, sports and recreational activities, it is also necessary to distinguish between the activities of organizations whose main goal is to achieve social effect. and for which it is primarily commercial. thus, according to the law of ukraine "on physical culture and sports", the organizations and institutions that primarily perform socially important functions include specialized educational institutions of sports profile, children's and youth schools, schools of higher sports skills, olympic training centers, centers of sports rehabilitation of the disabled, etc. in the authors' opinion, this category also includes the organizations proposed by the author that provide military sports training for boys and girls. this group of institutions and organizations is a priority in terms of budget funding. at the same time, it is necessary to expand opportunities for additional revenues through: grants, sponsorship, expanding the scope of paid services and other sources. based on current realities, it is also worth reviewing the degree of state participation in ensuring the process of expanded reproduction in the sports and recreation industry. in particular, the content of economic activity of the central executive bodies in physical culture and sports, which should be exempted from the functions of operational distribution of budget funds to ensure the maintenance of national teams in sports, requires qualitative reorientation. instead, this body, as an authorized representative of the state, should primarily ensure the implementation of the function of regulating economic relations in the field of physical culture and sports. improving the efficiency of non-profit organizations in the sports sector requires: revision of the mechanism for managing public funding and coordination of activities; granting more powers to sectoral federations; encouraging participation in social and sports projects. as for the business entities operating in the field of professional and mass sports, it is possible to increase the efficiency of their activities by increasing the quantity and quality of services provided, developing partnerships with non-profit sports organizations and other business structures for the joint implementation of social and sports projects in order to advertise their goods (services) and increase the number of consumers. thus, people's desire for an active lifestyle, the fashion for sports, the development of socially responsible business contribute to investing in various sports social projects. and although they are not profitable, entrepreneurs receive economic benefits in the form of advertising, increasing the value of the company by creating a positive image, increasing the productivity of employees, assistance from the state in further development of entrepreneurship in the sports industry (sports ukraine, 2020). based on the experience of countries with developed economies, it is also worth paying attention to the formation of motivational financial instruments that will stimulate the business sector in the field of sports and recreation services. to date, ukraine has not created financial preferences for extra-budgetary funding of physical culture and sports. it is necessary to regulate the issue of formation of funds for the development of physical culture and sports at the expense of part of the profits of domestic and foreign producers of tobacco and alcohol products as a compensation for the negative consequences for human health from their use. these funds can be used primarily for the development and restoration of sports infrastructure in the regions, in particular for the development of mass sports. revenues from sports lotteries, sweepstakes and bookmakers are also an important source of funding for sports organizations. however, the issue of raising funds from their profits directly to finance sports organizations is not regulated at the proper level, which gives grounds for speculation and the formation of shadow schemes in this area. according to o. v. ivanova, "when forming an economic mechanism for the development of physical culture and sports, it is necessary to clarify that the sphere of providing sports services is a sphere of production, and, as you know, production consists of labor, means of labor and objects of labor. the subject of work in the field of service provision is a service. reasonable pricing in the field of sports services is an important area of development of physical culture and sports and requires additional research". (ivanova, 2006) in this context, an important direction of the state policy remains the formation of measures to support small and medium-sized businesses in the production of sports equipment and the provision of other related services to sports organizations. another useful example is the strengthening of communication ties between domestic manufacturers of sports goods and sports organizations on the terms of mutual benefit, which will create additional opportunities for financing organizations through the provision of marketing services. baltic journal of economic studies 93 vol. 8 no. 4, 2022 3. subsystems of strategic development of physical culture and recreation activities considering the sports and recreation sector through the prism of business opportunities in ukraine, one should take into account the measures taken by the government of ukraine to support business. in the strategic perspective, the following elements of financial support for the development of physical culture and recreational activities need to be improved: the formation of state and regional financial preferences for extra-budgetary funding of physical culture and sports; settlement of issues related to the formation of funds for the development of physical culture and sports at the expense of part of the profits of domestic and foreign producers of tobacco and alcohol products; stimulation of investments (especially foreign ones) in the development of sports infrastructure; development of public-private and municipal-private partnership projects; improvement of sponsorship and patronage institutions; development of modern financial instruments that facilitate the attraction of public funds to the development of sports of higher achievements (blockchain technology) and joint investment institutions. the development of public-private partnership is also one of the modern mechanisms for increasing investment activity in the development of social, sports and municipal facilities. in this context, consider reasonable the opinion of scientists dudorova l. yu. and bondarenko b. o. that "the socio-economic result of ppp should be ensured by coordinated and balanced management of a special body to support and develop ppp in the field of physical culture and sports, the activities of which should be aimed at coordinating actions in the preparation of projects and decision-making on their implementation, in particular, determining the participation of participants in project financing, providing methodological assistance on management and financing, developing regulations, conducting expert analysis of project implementation, etc." (dudorova, bondarenko, 2018) according to the law of ukraine “on public private partnership": "public-private partnership is cooperation between the state of ukraine, the autonomous republic of crimea, territorial communities represented by the relevant state bodies, local self-government bodies, the national academy of sciences of ukraine, national branch academies of sciences (public partners) and legal entities, except for state and municipal enterprises, institutions, organizations (private partners), which is carried out on the basis of an agreement." (verkhovna rada of ukraine, 2010) international experience expands the boundaries of public-private partnership: "it includes various forms of concessions and partnerships, and the basis of ppp is the investment attractiveness of the project." "a concession is a form of public-private partnership, which provides for the granting by the concessor to the concessionaire of the right to create and/or construct (new construction, reconstruction, restoration, overhaul and technical re-equipment) of the concession object, and/or management (use, operation, maintenance) of ‘the concession object and/or provision of socially significant services in the manner and on the terms and conditions specified in the concession agreement, and also provides for the transfer to the concessionaire of most of the operational risk covering the demand and/or supply risk’" (verkhovna rada of ukraine, 2019). therefore, the organizational and economic model of increasing investment activity in the sports and recreation sector is based on the use of public-private partnership and active interaction between the state, business and the public. concession – transfer of rights to sports facilities and/or operation of sports and recreation facilities – can be considered as a type of such interaction. public-private partnership has a number of advantages that are important for the development of sports and health sector. at the same time, having advantages, public private partnership, according to experts of the institute for strategic studies under the president of ukraine, has a number of disadvantages: "– firstly, there is no minimum share of private partner participation in the project (in particular, in developed countries the minimum share of private financing is 25%). in this regard, even a minimal share of private financing in a joint project allows it to be classified as a ppp, shifting most of the responsibility to the state; – secondly, there are no clearly defined mechanisms for practical implementation (determining the stages of ppp projects implementation, creating motivation for foreign investors, etc.); – thirdly, according to art. 7, public-private partnership is applied to objects that are in state or communal ownership or belong to the autonomous republic of crimea, which makes it impossible to implement such projects as construction of objects by a private partner with their subsequent transfer to a state (communal) partner; – fourth, the role of the state fund for regional development in financing ppp projects remains uncertain." (national institute of strategic studies, 2019) public-private partnership in ukraine is built and implemented on the principles of equality before the law, non-discrimination of rights, mutually baltic journal of economic studies 94 vol. 8 no. 4, 2022 beneficial coordination of partners' interests, efficiency of activity, immutability of purpose, recognition of rights and obligations of ukraine, fair distribution of risks and recognition of partners on a competitive basis. public-private partnership in ukraine, despite the insufficient pace of development and penetration in most areas of economic activity, already demonstrates certain positive results, in particular in such areas as transport, energy, communications, utilities, etc. currently, public-private partnership in the field of sports and recreation services is underdeveloped due to the imperfection of regulatory support that does not take into account the specifics of the industry. however, taking into account international experience, it is worth developing this area, in particular at the regional level. according to the authors, public-private partnership in sports and recreation activities provides a number of advantages, namely: – more efficient management of project implementation, saving time and resources by combining the potential of partnership participants; – improving the efficiency of management decisions that will be made taking into account different approaches to project selection and finding the most optimal ways of their implementation based on a wider set of alternatives; – improving the efficiency of operational project management, based on the experience of private business, introduction of market instruments for project development (social networks, advertising, marketing communications); – increasing the social responsibility of business through its integration into public life through involvement in the implementation of socially significant projects; – improving the quality of sports and recreation services, their better integration with other sectors of the sports industry, as well as the it sector. in order to fairly distribute risks and recognize partners on a competitive basis in the process of implementing public-private partnerships in the field of sports and health, an important issue is the selection of pilot projects and the formation of criteria for this selection. within the framework of public-private partnerships, public sports organizations and local governments can cooperate by concluding agreements on the long-term use of communal property, land plots, etc. based not only on lease agreements, as is common, but on the targeted joint use and development of physical culture, sports and recreational activities with the provision of benefits for both parties. where it will allow, on the one hand, to distribute risks and costs, and on the other – to ensure the development of sports organizations in a particular region. thus, this section outlines the issues related to the formation and balanced development of subsystems that are necessary to support the effective functioning of the sports and recreation industry in the strategic perspective, the implementation of state policy and the achievement of strategic goals. the formation and development of these subsystems should be carried out taking into account global trends in the field of sports and recreation activities, as well as the limitations dictated by the socio-economic situation of the country after the war. it is obvious that the industry will need new projects and strategies, as well as the formation of models for their implementation in the new realities. in this context, the main functions and tasks of subsystems in the context of existing problems are defined. however, the tools and mechanisms for their implementation will require additional analysis and research, taking into account the post-war situation in the country and its regions. the war in ukraine has destroyed a significant part of the economic potential, sports, social and transport infrastructure, caused significant damage to the economy and led to the loss of human resources – this is the opinion of most scientists (irtyshcheva, and etc., 2022; popadynets, et al. 2021; yakymchuk, et al., 2021; pletsan, et al. 2021). 4. conclusions particular attention in the context of strategic development of physical culture and recreation is focused on the creation of an effective system of financial and economic support of the industry as a basic factor in the functioning of other subsystems. the financial and economic subsystem of the development of physical culture and recreation in the work is understood as a set of structural and dynamic characteristics of economic relations within the industry (between all participants in the processes of physical culture and recreation) and beyond (with government agencies, scientific organizations, foreign partners), which includes a set of certain property relations, systems of financial resources flow and management methods regulated by the relevant legal norms, embodied in organizational and economic mechanisms that allow to function effectively in a changing environment. in the context of improving the mechanisms of financial support for the development of physical culture and sports in the strategic perspective, the following elements need to be finalized and improved: formation of state and regional financial preferences for extra-budgetary financing of physical culture and sports; settlement of issues related to the formation of funds for the development of physical culture and sports at the expense of part of the profits of domestic baltic journal of economic studies 95 vol. 8 no. 4, 2022 and foreign manufacturers of tobacco and alcohol products; stimulation of investments (especially foreign ones) in the development of sports infrastructure; development of public-private and municipal-private partnership projects; improvement of sponsorship and patronage institutions; development of modern financial instruments that facilitate the attraction of public funds to the development of sports of higher achievements and joint investment institutions. references: tsymbalyuk, i., pavlikha, n. v., & tsymbalyuk, s. m. (2022). sustainable development of the sports and recreation sphere of the region for the sake of peace and security: monograph. lutsk: vezha-druk. ivanova, o. v. (2006). mechanisms of state management in the field of physical culture and sports in ukraine. available at: http://baltijapublishing.lv/omp/index.php/bp/catalog/view/137/4006/8373-1 ukraine is sporty (2020). information guide. 2020 is the year. available at: https://mms.gov.ua/storage/app/ sites/16/fizychna_kultura/nakazy_statystichna_zvitnist/zbirnik-2020.pdf popadynets, n., et al. (2021). evaluation of domestic market development in ukraine. international conference on intelligent human systems integration, рр. 357–363. yakymchuk, a., et al. (2021). economic diagnostics and management of eco-innovations: conceptual model of taxonomic analysis. 4th international conference on intelligent human systems integration (ihsi) – integrating people and intelligent systems, рр. 573–579. dudorova, l. yu., & bondarenko, b. o. (2018). state policy of ukraine in the field of physical culture and sports. actual problems of innovative development of cluster entrepreneurship in ukraine: iv all-ukrainian scientific and practical conference, рр. 174–178. on public-private partnership: law of ukraine. information of the verkhovna rada of ukraine (vvr), 2010, no. 40, article 524. available at: https://zakon.rada.gov.ua/laws/show/2404-17#text melikh, o., irtyshcheva, i., & bogatyrev, k. (2019). organizational and economic fundamentals of development of sports tourism in the system of management of sports and health activities. baltic journal of economic studies, vol. 5, no. 5, рр. 79–83. doi: https://doi.org/10.30525/2256-0742/2019-5-5-79-83 irtyshcheva, i. and etc. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, vol. 8, no. 2, рр. 78–82. doi: https://doi.org/10.30525/22560742/2022-8-2-78-82 research report (2015). public-private partnership (ppp) as a financial mechanism for diversifying sources of funding for hiv prevention services among vulnerable population groups in ukraine. kyiv. on the concession (2019). the law of ukraine. information of the verkhovna rada (vvr), no. 48, article 325. available at: https://zakon.rada.gov.ua/laws/show/155-20#text peculiarities of the use of public-private partnership as a mechanism for the implementation of a new regional policy " (2019). analytical note / national institute of strategic studies. available at: http://www.niss.gov.ua/ articles/1239/ melikh, o., bogatyrev, k., & irtyshcheva, i. (2019). conceptual approaches to the development of health improving tourism. baltic journal of economic studies, vol. 5, no. 2, рр. 131–136. doi: https://doi.org/ 10.30525/2256-0742/2019-5-2-131-136 received on: 19th of september, 2022 accepted on: 27th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 186 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-186-194 the position of the financial component in the paradigm of modern economic diplomacy kostyantyn flissak1, darya glukhova2 abstract. at the beginning of the 21st century, most subjects of international economic relations announced a course to liberalize the world economy both as a whole and as its individual components. at the same time, under the influence of geopolitical and geo-economic aspirations, state instruments of a protectionist nature were increasingly used. global economic development has become a hostage to such processes. in such circumstances, the efficiency of individual business entities has begun to decline. innovative tools were needed to prevent this. one of them was economic diplomacy, which has acquired a special role in providing the promotion of the interests of both national economies as a whole and their individual subjects. at the same time, economic diplomacy itself covers different areas of economic activity and not all of them are investigated to the same extent. the purpose of the article is to study and analyze the financial component of economic diplomacy in modern conditions, the specifics of its formation and development, aimed at improving the national system of promoting national interests both within the state and abroad. to achieve this goal, the research is focused on the following tasks: to consider and analyze the theoretical basis of the financial component of economic diplomacy, to highlight its manifestations in various forms of international economic relations, to determine the main imperatives of state support for international investment partnership. special attention is paid to the issues of external borrowing and the movement of public debt funds from the point of view of the influence of economic diplomacy on them. based on the results of this review, a whole number of theoretical conclusions were made, which at the same time establish the basis for further research of the considered problem. methodology. in the process of preparing the article, methods of scientific abstraction, observation, analysis and synthesis, generalization, as well as statistical and economic methods were used to assess a number of financial and economic indicators of state development in order to identify the weaknesses and prospects for the impact of economic diplomacy tools on them. the information and analytical base for the study are materials and analytical reports of international organizations dealing with the issues under consideration (unctad, imf, world bank), regulatory and statistical data of state authorities of ukraine and the united states, the results of scientific research of modern scientists from different countries. the results of the study show that providing the proper efficiency of foreign economic activity requires the use of a set of tools to promote and support its subjects. economic diplomacy plays a significant role in this sphere. the development level of international economic relations actualizes the justification of the modern paradigm of the financial component, mechanisms for applying the tools of economic diplomacy in financial issues. all this requires a clear delineation and structuring of object-by-object areas and directions of efforts. only on this basis, an effective mechanism for implementing the financial component of economic diplomacy can be formed. the practical implications of the scientific research are to find out the current state of economic diplomacy mechanisms in the financial sphere, trends in their development, and potential consequences for other states (including ukraine). value/originality. the studied mechanisms and practice of using economic diplomacy in the sphere of the financial component, in particular in issues of interstate investment partnership, external government borrowing, and work with public debt deserve attention from the relevant state structures of ukraine on the implementation of tools and standards of economic diplomacy in this area. in addition, this corresponding author: 1 west ukrainian national university, ukraine. e-mail: flissak.k@ukr.net orcid: https://orcid.org/0000-0002-0980-2398 researcherid: p-9986-2018 2 taras shevchenko university of kyiv, ukraine. e-mail: gdarja03@gmail.com orcid: https://orcid.org/0000-0003-4734-4268 baltic journal of economic studies 187 vol. 7 no. 3, 2021 study can serve as a basis for further research, since the considered problem contains the significant potential for further investigations in subsequent scientific publications. key words: national interests, economic diplomacy, foreign economic activity, global economic development, investment, state debt. jel classification: f13, f21, f63, o24 1. introduction the world economic processes of the globalization era are accompanied, on the one hand, by the liberalization of market relations, the expansion of forms and methods of international economic cooperation, the unification of standards and regulatory requirements for the cross-border movement of goods, services, capital and labor, and on the other hand, by the strengthening of the struggle for markets of raw materials and resources, for markets of products, increased competition and the use of noncompetitive methods of promoting their own interests. periodically occurring crisis phenomena and force majeure situations, including the 2020-2021 pandemic of covid-19, are adding to the negative impact. in these circumstances, the importance of intensifying the efforts of states to defend their national interests increases. at the same time, it is difficult to overestimate the role and opportunities of economic diplomacy. in the context of the range of problems under consideration, the financial sphere is an important direction for the efforts of economic diplomacy in practice in the system of international economic relations. the theoretical and practical aspects of its various components (such as the financial interest of states in commodity expansion on the international market, international capital flows, investment flows, external borrowing, and regulation of external debt) have been and are the subject of research by different experts and scientists, in particular, such as n. bayne (2011), p.a.g. van bergeijk (2009), g. dieckheuer (2001), m. eng, f.a. lees, and l.j. mauer (1995), a. filipenko and o. rogach (2005), p. krugman and m. obstfeld (2018), o. sharov (2008), r . jackson and g. sorensen (2013), w. vergun and o. stupnytzkiy (2009), h. wagner (2009), s. woolcock (2016) and others. at the same time, the analysis of professional publications on the problems of international economic relations and foreign economic activity shows that the study of the financial component of economic diplomacy and the use of its tools in this area is practically ignored. the relevance of the problem also is in the fact that governments of states constantly face new challenges that require an adequate response in issues of diplomatic support in the financial segment of international relations. it should be noted that the possibilities of the sphere under consideration have significant potential in providing the effectiveness of the financial component of foreign economic relations, in preventing negative manifestations and crisis phenomena, and in resolving existing problems. justification of the modern paradigm of the financial component, mechanisms for applying the tools of economic diplomacy in financial matters requires a clear delineation and structuring of object-by-object spheres and directions of efforts. only on this basis, an effective mechanism for implementing the financial component of economic diplomacy can be formed. 2. financial component of economic diplomacy the practice of international relations, bilateral and multilateral economic partnership of countries constantly puts the need to coordinate financial parameters in trade and economic relations, investment cooperation, international cooperation, migration processes, and issues of innovation development on the agenda. theoretical justifications of the practical implementation of the economic diplomacy’s financial component require a clear structuring, first of all, of its objects, which include financial aspects: a) foreign trade (price and performance components); b) investment cooperation; c) international cooperation; d) external borrowing. price aspects of foreign trade comprise compliance with price parameters in the fulfillment of trade operations, optimization of export prices, prevention of dumping and anti-dumping actions from the side of partners, countering discriminatory manifestations against national subjects of economic activity in foreign markets. providing compliance with price parameters and optimizing prices represent the basis on which the final financial result is formed both directly by the exporting entity and by the country from which the export is carried out. for the exporter, the financial result is profit, and for the country of origin of export – export duty and corresponding tax revenues to the budget. in addition, the financial component of economic diplomacy in foreign trade includes the prevention and protection against dumping, as so as anti-dumping measures from the side of partners can result in appropriate trade, economic and financial sanctions (export restrictions on relevant commodity items with all the consequences that follow from this, as well as direct penalties) (yankiv, flissak 2020). with the assistance of applying the tools of economic diplomacy, it becomes possible to significantly increase baltic journal of economic studies 188 vol. 7, no. 3, 2021 the efficiency of foreign trade operations due to the financial component. in foreign trade operations, the financial component of economic diplomacy should cover the activities of diplomatic missions in the host countries in issues of countering discriminatory manifestations from the side of foreign partners in relation to national subjects of foreign economic activity in markets abroad. this problem is particularly relevant for ukraine. financial aspects of investment cooperation include the volume of attracting foreign investment in the national economy, investing funds by national investors in projects abroad, and ensuring that risks for investors are minimized. since the second position in foreign economic activity after export-import operations is occupied by capital movement or, in other words, investment cooperation, so direct investment is of particular interest to the country’s economy. however, the movement of investment capital always has two sides: from the point of view of the recipient country it is an investment of capital in its economy, and for the investor country it is the export of capital. at the same time, the export of capital for the investor country can be considered both positively and negatively. the investment is positive if the capital is used more efficiently outside the investor country in comparison to the investment of the same capital within the country itself. from the point of view of the investor country, investing capital abroad may be negative if there is a shortage of funds for domestic investment and the development of the national economy. from the point of view of national interests, such exports of capital are classified as harmful and posing threats to the country’s economic and national security. this is one of the objects of economic diplomacy in promoting the national interests of the state. the financial components of international financial cooperation, which we consider objects of economic diplomacy, are the financial support of cooperative networks, increasing their income and reducing costs, minimizing risks in achieving foreign economic goals, combining financial resources to implement significant financial projects (kaufmann, 1990, wirtschaftsförderung sachsen gmbh, 2019). the financial component of international cooperation is primarily manifested at the stage of planning and determining the need for financial support, the forms of which can be: bank loans, warranties, financial intermediation, and financial participation of the cooperation center, as well as the insurance system for cooperation partners. the experience of foreign economic activity of a number of countries, primarily the federal republic of germany, regarding their active position in diplomatic support of the financial component of international cooperation confirms that this is an intensive tool for national exporters to develop new markets abroad. during the creation and further development of a system of international cooperation relations and developing international cooperation using the tools of economic diplomacy, the financial component covers the issues of financial support for cooperative networks, increasing revenues and reducing costs, minimizing risks in achieving foreign economic goals. in the area of external borrowing, providing of which should account for a significant share of the financial component of economic diplomacy, we highlight actions to support the reception of funds in the formation of public debt, its repayment, servicing and possible restructuring. 3. imperatives of state support for international investment partnership a significant segment in the financial component of both foreign economic activity and its state support by the tools of economic diplomacy is occupied by investment activities. since one of the challenges of the globalized world economic system in relation to national economies is the need to optimize their participation in the international division of labor, this increases the importance of the investment segment of foreign economic activity in achieving economic growth in a competitive environment with priority provision of national interests. when making decisions on new investments, it is necessary to balance investment flows into and from the country as much as possible. at the same time, it is extremely important to take into account the impact of investments on the economic growth of countries, on the volume of gdp, ensuring financial stability, solving problems with the employment of the population, and on the level of economic security of states. in the context of the country’s participation in integration processes, the systematization of elements and components in forming the basis for investment expansion in foreign markets becomes particularly relevant. for ukraine, this moment is of particular importance both for theory and practice due to the lack of such developments here. the state of investment cooperation of ukraine is characterized by the data in table 1, and table 2 shows data on the countries that are the main investors for the ukrainian economy. the dynamics of the share of accumulated direct investment in gdp (table 1) indicates that the presence of national investors of ukraine in foreign markets is insignificant. this is due to the lack of both necessary capital and a state system of assistance and support of national investors in expanding their activity outside the country. also, the need for further improvement of the investment climate in terms of developing the legal and organizational framework to increase the capacity of mechanisms for ensuring a favorable investment climate and forming the basis for maintaining and improving the competitiveness of the baltic journal of economic studies 189 vol. 7 no. 3, 2021 national economy remains relevant for ukraine. it is the investment climate in the country that is a significant reason for the outflow of investment. thus, in 2020, according to the national bank of ukraine, the total net outflow of foreign investment from ukraine amounted to 870 million usd, and for the first quarter of 2021 – 300 million usd. here it is appropriate to draw attention to the practice of the eu countries in promoting national interests in the investment sphere and the real effectiveness of using the means of economic diplomacy, in particular, in slovakia (flissak, drakokhrust, 2021) and poland (yankiv, flissak, kozłowski, 2020). in particular, poland’s current economic policy in the field of foreign investment is focused on creating opportunities for polish companies investing abroad. confirmation of the state's actions in this area is resolution no. 3/2018 of the council of ministers of poland dated january 3, 2018 on the “program to support investments of importance for the polish economy for 2011-2023”. this program is one of the tools including economic diplomacy for support of investment projects, and is closely linked to strategic development documents; it contains clear goals to provide investment support, which are of particular importance for the development of innovation and competitiveness, as well as identify priority sectors in which investment will be supported. analysis of the practice by which the necessary dynamics of the investment segment of foreign economic activity in such eu countries as poland, slovakia, hungary, and the czech republic is providing, as so as the effective attraction of fdi to the national economy and successful expansion of investment presence in foreign markets, increases the role and influence of state regulation of these processes in the presence of the market status. this activity is manifested in the appropriate legislative and regulatory support for investment cooperation, in the use of a wide range of financial and institutional support for investment activities, and in the creation of a network of structures for investment policy implementation. 4. external borrowing in the sphere of economic diplomacy influence a separate and independent place in the systematic regulation and support of activities in the field of external borrowing should be occupied by a set of measures taken by the state including applying diplomatic tools. as it is known, in the market economy the appearance of debt can objectively be both a basis and a consequence of financial, economic, and commercial activities. that is why an integral element of the globalized world economic system in resolving the problem of insufficient funds for economic development, implementation of socio-economic development programs, financial support for the introduction of new and cutting edge technologies and innovations is the attraction of thirdparty funds and external financial resources. at the macro level usually are turned to both internal and external borrowings. as a result of such fund attractions, debts arise at the government level – as state and stateguaranteed debts. issues of external debt in international economic activity have become particularly relevant in recent decades, and the problem of improving the efficiency of external borrowing and resolving external debts has become particularly acute for the economic diplomacy of countries under the influence of the global financial and economic crisis of 2008-2010. to solve it, both at the level of states and international organizations, a whole system of mechanisms and instruments of influence is used (dieckheuer, 2001), among which economic diplomacy plays a special role. here it is necessary table 1 dynamics of annual direct investment and its share in gdp of ukraine annual direct investment in and out ukraine, in m. usd dynamics of the share of accumulated direct investment, in % of gdp of ukraine from foreign countries into ukraine from ukraine abroad from foreign countries into ukraine from ukraine abroad 2009 4 816 162 37.31 4.83 2010 6 495 736 38.87 4.81 2011 7 207 192 35.95 4.03 2012 8 401 1 206 37.05 4.39 2013 4 499 420 36.57 4.27 2014 410 111 37.33 5.68 2015 2 961 51 47.26 8.18 2016 3 284 16 45.07 8.00 2017 2 601 8 38.55 6.66 2018 2 355 5 33.89 5.68 2019 3 070 648 31.90 5.25 source: compiled by the author based on data by unctad foreign direct investment: inward and outward flows and stock (2021) baltic journal of economic studies 190 vol. 7 no. 3, 2021 to emphasize that one of the defining directions of ensuring effective foreign economic activity of own country is the orientation of economic diplomacy to the main vectors of economic and political priorities, as well as the mandatory coordination of its goals with the strategic guidelines of the state’s foreign economic policy. economic diplomacy means should support the country’s external debt from the stage of the search of partners and making agreements with creditors up to the stage of its repayment. often, as practice shows, diplomats need to make significant efforts to resolve emerging problems, eliminate bottlenecks and contradictions between the parties (creditors and borrowers) in the process of using external borrowing. the analysis of international practice shows that the problems of public debt and external borrowing are among the most relevant in the modern economic life of each country, regional supranational entities, and international organizations. in a number of countries, the level of public debt exceeds or is quite high relative to gdp, which is confirmed by the data in table 3. certain distortions in the use of financial and credit resources, ignoring the requirements for effective investment of credit resources, excessive enthusiasm for consumer crediting and unsecured provision of loans in a number of european countries (primarily in greece, portugal, spain, iceland, italy) and in the united states have greatly aggravated the problem of external debt. to a certain extent, these problems also affected ukraine, where coincided the impact of the global financial crisis and the accumulation of internal unresolved problems in part of accumulating the necessary financial resources for the needs of economic development, ensuring employment, and preventing a fall in social standards. the problem of external debt in ukraine is also aggravated by the lack of own funds for the modernization of production sectors, the high level of deterioration of fixed production assets, the high level of the shadow sector in the economy, and the lack of funds for timely financing of social programs and activities. since in the modern world external debt has become a common phenomenon in the world economy, it should be mentioned that in the system of the world economy there are two poles of external debt: on the one hand, a small group of creditor countries and international credit organizations; on the other hand, a large group of debtor countries. at the same time, the dominant position for a long time was that developing countries and economies in transition are more exposed to external borrowing. but the trends of the 21st century clearly deny this: the most developed economies in the world are among the main debtors. according to the international monetary fund, the highest level of external debt-to-gdp ratio is found in economically developed countries. by absolute volumes of public debt, the first position is consistently occupied by the united states, the dynamics of which over the past decade are characterized by the data in table 4. table 2 main investment partners of ukraine in amounts of direct investments, at the end of the year, in percent of total amounts 2010 2013 2014 2015 2018 2019 world , mln usd 47 956 58 864 29 227 43 780 44 009 51 387 1. the netherlands 26.3 cyprus 32.2 cyprus 21.2 cyprus 34.4 cyprus 30.2 cyprus 31.2 2. cyprus 23.3 the netherlands 17.9 the netherlands 19.2 the netherlands 19.3 the netherlands 21.9 the netherlands 22.8 3. germany 11.2 russia 7.0 germany 8.5 germany 4.9 germany 5.2 switzerland 6.2 4. russia 6.2 germany 6.3 united kingdom 6.9 united kingdom 4.2 switzerland 4.7 germany 4.9 5. united kingdom 4.4 austria 4.7 russia 6.2 british virgin islands 3.7 united kingdom 4.3 united kingdom 4.2 6. france 3.8 switzerland 4.6 switzerland 5.3 france 3.5 russia 2.8 austria 2.9 7. austria 3.5 united kingdom 4.1 france 5.2 austria 3.1 austria 2.6 russia 2.2 8. united states 2.6 france 3.1 austria 4.3 russia 3.0 british virgin islands 2.4 france 2.2 9. switzerland 2.6 united states 2.2 united states 3.4 switzerland 2.1 france 1.8 poland 1.7 10. poland 1.9 british virgin islands 2.0 poland 2.9 united states 2.0 poland 1.8 luxembourg 1.6 source: compiled by the author based on data by imf (2020) baltic journal of economic studies 191 vol. 7 no. 3, 2021 a retrospective assessment of the amount and dynamics of the us state debt over the past decade is especially indicative. in 1980, the us state debt was 32.5% of gdp, in 1990 – 54.2%, in 2000 – 55.5%, and since 2012 – exceeded 100% (table 4) (unctad handbook of statistics, 2003, unctad handbook of statistics, 2009). the given data indicate that it is impossible to maintain the national economy and budget without increasing public debt and external borrowing. in fact, one of the main roles in the increase of american gdp over the past decades belongs precisely due to the growth of state debt. on this basis, a block of target tasks for american economic diplomacy is formed with the appropriate definition of areas of activity, spheres, and regions of influence using the necessary methods and forms. it is mandatory to take into account the level of the financial component of foreign economic activity in the country’s economic development strategy. this applies to export-import operations, investment partnerships, international table 3 rating of countries by the amount of public debt relative to gdp, in percent 2013 2015 2017 state state debt i n per cent of gdp state state debt in per cent of gdp state state debt in per cent of gdp 1. japan 226.1 japan 227.9 japan 236.4 2. zimbabwe 202.4 zimbabwe 205.3 greece 181.9 3. greece 175.0 greece 182.0 lebanon 152.8 4. italy 133.0 lebanon 138.8 yemen 135.5 5. iceland 130.5 italy 135.8 barbados 132.9 6. portugal 127.8 portugal 129.0 italy 131.5 7. ireland 124.2 eritrea 122.6 eritrea 131.2 8. jamaica 123.6 jamaica 122.5 cape verde 126.0 9. lebanon 120.0 cape verde 116.2 sudan 126.0 10. cyprus 113.1 grenada 110.0 portugal 125.6 11. sudan 111.0 cyprus 107.0 gambia 123.2 12. grenada 110.0 belgium 107.0 congo 119.1 13. singapore 105.5 singapore 105.6 singapore 110.9 14. eritrea 104.7 puerto rico 105.4 jamaica 104.1 15. belgium 102.4 ireland 101.2 egypt 103.3 16. puerto rico 96.5 barbados 101.0 belgium 103.2 17. spain 93.7 spain 101.0 bhutan 102.4 18. france 93.4 bhutan 98.5 mozambique 102.2 19. egypt 92.2 france 98.2 cyprus 99.3 20. united kingdom 91.1 canada 95.4 belize 99.0 21. barbados 90.5 ukraine 94.9 spain 98.4 source: compiled by the author based on data by central intelligence agency (2021) table 4 dynamics of the us state debt gdp, in bln usd total public debt outstanding, at the end of the year amount, in bln usd in percent to gdp growth compared to the previous year bln usd в % 2010 14 992 14 025.2 93.5 x x 2011 15 543 15 222.9 97.9 1 197.7 108.5 2012 16 197 16 432.7 101.5 1 209.8 107.9 2013 16 785 17 351.9 103.4 919.2 105.6 2014 17 527 18 141.4 103.5 789.5 104.5 2015 18 225 18 922.2 103.8 780.8 104.3 2016 18 715 19 976.8 106.7 1 054.6 105.6 2017 19 519 20 492.7 105.0 515.9 102.6 2018 20 580 21 974.1 106.8 1 481.4 107.2 2019 21 433 23 201.4 108.3 1 227.3 105.6 2020 20 933 27 747.8 132.6 4 546.4 119.6 source: compiled by the author based on data by the us treasury (2021), the worldbank (2021), the international monetary fund, the world economic outlook database (2021) baltic journal of economic studies 192 vol. 7 no. 3, 2021 cooperation, and participation in international financial institutions. analytical assessment of the situation involving external borrowing, the state of use and servicing of ukraine’s external debt serves as the basis for determining the “problematic” points of application of efforts of economic diplomacy representatives both within the country and in the host states of diplomatic missions – both current and potential creditors. an important element here should be considered the formation of a system of evaluation criteria both on the part of foreign lenders in relation to ukraine (regarding the reputation of the borrower, the level of risks for repayment of funds, terms and volumes of loans), and on the ukrainian side in relation to desired and expected borrowings (regarding terms, special notes, price, possible benefits, procedures for servicing, repayment, possible restructuring, etc.). the dynamics of ukraine’s gross external debt over the past decade are reflected in table 5. the analysis of the considered problem shows that the larger the amount of external debt is, the more often problem situations and conflicts of interest between creditors and borrowers arise. in addition, under favorable circumstances for creditors and significant debt obligations of borrowers, creditor countries and international creditor organizations gain opportunities for strong economic and political influence in different parts of the world in their strategic interests. this once again confirms the need for active diplomatic support and the use of economic diplomacy tools in resolving external debt problems. at the same time, to a large extent, the issue of activating the use of means and methods of economic diplomacy in solving a wide range of emerging problems, in preventing obviously unprofitable steps on the part of borrowers-subjects of external debt, especially in parts of the state and state-guaranteed debt in the context of defending and protecting the national economic interests of the state remains actual. this is especially important for the economic diplomacy of ukraine. at the same time, it is important to take into account that the use of funds that form the country’s public debt implies its permissible limits, exceeding which signals an inefficient, illiquid, and non-payment economy. thus, the efforts of economic diplomacy in matters of external borrowing should be distributed in two main areas: firstly, to intensify cooperation with international financial organizations and international regional development banks in order to attract the necessary external financial and credit resources to the national economy; secondly, to repay and restructure external debt and external borrowing, in other words, to implement effective debt diplomacy. comprehensive coverage of all segments of the financial component of economic diplomacy is the key to preventing risks and undesirable problem situations for the state, as well as providing the provision of national interests, including ukraine, in foreign trade, international investment partnership, and international cooperation, in the implementation of state economic and social development programs. 5. conclusions providing the proper efficiency of foreign economic activity requires the use of a set of tools for the promotion of interests and necessary support of its subjects. in this sector, economic diplomacy plays a significant role. the level of development of international economic relations actualizes the justification of the modern paradigm of the financial component, mechanisms for applying the tools of economic diplomacy in financial issues. all this requires a clear delineation and structuring of objecttable 5 dynamics of gross external debt of ukraine (according to the imf methodology) gdp mn. usd gross external debt, data at the end of the year amount, mn. usd in percent to gdp growth in comparison to the previous year mln usd in percent 2010 135 938 117 346 86.3 … … 2011 163 110 126 236 77.4 +8 890 107.6 2012 175 803 134 625 76.6 +8 389 106.6 2013 183 379 142 079 77.5 +7 454 105.5 2014 133 503 126 297 94.6 15 782 88.9 2015 91 009 117 668 129.3 8 629 93.2 2016 93 361 112 624 120.6 5 044 95.7 2017 112 176 115 451 102.9 + 2 827 102.5 2018 130 904 114 710 87.6 741 99.4 2019 153 903 121 739 79.1 + 7 029 106.1 2020 155 568 125 690 80.8 + 3 951 103.2 source: compiled by the author based on data by the national bank of ukraine (2021), state statistics service of ukraine (2021) baltic journal of economic studies 193 vol. 7 no. 3, 2021 by-object areas and directions of efforts. only on this basis, an effective mechanism for implementing the financial component of economic diplomacy can be formed. the study of this problem allowed us to make the following conclusions: 1. theoretical reasoning for the practical implementation of the financial component of economic diplomacy give grounds to clearly structure its objects, which include financial aspects: foreign trade (price and performance components); investment cooperation; international financial cooperation; external borrowing, and external debt. 2. in foreign trade operations, the financial component of economic diplomacy, in addition to observing price parameters in the implementation of trade operations, optimizing export prices, should cover the activities of diplomatic missions in the host countries in countering discriminatory manifestations from side of foreign partners in relation to national subjects of foreign economic activity in markets abroad. this problem is particularly relevant for ukraine. 3. the financial components of international financial cooperation, as objects of economic diplomacy, should include financial support for cooperative networks, increasing their income and reducing costs, minimizing risks in achieving foreign economic goals, combining financial resources to implement significant financial projects. these aspects can and should play a significant role in the implementation of integration efforts and programs of the countries concerned. 4. due to the fact that in the financial component of both foreign economic activity and its state support by economic diplomacy tools a significant segment here is occupied by investment activities, and become necessary appropriate actions on the part of national states. the experience of a number of eu countries shows that in matters of effective attraction of fdi to the national economy and successful expansion of investment presence in foreign markets, state regulation of these processes in the market economy plays a significant role. this is reflected in the legislative and regulatory support of investment cooperation, the use of a wide range of financial and institutional support for investment activities, the creation of a network of structures, both within countries and abroad, for the implementation of investment policy. 5. in matters of external borrowing and external debt, according to the 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(2020). dyplomacja w zagranicznej współpracy gospodarczej [diplomacy in foreign economic cooperation]. warszawa, cedewu. baltic journal of economic studies 66 vol. 3, no. 2, 2017 corresponding author: 1 department of economics and entrepreneurship, zhytomyr national agroecological university. е-mail: faulbeere@ukr.net 2 department of marketing, zhytomyr national agroecological university. е-mail: luda2310@i.ua 3 department of economics and entrepreneurship, zhytomyr national agroecological university. е-mail: marinel82@ukr.net development of the socially-oriented economy in ukraine: prerequisites and strategic forecasting nataliia kravchuk1 zhytomyr national agroecological university, ukraine liudmyla tarasovych2 zhytomyr national agroecological university, ukraine maryna yaremova3 zhytomyr national agroecological university, ukraine abstract. the purpose of this article is to substantiate prerequisites and prospects for the formation and development of the socially-oriented economy in ukraine. the theoretical and methodological background to the research is system and synergetic scientific approaches, which use in the research of the development of a socially-oriented economy is determined by orientation to basic values and fundamentals of the market economic system and focus on building a democratic society in ukraine. scientific results – it is substantiated that in modern conditions of transformational changes, a strategic course of ukraine is to combine mechanisms of market selfregulation and state regulation, which in its basis is based on principles of socially-oriented economy. such a model of the economy is focused on a human along with its needs and interests, relations with other members of society during production, distribution, exchange, and consumption. at the same time, social orientation foresees providing high productive economic management that configures private initiative and competition. results of conducted analysis of analytical indicators of socio-economic development of ukraine show an urgent necessity and objectivity of forming a socially-oriented economy. it is proved that taking into account increase in openness of the national economy, it is appropriate to consider strict conditions concerning its adequacy to requirements of the current international competition. in this relation, there are analysed vectors of the formation of the socially-oriented economy in ukraine declared by the strategy of sustainable development “ukraine  – 2020” within which a key reference point is an introduction in the country of european standards of living and its achieving a dominant position in the world. an economic platform of the formation and development of the socially-oriented economy is determined the following: providing economic freedom; availability of different types of business; development of competition; formation of a free pricing mechanism; creation of market and social infrastructure; formation of a model of the open economy. in addition, tools and measures of socioeconomic policy of the state are: transparency of activities of public authorities at all levels; focus of investment flows on an implementation of the nation’s social potential and improvement of the population quality of life; priority of development of a transparent competitive area; demonopolization of business environment; strict control over the compliance with the international practical requirements; successive narrowing a sphere of influence of shadow economy and rooting out corruption; power consolidation and efficient cooperation of all its branches; solving a problem of a conflict in the southeast of ukraine. practical implication of the scientific results lies in the fact that the substantiated prerequisites and prospects for the formation and development of socially-oriented economy in ukraine will contribute to the organization of public production that will combine efficiency of market mechanism and principles of self-organization on the basis of accentualization on achieving high standard of living for all segments of the population. key words: socially-oriented economy, society, model, prerequisites of formation, development prospects. jel classification: а14, н41 baltic journal of economic studies 67 vol. 3, no. 2, 2017 1. introduction a qualitatively new level of development of the national economy is determined by development and introduction of a working model of its economic system. dual nature of such a model envisages, on the one hand, taking into account a positive world experience in management of society and harmonization of state and market mechanisms of economic regulation, and on the other  – acceleration of implementation of a strategic aim –achievement of high standard of living for all segments of the population. today, the development of socially-oriented economy is under way in developed countries that occurred as a result of transformation of market economy under the influence of globalization and internationalization and is based on principles of productive work and favourable conditions for it, combination of values of an individual activity concerning the rise in living standards and selfrealization for the good of society. formation of the economic system of a qualitatively new level and providing its balanced development are extremely important for the future of ukraine. current, a low one according to the european standards, the social standard of living, polarization in incomes of different segments of the population are one of the causes of underdevelopment of “middle class”, low level of trust of ukrainian citizens to all government institutions. levelling of social pessimism and apathy on the basis of new social and economic standards will provide guarantees for the sustainable development of ukrainian democracy and ukrainian statehood as such. taking the above mentioned into consideration, a substantiation of prerequisites and prospects for the formation and development of the socially-oriented economy in ukraine is seen as necessary not only from the scientific point of view but also a practical one. 2. current state of the problem research a concept of “social market economy” has obtained a gradual implementation in a model of “social marketbased economy” in germany. ludwig erhard in his work “prosperity for all” determined the main key factors of economic renovation  – free private initiative and competition in conjunction with an active role of the state (erhard, 1948). economic and social “order” established in frg was called “synthesis of a new type” and it clearly outlined boundaries of the state power activities in the economy for the purpose of preventing undesirable effects of a “chaotic development” and also avoiding the formation of the central administrative system. a key idea of a new order was to create free, economically efficient, socially just economic and public “order” (pytannia nimetskoi istorii, 2014). economic order (wirtschaftsordnung)  – is a central concept of german economic thought over the past 50 years. it was introduced by w. eucken – one of the founders of the theory of “social market economy” which the author understands as a body of rules, first of all legal, where economic and social processes have to take place, and he puts social just on a par with economic freedom and free enterprise (oiken, 1995). the model of the social market economy has to provide free, efficient, stable status in society and economy that guarantees economic freedom, market methods of economic management, competition and herewith provides a social security system and social justice (babichev, 2001). issues of the formation of the socially-oriented national economy in ukraine are considered in works of such scientists as: о. bondar-pidhurska (bondar-pidhurska, 2015), n. hrynchuk (hrynchuk, 2003), v.  hryshkin (hryshkin, 2005), n. dieieva (dieieva, 2001), о. lozova (lozova, 2014), о. makara (makara, 2012), h. onyshchuk (onyshchuk, 2012), о. serhiienko (serhiienko, 2002), n. tereshchenko (tereshchenko, 2010) and others. fundamental research on this issue are made by russian scientists, in particular, l.  abalkin (abalkin, 2005), а. butkovskyi (butkovskii, 2001), а. babychev (babichev, 2001). a special attention should be paid to the results of scientific research of r. m. nurieiev who puts an emphasis on an urgent necessity to create institutional conditions similar to “social market economy” of germany in the formation of market economy of russia and, in turn, substantiates advantages and possibilities of this model of development (nurieiev, 2002). considering the fact that the model of the socially-oriented economy must be built taking into account national features of a certain country, in the context of this research, there are good reasons to substantiate prerequisites and prospects for its formation and development through the prism of such features in ukraine. 3. substantiation of the essence of socially-oriented economy adoption of the declaration of state sovereignty of ukraine and act of declaration of independence of ukraine in due course practically initiated the formation of fundamentals of the state policy oriented to democratic development of the state and prospects for social development. at the same time, a process of further democratic development of radical changes in the country on all its fronts is constantly under way. creation of an efficient system of public authorities, working social protection system, and development of civil society are still the main tasks of ukrainian state (tytarenko, 2010). social orientation of the economy of ukraine provides securing high productive economic management that configures private initiative and competition. national competitiveness in the long term can be provided by intensive reproduction of human capital and formation of the middle class of citizens with increasing quality of life. if full-fledged economy lies in the basis, it is possible baltic journal of economic studies 68 vol. 3, no. 2, 2017 to form a balanced system of social protection of the population, provide equal opportunities for access to universal human values. social market economy is oriented to the achievement of a set of goals, which implementation will enable improving the quality of life of the population and sustainable economic growth of the country as a whole. key goals of social market economy should be considered as the following: economic freedom (opportunities of economic entities to choose a field of activities and model of economic behaviour); economic growth (growth of economy that provides high level of quality of living of the social market economy market state regulation of economy open model of economy modern market infrastructure welfare system social infrastructure fig. 1. specific features of social market economy source: the author’s research population); formation of efficient and socially just monetary system; social security and social progress; equitable taxation (setting privileges in the taxation for population groups with low incomes); environmental and food security. a strategic direction of the social market economy is: efficient system of property relations; monetary and exchange order; competitive, financial, tax, foreign economic orderliness, and also order in the field of labour and social relations. the use of market methods of economy, state regulation and forecast of the economy, open model of the economy, availability of modern market and social infrastructure, welfare system etc. are peculiar to the social market economy. the interrelation between components of the social market economy is shown in fig. 1. 4. analytical study of the level of socioeconomic development of ukraine a readiness of transition of ukraine to the sociallyoriented economy can be shown by indicators that characterize the level of economic development of the country such as gdp per capita, volume, and indices of table 1 the main indicators of socio-economic development of ukraine indicator year 2016 vs. 2000, % 2000 2010 2016 * present population size, million people 49,4 45,9 42,8 86,6 gdp per capita, uah 3436 24429 46201 in 13 times sold production of industry, billion uah 155,9 792,9 1565,3 in 10 times sold production of agriculture, billion uah 65,1 184,9 631,1 in 9,6 times the number of registered unemployed, thousand people 1008,1 544,9 390,8 38,8 average monthly nominal wage per employee, uah 304,90 2239 5070 in 16,6 times real wage compared with previous year, % х 110,2 79,8 х average monthly pension, uah 68,9 1032,6 1699,5 in 2,5 times backdated wages – total, million uah 2996,7 1218,1 2004,0 66,9 monthly minimum living wage per capita, uah 270 825 1544 in 5,7 times inflation index, % (annual average growth rate) 128 109,4 112,4 consumer price index compared with previous year 128,2 109,4 113,9 number of families who received accommodation during the year, thousand 32 11 х number of medical institutions, thousand 3,3 2,8 1,7 51,5 foreign direct investment in ukraine’s economy, million usd 3865,5 5851,2 4405,8 114,0 export of goods and services, million usd 14948,4 46129,6 32734,4 219 import of goods and services, million usd 14286,9 54087,6 35058,7 245 net balance (+, –), million usd 661,5 -7958,0 -2324,3 crime rate, % of prison population to the general population 0,5 0,4 0,2 х * note: without consideration of temporarily occupied territory of the autonomous republic of crimea and sevastopol and anti-terrorist operation zone. source: calculated by data (osnovni pokaznyky ekonomichnoho i sotsialnoho rozvytku ukrainy, 2016; sotsialni indykatory rivnia zhyttia naselennia, 2016; tablytsia indeksiv infliatsii, 2016; chyselnist naiavnoho naselennia ukrainy, 2016). baltic journal of economic studies 69 vol. 3, no. 2, 2017 industrial and agricultural production, unemployment level, inflation index, foreign economic net balance, and so on. thus, positive characteristics of the national economy was the renewal of high rates of economic growth in 2016 that is characterized by gdp volume per capita  – in 13 times. volumes of industrial production have increased in 10 times over the last 16 years, mainly at the expense of the growth in such branches of the economy as mining, processing industries, machine building, paper-and-pulp industry, metallurgy, foodstuff industry etc. agriculture demonstrates the same result – the growth in 9,6 times (table 1). the main result of positive economic dynamics is the fact that in ukraine, an active social orientation of economic development is rooted. the main indicators of level and quality of living of the population are nominal wage increase in 16,6 times for the studied period, however, real wage does not correspond to growth rates of the first one. the negative factor is annual growth of consumer price index. monthly average wage is now three times higher than a living wage. therewith, backdated wages reduced by 33%. important indicators of social security services are the development of service industry, in particular, housing per capita, educational institutions, medical institutions etc. in this view, considerable volumes of investment resources for the renewal of destroyed facilities of the social infrastructure, especially in rural areas, are necessary. thus, according to data of the state statistics service of ukraine, there is annual reduction in public health institutions  – at least twice, intensive closure of village schools, not well-established housing construction, in consequence of which young families have no opportunities to satisfy their need for housing that in developed countries rank with food, clothes, education, health demand etc. a  feature of 2016 was a significant deterioration of foreign trade balance  – net balance amounts to 2324,3 million usd. energy intensity of the national production and own energy resource shortage cause the expected rising cost of energy import that will leave the problem of foreign trade imbalance relevant for the future. providing a balanced development, conducting structural reforms • macroeconomic stability • sustainable economic growth by means of environment • progressive innovation • transparent tax system • favourable conditions for business vector of development state, business, population security guarantees, investment and private property security vector of security • honest and impartial justice • efficient anti-corruption mechanisms • human life and health security (effective medicine, security of vulnerable social groups, secure condition of environment, safe food and industrial goods) guaranteeing vector of responsibility every citizen regardless of race, political, religious and other opinion will have access to: • high quality education • health care system • other services in state and private sectors achieving mutual respect and tolerance in society • rightful place among leading states of the world • adequate standards of living and proper working conditions for developing own talents • the world leading specialists in various fields vector of pride fig. 2. vectors of the formation of socially-oriented economy in ukraine until 2020 source: made by data (pro stratehiiu staloho rozvytku, 2015) baltic journal of economic studies 70 vol. 3, no. 2, 2017 southeast of ukraine (fig. 3). economic platform (determinants) of formation formation of a model of the open economy creation of market and social infrastructure development of competition formation of a free pricing mechanism availability of different types of business ensuring economic freedom development of socially-oriented economy прозорість діяльності органів державної влади на всіх рівнях focus of investment flows on the national social potential implementation and improvement of the population quality of life demonopolization of business environment control over the compliance with international practical requirements priority of development of a transparent competitive area tools and measures of the state socioeconomic policy successive narrowing a sphere of influence of shadow economy and rooting out corruption power consolidation and efficient cooperation of all its branches solving a problem of a conflict in the southeast of ukraine 5. economic platform of the socially-oriented economic development taking into account ukraine’s striving for integration in the world economic and legal environment, increasing the openness of the national economy, it is necessary to consider hard terms concerning its adequacy to the requirements of contemporary international competitiveness and search for a proper place in the world and regional labour specialization. indeed, the government of the country made a lot of steps towards the international business networking. in particular, the presidential decree “on sustainable development strategy “ukraine – 2020” determines the main goal of the government for the foreseeable future – introduction of european living standards in the country and ukraine’s achieving leading position in the world (pro stratehiiu staloho rozvytku, 2015). important vectors of the implementation of the above mentioned are the following socio-economic transformations (fig. 2). today, conditions for the transition to the sociallyoriented market economy are engendering in ukraine. in this relation, there is a pressing need of just economic and institutional preconditions that can become the basis for the transition from the post-crisis raising to the stage of dynamic development within the market socially-oriented development model. these preconditions can include: 1) providing economic freedom; 2) availability of different types of business; 3) development of competition; 4) formation of a free pricing mechanism; 5) creation of market and social infrastructure; 6) formation of a model of the open economy. the key tools and measures of socio-economic policy of the state are: transparency of activities of public authorities at all levels; focus of investment flows on an implementation of the nation’s social potential and improvement of the population quality of life; priority of development of a transparent competitive area; demonopolization of business environment; strict fig. 3. substantiation of prerequisites for the development of socially-oriented economy of ukraine source: generalized by the authors based on data of studied sources baltic journal of economic studies 71 vol. 3, no. 2, 2017 control over the compliance with the international practical requirements; successive narrowing a sphere of influence of shadow economy and rooting out corruption; power consolidation and efficient cooperation of all its branches; solving a problem of a conflict in the southeast of ukraine (fig. 3). 6. conclusions and prospects for further research the market economy development should be considered in the context of the national economic policy, which indicators of performance evaluation are an increase in competitiveness and formation of a favourable business platform for the development of the socio-oriented economy. this economy should be seen as the most perspective model of organization of social production, which that configures high efficiency of the market mechanism and orientation to achieving justice and equality. the model of the socially-oriented economy must be built taking into account national features of ukraine that will allow bringing to nought threatening trends of the society fragmentation, social disappointment, loss of feeling of participation in shaping the future of the own state. prospects for future research are substantiation of the model of sociallyoriented development of ukraine in terms of integration to the european economic space. references: abalkin l. i. 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[electronic resource]. – available at: http://www.e-reading.club/book. php?book=67568 baltic journal of economic studies 72 vol. 3, no. 2, 2017 наталия кравчук, людмила тарасович, марина яремова развитие социально ориентированной экономики в украине: предпосылки и стратегическое предвидение аннотация. целью данной статьи является обоснование предпосылок и перспектив формирования и развития социально ориентированной экономики в украине. теоретико-методологической основой исследования являются системный и синергетический подходы, использование которых в исследовании развития социально ориентированной экономики обусловлено ориентацией на базовые ценности и фундаментальные основы рыночной экономической системы и курсом на построение демократического общества в украине. результаты исследования  – обосновано, что в современных условиях трансформационных изменений стратегическим курсом украины является сочетание механизмов рыночного саморегулирования и государственного регулирования, что в своей основе основывается на принципах социально ориентированной экономики. фокусом внимания такой модели экономики является человек с его потребностями и интересами, ее отношения с другими членами общества в процессе производства, распределения, обмена и потребления. при этом социальная ориентация предусматривает обеспечение высокопроизводительного хозяйствования, конфигурирует частную инициативу и конкуренцию. результаты проведенного анализа аналитических показателей социально-экономического развития украины свидетельствуют о настоятельной необходимости и объективность формирования социально ориентированной экономики. доказано, что учитывая рост открытости национальной экономики, целесообразным является учет жестких требований относительно ее адекватности требованиям современной международной конкуренции. в этой связи проанализированы векторы формирования социально ориентированной экономики в украине, что задекларированные стратегией устойчивого развития «украина  – 2020», в рамках которой ключевым ориентиром определено внедрения в стране европейских стандартов жизни и выход ее на ведущие позиции в мире. экономической платформой формирования и развития социально ориентированной экономики являются: обеспечение экономической свободы; наличие различных организационно-правовых форм; развитие конкуренции; формирование механизма свободного ценообразования, создание рыночной и социальной инфраструктуры; формирование модели открытой экономики. инструментами и мерами социально-экономической политики государства при этом являются: прозрачность деятельности органов государственной власти на всех уровнях; ориентация инвестиционных потоков на реализацию социального потенциала нации и повышения качества жизни населения; приоритетность развития прозрачного конкурентного поля; демонополизация бизнес-среды; жесткий контроль соответствия международным требованиям практики; последовательное сужение сферы влияния теневой экономики и искоренение коррупции; консолидация власти и эффективное взаимодействие всех ее ветвей; решение проблемы конфликта в юго-восточном регионе украины. практическое значение результатов исследования заключается в том, что обоснованные предпосылки и перспективы формирования и развития социально ориентированной экономики в украине будут способствовать организации общественного производства, которая будет сочетать эффективность рыночного механизма и принципы самоорганизации на основе акцентуализации на достижении высокого уровня жизни для всех слоев населения. baltic journal of economic studies 19 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state university of trade and economics, ukraine e-mail: a.bokhan@knute.edu.ua orcid: https://orcid.org/0000-0002-6279-4374 researcherid: м-3160-2016 2 state university of trade and economics, ukraine (corresponding author) e-mail: v.zalizniuk@knute.edu.ua orcid: https://orcid.org/0000-0002-7014-0207 researcherid: ade-7872-2022 doi: https://doi.org/10.30525/2256-0742/2022-8-4-19-25 economic diplomacy in new projections of activation alina bokhan1, viktoriia zalizniuk2 abstract. the purpose of the article is to analyze the previous widely used approaches to the analysis of the phenomenon of economic diplomacy and to search for new approaches to its consideration in view of the new projection of the process of activation at the global level. globalization and economic achievements of many countries in the field of international relations lead to the development of various models of diplomacy for an adequate response to challenges and threats. the subject of the study is the phenomenon of economic diplomacy in the context of a new projection of activation. among these prerequisites were identified: international relations and international dialogue expand the range of functions of diplomacy in order to protect the interests of countries in the international arena; strengthen the format of consolidation of countries based on security systems; change the structure of negotiations, ensure the functioning of institutions and networks of cooperation. methodology. the set of studies was based on the analysis of previous widely used approaches to the consideration of economic diplomacy. a new consideration is applied, where the new structure is considered through modern projections of activation associated with new internal features. it is in this context that economic diplomacy has the nature of an international phenomenon, which is associated with its new projections of activation, where the signs of status, integration, adaptability and mobility can radically change the perception of its potential and scope. results. it is noted that the interpretation of the concept of "economic diplomacy" takes into account the interaction of different actors: state and non-state. approaches to a deep understanding of the concept of "economic diplomacy" are presented in articles and studies of many modern scholars. however, the discourse of "economic diplomacy" is multidimensional and therefore needs to be developed on the basis of other scientific approaches, not only within the "systemic approach". when defining the essence of diplomacy, the following approaches should be taken into account: 1) activity; 2) communicative; 3) presentation; 4) image; 5) management; 6) environmental. practical implications. in general, it is summarized that the availability of the above-mentioned approaches is due to the processes of modernization of the diplomatic systems of countries to form a qualitatively new line of international relations, positioning of the national economy and use of resources to ensure its full status in the geopolitical space. in modern trends of activation, it is globalization, digitalization and democratization that expand the professional boundaries of diplomacy, increase the number of alternative and independent diplomatic actors. it is summarized that the impact of the environmental factor on the competitive advantages of countries stimulates them to develop new forms of cooperation, including diplomatic. value/originality. it was emphasized that in the current conditions economic diplomacy remains in line with the foreign policy of different countries, and, no doubt, the foreign policy of ukraine as well. ukraine's economic integration with the eu is deepening not only by strengthening trade and economic opportunities of the association agreement, but also by intensifying all spheres and levels of international relations and active diplomatic cooperation. key words: economic diplomacy, global challenges, foreign policy, progress, environmentalization, clusterization, integration dominant. jel classification: f01, f02, f29, f42 baltic journal of economic studies 20 vol. 8 no. 4, 2022 1. introduction the global space of human development of the xxi century transforms modern international relations, strengthens the links between politics, economics and ecology. the new millennium fundamentally changes the economic consciousness of mankind due to its ambitious and natural aspirations for progress, but at the same time reveals the contradictory and conflict nature of social actions. an important aspect that reflects these trends is the inclusion of countries in the projects "agenda for sustainable development until 2030", "un global compact". the achievements of countries in the dimensions of various systems of international positioning, ranking and image correlate with their ability to apply appropriate models of diplomacy to respond to the challenges and threats of globalization. international dialogue expands the range of diplomacy functions in order to: represent and protect the interests of countries in the international arena; strengthen the format of consolidation of countries based on security systems; change the structure of negotiations, ensure the functioning of institutions and networks of cooperation; promote the protection of national interests; expand the scope of strategic partnership and international business. diplomacy of the new era does not exclude risks, opportunities and chances in the field of multilateral international relations, transforming the forms of interaction between countries. however, geopolitical asymmetries complicate the answers of countries to the questions: the price of prosperity, balanced development, energy independence, environmental comfort, information security, civilizational realities, preservation of peace in the context of global interdependence. modern mechanisms of diplomacy have changed their classical image to a more strong-willed, pragmatic and aggressive one. the unification of diplomatic forces, resources and professionalism, as well as institutions, missions and associations in solving complex problems in the international arena requires more and more interest. economic interests of even allied states can come into conflict and aggravate competition in world markets. to prevent political and military tensions between countries, trade and economic relations should be in an active phase of diversification. in this context, economic diplomacy has the character of an international phenomenon, which is associated with its new projections of activation, where the signs of status, integration, adaptability and mobility can radically change the perception of its potential and scope. the new architecture of diplomacy is of increasing interest to scholars and practitioners, stimulates politicians and businessmen to constructiveness, consolidation and solidarity. 2. innovative aspects of the scientific discourse of economic diplomacy the trend of international economic relations is to deepen the relationship between domestic and foreign policy. global challenges and threats to humanity are often generated by local conflicts, ambitious aspirations for hegemony of certain countries by any means to achieve them, which can pose a great threat to other countries. according to the world economic forum's global risk perception survey 2021–2022, the respondents who answered the question "how do you feel about the prospects for world development?" were as follows: 61% – concerned, 32% – worried; 12.1% – positive; 3.7% – optimistic. according to experts, the lack of optimism creates a vicious circle of frustration, social unrest and slow economic recovery. after contracting by 3.1% in 2020, global economic growth is expected to reach 5.9% in 2021 and slow to 4.9% in 2022. by 2024, the global economy is projected to be 2.3% smaller than it would have been without the pandemic. risks to economic growth are significant (the global risks report, 2022). the covid-19 crisis, economic, geopolitical and military conflicts have led to disagreements in international politics due to slow reactions, fixed perceptions and belated decisions of individual countries. therefore, effective domestic and international actions depend on building trust in society, activation of national and world leaders in search of new opportunities for cooperation. diplomacy is a central institution of community development and a basic element of the international order. the evolutionary vector of diplomacy development and critical understanding of its role in the world economy is associated with the expansion of the circle of participants and deepening of the content of their activities. according to the international trade centre, economic diplomacy is defined as the process by which the internal and external efforts of countries contribute to maximizing national benefits in all areas of the economy. therefore, economic diplomacy is an indispensable element of this process and refers to diplomatic missions to support a country 's business sectors, trade, investment and other economically beneficial exchanges. the development of business ecosystems is relevant, which involves cooperation with logistics companies, chambers of commerce, industry associations, business unions, technology providers, banking institutions and other participants. ecosystems enable commercial diplomats (representatives) to develop trade, investment and partnerships with companies in their home and host countries. studies of economic diplomacy are carried out in an interdisciplinary plane, which allows to identify baltic journal of economic studies 21 vol. 8 no. 4, 2022 new signs of its functioning, transformation and diversification (figure 1). the interpretation of the concept of "economic diplomacy " takes into account the interaction of different actors: state (economic and commercial diplomats), non-state (corporations, business, national and transnational diplomats). for example, approaches to the systematic understanding of this field of activity are reflected in scientific works: "economic diplomacy: foundations, problems and prospects" (o. sharov, 2019) – the symbiosis of science and practice within the framework of economic diplomacy as a political and economic category is considered; "the new economic diplomacy " (n. bayne, st. woolcock, 2019) – the basic principles of the functioning of economic diplomacy, given national and regional differences, are considered; "economic diplomacy and foreign policy-making" (ch. chatterjee, 2020) – the correlations of economic diplomacy and the system of foreign policy decision-making are analyzed) 4; "modern indices for international economic diplomacy " (v. charles, a. emrouznejad, 2022) 5 – attention is focused on expanding areas of postmodern diplomacy in the context of evaluating the progress and effectiveness of political dialogue, comparing the economic situation between countries and regions of the world; "economic diplomacy in the 21st century: principles and challenges" (l. yueh, 2020) 6 – shows the importance of diplomacy in renewing the global economic system, which will face more serious challenges in the field of international competition of powerful states in the new millennium. it should be noted that indeed modern studies of the concept of "economic diplomacy ", including the above examples, reveal various aspects of this concept (categories and directions) mainly within the framework of a systematic approach. however, the discourse of "economic diplomacy " is multidimensional and therefore needs to be developed on the basis of other scientific approaches, such as: – historical (identification of points of intersection in the environment of subject studies of the history of politics, history of economics, history of diplomacy); – evolutionary (determining the role of national and international politics in the birth and development of economic diplomacy in the countries of the world); – institutional (the nature of the functioning of economic diplomacy, forms of interaction between its state and non-state institutions); – security (development of models of economic diplomacy to improve the level of global, international, national economic security); – strategic (inclusion of elements of diplomacy in the mechanisms of implementation of strategies of economic development of countries); – progressive (economic diplomacy in aspects of the development of information and innovative technology). in determining the essence of diplomacy, the following approaches are considered: 1) active (activities of heads of states, governments and special bodies in the implementation of the goals and foreign policy of countries, protection of the rights and interests of countries abroad); 2) communicative (application of special strategy, tactics and behavior in the implementation of official relations between governments; conducting historical evolutionary institutional security strategic aspects of the investigation approaches to identification active communicative presentational image-like managerial enviromentalprogressive new forms, models and mechanisms of the diplomacy clusters, platforms and nets within relations of the actors of the diplomacy potential of difersification of the diractions of development generator and catalyst of international relations economic diplomacy signs of transformation of the diplomacy sphere adaptability mobilityintegration status figure 1. peculiarities of economic diplomacy research source: designed by the authors baltic journal of economic studies 22 vol. 8 no. 4, 2022 business between countries using peaceful means and negotiations); 3) presentational (a kind of expression of the normative logic widespread at the transnational level, which guides countries in their actions in the formation of international identity); 4) image (a dynamic area of international activity, which uses tools and mechanisms to enhance the authority, image and brand of the country); 5) managerial (a form of management of international relations); 6) environmental (synchronization of foreign economic policy and environmental responsibility). the presence of the above-mentioned approaches is due to the processes of modernization of diplomatic systems of the countries for the formation of a qualitatively new line of international relations, positioning of the national economy and use of resources to ensure its full status in the geopolitical space. 3. the vector of ecologization in the international coordinate system of economic diplomacy globalization, informatization and democratization are expanding the professional boundaries of diplomacy, increasing the number of alternative and independent diplomatic actors. diplomacy as a profession has undergone changes in qualification requirements and expectations of what a diplomat should or should not do. for example, in the scientific work "international economic diplomacy: mutations in post-modern times" (r . saner, l. yiu, 2003) identifies the following 7 tasks of "postmodern diplomats": 1) creation of conditions for international cooperation taking into account the needs and interests of individuals in the system "politics – economy – ecology "; 2) improvement of cooperation with the international regulatory body, whose decisions affect international trade and financial regulation; 3) prevention of conflicts with foreign governments, non-governmental organizations, participants of economic activity in order to minimize political risks; 4) use of international information channels to form the image of the country and "reputation capital" of enterprises; 5) maintaining the credibility and legitimacy of its representative bodies; 6) stimulating bilateral and multilateral negotiations, coordination of international campaigns, public relations; 7) expanding the functions of international cooperation based on new competencies of different types of diplomats. however, postmodern economic diplomacy is specific due to the aggravation of global problems and a large number of conflicts since the creation of the un. in his preface to "the sustainable development goals report 2022", antónio guterres (secretary-general of the un, 2022) noted: "the conflict in ukraine has also caused soaring prices for food, fuel and fertilizers. this has further disrupted supply chains and global trade and caused a crisis in financial markets. according to current estimates, the war could reduce global economic growth by 0.9 percentage points in 2022. the situation will only worsen with climate change acting as a ‘crisis multiplier’ and the effects of which are already being felt around the world. increasing heat waves, droughts and floods are affecting billions of people around the world, contributing to the further spread of poverty, hunger and instability. the covid-19 pandemic and the war in ukraine have further delayed the much-needed transition to a greener economy " (figure 2). the influence of the environmental factor on the competitive advantages of countries stimulates them to develop new forms of cooperation. cluster formations, where relations between participants are built on the basis of cooperation, trust, synergy, transparency, long-term agreements, are becoming increasingly important. the terms "groupings", "networks", "clusters" are often used in multilateral diplomacy ("manifesto of clustering of eu countries", "european cluster memorandum", "european cluster observatory "). for example, cluster analysis was used to study the relationship between economic diplomacy and export flows. it is proved that the positive effect varies depending on the groups of countries (l. raneta, m. kunychka, 2015). in addition, clusters are used in the greening of economic diplomacy, which is focused on: cooperation between diplomatic missions of different countries on the implementation of environmental and economic initiatives (medial type of cluster); exchange of experience between diplomats on new models of contacts in international environmental and economic activities (lateral type of cluster). activators of actions in these clusters can be national, regional and international actors. concentration of cluster efforts involves the accumulation of capital, resources, investments, technologies, innovations, etc. 4. integration dominant in the development of economic diplomacy of ukraine in modern conditions economic diplomacy remains in line with the foreign policy of ukraine and has been formalized in the state strategic documents (national security strategy of ukraine, economic security strategy of ukraine, foreign policy strategy of ukraine, national economic strategy, export strategy, etc.). deepening economic integration with the eu is taking place through strengthening trade and economic opportunities of the association agreement by updating its individual provisions, as baltic journal of economic studies 23 vol. 8 no. 4, 2022 well as through active synchronization of ukrainian legislation in accordance with eu legislation, especially after ukraine officially acquires the status of "candidate" (candidate status for eu accession) in june 2022. interest in increasing trade, economic and investment cooperation can be traced in the activities of the country 's political actors. in 2021, trade turnover increased compared to 2020 and amounted to usd 140.9 billion, of which exports amounted to usd 68.1 billion and imports to usd 72.8 billion. the positive dynamics of ukrainian exports was ensured by the growth of demand and prices on the world markets of raw materials, metals and agricultural products. with the help of economic diplomacy, more than 200 ukrainian companies entered new foreign markets. the potential of economic diplomacy development is analyzed annually within the framework of the project "ukrainian prism: foreign policy ", which covers more than fifty areas and is assessed by five main indicators of the state of foreign policy implementation: 1) political interest; 2) institutional cooperation; 3) strategic vision; 4) activity; 5) results and achievements. each of these indicators is assessed on a five-point scale, where 1 point is the minimum and 5 points is the maximum possible score. for each indicator, the normative and actual base is determined. for all indicators, the overall assessment of the direction is determined by the arithmetic mean. the overall assessment (rating) is indicated in the form of latin letters (a, b, c, d, e) with arithmetic signs (+/-) depending on the value of the obtained indicator: a (5 points); a(4.6-4.9); b+ (4.1-4.5); b (4); b(3.6-3.9); c+ (3.1-3.5); c (3); c(2.6-2.9); d+ (2.1-2.5); d (2); d-(1.6-1.9); e+ (1.1-1.5); e (1). studies have shown that during 2015–2021 there were positive changes in the support of ukrainian exports and stimulation of foreign figure 2. global economic recovery is slowing down even more by the ukrainian crisis source: the sustainable development goals report 2022 table 1 achievements of economic diplomacy of ukraine success indicators 2015 2916 2017 2018 2019 2020 2021 political interest or involvement of actors in the economic diplomacy of ukraine 4 4 4 4 4 5 5 effectiveness of interaction and coordination between ukrainian institutions in the field of foreign policy 3 3 4 3 3 4 4 a strategic vision in the implementation of tasks of economic diplomacy 4 3 5 3 4 4 5 specific activity in the field of development of economic diplomacy 3 4 4 4 4 4 4 results, achievements and successes of economic diplomacy 2 4 4 3 4 4 4 overall assessment с+ вв+ с+ в в+ в+ source: ukrainian prism. foreign policy council 2016–2022 (11) baltic journal of economic studies 24 vol. 8 no. 4, 2022 investment in ukraine (table 1). state support for exports, expansion of investment and innovation opportunities are among the priorities for ensuring economic security. it is worth noting that one of the projections of the development of economic diplomacy is its public level due to the increase in public attention to foreign policy. for example, in 2021 the "new europe" center conducted a survey within the framework of the "join!" public activity promotion program funded by the united states agency for international development (usaid) and implemented by pact in ukraine. when asked whether ukraine's foreign policy should be guided by pragmatic interests or based on a value-based approach to the development of democracy, protection of human rights and the rule of law, the answers were as follows: 41.4% – it is necessary to find a balance between these two approaches; 33.6% – the priority should always be the protection of democracy, human rights and international law; 19.3% – exclusively pragmatic interests – to build relations with those countries with which it is most profitable to cooperate; 5.8% – difficult to answer, refused 12. this gives grounds to assert that economic diplomacy includes an element of transparency. in this regard, international actors, business and civil society are interested in promoting new areas of economic diplomacy based on networking. 5. findings the mechanisms of formation of new projections of economic diplomacy are associated with the great dynamics of foreign policy actions of countries and the nature of competition in the context of globalization. this affects the expansion of diplomacy functions, the need to strengthen the relationship between domestic and foreign policy, the formation of new levels of institutionalization, updating strategies of economic development, partnership and cooperation. given the complexity of maintaining international order, diplomacy will continue to be its basic element, a driver of change in the world economy. the topics of modern studies, analyses, expert reviews, international reports on economic diplomacy mostly correlate with the issues of: security, progress, modernity, postmodernity, clustering, integration, ecologization. 6. conclusions studies of economic diplomacy are carried out in an interdisciplinary plane, which allows to identify new signs of its functioning, transformation and diversification. the interpretation of the concept of "economic diplomacy " takes into account the interaction of different actors: state and non-state. approaches to a deep understanding of the concept of "economic diplomacy " are presented in articles and studies of many modern scholars. however, the logic of disclosing the concept of "economic diplomacy " is multidimensional and needs to be developed on the basis of other scientific approaches, and not only within the framework of the "system approach". when defining the essence of diplomacy, the following approaches should be taken into account: 1) activity; 2) communicative; 3) presentation; 4) image; 5) management; 6) environmental. in general, it is summarized that the availability of the above-mentioned approaches is due to the processes of modernization of the diplomatic systems of countries to form a qualitatively new line of international relations, positioning of the national economy and use of resources to ensure its full status in the geopolitical space. globalization, digitalization and democratization expand the professional boundaries of diplomacy, increase the number of alternative and independent diplomatic actors. the impact of the environmental factor on the competitive advantages of countries stimulates them to develop new forms of cooperation, including diplomatic. in modern conditions, economic diplomacy remains in line with the foreign policy of different countries, and, no doubt, the foreign policy of ukraine as well. deepening of ukraine's economic integration with the eu takes place not only through strengthening trade and economic opportunities of the association agreement and acquiring the status of a candidate for accession to the eu, but also through intensification of all spheres and levels of international relations and active diplomatic cooperation. for ukraine, the development of economic diplomacy acquires strategic importance and special status in terms of opportunities: its own representation in the global economic space; increasing the level of competitiveness; generating new forms of international cooperation to strengthen food, energy and environmental security. today, ukrainian diplomacy is also at the epicenter of accumulation of financial and economic resources to counter military aggression. constructive interaction between countries requires a serious awareness of global interdependence, existing threats and potential risks, the manifestations of which can either negate the achievements of civilization or promote peace, humanity, democracy and freedom. baltic journal of economic studies 25 vol. 8 no. 4, 2022 references: a guide to commercial diplomacy. international trade centre (2019). 106 p. available at: https://www.intracen.org/publications charles, v., & emrouznejad, a. (2022). modern indices for international economic diplomacy. available at: https://link.springer.com/content/pdf/bfm%3a978-3-030-84535-3%2f1 chatterjee, ch. (2020). economic diplomacy and foreign policy-making. cham, switzerland: palgrave macmillan, springer nature switzerland ag, 201 p. dyplomatiia – 2022. zovnishnopolitychni ochikuvannia ukrainskoho suspilstva [diplomacy – 2022. foreign policy expectations of ukrainian society]. available at: http://neweurope.org.ua/analytics/dyplomatiya-2022zovnishnopolitychni-ochikuvannya-ukrayinskogo-suspilstva/ raneta, l., & kunychka, m. (2015). applying cluster analysis to studying commercial diplomacy of ukraine. actual problems of economics, vol. 5 (167), pp. 501–509. saner, r ., & yiu, l. (2003). "international economic diplomacy: mutations in postmodern times. discussion papers in diplomacy ". netherlands institute of international relations clingendael‘, no. 84, 31 p. the global risks report 2022. 17th edition, is published by theworld economic forum. available at: https://www3.weforum.org/docs/wef_the_global_risks_report_2022.pdf the new economic diplomacy. 4th edition. ed. by n. bayne and st. woolcock. abingdon, oxon; new york: routledge, 2017. 339 p. the sustainable development goals report 2022. available at: https://unstats.un.org/sdgs/report/2022/ the-sustainable-development-goals-report-2022.pdf ukrainska pryzma. rada zovnishnoi polityky [ukrainian prism. foreign policy council]. available at: http://prismua.org/scorecards2021/ (in ukrainian) ukrainska pryzma: zovnishnia polityka 2021. analitychne doslidzhennia [ukrainian prism. foreign policy 2021. analytical research]. available at: http://prismua.org/wp-content/uploads/2022/06/upfp-21-vers8press.pdf (in ukrainian) yueh, l. economic diplomacy in the 21st century: principles and challendes. lse ideas strategic update/ august 2020. available at: https://www.lse.ac.uk/ideas/assets/documents/updates/lse-ideas-economicdiplomacy-in-the-21st-century.pdf received on: 4th of september, 2022 accepted on: 14th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 82 vol. 3, no. 1, 2017 time management and its implementation at production companies yurii safonov1 kyiv national economic university named after vadym hetman, ukraine yevhen maslennikov2, artur kashubskyi3 odessa i.i. mechnikov national university, ukraine abstract. the purpose and objectives. time management is still not a very popular element in many enterprises, while its implementation significantly increases staff productivity and, ultimately, the effectiveness of the company. for this reason, the purpose of the article is to promote time management in a business environment by providing specific tools, principles, methods and systems, and to show its importance to the company and describe the influence of time management for the enterprise. methods. the study used a generalization, systematization, empirical research, systematic and logical approach to the development of theoretical and methodological provisions for instrumental support management performance of the industrial enterprise. results. time management is one of the most important strategic tools of the modern manager. it can help both existing companies and companies that are just launched (the project). practical implications. the current goal of time management as a mechanism to improve the efficiency of the company. value/originality. to implement it, the company offered a popular time management system, allowing the company to increase the effectiveness of its activities. key words: time management, manager, time, purpose, planning, priority, plan, staff efficiency. jel classіfіcatіon: d23, q13, q14 corresponding author: 1 department of macroeconomics and public administration, kyiv national economic university named after vadym hetman. e-mail: sum1971@inbox.ru 2 department of economics and management, odessa i.i. mechnikov national university. e-mail: sks1982@ukr.net 3 department of economics and management, odessa i.i. mechnikov national university. e-mail: sks1982@ukr.net 1. introduction today, for many businesses in ukraine, one of the key elements of management is time management, allowing efficient use of staff working time by optimally allocating available resources and using methods of prioritization. manager as one of the key parts of the company, responsible for management decisions, needs a responsible approach to the issue of improving the management because it affects the efficiency of the enterprise. the issues of the theory and methodology of work time are considered in works of both domestic and foreign scientists such as v.r . kucherenko, e.a. kuznetsov, p. drucker, d. eisenhower, v. pareto, g. hunt, b. franklin, s. covey, d. allen, j. morgenstern and others. time management is still not a very popular element in many enterprises, while its implementation significantly increases staff productivity and, ultimately, the effectiveness of the company. for this reason, the purpose of the article is to promote time management in a business environment by providing specific tools, principles, methods and systems, and to show its importance to the company and describe the influence of time management for the enterprise. the aim of the article is to outline the best known and most effective time management tools for the implementation at production companies. 2. stages of the time management process today, in addition to making responsible decisions, modern managers must pay an active attention to planning both their work and the company as a whole. the importance of planning as one of the functions of management is difficult to call into question, even though that is not always the goals and objectives of the company (offices, personal) are implemented in practice. yes, these plans remain a formality, the printed document. managers with extensive experience not just tackle the current challenges. first, they analyse their time, then distribute it. the next stage  – to reduce costs (figure 1). it is the most difficult because it is necessary to determine unproductively used time to find the causes of its appearance, and reduce its use. as a result, we get the same result but with less expenditure of time and thus improve the efficiency of the company as a whole and its departments and staff in particular. in addition, time is ceaseless. it plays a baltic journal of economic studies 83 vol. 3, no. 1, 2017 significant role in logistics companies. for example, during the force majeure, it is impossible to stop the deterioration of products or impossible to speed up the movement of vehicles in traffic. also, it should be stressed that the time  – this is the limit that applies to every management decision. like the direct deciding whether there are certain time constraints, and the performance of this solution is certain deadlines. therefore, the time can and should be attributed to the company 's resources, to unique resources of the company. unique because time cannot be: bought; saved; accumulated; replaced; transferred; sold; increased. top management of the company should be a model for efficient use of the available working time. this means that the director, at least, has to spend more time on the removal of a problem or achievement of a particular task, and, best of all, seek to reduce this time. for example, a situation where a worker performs (ends) the work at home is totally unacceptable in the context of time management because time management includes setting the timeframe for the task. also wrong is the situation when there was large hover time, but the result was not achieved. here at work treads smart system, indicating that the task set before the worker should be achievable. that is, it is impossible to prepare the general presentation of the company 's products with all the statements in one day. time management is very important not only in business but also for active and ambitious people, ranging from students and ending housewives. this need arises from the fact that in modern society active (rate) life and significant information overload makes it difficult to achieve the important objectives of individual rights. it is because most of these people want to become more efficient and do not leave things for later. 3. time management as a technology time management is a technology that allows you to organize your time and, thus, increase the efficiency of its use. in other words, an organization by a man of his time, aimed at increasing the efficiency of its use. time management includes such activities as: goals setting; planning and allocation of time; delegate tasks and resource management; analysis of effort; fixing time; setting priorities; preparation of lists. if at the beginning of its existence, time management concerned only employment and business, today it is a mandatory component of any development project, as it is widely utilized in project management in the calculation and accounting of time required for this project. time management structure consists of the following processes: analysis; development and drawing up the strategies; targeting; planning and setting the priorities; implementation process; monitoring the achievement of the objectives. it should be noted that while resource management is not only the efficient use of time but free time  – the time it takes for the rest of the employee. in the context of time management, determining targets is a crucial element. the goal is the end result, which intentionally sent the result. the main means of goal-setting: intuition; invention; computation; selection and instruction. the most common way is an intuitive search for purposes. its essence: the need to closely relate to their own ideas, waiting for inspiration. the invention targets is an experimental process, based on the trial reaching destinations in the near future and (or) a reduced scale. calculation goals  – a method that consists in choosing goals that scored the most points among all. that is a table, which specifies the criteria on which the evaluation will be placed (for example, the implementation, heaviness achievements, etc.) and the end result is performed on each target. the method of choice and prescription  – a method that implies a certain number of goals set by someone, and we need only choose one of them and attributed its performance. in other words – a way of imitation of someone and an attempt to act upon an already known algorithm. 4. planning an integral part of time management is planning  – the process of optimal allocation of resources necessary to achieve their goals and objectives, as well as a set of processes associated with the production and sale. with skilful use, planning can significantly improve time management. fig. 1. three stages of the time management process baltic journal of economic studies 84 vol. 3, no. 1, 2017 planning is characterized by the following steps: the stage of setting goals (tasks); the stage of making a schedule of the achievement; the stage of variant design; the stage of identifying the required resources and their sources; the stage of determining individuals and briefing; the commit stage of the planning results in the physical view (plan, draft, map, etc.). an important part of planning is the process of prioritization. it lies in the alignment of priorities  – indicators that show dominance on the importance of a point over the rest of the plan. the reason for prioritizing appears that there are certain nuances and features that minimally affect the process of achieving goals, and those that take the main role. and that is an ability to prioritize one of the performances of a planning process. modern enterprises use a variety of methods of planning, including: abc-planning, eisenhower’s principle, pareto principle and others. abc-planning. a prerequisite for this method serves as an experience which clearly shows that the ratio of important and unimportant affairs percentage always about equal. for distribution in importance, tasks are distributed using the letters a, b and c. of these, a  – main cause (15 percent of all cases make up 65 percent of the results). next is b in things to do (20 percent of cases and 20 percent of the results). the last category, the letter c – things of the smallest importance (65 percent of all cases at 15 percent of results). when using this method, one takes into account the importance of the task, not the effort required for their implementation. the principle of eisenhower. this planning method, created by the american general eisenhower, is also one of the most popular tools for sorting solutions in importance. unlike abc planning, allocation by category is carried out using the urgency (except of importance). the first category – the category a. it includes the most important and most urgent cases. the second category includes urgent but not important things. category c  – not urgent but important case. the latter category d includes not urgent and not important things. the pareto principle. this rule, formulated by italian economist vilfredo pareto, suggests that the smallest actions bring the greatest results, and vice versa. thus, for example, 20 percent of actions  – 80 percent of the outcome, or the opposite: 80 percent of actions  – 20 percent of results. timing. one of the basic but effective methods is to study the time spent. it is carried out by recording and measuring committed action  – held a record of all actions to the nearest 5 minutes for 2-3 weeks. objectives of timing – account of time spent, search for time and other reserves. gantt chart. developed by the american specialist in management gantry gantt bar graph, this method is widely used in the planning of projects. a diagram consisting of strips that are placed along the time axis and each of them reflects a specific task, which is a part of the project. the vertical axis is a list of tasks. the best use of this chart – small projects. smart-technology. one of the most popular methods of goal setting system is smart. in addition to setting the time frame for implementation purposes, there are other criteria: specific – the goal must be specific, that is my point that can be achieved; measurable – indicates a measured result. in quantitative objectives – stated target figure, while high-quality  – set a standard; achievable  – set a goal to be real. to be a clear mechanism to achieve, it must also be real; relevant  – should be understood that performance objectives are relevant and reasonably necessary to achieve the desired; time-bound  – the goal should have a clearly defined time frame to achieve it. algorithm of smart-goals setting as the following: the maximum clarification of the results (s); justification of the goals as necessary or relevant goals (r); prediction and assessment of the reach of goals (a); criteria selection for assessing the goals and targets (m); for the most refined targets chosen deadline (t). all these methods of planning can be used not only individually, but also together. after selecting goals and objectives, as well as planning, the company management should choose a system of time management. the system of time management refers to a special technique with its own tools, advice and tips on effective organization of activities. in addition to reminders and scheduling, the task of time management is to show how to effectively perform a particular job as not only complete it in time but also to achieve more. 5. time management is a technology today there are well-known time-management systems as franklin covey time management matrix, alain david’s gtd, and others. pyramid of franklin. this system is a complex system with a long-term goal setting and ways how to implement them. it looks like a pyramid, where each fig. 2. the franklin’s pyramid baltic journal of economic studies 85 vol. 3, no. 1, 2017 element depends on the previous one. the foundation of the pyramid  – the basic values of life. this is what is important for the person that built it around, life concept. the next block  – global goals  – a concrete expression of the result, the main target based on major global master plan goals, based on their achievement. the next set is a more specific long-term plan for 3-5 years, which includes concrete steps. short-term and medium-term plans for 1-12 months are the next block of the pyramid. as a result formed a distinct and clear picture of how to achieve goals. the essence of this system  – the gradual ascent to the intended result. this system is being built on the principle of "top-down"  – from the definition of global life problems to more specific steps for success. stephen covey time management matrix. this system complements the franklin pyramid described above. a matrix is a great tool for planning of employment and determination of time being spent for nothing (styven, 2016). this tool is a ready template, which can include a worker’s problem and the case with which he is confronted daily. stephen covey argues that successful managers organize their work so that their cases were in the main square ii (important but non-urgent cases). he added that a competent time-management perfectly to 65-80% of the cases were concentrated in this square. gtd by david alain. to create a method of getting things done (gtd), david allen argued that the organization of work should never take longer than the time at work. that is why the foundation of this system formed the conviction that every effort should make the practical task, not to remember everything you need to do. unlike covey time management matrix, david allen believes that there is no need to allocate priorities and monitor the process of implementation of tasks and, based on the results, build a vision for the future (dévyd allen, 2007). yes, allen proposes to end global plans, but not to start with them (as in the pyramid franklin). to succeed, he identifies three distinct models, such as: – manage a workflow that is in control of tasks and is implemented through five stages: data collection, processing, organization, review, and actions; –perspectives, which consist of six levels: current actions, current projects, areas of responsibility, 1-2 year goals, 3-5 year goals and life; – the only method of planning consists of a selection of objectives and principles, the vision of desired outcomes, brainstorming, organizing and defining the next concrete steps. the advantage of gtd  – this system is the most complete and offers its users a ready set of instructions. thus, the system of getting things done requires brutal self-discipline. there is also speculation that this system is not suited for creative people, as it does not give full freedom for innovation. his opinion was about time management. thus, world famous peter drucker argued that the time management and management are closely linked. time management is not possible without the management of the whole. and we have this correct goal setting, selection of priorities and how to achieve the set objectives, distribution and delegation of responsibilities. also, drucker stressed that a continuous efficient operation of the brain  – 2-3 hours. after this time, table 1 the time-management matrix by steven covey (styven, 2016) i urgent – important т в ii not urgent – important т в sector of crises ✓ ✓ sector of quality ✓ – critical situation; – urgent problems; – projects with a "burning" period; – urgent matters of high priority that require immediate participation in overcoming the crisis. results: – management in crisis conditions; – stress; – "burnout"; – "fire-fighting" and "the eternal battle"; – destruction of life. – prevention; – clarification of values; – planning; – strengthening of ties and relations; – refreshment; – looking for new opportunities. results: – vision, perspective; – efficiency; – expediency; – balance; – satisfaction; – reducing the number of crisis situations; – control of life. – pressure of others; – daily obstacles and distraction; – implementation of other people's desires and goals; – common (normal) types of activities; – some meetings. results: – short-term focus; – feeling in the role of "victim"; – reputation of a chameleon; – idea of the meaninglessness of goals and plans. – loss of time; – confusion; – trivia time-consuming; – permit time; – addiction to any activities. results: – complete irresponsibility; – dependence on core issues from other individuals or organizations; – accumulation of negative emotions, the destruction of life. a sign of the crisis of the sector т в sector of degradation т в iii urgently – no matter ✓ iv not urgent – unimportant baltic journal of economic studies 86 vol. 3, no. 1, 2017 the brain begins to be distracted, and for a period of time performs less productive functions. here peter drucker highlights two things: time and discretionary consolidation of time (pyter, 2014). he argued that working time must be split into time blocks, chief among them – discretionary when the greatest performance is and when to decide important matters. another time required to consolidate and apply are equally important to address the problems. in addition to time management system, there are tools for time management that will enhance the personal effectiveness of the worker. this is, so to speak, advice from experts in time management. one of these experts is julia morgenstern and she suggested the following tools (morhenstern, 2006): 1. evaluation. she argues that one should start with evaluating the time spent and the evaluation of their actions. there are several reasons that hinder performing important tasks such as technical, external circumstances and psychological obstacles. 2. the time limits. a mandatory part of any task. 3. 4d technology. if over some cases the worker cannot perform the task, he has to perform one of the following: – delete – rejection of the case; – delay  – sort tasks by priority, starting with the most important; – delegate – involvement of colleagues by delegation; – diminish  – reducing the time spent on a task by a section of total time for short periods of time. 4. prioritization. includes global development goals through three stages. the first stage  – the selection of six main categories for something important. the next stage  – targets for each category. and the last third stage – 2-3 activities to achieve this objective. 5. space technology. this special planning technique involves the organization time and of space. – sort – sort through cases and around; – purge  – cleaning time and space of unnecessary things; – assign – timeliness of each task; – containerize  – determining the parameters of each significant action; – equalize – a periodic reassessment of its system. 6. conclusion thus, time management is one of the most important strategic tools of the modern manager. it can help both existing companies and companies that are just launched (the project). in the words of the famous peter drucker: “time is the scarcest resource, and unless it is managed nothing else can be managed. the analysis of one’s time, moreover, is the one easily accessible and yet systematic way to analyse one’s work and to think through what really matters in it.” (pyter, 2014). therefore, for the company, it is very important to analyse the time, correctly allocate it and cut. in addition, the manager has a responsible approach to planning; it is also a part of time management. one of the problems of time management is the effective and efficient use of both working and leisure time. in order to fulfil this task, it is important to optimally allocate resources (including human). equally important in time management is prioritizing the issue  – a sort of clear cases of importance. this is a management task of the organization that wants to improve its effectiveness and this can be achieved through the above methods, principles, tools, models and time management. references: kucherenko v.r ., kuznyetsov e.a., markitan o.s. 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(2015). zvitnist' pidpryyemstv. – odesa, 188 s. юрий сафонов, евгений масленников, артур кашубский менеджмент и его имплементация на производственном предприятии аннотация. цель и задачи. тайм-менеджмент по-прежнему не очень популярен в качестве элемента на многих предприятиях, в то время как его реализация значительно повышает производительность труда сотрудников и, в конечном счете, эффективность компании. по этой причине, цель статьи состоит в том, чтобы содействовать внедрению тайм-менеджмента в бизнес-среде, предоставляя конкретные инструменты, принципы, методы и системы, а также, чтобы показать свою значимость для компании и описать влияние управления временем для предприятия. методы. в исследовании были использованы обобщение, систематизация, эмпирические исследования, систематический и логический подход к разработке теоретических и методологических положений для инструментального исполнения управления поддержки промышленного предприятия. результаты. тайм-менеджмент является одним из наиболее важных стратегических инструментов современного менеджера. он может помочь повысить эффективность управления как существующей компании, так и компании, которая только что запущена (проект). практические результаты. текущая цель тайм-менеджмента в качестве механизма для повышения эффективности работы компании была достигнута на конкретных производственных предприятиях. значение/оригинальность. для реализации компания предложила популярную систему тайм-менеджмента, что позволило компании повысить эффективность своей деятельности. baltic journal of economic studies 114 vol. 7 no. 5, 2021 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: l.lebedeva@knute.edu.ua orcid: https://orcid.org/0000-0001-8632-5460 researcherid: o-2213-2016 2 state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: oleksandra.moskalenko@kneu.edu.ua orcid: https://orcid.org/0000-0003-1036-5356 researcherid: g-5015-2017 doi: https://doi.org/10.30525/2256-0742/2021-7-5-114-122 impact of the covid-19 pandemic on the industrial sector: implications for economic policy larysa lebedeva1, oleksandra moskalenko2 abstract. the covid-19 pandemic had a major impact on the economy around the world, damaging many areas of daily life. the industrial sector has been affected by the effects of industrial closures, reduced economic activity, and disruptions in logistics and transportation. the damage caused by the crisis has not yet been specifically assessed, as the industrial sector was not the most affected by the pandemic compared to other sectors of the economy. the subject of the study is the industrial sector of ukraine and the eu. the aim of the article is to assess the impact of the covid-19 pandemic on industrial development in ukraine and the eu, as well as to propose economic policy measures to achieve stabilization in the industrial sector. since industry is the foundation of economic growth and development, it is necessary to assess the depth of its decline and find possible solutions to get out of the recession. the theoretical analysis of the article is based on recent work by scientists in the field of industrial development, as well as on the authors' developments assessing the impact of the covid-19 pandemic on the economy. the covid-19 pandemic created the following problems for ukraine's economy and industry: a decrease in aggregate global demand and a decline in business activity, which led to lower prices on world commodity markets; strengthening of government regulation; raw-material orientation of ukraine's exports and the significant dependence of industrial enterprises on world prices for raw materials; transport and logistics problems with raw material supply chains; lower business expectations and reduced investment due to significant uncertainty. the findings showed that the coronavirus crisis hit the industrial sectors mainly in april 2020, leading to a 16.1% decline in industrial production in ukraine and an 18.6% decline in the eu. such industries as automobile manufacturing, leather manufacturing, light industry, furniture manufacturing, coal mining, oil and gas extraction were hit the hardest. the following measures to stabilize the industrial sector are proposed: support for domestic demand for the products of industries, namely metallurgy, machine building, and chemical industry, which are mainly export-oriented and very sensitive to changes in global demand; stimulation and development of high value-added production; acceleration of the digitalization process within national borders; support for the industrial sector in its pursuit of environmentally friendly production, and others. key words: covid-19 pandemic, industrial production, economic policy. jel classification: l16, l52, l50, l60, o14, o25 1. introduction the covid-19 pandemic has been a serious test for countries around the world. the current global crisis is one of the deepest in 150 years. according to the world bank, global gdp fell 4.3% in 2020, u.s. gdp fell 5.4% and european union gdp fell 3.6%, global trade declined by 9.5%. at the same time, china's economy grew by 2%, which reduced the global gdp decline. according to the state statistics service of ukraine, ukraine's gdp declined by 4% in 2020. the industrial sector also experienced a decline from the effects of the crown crisis, the extent of which will be shown in this article. so now, in a time of economic crisis, it is more important than ever to focus on supporting production, namely the industrial sector, as a source of economic growth. the industrial revolution, which originated in great britain in the 18th century, gave impetus to the development of the world economy. thomas mann stressed the importance of industry, arguing that the development of industry baltic journal of economic studies 115 vol. 7 no. 5, 2021 would facilitate mutually beneficial foreign trade. william petty believed that the source of wealth was not trade and exchange, but production, emphasizing the need for government support to stimulate industry. thus, the importance of the industrial sector cannot be underestimated, since it is the driving force behind modern economic development. theoretical basis. modern research in the field of economic development and, in particular, in the industrial sector has been carried out by the following researchers: vyshnevsky, v. (2016), geyets, v. (2015), gerasymenko, a. (2018) kindzersky, y. (2020), moskalenko, o. (2017), umantsiv, iu. (2019) etc. the national institute for strategic studies of ukraine (2020) assessed the impact of the covid-19 crisis on the economic development of the country. recently, there have been many publications highlighting various aspects of the impact of the covid-19 crisis on economic development, such as: rose, a. (rose, 2021) puts the covid-19 pandemic in perspective, comparing it to other recent disasters in terms of impact on the us macroeconomy; ya’nan z., li f., xin zh. et al. (ya’nan, 2021) consider the spatiotemporal patterns of the effects of covid-19 controls on industrial production in wuhan, using a time series of earth observation data; humeniuk v. et al. (humeniuk, 2021) considers conceptual approaches to the interpretation of the features of state financial support for small businesses during the coronavirus crisis; szczygielski j., charteris a., bwanya p. et al. (szczygielski, 2021) analyze the global impact of covid-19-related uncertainty on industry returns and volatility; li l., peng j., wu j., lu y. (li, 2021) assess the perceived impact of the covid-19 crisis on smes in various industrial sectors; lagutin v. et al. (lagutin, 2020) analyze the institutional conditions for the resilience of the national economy to crisis conditions. despite considerable attention to this issue, a systematic assessment of the industrial sector in a pandemic and the government's role in minimizing the impact of covid-19 is needed to mitigate the negative effects of the pandemic on industry and to prepare for future potential shocks. the aim of the article is to assess the impact of the covid-19 pandemic on industrial development in ukraine and the eu, as well as to propose economic policy measures to achieve stabilization in the industrial sector. 2. the impact of the covid-19 crisis on ukraine's industrial sector after independence, ukraine's economy experienced a significant recession, after which it stabilized only in 2000, but the gdp level of 1991 has not been reached. despite economic stabilization and economic growth in 2000-2007, the global financial and economic crisis of 2008–2009 greatly affected the economy of ukraine. this shock was primarily caused by the significant raw-material orientation and export dependence of the ukrainian economy, and therefore vulnerability to fluctuations in world commodity prices, which change greatly during periods of economic instability. economic growth since 2010 was stimulated by the positive dynamics of prices in foreign markets, but did not bring positive changes in the structure of production of domestic gdp. "the share of industry (b, c, d by nace) in gdp fell from 45.8% in 1991 to 17.6% in 2020 (specifically mining and manufacturing to 14.6%)". (state statistics service of ukraine, 2021) industrial production, especially mechanical engineering, is the basis of the country 's economic development, a significant decline in industry has caused the current difficult unstable state of the domestic economy, its raw-material export orientation. by exporting raw materials and semifinished products, ukraine actually ensures the economic growth of other countries, since the greatest added value is produced in finished products, not in raw materials. for example, in 2019, 24.2% of the value of ukrainian merchandise exports were vegetables, ferrous metals 15.6%, and 11.7% were fats and oils, which together accounted for 51.5% of export volumes (state statistics service of ukraine, 2021). to overcome this trend, ukraine needs a strategy of sustainable reindustrialization that will give hope for future economic growth and development. the industrial sector is important to ukraine's economy. "in 2020, industry (sectors b, c, d according to nace) created 17.5% of the gross value added of the economy, 17.6% of gdp, 21.5% of wages, 19.6% of gross profit of enterprises. there are about 40,000 enterprises involved in the industry " (state statistics service of ukraine, 2021). the industrial sector also provides employment in related industries, such as transport and trade. according to the european commission, one manufacturing job provides up to two jobs in other industries. in general, industry in the country is the basis of reproduction of all sectors of the economy through the production of consumer goods and means of production used in agriculture, trade, construction, etc. it is in industry that goods with high added value are produced, which is of great importance for the sustainable development of the economy and the growth of competitiveness of nationally produced goods on world markets. ukraine's industry today is influenced by many factors, among which the main ones are: – the structure of production and the nature of cooperative ties that remained after the collapse of the ussr; baltic journal of economic studies 116 vol. 7 no. 5, 2021 – the consequences of the failed reforms of the 1990s, when a significant part of the industrial potential, especially high-tech (radioelectronic industry, machine building), was heavily damaged; – strong dependence on the international market (especially in metallurgy and mining); – limited and undeveloped demand in the domestic market, particularly for investment products; – the actual absence of state industrial policy, which would determine the strategic objectives and priorities of industrial development. today another factor has been added to these factors – the covid-19 pandemic. the covid-19 pandemic has significantly affected economic growth in ukraine because of existing quarantine restrictions, which were implemented in march 2020. in may 2020, quarantine restrictions were eased. the restrictions included limitations on the entry and movement of people, prohibitions on public transport and inter-regional transportation, a ban on small business activities, a ban on trade, fairs, and also on mass events. the covid-19 pandemic has created the following problems for ukraine's economy and industry: – the decrease in aggregate global demand and business activity, the reduction of production in the countries of the world, which led to lower prices on world commodity markets. under these conditions, ukrainian industrial enterprises incurred losses and reduced the number of employees; metallurgy and machine-building suffered the most. "the decline in demand from world leaders has affected the activities of extractive industries around the world, not just in ukraine. this caused a decline in the mining industry, as well as in some processing industries (primarily in metallurgy – a decline of 11.7% in january-october 2020)" (consequences of the covid-19 epidemic, p. 9); – strengthening of state regulation (the introduction of a state of emergency, the use of sanitary and epidemiological norms, restrictions on the movement of citizens, distance working and education). such restrictions have had the greatest impact on internallyoriented industries: transport (primarily aviation), tourism (both external and internal), and other services (food service, sports, art, recreation and entertainment); – сommodity orientation of ukraine's exports and the significant dependence of industrial enterprises on world commodity prices, with the existing volatility of world markets, which exacerbates the dependence of foreign currency inflows on external price fluctuations; – transport and logistics problems with raw material supply chains due to anti-epidemiological restrictions, reduced production in the processing industry; – decline in business expectations and reduced investment due to significant uncertainty, which affected the manufacturing industries (a 20.4% drop in production in mechanical engineering in januaryoctober 2020 and a decrease of 8.4% in the production of construction materials); the pandemic, however, had not only negative effects, but, on the contrary, had a positive impact on some manufacturing industries, in particular, chemical production showed positive growth (up 6.7% in january-october 2020) and pharmaceutical production (up 1.0%) due to high demand for disinfectants and medicines. thus, the covid-19 pandemic has exacerbated existing contradictions in the industrial sector of ukraine, revealing the most acute problems of its development, such as: significant dependence on world commodity prices (as the main export items), which makes ukraine vulnerable to fluctuations in aggregate demand abroad and export revenues; narrow domestic market for national products; export of raw materials with low added value. the impact of the pandemic on industrial production can be seen in the dynamics of the industrial production index (figure 1). due to the limitations of economic activity, transportation problems and a decline in aggregate demand, industrial production in ukraine fell by 4.5% per year, with the largest decline coming in april 2020 and amounting to 16.1%. with the easing of quarantine restrictions in may, the decline in industrial production softened to 12.5%. industrial production resumed in november-december 2020 to the values of the previous year, but with the restrictions associated with the second wave of the coronary crisis, decreased again by 4% in januaryfebruary 2021, resumed in march 2021 (+ 2.1%)) and increased even more in april 2021 (+ 13%) (state statistics service of ukraine, 2021). the decline in april 2020 was typical for all industrial groups, but the largest declines were in consumer durables by 23% (to 77%), intermediate goods by 17% (to 83%), and capital goods by nearly 15% (to 86, 6%) from the base year 2016 (figure 2). consumption of consumer durables declined the most, but recovery was fastest after the easing of quarantine restrictions in june 2020 (+ 20%) and august 2020 (+ 40%). the situation stabilized in august 2020 with growth in subsequent periods. the decline in ukrainian industry began long before the coronavirus crisis and was caused by the negative situation in the markets of the main industrial products for export and a significant imbalance in domestic demand. "in the first five months of 2020, all industries declined except for the chemical industry (up 9.3%), the pharmaceutical industry (up 6.7%), and coke and refined oil products production (up 0.2%)" (state statistics service of ukraine, 2021). high growth rates in the chemical industry were due to the resumption of operation of the pjsc "odessa port plant", as well as favorable conditions for the operation of chemical baltic journal of economic studies 117 vol. 7 no. 5, 2021 enterprises with cheaper raw materials (natural gas and oil). the pharmaceutical industry experienced growth due to the increased demand for its products with the onset of the pandemic. "the decline in investment during the pandemic led to a decline in mechanical engineering (-20.2% in januarymay 2020), and a downturn in metallurgy (-16.1%), which was caused by a decline in global demand for metal products due to the closure of a large number of auto plants in the eu, significant protectionist restrictions on exports of domestic metal products to the eu, the us, eurasian economic area, india, pakistan, egypt, canada, etc." (ukraine after the coronavirus crisis, 2020, p. 41). in addition, the situation was significantly complicated by the introduction of restrictions on imports to the eu; logistical problems of iron and steel enterprises due to frequent interruptions of deliveries by state transport companies and seaports. in spite of a significant decrease, there was a significant growth in some positions in the engineering industry. thus, the production of radiological, electromedical and electrotherapeutic equipment increased by 1.34 times (which is the result of growth in demand). production of batteries and accumulators (1.2 times), production of electric lighting equipment (1.03 times), production of household appliances (1.2 times) also increased (state statistics service of ukraine, 2021). the increase in production of these products is due to a change in lifestyle during the pandemic (self-isolation pushes self-sufficiency, including kitchen appliances). in the structure of mechanical engineering, these 60,0 70,0 80,0 90,0 100,0 110,0 120,0 jan 20 feb 20 mar 20 apr 20 may 20 jun 20 jul 20 aug 20 sep 20 oct 20 nov 20 dec 20 jan 21 feb 21 mar 21 apr 21 figure 1. the index of industrial production in ukraine in jan. 2020 – apr. 2021, month-over-month of the previous year source: (state statistics service of ukraine, 2021) 60,0 80,0 100,0 120,0 140,0 160,0 180,0 intermediate goods capital goods non-durable consumer goods durable consumer goods energy figure 2. indices of industrial production in ukraine by types of activity and main industrial groupings (migs) source: (state statistics service of ukraine, 2021) baltic journal of economic studies 118 vol. 7 no. 5, 2021 products accounted for only 5% and therefore did not have a significant impact on the overall picture. during the march-may 2020 quarantine, production fell sharply in all industries, but the food industry was the least affected, the pharmaceutical industry was positive, and the chemical industry slowed after march before falling in may 2020. the coronavirus crisis affected industrial enterprises regionally in ukraine rather unevenly. most enterprises did not stop working during the quarantine period, adapting to the requirements and carrying out antiepidemic measures and organizing the transportation of workers. in transcarpathian region during the quarantine many enterprises suffered losses in the automotive and electronics industries (llc "jabil", cjsc "eurocar", llc "yazaki ukraine", llc "ungweier"), woodworking industry (llc "sio-k", llc " wood-working industry ", llc "samver"), which reduced production by half. this reduction was caused by a drop in demand from eu countries and a shortage of components. at the same time, employees were sent on vacation or part-time. "exporting companies in lviv, volhynia and zhytomyr regions have reduced production, depending entirely on orders from parent companies, most of which are in the european union, due to the decline in demand for cars. the companies bader, leoni, bordnetse, fujikura, kromberg & schubert resumed operations from the beginning of may 2020, their production capacity not exceeding 70% compared to the previous year" (ukraine after the coronavirus crisis, 2020, p. 68–70). a critical situation has developed in the field of coal mining, as the crown crisis has effectively shut down coal production in ukraine. in aprilmay 2020, dtek "pavlograd coal" and dtek "dobropolyevugol", which accounted for 95% of coal production in ukraine (excluding production in the temporarily occupied territories) and employed over 40,000 people, suspended their operations" (ukraine after the coronavirus crisis, 2020, p. 68–70). 3. the impact of the covid-19 crisis on the industrial sector in the eu and the world the covid-19 pandemic has affected all countries in the world, consider what methods have been used in the eu to combat the pandemic. to combat the pandemic, eu member states used various measures, including restrictions on entry and movement between member states, a ban on public events, restrictions on private gatherings, closures of schools, bars, restaurants, hotels, and more. in italy and spain, non-critical areas of production were halted, but the measures imposed had an overall negative impact on demand and, consequently, on production in many areas. the vast majority of preventive measures were introduced in mid-march and continued through april 2020. in may, eu countries introduced some easing of restrictions, which contributed to the resumption of industrial production. due to the restriction of business closures, industrial production fell 10.1% in march and 18.6% in april 2020 in the eu, recovering in may (+ 12.0%), june (+ 9.5%), and july (+ 4.6%). overall, industrial production in february 2021 was 99.0% of what it was a year earlier (eurostat, 2021). industrial production in the european union declined significantly during the coronavirus crisis (figure 3). the index of industrial production as a whole fell by 23.7% to 76.7% in april 2020. by major industrial groups, the largest decline was in: consumer durables (like household appliances, furniture) – a decrease of 44.3%, investment goods (e.g., transport equipment, computers) (-37.6%), intermediate goods (e.g., raw materials) decreased by 20%, energy production by 13.3%. production of consumer 50 60 70 80 90 100 110 120 jan 20 feb 20 mar 20 apr 20 may 20 jun 20 jul 20 aug 20 sep 20 oct 20 nov 20 dec 20 jan 21 feb 21 mar 21 total industry intermediate goods energy capital goods durable consumer goods non-durable consumer goods figure 3. eu industrial production index, january 2020 – march 2021, to base year (2015) source: (eurostat, 2021) baltic journal of economic studies 119 vol. 7 no. 5, 2021 durables (e.g., food, clothing) declined the least, by 5.9% (eurostat, 2021). in march 2021, industrial production in the eu increased by 0.6% compared to the previous month; in the eurozone, industrial production increased by 0.1% with a further positive trend. as for the crisis in eu industry, in 2020 there was a decline in production in all industries, most of all in: the automotive industry (-83%), leather (-79%), light industry (-68%), furniture (-52%), coal, oil and gas extraction (-50%). an increase of 32% was observed in the pharmaceutical industry (eurostat, 2021). regarding the recovery, the european parliament estimates that "industries such as the chemical, construction, and food and beverage sectors are likely to experience a v-shaped recovery from the crisis. despite the initial shocks, the automobile and textile industries seem to be on the road to recovery from the initial closures. sectors that depend on human contact and interaction, such as the cultural and creative industries and the aerospace industry (due to declining mobility and tourist activity), have been hit hard by the crisis, and they are likely to suffer for a long time from these unprecedented shocks" (de vet, 2021, p. 8). the coronavirus pandemic affected eu countries in different ways. since the measures to contain covid-19 differed across the eu in terms of the timing and severity of restrictions, it is clear that the impact on the level of industrial production was different. "during the peak months of the crisis (february 2020 – april 2020), italy, slovakia, cyprus and hungary experienced extremely high rates of decline. these countries also showed high rates of recovery in may 2020. in some other countries, the crisis had a rather small effect on industrial production: between february and april 2020, production rose in ireland by 6.4%, and in finland by 0.2%. in most countries, however, the rate of industrial production (recession) was about – 25%" (eurostat, 2021). in wuhan, china, the coronavirus crisis had this effect on industrial production: during the year, industrial production was lower than expected, with a 14.30% drop; the most serious effect of covid-19 on industrial production was seen in march and april 2020, then, after the lockdown was lifted, some regions (approximately 4.90%) initially returned to expected levels in june, and almost all regions (98.49%) completed the resumption of work and production through november 2020 in wuhan, china (zhou, 2021). globally, based on an analysis of the impact of uncertainty associated with covid-19 on industry returns and volatility, it was shown that "uncertainty associated with covid-19, as measured by the aggregate google search volume index, has a persistent negative impact on industry returns and a positive impact on return volatility. the least impacted industries are those associated with the provision of goods and services that can be viewed as necessities and substitutes (in the days of covid-19). prominent examples are food and basic goods retailing, household goods, and telecommunications. industries such as energy, consumer credit and air travel are the most negatively impacted, which may reflect the negative impact of covid-19 on global economic growth and confidence, as well as the impact of related blockchains and restrictions" (szczygielski, 2021). 4. economic policy measures to stabilize the industrial sector of the economy the european parliament makes recommendations such as recovery measures and policies in the covid-19 crisis: 1) "ensure that national recovery and sustainability plans address the specifics of industrial fabrics: there is no "one-size-fits-all" solution; 2) national recovery and resilience plans should go beyond recovery to pre-crisis levels and should focus on improving the competitiveness of eu industry through investment in r&d and digital retraining/upskilling; 3) maintain strategic value chains in which europe can have a competitive advantage, rather than dealing with potential short-term disruptions; 4) to ensure sustainability, national and eu measures must support diversification of access to critical raw materials; 5) include investment in the circular economy in national recovery plans and provide the necessary regulatory changes to reduce pressure on value chains; 6) address the problem of multiple goals in national recovery and resilience plans by prioritizing them; 7) accelerate the adoption of national recovery and resilience plans to avoid further widening the gap with other leading economies; 8) make sure national recovery and sustainability plans have genuine european character and oversight" (de vet, 2021, p. 9). the impact of the pandemic has highlighted and further exposed ukraine's industrial weaknesses. 1. ukrainian industry develops haphazardly and uncoordinatedly between different types of economic activity. for example, ukraine actively exports iron ore, titanium raw materials, and rare earth minerals, such as lithium, niobium, and tantalum, which are in short supply on the world market. at the same time in the structure of imports there are machines, equipment, instruments, microelectronics, other high-tech products that could be produced within the national borders in the presence of raw materials and still high enough scientific and technological potential baltic journal of economic studies 120 vol. 7 no. 5, 2021 of ukraine. the pandemic has shown that the global economic crisis caused by it further strengthens the raw material orientation of ukrainian industry and the gap between highly developed countries that have overcome the crisis with the help of new technologies and third world countries is widening. 2. to overcome these negative trends, an active state economic and industrial policy is needed that will support national innovative manufacturers. recommendations to change the approach to the development of industrial policy in ukraine, taking into account the consequences and lessons of the pandemic period. 1) supporting domestic demand for the products of industries, namely metallurgy, engineering, and the chemical industry, which are mainly export-oriented and very sensitive to changes in global demand, as well as promoting a policy of export diversification. due to the reduction of investments by european partners, strengthening of protectionist policies and increased competition on export markets, a further decrease in demand for the main components of ukrainian industrial exports will be observed, it should be expected that industrial production in exportoriented sectors will decrease in the future and tax and currency revenues will decrease accordingly. 2) stimulation of processing in the food industry and development of industries with high added value. external demand for food products will remain stable and grow. however, the growing presence of ukrainian food products on world markets is currently constrained by an insufficient share of deeply processed goods and a focus on raw material exports. under such conditions, even a significant increase in exports will not provide a qualitative change in its structure and the necessary growth rate of foreign exchange earnings, so it is necessary to maintain the production of processed goods in the structure of ukraine's exports. 3) conduct a systematic structural policy that will ensure the consistent development of domestic industry and get rid of the raw material model of the economy. 4) it is necessary to reverse the trend of international specialization of ukraine, according to which in the structure of exports more than two-thirds are raw materials and low-tech products, and in the structure of imports – on more advanced processing goods. 5) support of the national production and investment infrastructure based on the introduction of new technologies. the global trend in the context of the coronavirus pandemic to localize production chains within national borders will increase the stability of national supply chains and minimize dependence on external partners. in addition to the decline in demand for ukraine's intermediate products, this threatens a significant reduction in foreign investment in industry. the answer to these risks should be an intensification of efforts to form ukraine's own national economic ecosystems by developing investment infrastructure and financial support for regional specialization. priority for specialization should be given to industries that will ensure the economic security of the state – food, chemical, pharmaceutical, engineering. efforts should be aimed at strengthening the innovative potential of the research sector, its ability to generate new methods of combating modern threats of the coronavirus crisis, etc. 6) support the process of digitalization within national borders. the digital component of the domestic and global competitiveness of industrial enterprises will be strengthened. in the face of severe quarantine measures and transportation restrictions during the pandemic, the viability of many industries was directly proportional to the level of automation and digitalization of production and management processes. the transition of transactions to the digital space will continue at an accelerated pace. therefore, state support measures for the development of digital infrastructure in the industrial sector will be relevant. "as the best global experience shows, the structural policy in the industry of ukraine should be dualistic in its content and form – combine the tools of both "vertical" ("sectoral") and "horizontal" ("institutional") models of such a policy. the tools of the "vertical" model should be used to change the structure of production, its technological modernization and creation of new productions mainly on the basis of large-scale technological borrowings. at the same time activation of entrepreneurial and innovative activity of subjects should be achieved with the help of tools of the "horizontal" model of policy " (kindzerskyi, 2020, p. 112). 7) it is necessary to strengthen state financial and institutional support of national producers. with the growth of protectionist measures in the world, the variety of instruments for supporting domestic producers (state guarantees, tax, credit, customs preferences, export support, subsidies, etc.) gives undeniable advantages in overcoming the consequences of the coronavirus crisis. 8) supporting the industrial sector in its pursuit of environmentally friendly production. environmental standards and eu requirements will become a real obstacle for ukrainian exporters in the near future. thus, the "european green deal" involves the transition to a carbon-neutral economy by 2050 and the introduction of import duties on products with high carbon emissions (border tax on carbon) to protect domestic producers and prevent the export of environmentally polluting industries abroad. thus, the prospects for ukrainian products in foreign markets will largely be determined by the amount of investment in ecomodernization, resource saving and decarbonization of industry. baltic journal of economic studies 121 vol. 7 no. 5, 2021 5. discussion the coronavirus crisis pandemic has had a huge impact on economies around the world, it is said to have had even greater consequences than the 2008–2009 crisis. governments therefore need to respond urgently to the consequences of this crisis and ensure that their economies are sustainable in the future. this requires using the lessons of the current crisis to make economies more resilient to future shocks. some measures for stabilization in the industrial sector of ukraine, which can be implemented, are proposed. they can be used for further discussion and improvement of the country 's economic policy. 6. conclusions the covid-19 pandemic has exacerbated existing contradictions in ukraine's industrial sector, exposing its most acute development problems, such as significant dependence on world raw material prices (as the main export item), which makes ukraine vulnerable to fluctuations in aggregate demand abroad and income from exports; narrow domestic market; export of raw materials with low added value; insufficient investment for future development. due to restrictions on economic activity, transpor tation problems, and a decline in aggregate demand, industrial production in ukraine declined by 4.5% in 2020, with the largest decline occurring in april 2020 at 16.1%. most ukrainian enterprises did not stop working during the quarantine period, adapting to the requirements and implementing antiepidemic measures and organizing the transportation of workers. in the european union, industrial production is down 10.1% in march 2020 and 18.6% in april 2020 due to constrained business activity. the decline in production in 2020 was observed in all industries, most of all in: automobile industry (-83%), leather (-79%), light industry (-68%), furniture production (-52%), mining of coal, oil and gas (-50%). the growth of 32% was observed in the pharmaceutical industry. the crisis caused by the coronavirus hit the industrial sectors of italy, slovakia, cyprus and hungary the hardest, while finland and ireland were the least affected, growing by 6.4%. thus, the coronavirus crisis has had a strong impact on industrial production in both ukraine and the european union. the fall in industrial production in the spring of 2020 in the eu was about 19%, in ukraine 16%, as of april 2021 eu industry has recovered to precrisis levels, the national industry of ukraine has grown by 13% (by april 2020), which did not compensate for the fall in 2020. measures to stabilize the industrial sector in ukraine include the following: supporting domestic demand for the products of industries, namely metallurgy, engineering, chemical industry, which are mainly export-oriented and very sensitive to changes in global demand, as well as promoting a policy of export diversification; stimulate processing in the food industry and the development of industries with high added value; pursue a systematic structural policy that will ensure the consistent development of domestic industry and the abandonment of the raw materials model of the economy; it is necessary to reverse the trend of international specialization of ukraine, according to which in the structure of exports more than two-thirds are raw materials and low-tech products, and in the structure of imports – more advanced processing goods; make sure that the development of national industrial and investment infrastructure is based on the implementation of new technologies; accelerate the process of digitalization within national borders, because when strict quarantine measures and transport restrictions were imposed during the pandemic, the viability of many industries was directly proportional to the level of automation and digitalization of production and management processes; supporting the industrial sector in its pursuit of environmentally friendly production, as environmental standards and eu requirements will become a real obstacle for ukrainian exporters in the near future. references: de vet, j. m., et al. 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(2021). spatiotemporal patterns of the covid-19 control measures impact on industrial production in wuhan using time-series earth observation data. sustainable cities and society, 75. baltic journal of economic studies 151 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: danusy7777@gmail.com 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: lsv300lsv@gmail.com 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: tatianaponomarova@ukr.net doi: https://doi.org/10.30525/2256-0742/2022-8-4-151-157 criminological provision of economic security in ukraine bohdana semenyshyna-fihol1, sergii losych2, tetiana titochka3 abstract. the purpose of the article is to disclose the essence of criminological protection of public relations; to differentiate the areas of criminological protection of economic security; to provide proposals for improving criminological science with regard to the protection of public relations in the economic sphere. the scientific discussion on the problem of improving the mechanism of criminological provision of economic security in ukraine is presented. the author's vision of the essence and content of criminological protection is formulated. due attention is focused on the institutional provision of economic security protection, which is represented in the totality of activities of regulatory institutions, which is implemented through the performance of specific functions in the economic sphere. the organizational and managerial sphere of criminological protection of economic security is characterized. its activity is aimed at creating a mechanism for counteracting and protecting the economy from criminal manifestations, which includes a set of measures aimed at timely impact on criminogenic threats and risks in the economy. a number of problematic aspects that hinder the development of the ukrainian economy are identified: 1) lack of an established system of protection of information activity, which, as a result, can potentially destabilize the economic sphere; 2) absence of specific measures and means of criminological influence on economic criminal unlawful activity; 3) low level of protection against criminal offenses in the sphere of economy committed with the help of computer technologies; 4) lack of a unified approach to the strategy of prevention of economic criminal offenses. results. the definition of criminological protection is proposed. it is established that the criminological provision of economic security should be aimed primarily at eliminating general social determinants, such as increasing the investment attractiveness of the national economy, improving tax culture, simplifying customs procedures, forecasting market conditions, globalization of stock markets, etc. it is proved that the improvement of criminological provision of economic security can be realized through the following: development of the information system in terms of creating a single unified platform for monitoring the economic situation in the country and forecasting potential risks; improvement of coordination of activities of economic security and criminal protection entities in terms of reducing competition and conflict of interest; increasing the level of international and european cooperation in terms of criminological protection and ensuring economic security; synchronization of national and foreign criminological policy in terms of ensuring economic security. key words: economic security, criminological protection, criminological support, national security, information system, economic situation. jel classification: k14, f52 1. introduction protection of the national security of ukraine is a priority task of the state, especially in the conditions of a special legal regime. an integral component of national security is economic security, which is a set of measures and means aimed at ensuring the growth of economic indicators, controlling the economic situation and preventing the impact of destabilizing factors. the above shows that any unlawful encroachments on economic security can cause a serious "blow" to a number of social relations, and therefore there is an urgent need to create a modern mechanism of criminological provision of economic security in ukraine. in the field of domestic scientific research there are a number of works devoted to the problems of baltic journal of economic studies 152 vol. 8 no. 4, 2022 improving the criminological policy in terms of protecting the economy of the state (p. andrushko, o. bandurka, v. batyrhareieva, t. denisova, o. dzhuzha, v. tuliakov, v. shakun, etc.). however, the disclosure of the issue of criminological provision of economic security of the state requires additional attention, which emphasizes the relevance of the topic of the article. the purpose of the article is to reveal the essence of criminological protection of public relations; differentiation of directions of criminological protection of economic security; presentation of proposals for improving criminological science in terms of protection of public relations in the economic sphere. 2. criminological protection as an element of ensuring the security of public relations criminological protection is an integral element of ensuring criminological security. in modern conditions, criminological protection should be understood as a set of provisions enshrined in normative legal acts and documents that establish the specifics of criminal law regulation of social relations, as well as determine the algorithm for responding to illegal activities by entities whose direct responsibilities include counteraction and prevention of socially dangerous manifestations, as well as the establishment of legal prohibitions and restrictions in case of encroachment on the legitimate rights and interests of ukrainian citizens. measures of criminological protection should solve specific preventive tasks, including: 1) creation of such conditions under which criminal activity will be unprofitable, when the cost of time, effort, means, funds for committing a crime exceeds the expected result. such conditions include the desire to make it impossible to sell the property obtained by criminal means, applying special and hidden markings that are difficult to remove; creating databases and catalogues of particularly valuable and rare items (antiques, works of art, etc.); 2) development and implementation of elements of direct protection of objects of possible encroachment. this should include technical means of strengthening the objects of encroachment, such as installation of bars on windows, replacement of doors and locks, installation of alarm systems (mozol, 2021). creating conditions that make criminal unlawful activity impossible or make it uninteresting and unprofitable for the criminal is the main task that is entrusted not only to criminal law, but also to criminological, forensic and operational-search policy. the popularization of the foreign anti-victim model of "zero tolerance to criminal offenses" "works backwards", that is, implements criminological policy through citizens who suffer from socially dangerous offenses. timely preventive work on training in the peculiarities of observance of elementary security measures, both personal and property (if it is about local actions, and not such large-scale as economic offenses) is one of the best ways of criminological protection of a number of social relations. the key issue in this aspect should be the develop-ment of special standards of criminological protection in all spheres of human activity. for example: in the financial sphere it is to stimulate the increase of non-cash circulation of funds, development of methods of financial transactions that reduce the possibility of theft and abuse; in the field of high technologies – creation of analytical programs that will detect atypical, suspicious financial transactions, creation of technological means that will allow processing raw materials (precious metals, petroleum products, alcohol, tobacco, etc.) with minimal human intervention, implementation of programs for the administration of administrative services without physical contact with state bodies and institutions (mozol, 2021). that is why today the issues of informatization and digitalization of society are becoming increasingly popular. it is worth agreeing that, subject to all conditions for the protection of information prohibited for public access, such an approach will not only simplify the work of a number of organizations, enterprises, institutions, etc. but will also help prevent certain types of criminal offenses. the following measures of criminological protection are: 3) creation of effective barriers and difficulties for criminal activity while informing the public about the work done so that potential criminals realize the futility of their activities. among them may be measures to introduce various special security regimes at the objects of possible attacks (pass regime, border regime, migration security regime, etc.), as well as the introduction of measures under which the means of committing criminal offenses become inaccessible to criminals (total inspection of weapons owners, inspection of personal belongings of visitors to mass cultural or sports events), etc; 4) spreading the practice of applying measures aimed at increasing the probability of detecting and detaining offenders. such measures include the organization of rapid interaction with law enforcement agencies through specially installed so-called "panic buttons" in public places, optimization and change of patrol routes by patrol police officers, etc. (mozol, 2021) involvement of citizens in the programs of prevention of criminal illegal activity is becoming more and more important every year. over the past decades, the community as a subject of such prevention has remained outside the attention of the legislator, which is due to the baltic journal of economic studies 153 vol. 8 no. 4, 2022 unproven, in the authors' opinion, position on its ineffectiveness. moreover, the existing criminal law measures that provide for the involvement of citizens in the interaction with criminal offenders were ignored. scientists also note that the widespread installation of video surveillance at the objects of possible encroachment significantly contributes to the detection of offenders (for example, the information space "safe city ", which is a security system of ukrainian communities, implemented as a set of innovative solutions that provides video recording of traffic and pedestrians and allows monitoring and management of the activities of utilities, police and the state emergency service of ukraine (specified by authors – author's note) in the settlement). for effective application of criminological protection measures it is necessary to pay attention to specific criminogenic situations and analyze, study and systematize them. this will make it possible to develop standard crime prevention measures depending on the prevalence of certain criminal offenses, which in turn will have a positive impact on the overall crime dynamics. thus, even a superficial analysis of the functioning of criminological protection in ukraine shows that there are grounds for its improvement in terms of unused potential of preventive activities (mozol, 2021). therefore, criminological protection involves the application of a number of measures aimed at both interaction with criminal offenders and their victims, and general assistance in improving strategic planning to counter socially dangerous manifestations. 3. main directions of criminological provision of economic security in ukraine criminological protection of economic security should be aimed primarily at eliminating general social determinants, such as, for example, increasing the investment attractiveness of the national economy, improving tax culture, simplifying customs procedures, forecasting market conditions, globalization of stock markets, improving the use of human capital in providing conditions for the development of the national economy, etc. the strategic course in the field of economic security has two interrelated directions – development and security (economic security strategy of ukraine until 2025). given the processes of shadowing and criminalization of economic relations, the security direction must necessarily include measures to neutralize threats of a criminal nature (chernyshov, 2022). according to t. v. melnychuk, the concept of criminological security of the economy consists of the following elements: 1. security objects (relations regarding the production, exchange, distribution and consumption of goods and services; the economic system as a whole and its individual components in the field of protection against criminogenic manifestations and the ability to resist them (elimination of victimization)). 2. the goal of criminological security. the real, not utopian (complete elimination of threats) goal can be defined as minimization of external and internal threats to the economy. 3. the main risks (threats) of criminological security. 4. organizational and legal provision of criminological security of the economy (melnychuk, 2018). thus, by creating a symbiosis of development and security, an effective mechanism of criminological protection of the economy is created, aimed at preventing criminal offenses through the timely detection of risks and their elimination at early stages. in this aspect, it is necessary to pay attention to the institutional support of criminological protection of economic security, which is understood as a set of activities of normatively defined institutions, implemented through the performance of specific functions assigned to them in the field of economy. criminological support of economic security is also carried out in a number of areas, including regulatory, organizational, managerial, informational, scientific and methodological support. regulatory and legal support. counteraction to crime, including economic crime, is based on the legislative framework that guides the subjects of relevant activities in the implementation of their duties. in essence, it is the creation of material and procedural conditions to ensure the effectiveness of the subjects of combating economic crime. the legal means of combating crime include the following: 1) the constitution of ukraine; 2) international treaties ratified by the verkhovna rada of ukraine; 3) codified normative legal acts; 4) laws of ukraine; 5) by-laws; 6) acts of application of legal norms; 7) judicial precedent and judicial practice. the relevance of the study of this area of criminological support is determined by the reform and constant legislative changes in the legal regulation of economic processes in the country. legal regulation, legal means, legal phenomena and legal influence form the basis of regulatory and legal support for combating crime, with the help of which the subjects of combating crime carry out appropriate measures (sazonov, 2019) in a general sense, most legal acts and documents aimed at protecting economic security are aimed at defining strategies for economic development for baltic journal of economic studies 154 vol. 8 no. 4, 2022 a certain period of time. another part is aimed at direct legal prevention of encroachments in the economic sphere). inconsistency and lack of coordination of normative acts on regulation of economic processes led to serious mistakes made at the initial stages of reforms, weakening of the system of state regulation and control, which together with imperfection of the legislative framework, lack of effective state policy in the social sphere, decline of spirituality and morality of society became the main factors that contributed to the growth of crime, especially its organized forms, as well as corruption. in leading western countries, the concept of national economic security is the theoretical basis of the country 's economic policy. it is formed by the joint efforts of scientists and specialists of certain state structures and reflects in a concentrated form the views on the essence of changes and ways to protect national economic interests. analyzing the state of legislative support for combating economic crime, it should be noted that its significant drawback is the lack of a single legal act that would regulate state policy in this area (sazonov, 2019). currently, there is no general concept of national economic security in ukraine, which is due to the lack of a universal legislative vision of the platform for its implementation. all existing threats and minor problems are solved by applying auxiliary economic measures and means created for direct use in addressing other needs of the ukrainian economy. that is why every year the latter is increasingly under attack due to the develop ment of economic criminal activity and the growth of "professionalism" of its subjects. organizational and managerial support. the effectiveness of the relevant subjects of combating economic crime directly depends on the quality of organizational support, because the organization is a crucial link in any activity. the essence of organization is that everyone should be in their place and perform their duties. this very simple truth is at the same time the basis of the science and practice of management, including in the field of combating crime in the field of combating crime, as in other areas, management and organization are inextricably linked and interdependent (bandurka, litvinov, 2012). organizational and managerial sphere of criminological provision of economic security is an activity aimed at creating a mechanism for counteracting and preventing economic criminal manifestations, which includes a set of measures aimed at timely impact on criminogenic threats and risks in the economic sphere. information support of law enforcement is a qualitatively necessary basis for improving the effectiveness of combating crime. prevention and minimization of negative consequences, efficiency and effectiveness of combating them depend on the quality and adequacy of information about potential and real threats to the economic security of the country. information support of combating economic crime is a structurally complex activity of the relevant authorities aimed at obtaining, using, storing, processing and transmitting criminologically significant information in order to solve the main tasks of combating criminal manifestations that pose a threat to the economic security of the country. modern development of information technologies changes both society and crime as a social phenomenon. information and network relations in various spheres of life are becoming increasingly important. cybercrimes are becoming increasingly widespread, which have significant specifics of commission and prevention. in view of this, information support for combating economic crime must meet the requirements of the time (sazonov, 2019). unfortunately, modern ukraine has not yet fully realized itself in terms of information support and information security. the active development of the information society often leads to a deterioration of the criminological situation in the economic sphere, rather than to the improvement of domestic interaction between the subjects of economic policy implementation, which is associated with the increase in the professionalism of criminal offenders. in this regard, according to the authors, it is important to create a unified information platform to ensure economic security, monitoring and forecasting of potential risks and threats. scientific and methodological support. the effectiveness of combating crime depends on the degree of scientific and analytical support at all levels, the intensity of interaction between scientists and practitioners of various specialized fields of science in order to form a coherent integrated holistic scientific product. negative processes and trends taking place in ukraine require constant scientific monitoring, detailed study of the crime situation and making appropriate adjustments to the strategy and tactics of combating crime (bandurka, lytvynov, 2018). criminological research plays an exceptional role in this process. they are invaluable for timely identification of gaps in the legal regulation of issues related to economic security and solving problems of law enforcement practice. one of the main goals of criminological research is the practice of their implementation in law enforcement. it is criminological science that is looking for scientifically sound ways to solve problematic issues related to crime and measures to counter it. they are embodied in the development of practical recommendations on organizational and methodological aspects of combating crime in general and economic crime in particular. baltic journal of economic studies 155 vol. 8 no. 4, 2022 these studies provide grounds for such activities as criminological monitoring, criminological forecasting and criminological planning of crime prevention. they are the basis for determining trends in the development of economic crime, substantiating its forecasting, planning measures to counter it, determining the main directions of its development (sazonov, 2019). therefore, the directions of improving the criminological provision of economic security determine its general strategic course, which forms the criminological policy in the field of the state economy. 4. improvement of criminological provision of economic security in ukraine national economic security requires appropriate changes that will contribute to its improvement. a number of such changes lie in the area of criminological protection and provision. improvement of criminological provision of economic security can be achieved by: 1) development of an information system in terms of creating a single unified platform for monitoring the economic situation in the country and forecasting potential risks; 2) improving the coordination of activities of economic security and criminal protection entities in terms of reducing competition and conflicts of interest; 3) increasing the level of international and european cooperation in the field of criminal protection and economic security; 4) synchronization of national and foreign criminological policy in terms of economic security. the third and fourth points are especially relevant in connection with recent events. scientists rightly point out that the main forms of international cooperation of ukraine, as one of the means of improving the criminological provision of economic security, include the following forms of cooperation: the conclusion of multilateral international legal treaties; joint consultations to develop a national and international strategy for each of the cooperating countries on the criminological provision of preventive activities in the economic sphere; participation of ukraine in international organizations specializing in the fight against crime in the sphere of economy and its auxiliary direction – criminological provision of economic security; development of current and long-term programs of cooperation in the sphere of criminological provision of economic security; exchange of experience with organizations and conducting preventive activities in the sphere of economic security. the study of the international aspect of ensuring criminal security in the sphere of the ukrainian economy showed that there are a number of different forms of international cooperation in this area (sazonov, 2020). this is also particularly relevant in view of our country 's accession to the entso-e synchronous network f continental europe, which took place on february 16, 2022, after ukraine's application for accession to the european union on february 28, 2022. the creation of appropriate criminological strategies that take into account foreign experience and international standards of economic security will provide an opportunity to timely identify potential socially dangerous risks and create measures and means to overcome them. the european practice is more progressive in terms of protection of economic cyberspace, which is very important and valuable given that certain sectors of the economy are increasingly suffering from hacker attacks, as well as other criminal offenses committed with the use of computer technology. taking into account the international standards of criminological provision of economic security, the eu bodies, recognizing the serious and growing threat of international organized crime, primarily economic, to the very existence of the european union, adopted a number of legislative acts aimed at combating corruption in the private sector of the economy, money laundering, illegal insider trading and fraud, equating financial and economic crime (sazonov, 2020). these provisions are updated in the standards developed by the international organization for standardization and reflected in a number of national legal acts and documents. for example, the decree of the president of ukraine of september 30, 2019 no. 722/2019 "on the sustainable develop ment goals of ukraine for the period up to 2030" states that the sustainable development goals of ukraine for the period up to 2030 are guidelines for the development of draft forecast and program documents, draft regulatory legal acts with the aim of ensuring a balance of economic, social and environmental dimensions in the sustainable development of ukraine (decree of the president of ukraine no. 722/2019 "on sustainable development goals of ukraine for the period up to 2030" dated september 30, 2019). thus, the document points to the need to ensure the normal functioning of society by synchronizing economic, social and environmental components. certain international and european standards for ensuring economic security are also implemented in the main directions of development of the system for preventing and counteracting the legalization (laundering) of proceeds from crime, the financing of terrorism and the financing of the proliferation of weapons of mass destruction in ukraine for the period up to 2023, approved by the order of the cabinet of ministers of ukraine no. 435 of may 12, 2021, which states that the system of baltic journal of economic studies 156 vol. 8 no. 4, 2022 prevention and counteraction to legalization (laundering) of proceeds of crime, financing of terrorism and financing of proliferation of weapons of mass destruction within the framework of the united nations documents, international conventions ratified by ukraine, the standards of the financial action task force (fatf) and standards equivalent to those adopted by the eu are recognized as an essential element of the economic security of a modern state (the main directions of the development of the system of prevention and counteraction to legalization (laundering) of proceeds of crime, financing of terrorism and financing of proliferation of weapons of mass destruction in ukraine for the period up to 2023, approved by the order of the cabinet of ministers of ukraine no. 435-p dated may 12, 2021). it should also be noted that certain peculiarities of ensuring criminological protection of economic security are also provided for in the normative legal acts devoted to the implementation of anti-corruption policy, the liberalization of the visa regime for ukraine by the european union, as well as in section vii ("criminal offenses in the field of economic activity ") of the criminal code of ukraine. 5. conclusions thus, in the course of the research it was possible to summarize that the platform of criminological provision of economic security is implemented through international and european standards of integration of national security protection. the reproduction of modern information and technological trends in criminological practice brings ukraine closer to the actualization of the needs of a modern european state. despite this positive situation, it is impossible to ignore a number of problematic aspects that hinder the development of the ukrainian economy: 1) the lack of an established system of protection of information activities, which, as a result, can potentially destabilize the economic sphere; 2) the unavailability of specific measures and means of criminological influence on economic illegal activities; 3) low level of protection against criminal offenses in the field of economy committed with the use of computer technologies; 4) no unified vision of the strategy for combating criminal offenses in the field of economy. this indicates the need to move away from rudimentary forms of economic security and give preference to more modern ones that meet the needs of the mentality of the ukrainian state and its people. references: bandurka, o., & lytvynov, o. (2015). zlochynnist yak obiekt fenomenolohichnoho analizu [crime as an object of phenomenological analysis]. pravo i bezpeka, vol. 3 (58), pp. 6–10. bandurka, o., & lytvynov, o. (2012). stratehiia i taktyka protydii zlochynnosti: monohrafiia [strategy and tactics of combating crime]. kharkiv: nikanova. zakon ukrainy vid 21 kvitnia 2022 roku № 2215-ix "pro deradianizatsiiu zakonodavstva ukrainy " ["on de-sovietization of the legislation of ukraine"]. available at: https://zakon.rada.gov.ua/laws/show/ 2215-20#text lytvynov, o. m. (ed.) (2018). kryminolohiia. akademichnyi kurs [criminology. academic course]. kyiv: kondor. melnychuk, t. (2018). kryminolohichna bezpeka ekonomichnoi diialnosti: navch.-metod. posib. [crimino logical security of economic activity]. odesa: vydavnychyi dim "helvetyka". mozol, s. (2021). kryminolohichnyi zakhyst yak element zabezpechennia kryminolohichnoi bezpeky [criminological protection as an element of ensuring criminological security]. available at: http://dspace.univd.edu.ua/xmlui/bitstream/handle/123456789/10418/zlochynnist%20i%20protydiia% 20yii%20v%20umovakh%20synhuliarnosti_2021.pdf ?sequence=1&isallowed=y osnovni napriamy rozvytku systemy zapobihannia ta protydii lehalizatsii (vidmyvanniu) dokhodiv, oderzhanykh zlochynnym shliakhom, finansuvanniu teroryzmu ta finansuvanniu rozpovsiudzhennia zbroi masovoho znyshchennia v ukraini na period do 2023 roku [the main directions of the development of the system of prevention and countermeasures against the legalization (laundering) of criminal proceeds, financing of terrorism and financing of the proliferation of weapons of mass destruction in ukraine for the period until 2023], skhvalenykh rozporiadzhenniam kabinetu ministriv ukrainy vid 12 travnia 2021 r. № 435-r. available at: https://zakon.rada.gov.ua/laws/show/435-2021-r#text sazonov, v. (2019). koordynatsiia dii subiektiv kryminolohichnoho zabezpechennia ekonomichnoi bezpeky ukrainy [coordination of actions of the subjects of criminological support of economic security of ukraine]. available at: http://www.law.stateandregions.zp.ua/archive/2_2019/23.pdf sazonov, v. (2020). kryminolohichne zabezpechennia ekonomichnoi bezpeky ukrainy [criminological support of the economic security of ukraine]: avtoref. dys. d-ra yuryd. nauk (d-ra nauk): 12.00.08 – kryminalne pravo ta kryminolohiia; kryminalno-vykonavche pravo; mvs ukrainy, khark. nats. un-t vnutr. sprav. kharkiv. sazonov, v. (2020). napriamky kryminolohichnoho zabezpechennia ekonomichnoi bezpeky ukrainy [directions of criminological provision of economic security of ukraine]. available at: http://dspace.univd.edu.ua/ xmlui/bitstream/handle/123456789/5817/napriamky%20kr yminolohichnoho%20zabezpechennia%20 ekonomichnoi%20bezpeky%20_%20sazonov_%202019.pdf ?sequence=1&isallowed=y baltic journal of economic studies 157 vol. 8 no. 4, 2022 stratehiia ekonomichnoi bezpeky ukrainy na period do 2025 roku [strategy of economic security of ukraine for the period until 2025]. zatverdzheno ukazom prezydenta ukrainy vid 11 serpnia 2021 roku no 347/2021. available at: https://zakon.rada.gov.ua/ laws/show/347/2021#text ukaz prezydenta ukrainy vid 30 veresnia 2019 roku № 722/2019 "pro tsili staloho rozvytku ukrainy na period do 2030 roku" [on the goals of sustainable development of ukraine for the period up to 2030]. available at: https://zakon.rada.gov.ua/laws/show/722/2019#text chernyshov, h. (2022). instytutsiine zabezpechennia kryminolohichnoi bezpeky ekonomiky v ukraini [institutional provision of criminological security of the economy in ukraine]. available at: http://newukrainianlaw.in.ua/index.php/journal/article/view/301/266 received on: 21th of september, 2022 accepted on: 28th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 18 vol. 7 no. 4, 2021 corresponding author: 1 university of security management in košice, slovakia. e-mail: josef.reitspis@vsbm.sk orcid: https://orcid.org/0000-0003-4248-5758 2 university of security management in košice, slovakia. e-mail: martin.maslan@vsbm.sk orcid: https://orcid.org/0000-0003-1913-655x doi: https://doi.org/10.30525/2256-0742/2021-7-4-18-23 possibilities of prevention and reduction of threats affecting the safety and fluidity of land transport josef reitšpís1, martin mašľan2 abstract. ensuring mobility and the necessary volume of transportation is one of the basic conditions for the functioning of the economy. the potential threat to existing transport systems is therefore an area that needs increased attention. the complexity of modern transportation is due to its increasing frequency, the expansion of transport routes, as well as the increase in the number of actors involved in their implementation, which places ever greater demands on their mutual coordination. it is necessary to constantly monitor the progress of transportation, to identify and assess the risks that may affect them. insufficient attention to this issue can lead to time and material losses, in the worst case, the death of their participants, or to the high financial costs required to rebuild the disrupted system. transport is an open system in which more and more people are working, whether transported or involved in its organization, which increases the possibility of their failure and facilitates the possibility of attack. strict application of risk management, assessment and, if necessary, implementation of necessary measures can lead to protection of high-value assets. at present, we already commonly encounter concepts such as the intelligent transport route or the autonomous means of transport. all these circumstances, as well as the importance of transport, which we could compare to blood circulation of the state's economy, make it a possible target for various types of attacks. cyber threats and attacks are becoming more and more relevant today. such an attack is characterized by a relatively low level of threat to the attacker himself and a possible high level of damage if it is successful. key words: land transport, road transport, rail transport, security threats, logistics, cyber attack, risk management. jel classification: l92, r41, r42, j28, k24 1. introduction the development of the global economy is largely dependent on the free movement of people, goods and information. we are witnessing a globalized world, but this does not mean global security. world globalization also directly affects transportation, which is rapidly growing in importance and intensity. both the number of transported persons and the volumes of materials are increasing, the transport routes that can lead through or over risk areas are being extended. a characteristic feature is the fact that transport infrastructure is developing more slowly on a global scale than the requirements it has to meet. the transport system is currently exposed to security threats, both to the known ones, which are constantly taking on modified forms, as well as to many new ones, which are so far only intuitively suspected, or even unknown at all. certain types of transportation have their own specifics; their object may be hazardous substances and materials that pose a threat both to the participants of transportation and to the civilian population located along the transportation routes, or to the general safety of the state. the combination of various factors accumulates safety risks affecting transport and their possible consequences. continuous identification of these risks, their analysis using appropriate methods that take into account the nature of the system under analysis, subsequent analysis and evaluation of the identified risks, the development of necessary measures, as well as the inclusion of the acquired knowledge in the practical and theoretical training of transport participants is a necessary condition for safe and uninterrupted operation of transport. it must be stated that the level of vulnerability of the system is still increasing. baltic journal of economic studies 19 vol. 7 no. 4, 2021 an important condition for the safe and uninterrupted operation of transport is the implementation of corrective and preventive measures developed on the basis of the identification and assessment of risks affecting the transport system. despite the everincreasing attention paid to the management of safety risks arising from transport, more than 1.3 million people die in road accidents worldwide each year. depending on the country, the implementation of the necessary measures may depend on their funding possibilities, but also on conflicts over the provision of passenger security, taking into account the privacy of their guaranteed rights. the flow of transport is largely influenced by the level of protection of the individual assets that are part of the existing transportation system. the present time is a period of increasing importance of the use of information technology, which leads to attempts to abuse it, aimed at the economic, military and political weakening of the enemy. for the operation of transports it is important to maintain the ability to function in the event of unauthorized access to the information system, penetration of misinformation, damage to existing databases, which can lead to its partial or complete disruption. the protection of information systems includes elements that increase their resilience, as well as the possibility of transport operation in the event of their failure. transportation requires the interconnection of a large number of information systems, which increases the possibility of putting them at risk. in order to increase system resilience, it is constantly necessary to upgrade existing and add new security features to hardware and software. the problem is the rapid development of information technology and cyber threats, which is incompatible with the service life of vehicles. when purchasing vehicles, it is necessary to consider not only price, quality, functionality, but also the integration of modern elements of active and passive security. 2. safety aspects affecting the transport system if we understand transport as an organized system with three interacting basic elements, which are the transport route, means of transportation and participants (active or passive), then we can argue that security threats can refer to one of the elements and their possible combinations. the consequences of a flow restriction or supply disruption can affect both local and global security, and can lead to negative impacts on the health and lives of people involved in the supply chain, as well as people who are not involved in the system at all. other consequences are various forms of damage to property, which may be the transport infrastructure, the transported material, the means of transport, or property that has no direct connection with the transport itself. transport and its security system are constantly evolving, and the individual elements are characterized by different paces of such development. the advancement of vehicles, in which new elements of passive and active safety are constantly being applied, is most noticeable. the vehicle and the active participant – the driver act interactively, the active safety features applied contribute to the reduction or elimination of safety risks from the driver, which may gradually lead to its complete replacement and the production of autonomous vehicles. the road-vehicle interaction has been the subject of extensive research in various countries around the world for many years. we are increasingly confronted with the terms 'smart road', 'smart highway ' or 'intelligent transport system', which will become part of real life in the future. these facts could give the impression that the vulnerability of transport systems is constantly increasing due to the technical improvement of their elements. this is just one of the prerequisites for the safe operation of the system. the second is the constant monitoring of the security risks and threats to which this system is exposed. in general, we can divide security threats affecting traffic into 3 groups: 1. objective (existing without human intervention, thus arising independently of human action). we advise you on these: a) technical failures, technological deficiencies and accidents on the road or means of transport; b) natural disasters – seismic, volcanic, climatic. 2. subjective (caused by transport participants, whether active or passive, or by other human actions): a) subconscious-unconscious action e.g. under the influence of health problems; b) conscious action – intentional or unintentional (eg neglect, arrogance, aggression, influence of alcohol). 3. external attacks on the transport system: a) individual and/or organized crime; b) terrorism – individual and/or organized, for example, attacks using "cbrne" threats, i.e. "chemical, biological, radioactive, nuclear and explosive". cyber threats and the use of vehicles as weapons are also increasingly mentioned in this context. the degree of action of individual threats can lead to extraordinary events, which have different probabilities of occurrence, as well as the severity of consequences. therefore, it is essential to constantly monitor the security aspects of traffic by analyzing and assessing existing security risks. every extraordinary event requires a thorough analysis, which examines the causes, course and consequences of its occurrence. based on the knowledge gained in this way, it is possible to propose the necessary measures. the primary task of corrective measures is to restore the functionality of the transport system. in contrast, preventive measures seek to reduce the existing risk to an acceptable level, which should protect the system from further emergencies. baltic journal of economic studies 20 vol. 7 no. 4, 2021 therefore, the safety of transport and its individual components depends to a large extent on preparing the system for possible risk situations and the occurrence of emergency events. this activity is the subject of risk management, i.e., management that prepares the system for action in emergency and crisis situations. 2.1. the importance of logistics for the functioning of sectors of the national economy the basis of logistics can be derived from the need to address logical procedures (processes) related to the satisfaction of basic human needs, such as satiety or clothing. according to junemann, "logistics – the scientific science of planning, managing, and controlling the flow of materials, people, energies, and information in systems" ( junemann, 1989). the european logistics association defines logistics as the organization, planning, management and performance of flows starting with development and purchasing, ending with production and distribution according to the order of the final customer so that all market requirements are met at minimum cost and minimum capital expenditure. since its inception, logistics activities have undergone a gradual development, which is a neces sary prerequisite for meeting the ever-changing requirements. they are reoriented from the market of the seller to the market of the buyer, while the delivery time is reduced and the level of provided services increases. the products manufactured are characterized by higher production quality, as well as a shorter life cycle and a growing assortment while constantly striving to reduce inventories. the main determining factor in the development of this activity was the transition from manual administration and data processing to their electronic form and the introduction of systems that allow for comprehensive monitoring of logistics processes in real time. nowadays, logistics activity is an integrating element of both individual internal components of the system and the connection of this system with the environment. the main prerequisite for this integration is a functional information system, which in real time: – provides information on material flows and current conditions in individual warehouses; – updates the production status; – indicates the need to purchase inventory, allows distribution planning; – provides information on existing and potential customers and suppliers; – informs about the status of materials at suppliers; – monitors the ordering process; – monitors the volume, composition and price level of ordered and delivered products; – shows the financial flows and payment discipline of the participants; – monitors the quality of ordered and delivered materials. thus, properly selected and implemented information system can largely ensure the mutual replacement of information and material flows, as well as reduce productivity and logistics costs. the reason for the functioning of the logistics system defined in this way is the ever-increasing requirements for the volume of transport of people and materials. such shipments can serve as inputs to production processes, transfers within existing productions and intermediate warehouses, a means of meeting the needs of end customers through the delivery of required products and services. at a time of globalization, these transports are characterized by increasing risk factors, such as internationalization, an increase in the length of transport routes and transportation volumes, and an increase in the number of people needed to organize them. therefore, to ensure the safe functioning of logistics and transportation systems, constant attention must be paid to existing and emerging risks. 2.2. land transport and its operation in the slovak republic in the conditions of the slovak republic, road transport is mostly used for these purposes. the main advantages of this type of transport include its speed, reliability, flexibility, possibility of direct sale of transported goods and its independence from other modes of transport, diversity of the offered fleet of vehicles. road transport is mainly used for shortand medium-distance transportation. an important factor favoring this mode of transport is the large number of roads, which is due to the accessibility of the final destination, the lack of the need to combine with other modes of transport, and the lower cost of repairing infrastructure in case of damage. the second most used mode of transport is rail, which is limited by transport routes, the need for access roads, lower speed and higher cost. its advantage is the low environmental impact and minimal impact of weather conditions. although this mode of transport allows unrestricted movement of materials and people, it is subject to the above-mentioned limitations. this transport works most effectively for direct transport from train to train. in other cases, it must be combined with road transport for efficient delivery. the speed of transport is greatly influenced by the number of consignors and consignees within one train. the fastest transport is performed by a direct integrated train, i.e. by a train which transports consignments from one transmitting station from one consignor to one receiving station (siding) for one consignee. the disadvantage is the very problematic transport of oversized materials baltic journal of economic studies 21 vol. 7 no. 4, 2021 and the time that this method of transportation requires when delivering materials from multiple senders, from multiple stations to multiple recipients. in the conditions of the slovak republic, domestic water transport is of only marginal importance due to the insufficient length of navigable watercourses. in general, it is the most cost-effective mode of transportation, suitable for transporting large volumes of materials over long distances. the disadvantages are the speed of transportation, fluctuations in the condition of watercourses and weather conditions. the technical equipment of existing ports is also a limiting factor. it is also necessary to combine this transport with other modes of transportation and distribution – i.e. rail and road transport. since the slovak republic is a landlocked country, sea transport is only minimally used in the conditions of the slovak republic. however, in a global sense, this mode of transport is a means of strategic mobility. according to existing estimates, the importance of road transport will continue to grow, to the detriment of rail and water transport. the estimates of the european commission concerning the performance of individual types of transport for the years 2018–2030 in the conditions of the slovak republic are shown in the figure 1. combined transport (ct) is a transport and handling system ensuring the transport of goods in one and the same cost unit from the sender to the recipient as an unbroken chain. in essence, it is not a separate mode of transport, but an efficient use of interconnected modes of transport (rail, road, air and waterborne), which, due to their comparative and systemic advantages, can reliably meet transport requirements. intermodality is a transport system in which two or more types of transport are used for the continuous transport of the same load unit within the supply chain. in the conditions of the slovak republic a combination of road and rail transport or cooperation of these modes of transport with water and sea transport is used, to a lesser extent air transport is also involved in such transportation. the basic condition for quality performance of transport logistics tasks is mobility, i.e. the possibility to move the necessary volume of materials or people quickly, either by means of own transport capacities or by renting transport services offered from outside. in ensuring the necessary level of mobility, we always take into account factors that may negatively affect it. 3. characteristics of safety risks affecting fluidity of land transport the purpose of identifying risk factors is to create a list of events (risk catalog) that could lead to an undesirable disruption of current processes. at this stage it is necessary to identify as many risks as possible, which will later be analyzed and evaluated. when identifying risk factors, both external and internal environmental influences must be considered. although individual land transports have their own specifics (weather, transport routes), they also show common elements within which individual risk factors act. the basic prerequisite for effective risk management is its knowledge which enable us to provide following activities: risk analysis: it is the process of assessing the causes and sources of risks, their positive and negative figure 1. prediction of the development of transport performance in freight transport in slovakia until 2030 source: european energy and transport, trends to 2030, european commission baltic journal of economic studies 22 vol. 7 no. 4, 2021 impacts, the severity of possible impacts and then determining the likelihood that these impacts may occur. the choice of risk analysis method depends on the nature of the system under investigation itself, on the availability and complexity of the input information – this must be reliable, relevant and must carry the required data, from the stage of development of the research. identifying of risk factors create a list of events that could cause undesirable disruption to ongoing processes. at this stage, we define all the risks that will be subsequently analyzed and evaluated. when identifying risk factors, we can use analythiclal methods as check list (ca), preliminary hazard analysis (pha). this analysis serves as a basis for further analyzes such as ishikawa diagram, eta or fta as a risk modelling methods or fmea as a method for basic analysis of the system. methods for risk modelling enable to create teh scenarios in the course of risk event, based on cause-and-effect diagrams displayed the analyzed problem in a simple form based on its causes. the most commonly used methods for basic system analysis is fmea (failure mode and effect analysis). analysis of the causes of failures and their consequences, the task of which is to select significant risks affecting the system under investigation. the result of the analysis is a clear tabular and graphical representation of both acceptable and unacceptable risks. when designing measures for individual risks, it is always necessary to take into account how the individual components contributed to the total amount of the risk number. if there is a possibility of a high severity of consequences but a very low probability of an event, it may not be necessary to take precautionary measures. risk evaluation: a complex process in which we determine the magnitude of risk in terms of the extent of damage and loss that a given crisis event may cause and the likelihood that such an event will occur, we compare the degree of risk to existing standards, tolerance limits or other predetermined criteria. based on the degree of risk, we determine the order of risks in terms of their significance, taking into account the impact of the probability of occurrence and possible consequences. we then compare the individual risks with the level of acceptability and decide which risks we will consider further. risk treatment and reduction: is a diverse process, which depends on the nature of the risk itself, the degree of probability of a crisis phenomenon that may cause the risk and the expected negative consequences. thus, risk reduction can be achieved, for example, through crisis policy, risk diversification (insurance), but also by creating reserves or optimizing processes. familiarization of the persons concerned with the residual risks: instruction of competent staff about the risk factors that exist in the individual processes and activities. ongoing monitoring of the level of risks and the implementation and effectiveness of the measures in place. in this process, the existence of feedback and the continuous incorporation of control findings into the system is essential. among the security threats which affect land transport and currently need to be given increased attention, we can include: – ensuring the operability of the system even in the event of a cyber threat. focus future research on an integrated approach to ensuring cyber resilience in land transport. the need to ensure a degree of flexibility of it systems against possible cyber attacks. ensuring the operation of transport systems even in the event of an it failure. adaptation of existing it systems to emerging cyber risks – analysis of threats and deficiencies, measures to eliminate emerging security gaps. – timely and effective threat detection. an integrated approach to the timely and effective detection of threats in land transport. – safety problems of railways as open systems. focusing research on an integrated approach to railway safety and public transport – detection, crisis management and human resources training. – balancing security requirements and passenger privacy. privacy and security are often threatened, but also in competing areas. focus on tools that take privacy and fundamental human rights into account when implementing security measures. – security awareness of staff and customers. focused on training and educational programs for security personnel and measures for seamless communication with passengers. – safety as part of system design. the goal is to offer solutions in which security elements will be incorporated into the ground transportation hardware. this eliminates the additional costs associated with the purchase of additional security features. security should be part of the ict (information and communication technology) design. a comprehensive approach to transport ict security design. increased security risks require the design of ict systems with directly embedded security features. – secure communication links for traffic management systems. risk assessment and safety protocols for traffic management systems. the number of interconnected control systems as well as systems enabling self-monitoring is constantly growing (see also autonomous vehicles) – protection of autonomous vehicles against cyber attacks. protection of autonomous vehicles through the joint development and harmonization of cyber vehicle architecture, reliable communication systems and more efficient knowledge exchange. overall transportation safety is always a reciprocal interaction of its individual components, which are baltic journal of economic studies 23 vol. 7 no. 4, 2021 route-means of transportation and human factors. lack of attention to the security risks posed by these components can mean an overall threat to the mobility necessary for the functioning of society, as well as undesirable synergies that can be achieved at the expense of low costs and the anonymity of perpetrators at a low level of system security. a characteristic feature of the modern world is its globalization and increasing international tensions, factors that also lead to an increase in security risks and related threats affecting transportation systems. 4. conclusion the complexity of current transports is due to their growing frequency, extension of transport routes, as well as the growing number of entities that participate in their implementation, which places ever-increasing demands on their mutual coordination. increasingly, external services are being rented out, either by transport customers or their providers. outsourcingusing of external capacities represents advantages related to specialization, speed of deliveries, or their actual implementation in case of insufficient internal capacity, or quality of provided services. however, this always means the entry of an external element into the system, whose staff, it systems and activities cannot be controlled and managed as efficiently as existing internal resources. a prerequisite for the functioning of the transport security system is the continuous innovation of existing technical equipment and technologies, which should ensure their functionality and ability to respond to existing and anticipated security risks and threats that may occur in this system. the level of use of established technologies always depends on the knowledge, motivation and working conditions of the staff -internal or external who work with existing technologies. within transport, we can define the following areas of use of security technologies, systems and related activities: – access control; – security of transport assets and cargo; – cyber protection; – safety of employees, visitors, passengers; – loss prevention; – perimeter protection of space and buildings; – place of transaction. nowadays, we already often encounter such concepts as the intelligent transportation route or autonomous means of transportation. all these circumstances, as well as the importance of transportation, which we could compare to the circulation of the state's economy, make it a possible target for various types of attacks. cyber threats and attacks are becoming more and more relevant today. such an attack is characterized by a relatively low level of threat to the attacker himself and possible high damage in its successful implementation. an increasingly important place in management activities, therefore, occupies risk management. it is a continuous process that is a means of effectively identifying and assessing risks, in case there is a need to design and implement the necessary measures. the implementation of these measures is often associated with the need to spend certain funds. the need to secure these funds means an increase in the total cost of running the system, but overall they represent only a certain percentage of the total value of the asset to be protected by these measures. references: soušek, r . (2010). doprava a krízový managament. pardubice: institut jana pernera, 260 s. isbn 978-80-86530-64-2 mesároš, m., kiss, i., & majerník, ľ. (2008). logistika, všbm, košice, 108 s. isbn 978-80-89282-17-3 kortschak, b. h. (1994). úvod do logistiky: co je logistika? praha: babtext, 176 s. isbn 80-85816-06-7 buzalka, j. (2012). teória bezpečnostných rizík. bratislava: akadémia pz, 168 s. isbn 978-80-8054-547-5 smejkal, v., & rais, k. (2006). řízení rizik ve firmách a jiných organizacích. praha: grada publishing, a.s., 300 s. isbn 80-247-1667-4 reitšpís, j., bartlová, i., & hofreiter, l. (2004). manažérstvo bezpečnostných rizík. žilina: edis – vydavateľstvo žilinskej university, 296 s. isbn 80-8070-328-0 přibil, p., janota, a., & spalek, j. (2008). analýza a řízení rizik v dopravě. praha: ben-technická literature, 526 s. isbn 978-80-7300-2140-0 straka, m. (2013). logistika distribúcie, epos, 399 s. isbn: 978-80-56200-15-5 tichý, m. (2006). ovládání rizika:analýza a management. praha: c.h.beck, 396 s. isbn 80-7179-415-5 paleček, m. (2006). prevence rizik. praha: vše. isbn 80-245-1117-7 hofreiter, l. (2004). bezpečnosť, bezpečnostné riziká a ohrozenia. žilina: edis – vydavateľstvo žilinskej university, 146 s. isbn 80-8070-181-4 kuracina, r ., & ferjenčík, m. (2006). nástroje pre oceňovanie rizika a vyšetrovanie havárií. recenzovaný zborník. isbn 80-8073-649-9 zborníky z vedeckých konferencií riešenie krízových situácií v špecifickom prostredí, fši žu, žilina, 1996–2005. stn en iso 31000:2011:manažérstvo rizika. baltic journal of economic studies 36 vol. 3, no. 1, 2017 corresponding author: 1 institute of industrial economics of the national academy of sciences of ukraine. e-mail: zaloznova-yuliya@mail.ru 2 department of issues of perspective development of fuel-energy complex, institute of industrial economics of the national academy of sciences of ukraine. e-mail: nata_tru@ukr.net methodical support of improving the organization of marketing activity of the coal-mining enterprises of ukraine* yuliia zaloznova1, nataliia trushkina2 institute of industrial economics of the national academy of sciences of ukraine, ukraine abstract. the purpose of the paper is to develop scientific and methodical approaches and proposals for improving the organization of marketing activity of the coal-mining enterprises of ukraine in the conditions of instability in demand. methodology. to achieve this goal used methods: statistical analysis, synthesis, comparison, structural and logical, expert evaluation, ranking. results. factors affecting the organization of the processes of sales activity of coal mining enterprises are revealed. trends of the modern development of the domestic coal market in ukraine are determined. the dynamics of marketing performance of coal mining enterprises is analysed. proposals for improving the organization of marketing activity of the coal-mining enterprises are developed, principal among which are the formation and development of a system of contractual relationships with various categories of consumers of coal products; rationale for the creation of the syndicate as the organizational-economic mechanism of management of marketing activity of the coal-mining enterprises of various forms of ownership; formation of the methodical approach to the selection of an effective channel of coal sales; information support. practical implications. the expected economic effect of the implementation of measures to improve the organization of marketing activity of the coal-mining enterprise is designed. it consists of cost savings on marketing by increasing the level of coherence between the enterprise and the loading and transport management at the conclusion of contracts for the provision of transport services; formation of optimal schedules of wagon movement; rational use of cars on duty; reducing maintenance time consumers of coal products. the introduction of a set of measures to improve the organization of marketing activity of enterprise through improving a service of various categories of consumers and improve the contractual relationships will contribute to the formation of evidence-based marketing strategy that will meet the requirements of modern management. value/originality. the main idea of the study is to develop theoretical and scientific-methodical provisions and develop practical recommendations to improve the organization of marketing activity of the coal-mining enterprises of ukraine. key words: coal mining enterprise, marketing activity, management, instability of demand, contractual relationships, consumers, syndicate, information support. jel classification: d11, d80, c70, k23, l14, l30, m11, m31 1. введение на современном этапе угледобывающие предприятия украины функционируют в условиях нестабильности спроса и снижения уровня лояльности потребителей. ключевым компонентом создания добавленной стоимости и конкурентных преимуществ предприятий является совершенствование организации их сбытовой деятельности за счет прогнозирования спроса потребителей угольной продукции, формирования реально выполненных планов и программ, постоянного контроля и регулирования процессов в сбытовых сетях, своевременного выявления проблем и оперативно принятых управленческих решений, внедрения информационных технологий. по оценкам экспертов, внедрение мероприятий по совершенствованию организации сбытовой деятельности промышленных предприятий способствует * исследование выполнено в рамках научно-исследовательской работы института экономики промышленности нан украины «развитие публично-частного партнерства в процессе модернизации угольной промышленности и тепловой энергетики» (№ госрегистрации 0115u001638). baltic journal of economic studies 37 vol. 3, no. 1, 2017 сокращению затрат на реализацию, маркетинг и поддержку клиентов на 10–15% (kapinus, 2008), уменьшению стоимости и времени на обработку заказов на 20–40% (ill’chenko, 2010), увеличению объемов отгрузки продукции на 35–40% (posylkina, sahaydaknikityuk, zahoriy, 2011), снижению времени на перемещение товаров и уровня транспортных затрат в результате оптимизации маршрутов движения транспорта и согласования графиков поставок (krykavs'kyy, pokhyl'chenko, chornopys'ka, kostyuk, savina, nikshych, yakymyshyn, 2014). таким образом, современные условия хозяйствования угледобывающих предприятий требуют поиска резервов повышения эффективности их функционирования, среди которых можно назвать совершенствование организации сбытовой деятельности с учетом нестабильности спроса на угольную продукцию. в результате исследования выявлено, что ученые, как правило, под управлением сбытовой деятельности промышленных предприятий понимают организацию контрактной работы с потребителями на поставку готовой продукции, формирования каналов распределения и портфеля контрактных обязательств. как показывает анализ отечественной и зарубежной научной литературы, к основным направлениям повышения эффективности организации сбытовой деятельности промышленных предприятий отнесены: совершенствование законодательства о реализации угольной продукции; разработка системы обслуживания потребителей; совершенствование организации системы сбыта продукции потребителям путем создания оптимальных каналов сбыта; предложения по обоснованию целесообразности формирования сбытовых сетей. на основе анализа научных публикаций обобщены основные положения ученых и специалистов: – проанализированы рыночные условия функционирования предприятий угольной промышленности и сформирован организационно-экономический механизм управления ресурсным потенциалом шахт в условиях неустойчивого спроса на уголь (vahonova, papizh, 2013); – предложено, что «либерализация национального угольного рынка должна происходить путем перехода к заключению прямых контрактов между производителями и потребителями угольной продукции и внедрения биржевой (аукционной) торговли углем» (amosha, starychenko, cherevats'kyy, 2013); – исследованы современное состояние развития угольных шахт и экономические проблемы обеспечения их устойчивого функционирования (tryfonova, 2015); – разработана эффективная модель для определения необходимости и рациональности заключения контракта с тем или иным агентом, которая должна включать такие подходы: применение теории игр; эконометрическая модель для оценки методологии заключения гибридных контрактов; диагностика контрактной деятельности на основе построения диаграмм бизнес-процессов; метод ранжирования харрингтона; логит-модель, особенностью которой является то, что она переводит значение функции факторов контракта в предполагаемые вероятности заключения контракта; рамочная проблемно-ориентированная методика решения организационно-экономических задач (komarov, vyzhitovich, 2014); – обосновано, что соотношение предприятий государственного сектора угольной промышленности и их контрагентов  – энергогенерирующих компаний и металлургических корпораций  – целесообразно организовывать на принципах экономических сетей (starychenko, amosha, cherevats'kyy, zaloznova, 2016). несмотря на широкий круг научных разработок по выбранной теме, проблема совершенствования организации сбытовой деятельности угледобывающих предприятий с учетом особенностей их функционирования в условиях нестабильности спроса на угольную продукцию и современных тенденций развития институциональной среды требует дальнейших научных исследований. все это в значительной степени обусловило выбор темы исследования и его целевую направленность. цель данной работы состоит в развитии научно-методических положений и разработке практических рекомендаций по совершенствованию организации сбытовой деятельности угледобывающих предприятий украины в условиях нестабильности спроса. для достижения поставленной цели решены следующие научные задачи: выявлены факторы, влияющие на организацию процессов сбытовой деятельности угледобывающих предприятий; определены тенденции современного развития внутреннего рынка угля в украине; проанализирована динамика показателей сбытовой деятельности угледобывающих предприятий; разработаны предложения по совершенствованию организации сбытовой деятельности угледобывающих предприятий, основными среди которых являются формирование и развитие системы контрактных взаимоотношений с различными категориями потребителей угольной продукции; обоснование целесообразности создания синдиката как организационно-экономического механизма управления сбытовой деятельностью угледобывающих предприятий различных форм собственности; формирование методического подхода к выбору эффективного канала сбыта угля; информационное обеспечение. для решения перечисленных научных задач использованы методы исследования: статистический анализ, синтез, сравнение, структурно-логический, экспертная оценка, ранжирование. baltic journal of economic studies 38 vol. 3, no. 1, 2017 2. особенности и тенденции развития сбытовой деятельности угледобывающих предприятий украины выявлено, что отечественной угольной отрасли присущи специфические особенности организации процессов сбытовой деятельности. среди них: постоянные колебания и изменения конъюнктуры рынка угля, нестабильный спрос на угольную продукцию, влияние фактора сезонности на формирование материального потока угольной продукции. неравномерное развитие процессов потребления и добычи угля в украине. так, по данным государственной службы статистики украины, объем потребления угля сократился за 2007–2015 гг. на 36,2%, а добычи угля – на 49,2%. при этом наблюдается рост соотношения объема потребления и добычи угля. если в 2007 г. значение этого показателя составило 1,21, то в 2015 г. – 1,52 раза. это свидетельствует об увеличении уровня неудовлетворения спроса потребителей угольной продукции (как правило, коксующегося и антрацитного угля) (табл. 1). таблица 1 динамика объемов добычи и потребления угля в украине годы объем добычи угля, млн т объем потребления угля, млн т соотношение объемов потребления и добычи угля, раз 2007 58,9 71,0 1,21 2008 59,5 70,4 1,18 2009 55,0 63,0 1,15 2010 55,0 67,8 1,23 2011 62,7 72,5 1,16 2012 65,7 73,3 1,12 2013 64,4 71,3 1,11 2014 45,9 53,9 1,17 2015 29,9 45,3 1,52 источник: статистические сборники украины за 2007–2015 гг. в структуре потребления энергетических материалов удельный вес угля вырос за 2007–2015 гг. на 5,7%, или с 25,2 до 30,9%. сокращение объемов добычи, готовой товарной и реализованной угольной продукции государственных угледобывающих предприятий. по данным министерства энергетики и угольной промышленности украины, объем добычи государственных угледобывающих предприятий сократился за 2007–2015 гг. на 84,1%, готовой угольной продукции – на 82,5%, товарной  – на 82,6%, реализованной угольной продукции – на 84,3% (табл. 2). увеличение объема остатков угля на складах государственных угледобывающих и углеперерабатывающих предприятий, то есть наблюдается тенденция профицита угольной продукции (как правило, угля газовой марки). так, по данным министерства энергетики и угольной промышленности украины, объем остатков угля в украине вырос за 2007–2015 гг. на 114,1%, а на государственных угледобывающих предприятиях – на 68,1% (табл. 3). характерным является снижение объема экспорта угля и, соответственно, рост его импорта (как правило, коксующегося и антрацитного). по данным государственной службы статистики украины, объем экспорта угля сократился за 2007–2015 гг. на 83,8%, а объем импорта угля увеличился на 10,6%. при этом наблюдается тенденция превышения объема импорта над экспортом угля. если в 2007 г. значение этого показателя составляло 3,57, то в 2015 г. – 24,3 раза (табл. 4). 7. угольная продукция отгружается различным категориям потребителей: крупнооптовым (постоянная группа  – металлургические, коксохимические таблица 2 динамика объемов добычи угля, готовой, товарной и реализованной угольной продукции государственных угледобывающих предприятий годы объем добычи угля, млн т объем готовой угольной продукции, млн т объем товарной угольной продукции, млн т объем реализованной угольной продукции, млн т 2007 42,2 28,6 28,2 28,1 2008 45,7 28,4 28,0 27,7 2009 38,4 25,4 25,0 25,4 2010 38,5 25,1 24,7 24,4 2011 38,4 25,3 25,0 24,7 2012 24,9 17,8 17,5 17,4 2013 24,1 18,0 17,8 15,9 2014 12,9 9,7 9,5 8,4 2015 6,7 5,0 4,9 4,4 источник: информационные материалы министерства энергетики и угольной промышленности украины таблица 3 динамика объемов остатков угля на складах угледобывающих и углеперерабатывающих предприятий в украине годы объем остатков угля на складах по украине, тыс. т объем остатков угля на складах государственных предприятий, тыс. т 2007 1288,3 1188,8 2008 2468,8 2315,8 2009 2101,6 1979,4 2010 2877,3 2640,0 2011 2753,0 2411,7 2012 3849,2 2114,8 2013 2675,4 1938,8 2014 2716,3 1968,1 2015 2757,9 1997,8 источник: информационные материалы министерства энергетики и угольной промышленности украины baltic journal of economic studies 39 vol. 3, no. 1, 2017 заводы, теплоэлектростанции, ежемесячный объем поставки угля которым составляет от 10 тыс. т); среднеоптовым (посреднические организации, которым угля отгружается один или несколько раз в год; ежемесячный объем поставки составляет до 10 тыс. т) и мелкооптовым (население – объем поставки угля до 10 тонн). наблюдается неравномерность объемов отгрузки угля крупнои среднеоптовым потребителям. например, на одном из обследованных угледобывающих предприятий объем отгрузки угля крупнооптовым потребителям снизился за 2001–2015 гг. на 65,8%, или с 1731,7 до 592,6 тыс. т, а среднеоптовым – на 87%, или с 509,3 до 66,4 тыс. т. при этом удельный вес отгрузки угля крупнооптовым потребителям увеличился за этот период на 12,6%  – с 76,7 до 89,3%, а среднеоптовым потребителям сократился на 12,6%  – с 22,6 до 10%. удельный вес отгрузки угля мелкооптовым потребителям менялся несущественно и составлял 0,7%. обследования показали, что в 2015 г. удельный вес поставок на ряде отечественных угледобывающих предприятий в структуре отгрузки угольной продукции крупнооптовым потребителям составил 86–90%, среднеоптовым – 3–10%, а мелкооптовым – 1–3%. в 2007–2015 гг. наблюдался рост убыточности угледобычи в государственном секторе отрасли. в 2007 г. этот показатель составил 33,1%, в 2011 г. – 36,4, а в 2015 г.  – 39,8%. в 2015 г. себестоимость 1  т товарной продукции государственных угледобывающих предприятий превышала цену 1 т товарной продукции в 1,7 раза (в 2007 г. – в 1,5 раз, в 2011 г. – в 1,6 раз). полная себестоимость в угольной промышленности украины выросла в сопоставимых ценах за 2007– 2015 гг. на 70,3%, средний темп роста за этот период составил 106,9%. затраты на организацию сбытовой деятельности в сопоставимых ценах уменьшились на 19,1%, средний темп сокращения составлял 97,4%. удельный вес затрат на сбытовую деятельность в полной себестоимости товарной продукции сократился за 2007–2015 гг. с 0,96 до 0,46%. затраты на сбыт 1 т товарной продукции государственных угледобывающих предприятий украины увеличились за 2007– 2015 гг. на 36,5%, или 6,55 до 8,94 грн, средний темп роста составил 104,0%. таким образом, анализ статистических данных свидетельствует о недостаточно эффективной организации сбытовой деятельности угледобывающих предприятий украины. в связи с этим целесообразным является определение стратегических направлений совершенствования организации сбытовой деятельности угледобывающих предприятий украины в условиях нестабильности спроса. 3. формирование системы контрактных взаимоотношений угледобывающего предприятия с потребителями угольной продукции под системой контрактных взаимоотношений авторы данной статьи понимают совокупность взаимосвязанных элементов (объектов, субъектов, функций, методов, принципов, инструментов) для организации непрерывного процесса заключения и выполнения условий контрактов на поставку угольной продукции. этот процесс должен реализовываться через весь комплекс функций управления: прогнозирование, планирование, организация, учет, контроль, анализ, регулирование. при составлении контракта на поставку угольной продукции определяются обязанности, условия действия, права сторон, гарантии защиты прав, если одна из сторон нарушает обязательства. при организации контрактной деятельности угледобывающего предприятия с потребителями угольной продукции существует определенная специфика, которую необходимо учитывать. так, при оформлении контрактов на поставку угольной продукции крупнооптовым потребителям целесообразным является включение такого пункта, как 30–50% предоплаты или отсрочка платежей за отгруженный уголь на определенный срок. при этом при реализации угольной продукции крупнооптовым потребителям следует учитывать тот факт, что оплата за отгруженный уголь потребителями может осуществляться несвоевременно. в этом случае предприятие-потребитель должно заплатить штраф. согласно гражданскому кодексу украины должник, который просрочил выполнение денежного обязательства, по требованию кредитора обязан уплатить сумму долга с учетом установленного индекса инфляции за все время просрочки, а также 3% годовых от просроченной суммы, если иной размер процентов не установлен договором или законом. таблица 4 динамика объемов экспорта и импорта угля в украине годы объем экспорта угля, млн т объем импорта угля, млн т соотношение объемов импорта и экспорта угля, раз 2007 3,7 13,2 3,57 2008 4,5 12,8 2,84 2009 5,3 7,9 1,49 2010 6,2 12,2 1,97 2011 7,0 12,7 1,81 2012 6,1 14,8 2,43 2013 8,5 14,2 1,67 2014 7,1 14,7 2,07 2015 0,6 14,6 24,33 источник: энергетический баланс украины за 2007–2015 гг. baltic journal of economic studies 40 vol. 3, no. 1, 2017 в соответствии со ст. 230 хозяйственного кодекса украины участник хозяйственных отношений обязан уплатить штрафные санкции в виде денежной суммы (неустойка, штраф, пеня) в случае нарушения им правил осуществления хозяйственной деятельности, невыполнения или ненадлежащего выполнения хозяйственного обязательства. при этом за нарушение сроков выполнения обязательства взимается пеня в размере 0,1% стоимости товаров (работ, услуг), по которым допущена просрочка выполнения за каждый день просрочки, а за просрочку свыше 30 дней дополнительно взимается штраф в размере 7% указанной стоимости. таким образом, сумма платежа, которую должен оплатить крупнооптовый потребитель за отгруженную угольную продукцию, увеличивается на сумму штрафа за несвоевременное выполнение своих денежных обязательств. в связи с тем, что крупнооптовым потребителям необходимы значительные объемы угля, при отгрузке применяется железнодорожный транспорт. формирование графиков транспортировки осуществляется с учетом времени в пути и времени разгрузки вагонов. отличием контракта на поставку угольной продукции среднеоптовым потребителям должно быть то, что условием оплаты является 100% предоплата, а также выбор вида транспортного средства в зависимости от объемов отгрузки. особенностью контракта на поставку угля мелкооптовым потребителям является 100% предоплата за предоставленные услуги «уголь плюс поставка» или «уголь без поставки». таким образом, к этапам подготовки контрактов на поставку угольной продукции целесообразно включить такие пункты: прогнозирование объемов отгрузки угольной продукции потребителям; прием заказов на угольную продукцию, заключение контрактов на поставку; процедуры согласования сроков поставок, условия оплаты за угольную продукцию; выбор вида транспорта, заключение контрактов на транспортное обслуживание с погрузочно-транспортным управлением или автотранспортным предприятием; формирование графиков транспортировки с учетом времени в пути и времени разгрузки вагонов и автомобильных средств; применение взысканий штрафных санкций с потребителей в случае их несвоевременного отказа от заказа на поставку продукции. содержание контрактов на поставку угольной продукции требует уточнения и дополнения. практика показывает, что, как правило, в ситуации, когда потребители несвоевременно отказываются от заказанной угольной продукции, предприятие платит за услуги погрузочно-транспортного управления за использование, представление и уборку вагонов. в связи с этим в контракты на поставку следует включить такой пункт: в случаях, когда потребители несвоевременно отказываются от заказанной угольной продукции, они возмещают предприятию затраты, связанные с оплатой услуг погрузочно-транспортного управления за использование, представление и уборку вагонов. 4. обоснование необходимости создания угольного синдиката исходя из того, что сейчас невозможно достоверно спрогнозировать изменения спроса на угольную продукцию, актуализируется вопрос о формировании организационно-экономического механизма, направленного на минимизацию рисков (связанных с нестабильностью спроса) для обеих сторон (частного и государственного сектора угольной отрасли). таким механизмом может стать синдикат как организационная форма, объединяющая крупные вертикально интегрированные компании (которые одновременно являются производителями и потребителями угольной продукции) и отдельные государственные угледобывающие предприятия. актуальность данной проблемы подтверждается научными разработками ряда ученых. так, по мнению ученых, «основными причинами объединения предприятий в топливно-энергетическом комплексе является стремление получить и усилить синергетический эффект, который возникает в результате снижения затрат в вертикальной цепи производства продукции и проведения несколькими компаниями согласованной экономической политики» (akmayev, byelozertsev & byelozertsev, 2009). как отмечают ученые института экономики промышленности нан украины, «…для повышения эффективности хозяйствования в угольной промышленности украины целесообразно предложить институты самоуправления отношений между угольщиками и энергетиками (металлургами) по форме экономических сетей с «площадками» выяснения интересов сторон» (starychenko, amosha, cherevats'kyy, zaloznova, 2016). в рамках государственно-частного партнерства синдикату передается функция управления сбытовой деятельностью. главной целью деятельности синдиката является поддержка непрерывной эксплуатации тэс (за счет поставки необходимого объема топлива) и обеспечение каналов сбыта угольной продукции для государственных шахт. среди основных задач синдиката можно назвать следующие: определение необходимого объема добычи угля; обеспечение организации процессов сбытовой деятельности; формирование цен на уголь и политики работы угледобывающих предприятий. создание синдиката обусловлено необходимостью своевременного реагирования на изменения спроса, организации непрерывных поставок топлива на тэс, обеспечения гарантированных каналов сбыта продукции для государственных угледобывающих предприятий, распределения рисков. baltic journal of economic studies 41 vol. 3, no. 1, 2017 доход между участниками синдиката должен распределяться в соответствии с договором о совместной деятельности. согласно ст. 1130 главы 77 гражданского кодекса украины по договору о совместной деятельности стороны (участники) обязуются совместно действовать без образования юридического лица для достижения определенной цели. в данном случае (на примере синдиката) без объединения вкладов участников с целью организации и регулирования совместной сбытовой деятельности. 5. методический подход к выбору эффективного канала сбыта угольной продукции в результате исследования предложен методический подход к выбору эффективного канала сбыта угольной продукции. из определения приоритета в выборе канала сбыта продукции, предприятие может перепроектировать свою сбытовую сеть. выбор критерия оценки степени достижения поставленной цели и ранжирование показателей, характеризующих этот критерий, устанавливается экспертным путем на основе балльной оценки (табл. 5). данная таблица является исходной. при этом следует рассчитать следующие показатели: – отклонение фактического размера от оптимального: фактоптij fff −=∆       ∆ −= опт ij kij f f p 1 kijbnij pkm ⋅= ∑ nijm ∑ nijm ∑ nijm ; (1) – степень соответствия оптимальности фактическому размеру: фактоптij fff −=∆       ∆ −= опт ij kij f f p 1 kijbnij pkm ⋅= ∑ nijm ∑ nijm ∑ nijm ; (2) – степень влияния показателя на эффективности сбытовой системы: фактоптij fff −=∆       ∆ −= опт ij kij f f p 1 kijbnij pkm ⋅= ∑ nijm ∑ nijm ∑ nijm ; (3) расчетами определено значение интегральных показателей  – фактоптij fff −=∆       ∆ −= опт ij kij f f p 1 kijbnij pkm ⋅= ∑ nijm ∑ nijm ∑ nijm отдельно по каждому каналу сбыта угольной продукции. так, значение фактоптij fff −=∆       ∆ −= опт ij kij f f p 1 kijbnij pkm ⋅= ∑ nijm ∑ nijm ∑ nijm прямого канала сбыта составляет 99,3%, а через посредников – 69,7%. сравнивая эти значения, выбирается тот канал сбыта, который имеет наибольшее значение интегрального показателя ( фактоптij fff −=∆       ∆ −= опт ij kij f f p 1 kijbnij pkm ⋅= ∑ nijm ∑ nijm ∑ nijm ). таким образом, анализ сбытовой системы на примере угледобывающего предприятия показывает, что варианту сбыта угольной продукции через прямой канал отдается наибольшее предпочтение. это обусловлено одной из особенностей функционирования угледобывающих предприятий  – сбыт угля, как правило, осуществляется по прямому каналу (почти 80% объема реализации угледобывающего предприятия составляют прямые поставки угольной продукции крупнооптовым потребителям). 6. информационное обеспечение организации сбытовой деятельности угледобывающих предприятий украины согласно целям устойчивого развития на 2016– 2030 годы первоочередными мерами по созданию устойчивой инфраструктуры, содействию постоянной индустриализации и инновациям признано усиление интеграции промышленных предприятий в производственно-сбытовые сети. среди особенностей современных условий хозяйствования промышленных предприятий следует указать интенсивное развитие информационно-компьютерных и логистических технологий. это подтверждается результатами анализа статистических данных. так, по данным государственной службы статистики украины, количество предприятий, пользующихся автоматизированным обменом данных для отправки или получения товарно-транспортных накладных, выросло за 2011–2015 гг. на 119,7%, или с 6398 до 14057; получения заказов от клиентов – на 70,4%, или с 13005 до 22161; отправки или получения информации о продукции – на 57,6%, или с 15038 до 23702. при этом удельный вес предприятий в общем их количестве, где осуществляется автоматизированный обмен данными, увеличился, соответственно, на 14,4% (с 24,4 до 38,5%), 11,3% (с 49,5 до 60,8%) и 7,8% (с 57,2 до 65%). количество предприятий, где осуществляется регулярный электронный обмен информации, по таблица 5 критерии выбора канатала сбыта угольной продукции критерии ед. изм. «0» канал «1» канал важность коэффициента влияния , % увеличение объемов реализации балл 80 40 30 сокращение уровня затрат на сбыт балл 70 30 15 увеличение рентабельности продаж балл 70 60 15 своевременная оплата за продукцию балл 80 80 20 передача прав собственности за товар балл 60 40 5 установление долгосрочных взаимоотношений с потребителями балл 60 50 15 %100=∑ bk источник: составлено авторами baltic journal of economic studies 42 vol. 3, no. 1, 2017 уровню технико-материального обеспечения, производственного плана или прогноза спроса клиентов увеличилось на 35,6%, или с 3840 до 5206; по развитию доставки конечной продукции потребителям – на 40,6%, или с 4331 до 6088. удельный вес этих предприятий в общем количестве предприятий, где используется автоматизированный обмен данными, составлял в 2015 г., соответственно, 14,3% и 16,7%. на основе обследования уровня осознания преимуществ в использовании информационно-коммуникационных технологий при организации рынка сбыта выявлено, что 10,7% респондентов отмечают о значительных улучшениях (в 2011 г. – 7,7%). к основным логистическим технологиям, применяемым для организации процессов сбытовой деятельности предприятий, можно отнести: crm (управление взаимоотношениями с потребителями), ddt (концепции «реагирования на спрос»), drp (системы планирования дистрибуции продукции и ресурсов в распределении). на основе обобщения зарубежного и отечественного опыта использования информационно-коммуникационных и логистических технологий определены направления совершенствования организации сбытовой деятельности угледобывающих предприятий, которые систематизированы по 3 группам: – совершенствование процессов обслуживания потребителей: внедрение системы электронной коммерции (b2b  – «бизнес-к-бизнесу»)  – программные комплексы для осуществления коммерческой деятельности между предприятиями в сети интернет. по этой системе осуществляется около 80% электронной коммерции; применение системы электронной коммерции (b2c  – «бизнес-к-потребителю»)  – программные комплексы для осуществления электронной торговли; внедрение концепции crm (управление взаимоотношениями с клиентами) – информационные технологии, которые предоставляют функциональные возможности для автоматизации полного цикла отношений с клиентами и обеспечивают необходимые средства для управления сферами маркетинга, продаж, сервиса; – повышение эффективности организации сбытовой деятельности на угледобывающих предприятиях: внедрение современных информационных технологий с целью совершенствования организации дистрибуции: drp, drpii; разработка методики выбора эффективных каналов сбыта на основе специального программного обеспечения для осуществления расчетов с использованием экономико-математических моделей; – совершенствование организации транспортных операций: оптимизация транспортного потока при внедрении систем управления грузопотоками: gonrand (сбор информации о наличии грузов), videotrans (информационное обслуживание предприятий транспорта), стс (информация о наличии грузов, вид транспортных средств, маршруты рационального движения), gis, gps (определение местоположения транспортных средств); разработка предложений по оптимизации загрузки транспортных средств; внедрение программного обеспечения и использования интернет-технологий для автоматизации транспортных процессов; применение автоматизированной обработки документов для оформления процесса транспортировки грузов. 7. выводы в результате исследования выявлены проблемы недостаточно эффективной организации сбытовой деятельности угледобывающих предприятий украины. определены тенденции и закономерности функционирования угледобывающих предприятий с позиций организации процессов сбытовой деятельности. установлено, что резкое колебание спроса на уголь приводит к нестабильному функционированию топливно-энергетического комплекса страны в целом, то есть к возникновению таких негативных явлений, как дефицит и профицит угольной продукции. для решения определенных проблем в современных условиях необходим поиск действенных механизмов организации сбытовой деятельности угледобывающих предприятий, одним из которых является совершенствование системы контрактных взаимоотношений с учетом специфики обслуживания крупно-, среднеи мелкооптовых потребителей. предлагается, что негативные последствия, вызванные нестабильностью спроса на угольную продукцию, можно преодолеть за счет объединения в синдикат крупных вертикально-интегрированных компаний (которые одновременно являются производителями и потребителями угольной продукции) и государственных угледобывающих предприятий. на законодательном уровне предлагается внесение изменений и дополнений в ст. 120 «организационно-правовые формы объединений предприятий» хозяйственного кодекса украины: «синдикат  – организационная форма существования разновидности картельного соглашения, предусматривающего реализацию продукции, произведенной участниками объединения, через создание совместного сбытового органа или сбытовой сети одного из участников синдиката. такая форма объединения характерна для предприятий, производящих однородную продукцию». для обеспечения эффективной деятельности угольного синдиката в условиях отечественного топливно-энергетического комплекса министерству энергетики и угольной промышленности украины необходимо внести изменения и дополнения к проектам: – закона украины «о рынке угольной продукции»  – включить в ст. 1 определение синдиката baltic journal of economic studies 43 vol. 3, no. 1, 2017 как организационной формы, которая объединяет угледобывающие предприятия для организации и регулирования совместной сбытовой деятельности на основе государственно-частного партнерства, а также дополнить законопроект статьей, в которой изложить нормативно-правовые основы функционирования синдиката; – энергетической стратегии до 2035 года «безопасность, энергоэффективность, конкурентоспособность» – расширить цель «развитие энергетических рынков» формированием и функционированием синдиката как инструмента внедрения рыночной модели функционирования энергетических рынков и удовлетворения потребностей национальной экономики собственной угольной продукцией в необходимых объемах с привлечением частного сектора; – концепции государственной целевой экономической программы реформирования угольной промышленности на период до 2020 года  – включить комплекс мероприятий по совершенствованию организации сбытовой деятельности угледобывающих предприятий с учетом нестабильности спроса на угольную продукцию. в результате проведенных расчетов определен ожидаемый экономический эффект от реализации мероприятий по совершенствованию организации сбытовой деятельности угледобывающего предприятия, состоящий из экономии затрат на сбыт в результате повышения уровня согласованности действий между предприятием и погрузочно-транспортным управлением при заключении контрактов на оказание транспортных услуг, формирования оптимальных графиков движения вагонов, рационального использования вагонов по грузоподъемности, сокращения времени на обслуживание потребителей угольной продукции. расчеты показывают, что ожидаемый экономический эффект от реализации мероприятий по повышению эффективности организации сбытовой деятельности на примере пао «шахта имени а.ф.  засядько» составляет 279,6 тыс. грн, на структурных подразделениях «шахтоуправление «павлоградское»  – 46,6 тыс. грн и «шахта «степная» пао «дтэк павлоградуголь» – 52,8 тыс. грн. таким образом, внедрение комплекса мероприятий по совершенствованию организации сбытовой деятельности угледобывающих предприятий украины за счет повышения уровня обслуживания различных категорий потребителей, улучшения контрактных взаимоотношений, 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(2015). sustainable management operation of coal mining companies: theory and practice. dnepropetrovsk, nmu, 330 p. baltic journal of economic studies 44 vol. 3, no. 1, 2017 юлия залознова, наталия трушкина методическое обеспечение совершенствования организации сбытовой деятельности угледобывающих предприятий украины аннотация. целью работы является разработка научно-методических подходов и предложений по совершенствованию организации сбытовой деятельности угледобывающих предприятий украины в условиях нестабильности спроса. методология. для достижения этой цели используются методы: статистический анализ, синтез, сравнение, структурно-логический, экспертная оценка, ранжирование. результаты. выявлены факторы, влияющие на организацию процессов сбытовой деятельности угледобывающих предприятий. определены тенденции современного развития внутреннего рынка угля в украине. проанализирована динамика показателей сбытовой деятельности угледобывающих предприятий. разработаны предложения по совершенствованию организации сбытовой деятельности угледобывающих предприятий, основными среди которых являются формирование и развитие системы контрактных взаимоотношений с различными категориями потребителей угольной продукции; обоснование целесообразности создания синдиката как организационно-экономического механизма управления сбытовой деятельностью угледобывающих предприятий различных форм собственности; формирование методического подхода к выбору эффективного канала сбыта угля; информационное обеспечение. практическое значение. рассчитан ожидаемый экономический эффект от реализации мероприятий по совершенствованию организации сбытовой деятельности угледобывающего предприятия, состоящий из экономии затрат на сбыт в результате повышения уровня согласованности действий между предприятием и погрузочно-транспортным управлением при заключении контрактов на оказание транспортных услуг; формирования оптимальных графиков движения вагонов; рационального использования вагонов по грузоподъемности; сокращения времени на обслуживание потребителей угольной продукции. внедрение комплекса мероприятий по совершенствованию организации сбытовой деятельности угледобывающего предприятия за счет повышения уровня обслуживания различных категорий потребителей и улучшения контрактных взаимоотношений будет способствовать формированию научно обоснованной маркетинговой стратегии предприятия, которая будет отвечать современным требованиям хозяйствования. значение/оригинальность. основная идея исследования состоит в развитии теоретических и научнометодических положений, разработке практических рекомендаций по совершенствованию организации сбытовой деятельности угледобывающих предприятий украины. baltic journal of economic studies 153 vol. 7 no. 4, 2021 corresponding author: 1 national aviation university, ukraine. e-mail: zarina_www@ukr.net orcid: https://orcid.org/0000-0001-6245-038x researcherid: t-8659-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-4-153-164 conceptual framework for managing the formation of an effective business model of an airline company zarina poberezhna1 abstract. the aim of the article is to develop and test the theoretical and methodological approach concerning the management of the formation of an effective airline business model based on its integral competitiveness indicator, which is a determining factor of survival in difficult and dynamic conditions, as well as the guiding vector of the enterprise development in the future. the method for assessing the competitiveness of the airline business model is based on a dualistic system of integrated indicators. the first integrated indicator provides a static assessment of the competitiveness of the airline business model compared to selected competitors, a reference company or average data for a particular market (local, regional, national). in order to assess the static component of the competitiveness of the business model of the airline company, as a method of constructing an integral indicator, the method of taxonomy was chosen, which best meets the condition of maximum objectivity in the calculations. the second integral indicator is responsible for the dynamic component of the assessment and shows the degree of synchronization of the company with the relevant market. accordingly, will assess a set of financial, managerial and marketing indicators that characterize the results of both basic and management business processes of companies, taking into account the overall quality of business management processes. the information base of the study consists of data from financial statements of aviation enterprises of ukraine. the sample size is 15 units. methodology. the first stage of the analysis included the calculation of the share indicators of the competitiveness of the business model of the airlines according to the following criteria: "efficiency of production activities", "financial condition", "efficiency of marketing activities", and "quality of business processes". further, the study calculated conditional (relative) indicators of competitiveness of the studied airlines by comparing the absolute measure of the enterprise with the best value of these indicators of all competitors in the market. on the basis of which the "matrix of competitive development" was built. results of the study. according to the results of the construction of the "matrix of competitive development" the following four types of management business model development of the airline enterprises were formed: adaptive management, strategic management, anticipative management (there are no enterprises in this zone), anti-crisis management. practical conclusions. the conducted research allowed to establish that the overall level of competitiveness of the business models of the studied airline companies is quite low, since there is not a single company in the most attractive zone of high competitiveness. also, 6 of the 15 examined airlines are at a crisis stage of development, which actualizes the need to develop a set of anti-crisis measures to further stabilize the competitive position. key words: conceptual framework, methodology of business model evaluation, airline companies, theoretical and methodological approach to business model management, airline competitiveness, efficient business model, integral indicator of the competitiveness of the business model of the airline company, types of business model management. jel classification: m21, l93 1. introduction the interest of airlines in the results of their activities increases the need to improve product competitiveness, which requires improvements in all services and departments of business units. competitiveness is the most important factor in ensuring the safety of the airline company, i.e. survival and effective further development. an integrated approach to the baltic journal of economic studies 154 vol. 7 no. 4, 2021 development and construction of the competitiveness model of the airline company acquires particular relevance in today 's conditions, because it can serve as a tool for solving strategic tasks to improve competitiveness. despite a number of studies in the field of assessing the competitiveness of the enterprise, allowing to carry out the assessment using matrix methods (miroshnyk, kobjeljev, 2014; nykoljuk, 2011; shevchenko, 2018; metodychni…) and methods based on the theory of effective competition (ghorbalj, sukhorsjka, 2012; skoroboghatova, gherghelj, 2014) an objective need arose to develop a system for assessing the competitiveness of the business model of the airline company, which would combine the statistical and dynamic component of companies and minimize the weight of expert evaluations in its implementation process. the aim of the article is to develop and test the theoretical and methodological approach to managing the formation of the effective business model of an airline company on the basis of its integral competitiveness indicator. accordingly, the objectives of the study are as follows: to generalize existing approaches to assessing the competitiveness of enterprises, to identify shortcomings for the application of these methodologies to assess the competitiveness of business models of aviation enterprises, to develop our own theoretical and methodological research approach in the problem area and its validation. 2. instrumental ensuring methods for assessing the competitiveness of the enterprise enterprise competitiveness is understood as competition for the best results, which is impossible without the accumulation and use of all available potential capabilities of the company and its individual components, namely: resources, human skills, technology, efficiency (productivity, profitability and effectiveness) (shevchenko, 2018 istorychna…). mathematical modeling can be a tool for assessing the competitiveness of the enterprise, allowing you to identify the features of the economic object and on this basis to anticipate the future behavior of any changes in the parameters of the business model. modern economics offers a number of quantitative tools for such analysis, including the best-known measures of concentration of production, the herfindahl-hirschman index and several other indicators that basically determine competitors' market share, profitability and market growth (kokura, 2013). the most popular methods for assessing competitiveness include the following (miroshnyk, kobjeljev, 2014; nykoljuk, 2011; shevchenko, 2018 metodychni…): 1. the matrix method. the basis of this method is an analysis of competitiveness, taking into account the life cycle of the product / service. the essence of the assessment is to analyze the matrix, based on the principle of constructing a system of coordinates, where the horizontal line is responsible for the growth/decrease in sales on a linear scale, and the vertical line is the relative share of goods/services in the market. the most competitive companies are those that have a significant share of the fast-growing market. 2. a method based on the theory of effective competition. according to this theory, the most competitive enterprises are those in which the work of all departments and services is better organized. the method is based on an assessment of four group indicators (criteria) of competition, namely: the first group includes indicators characterizing the effectiveness of management of the production process; the second group includes indicators reflecting the effectiveness of working capital management; the third group is indicators, which give an idea of the effectiveness of sales management and promotion of goods in the market through advertising and promotion; the fourth group includes indicators of product competitiveness (product quality, service, price). since each of these indicators has a different value for calculating the coefficient of competitiveness of the enterprise, the weighting coefficients of the criteria are calculated by expert-based method (ghorbalj, sukhorsjka, 2012; skoroboghatova, gherghelj, 2014). to make management decisions as part of the basic analysis of the company can use the index of their integrated competitiveness. however, there are a number of problems with the application of this index, which are associated with the methodological difficulties of its quantitative calculation, leading to a very wide use of expert evaluations, so the adequacy of the results of calculations raises certain doubts. the authors substantiate different groups of factors that should be included in the aggregate (integral, group) indicator, depending on the field of study and on the basis of their scientific point of view. in addition, different methods of making an expert conclusion are offered, and it is often simply said that "the scales are defined expertly " (zotova, 2012; kabaljsjka, 2013). 3. development of a theoretical and methodological approach to managing the formation of the effective business model of the airline company to assess the competitiveness of the business model of the airline company, lets form a methodological basis for determining its integral competitiveness, which would exclude expert estimates as a result of baltic journal of economic studies 155 vol. 7 no. 4, 2021 calculations based on the available information about the activities of the company. first, it should be noted that any calculated efficiency of the airline company is an index that characterizes its potential, which, for one reason or another, may not be realized. the established result of the airline company 's activity, which is subject to observation and measurement, is the actual result. given this observation, one way or another, the calculated competitive indicator of the airline company characterizes its competitive potential. and the real competitiveness of the business model of the airline company manifests itself only in the market. in determining a possible algorithm for assessing the competitiveness of the business model of the airline company should be based on the following two main characteristics of this indicator (shevchenko, 2013 suchasni…; jackovyj, 2013): 1) сompatibility. it is impossible to assess the competitiveness of the airline business model solely on the basis of the analysis of its indicators. a prerequisite of this assessment is a comparison of performance, namely the studied index with competitors, standards, benchmarks or average values for a set of objects; 2) fixation in time. the results of assessing the competitiveness of the business model of the airline company have brief relevance. this is a derivative feature, changes in the achieved competitiveness of the business model of the airline company are influenced not only by the efficiency of its operations, but also by the actions of competitors and the general situation in the market. the development of a sequence of assessing the competitiveness of the business model of the airline company should be based on a number of principles, objective (regardless of the subject) and subjective (taking into account the specifics of the subject and the needs of the final recipients) assessment results. objective principles include complexity, systematization, and validity. compliance with subjective principles, in turn, depends on the type of end user, information and complexity of the enterprise under study. the final recipients of the results of assessing the competitiveness of the airline business model include the following groups: internal (management, analysts), and external (owners, potential investors, competitors, consumers, etc.). each of these groups has specific objectives regarding the assessment of the competitiveness of the airline business model, and their requirements for the assessment methodology may differ in terms of time and material costs, given all the number of objects, simplicity of calculations, etc. the subjective principles of constructing a methodology for assessing the competitiveness of the airline business model include (kokura, 2013; shevchenko, 2018 konkurentnyj…): а) dynamicity. despite this characteristic of the competitiveness of the airline business model "fixation in time", most clientele want the results of a retrospective analysis of the competitive position of the enterprise in the market, which encourages the search for a harmonized methodology to meet the needs of clientele. it should be noted that such a category of clientele, as consumer, often requires sufficient one-time determination of the competitiveness of the business model of the company; b) optimality. it is manifested both in the careful selection of indicators to be analyzed to avoid duplication, redundancy, excessive complexity and detail, and in the methods for analyzing these indicators; c) еxpenses. the expenditures for assessing the competitiveness of the airline business model must be reasonably correlated with the impact achieved by implementing the results of this assessment. so, the development of the methodology for assessing the competitiveness of the business model of the airline company needs to form the following list of requirements (serghijenko, tatar, 2012): 1) maximum avoidance of subjectivity in the analysis of indicators; 2) a combination of assessing the company 's competitiveness at a particular point in time with a dynamic assessment of the characteristics that determine the competitive position of the company and are characterized by comparability over time; 3) accounting for the quality of business process management at the enterprise; 4) use of quantitative indicators; 5) a basis for comparison. a generalized sequence of stages of assessing the level of competitiveness of the airline business model is shown in figure 1. the proposed methodology for assessing the competitiveness of the airline business model is based on a dualistic system of integrated indicators. the first integral indicator provides a static assessment of the competitiveness of the airline business model compared to selected competitors, a reference company or average data for a particular market (local, regional, national). the second integral indicator is responsible for the dynamic component of the assessment and shows the degree of synchronization of the company with the relevant market (figure 2). to evaluate the static component of the competitiveness of the business model of the airline company the method of taxonomy was chosen, which best meets the condition of maximum objectivity in the calculations. the considering of the components of the integral index is usually determined by the expert method, which is characterized by one of the highest degrees of subjectivity (shevchenko, 2018 konkurentnyj…). with the help of the taxonomy method it is possible to take into account the different impact of indicators on the level of the competitiveness baltic journal of economic studies 156 vol. 7 no. 4, 2021 of the business model of the airline company in the application of hierarchical coefficients, the calculation of which is also based on the methods of qualitative assessment, which increases the subjectivity of the developed methodology. for the current study, the positive effect of the taxonomy overcomes the need to differentiate the effect of the components on the integral index. the choice of the system of indicators is based on the study of the methods and techniques for assessing the competitiveness of the business model of the airline company, as well as approaches to assessing the quality of management of business processes of the airline company. the proposed integral indicator, i.e. the development level indicator, will assess a set of financial, managerial and marketing indicators characterizing the results of both basic and equally important managerial business processes, some significant service business processes at the airline, taking into account the overall quality of business management processes. consequently, the integral coefficient of competitiveness of the airline business model, which determines the degree of its attractiveness for the buyer, usually combines the following potentials and resulting indicators (table 1). having analyzed the aforementioned information, it can be seen that the proposed competitiveness evaluation system covers only a small part of the indicators that can assess the level and state of the competing enterprises. the problem with using an integrated indicator of the competitiveness is that it is 1 1. formation of the goal of assessing the competitiveness of the business model of the airline companies 2. analysis of existing methods for assessing the competitiveness of the business model of the airline enterprises 3. identification of key areas of the competitiveness of the business model of the airline companies industrial potential financial potential marketing potential potential of internal business processes 4. establishing partial indicators within certain components of assessing the competitiveness of the business model of the airline companies 5. formation of a matrix of values of partial indicators to assess the level of the competitiveness of the business model of the airline companies 6. standardization of certain values of partial indicators on the basis of determining the relative assessment of each of them as a result of dynamic development 7. calculation of weights of significance of partial indicators within the framework of component assessment of the competitiveness of the business model of the airline companies 8. determination of partial integral indicators, reflecting the level of components of the competitiveness of the business model of the airline companies 9. determination of a general integral indicator for assessing the level of the competitiveness of the business model of the airline companies 10. building a hierarchy of competitive priorities for the airline companies figure 1. stages of the business model competitiveness assessment in the airline company source: designed by the author baltic journal of economic studies 157 vol. 7 no. 4, 2021 impossible to identify several relevant determinants. however, it is possible to identify indicators that best reflect the level of the competitiveness of the enterprise and reveal its activities (kotvicjkyj, 2009). since each of the calculated indicators has a different value for calculating the coefficient of the competitiveness of the business model of the airline enterprises (cce), the weights of each criterion and indicator were set by experts. the calculation of the criteria and the coefficient of the competitiveness of the enterprise is carried out according to the formula of the weighted arithmetic mean (tranchenko, 2013). for example, applying this formula to the coefficient of the competitiveness of the business model of the airline we get the following expression (kabaljsjka, 2013, shynkar s.m., 2011): cce = 0,15 × cepa + 0,29 × cfc + 0,23 × × cema + 0,33 × cqbp where cce – the coefficient of the competitiveness of the business model of the airline enterprises; cepa – the value of the criteria of efficiency of the production activities of the enterprise; cfc – the value of the criteria of the financial condition of the enterprise; cema – the value of the criteria of effectiveness of the marketing activities; cqbp – the value of the criteria of quality of the business processes. the coefficients 0.15; 0.29; 0.23; 0.33 were determined expertly by successive comparisons. the proposed methodology for assessing the integral indicator of the competitiveness of the competing enterprises on the basis of the key performance indicators, which can optimally assess the real level of the competing enterprises in the current economic environment. in order to calculate the integral indicator "criteria of the production efficiency " of the airline company is proposed to evaluate the following partial indicators: yield on capital investments, return on assets, rate of return on operating activities, labor productivity. the criteria for the effectiveness of the production activities of the airline company is determined by the formula (kabaljsjka, 2013; shynkar, 2011): cepa = 0,31 × ci + 0,19 × roa + 0,40 × roa + 0,10 × lp 1 methods for assessing the competitiveness of the business model of the airline companies static component dynamic component a system of indicators reflecting the overall performance of the enterprise and its related business processes minimum system of indicators, reflecting the company's compliance with current market trends main competitors, reference indicators, average data on a particular market averaged data for a specific market method of taxonomy index method, geometric mean method sy st em o f in di ca to rs b as e of co m pa ri so n m et ho d of ca lc ul at in g th e in te gr al in di ca to r figure 2. methodology for assessing the competitiveness of the airline business model source: designed by the author table 1 input data for estimation of integral coefficient of the competitiveness of the airline business model (cce) indicator sensitivity coefficient 1. the criteria for the effectiveness of production activities 0,15 2. the financial condition criteria 0,29 3. the criteria for the effectiveness of marketing activities 0,23 4. the criteria for the quality of the business processes 0,33 source: designed by the author baltic journal of economic studies 158 vol. 7 no. 4, 2021 where cepa – criteria of efficiency of production activity; ci – yield on capital investments; roa – return on assets; roa – rate of return on operating activities; lp – labor productivity. the coefficients 0.31; 0.19; 0.40; 0.10 were determined expertly by successive comparisons. calculation of the integral indicator "criteria of financial condition" of the airline company is proposed to evaluate the following share indicators: equity to total assets ratio, solvency ratio, absolute liquidity ratio, turnover ratio of current assets. the criterion of financial condition is determined by the formula (kabaljsjka, 2013; shynkar, 2011): cfc = 0,29 × er + 0,20 × sr + 0,36 × lr + 0,15 × trca where cfc – criteria of financial condition; ca – equity to total assets ratio; sr – solvency ratio; lr – absolute liquidity ratio; trca – turnover ratio of current assets. the coefficients 0.29; 0.20; 0.36; 0.15 were determined expertly by successive comparisons. to calculate the integral indicator "criteria of marketing activity efficiency " of the airline company it is proposed to estimate the following share indicators: return on sales, profitability ratio of sales costs, ratio of change in sales volume, product profitability ratio. the criteria for the effectiveness of the marketing activities will be determined by the formula (kabaljsjka, 2013; shynkar, 2011): cema = 0,37 × ros + 0,29 × rpsc + 0,14 × × rcsv + 0,2 × ppr where cema – criteria for the effectiveness of the marketing activities; ros – return on sales; rpsc – profitability ratio of sales costs; rcsv – ratio of change in sales volume; ppr – product profitability ratio. the coefficients 0.37; 0.29; 0.14; 0.20 were determined expertly by successive comparisons. having analyzed the above information, we can see that this system of evaluating the competitiveness of the airline business model covers only a small part of the indicators that could evaluate the level and condition of the competing airlines. the problem with using an integrated indicator of the competitiveness of the airline business model is that it is impossible to identify several determinants. however, we can identify those indicators that best reflect the competitiveness of the airline business model and reveal its activities. to return to the system of the indicators for the static assessment of the competitiveness of the business model of the airline company, the indicator of "the quality of business process management" is worth special attention. quantitative assessment of the criterion "quality of business process management" is possible on the basis of a score system (figure 3). 1 questionnaire on the quality of business process management of the airline company management (maximum score – 10 points) 1. the fact of separation of business processes yes (1 point) no (0 points) 2. the availability of a mechanism for determining the importance of business processes yes (1 point) no (0 points) 3. availability of continuous monitoring of business activity (business activity monitoring, bam) yes (1 point) no (0 points) 4. using business analytics tools (business intelligence (bi) tools) yes (1 point) no (0 points) 5. availability of an automated corporate content management system yes (1 point) no (0 points) 6. the level of achievement of key performance indicators (key performance indicators, kpi) 0-50 % (0 points) 50-70 % (1 point) 70-80 % (2 points) 80-100 % (3 points) 7. effectiveness of business process reengineering not conducted or absent results (0 points) partial improvement (1 point) achieved most goals (2 points) figure 3. system of indicators for assessing the quality criteria of business process management (cqbp) in the airline enterprises source: designed by the author baltic journal of economic studies 159 vol. 7 no. 4, 2021 considering the above, the author proposed a theoretical and methodological approach to managing the formation of the effective business model of the airline company, the main stages of which are presented in figure 4-6. the preparatory stage of assessing the competitiveness of the business model of the airline enterprises (aсa) is presented in figure 4. the calculation stage of assessing the competitiveness of the business model of the airline enterprises (aca) is presented in figure 5. the analytical stage of assessing the competitiveness of the airline business model is presented in figure 6. the analytical stage of assessing the competiti veness of the airline business model should be considered the central stage of the developed approach. in particular, at this stage it is advisable to carry out the identification of relevant indicators, such as: 1. identification of the level of the competitiveness of the airline business model by the icce value. in this case, the distribution of the level of competitive development of the enterprise is proposed to carry out on the following scale: – high level of cce (0,67< icce <1); – intermediate level of cce (0,34< icce <0,66); – low level of cce (icce <0,33). 2. identification of the stage of the life cycle of the airline company by the indicator of the intensity of sales (ratio of change in sales volume – rcsv). thus the corresponding values of the indicator rcsv are calculated in the dynamics for at least two years in order to be able to reflect the nature of changes in the sales volume of the enterprise (increasing or decreasing). according to the results of the analytical stage of the identification of the level of the competitiveness of the business model of the airline company according 1 1. the preparation stage 1.1. determination of the primary composition of the aca indicators determining the primary composition of the aca criteria determination of the primary composition of the partial indicators for the each aca criteria 1.2. formation of an expert group to evaluate the aca indicators condition 1 "professionalism". the group of experts consists of experienced highly qualified specialists condition 2 "optimality". number of experts – 10 people according to the reichman-azgoldov criteria 1.3. development of a preliminary array of initial data for diagnostics figure 4. the preparation stage of business model competitiveness assessment for the airline company source: designed by the author 2. the calculation stage 2.1. formation of the final list of indicators of cce and a data set 2.2. calculation of partial indicators of cce estimation 2.3. calculation of integrated indicators (criteria) of the cce: cepa = 0,31 × ci + 0,19 × roa + 0,40 × roa + 0,10 × lp cfc = 0,29 × ca + 0,20 × sr + 0,36 × lr + 0,15 × trca cema = 0,37 × ros + 0,29 × rpsc + 0,14 × rcsv + 0,2 × ppr 2.4. calculation of the integrated indicator of competitiveness of the business model of the aviation enterprises (cce) cce = 0,15 × cepa + 0,29 × cfc + 0,23 × cema + 0,33 × cqbp figure 5. the calculation stage of the airline business model competitiveness assessment source: designed by the author baltic journal of economic studies 160 vol. 7 no. 4, 2021 to the value (icce) and the identification of the life cycle stage of the airline company according to the indicator of the intensity of sales (ratio of change in sales volume – rcsv) the corresponding values of indicators of the competitive development of the company should be positioned. there are 21 quadrants, each of which can be attributed to a particular type of the business model management system: 1. adaptive business model management (quadrants 1, 2, 3, 4, 5, 6). 2. strategic business model management (quadrants 7, 8, 9, 10, 11, 12). 3. anticipative business model management (quadrants 13, 14, 15, 16, 19). 4. anti-crisis management of the business model (quadrants 17, 18, 20, 21). so, the proposed methodology is a synthesis of expert, matrix and integral approaches to assessing the competitiveness of the business model of the airline company and additionally takes into account the identified features of assessing the competitiveness of the subjects of the airline industry. 4. practical implementation of the theoretical and methodological approach to assessing the competitiveness of the business model of the airline company to confirm the practical value of the developed methodology for assessing the competitiveness of the business model of the airline companies, its approbation is necessary. the information base of the study was the data from the financial statements of the airline companies of ukraine. the sample volume is 15 units. it is also necessary to calculate the conditional (relative) indicators of the competitiveness of the examined airlines companies. according to the methodology of the effective competition theory, the relative indicators of the competitiveness of the airline business model are determined by comparing the absolute measures of the airline with the best value of these indicators of all competitors in the market. the following integral indexes of the cce (icce) were obtained based on the results of the integral assessment of the competitiveness of the business model of the airline companies of ukraine: the first company shows – 0.364; the 2nd – 0.437; the 3rd – 0.295; the 4th – 0.364; – 0.193; the 5th – 0.336; the 6th – 0,244; the 7th – 0,276; the 8th – 0,505; the 9th – 0,430; the 10th – 0,398; the 11th – 0,243; the 12th – 0,304; the 13th – 0,402; the 14th – 0,265; the 15th – 0,425. it should be noted that almost all of the studied airlines received mediocre values of integral indices of the competitiveness, which indicates the existing problems of formation and development of the business model, optimal to external and internal conditions of management. 1 3. the analytical stage 3.1. identification of the level of the competitiveness of the business model of the airline enterprises by the value of icce high level of cce (0,67< icce <1) intermediate level of cce (0,34< icce <0,66) low level of cce (icce <0,33) 3.1. identification of the stage of the life cycle of the airline enterprises on the indicator of sales intensity (ratio of change in sales volume – rcsv) getting started (rcsv <0,4) (↑) growth (0,4< rcsv <0,6) (↑) stabilization (0,6< rcsv <0,8) (↑) successful operation (0,8< rcsv <1) stagnation (0,6< rcsv <0,8) (↓) decline (0,4< rcsv <0,6) (↓) crisis (rcsv <0,4) (↓) figure 6. the analytical stage of assessing the competitiveness of the airline business model source: designed by the author baltic journal of economic studies 161 vol. 7 no. 4, 2021 the obtained values of the integral indicator of the competitiveness of the business model of the studied airline enterprises (icce) are presented in figure 7. consequently, according to the data of figure 7 it can be stated that the most competitive are the airlines under № 4, 6, 7, 11, 14, because the obtained indicators of their integral indexes (icce) have an extremely low value. at the same time, the leaders in the level of competitiveness were the airlines № 2, 8, 9, 10, 13, 15 with sufficiently high values of integral indices (icce). in order to identify the stage of the life cycle of a particular airline company, it is necessary to calculate the ratio of change in sales volume (rcsv) in the dynamics for two years (2018–2019). the results of 1 0,364 0,437 0,295 0,193 0,336 0,244 0,276 0,505 0,43 0,398 0,243 0,304 0,402 0,265 0,425 0 0,1 0,2 0,3 0,4 0,5 0,6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 figure 7. the value of the integral indicator of the competitiveness of the business model of the surveyed airline enterprises (icce) in 2019 source: designed by the author the identification of the stage of the life cycle of the airline by the ratio of change in sales volume (rcsv) are presented in table 2. consequently, the calculated values of the ratio of change in sales volume (rcsv) are necessary for further positioning of the each airline company on the "matrix of competitive development". at the same time, the established trends in the volume of sales reflect the dynamics of enterprises on the market (increasing or decreasing). the results of the positioning of the examined airlines in the corresponding quadrants of the "competitive development matrix" with the identification of the appropriateness of the relevant type in the management of their business model are presented in figure 8. table 2 the results of the identification of the stage of the life cycle of the airline by the ratio of change in sales volume (rcsv) company ratio of change in sales volume – (rcsv) sales volume, thousand uah the difference between 2018 and 2019. trend in sales volumes 2018 2019 1 0,337 10387 6011 -4376 (↓) 2 0,138 1679318 398401 -1280917 (↓) 3 0,611 5569 5836 267 (↑) 4 0,591 4497693 4561181 63488 (↑) 5 0,654 349261 392176 42915 (↑) 6 0,557 9792 9357 -435 (↓) 7 1,000 30763 52782 22019 (↑) 8 0,015 6584 172 -6412 (↓) 9 0,135 1590713 367533 -1223180 (↓) 10 0,653 29033 32528 3495 (↑) 11 0,624 4106 4396 290 (↑) 12 0,585 38683 38851 168 (↑) 13 0,341 118 69 -49 (↓) 14 0,828 2174210 3088113 913903 (↑) 15 0,329 478162 270172 -207990 (↓) source: designed by the author baltic journal of economic studies 162 vol. 7 no. 4, 2021 the result of the study was the positioning of the each airline company in the corresponding quadrants of the "matrix of competitive development", which allowed to propose different types of the business model management system of the airline company (figure 9). thus, four types of airline business model management templates were formed, namely: – adaptive management template for enterprises № 4, 12; – strategic business management template for enterprises № 3, 5, 7, 10, 14; – anticipative business management template (there are no enterprises in this field); – anti-crisis management template for enterprises № 1, 2, 6, 8, 9, 13, 15. on the basis of which it was found that the overall level of the competitiveness of the business models of the studied airline companies is quite low, since there is not a single company in the most attractive high competitiveness area. also, 6 out of 15 examined airlines are at a crisis stage of the development, which actualizes the need to develop a set of anti-crisis measures to further stabilize the competitive position. 5. conclusions the study conducted allowed to group and identify common methods for assessing the competitiveness of the enterprises, namely: matrix methods, methods based on the evaluation of goods and services, as well as methods based on the theory of effective competition, which proved unsuitable for assessing the competitiveness of the business models of the airline companies, because of the difficulties of calculating the integral index. therefore, it was proposed own theoretical and methodological approach to managing the formation of the effective business model and diagnostics of the competitiveness of the business 1 th e le ve l o f t he c c e high (0,67-1,00) quadrant 1 quadrant 4 quadrant 7 quadrant 10 quadrant 13 quadrant 16 quadrant 19 medium (0,34-0,66) quadrant 2 quadrant 5 quadrant 8 quadrant 11 quadrant 14 quadrant 17 quadrant 20 low (0-0,33) quadrant 3 quadrant 6 quadrant 9 quadrant 12 quadrant 15 quadrant 18 quadrant 21 beginning (0-0,40) growth (0,410,60) stabilization (0,610,80) successful operation (0,811,00) stagnation (0,610,80) decline (0,410,60) crisis (0-0,40) life cycle stages (rcsv) company ratio of change in sales volumes (rcsv) integrated competitiveness indicator (icce) the trend of changes in sales 1 0,337 0,364 (↓) 2 0,138 0,437 (↓) 3 0,611 0,295 (↑) 4 0,591 0,193 (↑) 5 0,654 0,336 (↑) 6 0,557 0,244 (↓) 7 1,000 0,276 (↑) 8 0,015 0,505 (↓) 9 0,135 0,430 (↓) 10 0,653 0,398 (↑) 11 0,624 0,243 (↑) 12 0,585 0,304 (↑) 13 0,341 0,402 (↓) 14 0,828 0,265 (↑) 15 0,329 0,425 (↓) 1 2 3 4 6 7 9 12 13 14 8 9 figure 8. the results of the positioning of the studied airlines on the "competitive development matrix" source: designed by the author baltic journal of economic studies 163 vol. 7 no. 4, 2021 models of the airline enterprises through the use of the dualistic system of the integrated indicators, which combined statistical and dynamic assessment systems. the first integral indicator provides a static assessment of the competitiveness of the airline company 's business model compared to selected competitors, a reference company or average data for a particular market. the second integral indicator is responsible for the dynamic component and, accordingly, helps to evaluate a set of financial, managerial and marketing indices, which characterize the results of both basic and managerial business processes of the enterprise, taking into account the overall quality of business management processes. which, according to the article, allowed to link such basic characteristics of competitiveness as comparability and fixation in time. the prospect of the study should be the development of strategies to develop the competitiveness of the business models of the airline companies according to the obtained templates of their management. references: ghorbalj, n. i., & sukhorsjka, u. r . 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(2013). suchasni metodyky ocinky konkurentospromozhnosti pidpryjemstva [modern methods of assessing the competitiveness of the enterprise. bulletin of socio-economic research]. visnyk socialjnoekonomichnykh doslidzhenj, 4, 183−188. baltic journal of economic studies 77 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national university odessa law academy, ukraine (corresponding author) doi: https://doi.org/10.30525/2256-0742/2022-8-4-77-83 legitimacy of law as its justification and recognition olga ivanchenko1 abstract. the subject of research is social relations in the field of legitimacy of positive law in the modern state. methodology. the methodological basis of the study is the methods of induction and deduction, dialectical-materialistic method, method of analysis and synthesis, historical method, which allowed to objectively comprehend the content and essence of the issues under study. the purpose of the article is a theoretical and legal study of the legitimacy of law as its justification and recognition. the results of the study are: the legitimacy of law from the point of view of the theory of communicative rationality is investigated; the historical and theoretical process of development of interaction between subjects and the process of recognition, legitimation of norms in society as a social evolution is investigated; the development of the ideas of legitimacy and moral consciousness in the modern legal order is investigated; the tendencies of legitimization of positive law in the modern state on the basis of morality are determined; the peculiarities of ensuring the legitimacy of power through the legitimacy of law are highlighted. conclusions. law and modern morality stem from traditional relations, and they are interconnected. legal norms are not just orders, they are fulfilled not only out of fear of coercion, but also out of respect for the law. however, for this, the legal order must be legitimate, enjoy the authority of citizens, and this is possible only if the positive law does not contradict the moral norms shared by a given society. the legitimacy of law lies, first of all, in the development of the legal basis of state and social life. but the meaning of the legitimacy of law in a society that calls itself democratic is seen not in the mere fact of existence and strict implementation of even legally perfect legislation, but in the extent to which it comprehensively embodies universally recognized humanistic goals, ideals, and values. among them are the recognition of the people as the exclusive source of power and law, the rule of law, separation of powers, inadmissibility of usurpation and unlimited power, equality of all before the law and the court, inviolability of justice, etc. of course, it is about fundamental human rights and freedoms with the legislative consolidation of the state's obligations to ensure and protect them. the legitimacy of law is the idea, requirement and system of real expression of law in the laws of the state, in lawmaking itself, in subordinate lawmaking with the steady recognition and perception by the population of the state. key words: legitimacy of law, legitimation, legality, theory of law, legal nature, legal norms, lawmaking, state, human rights, positive law, morality. jel classification: k10, k39 1. introduction modern ukraine is undergoing radical democratic transformations. however, during this time fundamentally new political, economic and ideological relations have been formed in the country. they are based on human rights, democracy, rule of law, market relations, pluralism of opinions, etc. despite the successes, modern ukrainian society is still far from democratic perfection. here it is possible to fully talk about the issue of legitimacy of law. on the one hand, this issue has long been one of the most pressing in ukraine. on the other hand, the legitimacy of law in modern ukraine is in a state of relative oblivion at the level of domestic politics and ideology, due to insufficient attention to the theory of state and law. to a large extent, this is due to the bureaucratization of society, the unwillingness of the growing bureaucracy to bind itself to obey the law, which is formed by legal nihilism in society. discussions on the understanding and content of the legitimacy of law have been going on in science baltic journal of economic studies 78 vol. 8 no. 4, 2022 for a long time. the solution of these issues in a particular country is usually determined by the political and legal regime, the functioning of specific political and legal systems, the dominant ideology regarding the understanding of law, power, human rights, freedom, democracy. with all the diversity, it usually refers to the well-known liberal democratic principles in the relations of the population with the state authorities, or their variants. the understanding of legality largely depends on how the law is interpreted. in science, as is known, there are two main concepts of understanding law. according to one of them, the law is a system of legal norms emanating from the state, enshrined in legislation and guaranteed, i.e. written law. according to another concept, law is not only power norms, but also fundamental ideas and principles of freedom, equality, dignity, morality, humanism, justice, which are most concentrated in natural, inalienable human rights. disputes about the priority of this or that concept do not stop. meanwhile, today the productive opinion about the value of each of them and the need for their close interconnection in practice is increasingly prevailing. in ukrainian legal science, especially in the educational literature, the legality of law is often referred to, with certain variations, as the requirement of compliance and perception of normative legal acts by all subjects of law – state bodies, public organizations, enterprises, institutions, officials and citizens. this approach was laid down in the soviet period of the country 's history. the main emphasis then was on the implementation of legal norms. the question of their very content was silenced, which did not cause criticism, because, as the authorities claimed, the content of legal norms is the will of the workers, the whole people. this understanding of the legitimacy of law is very convenient for any dictatorship. it has the opportunity to create selfish arbitrariness with the help of undemocratic law and its further strict implemen tation and forced perception by the subjects of power and the people. it is no coincidence that with the objective course of history, the moral understanding of law, which is generally recognized today, was formed and established, based on the axiom: "the law is correct in content, not in established form" or "not every legislative or judicial-administrative decision, being formally correct, contains a right." (mishchenko, 2010) accordingly, it is necessary to adequately approach the understanding of the legitimacy of law in its true democratic sense. 2. legitimacy of law and the theory of communicative rationality the question of the legitimacy of positive law is very relevant in legal science, meanwhile, in recent years, rationalism in understanding the nature of law has been criticized in domestic legal science. it is about e. yuriychuk, who defends the anthropological approach to law (yuriychuk, 2010), as well as about t. novachenko, who points out: "having embarked on the path of scientific development, jurisprudence finds itself at the crossroads between science and ideology, precisely established fact and value, often succumbing to the spell of illusions, myth-making." (novachenko, 2016). in connection with the criticism of the theory of classical rationality, the theory of communicative rationality, which has not yet become widespread in ukraine, developed by k. apel and j. habermas in the twentieth century, seems interesting. according to this theory, there are two types of activity in society: instrumental and communicative. while m. weber and many other scientists reduced actions and social development to instrumental actions, representatives of the theory of communicative rationality also distinguish communicative actions aimed at mutual understanding. according to j. habermas, m. weber was wrong to consider purposeful action as the only model that explains behavior in society. m. weber identified different types of social action, which differ in varying degrees of rationality. however, in his typology there is no action aimed at mutual understanding of subjects, that is, communicative action (apel, 1998; habermas, 1995; weber, 1998). communicative rationality implies that statements can be criticized. here knowledge is not given as definitively formulated rules, it can be questioned in communicative practices. proponents of commu nicative rationality have developed a theory of consensual truth. a fact is not directly an object that exists independently of the subject. a fact is something that is asserted in the statement of the subject. therefore, the truth is what the community recognizes. in general, in the xx century, many thinkers criticized the categories of "reason" and "rationality ", since rationality was perceived exclusively in the sense of the ideas of the enlightenment. m. weber, as well as representatives of the so-called frankfurt school of philosophy m. horkheimer linked the problems of social development with the spread of purposeful action. the theory of communicative rationality indicates that in the process of evolution of society there is a separation of purposeful action from communicative. after that, different types of coordination of actions are formed, in one case it is mutual understanding, and in the baltic journal of economic studies 79 vol. 8 no. 4, 2022 other – money and power. thus, supporters of communicative rationality suggest "to consider society as a whole, which in the course of social revolution is differentiated into a system and a life world. the systemic evolution is measured by the growing regulatory capacity of society, while the state of development of the symbolically structured life world is marked by the separation of culture, society and personality." (m. weber, 1998; m. horkheimer, 1985) the fact that in society, in addition to purposeful actions, there are also communicative ones is justified by the historical process of anthroposociogenesis, or the process of social evolution. communicative action is the basis of other actions. these views were first developed by the representative of interpretive sociology g. kelsen. according to g. kelsen, three stages of interaction development can be distinguished in the course of social evolution. first, there is interaction mediated by gestures. then comes the stage at which symbolically mediated interaction takes place. finally, the last stage is linguistically mediated, normatively directed interaction (kelsen, 2004). at the third, the highest stage of symbolic indirect influence, grammatical language is already formed. in order for it to be formed, it is necessary to have objective, social and subjective in society. before the formation of these worlds, language cannot perform the function of coordination, because the participants are not able to orient their actions so that they serve as a claim to significance. the binding effect of a statement is directly related to the fact that the listener perceives it as significant. in addition, this means that the speaker, claiming to be significant, firstly, claims to establish truth in the objective world, secondly, to the correctness of legitimate systems in the social world, and thirdly, to sincerity in the subjective world of the subject. considering how a person, g. mead points out that a norm is an expectation of the behavior of a “generalized other”, that is, a pattern of behavior that any member of society expects from us, perceives norms. "the installation of a generalized other is the installation of the whole community." (mead, 1934) the perception of a norm occurs only when an individual agrees with it. the norm differs from mere requirements supported by sanctions by the moment of its recognition by the addressee. the difference from animal signals-symbols is that the interaction takes place on the basis of a common culture. however, this raises the question of how a rule becomes meaningful, legitimate for the whole community. this aspect was most thoroughly developed by l. wittgenstein: " when different people perform certain actions in different circumstances, it is only by following the rule that it is possible to determine whether they are performing the same actions or not. the criterion that a naturalist uses when observing natural processes will not help here: to identify what is repeated in the observed phenomena. what is repeated, or thus remains in symbolic actions, can be identified only by relying on the rule." (wittgenstein, 2022) thus, not every repetition is a rule in society. what is also important is the reaction of other people, in which interaction becomes a cultural program, provided with a common understanding of what is right and what is wrong. however, where does this agreement come from? subsequently, é. durkheim drew attention to the fact that ritual practice is the form that generates norms in society, since initially legal norms had a religious character. violation of these rules was understood not only as a sanction, but also as a violation of the sacred. henceforth, the moral authority of the rules justifies sanctions and is primary in the norms. thus, as é. durkheim pointed out, ritual religious practices made social interaction possible with the help of symbols and formed norms that became significant for the social community. it is ritual practices that create the community of the group, which is personified in significant symbols. human activity, its instrumental actions presuppose the presence of cooperation within the community, that is, regulation of relations by norms (durkheim, 1982). 3. legitimacy of legal norms: ideological genesis consider now how the further development of interaction between subjects takes place and how the process of recognition and legitimation of norms in society changes with social evolution. the functions originally performed by ritual practice are transferred to communicative action; the authority of the reached consensus gradually replaces the authority of the sacred. this means the liberation of communicative action from sacredly protected normative contexts. the disillusionment that leads to the sphere of the sacred losing its power occurs through the linguistics of ritually secured basic consent; the potential for rationality of communicative action is released. when there is a division of labor in society, there is a separation of ordinary life and its practices from the sphere of religious practices. the ordinary, or profane, sphere of life performs the function of adapting society to the environment, which gives a certain independence to actions in this sphere. unlike the sacred sphere, where symbols and rituals are not subject to criticism, in other spheres of life norms can be challenged. the grounds for recognition are gradually changing, that is, the reason for the legitimacy of norms is no longer the authority of the sacred, but the consensus in society, which depends on arguments. baltic journal of economic studies 80 vol. 8 no. 4, 2022 in the early stages of social evolution, there is a mythological consciousness, characterized by a fuzzy distinction between the external world and language, as evidenced by the magical practice that identifies names and the objects they denote. such a worldview can be characterized as "closed" (using the terminology of j. berger), that is, when there are no alternatives to sacred beliefs, and they cannot be challenged (berger, 1998). according to supporters of communicative rationality, there are three historical types of worldview: mythological, religious and metaphysical, modern. the first type is characteristic of tribal societies, the second is inherent in ancient and feudal states, and the last is formed in the modern era. the transition from one type of worldview to another means an increase in the degree of openness of worldviews, the growth of their rationality. these changes cannot be explained only by external, for example, economic, factors). they are explained by problem solving, by the learning process. the modern scientist s. zykova developed the training and its stages. in his opinion, learning is seen as a problem-solving process. the new stage of development is characterized by the formation of new skills. thus, the transition from one stage of thinking to another, higher one, is caused, first of all, not by the influence of the outside world, but by the learning process. according to the proponents of communicative rationality, the development of worldview in the process of anthroposociogenesis is similar to the stages of intellectual development of s. zykova. in the works of the latter, the category of "decentration" is used, which characterizes the process of intellectual development of the individual. initially, the external world and the inner world of the subject are not distinguished at this stage. in addition, social and physical phenomena, symbols and meanings are not separated. subsequently, there is a differentiation of the inner and outer world. the individual begins to realize the points of view of others, which is a manifestation of the decentralization of his worldview. as noted above, the evolution of social worldview is also characterized by decentralization. the mythological worldview does not separate the objective, subjective and social worlds, so it does not allow to distinguish between the world of significant norms and the world of subjective experiences (zykova, 2013). m. weber first studied the process of changing the social worldview from mythological to modern. the process of rationalization, or "disenchantment" of the world in human consciousness in the process of society development as a change of culture was studied by him most consistently along with all the factors that characterized rationalization (weber, 1994). however, in relation to the subject under study, the most valuable is the development of the worldview itself, which results in the formation of a secular culture in which the norms of law are legitimized in a different way than in traditional societies. the change of worldview and the departure from religious legitimation of norms occurs as a result of differentiation of such spheres as art, morality and religion. the beginning of this process falls on the xvi century, and it ends in the xviii century. thus, by the end of this period, scientific activity was already separated from religion, academies and universities were engaged in science, in which scientific problems were studied independently of religious doctrines. the independence of art and literature is evidenced by the emergence of criticism – artistic or literary. of course, in this historical period the argumentation is still tied to religion, but the legal system is becoming more and more independent, which is manifested in professional education, development of legal science and justice. "disenchantment," as m. weber called this process, led to the formation of autonomous public cultural values that are not associated with magic or religion. the division of society into the world of the sacred and the world of ordinary life disappears; the worldview becomes "open" (weber, 1994). thus, in the process of developing a social worldview, the development of positive law takes place. 4. development of ideas of legality and moral consciousness in the modern legal order the development of morality and law is directly related to the development of public moral consciousness. after the emergence of state power, the so-called traditional society, or society formed around the state, is formed. there is already a legal order, although there is no clear distinction between law and morality. legal norms are perceived as something given, there is no understanding that they can be criticized or challenged. the rule of law is certainly beginning to form as an independent system, because there are already general norms and sanctions, and punishment is already understood as protection of the normative order. however, in a traditional society, an individual simply complies with the existing norms, which he or she cannot challenge. d. zadykhaylo called such dependence on existing norms heteronomy, which means that it is not the will of man that creates the law, but this law acts as an external third-party motivation (zadykhaylo, 2007). finally, in the period of modern times, the so-called modern society is formed, during this period legal norms can already be criticized and are based on universal principles, not on the forms of life of specific societies. legitimation of law through general legal principles is connected with the idea of rational natural law, which was developed in the xvii century. baltic journal of economic studies 81 vol. 8 no. 4, 2022 in the transition to modern consciousness and culture, the morality inherent in traditional society is divided into morality and positive law. the historical process of rationalization of culture was analyzed by m. weber, who pointed out how the ethics of faith is formed from the religious traditional consciousness, when due to "disappointment" with the world, the norms justified by traditions are devalued. that is when morality in the true, modern sense appears. for human behavior to be said to be dictated by morality, it is not enough that it is simply based on generally accepted norms. it is necessary that the personality is autonomous and moral norms are accepted voluntarily, not because of sanctions in society or fear of god (weber, 1994). moreover, autonomy can only be rational. morality is formed from the morality of traditional society, when norms lose their self-evidence, when there is an attitude to generally accepted norms, an understanding that they may be different, and, therefore, their recognition by a person requires their justification by the principles of justice, and these principles can be discussed. therefore, in modern society the attitude to law and morality becomes conscious. 5. trends in the legitimacy of positive law in the modern rule of law based on morality positive law (position in latin means "establishment", "affirmation") in the period of formation of the modern worldview is already considered as a human institution, and not as an eternal unchanging divine law. "modern law is regarded as a law that has been positively put into effect. it does not develop through the interpretation of recognized revered traditions; rather, it expresses the will of a sovereign legislator who regulates the state of affairs in society through the legal means of organization." (mishchenko, 2010) law and modern morality stem from traditional relations, and they are interconnected. legal norms are not just orders, they are fulfilled not only out of fear of coercion, but also out of respect for the law. however, for this, the legal order must be legitimate, enjoy the authority of citizens, and this is possible only if the positive law does not contradict the moral norms shared by a given society. of course, since positive law is endowed with the power of state coercion, it also affects subjects who do not share public moral principles, but at the same time laws cannot ignore the values of this society, otherwise they will not be norms with authority. however, it should not be assumed that in modern society morality is above law, rather they complement each other. here we should recall the characterization of legality, which was given by e. kant in the work "metaphysics of morals" (kant, 1996). law abstracts from free will, as freedom of choice is sufficient for law-abiding behavior. also, unlike morality, law regulates only external relations between people, that is, it is not interested in the motives of behavior. this is because law provides coercive power that can influence external actions, but not the motivation and values of the subject. thus, positive law needs morality, because law is limited by legality, and legality is the sphere of morality. thus, moral principles legitimize law, since law cannot be based solely on coercion, but, on the other hand, law compensates for the lack of coercion in modern morality. at the same time, of course, not all legal issues are moral, since the main source of positive law is legislation. 6. features of ensuring the legitimacy of power through the legitimacy of law the establishment of democratic ways of forming political institutions in modern times destroys traditional legitimation. through the rationalization of society, the authority of the sacred is replaced by moral consent, which expresses in a rational form what has always been implied in the symbolism of the sacred: the common interest. norms are enforced because they have moral authority and express a common interest. therefore, the implementation of these norms also serves to preserve group identity. in the traditional society, the rights of the one who held this position were considered as personal rights of the one who held this position. in the conditions of the secular worldview in the new time, when the rule of law is being formed, power has become an abstract category not related to a specific person. thus, in modern times, bureaucratic management is being formed, which m. weber first wrote about (weber, 1994). the formation of legal dominance is associated with a change in the values and motives of interaction in society. the development of motives in interaction is associated with the separation of empirical motivation of the subject from actions aimed at interaction. as s. kozlov wrote, "in the course of social evolution, there must be a process of increased generalization of value systems." (kozlov, 2014) power relations are unequal, asymmetrical relations. in addition, the authorities rely on monopolistic means of coercion that can always be used against a citizen. in particular, v. nevidomiy draws attention to this, indicating the reason why the legitimization of power is necessary. in particular, he writes that the justification of state power is necessary because it restricts the freedom of the individual and at the same time has the means of coercion (nevidomiy, 2011). this position of the parties can be justified only by the fact that the government serves the general interests in society. therefore, power inevitably needs justification, i.e., legitimation. in addition, since baltic journal of economic studies 82 vol. 8 no. 4, 2022 the government acts through legal acts, the legitimacy of the government is ensured through law. first of all, it is about modern law and the state. 7. conclusions human activity, its instrumental actions presuppose the existence of cooperation within the community, that is, regulation of relations by norms. the change of worldview and departure from religious legitimation of norms occurs through the differentiation of such spheres as art, morality and religion. in the process of development of social outlook, positive law is developing. the rule of law, of course, begins to form as an independent system, because there are already general norms and sanctions, and punishment is already understood as protection of the normative order. in the period of modern times the so-called modern society is formed, during this period legal norms can already be criticized and are based on universal principles, not on the forms of life of specific societies. legitimation of law through general legal principles is connected with the idea of rational natural law. positive law in the period of formation of the modern worldview is already considered as a human institution, not as an eternal unchanging divine law. law and modern morality stem from traditional relations, and they are interconnected. legal norms are not just orders, they are fulfilled not only out of fear of coercion, but also out of respect for the law. however, for this, the legal order must be legitimate, enjoy the authority of citizens, and this is possible only if the positive law does not contradict the moral norms shared by a given society. of course, since positive law is endowed with the power of state coercion, it also affects subjects who do not share public moral principles, but at the same time laws cannot ignore the values of this society, otherwise they will not be norms with authority. however, it should not be assumed that in modern society morality is above law, rather they complement each other. the establishment of democratic ways of forming political institutions in modern times destroys traditional legitimation. through the rationalization of society, the authority of the sacred is replaced by moral consent, which expresses in a rational form what has always been implied in the symbolism of the sacred: the community of interests. norms are enforced because they have moral authority and express a common interest. therefore, the implementation of these norms also serves to preserve group identity. power relations are unequal, asymmetrical relations. in addition, the authorities rely on monopoly means of coercion, which can always be used against a citizen. this position of the parties can be justified only by the fact that the government serves the general interests of society. therefore, power inevitably needs justification, i.e., legitimation. in addition, since power acts through legal acts, the legitimacy of power is ensured through law. first of all, it is about modern law and the state. the legitimacy of law lies, first of all, in the development of the legal basis of state and social life. but the meaning of the legitimacy of law in a society that calls itself democratic is seen not in the mere fact of existence and strict implementation of even legally perfect legislation, but in the extent to which it comprehensively embodies universally recognized humanistic goals, ideals, and values. among them are the recognition of the people as the exclusive source of power and law, the rule of law, separation of powers, inadmissibility of usurpation and unlimited power, equality of all before the law and the court, inviolability of justice, etc. undoubtedly, it is about the fundamental human rights and freedoms with the legal consolidation of the state's obligations to ensure and protect them. the legality of law is understood as the idea, requirement and system of real expression of law in the laws of the state, in lawmaking itself, in subordinate lawmaking with consistent recognition and perception by the population of the state. references: apel, k.-o. (1998). towards a transformation of philosophy. marquette studies in philosophy. milwaukee: marquette university press. berger, j. (1998). the legitimation and delegitimation of power and prestige orders. american sociological review, vol. 63, no. 3, pp. 379–405. durkheim émile (1982). rules of sociological method and selected texts on sociology and its method, edited by s. lukes, translated by w. d. halls. new york: the free press. habermas, j. (1995). reconciliation through the public use of reason: remarks on john rawls's political liberalism. journal of philosophy, vol. 92(3), pp. 109−31. horkheimer, m. (1985). vorträge und aufzeichnungen 1949−1973; soziologisches, universität und studium. kant, i. (1996). theoretical philosophy: 1755–1770. cambridge university press. kelsen, g. (2004). pure legal awareness. kyiv: yunivers. kozlov, s. v. (2014). on the conceptual analysis of the concept of "legitimacy ". vestnik tvsu. the philosophy series, vol. 1, pp. 26–34. baltic journal of economic studies 83 vol. 8 no. 4, 2022 mead, g. (1934). mind self and society from the standpoint of a social behaviorist (edited by charles w. morris). chicago: university of chicago. mishchenko, a. b. (2010). trust as a component of legitimation of power in the conditions of modern democracy (abstract of the phd thesis). kyiv. nevidomiy, v. (2011). self-organization of legal reality that legitimacy of the basic law: monograph. kyiv. novachenko, t. v. (2016). the authority of the manager as a type of legitimacy of power. bulletin of the nagu under the president of ukraine. the series "political sciences", vol. 2, pp. 62–67. weber, m. (1998). sociology: historical analysis, politics. kyiv: osnovi. yuriychuk, e. p. (2010). electoral legitimacy and legitimation of power: terminological aspects. actual problems of politics: a collection of scientific papers. odessa: feniks publ. wittgenstein, l. (2022). private notebooks: 1914–1916 (edited and translated by marjorie perloff ). new york: liveright publishing corporation. zadykhaylo, d. d. (2007). systemic legal values as a guarantee of executive power efficiency. state construction and local self-government, vol. 14, pp. 158–166. zykova, s. v. (2013). actual problems of legal theory of the state. unity-dana: zakon i pravo. received on: 7th of october, 2022 accepted on: 17th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 56 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-56-64 adaptation of ukrainian corporate legislation to european standards ivan horodyskyy1, andriy borko2, mariia sirotkina3 abstract. defining the european vector of development of ukraine in the model of international cooperation as a priority involves the use of european standards in the field of law. this is impossible without careful adaptation work to bring the domestic legal system in line with the system that exists in the countries of the european union. recent changes in legislation have been long-awaited and have been a breakthrough in the corporate and financial sectors. the authors aim to carry out a comprehensive analysis of ukrainian corporate law by comparing the political governance of eastern europe, economic and political aspects of the current situation, problems of corporate governance and ways to solve them, and the current stages of adaptation of corporate law in its transformation to the eu’s norms. in february 2018, the european commission proposed to consider 2025 a possible date for the accession of serbia and montenegro, which means recognizing these countries as the first league in the balkans, even in case the eu council does not approve this date. the second league was set by the council in june 2018, when 2019 was marked as a possible conditional date for the opening of accession negotiations with albania and macedonia. while the third league is for the accession of bosnia and kosovo, for which no date has been set. negotiations with turkey have been suspended. for comparison, if we take into account both political and economic indicators, ukraine is approximately equal to the balkan states of the second league. the prospect of eu membership has been recognized as the strongest external factor in domestic political change in the countries surrounding the eu. in accordance with the requirements of the association agreement with the eu on corporate law (eu directives no. 2001/34/ec, no. 2003/71/ec, no. 2004/109/ec, no. 2007/14/ec, no. 2007/36/ec, no. 2012/30/ ес, no. 2013/34/ес, recommendations of the european commission no. 2005/162/ес and no. 2004/913/ес) the law of ukraine no. 2210-viii, the law of ukraine “on limited liability and additional liability companies” dated february 06, 2018 no. 2275-viii, amendments to the laws of ukraine №514-vi, “on securities and stock market”, “on business associations”, the economic code of ukraine, the civil code of ukraine, the criminal procedural code of ukraine and other laws were made and came into force on july 1, 2021 in the law of ukraine no. 738-ix. european integration transformation of ukrainian legislation in the context of protection of shareholders’ rights was manifested through the implementation of directive 2004/25/ec in the law of ukraine “on amendments to certain legislative acts of ukraine concerning the simplification of doing business and attracting investments by issuers of securities” dated march 23, 2017 no. 1983-viii and the law of ukraine no. 514-vi. ukraine’s economy has not yet recovered from the negative effects of the global financial crisis of 2008, the political coup, the national crisis of 2015, the current crisis caused by the covid-19 pandemic. this situation shows declining dynamics, and changes in ukrainian legislation are offset, not showing real effect. the harmonization of ukrainian legislation is complicated by the unwillingness of ukraine’s business environment to comply with eu rules. analyzing the activities of the jsc, the dynamics of the securities market, stock market and the transformation of ukrainian legislation, the initiatives of certain branches of government, we can say that ukraine is moving in the right direction but not fast enough and forms a country with a real market economy. therefore, we can conclude that the adaptation of ukrainian corporate law to eu legislation should be carried out not only in relation to existing eu directives but in accordance with general trends and prospects for the development of european corporate law. corresponding author: 1 ukrainian catholic university, ukraine. e-mail: ih@ucu.edu.ua orcid: https://orcid.org/0000-0003-2187-7752 2 admiral makarov national university of shipbuilding, ukraine. e-mail: anbork@ukr.net orcid: https://orcid.org/0000-0002-5498-1620 3 supreme court, ukraine. e-mail: mvs161017@gmail.com orcid: https://orcid.org/0000-0001-7897-409x baltic journal of economic studies 57 vol. 7 no. 3, 2021 key words: corporate law, political governance, ukrainian legislation, bond issuance manager, victim, civil plaintiff, conciliation agreement, criminal proceedings, european integration transformation, joint-stock companies, problems of corporate governance, stages of adaptation, eu regulations. jel сlassification: e22, e60, f02, g30 introduction defining the european vector of development of ukraine in the model of international cooperation as a priority involves the use of european standards in the field of law. this is impossible without careful adaptation work to bring the domestic legal system in line with the system that exists in the countries of the european union (eu). such work in the field of corporate law is especially relevant in this context. this is due to the fact that at the present stage of the development of ukraine’s economy, the adaptation of domestic corporate legislation to generally accepted european standards is one of the main prerequisites for achieving the attractiveness of ukraine's corporate sector for investors. recent changes in legislation have been long-awaited and have been a breakthrough in the corporate and financial sectors. radical change of a number of legislative acts (namely, law of ukraine “on joint stock companies” dated september 17, 2008 no. 514 vi (law of ukraine, 2008-2016), law of ukraine “on amendments to certain legislative acts of ukraine concerning the simplification of doing business and attracting investments by issuers of securities” dated november 16, 2017 no.2210-viii (law of ukraine, 2018)), and introduction of the law of ukraine "on capital markets and organized commodity markets" (law of ukraine, 2020), which comes into force on july 1, 2021, no.738-ix, etc., require a detailed analysis of changes in the activities of joint-stock companies, which determines the relevance of the chosen research problem. given the european integration nature of the transformation of ukrainian legislation, we propose to investigate the impact of such changes on the activities of joint-stock companies. the author aims to carry out a comprehensive analysis of ukrainian corporate law by comparing the political governance of eastern europe, economic and political aspects of the current situation, problems of corporate governance and ways to solve them, and the current stages of adaptation of corporate law in its transformation to the eu’s norms. 1. methodology of research 1.1. political governance in eastern europe as a prerequisite for creating promising areas for adaptation of legislative processes in a country the political geography of the territories directly close to the eu consists of three groups of countries, which in the official doctrine of the eu differ in the prospects of integration into the eu. the balkans are by far the most privileged group. they received a conditional promise of eu membership in 2000. next are the three eastern partnership countries (georgia, moldova and ukraine, but not armenia, azerbaijan and belarus), which have accepted the eu’s proposal for deep and comprehensive free trade and close political association, which, however, does not correspond to full eu membership (bokovets, 2015). the countries of the middle east and north africa (mena) are in third place less likely to achieve an advanced level of integration in the eu than their eastern neighbors due to various internal and regional barriers or lack of interest from the countries concerned. accordingly, the eastern partnership neighbors are included in the middle category, but they are themselves divided into those who want to join the eu and have signed an association agreement with the eu, as well as those who are unwilling or unable to take on such close contractual obligations with the eu (kwilinski, slavitskaya, dugar, khodakivska, 2020). the eastern partnership countries are also “european” states, which, if they are democracies, have the right to apply for full membership in the eu under article 49 of the treaty, unlike their southern neighbors. in february 2018, the european commission proposed to consider 2025 a possible date for the accession of serbia and montenegro, which means recognizing these two countries as the leading countries in the balkans (the first league), even in case the council of europe does not approve this date. the second league was set by the council in june 2018, when 2019 was marked as a possible conditional date for the opening of accession negotiations with albania and macedonia. the third league includes bosnia and kosovo, for which no date has been set. negotiations with turkey have been suspended. the prospect of eu membership has been recognized as the strongest external factor in domestic political change in the countries surrounding the eu. scholars have argued that the quality of democratic governance in the wider neighborhood is commensurate with the strength of the incentives offered by brussels (boerzel and schimmelfennig, 2017). countries that enjoy a solid prospect of joining the eu have large-scale democratic changes. the opinion was expressed that in the countries with which have concluded the eu association and partnership agreements, the pace and level of democratic transformations are not the baltic journal of economic studies 58 vol. 7, no. 3, 2021 same as in the candidate countries for eu accession ( jelena jovanovic, biljana grujic, 2018). 2. results and discussion 2.1. transformation of ukrainian corporate legislation ukraine has relatively recently embarked on the path of market transformation. the only european integration path that the country has chosen in 2014 is currently being implemented by the government. first of all, the priority of european integration of ukraine involves the fulfillment of political, economic and legislative criteria. the latter criteria also provide for the consistent and gradual adaptation of national legislation to the acquis communautaire in the field of alternative energy sources, banking law, company accounting, company law, intellectual property law, legislation on labor protection and taxes, incl. indirect taxes, competition rules, freedom to provide services and movement of capital and persons, financial services, securities and investment funds, etc. (derevyanko, pashkov, turkot, zahrisheva, 2020). the implementation of the acquis acts is primarily aimed at forming a country with a market economy and harmonization of ukrainian legislation with the eu. every eu country in the field of corporate governance, financial services, and company activities must follow the strict rules of protection of the rights of investors, creditors, and other stakeholders; apply effective mechanisms for the establishment and operation of companies and corporate management; gradually move to international standards of accounting and auditing; create preconditions and opportunities for financial market development. in accordance with the requirements of the association agreement with the eu on corporate law (eu directives no. 2001/34/ec, no. 2003/71/ec, no. 2004/109/ec, no. 2007/14/ec, no. 2007/36/ec, no. 2012/30/ес, no. 2013/34/ес, recommendations of the european commission no.2005/162/ес and no. 2004/913/ес) the law of ukraine no. 2210-viii, the law of ukraine “on limited liability and additional liability companies” dated february 06, 2018 no. 2275-viii, amendments to the laws of ukraine №514-vi, “on securities and stock market”, “on business associations”, the economic code of ukraine, the civil code of ukraine, the criminal procedural code of ukraine and other laws were made and came into force on july 1, 2021 in the law of ukraine no. 738-ix. in particular, according to the above amendments to the law of ukraine no. 738-ix to the criminal procedure code of ukraine, the bond issuance manager, who acts acts of the basis of the law of ukraine “on securities and stock market” in the interests of bondholders who have suffered property damage as a criminal offense, is enshrined by law to the concept of a victim (part 1 of art. 55 of the cpc of ukraine) along with a natural person who has suffered moral, physical, or property damage by a criminal offense or a legal entity whose property damage has been caused by a criminal offense. the bond issuance manager, who acts in the interests of the bondholders, is endowed with sufficiently broad procedural rights as a victim in criminal proceedings. it may also be recognized as a civil plaintiff who has suffered property damage by a criminal offense or other socially dangerous act, and who has filed a civil lawsuit in accordance with the procedure established by the criminal procedure code (art. 61 of the cpc of ukraine). the state gives the bond issuance manager, who acts in the interests of bondholders, to protect them by concluding a conciliation agreement (as a victim) in criminal proceedings (in case of a criminal offense against them and causing property damage), and to refuse to enter into such agreement, but only with the consent of the meeting of bondholders, obtained in accordance with the provisions of the law of ukraine “on securities and stock market” (part 4 of art.61 of the cpc of ukraine). these are just a few examples of changes in ukrainian sectoral legislation and its adaptation to european standards in the corporate sector. european integration transformation of ukrainian legislation in the context of protection of shareholders’ rights was manifested through the implementation of directive 2004/25/eu in the law of ukraine “on amendments to certain legislative acts of ukraine concerning the simplification of doing business and attracting investments by issuers of securities” dated march 23, 2017 no. 1983-viii and the law of ukraine no. 514-vi. the issue of purchase of a significant block of shares has been settled (a person is obliged to submit a written notice of his or her intention to the company and make it public no later than 30 days before the date of purchase of the respective block of shares) (art. 64 of the law of ukraine no. 514-vi). for a long time, scholars have also focused on the problem of regulating mergers and acquisitions in ukrainian legislation. the squeeze-out procedure is popular in european law and is widely used. since 2017, amendments were also made to law of ukraine no. 514-vi, which provides for the mandatory sale of shares by shareholders at the request of the dominant controlling interest (95%). (art. 65 of the law of ukraine no. 514-vi). in turn, minority shareholders also received the sell-out right. in general, as of december 31, 2019, according to the nssmc, squeeze-out procedure was used 308 times (figure 1), of which in 2017 – 7 procedures, in 2018 – 173 procedures, and in 2019 – 128 procedures. most joint-stock companies approved the market value determined by the subject of valuation activity, baltic journal of economic studies 59 vol. 7 no. 3, 2021 which is 85.7%. more than 8% of the procedures were carried out at the highest price at which the claimant purchased the shares of this jsc; 5.5% – at double the market price of jsc shares; and 0.65% – at the highest share price at which the claimant purchased the shares of this jsc within 12 months. increasing the transparency of jsc activities in accordance with directive no.2004/109/eu in the regulations of ukraine and decisions of the nssmc (national securities and stock markets commission) has also undergone positive changes (the national securities and stock market commission, 2020): – the establishment of a supervisory board (directive no.2005/162/ec) as the company’s governing body for public jscs (pjscs) and private jscs (prjscs) with more than 10 shareholders provides for both increasing the transparency of the jsc and protecting shareholders’ rights by reducing the influence of the majority shareholder in reference to the minority one. unfortunately, in ukraine, there is a discriminatory tendency to pay dividends to minority investors, with the subsequent inability to sell their own shares at market prices. for example, the actions of pjsc ukrnafta against shareholders holding a stake of less than 1% were established in court due to the effective operation of the supervisory board of pjsc; – information coverage about the activities of the jsc. prjscs and jscs that have not made a public offer should disclose only annual regulated information, special information, insider information and information on shareholders whose share is more than 5%. pjscs should also disclose both interim and annual regulated information, the company 's financial statements confirmed by an independent audit firm, prepare a management report, which includes: probable prospects for further development of the issuer; information on the issuer’s development; information on the issuance of derivatives or transactions with derivative securities by the issuer if it affects the assessment of its assets, liabilities, financial condition and income or expenses of the issuer and the corporate governance report (the verkhovna rada of ukraine, 2017); – the shareholder must notify the public joint-stock company about the change of the threshold value of the block of shares (5, 10, 15, 20, 25, 30, 50, 75, 95 percent of voting shares) owned by such shareholder, including as a result of increase or decrease of the authorized the capital of such a company; – the payment of dividends for the pjsc directly to the shareholder has been canceled. currently, dividends are paid only through the depository system. however, unfortunately, the implementation of the relevant directives and recommendations have not brought the necessary results for the transparency of jscs. instead, jscs “go into the shadows” (figure 2) (the national securities and stock market commission, 2019). firstly, there is a declining dynamics of the number of jscs. as of 2020, the decline is more than 50% compared to 2013. secondly, the transformation of pjsc into prjsc. in 2016, the number of pjscs was higher than the prjsc by 663 companies, but in 2017 the opposite trend was observed: the number of pjscs decreased by 1,027 companies, and the number of prjscs increased by 862 companies. it should also be noted that 2016 was marked by the largest decrease in the number of legal entities of ukraine of various forms of ownership, not only jsc. then there is the upward trend of an increase. figure 1. number of squeeze-out procedures performed in ukraine source: compiled according to the state statistics service of ukraine (2020)   7 173 128 92 0 20 40 60 80 100 120 140 160 180 200 2017 2018 2019 2020 baltic journal of economic studies 60 vol. 7 no. 3, 2021 thirdly, the transformation of jsc into llc. based on the reduction in the number of jsc, the number of llcs is increasing every year. for many years, llc has remained the most popular organizational and legal form of management for legal entities. most 97% of ukrainian enterprises operate as small and micro enterprises, which is caused primarily by a lack of financial resources and the inability to modernize the enterprise and improve the quality of production. thus, analyzing the main trends in the jsc operation and the situation in the stock market, we can summarize the main reasons for the reduction in the number of jscs, changes in their forms of organization, falling trading in the stock market and a significant reduction in its stock segment (state sites of ukraine, 2019): – a nationwide problem of the number of medium and large enterprises (only 3%). since jsc is mostly a form of conducting business for large and medium-sized enterprises, it is logical to reduce the number of such enterprises. and those who remained as jscs, simply could not meet the new conditions and high standards due to increasing requirements for jscs; – the need for additional financial resources for the creation of jsc (under art. 14 of the law of ukraine №514^1, the minimum size of the authorized capital of a joint-stock company must be 1250 minimum wages, based on the minimum wage rate in force at the time of creation (registration) of the joint-stock company (until december 31, 2020 – 6,250,000 uah) and for its operation (creation and maintenance of a website, proper accounting and financial reporting, possibly in accordance with the requirements of iasb and the procedure of independent audit or the establishment of an internal audit service, etc.); – the complexity of corporate governance. this is primarily due to the holding of shareholders’ meetings, the creation of a supervisory board, the issue of shares and other securities through the nssmc. at the same time, it should be noted that due to the increase of requirements and procedures for jsc, an effective mechanism for minimizing the risk of expropriation has been created; – the need to compile and cover additional information about the company (annual and interim financial statements, management report, etc.); – undergoing a complex listing procedure on at least one of the stock exchanges. regarding directive no. 2001/34/ec on the admission of securities to official listing on a stock exchange and on the information to be made public, amendments to the requirements for the issue of shares on the stock exchange were approved (nssmc decision no. 546 "on approval of amendments to the regulations of stock exchanges" dated august 3, 2018): the issuer must exist for at least three years; its equity must be at least 300,000,000 uah; the annual net income from the sale of goods, works and services for the last financial year must be at least 300,000,000 uah; the average value of the market capitalization of pjsc must be at least 100,000,000 uah; the minimum share of shares in free float must be at least 10 percent, i.e., 75,000,000 uah or more; quantitative composition of the company 's shareholders – not less than figure 2. dynamics of the number of joint-stock companies in ukraine source: compiled according to the national securities and stock market commission (2019), state statistics service of ukraine (2020) 25531 24813 23110 15571 15206 14710 14310 13902 0 5000 10000 15000 20000 25000 30000 2013 2014 2015 2016 2017 2020 jsc pjsc prjsc 2018 2019 linear (jsc) baltic journal of economic studies 61 vol. 7, no. 3, 2021 150 shareholders; the issuer has introduced the position of corporate secretary; the issuer conducts an annual audit in accordance with international auditing standards with the participation of an independent external auditor (at least two years) (the national securities and stock market commission (2019), state statistics service of ukraine (2020), etc. 2.2. problems of corporate governance at ukrainian enterprises problems of the corporate sector of the domestic economy have been considered by scientists in various aspects, namely legal, organizational, economic, financial, information, and so on. the comprehensive study of the problem has made it possible to conduct a complete assessment of the corporate governance of any enterprise or corporation. many authors consider the corporate governance system an organizational model by which the interests of investors are represented and protected, i.e. corporate governance is an organizational agreement that may cover various aspects of the corporation, the organization of senior management, staff motivation and others, and due to the delimitation from the management process. the main problem of this management process is the creation of mechanisms for the control of outsiders (creditors and minority shareholders) over insiders (senior management and shareholders with a controlling share). some scientists equate corporate governance with the management of a joint-stock company (kozakova, 2016; okunev, 2016). there is no single, generally accepted model of corporate governance that would be used by all countries. however, there are certain defined principles, standards, basic criteria and provisions used in the previously mentioned research contexts. accordingly, almost all rating agencies use the standards proposed in these models to assess the level of corporate governance. it should be noted that most ukrainian companies use the domestic model of corporate governance. the ukrainian model of corporate governance, in contrast to countries with developed market economies, was formed mainly artificially by almost simultaneous corporatization and privatization of a large number of state-owned enterprises, originally formed under the administrative regulation of the economy. however, in modern conditions, the mass corporatization of enterprises has not led to significant changes in achieving the main goals of society. the effectiveness of corporate governance is defined as the result of a combination of four factors that are applied in accordance with national or regional specifics: features of national legislation, type of ownership, government, public pressure. by studying them, it is possible to achieve a deeper understanding of the national “regulatory” environment with which corporations interact (bokovets, 2015). features of the formation of an effective domestic corporate sector are: it is highly dispersed; inefficient structure of shareholder ownership in the privatization process; the significant role of the state in the formation of the corporate sector; the state has a large number of shares and the need to solve the problem of managing state corporate rights; strong tax burden, which creates different tax conditions for shareholders of different industries, etc. (korobka, 2016). the main problems of modern corporate governance, in our opinion, are the following: – uncertainty of the external environment in which the participants of corporate governance (corporations) operate. the external environment of the domestic economy remains uncertain, complex, rather problematic, and with a significant number of pronounced non-market characteristics; – difficulty in using the domestic model of corporate governance, which leads to significant errors and miscalculations, and as a result – the inefficiency of the management system as a whole; – violations related to shareholders' rights, awareness of dividends, transparency of certain activities and business transactions, irregular and incomplete information of shareholders, non-transparency and inaccessibility of financial and economic information; – ineffective decisions of managers, due to their lack of qualifications or awareness and as a consequence – a decrease in the value of shares, corporate income and dividends of shareholders; – reluctance of managers of individual corporations to make full use of the code of corporate governance; – a sharp divergence between theory and practice regarding corporate governance, its principles, methods of the decision making on income distribution, etc. moreover, in the last year, during the period of total quarantine, the restriction of the activities of individual corporations and enterprises is becoming more and more problematic, and there are almost no resources for their quick and effective solution. 2.3. stages of adaptation of corporate legislation to eu’s regulations the adaptation of ukraine’s corporate legislation to eu’s law is not spontaneous; it has a strong legal basis, the analysis of which will be discussed in more detail. according to the provisions of the program, the adaptation of ukrainian legislation to the eu’s one is recognized as a priority component of ukraine’s european integration process and aims to achieve compliance of the legal system of ukraine with the acquis communautaire taking into account the eu's requirements for the countries to join the eu. baltic journal of economic studies 62 vol. 7, no. 3, 2021 in section ii of the program, the term “adaptation of legislation” is defined as the process of bringing the laws of ukraine and other normative legal acts in line with the acquis communautaire. in turn, the acquis communautaire means the eu legal system, which contains (but is not limited to) the eu legislation adopted within the framework of the european community, the common foreign and security policy and cooperation in the field of justice and home affairs. that is, the term “acquis communautaire” is broader than the concept of the “eu legislation”, in connection with which we consider it more correct to talk about the adaptation of ukrainian legislation to the eu’s law (ligazakon, 2020). implementation of a number of directives: no.600/2014/ec – on markets in financial instruments (mifir); 85/611/eec – on mutual investment institutions; 2003/6/ec – on insider trading and market manipulation; 98/26/ec; – on payment settlements for securities of the regulations of the european parliament 2014/65; – on markets in financial instruments (mifid ii) and 648/2012; – on otc derivatives, central counterparties and trade repositories (emir) and the model netting act (isda) of 2006 in the current law of ukraine “on amendments to some legislative acts of ukraine to simplify investment attraction and introduction of new financial instruments” dated june 19, 2020 no. 738-ix. this led to a further transformation in the law "on securities and stock market", which entered into force on july 1, 2021, primarily aimed at forming a liquid capital market with greater opportunities for its participants, including jsc (law of ukraine “on securities and stock market”, 2020). these laws regulate the use of derivative contracts, which are: option certificates, stock warrants, credit notes, depository receipts, government derivatives. also, the concepts such as green bonds, credit default swap, swaption, swap futures, forward swap, contract for the difference in prices, interest rate future are introduced. in addition, the new law regulates the provisions on final settlements and liquidation netting in accordance with the eu’s regulations (derevyanko, pashkov, turkot, zahrisheva, 2020). in accordance with the provisions of the emir regulations, the nssmc and the ndu have introduced a single database for derivatives transactions. an important challenge is the implementation of directive (eu) 2017/1 132 on certain aspects of corporate governance, some provisions of which are covered in the new draft law "on joint stock companies" no. 2493 dated november 25, 2019, which provides for jsc: – holding a general meeting of shareholders by electronic means of communication and electronic voting; – merger, acquisition, division, separation, transformation of jsc (the draft of a bill takes into account the provisions of the directive on the conditions of free publication of information on the terms of the merger/acquisition, the procedure for decision-making which can be sued for its cancellation, the conditions of free publication of information on the conditions of allocation/division, etc.) (oecd principles of corporate governance); – corporate governance for professional capital market participants (provides for the introduction of mifid ii and the capital requirements directive). at the same time, the requirements for voting for decisions of the general meeting and the use of reserve capital do not comply with the provisions of the directive, so we propose to regulate this aspect. some aspects of the development and implementation of mechanisms to regulate the disclosure of information by branches of foreign companies also remain unresolved. in european corporate law today, much attention is paid to mergers and acquisitions of companies, corporations, joint-stock companies, and more. in such processes, there are positive moments provided they are carried out correctly. in particular, operating synergy arises from a combination of the merging corporations' productional, technological, and intellectual assets and has a significant impact on the cost of capital of the future corporation. the result of financial synergy is the assessment of the stocks of a new corporation, while the total value of shares of corporations before the merger is less than that after integration (lavrinenko, frolova, ananiev, 2020). on the other hand, mergers and acquisitions of companies-subjects of corporate relations of ukraine often occur through “raiding” mechanisms, i.e., without the desire of the subject of such relations under a merger or acquisition (bershadsky, yurchishena, 2017). therefore, ukrainian corporate law should adapt the best rules of the eu’s law in order to prevent “raiding” and realize the interests of all participants in corporate relations. the process of adaptation of domestic corporate legislation to the eu regulations provides a variety of opportunities for the ukrainian market to attract companies from the european union to the domestic market, which will help our country accelerate new jobs and attract foreign investment to the domestic economy. comparing the provisions of the current corporate legislation of ukraine with the provisions of the directives of the european union in this area of law, we can conclude that many provisions meet the requirements of the european community law. many of these provisions have been brought into line with the eu’s law through the phased implementation of the directives (zagorodniuk, 2018). baltic journal of economic studies 63 vol. 7 no. 3, 2021 conclusions ukraine's economy has not yet recovered from the negative effects of the global financial crisis of 2008, the political coup, the national crisis of 2015, the current crisis caused by the covid-19 pandemic. this shows declining dynamics, and changes in ukrainian legislation are offset, not showing real effect. the harmonization of ukrainian legislation is complicated by the unwillingness of ukraine's business environment to comply with eu rules. analyzing the activities of the jsc, the dynamics of the securities market, stock market and the transformation of ukrainian legislation, the initiatives of certain branches of government, we can conclude that ukraine is moving in the right direction but not fast enough and forms a country with a real market economy. thus, the corporate law of ukraine is actively developing in accordance with trends, new bills, concepts for its reform and improvement are being introduced. regarding the adaptation of ukraine's corporate law to the eu's law, it should be noted that this process is already 80% completed, for example, depository reform – the creation of a single depository has brought ukraine much closer to integration into the international financial sector (conference on european company law, 2011). therefore, we can conclude that the adaptation of ukrainian corporate law to the eu's legislation should be carried out not only in relation to existing eu directives but in accordance with general trends and prospects for the development of european corporate law. the above allows us to provide the following recommendations for the adaptation of ukrainian legislation to the eu's law in the field of corporate relations: 1. adaptation must be carried out to achieve certain objectives, not just for the sake of similarity of laws. 2. during adaptation, the most important task should be to follow current trends and prospects for the development of eu corporate law. 3. for effective adaptation, it is necessary to use the experience of the eu member states, which are also reforming their legislation in the field of corporate law, the analysis of the consequences will allow a clearer understanding of what mechanism for improving corporate law to choose. 4. carrying out a comparative legal study of the law of the eu companies and the legislation of ukraine in this area in order to identify gaps and contradictions. 5. adaptation should be carried out in accordance with the economic situation of the country, as well as taking into account social and cultural development. 6. adaptation should be carried out taking into account the peculiarities of national legislation, i.e., the rules should be mainly framework and establish the basic principles and standards of corporate relations and leave their details in the competence of national authorities. 7. adaptation must comply with generally accepted principles: respect for human rights, legal certainty, equality, the right to be heard. 8. clear delineation of types of companies and appropriate differentiation of legal regulation. 9. liberalization of many rules and requirements of corporate law, increasing the dispositive nature of its rules. 10. creating a legal framework for the use of new information technologies by participants in corporate relations. 11. encouraging cooperation between legal entities of different member countries in all spheres of economic activity. references: about the consolidated principles of corporate governance (2014): decision of the national committee of the central part of the stock market from 22.07.2014. no. 955. available at: https://www.nssmc.gov.ua/documents/ rshennya-pro-zatverdzhennya-printsipv-korporativnogo-upravlnnya/ bershadsky, a. o., & yurchishena, l. v. (2017). joint stock companies: trends, functional problems, dividend policy. skhidna yevropa: ekonomika, biznes ta upravlinnia, 3, 95–102. bokovets, v. v. (2015). the effectiveness of corporate governance in enterprises. global and national economic problems, 8, 328–331. (in ukrainian) conference on european company law (2011). the way forward, 16-17.05.2011. brussels. available at: http://ec.europa.eu/internal_market/company/docs/modern/conference201105/programme_en.pdf derevyanko, b., pashkov, v., turkot, o., & zahrisheva, n. (2020). addressing the issue of corporate raiding in ukraine. problems and perspectives in management, 18(1), 171–180. doi:10.21511/ppm.18(1).2020.156. jelena jovanovic, biljana grujic (2018). historical development of corporate governance as the basis for current corporate trends. ekonomika, 62(1), 187–197. available at: https://pdfs.semanticscholar.org/ae2e/ ea977ebd1fccbffda37274f177ccf496dd07.pdf korobka, s. v. (2016). corporate governance in ukraine: the problems and ways of their solution. naukovyj visnyk lnuvmbt imeni s.z. yzhytskoho, 2, 80–83. (in ukrainian) kozakova, t. s. (2016). modern approaches to the definition of corporate governance in the information economy. black sea economic studies, 1, 56–58. (in ukrainian) kwilinski, a., slavitskaya, i., dugar, т., & khodakivska, l. (2020). main effects of mergers and acquisitions in international enterprise activities. international journal of entrepreneurship. vol. 24. special issue. baltic journal of economic studies 64 vol. 7 no. 3, 2021 p. 9467–9471. available at: https://ibima.org/accepted-paper/synergetic-and-value-effects-in-corporate-mergersand-acquisitions-of-international-companies/ lavrinenko, о., frolova, t., & ananiev, m. 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(2018). international experience: corporate agreements under english law. pravo ukrainy, 10, 70–85. ministry of justice (2020). acts acquis communautaire. available at: https://minjust.gov.ua/acquiscommunautaire (accessed may 02, 2021). baltic journal of economic studies 11 vol. 3, no. 1, 2017 modern marketing concepts as the basis for formation and increase of the at tractiveness of cities and territories iryna budnikevych1, iryna gavrysh2 yuriy fedkovych chernivtsi national university, ukraine abstract. instruments of formation and increase of attractiveness of the territory within the framework of modern marketing conceptions, the role of marketing complex elements in shaping the attractiveness of the territories are examined, separate economical categories, forming notional instrument of the attractiveness of the territories are specified and proposals concerning the directions of marketing efforts are formulated. methodology. theoretical and methodological basis of the research is the work of scientists on marketing problems of the city, theory of i. budnikevych, identifying the characteristics of territorial marketing (municipal, city marketing) within industrial, commodity, sale, classical, social-ethic and partnership conceptions. the authors used the combination of following methods in the process of scientific investigation: method of generalization and scientific abstraction – for concrete definition of notional-categorial apparatus; analytical monographic method – to represent scientific thoughts on the directions of marketing instruments application in the processes of territorial attractiveness management; comparative analysis  – to find out the peculiarities of marketing instruments and methods use within the limits of different concepts and at different stages of territorial development. practical value. it was defined that territorial marketing system allows to expand traditional approaches to the policy of regional and local authority’s attractiveness, supplementing them with modern components and characteristics. nowadays, the instruments of situational conceptions are still actively applied by homeland and foreign territorial marketing practice, sale conception in particular, which stipulates the direction of territorial authorities’ activity to satisfy territorial needs. the instruments of modern territorial marketing conceptions allow to form and increase the attractiveness of territories for defined target audiences. using the instruments of municipal marketing social-ethic conception one can focus target audiences’ attention on social, ecological and economical territorial attractiveness ensuring stable territorial development. territorial marketing within the framework of partnership conceptions as the philosophy of territorial (region, city) functioning based on the formation, support and development of mutually beneficial long-term relations between the participants of interaction will create new common values, obtaining and sharing advantages of this activity. the development of the relations between territory and its target audiences defines and forms the basis of the environment to make decisions as to the habitation, visiting, conducting business, investment etc., i. e. forms specific territory’s (country, region, city, settlement) attractiveness. novelty. on the basis of this research the authors proposed to consider marketing approach to territorial (regional, urban) attractiveness as a transition to long-term development in the field of systematic management on the basis of consumers’ demands orientation and partnership, clear definition of target audience and its demands, flexible regional policy, applying both traditional and non-traditional instruments to form, improve, support and, sometimes, decrease the attractiveness of territory with demarketing means. conclusions. it has been determined, that according to marketing approach, the attractiveness of the territory is – the ideas total about properties and features, factors and conditions, limits and possibilities, means and instruments, providing satisfaction and the perspective of increase of target audiences’ needs while they choose a proper region for activity and organize their loyalty towards the territory (region, city). marketing policy of the attractiveness of territories is proposed as a complex of measures aimed at attracting target audience’s attention, it’s being worked out and realized by territorial bodies (members of the community take active part) and it is the element of territorial programs and development strategy. marketing efforts should be fixed on the increase of territorial attractiveness not only for the inhabitants but for other target groups – tourists, visitors, investors, population and entrepreneurs from other cities, subjects of regional, national corresponding author: 1 department of marketing, innovation and regional development, yuriy fedkovych chernivtsi national university. e-mail: budnikevich@mail.ru 2 department of marketing, innovation and regional development, yuriy fedkovych chernivtsi national university. e-mail: ira_vision@mail.ru baltic journal of economic studies 12 vol. 3, no. 1, 2017 1. introduction the quality of urban development management in new conditions of postindustrial society and further development of economical knowledge demands focusing on the newest approaches in such management organizations. managerial efforts should be oriented on target audiences demands, urban resource potential and mostly based on intellectual, informative, managerial, cultural-patriotic and national-ethic needs. the necessity to form the systems of territorial (regional) management focused on target audiencies demands satisfaction and economic, ecological, social, cultural factors balancing, defines actuality of marketing approach to this kind of management. marketing as the system of principles and mechanisms, the complex of means and instruments aimed to learn consumers’ needs and involve them into the process of socially useful values creation gives the opportunity to form a qualitative new territorial product, to provide the system of functioning and further stable development of all public institutions and local authorities with a new content. these institutions are aimed at providing urban social economic development and obtaining social economic effect (the increase of population’s well being and living standards, comfortable living conditions, formation of favourable entrepreneurship and investment environment etc.). according to the marketing approach the territory attraction is a reflection of the degree of satisfaction of the needs and expectations of target audiences. attractiveness is a potential of the territory from the viewpoint of the satisfaction degree and perspective growth of the needs of target audiences in case of their choice of territory (city, region, country) for activity (visiting, habitation, investment, etc.) taking into account the objectives and their capabilities. based upon the priority target audiences and their needs there are made not only reasonable decisions in territorial management, but also territorial development strategies are developed. the problem of territorial attraction, its formation, evaluation and increase is reflected in scientific works by a. asaul, i. blank, v. hramotnev and n. bobrytska, n.  bryukhovetska, v.  demydovych, s.  zelenskyi, m.  lesechko, o.  mykhailenko, m.  oklander, o.  yastremska, v.  hob and many others.  marketing approach to territorial attractiveness is analysed in the works by i.  budnikevych, m.  butko, v.  vakulenko, d.  vizgalov, v.  homolska, f.  kotler, o.  lashchenko, t.  metaksas, m.  oklander, o.  pankrukhin, e.  romat, t.  sachuk, d.  haider. at the same time, the notion “attractiveness as marketing influence object” is not clearly defined, the statements connected with the policy of marketing attractiveness are not formulated, marketing tools characteristic to modern marketing conceptions are not identified. the aim of the article is а consideration the tools of formation and increase of territorial attractiveness within the framework of modern marketing conceptions, the role of marketing complex in the formation of territorial attractiveness will be discussed. some economic categories formulating the notion of territorial attractiveness are specified; the offers to direct marketing efforts are formulated. the concept of territorial marketing is considered as an effective tool to maximize the efficiency of territorial management, aimed at: meeting the needs of internal and external subjects of the territory in public goods, services, ideas; increase of the territory attractiveness (for habitation, for visiting, for activities, for investment); solution of the problems that most local authorities can not cope with traditional management methods; preservation of existing and formation of new competitive advantages of the territory; achievement of sustainable development of territorial systems; partnership development and harmonization of interests of socio-economic relations participants. 2. marketing concepts and the territorial policy in the works by i. budnikevych (budnikevich, 2012) the characteristics of territorial (municipal marketing, urban marketing) within the framework of manufacturing, trade, sale, marketing in particular (classical), social-ethic and partnership conceptions are identified. each of the conceptions can be used at different stages of territorial development, extending the tasks and fields of marketing usage, changing its tools and methods. thus, big cities of ukraine have already started to realize the conceptions of classical and international levels. investment, settlement, social, business, innovation, tourist and educational attractiveness will favour long-term paretnership formation with target audiences. marketing instruments ensure long-term relations, helping to increase an transform territorial image, provide loyalty of all the subjects, objects and contact territorial audience, and they are one of the most complex and effective mechanisms of formation and increase of the attractiveness of territories, their promotion in internal and external social-economic environment. key words: marketing conceptions, city marketing, municipal marketing, classical marketing conception, socialethic marketing conception, relationship conception, marketing techniques, marketing influence, attractiveness of territories, marketing approach, marketing policy of attractiveness. jel classification: а11, r19, p49 baltic journal of economic studies 13 vol. 3, no. 1, 2017 marketing. middlesized cities either finish to realize sales conception and form prerequisites of transformation to marketing conception or develop new advantages to involve economical agents to the city. small towns mostly search for their own position within the goods conception or activate sales conception actual due to investors’ migration out of big cities to more available land areas. the definition of marketing concept and systematic usage of its tools by territorial authorities allow to intensify the development of the territory (city, region). territorial marketing system allows to extend traditional approaches of regional and local authorities’ policy, supplementing them with modern elements: image formation and development, complex attractiveness formation, target audiences eliciting and consecutive orientation on their needs satisfaction, ecological and social determination, the partnership of authorities and private business. every member of territorial community and the subject of regional economy has his own opinion on desirable territorial attractiveness and it is important to achieve adequate consensus and social agreement towars aims, strategies, approaches, tasks, values, events, mechanisms of territorial development. marketing policy of attractiveness is a set of measures aimed at attracting the attention of target audiences to a certain territory (country, region, city, tourist territory, etc.), is developed and implemented by the territorial authorities with the active participation of community members and as a part of territorial programs and development strategies influences on business, investment, innovation, tourism, social, migration, environmental infrastructural attractiveness of the territory. this policy forms favorable business and innovative environments, it determines the income and direction of investments, tourist flows, qualified professionals and workers, it attracts the creative class to the city, reduces the outflow of local people from the region, especially the young and the middle class etc. territorial marketing allows to realize in practice the idea of social partnership, when interaction, approaches of social subjects to joint decisions of the tasks on the basis of balance, consensus, regulating society united by mutual values, becomes the main idea (sachuk, 2009). among the examples of conceptual practical realization of marketing in particular is dresden’s (germany) “masterplan” promotion (vizorek, 2010). three interested parties take part in dresden marketing simultaneously: local business communities, tourist agencies, municipal and local administration representatives managing all the processes. alongside with that all main stockholders are involved into common work to realize innovative ideas. at the first stages the main task is to strengthen dresden image as the city with attractive culture and economy, target audiences here are investors (tourists and local people). o. vizorek (vizorek, 2010) presents a lot of marketing programmes realized in dresden: the creation of city guide-book, the launch of the programme “november boredom overcoming”, including numerous cultural and art events (115 disk jokeys and orchestras took part in the party “unity. dresden. night”). a part of these events were aimed at establishing the connections with neighbouring countries  – czech republic (“the days of czech culture”), poland; organization of family leasure (the project “children in the city”); the programmes of involving the students from other countries and regions (to help the talented youth in their studying and future work). further stages of dresden marketing programmes were connected with the realization of marketing partnership conception, allowing to unite all the stockholders into one common chain. marketing tools provide necessary informational resources, close cooperation of the departments responsible for foreign relations, public relations and city promotion with other departments, deputies, regional and state authorities. they help to establish interactive connections with all target audiences (population, investors, business), to form adequate distributing policy connected with available municipal services, to realize effective price forming methods, to produce new kinds of services, to change employees’ organizational culture. 3. the attractiveness of the territory and marketing tools nowadays in the practice of domestic and foreign territorial marketing the tools of sales conception are still actively used. it predicts directed activity of territorial authorities to satisfy the needs of external and internal subjects for territorial investment attractiveness increase. the orientation on sales conception of territorial marketing is actively applied to attract new companies and trade chains of national and international format into the region or city, to increase territorial attractiveness for legal entities to invest assets and expend their market share, and for the population to realize labour potencial, and for tourist territories promotion into new markets. workshops are an interesting instrument of the increase of states and regions’ attractiveness. for example, a representative office of the ministry of tourism of israel in ukraine alongside with the hotel assocoation of jerusalem and tel-aviv, with the assistance of telaviv municipal tourist office and the company on the development of jerusalem held in 2016 a workshop “jerusalem and tel-aviv: two capitals  – one country” (israel is getting…, 2016), where they represented the program “city break jerusalem” as well. this program is produced especially for the tourists having arrived for more than three nights and can save greatly on the baltic journal of economic studies 14 vol. 3, no. 1, 2017 account of this proposal. in our opinion this experience is valuable for chernivtsi city, the tourism of which is mostly positioned as a one-day tourism. marketing usage in this conception and those mentioned above (industrial, trade) is based on the complex of technical methods, skills and actions which can be successfully “sold”, for example, specific territorial characteristics (especially geographic position, its resources, special objects making the territory more attractive for investors, tourists, visitors etc.). however, marketing activity within the framework of situational conceptions isn’t of systematic character, marketing factors are underdeveloped, and the results of marketing research are understood as recommendations rather than the basis of territorial development strategies. discourses “city for tourists”, “city for investors” are rather risky, as total enthusiasm of territorial authorities (state authorities of higher level as well) concerning the strategies of increasing tourist and investment attractiveness of the country, region or city focused on external target audiencies, can worsen living conditions and entrepreneurship activity of the territorial community (the pressure on public utilities increases: scavenging, watersupply and drenage system, gas and electric circuit, transport and its emissions into the air etc.). it can decrease local investors’ activity (unjust access to resourses, more favourable conditions, lower expenses for foreign investors), change the attitude towards tourists (in western press the so-called “paris syndrome” was discussed not once. they mean unkind attitude of parisians to tourists from japan. this fact forced local authorities to work out additional programs to increase paris tourist attractiveness. foreign tourists can apply to police officers who are able to speak two languages (there’s an emblem of the state flag, representing the language of the country on their uniform). the policemen are ready to give necessary additional information (help to find the way to places of interest) and answer more delicate questions conserning theft or assault. active also is the program s. a. v. e. (systeme d’assistance des victimes etrangeres, the system of help to suffered foreign tourists, available in 16 languages). for such target audience as investors the most adequate tool is personal (direct) sale  – “from person to person” (p2p). personal contacts between local authorities, local business, consulting companies, scientists are the tools potencial investors prefer (budnikevich, 2012). the increase of ukrainian cities and regions’ investment attractiveness is possible only under the conditions of efficient work with investors (quickly, accurately, in a creative way), working out the events to return their trust, organizing the system of studying territorial marketing and branding for the authorities’ representatives of different levels. the tools of territorial marketing modern strategic conceptions allow to form and increase territorial attraction. according to a classic approach, territorial marketing as the philosophy of territorial management defines and satisfies target audiencies’needs through long-term competitive advantages’ formation and the definition of prior approaches to develop territorial attraction. philosophy of municipal bodies’ functioning, based on social, ecological and economic attractiveness and provision of stable territorial development is founded on municipal marketing social-ethic conception. territorial marketing within the framework of partnership conception – is the philosophy of territorial (region, city) functioning, based on the formation, support and development of mutually beneficial longterm relations with the participants of this process, the aim of which is to create new common values to satisfy key needs of specific target audience, i.e. to form attractiveness. marketing product consists of almost the same elements, but the demands to each element’s characteristics depend on target marketing peculiarity. for example, population’s demands in changing places provide public transport, pedestrian zones, parking places, airport, railway station are important for tourists and guests. business demands to develop transport corridors, customs terminals, by-pass highways etc. real property is useful for the population, industrial and commercial property is important for entrepreneurs, accomodations – for tourists, development for investors. tourists evaluate natural resourses available for rest and recreation, but antrepreneurs appreciate all natural resourses etc. city pricing attractiveness for guests and tourists is defined by the content of their consumer basket having a lot of modifications. “eca international worldwide cost of living ranking” (www.eca-international. com) is held two times a year – in spring and autumn, standard consumer basket is evaluated for goods and services (the prices for 125 kinds of basic goods and servises, cost of livind included) bought by foreigners in 450 largest cities of the world. mercer’s “ worldwide cost of living survey” (www.mercer.com) includes fewer cities (209 cities in 2016, among them the most expensive in 2016 became hong kong, kyiv occupies 176th place, among the cities of the former ussr the cheapest cities for habitation are bishkek and minsk). mercer’s survey is focused on large transcontinental corporations paying wages to their employees abroad, and the persons with high income. but there are different criteria of purchasing power for tourists. according to tourist portal price of travel (priceoftravel.com), european tourist “econom” basket includes such expenses as the price of accomodation per night in the cheapest hotel, motel or hostel, the cost of meals three times a day and two rides in public transport, visiting one of the city sights and three not expensive local beers or wines. the portal composed three star rating among the cities for an average tourist baltic journal of economic studies 15 vol. 3, no. 1, 2017 who neither economizes nor makes whoopee. it comprises: the cost of dbl accomodation per night in the cheapest three star hotel with good location and favourable comments, two 3 kilometer rides by taxi, cost of visiting of one of the city sights, meals in an inexpensive restaurant three times a day (drinks included, for abstainers  – dessert or a local concert performance). according to the survey of 2015, swiss zurich has become the most expensive european city for tourists. top five included venice, helsinki, london and bergen. the cheapest city appeared to be ukrainian kyiv. like the latter, bucharest, krakiv, sophia and belgrade were referred to as budget places for recreation. in 2011 searching system tripadvisor started rating of the most expensive cities for travelers (https://www.tripadvisor.ru). they took into consideration the cost of accomodation in a 4 star hotel per night, pizza with cheese, onedry martini and 8 kilometer ride by taxi. the capital of ukraine traditionally occupies high places in this rating. pricing attractiveness of entrepreneur sector is connected with the necessity to pay taxes (if state taxes don’t depend on the city, local taxes, duties and payments have enough regulative influence), to hire employees of adequate qualification (expensive qualified workforce is an important vector of modern city development, forming consumers’ demand for business product, and on account of savings allows financial sector to form investment resourses, expenses for public utilities, payments connected with running business (registration, functioning, liquidation). the regulation of prices, tariffs, income duties, licencing, benefits, subsidies, preferences, imposing penalties, granting preferencial credits and secured loans are the instruments of pricing marketing policy, concerning urban business sector. though, setting prices, for example, for hotel accomodation, is not local authorities’ duty, there are some methods allowing them to regulate this field as well. for example, the creation of preferencies to open inexpensive hotels (hostels), free information about hotels with reasonable prices in local tourist informational centres, the issue of a tourist ticket (vienna ticket gives public transport preferences, those of visiting city attractions, vienna opera, visiting cafes, national restaurants etc.). the quality of municipal management influences territorial products price. negative emotions, arising from bureaucracy counteraction, the time lost in the local departments, decrease its attractiveness (chernaya, 2005). it is very important to solve the problem of business expences working on municipal projects or their evaluation by local administrations, concerning credit granting, warranting, to create the conditions of investment attractiveness increase. qualified management can form such conditions even if there are no resource prerequisites. 4. promoting the attractiveness of areas before promoting the attractiveness of a territory it’s necessary to understand its essence. we wholly agree with d vizgalov, that “marketing for marketing” (vizgalov, 2008) pursuing modern tendences, has no sense. urban community must clearly realize what should be changed in its life as a result of marketing, that’s why, it’s necessary to define the strategies of urban development, specific model of its future, reflecting corresponding municipal marketing conception. to announce the city “innovative directed” without envolving high technological firms, qualified employees, financial resources  – is usual practice of homeland cities, strategic aims of which have innovative tinge, keeping pace with time. high salary, comfortable living conditions a specialist can get in a big city, these are classical competitive advantages (it is not marketing business, marketing can speak about it), but to transform city’s disadvantages into strong points  – is marketing task: to transform city’s provinciality into kind atmosphere, small dementions into compact infrastructure, absence of industrial production into ecological habitation, even low level of public transport development can become the basis for development, for example, the projects “urban bicycle”, “a shop round the corner”, “city promenade zones” etc. strategic aim of all ukrainian cities is to get the status of “tourist mecca”. but a question arises: “for what target audiences?”, that’s to say, the question of who we shall focus on is delayed. though, it’s this question that is significant in territorial marketing, because different marketing tools influence different target audiences. for example, to sell mass tourist product, it doesn’t matter to whom, is the main task within the framework of premarket conceptions. segmentation of specific target audiences happens within classical conception. for each audience the tourist product is worked out, the impressions are formed, adequate communicative means are chosen, varied prices are set, the attention is paid to logistic availability, the question of further visiting starts to be actual, social-ethic conception is forming “creative” tourist product, connected with events, ecological, ethic, comfort characteristics, additional social oriented value. partnership conception actualizes interactiveness of tourist product, tourist’s ability to influence its quality, quantity, characteristics, creates the efect of attraction on the basis of interaction with urban museums (“international club of hermitage friends”, “great karlovy vary forum”), municipality (different programs aimed at distance shortening between atourist and a resident, for example, through street performances). territorial marketing within the framework of modern conceptions should actively use new media platforms (social networks; microblogs; social networks’ aggregation; event sites; informational sites; informational aggregators; social news sites; baltic journal of economic studies 16 vol. 3, no. 1, 2017 social layings; comment sites; reviwes; opinion sites; communicators) and base on electronic informational technologies; computer data fixing product price communicative advantages of target markets and their profile. these technologies allow a city to analyse marketing, collective specific information about consumers, form individual oriented product of the city. within the framework of partnership conception such factor of marketing mix as performance is also activated  – presentation of municipal products to intrested groups and persons. the tools of this process are: direct translation of local authorities’ meetings, mayor’s public report; presentation of project results, marketing research, debates, round tables, talk show, press tours, public auctions and tenders, public hearings, charity events etc. for example, ny mayor michael bloomberg presented personally city budget three times: for local council, for other officials, for the press. logic is simple: if the audience is aware of the forces moving local economy, it is possible to make clear tax and budget priorities. mayor’s meetings and personal contacts help to establish relations with different initiative groups and public organizations. nowadays the management function, important for classic marketing, stipulates not only marketing decision management, but rather the management of interrelations between local authorities, population, business, visitors and other target audiences of the city. management function modification for the benefit of interaction gave chance, from communicative positions, to have a look at the technology of marketing as the mutually beneficial process of establishing, support and improvement of interrelations with buyers and other subjects to satisfy the aims of the parties of the operation. it’s worth stressing, that the conception of marketing interrelation involves not only specialists in this sphere, but all municipality personnel, including higher authorities (mayor, executive committee, city council deputies). thus, municipal marketing actualizes technologies of internal marketing, connected with hiring, studying and stimulating municipal employees to grant high level facilities to population, tourists and visitors, entrepreneurs and investors, public organizations etc. there appears also an integrant function within the partnership conception of municipal marketing, it allows to harmonize separate actions and tools with the aim to guarantee composite nature of territorial programmes and strengthening of attractiveness policies. marketing instruments form long-term relations, favourable to increase and transformation of territorial image, provide all subjects’ loyalty, objects and contact audiences of the territories (including other cities, regions and countries). they are one of the most complex and effective mechanisms of forming and increase of attractiveness of the territory, its promotion in internal and external social-economical area. 5. conclusions the system of territorial marketing allows to widen traditional approaches of regional and local authorities’ policy, supplementing them with modern elements and characteristics. according to the marketing approach the territory attraction is a reflection of the degree of satisfaction of the needs and expectations of target audiences. attractiveness is a potential of the territory from the viewpoint of the satisfaction degree and perspective growth of the needs of target audiences in case of their choice of territory (city, region, country) for activity (visiting, habitation, investment, etc.) taking into account the objectives and their capabilities. based upon the priority target audiences and their needs there are made not only reasonable decisions in territorial management, but also territorial development strategies are developed. marketing policy of the territory attractiveness is a set of measures aimed at attracting attention of target audiences to a certain territory, it is developed and implemented by the territorial authorities with the active participation of community members and is an element of territorial programs and development strategies. in our opinion, it is necessary and possible to make the transition from situational concept of territorial marketing in ukraine, where the goal is, for example, "earning the status of tourist city " or "attracting foreign investment", to strategically oriented concepts which are aimed at: in the classical concept – the status of a comfortable city for visiting, habitation, education, management, implementation of capabilities, investment; in the social and ethical concept – environmentally, economically and socially sustainable city; in the concept of interaction – a partnership based on long-term relationships. the marketing approach to the territory attractiveness in our opinion, should be seen as a transition to a longterm systematic management of territory development, based on a client-orientation and partnership, clear definition of the target audiences and their needs, formation of flexible regional policy, using both traditional and non-traditional tools for improving, maintaining, and sometimes decreasing attractiveness of the territory. marketing efforts should focus on building a complex of long-term stable benefits, aimed at increasing the attractiveness of territorial product compared to other territories, not only for residents but also for other target groups – tourists, visitors, investors, population and entrepreneurs of other cities, subjects of regional, national and international level. competitiveness of territories, in this case, provides with complementary social, business, investment, innovation, recreation, tourism, education, financial attractiveness, which will promote establishing the long-term partnerships with target audiences. baltic journal of economic studies 17 vol. 3, no. 1, 2017 as long-term issues that we are going to examine in our further studies are demarketing or counter marketing tools that will be directed on undesirable, for certain territories, target audiences(enterprises that reduce the ecological compatibility of territory, unfair investors, antisocial projects, sales of harmful products; radical organizations, etc.) and crisis marketing. references: budnikevich, i. (2012). municipal marketing: theory, methodology, practice. chernivtsi: chernivtsy national university, 645 p. (in ukr.) chernaya, i. (2005). territorial marketing. vladivostok: vgues. – 188 р. (in rus.) israel is getting even closer (2016, june 10). website «news of tourist industry». retrieved from: http: // novostiturbiznesa.info/article/izrail_stanovitsya_eshche_blizhe.html (in ukr.) sachuk ,t. (2009). territorial marketing. – spb.: peter., 2009, 368 p. (in rus.) vizgalov, d. (2008). city marketing. m. : the institute for urban economics, 110 р. (in rus.) vizorek, е. dresden: uniting past and future. marketing of cities and regions. – м.: смd, 2010, p. 70-71. (in rus., in eng.) the official website of the eca international. retrieved from: http://www.eca-international.com/home the website of the mercer global. worldwide cost of living survey. retrieved from: http://www.mercer.com the website of the price of travel. retrieved from: http://www.priceoftravel.com the website of the tripadvisor. retrieved from: https://www.tripadvisor.ru ирина будникевич, ирина гавриш современные концепции маркетинга как основа формирования и повышения привлекательности городов и территорий аннотация. рассмотрены инструменты формирования и повышения привлекательности территорий (регионов, городов) в рамках современных концепций маркетинга, роль элементов комплекса маркетинга в формировании привлекательности территорий, уточнены отдельные экономические категории, которые формируют понятийный аппарат привлекательности территорий и сформулированы предложения по направлениям маркетинговых усилий. методология. теоретическими и методологическими основами исследования является работа ученых по проблемам маркетинга города, теория и. будникевич согласно которой идентифицированы характеристики территориального маркетинга (муниципального маркетинга, маркетинга города) в рамках ситуативных и стратегических концепций. авторы в процессе научного исследования использовали комбинацию из следующих методов: обобщение и научной абстракции  – для конкретизации понятийно-категориального аппарата; монографический метод  – для представления мнения ученых по направлениям применения маркетинговых инструментов в процессах управления привлекательностью территорий; сравнительный анализ  – для выявления особенностей использования инструментов и методов маркетинга в рамках различных концепций и на разных этапах развития территории. практическая ценность. было установлено, что система территориального маркетинга позволяет расширять традиционные направления политики привлекательности региональной и местной власти, дополняя их современными элементами и характеристиками. сегодня в практике отечественного и зарубежного территориального маркетинга еще активно применяются инструменты ситуативных концепций, в частности сбытовой концепции, которая предусматривает ориентацию деятельности территориальных органов власти на удовлетворение потребностей внешних и внутренних субъектов для повышения инвестиционной привлекательности территории. инструменты современных стратегических концепций территориального маркетинга позволят сформировать и повысить привлекательность территорий для определенных целевых аудиторий. используя инструменты социально-этической концепции муниципального маркетинга можно акцентировать внимание целевых аудиторий на социальной, экологической и экономической привлекательности территории и обеспечить устойчивое развитие территории. территориальный маркетинг в рамках партнерской концепции, как философия функционирования территории (региона, города) основанная на формировании, поддержании и развитии взаимовыгодных долгосрочных отношений с участниками процесса взаимодействия, позволит создать новые общие ценности, получать и распределять выгоду от этой деятельности. развитие отношений между территорией и ее целевыми аудиториями определяет основу и формирует среду для принятия ими решения о проживании, посещения, ведение бизнеса, инвестирования и т.д., то есть формирует привлекательность конкретной территории (страны, региона, города или другого населенного пункта). оригинальность. на основании этого исследования авторы baltic journal of economic studies 18 vol. 3, no. 1, 2017 предложили рассматривать маркетинговый подход к привлекательности территории (региона, города) как переход к долгосрочному развитию и системному управлению, на основе клиент-ориентированности и партнерства, четкого определения целевых аудиторий и их потребностей, гибкой региональной политики, используя как традиционные так нетрадиционные инструменты для формирования, улучшения, поддержки, а иногда и для уменьшения привлекательности территории средствами демаркетинга. результаты. определено, что в соответствии с маркетинговым подходом, привлекательность территории это совокупность устойчивых представлений о свойствах и признаках, критериях и условиях, возможностях и ограничениях, средствах и инструментах, которые обеспечивают удовлетворение и перспективу роста потребностей целевых аудиторий при выборе ими данной территории (региона, города) для активной деятельности и формируют их лояльность. предложено понимать маркетинговую политику привлекательности территории как комплекс мероприятий, направленных на привлечение внимания целевой аудитории к определенной территории, она разрабатывается и реализуется территориальными органами управления при активном участии членов сообщества и является элементом территориальных программ и стратегий развития. маркетинговые усилия должны быть сосредоточены на повышении привлекательности территории не только для жителей и бизнеса, но и для других целевых групп – туристов, посетителей, инвесторов, населения и предпринимателей других городов, субъектов регионального, национального и международного уровней. инвестиционная, поселенческая, социальная, деловая, инновационная, туристическая, образовательная и др. привлекательность будет способствовать установлению долгосрочных партнерских отношений с целевыми аудиториями. маркетинговые инструменты формируют долговременные отношения, которые способствуют повышению и трансформации имиджа территории, обеспечивают лояльность всех субъектов, объектов и контактных аудиторий территории, является одним из наиболее комплексных и эффективных механизмов формирования и повышения привлекательности территорий, ее продвижения во внутреннем и внешнем социально-экономическом пространстве. baltic journal of economic studies 59 vol. 8 no. 2, 2022 1 taras shevchenko national university of kyiv, ukraine e-mail: magryss@gmail.com orcid: https://orcid.org/0000-0002-0816-4734 2 taras shevchenko national university of kyiv, ukraine (corresponding author) e-mail: pryyatelchuk@gmail.com orcid: https://orcid.org/0000-0002-5222-452x researcherid: i-1126-2018 3 taras shevchenko national university of kyiv, ukraine e-mail: lashvorak@gmail.com orcid: https://orcid.org/0000-0003-1728-601x doi: https://doi.org/10.30525/2256-0742/2022-8-2-59-67 correlation and interaction of economic creativity factors as a determinant of sustainable development (on the example of the eu countries) maryna hrysenko1, olena pryiatelchuk2, liudmila shvorak3 abstract. the creative economy is currently demonstrating quite intensive development indicators, and the share of the creative sector in gdp creation is constantly growing. the aim of this article is to reveal the interrelation and interdependence of socio-economic development factors and to clarify the place of the creative sector in ensuring sustainable economic growth. on the basis of 19 variables, the economies of the eu countries were analyzed by means of cluster analysis, which allowed the authors to single out 8 clusters in the constructed dendrogram, united by the nature and trends, as well as the role of the creative sector in these processes. in addition, the degree of correlation and interaction between the influencing factors themselves was described. using rstudio, the authors built two multiple regression models, where the dependent variables were gdp and the global creativity index, and the factors were the indicators used to calculate the creativity index. innovations and creativity are one of priorities of the program of socio-economic development of the european union. there is a universal approach to understanding the importance of creative economy in the eu. however, the practical implementation of the strategy of development and activity of the creative industries by the eu countries is carried out in the following different directions – the foreign economic expansion of the creative industries themselves; the promotion of all national culture at the international level; export-oriented development of the creative sector of the economy; the lack of a separate comprehensive strategy of foreign economic activity for the creative industries, but the implementation of various programs and measures aimed at promoting exports of products of these industries as part of a national development strategy. overall, the active functioning of the eu creative sector directly or indirectly affects the economy by improving its performance and creating jobs, stimulating innovation, and contributing to social and sustainable development. as a result, it was found that the global creativity index is largely dependent on the share of the creative class. it has also been proved that the creative and cultural industries determine the growth of a country's economy in terms of traditional economic and employment indicators. investments in the creative economy will increase the qualitative and quantitative indicators of sustainable economic development. key words: cluster analysis, creative economy, cultural and creative industries, sustainable development. jel classification: c15, c38, d87, j24 1. introduction the modern economic system is increasingly evolving toward the intellectualization of the economy, the main result of which are new ideas that are commercialized in innovation, especially in the creative sphere of human activity. the results of intellectual property rights are increasingly being used and applied in practice as the most valuable economic resource, and creativity is becoming a major source of economic value. today creativity is becoming a qualitative characteristic of the development of most economic processes, which are characterized by innovation, a significant information load, digitalization, networking and the introduction baltic journal of economic studies 60 vol. 8 no. 2, 2022 of completely new business models in the framework of the fourth industrial revolution. comprehensive creativity has led to the transformation of socio-economic relations and changes in sectoral and regional structures. since the speed of such changes in different countries depends on their level of development, there is a need to reconfigure the world economy under the influence of creativity. thus, the study of the creative imperative of the reconfiguration of the global economy and the concept of creative economy is relevant and has important theoretical, methodological and practical significance. the emergence and formation of the concept of creative economy was influenced by the results of scientific opinion of leading scientists who studied the features and trends of development of socio-economic systems from the late xx – early xxi centuries. one of the most influential is the concept of post-industrialism (d. bell, 1999; j. naisbitt, 1982; a. toffler, 2003), which describes the new technological system, method of production, characteristic of new conditions, general trends in the transformation of various spheres of society. this concept continues to develop today. its directions, such as informationcybernetic, technocentric and humanistic-noosphere and anthropocentric theories, are distinguished. the theoretical heritage of the classics of economics m. weber, w. sombart, f. hayek, j. schumpeter, and others is important for understanding the essential characteristics of economic and anthropological aspects of modern society. j. schumpeter defined the special role of the "new combination of production factors" that affect the entrepreneur giving him a competitive advantage in the market. the most famous and popular is his theory of "creative destruction", developed in the early xx century, which describes the process of economic transformation after the action of innovation. companies that implemented changes through innovation and captured the market, then gave way to competitors who produced better or cheaper products. a separate area of modern research is the study of the peculiarities of scientific and technological and innovative development, the impact of innovation on the national economy. in particular, r . harrord, d. robinson, r . solow (daubaraitė & startienė, 2015) analyzed the contribution of scientific and technological development to economic growth, thus creating the theoretical and methodological foundations of innovative economy. studies show that scientists have long noticed and theorized the priority of intangible resources in the formation of competitive advantages of enterprises. intangible resources were considered as a totality of knowledge presented in a certain form, which has a business entity, providing it with organizational and legal opportunities for further stable development, the formation of high-level competitive advantages associated with qualified personnel, patents, modern management, long-term relationships with customers, good reputation, etc. the most important characteristic of intangible resources is the intangible form of their existence. it should also be noted that the consideration of intellectual resources as factors of economic growth, allowed to highlight their essential features in comparison with the material factors of social production, which does not allow to put them on a par with the latter. essential transformations of economic processes are reflected in the scientific literature through such terms as "innovation economy ", "e-economy ", "knowledge economy ", "internet economy ", "network economy " (t. johansson, m. carlson, p. westin, p. kotler, etc.), "digital economy " (p. dicken, t. terranova, d. tapscott), "sharing economy " ( j. weng, m. cheng, b. kremer, m.l. gensky, m. noreu, a. sundararajan) and others. another broad concept is the "new economy ": it covers the various effects of the transformation of economic relations under the influence of innovation, intellectualization, informatization, networking, digitalization, etc. scientists explain the increased attention to the creative sphere by the integration of production (primarily related to the digital revolution) and society (social networks), which resulted in a fundamentally new channel of mass sales of creative products. as a result, the economy has found an innovative tool to expand the sphere of access to the mass consumer, which allows us to state the emergence of creative marketing as a "creative business model". in this situation, any technological innovation is accompanied by a chain of unpredictable long-term economic consequences, the lag in the development of which can throw the national economy back to the level of the "pre-digital" era. this means that the specificity of the creative products market lies in the stable nature of the formation of demand for the creative market commodity products. in addition, the macroeconomic importance of the demand for creative goods and services is determined by the fact that it is satisfied mainly at the expense of the domestic market. this also substantiates the necessity of introducing the concept of creative economy in connection with the crisis of national economies, where it acts as an anti-crisis factor due to the emergence and expansion of the creative market, which provides overall economic stability. the main features of the creative economy are: continuous innovative development, the significant role of human capital in the innovative development of the country; investment in new goods, services, technologies, and the development of human potential; large share of knowledge-intensive products baltic journal of economic studies 61 vol. 8 no. 2, 2022 in gdp; competition based on innovations; specialization and cooperation in the field of innovation activities of business entities; protection of intellectual property. the main growth factors of creative economy are human potential; innovations; investments. relevant factors for the development of the creative economy format include the appropriate "soft" infrastructure (effective creative space), creativity (and its varieties), innovation, investment, production, social management. it is also worth highlighting another approach to the interpretation of the features of the creative economy. in practice, this model is based on the methodology of non-standard, original, uncon ventional managerial decisions, both for strategic development and for overcoming emergencies and crises, when it is necessary to find and implement fundamentally new ways of survival, moving forward, achieving market competitiveness and, consequently, ensuring success in competition. therefore, the concept of "creative economy " is associated, first, with the original specific form of economic thinking, different from the generally accepted logical standard schemes and the ability to find and implement new socio-economic relationships and models between phenomena and processes; second, with the ability to bring something new, original, un-copied in different areas of practical activity; third, the constant willingness to solve non-standard problems and situations (cabra & guerrero, 2022). 2. methodology & findings the creative economy contributes to income generation, job creation, and export earnings by promoting social adaptation, cultural diversity, and human development, including technological development and intellectual property issues. the creative economy is designed to create an attractive investment climate, promote the growth of social capital and social development, modernize education, and much more. new business models, new types of social relations, and new cultural paradigms are being formed within the creative economy. the organization and implementation of the concept of creative economy provides innovative progress and socio-economic development. creative development of the enterprise is carried out by initiating new ideas, constant renewal of production, entering the market with innovative products, which is also a reliable basis for long-term competitive advantage. the creative economy greatly expands the possibilities of traditional production of goods and services. creative industries develop and interact only in connection with sectors of the traditional economy. creative entrepreneurship is growing faster than the production and services market, providing jobs for some 8.3 million eu citizens, giving it the status of an effective economic model of self-employment. 1.2 million creative enterprises provide 155 billion euros of added value in the eu (mittone et al., 2022). the development of creative economy has an increasing influence on the socio-economic development of the enterprise, country, region and the world. measures to support the creative industries play an important role in the socio-economic development of european cities and countries, as they have a significant impact on economic and socio-political processes. innovation and creativity is one of the priorities of the socio-economic development program of the eu "europe 2030", the main goal of which is to promote creativity through lifelong learning as a driving force of innovative development and a key factor in human development. the eu has a creative europe program, which includes working plans for culture, the most relevant of which is the 2019–2022 plan. the development of human potential and creative industries enterprises, which are effective subjects of the formation of sustainable socio economic development of individual countries and regions as a whole, contributes to the formation of a quality creative environment. assessment of the overall level of creativity of the country allows to predict the effectiveness of the development of creative industries and the activity of the practical implementation of the concept of creative economy as an innovative model of the economic system of the country. the approach of defining the creative economy as one of the sectors of the economic system of the country, which together form the potential and contribute to socio-economic development, is widespread. the question of finding the relationship and interdependence between the creative sector of the economy and the key indicators of socio-economic development, including gdp, should be defined as relevant and innovative. the main factors of growth of creative economy are: investments, innovations, human potential, external markets for creative goods, global market of intellectual property. at the same time it is possible to distinguish groups of factors determining the influence of creativity on the reconfiguration of the global economy: – conjuncture on the creative goods market: demand, supply, peculiarities of pricing, cycles and dynamics, proportionality; – institutional factors: a focused public policy on the development of creative economy, the creation of creative clusters, the effectiveness of interaction between the authorities of different hierarchical levels (reflected in the relevant program and strategic documents), the level of intellectual property protection, favorable conditions for foreign baltic journal of economic studies 62 vol. 8 no. 2, 2022 economic activity, working conditions, antimonopoly policy; – infrastructural factors: level of ict, creative locations, network forms of creative business; – innovation factors: the share of high technology in production and exports; the science intensity of gdp; the level of ability to absorb innovation and technology in society; – resource factors: level of human capital, share of skilled and creative professionals in the total amount of people employed in the economy; – financial factors: availability of financial resources, availability of programs of preferential financing of socially significant creative projects; – social and communication factors: level of social capital, involvement of the population in social networks; level of perception of social projects. the search for an algorithm of interdependence of gdp and the creative economy can be realized by studying the key indicators of socio-economic development and constructing on this basis a stepby-step linear multiple regression model, which will identify the factors of greatest influence. the purpose of the study is to identify the relationship and the degree of correlation between gdp as a key macroeconomic indicator of economic development and the creative sector of the economy, as well as to determine the factors and determinants of active positive and negative impact on the formation of their quantitative and qualitative indicators. the variables examined are intellectual property (in the amount of their income and payments), the number of registered patents, the level of urbanization, the share of the intellectual class, the gross domestic product and the global creativity index, which in turn includes investment in research and development, the number of researchers and patents per capita, the level and nature of education, gallup polls on attitudes of people from different countries towards immigrants, racial and ethnic and sexual minorities. to study the levels of economic development of the eu, a cluster analysis was performed using the k-means method (figure 1). the following variables were taken as variables that determine economic development: x1 – refugees abroad; x2 – intellectual property, income; x3 – patents, residents; x4 – urbanization, %; x5 – part of creative class, %; x6 – access to sanitation services%; x7 – mortality on the roads, per 100 thousand people; x8 – population in the largest city, % of urban population; x9 – intellectual property, payments; x10 – patents, non-residents; x11 – gdp per capita; x12 – gdp growth per year,%; x13 – exports, % of gdp; x14 – global creativity index; x15 – subindex (conditional); x16 – subindex (real); x17 – global talent competitiveness index; x18 – global creativity index; x19 – global innovation index. the first step in building the model was to find out the degree of correlation and interaction between the influencing factors themselves. in the figure we can see the correlation table between the variables. in the second stage, the authors built two multiple regression models, where the dependent variables were gdp and the global creativity index (gci), and the factors were the indicators used to calculate the gci. the regression models were built using rstudio, a free precursor to open-source software -1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 x7 x1 2 x8 x1 x3 x1 0 x6 x1 3 x4 x1 1 x5 x2 x9 x1 4 x1 8 x1 6 x1 9 x1 5 x1 7 x7 x12 x8 x1 x3 x10 x6 x13 x4 x11 x5 x2 x9 x14 x18 x16 x19 x15 x17 figure 1. сorrelation matrix of influencing factors baltic journal of economic studies 63 vol. 8 no. 2, 2022 development for the r programming language, which is designed for statistical data processing and graphics. the developed model has a geographical limitation – the object of modeling are the eu countries. in the constructed econometric model, according to the first scenario, gdp and gci were chosen as dependent variables. under the first scenario (1) (y – gdp, x1 – number of refugees, х2 – intellectual property, х3 – patents, х4 – level of urbanization, х5 – share of creative class) the following regression model was obtained: y x x x x x� � � � � � � � � � � � ��55704 5 0 114 7 4 10 0 05 174 1 2047 81 5 2 3 4 5, , , , , , y x x x x x� � � � � � � � � � � � ��55704 5 0 114 7 4 10 0 05 174 1 2047 81 5 2 3 4 5, , , , , , (1) according to the second scenario (2), the dependent variable y is the global creativity index (gci) as a generalizing system indicator of the creative economy. y x x x x� � � � � � � � � � � � ��� � � �0 28 4 8 10 5 5 10 1 4 10 9 0 10 0 06 1 9 2 6 3 5 4, , , , , , 11 5� x y x x x x� � � � � � � � � � � � ��� � � �0 28 4 8 10 5 5 10 1 4 10 9 0 10 0 06 1 9 2 6 3 5 4, , , , , , 11 5� x (2) the global creativity index, assuming that almost all coefficients are close to 0, depends solely on the share of the creative class. this result is logical, since it is human resources and creativity as their key characteristic that create the main product in the creative economy. the result of the first model shows a significant dependence of gdp also on the indicator of the creative class. this indicates the growth of not only the share of the creative economy in gdp as one of the innovative industries, but also the growth of the intellectual component as a quality factor of creative human resources as the main in the process of value creation. this fact must be understood and taken into account in the process of developing a sustainable development strategy and implementing certain targeted programs to support it. of course, it should be taken into account that the object of analysis at the regional level was the european union – an association of industrialized countries, whose product structure is mainly focused on goods with high added value, high-tech, intellectual, creative goods and services. given the heterogeneity of the development and structure of the economies of individual countries in the west european region, as well as differences in the level of creativity of their economic systems, a significant addition to this study is a cluster analysis. based on the analysis of key indicators and factors that characterize the current state of socio-economic figure 2. cluster dendrogram of eu countries (according to general economic indicators and the level of development of the creative economy) baltic journal of economic studies 64 vol. 8 no. 2, 2022 development of national economies according to their creativity and the use of economic-mathematical modeling, the main clusters that unite the national development systems of the eu were identified. on the basis of mathematical modeling a dendrogram was built (figure 2). the eu countries were considered as a homogeneous group in terms of the nature of the relationship between general economic indicators and the level of development of the creative economy. the analysis of dendrogram made it possible to identify the following clusters of countries: 1. france, denmark, sweden, finland. 2. germany, netherlands, luxembourg. 3. bulgaria, greece, poland, cyprus. 4. malta. 5. lithuania, czech republic, estonia, latvia. 6. italy, spain, portugal, hungary. 7. slovenia, romania, croatia. 8. austria, ireland. the countries, united into separate groups as a result of the cluster analysis, besides the commonalities in the set of studied indicators, have a number of common features, including directions and methods of general economic policy, peculiarities of national labor markets (taking into account special methods of management of creative human resources), forms and methods of development of separate sectors of creative economy and instruments of their complex integration into the general economic system of national economies. today, the eu takes a unidirectional approach to understanding the importance of the creative economy. this sector can directly or indirectly influence the economy by improving its performance and creating jobs, stimulating innovation, and contributing to social and sustainable development. in 2021, the major creative industries accounted for 558 billion euros in value-added gdp in the eu, about 4.4% of total european gdp. these industries provide about 8.3 million full-time equivalent jobs, or 3.8% of the total number of jobs in europe. statistics also show that most ccis (cultural and creative industries) have a higher share of young workers than the rest of the economy, and this sector is resilient during economic and financial global and regional crises compared to others. despite growing recognition, the development of ccis is slowing as they cover different areas of regulation, including culture, education, the economy, and urban/regional development. in recent years, the debate about the role of ccis in the eu has focused on the following key issues: – inclusion of ccis in the eu strategic program aimed at developing an integrated european ecosystem. cci is still largely absent and is not covered by the eu 2025 strategy. at the highest level, some eu institutions recognize the role of culture in achieving the sustainable development goals and are working to consider culture as a key driver for the implementation of the 2030 agenda for sustainable development. the eu needs to take further steps to recognize and invest in tpps and identify their potential to contribute to economic development and employment, the ability to catalyze innovation and become a key element of global competition and soft power. innovation, entrepreneurship and ccis have been formally identified as interrelated themes in the eu programs, such as horizon 2020, horizon 2030, cosme for small and medium-sized enterprises (including erasmus for young entrepreneurs), start-up europe, erasmus +, interreg – territorial cooperation and funds aimed at strengthening the eu's economic and social cohesion. – integrate the competitive advantages of ccis with regional "smart specialization" strategies for regional and socio-economic development and innovation. ccis can interact with other activities, often leading to agglomeration and clustering and contributing to a high share of local value added. several eu regions direct their structural and aggregate funds to cci for asset planning, resource mobilization, strategic partnerships and clusters, and infrastructure and service improvements. – recognizing the strategic importance of cci for urban policy within the european capitals of culture initiative (ecc). cities have always been places where artists and other creative people find themselves and succeed. new creative centers, platforms where professionals can create, meet, collaborate, and showcase their work, are catalysts for urban revitalization, giving new functions to abandoned industrial areas or unoccupied buildings and attracting related services and businesses to them. the ecc, a long-standing flagship initiative of the eu, has evolved from an international arts and culture program into a more structured initiative that encourages cities to include cultural development and cci in their development strategies. the ecc brings together european cooperation and culture with stakeholders in the fields of innovation, tourism, and urban planning. – inclusion of cci in innovation and research programs. the potential of cci to promote innovation processes is not yet fully recognized and supported. the understanding that innovation is increasingly influenced by non-technological factors such as creativity, design, branding, and new organizational processes is rather declarative. – stimulating spillover effects and impacts on other sectors and society. ccis are strategically positioned to have spillover effects on other sectors and industries related to both the arts and science and technology. – improving access to finance, through the new eu guarantee fund. insufficient access to a variety of funding sources is the biggest obstacle for ccis. baltic journal of economic studies 65 vol. 8 no. 2, 2022 – promoting international networks and alliances with creative centers and entrepreneurs – the european network of creative centers and the creative tracks platform. the european commission supports two pilot projects aimed at creating a european network of creative centers and an international platform for young creative entrepreneurs, creative tracks. these pilot projects create communities, peer-to-peer training programs, coordinating platforms and competitions, disseminate information and facilitate meetings, and offer a common platform for support structures around the world to share experiences and learn from each other. analyzing the approaches of various eu member states to strategic planning of creative industries, it is possible to divide them into four types of strategies: – specialized strategies for foreign economic expansion of directly creative industries (for example, in the netherlands – policy program for the creative industries, creative industries internationalization program; in finland – finnish cultural export promotion program); – specialized strategies that promote the entire national culture at the international level (for example, in sweden – swedish cultural internationalization strategies); – general foreign economic strategies, which also affect the export-oriented development of the creative sector of the economy (for example in denmark – the strategy value, growth and knowledge for denmark; in austria – the go-international program); – the absence of a separate comprehensive foreign economic strategy for the creative industries, but the implementation of various programs and activities aimed at promoting exports of these industries as part of a national development strategy (for example, in belgium – flanders image flanders audiovisual fund; in greece – hellas film center greek film center). the european commission is actively researching the creative economy industries, studying the forms of its impact and realization, and assessing its share in the overall economic development. often the results of these studies are ambiguous, which once again emphasizes the diversity of the creative industry and the appropriateness of specific methods of its management development. thus, according to the rating of european cities "cultural and creative cities monitor", based on the assessment of the cultural and creative potential of 168 cities in 30 european countries, not only megacities, but also small provincial cities received high scores. this reduces the importance of urbanization in the overall system of factors that activate the creative sector. trends of global urbanization and increased attention by governments around the world to the creative industries will continue over the next few decades. in many regions of the world, creative industries are systematically becoming the most important outline of social and economic change. especially at the city or agglomeration level. summarizing the state of development of the creative economy in the eu, the following current trends and problems can be noted: – what the future of the creative industries will be and how their activities are evaluated in terms of value and in terms of social significance; – how to respect the rights and labor protection of artists; – how to create innovations and conduct research activities in the future; – what will be the digital environment and its impact on the economy; – issues of intellectual property, especially copyright, the legal framework in the field of copyright protection; licensing, open access information sources, protection against information piracy; – management in the field of intellectual property. the creative and cultural industries determine the growth of a country 's economy both in terms of traditional economic indicators and in terms of employment indicators. the world's creative industries account for about 3% of global gdp, drive the global economy, and employ 29.5 million people (1% of the world's active population). according to the international confederation of societies of authors and composers (cisac) and unesco, income from the creative industries exceeds income from telecommunications services and creates more jobs than the automotive industry in europe, japan and the united states combined (29.5 million versus 25 million). europe, along with the u.s., is a major innovation center from where the development and focus on creative business began. 3. conclusions innovation and creativity of the economy at the present time is not only a characteristic feature of the leading economies of industrialized countries, but also a necessary condition for the formation of a modern advanced business environment, strengthening the competitive position of developing countries and a factor in achieving qualitative changes and specific quantitative indicators of sustainable development. eu countries consider the creative and cultural industries to be priority development areas with a high return on investment and a great impact on overall socioeconomic development, including gdp growth, employment growth, sme development, improved investment climate, etc. in general, the creative economy is associated with the ability to bring something new and original to different fields of practice, to find solutions to unusual problems and situations and, as a consequence, actively contributes to income generation, job creation baltic journal of economic studies 66 vol. 8 no. 2, 2022 and export earnings, promoting social adaptation, cultural diversity and human development, including technological development and intellectual property issues. quantitative measurements of the creative industry in its global relationship with socio-economic development are indicators of intellectual property (in the amount of its income and payments), the number of registered patents, the level of urbanization, the share of the intellectual class, gross domestic product and the global creativity index, investment in research and development, the number of researchers and patents per capita, the level and nature of education, etc. based on the cluster analysis the degree of correlation and interaction between the influencing factors themselves was determined. the main growth factors of the creative economy in question are: investments, innovations, human potential, external markets for creative goods, and the global intellectual property market. as a result of multiple regression modeling with geographical restriction within the european union region it was found that both gdp and the global creativity index are excessively dependent on the creative class indicator. this result indicates the growth of both the share of the creative economy in gdp and the intellectual component as the main value-added factor. the commodity structure of eu production is already mainly focused on products with a high share of added value, high-tech, intellectual, creative goods and services. there is now a unidirectional approach to understanding the importance of cultural and creative industries in the overall socio-economic structure in the eu. ccis have a significant impact on the economy, improving its performance and creating jobs, stimulating innovation, and contributing to social and sustainable development. as a result of mathematical modeling, the authors built a dendrogram that can be divided into eight clusters. this dendrogram shows the heterogeneity of the development and structure of the economies of western european countries, as well as differences in the level of creativity of their economic systems. presumably, in many regions of the world, the creative industries are systematically becoming a critical factor in social and economic change. this obliges us to strengthen the emphasis in the list 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(2002). the imposition of a global development architecture: the example of microcredit. review of international studies, vol. 28, no. 3, pp. 537–555. baltic journal of economic studies 166 vol. 8 no. 3, 2022 1 rivne state university of humanities, ukraine (corresponding author) e-mail: nataliia.poliukhovych@rshu.edu.ua orcid: https://orcid.org/0000-0001-9312-8908 3 national aviation university, kyiv e-mail: larisa_1991@ukr.net orcid: https://orcid.org/0000-0002-7764-4766 3 odessa national maritime university, ukraine e-mail: andriy5555@i.ua orcid: https://orcid.org/0000-0002-7691-3012 doi: https://doi.org/10.30525/2256-0742/2022-8-3-166-173 mathematical modeling of risk assessment of enterprise management nataliia poliukhovych1, larysa raicheva2, andrii ivanov3 abstract. the article considers the issues of selection and use of management tools and methods, development and selection of enterprise strategy taking into account risks. the author's understanding of the risk management process is given, the basic principles that guide the development and implementation of risk management strategy at the enterprise are listed. the development of a risk assessment algorithm is proposed and the features of individual elements of the integrated risk assessment flowchart are characterized. in the paper, attention was drawn to the differences in the qualitative and quantitative risk analysis, the peculiarities of their methodology were determined. considerable attention is paid to the definition of risk assessment methods, methods of risk minimization are listed, and as a result, the definition of the term "risk" is generalized. the methods of formation of enterprise strategy, which can be represented by three groups: portfolio analysis methods, mathematical methods, forecasting methods, are investigated. it is determined that modern methods of enterprise management and mechanisms for making key decisions in business imply the need to develop a procedure for both substantive and quantitative accounting and assessment of the entire range of possible uncertainties and risks that accompany the market activity of the enterprise. it is shown that most of the risks to be taken into account, quantified and accounted for in the economic and mathematical model of the enterprise, cover two main activities of the enterprise, and are integrated into the concept of risk management assessment: production and financial sphere. an economic and mathematical model of choosing the optimal strategy of the enterprise, taking into account the risk factors of management, according to the criterion of maximizing the amount of consolidated cash flow from operating and financial activities, which reflects both the production and technological conditions of the enterprise and the peculiarities of decision-making in the commodity and financial markets, is built. this optimization model is implemented to solve the problem of choosing the optimal management strategy taking into account management risks. however, all these methods start to work when the risk is realized (or must be realized) in losses and damages. such an approach to building an effective risk management system does not comply with the principle of proactivity: it is not necessary to include in the cost estimate of the enterprise the costs of eliminating the consequences of the risk, it is necessary to include the costs of preventing the risk. with this approach, preventive and adequate measures can reduce the cost of risk, as well as choose the optimal level of risk, which is determined by the minimum cost. the results of the analysis show that most of the known methods of forecasting and risk assessment are inapplicable in conditions of unpredictability. the situation with the application of risk management tools is slightly better. dissipation and insurance, as well as diversification of activities and the creation of funds and reserves are at least limitedly applicable. the presence of a risk assessment and coordination system at the enterprise will make it possible to identify existing risks, determine the level of danger and, using certain methods and tools of risk management, reduce their negative impact on the financial and economic activities of the enterprise. currently, the approach to risk assessment is being transformed, as new challenges require fundamental changes in risk assessment and modeling systems. key words: uncertainty, risk, risk management system, risk management, evaluation model, mathematical modeling, enterprise strategy. jel сlassification: m21, d81 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 167 vol. 8 no. 3, 2022 1. introduction the modern stage of economic development of the enterprise is characterized by radical political, economic and social changes, as well as the rapid development of scientific and technological progress, which penetrates into all spheres of human life, enterprise and the country as a whole. the growth of crisis phenomena, increasing dynamism and uncertainty of the economic situation requires from business entities to pay more attention to their own economic security, to identify and neutralize possible threats, risks and dangers that can adversely affect the state and results of their activities. many scientific publications of domestic and foreign authors are devoted to the problems of risk management in the enterprise and methods of mathematical modeling of risk assessment, in particular: j. m. keynes, j. mead, j. neumann, v. v. vitlinskyi, і. t. balabanov, a. m. dubrov, a. o. starostina. but despite a significant number of scientific works devoted to this topic over the past 80 years, the problems of preventing or neutralizing the risks of management activities of enterprises remain ambiguous and unresolved. although in most aspects the theoretical justification of risk management has already been developed, the issues of determining the structure of risk management and risk assessment of managerial decisions remain open. and if the production or monetary sphere has undergone gradual changes, then approaches to management, own management decisions and decision-makers are changing turbulently and not always predictably, but this primarily affects financial indicators that can be measured, modeled and adjusted, so the issues of analysis and assessment of management risks will always be relevant and require constant research. it should be noted that in order to neutralize any threats to economic security, enterprises should direct their efforts to create their own security system, which will create conditions for the effective functioning of the enterprise, achievement of its goals in conditions of fierce competition and significant risks, by timely identifying and neutralizing various risks. the ineffectiveness of transformation processes in the economy of ukraine, until 2022, when military operations began on a large area of the territory of ukraine, could be explained by the lack of effective practical developments in risk management of enterprises. as the business practice of the last three years has shown, when after the severe quarantine crisis due to covid-19, and in 2022, when the war broke out in ukraine, it was those enterprises that, as a result of forecasting, created and maintained their own risk protection system, even in the most difficult modern conditions, were able to remain operational. at the moment, there is an urgent need to create a fundamentally new methodology for the formation of a risk management assessment system that can be adapted to the current realities of the ukrainian economy. the author aims to investigate methodological approaches to determining management risks and applied aspects of economic and mathematical modeling of the management risk assessment system and the formation of a model of optimal choice of scenario behavior of the enterprise in the conditions of management risk at the enterprise. 2. methodological approaches to risk management the author is of the opinion that risk management is a process of making management decisions that minimize the adverse impact of external and internal factors on the enterprise, as well as reduce losses caused by random events. moreover, minimization of possible adverse impact is a priority task, the solution of which does not allow a situation to arise when the company faces financial losses and other damages. thus, risk management should be considered in a broader sense than as one of the methods of financial management. risk management is based on the results of risk assessment, technical, technological and economic analysis of the potential and environment of the operating enterprise, as well as on the forecasting of the regulatory framework, economic and mathematical methods, marketing and other research. in addition, risk management includes the development of strategy and tactics. thus, risk is an economic category that characterizes the possibility of deviation of the actual state from the planned one under the influence of uncertainty in economic relations. modern economic literature on the theory of risks is characterized by ambiguity in the interpretation of the features, properties and elements of risk, in understanding its content, the correlation of objective and subjective sides. thus, in the development and implementation of management decisions to minimize the effects of uncertainty factors, the risk of getting a "first" or "second kind" error is formed. the error of the "first kind" is the failure to achieve the planned performance indicators of the enterprise, which is expressed in the planned costs, but lack of income. the error of the "second kind" consists in exceeding the planned performance indicators of the enterprise, which is expressed in a disproportionate increase in costs compared to the growth of income. baltic journal of economic studies 168 vol. 8 no. 3, 2022 the error of the "first kind" is formed as a result of changes in market conditions, and the error of the "second kind" is the result of unprofessionalism of the enterprise management system. modern approaches to solving problems related to the risk of economic activity do not fully reflect the role and importance of a person in the enterprise risk management system. motivational, managerial, professional qualification, socio-psychological, physio-logical risks caused by human parti cipation in the production and economic activities of the enterprise are often the only real risks. thus, the risk determines the possibility of deviation, that is, the difference between the planned and the actual result of the decision, due to the presence of a certain number of restrictions of motivational, managerial, professional competence, socio-psychological and physiological nature. thus, risk management is the modeling of the possibility of deviation, that is, the mismatch of the planned and actual results of the decision, due to the action of certain restrictions of motivational, managerial, professional competence, socio-psychological and physiological nature. the main purpose of "risk analysis" is to establish the maximum permissible risk for a certain type of cases, and for the studied and known risk factors – the values of the maximum permissible risk values. quantitative and qualitative are the two main types of risk analysis. based on the information obtained, qualitative and quantitative risk analysis is carried out. figure 1 shows the procedures used in risk analysis. the main specific feature of the qualitative approach in risk research is that firstly, the risks are identified, and then the consequences of the risk and the developed measures to combat them are costed. qualitative analysis should be carried out at the stage of business plan development. quantitative analysis, which is based on the tools of probability theory and mathematical statistics, consists in the numerical dimension of the impact of changes in project risk factors on the change in project efficiency and is based on the basic version of the project business plan and qualitative analysis (shymko, hrybkova, 2009). the main methods of qualitative analysis are given in table 1, quantitative methods of analysis are presented in table 2. qualitative analysis is responsible for the identification of all possible risks, which determines the risk factors, the sequence of works, during which the risk arises, etc. quantitative analysis is responsible for identifying the amount of damage from various subtypes of risk, which identifies the causes, sources of risk and the magnitude of the likely consequences. in our opinion, it is the system of bankruptcy control and diagnostics that is close to the study and assessment of financial risks, since all similar financial and risk analysis qualitative approach specifying the types of risks assessment of possible damage and its probability development of risk control measures and estimation of their approximate cost quantitative approach break-even point analysis sensitivity analysis: – based on financial statements; – based on project efficiency assessment criteria scenario analysis: – without taking into account the probabilities of scenario realization; – taking into account the probabilities of scenarios implementation simulation modeling figure 1. risk analysis procedure baltic journal of economic studies 169 vol. 8 no. 3, 2022 economic indicators that determine the "health of the enterprise" are taken as a basis. currently, the most common are: two-factor model, altman coefficients, taffler's four-factor model, expert estimates, cost-effectiveness, analytics. however, to assess the magnitude and probability of the risk, it is not enough to use only the mathematical apparatus determined by the set of the initial information flow. the enterprise, in the course of its activities, may refuse to implement a particular risk-related decision, and these methods can be applied to significant risks both at the stage of preliminary processing of the decision and in the process of activity as a corrective action in case of unauthorized risk growth. today there are a large number of methods of risk minimization. the main ways of risk minimization table 1 main qualitative and quantitative methods of analysis method the essence of the method peculiarities of the method qualitative methods of risk analysis specifying the types of risks involves the collection and detailed study of information about the future "project "* and its inherent risks requires time and financial costs to obtain information the method of analogies provides for comparison of the future "project" with previously implemented "projects" by a number of features requires completeness of information to understand the degree of its applicability in a particular situation cause and effect analysis it involves heuristic identification of risk events, formal logical analysis of their possible causes and development of anti-crisis measures it is used at the pre-investment stage, stimulates the search for options to improve the reliability of the "project" as a whole the eventconsequence method it involves dividing the "project" into elements and identifying risks for each of them it is used to identify specific risks methods that combine quantitative and qualitative analysis the method of expert assessments the central figure of this method is an expert who conducts the assessment using logical and mathematical – statistical methods the advantage of this method is the absence of the need for accurate initial data and expensive software tools, to take into account the influence of various factors using the experience of an expert creating a risk profile or risk map it involves assessing the risks of the "project" by a number of parameters and displaying them on a group of appropriate scales. the resulting "profile" is compared with the "reference" it is a tool for visualizing the risk structure and assessing the project's compliance with the organization's risk policy * different types are meant (draft agreement, investment project, cooperation project, etc.) table 2 main quantitative methods of analysis method the essence of the method features of the method adjustment of the norm discounting provides for an increase in the discount rate in accordance with the totality of risks affecting the "project" does not take into account changes in the level of risk during the implementation of the "project" reliable equivalents method provides for expert adjustment of cash flows depending on the subjective assessment of the level of risk associated with the receipt of these cash flows the danger of the method is that there are no reasonable methods for calculating risk-free equivalents, as well as the subjectivity of expert assessment analysis of performance indicators and cash flow dynamics provides for consideration of the safety margin of the project, manifested by relative indicators provides only an aggregate assessment of all project risks sensitivity analysis by making alternate single changes to the technical and economic parameters of the "project", the risks that most affect the project are identified the method also allows to estimate the degree of deviation of the parameter at which the "project" becomes unprofitable the method of scenarios by simultaneously making changes to a number of technical and economic parameters, alternative to the basic scenario of the "project" development are formed the use of this method, unlike sensitivity analysis, eliminates the limitation on the number of factors simulation modeling provides for the construction of a financial model and multiple calculation of "project" scenarios, calculated taking into account the correlation between its parameters the method is difficult to use, requires the use of special software, as well as additional research * different types are meant (draft agreement, investment project, cooperation project, etc.) baltic journal of economic studies 170 vol. 8 no. 3, 2022 are as follows: risk avoidance; risk distribution between participants; risk insurance; self-insurance; diversification; limitation; alternative planning; creation of a flexible production structure; creation of reserve funds; monitoring of information; education and training; application of flexible technologies. effective methods of risk management are risk allocation, funds reservation, hedging. thus, the use of methods to reduce the risks of enterprise activity allows to effectively assess the risk and increase the level of income and profit, but it requires a comprehensive and integrated assessment and reliable development forecasts. 3. economic and mathematical modeling of the management risk assessment system the article builds an economic and mathematical model for choosing the optimal development strategy, taking into account risk factors by the criterion of maximizing the amount of consolidated cash flow from operating and financial activities. as a criterion function of the model, the market criterion is considered – the maximum consolidated cash flow for two interrelated areas of the enterprise's market activity: operational and financial. the amount of consolidated cash flow should be adjusted for the amount of risk adjustment, which is interpreted as a possible loss or shortfall in profit (in value terms) due to the realization of a group of internal risks of the enterprise. the limitations of the model for choosing the optimal strategy of the enterprise are supposed to be taken into account in the following groups: production and technological, financial and resource, market and risk. the group of production and technological should include restrictions on the volume of specific assets of the enterprise, characterizing the existing operational and production capacities. in the constraints of this group, the traditional approach to the problems of modeling the production activity of the enterprise is used, focused on the accounting of the effective time fund of the main technological equipment (irtishcheva, stegney, pauk, 2014). the block of financial and resource constraints reflects the amount of the company 's capital attracted to finance the above market activities. the group of market constraints reflects the conditions for the sale of the company 's commodity products in the developed market segments, as well as the possible volumes of credit resources attracted to market activities at the external borrowing rate set in the scenario. for the formation of the first of the group of market constraints, the approach related to the binding of market demand for the commodity products of the enterprise to the planned price of its sale was used. the second constraint from the market block is set based on the relationship between the volume of planned external borrowings and interest rates. it is assumed that the dependence under study is determined at the stage of scenario development. the fourth block of restrictions establishes acceptable levels of risks in the production and financial sphere of the market activity of the enterprise, the characteristics of which are supposed to use the coefficients of return on equity (roe) and autonomy (ka) (shtefanich, 1999; irtishcheva, stegney, pauk, 2014). the value of the autonomy ratio coincides with the share of equity divided by total capital (the sum of equity and borrowed capital). considering the absence of long-term borrowings planning at the enterprise in the short-term interval, we present the formula for calculating the autonomy ratio: k bk bk ka t t t t � � � � � �� 1 1 (1) where bk(t-1) is equity at the end of period (t-1) – the beginning of planning period t, kt – is the amount of attracted short-term loans in the planning period t, which are expected to be repaid in the next period (t+1). taking into account the minimum standard value of the financial autonomy ratio, the planned range of its changes is determined (irtishcheva, stegney, pauk, 2014): 0 5 1, � �� �ka t (2) based on formulas (1) and (2) the following is obtained: 0 1� � �� �к bkt t (3) taking into account the restriction on the planned amount of кt borrowed funds: 0 ≤ ≤�к st t (4) where st – the maximum amount of credit resources available for the planning period t, the restriction on the amount of external borrowing is determined, which is initiated by the marginal value of the autonomy ratio and the credit rating of the borrower: 0 ≤ ≤�к mt t (5) mt – upper limit on the amount of credit resources to be attracted: mt = min {bkt−1; st} (6) also important is the problem of accounting in the enterprise model of the risk of market activity on the basis of the marginal value of the profitability ratio on the basis of the marginal value of the return on equity, baltic journal of economic studies 171 vol. 8 no. 3, 2022 the formula for determining is presented in the form of formula (7) (irtishcheva, stegney, pauk, 2014): roe np bk вkt t t � � � �2 2 1 � (7) where npt is the net profit for the planning period t; ∆вк – increase in own funds for the planning period t (the amount of retained earnings for the planning period t). the restriction on the roe is represented by the following formula (8): roe roet t≥  where roet is the marginal value of the return on equity for the planning period t. the formalized description of the model of formation of the optimal strategy of the enterprise taking into account risk factors is presented. the target function of the model is the maximum consolidated cash flow from operating and financial activities adjusted for the amount of risk expenses for the internal risk group. according to form 3 "statement of cash flows", cash flow from operating activities ocf cash flow from operating activities (vіtlinskiy, velikoіvanenko, 2004): 1) revenues from: sale of products (goods, works, services); refund of taxes and fees; targeted financing; other revenues; 2) expenditures on payment for: goods (works, services); labor; contributions to social activities; liabilities on taxes and fees, other costs. according to form 3 "statement of cash flows", cash flow from financing activities fcf cash flow from financing activities) (vіtlinskiy, velikoіvanenko, 2004): 1) income from: equity, loans, other income; 2) expenses for: redemption of own shares; repayment of loans; payment of dividends; other payments. excluding dividend payments to major shareholders (within the short-term planning period), cash flow is presented as the difference between revenue from sales of goods and total production costs of the enterprise, which includes interest on short-term loans: ocf p c y f kt t j j j t j t j t t t t� �� � � � � � � � � � � � � � � � � ��1 1 � �( ]� (10) where osft – cash flow from operating activities for the planning period t; δ is the income tax rate in the planning period t; pj t� � j=1,j – is the selling price of a unit of the j-th commodity in the planning period t; cj t� � j=1,j – is the variable cost per unit of the j-th product in the planning period t; yj t� � j=1,j – is the output of commodity product of j-th name in the planning period t; ft is the fixed cost of production in the planning period t; ωt is the interest rate on borrowed funds for the planning period t. thus ocft cash flow from operating activities of the enterprise for the planning period t coincides with the net profit of the np for the same period. the element composition of variables cj t� � j=1,j, and constant f – production costs for an enterprise with serial production is determined. production costs сt of operating activities include items of expenses for the implementation in the planning period of the main activities related to the production and sale of marketable products, which is given by the vector y =(y1, y2, …, yj, … yj). here is the elementary composition of cash flow from financing activities. let us formulate the calculation formula for cash flow from financing activities, assuming that the issue of shares and the associated increase in equity capital in this short-term planning interval t is not carried out (11): fcf k kt t t� � �1 (11) where fcft is the cash flow from financial activities of the enterprise for the planning period t. kt−1 – is the amount of attracted short-term loans in the previous planning period t -1... which are repaid іn the current period t. write down the objective function of the model using the described structure of the formation of the components of the consolidated cash flow (12). cf ocf fcf r p c y ft t t t t j j j t j t j t t� � � �� � � � � � � � � �� � � � � � � ��� � �� 1 1 � ( �� � � � ���t t t t tk k k r max] 1 � � cf ocf fcf r p c y ft t t t t j j j t j t j t t� � � �� � � � � � � � � �� � � � � � � ��� � �� 1 1 � ( �� � � � ���t t t t tk k k r max] 1 � � (12) cft is the consolidated cash flow from operating and financial activities for the planning period t, adjusted for the amount of the insurance reserve. 4. formation of the model of optimal choice of scenario behavior of the enterprise in the conditions of risk management at the enterprise suppose that the block of risk constraints involves the use of inequality on the maximum available amount of resources кt for the planning period t, taking into account the threshold value of the autonomy coefficient, which the decision maker determines. then, the following formalization of the criterion function and the system of constraints of the model of forming the optimal variant of the enterprise strategy, taking into account the risk factors of the production, financial and managerial spheres, allows to present it in the following form (13): baltic journal of economic studies 172 vol. 8 no. 3, 2022 � �cf p c y f k k kt t j j j t j t j t t t t t t� �� � � � � � � � � � � � � � � � � � � � � ��1 1 1� �( ] ��r maxt � � �cf p c y f k k kt t j j j t j t j t t t t t t� �� � � � � � � � � � � � � � � � � � � � � ��1 1 1� �( ] ��r maxt � (13) j j j h t j t h t y x j j h h � � � � � � �� � � � � 1 1 1 1� , , , , ,� � � � � � � � (14) j j j t j t t t tc y f bok k � � � � �� � � � � 1 1 � � (15) y y d j jj t j t j t  � � � � � �� � �, , ;� �1 (16) 0 ≤ ≤�к mt t roe roet t≥  cft – is the consolidated cash flow from operations for the planning period t; pj t� � � – is the selling price of a unit of the j-th commodity in the planning period t; cj t� � j=1,j – is the variable cost per unit of the j-th product in the planning period t; yj t� � j=1,j – is the output of commodity product of j-th name in the planning period t; ft – is the fixed cost of production in the planning period t; ωt – is the interest rate on borrowed funds for the planning period t. kt – is the amount of attracted short-term loans in the planning period t, which are expected to be repaid in the next period (t+1). kt−1 – is the amount of attracted short-term loans in the previous planning period (t-1), which are repaid in the current period (t). rt – insurance reserves (belong to the section equity). � j h t , � � – is the intensity of supply of the j-th product to the h-th group of technological equipment in the planning period t; xh t� � , – is the effective operating time fund of the equipment of the h-th group in the planning period t; bokt – own working capital of the enterprise at the beginning of the planning period; yj t� � – is the minimum allowable volume of products of the j-th item to be produced; dj t� � – is the market demand for the j-th product in the planning period t; mt – upper limit on the amount of attracted credit resources (determined on the basis of the financial autonomy ratio); roet – is the return on equity for the planning period t; roet – is the threshold value of the roe for the planning period t. the values of the variables � j h t j j h h, ( , , , ) � � � �� � � � � �1 1 , c j jj t� � �� �� �1, , , ft , kt−1 , δt , rt are determined by the technical, economic and financial conditions of the production strategy formation and are the determined values. the values of the variables y j t  � � ( j j= � �1, ,) , x h hh t� � �( , )� �1 , bokt−1 , mt and the set of indices j and h are set at the stage of forming the list of alternative options for the production strategy by the decision maker. the variables p j jj t� � �� �� �1, , , djt� � ( j j= � �1, ,) , ωt , as well as the maximum available for the planning period t, the amount of credit resources is given by the scenario. all these changes belong to the group of exogenous variables in our model. the variables y j jj t� � �� �� �1, , kt constitute a block of endogenous factors and reflect the elemental composition of the strategy that is formed in the presented model. thus, the model (13)-(16) for choosing the optimal strategy of the enterprise is formed, which is reduced to the problem of integer linear programming. 5. conclusions taking into account the modern understanding of the risk management process as part of the strategic management of the organization, it can be concluded that in a modern enterprise the risk management system should not just be as such, but organically integrated into the planning and management system of the enterprise. the presence of a risk management system at the enterprise will make it possible to identify existing risks, determine the level of danger and, using certain methods and techniques of risk management, reduce their negative impact on the financial and economic activities of the enterprise. currently, the approach to risk assessment is being transformed, because new challenges require fundamental changes. the abovementioned ways to reduce risks allow enterprises to function more stably in the current conditions of the dynamically changing economy of ukraine. the results of the analysis show that most of the known methods of forecasting and risk assessment are inapplicable in conditions of unpredictability. the situation with the application of risk management tools is slightly better. dissipation and insurance, as well as diversification of activities and creation of reserves, are at least limitedly applicable. given these results of the study, however, it is impossible to conclude that risk assessment and management for the enterprise is useless: a significant proportion of events are not unpredictable, so integrated, systematic risk management gives the baltic journal of economic studies 173 vol. 8 no. 3, 2022 company the opportunity to prevent them or be prepared for their occurrence. it is only necessary to understand the weak applicability of the considered methods in the conditions of unpredictability and to look for additional tools that would allow the enterprise to timely detect the occurrence of unforeseen events and quickly adapt to unexpectedly changed conditions. however, all these methods start to work when the risk is realized (or must be realized) in losses and damages. such an approach to building an effective risk management system does not comply with the principle of proactivity: it is not necessary to include in the cost estimate of the enterprise the costs of eliminating the consequences of the risk, it is necessary to include the costs of preventing the risk. with this approach, preventive and adequate measures can reduce the cost of risk, as well as choose the optimal level of risk, which is determined by the minimum cost. the built models allow to make a timely choice of the development strategy of the organization in a rapidly changing business environment and do not require significant time, labor and financial resources. for the development of the study of tasks related to the choice of the optimal development strategy, it will be relevant to develop a variant of the dynamic model of forming the optimal strategy of the enterprise, taking into account the risk factor of its internal and external environment. the need to develop such a model is dictated by the requirements of the formation of the enterprise strategy at least for the medium term, which takes into account the dynamic variability of its components. references: abdullaev, n. a. (2008). modern tools, methods and technol¬ogy for the formation of enterprise development strategies. regional problems of economic transformation. available at: https://cyberleninka.ru/article/v/ sovremennye-instrumen-ty-metody-i-tehnologiya-formirovaniya-i-obosnovaniya-strategii-razvitiya-predpriyatiy akoff, r . (1985). future corporation planning. moskva: progress. financial sector statistics (2021). available at: https://bank.gov.ua/statistic/sector-financial (in ukrainian) granaturov, v., litovchenko, i., & kharichkov, s. (2003) analysis of financial risks: problems of identification, classification and assessment: monograph. odesa: institute for market problems and economic and ecological achievements of the national academy of sciences of ukraine. hofer, c. w., & schendel, d. (1986). strategy formulation: analytical concepts, west publishing. korneeva, t. ju., & nikitin, s. a. (2009). formation of a development strategy for industrial enterprises in the face of uncertainty. bulletin of tula state university. economics and law, pp. 136–141. shtefanich, d. a. (ed.) (1999) management of the entrepreneurial risk. ternopil: "economichna dumka". entrepreneurial shymko, o. v., & hrybkova, s. m. (2009). enterprise strategy. kramatorsk: ddma. c shiianov, b. a., & shiianova, g. b. (2009). risk analysis as a source of nonequilibrium states of economic systems. bulletin of voronezh state technical university. available at: https://cyberleninka.ru/article/n/analiz-riskov-kakistochnikaneravnovesnyh-sostoyaniy-ekonomicheskih-sistem/viewer ivashko, l. m., & ponomarenko, v. i. (2019). mathematical model for choosing an enterprise strategy. the fifteenth all-ukrainian scientific-practical internet conference "accounting-analytical and statistical methods and models in taxation, business, economy". irpin. (in ukrainian) irtishcheva, i., stegney, m., & pauk, m. (2014). methodically approach to the appointment of investment privatility of the gallery, business. bulletin of khnau im. v. v. dokuchaeva, series "economic sciences", vol. 5, pp. 15–25. levitskaia, a., zhuravlova, t. o., ivashko, l. m., & ponomarenko, v. i. (2018). modeling the task of management by number of dynamics and professional-qualification structure of personnel. financial and credit activity: problems of theory and practice, vol. 4, no. 27, pp. 296–306. proskurova, v. (2017). methodological approaches to risk management. economy and society, vol. 9, pp. 599–607. vіtlinskiy, v. v., & velikoіvanenko, p. i. (2004). rhysicology in economics and business: monograph. kyiv: kneu. (in ukrainian) vytvytska, o., martynyuk, o., & shpak, n. (2020). structural-functional modeling for th., g. t. e determination of the company 's equilibrium conditions in the dynamic business environment. mmc mathematical modeling and computing , vol. 7, no. 1, pp. 104–111. available at: http://science.lpnu.ua/mmc/all-volumes-and-issues/ volume-7-number-1-2020/structural-functional-modeling-determination received on: 11th of july, 2022 accepted on: 9th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 51 vol. 3, no. 2, 2017 corresponding author: 1 department of management and economics, national university of pharmacy. e-mail: yakakos74@gmail.com 2 department of management and administration, national university of pharmacy. e-mail: sagaidakrita@ukr.net 3 department of management and administration, national university of pharmacy. e-mail: demchenconata@ukr.net analysis of the socio-economic development of ukrainian regions оlena kozyrevа1, rita sagaidak-nikituk2, natalia demchenko3 national university of pharmacy, ukraine abstract. for a long period of time from 1991 to 2016, the socio-economic development of ukrainian regions was characterized by enhanced differentiation and persistent inequality. permanent preservation of the gap between the maximum and minimum values of indicators of socio-economic development of regions, in particular, the grp per capita (8.8 times in 2014); disposable income of populace (10.3% in 2015); unemployment rate according to ilo methodology (in 2.8 times in january-september 2016), the volume of realized industrial products (38,9 times in january-september 2016) indicate the persistence of centre-periphery relations between regions in the economic space of the country. this situation reduces the overall efficiency of the economy, which is reflected by the decline of ukraine’s position in the rankings of international organizations. according to the global competitiveness index in 2015, ukraine has shifted from 76 to 79 place compared with 2014, according to the index of human development, there was a slight increase from 83 to 81 place. to crown it all, taking into account the complexity of modern processes of ukrainian regions’ socio-economic development, the total assessment of determination of ukrainian regions’ levels of socio-economic development is required. the purpose of the article implies prompting the research results of determining the problem concerning the consolidated assessment of the socio-economic development of ukrainian regions. methodology. the article examines the processes of socio-economic development of ukrainian regions and offers an analytical scheme of identification stage of problematic of the regions’ socioeconomic development. the article justifies a system of partial indicators and on its basis calculates the integral and generalizing indicators of economic and social development of ukrainian regions. analysis of recent researches and publications. issues of spatial development of the country’s regions have researched italo f., baklanov p., boyer g., bramanti a., grossetti m., dmytryshyn l., krugman p., lappo g., demyanenko о., myrdal g., fujita м., etc. statement of the problem. however, reasoning the topical approach to the determination of the level of socio-economic development of the country’s regions requires in-depth development that in its turn determines the relevance of this article. key words: socio-economic development of region, irregularity, gross regional product, unemployment rate, migration index, problematic. jel classification: h50, j10 1. introduction socio-economic development of ukraine is based on the substantial positive changes in the regions. so, transition processes in ukraine were differently marked on the development of its regions: some of them managed to mobilize their capacity and gradually adapt to difficult economic conditions, while the others, as before, are currently in the state of deep economic stagnation, which has led to an increase in regional inequality. to crown it all, taking into account the complexity of modern processes of ukrainian regions’ socioeconomic development, the total assessment of determination of ukrainian regions’ levels of socioeconomic development is required. 2. literature review modern processes of the socio-economic development of ukrainian regions’ are complex and poorly defined and, therefore, require a detailed analysis to determine the factors of their irregularity. in the scientific economic literature, there are three main approaches to the survey of socio-economic processes, which are based on: modelling, analytical baltic journal of economic studies 52 vol. 3, no. 2, 2017 schemes or a combination of both directions together (piermartini, 2005; ostashko, voloschenko-hold'em, 2011). each of the abovementioned approaches has certain advantages and disadvantages, which are thoroughly analysed in the work (tochilina, 2012). analysis of a number of studies [5–11], which studied the processes of the regions’ socio-economic development, allows offering a certain identification stage of problematic concerning the country’s regions socio-economic development. 3. analysis of the economic development of ukrainian regions one of the main indicators determining the economic development level of the country regions is gdp per person. fig. 1 shows the distribution of ukrainian regions on this indicator in 2013. as can be judged from fig. 1, the leader in the country in terms of grp per person is the city of kyiv  – 109402  uah, which is far ahead of the second region in the range, namely, dnipropetrovsk region  – 46333  uah. the following areas are kyiv region  – 39988 uah, poltava region  – 39962 uah, donetsk region – 37830 uah, and kharkiv region – uah 31128. outsiders of grp per person in the country are the following regions: chernivtsi – 15154 uah, ternopil – 16819  uah, rivne  – uah 19003 and kherson  – uah 19311. in accordance with grp indicator per person to the average rate within the country, regions were divided as follows (fig. 2). 15154 16819 17044 19003 19311 19817 20165 20286 22303 22603 23517 24022 24514 24937 25533 26168 27355 29118 30526 31128 33473 37830 39962 39988 46333 109402 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 110000 chernivtsi ternopil zakarpatya rivne kherson volyn khmelnytsky zhytomer vinnytsya сhernihiv sumy ivano-frankivs'k luhans'k lviv kirovograd cherkasy mykolayiv odesa zaporizhzhya kharkiv ukraine together donets'k poltava kyiv region dnipropetrovs'k kyiv сity grp per person, uah region fig. 1. the diagram of ukrainian regions division according to the grp indicator per person (2013) source: the author’s calculations baltic journal of economic studies 53 vol. 3, no. 2, 2017 -23,3 -18 -15,1 -15 -12,5 -9,7 0,4 0,6 2,2 9,6 10,6 12 13,8 17,4 26,4 -30 -20 -10 0 10 20 30 zhytomer lviv kirovograd kyiv cherkasy poltava donets'k dnipropetrovs'k kyiv region reducing grp per person, % growth of grp per person, % odesa volyn rivne kherson ророр region -10 -20 -30 zaporizhzhya sumy 0 fig. 3. the dynamics of grp changes per person to the average rate within the country in different ukrainian regions in 2000–2013 source: the author’s calculations 1 2 3 2013 year 20% (5) 24% (6) 56% (14) 1 2 3 2001 year 24% (6) 20% (5) 56% (14) 1 2 3 2013 year 20% (5) 24% (6) 56% (14) 1 2 3 2001 year 24% (6) 20% (5) 56% (14) fig. 2. division of ukrainian regions in accordance with grp indicator per person to the average rate within the country in 2001 and 2003: 1 – more than 100%; 2 – from 75% to 99%; 3 – less than 75% source: the author’s calculations baltic journal of economic studies 54 vol. 3, no. 2, 2017 17789,7 18984,8 19273 19920,6 21083,4 21103,2 21610,9 22742,6 22742,6 22502,6 22913 23973,4 23545 24239,4 24271,6 24386,1 24700,4 25076,2 26417,7 26719,4 26998,5 27516,7 29361,5 31106,2 33352,1 65672,8 0 10000 20000 30000 40000 50000 60000 70000 zakarpatya chernivtsi ternopil luhans'k volyn ivano-frankivs'k kherson cherkasy kirovograd rivne zhytomer сhernihiv khmelnytsky lviv vinnytsya mykolayiv sumy odesa donets'k ukraine in a whole poltava kharkiv kyiv region zaporizhzhya dnipropetrovs'k kyiv income per person, uah region obviously, the structure of ukrainian regions according to this indicator has slightly changed. only kyiv region was replaced from the second group to the first while zaporizhzhia and odesa regions were replaced vice versa, from the first group to the second. the biggest increase of the grp indicator per person to the average rate in ukraine in 2013 in comparison with 2001 was detected in kyiv region  – 26,4%, dnepropetrovsk region  – 17,4%, donetsk region  – 13,8%, and poltava region – 12,0% (fig. 3). meanwhile, a decrease of the grp indicator was present in sumy region– 23,3%, zaporizhzhia – 18,0%, rivne region – 15,1%, and odesa region – 15,0%. 4. analysis of the regions’ social development w hile scientists characterize the economic development of the regions by one indicator – the grp indicator per person, several indicators characterize the social development. thus, the analysis of some works (omarov, 2014; gaiman, 2009; dobkin, chernov, kernes, 2010; hranberh, 2001; kuznetsova, 2014; klebanova, kizim, 2012) gives an opportunity to offer the following set: the income per capita, the unemployment rate and migration coefficient. according to the rate of income per capita, ukrainian regions in 2013 were distributed as follows (fig. 4). fig. 4. diagram of ukrainian regions’ distribution according to income per person in 2013 source: the author’s calculations baltic journal of economic studies 55 vol. 3, no. 2, 2017 11,5 11,5 11,4 11,3 11,2 11,2 11 10,6 10,5 10,2 9,9 9,9 9,5 9,4 9,3 9,2 9,1 9 8,6 8,4 8,1 8 8 7,8 6,7 6,7 0 1 2 3 4 5 6 7 8 9 10 11 12 zhytomer poltava luhans'k ternopil сhernihiv kirovograd donets'k rivne vinnytsya cherkasy kherson volyn sumy khmelnytsky ukraine in whole zakarpatya mykolayiv chernivtsi lviv zaporizhzhya ivano-frankivs'k kyiv region dnipropetrovs'k kharkiv odesa kyiv unemploy ment rate, % as can be judged from fig. 5, the leader in terms of the income rate per person in the country is kyiv city – uah 65672,8 which is far ahead of the second value of dnepropetrovsk region – uah 33352,1. at the following places are zaporizhzhia region  – 31106,2 uah, kyiv region  – 29361,5 uah, kharkiv region  – uah 27516,7 and poltava region  – 26998,5  uah. outsiders by income per person in the country are zakarpattia region  – 17789,7 uah, chernivtsi region  – 18984,8 uah, ternopil region  – uah 19273,0 and luhansk region – uah 19920,6. the unemployment rate of ukrainian regions’ population in 2013 was as follows (fig. 5). subject to fig. 5, the leaders of the unemployment rate in the country are kyiv city  – 6,7%, odesa  – 6,7%, and kharkiv region  – 7,8%, while the outsiders are zhytomyr  – 11,5%, poltava  – 11,5%, and luhansk – 11,4% regions. according to migration coefficient, ukrainian regions in 2013 were distributed as follows (fig. 6). as can be judged from fig. 6, the biggest positive migration coefficient has kyiv region  – 6,4%, kyiv city  – 6,0%, and kharkiv region  – 3,0%, while the negative migration coefficient has luhansk region (–3,6%) and donetsk region (–2,5%). fig. 5. diagram of ukrainian regions’ distribution according to the unemployment rate in 2013 source: the author’s calculations baltic journal of economic studies 56 vol. 3, no. 2, 2017 the results of integral estimation of ukrainian regions’ social development index (ic), which is offered in the work (omarov, 2014), are described in fig. 7. according to fig. 7, the city of kyiv (1,0) is significantly ahead of other regions of the country subject to the integral indicator of social development. kyiv region is in the second place – 0,6346, it is followed by odesa region– 0,5065, kharkiv region – 0,4338, and dnipropetrovsk region – 0,3725. it should be stressed that the above-mentioned indicators of ukrainian regions’ social and economic development have different nature and have no threshold, which could identify their problematic, and the need for the state support. 5. conclusions a significant number of half-peripheral and peripheral regions requires support from the state, aimed at aligning trends of the socio-economic development of top regions and problem regions, as well as the introduction of a mechanism to promote economic activities in the growth poles. the implementation of these measures requires regional support from the state, aimed at fig. 6. diagram of ukrainian regions’ distribution according to migration coefficient source: the author’s calculations -3,6 -2,5 -0,8 -0,8 -0,6 -0,5 -0,4 -0,4 -0,4 -0,2 0 0,1 0,1 0,2 0,2 0,6 0,6 0,7 0,8 0,9 1,5 1,9 3 6 6,4 -4 -3 -2 -1 0 1 2 3 4 5 6 7 khmelnytsky ternopil dnipropetrovs'k cherkasy vinnytsya mykolayiv lviv volyn poltava ivano-frankivs'k chernivtsi odesa kharkiv kyiv kyiv region region н аз ва ни е ос и сhernihiv sumy zaporizhzhy zhytomer rivne kirovograd ророр region -1 -2 -3 zakarpatya kherson donets'k luhans'k positive migration rate, % negative migration rate, % -4 baltic journal of economic studies 57 vol. 3, no. 2, 2017 fig. 7. diagram of ukrainian regions’ distribution subject to the integral indicator of social development in 2013 source: the author’s calculations 0,0466 0,0777 0,0915 0,1065 0,1084 0,1253 0,1297 0,1307 0,173 0,1796 0,1809 0,207 0,2272 0,2403 0,2686 0,2721 0,2769 0,2848 0,3107 0,3247 0,3725 0,4338 0,5065 0,6346 1 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 ternopil rivne kherson zhytomer сhernihiv cherkasy zakarpatya kirovograd vinnytsya sumy khmelnytsky volyn mykolayiv poltava lviv ivano-frankivs'k donets'k chernivtsi luhans'k zaporizhzhya dnipropetrovs'k kharkiv odesa kyiv region kyiv region ic aligning trends of the socio-economic development of the regions. however, the problems of reducing the inequality among socio-economic development of the ukrainian regions, grounding of the current concepts of socioeconomic development of the country’s regions require in-depth development. the main purpose of this article is to analyse the processes of socio-economic development of ukrainian regions. the system of fractional indicators is justified and, on its basis, the integral and generalizing indicators of economic and social development of the regions of ukraine are calculated. references: piermartini, r ., the, r . (2005). demystifying modelling methods for trade policy, world trade organization, geneva, p. 59. ostashko, t., voloschenko-hold'em, l. (2011). emergency measures of wto to protect the markets of agro-food goods, kiyv: national academy of sciences, institute of economics and forecasting, p. 224. the prospect of deep free trade between the european union and ukraine, (2006). centre for european policy studies, brussels, p. 238. baltic journal of economic studies 58 vol. 3, no. 2, 2017 tochilina, v. (2012). markets of real economy in ukraine's institutional of wto: conditions and integration, kiyv: national academy of sciences, institute of economics and forecasting, p. 552. omarov, sh.a. (2014). sustainable development strategy of ukraine's regions: assessment and forecasting: monograph, kharkiv: рh "inzhek", 288 p. gaiman, o.a. (2009). nonlinearity of economy and uneven development of regions: monograph, kharkiv: рh "inzhek", 428 p. dobkin, m., chernov, s., kernes, g. (2010). fundamentals of sustainable development of the kharkiv region by 2020: monograph, рh "inzhek", 512 p. hranberh, a. (2001). fundamentals rehyonalnoy economy, moscow: su hes, p. 495. kuznetsova, o.v. (2004). economic development of regions: theoretical and practical aspects of state regulation: monograph, moscow: editorial urss, p. 304. klebanova, t.s, kizim, n.a. (2012). nonequilibrium and cyclic dynamics of the socio-economic development of regions: assessment, analysis and forecasting: monograph, kharkiv: рh "inzhek", 512 p. елена козирева, рита сагайдак-никитюк, наталия демченко анализ социально-экономического развития регионов украины аннотация. в течение длительного периода времени с 1991 по 2016 год социально-экономическое развитие регионов украины характеризовалось усилением дифференциации и сохраняющегося неравенства. постоянное сохранение разрыва между максимальными и минимальными значениями показателей социально-экономического развития регионов, в частности врп на душу населения (в 8,8 раза в 2014 году); доходов населения (10,3% в 2015 году); уровня безработицы согласно методологии мот (в 2,8 раза в январесентябре 2016 года), объема реализованной промышленной продукции (38,9 раза в январе-сентябре 2016 года) свидетельствуют о сохранении центр-периферийных отношений между регионами в экономическом пространстве страны. такая ситуация снижает общую эффективность экономики, что отражается в снижении позиций украины в рейтингах международных организаций. в соответствии с глобальным индексом конкурентоспособности в 2015 году украина переместилась с 76 на 79 место по сравнению с 2014 годом. поэтому, учитывая сложность современных процессов социально-экономического развития регионов украины, необходима общая оценка уровня их социально-экономического развития. цель статьи  – обосновать результаты исследований интегральной оценки социально-экономического развития регионов украины. методология. в статье рассматриваются процессы социально-экономического развития регионов украины и предлагается аналитическая схема выявления проблемных вопросов социально-экономического развития регионов. в статье обоснована система частных показателей и на ее основе вычисляются интегральные и обобщающие показатели экономического и социального развития регионов украины. анализ последних исследований и публикаций. вопросы пространственного развития регионов страны исследовали итало ф., бакланов п., бойер г., браманти а., гроссетти м., дмитришин л., кругман п., лаппо г., демьяненко  о., мюрдаль  г., фуджита м. и др. постановка проблемы. однако обоснование актуального подхода к определению уровня социально-экономического развития регионов страны требует углубленного анализа, что в свою очередь определяет актуальность данной статьи. baltic journal of economic studies 111 vol. 8 no. 1, 2022 corresponding author: 1 classical private university, ukraine e-mail: kpuinform@gmail.com 2 classical private university, ukraine e-mail: pokataeva.olga1978@gmail.com 3 classical private university, ukraine e-mail: m.d.dyachenko@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-1-111-117 the management aspect of training future heads of educational institutions for economic activity viktor oharenko1, olga pokatayeva2, mariia diachenko3 abstract. the purpose of the article is to elucidate the training of future heads of education institutions for economic activity in the modern context; cover the management aspect and the results of an experimental test on the readiness of master’s students, specialty 073 management (educational institution management), for economic activity. a scholarly discussion on the problem of training future heads of education institutions for economic activity is presented. the authors describe the essence of the management aspect of training concerned. it is determined the levels (high, sufficient, average, low), structure, and criteria of the readiness of future heads of educational institutions for economic activity: motivational, cognitive, activity, and reflective. the foreign experience in training education managers for economic activity is considered. the requirements for training future heads of educational institutions for economic activity in ukrainian universities are analyzed. the authors clarify the peculiarities of teaching the following disciplines of economics to master’s students, specialty 073 management (educational institution management): "management of financial and economic activity", "legal and financial-economic fundamentals of educational institution management", and "educational fundraising". it is identified core theoretical knowledge and practical skills that a graduate of the specialty 073 management (educational institution management) must possess. emphasis is placed on the understanding of the principles of financial management of an educational institution; accounting organization as a separate area of an educational institution; the economic essence of salaries in educational institutions and accounting tasks; financial management of an educational institution, etc. results. the authors have developed components of educational institution management amidst the educational system’s modernization and economic progress of the state, as well as the main ways to train future managers of educational institutions for economic activity. the results of an experimental test on the readiness of future managers of educational institutions for economic activity are presented: in the process of professional training, the number of students with a high level of ea readiness increased by 22.2%, the low-level indicator significantly decreased – by 18.4%, and the indicator of a sufficient level increased by 14.2%. this is also confirmed by qualitative changes in the readiness of future education managers for economic activity. key words: higher education, economic activity, future head of educational institution, educational management, development, professional training. jel classification: i23, f15, f63 1. introduction in the context of education modernization, the functions of the head of the educational institution, which involve not only planning, motivation, organization, control, and analysis but also an understanding of the strategy and ways of developing the educational institution, need updating. the education manager today should today take into account the best world practices in the management of economic development and finances of the educational institution and marketing. the realm of domestic scholarly research comprises many contributions devoted to the national economic management of ukraine in the context of european integration (h. kovalchuk, n. tkalenko, v. fedorchenko, et al.), the training of future specialists in education management (i. abernikhina, o. binytska, l. zadorozhna-kniahnytska, o. kravchuk, baltic journal of economic studies 112 vol. 8 no. 1, 2022 o. lebid, v. khomenko, n. chernenko, et al.). however, the study of training master’s students of the specialty 073 "management", study program "educational institution management", for economic activity requires thorough attention that emphasizes research relevance. the purpose of the article is to elucidate the training of future heads of educational institutions for economic activity in the modern context; cover the management aspect and results of the experimental test on the readiness of master’s students of the specialty 073 management (educational institution management) for economic activity. 2. foreign experience in training education managers for economic activity in the process of professional training, the future head of the educational institution needs to form managerial and economic culture. only then will he be able to clearly identify problems, look for ways to solve them, and predict the effect of decisions made and planned measures, etc. thus, for example, american management culture considers management as a specialized activity and manager as a professional with expert knowledge. rationalism is at the heart of american management culture (just like in european culture). it is characterized by individualism, self-reliance, and calculated competitive pragmatism (kravchuk, 2017). the german model focuses on general intellectual abilities, punctuality, employability, flexibility, carefulness, independence, loyalty, a sense of duty, respect for corporate interests, the ability to negotiate, establish contacts, distribute tasks, make decisions, etc. the professional training of education managers involves blended learning – integration of group learning, independent learning in classrooms and online using electronic means, various interactive methods, and internet resources (katkova, 2002). in france, significant attention is paid to economic and financial aspects of the management of educational institutions: statistics, logistics, the educational institution’s information system, control and recording, financial management, accounting, and budget management (khomenko, 2012). on-the-job training of heads of educational institutions through the gradual career progress of future managers, starting from entry-level jobs, is peculiar to japan (kravchuk, 2017). it is worth noting that japanese education workers are characterized by a high level of educational culture and very rarely change their place of work that facilitates their promotion. 3. requirements for training future education managers for economic activity in higher education institutions of ukraine modernization of the professional training of the future manager of the secondary educational institution entails improving the educational process aimed at updating the content of the professional training of master’s students of the specialty 073 "management", study program "educational institution management" (lebid, 2018). the law of ukraine "on education" (on education, 2017) marks that education is a state priority that ensures innovative, socio-economic, and cultural development of society. in general, the professional activity of the head of the educational institution consists of administrative, economic, and pedagogical components. the education manager must be able to integrate the educational environment of the institution against internal and external factors that negatively affect it; ensure the organization of effective functioning of the educational institution (in the economic sense as well); solve the current problems of the staff; predict the strategy for the further development of the institution with extrapolation to its competitiveness in terms of the quality of educational services. the head of the educational institution should focus his activities on making education a strategic resource for guaranteeing national interests, improving the lives of citizens, and strengthening the competitiveness of our state in the world (figure 1). shortcomings in the activities of the head of the educational institution are complexity in making managerial decisions on problem solving, setting goals, processing information, planning, and control; labor time loss and inefficiency of working methods, etc. (zadorozhna-kniahnytska, 2007). the training of education managers should focus on forming their readiness for professional, innovative economic activity. this is only possible if innovative economic technologies, which characterize the independent learning and cognitive activity of training future managers of education enterprises, institutions, and organizations and on-the-job training for innovative economic activity, are implemented (binytska, 2013). today’s head of the educational institution must keep track of the economic situation of the state, maintain the financial stability of the institution and, if necessary, be able to obtain a loan for its material needs, develop a budget, conclude contracts, and control payroll accounting. the main ways to train future managers of educational institutions for economic activity are presented in figure 2. as part of the professional training of future heads of educational institutions, it is important to focus baltic journal of economic studies 113 vol. 8 no. 1, 2022 formulation of new educational strategies for the renewal of an educational environment formation of readiness for economic activity educational management amidst the modernization of the education system and economic development of the state improvement of the professional training of future managers of educational institutions approximation of ukraine’s education to world educational standards laying the groundwork for an optimal strategy of economic behavior in management development of the ability to optimize the educational process and rational use of resources and funds figure 1. components of educational management amidst the modernization of the educational system and economic development of the state organization of activity, contextual, training education training of future managers of educational institutions for economic activity coaching, tutoring information communications technology interactive teaching methods project activity economics-based practical training with practitioners (economists) figure 2. the main ways to train future managers of educational institutions for economic activity their education on economic activity in terms of pedagogical management; to introduce innovative educational technologies to develop managerial abilities and skills, etc. a course from the compulsory part of the curriculum "legal and financial and economic fundamentals of educational institution management" covers the peculiarities of the resource and adaptation approaches to the strategic management of a general education institution, namely: management of the internal environment of an educational institution (resource, financial capacity) and response to possible alterations of the external environment (scientific and technological, environmental, regulatory, and economic). an academic discipline "educational fundraising" is intended to familiarize future heads of educational baltic journal of economic studies 114 vol. 8 no. 1, 2022 institutions with attracting and accumulating financial means from various sources to formulate and implement a strategy for the innovative development of a general education institution. under the course, students become acquainted with fundraising as a technique for attracting additional funds, fundraising goals, means of interaction with donors, forms and tools, prospects and rules for successful fundraising. an academic discipline "management of financial and economic activities" for master students of the specialty 073 management (educational institution management) is designed to master knowledge and skills in the organization of financial management under centralized and decentralized conduct of financial and economic activities in educational institutions as business entities. within the discipline, strategic directions, technologies and mechanisms for making managerial decisions on the financial and economic activities of the educational institution are studied. during the course, students become acquainted with the organization of budget management and the rules for the institution’s asset management, etc. the practical part of the academic discipline provides analysis and additional information on the most common challenges of the financial and economic activities of education managers. in studying the course "management of financial and economic activities", future heads of educational institutions acquire a system of knowledge of theoretical and practical aspects of management of financial and economic activities of an educational institution; obtain skills in financial planning, making sound managerial decisions when using corporate financial resources, etc. education managers should be well-versed in the following issues: the provision of paid educational services by the educational institution in a market economy; their authority to manage extrabudgetary resources of the institution and use them; the functioning of the charitable fund as an additional source of funding for the educational institution. knowledge and skills related to the economic activities of future education managers are specified in table 1. graduates of the specialty 073 "management", study program "educational instituion management", must also understand: 1) the principles of financial management of an educational institution; 2) the organizational structure of the accounting department as a particular area of an educational institution; 3) requirements for the chief accountant of an educational institution and accounting employees; 4) the economic essence of wages in educational institutions and the task of accounting; 5) finance management of an educational institution; classification of employees; 6) recording of the staff number and working time; 7) forms of remuneration in educational institutions; 8) the procedure for the use and accounting of resources of a special fund; 9) the task of accounting for resources of a special fund; 10) accounting for special funds and other revenues; 11) business characteristics of the educational institution; 12) the powers and responsibility of the fund manager regarding the institution’s financial and economic activities. as a result of the study of economics-based courses, the future education manager in his managerial activity will be able to avoid financial and economic risks, incl. the promotion of financial funds in the educational institution: drawing up a budget and a financial plan, the formation of monetary resources and their distribution between the structural units that determine the organization’s activity; assessment of the financial capacity of the educational institution (chernenko, 2016). table 1 expected economic knowledge and skills of future education managers № knowledge skills 1. theoretical and practical fundamentals of financial and economic activity of the educational institution. to plan, manage and use the educational institution’s financial resources. 2. legislative and regulatory framework for the organization of financial and economic activities of the educational institution. to use various forms of financial support of the educational institution. 3. mechanisms and technologies for planning, management and use of the educational institution’s financial resources. to make and analyze the estimate and its capacity to maintain the educational institution’s activities. 4. organizational and economic model of financial support of the educational institution. to attract extrabudgetary resources using the knowledge of fundraising. 5. particularities of the educational institution’s activities in market conditions. to manage the attracted and own resources, optimize their structure. 6. educational accounting and estimates. to exercise effective control over the educational institution’s financial and economic activities. 7. ways to find methods of financing educational institutions at the present stage. to conduct an assessment of the effectiveness of the management of the educational institution’s resources baltic journal of economic studies 115 vol. 8 no. 1, 2022 the head of the educational institution should be informed that "insurance as a target compensatory resource of the enterprise allows the recovery of losses on the realization of property risks and contributes to the sustainable, uninterrupted operation of the enterprise, which is the main purpose of the economic security system" (abernikhina, 2007). thus, the insurance of corporate facilities makes it possible to compensate for losses in case of emergencies and help restore facilities and resources. in training managers for economic activity, the problem of optimizing energy saving in the institution is relevant. it entails the specification of means of accounting and control over the consumption of various energy resources; organization of consultations on energy cost reduction in the educational institution; establishment of control and responsibility for efficient electricity consumption, etc. graduates of the specialty 073 "management", study program "educational institution management", should be trained to deal with the above-mentioned. the authors have determined the readiness of future heads of educational institutions for economic activity in the process of professional training by following criteria, namely, motivational, cognitive, activity, and reflective. 4. experimental verification of the readiness of future heads of educational institutions for economic activity under the investigation of the readiness of master’s students of the specialty 073 "management", study program "educational institution management", the motivational criterion has shown the following results (table 2). table 2 shows that after repeated diagnostics of the eg, the percentage of students with a high level of motivation increased by 21.9% (from 11.1% to 33.3%), with sufficient – by 22.2% (27.8% to 50%); the indicators of the average level decreased by 33.3% (from 44.4% to 11.1%), and the initial level – by 11.1% (from 16.7% to 5.6%). minor changes also occurred in the cg: compared to the original data, a high level increased by 5.5% (from 5.6% to 11.1%), sufficient – by 11.1% (from 38.9% to 50%); average – by 11.1% (from 44.4% to 33.3%), and low – by 5.5% (from 11.1% to 5.6%). according to the cognitive criterion, analysis of the dynamics of readiness for economic activity during the experiment demonstrates significant positive changes in the eg and minor positive shifts in the cg. based on the above results, it can be concluded that in the eg, the indicators of a high level increased by 22.2% (from 16.7% to 38.9%), a sufficient level increased by 11.1% (from 27.8% to 38.9%), and the indicators of an average level decreased by 16.6% (from 33.3% to 16.7%) and an initial level – by 11.1% (from 16.7% to 5.6%). in the cg, the percentage of an initial level decreased by 11.1% (from 22.2% to 11.1%), and minor changes are observed at a high level, the indicators of which increased by 5.5% (from 16.7% to 22.2%), and at an average level – by 5.6% (from 33.3% to 38.9%) (table 3). the findings of observation, requestioning on the readiness of future heads of educational institutions for economic actions are as follows according to the activity criterion: in the eg, the percentage with a high table 2 dynamics of the levels of readiness of future heads of educational institutions for economic activity according to the motivational criterion levels eg (experimental group) cg (control group) ascertaining stage control stage increment ascertaining stage control stage increment % % % % % % high 11.1% 33.3% 21.9% 5, 6 11.1% 5.5% sufficient 27.8% 50% 22.2% 7 ( 38.9%) 50% 11.1% average 44.4% 11.1% 33.3% 8 ( 44.4%) 33.3% 11.1% initial 16.7% 5, 6 11.1% 2 ( 11.1%) 5, 6 5.5% table 3 dynamics of the levels of readiness of future heads of educational institutions for economic activity according to the cognitive criterion levels eg cg ascertaining stage control stage increment ascertaining stage control stage increment % % % % % % high 16.7% 38.9% 22.4% 16.5% 22.2% 5.5% sufficient 27.8% 38.7% 11.3% 27.8% 27.8% 0% average 33.3% 16.7% 16.6% 33.3% 38.9% 5,6% initial 16.7% 5,6% 11:1. 22.2% 11:1. 11:1. baltic journal of economic studies 116 vol. 8 no. 1, 2022 level increased by 38.8% (from 5.6% to 44.4%), in the cg – by 5.6% (from 22.2% to 27.8%), a sufficient level in the eg increased by 22.2% (from 16.7% to 38.9%), in the cg – by 5.5% (from 27.8% to 33.3%), an average level in the eg decreased by 16.7% (from 27.7% to 11.1%), in the cg – by 5.6% (from 27.8% to 22.2%), an initial level in the eg decreased by 44.4% (from 50% to 5.6%), and in the cg – by 5.5% (from 22.2% to 16.7%) (table 4). comparative analysis according to the reflective criterion showed that in eg, the percentage with a high level increased by 16.7% (from 11.1% to 27.8%), a sufficient level – by 5.6% (from 50% to 55.6%), and thus, the indicators of an average level decreased by 11.2% (from 22.2% to 11.0%) and an initial level – by 11.1% (from 16.7% to 5.6%). minor dynamics can be seen in the cg: a high level decreased by 5.6% (from 16.7% to 11.1%), average increased by 11.1% (from 27.8% to 38.9%), an initial level decreased by 5.6% (from 16.6% to 11.1%), the indicators of a sufficient level remained unchanged (table 5). therefore, the results indicate positive growth dynamics in the readiness of future heads of educational institutions for economic activity according to the reflective criterion in the eg, which significantly exceeds the results of the cg participants. let us summarize all the experiment results (table 6). 5. conclusions as a result of the experiment, which has engaged master’s students of the institute of management of the classical private university of zaporizhzhia, there are quantitative changes in the indicators which demonstrate qualitative transformations in the consciousness and behavior of future heads of educational institutions. it confirms the positive dynamics of their readiness for economic activity. summarizing the quantitative indicators of both groups for the levels of readiness of future heads of educational institutions for economic activity, the authors obtained the following results: the number of students with a high level of readiness for economic activity by 22.2% in the eg increased, while the cg demonstrated minor changes – by 2.1%. an essential decrease in the number of students with an initial table 4 dynamics of the levels of readiness of future heads of educational institutions for economic actions according to the activity component levels eg cg ascertaining stage control stage increment ascertaining stage control stage increment % % % , % % % high 5,6% 44.4% 38.8% 22.2% 27.8% 5,6% sufficient 16.7% 38.9% 22.2% 27.8% 33.3% 5.5% average 27.7% 11:1. 16.7% 27.8% 22.2% 5,6% initial 50% 5,6% 44.4% 22.2% 16.7% 5.5% table 5 dynamics of the levels of readiness of future heads of educational institutions for economic activity according to the reflective criterion levels eg cg ascertaining stage control stage increment ascertaining stage control stage increment % % % % % % high 11:1. 27.8% 16.7% 16.7% 11:1. 5,6% sufficient 50.0% 55.6% 5,6% 38.9% 38.9% 0% average 22.2% 11.0% 11:1. 27.8% 38.9% 11:1. initial 16.7% 5,6% 11:1. 16.6% 11:1. 5,6% table 6 dynamics of the levels of readiness of future heads of educational institutions for economic activity after the experiment levels eg cg ascertaining stage formative stage increment ascertaining stage formative stage increment % % % % % % high 15.3 37.5 22.2 16.0 18.1 2.1 sufficient 29.1 43.4 14.3 33.0 37.5 4.2 average 30.6 12.5 18.1 33.0 33.3 0.3 initial 25.0 6.6 18.4 18.0 11.1 6.9 baltic journal of economic studies 117 vol. 8 no. 1, 2022 level was recorded in the eg – by 18.4%, and in the cg – by 6.9%. the number of experiment participants with a sufficient level of readiness for economic activity increased by 14.2% in the eg, and in the cg – by 4.2%. the percentage of students with an average level in the eg decreased by 18.1%, the cg showed 0.3%. during the professional training of future education managers, it is necessary to teach them to analyze and solve problems in the regulation of economic-social and labor relations; use analytical and methodological tools for economic substantiation of management decisions; identify economics-based problems in an educational institution, etc. references: abernikhina, i. h. (2007). zastosuvannia modeli zmishanoho finansuvannia pry upravlinni mainovymy ryzykamy pidpryiemstva [application of the model of mixed financing in property risk management of the enterprise]. ekonomika: problemy teorii ta praktyky: zb. nauk. pr., vol. 233, t. 4, pp. 1076–1084. (in ukrainian) binytska, o. p. (2013). suchasnyi stan pidhotovky maibutnikh kerivnykiv ustanov ta orhanizatsii u sferi osvity do innovatsiinoi ekonomichnoi diialnosti [the current state of preparation of future heads of institutions and organizations in the field of education for innovative economic activity]. pedahohichnyi protses: teoriia i praktyka, vol. 3, pp. 27–32. (in ukrainian) zadorozhna-kniahnytska l. (2014). udoskonalennia profesiinoi pidhotovky menedzheriv osvity v suchasnomu vyshchomu navchalnomu zakladi na antropolohichnykh zasadakh [improving the professional training of education managers in a modern higher education institution on anthropological principles]. vytoky pedahohichnoi maisternosti. seriia: pedahohichni nauky, vol. 13, pp. 133–138. (in ukrainian) katkova, t. i. (2002). kompetentnyi vypusknyk – meta i rezultat diialnosti vyshchoho navchalnoho zakladu osvity [competent graduate – the purpose and result of higher education]. postmetodyka, vol. 2–3, pp. 79–82. (in ukrainian) kravchuk, o. s. (2017). vitchyznianii ta zarubizhnyi dosvid profesiinoi kerivnykiv navchalnykh zakladiv v umovakh mahistratury [domestic and foreign experience of professional heads of educational institutions in the conditions of a magistracy]. visnyk zhytomyrskoho derzhavnoho universytetu imeni ivana franka. pedahohichni nauky, vol. 4(90), pp. 77–86. (in ukrainian) lebid, o. (2018). zmistovyi komponent systemy formuvannia hotovnosti maibutnoho kerivnyka zahalnoosvitnoho navchalnoho zakladu do stratehichnoho upravlinnia v umovakh mahistratury [the semantic component of the system of forming the readiness of the future head of a secondary school for strategic management in the conditions of master's degree]. naukovyi visnyk mnu imeni v. o. sukhomlynskoho. seriia: pedahohichni nauky, vol. 2(61), pp. 144–149. (in ukrainian) pro osvitu: zakon ukrainy vid 05.09.2017 № 2145-viii. available at: https://osvita.ua/legislation/law/2231/ (in ukrainian) khomenko, v. v. (2012). vykorystannia dosvidu pidhotovky menedzheriv osvity frantsii u vyshchykh navchalnykh zakladakh ukrainy [using the experience of training french education managers in higher educational institutions of ukraine]. naukovi pratsi vyshchoho navchalnoho zakladu "donetskyi natsionalnyi tekhnichnyi universytet". seriia: pedahohika, psykholohiia i sotsiolohiia, vol. 2(12), pp. 28–35. (in ukrainian) chernenko, n. m. (2016). teoretychni i metodychni zasady pidhotovky maibutnikh menedzheriv osvity do upravlinnia ryzykamy u navchalnykh zakladakh [theoretical and methodical bases of preparation of future managers of education to risk management in educational institutions]. odesa, 511 p. (in ukrainian) baltic journal of economic studies 121 vol. 3, no. 2, 2017 corresponding author: 1 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: pnvuniv15@ukr.net 2 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: oliynik_anna@ukr.net the impact of cooperation bet ween insurers and banks on the development of the insurance system nataliya prikazyuk1, ganna oliynik2 taras shevchenko national university of kyiv, ukraine abstract. the article highlights how the cooperation of insurance companies and banks affects the insurance system. defined the concept of bancassurance, provided a brief description of the main bancassurance models in the context of their impact on the insurance system. defined the main benefits and risks that accompany cooperation of insurance companies and banks within different models of association. it is noted that despite the generally accepted benefits of cooperation between insurers and banks, financial intermediaries’ unions often carry significant risks. benefits from the cooperation of insurance companies and banks are disclosed with operational, marketing and financial aspects. the purpose of the article is to study the forms of cooperation between financial intermediaries and their impact on the insurance system. methodology. the study is based on theoretical methods to study this problem. the theoretical and methodological basis of the study is works of scientists on the models of cooperation between insurers and banks. the dialectical method of cognition as well as such methods as logical generalization, structural and systematic analysis are used to study the methodological foundations of banks’ impact on the insurance companies and insurance system. results. banking activity has a significant impact on the insurance system. this impact is noticeable at the micro-level: insurers and banks can be clients of each other as well as they can sign cooperation agreements. a significant positive impact of the bancassurance on the activities of both financial institutions within the synergy that appears during their cooperation is highlighted in the article. respectively, the insurance company and the bank are experiencing the benefits of cooperation along with savings on fixed, variable costs and obtaining additional profits; simplifying and optimization of the process of collecting and processing information; savings on advertising and marketing research. value/originality. despite the numerous works on this subject, such an issue like the impact of insurers and banks cooperation on the insurance system development remain insufficiently studied. the article highlights the impact of the banking system on insurance as from the perspective of their interaction and the factors of direct and indirect influence of banking activities on the insurance system. key words: bank, insurance company, bancassurance, cooperation, financial intermediaries. jel classification: g21, g22, g34 1. introduction the activities of insurance companies and banks are historically related. insurers and banks significantly affect each other as active members of a single financial system. moreover, the impact of banking on all of the systems of the financial market, including insurance, is considered to be the most noticeable. it can be explained by the fact that the banking sector is the most powerful and its share of the financial market is the largest. therefore, its fluctuations significantly influence the activities of other market participants. the influence of banking on insurance system can be considered at two levels: micro-level  – banks’ impact on insurance companies within their joint activities and macrolevel – the state level. collaboration and cooperation of financial intermediaries in providing financial services become one of the main characteristics of modern economic space. such cooperation is gaining increasingly larger scales. it becomes a common phenomenon and provides new prospects for the development of the financial system and its separate subsystems. the cooperation of insurance companies and banks is the most common occurrence, despite the great number of financial institutions. historically, the banking and insurance activities are closely related, therefore, their baltic journal of economic studies 122 vol. 3, no. 2, 2017 partnership is not accidental. it’s economically justified for both parties. 2. the main aspects and models of cooperation it should be noted that insurance companies are interacting with banks constantly while conducting their activities. this interaction starts with the maintenance of insurer’s monetary circulation by the bank and ends with higher forms of cooperation. the main aspects of insurance companies and banks interaction are presented in figure 1. thus, the relationship between the bank and the insurance company is formed at different levels and in different fields. most often the cooperation between insurers and banks is called bancassurance. in our opinion, in the broad sense, bancassurance is a legally executed agreement between the bank and the insurance company to meet the needs of consumers in insurance (banking services) through the bank (insurance) distribution channels. the degree of interaction between banks and insurance companies greatly influences the activity of insurance companies and insurance system in general. so we consider it necessary to disclose the different models of cooperation between banks and insurance companies, describing the main features they offer and the risks they carry. primarily, insurance companies and banks are customers of each other. bank performs cash management services of the insurance company; accepts deposits from insurance companies; may be its lender. so, the first step of interaction between banks and insurance companies is the stage of mutual services, as the quality of services could influence the choice of the partner for cooperation. the agency agreement is the initial stage of cooperation between the insurance company and the bank, financial intermediaries are responsible solely for services rendered (thus securing themselves from a number of risks), and financial results of such cooperation are relatively small. more integrated forms of cooperation between insurers and banks proved its effectiveness in the world. complex and interconnected structure provide a substantial interest of the parties to achieve common goals and, therefore, greater responsibility for joint activities and reputation of each other. however, complex structures not only could lead to additional benefits of financial intermediaries but also entails additional risks. selecting the appropriate models of cooperation should depend on the overall economic and political situation in the country, the state of the financial services market and objectives to be set by the financial intermediaries. the strategic alliance between the bank and the insurer is the next-stage model of cooperation after the agency contract. at this stage, insurance companies and banks do not have shares in the capital of each other, but the intention of cooperation is greater than when signing the agreement and the customer base of the insurer and the bank at this stage tend to unite. the main advantage of the strategic alliance is that the insurer and the bank do not take additional risks, are completely independent of each other in the financial and organizational aspects (charles, vincent, huldah 2004). creation of a joint venture (bank insurer) requires the additional funding of banks and insurance companies. typically, one of the transaction participants is the moderator (makes a larger share of the joint venture) and, therefore, has a greater influence in decision aspects of interaction of insurance companies and banks bank as a client of insurance company forms of interaction between banks and insurance companies insurance company as a bank’s client property insurance: movable property; real estate. life insurance: medical; personal, etc. liability insurance: d&o (directors and officers liability insurance); professional liability insurance. integrated bancassurance: bbb (comprehensive insurance of banks). cash and settlement services for insurance company; saving insurer’s funds in banks accounts; keeping the part of reserves of an insurance company in the form of bank deposits. agency agreement strategic alliance joint venture mergers/acquisitions financial supermarket fig. 1. aspects of interaction of insurance companies and banks source: compiled by the author, based on (prikazyuk, 2008) baltic journal of economic studies 123 vol. 3, no. 2, 2017 making and gets a higher revenue. the advantage of this interaction is a clear separation of the insurance and banking: each financial intermediaries dealing with the exclusively own profession. common features of the insurer and the bank shifted to the newly created company (szewieczek, 2013). the next model of interaction between banks and insurance companies is mergers/acquisitions. for banks, mergers/acquisitions have several advantages. compared with the foundation of its own insurance company, the process of mergers and acquisitions for the bank is easier and takes less time. primarily, the bank does not have the internal capacity to insurance processes, so it strives to find insurers that have a positive reputation in the market, developed infrastructure, highly qualified staff, and a stable customer base. however, mergers and acquisitions between insurers and banks are less common than the full union of several financial intermediaries because it requires a complete transfer of assets from an insurer to a bank (if the bank initiated mergers / acquisitions). this operation entails major risks: firstly significant investment may not bring the expected profits in the future, and secondly, changing the legislative requirements and regulations for insurance companies and joint activities may lead to loss of a bank. the financial supermarket is a highest and quite common model of financial intermediaries’ cooperation that provides customers the possibility to get banking and insurance services, buying and selling shares and bonds, mortgages and more. often comprehensive financial services are carried out online. in times of ever-increasing pace of life and constant lack of time, financial supermarket concept is particularly relevant (martin, rey 2001). often the benefits of bancassurance are mentioned in the literature but there is also the negative impact of insurers’ and banks’ joint activities: reduction of loyalty to the tandem of financial institutions because of disloyalty to one of the partners; reducing the number of customers as a result of the imposition of insurer bank’s partner; restricting range of insurance services to those in which the bank is interested; reduced income of insurers due to overloading by bank’s commission for mediation services. it should be noted that the decision to cooperate is accepted by the senior management of financial institutions; selling of financial services via the bancassurance channel is carried out through the front offices of the companies; collection, processing, and analysis of information is exercised through the back offices. one should take into consideration that both financial institutions have to reach agreement on certain organizational, financial, and management issues for conducting joint activities. models, methods of implementation and main characteristics of bancassurance can vary depending on the country and on conditions, in which it occurs. it is also important to take into consideration what kind of bank and insurance company will conclude an agreement on bancassurance. the boundaries of interaction between insurers and banks vary considerably across the countries. the absence of direct legislative obstacles to the implementation of financial intermediaries’ joint activities. availability of the legal framework that regulates relationships of financial intermediaries. the interest of a target audience in bancassurance products is one of the most important components of its implementation. it determines the model in which it will be implemented. availability of consumers’ needs and demand. availability of agreement, the management and financial components. the presence of the relevant components is the basis of partnership beginning of insurers and banks, the specificity of financial institutions affects the model of bancassurance implementation. availability of financial products that would be in demand among the consumers of a certain segment. insurance products that are interesting for the certain segment are sold through banking channels. bancassurance the prerequisites for the existence and development of bancassurance fig.2. the prerequisites for the existence and development of bancassurance source: compiled by the authors baltic journal of economic studies 124 vol. 3, no. 2, 2017 these factors affect the bancassurance forms and they are crucial in its organization. the prerequisites for the existence and development of bancassurance are presented in figure 2. in general, the implementation of bancassurance has a significant positive impact on the insurance company as well as on the bank. this effect, as a rule, leads to the development of both institutions. consequently, the development of insurance companies positively affects the development of the entire insurance system. positive trends from the implementation of bancassurance are embodied in the following aspects: financial, operational, and marketing aspect (fig. 3). the financial aspect is realized through a larger profit that the financial institutions can get. it means that the number of financial services that are sold by the bank and the insurance company increases but, at the same time, overall costs are reduced or remain unchanged. for example, fixed costs for salaries, rent, utilities remain the same because the bancassurance products are sold through banking channels and don’t require the lease of new premises or attracting new employees. it can be carried out by a representative of the insurance company, who is located in a bank branch or by the bank employee who was specially trained. also, the costs for hardware and software can be included to the fixed costs. the development of new software is essential when creating a new company (bank insurer). if the bancassurance is implemented through banking distribution channels, the software development and purchase of new computer equipment are optional. insurance costs and costs for new customers’ attraction belong to variable costs. insurance costs are reduced because the bank as a partner of the insurance company uses certain preferences (discounts) for personal property insurance and employee insurance. also, when conducting the joint activities, the insurance companies and banks often have an access to the customer bases of each other, which significantly reduces the costs of financial institutions to expand customer bases. operational aspect of the implementation of bancassurance is embodied by simplifying the technological processes, which are associated with the processing and analysis of financial information. access to the partner’s technologies and the achievements is another element of the operational aspect of cooperation between insurers and banks. the reduction of technological processes that accompany the search for new customers can be also considered as a result of the merger of two customer bases. the marketing aspect is embodied by the improvements in the development of the new financial product. since the development and implementation of new financial products, as well as market research for new products in the financial services market, are characterized by a fairly high cost, the attractiveness of the cooperation between insurance companies and banks grows even greater. also, the marketing effectiveness of two financial institutions increases thanks to the ability to reach a larger segment of the market (the insurance company’s clients automatically become clients of the bank) and thanks to geographical diversification. in addition, the cooperation between insurers and banks has a positive impact on the reputation of both financial institutions. cooperating with the insurance company the bank gets additional benefits by increasing its own sales volume due to the fact that the banking products that include an insurance component give the customers a greater confidence in them. each of the aspects listed above is fully realized by synergy that accompanies any process of institutions’ merger or their separate elements. synergy implies the achievement of a greater effect as a result of joint activities of financial institutions than when the bank and the insurance company operate separately. in these aspects, synergy appears in the following ways: in the financial aspect, additional profits appear beside the saving of fixed and variable costs. the insurer significantly increases the number of channels, and thus the volume of sold insurance products increases. bank profits rise due to commissions that are received from insurers. bancassurance synergy effect reducing relatively fixed costs; reducing relatively variable costs. simplification of technological processes; access to technologies and achievements of the partner. development of new financial products; increase of the market share; geographical diversification. financial aspect: operational aspect: marketing aspect: fig. 3. aspects of bancassurance implementation source: compiled by the author, based on (szewieczek, 2013) baltic journal of economic studies 125 vol. 3, no. 2, 2017 in the operational aspect, the synergy effect is more visible at the level of back-offices of the insurance company and the bank, as the collection, analysis, and processing of information that is necessary for the financial institutions’ activities are carried out at this level. banks and insurance company are able to distribute the costs for the salary of back office staff, their hardware, and software. in the context of the marketing aspect, the synergy is embodied in the form of savings on marketing campaigns (advertising) and marketing research. this occurs due to cost allocation between financial intermediaries and thanks to the fact that marketing achievements of the insurance company and bank make it possible to achieve a greater effect on the financial services market. however, the transience and the uncertainty of the development of the global financial system have a permanent effect on all spheres of economic activities, including banks and insurance companies. thus, the cooperation between banks and insurance companies falls under the double impact of risks: risks of the environment, on the one hand, and the risks of the banking and insurance activities, on the other hand. the difficult economic situation in the domestic financial market complicates the implementation of the partnership of insurers and banks. studying the different aspects of cooperation between banks and insurance companies, one cannot determine its impact on the insurance system unambiguously since such cooperation brings both advantages and threats for insurance companies and, therefore, for the entire insurance system. 3. the impact of banks on the insurance system in general, when analysing the cooperation between insurance companies and banks, one need to focus on the studying of impact, which the banks have on insurers and, consequently, on the entire insurance system. the banking system is more developed than the insurance industry in the vast majority of countries. as a rule, assets of the banking system substantially outweigh the total assets of insurers. thus, the stability and the development of the national economy depend largely on the efficient and uninterrupted operation of the banking system. consequently, the banking system has a significant impact on all segments of the financial system on the whole and on the insurance system in particular. in our opinion, the impact of banks on insurance companies and insurance system can be divided into managed and unmanaged; also, there are some indirect banking factors that can influence the insurance. thus, the factors of influence that depends on banks include the following: 1. banks’ loyalty to insurance companies. banks and insurance companies may have a different approach to partnership. when concluding agreements on long-term periods, banks and insurance company can strengthen their market position thanks to achieving sustainable competitive advantages as partners. in ukraine, banks consider insurance companies only for obtaining an additional income. this situation is common today. the insurance company is not considered by the bank as a long-term strategic partner. however, the experience of developed countries shows that the cooperation between the bank and the insurance company for many years, along with favourable socio-economic conditions, strengthens the position of both financial intermediaries in the market and provides a basis for the qualitative deepening of their partnership. 2. bank downgrade or bankruptcy. first of all, we should note that the downgrade and, especially, a bankruptcy of a major bank have a significant negative impact on the national economy (the occurrence of so-called systematic risk). sometimes the bankruptcy of a major bank or financial conglomerate becomes the beginning of the economic crisis. such cases are not rare in the world practice. considering the impact of the downgrade of the bank or its bankruptcy on the activities of insurance companies more detailed, it should be noted that the insurance company as a client of the bank falls under the significant risk of non-repayment of deposits and funds on accounts. if the volume of deposits is substantial, it can significantly harm the solvency and liquidity of the insurance company, by creating additional risks of its activities, and adversely affecting the development of the insurance system, especially if this insurance company is systemically important. secondly, the downgrade of the bank or its bankruptcy can negatively affect the rating of the insurance company, as a partner of this bank, which threatens the loss of customers. we believe that the factors that don’t depend on banks include the following: 1. state regulation of banking and insurance activities. government authorities may impose a ban on any agreements between financial intermediaries or set clear boundaries of their interaction. for example, in the first half of the 20th century as a result of the economic crisis in italy and america, the laws that were restricting the speculative activities of banks (amato law and glass-steagall act respectively) were adopted (broner, ventura, 2010). thus, banks were not allowed to be engaged in insurance and securities transactions and, therefore, they lost a source of additional income as a participation in providing the insurance services. insurance companies, in their turn, lost potential customers and distribution channels of their services. since banks have significant information, these "missed opportunities" are noticeable for insurance companies. establishing of particular limits of interaction between banks and insurance companies at the level of the baltic journal of economic studies 126 vol. 3, no. 2, 2017 agency agreement is another example of government restrictions in ukraine. 2. since banks occupy the largest share in the financial market, customer loyalty to banks often determines their loyalty/trust in all financial intermediaries, including insurance companies. regardless of the number of banks in a country, the stable banking system demonstrates the stability of the financial market (the entire country 's economy). therefore, under these conditions, all kinds of financial services (banking, investment, insurance, consulting, etc.) are in constant demand among the population. and conversely, the absence of clients’ loyalty to banks, all financial intermediaries (including insurance companies) suffer from a shortfall in revenues. in our opinion, the indirect impact of banks on insurance companies consists of the following: 1. by increasing the volume of lending banks influence the money supply that may affect the activity of the consumption of insurance services and the level of their prices. 2. growth in consumer loans and mortgages is causing increased demand for insurance products. by mitigating terms of the mortgage, consumer, and other loans, banks at the same time attract a significant number of new customers to the insurance companies. it is connected with the compulsory insurance of collateral and the borrower's life insurance. 3. the impact of banks on insurance companies can be considered in terms of competition for customers. clients’ funds that can be placed in bank deposits or in the form of investment in long-term life insurance is the basis of competition between banks and insurance companies. so, in order to attract more customers and, accordingly, a greater volume of temporarily free funds, insurance companies have to offer their customers a higher rate of returns than bank interest. the funds that are attracted by the insurance companies in the form of contributions and by banks in the form of deposits constitute the financial basis of investment activities of financial intermediaries. investment activities can be also considered as a competitive basis of financial intermediaries. in the conditions of a limited number of attractive investment projects, banks, and insurance companies have to look for additional investment options. 4. conclusions banks occupy a leading part among other financial intermediaries in most countries and do a significant impact on the entire financial market and the insurance sector in particular. being a partner of the insurance company, a bank may significantly affect the volume of insurance, profit of insurance companies and customer loyalty to them. this effect may have both positive and negative consequences. at the macro level, the banking sector is able to influence the insurance business directly (managed and unmanaged factors) or indirectly. the impact of cooperation between insurance companies and banks on the insurance system depends largely on the level of such cooperation, activities of the banks and the government, which controls their activities, as well as on independent factors such as competitive market conditions and changes in lending volumes. balanced and effective banks’ activities and its reasonable control guarantees the stability of the banking system development and has a positive impact on all segments of the financial market, including, insurance system. references: charles j., vincent j., huldah a. (2004). strategic alliances in the financial services and chemical industries. journal of business & economics research. 2(11): 11-16. fernando a., jaume v. rethinking the effects of financial liberalization. (2010). working paper. 16(7): 51-68. martin f., helene r . financial. (2001). super-markets: size matters for asset trade. nber working paper no. 8476. retrieved from http://www.nber.org/papers/w8476 prikazyuk n. (2008). the integration of insurance companies and banks: strategic alliance. bulletin of kyiv national taras shevchenko university. series "economy ". (106): 30-32. szewieczek d. the risk of cooperation between banks and insurance companies. (2013). studia ekonomiczne. (127): 137-151. наталия приказюк, анна олейник влияние взаимодействия страховых компаний и банков на развитие страховой системы аннотация. в статье раскрыто, как сотрудничество страховых компаний и банков влияет на систему страхования. дано определение банкострахования и краткое описание основных моделей банкострахования в контексте их воздействия на страховую систему. определены основные преимущества и риски, которые сопровождают сотрудничество страховых компаний и банков в рамках различных моделей банкострахования. отмечается, что, несмотря на общепринятые преимущества сотрудничества между страховщиками и банками, объединения финансовых посредников часто несет значительные риски. преимущества baltic journal of economic studies 127 vol. 3, no. 2, 2017 сотрудничества страховых компаний и банков раскрыты с позиции операционного, маркетингового и финансового аспектов. цель статьи – изучить формы сотрудничества между финансовыми посредниками и их влияние на систему страхования. методология. исследование основано на теоретических методах исследования этой проблемы. теоретической и методологической основой исследования являются труды ученых о моделях сотрудничества между страховщиками и банками. диалектический метод познания, а также такие методы, как логическое обобщение, структурный и систематический анализ, используются для формирования методологических основ влияния банков на страховые компании и систему страхования. результаты. банковская деятельность оказывает значительное влияние на страховую систему. это воздействие заметно на микроуровне: страховщики и банки могут быть клиентами друг друга, а также могут подписывать соглашения о сотрудничестве. в статье подчеркивается существенное положительное влияние банкострахования на деятельность финансовых организаций в рамках синергии, проявляющейся в ходе сотрудничества. соответственно, страховая компания и банк пользуются преимуществами от сотрудничества благодаря экономии на постоянных и переменных издержках и получении дополнительной прибыли, упрощении и оптимизация процесса сбора и обработки информации, экономия на рекламных и маркетинговых исследованиях. новизна. несмотря на многочисленные работы по данной тематике, такой вопрос, как влияние сотрудничества страховщиков и банков на развитие страховой системы, остается недостаточно изученным. в статье раскрывается влияние банковской системы на страхование с точки зрения их взаимодействия, а также рассматриваются факторы прямого и непрямого влияния банковской деятельности на страховую систему. baltic journal of economic studies 83 vol. 2, no. 3, 2016 corresponding author: 1 management institute of classic private university. 2 department of management of organization and foreign-economic activity, classic private university. prerequisites and prospects of public regulation of state and regions sustainable development anzhela merzlyak1, yuliia vikhort2 classic private university, ukraine abstract. the theoretical bases and prerequisites of public regulation of sustainable development are proved in the paper. the system of indicators for measurement of definite components of state and regions sustainable development is presented. the assessment of sustainable development indicators of several states of the world is carried out and the place of ukraine in this aspect is defined. the legal mechanism of public regulation of sustainable development of ukraine and its regions is investigated. the components of the “smart regions” conception of regulation are considered. the prospects of public regulation of sustainable development in ukraine and its regions are grounded. key words: sustainable development, public regulation, economic dimension, social dimension, ecological dimension, mechanisms. jel classification: q01, g39, g18 1. introduction at the beginning of the xxi century ukraine has proclaimed an idea of transition to a vector of sustainable development as one of the strategic priorities. the transition to such model of development becomes more urgent in the last years over the intensification of social and economic problems in the state. in the modern conditions just this concept has been chosen as the key direction of development in many countries of the world, and ukraine, which rushes to european integration, should direct to it the dynamics of its development. officially the term “sustainable development” has been accepted at the united nations conference on environment and development (unced) which took place in rio de janeiro in 1992. in the wide sense by the definition of the un world commission on environment and development its essence consists in “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (what is sustainable development). at the present stage ukraine and its regions experience deep social and economic crisis owing to the intensification of the economic, social and environmental problems caused mainly by ineffective governance. for this reason the future of the state and its place on the world scene depends on the choice of the effective mechanisms of public regulation directed to the sustainable development support. the experts of legrand group, the global specialist in electrical and digital building infrastructures, that over the decades has actively supported and introduced the elements of the sustainable development concept in its activity, mark out that the main goal of such development is to find a constant and long-term balance between three compounds (economic, social, ecological). however, at the same time appropriate public administration, which have to provide the effective decision-making in this area and to stimulate achieving of the consensus between all participants of society (public and private sector, associations, non-governmental organizations, labor unions, citizens etc.), is not less important factor too (sustainable development: definition, background, issues and objectives. legrand group). all this causes topicality of research in the field of public regulation of state and regions sustainable development. therefore, the purpose of this paper is a complex analysis of theoretical bases and prerequisites of public regulation of state and regions sustainable development and also identification of prospects in realization of mechanisms of sustainable development public regulation in modern terms in ukraine. 2. literature review different aspects of state and regions sustainable development and mechanisms of its public regulation were investigated by both foreign and domestic scientists. researches of such foreign authors as g.  alperovitz, i.  burton, r .  costanza, h.  e.  daly, j.  farley, c.  franco, r .  heinberg, k.  hoffman, t.  jackson, r .  w.  kates, a.  leiserowitz, t.  parris, m.  thomas and others had considerable influence on formation of sustainable development theoretical bases. baltic journal of economic studies 84 vol. 2, no. 3, 2016 among domestic scientists who pay attention to research of sustainable development it is necessary to mention yu. barskii, s. bila, o. bilorus, o. bobrovska, o. borysenko, z. herasymchuk, b. danylyshyn, a. diehtiar, m. latynin, v.  zahorskyi, v.  kravtsiv, s.  serohin, v.  trehobchuk, m. hvesyk and others. considering the importance of acceptance of sustainable development concept by the states it is necessary to appeal to the opinion of foreign scientist j. stiglits who notes that in complicated conditions of society development it amplifies the role of public administration, but not the regulation of liberalization, privatization issues or so on, but directly of framework creation for permanent dynamic economic growth (stiglits, 2003). at the same time the authors b. hopwood, m. mellor and g. o’brien note that the sustainable development concept is a potentially important shift in arrangement of relationship between the mankind and the nature, and also between people themselves, on the contrary of dominating tendency of the last centuries characterized by separation of ecological aspects from social and economic problems (hopwood, mellor, o’brien, 2005). however, starting from the rising circle of problems in the terms of global transformations, there is an objective necessity of deeper scientific and theoretical study of modern approaches to the sustainable development concept as prerequisite for formation and implementation of long-term strategy of competitive development of ukraine and its regions. 3. results the terminological analysis of the concept “sustainable development” and its derivatives, in particular “state sustainable development”, “region sustainable development” (chart 1) allows to generalize that this vector of development provides the gradual, stable, balanced and regulated dynamic movement of the state or the region to positive changes that is based on settlement and coherence of economic, social and ecological compounds of such development, and also provides formation of appropriate conditions and institutional support of this vector. it is aimed at achievement of goals by certain participants of society with the most effective use of resources (natural, chart 1 terminological analysis of the category “sustainable development” source definition united nations conference on environment and development (unced) (what is sustainable development) sustainable development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs world bank (sustainable development: world bank glossary) sustainable development provides a process of managing a portfolio of assets to preserve and enhance the opportunities people face h. e. daly (daly, 1991) sustainable development is a harmonious, balanced, conflict-free progress of all earth civilization, groups of countries (regions, subregions) and also certain countries of our planet behind evidence-based plans (methods of system approach) when in a process of steady, innovative, intensive (but not extensive) economic development of countries it is at the same time positively resolved the complex of issues concerning preservation of environment, elimination of exploitation, poverty and discrimination both every separately taken person, and the whole population or groups of the population o. akimov, l. akimova (stalyi rozvytok terytorii: problemy ta shliakhy vyrishennia sustainable development is a regulated stable social and economic development which doesn’t trouble a natural basis, directed to a survival and permanent progress of society within the economic capacity of the biosphere m. kalinchykov (kalinchikov, 2005) sustainable development is a development of economic, political, social and ecological areas with peculiar to them the internal characteristics such as striving for a balance and reduction of disparity which insure balanced and progressive move resulting in improvement of people life in the region institute of sustainable development in ukraine (institute of sustainable development : official site) sustainable development presents a socio-economic model of progressive technological and social development of the society for the purpose of satisfaction of vital needs of present and future generations according to which the production and social areas develop balanced, without making the irreparable damage to environment the draft law «about the concept of sustainable development of ukraine» (the draft law «about the concept of sustainable development of ukraine») state sustainable development is a development of the country on the basis of indivisibility of environment preservation problems and a process of social and economic development with domination of criteria, requirements and indicators of surrounding environment quality h. hutman, a. myroiedov, s. fedin (gutman, 2002) region sustainable development is such state of socio-ecological-economic system by which it exists necessary conditions and prerequisites for progressive move for support of internal and external balance, for ensuring gradual transition of economy from the simple phenomena to difficult, thereby it takes place a formation of conditions for its transition to qualitatively new state baltic journal of economic studies 85 vol. 2, no. 3, 2016 material, human etc.) available in the state or its regions and in the same time with the smallest losses and damage for environment that finally provides the general progress of the country and its society. considering the main compounds of state sustainable development concept, the most widespread methodology of its measurement (developed by the un commission) is an assessment of following groups of indicators (mannis): – indicators of social aspects of sustainable development (poverty, health, education, demographic indicators, transport etc.); – indicators of economic aspects of sustainable development (level of production and consumption, financial resources, international cooperation, transfer of technologies etc.); – indicators of ecological aspects of sustainable development (characteristic and level of use of water, land, air and other natural resources, waste management etc.); – indicators of institutional aspects of sustainable development (public policy, legal mechanism, scientific researches, information infrastructure etc.). also it is possible to assess separate components of state sustainable development in different dimensions using such indexes (kornus, a.o., kornus, o.h., 2012): – economic dimension – a competitiveness index (an assessment of 12 indicators which define national competitiveness, particularly, quality of institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods and services market efficiency, labor market efficiency, financial market sophistication, technological readiness, domestic market size, business sophistication, innovation) and an index of economic freedom (is based on 10 indexes, including business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, labor freedom); – social dimension – an index of life quality and safety (it is formed by means of nine indicators such as gdp per capita based on purchasing power parity, average life expectancy of population of the country, ranking of political stability and safety, number of divorced families per 1,000 population, level of public activity (activity of labor unions, non-government organization etc.), unemployment rate, level of political and public freedoms, a ratio between an average salary of men and women etc.) and an human development index (including 3 types of indicators among which are the life expectancy, the level of literacy of the population in the state and the expected training duration, the standard of living, gdp per capita based on purchasing power parity); – ecological dimension – an index of ecological efficiency (represents achievements of the state in the area of natural resources management and their rational use). chart 2 assessment of separate indicators of sustainable development in selected states country economic dimension social dimension ecological dimension competitiveness index, 2015-2016 index of economic freedom, 2015 index of life quality and safety, 2016 human development index, 2014 index of ecological efficiency, 2016 switzerland 5,8 (1) 81,0 (4) 208,54 (1) 0,930 (3) 86,93 (16) singapore 5,7 (2) 87,8 (2) 93,09 (49) 0,912 (11) 87,04 (14) usa 5,6 (3) 75,4 (11) 183,96 (12) 0,915 (8) 84,72 (26) germany 5,5 (4) 74,4 (17) 190,70 (4) 0,916 (6) 84,26 (30) netherlands 5,5 (5) 74,6 (16) 192,40 (7) 0,922 (5) 82,03 (36) japan 5,5 (6) 73,1 (22) 176,06 (16) 0,891 (20) 80,59 (39) hong kong 5,5 (7) 88,6 (1) 108,33 (44) 0,910 (12) … finland 5,5 (8) 72,6 (24) 184,01 (11) 0,883 (24) 90,68 (1) sweden 5,4 (9) 72,0 (26) 185,81 (10) 0,907 (14) 90,43 (3) united kingdom 5,4 (10) 76,4 (10) 180,25 (14) 0,907 (14) 87,38 (12) norway 5,4 (11) 70,8 (32) 188,90 (8) 0,944 (1) 86,90 (17) canada 5,3 (13) 78,0 (6) 177,23 (15) 0,913 (9) 85,06 (25) china 4,9 (28) 52,0 (144) 99,03 (46) 0,727 (90) 74,88 (60) estonia 4,7 (30) 77,2 (9) … 0,861 (30) 88,59 (8) check republic 4,7 (31) 73,2 (21) 167,38 (22) 0,870 (28) 84,67 (27) lithuania 4,5 (36) 75,2 (13) 134,33 (40) 0,839 (37) 85,49 (23) poland 4,5 (41) 69,3 (39) 153,61 (29) 0,843 (36) 81,26 (38) latvia 4,5 (44) 70,4 (36) … 0,819 (46) 85,71 (22) romania 4,3 (53) 65,6 (61) 146,13 (32) 0,793 (52) 83,24 (34) bulgaria 4,3 (54) 65,9 (60) 141,61 (34) 0,782 (59) 83,40 (33) hungary 4,2 (63) 66,0 (58) 140,74 (35) 0,828 (44) 84,60 (28) moldova 4,0 (84) 57,4 (117) … 0,693 (107) 76,69 (55) ukraine 4,0 (79) 46,8 (162) 85,56 (52) 0,747 (81) 79,69 (44) based on the data of international ratings baltic journal of economic studies 86 vol. 2, no. 3, 2016 the assessment of sustainable development indicators in selected states of the world (chart 2) in 2014–2016, starting from frequency of carrying out of these international ratings, and the determination of the place ranked by ukraine in this aspect, gives an opportunity to state such tendencies: – the index of economic freedom is the weak place of our state on which public regulation should be directed. behind this indicator ukraine takes the 162-nd place and at the same time belongs to the category of “the countries with the pressed-down economy”. the subindexes of investment freedom (20,0 from 100 points), property rights (25,0), freedom from corruption (26,0), financial freedom (30,0), government spending (30,6) have especially low level (index of economic freedom 2016); – indexes which characterize social dimension demonstrate availability of considerable human potential in ukraine (0,747 points – 81-st place – group of the countries with the high level of human development) (human development report), however, is depressed by adverse living conditions and safety in the state (the 52nd place from 56) (quality of life index for country 2016); – in recent years it was observed the progress in realization of public environmental policy which caused the increase of level of ecological efficiency index (the 44-th place) in comparison with 2012 (the 102-nd place) and 2014 (the 95-th place) (environmental performance index). according to the strategy of sustainable development “ukraine – 2020” (strategy «ukraine – 2020») it is also defined some vectors as the criteria for evaluation of state movement in the sustainable development direction: – a development vector – state sustainable development support, carrying out of structural reforms and, as a result, increase of life standards; – a safety vector – guarantee of state, business and citizens safety, investments and private property security; – a responsibility vector – guarantee for every citizen for access to high-quality education, health system and other services in the public and private sectors; – a pride vector – ensuring mutual respect and tolerance in society, pride of own state, its history, culture, science, sport. the legal mechanism of public regulation of state and regions sustainable development implies formation of institutional framework for sustainable development of ukraine and, first of all, is based on adoption of appropriate standard and legal acts which are presented today by (ecology and social protection: program of sustainable development of ukraine): – international documents – the rio declaration on environment and development (14 june 1992), the stockholm declaration (16 june 1972); – national strategic and program acts – the decree of the president of ukraine “about strategy of sustainable development”, the order of the cabinet of ministers of ukraine “about approval of the concept of the state target program of sustainable development of rural territories for the period till 2020” (3 february 2010), the decree of the president of ukraine “about strategy of sustainable development “ukraine – 2020” (12 january 2015); – national acts which regulate regions sustainable development – the resolution of the verkhovna rada of ukraine “about acceptance for a basis of the draft of the concept of sustainable development of settlements” (22 october 1999), the resolution of the verkhovna rada of ukraine “about the concept of sustainable development of settlements” (24 december 1999), the decree of the president of ukraine “about work of local executive authorities concerning support of sustainable social and economic development of regions” (29 august 2003). in the aspect of state sustainable development the content of these laws and acts is necessary to consider from the point of view of their effective realization. scientists suggest to divide them into three main groups of decisions, namely: – local – branch solutions which set the local purposes and tasks in scales of one or several common areas in the context of sustainable development of ukraine; – infrastructure solutions of nation-wide level which create the necessary balanced conditions and opportunities for realization of the purposes and problems of sustainable development; – system decisions behind target programs which define the directions of realization of the purposes and problems of sustainable development at the national or regional levels (chalchynskii, 2010). the development of target programs is an example of the local branch and interbranch solution of sustainable development. in ukraine over 250 programs are realized in this context. in the process of transition to sustainable development model the state should have the system of program and prognostic documents, namely: national strategy of sustainable development; long-term and medium-term forecasts of development, and also effective system of interaction “center – region”. at the regional level it can be perspective to use a concept of “smart cities” or “smart regions” which embodies the best practice of the european regional policy of sustainable development and is based on six main criteria: smart economy, smart mobility, smart environment, smart people, smart life and smart government (figure 1). all these criteria meet the traditional directions of development of territories and are based on the known principles of regional competitiveness, the organization of transport and ict networks, economies, natural resources, human and social capital, quality of life, and also participation of citizens in region governance. development of regions on the basis of the above-mentioned concept in ukraine is at an initial stage compared with foreign practice. in this context the greatest attention is paid to projects which are aimed at the development of infrastructure of the cities, namely introduction of new technologies and control systems which allows to use rationally power sources and to minimize negative influence of scientific baltic journal of economic studies 87 vol. 2, no. 3, 2016 fig. 1. the components of the “smart regions” conception of regulation (smart city – rozumne misto. project: public monitoring of administrative services) „smart economy” „smart mobility” „smart environment” innovation activities; development of entrepreneurship in the region; economic image of the region; flexibility of the labor market; international relations of the region criteria for regional policy of sustainable development in terms of “smart regions” concept local availability; international availability; infrastructure of ict; sustainability and innovation of transport networks; attraction of natural recourses; level of pollution of natural resources; environmental protection; sustainable resource management „smart people” „smart life” „smart government” skill level of labor of the region; level of implementation of system “life-long education”; mobility and flexibility of workforce; cultural institutions; health care system; safety and quality of life; educational institutions; tourist potencial participation in decision-making; public and social services; transparent governance; participation in public life political strategy and prospects and technical progress on environment. new technical solutions in the sphere of power supply, water supply, the accounting of resources, recycling, and also creation of more effective transport system. 4. conclusion thus, the concept of sustainable development in modern terms is the strategic vector that needs special attention from the government. considering this fact, for the purpose of avoidance in the future of the crisis phenomena and achievement of the balanced development of the state and its regions, it is very important is implementing of such principles and approaches to reforming of certain spheres in the state which would provide the dynamic growth of indicators of all country and each separate territorial unit which will lead to improvement of separate compounds – economic baltic journal of economic studies 88 vol. 2, no. 3, 2016 (effective activity of the ukrainian enterprises, increase of gdp etc.), social (improvement of living standards of the population, increase of a level of life quality and safety, appropriate social protection) and preservation of environment (solution of issues of energy efficiency, increase of level of ecological safety, etc.). references chalchynskii, v. 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[electronic resource]. – retrieved from: http://www.worldbank.org/ depweb/english/beyond/global/glossary.html. the draft law «about the concept of sustainable development of ukraine» (25 april 2001). retrieved from: http://mns.gov.ua/laws/laws/nuclear/269.htm. what is sustainable development. the world bank group. retrieved from: http://www.worldbank.org/depweb/ english/sd.html. baltic journal of economic studies 89 vol. 2, no. 3, 2016 анжела мерзляк, юлия вихорт предпосылки и перспективы государственного регулирования устойчивого развития государства и регионов аннотация. в статье доказаны теоретические основы и предпосылки государственного регулирования устойчивого развития. представлена система показателей для измерения определенных компонентов устойчивого развития государства и регионов. осуществлена оценка показателей устойчивого развития ряда стран мира, а также определено место украины в этом аспекте. исследуются правовой механизм государственного регулирования устойчивого развития украины и ее регионов. рассматриваются компоненты регулирования концепции «умных регионов». обосновываются перспективы государственного регулирования устойчивого развития в украине и ее регионах. baltic journal of economic studies 129 vol. 7 no. 2, 2021 corresponding author: 1 mykolaiv national agrarian university, ukraine. e-mail: olha-luhova@ukr.net orcid: https://orcid.org/0000-0003-4432-0295 researcherid: d-2389-2018 2 mykolaiv national agrarian university, ukraine. e-mail: pisochenko@mnau.edu.ua orcid: https://orcid.org/0000-0001-5647-8167 researcherid: d-3590-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-2-129-138 formation of integrated reporting in the context of sustainable development olha luhova1, tetiana pisochenko2 abstract. the purpose of the paper is to theoretically justify the preparation of integrated reporting, the influence of sustainable development ideas on the formation of the concept of integrated reporting, the problems of its creation and implementation in the practice of organizations. methodology. the methodological and theoretical basis of the study was made up of the works of scientists and specialists in corporate reporting and sustainable development; frameworks, instructive and methodological materials for the formation of integrated reporting. we used general scientific methods of cognition such as comparison, analysis and synthesis, generalization, systematization, historical and logical methods. results. information deficiency arising from the formation of exclusively financial statements stimulates the emergence of integrated reporting. non-financial reporting (social, environmental, etc.) provides useful information but does not reflect the relationship between different aspects of the company’s activities and its results, which does not contribute to understanding its ability to create value over time. the constant trend of companies to sustainable development involves the study of issues of formation of integrated reporting as a tool for building a sustainable business. the integrated report aims to provide an insight into the company’s resources and relationships that are known as the capitals and how the company interacts with the external environment and the capitals to create value. key indicators of sustainability reporting, which should be reflected in integrated reporting, are grouped into three components: economic, environmental, and social. they are based on an assessment of the value of business and the value of capitals. companies interested in implementing integrated reporting face a number of challenges, beginning with the fact that no globally accepted framework specifying what goes into an integrated report exists. but there are a growing number of examples of integrated reports from which companies can learn. practical implications. this is an explanatory research to come with conceptual paper cited with recent literature for understanding the impact of sustainable development ideas on the emergence of integrated reporting. despite the long list of internal and external challenges, the list of drivers contains a wide range of business advantages. value/originality. integrated reporting is a powerful tool for transparency and information openness of the company, which contributes to the sustainability of the business. integrated reporting can become a tool for building a sustainable business for a company. in the process of its implementation and formation, the issues of the need to transform the company’s management system, strengthen control over the solution of environmental and social problems, study and improve the company’s business strategy should be resolved. key words: integrated reporting, sustainable development, international integrated reporting council, stakeholders, value creation, financial statements. jel classification: m41, f20, f38, f63 1. introduction the 21st century has been marked by the onset of the era of an innovative economy, in which the competitiveness of organizations and the state is inextricably linked with the introduction of the scientific and technological achievements into the economic process. the great theoretical physicist albert einstein noted about technologies following: “it has become appallingly obvious that our technology has exceeded baltic journal of economic studies 130 vol. 7 no. 2, 2021 our humanity”. don delillo, american novelist, has the following point of view about technology: “this is the whole point of technology. it creates an appetite for immortality on the one hand. it threatens universal extinction on the other. technology is lust removed from nature”. omar n. bradley, an american military leader and general of the us army, said the following: “if we continue to develop our technology without wisdom or prudence, our servant may prove to be our executioner”. three completely different personalities agreed on the same opinion – the development of technology can both improve our life and destroy it. already, a detrimental effect of mass creation of various technologies is reflected in such global problems as increased pollution, severe depletion of natural resources, an increase in the proportion of the unemployed population replaced by artificial intelligence, and other important problems. undoubtedly, all this cannot be ignored and requires the adoption of appropriate measures to neutralize the negative impact and ensure sustainable development. sustainable development is not only about achieving long-term profitability, but also about the company 's acceptance of social and environmental responsibility. long-term sustainability creates the necessary conditions for achieving the main business goal – value creation. increasing the transparency and sustainability of the business requires the modernization of the company 's reporting system. traditional annual reports are unable to provide investors with enough relevant information to forecast the ability of corporations to create value in the long term. the economic environment changed dramatically in the last 20 years. accounting needs to change accordingly. it can be argued that accounting should be adapted to the changing conditions of a modern enterprise and more fully take into account aspects of sustainable development and strategic planning of economic consequences. one of the most promising areas for the development of corporate reporting is the concept of integrated reporting, which accumulates current trends in the external environment and the needs of business partners. the concept is aimed at disclosing information about the creation of the company's value, reflecting the relationship between the results of the organization's activities and their various consequences, focused on the future, structured in accordance with the strategic objectives of the company and its business model. victor hugo said that, “nothing is as powerful as an idea whose time has come”. in a world of rapid change, the time has come to evolve our corporate reporting model. the time has come for integrated reporting. building momentum: iirc integrated report (2018) emphasizes that integrated reporting is viewed by many as the next evolution in corporate reporting, an antidote to the narrow and siloed focus on short-term, financial profit of traditional annual reports which is now accepted to have far-reaching destructive consequences for the environment, society and the economy. research in the field of integrated reporting is increasing and attracting a growing number of scientists: the relationship between integrated reporting and sustainable business development is the subject of works by r .g. eccles and м.р. krzus (eccles, 2010), dragu ioana and tiron-tudor adriana (dragu, 2014), d. tweedie and n. martinov-bennie (tweedie, 2015). however, a deeper and more systematic understanding of the impact of sustainable development ideas on the emergence of integrated reporting is still required. consequently, the problem under study requires more attention in the following areas: – the genesis of integrated reporting since the emergence of socially responsible business and solving environmental and social problems; – the impact of sustainable development ideas on the formation of the concept of integrated reporting. the aim of the paper is to study the issues of the genesis of integrated reporting with the determination of its place and role in the information support system of an enterprise in the context of sustainable development. 2. the advance of integrated reporting in our opinion, the introduction of integrated reporting in business practice and its theoretical understanding is impossible without an analysis of its genesis. understanding that the true value of business is measured not only by the economic benefits that it brings to owners, but also its usefulness to society, led to increased interest in the concept of sustainable development and implementation of the principles of social responsibility, which, in turn, required adequate indicators and forms of their presentation. for this purpose, a set of standards and recommendations was developed to promote the implementation of the principles of socially responsible business conduct in management practice and to inform about it. in 2015, world leaders agreed to 17 global goals (officially known as the sustainable development goals or sdgs). these goals have the power to create a better world by 2030, by ending poverty, fighting inequality and addressing the urgency of climate change. the 17 sdgs are integrated – that is, they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability. representatives of the audit company deloitte (deloitte, 2011) note: “today, there are growing expectations that business do more than simply turn a profit. they must operate (and be perceived to operate) in a manner that is responsible, ethical, and baltic journal of economic studies 131 vol. 7 no. 2, 2021 sustainable; that minimizes negative impacts on the environment; that takes into consideration the varied needs of a spectrum of stakeholders; and that positively contributes to the communities in which they operate and the planet generally”. in our opinion, in relation to business, sustainable development is aimed at achieving long-term profitability, as well as taking on environmental and social responsibility. the global reporting initiative (gri) claims that more and more companies are striving to make their operations sustainable. gri stresses that long-term profitability must be combined with social justice and environmental protection. information deficiency arising from the formation of exclusively financial statements stimulates the emergence of integrated reporting. critics of the financial statements attribute the lack of forwardlooking data and non-financial information to its weaknesses. however, this information is in demand for the purpose of a comprehensive assessment of the firm's business, its competitiveness and investment attractiveness. the development of modern standards, recommendations and guidelines on the formation of reporting of a fundamentally new format is aimed at eliminating the shortcomings of financial information. the management of global processes, the description of the business environment and the business model of the company replace the process of regulating certain facts of the financial and economic activities of the company. we can distinguish two major stages in the development of non-financial reporting for the period of its existence (over 25 years): “mono-reports” (environmental and social) and complex reports (“on the triple bottom line”). these reporting formats have significantly increased the scope of the information provided on the activities of companies. however, they turned out to be insufficient for the purpose of assessing the company 's ability to create value. currently, we can state the beginning of a new stage, a distinctive feature of which is the development of the concept of integrated reporting, which solves the problem. it can be argued that the adoption of environmental and social responsibility by companies has contributed to the formation of ideas for sustainable development, which in turn are the forerunners of the development of the concept of integrated reporting. thus, the one becomes an objective requirement of the time in conditions when: – financial statements do not meet the growing information needs of users; – business is becoming socially oriented and additionally assumes social and environmental responsibilities; – companies, as well as the countries, tend to their sustainable development and appreciate not only the current achievements, but also focus on the future; – non-financial reporting (social, environmental, etc.) provides useful information, but does not reflect the relationship between different aspects of the company ’s activities and its results, which does not contribute to understanding its ability to create value over time; – there is a need for a comprehensive assessment of the organization and its capabilities, which requires disclosure of the higher-order information. the highlighted factors are not exhaustive. however, in our opinion, they contributed to the development of the concept of integrated reporting as a new form of corporate reporting with financial and non-financial indicators. the tendency to change the profession of an accountant and its role under the influence of the challenges of economic reality was revealed at the 19th world congress of accountants “2020 vision: learning from the past, building the future” (ifac, 2014). acca and ima in their joint research “from share value to shared value” (acca/ima, 2016) determined that the accounting profession has played a crucial role in pushing the idea of integrated reporting forward. the change in the focus of research on the international integrated reporting (ir) framework in the direction of building a sustainable business for the company is of particular relevance. the constant tendency of companies to their sustainable development involves the study of issues of formation of integrated reporting as a tool for building a sustainable business. many authors come to similar conclusions. dragu ioana and tiron-tudor adriana (dragu, 2014) define integrated reporting as the integration of information on sustainable development and corporate social responsibility in the annual report. robert g. eccles and michael krzus (eccles, 2010) in their book “one report: integrated reporting for a sustainable strategy” advocate the view that one report should be generated as a result of more integrated reporting, which will only be so if sustainability is incorporated into company strategy. we share the statement of clg member (gri, 2017) “we believe that integrated reporting is the way of the future; it is not possible to assess the health of the company solely with financial indicators”. an important part of the global push towards sustainability practices involves a need to account for, and report on, sustainability – sometimes referred to as environmental, social, and governance (esg) reporting. the existing state regulators cope with traditional forms of reporting with great difficulty; they have a very pragmatic function to ensure the receipt of tax and other fees and control of registers of basic property rights. in this context, the development of non-financial reporting has been the subject of study by predominantly non-governmental stakeholders (table 1). baltic journal of economic studies 132 vol. 7 no. 2, 2021 however, sustainability reports are still often produced in a silo alongside other reports such as financial statements. w hile individual reports still provide critical information to stakeholders, in isolation they are not sufficient to gain a comprehensive understanding of the full impacts and performance of a company. the establishment of the international integrated reporting council (iirc), of which gri was a founding member, had the objective to help organizations provide a more comprehensive picture of how they are performing to create value over time across all relevant capitals. integrated reporting, which is founded on integrated thinking within the business, explains the interrelationships between financial and other capitals that the business depends on. the integrated report may link to more in-depth financial or sustainability information that different stakeholders require. a growing number of companies are already adopting this approach and are experimenting with ways to successfully implement this cycle of integrated thinking and reporting, enabling them to embed sustainability issues into their business strategy and communicate about it. bastian buck (director, reporting standards) (gri, 2017) claims: “gri believes that sustainability reporting experience is a necessary prerequisite for good integrated reporting. integrated reporting does not replace the strategic element of the sustainability reporting exercise”. differently from other forms of reporting, it is not an additional but rather an overall and holistic component of the system. integrated reporting is intended to connect and bring together all the different components of the corporate reporting. the ifrs foundation and the iirc both strive to progress the quality, consistency and accountability of corporate reporting through collaborative means. this collaborative effort was highlighted in 2020, as five global sustainability and integrated reporting organizations (cdp, cdsb, gri, iirc and sasb) published their statement of intent to work together, the iirc and sasb announced their intention to merge, becoming the value reporting foundation and the ifrs foundation began an exploration into broadening its remit beyond financial reporting standards. following a consultation on the creation of a sustainability standards board, the ifrs foundation has acknowledged the urgent demand for global consistency and comparability in sustainability disclosure. the iirc supports this direction and believes that existing frameworks and standards, together with tcfd’s recommendations, should act as the building blocks for the ifrs to develop global sustainability standards relevant to enterprise value creation. the integrated report aims to provide an insight into the company’s resources and relationships that are known as the capitals and how the company interacts with the external environment and the capitals to create value. value is not created by or within an organization alone. organizations interact with their external environment and various capitals to create value over the short, medium and long term. that value has two interrelated aspects – value created for: – the organization itself, which enables financial returns to the providers of financial capital – other stakeholders. an organization can think about value creation in terms of value to shareholders and funders, customers, employees, suppliers, partners, regulators and society. both aspects of value creation are critical to the survival of any organization – it cannot survive for very long delivering one without the other. unless an organization creates value for itself it will risk going out of business; and unless it creates value for others it could either become irrelevant or lose its social licence to operate. table 1 organizations involved in sustainability and integrated reporting organization mission international integrated reporting council (iirc) aims to create a globally accepted framework for a process that results in communications by an organization about value creation over time. global reporting initiative (gri) promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to a sustainable global economy. gri’s mission is to make sustainability reporting standard practice. climate disclosure standards board (cdsb) seeks to promote and advance climate change-related disclosure in mainstream reports through the development of a global framework for corporate reporting on climate change united nations environment programme finance initiative (unep fi) identifies the roles of the finance sector in addressing climate change, and advances the integration of climate change factors – both risks and opportunities – into financial decision-making. this is done through a work programme encompassing research, training, events and regional activities. deloitte sustainability and climate change resources deloitte, in collaboration with the institute of chartered accountants in england and wales (icaew), offers a dedicated climate change website and video learning programme. the joint initiative is designed to help businesses and finance professionals learn more about tackling climate change. source: prepared by the authors using (ias plus. sustainability reporting and integrated reporting) baltic journal of economic studies 133 vol. 7 no. 2, 2021 the actions of stakeholders in the process of financial and economic activities should be based on the ideas of building a sustainable business, as well as on the principles of social and environmental responsibility. stakeholders provide the company with the resources that form its capital. as a result of the commercial activity of the organization, the value of its capital increases, decreases or is transformed. as a result, value is created for the company and its stakeholders. the goal of the firm is to maximize its value by developing effective cooperation with stakeholders and optimal allocation of resources. the result of this approach is an integrated report as a tool for sustainable business development. integrated reporting is the way to achieve a more coherent corporate reporting system, fulfilling a need for a single report that provides a fuller picture of organizations’ ability to create value. integrated reporting can be used as an “umbrella” report for an organization’s broad suite of reports and communications, enabling greater interconnectedness between different reports. the international federation of accountants (ifac, 2017) also strongly supports the international integrated reporting council and the implementation of its framework. ifac has stated integrated reporting is the future of corporate reporting. since its release in 2013, 1,700 companies in 72 countries have adopted the iirc's <ir> framework. chartered accountants australia and new zealand (ca anz, 2019) believe that integrated reporting will be the reporting norm in most jurisdictions by 2022 if the international integrated reporting council (iirc) achieves its goals. as the demand for clearer communication grows, integrated reporting can help organizations meet their reporting obligations and tell their value story to investors and other stakeholders in a more compelling way. 3. indicators of integrated report as the iirc framework does not yet include a set of integrated reporting indicators, it is advisable to use both the indicators proposed by ifrs (and national accounting standards) and sustainable development indicators, as well as to use their own indicators of capital efficiency and indicators, which take into account the specifics of the company. integrated reporting in terms of financial indicators should be based on three main concepts: 1) the concept of fair value, which allows users to provide information about the financial condition and results of the company, based on the real value of the reporting elements; 2) the substance over form concept, according to which professional judgment allows to draw conclusions about the economic form and more accurately reflect the elements of financial statements; 3) the concept of transparency, which provides a reflection of all the essential details of the company. these three areas provide an opportunity to most accurately and comprehensively approach the assessment of the real state of the company’s business. integrated reporting should give an idea of the contribution that the company makes or intends to make in the future to improve or degrade the economic, environmental and social situation, development processes and trends at the local, regional and global levels. key indicators of sustainable development, which should be reflected in integrated reporting, can be grouped into three components: 1) economic component, which includes created and distributed economic value, revenues, operating costs, employee benefits, payments to suppliers, taxes, grants and investments, retained earnings; 2) environmental component, which includes the results of activities related to both input flows (raw materials, energy, water) and output flows (emissions, discharges, waste, as well as costs associated with the environment); 3) social component: the number of employees and staff turnover, the relationship between employees and management, health and safety in the workplace, training and education, wages and social benefits, investment in social projects. the system of indicators of integrated reporting is shown in figure 1. common to the indicators is that they are based on an assessment of the value of business and the value of capitals. meaningful disclosure of performance is essential to enable a critical assessment – internally by the governing body and management and externally by stakeholders. kpis (and other quantitative indicators) compare and track performance against past and current targets and determine future targets. ideally, kpis are consistent year-on-year and any changes are explained. the following table 2 is helpful to organizations setting kpis for the first time or where previously only financial kpis had been set. the information that must be provided in the integrated reporting requires certain tools, changes the approach to planning work on the preparation of integrated reporting and, accordingly, there is a need to solve the following tasks: – making adjustments to all elements of accounting systems: methodology, techniques, organization of the accounting process, procedures for collecting and processing accounting information. it is necessary to develop internal regulations that determine what information is subject to disclosure. it is necessary to make changes in the structure of analytical accounts baltic journal of economic studies 134 vol. 7 no. 2, 2021 international financial reporting standards global reporting initiative integrated reporting concept of fair value substance over form concept concept of transparency economic component environmental component social component indicators of integrated reporting figure 1. groups of integrated reporting indicators source: formed by the authors table 2 directions for setting kpis in integrated report directions setting of kpis the organization’s strategies and priorities when setting kpis to measure actual performance against strategic targets consider the organization’s strategies and priorities: – what are they? – how do the governing body and executive team measure and monitor them? – are they reflected in remuneration packages, including the chief executive officer? is there an indication of how the leadership has performed against the strategies and priorities? what information is required internally? new reporters should consider the minimum information that will be required. it is easier to start small than to immediately aim to be the best in the industry. consider the following questions when deciding what information to include: – what information do senior management and executives require to make effective business decisions? – what information is needed to monitor achievement of strategies and priorities? – benchmarking – what are peers doing (industry, geographic, etc.)? – what is the current best practice, for example king iv, gri, etc.? what information is required externally? when considering the needs of users, ask the following questions: – what information have stakeholders requested that are material to the organization? – what are the relevant regulatory requirements, including laws, regulations, governance standards etc.? – what is the industry-specific information (for example, water usage and carbon emissions) that applies to all organizations in the industry? – what is important geographically (the information that is required when operating in a geographic jurisdiction)? what information is currently available? consider existing information: – what financial and non-financial information is available? – what is the information used for and how often is it compiled (monthly reporting/incentive schemes/regulatory requirements etc.)? – what information has historically been provided in reports? – is the available information internal or external and is it reliable? prioritise based on an information gap analysis once a gap analysis using existing information establishes what is required, the organization decides on how quickly it can bridge the gaps – the most critical kpis/information are addressed first. the priority can be informed by the capitals and the material matters identified for inclusion in the integrated report. embedding proper processes to ensure quality information takes time (even a number of years) – focus on quality over quantity of information. source: formed by the authors baltic journal of economic studies 135 vol. 7 no. 2, 2021 in financial and management accounting, which will form the necessary for inclusion in the integrated reporting financial and non-financial analytical information; – actualization of information systems of the entity; – coordination of the activities of functional units that will be involved in the process of compiling and presentation integrated reporting; – planning the process of preparing integrated reporting; – development of integrated thinking for compiling an integrated report; – implementation of the principles of social responsibility in the practice of economic entity management in accordance with the iso 26000 “social responsibility guidance”, developed by the international organization for standardization, the un global compact, etc. 4. criticism and challenges of integrated reporting integrated reporting has not only advantages but also disadvantages that lead to significant difficulties in the transition from traditional financial to integrated reporting. of course, as in all other fields, there are critics solomon j. and maroun w. (solomon, 2012), milne m.j. and gray r . (milne, 2013), brown j. and dillard j. (brown, 2014), flower j. (flower, 2015) who focus their research skills on refuting the proven positive impacts of ir . hence, they argue that there is still insufficient evidence to support that the international <ir> framework implementation influences organizational change in reporting and that, compared to previous guidelines (e.g. gri), the iirc framework concept is highly regressive, i.e., that it has a limited and one-sided approach to assessment and reporting on sustainable issues. of course, integrated reporting is not a panacea for improving resource allocation decisions or a silver bullet for solving contemporary problems with financial and nonfinancial reporting, particularly as it is so young. companies interested in implementing integrated reporting face a number of challenges, beginning with the fact that no globally accepted framework specifying what goes into an integrated report exists. but there are a growing number of examples of integrated reports from which companies can learn. a closely related problem is that there is no globally accepted set of standards for measuring and reporting nonfinancial information. few companies have internal control and measurement systems for nonfinancial information that are of the same quality as for financial information. simply gathering all the nonfinancial and financial information to issue an integrated report is a formidable challenge in most companies. editors of the journal of accounting & organizational change, 2021 state that how organizations change is also reflected in how organizations adopt the integrated reporting because not all organizations adopt all elements of the framework. for example, some organizations rely only on integrated reporting’s principles, while others analyse and measure all six capitals and their transformation through their business model. some organizations also explain their governance and strategy, and their business model, and identify their tangible and intangible assets and present the key risks they face and how they plan to avoid or mitigate them. to other organizations, integrated reporting can appear “complex and timeconsuming” because the structuring of non-financial information is not as advanced as that of financial information, or is “costly” to produce. thus, different organizations implement integrated reporting differently, making it hard de facto to compare one integrated report to another. forward-looking information is central in integrated reporting, as one of its most innovative features is the orientation to the future. if this kind of information is extremely relevant to investors, at the same time, it may damage the corporation because competitors may have access to proprietary information. generalized disadvantages and challenges of the integrated reporting are as follows: – the need to balance professional, administrative, regulatory requirements in the preparation of integrated reporting; – the difficulty of summarizing the information interests of all groups of stakeholders in one report; – the difficulty in determining key performance indicators; – the time-consuming and costly process of transition from financial reporting to integrated; – the underdevelopment of the sustainable development accounting system carries additional risks to ensure the reliability of integrated reporting; – lack of uniform requirements for the preparation of integrated reporting; – the need for high-level specialists to compile integrated reporting; – the absence, stated as an advantage, of the possibility of comparing the information provided by different companies because of its incompatibility; – preparation integrated reporting requires knowledge in many areas; – the complexity of estimation non-financial assets; – increasing the risk of disclosure of trade secrets; – inaccuracy of forecast indicators. questions exist about the reliability of the information reported by companies. for the most part, having any type of third-party assurance on nonfinancial information in the report, let alone on the entire integrated report, is voluntary. and even when assurance is provided, it is not done with the same degree of rigor as the audit of a financial report. baltic journal of economic studies 136 vol. 7 no. 2, 2021 the following table provides an overview of the main external and internal drivers and challenges to integrated reporting. despite the long list of internal and external challenges, the list of drivers contains a wide range of business advantages. this would suggest that the uptake of ir would continue slowly but surely. although these challenges are significant, they can and must be overcome, and quickly. a sustainable society requires that all of its companies practice integrated reporting, so that resources used today do not jeopardize access to resources for future generations. there really is no alternative to integrated reporting. this still infant idea needs to grow into a strong and robust management practice. doing this requires a cross-sector approach that involves the public and private sectors, and civil society as represented by ngos. 5. conclusions integrated reporting reflects a holistic picture of the company’s development, which allows the company to gain the trust of stakeholders and develop relationships with them. the completeness of disclosure of financial and non-financial information allows investors to draw informed conclusions about the company, the main opportunities and risks. it facilitates operational control and financial risk management. integrated reporting makes it possible to collect and comprehensively analyse information regarding the company’s performance, its sustainable development. based on this information, decisions related to the company’s future strategy, ways to minimize costs and risks are made. the integrated report tells the organization’s value creation story clearly and concisely. it gives a holistic view of the organization’s current position, as well as its strategic goals and how it intends to reach them. users should be able to assess how the organization creates positive and negative value over time, for itself, its stakeholders and the environment. the integrated report should not be seen as yet another compliance burden. it is a good communication tool that also offers many internal benefits for the organization. integrated reporting is a journey. it is unlikely that the organization will meet all objectives for its integrated report in the first year, but reporting will improve as the organization remains committed to the journey. more analysis is needed on the firm characteristics and determinant variables in the implementation of integrated reporting, its quality and quality of management, and market reactions to such adoption. additionally, how the display of intellectual capital and other forms of capital in integrated reporting table 3 main external and internal drivers and challenges to integrated reporting drivers challenges external – framework is adapted to investors’ language (capitals, value creation) – legislation on transparency and reporting – high standards on accounting – policy measures – stock exchange listing – shareholder pressure/possibility to see how sustainability impacts financial value and risks – information need of stakeholders on how a company creates value – risk of enhanced disclosure – liability (e.g. on outlook) – risk of greenwashing – expectations on assurance – stock listing (long term vs. short term)/ support by investors not always evident – different guidelines for reporting (g4 – sasb iircform 10-k and others) – lack of ir thinking at governmental level internal – easier access to financial capital – internal engagement (multidisciplinary, all levels) – integrated strategy linked to purpose – connect financial – csr department/ breakdown silos – stimulates integrated thinking /holistic approach – stimulates integrated risk management – support tenders – expected link with business performance – enhance stakeholder engagement – focus on material issues – focus on strategy and longer term value creation – better allocation of capital / resources – drives kpi setting on both financial and non-financial material aspects – favours monetization – report non-financial data more frequently – conceptual framework, lacks practical application – collection, measurement and valuation of non-financial data – defining smart targets – full board commitment – embedding throughout the entire organization – conciseness of report versus completeness – industry-specific regulations might not favour ir – lack of evidence that ir links to business performance – consistency (connectivity) of materiality matrix, strategy, targets, and performance source: formed by the authors using (deloitte, 2015) baltic journal of economic studies 137 vol. 7 no. 2, 2021 contribute to the value creation in longer periods needs to be explored. integrated reporting quality and e.g., accuracy of analysts’ forecast and firm valuation are other emerging topics for future research. controlling variables such as ownership, corporate governance factors, age of the company, emerging information technologies may also be included to test how firm performance is reflected with the implementation of integrated reporting. furthermore, investor’s opinions of the ir need also to be examined in details. last but not the least, it looks that the measurement of ir quality is also questionable. international <ir> framework needs to be standardized iirc needs to think of introducing a checklist for measuring ir quality. integrated reporting should contain all significant data on the company’s strategy, corporate governance, performance indicators and prospects that reflect its economic, social and ecological environment. in addition, there must be a clear and concise understanding of how the company is managed and how it creates value. the study found that the history of integrated reporting dates back to the advent of the international <ir> framework and the official publication of integrated reporting by individual companies, and its current structure was formed as a result of expanding information needs of users of accounting information. integrated reporting is a powerful tool for transparency and information openness of the company, which contributes to the sustainability of the business. corporate transparency is a significant factor that ensures the growth of business value and is directly related to the formation of integrated reporting indicators that characterize the value created. in this regard, the need for the development of analytical support for integrated reporting in the context of sustainable business is currently increasing. in our opinion, integrated reporting can become a tool for building a sustainable business for a company. in the process of its implementation and formation, the issues of the need to transform the company 's management system, strengthen control over the solution of environmental and social problems, study and improve the company 's business strategy should be resolved. this becomes necessary to meet the high demands placed on integrated reporting. references: brown, j., & dillard, j. (2014). “integrated reporting: on the need for broadening out and opening up”. accounting , auditing & accountability journal, vol. 27, no. 7, pp. 1120–1156. doi: 10.1108/aaaj-04-2013-1313 chartered accountants australia and new zealand (2019). how integrated reporting <ir> tells the value story. retrieved march 19, 2021, from https://www.acuitymag.com/finance/how-integrated-reporting-tells-the-valuestory deloitte (2011). integrated reporting: a better view? retrieved march 19, 2021, from https://www.iasplus.com/ en/binary/sustain/1109integratedreportingview.pdf deloitte. (2015). integrated reporting as a driver for integrated thinking? retrieved march 22, 2021, from https://www2.deloitte.com/content/dam/deloitte/nl/documents/risk/deloitte-nl-risk-integrated-reporting-adriver-for-integrated-thinking.pdf dragu ioana, & tiron-tudor adriana (2014). research agenda on integrated reporting: new emergent theory and practice. procedia economics and finance, vol. 15, pp. 221–227. doi: 10.1016/s2212-5671(14)00488-2 eccles, robert g., and michael krzus (2010). one report: integrated reporting for a sustainable strategy.  new york: john wiley & sons. flower, j. (2015). “the international integrated reporting council: a story of failure”. critical perspectives on accounting, vol. 27, pp. 1–17. doi: 10.1016/j.cpa.2014.07.002 gri (2017). forging a path to integrated reporting. insights from the gri corporate leadership group on integrated reporting. retrieved march 19, 2021, from http://integratedreportingsa.org/ircsa/wp-content/ uploads/2017/05/gri-clg_integratedreporting.pdf ias plus. sustainability reporting and integrated reporting. retrieved march 23, 2021, from https://www.iasplus.com/en/resources/sustainability/sustainability institute of management accountants (2016). from share value to shared value: exploring the role of accountants in developing integrated reporting in practice. retrieved march 19, 2021, from https://www.imanet.org/insights-and-trends/external-reporting-and-disclosure-management/share-value-toshared-value?ssopc=1 integrated reporting and change?: the impacts after a decade of integrated reporting. journal of accounting & organizational change, 2021. retrieved march 19, 2021, from https://www.emeraldgrouppublishing.com/ journal/jaoc/integrated-reporting-and-change-impacts-after-a-decade-integrated-reporting international federation of accountants (2014). opening remarks to world congress of accountants 2014. retrieved march 19, 2021, from https://www.ifac.org/news-events/2014-11/opening-remarks-world-congressaccountants-2014 baltic journal of economic studies 138 vol. 7 no. 2, 2021 international federation of accountants (2017). enhancing organizational reporting: integrated reporting key. retrieved march 19, 2021, from https://www.ifac.org/knowledge-gateway/contributing-global-economy/ publications/enhancing-organizational-reporting-integrated-reporting-key international integrated reporting council (iirc) (2018). building momentum: iirc integrated report 2018. retrieved march 19, 2021, from https://integratedreporting.org/integratedreport2018/download/pdf/iirc_ integrated_report_2018.pdf milne, m. j., & gray, r . (2013). “w(h)ither ecology? the triple bottom line, the global reporting initiative, and corporate sustainability reporting”, journal of business ethics, vol. 118, no. 1, pp. 13–29. doi: 10.1007/s10551-0121543-8 solomon, j., & maroun, w. (2012). “integrated reporting: the influence of king iii on social, ethical and environmental reporting”, the association of chartered certified accountants, london. tweedie, d., & martinov-bennie, n. (2015). “entitlements and time: integrated reporting's double-edged agenda”. social and environmental accountability journal, vol. 35, iss. 1, pp. 49–61. doi: 10.1080/0969160x.2015.1007466 baltic journal of economic studies 25 vol. 3, no. 2, 2017 organizational project management maturity yana derenskaya1 national university of pharmacy, ukraine abstract. the present article is aimed at developing a set of recommendations for achieving a higher level of organizational project maturity at a given enterprise. methodology. for the purposes of the current research, the available information sources on the components of project management system are analysed; the essence of “organizational maturity” and the existing models of organizational maturity are studied. the method of systemic and structural analysis, as well as the method of logical generalization, are employed in order to study the existing models of organizational maturity, to describe levels of organizational maturity, and finally to develop a set of methodological recommendations for achieving a higher level of organizational project maturity at a given enterprise. the results of the research showed that the core elements of project management system are methodological, organizational, programtechnical, and motivational components. project management encompasses a wide range of issues connected with organizational structure, project team, communication management, project participants, etc. however, the fundamental basis for developing project management concept within a given enterprise starts with defining its level of organizational maturity. the present paper describes various models of organizational maturity (staged, continuous, petal-shaped) and their common types (h. кеrzner organizational maturity model, berkeley pm maturity model, organizational project management maturity model, portfolio, program & project management maturity model). the analysis of available theoretic works showed that the notion “organizational project maturity” refers to the capability of an enterprise to select projects and manage them with the intention of achieving its strategic goals in the most effective way. importantly, the level of maturity can be improved by means of formalizing the acquired knowledge, regulating project-related activities, and documenting best practices and potential difficulties. practical implications. for the purposes of the present research, the level of organizational project management maturity of the enterprise in question is evaluated according to the three-level model developed by h. кеrzner. the conclusion is made that project management maturity of this enterprise corresponds to maturity level 2. besides, the defined maturity level is specified in more detail along the life cycle phases in order to determine more precisely the position of project management activity of the enterprise within the maturity model. potential problems (the so-called “bottlenecks”) of the enterprise in the field of project management are identified. based on the results of the analysis, a number of recommendations are suggested for further development of the corporate system of project management at the given enterprise. the results of the research showed that in order to achieve a higher level of maturity, it is necessary to create a project team, organize a project office, and distribute project management functions among the team members, develop a procedure of involving experts with different professional backgrounds into the project implementation, improve the procedure of creating project teams, ensure the accumulation of best practices of project implementation, establish the corporate standard of project management, and improve the strategic planning for project management, project implementation control, managing changes, labour resources and communication. the suggested guidelines are expected to facilitate the achievement of a higher level of maturity. they also envisage the terms of this transition and the responsible executives. further enhancement of maturity level is achieved by means of performing a set of activities for improving and aligning various project management sub-processes aimed at managing costs, time, quality, and risks. another important condition of enhancing organizational maturity is the development of an integrated management system that would help to achieve synergy from combining different methodologies. value/originality. assessment of the project management maturity and identification of problems made it possible to develop a set of recommendations for achieving a higher level of organizational project management maturity by the enterprise in question, which in its turn is expected to reduce the costs and the time that are necessary for project implementation. key words: project, project management, organizational maturity, organizational maturity model, levels of organizational maturity. jel classification: m11, l00, o22, o31 corresponding author: 1 department of management and economy of enterprises, national university of pharmacy. e-mail: y.derenskaya@gmail.com baltic journal of economic studies 26 vol. 3, no. 2, 2017 1. introduction being a unique dynamic system, a project requires certain specific methods and tools of its initiation, planning, implementation, and control. project management tools have undergone a long and successful evolution helping enterprises to save resources (finance, labour, materials, time) and to achieve the expected project goals in the most effective way. however, the practice of using project management approach is often limited to basic tools, such as network diagrams, gantt’s charts, cost budgets, etc. this kind of planning is only acceptable when resolving minor current tasks of the project. while implementing more significant projects that require more time, efforts, and budget, it becomes increasingly important to use appropriate methods and tools of project management that help to make adjustments to the project parameters in a timely and competent way, taking into consideration the uncertainty of the economic situation. the theory and practice of project management allow various interpretations of project management system and its numerous components. for instance, a  guide to the project management body of knowledge (pmbok® guide, 2008) describes project management system as a combination of processes, tools, methods, resources, and procedures for project management. the core elements of a sustainable project management system are the following: methodological, organization-al, program-technical, and motivational (levin, 2014). the methodological component of project management refers to a variety of methods, approaches, and tools that are used for planning, implementing, and monitoring different projects. the organizational component of the project management system deals with establishing certain executive bodies responsible for project management (project office, project committee, project teams), as well as creating and maintaining all the necessary documentation for ensuring project management and communication among project stakeholders (process models, project management procedures, document templates, rules, regulations, and job descriptions). the programtechnical component of the project management system refers to procedures of using various software for planning and monitoring project implementation taking into consideration the necessity to integrate these plans and reports into other management systems of the enterprise (strategic planning, financial management, human resources management, changes management, etc.). the motivational element of project management system is closely connected with human resources management as it involves a number of motivational tools and incentives that help to activate project implementation by all the involved parties. the methodological element is the fundamental component of project management system (levin, 2014) but its implementation largely depends on the efficiency of the organizational component. project management encompasses a wide range of issues connected with organizational structure, project team, communication management, project participants, etc. however, the fundamental basis for developing project management concept within a given enterprise lies in defining its level of organizational maturity. in order to develop a set of guidelines for achieving a higher level of organizational project management maturity by an enterprise, it is necessary to analyse the existing models of organizational maturity and the characteristics of their levels. 2. models of organizational maturity the standard for portfolio management (2006) developed by project management institute (pmi) defines project management maturity as the level of project-portfolio management processes as compared to a certain standard. the standard is understood here as a collection of best practices in the sphere of project management, and the maturity level is defined as a measurable degree of approaching this benchmark. the models describing the level of development of an enterprise, i.e. maturity models, make it possible to assess the current performance and outline the strategy and tactics of improving project management system (pasian, 2011). an enterprise involved in project management has to make a continuous effort of enhancing its organizational maturity in order to improve its economic and technological conditions. what causes a major problem here is the necessity to synchronize the progress made by the enterprise along all the components (methodological, organizational, program-technical, motivational) as compared to the current level. in other words, achieving a higher level of organizational maturity will not be fully effective until each of the components that constitute the project management system of the enterprise is developed sufficiently. these assumptions gave rise to a number of different models of assessing organizational maturity that help to evaluate the level of project management at the enterprise, to create an action plan for its further improvement, and to identify potential pitfalls (pennypacker & grant, 2003). the ex-isting models of organizational maturity can be divided into three types: staged models where a certain level means that an enterprise has achieved a number of designated goals, each level serving as a foundation for the next one; continuous models where a set of competencies suggests developing and improving processes in each specific area; petal-shaped models where each characteristic of project management maturity is assessed against a certain scale and finds its visual representation in a diagram (malinina, 2011). baltic journal of economic studies 27 vol. 3, no. 2, 2017 in terms of organizational project management, the most wide-spread maturity models are the following: 1. maturity model by h. kerzner (кеrzner, 2010). it focuses on assessing the efficiency of project management in the enterprise, making particular emphasis on strategic project management for achieving higher competitiveness in the marketplace. the model contains 3 or 5 levels: common language (creating a common system of terms); common processes (replicating managerial success on one project to others); singular methodology (integrating project management methodology with quality management, process control, change management, etc.); benchmarking (comparing project management practices with recognized leaders); continuous improvement (on-going development and expansion of project management methods). 2. berkeley pm maturity model the emphasis is made on guidelines for accomplishing higher maturity. it also includes 5 steps: ad hoc management (inconsistent use of some project management tools); planned (more formalized project management practice); managed at project level (systematization of project management expertise); managed at corporate level (project management processes are standardized and integrated with other spheres of management); continuous learning (systemic and structured approach to project planning and control, constant improvement of project management processes, implementation of innovative project management methods). 3. organizational project management maturity model (opm3, 2003). published by pmi, these guidelines help enterprises to plan their development, to choose their priorities, and to save project resources. it contains a database of best practices of project management, kpi descriptions, expected results and recommendations for achieving higher project management efficiency. this model outlines the following stages: initial, non-regulated (weak control, partial use of project management tools); individual projects management (using individual project management procedures within the singular methodology); management stage (partial formalization of basic project management and planning); integration stage (full-scale formalization and acceptance of all processes pertaining to project management, information recording procedures); improvement stage (project management automation, ongoing improvement of project management practices). 4. portfolio, program & project management maturity model (р3м3, 2006). this model de-scribes successful practices of managing portfolios, programs, and projects at the following levels: knowledge about the processes; repeatable processes; defined processes, managed processes; optimized processes. besides the above-mentioned models, there are other models of assessing organizational maturity: capability maturity model for software engineering; spice model (software process improvement and capability determination); project framework produced by еsа; рм solutions, etc. (rusyakova, 2014). all these models share the principle of consecutive transition from lower maturity levels to more advanced, i.e. from more general knowledge about project management practice to continuous improvement of project management processes. however, it is worth noting that the above-mentioned models are aimed at several types of maturity – organizational and technological. here technological maturity is understood in a broader meaning of this word and is referred to as the existing level of a certain methodology employed in a certain process or applied to a certain object. one can say that technological maturity is considered to be a degree, to which a certain technology is employed by an enterprise. organizational maturity in a broader context describes the level of development of the organizational system. considered from the point of view of project management, technological maturity can be de-fined as the readiness of an enterprise to embrace effective management practices and commit to the concept of project management. in other words, technological maturity is understood as the potential of an enterprise for further development. the notion “organizational project maturity” refers to the capability of an enterprise to select projects and manage them with the intention of achieving its strategic goals in the most effective way. reaching higher maturity levels means acquiring more advanced organizational competence, higher predictability and manageability of processes. this is achieved by means of reducing the use of informal communication processes among project team members and alleviating the adverse effects caused by individual peculiarities displayed by labour resources. project management practice is also facilitated by knowledge formalization, higher standardization of project management activity, due documentation of problems and best practices. project management improvement is also connected with a more extensive use of qualitative indicators and implementing best practices of project management. adopting organizational project management procedures helps to shorten the time necessary for launching a new product into the market (by 30-65%), reduce defects (by 35-75%), decrease the number of changes to the content and engineering part of the projects (by 45-68%), increase profit (by 6%) and return on investment (by up to 20%) (degtyaryev, 2014). 3. assessment of organizational maturity of the enterprise the present research was conducted on the basis of the project management system of a pharmaceutical enterprise in ukraine. in order to improve the baltic journal of economic studies 28 vol. 3, no. 2, 2017 organizational project management practiced by this enterprise, the three-level maturity model developed by h. kerzner (which is al-ready employed by the enterprise) was used, which helped to determine the level of its organizational maturity in terms of project management (table 1). judging from the data in table 1, it can be concluded that project management maturity displayed by the enterprise in question corresponds to level 2. however, it also features certain characteristics of level 1 (absence of a common register of projects) and level 3 (receiving synergy from integrating project management with other spheres, such as change and processes management, etc.). for a more precise evaluation of project management performance displayed by the enterprise in question, level 2 was described in more detail taking into consideration life cycle phases (table 2) in accordance with the following source (polkovnikov, terpugov & belozerov, 2004). judging from the data in table 2, the conclusion was made that project management maturity of the enterprise in question corresponds to maturity level  2. the above-described analysis helped to outline certain ways of developing corporate system of project management in the given enter-prise relying on the following assumptions: by means of achieving more advanced levels of project management maturity, the enterprise improves its project management performance and reduces the risks of unsuccessful project completion; although it is possible to transfer to a higher maturity level without fully meeting the criteria of the current level, this might increase risks due to the lack of consistency in the development of project management. on the basis of these assumptions, it is deemed strategically correct to complete all the elements of level 1 before moving on to maturity level 2, which may consequently lead to a transition to maturity level 3. in order to ensure the enterprise’s transition to maturity level 3, it was recommended to create a project office and to redistribute project management functions. the terms of transition and the executives in charge are given in table 3. thus, taking into consideration the results of the analysis of organizational project management at the given enterprise, a strategic action plan was developed in order to ensure its transition to more advanced maturity levels. the activities envisaged by the plan are specified in table 4. table 1 assessment of organizational project management maturity of the enterprise in question according to the following source (polkovnikov, terpugov & belozerov, 2004) maturity level brief description of the level degree of displaying maturity qualities by the enter-prise 1 there is certain experience of managing successful projects the enterprise has a sufficient experience of successful projects (14 years, 6 projects). there is an emerging interest in project management methods first steps have been made to implement project management approach. top-managers become aware of the benefits of using project management methods. support is available; certain employees receive training in project management. a common terminology is introduced. there is a common terminology, which is used by all project participants; a common glossary is developed. all completed projects are duly documented. there is no common register of projects. 2 awareness of considerable benefits of using project management approach. partially present (in terms of saving time for project completion) project management approach is supported at all management levels. present there is a common methodology of project management. a common methodology of project management is under development (30% readiness) project control system is available. fragmentary (project budget, time schedule, and performance control) there is a consistent program of personnel training in project management. partially available (training programs are available for employees who are responsible for project implementation). 3 project management processes are integrated with other spheres. partially (project management system is integrated with quality management) support on the part of the enterprise (at the level of corporate culture) partially available different project management knowledge areas are formalized in a balanced way. not available availability of procedures of accumulating and disseminating best practices of project management not available baltic journal of economic studies 29 vol. 3, no. 2, 2017 table 2 life cycle phases corresponding to project management maturity, level 2 phase characteristics degree of displaying maturity qualities initial recognizing the need for project management tools and methods present project management is accepted at the level of executive management. project management is supported at the level of executive management. present the essence of project management approach is understood by senior executives. present project mentorship is available. partially available (there is no formal committee dealing with projects) willingness to change the existing practices at the enterprise partially available project management practice is accepted at the level of line management. project management is supported at the level of line management. partially available functional managers receive training in project management. not available employees of functional departments receive full-time training in project management. not available growth development of project management methodology under implementation commitment to effective project planning limited presence minimization of changes in project content and scope not available selection of project management software to support methodology partially available maturity development of cost/schedule management control system partially available integration of schedule and cost control partially available the training program is developed to support project management and to upgrade the personnel’s skills. not available project office is created (i.e. a department that defines and maintains standards for project management within the organization) not available table 3 maturity levels characteristics level characteristics recommendations term executives in charge terminology the enterprise recognizes the importance of project management; it understands the need for a more extensive application of project management knowledge and adopting the relevant terminology. the basic recommendation is to make sure that the transition to the next maturity level is performed only after the enterprise has duly classified the acquired experience of its best practices of project management, renewed its glossary and templates of major project documents. the level is achieved business development director common processes the enterprise recognizes the necessity of determining and developing common processes so that the success of one project could be replicated in other projects. in order to move to the next level of maturity, it is recommended to finalize the model of project management process, as well as the process models for initiating, planning, monitoring, controlling, and completing projects, standard operational procedures of key subprocesses of project management. 12 months business development director singular methodology the enterprise understands the importance of synergy, which is achieved through integrating project management methodology with other management methodologies. in order to make a transition to the next level of maturity, it is recommended to carry out a major reorganization (create a committee dealing with projects, establish a project office, redistribute functional responsibilities, develop a relevant set of standards and regulations for the proper functioning of project office), to reconsider the existing corporate standard of project management, to continue working on the integrated management system at the enterprise. 25 months project office benchmarking there is a growing understanding of the necessity to improve corporate processes in order to keep the competitive position. more extensive application of the integrated management system of the enterprise, synchronization of various directions of project management development, implementation of innovative approaches, accumulation (analysis) of best practices of project management. 15 months project office continuous improvement the enterprise evaluates the information obtained at the previous level and decides whether it is possible (feasible) to use it for the further development. the basic guidelines lie in the necessity to analyse the results of the previous levels, to identify obstacles and potential resources of development, and to improve the methodology and corporate system of project management. constantly project office baltic journal of economic studies 30 vol. 3, no. 2, 2017 creating a project team is the top priority task for business development director on the first stage of transition to a more advanced level of organizational project management maturity. as long as the project management department evolves into a project office, and more experience is gained of how to involve experts with different professional backgrounds into the project implementation, the procedure of forming project teams is becoming increasingly refined. on the next stage, it is important to pay attention to creating standards of project management, which calls for a standardized typical process, which will regulate and prescribe the document database, procurement, executors in charge of certain sub-processes within the entire project management system of the enterprise. this stage involves the development (renewal and improvement) of procedures of outlining project management strategies, project implementation control, managing changes, human resources, communication patterns, etc. the completion of all these tasks is expected to facilitate the emergence of the project management corporate standard on the next level of organizational maturity. besides, having achieved this level of maturity, the enterprise is expected to understand the synergy of using various methodologies, so with the purpose of achieving greater cooperation and better control of operational and project-related processes, the company is expected to form an integrated management system. 4. conclusions the conducted research yielded the following results: 1. project management system practiced by the enterprise should be developed with due account for the integral effect of methodological, organizational, program-technical, and motivational components. the fundamental element within the organizational component is the evolution of project management organizational maturity. among various organizational maturity models, the most widely spread are the model developed by h. kerzner, berkeley pm maturity model, and opm3. p3m3 model is used in case of dealing with a significant number of projects and if there is a task to determine the necessity of project portfolio management. 2. the conducted assessment helped to define the organizational project management maturity of the given enterprise, which corresponds to level 2. however, it also detected certain “bottlenecks”, which testify to the fact that some elements of the previous maturity level yet remain to be completed. 3. in order to help the enterprise to fully complete organizational maturity level 2 and move on to the next level, a set of recommendations was developed that contains a strategic action plan and gives a detailed description of all the tasks to be completed in order to develop all the components of organizational project management system. further enhancement of maturity level is achieved by means of performing a set of activities for improving and aligning various project management subprocesses aimed at managing costs, time, quality, and risks. table 4 strategic action plan for transition to a more advanced level of organizational maturity activities term executives in charge to develop a training course in basic project management for functional managers 3 months business development director, hr director to develop a template (algorithm) for project management 2 months project planner, project managers to develop a procedure for change management within the framework of project implementation 12 months project office head to improve control system within the framework of project implementation, to reconsider job descriptions, departmental regulations, and project communication procedures 17 months project office head, hr director, project planner, project administrator to outline a procedure (algorithm) for creating project teams 3 months business development director, project office head, hr director to create corporate standard of project management 5 months project office head, project administrator references: a guide to the project management body of knowledge (pmbok® guide). (2008). new-town square, pennsylvania, usa: project management institute. degtyaryev, v. a. (2014). proektnaya zreloct` i tsennostno-orientirovannoe upravlenie proektami. retrieved from: http://www.i-mash.ru/materials/economy/64524-proektnaja-zrelost-i-cennostno-orientirovannoe.html кеrzner, g. (2010). strategicheskoe upravlenie v kompanii. моdel` zrelogo upravleniya proektami. мoscow: dмк press. levin, k. (2014). rozvytok systemy upravlinnya proektamy v organizatsiyi seredn`ogo biznesu. retrieved from: http://it-ua.info/news/2014/05/16/rozvitok-sistemi-upravlnnya-proektami-v-organzac-serednogo-bznesu.html маlinina, м. v. (2011). sovremennye modeli zrelosti organizatsionnogo upravleniya proektami. upravleniya proektami i programmami, 03(27), 218-230. baltic journal of economic studies 31 vol. 3, no. 2, 2017 organizational project management maturity model (opm3) – knowledge foundation. (2003). newtown square, pennsylvania, usa: project management institute. pasian, b. l. (2011). project management maturity: a critical analysis of existing and emer-gent contributing factors. sydney: university of technology. pennypacker, j. s. & grant, k. p. (2003). project management maturity: an industry bench-mark. project management journal, vol. 34, no. 1, 4-11. polkovnikov, a., terpugov, a. & belozerov, a. (2004). chto takoe modeli zrelosti uprav-leniya proektami? retrieved from: http://www.cfin.ru/itm /project/opmmm.shtml portfolio, program & project management maturity model (p3m3). (2006). newtown square, pennsylvania, usa: project management institute. rusyakova, м. s. (2014, july). obzor sovremennyh modeley otsenki zrelocti upravleniya proektami. young scientist, 11(70), 230-236. the standard for portfolio management. (2006). newtown square, pennsylvania, usa: project management institute. яна деренская организационная зрелость управления проектами аннотация. целью работы является разработка рекомендаций по переходу анализируемого предприятия на более высокий уровень организационной зрелости управления проектами. методика. для данного исследования были проанализированы доступные источники информации о компонентах системы управления проектами, сущности понятия «организационная зрелость», моделях организационной зрелости. методы системного и структурно-го анализа, логического обобщения использовались для изучения существующих моделей зрелости, характеристики уровней организационной зрелости и формирования методологических подходов по переходу предприятия к более высокому уровню зрелости управления проектами. результаты исследования показали, что основными элементами системы управления проектами являются методологический, организационный, программно-технический и мотивационный. вопросы организации управления проектами охватывают широкий спектр проблем, связанных с формированием организационной структуры, проектной команды, управлением коммуникациями, участниками проекта и пр. однако, основополагающей базой организационного развития концепции проектного менеджмента в рамках определенного предприятия является определение уровня его организационной зрелости. описаны типы моделей организационной зрелости (уровневые, непрерывные, лепестковые) и основные их виды (модель организационной зрелости г. керцнера, модель беркли, organizational project management maturity model, модель зрелости управления портфелями, программами и проектами). в результате анализа теоретических источников выявлено, что понятие «зрелость организационного управления проектами» описывает способность предприятия отбирать проекты и управлять ними с целью максимально эффективного достижения стратегических целей. при этом повышение уровня зрелости достигается путем формализации знаний, регламентируемости проектной деятельности, документирования проблем и лучших практик. практическое значение. для реализации цели исследования проведена оценка уровня организационной зрелости управления проектами анализируемого предприятия согласно трехуровневой модели г. керцнера. был сделан вывод, что зрелость управления проектами предприятия соотносится со стадией второго уровня зрелости. кроме этого, для более четкого позиционирования проектной деятельности предприятия в модели зрелости выявленный уровень детализирован по фазам жизненного цикла. определены проблемы («узкие» места) предприятия в сфере управления проектами. по результатам анализа были сформулированы направления развития корпоративной системы управления проектами предприятия. выявлено, что для перехода на более высокий уровень зрелости необходимо создать проектную команду, сформировать проектный офис и перераспределить функции по управлению проектами, разработать процедуру привлечения к реализации проектов предприятия специалистов различных функциональных сфер, усовершенствовать процедуру формирования проектных команд, обеспечить накопление опыта успешной реализации проектов, разработать корпоративный стандарт управления проектами и усовершенствовать процедуры формирования плана управления проектами, контроля реализации проектов, управления изменениями, трудовыми ресурсами, коммуникациями. разработанные рекомендации по переходу на следующий уровень зрелости также включали сроки реализации перехода и ответственных исполнителей. дальнейшее повышение уровня зрелости baltic journal of economic studies 32 vol. 3, no. 2, 2017 осуществляется путем реализации робот по усовершенствованию и гармонизации подпроцессов управления проектами, направленных на управление стоимостью, временем, качеством и рисками. также существенным условием роста уровня зрелости предприятия является развитие интегрированной системы менеджмента, позволяющей достичь синергетический эффект от взаимодействия методологий разной направленности. значение/оригинальность. оценка уровня зрелости управления проектами, выявленные проблем позволили разработать план реализации соответствующих мероприятий по переходу предприятия на более высокий уровень организационной зрелости управления проектами, что будет способствовать снижению затрат бюджета и времени на реализацию проектов исследуемого предприятия. baltic journal of economic studies 101 vol. 8 no. 3, 2022 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: lvovaliza@outlook.com orcid: https://orcid.org/0000-0002-3381-3185 2 yuriy fedkovych chernivtsi national university, ukraine e-mail: k.kozmulyak@chnu.edu.ua orcid: https://orcid.org/0000-0002-4989-3669 3 yuriy fedkovych chernivtsi national university, ukraine e-mail: l.strutynska-struk@chnu.edu.ua orcid: https://orcid.org/0000-0003-3267-1389 doi: https://doi.org/10.30525/2256-0742/2022-8-3-101-114 reducing climate impacts on water resources as the legal and economic basis for environmental security in the eu candidate countries: the case of ukraine ielyzaveta lvova1, kateryna kozmuliak2, liudmyla strutynska-struk3 abstract. as climate change is one of the greatest challenges of our time, the legal and economic issues of global environmental security deserve high praise. in the area of industrial competitiveness, where the negative effects of global climate change include floods and droughts, forest fires, and rising sea levels, climate change is highly problematic. climate impacts affect public and private agricultural infrastructure (including the coastal zone), resulting in lost productivity and increased costs for agriculture. the article applies climate change on a global scale in the form of greenhouse gas (ghg) emissions to determine how the mixtures and emissions of any one entity affect other areas (e.g., individual, community, company or country emissions). exploring the theoretical and practical premises of climate change as a complex phenomenon, the novelty of this article is that it examines the current framework of the environmental-legal concept, not just the political implications of the legal framework. the research aim of the article lies in two dimensions: the european union's current climate change policy framework (the climate and energy package, a set of climate change strategies and related policies targeting eu candidate countries); recent environmental operations in ukraine as an eu candidate country under extraordinary conditions. this article examines recent changes in climate legislation and climate policy in eu member and candidate countries, as well as other highly developed countries, such as the united kingdom, the united states, and china. focusing on the impact of the eu climate and energy package (2020 and 2030), this article examines the main implications of eu climate legislation regulating the eu emissions trading scheme and promoting the role of renewable energy in global energy consumption and energy efficiency in general. as a result of this study, this analysis offers multifaceted conclusions based on the interaction of a number of current administrative acts on climate change and environmental policy on a global scale. key words: climate change, comparative advantage, equitable and reasonable use, eu law and policy on climate change, eu climate and energy package, eu-ukraine association agreement, environmental security, greenhouse gases, water resources. jel classification: q54, q59 1. introduction it is common knowledge that the earth's surface temperature is expected to rise before mid-century, at least under all available emission scenarios (sixth assessment report (ipps) headline statements from the summary for policymakers). ghgs spread beyond the borders of states, and what follows is a domino scenario where pollution in one country can go viral and exacerbate the current environmental condition in another country-no matter how far apart the two countries are, it can threaten the natural environment on a global scale. even if one or more countries succeed in reducing greenhouse gas emissions to zero, this will not solve the problem of climate change. to this end, it is worth noting that efforts to prevent climate change require international action to protect the environment. however, some states with the world's largest this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 102 vol. 8 no. 3, 2022 economies, notably the united states and china, have reasonable doubts about abandoning the international climate change regime. frequent extreme disasters such as floods and droughts affect water resources around the world. droughts and drier soils can be expected in west africa and the amazon during the june-august season, and in the asian monsoon region during the december-february season (soha m. mostafa; osama wahed, et al., 2021). it is particularly evident in the hindu kush himalaya (hkh) region that increasing temperature is melting glaciers and reducing snowfall, impacting the flow of china’s domestic and shared rivers (devlaeminck, 2018); besides there is more rainfall in northern europe which will lead to an increased number of water sources in the north and in a decreased one in the south (radu ioan mogos, negescu-oancea mihaela diana, et al., 2021). since then, 2021 intergovernmental panel on climate change (ipcc) report provides that climate change is dramatically affecting the water cycle: the average rate of sea level rise was 1.3 [0.6 to 2.1] mm yr–1 between 1901 and 1971, increasing to 1.9 [0.8 to 2.9] mm yr–1 between 1971 and 2006, and further increasing to 3.7 [3.2 to 4.2] mm yr–1 between 2006 and 2018 (high confidence) (ipcc, 2021). rising sea levels are already affecting coastal ecosystems, biodiversity, agriculture, food systems, aquifers, and reducing natural water supplies in ice and snow. in addition, the un world water development report 2020 (unesco, un-water, 2020), decline that water is the "climate connector" that allows for greater collaboration and coordination across most targets for climate change, sustainable development, and disaster risk reduction. in a recent 2021 unicef report on climate risks to children, some 144 million children worldwide under the age of five are stunted, 335 million children are highly exposed to river flooding, 240 million children are highly exposed to coastal flooding, and 400 million children worldwide live in areas that are highly exposed to tropical cyclones (the climate crisis is a child rights crisis). in july 2020, the european council approved a 750 billion euro economic recovery plan called the next generation eu (ngeu), which will begin in 2021, and the multiannual financial framework for 2021–2027 (mff) ( jonatan echebarria fernández, 2021). the negu allocates 30 percent of the total package to climate protection, contributing to the union's new 2030 climate goals and meeting the eu's climate neutrality goal by 20501. this interprets to more than eur 500 billion over the next seven years (ewa krukowska, laura millan lombrana). 2. interception between climate change and water cycle: international legal issues global warming and climate change are caused by the natural presence of so-called greenhouse gases such as carbon dioxide (co2), methane (ch4), nitrous oxide (n2o), hydrofluorocarbon (hfc), perfluorocarbon (pfc) and sulfur hexafluoride (sf6) in the atmosphere of earth2. these gases are used in various economic sectors and have many applications. for example, hydrofluorocarbons (hfcs) are used as refrigerants in refrigeration and refrigeration engineering; perfluorocarbons (pfcs) are commonly used in the electronics sector as well as in the cosmetics and pharmaceutical industries; sulfur hexafluoride (sf6) is mainly used as an insulating gas in high voltage switchgear as well as in magnesium and aluminum production3. in the united nations framework convention on climate change of 19924 associates the term ‘climate change’ with human activity and composition shifts in global atmosphere due. climate change affects the quality of water and poses challenges for beneficial uses of water resources. according to the intergovernmental panel on climate change (ipcc) 2021, states face a highly uncertain future of water availability (quality and quantity) and need to adapt their transboundary water management regime to meet their needs. transboundary cooperation seeks to address climate impacts that cross national boundaries (e.g., droughts or flooding on transboundary rivers) to avoid de-adaptive effects from a basin perspective and to exploit the potential co-benefits of improved regional cooperation, such as reduced uncertainty through data sharing, peace and stability, expanded planning space, and shared costs and benefits (un-water policy brief on climate change and water). currently, there are more than 260 transboundary agreements between riparian states ( jafroudi, 2020). however, as the unece study confirms, many transboundary water agreements existed before climate change adaptation entered the water management discourse, and therefore assume relatively fixed water conditions in the respective basins (spijkers, 2019). 1 report by the joint research centre global energy and climate outlook 2020: a new normal beyond covid-19. available at: https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/global-energy-and-climate-outlook-2020-new-normal beyond-covid-19 2 available at: https://www.epa.gov/ghgemissions/overview-greenhouse-gases 3 available at: https://ec.europa.eu/clima/policies/f-gas_en 4 the unfccc was adopted on 9 may 1992, having entered into force on 21 march 1994. available at: https://unfccc.int/resource/docs/ convkp/conveng.pdf baltic journal of economic studies 103 vol. 8 no. 3, 2022 to this extent, one should mention the convention on the protection and use of transboundary watercourses and international lakes (the transboundary water convention), concluded in helsinki on 17 march 1992 (entry into force on 1996)5, the convention on the law of the nonnavigational uses of international watercourses (the watercourse convention), concluded in new york on 21 may 1997 (entry into force on 2014)6. these general rules are complemented by more specific rules relating to state responsibility in the context of the management of international watercourses. some compliance mechanisms can also be found in in regional water law, such as the eu water framework directive of 23 october 20007 and treaties regulating the joint management of a specific international watercourse, such as the convention on the protection of the rhine on 12 april 1999 (entry into force on 2002)8, the danube river protection convention on 29 june 1994 (entry into force on 1998.)9, agreement on the nile river basin cooperative framework on 14 may, 201010 and so on. many provisions of international water law can also help adapt to climate change, such as the "equitable and reasonable use" principle, the "no significant harm" principle, and the "precautionary principle". the principle of equitable and reasonable utilization of water is one of the cornerstones of international freshwater law. this principle requires states to take into account considerations of equity in exercising their rights and fulfilling their obligations when using the freshwater resources they share with others. as m. jafroudi underlines, this reading of the principle of equitable and reasonable use of water comes from the notion of ‘perfect equality of states’ enshrined, inter alia, in the judgment of the pcij in the case relating to the territorial jurisdiction of the international commission of the river oder, were court ruled out any preferential privilege of any one of the riparian states over others in using he water of the basin for navigational purposes ( jafroudi, 2020). most international instruments interpret equity in the exercise of the rights of riparian states with respect to a transboundary basin as the equal right of each riparian state to benefit from the waters of such a basin. for example, the watercourses convention establishes an obligation for states to "utilize" and "participate in the use, development and protection" of an international watercourse in an equitable and reasonable manner (art. 5). the convention also clarifies that when using an international watercourse on its territory, a state must take all necessary measures to prevent significant harm to other watercourse states. the water convention takes the same approach and requires states to "...ensure reasonable and equitable use of transboundary waters, taking into account their transboundary character, in the case of activities which cause or are likely to cause transboundary impact." (spijkers, 2019). d. j. devlaeminck emphasized that china’s water treaties reflect the reciprocal aspects of international water law, illustrating that in some way china believes in and adheres to international water law principles (devlaeminck, 2018). for example, china adheres to the principle of fair and reasonable use in individual treaties, expressed using mutually enforceable terms such as "equitable," "equitable," and "rational". in addition, the obligation not to cause substantial harm often takes a broad, reciprocal approach that protects both upstream and downstream states, but some of china's treaties contain a narrow definition, focusing on types of harm that primarily affect downstream states, which is potentially more onerous for china (devlaeminck, 2018). an important debate regarding the interaction between climate change and water law is ongoing in the united states. r . k. craig argues that it is unlikely to be resolved until (1) the full implications of climate change for the water resources of the united states are better understood and assessed; and (2) patterns of voluntary human adjustments become clearer. for example, it matters a great deal to the future of western water law whether the average flow of the colorado river falls by 10 percent, or by half, or whether the river runs dry-and how quickly that change occurs. as for the second example, california would face a very different water law problem if its silicon valley industry, hollywood movie studios, agriculture, and accompanying social support systems moved en masse to michigan 5 convention on the protection and use of transboundary watercourses and international lakes. available at: https://treaties.un.org/doc/ treaties/1992/03/19920317%2005-46%20am/ch_xxvii_05p.pdf 6 convention on the law of the non-navigational uses of international watercourses. available at: https://legal.un.org/ilc/texts/instruments/ english/conventions/8_3_1997.pdf 7 directive 2000/60/ec of the european parliament and of the council of 23 october 2000 establishing a framework for community action in the field of water policy. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex:32000l0060 8 convention on the protection of the rhine. available at: https://op.europa.eu/en/publication-detail/-/publication/fa42cafd-30ee-4d8f94a8-bc404d0ee550/language-en 9 convention on cooperation for the protection and sustainable use of the danube river (danube river protection convention). available at: https://www.icpdr.org/flowpaper/app/#page=1 10 agreement on the nile river basin cooperative framework. available at: http://www2.ecolex.org/server2neu.php/libcat/docs/tre/ full/en/tre160035.pdf baltic journal of economic studies 104 vol. 8 no. 3, 2022 and wisconsin than if they remained in place (craig, 2020). furthermore, the united states has a major problem with the protection of native water rights. ultimately, the only way to adequately protect tribal rights and resources is to place american indian tribes on an equal footing with the states and the federal government by recognizing tribes as equal partners in the management of water resources in their territories (dylan r . hedden-nicely, lucius k., 2020). it is important to emphasize that climate change is a serious obstacle to the realization of the rights to water and sanitation. water is a key medium through which climate change affects populations and ecosystems, especially in relation to projected changes in water quality and quantity. unfortunately, water is not explicitly mentioned in the most important international instrument to combat climate change, the paris agreement, which was adopted on december 12, 2015 and entered into force on november 4, 2016 (paris agreement). the preamble makes clear that "parties must respect, promote and accommodate their respective human rights obligations, the right to health, the rights of indigenous peoples, local communities, migrants, children, the disabled and people in vulnerable situations, and the right to development, as well as gender equality, women's empowerment and intergenerational equity." the relationship between climate, human rights, water, and sanitation is dominated by various disciplines: political, economic, natural sciences, and lawyers, in the latter case. in may 2020, a group of torres strait islanders petitioned the un human rights committee against the australian government for not setting sufficient goals and plans to reduce greenhouse gas emissions, and for not funding adequate measures to protect and improve shoreline resilience on islands threatened with inundation from rising sea levels11. petitioners claim that australia violates their human rights under the international covenant on civil and political rights: article 6 (right to life), article 17 (right to be free from arbitrary interference with privacy, family and home) and article 27 (right to culture). there is another case in canada seeking damages because of climate change. ontario burgess v ontario minister of natural resources and forestry, court file no. 16-1325cp (burgess v. minister of natural resources and forestry), the plaintiff sued a provincial official in canada responsible for managing the water level in several canadian lakes, alleging that the government failed the plan of adaptation to climate change and an obligation to prevent flooding which caused property damage to the plaintiffs' homes around the lakes. in 2018, burgess voluntarily discontinued the case. peruvian farmer luciano lliuya sued the german utility rwe ag (germany’s largest electricity producer) seeking compensation for the costs of protecting the plaintiff ’s town of huaraz (population 120,000) from melting glaciers (case luciano lliuya vs rwe ag). the case was dismissed for lack of a "linear causal chain" linking the plaintiff 's injury and rwe's emissions. on appeal, however, the court reversed the decision and has now begun the evidentiary phase of the trial, gathering evidence on, among other things, the extent of the defendant's greenhouse gas emissions and how those emissions contribute to a warming atmosphere (united nations environment programme, 2020). as a conclusion, it should be noted that transboundary water agreements existed prior to the adaptation of the international climate change regime, and therefore such agreements are being reviewed and modified. thus, when developing new transboundary water and climate change cooperation agreements, states should design new trans boundary agreements with flexibility in mind. a flexible regulatory framework can accommodate the significant changes in water policy and legislation needed to account for future climate change impacts. a flexible approach that allows for adjustments in the event that climate change makes previously adequate water quantities inadequate. new agree ments must include flexibility in water allocation schemes. regulations for transboundary cooperation related to water quality should include provisions stating what, how, and when to evaluate when determining climate change impacts. to meet obligations to adapt transboundary water agreements to climate change, states can establish joint climate monitoring and forecasting programs. if states fail to take all possible measures to allow them to adapt their transboundary water agreements to such changes, they risk failing to meet their environmental obligations and violating the rights of non-party basin states to beneficially use water, thereby committing an internationally wrongful act. (spijkers, 2019). 3. long-term eu climate policy framework the environmental and climate legislation of the eu candidate countries is mainly characterized by long-term political goals is a fertile ground for the adoption of the above-mentioned objectives (alessandro monti, beatriz martinez romera, 2020). 11 petition of torres strait islanders to the united nations human rights committee alleging violations stemming from australia’s inaction on climate change. available at: http://climatecasechart.com/climate-change-litigation/non-us-jurisdiction/united-nations human-rights-committee/ baltic journal of economic studies 105 vol. 8 no. 3, 2022 eu environmental policy implies a set of objectives necessary to create and maintain the well-being of the state and its society. in terms of the eu treaty on climate change, "eu climate policy " is used as a legal term referring to the european union's policy aimed at achieving a specific eu environmental goal, namely combating climate change (kenig-witkowska, krämer, ubysz, stoczkiewicz, 2015). the first eccp (2000–2004) examined a wide range of policy sectors and instruments for reducing ghg emissions: the eu emissions trading system; the clean energy development mechanism; energy supply; energy demand; energy efficiency; transport; industry; research; agriculture. in addition, impacts on other policy areas, including co-benefits such as energy security and air quality, were examined. the main goal was to create a rational, medium and long-term climate policy based on the "no bridge burned behind" strategy. under eccp ii, climate change involves some significant adjustments in our societies and economies, especially in terms of restructuring the energy system and the public transportation system. this chapter of the paper offers a brief overview of the current eu and global legal framework. in 2014, the european council approved the eu 2030 climate and energy framework. in its conclusions adopted, the european council endorsed these key important targets 2030, namely: (a) a binding eu target of at least 40% less greenhouse gas emissions by 2030, compared to 1990 (as the eu’s contribution into the global climate agreement); (b) a target, binding at eu level, of at least 27% renewable energy consumption in 2030; (c) an indicative target at eu level of at least 27% improvement in energy efficiency in 2030. further on, the paris agreement in 201812 was signed and the eu climate and energy policy framework 2030 was amended. the eu climate and energy policy framework 2030 reaffirmed the following key targets: 1) 40% cuts in greenhouse gas emissions by 2030 regarding (from 1990 levels, as the eu’s contribution into the global climate agreement); 2) 32% for renewable energy in the energy consumption of 2030; 3) 32.5% improvement in energy efficiency for 2030 from energy consumption projections. climate and energy policy 2030 (2018) seeks to revise the energy efficiency directives, the renewable energy directives (red ii), and the emissions trading system (ets). besides, it supplemented the current framework with the two new instruments (kati kulovesi, sebastian oberthür): first, the regulation on the governance of the energy union and climate action (the governance regulation) established crucial integrated structures for the planning, reporting and review of the climate and energy policy; second, the lulucf regulation set a key important target for the lulucf sector to prevent any net ghg emissions and strengthen the rules on accounting for emissions and removals in the lulucf. on november 28, 2018, the european commission proclaimed the eu climate policy 2050, which presented the european commission's longterm strategic vision for a prosperous, modern, competitive and climate-neutral economy by 2050. the 2015 paris agreement introduced the principle of climate neutrality, in which eu member states agreed to limit global temperature rise to well below 2 degrees celsius compared to pre-industrial levels. to achieve this overall goal, eu member states have pledged to achieve a balance between current anthropogenic emissions from sources and their removal by absorption of ghgs by 2050 in order to achieve a balance between ghg emissions and absorption (in the natural course of things). in this respect, the path to a net-zero economy must be based on a joint action plan that is compatible with seven major strategic pillars, such as energy efficiency; renewable energy; clean, safe and networked mobility; competitive industry and circular economy; infrastructure and interconnections; biosphere carbon and clean carbon sinks; carbon capture and storage capacity to address other emissions. the european commission argues that the implementation of all these strategic priorities will contribute to the implementation of the concept of climate neutrality. notably, in december 2019, the european commission presented to the european parliament, the european council, the council of the european economic and social committee and the committee of the regions the communication "the european green deal". this communication proves the growth of the eu's climate ambitions for 2030 and 2050. the european green deal is an ambitious package of measures that will allow european citizens and businesses to benefit from a sustainable green economy. the european green deal resets the european commission’s commitments, presented below: 1) achieving climate neutrality by 2050, boosting momentum for climate action and stepping up eu’s climate ambition 2030. with the 2030 climate target plan, the commission proposes to raise the eu's ambition on reducing greenhouse gas emissions to at least 55% below 1990 levels by 2030 (2030 climate target plan); 12 the paris agreement was concluded on 5 october 2016, on the basis of the eu council decision (eu) 2016/1841. baltic journal of economic studies 106 vol. 8 no. 3, 2022 2) promotion of nature-friendly solutions while protecting and restoring the current ecosystems and biodiversity (necessity to broaden the scope of the forest restoration plan in europe); 3) implementation of the eu ‘farm to fork’ strategy implies the development of a fair, healthy and environmentally friendly food system (need for a balanced diet and further sustainable consumption in europe); 4) elimination of all sources of pollution to resolve the water pollution problem, reduce freshwater biodiversity loss and build resilience to the climate change; 5) inclusion of finance and investment into the mainstream policy and fair transition to the dedication of 25% of the overall future eu budget to climate action; 6) setting up a new partnership between the eu institutions and eu member states to enable the european commission to align the sustainable development goals with the eu system; 7) streamlining the eu’s role as a global pioneer (future trade agreements should set forth the binding and enforceable commitments to start a new chapter on the sustainable development, specifically, as regards to the current environmental and social legislation). however, the european parliament and council regulation setting the framework for achieving climate neutrality and amending regulation (eu) 2018/1999 establishes a binding eu climate neutrality target by 2050 to achieve the longterm temperature goal under article 2 of the paris agreement, providing the necessary framework for achieving the global adaptation goal set out in article 7 of the paris agreement (see article 1 of the european climate law). in this context, m. peeters and m. chamon argue that this contribution will address both of the above aspects in the light of primary eu law, i.e., the commission's delegated authority to decide on the trajectory to 2050 and to assess the impact of measures taken by eu member states. the greatest danger of this proposal is that the eu's hard lawbased approach to emissions reduction becomes too soft (peeters, chamon, 2020). if the commission considers that national measures do not correspond to the trajectory, it can make public recommendations to member states. under article 288 tfeu, these would be non-binding obligations, but the climate act would oblige eu member states to "take into account" these recommendations. if a member state does not follow the recommendation (or only partially follows it), it will have to explain why it does not follow the recommendation. in essence, this mechanism does not differ much from the already well-known open coordination method: although no binding substantive obligations are imposed on eu member states, there are still attempts to change their behavior through public "branding and shaming" and imposing the obligation to state reasons (fulfill or explain). it remains to be seen whether this soft approach will lead to sufficiently ambitious climate action on the part of eu member states. eu ‘green deal: fit for 55 plan’ 2021 suggests amendments to over 10 regulations, i.e.,13..: 1) revision of the eu emissions trading system to extend the current eu ets to the maritime and aviation sector and create a ghg emissions trading scheme for road transport and buildings in 2026); 2) update the effort allocation regulation (esr) to meet the eu-wide ghg reduction goal of at least 40% in industrial sectors by 2030; 3) development of a carbon border adjustment mechanism as a legal tool to address current market dynamics by reducing ghg emissions in the eu and globally, as well as the modernization of the relevant sectors; 4) development of amendments to the renewable energy directive to increase the overall binding target from the current 32% res to a new level of 40% res in the eu energy mix and to strengthen sustainability criteria in bioenergy; 5) revision of the land use change and forestry regulation to raise the quality and quantity of the eu’s forests and other natural carbon sinks; 6) submission of amendments to the alternative fuels infrastructure regulation to ensure user friendly infrastructure for the recharging and refuelling cleaner vehicles across the eu; 7) review of the energy efficiency directive to implement the climate ambition of the new climate target 2030 to achieve 9% reduction in energy consumption by 2030, compared to the baseline projections; 8) re-dressing the energy performance of buildings directive to accelerate the pace of renovations at buildings, contributing to the energy efficiency and renewable energy targets and reduction of ghg emissions in the buildings sector; 9) update of the energy taxation directive to align the minimum tax rates for heating and transport fuels with the eu climate and environmental objectives; 10) re-addressing the co2 emission standards for the new cars and vans for further decline in ghg emissions for these vehicles, providing a clear and realistic pathway towards zero-emission mobility. 13 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions 'fit for 55': delivering the eu's 2030 climate target on the way to climate neutrality. аvailable at: https://ec.europa.eu/info/sites/default/files/chapeau_communication.pdf baltic journal of economic studies 107 vol. 8 no. 3, 2022 4. combating climate change as part of environmental action in the european union 4.1. eu climate policy as part of the environmental policy of the eu and eu candidate countries a legal analysis of article 2 of the treaty on european union allows three general environmental objectives to be identified: 1) high level of environmental protection to include high level of climate protection; 2) improvement of environment quality to include climate quality improvement; 3) sustainable development of europe and the earth to include the fight against climate change (kenigwitkowska, 2017). through specific reference to climate change and the strengthening of a common energy policy governing safety, efficiency, interconnectedness of supply and energy solidarity, the treaty reinforces eu action in these crucial areas covered by environmental policy and energy policy. since 2007, climate protection has been partly included in eu environmental policy, emphasizing one of its stated goals in promoting appropriate safeguards at the international level to address regional or global environmental problems. multiannual action programs are fundamental to environmental policy, since these acts constitute the policy itself. action programs are drawn up in accordance with art. 192 par. 3 tfeu. this provision states that the general programs of action setting the priority objectives to be achieved will be adopted by the european parliament and the council in accordance with the general legislative procedure and after ongoing consultations with the economic and social committee and the committee of the regions. the action programs, although not normative in nature, have an impact on the legislative process in the field of environmental protection. since 1973, the commission has announced multiyear environmental action programs (eaps) to outline future proposals and goals for eu environmental policy. the environmental program of the 1980s addressed the problem of climate change politically. in the third environmental action programme (1982–1986) adopted by the council resolution on 7 february 1983 climate was mentioned for the first time as one of the resources to determine the quality of life14. in the fourth environmental action programme (1987–1992) adopted by the council resolution on 19 october 1987, climate was referenced to in the chapter on the general policies of the community15. it has been shown that fossil fuel use can pose complex problems if it turns out that the accumulation of atmospheric carbon dioxide and the greenhouse effect have a serious impact on the climate. in 1989, the commission presented to the council the first communication regarding the climate change where the council responded quickly in its resolution of 21 june 1989 on the greenhouse effect and the community (council resolution of 21 june 1989 on the greenhouse effect and the community (89/c 183/03)). the climate change was addressed not earlier than in the fifth environmental action programme (1993–2000) adopted by the council in its resolution of 1 february 1993 (european community programme of policy and action in relation to the environment and sustainable development "towards sustainability "). an entire section of the programme was devoted to climate change where co2, cfc, ch4, and h2o were determined as the major factors in climate change. the fifth programme was actuated by decision no 2179/98/ec of the european parliament and the council of 24 september 1998 on the review of the european community programme of policy and action aimed at the environmental and sustainable development "towards sustainability " (decision no 2179/98/ec). according to this programme, the community had to ensure that sustainability is the driving force in future work towards the biodiversity and climate conventions. in 2000, the green paper on trading greenhouse gas emissions within the european union was published (com (2000) 87 green paper on greenhouse gas emissions trading within the european union). its purpose was to initiate discussions on the suitability and possible functioning of greenhouse gas emissions trading within the european union, as well as on the relationship between greenhouse gas emissions trading, other policies and actions aimed at combating climate change. in the 6th environmental action programme, which was in force from 2001 to mid-2010, halting climate change was defined as one of the four priorities where action should be taken in the field of environmental protection. the 6th programme was adopted by decision no 1600/2002/ec (decision no 1600/2002/ec) where the objective 14 resolution of the council of the european communities and of the representatives of the governments of the member states, meeting within the council, of 7 february 1983 on the continuation and implementation of a european community policy and action programme on the environment (1982 to 1986). available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex:41983x0217 15 resolution of the council of the european communities and of the representatives of the governments of the member states, meeting within the council of 19 october 1987 on the continuation and implementation of a european community policy and action programme on the environment (1987–1992). available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a41987x1207 baltic journal of economic studies 108 vol. 8 no. 3, 2022 was set of a maximum global temperature increase of 2 celsius over the pre-industrial levels and maintenance of co2 concentration below 550 ppm. the 6th programme suggested the references to the preamble to directive 2003/87/ec establishing the ghg emission trading scheme within the community and amending council directive 96/61/ec (decision no 1600/2002/ec). the 7th eu environmental action programme (2013–2020) was adopted pursuant to the decision of the european parliament and of the council no 1386/2013/eu of 20 november 2013 under the general union environment action programme to 2020 "living well, within the limits of our planet" (decision no 1386/2013/eu). this program identifies priority areas, one key element of which is adaptation to climate change. this area of activity governs the eu in its efforts to transform itself into a resource-efficient and low-carbon economy, aiming to maximize the benefits of environmental legislation, improve knowledge and evidence on the environment and climate to better integrate more coherent environmental policies into action and effectively address international environmental and climate challenges. for the period of 2021–2027 the programme for the environment and climate action (life) (regulation (eu) 2021/783) was established in the eu. the overall objective of life is to contribute to the implementation, updating and development of eu environmental and climate policies and legislation by co-financing projects with european added value. life consists of four subprograms in two areas. the climate action area includes subprogrammes on climate change mitigation and adaptation and on the transition to clean energy. the life mitigation and adaptation subprogramme promotes the transition to a sustainable, energyefficient, renewable, climate-neutral and sustainable economy, thereby contributing to sustainable development. climate change mitigation, adaptation to climate change, climate governance, and information are the key focus areas of this subprogram. life's clean energy transition subprogramme aims to promote the transition to an energy-efficient, renewable, climate-neutral and sustainable economy by funding coordination and support for action across europe. 4.2. legislation of ukraine on environmental impact assessment in extreme conditions: recommendations the eu-ukraine association agreement16 is an important impulse for ukrainian legislation approximation to the eu law. a great deal of attention in the association agreement is given to cooperation in the areas of environmental protection, in particular the promotion of the reduction of greenhouse gas emissions; the promotion of energy efficiency and energy conservation. particular attention is paid to energy-efficient and environmentally friendly technologies, development and support of renewable energy sources (art. 338). according to article 365 of the association agreement, among other purposes of cooperation between the eu and ukraine is specified "the development and implementation of climate change policies, in particular those specified in annex xxxi to this agreement." articles 374 and 376 provide, inter alia, that parties will develop their scientific capacity to meet their global environmental responsibilities and obligations, including climate change, and strengthen cooperation at the regional and international levels in the context of multilateral agreements such as the 1992 un framework convention on climate change. in order to meet the requirements of the association agreement and to adapt the ukrainian agreement, amendments were made to the law of ukraine "on alternative fuels". the amendments are aimed at simplifying the conditions for conducting business activities in the production of biofuel: the requirements for the state register and business entities that conduct business activities in the production, storage and introduction of liquid biofuel and biogas were abolished. the law of ukraine of april 25, 2019 "on amendments to some laws of ukraine regarding the provision of competitive conditions for the production of electricity from alternative energy sources" amended the existing support system. in 2017, the energy strategy of ukraine until 2035 "security, energy efficiency, competitiveness" entered into force. to shape the structure of primary energy supplies, the document uses indicative indicators, which ukraine must achieve in accordance with its international commitments in the areas of renewable energy development and climate change. in addition, in order to implement the objectives of the strategy, the ministry of natural resources of ukraine was instructed to ensure the creation and operation of the trading system of greenhouse gas emissions quotas. in 2018, the cabinet of ministers of ukraine approved the low-carbon development strategy of ukraine until 2050. ostap semerak, former minister of ecology and natural resources of ukraine, once noted: "ukraine was one of the first in the world to develop a relevant strategy and take responsibility for the transition of the country 's economy to low-carbon development. 16 association agreement between the european union and its member states, of the one part, and ukraine, of the other part. available at: https://trade.ec.europa.eu/doclib/docs/2016/november/tradoc_155103.pdf baltic journal of economic studies 109 vol. 8 no. 3, 2022 this document stipulates reduction of emissions and increase of absorption of greenhouse gases, introduction of environmentally safe production using green technologies in all sectors of the economy."17 the main objective of the strategy is the transition to an energy system involving the use of low-carbon energy sources, the development of clean electric and thermal energy sources, increasing energy efficiency and energy conservation in all sectors of the economy and at housing and communal infrastructure facilities, and encouraging the use of motor fuels alternative to petroleum products. the goal is also to increase carbon sequestration and retention through the use of best practices in agriculture and forestry, adapted to climate change. the section dedicated to the decarbonization of the energy sector of ukraine is recognized as the key section of the strategy18. at the end of 2019, the law of ukraine "on the basic principles (strategy) of the state environmental policy of ukraine until 2030" was adopted. it provides for several climate goals, such as increasing the use of renewable energy sources by 17% by 2030; reducing greenhouse gas emissions to 60% compared to 1990 levels. unfortunately, in ukraine, the climate is not yet recognized as an independent object of legal protection. the law of ukraine "on environmental protection" does not contain provisions on climate change prevention at all. certain regulation of activities affecting climate change is contained only in the law of ukraine "on atmospheric air protection". one of its articles obliges legal entities and individuals to reduce, and in the future completely stop, the production and use of chemicals that have a harmful effect on the ozone layer, as well as to work to reduce emissions of substances whose accumulation in the air could lead to negative climate change. some other environmental laws only mention the word "climate" without any additional legal mechanisms to combat climate change as a national security challenge. agree with o. kovalova, m. kornienko, and yu. pavlyutin that "...as part of the organizational direction it is necessary: 1) enforce systematic national security reporting legislation within the purview of each of the state actors involved in national security; 2) establish a uniform standard for continuous monitoring of national security cooperation agreements and memoranda between authorities and public organizations; 3) transform the practice of consultative situational cooperation into a practice of ongoing coordination and strategic cooperation in the area of national security; 4) create a unified register of threats within the framework of the national security strategy of ukraine; 5) improve the register of public organizations, in particular, organize them by areas and forms of activity, display links to the official sites of organizations and provide public access to it; 6) to introduce an effective mechanism for coordinating the partici pation of public organizations in ensuring national security and providing them with donor assistance by creating a unified coordination center on the participation of public organizations in ensuring national security." (kovalova, korniienko, pavliutin, 2020). for example, the law of ukraine "on environ mental impact assessment" defines that the impact on the environment is connected with any consequences of the planned activity, including climatic ones (article 1), and the law of ukraine "on strategic environmental assessment" consequences for of the environment are identified as likely consequences for the climate." (the law of ukraine "on atmospheric air protection"). as for the transport sector, in order to decarbonize and develop electric transport, the law of ukraine "on amendments to some legislative acts of ukraine regarding access to the infrastructure of charging stations for electric vehicles" was adopted in 2019. the law establishes liability for stopping or parking vehicles in places designated by appropriate road signs and/or road markings, where only vehicles equipped with electric motors are allowed to stop or park, as well as creating obstacles to stopping or parking for drivers of such vehicles. by 2025 it is planned to gradually reduce the coefficient of the "green" tariff for electricity produced by generating facilities using alternative energy sources. a system of auctions was introduced to distribute the support quota, i.e., to determine the business entities that acquire the right to support from the state in the production of electricity from alternative sources. in december 2019 the law of ukraine "on regulation of business activities with ozone depleting substances and fluorinated greenhouse gases" was adopted, which will come into force in june 2020. ozone-depleting substances and fluorinated greenhouse gases are classified as "controlled substances". the law prohibits the production of controlled substances and defines the basic principles of their import into ukraine. only persons listed in the unified state register of operators of controlled substances have the right to conduct operations with controlled substances. 17 the low-carbon development strategy of ukraine until 2050. available at: https://legalhub.online/energetyka/pryjnyato-strategiyu-nyzkovugletsevogo-rozvytku-ukrayiny-do-2050-roku/ 18 low-carbon development strategy of ukraine until 2050. available at: https://mepr.gov.ua/files/docs/proekt/leds_ua_last.pdf baltic journal of economic studies 110 vol. 8 no. 3, 2022 these persons are obliged to take measures to reduce the consumption of controlled substances, to prevent emissions of controlled substances into the atmosphere, to ensure timely collection and storage of controlled substances in a sealed container for recycling or disposal. starting in june 2021, the labeling of products that contain or use controlled substances is mandatory. an appendix to the law contains a list of controlled substances, their ozonedepleting potential and global warming potential. in december 2019 the law of ukraine "on the basis for monitoring, reporting and verification of greenhouse gas emissions" was adopted (entered into force on january 1, 2021). this law defines the legal and organizational framework for monitoring, reporting and verification of greenhouse gas emissions and is aimed at fulfilling ukraine's obligations under international agreements, including the association agreement, as well as the requirements of the un framework convention on climate change and the paris agreement. a separate block of legal regulation is devoted to energy efficiency issues. the law of ukraine from june 22, 2017 "on the energy performance of buildings", adopted in accordance with directive 2010/31/eu, introduced energy performance certification of buildings. it is conducted for construction sites and existing buildings in order to assess compliance with the established minimum energy performance requirements for buildings and to provide recommendations for improving the energy efficiency of the building. the energy efficiency fund was established in 2017 to support energy saving measures. on october 21, 2021, the verkhovna rada of ukraine adopted the law of ukraine "on energy efficiency ". this normative act aims to implement the acquis communautaire of the european union in the relevant area. it introduces mechanisms to strengthen energy security, reduce energy poverty, sustainable economic development, conservation of primary energy resources and reduction of greenhouse gas emissions. considerable attention is paid to economic incentives for energy efficiency in the areas of electricity transmission and distribution, natural gas transportation and distribution, and heat supply. the main principles of incentives for consumers to implement energy efficiency measures are formulated. international studies note that wars, starting with the first world war, affect ecosystems more and more. this is due to the increase in the potential of modern weapons, which cause more damage to the environment (schillinger, özerol, et al., 2020). the war in ukraine affected not only food security, but also economic and environmental research for all countries. all more research on the significant impact of the war in ukraine on climate change.19 as a result of the war, atmospheric air is significantly polluted. according to the president of ukraine, since february 24, 2022, the russian federation has launched about 3,500 missiles over ukraine20. during the detonation of missiles and shells a number of chemical compounds are formed – carbon monoxide, brown gas, nitrogen dioxide, formaldehyde, etc., which pollute the environment. in addition, russia shells ukrainian oil depots and industrial enterprises that use various chemicals in their activities. and these are also tens of thousands of tons of harmful substances released into the atmosphere (dyachuk). at the same time, experts note that if today energy security is one of the main global problems of the world, water security comes to the fore in conditions of climate change. it is obvious that already now the war unleashed by russia in ukraine directly affects the issue of water security in our country. the invaders are shelling water infrastructure, mining dams, and waging hostilities in the black sea and the sea of azov. for example, as a result of the shelling of the water treatment facilities of the vasylkivsk water supply and drainage department, the army of the russian federation destroyed the building of the sewage pumping station. " water is essential to life and a right of every human being," said osnat lubrani, humanitarian coordinator for ukraine, warning of the health risks caused by a water cut, especially for children and the elderly. "poor water quality can lead to diseases, including cholera, diarrhea, skin infections and other deadly infectious diseases. people are forced to live in crowded conditions and cannot observe basic hygiene measures. this problem needs to be addressed," lubrani added (unicef). as a result, an estimated 1.4 million people in the country currently do not have access to safe water. another 4.6 million people have only limited access to safe water21. russia's nuclear terrorism is of particular concern. on february 24, 2022, russian troops seized the chernobyl nuclear power plant and other nuclear facilities in the chernobyl exclusion zone in an 19 this is how the conflict between ukraine and russia could impact climate change. available at: https://www.weforum.org/agenda/2022/03/ russia-and-ukraine-are-important-to-the-renewables-transition-here-s-what-that-means-for-the-climate; ukraine war’s latest victim? the fight against climate change available at: https://www.nytimes.com/2022/06/26/world/europe/g7-summit-ukraine-war-climate-change.html; climate change: ukraine war prompts fossil fuel 'gold rush' – report. available at: https://www.bbc.com/news/science-environment-61723252 20 these days, if you are abroad, be there with the flag of ukraine and spread the truth about the crimes of the occupiers – address by president volodymyr zelenskyy. available at: https://www.president.gov.ua/news/cimi-dnyami-yaksho-vi-za-kordonom-budte-tam-iz-praporomukra-77205 21 how has the war impacted ukraine’s environment? available at: https://www.weforum.org/agenda/2022/07/ukraine-war-environmental-impact/ baltic journal of economic studies 111 vol. 8 no. 3, 2022 invasion and remained there until march 31. an inventory and assessment of the damage caused by the russian occupation in the exclusion zone is currently underway. according to preliminary estimates, the damage caused by russian troops in the exclusion zone is almost 2.5 billion hryvnias. the occupiers destroyed almost 100 units of valuable analytical equipment, which has no analogues in europe.22 russia committed another act of nuclear terrorism on june 5, when a russian cruise missile similar to the kalibr missile flew at a critically low altitude over the south ukraine nuclear power plant. the zaporizhzhia npp continues to operate under occupation. the russian army uses the territory of the nuclear plant as a military base. the presence of russian military forces at the zaporizhzhia nuclear power plant prevents the operator and ukrainian authorities from fulfilling their nuclear and radiation safety obligations under international conventions and iaea safety standards, and also prevents the iaea from fulfilling its safeguards mandate. read more about nuclear safety in this war at the link (ukraine: russia-ukraine war and nuclear energy). 5. conclusions since russia's military invasion of ukraine on february 24, 2022, there have been at least 20 separate instances of water infrastructure damage in eastern ukraine. the recent intensification of fighting in the donbass and the widespread use of explosives in populated areas threatens to bring the water supply system, already damaged by the previous eight-year conflict, to the brink of total destruction. just three days after the latest invasion began, russian troops destroyed a dam in ukraine's kherson region that was blocking water access to russia-annexed crimea. in mariupol, a city in southeastern ukraine, russian soldiers cut off the local water supply as part of a brutal siege of the city, leaving the trapped population without access to safe drinking water and sanitation. in 2022, despite military aggression of russia, ukraine continued to improve legislation in the field of energy efficiency. in particular, in july the adopted law23 approves the reduction of number of procedures required for implementation of energy-efficient measures implementation projects and thermal modernization of buildings, introduces the possibility of implementation of partial energy-efficiency measures implementation projects. as a final note, it is important to emphasize that in today 's legal and socioeconomic debates, principles of environmental security are grounded in the parametric features of human rights to a safe environment. while climate change exacerbates human rights to water and sanitation, local governments must focus on the legal framework of economic impact and integrated effects on the capacity of the most fragile water-related regions. 23 the law of ukraine "on amendments to some laws of ukraine regarding the creation of conditions for the introduction of complex thermal modernization of buildings". available at: https://zakon.rada.gov.ua/laws/show/2392-20?lang=en#text 22 briefing on the environmental damage caused by the russia’s war of aggression against ukraine (2-8 june 2022). available at: https://mepr.gov.ua/en/news/39274.html references: 2030 climate target plan. available at: https://ec.europa.eu/clima/eu-action/european-green-deal/2030climate-target-plan_en agreement on the nile river basin cooperative framework. available at: http://www2.ecolex.org/server2neu. php/libcat/docs/tre/full/en/tre160035.pdf alessandro monti, beatriz martinez romera (2020). fifty shades of binding: appraising the enforcement toolkit for the eu’s 2030 renewable energy targets. review of european, comparative & international environmental law, 29:221–231. doi: https://doi.org/10.1111/reel.12330 association agreement between the european union and its member states, of the one part, and ukraine, of the other part. available at: https://trade.ec.europa.eu/doclib/docs/2016/november/tradoc_155103.pdf briefing on the environmental damage caused by the russia’s war of aggression against ukraine (2-8 june 2022). available at: https://mepr.gov.ua/en/news/39274.html burgess v. minister of natural resources and forestry, no. 16-1325 cp, statement of claim (ont. sp. ct. sept. 14, 2016). available at: http://climatecasechart.com/climate-change-litigation/wp-content/uploads/sites/16/nonus-case-documents/2016/20160914_court-file-no.-16-1325-cp_points-of-claim-1.pdf by radu ioan mogos, negescu–oancea mihaela diana, sorin burlacu, victor adrian troaca (2021). climate change and health protection in european union european journal of sustainable development, 10(3):97–108. doi: https://doi.org/10.14207/ejsd.2021.v10n3p97 case luciano lliuya vs rwe ag. available at: https://climate-laws.org/geographies/germany/litigation_cases/ luciano-lliuya-v-rwe com (2000) 87 green paper on greenhouse gas emissions trading within the european union. available at: https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:52000dc0087&from=en baltic journal of economic studies 112 vol. 8 no. 3, 2022 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions 'fit for 55': delivering the eu's 2030 climate target on the way to climate neutrality. available at: https://ec.europa.eu/info/sites/default/files/chapeau_communication.pdf convention on cooperation for the protection and sustainable use of the danube river (danube river protection convention). available at: https://www.icpdr.org/flowpaper/app/#page=1 convention on the law of the non-navigational uses of international watercourses. available at: https://legal.un.org/ilc/texts/instruments/english/conventions/8_3_1997.pdf convention on the protection and use of transboundary watercourses and international lakes. available at: https://treaties.un.org/doc/treaties/1992/03/19920317%2005-46%20am/ch_xxvii_05p.pdf convention on the protection of the rhine. available at: https://op.europa.eu/en/publication-detail/-/ publication/fa42cafd-30ee-4d8f-94a8-bc404d0ee550/language-en council resolution of 21 june 1989 on the greenhouse effect and the community (89/c 183/03). available at: 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(2020). water law and climate change in the united states: a review of the legal scholarship. wires water, vol. 7, issue 3/e1423. doi: https://doi.org/10.1002/wat2.1423 decision no 1386/2013/eu of the european parliament and of the council of 20 november 2013 on a general union environment action programme to 2020 ‘living well, within the limits of our planet’. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex:32013d1386 decision no 1600/2002/ec of the european parliament and of the council of 22 july 2002 laying down the sixth community environment action programme. available at: https://eur-lex.europa.eu/legal-content/ en/txt/?uri=celex%3a32002d1600 decision no 2179/98/ec of the european parliament and of the council of 24 september 1998 on the review of the european community programme of policy and action in relation to the environment and sustainable development "towards sustainability ". available at: https://eur-lex.europa.eu/legal-content/en/ txt/?uri=celex%3a31998d2179 devlaeminck, d. j. 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available at: https://legalhub.online/energetyka/ pryjnyato-strategiyu-nyzkovugletsevogo-rozvytku-ukrayiny-do-2050-roku/ the paris agreement was concluded on 5 october 2016, on the basis of the eu council decision (eu) 2016/1841. the unfccc was adopted on 9 may 1992, having entered into force on 21 march 1994. available at: https://unfccc.int/resource/docs/convkp/conveng.pdf these days, if you are abroad, be there with the flag of ukraine and spread the truth about the crimes of the occupiers – address by president volodymyr zelenskyy. available at: https://www.president.gov.ua/news/ cimi-dnyami-yaksho-vi-za-kordonom-budte-tam-iz-praporom-ukra-77205 baltic journal of economic studies 114 vol. 8 no. 3, 2022 this is how the conflict between ukraine and russia could impact climate change. available at: https://www.weforum.org/agenda/2022/03/russia-and-ukraine-are-important-to-the-renewables-transitionhere-s-what-that-means-for-the-climate; ukraine war’s latest victim? the fight against 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un-water-policy-brief-on-climate-change-and-water/ received on: 1th of august, 2022 accepted on: 16th of september, 2022 published on: 30th of september, 2022 baltic journal of economic studies 92 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 sumy national agrarian university, ukraine (corresponding author) e-mail: bohdan.hnatkivskyi@lnu.edu.ua orcid: https://orcid.org/0000-0001-5146-9077 2 state biotechnological university, ukraine e-mail: poltavetsanatolii949@gmail.com orcid: https://orcid.org/0000-0002-3310-3271 3 sumy national agrarian university, ukraine e-mail: volyk_s_v@i.ua orcid: https://orcid.org/0000-0001-7731-4882 doi: https://doi.org/10.30525/2256-0742/2022-8-5-92-100 economic efficiency in the use of land resources by agricultural enterprises in the context of global development bohdan hnatkivskyi1, anatolii poltavets2, serhii volyk3 abstract. the subject of the study is the economic efficiency of the use of land resources by agricultural enterprises. methodology. the research was conducted using general scientific methods, in particular: theoretical generalization, methods of positive and normative analysis, statistical analysis. the goal is to analyze the dynamics of economic efficiency of land use by agricultural enterprises. research conclusion. the economic efficiency of reproduction processes is the ratio of the amount of newly created value to the amount of capital, the cost of all resources and some of their main types. the peculiarity of the reproduction of land resources is that they are combined with the stage of production of agricultural products, when the reproduction of soil fertility is carried out in a single technological process of growing crops. analysis of the efficiency of use of land resources by agricultural enterprises in ukraine, which has significant areas of land suitable for agricultural production. it should be noted that agricultural land should be used more efficiently than in other countries. the activity of agricultural enterprises in general and their use of land resources can be characterized as extensive – a large number of resources are involved, and the return from each resource unit is low. in addition, the fact that landowners are not in a hurry to sell their agricultural land, realizing that in a few years a completely different offer price will be formed, as agricultural companies will enter the game and the demand for agricultural land will be much higher. it is necessary to mention that there are some difficulties in the research process, because today it is impossible to reflect the total volume of the ukrainian agricultural land market in monetary terms, since the transaction price is declared in only 55% of the concluded transactions. in 2022, the average price of buying and selling agricultural land in ukraine will be 38,560 uah/ha. this is 28% higher than the average normative monetary value of arable land in ukraine, which is uah 27,520/ha. key words: economic efficiency, price of land, agricultural land, the efficiency of use of land resources, agricultural enterprises. jel classification: e20, h56, o10 1. introduction effectiveness and efficiency occur in various fields of human activity. these concepts are widely used in economics because they are closely related to the goals of economic development of society and market economy. efficiency is a general scientific concept used in various scientific fields. it is derived from the concept of effect. an effect is a result of the consequences of actions. these concepts are usually considered independent, but they are closely related. consider that the effect is the achievement of a result in material or other terms. in this case, effectiveness is the relative effect and efficiency of the process, and phenomena are determined as the ratio of the effect to the cost necessary to obtain it. effect and efficiency occur in various areas of human activity. these concepts are widely used in the economy because they are closely related to the goals of the economic development of society and the market economy. after analyzing the works of foreign scientists, it is possible to select some relevant ones. for example, qingmu su and xiaoqin jiang (2021) attempted baltic journal of economic studies 93 vol. 8 no. 5, 2022 to evaluate the economic and environmental efficiency of land use from the perspective of the subjective preferences of land management decision makers. herzig a., nguyen t. t., ausseil a. g. e., maharjan  g. r ., dymond  j. r ., arnhold s., tenhunen  j. (2018) introduced an explicit indicator and the land use management support system to evaluate the resource use efficiency (rue) of land use at the landscape scale. to estimate rue, they related land use performance in terms of ecosystem service indicators to the maximum possible land use performance based on an optimized land use configuration. fei, rilong & lin, ziyi & chunga, joseph (2021) investigated how land transfer affects agricultural land use efficiency: evidence from china's agricultural sector. viana c.m., freire d., abrantes p., rocha j., pereira p. (2022) conducted a systematic review of the importance of agricultural land systems in supporting food security and sustainable development goals. the scientific discussion about the nature, criteria and other aspects of the economic efficiency of the use of land resources by agricultural enterprises does not weaken, which indicates the need for further research of this complex and multifaceted economic category under the conditions of market management. the purpose of the article is to analyze the dynamics of economic efficiency of land resources use by agricultural enterprises. 2. requirements for the use of land resources by agricultural enterprises in the context of global development as a set of relations that arise between subjects of land law regarding ownership, use and disposal of land, including issues of ownership and management, turnover and land market, land prices and rents, land payments, management of land resources, regulatory rights and responsibilities of landowners and land users. the main principles of the system of land relations in modern conditions are: – equality of all forms of land ownership; – payment for land ownership and land use; – purposeful use of land of various categories; – state regulation, accounting, control, and monitoring of land; – accounting for regional characteristics of land use; – environmental sustainability of land tenure and land use. the choice of approach to land use planning depends on the political system of the country and the division of responsibilities between different parts of the administrative system. some functions are performed at the national level, while others may be devolved to the local level. in addition, the approach to urban development is often quite different from the approach to rural development. therefore, it is appropriate to manage land resources in terms of individual land holdings or land uses, i.e., agricultural enterprises. a wide range of land functions in agricultural production requires the agricultural producer to find scientifically based measures for rational and practical use of available land resources. today it is generally accepted that land, as the basis of activity and the primary means of production in agriculture, requires constant reproduction of the highest quality of land – soil fertility. the economic efficiency of reproduction processes is the ratio of the amount of newly created value to the amount of capital, the cost of all resources and some of their main types. the peculiarity of the reproduction of land resources is that they are combined with the stage of production of agricultural products, when the reproduction of soil fertility is carried out in a single technological process of growing crops. the expanded reproduction of land resources implies an improvement in their quality, which is manifested in an increase in soil fertility, and an increase in the efficiency of land use. in turn, the reproduction of soil fertility is equivalent to the expansion of the area of agricultural land with a relative saving of material, financial and labor resources. therefore, the improvement of the soil quality should become one of the main criteria when the agricultural producer chooses the most profitable, from the economic point of view, direction of development. 3. analysis of the dynamics of economic efficiency of land use by agricultural enterprises land transformations in ukraine, which began more than thirty years ago, led to fundamental changes in land relations, the emergence of various forms of land ownership, and the complexity of management methods. the land reform mainly affected agricultural land, most of which was given to subjects engaged in commercial agricultural production (figure 1). as it can be seen from figure 1, the total number of economic units and enterprises engaged in agriculture tends to increase. thus, the total number of economic entities increased from 306,470 units. in 2016, 373,897 in 2020, while in 2019, their number was 380,673 units, by 6,776 units more than in 2020. the number of enterprises engaged in agriculture increased from 44,998 units in 2016 to 49,452 units in 2020, but this is 787 units less than the previous year, 2019 (state statistics service of ukraine, 2021, activity of business entities for 2020). baltic journal of economic studies 94 vol. 8 no. 5, 2022 agricultural lands have a special legal regime and are subject to special protection in order to preserve their area, prevent the development of negative soil processes and increase soil fertility. according to the state statistics service of ukraine, in 2022 the total area of agricultural land will amount to 41.33 million hectares, which is 69% of the total land area of ukraine, having decreased in comparison with 2011 by 1.45 million hectares (about 2%) to 42.79 million hectares (71%) (state statistics service of ukraine, 2022, statistical yearbook of ukraine for 2021). consider the structure of agricultural lands. the central part of these lands is occupied by arable land – 79% (32757.3 thousand hectares), in the second place – pastures – 13% (5250.3 thousand hectares), hayfields – 6% (2283.9 thousand hectares), perennial plantations – 2% (852.7 thousand hectares), fallow land – less than 1% (166.7 thousand hectares) of the total area of agricultural land, which as of 2019 is 41310.9 thousand hectares (table 1). table 1 shows that during the analyzed period the total area of agricultural land has been constantly decreasing: from 41,827.0 thousand hectares to 41,310.9 thousand hectares, i.e., by 516.1 thousand hectares (almost by 1.5%). this means that the norms table 1 dynamics of changes in the area of agricultural land by species (2000–2019), thousand hectares types of land 2000 2005 2010 2015 2016 2017 2018 2019 arable land 32563,6 32451,9 32476,5 32541,3 32543,4 32544,3 32698,5 32757,3 pastures 5521,3 5521,3 5481,9 5434,1 5430,9 5421,5 5282,6 5250,3 hayfields 2388,6 2429,2 2410,9 2406,4 2402,9 2399,4 2294,4 2283,9 perennial plantings 931,9 900,5 896,5 892,4 897,1 894,8 863 852,7 fallow land 421,6 419,3 310,2 233,7 230,6 229,3 190,5 166,7 total agricultural land 41827,0 41722,2 41576,0 41507,9 41504,9 41489,3 41329,0 41310,9 source: state statistics service of ukraine, 2022, agriculture of ukraine for 2021 306470 338341 355956 380673 373897 44998 50115 50504 50239 49452 0 50000 100000 150000 200000 250000 300000 350000 400000 2016 2017 2018 2019 2020 the number of active business entities including in agriculture figure 1. dynamics of changes in the total number of economic entities and enterprises operating in the field of agriculture source: state statistics service of ukraine 2021, activity of business entities for 2020 of the land legislation on the priority of the use of the land suitable for the needs of agriculture, primarily for agricultural use, are not fulfilled. arable land is the most productive type of agricultural land. arable land in agricultural enterprises in 2019 was located on the area of 32,757.3 thousand hectares, 79% of agricultural land. during the studied period, the growth of the area of these lands in ukraine from 2000 to 2019 decreased by about 193.7 thousand hectares – from 32,563.6 thousand hectares in 2000 to 32,757.3 in 2019 (state statistics service of ukraine, 2022, agriculture of ukraine for 2021). this trend indicates the redistribution of area within agricultural lands: from table 1 it can be seen that in 2019 compared to 2000 the area of pastures decreased by 271.0 thousand hectares – from 5521.3 to 5250.3 thousand hectares; hayfields on 104. 7 thousand hectares – from 2388.6 to 2283.9 thousand hectares; perennial plantations on 79.2 thousand hectares – from 931.9 to 852.7 thousand hectares; fallow land more than doubled – by 254.9 thousand hectares – from 421.6 to 166.7 thousand hectares. that is, the area of such types of agricultural land as pastures, hayfields, perennial plantations and fallows in 2019 in comparison with previous years decreased by 709.8 thousand ha, part of this land was converted baltic journal of economic studies 95 vol. 8 no. 5, 2022 into arable land – 193.7 thousand ha, and part 516.1 thousand ha was withdrawn from agricultural use. a system of physical and value indicators characterizes the economic efficiency of land use in agriculture. the main ones are: – yield of crops, tons/ha; – cost of gross production, gross and net income, profit per hectare, hryvnias; – payback of costs for land resources, hryvnias per 100 hryvnias. material costs; – profitability of production, %. when determining the indicators of economic efficiency of land use, it is necessary to take into account the quality of the land, i.e., its cadastral value. the following can be used as additional indicators of land use efficiency; – specific weight of agricultural land in the total land area, %; – specific weight of arable land in the structure of agricultural land, %; – specific weight of sowing of crops in the arable area, %. the economic efficiency of land use should be understood as the level of management. the relationship between the results of economic activity and the cost of resources always characterizes the economic efficiency. the economic efficiency of land use in agriculture is determined by a system of indicators. the most important is the yield of crops and the unit cost of produced products. in ukraine in 2019, the total cultivated area of crops on farms of all categories amounted to 28,581 thousand hectares, which is 434 thousand hectares (1.5%) more than in the previous year. however, there were changes in the structure of cultivated areas of crops. the sown area of cereal crops amounted to 15,995 thousand hectares, which is 603 thousand hectares or 3.8% more than in the previous year, mainly due to the increase in wheat cultivation. a peculiarity is an appearance in the structure of significant cultivated areas of such crops as soybeans and rapeseed: in 2000, 65 and 214 thousand hectares of soybeans and rapeseed, respectively, were sown, and already in 2019, their areas increased to 1,066 and 1,311 thousand hectares, respectively, i.e., 16 times more soybeans and six times more rapeseed area (table 2). as mentioned above, the most valuable component of land is arable land. the efficiency of the entire agricultural sector depends on how fully and rationally it is used. in 2019, the area of used arable land, i.e., occupied by agricultural crops, was 28,581 thousand hectares, while the total area of arable land was 32,757 thousand hectares. that is, the difference is 4,176 thousand hectares. (12.7%). it is logical to assume that couples occupy part of this area. in general, however, it can be concluded that arable land is used inefficiently, since in 2019 more than 12% of arable land was not used for agricultural production for various reasons (figure 2). productivity is a complex productive, quantitative and qualitative indicator, which allows to assess the general influence of natural, economic and climatic factors on the efficiency of land use. the conducted analysis showed that under the conditions of reduction of cultivated areas in the analyzed period, a trend of growth was outlined both in the gross harvest of the main zonal crops and their yield in agricultural enterprises (table 3). table 2 sown areas of agricultural crops (2000–2021), thousand hectares cultures 2000 2005 2010 2015 2016 2017 2018 2019 cereals and legumes: 13646 15005 15090 14739 14839 15318 15392 15995 wintery 6324 7289 7904 7904 7455 7836 7600 8226 including wheat 5316 6185 6137 6696 6417 6650 6429 6908 spring crops 7322 7716 7186 6835 7384 7482 7792 7769 technical: 4187 5260 7296 8350 9266 9130 9224 9244 sugar beet 856 652 501 237 276 222 220 227 sunflower 2943 3743 4572 5105 6117 5928 6457 6622 soy 65 438 1076 2158 1716 1609 1351 1066 rapeseed 214 207 907 682 1042 1282 1127 1311 potatoes, vegetable and melon food crops 2277 2941 1967 1823 1825 1828 1854 1807 fodder 7063 3738 2599 1990 1769 1725 1677 1535 in total 27173 26044 26952 26902 27699 28001 28147 28581 table 3 the leading indicators of the effectiveness of land use in agriculture indicators 2000 2005 2010 2015 2016 2017 2018 2019 gross collection, thousand tons 24459 38015,5 39270,9 60125,8 70056,5 75143,2 64933,4 86010,4 productivity, thousand tons/ha 19,4 26 26,9 41,1 47,4 49,1 42,5 53,9 collected area, thousand ha 12586,8 14605,2 14575,7 14640,9 14794,1 15291,9 15282,9 15948,4 baltic journal of economic studies 96 vol. 8 no. 5, 2022 27173 26044 26952 26902 27699 28001 28147 28581 32564 32452 32477 32541 32543 32544 32699 32757 0 5000 10000 15000 20000 25000 30000 35000 2000 2005 2010 2015 2016 2017 2018 2019 sown areas arable land figure 2. comparison of the dynamics of changes in cultivated area with the total area of arable land (2000–2019), thousand hectares source: state statistics service of ukraine, 2022, agriculture of ukraine for 2021 thus, in 2019, the highest yield of winter wheat was achieved in the region – 45.3 tons/ha. meanwhile, data from the state statistics service of ukraine show that in european countries specializing in the cultivation of this crop, this indicator is several times higher than the level in ukraine. for example, in the netherlands 89.1 tons of wheat are produced per hectare, in belgium – 88.3 tons, and in ireland – 86 tons. of course, in this comparison it is necessary to take into account the dependence of production conditions and results on random, first of all weather factors, but at the same time such a delay in ukraine indicates a low level of organization of agricultural production, in particular, low efficiency of use of land resources by agricultural enterprises. in figure 3 the average dynamics of yields of grain and leguminous crops is shown. as criteria of economic efficiency of use of land resources, scientists most often use the following indicators: the number of land payments to budgets (land tax, rent), the price of land, industrial indicators characterizing the final results of land use (gross agricultural production, inflow of investments), etc. in 2020, the price policy in european countries was formed as follows: the five leading countries that had the highest price for agricultural land are the netherlands, luxembourg, italy, great britain, and ireland, the average price of which was $68.2 thousand/ha, $35.6 thousand/ha, $33.5 thousand/ha, $23.5 thousand/ha, $19.9 thousand/ha. 19,4 26 26,9 41,1 47,4 49,1 42,5 53,9 0 10 20 30 40 50 60 2000 2005 2010 2015 2016 2017 2018 2019 figure 3. dynamics of changes in the average yield of cereals and legumes (2000–2019), tons/ha source: state statistics service of ukraine, 2022, agriculture of ukraine for 2021 baltic journal of economic studies 97 vol. 8 no. 5, 2022 however, there are several countries in which the price did not exceed $3 thousand/ha, and these are croatia, latvia, estonia and romania (respectively $3.0 thousand/ha; $2.9 thousand/ha; 2, $9 thousand/ha; $2.1 thousand/ha) (table 4) (land directory of ukraine 2020, 2022). in 2022, the average price of buying and selling agricultural land in ukraine will be uah 38,560/ha. this is 28% higher than the average normative monetary valuation of arable land in ukraine, which is uah 27,520/ha (table 4) (business censor, 2022). as of 2022, 64,262 land sale and purchase agreements have been concluded in ukraine. according to these agreements, agricultural land of the total area of 155.52 thousand hectares was sold, which is almost 0.38% of the total agricultural land in ukraine. the most active buying and selling process was carried out in the kharkiv region, where almost 7,000 transactions were concluded for the total area of 24,277 hectares, which is slightly more than 1% of the total volume of agricultural land in the region. on the contrary, the smallest number of transactions was carried out in the ivano-frankivsk region: 1,007 transactions with the total area of 464 hectares (0.07% of agricultural land in the region) (business censor, 2022). some difficulties arise in the research process because today there is no possibility to reflect the full volume of the ukrainian agricultural land market in monetary terms, since, according to the center for food and land use research of the kyiv school of economics, the transaction price is declared in only 55% of the concluded transactions (business censor, 2022). the researchers of this institution modeled the value of land plots, taking into account their purpose, area, type of land and location of land plots to calculate the volume of the land market. thus, the volume of the market in monetary terms is about 5.3 billion uah. analyzing the market structure, the most significant part of this market (3.2 billion uah) is the so-called commercial land, the former moratorium land. about a third of the market (1.7 billion uah) is land for personal agriculture. the third place in monetary terms is occupied by land for individual gardening, 2.4% of the market, with a total value of 127 million uah (business censor, 2022). from october 2021, the cabinet of ministers resolution no. 1013 initiated electronic auctions for the lease and sale of agricultural land (cabinet of ministers of ukraine, 2021). in just four months, 63 auctions for the sale of agricultural land were held through the electronic auction system "prozorro. prodazhi"; most of these auctions involved land that was under arrest and sold to pay off the debts of the former owner. in total, in the electronic system, since the beginning of the war in february 2022, auctions for the sale of agricultural land were held in 15 regions of ukraine, where a total of 172.8 hectares of land were sold for the total amount of uah 17.3 million. according to the electronic auctions, the average price of one hectare of land in 15 regions of ukraine where the sale took place through the "prozorro.prodazhi" system ranged from uah 32,260/ha in mykolaiv oblast to uah 1,792,590/ha in lviv oblast (figure 5). table 4 prices for 1 ha of agricultural land after market opening countries price per 1 ha of land years since start of liberalization 1 2 3 4 5 6 7 8 9 10 11 12 czech republic $ 1561 1621 1625 1867 2375 2557 2807 2962 3253 3400 3825 4455 % to the previous year 3 4 0 15 27 8 10 6 10 5 13 16 lithuania $ 406 536 734 831 1075 971 1138 1605 1608 1883 2171 2220 % to the previous year 4 32 37 13 29 -10 17 41 0 17 15 2 estonia $ 583 894 1125 1056 1111 1111 1083 1333 1681 2111 2417 % to the previous year 107 53 26 -6 5 0 -3 23 26 26 14 latvia $ 1001 2183 3786 3552 1940 1015 1503 1804 3287 4144 4818 % to the previous year 90 118 73 -6 -45 -48 48 20 82 26 16 poland $ 1464 2051 2388 3210 3668 4083 4333 4833 6150 6333 % to the previous year 12 40 16 34 14 11 6 12 27 3 hungary $ 1771 1853 1927 1987 2221 2403 2416 2544 2880 3216 % to the previous year 2 5 4 3 12 8 1 5 13 12 romania $ 972 1408 1500 1727 1891 2182 3000 3182 3364 % to the previous year -3 45 7 15 9 15 37 6 6 bulgaria $ 1202 1595 1519 1420 2092 2820 2930 3832 4558 % to the previous year 5 33 -5 -7 47 35 4 31 19 slovakia $ 946 981 1017 1121 1211 1256 % to the previous year 4 4 4 10 8 4 source: land directory of ukraine 2020, 2022 baltic journal of economic studies 98 vol. 8 no. 5, 2022 as it is shown in figure 5, there is a great discrepancy between the prices of agricultural land even within the same region, especially in the case of the sale of land located near large cities or recreational areas with great development potential. for example, in the lviv region through "prozorro.prodazhi" they bought an agricultural land with the area of 0.06 ha, which is located in the regional center on the territory of the garden association for 350,000 uah, i.e., 1 ha of this land would cost 5, 5 million uah. a similar increase in prices occurred at auctions in the kyiv, odesa, ivano-frankivsk and zakarpattia oblasts (business censor, 2022). in the conditions of global challenges, the effective use of land becomes the basis of military and economic recovery. therefore, the study of the 24277 13602 12701 11861 11478 8368 8210 8051 7249 6971 6476 6253 4491 4386 3813 3711 3673 3569 2087 1282 982 805 763 464ivano-frankivsk oblast zakarpattia oblast chernivtsi oblast rivne oblast lviv oblast ternopil oblast volyn oblast odesa oblast cherkasy oblast zhytomyr oblast donetsk oblast luhansk oblast kyiv oblast zaporizhzhia oblast chernihiv oblast khmelnytskyi oblast vinnytsia oblast sumy oblast mykolaiv oblast kirovohrad oblast poltava oblast dnipropetrovsk oblast kherson oblast kharkiv oblast figure 4. ranking of regions of ukraine by the total area of agricultural land sold by 2022, ha source: business censor 2022 1792590 1256640 836620 324020 73180 61090 61010 49030 46460 40730 40120 39830 36140 32260mykolaiv oblast zaporizhzhia oblast chernihiv oblast sumy oblast kherson oblast kharkiv oblast dnipropetrovsk oblast vinnytsia oblas cherkasy oblast kirovohrad oblast odesa oblast kyiv oblast zakarpattia oblast lviv oblast figure 5. average value of agricultural land sold at electronic auctions, uah/ha source: business censor 2022 baltic journal of economic studies 99 vol. 8 no. 5, 2022 world experience of use and sale is promising for further research (pryshchepa, kardash, yakymchuk, et al. 2020; popadynets, et al. 2021; irtyshcheva, kramarenko, sirenko, 2022). 4. conclusions analyzing the efficiency of land resources use by agricultural enterprises in ukraine, which has significant areas of land suitable for agricultural production, it should be noted that agricultural land must be used more efficiently, also in comparison with other countries. the activity of agricultural enterprises in general, and their use of land resources in particular, can be characterized as extensive – a large number of resources are involved, and the return from each resource unit is low. in addition, it can be highlighted as a feature of the use of land resources that the owners of land plots are not in a hurry to sell their agricultural land plots, realizing that in a few years a completely different supply price will be formed, because agricultural companies will come into play and the demand for agricultural land will be much greater. it should also be noted that some difficulties arise in the research process, because today it is impossible to reflect the total volume of the ukrainian agricultural land market in monetary terms, since the transaction price is declared in only 55% of the concluded transactions. in 2022, the average price of buying and selling agricultural land in ukraine will be 38,560 uah/hectare. this is 28% higher than the average normative monetary value of agricultural land in ukraine, which is 27,520 uah/ha. references: su, q., & jiang, x. 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(2021). evaluation of domestic market development in ukraine. international conference on intelligent human systems integration, pp. 357–363. fei, rilong, lin, ziyi, & chunga, joseph (2021). how land transfer affects agricultural land use efficiency: evidence from china’s agricultural sector. land use policy, elsevier, vol. 103(c). doi: https://doi.org/ 10.1016/j.landusepol.2021.105300 viana, c. m., freire, d., abrantes, p., rocha, j., & pereira, p. agricultural land systems importance for supporting food security and sustainable development goals: a systematic review. sci total environ. 2022 feb 1; 806(pt 3):150718. doi: https://doi.org/10.1016/j.scitotenv.2021.150718 gutorov, o. i. (2006). concept of land price and value. khnau bulletin. the series "agriculture economy and nature management", vol. 8, рр. 10–15. fedorov, m. m. (1998). economic problems of land relations in agriculture. kyiv: iae. land directory of ukraine 2020. available at: https://agropolit.com/storage/2020/zemelniy_dovidnyk_ 2020.pdf ?utm_source=mailchimp&utm_campaign=0300ccc2e1f0&utm_medium=page business censor 2022. at what prices are agricultural land sold in ukraine. available at: https://biz.censor.net/ r3314160 resolution of the cabinet of ministers, 2021. some issues of preparation for the holding and holding of land auctions for the sale of land plots and the acquisition of rights to use them (lease, superficies, emphytheusis). available at: https://www.kmu.gov.ua/npas/deyaki-pitannya-pidgotovki-do-provedennya-ta-provedennyazemelnih-torgiv-dlya-prodazhu-zemelnih-dilyanok-ta-nabuttya-prav-koristuvannya-nimi-orendi-superficiyuemfitevzisu-i220921-10 irtyshcheva, i., kramarenko, i., & sirenko, i. 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"statistical yearbook of ukraine" for 2021. kyiv, ukraine. received on: 4th of october, 2022 accepted on: 15th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 1 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 vytautas magnus university, lithuania (corresponding author) e-mail: lina.pileliene@vdu.lt orcid: https://orcid.org/0000-0003-2704-8314 2 azman hashim international business school (ahibs), universiti teknologi malaysia (utm), malaysia e-mail: ahmedalsharif07@gmail.com orcid: https://orcid.org/0000-0002-1364-3545 3 applied college in madinah, taibah university, saudi arabia e-mail: iharbi@taibahu.edu.sa orcid: https://orcid.org/0000-0002-1407-3937 doi: https://doi.org/10.30525/2256-0742/2022-8-5-1-12 scientometric analysis of scientific literature on neuromarketing tools in advertising lina pilelienė1, ahmed h. alsharif2, ibrahim bader alharbi3 abstract. neuromarketing (nm) is a relatively new area of marketing that involves innovative technological changes in the marketing research process and the tools and methods used. considering the novelty of the domain, the subject of the study is chosen to be articles published in scientific literature describing neuromarketing tools used in advertising. this study examined articles in the field of advertising that used neuromarketing techniques to measure consumers' neural and physiological responses to advertising, which has not yet been covered in the literature. methodology. to fill the gap in the literature, the authors, guided by the preferred reporting items for systematic reviews and meta-analyses (prisma) protocol, selected relevant articles and conducted a bibliometric analysis to identify global trends and developments in the field of advertising and neuromarketing. from the web of science (wos) database, 41 articles published between 2009 and 2020 were extracted and analyzed. purpose of the study was to establish a background for advertising research based on the application of nm tools. the findings revealed that spain was the most productive country with eleven papers published in a domain of advertising research, followed by italy and the usa with eight and seven papers, respectively. among academic institutions, sapienza university rome was recognized as the leading academic organization with three articles. as for the most productive journals, frontiers in psychology was the most cited journal with eight articles and 29 total citations (tc). as the highest productive author, babiloni, f. with two papers and 68 tcs by 2020 was identified. keyword analysis showed that "advertising" (27 occurrences and 127 total references) is the most frequently used keyword. the analysis of co-occurrence of keywords showed that nm focused on marketing research such as advertising (12 occurrences, 63 total link strength (tls)), followed by brain processes such as attention, emotions and memory. the paper titled "neuromarketing: the new science of consumer behavior" was the most-cited paper with 152 tcs. conclusion of the study. this study presents a brief overview of the latest universal areas of neuromarketing and advertising research. the findings suggest that neuroscientific methods and techniques are extremely important for mapping consumers' neural and physiological responses to advertising. key words: advertising, bibliometric analysis, marketing, neuromarketing, wos database. jel classification: m00, m31, m37 1. introduction self-report has been accepted as a marketing research method for a long time to assess consumer reactions to marketing stimuli such as advertising. the self-report method reflects, as expected, conscious reactions (e.g., perceptions, attitudes and opinions) to advertising (carrington et al., 2014). on the other hand, selfreport cannot measure unconscious reactions, which represent the majority of consumer reactions to stimuli. thus, researchers and marketers have applied neuroscience tools, such as electroencephalography (eeg), to marketing to better understand consumers' unconscious reactions (harris et al., 2018; plassmann et al., 2012), leading to the emergence of a new field called "neuromarketing" (nm). the term nm was coined in 2002 by smidts (2002) as an interdisciplinary field that includes psychology, marketing and neuroscience (ahmed et al., 2020; javor et al., 2013). in the united states, bright house created the first neurology department equipped with functional baltic journal of economic studies 2 vol. 8 no. 5, 2022 magnetic resonance imaging (f mri) for marketing purposes (alsharif et al., 2021b; fortunato et al., 2014). in a hyper-competitive environment, nm is a mainstay in advertising because it has the ability to measure the areas of brain activity of consumers that respond to advertising, which is a revolutionary direction to better understand the subconscious and unconscious reactions of consumers (alsharif et al., 2021a). according to the literature, rapid technological advances in the field of neuroscience have led to a better understanding of consumer behavior in different contexts (e.g., in advertising) (bočková et al., 2021; levallois et al., 2012). according to isabella et al. (2015), nm tools have been categorized into two clusters: (1) neurophysiological tools: eeg, magnetoencephalography (meg), f mri, positron emission tomography (pet) and transcranial magnetic stimulation (tms); and (2) physiological tools such as galvanic skin responses (gsr), eye-tracking (et), electrocardiogram (ecg), and electromyography (emg). neurophysiological tools record cognitive and emotional reactions (arousal, pleasure, attraction, approach and withdrawal) to advertising (izhikevich, 2003). physiological tools such as eye-tracking (et) allow to track physiological reactions of consumers such as visual fixation, eye movements and saccades at the moment of purchase. thus, it provides useful information about what the consumer likes and what not (alsharif et al., 2022; dimpfel, 2015). taking into account the latter, it is necessary to create a substantial basis for continuous improvement of nm research. thus, generalization of existing trends in advertising research conducted within the framework of nm becomes important for further improvement of applied methodologies. the scientific literature in this field still lacks general guidelines for researchers on the most prominent scholars and the most reliable articles to be taken as a basis. the current scientometric/ bibliometric analysis aims to fill the gap in the literature related to nm by focusing on the research question: what are the main trends in advertising research within nm identified in the wos database. the purpose of the article is to create prerequisites for advertising research based on the use of nm tools. nm research is useful for the academic and professional world to improve traditional marketing research such as advertising research (fortunato et al., 2014). however, the understanding of universal academic trends in nm and advertising research is still unclear in the literature. to this end, this study attempts to present universal academic trends in nm and advertising research with brief conclusions. the main findings of this study can be illustrated as follows, based on the research objectives: – to determine the annual and cumulative growth of scientific publications, the indicators of reputable journals were used; – identify common indicators such as leading countries, authors, academic institutions, journals and most cited papers; – identify the most prominent keywords in "neuromarketing" or "consumer neuroscience" and "advertising*"; – to provide new benchmarks and future directions for emerging researchers and scholars in the field of nm and advertising research. with this in mind, this paper provides an overview of nm and the current research questions. next, the methodology and data collection methods used in this study are described (section 2). section 3 presents the bibliometric analysis. discussion of the results is presented in section 4. section 5 provides conclusions and policy recommendations. finally, section 6 presents the limitations and future directions of this research. 2. methodology bibliometric analysis (ba) is a statistical method of analyzing publications in the relevant field, which has been used since the 1920s (gingras, 2016). this study aims to extract empirical articles in the field of advertising in the context of nm from the web of science (wos) database to fill the gap in the literature. the first step, it has followed the preferred reporting items for systematic reviews and metaanalyses (prisma) protocol of moher et al. (2015) to select the original articles in advertising research that have used nm methods to investigate consumers’ behaviour toward advertising, as depicted in figure 1. in the second step, it has used a ba to know the current directions and developments in advertising research based on the outcomes / findings of articles such as the leading countries, academic research institutes, authors / researchers, and the total publications (tps) and total citations (tcs), which is highly beneficial for evaluating advancement in thefield of advertising research (ahmed et al., 2021; alsharif et al., 2020). in addition, to present an impactful / valuable ba in a certain area such as advertising, it has followed the instructions of block & fisch (2020). these processes will give a complete picture of the general nm methods used in advertising research. thus, the results obtained will be a reference point for researchers interested in the field of advertising and nm. the study used the search query according to the title, abstract, and keywords: (("neuromarketing" or "consumer neuroscience") and ("adverti*")). articles published in 2021 were excluded; thus, the total number of publications was 125 papers for baltic journal of economic studies 3 vol. 8 no. 5, 2022 the period 2009–2020. finally, forty-one original articles were selected from the web of science (wos) database. figure 1 illustrates the process of selecting relevant articles for this study, which meets the following characteristics: – publication year: 2009–2020. – methods: neurophysiological and physiological techniques. – language: english. – document type: original articles. to analyze the articles selected for this study, the authors used vosviewer software, which is a proven tool for creating a view/map visualization based on the area of interest. vosviewer is widely used in bibliometric research (for example, in neuromarketing) (ahmed et al., 2022a; alsharif et al., 2021c); service quality and health-care (ali et al., 2021a, 2021b); social media (abbas et al., 2021; abbas et al., 2022)). figure 2 shows the methods that were used in the analytical framework of this study. it also shows the organization of this study, the structure, indicators and methods that were used. 3. results figure 3 provides a brief overview of selected articles on advertising research based on nm methods. there were also studies that used more than one method in one experiment or study. there were 41 articles published in journals included in the wos database related to advertising, in which nm tools were used. from 2009 to 2020, there was a fluctuation in the number of published articles on advertising. in 2020, there was the highest number of annual publications – thirteen articles, as shown in table 1. table 1 the number of annual and cumulative publications by year year annual publications cumulative publications 2009 1 1 2010 1 2 2011 2 4 2012 1 5 2013 1 6 2014 1 7 2015 2 9 2016 2 11 2017 10 21 2018 3 24 2019 4 28 2020 13 41 figure 1. flow chart process for selecting relevant articles baltic journal of economic studies 4 vol. 8 no. 5, 2022 the results showed that eight publishers belong to six countries that published at least two articles in advertising and nm, as shown in table 2. for example, swiss publishers such as frontiers media sa and mdpi are the leading players in the field of nm and promotional publications with fourteen articles, representing 34% of the total number of articles, followed by spanish publishers such as grupo comunicar and university complutense madrid with six articles (14.6% of the total number of articles). although hindawi ltd published only two articles (4.9% of the total number of articles) in advertising and nm, it published the most cited article with 57 citations by vecchiato et al. (2011). this is followed by the netherlands, which also published two articles (4.9% of the total number of articles) and the second most cited article with thirty-eight references stallen et al. (2010). the authors analyzed 41 papers from the wos database. table 3 shows that three countries are key players in nm advertising research, namely spain, italy and the united states, with these countries accounting for almost more than 60% of the total number of publications, suggesting that these countries play a significant role in strengthening nm advertising research. in addition, spain is the country producing the largest number of documents – 11 documents (approximately 26.83% of the total number of documents), followed by italy, which is the second producing country in the list with almost eight documents (19.51% of the total number of documents). the united states provided seven documents (almost 17% of the total number of documents), ranking third in the list. australia and england took the fourth position with four documents from each country. in fifth place is the figure 2. analytical structure of the study figure 3. the number of selected papers according to nm methods baltic journal of economic studies 5 vol. 8 no. 5, 2022 netherlands with three documents. finally, the sixth position was shared by three countries – china, lithuania and germany (two documents each). table 3 the most contributed countries in advertising and nm research (min. = two papers) # country tps tcs 2020 % of total articles 1 spain 11 96 26.83% 2 italy 8 115 19.51% 3 usa 7 98 17.07% 4 australia 4 46 9.76% 5 england 4 51 9.76% 6 netherland 3 23 7.32% 7 china 2 80 4.88% 8 lithuania 2 9 4.88% 9 germany 2 8 4.88% table 4 shows the most productive academic institutions that published at least two papers. for example, sapienza university of rome, complutense university of madrid and rey juan carlos university published nine papers, three papers from each academic institution. they are followed by brainsigns srl; catholic university of the sacred heart; erasmus university of rotterdam; vytautas magnus university; swinburne university of technology; and the university of salamanca, which submitted a total of twelve papers, two papers each. the study showed that the most productive authors in the context of nm, who published at least two articles in the advertising field, belong to four countries – italy, spain, lithuania and australia, as shown in table 5. thirteen authors from four countries published a total of twenty-six papers, two papers each, which indicates a high level of collaboration between them. it is noteworthy that all these authors published the same number of papers – two papers per author. therefore, the authors divided the co-authors into four clusters (figure 4). figure 4 shows the clusters of collaboration between authors. for example, cluster 1 is the most collaborative cluster, which involves six authors from sapienza university rome (italy) such as babiloni, fabio; cherubino, patrizia; carato, myriam; rossi, dario; modica, enrica; and cartocci, giulia. followed by cluster 2, it is from universidad table 2 the leading journals in advertising and nm (min. = 2 papers) source/journal tps % of 41 papers tcs 2020 reference of the most cited article time cited publisher country frontiers in psychology 8 19.5% 29 guixeres et al. (2017) 20 frontiers media sa switzerland comunicar 4 9.8% 55 ananos (2015) 18 grupo comunicar spain frontiers in neuroscience 4 9.8% 10 wei, z. et al. (2018) 10 frontiers media sa switzerland computational intelligence and neuroscience 2 4.9% 62 vecchiato et al. (2011) 57 hindawi ltd england journal of economic psychology 2 4.9% 64 stallen et al. (2010) 38 elsevier netherlands scientific annals of economics and business 2 4.9% 7 grigaliunaite & pileliene (2016) 5 de gruyter poland sp zoo poland behavioral sciences 2 4.9% 4 harris et al. (2019) 3 mdpi switzerland neuropsychological trends 2 4.9% 1 leanza (2017) 1 edizioni univ lettere economic diritto italy vivat academia 2 4.9% 1 jimenez-marin et al. (2019) 1 university complutense madrid spain note: tps= total publications, tcs= total citations table 4 the high prolific academic institutes in advertising and nm research (min. = two papers) # the most prolific academic institutions/ affiliations tps h-index tcs 2020 % of total articles country 1 sapienza university rome 3 3 72 7.32% italy 2 complutense university of madrid 3 2 18 7.32% spain 3 universidad rey juan carlos 3 1 12 7.32% spain 4 brainsigns srl 2 2 15 4.88% italy 5 catholic university of the sacred heart 2 1 1 4.88% italy 6 erasmus university rotterdam 2 1 15 4.88% netherland 7 vytautas magnus university 2 2 7 4.88% lithuania 8 swinburne university of technology 2 2 29 4.88% australia 9 university of salamanca 2 1 0 4.88% spain baltic journal of economic studies 6 vol. 8 no. 5, 2022 rey juan carlos (spain), which involves four authors such as goya-esteban, rebeca; banos-gonzalez, miguel; baraybar-fernandez, antonio, barqueroperez, oscar. cluster 3 includes pileliene, lina and grigaliunaite, viktorija from vytautas magnus university (lithuania). ciorciari, joseph from swinburne university of technology (australia) belongs to cluster 4. the most productive were the eight journals that published at least two articles in advertising research in the context of nm, as shown in table 6. for example, frontiers in psychology was found to be the most productive among the other journals with eight articles, followed by comunicar and frontiers in neuroscience with four articles per journal. finally, two articles were published in journals: computational intelligence and neuroscience, journal of economic psychology, scientific annals of economics and business, behavioral sciences, neuropsychological trends and vivat academia. according to literature sources, the number of citations is an indicator of the quality and popularity of articles. according to the literature, the number of publications is an indicator of the productivity of the journal, and the number of citations is an indicator of the quality and impact of the journal in the scientific field. the authors calculated the average citation per article (nacpil et al., 2019) of the leading journals based on total citations (tc) and total publications (tp) from the wos database. as shown in table 6, despite the fact that the journal of economic psychology has only two publications on advertising and nm, it has the highest impact factor in the list with 32 citations. table 5 the most contributed authors in nm and advertising (min. = two papers) authors tps tcs 2020 h-index affiliated institutes country babiloni, fabio 2 68 2 uniroma; brainsigns srl it ciorciari, joseph 2 29 2 swinburne au modica, enrica 2 25 2 uniroma it rossi, dario 2 25 2 uniroma it carato, myriam 2 15 2 uniroma it cartocci, giulia 2 15 2 uniroma it cherubino, patrizia 2 15 2 uniroma; brainsigns srl it banos-gonzalez, miguel 2 12 1 urjc es baraybar-fernandez, antonio 2 12 1 urjc es barquero-perez, oscar 2 12 1 urjc es goya-esteban, rebeca 2 12 1 urjc es grigaliunaite, viktorija 2 7 2 vdu lt pileliene, lina 2 7 2 vdu lt note: uniroma: sapienza university rome; swinburne: swinburne university of technology; urjc: universidad rey juan carlos; vdu: vytautas magnus university; it: italy; es: spain; lt: lithuania; au: australia figure 4. the network map of leading authors (min. = two papers) baltic journal of economic studies 7 vol. 8 no. 5, 2022 it is followed by computational intelligence and neuroscience with 31 citations. these results demonstrate that the number of publications does not necessarily indicate the number of citations. the study identified eight journals as the most productive that published at least two articles in advertising research in the context of nm, as shown in table 6. for example, the journal frontiers in psychology was recognized as the most prolific among other journals with eight articles, followed by comunicar and frontiers in neuroscience with four articles per journal. finally, journals contributed two articles: computational intelligence and neuroscience, journal of economic psychology, scientific annals of economics and business, behavioral sciences, neuropsychological trends, and vivat academia. according to the literature, the number of citations is an indicator of the quality and popularity of articles. based on the literature, the number of publications is an indicator of the productivity of the journal, and the number of citations is an indicator of the quality and influence of the journal in the scientific field. the authors calculated the average citation per article (nacpil et al., 2019) of the leading journals based on total citations (tc) and total publications (tp) from the wos database. table 6 shows that although the journal of economic psychology has only two publications on advertising and nm, it has the highest impact factor in the list with 32 citations. it is followed by computational intelligence and neuroscience with 31 citations. these results demonstrated that the number of publications does not necessarily indicate the number of citations. keywords occurrences refer to a numerical method in ba (wang & chai, 2018) to identify keywords, providing a content explanation of papers (comerio & strozzi, 2019). the correlation/connection between a pair of keywords is displayed in a numerical value, which indicates the link strength (ls) between the keyword pair; the stronger the link, the higher the numerical value (ravikumar et al., 2015). ls between two keywords means the number of appearances of two keywords in one article. the number of total links (tls) indicates the total occurrence together in one article. in vosviewer, it has a value of two as the minimum number of occurrences of keywords, which means at least twice the occurrence of a pair of keywords on the bibliometric map in one article. the analysis of keyword usage conducted in this study included forty-one original articles published in twenty-three reputable academic journals, with one article considered the minimum number of articles. in addition, synonymous words were considered before using vosviewer. for example, "neuromarketing" and "consumer neuroscience". the keyword match analysis is very important for identifying relevant topics and trends in specific areas, which gives a brief description of the content of articles (ahmed et al., 2022a; ahmed et al., 2022b; comerio & strozzi, 2019). as shown in figure 5, the keyword occurrence map, nm focused on marketing research, such as advertising (12 occurrences, 63 total link strength (tls), which means that advertising occurred twelve times and the tls for this total occurrence is 63 links to the nm topic; in addition, brand (6 occurrences, 42 tls), followed by brain processes such as attention, emotion and memory. finally, nm and advertising are correlated with neuroscience tools such as eeg and f mri. this means that nm research investigates the consumer's brain responses to marketing stimuli (e.g., advertising, brand). it has shown an excellent correlation between nm/consumer neuroscience and neuroimaging techniques (e.g., eeg, f mri). furthermore, a strong relationship between unconscious/subconscious reactions such as "attention", "emotion" and "memory " and stimuli such as "brand", "advertising" and "advertising effectiveness". for example, "advertising" is the first examined theme with 27 frequencies and 127 total link strength (tls), followed by "attention" with eight frequencies and 51 tls, next "emotion" with six frequencies and 27 tls. in addition, it was table 6 the most contributed journal in advertising and nm research (min. = two papers) journal tps tcs 2020 acp h-index publisher country front. psychol. 8 29 3.6 2 frontiers media sa switzerland comunicar 4 55 13.8 4 grupo comunicar spain front. neurosci. 4 10 2.5 2 frontiers media sa switzerland comput. intell. neurosci. 2 62 31 2 hindawi ltd england j. econ. psychol. 2 64 32 2 elsevier netherlands sci. ann. econ. bus. 2 7 3.5 2 de gruyter poland sp zoo poland behav. sci. 2 4 2 1 mdpi switzerland neuropsychol. trends 2 1 0.5 1 edizioni univ lettere economic diritto italy vivat academia 2 1 0.5 2 university complutense madrid spain note. tps= total publications, tcs= total citations, acp= average citation per paper baltic journal of economic studies 8 vol. 8 no. 5, 2022 observed that "eeg" is significantly related to nm and advertising research. table 7 shows the keywords with high frequency of occurrence, for which at least five occurrences were found. table 7 top keywords (min. = five occurrences) keyword occurrences tls neuromarketing (nm) 27 127 advertising 12 63 neuroscience 11 59 consumer neuroscience 10 70 attention 8 51 eeg 7 50 brand 6 42 emotion 6 27 memory 5 32 advertising effectiveness 5 22 f mri 5 19 the study used citation analysis to identify common articles in nm and advertising research. article citation analysis is very important to identify commentary articles in the relevant field by knowing the tc of selected original articles (kumar et al., 2019). the citation of forty-one original articles was analyzed. table 8 shows the most cited articles in nm and advertising that had at least ten references. it was found that the most cited article is "neuromarketing: the new science of consumer behavior", which has 152 tcs, written by morin (2011), published in the journal society. followed by an article named "on the use of eeg or meg brain imaging tools in neuromarketing research" with 57 tcs by 2020, written by vecchiato et al. (2011), contributed by comput. intell. neurosci. finally, the least cited document in the list is " using support vector machine on eeg for advertisement impact assessment" was published in the journal front. neurosci., and written by wei, zhen et al. (2018), with 10 tcs. figure 5. keywords co-occurrence map (min. = two occurrences) baltic journal of economic studies 9 vol. 8 no. 5, 2022 4. discussion the literature review showed that the annual and cumulative number of publications has been increasing since 2004. the prisma protocol guidelines were followed to select and extract original articles relevant to this study, which focused on nm advertising and research. in addition, this study adopted a baseline analysis to learn about the current global trends in the relevant topics. fortyone articles were selected and analyzed. the results showed that three countries, namely: spain, italy and the usa, published more than half of the total number of papers – twenty-six articles and more than three hundred tcs. for example, spain alone has published eleven papers out of ninety-six tcs as of the end of 2020, being the most productive country compared to italy and the usa, which published eight and seven papers respectively. in addition, the results of the study showed that the greatest contribution was made by the university of rome sapienza (italy), complutense university of madrid (spain) and rey juan carlos university (spain) – three papers and 72, 18 and 12 citations respectively. at the end of the list was the university of salamanca with two papers and only one citation. regarding the most productive authors or researchers, although all authors in table 5 published the same number of publications with two papers, it was found that babiloni, f. is the most productive author with two papers based on the highest impact factor scores (68 тсs). according to the top journals, this study found that nine productive journals with at least two publications belong to six countries such as switzerland, spain, england, poland, the netherlands and italy. the total volume of publications from these six countries amounted to twenty-eight articles, of which swiss journals (e.g., front. psychol., front. neurosci. and behav. sci.) contributed fourteen articles and spanish journals (e.g., communicar and vivat academia) published six articles. in addition, it was found that the most prolific journal among others is front. psychol. with eight articles, followed by comunicar and front. neurosci. with eight articles (four articles in each journal). the remaining journals, such as comput. intell. neurosci., j. econ. psychol., table 8 the top articles by tcs (min. = ten tcs) title authors journal tcs 2020 "neuromarketing: the new science of consumer behavior" morin, c., 2011 society 152 "on the use of eeg or meg brain imaging tools in neuromarketing research" vecchiato, g., 2011 comput. intell. neurosci. 57 "branding and a child's brain: an f mri study of neural responses to logos" bruce, a. s., 2014 soc. cogn. affect. neurosci. 41 "eeg spectral dynamics of video commercials: impact of the narrative on the branding product preference" wang, r . w. y., 2016 sci. rep. 40 "technologies of ironic revelation: enacting consumers in neuromarkets" schneider, t., 2012 consum. mark. cult. 32 "mapping a multidimensional emotion in response to television commercials" morris, j. d., 2009 hum. brain mapp. 27 "using the p3a to gauge automatic attention to interactive television advertising" treleaven-hassard, s., 2010 j. econ. psychol. 26 "consumer neuroscience-based metrics predict recall, 9liking and viewing rates in online advertising" guixeres, j., 2017 front. psychol. 19 "eye tracker technology in elderly people: how integrated television content is paid attention to and processed" ananos, e., 2015 comunicar 18 "the cognitive processing of an educational app with electroencephalogram and eye tracking" cuesta-cambra, u., 2017 comunicar 17 "social consumer neuroscience: neurophysiological measures of advertising effectiveness in a social context" pozharliev, r ., 2017 j. advert. 15 "evaluation of emotional responses to television advertising through neuromarketing" baraybar-fernandez, a., 2017 comunicar 12 "consumers favor "right brain" training: the dangerous lure of neuromarketing" lindell, a. k., 2013 mind brain and education 12 "electroencephalographic, heart rate, and galvanic skin response assessment for an advertising perception study: application to antismoking public service announcements" cartocci, g., 2017 j. vis. exp. 11 "using support vector machine on eeg for advertisement impact assessment" wei, z., 2018 front. neurosci. 10 baltic journal of economic studies 10 vol. 8 no. 5, 2022 sci. ann. econ. bus. and neuropsychol. trends published two articles each. analysis of keywords and citations showed that the most frequent keyword is "neuromarketing" with 27 occurrences and 127 tls, followed by "advertising" and "neuroscience" with 12 and 11 occurrences and 63 and 59 tls, respectively. according to the most cited papers, it was found that the most cited article among others is "neuromarketing: the new science of consumer behavior" with almost 152 citations, which was published by morin (2011) in the journal "society ". while in the tail of the list was "using support vector machine on eeg for advertisement impact assessment" with 10 tcs which written by wei, z. et al. (2018) and published by front. neurosci. summing up, the authors noticed that developing countries do not publish papers in the field of nm advertising and research. therefore, this article encourages authors and scientists in these countries to share their ideas and contributions, and to increase funding for this revolutionary field that can help society (e.g., encouraging people to use seat belts in cars and now, during the covid-19 pandemic, encouraging people to use disinfectants and masks, and also to care more about cleanliness, but for business, some companies and firms used emotional aspects, i.e., fear aspects in their advertising campaigns to increase their profits from the sale of their products), health (e.g., creating anti-smoking campaigns) and other areas. hopefully, this study will provide comprehensive information that can be a guide for scientists in further research. 5. conclusions and implications theoretically, the current findings can be divided into two components: first, neuroscientific techniques/ methods allow to capture/measure signals of consumers' brain and body activity (e.g., emotions and feelings, attention, memory, perception, reward processing and motivation) to advertising campaigns. for example, neuroimaging tools (e.g., f mri, eeg/erp, f nirs) allow the recording of neural signals of mental reactions (e.g., pleasure/ displeasure, low/high arousal, recall and recognition of ads) to advertisements, which can be useful for advertisers and marketers in creating more effective advertising campaigns to attract, capture and influence consumers. meanwhile, physiological tools, such as eye movement tracking, can enrich scientists with valuable information about physiological responses such as pupil dilation, fixation, and eye movements towards stimuli. secondly, it is possible to identify problems related to the attractiveness, strengths and weaknesses of incentives (e.g., advertising, brand logo, products, ... etc.) that lead to consumer decisions by practitioners before their actual implementation. nm is a new generation marketing industry that has the prospect of not only studying but also solving such commercial problems as the issue of advertising effectiveness, as well as reducing the waste of advertising budget, creating more effective advertising campaigns in the social, political and medical sectors in order to raise people's awareness. today, the competition between companies and firms has increased significantly due to technological progress, so each firm resorts to the use of technology to win the competition and increase its market share. thus, large companies turn to nm agencies to conduct their advertising research and maximize profits with the help of nm methods that allow tracking unconscious/subconscious reactions of consumers to advertising. most studies in the field of advertising research have identified the main mental processes of interest in advertising research, such as emotions and feelings, attention, memory, reward processing, motivation and perception. the findings suggest that neuroscientific methods and techniques are very important in mapping consumers' neural and physiological responses to advertising. the authors believe that this study will provide comprehensive information about the latest advertising research, which can help beginning researchers and students interested in nm and advertising research. 6. limitations and future research directions although it reduced the methodology shortco mings, there are obstacles in this study that give a chance for future research. for example, it focused on original english language articles that conducted experiments in advertising using nm methods or techniques and obtained results, and this study ignored other non-english language papers such as, but not limited to, review articles. therefore, this study is not completely free from bias. to identify future trends, it is suggested to expand the research to include other areas such as social sciences, education, management, consumer behavior, leadership and productivity. as can be seen, developing countries have not been involved in neuromarketing research, so the authors call on scientists from these countries to contribute to this revolutionary field of marketing and consumer behavior science.we references: abbas, a. f., jusoh, a., od, a. m., ali, j., alsharif, a. h., & e, a. r. h. 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(2018). using support vector machine on eeg for advertisement impact assessment. frontiers in neuroscience, 12, 12. doi: https://doi.org/10.3389/ fnins.2018.00076 received on: 16th of october, 2022 accepted on: 23th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 231 vol. 7 no. 4, 2021 corresponding author: 1 national technical university of ukraine «igor sikorsky kyiv polytechnic institute», ukraine. e-mail: alsu@i.ua orcid: https://orcid.org/0000-0002-8623-4507 researcherid: https://publons.com/researcher/2933513/alla-dunska/ 2 national technical university of ukraine «igor sikorsky kyiv polytechnic institute», ukraine. e-mail: boyarinovaea@ukr.net orcid: https://orcid.org/0000-0001-5879-2213 3 national technical university of ukraine «igor sikorsky kyiv polytechnic institute», ukraine. e-mail: marina.kravchenko.kpi@gmail.com orcid: http://orcid.org/0000-0001-5405-0159 doi: https://doi.org/10.30525/2256-0742/2021-7-4-231-242 scientific approach to determining the vectors of innovative development of industrial enterprises alla dunska1, kateryna boiarynova2, maryna kravchenko3 abstract. the purpose of the paper is to form a scientific and methodological approach to determining the vectors of innovative development of industrial enterprises as a tool for establishing the trajectory of innovation in terms of development of innovation potential and environmental impact. correlation analysis of these factors as indicators of external (external environment of the enterprise) and internal (innovative potential) environment based on the nature and direction of influences allows to establish the vector of development, and the construction of a forecast model of economic results confirms its correctness. methodology. the research used its own methodological developments, correlation analysis, formed the parameters of the external environment, innovation potential, the results of enterprises. the approach was tested at the enterprises of the pulp and paper industry of ukraine, which proved its effectiveness and efficiency. results. the ideology of the proposed approach on the combination of organizational and managerial aspects of innovative development with economic indicators is formed and substantiated. the types of target innovation orientation of the enterprise, which is formed into a bipolar matrix, are determined. based on the corresponding trajectory of the transition between the components of the matrix, three key vectors of development are formed: innovation-adaptive, innovation-balanced, innovation-concentrated. practical implications. on the example of enterprises of the pulp and paper industry their vectors of development, forecast indicators of profit and sales revenues as an economic effect of following the vector direction and the trajectory of innovation are designed. value/originality. the developed scientific and methodological approach involves the establishment of the vector of innovative development of the enterprise on the interdependence of innovation potential and the nature of the impact of the external environment, which provides an opportunity to predict the results of its operation. key words: innovative development, vectors, industrial enterprise, methodical approach. jel classification: o32, m11, l65. 1. introduction the slowdown in economic growth of processing industries of the national economy, due to changes in the foreign economic vector of the country, the transformation of the nature and growth of competitive and economic relations, the need to revise innovation policy, is critical to ensure the efficiency of innovation of industrial enterprises. the implementation of progressive changes requires the systematic use of knowledge, the latest technologies, intangible assets, which determines innovation by the primary activators of the development of such enterprises. this stimulates them to reconsider the principles of development management, especially in the context of paradigmatic changes in management theory in the direction of using innovative approaches, opportunities and mechanisms, rethinking classical development theories and forming a new methodological basis on the basis of modern concepts. the problems of innovative development of enterprises today are considered through the prism of two main theories: the theory of development, which is based on the integrity of the enterprise as an economic system and focuses on the transformation of the system as a whole, and systems theory, which takes into baltic journal of economic studies 232 vol. 7 no. 4, 2021 account structural features, processes that ensure the functioning of the enterprise as an economic system aimed at achieving the goal in the external environment, which is also determined by a certain structure and features. the scientific basis of the theory of development and, in particular, the theory of innovative development is laid in the works of many domestic and foreign scientists, including m. kondratieff (long wave theory) (kondratieff, 2003), j. d. bernal, g. mensha (technological stalemate), a. kleiknecht, s. kuznets, b. twiss, с. freeman, j. clark, l. soete (freeman, clark, soete, 1982), n. nelson (the concept of the national innovation system), l. leidesdorf (triple helix theory). in this direction it should be noted the works of j. schumpeter (theory of economic development) (schumpete, 1934), p. drucker (theory of innovative economics of entrepreneurial type) (drucker, 1993), who explored the entrepreneurial approach to development as an activator of innovation processes; discrete development on an innovative basis over time; the primacy of innovation compared to other activators of development, which form not only innovation but also business potential and develop new forms of business. yu. yakovets, s. glazyeva (yakovets, 2004; glazyev, 2012), which identified the factors of innovative development of the enterprise within the fifth, sixth or seventh technological modes and innovation capacity of each of the factors of economic development. acquisition of competitive advantages of development on the basis of innovations, formation of a policy of protection of large enterprises from competition of subversive innovations were devoted to works of m. porter (theory of competitive advantages) (porter, 1980), k. christensen (concept of "subversive" innovations) (christensen, 1997). among the scientists developing the latest theories of innovative development are f. jansen, f. hayek (theory of intellectual technology) ( jansen, 2000; hayek, 2001), g. itzkowitz (triple helix theory) (itskowitz, 2010), h. chesbrough (the concept of open innovation) (chesbrough, 2003; 2006), p. gloor (model of innovation collaboration networks) (gloor, 2006 ), v. hwang, g. horowitt (concept "tropical forest of innovations") (hwang, horowitt, 2012), which defined a set of patterns of innovative development: cyclical acquisition of innovative experience, the need for economic relations to accumulate intellectual potential and use it as a resource for innovative development; implementation of innovative development in the ecosystem at parity of economic interests of the enterprise with the subjects of interaction; use of the model of open innovations for formation of policy of economic behavior; creating innovations in the process of collaborative relationships with stakeholders. the scientific works of i. ansoff, m. zgurovsky (zgurovsky, 2003), g. kleiner (kleiner, 2012), j. kornai (kornai, 2002), g. milner, m. kravchenko (kravchenko, 2017) are devoted to the problems of the system approach. and others. paying tribute to the significant contribution of these scientists, it should be noted that ukrainian industry has a number of features, including lack of capital resources, obsolescence of technical and technological base, deformed management structure, which complicate, and sometimes impossible, the use of classical theories of enterprise development. approach to the transformation of economic systems. this necessitates a revision of the theoretical and methodological basis, which should be used in the management of industrial enterprises, based on the ontological connection of development theory and systems theory. this determines the objective need to form a scientific and methodological approach to determining the vectors of innovative development of industrial enterprises as a tool for establishing the trajectory of innovation in the development of innovation potential and environmental impact. 2. organizational and managerial approach to ensuring innovative development ensuring the development of industrial enterprises should be based on the definition of a certain trajectory. at the same time, the formation of such a trajectory should take into account the external influences on the enterprise, the level of development of innovation potential, targets and orientation of the enterprise, which is set out in detail by the author in the works (gavrysh, dunska, zhygalkevich, kravchenko, 2019). in addition, the regulation of the trajectory in accordance with the targets of development should be based on the use of the results of systematic economic and managerial diagnostics, in the existing conditions, which allows to establish their inconsistency with the target level for management decisions to eliminate negative trends (boiarynova, kopishynska, hryhorska, 2019; gavrysh, boiarynova, 2017). the development of an industrial enterprise can be conditionally represented as the transition of the production and commercial system from one state to another, and the new state should have more progressive, qualitative and quantitative characteristics (figure 1). the incentive to initiate the process of qualitative changes in the system and its transition to a new state are management decisions that are made at the industrial enterprise, and take into account the disturbances that occur in the external environment of enterprises. to ensure the effective innovative development of an industrial enterprise, it is important to determine the conditions under which the system of goal-setting of the enterprise is formed: the economy is in a declining baltic journal of economic studies 233 vol. 7 no. 4, 2021 or growing wave of market conditions. trends in the external environment determine the nature of innovative development of an individual enterprise, in particular in terms of determining the predominant type of innovation that forms the basis of innovative development of the enterprise. with this in mind in industrial enterprises under different environmental conditions, given the type of innovation that prevails, it is advisable to determine the set of organizational and functional subsystems that play a key role in innovation transformations – let's call it "enhanced action unit". this unit covers the functional units of the industrial enterprise, which are the main generators and consumers of innovation. thus, during the downturn of the economy, it is advisable for industrial enterprises to focus on active innovation on the basis of technical and technological, production innovations, which should result in new products, technologies, technical and technological solutions (figure 2). at the peak of the economic situation on the growing wave of enterprises will try to maintain their position, and therefore they need to focus more on organizational and managerial and marketing innovations, which result in new approaches to managing the company or its departments, new methods of organization works, marketing innovations, market innovations, etc. (figure 3). at the same time, the role of processes that ensure consistency and implementation of innovative development is changing. in the declining wave, innovation development occurs through diagnostic and interaction processes, as technical and technological innovations involve a sufficiently high level of innovation potential of the enterprise, conducting its own research or attracting external sources of innovative ideas, effective implementation of which depends on relationships between functional units. from the given figures it is possible to draw a conclusion that at different stages of economic development it is expedient for the industrial enterprises to concentrate the efforts on various functional subsystems in structure of organizational maintenance of innovative development. 3. types of targeted innovation orientation of the enterprise effective management of functional subsystems is carried out under the conditions of clear definition of the purposes which the enterprise aspires to reach, that is for maintenance of development at the enterprise its target innovative orientation should be specified. depending on the level of development of the innovative potential of the enterprise and the strength of the impact of the external environment in which the enterprise operates, we propose to identify seven types of targeted innovation orientation of industrial enterprises, namely: 1. supportive – involves the operation of the enterprise in conditions of low level of innovation potential and low level of turbulence of the environment. innovations do not have a high level of novelty, they have an improving character. 2. preventive – appropriate for an enterprise that has an innovation potential below average, given the average level of turbulence in the environment and involves tracking adverse changes in certain parameters of the innovation potential of the enterprise and its environment. 3. synergetic – takes place under the condition of strong stimulating influence of the external parameters of the enterprise development environment. external disturbances y1, y2, …yn production and commercial system condition 1 indicators of innovation potential x1, x2, … xn виробничо-комерційна система condition 1 indicators of innovation potential x1 `, x2`, … xn ` management decisions r1, r2, …rn figure 1. schematic representation of the process of industrial enterprise development source: generated by the author baltic journal of economic studies 234 vol. 7 no. 4, 2021 targeting system of industrial enterprises on the downward wave of the economic cycle functional subsystems research and development marketing production foreign economic activity finances personnel information technology logistics provisioning process the process of influence th e pr ed om in an t t yp e of in no va tio n: te ch ni ca l a nd te ch no lo gi ca l, pr od uc tio n innovative development enterprises the process of interaction the block of the strengthen ed action support systems diagnostic process the process of transformation targeting system of an industrial enterprise on the rising tide diagnostic process functional subsystems marketing research and development production finances foreign economic activity logistics information technology personnel provisioning process the process of influence th e pr ed om in an t t yp e of in no va tio n: o rg an iz at io na l a nd m an ag er ia l, m ar ke tin g innovative development of an industrial enterprise the process of transformation the process of interaction the block of the strengthen ed action support systems figure 2. organizational support of innovative development of an industrial enterprise in the declining wave of economic conditions source: developed by the author figure 3. organizational support of innovative development of an industrial enterprise in terms of ensuring sustainable development source: developed by the author baltic journal of economic studies 235 vol. 7 no. 4, 2021 environment on the development of the enterprise and is recommended for those enterprises that have a high level of innovation potential, which allows to react in time to changes in the external environment. 4. protective – provides an opportunity to operate in a high level of turbulence of the external environment and a low level of innovation potential of the enterprise, which necessitates the company to take immediate measures to resist external pressure by increasing the level of innovation potential. 5. balanced – provides an opportunity for the company to be in equilibrium and choose the direction of its development in terms of the average level of development of innovation potential and the average level of environmental impact. 6. absorbent – provides an opportunity to respond and "mitigate" the negative impact of the external environment due to a sufficiently high level of innovation potential. 7. niche – focuses the company on the accumulation of resources for radical change, as it provides a strong innovative potential of the enterprise in a weak environment. each of the above types of innovation focuses on the need to identify appropriate strategies, programs and projects that are tools to ensure the development of the enterprise under a certain level of environmental impact and the level of development of innovation potential. in fig. 4 specifies which innovation strategies, programs and projects should be used to ensure effective innovative development of industrial enterprises within each of the identified types of targeted innovation. it should be noted that the development of the enterprise is through the transformation of functional subsystems based on a set of processes of interaction, diagnosis, impact and provision. therefore, for each type of targeted innovation, key processes and subsystems have been identified, which will primarily be involved in the process of innovation development (figure 4). in general, taking into account changes in the external environment and the innovative potential of the enterprise provides an opportunity to identify three vectors of development of the industrial enterprise: 1. innovation-adaptive vector, which describes the company 's intentions to adapt to the growing influence of the external environment without spending efforts to increase capacity. 2. innovation-balanced vector, which characterizes the company 's efforts to ensure its sustainable development in terms of increasing environmental impact. 3. innovation-concentrated vector, which involves the concentration of efforts of the enterprise primarily on the development of its innovation potential. 4. survey methodology we propose to base the determination of the appropriate vector of development for industrial enterprises and the subsequent forecasting of the results of the introduction of innovative development on the results of correlation analysis. to analyze the relationship between the parameters of the external and internal environment, we have formed the appropriate groups of parameters, taking into account the possibility of obtaining the necessary reliable data for analysis. the parameters of the external environment included factors that characterize the state of innovation in industry, as industry-wide trends in innovation affect the nature of innovation in an individual enterprise, as well as expert assessments of direct environmental factors of industrial enterprises, which we identified and described in work (dunska, 2013). the list of environmental parameters is given in table 1. in the table 2 and 3 respectively show the composition of the parameters of the innovation potential of the enterprise and the composition of the parameters that characterize the results of the enterprise. 5. finding the study was tested on the example of leading enterprises of pulp and paper enterprises of ukraine: pjsc "malyn paper factory-weidmann", pjsc "kyiv cardboard and paper mill", pjsc "rubizhansky cardboard and packaging plant", banknote paper factory of the national bank of ukraine. specific information materials were the data of economic reporting for the period from 2009 to 2020 and the results of expert assessments. correlation methods of analysis have a number of limitations, as they provide averaged dependences of the interaction of the parameters of the external and internal environments of enterprises and poorly take into account the specifics of an individual enterprise. however, the calculation of correlations makes it possible to determine the strength and nature of the mutual influence of parameters that characterize the external and internal environment of the enterprise, and, accordingly, to identify the most important of them to choose to ensure the development of individual enterprises. a key point in the analysis of the calculated correlation coefficients is to determine the importance or non-importance of the relationships between the parameters by setting the threshold of statistical significance ρn. determining the quantitative threshold of statistical significance is not a clearly formalized task and largely depends on experience and intuition. in the general case, the values of the correlation coefficient range from -1 to +1. negative values of the coefficient indicate the inverse relationship baltic journal of economic studies 236 vol. 7 no. 4, 2021 t he le ve l o f e nv ir on m en ta l i m pa ct the level of development of innovation potential lo w low m ed ia l medial hi gh high p r o t e c t iv e in no va ti on s: re ac tiv e, m ar ke tin g st ra te gi es : p ro te ct iv e, d ep en de nt p ro gr am s: u pd at in g th e m at er ia l a nd te ch ni ca l b as e; im pr ov em en t o f r es ou rc e pr ov is io n; a da pt iv e m an ag em en t p ro je ct s: e qu ip m en t r ec on st ru ct io n; c ha ng es in th e su pp lie r a nd c ou nt ry o f o ri gi n of ra w m at er ia ls ; s ys te m im pr ov em en t; en te ri ng th e fo re ig n m ar ke t su bs ys te m s: m ar ke tin g, lo gi st ic s, fo re ig n ec on om ic ac tiv ity p ro ce ss es :i nf lu en ce , i nt er ac tio n p r e c a u t io n a r y in no va ti on s: ps eu do -i nn ov at io ns , p ro du ct in no va tio ns fo llo w er s, n on -t ec hn ol og ic al in no va tio ns st ra te gi es :s im ul at io n p ro gr am s: in vo lv em en t o f e xt er na l i nn ov at iv e de ve lo pm en ts ; i nc re as in g th e le ve l o f h um an re so ur ce s; op tim iz at io n of re so ur ce p ro vi si on p ro je ct s: a cq ui si tio n of a li ce ns e; s ta ff tr ai ni ng ; u se o f al te rn at iv e ra w m at er ia ls su bs ys te m s: m ar ke tin g, lo gi st ic s, fi na nc eп ро це си : вп ли ву , з аб ез пе че нн я s u p p o r t in g in no va ti on s: im pr ov in g, te ch no lo gi ca l, ad ap tiv e st ra te gi es :t ra di tio na l, re si du al p ro gr am s: te ch ni ca l r eeq ui pm en t; im pr ov in g pr od uc t qu al ity ; i nn ov at iv e ad ap ta tio n p ro je ct s: in tr od uc tio n of a dv an ce d m ec ha ni sm s, e le m en ts of e qu ip m en t; op tim iz at io n of te ch no lo gi ca l m od es o f pr od uc tio n; in tr od uc tio n of a m od if ie d ty pe o f p ro du ct su bs ys te m s: pr od uc tio n, fi na nc e p ro ce ss es :i nf lu en ce , p ro vi si on w a r n in g in no va ti on s: fo llo w er s, b or ro w ed , r ea ct iv e st ra te gi es :o pp or tu ni st ic p ro gr am s: as so rt m en t p ol ic y up da te ; d ev el op m en t o f t he te ch no lo gi ca l s ub sy st em o f t he e nt er pr is e p ro je ct s: in tr od uc tio n of a n ew ty pe o f p ro du ct ; im pr ov em en t o f p ro du ct io n te ch no lo gy ; t ec hn ic al re eq ui pm en t o f p ro du ct io n pr oc es se s su bs ys te m s: pr od uc tio n p ro ce ss es :d ia gn os tic s, s up po rt b a l a n c e d in no va ti on s: st ra te gi c, m ar ke tin g, te ch no lo gi ca l, re ac tiv e st ra te gi es :i nt er m ed ia te p ro gr am s: in no va tiv e m od er ni za tio n p ro je ct s: in tr od uc tio n of a n ew o rg an iz at io na l f or m o f in no va tio n m an ag em en t; in tr od uc tio n of n ew p ro du ct io n te ch no lo gy ; i nv ol ve m en t o f t ec hn ol og ie s su bs ys te m s: p ro du ct io n p ro ce ss es :i nt er ac tio ns , t ra ns fo rm at io ns 0,330,67 0 ,3 3 0 ,6 7 1 1 n ic h e in no va ti on s: br ea kt hr ou gh , s tr at eg ic , i nn ov at io ns th at cr ea te n ew n ee ds , i nn ov at io ns th at " co m e ou t o f t he la bo ra to ry ", m ar ke t st ra te gi es : c re at in g a ne w m ar ke t p ro gr am s: in no va tiv e b re ak th ro ug h p ro je ct s: la un ch o f a n ew u ni qu e pr od uc t; cr ea tin g a st ar tu p ba se d on a n in no va tiv e id ea ; c re at io n of a v en tu re st ru ct ur e su bs ys te m s: re se ar ch a nd d ev el op m en t, pr od uc tio n p ro ce ss es :i nf lu en ce , d ia gn os tic s, in te ra ct io n a b s o r b in g in no va ti on s: co m pl em en ta ry , r ea ct iv e, fo llo w -u p in no va tio ns , t ec hn ol og ic al in no va tio ns st ra te gi es :d ep en de nt p ro gr am s: de ve lo pm en t o f c om pe tit iv e ad va nt ag es ; ad ap tiv e m an ag em en t p ro je ct s: o pt im iz at io n of o rg an iz at io na l s tr uc tu re ; c ha ng es in th e pr ic in g po lic y of th e en te rp ri se ; c re at io n of s tr at eg ic m an ag em en t z on es su bs ys te m s: m ar ke tin g, lo gi st ic s, p ro ce ss es :i nf lu en ce , i nt er ac tio n a b s o r b in g in no va ti on s: a c om bi na tio n of s tr at eg ic a nd re ac tiv e in no va tio ns , m ar ke tin g in no va tio ns st ra te gi es : s lo w o ff en si ve p ro gr am s: co st m an ag em en t o pt im iz at io n; d ev el op m en t o f in no va tiv e re ce pt iv ity ; s al es d iv er si fi ca tio n p ro je ct s: in tr od uc tio n of e co no m ic al p ro du ct io n; in cr ea si ng th e le ve l o f e nv ir on m en ta l s af et y of th e en te rp ri se ; s ta ff d ev el op m en t; op tim iz at io n of s al es ge og ra ph y su bs ys te m s: pe rs on ne l, re se ar ch a nd d ev el op m en t p ro ce ss es : d ia gn os tic s, in te ra ct io ns s y n e r g e t ic in no va ti on s: b re ak th ro ug hs , t ho se th at c re at e ne w n ee ds , m ar ke tin g an d m an ag em en t i nn ov at io ns st ra te gi es :a ct iv el y of fe ns iv e p ro gr am s: de ve lo pm en t o f i nn ov at io n in te ra ct io n; de ve lo pm en t o f s oc ia l c ap ita l o f t he e nt er pr is e p ro je ct s: p ar tic ip at io n of th e en te rp ri se in th e in no va tio n cl us te r; te ch no lo gy tr an sf er ; d ev el op m en t o f i nt er na l s oc ia l ca pi ta l su bs ys te m s: re se ar ch a nd d ev el op m en t, m ar ke tin g, s ta ff p ro ce ss es : t ra ns fo rm at io ns , d ia gn os tic s, in fl ue nc es fi gu re 4 . m at ri x of ty pe s of in no va ti on o ri en ta ti on o f i nd us tr ia l e nt er pr is es in b ip ol ar it y: d ev el op m en t o f i nn ov at io n po te nt ia l a nd in fl ue nc e of th e ex te rn al e nv ir on m en t so ur ce : p ro po se d by th e a ut ho rs baltic journal of economic studies 237 vol. 7 no. 4, 2021 a) without taking into account the nature of the impact of the external environment niche synergetic supporting balanced supporting precaution precaution protective supporting synergetic synergetic niche precaution protective absor bi ng ab sor b i ng protective ab sor b i ng positive influence of the external negative influence of the external levels of development of innovative innovationadaptive vector innovatively balanced innovationconcentrated vector innovatively balanced ow low low medium medium medium б) з урахуванням характеру впливу зовнішнього середовища innovative adaptive vector innovative balanced vector innovative concentrated vector the level of development of innovation potential level of influence external environment high high high vector vector potential of b) taking into account the nature of the impact of the outdoor environment figure 5. vectors of innovative development of enterprises source: suggested by the authors a) without taking into account the nature of the impact of the external environmenta) without taking into account the nature of the impact of the external environment niche synergetic supporting balanced supporting precaution precaution protective supporting synergetic synergetic niche precaution protective absor bi ng ab sor b i ng protective ab sor b i ng positive influence of the external negative influence of the external levels of development of innovative innovationadaptive vector innovatively balanced innovationconcentrated vector innovatively balanced ow low low medium medium medium б) з урахуванням характеру впливу зовнішнього середовища innovative adaptive vector innovative balanced vector innovative concentrated vector the level of development of innovation potential level of influence external environment high high high vector vector potential of between the parameters. in (glass and stanley, 1976), the following interpretation of correlation coefficients is proposed, which will be used by us to analyze the results of calculations: +1,00 – deterministic (direct close) relationship; about +0.50 – weak connection; 0.00 – no connection; about -0.50 – weak connection; -1.00 – deterministic (inverse close) connection. as a result of processing the collected data, we built matrices of pairwise correlation coefficients for environmental parameters, innovation potential, performance and environmental parameters and parameters of innovation potential and performance of enterprises. based on the logical analysis of the nature and nature of the relationships of the studied parameters, we chose the threshold of statistical significance ρn = ± 0.5. the obtained calculations make it possible to conclude that there is a direct relationship between baltic journal of economic studies 238 vol. 7 no. 4, 2021 table 1 list of parameters of the external environment of industrial enterprises designation (environment) parameters of the external environment of the enterprise units of measurement e1 volumes of financing of innovative activity in branch uah million e2 number of enterprises in the industry that have implemented innovations pcs e3 the number of introduced innovative types of products at the enterprises of the branch units e4 the number of implemented advanced technological processes at the enterprises of the branch units e5 the number of implemented low-waste, resource-saving or non-waste technologies at the enterprises of the branch units e6 number of inventors, authors of industrial designs and innovation proposals person e7 number of applications for inventions, utility models and industrial designs filed in the field units e8 the volume of sold innovative products of cpp outside ukraine uah thousand e9 the strength of the impact of changing conditions on the activities of enterprises in the industry points e10 intensity of technological changes in the industry points e11 the degree of consumer influence on the activities of enterprises in the industry points e12 the degree of influence of state regulation on the activities of enterprises in the industry points e13 the degree of influence of the resource base of the industry points e14 the degree of influence of environmental factors on the activities of enterprises in the industry points source: compiled by the authors. table 2 list of parameters of innovation potential of industrial enterprises designation (innovative potential) parameters of innovation potential of the enterprise units of measurement ip1 costs of acquisition of non-current assets uah thousand ip2 the degree of depreciation of fixed assets % ip3 capacity utilization level % ip4 return on assets % ip5 the share of electricity costs in the structure of production costs % ip6 the share of material costs in the structure of production costs % ip7 the level of provision of the enterprise with material resources. points ip8 number of new and modernized technological processes put into operation in the current year units ip9 the value of the coefficient of maneuverability % ip10 coefficient of financial independence % ip11 coefficient of financial stability % ip12 assessment of the innovative orientation of the enterprise points ip13 the level of innovative receptivity of staff points ip14 the growth rate of the average number of employees without measurement ip15 the share of labor costs in the structure of production costs % ip16 productivity uah / person ip17 research and development costs uah thousand ip18 selling expenses uah thousand ip19 the level of use of information technology points ip20 efficiency of communication channels points ip21 the share of exports in total production % ip22 the share of exports to foreign countries in total production % source: compiled by the authors the degree of influence of the resource base of enterprises in the industry (e13) and the assessment of the impact of changes in environmental conditions on the activities of enterprises (e9), the degree of influence of state regulation (e12). the degree of influence of environmental factors (e14) and the share of enterprises in the industry that have implemented innovations (e2). feedback is present between the impact of government regulation (e12) and the number of new products developed in the industry (e3). when intensifying innovative development, it is important to assess the nature and direction of the impact of the external environment on the innovative potential of the enterprise. the analysis of the obtained baltic journal of economic studies 239 vol. 7 no. 4, 2021 table 3 list of parameters of results of industrial enterprises designation (rezult) parameters of efficiency of enterprise activity units of measurement r1 production volume uah thousand r2 sales volume uah thousand r3 sales revenue uah thousand r4 net profit (loss) uah thousand r5 product profitability % r6 return on assets without measurement r7 return on equity without measurement r8 total liquidity ratio without measurement r9 costs per 1 uah. sold products pennies r10 dynamics of export growth % source: compiled by the authors calculations shows that the most significant factor of the external environment is the assessment of the degree of consumer influence on the activities of enterprises in the industry (e11). the greatest closeness of the relationship can be traced between this indicator and the following parameters of innovation potential: the number of new and modernized technological processes put into operation in the current year (ip8): the growth of this indicator indicates the improvement of the innovative level of production and products in accordance with the growing demands of consumers; – the level of innovative receptivity of staff (ip13): the adaptation of technological processes to the new needs of consumers requires an appropriate level of creativity from employees of enterprises; – costs of research and development (ip17): increasing market power of consumers requires companies to find new, non-standard solutions to meet the needs of consumers, and, consequently, leads to increased costs of research and development; – sales costs (ip18): increasing the number of consumers requires higher costs for their supply of products, increasing consumer demand requires the establishment of efficient operation of sales channels. it should be noted that the correlation analysis showed a close relationship between the amount of funding for innovation in the industry (e1) and the level of innovation susceptibility of staff in the industry (ip13): the correlation coefficient is 0.82 (according to our research from 2000 to 2005 years, the value of this ratio was 0.55). it is obvious that the tendencies to increase the volume of funding for innovation in the industry will lead to an increase in the innovative receptivity of staff at each individual enterprise. on the other hand, awareness of the role of innovative transformations in enterprises contributes to increasing funding for innovation, quantitative and qualitative growth of innovation results, increasing the number of employees in the innovation sector and, consequently, increasing the innovation sensitivity of staff in general. the analysis of the correlations between the indicators of innovation potential and the parameters that characterize the results of the enterprise, provided an opportunity to identify the most significant factors of innovation potential on which the effectiveness of the enterprise depends. namely, there is a close connection between: – the level of capacity utilization (ip3) and production and sales volumes (r1, r2); – the number of innovative technological processes put into operation (ip8) and the company 's profit (r4); – costs of research and development (ip17) and sales revenue (r3), costs per 1 uah of sold products (r9), and the dynamics of export growth (r3). there are also correlations in the structure of innovation potential parameters. in particular, the calculations showed the presence of feedback between the level of security of the enterprise with material resources (ip7) and the number of new and modernized technological processes (ip8); direct links with the value of the correlation coefficient greater than 0.95 are present between the value of the share of material costs in the cost structure (ip6) and the level of material security of the enterprise, between the value of the share of electricity costs in the cost structure (ip5) and the number new and modernized technological processes (ip8); the growth rate of the number of employees (ip14) and labor productivity (ip16); the level of innovative susceptibility of personnel (ip13) and the share of exports to industrialized countries in total production (ip22). these results of the analysis of the relationship between the parameters of innovation potential of enterprises, environmental parameters and performance of enterprises provide an opportunity to build a linear multiple regression equation for each vector of development, which allows to analyze the relationship between several variables and assess their impact on the dependent variable. the equation for the innovation-adaptive vector should be based on the relationship between corporate profits (r4), the number of implemented innovation processes (ip8) baltic journal of economic studies 240 vol. 7 no. 4, 2021 table 4 design of vectors of development of pulp and paper enterprises selection criterion development vector terms of selection model for forecasting explanation m ax ( e nt er pr is e re ve nu e) innovatively balanced rising costs for innovation in the industry increasing the level of innovation receptivity yіз = а01 + а11 * * x1 + а12 * x2 yіз – revenue of enterprises from sales of products (r3), х1 – costs of innovation in the industry (е1) х2 – the level of innovative susceptibility of enterprise personnel (ір13) innovationconcentrated the growth of enterprise costs for innovation increasing the level of innovation receptivity yік = а02 + а21 * * x3 + а22 * x2 yік – revenue of enterprises from sales of products (r3), х3 – costs of enterprises for innovation (ір17) х2 – the level of innovative susceptibility of enterprise personnel (ір13) innovativeadaptive rising costs for innovation in the industry growing consumer influence yіа = а03 + а31 * * x1 – а2 * x4 yіа – revenue of enterprises from sales of products (r3), х1 – costs of innovation in the industry (е1) х4 – level of consumer influence (е11) source: developed by the authors table 4 forecasting the development of pulp and paper enterprises enterprise development vector model for forecasting enterprise revenue forecast, thousand uah 2021 2022 2023 pjsc "malyn paper factory-weidmann" innovationconcentrated yік = 110335,1813 + 49,4127*x3 + 8410,9133*x2, where yік – revenue of enterprises from sales of products (r3), х3 – costs of enterprises for innovation (ір17), х2 – the level of innovative susceptibility of enterprise personnel (ір13) 490 436,4 626 740,6 822 148,8 pjsc "rubizhansky cardboard and packaging plant" innovatively balanced yіз = -140689,5637 + 4029,7835*x1 + 207600,1961*x2, where yіз – revenue of enterprises from sales of products (r3), х1 – costs of innovation in the industry (е1), х2 – the level of innovative susceptibility of enterprise personnel (ір13) 2 706 275,167 3 265 620 4 032 056 pjsc "kyiv cardboard and paper mill" innovativeadaptive yіа = 31821625,3461 + 1286,2602*x1 – 3354871,9406*x4, where yіа – revenue of enterprises from sales of products (r3), х1 – costs of innovation in the industry (е1), х4 – level of consumer influence (е11) 5 035 822,81 5 866 148 7 097 294 ukrainian paper llc innovationconcentrated yік = -90201,4911 + 438,7126*x3 + 24003,5649*x2, where yіз – revenue of enterprises from sales of products (r3), х1 – costs of innovation in the industry (е1), х2 – the level of innovative susceptibility of enterprise personnel (ір13) 142 022,47 157 764,8 175 319,2 source: calculated by the authors and the strength of consumer influence (e11); the equation for the innovation-balanced vector should take into account the relationship between the revenue of enterprises from sales (r3), the cost of innovation in the industry (e1) and the level of innovation susceptibility of enterprise personnel (ip13); the innovation-focused vector takes into account the relationship between the revenue of enterprises from sales (r3), the costs of enterprises for innovation (ip17) and the level of innovation susceptibility of enterprise personnel (ip13). in the table 5 shows the calculated regression equations for alternative development vectors and forecast indicators of profit and sales revenue at the studied enterprises. in the case of existing alternative vectors of enterprise development, the one that provides the opportunity to obtain higher economic results is chosen. 6. conclusions activation of actions for innovative development of industrial enterprises is preceded by the lack of a proper trajectory, which is determined by the vector. accordingly, the article forms a scientific and methodological approach to the definition of baltic journal of economic studies 241 vol. 7 no. 4, 2021 such vectors. development depends on the type of innovation orientation of the enterprise, due to the available innovation potential and the impact of the external environment. therefore, the key types of targeted innovation orientation of enterprises should be considered: supportive, preventive, synergistic, protective, balanced, absorbing, niche. types of orientation are the basis of the developed matrix, which has bipolarities: the development of innovation potential and the impact of the external environment. its use and application of correlation analysis of indicators of external (external environment of the enterprise) and internal (innovative potential) environment allows to determine vectors of innovative development of industrial enterprise. based on the approbation of the approach on the example of pulp and paper enterprises of ukraine, it was determined that their innovative development should be formed on the basis of three vectors: innovation-balanced, 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(1980). competitive strategy: techniques for analyzing industries and competitors. toronto: the free press. schumpeter, j. (1934). theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle. cambridge, ma: harvard university press. yakovets, yu. v. (2004). epohalnyie innovatsii xxi veka [epochal innovations of the xxi century]. moscow: ekonomika. (in russian) zgurovsky, m. (2003). suspilstvo znan ta informatsiyi – tendentsiyi, vyklyky, perspektyvy [society of knowledge and information – trends, challenges, prospects]. dzerkalo tyzhnya. available at: http://gazeta.dt.ua/ economics/suspilstvo_znan_ta_informatsiyi__tendentsiyi,_vikliki,_perspektivi.html (in ukrainian) baltic journal of economic studies 65 vol. 7 no. 2, 2021 corresponding author: 1 state university of telecommunications, ukraine. e-mail: evtushtnko.13.nat@gmail.com orcid: https://orcid.org/0000-0001-8865-8365 2 state university of telecommunications, ukraine. e-mail: anatolijakovi4@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-2-65-76 consulting in increasing innovative activities of enterprises of ukraine natalia yevtushenko1, anatoliy salo2 abstract. the purpose of the article is to study economic phenomena and processes in ukraine in order to substantiate the need to intensify innovative activity on its territory and to search for promising opportunities to increase the competitiveness of ukrainian enterprises during the political and economic crisis. measurement of the level of innovative development of ukrainian enterprises was carried out using data for a nine-year period of time (2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019). methodology. the use of economic, abstract and logical research methods through methods of analysis, synthesis and graphical presentation made it possible to assess the level of innovative development of ukrainian enterprises for the main international rating and macroeconomic indicators. results. the content of the concept of “innovative activity” was clarified, which made it possible to highlight the main directions of innovative development of enterprises in the country. a methodology for conducting a step-by-step assessment of the level of innovative development of enterprises in ukraine through the criteria that determine the profile of the national innovation system of ukraine is proposed. according to the results of the assessment, it has been found that during the analysed period, ukraine’s positions in the global competitiveness index in the context of individual rating indicators do not have stability and are positioned at the level of underdeveloped countries. at the macroeconomic level of ukraine, this is confirmed by the annual decrease in the part of expenses for the implementation of innovative developments in the structure of gdp expenditures to a critically low level. in the process of assessing the costs of performing innovative developments by type of work, it has been found that the most funded type in ukraine is scientific and technical (experimental) developments. practical implications. the results of the assessment confirm the drop in the level of innovative activity of ukrainian enterprises, the low efficiency of the national innovation system, and explain the passive role of the state and the further lag of the country in technological development from the developed countries of the world. in such conditions, there is the need to attract consulting companies to increase innovative activity. value/originality. a methodology for assessing the level of innovative development of ukrainian enterprises has been formed according to the results of which it is proposed to use consulting as an effective tool of the national innovation system in order to increase the competitiveness of ukrainian enterprises. key words: consulting, innovation, competitiveness, national innovation system, strategy, enterprises. jel classification: f63, g29, о11, о30 1. introduction at the present stage of development of ukraine, the stimulation of innovative activity is one of the primary factors of structural restructuring and accelerated economic growth. the basis of the innovation activity of enterprises is innovation, which at the legislative level is an effective tool for increasing the socioeconomic growth of any country. without a developed innovation market, the normal functioning of a modern market economy based on technical, technological and managerial innovations is impossible. unfortunately, the innovation market has been the weakest link in the ukrainian economy due to imperfections in the mechanism of its financing and management. the deficit of financial resources combined with ineffective management methods both at macro and at micro levels is becoming the main problem that hinders the innovative development of domestic enterprises and the country as a whole. so today, the situation continues to be relevant for solving the economic problem of the election of alternative directions for enhancing the innovative baltic journal of economic studies 66 vol. 7 no. 2, 2021 activity of enterprises in ukraine, which in the future will ensure the stable growth of the country, contribute to an increase in labour productivity and competitiveness of domestic goods. 2. literature review 2.1. formation of the national innovation system: foreign experience and ukrainian realities the concept of national innovation system (nis) and innovative development of enterprises was formed in world practice in the 1980s. foreign scientists d. archibugi, j. howells, j. michie (archibugi, howells & michie, 1999), r . coombs, m. harvey, b. s. tether (coombs, harvey, & tether, 2003) substantiate that the features of modern nis in the global economy are manifested through the synthesis of the following theoretical propositions: 1. general systems theory, according to which the system is an integrity, has certain boundaries, and in which there are hierarchical relationships. 2. the innovative theory of j. schumpeter, the essence of which is that the engine of progress is innovation, that is, fundamentally new goods, technology, forms of production and exchange. 3. d. north’s theory of institutional change, which substantiates that institutions directly and indirectly affect both knowledge and technology. taking into account the main provisions of theoretical concepts on the content of nis, it is customary to define it as: – a network of institutions in the public and private sectors, the interaction and activities of which are aimed at initiating, importing, modifying and disseminating new technologies (freeman, 1995); – organizations and institutions involved in the search and research, which interact in the process of production, distribution and use of new, economically beneficial knowledge, and also are located or originate from the territory of the nation state (lundvall, 1992); – set of institutions, the interaction of which determines the innovative productivity (efficiency) of national companies (nelson & rosenberg, 1993); – national institutions, their incentive structures and their competencies that determine the speed and direction of technical training (or the volume and composition of changes in activities in the country (patel & pavitt, 1992); – network of different institutions that contribute to the development and diffusion of new technologies, creating a framework within which governments form and implement policies to influence the innovation process. it is a system of interconnected institutions that create, store and transfer knowledge and skills, which define new technologies (metcalfe, 1995); – all important economic, social, political, organizational, institutional and other factors that influence the development, diffusion and use of innovations (edquist, 1997; 2005); – a historically formed subsystem of the national economy, in which various organizations and institutions interact and influence each other in the process of implementing innovative activities (galli & teubel, 1997). in current business environment, activation issues continue to be relevant. many foreign scientists, including м. castells (castells, 2010), t. merriden (merriden, 2003), i. shugurova (shugurova, 2010), i. wilkinson, l. young (wilkinson & young, 2002), j. rifkin (rifkin, 2014), reveal the economic and legal aspects of technology transfer at the micro and macro levels. in contrast to developed countries, the need to create nis in order to intensify the innovative activities of domestic enterprises has not been legally defined for a long time in ukraine. the term “national innovation system” in the legislation of ukraine was first formed in 2007 by the resolution of the verkhovna rada “on the recommendations of parliamentary hearings on the topic: national innovation system of ukraine: problems of formation and implementation” (resolution of the verkhovna rada of ukraine, 2007). later, in 2009, by the order of the cabinet of ministers of ukraine, the concept for the development of ukrainian national innovation system was approved, according to which the national innovation system is interpreted as a set of legislative, structural and functional components (institutions) that are involved in the creation and application of scientific knowledge and technologies and determine legal, economic, organizational and social conditions for ensuring the innovation process (order of the cabinet of ministers of ukraine, 2009). the order of the cabinet of ministers of ukraine “on approval of the concept for the development of the national innovation system of ukraine” dated 2009 includes such subsystems as: generation and dissemination of knowledge; innovative infrastructure (industrial and technological structures, financial structures, universities, educational centres, examination system, intellectual property protection system; certification, standardization and accreditation centres). innovative activity is mastering, preparation and substantiation of the process, the introduction of innovations in the activities of enterprises. well known academicians of the national academy of sciences of ukraine a. amosha (amosha, 2005), v. heiets (heiets, 2014), b. paton (paton, 2008) іn their work presented the ways to create skills for the transition to an innovative model of development in ukraine and proposed a set of measures and areas that can ensure the development of ukraine as an innovative state. baltic journal of economic studies 67 vol. 7 no. 2, 2021 well-known ukrainian scientists a. hudz (hudz, 2018), i. bahrova, о. cherevko (bahrova, & cherevko, 2014), l. fedulova, v. aleksandrova, y. bazhal (fedulova et al, 2005) conduct numerous scientific studies to enhance the innovation activity of ukraine, in which they determine the problems of development of the country’s innovative economy, recommend directions of state policy, innovative models and systems for managing the innovative activity of ukrainian enterprises in accordance with the change in values and guidelines for managing the digital economy. v. ivchenko (ivchenko, 2007), l. shapovalova (shapovalova, 2011) substantiate the ways of development of the national innovation system of ukraine, necessary for ukrainian enterprises to build a competitive state economy. k. sichkarenko (sichkarenko, 2015) complements the scientific heritage and emphasizes the formation of network cooperation in ukraine for the purpose of efficient organization of technology transfer and determines the economic effect of its development. according to the results obtained, k. sichkarenko substantiates the further development of the national innovation system on a network basis, proves the need for the development of a unified innovation and information network and its integration into similar international institutions. y. bazhal (bazhal, 2015) presents methodological and analytical generalizations of the modern experience of institutional support of organic cooperation between the state, universities and business structures in ukraine regarding the implementation of innovative activities and substantiates the need to improve the existing innovation policy of ukraine by creating and maintaining mechanisms of cooperative interaction between the state, universities and business structures. 2.2. consulting as an element of the national innovation system of ukraine: theoretical aspect the order of the cabinet of ministers “on approval of the concept for the development of the national innovation system of ukraine” from 2009 includes such subsystems as (order of the cabinet of ministers of ukraine, 2009): 1) generation and dissemination of knowledge; 2) innovation infrastructure (production and technological structures, financial structures, universities, educational centres, examination system, intellectual property protection system; certification, standardization and accreditation centres). in the current nis of ukraine, consulting is an element of the innovation infrastructure “intellectual property protection system”, the functions and tasks of which are related to ensuring the copyrights of inventors, patenting and licensing innovations. in this form, the direction of consulting at nis does not disclose its full content. in the article, consulting will be considered as a coordinated process of creating intellectual products by professional consultants with their subsequent implementation in the activities of customer enterprises (yevtushenko, 2017). in the western economic literature, consulting was considered by scientists as one of the most effective tools for managing the innovation activities of enterprises. m. kubr, k . makha, v. riviera, s. johnson, p. blok and others made a significant contribution to the study of this direction. the theoretical and methodological basis of consulting was highlighted by modern foreign scientists: m. kipping, f. wickham, m. sharko, e. shane, d. gable, l. greiner, e. utkin, v. aleshnikova, a. blinov, g. marinka, a. posadsky, j. prigogine, v. rapoport and others. in the context of globalization, transformations are reflected in the works by such domestic scientists as v. verba, s. dunda, n. yevtushenko, t. reshetnyak, s. kozachenko, v. novitsky etc. paying tribute to the developments of foreign and domestic scientists, carried out in the field of the theory of national innovation systems and the organization of ensuring the country’s innovative development using consulting companies, today they have not found their final decision. many issues on enhancing the innovation activity of enterprises in ukraine and ways of interaction of consulting with it are relevant and require a comprehensive study. 3. methodology and research methods the development, preparation and justification of the process of introducing innovations into the activities of enterprises are characterized as innovative activities. according to the law of ukraine “on innovation activity”, innovations, newly applied and/or improved competitive technologies, products or services, as well as organizational and technical solutions of production, administrative, commercial or other nature, significantly improve the structure and quality of production and/or social sphere (law of ukraine, 2002). in a general sense, “innovative activity ” is defined as a process aimed at the development and implementation of the results of completed research and development or other scientific and technical achievements into a new or improved product sold on the market, into a new or improved technological process used in practice and related additional research and development (skripko, 2011). on the other hand, innovative activity is understood as all scientific, technological, organizational, financial and commercial actions that actually lead to the implementation of innovations or are conceived for this purpose. innovation activities are all baltic journal of economic studies 68 vol. 7 no. 2, 2021 scientific, technological, organisational, financial and commercial steps which actually, or are intended to, lead to the implementation of innovations (hnylyanska et al, 2013). in the narrow sense, innovation activity is the process of creating, implementing and disseminating innovation (ilyashenko, 2010). innovation is an activity aimed at updating the existing one, creating and using a new competitive product (product, technology of production method) in order to better meet social needs (increasing labour productivity, product quality, reducing its cost, etc.) (faychuk & faychuk, 2013). in this case, we can conclude that the innovation activity is an activity associated with the use of the results of fundamental scientific research for the development of new products or technologies (improvement of existing products and technologies) and the subsequent commercialization of developments, that is, the production of new products of technological systems and their implementation in the markets. methods for assessing the level of innovative development of ukrainian enterprises are based on the criteria, as well as an innovative ukrainian profile of the national system (yevtushenko, 2017). it is proposed to assess the level of innovative development of ukrainian enterprises in the following stages: 1. analysis of the rating indicators of ukraine in the global competitiveness index. 2. assessment of the level of state financing of innovative activities in ukraine. 3. assessment of the level of innovative activity of industrial enterprises in ukraine. 4. analysis of the development of research personnel in ukraine. 5. providing recommendations for increasing the competitiveness and the level of innovative activity of ukrainian enterprises. 3.1. analysis of rating indicators of ukraine at the first stage of assessing the level of innovative development of ukrainian enterprises, an analysis of ukraine’s rating indicators in the global competitiveness index in the period 2010–2019 has been carried out, the results of which are given in table 1. according to the results of the analysis, it turned out that during the analysed period ukraine occupied unstable positions in the rating of the global competitiveness index, which in 2019 returned ukraine to the level of 2016, which indicated the low efficiency of the state scientific, technical and innovation policy. the decline in the level of competitiveness of ukraine at the international level can be traced in relation to countries such as greece, 26 positions ahead of ukraine in 2019, georgia – 11 positions more than in ukraine in 2019, turkey – 21 positions more than in ukraine in 2019 etc. these circumstances contribute to the classification of ukraine in the list of “traditional underdeveloped” countries, along with namibia and honduras. for a detailed clarification of the reasons for the fall of ukraine’s positions in the global competitiveness index, an analysis was carried out for individual indicators included in this index: financial market development (8), market size (10), business sophistication (11), innovation (12) (figure 1). the analysis revealed that some of ukraine’s positions in the global competitiveness index (2010–2019) are not stable, and some of them are deteriorating every year. thus, in terms of the “financial market development” component, ukraine in 2019 fell by 53 positions in comparison to the indicators of 2010, and in terms of the “market size” component – by 9 positions in comparison to 2010. at the same time, the review of legislative acts on business development table 1 ukraine’s rating according to the global competitiveness index (2010–2019) position of ukraine among individual countries 20 10 –2 01 1 (f ro m 1 44 c ou nt ri es ) 20 11 –2 01 2 (f ro m 1 44 c ou nt ri es ) 20 12 –2 01 3 (f ro m 1 44 c ou nt ri es ) 20 13 –2 01 4 (f ro m 1 48 c ou nt ri es ) 20 14 –2 01 5 (f ro m 1 44 c ou nt ri es ) 20 15 –2 01 6 (f ro m 1 40 c ou nt ri es ) 20 16 –2 01 7 (f ro m 1 38 c ou nt ri es ) 20 17 –2 01 8 (f ro m 1 35 c ou nt ri es ) 20 18 –2 01 9 (f ro m 1 40 c ou nt ri es ) 20 19 –2 02 0 (f ro m 1 41 c ou nt ri es ) china 27 26 29 29 28 28 28 28 28 28 poland 39 41 41 42 43 41 36 37 37 37 russia 63 66 67 64 53 45 43 45 43 43 greece 83 90 96 91 81 81 86 87 57 59 turkey 61 59 43 44 45 51 55 58 61 61 georgia 93 88 77 72 69 66 59 67 66 74 namibia 74 83 92 90 88 85 84 90 100 94 ukraine 89 82 73 84 76 79 85 89 83 85 honduras 91 86 90 111 100 88 88 103 101 101 source: built by authors based on (world economic forum, 2010–2019) baltic journal of economic studies 69 vol. 7 no. 2, 2021 in ukraine in 2019 contributed to an increase in the “business sophistication” component by 15 positions compared to 2010. an important factor behind ukraine’s low rating in the global competitiveness index (2010–2019), in addition to problems associated with imbalances in socio-economic and political development, was the policy of trade distortions. we believe that the low level of applied innovative technologies in the activities of enterprises led to the production of goods with low benefit, which affected the level of competitiveness of enterprises and the level of their purchasing power. however, the main problem that hinders the innovative development of the ukrainian economy is the lack of financial resources. 3.2. assessment of the level of state funding for innovation in ukraine in developed countries, it has been established that the state must ensure that the growth of expenditures on the development of scientific and technological progress and the encouragement of innovative activities of enterprises is ahead of the growth of the gross domestic product. according to the recommendations of the european union countries, the share of expenditures on the implementation of the volume of scientific research in gdp is formed at the level of more than 2%. in this regard, the level of innovative development of ukrainian enterprises has been assessed and we will determine the share of expenditures that the state allocates for innovation in the structure of ukraine’s gdp for the period 2000–2009 (figure 2). the analysis shown in figure 2 shows that in the context of political, economic and institutional imbalances, low demand for innovations in ukraine, there is an annual reduction in the share of spending on innovation development in gdp. thus, during the analysed period, the share of expenses for the implementation of innovative developments in gdp decreased almost twice (by 0.32%), in particular, 83 116 114 117 107 121130 120 117 136 63 74 71 93 8154 52 61 58 60 0 20 40 60 80 100 120 140 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 financial market development market size business sophistication innovation figure 1. selected indicators of the global competitiveness index (2010–2019) source: built by authors based on (world economic forum, 2010–2019) 0,75 0,65 0,67 0,7 0,6 0,55 0,48 0,45 0,43 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 figure 2. share of spending on innovation development in gdp, % source: built by authors based on (state statistics service of ukraine, 2010–2019) baltic journal of economic studies 70 vol. 7 no. 2, 2021 this share decreased from 0.75% in 2010 to 0.43% in 2019. such negative trends persisted despite the approved legislative standards. according to the law of ukraine “on scientific and scientific and technology activities”, this level was set in the range from 1.7% to 2.5%, except for defence expenditures (law of ukraine, 2015). to identify the most significant areas of scientific research in ukraine by type of work, we will analyse the level of costs for the implementation of fundamental, applied scientific, and technical developments for 2010–2019 (figure 3). the study has found that the most significant direction is scientific and technical (experimental) developments, the share of which is on average almost 61.25%, respectively, of the total expenditures for scientific research and development in ukraine. in developed countries, this figure reaches 70% (paton, 2008). the volume of expenses for the implementation of applied research studies for the analysed period are practically unchanged (on average – 23.14%). this example of partial research is carried out by basic research adjusted for analysis of the results by 5.1% and is calculated at the middle of 26.71%; it is a widely used type of research presented in developments, typical research studies. 3.3. assessment of the level of innovation activity of industrial enterprises of ukraine a similar drop in the level of innovation occurs among industrial enterprises in ukraine. in this regard, the sources of financing the innovative activity of industrial enterprises of ukraine for the period 2010–2019 have been analysed (figure 4). analysis of statistical data shows that during the period under review, the main source of financing for innovative activities of industrial enterprises is the own funds of these enterprises, which constitute on average 87.4% of the total volume of financing for innovative activities, while the volume of state funds is 2.4%, funds from non-resident investors – 6.3%, and funds from other sources – 15.0%. such a distribution of funds by sources of financing for innovative activities indicates the insignificant participation of the state in the development of innovative potential, despite the significant resource capacities of ukraine. let us determine the proportion of industrial enterprises in ukraine for the period 2010–2019, and the proportion of the volume of sold innovative products belonging to these industrial enterprises (figure 5). in the process of calculations, it turned out that the share of industrial enterprises that introduced innovations in ukraine during 2010–2019 did not exceed 16% of the total number of enterprises in ukraine. moreover, the largest number of innovative types of products has been introduced at the enterprises of zaporizhzhia, lviv, kharkiv, dnipropetrovsk oblasts, and kyiv. during the period of independence, industrial enterprises of ukraine have experienced crisis periods more than once. thus, the proportion of enterprises that introduced innovations was very low in 2010 – 11.5% and in 2014 – 12.1%, which was below the threshold value (25%) and much lower than in developed countries (70–80%) (yеvtushenko, 2017). the result of it was a drop in the share of the volume of sold innovative products in the total volume. by the end of 2019, this indicator decreased by 2.5% compared to 2010 and equalled the indicator of 2015. in the current conditions, industrial enterprises of ukraine find it difficult to carry out innovative activities associated with changes in technological processes and the release of innovative products (figure 6). 26,8 25,9 27,8 26,3 25,9 22,4 19,3 21,9 22,4 21,7 53,6 52,8 50,7 53,6 54,3 59,8 58,5 54,5 56,3 57,2 0 20 40 60 80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 basic research costs applied research costs expenses for the implementation of scientific and technical (experimental) developments figure 3. dynamics of expenditures on scientific education and distribution by types (2010–2019), mln uah source: built by authors based on (state statistics service of ukraine, 2010–2019) baltic journal of economic studies 71 vol. 7 no. 2, 2021 4775,2 7585,6 7335,9 6973,4 6540,3 13427,0 22036,0 7704,1 10742,0 12474,9 0,0 5000,0 10000,0 15000,0 20000,0 25000,0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 funds from other sources funds of non-resident investors state budget funds еnterprise funds figure 4. dynamics of volumes of financing of innovative activity of industrial enterprises in ukraine by sources (2010–2019), mln uah source: built by authors based on (state statistics service of ukraine, 2010–2019) 11,5 13,6 12,1 16,6 15,6 13,8 3,8 3,8 3,3 3,3 2,5 1,4 0,7 0,8 1,3 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 share of the number of industrial enterprises that introduced innovations in the total number, % share of the volume of sold innovative products in the total volume of sold products of industrial enterprises, % figure 5. dynamics of a part of the number of industrial enterprises and share of the volume of innovative products sold by them in 2010–2019, % source: built by authors based on (state statistics service of ukraine, 2010–2019) in the process of analysing the data, the absence of a clear course for determining measures to improve innovation policy in ukraine was revealed, where more than the number of technological processes for the production of these innovative products is being introduced in terms of quantity. so, on average, 3500 units of innovative products are being introduced into the activities of industrial enterprises, while the average number of new technological processes is 2324 units. 3.4. analysis of the development of research staff in ukraine the next criterion that determines the profile of the national innovation system of ukraine is human resources. let us analyse the impact of research personnel in ukraine on the enhancement of innovative activity (figure 7). it has been established that the bulk of research fellows in ukraine are formed by researchers – on average 78%, the number of which at the end of 2019 decreased by 82.6 thousand people baltic journal of economic studies 72 vol. 7 no. 2, 2021 in relation to 2010, and decreased by 43.2 thousand – relative to 2015. technicians account for an average of 10% of the total number of employees involved in research and development, the share of which decreases annually, in particular, in 2019 the number of technicians decreased by 12.6 thousand people compared to 2010. the number of researchers in the form of doctors of sciences and doctors of philosophy during the analysed period is shown in figure 8. it was found that, in contrast to developed countries, the proportion of doctors of philosophy (candidates of sciences) in ukraine among the performers of research work was 27%, and doctors of sciences – 8.1%. moreover, more than half of the total number of doctors of sciences and doctors of philosophy carried out their research and development in organizations of the public sector of the economy, 39.1% – in higher education, 4.8% – in the business sector. the reason for the reduction in the human scientific potential of ukraine is outdated forms of organization of fundamental research, materially insecure jobs with little opportunities for career growth and professional recognition, a general underestimation by society of the role of fundamental research in the country’s economic growth. so the minimum funding allocated for one scientist in the european union is 50-55 thousand usd per year, in ukraine – 15 thousand usd (holovinov, & kovtun, 2010). 4. recommendations according to the results of the study, the activation of innovative activity in ukraine is slow and hazard. in these circumstances, increase of the competitiveness of ukraine is possible only through the use of adaptive mechanisms to enhance innovation and the introduction of new resource-saving technologies 2043 1576 1217 3489 23182408 3661 4139 3843 2148 0 500 1000 1500 2000 2500 3000 3500 4000 4500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 number of new technological processes introduced into production, units number of implemented types of innovative products, units figure 6. dynamics of the number of introduced new technological processes and types of innovative products 2010–2019, units source: built by authors based on (state statistics service of ukraine, 2010–2019) 182484 164340 136123 97912 79262 133744 122106 101440 63694 51121 20113 15509 12299 10000 7470 0 50000 100000 150000 200000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 the number of employees involved in the implementation of research and development – total, people including the number of researchers, people including the number of technicians, people figure 7. dynamics of the number of employees involved in research and development, by categories of personnel for 2010–2019, people source: built by authors based on (state statistics service of ukraine, 2010–2019) baltic journal of economic studies 73 vol. 7 no. 2, 2021 designed to improve the economic, social and environmental situation. such activity is associated with the emergence of new relationships and interpenetration of economic, social and technical sciences, the creation and development of a specific conceptual apparatus. taking into account international experience, we believe that consulting is endowed with many characteristics that allow it to be presented in terms of a coordinated process of creating intelligent products for client enterprises by professional consultants in order to spread new technologies to ensure efficiency and the level of innovative development. (yevtushenko, 2019). the place of consulting in the national innovation system of ukraine should be designated between the system of state regulation (institutions) of education; generation of knowledge; innovative infrastructure; production. in important systems, consulting can become an innovative representative of nis and an active intermediary in the transfer of innovative technologies to the state and private economy (figure 9). in the process of interconnection with the main subsystems of nis (government regulation; production; innovation infrastructure; education), consulting realizes its relations with consumers of services, taking into account the creation of consulting interaction. n. yevtushenko proposed to understand “consulting interaction” as a professional communicative process between subjects of economic relations in the communicative space regarding the solution of problem situations of enterprises-customers of consulting services in accordance with increasing their potential in the field of management, operation and development (yevtushenko, 2017; yevtushenko, 2019). in order to increase the efficiency of the enterprise of the customer the consulting company should carry out rational joint actions with the subsystems of the nis in particular (yevtushenko, 2019): 1. process of transfer of intellectual products, taking into account fundamental and applied research, development, innovation in the production and technological sphere of the private sector. 2. process of training the personnel of the customer enterprise to work in new conditions. 3. process of attracting state-owned enterprises to work on examination, certification and standardization. 4. process of developing financial (tax) schemes for the optimal use of the customer’s capital for the implementation of innovative projects. 5. procedure for the protection of their intellectual property. 6. recommendations for minimizing risks in the development, implementation of innovative projects. it is important to note that in order to implement the system of interconnections and interaction with the subsystems of nis of ukraine consulting; it is desirable to have access to the knowledge generation system in order to disseminate them through the subsystems of the innovation infrastructure and production, education and government regulation. this will help them develop in accordance with the strategies of innovative development specified in the directions of the state innovation policy. 5. conclusions thus, the assessment of the level of innovative development of ukrainian enterprises made it possible to identify the problems of innovative activity. the results of the analysis of international rating and macroeconomic indicators point to recessive processes in the ukrainian economy, a drop in production and the level of innovation activity against the background 6,6 6,7 7,2 7,8 7,4 8,2 25,6 26,4 26,5 26,8 20,4 21,4 0,0 5,0 10,0 15,0 20,0 25,0 30,0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 doctors of science to the total number of employees involved in research and development doctors of philosophy to the total number of employees involved in research and development figure 8. the number of doctors of sciences and doctors of philosophy involved in the implementation of scientific research in 2010–2019, persons source: built by authors based on (state statistics service of ukraine, 2010–2019) baltic journal of economic studies 74 vol. 7 no. 2, 2021 state organizational model of institutional mechanism consulting in nis of ukraine education stateregulation knowledge generation system innovation infrastructure consulting national innovation system (nis) innovative development strategy of the country structural position of consulting in nis of ukraine strategy of innovative development of enterprises production сonsulting interaction innovation policy of ukraine strategy for increasing the innovation potential of enterprises figure 9. the system of interconnection and interaction of consulting with the main subsystems of the national innovation system of ukraine source: (yevtushenko, 2019) of a decline in welfare in the country. ukrainian enterprises are forced to independently adapt to changes by optimizing their activities in order to obtain a small but guaranteed profit. all this hinders the already development of innovations in ukraine against the background of slow technical re-equipment of enterprises and a significant reduction in the human scientific potential of ukraine. to solve this problem, a scientific substantiation of the system of interconnections and interaction of consulting with the main subsystems of the nis of ukraine was carried out, in which consulting activities are considered as intermediary according to the structural position in this system, by developing and introducing innovations into production against the background of coordinating appropriate management decisions. the effective interaction of consulting as a separate element of the innovation infrastructure of nis ukraine should be aimed at implementing strategic directions for building up the innovative potential of ukrainian enterprises, used by highly developed countries (usa, great britain, germany, france, etc.). the use of foreign experience in the implementation of consulting services in ukraine will lay the foundation for increasing the competitiveness of the country’s economy. the formation of the necessary internal conditions will make it possible to ensure an “innovative breakthrough” of the economy in the future to enter the category of competitive economies. references: archibugi, d., howells, j., & michie, j. 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state regulation of publishing: prospects for development* yuriy safonov1, andrey shtangret2, alexander melnikov3 abstract. the experience of most countries confirms that the development of modern information technologies does not reduce people's interest in books. the demand for publishing products remains stable, and in the context of the dynamic development of the digital economy and the priority of information as a resource for sustainable development, it is even growing. thus, in the eu countries, 6 to 8 books are published per capita per year. in ukraine, there are significantly different trends, because in 2020 the annual circulation of books in ukraine amounted to 20.2 million copies, that is, 0.48 copies of books and brochures per one inhabitant of ukraine. under such conditions, the development of publishing entities requires strategic and conceptual organizational and financial support from the state in the context of more efficient use of limited financial resources. since 2005, ukraine has been implementing the "ukrainian book" program, which along with providing tax benefits to publishers and book distributors is a form of state support for publishing. the results of the audit of the effectiveness of the use of funds proved that the effectiveness of the use of state budget funds is not high enough, in particular due to the imperfection of the criteria for selecting publications. based on the results of the study, a list of such criteria was formed. the methodological principles of expert evaluation of book publications declared by the subject of publishing business in accordance with the established criteria for the selection of book products using points have been formed. an evaluation scale based on the selection criteria was developed. additional characteristics that specify the main criteria for selecting publications included in the program and financed from the budget are proposed. the number of the expert group (7-15 persons) is substantiated, which ensures the reliability of the examination. the developed methodological and practical principles are intended to partially solve the existing problems by establishing scientifically based criteria for more efficient use of state budget funds and satisfying the reading interest of ukrainian citizens. key words: publishing, state support, selection criteria, publication, expert, expert evaluation. jel classification: h70, h75 * for the implementation of a scientific topic (state registration number 0122u002363). 1. introduction the experience of most countries confirms that the development of modern information technologies does not lead to a decrease in people's interest in books. the demand for publishing products remains stable, and in the context of the dynamic development of the digital economy and the priority of information as a resource for sustainable develop ment, it is even growing (afonin, senchenko, 2009; durnyak, shtangret, melnikov, 2006; melnikov, semenyuk, 2014). in transition countries there is a need to regulate the media industry. it is clear that certain trends only intensify in case of socio-economic disasters. regulation of the media industry and its components (in particular, publishing) is a set of measures of state influence (forms, methods and means) on the activities of relevant business entities in order to create normal conditions for their functioning and weakening the effect of constraining factors of development. regulation should be carried baltic journal of economic studies 166 vol. 8 no. 5, 2022 out in order to protect the rights of media industry entities. in this regard, the most difficult is the problem of determining the permissible limits of state interference in the economic freedom of publishing houses and printing enterprises producing media products due to the sometimes too broad interpretation of the state's interests in this area by the subjects of the relevant policy to the detriment of public and individual interests. one of the types of regulation of the media industry is state support for book publishing. the ukrainian book program is an important tool for implementing state support for book publishing. in 2005–2016, the state committee for television and radio broadcasting of ukraine (state committee for television and radio broadcasting of ukraine) was the main administrator of budget funds and the responsible executor of this budget program, and since 2017 – the ukrainian book institute, which belongs to the sphere of management of the ministry of culture and information policy of ukraine (ministry of culture and information policy of ukraine). analyzing the effectiveness of the use of the state budget funds allocated by the state committee for television and radio for the production of books under the program "ukrainian book", the accounting chamber of ukraine in its conclusion noted that the allocation of funds from the state budget for the production of books and their use was often carried out subjectively (decision of the accounting chamber). it should be noted that after 2017, the situation regarding proper calculations and justifications of the need, the regulatory definition of the relevant criteria for allocation and expenditure of funds, if anything, has changed for the better, but not significantly. despite the fact that funding for the ukrainian book program in 2022 is not provided (activity report of the ukrainian book institute for six months of the war), the problem of reasonable use of budget funds remains relevant. ukraine has conducted studies of the state support of business entities at various levels of detail. for example, they were studied quite thoroughly within the framework of the eu project "harmonization of the public procurement system in ukraine with eu standards". the conclusions of the work were published in the "report on the results of the study of state support of business entities in ukraine" (hölzler, and oth., 2015). o.v. afonin and m.i. senchenko, g.i. glotova and yu.o. barnych, a.m. ivashina, k.i. indutna dealt with issues of state support for publishing. ya.v. kotlyarevskyi et al., a.l. murakhovskyi. paying tribute to the achievements of these scientists, it should be noted that not enough attention is paid to the development of a methodology for using funds to support publishing. the purpose of the study is the need to improve approaches to the regulation of publishing in terms of determining the criteria for selecting publications published at the expense of the state budget. 2. presentation of the main material one of the main claims based on the results of audits of the effectiveness of the use of state budget funds, which were put forward by the accounting chamber (decision of the accounting chamber) and the state audit service of ukraine (report on the results of the work of the state financial inspection bodies in 2012) to the implementation of the "ukrainian book" program, was the need to improve the selection criteria for publications included in the program and financed from the budget. therefore, in order to conduct further analysis and to be able to make proposals for improving the procedure of rational use of funds, it is necessary to determine what are the selection criteria in our case. a publication selection criterion is a certain property or characteristic of a book publication established to assess the overall suitability of the publication for the program. since the evaluation and selection of publications is carried out by an expert council, the requirements for such criteria should be considered in more detail. the type of these criteria depends on the class of systems being evaluated. if to try to summarize the requirements for the system of criteria for expert evaluations, the set of criteria should be complete, cover all the main aspects, tasks, the addition of new criteria should not affect the results of the selection of options. in addition: the meaning of each criterion should be clear and unambiguous for the decision maker and the expert evaluating the options; the system of criteria should be indepen dent, i.e., the score assigned to each option by this criterion should remain unchanged when evaluating this option by another criterion; criteria should be critical to the parameters, with relatively small changes in the parameter, the criterion reflecting it should change significantly; criteria should have a physical content and be quantified, all dimensional criteria should be reduced to dimensionless indicators. according to the above, the authors have formed the following list of criteria (table 1). the next step is to determine the scale of evaluation of the publication. in this case, an expert is a person included in the expert council for the formation of the draft list of publications, who, due to his knowledge and experience, is competent enough to evaluate and select books for inclusion in the draft baltic journal of economic studies 167 vol. 8 no. 5, 2022 list of publications in accordance with the established selection criteria. accordingly, expert evaluation is a method of evaluation by experts of book publications declared by the subject of publishing in accordance with the established criteria for selecting book products using points. the process of expert assessments makes it possible to quantitatively compare the claimed publications, increase the efficiency of decision making and reduce the risk of this process. rational use of information received from experts is possible if it is transformed into a form convenient for further analysis aimed at preparing and making decisions. depending on the peculiarities of the expert survey, the object of research and the method used to process expert data, expert assessments may have different measurement scales (melnikov, senkivskyi, shtangret, ratushnyak, 2017). for the purposes of this study, the ordinal scale is the most acceptable. the results of expert evaluation are usually expressed in points. the point ordinal scale is necessary for assigning quantitative characteristics to the evaluated objects, which is a measure of the severity of a certain characteristic. the number of scale gradations is determined by the possibility of qualitative characterization of quantitative gradations. to ensure the possibility of distinguishing the gradations of the evaluation scale of any characteristic, it is necessary to provide experts with a description, which indicates the characteristic features of the gradation, which make it possible to clearly distinguish the gradation from those bordering it and those characterizing the degree of severity of the characteristic being evaluated. the set of qualitative descriptions of the scale must meet the following requirements: general use – prevalence, familiarity for the expert; unambiguity – close interpretation by different experts; discriminativity – the ability to distinguish between features in all gradations; adequacy – the number of scale gradations provides the necessary accuracy of the result. for expert assessments of qualitative attributes, it is advisable to use scales with an odd number of gradations, in which, in addition to the lower and upper levels, there is an average (satisfactory). five and seven gradations are widely used for comprehensive assessment. in accordance with the above conditions, an evaluation scale was compiled based on the selection criteria for published publications (table 2). for greater clarity of the properties of the evaluated criteria (table 1) for each of the selected gradations listed in table 2, experts can be offered additional characteristics that illustrate the degree of manifestation of this criterion (table 3). how many experts are needed to evaluate and select publications? the required number of them is selected taking into account the following considerations. the size of the group should not be small, as in this case the sense of forming expert assessments determined by a group of specialists is lost. in addition, group expert assessments will be strongly influenced by the rating of each expert. table 1 list of selection criteria for publications included in the program and financed from the budget № criterion 1 the author (author team, compiler) of the publication has applied for inclusion in the program 2 relevance of the declared edition 3 social significance of the publication 4 thematic orientation of the publication 5 satisfaction of reader demand 6 the price of the edition declared for inclusion in the program 7 availability of equipment and material and technical base of the publishing entity that has applied for the publication under the program 8 availability of employees with appropriate qualifications at the publishing entity that has applied for the publication under the program source: supplemented on the basis of data: https://www.ukrstat.gov.ua/ table 2 the evaluation scale based on the selection criteria of the published publications included in the program and financed by budget funds gradation points quality assessment of the publication 5 5 highly desirable for inclusion in the program 4 4 desirable for inclusion in the program 3 3 it is difficult to determine what is desirable or undesirable for inclusion in the program 2 2 undesirable for inclusion in the program 1 1 extremely undesirable for inclusion in the program source: supplemented on the basis of data: https://www.ukrstat.gov.ua/ baltic journal of economic studies 168 vol. 8 no. 5, 2022 with the increase of the group of experts, although these shortcomings are eliminated, there is a danger of new ones. thus, in the conditions of a very large number of experts, the assessment of each of them separately almost does not affect the group assessment. however, an increase in the number of expert groups does not always entail an increase in the reliability of assessments. often, the expansion of the group of experts is possible only at the expense of insufficiently qualified specialists, which can lead to a decrease in the reliability of group assessments. at the same time, with the increase in the number of experts, the difficulties associated with the processing of assessment results are growing. the analysis of the practical activities of expert groups allows us to recommend the inclusion of 7-15 experts in the expert group. the upper limit of the number of experts depends on the time and money invested in the expertise, the number of potential experts, the possibility of involving them in the work, etc. in addition, when selecting experts, restrictions on the compatibility of the goals of experts with the goals of the expert assessment should be taken into account. that is, it is necessary to establish whether there is a tendency to biased assessment of certain events and phenomena in the work of individual experts. to do this, it is desirable to identify possible potential goals of experts that may contradict the goals of obtaining objective results. analyzing the previous activities of the experts, it is necessary to find out the reasons that lead to the desire to overestimate or underestimate the estimates in order to influence the group in the desired direction for themselves or for other people. 3. conclusions today, the system of state support for book publishing is characterized by an insufficient level of planning, monitoring and achievement of targets: for example, in 2020, the annual circulation of books in ukraine was 20.2 million, i.e., 0.48 copies table 3 the degree of manifestation of the selection criteria for publications included in the program and financed from the budget points quality assessment of the publication publication selection criteria author topicality social significance thematic orientation satisfaction of reader demand edition price availability of equipment and material and technical base availability of employees with appropriate qualifications 5 highly desirable for inclusion in the program widely known extremely relevant domestic and foreign readers the content fully corresponds to the program badly substantiated and confirmed are sufficient are sufficient 4 desirable for inclusion in the program known probably relevant every reader of the state the content corresponds to the program unsatisfactorily justified own resources own resources 3 it is difficult to determine what is desirable and what is undesirable for inclusion in the program popular currently relevant a reader of a certain profession the content does not fully correspond satisfactorily calculated, but unfounded within the usual possibilities within the usual possibilities 2 not desirable for inclusion in the program known to the target audience less relevant reader of a particular region the name corresponds to the program fine calculations are incomplete do not fully satisfy the needs of the people do not fully meet the needs 1 extremely undesirable for inclusion in the program beginner no longer relevant reader of part of a separate region cannot be included in the program fully the calculations were made carelessly insufficient insufficient source: developed by the authors baltic journal of economic studies 169 vol. 8 no. 5, 2022 of books and brochures per capita, while in the eu countries, 6 to 8 books are published per capita per year (murakhovsky, 2008; horobets, 2019; buryak, 2021). the publication of books under the ukrainian book program is one of the forms of state support for publishing, along with the provision of tax benefits to publishers and book distributors. the practice shows insufficient efficiency of the use of funds allocated from the state budget, and one of the key remarks is the lack of clear criteria for the selection of publications. the developed methodological and practical principles for the implementation of the "ukrainian book" program are designed to partially solve the existing problems by establishing scientifically sound criteria for more efficient use of state budget funds and satisfaction of the reading interest of citizens. references: afonin, o. v., & senchenko, m. i. (2009). ukrainian book in the context of world book publishing. kyiv: book chamber of ukraine, 278. durnyak, b. v., shtangret, a. m., & melnikov, o. v. (2006). publishing and printing industry of ukraine: state, problems, trends. statistical and graphical review. lviv: ukrainian academy of printing, 275. melnikov, a. v., & semenyuk, e. p. (2014). the information revolution and the modern printing industry. scientific and technical information processing, 41:1, 1–11. doi: https://doi.org/10.3103/s0147688214010031 decision of the accounting chamber "on the results of the audit of the effectiveness of the use of state budget funds allocated to the state television and radio broadcasting committee of ukraine for the production of books under the "ukrainian book" program dated 07.12.2016 no. 14-1. available at: http://www.ac-rada.gov.ua/ doccatalog/document/16749474/r_rp_14-1.pdf ?subportal=main activity report of the ukrainian book institute for six months of the war. february 24 – august 24 2022. available at: https://book-institute.org.ua/uk/news/kategoriya-2/zvit-diyalnosti-uik-za-piv-roku-viyni hölzler h., and oth. (2015). study on state support to enterprises in ukraine. kyiv: crown agents. 197. (harmonization of public procurement system in ukraine with eu standards). available at: http://eupublicprocurement.org.ua/wp-content/uploads/2015/04/state-support-study_eng_20.04.2015.pdf glotova, g. i., & barnich, yu. o. (2007). state organizational and economic regulatory directions of development of the market of publishing products. printing technology and technique, 1–2, 131–140. ivashina, a. (2015). not only poland: book institutions in countries with a successful publishing business. available at: http://www.chytomo.com/news/ne-polshheyu-yedinoyu-knizhkovi-instituciii-v-kraiinax-zuspishnim-vidavnichim-biznesom indutna, k. (2010). directions of state support for book publishing in ukraine. ukraine economy, 2, 24–33. kotlyarevskyi, ya. v., melnikov, o. v., yermolychev, r . v., derevyankin, v. v., & shtangret, a. m. (2017). the development of publishing activity in the context of improving the regulation of competition policy and state aid. scientific works of ndfi, 4 (81), 104–127. doi: https://doi.org/10.33763/npndfi2017.04.104 murakhovsky, a. l. (2015). state regulation in the field of publishing. bulletin of the book chamber, 2, 3–8. report on the results of the work of the state financial inspection bodies in 2012. available at: htt p://w w w.d krs.gov.ua/kr u/uk/publi sh/ar ticle/95755; jsessionid=0e3c483387dfc3b69fbb4309 d2a16753.app8:2 melnikov, o. v., senkivskyi, v. m., shtangret, a. m., & ratushnyak, yu. v. (2017). state support of publishing: experience, problems, prospects. kyiv: center of educational literature, 130. murakhovsky, a. (2008). the state supports the development of the book publishing industry in every possible way. available at: http://comin.kmu.gov.ua/control/uk/publish/printable_article?art_id=65823 horobets, o. o. (2019). a statistical analysis of the book publishing industry in ukraine: 1917–2017. statistics of ukraine, 85 (2), 4–11. doi: https://doi.org/10.31767/su.2(85)2019.02.01 buryak, s. (2021). book publishing activity of modern ukraine. state, trends and prospects of development. bulletin of the book chamber, 1, 10–21. doi: https://doi.org/10.36273/2076-9555.2021.1(294).10-21 received on: 10th of october, 2022 accepted on: 27th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 109 vol. 3, no. 1, 2017 corresponding author: 1 department of management, sumy state university. e-mail: annshev@ukr.net regulatory policy and optimization of investment resource allocation in the model of functioning of recreation industry* hanna shevchenko1 sumy state university, ukraine abstract. the research objective is the rationale of the theoretical and methodical approach concerning the improvement of regulatory policy as well as the process of distribution of financial investments using the model of the functioning of a recreational sector of the national economy. the methodology of the study includes the use of optimal control theory for the model formation of the functioning of the recreational industry as well as determining the behaviour of regulatory authorities and capabilities to optimize the allocation of investment resources in the recreational sector of the national economy. results. the issue of equilibration of regulatory policy in the recreational sector of the national economy is actualized, including the question of targeted distribution of state and external financial investments. also, it is proved that regulatory policy should establish the frameworks that on the one hand, do not allow public authorities to exercise extra influence on the economy of recreation, on the other hand, to keep the behaviour of the recreational business entities within the limits of normal socio-economic activity  – on the basis of analysis of the continuum “recreation – work” by means of modified brennan-buchanan model. it is revealed that even with the condition of the tax reduction, the situation when the population resting less and works more than in the background of a developed economy is observed. however, according to the optimistic forecast, eventually on condition when the economy is emerging from the shade, we will obtain an official mode of the work in which, while maintaining taxes on proposed more advantageous for the population level, ultimately the ratio leisure and work will be established which is corresponding to the principles of sustainable development. practical value. on the basis of methodical principles of the theory of optimal control, the model of the functioning of the recreational industry under the conditions of transitivity of the national economy is developed, particularly includes a component of the management of investment resources. as a part of the proposed model, the peculiarities of the functioning of the recreational sector as a combination of recreational enterprises are explored as well as the factors of a behaviour of relevant regulatory authorities are analysed that can be used in the practical activities of recreational business entities. originality. the paper developed a fundamentally new approach to the analysis of the functioning and management of enterprises in the recreational sector on the basis of economic-mathematical modelling using elements of the optimal control theory. the methodological approach to the rationale of the regulatory policy’s role in establishing optimal points on the continuum “recreation – work” is also improved. key words: recreational industry, economic regulatory policy, allocation, investment, model, optimal control theory, ukraine. jel classification: d72, h76, l83, r53 * the paper was written within the scientific-research theme “modeling conflict in the economy” (№ 0115u001073) 1. introduction the recreational sector of the national economy in ukraine in conditions of uncertainty and incompleteness of the final stage of formation of the market of recreational services, and the overall impact of socio-political crisis, requires a revision of the state policy towards the industry, particularly in the form of regulative influence, including those regarding the allocation of very limited investment resources. particularly actual are the issues of equilibrating the regulatory policy, including the definition of proportions of the state intervention and non-interference in the affairs of the recreational sphere. at the same time, undeniable is a question about the central role of regulatory authorities in determining the directions and objects for the financial investment of the industry, in socially and ecologically oriented directions of sustainable development of the national economy. baltic journal of economic studies 110 vol. 3, no. 1, 2017 to the question of recreational activity in its socioeconomic aspects devoted are the works of scientists of the institute for market problems and economicand-ecological research under the direction of b.  v.  burkynskyi, council for ukraine’s productive forces studies under the direction of s. i. dorohuntsov, b.  m.  danylyshyn, m.  a.  khvesyk, institute of regional research named after m. i. dolishniy, v. s. kravtsiv and so on.  investments in interrelated spheres of recreation, tourism, sports and resort treatment, including their ecological context, are analysed in the works of a. hadzik, m. grabara (2014), l. j. sonter, k. b. watson, s.  a.  wood, and t. h.  ricketts (2016) et al. regulatory policy issues are explored in the works of i. v. kolupaev (2013), v.  i.  liashenko (2014) and many others.  new political economy approaches aimed at forming the rules of the game of economic agents are outlined in the works of a. breton (1974), g. brennan, j. m. buchanan (1980), d. c. mueller (2002), r. m. nureev (2005); aimed at the application of the theory of optimal control in studying the features of the social and economic processes  – in the works of r.  bellman (1961), n.  n.  moses (2003), s.  izmalkov, k.  sonin, and m.  yudkevych (2008) and others. at the same time, questions of modelling the functioning of the recreational industry as well as the behaviour of regulatory authorities concerning the activity of recreational business entities need to be further explored. thus, the research objective is a justification of the theoretical and methodical approach concerning the improvement of regulatory policy as well as the process of distribution of financial investments using the model of the functioning of the recreational sector of the national economy. the methodology of the study includes the use of optimal control theory for the model formation of the functioning of the recreational industry as well as determining the behaviour of regulatory authorities and capabilities to optimize the allocation of investment resources in the recreational sector of the national economy. the logic of presentation of research materials as follows: 1) the rationale for an equilibrated approach to regulatory policy in the scope of recreational socioeconomic relations; 2) the construction of the model of dynamic of recreational industry in three stages: the functioning of the sector; the determination of behaviour of regulatory authorities; the optimization of investment allocation by the enterprises of the recreational sphere. 2. regulatory policy of the state in the recreational sector economic regulation or government regulation of the economy (primarily fiscal, currency and tax regulation) is caused by the following factors: – the availability of objective contradictions between public and private forms of ownership and, accordingly, the nature of production and provision of services; – the availability of public goods, including recreation, and, therefore, the potential of conflict relations for limited resources, by which these benefits are satisfied; – the inability of the market independently resolve internal problems, generally because of monopolistic tendencies and due to complications of the economic processes with the social and ecological components; – the necessity to create the prerequisites for a compliance of technical-scientific progress and international competition, etc. under the law of ukraine “on principles of regulatory policy in economic activity” (zakon, 2004), state regulatory policy in the area of economic activity shall be the direction of state policy aimed at improving legal regulation of commercial relations, as well as administrative relations between regulatory bodies or other state bodies and business entities. the regulatory activity in its turn is seen as an activity aimed at preparing, adopting, monitoring of efficiency and revision of regulatory acts in accordance with the principles of the state regulatory policy (appropriateness, adequacy, effectiveness, balance, predictability, transparency and consideration of public opinion). in the work (kolupayeva, 2013), the opinions on the concept and essence of the regulatory policy are generalized, which is examined from the state, legal and economic views. state regulatory policy is defined as “the direction of state policy that envisages the synthesis of legal and economic regulation ... administrative and economic relations between regulatory authorities and other bodies of power and business entities.” it is noted that it is unacceptable to adopt economically inexpedient and inefficient regulatory acts; the main instrument of regulatory policy is tax leverage aimed at stimulating legitimate economic activity. the known researcher of regulatory processes v. i. lyashenko (pershyy, 2014: 526) considers a part of the state regulatory policy in small business, in our opinion, the following most complete list of constituents (which certainly are all relevant and on an industry basis, e.g. regarding the recreational entrepreneurship), namely: – the creation and liquidation of entrepreneurial structures; – the system of permits on the conduct of certain type of entrepreneurial activities, as well as rules and procedures that govern it; – the rules and procedures of market entry and exit from it of business entities, its clotting in case of none profitability or inexpediency; – the mechanisms of regulating the pricing; – the regulation of employment and use of manpower; – the modes of taxation of entrepreneurial activity and the mechanisms of control over the payment taxes to the budget; – the rules on the volumes and procedures for the provision of mandatory statistical, accounting and tax reporting; baltic journal of economic studies 111 vol. 3, no. 1, 2017 – the control on safety and quality of products and services; – the modes of attraction of loans and investment; – the modes and mechanisms for stimulating the innovation activity and others. generally, the regulatory policy should focus not so much on creation of maximally favourable conditions for economic entities but to establish the equilibrium framework that on the one hand, do not allow public authorities to exercise an extra impact on the economy, on the other hand, hold the behaviour of economic players within the limits of normal socio-economic activity as a prerequisite for long-term development of the national economy. for the detailed explanation of this approach, we will conduct analyses of continuum “recreation  – work” by using a modified model of brennan-buchanan (breton, 1974; brennan, 1980; mcnutt, 2002: 146– 148; mueller, 2002: 380–383; nureev, 2005: 369– 371), fig. 1. as of 2017, the “salary” tax in ukraine is 2 times higher than in european countries; by rating of paying taxes ukraine occupies the 83 place in the world (zheltukhin, 2016). therefore, there is no doubt that the issue of taxation is certainly currently most actual in the context of regulatory policy in our country that directly intersects with the content of the model stated above. е1 е0 е2 е а е0 ’ е1 ’ е2 ’’ а’ а’’ е а а’ c’ 0 b recreation work income g c ll’’ ll’ ll’’’ b’ d t d’ h0 h2 u1 u1 ’’ u2 u3 u1 ’ (corrected) recreation’ е0 ’ е0 е2 е1 е1 ’ е2 ’’ h1 work’ income – consumption price – consumption time (income – consumption)’ (price – consumption)’ work recreation brennan–buchanan model: bh0 + oh0 ⇒ bh2 + oh2 correction considering factors transitiveness: b’h0 ’ + o ’h0 ’ ⇒ b’h2 ’’ + o ’h2 ’’ 0’ h1 ’ h2 ’’ h0 ’ fig. 1. rationale for balanced approach to regulatory policy in the plane of recreational socio-economic relations source: developed by the author on the basis on brennan-buchanan model, 1980 baltic journal of economic studies 112 vol. 3, no. 1, 2017 hence, the representatives of the economic theory of public choice g. brennan and j. m. buchanan (1980) suggested that the public may limit the actions of the government-monopolist by lowering the tax base. for a basis, they took the idea of a. breton (1974) that the government is completely controlled by legislation and at the same time is a monopolist in the production of public goods. in their model, the scientists accentuate on the possibility of restricting the actions of government officials by using the tax laws i.e. the limitation of incomes received by the state. as of the beginning of 2017, as well throughout the years of independence of our state, the question of taxes reduction for the ukrainians rises. reasonably, the theoretical question arises of how low these taxes can be in general, not being attached to a specific country and how it can affect the correlation of such benefits as work and leisure. according to (nureev, 2005: 369– 370), assuming that the marginal taxes have a linear character, and then ideal prerequisites for taxation are the following factors: – the “work” and “leisure” is the normal benefits that are mutually substituted; – the population maximizes the utility within budgetary limitations, if it is relevant, comparing time on labour and time for rest; – the public expenditures are the transfers that are directed in favour of the taxpayers; – the balanced budget exists, in which the taxes are allocated between the public authorities (“bureaucrats”, i.e. the public servants) and the recipients of transfer payments. first, consider the how the model works according to given factors. by abscissa axis, let’s defer the total time of an individual, including the time on labour and time for rest. (note that overall tendencies and results obtained based on the model in fig. 1, can be transferred to macrolevel through their prior aggregation, taking into account an individual unified, that is a unit of population). by ordinate axis, let's defer the income of the individual. then ab is a budgetary limitation, the point e0 on the line ab is the status quo of an individual in terms of the time distribution on working time (bh0) and leisure time (oh0). the line cd (cd // ab) reflects the perfect tax. eb is a budget line of a higher marginal tax ((ae / ao) > (ac / ao)). then points e0 and e2 are optimal for the population (in the case of marginal tax – e0 and e3 respectively). the population chooses the perfect tax with less distorted tax base because of indifference curves are u2 > u3. recall that the model of g. brennan and j. m.  buchanan in the context of the analysis the dynamics of correlation “working time  – leisure time” demonstrates not so much taxation as a financial tool and process, but as part of a regulatory policy that reflects the conflictual relationship of taxpayers and public bodies that distribute these taxes are not always properly from the standpoint of population. thus, according to this thesis, the regulatory body in order to maximize the budget will raise the tax to ag, as soon as the population will be ready to reduce the utility to u3 (respectively, the marginal tax will be installed at the level ae / ao). as a result, the optimum point (in our interpretation – a point of status quo) will shift from e0 to e2. if the regulatory body will introduce the undistorted tax simultaneously, the budget line eb will shift in position ll’, and the optimal point from e2 to e1 respectively. distance e0e1 corresponds to the effect of substitution and e0e2  – to the effect of income. since the e0e1 > e0e2 (the curve “price  – consumption” will pass through the projection of points e0 and e2, and the curve “income – consumption” – through the points e0 та e1) then working hours will be reduced from bh0 to bh2 (e0e1  – e0e2 = h0h2). that is, at higher taxes the population will reduce their working hours on the value e1e2, which eventually will cause a decline in tax payments. now proceed to provisions which, in our opinion, require to make certain changes to the specified model in order to obtain additional results of analysis of correlation “work  – rest” taking into account the national socio-economic specifics, namely: – if to consider the situation depicted in accordance with the description above to fig. 1, in the context of the current state of recreational relations in ukraine as a state with transitive economy and high level of shadowing of socio-economic processes, then it not displayed the proportion of time that is not fixed in a direct relationship with the official incomes of the population; – similarly, the level of income taxation of the population that at present is topical in ukraine, in theory, can be changed in the direction desirable for the population, that it is likely to facilitate the process of taxation, not its complication as it has shown in fig. 1. thus, according to these two provisions, let's display the following amendments in fig. 1: – ab is displaced in a’b’, because the parts of the income of the population are not official and therefore the time spent to work is not officially counted. accordingly, ll’ is shifted to ll’’. we obtain new optimization points that lie on the indifference curve u1’: e0’ and e1’; – at the same time, we reduce tax loading: cd s shifted to the right to c’d’. we obtain e2’’ – the point of intersection the indifference curve u1’’ and the budget line ll’’’. projecting the points e0’, e2’’, e1’ on the time axis, we get a situation in which the substitution effect exceeds the income effect (e0’e1’ > e0’e2’’), as in the original model formulation (e0e1 > e0e2). however, even with the condition of tax reduction (cd ⇒ c’d’), we observe a situation where the baltic journal of economic studies 113 vol. 3, no. 1, 2017 population is resting less than in the background of developed economy: o’h2’’ < oh2, but employs over: h2’’b’ > h2b; despite the fact that officially works less by the amount bb’, from which taxes are not paid. however, according to the optimistic forecast, eventually on condition when the economy is emerging from the shade (in general terms, a switch from the transitive to developed status) we will obtain official mode of the work in which, while maintaining taxes on proposed more advantageous for the population level, ultimately the ratio leisure and work will be established, which is corresponding to the principles of sustainable development and the conditions of a healthy lifestyle. 3. the model of functioning of the recreational sector of the national economy the investment in the recreational sector in ukraine as of 2015 is virtually absent in absolute terms and in relative terms  – compared to the industries of production sector (table 1). table 1 the percentage of investment to the recreation in ukraine in the structure of economic activity at the end of 2015* type of economic activity the volume of foreign direct investment (equity), million usd the structure of investment, % total 43371,4 100,0 agriculture, forestry and fishing 500,6 1,2 industry 13280,1 30,6 education 10,7 0,0 healthcare and social assistance provision 46,2 0,1 arts, sports, entertainment and recreation 117,4 0,3 other types (transport, trade, finance etc.) 29416,4 67,8 *compiled based on the (ukrayna, 2005: 186) one of the major factors that explain the low activity of investors and the lack of wide national program of investment in recreation is the imperfection of mechanism for the distribution of investment resources, which, in turn, is linked to the stochasticity of transformational process in the recreational sector and disequilibration of the behaviour of relevant regulatory bodies of the state. the model of the recreational sector dynamics in general form (based on the recommendations in the works of moiseev, 2003: 248–253; bellman, 1961; izmalkov, 2008) can be represented by following way, namely, in three stages: the functioning of the recreational sector, behaviour of regulatory authorities regarding recreational business entities, allocation of investment recreational resources. the functioning of the sector. consider the recreational industry in certain territorial limits (across the country, some regions, one region separately given area, etc.) as a socio-economic system, which includes n of recreational enterprises, dynamic state of each of them (stability, sustainable development, survival, etc.) is denoted by the vector ri. construct the system of differential equations: ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (1) where і = 1,…,n; vi(t)  – state and/or external financial investments of i-th recreational enterprise the direction of which is carried out by a coordination of contest of projects for the development of recreation, million uah; (vi,…,vn) ∈ gv – the volume of financial investments limited at the time of the contest by the magnitude gv, million uah; ui  – the vector of management of the recreational enterprise (a set of managerial organizational-economic, administrative and socio-psychological instruments), ui ∈ ruі, where ruі  – the managerial potential of і-th recreational enterprise (the ability to conduct an effective management, using human and social potentials of human resources and making possible impact to external constraints); mi(ui) – the incentives that motivate і-th recreational enterprise to a socially and ecologically equilibrated activity (such as privileged taxation, interest-free lending, etc.), {mi(ui),…,mn(un)} ∈ gm, where gm – the state budget constraints that may be aimed at stimulating the equilibrated recreation; ξi(t) – some random function of time that is explained firstly, by the impact of a human factor on the course of any socio-economic processes, especially such as recreation, where the social component has a high significance. secondly, by multilevel of recreational processes realization and managing them, as well as the relevant information asymmetry. third, by instability and availability of crisis phenomena in the development of macroeconomics, politics, international relations, etc. that may have at least an indirect and sometimes direct impact on the functioning of the recreational sector of the national economy. the levels of awareness of the state and enterprises of the recreational sector concerning values ξi(t) are different, hence ξi ∈ ri, where ri – amount of information on strengths and weaknesses, opportunities and threats of its activities, which has і-th recreational enterprise; ξi ∈ gi, where gi – the total scope of all recreation relevant information held by the relevant public authority. it is clear that ri ≠ gi. given the above, an entity of the recreational business will manage its activities in this way, including the baltic journal of economic studies 114 vol. 3, no. 1, 2017 responding to the impact from the side of the state in order to maximize the functional: ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (2) equation (2) is the problem of optimal control. herewith operation fi over ξi can be approximated operation of mathematical expectation or operation of minimization, i.e.: ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (3) the behaviour of regulators. the regulatory authorities, on the basis of the foregoing constraints, have the following possibilities to influence on some recreational enterprises and industry in general: – to distribute the investments vi within their total volume gv; – to form a motivational mechanism and some motivational instruments that are displayed in the character of functions mi(ui); – to determine the structure and strength of impacts on management opportunities on actors of the recreational business ruі. accordingly, the objective function of regulatory authorities regarding the functioning of the recreational sector can be written as follows: ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (4) provided a transparent regulatory policy the values ri and ui will be some operators from vi (t), mi and ξi, i.e. ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (5) in the equation (5), as in previous equations (1–4) the random factor ξi, is present because recreation as a socioeconomic process cannot be fully managed, especially in transitivity conditions that are strengthened by the scale crisis situations in almost all aspects of society life. an approximation of the stochastic factor to determined factor is required: the rule of formalization the parameter ξi. should be regulated in a certain way. thus, according to the principle of foresight prediction (denoted as q), we can assume the possibility of optimization of the state regulation and better coordination of joint action of the state and of the recreational business, for example, in the form of public-private partnerships and so on. accordingly, a certain possibility arises to mathematically formalized stochastic factor in the equation presented above, for example, through the operation of mathematical expectation or the operation of minimization (similar to the equation 3). then the functional (5) can be written as follows: ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (6) the allocation of investment recreational resources. subject to the relative elimination of the randomness factor in decision-making by regulators (in terms of collegial discussion and general conduct of public tenders) regarding the distribution of financial investment resources among the enterprises of the recreational sector that are planning to implement their socially oriented and cost-effective projects simultaneously, – the objective function of operation of the recreational sector (according to the concept of sustainable development in ukraine) is reduced to the determination of vector and the implementation of effective management of ui (t) and, therefore, appears in the form of the first equation (second equation is a limitation of the objective function) in the following system: ),),(,,( iiiiiii umuvfr ξ= ∫ ∂= it iiiiiiii ttumvurfj 0 .),),(,,,( ξ ).,),(,,,(min tumvurff iiiiiiri ii ξ ξ  ∈ = ∫ ∂= t nnnnnin ttumumvvuurrfj 0 11111 .),,...,),(),...,(,,...,,,...,,,...,( ξξ .t)t,,...,,m,...,m,v,...,v(fj t nnn ** ∫ ∂= 0 111 ξξ .),,...,,,...,,,...,(min 0 111 ** ∫ ∂= ∈ t nnnq ttmmvvfj i ξξ ξ         ∈= ∂= ∫ . ),,,,( ),,,( 0 i i uisiiii t iiiii rutuvrfr ttvurfj (7) 4. conclusions so, as a result of conducted research, the following conclusions can be made. firstly, the issue of equilibration of regulatory policy in the recreational sector of the national economy is actualized, including the question of targeted distribution of state and external financial investments. secondly, it is proved that regulatory policy should establish the frameworks that on the one hand, do not allow public authorities to exercise extra influence on the economy of recreation, on the other hand, to keep the behaviour of the recreational business entities within the limits of normal socio-economic activity – on the basis of analysis of the continuum “recreation  – work” by means of modified brennan-buchanan model. it is revealed that even with the condition of the tax reduction, the situation when the population rests less and works more than in the background of the developed economy is observed. however, according to the optimistic forecast, eventually on condition when the economy is emerging from the shade, we will obtain official mode of the work in which, while maintaining taxes on proposed more advantageous for the population level, ultimately the ratio leisure and work will be established, which is corresponding to the principles of sustainable development. thirdly, on the basis of methodical principles of the theory of optimal control, the model of the functioning of the recreational industry under the conditions of transitivity of the national economy is developed, particularly includes a component of the management of investment resources. as a part of the proposed model, the peculiarities of the functioning of the recreational sector as a combination of recreational enterprises are explored as well as the factors of behaviour of relevant regulatory authorities are analysed. further developments will be devoted to issues of the implementation of competition policy as well as state investment policy in the recreational sector of the national economy. baltic journal of economic studies 115 vol. 3, no. 1, 2017 references: bellman, r . (1961). adaptive control processes: a guided tour. princeton: princeton university press, 255 p. brennan, g., buchanan, j. m. (1980). the power to tax. cambridge: cambridge university press, 254 p. breton, a. (1974). the economic theory of representative government. london: macmillan press, 228 p. hadzik, a., grabara, m. (2014). investments in recreational and sports infrastructure as a basis for the development of sports tourism on the example of spa municipalities. polish journal of sport and tourism, vol. 21, no. 2, pp. 97–101, doi:10.2478/pjst-2014-0010. izmalkov, s., sonin, k., yudkevich, m. (2008). teoriya ekonomicheskikh mekhanizmov. voprosy ekonomiki, no. 1, pp. 4–26. kolupayeva, i. v. (2013). derzhavna rehulyatorna polityka: sutnist ta pryntsypy formuvannya. problemy ekonomiky, no. 4, pp. 99–107. mcnutt, p. a. (2002). the economics of public choice. 2nd ed. cheltenham: edward elgar, 337 p. mueller, d. c. (2003). public choice iii. cambridge: cambridge university press, 768 p. moiseev, n. n. (2003). izbrannye trudy v 2 tomakh. gidrodinamika i mekhanika. optimizatsiya, issledovanie operatsiy i teoriya upravleniya. moskva: tydex co, vol. 1, 376 p. nureev, r . m. (2005). teoriya obshchestvennogo vybora. moskva: izd. dom gu vshe, 531 p. pershyy etap modernizatsiy ekonomiky ukrayny: dosvid ta problemy (2014); red. v. i. lyashenko. zaporizhzhya: kpu, 798 p. sonter, l. j., watson, k. b., wood, s. a., ricketts, t. h. (2016). spatial and temporal dynamics and value of naturebased recreation, estimated via social media. plos one, no. 11(9). retrived from: https://www.ncbi.nlm.nih.gov/ pmc/articles/pmc5017630/, doi:10.1371/journal.pone.0162372. ukrayna u tsyfrakh 2015: stat. zb.; red. i. m. zhuk (2016). kyyv: derzhavna sluzhba statystyky ukrayny, 239 p. zakon ukrayny ‘pro zasady derzhavnoy rehulyatornoy polityky u sferi hospodarskoy diyalnosti’ (2004). vidomosti vru, no. 9, art. 79. zheltukhin, ye. (2016). “zarplatnyy” podatok v ukrayni u 2 razy vyshchyy nizh v yevropeyskykh kraynakh,  – eksperty. yurydychna gazeta online. retrived from: http://yur-gazeta.com/golovna/zarplatniy-podatok-vukrayini-u-2-razi-vishchiy-nizh-v-evropeyskih-krayinah--eksperti.html. анна шевченко регуляторная политика и оптимизация распределения инвестиционных ресурсов в модели функционирования рекреационной отрасли аннотация. целью исследования является обоснование теоретико-методического подхода к усовершенствованию регуляторной политики, а также процесса распределения финансовых инвестиций с помощью модели функционирования рекреационной отрасли национальной экономики. методология исследования включает применение теории оптимального управления для формирования модели функционирования рекреационной отрасли, а также определения поведения регуляторных органов и возможностей оптимизации распределения инвестиционных ресурсов в рекреационном секторе национальной экономики. результаты. актуализирован вопрос уравновешенности регуляторной политики в рекреационной отрасли национального хозяйства, в том числе и в отношении целевого распределения государственных и внешних финансовых инвестиций. также доказано, что регуляторная политика должна устанавливать рамки, которые, с одной стороны, не позволяют государственным органам осуществлять излишнее влияние на экономику рекреации, а с другой стороны, удерживают поведение субъектов рекреационного бизнеса в пределах нормальной социально-экономической деятельности  – на основе анализа континуума “рекреация  – труд” с помощью модифицированной модели бреннана–бьюкенена. выявлено, что даже при снижении налогов наблюдается ситуация, когда население отдыхает меньше, а работает больше, чем в условиях развитой экономики. однако согласно оптимистическому прогнозу, со временем при условии выхода экономики из тени можно получить официальный режим работы, в котором при сохранении налогов на предложенном более выгодном для населения уровне наконец-то установится соотношение отдыха и труда, отвечающее принципам устойчивого развития общества. практическое значение. на основе применения методических положений теории оптимального управления разработана модель функционирования рекреационной отрасли в условиях транзитивности национальной экономики, которая, в частности, включает компоненту управления инвестиционными ресурсами. в рамках предложенной модели исследованы особенности функционирования рекреационной отрасли как совокупности рекреационных предприятий, а также проанализированы факторы поведения соответствующих регуляторных органов, что может быть использовано в практической деятельности субъектов рекреационного бизнеса. оригинальность. в работе разработан принципиально новый подход к анализу функционирования и управления предприятиями рекреационной отрасли на основе экономико-математического моделирования с использованием элементов теории оптимального управления. также усовершенствован методологический подход к обоснованию роли регуляторной политики в установлении оптимальных точек на континууме “отдых – рабочее время”. baltic journal of economic studies 134 vol. 7 no. 3, 2021 corresponding author: 1 stepan demianchuk international university of economics and humanities, ukraine. e-mail: kniazevich.a@gmail.com orcid: https://orcid.org/0000-0002-5394-5599 2 lviv polytechnic national university, ukraine. e-mail: volodymyr.y.olikhovskyi@lpnu.ua orcid: https://orcid.org/0000-0002-4651-3835 3 lviv institute of the private joint stock company “higher education institution “the interregional academy of personnel management”, ukraine. e-mail: olih.marta@gmail.com orcid: https://orcid.org/0000-0002-2699-7684 doi: https://doi.org/10.30525/2256-0742/2021-7-3-134-139 clustering of the economy as a means of developing an innovation infrastructure anna kniazevych1, volodymyr olikhovskyi2, marta olikhovska3 abstract. the experience of the functioning of national innovation systems in the developed countries indicates that the development of an innovative model of the national economy is impossible without the formation of an active innovation infrastructure. the article deals with the problems of formation and development of the innovation infrastructure of the country in difficult social and economic conditions based on clustering of the economy. the purpose of the research is to analyze the role and impact of clusters on self-organization and selfdevelopment of the country’s innovation infrastructure in the conditions of limited financial resources. the research investigates the tendencies of the spread of regional clustering and its influence on the creation of a network of infrastructure companies, which, on a commercial basis, offer and distribute services. clustering of regions is accompanied by the spread of the impact of a growing number of clusters (innovation structures of the network type) on the national economy and its innovation infrastructure. a certain infrastructural environment develops around the hub and the core of the cluster. it includes a number of companies specializing in innovative services, which can offer their services on a commercial basis not only to companies in this cluster, but also to all nearby innovative enterprises. the spread of clustering in all regions can serve as a basis for further self-organization and self-development of subsidiary companies under the influence of market mechanisms of management and growth of the innovation infrastructure of clusters into a basic platform of the innovation infrastructure of the country. activation of entrepreneurship in clusters is carried out through the concentration of business activity and intersectoral cooperation. vertical cluster associations are formed based on the synergy of enterprises, institutions, organizations, and individuals that are heterogeneous in the field of activity and form of ownership. the state, creating a favorable innovation environment, regulates the boundary conditions for innovation infrastructure subjects and clusters, which independently self-organize themselves under the influence of market mechanisms and expand their services to all regions, forming a holistic innovation infrastructure of the country. key words: innovation infrastructure, clustering of the economy, cluster, hub, network structures, self-organization, synergistic effect. jel classification: о10, o31, o32 1. introduction since the second half of the twentieth century, the priority direction of the world economy development has been the widespread introduction of innovations in all spheres of production and economic activity. the activity of the country’s innovation system for the introduction of the latest scientific and technical developments in the production and service spheres is the main factor in increasing the competitiveness of its products on the world market. the formation of the innovation system involves a set of special tools and appropriate means, which include legal regulations and a respective infrastructure for innovation activity. clustering is one of the most effective forms of organizing innovation processes. support and development of clustering of the economy contributes to the emergence of a synergistic effect, which is necessary for the restoration, self-organization and baltic journal of economic studies 135 vol. 7, no. 3, 2021 further development of the country’s innovation infrastructure. the study of the relationship between clustering of the country and the problems of development of its innovation infrastructure, the analysis of the cluster mechanisms in the national innovation system are reflected in the works of such economists as z. adamanova (adamanova, 2012), yu. bocharova (bocharova, 2017), yu. fedotova (fedotova, 2018), l. fedulova (fedulova, 2015), l. pankova, t. potapenko (pankova, potapenko, 2018), m. porter (porter, 1998), s. pyatinkin, t. bykova (pyatinkin, bykova, 2008), n. potapova (potapova, 2010), l. ryneiska (ryneiska, 2016), i. shvets (shvets, 2011), j. schumpeter (schumpeter, 2005), s. sokolenko (sokolenko, 2004), l. vasylchenko (vasilchenko, 2015), yu. yukhnovska (yukhnovska, 2020) and others. innovation clusters are considered as an effective mechanism that contributes to the formation of a market infrastructure environment, attracting investment and supporting the operation of small and medium businesses. however, the influence of clustering on the development of the national innovation system, as well as the mechanisms and methodology of the formation and spread of the innovation infrastructure around clusters are insufficiently studied in the scientific literature and require additional research and analysis. the purpose of the article is to study the role and impact of clustering on self-organization and selfdevelopment of the country’s innovation infrastructure. 2. the essence of clustering in the economic processes the process of clustering should be considered from the standpoint of the mechanism of diversified development of regional or national economy, given that the economic cluster itself is a high, but not the final form of economic integration. the presence of diversified clusters allows regional economic systems to maintain their advantage over other regions more prone to renewal and innovation. diversified clusters are a prerequisite for significant investment and close attention of the government and society, i.e. a cluster becomes a more important unit than a simple sum of its individual businesses. in the process of a diversified cluster development, economic resources come to it from isolated industries that cannot use them as productively as it is possible with diversified partnerships (vasilchenko, 2015). clustering is a set of organizational and economic measures carried out by state, private or public institutions in order to unite enterprises and businesses into clusters, to establish informal relationships between them and to provide network cooperation (pyatinkin, bykova, 2008). a cluster is an organizational unit of technologically interconnected industries located in one region (porter, 1998). thus, first, the core of a cluster is created; a number of service companies appear around it and form the cluster infrastructure, which offers various services to the cluster companies on a commercial basis. cluster-based economic development is carried out through the introduction of successive stages (sokolenko, 2004): 1) mobilization stage (stimulation of the interest of implementers); 2) diagnosis stage (assessment of the economy and economic infrastructure); 3) cooperation stage (persuasion in the importance of cooperation); 4) implementation stage (implementation of the initiatives of cluster working groups). the formation of clusters of innovation and research activity is mainly associated with specializing in specific areas, including the creation of new products and technologies. the effectiveness of the results of the cluster depends on the balance of research funding processes and the final costs of their development. the achievement of optimal proportions allows to form territorial zones that combine the scientific and production potential of enterprises with a certain specialization in the innovation areas (potapova, 2010). it is important to note that cluster development policy focuses on the microeconomic level. this allows to take into account local characteristics and introduction of targeted measures to accelerate the development and competitiveness of enterprises based not only on existing but also on created factors of production, among which an important place belongs to a highly skilled workforce and developed infrastructure (fedotova, 2018). a developed innovation infrastructure is a necessary part of a competitive national economy. it is an array of scientific and technical centers for developers of innovative ideas and proposals, an array of financial assets, production facilities, and an information array: 1. scientific and technical centers of innovative proposals include, primarily, universities, scientific, research, technical and design institutions, as well as developers of new ideas and innovative proposals, inventors and innovators. 2. the financial array is represented by venture capital and venture banks, which are ready to invest their assets in the production of new goods, equipment, and services. 3. the array of production facilities consists of venture firms, experimental workshops, plants and factories, which provide their production facilities and equipment, offer services for the implementation of innovative projects, production of prototypes and the beginning of industrial production of innovative products. baltic journal of economic studies 136 vol. 7, no. 3, 2021 4. the information array of the innovation infrastructure is a complex of consulting firms, patent and license bureaus, information agencies and more. a cluster model of national economy development is a conceptual approach that involves the use of clusters as system-forming elements of a modern market economy, which allows to realize the country’s competitive advantages within the international economic space (pankova, potapenko, 2018). 3. clusters: types and formation principles a classic example of a cluster is silicon valley in the usa (martines, 2018). until the middle of the last century, it was an agricultural area known for its gardens. the center that gave this area the impetus for innovative development was stanford university in palo alto, where innovative ideas and proposals in the field of semiconductors and electronics were researched and developed. the university began to offer its research to companies involved in the introduction of new technological developments in the field of electronics. these ideas were industrially implemented in 1956, when ibm corporation opened the first large computer plant in san jose. the infrastructure gradually developed in silicon valley, which to this day specializes in servicing hightech enterprises implementing projects in the field of radio electronics and rocketry. new jobs appeared, and the standard of living in the region became one of the highest in the usa. silicon valley now includes the range of cities that stretch from san francisco bay to san jose. thus, the cluster and its infrastructure is an open network formation, which is gradually spreading and is not closed within the initial framework of the regional market. european cluster policy is based primarily on the european regional charter and the cluster initiative greenbook (the cluster initiative greenbook, 2003), which identifies the importance of cluster associations and includes a number of factors necessary for their effective formation. the eu sees cluster policy as a key tool for increasing the competitiveness of industries and regions, strengthening innovation capacity and economic development in the medium and long term. the classification of clusters according to the direction of the predominant integration ties, by sectors of the economy and types of activity demonstrates the multifaceted nature of their functioning. due to this, clusters can be considered universal tools for economic development (ryneiska, 2016). there are vertical and horizontal types of clusters. vertical clusters are based on “buyer – seller” relationships. horizontal clusters include industrial enterprises that share markets for final products, use the same technologies, production processes or require the same natural resources (porter, 1998). taking into account the specifics of the industry, there are: discrete clusters (containing enterprises that produce products and related services, consist of discrete components, in particular, enterprises that develop around assembly and construction organizations); process clusters (formed by enterprises belonging to process industries, such as agriculture, food industry and others); innovation and creative clusters (developing in the fields of information technology, biotechnology, new materials, as well as in the service sectors related to business, creative and animation activities); tourism clusters (formed on the basis of tourism assets of the region and consist of enterprises of various sectors related to tourist services, such as tour operators, hotels, restaurant business, souvenir manufacturers, transport companies and others); transport and logistics clusters (contain a set of infrastructure and companies specializing in storage, escort and delivery of passengers and goods) (yukhnovska, 2020), (shvets, 2011). forming a cluster policy, state authorities of developed countries distinguish the following types of clusters: competitive (the priority is leadership in competition); strategic (economic recovery of the backward region); emerging (with a high rate of development); potential (with a high level of competence, which may ensure the recovery of the region’s economy); stabilizing (contribute to economic diversification and jobs creation) (adamanova, 2012). thus, the intensification of entrepreneurship in clusters is carried out through the concentration of business activity and inter-sectoral cooperation. vertical cluster associations are formed on the basis of synergy of enterprises, institutions, organizations, and individuals that are heterogeneous in terms of activity and form of ownership. 4. a cluster’s hub as an element of interconnection of innovation infrastructure entities defining the critical point of the enemy’s infrastructure, the nineteenth-century prussian military theorist and historian carl clausewitz (clausewitz, 1873) proposed to find a center of mass – a “hub”, a “central point” of the armed forces, economy or infrastructure of the state, the center of all resources and events. an attack on such a center of the enemy can ensure victory in a military conflict. however, it is possible to consider hubs in the economic aspect as well. for example, the creation of such a hub as a center for the production of competitive products will serve as a basis for grouping around it of the area of service organizations for infrastructure purposes and their further integration into the cluster. a cluster’s hub should be understood as a key node that ensures the connection and interaction of all subjects of the innovation infrastructure, without baltic journal of economic studies 137 vol. 7, no. 3, 2021 which a hub cannot function or its capabilities will be significantly limited. a hub can be seen as the beginning, the starting point of the future network structure – a cluster and the emergence of a new form of organization of interaction between economic entities in a particular region. the most innovatively active company, research organization or higher education institution can become a starting point, a hub, which is combined with a number of carefully selected, interconnected in the technological chain and interested in economic symbiosis business partners. among the conditions that ensure the economic development of the country in the era of markets globalization, an important role is played by the processes of the widespread use of innovations, innovative activity of enterprises, general development of the innovation infrastructure, communication with scientific and educational institutions, and constant improvement of the qualification level of personnel, their knowledge, skills and abilities. innovative activity is a characteristic feature of most existing clusters and their infrastructural environment. the innovation infrastructure, like other large network structures (for example, the internet, economic and social network structures, etc.), has a complex internal organization and under certain conditions can become self-organizing on the basis of interaction and widespread interference of the network of hubs, clusters, centers of economic development and innovative services. in the military economy, the basic element that is necessary for the self-organization of such a system is energy. it can be physical energy (a large number of people, equipment, industrial facilities, special structures, communication systems, new types of equipment and technologies) or psychological energy (willpower and strength of spirit of people, their dedication, knowledge, capabilities and abilities). the potential energy of money, financial and innovation potential of the region or country can be added to the physical energy. according to the theory of self-organizing networks, which include an innovative infrastructure, initially, the number of such development centers, hubs, and clusters may be insignificant. as the amount of physical and psychological energy increases, they can grow and expand effectively in accordance with current economic laws and legal regulations. this allows unstructured elements to form arrays of cluster groups as centers of innovation development are the subjects of innovation infrastructure and self-organizing in different regions of the country. a certain mass of commercial structures accumulates around the clusters and offers their services, necessary for the implementation of the innovative projects at different stages of this process, to not only the enterprises of this cluster, but also to other innovative enterprises that have the nearest location. that is, the innovation infrastructure of clusters is gradually growing into the innovation infrastructure of the country. therefore, a cluster is a sectoral, territorial, voluntary association of business structures that work closely with scientific (educational) institutions, non-government organizations and local authorities to increase the competitiveness of their products and promote economic and innovative development of the territory or region (kniazevych, 2018). a cluster is a contractual association of legal entities and individuals without the creation of a new legal entity. it should be emphasized that clustering has a voluntary nature. entrepreneurs, based on their commercial considerations, come to believe and agree on the need and mutual benefit of such an association. only in this case, there is a surge of physical and, most importantly, psychological energy based on personal and commercial interest and enthusiasm needed for the hub formation, which through the activity of the founders extends its sphere of influence to other organizations and can grow into a cluster. a cluster hub can be one or more companies that are able to produce quality, competitive products and are market leaders. the application of the cluster approach is one of the most effective mechanisms of structural development of the economy. depending on the innovation activity, network structures can be of two types: with a center (hub) or, less often, without a clear center. the positive side of a cluster is that its members do not compete directly with each other, but operate in different market segments (tyutyushev, gasanov, vasechko, 2011). clusters are varieties of large business-type networks concentrated in a geographically defined area. a cluster usually includes manufacturers of certain products and services, suppliers of raw materials, equipment and technology, and commercial structures. the basics of cooperation, interaction and inter-network relations between the organizations that are part of the cluster are determined by the relevant agreements. the most successful innovation clusters are formed in areas, where there is an innovative breakthrough in the field of production, technology, or services. a hub provides an innovative initiative and the main focus of innovation. other members of the cluster gather around the hub, performing their functions in accordance with the leadership of the hub. the innovation infrastructure develops around the core of the cluster. it includes independent organizations, enterprises, companies and institutions, branches of organizations and enterprises, and private professionals, who offer their services in the implementation of innovation activities to the cluster entities. innovative orientation of activity, which is characteristic for clusters, causes the need to include in the general network of the cluster organizations that create an auxiliary infrastructure around the production center. compared to other types of business networks, baltic journal of economic studies 138 vol. 7 no. 3, 2021 clusters bring together a wider range of innovation participants. the innovation infrastructure of the cluster may include research and design institutes, universities, information agencies, standardization centers, trade associations, agencies that provide specialized training and retraining, and grant-making funds. the infrastructure shell of the cluster provides selection, development and implementation of innovative projects. a cluster brings together independent and informally connected companies and institutions that can simultaneously cooperate with other organizations that are not part of the cluster. a cluster is a concentration of industrial and other facilities that receive economic benefits due to their close proximity to each other. however, all subjects of innovation infrastructure of one cluster can actively expand the area of their activity and offer their services on commercial terms, both for a number of neighboring clusters and for individual enterprises implementing innovation projects. the impact of the innovation infrastructure of neighboring clusters can extend the scope of their services to the entire region, and with the further clustering of regions – to the whole country. therefore, clustering of regions can ensure the overall development of the country’s innovation infrastructure. 5. conclusions clusters and an innovation infrastructure, which appears around them, form an attractive basis for innovation, investment flows, and development of small and medium enterprises. this is a kind of a large innovation-entrepreneurial network, which is especially effective in times of crisis. the application of the cluster approach and the spread of the processes of clustering of the economy are among the most effective mechanisms for the structural development of national and regional innovation systems. the gradual increase in the number of cluster structures and their concentration in different regions of the country will lead to the creation around them of a network of business entities that self-organize on a commercial basis and specialize in providing services for innovative projects for a wide range of innovative enterprises. thus, the growth of a network of similar structures specializing in innovation services will serve as a basis for self-organization of the system of the active innovation infrastructure of the whole country. self-organization is a synergy process of ordering the chaotic action of the elements of the system and their transition to a qualitatively new level due to internal factors, without any external influence. however, this does not mean that these structures are unmanageable. they are controlled not by direct commands but by changing the boundary parameters. a state regulates the boundary conditions of activity for the subjects of an innovation infrastructure, clusters, which independently, based on commercial considerations, self-organize under the influence of market mechanisms and expand their services to all regions, forming an integrated innovation infrastructure. references: adamanova, z. o. 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(in ukrainian) baltic journal of economic studies 96 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 mukachevo state university, ukraine e-mail: stegneym@gmail.com orcid: https://orcid.org/0000-0002-4688-6447 3 vocational college of the transcarpathian hungarian institute named after ferenc rakotsi ii e-mail: nod_orshoia@ukr.net orcid: https://orcid.org/0000-0002-1048-776x doi: https://doi.org/10.30525/2256-0742/2022-8-4-96-101 balanced development of tourism and resort and recreational sphere: international, national and regional vectors inna irtyshcheva1, marianna stehnei2, nod orshoia3 abstract. the subject of the study is international, national and regional vectors of balanced development of tourism and resort and recreational sphere. methodology. the study used general scientific methods, in particular: theoretical generalization; methods of positive and normative analysis and statistical analysis. the aim is to substantiate the process of balanced development of tourism and resort and recreational sphere using international, national and regional vectors in modern conditions. conclusion of the study. international experience of balanced tourism development has shown that among the leading countries in tourism are france, usa, china, spain, italy, turkey, mexico, thailand. it is emphasized that these countries are annually visited by 30 to 100 million tourists. it was noted that france ranks first among the countries that attract tourists, the tourist flow to which in 2019 amounted to 217.8 million people, in 2020 it decreased to 117.1 million people, or almost 1.86 times; in second place among the leading countries is the united states of america, where in 2019 the tourist flow amounted to 167.4 million people, and in 2020 it decreased by almost 3.7 times and amounted to 44.7 million people; china ranks third in terms of tourist visits in 2019 – 167.5 million people, in 2020 it decreased to 30.4 million people, or 5.3 times. analysis of the national experience of tourism development showed that the pandemic of viral infection also had the most significant impact on the reduction of tourist flows in ukraine. it is noted that in 2019, the reduction of inbound tourists was almost 4 times, while the reduction of tourists in 2014 at the beginning of military aggression was 1.8 times. the authors consider it appropriate to predict a slight reduction in tourist flows during a full-scale war between russia and ukraine and to ensure the development of an innovative model of balanced development of national tourism. the creation of an innovative model of balanced development of tourism and resort and recreational sphere with the use of international, national and regional vectors is quite relevant in modern conditions. it is proved that such a model should ensure the achievement of public interests, short-term and long-term goals in solving alternative tasks of obtaining quick and maximum profit by the tourism business and meeting the needs of international tourist traffic and international capital in solving the problem of geographical promotion of tourist flows to new territories. key words: international tourism, tourist flows, coronavirus pandemic, military aggression. jel classification: e20, h56, o10 1. introduction recently, the conditions for tourism development have been extremely unfavorable. in early 2020, tourism was globally affected by the coronavirus pandemic, which led to a reduction in international tourist flows, and in some cases almost to a standstill. the gradual recovery of tourism took place against the backdrop of severe pandemic restrictions. it should be noted that even the leading countries in tourism were unable to restore tourist flows to the forecasted level. unfortunately, the development of tourism in ukraine was affected not only by the coronavirus pandemic, but also by russia's military aggression. it is noted that we will have to use the crisis situation to implement unexpected tourist ideas and take care baltic journal of economic studies 97 vol. 8 no. 4, 2022 of the restoration of the industry before the end of the war. that is why the analysis of tourist flows of the leading countries of the world, the use of their best experience of restoration will allow to build world-class tourism in ukraine. they recognize that "international tourism is becoming a powerful factor in establishing ties between countries and peoples, contributes to solving political, economic, social, foreign economic, trade, cultural problems in the world. in the field of international tourism, cooperation between countries is manifested in the form of: bilateral and multilateral cooperation, which affects the establishment of long-term tourist ties, their use for the development of profitable economic relations, establishing close contacts in the field of cultural, scientific and technical organizations, improving the exchange of tourist information, developing common methods of standardization, tourist services. international tourism is defined as the sphere of production and sale of tourism product, thus forming the interna tional tourism industry. tourism enterprises are the main participants of international tourism as a business." (aleksandrovoy, 2009) therefore, the justification of balanced development of tourism and resort and recreational sphere with the use of international, national and regional vectors is quite relevant in modern conditions. 2. international experience of balanced development of tourism and resort and recreational sphere according to the world tourism organization, the dynamics of tourist flows in the leading countries for 2010–2021 decreased from 2.5 times to almost 40 times. in general, the drop in tourist flows was caused by the coronavirus pandemic in 2020–2021, as we can see from the statistics (figure 1). according to the data, france, usa, china, spain, italy, turkey, mexico, thailand are the leading countries in tourism. in general, these countries are annually visited by 30 to 100 million tourists. the first place among the tourist countries is occupied by france, the tourist flow to which in 2019 amounted to 217.8 million people, in 2020 it decreased to 117.1 million people, or almost 1.86 times. in second place among the leading countries is the united states of america, where in 2019 the tourist flow amounted to 167.4 million people, and in 2020 it decreased by almost 3.7 times and amounted to 44.7 million people. the third place is occupied by china in terms of tourist visits in 2019 – 167.5 million people, in 2020 it decreased to 30.4 million people, or 5.3 times, it should be noted that it is from this country that the coronavirus infection originates. in general, it is necessary to note the world experience of tourism development. the principle of decentralization has a special influence on the french tourism policy. delegation of powers to local governments, support of local initiatives, development of all forms of social tourism, the principle of comprehensive cooperation between the authorities, local communities and entrepreneurs in the field of tourism. french experience shows that the maximum effect in tourism development can be achieved only with the cooperation of executive authorities, local governments, public and professional organizations and business structures (kryvenkova, 2016). 0 50000 100000 150000 200000 250000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 italy france spain usa china turkey mexico thailand figure 1. dynamics of tourist flows in the leading countries of the world for 2010–2021, thousands of people source: grouped by data unwto baltic journal of economic studies 98 vol. 8 no. 4, 2022 world experience gives us examples of mainly market regulation of investment processes in the tourism sector (usa). the combination of factors of production in the investment process is carried out by tourism companies. but this is possible only under the following conditions: – incomes of firms from market activities allow them to form the necessary accumulation of financial resources or use loans; – effective demand in the country is growing; – the costs of construction of the facility and the current costs of production activities at the facility are acceptable to the market; – the investment project differs from others in that it has a fairly quick payback. at the same time, taxes on the income of enterprises in the tourism industry should be minimal, and the state should not interfere in the functioning of the tourism sector of the economy, should not participate in financing this activity (stoyka, 2011). the attractiveness of china around the world is explained quite simply: the great attractiveness of the celestial empire for business circles forms a constant influx in the mice segment – mainly to chinese exhibitions, fairs, production facilities, etc. an extremely rich culture, the age of which is determined by thousands of years, a huge number of architectural, historical, cultural and natural monuments attract millions of tourists to china who go on sightseeing tours. another attractive destination for chinese tourism is an amazing variety of authentic cuisine of different regions, folk medicine and recreation at seaside resorts (for example, hainan island off the southeast coast of mainland china). (shapovalova, 2017) thus, in general, the experience of leading countries in the field of tourism determines the need to form an innovative model of inclusive tourism development at the national level. 3. national and regional vectors of tourism and resort and recreation development according to the world tourism organization in ukraine, the dynamics of tourist flows in ukraine in 2020 decreased almost to the level of 1995 (figure 2). the coronavirus pandemic also had the most significant impact on the reduction of tourist flows to ukraine. in 2019, the reduction of inbound tourists was almost 4 times, while the reduction of tourists in 2014 at the beginning of military aggression was 1.8 times. in general, it is possible to predict a slight reduction during a full-scale war of russia against ukraine and the need to develop an innovative model of balanced development of national tourism. the balanced development of the tourism industry potential means the balanced development of all sectors of the tourism complex, which is achieved in the triad "economy – social sphere – nature management". from the point of view of "tourismeconomy " interaction, balance implies effective development of the tourism industry potential due to the balance of supply and demand. the balance of the tourism industry within the social environment means the maximum satisfaction of tourists' needs. the development of the tourism industry 's potential while preserving natural resources ensures a balance in the relationship "tourism – nature management" (yukhnovska, 2020). the main components of balanced national and regional tourism development are economic, financial, 0 5000 10000 15000 20000 25000 30000 35000 1995 2000 2005 2008 2010 2014 2016 2017 2018 2019 2020 total arrivals overnight stay of tourists excursionists excursionists figure 2. dynamics of tourist flows in ukraine for 1995–2020, thousands of people source: grouped by data unwto baltic journal of economic studies 99 vol. 8 no. 4, 2022 environmental, social and institutional balance. the relevant innovation model should take into account the components of balanced national and regional tourism development in accordance with modern conditions. as the world experience of tourism leaders has shown, the relationship between society and the environment in the context of sustainable tourism development is important in the context of an aging innovation model (figure 4). in general, the innovative model of balanced tourism development should take into account the public interests of achieving short-term and long-term goals in solving alternative problems of obtaining quick and maximum profit by the tourism business and meeting the needs of international tourist traffic and international capital in solving the problems of geographical promotion of tourist flows to new territories. in the current conditions of economic development, tourism is an area that brings not only income, but also has great potential for progress. possessing significant natural resources, good geographical location of the country, a large number of tourist facilities, having highly qualified personnel, balanced regional development of tourism institutional stability of the regions ecological balance social balance economic balance financial balance figure 3. components of balanced national and regional tourism development source: grouped by the authors (yukhnovska, 2020) time vector spatial vector achievement of short-term and long-term goals while solving alternative tasks of obtaining quick and maximum profit by tourism business, using tourism resources within the restoration process or optimizing these relationships; meeting the needs of the international tourist movement and international capital in solving the problems of geographical promotion of tourist flows to new territories, ecologically clean and protected areas, hard-to-reach places without certain restrictions, improving the economic conditions for the development of local communities, preserving certain potential destinations and tourist sites, or optimizing these alternative approaches and minimizing tourist interference in the conditions and lifestyle of individual communities in th e co nt ex t o f s us ta in ab le to ur is m d ev el op m en t, th e ke y is su e is th e co ns ta nt (c on tin uo us ) c oo rd in at io n an d ha rm on iz at io n of th e re la tio ns hi p be tw ee n m an a nd h is e nv ir on m en t i n ac co rd an ce w ith : figure 4. the relationship of man with the environment in the context of sustainable tourism development source: grouped by the authors (tkach, 2019) baltic journal of economic studies 100 vol. 8 no. 4, 2022 overcoming infrastructure and investment problems, tourism can develop according to an optimistic scenario, thereby increasing not only its efficiency, but also the efficiency of related industries. however, the abandonment of tourist heritage sites, irrational use of available natural resources, lack of investment in the development of not only infrastructure, but also tourism in general, the outflow of personnel abroad can be key factors in choosing a pessimistic path of development (tkach, 2019). the development of the strategy for managing the development of the region is based on the main directions of environmental protection policy and requires significant adaptation of existing norms and requirements in our country to european standards. this requires a combination of all the positive that has been acquired by the national and international community in the field of theoretical, methodological, practical principles of rationalization of the use of natural resource potential of tourism and recreation, optimization of the functioning of the ecological and economic system, preservation of environmental quality in the context of environmentally sound spatial development. it should be noted that the theoretical framework, which is the basis of the new course of the modern economy, declared in the un policy documents, provides for the concept of "green economy " as a system of economic activity related to the production, distribution and consumption of goods and services that lead to human well-being in the long term, do not expose future generations to significant environmental risks or environmental deficit, and are aimed at creating new jobs in the regions (nezdoyminov, 2012). the attractiveness approach allows to effectively develop the territory, i.e., to produce those goods and provide those services that will be most in demand by tourists visiting the destination. this will make it possible to make the right management decisions to attract investments in the development of not just the infrastructure of the region, to build not just accommodation, entertainment, etc., but to invest them purposefully, according to the needs, with the attractiveness that makes most tourists visit the destination. at the same time, a systematic approach to the management of tourist areas will have a great synergistic effect and significantly increase the competitiveness of the territories as tourist destinations. (koshkalda, kalinichenko, groholskyi, hrybinyk, 2022) the infrastructure of tourist facilities is poorly developed, and in some regions it is absent at all, this is the reality of modern tourist and recreational areas of ukraine. during the years of independence, unfortunately, ukraine has not only failed to improve its tourist infrastructure, but over time, soviet projects have become outdated and should have been modernized and made competitive, but this has not happened. most of the health resort fund of ukraine is abandoned, depleted and in a very difficult situation. the development of regional tourism in ukraine is closely connected with the tourist infrastructure, which in turn acts either as a constraining factor in the development of the industry, or determines the positive dynamics of the development of tourism and recreation. at the same time, for most regions of ukraine, infrastructure problems are the main reason for the decline in the competitive advantages of the territory in the market of tourist services. (symonenko, 2020) in general, as most authors emphasize, for the prospects of national and regional tourism development it is necessary to take into account the mechanism of attracting investments, motivation to create innovations, transformation of infrastructure in modern conditions (irtyshcheva, and etc., 2022; popadynets, et al. 2021; yakymchuk, et al., 2021; pletsan, et al. 2021). 4. conclusions international experience of balanced tourism development has shown that france, usa, china, spain, italy, turkey, mexico, thailand are among the leading countries in tourism. it is emphasized that these countries are annually visited by 30 to 100 million tourists. it was determined that france ranks first among the tourist countries, the tourist flow of which in 2019 amounted to 217.8 million people, in 2020 it decreased to 117.1 million people, or almost 1.86 times; the second place among the leading countries is occupied by the united states of america, where in 2019 the tourist flow amounted to 167.4 million people, and in 2020 it decreased by almost 3.7 times and amounted to 44.7 million people; the third place in terms of tourist visits is occupied by china – in 2019 167.5 million people, in 2020 it decreased to 30.4 million people, or 5.3 times. analysis of the domestic experience of tourism development has shown that the most significant impact on the reduction of tourist flows in ukraine was also caused by the coronavirus pandemic. it was determined that in 2019 the reduction of inbound tourists was almost 4 times, while the reduction of tourists in 2014 at the beginning of military aggression was 1.8 times. it is appropriate to predict a slight reduction in tourist flows during a full-scale war between russia and ukraine and the need to develop an innovative model of balanced development of national tourism. creation of an innovative model of balanced development of tourism and resort and recreational sphere using international, national and regional baltic journal of economic studies 101 vol. 8 no. 4, 2022 vectors is reasonable and quite relevant in modern conditions. it is proved that this model should take into account the public interests of achieving short-term and long-term goals in solving alternative problems of obtaining quick and maximum profit by the tourism business and meeting the needs of international tourist traffic and international capital in solving the problems of geographical promotion of tourist flows to new territories. references: alexandrova, a. yu. (2009). geography of tourism. moscow: knorus, 592 p. unwto (2022). available at: https://www.unwto.org/tourism-statistics/key-tourism-statistics kryvenkova, r . yu. (2016). foreign experience in the formation of tourism potential. public administration: improvement and development, 4. available at: http://www.dy.nayka.com.ua/pdf/4_2019/43.pdf yukhnovska, yu. o. (2020). theoretical principles of balanced development of the potential of the national tourism industry. review of transport economics and management, vol. 3(19), pp. 66–78. tkach, u. v. (2019). sustainable development of the tourism sphere of the region: theoretical basis and conditions of formation. actual problems of innovative economy, vol. 3, pp. 67–74. nezdoyminov, s. g. (2012). "green" vector of regional tourism. herald of socio-economic research, vol. 2 (45), pp. 348–353. koshkalda, i., kalinichenko, s., groholskyi, v., & hrybinyk, a. (2022). regional approach to tourism product development. bulletin of the khmelnytskyi national university, vol. 3, pp. 51–55. simonenko, d. a. (2020). infrastructure projects as a basis for the development of resort and recreation areas. efficient economy, vol. 8. available at: http://www.economy.nayka.com.ua/pdf/8_2020/154.pdf irtyshcheva, i. and etc. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, vol. 8, рр. 78–82. doi: https://doi.org/10.30525/22560742/2022-8-2-78-82 popadynets, n., et al. (2021). evaluation of domestic market development in ukraine. international conference on intelligent human systems integration, рр. 357–363. yakymchuk, a. et al. (2021). economic diagnostics and management of eco-innovations: conceptual model of taxonomic analysis. 4th international conference on intelligent human systems integration (ihsi) – integrating people and intelligent systems, рр. 573–579. popadynets, n. et al. (2021). analysis and modeling of factor determinants for ukraine hotels and tourist sphere. 4th international conference on intelligent human systems integration (ihsi) – integrating people and intelligent systems, рр. 509–515. pletsan, khr., et al. (2021). creative industries in the socio-cultural space. ad alta-journal of interdisciplinary research, vol. 11, pp. 124–128. received on: 4th of october, 2022 accepted on: 9th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 73 vol. 3, no. 2, 2017 corresponding author: 1 kharkiv department for macroeconomic policy and regional development, sector for macroeconomic analysis and forecasting, research centre of industrial problems of development of national academy of sciences of ukraine. e-mail: levanda2008@rambler.ru the legal framework for ensuring the standards of the living standards of the population in ukraine elena levanda1 research centre of industrial problems of development of national academy of sciences of ukraine, ukraine abstract. the purpose of the paper is legal base in the context of the system of ensuring standards of living standards of the population of ukraine. methodology. the analysis of normative  – legal documents on the basic level of life of different population groups. the legislative field is investigated through the official web portal of the verkhovna rada of ukraine, the state statistics service of ukraine clarified the period from 1991 to the present. results. functioning laws of the last century  – outdated, not consistent with the goals of social policy and the contemporary economy. it is important to modernize the laws, concerning basic living standards of the population to the country's foreign policy, according to the eu methodology. apply state social standard as a tool for poverty reduction, and the perspective tool starter package with a guaranteed standard of living government to its citizens. the practical implications. different stages of development of economy of independent ukraine, laid the foundations of the legislative framework of normative documents concerning social protection of the population. a country's legal framework contains a set of laws belonging to the last century, policy and regulatory documents that comply with eu standards. in turn, the regulatory framework has tenedency to the modernization of laws that establish the guaranteed state social standards and guarantees for every citizen. value/originality. analysis of the legislative base, revealed the ineffectiveness of the law guaranteeing basic social standard to citizens. understanding of the process of modernization of a relatively large part of the laws adopted in the last century. key words: basic social standard, consumer recruitment, consumer basket and minimum consumer budget. jlf classification: і3, і38, к1 1. введение каждый гражданин современного государства должен иметь равные возможности строить жизнь по своему собственному выбору и быть застрахованным от крайних форм депривации (лишения возможностей удовлетворить жизненно важные потребности). социальная справедливость – это фактор, обеспечивающий безопасность в «завтрашнем дне». государственные институты должны способствовать выравниванию правил игры, когда все члены общества располагают примерно одинаковыми шансами стать социально активными, политически влиятельными и экономически продуктивными, вносить свой вклад в устойчивый экономический рост и устойчивое развитие (всемирный банк, 2005). государство выступает гарантом для населения, обеспечивая каждому гражданину государственные социальные стандарты и гарантии  – закон «о государственных социальных стандартах и государственных социальных гарантиях» № 2017-iii от 05.10.2000г. согласно данного закона базовый социальный стандарт, есть прожиточный минимум (раздел 1, статья 6). таким образом, доходы каждого гражданина украины независимо от его социальной роли в обществе зависят от установленных правительством экономических показателей прожиточного минимума на одно лицо и для основных социальных и демографических групп населения. цель работы  – исследование нормативно-правовой базы в контексте системы обеспечения нормативов уровня жизни населения украины. проблема законодательного поля украины относительно правовых гарантий социальной защиты населения состоит в нечеткости трактовки понятий; награможденности нормативно-правовой базы, относительно базового социального стандарта уровня жизни; финансовых показателей установленных законом, которые не соответствует стоимости основных потребностей для разных групп населения в повседневности; не соответствии приоритетам современной социальной политики, проводимой в государстве и реальным возможностям экономики. 2. стандарты уровня жизни населения украины миссия государства  – развитие человека и человеческого потенциала, с помощью государственных baltic journal of economic studies 74 vol. 3, no. 2, 2017 институтов и законодательной базы, утвержденной в стране. стартовой площадкой социальной защиты и социальных гарантий в украине при переходе к рыночной экономике в 1991 г. является закон «о  минимальном потребительском бюджете» верховный совет усср; закон от 03.07.1991 № 1284-xii. закон был утвержден 1-м президентом независимого государства украины  – л. кравчуком. цель закона  – «обеспечить проведение социальной политики, направленной на поддержку наименее социально защищенных слоев населения, формирование взаимосвязанной системы минимальных доходов и расходов государства на их содержание в учреждениях социальной сферы». минимальный потребительский бюджет (мпб)  – это набор продовольственных и непродовольственных товаров и услуг в натуральном и стоимостном выражении, обеспечивающий удовлетворение основных физиологических и социально-культурных потребностей человека. мпб формируется нормативным методом на основе системы потребительской корзины, научно обоснован. стоимостная оценка мпб пересматривается с учетом индекса цен на потребительские товары и услуги. мпб служит ориентиром стоимости жизни для населения с низкими доходами и мотивацией для правительства, как социального стандарта уровня жизни, который заслуживают граждане украины в условиях увеличения показателей экономики в стране. мпб был сформирован в период становления украины как независимого государства. нормативно-правовая база выходит из переходных законов бывшего ссср. анализ литературы по данному вопросу  – ограничен. мпб гарантирует гражданам равные шансы быть здоровыми, экономически продуктивными, социально активными. статус в законодательном поле  – действующий, однако на практике находиться в «латентной форме». с 1994 по 1999 гг., экономика украины находится в кризисных условиях. разрабатывается и утверждается закон украины n 190/94-вр «о черте мало обеспеченности» от 04.10.1994 г. согласно ст.  46 конституции украины (254к / 96-вр) «пенсии, другие виды социальных выплат и пособий, являющиеся основным источником существования, должны обеспечивать уровень жизни не ниже прожиточного минимума, установленного законом». таким образом, население должно быть социально защищенным. в этот период устанавливается социальный норматив  – черта мало обеспеченности. величина среднедушевого совокупного дохода, который обеспечивает нетрудоспособным гражданам потребление товаров и услуг на минимальном уровне, установленном законодательством. применяется предел мало обеспеченности для определения размеров социальных гарантий и социальной помощи. закон закладывает правовую основу осуществления адресной материальной поддержки наименее социально защищенных слоев населения в условиях кризисного состояния экономики (http://zakon3.rada.gov.ua/ laws/show/190/94-%d0%b2%d1%80). в дальнейшем он становится основой закона «о прожиточном минимуме». в настоящее время этот закон применяется к нетрудоспособным гражданам, которые получают пенсию, и среднедушевой совокупный доход семей не превышает величины стоимости черты мало обеспеченности (http://zakon5.rada.gov.ua/laws/show/1282-12). применяется нормативно-статистический метод. продовольственные товары определяются в соответствии с социальными нормами потребления для нетрудоспособного возраста  – нормативным методом. стоимость непродовольственных товаров и услуг и стоимость на содержание жилья, определяются в соответствии с фактическими расходами семей с низкими доходами. стоимость непродовольственных товаров не может составлять менее 15% от стоимости продуктового набора (http://zakon3.rada.gov.ua/ laws/show/190/94-%d0%b2%d1%80). величина стоимости черты мало обеспеченности один раз в год утверждается и прописывается в государственном бюджете украины, верховным советом украины. может пересматриваться в соответствии с ростом индекса цен на потребительские товары и услуги вместе с уточнением показателей государственного бюджета украины. в исключительных случаях верховный совет украины может утвердить величину стоимости черты мало обеспеченности без утверждения государственного бюджета украины. статус закона – действующий в законодательной базе. в 1999 году в условиях реконструкции экономики украины был принят закон украины № 966-xiv «о  прожиточном минимуме» от 15.07.1999. он заложил правовые основы реализации государством конституционной гарантии граждан на достаточный жизненный уровень (ст. 46 конституции украины (254к/96-вр)). прожиточный минимум  – это стоимостная величина достаточного для обеспечения нормального функционирования организма человека, сохранения его здоровья набора продуктов питания, а также минимального набора непродовольственных товаров и минимального набора услуг, необходимый для удовлетворения основных социальных и культурных потребностей личности. в разрезе украинская потребительская корзина определяет величину прожиточного минимума каждого украинца  – согласно постановлению №780 «об утверждении наборов продуктов питания, наборов непродовольственных товаров и услуг для основных социальных и демографических групп населения», от 11.10.2016 г. (предыдущая версия методика №656, п.1 от 14.04.2000  г). для расчета прожиточного минимума используются средние потребительские цены (тарифы) в baltic journal of economic studies 75 vol. 3, no. 2, 2017 стране (регионе), пункт 1.5 (http://ukrstat.org/uk/ metod_polog/metod_doc/2006/519/519.htm). стоимость пожиточного минимума оценивается в текущих ценах, корректируются исходя из развития и возможностей экономики. согласно конституции украины, прожиточный минимум является базовым социальным стандартом и государственным регулятором бюджета украины, при утверждении показателей на год. указом президента украины n 637/2001 (637/2001) от 15.08.2001 р., впервые официально в стране утвердили черту бедности («стратегия преодоления бедности»). черта бедности – это уровень дохода, ниже которого невозможно удовлетворение основных потребностей. черта бедности рассчитывается по фиксированной долей среднедушевого дохода (расходов)  – 75% медианного уровня совокупных доходов (расходов) в расчете на условного взрослого на основании данных выборочного обследования условий жизни домохозяйств, проводится государственной службой статистики украины. для определения черты бедности используют показатель расходов (это связано с тем, что в стране развита теневая экономика, и доходы деятельности граждан не зарегистрированы в государственных институтах). из этого следует, что черта бедности определяет масштабы и уровень бедности в стране. в законодательном поле дает общую оценку уровня жизни населения. в 2012 году, согласно приказа №  629/1105/1059/408/612 «методика комплексной оценки бедности» от 08.10.2012 и приказа № 114/242/392/85/85 «методика проведения мониторинга и оценки эффективности программ социальной поддержки населения» от 12.03.2013  – рассчитывают существующие в современности черты бедности. «методика проведения мониторинга и оценки эффективности программ социальной поддержки населения» предусматривает расчет системы показателей, которые формируются на основе обследования домохозяйств, статистических и административных данных, относительно бедности. устанавливает предел бедности по относительному критерию (определяется по фиксированной долей среднедушевых совокупных расходов) – 75% медианного уровня среднедушевых эквивалентных совокупных расходов в расчете на одну условную личность и черту бедности по абсолютному критерию  – размер законодательно установленного прожиточного минимума в расчете на месяц на одного человека. по относительному критерию с использованием показателя «эквивалентные совокупные расходы в расчете на одно лицо» осуществляет институт демографии и социальных исследований им. птухи (далее – нан украины). по абсолютному критерию с использованием показателя «эквивалентные общие доходы в расчете на одно лицо» осуществляет государственная служба статистики украины, пункт 1.4 (http://zakon2.rada.gov.ua/laws/show/z0508-13). рассчитывается один раз в год. цель  – отследить изменения в численности получателей помощи, объемы и суммы выплат, оценить влияние на бедность, действенность и адресность помощи, пункт 1.7 (http://zakon2.rada.gov.ua/laws/show/z0508-13). «методика комплексной оценки бедности» утверждает уже существующие границы бедности в приказе № 114/242/392/85/85 от 12.03.2013 и другие: границу крайней бедности, определенная по относительному критерию 60% медианного уровня среднедушевых эквивалентных совокупных расходов. адаптирована к критерию европейского союза; границу абсолютной бедности, определяется по критерию стоимости суточного потребления на уровне 5 долларов сша в соответствии с паритетом покупательной способности (гривневый эквивалент 5 долларов сша по паритету покупательной способности рассчитывается всемирным банком), используют для сравнения с международными показателями. расчеты осуществляются ежеквартально на основании данных выборочного обследования условий жизни домохозяйств государственной службой статистики украины, пункт 1.3, 1.6 (http://zakon3.rada.gov.ua/laws/show/z1785-12). цель  – выполнение государственной целевой социальной программы преодоления и предотвращения бедности. с 2002 года вводится расчет индекса потребительских цен (ипц) по международной классификации индивидуального потребления по целям (coicophbs (1997))  – товары и услуги, наиболее репрезентативные и важные для всех домашних хозяйств. рассчитывается ипц на основе «потребительского набора» государственной службы статистики. потребительский набор – единый для всех регионов страны репрезентативно отобранный перечень товаров и услуг, чаще всего потребляющий населением. ипц характеризует изменения во времени общего уровня цен на товары и услуги, которые покупает население для непроизводственного потребления. методология расчета ипц базируется на общих требованиях конвенции 160 международной организации труда 1985 года (статья 12), «резолюции по индексам потребительских цен», принятой на 17 международной конференции статистиков труда (2003) и совместном документе мот, мвф, оэср, евростата, оон и всемирного банка «руководство по индексу потребительских цен. теория и практика» (2004). наблюдение за изменениями потребительских цен (тарифов) на товары (услуги) осуществляется на центральном уровне и является репрезентативным для расчета ипц для каждого региона страны (гипермаркеты и супермаркеты, торговые центры, средние, маленькие и др. специализированные магазины), кроме сельской местноbaltic journal of economic studies 76 vol. 3, no. 2, 2017 государственные социальные стандарты и гарантии для населения украины минимальный потребительский бюджет (1991г) экономика: переход к рыночной системе основы социальной защиты и гарантий для населения черта малообеспеченности (1994-1999гг.) экономика: условия кризисного состояния правовая основа осуществления адресной материальной поддержки наименее социально защищенных слоев населения прожиточный минимум (1999г.) экономика: условия реконструкции гарантирует ст.46 конституции украины населению достаточный жизненный уровень бедность приказ n 637/2001 (637/2001) от 15.08.2001 ( «стратегия преодоления бедности»). экономика: спад производства, инфляция, изменения форм собственности. цель стратегии: обеспечение экономического роста; повышение уровня занятости населения; блокировки острых проявлений бедности; реформирования социальной системы, путем консолидации всех социальных программ и видов помощи на основе оценки совокупного дохода семьи; интеграции лиц с ограниченными физическими возможностями в общественную жизнь. приказом № 629/1105/1059/408/612 от 08.10.2012 (методика комплексной оценки бедности). экономика: развитие к экономическому прогрессу и политической стабильности. цель: выполнение государственной целевой социальной программы преодоления и предотвращения бедности. приказ № 114/242/392/85/85 от 12.03.2013 (методика проведения мониторинга и оценки эффективности программ социальной поддержки населения). цель: отследить изменения в численности получателей помощи, объемах и суммах выплат, оценить влияние на бедность, действенность и адресность помощи. программа интеграции украины в европейский союз президент украины; программа от 14.09.2000г. потребительский набор (государственной службы статистики украины с 2002г.) международная классификация индивидуального потребления по целям (coicop-hbs (2003)) товары и услуги, наиболее репрезентативные и важные для всех домашних хозяйств. экономика: развитие к экономическому прогрессу и политической стабильности. потребитель украины рис. 1. государственные социальные стандарты и гарантии независимой украины сти. отражает реальную структуру потребительских денежных расходов домохозяйств; оптимальную организацию процесса регистрации цен; современные потребности украинцев и их структуру потребления продовольственных и непродовольственных товаров и услуг. показатель ипц характеризует уровень инфляции, который используется в государственной политики для анализа и прогноза ценовых процессов в экономике, пересмотра денежных доходов населения, перерасчета показателей системы национальных счетов в постоянные цены, обеспечивает проведение международных сопоставлений. потребительский набор, это удовлетворение актуальных потребностей населения в сложившихся baltic journal of economic studies 77 vol. 3, no. 2, 2017 условиях экономики. ипц фиксирует экономическую составляющую, каждого домохозяйства «здесь и сейчас». с помощью установленного ипц индексируются государственные социальные гарантии для населения. структура потребительского набора, соответствует стандартам евросоюза, адаптирована к современным условиям украины, включая все сферы жизни населения. государственные социальные стандарты и гарантии для населения украины с 1991 г. по настоящее время (рис. 1). 3. спецификация потребительских бюджетов в украине в правовом поле украины на сегодняшний день действуют три потребительских бюджета: минимальный потребительский бюджет (мпб); базовый социальный стандарт – прожиточный минимум (пм); потребительский набор (пн) государственной службы статистики украины. действующие потребительские бюджеты относятся к разным моделям уровня жизни. отличия состоят в норме потребления, структуре спецификации, ассортимента товаров и услуг, стоимости потребительских корзин. из таблицы 1 видно, что «потребительский набор» государственной службы статистики состоит из 12 групп спецификаций. удовлетворяет фактические потребности всех групп населения украины «здесь и сейчас». методология – государственная служба статистики украины, приказ № 190 от 01.07.2013г. (с изменениями, приказ № 371 от 28.11.2014г. и приказ № 315 от 05.11.2015  г.  – методологические положения по организации статистического наблюдения за изменениями цен (тарифов) на потребительские товары (услуги) и расчетов индексов потребительских цен. «потребительский набор» утверждается государственной службой статистики украины вместе с межведомственной группой  – специалисты министерства экономического развития украины, национального банка украины, профсоюзов, ученые. соответствует методологии евросоюза. «минимальный потребительский бюджет»  – состоит из 10 групп спецификаций. удовлетворяет основные физиологические и социально  – культурные потребности личности. методология  – постановление n 244 «о минимальном потребительском бюджете» от 3.10.1991 г. в расчете состава корзины участвуют профсоюзы и общество защиты прав потребителей. далее бюджет проходит научно-общественную экспертизу при кабинете министров украины (кму) и утверждается данным ведомством. население: одно лицо или семьи разного типа. прожиточный минимум – состоит из 9 групп спецификаций. удовлетворяет физиологические, основные социальные и культурные потребности личности. методология  – приказ №109 / 95/157 «методика определения прожиточного минимума на одно лицо и для лиц, относящихся к основным социальных и демографических групп населения» от 17.05.2000  г. расчет состава корзины производит министерство социальной политики украины, министерство таблица 1 спецификация потребительских бюджетов в украине № п/п спецификация потребительский набор приказ государственной службы статистики украины № 158 от 29.08.2016 г. прожиточный минимум закон украины № 966xiv, ст. 4. от 15.07.1999 г. постановление №780 от 11.10.2016 г. минимальный потребительский бюджет закон украины № 1284-xii от 03.07.1991г. 1. питания и безалкогольные напитки ++ +/ + +/ 2. алкогольные напитки и табачные изделия ++ -/+ 3. одежда и обувь ++ + + 4. жилье, вода, электроэнергия, газ и другие виды топлива ++ + + 5. бытовая техника и текущее обслуживание ++ + + 6. здоровье ++ -/+ + 7. транспорт ++ + + 8. коммуникации ++ + + 9. отдых, культура ++ -/+ -/+ 10. образование ++ -/+ + 11. рестораны и гостиницы ++ 12. смешанные товары и услуги ++ + итого: 12 9 10 источник: сайт верховного совета украины baltic journal of economic studies 78 vol. 3, no. 2, 2017 финансов украины, министерство охраны здоровья украины, министерство экономического развития украины, представители профсоюзов и работодателей. утверждается кму. все бюджеты утверждаются один раз в год и пересматриваются, раз в пять лет. однако базовый социальный стандарт был пересмотрен и утвержден через 16 лет с момента его функционирования на социально-экономической платформе украины. данное действие противоречит законодательной базе страны. 4. исследование законодательного поля нормативов уровня жизни населения исследование нормативно-правовой базы в контексте системы обеспечения нормативов уровня жизни, дал оценку функционирования населения в рамках законодательной системы в повседневности. законодательное поле исследовано с помощью официального веб-портала верховной рады украины, официального сайта государственной службы статистики украины. анализ показал, что большая часть законов, соприкасающихся с внутренней политикой украины характерны для политики прошлого столетия. в настоящее время в условиях инновационного развития страны, законодательная база нуждается в модернизации и изменении фундаментальных законов, относительно законов социальной защиты населения. социальная политика не должна строить фундамент социальной защиты на принципах «прошлого опыта». базовый социальный стандарт, используется правительством как инструмент борьбы с бедностью, что не соответствует политики государства в условиях интеграции в ес. население не обучено, как вести здоровый, экономный и социально активный образ жизни. внешней политики украины, соответствует «потребительский набор» государственной службы статистики украины. адаптирован и протестирован с 2002 года к нынешнему законодательству, жизнедеятельности населения и отвечает методологии ес. сегодня «потребительский набор» применяется в рамках международной статистики и как адаптер социальных гарантий во времени. из этого следует, что законодательная база внутренней политики украины устарела и идет параллельно с нормативными документами, отвечающих внешней политики страны. 5. выводы переход украины к рыночной экономики в 1991 году заложил основу социальной защиты и социальных гарантий для населения, закон «о минимальном потребительском бюджете». модель  – социального стандарта уровня жизни. в условиях реконструкции экономики украины в 1999 году, был основан закон «о прожиточном минимуме». модель  – достаточный жизненный уровень. в условиях интеграции украины в европу, 2002 год  – классификация индивидуальных потребностей по целям (далее потребительский набор государственной службы статистики украины). модель  – приемлемый уровень жизни. выполняя роль государственного базового социального стандарта в законодательстве  – прожиточный минимум применяется и используется в реальной экономике в качестве номинального показателя для расчета социальных гарантий (социальной помощи, минимальный должностной оклад и минимальная заработная плата, пенсии, стипендии). не отображает актуальные потребности населения. государство не может обучить население, как строить здоровую, экономную, социально активную жизнь в обществе, из-за несоответствия стоимости базового социального стандарта, заложенного в бюджете и фактической стоимости основных потребностей в повседневности. нормативно-правовая база по отношению к базовому социальному стандарту имеет большую нагрузку и сталкивается с большим количеством нормативных документов, нет четкости в экономических показателях, доступности в понятиях нормативных документов, последовательности применения законов. переориентация социальной политики от политики прошлого столетия к современности, позволит модернизовать каркас законов, относительно стандарта уровня жизни населения в реальных возможностях развития экономики. применять государственный социальный стандарт не как инструмент борьбы с бедностью, а в ракурсе инструмента стартового пакета гарантированного уровня жизни государством своим гражданам. базовый социальный стандарт должен мотивировать население к социальной «полезности», в связи с этим должен идти с функцией справедливости. дифференцировать социальную справедливость по стандартам уровня жизни для различных слоев населения (децильные группы), согласно кипц references: оbzornyj doklad o mirovom razvitii 2006. socialnaya spravedlivost' i razvitie. vsemirnyj bank. vashington: federalnyj okrug kolumbiya. 2005. 34 s. zakon ukrayiny «pro prozhytkovyy minimum»: zakon vid 15.07.1999 №966-xiv [elektronnyi resurs].  – retrieved from: http://zakon2.rada.gov.ua/laws/show/966-14 zakon ukrayiny «pro mezhu malozabezpechenosti»: zakon vid 04.10.1994 №190/94-vr [elektronnyi resurs]. – retrieved from: http://zakon3.rada.gov.ua/laws/show/190/94-%d0%b2%d1%80 zakon ukrayiny «pro indeksatsiyu hroshovykh dokhodiv naselennya»: zakon vr ursr vid 03.07.1991 №1282xii [elektronnyi resurs]. – retrieved from: http://zakon5.rada.gov.ua/laws/show/1282-12 baltic journal of economic studies 79 vol. 3, no. 2, 2017 nakaz № 519 «pro zatverdzhennya metodolohichnykh polozhen' shchodo orhanizatsiyi statystychnoho sposterezhennya za zminamy tsin (taryfiv) na spozhyvchi tovary (posluhy) i rozrakhunku indeksu spozhyvchykh tsin» vid 14.11.2006. derzhstat ukrayny [elektronnyi resurs]. – retrieved from: http://ukrstat.org/uk/metod_ polog/metod_doc/2006/519/519.htm nakaz №114/242/392/85/85 «metodyka provedennya monitorynhu ta otsinyuvannya efektyvnosti prohram sotsial'noyi pidtrymky naselennya» vid 12.03.2013 [elektronnyi resurs]. – retrieved from: http: //zakon2.rada. gov.ua/laws/show/z0508-13 nakaz №629/1105/1059/408/612 «metodyka kompleksnoyi otsinky bidnosti» vid 08.10.2012 [elektronnyi 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http://zakon2.rada.gov.ua/laws/show/1284-12 zakon ukrayiny «pro derzhavnu sotsial'nu dopomohu malozabezpechenym sim»yam»: zakon vid 01.06.2000 № 1768-iii-vru [elektronnyi resurs]. – retrieved from: http://zakon2.rada.gov.ua/laws/show/1768-14 zakon ukrayiny «pro derzhavnyy byudzhet ukrayiny na 2016 rik»: zakon vid 25.12.2015 №928-viii [elektronnyi resurs]. – retrieved from: http://zakon0.rada.gov.ua/laws/show/928-19 postanova ukrayiny «pro naukovo-hromads'ku ekspertyzu naboru produktiv kharchuvannya, naboru neprodovol'chykh tovariv i naboru [...] «: postanova № 1767 kmu vid 24.09.1999 [elektronnyi resurs].  – retrieved from: http://zakon3.rada.gov.ua/laws/show/1767-99-%d0%bf postanova ukrayiny «pro zatverdzhennya polozhennya pro vyznachennya vartosti neprodovol'chykh tovariv i posluh ta vartosti utrymannya zhytla pry formuvanni mezhi malozabezpechenosti»: postanova № 310 vid 01.03.1999 [elektronnyi resurs]. – retrieved from: http://zakon0.rada.gov.ua/laws/show/310-99-%d0%bf postanova ukrayiny «poryadok provedennya indeksatsiyi hroshovykh dokhodiv naselennya»: postanova n 1078 кму vid 17.07.2003р [elektronnyi resurs]. – retrieved from: http://zakon0.rada.gov.ua/laws/show/1078-2003%d0%bf postanova ukrayiny « pro zatverdzhennya naboriv produktiv kharchuvannya, naboriv neprodovol'chykh tovariv ta naboriv posluh dlya [...] «: postanova № 656 kmu vid 14.04.2000р [elektronnyi resurs].  – retrieved from: http://zakon0.rada.gov.ua/laws/show/656-2000-%d0%bf nakaz № 519 «pro zatverdzhennya metodolohichnykh polozhen' shchodo orhanizatsiyi statystychnoho sposterezhennya za zminamy tsin (taryfiv) na spozhyvchi tovary (posluhy) i rozrakhunku indeksu spozhyvchykh tsin» vid 14.11.2006. derzhstat ukrayny [elektronnyi resurs]. – retrieved from: http://ukrstat.org/uk/metod_ polog/metod_doc/2006/519/519.htm nakaz №190 zi zminamy vid 01.07.2013, zatverdzhenymy nakazamy № 371 vid 28.11.2014 ta № 315 vid 05.11.2015. derzhstat ukrayny [elektronnyi resurs].  – retrieved from: http://www.ukrstat.gov.ua/metod_polog/metod_ doc/2013/190/190_2013.htm nakaz №109/95/157 «pro zatverdzhennya metodyky vyznachennya prozhytkovoho minimumu na odnu osobu ta dlya osib, yaki vidnosyat'sya do osnovnykh sotsial'nykh i demohrafichnykh hrup naselennya» vid 17.05.2000р [elektronnyi resurs]. – retrieved from: http: http://zakon3.rada.gov.ua/laws/show/z0347-00 nakaz prezydenta ukrayiny l. kuchma № 637/2001 «pro stratehiyu podolannya bidnosti» vid 15.08.2001. derzhstat ukrayny [elektronnyi resurs]. – retrieved from: http://www.ukrstat.gov.ua konstytutsiya ukrayiny: zakon vid 28.06.1996 № 254к/96  – vr [elektronnyi resurs].  – retrieved from: http: //zakon2.rada.gov.ua/laws/show/254%d0%ba/96-%d0%b2%d1%80 ministerstvo sotsial'noyi polityky ukrayiny [elektronnyi resurs].  – retrieved from: http://www.mlsp.gov.ua/ labour/control/uk/index baltic journal of economic studies 80 vol. 3, no. 2, 2017 елена леванда законодательная база системы обеспечения нормативов уровня жизни населения в украине аннотация. цель статьи  – исследовать нормативно-правовую базу в контексте системы обеспечения нормативов уровня жизни населения украины. методология. анализ нормативно-правовых документов, относительно базового уровня жизни разных групп населения. законодательное поле исследовано с помощью официального веб-портала верховной рады украины, официального сайта государственной службы статистики украины. в работе осветляется период с 1991 года по настоящее время. результаты. функционирующие законы прошлого столетия  – устарели, не соответствуют целям социальной политики и современным возможностям экономики. важно модернизировать свод законов, относительно базового стандарта уровня жизни населения к внешней политики страны, согласно методологии ес. применять государственный социальный стандарт не как инструмент борьбы с бедностью, а в ракурсе инструмента стартового пакета гарантированного уровня жизни государством своим гражданам. практические последствия. разные стадии развития экономики независимой украины, заложили основы в законодательной базе нормативных документов, относительно социальной защиты населения. законодательная база страны содержит свод законов, принадлежащих к политике прошлого столетия так и нормативные документы, отвечающие стандартам ес. в свою очередь нормативно-правовая база имеет тенденцию к модернизации законов, которые устанавливают гарантированный государственный социальный стандарт и гарантии для каждого гражданина. ценность/оригинальность. анализ законодательной базы, раскрыл неэффективность закона, гарантирующего базовый социальный стандарт гражданам. понимание процесса модернизации относительно большей части законов, принятых в прошлом столетии. baltic journal of economic studies 49 vol. 7 no. 5, 2021 corresponding author: 1 state enterprise "production association yuzhny mashinbuilding plant named after a. m. makarov", ukraine. e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0001-9566-3090 2 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 3 ceo at movingcalifornia.com, ukraine. e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0001-6225-5277 doi: https://doi.org/10.30525/2256-0742/2021-7-5-49-58 strategy for the development of warehouse logistics as a component of transport and logistics systems in the focus of economic transformation sergii voit1, inna irtyshcheva2, anatoly nosar3 abstract. the subject of the study is the theoretical and methodological aspects of the development strategy of warehouse logistics as a component of transport and logistics systems in the focus of economic transformation. methodology. general scientific methods used in the study, in particular: theoretical generalization; methods of positive and normative analysis, statistical analysis. the purpose of the work is to substantiate the strategy of development of warehouse logistics as a component of transport and logistics systems in the focus of economic transformation. results. the article substantiates the development strategy of warehouse logistics as a component of transport and logistics systems in the focus of economic transformation. the main components of the development strategy of logistics management at the macro-, mesoand micro-levels are revealed. the main directions of development of transport and logistics system of ukraine in the context of european integration. it is emphasized that the multiplier effect of investment in transport and logistics does not work by itself, but requires effective management of the regional economy, a high level of business activity in the leading sectors of the regional economy and successful spatial planning. the identified multiplier indicators and their trends in the regions show that investment in the development of transport and, in particular, infrastructure is one of the important incentives for regional economic development. at the same time, the investment acceleration indicators in the dynamics show a downward trend in all regions, which indicates the insufficient level of funding for transport and logistics support against the background of the gradual growth of the regional economy. the article substantiates a system model for assessing the level of development of the transport and logistics system in the region. the structural model of the development strategy of regional warehousing logistics has been proposed. to clarify the nature, main tasks and role in the development of transport and logistics structures in the region, a structural model of the development strategy of warehouse logistics, which systematizes: the conditions necessary to build a warehouse infrastructure and organize logistics activities in the region; identified alternatives for the necessary scale, technology placement and communications of warehouse systems, as well as the types and forms of organizational links between market participants, which are directly or indirectly related to this activity. key words: strategy, warehousing logistics, transport and logistics systems, economic transformations. jel classification: f01, r14, q28, q29 1. introduction in the current context of globalization, internationalization and transformation of markets, the role of transport and logistics systems and corresponding logistics centers in ensuring economic development, security and competitiveness of the economy at the global, national and regional levels is increasing. thus, global trends in the development of transport and logistics systems include the integration of transport, information technology, and regional mobility projects. in this case, warehouse systems play the role of integrating the created elements of transport and logistics complexes and the level of their organization, manufacturability, standardization and baltic journal of economic studies 50 vol. 7 no. 5, 2021 compliance with the needs of the logistics market is one of the important factors in assessing the logistics competence of the country and individual regions. due to the small number of warehouses, there is a need for perfect management. warehouse logistics management should be based on the basic functions of management: planning, organization, coordination and control. the efficiency of warehouse management will depend on the implementation of certain functions. therefore, the proper role in the management of warehouse logistics belongs to planning. the efficiency and effectiveness of the entire system will depend on the tasks of warehouse logistics planning. the main tasks of comprehensive logistics planning include: distribution of work areas and equipment on them in order to minimize costs, increase the level of cargo handling and warehouse capacity, and increase throughput capacity. an important role in the planning of warehouse logistics belongs to the reduction of costs associated with document flow. therefore, a significant place in the development of warehouse logistics belongs to the means of informatization and automation, which will significantly speed up shipment time and contain all information in the appropriate database (platform). among the main vectors of development in the field of warehouse logistics in ukraine should be noted: the development of state and regional programs of functioning of warehouse logistics, to introduce highquality services in logistics expansion of material and technical base (class a warehouses), reducing overhead costs, energy costs by increasing the share of auto mation and digitization throughout the logistics chain. that is why improving the strategic approach to warehouse logistics management plays an important role in today 's environment. 2. justification of the main components of the logistics management development strategy at the macro-, mesoand micro-levels the analysis of logistics efficiency subindices shows on a 5-point scale the main strengths and weaknesses of transport and logistics systems in comparison with similar ones in other countries. the highest for the period under study are the indicators of the timeliness of cargo delivery, which positively characterize ukraine as a transit service. ukraine also has above-average scores on the sub-indices of freight transportation on average (2.80 points) and freight tracking systems (3.15). compared to the previous period, the transport infrastructure score decreases (from 2.69 to 2.2 points), which is primarily due to the depreciation of fixed assets in the industry and the condition of the road surface. the assessment of the customs service is the lowest because of inefficient administrative procedures and a high level of corruption. based on these indicators, we see that the current logistics potential of ukraine is used on average 2.83 points out of 5, and the structure of the overall coefficient reveals the main weaknesses of the system, including bureaucracy, limited and inefficient investment, lack of qualified personnel, the lack of pace of innovation technologies and european standards of logistics services. as ustenko m. a. notes, "participation in the globalization of the transport services market for the transport system of any state means: – active development and modernization of transport infrastructure, unification and universalization of vehicles, technologies, technical requirements; – abandonment of state regulation, which leads to the liberalization of all areas of transport, and thus to increased competition; – subordination of the activities of transport companies to the requirements of legislation and international agreements, increasing the transparency of the transport services market, increasing informational openness (including financial)" (ustenko and ivashkevich, 2017). the development of logistics activities in ukraine and promising opportunities for further growth of its share in gdp are determined by the following factors: – geographical location and available transit potential; – availability of an extensive transport network represented by all types of transport (road, air, rail, waterborne); – agricultural development; – growth of the trade and retail trade sector; – increase in the e-commerce market; – development of information and computer technologies and development of the communications sector. all of these factors combine to form a growing need for the development of a professional logistics market and the development of logistics infrastructure. at the same time, the paper agrees with the authors parkhaeva n. v. and kolosova b. v. that "today ukraine significantly lags behind the global level of development of logistics systems, and the deterrent factors include: the lack of road network development, the lack of modern freight terminals, the high level of depreciation of road, rail and other types of transport fleet, as well as its increasing obsolescence; a small number of high-quality modern warehouses with the necessary specialized equipment to meet global logistics needs; the low level of implementation of communication systems, due to which many logistics companies have difficulties in tracking logistics chains and the process of transporting goods across the country and abroad; poor development of the industry for the production of modern containers and packaging; an acute shortage of qualified professionals who are well-versed in modern principles of the baltic journal of economic studies 51 vol. 7 no. 5, 2021 organization of logistics schemes to promote material flows and have the skills to respond quickly to changing market conditions; the lack of an effective mechanism of partnerships between firms and enterprises" (parkhaeva and kolosova, 2020). research shows that despite the growing attention of state authorities and local governments to the development of transport infrastructure of territories, little attention is paid to the issue of warehouse logistics in strategic documents. the main objectives of strategies at all levels are, above all, the development of transport infrastructure (repair of roads, ports, modernization of airports and railway infrastructure). the authors believe that additional attention and stimulation of warehouse logistics development will increase business activity in the region and help solve a number of important issues, including economic (increased profitability of priority sectors of economic activity by reducing logistics costs, increased tax revenues to local budgets), social (employment growth, food security, human capital development) and environmental (construction of storage facilities in areas that do not have a significant impact on the environment, safety and quality control of transport and storage technology). this area of activity in ukraine is considered a business problem, as entrepreneurs are interested in building and equipping warehouses in accordance with the directions of business development. however, without the necessary conditions business will be limited to minimum investment to maintain a certain level of production and sales. indirectly, some areas of warehouse logistics are mentioned in strategic documents such as the "national transport strategy to 2030", "draft strategy of sustainable logistics and the government action plan", "strategy for reforming the life cycle management of infrastructure projects in ukraine 2020–2024", as well as the state regional development strategy for 2020–2027 and the strategy of social and economic development of regions until 2027. in particular, the transport strategy outlines the main objectives of the development of transport and logistics system of ukraine, including the development of warehouse logistics: – implementation of a mechanism to stimulate the gradual modernization and development of transport infrastructure, renovation of vehicles for the needs of the industry, including the improvement of the management system of transport infrastructure development and implementation of the transport network development plan based on the national transport model; – introduction of an effective tax mechanism to attract private capital to the development of various types of transport; – legislative improvement of the mechanism for the use of public-private partnerships in the implementation of transport infrastructure development projects; – transition to planned and stable financing of road construction and maintenance in the medium and long term; – improvement of legislation to develop a simplified mechanism for the seizure and redemption of land for the development of transport infrastructure, the concession of land for road construction and the registration of enterprises and organizations for the transport of land for use; – improvement of legislation and economic mechanism that promotes localization of the best innovative technologies for construction of transport infrastructure, production and renovation of rolling stock on the basis of domestic enterprises, in particular stimulating the development of their foreign economic activity by establishing customs privileges; – development of a transparent mechanism for prioritizing public procurement, their justified technical and economic feasibility, cost-benefit analysis; – implementation of long-term financial planning for the implementation of infrastructure projects in the transport sector in accordance with the strategic priorities, implementation timeframe and life cycle of transport facilities with the priority of projects related to the ten-t network; – creation of a unified system for coordinating, planning, attracting and monitoring international aid for the effective allocation of investments in accordance with the priorities for the development of the transport industry. in the regional dimension, warehouse logistics is seen as an important component and one of the leading business processes of transport and logistics systems. therefore, the strategy for the development of warehouse logistics can act as a cross-cutting project in the strategy for building transportation and logistics systems in the region and most effectively located in relation to the main objects of demand for the corresponding warehouse services. thus, the strategy of warehouse logistics is undoubtedly an important component of the transport and logistics infrastructure of the region and the national economy as a whole, and the effectiveness of its organization affects the formation of the logistics strategy of enterprises and determines the efficiency of their business processes. that is why an important task is to identify the main components influencing the strategic location and level of development of warehouse infrastructure at the macro-, mesoand macro-levels, to assess the main mechanisms of influence of these factors and determine the key tools to stimulate this type of economic activity. figure 1 systematizes the main factors that directly or indirectly influence the baltic journal of economic studies 52 vol. 7 no. 5, 2021 development of storage infrastructure in the regions and its specification in accordance with regional needs. the national transport strategy defines the main government priorities in the development of transport infrastructure in accordance with the strategic needs of the national economy, taking into account international relations of the country and the framework conditions for international cooperation in this area. an important element of the national strategy for the development of transport and logistics systems at the state level is also the development of international cooperation in this area, which determines the place of the state in the organization of international transport and logistics flows. in particular, the main strategic priorities and principles of the development of the transport system of ukraine in the framework of the signed association agreement between ukraine and the european union were discussed. the team of authors notes that "one of the main areas of national security of the country, a means of preserving its sovereignty and independence, a necessary condition for the implementation of strategic national priorities to ensure a high standard of living of the population is the food security of the country " (irtyshcheva, ponomarova & dolzhykova, 2019). table 1 systematizes the main principles of development of transport and logistics system of ukraine, aimed at harmonization and integration of domestic transport and logistics systems in the european network. macro-level factors affecting the development and arrangement of storage infrastructure include the strategy for reforming the life cycle management of infrastructure project in ukraine for 2020–2024, developed by the cabinet of ministers of ukraine, taking into account the provisions of the association agreement between ukraine and the european union. the purpose of the strategy is to improve the management of the life cycle of infrastructure projects implemented in the field of transport and logistics, the removal of barriers to the effective management of infrastructure projects in ukraine and the elimination of limiting factors for the sustainable development of transport systems. the implementation of the strategy provides for the implementation of the following measures: – improvement of the system of coordination of investment management in the transport sector; – ensuring the development of transport infrastructure within a single (unified) system of long-term and medium-term planning; – improving the process of preparation, evaluation and selection of investment projects in the field of transport in accordance with international experience; – an agreed definition of terminology, stages and procedures for infrastructure projects to eliminate technical barriers and ensure effective international cooperation; – implementation of the management model for infrastructure projects at all stages of their life cycle in accordance with iso 21500: 2012 "the project management manual"; – improvement of the monitoring system of the infrastructure project during its life cycle; – introduction of independent engineering supervision of construction; – introduction of standard forms of contracts and agreements for the provision of engineering services, ensuring the mandatory use of internationally recognized forms of contracts in the field of construction; – definition of requirements for business entities providing engineering services in accordance with the european experience, ensuring conditions for the formation and development of the engineering services market; table 1 the main directions of development of the transport and logistics system of ukraine in the context of european integration directions for the development of transport and logistics systems international agreements implementation of projects to attract financial instruments and funds of eu financial institutions – international technical assistance of the eu in the field of transport – cooperation with eu thematic programs and agencies in the field of air, sea, river and rail transport cooperation in the field of harmonization of legislation and existing standards – association agreement between ukraine and the european union, the european atomic energy community – regulatory framework of ukraine on the adaptation of ukrainian legislation in the fields of transport, tourism and postal services to the eu legislation participation in regional eu projects in the field of transport and logistic – eastern partnership – eu strategy for the danube region – interregional program traceca source: systematized by the authors baltic journal of economic studies 53 vol. 7 no. 5, 2021 – improving the procedures for the procurement of goods, works and services necessary for the implementation of transport infrastructure projects, in accordance with european practice, taking into account non-price selection criteria, life cycle costs and technical specification requirements; – for the introduction of information modeling of construction sites to create a regulatory framework; – assess the results of infrastructure projects by key performance indicators of the implementation of european experience; – improving the mechanism for implementing investment projects and improving the investment climate financed by international financial institutions; – providing continuous professional training of employees of state authorities, local governments, national transport strategy state management priorities development of the national system regulatory and legal support for the development of transport and logistics financial support for the implementation of projects scientific, technical, and personnel support infrastructure development projects in the regions the strategy of socio-economic development of the region macro-level perspective territorial development plan projects and programs for the development of territories and industries infrastructure development projects mechanism to stimulate infrastructure development at the local level regional level the company's warehouse logistics strategy development of own warehouse network partial outsourcing horizontal integration of storage systems full outsourcing micro-level figure 1. the main components of logistics management development strategy at the macro-, mesoand micro-levels source: systematized by the authors baltic journal of economic studies 54 vol. 7 no. 5, 2021 state-owned enterprises for investment management in modern market conditions. 3. the formation of a structural model of warehouse logistics development strategy in the region the implementation of these measures is designed to encourage investors in the field of transport and logistics infrastructure and unify processes, technologies and procedures in accordance with those in force in the eu. it is impossible not to agree with the opinion of scientists that "a significant problem in the formation of an integrated logistics infrastructure in the regions, in contrast to developed countries, is the lack of logistics hubs, which can optimally organize the distribution of material flows, inventory management, change of transport, as well as the provision of warehouse services. logistics centers that meet global standards for cargo handling are an integral part of the logistics infrastructure because they ensure its coordination, integration of circulation and transportation systems, and relationships with manufacturers, carriers, banks, insurance companies and consumers" (parkhaeva and kolosova, 2020). at the regional level, first of all, factors affecting the development of warehouse infrastructure and the development of warehouse logistics services: – the geographical location and available transport potential of the region; – the structure of the region's economy, which determines the prevailing specification of warehouses and logistics services; – the investment climate and the level of interregional integration; – the level of business activity of business entities in the region. the main components affecting the development of transport and logistics system of the regions are shown in figure 2. bringing these factors in line with current market needs and growing trends will facilitate the creation and development of logistics systems in the region and individual territories, as well as stimulate business activity in related sectors of the economy – trade, manufacturing, construction and agriculture. at the micro-level, warehouse logistics strategy of the enterprise is formed as part of the logistics (procurement and warehouse) strategy and depends on the specifics of economic activities, stocks, volume of activities and regional conditions. based on these the potential of tls available in region regional factors infrastructure natural and geographical location human potential international relations level of development automobile transport railroad transport water transport pipeline transport level of logistical support regional transport and logistics centers logistics intermediaries logistics clusters information systems and innovative potential of the region investment potential of the region management potential development of productive forces the state of the economy figure 2. system model to assess the level of development of transport and logistics system in the region baltic journal of economic studies 55 vol. 7 no. 5, 2021 features, the company as a whole can use one of the general strategies: the construction and use of their own warehouses; production cooperation (integration), partial outsourcing (when opening branches or opening new markets and full outsourcing of warehouse logistics, the strategy of direct delivery. thus, the basic principles for the development of warehouse logistics depend on the organization's overall strategy and the corresponding logistics strategy. the main criteria for warehouse logistics in the development of the strategy are the level of logistics costs and the quality of warehouse procedures (storage conditions, inventory placement, labeling, shipment, grouping of goods, accounting). researcher palchyk i. m. notes that "the application and selection of optimal logistics strategies can be based on three key parameters: the planned logistics costs (because they will determine the financial support strategy), the quality of logistics services (this parameter will determine customer satisfaction with the logistics system) and enterprise revenue (the results of logistics strategy)" (palchyk, 2016). based on the study, a generalized definition of the development strategy of warehouse logistics as an integrative component of the management of territorial transport and logistics systems and contributing to the reduction of their logistics costs can be given. composite strategies of regional warehouse logistics substantiate the choice of alternatives for placing warehouses in relation to transport and production infrastructure, the number, levels and directions of their specialization, cargo handling technologies, forms and sources of financing construction (modernization) projects, the list of qualification requirements and standards of construction and service provision. approximately schematically we can reconstruct the model of warehouse logistics development strategy in the regions by structure and attributes (figure 3). in this case, the specification of individual components and their strategic orientation is determined in accordance with regional specifics, namely the economic structure, geographical location and topography of territories, the role in national and international transport and logistics chains, socio-economic development strategies, long-term development plans, etc. this model is based on an overall transportation strategy and includes: 1) conditions necessary for the development of storage infrastructure and organization of logistics activities in the region (information, financial, personnel and organizational support), i.e., identified alternatives for organizational and resource support of the storage infrastructure, corresponding to the specifics and strategic priorities of the transport system and the economy as a whole; 2) identified alternatives of the necessary scale and location (for the main transport routes, producers or consumers), the requirements for the technologies used in warehouse logistics and the relevant technical, design, environmental standards for the construction, handling, storage and transportation of goods and the conditions of their insurance and payment; 3) types and forms of organizational links between economic entities, economic and state bodies, subjects of territorial administration, other holders of the state. the development of logistics systems in the regions is facilitated by developed organizational forms of links created on the basis of cluster formations, public-private partnerships and interterritorial agreements. an important element of the strategy for the development of warehouse infrastructure is to justify the criteria for assessing this type of business in terms of its impact on the economy, social and environmental situation of the region or territories and business складська інфраструктура регіону (території) scale, location, capacity technologies, standarts, specifications personnel support organizational and economic relations financial support information support organizational support performance criteria for project implementation warehouse infrastructure of the region (territories) figure 3. structural model of the development strategy of regional warehousing logistics source: suggested by the authors baltic journal of economic studies 56 vol. 7 no. 5, 2021 development. thus, at the regional level, the main criteria for the effectiveness of warehouse logistics can be: – economic (increased tax revenues, increased business activity, increased investment in the region, increased exports and imports); – social (increase of population incomes, strengthening of food security, reduction of prices for delivery of goods); – ecological (placement of storage facilities in areas of no significant value in terms of preservation of regional ecosystems; reduction of environmental pollution; compliance with environmental standards of storage, especially of harmful substances, agriculture and food industry). the practice of countries with developed economies has proven that the availability of storage facilities and appropriate transport infrastructure in the regions creates a competitive advantage of these territories in terms of attracting investment and opening various types of business. that is why one of the priority directions of development of regional logistics systems is the formation of transport and logistics parks. the advantages of creating transport and logistics parks in the region are obvious, in particular: – adapting to the trade and production needs of the region will optimize the costs of local producers and trade organizations; – the establishment in the project of unified standards of european quality, technology, management and environmental safety, which will improve the image of the region in international markets and contribute to the integration of the national economy into the world transport and logistics systems; – a component of infrastructural support and integration basis for the formation of territorial production clusters; – promoting the integration of the region into the global logistics chains of e-commerce; – alignment of economic, socio-economic develop ment of territories through the construction (reconstruction) of transport hubs; – expanding the volume of foreign economic activity and attracting additional investment to the region; – creation of new jobs and strategic prospects for the development of human capital. in addition to regional benefits, the development of warehouse logistics, provided with the appropriate transport infrastructure, will have significant benefits for business, indirectly contributing to its competitiveness in domestic and foreign markets by reducing transport and logistics costs, the timely delivery of products to consumers, reducing the risk of damage. in other words, businesses will have an alternative – to carry out storage and other logistics operations themselves or to use the services of appropriate logistics operators. at the current stage of the gradual transformation of socio-economic development of regions and the implementation of the reform of budgetary decentralization, there are a number of acute problems associated with the financial provision of social development, guaranteeing social standards for the population, improving the quality of social services. the problems have also been exacerbated by a general economic crisis, military action in the east of the country, and significant political turbulence, which has led to chronic budget deficits, underfunded social programs, and exacerbated social crises (stehnei, irtyshcheva & gurina, 2018). the formation of transport and logistics centers in the regions is aimed at the formation of partnerships between producers and consumers of products through a flexible system of interaction between different types of transport and to ensure quality storage of goods and inventory. in general, the work of the transport and logistics center of the region can be represented as a diagram (figure 4). the efficiency and competitiveness of transport and logistics centers is determined by the existing infrastructure, the level of technology and professionalism of services, the level of competence and skills of staff and the digitalization of logistics operations. globalization processes have stimulated the formation of a world market, which has greatly increased the need to improve the competitive position of commodity producers (vyshnevska, kaliuzhna & irtyshcheva, 2019). transport and logistics centers act as intermediaries in the organization of interaction between producers and consumers of goods and indirectly influence the business climate in the region, business activity and integration of the region in production and economic relations at various levels. it should be noted that in recent years the processes of transformation of domestic transport organizations into logistics operators, providing a wider range of logistics services, have been quite active. in addition, there is an active promotion of global logistics companies, which stimulates competition in the industry and promotes the development of business processes. thus, the top five most powerful logistics companies operating in ukraine in 2020, according to the ministry of transport, included mostly companies with foreign capital: küehne + nagel (switzerland), dsv logistics (denmark), fm logistics ukraine (france), raben (netherlands), ekol ukraine (turkey). it is worth noting a significant increase in turnover and capital and domestic logistics operators, the most powerful of which are: zammler , logistic-plus, uvk baltic journal of economic studies 57 vol. 7 no. 5, 2021 and pakline logistics. each of these logistics companies has its own warehouses of various types in ukraine and abroad. thus, the main areas of development of warehouse logistics, which require increased attention and assistance at the regional level, are: – implementation of public-private partnership projects in the construction and equipping of warehouses for priority economic activities of the region, which will allow, on the one hand, to receive direct payments to the budget in the form of profit from transport and logistics services and exercise a certain control over the regional economic impact. food and environmental safety, and on the other hand – to attract private investment on a parity basis; – administrative assistance in the construction (allocation of land, permits, information support) and technological re-equipment of warehouses, provided that investors comply with environmental, technical and other standards; – the introduction of transparent bidding procedures and public procurement for warehousing logistics services; – stimulation of investment and innovation activities in the region; – development of regional training and retraining programs for logistics specialists; – information and organizational support in the formation and development of regional business structures (clusters, logistics centers, technology parks, etc.). 4. conclusions it is emphasized that the multiplier effect of investment in transport and logistics does not work by itself, but requires effective management of the regional economy, a high level of business activity in the leading sectors of the regional economy and successful spatial planning. the identified multiplier indicators and their trends in the regions show that investment in the development of transport and, in particular, infrastructure is one of the important incentives for regional economic development. at the same time, the investment gas pedal indicators in dynamics show a downward trend in all regions, which indicates an insufficient level of funding for transport and logistics support against the background of the gradual growth of the regional economy. achieving the acceleration and multiplier effect of investment in the transport and logistics sector requires a comprehensive analysis and rational planning of capital investments in the industry, their compliance with the needs and trends of development of the regional, national and world economy. in this regard, an urgent task at the level of regional and territorial administrations is to develop strategies for the development of warehouse logistics as an integrative component of transport and logistics systems. to clarify the nature, main tasks and role in the development of transport and logistics structures in the region offers a structural model of the development strategy of warehouse logistics, which systematizes: the conditions necessary to build a warehouse transport and logistics center of the region (territory) manufacturers complex of transport and logistics services information exchange pu rc ha se r ea lis at io n transportation transportation planning, delivery organization, control warehousing planning, inventory management, forecasting information, legal, administrative, insurance support consumers figure 4. business processes of transport and logistics services within the transport and logistics centers of the region source: summarized by the authors baltic journal of economic studies 58 vol. 7 no. 5, 2021 infrastructure and organization of logistics activities in the region; identified alternatives for the necessary scale, location of technologies and communications of storage systems, as well as the types and forms of organizational links between market participants that are directly or indirectly related to these activities. references: irtyshcheva, i., ponomarova, m., & dolzhykova, i. (2019). conceptual fundamentals of development of the food security system. baltic journal of economic studies, 5(2), 57–64. doi: https://doi.org/10.30525/2256-0742/20195-2-57-64 official website of the world bank available at: https://lpi.worldbank.org/international/scorecard/radar/254/ c/ukr/2016/c/ukr/2014/c/ukr/2012/c/ukr/2010/c/ukr/2007?sort=asc&order=infrastructure# datatable (accessed may 18, 2021). ustenko, m. a., & ivashkevich, v. s. (2017). prospects for the development of transport and logistics systems of ukraine. bulletin of transport economics and industry, 59, 84–90. parkhaeva, n. v., & kolosova, b. v. (2020). problems and prospects for the development of logistics infrastructure in ukraine. available at: http://eir.pstu.edu/bitstream/handle/123456789/5735/%20.%20259. pdf ?sequence=1 (accessed may 19, 2021). stehnei, m., irtyshcheva, i., & gurina, o. (2018). financial mechanism of the socio-oriented economic development of the black sea region. baltic journal of economic studies, 4(4), 202–208. doi: https://doi.org/ 10.30525/2256-0742/2018-4-4-202-208 on approval of the national transport strategy of ukraine for the period up to 2030 (2021). available at: https://zakon.rada.gov.ua/laws/show/430-2018-%d1%80#text (accessed may 19, 2021). sustainable logistics strategy and government action plan (draft for consideration) (2021). available at: https://mtu.gov.ua/files/logistics.pdf (accessed may 19, 2021). strategy for reforming the life cycle management of the infrastructure project in ukraine for 2020–2024 (2021). available at: https://mtu.gov.ua/content/investoru.html (accessed may 19, 2021). state strategy for regional development for 2020–2027 (2021). available at: https://www.kmu.gov.ua/npas/prozatverdzhennya-derzhavnoyi-strategiyi-regionalnogo-rozvitku-na-20212027-t50820 (accessed may 19, 2021). vyshnevska, o., kaliuzhna, o., & irtyshcheva, i. (2019). infrastructure provision of the agrarian market in the globalized environment. baltic journal of economic studies, 5(5), 39–46. doi: https://doi.org/10.30525/22560742/2019-5-5-39-46 palchyk, i. m. (2014). formation of logistics strategy of the enterprise in modern business conditions. efficient economy, 11. available at: http://www.economy.nayka.com.ua/?op=1&z=3575 (accessed may 20, 2021). ministry of transport (2021). available at: https://mintrans.news/logistics/top-10-naybilshikh-logistichnikhkompaniy-ukraini (accessed may 20, 2021). baltic journal of economic studies 260 vol. 7 no. 5, 2021 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: artolena11@ukr.net orcid: https://orcid.org/0000-0003-2041-8925 2 private higher education establishment "academician stepan demianchuk international university of economics and humanities", ukraine. e-mail: zakhist@ukr.net orcid: https://orcid.org/0000-0003-1789-0647 3 national university of kyiv-mohyla academy, ukraine. e-mail: kurylo.l@gmail.com orcid: https://orcid.org/0000-0001-5131-0146 4 national university of life and environmental sciences of ukraine, ukraine. e-mail: kovalyeva@gmail.com orcid: https://orcid.org/0000-0002-7617-3595 5 state fiscal service university of ukraine, ukraine. e-mail: knyazka@ukr.net orcid: https://orcid.org/0000-0003-0357-2680 doi: https://doi.org/10.30525/2256-0742/2021-7-5-260-267 the importance of the state ensuring the right of citizens to quality medical care in the context of the vaccination of covid-19 olena artemenko1, lubov krupnova2, lіudmyla kurylo3, svitlana kovalova4, liliia kniazka5 abstract. the article analyzes the state guarantee of citizens' right to quality medical care in terms of vaccination against covid-19. it has been established that in modern conditions it is extremely important to ensure the proper functioning of health care, the provision of quality medical services, which, in turn, will guarantee proper medical care. at the time when the world has already entered the stage of eradicating coronavirus disease, through mass vaccination, the role of state regulation of these activities increases significantly. the state must provide ukrainian citizens not only with vaccines, but also with reliable information about the need for vaccination. it turns out that the small number of vaccinated people in ukraine is not only due to the slow pace of procurement and vaccination, but also to the lack of awareness of citizens about all the benefits of the need for vaccination. the main vaccination rates in the world and ukraine as of mid-april 2021 have been determined. it is concluded that the positive in today's conditions are: the efforts of the legislator still not to influence the subjective choice of every resident of ukraine on the need for vaccination; regulatory support of the center for public health, which in turn will strengthen the network of regional centers for disease control and prevention (сdc); creation of a roadmap for the introduction of a vaccine against acute respiratory disease covid-19 caused by the coronavirus sars-cov-2. at the same time, negative aspects remain: public ignorance of the importance of vaccination, the slow pace of vaccination, and delays in approving the necessary vaccine doses, which in turn undermine the authority of the state and its bodies in the context of human rights to quality health care. proposals are made to focus the attention of public authorities and local governments on the information component of ensuring the right of citizens to quality health care in the context of vaccination against covid-19. key words: citizens, legal culture, medical care, covid-19, state authorities. jel classification: i11, i19 1. introduction with the world gripped by a global health crisis and the world health organization (who) declaring a pandemic due to the spread of the covid-19 coronavirus infection, human rights are becoming a priority. it should be noted that states impose certain restrictions on certain human rights in order to protect public health in the context of the covid-19 coronavirus pandemic. only in ukraine, during the second year of the fight against coronavirus infection, the ukrainian government introduced baltic journal of economic studies 261 vol. 7 no. 5, 2021 several blockages. it should be recognized that such actions did help to contain the spread of the virus for some time. at the same time, such restrictions must comply with generally accepted standards in the field of human rights. it is worth noting that the relevant issue is the formation of the level of legal culture of compliance with social regulations and awareness of socially significant positive behavior of citizens in relation to other members of the community. even the imposed blockages in ukraine have not reduced the dynamics of reducing the total number of patients with coronavirus infection covid-19 for the period 2019–2021. at the same time, eu countries show a dynamic in decreasing the total number of patients compared to the pandemic years for the period 2019–2021. eu citizens behave consciously toward other members of society. examples include keeping a distance when in a public place and wearing a mask. at a time when the world has already entered the stage of mass vaccination, the role of government provision of not only vaccines, but also of informing citizens about the importance of combating covid-19 coronavirus infection in this way is increasing. due to the fact that ukraine is not purchasing the first vaccines and the fact that a certain portion of its citizens have received the first doses of the vaccine, there is a need to explore such state support regarding the right to adequate medical care in the process of vaccination against covid-19. therefore, the purpose of the work is to study the state provision of the right of citizens to quality health care in the context of vaccination against covid-19. an analysis of recent studies and publications shows that scholars and researchers are very interested in ensuring human rights in the context of covid-19. scientific value and relevance. at the same time, some aspects of our study were covered in the works of the following scientists: v.m. lekhan, d.v. karamishev, j.f. radish, n.m. udovichenko, l.v. domnikov and others. 2. aim and tasks the purpose of the study is to establish and analyze: – the duty of the state to create conditions in ukraine aimed at protecting human life and health; – the current state of state support for the realization of the right of citizens to quality medical care in terms of vaccination from сovid-19; – ensuring the right and existence of the choice of types of vaccine against coronavirus infection covid-19; – coverage of the formation of consciousness and legal culture of citizens in the context of compliance with the rules of sanitary and epidemiological measures aimed at combating coronavirus infection covid-19. the study analyzes the content of public administration, examines the vector of management measures to form the administrative apparatus of health care management, the use of preventive measures and penalties for violations of sanitary and epidemiological measures to control covid-19 coronavirus infection in public places, as well as suspension from work. the following tasks are determined depending on the goal: – describe the administrative and legal measures to combat coronavirus infection covid-19; – focus of public authorities and local governments on the information component of ensuring the right of citizens to quality medical care in the context of vaccination against covid-19; – to pay attention to the information component of ensuring the right of citizens to quality health care in the context of vaccination against covid-19 and establishing the role of public authorities and local government; – to determine the state of legal culture of citizens in the context of vaccination and compliance with the rules of sanitary and epidemiological measures aimed at combating covid-19 coronavirus infection. 3. presentation of the main material to begin with, it is worth noting the basic legal norms directly related to health care for citizens, as well as the role of the state in this process. according to art. 49 of the constitution of ukraine "everyone has the right to health care, medical assistance and medical insurance". in addition, paragraph 3 of this article stipulates that "the state creates conditions for effective and accessible medical care for all citizens. in state and municipal health care facilities, medical care is provided free of charge; the existing network of such establishments cannot be reduced. the state promotes the development of medical institutions of all forms of ownership" (constitution of ukraine). article 3 of the law of ukraine "fundamentals of health care legislation of ukraine" defines medical assistance as "the activity of health care institutions, rehabilitation institutions, departments, units and individuals – entrepreneurs, registered and licensed in the manner prescribed by law, in the field of health care, which is not necessarily limited to medical care and/or rehabilitation assistance, but directly related to their provision" (law of ukraine № 2801-xii). protection of human life and health is recognized as one of the priorities of public policy (lytvyn, artemenko, 2021). guarantees of human and civil rights and freedoms are a system of specific means baltic journal of economic studies 262 vol. 7 no. 5, 2021 by which citizens realize the effective exercise of their rights and freedoms, their protection, and their defense in the event of violation. their main purpose is to provide everyone with equal legal opportunities to acquire, exercise, protect and defend subjective rights and freedoms (gusareva, tikhomirova, 2017). thus, guarantees of human rights and freedoms are the totality of all factors in the economic, political, state, cultural, and other spheres that contribute to the full realization of his rights. the right to health care and the proper provision of medical services and care is inherent to a person from birth, is realized every day, is protected by the state and has a system of protection of the violated right. karamishev d.v. determined that the most pronounced objective factors in the low level of health of citizens, and thus in the efficiency of the industry and the quality of health care, are primarily the lack of awareness among citizens about the opportunities available in their health care system and the threats that arise. low trust in medical facilities, non-compliance with safety, hygiene and sanitation rules were the main factors affecting human health and life. today, due to the large-scale coverage of the planet by viral infection, society needs a significant transformation of the culture of behavior and awareness of the consequences of violations of preventive measures (karamishev, 2007). given the pandemic impact on society, it can be stated that new factors are emerging that affect the increase in the total number of patients with coronavirus infection covid-19. such factors include: – first, the low level of timely access to the necessary assistance to health facilities; – second, violation of the basic rules of hygiene and anti-epidemic measures: distance, mask mode; – third, due to the lack of real control by the state over the preservation of health in society; – fourth, the lack of actual control over the observance of anti-epidemic rules by citizens in public places. according to karamishev d.v., the state measures to be envisaged should be very simple – the promotion of the ideology of a healthy lifestyle, employment control, and medical examinations. thus, state policy in the field of health care should be aimed at ensuring the high priority of health in the system of social values of society, to promote the attention of each person to their own health (karamishev, 2007). what is important for our study, based on the scientist's position, is that indeed the citizens of ukraine do not have a proper level of awareness of the capabilities of the health care system, which is extremely important when vaccinating ukrainian citizens against the covid-19 coronavirus infection. the right to health care is one of the most important social human rights, which is enshrined not only in the regulations of ukraine, but also in international acts, namely: human rights instruments of the un, who, ilo and resolutions of international forums. the right to health is also regulated in the universal declaration of human rights, the convention on human rights, the convention on the elimination of all forms of discrimination against women and others. it is also worth noting that it belongs to the group of economic, social and cultural rights that fall under the rights of the second generation. it is noted that today the main lever of influence on the formation of medical services belongs to such state body, the central body of executive power – the ministry of health of ukraine. in addition, its subdivisions specialized in quality control of medical services are represented by the department of medical services, the medical department, the department of licensing and quality control of medical services, the department of emergency and disaster medicine (artemenko, lytvyn, 2021). the right to health care is one of the most important social human rights, which is enshrined not only in the regulations of ukraine, but also in international acts, namely: human rights instruments of the un, who, ilo and resolutions of international forums. the right to health is also regulated by the universal declaration of human rights, the convention on human rights, the convention on the elimination of all forms of discrimination against women, and others. it is also worth noting that it belongs to the group of economic, social and cultural rights, which are second-generation rights. in order to fully ensure the opportunity for everyone to exercise this constitutional right, certain levers or tools are needed from the state, represented by its bodies. one such mechanism is the institution of service provision, in particular medical services, the formation of which to a certain extent depends on the subjects of state administration (artemenko, lytvyn, 2021). today, the main health care institution responsible for preserving and strengthening the health of citizens is the public health center of the ministry of health of ukraine (cgh). in addition to the above, the state institution has the authority to carry out social and hygienic monitoring of diseases, epidemiological surveillance and biological safety, group and population prevention of diseases, control of epidemics and strategic management in the field of public health. the state institution was established to implement the order of the cabinet of ministers of ukraine by the order of the ministry of health of ukraine dated 18.09.2015 № 604. the main task of the center for public health is to work in the field of public health. the center performs treatment-and-prophylactic, scientificpractical and organizational-methodical functions baltic journal of economic studies 263 vol. 7 no. 5, 2021 in the field of health care in order to ensure the quality of treatment of patients with socially dangerous diseases, in particular from coronavirus infection covid-19. cgc participates in the formation of regulatory policy and interacts with other ministries, research institutions, international and nongovernmental organizations working in the field of public health and combating socially dangerous diseases. based on the topic of the research topic, it can be noted that starting from its own vision, the state institution "public health center of the ministry of health of ukraine" should be a national leader in forming a culture of health among citizens of ukraine. being on guard to strengthen, preserve and protect the health of the citizens of ukraine cgs within the professional community through continuous training, development and improvement of the educational professional environment, developing professional and educational standards. protecting the right to inform the citizens of ukraine, the center provides reliable data on the sick. promotes rules of conduct that include the status of epidemic measures. of course, in cooperation with public authorities and local governments, to overcome the dynamic increase in the number of patients and encourage citizens to vaccinate, the cpc forms the evidence base for the preparation of management decisions and regulations, which today must be operational and dynamic, as flexibility and speed of public response directly affects the stable sanitary and edematous state of citizens (public health center of the ministry of health of ukraine). it should be noted that on february 4, the verkhovna rada of ukraine adopted in first reading the draft law № 4142 "on the health care system". the bill is the result of joint work during the last 3 years of the expert community and international partners (who, eu, usaid). this bill aims to create a full-fledged national epidemiological service. in fact, the center for public health will be strengthened by a network of regional centers for disease control and prevention (cdc). tsgz, will be the main expert institution, which will be responsible for coordinating the activities of this network in the framework of epidemiological surveillance and response to hazards. сdcs will be set up around regional facilities – laboratory centers, regional public health centers, statistics and monitoring and evaluation units. these centers will be fully responsible for their own region – from routine monitoring of indicators to forecasting, detection of emergencies, outbreaks and response to them (draft law of ukraine № 4142). first of all, what should be emphasized, based on the provisions of the aforementioned draft law, is the norm concerning mandatory vaccination against coronavirus infection. it should be noted that the majority of citizens of ukraine are not supporters of such compulsory vaccination. and their actions can be explained on the basis that people do not want to be vaccinated against what the state imposes on them, so the chairman of the committee on national health, medical services and health insurance mykhailo radutsky said that the bill was passed in the first reading, and in preparation for the second reading the section on vaccinations will be excluded. therefore, the issue of vaccination in ukraine will continue to be regulated by current legislation (radutsky, 2021). this seems quite acceptable, because it is impossible to force a person to do something against his will, which has been repeatedly emphasized in international conventions, pacts and, above all, in the constitution of ukraine. at the same time, if we turn to the case law of the european court of human rights (echr), especially since its decision is a source of law for our country, it is possible to cite the following theses. in pretty v. united kingdom (no. 2346/02) it was stated that in the provision of medical care, even when the refusal of a certain method of treatment could be fatal, forced medical treatment without the consent of an adult legally capable patient constituted an interference with his right to physical integrity and a violation of the rights guaranteed by article 8 of the european convention (pretty v. united kingdom, 2002). the echr also noted that in order to preserve the sense of freedom to refuse treatment, it is necessary for the patient to have the right to make decisions in accordance with his or her own views and values, no matter how irrational, unreasonable and short sighted they may seem to others (case № 302/02). but in paragraphs 85 and 136 of the decision, the court stated that the state has an interest in protecting and preserving the life and health of its citizens. in certain cases, these interests will prevail over a citizen's right to self-determination. the state can require citizens to undergo medical procedures to address the threat of harm to citizens' health (pretty v. the united kingdom, 2002). thus, based on the topic of our study, if we are talking about eliminating the threat of harm to the health of citizens of ukraine (in conditions of covid-19 it is especially relevant), the state must ensure an appropriate level of quality of medical care, including vaccination of its citizens. it is known that as of mid-april 2021, three vaccines have already been imported into ukraine from various manufacturers in the global community. without going into what these vaccines are, what their origin or manufacturer is, here's just the number. the first vaccine received 500,000 doses, the second vaccine 215,000 doses, and 367,000 were received more recently. the total number of vaccines imported baltic journal of economic studies 264 vol. 7 no. 5, 2021 is just over 1 million, whereas according to official data of the state statistics service of ukraine, as of march 1, 2021 there were 41.5 million citizens of ukraine (official data, 2021). thus, it can be said that ukraine cannot boast of a high rate of vaccine procurement, including the pace of vaccination of ukrainian citizens, because as of mid-april 2021 just over half a million ukrainian citizens received only the first dose of the vaccine (by the way – it is planned that the human immune system will be able to resist the virus only after the second dose) and several people the second dose. according to official data from the ministry of health of ukraine, vaccination against covid-19 started in ukraine on february 24, 2021. a total of 20,950,877 vaccinations were administered from the start of the campaign until november 1, 2021. the number of persons vaccinated against covid-19 received one dose, a total of 12,228,642 persons, received two doses, a total of 8,722,235 persons, which is 21.9% of all ukrainian citizens (coronavirus vaccination statistics (covid-19, 2021). if to compare the level of vaccination in ukraine with european countries, it is possible to draw the following statistics. comparing in the percentage of citizens: ukraine 1.22%, uk 48.78%, israel 58.43%, malta 45.62%, uae 50.89%, hungary 36.40%, france 20.29%, chile 40.78%, sweden 19.81%, uzbekistan 1.35%, japan 1.32%, turkey 15.04%, poland 19.33%, canada 26 , 79% (coronavirus vaccination statistics (covid-19, 2021). such indicators of vaccination in ukraine indicate not only a rather slow pace of procurement and implementation of vaccination among citizens, but also the lack of awareness of citizens about all the advantages and necessity of such vaccination. it should be noted that it is primarily the duty of the state to provide citizens with information about: the importance and necessity of vaccination; the number of imported vaccines; the advantages and disadvantages of this or that type of vaccine. it is equally important to carry out explanatory work among the citizens of ukraine, to form the concept of medical literacy and awareness in the minds of everyone, to ensure the right of everyone to quality medical care. regarding informing the citizens of ukraine about vaccination, it is worth mentioning in the scope of our study such a legislative act as the order of the ministry of health of ukraine "on approval of the roadmap for the introduction of vaccine against acute respiratory disease covid-19 caused by coronavirus sars-cov-2, and mass vaccination in response to the covid-19 pandemic in ukraine in 2021–2022" (order of the ministry of health of ukraine № 3018). it should be noted that this order should become an information act for citizens of ukraine. which should contain the following information: – regarding available vaccines; – studies on each type of vaccine; – the ability of each type of vaccine to counteract coronavirus infection; – possible consequences for humans after receiving each dose of the vaccine. after all, his introduction contains the following thesis: "roadmap for introduction of vaccine against acute respiratory disease covid-19 caused by sars-cov-2 coronavirus and mass vaccination in response to pandemic coronavirus covid-19 disease in ukraine (hereinafter – roadmap) was developed to ensure adequate and equal access to effective vaccine against acute respiratory disease covid-19 caused by sars-cov-2 coronavirus (hereinafter referred to as covid-19 coronavirus disease) for all citizens of ukraine who should receive it, as well as to control related processes" (order of the ministry of health of ukraine № 3018). however, when analyzing this regulatory act, in terms of its compliance with the expectations that every average citizen would like to see, we should note its imperfection, as indicated by the chief sanitary doctor of ukraine – it is necessary to completely revise the roadmap for vaccination against coronavirus, as the task is to vaccinate 70% of adult citizens by the end of 2021 (lyashko, 2021). but based on the rate of vaccination and the number of vaccines, in our opinion, it will be extremely difficult. according to v.m. lehan, the state through the executive authorities, local governments or other bodies authorized by it should perform the functions of organizing medical care and financial reimbursement of medical services, ensuring the realization of expectations, rights and legitimate interests of all groups of health care and balance between them. at the same time, it should also take care of ensuring control over expenditures and rational use of public financial resources allocated to the health sector (lehan, 2015). agreeing with the position of v.m. lehan, it can be said that the state, represented by the authorized bodies of state power and local self-government is obliged to take responsibility for creating appropriate conditions for medical care of citizens associated with the free choice of a particular type of vaccine, to ensure the expectations, rights and legitimate interests of all groups of participants in the health care system and the balance between them. given the state's current realities of ensuring the nation's health, state agencies have begun to take the following steps. first, a number of restrictions were developed and implemented by the protocol of the standing baltic journal of economic studies 265 vol. 7 no. 5, 2021 committee on technogenic and ecological safety and emergencies dated 28.10.2021 № 68, such as: – only those with a negative pcr test or antigen test within 72 hours will be able to use public transportation. and a certificate of vaccination with one or two doses. it is also possible to use public transportation with a certificate of convalescence; – the obligation to check whether passengers have vaccination certification documents is incumbent on both the driver and special groups of law enfor cement agencies. checks are carried out selectively, not at stops, but directly in the transport; – it is prohibited to be without masks covering the nose and mouth in the underpasses, at bus stops, on the territory of health care and educational institutions. in other places of common use it is possible to be without a mask only on condition of social distance in one meter. according to article 12 of the law of ukraine "on protection of citizens against infectious diseases" and article 27 of the law of ukraine "on ensuring the sanitary and epidemiological welfare of citizens", employees of certain professions, industries and organizations whose activities may lead to infection of these workers and the spread of infectious diseases are subject to compulsory preventive vaccination also against other relevant infectious diseases. the ministry of health, by its order on approval of the list of professions, industries and organizations, whose employees are subject to mandatory preventive vaccination, included in the list of professions subject to mandatory vaccination against covid-19, employees of: the central executive authorities and their territorial bodies; local state administrations and their structural subdivisions; institutions of higher, postgraduate, professional higher, professional (vocational), general secondary, including special, preschool, out-of-school education, institutions of special education and scientific institutions, regardless of type and form of ownership (order of the ministry of health of ukraine № 2153). in case of refusal or evasion of mandatory preventive vaccinations, these workers are suspended from performing these types of work (article 12 of the law of ukraine "on protection of citizens from infectious diseases"). but it should be noted that vaccination is mandatory in the absence of absolute contraindications to preventive vaccinations, according to the list of medical contraindications and warnings to preventive vaccinations, approved by the order of the ministry of health of ukraine from 16.09.2011 № 595, registered in the ministry justice of ukraine 10.10.2011 for № 1161/19899 (as amended by the order of the ministry of health of ukraine dated 11.10.2019 № 2070). the ministry of justice of ukraine concluded that order of the ministry of health № 2153 complies with the convention for the protection of human rights and fundamental freedoms, in particular article 8 of the convention on the right to respect for private and family life, and the case law of the european court of human rights. thus, if the question of compulsory vaccination of employees from the above list is raised in the above order, it can be concluded that it cannot be done only by those employees who have absolute contraindications to preventive vaccination. the list of medical contraindications and warnings for vaccination against covid-19 is explained by the ministry of health of ukraine. contraindications to vaccination can be deter mined by the family or treating physician and an appropriate opinion on temporary or permanent contraindications. if additional information about the verification of the diagnosis, the course of the disease, or the need for additional examinations is needed, the doctor may also refer the patient to a specialist, after which he or she will finally decide whether to vaccinate or postpone it until a certain time. if a patient has a contraindication to one of the covid-19 vaccines, he or she should be vaccinated with other types of vaccines if possible. in the future, it will be possible to enter a second dose contraindication or a general contraindication to vaccination in the electronic health system. in addition, there are contraindications to the introduction of certain vaccines, such as coronavac from sinovac biotech is contraindicated in pregnant women. if there are questions about choosing a vaccine, talk to the family physician. recall that antibody testing or other laboratory tests are not required before vaccination with covid-19. thus, in particular, in accordance with the resolution of the cabinet of ministers of ukraine № 1236 (as amended), it is the heads of state bodies (public service), heads of enterprises, institutions and organizations must ensure: 1) control of compulsory preventive vaccinations against covid-19 by employees and civil servants, whose compulsory preventive vaccinations are provided by the list of professions, industries and organizations, whose employees are subject to compulsory preventive vaccinations, approved by order no. 2153 of the ministry of health of october 4, 2021; 2) dismissal of employees and civil servants, the obligation of preventive vaccinations against covid-19 which is listed and who refuse or evade such mandatory preventive vaccinations against covid-19 in accordance with article 46 of the code of laws on work of ukraine, part two of baltic journal of economic studies 266 vol. 7 no. 5, 2021 article 12 of the law of ukraine "on protection of citizens from infectious diseases" and part three of article 5 of the law of ukraine "on civil service", except for those who have absolute contraindications to such preventive vaccinations against covid-19 and provided a medical opinion about the presence of contraindications to vaccination against covid-19, issued by a health care institution; 3) taking note that: – at the time of such removal, remuneration of employees and civil servants is carried out taking into account part one of article 94 of the labor code of ukraine, part one of article 1 of the law of ukraine "on remuneration" and part three of article 5 of the law of ukraine "on civil service"; – removal of employees and civil servants is carried out by issuing an order or directive of the head of a state body (civil service) or enterprise, institution, organization with its obligatory notification to the persons being removed; – the period of suspension is set until the causes that caused it are eliminated. it should be noted that there is no definition of "dismissal" in the legislation of ukraine, so there are some difficulties in how to do it correctly. it is necessary to proceed first of all from the fact that in practice dismissal means suspension of labor relations (temporary release of the employee from the obligation to perform work under the concluded employment contract and, in turn, temporary release of the employer from the obligation to provide the employee with work or create conditions for its implementation and, accordingly, to pay wages. it is important to understand that the temporary removal of an employee from duty by way of dismissal (on the conditions and grounds established by law) is not a disciplinary sanction in itself, but a special preventive measure. this measure is applied in exceptional cases and is aimed at preventing and/or preventing negative consequences. dismissal in this case does not necessarily entail the termination of the employment relationship. the employee's job is kept for the period of dismissal. as a general rule, dismissal of an employee is carried out by the employer on the grounds provided by law on its own initiative (such grounds, including those listed in the above laws and the cabinet of ministers resolution № 1236). removal from work is made out by the order (order) of the employer. it should state the basis and terms of dismissal. the employee must read such an order immediately under the list, as it concerns the exercise of the employee's right to work. given that the dismissal order will not specify the specific period of dismissal, it is necessary after the removal of all the grounds that caused such dismissal, to issue an order of admission to work. it is advisable to inform the dismissed workers about the consequences of such a temporary measure. there are several of them. – in case of dismissal of the employee with termination of salary payment, temporary disability allowance is not granted (article 22 of the law of ukraine "on compulsory state social insurance" provides that temporary disability allowance is granted to the insured person as full or partial compensation, which he loses due to illness or other insured events). during the period of dismissal without pay, social insurance contributions are not paid, and such a period is not included in the insurance record. – according to article 82 of the labor code, article 9 of the law of ukraine "on vacation", the period of dismissal of an employee does not count in the length of service, which gives the right to annual leave. the employer should also pay attention to the provisions of article 44-3 of the code of administrative offenses of ukraine "violation of the rules on quarantine of people", which stipulates that violation of the rules on quarantine of people, sanitary and hygienic, sanitary and anti-epidemic rules and norms of the law of ukraine protection of citizens from infectious diseases", other acts of legislation, as well as decisions of local governments on combating infectious diseases – entails the imposition of a fine on citizens from one to two thousand non-taxable minimum incomes and officials – from two to ten thousands of tax-free minimum incomes. employees have the right to go to court to resolve labor disputes, regardless of the nature of the work performed or the position held, except in cases provided for by law (article 2 of the labor code). according to the explanations of the plenum of the supreme court of ukraine, set out in paragraph 10 of the resolution of 24.12.1999 № 13 "on judicial practice of labor legislation," if it is found that in violation of article 46 of the labour code of ukraine the employer has suspended an employee from work with suspension of wages, the court must satisfy the claim of the latter in this part on the recovery of average earnings for the period of enforced idleness (article 235 of the labor code). violators are brought to justice for violating labor legislation in accordance with the law (plenum resolution № 13). 4. conclusions and suggestions the study conducted a detailed analysis of the current state of state support for the implementation of the right of citizens to quality health care in the baltic journal of economic studies 267 vol. 7 no. 5, 2021 field of vaccination from covid-19. it turns out that despite the fact that ukraine is fighting for the crown for the third year in a row, no single approach causes such an infection. among the positives are: the legislator's efforts not to influence every ukrainian citizen's subjective choice about the need for vaccination; regulatory support from the center for public health, which in turn will strengthen the network of regional centers for disease control and prevention (cdc); the creation of a roadmap for the introduction of the vaccine against acute respiratory disease covid-19, caused by the coronavirus sars-cov-2. at the same time, negative aspects remain the lack of public awareness of the importance of vaccination, the slow pace of vaccination, and delays in approving the necessary vaccine doses, which in turn undermines the credibility of the state and its bodies in the context of human rights to quality health care. therefore, at present, state authorities and local governments should pay attention to the information component of ensuring the right of citizens to quality health care. references: the constitution of ukraine: the law of ukraine of june 28, 1996 № 254k/96-vr . available at: https://zakon.rada.gov.ua/laws/show/254%d0%ba/96-%d0%b2%d1%80#text fundamentals of the legislation of ukraine on health care: law of ukraine of 19.11.1992 № 2801-xii. available at: https://zakon.rada.gov.ua/laws/show/2801-12#text lytvyn, n. a., & artemenko, o. v. (2021). protecting human rights in the context of the covid-19 pandemic, taking into account the gender component. pravo.ua, № 1, pp. 50–56. theory of state and law. textbook manual; for general ed. s. d. gusareva, o. d. tikhomirova. kyiv: navs, education of ukraine, 2017. 320 p. karamishev, d. v. (2007). problems of providing constitutional guarantees and implementation of state health policy in ukraine. mater. and all-ukrainian scientific practice. conf. (april 19-20, 2007, lviv). lobf "medicine and law", p. 157. on the public health system: draft law of ukraine dated 22.09.2020 № 4142. available at: http://w1.c1.rada.gov.ua/ pls/zweb2/webproc4_1?pf3511=70025 public health center of the ministry of health of ukraine. available at: https://phc.org.ua/pro-centr vaccination in ukraine will be voluntary – mykhailo radutsky on the bill № 4142. available at: https://sluga-narodu.com/vaktsynatsiia-v-ukraini-bude-dobrovilnoiu-mykhaylo-radutskyy-pro-zakonoproiekt-4142/ pretty v. the united kingdom: judgment of the european court of human rights (case № 2346/02) of 29 april 2002. available at: https://zakon.rada.gov.ua/laws/show/980_210#text number of citizens as of march 1, 2021. official data of the state statistics service of ukraine. available at: http://www.ukrstat.gov.ua/ statistics of vaccination against coronavirus (covid-19). available at: https://index.minfin.com.ua/en/ reference/coronavirus/vaccination/ on approval of the roadmap for the introduction of the vaccine against acute respiratory disease covid-19 caused by the coronavirus sars-cov-2, and mass vaccination in response to the pandemic covid-19 in ukraine in 2021-2022: order of the ministry of health of ukraine from 24.12.2020 № 3018. available at: https://zakon.rada.gov.ua/rada/show/v3018282-20#text ukraine should make 47 million vaccinations by the end of 2021. available at: https://www.slovoidilo.ua/ 2021/04/12/novyna/suspilstvo/ukrayina-povynna-zrobyty-47-mln-vakcynaczij-kincya-2021-roku-lyashko lekhan, v. m., slabky, g. o., & shevchenko, m. v. (2015). analysis of the results of reforming the health care system in the pilot regions: positive consequences, problems and possible ways to solve them. ukraine. the health of the nation, vol. 3, pp. 67–86. order of the ministry of health of ukraine dated 04.10.2021 № 2153 "on approval of the list of professions, industries and organizations whose employees are subject to mandatory preventive vaccination". available at: https://moz.gov.ua/article/ministry-mandates/nakaz-moz-ukraini-vid-04102021--2153-pro-zatverdzhennjapereliku-profesij-virobnictv-ta-organizacij-pracivniki-jakih-pidljagajut-obovjazkovim-prophylactic-scheplennjam artemenko, o. v., & lytvyn, n. a. (2021). providing the population with public medical services as a guarantee of the realization of the constitutional right to health care. legal scientific electronic journal, vol. 3, pp. 157–159. available at: http://lsej.org.ua/index.php/arkhiv-nomeriv?id=135 resolution of the plenum of the supreme court of ukraine of 24.12.1999 № 13 "on the practice of application by courts of legislation on remuneration of labor". baltic journal of economic studies 158 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state environmental university, ukraine e-mail: serbov@odeku.edu.ua orcid: https://orcid.org/0000-0002-0220-6745 2 odessa state environmental university, ukraine e-mail: pavlenkoep@ukr.net orcid: https://orcid.org/0000-0002-0220-6745 3 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 doi: https://doi.org/10.30525/2256-0742/2022-8-4-158-164 peculiarities of freshwater resources management: national and european experience and current trends nikolay serbov1, olena pavlenko2, inna irtyshcheva3 abstract. the subject of the study is the current features of freshwater management in european countries and experience for ukraine. methodology. the study used general scientific methods, in particular: theoretical generalization; methods of positive and normative analysis and statistical analysis. the goal is to study the european experience in freshwater management and adapt it for ukraine. research conclusion. an analysis of the water supply of european households has been carried out and it has been found that there is no "water stress" under such conditions. however, with the global water scarcity resulting from population growth and urbanization, particularly tourism, in recent years, negative factors have particularly affected water use in small mediterranean islands and in densely populated areas. to stabilize this situation, eu member states have been asked to report on each of the monitoring stations that have been removed from their monitoring network, the reason for such removal and the alternative stations installed in case of persistent pollution. it was found that trends can be calculated for 83% of groundwater stations (so far only 20% in sweden) and 75% of surface water stations (but less than 50% for greece, hungary, latvia, malta, slovakia and sweden). the importance of freshwater and seawater remediation measures by eu member states under directive 24 to reduce the impact of eutrophication caused by nitrates or phosphorus is stressed. it was found that european integration strategies in the field of environmental protection are characterized by improving water quality and water management; environmental management and integration of environmental policies; ensuring air quality; waste management; reducing the use of genetically modified organisms. it is justified that to assess the effectiveness of the implementation of the environmental component (natural environment) in the association agreement, the authors will analyze ukraine on the index of environmental performance (the environmental performance index), which provides a quantitative basis for comparison, analysis and understanding of environmental indicators in 180 countries. key words: freshwater resources, management, european experience, index of ecological efficiency. jel сlassification: o13, o32, q28 1. introduction today, the prospect of water resources management, underlying the main strategic components of state water policy, is the introduction of an integrated water resources management system based on the basin principle, which meets the requirements of the eu water framework directive (eu water framework directive 2000/60/ec, 2006). such a mechanism for water resources management is reflected in the laws of ukraine "on the basic principles (strategy) of state environmental policy until 2020" and "on the national target program of development of water and environmental improvement of the dnieper river basin until 2021" (law of ukraine, 2012). according to the association agreement between ukraine and the european union, ukraine undertakes to bring its legislation closer to the eu legislation within the deadline from the date of entry into force of the agreement (november 1, 2014) (association agreement between ukraine…, 2021), on the one hand, and the european union and its member states. baltic journal of economic studies 159 vol. 8 no. 4, 2022 therefore, under such conditions there is a need to study general trends and peculiarities of freshwater management in europe and ukraine. the nitrates directive requires member states to develop and implement appropriate monitoring programs to assess the effectiveness of action programs. it sets out basic principles and criteria for water monitoring, but aspects such as the density of the monitoring network, stability and sampling frequency remain the responsibility of the member states. despite the abundance of renewable water in europe, signals from long-term climate and hydrological assessments, including population dynamics, show that between 1960 and 2010, europe experienced a 24% decrease in per capita renewable water, especially among southern european populations. at the same time, the ministry of environmental protection and natural resources of ukraine presented measures and strategies for european integration in the field of environmental protection. strategies of european integration in the field of environmental protection are characterized by improvement of water quality and water management; environmental management and integration of environmental policy; ensuring air quality; waste management; and reduction of use of genetically modified organisms. so, the purpose of the article is to study the european experience of freshwater management and adapt it for ukraine. 2. european experience in freshwater management densely populated river basins in various parts of europe, corresponding to 11% of europe's total area, continue to be hotbeds of water stress, with 86 million inhabitants living in these areas in the summer of 2014. about 40% of the inhabitants of the mediterranean region lived under water stress in the summer of 2014. groundwater and river resources continue to suffer from overexploitation in many parts of europe, especially in the basins of western and eastern europe. on the positive side, water withdrawals decreased by about 7% from 2002 to 2014 (indicator assessment, 2021). the agricultural area of the eu covers about 47% of the total area of the eu27 + the uk. from 2010 to 2019, agricultural production increased by 14.5%. it is estimated that livestock production is responsible for 81% of agricultural nitrogen entering water systems and 87% of ammonia from agricultural emissions into the atmosphere (report from the commission to the council and the european parliament…, 2021). in europe, the average per capita household water supply is about 102 l/person/day, which means that there is no "water stress. however, water stress conditions created by population growth and urbanization, especially tourism, have particularly affected small mediterranean islands and densely populated areas in recent years. the commission's joint research center has developed an online viewer that provides access to reporting data under the nitrates directive. regional and even individual station water quality reports are available, as well as agricultural data. for the first time, member states were asked to report each monitoring station that was removed from their monitoring network, the reason for such removal and the alternative stations installed in case of permanent pollution. over the last two reporting periods, trends could be calculated for 83% of groundwater monitoring stations (so far only 20% in sweden) and 75% of surface water monitoring stations (but less than 50% for greece, hungary, latvia, malta, slovakia and sweden). regarding saltwater, it is a welcome development that the sharp 29% reduction in the total number of monitoring stations observed between 2008 and 2015 has been partially corrected by additional stations. unfortunately, however, the number of saltwater monitoring stations remains relatively low in some member states 21. saltwater monitoring is very important to determine marine pollution and impacts on marine biodiversity. from 2016 to 2019, 14.1% of groundwater stations still exceeded an average of 50 mg of nitrate per liter, which is comparable to the previous reporting period, when 13.2% of stations exceeded 50 mg/l. data on nitrate concentrations at eu level show that groundwater quality has improved since the directive was adopted, but further improvement has been very slow since 2012. this can be interpreted as the low-hanging fruit that has already been harvested, and now more extensive measures are needed to improve the positive trend. a large percentage of groundwater monitoring stations still show levels exceeding the maximum 50 mg nitrate/l in malta, germany, luxembourg, spain, portugal, and belgium (flanders region) (report from the commission to the council and the european parliament…, 2021). member states' water quality monitoring has improved with respect to assessing eutrophication as well as saline waters. eutrophication is a serious problem in all types of surface waters, with inland, transitional, coastal and marine waters still seriously affected. several member states that stand out for their abundance of eutrophic waters are the czech republic, finland, denmark, luxembourg, belgium, germany, latvia and poland. baltic journal of economic studies 160 vol. 8 no. 4, 2022 despite significant efforts by most member states and farmers, who have respectively developed and implemented measures to reduce nitrate losses in water, water quality data show that the level of implementation and enforcement is still insufficient to achieve the objectives of the directive, 30 years after its adoption and despite some progress: – some member states have noted poor water quality throughout the territory and a systemic problem of managing nutrient losses in agriculture: belgium (flanders region), czech republic, denmark, germany, finland, hungary, latvia, luxembourg, malta, netherlands, poland and spain; – some member states have "hot spots" where pollution is not adequately addressed: bulgaria, cyprus, estonia, france, italy, portugal and romania. therefore, some member states urgently need to take additional measures to achieve the goals of the nitrates directive, in particular belgium, the czech republic, luxembourg, spain, the netherlands and germany, which are furthest away from these goals. while there is no timeline in the nitrates directive for achieving water quality goals, the wfd goals for good environmental and chemical status must be achieved no later than 2027, and observed water quality trends show that this will not be achieved without radical changes in current measures. the commission will strengthen its actions to improve the implementation and enforcement of the directive to achieve its goals. this is a prerequisite for achieving a 50% reduction of nutrient losses by 2030, as defined in the context of the eu green deal. in 2022, the commission will develop an integrated nutrient management 33 action plan, building on the zero pollution 34 action plan. this will help coordinate efforts and will aim to address nutrient pollution at source, identify nutrient load reductions needed to achieve the eu green deal nutrient targets, promote markets for safe and sustainable reclaimed nutrients and improve livestock sustainability. significant progress has been made in the development of manure treatment technologies. reduced nitrogen, which replaces inorganic fertilizers, reduces co2 emissions, while reduced phosphate reduces dependence on phosphate imports, and the remaining organic fractions can be used in local deposits. however, modern technologies are not yet widely used and there are a number of economic barriers related to the high cost of these processes, transportation costs and the frequent need to pay farmers to apply these products to their fields. in addition, the maximum level of nitrogen from manure that can be applied under the nitrates directive also includes processed manure. in july 2022 the new fertilizer regulation 35 will expand the scope of the existing fertilizer regulation 36 from purely inorganic fertilizers to organo-mineral and organic fertilizers, opening the way for the marketing of these treated organic fertilizers in the eu internal market. therefore, analysis of household water supply in europe has shown that there is no "water stress" under such conditions. however, with global water scarcity resulting from population growth and urbanization, particularly tourism, in recent years, negative factors have particularly affected water use on small mediterranean islands and in densely populated areas. 3. personal management of freshwater resources in ukraine according to the ministry of environmental protection and natural resources of ukraine, cooperation between ukraine and the eu is aimed at: – preservation, protection, improvement and reproduction of environmental quality; – protection of public health; – reasonable and rational use of natural resources; – encouraging measures at the international level aimed at solving regional and global environmental problems (report from the commission to the council and the european parliament…, 2021). because of the enormous volumes of water withdrawn for hydropower and cooling, the hydromorphology and natural hydrological regime of rivers and lakes continue to change. the implementation of the agreement will take place through the creation of a strategy, and then the necessary laws and regulations through national reforms, not the other way around, and their implementation is carried out through the prism of the implementation of the agreement, where the main focus is on the environmental component. given the need for a major overhaul of the legal framework to develop a new eu water policy, and based on consultations with a wide range of specialists, the economic commission for europe proposed a new framework directive called directive 2000/60/ec of the european parliament and of the council of 23 october 2000 establishing a framework for community action in the field of water policy (before that and in the future – the water framework directive, wfd). the wfd establishes river basin areas defined not by administrative or political boundaries, but by the boundaries of the river basin as a natural hydrographic holistic entity. european integration strategies for environmental protection are the ecological component (natural surroundings) in the association agreement with the eu. kovshun n. e., piatka n.s. consider that "in ukraine it is unpromising to be guided by budgetary funds in financial provision of environmental protection baltic journal of economic studies 161 vol. 8 no. 4, 2022 measures. in addition, enterprises carry out environmental measures only if it is economically profitable for them. in ukraine in the field of environmental protection, in order to meet international obligations, enterprises that need to bring their activities to high european standards, which requires significant costs, expect assistance from the state. that is why the legislative consolidation of economic incentives is the development of appropriate means, which would allow to solve the problem of financial provision of environmental protection through the diversification of funding sources." (kovshun, piatka, 2019) to assess the effectiveness of the implementation of the environmental component (natural environment) in the association agreement, the authors will analyze ukraine according to the environmental performance index. the environmental performance index (epi) provides a quantitative framework for comparing, analyzing and understanding environmental performance in 180 countries. the epi evaluates and ranks these countries according to their environmental performance, using data from the last year, and calculates how these indicators have changed over the previous decade (the environmental performance index, 2020). the epi environmental performance indicators are a data-driven summary of the state of sustainability around the world. using 32 epi performance indicators, the epi covers 11 categories of environmental and ecosystem resilience issues in 180 countries. the indicators provide a national measure of how close countries are to meeting policy goals. epi offers a scorecard that identifies leaders and laggards in environmental performance and provides practical recommendations for countries seeking to move toward a sustainable future. the rankings are based on various sources and represent the most recently published data, often for 2017 or 2018. thus, the analysis does not reflect recent events, including the drastic reduction in air pollution in 2020 due to the covid-19 pandemic or the extensive greenhouse gas emissions, amazon fires in 2019. these indicators help identify issues, set goals, track trends, understand outcomes, and identify best policy practices. good data and evidence-based analysis can also help government officials improve their policy programs, government communications with key stakeholders, and maximize the return on regular investment. epi offers a powerful policy tool to support efforts to achieve the un sustainable development goals. development goals and the movement of society toward a sustainable future. epi's overall rankings show which countries are best at responding to environmental issues, chronic challenges facing each country. going beyond the overall scores and delving into the data to analyze performance by category of issues, policy goals, peer group proposals, and countries provides even more value for policymakers. such a detailed view and a comparative perspective can help to understand the drivers of environmental progress and clarify policy choices. figure 1 analyzes the ranking positions of ukraine and some countries of the world on the environmental performance index in 2020 (the environmental performance index, 2020). according to the index of environmental efficiency in 2020 ukraine ranks 60th, while in 2018 on this indicator ukraine was in 109th place, which confirms the correctness of the course and policy on resource conservation. the ranking according to the index of environmental efficiency allows to determine the effectiveness by categories of problems, policy goals, which can be used for proposals to improve the management of ecosystems. epi 2020 comes in the midst of the covid-19 crisis, which has challenged health systems and disrupted economic activity around the world. the global pandemic has clearly demonstrated the interdependence of all countries and the importance of investing in sustainability. the unintended consequences of stopping economic activity in many countries include drastic reductions in pollution and the return of wildlife. the epi team hopes that this unexpected look at what a sustainable planet can look like from an environmental perspective-albeit at a terrible cost in terms of health and economic damage-will inspire the political change needed for a sustainable future that is both economically vibrant and environmentally sound. the values of the 10 major categories of the environmental performance index 2020 are shown in figure 2. as one can see, the values of the 10 major categories of the environmental performance index in 2020 (the environmental performance index 2020): agriculture is in the first position; climate change – 26; heavy metals – 42; biodiversity – 45; water resources – 60; pollution emissions – 64; sanitation and drinking water – 66; fishing – 71; air quality – 86; ecosystem services – 139. so, as can be seen, ukraine has the worst positions in emissions, drinking water, fisheries, air quality and ecosystem services. consider the economic instruments to stimulate green modernization of industrial enterprises (figure 3). the main environmental tools to stimulate green modernization of enterprises in the eu include: state aid, environmental taxation, tax incentives, soft loans, collateral system, grants, special funds. for ukraine, promising tools are environmental taxation, the creation of a special baltic journal of economic studies 162 vol. 8 no. 4, 2022 0 50 100 150 200 liberia india nepal indonesia turkey moldova ukraine russia belarus poland slovakia italy japan germany france great britain switzerland luxembourg denmark 180 168 149 116 99 87 60 58 49 37 26 20 12 10 5 4 3 2 1 86 66 42 45 139 71 26 64 1 60 0 20 40 60 80 100 120 140 160 air quality sanitation and drinking water heavy metals biodiversity ecosystem services fishing climate change pollution emissions agriculture water resources figure 1. ranking positions of ukraine and some countries of the world on the index of environmental efficiency in 2020 (the environmental performance index 2020) source: compiled by the authors (the environmental performance index, 2020) figure 1. ranking positions of ukraine and some countries of the world on the index of environmental efficiency in 2020 (the environmental performance index 2020) source: compiled by the authors (the environmental performance index, 2020) baltic journal of economic studies 163 vol. 8 no. 4, 2022 fund, permanent (green) public procurement and state aid. in general, the main stimulating tool in the eu member states is tax policy (reducing the tax burden) when introducing resource-saving technologies. vdovenko n. m. and korobova n. m. consider that "it is basic for all countries possessing biological resources to strive to establish various forms of payment for the extraction of biological resources in their waters, certain volumes of such resources by other countries, subject to mandatory environmental protection measures, and having a reproductive nature. at the same time, in the case of developed countries, monetary license fees are the main form of payment. in developing countries, there are other trends in the forms of payment for biological resources in their zones, which are directly related to solving socio-economic problems. it speaks about the development of coastal areas, employment level, development of national economy sectors, and improvement of protein balance of population's nutrition by taking water from natural water bodies. in some countries, there is an in-kind form of license payment)." (vdovenko, korobova, 2019) during 2010–2020, the reduction of water intake from natural water bodies decreased by 4,894 million m3, the largest volume of fresh water was 4,457 million m3 from surface sources. also, the use of fresh water (including seawater) decreased from 9,817 million m3 in 2010 to 7,238 million m3 in 2020, or by 2,579 million m3. in 2020, the largest volumes of water were used for industrial needs – 4,532 million m3, drinking and sanitary – 1,169 million m3, and irrigation – 1,452 million m3. the capacity of treatment facilities decreased from 7425 million m3 in 2010 to 5142 million m3 in 2020, or 2283 million m3. in 2020, the largest volume of clean water discharged into surface water bodies without treatment was 3,216 million m3, treated according to standard – 1,426 million m3, polluted return water – 518 million m3, insufficiently treated – 418 million m3, without treatment – 100 million m3. hrabovska l. l. and yefremova o. o. consider that "despite the significant economic downturn observed in ukraine in recent years and accompanied by a general reduction in the use of fresh water, the volume of polluted (untreated and insufficiently treated) wastewater flowing into surface water bodies of the dnieper basin has not virtually decreased – 1.82 billion m3, that is, their share in the total flow has increased by almost 1.15 times." (hrabovska, eu possible for ukraine state aid environmental taxation tax benefits preferential loans environmental taxation special fund state aid: grants and subsidies; subventions; tax benefits; guarantees, loans on preferential terms, loan servicing at preferential rates, etc. according to the law "on state aid to business entities", state aid for environmental protection may be recognized as admissible. the process of implementation of the state aid system in accordance with the association agreement between ukraine and the eu is currently underway. sustainable (green) public procurement pledge-rotating system grants, special funds government procurement supply chain management figure 3. economic instruments to stimulate "green" modernization of industrial enterprises baltic journal of economic studies 164 vol. 8 no. 4, 2022 references: eu water framework directive 2000/60/ec. basic terms and their definitions. kyiv, 2006. 240 p. on approval of the national target program for the development of water management and environmental rehabilitation of the dnipro river basin for the period up to 2021: law of ukraine of 24.05.2012 no. 4836-vi. available at: http://zakon3.rada.gov.ua/laws/show/4836-17 association agreement between ukraine, of the one part, and the european union and its member states, of the other part (electronic edition). government portal. available at: http://www.kmu.gov.ua yakymchuk, a. et al. (2021). economic diagnostics and management of eco-innovations: conceptual model of taxonomic analysis. 4th international conference on intelligent human systems integration (ihsi) – integrating people and intelligent systems, рр. 573–579. indicator assessment. use of freshwater resources. available at: https://www.eea.europa.eu/data-and-maps/ indicators/use-of-freshwater-resources-2/assessment-2 report from the commission to the council and the european parliament on the implementation of council directive 91/676/eec concerning the protection of waters against pollution caused by nitrates from agricultural sources based on member state reports for the period 2016-2019. available at: https://eur-lex.europa.eu/legal-content/en/txt/html/?uri=celex:52021dc1000&from=en ministry of environmental protection and natural resources of ukraine. available at: https://mepr.gov.ua/ timeline/evrointegraciya.html kovshun, n. e., & piatka, n. s. (2019). the current state of financing of environmental protection measures in ukraine. ukrainian journal of applied economics, vol. 4 no. 4, рр. 241–249. environmental performance index. ukraine. available at: https://epi.yale.edu/epi-results/2020/country/ukr environmental tax and economic tools for stimulating green modernization of industrial enterprises. available at: https://mepr.gov.ua/files/%d0%bf%d1%80%d0%b5%d0%b7%d0%b5%d0%bd%d1% 82% d0%b0%d1%86%d1%96%d1%8f%20%d0%92%d0%91%d0%a3.pdf popadynets, n., et al. (2021). evaluation of domestic market development in ukraine. international conference on intelligent human systems integration, рр. 357–363. vdovenko, n. m., & korobova, n. m. (2018). sectoral aspect of the development of the national economy, a paradigmatic view of the development of the system of sustainable water use in the context of integration processes. problems and prospects of economics and management, vol. 4 (16), рр. 69–76. hrabovska, l. l., & yefremova, o. o. (2011). creation of a database of the ecological state of surface water sources. bulletin of the khmelnytskyi national university, vol. 3, рр. 259–264. irtyshcheva, i. and etc. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, vol. 8, рр. 78–82. doi: https://doi.org/10.30525/22560742/2022-8-2-78-82 received on: 11th of september, 2022 accepted on: 12th of november, 2022 published on: 30th of november, 2022 yefremova, 2011) under the conditions of russia's war against ukraine, the effective management of fresh water resources has become an acute problem precisely because it is important to develop an effective organizational and economic mechanism that will ensure access to water (irtyshcheva, and etc., 2022). thus, the general trends and features of freshwater management in europe and ukraine, which determine the prospects for the use of european experience and its adaptation in modern conditions were identified. 4. conclusions an analysis of the water supply of european households has been carried out and it has been found that there is no "water stress" under such conditions. however, with the global water scarcity resulting from population growth and urbanization, in particular tourism, in recent years negative factors have particularly affected water use in small mediterranean islands and in densely populated areas. in order to stabilize this situation, eu member states were asked to report each monitoring station that was removed from their monitoring network, the reason for this removal and the alternative stations installed in case of sustained pollution. it was found that trends could be calculated for 83% of groundwater monitoring stations (so far only 20% in sweden) and 75% of surface water monitoring stations (but less than 50% for greece, hungary, latvia, malta, slovakia and sweden). the importance of eu member states adopting freshwater and seawater remediation measures in accordance with directive 24 to reduce the impact of eutrophication caused by nitrates or phosphorus is stressed. it was found that european integration strategies in the field of environmental protection are characterized by improving water quality and water management; environmental management and integration of environmental policies; ensuring air quality; waste management; reducing the use of genetically modified organisms. baltic journal of economic studies 195 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-195-202 development of modern business processes and outsourcing activities svitlana khalatur1, igor vinichenko2, dmytro volovyk3 abstract. the purpose of the article is to study the key features of modern business processes and outsourcing. the subject-matter of the study is the methodological and conceptual foundations of the development process of modern business and outsourcing activities. methodology. the research is based on a set of well-known general scientific and special methods of research in economics. in particular, the method of scientific abstraction, the method of systematic analysis, economic and mathematical modeling were used in the article. conclusion. many types of modern work can be outsourced. thus, this will eventually lead to a confrontation between protected freelancers and freelancers whose employment is not regulated at the legislative level. the world is changing much faster, the labor market is undeniably affected when most jobs are simplified by technology; one of the consequences is a departure from the usual regulated labor relations and structures. the work environment and the environment are changing radically today. new forms of cooperation can take legal relations beyond legal regulation in those countries that fail to adapt their legislation in time to new rapidly evolving business strategies, which often lack the concept of territorial boundaries and mostly demand talent for effective solutions. with the help of constructed multifactor regression models, which are adequate to the available statistical and calculated data and have high degrees of significance of the estimated parameters, it is possible to predict changes in the simulated economic phenomenon as a result of changes in one or more factors. it should be noted that such models today are not sustainable in the long run, as in the ukrainian and global economies, the external environment and its conditions change quite often. therefore, in the future it is advisable to calculate new parameters of regression models based on the presented methods and make predictions according to the obtained data. in authors’ opinion, the main reason for the increase in the share of outsourcing in europe in the coming years is the strengthening of competition in the world market and the growth of the euro. it is believed that traditionally vertically integrated business processes will be broken into fragments and partially outsourced. this will allow european companies to increase their revenues and production volumes. key words: labor market, development of business strategies, information technology outsourcing, business process outsourcing; tool for optimizing the activities of the enterprise. jel classification: е27, f62, o11 1. intrоduction corresponding author: 1 dnipro state agrarian and economic university, ukraine. e-mail: skhalatur@gmail.com orcid: https://orcid.org/0000-0001-8331-3341 researcherid: t-7645-2019 2 dnipro state agrarian and economic university, ukraine. e-mail: vinichenko.i.i@dsau.dp.ua orcid: https://orcid.org/0000-0002-9527-1625 3 dnipro state agrarian and economic university, ukraine. e-mail: volovykv@gmail.com orcid: https://orcid.org/0000-0001-6585-3328 outsourcing as a business strategy is firmly integrated into international business, making changes to business processes in the market, both locally and globally, while maintaining a position of growth over the past decades. the use of external contractors (specialists in a particular field) helps to increase the competitiveness of their company in fast-growing industries, as well as gain access to the necessary professional resources with a certain reduction in their own costs to solve tasks. in a market economy in a state of globalization, enterprises face a multiple increase in competition. in this regard, the problem of finding sources of support for economic efficiency becomes a priority. an important area of companies’ adaptation to the changing baltic journal of economic studies 196 vol. 7 no. 3, 2021 market environment, with increased commercial risk and in the current crisis, is the use of outsourcing, that is a modern methodology for creating highly efficient organizations in conditions of fierce competition. the global dynamics of the development of commoditymoney relations is characterized by a clear focus on the production of services. in today’s world, more than half of the gdp of advanced countries will be services. in the conditions of transformation of the world community, the service economy is an important vector of progressive development. the global trend in recent years is that outsourcing has become one of the main tools to increase business competitiveness. as a rule, it consolidates key management functions, which significantly reduces the cost of manufacturers to promote their own products. the purpose of outsourcing as a management tool is to increase the market value of the enterprise by improving its performance, reducing costs and risks, increasing the competitiveness of products through the involvement of external contractors who specialize in performing certain, usually non-core for the company, production and economic functions. world practice has shown that it is profitable for a business to attract experienced specialized companies with highly qualified specialists to perform specific functions. therefore, there is an objective need for the formation and development of modern business processes to improve the efficiency of enterprises, which confirms the relevance of this study. 2. literature review significant contribution to the study and disclosure of the essence of outsourcing as an element of the development strategy of business entities was made by scientists such as b.a. anikin, m.yu. grygorak, н.н. dumna, o.v. zozulov, s.o. kalendjian, i.d. kotlyarov and others. despite significant scientific developments, there are a number of issues that require further research, including comprehensive research on the theoretical foundations and methodological approaches to the development and adaptation of outsourcing business model to domestic business conditions. given this, the issue of improving the effectiveness of enterprise development through the formation of an outsourcing business model is of particular importance and requires further research. thus, olena bilovodska, nataliia gaidabrus and daria ruban (2017) note that the modern economy is characterized by constant changes in the external micro and macro environment, accelerating the pace of technological progress; reduction of product life cycle; strengthening competition between domestic and foreign producers; changes in consumer tastes and preferences. world experience shows that such conditions exist for competing companies that provide a higher level of services. at the same time, there is a tendency to focus on the main types of activities of enterprises and the question of the transfer of certain functions of outsourcing is increasingly raised. dag øivind madsen (2017) in his research focused on the general structure of the popularity of international outsourcing, as the local popularity of outsourcing can differ significantly from the global pattern. therefore, research can focus on the regional or country-specific trajectory of outsourcing popularity. research has shown that outsourcing is closely linked to other management concepts and ideas. purpose. given the relevance of the research topic, the purpose of the work is to study the key features of modern business processes and outsourcing. 3. research of world experience of development of modern business processes and outsourcing activity for the purposes of this article, outsourcing is defined as a set of measures aimed at transferring certain processes and functions to another organization that specializes professionally in the field of tasks and has a longer nature of interaction compared to one-time services used more situationally. by making a strategic decision on outsourcing, the customer gains access to the existing business process, individual systems and infrastructure of external companies, concentrating on conducting specialized activities in their company, increasing capacity with increasing market presence. the use of human resources is the basis of successful outsourcing in the world. according to the latest report by staffing industry analysts (sia), the cost of crowdsourcing (when a wide range of people can be involved in solving tasks through information and communication technologies around the world) in the world ranged from 47 to 51 billion usd. the annual global services location index, formerly known as the offshore location attractiveness index, is a tool that helps companies understand and compare the factors that make countries attractive as potential locations for offshore services. it is analyzed the global service location index (gsli) for 2016-2020. the global labor market for services is evolving as automation destroys low-skilled jobs and shifts the focus to more skilled jobs. the effort to find the right talent at the right price – anytime, anywhere – will continue and grow. the global services location index rose from 50 countries in 2016 to 60 in 2021, indicating only how global the industry has become. most locations have shifted in rankings over the years as competition has intensified and economies have developed. central and eastern europe is a strong region where many of the best players now converge – poland, bulgaria, the czech republic and romania in just a few places. in table 1 the baltic journal of economic studies 197 vol. 7 no. 3, 2021 components of a.t. kearney global services location index of european countries are analyzed. the development of the information society, the transition to priority scientific, technological and innovative development, the introduction of it in all spheres of life of the state determined the emergence and development of new management technologies, such as outsourcing, outstaffing and others. thus, there is a formation of innovation infrastructure, which determines the new quality of economic growth. the strategy of raising the productive forces through science and education increases the opportunities of large countries in scientific and technological innovation and improves the quality of the workforce. in developed countries, outsourcing has become an important tool to ensure the competitive advantage of the enterprise. in ukraine, this process is not so fast, but with the intensification of competition in the domestic market, the development of integration processes, more and more companies recognize its benefits and feasibility. the use of outsourcing is aimed at stabilizing the development of the enterprise, effective use of its internal potential, increasing flexibility and adaptability to changes in the market environment, finding new market opportunities, increasing the company 's ability to innovate. outsourcing stimulates the development of competition, undermining the oligopolistic and monopolistic structures of the world economy, enabling new entrants to enter the markets, eliminating the dominant position of individual companies in the market. on the other hand, large companies, possessing powerful resources, are constantly increasing their share of international markets, expanding geographical boundaries, putting more and more production under control, i.e., strengthening the function of controlling the economies of countries. more and more companies are switching to the so-called “international network model of organization of activities”, which helps increase efficiency, reduce financial, production, technological and political risks. thus, traditional vertically integrated western companies are gradually being replaced by transnational horizontal network structures. and we are talking about the formation of a geoplanetary production and functional network. the form of the company’s presence in the country’s economy is the creation of so-called “service centers” owned by tncs, but geographically located in countries with cheap labor. they integrate scientific and technical, production potentials of different countries, provide round-theclock work in their service centers located around the world, thus working to constantly reduce costs. transnational service companies, offering outsourcing services, compete with national outsourcing companies, table 1 components of global services location index of european countries country 2017 2019 2021 fi na nci al att ra ct iv en es s pe op le sk ill s an d av ai la bi lit y b us in es s en vi ro nm en t fi na nc ia l att ra ct iv en es s pe op le sk ill s an d av ai la bi lit y b us in es s en vi ro nm en t d ig ita l r es ona nc e fi na nc ia l att ra ct iv en es s pe op le sk ill s an d av ai la bi lit y b us in es s en vi ro nm en t d ig ita l re so na nc e poland 2.63 1.38 1.68 2.05 1.11 1.56 0.63 2.15 1.18 1.58 0.72 bulgaria 2.99 0.95 1.61 2.47 0.73 1.61 0.61 2.52 0.77 1.64 0.66 czech republic 2.44 1.17 1.87 1.95 0.93 1.68 0.64 1.91 0.99 1.75 0.66 germany 1.16 2.15 2.14 0.76 1.86 1.91 1.02 0.79 1.85 1.91 1.04 romania 2.84 1.13 1.49 2.29 0.92 1.46 0.58 2.27 0.97 1.52 0.60 united kingdom 1.03 2.26 1.12 0.85 1.84 1.95 1.14 0.85 1.93 2.08 1.11 ukraine 3.23 1.14 0.93 2.90 0.87 1.01 0.58 2.65 0.87 1.08 0.64 estonia 2.39 0.95 1.95 2.13 0.78 1.81 0.92 2.04 0.83 1.95 0.91 hungary 2.53 1.09 1.67 2.22 0.85 1.56 0.60 2.14 0.94 1.54 0.68 latvia 2.69 0.94 1.65 2.33 0.74 1.67 0.62 2.34 0.80 1.72 0.69 lithuania 2.73 0.92 1.64 2.46 0.72 1.63 0.70 2.23 0.77 1.70 0.71 portugal 1.91 1.32 1.86 1.66 1.15 1.70 0.83 1.83 1.23 1.79 0.74 turkey 2.32 1.45 1.32 1.96 1.28 1.22 0.59 2.07 1.41 1.32 0.66 slovakia 2.32 1.00 1.69 2.04 0.78 1.69 0.62 2.02 0.82 1.67 0.66 france 0.85 2.04 2.04 0.56 1.72 1.81 0.93 0.65 1.82 1.95 0.99 spain 1.09 1.84 1.86 1.00 1.51 1.61 0.88 1.13 1.57 1.83 0.88 ireland 0.50 1.66 2.04 0.57 1.37 1.86 0.92 0.48 1.42 1.98 0.97 source: compiled by authors based on a.t. kearney global services location index data baltic journal of economic studies 198 vol. 7 no. 3, 2021 offering lower prices. they are ready to minimize their profits in order to conquer markets. at the same time, they incur quite high costs due to high salaries, which are offered to specialists, enticing them to national outsourcing companies. in general, outsourcing is a new form of development of industrial and economic relations, focused on the integration and replacement of commodity relations with production and functional. thus, we can talk about the formation of a mobile adaptive international and geoplanetary network that accelerates the development of economic globalization in modern society. institutional support of business process outsourcing (its content) is the actions of the government aimed at establishing institutions (norms, rules, restrictions) and determining the order of their observance, aimed at achieving the goals and objectives set by the government in cooperation with outsourcing entities business processes (or in the absence of such interaction). the task of institutional support for the long-term development of business process outsourcing is to carry out reforms, respect the rights and freedoms of economic entities, and actually promote the development of market institutions. institutional support for business process outsourcing is achieved not directly, but through relevant organizations: public authorities, corporate and other business structures, state enterprises. organizational aspects are important as those that are closely related to the tradition of neo-institutionalism and coase’s theory that organizations (firms) are created to save transaction costs. thus, attention should be paid to the problems of forming effective organizational structures in the real sector of ukraine’s economy, adequate to today’s challenges, the problem of interaction between government institutions and market agents, as well as the institutional aspects of business process outsourcing. in table 2, it is analyzed the dynamics of a.t. kearney global services location index of european countries. in 2017, ukraine was ranked 24th in the top-25 of the global services location index, gsli. in 2021, ukraine moved to 42nd place. the outsourcing potential of each of the 55 countries participating in the ranking is assessed by 38 indicators, comparing the financial attractiveness, professionalism and availability of the necessary human resources, as well as the business environment. countries in the global service location index were selected on the basis of corporate data, current remote service activities, and government initiatives to promote the industry. they were evaluated in four main categories: financial attractiveness, people’s skills, business environment and digital resonance (table 1). in figure 1, it is analyzed the size of the global market for outsourcing services for 2000-2019. the size of the business process outsourcing market in 2020 was estimated at 232.32 billion usd, and from 2021 to 2028 the annual growth rate (cagr) is expected to be 8.5%. the agility of the business to survive the ever-changing dynamics of the business and ways to increase efficiency, while reducing operating costs and emphasizing core competencies, are mostly important. moreover, organizations are increasingly focused on reducing the cost of doing business to access global resources to meet the growing needs of the industry. as a result, several organizations around the world are taking advantage of business process outsourcing table 2 the dynamics of global services location index of european countries country 2017 2019 2021 rank index rank index rank index poland 12 5.69 24 5.35 14 5.63 bulgaria 15 5.55 17 5.42 17 5.59 czech republic 16 5.48 33 5.21 34 5.31 germany 17 5.46 15 5.55 16 5.59 romania 18 5.45 28 5.25 32 5.36 united kingdom 19 5.41 8 5.79 8 5.97 ukraine 24 5.31 20 5.36 42 5.24 estonia 25 5.30 12 5.64 12 5.73 hungary 26 5.30 31 5.24 37 5.30 latvia 28 5.29 21 5.36 20 5.55 lithuania 29 5.29 16 5.52 30 5.41 portugal 37 5.09 26 5.33 18 5.59 turkey 38 5.09 39 5.06 26 5.46 slovakia 42 5.01 35 5.12 44 5.17 france 44 4.93 41 5.02 29 5.41 spain 49 4.79 42 5.00 28 5.41 ireland 53 4.20 47 4.72 51 4.85 source: compiled by authors based on a.t. kearney global services location index data baltic journal of economic studies 199 vol. 7 no. 3, 2021 (bpo) services and focusing on core competencies, thus creating ways to grow the market. the versatility of business process outsourcing services is driving market growth as several enduse industries, including banking, financial services, healthcare and manufacturing, use these services to some extent. benefits such as reduced operating costs and increased efficiency of support functions, such as customer service, encourage the adoption of business process outsourcing services. offering enhanced business relationships, business process outsourcing services also provide reliable, up-to-date and round-theclock support for important business processes. shifting the focus from monopolistic business strategies to the joint burden of business culture determines the demand for outsourcing business processes for further success and improved results. technological advances in various fields, such as automated robotic processes, machine learning, social media browsing and big data analysis, portend future market growth prospects. increasing the advantage of cloud technologies and other automation methods helps stimulate the market. moreover, such factors, the improvement of cloud infrastructure and the rapid introduction of process automation into business functions also contribute to market growth. in addition, it is expected that increasing the level of acceptance of business processes as a service for streamlining the numerous workflows through their automated planning will stimulate market growth over the forecast period. business process outsourcing service providers take advantage of cloud computing to reduce the time required to process business processes that require large amounts of data. cloud computing in outsourcing business process leads to an improved data processing workflow in a shorter turnaround time. in addition, thanks to the internet and the continuous improvement of the network infrastructure around the world, a way has been paved to place applications in the cloud instead of complex infrastructure prone to downtime. moreover, several market players are involved in integrating cloud computing into the service portfolio to improve the outsourcing process. it is expected that the growing number of government initiatives implemented to promote the introduction of cloud technologies will work well in the market. it is also expected that the growth of government investments around the world in the field of cloud computing will contribute to the overall growth of the market, thereby increasing the demand for business process outsourcing solutions. business process outsourcing involves outsourcing various non-core back-office and front-office functions, including it services, call center operations, financial services and recruitment services. outsourcing these features allows companies to reduce their operating costs and focus on their core competencies. it is expected that the growing demand for reducing operating costs for non-core activities and increasing attention to core competencies in several end-use verticals will increase demand for such services. the influence of many factors on the output variable can be described by a linear model: y a a= + + + + + +0 1 1 2 2 3 3x a x a x a x um m... , (1) where y is the exact actual values of the studied (dependent, explained) variable, indicator or regression; x1, x2, xm, are independent (explanatory) variables, factors or regressors; a0, a1, a2, …, am are unknown model parameters; u is the random component of the regression equation, m is the number of factors in the model. function (1) is linear with respect to the independent variables and parameters of the model, but it is the linearity by parameters that is more significant because figure 1. the size of the global market for outsourcing services for 2000-2019, billion usd source: compiled by authors based on statista’s data   45,6 52,4 60,1 64,8 70 76,3 77,1 80,5 87,5 91,3 93,1 95 99,1 82,9 104,6 88,9 76,9 88,9 85,6 92,5 y = 16,963ln(x) + 44,748 r² = 0,7849 0 20 40 60 80 100 120 baltic journal of economic studies 200 vol. 7 no. 3, 2021 it is related to the methods of estimating parameters. the random component is the resultant action of all uncontrolled random factors that cause deviations of the real values of the studied indicator from the analytical ones (calculated on the basis of the selected regression dependence). linear relationships do not exhaust all possible forms of dependence between indicators. therefore, in the study of a particular economic phenomenon, the priority is to find the most accurate analytical form of describing the statistical relationship between its indicators. some form of dependence must have an appropriate economic justification. if the type of dependence is difficult to establish, then for the first approximation to the model still choose a linear dependence. the usual mathematical approach to solving problems is to separate specific classes of problems or to reduce problems to a certain class and to apply appropriate methods of solving them. since the study of linear functions has indisputable advantages over other classes of functions, nonlinear functions try to reduce primarily to linear ones. thus, the subject of our research will be a generalized multifactor linear regression model (1). based on the available data, it is necessary to build a linear multifactor regression model of the relationship global services location index from foreign direct investment, net inflows (% of gdp) – x1; foreign direct investment, net outflows (% of gdp) – x2; gdp growth (annual%) – x3; gini index (world bank estimate) – x4; gross capital formation (% of gdp) – x5; inflation, gdp deflator (annual%) – x6; tax payments (number) – x7 according to the table. 3. the calculations of the model were performed using the functions of the excel package. then, the regression equation (1) has the form: y 0,34= + − + + + + +10 2 0 24 0 46 0 21 0 57 0 24 0181 2 3 4 5 6 7, , , , , , , .x x x x x x x (2) y 0,34= + − + + + + +10 2 0 24 0 46 0 21 0 57 0 24 0181 2 3 4 5 6 7, , , , , , , .x x x x x x x after creating a regression model, it is necessary to assess its practical significance. residual variance σεi 2 50 52= , . the percentage deviation of individual sample values varies from 0.07% to 32.31%. the average approximation error for the regression equation as a whole is k = 10.03%. auxiliary values are to calculate the multiple correlation coefficient. the value of the multiple correlation coefficient r = 0.9181 indicates a close linear correlation with factor features, as well as a satisfactory agreement between theoretical and actual data. regression and variance analyzes of linear regression were performed using the option “regression” of the excel package (table 4). table 4 results of regression analysis conclusion regression statistics multiple r 0.918075435 r-square 0.842862505 normalized r-square 0.797966078 standard error 7.088771776 observations 119 source: authors’ calculations table 3 indicators of the business environment of studied european countries on average for 2001-2020 country foreign direct investment, net inflows (% of gdp) foreign direct investment, net outflows (% of gdp) gdp growth (annual %) gini index (world bank estimate) gross capital formation (% of gdp) inflation, gdp deflator (annual %) tax payments (number) poland 3.25 1.03 3.79 33.17 20.84 2.21 23.80 bulgaria 8.36 0.90 3.59 36.93 24.07 4.26 16.33 czech republic 4.81 1.92 2.85 26.18 28.39 1.88 10.60 germany 2.03 3.10 1.27 30.88 20.57 1.36 10.40 romania 3.74 0.22 4.13 36.31 25.50 10.40 62.67 united kingdom 4.10 3.37 1.76 34.51 17.22 1.99 8.07 ukraine 3.80 0.22 2.43 26.46 22.38 15.78 72.73 estonia 8.09 3.69 3.78 32.76 29.42 4.55 7.67 hungary 9.80 7.63 2.56 29.87 23.68 4.32 12.33 latvia 3.45 0.77 3.73 35.83 28.03 4.63 8.47 lithuania 3.14 1.17 4.22 35.83 21.34 2.92 11.07 portugal 3.92 2.22 0.73 36.28 20.34 1.99 7.67 turkey 1.66 0.32 4.83 40.77 26.74 13.69 10.00 slovakia 4.14 1.15 3.93 26.49 25.14 1.96 22.20 france 2.05 3.32 1.29 32.07 22.71 1.34 11.40 spain 2.92 4.01 1.67 34.64 23.47 1.83 8.80 ireland 20.21 16.51 4.76 32.54 26.17 1.69 9.00 source: compiled by authors based on world bank data baltic journal of economic studies 201 vol. 7 no. 3, 2021 from the tables it is found the critical value of the student's criterion tcr = 2.365; ∆r = − − − =2 365 1 0 9191 17 2 1 014 2 , , , . the confidence interval for the multiple correlation coefficient has the form 0.9181-0.14≤r≤0.9181+0.14 . since the multiple correlation coefficient cannot be more than 1, the interval takes the form 0.78≤r≤1. with an error of 5%, it can be said that the actual correlation coefficient is not less than 0.78. the coefficient of determination r2 = 0.8429 shows that 84.29% of the variance of the indicator can be explained using the model of dependence on і . the coefficient of f-statistics is equal to f=0.8429/ (1-0.8429)*((17-2-1)/2) =18.77. the critical value at α = 0.05 will be fcr (17; 7; 0.05)=4.74. since f >fcr, the constructed model can be considered adequate. the meaningful value of the parameters of the found model is as follows: – if the factor x1 changes by its unit of measurement, the average will change by a1 = 0.34 units of its measurement, provided that other factors remain unchanged; – similarly, if the factor x2 changes per unit of its measurement, the indicator will change by a2 = 0.24 units of its measurement, provided that other factors remain unchanged; – if the factor x3 changes by its unit of measurement, the indicator will change by a3 = 0.46 units of its measurement, provided that other factors remain unchanged; – if the factor x4 changes by its unit of measurement, the indicator will change by a4 = 0.21 units of its measurement, provided that other factors remain unchanged; – if the factor x5 changes to the unit of its measurement, the indicator will change to a5 = 0.57 units of its measurement, provided that other factors remain unchanged; – if the factor x6 changes by its unit of measurement, the indicator will change by a6 = 0.24 units of its measurement, provided that other factors remain unchanged; – if the factor x7 changes per unit of its measurement, the indicator will change by a7 = 0.18 units of its measurement, provided that other factors remain unchanged; thus, the change in foreign direct investment, net inflows, gdp growth, gross capital formation, inflation by 1% will lead to a change in the global services location index by 0.34, 0.46; 057; 0.24 in that direction; a change in foreign direct investment, net outflows by 1% will change the global services location index in the opposite direction by 0.24; and changing the gini index (world bank estimate) and tax payments (number) by 1 will change the global services location index by 0.21 and 0.18, respectively. 4. conclusions many types of modern work can be outsourced. thus, this will eventually lead to a confrontation between protected freelancers and freelancers whose employment is not regulated at the legislative level. the world is changing much faster, the labor market is undeniably affected when most jobs are simplified by technology; one of the consequences is a departure from the usual regulated labor relations and structures. the work environment and the environment are changing radically today. new forms of cooperation can take legal relations beyond legal regulation in those countries that fail to adapt their legislation in time to new rapidly evolving business strategies, which often lack the concept of territorial boundaries and mostly demand talent for effective solutions. with the help of constructed multifactor regression models, which are adequate to the available statistical and calculated data and have high degrees of significance of the estimated parameters, it is possible to predict changes in the simulated economic phenomenon as a result of changes in one or more factors. it should be noted that such models today are not sustainable in the long run, as in the ukrainian and global economies, the external environment and table 5 the results of the econometric analysis of the dependence of the global services location index on the studied factors indices coefficients standard error t-statistic p-value lower 95% upper 95% y-intersection 11.29995504 9.46554875 1.1937981 0.271439 -1.08251 33.6824211 variable x1 0.34186688 7.39399643 5.3298466 0.001087 1.924843 56.8928901 variable x2 -0.243771887 8.20071100 0.7962446 0.452043 -2.86182 25.921372 variable x3 0.460574832 6.91742914 1.6378239 0.127864 -2.86182 23.978546 variable x4 0.214562751 8.09174632 0.5367823 0.934106 2.59873 24.906753 variable x 5 0.576734582 7.34109763 1.8243561 0.256381 4.98746 23.678231 variable x 6 0.246278391 6.45823901 0.5247186 0.053461 1.45673 25.983561 variable x 7 0.182134832 8.27814538 0.8745632 0.108493 2.345671 23.68732 source: authors’ calculations baltic journal of economic studies 202 vol. 7 no. 3, 2021 its conditions change quite often. therefore, in the future it is advisable to calculate new parameters of regression models based on the presented methods and make predictions according to the obtained data. in our opinion, the main reason for the increase in the share of offshore outsourcing in europe in the coming years is the strengthening of competition in the world market and the growth of the euro. it is believed that traditionally vertically integrated business processes will be broken into fragments and partially outsourced. this will allow european companies to increase their revenues and production volumes. in the segment where companies with foreign capital operate, the most common is the long-term offshore outsourcing business model. according to the results of research, it can be concluded that the use of outsourcing model of doing business in domestic enterprises can significantly increase the efficiency of their activities and open fundamentally new opportunities for mutually beneficial cooperation, significantly strengthen their competitiveness in today 's economic environment, as this business model resources for the main objectives of the business by delegating certain functions to third parties that provide outsourcing services and reducing the cost of functions outsourced to the outsourcing company. in addition, the outsourcing business model helps to gain access to resources or new technologies that are missing or insufficient in the enterprise, as well as minimizing the level of responsibility and risk for performing a particular function. references: bilovodska, o., gaidabrus, n., & ruban, d. 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(2016). transformation and development of production-logistics enterprises in ukrainian agrarian economy. management theory and studies for rural business and infrastructure development, 38(1), 70–87. available at: https://publons.com/publon/19531873/ world bank (2021). world development indicators 2021, world bank. available at: https://data.worldbank.org/ indicator (accessed 11 may 2021) baltic journal of economic studies 91 vol. 7 no. 4, 2021 corresponding author: 1 lviv polytechnic national university, ukraine. e-mail: oleh.i.karyi@lpnu.ua orcid: https://orcid.org/0000-0002-1305-3043 2 lviv polytechnic national university, ukraine. e-mail: uliana.o.balyk@lpnu.ua orcid: https://orcid.org/0000-0001-8379-4907 3 lviv polytechnic national university, ukraine. e-mail: nataliia.i.kara@lpnu.ua orcid: https://orcid.org/0000-0001-7000-2931 doi: https://doi.org/10.30525/2256-0742/2021-7-4-91-100 tourism territorial branding in the conditions of the covid-19 pandemic (on the example of ukraine and poland) оleh karyy1, uliana balyk2, nataliia kara3 abstract. in conditions of the deep crisis caused by the covid-19 pandemic, there is an urgent need to find effective ways to reboot the tourism industry. territorial branding as a tourism marketing tool is one of such ways. therefore, the purpose of this article is to compare the features of tourism branding in ukraine and poland, taking into account the impact of the covid-19 pandemic on the tourism industry and consumer behavior. the study is grounded on the use of general and specific methods based on a systematic approach to the study of tourism branding opportunities in ukraine and poland before and during the covid-19 pandemic: analysis and synthesis – used to compare the competitiveness of tourism, brand, development status and trends in the tourism industry of countries; deduction and induction – used to describe the impact of the covid-19 pandemic on tourism development and outline the problems of competitiveness of countries' tourism; abstraction and generalization – used to provide recommendations on how to improve countries' tourism branding. the article revealed that tourism plays a significant role in the economy of ukraine and poland and is closely linked with other industries. a comparison of the weaknesses and strengths of the countries’ tourism competitiveness made it possible to identify basic components that need to be improved. it was found that ukraine and poland are in constant search of optimal tourist brands. the authors investigated the specifics and retrospective development of tourist brands by government bodies in both countries. the concept of the latest versions of the tourist brand is to show ukraine as an open, modern country where all the most interesting things are happening right now (ukraine now ), and poland as a country that can expand the imagination of visitors (poland. move your imagination). based on a comparison of various international rankings levels of tourist brands of these countries, it was found that poland has a much better performance than ukraine. in addition, the authors thoroughly investigated the effects of the covid-19 pandemic on tourism development in both countries and changes in tourism consumer behavior. the article offers recommendations for improving the tourism brands of countries, taking into account the new epidemiological conditions. key words: tourism brand, competitiveness, covid-19 pandemic, consumer behavior. jel classification: m31, е20, o57 1. introduction tourism is an important segment of the global economy and a key element in the preservation of natural and cultural heritage because one in 10 people on earth is employed in the tourism industry, and it provides a livelihood for hundreds of millions of people (the united nations, 2020; prokopenko and & omelyanenko, 2020). moreover, tourism as a system has proven quite resilient to various external shocks (e.g., the september 11 terrorist attacks (2001), the severe acute respiratory syndrome (sars) outbreak (2003), the global economic crisis (2008/2009), the middle east respiratory syndrome (mers) of 2015). yet, the covid-19 pandemic has created radically different conditions for the survival of the tourism industry. the situation is aggravated by the fact that baltic journal of economic studies 92 vol. 7 no. 4, 2021 traveling and tourism simultaneously contribute to the spread of the disease and its economic consequences, so some experts even compare it with the current climate crisis. it is worth emphasizing that, unlike other business segments, income from tourism is lost forever because unsold capacity cannot be sold in the following years, with corresponding consequences for employment in the segment (gössling et al., 2021). in 2020, tourism faced the deepest crisis with the international arrivals drop by 74% due to widespread travel restrictions and a substantial decline in demand. the world tourism organization (2021) predicts the tourist activity recovery for the second half of 2021: july 66% growth compared to 2020 and 55% decline compared to 2019 (1 scenario); september 22% (2020), -67% (2019). nevertheless, januaryfebruary 2021 faced a decline in international arrivals: -87% (2020). overall, tourism can recover in 2.54 years or even longer, depending on the pandemic development. meanwhile, it is interesting that health-related crises have historically caused "unscientific" and disproportionate global responses that have mostly affected the tourism industry (novelli et al., 2018). it is confirmed by the research of the world bank (2020), which specifies that society tries to avoid infection and makes non-coordinated and irrational efforts leading to 90% of all economic losses related to epidemics and outbreaks. it is worth mentioning that domestic tourism recovers quicker in crisis due to its scales and it is called the driver of tourism industry recovery. in particular, in the european union the expenditure on domestic tourism exceeds the costs of inbound tourism by 1.8 times (world tourism organization, 2021). tourist behavior is transformed by the consequences of the pandemic, such as the revision of a person's psychological distance and his perception of new risks (wen et al., 2021). marketing can be an effective measure to influence tourist behavior during and after the covid-19 pandemic and manage the subjective aspects of perceived risk (matiza, 2020; tkach, 2013). namely, territorial branding is an efficient marketing tool in the tourism industry. 2. literature review the brand has now become a traditional characteristic of countries. nevertheless, the first theoretical studies of territorial marketing (place marketing) and branding are relatively recent (1990s). kotler p., haider d.h. and rein i. (1993) the concept of strategic place marketing, according to which places and territories should operate as businesses and sell themselves as businesses if they respond adequately to global threats, competition and technological change. meanwhile, the concept of place branding was suggested by anholt, s. (2010), who argued that the theory of brands has finally reached the governments of cities and countries through commercial practices and reached it mainly in two ways: tourism and export marketing. the country or region is responsible for the overall image of the site, leaving private operators to market specific services to end users. yet, the government’s main task is to combine them in the consciousness of an end-user. therefore, the government creates an umbrella brand for private providers of tourism services, destinations, attractions in public and private ownership. nowadays, we understand the brand of a territory as a network of associations in the consciousness of site consumers that is grounded on the visual, verbal, and behavioral expression of the site and its stakeholders (zenker and braun, 2017). associations vary in their impact on the network and their role in the attitudes and behavior of site consumers. anholt s. (2010s) suggests combining six forces that generate the perception of any country: tourism and desire to visit a country, people, culture and heritage, investment and migration, foreign and domestic policy, and export – goods and services. there are two approaches to the vector of country brand orientation: an externally oriented phenomenon (i.e. a carrier/conductor to an external country of ideas, which a particular country is) (p. van ham, 2001); 2) a country brand is both an internally and externally oriented phenomenon, which is spread through slogans, logos and information campaigns. the perception (and acceptance) and ongoing re-translation by residents of all segments of the population is another important component of the process (aronczyk, 2008). overall, the process of territorial marketing includes two main stages: positioning and promotion. when positioning, the strongest and most exceptional characteristics of the territory are determined, which will be used to form its unique position in the future. meanwhile, the promotion with the help of various means of communication helps to skillfully make a statement to the selected target audience, taking into account marketing goals (decentralization, 2021). however, one should not hope that the tourism brand of the country can be formed only through marketing, because a strong brand needs such basic elements as a developed infrastructure, economic sustainability, effective public administration, developed civil society, etc. nevertheless, the role of marketing should not be underestimated, as targeted marketing campaigns have repeatedly played a crucial role in reducing the risks associated with travel and tourism perceived by visitors (matiza, 2020). practice shows that territories that gradually implement interrelated marketing activities, including branding, achieve sustainable development goals baltic journal of economic studies 93 vol. 7 no. 4, 2021 much faster than territories that do not (gössling et al., 2021; novelli et al., 2018; matiza, 2020). among other things, in a pandemic, the tourism branding of a territory requires a quick adjustment. wen j., kozak m., yang s., liu f. (2021) studied the main effects of covid-19 on tourist behavior patterns and hypothesized that health emergencies generate three types of tourism: from general to complex, from open to closed, and from radical to conservative. seminary marketing theory states that consumer behavior responds more to the subjective impact of perceived risk than to an objective assessment of risk (bauer, 1967). personal and physical safety issues have a significant impact on tourist decisions and choices (novelli et al., 2018; bondarenko and romanіuk, 2021). namely, world tourism organization (2021) emphasizes the following key changes in travelers’ behavior in the pandemic: they prefer domestic tourism, in particular, travelers going for "staycations" or vacations close to home; health and safety measures and cancellation policies have become the main concerns of consumers; last-minute bookings; nature, rural tourism, and road trips have become popular travel options; young people are more likely to reclaim travel than older generations; travelers place greater importance on creating a positive impact on local communities, increasingly seeking authenticity. ukraine and poland, as neighboring countries of central and eastern europe, have similar geopolitical, natural, demographic, socioeconomic, and cultural conditions. however, under market conditions, the competition of countries for tourists turns them from geographical units into goods, which have their own value, properties and value. the change in the paradigm of consumer behavior of tourist services leads to an additional need for a comprehensive study of the development of the tourism industry in ukraine and poland before and during the covid-19 pandemic. 3. aims and methods the aim of the article consists in comparing the features of tourism branding of ukraine and poland considering the impact of the covid-19 pandemic on the tourism industry and its consumer behavior. on the basis of this goal, the study has the following objectives: – to perform a comparative analysis of the place that the tourism industry takes in the economy of countries, and their tourism competitiveness among countries of the world; – to explore how public authorities are developing tourism brands of countries; – to carry out a comparative analysis of the level of the countries’ tourism brands on an international scale; – to evaluate the consequences of the covid-19 pandemic on countries’ tourism development and consumer behavior; – to develop recommendations for improving the tourism brands of countries in the context of recovered tourism. in the article the authors use the method of literature review to substantiate the importance of territorial branding in tourism at the national level and, therefore – to justify the relevance of the chosen topic of research. the study is founded on general and specific methods based on a systematic approach to the study of tourism branding opportunities in ukraine and poland before and during the covid-19 pandemic: analysis and synthesis – comparison of tourism competitiveness, brand, state of development and trends in the tourism industry of countries; deduction and induction – description of the impact of the covid-19 pandemic on tourism development and identification of tourism competitiveness problems of countries; abstraction and generalization – to provide recommendations on how to improve the tourist branding of countries. 4. discussion and research results the place of the tourism industry in the countries’ economies ukraine and poland have significant tourism potential with unique cultural, historical, natural and geographical, socio-demographic and economic components. according to the world travel & tourism council, in ukraine the share of travel and tourism industry in the gdp is higher than in poland (5.9% against 4.7%), same as its annual growth (6.1% against 4.0%). travel and tourism industry has provided 1 028 800 jobs or 6.2% of total employment in ukraine. meanwhile, in poland there are 811,800 jobs, or 5.0% of total employment. nevertheless, it is worth noting that the data is taken from official statistics, and given the high level of shadow activity in the tourism industry in both countries, the figures are actually much higher. in terms of the share of international visitors in total exports, the travel and tourism industry is dominated by poland – 4.4% or $14,300,000. while in ukraine, the rates were 3.3%, or $2,251,800,000. the share of domestic expenses in ukraine is 2.3 times higher than in poland (70% against 31%), and the share of international expenses is 30% against 69% in poland. in both countries, spending on leisure prevails over spending on business: 91% against 9% in ukraine and 66% against 34% in poland. the countries’ tourism competitiveness according to the world economic forum’s the travel & tourism competitiveness index 2019 (world economic forum, 2019), ukraine’s points increase baltic journal of economic studies 94 vol. 7 no. 4, 2021 in the rankings was the largest in the sub-region. it moved up 10 positions to 78th in the world. namely, when ukraine stabilized and recovered economically, it abruptly improved its business environment, security, international openness and general infrastructure. in the meantime, poland is the largest scientific-technological economy in the region and second by competitiveness. the country benefits from higher scores for natural and cultural resources, with the latter category having the best scores in the balkans and eastern europe. a more detailed comparison of the competitiveness of tourism in both countries (table 1) shows that they have similar indicators in the category human resources and labor market. there are slight differences on 1-3 points in areas such as business environment, health and hygiene, travel and tourism priority, price competitiveness, environmental sustainability, tourism services infrastructure. it is worth noting that the effectiveness of marketing and brand in attracting tourists is one of the key indicators for determining the level of priority of travel and tourism in countries. obviously, both countries rank relatively low in terms of prioritization of travel & tourism (92nd and 98th). meanwhile, the following competitive advantages are much stronger in poland: cultural resources and business travel, ground and port infrastructure, natural resources, ict readiness, safety and security. competitive advantages such as price competitiveness and health and hygiene are slightly stronger in ukraine than in poland. overall, the weaknesses in tourism competitiveness for both countries compared to others were as follows: business environment, travel and tourism prioritization, and environmental sustainability. this indicates a lack of prioritization and importance of the tourism industry among other segments of the economy, poor conditions of tourism business, a high level of shadow activities in the industry, low level of culture in terms of compliance with the principles of sustainable tourism among the industry stakeholders, as well as among the local population and tourists. the countries’ tourism brands understanding the instability of the international tourism market, ukraine and poland are in constant search for optimal tourist brands. ukraine made its first attempt to improve its national image in 2005, but for organizational reasons it failed to create a brand. in 2007 the state service of tourism and resorts under the ministry of culture presented a tourist brand "snowy winter" with the slogan "ukraine for the snow lovers" (letunovska, and lyulyov, 2020). the question of new branding for the country was resurfaced before the 2012 european football championship. in 2011 the strategy of ukraine’s positioning abroad was presented. its main slogan was "ukraine – openness", which was supposed to show ukraine's openness to reforms, tourism development, readiness to participate in global processes and investments. in 2014, a new ukrainian brand was presented with the slogan "ukraine. all about u" and cultivating such values as trust, dignity, responsibility and geodiplomacy related to ukraine's ability to live "in between" (ukraine tourist brandbook, 2014). the complex of activities under this concept took place table 1 t&t competitiveness index 2019 overall rankings ukraine poland t&t competitiveness index 2019 overall rankings 78 (3.7) 42 (4.2) subindex a: enabling environment 65 (5.0) 45 (5.3) subindex b: t&t policy and enabling conditions 70 (4.5) 55 (4.5) subindex c: infrastructure 73 (3.4) 50 (4.0) subindex d: natural and cultural resources 89 (2.1) 34 (3.1) pillar 1: business environment 103 (4.1) 91 (4.3) pillar 2 safety and security 107 (4.8) 56 (5.6) pillar 3: health and hygiene 11 (6.5) 24 (6.3) pillar 4: human resources and labour market 48 (4.8) 53 (4.8) pillar 5: ict readiness 78 (4.5) 39 (5.5) pillar 6: prioritization of travel & tourism 92 (4.3) 98 (4.2) pillar 7: international openness 55 (3.7) 33 (4.1) pillar 8: price competitiveness 19 (5.9) 40 (5.7) pillar 9: environmental sustainability 114 (3.9) 81 (4.2) pillar 10: air transport infrastructure 71 (2.7) 56 (3.2) pillar 11: ground and port infrastructure 77 (3.1) 37 (4.3) pillar 12: tourist service infrastructure 65 (4.3) 56 (4.5) pillar 13: natural resources 116 (2.2) 55 (3.2) pillar 14: cultural resources and business travel 55 (1.9) 28 (3.0) source: world economic forum, 2019 baltic journal of economic studies 95 vol. 7 no. 4, 2021 in several stages: 1) information of the projects was aimed at general presentation of ukraine to the world – "switch on ukraine" (tourist opportunities, investment attractiveness, etc.); 2) programs and activities were more specific (ethnical tourism, investments in specific industries and national projects, etc.), which was expressed in the slogan "ukraine. moving along the fast lane". the concept of the latest tourism brand (accepted on may 10, 2018) is to demonstrate ukraine as an open modern country, where all the most interesting things are happening right now. a survey of perceptions of ukraine abroad conducted with the support of the british government (state agency for tourism development of ukraine, 2021) shows that corruption, revolution and military actions are the three most popular associations with ukraine. the image is formed mainly by what people see and hear in the news. however, those who have been in ukraine think differently and emphasize the hospitality of ukrainians, beautiful landscapes, culture and architecture. the new campaign and branding idea is based on the word "now " because research shows that this moment of change is important for modern people from all over the world, tourists and investors. thus, the logo (figure 1a) as if "highlighted" in yellow the main word in the application – now, and the blue element resembles the form of a notice in social networks. it is a symbol of something new, something that catches the eye (state agency for tourism development of ukraine, 2021). in 2019, the state agency for tourism development of ukraine launched the "ukraine’s magnets" program to attract investment. the first projects were: chornobyl: renaissance, danube riviera, khortytsia island, pylypets, and promprylad. renovation (state agency for tourism development of ukraine, 2021). in 2020 a large-scale national project "travel ukraine" was launched, aimed at promoting travel destinations, which is very timely in terms of the pandemic. ukraine.ua was officially launched in 2021. it has become a major resource for tourists and business investors. poland is one of the countries that have been successful in promoting the national tourist product. in particular, the country is constantly holding active marketing campaigns both internationally and domestically. in 2009 a tourist brand with the slogan "polska. move your imagination" was developed. the brand logo (figure 1b) is a collage with visual themes and icons related to poland and its culture, to demonstrate the diversity and appeal of polish heritage from different perspectives, both in contemporary style and in old folklore traditions. (the polish tourism organisation, 2021). in addition, in 2008-2015 was implemented a project of tourist marketing "promujmy polskę razem". its purpose is to support and intensify activities to promote poland in cooperation with all organizations involved in the positioning of the country in the world, to increase the effectiveness of marketing activities to promote polish tourism, increase the number of international tourists and their spending in poland, as well as to extend the tourist season in the country (nikolaichuk, 2020). in 2012, the "i like poland" project was launched, aimed at increasing poland's competitiveness in asian markets – namely china, india and japan. the project implementation was meant to increase the revenues and expenditures of international tourists from these countries. in addition, as part of cooperation with the eu in 2010–2012, the project "eastern poland promotion" was implemented. it was aimed at increasing interest in the tourism offer of the five voivodeships of eastern poland, focusing on domestic (including residents of eastern poland) and international tourists (germany, ukraine). with the help of the polish government a number of successful programs to promote domestic tourism (in particular, "poland see more – weekend at half price") have been a) ukraine b) poland figure 1. brand’s logo source: state agency for tourism development of ukraine; the polish tourism organisation baltic journal of economic studies 96 vol. 7 no. 4, 2021 put forward. the ministry of sports and tourism, in cooperation with the polish tourist organization, implemented the project "polish tourist stamps" (until september 16, 2019) (the polish tourism organisation, 2021). its main goal was to improve the branding of regions by developing tour packages, combined into one and promoted as a tourist brand. creating mobile electronic applications for smartphones and tablets is a valuable e-marketing tool to promote a travel brand in the context of rapid digitalization. there are much more such applications in poland (turystyka w polsce, poland. travel, poland travel guide offline, thetripplanner, ski raport, castles of poland, poland tourist map offline, guide with me, noclegi, hotele, pokoje w polsce, poland a guidetomajorcities) than in ukraine (ukraine inside out, ukraine travel & explore, offline tourist guide, turyst ukrayiny) (google play app, 2021). in general, such central executive authorities as the ministry of culture and information policy and state agency for tourism development of ukraine are responsible for the tourism attractiveness in ukraine and tourism development vector in the country. in poland, these are the ministry of economic development and technology and the polish tourism organization with 14 international offices. meanwhile, destination branding in eastern and central europe is accompanied by the following problems: lack of proper funding to support appropriate marketing campaigns; pressure on tourism branding experts to ensure short-term results; difficulties in developing a single brand for a destination consisting of a large number of products and environments (nikolaichuk, 2020). evaluating the tourist brands of ukraine and poland at the international level, it is worth paying attention to the study of the official data partner of the world economic forum – bloom consulting. every two years it publishes the country tourism brand ranking by the following criteria: 1) economic indicators (key parameters: the average rate of total annual receipts of international tourists to the country and the average growth of total annual receipts of international tourists to the country); 2) digital demand (total volume of online searches for tourism-related activities and attractions in all countries included in the ranking); 3) cbs ranking (comparing the most popular brand tags for a particular country with the most actively promoted brand tags of national tourism organizations in that country), as well as online indicators (number of total visits to the official web page and average time spent per visitor, number of likes and followers on social networks) (bloom consulting, 2021). according to 2019–2020 data, ukraine ranks 98th in the world and 34th among european countries, while poland ranks 39th and 18th, respectively. in particular, the level of the country brand strategy in poland is estimated by experts as а level (slightly strong), and in ukraine it is a level lower – bbb (very good). moreover, the position of ukraine decreased by 2 points, and poland remained in the same position. the future brand country index evaluates brands on the following parameters: values system, quality of life, business potential, heritage & culture, tourism, and products & services. also, additional topics are considered within each parameter like natural beauty, food, tolerance, and political freedom (future brand, 2021). moreover, the brand strength is quantified by comparing their "online talk-ability ". data for 2019 show that poland and ukraine ranked penultimate and last among european countries, 44th and 74th in the world, respectively. meanwhile, the world bank ranking positions poland as 23rd and ukraine as 60th. peculiarities of tourism industry development in countries before the covid-19 epidemic speaking about the tourism branding of ukraine and poland, it is necessary to consider the peculiarities of the tourist industry before and during the pandemic. thus, in 2019, there were more than 4,600 travel companies in ukraine, and more than 11,000 travel companies in poland. comparison of ukraine and poland on the main parameters of collective accommodation facilities in 2019 shows the advantage of the latter (table 2). namely, the number of collective accommodation facilities and their capacity in poland is twice higher than in ukraine. the main difference is that in ukraine hotels and similar accommodation facilities account for 59.3% of the total number of collective means of accommodation, while in poland, the rate is 37.6%, which shows a more developed tourism infrastructure. meanwhile, the share of hotels and similar lodging facilities in total accommodation capacity is about the same in ukraine and poland (46.3% and 44.7%, respectively). in poland in 2019, the number of people staying in collective accommodation facilities and the number of nights spent there is more than 5 times higher than in ukraine. while in poland overnight stays of international tourists in such facilities account for 20% of the total number, in ukraine – 10.9%. it is worth noting that by 2014 ukraine has surpassed poland in terms of inbound tourism. thus, in 2013, their number was about 25,000,000. visitors per year, while poland failed to reach this level in 2010–2019. however, in 2014, the russian federation annexed part of ukrainian territory (the crimean autonomous republic) and is still engaged in military operations in donetsk and luhansk regions. this had a significant impact on the tourist attractiveness of the country. poland, meanwhile, baltic journal of economic studies 97 vol. 7 no. 4, 2021 has seen a steady annual increase in inbound tourists. as of 2019, the number of inbound tourists coming to ukraine was about 13,000,000 and to poland about 22,000,000. it is worth pointing out that euro 2012, held in ukraine and poland, was a powerful driver of tourism development and contributed to the recognition of their tourism brands. preparations for this event greatly accelerated the creation of new accommodation facilities and the further development of tourist infrastructure in both countries (figure 2). nevertheless, the number of collective accommodation facilities decreased by more than 70% in ukraine in 2014 due to the military aggression of the russian federation and continued to fall until 2018. figure 2 shows that while in 2011 the gap between poland and ukraine on the number of collective accommodation facilities was only 22.5%, after 9 years it was 110.9%. so it is a good example of how territorial branding for some events can be used to further the development of domestic tourism. consequences of the covid-19 pandemic for tourism and consumer behavior in the countries the covid-19 pandemic has significantly affected tourism in ukraine and poland. like other countries around the world, these two european countries have had to resort to avoidable travel restrictions, both domestically and internationally. the severity of restrictions varied depending on the epidemiological situation (table 3), but they continued to affect the recovery of tourism. in 2020, the number of foreigners entering the territory of ukraine decreased by 4 times compared to the previous year. the volume of traffic in the airports of ukraine in 2020 fell in 2.8 times, while the volume of regular flights – in 3.5 times, and charter – less than two times. three times fewer passengers used railway transport (state agency for tourism development of ukraine, 2021). analysis of the dynamics of the services provided shows that in contrast to their consistent growth in the range of 13-19% in 2019, in the following year they fell by 23.2% in the і quarter, 73.4% – in the іі quarter, 45.5% – in the ііі quarter, and 41.2% in the iv quarter (the state statistics service of ukraine, 2021). the situation in poland is similar. in particular, the stay of tourists in accommodations decreased quite significantly in the first year of the pandemic: 17.3% in the і quarter, 80.9% – in the іі quarter, 30.8% – in the ііі quarter, and 69.2% in the iv quarter. table 2 main parameters of collective accommodation facilities’ activity in ukraine and poland in 2019 parameters ukraine poland number of collective accommodation facilities 5 335 11 251 including hotels and similar accommodation facilities 3 165 4 229 beds 370 560 825 522 including hotels and similar accommodation facilities 171 721 368 944 number of persons staying in collective accommodation facilities 6 960 949 35 668 100 including international tourists 959 423 7 470 500 number of overnight stays (over one night) 18 459 138 93 342 700 including international tourists 2 016 623 18 683 600 source: statistic poland; the state statistics service of ukraine 5882 6041 6411 4572 4341 4256 4115 4719 5335 7206 9483 9 775 9 885 10024 10509 10681 11076 11251 10291 0 2000 4000 6000 8000 10000 12000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ukraine poland figure 2. dynamics of the number of temporary accommodation facilities in 2011–2020 in ukraine and poland source: statistic poland; the state statistics service of ukraine baltic journal of economic studies 98 vol. 7 no. 4, 2021 for international tourists the rate is even higher: 21.8%, 94.2%, 65.5%, and 83.8%, respectively (statistic poland, 2021). fear of covid-19 and perceived risk significantly affect the attitudes of ukrainian and polish residents toward tourism, but the desire to travel remains unchanged. the need to catch up is very strong. practice shows that the closure of borders encouraged people to travel within their countries (mostly in private cars). tourists nowadays prefer green tourism to staying in large hotels, and instead of group tours they choose individual trips with safety precautions. meanwhile, travel agencies in ukraine and poland began to pay more attention to the domestic market, looking for new places and destinations that were not popular before. nevertheless, it is worth emphasizing that consumers of travel services are "tired" of a pandemic that pushes them to risk their health. an example is the winter ski season in ukraine, when many people visited ski resorts under blocked conditions. this led to new outbreaks of covid-19 in the regions. 5. conclusions tourism plays an important role in the economy of ukraine and poland and is closely linked with other industries. therefore, its crisis condition caused by the covid-19 pandemic affects the economy in general. the recovery of the tourism industry is taking longer than expected. changes in the behavior of tourist services’ consumers show that the approach to marketing the tourism industry must be radically revised, both at the national and local levels. namely, it is necessary to consider the following measures to improve the tourist branding of ukraine: – positioning: demonstrating the unique strengths of the tourist potential of countries, taking into account the new needs of consumers of tourist services. in particular, messages that are emotionally warm and full of happiness and security should be developed to meet consumers' needs for emotional warmth and a sense of security. it is also worth considering the needs of consumers in a sense of solidarity in a crisis, so the message should demonstrate a moment of unity and change the situation. moreover, positioning that demonstrates the opportunity to take advantage of the best tourist offers at the moment (in this context, the current ukrainian brand meets this requirement) will be useful to reduce consumers' sense of loss of time, opportunity, the experience of isolation. to emphasize the safety of travel, it should be pointed out that the travel offerings are based on the recommendations of the world health organization and the countries' ministries of healthcare; – promotion: given the sharp transition of life in modern society from offline to online, we should make maximum use of modern technology, reducing the distance to consumers of tourist services, so to speak, at arm's length. it includes promotion of travel websites and channels/accounts on youtube, instagram, facebook, maximum exposure on social media; creation of mobile electronic applications for smartphones and tablets. it is important to invest in the online presence and reputation of the countries’ tourism brands (likes, shares, online reviews). in addition, classic cross-promotions and broadcasts of promotional video content in countries and abroad, etc. should be carried out. it is worthwhile to conduct positive outreach activities that address the interests and needs (described above) of the general public and debunk the myths and cautions tourists have about counties. in addition to improving marketing, to develop strong brands of ukraine and poland in the context of the pandemic, attention should be paid to the following key components of tourism competitiveness: ukraine: safety and security, natural resources, ict readiness, air transport infrastructure, ground and port infrastructure, tourist service infrastructure. poland: safety and security, air transport infrastructure, tourist service infrastructure. both countries: business environment, prioritization of travel & tourism, environmental sustainability. moreover, an alternative way to restore tourism is that ukraine and poland can not stand on opposite sides of the barricades in the fight for tourists, but table 3 travel restrictions related to the covid-19 pandemic in ukraine and poland month ukraine poland april 2020 total border closure total border closure may 2020 total border closure total border closure june 2020 total border closure partial border closure july 2020 other measures partial border closure september 2020 total border closure partial border closure november 2020 other measures partial border closure february 2021 testing / quarantine total border closure source: world tourism organization, 2021 baltic journal of economic studies 99 vol. 7 no. 4, 2021 join forces. in particular, this could be accomplished by creating a tourism alliance with each other, as in the trans-tasman travel bubble between new zealand and australia. simplifying border crossing requirements and developing new and interesting tours on both sides increases tourist flows, helps to get to know the countries better and develop a vision for their tourism brands. however, the epidemiological level is the only precautionary measure 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(2017). questioning a "one size fits all" city brand: developing a branded house strategy for place brand management. journal of place management and development, 10(3), 270–287. doi: https://doi.org/10.1108/jpmd-04-2016-0018 baltic journal of economic studies 210 vol. 7 no. 2, 2021 corresponding author: 1 mykolayiv national agrarian university, ukraine. e-mail: sirceva@mnau.edu.ua orcid: https://orcid.org/0000-0003-4824-3741 researcherid: d-2950-2018 2 mykolayiv national agrarian university, ukraine. e-mail: heban@mnau.edu.ua orcid: https://orcid.org/0000-0002-8231-2918 researcherid: d-2907-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-2-210-218 accounting compliance: an institutional approach to ensure the quality of accounting information of the enterprise svitlana syrtseva1, yuliia cheban2 abstract. the subject of the study is theoretical, methodological and practical aspects of the formation, development and functioning of the accounting compliance system as an appropriate institution for ensuring the quality of enterprise accounting information. methodology. the methodological basis of the study is general scientific and special methods of cognition. in the course of the study, the following methods were used: abstract-logical method was used for the cognition of the essence, approaches, clarification of the concept of “compliance”, “accounting compliance”; bibliographic method was used for the study and development of scientific works devoted to the definition of the essence of the term “compliance”; graphic method was used for the design of the described processes using logical block diagrams; system-structural analysis was used to improve the mechanism for the formation and implementation of the accounting compliance system as an institution for ensuring the quality of accounting information. the objective of the study is to consider the essence of the concept of “compliance”, “accounting compliance”, to establish and define the role of accounting compliance in ensuring the quality of accounting information, to substantiate methodological approaches and practical recommendations for its formation and implementation at the enterprise. results. the study has established that the definition of “compliance” should include an institutional approach, i.e. “compliance” should be understood as an institution of the internal control and corporate ideology system, which, using a system of regulations and a set of control mechanisms, forms the company’s ability to comply with established norms, standards, rules and procedures; a means of propaganda aimed at promoting the requirements for compliance with internal regulatory documents and generally accepted social values of the enterprise; a set of measures aimed at identifying risks accompanying the activities of the enterprise and eliminating their adverse consequences. “accounting compliance” is an institution of the internal control and corporate ideology system of the enterprise, which with the help of a system of measures and a set of control mechanisms provides the ability to track, monitor, evaluate and comply with the requirements of regulatory documents, regulations, instructions in the accounting system. it must be necessarily aimed at identifying, reducing and eliminating the risks of distortion, misrepresentation and falsification of accounting information. it has been substantiated that the accounting compliance system, as an appropriate institution, should be formed in stages, based on a set of specially developed internal methods, rules and procedures. it has been proved that most of the actions of the compliance system are aimed at identifying, analysing and assessing risks in the accounting system, and a significant number of documents defining its normative content are closely related to the implementation of the risk management function. practical implications. in order to ensure the identification of compliance risks in the company’s accounting system and determine their impact on the formation and quality of accounting information, the grouping of risks by type is presented. to implement the functions of accounting compliance, it was proposed to develop and approve a number of internal standards and regulations, which will guide the employees of the compliance department in their work. in order to ensure the quality of accounting information to users necessary for making effective management decisions, the organizational and economic mechanism of the accounting compliance system has been developed. conclusion of the study. thus, accounting compliance, as an institution for ensuring the quality of accounting information at an enterprise, should be focused on finding, identifying, baltic journal of economic studies 211 vol. 7 no. 2, 2021 assessing, analysing and taking measures to minimize compliance risks in the accounting system arising from noncompliance with established rules, standards and procedures for organization and maintenance of accounting. substantiated methodological foundations and recommendations for the formation and implementation of accounting compliance will not only ensure the quality of accounting information, but also guarantee business purity, a high level of corporate culture. the latter will contribute to improving the efficiency of economic activities and sustainable development of the enterprise. key words: compliance, accounting compliance, accounting information, quality of accounting information, financial statements, compliance risks. jel classification: d73, m40, m41, m49 1. introduction under the conditions of the institutional environment, the traditional view and attitude towards such a subsystem of enterprise management as accounting is changing. the main task of accounting is to provide complete and reliable information to all users of the enterprise for making rational management decisions. as a specific system, the following features are inherent in it: fullness, hierarchy, integrity, purposefulness, reliability, level of independence and openness, complexity. in the institutional economy, in addition to the generally accepted functions, accounting performs the following ones: formation of information about the entrepreneurial ability of management; informing the owner about the condition of the property over which he or she does not have direct control; formation of an information base for making decisions on investing funds; formation of archives (history of the enterprise); evidentiary instrument in courts (chyzhevska, 2013). transnationalization processes in the economy and the integration of ukraine into the world economic community have a direct impact on the development of national accounting and require effective implementation of international financial reporting standards into accounting practice. the requirements for the quality of accounting information that must be presented in the financial statements of the enterprise are also increasing. thus, the information in accounting must be of high quality in order to ensure the reliability, comparability, clarity and truthfulness of the reflection of the facts of the economic activity of the enterprise. on the other hand, inaccurate information about the financial condition and performance of business entities makes it impossible to make reasonable management decisions and, as a result, leads to economic losses, investor distrust and sanctions from regulatory authorities. however, in some cases, it can be difficult to identif y and avoid possible misstatements, errors and fraud in the financial statements, since fraud sometimes appears to be lawful transactions committed in accordance with applicable law. in this regard, the issue of ensuring and improving the quality of accounting information with the help of appropriate tools, among which there should be accounting compliance, is relevant. 2. the essence of the concept of “compliance” and “accounting compliance” compliance was first applied at the beginning of the 20th century in the united states, when the food and drug administration was created to develop and implement the rules for the functioning of business participants in the pharmaceutical and food industries. a prerequisite for the development of compliance was the adoption of foreign corrupt practices act of 1977 by the usa, which introduced requirements for accounting and financial documentation, and established rules for controlling relations with state authorities. today in the modern economic literature there is no single approach to the definition of the concept of “compliance”. table 1 shows the results of summarizing the most common approaches. the analysis of the definitions presented in table 1 made it possible to conclude that the definition of the term “compliance” was carried out through such concepts as an integrated programme, management, function, control, guarantee of protection of reputation and elimination of reputational risks, which did not fully disclose its content. in our opinion, the definition of “compliance” should include an institutional approach. indeed, in the general sense, an institution is a set of customs, procedures, norms, rules of behaviour operating in society, as well as a set of mechanisms that control and support their implementation. thus, “compliance” is: – the internal control and corporate ideology system, which, with the help of a system of regulations and a set of control mechanisms, forms the company’s ability to comply with established norms, standards, rules, and procedures; – a means of propaganda aimed at promoting requirements for compliance with internal regulatory baltic journal of economic studies 212 vol. 7 no. 2, 2021 table 1 modern approaches to the definition of “compliance” approach source definition a s a co m pr eh en si ve pr og ra m m e valiev, 2015 compliance is a set of real measures aimed at protecting businesses from corruption both externally and in the enterprise. kobielieva, 2018 compliance is a set of regulations that shapes the company’s ability to comply with applicable laws, instructions, rules and regulations. a s a m an ag em en t f un ct io n nieizviestna, 2017 compliance is a set of functions built into the organization’s business process aimed at adherence to internal business standards, corporate ethics, legal and regulatory requirements in order to achieve the highest efficiency ambrozhevich, 2011 compliance is a function with the purpose to manage compliance risks and maintain an adequate compliance culture in the company. krepysheva, sergievskaya & storchevoy, 2020 compliance is an important management function of the company, in particular risk management, aimed at identifying ways to prevent them a s a c on tr ol pr oc es s chekh et al., 2019 compliance is a process of control at the enterprise over the observance of regulatory legal acts and prevention of compliance risks ermakova & akhmetova, 2014 compliance is a process that is carried out by management bodies and employees of an organization in order to control compliance with applicable laws, rules, and standards, both internal and external. a s a n el em en t o f c or po ra te cu ltu re сovali, 2019 compliance is a guarantee of reputation protection, since monitoring and control of an enterprise’s reputational risks is usually assigned to compliance and is perceived in the international financial compliance sphere as a compliance institution formed long ago palcun, 2013 compliance is a corporate policy aimed at minimizing legal and reputational risks arising from the employees violating professional and ethical requirements established by the company’s documents bondarenko, 2008 compliance is an integral part of the company’s corporate culture, in which the performance of their job responsibilities, including decision-making at all levels, by each employee must comply with the standards of legality and integrity g en er ic a pp ro ac h (a nt ico rr up tio n, a cc ou nt in g, ta x) kobielieva, 2019 antimonopoly compliance is a set of legal and organizational measures provided for by an internal act (acts) of an economic entity or another person from the persons belonging to the same group of persons with such an economic entity, if such internal acts apply to the relevant economic entity and are aimed at complying with the requirements of antimonopoly legislation miheev, 2013 accounting compliance is a process of managing the risks of misstatement of financial statements due to conflicts of professional judgment in the application of the provisions of accounting regulations korostelkin, 2014 tax compliance ensures compliance with tax legislation by participants in tax legal relations and provides, first of all, minimization of financial, economic, legal and tax expenses arising from violations of tax legislation documents and generally accepted social values of the enterprise; – a set of measures aimed at identifying risks accompanying the activities of the enterprise and eliminating their adverse consequences. “accounting compliance”, in our opinion, is an institution of the internal control and corporate ideology system of the enterprise, which provides the ability to track, monitor, evaluate and comply with the requirements of regulatory documents, regulations, instructions in the accounting system with the help of a system of measures and a set of control mechanisms. accounting compliance is necessarily aimed at identifying, reducing and eliminating the risks of distortion, misrepresentation and falsification of accounting information. 3. compliance in the system of ensuring the quality of accounting information according to the reporting survey 2011 conducted by the audit firm pricewaterhousecoopers, 65% of ceos surveyed noted that the top priority in reporting is the quality of the information provided in it. high requirements for the quality of accounting information are the result of the growing importance of the public image of companies and constant monitoring of their development by investors. in addition, 85% of enterprises planned to take further measures and apply tools aimed at improving the quality of accounting information. the quality of accounting information correlates with the effectiveness of the implementation of the entire management process: the higher the quality parameters baltic journal of economic studies 213 vol. 7 no. 2, 2021 of information, the better the ability of managers to prepare optimal decisions. at the same time, the presence of inaccuracies and errors in the reporting, as well as the desire of management personnel to hide the reliable data of the reports in order to present the financial position of the enterprise in a more attractive light for investors, misleads the users of accounting information and reduces the confidence of stakeholders in the management of the enterprise (pravdiuk n. & pravdiuk m., 2016). therefore, today, in order to avoid problems with the preparation of high-quality accounting information, most enterprises need to introduce such an effective tool as accounting compliance. the formation of an accounting compliance system and its implementation at the enterprise is a step-bystep process, shown in figure 1. the implementation of the accounting compliance system must begin with the formation of the company’s compliance policy. compliance policy is a set of means, methods and procedures aimed at managing compliance risks. the purpose of the compliance policy is to minimize or eliminate compliance risks, primarily those that can significantly affect the quality of accounting information in financial statements. it can manifest itself in the form of applying various sanctions, financial or reputational losses as a result of noncompliance with laws, rules and standards (kobіelіeva, 2019). for the effective functioning of the accounting compliance system at the enterprise, firstly, it is necessary to develop and approve a number of internal standards and regulations, which will guide the employees of the compliance department in their work. such documents should be: 1. code of corporate ethics (conduct) of the enterprise. this is a general document that regulates the norms of behaviour of employees of the enterprise when interacting with counterparties (customers, suppliers), supervisory authorities and other third parties with whom this or that employee deals in the course of performing his or her professional duties. 2. regulations on the organization of accounting compliance at the enterprise. this is a generalizing document that defines the procedure for the creation and operation of an accounting compliance system. it has to reveal: the purpose and organizational order of functioning at the enterprise; job duties of employees and basic requirements for their performance; descriptions of methodological approaches, techniques, rules, procedures and requirements, the implementation of which ensures the objective and reliable nature of the results and conclusions of accounting compliance; algorithms of actions for the main procedures, criteria for assessing risk, a list of indicators and articles that must be considered and analysed without fail; the procedure for preparing and submitting information to the company’s management based on the results of accounting compliance; reactions in case of identifying deviations and violations during accounting compliance. 3. job descriptions of employees of the compliance department. they determine the uniform principles st ag e i preparation and formation of materials on the need for accounting compliance; development of policies, procedures, general regulations which will ensure their consistent and effective implementation; creation of an accounting compliance department at the enterprise (independent service; individual employee; group of persons responsible for the respective areas); development of internal standards and documents; approval of the compliance programme; selection of forms of primary documentation, registers of analytical and synthetic accounting, management reporting, ensuring continuous consistent registration and systematization of the facts of economic life, the formation of high-quality accounting information; informing the staff about the functioning of the accounting compliance system at the enterprise st ag e іі st ag e іі і analysis and assessment of risks in the accounting system; development of measures to minimize and eliminate risks in accounting generalization of the results of the work of the accounting compliance department (formation of reporting documentation for the prevention, identification and correction of distortions, errors and forgeries in the financial statements of the enterprise) figure 1. stages of formation and implementation of the accounting compliance system at the enterprise source: prepared by the authors baltic journal of economic studies 214 vol. 7 no. 2, 2021 of activity, the scope of job duties and the basic requirements for their performance, rights and scope of responsibility. 4. accounting compliance procedure. this is a document that contains detailed algorithms for the actions of compliance controllers, the distribution of responsibility for the order and timing of control procedures. 5. the procedure for registering the results of accounting compliance. this is a document that discloses the basic requirements for the preparation and presentation of information to the company’s management based on the results of accounting compliance. it may contain developed and approved forms of reporting documentation. the methodological support of accounting compliance is based on the relevant working documentation, the development of which presupposes a certain level of formalization, including organizational consolidation and structuring of all control actions and procedures. such documents can be developed in any form. however, at the enterprise it is desirable to approve a detailed description of the set of documents and accounting registers, which will guide the employees of the compliance department in their work. 4. methodology for identification, assessment and analysis of compliance risks one of the main objectives of the compliance policy is the identification, assessment and analysis of compliance risks. in order to identify compliance risks, it is necessary to have information about the types of risks in the accounting system, the causes and factors of their occurrence, the methods of identification and the nature of the impact on the final indicators of the company’s financial statements. we support the position of b.a. zasadnyi (zasadnyi, 2017) that one of the biggest risks of the accounting system in the context of applying ifrs is the poor quality of information reflected in the financial statements. to increase the identification of risks in the company’s accounting system, risks are grouped by type (table 2). regarding the factors affecting the degree of risk in accounting, they can be conditionally divided into two groups: 1. objective. they do not directly depend on the decision-making subject. these are inflation, competition, political and economic crises, ecology, behaviour of suppliers and buyers, changes in the taxation system, etc. 2. subjective. they directly characterize the employees of the accounting department: the level of competence and intellectual potential of the accountant, the level of awareness in the field of economic, civil and labour legislation, organization of accounting at the enterprise, etc. (vyhivska, 2006). it is possible to identify the risks of influencing the quality of the company’s accounting information by analysing the accumulated information for past reporting periods, in which there have been cases of theft and damage to property, incorrect assessment of accounting objects, errors in financial statements, overstating the company’s expenses, concealing income, etc. the compliance risk assessment process should include risk identification methods, mechanisms for controlling business processes and control procedures that are designed to comply with legal requirements in accordance with the industry sector of the enterprise. compliance risk assessment should be carried out taking into account: professional competence of employees of department performing compliance control functions; the scale and types of activities of the organization; customer base (in the context of suppliers, buyers and other counterparties); the presence of structural units, including those in other regions; establishment of legislative and regulatory acts in the field of accounting and taxation (kevorkova & sapozhnikova, 2020). to identify and assess the risks, we propose to draw up such special documents as: 1. the risk map is a document that, as a rule, is drawn up in a tabular form, which indicates risk factors, the likelihood of a negative event, possible losses/damages, and ways to prevent risk. drawing up such a document will allow to get an idea of the company’s activities in the shortest possible time. it can serve as a basis for checking the effectiveness of control procedures and assessing the risk of material misstatement of the accounting (financial) statements. 2. the risk assessment ranking table. for example, there can be proposed a methodology for ranking risk by probability, based on the likelihood of the risk occurring during the reporting period. it is a little more difficult to offer options for ranking by consequences. 3. the risk matrix is an informative document that can be used to obtain a risk assessment. each cell of the matrix reflects the assessment of each risk (depending on the established criteria). on the identified compliance risks, the compliance officers should take actions to indicate material misstatements, distortions and misrepresentation of information in the financial statements and certainly inform the management of the enterprise and its owners about this. the choice of actions and activities of compliance officers should be based on their professional judgment. in order to avoid or minimize compliance risks in the accounting system at the enterprise, we propose to introduce and use the following measures to baltic journal of economic studies 215 vol. 7 no. 2, 2021 table 2 risk groups and their impact on the formation and quality of accounting information risk group types of risks impact of risk on the formation and quality of accounting information r is ks a ss oc ia te d w ith th e or ga ni za tio n of a cc ou nt in g at th e en te rp ri se the risk of the formation of the order on accounting policy is associated with errors and vague wording of the provisions of the order, which have a double interpretation of the same position and create the basis for choosing the accounting method, and not strict adherence to certain provisions lead to distortion and incomplete accounting information the risk of choosing the form of organization and accounting records maintenance can cause additional costs, an increase in the degree of information risk and the risk of liability to users of financial statements the risk of the formation and presentation of financial statements consists in non-compliance with the requirements of the legislation on the disclosure of reliable information in the statements; may be associated with data manipulation and distortion of information provided to users r is ks o f o pe ra tin g ac tiv iti es production risk consists in an increase in the costs of the enterprise due to unjustified cost overruns. decrease in capital. impact on the indicator – production costs commercial risk consists in the increase in the company’s expenses associated with losses from damage to products in warehouses and during transportation; payment of fines, penalties, forfeit for violation of the terms of contracts decrease in capital. impact on the indicator – marketing costs property risk consists in the decrease in the value of the enterprise’s property associated with theft and deficiencies, losses exceeding the rate of natural loss decrease in capital. impact on the indicator – operating activity expenses the risk of emergency activities consists in the occurrence of unpredictable situations, accompanied by the loss of enterprise assets, additional costs for eliminating the consequences of emergency situations; costs of compensation for damage to the environment decrease in capital. impact on the indicator – extraordinary expenses r is ks o f c or re ct re co gn iti on o f t he as se ss m en t the risk of change in the value of assets is manifested through methods of further assessment (revaluation) of assets. for fixed assets, the result of revaluation is the adjustment of their initial cost and the amount of accrued depreciation. for inventories, it manifests itself through the choice of methods for assessing inventory write-off in the event that this method does not meet the requirements of the market environment increase or decrease in capital. growth in other operating activity expenses credit risk manifests itself through the growth of bad and doubtful accounts receivable as part of the initial cost of accounts receivable, not confirmed by a reserve of doubtful debts r is ks c au se d by th e ac tio ns o f cr ed ito rs a nd in ve st or s the risk of the procurement process lies in the fact that the company may have to pay fines, penalties and forfeitures in case of late or incomplete repayment of obligations to suppliers and other creditors decrease in capital. impact on the indicator of other operating activity expenses interest rate risk is caused by possible changes in interest rates on loans and borrowings, as well as the need to pay additional amounts in case of untimely or incomplete repayment of loans source: performed by the authors based on materials (hnylytska, 2017, vyhivska, 2010) be implemented as part of ensuring the quality of accounting information: increase the volume of substantive procedures related to the detection of errors in accounting and reporting; increase the sample size when performing compliance testing; make changes in the timing of the implementation of the procedures provided for by the compliance system; involvement of other specialists or experts (legal advice, auditors, forensic specialists). 5. organizational and economic mechanism of accounting compliance disclosure of the theoretical essence of accounting compliance provides for the definition of functions, policies and principles in this direction of the economic activity of the enterprise. the objectives of accounting compliance determine the assessment of the compliance of the application of accounting procedures and accounting policies in accordance with the established requirements; identification, assessment and prevention of risks of misrepresentation of accounting information. it should be noted that ensuring accounting compliance at the enterprise should be carried out with a known level of formalization, which provides for the organizational consolidation and putting in order all control actions and procedures. the theoretical essence of accounting compliance as an economic category, its place in ensuring the quality baltic journal of economic studies 216 vol. 7 no. 2, 2021 of accounting information and organizational and economic mechanism are presented in figure 2. the proposed organizational and economic mechanism of the accounting compliance system will help ensure the quality of accounting information necessary for both internal and external users in order to make effective management decisions. the result of such decisions is the effective operation of the enterprise, attracting investment, etc. 6. conclusions thus, accounting compliance, as an appropriate institution for the quality of accounting information at an enterprise, should be focused on finding, identifying, assessing, analysing and taking measures to minimize compliance risks in the accounting system arising from non-compliance with established rules, standards and organizational procedures for the organization and maintenance of accounting. for the formation of an accounting compliance system and its implementation at the enterprise, it is advisable to use a certain algorithm, which includes the following stages: implementation of the compliance system, risk monitoring, generalization of results. the necessary accounting support for accounting compliance can be built on the basis of an appropriate system of internal standards and regulatory documents, which will guide the employees of the compliance service in their work. these are general purpose documents and regulations for conducting accounting compliance. the effectiveness of accounting compliance depends on properly organized and well-regulated work with compliance risks. to identify and assess risks, it has been proposed to draw up such special accounting compliance as an institution for ensuring the quality of accounting information goal: ensuring the level of reliability of accounting information in accordance with the established legislation objectives: assessment of the compliance of the application of accounting procedures and accounting policies in accordance with the established requirements; identification, assessment object: presented accounting data and forms of financial statements of the enterprise. subject: violation of accounting records maintenance rules, the procedure for the formation and presentation of financial statements principles: responsibility, independence, availability of resources, inevitability of punishment expected result: methodological and technological support of accounting compliance accounting compliance functions: protective, regulatory, preventive, informational. threat detection tools: compliance monitoring; compliance diagnostics and control; risk management; interaction with other control services. accounting compliance methods and procedures: accounting data research methods and procedures; statistical methods of analysis; audit methods; forensic accounting methods and organizational support of accounting compliance: prevent, reduce the risk of distortion and misrepresentation of financial statements; increasing the responsibility of employees of the enterprise, in particular the accounting service; increasing the reputation of the company; increasing the investment attractiveness of the enterprise. formation of a compliance management system; justification for the creation of a compliance department (independent service; individual employee; group of persons responsible for the relevant areas); development of internal standards and documents; development and implementation of a compliance programme, plans, strategy; development of a system for assessing and monitoring compliance risks in accounting. procedures and prevention of risks of distortion of information in financial statements; prevention of errors and deliberate distortions in the enterprise accounting data figure 2. organizational and economic mechanism of accounting compliance source: performed by authors baltic journal of economic studies 217 vol. 7 no. 2, 2021 documents as a risk map, a risk assessment ranking table, a risk matrix. prevention or minimization of compliance risks in the accounting system at an enterprise is possible by introducing the following measures to be implemented as part of ensuring the quality of accounting information: increasing the volume of procedures in essence related to the detection of errors in accounting and reporting; increasing the sample size in the implementation of compliance testing; amending the timing of the procedures provided for by the compliance system; involvement of other specialists or experts (legal advice, auditors, forensic specialists). the proposed organizational and economic mechanism is the basic platform of the accounting compliance system at the enterprise, capable of ensuring the quality of accounting information necessary for both internal and external users in order to make effective management decisions. substantiated methodological principles and recommendations for the formation and implementation of accounting compliance will not only ensure the quality of accounting information, but also the guarantee of business purity, a high level of corporate culture, which will improve the efficiency of economic activities and sustainable development of the enterprise. references: ambrozhevich, о. 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(2019). organizatciia, metodika, poniatie i sushchnost komplaens-kontrolia [organization, methodology, concept and essence of compliance control]. іn: studia universitatis moldaviae (seria ştiinţe exacte şi economice), nо. 2(122), рp. 138–142. baltic journal of economic studies 84 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 south ukrainian national pedagogical university named after k. d. ushynsky, ukraine e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0002-7224-7892 3 south ukrainian national pedagogical university named after k. d. ushynsky, ukraine е-mail: ss.romanenko9@gmail.com orcid: https://orcid.org/0000-0002-4446-9244 doi: https://doi.org/10.30525/2256-0742/2022-8-4-84-89 strategic vectors for the development of sports and recreational activities: international and national experience inna irtyshcheva1, konstantin bogatyrev2, serhii romanenko3 abstract. the subject of the study is international and national education on the strategic development of physical education and recreation. methodology. general scientific methods were used in the research, in particular: theoretical generalization; methods of positive-normative analysis and statistical analysis. the purpose is the process of researching international experience in order to identify best practices for the development of strategic vectors for the development of physical culture and recreation activities in ukraine. conclusions of the study. the experience of the leading countries of the world in organizing the management of physical culture and recreation activities has been studied and systematized, and the possibilities of implementing individual mechanisms and tools in the national model at the present stage of its reorganization have been determined. it is noted that currently the basic condition for the development of the system is the search for the most optimal balance of powers between the state, regions and the private sector in managing this area, which includes the advantages of the american model on the one hand (primarily in terms of creating favorable conditions for attracting private capital) and the european model, which provides for a moderate transfer of powers by the state through setting priorities, coordination of business entities and targeted financing of priority areas. it is noted that the defining features that are inherent in the system of management of physical culture and recreation activities in all countries that have achieved high results in this area are, first of all: a developed legal framework and institutions, clear state priorities for the development of sports, diversified sources of funding and tools to stimulate entrepreneurship, as well as high attention to training and development of science and technology in this area. it is proved that the development of sports and recreation should be carried out at different levels: state, regional, territorial communities. the possibilities of development of sports and recreational activities on the example of odesa region are analyzed. as of early 2020, it was recognized that the level of funding for sports and recreation in odesa region from the local budget and other sources, such as trade unions, sponsorships, etc. is insufficient. in addition, problems with the development and condition of sports architectural objects and facilities were noted. problems with the staffing of the sports and recreation sphere in odesa region are associated with low wages, which caused the outflow of personnel. a particular shortage of sports facilities is observed in rural areas. key words: sports and health activities, financing, national characteristics, world health organization. jel classification: g18, h30, h51, h61, i10 1. introduction in modern transformational conditions, the physical culture and recreation sphere as a specific type of professional activity and an important social institution has an active influence on human development and under the influence of global trends undergoes deep qualitative and structural transformations. in ukraine, along with a high level of human development, the development of professional sports is stagnating. there is insufficient financial support from the state authorities at various levels, sports baltic journal of economic studies 85 vol. 8 no. 4, 2022 events are possible only through sponsorship, in most regions there are no conditions for training (outdated infrastructure, high energy costs, low salaries of coaches), limited choice of youth for development in various sports, most existing sections provide only paid services, which reduces their accessibility for children and youth from low-income families. the above factors, as well as a number of systemic problems in the development of professional sports, caused by destructive phenomena of socioeconomic nature, which are inherent in the development of socio-economic systems in ukraine in recent years, have led to the loss of ukraine's general position in the international sports arena, the outflow of talented athletes and coaches abroad and the deterioration of the overall image. despite the existence of strategic programs for the development of sports in ukraine, the management of this sphere is unsystematic and imperfect. the chronic shortage of public resources, acute socioeconomic problems that come to the forefront of state regulation, as well as the general decline in the country 's investment attractiveness restrain investment support for the development of this sphere and transfer the problems of youth and sports development to a secondary level. that is why, in modern conditions, the study of international experience in the development of physical culture and health activities and its adaptation in ukraine is quite relevant. the purpose of the article is the process of researching international experience in order to identify best practices for the development of strategic vectors for the development of physical culture and recreation activities in ukraine. 2. international experience in the development of physical culture and recreation activities according to the results of the study, n. neroda also identifies certain features that distinguish the european and american models of sport: "the european model of professional sports is characte rized by the lack of a clear division between amateur and professional sports, despite the significant influence of the concept of amateurism on the development of professional sports in europe. european professional sport is characterized by a sport-commercial direction of development, in contrast to american professional sport, which focuses on commercial and sports direction. the peculiarities of the organizational structure of professional leagues, namely the open format, characteristic of the european model, or the closed format, characteristic of the north american continent, regulate the procedure for new teams to join the league and form the peculiarities in the regulation of sports competition and the labor market. the processes of international integration had a significant impact on the formation of the legal framework of european professional sport, which affected its greater internationalization." (neroda, 2016) in general, the features that unite the american and european models of development of physical culture and recreation activities are as follows: 1) a wide range of differentiated sources of funding for the development of sport, based primarily on the recognition of sport as an important area of business, the integration of sport and business, sport and municipal government, sport and science; 2) special attention is paid to the development of mass sports, which is considered as an important element of economic, social and ideological policy of the state; 3) high level of development of management and marketing of sports as a tool of sports business and attracting investments in sports and recreation activities; 4) developed scientific base and priority innovative research in the field of sports, funded from various sources, among which the most powerful are international organizations, sponsors and the business sector; 5) a stable and comprehensive system of regulation of relations in the field of sports, as well as integrated rules and restrictions relating primarily to ensuring transparency and preventing corruption in the organization of sports competitions, doping, etc. 6) the development of "sports diplomacy ", which is seen as a "soft power" to overcome various misunderstandings between countries. the growing attention to sports diplomacy is largely seen as a response to the crisis of traditional diplomacy. new forums and instruments were perceived as necessary to achieve international policy goals. sport can play a role in achieving foreign policy goals. in addition to the general perspectives of public diplomacy and cultural diplomacy, the concept of sports diplomacy was also considered. this is all the more relevant as the values associated with sport, such as volunteerism, civil society and democracy, are closely linked to democratic values. comparing the european and ukrainian models of sports management and state regulation in this area, professor s. v. lischuk notes that in ukraine, despite the high level of state intervention in the development of sports and recreational activities, a significant number of issues remain unsettled. in particular, with regard to professional sports, according to the scientist: "the current experience of state regulation of professional sports cannot be called successful. in this regard, it is necessary to solve the following problems: 1) to find the optimal combination of self-regulation and state regulation in the field of professional sports; baltic journal of economic studies 86 vol. 8 no. 4, 2022 2) to establish the limits of state regulation of public relations in the field of professional sports. the solution to these problems cannot be unambiguous and simple: on the one hand, it is necessary to prevent excessive state interference in the affairs of sports organizations, which is dangerous and can destroy the system of state regulation created by sports organizations. on the other hand, the problems of ensuring public order, bribery of participants in sports events, doping and corruption in sports cannot be solved without the help of the state. accordingly, the state should understand its role and more clearly define the limits of its participation in the legal regulation of social relations in the field of professional sports." (lischuk, 2015; melikh, 2019) given the difficulties of the current stage of the socio-economic situation in ukraine, the problems of certain reformatting or complete restructuring of the current model of state management of physical culture, sports and recreational activities, which will meet current and strategic challenges and will be based in certain aspects on international experience, become obvious. the analysis of the experience of countries with developed economies shows that the most acceptable model of management of physical culture and recreation activities in ukraine is the european model, which provides for a wider participation of the state and local governments in the development and financing of certain areas of development of this industry. in this context, the most balanced distribution of powers between the state and regional levels of government regarding its role is important. 3. strategic vectors of development of physical culture and recreation activities in ukraine the development of physical culture and recreation should be carried out at different levels of the state, region and territorial communities. consider the possibilities of developing physical culture and recreation activities on the example of odesa region, which is the largest in area among all regions of ukraine. the demographic situation in the odesa region corresponds to the national one and is characterized by the tendencies to reduce the available and permanent population, deterioration of the natural movement and vital rate, increase of migration flows (table 1). the average life expectancy in odesa region for 2015–2020 ranged from 70.4 years in 2015 to 72 years in 2019, for women – from 74.7 to 79.9 years, and for men – from 65.9 to 66.9 years (table 2). it should be noted that in 2020 there was a slight but significant decrease in life expectancy for both genders, which most researchers attribute to the effects of the pandemic. as for the age distribution of the population of odesa region, there are also national trends of predominance of the elderly population over the table 1 оmposition of the existing population of odesa region for 2015–2019 2015 2016 2017 2018 2019 available population, thousands of people 2396,4 2390,3 2386,5 2383,1 2380,3 deviations to the previous year: absolute, thousands of people; -0,1 -6,1 -3,8 -3,4 -2,8 relative, percentage; -0,004 -0,3 -0,2 -0,14 -0,12 number of births, thousands of people 29,5 27,4 26,4 25,2 23,1 number of deaths, thousands of people 34,2 34,6 33,6 33,4 33,6 natural reduction, thousands of people -4,7 -7,2 -7,2 -8,2 -10,5 migration growth, thousands of people +4,6 -0,99 +3,4 +4,7 +7,7 the density of the existing population 71,9 71,8 71,6 71,5 71,5 source: (odesa regional state administration, 2022) table 2 average life expectancy in odesa region period for which indicators are calculated (years) average life expectancy at birth both genders men women difference between life expectancy of men and women 2015 70,4 65,9 74,7 8,8 2016 70,8 66,4 75,2 8,8 2017 71,1 66,6 75,5 8,9 2018 71,8 66,7 76,7 10 2019 72,0 66,9 76,9 10 2020 71,4 66,4 76,2 9,8 source: data of the state statistics service of ukraine, 2022 baltic journal of economic studies 87 vol. 8 no. 4, 2022 number of children and trends that are unacceptable for ensuring demographic processes of population reproduction. this indicates the need for the speedy development and implementation of social programs of regional development aimed at increasing the birth rate and improving the level of social guarantees and life of the population. demographic improvement of the population of ukraine and its regions, increasing life expectancy is possible through the development of sports and recreation. in the odesa region in 2015–2017, the system of children's and youth sports schools (cyss (children's and youth sports school)) was optimized, the need for which was caused by the abolition of the possibility of financial revenues from the social insurance fund for the activities of cyss. as a result of such optimization, more than 1000 children were forced to transfer to other sports schools, and more than 600 pupils lost the opportunity or refused to continue their studies in the cyss. as a result of such optimization, and in fact a decrease in the number of cyss, at the beginning of 2019 there were again as many as in 2015 – 67 cyss (odesa regional state administration, 2022). comparison of the number of sports facilities in the odesa and other oblasts allows us to state that the odesa oblast ranks second after the lviv oblast in terms of the number of sports facilities in general, and second after the zaporizhzhia oblast in terms of the number of sports facilities in the ahs (amalgamated hromadas). "in the period 2014–2018, the construction of sports facilities continued in odesa region, but the growth in the number of sports facilities is slower than in other regions of ukraine. there are also practically no large infrastructure facilities being built, except for the construction of the innovative sports palace in izmail and the sports hall of the state university of applied sciences in balta. in 2017–2018, sports grounds for mini-football with artificial turf and multifunctional fields were actively built and reconstructed in ahs of the odesa oblast." (odesa regional state administration, 2022) trends in the gender distribution of residents of odesa region engaged in sports correspond to the national trends and are characterized by a slight uniform growth. as of the beginning of 2020, it was recognized that the level of funding for the sports and recreation sphere of odesa region from the local budget and other sources, such as trade unions, sponsorships, etc. is insufficient. in addition, problems with the development and condition of sports architectural objects and facilities were noted. problems with staffing of the physical culture and recreation sphere in odesa region are related to the low level of wages, which caused the outflow of personnel. a particular shortage of sports facilities is observed in rural areas. all these shortcomings were declared in the development strategy of odesa region for the period 2021–2027, which made it possible to identify strategic imperatives for the implementation of state policy in the field of physical culture and sports. the conducted researches proved that the physical culture and health sphere is of strategic importance for the development of the state and its regions for several reasons: 1) formation and development of human potential, which is the basis for building an effective economy, reducing morbidity and combating stress; 2) educational influence on the development of society as a whole and each individual in particular through the formation of mass sports culture and satisfaction of the need of the majority of people for involvement and achievements, distraction from bad habits and antisocial behavior, development of international relations and communications and unification of values, social cohesion, formation of a conscious civil society; 3) a source of economic growth in the context of the development of the sports industry, the growth of the market of sports and recreation services, as well as related industries; 4) an important image component is the element of international integration, participation in international and world competitions. sports and recreational activities are also an important component of sustainable development of the country, regions and hromadas. the role of sport in sustainable development is affirmed in the 2030 agenda for sustainable development (para. 37), which confirms the growing contribution of the sport and health sector to the realization of development and peace, the promotion of tolerance and respect, the empowerment of women and youth, people and communities, as well as health, education and social inclusion, which together contribute to the achievement of sustainable development (vidomosti verkhovna rada of ukraine, 2022). according to s.m. tsymbalyuk: "in ukraine, the sustainable development of physical culture and sports is recognized as one of the important vectors of state support and the direction of activity of local executive authorities, local self-government bodies, which is approved by the resolution of the verkhovna rada of ukraine ‘on ensuring sustainable development of physical culture and sports in ukraine in the conditions of decentralization’ of 19.10.2016. taking into account the role of physical culture and recreational activities in the formation of a healthy society, development of productive forces and stimulation of demographic processes, the management of this sphere should be based on clear, qualitatively defined strategic goals, which together baltic journal of economic studies 88 vol. 8 no. 4, 2022 are aimed at building an effective model of development of physical culture and sports as one of the basic institutional foundations of society, which promotes sustainable development and quality reproduction of socio-economic systems." (tsymbalyuk, 2021) on the basis of the study of the development of physical culture and recreation activities in section 3 of the dissertation research, it is possible to outline the state of this industry at the end of 2020 and highlight the main positive and negative trends observed within the current model and under the influence of objective factors such as the covid-19 pandemic, the deterioration of the economic situation in the state, etc. among the positive factors, it is worth highlighting a number of factors, further support of which can stimulate the development of physical culture and recreation activities, namely: 1) popularization of mass sports among the population, which led to the development of entrepreneurship in this area, in particular, the creation of new fitness clubs, sports centers, sections, etc. and the development of related industries – production and sale of sports goods, mobile applications, sports equipment, and so on. under quarantine restrictions, these industries have experienced a slight decline. however, mass sports still remained a trend and a component of the transformation of national culture. 2) against the background of popularization of sports, the work on construction, modernization and development of sports infrastructure in a number of regions has intensified. at the level of ahs, the work on the support of sports at the local level, creation of sports teams, in particular in popular areas (football, volleyball, tennis), maintenance of sports clubs, etc. has also been intensified. 3) local executive authorities and local self government bodies have increasingly (with the exception of the quarantine period) held mass sports micro-events, namely the organization of charity sports runs, sports competitions and sports days, in which all segments of the population participated. that is, it is possible to talk about a certain revival and development of sports traditions in ukraine and the formation of mass sports culture. at the same time, there are significant problems in the system of management of physical culture and recreation activities, which can be divided into political (use of sport as an instrument of influence, struggle for power, problems in the field of judging and organization of various types of competitions), economic (problems of financing sport and investing in sports infrastructure) and organizational (problems with the distribution of powers, resources, responsibility). these types of problems follow from each other and indicate the insufficient efficiency of the current management model. in addition to the above, there are system-wide problems: lack of management of physical culture and recreation activities as an integral system, imperfection of state regulation mechanisms, insufficiently clear system of priorities. experts of the institute for the future of ukraine have formed a strategic vision of the development of physical culture, sports and recreational activities in ukraine under the condition of gradual implemen tation of the established trends until 2019. according to their "vision", the future of sport in ukraine has the following characteristics: "– increasing physical activity of ukrainians is a priority vector of state policy. – the strategy of increasing physical activity of citizens is being successfully implemented in the country. – in 2023, a package of sports laws and by-laws – 'sports reform' – was adopted, which contains the concept, a number of laws, in particular the law 'on a physically active nation', adopted instead of the law 'on physical culture and sports'. – in 2025, the last state secondary school will be transformed into a public sports club. mass amateur sports and physical activity are separated from sports of higher achievements. an independent agency is established for this purpose in 2022. – federations are completely independent from the ministry of youth and sports, develop on the basis of sports clubs and have mutually beneficial relations with business. – the state policy is aimed at stimulating the development of sport at all levels. a large-scale national survey is conducted annually to assess quantitative and qualitative indicators, in particular, physical activity of the population. this allows adjusting the state policy. – every year up to 1% of gdp is allocated from the budget of ukraine for the development of sports infrastructure and promotion of physical activity. – public spending on sport and physical activity in 2030 will amount to 100 euros per capita. – the standards of necessary conditions for an active lifestyle with long-term geoplanning, financing and prioritization for at least 4 years have been approved at the municipal level." (ukrainian institute of the future, 2022) unfortunately, given the current events, it is impossible to implement the proposed "vision". the war in ukraine has destroyed a significant part of the economic potential, sports, social and transport infrastructure, caused significant damage to the economy and led to the loss of human resources – this is the opinion of most scientists (irtyshcheva, and etc., 2022; popadynets, et al. 2021; yakymchuk, et al., 2021; pletsan, et al. 2021). baltic journal of economic studies 89 vol. 8 no. 4, 2022 4. conclusions the experience of the leading countries of the world in organizing the management of physical culture and recreation activities has been studied and systematized, and the possibilities of implementing individual mechanisms and tools in the national model at the present stage of its reorganization have been determined. it is noted that currently the basic condition for the development of the system is the search for the most optimal balance of powers between the state, regions and the private sector in managing this area, which includes the advantages of the american model on the one hand (primarily in terms of creating favorable conditions for attracting private capital) and the european model, which provides for a moderate transfer of powers by the state through setting priorities, coordination of business entities and targeted financing of priority areas. it is noted that the defining features that are inherent in the system of management of physical culture and recreation activities in all countries that have achieved high results in this area are, first of all: a developed legal framework and institutions, clear state priorities for the development of sports, diversified sources of funding and tools to stimulate entrepreneurship, as well as high attention to training and development of science and technology in this area. it is proved that the development of sports and recreation should be carried out at different levels: state, regional, territorial communities. the possibilities of development of sports and recreational activities on the example of odesa region are analyzed. as of early 2020, it was recognized that the level of funding for sports and recreation in odesa region from the local budget and other sources, such as trade unions, sponsorships, etc. is insufficient. in addition, problems with the development and condition of sports architectural objects and facilities were noted. problems with the staffing of the physical culture and recreation sphere in odesa region are associated with low wages, which caused the outflow of personnel. a particular shortage of sports facilities is observed in rural areas. references: neroda, n. 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(2021). economic diagnostics and management of eco-innovations: conceptual model of taxonomic analysis. 4th international conference on intelligent human systems integration (ihsi) – integrating people and intelligent systems, рр. 573–579. received on: 23th of september, 2022 accepted on: 4th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 211 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 zaporizhzhia national university, ukraine (corresponding author) e-mail: liliia_khorishko@ukr.net orcid: https://orcid.org/0000-0002-0618-976x 2 zaporizhzhia national university, ukraine e-mail: rudnevanna2017@gmail.com orcid: https://orcid.org/0000-0003-4113-8332 doi: https://doi.org/10.30525/2256-0742/2023-9-2-211-215 lat vian renewable energy policy in the context of eu initiatives liliia khorishko1, anna rudnieva2 abstract. energy security and reduction of dependence on energy imports is a key issue on the eu's agenda in the context of today's global challenges. the resource potential of renewable energy expands the capabilities of eu member states to increase energy sustainability and attract additional investments to implement the green transformation of national economies. the eu has adopted a number of initiatives under directive eu 2018/2001, repowereu, which are synchronized with "the european green deal". they are aimed at boosting the development of renewable energy. these eu initiatives and the need to increase energy security and sustainability make the development of renewable energy relevant for latvia. the subject of the study is the content and features of latvia's energy policy. the purpose of the scientific research is to study the key trends in the development of latvia's renewable energy policy in the context of eu initiatives. research methodology: systematic approach, methods of analysis and generalization. one of the key areas of the government's energy policy is the development of renewable energy. this is stated in the national energy and climate plan 2021–2030 and the sustainable development strategy until 2030. key tasks include synchronising the efforts of the state, business, the public and stakeholders in developing energy security by increasing the use of energy from renewable sources, attracting investment in the energy sector to promote a green economic transformation, energy efficiency and creating a culture of responsible resource consumption. latvia has identified key areas for the development of renewable energy in line with the content of its energy policy and relevant eu initiatives. considerable attention is being paid to optimising the regulatory framework. the green channel online platform has been created to coordinate the efforts of the government and stakeholders in developing key sectors of the national economy, including renewable energy. the resource of cross-border cooperation is actively used in the implementation of projects for the construction of wind farms for the production of electricity and the necessary infrastructure for its supply to domestic and foreign consumers. the research phases of the latvian-estonian offshore wind project elwind and the construction of the kurzeme wind farm with the assistance of the swedish company eolus and the german company pne have been launched. domestic stakeholders are interested in building solar parks and related infrastructure. considerable attention is being paid to the digitalisation of the energy sector in order to optimise the management of the energy market and consumer services. results of the study: the priority direction of latvia's energy policy is the development of renewable energy in the context of increasing the level of energy security of the state and correlation with relevant eu initiatives; the national government promotes the optimisation of the content of the regulatory framework in the field of renewable energy, expands opportunities for cross-border cooperation and involves stakeholders' initiative in project implementation; measures are taken to digitalise the energy sector and create a culture of responsible energy consumption. key words: renewable energy, energy security, energy policy, energy market, cross-border cooperation, stakeholders. jel classification: q28, q42, q48, q54 baltic journal of economic studies 212 vol. 9 no. 2, 2023 1. introduction today 's global challenges are intensifying the processes of cooperation to find additional ways to ensure the sustainability of economic development and the security of modern states. the potential of renewable energy resources is seen by the international community as one of the key mechanisms for promoting the development of a green economy, increasing energy security and reducing negative impacts on the environment. in addition, russia's aggression against ukraine has raised the issue of energy security for both individual european countries and the eu as a whole. renewable energy, green economy and cross border cooperation are important components of the baltic sea region's energy security strategy under the eu's repowereu plan. it aims to increase energy resilience, diversify energy sources and expand opportunities for renewable energy production. the eu is also actively working to achieve its ambitious goals of reducing greenhouse gas emissions and ensuring that 55% of its energy comes from renewable sources by 2030. in the context of european energy and climate initiatives, latvia is committed to reducing its dependence on fossil fuels and gradually increasing the use of renewable energy in various sectors of society. the development of the renewable energy sector creates new challenges for the state in terms of updating the regulatory framework, building energy infrastructure, digitalisation of energy and related sectors, raising the level of environmental culture and responsibility of citizens, etc. it can be stated that latvia has practical experience in responding to these challenges in the field of renewable energy. the purpose of the study is to examine key trends in the development of latvia's renewable energy policy in the context of eu initiatives. the complexity of the study is to determine the role of renewable energy in latvia's energy policy in the current political reality. the systematic approach of the study will help to specify the main trends in the development of renewable energy in latvia in the context of eu energy and climate initiatives. the method of analysis will help to clarify the content of energy policy and the subjectivity of the state in the development of renewable energy. the use of the generalisation method will make it possible to specify the final results of the study. 2. basic principles of latvia's energy policy the goals of latvia's energy policy are set out in the national energy and climate plan for 2021–2030 (latvian government, 2020). it envisages synchronising the efforts of the state, business, the public and stakeholders in developing a green competitive economy, increasing energy security and streng thening the state's resilience to modern challenges. according to latvian officials, the developed energy policy directions will help to stabilise prices on the domestic energy market by increasing the share of national energy production, including from renewable sources, which will help to eliminate energy dependence on russian energy resources. the investments attracted by the implementation of energy projects will contribute to the sustainable development of the latvian economy. one of the key objectives of the plan is to increase the use of renewable energy resources in areas such as electricity generation, heating and cooling, and transport. in this context, several key energy policy targets have been formulated that can contribute to increasing the share of renewable energy in final consumption in general (see table 1). the data in table 1 show that latvia is striving to meet its commitments under the eu energy initiatives to increase the share of renewable energy in final consumption to at least 40%. given the existing high level of renewable energy production and use in heating and cooling, no further significant growth is planned. at the same time, an indicative target of >60% by 2030 has been set. at the same time, there is an urgent need to increase the share of renewable energy in the functioning of transport, to be achieved through the use of biofuels and biogas. the sustainable development strategy up to 2030 also pays considerable attention to the prospects for increasing the final consumption of renewable energy, which will contribute to energy security, improve the country 's import-export balance and stimulate regional development. promising areas for renewable energy development include wind and table 1 latvia's national renewable energy targets national goals 2020 2022 2025 2027 2030 share of renewable energy (re) in final consumption, % 40 41,8 44,3 46.5 50 share of re in energy production, % 59.8 >60 share of re in heating and cooling, % 53.4 55.2 56.8 56.69 57.59 share of re in the functioning of transport, % 10 7 share of biofuels and biogas in final energy consumption by transport, % 0.2 1.0 3.5 source: (latvian government, 2020) baltic journal of economic studies 213 vol. 9 no. 2, 2023 solar power generation and biofuel production (latvian parliament, 2010). renewable energy is seen as a key mechanism for improving energy efficiency and competitiveness of the national economy in the context of eu climate and energy initiatives. the key aspects of renewable energy development identified by the latvian government and parliament correlate with eu initiatives such as eu directive 2018/2001 and repowereu. the eu directive 2018/2001 defines the basic principles of renewable energy development as a key objective of the eu energy policy aimed at reducing co2 emissions and fulfilling commitments under the paris climate agreement. it is emphasised that the ultimate goal of forming a renewable energy system is to stabilise prices for consumers, as well as to minimise the negative impact on the environment in the context of the transition to a low-carbon economy by 2050 (european commission, 2018). the eu encourages cross-border cooperation between member states to develop and implement innovative projects aimed at building the infra structure and storage facilities necessary for the efficient use of renewable energy. the invasion of ukraine by russian troops and massive attacks on the ukrainian energy system prompted the eu to adopt the repowereu plan (european commission, 2022), which aims to increase energy resilience, diversify energy sources and expand renewable energy production. this will reduce the eu's need to import russian energy resources, encourage the gradual transition of industry and transport to energy consumption from renewable sources, and help reduce co2 emissions. by 2027, the eu plans to attract €210 billion of investment to achieve its goals. this initiative is synchronised with the eu's ambitious "european green deal" plan. therefore, according to the existing national regulatory documents, renewable energy is a component of latvia's energy security. the development of renewable energy is linked to the eu's energy and climate initiatives. the key areas of energy policy are to achieve the set targets for increasing the share of renewable energy in final consumption by maintaining positive dynamics in electricity production, use in heating and cooling, and expanding the possibilities for its use in transport. 3. key trends in the development of renewable energy in latvia renewable energy is a priority area for the implementation of latvia's energy policy. in this context, amendments have been made to the electricity market law to promote the development of renewable energy (latvian parliament, 2022). it regulates the system of settlements between traders and consumers of renewable energy, defines the procedure for the formation of energy communities, their functions in the distribution and sharing of energy, and the exchange of digital data. the ministry of economy and the investment and development agency of latvia have launched the green channel initiative, which aims to expand opportunities for stakeholder participation in the development of key areas of the national economy. in particular, this refers to smart energy and mobility, a key aspect of which is investing in the development of renewable energy (liaa, 2021). investment projects should contribute to the intensification of entrepreneurial initiatives, the search for creative ideas and solutions in the field of renewable energy, and an increase in the number of jobs. this will have a positive impact on increasing the competitiveness of the latvian economy in the face of today 's global challenges. considerable attention is paid to finding new areas of cross-border cooperation in the implementation of projects aimed at increasing the role of renewable energy in the baltic sea region as a whole. as part of the cooperation between latvia and estonia, the governmental cross-border offshore wind project elwind has been launched in the baltic sea (elwind, 2020). the objective is to build two offshore wind farms to generate renewable electricity, which will contribute to the development of ports in both countries and the transition to the use of renewable energy in public transport (khorishko, horlo, malovana, 2023). this will intensify the fulfilment of latvia's commitments under the european green deal to reduce co2 emissions. this project is part of cross-border cooperation in the field of renewable energy, which makes it possible to apply to the european commission for funding under the connecting europe facility. sweden's leading renewable energy company eolus and germany 's pne have launched a joint project to build the kurzeme wind farm off the west coast of latvia (eolus/pne, 2023). at this stage, studies are underway to estimate the cost of the project, assess the potential environmental impact and explore the prospects for long-term collaboration between the initiatives of various stakeholders in the field of clean energy production. the plant is expected to be operational in 2030 and will generate 4.5 twh of renewable electricity per year. the prospects for the construction of wind power plants in the baltic region are boosting the initiative of internal stakeholders to implement renewable energy projects. the management of the northern port of ventspils is initiating a long-term development strategy aimed at building the necessary infrastructure within the port area, as well baltic journal of economic studies 214 vol. 9 no. 2, 2023 as a service centre for offshore wind farms already operating in the region or to be built in the future. the port is currently actively seeking investors. given its geographical location and climatic conditions, the port area is promising for the implementation of projects to build solar parks for electricity generation and infrastructure for its export to consumers. in this context, a number of agreements have been signed for the construction of these parks in the port's industrial zone (liaa, 2023). at the same time, according to t. naburgs, head of the latvian wind energy association, the effectiveness of the country 's wind energy development depends on further action by government officials to take an integrated approach to the development of the wind energy sector (eng.lsm.lv, zalamane, 2021). this means improving the relevant regulatory framework, developing mechanisms for resolving problematic issues of interaction between stakeholders and local municipalities at all stages of infrastructure construction. investor interest in the construction of solar power generation parks is growing. the investment company merito partners (merito) has expressed a desire to invest €50 million in the construction of 10 solar power plants in different regions of latvia. this will enable the production of around 70,000 mwh of electricity per year, enough to meet the needs of more than 35,000 households. to implement the initiative, the merito sustainable energy fund i was established, which has accumulated approximately €20 million. consultations with national and regional stakeholders are underway to attract additional investment (liaa, 2023). digitalisation processes expand the possibilities of modern states to optimise the functioning of the energy sector in the context of creating a single energy data space. the latvian environmental investment fund is an active participant in the european commission's enershare project, funded with €8 million (leif, 2022). its ultimate goal is the digitalisation of the energy and related sectors, with the aim of providing stakeholders with access to a significant range of energy data, algorithms for interacting on its use, and making the process of forming the cost of energy services manageable. particular attention will be paid to optimising the provision of energy services, taking into account the amount of energy from renewable sources, sharing data on its surplus and redistributing it to meet the needs of vulnerable groups. an important area in promoting the development of renewable energy is the involvement of public initiative, the promotion of a high level of environmental culture and responsibility among latvian citizens. in this context, the latvian environmental investment fund and the physical energy institute, with the support of government officials, are involved in the implementation of the eu horizon2020 project "community energy for the uptake of renewables in the electricity sector. linking long-term visions with short-term actions" (come res, 2020; leif, 2020). the total budget of the project is around €3 million. its aim is to create a platform for interaction and communication between different public groups on the development trends and prospects of renewable energy in the context of ensuring sustainable development of the country as a whole. the main tasks include developing practical recommendations for the government to optimise the functioning of the renewable energy sector, taking into account the experiences of municipalities and communities, analysing the experiences of foreign partners, and intensifying the involvement of come res members in the implementation of effective business models or practices for the production and consumption of energy from renewable sources. the project will also include cultural and educational events, round tables and discussions aimed at raising public awareness of the benefits and prospects of renewable energy development in the context of energy security and sustainable development in latvia. the development of renewable energy is therefore one of the most important areas of the country 's energy policy. this is evidenced by the synchronised efforts of key authorities to introduce relevant changes in national legislation, launch public initiatives, establish cooperation with stakeholders and crossborder cooperation in the implementation of renewable energy projects in the context of eu initiatives. 4. conclusions the development of renewable energy in latvia is a key area of the national energy policy aimed at reducing dependence on energy imports and increasing the final consumption of renewable energy in various sectors of society. the implementation of renewable energy projects will facilitate the introduction of green technologies and attract significant investments in the development of the national economy. the key aspects of latvia's renewable energy policy are: improving the regulatory framework and developing mechanisms to resolve problematic issues of stakeholder interaction in the energy market; developing cross-border cooperation and expanding opportunities to use the resource potential of renewable energy to ensure energy security in the baltic sea region as a whole; further digitalisation of the energy sector to optimise energy data management processes; creation of online platforms to synchronise the efforts of stakeholders and the government in the implementation of renewable energy projects; involvement of public initiatives to raise the level of environmental culture and responsibility of citizens in general. baltic journal of economic studies 215 vol. 9 no. 2, 2023 references: eolus/pne (2023). joint press release. eolus and pne start co-developing offshore wind in latvia. available at: https://ml-eu.globenewswire.com/resource/download/3c5cca27-f4b0-4f8c-a153-5e05f2edba9f eng.lsm.lv, d. zalamane (2021). latvia plans to set up more wind parks in the long term. available at: https://eng.lsm.lv/article/economy/economy/latvia-plans-to-set-up-more-wind-parks-in-the-long-term.a436205/ come res latvia (2020). the latvian stakeholder desk. available at: https://come-res.eu/stakeholder-desks/ latvia european commission (2018). directive (eu) 2018/2001 of the european parliament and of the council of 11 december 2018 on the promotion of the use of energy from renewable sources. available at: https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:02018l2001-20220607&from=et european commission (2022). repowereu: affordable, secure and sustainable energy for europe. available at: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/ repowereu-affordable-secure-and-sustainable-energy-europe_en khorishko, l., horlo, n., & malovana, y. (2023). estonian energy policy in the context of modern challenges. baltic journal of economic studies, 9 (1), 184–188. doi: https://doi.org/10.30525/2256-0742/2023-9-1-184-188 latvian government (2020). about latvia's national energy and climate plan 2021-2030. available at: https://likumi.lv/ta/id/312423-par-latvijas-nacionalo-energetikas-un-klimata-planu-20212030-gadam latvian parlament (2010). sustainable development strategy of latvia until 2030. available at: https://www.varam.gov.lv/sites/varam/files/content/files/lias_2030_en.pdf latvian parlament (2022). amendments to the electricity market law. available at: https://likumi.lv/ta/ id/334153-grozijumi-elektroenergijas-tirgus-likuma leif (2022). the enershare project received eur 8 million in support for the creation of the first common european energy data space. available at: http://www.lvif.gov.lv/?object_id=136734 leif (2020). energy communities as a platform for res use in electricity production: promoting long-term visions with immediate actions (come res). available at: http://www.lvif.gov.lv/?object_id=33726 liaa (2021). fast-track "green channel" initiative. available at: https://investinlatvia.org/en/for-investors/ why-invest/green-channel liaa (2023). renewable energy park service center planned in ventspils northern port. available at: https://investinlatvia.org/en/news/renewable-energy-park-service-center-planned-in-ventspils-northern-port liaa (2023). merito partners to invest 50 million euro in solar power plants in latvia. available at: https://investinlatvia.org/en/news/merito-partners-to-invest-50-million-euro-in-solar-power-plants-in-latvia received on: 12th of march, 2023 accepted on: 22th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 71 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state university of infrastructure and technologies, ukraine (corresponding author) e-mail: mvkov58@gmail.com orcid: https://orcid.org/0000-0002-1149-6537 researcherid: https://publons.com/researcher/3744258/maryna-kovbatiuk/ 2 state university of infrastructure and technologies, ukraine e-mail: kgacs1.6@gmail.com orcid: https://orcid.org/0000-0001-8140-4506 researcherid: https://publons.com/researcher/4663511/george-kovbatiuk/ 3 state university of infrastructure and technologies, ukraine e-mail: shklyarw@gmail.com orcid: https://orcid.org/0000-0003-2651-0319 researcherid: https://www.webofscience.com/wos/author/record/abe-1505-2022 doi: https://doi.org/10.30525/2256-0742/2023-9-1-71-81 the model of assessment of goods exports of ukraine to the world integration associations maryna kovbatiuk1, george kovbatiuk2, viktoriia shkliar3 abstract. foreign trade is an important factor of economic growth and development of open economies. at the same time, the analysis of the state of foreign trade operations is becoming methodologically more complex due to the increase in the number of indicators used and the appearance of new ones. they allow not only to examine the effectiveness of the state trade policy, the set of goods and trade partners, but also to get an idea of the structure of the economy, the level of its development and competitiveness, as well as to assess the quality of the export and import baskets from the point of view of economic growth prospects. therefore, it is advisable to use models of commodity export valuation, which determines the relevance of the chosen topic. the subject of the study is the methods and models of commodity export evaluation. the purpose of the article is the formation of a model for the evaluation of ukraine's commodity exports to the integration associations of the world and its approval. methodology. the theoretical and methodological basis of the conducted research is the dialectical method of cognition, the principles of system analysis and synthesis, statistical processing of information. the methods of structural dynamics were used for the analysis of statistical indicators of commodity exports for 2016–2020; the method of constant market share – for the evaluation of changes in commodity exports of ukraine for the period under consideration; the method of scientific abstraction is used for the generalization of the obtained results and the formation of conclusions; the graphic method – for the visual presentation of the obtained research results. results. the article proposes a model for assessing ukraine's commodity exports to the world integration associations, the main component of which is the constant market share method (cms analysis). this model is easy to use and allows a qualitative assessment of changes in ukraine's commodity exports. approval of the model and assessment of changes in commodity exports of ukraine was carried out on the international statistical database unctadstat for 2016–2020. the data are aggregated into groups according to the standard international trade classification (sitc). the following trading partners have been selected for the cms analysis: eu-27, asean+3, cis and rest of the world. the obtained results make it possible to assess the state of ukraine's commodity exports and the level of its competitiveness in foreign markets. practical implications. the practical implications are related to the possibility of using the proposed model for the evaluation of commodity exports, using various options for the classification of goods and integration associations – partners of the exporting country. value/originality. the originality lies in the development of a model for the assessment of ukraine's commodity exports to the world integration associations based on the constant market share (cms) method, which allows to determine to what extent exports change with the growth of the competitiveness of the goods of the exporting country. key words: merchandise export valuation model, constant market share – cms, integration associations, international trade, commodity export, foreign trade activity. jel classification: с81, f10, f15 baltic journal of economic studies 72 vol. 9 no. 1, 2023 1. introduction foreign trade activity is an important factor determining the economic growth and development of countries, especially those whose economy is characterized by a high degree of openness. in this regard, in recent years the analysis of the state of export and import has become methodologically more complex due to the increase in the number of indicators used and the appearance of new ones. they allow not only to examine the effectiveness of the state trade policy, the set of goods and trade partners, but also to get an idea of the structure of the economy, its level of development and competitiveness, as well as to assess how favorable the composition of export and import baskets is from the point of view of economic growth prospects. the importance of understanding the nature, consequences and determinants of the development of global export models determines the relevance of the chosen research topic. changes in a country 's share of world exports are a useful indicator of how well an economy can generate income to pay for imports. changes in a country 's share of world exports can be influenced by many interrelated factors, such as competitiveness and specialization. on the one hand, internal and external macroeconomic features and events can affect the relative competitiveness of exports, such as input costs or exchange rate changes, markup behavior, and quality. on the other hand, structural factors, such as the availability of factors of production or technological and geographical linkages, also determine the sectoral specialization of exports and their distribution among different trading partners. thus, if a country specializes in exporting goods to countries or groups of countries where demand is particularly high, its aggregate market share will increase even if its competitiveness does not improve. at the same time, even if a country maintains its share in individual markets, its aggregate market share may decline if it specializes in markets that grow more slowly than world exports or in goods for which demand grows more slowly than average. all these elements are relevant for the ukrainian economy. the ukrainian economy is faced with the task of maintaining and strengthening its export indicators in order to achieve further improvement of the balance of current operations and to bring the external debt on the path of reduction. against this background, the application of commodity export evaluation models is an objective necessity. the purpose of the article is the formation of a model for assessing ukraine's commodity exports to the integration associations of the world and its approval. the theoretical and methodological basis of the conducted research is the dialectical method of cognition, the principles of system analysis and synthesis, statistical processing of information. in the analysis of statistical indicators for 2016–2020, the methods of structural dynamics were used; the method of constant market share was used to assess the changes in the export of raw materials of ukraine for the period under study; the method of scientific abstraction was used to generalize the obtained results and to form conclusions; the graphic method was used to visually present the obtained research results. the research information base was formed on the basis of unctadstat data. 2. literature review in the course of theoretical and empirical researches, a set of applied tools most often used in the study of the export structure of countries was determined. among the most widespread are the krugman specialization index, the herfindahl-hirschman index and the balassa index of revealed comparative advantages. the first two indices make it possible to determine the degree of specialization of a country 's exports, but the first one measures product specialization and the second – geographical specialization. the balassa index makes it possible to calculate the level of competitive advantages of industries in relation to a given group of countries on the basis of export volumes. despite its ease of use, the index has theoretical (assumption that all groups of goods are traded) and conceptual (only the volume of exports is taken into account, other factors of change in trade are not taken into account) shortcomings, so the index is subject to constant improvement. thus, leromain e. and orefice g. proposed a version of the balassa index that takes into account the productivity of the industry, the effect of reciprocal trade and partially the effect of the geographical structure. (leromain, orefice, 2014) another noteworthy tool is the constant market share method, which combines the elements of the krugman index and the balassa index and at the same time takes into account the relationship between the commodity and geographical structure of exports. from the theoretical point of view, the method is developed on the basis of transformations of the demand elasticity function for a certain product of the exporting country in the market of the importing country. the method of constant market share in connection with the analysis of international trade was first formulated and applied by the polish economist tyszynski h. (tyszynski, 1951) he suggested that a country 's share of world exports may depend not only on structural changes in world trade, but also on changes in the competitiveness of the baltic journal of economic studies 73 vol. 9 no. 1, 2023 products it exports. to test his hypothesis, tyszynski proposed to calculate a country 's possible share of the world market if its market shares for each product group remained unchanged over a given interval, and then to calculate the difference between the actual observed market share and the hypothetical one. in this way, it is possible to adjust the export structure for the market effect (structural changes in world trade or the regional market) and the effect of competitiveness (the country 's exports). important contributions to the theoretical development and improvement of this method of analysis were made by e. limer and r . stern, y. fagerberg and g. solly, k. jepma, a. nissens and g. puli, m. dyadkova and g. momchilom. the main applied works on the application of cms analysis are the article devoted to the export of portugal by j. amador and s. cabral (amador, cabral, 2008), the analysis of the effect of competitiveness on the example of asean countries (widodo, 2008), the analysis of the export of austria by e. skriner (skriner, 2009), the study of the export of spain by a. pandiella (pandiella, 2015), the research on the export of ukraine (bakaev, bakaeva, 2020) and others. the advantages of the method include its relative simplicity, as well as the fact that it is a tool for analyzing the structural causes that influence the characteristics and trends of countries' trade, leaving exogenous and endogenous macroeconomic factors out of the scope of consideration. in particular, the method makes it possible to determine the extent to which exports change with the growth of the competitiveness of the goods of the exporting country, due to the fact that the country supplies goods to fast or slow growing markets. (pandiella, 2015) a review of literary sources on methods and procedures of commodity export valuation shows that they are quite numerous. each method has its own goals. at the same time, each method requires the development of a methodology for its application, including through the development of valuation models. this determined the choice of the research topic. 3. the main material of the research the authors propose a model for the assessment of ukraine's commodity exports to the world integration associations, the component of which is the constant market share method. in general, this model is presented in figure 1. in order to achieve the objective of the study, it is necessary to define the tasks to be solved by building a model for the evaluation of merchandise exports. firstly, it is necessary to determine which classification of goods (groups of goods) will be used for the assessment. among the most common are the standard international trade classification (sitc, 2022) and the lall classification (lall, 2000) used by the united nations conference on trade and development (unctadstat, 2022). approaches to the classification of trade flows have been considered in detail by the authors in previous studies. (kovbatiuk, kovbatiuk, 2021) secondly, it is necessary to determine the number and composition of integration associations to which export flows are directed. as a rule, this is determined on the basis of the data of a preliminary analysis based on the materials of national and international statistics. according to the composition of the selected product groups and the list of integration associations, statistical information is grouped based on unctadstat data for the period under analysis. the success of the evaluation process depends primarily on the timeliness, completeness and reliability of the information support. (hanas, dorosh, nodzhak, lutsyshyn, 2019) direct data processing is performed using the constant market share (cms) method. after carrying out all necessary calculations, the resulting information is analyzed, analytical conclusions about changes in the structure of commodity exports of ukraine are drawn, on the basis of which recommendations for improving the state and structure of commodity exports are developed. as robert shannon pointed out (shannon, 1975), any model must meet certain criteria. he pointed out such criteria as simplicity and comprehensibility for the user; goal orientation, adequacy, comprehensibility and ease of use; ability to solve the main tasks; adaptability (ability to add data to the model); ability to change the model if necessary. the proposed model for the assessment of ukraine's commodity exports to world integration associations meets the above criteria, is easy to use, and allows for a qualitative assessment of changes in ukraine's commodity exports. 4. constant market share analysis methodology the constant market share (cms) method is developed on the basis of transformations of the demand elasticity function for a certain product of the exporting country in the market of the importing country. the essence of the method is the assumption that the country 's share in world exports may depend not only on structural changes in world trade, but also on changes in the competitiveness of the products exported by the country. that is, it is necessary to calculate the possible share of the country in the world market if its market shares for each product group remained unchanged for a given interval, and then to calculate the difference between the real observed baltic journal of economic studies 74 vol. 9 no. 1, 2023 market share and the hypothetical one. in this way, it is possible to adjust the export structure for the market effect (structural changes in world trade or regional market) and the effect of competitiveness (exports of the country). the most optimal cms analysis is the nissens and poulet specification, which generally looks as follows (pandiella, 2015): te=mse+cse=mse+pse+gse+mix te=mse+cse=mse+pse+gse+mix (1) where: te – total effect; cse – combined structure effect; mse – market share effect or the effect of competitiveness; pse – product structure effect; gse – geographical structure effect; mix – mixed structure effect. each of the effects is calculated according to the following formulas: te g g g g* i j ij ij i j i*j i*j� � � � � �� � � �� � (2) mse g g i j ij ij i j *� � �� �� �� �� (3) cse pse gse mix� � � (4) pse g g i i i * i *� �� � �� �� � � (5) gse g g j j j * j * *� �� � �� �� � � (6) mix i j ij ij * i i * ij * i * j j * ij * j * � � �� � � �� � � �� � � � � � � � �� � � � � � � � � � � � �� gij * (7) where "i" is the exported product, "j" is the country to which product "i" is exported; evaluation of the product exports of ukraine to the world integration associations defining the list of integration associations (asean, eu-27, cis, nafta and others) determination of groups of export goods according to a certain classification (lall, cits, other) grouping of statistical information based on unctad data for the period under review data processing based on the cms analysis method analysis of the obtained results development of recommendations for improving the structure of commodity exports of ukraine figure 1. the model of evaluation of goods exports of ukraine to the integration associations of the world source: developed by the authors baltic journal of economic studies 75 vol. 9 no. 1, 2023 gij – percentage change in the export of the i-th product to the j-th country in the period t; g θij – the share of exports of the i-th product to the j-th country from the country 's total exports in the period t – 1, gij і θij are calculated according to formulas (8) and (9), g x x x ij ij t ij t ij t � � � � , , , � � 1 1 (8) �ij ij t i j ij t x x � � � �� � , , � � 1 1 (9) g x x x ij * ij t * ij t * ij t * � � � � , , , � � � � 1 1 (10) �ij * ij t * i j ij t * x x � � � �� � , , � � 1 1 (11) where x is the volume of exports in value terms. parameters g*ij і θ*ij express the same relations as gij, θij, but for world exports, and the country that is the object of analysis is not included in the volume of global exports. in formulas (2) – (7): θi = σiθij – the share of product "i" in the country 's exports; θ*i = σjθ*ij – the share of product "i" in world exports; θj = σiθij – market share "j" in the country 's exports; θ*j = σiθ*ij – market share of "j" in world exports; g g i * j ij * ij * i * � � � � � – growth of world exports of goods "i"; g g j * j ij * ij * j * � � � � � – growth of global exports to the market "j". this method allows to consider four effects that can be unambiguously interpreted at a given level of data aggregation. 5. results approval of the model and assessment of changes in ukraine's commodity exports were carried out on the international statistical database unctadstat for 2016–2020. unctadstat provides detailed annual data on nominal imports and exports of goods by commodity, partner country or group of countries, expressed in us dollars. the advantage of using annual data is that it avoids the variability found in high-frequency trade data. data are aggregated into groups according to the standard international trade classification (sitc, 2022). consider the structure of world exports and ukrainian exports according to this classification. as shown in table 1, the structure of ukraine's exports differs significantly from that of the world. the largest share of world exports is occupied by machinery and transport equipment – sitc 7 (36.81% and 36.80% in 2016 and 2020, respectively), fuels and lubricants – sitc 3, chemicals and related products – sitc. 5, manufactured goods – sitc 6, miscellaneous manufactured articles – sitc 8. the share of these goods ranges from 8.5 to 12.63%. the export structure of ukraine is dominated by manufactured goods – sitc 6 (27.25% and 22.44%), food and live animals – sitc 0 (25.6% and 28.32%) and raw materials – sitc 2 (13.67% and 16.02%). in the dynamics over five years, it is food and live animals that have the greatest tendency to grow, while the share of manufactured goods is decreasing. the structure of world exports and exports of ukraine in 2016 and 2020 is shown more clearly in figure 2. table 1 the structure of world exports of goods and exports of ukraine group of goods world ukraine 2016 2020 2016 2020 mln $ % mln $ % mln $ % mln $ % total all 15 886 802 100 17 463 039 100 36 357 100 49 219 100 sitc 0 1 077 075 6,78 1 237 098 7,08 9 308 25,60 13 937 28,32 sitc 1 139 855 0,88 149 328 0,86 484 1,33 648 1,32 sitc 2 566 927 3,57 709 519 4,06 4 969 13,67 7 883 16,02 sitc 3 1 509 492 9,50 1 496 044 8,57 446 1,23 555 1,13 sitc 4 90 120 0,57 104 718 0,60 3 922 10,79 5 703 11,59 sitc 5 1 783 592 11,23 2 172 470 12,44 1 373 3,78 1 934 3,93 sitc 6 1 986 275 12,50 2 136 560 12,23 9 907 27,25 11 043 22,44 sitc 7 5 847 890 36,81 6 426 194 36,80 4 175 11,48 5 292 10,75 sitc 8 2 005 955 12,63 2 105 314 12,06 1 556 4,28 2 028 4,12 sitc 9 879 621 5,54 925 794 5,30 217 0,60 196 0,40 source: formed by the authors on the basis of (unctadstat, 2022) baltic journal of economic studies 76 vol. 9 no. 1, 2023 the analysis of these indicators in dynamics indicates that the trends of changes of indicators in relation to product groups in the world and in ukraine are approximately the same. this is confirmed by the data shown in figure 3. although the growth of ukrainian exports in 2016–2020 is similar to the growth of global exports, it is lower than the global growth for certain groups of goods due to negative competitiveness (measured by the effect of market share) and structural effects. for the analysis of the cms, the trade partner associations – eu-27, asean+3, cis and all others – were selected. the total share of ukrainian exports to eu-27, asean+3 and cis countries in 2020 is 69%. during the analyzed period it increased by 6% (figure 4). however, it can be noted that within five years there have been some changes in the distribution of exports to the eu-27, asean+3 and cis countries. the share of exports to the countries of the european union increased from 37% to 38%, while the share of exports to the countries of the former soviet union decreased from 16% to 12%. the largest changes occurred in the volume of exports to the asean+3 countries, which increased from 10 to 19%. first of all, it is connected with political factors, deterioration of economic and political relations with some cis countries. in the process of applying the cms analysis method to the structure of ukrainian commodity exports, estimates of the effects of the model were obtained, which are shown in the table 2. the obtained results indicate that in 2017, the growth rate of exports in ukraine was almost twice as high as the growth rate of world exports. this was caused both by the activation of manufacturers in foreign markets and by the improvement of the product structure. in 2018, there was a decline in the indicators, and in 2019–2020, the dynamics of ukrainian exports also improved, the deviations of export growth exceeded the global ones, which indicates an improvement in the structure and volume of commodity exports of ukraine. table 3 shows more detailed data in the section of individual commodity groups regarding their contributions to the increase of the total market share (mse) of commodity exports of ukraine to each association (market) in 2020 by 0.02%, and the positive change in the total effect of the change in export (te) by 5.5%. figure 2. structure of world exports and exports of ukraine by groups of goods source: formed by the authors on the basis of (unctadstat, 2022) baltic journal of economic studies 77 vol. 9 no. 1, 2023 figure 3. dynamics of the structure of world exports and exports of ukraine according to the sitc classification source: formed by the authors on the basis of (unctadstat, 2022) the general effect is the difference between the growth rates of ukrainian exports and world exports. the market share effect aggregates market share fluctuations in individual export markets. the combined structural effect, in turn, is divided into three components: the product structure effect, the geographical structure effect, and the mixed structural effect. the product structure effect and the geographical structure effect of exports are positive when a country 's specialization in markets that grow faster than world trade as a whole is above average. conversely, high specialization in slow-growing markets leads to negative structural effects (figures 5-6). baltic journal of economic studies 78 vol. 9 no. 1, 2023 figure 4. structure of ukraine's exports by trading partners source: formed by the authors on the basis of (unctadstat, 2022) table 2 the main results of the cms analysis years export growth te mse cse components of the combined structural effect ukraine world pse gse mix 1 2 3=1-2 =4+5 4 5= 6+7+8 6 7 8 2017 0.1944 0.1059 0.0885 0.0730 0.0155 0.0015 0.0096 0.0044 2018 0.0899 0.1029 -0.0130 0.0239 -0.0369 0.0054 -0.0024 -0.0399 2019 0.0575 -0.0298 0.0873 0.0870 0.0003 -0.0075 0.0078 0.0000 2020 -0.0166 -0.0715 0.0550 0.0002 0.0548 -0.0043 -0.0032 0.0623 average 0.0813 0.0269 0.0270 0.0460 0.0084 -0.0012 0.0030 0.0067 source: developed by the authors table 3 contributions to the overall change in the market share of ukraine's commodity exports according to the standard international trade classification for 2020 merchandise groups integration associations eu-27 asean+3 cis rest world sitc 0 -0,0166 0,0231 -0,0020 -0,0118 sitc 1 0,0004 0,0007 -0,0001 0,0003 sitc 2 -0,0129 0,0229 -0,0022 -0,0085 sitc 3 -0,0004 0,0000 -0,0002 0,0002 sitc 4 0,0023 0,0053 0,0000 0,0015 sitc 5 -0,0005 0,0007 -0,0006 0,0030 sitc 6 -0,0075 0,0052 -0,0051 -0,0036 sitc 7 0,0043 0,0011 -0,0009 0,0016 sitc 8 0,0018 -0,0003 0,0002 0,0001 sitc 9 0,0003 0,0000 0,0004 -0,0019 mse -0,0289 0,0587 -0,0105 -0,0191 0,0002 source: developed by the authors baltic journal of economic studies 79 vol. 9 no. 1, 2023 -0,0600 -0,0400 -0,0200 0,0000 0,0200 0,0400 0,0600 0,0800 0,1000 2017 2018 2019 2020 year total effect (te) cse mse figure 5. the general results of the cms analysis (те) source: developed by the authors -0,0600 -0,0400 -0,0200 0,0000 0,0200 0,0400 0,0600 0,0800 2017 2018 2019 2020 years combined structure effect (cse) mix gse pse figure 6. the main results of the cms analysis (cse) source: developed by the authors baltic journal of economic studies 80 vol. 9 no. 1, 2023 market share effect (mse). the mse provides information on the development of market shares independent of structural changes in trade patterns. the results indicate the stabilization of the competitiveness of ukrainian goods for the period 2016–2020. the indicator has positive values throughout the analyzed period and indicates that ukraine's market share in world exports has been constantly increasing. the increase in market share was due to its increase in the asean+3 countries. in terms of product groups, the growth was due to an increase in the market share of sitc group 0 "foodstuffs and live animals", sitc group 2 "raw materials", sitc group 4 "animal and vegetable oils, fats and waxes", sitc group 6 "industrial products", sitc group 7 "machinery and transport equipment". as for the analysis of geographical directions in the period 2016–2020, it can be noted that ukraine gained market share in the countries of the european union and the association of southeast asian nations, china, south korea and japan, as well as in other countries of the world. at the same time, the largest losses of market share were in the cis countries. the combined structure effect (cse) consists of three effects: product structure effect, geographic structure effect, and mixed structure effect. product structure effect (pse). on average, during 2016–2020, the relative specialization of ukraine's export products has a negative impact on export indicators. the contribution to the product structure was positive in 2017–2018 and became negative in 2019–2020. in 2016–2017, the most negative effect was caused by the relatively low specialization of ukrainian exports of products of the following commodity groups: sitc 5 "chemicals and related products", sitc 7 "machinery and transport equipment", sitc 8 "miscellaneous manufactured goods", sitc 9 "other goods". this was partially offset by the positive market impact of the following product groups: sitc 0 "foodstuffs and live animals", sitc 3 "fuels and lubricants", sitc 4 "animal and vegetable oils, fats and waxes", sitc 6 "industrial products". the data in table 4 illustrate the product structural effect according to the 2020 data and testify to the impact of relative specialization on the evolution of total market share. geographical structure effect (gse). the geographical specialization of ukrainian exports had a negative impact on the overall evolution of market shares. this reflects the high relative specialization of ukrainian exports in some european markets and the lower average growth rates of world exports to these countries. in contrast, the non-specialization of ukrainian exports to china and other asian economies made an important negative contribution, given the high growth of world exports to developing asian countries. it is worth noting the spread of specialization of ukrainian exports to other countries of the world. 6. conclusions in the process of applying the cms analysis method to the structure of ukraine's commodity exports, estimates of the effects of the model were obtained, which indicate that ukraine is experiencing strong competitive pressure from other countries, which has led to a loss of world market share. however, the structure of the geographical markets to which ukraine exports, with a large share for relatively slow-growing areas such as the eurozone and a small share for fast-growing countries such as china and other asian economies, has had a negative impact on ukrainian exports. the product structure, focused on relatively slow-growing product lines, also did not contribute to better export performance. the obtained results indicate the expediency of applying the proposed model of evaluation of commodity exports of ukraine to the integration associations of the world for the analysis of foreign trade relations and determination of the country 's place in the international environment. moreover, this model has signs of universality and can be used for the analysis of commodity exports of any country. table 4 distribution of the product structure effect of commodity exports of ukraine, 2020 sitc 0 sitc 1 sitc 2 sitc 3 sitc 4 sitc 5 sitc 6 sitc 7 sitc 8 sitc 9 0,018 0,000 0,010 0,027 0,017 -0,006 0,003 -0,005 -0,001 -0,002 source: developed by the authors table 5 distribution of the geographical structure effect of commodity exports of ukraine, 2020 integration associations eu-27 asean+3 cis rest world change % -0,05 -0,25 -0,10 0,07 source: developed by the authors baltic journal of economic studies 81 vol. 9 no. 1, 2023 references: amador, j., & cabral s. 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(2008). the method of constant market shares (cms) – competitiveness effect reconsidered: case studies of asean countries. jurnal ekonomi dan bisnis indonesia, vol. 23, no. 3, pp. 223–242. received on: 2th of february, 2023 accepted on: 11th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 139 vol. 7 no. 2, 2021 corresponding author: 1 ukrainian state university of chemiсal technology, ukraine. e-mail: myachin2020fuzzy@gmail.com orcid: https://orcid.org/0000-0002-1491-5100 2 dnipro humanitarian university, ukraine. e-mail: el.judina@gmail.com orcid: https://orcid.org/ 0000-0003-3699-5321 researcherid: https://publons.com/researcher/4350920/olena-yudina doi: https://doi.org/10.30525/2256-0742/2021-7-2-139-145 fuzzy-logical approach to constructing an integral indicator in a level estimation model significant market advantage valentin myachin1, olena yudina2 abstract. the purpose of this research is to construct fuzzy expert system to estimate an integral degree of market concentration by fuzzy-logical approach. the methodological basis of the study consists of scientific works of domestic and foreign scientists and leading specialists, statistical and analytical materials of state authorities. fuzzy inference is introduced for the integrated indicator construction. two indicators are chosen as input variables. the first indicator, cr, is a level of concentration ratio. the second indicator, hhi, is the herfindahl-hirschman index. output variable, mc indicator, means a degree of market concentration. both input and output variables are transformed to fuzziness through the construction of membership function. the function type and parameters are substantiated and “bell”-shaped membership function to describe uncertainty of the values falling under normal distribution is chosen. the quantity of fuzzy sets at every input is considered z=3 and the quantity of input variables is considered ω=2. to achieve completeness of the model, the quantity of logic rules is considered r=3²=9. to calculate a degree of market concentration, mamdani fuzzy conclusion is applied. defuzzification is engaged to calculate value of the output variable which is mc indicator to mean a degree of market concentration and therefore readiness to implement the innovation strategy for enterprises active in innovation. to estimate a degree of market concentration, the fuzzy expert system given allows for engagement of different indicators due to fuzzy logic methodology which considers fuzziness of the input and output variables. the construction of an integral indicator for assessing the state of economic competition in order to establish the feasibility of identifying operators and providers with a significant market advantage will improve the assessment of the state of economic competition in the market in the telecommunications services market in ukraine. key words: monopolization of the market, market concentration coefficient, the herfindahl-hirschman index, fuzzy expert system, fuzzy logic, membership function, defuzzification. jel classification: b21, b41, c65, d41, d42, d43 1. introduction the aggravation of competition in highly competitive markets, for example, in the markets of telecommunications services, raises the issue of regulating the economic competition of telecommunications operators in the interconnection of telecommunications networks and the provision of telecommunications services. in the telecommunications industry, it is useful to take into account the experience of applying various mechanisms of antitrust and competitive regulation of various industries or markets in countries around the world. according to the decision of the national commission for state regulation of communications and informatization (nccir) no. 640 dated december 11, 2018, registered with the ministry of justice of ukraine on january 17, 2019 according to no. 54/33025 “on approval of the procedure for analyzing the markets of certain telecommunications services and determining operators, telecommunications providers with a significant market advantage in the markets of such services” assessment of the state of economic competition in the market of telecommunications services nccir to establish the expediency of determining operators, providers baltic journal of economic studies 140 vol. 7 no. 2, 2021 with a significant market advantage, to which the obligations established by law will apply, evaluates the state of economic competition in the market of certain services according to three criteria: 1) the level of market concentration (concentration of the share of income from the provision of services in the service market for a certain number of operators, providers of such services); 2) the presence of significant (high and constant) barriers to entry into the market of services of other operators, providers; 3) the presence of problems that exist in the markets of telecommunications services, regarding the regulation of interaction of telecommunications operators when connecting telecommunications networks and providing telecommunications services (starting a connection, passing traffic, access to telecommunications networks, providing telecommunication channels for use), the solution of which falls within the competence of nccir and which cannot be solved in full only with the application of legislation on the protection of economic competition. 2. methods of studying the level of concentration and monopolization of the market when analyzing antimonopoly and competition regulation, in particular, in the telecommunications industry, it will be useful to take into account the experience of applying various mechanisms of antimonopoly and competition regulation in various industries or markets in the world. in the united states, the level of concentration and monopolization of the market is determined using the herfindal or herfindal-hirschmann index and the concentration ratio, which are effective tools for antitrust regulation. the herfindahl-hirschman index is designated as hhi (the herfindahl-hirschman index), and the concentration ratio as cr (concentration ratio). the definition of the hhi index is used to analyze the level of competition and takes into account the market share of each participant (posner, 1999). when analyzing competition, this indicator reacts to the share of each business entity in the market. the procedure for calculating it consists in determining the sum of squares of interest of each subject in the market or in the industry: hhi = s s s sn i n i1 2 2 2 2 1 2+ +…+ = = ∑� , (1) where si is a market share of the n business entity (pindyck, rubinfeld, 2015). the concentration ratio cr is an indicator that shows the market share of a selected number of large business entities in the market or the sum of their market shares. the upper limit of this ratio is 100, which means that the market is completely monopolized. in this respect, the concept of “set number” of business entities in the market is uncertain. to clarify this “set number” of large business entities in the market, this indicator is determined with a figure that characterizes this number of market players, for example, cr2, cr5 or crn, which means considering the share of 2, 5 or n firms in the market, respectively: crn = i n is = ∑ 1 �, (2) where crn is a concentration ratio of n business entities in the market; si is the market shares of the largest companies (percentage). 3. features of the study of a significant market advantage in the telecommunications services market for the telecommunications industry, the market concentration coefficient is the sum of the largest shares of three operators and providers ranked in descending order of income received during the year in a certain service market. according to the decision discussed above (arbabi, tash, 2018), if the value of the market concentration ratio cr exceeds 45% and/or the value of hhi exceeds 1000, the level of concentration in the market of certain services, which is analyzed, indicates that according to this criterion, the market is favourable for the application of preliminary regulation and there is a need to determine the presence of structural, strategic and administrative barriers to entering the market. however, this solution does not define a single, comprehensive indicator of markets in terms of their concentration (pryputa, 2016). as noted above, the value of hhi is the basis for decision-making at the enterprise level. in addition to determining market concentration, hhi and cr serve as the basis for making m&a decisions. they are the basis for characterizing markets in terms of concentration. in the usa, there are three types of markets based on this feature: type i – markets with a low concentration ratio, the state of which is characterized by the value of the limits of the above indices: cr < 45%; hhi < 1000; type ii – markets with a middle concentration ratio, with the characteristics of coefficients: 45% < cr < 70%; 1000 < hhi < 1800; type iii – markets with a high level of concentration, with the value of coefficients: 70% < cr < 100%; 1800 < hhi < 10000. in the united states, since 1982, hhi and cr have been legally approved as one of the most important indicators for assessing the permissibility of mergers and acquisitions in the process justification of baltic journal of economic studies 141 vol. 7 no. 2, 2021 antimonopoly legislation. the criterion for making decisions about the possibility of increasing the concentration ratio is the levels of hhi and cr. 4. construction of an integral indicator for evaluating a market advantage indicator using the fuzzy logic apparatus identifying the type of market structure is quite a complex task. this is largely due to the lack of clear boundaries of the criteria that separate them. therefore, to determine the type of market structure, it makes sense to use the tools of fuzzy logic theory (nikolaev, 2013). the use of the method of applied mathematics based on the theory of fuzzy logic by l. zadeh in economic research is a relatively new phenomenon (arbabi, 2018). in this case, the subjective assessment of the criterion for determining a particular type of market structure is based on its characteristics. one of the signs of the type of market structure is the number of sellers. in an oligopoly, there are a small number of large organizations – from 2 to 10, in conditions of perfect competition – there are many (more than 100 units) organizations of equal size. the second feature that allows you to distinguish between market structures is the density of distribution of organizations’ shares in the market (tash, 2014). modern mathematical apparatus allows you to take into account several features and their types at once when using the fuzzy logic method, that is, it is quite possible to take into account all or the main indicators of concentration. in our opinion, it is advisable to take into account only one indicator – the herfindalhirschman index – in order to avoid distortion. its indisputable advantage is that it takes into account almost equally such concentration parameters as the number of organizations operating in the industry market and the degree of inequality in their market shares. taking into account that the upper limit of the herfindal-hirschman index is 10,000, and the lower limit tends to zero, then a clear set for the monopoly market will be the value x = 10,000, for an oligopoly x ∈ [1000; 5000], for perfect competition x ∈ [0; 1000] (x is the base variable). thus, to implement a fuzzy-logical approach to determine the integral indicator of enterprise market concentration (mc), we have selected the main groups of input indicators that affect the target indicator, namely: the herfindal-hirschman index (hhi) and the concentration ratio of the business entities in the market (crn). since then, intellectual system development based on multicriterial methods of fuzzy sets theory as well as on the models of multidimensional analysis of economic systems is vital for economic decision making about market concentration. figure 1 introduces general layout of fuzzy expert system as a transformation of data inside the system itself. next phase of the fuzzy expert system construction is based on membership function selection. fuzzy model rather complicates the model if based on a significant quantity of input variables which is actually illustrated further. due to the fact, input variables quantity requires substantiated optimal reduction. furthermore, membership function requests for relevant correction considering aforementioned reduction; anyhow, range of the values should be kept unchanged for linguistic description of the variables for every input value (korol, 2012). “bell”-shaped membership function has a layout of a symmetric curve which resembles shape of the bell. this function is set by the formula which parameters are interpreted as follows: inference defuzzification fuzzification rules crisp input crisp output y х fuzzy еxpert y = f (х) figure 1. general layout of fuzzy expert system baltic journal of economic studies 142 vol. 7 no. 2, 2021 µ x x c a b( ) = + − 1 1 2 � , (3) where a is a concentration ratio of the membership function; b is a curvature ratio of the membership function; c is a maximum coordinate of the membership function. next phase of the fuzzy model construction is the identification of fuzzy logic rules. considering that quantity of the model inputs (input variables) is ω and every input has z of fuzzy sets (membership functions) then the quantity of fuzzy logic rules can be defined through the following formula: r z= ω . (4) table 1 introduces correlation between the quantity of the model fuzzy rules which secure model completeness and model inputs (input variables) ω as well as the quantity of z fuzzy sets in every input. table 1 demonstrates that increasing quantity of the model inputs (input variables) ω along with increasing quantity of z fuzzy sets results in fuzzy rules increase which makes the model construction quite an intense (pegat, 2009). the quantity of fuzzy sets at every input is considered as z=3, the quantity of input variables is considered as ω=2. then the quantity of fuzzy logic rules should result in r=3²=9 to secure the model completeness. modelling of an integral degree of market concentration has been executed in in fuzzy logic toolbox software of matlab environment (version r2015b) by mathworks company which has affected setting and view of the “ bell”-shaped membership function. the setting of the function is as follows: μ(x)=gbellmf (x, [a b c]). x is an input variable, a, b and c are aforementioned parameters (formula (3)). next figures 2-4 introduce attributes and membership functions for two input variables and one output variable. figure 2 introduces cr input variable which is a concentration ratio and has three attributes (membership functions): low – low concentration, middle – middle concentration, high – high concentration. this function is “bell”-shaped and has value rate [0;100]. low membership function means that low concentration has parameters [45 2.5 -0.108], middle membership function means that middle concentration has parameters [13.9 1.57 60], high membership function means that high concentration has parameters [25.51 2.5 100]. figure 3 introduces input variable hhi (“the herfindahl-hirschman index”) has three attributes (membership functions): low – low hhi level, middle – middle hhi level, high – high hhi level. this function is “ bell”-shaped and has value rate [0;10000]. low membership function means that low hhi level has parameters [550 2.5 20.1], middle membership function means that middle hhi level table 1 correlation between the quantity of the model fuzzy rules which secure model completeness and model inputs (input variables) ω as well as the quantity of z fuzzy sets in every input quantity of z fuzzy sets at every input quantity of the model ω inputs (quantity of the input variables) ω = 1 ω = 2 ω = 3 ω = 4 ω= 5 z = 1 1 1 1 1 1 z = 2 2 4 8 16 32 z = 3 3 9 27 81 243 z = 4 4 16 64 256 1024 z = 5 5 25 125 625 3125 figure 2. membership function chart for input linguistic variable cr (concentration ratio) baltic journal of economic studies 143 vol. 7 no. 2, 2021 has parameters [739 2.38 1320], high membership function which means high hhi level has parameters [7452 20.3 9530]. figure 4 introduces output variable mс (market concentration) and has three attributes (membership functions): low has parameters [0.4046 4.97 6.94e18], middle has parameters [0.154 2.11 0.556], high has parameters [0.2 2.95 0.908]. this function is “bell”shaped and has value rate [0;1]. based on the description of two-input and oneoutput variables we have defined 3²=9 fuzzy rules for the output variable conclusion. fuzzy logic rules are laid out as follows: rule 1: if (cr is low) and (hhi is low) then (mc is low); rule 2: if (cr is low) and (hhi is middle) then (mc is low); rule 3: if (cr is low) and (hhi is high) then (mc is middle); rule 4: if (cr is middle) and (hhi is low) then (mc is middle); rule 5: if (cr is middle) and (hhi is middle) then (mc is middle); rule 6: if (cr is middle) and (hhi is high) then (mc is middle); rule 7: if (cr is high) and (hhi is low) then (mc is middle); rule 8: if (cr is high) and (hhi is middle) then (mc is high); rule 9: if (cr is high) and (hhi is high) then (mc is high). left column of figure 5 introduces all 9 defined fuzzy rules and next two columns show cr=10.6 and hhi=0.985 for input values. mс value shows off in the right column for every fuzzy rule as a degree of market concentration. for instance, output value of degree of market concentration is mc=0.22. results are visualized in matlab environment through rule viewer visualizer. the constructed model of fuzzy conclusion allows to evaluate a degree of market concentration once mc indicator which is the concentration ratio and hhi indicator which is the herfindahl-hirschman index use have been set. depending of output variable mc which is a degree of market concentration on the input variables is proven by infinity of the mc values represented as figure 3. membership function chart for input linguistic variable hhi (“the herfindahl-hirschman index”) figure 4. membership function chart for output linguistic variable mc (market concentration) baltic journal of economic studies 144 vol. 7 no. 2, 2021 figure 5. implementation of mamdani fuzzy conclusion in fuzzy logic toolbox software of matlab environment by mathworks company for evaluation of a degree of market concentration a response surface constructed with surface viewer (figure 6). visualization of “input-output” surface allows to define that output indicator mc, market concentration, reaches its maximum at maximum value of cr indicator which is a concentration ratio along with big value of hhi which is a herfindahl-hirschman index. 5. conclusions coming to a conclusion of all aforementioned it should be stated that to evaluate a degree of market concentration, methods of fuzzy sets are considered figure 6. depending of output variable мс, market concentration, on the input variable cr , concentration ratio, and input variable hhi, the herfindahl-hirschman index. modelling results to be the most effective in comparison with linear models. fuzzy model developed for evaluation a degree of market concentration allows to consider not only qualitative but also quantitative features of an industrial enterprise which are perceived to be set with obstacles or as the ones impossible to set. the model theoretically allows for engagement of significant quantity of the indicators. nevertheless, the practical choice should be substantiated by the indicators weight on the one side and by the intense of data collection required to evaluate a degree of market concentration on the other side. baltic journal of economic studies 145 vol. 7 no. 2, 2021 to implement a fuzzy-logical approach to determine the integral indicator of market concentration (mc), we have selected the main groups of input indicators that affect the target indicator, namely the herfindal-hirschman index (hhi) and the concentration index of business entities in the market (crn). fuzzy logic model developed for evaluation of a degree of market concentration is executed in the following phases: 1) engagement of two integral indicators one of which describes concentration ratio while another one describes level of the herfindahlhirschman index use; 2) selection of membership function parameters and type for two-input and the output variables; 3) development of the system of 9 rules; 4) calculation of a degree of market concentration using mamdani fuzzy conclusion; 5) verification of the model adequacy. references: arbabi, l., & tash, m. (2018). study of the relationship between concentration, skilled labor and efficiency using the fuzzy logic approach in iranian manufacturing industries. the open access journal of resistive economics (oajre), vol. 6, no. 4, pp. 1–18. gawronska, a., & gawronski, t. (2012). assessment of bankruptcy threat of furniture manufacturing companies with fuzzy logic. intercathedra, vol. 28(1), pp. 13–18. korol, t., & korodi, a. (2012). an evaluation of effectiveness of fuzzy logic model in predicting the business bankruptcy. institute for economic forecasting , vol. 3, pp. 92–107. nikolaev, d.  v. (2013). metodicheskii podkhod k identifikatcii tipa rynochnoi strukttcry (na primere rynka ryboproduktcii primorskogo kraia) [methodological approach to identifying the type of market structure (on the example of the fish market of primorsky krai)]. forecasting problems, vol. 1, pp. 95–101. pegat, a. (2009). nechetkoe modelirovanie i upravlenie [fuzzy modelling and control]. moscow: binom. laboratoriia znanii [binomial. knowledge lab], 798 р. posner, r . a. (1999). natural monopoly and its regulation. washington dc., cato institute, 115 р. pro zatverdzhennia poriadku provedennia analizu rynkiv pevnykh telekomunikatsiinykh posluh ta vyznachennia operatoriv, provaideriv telekomunikatsii z istotnoiu rynkovoiu perevahoiu na rynkakh takykh posluh [on approval of the procedure for analysing the markets of certain telecommunications services and identifying operators and telecommunications providers with a significant market advantage in the markets of such services]. cabinet of ministers of ukraine. available at: https://zakon.rada.gov.ua/laws/show/z0054-19#n33 pryputa, т. (2016). methodological approaches to assessing the level of monopolization in the economy. scientific bulletin of mukachevo state university. economy series, vol. 1(5), рp. 51–55. sivanandam, s. n., & sumathi, s. d. s. (2006). introduction to fuzzy logic using matlab. springer-verlag berlin heidelberg, 430 р. tash, m., molaei, s., & barghandan, k. (2014). impact of structural components of market on the markup level based on radial basis neural network and fuzzy logic. international journal of business and development studies, vol. 6, no. 1, pp. 99–112. baltic journal of economic studies 1 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 azerbaijan state university of economics (unec), azerbaijan (corresponding author) e-mail: jafarlihanifa1967@gmail.com orcid: https://orcid.org/0000-0002-8104-2426 doi: https://doi.org/10.30525/2256-0742/2023-9-2-1-7 problems of modernization of the structure of the national economy taking into account global economic conditions hanifa jafarli1 abstract. in the article the problems of modernization of the structure of the national economy in modern conditions and ways of their solution are considered. the aim was to find the ways how to improve the process of modernization of the structure of the national economy, taking into account the world economic situation. the object of the article is the process of technological modernization of the structure of the national economy of azerbaijan. the subject of the study are theoretical, methodological and applied aspects of creation of components for technological modernization of the national economy of the country. to this end, the issues of improving the modernization of the structure of the national economy, taking into account the global economic situation and the expansion of the activities of sectors of the economy, which are characterized by the creation of competitive added value, have been studied more optimally. it is important to improve the structure of the national economy in a more optimal and efficient way, to identify methods of solving problems related to modernization and to ensure their adaptability to the system of mechanisms of the national economy. in this connection, it is necessary to define the goals, objectives and tasks in the most optimal way. to this end, based on objective realities, the analysis of economic development processes took into account the reconstruction of the processing sector, the formation of production capacities, an increase in the economic activity of regions, the development of industrial infrastructure, a significant reduction and acceleration of the country's dependence on oil. in general, the article focuses on the inclusion of modernization of economic development as a priority. the article gives recommendations on the considered problems, makes suggestions and forms scientific and practical views, gives the author's position on the problems of modernization of the structure of the national economy: the efficient use of the potential of the oil and gas industry, which is the main leading sector of the national economy, should be ensured, first of all, to ensure the intensive development of the non-oil sector. results. the competitiveness of the country's economy should be increased year by year, the business environment should be improved, the development of business and entrepreneurship in the "public-privatesocietal" triangle, the national economic development model should be designed in the context of global economic challenges. strategic development and action programs should be adopted to ensure that the level is interesting and effective. modernized competitive economic activities should be actively integrated into the structure of the country's economy, the network of manufacturing enterprises should be expanded, export potential should be increased by organizing import-substituting activities, and sources of foreign exchange should be diversified. in general, it is important to comprehensively and systematically implement key measures to strengthen the competitiveness of the national economy and its resilience to global economic threats in order to ensure the sustainability of its sources of growth. key words: structure of the national economy, modernization, economic development. jel classification: e02, o10, o20, o30, o40, o11 1. introduction problems of improvement and diversification of the structure of the national economy are typical for most countries of the world. in particular, the severity of these problems increases significantly during the development and application of new mechanisms and practical tools of the national economy in anticrisis conditions. due to the negative consequences baltic journal of economic studies 2 vol. 9 no. 2, 2023 of the recent global financial crisis, there is a need to modernize the structure of the national economy in most countries, including the leading countries of the world. the main reason for this is that the previously productive sectors of the economy do not meet the global economic challenges and the new requirements arising from global trends. in other words, the improvement or modernization of existing mechanisms in many traditional sectors of the economy has arisen from objective necessity. in fact, these processes are not new in the world economic processes, each time after the known crises, including energy, oil, financial, currency crises, the negative impact of the economy has made it necessary to develop new mechanisms ( jafarli, 2018). on the other hand, world civilization and economic processes do not stay together, they are constantly developing, economic views are changing, in this case the emergence of new economic mechanisms and tools can be characterized as a natural process. in this regard, the countries of the world must constantly improve their economic development models and economic systems, modernize and diversify them in accordance with the characteristics of economic development and resource potential of their countries. in any case, the country 's economic development model should be based on economic mechanisms that keep pace with modern requirements, and practical tools that can produce productive results should be applied. in addition, during the modernization of the structure of the national economy, measures should be taken to actively apply incentive economic mechanisms, first of all, to develop and model the real economy. the responsibility of state bodies for structural changes should be defined and control mechanisms for certain periods should be applied (kadyrov, 1999). it is important to improve the structure of the national economy in a more optimal and efficient way, to identify methods of solving problems related to modernization and to ensure their adaptability to the system of mechanisms of the national economy. in this connection, it is necessary to define the goals, objectives and tasks in the most optimal way. in these processes, the effectiveness of economic and organizational mechanisms, approaches to budgeting and monetary policy should be taken into account ( jafarli, 2018). in the process of structural modernization, special attention should be paid to the conditions for deepening institutional reforms. it is important to protect property rights in a market economy, to ensure a healthy competitive environment, to create an investment and innovation environment in the country, to enforce the law, and finally to have specific goals and mechanisms for each mechanism of the economic system. in addition, serious attention should be paid to the effectiveness of practical tools for the implementation of strategic goals and priority issues (http://economics.studio). in order to ensure the sustainability of the economic system in the global context and its immunity to existing global influences in the anti-crisis environment, the state must take sustainable and systematic measures, carry out structural modernization and focus on the formation of maximum productive sectors. in the global context, structural changes must be based on issues that enable the solution of global problems ( jafarli, 2018). the modernization of the structure of the economy is not a simple task and must be balanced and coordinated by the state with development programs that reflect long-term and strategic goals. in addition, structural modernization should differ from the traditional mechanisms of the economic system and attract attention with its productivity (balcerowicz, 1980). structural modernization should not create socio-economic tensions in society, take into account the situation of vulnerable groups, create favorable conditions for solving existing problems and identify sources of funding for its implemen tation. otherwise, inefficient implementation of structural modernization can slow down the development of key areas of economic activity and create problems for the pace of development of the national economy as a whole (balcerowicz, 1980). from this point of view, the method of analysis of the studied problem is used in the process of modernization of the structure of the national economy in modern conditions, taking into account the characteristics of the post-oil period, improving the existing mechanisms in the context of different approaches, re-modeling the key indicators of sustainable development. this is explained by the possibilities of making. the main idea of the article is the author's approach to the problem and his position. the author believes that in comparison with the world experience in the optimization of the solutions of the problems of modernization of the structure of the national economy in modern conditions, an adequate model of national economic development has not been formed yet, which would allow sustainable and dynamic economic growth of azerbaijan. this should be done. 2. analysis of the current state of the structure of the azerbaijani economy in modern conditions the structure of the national economy is quite complex, and it is not easy to modernize it in a few years. in this regard, all possible areas of activity should be evaluated and used within the framework of long-term strategic goals. azerbaijan has known strategic approaches in these areas, and the main task in the near future is to achieve strategic goals, expand the development of the national economy in the value baltic journal of economic studies 3 vol. 9 no. 2, 2023 chain, enrich and improve the national economic development model through maximum efficient use of modern technology-based economic sectors. some initial positive points in this direction have already been noted. economic and financial shocks, panic, setbacks, and downward trends are now behind the country, as the country 's economic system has managed to build its own necessary immunity to the anti-crisis conditions. why does this conclusion arise? maybe there's not enough objectivity? according to the author, the recorded trends in socioeconomic development, the resumption of growth in many areas, especially in the non-oil sector, more confident steps, positive results, and an increase in non-oil products and exports are sufficient. figure 1 shows the dynamics of azerbaijan's gdp, which is one of the main indicators of national economic security, in 2005–2020. based on figure 1 it can be concluded that the real volume and value of gdp in azerbaijan will increase 3.23 times in 2005–2020. if in 2010 the real value of gdp in the country was 52.9 billion usd. in 2015 this figure was 53.0 billion usd and in 2016 significantly lower – 37.8 billion usd. in 2017 the real value of gdp will increase to 40.9 billion usd, in 2018 it will increase significantly to 46.9 billion usd, in 2019 to 48.1 billion usd and in 2020 significantly lower – 42.7 billion usd. if one looks at what was mentioned above, one can see that the growth rate in 2016 decreased by about 28.5% compared to 2010–2015, but the growth rate resumed in 2017, and at least in 2018–2019 the growth rate will be even higher. objectively speaking, this increase in 2010–2015 was due to the exchange rate difference of the manat against the dollar. the volume of the country 's gdp in 2019 was accompanied by an increase compared to 2018. this means that azerbaijan was able to get away from the difficulties caused by the negative consequences of the global economic and financial crisis. however, in 2020 the gdp decreased due to the negative consequences of the pandemic. it can be said that the negative consequences of the pandemic have been eliminated, the country 's economic growth rate is being restored, and systematic work is underway to create new sources of growth. figure 2 shows the structure of gdp by type of economic activity in azerbaijan in 2020. based on the analysis of figure 2, it can be noted that the main place in the structure of the country 's economy is still occupied by industry, which is 33.7%. in recent years, the share of social and other services has been growing, and their share in the structure of gdp is 18.9%. the share of trade and repair of vehicles is 11.5% of gdp. unfortunately, despite the high potential of agriculture, agro-industrial complex, information and communication technologies, and tourism with high potential, their share in the country 's gdp is much lower than their potential. given this fact, in the next paragraph it is necessary to consider in detail and reveal the problems of modernizing the structure of the national economy. 3. disclosure of problems of modernization of the structure of the national economy of course, there is a lot of talk about the problems of modernizing the structure of the national economy, information is provided, and there are statistics. however, the main issue is to increase the strength of the foundations of sustainable and sustainable 13,2 52,9 53,0 37,9 40,9 46,9 48,1 42,7 0 10 20 30 40 50 60 2005 2010 2015 2016 2017 2018 2019 2020 gdp, billion usd gdp figure 1. gdp dynamics in the republic of azerbaijan in 2005–2020, billion usd source: prepared by the author on the basis of the state statistics committee of the republic of azerbaijan. 2021. available at: http://www.stat.gov.az baltic journal of economic studies 4 vol. 9 no. 2, 2023 development of the national economy, to take more effective measures to solve the problems of diversification of the national economic development model. are there too many problems for this? sometimes one tries to avoid problems, but global economic threats see them clearly and do not forgive, and sooner or later they make themselves felt, and one is forced to look for a way out again. with regard to the problems of modernization of the structure of the national economy of azerbaijan, it is important to note the following: – considering that the process of large-scale invest ments in the oil and gas sector of azerbaijan will continue until 2050, the reconstruction of the processing sector of this sector and the creation of a petrochemical complex based on modern technologies must be resolved in the near future. much can be said about the processing capabilities and value-added potential of this sector, in fact, it is said that programs and projects are offered, but unfortunately, the scope and scale of specific works do not reflect the real potential; – the refining network of the oil and gas sector should not be limited to oil refining, and the fact that oil refining has remained at the same level for many years should not be overlooked, so the steps taken to expand the refining network are not enough. nevertheless, a huge plant was built to organize gas processing and to produce agricultural fertilizers. it should be noted that most of the products are export-oriented, which will be another reliable source of foreign exchange inflows into the country. however, this is not the end of the matter, it is possible to obtain a wide range of new processed products from oil and gas raw materials, and increasing the depth of processing in these areas is an important condition. the developed countries of the world pay special attention to this issue, and the non-oil countries have managed to create various refining industries by actively importing oil, thus forming a strong economic potential. in addition, the process of obtaining new products and semi-finished products from gas raw materials for the development of various sectors of the national economy, the formation of production capacity in azerbaijan is still weak. more specifically, the use of opportunities in this area is only at the initial level of existing potential; – another important issue is the creation of favorable conditions for the development of entrepreneurship in the oil and gas sector. important steps are being taken to develop the state oil company, to turn it into a world-class transnational company, to bring the corporate governance system up to world standards, to establish socar offices in various countries, all of which should be commended, but one peculiarity should not be forgotten. when will the participation of the private sector in the country 's oil and gas sector and the creation of a healthy competitive environment, the organization of private companies and enterprises take place? it is known that this will take some time, but is it too late to create the necessary conditions to intensify these processes, to create a legislative framework, to create a healthy competitive environment and other related issues? it is important to accelerate the search for answers to these questions and to answer them with real practical work; – it should be noted that measures are being taken to boost the development of the chemical and 6,9% 33,7% 1,1%0,2%7,7% 11,5% 7,1% 1,2% 2,0% 18,9% 9,7% agriculture, forestry and fisheries manufacturing generation, distribution and supply of electricity, gas and steam water supply; waste treatment and recycling construction trade; repair of vehicles shipping and storage tourist accomodation and catering information and communication social and private services net taxes figure 2. structure of gdp by types of economic activity in azerbaijan in 2020, in % source: prepared by the author on the basis of information from the state statistics committee of the republic of azerbaijan. 2021. available at: http://www.stat.gov.az baltic journal of economic studies 5 vol. 9 no. 2, 2023 petrochemical complex, which is an important downstream industry in the oil and gas sector. earlier, it was mentioned that the commissioning of a regional plant is already a major project, and in this regard, technological facilities will be put into operation. in addition, another large processing complex has been built – a plant for the production of various polyethylene products. polymer products are export-oriented, but they also have the ability to create added value. thus, by organizing the processing of these products, it is possible to create production facilities and enterprises in different regions of the country. this, in turn, means the creation of new jobs, the creation of national production, the increase of economic activity in the regions, the development of production infrastructure, the organization of the use of intellectual and human resources, the increase of incomes; – taking into account the modeling of the development of the non-oil sector and the potential to create added value, a significant increase in their share in the structure of the national economy and, ultimately, a significant reduction in the country 's dependence on oil, etc. it should be noted that the modernization of the development processes of the national economy, especially its structural problems, is not a simple matter. the main attention should be paid to the selection of the most efficient and productive mechanisms in the process of economic development. it is necessary to ensure the harmonious course of economic processes, intensification of production processes in the value chain and acceleration of activities that enable economic growth. in order to solve the problems of modernization of the economic system and the structure of the national economy, the country needs to deepen reforms at the institutional level, regulate the state economic policy in accordance with global economic challenges and bring economic activity to the required level (radieva, 2018). in addition, more attention should be paid to ensuring the maximum efficiency of the economic system, as well as the identification and consistent solution of related problems. in the economic policy of the state, the structural problems of the national economy must be considered at a high enough level and the necessary strategic decisions must be made. in order to solve the problem of ensuring the improvement of the structure of the national economy in accordance with the goals of economic development of the country and raising the standard of living of the population, it is necessary to coordinate and balance the views and approaches at the state and public levels. it is necessary to provide a creative and strategic approach to the problems of development and modernization of the structure of the national economy (ahmed alawi al dhahab, 2016). at the same time, the opportunities for the formation and development of new channels of economic growth should be fully utilized by strengthening the resilience of the national economy, increasing the immunity of individual sectors of the economy in times of crisis, and improving the structure of the national economy using its self-development characteristics. one of the important and pending issues for this is that the models and methods chosen for the modernization of the structure of the national economy reflect the characteristics of efficiency, flexibility and national development (wray randall l., dantas flavia, 2022). the focus should be on the creation of productive sources of economic development and economic growth and related measures, elimination of intersectoral disparities at the macroeconomic level, development and implementation of necessary state programs for the development of the country 's regions, implementation of economic rehabilitation of economically disadvantaged areas, ensuring, expanding and accelerating the activities of sectors of the economy that create competitive added value, and making inclusive economic development a priority in general. the problems of modernization of the structure of the national economy and effective use of the potential of activities that allow its sustainable growth should be considered in a comprehensive manner and their solutions and mechanisms should be identified (richard c. barth, chorng-huey wong, 1994). special attention should be paid to strengthening the basic principles of economic development. the criteria and principles of economic development indicators, which can be a guarantee of macroeconomic stability in the country, must be protected, and economic security issues must be kept under special control. serious consideration and evaluation of the investment factor should be taken into account at the strategic level in order to ensure the stability of the economic development of each country and the improvement of the structure of the national economy (feldman, tom, lanahan, 2016). instead, measures to measure and assess the potential of economic development to modernize the solution of socio-economic problems in the country should be carried out systematically. on the basis of economic reforms, as mentioned above, more attention should be paid to improving the living standards of the country 's population and at the same time increasing its competitiveness by using the structural potential of the country 's economy. the problems of development of the national economy and formation of sources of growth should be reasonably planned in the long term and forecast as optimally as possible within the planned priorities (kolawole, ojapinva, 2013). frequently, the problems associated with the inclusive development of the national economy are exaggerated, which is baltic journal of economic studies 6 vol. 9 no. 2, 2023 natural, as it is impossible to model and forecast the goals of the national economy in the face of global economic challenges without ensuring inclusive development. on the other hand, inclusive development is a fairly important approach in terms of modern economic development trends in the world economy, and it is impossible not to take into account these realities (samans, blanke, 2017). at the same time, the implementation of economic development priorities must be accompanied by the necessary steps to ensure the sustainability of the national economy, ensure the balance of institutional and economic reforms, and improve state control mechanisms. in this regard, it should be ensured that mechanisms and instruments of economic development with high potential are actively involved in economic development processes (deaton, 2010). it should be noted that in modern times the problems of modernization of the structure of the national economy of azerbaijan are always in the limelight. almost every year, continuous measures are taken in this direction. attention is paid to strengthening the competitiveness of the national economy, deepening structural reforms and forming new development paradigms. improving the structure of the country 's economy, strengthening the coordination of macroeconomic policy, forming an optimal macro-fiscal framework in terms of financial stability, meeting the demand for money in line with the inflation target, increasing the level of institutional development of the securities market, increasing capitalization in the economy, balanced development of the financial services market remains as (hasanov, 2017). in the near future, it is possible to predict the intensification of development processes of the national economy with the most effective use of the potential to create added value. 4. conclusions summarizing the above, it is possible to draw certain conclusions, namely: the national economy of countries with significant natural resources, especially oil and gas, runs the risk of becoming dependent on the extractive industry. the modernization of the structure of the national economy of these countries, in particular azerbaijan, should take into account the development of the processing industry. the process of large-scale investment in the oil and gas sector will take another thirty years. the issue of reconstructing the processing sector of this industry needs to be resolved. it is necessary to create a petrochemical complex based on modern technologies. but this work will take time. the potential of the oil and gas industry, which is the main leading sector of the national economy, must be used effectively, especially to ensure the intensive development of the non-oil sector. the economy of the country should not only be engaged in oil processing. the recycling network should be expanded. a plant for the organization of gas processing and production of agricultural fertilizers has already been built. most of the products are export-oriented. however, this is not the end of the story, a wide range of new processed products can be obtained from oil and gas raw materials, an important condition is to increase the depth of processing in these directions. the developed countries of the world, which import oil, managed to create various branches of oil refining and thus formed a powerful economic potential. the process of obtaining new products and semifinished products from gas raw materials for the development of various branches of the national economy and the creation of production capacities is still weakly developed. another important issue is the creation of favorable conditions for the development of entrepreneurship in the oil and gas complex. the participation of the private sector in the oil and gas sector of the country should be stimulated and a competitive environment should be created. every year it is necessary to increase the competitiveness of the country 's economy, improve the business environment, develop business and entrepreneurship in the triangle of the "state – private sector – society ", and conceptualize a model for the development of the national economy in the context of global economic challenges. it is necessary to adopt strategic development and action programs to make the level interesting and effective. it is advisable to create production facilities and enterprises in various regions of the country. this, in turn, means creating new jobs, national production, increasing the economic activity of regions, developing the production infrastructure, organizing the use of intellectual and human resources, and increasing the income of the population. it is necessary to actively include modernized competitive types of economic activity into the structure of the country 's economy, expand the network of manufacturing enterprises, increase export potential by organizing import substitution activities, and diversify sources of foreign exchange. in general, it is important to comprehensively and systematically implement important measures to strengthen the competitiveness of the national economy, as well as its resistance to global economic threats, ensuring the sustainability of its growth sources. baltic journal of economic studies 7 vol. 9 no. 2, 2023 references: jafarli, h. a. (2018). macroeconomic problems of continuous development of global economic counsels in the conditions of nationalism. the 6-th international conference on control and optimization with industrial applications. volume ii. baku, azerbaijan. available at: https://apps.webofknowledge.com/summary. do?product=wos&doc=1&qid=1&sid=d3ddljsxyrrnkkrkfwi&search_mode=advancedsearch&update_ back2search_link_param=yes kadyrov, a. l. (1999) models of organizational structures for managing the national economy: on the example of the republic of tajikistan. dissertation of the doctor of economic sciences. khujanzh, 358 p. jafarli, h. a. (2020). analysis and assessment of the structural problems of the national economy at the present stage. the first international conference on modern trends on digital economy. modern challenges and real opportunities. baku, azerbaijan. available at: http://de-conf.unec.edu.az/index1.html global problems of economic restructuring. available at: http://economics.studio balcerowicz, l. (1980). organizational structure of the national economy and technological innovations. acta oeconomica, vol. 24, no. 1/2, pp. 151–167. published by: akadémiai kiadó. available at: https://www.jstor.org/ stable/40729961 state statistics committee of the republic of azerbaijan (2021). available at: http://www.stat.gov.az radieva, m. (2018). institutional modernization of the global economy. baltic journal of economic studies, vol. 4, no. 5, pp. 283–290. doi: https://doi.org/10.30525/2256-0742/2018-4-5-283-290 ahmed alawi al dhahab. entrepreneurship in the gulf cooperation council (2016). available at: https://reader.elsevier.com/reader/sd/pii/b9780128112885060012?token=d6f4538b0aea578e13fb492bb 36ae9fe13e6df6c07fc94ec033531915a87c14c14253b4f430948f5946b4b1685bc35c5&originregion=euwest-1&origincreation=20230418143302 wray randall l., & dantas flavia (2022). handbook of economic stagnation. doi: https://doi.org/10.1016/ c2017-0-03644-3 approaches to exchange rate policy (1994) / ed. by: richard c. barth and chorng-huey wong. / international monetary fund. washington d.c., 293 p. economic development: a definition and model for investment maryann feldman, theodora tom, lauren lanahan (2016). available at: https://www.eda.gov bashir olayinka kolawole, & taiwo victor ojapinwa (2013). economic planning models for development: the relevance for a developing economy. international journal of humanities and social science, vol. 3, no. 16, special issue – august. available at: http://www.researchgate.net the inclusive growth and development report 2017 is published by the world economic forum. richard samans. member of the managing board. jennifer blanke. available at: http://www.weforum.org/docs/wef_ forum_incgrwth_2017.pdf angus deaton (2010). understanding the mechanisms of economic development. journal of economic perspectives, vol. 24, no. 3 (summer), pp. 3–16. available at: https://www.princeton.edu hasanov, r . t. ( june 20, 2017). competitiveness of the national economy: structural reforms and new development paradigm. journal of strategic analysis. available at: http://www.stj.sam.az received on: 03th of march, 2023 accepted on: 21th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 77 vol. 3, no. 3, 2017 corresponding author: 1 department of political analysis and forecasting, national academy for public administration under the president of ukraine. e-mail: schyv5@gmail.com perspective directions for the development of ukrainian anti-crisis strategy in modern conditions of aggravation of the socio-economic situation yuriy schedrin1 national academy for public administration under the president of ukraine, ukraine abstract. the article explores the prospects for the development of ukraine’s anti-crisis strategy in the current conditions of aggravation of the socio-economic situation. the urgency of the researched subject  – namely, the study of the potential directions for the development of the anti-crisis tools of ukrainian state policy – is determined primarily by the seriousness of the problem, which should be overcome by means of these methods. the purpose of the article is to identify promising tools and mechanisms for an anti-crisis policy that can make a significant contribution to improving the current state of the socio-economic sphere in ukraine. its subject is anti-crisis tools and instruments, which could be used in ukrainian scenario. it is noted that our state is at the stage of the permanent crisis and suffers from the consequences of both global and local crisis phenomena. the scientific novelty of the article is determined by the combination of economic, social, political, and legal approaches to the study of the current state of the ukrainian economy. the methodology of the research is formed by the combination of economic and political methods of scientific activities, which are based on the principles of objectivism and systematic approach. the findings of scientific research and recommendations of some ukrainian scientists regarding the necessary anti-crisis tools are considered as the sources for the article. the results of the study show that ukraine suffers from a series of systemic problems and challenges, which are the main threat to the stability of the national economy. among the most influential of them we can identify the low level of incomes of citizens, which is associated with the devaluation of the national currency and the increase in utility tariffs; high level of unemployment; shortage of foreign and domestic investments; the decline in production and exports, caused both by military operations in the donbas and the loss of the russian market, and by the absence of a targeted government industrial and trade policy; energy dependence and technological primitivization of production; corruption, and inefficiency of public administration. ukraine needs a deep modernization. from the social and economic points of view, this means settlement of three interrelated problems, namely, the modernization of the state economic policy, the production and technological base of the economy, and the system of social protection of the population. the formation of the post-crisis model of development in ukraine should be aimed at eliminating defects in the mechanism of functioning of the national economy, which were accumulated during the years of state independence, and carrying out systemic reforms in all spheres of public life. at the same time, we should take into account the absence of a universal example of an anti-crisis program, which will peremptorily correspond to ukrainian realities; the need to implement unpopular but effective anti-crisis measures; long terms, which are necessary to overcome the crisis. as conclusions, we should stress out that ukraine in modern conditions must solve a dual task. on the one hand, kyiv must create a powerful national economic complex. at the same time, this process must be accompanied by the organic integration of the national economy into the world and european labour markets. it is necessary to emphasize that these issues should be solved in the economic and social sphere, not on the basis of a momentary political background. ukraine should develop and implement an institutional-market model of economic recovery based on the priority of its own national interests. such an approach will help to implement the anti-crisis strategy in practice and, as a result, will help our state to occupy a worthy place in the modern globalized world. key words: anti-crisis strategy, socio-economic situation, ukraine, public administration, recommendations. jel classification: g01, h12, h83 baltic journal of economic studies 78 vol. 3, no. 3, 2017 1. вступление новейшая история независимой украины насчитывает более четверти века. это  – нелегкое время для государства, которое де-факто находится в условиях непрерывного системного кризиса. отдельные периоды стабильности и роста не должны вводить в заблуждение, поскольку они являются результатом специфических факторов (в том числе – внешних), а не последствием коренной перестройки общества, которая является необходимой составляющей для успешного преодоления негативных явлений в социально-экономической сфере. в таких условиях разработка и реализация антикризисной стратегии для украины становится жизненно важной задачей. впрочем, она должна базироваться как на теоретических результатах научного поиска, так и на комплексной и объективной оценке сложившейся в государстве на практике ситуации. последнее особенно важно сегодня, в условиях, когда украина с одной стороны все еще ощущает последствия мирового экономического кризиса 2008-2009 годов, а с другой  – страдает от новых негативных тенденций, вызванных, прежде всего, обострением отношений с россией. таким образом, актуальность рассматриваемой в статье тематики  – а именно изучение потенциальных направлений развития антикризисного инструментария украинской государственной политики – определяется, прежде всего, болезненностью и серьезностью проблемы, на преодоление которой эти методики направляются. тематика антикризисного управления нашла должное отражение в трудах украинских ученых  – представителей экономических, политически, правовых и управленческих наук. впрочем, основная часть работ выполнялась в рамках экономической области и касалась выработки стратегий для отдельных хозяйственных объектов или секторов. в глобальном смысле государственного управления эта тематика не отображалась в теоретическом формате. таким образом, научная новизна статьи заключается в сочетании этих подходов в рамках изучения современного состояния украинской экономики и анализа рекомендаций отдельных ученых относительно необходимого антикризисного инструментария. целью статьи является определение перспективных инструментов и механизмов антикризисной политики, которые способны внести значительный вклад в улучшение современной социально-экономической ситуации в украине. при этом отмечается, что наша страна находится в стадии перманентного кризиса и страдает от последствий кризисных явлений как глобального (мировой финансовый кризис 2008-2009 годов), так и локального (последствия российской агрессии) характера. 2. системные проблемы украины поиск путей совершенствования антикризисных механизмов, которые задействованы для улучшения социально-экономической ситуации в украине, является одной из основных задач науки о государственном управлении. эта проблематика сегодня – в условиях обострения ситуации в государстве, которое находится в состоянии перманентного кризиса (вызванного не только внешними факторами вроде российской агрессии, но и неэффективным управлением)  – приобретает чрезвычайное практическое значение. выработка действенного антикризисного инструментария требует комплексного понимания современной ситуации в стране, оценки негативных тенденций, которые угрожают благосостоянию украины. в этом контексте, прежде всего, необходимо определить главные системные вызовы, которые влияют на перспективы развития украинской государственности. прежде всего, отметим низкий уровень доходов граждан, который связан в том числе с обесцениванием национальной валюты и повышением коммунальных тарифов, которые не сопровождалось соответствующим увеличением уровня заработных плат (популистские действия правительства по повышению минимальной зарплаты не могут рассматриваться в качестве эффективного средства исправления ситуации). на практике из-за шокового трехкратного обесценивания гривни (от 8 до 26  гривен за доллар сша) доходы украинских граждан сегодня скатились до уровня экономически отсталых стран. существует несколько показателей, позволяющих оценить уровень благосостояния населения украины. например, валовый доход на одного жителя страны в 2014 году не изменился по сравнению с предыдущим годом, составив около 7500 грн. но если в 2013 году это составляло почти 1000 долларов сша, то по курсу на конец 2014 года  – чуть менее 500 долларов сша. номинальная заработная плата по данным государственной статистики в 2014  году выросла с 3619 до 4012  грн. впрочем, в долларовом эквиваленте она упала с 453 до 254 долларов сша. в таких условиях неудивительно, что в первом квартале 2015 года в сравнении с аналогичным периодом 2014  года реальные доходы населения уменьшились на 23,5% (ukrainets, yablonska, kravets, stasyna, 2017). по некоторым данным, по состоянию на март 2016 средний доход в украине сократился до 130 долларов сша, а доля сбережений  – до 3,4% (obraztsov, 2016). официальная статистика отмечала, что в первом квартале 2016  средний доход украинцев составлял около 265 долларов сша – в два раза меньше, чем в 2014 году, оставаясь на уровне 2005-2006 годов (mychkovskaia, 2016). такое положение дел обескровливает национальную экономику и дестабилизирует социально-политическую ситуацию в стране. baltic journal of economic studies 79 vol. 3, no. 3, 2017 высоким остается уровень безработицы. по официальным данным он составляет около 9,5% трудоспособного экономически активного населения, или 1,65 млн. человек. по сравнению с показателями 2013 он увеличился примерно на 2% (уровень безработицы в украине, 2017). при этом следует учитывать, что за счет «скрытой компоненты» – понятия, в которое входят неполная занятость, отпуска за свой счет и т.д. – этот показатель на практике еще больше. такая ситуация прежде всего вызывает социальную дестабилизацию украинского общества. впрочем, она имеет и косвенные негативные последствия, подтачивая основы производительности экономики и дополнительно истощая покупательную способность населения. другим негативным фактором для украинской экономики является дефицит инвестиций – как прямых иностранных, так и отечественных; частных и государственных. в результате многолетней нисходящей динамики капитальных инвестиций уровень валового накопления основного капитала  – инвестиций в будущее экономики – сократился до 12% от ввп (при уровне в 19% в ес и более 25% в развивающихся странах) (obraztsov, 2016). относительно инвестиционной привлекательности украины для зарубежных партнеров следует сказать, что физическое уменьшение притока финансового капитала в украинскую экономику в 2014 году составило около 42 млрд. долларов сша, в 2015 году – около 33 млрд. долларов сша. эти суммы в абсолютном измерении существенно превышали официальный объем инвестиций  – в 2014 году в 2,5 раза, в 2015 году  – в 3,3 раза (lanovoi, 2016). актуальной проблемой остается падение производства и экспорта, вызванное как военными действиями на донбассе и потерей российского рынка, так и отсутствием целенаправленной правительственной промышленной и торговой политики. результатом становится значительное снижение соответствующих показателей. в 2014 году негативную динамику продемонстрировали все основные виды промышленной деятельности: сокращение объемов производства в добывающей промышленности составило 13,7%, в перерабатывающей промышленности – 9,3%, в поставках электроэнергии, газа и кондиционированного воздуха  – 6,6 %. такой тренд во многом был обусловлен падением производства в донецкой и луганской областях (на 31,5% и 42% соответственно в 2014). падение реального ввп в целом продолжилось и в следующем году. в первом полугодии 2015 года оно составило 16,7%. резкое сокращение производства в донецкой и луганской областях в результате военных действий и частичной оккупации лишь частично объясняет его  – ввп на остальной территории украины также упал минимум на 10,2% (ukrainets, yablonska, kravets, stasyna, 2017). за одиннадцать месяцев 2015 года промышленное производство снизилось почти на 15%, а товарный экспорт – на 31% (obraztsov, 2016). украина страдает от финансовой зависимости и макрофинансовой нестабильности. они вызваны отрицательным сальдо торгового баланса в течение последних девяти лет; трехкратным шоковым обесценением национальной денежной единицы; чрезмерной нагрузкой государственного и гарантированного государством долга на экономику страны (80% ввп в 2015, тогда как мвф считает критическим максимумом в 60%) и непомерными бюджетными расходами на его обслуживание (14,8% расходов государственного бюджета на 2016 год – вторая крупнейшая статья государственных расходов) (obraztsov, 2016). важной проблемой для украины в современных условиях становится энергетическая неэффективность и импортная зависимость. энергоемкость единицы ввп в украине в два раза выше показателей чехии и в три раза – показателей польши. при этом в начале 2016 года украина все еще на 33% зависела от импортных энергоносителей (obraztsov, 2016). это и неудивительно, поскольку значительная часть отечественного энергетического сектора украины на протяжении долгих лет была зависимой от закупок природного газа, нефтепродуктов, топлива для электростанций в российской федерации. зависимость от импорта превратила газ, нефть, ядерное топливо, а затем и уголь в рычаги давления на украину со стороны соседнего государства. потеря объектов топливно-энергетического комплекса и перспективных территорий для разработки углеводородных ресурсов в результате аннексии крыма и военных действий на донбассе, а также разрушения нефтегазовой инфраструктуры в донецкой и луганской областях стали новыми негативными факторами, которые в значительной мере ослабили уровень энергетической безопасности страны (markevych, omelchenko, 2016). такое положение дел в свою очередь делает множество видов украинской продукции неконкурентоспособными на международном рынке. также в украине наблюдается технологическая примитивизация производства и экспорта. она выражается в первую очередь в низкой доли перерабатывающей промышленности в ввп страны (лишь 13% в украине, на фоне 18% в турции и польше, 21% в словакии); мизерной доле высокотехнологичного экспорта (лишь 6% от всего товарного экспорта, на фоне 8% в польше, 15% в чехии) (obraztsov, 2016). это приводит, в том числе, к становлению низких социальных стандартов в стране. следующие негативные факторы формируются из явлений, которые являются примерами преимущественно незаконной деятельности, за которую должна быть введена уголовная ответственность. прежде всего речь идет о чрезмерной роли теневого baltic journal of economic studies 80 vol. 3, no. 3, 2017 сектора в отечественной экономике. это не только дисбалансирует национальную систему и приводит к сокращению доходов государства от налоговых поступлений, но и искажает государственную экономическую статистику, мешая формированию реальной динамики развития страны, порождает социальную несправедливость. теневая экономика в украине является одним из основных препятствий для развития конкурентоспособности страны, роста социальных стандартов жизни населения и интеграции в европейское сообщество. она является отражением активной криминализации экономических процессов, высокой коррумпированности органов государственной власти и низкой правовой и налоговой культуры юридических и физических лиц. решение этих проблем – серьезный вызов для киева. их масштабы впечатляют. государственная служба статистики украины в последние годы определяет объемы теневой экономики в среднем от 15% до 18% ввп. согласно расчетам министерства экономического развития и торговли украины, объем теневой экономики в государстве за 2010-2014 годы составлял от 28% до 39% ввп (bochi, povoroznyk, 2014). по оценкам экспертов и отдельных оппозиционных политиков, по состоянию на начало 2016 более 50% отечественной экономики находилось «в тени» и не платило налогов (obraztsov, 2016). в результате налоговое бремя ложится на плечи наименее социально защищенных слоев населения  – представителей бюджетной сферы (учителей, врачей), военных и работающих пенсионеров. главной проблемой украинского общества, которую отмечает подавляющее большинство населения украины в качестве преграды на пути к преодолению кризиса в экономике, восстановления государства и превращения его в равноправного члена европейского сообщества, является коррумпированность государственных институтов. это подтверждают и оценочные данные международных исследований. во всемирном коррупционном рейтинге срі украина в 2016 году занимала 131 место из 176 стран. это место с показателем 29 баллов вместе с ней разделили казахстан, россия, непал и иран (bezkarnist ta nediieve pravosuddia…, 2017). наиболее часто коррупция проявляется в судебной системе, налоговой службе, на таможне, в работе органов исполнительной власти. она уничтожает доверие общества и бизнеса к власти, снижает инвестиционную привлекательность государства для иностранных партнеров, тормозит развитие страны. отдельные реформы  – вроде формирования национального антикоррупционного бюро  – не могут исправить ситуацию. заведенные в последнее время антикоррупционные дела трудно назвать свидетельством системной борьбы с этим явлением. в основном они инициируются властью против политических оппонентов или начинаются в критический период для отвлечения народного внимания или быстрого получения электоральной поддержки. следует отдельно отметить, что практически ни одно из громких дел – несмотря на активную рекламу в сми на первом этапе  – не было доведено до логического завершения. 3. задачи и направления украинской антикризисной стратегии объемы и масштабы проблем, стоящих перед украиной в xxi веке, требуют от государства и общества разработки и утверждения единой комплексной долгосрочной программы реформ, которая не должна ограничиваться рамками циклов предвыборных кампаний, а напротив – обеспечит преемственность при изменениях состава правительства (oskovskyi, 2010). ситуация осложняется из-за стагнации национальной экономики, несовершенства ее структуры, роста дифференциации территорий по степени их развития, что в совокупности лишь усиливает противостояние между подходами к решению проблем экономического, идеологического, политического, религиозного, социального и иного характера (melnychenko, 2015). перманентный кризис еще раз показал, что украина нуждается в глубокой модернизации. в социально экономическом плане это означает решение трех взаимосвязанных проблем, а именно – осуществление: • модернизации государственной экономической политики; • модернизации производственно-технологической базы экономики; • модернизации системы социальной защиты населения в широком смысле этого слова. инструментом социально-экономической модернизации в современных условиях является внедрение целого ряда реформ, направленных на применение наиболее эффективных принципов, механизмов и форматов управления социально-экономическими процессами в стране (antikrizova politika v sviti ta ukraini…, 2009). в таких условиях мы приходим к обоснованному выводу, что формирование посткризисной модели развития в украине должно быть направлено на устранение дефектов в механизме функционирования национальной экономики, накопленных за годы независимости государства, и проведение системных реформ во всех сферах общественной жизни. следует подчеркнуть, что при отборе метода и инструментов их осуществления эксперты сходятся во мнении, что они не должны базироваться на неолиберальной теории. ее положения объективно неприемлемы для кризисных условиях в украине. вместо этого а.  олешко еще в 2012 году настаивал на необходимости дальнейшего развития государства на основе кейнсианской модели. лучшим методом для преодоления негативных тенденций и усиления антикризисbaltic journal of economic studies 81 vol. 3, no. 3, 2017 ного потенциала он считал введение антикризисного регулирования национальной экономики, направленного на формирование устойчивой к внешним и внутренним возмущениям постиндустриально информационной экономики, основанной на инновационных принципах. проанализировав более подробно мировой опыт и модели антикризисного управления, следует отдельно обратиться к этому вопросу и определить несколько теоретических положений, на которых должен базироваться наш отбор соответствующего инструментария для конкретного украинского случая. взяв за основу научные достижения в. будкина (budkin, 2010), которые разрабатывались в других – довоенных  – условиях, однако все еще остаются актуальными и сегодня, можно сделать выводы относительно выбора модели антикризисного развития для нашего государства. во-первых, в мире нет уже апробированной, готовой для внедрения в украинских условиях программы выхода из кризиса. при отсутствии такого универсального инструмента целесообразным представляется критическое изучение и использование положительных элементов многих существующих за рубежом наработок в сфере антикризисной политики. таким образом, украине не стоит искать «спасения» в исключительном копировании опыта успешных реформ любой другой страны (будь то сингапур ли куан ю или грузия михаила саакашвили). вместо этого надо сочетать их стратегии с учетом украинской национальной специфики. во-вторых, хозяйственный организм украинского государства находится в патовом состоянии, выход из которого возможен только путем рационального привлечения внешнего фактора в сочетании с непопулярными, но императивно необходимыми внутренними мерами оздоровления экономики. среди практических мероприятий этой сферы можно вспомнить повышение пенсионного возраста (для преодоления страшной угрозы национальной экономике, вызванной демографическим кризисом и объективной невозможностью трудоспособного населения обеспечивать сегодня уже существующих пенсионеров) и коммунальных тарифов (де-факто  – их привязку к рыночной стоимости предоставляемых услуг, что вступает в противоречие с длительной политикой власти, которая в течение многих лет для получения электоральной поддержки населения регулировала этот сектор согласно принципам социального государства). впрочем, необходимо помнить, что такие непопулярные меры будут на первом этапе оказывать дестабилизирующий эффект в социальной сфере. в-третьих, следует пессимистично констатировать, что украине не стоит надеяться на быстрое преодоление кризиса. наиболее вероятным на несколько ближайших лет является сценарий l-развития, то есть прекращение падения показателей, но без ощутимого повышения хозяйственной динамики. этот прогноз делался относительно процесса борьбы с последствиями мирового финансового кризиса 2008-2009 годов на национальном уровне. впрочем, его актуальность остается неопровержимой и в новых условиях. 4. подходы отдельных ученых к планированию антикризисной стратегии исходя из указанной выше характеристики украинской специфики представляется целесообразным проанализировать различные подходы к планированию антикризисных стратегий, которые предлагались отдельными экспертами в течение последних лет. условно их можно разделить на две группы. к первым относится научная аналитика, призванная помочь в преодолении последствий мирового финансового кризиса 2008-2009 годов. хотелось бы отдельно подчеркнуть, что большинство предложенных инициатив так и не были реализованы, а значит  – остаются актуальным для внедрения инструментарием и сегодня. вторую группу составляют антикризисные предложения, обнародованные в рамках противодействия современным кризисным явлениям, которые обострились после событий революции достоинства и начала российской агрессии. в целом обобщение международного опыта позволяет выделить ряд инструментов для повышения эффективности антикризисной политики украины в разных направлениях и сферах. н. сапа (sapa, 2012) считает, что для эффективного функционирования антикризисного управления в украинских реалиях нужно, прежде всего, наладить систему предкризисного государственного управления, которая должна базироваться на проведении фундаментальных исследований в рамках взаимодействия власти и науки. также он подчеркивает, что необходимо разработать действенную правовую базу антикризисного государственного управления, а именно – сформировать соответствующее антикризисное законодательство, которое бы соотносилось со стратегией долгосрочного социально-экономического развития страны. приоритетными задачами украинского антикризисного государственного управления в связи с приведенными выше фактами должны стать разработка и принятие государством стратегии инновационного прорыва; усиление гуманитарной и экологической составляющей экономики; создание благоприятных условий для спроса на инновационную и научную продукцию; поддержка интеллектуальных ресурсов внутри государства. м. лизун (lyzun, 2011) среди основных и наиболее действенных инструментов антикризисной политики отмечал активизацию государственной baltic journal of economic studies 82 vol. 3, no. 3, 2017 политики в кредитной и инвестиционно-инновационной сферах. в первом случае речь шла об увеличении кредитования экономики банками развития; укреплении и расширении государственных кредитных гарантий и финансирования со стороны государственных финансовых учреждений; увеличении уставного капитала государственных банков; приобретении коммерческих ценных бумаг, выпущенных компаниями с целью ослабления жесткости условий финансирования. во втором случае эксперт отмечал необходимость предоставления инвестиционных налоговых льгот на приобретение новых материальных активов и на капитальные инвестиции; прямого государственного финансирования перспективных проектов; привлечения прямых инвестиций путем создания совместных фондов с зарубежными партнерами; увеличения ассигнований на реконструкцию зданий с целью улучшения их энергетической эффективности; направления инвестиций на научные исследования и разработки, в том числе  – в сфере возобновляемых источников энергии. в рамках поддержки отдельных отраслей экономики лизун подчеркивал чрезвычайную важность сельскохозяйственного сектора. он предлагал инициировать повышение субсидий для фермерских хозяйств, увеличение объемов государственных закупок продовольствия у фермеров; расширение объема и спектра государственных интервенций на сельскохозяйственную продукцию по фиксированным закупочным ценам. л. верховодова (verkhovodova, 2009) акцентировала внимание на проблемах малого и среднего бизнеса в условиях обострения социально-экономического кризиса. в рамках действенной антикризисной стратегии она предлагала направить усилия на его поддержку. в этом контексте упоминались такие инструменты и меры, как субсидирование процентной ставки по коммерческим кредитам для малых и средних предприятий и домохозяйств; освобождение предприятий от уплаты определенной доли отчислений в бюджет при приеме на работу новых работников и постепенное увеличение таких отчислений в последующие периоды; создание специальных фондов, которые будут предоставлять кредиты для малого и среднего бизнеса; расширение кредитных линий, предоставляемых государственными финансовыми учреждениями; упрощение процедуры получения кредитов. по мнению а. бояр (boiar, 2011), приоритетными задачами, которые обязано поставить перед собой правительство украины в условиях экономической рецессии, должны прежде всего стать оперативные разработки и принятие плана противодействия кризисным явлениям, сформированного на основе комплексного подхода, предусматривающего консолидацию монетарных, фискальных, финансово-кредитных, структурных и других антикризисных мер. в этом контексте необходимо обеспечить оперативный пересмотр приоритетов бюджетно-структурной политики; внесение изменений в национальный и местные бюджеты, направленные на увеличение капитальных расходов в отраслях экономики со значительным потенциалом инновационного развития; активизацию притока частных инвестиций, в том числе  – иностранных; снижение административных барьеров при учреждении и ведении бизнеса за счет сокращения сроков регистрации новых предприятий, упрощения процедур найма работников, снижения стоимости административных услуг; расширение механизмов государственно-частного софинансирования инвестиционных проектов; стимулирование спроса и экспорта. в современных условиях высокая вероятность возникновения кризисных явлений в процессе деятельности украинского банковского сектора обуславливает необходимость внедрения специализированных мероприятий, направленных на их нейтрализацию. средством такого противодействия должно стать антикризисное управление банком (perekhrest, 2009). для развития адекватной системы корпоративного управления и контроля за банковским сектором в украине необходимо разработать возможные сценарии развития кризиса в результате воздействия внешних и внутренних факторов для последующего моделирования; сформировать и поддерживать систему оперативного получения информации о финансовых показателях, механизм оперативной коррекции проблем несистемного характера; инициировать подготовку изменений в корпоративную систему управления и контроля; периодически проводить анализ эффективности корпоративного управления и надежности систем контроля (korenieva, 2012). 5. выводы суммируя приведенные антикризисные подходы, оценивая их соответствие имеющейся ситуации, как в международной среде, так и на национальном уровне, мы можем прийти к следующим выводам. встав на путь либерализации внешнеэкономических связей и построения открытой экономической системы, украина постоянно чувствует растущее влияние тенденций мирового развития на свои внутренние процессы. в том числе речь идет и о негативных факторах влияния. до сих пор международное сообщество так и не создало эффективную систему защиты интересов слаборазвитых стран, требующих определенных преференциальных условий для внешнеэкономических контактов. к большому сожалению, украина  – исходя из приведенных показателей экономического развития – находится сегодня в числе таких аутсайдеров. поэтому в системе управления и организации внешнеэкономических связей baltic journal of economic studies 83 vol. 3, no. 3, 2017 нашей страны необходимо предусмотреть такие принципы и механизмы, которые давали бы ей возможность активно участвовать не только в региональном, но и в мировом разделении труда, искать новые нетрадиционные рынки товаров, диверсифицировать источники получения сырья, энергии, топлива, продовольственных товаров, достойно отстаивая свои национальные интересы. украине в современных условиях необходимо решать двойную задачу. с одной стороны киев должен создавать мощный национальный экономический комплекс. впрочем, этот процесс должен сопровождаться органической интеграцией национальной экономики в мировую и европейскую систему разделения труда на современном уровне научно-технического и социально-экономического развития. большинство экспертов сегодня отстаивают утверждение, что нельзя сначала создать национальный комплекс, а затем встраивать его в интеграционное пространство, как и наоборот, не строить национальный комплекс, а положиться только на самотек глобализационных тенденций, благоприятный инвестиционный климат и помощь внешних партнеров (sapa, 2012). оба пути в своей самостоятельности неэффективны и разрушительны для экономики украины. первый ведет к постепенной изоляции и отставания государства от мировых модернизационных тенденций. второй превращает ее в зависимого от внешних факторов актора, ресурсную базу для развитых инновационных экономик. необходимо особо подчеркнуть, что эти вопросы должны решаться в экономической и социальной сфере, а не исходя из политической подоплеки. к  большому сожалению, политика украины в этой сфере в течение всего периода независимости не базировалась на результатах научного анализа и обоснованных выводах, а выходила из чисто политических конъюнктурных пожеланий и субъективных ориентаций. для преодоления этих негативных тенденций в украине нужно пересмотреть концептуальные основы экономической политики на принципиально новой, либерально-демократической основе. трансформация политической системы украины в реальных условиях настоящего должна быть направлена на выработку  – на основе консенсуса между основными политическими силами  – дееспособной, консолидированной власти, преодоление противостояния между ее ветвями, поиск оптимальных путей отношений между центром и регионами (sapa, 2012). для того, чтобы украина не осталась на периферии глобального прогресса и нового устройства мирового хозяйства, в стратегии ее развития необходимо учитывать, что механизм международных экономических отношений в xxi веке кардинально меняется и все больше базируется на высокой степени координации регулятивных действий как в отдельно взятой стране, так и на межгосударственном уровне. в то же время следует помнить, что каждое государство прежде всего заботится о защите своих национальных интересов. следовательно, украина должна разработать и внедрить институционально-рыночную модель экономического восстановления на основе приоритета собственных национальных интересов, которая позволит противостоять современным вызовам глобализации и позиционировать себя в глобализованном мире, не оказавшись в роли придатка мировой экономики (hryshchenko, 2010). только такой подход сможет способствовать эффективной реализации на практике антикризисной стратегии, и в результате поможет нашей стране занять достойное место в современном глобализированном 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(chastyna 1: zahalna otsinka makroekonomichnoi sytuatsii). free voice information analysis center. retrieved june 4, 2017 from: http://iac.org.ua/kompleksna-otsinka-ekonomichnoyi-situatsiyivukrayini-u-2014-2015-rr-chastina-1-zagalna-otsinka-makroekonomichnoyi-situatsiyi/ uroven bezrabotytsi v ukrayne. retrieved june 3, 2017 from: http://index.minfin.com.ua/people/unemploy.php юрий щедрин перспективные направления развития антикризисной стратегии украины в современных условиях обострения социально-экономической ситуации аннотация. в статье исследуются перспективы развития антикризисной стратегии украины в современных условиях обострения социально-экономической ситуации. актуальность рассматриваемой тематики  – а именно изучение потенциальных направлений развития антикризисного инструментария украинской государственной политики  – определяется, прежде всего, болезненностью и серьезностью проблемы, на преодоление которой эти методики направляются. целью статьи является определение перспективных инструментов и механизмов антикризисной политики, которые способны внести весомый вклад в улучшение современного состояния социально-экономической сферы в украине. предметом исследования являются антикризисные инструменты и механизмы, которые можно использовать в украинском сценарии. при этом отмечается, что наша страна находится в стадии перманентного кризиса и страдает от последствий кризисных явлений как глобального, так и локального характера. научная новизна статьи заключается в сочетании экономического, социального, политического и правового подходов в рамках изучения актуального состояния украинской экономики. методология исследования формируется сочетанием экономических и политических методов научной деятельности, которые основаны на принципах объективизма и систематического подхода. научные изыскания и рекомендации отдельных украинских ученых относительно необходимых антикризисных инструментов сформировали источниковую базу статьи. результаты проведенного исследования показывают, что украина страдает от серии системных проблем и вызовов, которые являются основной угрозой стабильности национальной экономики. в качестве их наиболее весомых проявлений можно выделить низкий уровень доходов граждан, который связан, в том числе, с обесцениванием национальной валюты и повышением коммунальных тарифов; высокий уровень безработицы; дефицит иностранных и внутренних инвестиций; падение производства и экспорта, вызванное как военными действиями на донбассе и потерей российского рынка, так и отсутствием целенаправленной правительственной промышленной и торговой политики; энергетическую зависимость и технологическую примитивизацию производства; коррупцию и неэффективность государственного управления. украина нуждается в глубокой модернизации. в социально-экономическом плане это означает решение трех взаимосвязанных проблем, а именно  – осуществление модернизации государственной экономической политики, производственно-технологической базы экономики и системы социальной защиты населения. формирование посткризисной модели развития в украине должно быть направлено на устранение дефектов в механизме функционирования национальной экономики, накопленных за годы независимости государства, и проведение системных реформ во всех сферах общественной жизни. при этом следует принимать во внимание отсутствие универсального примера антикризисной программы, которая будет безапелляционно соответствовать украинским реалиям; необходимость реализации непопулярных, но эффективных baltic journal of economic studies 85 vol. 3, no. 3, 2017 антикризисных мер; долгие сроки, необходимые для преодоления кризиса. в качестве выводов мы должны подчеркнуть, что украине в современных условиях необходимо решать двойную задачу. с одной стороны киев должен создавать мощный национальный экономический комплекс. в то же время этот процесс должен сопровождаться органической интеграцией национальной экономики в мировую и европейскую систему разделения труда. необходимо особо подчеркнуть, что эти вопросы должны решаться в экономической и социальной сфере, а не исходя из сиюминутной политической подоплеки. украина должна разработать и внедрить институционально-рыночную модель экономического восстановления на основе приоритета собственных национальных интересов. такой подход сможет способствовать эффективной реализации на практике антикризисной стратегии, и в результате поможет нашей стране занять достойное место в современном глобализированном мире. baltic journal of economic studies 118 vol. 8 no. 1, 2022 corresponding author: 1 vinnytsia national agrarian university, ukraine e-mail: np070101@gmail.com orcid: https://orcid.org/0000-0002-8779-5867 researcherid: m-1417-2018 2 educational and research center for foreign and international relations, cherkasy national university named after bohdan khmelnytsky, ukraine e-mail: old.vice2017@gmail.com orcid: https://orcid.org/0000-0002-6885-792x researcherid: abb-2754-2021 3 bohdan khmelnytsky national university of cherkasy, ukraine e-mail: ekaterinae@ukr.net orcid: https://orcid.org/0000-0003-4138-0313 doi: https://doi.org/10.30525/2256-0742/2022-8-1-118-125 organizational, methodological and economic imperatives of developing an innovation strategy of a region's sustainability on the basis of intellectual capacity building oksana pidvalna1, tamara kachala2, kateryna romashchenko3 abstract. the purpose of the paper is the research of organizational, methodological and economic imperatives of developing an innovation strategy of sustainability for a region on the basis of intellectual capacity building. methodology. methods of scientific analysis and synthesis, structural, factor, system and functional analysis, methods of economic and statistical analysis were used as main methods in this research. in addition, we used special methods of complex economic analysis: monographic method during the research on the specific features of intellectual capacity building, historical method during the research on principles and factors of a region's intellectual capacity building and development strategy, abstract and logical methods in defining modern requirements for the intellectual potential of a region, systematic and comprehensive methods in formulating a model of economic sustainability of intellectual capacity development in a region, structural objectives to develop the strategic mechanism of intellectual capacity development in a region. results. an innovation strategy of a region economic sustainability is proposed in this paper. the strategy is a scheme of achieving significant long-term competitive advantages and the main tool of a sustainable region development that creates a possibility for the efficient use of intellectual, productive, technological and market resources. structural interconnection of resource components of innovational capacity in the system of a region strategic sustainability support is analyzed. the research presents the algorithm of innovation strategy development in the system of a region strategic sustainability support. an integrated benchmark and indicator system that helps to choose a certain innovation strategy of region development is characterized. the mentioned criteria and indicators provide more rational and effective choice of innovative behavior. we proposed principal directions of investment in the intellectual capacity of a region and developed a scheme for evaluation and selection of investing alternatives for the intellectual capacity of a region. practical implications. the proposed organizational and economic tools allow implementing relevance and efficiency of intellectual capacity management in order to ensure its strategic sustainability. value/originality. the acquired results show a theoretical base of organizational, methodological and economic imperatives of developing an innovation strategy of region sustainability and the growth of the regional economics. key words: innovation, innovation strategy, intellectual capacity, sustainable development, investment, regional economic. jel classification: o18, o31, o34, r10 baltic journal of economic studies 119 vol. 8 no. 1, 2022 1. introduction the intellectual capacity is a basic premise for the development and implementation of specific innovations that provide competitive advantages and strategic sustainability of a region. the innovation plays the most important role in its economic life. an efficient innovation strategy of a region is the main mechanism of achieving significant long-term competitive advantages on the market by making new and improved products and/or implementing new and improved procedures, i.e., the main tool of sustainable development. in current context, the sustainability of a region in different business sectors is acquired by a means of operational use and commercialization in its economic activities of innovations that allow for strategic competitive advantages. therefore, an innovation strategy of region sustainability, based on the innovational and creative capacity building, is the main tool of its implementation. 2. the concept of "strategy" before covering conceptual frameworks for developing and implementing innovation strategy it is necessary to determine the meaning of the term "strategy ". key definitions of the concept are given in table 1. it must be noted that according to the definition of strategy it takes into account baseline processes of the region and its external environment and the possibilities of economic capacity building. strategic management decisions form the basis of strategy development and its practical implementation. these decisions are typically made by choosing qualitatively different variants from a discrete set accordingly. generally, strategic management decisions are focused on anticipated or predicted changes in the external environment and in the region itself and aimed on the extensive use of intellectual capacity and innovative technologies that are constantly evolving. during the process of making strategic decisions such basic systemic principles of the region must be taken into consideration as: innovative behavior – readiness for continuous improvement of technology, techniques and labor organization, product and market policy; flexibility and adaptability – rapid introduction of necessary changes depending on changing market conditions; economic efficiency, practicality and ability to implement strategies, as well as consistency with the resource capabilities of a region; accounting for internal priorities and strengthening the motivation of the region's staff, etc. it should be emphasized that concepts of a strategy and strategic decisions are intimately related to the concept of a region's capacity. every region has a certain production and economic capacity. it can be represented as overall resources at the disposal of a company that are essential to the use of region's internal capacity on solving its strategic problems. moreover, the resources are considered as basic for a region only if their types, level and structure couldn't be changed except by making and implementing appropriate strategic decisions. production and economic capacity of any region is not a constant. it has a tendency either to increase or to decrease. if a region intends to ensure its firm position in the market, it develops and implements a set of measures thus contributing to its efficient increase. in our view, the term the strategy of a sustainable region development refers to a set of organizational, productive, market, financial and economic measures that is aimed to achieve competitive advantages to provide its long-term and efficient functioning and development. as previously stated, the intellectual capacity is a basic premise for the development and implementation of specific innovations that provide competitive advantages and strategic sustainability of a region. table 1 key definitions of the concept of "strategy" definition source strategy is a set of rules for decision making to guide the behavior of an organization (ansoff, 1989) the term strategy refers to a specification of a development path based on the dynamics of the external environment with the help of long-term goals, securing resources for their achievement and planning forward-looking actions (yevenko, 1996) the term strategy refers to a dynamic system of interconnected rules and techniques that provide efficient and long-term development and support of competitive advantages on internal and external markets of the individual and common good (gradov, 2003) strategy is the managerial plan to enhance the organization’s position in the market, boost customer satisfaction and achieve performance targets (thompson, strickland, 1998) strategy is a long-term qualitatively defined direction of development related to the sphere of activity, means and forms of its activity, the system of relations within the region, as well as the region's position in the environment, which leads the region to its goals. (vikhansky, 1995) strategy is a qualitative consistency of operations and states used for achieving its goals (trenyov, 2000) baltic journal of economic studies 120 vol. 8 no. 1, 2022 generally, an innovation in business is an implemented idea that generates income and social benefit. for example, peter drucker views an innovation as a phenomenon of the demand context rather than a supply context. that is to say, it is changing the value obtained from resources by a customer (drucher, 1994). it should be noted that the term "innovation" can be applied to any novelties in productive, commercial, financial, scientific, research, marketing, management and other spheres, any changes and improvements that provide progress in the economic system on any level. from this point of view, innovations are the exact opposite of conservatism aimed to preserve the current state and are focused on a qualitative change and an improvement of economic activities. however, the state of the utilization of innovations and intellectual capacity in ukrainian economic system is far from satisfactory. in fact, the system undergoes the negative trends associated with an unprecedented loss of intellectual capacity. this proves that the innovational approach to ukrainian economic development should be strengthened on the governmental level, and the mechanisms of economic stimulus – on the micro levels, thus enhancing regional innovations. from this perspective, the transition to an economics that is based on the factor of knowledge implementation rather than on the export of raw materials and energy recourses is the main goal for ukraine. the development of such economic system will preserve the intellectual capacity and provide the possibility to take a favorable position in the world. 3. innovation strategy of a region's sustainability the key condition to strategic sustainability support of a region in a highly competitive environment is the constant improvement of innovation (and intellectual) capacity and its effective use. it is the innovation capacity that provides production of such quality and quantity that ensures its sustainability under the negative influence of external environment factors. subsequently, it means that the innovation capacity is primarily aimed on the adaptive capabilities of a system and the qualitative changes in it. thus, the increase of the capacity implies not only the quantitative increase, but also the ability to compensate the influence of the negative factors and to use innovations. it follows that the indicators of innovation production level, qualifications and motivation level of staff, flexibility of production technology, adaptive capacities to changes in the external environment or the strategic sustainability in relation to such changes should be taken into account in the structural composition of innovation capacity. the mentioned above criteria and equivalent parameters basically reflect the effective development of a region and its ability to implement its strategic objectives of economic development. it must be mentioned that ukrainian business structures are able neither to ensure the implementation of the existing innovation potential nor to formulate the efficient mechanism of its development. our analysis shows the need to consider the innovation capacity at the level of regions not only as the existing resources but also as the ability of their use in order to develop the economy and ensure the strategic sustainability. this type of capacity defines opportunities, the depth and efficiency of innovations depending on its quantity and quality. a structural and innovation capacity of a region can be represented as a set of such recourse components as intellectual, productive, technical, informational and marketplace recourses. the structural interconnection of the main innovation capacity components of a region are depicted in figure 2. it is worth mentioning that the resource component of the innovation capacity is the basics of its development. it comprises of the following components that have different functional aim: productive and technical, informational, intellectual and other types of recourses. therefore, the productive and technologic resources as a physical base define technical and technological capacity base that eventually will influence the expansion and pace of regional innovations. from this point of view, developing an innovation strategy of region sustainability on the basis of intellectual capacity building is a strategically important task. the innovation strategy of a region is in fact a complex set of measures aimed on the achievement of its objectives. a strategic plan as a forward-looking set of interconnected actions includes the objective of an efficient recourse use, the highest level of adaptation to the external environment, the flexibility of internal structure of a region. the plan describes its future plan, that is to say, it is based on the vision of the future in terms of management, the envisioning change of external environment parameters and status indicators of a region. the process of innovation strategy development in the system of strategic sustainability support in a region can be represented as the following algorithm depicted on figure 2. it is worth mentioning that innovation strategies for the systematic management area of its implementations should be reformulated into innovation goals that in qualitative terms could reflect following results of: creation of new products and materials, transition to new technologies, production of new services, transition to new resources or new priorities of any resource, new methods of production organization and the use of a new approach in a chain baltic journal of economic studies 121 vol. 8 no. 1, 2022 of the marketing mix, the implementation of a new logistic scheme or its element, development of new methods of income and new business model, transition to a new organizational structure, a new communications network, new elements of corporate culture, transition to a new management system and a new system of incentives (dovba, 2019). 4. the criteria and indicators for evaluating and selecting the concept of sustainable development of the region it should be noted that the choice of a specific innovation strategy is carried out subject to the internal and external conditions of the regional development based on a system of balanced criteria. in this context, the paper defines a comprehensive system of criteria and indicators that allow choosing a certain innovation strategy for the development of the region (table 2). these criteria and indicators allow us to ensure region more rational and effective choice of innovative behavior. for example, evaluating the intellectual resources of the region implies an analysis of the abilities of business entities located in the region to conduct r&d, as well as the possibilities of implementing the accumulated scientific and technical developments on the market. analysis of the intellectual potential involves: evaluating the effectiveness and use of existing scientific experience; identifying the ability to reproduce intellectual potential; finding out ways to transform existing opportunities into a product, promoting it to the market, or choosing the optimal path for technology transfer. assessment of the level of production and technological potential of the region provides for the analysis of existing mechanisms for the materialization of an idea or the assessment of technical bringing a scientific and technical idea to the stage of commercial implementation on the market in competitive conditions, and so on. as mentioned above, the formation of an innovation sustainability strategy of the region based on the development of intellectual potential is a strategically important task. it should be noted that the intellectual potential of the region has a powerful reserve of entrepreneurial activity, which acts as an innovation development vector of the modern region. that is, intellectual potential is a strategic factor, a creative resource, the development of which ensures stability and scientific and technological steadfastness of local development. in the conditions of fierce competition without a highly developed intellectual potential no region will be able to carry out its innovation development. intellectual potential, as the main competitive advantage of the region's development, forms the possibility of improving the technological production facilities and its products. this makes it possible to characterize marketability of an idea marketplace resource mechanism of innovation promotion on the basis of ic criteria and methodology of a strategic region sustainability evaluation strategic sustainability support of a region productive and technological resources intellectual resources m ec ha ni sm o f id ea im pl em en ta tio n information component of resourcing innovation capacity of a region figure 1. structural interconnection of resource components of innovational capacity in the system of a strategic regions sustainability support baltic journal of economic studies 122 vol. 8 no. 1, 2022 intellectual potential as a system of characteristics that determine the quality of the labor force of an individual, an aggregate employee of a company materialized in the process of carrying out labor activity on the basis of mechanisms of personalized material interest. from this point of view, it is obvious that the resource of knowledge and the ability of individuals in the form of intellectual potential are the only economic value of this object. thus, the intellectual potential in the process of dynamic development acquires new innovative properties, which are characterized by the presence and progressive development of intellectual property; the formation of a creative type of thinking of personnel, which forms and implements the main strategies for the development of a particular region. ultimately intellectual potential region gradually acquires its own original form of development, the integrated element of which is knowledge. intellectual and innovative capitals of the region are considered as the most important elements of strategic potential for creating its fundamental value. it follows that intellectual capital includes: intellectual capital of employees, human capital (as an integral amount of capital of employees 'personalities), structural capital (as a corporate created conditions for organizing employees' work), intellectual property (which must be legally fixed) and intangible assets. innovative production assets from this point of view will be such assets that, in combination with intangible assets, are used for the production implementation of the ideas put forward (as a result of a person's creative activity). regional mission potential threats, risks and opportunities of the region analysis of strategic alternatives assessment of the strategic stability of the region regional goals assessment and analysis of the environment choosing an alternative development strategy implementation of an innovation strategy figure 2. algorithm for forming an innovation strategy in the regional sustainability system table 2 comprehensive system of criteria and indicators for evaluating and selecting the concept of sustainable development of the region criteria key indicators strategic criteria compliance with the main development goals of the region; acceptable level of risk of implementing the innovation strategy of the region criteria for intellectual potential accumulated scientific and development developments, existing intangible assets, patentability of the idea; level of scientific and methodological support for the development of the region, professional personnel investment criteria cost of project implementation; estimate of cash flows; net present value; internal rate of return; budget and social efficiency, etc. innovative criteria sustainability of innovative development of the region; probability of scientific and technological success; availability and implementation of innovative developments, etc. production and technological criteria level of use of production capacity; technical and technological capabilities of the region's development; technological security of the region market criteria market volumes, assessment of consumers of intellectual products in the region; assessment of competing regions, assessment of the business reputation of the region, availability of service marks baltic journal of economic studies 123 vol. 8 no. 1, 2022 the information component (or potential) integrates all the relevant elements that form the fundamental value. the so-called communication assets act as an element of the information field and are considered as an element that manifests itself in internal and external communication activities, that is, in relationships of the region with the external environment. objective processes of accelerated information dissemination, as well as a noticeable synergistic effect from joint actions, increase the role of the management system, which is focused on the interests of all participants of the process both internally and externally. it is quite obvious that the main factor in supporting and developing intellectual capital of the region is the investment into the intellectual potential of the staff. however, issues related to the investments in the intellectual potential of the personnel and the estimate of their efficiency do not have an unambiguous assessment. therefore, it is advisable to consider the system of main directions of investment in intellectual potential proposed by us. investments into the intellectual potential of the personnel can be divided into direct and indirect investments of monetary resources (figure 3). while analyzing investments in the intellectual potential of the organization's personnel, we identified the following specific features and forms of its manifestation. first, it is quite difficult to determine the final result or return on investment in intellectual potential. secondly, the return on investment in intellectual potential is directly related to the life expectancy of a person, or rather his working age. third, in the process of disposal of investments, the intellectual potential of the organization's personnel is accumulated and developed. fourth, compared to the investments in other forms of funds placements, investments in intellectual potential bring a synergistic effect, which has prominent economic, innovative and social components. fifth, investments in the intellectual potential of the personnel have a fairly long payback period. 5. evaluation of the effectiveness of investments in intellectual capital one of the main problems of forming, ensuring and developing of the intellectual potential is to evaluate the effectiveness of investments or economic feasibility. in this regard, the paper offers a consistent scheme for evaluating and selecting alternative options for investing financial resources of the development of the intellectual potential of personnel (figure 4). in this paper, the intellectual potential of the region is considered as an internal resource, that ensures its competitive advantages and strategic stability. the intellectual potential of the region can be assessed by the following indicators: – share of the research & development (r&d) in total production costs; – share of intangible assets in the total value of major production assets; – share of innovative products in total sales; – the number of licenses, patents, inventions, trademarks, industrial samples, etc.; – the number of innovative offers for improving the production and technological activities of the region; – the number of annually implemented innovative activities provided for by the strategic planning system. the system of measures of the region for the development of intellectual potential in order to ensure strategic stability is characterized by such indicators as: development of the intellectual potential of the region direct investment: 1) investing in r&d; 2) investments related to training, advanced training, retraining, etc. 3) investments driven by career motivation; 4) investments related to knowledge transfer (outsourcing, acquisition of intellectual property objects). indirect investments: 1) investments in tangible assets, innovation and communication infrastructure; 2) investment in new information technologies; 3) investment of funds in the health and medical care of personnel. figure 3. key intellectual potential-focused investments baltic journal of economic studies 124 vol. 8 no. 1, 2022 main stages of economic evaluation of investments in intellectual potential (ip) establishment the economic feasibility of investing in ip: – calculation of economic feasibility of investments based on methods for evaluating investments projects. setting goals and selecting criteria for optimizing investments in ip: – determining the purpose of investments; – establishment of optimization criteria and investment performance indicators. identification of investment risks and limitations: – setting resource restrictions; – identification of risks and their assessment. organization of alternative investment options in ip formation of an organizational and methodological base for calculating the effectiveness of alternative investment options in ip calculation of indicators: commercial significance of intellectual assets (ia); profitability of ia; social significance of ia; growth of ia; payback comparative analysis of the assessment of alternative investment options in ip making a decision on selecting the most effective investment option in ip of the region figure 4. scheme for evaluating and selecting alternative options for investing financial resources in the development of the intellectual potential of the region – the level of costs for training, retraining and advanced training of personnel; – the level of costs for the purchase of scientific and technical literature, the use of advanced information technologies related to improving the knowledge level of personnel; – the level of costs for personnel participation in various exhibitions, conferences, symposia; – the level of costs associated with the study of world experience in the formation and development of intellectual potential, etc. it is to be noted that in order to ensure strategic sustainability, the region should form human resource management mechanisms that are generally focused on improvement and development of ip. in general, these mechanisms are an integrated system of staff management that is based on the following principles: – a staff orientation with the regard of objectives and missions of region development; – the effective functioning of intellectual capacity management system (cost to results ratio, the need for investment, the selection of evaluation criteria for work results of the stuff ); – the structural balancing of the stuff with the regard of certain types of activities and the social and psychological orientation of the stuff; – the development of intellectual capacity, creativity of the staff on the basis of formation and implementation of modern incentive mechanisms. 6. conclusions in this article we have modeled an innovation strategy of economic sustainability in a region as a scheme of achieving long-term and valuable competitive advantages and the main tool of sustainable development, described an integrated benchmark and indicator system of the sustainable development concept and an algorithm of evaluation and the selection of investing alternatives of financial resources for the intellectual capacity development in a region. we have reached the conclusion that the intellectual capacity development is a multidimen baltic journal of economic studies 125 vol. 8 no. 1, 2022 sional task and it requires to use adequate management tools and methods in a region. the proposed organizational and economic tools allow implementing relevance and efficiency of intellectual capacity management in order to ensure its strategic sustainability. references: ansoff, i. (1989). strategic management. moscow: economy. clark, j., huang, h. i., & walsh, j. (2010). a typology of "innovation districts": what it means for regional resilience. cambridge journal of regions, economy and society, vol. 3, рр. 121–137. dovba, i. v. (2019). regional dimension of innovative development: dis. ph.d: 08.00.05; uzhhorod national university. uzhhorod. drucher, p. f. (1994). the age of social transformation. the atlantic monthly. november. evenko, l. (1996). strategy in a joint stock company. journal for shareholders. gradiv, a. (2003). economic strategy of the firm. moscow: triad. semiv, l. k., & lutsyk, m. v. (2013). a role of intellectual resources in providing of innovative development of economy. contemporary economies in the face of new challenges-economic, social and legal aspects. thompson, a., & strickland, a. (1998). strategic management. moscow. trenev, i. (2000). strategic management. moscow: prior. baltic journal of economic studies 65 vol. 7 no. 3, 2021 doi: https://doi.org/10.30525/2256-0742/2021-7-3-65-72 information support of the labor market of ukraine and eastern europe: innovation aspects olena hryshko1 abstract. introduction. the processes of informatization of society, reform of state institutions and transformation of the economic system of ukraine identify new problems and set new challenges for regulating the labor market and employment on the basis of public-private partnership, including by bringing to all labor market actors relevant information from verified sources. given the signing of the association agreement with the european union, ukraine should take into account the experience of eastern european countries that have been in similar transition conditions and have shown significant progress, in particular in overcoming the problems and threats in the labor markets that they have encountered in the process of european integration. purpose and objectives. there is a necessity to justify the expediency of integration of information of subjects in the labor market of ukraine for the purpose of formation of uniform information support of the labor market that will promote legal productive employment of citizens. methodology. the article is based on international legal acts, laws and bylaws of ukraine in the field of employment and regulation of labor market processes in the context of the functioning of a single information environment, formed on the basis of public-private partnership. both general and special methods were used for the research: methods of analysis and synthesis, descriptive method, methods of induction and deduction. results. the article analyzes the regulation of the european labor market by integrating the capabilities of national public employment services, the implementation of equal opportunities in free labor mobility for european workers. the data and experience of the countries of eastern europe are given. the institutional and legislative aspects of the functioning of private mediation in the domestic labor market are considered and it is proved that in ukraine there is currently no regulatory influence of the state on the activities of private mediation in this market, and regulatory support in this area is imperfect. it is studied that information flows of private intermediaries, including job search and recruiting websites, operate independently of state intermediaries, and the public does not fully have up-to-date information on the state and needs of the domestic labor market. the article highlights the role of the government and the state employment service in the formation of information support of the labor market, compares the published data, provides relevant recommendations of the international labor organization and foreign experience. conclusions. the information published in ukraine by private labor market intermediaries needs full attention, as its connection with informal employment is not excluded. given the impact of globalization challenges on the functioning and development of the domestic labor market, it is proposed to standardize the activities of private labor market intermediaries, including job search and recruiting websites, by including their data on labor supply and demand in the domestic labor market. for ukraine, the experience of the european countries in cooperation between public and private intermediaries in the labor market, based on the creation of single information support of the labor market, including through joining the eures system, is relevant. key words: job search and recruiting website, state employment service, information support, labor market intermediaries, labor market. jel classification: j20, j22, j28, j60, j68 corresponding author: 1 ukrainian state employment service training institute, ukraine. e-mail: elenapetrovna222@gmail.com orcid: https://orcid.org/0000-0002-5711-897x 1. introduction nowadays, there are more and more appeals of job seekers for services to online labor market intermediaries who provide employment services. for employers who offer vacancies and seek to fill them as soon as possible, the services of such private labor market intermediaries save time on recruitment and maintenance costs of hr staff. it is generally accepted in the world that private labor market intermediaries help reduce unemployment and increase employment, baltic journal of economic studies 66 vol. 7 no. 3, 2021 as evidenced by the successful experience of the european countries. in ukraine, the services of private intermediaries are in demand, but their improper legal regulation, failure to ensure control over their activities results in the continued existence of informal labor relations in ukraine, violation of workers' rights in the course of their employment. job search and recruiting activities in this area remain poorly understood, and there is no information interaction between the public and private sectors. all this requires in-depth analysis of the experience of the european countries and search of new modern solutions to regulate the interaction of private mediation with the state to ensure the effective functioning and development of the labor market, regulation of relations between employers and employees, development of qualitative forecasts of economic development and related market changes, facilitation of the performance of educational services, promotion of productive employment, reduction of informal labor relations. 2. mechanisms for regulating labor markets based on public-private partnerships using information technology the questions of the functioning of the labor market, its functions and mechanisms of regulation, the implementation of employment policy in the direction of reducing unemployment and increasing employment have been studied in the works by prominent economists a. marshall, a. pigou, j. rubery and f. wilkinson, j. stiglitz, j. kornai, r . ehrenberg and r . smith. for our study, the conclusions of prominent american scientists – nobel laureates in economics g. akerlof, m. spence and j. stiglitz – are very important. they prove “the interdependence of economic crises with asymmetric information flows, lack of transparency of the information environment and the absence or inefficiency of institutions designed to address the regulation of this market because free movement of market resources is impossible without free movement of information” (akerlof, 1970). meanwhile, as the current state of the labor market of ukraine is characterized by an increasing imbalance between supply and demand of labor, excessive supply of educational services in their mismatch with quantitative and qualitative parameters of demand, reduced motivation of able-bodied people to productive legal employment within ukraine, excessive labor emigration, there is a position of f. schneider that “it is the policy of state regulation that makes it possible to neutralize the numerous destructive processes and undesirable deviations that periodically interrupt and distort the movement of the economic cycle” (schneider, 2012). domestic scientists define that the modernization of the labor market is not carried out effectively enough (irtyshcheva, 2020); they agree with foreign scientists that in modern conditions, the labor market regulation mechanism should combine elements of self-regulation with state influence on labor market and employment processes; they also prove that “it is inexpedient to be limited only to market self-regulators, the market mechanism alone cannot provide full, productive and freely chosen employment” (petrova, 1996). at the same time, it is noted that the mechanism of information support and communication of the state employment service should provide for the focus of information and communication resources on various subjects of employment: employers, employment intermediaries and other stakeholders (lutai, 2017). employment in europe is determined by an independent value that ensures not only material wellbeing but also social harmony of all the strata of the population in society. labor mobility in the european employment strategy is not only a fundamental right but also a tool to help the labor market adapt to constant and dynamic change. the european employment services has launched the eures portal as a tool to improve the regulation of the european labor market by integrating the capabilities of national public employment services, realizing equal opportunities in free labor mobility for european workers, eliminating language barriers, cultural differences, bureaucratic problems, differences in labor legislation and with the help of the recognition of educational certificates of other countries. using this portal, job seekers including migrant workers have the opportunity to obtain reliable information on vacancies from employers in the eu countries, as well as to compare their professional data to employment. in march 2021, eures brought together around 30 european countries, with 2.8 million job offers, 820,000 cvs, 5,000 cooperating employers and 1,000 euroconsultants from the public employment services of each member state or from eures partner organizations. at the same time, the base of vacancies from the czech republic, slovenia, and sweden is filled with job offers formed by the state employment services of these countries. other countries submit those vacancies to eures that have been identified by employers suitable for foreign applicants; in practical terms, this means that these are jobs with an international component. the portal provides communication with eures advisers, who provide advice to entities interested in entering the european labor market. in ukraine, the information component of the domestic labor market consisting of data from private agencies and job search websites and staff has long remained understudied. at the same time, the world community recognizes that “well-regulated and organized private employment agencies increase the workforce by creating additional jobs, promoting a variety of forms of employment, facilitating baltic journal of economic studies 67 vol. 7 no. 3, 2021 employment for people with disabilities, and reducing informal employment” (ghada, 2011). cooperation between public and private labor market intermediaries in many countries is based on “the creation of a single information support of the labor market through access to the database of vacancies and cvs of individuals” (abdusaidov, 2020). italian law provides for the accession of all public and private employment agencies to the national computer network. this network is used to summarize and exchange available information about the nature, demand and supply of labor to limit and eliminate services provided by the “gray market” (rymar, 2015). there are 10,273 employment agencies in france, which operate in all employment sectors and regulate the labor market at the regional and local levels. in 2019, they offered more than 21 million employment opportunities, 44% of which were temporary. since january 2005, employment agencies have been able to recruit staff on behalf of companies, posting information in a single system in partnership with the public employment service pôle emploi, afpa, and local authorities (prism'emploi – rapport économique et social, 2019). in ukraine, the legislative support of private intermediaries in the labor market is not harmonized with international law, there is no regulatory influence of the state on the activities of private mediation in this market, regulatory support in this area is incomplete and helps the autonomy of private labor market intermediaries and job search and recruiting websites. meanwhile, at the world economic forum in davos, head of the center for new economy and society s. zahidi in his report proposed to address the problems of excessive concentration in the market of online platforms including by improving the regulation of their activities (zahidi, 2019). the international labor organization holds the same point; the organization continues to focus on the growing global spread of “disguised” forms of labor relations (mandl, 2015), which are circulating on online platforms. the processes of informatization of society, reform of state institutions and transformation of the economic system of ukraine identify new problems and set new challenges for regulating the labor market and employment on the basis of public-private partnership, including by bringing to all labor market actors relevant information from verified sources. the formation of a single information environment of the labor market will create tools for public administration to achieve the most effective regulatory influence on processes and phenomena in the labor market. 3. analysis of information support of the labor market of eastern european countries european integration aspirations of ukraine stimulate the country to actively develop information society, “digitalize” the economy, adapt the labor market to globalization risks, informatize social and administrative services. domestic scientists predict threats to the opening of european labor markets for ukrainians and catastrophic consequences for the domestic economy; they propose measures to artificially limit, delay and deter certain european integration processes, draw analogies of “destructive” consequences of european integration for the baltic states and the warsaw pact connected with the market transformations, denationalization and privatization, introduction of efficiency systems and high standards for labor economy. the dynamics of unemployment in eastern european countries from 2010 to 2020 is presented in table 1. compared to the situation in the eu as a whole, there is a kinship in the chronology of changes in the represented countries of eastern europe. in the period from 2015 to 2018, slightly higher rates were observed in slovakia and latvia, but every year during this period they were also improved for poland, the czech republic, hungary, bulgaria, and romania. in 2019, all the countries assessed without exception reached the unemployment rate below the european union average. in 2020, economic factors were joined by circumstances such as the covid-19 pandemic. table 1 unemployment rate in eastern european countries from 2010 to 2020 from the economically active population country/year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 eu 9.9 10.8 11.4 10.8 10.0 9.1 8.1 7.2 6.7 7.0 bulgaria 11.3 12.3 13.0 11.4 9.2 7.6 6.2 5.2 4.2 5.1 estonia 12.3 10.0 8.6 7.4 6.2 6.8 5.8 5.4 4.4 6.8 latvia 16.2 15.0 11.9 10.8 9.9 9.6 8.7 7.4 6.3 8.1 lithuania 15.4 13.4 11.8 10.7 9.1 7.9 7.1 6.2 6.3 8.5 poland 9.7 10.1 10.3 9.0 7.5 6.2 4.9 3.9 3.3 3.2 romania 7.2 6.8 7.1 6.8 6.8 5.9 4.9 4.2 3.9 5.0 slovakia 13.6 14.0 14.2 13.2 11.5 9.7 8.1 6.5 5.8 6.7 hungary 11.0 11.0 10.2 7.7 6.8 5.1 4.2 3.7 3.4 4.3 czech republic 6.7 7.0 7.0 6.1 5.1 4.0 2.9 2.2 2.0 2.6 baltic journal of economic studies 68 vol. 7 no. 3, 2021 currently, it is difficult to assess and predict their influence. at the end of 2020, the unemployment rate in ukraine was 9.5%. the lowest unemployment rate in the european union as of 2021 is shown by the czech republic (2.6%), poland, germany (3.2%), hungary (4.3%), which is on par with more successful countries such as the netherlands and norway. it should be noted that in the european countries this is facilitated by measures of active state regulation of the labor market and migration policy processes. given the signing of the association agreement with the european union, ukraine should take into account the experience of eastern european countries that have been in similar transition conditions and have shown significant progress, in particular in overcoming the problems and threats in the labor markets that they have encountered in the process of european integration. if we summarize them, we systematize the main priority response mechanisms of the ukrainian labor market to the challenges of globalization: – keeping an open and legalized labor market; – implementation of accessible, targeted and operational adult education programs; – stimulating the remigration of domestic specialists from abroad, the systematic and controlled involvement of foreign specialists; – taking measures to reduce the share of shadow employment, in particular by regulating the activities of job search and recruiting websites. ukraine should realize the possibility of joining the employment service to the eures system, and in particular to its local opportunities, the creation of eures cross-border partnerships, as eures plays a particularly important role in border crossings – more than 1 million people live in one eu country and work in another. eures cross-border partnerships are groups of members and partners of eures and, where appropriate, other stakeholders outside the eures network. the groups are involved in long-term cross-border cooperation to support the mobility of employees working abroad and their employers. they typically include regional or local employment services, the social partners, and other organizations, such as chambers of commerce, educational and training establishments, local governments from at least two neighboring member states. such agreements existed and operated during the times of active economic transformations between poland and germany. for ukraine, these may be agreements with poland, hungary, slovakia, and other countries. such agreements will be based on mutual benefit and trust on both sides. the information exchange on vacancies and applicants should be set up through the state employment service of ukraine, which is able to verify the employer and job seeker, working conditions and compliance with these requirements of applicants on site, as well as to some extent control the labor service of foreigners. on the other hand, providing information on the most popular and well-paid vacancies in ukraine to the employment services of other countries will create additional opportunities for the return of migrant workers. 4. analysis of information support of the labor market in ukraine in ukraine, private labor intermediaries in the labor market have always acted autonomously from state institutions, “there was fierce competition between the participants, there was no motivation to cooperate, as well as to unite efforts to improve the situation in the labor market and employment in general” (marchenko, 2013). the same situation remains to this day. convention no. 181 of the international labor organization (ilo) of 1997 recognizes that private employment agencies can play a positive role in the labor market, especially in the context of changing forms of employment in adapting the labor market to the needs of the time. a special section of recommendations no. 188, provides for cooperation between them, including through the creation of joint bodies whose activities are aimed at forming a coordinated policy in the labor market, and among the possible forms of cooperation, there are the exchange of information and use of common terminology, organization of joint projects in the field of training and integration of the unemployed into the labor market (ilo recommendation, 1997). to normalize mediation activities in the domestic labor market, the law of ukraine “on employment of population” dated 2012 defines the concept of an entity that provides services to mediation in employment, allows to form unions (associations), which have the right to submit proposals for the formation and implementation of state policy in the field of employment. among the main directions of state policy in the field of employment, legislation determines coordination and control of business entities that provide services with mediation in employment, their cooperation with the state employment service, which faces the task of formation of a database of vacancies (positions) on the basis of information received from employers and business entities that provide services with mediation in employment and public authorities; maintaining a list of business entities that provide employment mediation services. it should be noted that to date, a single database on job vacancies involving the public and private sectors is not being formed. the organization of interaction of private intermediaries with the state employment service is currently maintained in such a way that business entity submits an application in the appropriate form that is the basis for entering data into list of business entities that employment mediation services, and those baltic journal of economic studies 69 vol. 7 no. 3, 2021 that hire employees for further work in ukraine with other employers. the list is published on the official website of the state employment service. in particular, the following information on the service provider is given: name; type of economic activity, in particular: activity of employment agencies, activity of temporary employment agencies or other activity on provision of labor resources; location; last name and first name of the head; phone number; the number of the permit or license is given if the subject simultaneously provides services for mediation in employment abroad. in general, such published data are uninformative for users, as the entity is not informed about the results of its activities, in particular, such as the number of employed citizens, the number of vacancies operated by the intermediary, the number of employers with whom recruitment agreements are concluded, employment efficiency rating, service user feedback, etc. the legislation of ukraine stipulates that all business entities that provide employment mediation services quarterly inform the state employment service with a report on the form no.1-па “information on the number of employed citizens by business entities that provide employment mediation services” (table 2). in ukraine, there are about 90 virtual internet intermediaries in the form of job search and recruiting websites, the activities of which are currently not regulated by law, except the other employment intermediaries. they can be conditionally divided into groups: private websites and their regional or local pages, job aggregators, specialized industry resources, bulletin boards, subsites, etc. their functionality includes the provision of services for simplified registration: automatic selection of job offers and employers resumes; filtering and sorting data by date of publication, level of wages, type of employment, etc. it is studied that on the pages of these websites there is provided no information on the entity on whose behalf employment mediation services are provided, thus the registration of such websites is carried out without verification of registration data of the entity according to two open registers: 1) the unified state register of legal entities, individual entrepreneurs and public organizations and 2) list of business entities that provide employment mediation services and business entities that hire employees for further work in ukraine with other employers. data on the registered quantitative indicators on the demand for employees of the state employment service and the most rated job search and recruiting websites (work.ua, robota.ua, grc. ua, jobs.ua) in ukraine are presented in figure 1. in 2019, the state employment service registered 1.2 million vacancies from employers, while on one of the job search and recruiting websites (robota.ua), employers announced 0.7 million vacancies. in particular, on such websites, the employer is not limited to the number of vacancies registered, it is possible to register the same vacancy in several sections of the same site, or on different websites of the relevant specialization. at the same time, ilo recommendation no.188 stipulates that the competent authority must combat deceptive advertising practices and false advertising, including fake job ads. currently in ukraine, no public body is authorized to exercise such control. on the other hand, job search and recruiting websites do not exercise control over the prompt removal of the vacancy in the event of its staffing, which creates infoglud for users. 5. problems and prospects for development of information support of the labor market in ukraine bylaws in ukraine do not provide for the submission of private labor market intermediaries, including job search and recruiting websites, to the state employment service, information about the vacancies received from employers, they are not involved in the formation of table 2 number of domestic business entities that provided employment services in 2015-2020 year number of entities that provided employment services, units* of which provide employment in ukraine include employees hired for further work in ukraine with other employers provide employment abroad а 1 2 3 4 2015 549 169 90 322 2016 597 170 118 359 2017 742 214 155 427 2018 984 318 238 511 2019 ** 1 153 287 464 508 2020 1 225 325 544 468 * column 1 is not the sum of columns 2, 3, 4, due to the fact that some entities provide several types of services simultaneously. ** in 2019, a new form and procedure for its provision on a quarterly basis starting from the report for the third quarter was approved by the order of the ministry of social policy of ukraine no. 851 dated june 3, 2019 source: compiled by the author according to the state employment service baltic journal of economic studies 70 vol. 7 no. 3, 2021 a single information environment in the domestic labor market. at the same time, it is possible to include the data of private labor market intermediaries to the information support of the labor market only if the introduction and use of a single methodology for collecting and processing such data are based on the following elements. information about vacancies on private websites is not always in the legal field due to the significant amount of shadow employment in the country and the intentions of employers to have informal relationships with employees. private job search and recruiting websites are best suited for this, as the existing rules are the responsibility for the information about the vacancy by the entity that released it. the latter can directly affect the size of shadow employment and the presence of informal labor relations in the domestic labor market for a long time. given the limited number of job offers in the labor market in the legal sector of the economy, and in the absence of information about the full labor market, job seekers are in most cases forced to accept the informal job offers. according to the state statistics service of ukraine, the number of informally employed people in ukraine is over 3 million people (state statistics service of ukraine: in 2020 – 3.2 million people, in 2019 and 2018 – 3.5 million people, in 2017 – 3.7 million people). such data are crucial due to the fact that informally employed citizens not only work in the informal sector of the economy, but also periodically look for work, and therefore, in our opinion, such citizens find work in the labor market mainly through the private job search and recruiting websites. for example, in 2019, 1.4 million people posted their resumes on only one of the private job search and recruiting websites. since a significant part of job seekers and job offers are outside the registered labor market, it increases the scale of its asymmetry, affects the exacerbation of occupational imbalances. in addition, this condition gives rise to a restriction of competition, loss of social labor, inefficient use of material and human resources, conservation of the level of development of productive forces, low mobility of labor, its outflow abroad, etc. despite the fact that the law of ukraine “on employment of population” provides the public and private sectors with equal rights in the formation of state employment policy and defines their obligatory interaction, in practice, this rule does not work. in particular, the state employment service is obliged to form a database of vacancies (positions) on the basis of information received from business entities that provide employment mediation services, however, this is not regulated by bylaws and therefore there are no ways and forms of submission by private labor market intermediaries of information about vacancies received from employers. at the same time for various reasons, private labor market intermediaries are not interested in cooperating with the state employment service as streamlining this component of information support for labor market regulation is complicated by largescale shadow employment in ukraine; this situation indirectly satisfies the private sector. the ilo project survey revealed only a small number of agencies (7% of respondents) that stated their intention to cooperate with the state employment service, in particular by gaining access to a database of candidates, figure 1. number of vacancies according to the state employment service and job search and recruiting websites in the period, thousand units source: source: compiled by the author according to the data of state employment service and the websites mentioned 0,0 20,0 40,0 60,0 80,0 100,0 120,0 140,0 december 2019 may 2020 june 2020 state employment service work.ua rabota.ua grc.ua (hh) jobs.ua baltic journal of economic studies 71 vol. 7 no. 3, 2021 conducting training with the unemployed persons, implementing staff exchange programs (vakhitova, 2013). digitalization of all economic processes in ukraine is inevitable. currently, the ministry of digital transformation of ukraine is working on a set of issues that bring social support and social protection of citizens closer through the digitalization of social services (sylenko, 2020). at the same time, full functioning and development of the domestic labor market are impossible without legislative changes, in particular regarding the formation of single information support of the labor market on the basis of integration of information of public and private labor market intermediaries. it is proved that the transformation of economic processes includes the improvement of legislation and the legal system, it is “the most effective source of long-term economic growth and effectiveness of socio-economic policy” (stroiko, 2021). 6. conclusions european integration aspirations determine ukraine to develop and implement programs aimed at improving information society, including ensuring free access to global networks for further use of the received information in administrative management, education, health care, employment, and the labor market. given the successful practices of eastern european countries, ukraine should introduce legislative regulation of the activity of private labor market intermediaries, job search and recruiting websites, digital platforms, and establish mutually beneficial information interaction of public and private mediation in this market in ukraine. then, after organizational, normative, and technical streamlining the information support of the labor market, it is necessary to connect data to the eures system, including through the creation of the eures cross-border partnerships. the prospect for further research will be aimed at developing a model of innovation of information support of labor market regulation, which takes into account the solution of problems and consequences of the current state of the labor market of ukraine, in particular by introducing job seekers and job offers within the registered labor market with the exercise of further control over the registration of labor relations 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zrostannia [communication from commission europe 2020 – a strategy for smart, sustainable and inclusive growth]. yevropeiska komisiia. briussel, 2010. ievrostat. indykatory yevropy 2020. yevropeiska sluzhba statystyky [eurostat. europe 2020 indicators. european statistical office]. available at: http://ec.europa.eu/eurostat baltic journal of economic studies 184 vol. 7 no. 5, 2021 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: roman.rusin@nuos.edu.ua orcid: https://orcid.org/0000-0002-3450-0367 2 admiral makarov national university of shipbuilding, ukraine. e-mail: dubinskiy_oleg@ukr.net 3 national university "odesa law academy ", ukraine. e-mail: roman2012h@gmail.com orcid: https://orcid.org/0000-0003-0378-8377 doi: https://doi.org/10.30525/2256-0742/2021-7-5-184-191 implementation of international anti-corruption standards in the economic space roman rusin1, oleg dubinskiy2, roman kharytonov3 abstract. corruption as an anti-social phenomenon was initially considered in the moral, social and legal dimension. it was not until the 1970s that corruption began to be studied as an economic category and became a subject of systemic economic analysis. it should be emphasized that in legal practice, corruption is most often interpreted as a socially dangerous illegal phenomenon, which is a consequence of blackmail, bribery, venality of officials that use their authority for personal enrichment, disregarding the interests of other members of society. therefore, corruption is usually seen as a type of offense and criminal actions of officials in contradiction to the interests of the state and its citizens. and anti-corruption measures are associated with the improvement of the current legislation in terms of ensuring the inevitability of responsibility for corruption and corruption-related offenses. at the same time, given that corruption is inseparable from the shadow economy, it is necessary to study these two phenomena as a single system and consider anti-corruption policy as a key component of the fight against the shadow economy. despite this, the budgets of eu countries lose a certain amount each year from corruption schemes in the economic sphere. the aim of the article is to study the theoretical and institutional foundations of anti-corruption policy as a component of the fight against shadow economy to update the powers of relevant authorities in terms of their implementation in international anti-corruption standards in the economic space. in ukraine, anti-corruption policy is implemented in the context of the creation of an institutional system to prevent and combat corruption, which includes specialized organizations, legislation, the formation of special mechanisms to prevent and combat corruption, etc. at present, the following bodies have already been established and are functioning in ukraine: national agency on corruption prevention (nacp), national anti-corruption bureau of ukraine (nabu), specialized anti-corruption prosecutor's office (sapo), asset recovery and management agency, high anti-corruption court of ukraine, and some tasks in the field of combating corruption are performed by the prosecutor's office and the national police of ukraine. the state financial monitoring service of ukraine collects, analyzes and publishes information on suspected cases of withdrawal of funds of possible criminal origin. the results of the conducted research indicate that most of the goals set by the anti-corruption strategy for 2014–2017 were not achieved in the previous years. consequently, measures should continue to be taken both to increase the effectiveness of institutional mechanisms for preventing and countering corruption and to eliminate corruption risks in different sectors (primarily those where there is a high experience of corruption and/or the worst perception of corruption of the institutions involved). the implementation of international standards contributed both to the development of the system of prevention and counteraction to corruption (including specialized institutions) and to the reduction of corruption in some sectors by eliminating corruption risks, which were systemic and structural in nature. further implementation of these commitments and intentions will have a positive impact on reducing corruption and demonstrates the political will at all levels to achieve tangible results of implementing anti-corruption policies. key words: corruption, anti-corruption policy, international standards, anti-corruption bodies, implementation of legislation, anti-corruption strategy. jel classification: k19, k40, o19, f15, f42, r59 baltic journal of economic studies 185 vol. 7 no. 5, 2021 introduction corruption as an anti-social phenomenon was initially considered in the moral, social and legal dimension. it was not until the 1970s that corruption began to be studied as an economic category and became a subject of systemic economic analysis. it should be emphasized that in legal practice, corruption is most often interpreted as a socially dangerous illegal phenomenon, which is a consequence of blackmail, bribery, venality of officials that use their authority for personal enrichment, disregarding the interests of other members of society. therefore, corruption is usually seen as a type of offense and criminal actions of officials in contradiction to the interests of the state and its citizens. and anti-corruption measures are associated with the improvement of the current legislation in terms of ensuring the inevitability of responsibility for corruption and corruption-related offenses. at the same time, given that corruption is inseparable from the shadow economy, it is necessary to study these two phenomena as a single system and consider anticorruption policy as a key component of the fight against the shadow economy. un general assembly resolution no. 70/1, "transforming our world: the 2030 agenda for sustainable development," adopted by the general assembly on september 25, 2015, defined goal 16 – promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels (un, 2015). at the same time, the relevance of the phenomenon of corruption due to the growing diversity of its manifestations at the present stage of formation and development of the economic and political system of ukraine, which affects all areas of society. the world community, in particular the eu, has a well-developed system of state regulation, which many countries are guided by. despite this, the budgets of eu countries lose a certain amount each year from corruption schemes in the economic sphere. hessami (2014) used empirical data to study advanced economies, looked at 29 countries, and found a link between political corruption and government spending patterns. in his study, he argued that corruption in the public distribution of income occurs not only in developing countries, but also in highly developed countries. vukovych (2019) investigated the relationship between corrupt procurements and mayoral elections using croatian cities as examples and proved a hypothetical nonlinear relationship between corruption and re-election. szucs (2017) et al. analyzed policy reforms and in his work focused on alternative methods of state regulation based on thresholds. he analyzed the reforms and examined the results of their impact on national production. kováčiková h. (2019), examined conflicts of interest that arise during reforms and proposed a system of "red flags" that would indicate conflicts of interest, which should help to overcome corruption, massive violations and fraud in the process of anti-corruption policy making. the development of a system of indicators to monitor the adjustment process in order to prevent violations is an urgent problem in ukraine and could be the source of a separate study in the future. babitsa (2019) explored the shortcomings and prospects for innovation in public procurement and sees it as a tool to promote sustainable development in latvia. it should be emphasized that the phenomenon of corruption in the system of public administration, the current content and methodological principles of the study of the problem of formation of the basis of anti-corruption policy has not been systematically the subject of research in public administration. at the state level, laws, concepts and programs to prevent and combat corruption are constantly being adopted and a specific institutional model of public administration is being developed to combat corruption. in ukraine, at the level of legal regulation of combating and preventing corruption and related negative phenomena has been done a lot, in particular: the law of ukraine "on prevention of corruption" was adopted; the criminal code of ukraine and the code of ukraine on administrative offences were amended accordingly; norms aimed at preventing and combating corruption and neutralizing corruption-related offenses were introduced in a number of other normative and legal acts. however, the legal regulation of anticorruption activities cannot be considered perfect, this also applies to the legislation on criminal liability. the aim of the article is to study the theoretical and institutional foundations of anti-corruption policy as a component of the fight against shadow economy to update the powers of relevant authorities in terms of their implementation in international anti-corruption standards in the economic space. 1. research methodology 1.1. main aspects of adapting ukrainian legislation to international standards corruption, depending on the sphere in which it occurs and who abuses his or her official position, is divided into domestic, political, and business corruption. depending on the degree of regularity, corruption is divided into episodic and systematic. corruption is often referred to as kleptocracy when it becomes an integral component of social relations, where major government decisions are made in favor baltic journal of economic studies 186 vol. 7 no. 5, 2021 of a narrow circle of individuals for their personal enrichment against the interests of society. international documents pay special attention to the issues of prevention (prevention and avoidance) of corruption, rather than taking measures to combat corruption after the fact. therefore, it is very important to use modern experience and best practices of countries that have policies to identify the causes of the shadow economy and economic (financial) offenses. in particular, the united nations convention against corruption (uncac), adopted by the un general assembly on 31 october 2003, provides an internationally agreed understanding of corruption, its nature, and measures to counter it. the convention acknowledges that corruption undermines development, weakens democracy, the fight against organized crime, terrorism and other threats to common security. the purpose of the un convention against corruption is to promote anti-corruption cooperation at the international level (world economic forum, 2020). article 1 defines the goals of the convention to include the necessity of: a) promoting the adoption and strengthening of measures aimed at preventing and combating corruption in the most effective and efficient way; b) promoting, facilitating and supporting international cooperation and technical assistance in preventing and combating corruption, in particular in asset recovery; c) promoting honesty, responsibility, and proper management of public affairs and public property. the united nations convention against corruption was ratified in ukraine by law no. 251-v of 18.10.2006. "on ratification of the united nations convention against corruption" and entered into force on january 1, 2010. in many developed countries, anti-corruption policies are seen as part of the fight against shadow economic relations and are embedded in economic policy. specifically, france adopted the law on transparency, fight against corruption and modernization of the economy in 2016, and the uk passed the criminal finance act in 2017, giving english public authorities new tools in the fight against money laundering, corruption, tax evasion, and terrorist financing. the law introduces the concept of "wealth of unexplained origin," which can be excluded if the beneficiary does not explain the sources of his income. the law also regulates relations in the sphere of criminal liability of legal entities registered in great britain for nonpayment of generally binding taxes in other countries (patskan, 2021). rational approaches to the prevention of corruption have been developed in denmark. in the global competitiveness index 2019 (world economic forum, 2020), denmark was ranked first among the countries with the lowest level of corruption. moreover, denmark, norway, finland, new zealand, sweden, switzerland, singapore, canada, and germany are consistently among the countries with the least level of corruption (patskan, 2021). in ukraine anti-corruption policy is implemented in the direction of development of institutional system of prevention and counteraction to corruption, including specialized bodies, legislation, formation of special mechanisms for prevention and counteraction to corruption, etc. at present, the following bodies have already been established and are functioning in ukraine: national agency on corruption prevention (nacp), national anti-corruption bureau of ukraine (nabu), specialized anti-corruption prosecutor's office (sapo), asset recovery and management agency, high anti-corruption court of ukraine, and some tasks in the field of combating corruption are performed by the prosecutor's office and the national police of ukraine. the state financial monitoring service of ukraine collects, analyzes and publishes information on suspected cases of withdrawal of funds of possible criminal origin (stril'tsiv, cherniavs'kyj, fodchuk, 2020; nacp, 2020). 2. results and discussion 2.1. analysis of the results of the previous anti-corruption strategy (2014–2017) corruption is a widespread phenomenon in ukraine. a world bank survey of ukrainian entrepreneurs in 2019 showed that 74% of respondents consider corruption to be the biggest obstacle and a significant constraint on the business environment in ukraine (the world bank group, 2020). at the same time, the results of sociological research have shown that the share of citizens with direct experience of corruption has significantly decreased in recent years (if in 2013 about 60% of citizens had such experience, at the beginning of 2020 – no more than 40% of citizens) (nacp, 2020). according to the study "ukraine’s fight against corruption: the economic front" conducted in 2018, the already implemented anticorruption measures in certain areas (changes in the gas market, in public procurement, deregulation, the introduction of automatic refund of value added tax) have an annual economic effect of 150-160 billion uah (transparency international ukraine, 2020). according to the corruption perception index, which is defined by the international organization transparency international, in 2020 ukraine took 117th place among 180 countries (nacp, 2020; "strategic analysis of corruption risks"). thus, according to the results of a survey conducted by the global corruption barometer for the countries of europe and central asia, 64% of respondents from ukraine in 2016 considered all or most members baltic journal of economic studies 187 vol. 7 no. 5, 2021 of parliament to be corrupt. the worst figure in this survey was recorded only in moldova (76%). according to the results of a study conducted in 2020, it was found that the most corrupt institutions/ spheres from the point of view of the population are (corruption in ukraine, 2020): – customshouse (4.5 out of 5 points); – сourts (4,43); – verkhovna rada of ukraine (4,37); – public prosecutor's office (4,33); – medicine (4,32); – police, except for patrol police (4,08). businesses and experts consider the following areas to be the most corrupt (corruption in ukraine, 2020): – land matters (4.01 and 4.28, respectively); – city building (3,98 та 4,22); – construction of major infrastructure facilities (4,07 та 3,99); – eenergetics (3,38 та 3,74); – enterprise privatization (4,04 та 3,63); – public procurement (3,78 та 3,37). conclusions about the state of corruption can be drawn from statistical information about the prosecution of persons for corruption and corruptionrelated offenses. the previous anti-corruption strategy (for 2014–2017) and the state program for its implementation were high-quality policy documents with high anti-corruption potential. however, it was not possible to fully realize this potential, primarily because of the long process of creating anti-corruption institutions, which took place during 2014–2019. due to the fact that these policy documents have never been revised or updated since 2016, their provisions have gradually lost their relevance. at the end of 2017, the anti-corruption strategy period for 2014–2017 ended. a new anticorruption strategy was not adopted. this led to unbalanced and ineffective anti-corruption activities of public institutions (stril'tsiv, cherniavs'kyj, fodchuk, 2020). among the measures stipulated by the previous anti-corruption strategy and the state program for its implementation, measures on, in particular, the following have not yet been implemented: – conducting annual surveys of the state of corruption; – preparing and ensuring the adoption of an anticorruption strategy; – introduction of legal regulation of lobbying; – the enactment of a law on integrity checks of public servants; – adoption of laws on public consultations, administrative fees, and administrative procedure; – adoption of a new version of the law on service in local government; – increasing the transparency of the verkhovna rada of ukraine and its committees; – introduction of a mechanism for monitoring compliance with restrictions after the termination of activities related to the performance of state or local government functions; – methodological support for the development of industry codes of ethics; – analysis of judges' compliance with anti-corruption legislation and analysis of the main corruption risks in court proceedings; – consideration of proposals to introduce an electronic system for testing public servants' knowledge of anticorruption legislation; – improvement of the institution of authorized units (individuals) for the prevention and detection of corruption; – analysis of the practice of application of the criminal code of ukraine and the criminal procedure code of ukraine, improvement of legislation based on the results of the analysis, preparation of methodological materials; – identification of corruption factors in the application of the criminal code of ukraine and the criminal procedure code of ukraine, improvement of legislation to eliminate them. the results of the research show that in previous years, most of the goals defined by the anti corruption strategy for 2014–2017 were not achieved (nacp, 2020; "principles of state anti-corruption policy in ukraine; corruption in ukraine: perception, experience, attitude: analysis of nationwide surveys 2015–2018). among the main indicators of the success of the previous anti-corruption strategy is quite rightly the level of implementation of international anti corruption standards, determined by the level of implementation of international recommendations and obligations, the degree of compliance with the standards of international initiatives (initiatives on transparency in the extractive industries, the construction sector, the open budget index, etc.), as well as the value of the corruption perception index (transparency international ukraine, 2020). 2.2. state of implementation of international obligations of ukraine in the sphere of formation and realization of anti-corruption policy according to the anti-corruption strategy for 2014–2017, the level of implementation of international standards is determined by a number of indicators, including the state of implementation of recommendations for ukraine provided by the group of states against corruption (hereinafter – greco), as well as recommendations provided within the monitoring of the istanbul action plan on fighting corruption of the anti-corruption network for baltic journal of economic studies 188 vol. 7 no. 5, 2021 eastern europe and central asia of the organization for economic cooperation and development (hereinafter – oecd), implementation of the action plan for liberalization of the visa regime with the european union with regard to preventing and combating corruption and the action plan of the open government partnership initiative (third report, 2020). at the same time, it should be noted that in the previous cycle of anti-corruption policy, the role of ukraine's commitments and intentions on anticorruption issues in cooperation with the international monetary fund and the european union increased significantly. as for the un convention against corruption and the council of europe criminal convention against corruption ratified by ukraine, which oblige state parties to criminalize acts of corruption, it should be noted that ukraine generally adheres to these obligations. at the same time, there is a need to improve certain provisions of the legislation, in particular with regard to criminal liability for abuse of influence and abuse of official position or power, criminalization of certain acts of obstruction of justice, revision of established sanctions for acts defined in these international treaties, improvement of norms on the application of criminal law measures for corrupt acts against legal entities, clarification of certain provisions on the application of special confiscation, revision of statutes of limitations, etc. (kalitenko, kalmykov, koliushko, 2019). during the previous anti-corruption policy cycle, ukraine continued to implement the recommendations of the istanbul anti-corruption action plan, which is evaluated for compliance by the oecd anti-corruption network for eastern europe and central asia (istanbul anti-corruption action plan, 2015). also ukraine continues to implement international standards through the fulfillment of greco recommendations. since 2014, two reports on the status of implementation of recommendations from the general i and ii evaluation rounds have been approved; three reports on the status of implementation of recommendations from the iii evaluation round, as well as the first report on the implementation of recommendations provided within the iv evaluation round (anti-corruption reforms in ukraine, 2017). within the framework of the general i and ii rounds of assessment, ukraine was given 25 recommendations (association implementation report on ukraine, 2017). the last report on the implementation of the recommendations of this general round shows partial fulfillment of the 4 recommendations on: 1) creation of a separate body without law enforcement functions to supervise the implementation of anticorruption policy with representation of authorities and the public, with a sufficient level of independence; 2) improvement of legislation on the management of seized assets; 3) establishment of legal regulation of administrative procedures, decision-making procedures and the hierarchy of various normative legal acts on the activities of public administration; 4) measures to reform the public administration. in addition, this report states the fact of nonimplementation of the recommendation to introduce an external independent audit of the activities of local self-government bodies, which is based on the same principles of independence, transparency and control that apply to the accounting chamber. round iii of the assessment dealt with two topics – criminalization of corrupt acts and transparency of political party financing. one recommendation on criminalization of acts (regarding the need to expand the subjects that can be held liable for bribery in the private sector) remained partially implemented from this round. the rest of the recommendations on this aspect have been implemented satisfactorily. of the recommendations on transparency of party financing, the following were partially implemented as of 2017 (association implementation report on ukraine, 2019): – the need to harmonize the provisions of electoral legislation on the financing of election campaigns; – eliminating opportunities to avoid meeting the legal requirements for transparency of political party funding through indirect funding; – introduction of effective and coordinated monitoring of party and campaign financing; – improvement of the provisions of the legislation on liability for violation of the established requirements. according to the letter of intent and the added memorandum of economic and financial policy on the new 18-month international monetary fund stand-by program for ukraine, which was signed by the president of ukraine, the prime minister of ukraine, the minister of finance of ukraine and the chairman of the national bank of ukraine on behalf of ukraine on june 2, 2020, ukraine has undertaken such basic obligations in preventing and combating corruption (kalitenko, kalmykov, koliushko, 2019): 1) ensuring support of institutional and operational independence of the national anti-corruption bureau of ukraine (including preservation of jurisdiction of the national anti-corruption bureau of ukraine; ensuring the possibility of autonomous withdrawal of information from transport telecommunication networks; preservation of limited grounds for termination of powers or dismissal of the director of the national anti-corruption bureau of ukraine; conducting an audit of the national anti-corruption bureau of ukraine by respected experts with considerable foreign experience in anti-corruption issues); baltic journal of economic studies 189 vol. 7 no. 5, 2021 2) ensuring the autonomy of the specialized anticorruption prosecutor's office, improving the procedures for selecting its officials, introducing an audit of the specialized anti-corruption prosecutor's office, which should be conducted by respected experts with significant foreign experience in anti-corruption issues; 3) ensuring the proper functioning of the supreme anti-corruption court, including the provision of permanent facilities for it; 4) amending legislation to ensure that the selection processes for members of the supreme council of justice have an impeccable reputation. for this purpose, an independent commission should be established to vet potential candidates and assess their integrity. the same commission should conduct a onetime review of the current members of the supreme council of justice. at least half of the members of this commission should be experts with recognized ethical standards and judicial experience, including experience in other countries. such members should be given a defining role in the commission; 5) amending legislation to create a permanent unit of inspectors in the high council of justice to conduct disciplinary proceedings against judges and to make recommendations to members of the high council of justice on the imposition of disciplinary sanctions against judges; 6) amending legislation to transfer trial of exemplary administrative cases to the supreme court as a trial court and the grand chamber of the supreme court as an appellate court; 7) monitoring the implementation of legislation on illicit enrichment; 8) improvement of information on ultimate beneficial owners, which is contained in the state register (ukraine, 2020). it should be noted that both the last and previous memoranda reflected intentions for broader sectoral reforms, which had a tangible impact on reducing corruption in the sectors concerned. in particular, since 2014, cooperation with the international monetary fund has been one of the incentives for reforms in the banking sector, reforming the energy sector, and implementing corporate governance of state-owned enterprises. as noted in the studies above, such measures have helped to reduce the level of corruption in the corresponding spheres (finnish tax administration, 2019). the european union's provision of macrofinancial assistance to ukraine was also accompanied by the definition of some of ukraine's anti-corruption policy and governance commitments. between 2013 and 2020, five memorandums of such assistance were concluded. they noted the following main commitments of ukraine on anti-corruption policy issues (stril'tsiv, cherniavs'kyj, fodchuk, 2020): – adoption of an anti-corruption strategy based on international best practices and a program for its implementation; implementation of national anticorruption legislation in accordance with greco recommendations and other international standards; – implementation of the provisions of anti-corruption legislation on the declaration of public servants, preparing a draft law on the creation of an independent body for the proper introduction and application of the relevant legislation; – establishment of the national anti-corruption bureau of ukraine, the specialized anti-corruption prosecutor's office and the national agency on corruption prevention, ensuring their independence and adequate resources; creation of an electronic declaration system for employees; introduction of a mechanism to verify information on ultimate beneficial owners; creation of a body to recover assets obtained by criminal means and implementation of the so-called "extended" and civil confiscation; – establishment of a specialized anti-corruption court; introduction of automated verification of declarations and provision of the necessary access to registries and databases for this purpose. these obligations have mostly been fulfilled. the introduction of verification of information on ultimate beneficial owners remains problematic. on july 23, 2020, a memorandum of understanding was signed between ukraine and the european union (on ukraine receiving macro-financial assistance from the european union in the amount of up to 1.2 billion euros), which was ratified on august 25, 2020 (nacp, 2020; "strategic analysis of corruption risks"). according to this document, ukraine made the following major commitments on anti-corruption policy, the rule of law, and governance (corruption in ukraine 2020): – establishing a commission to evaluate the integrity of candidates for the positions of members of the supreme council of justice and conducting a similar one-time evaluation of current members of the supreme council of justice; – formation of a new high qualification commission of judges with the participation of international experts; – introduction of an electronic case management system for the national anti-corruption bureau of ukraine and the specialized anti-corruption prosecutor's office; – continuation of the certification of prosecutors; – improving the activities of public and private performers, further implementing measures to recover the assets of state banks; – conducting competitive selections for top civil service positions and conducting competitive selections for executive positions in anti-corruption bodies by depoliticized competition commissions; baltic journal of economic studies 190 vol. 7 no. 5, 2021 – continuation of the reforms initiated in the customs and tax services; – establishing a body to investigate serious financial and economic crimes; – continuation of the reform of the corporate management of state-owned enterprises; – transfer to the state enterprise "medical procurement of ukraine" the authority to conduct all necessary centralized procurement and establish an independent supervisory board for this enterprise. at the same time, there was a lack of progress in the implementation of some commitments with tangible anti-corruption potential related to other anti corruption commitments/measures of ukraine (in particular, to develop draft laws on administrative procedure and administrative fees (kotlyar, 2017)); introduction of effective mechanisms to verify information on ultimate beneficial owners (hutky, 2019). conclusions thus, the relevance of the problems of combating the shadow economy and economic offenses is important today. there is no doubt that without a systematic approach to corruption in the context of the connection with the shadow economy it is impossible to obtain positive results of anti-corruption policy. in turn, an effective policy to prevent and counteract the shadow economy is impossible without harmonizing the powers of state authorities at all levels. the experience of creating special anti-corruption institutions and their first steps show that the process of their establishment will require time and a number of politically difficult measures. among them, first of all, the following should be mentioned: – ensuring real political independence of anti corruption law enforcement agencies. obviously, it is very difficult to solve this problem without a real consensus of the main political forces on the country 's anti-corruption agenda. in practice, this means that the principle of independence of anti-corruption institutions should determine the legislative and resource support of their activities by the state; – the urgent problem is to ensure effective coordination of anti-corruption bodies. for this purpose, the nacp should finally become a state body that defines anti-corruption policy, coordinates the implementation by all state bodies of the anticorruption strategy and relevant international obligations of ukraine, identifies corruption risks in the activities of these bodies and eliminates them, identifies offenses related to corruption, etc; – priorities for further development of anti-corruption legislation should be the "closing" of opportunities to avoid punishment for corrupt acts, harmonization of relevant legislative and regulatory documents, clarification of the powers of anti-corruption bodies, in particular in terms of operational and investigative activities, etc. it is necessary to introduce a single transparent system of criminal statistics, without which it is impossible to adequately assess r elevant trends; – an urgent priority of anti-corruption reform is and remains the creation of the anti-corruption court; – the introduction of an automatic system for checking electronic declarations is critically important; – successful reform of the criminal justice system, the priorities of which should be to reduce the discretion of judges, prosecutors, and investigators, increasing their accountability and responsibility, primarily disciplinary, with public participation in disciplinary proceedings. without such measures, the "simple" replacement of some judges or prosecutors by other judges or regular courts with specialized anticorruption courts in the process of judicial reform will not be able to significantly change anything in the system of criminal justice. in conclusion, it should be noted that one of the key prerequisites for the successful formation and establishment of an institutional anti-corruption system is large-scale and effective cooperation between reformers and civil society. it is primarily a question of counteracting active attempts by interested parties to use the fight against corruption in their own narrow political and economic interests and thereby discredit anti-corruption reform. references: anti-corruption reforms in ukraine (2017). 4th round of monitoring of the istanbul anti-corruption action plan. oecd acn. available at: https://bit.ly/33akuyj association implementation report on ukraine (2017). european commission. available at: https://bit.ly/ 339wwmf association implementation report on ukraine (2019). european commission. available at: https://bit.ly/ 311kadv babica, v., & sceulovs, d. 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(2019). corruption and re-election: how much can politicians steal before getting punished? journal of comparative economics, 48(1), 124–143. doi: https://doi.org/10.1016/j.jce.2019.09.002 verkhovna rada of ukraine (2014). the law of ukraine "on prevention of corruption". available at: https://rada.gov.ua verkhovna rada of ukraine (2020). agreement on financing the event "eu support for egovernment and digital economy in ukraine. available at: https://rada.gov.ua world economic forum (2020). the global competitiveness report 2019. available at: www.we-forum.org baltic journal of economic studies 1 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 isma university of applied sciences, latvia (corresponding author) e-mail: antonina.djakona@isma.lv orcid: https://orcid.org/0000-0002-4089-9335 2 isma university of applied sciences, latvia e-mail: kaspars.kikste@gmail.com orcid: https://orcid.org/0000-0002-9522-6349 doi: https://doi.org/10.30525/2256-0742/2023-9-1-1-11 baltic black sea union modeling: factors and perspectives antonina djakona1, kaspars kikste2 abstract. an important feature of the current stage of world development is the increase in turbulence and tension, the increase in threats and the actualization of security issues. the creation of military-political and economic associations of countries makes it possible to unite efforts in solving security problems and ensuring their development. one of such promising associations can be cooperation between the countries of the baltic-black sea region. the purpose of the article is to assess the prerequisites and possibilities for creating the baltic-black sea union, modeling its various combinations. the subject of the research is the model of the economic and military union of the countries of the baltic-black sea region. the implementation of the analytic hierarchy process (ahp) method made it possible, using mathematical tools, to assess the conditions and probability of creating a bbs union, based on a multi-criteria analysis of the military, political or economic potential of states, and also to model options for its composition. results. the idea of creating a bbs has a long history, which is due to a whole range of historical, geographical, political and military prerequisites. ensuring the security of the bbs countries includes not only a military aspect, but also involves the development of economic cooperation and development. the composition of the bbs can vary considerably: from a basic number of core countries to a broad open participation of the countries of the baltic, black and adriatic sea regions and all neighboring countries. the baltic-black sea cooperation can become a very powerful economic entity. focusing on multilateral cooperation of partner countries in various fields will unite both resource-rich countries and fairly developed countries that have formed their specialization in the new conditions of the digital economy. practical implications. of particular importance is the creation of unified transport corridors between the northern and southern seas of the european continent. bbs can become part of a multi-stage and multi-level security system in europe and in the world as a whole. the value/originality of this publication is due to the high relevance of the issue in the context of open military aggression and the need to find new mechanisms for ensuring collective security in europe. key words: baltic-black sea union, regional security, collective security, economic cooperation, alliances. jel classification: d81, e61, f02, h56 1. introduction the need for a radical overhaul of the system of collective security, both in europe and in the world, is being renewed by the highly turbulent processes in the modern geopolitical space. the formation of a new world order and, in general, global civilisational shifts are characterised by an increase in tension, chaos, uncertainty, etc. despite the successes achieved since the second world war in establishing stable peace and order, one can observe a constant increase in the number of new security threats to countries, peoples and individual citizens. the need to build a radically new system of regional, collective, pan-european and even global security is becoming apparent. a necessary condition for ensuring security in modern conditions is the creation of military-political and economic associations of countries, alliances. for most countries, solving security problems is possible only through joint efforts. it seems that security in the european region and in the world can be ensured by a complex and multi-level system of alliances. regardless of the peculiarities of the new configuration of international security and the agreements reached after the end of active hostilities baltic journal of economic studies 2 vol. 9 no. 1, 2023 in europe, the development of cooperation in the black sea-baltic region in the aspect of building the north-south vertical, the baltic-black sea union, has great prospects. the idea of creating such a union has a long history, and in the modern context it can unite states that are ready to develop military, economic and other forms of cooperation to counter imperial ambitions. 2. analysis of recent researches and publications an urgent problem of security issues is the study of various aspects (military, political, economic) of the creation of alliances, military alliances. the practice of alliances has a long history, and there is no doubt about their usefulness and effectiveness. at the same time, the subject of scientific research is often the calculation of the economic efficiency of combining the efforts of countries, "free riders" in alliances, etc. sandler and hartley argue that security is a public good in alliances and is critically determined by factors such as technology and strategic doctrine (sandler and hartley, 2001). other researchers deny the existence of public goods effects in alliances, but confirm the existence of benefits for countries participating in alliances. moreover, the benefits of alliance participation outweigh the costs, as alliances have "reduced the transaction costs of collective action to address common threats from international terrorism to piracy " (brands and feaver, 2017). many studies show that there is a public good effect (alley, 2021; barrett, 2010; garfinkel, 2004; goldstein, 1995; gowa, edward d. mansfield, 2004; leeds; jeffrey, 2002; modelsky, 1963; sandler, 1993; sandler and hartley, 2001; walt, 1990; walt, 2009). the main problem is to study and prove either the presence or the absence of the free rider effect. it is often argued that small countries spend disproportionately less on alliance defence than large countries and thus act as free riders (i.e., they do not pay for the obvious benefits they receive, the benefits of alliance participation, which consist in strengthening their own national security). in modern conditions, any country, regardless of its size, can gain additional competitive advantages by joining the alliance, for example, in the production of technologies, spare parts or drones. within the alliance, advantages can be created that did not exist before the alliance was formed (tollison, willett, 1979; hoekman, 1989; morgan t. clifton, 1994; davis, 2004). sandler t. (2022) in her latest article also explores the economic theory of alliances to reveal the distribution of the burden of military spending in nato during the period from 1991 to 2020, before the russian invasion of ukraine in february 2022. sandler t. concludes that allies' free access to each other's total military spending led to a reduction in the military spending of nato allies located near russia. this division, the asymmetry within nato, contributed to the russian invasion. despite these different approaches and outcomes, there remains a generally accepted view of the importance of collective action in international politics. undoubtedly, the creation of military alliances increases security both internally and externally. by pooling the military potential of countries, such an alliance becomes a deterrent against possible external threats. for each country, participation in the alliance allows it to multiply its military power and optimise its defence portfolio. moreover, this can be achieved without a significant increase in military budgets. the problem of developing multilateral cooperation in the baltic-black sea region is also very topical. a comprehensive study of the cultural, political and socio-economic issues of the baltic sea region, including the problems of security and cooperation between the countries of the baltic and black sea regions, has become the subject of research in the scientific works of a significant number of scientists (maciejewski, 2002; melchiorre, 2009; tassinari, 2005); in the black sea (aydin, 2005); issues of political cooperation and security of the bbs union (volovich, 2016; georgievska, 2020; gladysh, krayevska, golovko-havrysheva, 2020; ryzhenko, 2021; yakovenko, 2016) etc. at the same time, the question of the formation of military associations and alliances of countries becomes extremely relevant in the context of the turbulent events of 2022. it is obvious that the system of collective security requires new solutions and approaches. it is promising to study the problem of creating the bbsu as a single corridor between the baltic and the black seas, which will allow to establish stable traffic, develop economic cooperation and provide a reliable security shield. the main purpose of the article is to assess the prerequisites and possibilities for the creation of the baltic-black sea union, modelling its various combinations. 3. research methods in order to assess the conditions and probability of the formation of a bbsu alliance, the following mathematical methods will be used, based on a multicriteria analysis of the military, political or economic potential of the states. science has already developed methods for analysing conflicts (political, military), making decisions about the creation of unions, alliances, etc. as a rule, two problems arise in the application of mathematical modelling of situations of confrontation, balance of power, cooperation between states and creation of alliances. firstly, how baltic journal of economic studies 3 vol. 9 no. 1, 2023 to obtain accurate and complete data, and secondly, how to evaluate (measure) them and check their reliability. and despite the huge amounts of money spent on analysis, the accuracy of the answer remains low. this is because there are always parameters that are difficult to quantify. the fact that subjective factors play a very important role in military-political issues is confirmed by the erroneous conclusions about the prospects of russia's aggression before the start of the war. nevertheless, the relevance of scientific modelling remains an important task and its toolkit is constantly expanding. one of the best known methods for the quantitative treatment of subjective judgements is the analytic hierarchy process (ahp), a mathematical tool of a systematic approach applied to complex decision problems. this method was developed by the american scientist thomas l. saaty in 1970 and can be used not only to compare objects, but also to solve more complex problems of control, forecasting, and so forth (saaty, 2005). the main advantage of the hierarchy analysis method is its high versatility – the method can be used to solve a wide variety of problems: analysis of possible scenarios for the development of various situations, resource allocation, ratings, personnel decisions, etc. the disadvantage of the hierarchy analysis method is the need to obtain a large amount of information from experts. the method is best suited to cases where the bulk of the data is based on the preferences of the decision maker in the process of choosing the best solution from a variety of existing alternatives. in a typical decision situation – several solutions are considered; – a criterion is set to determine the extent to which this or that solution is appropriate; – knowing the conditions under which the problem is solved and the reasons that influence the choice of one solution or another. formal statement of the problem in the process of applying the method of hierarchy analysis: given a set of alternatives (solutions): а1, а2, ... аk. each of the alternatives is evaluated according to a set of criteria: k1, k2, ... kn. it is necessary to find the best solution. stages of applying the method of analysis of hierarchies: 1. preliminary ranking of the criteria, as a result of which they are ranked in descending order of importance (significance). 2. pairwise comparison of the criteria in terms of importance on a nine-point scale with the compilation of an appropriate matrix (table) of size (n x n). the system of paired information leads to a result that can be represented as an inversely symmetrical matrix. the element of the matrix a(i,j) is the intensity of the manifestation of hierarchy element i relative to hierarchy element j, estimated on an intensity scale from 1 to 9, where the estimates have the following meaning. – at the same time, when pairwise comparisons are made, the following questions are mainly asked when comparing elements, e.g., k1 and k2: – which is more important or has more impact? – which is more likely? – which is preferable? 4. results and discussions under the conditions of open military aggression in europe, the problem of the formation of a new system of world order is becoming topical. an important aspect in this respect is the creation of new military-political alliances (both formal and informal), which is particularly important for small countries with relatively insignificant military potential. the formation of alliances must be considered taking into account all circumstances: military, political, economic, historical, security. in connection with the open aggression of russia against ukraine, the open support of belarus for such an invasion by the world community, various options and new models for the formation of a collective security system are being considered, including the question of table 1 matrix of elements and scores ranked by intensity scale significance vij definition explanation 1 equal importance, or equal importance two actions contribute equally to the achievement of an objective 3 some predominance of the importance of one action over others (weak/moderate importance) there are some arguments in favour of one of the actions, but they are not convincing enough 5 significant importance (superiority) there are reliable judgements or logical conclusions for preferring one of the actions 7 high importance (strong superiority) strong evidence in favour of one action over another 9 absolute importance (very strong superiority) the degree of preference is absolute 2, 4, 6, 8 intermediate values between two neighbouring assessments for a situation where a compromise judgement is required inverse values 1/vij the action j compared to i is assigned the inverse value when two actions are compared in reverse order, the value of the vij scale becomes the inverse of 1/vij. baltic journal of economic studies 4 vol. 9 no. 1, 2023 the creation of the baltic-black sea union or a union of the baltic countries, poland and ukraine. all the countries belonging to the black sea-baltic bloc occupy rather high positions in the global ranking of military power, but the highest positions are occupied by large countries. it is worth noting that the russian invasion of ukraine has significantly updated the issue of military potential, military power and weapons for the baltic countries, which have repeatedly become the object of threats from russia and belarus, both individually and as partners. despite the successes achieved after the second world war in establishing stable peace and order, it is possible to note the constant growth of new threats to the security of countries and peoples. the emergence of a phenomenon such as terrorism as a threat in its own right. aggravation of the painful imperial ambitions of the russian federation. the creation of any alliance is always conditioned by the presence of external threats. naturally, the increase in the number of threats creates conditions for the development of new forms of cooperation within existing military alliances. obviously, due to the current situation in connection with the military conflict and military aggression of russia in ukraine, as well as its constant threats, including to the baltic countries, there is a need to strengthen the eastern flank of europe. the creation of an additional shield can be facilitated by the formation of such a sub-alliance, capable of protecting the eastern border of europe and creating a certain border between the european countries and the aggressor countries. the baltic countries and all the countries bordering the russian federation are interested in strengthening their defence, and therefore they are the ones who can join the new military alliance proposed by great britain, which will unite poland, ukraine, the baltic countries and possibly great britain. in some sources, britain is included in this regional alliance as a special subject and coordinator. the announcement of such an alliance was made by boris johnson. it should be noted that the idea of creating such a union has a very long history. mentions of the existence of a trade route "from the varangians to the greeks", running from the baltic sea through eastern europe to byzantium, appear as early as the 10th – 111th centuries. in more recent history, the idea of creating such a single axis arose at the beginning of the 20th century, when the baltic-black sea union (bbs) programme was developed by the latvian diplomat siegfried meierovits. in august 1919, at a conference near riga, a confederation of states was created – the baltic-black sea union (bbs), with the aim of developing cooperation in the fields of defence, economy, a common banking and monetary system, a political convention on mutual support and common foreign policy, and ensuring a free route from the baltic to the black sea (gladysh, 2020). signed a programme document on the creation of countries such as finland, estonia, lithuania, latvia, poland and ukraine. russia also showed some interest in creating a single transport route from the baltic to the black sea. at the beginning of the twentieth century. the idea of building the baltic-black sea canal was obviously of special geographical, geostrategic and military importance for russian imperial policy. polish politicians were also interested in bcs. jozef pilsudski proposed the idea of a confederal state consisting of poland, lithuania, belarus and ukraine, i.e. those countries that could become a counterbalance to the dominance of germany and russia in eastern europe. such a confederation was proposed under the name of "intermarium" (polish – międzymorze, latin – intermarium) and envisaged the inclusion of all countries from the black and adriatic seas to the baltic sea. after the second world war, the idea of a union of countries between the baltic, black, aegean and adriatic seas was also put forward by the polish government in exile, led by vladislav sikorsky. the concept of jerzy giedroyc deserves special mention, who believed that what was important for poland was not imperial ambitions but equal relations with the countries of eastern europe – ukraine, lithuania and belarus. in his opinion, a developed poland should act as a "guide" of the east to europe, representing and protecting the interests of these countries in europe. he attached particular importance to ukraine, which he considered to be part of western civilisation and its most important partner. in his view, poland's historical mission was to support the democratic construction of the nation states of the ulb (ukraine, lithuania, belarus). he saw the development of relations with russia in the same way – through diplomacy and overcoming historical grievances. giedroyc and his colleague juliusz mieroszewski believed that only a non-imperialist russia and a non-imperialist poland had a chance of establishing and rationalising their relations. the soviet union and other allies reacted very negatively to these ideas (brzeziecki). the revival of the bbs project took place at theend of the 20th century, when the idea of "intermarium" or "intermarium" was raised by the politicians of belarus, lithuania, poland and ukraine. the first stage of the project was to include ukraine, poland, georgia, lithuania, latvia and estonia. the next stage is the possible expansion of the alliance into the adriatic-baltic-black sea union with the inclusion of countries such as moldova, croatia, slovenia, hungary, slovakia, the czech republic, baltic journal of economic studies 5 vol. 9 no. 1, 2023 azerbaijan and turkey. in addition to these states, romania, bulgaria, belarus (after the liquidation of the lukashenka regime) and finland, which also waited in vain for help from the western allies in the winter of 1939–1940, could theoretically join in the future. austria and sweden, which were not part of the bloc, were also considered potential partners (yakovenko, 2016). in the recent past, the world cup in the region has laid serious foundations for the development of comprehensive cooperation (economic, trade, cultural, scientific, etc.). and although it cannot be characterised as dynamic, such a vector of development would certainly contribute to further strengthening the potential of the region. the organisation of the black sea economic cooperation (bsec) was established in 1992. the bsec includes 6 countries with direct access to the sea (russian federation, georgia, turkey, romania, bulgaria and ukraine) and 6 neighbouring countries (albania, armenia, azerbaijan, greece, moldova and serbia). since 2004, serbia and montenegro have been full members, while poland, slovakia, austria, france, germany, italy, egypt, israel, tunisia, the bsec business council and the international black sea club have observer status. half of the coastline consists of eu countries (turkey, bulgaria and romania), nato members – greece, turkey, bulgaria, romania and albania. thus, within the framework of the potential baltic-black sea union, a separate economic forum, the baltic-black sea economic forum (about forum), has been formed. russia's aggression in 2014 and 2022 radically changed the configuration of the region, its aspirations, directions and forms of cooperation, in general – the strategic vector of development. it should be noted that the creation of the bbs is expected only in the general context of the development of the european region, nato or the eu. at the same time, the existence of common conditions and interests can become the basis for the creation of such an alliance with its own goals of cooperation. according to the author, the main goal of the creation of the bbs sub-alliance is the development of sub-regional cooperation in the economic, political, cultural, educational and military spheres. the main areas of cooperation, in the author's view, should be: investment cooperation (including in the military sphere); creation of unified transport systems and corridors; all possible promotion of cultural and educational cooperation at the national, regional and local levels; creation of a sub-regional security system (under the auspices of nato); multilateral economic and trade cooperation; mutual production and supply of military products; creation of a single financial space to promote investment; a common information and communication system. the following are also mentioned as more detailed forms of cooperation: multilateral coordination of economic and other sanctions; mutual supplies of lethal and defensive weapons; cooperation on energy security and transit of energy carriers; mutual assistance in combat training of troops and moder nisation of weapons; exchange of strategic, counterintelligence and other data; joint militaryindustrial enterprises and developments (especially high-tech); joint international initiatives to counter propaganda; exchange of military advisers and other experts (volovich, 2016). given that the bbs is initially considered as a sub-alliance, its formation may include a system of national, multinational, joint initiatives to achieve the goals set. particular attention should be paid to projects of strategic importance: economic, transport and security. the bbs should focus on joint projects of regional importance. first of all, the creation of a unified transport infrastructure. for example, it has already been pointed out that such projects have been implemented in the past (at the beginning of the 20th century – the baltic-black sea canal). this canal was supposed to connect riga and kherson with a single water artery, which would allow ships (including military ones) to move freely from one sea to another. this idea was later also expressed. in particular, in 2017, the ukrainian seaports administration and the belarusian company beltopenergo signed a memorandum on the restoration of river navigation between the countries and dredging of the dnipro river at the port of nizhniy zhary. it was assumed that the ship could cover the distance to odessa in five days (one way) (the baltic-black sea waterway, 2016). the development of the e40 international waterway (odesa – kyiv – pripyat – orsha – vitebsk – gdansk – riga) is a strategic and well-developed project. however, its implementation is impossible in today 's conditions due to the fact that its important link is the territory of belarus, which is an active party to the military aggression against ukraine. if the geopolitical situation changes, the baltic-black sea waterway can become a real and effective economic driver for the regional development of all potential partner countries. the implementation of the baltic-black sea union project can also become an important component of the revitalisation of the european union's interregional traceca (transport corridor europe-caucasus-asia) programme, which aims to create a transport corridor from europe through the black sea, the caucasus and the caspian sea to the countries of central asia and china. undoubtedly, the idea of developing trans national energy projects is also important. the idea baltic journal of economic studies 6 vol. 9 no. 1, 2023 of creating the euro-asian oil transport corridor (eantc) on the basis of the ukrainian odessabrody pipeline, ending in gdansk, is well known. the oil pipeline was built in 1996–2001 to transport caspian oil to central europe, bypassing russian territory. an oil pipeline was built with the prospect of further extensions, first from brody to the polish town of adamova zastava and then to the baltic sea ports. during all this time, the pipeline has not been fully operational. its importance is demonstrated by the fact that the european commission has once again included the completion of the pipeline among its priority energy projects for 2020. in accordance with the decisions of the 18th meeting of the council of ministers of the energy community (the energy community is an international organisation bringing together the european union and its neighbours to create an integrated pan-european energy market (energy community)), which took place on 17 december 2020, the list of projects of interest to the energy community (peci – 6 projects) and the list of projects of common interest (pmi – 11 projects) were approved. the project for the construction of the brody-adamova zastava oil pipeline was included in the peci list and the decision entered into force on 14 january 2021. important areas for co-operation on the project at the intergovernmental level in the near future are as follows: – to raise the issue of resuming negotiations on the preparation of an intergovernmental agreement on the eaotc project, which should provide the legal framework for the project and serve as evidence to potential investors of the full support of the participating states for the project; – creation of a favourable legislative climate for the implementation of the project, in particular the extension of the polish law on the preparation and implementation of strategic investments in the oil sector; – assistance in attracting strategic investors and their subsequent entry into the circle of project participants (2020 peci). a simple list of these projects speaks to the great potential of this region. perhaps now that the threat from the russian federation is so obvious and that country is no longer a strong and influential player, all the conditions are being created to strengthen the baltic-black sea axis in many ways. in general, all projects within the potential intermarium alliance can be implemented in both the medium and long term. in peacetime, the distribution of resources is based on the formation of long-term plans, according to which mediumterm and, accordingly, tactical-level plans are formed. medium-term plans include indicative forecasts of military requirements, an estimate of available resources and the possibility of their deployment or investment. in the context of this work, the task was set: to determine the optimal composition of the balticblack sea union (bbs). the set of countries included in the alliance represents various alternatives and forms the third level of the hierarchy. the criteria are: economic, military, geographical and human potential of the bbs. the criteria form the second level of the hierarchy. the top (first level) of the hierarchy is the goal – to choose the optimal composition of countries participating in the bbs. the hierarchical model of the task is shown in figure 1. for the hierarchy, 5 matrices are created: one for the second level and 4 for the third level, which are presented in the form of tables. the purpose of this model is to create a military-political alliance – the baltic-black sea union – to ensure reliable protection of european countries from aggressive neighbours and the comprehensive development of cooperation. the following criteria were chosen for the creation of the bbs: k1 – economic potential, the assessment was made on the basis of the average gdp per capita of each of the alliances; k2 – military potential, i.e., the existence of a common military and defence power of such an alliance; k3 – geographical potential, i.e., what part of the border will be closed by such an alliance; k4 – human potential, i.e., the number of persons in military service in the armed forces of the union. the study of the influence of the criteria on the overall objective is presented in table 2. world bank data on gdp per capita were used to assess and compare countries' economic potential (table 5). the next level of the hierarchical model compares alternatives for each criterion (table 4). the following possible alternatives were proposed for the countries participating in the bbs: цель – создание балтийскочерномоского союза (бчс) критерии льтернати к1 к2 к3 к4 а1 а2 а3 а4 аlternatives the goal is the creation of the baltic-black sea union сriteria figure 1. hierarchical model for the selection of countries in the baltic-black sea union source: developed by the author baltic journal of economic studies 7 vol. 9 no. 1, 2023 table 2 criteria comparison matrix criteria к1 к2 к3 к4 own vector weight к1 – economic potential 1 3 3 5 2,59 0,469 к2 – military potential 0,333 1 5 7 1,85 0,335 к3 – geographical potential 0,333 0,200 1 7 0,83 0,150 к4 – human potential 0,200 0,143 0,143 1 0,25 0,046 total 6,79 source: calculated and compiled by the author table 3 scale of relative importance of criteria/alternatives quantitative value degree of importance/significance 1 equal importance 3 some predominance of the importance of one action over others (weak/moderate importance) 5 significant importance (superiority) 7 high importance (strong superiority) 9 absolute importance (very strong superiority) source: (saaty, t.l., 2005; saaty, t.l., 2008) table 4 matrix of pairwise comparisons of the importance of alternatives for each criterion by criterion k1 – economic potential own vector weight alternative а1 а2 а3 а4 а1 1 1/5 1/9 3 0,51 0,092 а2 5 1 1/7 5 1,37 0,249 а3 9 7 1 9 4,88 0,884 а4 1/3 1/5 1/9 1 0,29 0,053 total 7,06 1,0 by criterion k2 – military potential own vector weight alternative а1 а2 а3 а4 а1 1 1/3 1/9 1/4 0,31 0,046 а2 3 1 1/7 1/4 0,57 0,084 а3 9 7 1 1 2,82 0,415 а4 4 4 1 1 2,00 0,295 total 5,70 1,0 by criterion k3 – geographical potential own vector weight alternative а1 а2 а3 а4 а1 1 1/5 1/9 1/5 0,26 0,047 а2 5 1 1/8 1/3 0,68 0,122 а3 9 8 1 1/3 2,21 0,401 а4 5 3 3 1 2,59 0,469 total 5,74 1,0 by criterion k4 – human potential own vector weight alternative а1 а2 а3 а4 а1 1 1/5 1/9 1/3 0,29 0,053 а2 5 1 1/7 1/3 0,70 0,127 а3 9 7 1 1/3 2,14 0,388 а4 3 3 3 1 2,28 0,413 total 5,41 1,0 source: calculated and compiled by the author a1 – the bbs includes latvia, lithuania, estonia and ukraine, in this composition the alliance will close a significant part of the land part of the border and partly the basins of the black and baltic seas. with such an alternative, the question of border areas (geographical potential) and human potential is largely closed. however, the military and defence potential is not sufficiently exploited. baltic journal of economic studies 8 vol. 9 no. 1, 2023 а2 – poland is added to the countries in a1. this increases the military, defence and human potential. а3 – finland is added to the countries included in a2. this will increase the military, defence and human potential. in addition, the length of the border with the russian federation, which will also be under the control of the bbs, will increase. а4 – an option if belarus joins the countries of latvia, lithuania, estonia, ukraine, poland and finland. yes, such an option is unlikely, at least until the political power in belarus changes, but it is possible. this would reduce the military threat to the baltic states and increase the geographical potential of the bss. there will be no significant changes in military and defence potential. an analysis of the results shows that the third alternative (a3) has priority according to the criteria "economic potential" and "military potential" with 88.4% and 41.5% respectively. according to the criteria of "geographical potential" and "human potential", the percentage of the fourth alternative (a4) is 46.9% and 41.3% respectively. the best alternative is determined according to the formula: s wvj i n i ji� � � 1 where sj – indicator of efficiency/quality of the j-th alternative; wi is the weight of the i-th criterion; vji is the importance of the j-th alternative according to the i-th criterion. for four considerations of strategies (alternatives) for creating bbs, the efficiency is calculated: sа1 = 0,469 * 0,092 + 0,335 * 0,056 + 0,15 * 0,047 + + 0,046 * 0,053 = 0,072 sа2 = 0,469 * 0,249 + 0,335 * 0,104 + 0,15 * 0,122 + + 0,046 * 0,127 = 0,176 sа3 = 0,469 * 0,884 + 0,335 * 0,511 + 0,15 * 0,401 + + 0,046 * 0,388 = 0,664 sа4 = 0,469 * 0,053 + 0,335 * 0,362 + 0,15 * 0,469 + + 0,046 * 0,413 = 0,236 as the latest generalised calculations show, the quality index for the third alternative (66.4%) is the highest, i.e., this alternative is the best. thus, the most militarily optimal is the creation of the bbs as part of the following countries: latvia, lithuania, estonia, poland, ukraine and finland. the next step is to consider options for alternatives with the expansion of the composition of such a military-economic union (bbsu) at the expense of the following countries: united kingdom, sweden, germany, denmark, bulgaria, romania, turkey, georgia, moldova, croatia, czech republic, slovakia, hungary, greece, belarus. the composition of the bbsu from these countries will significantly increase the combined table 5 gdp per capita of possible countries participating in the bcss (alternatives b1-b4) for 2021 (in current us$) countries gdp per capita 2021 (current us$) alternatives average gdp per capita 2021 (in us$) latvia 21 148.2 b1 24 884.3 lithuania 23 723.3 b2 27 973.7 estonia 27 943.7 b3 31 753.6 ukraine 4 835.6 b4 28 756.4 poland 17 999.9 finland 53 654.8 united kingdom 46 510.3 sweden 61 028.1 denmark 68 007.8 bulgari 12 221.5 rumania 14 858.2 turkey 9 661.2 german 51 203.6 czech 26 821.2 croatia 17 685.3 slovak 21 391.9 hungary 18 728.1 greece 20 192.6 belarus 7 302.3 georgia 5 023.3 moldova 5 230.7 source: calculated and compiled by the author from data https://data.worldbank.org/indicator/ny.gdp.pcap.cd baltic journal of economic studies 9 vol. 9 no. 1, 2023 military / defence potential and resolve many geopolitical issues / disputes. a more detailed examination of economic potential shows that the economic performance of countries such as georgia, belarus and moldova worsens the average value of gdp per capita. the volumes of gdp per capita of possible bbs participants and the average values of this indicator for alternatives b1-b4 are shown in table 6. for example, for alternative b4 (taking into account all the countries mentioned above) the gdp per capita will be the same. if one considers the composition of the alliance for the same alternative, but without georgia, belarus and moldova, this figure increases by more than 10% and amounts to $28,756.4 (table 5). therefore, the following alternatives were considered: b1 – this alternative assumes the composition of the alliance from the countries that were in alternative a3 (the best) at the previous stage, namely: poland, latvia, lithuania, estonia, ukraine and finland. b2 – britain is added to the countries included in alternative b1. this greatly strengthens the borders and increases the economic and military potential. b3 – countries with access to the baltic and black seas are added to alternative b2, namely sweden, germany, denmark, bulgaria, romania and turkey. b4 – the countries included in alternative b3 are added to the countries that do not have access to the sea but are interested in participating: croatia, czech republic, slovakia, hungary and greece. the analysis of the results shows that the third alternative (b3) has priority according to the criteria "economic potential" and "military potential", with respective values of 59.4% and 62.4%. according to the criteria "geographical potential" and "human potential", the percentages of the fourth alternative (a4) are 48.9% and 54% respectively. for the four considered enlargement strategies (alternatives) of the bbsu member states, the effectiveness was calculated using the following formula: sб1 =0,469*0,038 + 0,335*0,036 + 0,15*0,064 + + 0,046*0,048 = 0,042 sб2 = 0,469*0,092 + 0,335*0,102 + 0,15*0,126 + + 0,046*0,099 = 0,101 sб3 = 0,469*0,594 + 0,335*0,624 + 0,15*0,321 + + 0,046*0,312 = 0,55 sб4 = 0,469*0,276 + 0,335*0,239 + 0,15*0,489 + + 0,046*0,540 = 0,307 according to the latest generalised calculations, the efficiency indicator of the third alternative (55%) is the highest, i.e., this alternative is the best. thus, table 6 matrix of pairwise comparisons of the importance of alternatives for each criterion by criterion k1 – economic potential own vector weight alternative б1 б2 а3 а4 b1 1 1/5 1/9 1/6 0,25 0,038 b2 5 1 1/8 1/5 0,59 0,092 b3 9 8 1 3 3,83 0,594 b4 6 5 1/3 1 1,78 0,276 total 6,45 1,0 by criterion k2 – military potential own vector weight alternative б1 б2 а3 а4 b1 1 1/7 1/8 1/6 0,23 0,036 b2 7 1 1/7 1/5 0,67 0,102 b3 8 7 1 5 4,09 0,624 b4 6 5 1/5 1 1,57 0,239 total 6,56 1,0 by criterion k3 – geographical potential own vector weight alternative б1 б2 а3 а4 b1 1 1/3 1/5 1/5 0,34 0,064 b2 3 1 1/5 1/3 0,67 0,126 b3 5 5 1 1/3 1,70 0,321 b4 5 3 3 1 2,59 0,489 total 5,30 1,0 by criterion k3 – human potential own vector weight alternative б1 б2 а3 а4 b1 1 1/3 1/7 1/7 0,29 0,048 b2 3 1 1/5 1/5 0,59 0,099 b3 7 5 1 1/5 1,85 0,312 b4 7 5 3 1 3,20 0,540 total 5,92 1,0 baltic journal of economic studies 10 vol. 9 no. 1, 2023 according to the calculations, the best and optimal composition of the enlarged bbsu is as follows poland, latvia, lithuania, estonia, ukraine, finland, united kingdom, sweden, germany, denmark, bulgaria, romania, turkey. 5. conclusions the turbulence of the modern world, the increase in the number and scale of threats create a situation where collective security can only be guaranteed by a multi-level and multi-tiered system of blocs and organisations. of course, there are key players, such as nato, which set the tone and overall direction for development and cooperation. but this core structure can be complemented by a whole system of smaller blocs that focus on regional or functional aspects of security. these smaller alliances are within the sphere of influence of the key players, and at the same time they interact at their level to solve common and specific problems. it is this multi-tiered, multi-level system that provides the basis for the flexibility and strength of the overall security system. the baltic-black sea union can become a very powerful economic creation, as it will unite both resource-rich countries and fairly developed countries that have formed their specialisation in the new conditions of the digital economy. of particular importance in the context of economic prerequisites is the transport factor – the creation of a continuous transport corridor between the black sea and the baltic sea. moreover, this corridor can be served by almost all types of modern transport: road, rail, pipeline, river. the implementation of this project will undoubtedly increase the flow of traffic and reduce the time of transportation of various goods and passengers from the eastern regions to europe. in general, the creation of an alliance is possible, taking into account historical, geographical, political and military conditions, and the task of ensuring military security has not only a military aspect, but also involves a whole range of interrelated instruments. the strengthening of the military sector, the military economy, cannot take place independently of the state and growth of the entire national economy. within the framework of the alliance, any country can become an effective participant. modern warfare is not so much about having a huge military potential of one's own, but rather about the possibility of cooperation and the availability of advanced technologies that can be used for military purposes, such as drones, artillery technology, and so on. in today 's conditions, the armies of all countries of the world must be ready for military operations, taking into account the realities of the new world order. in this situation, joint cooperation is promising for many countries, which can not only contribute to common projects, revitalise the economy, but also become an important tool for strengthening collective security. the configuration of this union can change and expand with new members and partners who share its goals and values. 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(2016). balto-chernomorskij soyuz-evropejskij shhit ot kremlya. available at: http://www.fttc.com.ua/2016/08/balto-chernomorskij-soyuz-evropejskij-shhit-ot-kremlya/ received on: 14th of january, 2023 accepted on: 21th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 101 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 admiral makarov national university of shipbuilding, ukraine e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0002-8295-2261 3 admiral makarov national university of shipbuilding, ukraine orcid: https://orcid.org/0000-0001-9918-8813 doi: https://doi.org/10.30525/2256-0742/2022-8-5-101-107 managing business processes in the conditions of the development of the digital economy: global and national experiences inna irtyshcheva1, vitaly kim2, yehor kletsov3 abstract. the subject of the study is the management of business processes in the conditions of the development of the digital economy. methodology. the research uses general scientific methods, in particular: theoretical generalization – in the formation of national features of business process management; methods of positive and normative analysis – when analyzing the global experience of business process management in the conditions of the digital economy; statistical analysis – when analyzing investments in the development of digital technologies of enterprises. the goal is to study the global and national experiences of managing business processes in the conditions of the development of the digital economy. research conclusion. the study of national peculiarities of business process management in the conditions of the development of the digital economy shows a positive trend of adaptation for ukrainian enterprises. the majority of scientists identify significant advantages in the management of business processes in the conditions of the development of the digital economy and emphasize the inevitability of the transition of ukrainian enterprises to ensure their competitiveness. the analysis of the use of digital technologies by ukrainian enterprises showed that the most significant investments are in ensuring interaction with customers, data analysis, management of interaction with employees and business processes, automation and closure of the supply chain, cybersecurity and robotics. ukrainian enterprises generally show significant success in using the digital economy while increasing the volume of products sold (goods, works, services) through e-commerce, social networks, and internet platforms. a study of the development of the digital economy in the countries of the world showed an increase in its growth rate during the coronavirus pandemic. it was emphasized that among the global trends that will ensure the development of the digital economy in the future are: cloud computing, big data, the internet of things, blockchain, artificial intelligence, virtual reality, and augmented reality is increasingly becoming a new engine of high-quality economic development. a model of interaction of the development of the digital economy with the state, business, and society is proposed. key words: business processes, digital economy, management, global and national experience. jel classification: o30, o31, о32 1. introduction in the conditions of turbulent challenges (the pandemic caused by the coronavirus infection covid-19, the war of russia against ukraine), there is a need for most socio-economic systems to find ways to carry out their activities safely. from the beginning of the pandemic until today, it has been possible to carry out activities safely thanks to information and telecommunication technologies. this is confirmed by the speed of transition of all business entities to the use of information systems to ensure their activities and further development. assuming that the countries of the world, after the quarantine measures, gradually returned to carrying out their activities in a normal mode, then ukraine. in this case, the war caused by russia led to the further use and transition to digital technologies to ensure activities and functioning. in the conditions of successful development of digital economy in the world countries, there is a need for research and baltic journal of economic studies 102 vol. 8 no. 5, 2022 adoption of experience for ukrainian business entities. as already mentioned, ukrainian enterprises are moving to the use of digital economy in business process management, which shows significant effectiveness and efficiency of operations. however, such a transition requires significant financial resources and payback periods, so most managers do not foresee the benefits of transition to the digital economy while facing its manifestations on a daily basis. accordingly, under such conditions, there is a need to study the national and global experience of managing business processes in the development of the digital economy. the article aims to explore the global and national experiences of managing business processes in the context of the development of the digital economy. 2. national peculiarities of business process management in the conditions of the development of the digital economy as already mentioned, the importance of researching the national characteristics of business process management in the context of the develop ment of the digital economy is becoming more and more relevant. therefore, the team of authors notes: " with the development of it technologies, the relevance of digitization of business processes is constantly increasing. the perfection of business processes or an advantage in the efficiency of business processes compared to competitors contributes to strengthe-ning the competitiveness of companies, enterprises and organizations. the relevant topic becomes particularly relevant in the context of the covid-19 pandemic, in conditions when the resources of the company, enterprise and organi-zation can situationally shift the focus of efforts and, to a greater extent, direct activities to internal efficiency development projects." (timinsky, voytenko, raichuk, 2021) effective management of business processes ensures the appropriate level of competitiveness and therefore requires constant improvement. most ukrainian enterprises show the result of effective management only through the introduction of constant innovative changes, including the use of information technologies. the authors note that "digitalization is one of the main trends in the development of the domestic economy. increasing the competitiveness of industrial enterprises is possible only by taking into account the specifics of the fourth industrial revolution. the concept of "industry 4.0" is characterized by a set of ideas for the automation of production on the basis of digital technologies, the transformation of the world of professions in conditions of rapid automation, and the robotization of all spheres of production. therefore, the transition from the third to the fourth revolution is an inevitable transition from simple digitization (the third industrial revolution) to innovations based on the combination of technologies (the fourth industrial revolution), which forces domestic enterprises to rethink their business methods." (tkachenko, sharko, 2022) therefore, in addition to ensuring competitiveness, ukrainian enterprises must ensure their functioning in the conditions of the fourth industrial revolution, based on the automation of business processes using information technologies. accordingly, ensure the management of business processes based on digitalization. as the research team notes, "the goal of digitizing business processes is to optimize the available resource potential, labor costs, and increase the efficiency of business processes. the transition to a digital environment requires a whole set of procedures, such as the digitalization of production processes, control over the execution of work and product quality, communication with the team and customers, and logistics and deliveries. digitization of business processes is aimed at simplification and increased flexibility. considering the growing importance of the role of digitalization in the activities of enterprises, further scientific research is planned to determine the role of digitalization in the economic security of the enterprise." (dergacheva, vorzhakova, khlebynska, 2021) to ensure the digitalization of business processes it is necessary to have a long time, as well as skills and abilities of the management to make appropriate changes in the company with the participation of employees and taking into account their needs. in the conditions of digitalization and automation of business processes, a significant role belongs to the management of employees, because their number is reduced during such processes. therefore, it is important to find the right approach to human resources management in the process of business process digitalization. also, "the implementation of digitization of business processes of industrial enterprises is an important and relevant step, which acts as a driver of radical changes in the current activity and development of the enterprise. before making a managerial decision on the digital transformation of business processes, it is necessary to carefully analyze the current business processes of the enterprise, understand the problems and oppor tunities for solving them, and only then choose methods and measures for digitalization of existing business processes or development of funda mentally new ones based on digital technologies and platforms. in order to determine which baltic journal of economic studies 103 vol. 8 no. 5, 2022 companies and industries are capable of achieving the goals set by the national strategy, it is necessary to conduct an interdisciplinary analysis of the state of digitalization of business processes in industrial enterprises, and at the enterprise level it is advisable to develop own digital transformation maps, which will allow systematizing actions and concentrating resources on the most promising areas of development." (zub, kalach, 2021) in general, it is essential to develop a concept and an action plan for the transition of business process management to the digital economy. this will ensure the effectiveness and phasing of this procedure by determining the appropriate terms and executors, while calculating the necessary financial resources. taking steps towards digital transformation is typical for ukrainian companies today. however, the essence of the changes implemented is the chaotic use of digital tools without a previously established program. the identified benefits serve as a necessary basis for the development of a digital transformation program, and the identified obstacles actualize a more thorough consideration of the possibility of the emergence and impact of new risks and threats. the considered multi-level digital transformation is designed to identify the current place of each company with the corresponding planning to improve the situation to follow the development trends of the digital economy. (andriyev, 2022) therefore, when transitioning to digital manage ment of business processes, each manager must develop a concept, strategy, and an appropriate action program that will ensure the appropriate result of such work. it is important to remember the preservation of human potential when actively using digital technologies and economy. the active use of digital information technologies in business leads to changes in human participation in the business processes of economic entities, especially enterprises. the extensive capabilities of the software allow to process large amounts of information and offer ready-made conclusions. however, effective management of business processes requires prioritizing the formation of human potential in such a part of it as knowledge, as well as its constant renewal thanks to the activation of creative thinking processes. this is due to the central role of a person in the decision-making process as the basis of management. it uses all the possibilities of digital information technology only to improve the quality and speed of information processing. the secondary role of such technologies in the management of business processes determines the similar place of human digital skills. (ivanova, 2021) it is clear that over time robotics will replace human potential. under such conditions, it is necessary to ensure the priority of human potential; appropriate guarantees should be formed at the government level. in ukraine, more and more companies are investing in digital technologies for customer interaction – 75%, data analytics – 55%, employee interaction management – 48%, and business processes – 44%, supply chain automation – 38%, cybersecurity – 35%, cloud technologies – 31%, and robotics – 26% (figure 1). in general, ukrainian companies are interested in investing in the development of the digital economy. in the first place when making investments it is necessary to ensure customer satisfaction, therefore it is possible to predict the further development of the digital economy. most of the customers today are choosy; they need to open their mobile phones, gadgets or laptops. after checking all the information about the manufacturer of the product, they are content to make a purchase via e-commerce. to ensure their competitiveness, the corresponding demand for e-commerce is only growing, which is why ukrainian companies need to ensure the transition in managing business processes based on digitalization. digital technologies in modern conditions are being transformed and adapted in various areas of business processes of enterprises. the use of the latest software, artificial intelligence, big data, mobile and cloud technologies, blockchain, the internet of things, etc. together cause significant transformation processes in enterprise management. an essential tool of digitalization is the development of accounting to create a complete information system with control elements in the enterprise management system. interaction of information in electronic form is necessary both at the level of enterprises and the economy of states as a whole. therefore, the modern trend in the conditions of the digital economy is the introduction of it technologies into the business processes of enterprises to ensure their competitiveness and effective functioning in the market. (korolyuk, mazurenok, 2021). the development of digital tools in the economy today ensures the functioning of e-commerce both on the domestic and foreign markets, providing speed and spatiality in turbulent conditions. it has been observed that the development of digital tools in the economy is limited due to insufficient knowledge of their use, which is why knowledge and skills in their use are crucial. digitalization is one of the critical factors in the development of an enterprise, which involves not only the introduction of innovative technologies, but also a change in its management. as a result, there is a transformation of the specifics of influence both on individual structural divisions of the baltic journal of economic studies 104 vol. 8 no. 5, 2022 enterprise and on the management system of the enterprise as a whole. digital transformation requires significant changes in the business and economic environment, which should be aimed at tracking global digital trends, the possibilities of implementing innovative digital technologies, and monitoring and evaluating the stability of the company 's functioning (mykolyuk, bobrovnyk, 2021). therefore, the action program of the government and partner countries should create levers to support the post-war economic development of ukraine. accordingly, the study of world economic growth during the war in ukraine, the analysis of the current state of the war economy and the proposal of measures for the post-war economic development of ukraine is quite relevant and timely (irtyshcheva, kramarenko, sirenko, 2022). in general, it is important to study global trends in the development of the digital economy for their successful adaptation in ukraine. therefore, it is important to study the global experience of managing business processes in the development of the digital economy. 3. global experience in managing business processes under the conditions of the development of the digital economy the share of digitally deliverable services in total services exports increased in all regions during the pandemic. digitally deliverable services are approaching 80% and 70% of total services exports in north america and europe, respectively, in 2021. in asia and latin america and the caribbean, the share of total services exports also increased sharply between 2019 and 2020. in oceania, the share jumped from 24 percent in 2019 to 42 percent in 2021. in comparison, regions with relatively low pre-existing levels of digitalization-including digital connectivity and digital skills-entered the pandemic with lower levels of trade in digitally delivered services, and total exports of digitally delivered services declined in 2020 before recovering in 2021 (unctad digital economy database get the data, 2022). in africa, digitally delivered trade varied widely over the course of the pandemic. while countries in north africa experienced the strongest growth of any region, their less digitized counterparts in subsaharan africa experienced the sharpest decline from 2019 to 2020. least developed countries (ldcs), which generally have the lowest levels of availability, quality, and affordability of digital technologies and digital skills, followed a markedly different trajectory, experiencing no recovery in digitally deliverable services trade during this period. ldcs urgently need international support to take the necessary measures to seize the oppor tunities of digital trade, including resilience in times of crisis. (unctad digital economy database get the data, 2022) in general, for most countries in the world, regardless of the level of economy, several problems hinder the development of digital economy, such as insufficient digital infrastructure, insufficient digital industrial base and technical support, low level of digital penetration in the economy, delay in the construction of the appropriate system, and the incompleteness of the digital economic ecosystem. 75 55 48 44 38 35 31 26 0 20 40 60 80 interaction with customers data analysis management of interaction with employees management of economic processes supply chain automation cyber security industrial solutions in the cloud automation and robotics % figure 1. the structure of priority investments in digital technologies source: https://business.diia.gov.ua/cases/tehnologii/indeks-cifrovoi-transformacii-vid-eba-doslidzenna-stanu-cifrovoitransformacii-na-pidpriemstvah baltic journal of economic studies 105 vol. 8 no. 5, 2022 however, the prospects for the development of the digital economy point to corresponding economic growth. for example, by 2021, nearly 40% of china's gdp will come from digital economy revenues, with further growth predicted. (kan, lyu, huang, yao, 2022) new and emerging digital trends such as cloud computing, mobile web services, smart grids, and social media are radically changing the business landscape – reshaping the nature of work and the boundaries and responsibilities of organizations. these trends go beyond technological innovation. regardless of the sector or level of development in their respective countries, businesses are affected by policy developments related to icts, the internet and data flows. with the right policies in place, icts and the internet have enormous potential to accelerate growth and drive progress towards the global sustainable development goals (international chamber of commerce (icc), 2022). in general, the global development trends of the digital economy will be represented by innovative technologies such as cloud computing, big data, the internet of things, blockchain, artificial intelligence, virtual reality, and augmented reality is increasingly becoming a new engine of high-quality development economy. therefore, a model of the interaction figure 2. share of exports of digital services of world countries source: unctad digital economy database get the data digital economy state business society skills and knowledge access and privacy security management growth productivity competitiveness figure 3. model of interaction of the development of the digital economy with the state, business and society source: designed by the authors baltic journal of economic studies 106 vol. 8 no. 5, 2022 of the development of the digital economy with the state, economy and society has been proposed (figure 3). a model of interaction of the development of the digital economy with the state, business and society based on skills and knowledge is proposed, leading to economic growth, increasing productivity and ensuring competitiveness. the prospects for the development of digital technologies were also explored in the conditions of the war between russia and ukraine (irtyshcheva, kramarenko, sirenko, 2022), with the expansion of the sales market (pryshchepa, kardash, yakym chuk, et al., 2020; popadynets, et al. 2021), and with regional public administration (irtyshcheva, pavlenko, boiko, et al., 2022). 4. conclusions the study of national peculiarities of business process management in the conditions of the development of the digital economy shows a positive trend of adaptation for ukrainian enterprises. the majority of scientists identify significant advantages in the management of business processes in the conditions of the development of the digital economy and emphasize the inevitability of the transition of ukrainian enterprises to ensure their competitiveness. the analysis of the use of digital technologies by ukrainian enterprises showed that the most significant investments are made in ensuring interaction with customers, data analysis, management of interaction with employees and business processes, automation and closure of the supply chain, cybersecurity, and robotics. in general, ukrainian enterprises show significant success in using the digital economy while increasing the volume of products sold (goods, works, services) through e-commerce, social networks and internet platforms. a study of the development of the digital economy in the countries of the world showed an increase in its growth rate during the coronavirus pandemic. it was emphasized that among the global trends that will ensure the development of the digital economy in the future are: cloud computing, big data, the internet of things, blockchain, artificial intelligence, virtual reality and augmented reality is increasingly becoming a new engine of high-quality economic development. references: dergacheva, v. v., vorzhakova, yu. p., & khlebynska, o. i. 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(2022). digital economy and the upgrading of the global value chain of china’s service industry. j. theor. appl. electron. commer. res., 17, pp. 1279–1296. doi: https://doi.org/10.3390/jtaer17040065 serbov, n., pavlenko, o., & irtyshcheva, i. (2022). peculiarities of freshwater resources management: national and european experience and current trends. baltic journal of economic studies, vol. 8(4), рр. 158–164. doi: https://doi.org/10.30525/2256-0742/2022-8-4-158-164 received on: 5th of october, 2022 accepted on: 21th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 37 vol. 2, no. 3, 2016 corresponding author: 1 department of management and public administration, chernihiv national university of technology. e-mail: butko.mykola@gmail.com 2 department of management and public administration, chernihiv national university of technology. e-mail: ivanova.nat.vlad@gmail.com the modern trends of infrastructure development mykola butko1, nataliia ivanova2 chernihiv national university of technology, ukraine abstract. purpose – is to summarise and present the development of theoretical foundations of the process of integration of the national industrial infrastructure system based on logistic transformations. methodology of research. theoretical and methodological basis of the study are research works of domestic and foreign scholars on the integration of social and economic systems. the article used the dialectical method of cognition, as well as the following methods: a systematic and structural analysis, logical generalization – the study of the formation of scientific positions and forming the methodological foundations of the development of production infrastructure. results. implemented theoretical and methodological substantiation of the implementation of transformational changes infrastructural capacity in the context of sustainable development of the regional economic system. the transformation of the infrastructure capacity in the region is defined as a process of deep changes in the quantitative and qualitative characteristics of the multisectoral infrastructure complex on the principles of sustainable development in the direction of achieving the optimum, tailored to the needs of the regional parameters of its operation, taking into account global trends and inherited experience. the authors constructed a conceptual framework based on the transformation of infrastructure transformation sector. transport related activities have many impacts on the environment. the most important effects are contribution to climate change, to local air pollution, to noise levels, to biodiversity loss and natural resources depletion. practical value. these findings have practical value in the development of regional strategies and programs of development in the context of the european integration vector. key words: integration, infrastructure capacity, environment, ecological safety, transport. jel classification: f15, l91, r11, r40 1. introduction selected by ukraine european integration vector necessitates consideration of modern global trends, one of this trends is a solving problems in ecological and socioeconomic development for the socio-economic growth while preserving planetary resources for future generations. under sustainable understand the development that meets the needs of the present generation, but without compromising the possibility of future generations to meet theirs. the implementation of this paradigm provides the following purposes: high-quality environment and a healthy economy for all peoples of the world and meet the needs of people and the preservation of sustainable development for a long period. 2. the bases of infrastructure development the development of methodology of development of production infrastructure takes into consideration the following premises. firstly, regional infrastructure acts both as a specific public institution and a type of economic activity. it has the material, production, socioeconomic and environmental focus and is based on the integration of regional, national and transnational network structures. infrastructural potential is represented by the available opportunities and untapped reserves in the area of infrastructure maintenance of socio-economic needs of the region. secondly, the vector of logistics transformations of infrastructure potential due to the peculiarities of the socio-economic relations and the process of reproduction, which are formed within a specific regional area. thirdly, the process of modernization of production infrastructure is designed to optimize the relationship of material, financial and information links in the formation of the regional logistic flows. 3. environmental factors of integration integration of national logistic system in the european and global logistic network should take place, taking into account not only the economic, technical, spatial, market and social conditions. today worldwide topical issue is the realization of the principles of sustainable development paradigm. the baltic journal of economic studies 38 vol. 2, no. 3, 2016 concept of «sustainable development» means to ensure continuity of balanced development as a process based on the harmonization of quantitative and qualitative changes triad economy – society – nature. an important aspect in this case is the mechanism of interaction of the three components. in particular, the relationship of social and environmental components leads to the need of preserving equal opportunities for today and future generations to use natural resources. the interaction of social and economic components requires achieving fairness in the distribution of wealth between people and providing targeted assistance to the poor segments of society. the harmonization of ecological and economical components causes to valuation and minimization of manmade impacts on the environment. so one of the important factors is an environmental factor that affects to the success of entering into the european economic area, according to the principles of sustainable development the largest share of the logistic activities in ukraine has the transport industry. at the same time, transport has a significant environmental impact, is a source of thirds of harmful substances in ukraine. the greatest concern it is about road transport in the cities where its share in the emissions of pollutants reaches 90%. ecological standards of harmful substances emissions of transports euro were introduced by unece in 1993. one of the biggest problems is an inconsistency of these standards about transport that is used in ukraine. however, step by step the national legislation restricts the use of outdated and environmentally dangerous transport. thus, from 1st of january 2016 in ukraine introduced a prohibition on the import and registration of both new and used transport that are below the normal ecological standard «euro 5». and in 2018 in our country should take an effect environmental standards «euro 6». also, the roads are a source of dust formation in the surface layer of air, and while transport driving there is an abrasion of road surfaces and of car tires, wearing out products of which are mixed with emissions. another environmental issue of transport development is the increased noise. the noise is created not just by land transport, but also by aviation aircraft engines, auxiliary power units of airplanes, various motor transport and equipment of stationary objects which are used to maintenance and repair of aircraft. directive 2002/49/eu on noise in the environment is an important part of efforts to establish common noise policy. the problem of transport noise can be solved by borrowing polish experience of using the new technologies of production bitumen with rubber impurity, which materials are shredded tires. this allows to take a benefit of sweating out rubber wastes and also to increase the safety and durability of the road surface. however, it should be noted that in ukraine there is a delay of roads and transport network development, especially the development of public roads on the rate of motorization of the country. technical standards of roads in ukraine do not meet eu standards for quality and for the weight filling, so there is a need to direct it to the eu requirements. 4. environmental logistics solutions in the implementation of environmental policies, among other principles, eu guides two main policies, which should be laid to the basis of the ecological methodology of logistic system in ukraine (barro, 2012). the first principle “polluter pays” – has been significantly strengthened with the adoption in 2004 the directive 2004/35 / eu about the civil responsibility for pollution of environment: the polluter provides a compensation of the damage caused to the environment. this principle can be applied in solving the problems of financing industrial infrastructure in ukraine. thus, the sale of permits for emissions into the atmosphere will provide additional funds, which will be used to reconstruct the capital of the logistic system. the second principle “preservation” – is recognized in many international agreements. for logistic system of ukraine it may be implemented, among other areas, in the development of environmentally friendly transport. it is not only about electric cars, which are spreading in our country, but also about some new types of transports as a monorail transport and monocar, electric bicycles, heliotransport. nowadays in the europe there is a spreading of the concept of «sustainable transport» (or «green transport»), which is used to describe any type of transport with a low environmental impact. in ukraine there are signs of implementations of the principle of prevention in the field of environmental policy about sustainable transport. thus, on 26 june 2015, ukraine signed a protocol about sustainable transport to the convention on the protection and sustainable development of the carpathians. in cities, switching to cleaner transport is facilitated by the lower requirements for vehicle range and higher population density. public transport choices are more widely available, as well as the option of walking and cycling. cities suffer most from congestion, poor air quality and noise exposure. urban transport is responsible for about a quarter of co2 emissions from transport, and 69% of road accidents occur in cities ( jeon, amekudzi, 2005). the gradual phasing out of “conventionally fuelled” vehicles from the urban environment is a major contribution to significant reduction of oil dependence, greenhouse gas emissions and local air and noise pollution. it will have to be complemented by the development of appropriate fuelling/charging infrastructure for new vehicles (white paper on transport, 2011). also, a social security component of the sustainable development of the logistic system in ukraine can not be leaved out of account. this is due to the unsatisfactory baltic journal of economic studies 39 vol. 2, no. 3, 2016 level of security of traffic. in average in car accidents die more than 20 and injure about 200 traffic participants per day. the level of road accidents in ukraine exceeds the corresponding figure in european countries for several times. 5. the warehouse technologies. rfid-technology in logistic modern logistic centers are characterized by a large amount of realized services, by a wide range of the operations and by a significant list and level of turnover of nomenclature positions. this intensity of the logistic activity is dictated by the transformation processes which are taking place in the market of logistic services under the influence of global trends in globalization and integration processes. a special distribution in this time is being received transport-distribution centers that allow consolidate geographically dispersed local logistic markets. the main object here is a control of multi-directional material and accompanying information and financial flows. therefore, there is a need to increase the number of companies that automate logistic functions based warehouse management systems. traditionally barcoding is using to perform this task. modern innovative solution in this area is the use of rfid-technology (radio frequency identification), it refers to the automatic identification of objects of logistic flow via the radio signals. rfid technology provides unique opportunities to the subjects of logistic management, allowing retrieve data from the material flow quickly at all stages of its movement. the system can reduce labor costs, and most importantly reduce the probability of accounting errors. unlike bar codes, rfid enables automatic identification of objects without placing the object near the reader. the main benefits of using rfid-technology in logistic: 1. the ability to rewrite – the data rfid-tags can be recorded and supplemented many times, while the data on bar code can not be changed because they are recorded in the stage of printing. 2. there is no need for line of sight – rfid-reader does not need line of sight the label to take its data. at least it is needed to get into the area of registration long enough to read the data, even while moving and at a big speed. 3. big reading distance – rfid-tag can be read at bigger distances than bar code. depending on the model of the tag and the reader, read range can be up to several hundred meters. 4. large amount of data storage – rfid-tag can store much more information than a barcode. 5. multiple tags reading – industrial readers can simultaneously read over thousands of rfid-tags per second. 6. resistance to the environmental influence – there are rfid-tags that have high strength and resistance to harsh conditions of working environment. passive rfid-tags almost have unlimited service life. 7. intelligent behavior – rfid-tag can be used for other tasks, except to the tool of carrying data. barcode not programmable and is only a means of data storage. 8. the high level of security – a unique permanent identification number, which is assigned to the tag in the stage of production, guarantees a high level of protection against counterfeiting the tags. also, data on the tag can be encrypted. radiofrequency tag has the ability to close the operation and reading data by password, and encrypt their transmissions. it is fair to note that along with advantages, particularly in the context of globalization, rfid-technology has one drawback: relatively high cost compared with bar coding. therefore, despite the ten-year presence in the logistic market of ukraine, for many companies this tool is still in the plans. 6. warehouse management systems (wms) another area of spreading the use of it technologies in logistic solutions is a comprehensive automated warehouse management systems (wms), which not serve only for information support of the movement of inventory, but in real-time control the material, cash and information flows that pass through the warehouse. wms allow to provide a control of inventory at all technological stages considering all the features and requirements for storage. in developed countries the development and implementation of systems of automated control of warehouse complexes occupied by hundreds of specialized firms. there are plenty of different configurations systems that allow to adjust to the demands of the consumer. wms integrate with barcoding equipment and radio terminals, and in addition combine with production management systems of mrp classes (material requirement planning), erp (enterprise resource planning), csm (chain supply management) (bowersox, closs, cooper, 2009). according to various estimates in the ukrainian market there are from 20 to 70 adapted to our conditions of solutions that can be classified as wms of foreign and domestic production. "accounting wms» is the first domestic development of wms which is implemented in ukraine. today, there is an active interest in the automation means of logistic operations, including in stock. but it is too early to talk about structuring the demand for new technologies of work in ukraine. in general, users of wms can be divided into two classes: 1. consumers of logistic services. these are companies with their own management structures for their products, the main business of which is related to the production, importation or distribution of products. 2. providers of logistic services. these are companies whose business is based on providing services, including storage and warehouse processing of products that are belong to customers of logistic services. this is actually a professional logistic companies that manage warehouse baltic journal of economic studies 40 vol. 2, no. 3, 2016 logistic function as part of the product flow management of the client. it should be noted that wms is realized not in all cases and in "full program", because this systems requires appropriate hardware and software that is why they are quite expensive. often, in ukraine is using various warehouse management systems, which combine manual and computerized control methods, and many companies are trying to organize automated account their warehouses by their own. experts recommend to introduce a system of class wms in those companies for which the number of nomenclature positions more than 300 units and the storage area of over 2000 square meters, and the turnover rate of products in the storage less than 30 days (bowersox, closs, cooper, 2009). in this context the minimum system requirements of automation can be defined as the ability of wms: to rule product and its packaging schemes; to rule warehouse operations (receiving, location, inventory, internal displacement, selection, shipment of matched orders); to rule documents of the storage (internal warehouse flow of documents and synchronization with external documents); to control of employees (effective distribution of employees); to rule warehouse equipment (effective distribution of equipment). in addition to these minimum requirements powerful control systems of management and automation of the storage have additional specific functions such as customer management, traffic management of the storage, etc. some developers of wms offer additional modules to manage procurement (purchase orders) and sales (orders for shipment and delivery). in general, after the effective implementation of modern wms, in the storage there is less of reducing products, increases the accuracy of accounting of stored products and also reduces operation time of acceptance, placement and selection of products. it becomes possible to conduct an inventory of non-stop work and to plan and monitor the resulting indexes of the storage based on operational, accurate and complete reporting. an accuracy of accounting increased to almost 100%, which is especially important for products with little shelf life. the accuracy of selection increases to 99.5%. in average 30% staff productivity increases, allowing direct extra resources on development. thus, historical infrastructures, or logistic system, – the automobile/gasoline/roadway system, electrical grids, railways, telephony, and most recently the internet – become ubiquitous, accessible, reliable, and transparent as they mature. the initial stage in infrastructure formation is system-building, characterized by the deliberate and successful design of technology-based services. next, technology transfer across domains and locations results in variations on the original design, as well as the emergence of competing systems. infrastructures typically form only when these various systems merge, in a process of consolidation characterized by gateways that allow dissimilar systems to be linked into networks. in this phase, standardization and inter-organizational communication techniques are critical. as multiple systems assemble into networks, and networks into webs or “internetworks,” early choices constrain the options available moving forward, creating what historical economists call “path dependence” (edwards, jackson, bowker, knobel, 2007). 7. conclusions thus, we can define the main directions of the national logistic system integration on the basis of sustainable development: development and creation of environmentally secured objects in transport infrastructure; using of modern environmental constructional building materials, logistic technologies; introduction of energy saving technologies of protecting the environment from transports pollution; reducing the energy intensity of transport flows; optimization of processes of routing trucking for environmental criteria; increasing environmental security of transit, distribution piggyback. the use of smaller, lighter and more specialised road passenger vehicles must be encouraged. large fleets of urban buses, taxis and delivery vans are particularly suitable for the introduction of alternative propulsion systems and fuels. these could make a substantial contribution in reducing the carbon intensity of urban transport while providing a test bed for new technologies and opportunity for early market deployment. road pricing and the removal of distortions in taxation can also assist in encouraging the use of public transport and the gradual introduction of alternative propulsion (edwards, jackson, bowker, knobel, 2007). so, infrastructural development is always a contested process, tied as it is to questions around access, power, and the life chances of groups and individuals. would-be developers of infrastructure work within pre-constituted fields, and regularly encounter actors, both entrenched and emergent, who will see in the development of infrastructure opportunities for both gain and loss – and gauge their responses accordingly. this aspect of infrastructure has obvious implications for equity, participation, and a range of other broad social goals (including those expressed in nsf’s cyberinfrastructure vision for the 21st century). it is also an issue of strategic management, fit, and longterm sustainability. systems that fail to acknowledge and accommodate the tensions they inherit or provoke will have little chance to attract and sustain a broad scale base of users over time – and therefore little chance of rising (or sinking) to the level of infrastructure. in the world baltic journal of economic studies 41 vol. 2, no. 3, 2016 of cyberinfrastructure to date, we have often seen such tensions play out over the production, curation, and sharing of data – though just as often such data tensions serve as proxies for conflicts of a disciplinary, institutional, biographical, or broadly “cultural” sort. here again, our workshop findings point to the need for more and better research into such dynamics (edwards, jackson, bowker, knobel, 2007). references barro, r . (2012). government spending in a simple model of endogenous growth. journal of political economy, vol. 98, no 5, pp. 102-125. jeon, c. m.; amekudzi (march 2005). addressing sustainability in transportation systems: definitions, indicators, and metrics. journal of infrastructure systems: p. 31-50. white paper on transport (2011). luxembourg: publications office of the european union, p. 32. donald, j. bowersox, david j. closs, m. bixby cooper (2009). supply chain logistics management, mcgraw hill, p. 498. paul n. edwards, steven j. jackson, geoffrey c. bowker, cory p. knobel, (2007). understanding infrastructure: dynamics, tensions, and design. report of a workshop on “history & teory of infrastructure: lessons for new scientific cyberinfrastructures”, university of michigan, ann arbor. http://hdl.handle.net/2027.42/49353. николай бутко, наталия иванова современные тенденции инфраструктурного развития аннотация. целью статьи является обобщение теоретических основ процесса интеграции национальной системы промышленной инфраструктуры на основе логистических преобразований. методология исследования. теоретические и методологические основы исследования составляют научноисследовательские работы отечественных и зарубежных ученых по вопросам интеграции социальноэкономических систем. в статье использован диалектический метод познания, а также следующие методы: системного и структурного анализа, логического обобщения изучение формирования научных позиций и формирования методологических основ развития производственной инфраструктуры. результаты. осуществлено теоретико-методологическое обоснование реализации трансформационных изменений инфраструктурного потенциала в контексте устойчивого развития региональной экономической системы. трансформация пропускной способности инфраструктуры в регионе определяется как процесс глубоких изменений количественных и качественных характеристик поливекторность развития инфраструктурного комплекса осуществляется на принципах устойчивого развития в направлении достижения оптимальной, с учетом потребностей региональных параметров его работы, с учетом глобальных тенденций и унаследованного опыта. авторы построили концептуальную основу интеграции, основанную на преобразовании инфраструктурного сектора, связанных с транспортом, деятельность которых оказывает воздействие на окружающую среду. наиболее важными эффектами из которых являются влияние на изменение климата, загрязнение воздуха на местном уровне, уровень шума, истощение биоразнообразия и природных ресурсов. практическая ценность. данные выводы имеют практическое значение в разработке региональных стратегий и программ развития в контексте вектора европейской интеграции. baltic journal of economic studies 68 vol. 8 no. 2, 2022 1 uman national university of horticulture, ukraine (corresponding author) e-mail: oksana.zagorodniuk@gmail.com orcid: https://orcid.org/0000-0002-8297-2123 researcherid: ahb-4452-2022 2 uman national university of horticulture, ukraine e-mail: gomenyuk.marina@gmail.com orcid: https://orcid.org/0000-0002-7285-7746 researcher id: aal-6553-2020 3 uman national university of horticulture, ukraine e-mail: lydmal1976@gmail.com orcid: https://orcid.org/0000-0002-4057-2404 researcherid: aan-1920-2021 doi: https://doi.org/10.30525/2256-0742/2022-8-2-68-77 management of economic security of horticultural enterprises in ukraine oksana zagorodniuk1, maryna gomeniuk2, liudmyla maliuga3 abstract. the current state of economic security of horticultural enterprises in ukraine, functioning in the agro-industrial complex of ukraine, indicates the presence of a large number of internal and external threats that arise in the process of their financial and economic activities. most horticultural enterprises have an insufficient level of economic security. the purpose of the study is to substantiate the algorithm of economic security management of horticultural enterprises of ukraine. methodology. during the study the following methods were used: analysis and synthesis (to critically comprehend the theoretical provisions of economic security); system analysis (to substantiate the economic security management system of horticultural enterprises and its subsystems); expert method (to determine the weights in the integral index of internal economic security of horticultural enterprise); methods of statistical (correlation and regression) analysis (to check the sensitivity of horticultural enterprises of ukraine to changes in macroeconomic and other indicators); graphic and tabular methods (to visualize the results of the study). results. the authors pay special attention to the presence of internal and external threats to the economic security of horticultural enterprises. the authors have developed a protocol for managing internal and external economic security of horticultural enterprises as a set of successive stages, which will ensure the achievement of the target level of economic security. the article substantiates the methodological approach to the assessment of internal economic security of horticultural enterprise on the basis of relative indicators, which are combined into five components. the article substantiates methodological approach to the assessment of external economic security of horticultural enterprise on the basis of four macro-indicators. practical implications. the proposed protocol of economic security management of horticultural enterprise can be used as a technology of enterprise management to ensure its stable development. the proposed method for assessing internal and external economic security can be used by a horticultural enterprise. value/originality. improved the theoretical and applied bases of the study of economic security of agricultural enterprises on the example of horticultural enterprises. the methodological foundations of internal and external assessment of the economic security of enterprises were developed. the protocol of economic security management of horticultural enterprise is developed for the first time. the protocol includes interconnected and sequential stages and is adaptive to modern conditions of financial and economic activity of horticultural enterprises. key words: economic security, horticultural enterprise, internal economic security, external economic security, agricultural sector of ukraine. jel classification: q12 baltic journal of economic studies 69 vol. 8 no. 2, 2022 1. introduction the current state of economic security of horticultural enterprises in ukraine, functioning in the agroindustrial complex of ukraine, indicates the presence of a large number of internal and external threats that arise in the process of their financial and economic activities. most horticultural enterprises have an insufficient level of economic security. the threat of loss of economic security of horticultural enterprises is fixed in the state documents: without transformative measures on the part of state and industry structures to revive and intensify the development of commercial horticulture in 7-8 years ukraine could lose commercial horticulture and put the domestic market of fruits and berries in a strong dependence on imports. in 2013–2019, horticultural enterprises reduced the profitability of the main activity by 9.6 times (including medium enterprises by 11.3 times, small enterprises by 3.6 times), the profitability of all activities by 4.4 times (including medium enterprises by 3.5 times, small enterprises by 4.6 times) (ponomariov, 2000). another threat to the economic security of horticultural enterprises is the low level of profitability of horticultural enterprises (in 2019 – 7.4%) compared to the ukrainian economy (10.2%), agriculture (19.2%) and certain types of agriculture, such as grain farming (22.2%), vegetable farming (9.1%), plant reproduction (14.9%), animal husbandry (10.4%). in 2013-2019, the number of employees in horticultural enterprises decreased by 42.01%, which amounted to 11,470 people, planted areas – by 15.53%, which amounted to 20 thousand hectares (state statistics service of ukraine, 2021). key performance indicators for horticultural businesses show that businesses need economic security management updated to respond to the increasing volatility and uncertainty of the external economic environment in light of the covid-19 pandemic. considering all of the above, it is necessary to develop and implement a science-based management of economic security of horticultural enterprises. scientific information about the problem of economic security management of horticultural enterprises is absent in ukrainian and world economic literature. at the beginning of xxi century in the ukrainian economic scientific literature for the first time appeared a general theory of management of economic security of enterprises (kiriienko, 2020; ponomariov, 2020). however, these works were not devoted to the economic security of agricultural enterprises. only since 2009 in fundamental scientific publications began to consider the problems of formation of economic security of agricultural enterprises (boiko, 2012; yaremova, 2012) and ensuring the economic security of agricultural enterprises (kovalenko, 2009). the subject of reasoning in the management of economic security is a set of its elements (components), taking into account the activities of agricultural enterprises, including horticultural. there are such approaches to determine the items (components) of economic security of the agricultural enterprises: biological, investment, social, organizational, political and legal, innovative, marketing, technological, financial, environmental, foreign economic (zhurakivskiy, 2015), personnel, market, financial, technical and technological, legal, informational, production, environmental, energy (tkachuk, yaremova, 2019), organizational and managerial, financial, personnel, technical and technological, legal, informational, environmental, power, investment, market and interface, and additional, such as insurance and organizational and managerial (shumkova, 2017); investment, production, scientific and technological, raw materials, financial, energy, personnel, legal, environmental (duyunova, 2019); financial, personnel and intellectual, production and technological, political and legal, security of decisionmaking and information security, environmental, investment and innovative, social, marketing, resource and technical, energy, production, transport, foreign economic (utenkova, 2020); financial, intellectual, personnel, technological, legal, informational, environmental, power, energy components (shumkova, 2019); financial, social, resource, ecological (ulyanchenko, vasylishyn, bochulia, herasymenko, gorokh, 2021). according to the authors, to the components of the economic security of agricultural enterprises scientists refer components that do not characterize the economic relations of the enterprise with other economic entities. for example, legal, power and energy components. therefore, the purpose of this work is to substantiate the algorithm of economic security management of horticultural enterprises in ukraine. 2. materials and methods during the study the following methods were used: analysis and synthesis (to critically comprehend the theoretical provisions of economic security); system analysis (to substantiate the economic security management system of horticultural enterprises and its subsystems); expert method (to determine the weights in the integral index of internal economic security of horticultural enterprise); methods of statistical (correlation and regression) analysis (to check the sensitivity of horticultural enterprises of ukraine to changes in macroeconomic and other indicators); graphic and tabular methods (to visualize the results of the study). integrated index of internal economic security of horticultural enterprises (ies) is calculated taking into account weight coefficient of each component, baltic journal of economic studies 70 vol. 8 no. 2, 2022 determined by the expert method and fishburne's formula (formula 1). fishburne's formula is designed to determine the significance (weighting) components of economic security: r n i n n i � � � � 2 1 1 ( ) ( ) (1) where ri – weighting of components of economic security; n – total number of components of economic security, i – number (rank) of components of economic security. 3. results the management of economic security of horticultural enterprises is proposed to understand the totality of actions of subjects of management of economic security of enterprises to achieve the interests of owners and the target level of economic security. management of economic security of horticultural enterprises should be developed and implemented only systematically. achieving the target level of economic security is possible only through a systematic approach of management and accounting for all components of internal economic security (financial, industrial and environmental, personnel, market) and external economic security (monetary, tax, insurance, climate, state protectionism, etc.). thus, the protection of the general theory of systems and system approach ( jenkins, youle, 1968; mockler, 1968; tan, 1998) in the management of economic security of horticultural enterprises should be the key to an effective and efficient system of economic security. it solves the problem of ensuring the economic security of the enterprise in conjunction with its internal and external components, achieving its sustainable development, achieving the goal of its activities and ensuring food security of the state or region. management of economic security of horticultural enterprises combines a set of system components, which are the controlling subsystem and the controlled subsystem, as well as principles, tools, tasks, etc. managing subsystem of economic security management of horticultural enterprises is represented by internal and external authorized subjects. the hierarchy of subjects of economic security management of horticultural enterprises is proposed as follows: the first level is the highest governing bodies of the enterprises (general meeting of shareholders (for private/public joint stock company), general meeting of participants (for limited liability partnership, additional liability partnership) and supervisory board), the second level is middle governing bodies of the enterprises (director, general director, manage ment board and board of directors, accountable to general meeting of shareholders (participants) and supervisory board), the third level is lower level of entities of economic security management of the enterprises which includes supervisory services (internal audit service, group for internal revision) and other services (departments, division, including economic security service). managed subsystem of economic security management of horticultural enterprises is the level of economic security of the enterprise as a whole and its components in particular. protocol for managing the economic security of horticultural enterprises. the formation of the protocol of economic security management of horticultural enterprises is proposed to consider as a set of interrelated and sequential activities that meet the requirements of systemic and process approaches. the developed protocol meets the requirements of consistency and causality, and is adaptive to modern conditions of financial and economic activity of horticultural enterprises. the economic essence and nature of threats to the economic security of horticultural enterprises require their division into internal and external, i.e. (1) threats created at the level of the horticultural enterprise, and (2) threats created at the state and regional level, including environ mental threats. in this study, the authors will examine threats arising at the state level, although they agree that there are also regional threats, and there is a need to use cluster analysis. the foreign economic security management protocol of horticultural enterprises is shown in figure 1. management of economic security of horticultural enterprises, both in terms of internal and external components, is advisable to begin with the creation of the highest management bodies of the enterprise development strategy (stage 1), which will take into account the requirement of economic security at a sufficient level with a tendency to improve. stage 2 involves the substantiation of economic security indicators of horticultural enterprises and the creation of an integrated index model or the use of scientifically based indicators of economic security of horticultural enterprises. a review of the scientific literature on economic security shows the lack of methods for identifying the state of economic security of horticultural enterprises. the authors have developed a system of indicators of economic security of horticultural enterprises, based on the characteristics of horticultural enterprises and combining five components: replacement of fixed assets: i. financial security: (1) absolute liquidity ratio, (2) leverage ratio, (3) current assets to equity ratio, (4) product profitability (ros), (5) return on assets (roa), (6) cash flow ratio. baltic journal of economic studies 71 vol. 8 no. 2, 2022 ii. environmental and production security: (1) perennial crop yield, (2) plantation insurance ratio, (3) value level of fruit and berry sales. iii. technological security: (1) yield on capital investment, (2) fixed assets depreciation ratio, (3) fixed asset replacement ratio (smoliy, zagorodniuk, maliuga, 2017), (4) information security ratio, (5) digitalization ratio (novak, ermakov, demianyshyna, revytska, 2020). iv. personnel and social security: (1) turnover rate of personnel, (2) employee discipline rate, (3) employee motivation rate, (4) rate of compliance of the actual workplace of the employee in accordance with the requirements of the standards. v. marketing security: (1) advertising effectiveness ratio, (2) market share of fruit, and share of long-term sales contracts. start the goal is to ensure economic security, achieving its target state in the context of sustainable development of the enterprise, achieving activities and ensuring food security of the state creation of economic security management subjects of enterprises development strategy, ensuring the implementation of the requirements of the economic security of the enterprise identification and analysis of external threats to the economic security of the horticultural enterprise designing and forecasting the impact of external threats on the state of economic security of horticultural enterprise ensuring the development of measures to prevent and cure external threats to the economic security of the horticultural enterprise and recommendations for their implementation implementation of measures to prevent and suppress external threats to the economic security of the enterprise compliance of the developed economic security measures with the main sphere of activity and the purpose of the enterprise yes no monitoring the implementation of developed measures evaluation of the effectiveness of the implementation of the developed measures compliance of the achieved results with the objectives of economic security management of horticultural enterprises yes no finish figure 1. protocol for the management of foreign economic security of horticultural enterprises source: the authors’ development baltic journal of economic studies 72 vol. 8 no. 2, 2022 for export-oriented horticultural enterprises it is necessary to evaluate the efficiency of logistics processes studied in detail in the papers (pitel, alioshkina, verniuk, novak, smoliy, 2019). the possibility of adapting fishburne's formula to economic research was justified (boiko, 2016; kunitsyna, britchenko, kunitsyn, 2018; sigal, remesnik, 2021). the experts are the authors of this study. the rank and weight coefficients of the components of internal economic security of horticultural enterprises are calculated in table 1. authors’ integrated index of internal economic security of horticultural enterprises (ies): ies = 0.25 fs + 0.31 eps + + 0.15 ts + 0.08 pss + 0.21 ms (2) where: fs – financial security index, eps – environmental and production security index, ts – technological security index, pss – personnel and social security index, ms – marketing security index. the protocol of internal economic security management of horticultural enterprises is shown in figure 2. integrated index of external economic security of the horticultural enterprise (ees) is calculated on the basis of sensitivity of the indexes of the enterprise to changes of macroeconomic and other indicators. financing of innovation activity; volume of crediting of agrarian enterprises; credits issued by deposit corporations to residents; expenses per household on average per month; consumer price index – this is the list of factors influencing agricultural enterprises, which were proposed by ukrainian scientists (nepochatenko, yermakov, novak, kuzina, 2020; novak, verniuk, novak, 2016). the authors will use only some of them. the sensitivity test of indicators of activity of horticultural enterprises (profitability of operating activity (y1), profitability of all activity (y2) and balance sheet currency (y3) are carried out in macroindicators (official usd exchange rate (f1), consumer price index (f2), the area of planted fruit and berry crops. (f3), import and export of fruits (f4 and f5), taxation (f6, f7 and f8), amount of fruit consumption by households (f9), fruit price index (f10), discount rate of the nbu (f11, table 2). the correlation between the dynamics of profitability of horticultural enterprises' operating activities (y1) and macroeconomic indicators (f1-f11) in 2013–2020 was determined on the basis of the correlation and regression analysis technology. as the criterion for presence and density of the relationship the coefficient of determination (r2) and the correlation coefficient (r) are determined. according to figure 3, we can conclude the sensitivity of the dynamics of profitability of operating activity of horticultural enterprises to usd exchange rate (r2 = 0.897, r = -0.947, figure 3, a); average sale prices for fruits and berries (r2 = 0.612, r = -0.782, figure 3, i), total tax burden (r2 = 0.867, r = -0.931, figure 3, f ); single tax for perennial plantations (r2 = 0.955, r = -0.977, figure 3, g). similarly, the relationship between the dynamics of profitability of all the activity of horticultural enterprises (y2) and macroindicators (f1-f11) in 2013–2020 was checked. dynamics of profitability of all the activity of horticultural enterprises is sensitive to usd exchange rate (r2 = 0.919, r = -0.958); total tax burden (r2 = 0.900, r = -0.949); single tax for perennial plantations (r2 = 0.948, r = -0.974); average sale prices for fruits and berries (r2 = 0.642, r = -0.801). similarly, the relationship between the total value of assets, equity and liabilities of the horticultural enterprises (y3) and macro indicators (f1-f11) in 2013–2020 was checked. dynamics of the total value table 1 weighting coefficients of components of internal economic security of horticultural enterprises experts average 1 2 3 4 5 rank of components of internal economic security financial 1 2 3 1 4 environmental and production 2 1 1 2 1 technological 4 3 5 4 3 personnel and social 5 5 4 5 5 marketing 3 4 2 3 2 weighting of components of internal economic security financial 0,33 0,27 0,20 0,33 0,13 0,25 environmental and production 0,27 0,33 0,33 0,27 0,33 0,31 technological 0,13 0,20 0,07 0,13 0,20 0,15 personnel and social 0,07 0,07 0,13 0,07 0,07 0,08 marketing 0,20 0,13 0,27 0,20 0,27 0,21 total 1 1 1 1 1 1 source: the authors’ development baltic journal of economic studies 73 vol. 8 no. 2, 2022 start the goal is to ensure economic security, achieving its target state in the context of sustainable development of the enterprise, achieving activities and ensuring food security of the state creation of economic security management subjects of enterprises development strategy, ensuring the implementation of the requirements of the economic security of the enterprise determination of indicators of economic security of horticultural enterprises and the creation of an integrated index model formation of organizational (personnel, information) subsystem of economic security management of horticultural enterprise determination of the state of economic security of the horticultural enterprise ensuring the development of economic security measures of the horticultural enterprise based on the results of the identification and recommendations for their implementation (identification of performers, setting deadlines) implementation of developed measures in the financial and economic activities of the horticultural enterprise compliance of the developed economic security measures with the main sphere of activity and the purpose of the enterprise yes no monitoring the implementation of developed measures evaluation of the effectiveness of the implementation of the developed measures compliance of the achieved results with the objectives of economic security management of horticultural enterprises yes no finish figure 2. protocol for the management of foreign economic security of horticultural enterprises source: the authors’ development of assets, equity and liabilities of the horticultural enterprises is sensitive to usd exchange rate (r2 = 0.444, r = 0.666); consumer price index (r2 = 0.393, r = -0.627); total tax burden (r2 = 0.467, r = 0.684); single tax for perennial plantations (r2 = 0.680, r = 0.825); average sale prices for fruits and berries (r2 = 0.374, r = 0.611). thus, different performance indicators of horticultural enterprises (y1-y3) are sensitive to different macro-indicators (f1-f11). only macro indicators with which there is a very strong relationship (+.70 or higher (rex s.& rex a., 2018) or strong relationship (+.40 to +.69 (rex s.& rex a., 2018)) are used to build the table 3. the weight coefficients of internal baltic journal of economic studies 74 vol. 8 no. 2, 2022 table 2 macro-indicators of horticultural enterprise development macro-indicators 2013 2014 2015 2016 2017 2018 2019 2020 profitability of operating activity of horticultural enterprises, % (y1) 70,8 68,9 43,8 26,1 23,8 12,2 7,4 8,0 profitability of all activity of horticultural enterprises, % (y2) 64,9 62,5 39,5 18,0 21,3 10,3 14,9 3,2 total value of assets, equity and liabilities of the horticultural enterprises, million uah (y3) 11309 11898 9307 13822 17470 17839 21755 19598 official 100 usd exchange rate, uah (f1) 799,3 1188,7 2184,5 2555,1 2659,7 2720,1 2584,6 2695,8 consumer price index, % (f2) 100,5 124,9 143,3 112,4 113,7 109,8 104,1 105 the area of planted fruit and berry crops, thousand hectares (f3) 253 239 235 224 226 228 260 219 import of fruits, berries and grape (including canned and dried products counted as fresh), thousand tons (f4) 1172 856 588 732 819 871 1050 1150 export of fruits, berries and grape (including canned and dried products counted as fresh), thousand tons (f5) 392 350 324 283 291 331 433 272 total tax burden, % of gdp (f6) 23,2 23,2 25,5 27,3 27,8 27,7 26,9 27,1 single tax for perennial plantations, % of the tax base (f7) 0,09 0,09 0,27 0,49 0,57 0,57 0,57 0,57 the duty rate on apples (from april 1 to november 30), %(f8) 10 10 10 10 10 10 10 10 amount of fruit consumption by households, kg per capita (f9) 4,1 3,7 3,1 3,3 3,7 3,8 4,0 3,7 average sale prices for fruits and berries, uah per 1 ton (f10) 3010,8 2429,1 5894,5 5863,8 8766,6 5054 6494,4 9140,2 discount rate of the nbu, % (f11) 7,0 10,2 25,3 17,7 13,2 17,1 17,0 7,9 source: data of the state statistics service of ukraine table 3 weighting coefficients of components of external economic security of horticultural enterprises macro-indicators indicators of horticultural enterprises rank of internal economic security weighting in on internal economic security y1 y2 y3 y1 y2 y3 y1 y2 y3 average official 100 usd exchange rate, uah (f1) 0.897 0.919 0.444 2 2 2 0,30 0,30 0,33 0,31 consumer price index, % (f2) planted area of fruit and berry crops, thousand hectares (f3) import of fruits, berries and grape, thousand tons (f4) export of fruits, berries and grape, thousand tons (f5) total tax burden, % of gdp (f6) 0.867 0.900 0.467 3 3 3 0,20 0,20 0,17 0,19 single tax for perennial plantations, % of the tax base (f7) 0.955 0.948 0.680 1 1 1 0,40 0,40 0,50 0,43 the duty rate on apples (from april 1 to november 30), % (f8) amount of fruit consumption by households, kg per capita (f9) average sale prices for fruits and berries, uah per 1 ton (f10) 0.612 0.642 4 4 0,10 0,10 0,07 discount rate of the nbu, % (f11) total 1,0 1,0 1,0 source: the authors’ development economic security are determined by the fishburn formula (formula 1). to calculate the average value of weight coefficients of internal economic security, macro-indicators, to which two or more indicators of horticultural enterprises activity are sensitive, are involved. according to table 3, we make a conclusion that economic security of horticultural enterprise is weak against the usd exchange rate(f1), total tax burden (f6), single tax for perennial plantations (f7), average sale prices for fruits and berries (f10). authors’ integrated index of external economic security of horticultural enterprises (ees): ees = 0.31 f1 + 0.19 f6 + 0.43 f7 + 0.07 f10 (3) where: f1 – official usd exchange rate, f6 – total tax burden, f7 – single tax for perennial plantations, f10 – average sale prices for fruits and berries. stage 3. ensuring the development of measures of economic security of the enterprise and recommendations for their implementation (identification of performers, establishment of deadlines, expected results). in the framework of this stage the conformity of measures of economic security to the main directions of activity and purpose of the horticultural enterprise is checked. stage 4. implementation of measures to ensure economic security in the financial and economic activity of the enterprise. baltic journal of economic studies 75 vol. 8 no. 2, 2022 a) b) c) d) e) f) r² = 0,8969 0 10 20 30 40 50 60 70 80 0,0 1000,0 2000,0 3000,0p ro fi ta bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % official 100 usd exchange rate, uah r² = 0,0948 0 10 20 30 40 50 60 70 80 0 50 100 150 200p ro fi ta bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % consumer price index, % r² = 0,1148 0 10 20 30 40 50 60 70 80 200 220 240 260 280pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % planted area of fruit and berry crops, thousand hectares r² = 0,0036 0 10 20 30 40 50 60 70 80 0 500 1000 1500pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % import of fruits, berries and grape, thousand tons r² = 0,0603 0 10 20 30 40 50 60 70 80 0 200 400 600pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % export of fruits, berries and grape, thousand tons r² = 0,8675 0 10 20 30 40 50 60 70 80 22 24 26 28 30 pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % total tax burden, % of gdp g) h) i) j) r² = 0,9554 0 10 20 30 40 50 60 70 80 0 0,2 0,4 0,6 pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % single tax for perennial plantations, % r² = 0,0007 0 10 20 30 40 50 60 70 80 0 2 4 6 pr of ita bi lit y of o pe ra tin g ac tiv ity o f ho rt ic ul tu ra l e nt er pr is es , % amount of fruit consumption by households, kg per capita r² = 0,6118 0 10 20 30 40 50 60 70 80 0 5000 10000pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % average sale prices for fruits and berries, uah per 1 ton r² = 0,0666 0 10 20 30 40 50 60 70 80 0 10 20 30 pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % discount rate of the nbu, % baltic journal of economic studies 76 vol. 8 no. 2, 2022 g) h) i) j) r² = 0,9554 0 10 20 30 40 50 60 70 80 0 0,2 0,4 0,6 pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % single tax for perennial plantations, % r² = 0,0007 0 10 20 30 40 50 60 70 80 0 2 4 6 pr of ita bi lit y of o pe ra tin g ac tiv ity o f ho rt ic ul tu ra l e nt er pr is es , % amount of fruit consumption by households, kg per capita r² = 0,6118 0 10 20 30 40 50 60 70 80 0 5000 10000pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % average sale prices for fruits and berries, uah per 1 ton r² = 0,0666 0 10 20 30 40 50 60 70 80 0 10 20 30 pr of ita bi lit y of o pe ra tin g ac tiv ity of h or tic ul tu ra l e nt er pr is es , % discount rate of the nbu, % figure 3. macro-indicators of horticultural enterprise development: correlation and regression analysis source: the authors’ development stage 5. monitoring the implementation of measures to ensure the economic security of the enterprise by the subjects of the first and second level and partially by the subjects of the third level, if any, in the organizational structure of the horticultural enterprise. 4. conclusions management of economic security of horticultural enterprises is a set of actions carried out by the subjects of economic security of the horticultural enterprise, aimed at reducing or eliminating the negative impact of internal and external threats to achieve the target state of economic security. management of economic security of horticultural enterprises solves such acute problems as ensuring economic security of horti cultural enterprises as economic entities, ensuring food security, employment in horticulture, as well as in processing enterprises, rational use of land, development of rural areas, etc. the developed protocol of economic security management of horticultural enterprise includes interconnected and sequential stages and is adaptive to modern conditions of financial and economic activity of horticultural enterprises. the approach developed by the authors to determine the internal economic security of horticultural enterprises involves the use of the weight of financial (0,25), social (0,25), environmental and production (0,31), technological (0,15), personnel and social (0,08), marketing (0,21) components of economic security of horticultural enterprises. the approach developed by the authors to determine the foreign economic security of horticultural enterprises involves the use of the weight of four macroeconomic indicators: the official dollar exchange rate (0,31), the total tax burden, (0,19), the single tax on perennial plantations (0,43), average sales prices of fruits and berries (0,07). the main directions of our further research is to identify the main measures to ensure internal and external economic security of horticultural enterprises. references: kiriienko, a. v. 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(2016). structuring of sources of attracting capital toagricultural production as a prerequisite for the formation of an effective investment mechanism in the agricultural sector. economic annals-xxi, vol. 159(5-6), pp. 29–33. doi: http://dx.doi.org/10.21003/ea.v159-06 rex, s., & rex, a. (2018). detection of cyanide in freshwater fishes relative to sex dimorphism using landmarkbased geometric morphometrics in agusan del sur, philippines. international journal of biosciences, vol. 12(2), pp. 177–193. doi: http://dx.doi.org/10.12692/ijb/12.2.177-193 baltic journal of economic studies 86 vol. 3, no. 2, 2017 corresponding author: 1 department of economics and market relations modelling, odessa i.i. mechnikov national university. e-mail: masliy.natalia@gmail.com 2 department of economics and market relations modelling, odessa i.i. mechnikov national university. e-mail: nvzakharchenko777@gmail.com 3 department of economics and market relations modelling, odessa i.i. mechnikov national university. e-mail: ludmiluk333@gmail.com peculiarities of the international outsourcing services: ukrainian perspectives natalia maslii1, natalia zakharchenko2, luydmila kostolonova3 odessa i.i. mechnikov national university, ukraine abstract. this article analyses the theoretical foundations of outsourcing and the focus of the outsourcing market in ukraine. the criteria of assessment for the transfer of business functions to outsourcing are determined and emea evaluated according to these criteria. the aim of this work is to study the international outsourcing of services and the implementation of analysis of the characteristics of the process of selecting areas for the transfer of business functions to international outsourcing, and in this context to determine the prospects for ukrainian companies in this market. methodology. the study is based on the estimation of the states of the emea on the key criteria for transferring business functions to outsourcing. when assessing countries, factors are used, which are important indicators of the economic and political climate in the country, and you need to consider when choosing where to send the direction to outsourcing. the assessment of the countries is conducted on a number of criteria such as: labour cost in the country, the attitude to private property, foreign languages’ skills (in the language of the country of the customer), availability of developed infrastructure, government support, and implemented under this context measures of state regulation, etc. results of the evaluation showed that over the past few years in many countries, there has been rather significant activity aimed at improving the country’s attractiveness as an international outsourcers, including in ukraine, so ukraine has all the prerequisites to occupy a worthy place in the market players of international outsourcing and thus get all the benefits of scientific and technical development and integration in the innovation sector of the world economy. practical implications. the research is needed for the classification of countries according to their attractiveness because each customer has their own priorities when choosing a supplier and in order to highlight strengths and weaknesses inherent in a particular country. also, the study is intended to help potential customers of outsourcing services to identify the most suitable locations for the transfer of business functions to international outsourcing. value/originality. the findings of the study can provide a better understanding of such a category as international outsourcing and help customers of outsourcing services to conduct their own assessment of the transmission of their business functions to international outsourcers. key words: outsourcing, international outsourcing, it outsourcing, ukrainian pi account, emea, evaluation criteria, evaluation. jel classification: f490, m210 1. introduction the modern conditions of globalization and internationalization of production and economic activities of market forces and pressure from competitors force many companies-banks, insurance and investment organizations, industrial enterprises to consider outsourcing business processes as one of the important competitiveness forming factors. the concept of “outsourcing” is of the english origin or rather the abbreviation of the english term “outside source using”, which means the application of external sources or resources (suchanek, 2015). outsourcing allows maximizing the use of the strengths of participants of economic relations, achieving the necessary competitive advantage by allowing each party to carry out those functions in which it mostly succeeds, as well as solving important strategic tasks. by outsourcing, companies are able to obtain a cheaper service non-core activities and high quality of work, highly qualified servicing of the specialized areas. big businesses get additional savings due to the scale of production. today, it is impossible to imagine the development of the world economy and of the enterprises themselves baltic journal of economic studies 87 vol. 3, no. 2, 2017 without the use of outsourcing. almost any large american or european corporation does not spend time and money on non-core functions, transferring them to outsource to suppliers from their country or from other countries. this behaviour in the market allows not only reducing costs, achieving a high quality of work performed at the expense of high qualification of employees of the service provider of outsourcing but also freeing up a considerable part of the money and manpower that can be directed at solving complex, strategic problems and to achieve significant competitive advantages. today we can say that in the future it is those market participants will operate successfully who are now transfer much of the internal processes to outsourcing. meanwhile, it should be noted that besides the obvious benefits of outsourcing, it is associated with several risks. these risks may be associated with the choice of service provider, preparation of the contract for outsourcing the implementation of the transactions, and such independent from the customer factors as the degree of support from the government of the country where the planned transfer of business functions to outsourcing, the degree of awareness of this country, the labour pool of the outsourcer, and the level of the qualifications, political and economic stability, etc. thus, consideration of the development in the context of international outsourcing relationship is very important. this is especially important for determining the prospects of operation of the ukrainian enterprises in the international market of outsourcing services. 2. the analysis of recent researches and publications the problem of efficiency of the introduction of outsourcing of business processes as one of the competitiveness forming factors lies in that they are fairly little investigated in the literature, are mostly fragmented, and do not provide a general vision of the situation in the world markets. most of the works are devoted to the study of the introduction of outsourcing at the enterprises of specific industries and of informationpublicity character. aspects of interaction between companies’ outsourcing business processes in foreign literature are considered by such authors as: a. aksenov, g. anikin, r . aalders, j.-l. bravar, g. van der heiden, p. gottschalk, j. guevara, r . g. brown, k.  dreyfus, s. kalendzhyan, n. carr, l. cohen, j. marriott, g. morgan, g. nolan, s. notarpanaro, austin, x. sollyseter, e. sparrow, k. tornblom, f. racer, k. halle, x. huntley, j. harris, d. v. cheremisin, a. young and others. this situation allows, using a scientific approach, summarizing and arranged all the previously obtained results, to do their own research of international outsourcing services. 3. the main material outsourcing business processes are influenced by the economic situation in the country, just as all other business processes of the company, however, in the context of the economic crisis, the company must continue to carry on business and make a profit. the potential generated by collaboration with suppliers of business services cannot refuse any modern company because of the increase in efficiency caused by the implementation of technological innovations, as well as knowledge and experience of professionals is essential for business success. today, many companies run their deals for outsourcing not effective enough, not taking into account the changes and challenges, which are in the market. but also many managers that use the services of third-party organizations not just to “patch holes” in the work of their own financial, legal, and other departments but in order to have a serious and profound strategic impact on a business, and such a behaviour is the most relevant in the current crisis conditions. in connection with the economic crisis, there is an urgent need to reduce costs and new market requirements to the business, the accumulation of activity by turning to it outsourcing and outsourcing business processes and reducing the number of requests to external service providers. the financial component of outsourcing deals is becoming more complex and risky, and it puts additional pressure on those responsible for the decision. now they have to demonstrate a higher level of professional knowledge in the field of business, especially in terms of compliance with the internal requirements of the various departments, as well as work with external suppliers for outsourced services. it should be noted that relatively recently in ukraine, outsourcing began active development. partly, this activity can be attributed to companies with western capital, which prefer to focus on core business, shifting processes to outsourcers who have the necessary level of training services for the special systems. in turn, this allows reducing the cost of template operations, improving the efficiency of business processes and to new services in the shortest possible time. however, some percentage of companies with ukrainian capital still confronts the contractors, believing that outsourcing services unnecessarily expensive, and was entrusted to lead important infrastructure projects to staff members, considering it as a cost centre that provides the infrastructure function, not a source of business benefits. as evidenced by studies of ancor holding on “evolution of outsourcing. analysis of the relevance and quality assessment of services”, which was conducted in 2016 among managers of foreign and ukrainian companies operating on the territory of ukraine, 36% of respondents noted that their employers outsourced baltic journal of economic studies 88 vol. 3, no. 2, 2017 business processes including: it services is 40,5%, logistics  – 35,1%, resource support of production processes  – 27%, marketing services at 21.6%, accounting for 13.5%, payroll 13.5%, processing and systematization of information to 8.1%, outsourcing of medical representatives  – 8.1%, accounting personnel and hr administration  – 5.4%, and administrative functions  – 2.7%. the survey showed that 41.2% of respondents believe the main advantage of using outsourcing services saving own resources, 37.6% of respondents said about optimizing and accelerating business processes, 32.9% believe that their business became more effective, 14.1%  – improvement of the quality and control of work processes, 14.3% consider that thanks to the outsourcing companies, they are able to use solutions based on the latest achievements of the industry (kononov, 2016). for a fuller understanding of the category of outsourcing, there is its classification. the analysis of scientific sources showed that among scientists, there is no single approach to the classification of types of outsourcing (suchanek, 2015; horova, 2014) but mostly scientists differentiate between the types of outsourcing according to the nature of the activities transferred to outsourcing. the most appropriate classification according to the author is the classification of maiorova i. n. by types of activities. she classifies them so: it outsourcing, manufacturing outsourcing, logistics outsourcing, staff outsourcing, accounting outsourcing (mayorov, 2010). in ukraine as in many other countries, the most widely outsourced is it technology. this can be explained primarily by the presence in our country of scientific and technological potential and human capital, which has a competitive expertise in this area. so after ten years of appearing on the market, an industry engaged in software development services software it products, complex solutions for their testing and support, became one of the leading in the country. not only growth but also on the contribution to the trade balance of the country. according to ukrinform, in recent years the industry of it outsourcing is growing rapidly  – about 40% a year and if this trend continues, in 10 years, the size of this sector in ukraine will amount to $10 billion, and in this area will work more than 200 thousand representatives [14]. it should be noted that programs developed in ukraine are used in the information systems of major global banks, the management of boeing, in the billing systems of leading communications operators. in ukraine, there are companies who develop and promote the program under its own brand  – gsc world (games “cossacks”, “s.t.a.l.k.e.r .”), “terrasoft” (crm system), eleks software (information system for medical institutions doctor eleks, eleks), navigation software autonavigator), “visicom” (e-map) (ukrinform (2010)). however, ukraine is now at the end of the list of emea (europe, middle east, and africa), where it has overtaken not only the countries of eastern europe but also african countries such as mauritius and morocco. thus, according to gartner’s emea region in 2016, every twelfth company ordered outsourcing software development in mauritius. for ukraine, the number of such requests made 1 to 30. in order to understand what the constraints are and what are the prospects of ukrainian companies in the international market of outsourcing services, it is needed to determine the place of our country among the competitors, its strengths, and weaknesses. also, given the urgent need for cost reduction and improvement in this regard, many customers interest in the services of outsourcing, the author proposed the method of categorizing countries from different regions of the world with the aim of identifying the most attractive locations in terms of transmission destinations for outsourcing. the assessment of the countries is conducted on a number of criteria such as: cost of labour in the country, the respect for private property, foreign language proficiency (the language of the country of the customer), availability of infrastructure, support from the government and the introduction of measures of state regulation, etc. the goal is not only to classify countries according to their attractiveness because each customer has their own priorities when choosing a supplier but primarily to highlight strengths and weaknesses inherent in that particular country. this study is also intended to help potential customers of outsourcing services to identify the most suitable locations for the transfer of business functions to international outsourcing. figure 1 shows the evaluation criteria of the countries for the transfer of business functions to international outsourcing. the basis of this classification lays in the statistical information of gartner, dedicated to research in the field of it and telecom (mironov, 2014). support from the government: this criterion shows the extent, to which government institutions and ministries promote their country as an offshore outsourcer. w hat measures are being taken to support and protect local service providers. it also assesses the willingness of the government to develop and invest in the educational system to acquire skills and knowledge of workers. reserves of labour (human capital): manpower was evaluated on quantitative and qualitative grounds. applications  – project management skills, competence in the field of programming, management of business processes, etc., the number of graduates over the past year is also taken into account. it is necessary to assess the country’s ability to provide manpower, as needed by the customers. infrastructure: this criterion includes an assessment of operational reliability, quality, and sustainability of infrastructure: electricity, telecommunications, and baltic journal of economic studies 89 vol. 3, no. 2, 2017 quality of roads, rail services, air, and maritime traffic within and outside the country. education system: to assess the quality of the educational system, also the assessment is based on the number of higher education institutions in the country, and the number of graduates who received education in the promising sectors for the last time. potential costs: this category assesses the cost of labour in the country, other compensation to employees, as well as the cost of real estate, infrastructure, and telecommunications. the political and economic situation in the country: the criterion includes political stability, corruption, the level of security; also considers the possibility of international terrorism or wars in the country, the presence of the trade unions, the growth of gdp, and the stability of the national currency. global and legal maturity: assesses the presence of international service providers. to assess the degree of legitimacy is from the point of view of compliance with international standards, including overall legislation, tax system, and laws that protect intellectual property. it also assesses the ability of the legal system to protect and support foreign units that operate in the country, and the attitude of intellectual and private property. cultural compatibility and language skills: in this case, we assess how cultural differences with the country of the customer may hinder the successful conduct of business. assess the level of accessibility, including the proximity and accessibility of centres, the ability to quickly get into the country, as well as the difference in time. the assessment also includes oral and written language skills and knowledge of technical and business vocabulary. evaluated knowledge as english  – the primary language of offshore outsourcing, and also german (in eastern europe), and japanese (in asia pacific). information security, protection of intellectual and private property: assessed the effectiveness of legislation from the point of view of intellectual property protection, information protection, copyright, brand protection, and patent law. conducted by the author of the study, the criteria above are given in table 1. it showed, in the last few years in many countries has been rather significant activity aimed at improving the country’s attractiveness as an international outsourcing (marriott, i., karamouzis, f. & huntley, h. (2009)). considered in more detail, the results of the analysis of the region belong to ukraine – europe, middle east, and africa. from this region to the list of thirty leaders, there were 13 countries. this includes countries, which already for a long time are members of the eu, and those who have joined recently, or not included at all. for the first time in 2008, this list includes two north african countries  – morocco and egypt (table 1). the fact that none of the countries of the region have reached a rating above “good” in the category of “government support” reflects the need to undertake a number of measures at the government level for the support of foreign and local suppliers of outsourcing services. this is especially felt in ukraine. that the state of ukrainian entrepreneurs is expected not only the solution of fundamental problems of education but also much more: reducing the tax burden, effective laws, and mechanisms of venture investment. at the time the state protectionism has helped the indian companies to enter into world leaders in the development of custom software. evaluation criteria reserves of labour (human capital) support from the government infrastructure the education system the potential costs the political and economic situation in the country global and legal maturity cultural compatibility and language skills information security, protection of intellectual and private property fig. 1. criteria for the assessment of the transfer of business functions to outsource baltic journal of economic studies 90 vol. 3, no. 2, 2017 ukraine needs to learn from the indian experience and to initiate the draft law on the adoption of a special tax regime for companies operating in the market of information technologies. its implementation will help in the short term to increase the amount of “new export industry” significantly. it should be noted that the last few years ukrainian companies-outsourcing companies such as epam, ciklum, eleks, luxoft, n-ix, miratech, intetics, softserve very actively communicate with representatives of legislative and executive authorities and this has led to the adoption of a number of bills. it was expected that they will provide more opportunities for the industry, more benefits, but they were taken in a shortened version, and unfortunately are the minimum possible, in order to support the export outsourcing. data obtained in the field of human resources point to labour shortages and insufficient level of its quality. in this category, none of the countries received a rating above “good.” the development of the economies of israel, ireland, and spain indicates a high level of development of their infrastructure. these same countries and russia received the highest rating in quality of education. as for ukraine, it is enough appreciating the level of a basic university or technical education (“good”), it should be noted that universities do not provide in-depth training in the field of information technology, do not prepare analysts or programmers for specialized areas of the information technology market. it shows a rating of “satisfactory” in terms of the labour pool. on existing problems in infrastructure provision indicates a “satisfactory” assessment. so despite the development of science and technology in ukraine absolutely there is no connection “idea-product”. the country has almost no powerful centres of innovation, which could support the development of advanced industries and services. the removal of these barriers for the outsourcing market development in ukraine will allow our country to join a huge global industry with a wide range of opportunities for different specializations. ukraine showed good results in the area of potential expenditure. however, in the whole region, the level of costs should be assessed on a more regular basis because the level of wages, the value of the property, payment of telecommunication, and other expenses have shown a steady growth in the long term. countries such as ireland, israel, and south africa are characterized by a high level of english despite a large number of english-speaking population and the high quality of their education. the level of many other countries in this category had also become quite high in recent years, due to the response to increased needs of buyers in continental europe. only that country that has joined the list of leaders of morocco effectively uses in the business of outsourcing knowledge of french. in ukraine, the rating on this item is “satisfactory” because our professionals have insufficient knowledge of the english language. table 1 assessment of the state of europe, the middle east, and africa on key criteria for the transfer of business functions in international outsourcing countries factors su pp or t f ro m th e go ve rn m en t r es er ve s o f l ab ou r (h um an c ap ita l) in fr as tr uc tu re k no w le dg e of fo re ig n la ng ua ge s ed uc at io n sy st em po te nt ia l e xp en se s po lit ic al a nd ec on om ic st at e of th e co un tr y in fo rm at io n se cu ri ty , p ro te ct io n of in te lle ct ua l a nd pr iv at e pr op er ty c ul tu ra l co m pa tib ili ty g lo ba l a nd le ga l m at ur ity hungary 2 3 3 3 3 3 4 3 4 3 egypt 3 2 3 3 3 3 2 2 3 2 israel 3 3 4 4 4 2 3 5 4 4 ireland 4 3 4 5 4 3 5 5 5 5 spain 3 3 4 3 4 3 5 4 4 4 morocco 3 2 2 3 1 3 2 3 3 2 poland 3 3 2 3 3 3 4 3 4 3 russia 2 3 3 2 4 3 2 2 3 2 romania 3 2 2 3 3 3 3 2 3 2 slovakia 2 2 2 3 3 4 4 3 4 3 ukraine 2 2 2 2 3 4 1 1 2 2 czech republic 3 3 3 3 3 3 4 3 4 3 south africa 2 2 2 5 3 2 2 4 4 3 * the assessment was conducted on a five-point scale, where excellent is 5 points, very good – 4 points, good – 3 points, satisfactory – 2 points, bad – 1 point. compiled by the author on the materials (marriott, i. (2014); marriott, i. (2005); marriott, i. (2013)) baltic journal of economic studies 91 vol. 3, no. 2, 2017 among the countries that received lower ratings in the area of the political and economic situation, mainly there are those that are not a part of the eu. however, among the countries-members of eu and also many of those, whose activities must be under constant supervision from the point of view of efficiency and quality of services and compliance with the eu law. the region is characterized by a great cultural diversity, with cultural compatibility, only ukraine received the lowest rating. more recently, many countries in the region do not become offshore centres for traditional service providers of outsourcing and major suppliers from india. this is reflected in the category “global and legal maturity”, where 8 of the 13 countries were valued very highly. not many countries (except ukraine) have a sufficient number of providers that are actively positioning themselves outside of their own country. as for the category of “protection of intellectual and private property,” such factors as the maturity of national economies and membership in the eu allowed a number of countries in the region to obtain a high enough rating. as for ukraine, in the report “global competitiveness 2015-2016” our country ranks 134th on the protection of the rights of ownership and 120 for the protection of intellectual property rights from 139  countries. thus, for ukraine, it is necessary to improve the system of protection of intellectual and private property; it must be dl-ing the presence of a system of forms, methods, and ways of protection of rights. 4. conclusions therefore, in modern conditions of strengthening of processes of globalization, international outsourcing reflects the new processes and relationships due to a tendency to geoplanetary interaction and integration. it becomes a way for the international transmission of innovation and the growth of innovative activity of the national and world economy, which in turn leads to improving the quality of human capital of the country, which acts as an outsourcer. it should be noted that ukraine has all the prerequisites to occupy a worthy place in the market players of international outsourcing and thus get all the benefits of scientific and technological development and integration in the innovative sphere of the world economy. proposed technique for the classification of countries by the number of signs allows potential customers to facilitate the choice of the country for the purpose of conveying direction for outsourcing. this technique not only classifies countries according to their attractiveness but also allows you in visual form to highlight the strengths and weaknesses inherent in each country. in addition, the developed method allows the service providers of these countries to assess the position of their country or region in the world market of outsourcing services, and calculate your chances of increasing market share in the short and long term. in our opinion, ukrainian companies have a good chance to accelerate the solution of two main problems of international outsourcing by combining their efforts, because it will help to formulate and defend a common interest, to inform the public about the success of the industry. but, the development of international outsourcing in ukraine is hampered by two main obstacles: the underestimation of the potential customers of the possibilities of the country and serious institutional barriers. in public opinion, there is developed a strong belief that the only reason these issues are not within the jurisdiction of the individual companies, they cannot be solved without active government intervention. in world practice, there are precedents when the government action was crucial to start the accelerated development of international outsourcing, however, entrepreneurs should not overestimate its capacities. references: ukraine is a leader in the export of professionals. [electronic resource]. retvitered from: http://news.finance.ua/ ru/~/2/0/ all/2012/11/19/291488 mironov, m.g. (2014). your competitiveness. m.: alpha press, 160. marriott, i. (2014). 7 gartner's 30 leading locations for offshore services, 10. marriott, i., karamouzis, f. & huntley, h. (2009). analysis of egypt as an offshore services location, 9. marriott, i. (2005). consider offshore options around the globe, 14. marriott, i. (2013). 30 leading locations for offshore services, 9. everest research institute [electronic resource]. retvitered from: http://www.everestresearchinstitute.com ukrainian it industry to keep on growing in 2012-2013 [electronic resource]. retvitered from: http://itonews.eu/ ukrainian-itindustry-to-keep-on-growing-in-2012-2013/ central and eastern european outsourcing association [electronic resource]. retvitered from: http://ceeoa.org/ kononov i. (2016). demand analysis and assessment of the quality of outsourcing services in ukraine. [electronic resource]. retvitered from: http://www.chamber.ua suchanek, s. a. (2015). development of outsourcing and its forms: ukrainian and international aspects [electronic resource]. retvitered from: http://ena.lp.edu.ua:8080/bitstream/ntb/33811/1/29-208-215.pdf. horova, k. a. (2014). determination of the main approaches to the classification of outsourcing at the present stage of economic development. economic analysis : coll. sciences. papers. ternopil : publishing printing center of ternopil national economic university “economic thought”,18, 1, 12-19. baltic journal of economic studies 92 vol. 3, no. 2, 2017 mayorov, s. n. (2010). outsourcing in international trade. theoretical and practical aspects of economics and intellectual property, 1, 1, 233–239. ukrinform (2010). [electronic resource]: official website. – retvitered from: http://www.ukrinform.ua/ukr/ news/ukraiinskiy_eksport_poslug_it_autsorsingu_shchoroku_zrostae__na_40_1859411 наталья маслий, наталья захарченко, людмила костолонова особенности международных аутсорсинговых услуг: перспективы для украины аннотация. в данной статье проанализированы теоретические основы аутсорсинга и особенности рынка аутсорсинга в украине. определены критерии оценки стран для передачи бизнес-функций на аутсорсинг и проведена оценка emea по этим критериям. целью работы является исследование международных аутсорсинговых услуг и осуществления анализа особенностей процесса выбора направления для передачи бизнес-функций на международный аутсорсинг и в этом контексте определить перспективы для украинских предприятий на этом рынке. методика. исследование основано на оценке государств региона емеа по ключевым критериям для передачи бизнес-функций на аутсорсинг. при оценке стран были использованы факторы, которые являются важными показателями экономического и политического климата в стране, и которые необходимо учитывать при выборе места для передачи направления на аутсорсинг. оценка стран проводилась по ряду критериев, таких как: стоимость рабочей силы в стране, отношение к частной собственности, владение иностранными языками (на языке страны заказчика), наличие развитой инфраструктуры, поддержка со стороны правительства и введены в связи с этим меры госрегулирования и т.д. результаты оценки показали, что в течение последних нескольких лет во многих странах наблюдалась довольно существенная активность, направленная на повышение привлекательности страны в качестве международных аутсорсеров, в том числе и в украине; таким образом, украина имеет все предпосылки, чтобы занять достойное место на рынке игроков международного аутсорсинга и за счет этого получить все преимущества научно-технического развития и интеграции в инновационную сферу мировой экономики. практическое значение. данное исследование необходимо для квалификации стран по их привлекательности, поскольку у каждого заказчика есть свои приоритеты при выборе поставщика и для того, чтобы выделить сильные и слабые стороны, присущие той или иной стране. также исследование призвано помочь потенциальным заказчикам услуг аутсорсинга выявить наиболее подходящие места для передачи бизнес-функций на международный аутсорсинг. значение/оригинальность. полученные данные исследования способны обеспечить лучшее понимание такой категории как международный аутсорсинг и помогут заказчикам услуг аутсорсинга, проводить собственную оценку мест для передачи своих бизнесфункции на международных аутсорсеров. baltic journal of economic studies 165 vol. 7 no. 4, 2021 corresponding author: 1 private higher educational establishment-institute ”ukrainian-american concordia university”, ukraine. e-mail: oleksandr.romanovskyi@uacu.edu.ua orcid: https://orcid.org/0000-0002-3618-2999 2 national pedagogical dragomanov university, ukraine. e-mail: yuliia.romanovska@uacu.edu.ua orcid: https://orcid.org/0000-0002-0207-3348 3 private higher educational establishment-institute ”ukrainian-american concordia university”, ukraine. e-mail: internship_wiuu@hotmail.com orcid: https://orcid.org/0000-0003-3614-544x doi: https://doi.org/10.30525/2256-0742/2021-7-4-165-175 academic capitalism as a driver of transformational change in the complex system of higher education and science oleksandr romanovskyi1, yuliia romanovska2, oleksandra romanovska3 abstract. the purpose of the work is to study the complex essence of higher education as an integral part of the anthroposphere (technosphere); to define the main fundamental tasks of innovative academic (university) entrepreneurship; to study the main types of innovations initiated by academic capitalism in the higher education system, which can lead to innovative changes and its classification; to determine the main objects of innovation activity in the field of higher education and science and expedient directions of further innovative development of higher education in ukraine; to study the types of innovations in the higher education system. innovative transformations in the sphere of higher education and science are considered by the authors as objectively conditioned transformational changes caused by the environment of academic capitalism. the core of the study is academic or university entrepreneurship based on the market relations spread by academic capitalism in the sphere of scientific and educational activities of universities, research institutes and other institutions and organizations of this field. an important basis of scientific work is the application to national conditions of the triple helix model of innovation of n. etzkowitz on the innovative development of society. scientific novelty consists of the following: the world experience of innovative transformations in the sphere of higher education and science occurring under conditions of academic capitalism is studied; theoretical data for new approaches in understanding of innovative transformations in the sphere of higher education and science which are economic categories and occur under market laws are formulated and offered; new approaches for further innovative reformation of higher education and science under conditions of academic capitalism are offered. a new scientific term of "innovatics of higher education" has been put into circulation. provisions on the uniqueness of the essence of higher education, the main fundamental tasks of innovative academic (university) entrepreneurship, the types of innovations initiated by academic capitalism in higher education that can lead to innovative changes, and their classification of both theoretical and practical importance for the development of domestic science and higher education are proposed. the main objects of innovative activity in the sphere of higher education and science, the corresponding directions of further innovative development of higher education in ukraine, as well as the types of innovations in higher education that can lead to innovative changes are also defined. key words: academic capitalism, entrepreneurial university, innovations, higher education and science, technosphere. jel classification: i21, i25 1. introduction the environment of academic capitalism, which covers virtually the entire sphere of science and higher education, has had both positive and negative effects on them. academic capitalism has sharply accelerated the commercialization of applied research and development results of universities and research institutes and has allowed these organizations and institutions to significantly capitalize their intellectual capital. this has given rise to progressive innovations baltic journal of economic studies 166 vol. 7 no. 4, 2021 and outstanding inventions. for example, there is an intensive innovative development in the higher education system, which can certainly be attributed to the positive influence of academic capitalism on the development of the material, technical, scientific and engineering potential of universities and colleges. on the other hand, the pursuit of profit and the general search for opportunities to commercialize r&d results, mainly the results of applied research and experimental development, leads to a significant decrease in demand and attention to the development of basic science and the search for basic scientific values. this leads to a slowdown in the production of new fundamental knowledge and inhibits the intellectual development of society and leads to a legitimate criticism of the influence of academic capitalism on science and higher education. the excessive entrepreneurial activity of universities in the direction of profits from the development and commercialization of applied research instead of pure science and fundamental research leads to the loss of the position of universities and colleges as "temples of science". however, there are still many truly academic institutions (higher education institutions and research institutes) that continue to conduct the kind of basic research that is difficult to commercialize, but which constitutes true "scientific knowledge", or in other words, human knowledge. this article analyzes innovative changes in the system of higher education and science, an integral part of the anthroposphere (technosphere), caused by the spread of academic capitalism. possible directions and essence of innovative transformations in the sphere of higher education and science are investigated, and the negative influence of academic capitalism on this sphere of public activity is analyzed. the relevance of the topic is related to the need to implement innovative transformations in the system of higher education and science to improve its level, as well as for efficiency and further integration into the european and world system of higher education and science. on the basis of study and analysis of the theory and practice of innovative development of higher education and science systems of the leading countries in the world it is necessary to develop principles, directions and objectives for innovative development of higher education and science in ukraine to create and implement national programs of change in this field. 2. analysis of the main results of previous research and used literature (core sources) on the topic of work the period of "academic capitalism", caused by the commercialization of the results of budgetary and many other types of university research, began after world war ii. the impetus for the rapid development of entrepreneurship in science and education came from one of the best pieces of u.s. legislation, the bayh-dole act, commonly known as the patent and trademark law amendments act (a federal law enacted in 1980). as s. ezell points out, this law "allows universities, nonprofit research institutions, and small businesses to own, patent, and commercialize inventions developed as part of federally funded research programs in their organizations" (ezell, 2019). this was the beginning of the rapid development of applied research, the results of which could be turned into new developments and technologies for further commercialization. historically, academic capitalism emerged in the united states as a particular intellectual subtype (milieu) of the capitalist system. it is characterized by the extension of the laws and rules of the market economy to higher education and science. previously, higher education and science belonged to the non-profit sphere of intellectual activity and were designed to find, generate and disseminate knowledge for the benefit of all mankind. higher education institutions (heis) and scientific institutions (sis) were transformed from "temples of knowledge" into participants in the market of educational and scientific services with its inherent strict economic rules. the definition of "academic capitalism" was introduced in 1997 by s. slaughter and l. leslie (slaughter, leslie, 1997), who offered the following interpretation: "to maintain or expand resources, educators increasingly have to compete for outside money that comes from market research, variously called applied, commercial, strategic, and targeted research, whether that money came in the form of research grants and contracts, service contracts, partnerships with industry and government, technology transfer, or attracting more and more students paying higher fees. it is what the institutional and professorial market or market-like efforts to attract outside money that we have termed academic capitalism" (p. 17). in their books s. slaughter and leslie (slaughter, leslie, 1997), s. slaughter and g. rhoades (slaughter, rhoades, 2009) state the following: "innovative transformations in universities under the influence of the spread of market relations in the humanities spheres of society and the emergence in the second half of the twentieth century of a new type of capitalist relations in scientific, intellectual, technological and educational spheres – academic capitalism. in addition, there is a real opportunity to commercialize the results of r&d, which leads to the rapid development of the university and academic science and technology ". market relations in science and education, the ability to commercialize the results of intellectual activities of universities and research organizations have led to the spread of academic or university entrepreneurship and baltic journal of economic studies 167 vol. 7 no. 4, 2021 the accelerated formation of a favorable innovation climate, that is, the accelerated emergence of innovation and its wide spread in many areas of society. the contribution of innovations developed and implemented by universities and research organizations, for example, to the u.s. economy brought billions of dollars and accelerated the development of applied science and new technologies. gradually, the influence of academic capitalism began to spread to other countries. academic capitalism has transformed higher education and science into an environment of academic innovation. universities and scientific organizations were transformed from "temples of science" into academic innovation entrepreneurial institutions. it is known that j. schumpeter was the first to develop a complete description of innovation processes (he analyzed "new combinations" of changes in the development of economic systems). referring to j. schumpeter's book (schumpeter, 1934), j. fagerberg (fagerberg, 2008) emphasizes as follows: "first of all, he added the definition of innovation (or "development" as he originally formulated it) as new combinations of new or existing knowledge, resources, equipment and so on. second, he pointed out that innovation must be distinguished from invention. the reason schumpeter emphasized this distinction is that he viewed innovation as a specific social activity (function) carried out in the economic sphere and having a commercial purpose, while inventions can be carried out everywhere and without the intention of commercialization. thus, for schumpeter, innovation is new combinations of knowledge, resources, etc. that are attempted (or put into practice) for commercialization. he called this combinatorial activity the entrepreneurial function, and the social agents who perform this function the entrepreneurs" (fagerberg, 2008). later, j. schumpeter (schumpeter, 1976) and h. mensch (mensch, 1979) introduced the term "innovation", which was defined as the embodiment of scientific discovery in a new technology or product. there are many publications devoted both to the problems of academic capitalism and to the experience of commercialization of innovations in university research activities (r&d). however, a comprehensive study of different types, forms, and directions of innovation activity in the sphere of higher education and science, including heis and scientific organizations (sos) involved in the environment of academic capitalism, has not been performed yet. the authors of this work have conducted a longterm study of the best practices of innovative activities of institutions and organizations in the sphere of higher education and science in developed countries. as a result, a new interdisciplinary scientific and applied direction "innovatiсs of higher education" was brought to public discussion by o. romanovskyi & yu. romanovska (romanovskyi o., romanovska yu., 2020; romanovskyi o., romanovska yu., roma novska o., makhdi m.e., 2021). in this paper, the authors offer further development and specification of theoretical and practical provisions of innovative development of higher education, identifying the unique features and functions of higher education in modern society under conditions of academic capitalism. the authors believe that the findings and recommendations of this study are useful for specialists in higher education and science systems in developed countries, as well as in developing countries. a background report prepared for the second global education industry summit, held september 26-27, 2016 in jerusalem, states the following: "reviews the available evidence on innovation in education, the impact of digital technologies on teaching and learning, and the role of digital skills and the education industry in the innovation process, using oecd survey data" (oecd, 2016). "a better understanding of the education industry, including its market structures and innovation processes, will help create a more developed relationship with the education sector. innovation in the industry which develops products and services that can drive innovation in schools does not happen in isolation from what happens in the education sector. only when education systems develop an innovationfriendly culture, supported by an innovation-friendly business environment and policies, will industries begin to engage in risky research and development. governments can support this by fostering a climate of entrepreneurship and innovation in education" (p. 10). in addition, the report emphasizes that: "innovation in the public sector, and in education in particular, can be a major contributor to significant welfare gains. governments provide a large number of services in oecd countries, and these services account for a significant share of national income" (p. 13). important theoretical studies, as well as practical recommendations and original methodology in the field of creating innovative entrepreneurial universities were carried out by the pioneer in this field burton r . clark (clark, 1998, 2000, 2004). theoretical and practical approaches to the problems of innovative development of society under the "triple helix model" proposed by henry etzkowitz (etzkowitz, 2003, 2008, 2019), viale and etzkowitz (viale, etzkowitz, 2010), dzisah and etzkowitz (dzisah, etzkowitz, 2012), cadorin et. al. (cadorin, klofsten, albahari, etzkowitz, 2019), became the fundamental directions of innovative university entrepreneurship development, which significantly increased the role of universities in the innovative development of society. baltic journal of economic studies 168 vol. 7 no. 4, 2021 3. analysis of recent studies and publications considering the latest publications in the scientific literature, it should be noted that an article by s. graek (grajek, 2020) explores how universities are rapidly moving towards digital transformation. the following works are devoted to a critical study of the problems of academic capitalism. in "on academic capitalism", b. jessop highlights the following: "the growing trend toward academic capitalism and profit-oriented entrepreneurial practices in education and research discussed in the paper. this is happening as universities, in different ways and subject to more or less financial, administrative, and ideological pressure, behave less and less like centers of disinterested education and research and more like economic enterprises that seek to maximize their income and/or increase the economic competitiveness of the environment in which they operate". ( jessop, 2018). the article of p. somers et. al. (somers, davis, fry, jasinski, lee, 2018) defines "academic capitalism and a review of the research literature, presents perspectives on academic capitalism in the americas, and discusses the implications of academic capitalism for latin america. estimates of the usefulness of academic capitalism for brazil are given" (somers, davis, fry, jasinski, lee, 2018). in the following article (sigahi, t.f.a.c., saltorato, 2020), the authors conducted a systematic review of the literature on academic capitalism and proposed two classification schemes based on: a) analytical levels (macrostructural, organizational, individual) and actors; b) themes and contributions, research and reflection, building a theoretical framework, research themes and applications, emerging trends. this study can help not only to explore the characteristics of academic capitalism, but also to understand several ways in which neoliberal restructuring in universities. in his work, r . münch describes the most important features of academic capitalism and their impact on science as well as on the evolution of scientific knowledge, and notes that "academic capitalism is at the intersection of research, economic profit maximization, and innovation policy ", and examines the institutional conflicts of interest associated with corporate funding of research. he argues that "academic capitalism is a unique hybrid that combines the scientific search for truth and the economic maximization of profit and turns universities into businesses competing for capital accumulation and businesses into knowledge producers seeking discoveries that can be turned into patents and profitable goods" (münch, 2020). the report "structure of european educational systems 2020/21" provides information about the structure of the pan-european educational systems, from pre-school to higher education, for the academic year 2020/21. it includes national charts and a guideline for reading the charts. it also includes a map illustrating the main organizational models for primary and lower secondary education in europe: " unified structured education", "provision of a common core curriculum", and "differentiated lower secondary education". information is available for 43 european education systems, covering 38 countries participating in the eu erasmus+ program. the content of the report corresponds to the mission of the eurydice network (to understand and explain how the different education systems in europe are organized and how they work) (the structure of the european education systems 2020/21). the work (cai, ma, chen, 2020) considers higher education as an "engine" of innovation and a "catalyst" of sustainability development. the integration of the roles of "innovation engine" and "sustainability catalyst" is best reflected in the participation of higher education in innovation ecosystems. the theme of this special edition examines this topic from a variety of perspectives. this paper outlines a general concept of the relationship between higher education and the innovation ecosystem. a new definition of the innovation ecosystem is given and the three roles of universities in innovation ecosystems are identified based on a synthesis of relevant literature. the purpose of the work is to study the complex essence of higher education as an integral part of the anthroposphere (technosphere); to determine the main fundamental tasks of innovative academic (university) entrepreneurship; to study the main types of innovations initiated by academic capitalism in the system of higher education that can lead to innovative changes and their classification; to determine the main objects of innovative activity in the sphere of higher education and science and expedient directions of further innovative development of higher education in ukraine; to study the types of innovations in the system of higher education that can lead to innovative changes. scientific novelty lies in the following: the authors have studied the world experience of innovative transformations in higher education and science occurring under conditions of academic capitalism; formulated and proposed theoretical data for new approaches in understanding of innovative transformations in higher education and science, which are economic categories and occur under the laws of the market; proposed new approaches for further innovative reform of higher education and science in conditions of academic capitalism. a new scientific term of "innovatics of higher education" has been put into circulation. this study will use research methods such as: dialectical approach to analyze and comprehend the baltic journal of economic studies 169 vol. 7 no. 4, 2021 content and special characteristics of the innovative development of higher education on the basis of new phenomena of academic capitalism, university (academic) entrepreneurship, as economic categories in the system of socio-economic relations and connections of the integral economic system of modern knowledge society; abstraction methods, systemstructural and theoretical-informational approaches will be used to investigate the conditions of formation of new innovative forms of university (academic) entrepreneurship, peculiarities and essence of university business activity and its influence on the financial stability of higher education institutions; the methods of analysis and synthesis will be used to investigate individual innovative approaches and technologies in higher education and to form a holistic picture of the complex innovation activity of the subjects, objects and system of higher education as a whole. research methodology included critical study and awareness of the concept of innovation in higher education, analysis of literary sources, including electronic and computer aids, comparing and checking the feasibility or necessity of introducing different types of innovation, analysis of their effectiveness and the possibility of spread and implementation on objects and subjects of higher education, predicting ways of forming new innovative approaches, methods and technologies. 4. presentation of the main research material undoubtedly, the well-being of the members of a society depends on the level of development of higher education and science in that society. at the same time, higher education and science, as integral interrelated components of human intelligence and the academic freedom of society, stimulate both mutual development and the development of all humanity. since higher education also creates human capital and forms human resources, the development of higher education should be continuous, effective and innovative. thus, the unique characteristics of higher education as an integral part of the anthroposphere (technosphere) can be formulated as follows (figure 1). higher education as an integral part of the anthroposphere (technosphere) the treasury of knowledge is a set of systematized knowledge, acquired skills, innate abilities, as well as practical skills, ways of thinking, professional, ideological and civic qualities, moral and ethical values, and other competencies the educational and upbringing process is the provision of new knowledge (transfer of knowledge) to the citizens of the country and the upbringing of qualities necessary for society with the help of higher educational institutions and scientific organizations open educational, scientific and cultural systems, which have their own structure, purpose, characteristics and principles of functioning, exist and develop under the influence of the external environment (society) section of science in the theory and practice of training for the needs of society, the development of new techniques, methods and technologies the engine of the process of innovative socio-economic human society development the process of searching for new knowledge (scientific activity), the application of knowledge and technology transfer (scientific and technological activity) the sphere of transformative creative human activity the integral part of the economic complex of the country (as a branch of the national economy and its socio-economic system) the object of transformational changes in the environment of academic capitalism integrated subsystem of the overall complex system of education and science figure 1. unique characteristics of higher education baltic journal of economic studies 170 vol. 7 no. 4, 2021 the novelty of the work lies in the fact that the innovative changes in the system of higher education and science are investigated from the perspective of market-oriented transformation, covering all areas of the main actors of this system, namely universities and research institutes. the paper emphasizes that it is under the influence of market economic relations under academic capitalism that all changes in the system of higher education and science, including traditional, creative, scientific, educational, cultural and arts functions, take place. further consider the types of such innovations in the higher education system that can lead to innovative change, and classify them. most of them are directly or indirectly initiated by academic capitalism. innovations in higher education and science can lead to innovative changes of the following types: economic and market, technological, organizational, structural and pedagogical, educational, moral and environmental, cultural and artistic, other innovations caused by global changes, extraordinary and force majeure circumstances. in the context of academic capitalism, the function of academic or university entrepreneurship, which entrepreneurial universities as well as entrepreneurially oriented research institutes perform, is extremely important. the main task of innovative development of higher education in any country is to create the necessary conditions for purposeful business, scientific, educational, engineering and technological activities aimed at the formation of knowledge society with innovation-oriented type of state economy. further, in figure 2, the authors identified and presented the fundamental objectives of innovative academic (university) entrepreneurship. the main objects of innovative activity in the field of higher education and science are presented by the authors of this study in figure 3. the authors defined that the subjects of innovative activity in the sphere of higher education and science are private individuals or legal entities (universities, si, structural units of education and science, etc.), which carry out innovative activities, attract property and intellectual values, as well as invest their own or borrowed funds in the implementation of innovative socio-economic, social and humanitarian activities in the sphere of national projects. in this study it is considered necessary to define the directions of further innovative development of higher education and science in ukraine and, possibly, in other developing countries. these directions of further innovative development of higher education and science may be as follows (figure 4): the fundamental tasks of innovative academic (university) entrepreneurship development and implementation of concepts, methods, technologies, techniques of innovative economic and social development of local communities, regions and the country promoting effective entrepreneurship education and its development contribution to national economic growth, national gdp and competitiveness of countries' economies; development and spread of a new type of entrepreneurial activity in the intellectual sphere (academic entrepreneurship in universities) development of innovative activities of universities wide dissemination (transfer) of new knowledge, r&d results and advanced technologies promoting the financial self-sufficiency and independence of higher education institutions, increasing the level of material support for faculty and staff of higher education institutions the production and capitalization of new knowledge high-quality r&d, followed by effective commercialization of the results the formation of an entrepreneurial mentality in society figure 2. the main fundamental tasks of innovative academic (university) entrepreneurship baltic journal of economic studies 171 vol. 7 no. 4, 2021 objects of innovation activity in the field of higher education and science new experimental developments and innovative solutions of engineering and technical nature, innovative technologies for the production of new products (services) and mechanisms for their formation upbringing, education and training of entrepreneurial mentality and integrated corporate entrepreneurial culture among employees markets for educational and scientific services organizational and technical solutions of an economic, administrative, commercial or other (non-productive) nature that significantly improve the structure and quality of socioeconomic, community and humanitarian activities of the nation (non-productive and social sphere) the infrastructure of higher education and science in the socio-economic, social and humanitarian activities of the nation, university (academic) and intellectual entrepreneurship the cooperation of the "university – industry (business) – government (state)" triad innovative programs and projects new knowledge and intellectual products, educational and scientific services required qualifications of personnel creation of entrepreneurial ecosystems and optimization of the ecosphere of human economic activity figure 3. the main objects of innovative activity in the sphere of higher education and science directions for further innovative development of higher education the introduction of the institution of innovative academic (university) entrepreneurship development of a sector focused on academic entrepreneurship of non-profit and commercial universities with the participation of private capital development of endowment institute for financial support of leading research universities in the field of entrepreneurship granting full autonomy to universities at the legislative level to independently choose a development strategy, areas of statutory activity and achieve financial independence introduction of state (budgetary) and private (independent) project financing in higher education, organization of state support for cooperation between universities and industry (according to h. etzkowitz's triple helix model) the formation of an entrepreneurial mentality in all members of society, improving economic thinking, creative behavior, critical thinking and the development of creative tendencies among citizens of society figure 4. recommended directions for further innovative development of higher education in ukraine and other developing countries baltic journal of economic studies 172 vol. 7 no. 4, 2021 the authors consider academic capitalism, defined in seminal studies by slaughter and leslie (slaughter, leslie, 1997), slaughter and rhoades (slaughter, rhoades, 2009), as well as university entrepreneurship (by burton r . clark (clark, 1998, 2000, 2004) and henry etzkowitz (etzkowitz, 2003, 2008, 2019), as economic categories with its own characteristics related to the capitalization and commercialization of intellectual products, such as new knowledge, technology, teaching methods. it is also considered necessary to study, summarize the experience and describe the theoretical foundations and practical provisions of innovative activity in higher education on the basis of already known innovative activity in this area. it is expedient to allocate theoretical bases and practical provisions of innovative activity in the sphere of higher education as a separate scientific direction. the authors propose to introduce a new scientific direction in the sphere of higher education with a new scientific term innovatics of higher education. the use of the term higher education innovatics is appropriate to designate a separate scientific direction in the system of higher education together with other scientific areas, such as fundamentals of higher education, theory and practice of higher education, economics of higher education, etc. by its definition, theoretical foundations and practical provisions, a new scientific direction in higher education the innovatics of higher education includes a number of innovative changes in the following types of activities inherent in higher education: 1) teaching, training, learning, studying; 2) scientific and r&d activities, new technologies development, construction and design creativity; 3) engineering, technical, informational activities; 4) financial and economic support of the educational process and r&d, operating and business expenses, development and expansion of activities; 5) inventive and patent-licensing activities, technology transfer; 6) academic (university) entrepreneurship; 7) cultural and moral development, upbringing of human values; 8) education of honesty, justice and peacefulness; 9) tolerance, mercy, charity and compassion; 10) sports, recreational, festive and extracurricular activities, and other types of activities of universities, colleges and other institutions related to higher education. thus, innovatics of higher education (as a set of innovations in the whole sphere of higher education) includes innovative changes in almost all areas of higher education to improve and enhance the quality of professionally prepared for today 's community of responsible citizens and university development. they can be useful for the reform of the national system of higher education and for the development of new scientific directions in higher education. the foundations and concepts of innovatics of higher education were researched and developed on the basis of general theories of innovative activity in other spheres of human activity. innovatics of higher education should comprehensively promote the activities shown in figure 5. activities promoted by higher education innovatics to investigate the use and dissemination of innovation flows to contribute in society the need for innovative changes for continuous development, irreversibility of processes of innovation in all spheres of intellectual and economic human activity to promote and prove the benefits of innovation, the impact of innovation on the development of competition in higher education and science, as well as to accelerate and improve the development of higher education and science in the state as a whole to develop mechanisms of human adaptation to innovative changes to examine and propose ways to overcome resistance to innovation in higher education, pedagogical, scientific and engineering activities to study the principles of processes of development and formation of innovations, implementation of new solutions to existing problems to explore the mechanisms of change management figure 5. activities promoted by higher education innovatics baltic journal of economic studies 173 vol. 7 no. 4, 2021 summarizing the comprehensive study of the phenomenon of academic (university) entrepreneurship, it should be noted that innovative and entrepreneurial universities implement their activities in higher education and science under the current market laws of the economic system, interact with the internal forces of society (respond to its challenges and demands) and are under the influence of globalization pressure of the world community. the role of the state in the management of innovative activity in the sphere of higher education and science is important. it is necessary for the state to solve the following most important tasks (figure 6). 1. identify technological and economic core objectives, and develop a plan for macroeconomic transformation that mobilizes society with a unified focus on innovative development. 2. creating the necessary conditions that best facilitate the innovation and investment process. 3. uniting efforts of state bodies and business to support innovative initiatives of universities and subjects of science, stimulation of innovative management in this sphere, as well as spreading of innovations in this industry. support and practical implementation of h. etzkowitz's concept of innovative development of society according to the triple helix model [14–19]. 4. to use and improve the world's best practices in the field of innovative development of higher education and science. 5. active promotion of entrepreneurial intelligence and innovative thinking in society. innovation management should become a consolidated interaction of mechanisms of the state and business. creating conditions for achieving harmony between the interests of the state and the employee in the sphere of higher education and scientific-technical activity is the main task of the state level of management. this level becomes strategic, giving tactical and operational control to new innovative individual firms and specialized structures in higher education and science. at the same time, academic or university entrepreneurship has been noted as one of the main motivators and drivers of innovation in higher education and science sector. summarizing the results of a comprehensive study of the phenomenon of academic (university) entrepreneurship, the authors noted that entrepreneurial institutions of higher education carry out their activities in the field of higher education under the current market laws of economic system, interacting with the internal forces of society (with a response to its challenges and demands) under the influence of the globalization pressure of the world community. the authors argue that innovations in the field of higher education and science should be linked in order to lead to innovative changes. it is reasonable to consider innovative activity of higher education institution in the system of higher education as an economic the importance of the state in the management of innovation in higher education and science creation of necessary conditions for the organization and support of innovation and investment processes combining the efforts of state structures and business to support innovative initiatives of higher education and science subjects, stimulating innovative management in this sphere, as well as disseminating innovations in this industry. implementation of h. etzkowitz's concept of the triple helix model of creative cooperation of the "universities – business – state" triad using and improving the best international practices in the field of innovative development of higher education and science defining technological, economic and basic goals and plans for macroeconomic transformation to mobilize society with a unified focus on innovative development active promotion of entrepreneurial intelligence and innovative thinking in society figure 6. the most important tasks of the state in managing innovation activity in the sphere of higher education and science baltic journal of economic studies 174 vol. 7 no. 4, 2021 category connected with capitalization and commercialization of intellectual products (knowledge, technologies, educational and scientific services, etc.) 5. conclusions innovative development of higher education is crucial. the main scientific achievements of the authors are put forward positions on the uniqueness of the essence of higher education, the main fundamental tasks of innovative academic (university) entrepreneurship, types of innovations initiated by academic capitalism in higher education that can lead to innovative changes, and their classification, both theoretical and practical relevance for the development of domestic science and higher education. the study also identifies the main objects of innovation in higher education and science, appropriate directions for further innovative development of higher education in ukraine and other developing countries, as well as the types of innovations in higher education that can lead to innovative changes. a positive result of the work is a formulated and proposed interdisciplinary study in higher education and science (higher education innovation) that collects, summarizes, and classifies best practices of innovation in many higher education systems and leading universities around the world. this applies to universities as well as to all research institutes and organizations associated with higher education. the system of innovative transformation in higher education is interesting and practically useful for both developed and developing countries. summarizing the comprehensive study of innovation in university education as a factor of sustainable development of society, it should be noted that innovation in higher education is a complex interdisciplinary scientific field, applied directly to the field of knowledge and economic activity. for further research, it is suggested to 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(2020). higher education in innovation ecosystems. sustainability, 12, 4376. available at: https://www.mdpi.com/2071-1050/12/11/4376 (accessed august 20, 2021). baltic journal of economic studies 179 vol. 3, no. 4, 2017 corresponding author: 1 department of management and marketing, kherson national technical university. e-mail: mykmm@meta.ua 2 department of management and marketing, kherson national technical university. e-mail: savinagalina28@gmail.com features of evaluation of the competitive status of tourist enterprises kyrylo mykolaychuk1, galina savina2 kherson national technical university, ukraine abstract. the purpose of the paper is to provide methodological approaches to assessing the competitive status of the tourism business at different levels of management and to determine the characteristics of models for tourism enterprises. the construction of models will allow identifying the factors, influencing the competitive position; will contribute to increasing the competitiveness of tourism business in the regions and countries. methodology. the research is based on a comparison of the methods of assessing the competitiveness of countries and their achievements in sustainable development. indicators of competitiveness characterize the preconditions of development, and achievements in the implementation of competitiveness can be estimated on the basis of competitive status. the main achievement of each country is to ensure sustainable development. a generalized assessment, positioning of states is based on the human development index (hdi). it can be considered the main method of assessing the competitive status of the country. to assess the achievements of the regions in ensuring sustainable development, the regions of the hdi are determined, and appropriate indicators for enterprises can be developed. such a system of assessment is also required for tourism business. competitiveness of tourism activity of countries is assessed internationally by the index of competitiveness of travel and tourism (ictt). based on the comparison of the hdi and ictt, it is advisable to develop an indicator of the competitive status of tourism business in the country, regions, and enterprises. results. among the components of hdi, the most important is economic and social development. the impact of the tourism business on the economic component reflects the direct contribution to gdp of the country, as well as the indirect contribution by the cost of tourists in the territory of stay and investment in the development of tourism activities. one of the main social consequences of sustainable development is the increase in life expectancy. it is influenced by human confidence in the future, which depends on employment of the population. accordingly, the contribution to employment of the population is divided into employment directly in the field of tourism and general employment, taking into account the use of labour suppliers of products and services in other fields of activity. in assessing the competitive status of the tourist business of the regions, statistical indicators should be used, which reflect the results of tourism activity and factors influencing them. the economic results are influenced by revenues from the provision of tourist services and the structure of tourist flows. the social component should take into account employment, education, and remuneration of the subjects of tourism activity. it is worth taking into account the proportion of women and young people. methodological approaches to assessing the competitive status of tourism enterprises should be coordinated with the assessment of the competitive status of the tourism business in the region. based on this, the indicator of the competitive status of a tourist enterprise (iсstе) should also be determined by two components that characterize the impact on the economic and social development of the region. but in this indicator, it makes no sense to evaluate tourist flows, because they form integrated tourism services and distribute them mainly to different subjects of tourism activity. practical implications. the results of the comparative assessment of the competitive status of the regions of ukraine, as well as enterprises of the region, can reveal promising directions for the development of tourism business. value/originality. the model of estimation of the competitive status of tourist enterprises as a component of the system of evaluation of achievements in the development of tourism business of the country and regions, which is proposed, has a scientific novelty and contributes to the increase of the positive influence of tourism enterprises on the sustainable development of regions and the country. key words: competitive status, country, regions, tourist enterprises, factors of influence, methods of evaluation. jel classification: c52, o50, p25, z31 baltic journal of economic studies 180 vol. 3, no. 4, 2017 1. introduction the economy of ukraine needs a structural adjustment, the priority of which is the development of services. the natural resource potential of ukraine, unique features of individual regions create preconditions for the development of tourism activities. however, in recent years, there has been an intensification of competition in the tourism market that is strategically important for our country. therefore, the introduction at the domestic tourist enterprises of the competitive management, the essence of which is to ensure their competitiveness, both in the domestic and foreign markets, becomes more and more relevant. solving the problems of increasing competitiveness requires a clear definition of the essence of this category, systematization of methods for assessing the achievements of enterprises. competitiveness is characterized by the ability to gain an edge in a competitive struggle, ahead of their rivals in achieving their goals in a competitive environment. however, it allows you to assess the preconditions for the development of tourism business but does not guarantee its high results. achievements in the management of competitiveness can be estimated on the basis of competitive status, which reflects the presence of stable competitive advantages from enterprises and allows determining the positions in the competition. it should be noted that in the conditions of globalization, each country becomes a subject of management in the world space; it provides a certain contribution to solving global problems. the main task of the world economy is sustainable development. undoubtedly, the world community needs to assess the state of affairs in ensuring sustainable development of each country in order to determine the overall achievements and problems of mankind, allowing countries to compare their achievements, to identify their strengths and weaknesses. although each country and its regions form their own system for measuring the results, the criteria for sustainable development that they use should be consistent with those used by the international community in determining the various ratings. a generalized assessment of the achievements of each country in ensuring sustainable development, positioning of states is based on the human development index (hdi), that is, this indicator reflects the competitive status of the country. in addition to hdi, internationally, competitive indices are used that measure the favourable conditions for achieving a high competitive status. the most common comprehensive indexes are: global competitiveness index, world competitiveness index, index of ease of business, index of economic freedom. along with the comprehensive indexes, specialized indexes are defined that characterize the favourable conditions and threats for the development of specific areas of activity: trade promotion index, network availability index, index of competitiveness of travel and tourism. however, the competitive status of certain types of activities is not determined. it is important to take into account that the entities of the generation, as achievements in sustainable development, and problems, are enterprises. therefore, the global reporting initiative (gri) believes that it is precisely in the bottom line of the hierarchy of systems that provide sustainable development that it is necessary to systematically evaluate the results of various aspects of activity (global reporting initiative, 2017). then, the purpose of the study is to substantiate the methodological approaches to assessing the competitive status of the tourism business at different levels of management and to determine the characteristics of models for tourism enterprises. in order to control the competitive status of the tourism business of the country, its regions and tourism enterprises, the assessment model should reflect the hdi-approved criteria for assessing the results and the factors affecting competitiveness. therefore, the purpose of the study is to substantiate the methodological approaches to assessing the competitive status of the tourism business at different levels of management and to determine the characteristics of models for tourism enterprises. realization of the purpose needs comparing hdi with the competitiveness index of travel and tourism, developing, based on its results, indicators of the competitive status of tourism business of the country, regions, and enterprises, it is also advisable to assess the competitive status of tourist enterprises of one of the regions. 2. estimation of the competitive status of the tourist business of the country according to human development report 2016 of united nations development programme (united nations development programme, 2016), ukraine ranks 84th among 118 countries, and its results are lower than the average for countries in europe and central asia. economic achievements in the development of countries are estimated on the basis of the gross national product per capita (gnp), and social-based on the expected life expectancy and education of the population. the analysis of the components of national competitiveness based on the global competitiveness index (world economic forum, 2015) helps to identify the economic transformations that are necessary for the sustainable growth. in order to assess the preconditions for the development of the tourism business and the organization of targeted work to increase the competitive status of tourism enterprises, the index of competitiveness of travel and tourism (ictt) has a particular importance. among the factors that can be influenced at all levels of management, it is worth allocating human resources. among the factors that can be influenced at all levels of management, it is worth baltic journal of economic studies 181 vol. 3, no. 4, 2017 allocating human resources. to reconcile with the hdi index of the country’s competitive status in the tourism business (icstb), it is expedient to determine it on the basis of two components that reflect the contribution of tourism activities to the country’s economic and social development. the first component should reflect the direct and indirect contribution to gdp of the country (the cost of foreign tourists in the territory of stay, investments in the development of tourism activities). one of the criteria for the sustainable development is the increase in life expectancy, which is positively influenced by the confidence in the future, which depends on the employment of the population. therefore, the second component of the indicator of the competitive status of the country in the tourism business should reflect the contribution to employment of the population, which is divided into employment directly in the field of tourism and employment, taking into account the use of labour suppliers of products and services in other fields of activity. we will assume that the importance of economic results should be greater because they have a positive impact on the social component, and high employment can indicate an insufficiently high efficiency at the use of personnel. 3. assessment of the competitive status of the tourist business of regions the overall results of the country are significantly influenced by the tourist activity of the regions. therefore, it is necessary to assess the competitive status of the tourist business of the regions (icstbr). to do this, you should use statistical reporting indicators that reflect the results of tourism activities and the factors influencing them. by analogy with icstb, the definition of icstbr is accomplished through two components that characterize the contribution of tourism to the economic and social development of the region and the country. the contribution of tourist activity to gdp depends on the revenue from providing tourist services and the structure of tourist flows. the indicator of the structure has three components, the weight of which is not the same. it is desirable to increase the number of foreign tourists who spend considerable money during their stay in the country, and ukrainian citizens traveling within the territory of ukraine. the social component must take into account employment, education, and remuneration of the subjects of tourism activity. it should be borne in mind that since 2010, the hdi is determined on the basis of additional indicators – inequality of incomes, gender inequality and multidimensional poverty. it is advisable to reflect the involvement of young people. therefore, the indicator has the following components: employment of workers in the field of tourism; education of workers in the field of tourism activity; the share of labour costs in operating activities. the employment indicator has three components that reflect the overall employment, the share of women, and the share of workers under the age of 30. 4. model of assessment of the competitive status of tourist enterprises the complexity and multidimensionality of the processes of meeting the needs of the person traveling turn tourism into the industry. subjects of tourist activity according to the law of ukraine “on tourism” (verkhovna rada of ukraine, 2015) include: tourist operators, travel agents, other subjects of entrepreneurial activity, providing services for temporary accommodation, food, excursion services and others; specialists of tourist support (guidestranslators, sports instructors, directors, etc.), except for those who work on respective positions of enterprises, organizations, establishments that have visited objects or serve them, individuals who are not sub-entities’ business activities but provide accommodation, catering, etc. their role in providing tourist activities is different. thus, individuals who are not business entities can only provide vacationers with accommodation or supplementary food provision. at the same time, they serve a small number of people who prefer an unorganized rest. subjects of entrepreneurial activity mainly provide specialized services in accommodation, food or excursion service, at the same time, a certain number of tourists, which depends on the capabilities of their material base. specialists of tourist support provide specialized services, which are ordered by business entities engaged in excursions, etc. comprehensive services are offered by tour operators and travel agents. tourist operators in accordance with the law of ukraine “on tourism” (verkhovna rada of ukraine, 2015) may be legal entities created in accordance with the legislation of ukraine, obtained a license for tour operator activities, provide the formation of tourism product, its implementation and mediation activities for the provision of characteristic and related services. that is, the tour operators themselves are manufacturers of integrated tourist product. it is mainly distributed by natural persons-entrepreneurs – tour agents. there is no consensus among scholars as to subjects of the tourism. the author’s vision is that tourist enterprises are legal entities created in accordance with the legislation of ukraine, which form a complex tourist product, organize interaction with producers of certain tourist functions, perform intermediary functions in selling consumers of an integrated tourist product. therefore, tour operators should be considered as tour operators. methodological approaches to assessing the competitive status of tourism enterprises should be coordinated with the assessment of the competitive status of the tourism business in the region. based on this, the indicator of the competitive status of a tourist enterprise (icste) should also be determined by baltic journal of economic studies 182 vol. 3, no. 4, 2017 two components that characterize the impact on the economic and social development of the region. icste = 0,7 іied + 0,3 іisd. (1) however, in assessing the economic component, it is necessary to limit the definition of the indicator of income from the provision of tourist services. that is, іied = іits. (2) exceptions to the economic component of the characteristics of tourist flows are due to the fact that various subjects of the tourism industry mainly specialize in the servicing of domestic tourists or those traveling abroad. for example, in kherson region in 2016, tour operators sold 93.6% of vouchers to ukrainian citizens traveling within ukraine and only 6.4% for travel abroad (chief department of statistics in kherson oblast, 2017). travel agents mainly provide tours to those who prefer traveling abroad. for foreign tourists, the realization of permits was not carried out. the social component should be identical to the analogous component of the indicator of the competitive status of the tourist business of the region and take into account employment (with the allocation of the proportion of women and youth), education, and the payment of labour by the subjects of tourism activity. therefore, the indicator of the social development of a tourist enterprise has the following components: , (3) іisd – indicator of impact on social development; іemp – employment indicator; іel – indicator of education of labours of touristic enterprise; іlc – indicator of labour costs for a tourist enterprise. the employment indicator has three components that reflect the overall employment, the share of women, and the share of workers under the age of 30. , (4) іemp – employment indicator; іte – total employment; іwom – the share of women; іyw – the share of workers under the age of 30 (young workers). unlike the methodology for calculating the human development index proposed by the united nations development program (undp), where the indicator value is defined as the ratio of the difference between the value of a country’s indicator and the maximum value of this indicator to the extent of the variation of the indicator being analysed, we suggest using the relationship between the value of the index being analysed and the maximum value of the indicator. this will allow you to get a more “contrasting” feature. , (5) ij – indicator for a certain characteristic j; xj – actual value of the estimated indicator; xmax – maximum value of the estimated indicator. thus, the indicators are measured within from 0 to 1. a comparison of enterprises according to the system of indicators, characterizing their competitive advantages, will allow determining the integral relative estimation of competitive advantages. an approximation to 1 indicates a leading position in a particular area of activity. 5. competitive status of tourist enterprises of the kherson region in the market of tourist services of the kherson region in 2016, there were 3 tourist enterprises (tour operators): pe “xxi vek ukrainy” (“xxi century of ukraine”), pe “svitlana tour” and “tur plaza” (“tour plaza”). the results of calculating the employment indicator (from the best to the worst) are given in table 1. the highest level of employment indicator at pe “svitlana tour” is due to the structure of the labour force that meets the global requirements of sustainable development: gender policy and youth involvement. table 1 components for the employment indicator enterprise total employment the share of women the share of workers under the age of 30. employment indicator pe “svitlana tour” 0,374 1 1 0,791 pe “xxi vek ukrainy” 0,374 1 0,458 tov “tur plaza” 1 0,333 source: (results obtained by the authors on the basis of calculations) table 2 the structure of the social component of the indicator of the competitive status of the enterprise enterprise employment indicator education indicator indicator of labour costs indicator of impact on social development pe “svitlana tour” 0,791 1 0,990 0,927 pe “xxi vek ukrainy” 0,458 1 0,486 tov “tur plaza” 0,333 0,499 0,039 0,289 source: (results obtained by the authors on the basis of calculations) baltic journal of economic studies 183 vol. 3, no. 4, 2017 this tourist operator has almost all employees under the age of 30, including 50% of women. the largest number of employees is at the tur plaza tov but the lack of women and young people led to a low rating of the employment indicator. table 2 shows the components of the indicator of the impact on social development. according to this indicator, the ratio of the levels of the indicator also highlights the benefits of pe “svitlana tour”, where the vast majority of employees (66.7%) have higher or secondary special education in the field of tourism. the total values of the indicator of the competitive status of travel enterprises (icste) are shown in table 3. table 3 components of the index of the competitive status of the tourist enterprise enterprise indicator of impact on economic development indicator of impact on social development icste pe “xxi vek ukrainy” 0,007 0,486 0,151 tov “tur plaza” 1 0,289 0,786 pe “svitlana tour” 0,011 0,927 0,286 source: (results obtained by the authors on the basis of calculations) according to the general results, the highest level of competitive status is limited liability company “tur plaza”. the main advantage of this company is in providing high economic results. when using the prospects of a prospective staffing, private enterprise “svitlana tour” can strengthen its position in the market for tourist services in the region. 6. conclusions the growth of competition in the market of tourist services makes it necessary to carry out competitive management of the development of this sphere of activity. its essence lies not only in increasing the competitiveness of the tourism industry but also in transforming the opportunities in the results obtained, which characterize the competitive status. the tourism business should positively influence the sustainable development of the country and its regions. therefore, the criteria for assessing the competitive status of a tourism business must be consistent with the criteria for assessing the country ’s competitive status in the global community, which is an integral indicator of the hdi. in this regard, in models for assessing the competitive status of the tourist business of economic entities, it is expedient to identif y the components that characterize the impact of the tourism business on economic and social development. the list of indicators for each component at the country, regional or enterprise level depends on the factors influencing their competitive status and the availability of official statistical reporting thereon. the results of the evaluation of the competitive status of tourism enterprises, which play a special role in ensuring the development of tourism activities, allow positioning enterprises in the market of tourist services of the regions, to identif y ways to further improve the performance of their activities. references: global reporting initiative (2017). gri and sustainability reporting web page. retrieved from: https://www.globalreporting.org/information/sustainability-reporting/pages/gri-standards.aspx united nations development programme (2016). human development report 2016: human development for everyone. retrieved from: http://hdr.undp.org/sites/default/files/ 2016_human_development_report.pdf world economic forum (2015). the global competitiveness report 2016-2017 web page. retrieved from https://www.weforum.org/reports/the-global-competitiveness-report-2016-2017-1 verkhovna rada of ukraine (2015). about tourism (11.02.2015) web page. retrieved from: zakon3/rada/gov/ ua/laws/show/324/95-вр chief department of statistics in kherson oblast (2017). recreation and tourism in the kherson region. the statistical bulletin for 2016, kherson кирилл миколайчук, галина савина особенности оценивания конкурентного статуса туристических компаний аннотация. целью исследования является обоснование методических подходов к оцениванию конкурентного статуса туристического бизнеса на разных уровнях управления и определение особенностей моделей для туристических предприятий. построение моделей позволит выявить управляемые факторы влияния на конкурентный статус, способствовать повышению конкурентоспособности туристического бизнеса регионов и страны. методология. исследование основывается на сравнении методов оценивания конкурентоспособности стран и их достижений в устойчивом развитии. индикаторы конкурентоспособности характеризуют предпосылки развития, а достижения в их реализации возможно оценить на основе показателей конкурентного статуса. главным показателем развития каждой страны является обеспечение baltic journal of economic studies 184 vol. 3, no. 4, 2017 устойчивого развития. обобщенная оценка, позиционирование государств, осуществляется на основе индекса человеческого развития (ичр). его можно считать основным методом оценивания конкурентного статуса страны. для оценивания достижений регионов в обеспечении показателей устойчивого развития определяют ичр регионов, возможна разработка соответствующих индикаторов и для предприятий. подобная система оценивания необходима и для туристического бизнеса. конкурентоспособность туристической деятельности стран оценивается на международном уровне с помощью индекса конкурентоспособности путешествий и туризма (икпт). на основе сопоставления ичр и икпт целесообразно разработать индикатор конкурентного статуса туристического бизнеса страны, регионов, предприятий. результаты. среди составляющих ичр наибольшее значение имеют экономическое и социальное развитие. влияние туристического бизнеса на экономическую составляющую отражает прямой вклад в валовый внутренний продукт страны, а также непрямой вклад путем расходов туристов на территории пребывания и инвестиций в развитие туристической деятельности. одним из основных социальных результатов устойчивого развития является увеличение продолжительности жизни. на нее влияет уверенность человека в будущем, которая зависит от занятости населения. соответственно и вклад в занятость населения подразделяется на занятость непосредственно в сфере туризма и общую занятость с учетом использования труда поставщиков продукции и услуг других сфер деятельности. при оценивании конкурентного статуса туристического бизнеса регионов следует использовать показатели статистической отчетности, которые отражают результаты туристической деятельности и управляемые факторы влияния на них. на экономические результаты влияют доходы от предоставления туристических услуг и структура туристических потоков. социальная составляющая должна учитывать занятость, образование, оплату труда субъектами туристической деятельности. при этом целесообразно учитывать удельный вес женщин и молодежи. методические подходы к оцениванию конкурентного статуса туристических предприятий должны быть согласованы с оцениванием конкурентного статуса туристического бизнеса региона. исходя из этого, индикатор конкурентного статуса туристического бизнеса предприятия (икстп) тоже следует определять на основе двух составляющих, которые характеризуют влияние на экономическое и социальное развитие. однако, в этом индикаторе нет смысла оценивать туристические потоки, так как формируют комплексные туристические услуги и распространяют их в основном разные субъекты туристической деятельности. практическое значение. результаты сравнительной оценки конкурентного статуса регионов украины, а также предприятий региона, позволяют выявить перспективные направления развития туристического бизнеса. значение/оригинальность. предложенная модель оценивания конкурентного статуса туристических предприятий, как составляющая системы оценивания достижений в развитии туристического бизнеса страны и регионов, имеет научную новизну и способствует увеличению позитивного влияния туристических предприятий на устойчивое развитие регионов, страны в целом. baltic journal of economic studies 170 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national scientific center "institute of beekeeping named after p. i. prokopovich", ukraine (corresponding author) e-mail: senchuktanya.bee@gmail.com orcid: https://orcid.org/0000-0002-5272-8947 researcherid: abj-4760-2022 2 national scientific center "institute of beekeeping named after p. i. prokopovich", ukraine e-mail: igor.pelyuhnya@gmail.com orcid: https://orcid.org/0000-0003-4330-2722 3 national scientific center "institute of beekeeping named after p. i. prokopovich", ukraine e-mail: vitaliiadidenko14@gmail.com orcid: https://orcid.org/0000-0002-5947-2307 doi: https://doi.org/10.30525/2256-0742/2022-8-5-170-175 sustainable development of the ukrainian beekeeping industry tetiana senchuk1, ihor peliukhnia2, vitaliia didenko3 abstract. the results of an interdisciplinary systematic study of sustainable development of beekeeping in order to improve its institutional support are highlighted. the state documents (laws, concepts, strategies) concerning the development of agriculture and beekeeping are analyzed. it was found that the existing institutional support for the development of beekeeping is insufficient to fully realize the potential of the industry. the international criteria of sustainable development and their application to agriculture and beekeeping industry of ukraine are generalized. the role of beekeeping in the implementation of the sustainable development goals of ukraine until 2030 is substantiated. the factors and conditions influencing the development of beekeeping and improvement of its production capacities are studied. it is proved that many problems can be overcome by improving the system of state regulation of the industry and creating sufficient institutional support. for the first time, criteria and a system of indicators for sustainable development of beekeeping have been developed, which are grouped into 7 blocks: state regulation / management; education, education and science; material, technical and financial support; primary production and processing of products; market and sales of products; food safety, veterinary support, epizootic welfare; environment and biodiversity. the formulated goals, criteria and indicators of sustainable regional development of beekeeping will improve the system of institutional support of the industry and develop a monitoring system to assess its progress and development. key words: economy, legislation, institutional framework, sustainable development criteria, agriculture. jel classification: o13, о43, q01, q18 1. introduction beekeeping is closely related to many industries, as it occupies a specific intersectoral position in agricultural production: as an agricultural sector, beekeeping is an integral part of animal husbandry, at the same time, bees are among the main pollinators of entomophilous crops, contributing to the solution of agro-economic and environmental problems. moreover, it is one of the few industries that creates and multiplies the final product, both its own and related industries, with almost no negative impact on the environment (lisohurska et al., 2022). the beekeeping industry of ukraine has several problematic issues: low competitiveness of domestic producers due to non-compliance with european quality standards, lack of harmonized legislation on production, which also undermines the foundations of sustainable development of beekeeping, the problem of under-pollination of plants of natural and cultural flora of many regions of ukraine due to a certain deficit in pollinating insects, including honey bees. as a result, the decrease in crop yields due to under-pollination. in addition, deterioration of the ecological state of the environment and violation of ecological requirements for growing crops leads to mass poisoning of bees by insecticides and pesticides. many scientists have studied the problems of beekeeping development in ukraine (karpenko et al., 2019; dudar et al., 2021). in their works the main attention is paid to the issues of breeding, keeping and breeding of bees, control of major diseases and pests, improving the technology of keeping, wandering baltic journal of economic studies 171 vol. 8 no. 5, 2022 and wintering of bees, improving the production of bee products, developing drugs for apitherapy. however, the problems of choosing the most effective market-oriented institutions that would ensure sustainable regional development of beekeeping in ukraine based on the optimal combination of economic, environmental and social aspects remain insufficiently researched. thus, the complex of problems that have accu mulated in the industry does not allow it to develop effectively, and the existing mechanisms of industry management do not allow solving these problems. in this regard, it is of particular relevance to substantiate the main directions of improving the efficiency of beekeeping, ensuring the harmonization of legislation, the development of regulations governing social relations in the field of regional (and national) development of beekeeping and the formation of a mechanism for its development on the principles of sustainability (shvorak, filiuk, 2021). 2. elaboration of strategies and goals for sustainable development of ukraine one of the priorities of the state regional policy, according to the law of ukraine "on the basics of the state regional policy ", is to stimulate and support local initiatives for the effective use of the internal potential of the regions to create and maintain a full-fledged living environment, improve the quality of life of people (law of ukraine "on the basics of state regional policy ", 2015). implementation of the state regional policy is carried out on the basis of a system of interrelated documents based on the development strategy of ukraine, the general scheme of planning of the territory of ukraine, planning schemes of territories at the regional and local levels (state regional development strategy for 2021–2027; materials of the general planning scheme of the territory of ukraine, 2002). the elaboration of regional development strategies is carried out taking into account the development strategies of cities, towns and villages, strategic priorities for the development of districts of the respective region. implementation of regional development strategies and action plans for their implementation is carried out taking into account the strategic development goals of the region and provides for the incorporation of the sustainable development goals (sdgs) and indicators for their measurement into regional strategies and plans for their implementation, as well as comprehensive measurement of the impact of planned activities, projects and programs on the achievement of the sdgs at the regional level. the state strategy for regional development until 2027 envisages the implementation of tasks to ensure the implementation of the sdgs at the regional and local levels, which should be integrated into the processes of forming relevant horizontal (sectoral programs and strategies) and vertical (at the basic, subregional, regional and macro-regional levels, as well as at the level of inter-municipal cooperation) policies (state regional development strategy for 2021–2027 and action plan for its implementation, 2020). on the way to ensuring sustainable development (sd) for the people of ukraine, it is necessary to fulfill two important tasks: to create an institutional mechanism and to implement the sdgs at the level of regions and local hromadas (kormych et al., 2022). ensuring sustainable development of all components of the socio-economic system is important for ukraine today, especially in the context of european integration (buriak et al., 2022). the issue of sustainable development has its history in the political life of the european union. significant progress in the implementation of the strategy is demonstrated by some eu members, in particular estonia, latvia and lithuania (a handbook localising sustainable development goals (sdgs) in the baltic sea region, 2020). taking into account the fact that ukraine is a candidate for eu member ship, studying the experience of these countries should be of great practical interest for ukraine. consumer attitude to natural resources, attempts to achieve the highest economic effect today, despite the damage caused to the environment, have led to the depletion, degradation, violation of the quality of natural resources, especially soils, deterioration of health and living conditions of the population. one of the unique qualities of agriculture is that agricultural production is linked to renewable resources. it is clear that, like other resourceintensive sectors of the economy, agriculture faces a number of conflicts between economic, social and environmental aspects (melnychuk, 2014; pasemko et al, 2020). therefore, the transition to the principles of sustainable development, taking into account international criteria, is a necessary requirement of today (herasymiv, 2016; fraier, 2018, lipskyi et al., 2021). 3. implementation of sustainable development goals in beekeeping after analyzing the 17 goals of the sd, given in the decree of the president of ukraine, in order to determine in the implementation of which the beekeeping industry can participate, 5 such goals were found: goal 1 – overcoming poverty: beekeeping provides food (primarily honey), and everyone can be engaged in beekeeping; baltic journal of economic studies 172 vol. 8 no. 5, 2022 goal 2 – overcoming hunger, achieving food security, improving nutrition and promoting sustainable agriculture. beekeeping contributes to the achievement of food security, honey bees pollinate entomophilous crops, orchards and berries. therefore, it is impossible to achieve sustainable agricultural development without beekeeping; goal 3 – ensuring a healthy lifestyle and promoting well-being for all at all ages. all bee products (honey, propolis, bee sting, feather, wax, royal jelly, etc.) have healing properties and are used to strengthen the body, increase overall resistance and treat and prevent many diseases. bee products are used in the pharmaceutical and perfumery industries. nowadays a separate scientific and practical direction of medicine – apitherapy – is successfully developing. goal 8 – promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. to do this, it is necessary to establish training and retraining of the unemployed, giving them the necessary minimum knowledge and practical skills for beekeeping. goal 15 – protection and restoration of terrestrial ecosystems and promotion of their sustainable use, sustainable forest management, combating desertification, halting and reversing (reversing) land degradation and halting biodiversity loss. bees pollinating entomophilous plants contribute to the conservation of biodiversity and sustainability of ecosystems. it should be noted that the role of honey bees in plant pollination in ecosystems is increasing due to the rapid decline of "wild" pollinators. 4. problems of the ukrainian beekeeping industry today, ukrainian beekeeping has accumulated a lot of problems that can lead to a decline in the production of beekeeping products and export of honey to other countries, where ukraine has made significant progress in recent years. this problem was understood not only by beekeepers and scientists. the authorities also began to talk about it (green book on honey market regulation, 2018). serious preparatory work was carried out for 2 years, as a result of which in january 2021 an order of the ministry of economic development, trade and agriculture "on some issues in beekeeping" was published. also, a working group of specialists and representatives of public organizations was created to prepare a new draft law on the development of beekeeping, which included scientists of the national scientific center "institute of beekeeping named after p.i. prokopovich". the working group formulated a list of the main problems of the ukrainian beekeeping industry: – lack of effective state financial support for the industry; – low technological culture of production and processing of products, its packaging, lack of industrial technologies; – reduction of entomophilic crops and insufficient use of bees for their pollination; – deterioration of the ecological state of the environment and violation of technological requirements for the treatment of entomophilic agricultural plants with pesticides and pesticides and as a result – mass poisoning of bees; – insufficient veterinary support, which leads to uncontrolled spread of bee diseases; – lack of a harmonized legislative framework for the production and quality of the industry 's products and, as a result, difficulties in realizing the export potential of the industry. in connection with the introduction of state support for beekeeping – the provision of subsidies for bee colonies, beekeepers began to more actively register their apiaries. according to the register (register of apiaries of ukraine, 2021), which was compiled to provide subsidies for bee colonies, there are about 2.4 million bee families and 49 thousand apiaries table 1 data of the register of apiaries of ukraine by regions (as of 01.10.2022) oblast number of apiaries registered number of apiaries eliminated number of apiaries in total number of bee colonies vinnytsia 3137 4 3141 204313 volyn 969 0 969 29687 dnipropetrovsk 3190 1 3191 138069 donetsk 1352 0 1352 99769 zhytomyr 806 0 806 36215 zakarpattia 1054 0 1054 93283 zaporizhzhia 3252 3 3255 130662 ivano-frankivsk 2228 1 2229 99094 kyiv 1462 1 1463 56501 kirovohrad 3916 7 3923 216118 luhansk 1954 3 1957 103823 lviv 2158 0 2158 84886 mykolaiv 3101 9 3110 137204 odesa 2788 0 2788 160321 poltava 2047 0 2047 107067 rivne 1052 1 1053 33082 sumy 2418 1 2419 119803 ternopil 1714 12 1726 69656 kharkiv 2048 1 2049 104934 kherson 1400 0 1400 50307 khmelnytskyi 2186 7 2193 111438 cherkasy 2443 0 2443 102666 chernivtsi 1004 0 1004 77987 chernihiv 1404 0 1404 56536 kyiv (city) 16 0 16 848 total 49083 51 49134 2423421 source: data of the state statistics service of ukraine baltic journal of economic studies 173 vol. 8 no. 5, 2022 in ukraine (table 1). these data are approximate estimates of the number of bee colonies, as not all beekeepers applied for subsidies. currently, the main attention of the state is paid to the legislation in beekeeping, conducting nationwide registration of apiaries and beekeepers, preservation of native bees and involvement of science in breeding work. according to the state register of subjects of breeding in animal husbandry, 32 apiaries have the status of breeding farms in ukraine: 21 of them are breeding apiaries, 9 – bee nurseries and 2 – breeding plants. 5. the essence of criteria and indicators of sustainable development of beekeeping assessment of sustainable development is multidimensional in nature, therefore, the assessment of the real state of the industry, factors of influence and their dynamics requires comprehensive measures to develop appropriate criteria and indicators – indicators of sd, reflecting the social, economic and environmental aspects of this development. among a large number of sd indicators that characterize the state of a certain sphere, it is necessary to choose those that can be used for quantitative and qualitative assessment of the state of the environmental, social and economic environment without using a large amount of statistical information. at the same time, the indicators must meet such criteria as validity, sensitivity to changes, reliability, quantitatively and qualitatively reflect all the main details of the state of the environment, social and economic spheres and ensure the promotion of the beekeeping industry to the sd. based on the results of the study of the problems and factors influencing the state of beekeeping in ukraine, as well as the analysis of the collected information, a methodological framework and a system of criteria and indicators of the sr of beekeeping were developed on the basis of modifying the evaluation system (set of indicators); redistribution of indicators by areas (goals, objectives); assessment of the relevance of indicators; adjustment of the scale of measurement of variables. the developed system of indicators and measures is grouped into 7 blocks (figure 1), by environmental, environment / biodiversity 4 criteria, 18 indicators state regulation /government/ institutions 3 criteria, 10 indicators education/ scie nce 2 criteria, 10 indicators material and technical/ financial security 3 criteria, 12 indicators primary production/ processing 4 criteria, 12 indicators market/ sale of beekeeping products (goods) and bee pollination services 4 criteria, 16 indicators food safety / veterinary / epizootic welfare 3 criteria, 13 indicators figure 1. system of criteria and indicators for assessing the ecological, sociological and economic state of the sd beekeeping source: (peliukhnia, 2022) baltic journal of economic studies 174 vol. 8 no. 5, 2022 social and economic components, according to generally accepted international practices: 1) state regulation/management – to improve the management system of the beekeeping industry, to make the management system favorable for the development of the industry, to create an econo mically favorable environment and conditions for beekeeping, to provide guarantees for the observance of the rights and protection of the interests of individuals and legal entities engaged in beekeeping; 2) education, enlightenment and science – to form people's understanding of the role of bees in solving the food problem, providing raw materials for the pharmaceutical and cosmetic industry, and most importantly, awareness of the pollination role of bees to ensure the yield of entomophilic crops and conservation of wildlife biodiversity; to form a cohort of professionals for the beekeeping industry; to carry out scientific support of the beekeeping industry with the development and implementation of innovative technologies; 3) material, technical and financial support – to provide sufficient material, technical and financial support for the development of beekeeping to obtain the required volume of bee products and to achieve the number of bee colonies that will be sufficient for full pollination of agricultural and wild entomophiles; 4) primary production and processing of products – to create favorable conditions for the primary production and processing of bee products, the creation of cooperatives and other structures for this purpose; 5) market and sales of products – to create favorable conditions on the market for the sale of bee products for producers; 6) food safety, veterinary support, epizootic welfare – to create favorable conditions for the veterinary and epizootic welfare of bee families and ensure food safety of consumers of bee products; 7) environment and biodiversity – protection of local (native) bee populations and their habitats. the adopted system corresponds to the essence of environmental, social and economic assessment of the level of sustainable development as a dynamic structure that is consistently deployed. the sustainability of such a system is implemented on the principle of taking into account the weight and impact of each link. to ensure the goals and objectives of sustainable development, the minimum and maximum quantitative values of the relevant basic indicators are statistical indicators, indicators calculated by direct or indirect methods using official public sources of information and data for which it is possible to determine such indicators, indicators determined on the basis of expert judgments and sustainability benchmarks justified for the regional level. for integral convolution there are additive and multiplicative forms of the integral index, each of which has its advantages and disadvantages. an important stage of the integral assessment is the normalization of indicators and their threshold values. the procedure of normalization of indicators and their thresholds is a necessary step in the calculation of the integral index, since different indicators have different dimensions. moreover, they can be multidirectional: there are indicators whose increase is desirable, others whose decrease is desirable. the normalization procedure, firstly, transforms the indicators of different dimensions into dimensionless values in the range [0, 1], and secondly, makes it possible to compare multidirectional indicators. obviously, each component and indicator has its own influence on the integral index, so it is necessary to take into account the weights. moreover, the weights are not constant over time, so it is necessary to calculate dynamic weights. such an integrated assessment of sustainable development will reflect the degree to which the beekeeping industry is moving towards environmental, social and economic sustainability. the defined set of criteria and indicators is not final and can be changed and supplemented in accordance with current priorities, challenges and opportunities. 6. conclusions it was found that the institutional support of the ukrainian beekeeping industry is insufficient. in particular, there are no such strategically important documents as the nationally approved sustainable development concept, the national sustainable development strategy, and the national action plan. but there is the concept of sustainable development of human settlements, approved by the resolution of the verkhovna rada of ukraine on decem ber 24, 1999. also, the sustainable development goals of ukraine for the period up to 2030, approved by the decree of the president of ukraine no. 722/2019 of 30.09. 2019. it is established that one of the most significant problems of the industry is the lack of perfect harmonized (coordinated) legislation, imperfection of by-laws, regulation of relations in the functioning of the beekeeping market system. the options for improving legislation and by-laws to eliminate existing problems are proposed, which can lead to more effective development of the beekeeping industry in ukraine. improving the legislative framework, taking into account international experience, is the first step towards creating proper institutional support for sustainable development of beekeeping in ukraine. baltic journal of economic studies 175 vol. 8 no. 5, 2022 references: aleskerova, y., & todosiichuk, v. 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(2021). the effect of ecosystem services on the intensification of agricultural production. economic journal of volyn national university named after lesya ukrainka, 1 (25), 37–51. doi: https://doi.org/10.29038/2786-4618-2021-01-37-51 lipskyi, p. yu., peliukhnia, i. s., & senchuk, t. yu. (2021). development of criteria and indicators of sustainable development of beekeeping. modern beekeeping in ukraine and the world: a collection of materials of the scientific-practical conference. gadyach. received on: 7th of october, 2022 accepted on: 25th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 174 vol. 8 no. 3, 2022 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 national university of food technologies, ukraine e-mail: gutkevych@ukr.net orcid: https://orcid.org/0000-0003-2645-4011 3 national technical university of ukraine "igor sikorsky kyiv polytechnic institute", ukraine e-mail: lina.shenderivska@gmail.com orcid: https://orcid.org/0000-0003-3104-9803 * the article is made in accordance with the scientific topic № 0122u002363 doi: https://doi.org/10.30525/2256-0742/2022-8-3-174-184 peculiarities of management of enterprises in the printing industry* yurii safonov1, svitlana gutkevych2, lina shenderivska3 abstract. the aim of the study is to analyze the features of management of printing enterprises, to give recommendations for business development. the significance of the printing industry in the publishing and printing complex for the formation of the intellectual capital of the nation, the development of a democratic humane and progressive society is substantiated. the factors determining the spread of small business in printing were revealed. they are related to the peculiarities of the consumer market, which requires a wide geography of supplies and personalized orders; to the development of scientific and technological progress, the result of which is the invention of less capital-intensive technologies; to the state policy focused on the stimulation of small business development. the relevance of the business model of cooperation in the publishing and printing complex at the international level has been proved. its appropriateness is due to the small size of the domestic market, the lack of funding sources for innovation, the undeveloped domestic material and technical base. integration is also relevant on the domestic market. it can be implemented by concluding long-term contracts with advertising agencies and it specialists to offer multimedia publications and printed products with augmented reality that are in demand on the market. it was found that in conditions of high competitive pressure enterprises need to improve the level of service. this requires improvements in logistics process management and marketing communication policy. delivery efficiency and attention to individual customer needs become critical. the desire to effectively build relationships with customers stimulates the introduction of crm-systems. enterprise management at the planning stage should take into account the high complexity of mastering employees crm-systems. understanding the strategic importance of spending time and resources on mastering new technologies and on personnel development provides synergy for the entire production system, promotes self-improvement of employees, their desire for continuous progress and, finally, increases their job satisfaction. international benchmarking is relevant to improve the management of printing companies. the authors identified funding for training of talented youth, certification of production according to international quality standards, priority of investment in innovation, search for new market niches, and strengthening of inter-sector cooperation as priorities. key words: management of printing enterprises, process approach, publishing houses, publishing and printing complex, business model of collaboration, crm systems, level of service, foreign management experience, development. jel classification: m11, o10 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 175 vol. 8 no. 3, 2022 1. introduction a powerful incentive for the transformation of industries is the acceleration of scientific and technological progress, the development of the digital economy, and environmental safety priorities. this increases the frequency of creative destruction, encourages business to constantly change and improve in the context of limited resources. the task of improving management efficiency is relevant, especially for those industries that are losing markets in industry 4.0. such industries include printing, which is integrated into an integral publishing and printing complex. management of printing companies depends on the industry and the specifics of each company. in today 's environment, the long-term prospects of enterprises depend on whether they pay proper attention to the use of appropriate information and telecommunication technologies. new technologies provide efficiency in terms of saving money and reducing unproductive labor costs (karovich, kovach, karovich, vesely, 2020). the improvement of communication policy of printing enterprises through the introduction of mobile applications, the use of crm-systems can increase sales up to 40% (ibrahim, yunus, ramadhan, et al., 2020). another feature affecting the management of printing companies is their sensitivity to the information environment (khalina, nikonenko, mandzinovska, 2021). thus, the development of cooperation with publishing companies, as well as the development of new inter-branch relations are among the urgent tasks of management in the printing industry. information security of the country, as became clear in the context of russia's military aggression in ukraine, should be a priority state task. the lack of real state support in ukraine in the publishing and printing industry causes instability of economic entities, the decline of most communal and state enterprises, which in turn does not provide opportunities for development (palyha, basylyuk, palyha, 2019). the printing industry is material-intensive, so effective control of material costs, their optimization can lead to a significant reduction in costs for all types of operational activities, as well as improve the management of the company 's production portfolio (ejsmont, lipiak, 2017). the materialintensive nature of printing production also brings to the fore the task of managing the environmental safety of printing enterprises. the concept of green growth implies not only economical production and consumption in order to reduce the harmful effects on the environment, but also to generate income from greening (zinchenko, 2022). this point seems useful in the context of the publishing and printing industry and means the introduction of less resource-intensive production technologies, including digital printing, the introduction of "print on demand" technology, which allows to avoid overproduction and, accordingly, overconsumption of resources. in general, the greening and social orientation of production are among the factors that consumers increasingly take into account when making purchasing decisions. thus, the number of management challenges is increasing. to solve them effectively, zelenska m. (zelenska, 2015) recommends the introduction of a projectoriented approach. its main advantages include a clear structure of project management functions and their components (quality, risk, team, budget, production, costs, marketing, etc.), focus on managing both basic and additional business processes; standardization and regulation of processes; taking into account the interests of major stakeholders; target orientation; accumulation of competencies, potential, accumulation and preservation of knowledge, etc. improvement of management systems of printing enterprises should take into account another peculiarity of them – predominantly small business. scientists (soares, santos, ferreira, costa, 2021) justify the expediency of using a participative management model. the authors argue that decentralized decision-making and problem-solving structures facilitate the exchange of information and opinions among all, improving the communication process. the purpose of the study is to substantiate the directions of improving the efficiency of printing enterprises, based on the results of the analysis of the peculiarities of management of printing enterprises and their development. 2. methodology the issue of management of printing enterprises is investigated in the context of industry specifics. modern transformations of inter-branch relations in the publishing and printing complex are taken into account. the content analysis was conducted on the basis of modern scientific sources devoted to the management of printing enterprises in various functional areas. case analysis was used to study modern management methods in printing industry. business models of printing enterprises, the use of modern information technologies were considered in the study. thus, an interdisciplinary approach is implemented. the method of benchmarking is used to analyze the progressive world practice of printing companies. baltic journal of economic studies 176 vol. 8 no. 3, 2022 3. results and discussions the activity of enterprises in any industry largely depends on the specifics of enterprises, their size. thus, there are various organizational-legal forms of enterprises in the printing industry. more than 90% in the structure of the printing industry are small enterprises. according to the commercial code of ukraine (economic code of ukraine) micro enterprises are those with an average annual number of employees not more than 10 people and an annual income of no more than 2 million euros at the average annual exchange rate of the national bank of ukraine, small enterprises are those with fewer than 50 people and an income of no more than the equivalent of 10 million euros, large enterprises are those with more than 250 people and an income over the equivalent of 50 million euros, other enterprises are classified as medium-sized. it is worth noting that the scale of enterprises affects the peculiarities of their management. the spread of small business in printing is influenced by such factors as type of production, development of cooperation, demand reduction, the need for territorial proximity to customers and consumers for operative production, development of technologies that reduce labor intensity and are less capital-intensive and economically beneficial for small print runs. the peculiarities of small business management are related to the lack of resources to finance development, innovation, the lack of a complete production cycle. this limits the opportunities for market expansion, and the transfer of individual operations and functions to other market participants leads to higher costs of enterprises and does not guarantee a high quality of their work. based on the fact that printing enterprises provide printed products almost all sectors of the economy, so the state of the printing industry depends on their development. the peculiarity of the development of printing enterprises is the reproduction of products of intellectual consumption – books, magazines, newspapers, which are necessary for personal development, but are not basic necessities. therefore, the demand for them depends on income and state support. the publishing and printing industries need state financing of book publishing, state support for the promotion of reading, the fight against unauthorized distribution of books. intellectual products of consumption should be strategically important for the state, because they are the basis of the spiritual health of the nation, moral standards, priorities of humanism, business and personal ethics, high rates of scientific and technological progress, economic growth and formation of the country 's image. a nation with developed intellectual capital is protected from primitivism of thought, from the choice of power, which will destroy freedom of speech and the foundations of democracy by any means, including force, against the citizens of its own and other states. at the mesoand microlevels, the task of building effective interaction between industry objects and industry complexes is solved. a well-functioning system of interaction between partners is necessary to ensure effective publishing activities. this system of interaction is changing in the modern period due to the emergence of a new means of communication – the internet, which affects the efficiency of printing enterprises. figure 1 shows the scheme of the relationship between the objects of the publishing and printing complex. the authors analyzed the concept of publishing and printing complex, which was introduced by roman mashtalir and defined as a set of publishing houses, printing and bookselling enterprises that provide the preparation, production and distribution of publishing products (mashtaller, 1987). analysis has shown that with the active development of the internet and electronic technologies, the publishing industry is expanding connections, electronic publishing space is being formed, and the creation of publishing products and their consumption can take two forms – paper and electronic. printing companies are not involved in the production of electronic publications, as they traditionally print publications on paper. also, the transformation of interaction in the publishing and printing complex was due to the military aggression of the russian federation in ukraine, which began with a full-scale invasion of the russian occupants on february 24, 2022. within two months of the war, 5 million ukrainians left the country (mazepa, 2022). to meet the needs of immigrants from ukraine, domestic publishers implement a model of cooperation with foreign publishers or with charitable organizations and volunteers. according to this model, ukrainian publishers provide their colleagues with electronic originals of publications, and foreign publishers print publications at their own expense. the printed books are then given to ukrainian immigrants abroad free of charge. alternatively, print books are given from ukrainian publishers to immigrants abroad directly through charitable organizations. commercial models are also being implemented: objects of the publishingpolygraphic complex of ukraine have activated the sale of rights for the translation of ukrainian literature abroad. to improve the efficiency of the book market development it is necessary to improve the system of wholesale and retail book distribution. according to the analysis, the retail book trade is declining. as of december 2021, there were about 200 bookstores baltic journal of economic studies 177 vol. 8 no. 3, 2022 in ukraine, 15 times less than at the beginning of 1991 (kruglov, 2021). considering that books are among the goods of spontaneous purchase, the development of a bookstore network is important for increasing turnover. at the same time, the growing demand of the population for purchases on the internet creates significant potential for the development of e-commerce in the publishing and printing industry. the successful realization of this potential depends directly on effective management in areas such as: – logistics processes. since in a highly competitive environment, ensuring prompt delivery and providing timely information about the status of orders become important competitive factors; – marketing communication policy. actual tasks are formation of personal assortment offers; wide and timely informing about advertising offers, current prices, etc., diversification of communication channels. thanks to effective management in these areas, the company achieves a high level of service. and at a time when many manufacturers are able to produce high quality goods at competitive prices, the level of service becomes the decisive criterion by which consumers make their final decision on choosing a supplier. zhovnovach r . (zhovnovach, 2015) notes that service allows to form individual relationships with each client, creates conditions for maximum satisfaction of consumer needs, and provides a unique position of the company in the market. to increase the efficiency of customer relations it is reasonable to implement crm-systems. as a priority direction of managing the implementation of crm-systems, --customers author's originals domestic publishing houses internet environment electronic publications e le ct ro ni c pu bl ic at io ns reading environment printing companies (domestic or foreign) distribution network of printed and electronic publications printed publications pu bl is hi ng or ig in al s foreign publishers pu bl is hi ng o ri gi na ls foreign printing companies pu bl is hi ng o ri gi na ls charitable organizations, volunteers, etc. printed printed publications publications – new connections between industries in the digital environment – developed relations at the international level figure 1. the scheme of connections between the objects of the publishing and printing complex source: author's own work baltic journal of economic studies 178 vol. 8 no. 3, 2022 the authors identified a process approach. thus, at the planning stage of crm-system implementation it is necessary to critically assess the market offers, taking into account the needs of a particular enterprise. at the organizational stage, it is important to provide quality training for employees to work with the crm-system. indicators of the effectiveness of the introduction of crm-systems in enterprises should be introduced into the system of motivation of labor. qualitative control over the use of crm allows to improve its functionality and increase the efficiency of its use in the specific conditions of production, taking into account the specifics of the industry, markets. it is worth noting that the competent management of the introduction of new technologies, when sufficient time and resources are allocated for their mastering by employees, provides the synergy of socio-economic growth of the company. enterprises that encourage employee development and self-improvement are more competitive on the labor market and commodity markets. of particular interest is the activity of printing enterprises associated with the production of publishing products for publishing houses and non-publishing products for various consumer groups – industrial and non-industrial. analysis of the structure of the print products market showed that it includes traditional publishing products – books, newspapers, magazines and other continuing and periodicals, and non-publishing products – packaging, labels, paper and white goods, sheet products, stationery, etc. in modern conditions, the introduction of electronic administration, leads to the fact that the demand for printed stationery decreases. accordingly, the level of capacity utilization of printing enterprises engaged in its production decreases, resulting in an increase in fixed costs and a decrease in profits. it should be noted that a peculiarity of printing companies is that they do not produce on their own initiative, but only on the b2b model. the exception is paper and white goods. paper and white goods were produced by printing companies of various specializations. this allowed them to supplement their existing production capacity. but under the influence of modern information technology, demand for paper and white goods has declined. at this stage, the market is dominated by the largest producers, in particular, pjsc "biblos" (lviv), state publishing house "press of ukraine" (kyiv), factory "polygraphist" (kyiv). they are developing their own retail networks to stimulate sales. the expansion of the sales market is also connected with the increased attention of enterprises to corporate culture and branding. as a result, the demand for business diaries, notepads, folders with corporate symbols is growing. the analysis of enterprises of the printing industry has shown that the peculiarity of development is the operation of enterprises specializing in the production of newspapers and magazines. the main factors of competitiveness of products of these enterprises include speed, which is ensured by high-performance equipment and efficient management of operations. technical equipment is mainly due to web printers, which have a limited scope of application, making it difficult to change the specialization of enterprises. given the significant amount of investment in the creation of newspaper products and the current trends to reduce print runs, this segment of the market has a low level of investment attractiveness. vertical or horizontal diversification may be a promising direction for the development of these enterprises. according to the analysis, domestic printing companies, based on the improved material and technical base, increased the level of product competitiveness, which allowed to expand the sales market by attracting orders for magazines that were previously published abroad. the authors considered the changes taking place in the book market. they are caused by the expansion of the range of books, a decrease in the average circulation, which is associated with new approaches to the management of publishers, with the development of differentiation. printing companies are adapting to smaller print runs by introducing digital printing, replacing a number of post-printing operations, such as sheet selection, cover making, and insertion of blocks into the cover from mechanized to manual. and enterprises that have carried out technical re-equipment, in particular, pjsc "bila tserkva book factory ", pjsc "vipol", state publishing house "press of ukraine", printing house "huss", gained competitive advantages in quality, efficiency, price and increased market share. the issue of print advertising is one of the priorities for the development of printing companies. merch is becoming especially popular in modern conditions. it allows to stay in touch with the target audience: to strengthen relationships with employees, to attract the attention of customers and partners (kapska, 2021). merch is a means of expressing the company itself and its values. more and more manufacturers are turning to eco-friendly merch – shopper's merch, clothing (t-shirts, skinny, etc.) made of durable materials, etc. it is worth noting that the quality of advertising is influenced by the state of the economy. for example, during an economic downturn in the economy, advertising budgets are redistributed in favor of cheaper types of advertising products – leaflets, newspapers or internet advertising, and the demand for the products of printing companies that produce advertising products in expensive baltic journal of economic studies 179 vol. 8 no. 3, 2022 price categories decreases (glossy press market, 2014). factors in the development of the advertising segment of the market are constant demand, the moderate cost of creating printing products to serve this segment. the peculiarities of the development of the print advertising market are related to changes in the regulatory framework. thus, based on the decisions of local authorities, the number of places for outdoor advertising is reduced, which leads to a decrease in demand for printed advertising products. therefore, printing companies, in order to ensure sustainable development, are implementing such areas as: – strengthening of integration by entering into long-term cooperation agreements with advertising agencies, and to increase the volume of orders – with companies that have an extensive network of offices and branches; – with it specialists – for the production of multi media publications, augmented reality products; – provision of product design services, which allows to attract individual customers; – introduction of innovative technologies, these include the manufacture of complex advertising structures, printing on complex surfaces and others. given the projected decline in advertising spending in the print advertising segment from $44.173 million in 2021 to $40.019 million in 2023 and $35.628 million in 2025, print companies need to develop multi-branch collaboration. because combining print and digital advertising will make online campaigns 400% more effective (26 relevant print marketing statistics). with the digitalization of the economy and the growing demand for online content, the structure of print markets is changing. at the same time, label and packaging products are consistently in high demand. they dominate the print market. pjsc "kyiv printing factory zorya", "tetra pak", "packaging plant rotex", "lunapack", "impress", "ekko" and many others specialize in the production of labels and packaging. the development of printing companies specializing in the production of labels and packaging is related to the growing demand, market expansion due to increased environmental properties of products, as well as the entry barriers to the industry, namely high investment and high quality requirements. another peculiarity of the development of printing enterprises should be noted – it is participation in tenders, which are held both at the expense of the state and private companies. tenders are organized by companies with foreign investment, whose volume of orders is constant. participation in procurement tenders requires printing companies to ensure the appropriate level of product quality and competitiveness. the complexity of solving the problem of increasing the competitiveness of printing products in terms of price can be explained by a number of factors. given that the printing industry is characterized by a high level of material intensity – the main reserve for reducing production costs are material costs. also in the industry are used mainly imported materials, higher in price than domestic, so a significant factor is the instability of the hryvnia exchange rate. printing companies can adjust material inventories to adapt to changes in material prices. however, the use of this method is limited due to a lack of funding. the difficulty of stocking is also due to the wide range of printing products, the tendency to use non-standard formats, and to change them with each new order in search of a more economical option. for enterprises of the publishing and printing complex, an important indicator is the quality of products, which depends on many factors, including the level of logistics. the low level of development of domestic printing engineering also increases the import dependence of printing companies, respectively, the capital intensity of production. in ukraine, mainly equipment for special types of printing is produced, as well as for post-printing processing. the main producers are pjsc "kyivpoligrafmash", pjsc "ukrndisvd", jsc "research institute of laser technologies" and llc "laser flex". the peculiarity of the development of printing enterprises in modern conditions is related to the search for ways to reduce the capital intensity of production. in the conditions of deficit of own investment resources, the demand for lease of operating equipment and financial leasing is growing. print shops also prefer to equip themselves with equipment from asian manufacturers, which is cheaper in price than european manufacturers, but inferior in product quality. the organization of the complete production cycle, namely pre-press, printing and post-press processes in enterprises of different business sizes leads to an increase in investment costs, while in developed countries the specialization of enterprises prevails (gutkevych, shenderivska, 2018). the exception is some bookbinding work, so printing companies that have the technical capabilities to perform them have an additional market, providing the relevant services on a cooperative basis. in modern conditions, medium and large businesses are diversifying their activities towards the introduction of technologies that are economically feasible in terms of reducing turnover. enterprises determine the areas most attractive for investment in terms of profit, choose areas in which it is possible to achieve the greatest increase in added value (shenderivska, guk, 2018). profit, as an indicator of the effect obtained as a result of economic activity, is the main component of the financial resources of the enterprise, the source of formation of budgets at various levels. baltic journal of economic studies 180 vol. 8 no. 3, 2022 for the development of printing enterprises it is necessary to attract skilled labor. it should be noted that the growing degree of mechanization and automation of printing production tends to reduce the demand for labor. the structure of the printing industry is changing by forms of ownership due to the reduction of the public sector enterprises. there are various forms of ownership in the industry: private – 91% (kotlyarevsky, shtangret, melnikov, 2012), state, and municipal. as already noted, small enterprises, which develop at the expense of private purchases and produce a wide range of products, prevail in the scale of the industry. their economic growth requires an active policy of searching for and attracting new customers. the urgent tasks are to ensure stable product quality indicators, to reduce the percentage of technical losses, to apply a customer-oriented approach based on ensuring such a combination of the key factors of competitiveness of printed products – price, quality, speed, which meet the needs of specific customers. private companies have more credit opportunities because their activities generate income and allow them to repay loans. joint-stock companies were established in the industry, mainly on the basis of privatization of state property, but not all of them were able to ensure the utilization of production capacity, so they ceased to operate, including enterprises "book", "polygraph book" and others. the number of utilities is shrinking due to a decline in demand for their main product, newspapers. based on the analysis of state-owned enterprises, we have divided them into the following groups: group i – specialize in the execution of state orders (polygraph plant "ukraine", the mint of the national bank of ukraine); group ii – self-accountin (se "kyiv offset factory ", state publishing house "press of ukraine", state self-accounting publishing and printing enterprise "foreign trade publishing house of ukraine" and others). these enterprises are medium and large in scale. the greater stability of orders is inherent in the first group of enterprises. for example, printing works "ukraine" is a monopolist in the production of envelopes with stamps, blanks of passports of citizens of ukraine, as well as produces other types of blanks. except in the polygraph plant "ukraine", only one other company, "kyiv offset factory ", has a license to issue strict reporting forms, which restricts competition in this market. in contrast to state budget printing enterprises, state self-supporting enterprises ensure profitability mainly at the expense of non-state commercial orders. however, in the absence of state financing of investment activities and deficit of own funds, they are limited in development at the expense of credit resources, since the main object of collateral – fixed assets – belongs to the state. a special group is the infrastructure of the publishing and printing complex, in particular, institutions that provide scientific services. the state scientific institution "book chamber of ukraine named after ivan fedorov" conducts bibliographic and bibliographic research, cataloging of publications, statistical accounting of publishing products of ukraine (basic provisions). development of new equipment, materials, technologies, quality standards, labor standards, material costs, instructions are performed by pjsc "ukrainian research institute of special types of printing", jsc "t.g. shevchenko ukrainian research institute of printing industry ", design and research and production center "polinom". insufficient state funding for these institutions has a negative impact on their scientific activities, respectively, on the development of innovations for the printing and publishing industry. therefore, printing companies mainly implement innovative developments of foreign companies, among the most common being uv printers and digital printing machines, which increases the economic efficiency of production in the segments of large-format printing and small print runs; equipment for the production of printing plates using computerprinting plate technology, which increases speed and reduces production costs, and hybrid equipment that combines several printing methods or printing techniques to meet customer requirements in a differentiated way. scientists predict the prospects for the industry when it shifts from specializing in books to more stable demand products – periodicals and packaging (vorobyov, shtangret, petrashova, 2010). the strengthening of european integration processes will have favorable consequences for the publishing and printing industry, namely attracting consumers ordering large-scale printing services, in particular, the food, construction, banking and advertising industries. thus, the structure of the print products market in ukraine is changing. this is due to the intensification of marketing activities of enterprises-customers of printing products, changes in the structure of consumption of goods, competition from modern information technology. for the development of measures aimed at improving the efficiency of development of printing enterprises, a more thorough analysis of individual activities, taking into account internal and external environment factors. in the context of increasing competitive pressure, it is necessary to study and implement effective international experience in order to promote the economic growth of printing enterprises. there is a worldwide trend toward cooperation, the creation of various forms of business associations. in europe, for example, 23 national press associations have baltic journal of economic studies 181 vol. 8 no. 3, 2022 united to form the intergraph federation. this organization brings together the printing industry and digital communications for common tasks, namely the promotion of the printing and related industries, maintaining competitiveness through lobbying, information and networking. there is also a global network of printing associations " world printing and communication forum", which includes representatives of china, the united states, europe, india, japan, hong kong and other countries. from the point of view of implementation in ukraine the experience of poland is of interest. the polish printing industry has a number of positive developments, in particular, market expansion due to exports, which account for 42% of total income and have a tendency to grow (printing industry in poland). for printing companies that provide systematic technical and technological renewal of production, implement quality management systems and, accordingly, produce products that can be competitive in international markets, it is also advisable to develop such activities as export. it should be noted that the export orientation of the polish printing industry is explained by an active investment policy, which is facilitated by reasonable prices for loans and leasing. in particular, 60% of companies invested through leasing. participation in the european union is also a favorable factor. polish printing companies are expanding their sales not only by entering international markets, but also through diversification. it is mainly technological and consists in the introduction of digital printing, or through the introduction of new services, namely: online ordering, which is used by more than 50% of consumers, consulting, assistance in the distribution of finished products, product design, electronic development of versions of publications (printing industry in poland). for ukrainian printing companies, especially those involved in the production of advertising, books, newspapers and magazines, experiencing the greatest competitive pressure due to the development of internet technologies, these areas are also relevant. a lot of attention in polish printing companies, as well as in ukraine, is paid to personnel policy. this is due to the fact that up to 67% of industry employees have no specialized education, respectively, there is a need to train employees on the specifics of the industry, in addition to systematic work on the training of specialists in technological training, etc. (printing industry in poland). it is also advisable for printing companies in ukraine to intensify social development through the organization of staff training to master new technologies, learning from the experience of foreign colleagues, etc. in poland, the development of the printing and publishing industries has state support. thus, the state regulates the publishing and printing business, compensating the translation of publications of polish authors into foreign languages and foreign authors into polish, creating favorable conditions for investment, setting prices for certain products. the implementation of the first direction is supported by the growing interest of the world community in the political situation in ukraine, which requires not only timely information, but also thorough analytical reviews, which can be prepared in the form of books. financing of these publications and their translation into foreign languages can be provided both by state support and private investments. the first place in the world in terms of annual income of the printing industry – $80 billion – is occupied by the united states (printing in the us), so it is advisable to study the experience of this country. compared to other sectors of the economy, the printing industry is one of the most active in terms of investment. the share of large and medium-sized enterprises in market income is 80%, associations are formed with a significant number of participants and representative offices, including "consolidated graphics, inc." has 70 divisions in the usa, canada, the czech republic, "vst" has 45 divisions in the usa and owns a paper sales firm. as around the world, the printing industry is under competitive pressure from the internet, electronic reading devices, and an adaptation strategy that is groving popular in the united states, including diversifi cation of multimedia design, can be implemented in ukraine. to avoid increasing the costs of printing companies to maintain the staff of designers, implementing a strategy of diversification, it is advisable to involve them only in the implementation of projects. canada's experience is also interesting for ukraine. the country 's printing industry is characterized by a high level of development – its share in the total volume of industrial production is over 5%, while in ukraine this figure is less than 1%. there is active investment activity – the share of investments in the purchase of machinery and equipment in the printing industry reaches 65% of the total volume of investments. some of the difficulties associated with a shortage of orders and overproduction, which are also characteristic of ukraine, are solved by the consolidation of large enterprises seeking to maintain profits (printing in canada industry). canada's experience in cross-sectoral integration in areas such as investment and innovation, international trade, strategic management, education and training, and performance management is also useful, contributing to the progressive development of the printing industry and the national economy as a whole. as in many countries, canada has a printing industry association, and it has a feature that can be baltic journal of economic studies 182 vol. 8 no. 3, 2022 implemented in ukraine. so, at the initiative of the association was created trust fund for canadian printing scholarships, which aims to promote the future economic growth of the industry by attracting the most talented young people, providing places for internships, and funds for the fund, scholarships are provided by canadian printing companies (canadian printing industries scholarship trust fund). the development of this direction is relevant for ukraine in order to help solve the problems associated with the reduction of state funding for higher education, as well as to provide internships for students. the printing industry in finland has a progressive track record of finding new market niches, which is relevant due to the decline in demand in traditional markets. for example, some printers have found narrow niches, namely serving architectural and construction firms, while providing not only printing services, but also creating electronic archives based on digitization of old drawings, as well as effective experience in expanding the services of printing companies that produce advertising products. printing companies in ukraine can also develop in this direction, namely to provide a service for the distribution of promotional products. the achievements of latvian printing companies in finding ways to increase efficiency under the conditions of growing competition are of interest. for example, promising measures include the introduction of innovative technologies allowing the production of personalized advertising. in ukraine, this direction also requires development, as producers of different industries improve advertising activities on the basis of segmentation. singaporean printing companies have achievements that are effective for imitation in ukraine. in particular, the problem of reducing the circulation of newspaper products is solved through the implementation of the strategy of commercialization of newspapers, i.e., increasing their attractiveness as a means of advertising. for this purpose, newspapers started printing qr codes, with the help of which it is possible to view multimedia dynamic materials in the internet. thus, newspapers have gained the advantages of electronic editions, while the cost of their production has not increased. the functionality of newspapers is also enhanced by their additional processing – sewing on a staple, which helps to attract customers of specialized advertising newspapers. the experience of the chinese printing industry is also of interest, with companies devoting considerable attention to improving product quality by implementing the iso 9001 series quality management system and their own product quality management systems. enhanced quality control is carried out in associations of enterprises, the essence of which is that this function is performed by specialists of individual enterprises and specialists of the central body of the association (quality control, asiapacificoffset). chinese printing companies also create associations to enter international markets, and they may include members from other countries. to effectively position themselves in international markets, ukrainian printing companies should learn from china's experience in creating associations, providing quality information support, namely: the maintenance of english-language sites, product price calculators, sample assortment with average prices. based on the study of effective international experience in the printing industry, the authors identified promising areas of development of printing enterprises (table 1). a study of the experience of the printing industry in different countries shows that all countries have their own characteristics, but at the same time there is a general trend toward mergers and acquisitions, both vertical and horizontal. one important factor in the creation of associations in the printing industry in the long term will be the trend toward globalization of customers – publishers, advertisers, buyers of packaging, who require high-quality products. 4. conclusions the basis of any company 's management philosophy should be to create value for consumers. in modern conditions the availability of technology, table 1 prospective areas of development of printing enterprises country country experience relevant for implementation in ukraine canada increasing the level of social responsibility of printing companies by financing the training of talented young people – future employees of the industry china active implementation of international quality standards, additional centralized quality control in business associations poland investment in new technologies, increase in exports singapore, finland search for new market niches usa involvement of product designers during the implementation of projects source: compiled by the authors according to (canadian printing industries scholarship trust fund; printing in canada industry; printing industry in poland; printing in the us; quality control, asiapacificoffset) baltic journal of economic studies 183 vol. 8 no. 3, 2022 material and technical resources is increasing, so the supply of high quality products is growing. with this set of factors, companies need to improve service quality to win the competition. prompt delivery and customer information support become crucial. in this context, it is important for printing companies to improve, above all, marketing communication policies and logistics processes. automation of processes of interaction with clients will promote realization of the client-oriented approach and orientation on continuous develop ment of the company. orientation on continuous personnel training will promote realization of social function of the company – higher level of job satisfaction, and also economic – acquisition of strategic competitive advantages. strengthening of integration processes to improve the efficiency of individual enterprises and the industry as a whole should take place at different levels: intra-industry, inter-industry, international. this will help improve product quality, boost innovation and investment, fill market niches, and create new industries. effective management of publishing and printing companies should focus on greening production and adapting to the digital economy. references: 26 relevant print marketing statistics: 2022 ad spending & impact. available at: https://financesonline.com/ print-marketing-statistics basic provisions. book chamber of ukraine. available at: http://www.ukrbook.net/osnov_polozh.html canadian printing industries scholarship trust fund. available at: http://www.printscholarships.ca/en/about-us/ economic code of ukraine: code of 16.01.2003. № 436-iv. available at: http://zakon4.rada.gov.ua/laws/ show/436-15 ejsmont, k., & lipiak, j. 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(2012). organizational and economic mechanism of development of publishing and printing industry in the process of guaranteeing information security of ukraine, ukr. acad. drukarstva, lviv. kruglov, v. (2021). book results-2021: turns half a step to the abyss. available at: https://life.pravda.com.ua/ columns/2021/12/30/247011/ mashtaller, r . m. (1987). economics of the printing industry. moscow: knyga. mazepa, i. (2022). how the great resettlement of ukrainians will affect the economy. "economic truth". available at: https://www.epravda.com.ua/columns/2022/04/25/686191/ palyha, ye. m., basylyuk, v. b., & palyha, i. ye. (2019). improvement of corporate governance of publishing and printing enterprises. 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"scientific works of kirovograd national technical university. economic sciences", vol. 2. available at: http://economics.kntu.kr.ua/pdf/28/25.pdf zinchenko, o. a. (2022). world trends of "green" investment. "economic scope", vol. 177. available at: http://www.prostir.pdaba.dp.ua/index.php/journal/article/view/1049 received on: 21th of july, 2022 accepted on: 25th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 146 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: olya.litvak@gmail.com orcid: https://orcid.org/0000-0002-1351-3900 researcherid: g-9173-2018 2 admiral makarov national university of shipbuilding, ukraine e-mail: sergiy.litvak@nuos.edu.ua orcid: https://orcid.org/0000-0002-1508-8493 researcherid: g-9194-2018 doi: https://doi.org/10.30525/2256-0742/2023-9-2-146-156 implementation of the circular economy model in the agricultural sector of ukraine olga litvak1, serhiy litvak2 abstract. the urgency of studying the issues of the development of the circular economy in the agro-industrial complex is caused by the demand for national and international food security, the importance of preserving the environment in conditions of irrational environmental management, the need to harmonise the economic, ecological and social spheres of human activity involved in the production, sale and consumption of agricultural products. the purpose of the study is to justify a comprehensive approach to the implementation of the circular economy model in the agro-industrial complex, in the context of ensuring food independence, economic security of the country and achieving the goals of sustainable development. in the course of the research the general scientific methods of analysis and synthesis, statistical methods (comparison, analysis of absolute and relative values) and graphical methods were used in the evaluation of indicators of organic waste management of agricultural production, methods of a systematic approach – to justify a set of priority measures in the process of implementation of the model of circular economy in the agro-industrial complex. the information base for the research: legislative and regulatory acts; official materials of the state statistical service of ukraine, the ministry of agrarian policy and food of ukraine. based on the results of the research, a comprehensive approach to the implementation of the principles of circular economy in the agro-industrial complex was formed. the key factor is an effective public policy capable of ensuring high rates of development of innovative resource-saving technologies and the introduction of circular business models. state activity includes the development of tax, credit and pricing policies to stimulate the implementation of circular economy principles. it is important to develop and approve strategic plans, legislative and regulatory acts that regulate activities in the field of circular economy and are adapted to the standards and norms of the legislation of the european union. the activities of agricultural enterprises should be directed towards cooperation with scientific and educational institutions in order to solve the problems of introducing innovations and improving the qualifications of employees, technical and technological modernisation, establishing partnership relations with investors, raw material suppliers and local self-government bodies. ultimately, the implementation of these measures will contribute to the growth of the competitiveness of the domestic agricultural sector, the growth of investment attractiveness and the preservation of the environment. key words: circular economy, closed loops, agricultural production, organic waste, business models, food security. jel classification: o13, q01, q57 1. introduction today, the effective functioning of the agricultural sector plays an important role in the stable development of the country and in ensuring food security. this is due, first and foremost, to the growing demand for agricultural commodities as the world's population grows. it should also be noted that the existing global food system has a huge impact on the environment. agriculture is one of the four most environmentally damaging sectors of the economy, after transport, energy and industry (fao, 2009). as food production increases, so does the amount of agricultural waste that needs to be disposed of. when analysing the entire agricultural food production chain, up to a third of the food produced for human consumption is not taken into account, baltic journal of economic studies 147 vol. 9 no. 2, 2023 meaning that the global loss of modern food reaches 30% (ward, holden, white, oldfield, 2016). this means that a certain part of land and water resources is used irrationally and is actually lost in terms of the end result, and that its exploitation is inefficient and environmentally destructive. modern economic realities require a fundamentally new approach to economic activity in the agricultural sector. in order to ensure sustainable development, it is necessary to modernise the linear model of the economy and move towards a new model of economic development aimed at increasing responsibility for environmental issues and irrational use of environmental management. the implementation of the circular economy concept can contribute to solving these problems. circular economy – is an economic system of closed cycles in which raw materials, components and products lose their value to the absolute minimum, renewable energy sources are used and systems thinking is at the forefront (korhonen, honkasalo, seppälä, 2018). the concept of circular economy is based on the 3r theory (reduce – reuse – recycle), which includes three key components: waste prevention (as little waste as possible), reuse (maximum reuse of products and components) and recycling (production of high-quality products from recycled waste) (lieder, rashid, 2016). the circular economy approach to solving the environmental challenges of the present day is not limited to the treatment of waste at the end of the product life cycle, but is constantly expanding due to the proposed innovative methods that are integrated into all stages of production and consumption (tura, hanski, ahola, 2019). the purpose of the study is to justify a comprehensive approach to the implementation of the circular economy model in the agro-industrial complex, in the context of ensuring food independence, economic security of the country and achieving the goals of sustainable development. in the course of the research the general scientific methods of analysis and synthesis, statistical methods (comparison, analysis of absolute and relative values) and graphical methods were used in the evaluation of indicators of organic waste management of agricultural production, methods of systematic approach – to justify a set of priority measures in the process of implementation of the model of circular economy in the agro industrial complex. the information base for the research: legislative and regulatory acts; official materials of the state statistical service of ukraine, the ministry of agrarian policy and food of ukraine. 2. agricultural potential of ukraine the agro-industrial complex is an important strategic industry of the national economy, which provides the basis for maintaining the country 's food sovereignty and, within certain limits, economic, environmental and energy security, ensures the development of technologically related branches of the national economy, and forms the socio-economic framework for the development of rural areas. in 2021, the share of the agro-industrial complex in the structure of ukraine's gdp was the highest among all sectors of the economy and amounted to 10.6%. agro-food products account for the largest share of ukraine's total exports – about 41% annually. the agricultural sector remains almost the only industry that has ensured a positive foreign trade balance for many years in a row (leshchenko, 2022). the modern structure of agriculture in ukraine has its own peculiarities. according to the results of 2021, crop production accounted for 81.4% and animal husbandry – 18.6% of total agricultural production. cereals, sugar beet and potatoes are the most important crops. the cultivation of sunflowers, vegetables and fruit also plays an important role. in animal husbandry, cattle farming, pig farming and poultry farming are the leading areas of development. the real test for agricultural producers was the full-scale war that began in february 2022. the invasion of russian troops led to the destruction of processes and logistical chains established over the years. many farmlands have been mined, some of them inaccessible. according to the ministry of agriculture, the area of arable land in the zone of active hostilities decreased by 3.5 million hectares in 2022 as a result of the war (yaskyv, brianska, 2022). the agricultural sector faced a number of challenges: occupation of territories and agricultural lands, theft of grain and its export outside the territory of ukraine, blocked sea ports, destroyed elevators, farms, warehouses, machinery and fires in the fields. the government's policy to support agriculture in wartime conditions includes a number of measures: minimising bureaucratic procedures for agriculture, allowing the use of agricultural machinery without registration, simplifying the import of seed material, introducing a zero excise duty rate and reducing the vat rate on fuel to 7%. the government has also introduced special state programmes: available loans of 5-7-9%, grants for processing companies, for the development of horticulture and for the construction of greenhouses. tax exemptions have been introduced, which provide for changes in payment for land of state and municipal forms of ownership during the period of military rule (nehrey, taranenko, kostenko, 2022). baltic journal of economic studies 148 vol. 9 no. 2, 2023 thus, even under such difficult conditions, agricultural enterprises and farms continue to operate both for domestic consumption and for the international market, which depends on ukrainian grain. the agribusiness is adapting logistics and cooperation, expanding its production facilities in the western part of the country to ensure ukraine's food security. despite the growing importance of the agricultural sector in the expanded reproduction of the resource production potential of the ukrainian economy, this branch of the national economy does not fully use all available reserves and opportunities to maximise income by increasing the production of products with high added value (andreichenko, 2018). ukrainian farmers continue to expand the planting of the most export-oriented agricultural crops and increase the export supply of products with low added value, which also leads to soil depletion and structural imbalances in the agricultural sector of the national economy. this leads to a decrease in the level of comprehensiveness of the development of agroindustrial production, which in the long term will negatively affect the development of those regions where the processing of agricultural raw materials is the basic link of the economic complex (shmarov, 2021). the development of the agro-industrial complex and the expansion of agricultural areas lead to the generation of significant amounts of waste, which causes anthropogenic pressure on the environment (national waste management strategy in ukraine until 2030). according to statistical observations, the amount of waste generated by the agricultural sector in ukraine varies from year to year, but has tended to decrease in recent years (figure 1). in 2020, more than 9.8 million tonnes of waste will be generated from agricultural production. the share of vegetable waste is 62%, the share of animal faeces, urea and manure is 34%, the share of animal waste and mixed food waste is 4% (state statistics service of ukraine, 2022). taking into account the above data, plant production, together with animal production, accounts for the majority of waste in the agro-industrial complex. the share of animal waste in food production is insignificant in comparison with the previous two sources of waste. utilisation and processing of organic waste from agricultural production is one of the most acute modern environmental and economic challenges. the quantity of waste produced in agro-industrial production, as well as the degree of its further use, is now becoming the key indicator of the level of application of the achievements of scientific and technical progress in agro-industrial production. the more advanced the technologies of production and use of agricultural products, the less waste there will be. the main ways of dealing with agricultural waste in ukraine are incineration, recycling and landfilling (table 1). the analysis of the given data shows that the use of agricultural production waste is not efficient enough. animal faeces is the main waste, accounting for 70.1% of the total volume of this waste category. the share of recycled vegetable waste is 24.6%, and the share of recycled animal and mixed food waste is 50.2%. the main directions of organic waste utilisation in the agricultural sector of ukraine are: recycling, composting and fermentation. vegetable waste is also incinerated for energy recovery, the share of such waste is 7.9%. the most common method of processing organic waste is the production technology of organic fertilisers. the demand for organic fertilisers is so great that the companies that produce organic waste 954,2 897 990,6 587,6 607,5 441 405,4 9061,4 7742,3 8606 8782,3 7829,3 8068,6 6101,8 4037,2 4938 4288,7 3653,4 3233,8 3612,9 3314,7 0 2000 4000 6000 8000 10000 12000 14000 16000 2014 2015 2016 2017 2018 2019 2020 animal faeces, urine and manure vegetal wastes animal and mixed food waste of food preparation and products 1000 tons 4% 62% 34% figure 1. distribution of agricultural waste by material category source: compiled by the authors based on data from: https://www.ukrstat.gov.ua baltic journal of economic studies 149 vol. 9 no. 2, 2023 and fertilisers use them mostly in the cultivation of agricultural crops. part of the organic waste is used as raw material for feed production. a small proportion of organic waste is used in vermiculture to produce high quality organic fertiliser (vermicompost). another ethod of processing organic waste is the production of biogas for the generation of heat or electricity and as a fuel for agricultural machinery. vegetable waste can be a source of solid fuel for rural areas. other sectors of agricultural production and processing are lagging behind in the process of integrating organic waste into recycling. there are many reasons for this, ranging from problems with the collection, transport and storage of organic waste, to the lack of cost-effective technologies and technical means for processing organic waste, to insufficient interaction and information exchange across the entire hierarchy of the agricultural sector. the requirements of the modern market dictate the need to develop and implement production technologies with low energy, resource and capital intensity, which enable the production of high quality and competitive products. studying the agri-food system from the perspective of using the circular economy makes it possible to identify additional opportunities at all stages of the production process, starting from primary production using innovative methods of agricultural management and ending with various directions of recycling of waste from agricultural production (table 2). involvement in the field of waste production, its recycling ensures the expansion of the raw material base of the agro-industrial complex, while at the same time saving on labour costs. the release of additional products from secondary raw materials ensures a reduction in production costs per unit of final product for the same cost of raw materials. in the long term, the agro-industrial complex should switch to efficient, resource-saving, lowwaste technologies, where the waste from one stage of production becomes the raw material for another stage of production. this will provide the framework for the transition to closed-loop production, where waste that is not processed into useful products is reduced to a minimum. table 1 agricultural waste management by material category in ukraine in 2020 waste management waste generated, thousand tons waste utilization waste incineration waste disposal in specially designated places thousand tons % thousand tons % thousand tons % animal waste and mixed food waste 405.4 203.4 50.2 4.5 1.1 1.9 0.5 vegetable wastes 6101.8 1502.5 24.6 480.2 7.9 15.5 0.3 animal faeces, urine and manure 3314.7 2324.6 70.1 – – 0 – source: calculated by the authors based on data: https://www.ukrstat.gov.ua table 2 ways to use waste and secondary raw materials from agricultural production directions for usage waste and secondary raw materials used in agricultural production fodder for farm animals in raw or processed form straw and tops of agricultural plants, raw and dried beet pulp, cereal potato and molasses bards, potato and corn pulp, meal (cake), brewer's pellet, brewer's yeast sludge, malt sprouts, bone meal, whey, etc. bedding for livestock straw of rye, wheat, oats, barley, wood sawdust fertilizer production manure, poultry droppings, feces, potato cell juice, straw, stems, tops, roots and primary grain processing waste food production through industrial processing molasses, low-quality fruits and vegetables, phosphate concentrates, apple pomace, corn germ, fruit pits, blood, bones, whey, skim milk, buttermilk, and buttermilk production of building materials cereal stalks, sunflower and cotton husks, sawdust, shavings, grinding dust production of biofuels (pellets, briquettes, biogas, bioethanol, biodiesel) straw, plant residues, sawdust, manure, chicken manure, used vegetable oils, sunflower husks, cake, meal, coffee grounds, vine trimmings production of biopolymers, biodegradable packaging waste of corn, sugar cane, rice, grain husks (rice, buckwheat, millet), potato pulp, beet pulp use of wastewater for irrigation waste water of livestock farms, poultry complexes application in the pharmaceutical industry for the production of medical and veterinary products secondary raw materials generated after processing of meat products (blood, bones, by-products); husks, wheat and corn germs, potato and corn pulp production of cosmetic products cereal processing waste, fruit and vegetable seeds, grape marc, wheat germ, grape waste source: compiled by the authors on the basis of (international finance corporation, 2013) baltic journal of economic studies 150 vol. 9 no. 2, 2023 3. principles of implementing the circular economy model in the agricultural sector the implementation of the circular economy model in agro-industrial production has its own characteristics and must be created and operated in accordance with certain principles, the applied use of which minimises the consumption of raw materials and energy resources, limits the negative impact of production on the environment, ensures the cyclicity of material and financial flows, rationalises the production and economic activity of the agro industrial complex, stabilises the operation of the social, economic and external spheres of human life (figure 2). the implementation of the principles of the circular economy in agricultural production is primarily aimed at the creation of regulated biological and technical cycles and the transformation of energy and matter associated with them. the technical cycle is aimed at the recovery, repair and recycling of products and their components. in terms of biological cycles, the environmental benefit of the circular economy is the creation of fertile soils. important nutrients are returned to the soil through anaerobic processes or composting, which has a positive effect on agricultural land and natural ecosystems. according to the researchers' conclusions, the circular economy model operating in european food systems is able to reduce the use of artificial fertilisers by 80%, thus contributing to the natural balance of soils (van eijk, 2015). therefore, one of the tasks of the circular economy is to optimise the use of resources through the circulation of products, components and materials with the maximum benefit in both technical and biological cycles. the implementation of the circular principles of implementing the circular economy model in the agro-industrial complex use of innovative technologies to minimize losses at all stages of agricultural production: sowing, harvesting, storage, processing, transportation, consumption. each production process is part of a complex production system development of a closed production process that resembles the circulation of substances in nature sustainable use of resources, which allows to minimize losses due to the application of waste for further production adherence to environmental and sanitary norms and rules for the preservation of the environment and people's health reducing the use of non-renewable resources in production formation of closed chains when using waste streams abandonment of the use of hazardous materials and substances comprehensive use of all components of raw materials and the potential of energy resources reduction of energy intensity and material intensity of production optimization of production according to energy-technological, economic and environmental parameters formation of organized and regulated biological and technical cycles and related energy transformations d ir ec ti on s fo r im pl em en ti ng th e pr in ci pl es preservation and reproduction of environmental components (atmospheric air, fresh water, soil fertility, landscapes, flora and fauna) and population health. combination and cooperation of industries using waste from some technologies as raw material for the others substitution of primary raw and energy resources with secondary resources in production processes development of conditions for returning products to the production cycle after their physical and moral wear and tear strengthening the interconnection and interdependence of natural, industrial and social processes effect of the principles implementation figure 2. principles of implementation of the circular economy model in the agro-industrial complex source: generated by the authors using data of: (unido, 2020; wijkman, skånberg , 2015) baltic journal of economic studies 151 vol. 9 no. 2, 2023 economy model in the agro-industrial complex involves minimising the use of external resources (fuel, fertilisers and agrochemicals) and maximising the use of its own production factors (renewable energy sources, biofuels, organic fertilisers, etc.). it should be noted that implementing circular economy principles is not only about processing and reusing waste. it also involves technological, organisational, environmental and social innovations applied throughout the value chain. 4. circular business models in the agro-industrial complex in order to implement the principles of the circular economy, it is necessary to analyse various options of business models and choose the most effective one, as well as to make a comparative assessment of the benefits of using the model with the determination of factors that contribute to improving the quality of economic activity. at the heart of the transition to a circular economy are five business models that help transform traditional linear approaches to production and consumption, such as "take, make, dispose", into circular approaches that minimise waste, reduce environmental impact and increase business efficiency. such business models are already widely recognised by companies and organisations as an effective approach to implementing circular economy strategies (table 3). the resource recovery business model, which is a continuation of traditional waste management, has become the most common in agricultural production. in a perfect world, a recovered resource is used in such a way that it retains the highest possible value for the longest possible period of time. in this context, companies should consider the "waste hierarchy " when determining how to create value from end products. today, there are a large number of farms that already have a waste management strategy in place, so this model requires minimal adjustment to existing business structures. a feature of the circular supply model is the replacement of limited resources (traditional raw materials) with fully renewable sources or secondary materials. recently, some versions of this model, based on the use of biodegradable resources, have been actively implemented in the agricultural sector. the technology for the production of biogas or bioethanol, which are products of the processing of agricultural production (corn husks, cobs, stalks), has already become quite common (litvak, litvak, 2020). thanks to such developments, in addition to reducing the amount of production waste and the amount of greenhouse gases and pollutants emitted into the atmosphere, it leads to a reduction in the table 3 circular business models of the agro-industrial sector business model model description implementing a business model in the agricultural sector resources recovery implementation of technological innovations for the recovery and recycling of resources, which ensures the elimination of their losses and contributes to increasing the profitability of production. in agricultural production, the most widespread use is composting and anaerobic fermentation of waste to produce fertiliser and biofuel. circular supplies in the production process, non-renewable resources are replaced by renewable, biodegradable, recycled or recyclable materials, which ensures the partial or complete elimination of waste and reduces the negative impact on the environment. implementing renewable resource technologies, such as using rainwater harvesting and livestock effluent for irrigation; and processing agricultural waste into biofuels, bioplastics and microbial agrochemical solutions. product life extension the business model covers a range of activities – from repair, refurbishment and upgrading to trading and resale. extended product life can become a competitive advantage and attract new customers. companies specialising in the manufacture of agricultural machinery and equipment can carry out repairs, conversions and upgrades of technical equipment. this business model aims to increase the reliability of technical equipment by using stronger, more wear-resistant materials. product as a service products are used by one or more customers through rental or service fees. instead of buying expensive equipment, it is more advantageous for farmers to buy a service package for a complex of production operations (soil treatment, crop care and pesticide treatment, harvesting, etc.) or to rent agricultural machinery. sharing platforms this model increases the efficiency of the use of goods (services) and can benefit companies whose products and assets have a low utilisation rate. the sharing platform allows farmers to offer their equipment when not in use for use by other farmers from different regions who pay a rental fee. customers have convenient access to products and services. source: generated by the authors using data of: (lacy, keeble, mcnamara, 2014; kovalchuk, lukiіanenko, 2020; batova, sachek, tochitskaya, 2018; donner, gohier, de vries, 2020) baltic journal of economic studies 152 vol. 9 no. 2, 2023 extraction of fossil fuels and is a new source of income and the creation of new jobs. the circular supply model is being successfully implemented in ukrainian agricultural business. renewable energy and the use of biological fertilizers have become part of the business model of many agricultural enterprises. it is possible to replace 9 billion m3 of gas annually only thanks to the use of agricultural waste. moreover, farmers can get this amount of fuel by using only 37% of agricultural crop waste for energy needs (ukrsugar, 2018). by the end of 2022, 64 biogas plants will have been built in ukraine and will operate under a "green" tariff. the total electrical capacity of these plants is 130 mw, which is more than 7 times higher than at the end of 2015 (18 mw) (bezus, 2023). the agricultural holding prjsc "mhp" is considered the flagship of the circular economy in ukraine. the company effectively uses organic waste (chicken manure) generated by the activities of the agricultural holding's enterprises for energy production in two biogas complexes. biogas is converted into electricity, heat and steam, ensuring the company 's energy independence. at the same time, organic fertiliser is produced to restore soil fertility (mhp, 2023). there are also other unique circular economy projects in ukraine. for example, the "obolon" group sells by-products of beer production to agricultural companies, which become animal feed (nechytailo, 2020). some private companies are involved in the processing of fallen leaves into paper, the production of flour from the waste of non-alcoholic beer production, the production of spectacle frames from coffee grounds, and so forth (baiura, 2021). from the point of view of the circular economy, it is also important to solve the problem of plastic recycling. this approach can be effectively applied in the field of processing and turnover of polyethylene film for greenhouses, plastic canisters for fuel and lubricants, liquid pesticides and fertilizers, containers for water and beverages, plastic bags for mineral fertilizers, waste fittings for drip irrigation, etc. (oecd, 2018). the ban on plastic bags is prompting food processors to review their packaging materials. at the same time, new opportunities are opening up for entrepreneurs involved in the production of products made from biodegradable materials. for example, "greencup" llc, lviv oblast, produces environmentally friendly disposable tableware from corn starch, rye, reed, bamboo and wheat bran (melnyk, zlotnik, 2020). the effective application of circular business models in the agro-industrial complex plays a strategic role and has a positive impact on the growth of interest in the circular economy in society and becomes an incentive for steady economic growth. management decisions regarding the transition of agricultural enterprises to the principles of the circular economy as a result of the introduction of new business models are aimed not only at gaining additional competitive advantages, but also at compliance with environmental and consumer standards, a higher level of social and environmental responsibility. 5. prerequisites for the implementation of the circular economy model in the agro-industrial sector of ukraine the implementation of circular economy principles should be initiated by the country 's government, so it is important to explore legislation that encourages companies to comply with environmental standards and to develop and implement efficient, low-waste technologies. in ukraine there is still no regulatory legal act regulating the development of the circular economy, but separate elements are set out in various programme documents. the main legislative acts that form the legal framework of waste management and the principles of state environmental policy are as follows: – "national waste management strategy in ukraine until 2030", adopted in 2017; – national waste management plan until 2030", approved by the cabinet of ministers of ukraine in 2019; – the law of ukraine "basic principles (strategy) of state environmental policy of ukraine for the period until 2030", approved in 2019. the specified legislative acts introduce european principles of waste management in ukraine, promote the principles of circular economy and expand the responsibility of producers, which will encourage representatives of agricultural production to implement innovative circular business models. systemic change in the area of effective circular economy development is only possible if all parties are interested in it. this requires, on the one hand, support for projects at the state level and, on the other hand, a change in consumption patterns towards more rational ones. this requires a certain responsibility on the part of both consumers and producers. the main reasons for the gap of the ukrainian agribusiness in the implementation of the principles of circular economy are: – the imperfection of the legislative and regulatory framework, the lack of effective economic instruments regulating the processes of transition to new circular business models; – the technical and technological backwardness of most production processes; baltic journal of economic studies 153 vol. 9 no. 2, 2023 – limited information on the characteristics and composition of waste, on the available technologies for its processing; – lack of qualified professionals; – problems in investing in innovative projects in the agro-industrial complex; – high transport, logistical and technological costs for processing waste and secondary raw materials; – unstable demand for waste processing products; – the political situation and the conduct of military operations on the territory of the country. in order to overcome the aforementioned negative trends and effectively develop the agricultural sector of the economy of ukraine, a comprehensive approach has been formed, which provides for the introduction of a set of measures to implement the circular economy model (figure 3). active government support is one of the key success factors for the development of the circular economy in the agro-industrial complex. state regulation and economic incentives (taxes, environmental regulations, green tariffs, etc.) are of great importance as they affect the competitiveness of circular models and the possibility of achieving an acceptable level of economic efficiency. to stimulate demand for products made from waste or secondary raw materials, public green procurement, budget subsidies, etc. are important tools. taking into account the important role of the state, public sector demand can become the main condition for the development of the circular economy. at the same time, the relationship between the state and local authorities and agricultural producers should be developed on a long-term basis, so that enterprises have the opportunity to organise a planned, sustainable and stable production. the organisation of production within a closed technological chain is possible provided that vertically integrated agro-industrial structures are created. at the same time, significant progress in the implementation of the circular economy model in conditions of shortage of working capital can be achieved only by attracting large business funds. therefore, one of the important tasks is the optimisation of the infrastructure into an industrial scientific and technological complex in the form of an innovative organisational, legal, managerial and economic structure ecotechnoparks, agrarian bioclusters. with the cluster form of integration, regional executive structures at the regional and district levels and local self-government bodies have the opportunity to play a more significant role in the financial, economic and organisational support of the implementation of projects in order to increase the level of complexity of the development of all links of the agro-industrial complex. it is the processes of creating agricultural clusters that play a crucial role in the formation of a circular economy: – clusters can facilitate the introduction of structured eco-innovation supply chains. efficient and optimal supply chains are formed at the local level, where agricultural enterprises and farms are located in close proximity (ketels, protsiv, 2016); – high concentration of highly qualified employees, interaction with scientists and educational institutions are the characteristics of clusters; – clusters solve the problem of information support, information exchange of markets, best practices and technologies; – the problems of compliance of new circular business models with the requirements of legislation, environmental standards and norms are solved with the help of training programmes and consultancy by cluster organisations (barsoumian, severin, van der spek, 2011). the process of cluster creation in ukraine is complicated by the lack of a regulatory and legislative framework governing the creation, operation and state support of cluster structures. in countries where clusters operate successfully, 50-70% of the cluster budget is spent on local and state support programmes for cluster development. therefore, it is difficult for ukrainian clusters to start their activity, they have to rely only on their own strength and the support of international technical assistance programmes (ozturk, 2017). according to experts, kyiv, zakarpattia, zaporizhia and kharkiv oblasts are the most active oblasts in the development of clusters. and the best examples of clusters in ukraine recently are ukrainian food valley, agro food cluster kharkiv and "ukrainian organic cluster". thus, the introduction of a comprehensive approach to the implementation of the circular economy model in the agro-industrial complex will make it possible to increase labour productivity, reduce the material and energy intensity of production, increase the efficiency of recycling secondary raw materials and increase the production of high-quality, environmentally friendly products. ultimately, these processes will contribute to the growth of the competitiveness of the domestic agricultural sector and increase its investment attractiveness. 6. conclusions the analysis has shown that there are significant opportunities for transforming the dominant model of the linear economy in ukraine into an ecologically and economically effective circular model. favourable natural and climatic conditions, as well as land potential, are an important condition for the baltic journal of economic studies 154 vol. 9 no. 2, 2023 implementation of the circular economy model in the agro-industrial complex goal creation of closed-loop production systems that enable the innovative and cost-effective development of the agro-industrial complex, ensure the rational use of resources, reduce waste, lessen the burden on the environment and contribute to the country's food security and energy independence, in order to achieve the goals of sustainable development.  formulation and approval of strategic plans for the development of the circular economy  development and approval of normative legal acts, state standards and in relation to the implementation of circular business models in the agricultural sector  creation of financial and fiscal instruments to support the implementation of circular economy principles  strengthening state control over waste management and the rational use of primary raw materials  encouraging the development of renewable energy sources  supporting scientific research into the development of innovative environmentally friendly technologies and their implementation in agricultural production  development of an effective green public procurement system t a sk measures at the level of production activities  interaction with scientific and educational institutions to solve the problems of introducing innovations and improving the qualifications of employees  technical and technological modernisation of agricultural enterprises  creation of an effective system for recycling organic waste and secondary raw materials with the introduction of innovative, environmentally friendly technologies and promotion of circular business models  establishment of close relations with regional credit and financial structures, investors, suppliers of material and technical resources and service organisations  improving the system of relations with state and local government bodies  formation of an environmental management system and development of an effective environmental policy of agricultural enterprises  creation of a publicly accessible information network on issues of product promotion on the market, organisation of interaction between producers and consumers. f or m at io n of a gr ic ul tu ra l bi oc lu st er s an d ec ot ec hn ol og y pa rk s e x p e c t e d r e su l t s state support economical social environmental • reduction in the cost of agricultural products; • creation of new products and new markets; • reducing the dependence of production on imported resources; • creating an alternative raw material base for the development of processing industries; • production of reusable and recyclable goods; • development of bio-energy; • increasing the competitiveness of the industry • the urgent need for new workplaces; • development of rural infrastructure; • improving public health; • creation of high-quality products with increased nutritional value; • improving the quality of life of the population • rational use of energy, water and land; • preventing pollution; • reduction of greenhouse gas emissions; • reducing dependence on fossil resources; • production of fuels and plastics from biomass; • development of organic agriculture and organic market products; • increasing the level of environmental awareness among the population a da pt at io n of le gi sl at io n to th e no rm s an d st an da rd s of th e of th e e ur op ea n u ni on figure 3. a comprehensive approach to the implementation model and circular economy in the agro-industrial complex source: developed by the authors baltic journal of economic studies 155 vol. 9 no. 2, 2023 development of the agricultural sector based on the principles of the circular economy, which can significantly increase the competitive advantages of domestic agricultural enterprises and farms. the creation and development of an agro-industrial complex focused on closed production cycles will make it possible to solve not only the problems of environmental safety of food products and the natural environment, but also the social problems of rural areas by increasing the level of employment of the rural population. at the same time, it is solving the important national economic problem of ensuring the country 's food security, saturating the domestic market with high-quality, ecologically safe goods, and creating energy independence for the regions. based on the results of the research, a comprehensive approach to the implementation of circular economy principles in the agro-industrial complex has been developed. the key factor is an effective state policy capable of ensuring high rates of development of innovative resource-saving technologies and the introduction of circular business models. the state's activities include the formation of tax, credit and pricing policies to stimulate the implementation of the principles of the circular economy; strengthening state control over waste management and the rational use of primary raw materials; stimulating the development of renewable energy sources; supporting scientific research into the development of innovative environmentally friendly technologies and their implementation in agricultural production; developing an effective system of green public procurement. it is important to develop and adopt strategic plans, legislative and regulatory acts that regulate activities in the field of circular economy and are adapted to the standards and norms of the legislation of the european union. in order to implement circular business models, the activities of agricultural enterprises should be directed towards interaction with scientific and educational institutions in order to solve issues of introducing innovations and improving the qualifications of employees; technical and technological modernisation; establishing close relations with state and local government bodies, regional credit and financial structures, investors, as well as suppliers of material and technical resources and service organisations; creating a publicly accessible information network for the promotion of products on the market, organising interaction between producers and consumers. the development of the circular economy concept is an important task for the scientific community, ukrainian entrepreneurs, state bodies and society as a whole. the application of the principles of circular economy in the creation of a competitive and efficient economy of the country will not only enable the rational use of resources, but also reduce the negative impact on the environment. this will create favourable 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(2016). the "circular economy " applied to the agriculture (livestock production) sector – discussion paper. european commission. available at: https://ec.europa.eu/information_society/newsroom/image/document/2016-48/ward_-_circular_economy_ applied_to_the_livestock_production_sector___brussels__2_40231.pdf wijkman, a., & skånberg, k. (2015). the circular economy and benefits for society – jobs and climate clear winners in an economy based on renewable energy and resource efficiency. club of rome. yaskyv, b., & brianska, m. (2022). how the agricultural business works during the war. available at: https://zn.ua/ukr/ariculture/jak-pratsjuje-ahrarnij-biznes-v-umovakh-vijni.html received on: 05th of march, 2023 accepted on: 25th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 238 vol. 3, no. 4, 2017 corresponding author: 1 department of world economy and international economic relations, odessa i.i. mechnikov national university. e-mail: zhanna.sydorova@gmail.com 2 department of world economy and international economic relations, odessa i.i. mechnikov national university. e-mail: sergey_yakubovskiy@yahoo.com development prospects of london as the world’s financial center in the conditions of brexit zhanna sydorova1, sergey yakubovskiy2 odessa i.i. mechnikov national university, ukraine abstract. the purpose of the study is to examine the role of london as the global financial center in the modern international financial system under the conditions of britain's withdrawal from the european union. methodology. during the study, the comparative method, methods of statistics and economic-mathematical modeling were used. the methodological and theoretical basis of the study is the fundamental provisions of international economic relations, the study of economists in the field of international monetary and financial relations. information basis is analytical reports of international financial centers and statistical databases of international organizations. results. nowadays, london has all the necessary factors for success: open economy, developed financial infrastructure, stability of taxation system, geographical location, long-term government support, transparent policy, investor diversity and multi-culture. it is revealed that a growing variety of financial instruments is a characteristic feature of london as a modern global financial center. as a result, london is gradually winning the battle for the title of the world's leading financial center. the government of the united kingdom constantly develops growth strategies of the city of london, creates favorable conditions for the work of international companies, and attracts highly qualified specialists from other countries in the field of finance and law. the competent policy of the state and the wide range of services provided for the successful transactions on stock exchanges and commodity markets help london to maintain undisputed leadership in the global financial market and minimize losses associated with brexit. at the same time, the decision of the uk to withdraw from the eu had a negative impact on the stability of the country's banking system, it had provoked a decline in the country's credit ratings, a drop in the pound sterling against the dollar and the euro. another problem for the city of london was the speculation around the loss of multinational companies that might prefer frankfurt, after the completion of the uk's exit from the eu. regression analysis revealed that the ftse 100 index is influenced by such indicators: the industrial production index, the short-term interest rate and the money supply. it was revealed that the current stability of the uk financial system is related to the yield of government securities: a decrease in yield leads to an increase in the stability of the financial system. practical implications. the study showed that london still remains the most significant financial center in the world, despite concerns about the massive loss of investors and capital as a result of brexit. in the future, one can expect a strengthening of the pound sterling and higher policy of the bank of england than in the euro zone, increase of interest rates and a reduction in the tax rates, due to the final withdrawal from the eu, the uk government will no longer have to meet the maastricht criteria. on the other hand, the uk is not going to enter the eu banking union, which will maintain a fairly high level of liberalization in the country's banking system. all this, in turn, will make london even more attractive for national and foreign investors. value. the role and place of london in the modern global economy and the interest of investors from different countries in the city of london determine the value of this research in the context of the current development of the global financial market and the possible consequences of brexit, which in the long run are mostly positive. key words: international financial center, united kingdom, city of london, economic development, financial market indicators, brexit. jel classification: e44, f53, g15, o16 baltic journal of economic studies 239 vol. 3, no. 4, 2017 1. introduction the role and place of the global financial centers (gfc) in the modern global economy and the interest of countries in the development of their financial markets determine the relevance of their research in the context of the current development of the international financial environment. the importance of london as the gfc in the world arena and the popularity of the city of london among investors from different countries explain the relevance of this work in the context of the transformation of the global financial market and the possible consequences of brexit for the uk economy. among the foreign scientific works that made a significant contribution to this area, should highlight the studies of p.  buckley, a.  cairncross, g.  cassel, j. dunning, m. friedman, j. keynes, j. mirkin, j. sachs, j.  stiglitz, etc. among the national scientists who deal with this problem, it should be noted a.  filippenko, v.  korneev, i.  lomachynska, l.  shpak, s.  tsyganov, and others. defining the theoretical and practical value of these studies, a number of questions on the selected problem still require further consideration. the purpose of the study is to examine the role of london as a global financial center in the modern global financial system in the conditions of britain's withdrawal from the european union as a result of brexit. the achievement of the goal includes the following tasks: to consider the prerequisites for the formation and development of the gfc in london; to estimate london's position in the world ranking of financial centers; to study the influence of the global financial center on the development of the financial market; estimate the problems and influence of brexit on the uk economy. during the study, the comparative method, methods of statistics and economic-mathematical modeling were used. information basis is analytical reports of international financial centers and statistical databases of international organizations. 2. london as the world’s financial center london belongs to the historical gfc, ahead of many european cities became the center of world trade and moved to active development of services. this happened in the early 50's, due to the following factors: 1) the position of the former capital of the british empire allowed to maintain close relations with the united states and asian countries (the central geographical position contributes to the fact that london is a "bridge" between these regions); 2) the british legal system is the benchmark for international transactions; 3) english became the main language of international business communication; 4) relatively low taxes and a favorable business environment (nikitina, repeta-tursunova, 2014). nowadays, the city of london has all the necessary factors for successful operation: open economy, developed financial and transport infrastructure, stability of taxation system, geographical location, transparent state policy, diversity of investors, multiculture, reputation, transparent business environment and openness to external cultures and countries. that is why london has branches of the largest companies (more than 100 of the 500 largest companies in the world have their headquarters in the city of london). the london stock exchange (lse) is the third largest stock exchange by capitalization in the world, it was founded over 200 years ago. the lse determines the quotations of the entire old world, showing its independence from american trading platforms. a lot of tools used in the exchange business, appeared right here. currently, the capitalization of companies traded on the london stock exchange exceeds 6 trillion us dollars (kravets, 2014). according to the world federation of exchanges (wfe), in 2016, the london stock exchange took the third place in the world in terms of capitalization, reaching the value of 6.18 trillion us dollars, which is 50% higher than in 2012. figure 1. shows the market capitalization of companies registered on the london stock exchange, by industry. 19% 18% 13% 13% 9% 8% 7% 7% 3% 3% financial sector oil and gas industry wide range products industrial production raw materials telecommunication services consumer services health care high tech power engineering fig. 1. market capitalization of companies registered on the london stock exchange, by industry source: compiled by the author on the basis of (kravets, 2014) an important function of the lse is the definition of the ftse (financial times stock exchange index), which is conducted with the financial times. the most famous index traded on the lse is ftse 100 – the main stock exchange index, the international symbol of the british stock market, the baltic journal of economic studies 240 vol. 3, no. 4, 2017 indicator of the success of the uk economy. ftse 100 is based on the shares of 100 companies with the largest capitalization. the share of these companies occupies most of the capitalization of the lse. the top five companies in terms of capitalization and liquidity include a mining company, two financial corporations, an oil and gas company and a mobile operator. thus, it can be concluded that due to its advantages, london is gradually winning the title of the world's leading financial center. 3. characteristics of london based on the gfci index criteria to characterize london as gfc, the global financial centers index (gfci) was considered, which has been published every year since 2007 by z/yen group. this index is based on five key criteria for the competitiveness of the financial center: 1) «people» – the availability of good personnel and the flexibility of the labour markets; 2) «business environment» – regulation, tax rates, levels of corruption and ease of doing business. regulation is currently cited as the decisive factor in the relative competitiveness of london and new york; 3) «market access» – levels of trading, as well as clustering effects from having many financial services firms together in one centre; 4) «infrastructure» – the cost and availability of property and transport links; 5) «general competitiveness» – the concept that the whole is “greater than the sum of the parts” (mainelli, 2007). in figure 2, one can consider the dynamics of the gfci index change, starting from gfci 1 to gfci 22. in the gfci study, starting from the 18th edition, the leading center estimates are considered in dynamics, this allows to determine how the center moves, whether it retains its position, strengthens or loses it. it should be noted that london's rating position began to decline from the time of the world financial crisis in 2008, while the asian gfcs began to strengthen their position (lomachynska, 2015). 575 625 675 725 775 825 875 g fc i 1 g fc i 2 g fc i 3 g fc i 4 g fc i 5 g fc i 6 g fc i 7 g fc i 8 g fc i 9 g fc i 1 0 g fc i 1 1 g fc i 1 2 g fc i 1 3 g fc i 1 4 g fc i 1 5 g fc i 1 6 g fc i 1 7 g fc i 1 8 g fc i 1 9 g fc i 2 0 g fc i 2 1 g fc i 2 2 r a ti n g sc o re london new york hong kong singapore tokyo fig. 2. top five centers – gfci ratings over time source: compiled by the author on the basis of (yeandle, 2017) the city of london, according to data for 2017, more than 80% corresponds to the five main criteria for the competitiveness of gfci. london achieved this success thanks to its multi-culture (about 40% of londoners are foreigners and speak 300 languages). the highest marks were awarded to the qualification of the labor force and its accessibility, flexibility of the labor market and the quality of education. gfci 22 noted the high level of development of the business environment, but there were also negative comments regarding corporate tax rates, transport infrastructure and operating expenses. the importance and reputation of london as the gfc are growing, but brexit still causes some uncertainty among investors. it should be noted that in 2017, london overtook new york in the rating and once again became the leader among the world financial centers since the time of the british empire. considering london based on the gfci index criteria, it is necessary to take into account the disadvantages and possible obstacles (such as brexit) for its further development. for example, the drawbacks of london include: high profit tax rates in comparison with the asian financial centers and a slowdown in the development of the social sphere due to high direct and indirect costs. at the same time, despite the forced intensification of measures to control the movement of capital, in the fight against the financing of terrorism, restrictive measures, as well as the level of government intervention in the financial sphere in the uk, are still substantially lower than in the rest of the eu (yakubovskiy, rodionova, 2014). 4. brexit: problems and prospects the referendum on the withdrawal of the country from the european union took place on june 23, 2016. first and foremost, it had a negative impact on the stability of the uk banking system. the decision to withdraw the uk from the eu triggered a decline in the country 's credit ratings, a drop in the pound against the dollar and the euro. in june 2016, the pound sterling rate against the dollar declined by 20%, which is the lowest value for the last 30 years. it should be noted the decline in london's position in the gfc rating by two points, compared with last year, but this is a minor loss compared to the losses of other leaders. so, for example, the usa lost 24 rating points due to fears of investors towards the trade policy of president trump. another problem for london is the speculation around the loss of multinational companies, which may prefer frankfurt, after the completion of the uk's exit from the eu. only within one year frankfurt rose by 12 points in the ranking and took 11th place. according to many economists, there are all the necessary resources and conditions in frankfurt to become a good alternative to london. some companies have already announced their retirement from the city of london. so, bank of america chose dublin for a number of its financial baltic journal of economic studies 241 vol. 3, no. 4, 2017 operations, jp morgan chase purchased offices in the central districts of dublin, and morgan stanley has already chosen frankfurt as an alternative to london. it should be noted that the bank of england has eased monetary policy to support the british economy in the brexit process. for the first time since 2009, the refinancing rate dropped by a quarter of a percent. now it is at the lowest level for the three-century history of the organization – 0.25% per annum. the bank of england, unlike the european central bank, is trying to adhere to a more flexible policy in the conduct of monetary policy and is ready to promptly change the discount rate based on the situation in the economy and the financial sector. the ecb has set the refinancing rate at zero mark since 2016 (at the same time it buys assets and bonds for 80 billion euros a month). in the world was 380 billion us dollars more bonds with negative returns, after the decision of the uk to withdraw from the eu. currently, the yield of 10-year us bonds is at 2,35% and the yield of 10-year uk bonds at 1,31% (finch, 2017). at the same time, the yield of similar german bonds is lower than english bonds by more than three times, which, accordingly, increases the demand for uk financial assets. thus, we can conclude that the prospects are positive, london still remains the most significant financial center in the world, despite fears of a massive loss of investors and capital due to brexit. in the future, we can expect a decrease in the level of taxes, which in turn will make london even more attractive for investors. also, one should expect the strengthening of the pound sterling against the euro due to a policy of higher interest rates than in the euro area and a reduction in the tax rates. this is due to the fact that after the final withdrawal from the eu, the uk government will no longer have to meet the maastricht criteria. at the same time, the uk will not impose new restrictions on banking, which are likely to emerge in the eu after the creation of the banking union, which will increase london's attractiveness for banks from eu countries and, possibly, from the us and asian countries. 5. the impact of the city of london on the economic development the uk stock market, formed at the end of the 18th century, is one of the oldest in the world and according to data for 2017 ranks first in terms of market capitalization in europe. the london stock exchange (lse) takes the leading position in the stock market. nowadays, it is one of the most significant and international trading platforms in the world. the stock market of the london stock exchange is divided into two segments: the main and alternative markets. the most famous index is the ftse (the financial times stock exchange index) 100, which includes the shares of the 100 largest uk companies on the british stock market (shamraev, 2014). the market value of shares included in the ftse 100 index is about 70% of the total capitalization of the uk. it will be relevant to analyze the influence of london as a global financial center on the economic development of united kingdom. the impact of the city of london on the economic welfare of united kingdom can be assessed using regression analysis. constructing the regression model, the following indicators were selected: industrial production index (ip), consumer price index (cpi), interest rate (ir), money supply (ms) and exchange rate gbp/usd (exr). the values of these indicators for the uk were taken from the statistical database on a quarterly basis (the world bank, 2017). to make more detailed analysis and obtain more reliable results in the regression model, the total time interval covers the period from 2006 to 2016. the quarterly yield data of the ftse 100 index was used as a dependent variable. the following model was obtained with the probable dependence: ftse 100 index = β1*ir + β2*cpi + + β3*ip + β4*exr + β5*ms. (1) after the analysis in spss, we can conclude that in this case the multiple correlation coefficient of the model is 0,926, the explained variable has a strong dependence on the selected set of predictors. the r-square is 0,857, which means that 86% of the selected factors explain the dependent variable and 14% of the variance is unaccounted factors. for this model, fst > fcr (fst = 72,026). with 95% probability this model can be considered significant. the results of standardized coefficients allow us to identify which factors have the greatest influence on the dependent variable. the analysis revealed a low value of tst of the two indicators, which led to their removal from the model. the model coefficients (ip, cpi, ms) are significant, each of these variables explains the selected dependent parameter ftse 100 index by more than 90%. among the standardized beta coefficients the greatest influence is exerted by the coefficient 0,489 (the industrial production index). with an increase in this factor by 1 tbsp. deviation, the dependent variable will decrease by 0,489. less influence has the short-term interest rate and the money supply. all coefficients are significant at the level of 1% (all tst > tcr). the obtained model has the form: ftse 100 index= 0,489 ip – 0,237 cpi – 0,564 ms. (2) the current moment of stability and development of the financial system of united kingdom can be analyzed by such an indicator as the yield of government securities. with a decrease in the yield of government securities, one can talk about improving the stability of the country 's financial system. the level of return on long-term bonds issued by the government of the united kingdom over the past 20 years has gradually declined. baltic journal of economic studies 242 vol. 3, no. 4, 2017 therefore, for further analysis, we will construct a regression model of the dependence of the level of profitability of long-term government bonds (gb) and inflation rate (inf ), interest rate (ir), government debt (gd), money supply (ms) and exchange rate gbp/usd (exr) (the world bank, 2017). the time interval covers the period from 1996 to 2016. as a result, the following model was obtained with the probable dependence: gb = β1*inf + β2*ir + β3*gd + β4*ms + β5*exr . (3) after the analysis in spss, we can conclude that in this case the coefficient of determination (r-square) is 0,906, which means that the yield level of long-term government bonds is 90% described by the selected indicators. based on the data obtained in the analysis, it should be noted that for this model fst > fcr, since fst = 43,223. with 95% probability this model can be considered significant. the analysis revealed a low value of tst of one of the indicators, which led to its removal from the model. the coefficients of the model (inf, ir , gd, ms) are significant, each of these variables explains the selected dependent gb parameter by more than 90%. based on the standardized beta coefficients, we can draw the following conclusions that among the coefficients the coefficient of 0,506 (interest rate) has a greater impact. with an increase in this factor by 1 tbsp. deviation, the dependent variable will decrease by 0,506. less influence has the volume of the money supply, the inflation rate and government debt. all coefficients are significant at the level of 1% (all tst > tcr). the obtained model has the form: fs = 0,358 inf + 0,506 ir + 0,025 gd – 0,412 ms. (4) by the results of regression analysis, we can conclude that there is an inverse relationship between the dynamics of changes in the inflation rate and the dynamics of changes in the yield of long-term government bonds. that is, the higher the inflation rate, the higher the yield of government securities, which means that the financial sector is less stable. a high inflation rate with a strong pound sterling against the dollar leads to a greater consumption of foreign goods, that is, to an increase in imports and to restrain exports, which adversely affects the trade balance and the current account. in turn, the higher the inflation rate, the lower the stability of the financial sector, since high inflationary risks appear. there is also an inverse relationship between the dynamics of changes in government debt and the yield of government bonds. the higher the public debt, the more funds the state needs to attract for its repayment, the greater the yield of government-issued debt securities. this, in turn, negatively affects the level of sustainability and development of the country 's financial system. 6. conclusions the studies in this paper allow us to make the following conclusions. a characteristic feature of london as a global financial center, at the present stage of development, is the growing diversity of financial instruments. nowadays, london has all the necessary factors for success: open economy, financial infrastructure, stability of taxation, geographical location, long-term government support, transparent policy, investor diversity and multi-culture. due to its liberal legislation, london is gradually winning the title of the world's leading financial center. the government of the united kingdom on an ongoing basis develops growth strategy of the city of london, creates favorable conditions for the work of international companies, and attracts highly qualified specialists in finance and law. the competent policy of the state and the wide range of services, that are required for the successful transactions on stock exchanges and commodity markets, help london to retain undisputed leadership in the global financial market and minimize losses associated with brexit. the analysis of uk stock indices based on the regression model revealed that the index of the ftse 100 is influenced by such indicators as the industrial production index, the short-term interest rate and the money supply. the current stability of the financial system of the united kingdom, according to studies, is related to the yield of government securities, the decrease in profitability of which leads to the stabilization of the financial system and its sustainability. it can be concluded that the prospects are positive, london still remains the most significant financial center in the world, despite fears of a massive loss of investors and capital due to brexit. in the future, one can expect the strengthening of the pound sterling, the influx of investments into british securities, the reduction of the level of taxes and the changes in the state liberal policy over the financial market control, which will become especially noticeable in the eu countries as a result of the creation of the banking union. references: finch, g. (2017, september 11). london retains its crown as world's top financial center. bloomberg. retrieved from: https://www.bloomberg.com kravets, f. (2014). lse – london stock exchange – in details. equity. retrieved from: https://equity.today lomachynska i. a. (2015). finansovi systemy krayin pivdenno-skhidnoyi ta skhidnoyi aziyi: osoblyvosti suchasnoho rozvytku [financial systems of the south and east asian countries: features of contemporary development]. scientific journal of uzhgorod national university. international economic relations and world economy, №2, 11-15. baltic journal of economic studies 243 vol. 3, no. 4, 2017 mainelli m. (2007). market of markets: the global financial centres index. journal of risk finance, 8(3), 313-319. nikitina, t. v., & repeta-tursunova, a. v. (2014). financial markets and financial institutions. st. petersburg: spbgeu. shamraev, a. (2014). international and foreign financial regulation: institutions, transactions, infrastructure. moscow: knorus. the world bank data (2017). united kingdom. retrieved from: https://data.worldbank.org/country/unitedkingdom?view=chart yakubovskiy, s. o., & rodionova, t. a. (2014). international experience of the foreign capital control measures and the ways to implement it in ukraine. actual problems of international relations, vol. 2, № 121. retrieved from: http://journals.iir.kiev.ua/index.php/apmv/article/download/2401/2134 yeandle, m. (2017, september). the global financial centres index 22. z/yen group and the china development institute, 22, 48. жанна сидорова, сергей якубовский перспективы развития лондона как мирового финансового центра в условиях брексита аннотация. целью работы является исследование роли лондона как мирового финансового центра в современной мировой финансовой системе в условиях выхода великобритании из евросоюза. методика. при написании работы были использованы сравнительный метод, методы статистики и экономико-математического моделирования. методологической и теоретической базой исследования являются фундаментальные положения международных экономических отношений, работы ученых-экономистов в области международных валютно-финансовых отношений. информационной основой являются аналитические отчеты международных финансовых центров и статистические базы данных международных организаций. результаты. на сегодняшний день лондон располагает всеми необходимыми факторами успеха: открытая экономика, развитая финансовая инфраструктура, стабильность налогообложения, географическое положение, долгосрочная поддержка государства, прозрачная политика, разнообразие инвесторов и мульти-культура. выявлено, что характерной чертой лондона как современного мирового финансового центра является растущее многообразие финансовых инструментов. в результате лондон постепенно побеждает в схватке за звание ведущего мирового финансового центра. правительство великобритании на постоянной основе разрабатывает стратегии развития лондонского сити, создает выгодные условия для работы международных компаний, а также привлекает высококвалифицированных специалистов из других стран в сфере финансов и права. именно грамотная политика государства и широкий спектр предоставляемых услуг, необходимых для успешного заключения сделок на фондовых биржах и сырьевых рынках, помогают лондону удерживать бесспорное лидерство на мировом финансовом рынке и минимизировать потери, связанные с брекситом. в тоже время решение о выходе великобритании из ес оказало негативное влияние на устойчивость банковской системы страны, спровоцировало снижение кредитных рейтингов страны, падение фунта стерлинга по отношению к доллару и евро. еще одной проблемой для лондонского сити стали спекуляции вокруг потери крупных компаний, которые возможно отдадут предпочтение франкфурту, после завершения процедуры выхода великобритании из ес. на основе регрессионного анализа выявлено, что на индекс ftse 100 оказывают влияние такие показатели: индекс промышленного производства, краткосрочная процентная ставка и количество денег в обращении. выявлено, что текущая стабильность финансовой системы великобритании связана c доходностью государственных ценных бумаг: снижение доходности приводит к повышению устойчивости финансовой системы. практическое значение. исследование показало, что лондон по прежнему остается самым значимым финансовым центром в мире, несмотря на опасения относительно массовой потери инвесторов и капитала в результате брексита. в перспективе можно ожидать укрепления фунта стерлингов, политику более высоких, чем в зоне евро, процентных ставок со стороны банка англии, а также снижения уровня налогов, так как после окончательного выхода из ес правительству великобритании уже не будет необходимости соответствовать маастрихтским критериям. с другой стороны великобритания точно не войдет в банковский союз ес, что сохранит в банковской системе страны достаточно высокий уровень либерализации. все это, в свою очередь, сделает лондон еще более привлекательным для национальных и иностранных инвесторов. значение. роль и место лондона в современном мировом хозяйстве и заинтересованность инвесторов из разных стран в лондонском сити обуславливает ценность этого исследования в контексте современного развития мирового финансового рынка и возможных последствий брексита, которые в долгосрочной перспективе большей частью являются положительными. baltic journal of economic studies 65 vol. 3, no. 4, 2017 corresponding author: 1 department of sociology and political science, national technical university “kharkiv polytechnic institute”. e-mail: dolyaira5@gmail.com non-standard challenges and potential risks for the business in donbas iryna dolia1 national technical university “kharkiv polytechnic institute”, ukraine abstract. the purpose of the paper – the conflict, which began in 2014, in the political sphere of the state of ukraine and which led to the violation of the country’s sovereignty, the occupation of the part of donetsk and luhansk regions adversely affected the state of the economy of the state. the region, in which the main production complexes of coal mining, the metallurgy of machine building were concentrated, because of military actions and political decisions, was deprived of the opportunity to legally carry out its social and economic activities. this article presents an attempt to systematize and show specifically tendencies of the organization of domestic business in conditions of military occupation. methodology. the main research methods were: historical, statistical, a method of analysis, comparison. the historical method was used to recreate the picture of the industrial production capacities that existed before the conflict in the region began. the method of the comparison made it possible to track the use of “shadow” schemes in organizing a business for the sale of coal and electricity by enterprises located in the occupied territories of donbas. result. the method of analysis examined the negative consequences for the national economy of individual decisions of state policy, namely, the termination of the fiscal services of ukraine to return value-added tax, for products exported, which led to a decline in production up to the shutdown of a number of metallurgical enterprises over the lack of working capital. using the method of statistics and comparisons, the author analysed the dynamics of the decline in the level of production of the main sectors of the regional economic complex, and also illustrated the growth of social crises in the region and in the country: unemployment, reduction of social standards, wage arrears. practical implication. on the example of a number of large industrial enterprises of donbas, the author demonstrated a scheme for their destruction with the aim of depriving ukraine of strategically important industries: brick, metal, limestone, and others. at the same time, as shown in the material of the article, the illegal authorities of terrorists “lnr” and “dnr” are interested in the fact that the remaining enterprises worked and brought income, both to the budget of unrecognized republics and personally to persons in power. however, attempts to establish production by the occupation authorities only prove the interdependence of the regional economic complex of donbas and other regions of ukraine. the loss of economic ties, commodity markets, and the receipt of raw materials objectively do not allow enterprises in the occupation to work at full capacity, to the end using their potential. separately, an attention is paid to the problem of the revival of illegal coal mining in the occupied territories in the so-called private unformed mini-mines – “bootleg mines”. value/originality. the result of the study was the discovery of the facts of the stagnation of the regional economic complex. the ineffectiveness of state policy and the lack of control over oligarchic business structures make it possible to assert that, in this historical period in donbas, there is a redistribution of the remnants of existing enterprises, the purpose of which is not stabilization of the situation and withdrawal of the economy from the crisis but maximum shadowing and benefits for individuals. key words: occupation, regional economy, export, shadowing, bootleg mines, coal anthracite, electricity. jel classification: l50, r11, r50 1. introduction the challenge for the stable development of the country’s economy in 2014 was the fact of external armed aggression, which resulted in the loss on the part of ukraine of control a part of its territory and recognition of its temporary occupation. a part of luhansk and donetsk region, to date, has received the status of “temporarily occupied territories”. as a result, the powerful industrial complex of donbas is in the zone of military operations, which negatively affects both the social and economic life of the region, and the country as a whole. destruction of the basic enterprises baltic journal of economic studies 66 vol. 3, no. 4, 2017 of coal, metallurgical, chemical, and a number of other industries provoked a break in domestic production chains and significantly reduced the income from the export of products of a number of sectors of the economy. at the current stage, it is necessary to quickly monitor the status of those enterprises that are still operating in the occupation, and develop plans for the resuscitation of the regional economy returned to ukraine. the aim of the article is to study the state of the hotel sectors of economic activity in the old industrial region of donbas, identify threats and possible prospects for its revival. according to the results of the analytical review of the ministry of economic development and trade in 2014, the shadow economy of ukraine reached 42% of gdp and beaten the shadowing record set by our country in 2007, which, by the way, was 7% less. the most shadowed sectors of the economy are: mining and processing industries, transport, trade and real estate transactions. if you look at international experience, then such high indicators of the shadow economy, namely, above 40% are typical for latin america and africa. the emergence of such a situation has traditionally been justified by the conduct of hostilities in donbas, destabilizing the economy of the state. however, not everything is so simple. official kyiv seriously puts its hand to the departure of the leading branches of the economy (coal mining, metallurgy, energy) into the shadows. in this connection, a number of risks arose for ukrainian business (korrespondent.biz, 2016). 2. leaving big business in the shade in october 2014, the national energy and utilities regulatory commission, led by the way, by the former manager of roshen, dmitry vovk, who does not understand the essence of the energy resources in the market, approved the prices for coal in tariffs at the level of 800 uah per 1 tone. whereas, according to the quick calculations of coal miners, the cost of it is now about 1500 uah per 1 ton. undoubtedly, this step was taken by the state with the aim of striking the empire of one of the largest oligarchs r . akhmetov, which is a part of the business, which is called dtek, which owns a network of thermal power stations throughout ukraine. however, in this cunning intrigue, one very serious fact was missed. dtek is also the owner of the largest mines in donbas. indeed, the net cost of mining of 1 ton of coal without paying taxes to the state is 800 uah. although if the mines stop paying taxes to the treasury, then such a grid of prices for thermal power plants is really real. the precedent already exists – in the coal association “dobropolyeugol” (donetsk region), since march 2015 there is a delay in payment of salaries to employees, and consequently, taxes to the state. there is a second option, an exit from the current situation – the purchase of coal in the occupied territory, where its prime cost is generally minimal (450-650 uah per 1 ton). dtek is a concessionaire of such large coal corporations as rovenkyantratsit and sverdlovskantratsit, which are successfully operating in the luhansk region controlled by the militants of lnr , which allows the corporation to successfully exit the current situation and even develop its business in the ato zone. moreover, schemes of illegal coal supplies bypassing roadblocks were established and operated until february 2017. if we carry out modest calculations, a completely opposite picture turns out, what is a result of such a clever combination of state structures designed to undermine the business of r . akhmetov. the profit of tpps that are part of dtek amounted to approximately 1,9 billion uah for 5 months of 2015, according to the results of the same period in the successful for the corporation 2013, when it was equal to 2,3 billion uah, and therefore decreased only by 17,4%, while with the existing tariffs for raw materials and prices for electricity for consumers, the decrease in net profit should have been 44% in the first half of 2015 and go into minus after its end. in addition to shadow schemes that allow circumventing the bans of the national commission for energy regulation and utilities, there is still a variant of electricity production in the occupied territory. in total, 10212 mw, or 18,7% of the total capacity of the united energy system of ukraine, is produced in the ato zone. if we take into account only thermal generation, then the share of these tpps is 29,8%, which is not small. given that the commodity output of electricity for 2014 in monetary terms amounted to 111.889 billion uah, about 55% of which is for thermal generation, because tariffs for it are higher than those of nuclear power, it turns out that for the year, generation in the ato area accounts for 18,34 billion uah (bajkalov, 2016). for the state company of the power producer “centrenergo”, the prices for coal in tariffs at the level of 800 uah per 1 ton steel are much more sensitive. it received less than 2 billion uah income, and its profit for 5 months of 2015 amounted to 476,5 million uah, which indicates a nearing bankruptcy. back in late 2014, the government of a. yatsenyuk was going to expose centrenergo for the privatization but now the investor is unlikely to be found for the unprofitable enterprise. an important aspect of the current situation is the fact that, according to the official data of the ministry of energy, there was a sharp decline in the state coal production by almost 2 times – up to 9 million tons against 17 million tons from the already reduced in 2014. as a result, the state enterprises “lvivvuhillia” and “volynvuhillia” are on the verge of ruin and closure, and miners are forced to strike the cabinet (bajkalov, 2016). prime minister of ukraine a. yatsenyuk tried to somehow stabilize the situation, instructing the antimonopoly committee of ukraine to investigate the influence of dtek on the energy industry of the state. potentially, under the bankruptcy of centrenergo baltic journal of economic studies 67 vol. 3, no. 4, 2017 and the closure of lvivvuhillia and volynvuhillia, the results of such an investigation could lead to the demand of the official kyiv from r . akhmetov to sell a part of assets with the aim of reducing the share in the energy market. but, international experience shows that such investigations last for years, and it is not a fact that they end successfully. therefore, as a safety option, the nsdc proposed to establish a rent for coal mining, which could lower the profitability of the coal business of r . akhmetov, if a large part of it were not in the occupied territory. thus, to date, the efforts of the official authorities to ruin one of the largest oligarchs of donbas, created favourable conditions for the development of coal mining and energy production in the territory of the breakaway republics and the transition of these industries in ukraine into a shadow. serious difficulties in late 2014 – early 2015 began to experience the mining and metallurgical production of ukraine, whose problems are related to the fact that the state fiscal service of ukraine (sfsu) in the face of a serious deficit of the state budget has ceased to provide a vat refund (value added tax) for exported products. as of mid-may 2015, the amount of debt exceeded 5,6 billion uah, which had a negative impact on the work of metallurgical plants, the largest of which belonged to r . akhmetov and his partner in the corporation “metinvest”, the owner of the business group “smart” – b. novinsky, their losses from this amount amounted to 3,5 billion uah. according to the official information of the state treasury service of ukraine, the vat refund to the companies of mmc for the months of this year did not exceed 47,5% of the total debt, and in april it decreased to a critical 28,9%. the result of this policy has been a decline in production up to a stop because of a shortage of working capital. this is a trigger mechanism for increasing debt to suppliers of raw materials, materials, energy resources, transportation services and contracting organizations. according to the data of metalurgprom of ukraine, in the first quarter of 2015, the enterprises of the metallurgical industry of the country increased the negative financial result from ordinary activity before taxation by 65,4% compared to the corresponding period of 2014, which amounted to 21 billion uah. the export of ukrainian metal products fell in value by 38,2% – to $2,1 billion. thus, the state lost the balance of payments due to a decrease in foreign exchange earnings. it should be remembered that in this industry about 350 thousand skilled workers are involved, and almost 1 million are in related industries, whose unemployment can lead to real social protests. at the same time, the donetsk metallurgical plant, donetsk state plant; yenakiieve iron and steel works; makiivka branch of pjsc “yenakiieve steel”; khartsyzsk tube works; dokuchaevsk flux-dolomite plant; llc “electrostal” continue to operate in the occupied territory. the products of which have no added value, since the state simply does not pay the tax, and consequently there is no shortage of working capital. in this regard, a very dangerous situation arose, connected with the company “metinvest” and scm corporation. they own unprofitable (for now) – the largest producer of coke avdiivka coke plant (avdiivka) and consumers of its products by the metallurgical enterprises of mariupol (ilyich iron and steel works and “azovstal”). despite the risks, there are a number of points that testify that the situation of the transition of the ukrainian economy into the shadow will not change. 1. the fighting in the ato zone continues, no matter what. 2. administrative pressure on big business from the state is increasing. 3. the tax burden for small and medium-sized businesses becomes overwhelming. 4. a sharp increase in subsidies, living at the expense of government payments, funds for which are needed to be taken somewhere. in addition, the de-oligarchization of the ukrainian economy did not happen, as evidenced by the fact that the provisions of the transfer pricing law have not entered into force. verkhovna rada made every effort to keep the oligarchs able to withdraw profits from the controlled enterprises in ukraine to foreign offshore accounts, for which they voted on may 23, 2015. in order not to provoke outrage among the citizens, a law was passed that obliged businesses to disclose the final recipients of income – beneficiaries, what could be a breakthrough in the fight against corruption and economic crime in our country. if there were not only one point – sanction for its violation is simply missing. that is, the law cannot be implemented and nothing will be done for it. consequently, in the ukrainian economy, as before, the leading role is played by oligarchic structures, primarily concerned with making a profit, and not about the welfare of the state. thus, in the foreseeable future, the situation with the shadowing of the ukrainian economy is unlikely to change. 3. a military threat to businesses operating in the zone of contact a sharp aggravation of the situation in donbas in the zone of carrying out ato causes a great damage not only to the state but also to big business. so in the zone of active hostilities, there was a whole series of enterprises, whose owners somehow try to keep production facilities. to date, it is avdiivka coke plant, pjsc krasnogorovka refractory plant, research and production enterprise “donbassnerudprom”, ojsc “novotroitskoye rudoupravlenie”, ojsc “komsomolskoye rudoupravlenie”. some of them are unique not only in ukraine but also in europe. 1. pjsc krasnogorovka refractory plant (krasnogorovka, donetsk region) before the beginning of the ato was the largest not only in ukraine but also in the world manufacturer of the piece and unshaped baltic journal of economic studies 68 vol. 3, no. 4, 2017 materials for thermal units of metallurgy, machine building, coke chemistry, heat power engineering, construction materials industry. the enterprise supplied products to more than 3000 partners in the cis countries, as well as to hungary, poland, bulgaria, egypt, india, iran. however, since august 2015 krasnogorovsky refractory plant is under constant bombardment of terrorists again, as a result of which the last of which on august 14, 2015, the enterprise suffered a significant damage. in view of the lack of gas supply to krasnogorovka, the plant has been standing idle for three years. the owner of the plant since 2011 is the venture fund “general investment resources” (gir), for the benefit of which a private investment company operates in ukraine – “altra finance” investment group. the latter, on behalf of its sponsor by 2013, bought up all the largest ukrainian enterprises specializing in the production of refractories and extraction of raw materials for them: krasnogorovka refractory plant, krasnoarmeisk silica brick plant, velikoanadolsky enrichment plant, central processing plant “uzlovskaya”, “krasnaya zvezda”, central concentrating factory “russia” and central concentrating factory “ukraine”. the owner of the production of refractory products of ukraine, who received the nickname “the king of refractories” became guram nemsadze, the son of the infamous givi nemsadze, a friend of rinat akhmetov, accused of creating a criminal group in donbas in the 1990s, whose conscience was the murder of 57 people. in the ukrainian media for some time there was an opinion that givi nemsadze was simply a manager working for the business interests of the viktor yanukovych clan, and the refractory industry thus merged into the economy of the then president. general investment resources was registered at the same legal address with its management company “altera finance”, founded by eduard prutnik, a businessman close to viktor yanukovych, who worked for 10 years to create the largest business empire of the then-president’s family. as of 2014 the enterprise at least existed, and even was able to restore production, however, in the beginning of summer 2015, it was interested in the business structure of the new president of ukraine p. a. poroshenko. the head of the civil-military administration of the city was appointed a person close to the entourage of the president, who worked with p. zhebrivsky for a long time. on the night of august 14th to august 15th, 2015, the plant was once again seriously fired and it is unlikely that it can now be restored without major investments, a significant part of the enterprise is simply destroyed, as a half the city of krasnogorovka, by the way, the gas pipeline to which was not restored. the next promising direction for the business, unique in its capabilities, is the extraction of kaolin clays, one of the largest deposits of which in the post-soviet space is located near the village bogoroditskoe near volnovaha. the pit’s surface area is 30 hectares. production reserves amount to 10 million tons. the development of this area is also handled by a private firm. 2. the research and production enterprise “donbassnerudprom” (volnovaha, donetsk region) officially belongs to the lecturer of the department of electromechanical systems of donetsk national technical university, candidate of technical sciences, markov nikolay alekseevich, the actual owner is still unknown. the company, engaged in the extraction of kaolin, crushing and averaging it on the order of consumers, has a serious production turnover and capacity. the mine is located between the village novotroitskoe and bogoroditskoe in the “belaia balka” (“white gully”) where 14 km of railway canvas from it are laid to the node station volnovaha, but for buyers from greece, italy, spain, and turkey, kaolin clays are sent by sea from the mariupol port. the annual sales volume is 300 thousand tons. after the beginning of the ato, donbassnerudprom was re-registered in the city of volnovakh and before the events of august 2015 it carried out unimpeded production activities, even it was able to increase its turnover to 500,000 tons. but they remembered about it again, in a rather strange context. director n.a. markov received a proposal to replace the main staff of the work collective instead of local residents to hire specialists of the same profile from dnepropetrovsk. at the same time, the time of full repair for the budget account and the preparation of the necessary conditions for living in an abandoned hostel novotroitskoye was stipulated either. after the refusal of the management of donbassnerudprom from such an event, the mine was strangely in the field of heavy artillery, and the kaolin extraction had to be suspended because of the threat to the life of employees. 3. extraction of metallurgical limestone and dolomite is carried out by two large mines located in novotroitskoye of the volnovakhsky district of donetsk region, controlled by the scm group, owned by rinat akhmetov. its ownership in this area includes novotroitskoye ore administration, komsomolskoye mine administration – the largest in ukraine producers of flux limestone for metallurgical enterprises. at their disposal, there are two quarries central and zhegolevsky, and two crushing and dressing factories, bought out in 2007 with an auction. the mines are unique in that they are engaged in the development and extraction of metallurgical limestone, without which the melting of metal is simply impossible. the mines never fell under serious shelling, only isolated facts of “random” shells were found. even as a result of fierce fighting on august 12 and 14, 2015, the property of scm was not damaged in this area. today, as in 2014, the products go off on schedule. in addition, in the same production cycle, with these enterprises, ojsc “dokuchaevsk flux-dolomite plant” baltic journal of economic studies 69 vol. 3, no. 4, 2017 (dokuchaevsk, donetsk region, which is currently controlled by the dnr) operates. this is one of the largest mining and processing enterprises in ukraine, where fluxed limestone and dolomite are processed, and the metallurgical dolomite is fired. the plant burned in november 2014 as a result of the bombing of terrorists and the seizure of the city. the work of the enterprise was restored, however, already in the occupied territory. the terrorists reminded r . akhmetov about their existence. from time to time, yenakiieve iron and steel works and its branch makiivka metallurgical plant are burned either; however, work was not stopped until march 2017, until they became the property of the illegal armed formations of the dnr . thus, one can say with a confidence that ato is not only a large-scale military operation in donbas but also a new test for the local business. 4. attempts to restore the economic potential of donbas by self-proclaimed republics a special place in the economy of the self-proclaimed republics is occupied by heavy industry, fully represented today by one of the largest enterprises of metinvest holding group pjsc yenakiieve iron and steel works, which has a full metallurgical cycle, which restored its work after the shelling in march 2015 and received net profit in the first quarter 341,901 million uah. in addition, makiivka branch of pjsc “yenakiieve steel” continues to work in regular mode, despite the destruction caused by the serious shelling on august 12, 2015, as a result of which the electric networks, the gas pipeline, and the rolling stock of the enterprise were damaged. the enterprise is equipped with the most modern equipment in ukraine for the production of rolled steel the average performance of existing rolling mills is 1.5 million tons of steel a year (rbk, 2017). terrorists are doing another profitable business – they increase the amount of scrap metal export. the authorities of the so-called “dnr” created the state enterprise “vtortsvetmet”, an organization that controls the collection and sale of scrap metal on the territory of the republic. that is, the process of cutting industrial objects, including factories and mines, turning them into metal has been completely legalized and has already reached colossal scales. first of all, all infrastructure facilities located in the zone of military operations are under the knife. the second – the collection of war scrap metal. the process of selecting and transporting scrap metal is fine-tuned and fully controlled by the leaders of dnr and lnr . in the rear zones: near perevalsk, sverdlovsk, snezhnoye, and amvrosievka, large scrap metal reception centres have been set up, where it is loaded onto road transport, which is directly transported across the border to the russian federation, or at the ilovaysk station, where it is loaded into wagons and leaves by rail. according to unofficial data, the dnr has developed a map of the destruction of the remaining factories, the mines located in the first line of defence, which must be transferred to scrap metal in the first place. similar work has already begun on the outskirts of kuibyshev, petrovsky, kievsky districts of donetsk. the main component of the region’s economy is still the coal industry, which enterprises operate depending on the volatile situation of the armed conflict. so, on a half of capacity, work mines of a name of abakumov after chelyuskintsev and after skochinsky, as well as the former state enterprise “donetsk coal energy company”. the debt of ukraine to which on wages for the summer of 2014 was 500 million uah. however, the self-proclaimed republics are not in a hurry to pay with the miners, on average, the payments of the dnr and lnr make up 50% of the earned income, with a stable delay of 2-3 months. a very difficult situation arose with the enterprises of “donetskvuhillia” and “makiivvuhillia”, whose employees, working in full rotation, only after a series of protests and refusal to leave the lava were able to request a salary for the month of may 2015. in the associations “torezantratsit” and “snezhnaya anthracite” beginning of 2017, payments were more regular. best of all, until recently, things were going on at mines belonging to the large ukrainian capital cjsc zasyadko mine, rovenky coal, krasnodon coal, mines in sverdlovsk and shakhtersk, where coal mining was in the same volume and wages are paid in uah, and a delay of not more than a month. according to official statistics of the state statistics, at the beginning of 2015, 5,000 enterprises operating in the occupied territory of donbas are re-registered in ukraine; they paid 19 billion uah of taxes to the state budget. however, in conditions of the policy of the complete blockade of the self-proclaimed republics the dnr and lnr supported by the official kyiv, the coal-electricity-metal production relations are violated and difficult to maintain, which affects the existing volumes of production. so for the first half of the 2015 year, the production of ordinary coal amounted to 7,5 million tons, which is 12,8 million tons less than the same period of 2014 (by 2,7 times). the same situation is observed with the extraction of hard coal, whose volume was 5,8 million tons with the same proportions for cutting production as for the private. coke production for the same period of 2015 was implemented in the volume of 2,7 million tons to only 55,4% of 2014. the output of pig iron in the first half of 2015 reached 4,8 million tons, falling from the same period of 2014 by 34,1%. steel production, solely due to the active activities of “metinvest holding”, decreased by only 29,0%, amounting to 4,9 million tons. production of finished rolled products was carried out in the amount of 2,4 million uah and decreased on 38,0% from the last year (interfax-ukraine, 2017). baltic journal of economic studies 70 vol. 3, no. 4, 2017 in parallel, in ukraine, converting centres began to operate, through which the money earned in the occupied territories was laundered. according to the latest data of the ssu, one of such companies for “cashing” carried out its illegal activities in the city of kharkiv. periodically, law enforcement authorities reported such cases in the dnepropetrovsk and zaporizhzhia regions. in this regard, it is interesting that according to the requests of the head of the dnr , the ruble mass in the republic for 2015 almost supplanted the hryvnia and amounted to 92%, but the conversion centres for unknown reasons worked in ukraine until 2017. in conditions of high unemployment and, most importantly, the acute shortage of money supply in the occupied territories of donbas, attempts have been made to establish a local business focused on marketing products in the rf. the most profitable sector of the occupied territories of donbas until 2017 was the coal business, although this does not mean that the leadership of the dnr and lnr began to revive the mines of the region, on the contrary, the main stake was made on quick, less costly and conditionally legal production by developing “bootleg mines”, with which they fought in vain in peacetime. according to the independent trade union of miners of ukraine, the volume of illegal mining in donbas (using “bootleg mines”) in 2013 was 6 million tons or about 10% of all mined coal in the country. this is a colossal amount of money with minimal investments. and apparently, the leaders of illegal armed groups were familiar with this business in all details. it is the occupied cities of yenakiyevo, gorlovka, shakhtersk (donetsk region), as well as stakhanov, rovenky, and anthracite (luhansk region), which are the richest on “bootleg mines”. entering these cities, the terrorists, first of all, destroyed the officially operating mines and eliminated representatives of the “criminals” who control illegal mining, re-subordinating them to the so-called military commandants. one of the reasons for the conflict between a. mozgovoy and the ataman n. kozitsyn (currently already liquidated by his own associates) with the leadership of lnr (during the first weeks of occupation v. bolotov and then i. plotnitsky) was precisely the reluctance to give control over “mine” business to “military commandants” of cities appointed by the leadership of pseudo-republics. in the territory under the control of lnr , it was from the filing of a. mozgovoy and the ataman n. kozitsyn in 2014–2015, there was the active sale of the mined coal here to russia, and through it to ukraine. at the same time, at this stage, “military commandants” of the illegal armed formations of the cities of yenakiyevo and shakhtersk are people of a. zakharchenko, and here the situation is different – there is no division but there is a problem with the sale of mined coal. despite the decline in production at the officially operating mines of the occupied donbas, the terrorists control 83 coal mines out of 150 existing mines. in october 2014, donetsk region mines produced 1,134 million tons of coal, which is 64,4% less than the corresponding period of 2013, but 16,6% more than in september of the same year. thus, there really was an excess of coal in the dnr . however, to sell it to the leadership of the dnr , it was necessary to try hard and establish illegal rail traffic to ukraine. 5. legalization of “bootleg mines” in 2015 ( january 12), the head of the dnr , alexander zakharchenko, assembled the so-called directors of the mines (owners of “bootleg mines”) for the meeting and announced the coal mining plan, emphasizing that it should not just be fulfilled, “but also it is necessary to give a quality, and not mixed with the breed coal”. such machinations were abused by the leaders of state mines in peacetime. so in 2013, they reported on the extraction of 24,147 million tons of coal, and in fact, the output of marketable products was only 17,597 million tons. thus, 27% of the coal produced by the state went to the black market. given that in donbas by the beginning of 2014 there were 35 working state mines, it is possible to imagine the level of shadowing of the coal industry and the amount of profits involved in the schemes of officials and miners. in addition, the dnr and lnr started to seriously address the issue of legalization of “bootleg mines” even issued a decree providing for the official registration of “bootleg mines” as artels, which established a fixed “tax” (if this selection can be called so) for the coal mining, the sanction was approved in advance of the form of physical elimination of those wishing to create new corruption links and continue to receive super profits in circumvention of the leadership of illegal armed formations. the total fee from each such “coal artel” was 30  thousand uah per month, of which 10 thousand uah are for local (city or rural) “authorities” and 20 thousand uah – for donetsk, so to speak in the “republican budget”. in the event of the owners’ refusal of “bootleg mines” from the passage of this procedure, their business is simply taken in favour of the “republic” by transferring it to “state property”. thus, the selfproclaimed dnr and lnr by the end of 2015 received full control over coal mining in donbas by attempting to unshadow it. if at the end of 2014 coal mining in “bootleg mines” was in question, due to the elementary division of spheres of influence between the leadership of terrorists and local criminal structures, today all spheres of influence are divided. despite such a high level of interest in investing in legal production, the dnr and lnr are in no hurry since the main emphasis is on the work of “bootleg mines”. true, i. plotnitsky (who made a lot of efforts to suppress the “cossacks” who had their own views on the export of coal) tried to give some kind of legitimacy to “bootleg baltic journal of economic studies 71 vol. 3, no. 4, 2017 mines”, demanding their owners to issue a license for the extraction in the ministry of coal and energy of the people’s republic of finland. in fact, in this way, the terrorists tried to establish complete control over the extraction and receive not only kickbacks in their favour but also 20% of the proceeds. since the beginning of the armed conflict, this business has been gaining momentum in traditionally mining cities, where the deposits of coal beds are relatively shallow (from 100 to 300 meters) and except for the slave labour of miners for the extraction do not require special efforts. the activity of “bootleg mines” is resumed in such settlements as shakhtersk, torez, yenakiyevo, debaltsevo, anthracite, rovenky, stakhanov and other mining towns. the most interesting thing is that “bootleg mines” appear as mushrooms after rain in an area where workers already are, shallow to 1500 km, profitable mines. for example, mine “enakievskaya”, mine “bulavinskaya”, mine “poltava”, mine “dolzhanskaya capital”, but careful management of pseudo-republics prefers not to support working enterprises but practices their closure. the lack of an opportunity to formally work in the mines of the region forces men to become slaves to the owners of illegal mining. at the same time, the price of labour, given the high percentage of injuries, deaths, and completely manual extraction is minimal. so, for 10-12 hours of work the coal miner receives from 100 to 150  uah, the loader pulling the trolley with coal to the surface (100-200 kg of coal) receives 50-70 uah. in fact, for a day of work, one “bootleg mine”, in which 4 people work, produces from 3 to 10 tons of coal, depending on the formation and skill, about 300 tons of coal per month. but even with such a price policy and risk for life, those who want to work do not decrease. according to residents of shakhtersk who work on such “bootleg mine”, such an exploitation of the mineral resources can aggravate the ecological situation in the region and provoke an industrial catastrophe in the form of contamination of water basins with heavy metals from incorrectly stopped mines, the formation of holes, and erosion of soils. production in the “bootleg mines” is filled with industrial water from nearby nonfunctioning mines, which allows it to quickly reach the surface (sher, 2016). from january to april 2015, according to the data of the ministry of energy of the russian federation, “donbass”, “snezhnoyantratsit”, “torezantratsit”, “makiivvuhillia” coal mining industry workers, were credited with 1 billion 106 million 987 thousand uah wages and miners received 769 million 839 thousand uah. the facts of payments are confirmed by the miners themselves. but all this is just a cover, an illusion of renewal of the former glory of the mining region. in reality, however, the number of officially operating mines in the occupied territories is only about 20 out of 70  located on the territory of donetsk and luhansk regions controlled by the separatists, the rest are destroyed (13 completely and cannot be restored) and are gradually being flooded (according to unofficial data, more than 60% of the mines have been flooded donbas in the occupied territory). the number of officially working miners in comparison with 2013 has decreased by 40%, and the tendency to reduction remains. the work of these mines provides a kind of cover for setting up full-scale mining in an illegal way, thanks to which significant production figures appear. according to local residents, in 2016, the flow of coal export from “bootleg mines” has grown many times, for the transportation, there is actively used as an automobile transport for deliveries through the russian border checkpoints “donetsk”, “gukovo”, “matveev kurgan”, and railway through the checkpoint “ilovaysk – matveev kurgan”. true, it is not a secret for anyone that the supply of coal to the russian federation is carried out illegally; this is 100 % smuggling, which for some reason is not clearly seen by russian customs officers and border guards. but the most interesting thing is that this business is clearly damaging the coal enterprises of the russian kuzbass. in fact, coal from the occupied donbas interrupts the price and at the expense of better quality reduces the demand for russian coal (demchishin, 2016). the average wholesale price per ton of coal from the dnr and lnr for the russian federation is 500 uah, and the kuzbass price is 700 uah for the hryvnia equivalent. however, it has become more profitable for the separatists to trade with the ukrainian government since 2016 as, after the adoption of the “rotterdam plus” scheme, a ton of coal already costs more than 1000 uah. according to the so-called “ministry of energy of the russian federation”, during the period from march to june 2015, 20594 coal wagons were transported to ukraine. from the calculation of their tonnage, the volume of supplies almost reached one and a half million tons. true, an attention is constantly focused on the fact that russia remains the main consumer of coal. however, neither the dnr nor the lnr are in hurry to publish official statistics on the volumes of supplies to the “older brother”. and this is understandable; firstly, those who know how to take the coal miners as the direct miners will have an elementary question: where the money which they get is going; and secondly, the issue of the legality of these supplies is harmful to the image of the russian federation itself. at the moment, there is no legal way to export products from the occupied territories of donbas. since, according to international norms, any export activity presupposes the availability of international certificates for products. the only logical answer to why donbas coal has become so interesting to russia is the cheap purchase of highquality anthracite and resale already under the russian brand for much more money, moreover, it is possible that it is for the same ukraine (at a price of 1800 uah per ton) (112 tv channel, 2016). baltic journal of economic studies 72 vol. 3, no. 4, 2017 6. conclusions in addition to the export of coal to the russian federation, the price of anthracite coal sharply increased in the territories of donbas controlled by ukraine, which also activated the business of “bootleg mines” on the other side of the line of demarcation. this fact has a logical explanation, because of the numerous damages of the main gas pipelines, a significant part of settlements along the line of demarcation is forced to switch to the installation of solid fuel boilers oriented to coal anthracite. and given the inadequate price of gas for the residents of peaceful ukraine, then there also massively switch to an alternative to gas – coal. in the country since february 2017, there really exists a deficit of coal of “a” grade, especially in the front-line cities, caused by transport blockade from ukraine. as a rule, residents of the maryinsky and volnovakhsky donetsk regions purchased this coal grade from private entrepreneurs in the cities of donetsk, shakhtersk, and torez. and if back in may 2016, smuggled into the detour of official checkpoints on the line of delimitation, such supplies of coal were flowing (the price of transportation in case of hitting the ukrainian mobile checkpoint was 200 uah per ton of coal), today all roads are blocked, supplies are discontinued. at the same time in may 2017, the price of a grade coal for the population of the front-line ukrainian territories of donbas was 2200 uah for a ton but, at the beginning of autumn, it increased already up to 2700-3000 uah per ton. thus, the industrial potential of the occupied territory of donbas has been preserved only in a part and only thanks to the exceptional efforts of the owners of these enterprises, continuing to hold their own business, at their own risk and to cooperate with both sides of the conflict. undoubtedly, there is an insignificant part of those companies that fell into the hands of terrorists, managed to stay afloat and bring income to new owners. proceeding from the foregoing, it can be precisely said that the leaders of pseudo-republics are not oriented toward the development of the old industrial region and the creation of a self-sufficient subject, either within ukraine or as a separate state. references: 112 tv channel. «dnr» segodnja: posobija, pensii, zarplaty. retrieved march 20, 2016 from: https://112.ua/ statji/dnr-segodnya-posobiya-pensii-zarplaty-298949.html bajkalov v. (2016). radovat'sja nizverzheniju rinata ego protivnikam rano. retrieved february 27, 2016 from: http://www.ostro.org/general/economics/articles/465409/ demchishin nazval stoimost uglja iz «dnr» i «lnr». retrieved february 9, 2016 from: http://sharij.net/45814 interfax-ukraine. ukraina za 5 mes. snizila dobychu uglja na 3,2%. retrieved july 14, 2017 from: http://interfax.com.ua/news/economic/428862.html korrespondent.biz. tenevaja jekonomika ukrainy pobila mnogoletnij rekord. retrieved september 14, 2016 from: http://korrespondent.net/business/financial/3515474-tenevaia-ekonomyka-ukrayny-pobyla-mnoholetnyirekord rbk. v donbasse dva predprijatija ahmetova prekratili rabotu iz-za blokady. retrieved february 21, 2017 from: http://www.rbc.ru/rbcfreenews/58abbb9c9a7947ebfc1f97a5 sher m. (2016). vyhod iz temnogo uglja. shahty-kopanki, kontrabanda i drugie sekrety jekonomiki donbassa. retrieved june 1, 2016 from: https://www.kommersant.ru/doc/2733960 ирина доля нестандартные вызовы и потенциальные риски для бизнеса на донбассе аннотация. конфликт, начавшийся в 2014 году, в политической сфере государства украина и приведший к нарушению суверенитета страны, оккупацией части донецкой и луганской областей негативно повлиял и на состояние экономики государства. регион, на территории которого были сосредоточены основные производственные комплексы угледобычи, металлургии машиностроения из-за военных действий и политических решений был лишен возможности легально осуществлять свою социально-экономическую деятельность. цель статьи – попытка систематизировать и показать специфически тенденции организации отечественного бизнеса в условиях военной оккупации. основными методами исследования были: исторический, статистический, метод анализа, сравнения. исторический метод использовался для воссоздания картины существовавших до начала конфликта в регионе мощностей промышленного производства. метод сравнения дал возможность отследить использование «теневых» схем в организации бизнеса по продаже угля и электроэнергии предприятиями, размещенных на оккупированных территориях донбасса. методом анализа были изучены негативные последствия для экономики страны отдельных решений государственной политики, а именно, прекращение фискальных служб украины возвращать налог на добавленную стоимость, за продукцию, идущую на экспорт, что привело к снижению производства вплоть до остановки ряда предприятий металлургического комплекса из-за нехватки оборотных средств. применяя метод статистики baltic journal of economic studies 73 vol. 3, no. 4, 2017 и сравнения автор проанализировал динамику падения уровня производства продукции основных секторов регионального экономического комплекса, а также проиллюстрировал рост социальных кризисов в регионе и стране: безработица, снижение социальных стандартов, задолженности по выплате заработных плат. практическое значение работы. на примере ряда крупных промышленных предприятий донбасса автором продемонстрирована схема их уничтожения с целью лишения украины стратегически важных производств: кирпича, металла, известняка и других. незаконная власть террористов «лнр» и «днр» заинтересована в том, что бы оставшиеся предприятия работали и приносили доход, как в бюджет непризнанных республик, так и лично лицам, находящимся у власти. однако, попытки наладить производство оккупационными властями лишь доказывают факт взаимозависимости регионального экономического комплекса донбасса и других регионов украины. отдельно обращено внимание на проблему возрождения на оккупированных территориях нелегальной добычи угля в так называемых частных неоформленных мини-шахтах – «копанках». значением проведенного исследования стало выявление фактов стагнации регионального экономического комплекса. не эффективность государственной политики и отсутствие контроля за олигархическими бизнес структурами позволяет утверждать, что в данный исторический период времени на донбассе происходит перераспределение остатков действующих предприятий, цель которых не стабилизация ситуации и вывод экономики из кризиса, а максимальная тенизация и выгода для отдельных частных лиц. baltic journal of economic studies 33 vol. 3, no. 2, 2017 corresponding author: 1 department of international economics, national university of food technologies. e-mail: oksana_zanozovska@ukr.net the effects of the quality of employees’ interactions with their managers on the quality of their work oksana zanozovska1 national university of food technologies, ukraine abstract. the paper is devoted to the analysis of effects of the quality of employees’ interactions with their managers on the quality of their work. the paper includes seven parts: introduction, review of the literature, theoretical framework, methodology, data analysis, conclusions, and references. the main purpose and importance of the research are represented in the introduction. the purpose. the main purpose of the research is to analyse whether there are some effects of the quality of employees’ interactions with their managers on the quality of their work. leaders of any organization always have to solve the same problem: how to create an appropriate management system to ensure the cooperation of employees and successfully resolve possible conflicts between them in the organizational environment. literature review represents the main achievements of different researchers in the issue of employee’s interactions with their managers and its influence on the results of their work. a lot of researchers point that the interaction of high quality positively influences the productivity and quality of the work. the theoretical framework concerns different theories that are the basic for this research. the school of human resources and behavioural schools played the most important role in the creation of a theoretical basis for this research. the methodology. the main methods of research are represented in the methodology part. the correlation analysis and sociological method are used in this paper. in the case of the questioning method is the basis for determining the areas of research are the characteristics of respondents and their work. it makes sense in this situation to consider the involvement of the respondents to the research from different levels and departments of the organization, and that workers – direct contractors, and managers at all levels. the survey of 17 respondents at 33 enterprises was held using the special blank with variables and the range for each variable while conducting this research. results. the data analysis confirms the theoretical ideas of the paper and shows that there is a positive correlation between interactions of employees and their managers and the quality of their work. the survey shows that there is a higher percentage of leaders who effectively meet the personal needs after trainings (84%) in the group that presented the improved productivity of the work. in the conclusions, the main results of research are highlighted. value/originality. the results of the research show that there is the strong connection between the interactions of managers and employees on the employees’ productivity. key words: employees’ interactions, human recourses, personnel management, quality of work, motivation, productivity. jel classification: j500, o150, m120, j320, j240 1. introduction there are internal and external environments in each organization. the internal environment is characterized by the intense interaction of formal and informal structures. formal structures are built by breaking the overall objectives for the individual subtasks. the main elements of the organization – the tasks, structure, and actors – are constantly changing. in the first case, it is the emergence of new competitive structures, reassessment of values, shortage of personnel, etc.; the second is connected with the monitoring system for organization performance, management solutions that include supervision, inspection, evaluation, and correction of the situation on the basis of the accepted parameters. organizing control manager is aware that the development of cooperation and interactions with employees become more important priorities. in order to coordinate the actions of the employees, the executives use the vertical division of labour or hierarchy that has become an important structural feature of management (conway, 2011). the behaviour of leaders and their personal qualities improve the quality of employees’ interactions with them and the quality of work at the enterprise. the attention of scientists and organizations are focused on the role of a human factor for the internal environment of the company. baltic journal of economic studies 34 vol. 3, no. 2, 2017 the new trends of transition from industrial society to a post-industrial in organizational, managerial, industrial, and economic spheres orients to the qualitative aspect of changes in the organization: spiritually guided management, creativity, process activities, team building workers, intangible motivation, the increasing of the quality of employees’ interactions with their managers that will be resulted in high quality of work and the enterprise efficiency. functional relationships in the team are built on guidance in three areas: management of a formal group, informal, and employee self-management that are closely connected with the quality of the work (winter & jackson, 2006). formal interactions greatly influenced the quality of the work of employees because the important task of managers is to delegate the tasks to the subordinates. the informal relationships also influence the quality of work because they determine the psychological climate into the organization. if the employees have a good mood they will be more effective while working. the optimal interaction of business and personal qualities of leaders in these areas creates conditions for improving the quality of working life for employees and for the company as well. each leader works in a particular social and professional environment. it is closely related to the concept of social space. in this social space is quite different from space geometric and determined answer to the question: “who do people work?” people are adjacent to each other in geometrical space (for example, the director and work as the operator), in the social space separated by a significant distance. conversely, people who are far away from each other in geometric space (two directors of various plants of the company) may be very close socially. the ability of employees and managers to work as a team determines the main results of the enterprise’ activity that may be assessed by the indicators of productivity of labour and its profitability. human resources are the most important capital of each organization and its main wealth. there were times when it was believed that machine would replace the employee. in the xxi century, the role and importance of the employee in the company not only diminished but increased despite the machine became “sole owner” in many technological and managerial processes (konrad, 2006). the main aspects of the modern paradigm of management are: success of the organization depends not only on the market position and the availability of resources but the role of the human factor; the organization is seen as open dynamic system, which is based on common values of individuals; the need for constant adaptation to the conditions of turbulent environment reduces the value of the constant strict control, requires a change in approach to personnel management and focuses on the self-management and self-development of the individual, the formation and dissemination of knowledge, the integrated use of normative values, systems and situational approaches in management; increasing competition requires companies to operate on the basis of long-term perspective on the principles of strategic management; establishment of corporate social responsibility of business (konrad, 2006). the successful company seeks to leverage the potential of their employees creating all conditions for the fullest commitment of employees at work and for intensive development of their potential. however, there are often problems with the interaction of manager and subordinates as a result of poor communication culture (rhoades and eisenberger, 2002). this problem should be studied in more details because it is important to find the connection between these variables. the quality of life depends on the quality of work, that is why it is important to research this issue and it is relevant nowadays. the main purpose of the research is to analyse whether there are some effects of the quality of employees’ interactions with their managers on the quality of their work. leaders of any organization always have to solve the same problem: how to create an appropriate management system to ensure the cooperation of employees and successfully resolve possible conflicts between them in the organizational environment. the problem of “conflict – cooperation” is the basic contradiction of organizational behaviour that is either solved or worse. the degree of resolution of these contradictions is a major indicator of how efficiently managers interact with their staff. responsible and achievement-oriented employees that have high-quality interactions with managers seem to be more productive. such subordinates feel responsible for the possible results of the company; they believe that could bring something important to the company. the importance of this research lies in the improvement of working conditions and the quality of work by virtue of increasing the quality of interactions between employees and their managers. it is important for companies to improve the quality of their work because it determines the main result of its activity – the profit. on the other hand, the peoples’ life quality greatly depends on the quality of their work because the man spends the greater part of his life at work. the psychological climate in the staff is influenced by the interactions between managers and employees within the organization. the tangible result of the employee (salary and bonuses) may be determined by the relationship with the manager. the intangible results such as satisfaction, engagement, and self-realization are may also be the results of high-quality interactions with managers. despite the numerous researchers in this sphere, there are some aspects that need more attention. these aspects will be discussed in this paper. the research is significant not only for a person but for different organizations and scientific institutes baltic journal of economic studies 35 vol. 3, no. 2, 2017 that study this topic. it will be useful for managers and employees of different types of organizations, for managers of the human resources department, the students, researchers of it sphere of management and human resources management and those who are interested in the questions of improving the working conditions and the quality of the interactions between managers and employees. the study will include the research of leadership, the supervisor support, the training of employees and how it influences the quality of employees’ work. the formal and informal relationships will be analysed in the paper. the influence of different types of leaders on the employees and the quality of their work is not studied in the paper. this may be the subject of other research. there is next hypothesis: hypothesis 1. employees who have high-quality interactions with their managers are more likely to produce quality work than are employees who have lowquality interactions with their managers. 2. review of the literature a lot of researchers examined the different aspects of the problem of interaction between managers and workers, the effects of the quality of the interaction on the quality of the work, prevention of conflicts between them, the effectiveness of informal communication, types of communication, verbal communication. nearly 1,500 books and 7,000 articles have been written on empowerment in the workforce and more than 100,000 articles and studies and 4,780 books have been written on creating trust in the workplace during the 2005–2015 years (ddi, 2015). according to the ddi’s analysis “the reason most leaders in business fail is not because of a lack of business knowledge or technical skill but because of interpersonal and communication shortcomings” (ddi, 2015). jing zhou, the houston endowment professor of management at rice’s jones graduate school of business points: empowering leadership may be especially effective at promoting creativity for those who have high levels of both uncertainty avoidance and trust in their supervisors. in addition, we also found that creative selfefficacy (the degree, to which the employees themselves believed they are capable of being creative) was a psychological mechanism that explained the three-way interaction’s effect on creativity (rice university, 2014). the statement shows that empowering is important to increase the creativity of the employees. their creative self-efficacy will increase the creativity. more creative employees will show the better results of their work. they will be free and not shy while interacting with their managers. so, the study of this aspect of the interactions between managers and employees is important for this research. the research of some authors focuses on the interactions between employees’ personalities and the managers’ personalities “as a predictor of the employees’ proactive behaviour” (williams, parker, & turner, 2010). this aspect is also important while researching the interactions between managers and their subordinates. proactive behaviour as a result of interactions between employees’ personalities and the managers’ personalities determines that is closely connected with the topic of this research. konrad (2006) explores employee engagement and its influence on the firm performance. he points that employee engagement can be important to competitiveness in the contemporary business environment (konrad, 2006). the main reason that the employee engagement plays an important role in the improvement of the quality of work is the physiological responsibility of employees for the results of the work of organization where there is a part of their own contribution. the researcher of organizational effectiveness e. lawler determined four main principles for building a high-quality work system in order to increase the productivity and the quality of work. according to his researchers, the employees should be provided with power, knowledge, information, and rewards (lawler, 1963). the managers are those who must provide the employees with these important elements of their work. the quality of work depends on the ability of managers and employees to cooperate in the sphere of these principles. current researchers also determine four spheres in the interactions between employees and managers that should be assessed in order to study the effects of these factors on the quality of work (convey, 2015; winter & jackson, 2006). these spheres include the perceived organizational support, trust in the supervisor, leadermember exchange, and reward systems (convey, 2015). convey (2015) and winter & jackson (2006) analysed these spheres as the components of improvement the interactions between employees and their managers. they also studied how it may improve the quality of the employees’ performance. elangovan and xie (1999) pointed that high-quality interactions with supervisors have greatly influenced the employee outcomes and their ability to work more effectively. they explain that perception of a supervisor positively related with motivation and negatively with stress in employees (elаngovan and xie, 1999). employees measure interactions with their managers as negative or positive to create a perceived organizational support assessment of how they rank at their company (rhodes & eisenberger, 2002). the scientists point (rhodes & eisenberger, 2002) that support from a supervisor is closely connected with support from the company for an employee that is why perceived organizational support is so important in the ensuring of baltic journal of economic studies 36 vol. 3, no. 2, 2017 quality interactions between employees and managers. they explain that in order to achieve the goals of the organization, it is necessary to create a better treatment of employees. these may be represented in the forms of rewards, support, favourable work conditions, and so on (rhodes & eisenberger, 2002). trust in the supervisor is another important factor influencing the quality of interactions between employees and managers. rousseau, et al. (1998) defined trust as “a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another”. the trust is to predetermine the relationship between the team of employees and senior management personnel for the effective implementation of the set objectives in each organization. the trust in the team contributes to the successful collaboration that helps to solve complex issues, exchange views and develop the constructive solutions. the trust in senior management creates favourable conditions for the achievement of strategic objectives, development plans, the adoption and implementation of investment decisions, and others (winter & jackson, 2006). the trust in senior management is especially important for the establishment of high-quality interactions between supervisors and their subordinates. those employees who can trust their managers are more truthful, they try not to betray their managers; that is why they have a better quality of their work. the necessary prerequisites for trust in the executives are: competence of managers, their justice, the ability to properly evaluate the results and the true reward of employees, the capacity for a rapid decision-making, contributing to the effective work of the enterprise in market conditions, integrity and honesty both in relation to employees and in relation to the company’s shareholders. trust of employees creates coherence in the work of the team, accelerates the decisionmaking and implementation process, and enhances the competitiveness of the company (elangovan and xie, 1999).the trust interactions within the organization are the interactions of high quality that positively influences the psychological climate in the team that will affect the quality of the work of employees. an essential element of the building of trust relationship is such an important element of the control system as feedback. the feedback allows you to evaluate the correctness of the information transmitted by the leaders, its perception of the workers. trust in the team reduces staff turnover, thereby reducing administration and management costs of hiring labour, training, and retraining of personnel. trust should be a fundamental principle of the relationship between the various business units. this eliminates one of the major drawbacks of traditional management structures, where there are contradictions between the various entities that prevent the sharing of information between them (elangovan and xie, 1999). thus, trust between the units makes it possible to respond flexibly to market demands and adapt to the changing environment. it contributes to the creation of temporary groups to carry out specific projects, consisting of workers of different units. the third important factor is a leader-member exchange. it is a degree, to which an employee feels that he/she is in the manager’s in-group, and has a quality interaction with their manager (gómez & rozen, 2001). without leader-member exchange “employees and managers at lower levels perceived senior management as distant and formal in their communications with employees. this was thought to impede motivation and make communications more difficult...” (winter & jackson, 2006) these ideas are significant for the research as they show the importance of leader-member exchange in the team. coherent work may affect positively on the results of the work. research shows that motivation and reward system is one of the most factors that has a positive influence on the job productivity and quality of employees (elangovan and xie, 1999). there are different internal and external factors affecting employee motivation. the internal factors include fulfilment, creativity, satisfaction from your work; external motivating factors are income, promotion, recognition, and status in society. there intangible and material forms of motivation (elangovan and xie, 1999). if a person is motivated only by money, it is desirable to form additional motivators, otherwise, it easily replaces a job based only on material interest. however, the people lost material interest very easily stop to work effectively. sometimes the amount of compensation is not as important as employee perception of fairness or unfairness in relation to the result of labour. thus, rewards and motivation system influences the quality of interactions between employees and managers and the productivity of the work. thus, studying the experience of 62 most successful companies in the us allowed scientists t. peters and r .  votermen (2009) conclude the following: most of these companies hold the structural units and implementing special programs to diagnose and improve the organizational interactions, and relations between management and employees are based on a relation of “performance – person”. practical implementation of this principle is to recognize the staff as the main source of progress and success of the company, to create the atmosphere of trust, the spirit of responsibility and creativity, effective rewards system and to ensure the quality of leader-member exchange. in another study, eileen appelbaum and her group (2000) researches 17 apparel manufacturers, 15 steel mills, and 10 electronic instrument and imaging equipment producers. the study was aimed at comparing traditional production systems with flexible high qualified one that includes training, teams, and baltic journal of economic studies 37 vol. 3, no. 2, 2017 incentive pay systems. the enterprises of all industries with high involvement practices represented superior performance. literature review shows that a lot of researchers investigate the problem of quality of employees’ interactions with their managers, its effects on the quality of their work. there some areas of this issue to be researched more detailed. on the basis of scientific researchers and our own studies, we will try to achieve the purpose of this paper. 3. theoretical framework it is necessary to rely on theories in order to achieve the purpose of this work. the concepts of high-quality interactions between managers and employees, the quality of their work, the bad relationships between subordinates and supervisors are studied in different theories and disciplines such as management, sociology, psychology, and so on. f. taylor believed that the selection of personnel should be based on how a person to perform certain work, ability to learn new skills, g. emerson has repeatedly stressed on the need to inform the candidate to work with the ideals that are passed the employees by their employers, “each entrant must know the ideals of organization and practice of enterprise even before start to work” with all things necessary to exclude people who do not fit moral. if certain ideals know only employers it is not enough, ideals should be transferred to all workers and employees within the company. at the same time, representatives of the school of scientific management considered some aspects of social cultural management problems such as formulation and harmonization of objectives, careful selection and placement, attention to workers, the transfer of the ideals of managers to staff development, friendly relations and the formation of loyalty. the great attention while conducting this research should be paid to the humanistic trend in management that is represented by the school of human relations, and the concept of behavioural school. scientists working in this sphere focus following factors to ensure effective human management: the analysis of staff behaviour at work, the study peoples’ needs and their relationships with the supervisors. school of human relations (19301950) is connected with the names of such outstanding scientists as roethlisberger, hugo munsterberg, elton mayo, mary parker follett, chester barnard. one of the founders of this school was e. mayo who received a universal recognition after a series of experiments conducted in 1920–1930’s in the united states. e. mayo and his followers believed that the effectiveness of the company depends not only on material factors but mostly from the social ones operation (mayo, 1924). among important conclusions of e. mayo were statements: meet the basic needs of workers is a key cause in the performance of their work; clear designed instruction and production operations, high salaries are not the main motivators to improve productivity, meeting the needs and socio-psychological climate in team is significantly important; the manager must provide workers with a certain autonomy and the ability to control simple, routine operation (mayo, 1924). the actual results of some experiments of e.  mayo testified that employees are important not only to improve specific working conditions but they make the supervisors pay attention to the problems of staff (mayo, 1924). the attention of h. follet was focused on the study of the human factor in the management and not technical processes. she studied the problems that are relevant nowadays and for this research: power, leadership, ethics, the productivity of staff, influences the process of setting goals on the number of conflicts in the organization, effective interaction between managers and employees in the organization (follet, 1928). charles barnard is known as the author of the concept of an informal organization formed social groups within any formal organization. this theory argued that informal relations are an important factor that should be used for managers in the goals achievement of the organization and efficiency of their work. the concepts of this theory are an important contribution to the development of the human movement in management theory. therefore, charles barnard argued managers must treat personnel ethically that will allow expecting the adoption of subordinate power even in the most critical circumstances. in other words, the proper attitude to the staff can be a critical factor for success (barnard, 1938). charles barnard also argued that the main purpose of a leader is valuable leadership and mastery of social forces (barnard, 1938). thus, the main basis of human relations school played an important role in humanizing interactions at the workplace, determined the direction for the development of the theory and practice of management in the mid-twentieth century. the main critics of human relationships school claimed that its main provisions “show to some extent “farmer” approach to management: cows provided with hay give more milk and more satisfied workers reach good results” (daft, 2007). despite this criticism, one could argue that this research school of human relations is laid to the foundations for the progressive development of human recourses management as a science and its main concepts may be used in modern researches. followers of humanistic approach guided by the desire to improve and strengthen the fundamentals of this theory established a new direction – the school of human resources. outstanding representatives of this school are abraham maslow and douglas mcgregor. the main idea of the concept of human resources is to create those conditions, in which employees can realize their full potential that is the basis for baltic journal of economic studies 38 vol. 3, no. 2, 2017 achieving organizational effectiveness. the theory of motivation was first formulated within the school of human resources. maslow is the author of the theory of hierarchical subordination of human needs that were divided into five levels and combined into two groups: lower order (physiological and safety needs) and higher order (need for engagement, the need for recognition and self-assertion, self-actualization needs) (maslow, 1951). the theory of maslow is important for this research because it clearly defines the existence of every individual need of the highest order; indicates that all needs, including higher order, can and should be met during the work process; emphasizes that one should not overestimate the importance of material remuneration during work incentives. maslow theory logically shows that work is not just a place to make money, this is the opportunity for self-realization of the individual (maslow, 1943). these scientific opinions contributed subsequently forming ideas about “cultural right” of the organization. d. mcgregor guided by the desire to move away from the simplistic idea of the problems of human relations in the workplace formulated theory x and theory y (sahin, 2012). he believed that all the earlier management theory does not take into account the vision when the employee a lazy, is a passive, irresponsible person, and not overly ambitious the need for advanced security. this approach gave the birth to the control methods that are ineffective (theory x). as opposed to outdated approaches dr. mcgregor formulated the theory, which was based on the assumption that most people like to work, and the certain conditions even inclined to take responsibility and creative think. this theory may also be useful while researching the interactions between employees and managers. an important conclusion is that there is the certain theoretical background to conduct this research. the different aspects of interactions between managers and employees such as humanizing interactions at the workplace, creating those conditions, in which employees can realize their full potential and show the high results of their work, the statement that most people like to work, and creating the certain conditions even inclined to take responsibility and creative think are the components of different theoretic approaches. they were widely discussed by the famous scientists in the sphere of this research. 4. methodology the theoretical and methodological basis of the paper is a set of epistemological approaches, building logical laws findings, general and specific scientific methods that are directly caused by the purpose and objectives of the research. essential theoretical results obtained on the basis of the theory of modern management and theory of human resources that were discussed above. the method of scientific abstraction helps to find the basic statements that concern the interactions between managers and employees and the quality of their work in the theories of management. in the case of the questioning method is the basis for determining the areas of research are the characteristics of respondents and their work. it makes sense in this situation to consider the involvement the respondents to the research from different levels and departments of the organization, and that workers – direct contractors, and managers at all levels. the survey of 17 respondents on 33 enterprises was held using the special blank with variables and the range for each variable while conducting this research. after the survey, the results were presented in the diagram. the diagram is an effective tool to show the results of the survey because it clearly shows the tendency of increasing or decreasing of variables, improvement or deterioration of it. to determine the extent of factors that lead to a certain level of individual and corporate work efficiency in the analysis of performance management, the complex areas of socio-economic research are used: the study of leadership position influence on the performance management work; research the main methods used for performance management work; study the impact of compliance competency of their work functions on the effectiveness of labour (regulation complexity of work); study the influence of the nature of the link between work and encouraging results on the labour effectiveness; study the impact of the loyalty guidance to staff on efficiency measures; study of the influence of the intensity of labour and its treatment efficiency; study the impact of financing resources work on its effectiveness. empirical findings based on the use of economicstatistical methods, sociological method, forecasting, and use of special data packet. the scientific results are based on common technologies analysis and synthesis, identification and formalization, modelling, and use of the special techniques: the method of multivariate factor analysis in order to identify synthetic complex factors. there are complex relationships between the productivity of work and other factors influencing it. all economic indicators are under the influence of different factors and, therefore, mathematically interpreted as random variables. in this research, the variables are the quality of interactions between employees and managers, the accurateness of the work, the level of quality of their work. thus, different methods are used in the research: scientific abstraction, analysis, synthesis, correlation analysis in order to show the influence of the quality of interactions between managers and their employees on the quality of their work. 5. data analysis hypothesis 1. employees who have high-quality interactions with their managers are more likely to baltic journal of economic studies 39 vol. 3, no. 2, 2017 produce quality work than are employees who have lowquality interactions with their managers. the results of the research show that there is the strong connection between the interactions of managers and employees on the employees’ productivity. three groups of workers were analysed after trainings. some of them had reduced productivity, the productivity of others unchanged, and the third group presented the improvement of productivity. 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00% 90,00% 100,00% reduced unchanged improved employee productivity percent of leaders who effectivly meet personal needs of ohters after trainings fig. 1. how meeting personal needs is related to improved productivity diagram. the questionnaire was specially developed for the survey. there were some factors and the range in the table of the questionnaire. the most important means of communication and interactions are meetings of supervisors with their subordinates (88% of enterprises), attending the workplaces by supervisors (76%), computer local net (61%), the desk of announcements (46%) (fig. 2). 0,0% 20,0% 40,0% 60,0% 80,0% 100,0% attending the workplaces by supervisors computer local net the desk of announcements corporate cite ladership development command methods of management supporting the novation and delegating development of mentoring means of communication and interaction means of communication and interaction fig. 2. means of communication and interaction the results show that 88% of the enterprises believe the meetings of supervisors with their subordinates are at the first place in the communication systems. it has the greatest influence on the quality of work of the employees among other factors that were in the questionnaire. the study of pwc (2015) shows that less frequent interactions of managers with their subordinates have a negative impact on the engagement, leadership vision, and the growth and development of the organization (fig. 3). these interactions are not only being at the same place physically but have connections with the employees on regular bases. thus, the results of other and of my own researchers show that quality of work and its productivity are greatly dependent on the employees’ interactions with their managers that are represented by such variables as engagement of employees, leadership 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00% every day about once a week every two weeks once a month every three months les than three months engagment leadership vision growth and development fig. 3. frequency of meaningful interaction with manager the highest percentage of leaders who effectively meet the personal needs after trainings (84%) was in the third group that presented the improved productivity of the work. in another two groups, where the results were the same or even worse, the percentage of leaders who effectively meet the personal needs after trainings was 71% and 60%. the results of survey of 1500 respondents of european companies showed that the most important features manager should own include: the ability to form effective team – 96%; the ability to listen to colleagues and subordinates – 93%; ability to make decisions – 87%; the ability to attract others to perform decision – 86% (konrad, 2006). these results confirm the importance of managers’ ability to interact with subordinates effectively (93%). according to the ddi survey, there are principles to help a person meet others’ personal needs 1. maintain or enhance self-esteem. 2. listen and respond with empathy. 3. ask for help and encourage involvement. 4. share thoughts, feelings, and rationale (to build trust). 5. provide support without removing responsibility (to build ownership) (ddi, 2012). these data confirms the results of the research that the quality of work depends on the interactions of employees and managers within the organization. the survey of 17 respondents at 33 enterprises in order to get information about the most important factors in the system of communication and interactions within the company was held. a special blank helped to do this task. after the survey, the results were presented in the baltic journal of economic studies 40 vol. 3, no. 2, 2017 vision, motivation system (including the amount of salary and rewards), growth, and development of enterprises. all factors have the significant influence on productivity. among the motivation payment, the awards and bonuses for the productivity growth and over-labour standards, improving the quality products, the innovative activity can be distinguished. thus, the analysis shows that employees who have high-quality interactions with their managers are more likely to produce quality work than are employees who have lowquality interactions with their managers. 6. conclusions the results of organization activity greatly depend on the quality of employees’ work that is determined by different factors. one of the key variables influencing the quality of employees’ work is their interactions with supervisors. typically, the crises appear unawares because they cannot effectively be resisted. the wrong policies and ineffective leadership, in this case, lead to the decreasing the quality of work and the incomes of the company as well. to prevent the crises, the supervisors of the companies should regularly organize discussions on strategic planning that must go beyond daily work, maybe it should be done even outside the organization. the evaluation of the situation, identifying strengths and weaknesses of the company, and concept development for middle-long term should be the content and purpose of such discussions. these steps will increase the quality of interactions between employees and their managers that affects the quality of the work and provide effective activity. a lot of researches have been conducted to show that there is a relation between these variables. review of literature shows a great interest in modern researchers to this issue. leadership in the organization is multifaceted. the leader has the right to decide how to influence the subordinates providing some type of relationship with other people. the personal manager authority and official powers is the basis, on which it formed, has a real impact on the organization including management system as a whole and especially human recourses management. the manager must know not only all aspects of the relationships in the group but the factors that contribute to a positive moral and psychological climate. depending on the situation, he is the organizer, communicator, an expert, critic, and direct performer. that is why it is so important to have high-qualified interaction with employees. to deepen the theoretical part of the concept, the generalization, and systematization of scientific approaches to domestic and foreign schools to determine the functions and properties of this important economic phenomenon are held. the evolution of different management theories gives the opportunity to follow the development of the behavioural theories of human resources management that include the main principles and concepts to conduct this research. this theory appeared on the basis of other important theories, which did not take into account the interactions of employees and managers, and the role of the human factor in the results of the organization. the analysis of different theories shows that organization receives the additional benefits while the human factor becomes important in its activity. the perceived organizational support, trust in the supervisor, leader-member exchange, and reward system are the factors that determine the quality of the interactions between employees and managers. all these factors are important in the process of creating the high-quality interactions between employees and their managers. there will be not the positive changes in the organization without these important elements. other scientists emphasize on the role of effective means of communication in the ensuring the interactions with employees. the results show that 88% of the enterprises believe the meetings of supervisors with their subordinates are at the first place in the communication systems. it has the greatest influence on the quality of work of the employees among other factors that were in the questionnaire. essential theoretical results are obtained on the basis of the theory of modern management and theory of human resources. empirical findings are based on the use of the sociological method. new scientific results are based on common technologies analysis and synthesis, classification and systematization, identification and formalization. the data analysis gives an opportunity to confirm the hypothesis 1. in order to model the productivity of labour, the following factors are used: revenues from sales of products and services; the average number of staff; average of annual salary of one employee; and the capital-labour ratio. all factors have the significant influence on productivity. among the motivation payment, the awards and bonuses for productivity growth and over-labour standards, improving the quality products, the innovative activity can be distinguished. thus, the analysis shows that employees who have high-quality interactions with their managers are more likely to produce quality work than are employees who have low-quality interactions with their managers. the other study shows that more frequent interactions of managers with their subordinates have a positive impact on the engagement, leadership vision, and the growth and development. these interactions are not only being at the same place physically but have connections with the employees on regular bases. thus, the results of other and our own researchers show that quality of work and its productivity are greatly dependent on the employees’ interactions with their managers, which is represented by such variables as baltic journal of economic studies 41 vol. 3, no. 2, 2017 engagement of employees, leadership vision, motivation system (including the amount of salary and rewards), growth, and development of the enterprises. interactions of high quality are not only being at the same territory together but it is the trust, motivation, the recognition and organizational culture in the organization. references: barnard, ch. (1938). the functions of the executive. harvard university press, boston, conway, j. (2011). effects of supervisor-employee relationship on job performance retrieved from: http://steinhardt.nyu.edu/appsych/opus/issues/2011/fall/effects. ddi’s center for applied behavior research and resource centre (2012). interaction essentials. what they are and why they matter? retrieved from: http://www.ddiworld.com/ddi/media/monographs/interactionessentials_ mg_ddi.pdf ?ext=.pdf eisenberger, r ., huntington, r ., hutchison, s., & sowa, d. (1986). perceived organizational support. journal of applied psychology, 71, 500–507. elangovan, a.r ., & xie, j.l. (1999). effects of perceived power of supervisor on subordinate stress and motivation: the moderating role of subordinate characteristics. journal of organizational behavior, 20(3), 359-373. retrieved from http://www.jstor.org/stable/3100295 employee engagement landscape study (2015): championing greatness or capturing mediocrity. retrieved from: http://www.pwc.com/us/en/hr-management/publications/assets/pwc-hrs-employee-engagementlandscape-2015.pdf konrad, a.m. (2006). engaging employees through high-involvement work practices. ivey business journal. retrieved from: http://iveybusinessjournal.com/publication/engaging-employees-through-high-involvementwork-practices/ maslow, a. (1943),theory of human motivation (originally published in psychological review, vol. 50 #4. mayo, e.g (2007): the social problems of an industrial civilization, routledge. park, k. (2013). essentials of research methods: concepts and practice. la verne, ca: the university of la verne press (2013 edition only). (the bookstore lists this as the 2013 edition. isbn: 9780984344611)retrived from http://steinhardt.nyu.edu/appsych/opus/issues/2011/fall/effects rhoades, l., & eisenberger, r . (2002). perceived organizational support: a review of the literature. journal of applied psychology, 87(4), 698–714. doi: 10.1037//0021-9010.87.4.69 rice university. (2014, october 8). managers can boost creativity by 'empowering leadership' and earning employees' trust. sciencedaily. retrieved june 15, 2016 from www.sciencedaily.com/releases/2014/10/141008121948.htm rousseau, d.m., sitkin, s.b., burt, r .s., & camerer, c. (1998). not so different after all: across-discipline view of trust. academy of management review, 23, 393–404. sahin, f. (2012). the mediating effect of leader-member exchange on the relationship between theory x and y management styles and effective commitment: a multilevel analysis. journal of management and organization, 18(2). williams, h.m., parker, s.k., & turner, n. (2010). proactively performing teams: the role of work design, transformational leadership, and team composition. the british psychological society. 83, 301-324. zhang, x, zhou, j (2014). empowering leadership, uncertainty avoidance, trust, and employee creativity: interaction effects and a mediating mechanism. organizational behavior and human decision processes; 124 (2): 150 doi: 10.1016/j.obhdp.2014.02.002 оксана занозовская влияние качества взаимодействия персонала с менеджерами на качество их работы аннотация. статья посвящена анализу влияния качества взаимодействия сотрудников с менеджерами на качество их работы. статья включает семь частей: введение, обзор литературы, теоретические основы, методология, анализ данных, выводы и список литературы. основная цель и важность исследований представлены во введении. основная цель исследования – проанализировать, есть ли влияние качества взаимодействия сотрудников с их менеджерами на качество их работы. лидерам любой организации всегда приходится решать ту же проблему: как создать соответствующую систему управления для обеспечения эффективного взаимодействия сотрудников и успешного разрешения возможных конфликтов между ними в организационной среде. обзор литературы представляет собой основные достижения различных исследователей в вопросе взаимодействия сотрудника со своими менеджерами и его влиянии на результаты их работы. многие исследователи указывают, что взаимодействие высокого качества положительно влияет на производительность и качество работы. школа бихевиоризма сыграла важнейшую роль в создании теоретических основ для этого исследования. основные методы исследования представлены в части baltic journal of economic studies 42 vol. 3, no. 2, 2017 методологии. в этой статье использованы абстрактно-логический анализ и социологический метод. анализ данных подтверждает теоретические идеи работы и показывает, что существует положительная корреляция между взаимодействием сотрудников и их менеджеров и качеством их работы. опрос показывает, что среди работников более высокий процент (84%), который показал улучшенную производительность труда, считает, что их руководители проводят эффективную политику взаимодействия. в выводах выделены основные результаты исследований. результаты исследований показывают, что существует сильная связь между взаимодействием менеджеров и сотрудников с производительностью сотрудников. baltic journal of economic studies 294 vol. 3, no. 4, 2017 corresponding author: 1 department of economic consulting, simon kuznets kharkiv national university of economics. e-mail: irina_shev4enko@ukr.net the budget program: economic content and practice of implementation iryna shevchenko1 simon kuznets kharkiv national university of economics, ukraine abstract. the aim of the article is to analyse the practice of the economic content of budget programs’ implementation in ukraine. the definition of the budget program is given. it is noted that, in the ukrainian legislative area, there is a wide range of programs, namely: programs of economic and social development of ukraine; government activity programs; state target programs; local programs for the socio-economic and cultural development. the author reviews in more detail the differences between the budget program and the state target program since it is these types of programs that are most confusing. it is emphasized that there is a certain interconnection between budget and state target programs and a strategic document. thus, in order to achieve the corresponding goal and fulfil the tasks set out in the paper and aim at solving urgent problems of development, it is necessary to develop concrete ways in the context of branches of the economy. methodology. the study of the indicators of planned and fully financed state budget programs, planned and spent expenditures for the financing of budget programs for 2011– 2015, as well as the polynomial trend of planned expenditures for the financialization of budget programs for 2011– 2017, is conducted. the interrelation between elements of budget programs and their characteristic features is studied. indicators of the implementation of budget programs applied in international practice are considered and analysed, namely: great britain, australia, new zealand, usa. results. the author systematized the views of scientists on the performance indicators of budget programs. the analysis of the professional literature on this issue allowed generalizing the main classification features, which, according to the author, should be fixed at the legislative level. practical implication. the author proposed an additional classification mark “depending on the degree of risk of non-fulfilment of the program”. this will allow timely identification of the probability of non-fulfilment of the budget program and its possible cause but also will allow optimizing cash flows and their managers, will not allow assessing the necessity and expediency of combining several budget programs of one main manager of funds into one program; combining them according to the branch principle by transferring to other main budget holders in accordance with their functions; reducing the number of main budget holders. key words: government, budget programs, implementation, state program, budget management, development. jel classification: а110, g290, h500, h530, h610 1. introduction at the present stage of development of public relations in the public sector, in particular, one should note the increasing role of finance in the mechanism of state regulation of reproduction, which is the active role in the recovery of assets for the production of public goods in various forms (health and medical care, education, defence, financial stabilization, creation of the material base for the development of research and innovation potential, etc.). it should be borne in mind that the government uses the budget as a bridge between the distribution and productive consumption may provide priority development of the most advanced areas of the economy, regulate the levels of production and unemployment, using the tax system to regulate the activity levels of production and non-production sectors and individual sectors. as a result, you receive one of the challenges facing public authorities dealing with the budget process  – control of public finances as an essential resource reproduction economy. since the current stage of development of ukraine’s economy is characterized by staging large-scale national socio-economic problems, their solutions must be based on qualitative change and improving the efficiency of the state in various sectors of the economy. this targeted administrative and fiscal reforms, the essence of which is to establish effective governance and provides for the transition from the management of budget spending to performance management. baltic journal of economic studies 295 vol. 3, no. 4, 2017 2. review of theory and literature theoretical and methodological principles of budget management are considered in works of scientists like andrushchenko v.l., blahun i.h., vasylyk  o.d., galushka e.o., dieieva n. m., zvarych  m.a., mohyliak  pya., oparin v.m., pankevych l.v., fedosov  v.m., and others. directly involved are in budget spending such our scientists as bulhakova s.o., yermoshenko m.m., kyrylenko o.p., mishchenko  v.i., nakonechna yu.l., nechai a.a., ohon ts.h., pavliuk  k.v., pasichnyk yu.v., rozputenko i.v. and others. at the same time, the presence of a number of outstanding issues that have a complicated macroeconomic vector of economic development set the stage for further research in the area of budgeting. the aim of the article is to clarify the economic content analysis of the budget programs and their implementation in ukraine. 3. resources and indicators collection the need for improving public financial management system, improving the quality of public services and effective use of budget funds led to the introduction of the budget process program-target method of planning public expenditure, which at the national level began to be used since 1998, when the main budget holders began to compile a budget mandatory requests from the main objective of determining the objectives and the planned year. in 2001, the budget code (budget code of ukraine, 2010) was adopted that predicted the need for planning costs for the highest priority objectives of economic and social development and, in 2002, there was developed “concept of using program-target method in the budget process” (konseption, 2002), which defined the objectives and implementation of the basic principles of this method and established three stages of transition to its application. it should be noted that the use of program-target method is implemented through the budget program. but before you decide on the substance of the budget program, according to the author, it should be noted that, in the ukrainian legislative field, there is a wide range of applications, including: economic and social development of ukraine (hereinafter  – strategic documents); program of the government; state target programs; local socio-economic and cultural development (konseption, 2002). these types of programs are multicomponent, that is, they describe activities in a wide range of areas, industries, and categories of consumers of services, structures performers in many areas of implementation and a long list of different events and stages. these programs include one group that can be called comprehensive programs. as for the budget program, in accordance with art. 2 of the budget code, budget program  – a set of measures aimed at achieving a common goal, objectives, and expected results, the definition and implementation of which carries a spending according to its functions (budget code of ukraine, 2010). it should be noted that most scientists tend to the given in the budget code study of the nature of a definition of “budget program”. however, there is also a view that budget program  – a plan for the implementation of tasks to achieve the goal indicating artists, fulfilling life, necessary resources and performance indicators (budget code of ukraine, 2010). so, anyway, keep in mind that the budget program is a binding element of national programs with the programs of ministries and agencies, local authorities. unlike complex programs, the budget program describes the same type of activities in the same type of structure, and the service in question is aimed at the specific needs of the recipients of such services. however, according to the author, it is appropriate to elaborate on the differences between the budget program and state program because these types of programs are most confusing. thus, issues of differences between the concepts are involved in works of sukhareva l.o., fedchenko t.v., poteriailo i.yu., and other. the researchers noted that the main features characterizing the differences between the budget and state target programs – dependent on the perpetrators, sources of funding and program implementation period (sukhareva, 2013). thus, the implementation of state program may involve several key spending, indicating that inter-regional or cross-sectoral nature of the program, and the program budget  – only one of the perpetrators, who may be directly or key spending money or another responsible officer (dikan, 2011). in addition, if the budget program may involve only general funds and/or special funds budget one level, then the state program  – not only the budgets of different levels but the costs off-budget funds, grants, loans, and other sources not prohibited by applicable law. also there is emphasized the differences between public trust and budget programs, which is in terms of their performance: state target program implemented in one (5 years), two (5 to 10 years) or three phases (over 10 years) and budget program runs for one fiscal year (dikan, 2011). however, scientists say that the relationship between budget and state target program determined that according to the rules for passports of budget programs (dikan, 2011), within the budget program, state target programs can be executed. on the one hand, the state target programs are detailing (in annual proportion of corresponding budget program) in the law on the state budget for the corresponding year, and from the other  – the annual budget program may be a part of state target program (vajs, 2000). it should also be emphasized that there is a relationship between budget and target programs and governmental and strategic document. thus, to achieve appropriate goals and tasks set out in the document and aimed at solving urgent problems of development, it is necessary baltic journal of economic studies 296 vol. 3, no. 4, 2017 to develop specific ways in terms of industries. this problem is solved by a target program, making usually for several years and defining a set of interrelated objectives and measures to achieve their goals, deadlines for measures of this program, projected amounts, and sources of financing (heyts, 2008). as the studies for 2011–2015 show, the number of state programs significantly reduced (fig. 1). fig. 1. changes in the number of planned and fully funded state budget programs in 2011–2015 source: compiled by the authors according to the research results thus, analysing fig. 1, it should be noted that the number of budget programs for the period of 2011– 2015 gradually reduced. thus in 2015 compared to 2011, their number decreased by half. regarding the funds that were allocated for the financing shown in fig. 1 of a number of budget programs (fig. 2), it should be noted that their volume significantly decreased in 2014 (by 101  878  200  000  usd), in 2015 almost reached the level of 2011. also in 2015, compared to 2014, by far, the amount spent on budget program increased almost five times. 0,0 50000,0 100000,0 150000,0 200000,0 250000,0 300000,0 2011 р. 2012 р. 2013 р. 2014 р. 2015 р. 296121,7 218045,1 223375,1 194243,5 285802,0 132662,5 104809,3 114720,6 27083,3 159649,0 fig. 2. planned and carried out expenditures on budget programs in 2011–2015 source: compiled by the authors according to the research results if to build a trend line and extrapolate it, so it is possible to observe a trend to the further increase in the amount of financing for state programs (fig. 3). note that built predictive model shown in fig.  3 is adequate (coefficient of determination  – r2 = 0,8502). this means that the above dependence on 85.0% describes changes in amounts to finance budget programs. however, it is advisable to pay attention to the systematic underfunding of the budget programs indicating significant shortcomings in the management of public finances. thus, according to the results of analysis features, it should be noted that throughout the analysed period of 2011–2015, non-fulfilment of planned budget expenditures is observed. thus, conducting in 2011 expenditures was expected by 894 budget programs (without considering intergovernmental transfers, expenditures for public debt service and reserve fund), of which in the planned amount expenditures are undertaken for 331 programs amounting to 132 662.5 million uah or 44.8% of the plan. by 492 programs, expenditures are undertaken in the amount that is 6 773.9 million uah less the plan. the use of funds for 51 programs amounting to 508.8 million uah has not been started. in 2012, expenditure (excluding intergovernmental transfers, expenditures for public debt service and reserve fund) was assumed by 587 budget program in the amount of 218 billion 45.1 million uah. the main budget holders in the planned amount undertook expenditures by 160 programs amounting to 104 billion 809.3 million uah or 48.1%. in 2013, expenditures (excluding inter-budgetary transfers, expenditures for debt service and reserve fund) were assumed by 553 budget program amounting to 223  billion 375.1 million uah, of which for 101  programs amounting to 114 billion 720.6 million uah, or 51.4%, the main budget holders undertook expenditures in the planned volume, instead for 19 programs amounting to 668.5 million uah (0.3% of the plan) the use of funds has not been started. in 2014, undertaking expenditures (without intergovernmental transfers, expenditures for debt service and reserve fund) were assumed by 447 budget program amounting to 194 billion 243.5 million uah. in a planned amount, expenditures are undertaken by 123  budget program in the amount of 27 billion 83.3  million uah or 14.0% of the plan; the implementation of 18 budget programs  – 139.2 million uah, accounting for 0.1% of the planned amount, has not been started. in 2015, general fund expenditures (excluding interbudgetary transfers, expenditures for debt service and reserve fund) are undertaken by 439 budget program amounting to 285 billion 802.0 million uah, or 97.8% of the plan. fig. 3. the polynomial trend of planned expenditures for budget programs source: compiled by the authors according to the research results baltic journal of economic studies 297 vol. 3, no. 4, 2017 thus, in the planned scope, expenditures for 151  budget program amounting to 159 billion 649.0 million uah, of which 59.4% were expenditures of the ministry of social policy of ukraine for two budget programs to cover the deficit of the pension fund of ukraine to pay pensions and subsidies for the payment of pensions, allowances, and increases to pensions granted under various pension programs  – 94  billion 811.6 million uah. in the presence of planned assignments, implementation of 5 budget programs in the amount of 588.7 million uah or 0.2% of the plan has not been started. 4. the elements and indicators of budget programs in international and national practice the elements of the budget program include (heyts, 2008): 1) budget program title; 2) the purpose of the budget program; 3) subprogram title (subject to the division of the budget program into subprograms); 4)  budget program objectives, 5) performance indicators of the budget program. the relationship between elements of budget programs is presented in fig. 4. as can be seen from fig. 4, one key element of the budget of the program is the goal that defines the activity of budget holder and directs it to achieve a specific result. according to the order of the ministry of finances of ukraine № 679 on 09.07.2010 “on some issues of the experiment in the implementation of program method of preparation and execution of local budgets,” budget program goal – the end result, achieved by the implementation of a budget program, which corresponds to priorities of the state and regional policy and contributes to the achievement of strategic development goal of the state and/or administrative unit in the medium term (konseption, 2002). given the distinguished by the author and shown in fig. 1 characteristic features of the goal of the budgetary program, it can be argued that in essence  – it is a reflection of the overall end result, which achieving is in the focus of a specific budget program. according to the goal of the budget program, budget holders determine its objectives. according to the order of the mfu №679 on 09.07.2010, budget program objectives  – are a specific aimed at achieving the goal of the budget program set of measures reflecting the main stages of achieving this goal, identifies ways of the program execution and subject to verification (polozkova, 2015). it should be noted that objectives of the budget program are essentially a plan rationale for the use of resources by this program, meaning they stipulate for the estimate of funds of the budget holder. another element of the budget program, which also is a structural element of program budgeting, is performance indicators or indicators of budget programs execution that are designed to evaluate the effectiveness and efficiency of formation and implementation of budget programs and criteria of their execution. it is worth noting that in international practice performance indicators  – quantitative measurements of satisfaction with services in the public sector (productivity, efficiency, and profitability of services). at the same time, in different countries, individual sets of program performance indicators are used, but the most common is the complex use of indicators such as cost, performance, efficiency, and quality (fig. 5). elements of the budget program program title determining the final result of the program; focus on the long term; compliance with the main goal of activity of budget holder; is unique to each program focus on results; expression of results in quantitative terms; determination of specific task duration goal of the program objectives of the program relation to the goal and tasks performed within the budget program; are system elements (should not measure the effects of one-time actions or cover results of short-term activities) performance indicators fig. 4. the relationship between elements of the budget programs and their characteristics source: compiled by the author countries united kingdom australia new zealand usa indexes costs costs costs costs effectiveness number product effectiveness number producteffectiveness efficiency efficiencytimeliness timeliness efficiency quality quality influence benefit quality quality fig. 5. indicators of budget programs used in international practice source: compiled by the author baltic journal of economic studies 298 vol. 3, no. 4, 2017 at the same time in ukraine, according to the order № 679 on 09.07.2000, performance indicators  – indicators, on which the assessment of the efficiency of using budgetary funds allocated for the budget program execution to achieve its goal and objectives is carried out. performance indicators of budget programs include quantitative and qualitative indicators that determine the outcome of the budget program and describe the course of its implementation and the degree of achievement of the goal and objectives of the budget program. these figures should be formed for each task budget program and confirmed by official state statistics, financial and other reporting. performance indicators are divided into groups that are listed in fig. 6. 5. conclusions according to the author, for more thorough studies of indicators of budget programs, one should explore the development of this issue in domestic and foreign scientific literature. in this sense, it is expedient to note that certain aspects of the assessment of budget programs are considered in works of ukrainian and russian scientists, such as m.d. bilyk (sukhareva, 2013), v.f. besedin (sukhareva, 2013), b.a. rayzberh [8], a.m. karpov [8]. however, in ukraine to date, there are no reasonable methods for evaluating the effectiveness and efficiency of formation and implementation of budget programs. the author systematized views of scientists on performance indicators of budget programs (fig. 7). analysing fig. 7, an attention should be paid to the preferences of scientists in costs, product, profitability, and efficiency indicators. of course, the author supports this position in the evaluation of budget programs. however, it is appropriate to emphasize that the concept of efficiency in the scientific literature is defined as the ratio of costs and results. r. zodi defines efficiency as the ratio between the consumed factor (resource) and output (product). j. diamond defines effectiveness as related to the results imposed by (consumed) resources. that is, inherently efficiency already includes both cost indicator and product indicator. as for performance, it should be noted that it shows the extent, to which the goals and objectives identified in the budget program are achieved, the efficiency of the use of financial resources in the budget provision services at the state and local level. according to m.a. klishina, performance reflects the degree of achievement of quality indicators. according to her, “performance” is a complex concept that embraces financial resources saving, the efficiency of authorities and organizations  – recipients of budget funds, their efficiency in achieving results (sukhareva, 2013). performance indicators characteristic costs indicators define the scope and structure of resources that ensure the budget program execution product indicators used to assess the achievement of goals. an indicator of the product, in particular, is the number of users of goods (works, services) produced during the budget program performance indicators defined as the ratio of produced goods (works, services) to their value in monetary or human terms (resource consumption rate per unit of product) quality indicators reflects the quality of manufactured goods (works, services) fig. 6. budget program performance indicators used in ukraine source: compiled by the authors according to the research results author indicators e xp en se s pr od uc t pr ofi ta bi lit y e ffi ci en cy ( in m on et ar y te rm s) e ffi ci en cy ( in re al te rm s) q ua lit y pe rf or m an ce ( in m on et ar y te rm s) so ci al e ffi ci en cy e ffi ci en cy pe rf or m an ce ( in re al te rm s) w or kl oa d b en efi ts r et ur n o.p. kyrylenko + + + + l.v. dikan + + + + + + k.v. pavliuk + + + + + і.в. uskov + + + + j. diamond + + + r . hackter + + + + r . zodi + + + + e. borgue + + + + c. weiss + + + fig. 7. the views of scientists on the performance indicators of budget programs source: compiled by the authors according to the research results baltic journal of economic studies 299 vol. 3, no. 4, 2017 in turn, k. pavliuk considers performance as a program’s ability to achieve its goals and carry out tasks and activities. thus, under the evaluation of performance, the author understands the comparison and actual results with targets (sukhareva, 2013). consequently, the impact includes both the efficiency and quality of goods (services). moreover, the performance provides qualitative and quantitative indicators characterizing the validity of the performance of individual budget programs. the analysis allows determining that, during the evaluation of budget programs’ execution, a large number of performance indicators can be used that are significantly different. some, for example, cost indicators, are difficult to be included in the performance indicators but they also play an important role in the overall result. for the productive operation, an evaluation system should be coordinated, without differences and contradictions. the number of performance indicators should be sufficient for determining the efficiency of the main budget holder. it should be noted that most countries also clearly limits their number in order not to burden calculations and provide a selection of the most reliable and specific indicators. given the analysis of scientific works of domestic and foreign scholars, the author proposed using the following parameters as criteria for budget programs: 1) indicators of economic efficiency, which should reflect the correlation of financial resources and the quality of budget services provided; 2) indicators of social efficiency, representing the adherence to minimum social standards and their gradual increase; 3) performance indicators, which should take into account the degree of the budget program implementation by the goal and objectives, reflect the deviation of actual results from the target value, and the planned activities; 4) efficiency indicators that determine the economic benefit achieved from sales of the budget program, set spending amount per unit of production; 5) quality indicators that reflect the quality characteristics of provided services (goods). such a system of the performance of budget programs will allocate budget resources not only given the availability of funds but also taking into account the socio-economic efficiency. criterion types of of budget programs depending on the level of government national, regional local depending on features of public finances allocative (directed to overcome the market failure to provide basic public goods of law, order, and security); distribution (designed to prevent the socially undesirable result of market income distribution); stabilization (takes into account the impact of financial policy on the basic parameters of socio-economic conditions); depending on the nature of the program results management decisions; investments in the real economy; social; the share of state program depending on economic performance current; development programs depending on the method of implementation individual (implemented by one executor); distributed (approved in the budget for one responsible executor and should be distributed among the various executors over the financial year) depending on the duration long-term; medium; short depending on the direction of spending areas governance; defines; public order; security; judiciary; economic activity; environmental protection; utilities; health; physical and spiritual development; education depending on the time of implementation permanent (continuous); non-recurrent depending on the performance indicators of programs program that can be evaluated by simplified performance indicators; programs that require the detailed performance indicators depending on the risk of the program failure (suggested by the author) programs with high risk of failure; program with average risk of failure; applications with low risk of failure fig. 8. classification of budget programs source: compiled by the authors according to the research results baltic journal of economic studies 300 vol. 3, no. 4, 2017 also, it will allow strengthening the responsibility of the budgetary funds for the quantity and quality of public services (goods). in addition, the use of these parameters reduces the threat of making unreasoned subjective decisions on the implementation of fiscal policy, and monitoring of the effectiveness of budget spending does not lose its significance. according to the author, for a more thorough study of the economic content of the budget programs, it is also advisable to elaborate their varieties since budget programs today have no legislative classification but differ by code number of program and functional classification of expenditures. in addition, a detailed classification of budget programs will not only define their economic content but also enable to organize them, group according to specific common characteristics that provide a rational distribution of programs between the main budget holders of funds and facilitates their development and implementation. in this respect, it should be noted that the analysis of the scientific economic literature shows that scientists offered the classification of budgetary programs based on various criteria. thus, the analysis of this issue’s specialized literature allowed summarizing the main classification criteria, which, according to the author, should be fixed at the legislative level. it should be noted that in the fig. 8, in addition to the existing classifications, the author proposed an additional “depending on the risk of the program failure.” this will allow timely determining the probability of failure of the budget program and its possible cause and, therefore, will optimize the flow of funds and their holders, not to assess the need and appropriateness of combining several budget programs of one main budget holder into one program; their combining by sectoral principle by means of transferring to other budget holders according to their functions, reducing the number of the main budget holders. according to the author, given grouping by all defined attributes fully takes into account the specifics of budget programs. so the author studied the economic content of budget programs, which is disclosed through its elements and types. also, there are studied criteria for the implementation of budget programs that are expressed as certain indicators. references: biudzhetnyj codeks ukrainy vid 08.07.2010 № 2456-vi, [url]: http://zakon3.rada.gov.ua/laws/show/2456-17 polozkov, m. g. (2015). konceptual'nye osnovy i institucional'nye aspekty razvitija vneshnego gosudarstvennogo audita v sovremennoj ekonomike, monografija «rusajns», moskow, russia, 152. kontseptsiia zastosuvannia prohramno-tsil'ovoho metodu v biudzhetnomu protsesi, skhvalena rozporiadzhenniam kmu vid 14.09.2002 № 538, [url]: http://zakon3.rada.gov.ua/laws/show/538-2002-r sukhareva, l.o. (2013). derzhavnyj audyt efektyvnosti: systemnist', orhanizatsiia, metodyka: monohrafiia / l.o. sukhareva, t.v. fedchenko. – donets'k : donnuet, ukraine, 289. pravyla skladannia pasportiv biudzhetnykh prohram mistsevykh biudzhetiv ta zvitiv pro ikh vykonannia, zatverdzheni nakazom minfina ukrainy vid 26.08.2014 № 836 [url]: http://zakon3.rada.gov.ua/laws/show/ z1104-14 sajt derzhavnoi sluzhby statystyky ukrainy, [url]: http://www.ukrstat.gov.uа dikan', l.v. (2011). derzhavnyj audyt: navchal'nyj posibnyk / l.v. dikan', yu.o. holub, n.v. syniuhina.  – k.: znannia, kharkov, ukraine, 503. vajs, k. (2000). otsiniuvannia: metody doslidzhennia prohram ta polityky,: osnovy, kiev, ukraine, 671. vedunh, e. (2003). otsiniuvannia derzhavnoi polityky i prohram, vsesvit, kiev, ukraine, 350. hejts', v.m. (2008). derzhavni tsil'ovi prohramy ta uporiadkuvannia prohramnoho protsesu v biudzhetnij sferi , naukova dumka, kiev, ukraine, 383. ирина шевченко бюджетная программа: экономическое содержание и практика реализации аннотация. цель статьи – проанализировать практику экономического содержания реализации бюджетных программ в украине. дать определение бюджетной программы. было отмечено, что в законодательной области украины существует широкий спектр программ, а именно: программы экономического и социального развития украины; программы государственной деятельности; государственные целевые программы; местные программы социально-экономического и культурного развития. автор более подробно рассматривает различия между бюджетной программой и государственной целевой программой, поскольку именно эти типы программ являются наиболее запутанными. подчеркивается, что существует определенная взаимосвязь между бюджетными и государственными целевыми программами и стратегическим документом. таким образом, для достижения соответствующей цели и выполнения задач, изложенных в документе и направленных на решение неотложных проблем развития, необходимо разработать baltic journal of economic studies 301 vol. 3, no. 4, 2017 конкретные пути в контексте отраслей экономики. методология. изучены показатели запланированных и полностью финансируемых государственных бюджетных программ, запланированных и израсходованных расходов на финансирование бюджетных программ на 2011-2015 гг., а также полиномиальная тенденция планируемых расходов на финансирование бюджетных программ на 2011-2017 гг. взаимосвязь между элементами бюджетных программ и их характерными особенностями. рассмотрены и проанализированы показатели реализации бюджетных программ, применяемых в международной практике, а именно: великобритания, австралия, новая зеландия, сша. результаты. автор систематизировал взгляды ученых на показатели эффективности бюджетных программ. анализ профессиональной литературы по этому вопросу позволил обобщить основные классификационные особенности, которые, по мнению автора, должны быть закреплены на законодательном уровне. практическое значение. автор предложил дополнительный классификационный знак «в зависимости от степени риска невыполнения программы». это позволит своевременно определить вероятность невыполнения бюджетной программы и ее возможную причину, а также позволит оптимизировать движение денежных средств и их менеджеров, не позволит оценить необходимость и целесообразность объединения нескольких бюджетных программ одного основного менеджер средств в одну программу; объединяя их в соответствии с отраслевым принципом путем перевода в другие основные единицы расходов в соответствии с их функциями; уменьшая количество ключевых единиц расходов. baltic journal of economic studies 102 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 zaporizhzhia national university, ukraine (corresponding author) e-mail: kovpak.viki@ukr.net orcid: https://orcid.org/0000-0001-9461-0536 2 zaporizhzhia national university, ukraine e-mail: lebidnataliia2019@gmail.com orcid: https://orcid.org/0000-0002-7227-6597 * the article is prepared in the framework of the state-financed research coded 1/21, registered 0121u107470 "strategic communications as a tool for implementing the national interests of the state: ukrainian and foreign experience" of zaporizhzhia national university. doi: https://doi.org/10.30525/2256-0742/2022-8-4-102-109 creative industries as a mechanism of creative economy and strategic communications* viktoriia kovpak1, nataliia lebid2 abstract. in a period of crisis – namely, a pandemic and martial law – the economy is transforming into a system where the main driving forces are the exchange of knowledge, its mutual evaluation, where creativity and creative industries play a significant role, which ultimately form the creative economy, which economist and sociologist richard florida called "the new economic era of the 21st century". the purpose of the scientific work is to analyze the tools of ukrainian creative industries that contribute to the production of a new cultural product or service, have a semantic load, are a resource for strategic communications and increase the potential of the creative economy in martial law (on the examples of successful ukrainian cases of creative industries in the crisis period). the methodology of the study is based on a combination of systemic and value-based approaches, as well as discourse analysis, which together contribute to the disclosure of structural relationships in the ecosystem of the creative economy (in particular, social capital, entrepreneurial culture, state and international support, innovation potential, reputational capital of ukraine in the world), their correlations with the peculiarities of national political and economic development and global trends, in particular in times of crisis, such as pandemic and wartime. the scientific work traces the genesis of the formation of a conceptual understanding of the creative economy and creative industries in the ukrainian dimension, which contains legislative (order of the cabinet of ministers of ukraine no. 265-r "on approval of economic activities related to creative industries", the law of ukraine "on amendments to the tax code of ukraine and other laws of ukraine on state support of culture, small business and creative industries in connection with the implementation of measures aimed at preventing the occurrence and spread of coronavirus disease (covid-19)", etc.), terminology (the meaning of the concepts of "creative product", "creative industries", "project", "institutional support grant", etc. was clarified), social and institutional (creation of the public union "center for the development of the creative economy", the national bureau of the eu program "creative europe" in ukraine, the startup fund, the ukrainian cultural foundation (ucf), etc. special attention in the scientific work is paid to the anonymous online survey of the ucf together with the ministry of culture and information policy of ukraine of creative entrepreneurs and creative professionals, which was conducted among ucf 2020–2022 applicants on the state of culture and creative industries during the war (june 2022) in order to form a recovery and strengthening plan. the analysis of successful ukrainian cases of creative industries allowed to outline the tools for the development of the creative economy in the crisis period: monetization of hobbies, innovative entrepreneurship, business clustering (in particular, the idea of a cluster of creative industries), brand collaboration, craft production, creation of cultural products such as books, grant/fund support and others, on the terms of donation to support the humanitarian and military needs of ukrainian society. and the recently created podcast "frontline of creative industries" about the success stories of representatives of this industry, who with their projects resist russian aggression and support the economy and the institution of national identification of ukraine, opens up prospects for further analysis of such tools as crowdfunding, revitalization, development of creative clusters of ukrainian business. key words: creative economy, creative industries, strategic communications, cultural product, intellectual capital, wartime. jel classification: h11, h76, j48 baltic journal of economic studies 103 vol. 8 no. 4, 2022 "the main fuel of the хх century was oil, and the fuel of ххі century is creativity" john newbigin 1. introduction in connection with the introduction of martial law in ukraine in accordance with the presidential decree no. 64/2022 of 24.02.2022 due to the military aggression of the russian federation against ukraine, the economy of ukraine faced the risks of developing a humanitarian and economic crisis, as the press service of the ministry of finance of ukraine reports that "for eight months of this year, the state budget was executed with a deficit of 416. 9 billion uah, in particular, the general fund – 418.1 billion uah against the planned deficit of 864.2 billion uah for this period." (zharykova, 2022) it is obvious that today, when the war is in full swing and ukraine's economy has already suffered large-scale losses from russian armed aggression in the sectors of gdp, logistics, exports/imports, inflation, investments, banking sector, business activity, huge losses in metallurgy, fuel and energy, agriculture, migration and human capital (biz. censor. net, 2022), the state of the economy and the ideas of the anti-crisis plan should be analyzed constantly, because business continues to work and support the economic background, western partners support and agree to participate in the implementation of ukraine's recovery. thus, in the context of anti crisis measures in april, president zelenskiy stressed the need for creativity to restore the economy: "the economy is also the front on which we fight for our freedom, for our state and for our people, so we need to find ways to constantly adapt to the existing circumstances. now we need to be as creative and bold as possible in solving economic issues." (koval, 2022) therefore, there is a growing demand for the possibility of using creative potential to create innovations, the need for intellectual capital, structural capital (consumer capital and organizational capital), the demand for knowledge, which, in turn, is reflected in the scientific terminology of the economic sphere, in particular, along with the definition of "creative economy " the terms "knowledge economy ", "innovation economy " are used. this fact is connected "with the development of high-tech sectors of goods and services, wide availability of infor mation and communication technologies and higher education in the second half of the 20th century. thus, the creative economy, the knowledge economy and the innovation economy are components of each other, and each of them is part of the concept of the new economy, which can be interpreted as a high-tech economy that requires business entities to constantly innovate in the context of globalization." (ushkarenko, 2018) 2. concepts of creative economy and industries in the context of pandemic and war: ukrainian dimension in general, the concept of creative economy was first formed in the 1960s. “in 2001 john hawkins, a member of the united nations creative economy advisory council, a british writer and media manager, for the first time used this term in his book ‘the creative economy: how people make money from ideas’, where he defined the creative economy as "the creation of value from ideas." (creativeeconomy. center, 2022) but before the challenges of the "wartime economy ", people felt the challenges of the "pandemic era economy ". two years ago, covid-19 as an economic crisis of natural origin greatly affected the recreational sphere of life, the life of the cultural industries. this fact prompted the verkhovna rada on april 22, 2020 to register the draft law no. 3379 "on amendments to the tax code of ukraine and other laws of ukraine on state support of culture, small business and creative industries in connection with the implementation of measures aimed at preventing the occurrence and spread of coronavirus disease (covid-19)" (volos, 2020). this law proposed to introduce the concept of a grant, regulate the procedure for its taxation, temporarily exempt creative industries and cultural institutions from paying vat on services, income tax and personal income tax (personal income), which would increase the amount of liquid capital. law of ukraine "on amendments to the tax code of ukraine and other laws of ukraine on state support of culture, small business and creative industries in connection with the implementation of measures aimed at preventing the occurrence and spread of coronavirus disease (covid-19)" (bulletin of the verkhovna rada (bvr), 2020, no. 43, article 371) the meaning of the following concepts was clarified accordingly: "creative industries – types of economic activity aimed at creating added value and jobs through cultural (artistic) and/or creative expression" (zakon.rada.gov.ua, 2020); "creative product – goods and services that have high added value and are created/provided as a result of cultural (artistic) and/or creative expression" (zakon.rada.gov.ua, 2020). providing institutional support was identified as one of the tasks of the ukrainian cultural foundation among others; it is also emphasized the need to support and develop projects in the fields of culture and arts, creative industries and cultural (domestic) tourism, to provide grants of institutional support to legal entities of all forms of ownership to ensure competitiveness and job creation in the conditions of restrictions on economic activity imposed by law caused by an emergency or state of emergency, or the baltic journal of economic studies 104 vol. 8 no. 4, 2022 implementation of administrative and (or) health measures (quarantine); providing grants to support and develop projects in the fields of culture and arts, creative industries and cultural and educational (domestic) tourism (zakon.rada.gov.ua, 2020). according to this law, the project should be understood as "the activities of individuals and legal entities aimed at creating a certain cultural product, cultural good or cultural service (their combination); product or service (their combination) from cultural (domestic) tourism; a product or service (their combination) from the main economic activity in the types of creative industries approved by the cabinet of ministers of ukraine, or institutional support of legal entities, ..., to achieve clearly defined goals within a certain estimate (budget) and the implementation of which requires actions within the agreed time frame provided by the contract concluded with the ukrainian cultural foundation" (zakon.rada.gov. ua, 2020), and the term "institutional support grant" means "the provision of financial resources on a gratuitous and irrevocable basis to legal entities of all forms of ownership in the field of culture, cultural (domestic) tourism and those persons whose main activity belongs to the types of economic activity related to the creative industries..." (zakon.rada.gov.ua, 2020) the law adjusts the work of the national council on television and radio broadcasting, state support for cinematography in ukraine, for example, in the form of temporary state subventions for the development of film projects, state support for book publishing in ukraine, etc. and in wartime, this sphere, the sphere of creative industries, is able, in addition to commercial benefits, to generate intellectual capital as a resource of strategic communications, such as archetypal roots, national identification meanings, national cultural values, historical myths and is able to scale them on the civilizational map of the world. as noted in the study of the creative economy of ukraine and international experience, conducted in 2021 by the ngo golocal together with the think tank cmd ukraine and the center for the development of the creative economy, it is "the dna of the creative economy is the ability to generate intellectual capital with high profitability potential, create jobs and exports, while promoting social inclusion, cultural diversity and human development." (rivcha chenko, 2022) this study has proved the strong potential for the development of the creative economy in ukraine, in particular, a noticeable dynamics has been recorded since 2016, when the creative sphere began to rapidly increase its weight in most key macroeconomic indicators, when the added value created by the creative industries of ukraine increased by 32.7% and, according to analysts' forecasts, tends to increase. according to the head of the ngo golocal ihor komend, "state business support programs, such as diia city, 5-7-9 loans, startup fund, support from donor and international organizations, specific projects in the regions, such as creative economy centers, create a unique ecosystem for youth development, smart earnings and, as a result, for the development of the regions." (rivchachenko, 2022) (figure 1) therefore, the national genesis took place in accordance with global markers, where international organizations, creative hubs, society (consumers and creators of creative products), the state (active state and regional policy can be traced in the uk, china, south korea, the netherlands and other countries that are leaders in this issue), business (especially in the context of cooperation between small, medium and large enterprises), public organizations, local governments, educational and research institutions are identified as key stakeholders of the creative economy (creativeeconomy.center, 2022). the indicators in figure 1 suggest a more precise definition of the term "creative economy " as "a set of economic activities based on knowledge, creativity, intelligence, technology and innovation, with a high potential for profitability and job creation, and including creative industries and other creative economic activities (research, education, fashion, tourism, services, creative products, etc.)." (creativeeconomy.center, 2022) the measurable structuring of the creative economy by the center for creative economy development is presented in figure 2. the national bureau of the eu program "creative europe" in ukraine distinguishes the following 12 sectors of cultural and creative industries: performing arts (theater, dance, ballet, opera and musical performances); visual arts (painting, sculpture, graphics, printing, photography); crafts (textiles, ceramics, wood, metal, glass, graphics); cultural heritage (tangible and intangible heritage, cultural heritage sites; archaeology, museums, libraries, archives); audiovisual sector (films and videos); interactive software/it/training programs; computer and video game development; music (live and reproduced); design and fashion (clothing manufacturers and others specializing in the fashion industry and interior design); literature and publishing (books, magazines, periodicals); architecture (construction and landscape architecture); mass media, advertising (television, radio, newspapers) (prostir.ua, 2022). from june 1 to 13, the ukrainian cultural foundation (ucf) together with the ministry of culture and information policy of ukraine conducted an anonymous online survey among creative entrepreneurs and creative professionals – applicants for the ukrainian cultural foundation 2020–2022 on the state of culture and creative industries during the war in order to form a plan for the restoration and baltic journal of economic studies 105 vol. 8 no. 4, 2022 strengthening of the sphere, to engage partners and donors, taking into account that the outflow of human capital, along with the reorientation of funding to the armed forces of ukraine, reduced demand and other factors may disrupt the positive dynamics shown in figure 1 (ucf.in.ua, 2022). the survey revealed that the incomes of employees and their employment decreased along with the demand for cultural services and products; one third of the participants recorded a decrease in sales of products and services by more than 90% compared to last year; but the vast majority of enterprises and institutions continued to pay taxes in full, by reducing the volume of work and sending employees on unpaid leave. there was a lack of awareness among industry professionals about receiving state support, while at the same time, according to 61% of respondents, the restoration and development of the creative industries in the postwar period is possible through project grants. interestingly, 92% of respondents, being abroad, do not stop "donating" to the armed forces of ukraine, participate in various events and actions in support of ukraine from abroad. and the collection of open responses highlighted the following markers: transparent competition for senior positions, restructuring of the management vertical figure 1. the main producers of added value of the sector of creative economy in ukraine. the growth of the creative economy in ukraine from 2013 to 2019 source: (rivchachenko, 2022) figure 2. dimension of creative economy source: creativeeconomy.center (2022) baltic journal of economic studies 106 vol. 8 no. 4, 2022 of the industry, international educational trainings and exchange programs for artists and managers of the creative sector; co-production and cooperation in international projects; emphasis on cultural factors in state international policy; state support strategy, minimization of document circulation. 3. successful ukrainian cases of creative industries as tools for the development of creative economy in the crisis period examples of successful cases of creative industries in the crisis period provide an opportunity to try to identify tools that contribute to the production of a new cultural product or service, carry a semantic load and increase the potential of the creative economy in wartime. among the first tools is the monetization of hobbies, because thousands of ukrainians today are trying to develop small business ideas to enable them to make a systematic "donation" to help the armed forces, to implement volunteer initiatives: creation of jewelry, including patriotic themes, sale of clothing, including patriotic prints, sale of cosmetics, designer toys, repair of electronics, etc. for example, hanna horlenko, a methodist teacher, honored with "excellence in education of ukraine", with the help of the armed forces brigade, makes jewelry from beads for sale. in particular, the career hub community on its telegram channel (https://t.me/careerhub) within the framework of the marathon of useful tips #всебудеукраїна created a helpful infographic (https://careerhub.in.ua/wpcontent/uploads/2022/05/self-employment-1.pdf ) about monetizing a hobby with tips on where to start, how to find one's niche, what one needs to know before starting one's own business (yagodka, 2022). experts name the top five of the most popular niches for self-employment: cooking/ confectionery; floristry; artistic creativity, painting on objects, walls, showcases, decoupage; making candles, jewelry, perfume, soap, tableware, leather goods or cosplay costumes. among the tools for the development of the creative economy in the conditions of war is innovative entrepreneurship in the creative sector, or creative entrepreneurship is "a social technical and economic process that promotes the creation of best-in-class goods, services or technologies through the commercial use of innovation" (bukatseli, 2018), which is often based on creative production, is very mobile, based on project activities. so, for example, daria shapovalova (founder and creative director of "mercedes-benz kiev fashion days") and natalia modenova, ukrainian experts in the modern world of fashion, created in 2020 the project "dressx" – an online platform for selling digital clothes – "clothing models that designers develop according to the same patterns as traditional ones, but with the help of 3d technologies and computer programs. such digital versions of things are used to fill the profile on instagram or on online gaming platforms." (nikishova, 2022) the mission of the project is as follows: "the new approach should solve the problem of overproduction and overconsumption, returning purchases. according to barclays bank, about 9% of clothes are bought for photos and then returned, and this is with a market volume of $1.3 trillion per year." (bukatseli, 2018) the creators were able to prove to investors the need for people to get closer to the usual realities limited by quarantine restrictions during the pandemic, in particular, online fashions that the computer technology industry should respond to in clothing – thus, the project received $2 million in venture capital investment from alpha edison and artemis fund, which was aimed at creating a mobile application and launching an nft marketplace for clothing. the idea of selling a billion digital fashion items outlines the prospect of creating new jobs – virtual clothing designers, product promoters around the world. "now the popularity of the project makes it possible to raise funds for the defense of ukraine in the context of russian armed aggression. in the digital store "support ukraine" appeared a collection of clothes, all proceeds from the sale of which the co-founders transfer to the armed forces of ukraine." (nikishova, 2022) in addition to personalized examples, it is appropriate to mention regional cases, in particular, the clustering of business, the idea of a cluster of creative industries in the context of the development strategy of the carpathian region under martial law, which was presented by the head of the agency for regional development of ivano-frankivsk region, member of the board of the ivano-frankivsk business association viktor vintoniak. in an interview with the "firtka" news agency, he emphasized the prospects for the development of creative industries in their region, where there are no powerful industrial capabilities, and this industry can provide almost the greatest added value (darmograi, 2022). as an example, he cited the english model, where the contribution of creative industries in 2019 amounted to one hundred and eleven billion pounds, and emphasized the legislative basis for understanding creative initiatives in ukraine: resolution of the cabinet of ministers of ukraine no. 501 of may 19, 2021 established the creative economy development council, which includes the head of the expert group on creative industries of the directorate of book publishing, creative industries and tourism of the ministry of culture and information policy of ukraine. thus, among the diversity of creative industries, baltic journal of economic studies 107 vol. 8 no. 4, 2022 v. vintoniak noted the breakthrough of ukrainian film production since 2015 as the most meaningful, qualitative, value-forming and, according to him, "galician film production as a film industry can unite at least fifteen professions from the list of creative industries," (darmograi, 2022) since ivanofrankivsk region has been a popular location for filmmakers since s. parajanov’s "shadows of forgotten ancestors" was filmed in 1964. v. vintoniak states that hungarians, that have positive experience in the creative industries of film production with more than 30% of gross national income, are ready to help in creating pavilions for the production of audiovisual products. norwegian, italian and indian experts see the potential of a creative industries hub in the region with a focus on film production. there are cases when a cultural product is not only a mechanism for obtaining reputational, image and semantic capital, but becomes a tool for conveying a true picture of the world, in particular, the project created by the ukrainian studio starni games – the online game ukraine war stories, where players are offered to survive the occupation, save their relatives and leave for a safe place from bucha, gostomel and mariupol in three "visual novels". these "novels" are based on real events, with real photos. one of the creators of this game experienced this occupation in bucha firsthand. it is planned that the game will be released in october 2022 in free access. " we will not get anything from this project. our goal is to tell the world audience about the experience of the people of ukraine," the developers say (barsukova, 2022). the mechanism of brand collaboration today is also extremely effective and successful in the context of the creative economy. namely, the collaboration of fashion and sports, for example, the ukrainian sustainable brand from designer andre tan rdnt. "and despite the realities, rdnt continues to give light and broadcast national messages about independence, individuality, freedom of expression and lust for life. in the first spring drop... the main codes of the young brand are transmitted, which include environmental friendliness, manufacturability, relevance. the author's water print on clothes symbolizes life, because water is an integral part of our life and water polo." (cases.media, 2022) the proceeds from the sale of t-shirts of this collaboration will be directed to the charity platform dobro.ua to help children who are being treated in medical institutions of ukraine during the war. another example of a successful case is regional craft production: "support for local producers and craftsmen, promotion of quality goods made from natural raw materials, integration of villages into creative industries, modernization of ukrainian cultural heritage – these are the tasks of the "this is craft" trading platform created in nova kakhovka for producers and craftsmen from ukraine, who even during the full-scale war continued their work online, evacuating to uman, where they opened their first offline store (boychenko, 2022). having started a business at the height of the pandemic, a team of two activists working at the regional development agency of the tavria union of amalgamated hromadas set out to create an online platform for entrepreneurs and craftsmen. cooperation with 52 producers allowed to organize a creative service instead of a store. tasting evenings were organized in cooperation with a local promoter of movie nights with the introduction of gift sets in wooden boxes with a variety of food and drinks. they allowed to expand the customer base from individuals to businesses and local authorities. the team invests 50% of the marketplace's profits in its own charity fund "this is craft", which takes care of several programs: 1) "revolving fund" provides entrepreneurs with returnable money for them to scale up their activities, then people return funds; 2) "permanent competition of creators" is a micro grant competition that can be spent on an expert’s consulting from or creating a test model (for example, we made details for a necklace and author’s packaging for massage bags made of healing herbs); 3) "centavrida" is a program that appeared during the full-scale war to provide funds for the production of a minimum amount of copies of children’s books that would present the south of ukraine, tavria as an interesting legendary region of ukraine. eventually, when this territory was occupied, the team strategically reoriented the business to volunteering, and as a result of the evacuation, the relocation and arrangement of the offline store was carried out with the support of the ukrainian venture social fund. today their strategic idea, according to the co-founder of "this is craft" victoria kulakova, is to create an all-ukrainian network of "this is craft" stores with local and all-ukrainian gastro and regular souvenirs, which will work on the basis of a franchise, when the team is responsible for brand promotion, creation of a single marketplace, product placement on the website and its marketing, and local partner entrepreneurs saturate regional "this is craft" stores with high-quality local products. 4. conclusions comparing the performance of the creative industries with the same pandemic first quarter of 2021, when the "contact" sectors suffered the greatest losses, while others continued to grow, the ministry of culture and information policy of ukraine, together with representatives of the world baltic journal of economic studies 108 vol. 8 no. 4, 2022 bank, showed not just a drop in economic activity, but also its closure: "the total number of taxpayers decreased by 60% and the amount of declared income in the creative industries decreased by 41% in the first quarter of 2022 compared to the first quarter of 2021," (tax revenues, 2022) which is common to all sectors in the creative industries. "russia's war of aggression is destroying ukraine's creative economy. many objects of cultural and industrial infrastructure have been destroyed or seriously damaged by missile strikes. supply and demand chains are disrupted by the fighting. creative professionals are leaving the country – the problem of brain drain is becoming especially acute for preschoolers." (tax revenues, 2022) however, the formation of a successful ukrainian creative economy sector in the conditions of a promising creative environment and in the conditions of crisis socioeconomic preconditions, in particular during the war, requires, as the considered successful cases have shown, the use of certain tools: monetization of hobbies, innovative business (in particular, the idea of a cluster of creative industries), brand collaboration, craft production, creation of cultural products such as books, grant/equity support and other activities that involve donations to support humanitarian and military needs of ukrainian society. in the conditions of war, creative industries as an environment of economic activity are considered as a segment of the social economy that generates and promotes intellectual, value, semantic capital, which reveals its potential in the context of strategic communications. the podcast "frontline of creative industries" has been recently created to collect stories of how representatives of this field oppose russian aggression and support ukraine and each other. a more detailed consideration of such tools as crowdfunding, including the use of patreon, the creation of merch, revitalization, the so-called "second chance – from industrial use to creative impulse", and creative clusters of ukrainian business may also be promising. references: zharykova, a. 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(2022). they broke out of the occupation and opened a store in cherkasy region. how "this craft" supports local manufacturers. 23.08.22. #what's there. available at: https://shotam.info/vyrvalysiaz-okupatsii-ta-vidkryly-mahazyn-na-cherkashchyni-yak-tse-kraft-pidtrymuie-lokalnykh-vyrobnykiv/ (accessed september 10, 2022). tax revenues in the field of creative industries in ukraine (2022): q1 2022 vs q1 2021. ministry of culture and information policy of ukraine. august 2022. 28 p. received on: 26th of september, 2022 accepted on: 29th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 219 vol. 7 no. 2, 2021 corresponding author: 1 university of the state fiscal service of ukraine, ukraine e-mail: tilchikvv@ukr.net orcid: https://orcid.org/0000-0001-5964-3439 2 institute of innovative education of kyiv national university of construction and architecture, ukraine; national expert building alliance of ukraine, ukraine e-mail: le_v@ukr.net doi: https://doi.org/10.30525/2256-0742/2021-7-2-219-223 public and legal relations as a sphere of judicial protection of violated rights, freedoms, and interests vyacheslav tylchyk1, viktor leschynsky2 abstract. the role of legal relations in legal science cannot be overestimated, especially given the expansion of the boundaries of the subject of administrative law, which leads to the need to rethink its content. legal relations can be defined as a kind of phenomenon that is a sign of a systemic connection and includes law in its subjective and objective sense. this is due to the fact that the law without legal relations loses its practical meaning, even in the case of certain material leverage. an important statement in the context of scientific research is that law is a real element of public life only when its existence is mediated by legal relations. it is clear that the sphere of public and law relations is much narrower in terms of the volume of social relations in general, which are due to the presence of phenomena that, crystallizing through the prism of legal regulation, acquire legal consolidation and significance. analysing social relations (individual phenomena, institutions), scientists automatically transfer them to the legal plane. in this case, it is not possible to state the equal importance of social relations and law in legal relations, because the first will fill the legal gaps that will be the cornerstone of their order, and the conceptual apparatus of such a system will have to affect the legal form of law enforcement or vice versa. the reflexivity of a person’s perception of social norms expressed in the balance of social relations and law in legal relations can be established only by analysing not only legal norms but also social relations, which they organize in a “volumetric” sense. it is clear that such a process should not turn into a mechanical increase in legal regulation, but take into account the peculiarities of social relations, which, in fact, indicate anthropocentrism rather than the fact of priority or importance for the state as a subject (participant). in this context, it should be noted that today it is extremely difficult to determine which relations are most important for the state; moreover, the balance of human-centrism seems unclear, because without the participation of public authorities in the declared “self-regulation” to reach any “stability” whether it is impossible to overcome the negative phenomena. methodology. the solution of the tasks is carried out using the cognitive potential of the system of philosophical, general scientific and special methods. constitutionalism and synthesis allowed to define attributes and essence of the concept of “public law relations” and create this and other concepts. using the form of analysis – systematization – the problems of classification of disputes in the field of public relations are identified, which are resolved by administrative courts. the structural and functional method is used during the characterization of public and law relations as a sign of a dispute, which is resolved in administrative proceedings and the study of the structure of the judicial administrative process. methods of linguistic analysis and interpretation of legal norms helped identify gaps and other shortcomings in the legislation, develop proposals for its improvement. key words: public and legal relations, guarantees of legality, dispute in the field of public and legal relations, administrative proceedings and administrative process, subject of own powers, judicial protection. jel classification: k10, k40, k49 1. introduction along with a number of positive changes to the wording of regulations during the last judicial reform, the legislator has not paid attention to certain terms that can provide a single approach to understanding the law enforcement key criteria. this thesis primarily baltic journal of economic studies 220 vol. 7 no. 2, 2021 concerns the concept of “public law relations”. this notion is really a cornerstone, as administrative justice in general aims to protect the rights and interests of individuals (natural persons and legal entities) only if they are violated in the field of public relations. in the interests of effective administrative proceedings, a common vision of the nature of public law relations is of paramount importance for both the individual and the judge. according to v.b. averianov (2011), the lack of normative interpretation of the concept of these relations in the code of administrative judicial proceedings of ukraine (hereinafter referred to as cajp of ukraine) does not contribute to such unity. this problem is doctrinal because among the novels this concept has not been formulated in cajp of ukraine (2005), so the criterion that should identify the dispute as one that arose in the field of public relations becomes the subject of more epistemological conclusions of judges than normative legal reality. it should be noted that the lack of a formulated concept of “public relations” does not allow to define derived concepts, for example, “disputed public relations”, and so on. 2. scientific and normative approaches to determining criteria at public law relations v.m. kravchuk (2013) emphasizes the sufficiency of two criteria (substantive and subjective). according to the substantive criterion, civil, commercial, and administrative jurisdictions are distinguished. business cases arise between legal entities and entrepreneurs, as well as on the creation and termination of legal entities (corporate disputes), and administrative include the participation of the subject of power. all other cases (disputes) are resolved in civil proceedings. according to the subjective criterion, jurisdiction is divided into constitutional, civil (including economic and administrative), and criminal. in most cases, this distribution is not a problem. each of these types of proceedings has its own purpose, which determines such features of the proceedings that cannot be unified (kravchuk, 2013). despite this provision, the exclusive list of criteria for determining the subject (an unambiguous affiliation of the dispute) of the judicial administrative jurisdiction is considered insufficient, as evidenced by “ardent” scientific discussions. criteria are conditionally standardized, as already noted in article 4 of cajp of ukraine in determining the dispute in the field of public relations and article 19 of cajp of ukraine (code of administrative judicial proceedings of ukraine, 2005). the content of the latter allows scholars and practitioners to draw conclusions about the scope and nature of public relations, as well as their subjective composition (or vice versa) as illustrated by the above provisions. according to article 19 of the criminal procedure code of ukraine, the jurisdiction of administrative courts extends to the above disputes, code of administrative judicial proceedings of ukraine (2005). the analysis of this article makes it possible to conclude that its regulatory action concerns parts of the legal structure “dispute in the field of public relations”. “dispute” is normatively defined as “violation” in the form of performance or non-performance by the subject of the power of these functions, provision or non-provision of administrative services, other violations of the rights of a person – the subject of the election or referendum process (cajp of ukraine, 2005). at the same time, the content of this article does not contain a complete list of forms of encroachment – decisions, actions, and omissions, in particular, it is not about other facts that are subject to verification in administrative proceedings (paragraph 2 of article 2 of cajp of ukraine, 2005). instead, parts 1–15 of the first paragraph of article 19 of cajp of ukraine (2005) present an updated list of disputes on nature (content) of public law relations within which they arise. the analysis of the specified norms allows to state that the mentioned norms of cajp of ukraine regulate the same legal relations which are connected with a legal construction “dispute in the field of public law relations”. this legal structure should include the subject of power, the presence of which is mediated as a sign of the concept of “public law relations”, and on the other – as a party to the encroachment on the object of judicial protection (rights, freedoms, interests). logical is the selection of the following criteria: forensic administrative jurisdiction is used in case of the presence of the government entity whose activities are connected, including power management functions, as well as individuals or legal entities of public and private law, collective entities without legal personality, endowed (temporary) administrative powers or the use by the subject of the power of instruments of public administration. it should be noted at once that the formation of a “mixed” criterion “the subject of power and the implementation of its respective functions (or powers)” along with the criterion of the presence of “subject of power” seems more appropriate, which is explained by the dynamics and statics public relations. its use (the criterion of application of power by the subject) alone or in combination with another, with one separate criterion, seems impractical, given its evaluative nature, which is indicated by scientists (averianov, 2010). along with this, the selection of this criterion makes it possible to draw conclusions (possibly not final) on the nature of activities (e.g., administrative) of the subject of power in other areas of public relations (tax, land, election, criminal, etc.). moreover, the baltic journal of economic studies 221 vol. 7 no. 2, 2021 application of this criterion plays another role – the definition of relations as public law, and the dispute as one that has arisen in the field of public law relations. properly, violation (issuance of an illegal decision, commission of an illegal act, or admission of illegal inaction) can be characterized only in the implementation of management function(s), which, in turn, will trace the relationship of the category – the subject of power, public law relations and violations, i.e., the existence of a dispute in such relations and the fact of encroachment on the object of judicial protection – the rights, freedoms, and interests of natural persons and legal entities. thus, in particular, in case no. 800/301/16 dated november 15, 2016, the board of judges of the judicial chamber for administrative cases of the supreme court of ukraine decided to refuse to satisfy the claims, as they did not concern about the violated rights of the person. the violation must be real, affect the rights, freedoms, or interests of the person at the time of going to court. in fact, the court found no dispute (resolution of the supreme court of ukraine in case no. 800/301/16 dated november 15, 2016), the absence of violation of the right of a person also precluded the resolution of the dispute on the merits (resolution of the grand chamber of the supreme court in case no. 802/2474/17-a dated december 12, 2018). it should be summarized that in order for the criterion of “exercise of power by the subject” to play a more significant role in determining the subject of the jurisdiction of the administrative court, it is necessary to normalize the relations arising in the process of such activities. one of the proposed options is the adoption of the administrative and procedure code of ukraine or another form, but essentially the same in essence as the legal act. thus, the draft administrative and procedure code of ukraine (hereinafter referred to as the draft code) uses the term “individual administrative case” (administrative case), a case on the implementation and protection of the rights, freedoms, and legitimate interests of individuals, and legal entities, including the provision of administrative services, which is considered by the authorized entity in accordance with this draft code. under the authorized subject we understand the body of executive power, local government and their officials, who are authorized to consider and resolve administrative cases in accordance with their competence (it is clear that the list of subjects of power will be established in accordance with the scientific advances of administrative law and practice at the time of adoption of such a legal act). it is necessary to specify the elements of public law relations (including administrative) as they arise in the process of solving the “administrative proceedings”, result (form or tool is selected from the motives of the ambiguous approach established in legal science) is to take “administrative” decisions, actions or inaction. the use of the term “administrative” in such conditions will determine the automatic assignment of decisions (actions, omissions) to the subject of the jurisdiction of the administrative court in the presence of violations of rights, freedoms, etc. of citizens by the authorities competent to decide such a case. it is also appropriate to use the term “administrative case”, because in this case the process of fixing the facts concerning the need for adoption, validity, prudence, good faith, impartiality, “administrative decision” will perform the primary function of such entities. in this context, it is also necessary to emphasize the complexity of such a process, as resolving the issue of a clear definition of administrative jurisdiction in this way may contribute to a more complex problem – a clear definition of the jurisdiction of subjects of power. despite the above, we believe that in this case the decisive role will be played by the sustainability of the judicial practice. regarding the following criterion “the existence of rules governing the disputed legal relationship”, it should be noted that t.o. kolomoiets (2009) emphasized the use of the method of administrative and legal regulation to determine the nature of disputed legal relations and court proceedings, when considering them, as all public law relations arise on the basis of legal norms, and therefore the disputes can be called public. however, when distinguishing administrative jurisdiction from other types of jurisdiction, it is not necessary to absolutize the importance of the relationship that is the object of public administration. the latter has a universal character, i.e., extends its influence to most sectors of society, which are traditionally grouped into three spheres – economics, social and cultural, administrative and political. the competence of administrative courts in ukraine covers the control of public administration activities in all these areas. proponents of the association in the economic jurisdiction of both private and public disputes suggest removing from the jurisdiction of administrative courts management in one of these areas, which cannot be considered natural and scientifically sound because there is no reason for this – in all areas the same set of forms and methods of public administration is used, which only partially depends on the content of managed relations (kolomoiets, 2009). in this context, m.p. kucheriavenko and n.l. shevtsova (2012) point to the need to develop a unified approach in referring, in particular tax disputes, to administrative jurisdiction. tax disputes, as well as tax relations in general, should be of the same type. it is impractical to break the unified system in different types of jurisdictions. at the same time, tax disputes (all without exception) on the basis of orientation and connection with economic activity are difficult to attribute to a single group. the criteria for differentiation are quite traditional: baltic journal of economic studies 222 vol. 7 no. 2, 2021 the subjective composition and nature of the disputed legal relationship. however, they are applied in some cases in such a way that it is difficult to agree with it, even though such a problem is now clearly resolved and indicates the attribution of such disputes to administrative jurisdiction based on the public law nature of tax relations. 3. alternative criteria for the identification of public law relations as a sphere of protection of violated rights, freedoms and interests the existence of such a problem in other categories of disputes is emphasized by a large number of scholars and practitioners. in particular, a.o. monaienko (2019) points out that such categories of cases that lead to jurisdictional disputes are disputes with the state registrar regarding real estate rights, where his or her registration actions are challenged; land disputes with local governments as subjects of power or economic entities; disputes with the deposit guarantee fund of individuals; disputes over the organization and conduct of public procurement by subjects of power, etc. it is obvious that the problems that arise in the process of identifying administrative or other types of judicial jurisdiction are primarily related to the superficial application of criteria without a thorough analysis. this situation can be explained, in particular, by the excessive burden on judges. in addition, it is necessary to point to such a criterion of delimitation of administrative jurisdiction as “the presence and/or absence of a special procedure for resolving disputes in the field of public relations”, which logically follows from the rules of cajp of ukraine. thus, paragraph 1 of the first part of article 19 of the criminal procedure code of ukraine states that disputes of individuals or legal entities with the subject of authority to appeal its decisions (regulations or individual acts), actions or omissions are resolved by administrative proceedings except when the law establishes a different procedure for the consideration of such disputes. part 2 of article 19 of the criminal procedure code of ukraine provides that the jurisdiction of administrative courts do not extend to disputes that in accordance with paragraphs 1–3, referred to the jurisdiction of the constitutional court of ukraine, are resolved in criminal proceedings, disputes on administrative penalties, except as provided code. in addition, the third part formed the institute of the derivative claim. its essence is that administrative courts do not consider claims that are derived from the requirements of a private dispute and filed with them if the dispute is subject to consideration other than administrative proceedings and is pending before the relevant court (cajp of ukraine, 2005). therefore, the clarifying criterion to the criterion “presence and/ or absence of the procedure for resolving the dispute” should be recognized as the “nature of the claims”. the normative definition of this criterion, as a rule, is as follows: in accordance with article 55 of the constitution of ukraine, a person’s right to access to justice is guaranteed. the application of this article was explained by the supreme court of ukraine in the plenum “on the application of the constitution of ukraine in the administration of justice” no.9 dated november 1, 1996, in particular in part 8. here it was emphasized that taking into account the constitutional provision – justice in ukraine – applies to all legal relations arising in the state (article 124 of the constitution), the courts have jurisdiction over all disputes concerning the protection of the rights and freedoms of citizens. the administrative court hears cases and resolves disputes in the field of public law relations only on the basis of a statement of claim filed in accordance with the rules of cajp of ukraine, within the claims stated in it (part 2 of article 9 of cajp of ukraine, 2005). paragraph 4 of part 5 of article 160 of cajp of ukraine (2005) in the statement of claim indicates the content of the claims and a statement of the circumstances in which the plaintiff substantiates its claims. the grounds for closing the proceedings, and the signs of the above criterion, are determined by part 1 of article 170 of cajp of ukraine (cajp of ukraine, 2005). these include: in a dispute between the same parties, on the same subject and on the same grounds, there are those that have entered into force, a court decision or ruling, a decision to close the proceedings; the death of a natural person has occurred or a legal entity that is not a subject of power has been terminated, which has filled a statement of claim or to which a statement of claim has been filled if the disputed legal relationship does not allow succession; in the proceedings of this or that court, there is a case of a dispute between the same parties, on the same subject and on the same grounds. we agree with ya.o. bernaziuk (2019), who, analysing the claims, identifies disputes that are not subject to litigation at all. such disputes include disputes over claims: to the president of ukraine or the verkhovna rada of ukraine as political bodies formed by all-ukrainian elections, a claim does not relate to the direct management activities of these subjects of power; in which the applicant has chosen an ineffective (premature) method of protection in the presence of an alternative effective method of protection; in which the applicant has chosen a non-legal (artificial) method of protection; in which the applicant has chosen a method of protection for which the law defines a special procedure or imposes restrictions on the subject of the application with the relevant claim (bernaziuk, 2019). these conclusions are made on the basis of the analysis of case law (resolutions of the grand chamber of the supreme court: case no. 800/559/17 dated march 22, 2018, case no. 9901/152/18 dated april 3, 2018, case no. 9901/497/18 dated may 30, baltic journal of economic studies 223 vol. 7 no. 2, 2021 2018), etc. in most cases, the claims set out in the statement of claim concerned mainly the incorrect choice of the method (normatively determined procedure) of judicial protection. 4. conclusions the synthesis of knowledge about public law relations is an element of the content of the science of administrative law; therefore, it is an object of scientific interest and a vector of formation of modern legal doctrine. the complexity of the study of this category is due to the fact that the regulation of public relations is carried out in the constant development of management systems and in close connection with the main purpose of their operation – ensuring public interests and guaranteeing human rights in accordance with article 3 of the constitution. along with the above, the condition for disputes in the field of public relations is the conflict of the latter, which is due primarily to the nature of administrative law, as the right of power, based on its main doctrinal features and content, including in particular in 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(in ukrainian) baltic journal of economic studies 120 vol. 3, no. 4, 2017 corresponding author: 1 department of economics, vinnytsia national agrarian university. e-mail: nora.kirieieva@gmail.com 2 department of economics, vinnytsia national agrarian university. e-mail: dasha_veres@meta.ua state and prospects of rural development in ukraine eleonora kirieieva1, daruna kostyuchenko2 vinnytsia national agrarian university, ukraine abstract. reformation of the economy of ukraine today determines the necessity of development of the agrarian sector as a cornerstone of economic growth. transformational processes contribute to the increase in gross output of agricultural production, export capacity building of the branch but, unfortunately, it has little effect on the socioeconomic development of rural areas and raising the level of well-being of the rural population. underdevelopment of social infrastructure of rural areas especially significantly affects the quality of life in rural areas. most of the ukrainian villages are lacking preschool institutions, schools, medical outpatient clinics, emergency medical services, and other centres of social infrastructure. living conditions in rural areas remain unfavourable. as a consequence, a need arises to search for a complex approach to the solution of problems of rural development, which is based on principles of sustainable development. the purpose of the article is to study the state of rural areas in ukraine and vinnytsia region based on the use of swot-analysis and to determine perspective tools for the further promotion of rural development. methodology. when writing the article, the authors used a monographic method with the purpose of revealing cause-and-effect relations; an economic-statistical method for the analysis of a number of population; a graphical method for building schemes and diagrams; conclusions and recommendations are formulated by using abstract-logical method; methods of analysis and synthesis are used for conducting swotanalysis. results. as a result of conducted research, approaches of foreign and domestic scientists to the definition of “rural areas” are studied and, on its basis, the authors present the main signs peculiar to rural areas and propose the author’s definition for a category of “rural areas.” research of the modern state of rural areas on the basis of using swot-analysis is done. evaluation of the biggest problems of development of rural development in ukraine is made. it is determined that vinnytsia region is one of the agrarian-oriented regions and thus rural development in this region becomes of paramount importance. the article analyses dynamics of the number of rural population of vinnytsia region, investigates a relative share of rural population in the general structure of the population of regions of vinnytsia region, conducts an assessment of the ratio of income and expenditure of the rural population of vinnytsia region. based on the research done, conclusions and proposals are formulated, which are a set of measures for providing rural development, the main of which are: stimulating counselling to raise the level of knowledge and practical skills of peasants based on active teaching methods, as a tool of state support for the agricultural producer and rural population, contribution to the development of cooperation and creation of cluster associations able to provide for a higher added value of agricultural production, “green tourism” development. practical importance. research results allowed determining a set of measures to further improve rural development and ensuring a higher level of well-being of rural population who can be used in the development of state targetoriented programs and regional strategies of rural development. key words: rural areas, development, consumer expenditure, rural population, revenue structure. jel classification: c13, d31, r23 1. introduction the strategic direction of development of ukrainian economy predetermines a need to transform the agrarian industry into a highly competitive sector of the economy, providing its ability to integrate into the world agrarian market system. as a result, it is necessary to ensure agrarian formations, which would most fully respond to market challenges and form competitiveness of the industry [6]. the share of agriculture in gdp (including forestry and fishery) increased from 7.5% in 2008 to 10.3% in 2014. generated by agriculture value added increased by 71% during 2003–2014, while other sectors of the economy in aggregate increased only by 26%. the share of agricultural industry in the structure of employment of population of ukraine remained baltic journal of economic studies 121 vol. 3, no. 4, 2017 virtually unchanged – 18% in the 2000 year and 17% in the 2013 year (without including rural households) (yedyna kompleksna stratehiia ta plan dii rozvytku silskoho hospodarstva ta silskykh terytorii v ukraini na 2015-2020 roky). to the study of issues of rural development in the context of implementation of modern agrarian policy devoted their works such prominent ukrainian scholars as: a.  bydyka, t.  bondar, o.  borodina, v.  borshchevskyi, f.  vazhynskyi, i.  honcharuk (honcharuk, 2016), s. devko, h. kaletnik (kaletnik, 2015), e.  kirieieva (kirieieva, 2017), a.  lisovyi, m.  lesiv, a.  mazur, m.  malik, o.  onyshchenko, o.  pavlova, p.  sabluk, yu.  urkevych. these scholars made a number of significant developments on the concept of rural development; however, development of european integration processes in ukraine requires further in-depth study and formulation of an effective policy of rural development on the basis of implementation of european values. 2. definition of the concept “rural areas” according to i. honcharenko, rural area – is a complex and multifunctional natural, socio-economic and industrial-economic structure, which is characterized by a number of features peculiar to it, namely: land area; features of the landscape; the number of living people and type of their employment; the number, species diversity of the plant and animal world; volumes and structure of production; development of social and production infrastructure, and other features (honcharenko, 2009). g. hart and e. larson note that a significant part of politicians, researchers, and analysts prefer one standard universal definition, however, there is no unambiguous concept of “rural areas”. the definition of rural areas is elusive and often based on stereotypes and personal experience. the term envisages the presence of pastoral landscapes, unique demographic structure and resettlement schemes, isolation, low population density, availability of extractive industry, and excellent socio-cultural environment. however, they affirm that aspects of the countryside cannot fully define the definition of “rural.” for example, rural culture can also take place in urban settings. only a small part of the rural population participates in agriculture, and in cities, it ranges from a few inhabitants to tens of thousands. the proximity of rural areas to urban settlements ranges from a few miles to hundreds of kilometres. generations of rural sociologists, demographers, and geographers struggled with this concept (hart gary, 2005). according to f. mantino, rural areas or rural regions (district) covers people, territory, and other resources of the public landscape and small settlements outside the immediate sphere of economic activity of large city centres. a criterion for assigning a settlement to a city or village is the population density of more than 150 people per km (mantino, 2010). k. johnson from the usa mentions that the rural areas of america – much more than just agriculture. they include industrial parks, warehouses, and food factories located in rural intercity territories; regions where generations of people worked for the extraction, processing, and transportation of coal, ore, oil, and gas to both near and remote customers; woodworking and cellulose enterprises, which are located deep in the forests; industrial towns seeking to keep jobs in terms of intense global competition; and recreational areas that dynamically develop near mountains, lakes, and coasts ( johnson). czech scholars define “rural areas” by features given in table 1. table 1 features characterising the definition of “rural areas” (ondřej konečný) criteria main features the structure of the settlement low density of construction, farming, low ratio of built-up areas architectural features single-storey houses, integration of residential and other functions, lack of leased housing, private houses social functions conservatism, traditionalism, friendly relations with neighbours, compassion, cooperation, common history economic features travel to work, employment in agriculture, higher quality of life governance municipal form of ownership, the priority of municipalities in the structure of governance sizes number of inhabitants, population density, area, ratio of built-up area having analysed the above approaches of scholars to the concept of “rural areas”, one can distinguish some common features in all approaches: density of population, agriculture is the main sphere of employment of the population, low density of construction, species diversity of plant and animal life. in ukrainian legislation, there is no information on the maximum number of inhabitants who can reside in the administrative-territorial unit of rural areas. the current decree of the presidium of the supreme council of the ukrainian ssr “on the procedure for solving issues of the administrative-territorial division of the ukrainian ssr” provides for the definition that “the category of urban-type settlements may include the settlements located at industrial enterprises ... with a population of more than 2 thousand people, of which not less than two thirds are made up of workers, employees, and members of their families.” the interpretation of the term “village” is not mentioned in the decree (ukaz prezydii verkhovnoi rady ukrainskoi rsr) baltic journal of economic studies 122 vol. 3, no. 4, 2017 the draft law of ukraine “on the principles and procedure for solving issues of the administrative and territorial system of ukraine” states that “the category of villages includes a settlement with manor houses, small in number of people, formed in conditions of preferential employment of its inhabitants in the rural, forest, or fishing industry, folk crafts, primary processing of agricultural, forestry or fishery products” and “the category of settlements includes a locality with mainly manor houses, social and communal infrastructure, which relates to the location on its territory of an industrial enterprise, an enterprise for the production and processing of agricultural, forestry, fishery products, a railway junction, hydrotechnical or other construction, and has a population of more than 500 people” (zakonoproekt ukrainy), and also states that the villages and settlements are rural settlements. on the other hand, there it is specified that “the category of cities includes a locality where are industrial and processing enterprises, communal enterprises, housing stock, a network of social and cultural institutions and enterprises, which has a developed social and communal infrastructure, a network of streets with a mostly hard surface, with a population of at least 5,000 people” (zakonoproekt ukrainy), from which we can assume that the maximum population of the village is limited to 5,000 people. having analysed the definition of “rural areas” by researchers, we deem it advisable to consider rural areas as a complex open system with external connections. the main features of rural areas are given in figure 1. consequently, the concept of “rural areas” will be considered as a complex system, which is characterized by a specific socio-cultural environment, species biodiversity, residential buildings with plots of land, as well as a close connection with the development of agricultural production, which is influenced by factors of the external and internal environment. 3. analysis of the state of development of rural areas in ukraine for the purpose of studying the current state of development of rural areas in ukraine, it is relevant to use a method of swot-analysis. o. maisak informs that swot-analysis involves the division of factors describing the object of research into four categories: strengths, weaknesses, opportunities, and threats. strengths and weaknesses are factors of the internal environment of the object of research (that is, what the object itself is capable of influencing); opportunities and threats are factors of the external environment (that is, those that can affect the object from the outside and it is not controlled by the object). he argues that the swot-analysis is applied to objects of a different scale and not only in areas that are aimed at increasing profits but also in areas where goals have a complex social or socio-economic nature. we support his view that the object of modern swot-analysis in a broad sense – a socio-economic object (maisak, 2013). the main regulatory documents regulating the development of rural areas in ukraine are the conception of the state target program for sustainable development of rural areas for the period up to 2020 (kontseptsiia) and the unified integrated strategy for agriculture and rural development for 2015–2020 (yedyna kompleksna stratehiia ta plan dii rozvytku silskoho hospodarstva ta silskykh terytorii v ukraini na 2015-2020 roky). from these concept and strategy, we will highlight the strengths, weaknesses, opportunities, and threats fig. 1. the main attributes of rural areas source: developed by the authors by (honcharenko, 2009; zakonoproekt ukrainy; mantin, 2010; ukaz prezydii verkhovnoi rady ukrainskoi rsr ; hart gary; johnson; ondřej konečný) the main attributes of rural areas specific sociocultural environment close relationship with the development of agricultural species variety of flora and fauna population – no more than 5 thousand people and most people are employed in agriculture residential buildings with private plots baltic journal of economic studies 123 vol. 3, no. 4, 2017 of ukrainian rural areas and systematize them in the swot-analysis table (table 2) in order to find ways to improve development. from table 2 it can be concluded that in rural areas of ukraine, there is a mass of weaknesses in the internal environment and threats in the external one, but in contrast to them, there is not less number of strengths and opportunities. among the weaknesses of the development of rural areas it should be noted that particularly acutely in recent decades, the quality of life of rural inhabitants is influenced by the undeveloped social infrastructure of rural areas. in many ukrainian villages, there are not enough modern schools, kindergartens, hospitals, emergency medical services, clubs, and other social infrastructure centres. the living conditions in the ukrainian village remain extremely unfavourable (honcharuk, 2016). the level of wages in agriculture remains one of the lowest among the branches of the national economy (69% on average in the country). 661 400 people in all are officially employed in agriculture, forestry, and fishery; in small farms, informal employment prevails. monetary income of rural households per capita, of which 34.8% is dependent on social security assistance, is one quarter lower than that of non-rural households. table 2 swot-analysis table internal environment strengths weaknesses 1. preservation of traditions and cultural heritage as microenterprise assets. 2. presence of natural resources for the diversification of economic activity in rural areas. 3. potentially high consumer cost of environmentally attractive living environment. 4. sufficient spatial base for the development of multisectoral agriculture and placement of non-agricultural production facilities. 5. recreational potential. 1. limitedness of places for the application of labour, related to the low level of development of rural economy. 2. non-compliance by economic entities with environmental requirements in rural areas. 3. the orientation of branches of the social sphere to the centralization of service and “optimization” of the network of institutions. 4. destruction of material objects of historical and cultural heritage. 5. underdevelopment of industrial, engineering, and communication infrastructure. 6. prejudice towards the village as the only spatial development base for agro-industry. 7. low adaptability of the rural population to radical changes, limited possibilities for self-realization. 8. the unattractive business environment in the village. external environment opportunities threats 1. development of the world market: the growth of the population of the planet leads to an increase in demand, especially with the growth of the share of the middleincome population; increase in demand for bioenergy. 2. the growth of productivity: significant opportunities for increasing productivity, for example, by increasing yields in the south by intensifying irrigation. 3. investment opportunities: a high return on capital in some agricultural sectors has been recorded, despite the current unfavourable business environment. 4. foreign trade: association agreement between ukraine and the eu gives access to eu external markets; an incentive to achieve a compliance with international standards and technology transfer with the eu. 5. human capital, the potential for education and research: ongoing reforms of education, existing research, and counselling lead to higher levels of skills. 6. the attractiveness of farming as a profession: an increasing number of people in rural areas are prepared to engage in farming as it becomes more profitable. 7. reform of thinking: significant internal and external pressure on reforms. 1. the inability of some farmers to adapt: very small farms and possibly larger enterprises may not have enough information and will not be able to adapt to the requirements of the association agreement between ukraine and the eu, in particular, regarding hygiene, sanitation, and phytosanitary. 2. the deterioration of agricultural infrastructure: lack of investment in agrarian infrastructure (equipment, storage, etc.), maintenance, and development. 3. loss of export opportunities: new export markets are occupied by more flexible and productive competitors. 4. deterioration of the environment: the negative impact of the intensification of agricultural production on the environment (reduction of nutrient content in soils, erosion, wear of melioration systems) and climate. 5. the harsh situation of rural areas: the aging of the rural population; depopulation of the countryside; lack of skilled labour for agriculture; lack of development of non-agricultural business activity. 6. resistance to change: counteracting the changes by stakeholders that are beneficial in preserving the current situation and who are keenly interested in delaying and sabotaging many reforms. source: developed by the authors by using sources (yedyna kompleksna stratehiia; kontseptsiia derzhavnoi tsilovoi prohramy staloho rozvytku silskykh terytorii na period do 2020 roku) baltic journal of economic studies 124 vol. 3, no. 4, 2017 the share of agricultural income in the total income of rural households continues to decrease (29.9% in 2000, 10.6% in 2013). income per capita: 23% of rural households are below the minimum subsistence level (10.2% in urban areas). the poverty rate in rural areas is 1.7 times higher than in urban areas. in terms of living conditions, the percentage of poor rural and urban households is respectively 39% and 19% (yedyna kompleksna stratehiia). there is a big gap between the volume of housing construction and the quality of housing and communal services in villages located in suburban and recreational areas, and villages located in remote rural areas. only 31.5% of the rural housing stock is connected to centralized water supply systems. the state of environmental safety is deteriorating. emissions of harmful substances from stationary sources of pollution in the atmosphere in the agricultural segment can be compared with the mining sector. the number of unauthorized dumps is increasing. over the difficult living conditions, many members of rural communities experience hopelessness and distrust (yedyna kompleksna stratehiia). according to the results of the analysis, it is possible to determine the state of development of rural areas of ukraine today as a critical one, which is conditioned by the difficult conditions of doing business and the slow pace of development of smalland medium-sized agrarian enterprises (unfavourable business climate, lack of affordable lending), and directly underdeveloped rural infrastructure localities, lack of effective policy, and also uncertainty in the field of land relations. 4. modern state prospects for the rural development in vinnytsia region the development of rural areas and the well-being of their inhabitants are closely interconnected with the development of smalland medium-sized farming and, as a consequence, development of the entire agrarian sector. vinnytsia region – a traditional agrarian land with a significant share of the rural population, so we will analyse development trends of rural areas in the vinnytsia region. as h. kaletnik notes, “vinnytsia region, which had average rural development parameters in terms of the ecological situation, social environment, the state of communication and water supply, was supposed to focus on attracting foreign investment, implementing scienceintensive technologies, creating innovative agricultural structures, and developing a number of measures to increase rural welfare while, at the same time, solving problems of raising the level of education, qualifications of workers in the agrarian sector of the economy, widely using advisory services, consulting, and information services…” (kaletnik, 2015). it is expedient to reflect the development of rural areas through the prism of the population and analysis of the main indicators of the welfare of the region’s population. for clarity, we will reflect the dynamics of the population of vinnytsia region. table 3 the number of present population of the vinnytsia region since 1959 (statystychnyi shchorichnyk vinnychyny za 2016 rik) period, years total, thousand people including to the total population,% urban rural urban rural 1959 2132,6 363,1 1769,5 17,0 83,0 1970 2131,8 542,1 1589,7 25,4 74,6 1980 2033,7 727,1 1306,6 35,8 64,2 1990 1925,6 866,5 1059,1 45,0 55,0 2000 1811,0 844,3 966,7 46,6 53,4 2010 1650,6 814,2 836,4 49,3 50,7 2016 1602,2 813,4 788,8 50,8 49,2 it is evident from table 3 that the number of present rural and urban population is almost equal. in 1959, the share of rural and urban population amounted to 83.0% and 17.0% respectively. in the early 90’s, trends have changed and the share of the rural population was 55.0%. in 2016, the rural population accounts for only half (49.2%) of the total population structure, indicating the growing pace of urbanization. however given that rural areas cover a much larger area than urban areas, this is a matter of concern. according to statistical data in 2016, the total population of the vinnytsia region is 1 602 163 people, the share of the rural population is 49.23%, that is 788 776 people, and urban respectively 50.77%. consequently, the ratio of the rural and urban population of vinnytsia region is almost equal. let us determine the relative weight of the rural population in the general structure of the population of districts of vinnytsia region and represent results in fig. 2. it is clear from figure 2 that the smallest share of the rural population is in the tivriv district (45.45%) and the largest in the mohyliv-podilskyi district (88.39%). in general, in almost all districts of the vinnytsia region, the share of the rural population exceeds 50%. in our view, one of the decisive factors of rural development is the welfare of the population. evaluation of the welfare of the population of rural areas can be presented through the analysis of the structure of financial incomes of households of vinnytsia region and the study of cost structure. table 4 clearly shows that the main income in urban settlements – wage (salary), while in rural areas in 2016, the percentage of wages and pensions, scholarships, subsidies is almost equal, 34.5% and 31.9% respectively. to study the households’ money expenditures in vinnytsia region, we will determine what the cost of consumption is. according to shevchenko o., baltic journal of economic studies 125 vol. 3, no. 4, 2017 0 10 20 30 40 50 60 70 80 90 ба рс ьк ий р -н бе рш ад сь ки й рн в ін ни ць ки й рн га йс ин сь ки й рн іл лі не ць ки й рн к ал ин ів сь ки й рн к оз ят ин сь ки й рн м ог ил ів -п од іл ьс ьк ий р -н о ра ті вс ьк ий р -н п ог ре би щ ан сь ки й рн т ив рі вс ьк ий р -н т ом аш пі ль сь ки й рн т ул ьч ин сь ки й рн ч ер ні ве ць ки й рн ч еч ел ьн иц ьк ий р -н ш ар го ро дс ьк ий р -н 66,44 78 78,9 54,81 59,3 67,35 85,88 88,39 86,76 67,86 45,45 60,45 57,44 87,06 76,4 87,9 частка сільського населення від населення району fig. 2. the share of the rural population in the general structure of the population of districts of the vinnytsia region [formed by the authors by the source (chyselnist naiavnoho naselennia)] table 4 structure of financial incomes of households of vinnytsia region 2010 2015 all households including residing all households including residing in urban settlements in rural areas in urban settlements in rural areas total cash income, uah 2596,6 2908,97 2326,6 4839,2 5433,6 4307,9 per cents labour remuneration 44,3 58,0 29,4 39,4 43,9 34,5 income from entrepreneurship and self-employment 4,2 6,5 1,7 13,5 20,5 5,7 income from sales of agricultural products 11,1 0,6 22,4 8,6 0,1 18,2 pensions, scholarships, grants and subsidies provided in cash 32,1 25,0 40,0 28,1 24,6 31,9 cash assistance from relatives, other people and other cash income 8,3 9,9 6,5 10,4 10,9 9,7 source: statystychnyi shchorichnyk vinnychyny za 2016 rik table 5 structure of household expenditures 2010 2015 all households including residing all households including residing in urban settlements in rural areas in urban settlements in rural areas total cash expenses, uah 2511,1 2927,13 2151,5 4398,9 5287,4 3604,9 per cents consumer cash expenditures 86,4 90,5 81,5 90,2 92,4 87,3 food products (including out-of-home food, alcoholic beverages and tobacco products) 53,5 54,4 52,5 51,8 51,6 51,9 non-food products and services 32,9 36,1 29,0 38,4 40,8 35,4 cash assistance to relatives, friends, and others 5,4 4,3 6,6 4,3 4,0 4,8 other expenses (for a private subsidiary, purchase of shares, certificates, deposits to banks, alimony, housing construction, etc.) 8,2 5,2 11,9 5,5 3,6 7,9 source: statystychnyi shchorichnyk vinnychyny za 2016 rik baltic journal of economic studies 126 vol. 3, no. 4, 2017 consumer expenditure or consumption expenditures are divided into three groups: expenditures for goods of everyday use, i.e. food products, the bulk of clothing, personal hygiene products, etc.; expenditures for goods, the term of use of which is long (household appliances, electronics, etc.); expenditures for services (payment of housing and utilities, services provided in the field of education, medicine, etc.) (shevchenko, 2009). let us analyse the structure of household expenditures in table 5. we observe that, as in urban settlements and in rural areas, consumer expenditures on food products account for the largest part (51.6% and 51.9%). in general, the difference in the cost structure between urban settlements and rural areas is negligible (5-9%). 5. conclusions thus, the conducted research of the concept of “rural areas” and state of development of rural areas in ukraine and vinnytsia region allows determining a number of priority directions for further stimulation of rural development and ensuring a higher level of well-being of rural inhabitants: reforming the agrarian sector on the basis of support for the rural development; stimulating the creation of smalland medium-sized farms that can provide jobs and maintain infrastructure. thus, for the development of rural areas in terms of european integration processes, it is necessary to take the next steps: – determine “green tourism” as a strategic direction for the development of the countryside, capable of preserving and increasing its cultural heritage and traditions; – for the purpose of attracting young farmers to agribusiness, to use systems of direct and indirect economic incentives in the form of tax credits, tax holidays and state subsidies, subsidies, etc.; – actively stimulate counselling to increase peasants’ knowledge and practical skills on the basis of active learning methods as a tool of state support for agricultural producers and rural population; – stimulate cooperation and formation of cluster associations able to provide a higher added value of agricultural products; – popularize among the population of the country of consumption of environmentally friendly products grown in households; – standardize agricultural products in accordance with european and world standards for access to foreign markets; – more severely control business entities regarding compliance with environmental requirements; – develop non-agricultural business activities. references: honcharenko i. v. 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(2010). selskoe razvitie v evrope. politika, instituty i deistvuiushchie litsa na mestakh s 1970-kh godov do nashikh dnei [elektronnyi resurs]. rezhym dostupu: http://www.eastagri.org/publications/pub_docs/ mantino.pdf statystychnyi shchorichnyk vinnychyny za 2016 rik. (2016): stat. zb. / holovne upravlinnia statystyky u vinnytskii oblasti. vinnytsia, 2017, s. 119-133. ukaz prezydii verkhovnoi rady ukrainskoi rsr «pro poriadok vyrishennia pytan administratyvno-terytorialnoho ustroiu ukrainskoi rsr» [elektronnyi resurs]. rezhym dostupu – http://zakon2.rada.gov.ua/laws/show/165410 chyselnist naiavnoho naselennia. (2016): stat.zb. / derzhavna sluzhba statystyky ukrainy. kyiv, s. 15-17. rezhym baltic journal of economic studies 127 vol. 3, no. 4, 2017 dostupu: http://database.ukrcensus.gov.ua/pxweb2007/ukr/publ_new1/2016/zb_nas_15.pdf shevchenko o.o. (2009). formuvannia spozhyvatskoi povedinky domohospodarstv v umovakh rozvytku novoi ekonomiky: instytutsionalnyi aspekt. formuvannia rynkovykh vidnosyn v ukraini, 2009, № 7-8, s. 26-30. hart gary, ,eric h. larson (2005). rural definitions for health policy and research. american journal of public health. [elektronnyi resurs]. rezhym dostupu – ajph.aphapublications.org/doi/full/10.2105/ajph.2004.042432 johnson k. where is ‘rural america,’ and what does it look like? [elektronnyi resurs]. rezhym dostupu – theconversation.com/where-is-rural-america-and-what-does-it-look-like-72045 ondřej konečný. agritourism and rural tourism [elektronnyi resurs]. rezhym dostupu http://www.is.mendelu. cz/ eknihovna/opory/index.pl?cast=69867;lang=sk киреева элеонора, дарина костюченко состояние и перспективы развития сельских территорий украины аннотация. реформирование экономики украины сегодня определяет необходимость развития аграрного сектора как фундаментального элемента экономического роста. трансформационные процессы способствуют увеличению валового производства сельскохозяйственной продукции, наращивание экспортного потенциала отрасли, но, к сожалению, это мало влияет на социально-экономическое развитие сельских территорий и повышение уровня благосостояния сельского населения. неразвитость социальной инфраструктуры сельских территорий особенно ощутимо влияет на качество жизни на сельских территориях. большинство украинских сел испытывают недостаток дошкольных учреждений, школ, медицинских амбулаторий, служб скорой помощи и других елементов социальной инфраструктуры. остаются неблагоприятными условия проживания в сельской местности. в результате возникает необходимость поиска комплексного подхода для решения проблем развития сельских территорий, основанный на принципах устойчивого развития. целью статьи является исследование состояния сельских территорий украины и винницкой области на основе использования swot-анализа, и определения перспективных инструментов по дальнейшему стимулированию развития сельских территорий. методика. при написании статьи были использованы монографический метод с целью выявления причинно-следственных связей; экономико-статистический метод для анализа численности населения; графический метод для построения схем и диаграмм; с помощью абстрактно-логического метода сформулированы выводы и рекомендации; методы анализа и синтеза использовано для проведения swot-анализа. результаты. в результате проведенного исследования изучены подходы зарубежных и отечественных ученых к определению дефиниции «сельские территории» и на их основе авторами представлены основные признаки, присущие сельским территориям, предоставлено авторское определение категории «сельские территории». проведено исследование современного состояния сельских территорий на основе использования swot-анализа. осуществлена оценка крупнейших проблем развития сельских территорий украины. определено, что винницкий край является одним из аграрноориентованих регионов, а следовательно развитие сельских территорий в области приобретает первостепенное значение. в статье проанализирована динамика численности сельского населения винницкой области, исследованы удельный вес сельского населения в общей структуре населения районов винницкой области, проведена оценка соотношения доходов и расходов сельского населения винницкой области. на основе проведенных исследований сформулированы выводы и предложения, которые представляют собой комплекс мероприятий по обеспечению развития сельских территорий, основными из которых являются: стимулирование консультирования для повышения уровня знаний и практических навыков крестьян на основе активных методов обучения, как инструмента государственной поддержки сельскохозяйственного товаропроизводителя и сельского населения , содействие развитию кооперации и образованию кластерных объединений, способных обеспечить высокую добавленную стоимость сельскохозяйственной продукции, развитие «зеленого туризма». практическое значение. результаты исследования позволили определить ряд мер по дальнейшему стимулированию развития сельских территорий и обеспечение высокого уровня благосостояния жителей сельских территорий, которые могут быть использованы при разработке государственных целевых программ и региональных стратегий развития сельских территорий. baltic journal of economic studies 154 vol. 1, 2015 directions for effective use of forest resources in ukraine mariana svyntukh1, ternopil national economic university, ukraine abstract. purpose. the aim of the article is determination and substantiation of directions of rational use of forest resources in ukraine. methodology of research. the theoretical and methodological basis of conducted research is the provision of economic theory, sustainable development, environmental economics and economics forest exploitation. the following methodological tools and techniques were used to achieve this goal: methods of analysis and synthesis (to identify problems of the relationship for using potential of forest resources with factors of influence on their reproduction, the studying essence of the term “forest resources”); monographic – to study the experience of forming rational use of forest resources and wood waste; systematic approach (in substantiating the use of instruments for regulation forest exploitation); scientific abstraction (in the study of capabilities to ensure the process of rational reproduction of forest resources); graphic (for visual images of some analytical observations). results. theoretical approach to forest regeneration as a major task in forest management, which includes the integrated use of all available organizational and technological measures to facilitate its natural regeneration has been formulated. it has been established the regularity of ensuring the efficient use of waste wood in places of billets, identified and systematized its forms for future use. the methodical approach to assess the effect of using wood waste for fuel production and related products during processing on the harmonization of economic and environmental interests in the area of forest exploitation has been formulated. practical implications. the obtained results are the basis for solving practical problems of integrated management of forest resources in ukraine, waste of forest felling in the places of timber harvesting and also for development of the system of measures to improve the ecological and economic mechanism of development of nature protection territories and formation on this basis effective policy of nature use according to the national interests of ukraine. it will promote increasing the economic efficiency and the reasonableness of decisions related with priority directions of natural resource policy in terms of transformation of the national economy. value/originality. it has been established the application of fuel wood in the production of bio-fuels through the establishment of plantations of fast-growing woody species for industrial forest growing for energy purposes. key words: forest complex, forest resources, forest exploitation, forestry, wood waste, forest billet, plantations of fast-growing woody species. jel classification: q23, q42, q5 1. introduction the forest complex of ukraine is an important part of the national economy and has decisive importance for its social and economic development. the forest sector is a part of the world economy, therefore, development tendencies of the domestic market for forest products and services should be considered in the context of global trends. the global trend is the steady increase in demand for wood, food and technical resources as well as social and environmental properties of the forest. thus, in the last half of the twentieth century the growth rate of demand for social and environmental protection properties of the forest outpaced growing demand for forest resources. therefore, ensuring sustainable development of the forest sector is the main task of the forest policy in ukraine. forest resources that are the natural means of production always are covered by extensive or intensive type of reproduction. today, efforts for intensify of the forest sector of the economy can not be combined with the extensive development of the forest resource base, which will inevitably led to further aggravation of contradictions between society and forest. therefore, the solution of contemporary economic, social and environmental challenges should be linked within a single intensive reproduction process. the problems of rational use and reproduction of forest resources in scientific studies were conducted corresponding author 1 department of management of bioresources and use of natural resources, ternopil national economic university. e-mail: maryashas@mail.ru baltic journal of economic studies 155 vol. 1, 2015 by such scholars: p.h.  vakuliuk, yu.i.  haida, o.a.  hirs, a.m.  deineka, r .h.  dubas, yu.y.  kahaniak, a.y.  kovalevych, v.i.  parpan, p.r .  putsenteilo, i.m.  syniakevych, v.v.  usenia, o.i.  furdychko, m.a. khvesyk, m.v. shchuryk, r .m. yatsyk. along with this, proper attention in scientific works of these authors, publications of other scientists is not given to the economic aspects of production taking into account the ecological component that in the context of sustainable development of ukraine is becoming more important and requires further research in this area. the aim of the article is to identify and substantiate areas of rational use of forest resources in ukraine. 2. modern role of forest resources it is known that forest resources are the product of nature that are formed during the growth and development of forests and forest exploitation is the removal of the natural properties of forests for the needs of mankind. in recent years, the forests of the planet were regarded as one of the global factors of sustainable human development and ecological safety of its existence. approximately 90% of all stock of organic substance is concentrated in the forests. forests play particular role in nature and life of society. being a multipurpose resource, they ensure the preservation of natural complexes and objects that have special environmental, scientific, cultural and recreational value and create the biological diversity of living and inanimate nature. value of forests is great, because they form the gully in the basin of the rivers, control part of the runoff and protect soil from erosion. also forests provide moisturizing effects on farmland; they are the custodian of moisture and also reinforce riverbeds, preventing their random walk, restraining strength of the wind, weaken the loss of water from evaporation, serve as habitat for wildlife and have sanitary and hygiene value. growing forests is necessary not only for timber and other forest products, but also to form the normal conditions of human life on the earth, preserving the environment. the use of mineral properties and functions of forests has developed historically, as the development of human society. protective and social functions of forests acquired the economic value. scientific and technological progress, the growth of urban population has caused additional stress that affect both at human health and the state of forests. thus, the value of forests as places for recreation of the population more increases. it causes a particular orientation of forestry development in many industrial countries with high density of population. the intensive recreational use of forests often has a negative impact on the condition of plantings. however, as before the forest remains a source of wood production. the conclusion about the contribution of forest industry in total gross income of the country we make exactly on volume of received wood. management of forests in ukraine is possible based on the organization of the highly developed system of forestry that provide increasing of environmental and resource potential of forests, meet the needs of society in forest resources on the bases of scientifically proven rational, sustainable and multipurpose development of forests, conservation of biological diversity. this aim can only be achieved through forest management as one of the important tools of forest management. the role of forest management should increase under market economy conditions, because for sustainable development is necessary to conduct longterm forecast calculations of forest dynamics and volumes for possible uses for each type of forest resources. it is necessary to distinguish forest management as a science, theoretical basis and forest management as practical activity. but both sides are interconnected, influence each other and give a complete picture about the forest regulation. 3. use of forest resources according to the forest code of ukraine, forest lands are divided into: а) forest, covered with forest (tree and shrub) vegetation; do not covered with forest vegetation that are subject to forestation (log, conflagration, woodlands, wasteland, etc.) and occupied by forest roads, clearing, fire protection ruptures, etc. b) non-forest: occupied by buildings related to forest management, tracks of power lines, product pipelines and underground utilities, etc; occupied by agricultural land (arable land, perennial plants, hayfields, pastures, provided for the needs of forestry); occupied by marshes and ponds within land parcels of forest fund that are provided for the needs of forestry (forest code of ukraine, 1994). recently, the problems of forest are becoming more complex. requirements for forest management that must meet the current social, environmental and economic standards were increased. threats of damage to forest by fires, pests and diseases and other unfavorable factors have increased. particular attention should be paid to issues that are related with counteraction to the illegal forest exploitation. in the aggregate with possible climate change it may lead to a significant transformation of woods, weakening their social and ecological potential. forestry sector increasingly faced with the need to fully response to changing in environmental requirements, the globalization of markets, increasing competition of products and technologies. insufficient investment activity in the forest sector demonstrates the need for optimizing the structure of production and exports of forest and paper products. characteristics of the forests as a natural phenomenon serves to fully display all their components, in particular in the form of ecological system that is consist of a set of herbaceous, shrubs and woody plants, moss, litter, soil, animals and microorganisms that are combined by metabolism and the flow of energy and information with one another and with other components of nature  – air, atmosphere, water, rocks and also with society. the close scientific contact between biological (forestry literature) and economic researches is carried out at this baltic journal of economic studies 156 vol. 1, 2015 stage of the assessment; “transfer” of scientific results from biology (forestry literature) is also carried out for further their use in the process of economic evaluation. the concept “use of forest resources” means the use of all types of forest wealth. it is considered in the context of two areas: economic and legal. from an economic perspective “use of forest resources” is an organization of activity aimed at extracting and effective use of the properties of forest resources. but from a legal point of view is a legal institution. the process of forest exploitation is regulated by forest legislation. the following kinds of forest exploitation and its resources are allowed in commercial purposes at this moment: timber harvesting; food forest resources, medicinal plants; keeping hunting economy; implementation of hunting; implementation of recreational activity; processing of forest resources. it is necessary transition to intensive ways of using the forest resources in modern conditions, which includes achieving the point where they cease considered as a “gift” of nature and turned into products of social reproduction. the economic needs of society are the decisive force that provides a new phase for expanded reproduction of intensive type. intensification for use of forest resources is their social reproduction at the expense of which is productivity growth of forest environment and thus meet the needs of the national economy and the population in forest resources. urgent problem is the use of logging waste at enterprises of timber industry complex of ukraine. at certain stages of production of timber raw wood because of the low value of the commodity is not used or is lost as waste (putsenteilo, svyntukh, 2013). the task of intensifying towards two elements of the forest resources: forest environment and productivity of plantations should be resolved in different ways. if productivity of plantations is embodied in forest stands that are withdrawn and converted into a regular social product, the forest environment is included into this process differently. the intensive use of the forest environment involves the preservation of existing and mobilization of new natural forces that act in the role of the systems of natural machines in the interests of productivity growth of forest environment and conservation of natural relations for reproducing forest ecosystems. forest exploitation is carried out by harvesting and use of wood products. the main resource is wood, bark and wood chips. it also includes harvesting bark, spruce and pine quotes. the main direction of industrial forest exploitation is timber harvesting. the emergence of environmental problems in the areas of mass works is associated with this direction. harvesting of wood can lead to such consequences as: replacement of indigenous forests by secondary, which in turn is less valuable, and sometimes less productive. felling of forests is the cause of economic changes in the regions of disappearance of the forests. the most negative manifestations are observed in those cases where the amount of felling exceeds the amount of the forest that grows per year (felling of wood). however, unfavorable phenomena are considered defect that occurs during felling of lagging by rates from growth rates of wood. this leads to reducing productivity of forests, its aging and diseases of trees. forest management is interested in that forest exploitation would not be devastating. it should not exceed the productive forces of the forest. if the magnitude of use does not exceed the annual growth of forests, such use can be called sustainable. correlation of magnitude of forest felling and magnitude of growth is general theoretical solution of the problem on regulating forest exploitation. proportionality of these quantities is the basis on which forestry of the country is based. the equipment and technology of logging on logging works carries out negative impact on the forest fund. developed rational methods and methods of logging on the basis of various complexes of machines are violated in this article. timber cutting works are conducted on the least costly way, without taking into account preserving the environment. the mass destruction of trees, young stock and seedlings is the basis of future forest stand. the pursuit of loggers for high productivity of the work without regard to violations of technological regulations and weak control over them by the forest authorities leads to a prolongation of restoration terms of forests clearings, modified sawmills of softwood that promotes the emergence and spread of forest fires. the last do not only destroy vegetation cover, but also leads to burnout of the most fertile humus layer of soil, which further significantly slows forest recovery processes and for many years deduce these areas from productive land. majority of plantations that passed by felling and fires are damaged and low value tree species. the amount of forestry production in ukraine in 2014 was 7739.9 million hryvnias that almost on 23% more than in 2013. the production of logging from the total volume was 7181.9 million hryvnias or nearly 93%. 18.3 million m³ of wood was harvested by forestry enterprises of ukraine. wood energy was accounted for 10.1 million m³, including wood for heating 5.5 million m³ (state statistics service of ukraine, 2014). harvesting of secondary forest products is carried out by forest enterprises. in 2014 2.9 thousand tons of wood juices, 2.3 thousand tons of berries, 2.1 thousand tons of cane, 1.6 thousand tons of hay, 165.2 tons of mushrooms, 126.9 tons of medicinal plants, 34.3 tons of nuts, 7.6 tons of wild fruits, 7.3 tons of green wood, 4.2 tons of bark, 357.5 thousands of pieces of christmas trees were harvested by them (state statistics service of ukraine, 2014). today, interest in the use of wood as alternative fuel increased due to rising gas prices. one of the main reserve sources of local fuel that can be used for the needs of the fuel and energy complex are forest resources and wood of waste wood industry. deep wood processing and use of all products (technological wood chips, twigs and pine needles) is necessary due to the increasing of cost price of harvesting and transportation of wood and increasing the price on timber. baltic journal of economic studies 157 vol. 1, 2015 the resources of fuel wood include: fuel wood that are harvested during felling of the main and intermediate use of forests; logging residues; wood waste; wood that are not filling a long time; wood of fast-growing species; wood from cleaning of green spaces and care for them in settlements; tree and shrub vegetation outside the forest fund. the peculiarity of reproduction of forest resources is that attracting new resources instead of used is constantly implemented in production. rationality of forest exploitation is reduced to economical introduction in the economic turnover and rational exploitation of forest objects. the modern forest exploitation provides selfreproduction of this nature. reforestation is an important objective in forest management, which includes carrying out measures on forest regeneration on clearings, wastelands, glades and other former areas which were under forest, involving planting, seeding of the forest and promoting its natural regeneration. thinning and selective sanitary cuttings are due to the reconstruction of the young plantations, eliminating of clutter of logging sites and felled areas that are caused by fires, defeat of insect pests and unsystematic felling of forests by loggers. this forest reproduction that was effective at earlier stages of development of the national economy cannot ensure rational relations between society and forests in modern conditions. it is limited in terms of preservation and development of all system of forest resources, including forestry and environmental protection. one of perspective ways of using fuel wood is the production of bio-fuel by establishing plantations of fastgrowing tree species. fast-growing species: birch, aspen, alder, willow, poplar are perspective for industrial forest growing in energy purposes in the climatic conditions of ukraine. so, growing of fast growing tree species on fuel and energy plantations by the intensive technologies allows you to get to 20-25 years of age plantings 150-250 m3 of timber from 1 ha (state agency of forest resources of ukraine). in forest conditions of polissia 25-year-old plantations of fast growing tree species, prototypes of energy plantations, including plantings of gray alder have productivity more than 200 m3 / ha. productivity of 20-year crops of poplar amounts to 233 m3 / ha (kovalevych, usenia, 2013). a perennial forest cultural practice indicates that an important condition for accelerated growth of plantation crops are used for their creation of large-sized and also micro-clonal reproduction of selection planting material. therefore, the main direction for reproduction of forest resources is the intensification of all total forest production activity by improving equipment and technologies (artificial forest growing) that allow combining functions of forestry and forest use in a single process, when elements of forming a particular consumer cost and elements of forest reproduction will merge organically. 4. wood is efficient source of energy rational utilization of wood waste will give the possibility to reduce damage for the environment and will become a reliable source of cost savings, obtaining additional revenue through the implementation of new kinds of products. large volumes of processed timber entail obvious problem of waste disposal from this type of industry. thus, wood is the most efficient source of energy (except natural gas) to generate heat and at the same time it is the most ecologically clean product for thermal power plants. fuel briquettes are the most technological type of solid bio-fuels. it is deeply redesigned and ecologically clean kind of fuel. you can produce them from different kinds of biomass, sufficient energy value and excellent physical properties that allow effectively grinding material is inherent for them. the most common types of raw materials for the production of solid bio-fuels are: – wood (waste of logging, sawmill and wood processing); – agricultural residues (husks of sunflower, husk of buckwheat, millet, etc.; straw, cane, litter for domestic animals and birds); turf; solid waste; sewage sludge. wood residues and damaged wood are mainly used in regions with developed timber industry complex as raw materials for production of pellets and briquettes. fuel granules and briquettes are produced in regions with developed crop from waste plants: straw, husk of sunflower, corn waste. livestock enterprises considered used “litter” for animals and birds (usually sawdust mixed with dung) as raw materials. today briquettes are one of the most ecologically clean kinds of fuel. they are widely used for a long time in european countries. fuel briquettes differ from each other by composition of composites, density, strength, color of coloration, respectively, heat of combustion. it is generally dried and pressed raw material in the form of cylinders with a diameter of 6, 8, 10 mm and a length of 5-40 mm and which has a number of valuable properties (energy, environmental). this raw material is a certain solving of modern problems of alternative energy supplying. briquettes from waste wood have a number of advantages in comparison with traditional kinds of fuel: – ecological purity; – accessibility; – high calorific value; – low ash content of harmful substances; – possibility of full automation of the combustion process; – restoration of initial raw material; – the possibility of secondary use of waste (ash as fertilizer). wood pellets as heating fuel received extensive worldwide distribution thanks to the peculiarities of the combustion process. the amount of heat (calorific value) of wood pellets are slightly lower in compared with traditional fuels (coal, oil, shale, etc.), but at the same time, the amount of harmful baltic journal of economic studies 158 vol. 1, 2015 substances at burning of pellets is very insignificant. continuously growing popularity of granulated bio-fuel in the world is caused by the number of indisputable advantages in compared with initial material: – reduction of warehouses by 50% due to the greater bulk weight; – reducing expenses for transportation; – burning in the boiler is more efficient than the combustion of initial raw material; – the supply of fuel to the burners can be quite easily automated; – burners for granules are easily installed in boilers instead of the exhaust burners for liquid fuel with preserving of the high level of automation. production technology of granules includes a number of operations that can be divided into three main stages: – previous preparation of raw materials; – obtaining granules; – operations with ready granules. starting materials for the production of granules is significantly differ in particle size, bulk and specific gravity, moisture content, particle strength, chemical composition of raw materials. therefore, its own technological scheme which may be as simplified and complicated is developed for each type of raw material. the obtained wood waste can be supplied to special enterprises that engaged in manufacturing of briquettes in industrial scale or can be processed immediately. in this case, you should adhere to the requirements concerning preparation of raw materials: – low humidity (to reduce energy consumption for manufacture of briquettes); – comminuting, must be evenly shredded into particles about the same size, which greatly affects the quality of the output products. the stage of preparation of raw materials that leads to two directions of its using is absent in small granulators: or using another constant source of raw materials, or each time downloading mass into granulator, rearranging its mode of operation (instructions for pellet boilers and fireplaces); – compulsory optimization of temperature regime of production because natural lignin does not exhibit gluing properties until the mixture of raw materials will not heated to a certain temperature, but keep in mind that high temperatures can damage the equipment (instructions for pellet boilers and fireplaces). obligatory equipments for production of briquettes are (lotosh, 2007): 1) comminuting and drying equipment (in most cases such equipment is missing in mobile briquette presses, so you should select this equipment separately). 2) granulators that due to the lack of permanent filling of output raw materials should choose small volumes and capacity, such as mobile briquette press 3-5 m³ / h of output raw materials with output of finished products  – 500-700 kg; 3) briquette boiler, which can also be used for receiving bio-fuels, demand for which is constantly growing. 5. conclusions so, in order to provide the most sustainable and efficient management of forests, should apply measures for the forestry development of our country. the design and development of new technological processes that can lead to a significant reduction, and eventually complete elimination of losses in logging, processing and use of forest resources takes the critical place in the modern world. in this regard, tasks for nature protection from pollution related with deficiencies in the area of logging and use of forest resources play the important role. the modern development of low energetic on the basis of wood fuel use is one of the most important directions which provide reduction of the share of energy imports, increasing energy efficiency of the economy. successful implementation of bio-energy projects with the use of forest wood resources can only be based on the principles of economic benefits and ecological security that are only possible in the implementation of effective modern technologies of wood biomass, its logging, transportation and processing, environmental protection. along with the problem of unsustainable use of forest resources, there are other, equally important. illegal deforestation belongs of course to such problems. over the last decade, a huge number of facts of illegal logging were fixed by law enforcement authorities. thus, the problem of ecological crime at this moment is very serious and has tendencies to develop in the near future. unfortunately, organization and the fight against criminality in forestry is at rather low level that requires amplification of steps in this direction. references forest code of ukraine, (1994), article 99. instructions for pellet boilers and fireplaces, available at: http://www.woodheat.ru/leverage.html kovalevych, a.y., usenia, v.v. (2013), evaluation and prospects for the use of forest wood resources in bioenergetics of belarus, scientific bulletin nubip of ukraine, issue 187-2, p. 34-42. lotosh, v.e. (2007). recycling of natural resources. – yekaterinburg, printing, 503 p. putsenteilo, p., svyntukh, m. (2013). the energy potential of wood waste in ukraine. sustainable development of economy, issue 2, p. 190-195. state agency of forest resources of ukraine, available at: http://dklg.kmu.gov.ua/forest/control/uk/index. state statistics service of ukraine, (2014), available at: http://www.ukrstat.gov.ua/ baltic journal of economic studies 159 vol. 1, 2015 мариана свинтух направления эффективного использования лесных ресурсов в украине аннотация. целью статьи является определение и обоснование направлений рационального использования лесных ресурсов украины. методика. теоретической и методологической основой проведенного исследования являются постулаты экономической теории, устойчивого развития, экономики природопользования, экономики лесопользования. для достижения поставленной цели применялись такие методические средства и приемы: методы анализа и синтеза (для выявления проблем взаимосвязи использования потенциала лесных ресурсов с факторами влияния на их воспроизводство, исследовании сути понятия “лесные ресурсы”); монографический  – для изучения опыта формирования рационального использования лесных ресурсов и отходов древесины; системного подхода (при обосновании применения инструментов регулирования лесопользования); научной абстракции (при исследовании возможностей обеспечения процессов рационального воспроизводства лесных ресурсов); графический (для наглядного изображения отдельных аналитических наблюдений). результаты. сформулирован теоретический подход к лесовосстановлению, как важнейшей задачи в ведении лесного хозяйства, которое включает в себя комплексное использование всех имеющихся организационно-технологических мероприятий, способствующих его естественному возобновлению. установлена закономерность обеспечения эффективности использования отходов древесины в местах заготовки, выявлены и систематизированы ее виды для дальнейшего использования. сформулирован методический подход к оценке эффекта от использования отходов древесины для производства топлива и сопутствующих продуктов при переработке по гармонизации экономических и экологических интересов в сфере лесопользования. практическое значение. полученные результаты являются основой для решения практических проблем комплексного управления лесными ресурсами украины, отходов рубки леса в местах заготовки древесины, а также для разработки системы мер по совершенствованию эколого-экономического механизма развития природоохранных территорий и формирования на этой основе эффективной политики природопользования в соответствии с национальными интересами украины, что будет способствовать повышению экономической эффективности и обоснованности решений, связанных с приоритетными направлениями природоресурсной политики в условиях трансформации отечественной экономики. значение/оригинальность. обосновано использование топливной древесины в производстве биотоплива за счет создания плантаций быстрорастущих древесных пород для промышленного лесовыращивания в энергетических целях. baltic journal of economic studies 214 vol. 3, no. 5, 2017 corresponding author: 1 department of translation and philology, private higher educational institution “ivano-frankivsk king danylo halytskyi university of law”. e-mail: lena_zl@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-214-220 problems and prospects of management of rural development inna tomashuk1 vinnytsia national agrarian university, ukraine abstract. the purpose of the research is to study problems of rural development management, to analyse the effectiveness of management of the resource potential of rural areas, and to study the socio-economic priorities of their development, as well as to determine the justified ways of their solution in modern conditions. methodology. the system approach to studying the development of rural areas makes it possible to consider components in the relationship between themselves and interaction with components of other systems. the state, problems, and prospects of rural development management are considered. the necessity of significant changes in the state policy of rural management is determined. it is substantiated that the current trends in the development of rural areas of ukraine take place in the direction of narrowing the sphere of application of labour and the mismatch of professional and skilled workers’ quality to the needs of employers, and the growth of unemployment. the results showed that the revival of rural areas depends primarily on the level of economic development of the country. multifunctional development of the village should be carried out taking into account the integrated approach to solving the problems of the agrarian complex, villages, rural areas in general, through the combination of interests of inhabitants of rural areas, rural communities, local government, and the state, applying social and economic levers of regulation of the relevant relations in conjunction with the organizational and legal ones. the subject of the research is the mechanisms for managing the development of rural areas. the emphasis is made on the imperfection of the modern mechanism of the financial and economic provision of rural development management, in particular, regarding the distribution of state budget funds in this area. the impact of a clear state policy that is aimed at supporting regional development is outlined. the importance of the issue of transferring significant powers and resources to places is investigated; there must be an active position and mutual responsibility of local self-government, local business, and civil society for the development of their territory. the main problem is outlined that the financial situation of rural residents in terms of the unstable development of all spheres of the country’s economy is more complicated than that of the urban population. it is emphasized that the current state of social and economic infrastructure of rural areas confirms the existence of a deep crisis. taking into account the condition and problems of rural development and modern european traditions in this area, it is proposed to finance the management of rural development using three sources – the state budget, local budget, and rural development funds. potential sources of the formation of local budget funds, which will be directed to ensuring issues of management of rural development and rural development funds, are determined. specific directions for the use of funds of each of the mentioned sources are proposed. it is determined that for ukraine, it is important to study foreign skills of formation of sustainable development of rural areas, analyse their regularities and trends of development. it is proved that the experience of countries of the european union in the context of european integration should become especially useful for the national economy. practical implementation. the emphasis is made on the fact that state regulation is the main direction of ensuring sustainable development of the ukrainian village and a means of ensuring the equilibrium of the ukrainian economy. originality. it is outlined that one of the directions of the rural development strategy may be to strengthen initiatives of local entrepreneurs, which will be assisted by local partnerships and the state. the urgent task of further scientific development of this problem is to study the influence of the basic, district, and regional levels of state policy on the management of rural development. key words: rural areas, development management, reformation, state support, staffing. jel classification: p25, q14, r11, r58 baltic journal of economic studies 215 vol. 3, no. 5, 2017 1. introduction the main purpose of changes in agriculture in ukraine is to create an effective system of agrarian relations, increase the production of agricultural products, finally solve the food problem in the country, provide the industry with the necessary raw materials, and significantly increase the well-being of peasants. rural areas of ukraine are characterized by a number of problems, most of which have not been resolved for decades. the lack of a well-formulated and effective rural development management system leads to a permanent deterioration in the quality of life of the rural population, a decrease in its overall population and working age, in particular (due to both natural reduction and active migration processes), poor state of infrastructure provision, lower incomes, and the lack of alternatives to agriculture, at the same time accompanied with low economic efficiency and the high complexity of its implementation. thus, the topics discussed in the article, namely, the study of problems and prospects for the management of rural development, is very relevant. the purpose of the article is to study the existing problematic issues related to the management of rural areas development and to identify the main directions of its improvement. the research objective is to carry out a comprehensive analysis of the current state and problems of rural development, to substantiate criteria for optimizing their management, to determine the strategic priorities of their development. today it is necessary to state the absence of the necessary prerequisites for the effective realization of the potential of rural areas, as well as significant disadvantages and the absence of a management system for their development. systemic, monographic, analytical, and other methods of research are used to study theoretical and methodological foundations of rural development management. the potential of the development of rural areas of ukraine, as well as the state as a whole, can be disclosed and implemented only if an effective system of public administration is formed. thus, the scientific novelty of the article is to improve public administration in the study of the current state of development of rural areas and the economy of ukraine as a whole, as well as the analysis of recommendations of individual scientists regarding the fundamental changes in managerial decisions based on private-public partnership. the complexity of reforming public administration in the development of rural areas is the need to maintain systematic, comprehensive character, and take into account all aspects of this process, since each of its components plays an important role in the implementation of strategic objectives of the new state agricultural policy. at the same time, the effectiveness of public administration depends on the observance of value orientations. today we can state the absence of well-formed and valid values in the management of rural development, which leads, in particular, to the squandering of state resources and low effectiveness of measures for their socio-economic development (krupin, zlydnyk, 2012). today in ukraine, decentralization is one of the priority directions for solving problems of rural development management. in addition, the president of ukraine signed the law of ukraine “on voluntary association of territorial communities”, which regulates relations that arise in the process of voluntary association of villages, settlements, and cities. thus, it is planned that this integrated approach will help in solving the main problems of the development of rural areas of ukraine, which is based on the principles of sustainable development. 2. the role of rural areas in the national economy rural areas play an important role in the national economy. they provide food to the population and raw materials to the processing industry. the effectiveness of the development of the potential of rural areas depends on their effective management. the main subject of management in the countryside is local self-government bodies. granting them with appropriate powers and resources will solve the problems of creating a favourable living environment for peasants. mechanisms of effective interaction between enterprises of different forms of ownership and different spheres of the economy of regions are not worked out, which reduces the manageability of the agricultural sector. 3. problems of management of rural development today it is extremely difficult to imagine the economic development of ukraine without the revival of the ukrainian village. the tendency towards the deterioration of the socio-economic situation of rural areas leads to an increase in the imbalance in the placement of productive forces of the state, which results in the outflow of resources in large cities, which concentrate an increasing part of the financial, industrial, scientific and technical, and personnel potential. instead, the village, with underdeveloped infrastructure and low living standards, continues to be in a depressed state. the process of reforming rural areas is slowed down, which causes a number of problems (fig. 1). the lack of a well-formulated and effective rural development management system leads to a permanent deterioration in the quality of life of the rural population, a decrease in its overall population and working age, in particular (due to both natural baltic journal of economic studies 216 vol. 3, no. 5, 2017 reduction and active migration processes), poor state of infrastructure provision, lower incomes, and the lack of alternatives to agriculture, while at the same time it is accompanied by low economic efficiency and the high complexity of its implementation. 4. vectors of rural development policy world experience and domestic practice convince that the level of development of the economy and the quality of life of the country’s population can be assessed by the level of development of rural areas. this problems of management of rural development deprecation and an insufficient amount of agricultural machinery, which leads to a breach of the production technology and losses of a significant part of the crop deconcentration of agricultural production low entrepreneurial activity in rural areas irrational harvesting and processing of agrarian products, especially in the complex processing of raw materials, mechanization and automation of production processes, as well as packaging of finished products low quality and competitiveness of agricultural products lack of skilled personnel an insignificant amount of export of agricultural products low investment attractiveness of the agricultural sector unsystematic institutional development of rural areas, in particular, the excessive number of state and inadequate development of non-state bodies capable of effective implementation of regional policy tasks in interaction and coordination incomplete reform of land relations the inadequate agrarian policy of the state, in particular, lack of effective programs of financial and credit support for producers of agrarian products, significant tax burden, suspended land market reform, ineffective implementation of agricultural development programs destruction of cooperative traditions, which led to the deconcentration of agricultural production the decline of social, industrial, and market infrastructure in the countryside, which leads to an increase in the cost of production, significant loss of production during transportation and storage lack of motivation to work, the inertia of rural residents, the weakness of rural self-government and the lack of preparedness of rural communities to participate in local development projects lack of cooperation between scientific institutions and producers of agro-food products, which results in insufficient research and development in the agrarian sector aimed at improving the quality of seed and breeding material, increasing productivity of agricultural production the absence of a regional strategy for the development of foreign trade in agro-food products, which leads to a deformed structure of export of agro-food products fig. 1. problems of management of rural development source: compiled by the author by research results baltic journal of economic studies 217 vol. 3, no. 5, 2017 is explained by the fact that it is impossible to provide integrated development, to lay a solid foundation for the future without creating high standards of living for the rural population (fig. 2). taking this into account, the leading countries of the world are developing effective mechanisms for preserving the countryside, rural lifestyle, and rural traditions. with this purpose, the policy of socio-economic development of rural areas is constantly being improved, requiring appropriate changes to the management system, increasing expenditures for the implementation of state programs (danylenko, 2015). vectors of rural development policy improvement of the environment competitiveness of the agrarian sector diversification of the economy improving the quality of life in rural areas fig. 2. vectors of rural development policy source: compiled by the author by research results the key to effective implementation of rural development policy is its human resources. according to m. malik, professional staff is the main condition for the implementation of the chosen strategy of sustainable development of rural areas, that is, managers must answer it. in our country, employees of state administrations responsible for economic and social development are, as a rule, specialists in relatively narrow issues of planning and management. they are busy with the solution of current problems, they do not pay enough attention to perspective issues, do not have experience of sustainable regional development in the conditions of modern market economy and development of self-government, do not have system representations and knowledge of modern methodological approaches and algorithms (malik, 2008). unfortunately, today, in rural areas, traditional hierarchical structures with a rare splash of market mechanisms dominate in regional authorities. advantages of such organizational structures consist of a clear division of functions and hierarchical co-subordination of all management units, the ordering of a system of rules and standards that determine the functioning of the governing bodies. disadvantages are expressed in the strict conditionality of behaviour, difficulties of organizing interactions within the organization, and the inability to rapid innovations (onyshchenko, yurchyshyn, 2006). integration of plans for sustainable development of rural areas into a strategy of socio-economic development of the state has not yet been widely practiced. as a result, domestic interregional cooperation is practically absent; budget funds are not used effectively. state target programs also do not solve this task. many ukrainian scholars recognize that in ukraine as a whole, the culture of planning the use of the territory has been lost (antonov, 2010). 5. modern state of management of rural development the current state of management of rural areas’ development requires a significant increase in the role of the ministry of agrarian policy and food of ukraine. a significant influence on the financial provision of agrarian enterprises is also made by regional authorities for granting loans, making lease agreements, and so on. aic and rural development are interdependent categories. indeed, the effective use of the resource potential is a guarantee of the well-being of the rural population. in order to improve the socio-economic situation in the countryside, the state envisaged in the budget for 2018 almost 3 billion uah, which will be directed to the financial support of agricultural producers through full or partial vat compensation. this program was launched in 2017 as a substitute for the preferential vat regime for farmers. recall that the preferential vat payment regime for farmers existed from 1999 to 2016 (and only partially in the past 2017). in the budget of 2017, 4.77 billion uah was put into this program, and not all companies, but only those that specialize in certain types of activities, fell under the financial support program. the agrarian budget for 2018 is 6.3 billion uah. financing of credit easing program for agricultural producers has been substantially reduced (fig. 3). 300 66 0 50 100 150 200 250 300 350 2017 2018 credit easing program, million uah fig. 3. financing of credit easing program for agricultural producers, 2017–2018, million uah source: compiled by the author by research results as shown in fig. 1, in 2018, expenditures from the state budget for this program in comparison with 2017 have decreased by 4.5 times and amount to only 66 million baltic journal of economic studies 218 vol. 3, no. 5, 2017 uah. such a situation greatly reduces opportunities for farmers to attract credit resources. positive for the farmers in the budget of 2018 are costs to compensate for the cost of agricultural machinery. for this program, 1 billion uah is included in the draft budget for 2018. many agribusinesses need to upgrade their equipment. it is this program that will help to equip and modernize agricultural machinery. in addition, it is worth considering the mechanism of mortgage lending to agricultural producers. as h.m. kaletnik notes, mortgage lending is a promising direction and a powerful source of financial resources for agricultural production, which will be the driving force of effective management of rural development. efficiently functioning mortgage mechanism should become a lever and a stimulating factor in the financial and economic growth of the agroindustrial complex of ukraine while ensuring the social development of rural areas (kaletnik, 2013). the effectiveness of rural development management should be based on the principles of private-public partnership (fig. 4). such a combination is the basis of the sustainable development of rural areas. management requires the definition of clear benchmarks, as regards the desired socio-economic status, so the methods (means) for achieving it. overcoming the problems in the agricultural sector requires direct intervention by the state through financing specific targeted rural development programs. 6. basic conditions for the development of rural areas the rural development policy consists of three major parts: support for agricultural producers, environmental protection, and support for integrated rural development projects. in ukraine, in recent years, when there was a rethinking of the state regional policy on the basis of better european experience, the rural development policy has been identified as a part of the regional development policy. transparent conditions for investments; strategic planning; development of self-government state support for production and small business the transition to sustainable development priority national project creating comfortable living conditions public-private partnership mobilization of internal potential of selfdevelopment rural areas st at e an d re gi on al ta rg et ed p ro gr am s fo rm at io n of m ar ke t c on di tio ns in ve st m en ts a nd m on ey o f t he p op ul at io n r eg io na l s up po rt ho us in g m ed ic in e ed uc at io n ag ri cu ltu re fig. 4. scheme of development of rural areas source: compiled by the author by research results baltic journal of economic studies 219 vol. 3, no. 5, 2017 in addition, there are basic conditions for the development of rural areas, which are the key to their effective development (fig. 5). also important is the regulation of economic needs in accordance with the capabilities of the natural environment; maximum provision of rural territories with their own resources through their most rational and integrated use. the key is the rational implementation of all the achievements of scientific and technological progress in production activity, which does not allow or minimize the depletion and degradation of resources, especially land. the development and placement of production, taking into account the natural conditions and resource capabilities of each region, their protection, and most rational use, also belong to the fundamental principles of the management of rural areas (fig. 6). rural area (village council) rural development fund economic entities state budget public organizations local community local budget fig. 6. sources of funding for rural development source: compiled by the author by research results the management of human and labour-resource potential is an integral part of the integrated management of rural areas. the level of labour supply of the rural economy depends on the number of labour resources, their location, sex and age composition. workable rural areas have the opportunity to develop and diversify their economies more intensively (kyrylenko, 2003). 7. principles of management of rural development we note that the subsystem of management and organization of rural areas is formed by: village and settlement councils, rural communities, bodies of management of objects of production and social and economic activity, representations of public socioeconomic, social, and environmental organizations, basic conditions for the rural development the full institution of local self-government in the village. the potential of the territory itself (industrial, including agricultural, tourist, etc.). appropriate infrastructure (social and engineering). effective state and regional rural development programs. favourable conditions for entrepreneurship development. skilled personnel for agricultural production, education, medicine, services, etc. fig. 5. basic conditions for the rural development source: compiled by the author by research results careful attitude to resources, maximal use of natural conditions for physical, mental, and aesthetic development of the population of ukraine, and natural resources – for constant increase of production and increase of material goods. cognition and comprehensive use in the economic practice of the objective laws of nature, the dialectical unity of all its elements, the interconnection and interdependence of all processes that occur in the biosphere. principles of management of rural development fig. 7. principles of management of rural development source: compiled by the author by research results baltic journal of economic studies 220 vol. 3, no. 5, 2017 associations, and foundations. the centres of the organization of rural territories are villages and settlements (with their rural and settlement councils), population centres that are subject to them, separate agricultural settlements. direct administrative influence on the development of rural areas is carried out by the raion and regional bodies of local self-government and, on a national scale, state authorities, which are based on clear principles (fig. 7) (syniavska, 2012). 8. conclusions the state and prospects for the development of rural areas depend primarily on the level of economic development of the country. rural areas are an extremely complex object of administrative influence. in the management of rural areas, one must take into account that the achievement of a high standard of living of the population is the main goal of the economic development of rural areas. therefore, the key to effective management of the development of rural areas and the agro-industrial complex is the professional staffing, the need to intensify innovation activities, the rational introduction of scientific and technological progress in production activities, the effectiveness of state and regional rural development programs. the prospect of further development of the revival of rural areas should be the study of the development of agrarian and non-agrarian activities, capable of creating the necessary financial base for serious socio-economic transformations in the village in order to ensure adequate living conditions of the population. references: antonov, a. v. (2010). udoskonalennia systemy upravlinnia silskymy terytoriiamy [improvement of control system by rural territories]. derzhavne upravlinnia: udoskonalennia ta rozvytok [state administration: improvement and development] (electronic journal), no.10. retrieved from: http://www.dy.nayka.com.ua (accessed 14 dec 2017). antoniuk, g. ya., panyura, j. y. (2013). problemy rozvytku apk na silskykh terytoriiakh lvivshchyny [problems of development of apk on rural territories of lviv region]. socio-economic problems of modern period of ukraine, vol. 6, pp. 220-228. danilenko, a. s. (2015). priorytetni napriamy zabezpechennia rozvytku silskykh terytorii ukrainy [priority directions of providing of development of rural territories of ukraine]. economy and management apk, no. 1, pp. 10-13. kaletnik, g. m. (2013). ipotechne kredytuvannia v silskomu hospodarstvi ukrainy [mortgage lending in agriculture in ukraine]. economy of apk, vol. 7, рр. 58-63. kyrylenko, i. g. (2003). pro khid reformuvannia ta zakhody shchodo polipshennia sytuatsii na seli [about motion of reformation and measures in relation to the improvement of situation on the village]. economy of apk, no. 1(99), pp. 3-11. kropivko, m. f. (2005). orhanizatsiia derzhavnoho i samovriadnoho upravlinnia rozvytkom silskykh terytorii [organization of state and самоврядного administration development of rural territories]. economy of apk, no. 11(133), pp. 60-62. krupin, v. ye., zlydnyk, yu. r . (2012). tsinnisni oriientyry upravlinnia rozvytkom silskykh terytorii [the valued reference-points of management development of rural territories]. announcer of the national university "lviv politekhnika": management and enterprise in ukraine: the stages of becoming and problem of development, no.748, pp. 76-181. malik, m. ya., (2008). do pytannia staloho rozvytku silskykh terytorii [to the question of steady development of rural territories]. economy of apk : international scientific and production magazine, no. 5, pp. 51-55. onyshchenko, o. m., yurchyshyn, v.v. (2006). silskyi rozvytok: osnovy metodolohii ta orhanizatsii [rural development: bases of methodology and organization]. economy of ukraine, no. 10, pp. 4-13. syniavska, i. m. (2012). upravlinnia silskymy terytoriiamy ta pidvyshchennia yoho sotsialno-ekonomichnoi efektyvnosti [management and increase of him rural territories socio-economic efficiency]. scientific works of the poltava state agrarian academy. series: economic sciences, vol. 1(4), pp. 262-265. chukhno, i. a. (2015). vyznachennia dzherel finansovo-ekonomichnoho zabezpechennia derzhavnoho upravlinnia rozvytkom silskykh terytorii v suchasnykh umovakh [determination of sources of the financial economic providing of state administration development of rural territories in the modern terms]. efektyvna ekonomika [effective economy] (electronic journal), no. 3. retrieved from: http://www.economy. nayka.com.ua shulha, o. a. (2014). zarubizhna praktyka upravlinnia rozvytkom silskykh terytorii: transformatsiia dosvidu dlia ukrainy [is foreign practice of management development of rural territories : transformation of experience for ukraine]. agrarian economy, vol. 7, no. 1-2, pp. 23-28. baltic journal of economic studies 25 vol. 3, no. 5, 2017 corresponding author: 1 department of problems of interregional cooperation issues, institute of economic and legal studies of the national academy of sciences of ukraine. e-mail: economicaukraina2017@gmail.com 2 department of problems of interregional cooperation issues, institute of economic and legal studies of the national academy of sciences of ukraine. e-mail: economicaukraina2017@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-25-32 monitoring of international donor assistance in the context of the development of amalgamated territorial communities elina boichenko1, nataly vasilchuk2 institute of economic and legal studies of the national academy of sciences of ukraine, ukraine abstract. the research is conducted within the framework of the joint project of the f. ebert foundation (germany) and the institute of economic and legal studies of the national academy of sciences of ukraine (ukraine) “the experience of the association of territorial communities in eastern ukraine: economic and legal aspects”. the subject of the study is the theoretical, methodological, and practical aspects of monitoring international donor assistance in the context of the development of amalgamated territorial communities (atc) based on the example of bilokurakyne and novopskov atc. methodology. the system approach (in substantiating the directions of monitoring and established procedures for monitoring each component of the life of amalgamated territorial communities), logical generalization (in determining the state of development of amalgamated territorial communities), method of absolute, relative, and mean values, analysis of the dynamics series and structural shifts (in determining the dominant trends in the formation and development of atc), method of economic analysis and synthesis (in determining the content of the monitoring), method of comparison (when the violations in the process of atc), graphical method (the construction algorithm combined operation and development of local communities) imaging method (for presenting the results of the total amount of international aid to atc) are used in the work. the purpose of the research is to develop theoretical, methodological, and practical approaches to the monitoring of international donor assistance in the context of the development of amalgamated territorial communities. the article suggests using monitoring as the most effective tool for controlling economic and social phenomena and processes. the authorial scheme for constructing a procedure for the monitoring of functioning and development of amalgamated territorial communities is developed. the monitoring of international donor support of the bilokurakyne and novopskov settlement amalgamated territorial communities (satc) is conducted. as a result, it is concluded that the total amount of international donor assistance for novopskov satc amounted to 22.5 million uah for 2015–2016, for 2015 – 13 million uah, and for 2016 – 9.5 million uah with a population of 12,316 thousand people in the community. the population in bilokurakyne satc was 13,226 thousand (for the present – 13,700 people), which is 910 more than in novopskov. in 2016, the donor assistance for bilokurakyne community amounted to 14.25 million uah, which is 4.75 million uah more than in the same period in the neighbouring community. the above dynamics indicates, on the one hand, the absolute logic nature in the distribution of financial assistance between the communities in terms of the conceptual nature of the decentralization reform in ukraine; on the other hand, such tendencies require the establishment of the main reasons for the non-equality of the donor assistance. moreover, it is found that the majority of donor funds had been distributed between novopskov and bilokurakyne satc in order to develop infrastructure, that is, road repair, sidewalks, social facilities (clubs, schools, kindergartens, hospitals, etc.), lighting. the most active assistance was received from such donors as the un children’s fund (unicef) – in bilokurakyne satc, and eu/undp in novopskov satc. key words: international donor assistance, amalgamated territorial communities, monitoring of functioning and development of amalgamated territorial communities. jel classification: f53, h54, o18, o19 baltic journal of economic studies 26 vol. 3, no. 5, 2017 1. introduction the urgency of the chosen field of research is based on the modern social and economic trends, namely: firstly, in 2014, the government’s decentralization reform has gained momentum in ukraine, which contributed to the intensification of so-called “donor relations”. so, according to the ministry of economic development and trade of ukraine, as of july 1, 2016, 301 projects of procurement technical assistance had the state registration (re-registration) and are being carried out for the amount of 5.3 billion usd. according to the forecasts of the ministry of economic development and trade of ukraine, in the near future, it is expected an increase in the volume of financing of projects through international assistance, as in 2014, some new large-scale programs of cooperation with the eu were launched, namely, the program of border cooperation for 2014–2020: “ukraine  – romania”, “ukraine  – hungary  – slovakia  – romania”, “ukraine  – poland  – belarus”, “the black sea basin” within the framework of the european neighbourhood instrument with a total budget of more than 365 million euros. taking this into account, there is an urgent need for strict control over the use of international revenues. one of such tools of control is monitoring. based on the data obtained from the monitoring, the forecast of possible changes in the living conditions of the european territorial communities is being carried out and scientifically substantiated recommendations are being worked out, or already taken measures on social and economic development of the territory are being adjusted, which are the basis for substantiation of corresponding administrative decisions at the early stages of occurrence of problem processes or phenomena, with the purpose of their prevention, overcoming or neutralizing of influence. based on the above, the purpose of the work is to monitor the international donor support in the context of the development of the amalgamated territorial communities on the example of bilokurakyne and novopskov settlement amalgamated territorial communities. in order to ensure the fulfilment of the stated purpose, the following tasks are set and solved: ‒ to reveal the theoretical provisions of monitoring the functioning and development of amalgamated territorial communities; ‒ to submit monitoring of a separate component of the functioning and development of the bilokurakyne and novopskov settlement amalgamated territorial communities, namely, the results of their support by international donors for the period of 2015–2017. 2. review of previous research and publications in modern science, there is a powerful tool of research methods that are used to solve various academic tasks, including methodological support for studies of the development of the united territorial communities. the choice of methods depends on the object and subject of the study, their purposes and objectives, information provision, etc. the monitoring mechanism consists of interconnected stages, which determine its content, the sequence of implementation and functioning. consequently, monitoring as an integral part of the diagnostics of the development of the united territorial communities is a necessary procedure, the purpose of which is to assess completeness and effectiveness of the proposed measures aimed at overcoming, eliminating negative trends, and identifying appropriate organizational measures aimed at ensuring their effective existence. a significant contribution to the development of scientific and methodological principles for monitoring and evaluating regional development strategies and programs in ukraine was made by domestic economists b. vynnytskyi, m. lendel, yu. rateichak, i. sanzharovskyi and others (lendel, 2007). moreover, the results of the presented study are based on the analysis of the main provisions of works of foreign authors s. brown, p. brunel, z. moravetskiy, s. klepatskiy, s. stoke, m. robinson, j. touscoz, h.-a. schraepler, w. friedman, who considered the use of international assistance, as well as peculiarities of economic and legal regulation of international relations in this area. among the domestic scholars and researchers, we should highlight the works of y. hanushchak, i.  kaliushko, v. kolosova, o. saienko, n. slynko, n.  starostenko, a. tkachuk, and others (hanushchak, 2013, starostenko, 2014), which are aimed at studying issues of creation and development of amalgamated territorial communities (atc) in ukraine. while paying tribute to the scientific works of these scholars, it should be noted that for the present, there are no monitoring results in the context of the united territorial communities, therefore, this issue will need further research and will be considered in the proposed article. 3. theoretical provisions for monitoring the functioning and development of amalgamated territorial communities it should be noted that the essence of the monitoring organization is reduced to the formation of a standard model of the system of observation, collection, processing, and presentation of scientifically substantiated information characterizing the state of development of the social and economic sphere of amalgamated territorial communities. generally, modern science considers monitoring (from the latin “monitor”  – someone who monitors) as a complex of observation, collection, processing, and provision of information on quantitative and qualitative baltic journal of economic studies 27 vol. 3, no. 5, 2017 changes in the development of natural, technical and social processes or phenomena, which allows permanent control of the state of the object of the study, the result of which is to obtain an assessment of the state and identify negative trends in the development of the investigated process or phenomenon. in particular, this definition is the own development of the co-author of the article boichenko e. the main provisions of which are presented in the memorandum “monitoring the establishment and functioning of amalgamated territorial communities in the regions of ukraine.” monitoring makes it possible to obtain the necessary information, which is important for the adoption of appropriate management decisions to improve the living conditions of amalgamated territorial communities. the organization of monitoring is appropriate to consider as the construction of a structurally functional, organized system, the main elements of which are communication and information-analytical structures. the communication structure is designed to ensure the regular collection, accumulation, and storage of information concerning the condition and development of amalgamated territorial communities. the construction of informational and analytical systems is conditioned by the collection and accumulation of statistical information and information obtained from reports, based on observational results, sociological studies, expert estimation, implicit sets, model predictions, and so on. the organization of monitoring of the functioning and development of amalgamated territorial communities lies in the formation of a constantly updated information base, which is designed to provide the necessary information for the study and its conservation. the information component of monitoring the functioning and development of amalgamated territorial communities is: social and economic indicators published by the state statistics service of ukraine; information obtained on the basis of sampling surveys of the social and economic development of amalgamated territorial communities; information obtained on the results of sociological research; information obtained in the course of research by the staff of scientific institutions. information provided in reports on the implementation of fundamental or applied scientific topics, scientific reports, analytical notes, articles, theses of conferences, dissertations, etc. monitoring of the functioning and development of amalgamated territorial communities is carried out in accordance with some certain stages (table 1). the frequency of monitoring is once a year. however, a significant increase in the impact of social and economic risks leads to accelerating the changes in the conditions of functioning and development of amalgamated territorial communities. consequently, in such a case, the frequency of the monitoring may be once a month, a quarter or a half-year. monitoring of the functioning and development of the atc consists of the following parts: organizational, executive, managerial (figure 1). the organizational part of the monitoring solves the problem of selecting the object of the monitoring, the formation of data sets for the monitoring and the choice of the monitoring methods. tasks of the executive part of the monitoring system are to obtain a general assessment of the status and assessment of changes, identify negative changes (deviations), and identify symptoms of changes and admissible deviations. table 1 stages of monitoring of the functioning and development of amalgamated territorial communities no. stage characteristics 1 organizational involves defining of goals and objectives of the monitoring; coordination of the research period; periodicity of its implementation, formation of a surveillance system; needs, volume, collection, sources, systematization, and processing of primary information about the research objects taking into account quantitative and qualitative indicators; development of forms of documents for data collecting and accumulation; determination of costs associated with the introduction of monitoring and obtaining the necessary information; preparation of job descriptions, which include the characteristics of the work, tasks, and responsibilities of the employee, qualification requirements and their responsibilities; instruction, training, training of personnel in accordance with the monitoring tasks. 2 executive the research is carried out on the basis of the tool, with the help of which causal relationships and trends of the development of the components of the research object are established. comparison of the obtained results with the previous or normative (reference) indicators is carried out, which allows determining the state of the research object. at this stage, the reasons for the changes that are occurring and establishing are proved, the problems that cause them. 3 supervisory involves the control over processes and phenomena that occur in the functioning and development of amalgamated territorial communities. comparison of results with the planned indicators is carried out. possible options for measures that would help to overcome negative trends in development are developed. 4 administrative involves making proved management decisions for executive authorities. implementation of planned activities (programs, development strategies). an assessment of the effectiveness of management decisions is obtained, based on the monitoring of the implementation of the management decisions. source: made up by the authors on the basis of (lendel, 2007) baltic journal of economic studies 28 vol. 3, no. 5, 2017 the managerial part performs some certain monitoring tasks: the development of recreational activities, their implementation, control over changes in the development of the research object, the development and implementation of the stabilization program and its organizational support. the sequence of monitoring the functioning and development of amalgamated territorial communities is given. taking into account the limited scope of results of the research in this scientific work, as an example, we will monitor the separate component of functioning and development of the bilokurakyne and novopskov atc, namely, the results of their support by the international donors. based on the analysis of scientific points of view, which is detailed in the scientific research of the co-author of the article vasilchuk n.o. “the results of the support of the combined territorial communities by international donors and also based on the legal framework on international assistance and the development of otg in the article, as a result of the support of the joint territorial communities, by international donors means a certain sequence of actions of donors, recipients, special the authorized bodies in support of structural reforms and implementation of programs of socio-economic development of ukraine in qualitative or quantitative terms. in addition, it should be noted that, practically, the international support is provided in two ways: through fig. 1. an algorithm for constructing a procedure for monitoring of the functioning and development of amalgamated territorial communities source: compiled by the authors according to the research results selection of monitoring methods formation of data sets for monitoring receiving an overall assessment and assessment of changes determination of change symptoms development of health measures, their implementation control over changes in the development of the research object revealing negative changes (deviation) from the benchmarking yes no selection of the object of monitoring the functioning and development of united territorial communities exit revealing negative changes from the benchmarking no development and implementation of the stabilization program and its organizational support determination of admissible deviation yes baltic journal of economic studies 29 vol. 3, no. 5, 2017 international technical assistance (ita) and in the form of humanitarian assistance. in particular, the ita is implemented by concluding an international financial agreement to support structural reforms in the country, which envisages the transfer of funds on a gratuitous and irrevocable basis to the state budget of the country after the implementation of mutually agreed terms for the allocation of funds, that is, there is no direct assistance to the communities from the international donors. distribution of the ita in view of the support of the atc is not directly, but in the form of the state subventions, through the state fund of regional development and the development budget. 4. monitoring the results of the international donors’ support for the bilokurakyne and novopskov settlement united territorial communities for the period of 2015–2017 as it has been already outlined in the beginning of the article, the organizational support of the monitoring involves a clear sequence of actions. the organizational support for monitoring the results of international donors’ support of the bilokurakyne and novopskov satcs is presented in (figure 2). despite the fact that in luhansk region as of november 18, 2017, there are 4 satcs, only two communities  – bilokurakyne and novopskov  – were selected for the study. this choice is determined by the fact that the abovementioned communities began functioning in 2015, unlike in chmyryvska (december 2016) and troitska (april 2017) (profil novopskovskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady, 2016, profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady, 2016) the existence of which lasts on average a year, so, it is not appropriate to speak of the results in figures, since for a correct analysis and building on its basis of solid conclusions it is necessary at least 3 years (a series of dynamics). it should be noted that the total area of novopskov satc as of 01.11.2017 is 226 sq. km, the population is 12,316 thousand people (as of 01.01.2015): urban population  – 9,868 people, rural population  – 2,448 people. this information is essential for the conclusions (stratehiya rozvytku novopskovskoyi selyshchnoyi oth na period do 2025 roku). according to the monitoring results, the volume of the capital investments on enterprises of the region in 2015 amounted to 13 million uah. during this period, there is no information regarding the number of implemented projects. however, the report on the implemented projects, which is posted the official site of novopskov satc, shows that the volume of construction works at the expense of the ita is 900 thousand uah. during the year of 2015, 21 residential buildings with a total area of 2.2 thousand square meters were put into operation. subvention in the amount of 999.3 thousand uah was received for energy saving measures in the maternity home of novopskov satc from the regional budget. within the framework of the eu/undp project “community-based approach to local development”, monitoring purposes data gathering and reporting on the state of ita for the development of atc; diagnosis formation about the current state of ita for the development of atc; determination of efficiency of the activities of the international assistance of atc; determination of the greatest donors by funding and number of projects in atc; determination of the top-priority spheres of the designed purpose of ita in atc; forecasting of results for the support by international donors of the atc. receiving qualitative and quantitative assessment of ita for the development of atc at the target moment; determination of the efficiency and direction of the risks affect which occur in the process of receiving ita for the development of atc; construction of the most suitable mechanism of receiving ita for the development of utc; determination of deviation (absolute and relative) between actual and standard (sample or received for standard) data. monitoring tools monitoring tasks choosing the study subject; determination of the monitoring methods; determination of the deadline for the monitoring; formation of the data base. monitoring methods monitoring of the international donor support within the framework of the development of the utc. fig. 2. organizational support for the monitoring of the international donor support for the bilokurakyne and novopskov sutcs source: made up by the authors on the basis of review of previous research and publications baltic journal of economic studies 30 vol. 3, no. 5, 2017 4 public organizations are implementing micro-projects. the total amount for micro-projects is 1.2 million uah, of which the project funds are 870 thousand uah, 13 thousand uah was allocated from the regional budget, community contributions – 61 thousand uah, funds of rural and settlement budgets  – 237  thousand uah (stratehiya rozvytku novopskovskoyi selyshchnoyi oth na period do 2025 roku). in 2016, novopskov satc, with the support of the international donors, implemented 19 projects, totalling 9.5 million uah. the budget of novopskov satc for 2016 was approved without a basic and reverse grant, in addition, in 2016, novopskov atc received 1,507 thousand uah of the subvention funds for the maintenance of institutions of secondary education per 1 inhabitant, which testifies to its capability (stratehiya rozvytku novopskovskoyi selyshchnoyi oth na period do 2025 roku). the main volume of the ita was aimed at the introduction of street lighting in the village of osynove with innovative technologies. within the project, supports and photomodules were installed on the main street of the village (slobozhanska). the project was implemented with the participation of osinivska ngo, novopskov village council and the eu/undp project “local development” (stratehiya rozvytku novopskovskoyi selyshchnoyi oth na period do 2025 roku). at the expense of the state subvention for the overhaul of the building of the pei “teremok” of novopskov vc with the use of energy-saving technologies, 1.4 million uah was spent. the street lighting was reconstructed using innovative technologies in the village of makartetyne. modern led lamps were installed on the existing supports, the cost of which is 83,750 thousand uah. the capital repair of the preschool educational institution “svitlyachok” of novopskov vc for the amount of 826,580 thousand uah was carried out. thus, the total amount of the state subvention for 2016 amounted to 2,274,059 million uah (stratehiya rozvytku novopskovskoyi selyshchnoyi oth na period do 2025 roku). from the development budget in 2016, there was received the sum of almost 2,974,231 million uah, which was allocated for the reconstruction of the roof of the pi “novopskov settlement house of culture of novopskov village”, the cost is 877,251 thousand uah. major repair of sidewalks in the village of novopskov, shkilna str., the cost is 91,657 uah. pavement tracks in novopskov village in magistralna str. were repaired, the main cost was 461,300 uah, and the overhaul of the asphalt concrete pavement road was also carried out in hazoprovodska str. in the village of novopskov, which cost 560,432 uah, and in vyshneva str. in the village of osynove, which cost 923,591 uah (bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady, 2017). overhaul of the roof of the two-storey building of the preschool educational institution “svitlyachok” of the novopskov village council was executed for 355,562 uah. the cost of the energy-saving technologies that were used during the major overhaul of the preschool educational institution “svitlyachok” was 518,171 uah. for the major overhaul of pei “dzvinochok” of novopskov vc (insulation of the facade), it was spent 177,733 uah. overhaul and insulation of the roof of the preschool educational institution “dzvinochok” of novopskov vc cost 372,695 uah. in total, it was spent 1,424,161 million uah (profil novopskovskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady 2016 rik). the new construction of the street lighting with innovative technologies in the osynove village council, the installation of photomodules on the support was implemented thanks to the attraction of the ita, which came to the state fund of regional development and was distributed to the territorial community in the amount of 1,358,523 million uah. at the expense of the settlement budget, in 2016, children’s and sports equipment was purchased, a playground in park “aidar” of novopskov village was arranged for a total of 129,077 thousand uah. the arrangement of the site near novopskov rccl (ukrainska str.) cost 65,528 thousand uah. purchase of children’s and sports equipment, the arrangement of a playground in osynove-1 village, mahistralna str. near the house of culture of gas workers – 91,590 thousand uah. the sum of 43,466 thousand uah was spent for laying of paving slabs in ukrainska str. near novopskov rtma, thus, the total sum amounted to 329,661 thousand uah. at the expense of compatible subvention from the state budget to the local budgets for the formation of the infrastructure of the atcs (1 million 200 thousand uah) and the settlement council (198 thousand uah) in 2016, a new garbage truck was purchased for the community utilities. since 2017 has not finished yet, there is still no final data on support for the atcs by the international donors. in the same way, we will present the monitoring of bilokurakyne satc. according to the information provided on the official site of the community, the area of bilokurakyne satc as of 01.11.2017 is 789.50 sq. km. the total number of settlements included in satc is 24. the population as of 01.01.2017 was 13,700 people. the administrative centre of satc  – the village of bilokurakyne (profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady). the information regarding the number of implemented projects in bilokurakyne satc is absent. however, in order to draw some conclusions, the dynamics of the procurement technical assistance can be reflected in the capital investments in actual prices (thousand uah per person) for the period of 2010–2015, which is presented in (figure 3). baltic journal of economic studies 31 vol. 3, no. 5, 2017 capital investments of bilokurakyne satc for 2010–2015 14,853 26,133 21,831 19,865 46,385 0 5 10 15 20 25 30 35 40 45 50 2010 2011 2013 2014 2015 fig. 3. dynamics of the capital investments (thousand uah) for the period of 2010–2015 source: made up by the authors on the basis of (profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady) based on the figure, we can conclude that the dynamics of the capital investment for 2010–2015 has not stable tendencies. there are constant fluctuations, but in 2015, there is an increase in the investment, which may indicate an increase in donor assistance to communities. during 2016, a total of 28 projects were implemented in the amount of 14.25 million uah, of which 6 ones are being implemented now for a total of 903 thousand uah. in 2016, bilokurakyne satc applied and became the winner in the competition for the investment programs and regional development projects, which are realized at the expense of the state fund of the regional development under the project for the total amount of 2.4 million uah, “major repair of the highway in pidhirna str., bilokurakyne village”, on the project “overhaul of the building of the central ambulatory of general practice of family medicine, bilokurakyne village” in the amount of 4.1  million uah. in 2016, the implementation of the project “major repair of the house of children and youth creativity” was completed with the support of the iom mission in ukraine. at the expense of international technical assistance for the project implementation, the sum of 1.0 million uah was received, in addition, at the expense of the united nations children’s fund (unicef), the repair works were carried out in the premises of the pre-school educational institutions “sonechko” and “berezka” in the village of bilokurakyne, and kindergarten “zirochka” in neshcheretove village for the total amount of 1.0  million uah (profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady). the total amount of subvention funds from the state budget to the local budgets for the formation of the infrastructure of the utc in 2016 amounted to 12,421,717 million uah. a vacuum machine for the cleaning of cesspits and transportation of waste to a disposal site for the amount of 794,280 thousand uah were purchased at the expense of the state budget subventions received from the international donors, an excavator for construction, loading, repair, and other work which cost 839,000  thousand uah, garbage truck  – 896,000  thousand uah, a tractor with a trailer and a mower for the amount of 277,700 thousand uah, a dumper – 737,000 thousand uah, a motor grader for the construction of road infrastructure – 2,348,000 million uah. a dump truck was purchased at a cost of 750,750 thousand uah, an auto hydraulically operated lift – 1,517,700 uah. thus, the attracted sum amounted to 8,160,500 million uah (profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady). the major repair of the water supply system in the village of kuriachivka was made at the expense of the ita in bilokurakyne satc, the cost of which was 592,093 thousand uah, as well as the repair of the water supply systems in the village of bunchukivka, the cost of which was 1,231,838 million uah. the administrative building was reconstructed for the rural club in the village of oleksandropil, the cost of which was 370,804 thousand uah. the administrative building with auxiliary buildings and facilities was reconstructed for the communal enterprise “bilokurakyne-komunservis”, the cost of which was 813,517 thousand uah. the total amount of the assistance was 1,184,321 million uah. major repair of sidewalks, the cost of which was 621,739 thousand uah, was made. some parts of the roads were repaired, the total cost of which was 482,749 thousand uah. major repair of the roads, the cost of which was 740,570 thousand uah, was made. at the expense of the state fund for regional development, the water supply system was restored, oleksandropil village, in the amount of 305,200  thousand uah. in addition, the sum of 896,400 thousand uah was allocated for the purchase of a vacuum machine for clearing potholes and transportation of waste to a recycling site, and for an excavator  – 997,900 thousand uah. the total sum is 2,199,500 million uah (profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady). at the expense of the local budget, in 2016, the street lighting was reconstructed in the following villages: neshcheretove, pankivka; tsiluikove; shaparivka; oleksandropil; kuriachivka; popivka, khomenkove pershe. the recreation area and the stadium in mira square, the village of bilokurakyne; the recreation area in kuriachivka; 10 children’s playgrounds were purchased and installed in the villages of the community. the cost was 448,083 thousand uah. for the year of 2017, the strategy provided the implementation of 64 regional development projects totalling 50.7 million uah. for the first half of 2017, the total investment attracted in the economy of the bilokurakyne region amounted to 36.6 million uah, baltic journal of economic studies 32 vol. 3, no. 5, 2017 which is 3.7 times as much as the investments compared to the same period last year (1 half of 2016 – 9.9 million uah), or 1911.1 uah per person. the volume of capital investments in agriculture for the first half of 2017 is 13.3 million uah, in the education sector  – 4.8 million uah, in the field of culture  – 1.5 million uah, in the field of medicine  – 1.4 million uah, infrastructure – 15.6 million. according to funding sources, 1.0 million uah or 2.7%  – the funds of the undp children’s fund (unicef), 1.0 million uah or 2.7% – funds of iom, 5.9 million uah or 16.1% – funds of the state budget, 2.2 million uah or 6.0% – funds of the regional budget, 13.2 million uah or 36.1%  – funds of local budgets, 13.3 million uah or 36.4% – own funds of enterprises and organizations. during 2017, at the expense of the local budget, major repair of the bridge-passage was carried out in the villages of neshcheretove, kuriachivka, tsiluikove. the street lighting in the villages was reconstructed: oleksiivka, zaikivka, lubianka, lyzyne. the total cost was 182,244 thousand uah. also, major repair of roads in the village of bilokurakyne was carried out, the cost of which was 2,302,820 million uah. the total sum is 2,485,064 million uah (profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady). 5. conclusions generalization of the scientific points of view in relation to the monitoring made it possible to establish that this is a complex of observations, collection, processing, and provision of information on quantitative and qualitative changes in the development of natural, technical, and social processes or phenomena, which allows for continuous monitoring of the state of the object of the study, the result of which is to obtain an assessment of the state and identify the negative trends in the development of the investigated process or phenomenon. the main objective of the monitoring is to obtain the necessary important information for the adoption of appropriate management decisions to improve the living conditions of amalgamated territorial communities. the organizational support of monitoring of the international donor support of bilokurakyne and novopskov settlement amalgamated territorial communities was proposed, which allowed establishing the dominant trends in the formation and development of the satc. as follows from the monitoring, it is concluded that the total amount of the international assistance for novopskov satc for 2015–2016 amounted to 22.5 million uah, for 2015, 13 million uah, and for 2016  – 9.5 million uah with a population of 12,316 thousand people in the community. the population of bilokurakyne satc was 13,226 thousand people (now  – 13,700 people), which is 910 more than in novopskov. the donor assistance for bilokurakyne community in 2016 amounted to 14.25  million uah, which is 4.75 uah million more than in the same period in the neighbouring community. such a situation, on the one hand, points to the absolute logic in the allocation of financial assistance among the communities in terms of the conceptual nature of the decentralization reform in ukraine; on the other hand, such trends require the establishment of the main causes of the non-equality of the donor assistance. in addition, it is found that the majority of the donor funds were allocated for novopskov and bilokurakyne satc to develop infrastructure, namely, repair of roads, sidewalks, social facilities (clubs, schools, kindergartens, hospitals, etc.), lighting. the most active assistance was received from such donors as the un children’s fund (unicef)  – in bilokurakyne satc, in novopskov satc – eu/undp. references: lendel, m., vynnytskyi, b., rateichak, yu. and sanzharovskyi, i. (2007). posibnyk z monitorynhu ta otsinyuvannya prohram rehionalnoho rozvytku. [manual of monitoring and evaluation of regional development programs] kyiv: v-vo ‘k.i.s. (in ukr.) lendel, m., vynnytskyi, b. and rateichak, yu. (2007). monitorynh ta otsinyuvannya stratehiy i prohram rehionalnoho rozvytku v ukrayini. [monitoring and evaluation of regional development strategies and programs in ukraine]. kyiv: v-vo ‘k.i.s. (in ukr.) hanushchak, yu. (2013). reforma terytorialnoyi orhanizatsiyi vlady. shveytsarsko-ukrayinskyy proekt ‘pidtrymka detsentralizatsiyi v ukrayini [reform of the territorial organization of power. swiss-ukrainian project "support for decentralization in ukraine]. – despro’. kyiv: tov ‘sofiya-a’. (in ukr.) starostenko, n., saienko, o., kolosova, v., and slynko n. (2014). byudzhetna pidtrymka yes v ukrayini. [the eu budget support in ukraine] kyiv: fop moskalenko o.m. (in ukr.) novopskovskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady 2016 rik. (2017) stratehiya rozvytku novopskovskoyi selyshchnoyi oth na period do 2025 roku. [development strategy of novopskov satc for the period up to 2025]. electronic resources. retrieved november 11, 2017 from: https://rada.info/ (in ukr.) novopskovskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady 2016 rik. (2017). profil novopskovskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady 2016 rik. [profile of the novopskovsky satc 2016]. electronic resources. retrieved november 14, 2017 from: http://novopskovrada.gov.ua/ bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady. (2017). profil bilokurakynskoyi selyshchnoyi obyednanoyi terytorialnoyi hromady. [profile of the belokurakinsky satc]. electronic resources. retrieved november 14, 2017 from: https://rada.info/upload/ baltic journal of economic studies 216 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 cherkasy state technological university, ukraine (corresponding author) e-mail: cibkonatasa@gmail.com orcid: https://orcid.org/0000-0002-8133-9115 2 cherkasy state technological university, ukraine e-mail: olieksandr.strychok@icloud.com orcid: https://orcid.org/0000-0001-7245-7745 3 cherkasy state technological university, ukraine e-mail: e.v.kolomytseva@gmail.com orcid: https://orcid.org/0000-0002-6769-0590 doi: https://doi.org/10.30525/2256-0742/2023-9-2-216-221 partnership support and functioning of enterprises during martial law nataliia tsybko1, oleksandr struchok2, olena kolomytseva3 abstract. the work is devoted to the study of the activities of companies in the field of mechanical engineering under martial law. methodology. the study used general scientific methods, in particular: theoretical generalization; methods of positive and normative analysis and statistical analysis. the subject of the study is manufacturing enterprises that are an integral part of the market economy. it is manufacturing enterprises that are the basis of the entire social development of the country. they have a key role of primary care of the national economy, satisfying the needs of society, namely: is the process of creating material goods necessary for its existence and development. production is vulnerable to external factors: economic, political, legal. these factors are interrelated, and their stable functioning leads to the smooth operation of enterprises. the war significantly changed and limited the conditions for the functioning of the production sector, affected partnerships, export and import activities, logistics, personnel issues, the stability of enterprises was shaken and their number in ukraine decreased. the purpose of the article. study of the conditions and peculiarities of the functioning of machine-building enterprises in the conditions of war and the role of partnerships to support their stable operation in the industrial market of ukraine. currently, more and more ukrainian researchers are studying changes in the functioning of enterprises during martial law, their ability to withstand crisis phenomena, and ways to involve and support the national economy. in the works of m.i. zveryakov economic models of development of enterprises in new economic realities are studied; g.o. shchigelska considers the impact of a new stage of the russian-ukrainian war on the economy; humenyuk v.v. analyzes foreign experience of post-war management transformation economy of the country; i.o. korostova considers the marketing component of development of enterprises during the war; o.g. doroshenko substantiates and proposes priority measures and ways of revival of ukrainian economy in wartime. research conclusion. the peculiarities of the functioning of manufacturing enterprises in the current state and the need to support the stable are studied the ability of the industrial market to reduce the negative impact of the war on the economy of ukraine. the article examines the impact of partnerships on the activities of enterprises, identifies the main risks faced by manufacturing enterprises during the war, as well as explores new directions for the preservation and development of enterprises and general changes in the industrial market. the authors highlight the measures that will help improve the operation of manufacturing enterprises under martial law. the role of partnerships as the main mechanism of production enterprises is also revealed, and the importance of consolidating a common goal is characterized. key words: industrial market, manufacturing enterprises, mechanical engineering, martial law, partnerships. jel classification: l10, l60 1. introduction on february 24, 2022, martial law was introduced throughout the country, which led to the restriction of work in all spheres of activity. the decrease in gdp of ukraine for 9 months of 2022 is estimated at 30%. the war severely limited the conditions for the functioning of industrial enterprises. in the first half of 2022, industrial production in ukraine decreased baltic journal of economic studies 217 vol. 9 no. 2, 2023 by 10.4%, and the production of machinery and equipment – by 13.3%, the average wage in the manufacturing sector of ukraine decreased by 3.5% in comparison with the corresponding period of 2021, as evidenced by the operational data of the ministry of economy of ukraine (ministry of economy of ukraine). considering ukrainians, this war has forced about 14 million people (including 2 million children) to leave their homes due to bombing and fighting and become internally displaced within the country or by going abroad (unicef, 2022). the war is destroying the ukrainian labor market. violence continues in places where 10 million workers were employed. at least 5 million have lost their jobs. hundreds of workers have died in hostilities. the unemployment rate has increased significantly (ministry of economy of ukraine). the purpose of the study is the conditions and features of functioning of machinebuilding enterprises in the conditions of war and the role of partnerships in maintaining their stable activity in the industrial market of ukraine. 2. analysis of the current state of manufacturing enterprises in ukraine in wartime, partners can be seen as defenders of the business they are working with. a partnership is a strategic collaboration between parties, whether it's two businesses, a business and an individual, or just company personnel. the main objective of this cooperation is to achieve the main goals of both parties. partnerships can help to grow faster, enter a new market, develop innovative solutions, and expand the customer base. all companies need this reliable support to systematize their business, especially under martial law. from the very first days of the russia's aggression, companies and their management were faced with the question of what to do, how to continue industrial production when a significant part of the population was simply fleeing, missiles were hitting cities, and business partners were thinking about saving their own lives. this period lasted differently in each case. at that time, it was very important to carry out internal communication with employees, which, depending on the structure of the company, was mainly carried out by the management, the press service of the company and the human resources department. security measures, the current situation and plans of the company were the main topics of communication. the volume of tasks within the company sometimes required round-the-clock work, seven days a week, with maximum motivation, because the survival of the company under the conditions of war was a separate economic front for the employees, the opportunity to survive under martial law, to survive the families of the employees. during the period of force majeure, the manage ment of enterprises had to make quick and concrete decisions on the further work of manufacturing enterprises. scenarios of development of further actions in enterprises were divided depending on circumstances, systematic nature of the enterprise, its location, profile of activity, but for all enterprises the first issue was safety. for enterprises located in the western and central regions of ukraine, this is primarily the protection of people and property from missile attacks. in the absence or insufficient number of places in bomb shelters, cellars, basement floors were equipped with additional protection of pits, and the supply of water and electricity was organized. the study of enterprises operating under these conditions showed the readiness of workers to be at their workplaces and perform official duties even during shelling. small businesses and enterprises in the frontline areas associated with the provision of services were able to quickly navigate by collecting all the necessary property of the enterprise and go by truck under fire immediately to the western or central ukraine, but most of the businessmen of this segment, having left everything, went only with their own belongings. in the first days of the war, the growing demand for residential and industrial real estate in the western and central regions led to a multiple increase in prices. since the beginning of the action introduced by the ministry of economy of ukraine, the program "business relocation" in ukraine, more than 745 enterprises have moved their business to safe territories, of which more than 550 (ukrinform) have started working, but for large and medium sized enterprises, such as machine-building plants, relocation is one of the last options for saving the business due to the complexity of the process, significant costs, impossibility of relocating a significant number of personnel, technological ties to the raw material base, and so forth. but machinebuilding enterprises, such as: kramatorsk heavy duty machine tool building plant and pozhmashina were the first in ukraine to move production from the donetsk region to the transcarpathian region. in total, since the beginning of russia's war against ukraine, at least 422 industrial enterprises have been damaged, destroyed, or confiscated, with a total output of $8,143.3 million, of which $479.2 million are machine-building enterprises. one of the largest enterprises in the field of machine-building that were destroyed are: new kramatorsk machinebuilding plant and energomashspetsstal. direct losses of enterprises (assets, warehouses) due to war damage already amount to more than $100 billion. the baltic journal of economic studies 218 vol. 9 no. 2, 2023 recording of losses of damaged, destroyed and captured enterprises is carried out both on the basis of microdata – evidence of losses of specific enterprises collected from public sources was submitted directly by enterprises through the website of the project "russia will pay ", and on the basis of answers of enterprises to a special questionnaire developed within the project and sent to member enterprises of the largest business associations. the calculation of the recorded losses is carried out on the basis of financial statements (kyiv school of economics). ukraine's daily expenditures from the state budget related to the war with russia amount to about 2 billion uah, while the total losses of ukraine every day related to the destruction of infrastructure and loss of economic potential amount to up to 4 billion usd per day (ukrinform). in these difficult business conditions, the support of business partners is very important. in times of difficult conditions partnerships in industrial enterprises become more important. in particular, the world media coverage of the war in ukraine led to a huge information boom, which allowed machinebuilding companies to present themselves in new markets with new products, to get acquainted with potential partners and new potential markets. one such promotional channel is trade shows, such as innotrans, the largest international trade show for transportation technology and innovation held every two years in berlin. in september at innotrans 2022 representatives of ukrainian machine building enterprises organized free of charge a joint ukrainian stand under the supervision of the trade publication "railway supply " and 17 ukrainian enterprises, including lviv locomotive repair plant, kharkov bearing plant, experienced mechanical plant "karpaty " and others. all the ukrainian companies gained record popularity among the participants, because the cooperation of ukrainian companies with foreign companies will lead to successful export of grain and metal to the eu, north africa and the middle east. in addition, messe berlin provided 216 square meters of space for the joint ukrainian stand and covered all the costs of construction, design and information support for ukrainian manufacturers at the exhibition (railway supply). such vivid examples of partnerships influence the business activity of ukrainian enterprises (figure 1) and, according to the statistics and reporting department of the national bank of ukraine, were able to increase the index of expectations for the business activity of ukrainian enterprises by 10% in the 4th quarter of 2022 (department of statistics and reporting of the nbu). partnerships in the industrial market are also well reflected in the geographical changes in the sales of industrial products in the first half of 2022 (table 1). despite a 32% decrease in the output of machinetable 1 performance indicators of industrial enterprises in ukraine for the last 5 years name 2018 2019 2020 2021 q3 2022 sales of industrial products, million uah 3 045 202 3 019 383 3 236 369 3 589 379 2 064 729 including sales of engineering products 208 676 212 027 197 343 204 852 100 677 export sales of industrial products, million uah 681 927 650 410 710 206 1 017 676 443 900 including export sales of engineering products 79 090 78 337 80 519 92 233 47 299 net profit/loss, mln. uah, of which: 109 289 133 702 -47 212 361 115 -134 712 enterprises that made a profit 233 569 243 493 174 376 453 626 117 347 enterprises that incurred a loss -124 280 -109 791 -221 588 -92 511 -25 206 profitability of operations at enterprises, % 3 4 -1 8 -5 -60 -40 -20 0 20 40 60 80 100 120 140 q3 2021 q4 2021 q1 2022 q2 2022 q3 2022 q4 2022 index of business expectations production volumes rising consumer prices figure 1. macroeconomic expectations of manufacturing enterprises in 2021–2022, % baltic journal of economic studies 219 vol. 9 no. 2, 2023 building enterprises in 2022, product exports increased by 7% of total industrial output in 2022 compared to 2021 (the state statistics service of ukraine). 3. prospects for the development of processing enterprises in ukraine the war immediately and radically changed the way of thinking, working and decision-making. the partnership relations in the manufacturing enterprises were also transformed into a process of rapid and important establishment, maintenance and expansion of mutually beneficial relations and communication with key partners: voluntary organizations, charitable foundations, state bodies, sections of mobilized workers and units of territorial defense. manufacturing companies were faced with the need to communicate with suppliers, customers, and employees at an unprecedented level, while at the same time information technology imposed a number of restrictions on the placement of video and photographic materials. however, it should be noted that at the time of martial law in ukraine, information technologies at industrial enterprises are gaining in importance, as they assume the role not only of effective promotion of goods to current and new sales markets, but also of necessary informational assistance to all legal entities and citizens of ukraine, for example: information about the possibility of providing humanitarian aid, premises and living conditions to persons who were forced to leave their place of residence as a result of negative consequences of the armed conflict, participation in the program of temporary relocation of enterprises from the affected regions, etc. in this case, information technologies support the backbone of the country 's citizens. enterprises, which during the years of their activity have gradually formed and developed partnership relations and at the moment already have a well-established and effective system, thus definitely receive advantages in the process of recovery and development of activity. a striking example is the possibility of conducting and successfully completing a test by one of the largest machinebuilding enterprises in ukraine, the kriukiv railway car manufacturing plant, of a new model of railcars for the european union market and the start of planned mass production of new railcars for the 1435 mm gauge, which will currently be the only ukrainian enterprise that manufactures and supplies railcars for the european union (railway gazette group). one of the most important ways of saving enterprises was effective state support, which is quite unusual in peacetime. against the background of terrible events, the war was able to unite the country with an ideology of victory. this allowed production enterprises to create an "airbag". partnerships between enterprises and the state provided for programs that include a variety of tools and means of assistance, one of which is a program for temporary relocation of enterprises from the affected regions, which is aimed at preserving the production and labor potential of ukraine and is focused on all enterprises wishing to relocate production to western ukraine. in this case, partnerships certainly have an important role to play in organizing appropriate measures for the preservation and development of the business, which may include: – financial support: obtaining a grant; – legal support: contractual relations, taxes, registration; – marketplaces for ukrainian exports, platforms for promotion of ukrainian brands and goods abroad; – the possibility of finding international projects, expanding sales markets or replacing them in terms of relations with the aggressor country; – media, information support and crowdfunding fees; – services to check the company for contacts with the occupiers; – branding and digital marketing assistance, and more. all of the above capabilities allow manufacturing companies to implement processes and plans in a short period of time that were previously unattainable or took a long time to prepare and implement, which has a positive impact on their development. the issue of restoration of all economic sectors and further development of ukraine after the victory in the war remains relevant. ukraine has developed interregional cooperation; interregional cooperation is a complex system of interrelated processes that began to develop long ago and has gained relevance in the last five years. this fact is also confirmed by the fact that the association agreement between ukraine and the european union contains a norm on the comprehensive development of interregional cooperation in the strategic perspective and in most economic and legal issues; it is based on the experience of european countries such as germany and italy (zablodska, sieriebriak, kolomytseva, dzhumageldiyeva, rohozian, 2019). this, in turn, influenced the significant support of the world to ukraine in the struggle for its independence and the defense of european borders. the imf's emergency financing program, tranches from the world bank, the european union, a swap line from the national bank of poland, as well as a trust fund created in europe are guarantors of financial support for the restoration of the economy and destroyed infrastructure. in addition to financial and humanitarian assistance, political support from partner countries baltic journal of economic studies 220 vol. 9 no. 2, 2023 is very important, and this is exactly what ukraine is receiving (doroshenko, 2022). it is obvious that there will be radical changes in partnerships in the industrial market in the country if ukraine wins, including these relations will be observed in the development of marketing activities of enterprises. it is necessary to consider possible ways of adaptation of marketing for restoration of business in ukraine: 1. marketing tactics – movement through tactical action. the ability to quickly refocus strategy in a rapidly changing business environment. 2. changing the market and choosing the audience. communicating with customers is crucial. 3. cost optimization. this is an integral part of a wartime marketing strategy. funds should be directed to marketing that is clearly focused on customer acquisition. 4. changing the content strategy. changing the content includes: updating essential information about the product (service); covering contributions to the struggle: (volunteering, charity); providing the audience with useful information. 5. rapid response to changes in the environment (korostova, 2022). based on studies of the dynamics of existing changes, the following should be assumed: firstly, an increase in the number of international organizations in ukraine. until recently, companies that had offices on the territory of the cis preferred the russian federation, now, most likely, ukraine will be valued. this event is an opportunity for cooperation and synergy of ukrainian brands together with popular global brands. secondly, it will be considered prestigious and honorable to have one’s own ukrainian company. creating ukrainian brands and products is quite significant value and reputation. the majority of companies are uncompromisingly ready to work on the ukrainian market, all these prospects are changing the marketing of partnership relations. the language, traditions, culture and ukrainian character, which in the past were almost not reflected in the branding and marketing of industrial enterprises, are currently being asserted. thirdly, the development of ukrainian information content of mass communication: social networks, video hosting, media applications, production, websites, advertising, films. after the victory, ukraine will become a place where everyone is willing to come and create cooperation. this perspective must be used boldly. next, there will be a large-scale organic cleansing of the media space. public figures and brands that abstained or were collaborators will not be able to return to ukraine. patriotism plays an important role in this issue, because attempts to return to the country will be stopped very quickly, without the possibility of approval, because ukrainians will remember the events during martial law for a long time. this will greatly affect the media space, creativity and business, because those who despise ukraine simply cannot exist here. and finally, the formation of pure competition can be emphasized. for some time after the victory everyone will look for traitors and collaborators, but a few years will be enough to understand that this is wrong behavior and it is better to focus on the ability of ukrainians to unite. 4. conclusions based on the results of the study, it can be concluded that the full-scale war of the russian federation against ukraine affects the economic situation in the country and the industrial market, changes the rules of its functioning and introduces new restrictions. in such circumstances, those manufacturing enterprises that quickly adapted to the peculiarities of work in the conditions of martial law and predicted the needs of the market immediately after its end, were able to minimize business losses or even create a certain basis for development. today the industrial market of ukraine is damaged and deformed, but it is under control in the circumstances of force majeure, which makes it possible to recover and continue working. prospects of the vision of further partnerships at the manufacturing enterprises of ukraine are the formation of further production relations to support business development, which requires open dialogue and mutual respect; ensuring continuous communication with partners and customers through the integration of various offline and online touch points; taking into account successful cases of formation and development of business under martial law; considering the possibility and necessity of exporting products, taking into account resource saving measures. all this will create a basis for development in difficult modern conditions and prepare for post-war reconstruction using the existing potential. references: zveryakov, m. i. (2022). formation of the model of economic development in new historical realities. economy of ukraine, vol. 8. (in ukrainian) shchigelska, g. o. (2022). influence of a new stage of the russian-ukrainian war on the world economy. proceedings of the 10th international scientific and practical conference "challenges in science of nowadays" (washington, usa, november 16-18). baltic journal of economic studies 221 vol. 9 no. 2, 2023 humenyuk, v. v. (2022). foreign experience of post-war transformation of public administration and lessons for ukraine. economy of ukraine, vol. 8, pp. 34–54. (in ukrainian) korostova, i. o. (2022). state and prospects of marketing during the war. digital economy and economic security. odesa. (in ukrainian) doroshenko, n. o., & doroshenko, o. g. (2022). priority measures and ways of resuscitation of the ukrainian economy in wartime. modern research in world science. proceedings of the 1st international scientific and practical conference. spc. lviv, pp. 1128–1135. ministry of economy of ukraine. available at: https://www.me.gov.ua unicef (2022). available at: https://www.unicef.org/eca/ ukrinform. the day of the war with russia costs ukraine up to $4 billion. available at: https://www.ukrinform.ua/ rubric-economy/3452024-den-vijni-z-rosieu-kostue-ukraini-do-4-milardiv-smigal.html kyiv school of economics. project "russia will pay ". available at: https://damaged.in.ua/ railway supply. innotrans 2022 exhibition has started its work. available at: https://www.railway.supply/ vystavka-innotrans-2022-nachala-rabotu/ department of statistics and reporting of the nbu (2022). business expectations of ukrainian enterprises, vol. 2(66). the state statistics service of ukraine. available at: https://www.ukrstat.gov.ua/ railway gazette group. ukrainian wagon manufacturer targets eu market with new designs. available at: https://www.railwaygazette.com/traction-and-rolling-stock/ukrainian-wagon-manufacturer-targets-eu-marketwith-new-designs/62196.article zablodska, i., sieriebriak, k., kolomytseva, o., dzhumageldiyeva, g., & rohozian, yu. (2019). interregional partnership as a background for the sustainable development: european facet. european journal of sustainable development, vol. 8. received on: 03th of march, 2023 accepted on: 25th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 407 vol. 3, no. 5, 2017 corresponding author: 1 department of accounting and auditing methodology, national scientific center “institute of agrarian economics”. e-mail: trachovad@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-407-411 role of state protectionism in depreciation policy formation darya trachova1 national scientific center “institute of agrarian economics”, ukraine abstract. the purpose of the paper is a generalization of state protectionism measures concerning the depreciation policy formation, which has resulted in economic growth in countries with a stable economy and their adaptation to economic conditions of ukraine. methodology. for writing the paper, the grouping and comparison methods were used for the research of business peculiarities of foreign and national enterprises’ operation and their impact on the enterprise depreciation policy formation; abstract-logic one was used during the examination of peculiarities of depreciation policy formation abroad; analysis and synthesis were used for the investigation of impact factors of different state regulation measures on efficiency of assets’ renewal and enterprise depreciation fund use, as well as stimulation of investments in the science and technology progress. results. state depreciation policy is the basis in investment and innovation process, as well as one of the most important mechanisms for promoting the self-financing policy. in the developed countries, the state policy concerning the accelerated depreciation has become the main tool for economic growth. depreciation policy reforming has to be conducted within and out of an enterprise simultaneously. under existing conditions, the enterprise’s depreciation fund formation is impossible at the expense of its own resources. the changes of regulatory support for enterprise activity are necessary for depreciation fund forming. tax protectionism has to be carried out in two directions: at the expense of profit redistribution before taxation as the special-purpose funding of fixed assets’ renewal as far as enterprise profitability allows and under the condition of the document approved the renewal of manufacturing capacities after the end of operation period. the control over state protectionism implementation regarding the tax heaven and directing funds for innovative renewal of fixed assets has to be carried out with the help of obligatory state accounting statements. practical implications. forming their depreciation policy, enterprises need to have direct management concerning their self-sufficiency in forming and using the depreciation fund. the logical one will be the application of intensified control measures over those amounts available at an enterprise after tax exemption by any state protectionism programs on the depreciation fund use for assets’ innovative renewal. key words: depreciation policy, accelerated depreciation, innovative development, state regulation. jel classification: m4, m41, m48 1. introduction innovation process management classically aimed at a change of priority system and analysis of business forms, which regulate the innovation activity and control of this process efficiency, is a strategically important element of the innovation process. such management aims to compare the determined parameters in the case if the business standing does not meet the requirements of acting economic system. this happens if this economic system does not provide any possibility for innovative stimulation of a renewal process and it is regulated by external factors. the primary focus of this process is on the innovation strategy, which represents a set of rules and standards regulating the procedure of innovation selection and fulfilment technologically, as well as managing the innovation process implementation into a sociallyoriented model of society. at this point of ukraine’s development, there is no innovation strategy for the development based on the efficient use of depreciation fund or own enterprise capital. unfortunately, the present economic situation does not afford an opportunity for enterprises to raise big amounts of bank loans and investments. thus, the depreciation fund and own profit is the only source of financing of innovation development for most national enterprises. the global economy has developed a lot of ways for stimulating the enterprise’s innovation development, state regulation and stimulation of innovation introduction into manufacturing. baltic journal of economic studies 408 vol. 3, no. 5, 2017 the purpose of the paper is the study and generalization of practical experience in the application of state protectionism measures on the depreciation policy carrying out concerning the stimulation of the use of depreciation fund resources for innovation renewal of manufacturing, as well as the determination of the most favourable combinations for our country. during the research, general scientific and special research methods were used, in particular: grouping and comparison methods were used for research of business peculiarities of foreign and national enterprises’ operation and their impact on the enterprise depreciation policy formation; abstractlogic one was used during the examination of peculiarities of depreciation policy formation abroad; analysis and synthesis were used for the investigation of impact factors of different state regulation measures on efficiency of assets’ renewal and enterprise depreciation fund use, as well as stimulation of investments in science and technology progress. the research theoretic-empiric basis were the best practices of foreign and country’s scholars, statistic evidence data, laws and regulations on the issues of enterprise’s accounting and depreciation policy formation. 2. category “depreciation” essence transformation nowadays one of the rapidly developing trends in economics is a self-financing theory, according to which the main source of investments is the net income retained in business and depreciation charges. studying depreciation essence transformation as an economic category, m. sokolov determines that there is a principle difference of the approach to its content in the middle of the last century and the present time, in particular, the change of its functional essence. in the last century, depreciation was determined as the value of fixed assets, which could be included into production expenses gradually while nowadays due to the rapid paces of the progress in science and technology and evident shortening of actual terms for fixed assets’ life, the volumes of charged depreciation per a time unit are getting bigger. depreciation reforms taking place in most countries tend to shorten the terms of the useful life and thus growth rate of depreciation charging. in some countries, the value of accumulated depreciation is much higher than it is necessary for their renewal by undepreciated value. such a difference between actual historical cost and overcharged depreciation is used as net investments for extended renewal. the boundaries of net investments and investments for early fund depreciation were disappearing gradually. now depreciation charges are replaced into investment activity income after taxation, bank loans, and other sources” (sokolov, 2008). in real life recently the accelerated methods have spread among depreciation charging methods as they allow increasing the proportion of depreciation savings in the capital investment financing sources, extending the renewal, and covering the depreciation of fixed assets simultaneously. 3. depreciation accelerated methods’ role increase studying the practice of the countries, which had so-called “economic jumps” in development of production technologies, we have determined that the method of depreciation charging has two common components – application of accelerated methods of depreciation charging and the term-shortening for the useful life of assets. the following statements are to be considered as positive aspects of accelerated depreciation methods: • in economic terms, these methods can be compared with an interest-free loan for manufacturing capacity renewal as they are actual costs exempt from taxation during the first years of assets’ useful life retained at an enterprise; • increased rate of depreciation charges during the first years accelerates the process of fixed assets’ renewal as it stimulates investments due to funds’ raising; • rapid paces of the progress in science and technology cause more drastic obsolescence of assets, so the availability of large amounts of funds for renewal during the first years of operation allows replacing the asset on time. the first vivid example of the efficient application of accelerated depreciation methods was the usa during the world war ii. such a depreciation policy allowed improving equipment infrastructure of enterprises within a short time, as well as boosting their output dramatically. the next years, the american authorities were applying the methods of accelerated depreciation that led the country to a leading position by workforce productivity and put it onto the higher technical, technological, and information level of the development. in the usa since the second half of the xx century, the great depreciation reforms have been carried out about once a decade for the purposes of term-shortening for the renewal of fixed assets. the result of those reforms was the proportion increase in depreciation charges in general investments from 18% in 1950 to 70% in 2010. depreciation reforms were implemented in the case of any cyclical slowdown in the economic growth or if it was necessary to remove the country’s scientific-technological development lag from the other developed countries. the latest boom of depreciation reforms concerning stimulating the accelerated depreciation methods was in 2009 in the form of a law on profit reinvestment. baltic journal of economic studies 409 vol. 3, no. 5, 2017 standards of the law enabled corporations to write-off the fixed assets as depreciating 50% of their value, while smalland medium-sized enterprises could write-off up to 100% of the fixed assets value during the first year of the fixed assets’ putting into service. the result of the law of 2009 was the investment value increase into the fixed assets, which was equal to the accumulated depreciation value. however, nowadays due to the reforms of a new country’s government, the state depreciation policy is aimed at the reduction of tax benefits applying the accelerated depreciation methods for the purpose of the increase in taxable profit amounts. having studied the experience of us depreciation policy formation, scholars v. fedorovych and a. patron have concluded that “u.s. industrial corporations wroteoff the fixed assets of their plants, their facilities and equipment and science and technology infrastructure as depreciation charges a long time ago. now they are actually operating free-of-charge equipment” (fedorovych, patron, 2007). it is the result of us economic policy aimed at creating the competitive advantages for its own industry and gaining the benefits in the sphere of science and technology with the help of the depreciation policy. 4. relationship of depreciation policy and research & development (r&d) studying the practice of applying the accelerated depreciation methods has made it possible to state that besides gaining the investment sources in the countries, where such a depreciation policy was introduced, the research and development process has become more important. therefore, having raised the funds for buying the assets, an enterprise is interested in manufacturing modernization and maximum application of innovations. this depreciation policy encourages attracting investments as investors have the real terms of return on investments. enterprises use tax benefits generated by the increase in accumulated depreciation amounts and reduction of profit sums before taxation while companies gain the real funds for the renewal of manufacturing capacity. the allocated funds are used by entrepreneurs for the replacement of outdated machines and equipment for newer and more modern ones at the initial stage. later when the technical infrastructure level of an enterprise complies with the latest achievements of science and technology, a business has to spend a tax benefit not only on the purchase of new assets but the creation of new and more efficient ones, i.e. on r&d. this economic law explains why in industrially developed countries the expenses on r&d are ten times and even thousand times higher than those in the developing countries. therefore, in the countries with a developed economy, the methods of accelerated depreciation are applied to fixed assets used in the innovative activity. for instance, in the usa, fixed assets used for r&d and having the useful life from 4 to 10 years are amortized within 5 years. moreover, during the first two years, it is allowed to write-off up to 64% initial value as expenses. britain’s practice demonstrates that companies are granted benefits: 100% depreciation rate for fixed assets used in innovative activity of such spheres as informationcommunication technologies (software, computers, mobile communications, internet-technologies), for energy-saving equipment 40% depreciation rate is applied to fixed assets used in the innovative activity of plants and investments in technological equipment for small and medium-sized enterprises. methods of accelerated depreciation are actively used in japan while the maximum writing-off rate is 50 and minimum one is 10. the application of accelerated depreciation of fixed assets’ value is provided only for companies, which use energy-saving equipment or equipment, which encourage efficient use of resources or does not damage the environment. france has legislated the accelerated depreciation methods since the 50s of xx century but they are only applied in some industries. nowadays the practice of accelerated depreciation of fixed assets’ value is applied only for companies’ innovative activity. in this case, innovations have to lead to energy-saving, environment conservation or introduction of high information technologies. france’s depreciation policy also has the methods of degressive depreciation. they are applied for the purposes of encouraging the progressive structural changes in the economy. by degressive system, depreciation charges are applied to the fixed assets purchased after 1960 and having the useful life over 3  years. regressive methods are applied to fixed assets from the date of putting a fixed asset into operation. in canada, accelerated depreciation is used within the restriction system, which is common for ukraine’s legislation. the peculiarity of the system is that enterprises determine the term of asset use by themselves but this term must not go beyond the legally established standards of depreciation. all fixed assets are divided into 17 groups; each group has its own standards varying from 4 to 100%. nowadays the methods of accelerated depreciation are used in such countries: in germany, 40% value of fixed assets used for r&d may be written-off during the first year of operation; in sweden, 100% value of a fixed asset is amortized during the first year of operation if the term of service life of a fixed asset is not more than 3 years; in italy, the maximum depreciation rate by accelerated methods may not exceed 15%. baltic journal of economic studies 410 vol. 3, no. 5, 2017 5. present depreciation policy of ukraine the above examples of state depreciation policy affecting the depreciation policy of enterprises and stimulating the progress in science and technology could be referred to the countries with a developed and stable economy. ukraine’s legislation on the stimulating the increase in the proportion of depreciation charges in investment composition has not succeeded. for instance, the proportion of depreciation in general investments of the above countries varies within 65–70%. in ukraine, there are no overall statistic data on the composition of investments in fixed assets. depreciation policy is implemented according to canadian variant concerning the regulation of asset’s useful life terms and their grouping. however, the depreciation rates in annual percentage are understated in ukraine’s legislation. moreover, more radical inflation fluctuations influence the physical availability of funds in the country rather than in canada. nevertheless, despite the imperfections of overall state depreciation policy, the mechanism of accelerated depreciation is in force, so entrepreneurs gain some benefits as profit tax saving. but there are two essential aspects, which have to be taken into account while forming the state depreciation policy and without which the formation of an enterprise’s depreciation policy is rather nominal. firstly, depreciation charges are not the only source of fixed assets financing. for example, according to official statistic data in january-september, 2017, in ukraine, 259545.0 million uah was invested as capital investment out of which 72.7% is the own funds of enterprises and organizations. according to our own observations, there is a common trend for the composition of enterprise’s investments – there are only about 3% of depreciation charges. secondly, the state does not have a precise control mechanism or a mechanism stimulating enterprises to use their depreciation charges in the investment activity. in other words, accumulated funds are spent by entrepreneurs not on improving material and technical resources but financial investments such as purchasing securities and granting loans and other operations. we have examined and systemized the measures on state stimulation of investing the own funds with a great proportion of depreciation charges in scientifictechnical developments and we have defined the effective mechanisms for stimulating: • credit against tax – repayment of fixed interest on capital investments for production development and modernization in the form of enterprise’s profit tax reduction for this amount (10-20% from the total value of capital investments or a fixed sum); • reduction of taxable income amounting the expenses on research and developments; • applying a coefficient, which mark-ups the depreciation rate (1.5 or 2); • term-shortening of useful life by 30-40% (actual elimination of equipment rebuilding). in order to implement these changes, it is necessary to take into account the main requirements of accounting – comparativeness, preciseness, and objectivity, clearness and accessibility, timeliness, cost-effectiveness, and rationality. they allow achieving the goal of accounting: to provide management, proper services, and specialists with reliable data on economic processes and financial standing of a company. thus, the application of the world practice on accelerated depreciation in forming the accounting system of ukrainian enterprises will stimulate the technological revolution and transfer the economy of the country to a new level. an improved mechanism for forming the real funds for the renewal of fixed assets as the enterprise depreciation fund will allow achieving the main goal and tasks of accounting. 6. findings thus, the state depreciation policy is the basis of investment innovative process, as well as one of the most important mechanisms of the self-financing policy promoting. in the developed countries, the state policy concerning the accelerated depreciation has become the main tool for the economic growth. depreciation policy reforming has to be conducted within and out of an enterprise simultaneously. reform should include such elements: 1. changing the legal framework. under existing conditions, the enterprise’s depreciation fund formation is impossible at the expense of its own resources. the changes of regulatory support for enterprise activity are necessary for depreciation fund forming. 2. tax benefits. tax protectionism has to be carried out in two directions: at the expense of profit redistribution before taxation as special-purpose funding for the renewal of fixed assets as far as enterprise profitability allows and under the condition of the document approved the renewal of manufacturing capacity after the end of operation period. 3. state control over the implementation of depreciation policy. the control over state protectionism implementation concerning the tax heaven and directing funds for innovative renewal of fixed assets has to be carried out with the help of obligatory state accounting statements. 7. conclusions since the implementation of amortization reform should be initiated by the state, enterprises need clear norms and procedures. that is precisely why our future baltic journal of economic studies 411 vol. 3, no. 5, 2017 researches are to develop the guidelines regulating the implementation of state and enterprise depreciation policy with control over depreciation funds’ use for innovative renewal of manufacturing capacities at national enterprises. such a control will ensure a new standard of accounting “amortization policy” and a subsection of the tax code “adjustment of the profit tax when using the depreciation fund”. references: comparing practices in r&d tax incentives evaluation. final report. european commission. directorate general – research. brussels. october 31, 2008. 145 p. retrieved from: http://www.euroscience.org/ ?gclid=cjwke aia94ncbrdx ismumrl83icsja aeeetqna scnx sr smin2jpsju8t9lsuhv2ihhu6tgod y0awuroczbdw_wcb zherdev, ye. metodychni zasady formuvannya amortyzatsiynoyi polityky na pidpryyemstvakh [methodical bases of formation depreciation policy in enterprises]. oblik i finansy apk: bukhhalterskyy portal [accounting and finance agribusiness, accounting portal] retrieved from: http://magazine.faaf.org.ua/metodichni-zasadi-formuvannyaamortizaciynoi-politiki-na-pidpriemstvah.html (in ukr.) karavaeva, n. (1995). nalohovoe stymulyrovanye ynvestytsyy: opyt ssha [tax incentives: the us experience] nalogi [taxes] vol. 7: 4-6. klenin, a. (2006). do pytannya vplyvu reformuvannya derzhavnoyi amortyzatsiynoyi polityky v ukrayini na protses vidtvorennya kapitalu promyslovykh pidpryyemstv [before the impact of reform of state amortization policy in ukraine in the reproduction of capital industry] visnyk ekonomichnoyi nauky ukrayiny [ journal of economic sciences of ukraine] vol. 2. p. 109-112 (in ukr.) sokolov, m. (2014). amortizatsiya i kak yeye ispolzovat dlya podyema ekonomiki [amortization and how to use it for economic recovery]. ekonomist [the economist] . vol. 2. p. 24-43 (in rus.). sokolov, m. (2008). izmeneniya v amortizatsionnoy politike kak osobaya forma nalogovogo vozdeystviya na razvitiye ekonomiki [changes in the depreciation policy as a special form of tax impact on economic development]. vse o nalogakh [all about taxes]. vol. 3. p. 23-33(in rus.) trachova, d. (2016). amortyzatsiyna polityka inshykh derzhav: dosvid ta perspektyvy zastosuvannya [depreciation policy of other countries: experience and prospects of ]. naukovyy visnyk khersonskoho derzhavnoho universytetu. seriya «ekonomichni nauk y» [scientific bulletin of kherson state university. a series of "economic science"]. v. 18 182-185 (in ukr.) fedorovich, v., patron, a. (2007). ssha. gosudarstvo i ekonomika [usa. state and economy.]. mezhdunarodnyye otnosheniya [moscow: international relations] (in rus.) baltic journal of economic studies 84 vol. 3, no. 5, 2017 corresponding author: 1 department of finance, cherkasy state technological university. e-mail: irynahoncharenko@gmail.com 2 department of finance, cherkasy state technological university. e-mail: o.berezina@chdtu.edu.ua doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-84-90 challenges and strategic priorities for the development of investment insurance in ukraine iryna honcharenko1, olena berezina2 cherkasy state technological university, ukraine abstract. the purpose of the paper is to substantiate the feasibility of expanding the scope of investment insurance in ukraine, taking into account its advantages over other types of insurance services as well as the possibility of minimizing the possible disadvantages. methodology. the list of the research methods of the subject under consideration includes the monographic method, analysis, techniques of the abstract-logical method, etc. results. the urgency of the article is that the disclosure of the internal potential of the insurance market in ukraine should take place with the introduction or activation of modern insurance products capable of meeting several financial needs at once, not only of their consumers but of the state as a whole. the development of voluntary life insurance plays an important investment role in the country’s economy, therefore, at the moment, the need to develop new financial products aimed at increasing voluntary insurance is urgent. the share of life insurance services in the insurance market of ukraine in dynamic is analysed. the purpose and positive consequences of expanding the segment of investment insurance are substantiated. investment insurance as a financial product has both advantages and disadvantages. the benefits include the transparent structure of the insurance product, the choice of investment strategy, the possibility of obtaining increased investment returns while preserving the benefits of the insurance contract, preferential taxation of investment income, the existence of a guaranteed amount of payment in the contract, etc.; to the drawbacks – the lack of the possibility of early termination of the contract with the receipt of all the insurance premiums paid, the absence of a guarantee fund, guaranteed income, long-term contracts, limited range of people who can be insured. to enhance the use of investment insurance in ukraine and to minimize these shortcomings, the prospects for the development of the investment insurance market are identified. investment insurance in ukraine has a high potential for active use and transformation into a popular insurance product. it is necessary to carry out further adaptation of products unit-linked to the structure and specifics of the domestic insurance market. the growth of the volume of investment insurance and, as a consequence, the expansion of the life insurance market as a whole, could become one of the most important factors in the development of the insurance industry in ukraine in the near future. practical implications. the main idea of the article was to justify the expediency of providing and using the investment insurance service in ukraine, subject to minimize the shortcomings of this type of insurance and taking into account the prospects for its further development in the domestic financial market. value/originality. the conducted research allowed getting some results, such as promising directions for the development of this type of financial product in the domestic insurance market. key words: investment, insurance, investment insurance, life insurance, unit-linked insurance, insurance products, insurance services. jel classification: g22, f36, g11 1. introduction the current period of the domestic economic development is characterized by numerous discussions on the financial crisis, political and social instability and negative predictions about the destabilization of the financial system of ukraine, primarily due to the negative tendencies of the functioning of the financial market and numerous bank failures of its professional participants. the insurance segment of the financial market is also actively debated, as it is directly dependent on the state of the economy and is closely connected with the level of state financial and economic security. in the modern world, insurance plays a very important role in the economy of any country, especially where the risks baltic journal of economic studies 85 vol. 3, no. 5, 2017 to the physical condition and entrepreneurial activity of citizens and legal entities are constantly growing. given this, the importance of insurance, and the scope of insurance coverage of various aspects of private and economic life is constantly increasing. this is a positive trend, as it indicates a rise in the overall financial culture of the population, as well as in the level of participation awareness in insurance. in such circumstances, it should be remembered that the decline in demand for financial services, which is currently observed in ukraine, is also an opportunity for the development of new areas of financial services. therefore, at the moment, insurers carry out “brainstorming” among their own senior staff and representatives of the scientific elite in order to find ways to update insurance products; show lawmaking initiative, develop digital technologies for the promotion of insurance services. the disclosure of the internal potential of the insurance market in ukraine should take place with the introduction or activation of modern insurance products to meet several financial needs at the same time, not only of their consumers but of the state as a whole. for example, an increase in the number of voluntary insurance contracts can reduce social tensions in the range of persons covered by insurance, and also reduce the financial burden on the country’s budget. the development of the voluntary life insurance is of great investment value in the economy of any country. thus, it is necessary nowadays to develop financial products, which will increase voluntary insurance. the insurance companies are in active search for this job, widening insurance services. on the other hand, the majority of ukrainians do their best to improve their finances and make it stable in order to form a firm future. hence it is important to discuss investment and insurance products that are becoming extremely popular among the population of the developed countries. 2. results of previous researches the problem of insurance was investigated by domestic and foreign scholars. thus it proves the topicality of the research. kreidych i.m. (kreidych, 2009) studies the particularities of the investment insurance in ukraine, feschenko v. (feshchenko, 2013) specifies particularities of unit-linked investment insurance and preconditions for its implementation. due to the analysis of the mentioned above works including the author’s works (honcharenko, 2014, 2015; honcharenko & berezina, 2016; berezina, 2017), it is possible to make a conclusion. the insurance services used in ukraine known as an investment insurance abroad has the name a unit-linked insurance. domestic scholars quiet often combine these concepts to adjust the experience of the developed countries to the domestic situation. the research done by stasevsky  a. (stasevskyi, 2012) “investment life unit-linked insurance is a new perspective for the ukrainians” is a vivid example. the future development of the unit-linked insurance in ukraine is also studied by honta o.i. (honta, 2014). foreign scientists (rajagopalan & pai 2006; ciumaș cristina &chiș diana-maria, 2014; straub martin, 2011; hochreiter ronald, pflug georg & paulsen volkert, 2005; preda ana & monea mirela, 2011; anant gupta, 2015; frantz christophe, chenut xavier &walhin jeanfrançois, 2003; moller thomas, 1998) were interested in issues of expansion of the sphere of provision and use of investment-related insurance services unit-linked. however, the issues of maximizing the benefits and minimizing the deficiencies of investment insurance in ukraine, defining the prospects for its development in the domestic financial market are still of great scientific interest. 3. theoretical and law bases of investment insurance investment insurance is a form of cumulative insurance, which is done by investing in profitable financial instruments. at present, many insurance companies active in the domestic insurance market manifest their willingness to work in this direction. investment insurance is a new financial instrument for the practice of insurance in ukraine, due to which an insured person not only pays insurance premiums but also influences the investment process. the size of the investment income is not fixed and depends on the results of investing reserves. the benefit to the client of the freedom of action is obvious: in addition to the mandatory minimum guaranteed sum insured, investment insurance will also be able to receive additional profits. however, in domestic legislation, there is currently no clear definition of the concept of investment insurance, which complicates its formation and development in ukraine. this financial product is not standardized, which prevents it from active using. there appeared a question of the need to introduce investment insurance in the insurance markets of postsoviet countries back in 2007 when the european system of life insurance was gradually introduced into several types. at that time, these changes were seen as a progressive legislative provision for expanding life insurance companies, and it was believed that this new financial instrument could develop a new idea to joint investments for the ukrainian insurance market. as a result of the first stage of the modernization of the laws of ukraine on insurance, investment insurance was defined as a type of insurance in the field of life insurance, which provides for the insurer’s duty in case of death of the insured person before the expiration of the contract and/or the survival of the insured person termination of the contract, and/or occurrence of an event in the life of the insured person provided for in baltic journal of economic studies vol. 3, no. 5, 2017 86 the insurance contract, make an insurance payment or insurance payments, the size of which depends on the results of the size the cost of technical reserves under investment insurance contracts. the terms of the investment insurance contract stipulated the insurer’s obligation to make an insurance payment in case of death of the insured person in the amount not less than the sum of insurance premiums (contributions, payments) under such agreement (draft law of ukraine “on amendments to the law of ukraine “on insurance”, 2009). nowadays, in the period of post-crisis recovery of the global economic system, investment insurance is a modern civilized insurance product that is actively developing in the financial markets of many developed countries of the world  – switzerland, germany, hungary, poland, czech republic. 4. scopes and dynamics of investment life insurance in ukraine investment life insurance in ukraine compared to western countries, where it plays an important role in the financial system and forms a significant part of the insurance market, is not developed enough. the share of life insurance in the total amount of the domestic insurance market ranges from 4-8% on the indicator of insurance payments (table 1), which shows the limited market opportunities for the development of investment insurance. this situation arose as a result of unfavourable economic and political conditions in the country – life insurance is, in essence, a long-term financial product (on average, it lasts 10-20 years), but insurers cannot be sure of the effectiveness of their investments because of the instability of the domestic economy. the potential of the life insurance market in ukraine is high, given the fact of the aging of the nation and the inability of the pension system to ensure a decent life level for the abandoned people; however, there are many factors that hinder its development. for example, the narrowness of the product line, in particular, the impossibility of introducing all unitlinked products in the domestic market over the limited investment opportunities in the financial market, insufficient level of financial literacy of citizens, for the most part, life-saving life insurance remains difficult to understand the product, etc. the current state of the life insurance segment in the financial market of ukraine is characterized by the following data. gross insurance payments (premiums, contributions) for life insurance in 2016 amounted to 2756.1 million uah, which is 26.0% more than in 2015 (as of december 31, 2015 – 2186.6 million uah). the volume of gross insurance premiums from life insurance in 2016 (information on the state and development of the insurance market of ukraine, 2017) amounted to 418.3 million uah, which is by 14.9% less than in 2015 (491.6 million uah). the bulk of the amount of changes in life insurance reserves has been formed under other accrued insurance contracts, namely 997.2 million uah. according to other life insurance contracts, the value of changes in life insurance reserves is 18.9 million uah. according to the results of 2016, 13 insurance companies “life” received a negative value of an increase in life insurance reserves for a total amount of 37.2 million, uah which is caused by pre-term cancellation of insurance contracts (by the end of 2015, the negative value was declared 13 insurance companies “life” for the total amount of 11.8 million uah). thus, currently, there exist unfavourable grounds for the development of investment insurance but, on the other hand, a new insurance product can become a rescue mechanism that will allow the insurance market to gain new positive dynamics of its development, and the life insurance segment to take a worthy place in its structure. the pace of the dynamics of the life insurance market in our country has an unstable tendency, which is directly related to cyclical changes in the economic situation. as we see from the statistics provided by the state regulator, the national commission, which carries out state regulation in the field of financial services markets, the information concerning the investment insurance within the life insurance segment is not allocated to a separate analytical category, yet does not allow to make a reliable conclusion on the state of its development in ukraine. however, this type of insurance has its own specificity, which does not allow to put a sign “=” between investment insurance and life insurance in general. investment life insurance is the insurance protection of the life of the insured table 1 scopes of life insurance in ukraine indices years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 portion of insurance companies “life” in the total number of companies, % 14,6 15,3 16,0 14,7 14,5 15,0 15,2 14,9 13,5 12,6 portion of the gross insurance premiums in the overall life insurance, % 4,4 4,6 4,0 3,9 5,9 8,4 8,6 8,1 7,4 7,8 portion of the gross insurance payments for overall life insurance, % 0,6 0,6 0,9 0,9 1,5 1,6 3,2 4,7 6,1 4,7 resource: compiled by the authors according to the data obtained from information on the state and development of the insurance market of ukraine, 2017 baltic journal of economic studies 87 vol. 3, no. 5, 2017 person plus an investment instrument (investing money in order to generate profits) with the possibility of obtaining investment income. in investment life insurance programs, the amount of cash is divided into two funds: guarantee and risk (investment). the guarantee fund provides for the return of the paid-in capital in any situation on the stock market. purpose of the investment fund is to ensure the profitability of this financial product (zhegalova e. v., 2014, p. 37). 5. purpose, specific features, and directions for the development of the investment insurance in ukraine the purpose and tasks of activating the introduction of investment insurance in ukraine are presented in table 2. however, one should not forget that the global experience of investment insurance generates both the benefits of this financial product and its disadvantages. therefore, both clients and insurance companies need to study this type of insurance, find out its hidden negatives and consult with professionals to obtain maximum returns upon termination of the transaction. only a competent approach to understanding the contract and strict adherence to its norms and regulations can provide expected income and prevent damage. consider the specific features of investment life insurance. each insurance premium paid by an insurance company client is drawn up in accordance with the specifics of this type of insurance product in two parts: one part is used for the formation of a fund that is directly related to life insurance, the second is the accumulation or investment component invested in stock and money market instruments. prior to the introduction of investment insurance, insurers in the life insurance segment offered only risky contracts and accumulative life insurance. in the first of these insurance products, there is no accumulation of assets at all, the second  – the profitability is very low. therefore, customers were looking for more profitable financial instruments, and insurers  – an opportunity to offer consumers more profitable insurance products and services. so the idea of creating an investment tool in an insurance cover, which was called “investment life insurance”, was born. from the title, it becomes clear that in the first place  – an investment product, which aims to provide customers with significant investment income. however, it is evident that the higher the level of return on investment, the higher its risk. at the same time, insurance companies do not have the right to transfer the risk of investing to their clients. therefore, having received a large initial down payment from the client, the insurance company divides it into two unequal parts. the guarantee portion is designed so that its investment in risk-free financial instruments allows the client to receive the amount of the down payment before the contract is completed. thus, the client is guaranteed to preserve the money he invests in investment life insurance. less, the investment part  – is directed to assets that potentially can bring high profitability but also carry a significant risk. if assets significantly increase in price prior to the termination of the contract, the client may receive high investment returns. if sharply depreciates – the client will not get profit but, at the same time, will definitely save the capital invested in the beginning. unlike accumulative life insurance, where the technical interest rate is guaranteed, profits are not guaranteed for investment life insurance. it entirely depends on the success of funds that the client chooses in the insurance contract. each investment life insurance contract has an individual account table 2 purpose and tasks to activate the investment insurance in ukraine purpose tasks, positive consequences demographic potential support decrease in the financial burden of the state budget of ukraine due to the compensation of a portion of the pension payments; partial solution of the pension fund deficit, connected with the life expectancy and population aging, the possibility to rise the state pension at the expense of the voluntary donations in the investment pension programs. increase in demand for the financial services offer of a new financial product for consumers of all ages, sex, and professions; offering a product with the active participation of the client in making financial decisions (investment component); incentive to use of maintenance costs through a transparent structure; flexible decision-making system for the transformation of individual product parameters; provision of insurance coverage for the main types of risk; improvement of service by constant communication with the client. increase of insurance products expansion of distribution network of insurance services due to the emergence of a new product line, unit-linked, flexible system of motivation to distribute the product, which is possible through an advance payment of commission. increase in the financial stability level of the insurance market participants obtaining of long-term financial resources; more efficient use of equity by insurers; the possibility of increasing the quality of the risk management system and economic security; improvement of the mechanism for assuring the quality of warranties and risks assessment at the expense of a long period of service provision. resource: compiled by the authors baltic journal of economic studies 88 vol. 3, no. 5, 2017 specifying the actual number and type of purchased investment financial instruments, their prices and accrued payments and risk insurance premiums. customers, as a rule, are notified once a year in writing in the form of a statement on the status of their accounts (kreidych i. m., 2009). thus, it is possible to systematize advantages and disadvantages of investment insurance (table 3). to minimize shortcomings of investment insurance, it is advisable to propose some promising directions for the development of this type of financial product in the domestic insurance market. among them are: 1. formation of the industry standard of investment insurance. 2. development of the legislative framework for the regulation of investment insurance relations. 3. increasing the level of transparency of the insurance product for the client. 4. implementation of standards for the calculation and distribution of additional investment income among clients. 5. optimization of insurance protection programs. 6. extension of the list of persons who can use the service. 7. expanding the spectrum of investment strategies and investment tools (portfolio insurance strategies, option strategies, macro strategies, domestic and foreign promotions, precious metals and commodities, real estate, art objects, currencies, etc.). the prospects for the development of the unit-linked investment insurance market in ukraine are due to a combination of the following factors. 1. overcoming legislative barriers, including improving the legal framework in the financial market. 2. formation of the preferential income-tax regime unit-linked policies. 3. reforming the pension system. unit-linked policies can be a potential guarantee of a higher level of profitability, unlike other products of life insurance. 4. increase financial literacy of the population. first of all, at the expense of citizens’ awareness of possibilities of investing savings in the financial market. 5. increase in transparency, capacity and stabilization of insurance, stock, and other segments of the financial market. 6. further expansion of the range of banking insurance products, which has become widespread in recent times. realization of the existing ability to sell unit-linked products through banks. thus, investment insurance in ukraine has a high potential for active use and transformation into a popular insurance product. it is necessary to carry out further adaptation of products unit-linked to the structure and specifics of the domestic insurance market. the growth of the volume of investment insurance and, as a consequence, the expansion of the life insurance market as a whole, could become one of the most important factors in the development of the insurance industry in ukraine in the near future. table 3 advantages and disadvantages of the investment insurance advantages disadvantages transparent structure of the insurance product (allocation of investment, insurance and expense component). lack of early termination of the contract with receipt of all paid insurance premiums. ability to choose an investment strategy, not limited to conservative investment instruments. the absence of a guarantee fund that would be able to provide payment to the client in cases of withdrawal of a license or insolvency of an insurance company. correspondence of the structure of investment assets and the principles of distribution of investment income. not every fatal case is recognized as an insurance event. possibility to obtain higher investment returns while maintaining the benefits of the insurance contract. lack of guaranteed income. in case of negative development of the investment strategy, the client after the expiration of the contract will receive only a guaranteed payment of the contract. preferential taxation of investment income. only a small part of the one-time contribution is invested in investment instruments with a potentially high income. major investments are risk-free, low-income financial assets. taking into account the principle of complex interest, according to which the accounting of profit is made, the final amount grows at times. in order to prove the occurrence of an insured event, the insured person or the beneficiary must provide the insurance company with a wide range of documents. insurance terms may vary throughout the term. you can change the term, conditions, monthly amount, type of insurance, investment fund, number of heirs, etc., which allows you to control the investment. the complexity of the insurance contract is that the more insurance risks are included in the insurance coverage of the product, the more various restrictions in terms of time, on additional terms, on the amounts of payments. the existence of a guaranteed payment amount in the contract. agreements are concluded for a long time, and it is not known what can happen to insurance companies during this time. investment insurance keeps the money more secure than bank deposits since the priority of saving is in the first place. some groups of people are not accepted for insurance, for example, people with a disability, or are in an outpatient treatment. resource: compiled by the authors baltic journal of economic studies 89 vol. 3, no. 5, 2017 6. conclusions the study of features, problems, and prospects of investment insurance in ukraine made it possible to draw the following conclusions. 1. investment insurance is a new financial instrument for the practice of insurance in ukraine, which will enable the insured person not only to pay insurance premiums but also to influence the investment process. this type of insurance comes from the field of life insurance and provides for the insurer’s duty in case of death of the insured person before the expiration of the contract and/or the survival of the insured person before the expiration of the contract, and/or the occurrence of an event in the life of the insured person provided in insurance contract, insurance payment, the size of which depends on the results of placement of technical reserves under investment insurance contracts. 2. the development of investment insurance in ukraine is restrained by the low popularity of life insurance among citizens, proving indicators of the dynamics of shares of insurance premiums, payments and companies providing such services in the insurance market in a ten-year retrospective. the current state of the life insurance segment in the domestic financial market is characterized by a drop in the level of profitability and loss-making activity of insurance companies in the life sector. at the same time, official statistics released by the national commission for the regulation of financial services markets do not foresee the identification of information relating to investment life insurance, so instead of concluding its use in ukraine, we can only conclude that there is a weak basis for its formation and development. 3. investment insurance as a financial product has both advantages and disadvantages. the benefits include the transparent structure of the insurance product, the choice of investment strategy, the possibility of obtaining increased investment returns while preserving benefits of the insurance contract, preferential taxation of investment income, the existence of a guaranteed amount of payment in the contract, etc.; to the drawbacks  – the lack of the possibility of early termination of the contract with the receipt of all the insurance premiums paid, the absence of a guarantee fund, 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(2014). tendentsyy y perspektyvы razvytyia strakhovanyia zhyzny v rossyy [the tendencies and perspectives for development of the life insurance in russia]. regional development, vol. 2, pp. 76-79. baltic journal of economic studies 82 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 sumy state pedagogical university named after a.s. makarenko, ukraine (corresponding author) e-mail: science@sspu.edu.ua orcid: https://orcid.org/0000-0002-7364-1998 2 volodymyr dahl east ukrainian national university, ukraine e-mail: docentklus@gmail.com orcid: https://orcid.org/0000-0002-1841-2578 3 volodymyr dahl east ukrainian national university, ukraine е-mail: ivchenkoevg85@gmail.com orcid: https://orcid.org/0000-0002-6665-2461 doi: https://doi.org/10.30525/2256-0742/2023-9-1-82-88 the role of innovation clusters for the sustainable development of the region olga kudrina1, yuliia klius2, yevhen ivchenko3 abstract. the article considers the directions of intensification of the processes of clustering in the regions of ukraine. based on the analysis of the experience of clustering is proposed zoning, taking into account the collisions of national business and industry, as well as regulatory policy. the subject of the study is innovative clusters and their role in the sustainable development of regions. the purpose of the study: to develop practical recommendations to ensure and stimulate the processes of clustering in the context of indev regions of ukraine. methodology. for this purpose the following tasks were solved step by step: the peculiarities of indev region in the economic and social progress of territories in the context of clustering processes were determined; the strategic prospects for the formation of indev system of ukrainian regions and the directions of intensification of clustering processes were substantiated; the key problems of innovation clusters development in ukraine were systematized taking into account international experience of their creation; the management basis for the formation of innovation cluster models was developed; normative legal acts for information support and proper organizational and economic support of the process of innovation clusters formation were elaborated; methodological support for the processes of diagnostics of innovation clustering in the indev system of the region was improved. theoretical (analysis, systematization and generalization of scientific results; process modeling) and statistical (express-analysis) methods were used. conclusions. recommendations on the diagnosis of processes of innovation development of regions and processes of innovation clustering on the basis of express-diagnostics procedure, which is based on the assessment of parameters of innovation clustering. according to the results of innovation clustering regions of ukraine for the first cluster recommended principles of management support processes clustering: the development and implementation of a policy of active integration with europe, a free economic zone with the eu and other countries of the world; investments in innovation infrastructure; stimulation of venture financing; creation of business gas pedals and platforms of innovative design; organization of technoparks, involving foreign investments, grant projects, budget financing. the second cluster is recommended: involvement of scientific institutions in the processes of active learning business incubators and business gas pedals, adaptation and dissemination of benchmarking technology for innovation clustering. the third cluster is recommended: implementation of industry-specific target projects by indev, creation of innovation infrastructure facilities based on clustering processes, implementation of regional programs to support business and individual industries, formation of new industry projects to develop production (new production facilities, logistics centers, etc.). key words: cluster formation, innovation development, clustering processes, information activities, economy. jel classification: o31, c38, d83 1. introduction under decentralized economic development, the scale and direction of changes in regional economic complexes are determined by the priorities and strategic vectors of innovative development (indev) of ukrainian regions. the dynamics of such changes in the modern world community is provided by innovation clusters. clustering processes in indev baltic journal of economic studies 83 vol. 9 no. 1, 2023 regions allow to create conditions for the generation of innovations, stimulate the production of innovative products and increase the competitiveness of individual structures. formation of indev regions system on the basis of clustering processes creates the basis of consolidated economic space of the state, in the formation of which the leading role is played by innovation clusters as the basis of indev regions. assessing the state of indev regions of ukraine, it should be noted that indev regions are mainly carried out using outdated models and mechanisms, which determines its low efficiency. the key reason for this is the lack of a clear understanding of the diversity of innovation environment of the regions, the fundamental heterogeneity of processes taking place in innovation activity, the lack of effective tools and technologies for active clustering of the regional economy, taking into account the best european practices. the study of modern trends and leading models of indev regions proves the complexity and ambiguity of these processes. innovative progress in the modern understanding of scientists gets its realization only in certain conditions of active, multilevel, scientifically grounded support, corresponding to the needs of economic interests of regions and the country as a whole. multifaceted areas of research, the search for approaches to activate indev regions, received their coverage in the scientific works of foreign and domestic scientists: s. breschi, f. malerba (2001), e. jerome s. (2015), s. engel, i. del-palacio (2009), m. muro, b. katz (2010), o. kudrina (2019; 2020; 2021), s. markovsk, n. mikula (markovsky, 2011), м. porter (porter, 1998), a. tkachuk, v. tolkovanov, s. tallman, m. jenkins, n. henry, s. pinch (2004) etc., where the problems of regional innovation, development of innovation clusters, etc. are analyzed. the study of theoretical and practical developments of these authors allows us to assert that they proposed a practical tool for indev region, in particular, on the basis of the creation of innovation clusters, but the diagnosis of the processes of clustering in indev region and the formation of organizational, economic and information support of innovation clusters require solutions. the aim of the study is to develop practical recommendations to ensure and stimulate the formation of clusters in the context of indev regions of ukraine. to achieve this goal the following tasks were solved: the peculiarities of indev region in the economic and social progress of the territories in the context of clustering processes were determined; the strategic prospects for the formation of indev system of the regions of ukraine and the directions of intensification of clustering processes were substantiated; the key problems of innovation clusters development in ukraine were systematized taking into account the world experience of their creation; the managerial bases of innovation cluster model formation were developed; the provisions concerning the information support and corresponding organizational-economic maintenance of the process of innovation clusters formation were elaborated; the methodological support of innovations clustering processes diagnostics in the indev region system was improved. 2. theoretical foundations of clustering processes in the system of innovation development of the region gradual transition to a post-industrial society involves the formation of an innovative model of economic development, providing the most efficient use of all types of resources, including information, and qualitative improvement of all factors of production based on the latest achievements of the innovation economy. (porter, 1998) innovative development is an indispensable condition of socioeconomic progress of territories, which is reflected in the paradigm of relations: "knowledge" – "scientific and technological progress" – "innovation" – "innovative processes and technologies" – "innovative industries and industries" – "innovative economy " – "innovative social progress" – "socio-economic progress of territories". (markovsky, mikula, tkachuk & tolkovanov, 2011) the study of the essence of the key conceptual characteristics of indev enterprise ("innovation", "innovation process", "innovative development", "innovation economy ", "innovation clusters", "cluster development potential", etc.) allowed to define innovation as newly formed or improved competitive technologies, products or services, as well as organizational and technical solutions of a production, administrative, commercial or other nature that significantly improve the structure and quality of production and (or) the social sphere. (breschi, malerba, 2001) it is established that there is no unified approach to the definition of the categories of indev region, and their systemic vision is determined in accordance with the provisions of modern economic theory and management (figure 1). within the framework of national economies and their unique diversity, indev systems of states and territories are formed, focused on the realization of the potential of territories using the unique combination of resources available to the territory – labor, capital, intelligence. (engel, jerome, 2015) internal and external characteristics of innovation systems of the region, their connections, infra structure support, institutional reflection of inno baltic journal of economic studies 84 vol. 9 no. 1, 2023 vation activity, state and regional innovation policy, activity and relevant policy of corporations form a specific national innovation model. the formation of indev systems in the region within the national innovation model should be carried out in the most effective way on the basis of clustering processes. (engel & del-palacio, 2009) the author's vision of the innovation cluster as a target association of enterprises, organizations, highly qualified specialists for the development, implementation and realization of initiatives of the innovation cluster is presented. participants of the innovation cluster are stakeholders in the indev system of the region. (kudrina, 2019) 3. study of problems and experiences in the formation of clusters in the indev system of the region the authors have systematized features of global and domestic experience of clustering processes in the indev system of the region. this allowed to establish that the provision of indev territories in the world is mainly due to the formation of innovative clusters. according to experts' estimates, clustering currently covers about 50% of the world's leading economies. (muro & katz, 2010) the characteristic features of the process of formation of clusters were defined: – dynamics of the process of clustering and active growth in the number of clusters; – increase in the share of clusters with state participation; activity of diversification processes in the positioned clusters and cluster initiatives; – significant diversity of cluster models, cluster forms of relations, goals of cluster initiatives, as well as mechanisms and technologies of interaction within innovative clusters. provision of indev regions based on the stimulation of clustering processes should be carried out using modern methods of managerial influence on the processes of clustering. (tallman, jenkins, henry & pinch, 2004) the vectors of such impact include: – development and implementation of the targeted innovation policy of the regions, creation of the institutional foundations of indev territories, taking into account the objectives of regional development programs; – development and implementation of the regional policy of clustering and formation of innovation clusters; – creation of scientific basis for formation of innovative model of economy; – formation of the institutional structure of the national system of science and education; development of state programs and plans for financing indev region with its priority areas; – harmonization of the region's indev conditions with international norms, standards and business principles; integration of the education and d oc tr in al c ha ra ct er is ti cs o f i nn ov at io n interrelation and independence with the development of industrial production consistency at all stages of the management process the presence of the main characteristics in the organization of the process and forms of relevant activities formation of an independent direction of research in the field of innovation management regional development information progress figure 1. provisions of modern economic theory and management • incapacity of state and regional policy and infrastructure to create clustersmanagerial • lack of information transparency, asymmetry of information resourcesinformational • low level of financial and investment securityinvestment • absence of formation of economic interestsmarket • incompleteness of norms • and standardscultural figure 2. problems hindering the formation of the cluster baltic journal of economic studies 85 vol. 9 no. 1, 2023 science system into the european intellectual market, etc. characteristics of the problems hindering indev regions and the creation of innovation clusters in ukraine are shown in figure 2. the problems that constrain the processes of clustering in the indev system of the region reflect the systemic nature of internal conflicts at various levels of regional governance, so the solution of certain problems should occur systematically, at the level of state and regional development programs aimed at the transition to an innovative model of economic development. this model is based on clustering processes in the system of indev regions as a tool to complete the process of market transformation and transition to the european model of indev regions. (omelyanenko, kudrina, semenikhina, zihunov, danilov, liskovetska, 2020) 4. ensuring the formation of clusters in the indev system of the region in modern management theory and practice, the cluster approach is the most recognized and effective form of stimulating indev. it represents a unique way to consolidate science, education, production and the state to create an environment of innovation and implementation of cluster initiatives of different duration. (omelyanenko, prokopenko, kudrina, petrova, biloshkurska, biloshkurskyi & omelyanenko, 2021) the cluster approach to indev regions provides a fuller use of the territory 's resource potential, unique opportunities to enter new markets, and stimulates the development of small and mediumsized businesses. in addition, this model of management of the indev region organization helps reduce costs by reducing transactions, share human resources, infrastructure facilities, services and other resources, simplify the information support of the cluster, and finally, obtain synergies for all cluster members. thus, the cluster is a unique management structure in which enterprises and commercial organizations can effectively interact with scientific and educational institutions, regional authorities. the analysis made it possible to develop a management structure for the formation of an innovation cluster. they include approaches to the diagnosis of indev and the processes of creating innovation clusters, organizational and economic support of the processes of creating clusters in the region, including information support of the process of creating an innovation cluster. proceeding from the urgent tasks of promoting the formation of clusters in the indev system of the region, the authors improve the management framework for the formation of the model of innovation cluster. it has: description of participants of the process, levels of their interaction, goal, objectives, principles and approaches to modeling the process of innovation cluster. this helped to form the model of an innovation cluster in the region's indev system. based on the systematization of types of clusters focused on innovation as a key priority of interaction (innovation, innovation and education, innovation and production, industry and investment, innovation and investment, information and innovation, transboundary) it was found that one of the most promising organizational models of innovation cluster is the innovation and education model (innovation and education cluster). its implementation can attract higher education institutions and other research institutes to the formation of the cluster. this makes it possible to form powerful research and scientific-educational centers for clustering, as well as to attract the potential of scientific institutions to support cluster development through grants for the best research and programs to support innovative projects to the processes of cluster formation. based on the definition of models of information support (closed, open, semi-closed and semi-open type with a description of the main characteristics of information activities and communication links), the purpose, objectives and principles of information support of innovation cluster were developed approaches to information support and appropriate organizational support of the formation of an innovation cluster, which allowed to identify key conflicts in the system of information support of innovation cluster, to develop an algorithm of information support for the development of innovation cluster and to form a mechanism of collective (integrated) use of information resources of innovation cluster. the proposed approach to the diagnosis of indev processes and the formation of an innovation cluster in the region is based on the calculation of the innovation clustering index of the region. it is an integral indicator that takes into account the assessment of the content of innovation activity, assessment of the innovative resource (the ratio of human resources) and assessment of the innovative potential of the region. this approach made it possible to develop an algorithm for rapid diagnosis of clustering processes in the indev system of the region. this algorithm is aimed at assessing the parameters of innovation clustering in the region and at grouping regions according to the clustering criterion. it is a regulatory impact on the target groups of regions depending on their indev and long-term plans of state, regional or sectoral management. the algorithm for rapid diagnosis of clustering processes in the indev system of the region provides the following steps: baltic journal of economic studies 86 vol. 9 no. 1, 2023 1. justification of expediency of express diagnostics of innovation clustering in a particular region and the choice of parameters for assessing the state of innovation clustering. 2. determination of indicators for assessing innovation clustering. 3. formation of the information base required for rapid diagnosis in accordance with the established parameters and indicators. 4. determination of methods and tools for collecting information: collection of statistical information, the formation of information requests for indicators. 5. express diagnostics according to the set parameters. 6. analysis of the information obtained (processing, systematization). 7. development of recommendations for cluster formation processes in the indev region. for the purpose of analysis, forecasting, planning processes of clustering in indev region, development of practical directions of innovation policy of clustering in the regions of ukraine, rapid diagnosis of innovation clustering in the regions of ukraine is proposed to conduct on the basis of indicators of innovation activity in the region. the index of innovation activity of the region is a relative index that characterizes the innovation activity of the region in terms of human resources (employees involved in innovation and research activities), the results of innovation activity and the available potential in the region. determination of indicators of innovation clustering is based on the analysis of data on the state and dynamics of indev in ukraine and its regions. it is proposed to calculate the coefficient of availability of human resources, the coefficient of innovation activity and the coefficient of innovation potential of the region as indicators for assessing innovation clustering. the coefficient of human resources provision is calculated as the ratio of the total population of the region to the sum of employees of scientific organizations and researchers. it reflects the share of the population engaged in innovative activities in the region, which, in fact, is its intellectual potential. chrp = n / (ne+nr) where n – the total number of population of the region, kp – the number of employees of scientific institutions; nr – the number of researchers. according to the calculation of the coefficient of human resources provision of the regions of ukraine, it can be noted that the highest index has kyiv; this is due to the high number of people who are engaged in scientific activity, namely the number of employees of scientific organizations and the number of researchers. the top three also include kharkiv and dnipropetrovsk oblasts. the coefficient of innovation activity of the region ciar is calculated as the ratio of the sum of scientific organizations (sso) and the number of innovation-active enterprises (niae) to the sum of the number of enterprises (ne) that introduced innovations, and the number of introduced new technological processes (nip). ciar = (sso + niae) / (ne + nip) this coefficient reflects the degree of innovationactive enterprises, that is, the number of organi zations that are engaged in innovation activities, as well as the degree of implementation of innovation products by these organizations. the leaders in this indicator are kyiv, odesa and mykolaiv oblasts, which reflects the trends of growth in the number of innovation-active enterprises in these regions, expansion of ties with scientific institutions, strengthening of integration processes with europe and other countries. the coefficient of innovation ability (cia) is the ratio of the sum of the number of executed scientific and scientific-technical works (new) and the number of created advanced technologies (nct) to the sum of the number of introduced types of innovation products (nitip) and the number of patents to inventions (np). cia = (new + nct) / (nitip + np) the value of the coefficient of innovation ability reflects the ability of the region to create and use innovation products that are the result of the activities of scientific organizations in the region. according to the results of calculation of the coefficient of innovation ability five most innovative regions were identified, in which the value of the indicator is in the range of 14.44-10.07. among these regions are: kyiv, odesa, luhansk and chernivtsi oblasts. the only exception is kirovohrad oblast, where, according to calculations, the coefficient of innovation capability reached 29.76. this is due to a large number of scientific and scientific-technical works performed in the region during the reporting period. according to the results of the analysis of calculation of the index of innovation clustering of regions of ukraine the ranking of regions of ukraine with the grouping of regions by the level of innovation activity of regions of ukraine was carried out. at the same time, three zones of regions were identified according to their level of innovation activity in the interval framework of the development of innovation activity in the region from 32.26 to 2.02: 1. zone of high innovation cluster formation (value from 1 to 10.00 and higher) – regions that are actively engaged in innovation activities, baltic journal of economic studies 87 vol. 9 no. 1, 2023 introduce innovations and have a high potential for indev. 2. zone of average innovation cluster formation (value from 10.00 to 5.00) – innovation activity in the regions of this group is developed, but does not take a leading place among the branches of the region, performing a service or complementary role in certain industries. the regions that have indicators within these limits are located in the middle zone of the innovation cluster. 3. zone of low innovation cluster formation (value from 5.00 to 1.00) – regions where indev is not a priority area of development, is at an initial or low level and requires the development of programs to create favorable conditions for indev in the region, as well as appropriate investments. the grouping of regions of ukraine by the level of their innovation clustering is shown in figure 3. 5. conclusions according to the results of innovative clustering of ukrainian regions, the first cluster includes: kyiv, kirovohrad, odesa, luhansk, rivne, chernivtsi, lviv oblasts. the principles of management support of cluster formation processes were recommended for them: – development and implementation of a policy of active integration with europe, a free economic zone with the eu and other countries of the world; – investment in innovative infrastructure; stimulation of venture capital financing; creation of business gas pedals and platforms for innovative design; organization of technoparks, with foreign investment, grant projects, budget financing. high • 1. kirovohrad oblast, 32,26 • 2. kyiv (city), 16,62 • 3. odesa oblast, 15,38 • 4. luhansk oblast, 14,65 • 5. rivne oblast, 13,83 • 6. chernivtsi oblast, 12,33 • 7. lviv oblast, 10,60 average • 8. donetsk oblast, 9,11 • 9. poltava oblast, 8,69 • 10. volyn oblast, 8,28 • 11. khmelnytskyi oblast, 7,86 • 12. dnipropetrovsk oblast, 7,74 • 13. zhytomyr oblast, 6,98 • 14. vinnytsia oblast, 5,88 • 15. sumy oblast, 5,83 • 16. cherkasy oblast, 5,55 • 17. ivano-frankivsk oblast, 5,50 • 18. ternopil oblast, 5,43 • 19. zakarpattia, 5,27 • 20. kyiv oblast, 5,05 low • 21. kharkiv oblast, 4,42 • 22. chernihiv oblast, 4.24 • 23. kherson oblast, 3,29 • 24. mykolaiv oblast, 3,22 • 25. zaporizhzhia oblast, 2,02 figure 3. the grouping of regions of ukraine by the level of their innovation clustering the second zone includes a cluster formed by regions with an average level of innovation activity: donetsk, poltava, volyn, khmelnytskyi, dnipropetrovsk, zhytomyr, vinnytsia, sumy, cherkasy, ivano-frankivsk, ternopil, zakarpattia, and kyiv oblasts (defined as territories with an average level of development and inactive innovation environment). it recommends the basics of management support for these regions: the involvement of scientific institutions in active learning processes of business incubators and business acceleration centers; adaptation and dissemination of benchmarking technology for innovation clustering. the third zone includes regions with a low level of innovation activity: kharkiv, chernihiv, kherson, mykolaiv, zaporizhzhia oblasts. the principles of management support are recommended: implementation of sectoral targeted indev projects; creation of innovation infrastructure facilities based on clustering processes; implementation of regional programs to support business and individual productions; formation of new sectoral production development projects (new productions, logistics centers, etc.). the obtained results and the developed recommendations constitute the methodological basis for stimulating clustering processes in the system of indev regions. diagnosis of indev processes of regions and processes of innovation clusters formation using the index of innovation clustering provides measures of regulatory impact on the target group of regions in accordance with their indev and state, regional or sectoral management plans. baltic journal of economic studies 88 vol. 9 no. 1, 2023 references: breschi, s., & malerba, f. (2001). the geography of innovation and economic clustering: some introductory notes. oxford university press, industrial and corporate change, vol. 10, no. 4, pp. 817–833. engel, jerome s. (2015). global clusters of innovation: lessons from silicon valley. california management review, vol. 57, no. 2, pp. 36–65. engel, s., & del-palacio, i. (2009). global networks of clusters of innovation: accelerating the innovation process. business horizons, vol. 52/5, pp. 493–503. kudrina, o. (2019). formation and development of innovation clusters as one of the tools of increasing the competitiveness of the region. collection of scientific papers of donsuu: "problems and prospects of ensuring sustainable socio-economic development". economy series, xx, vol. 311, pp. 148–158. omelyanenko, v., prokopenko, o., kudrina, o., petrova, i., biloshkurska, n., biloshkurskyi, m., & omelyanenko, o. (2021). digital component of innovation landscapes: context of sustainable development at the local level. the 44th international ict convention – mipro 2021. september 27 – october 1, 2021. opatija, croatia, pp. 1519–1523. doi: https://doi.org/10.23919/mipro52101.2021.9597058 omelyanenko, v., kudrina, o., semenikhina, o., zihunov, v., danilov, o., & liskovetska, t. (2020). conceptual aspects of modern innovation policy. european journal of sustainable development, vol. 9 (2), іssue 2. doi: https://doi.org/10.14207/ejsd.2020.v9n2p238 markovsky, s., mikula, n., tkachuk, a., & tolkovanov, v. (2011). competitiveness of territories. kyiv: legal status icc. muro, m., & katz, b. (2010). the new cluster moment: how regional innovation clusters can foster the next economy. metropolitan policy program at brookings, pp. 1–59. porter, м. (1998). clusters and the new economics of competition. harvard business review. tallman, s., jenkins, m., henry, n., & pinch, s. (2004). knowledge, clusters, and competitive advantage. the academy of management review, vol. 29, no. 2, pp. 258–271. received on: 19th of january, 2023 accepted on: 27th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 165 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national technical university of ukraine "igor sikorsky kyiv polytechnic institute", ukraine e-mail: shevchuk-oa@ukr.net orcid: https://orcid.org/0000-0003-4117-1474 2 national technical university of ukraine "igor sikorsky kyiv polytechnic institute", ukraine (corresponding author) e-mail: skydoor13@gmail.com orcid: https://orcid.org/0000-0002-1860-756x researcherid: acx-8552-2022 3 national technical university of ukraine "igor sikorsky kyiv polytechnic institute", ukraine e-mail: uas.natalya@gmail.com orcid: https://orcid.org/0000-0001-7519-6560 doi: https://doi.org/10.30525/2256-0742/2022-8-4-165-175 the impact of transaction costs on management decisions (on the example of ukrainian companies) olena shevchuk1, glib mazhara2, nataliia semenchenko3 abstract. the purpose of the article is to study the impact of transaction costs on managerial decision-making on the example of ukrainian enterprises. the article notes that, despite the significant achievements of the institutional theory, there are still questions about the clarity of understanding of its key concepts and definitions, the content of transaction costs and the concept of their minimization, the expediency and efficiency of the existence of certain types of transaction costs. the subject of the study is the essence of transaction costs of the enterprise and their modern classification. the methodological basis of the study was an integrated approach to the essence and classification of transaction costs, as well as general scientific and special research methods: retrospective and systematic analysis, comparison and generalization, grouping and sampling, methods of building linear and nonlinear economic and statistical models with constraints. as noted above, the main issue of the study was the classification of transaction costs. the economic situation in ukraine was assessed, which allowed to determine that transaction costs are quite high for enterprises due to: insufficient development of markets, unformed structure of institutions, complex and ambiguous legislation, significant tax pressure and existing facts of corruption. the authors noted that the list of components of transaction costs is constantly updated due to the complication of the socio-economic conditions for doing business associated with crisisforming force majeure factors (in particular, the covid-19 pandemic), which have become very significant for the world economy and have significantly changed approaches to the allocation of investment resources. as a result of the study, it is proposed to supplement the existing classification of transaction costs with costs associated with adapting to new business conditions ("adaptation cost"), which together characterize the ability of an enterprise to adapt to new conditions of functioning and development. the main conclusions of the study include the fact that, given current trends, reducing transaction costs is becoming a priority issue. at the same time, in the context of the proposed classification, a model for minimizing transaction costs was developed for the first time, which includes a modern classification of transaction costs and provides the possibility of their modeling for a more complete and logical calculation. according to the authors, the presented model will provide an opportunity to more correctly determine the effectiveness of management decisions related to investments in the core business of the enterprise. it is important to note that, given the basic provisions of institutional theory, a significant amount of transaction costs, in principle, can neutralize the investment process. thus, the study is of both theoretical and practical importance and gives an idea of solving a number of both industrial and social problems and can become the basis for further research. key words: transaction costs, decision making, indirect optimization models, enterprise behavior. jel classification: d23, d81, d83, м13, с10 baltic journal of economic studies 166 vol. 8 no. 4, 2022 1. introduction humanity is at a turning point in its development. the realities of industrial civilization are becoming a thing of the past, the cadence of capitalism is coming to an end, and new transformational processes are being formed under the influence of the fifth industrial revolution. they prevail in all spheres of human existence. today, the transformation processes taking place in society form fundamentally new approaches to the functioning of complex socio-economic systems. new methods and techniques are being created to assess the feasibility and efficiency of resource use in conditions of their limited and gradual reduction. it should be noted that previous achievements, which have determined the general trends in the implementation of the modern management paradigm, play a significant role in the formation of new approaches, and, most importantly for evolutionary changes, support this process and form the foundation of "new thinking". at the same time, it should be noted that the speed of events and processes that are taking place allows, in comparison with previous periods, to quickly identify the main trends that form the basis of the new paradigm and, accordingly, scientific thoughts and research. it is important to note that currently in the ukrainian economic space the issue of transaction costs management is of particular relevance. according to the authors, this is due, first of all, to the fact that in ukraine there is a huge discrepancy between the institutional model and the use of the resource base and legal support to the strategic goals of the state development. the shift in the structure of transaction costs towards a significant predominance of the public sector with the simultaneous protection of their own rights significantly complicates the management process, eliminates the ability of the enterprise to further minimize and control their level. in addition, the analysis of the current economic situation in ukraine shows that administrative reforms related to the decentralization of public administration, changes in the administrative-territorial structure, powers of local governments and responsibilities of local communities significantly affect the management of transaction costs and the correctness of their calculation. in addition, the modern process of transaction cost management is complicated by the impact of crisis-forming force majeure factors. against the background of the existing methodological difficulties, in the absence of a unified approach to the definition of categories and types of transaction costs, a universal methodological basis for assessing their level at the enterprise, the inconsistency of the existing information base (completeness, transparency, timeliness, objectivity) with the requirements of the analytical process, there is a need to study the impact of transaction costs on the cost of making management decisions at the enterprise. 2. literature review today, a large number of scientists and specialists in the field of applied economics are engaged in the study of the impact of transaction costs on management decision-making in all areas of enterprise functioning. for the first time, r . coase (coase, 1937, 1960) drew attention to transaction costs and described them. it is determined that when concluding any contract (transaction) it is necessary to have information, negotiate, supervise, establish relations, resolve differences. at the same time, t. eggertsson (eggertsson, 1987) noted in his works that within the framework of orthodox economic theory, which assumes the availability of complete information, the costs of obtaining it are not taken into account. as a result, the theory of transaction costs did not receive proper distribution for a long time. weakliem d. l. (weakliem, 1989), ghoshal s., moran p. (ghoshal, moran, 1996) argue that despite the theory 's significant impact on managerial decisionmaking, some of the recommendations derived from this theory may not only be wrong, but also dangerous for corporate managers because of the assumptions and logic on which it is based. they provide evidence in favor of building a completely different theory, more adapted to "organizational economics". contrary to these approaches, nobel laureate d. north (north, 1990), after carefully studying the work of r . coase (coase, 1960), identified the fundamental component of transaction costs, which gave him the opportunity to justify the viability of the institutional theory. the combination of the theory of human behavior with the theory of transaction costs and the theory of production during the study of the american market allowed the author to conclude that each transaction is always accompanied by certain costs, which are based on two main components: 1) information search costs associated with determining the useful qualities of the object of exchange; 2) costs of ensuring rights and their observance during the conclusion of agreements, which are associated with the presence of institutions, the role of which is to minimize costs due to the reduction of uncertainty during the interaction of subjects. on this basis, the author concluded that the theory that does not take into account their functio ning does not correspond to economic realities. baltic journal of economic studies 167 vol. 8 no. 4, 2022 williamson o. e. (williamson, 1981, 1990), robins j. a. (robins, 1987), pratten s. (pratten, 1997), beccerra m., gupta a. k. (beccerra, gupta, 1999) drew attention to the need to apply a transactional approach to understanding the essence of the functioning of an economic organization. comparing non-traditional approaches to organizational forms of the firm and the market with new contract theoretical approaches, the author distinguishes the theory of disposal rights, the economic theory of agency relations, as well as the approach based on transaction costs. this comparison allowed the author to conclude that the theory of disposition rights is mainly based on retrospective analysis of institutional mechanisms, while the economic theory of agency relations focuses on the development of incentives in advance (ex ante, as costs associated with the preparation and execution of transactions); and the approach based on the theory of transaction costs emphasizes the importance of the organizational structure ex post – the costs that arise after the signing of agreements due to the violation of the mechanism of interaction and leveling its consequences with the maximum preservation of their own interests at the stage of contract execution. hennart, j.-f. (hennart, 1988) consider the application of transaction cost theory of joint-stock for joint ventures. a distinction is made between "scale" joint ventures, which arise when parent companies try to internalize a failing market, but inseparability due to economies of scale makes full ownership of the relevant assets inefficient, and "network" joint ventures, that arise from the simultaneous failure of markets for servicing two or more assets, when these assets are firm-specific public goods and the acquisition of the firm that owns them will entail significant management costs, the author proves that excessive transaction costs in intermediate markets lead to the fact that economic agents choose to manage through equity stakes rather than through signing contracts. nooteboom b. (nooteboom, 1993) in his work investigates the differences in the factors that determine the transaction costs of "threshold" costs at the stages of contact, contract and control and related to the position of the firm size. on the basis of which the author concluded that depending on the field of activity, experience and training, transaction costs of firms are determined by limited rationality, opportunism, uncertainty and transaction specificity of assets. lesmond d. a., ogden j. p., trzcinka c. a. (lesmond, ogden, trzcinka, 1999) in their paper argue that transaction costs are important for many empirical analyses, but we do not always have the opportunity to estimate them, and those that are available are quite expensive to acquire and difficult to use. therefore, they propose a model for estimating the efficiency of transaction costs based on the use of time series of daily securities returns and zero returns. anup madhok (madhok, 996) developed his vision of complementing the theory of transaction costs with the theory of organizational learning, where the firm is considered as a set of knowledge and processes underlying it. considering the impact of the resource attributes of the firm on managerial decisions, as well as the associated difficulties of contracting, the author expanded the focus of the study from minimizing the costs associated with the organization of activities within a particular management system to the management of the value embedded in the knowledge base of the firm. in recent years, the choice of threshold parameters by firms has become the subject of careful study in the field of information services. thus, laura poppo and todd zenger (poppo, zenger, 1998) developed a model of comparative institutional effectiveness. based on models of knowledge and measurement costs, the authors investigated the impact of exchange features on the effectiveness of markets and hierarchies as governance institutions. the work of meyer, k. e. (meyer, 2001), who analyzes the impact of transaction costs on business organization in the conditions of a protracted transition period, deserves special attention. the results are of practical importance for multinational companies that are part of transition economies and need to adapt their strategies to local institutions and reduce their dependence on highly imperfect markets. the question of choosing a method of entering a foreign market was also considered in the work of brouthers, k. d. (brouthers, 2013), who proved that companies whose choice of method could be predicted using an extended model of transaction c osts showed significantly better results (financial and non-financial) than companies that did not use it. trevor l. brown and matthew potosky (brown, potosky, 2003, 2005) examine contract management at the government contracting level and note that when governments enter into contracts for the provision of services under conditions associated with the risk of default, they use various monitoring techniques to increase the ability to monitor and adjust the work of suppliers. as a result, the authors prove that the monitoring process significantly increases transaction costs and sometimes leads to incorrect redistribution of public resources, which indicates institutional imperfections. what is very interesting in each study is the combination of different directions, which until now remained largely independent of each other. baltic journal of economic studies 168 vol. 8 no. 4, 2022 thus husted b. w., folger r . (husted, folger, 2004) combined: organizational justice and transaction cost economics. the result of these studies is a model of transaction costs based on a more complete description of human psychology acting in exchange relations. they prove that transaction costs often arise due to the difficulty of assessing the fairness of the exchange of goods and services. in addition, the relationship between the governance mechanism and the perception of fairness is governed by the elements of interactive fairness that characterize the exchange. jeonwook kim and joseph t. mahoney (mahoney, 2005) explore the need to apply the theory of property rights to explain business situations where inefficient economic results are maintained on the volume of transaction costs. the above list of works, of course, is not exhaustive, but it confirms the relevance of the chosen topic, its practical significance and wide scope of application, since transaction cost economics explains organizational decisions and final productivity. but the scale of the effect shows that there is still much to learn (crook, combs, ketchen, aguinis, 2013). the purpose of the transaction costs item for making managerial decisions (on the example of ukrainian enterprises). thus, the main objectives of the article are as follows: 1) theoretical substantiation of the impact of transaction costs on managerial decision-making on performance. 2. hence, the goals of the article are: 2) to supplement the existing classification with transaction costs associated with adaptation to new economic conditions; 3) to develop a model of minimizing transaction costs and compare the results of the enterprise with transaction costs that most fully reflect the efficiency of investments; 4) to assess the return on investment, taking into account transaction costs. 3. institutional approach to determining transaction costs one of such fundamental achievements, which makes it possible to form a logical basis for understanding the complex processes of modernity, forms the philosophy of perspective, is the assimilation of the theory of institutionalism. the institutional school is based on an expanded interpretation of the nature of the enterprise, including the analysis of internal and external factors of influence, possible solutions to the problems of organization, planning, control, motivation. according to the institutional theory, an enterprise is a hierarchical structure based on a system of rules that ensures interaction between its employees. at the same time, the company is considered as an alternative to the market mechanism of concluding transactions in order to save transaction costs. such costs are determined by the emergence of situations of uncertainty about the external environment for competitors and their behavior in the market space. thus, the main task of the institutional paradigm of enterprise development is to analyze its behavior under conditions of incomplete information, "market failures" or "uncertainty " ("insufficiency ") (coase, 1960; eggertsson, 1987). in contrast to the neoclassical paradigm, where transaction costs are not considered, representatives of the institutional direction focus on the internal components of the enterprise, which characterize the costs of business operations and are based on certain rules and regulations of staff interaction. thus, the company is considered as a separate institution, where rules and regulations simplify decision-making processes and increase the ability to meet the interests of various economic agents (weakliem, 1989). at the same time, relying on the optimization tools of the neoclassical paradigm, representatives of the institutional theory see the limitation of the expansion of enterprises in the significant costs of management and control. in the context of significant expansion of the enterprise, transaction costs tend to zero, while management costs increase significantly (coase, 1937). as a result, there is a risk of reducing the individual contribution of the employee due to the inability to control the overall result. therefore, the economic development of the enterprise depends on the ratio between internal and external transaction costs. at the same time, a significant drawback of the institutional paradigm is the difficulty of formalizing data that are subjective and difficult to quantify. in addition, the new institutional economic theory, despite significant achievements, remains controversial in terms of the clarity of understanding of its key concepts and definitions, the content of transaction costs and the concept of their minimization, the feasibility of some of them, the efficiency and profitability of transaction costs, etc. thus, all of the above confirms the relevance of the topic of the chosen research and provides an opportunity to outline its direction, namely to explore some aspects of minimizing transaction costs. it is necessary to study the components of transaction costs that significantly affect these processes in order to build a correct mathematical model that will allow to study both aspects of minimizing transaction costs and compare them with the final result of any economic system. baltic journal of economic studies 169 vol. 8 no. 4, 2022 4. components of transaction costs taking into account the study of the essence of transaction costs and factors that directly affect their volume, it is believed that they can be classified by sources of occurrence: і. costs of searching for information information search costs (costs of searching for buyers or sellers, costs of obtaining information about them, obtaining information about the market situation, costs of maintaining a marketing service, advertising, telephone and postage costs, etc.). this component of transaction costs occupies a special place among the studies of leading scientists and specialists, since depending on the institutional environment of economic systems, their structure changes. analysis of recent scientific publications on this issue shows that considerable attention is paid to it with the definition of "information aberrations" that form the market environment of the state and increase the level of transaction costs. thus, insufficient, incomplete and non-transparent information leads to additional costs associated with the purchase of goods at higher prices than possible in a given market and the sale of products at prices lower than possible. thus, economic entities should compare the benefits of better terms of purchase and sale with the costs of searching for information and loss of time for the transaction. please note that in the article we emphasize that the inherent nature of transaction costs in itself is a significant limitation when making decisions on the establishment and further functioning of the enterprise and its management decisions as such. thus, the above specificity indicates that they will always be greater than 0, and their list will constantly change (transform). form the conditions for the above information, the formula (1) where і – the number of information types; р1 – possible benefit from better terms of purchase; сі – the cost of the i-type of searching information; еі – the efficiency of і-type of searching information, in its turn it can be described in the following way, formula 2: (2) where j – the number of searching days; ai – completeness of the received information of the i-type in j day, which can be calculated as the ratio of the current amount of information (ap) and the full informing (a); ni j – the efficiency of i-type of searching information in j day. it all comes down to a general model, formula 3: (3) summing up, formula 4: (4) іі. costs associated with negotiating and concluding agreements costs associated with negotiating and concluding transactions (costs of negotiating the terms of the transaction, legal due diligence, managerial costs, representation costs, choice of the form of the transaction, costs of legal or illegal execution of the transaction, travel expenses, translation services). some experts distinguish between negotiation costs and transaction costs. it should be noted that today ukraine has extremely complex and unclear legislation, the rules of which are constantly changing. therefore, ukrainian companies need to spend a lot of time and resources to study, legally justify and conclude contracts that would satisfy both parties and have one interpretation from both economic and legal points of view. the conditions for the above information will be formed: (5) where р2 – possible benefits from negotiating and concluding agreements; сp – costs associated with concluding agreements; сy – costs associated with conducting agreements; each cost, in its turn, consists of: (6) where w – the general amount of personnel involved in the negotiation process; su – coefficient of the processes of concluding complexity; lw – regulated time spent by employee; fw – hourly rate of employee. (7) where u – the total number of personnel involved in the negotiation process; su – the coefficient of the complexity of the negotiation process; lu – time spent by employee; fu – hourly rate of employee. bring together everything to the general model: (8) baltic journal of economic studies 170 vol. 8 no. 4, 2022 iii. costs of measuring quality costs of quality measurement (costs of product quality assessment). they mainly include the costs of special equipment that provides quality control, standardization costs. according to the authors, these costs include the costs of obtaining the right to produce products under a well-known brand, as this requires the enterprise to comply with the quality standards set by the integrator company, the costs associated with measuring the quality of goods, concluding contracts for the provision of services. form the conditions to the above information: (9) where р3 – possible benefit from measuring quality; or – costs associated with renting special equipment to measure quality; kup – costs associated with the purchase of special equipment for measuring quality; fr – costs associated with obtaining the right to produce products under a well-known brand; br – costs associated with creating and promoting your brand; each of these can be calculated in the following way: (10) where q – the number of rent days; dq – the cost of rented equipment in q-day; oq – the cost of personnel that is recruited in q-day; vq – the number of worked hours in q-day. (11) where qq – the number of working days; dd – the cost of equipment that is bought; ddd – the cost of education of personnel for work with the new equipment; oqq – the cost of personnel who are hired in qq-days; vq – the number of worked hours in q-day. (12) where reg – initial funds to open a company; roz – the costs of the company development. (13) where b – the number of days; fr – the cost of the day of the franchise. thus, concluding the given above material. (14) this specific linear model can be used in order to analyze parameter 3, costs of measuring quality. iv. specification costs and costs for protection of property rights expenses for specification and protection of property rights, which include the costs of establishing property rights, losses from poor specification of property rights, losses from violation of property rights and their restoration, acquisition of licenses, obtaining a legal address, opening of bank accounts, costs of courts, arbitration, time and resources necessary to restore the rights violated during the execution of the contract, loss of property rights from unreliable protection and costs of registration of the enterprise, costs associated with the establishment of the enterprise, change of ownership and organizational and legal structure of the enterprise during its re-registration. thus, for the period from 2017 to 2020, the number of natural persons-entrepreneurs (pe) in ukraine increased significantly from 1466803 in 2017 to 1599755 in 2020 (ghoshal s., & moran p., 1996), due to significant policy changes in the field of small and medium enterprises (smes). in particular, through: 1) improvement of adaptive public administration. namely, improving the institutional and legal framework for smes by combining institutional reforms with financial and technical support from external donors, which led to an increase in the index from 2.45 to 3.5; 2) through the development of human capital by upgrading the skills of sme employees by improving key competencies, which led to an increase in the entrepreneurship training policy index from 2.25 to 3.98; 3) improved access to finance for smes, which led to an increase in the index from 3.22 to 3.31; 4) by supporting innovations and entrepreneurship through the development of sme support infrastructure, which is due to the presence of business centers (329 as of january 2019), business incubators (62), technology and science parks (79) and national industrial clusters (20), which led to an increase in the innovation policy index from 1.86 to 2.28 (north, 1990). as for ukraine, the parameters of this group of costs will be quite significant and will require constant monitoring by the company. the authors adhere to the principle that calls these costs "the cost of compliance with the law", which consists of hernando de soto's definition of the cost of access to the law (williamson, 1981). however, it should be noted that the costs associated with continuing to operate within the law (tax costs, compliance with labor laws, legal costs, etc.) are significant. due to the corruption of certain links of reproduction in society, significant tax pressure (and hence – due to high transaction costs), baltic journal of economic studies 171 vol. 8 no. 4, 2022 ukrainian companies are often forced to transfer their activities to the shadow economy (figure 1). as can be seen in fig. 1, the integrated indicator of the level of the shadow economy according to the calculations of the ministry of economic development of ukraine in 2021 amounted to 31% of gross domestic product (gdp), which is 1% less compared to the previous year. this is primarily due to the adaptation of ukrainian business to unpredictable quarantine restrictions. in particular, in the third quarter of 2021, gdp amounted to uah 1498.359 billion, so the size of the shadow economy for this period can be estimated at uah 464.491 billion (ghoshal, moran, 1996). based on the data of the state statistics committee on the number of enterprises in ukraine, each enterprise accounts for an average of uah 323,000, as well as due to the abuse of monopoly pricing position of certain business entities, etc. in addition, the indicators that increase the number of transaction costs include the scale of corruption in ukraine (figure 2). thus, according to the national anti-corruption bureau of ukraine, over the past two years (from 2019 to 2021), 41% of surveyed business executives and 39% of surveyed citizens have faced corruption in their professional -20 -10 0 10 20 30 40 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 integrated indicator of the level of the shadow economy in ukraine (in % of official gdp) level of shadow economy change in ukraine's real gdp, % compared to the previous year period figure 1. integral indicator of the level of shadow economy in ukraine figure 2. percentage of respondents who had an experience of bribes from 2019 to 2021 baltic journal of economic studies 172 vol. 8 no. 4, 2022 activities and paid bribes in the housing and communal services sector (6% of respondents), when obtaining registration and permits (5%), in tax authorities (4%), 3% each – when applying to city authorities, passing customs control, in administrative service centers and when applying to the prosecutor's office (williamson, 1990). based on the volumes that business owners assume within this issue; the list of transaction costs can also be added – the cost of overcoming administrative barriers built by the state on the way of doing business (administrative costs). if to examine the number of state-owned enterprises, despite the reforms, the number of decentralized enterprises remains quite large for our country, so there is no reduction in transaction costs (figure 3). as a result, administrative barriers have become full-fledged sectors of the economy that live by their own laws. therefore, it can be recognized that companies will work in the legal field only when the comparison of transaction costs in legal and illegal business is in favor of the former. conditions will be added to the above information: (15) р4 – possible benefit from better property rights; – costs associated with running a legal business. – costs associated with doing illegal business. explain what was mentioned above, each aspect of the business can be considered separately business will choose the minimum cost rather than a direct cost comparison. therefore, take into account the mathematical expectation of the function . (16) – is the mathematical expectation of shadow business, which is calculated as the product of the probability of paying a fine by the amount of penalties (st) in variable directions. v. costs of monitoring and preventing opportunistic behavior costs of monitoring and preventing opportunistic behavior (costs of controlling the implementation of contracts, ensuring the risks of their non fulfillment, costs of preventing such behavior of counterparties (monitoring) and staff ) (losses associated with strikes of staff, late fulfillment of obligations to suppliers). in the framework of building a more accurate model of transaction costs, it should be noted that these costs are also divided into different parts, such as costs associated with monitoring opportunistic behavior and costs associated with its prevention. opportunistic behavior is considered to be the behavior that consists in avoiding the fulfillment of the terms of the agreement in order to make a profit at the expense of the interests of partners. form the conditions for the above information, for this use the standard formula for the poisson distribution of the above possibilities in time: (17) for z take losses from the occurrence of an adverse event тhen, (18) 0 5000 10000 15000 20000 25000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 figure 3. number of state enterprises baltic journal of economic studies 173 vol. 8 no. 4, 2022 vi. costs of protection against third parties expenses for protection against third parties (the state). that is, the costs of protection against other persons (other than the parties to the agreement) who claim a share of the benefits from the implementation of the provisions of the agreement. in addition, it is advisable to add to this list the costs associated with adapting to new operating conditions ("adaptation cost", costs of additional staff training, psychological adaptation costs, pandemic costs). they, like some transaction costs, can be divided into endogenous and exogenous. сosts associated with innovations (costs of commercialization of innovations, costs of providing the innovation process with professional staff, costs associated with the transition to innovation-oriented management of enterprises and making appropriate decisions on their further development). among the most important tasks of adaptation to innovations is the formation of a new type of employees in the country, characterized by high competence, taking into account high general education and professional training. the conditions for the above information will be formed: (19) where р6 – possible benefit from the adaptation a – the number of adaptation types; ca – the costs connected with the adaptation of а-type; – the level of training that can be achieved by а-type of, where – the level of training. 5. model of minimization of transaction costs formulate a generalized nonlinear model, which includes all the above indicators and problems, as follows: this model summarizes all 6 criteria and can be used to calculate the right-hand side (factors) and make a decision on the transaction costs of governance. depending on the result, different solutions can be chosen. at the same time, it is very difficult to investigate all the problems that hinder the development of business and significantly affect not only the final result of the enterprises, but also generally exclude the expediency of their opening and further functioning in our country. at the same time, the most common and important problems faced by domestic enterprises in their activities include: weak protection of property rights by state authorities (p1 90.30%), high level of corruption of state authorities (p2 88.90%), tax system – types and rates of taxes (p3 86.10%), high payroll charges (p4 86.10%), insufficient access to credit resources (p5 80.60%), tax system – tax administration procedures (p6 79.20%), low law-abidingness of citizens and businesses (p7 77.80%), excessive state intervention in the regulation of economic relations (p8 77.80%), improper implementation of national legislation by state authorities and local self government (p9 72.20%), lack of practice of transferring state functions to self-regulatory organizations (p10 70.80%) (figure 4) thus, the study of the classification of transaction costs makes it possible to state that all of them are quite high at ukrainian enterprises. the reasons for this are insufficient market development, unformed structure of institutions, complex and ambiguous legislation, significant tax pressure, and corruption. 6. conclusions 1. the study underlined the relevance of the chosen topic and provided an opportunity to determine the impact of transaction costs on management decisions on performance. baltic journal of economic studies 174 vol. 8 no. 4, 2022 2. the assimilation of the theory of institutio nalism has allowed to supplement the existing classification of transaction costs associated with adaptation to new business conditions. these include "adaptation costs", additional staff training costs, psychological adaptation costs, pandemic costs, which together characterize the ability of an enterprise to adapt to new conditions of functioning and development. 3. in the context of the proposed classification, a model of minimization of transaction costs has been developed, which includes all the above indicators and problems and makes it possible to make a model for correct and logical calculations. 4. the application of the proposed model makes it possible to compare the results of the enterprise with transaction costs, which most fully reflect the efficiency of investments. 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00% 90,00% 100,00% p1 p2 p3 p4 p5 p6 p7 p8 p9 p10 problem of business development % of respondents figure 4. rating of problems that hinder business development 5. the practical significance of the study lies in the possibility of a realistic assessment of the return on investment not only due to the classical theory, which defines the main components of the production process, but also taking into account the theory of institutionalism, including costs that can devalue the investment process. 6. thus, it is concluded that taking into account current trends, quality becomes an integral component of competitiveness and that is why reducing transaction costs becomes a priority. 7. since a clear understanding of the essence of transaction costs and their types makes it possible to solve a number of problems of both production and social nature, the results of the analysis become the basis for further research. references: coase, r . h. 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(2004). fairness and transaction costs: the contribution of organizational justice theory to an integrative model of economic organization. organization science, vol. 15(6), pp. 719–729. available at: http://www.jstor.org/stable/30034772 kim, j., & mahoney, j. t. (2005). property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic eggertsson economics, vol. 26(4), pp. 223–242. available at: http://www.jstor.org/stable/25151371 crook, t. r ., combs, j. g., ketchen, d. j., & aguinis, h. (2013). organizing around transaction costs: what have we learned and where do we go from here? academy of management perspectives, vol. 27(1), pp. 63–79. available at: http://www.jstor.org/stable/23414339 olena shevchuk – idea conceptualization, conceptualization, methodology, drafting , peer review and editing , data curation, project administration. glib mazhara: data curation, formal analysis, methodology, software, visualization, writing – review & editing. nataliia semenchenko – formal analysis, investigation, initial drafting (including main translation), data curation, fundraising. received on: 4th of october, 2022 accepted on: 19th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 469 vol. 3, no. 5, 2017 corresponding author: 1 department of operative and searching activity, national academy of internal affairs of ukraine. 2 department of criminal procedure, national academy of internal affairs of ukraine. 3 department of administrative law and procedure, kharkiv national university of internal affairs. doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-469-473 formation of competitive advantages of enterprises in terms of globalization: competitive dynamics and an intellectual component oleg tarasenko1, yurii yermakov2 national academy of internal affairs of ukraine, ukraine vitalii pchelin3 kharkiv national university of internal affairs, ukraine abstract. the purpose of the article is to investigate the current state of scientific thought in relation to the formation of intellectual capital of an enterprise in the innovation process, achievement by the enterprise of corresponding competitive advantages and their protection. methodology. the methodological basis of the article is the systematic approach, which provided a comprehensive definition of the scope of this research  – intellectual property and its protection as a complex economic and legal category. this made it possible to systematically define the purpose, level of abstraction, hierarchy, forms of manifestation, and key attributes of the subject of research. application of principles of modelling of business processes also allowed studying the influence of factors of the external environment on the sequence of information flows in the process of forming competitive advantages on the basis of intellectual property. in addition, having determined the scientific basis, the collective and local monographic studies of leading scientists concerning the specificity of the formation of competitive advantages of innovative enterprises, including on the basis of intellectual capital, were also taken into account. results. the article studies, describes and, correspondingly, formalizes modern processes of formation of competitive advantages in the conditions of smart economy: knowledge management, their patenting, modern significance, and the influence of patenting on the role of intellectual property in the investigated phenomena, as well as management of relevant information flows. practical implications. the research demonstrates ways of forming competitive advantages in the modern economy, and the results of the analysis of relevant statistics explain patterns of economic and legal processes in the field of relevant practical activities. this allows assessing the actual state of the subject of the research, determining the development trajectory, and effectively forming methods and tools for managing the relevant processes. value/originality. the proposed approach allows ensuring the principle of unity in the research of economic and legal processes in the field of innovation activity management. the work simultaneously synthesizes important aspects of information flow management, intellectual capital formation, and intellectual property protection in the process of commercialization of results of innovation activities. key words: globalization, intellectual economy, competitive advantage, competitiveness, intellectual property, patent. jel classification: k22, d29, f23 1. introduction the process of globalization of the world economy is characterized by rapid qualitative and quantitative changes; modern economic relations are regulated by a large number of economic and legal regulators, and especially in this progressive part as an innovative direction. the activity in the innovation sphere provides the enterprise with the most influential and stable competitive advantages. therefore, from the scientific point of view, the study of regularities and peculiarities of the processes of formation of intellectual capital of an enterprise in the innovation process as a basis for the formation of the competitiveness of a modern enterprise is important today. baltic journal of economic studies 470 vol. 3, no. 5, 2017 2. formation of modern competitive advantages of enterprises in terms of globalization the globalization of the economy ensures cooperation in the production of fundamentally new products, creativity and use of the latest technologies due to access to new external ideas while respecting the protection of intellectual property (ip). as v.f. maksimova correctly notes, the accompanying process of globalization of the economy today is the formation of a new stage in the development of economic relations  – smart (intellectual) economy. the need for the transition to smart economy is caused by the underlying causes that determined the vector of the transformation of all spheres of society by increasing the efficiency of economic resources through innovation, intellectualization, institutionalization, environmentalization, and socialization (maksimova, 2011). it should be noted that the positivity of these tendencies not abolishes but, on the contrary, increases the intensity of economic competition since as s.v.  kondratjukov and s.s. staurskij correctly specify, reasons for the emergence of competition objectively laid down by the living nature, dictated by the condition of survival, when coming-into-being as a result of bioevolution of two or more organisms of the same type with the general goals of existence and a single habitat immediately required competition for limited resources (kondratjukov, 2015). taking into account such properties of the modern development of globalization of economic processes, in our opinion, the successful definition of the essence of competitiveness is proposed by m.v. bondarenko and l.o. ihnatenko, they understand competitiveness as a property of an object having a certain share of the corresponding relevant market, which characterizes the degree of conformity of the technical-functional, economic, organizational, and other characteristics of the object with the requirements of consumers, determines the market share belonging to this object, and prevents redistribution of this market in favour of other objects (bondarenko, 2007). yu.o. zaitsev, having comprehensively explored the versatile contemporary scientific views on the essence and characteristics of competitiveness and evaluating it as an element of the system of economic competitive relations, identified the following properties of competitive advantage: 1) competitive advantage is an element in the system of competitive relations; 2) competitive advantage manifests itself in conditions of competition; 3) competitive advantage is relative; 4) competitive advantage has a dynamic nature, and a steady competitive advantage  – a long-term benefit from the application of some unique, based on a unique combination of intra-firm resources and the state of the environment, which, due to uniqueness, cannot be copied (zaitsev, 2015). it should be specified that the most stable competitive advantage in the smart economy is provided by the intellectual component, including ip. several ip roles that it can perform in the process of forming competitive advantages are proposed by a.m. prohorov: in the first place, it affects the formation of the resource potential of the enterprise (is a part of the organization’s material, commercial, informational, and financial potential); is a kind of “foundation” of the innovative potential of the organization, which composition and structure determine its innovative capabilities, and hence directions of development of the competitive potential of the organization as a whole; it is also an economic tool that ensures the transformation of existing competitive capabilities of the organization into the corresponding competitive advantages, besides, it remains the source of additional competitive advantages of the organization (prohorov, 2013). at the same time, it should be noted that even being involved with globalization, institutionalized national differences in knowledge management remain in the economies of different leading countries. thus, the intellectualization of the innovative potential of a modern economic organization can take place in various ways, including under the influence of features of the national peculiarity of enterprise management, an example of which is given in table 1 (belova, 2016). however, through the prism of formation of competitive advantages and their protection, table 1 comparison of knowledge management approaches direction the main ideas the result of the activity american approach use of shared knowledge of employees, rather than individual aspects. organization of communities, in which people share information and knowledge that exist both in physical and virtual space. japanese approach socialization. change in the organizational environment. search for alternative approaches to solving problems. the company creates new knowledge and information necessary for a new approach to the problem and its solution. scandinavian (european) approach intellectual capital is the result of independent actions of individuals. promotion of new ideas within the company due to independent opinions of individual employees. source: (belova, 2016) baltic journal of economic studies 471 vol. 3, no. 5, 2017 the simultaneous internationalization and institutionalization of economic and legal processes, including the protection of intellectual rights both at the stage of patenting and the control of the protection of rights in the process of exchange, are the important advantage of globalization. 3. protection of intellectual property in the innovation process recently, great importance in increasing the competitiveness of goods, as noted by o.v. kirillov, is assigned to brand names, service marks, and trademarks. the competitiveness of commodity producers is largely manifested through the competitiveness of their products, which, in turn, is influenced by: – availability of patent or non-patent protection; – patent cleanliness of the equipment object; – the name of the place of origin of goods, service marks and registered trademarks; – applied technology; – a number of patents, licenses available in the organization. a significant factor affecting the competitiveness of the product is its patent clearance. at the same time, patent clearance is understood as the legal property of an object, the essence of which is that it does not violate the exclusive rights of ip (including industrial) in the given country, owned by third parties, and can be freely implemented in this country (kirillov, 2014). but over time, patent clearance may also appear in relation to other countries since other patents may expire in connection with, for example, expiry, etc. in this perspective, it is advisable to pay attention to the point of view of the s.p. rogozhin and s.l. sazanova, who noted that in the era of globalization of the economy, the active influence and interaction of legal and economic theories on the institute of ip, there is a need for its study as an economic and legal category, and the concept of “intellectual property right” should be considered as an institutionalization process for the protection of competitive advantages of the enterprise, which creates incentives and rules of economic behaviour (rogozhin, 2016). investigating the protection of ip rights in today’s globalization, one should pay attention to d.m.  chybisov’s research, which states that the emergence of ip protection was associated with the possibility of commercialization of ip results. the current concept of the protection of industrial property is provided for, in particular, in the agreement on trade aspects of ip rights, also provides patent protection of the invention only on condition that it is commercially viable (article 27 of the agreement), which may indicate that it is precisely industrial suitability of the result of a certain intellectual activity plays key role in the property protection of ip (chybisov, 2017). assessing the impact of patent clearance on the product competitiveness, it is possible to indicate respectively the economic and legal component of influence: 1) losses from potential claims of the patent holder, as sanctions for patent infringement must be substantial, which ensures the effectiveness of ip protection; 2) the legal component requires compliance with the rules and defined actions in the set of legal relations, including the determination of the extent of rights of existing patents and possible objections associated with the patent in a particular country at a particular time, such as, for example, in relation to expiration or for other reasons, patents whose validity may have expired earlier. an assessment of the importance of using patent information in the innovation process, which was obtained by experts from the european patent office (epo) as a result of the study (epo, 2017), is presented in fig. 1. according to epo data, approximately 80-90% of respondents who innovate believe that technical information is significant at all stages of the innovation process. information about business processes and property rights protection is of particular importance at the stages of applied research and subsequent commercialization; in general, the assessment of the importance of these types of information at all stages of the innovation process is approximately equal and makes up 65% of positive responses. the source of technical information for the innovation process is, above all, internet resources that are useful to more than 80% of inventors. the next important is the technical information that can be obtained from patent sources (more than 70%), followed by printed media (over 60%), personal contacts, databases, exhibitions and conferences, professional associations, forums, blogs, etc. in general, information from patent sources is used at the stage of theoretical studies in 37% of cases, in the applied research stage  – 76%, at the stage of design work  – 77%, and at the stage of commercial changes in the competitive environment factors of the environment, their value and duration total impact factor accumulation of information for management evaluation of information by the criterion of symmetry estimation of the degree of information value of resources of the company assessment of the system by the criterion of synergy interconnection, interdependence, complementarity of system elements creation of a strategy of competitiveness on the principles of information control and synergy 70% of innovators use patent information 72% consider patent information to be very important information importance at stages: theoretical research – 37%; applied research – 76%; design works – 77% fig. 1. the importance of using patent information in the innovation process source: compiled by the author on the basis of annual reports from the european patent office baltic journal of economic studies 472 vol. 3, no. 5, 2017 implementation – in 67% of cases. patent information resources are mainly the european patent office (75%), the german patent and trademark office (dpma) (30%), the united states patent and trademark office (uspto) (21%), the world intellectual property organization (wipo) (17%), google (15%), and others. the importance of using patent information at the stages of the innovation process is noted by more than half of the respondents. at the same time, obstacles to the use of patent information are the following factors: patent information has lost its relevance to innovators; unknown sources for obtaining patent information; patent information is too complicated, obsolete or expensive. at the same time, in practice of the majority of firms in developed countries of the world, the study of patent clearance represents at least half of all types of patent research and is an important part of the commercial activity in the creation and sale of products, technologies, and services. work on the provision and research of patent clearance is carried out before the beginning of the object’s implementation, that is, during its development. participants in this process are both developers and specialists in the field of ip: patent workers, lawyers, economists (kirillov, 2014). 4. information component of the competitiveness management process another important factor contributing to the growth of competitiveness in the context of globalization is the dynamic capacity for the synergy of information, production, financial, and other resources in order to obtain maximum effect. the information component in such a combination plays a key role since it connects all kinds of resources to a single decision-making system. the interconnection of elements of the decision-making system with the dominant role of information enables the organization to create new ones and to improve the existing strategies of competitiveness. in other words, the information component of the competitiveness management process is, in our opinion, one of the key factors for success. it follows that the task of managing the competitiveness of enterprises in the current dynamic conditions pushes the enterprise to construct such business processes, the dominant characteristic of which should be both intellectualization of global marketing information flows and the ability of an innovative product of enterprise to best meet the needs of specific consumers, while providing competitive activity with simultaneous protection of the sources of its smart competitive advantage. consequently, in our opinion, the intellectualization of competitive market advantages is ensured, on the one hand, by the permanent updating of competitive knowledge on the basis of effective organization of the marketing information system and, on the other hand, by the ability of the enterprise to protect its intellectual capital. changes in the competitive environment factors of the environment, their value and duration total impact factor accumulation of information for management evaluation of information by the criterion of symmetry estimation of the degree of information value of resources of the company assessment of the system by the criterion of synergy interconnection, interdependence, complementarity of system elements creation of a strategy of competitiveness on the principles of information control and synergy 70% of innovators use patent information 72% consider patent information to be very important information importance at stages: theoretical research – 37%; applied research – 76%; design works – 77% fig. 2. influence of environmental factors on the formation of competitiveness strategies source: developed by the author baltic journal of economic studies 473 vol. 3, no. 5, 2017 the development of competitiveness as a process can be represented by modelling the influence of environmental factors on information flows in the process of formation of competitiveness strategies, as shown in fig. 2. the resulting impact factor for the company, which causes changes in the competitive position, is the difference between the increase and decrease in the volume of information the specific fluctuation that an organization achieves due to exchange with the external environment. increasing the volume of information exchange leads to the effect of scale but complicates the process of its ordering. data collection and analysis requires consideration of the factor of symmetry of information, which shows the degree of ownership of information of various subjects of market relations. the unevenness of information flows causes the inappropriate behaviour of market participants, may lead to additional losses and, as a consequence, a possible restriction of competitive positions. in this case, it is advisable to use mechanisms for optimizing information flows. 5. conclusions according to the research results, the following conclusions can be made: one of the prerequisites for the successful functioning of the mechanism of formation of intellectual capital of the enterprise is the verified management of the organization’s information and scientifically substantiated provision of the process of obtaining the necessary information with the expected effects of their implementation; the formation of sustainable competitive advantages today should be ensured on the basis of intellectual capital in the process of innovation activity; the preservation of such competitive advantages of enterprises, including through patenting, is gaining increasing importance in the context of globalization, which is conditioned by the need for further research in this direction. references: maksimova, v. f. 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(2016). intellektualnyj kapital kak strategicheskij faktor razvitija organizacij. nauchno-metodicheskij jelektronnyj zhurnal «koncept», [electronic resource]. – mode of access: http://e-koncept.ru/2016/76068.html kirillov, a. v. (2014). razvitie konkurentnyh preimushhestv predprijatija na osnove kommercializacii obektov intellektualnoj sobstvennosti. vestnik universiteta, [electronic resource]. retrieved from: https://cyberleninka.ru/ ar ticle/n/razv itie-konkurentny h-preimuschest v-predpriyatiya-na-osnove-kommer tsializatsii-obektovintellektualnoy-sobstvennosti rogozhin, s. p., sazanova, s. l. (2016). intellektualnye prava sobstvennosti: institucionalnyj podhod. upravlenie, 1(11): 74–78. chybisov, d. m. (2017). okhorona prav intelektualnoyi vlasnosti v ramkakh svitovoyi orhanizatsiyi torhivli. odesa. odeska yurydychna akademiya: 272. the role of patent information in innovation management. results of a survey by the epo [electronic resource]. retrieved from: http://documents.epo.org/projects/babylon/eponot. nsf/0/35d952cfb1e36e9cc12581cb004ec72d/$file/0811_11.00_h_wongel_-_the_role_of_pi_in_ innovation_en.pdf baltic journal of economic studies 281 vol. 3, no. 5, 2017 corresponding author: 1 department of accounting and taxation, volodymyr dahl east ukrainian national university. e-mail: docentklus@gmail.com 2 department of accounting, analysis and audit, cherkasy state technological university. e-mail: chizhvera54@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-281-288 strategic analysis of the effective development of industrial enterprises on the basis of the use of “corporate innovation management chart” yuliia klius1 volodymyr dahl east ukrainian national university, ukraine vira chizh2 cherkasy state technological university, ukraine abstract. intensification of innovation activity of enterprises requires a qualitatively new organization of interconnections and interaction between all participants of the innovation process. the spreading of forms of corporate ownership and management in ukraine has led to the development of corporate governance, whose strategic focus is becoming a top priority in the management of industrial enterprises. the introduction of an effective corporate innovation management system enhances competitiveness and economic efficiency by ensuring due attention to the interests of investors, management, and other participants in corporate relations; financial transparency, the introduction of effective management and control rules. the purpose of the article is to substantiate the use of “corporate innovation management chart” at industrial enterprises in conducting a strategic analysis of their effective development. methodology. methodological basis of the work is a set of methods and principles of scientific knowledge, general and special methods and techniques used during the study. the theoretical basis of the research is fundamental positions of the general theory of systems and innovation management, the theory of corporate management, scientific works of domestic and foreign scholars in the field of innovation management and corporate governance. the legal framework of the study is the current legislative and regulatory documents regulating the innovation activity of enterprises and corporate governance. for the achievement of the set purpose during writing of the article, the following methods are used: method of system analysis (for the definition of conditions of functioning of the corporate system of management of innovations); modelling (in the development of a mechanism for managing the effective development of an industrial enterprise with the use of “corporate innovation management chart”); graphic (for a visual representation of stages of creating a “corporate innovation management chart”). practical implications. the obtained results and practical recommendations constitute the methodical basis for the formation of a corporate innovation management system. the results of the most practical significance include: directions of management of effective development of the industrial enterprise are revealed, the need to use “corporate innovation management chart” is proved, the necessity to create “corporate innovation management chart” is substantiated, types of these charts are considered, a model of “corporate innovation management chart” is developed, stages of creation of “corporate innovation management chart” are identified, the team’s actions on creation of “corporate innovation management chart” at each stage are studied. value/originality. it is substantiated that in order to make effective decisions under changes in the competitive environment, it is expedient for enterprises to use special forms of the planning of innovation activity. form of such planning is the developed “corporate innovation management chart” as a special form of innovation planning, in which the achievement of strategic objectives of the enterprise is based on meeting the needs of consumers of innovative products by choosing organizational, industrial or technological innovations taking into account available resource possibilities for their implementation, which promotes, due to the possibility of viewing and updating the developed chart, making strategic management decisions in terms of changes in external and internal environment of the enterprise. key words: analysis, innovations, corporate management, development, chart. jel classification: m41, o31, м14, м21 baltic journal of economic studies 282 vol. 3, no. 5, 2017 1. introduction development involves expansion of capabilities, potential, and has no limitations. in this sense, development is an effective redistribution of resources, primarily of an investment nature, in areas that ensure the highest possible competitiveness over the longest possible period, the improvement of goods and services (including on the basis of the existing organizational structure), the improvement of the structure and management systems, which result serves as an increase in demand for products of the enterprise, as well as the expansion of its economic activities. thus, development as a qualitative change of an object can take different forms: transformation, emergence, formation, destruction, the creation of a new form or structure, transformation of content, connections, and dependencies. any enterprise sooner or later resorts to innovation in order to maintain competitiveness and ensure effective development. as a rule, the introduction of innovations takes place against the background of production of core products, already well-known to market, due to which the accumulation of profits of the enterprise takes place. to determine directions of innovation activity (type, scale of innovation), an analysis of the enterprise’s innovation potential and marketing research to identify new market needs are conducted. next, the enterprise needs to determine sources of funding for the innovative development of the enterprise and the optimal amount of investment funds. if the size of the investment is insufficient, it is more appropriate for the company to continue the production of existing products. if the enterprise manages to find the optimal amount of investment, which provides profit, the implementation of the innovation project and the launch of new products with their subsequent marketing to the market begin. in this process, the introduction of an effective corporate governance system for innovation is of great importance. 2. managing the effective development of the industrial enterprise the existing concept of the effective development of industrial enterprises needs to be finalized as it does not reflect a number of issues arising during the implementation of the strategy of innovation development at the enterprise, in particular, the need to divide available resources for current and innovative activities, the choice of investment direction, depending on specific conditions of the internal and external environment of the enterprise, mechanism of enterprise management in terms of development of innovations. in order to ensure the strategy of effective development of the enterprise, a mechanism for the effective development management is needed. in order to effectively manage the enterprise development in terms of innovation, “corporate innovation management chart” can be used as a special form of planning, which helps to find effective solutions for changes in the competitive environment. the traditional model of strategic management of the effective development of the enterprise is a consistent implementation of the following elements: 1. goal: adaptation to changes due to the flexibility of internal processes and structures. 2. principles: stability of the environment, predictability, etc. 3. methods and systems of development: strategic planning and management, controlling, project management mechanisms. 4. direction of the development process: continuous improvement. 5. management system: the hierarchical structure of control and authority, the exact definition of rights, etc. there are also a number of other models of effective development management, the greatest interest of which is the model of integration of strategic and innovative management of enterprises. the model represents a sequential implementation of the following key blocks: 1. analysis: assessment of the external and internal environment, the definition of the mission, formulation of goals. 2. planning: planning a strategy, setting tasks. 3. realization: development of plans, carrying out of structural changes. 4. control: budgeting, operational management; assessment and control. this mechanism can be used when an enterprise plans to develop a strategy for its effective development. taking into account the above in fig. 1, there is represented the mechanism for managing the effective development of an industrial enterprise, consisting of blocks: planning, organization, motivation, coordination, control, and analysis. each of the blocks highlights stages that are significant in terms of building a strategy for effective development: 1. determination of purpose and objectives of effective development of an enterprise on the basis of innovative approach. at this stage, the enterprise determines the presence of internal resources, strengths and weaknesses, conducts market research, analysis of the management structure. in the process of setting the purpose and objectives of an effective development of the enterprise, it is necessary to determine factors that ensure the effective development of the enterprise. external factors include factors of the external environment (macroand microenvironment), on the impact of which the company cannot or almost cannot make an influence. internal factors include factors of the internal environment, which the company can have a direct impact on. among the many different factors of the effective development of an industrial enterprise, the following baltic journal of economic studies 283 vol. 3, no. 5, 2017 analysis + coordination + motivation organization + + planning determination of purpose and objectives of the enterprise development when reorienting to the innovative way of development analysis of the innovation potential of the enterprise adoption of the purpose for implementation a. the preliminary stage of creation of “corporate innovation management chart” identification of resource opportunities for innovation planning the strategy of innovation development of the enterprise based on the identified areas of investment b. development of “corporate innovation management chart” formation of an investment portfolio based on a multi-criteria approach analysis of the effectiveness of the investment project formation of an organizational management plan for effective development in terms of the introduction of innovations selection of a type of innovation improvement of innovation management system development of an employee incentive system for development of innovations analysis of the effectiveness of the system of personnel management and motivation creation of a corporate innovation management system coordination of the innovation project implementation operational management of the project implementation c. realization of “corporate innovation management chart” analysis of the compliance of the project implementation process with the plan control coordination and control over the project implementation process assessment, analysis, and adjustment of enterprise innovation activity monitoring of the environment fig. 1. mechanism of management of the effective development of an industrial enterprise with the application of “corporate innovation management chart” baltic journal of economic studies 284 vol. 3, no. 5, 2017 can be distinguished: competitiveness of enterprises and products; monitoring of the external environment; production structure; level of personnel qualification; flexibility of the organizational structure; level of production specialization; cost and their dynamics; structure of financial resources; structure of information flows of the enterprise; availability of innovation and investment potential, etc. it is necessary at this stage to analyse the innovation potential of the enterprise to identify opportunities for the enterprise in the implementation of innovation activities. this will allow excluding areas of activity that are not feasible for the enterprise. the result of this stage is the preliminary elaboration of “corporate innovation management chart”. 2. planning the strategy of innovative development of the enterprise on the basis of forming a corporate innovation management system. there are: a search for opportunities for investing in the most profitable and perspective directions, development of the strategy of innovation development, selection of a certain type of innovation, based on the enterprise possibilities. the result of this stage is the elaboration of “corporate innovation management chart”. 3. formation of an organizational management plan for the enterprise effective development in the context of introducing the corporate innovation management system. one should carry out an analysis of the existing organizational structure of the enterprise, identify directions of improvement of the innovation management system for its conformity with the chosen direction of development, and develop the system of personnel motivation for the development of innovations. 4. coordination of the activity on the investment project implementation. at this stage, a clear synchronization of artists on time and resources is required in order to implement the project on time with the planned results. 5. control. operational management of the project, control over compliance with terms and funds allocated to the project are carried out, operational measures are implemented to ensure that the project is in line with the plan elaborated. the result of this stage is the implementation of “corporate innovation management chart”. 6. analysis. in order to identify the successes and mistakes, an analysis of the project results is carried out to take them into account in future enterprise activities. if necessary, adjustments are made to the enterprise activities based on conclusions of this analysis. 3. substantiation of the use of “corporate innovation management chart” in order to effectively manage the enterprise development in terms of innovation, it is possible to use “corporate innovation management chart” developed by the author by analogy with the use of a “roadmap”. the application of principles of a “road map” is best known in the practice of managing companies in the usa during a period of weakening the economy. to date, the construction of a technological “roadmap” has become the main way of making strategic decisions in international business. the main feature of using the method of creating a “corporate innovation management chart” is to unite creative groups of employees of the enterprise in order to jointly see the future of the enterprise. using “corporate innovation management chart” in strategic planning should be based on teamwork, intensive knowledge sharing. at the level of an individual enterprise, “corporate innovation management chart” can have different uses with a number of following advantages (fig. 2). positive aspects of application of “corporate innovation management chart” promotes effective management of enterprise development participates in the management of innovative risks provides a link between the innovation strategy of an enterprise and its innovation needs controls the enterprise innovative development uses opportunities for introducing innovations it is an instrument of strategic innovation planning fig. 2. advantages of the use of “corporate innovation management chart” the success depends on how principles and methods for creating a “corporate innovation management chart” can be agreed upon. building a “corporate innovation management chart” can help strategic processes at all levels, set the same framework for all processes in the enterprise. the main advantage of using the “corporate innovation management chart” is to provide accurate and clear information, a basis for effective decision-making and the provision of control tools. this is done by identifying the necessary processes, new opportunities for the enterprise or those mistakes that need to be addressed to develop competitive and realistic innovation development goals and plans. one of the advantages of “corporate innovation management chart” is that the management is actually aware of the enterprise’s needs and as a result either receives at its disposal the necessary processes to meet those needs or prepares the existing processes for this. “corporate innovation management chart” gives a priority to investments based on a certain list of key factors (drivers) and uses emerging opportunities. also, “corporate innovation management chart” can be used as a strategic marketing tool to analyse which product is a key value for a company. any “corporate innovation baltic journal of economic studies 285 vol. 3, no. 5, 2017 management chart” should explain the enterprise’s needs to employees, management, clients, and all stakeholders, allowing them to understand where changes are needed to achieve effective development and to participate in these changes. at the enterprise, it is possible to develop several types of “corporate innovation management charts” depending on specific needs. for example, a “corporate innovation management chart” may consist of scientific, technological, production, organizational charts (by analogy with “roadmaps”). accordingly, different types of “corporate innovation management charts” have certain goals and a different time period, as well as varying degrees of importance for shareholders, managers, and business owners (fig. 3). the main direction of the strategy of innovation development of the enterprise, which is reflected in the “corporate innovation management chart” of the enterprise, is the most important and usually should be clarified in the first place. the key importance of scientific, technological, production and organizational charts is to set specific goals and take into account market needs. these private “corporate innovation management charts” should be the source of information for the elaboration of “corporate innovation management chart” of the enterprise. at the same time, there should be feedback – “corporate innovation management chart” of the enterprise should reflect the strategy, on the basis of which separate charts are drawn up. in the process of creating an “innovation chart” of the enterprise, a properly formed creative team must be involved in order to systematize and provide the information necessary for planning. the ultimate goal of the team is to make effective investment decisions. “corporate innovation management charts” should be created by senior managers with a certain knowledge, “corporate innovation management chart” of enterprise scientific “corporate innovation management chart” production “corporate innovation management chart” technological “corporate innovation management chart” organizational “corporate innovation management chart” degree of importance purpose time fig. 3. a set of “corporate innovation management charts” at an industrial enterprise table 1 the main participants in the process of creating “corporate innovation management chart” participants “corporate innovation management chart” of the enterprise scientific “corporate innovation management chart” production “corporate innovation management chart” technological “corporate innovation management chart” organizational “corporate innovation management chart” top management +++ ++ ++ + ++ shareholders +++ ++ + + + employees of r&d department + +++ ++ ++ ++ production management + ++ +++ ++ ++ technological management + ++ ++ +++ ++ marketing management ++ + +++ + ++ financial management +++ ++ ++ ++ ++ sales management + human resource management ++ + ++ ++ +++ quality management ++ ++ ++ ++ baltic journal of economic studies 286 vol. 3, no. 5, 2017 skills, and experience with the participation of representatives of the r&d department, heads of production units, representatives of financial, marketing departments, and key employees of departments. the procedure of forming an “innovation chart” refers to the participation of key stakeholders representing different levels and departments of the enterprise (table 1). the process of creating a “corporate innovation management chart” should start with a small team represented by employees of marketing departments, r&d department, design department, as well as a department dealing with general management, development, production, and implementation of individual products. and only later, the team should be gradually supplemented by managers and shareholders. team members must have principles of the chart creation process, as well as be able to identify needs and incentives for enterprise development. 4. creation of “corporate innovation management chart” creation of “corporate innovation management chart” – is a planning process in order to identify, select, and develop a strategy for innovation development to meet interests of owners and shareholders and achieve the best results in the long run. one direction of action can be selected and a certain plan developed. if there is a great uncertainty or risk, then several directions can be selected, which can be followed simultaneously. “corporate innovation management chart” as a visual representation of the sequence of steps in time depends on a certain technique used by the enterprise. the main purpose of the method is to realize the correct steps and prepare for the future (datsii, 2012). the process of creating a “corporate innovation management chart” consists of certain stages. if to consider it by the analogy with the creation of a “roadmap”, then the process can take place in stages: identifying needs, reviewing and evaluating technology, confirming interrelationships between technology and needs; identifying requirements, benchmarking, technology monitoring, project creation, project evaluation, portfolio optimization. according to different approaches to the “roadmap” development process, in order to achieve the main tasks in the development of the “corporate innovation management chart”, it is advisable to distinguish three stages (fig. 4). 1. preliminary stage. 2. development of “corporate innovation management chart”. 3. realization of “corporate innovation management chart”. the process of creating a “corporate innovation management chart” begins with the study and analysis of the internal and external environment of the enterprise, which serves as a source of input information. initiating the process requires significant efforts, especially at early stages, when the mission, vision, strategic goals, resources, scale, team, and system of views are determined and agreed with the process of creating a “corporate innovation management chart”. the research and analysis stage (a1) should include analysis of the enterprise’s internal environment, analysis of external environment, skills, know-how, etc. in the process of analysis, the need to create a “corporate innovation management chart” should be substantiated. decision-makers need to figure out if they really are faced with a problem that can be solved by creating a “corporate innovation management chart”. this should be done at the stage of problem setting (a2). managers need to eliminate problems to meet their goals. once the essence of the problem has been clarified and a decision has been made to continue the project, the next stage is the definition of the mission and strategy (a3). the process of creating a “corporate stages of the creation of “corporate innovation management chart” a. preliminary stage a1. research and analysis a2. problem formulation a3. mission and strategy a4. statement of purpose a5. resources and budget а6. content and time a7. creating a project team в. development of “corporate innovation management chart” в1. formulating key questions в2. opportunities and risks в3. identification of alternatives в4. criteria and evaluation в5. preliminary evaluation в6. chart strategy в7. chart creation с. realization of “corporate innovation management chart” c1. approval of the chart plan с2. discussion by managers с3. chart final report с4. report publication с5. chart implementation plan с6. periodic control and review of the chart с7. report/plan of chart update fig. 4. the process of creation of “corporate innovation management chart” baltic journal of economic studies 287 vol. 3, no. 5, 2017 innovation management chart” helps to develop a common mission and vision of the future when the company faces the challenges it needs to cope with in order to achieve its goals. the implementation of the chosen strategy requires the definition of strategic goals (a4). these may be financial goals (achieving a certain amount of revenue growth, increasing profits) and nonfinancial goals associated with innovation, cost-effective management system. then the resources and budget (a5) should be determined: financial, human resources, know-how, information, technology, culture, real estate. for the purpose of efficient management, all resources should be listed in the statement of resources. the content and length in time (a6) are also of great importance. at this stage, all accumulated characteristics are evaluated in order to eliminate uncertainty and solve emerging problems. the plan for managing the content of the project is one of the most important information documents at the enterprise. this document includes information on all the scale of work required to complete the project. it is also used to control. at the previous stage, the team (a7), which consists of participants and process sponsors, is determined and approved (tulenkov, 2005). upon completion of previous actions, the team of creating a “corporate innovation management chart” can begin to make it. the first stage of creating a “corporate innovation management chart” is the formulation of key issues (b1). based on previous results, the team must decide, which area the chart will be targeted to. further to achieve the set goals (based on the stage of research and analysis), the general opportunities and risks (b2) should be assessed and the impact and likelihood of each opportunity or risk should be considered. one of the important aspects of creating a “corporate innovation management chart” is identifying alternative strategies (b3). these alternatives may include an optimal, pessimistic, and neutral option. understanding alternatives is a basis for determining which solution represents the greatest value, taking into account aggregate costs, total benefits, risks, and opportunities. it is necessary to identify, measure, and evaluate the costs, benefits, risks, and uncertainties associated with each alternative. the preferred solution must be consistent with appropriate timescales and necessary characteristics. it is also necessary to identify the priority objectives of “corporate innovation management chart” to achieve a balance between conflicting requirements. the team should define the criteria and rating system (b4), based on which planned options and success will be assessed. preliminary estimate (b5) of the feasibility of a better option is based on estimated financial costs and benefits in such a way as to see how they can be reconciled with the overall financial strategy. team members for “corporate innovation management chart” should monitor whether these processes contribute to the implementation of the expected highlevel strategy of “corporate innovation management chart” (b6). it is necessary to make sure that the charts contain information from all stakeholders. a chart must always have certain goals distributed over time. the best form of creating a “corporate innovation management chart” (b7) is a schedule that also has several goals and contributes to disseminating information about the result and strategic goals developed throughout the enterprise. there are several fig. 5. model of “corporate innovation management chart” р1 р2 р3 т1 т2 т3 в1 в2 в3 о1 о2 о3 м1 м2 м3 с1 с2 с3 ц1 ц2 ц3 strategic goals consumers markets organizational innovations production innovations technological innovations resources tim baltic journal of economic studies 288 vol. 3, no. 5, 2017 ways to visualize the result of the process of creating a “corporate innovation management chart”, one of which is shown in fig. 5. the completed process of creation of “corporate innovation management chart” should answer the following questions: 1. why? (strategic goals, resources, market needs, customer requirements, competitors, environment, industry trends). 2. what? (processes, technologies, products, services, performance, basic principles). 3. how? (strategy, culture, programs, knowledge, skills, equipment, infrastructure, standards, sources, projects). 4. when? (plans, timetables, schedules, prolongation systems). the third stage of creating a “corporate innovation management chart” is the implementation of this process. at this stage, the chart is reviewed, publicly announced, and implemented. this stage should include an analysis of the most important processes and competencies aimed at the successful implementation of “corporate innovation management chart”. the stage of approval of the “corporate innovation management chart” plan (c1) usually has two goals. first, within the framework of the working group, results of the process of creating a “corporate innovation management chart” are approved. secondly, the process of advancement and promotion of recommendations proposed in the framework of the “corporate innovation management chart” program begins. after the working group completes the formation of the previous version of the “corporate innovation management chart”, it spreads within the enterprise from a wide range of employees to get responses from different groups. thus, it is desirable to organize a discussion of managers (c2) devoted to the data, problems, scientific expertise received during the creation of “corporate innovation management chart” for the purpose of drawing up a final report on the creation of a “corporate innovation management chart” (c3). after the publication of the general report (c4), separate implementation plans (c5) should be developed, resources distributed, and the chart should be implemented. the progress of its implementation is monitored, and the report is reviewed and updated as necessary (c7). the completed document should be a complex strategic plan. 5. conclusion thus, the application of the “corporate innovation management chart” is aimed at supporting decisionmaking in implementing the strategy of innovation implementation at the enterprise. “corporate innovation management chart” is a special form of planning that helps to find effective solutions for changes in the competitive environment. the most important things in implementing the “corporate innovation management chart” are the following: • effective prioritization; • setting of criteria of responsibility; • establishment of constant communication; • checking the proper level of employee initiative; • control that employees have the opportunity to directly participate in the creation of a strategy; • confirmation of an explicit connection between the implementation of “corporate innovation management chart” and the system of efficiency management. the proposed mechanism of an effective development management strategy can be used in cases when an enterprise plans to implement an investment project aimed at implementing innovations in order to effectively develop an enterprise. the selection of the project in 8 directions identified during the study, as well as the account of external and internal factors affecting the management system, will allow the enterprise to more effectively engage innovations in economic turnover, to select investment directions that ensure sustainable development of the enterprise. references: garcia, m. l., bray, о. н. (1997). fundamentals of teclmology roadmapping. sandia national laboratories, working paper: 255-303. kappel, t. a. (2001). perspectives on roadmaps: how organizations talk about future. journal of product innovation management: 25-30. hornyk, v. (2012). concept and system of management of innovative development of industry of ukraine. bulletin of napa, 4: 168–174. datsii, o. (2012). formation of a model of innovative enterprises. bulletin of napa, 4: 174–179. tulenkov, n. (2005). features of public administration in a transitional society. ekonomika ta derzhava, 2: 12–14. baltic journal of economic studies 163 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 chernihiv polytechnic national university, ukraine; architectural construction department, university of seville (us), spain e-mail: m-olena@ukr.net orcid: https://orcid.org/0000-0002-7682-2292 3 state scientific institution "institute of education content modernization", ukraine e-mail: mahs@meta.ua orcid: https://orcid.org/0000-0002-9671-7537 doi: https://doi.org/10.30525/2256-0742/2023-9-1-163-168 problems of functioning of printing enterprises in conditions of uncertainty* yuriy safonov1, olena mykhailovska2, marianna dmytrieva3 abstract. the article deals with the problems of development of printing enterprises in ukraine in the conditions of uncertainty connected with military operations (destruction of enterprises, problems with supply of imported raw materials, logistic obstacles, risks of shelling, power cuts, etc.). the study points out the dependence of the printing industry on the import of raw materials and the dependence on customer enterprises, many of which ceased to operate after the start of a full-scale invasion of ukraine. it is proved that the producers of printing products are forced to adapt to modern realities in conditions of uncertainty. a list of necessary factors that will create an additional impetus for the development of enterprises is presented. the relationship between such components as new sales markets, availability of resources, efficiency of material and technical support, enterprise development is described in detail. it is proposed to examine the possibility of using the theory of strategic games as a direction for optimizing the configuration of printing enterprises with material reserves. it is established that the development of the printing market is determined by the development of the industries consuming printing services. this proves the intensification of the struggle for sales markets. since printing is a material-intensive industry, it is relevant to take into account modern challenges. to solve the problem of enterprise development it is proposed to use the theory of strategic games. on the basis of the calculation of possible strategic options it is determined which strategy should be chosen for the printing enterprise. the possibilities of the development of conditions for the optimization of the equipment of printing houses with material reserves using the theory of strategic games are shown. key words: game theory, efficiency, strategy, development, inventories. jel classification: с02, с79, d29, d81, e66, l10, l20, l52, l60, m20 * for conducting scientific and applied research 0122u002363 1. introduction against the background of armed aggression against ukraine, the urgency of preserving the economic development of the state is of particular importance. the activities of all business entities today are associated with many subjective and objective risks. the printing industry supports the activities of many other industries and at the state level becomes particularly important in the focus of national security. printing is the use of tons of paper that is constantly processed, it is expensive equipment and large production facilities that can become easy targets for the enemy. for example, in the city of kharkiv, printing companies were partially destroyed by the invaders. many businesses are still unable to resume operations due to constant shelling or power outages. the printing industry depends on paper imports, which have been a major problem during the war. the problem of effective operation of printing enterprises also depends on the customer enterprises, and since many production facilities in ukraine were shut down, the production of printed products also decreased. this is not to say that all regions experienced the same decline in production, although it should be noted that all companies felt the negative impact (to varying degrees). it is also important to note that there is no time to talk about restoring 100% of pre-war production volumes. baltic journal of economic studies 164 vol. 9 no. 1, 2023 managers of a large number of companies today talk about loading only 30-50% of the possible volume. therefore, it can be said that most printers are working to keep customers and support equipment, as it is difficult to ensure the profitability of the printing business today. it should be noted that not only ukrainian enterprises, but also western ones have experienced negative changes in their activities. for example, the printing associations of the eu reported that printing houses were forced to build up stocks of paper for production for three to four months in advance, and the process of buying paper is difficult, since there are long delays in its production and timely delivery. however, the accumulation of raw materials in warehouses is not effective for ukrainian printing companies, since there is a constant threat of shelling. in addition, in some cases, the storage conditions for raw materials have changed; many companies have moved to other locations; logistics operations within the country itself have been further complicated by restrictions related to curfews, roadblocks, etc.; there has been a problem with delivery to certain areas due to additional risks. this difficult situation is forcing print providers to adapt to modern realities under conditions of uncertainty. in order to give an additional impetus to the development of the printing industry in today 's conditions, it is necessary to: create favorable conditions for production in those areas where it is possible; find ways to support printing houses that should meet the needs of the market; develop ways to improve the efficiency of operations in conditions of uncertainty. purpose of the article: investigation of the possibility of using the theory of strategic games as a direction for optimizing the equipment of printing companies with material reserves in modern economic conditions with a high degree of uncertainty. 2. literature review since the beginning of the full-scale war in ukraine, the problems of the functioning of printing enterprises have been repeatedly raised by practitioners. the system of material and technical support (the problem of the raw material base, logistics, fuel, etc.) plays an important role in supporting the development of a printing enterprise in today 's conditions. managers of printing houses have to make key management decisions in conditions of uncertainty of the external environment to solve the problem of development, the authors proposed to use the theory of strategic games. a large number of works are devoted to game theory. cardano first described games in "liber de ludo aleae" (around 1564), and game theory was widely developed in the 50s of the twentieth century. it is now recognized as an important tool in many fields (chen, nok., 2022; fang, liu, basak, zhu, kiekintveld, kamhoua, 2021). as of 2020, fifteen game theorists have won the nobel prize in economics. today, the international journal of game theory is published, which proves its popularity among scientists. game theory itself is defined as the study of mathematical models of strategic interaction between rational agents (myerson, rodger b., 1991). game theory is widely used in the study of sales markets of industrial enterprises (berninghaus, güth, levati, et al., 2011). the study of models of selection of sales markets for enterprises (anisimov, v. & anisimov, e. & saurenko, t., 2020) proves the importance of logistics processes, and the introduction of anti-crisis measures related to the activities of enterprises is largely based on the adequate provision of necessary resources (obydiennova, antyptseva, dudnieva, 2019). thus, it is possible to trace an inextricable link between the following components: 1) new sales markets; 2) availability of resources; 3) efficiency of logistics; 4) development of the enterprise. 3. development of the printing market under martial law the printing industry is an industry that mainly employs small and medium-sized enterprises, and its development is determined by general economic factors, such as the growth of the industry as a whole or consumer demand. the development of the printing market is determined by the development of the industries that consume printing services, and the fact that printing is one of the high-tech industries further complicates its activities under military conditions. at the same time, both state-owned enterprises and private enterprises are currently in difficult conditions. it is also worth noting that printing is a materialintensive industry, which has certain characteristics in the composition of production assets: 1) a relatively large share of working capital; 2) a high percentage of premises, machinery and equipment (more than 90% of the total cost of fixed assets); 3) in the production process, enterprises use a large number of resources; 4) in the structure of the cost of printing products, the largest share is occupied by raw materials (materials), and so forth. for products that require significant post-printing work, the percentage is lower, but this is still a key position – 30-70% of the cost price. with the beginning of a full-scale invasion, paper from abroad stopped coming to ukraine, the exchange rate rose, and logistics became so expensive that it was extremely difficult to make any price calculations. the problem was aggravated by the fact that european countries also felt an imbalance. paper producers attributed the price increase to problems with the baltic journal of economic studies 165 vol. 9 no. 1, 2023 availability of raw materials (wood) and higher energy prices. last year was also difficult for the printing market due to problems with the supply of resources. domestic manufacturing enterprises were partially closed, others were bought by competitors or became inaccessible to the ukrainian market due to product prices that increased significantly due to logistical problems, etc. on the one hand, enterprises tried to find suppliers, but on the other hand, they did not have timely delivery of raw materials to warehouses. at the same time, the companies that ordered printing products did not always understand such circumstances in the printing market, as a result of which the profitability of the printing house decreased or the customer was lost. the issue of obtaining high quality raw materials in large quantities and at affordable prices for printing companies is still extremely important and sometimes decisive for the existence of the company as a whole. in other words, the issue of the probability of late delivery of necessary material resources to printing companies is updated. the main task of any enterprise, publishing house or printing house is to develop even in the conditions of military operations. this statement is also true because the possibility of successful functioning of the state as a whole depends on economic stability. this problem can be solved in a comprehensive and joint manner only by reacting quickly to the changes that are taking place and by working out all possible ways of providing material resources to printing companies. 4. effective material and technical support as a factor in the development of a printing enterprise taking into account all the obstacles connected with the activities of printing houses in ukraine, it is necessary to note that the material and technical support (mts) system of production plays an important role in improving the use of material resources. the main goal of mts production is to meet its material needs in a timely manner with the highest possible economic efficiency, which fully coincides with the goal of supply logistics. in order to successfully achieve the company 's management goal, it is necessary to: identify the critical nomenclature of material resources used in the production process; ensure the exact correspondence between the number of deliveries and their needs; maintain reasonable purchase terms; meet the quality requirements of materials; try to ensure the timely delivery of materials to production units and workplaces. the implementation of the mts process in printing enterprises is divided into stages: 1) organization of material supply to the company 's warehouses; 2) management of production stocks; 3) organization of mts workshops, sites and workplaces. in this case, one can use two forms of delivery: direct (transit) and warehouse. the first option is not economically feasible, since it leads to a deterioration in the turnover of the enterprise's working capital. in the second case, the material resources are first transferred to the warehouses of intermediary companies. this form of delivery is widely used by printing enterprises as it allows rational use of working capital of the enterprise, not to create excess materials in the warehouses of the enterprise, thus contributing to increase of profitability of the enterprise. however, the appearance of an intermediary in the "producerconsumer" chain naturally leads to additional costs for covering the costs of intermediary organizations' activities. at the same time, this need is justified by the lack of possibility to establish direct links between the producer and the consumer of material resources. the effectiveness of the warehouse form of delivery depends largely on the optimal choice of the supplier (intermediary) and the frequency of purchases. this is characterized by a high degree of uncertainty associated with military operations on the territory of ukraine. the next stage of mts production is carried out in the internal environment of the enterprise and is aimed at optimizing the level of production stocks. at this stage, specific types of work are performed: the need for each type of material resource for the planned period is determined, production stocks are optimized, their rational use is monitored, etc. as it is known, production stocks are a set of material resources that have arrived at the enterprise's warehouse but are not involved in the production process. they are among the objects that require large capital investments and therefore represent one of the factors that determine the efficiency of the organization of production in the enterprise. the number of material resources should be sufficient in quantity and quality to ensure the continuity of the production process in the printing enterprise. at the same time, unreasonably high value of production stocks leads to inefficient use of working capital of the enterprise, which creates the need to optimize the size of production stocks. in normal conditions of activity of enterprises, rationing of production stocks is used (the process of establishing for each type of material resources a reasonable minimum amount of them necessary to ensure the rhythmic operation of a printing enterprise). standards are set in calendar days, in physical and monetary terms. effective management of production stocks in printing enterprises includes, in addition to the traditional control method, the use of modern inventory baltic journal of economic studies 166 vol. 9 no. 1, 2023 management systems: 1) optimization of the delivery value; 2) the size of the delivery interval. other inventory management systems are based on the use of these two basic systems (table 1) (organization of printing production, 2002). despite the fact that the above-mentioned approaches to inventory management are designed to ensure a continuous production process, in today 's conditions none of the systems can guarantee the efficiency of the enterprise, since the external conditions are characterized by a high degree of uncertainty, which does not allow the full implementation of the presented systems. that is, today printing enterprises are subject to the requirements of greater flexibility of production, which is achieved, in particular, through the use of modern inventory management systems. 5. development of printing enterprises in conditions of uncertainty the necessity to adapt the printing industry to modern realities leads to the necessity to study the effectiveness of various methods of material resources management in such conditions. the search for methods of inventory management in printing enterprises in conditions of uncertainty, taking into account modern challenges, becomes relevant. in order to solve the problem of development of the enterprise in the presence of certain factors, the efficiency of the process is evaluated by the minimum value of the probability of completion of the task, which is possible with the worst values of uncertain factors. the optimality condition of the process (system) in this case has the following form: w p a z� � � � �max min ( / ) ,, (1) where a is a random variable involved in reaching the goal; z are undefined factors; p (a/z) is the probability of event a under conditions z. such problems are solved using game theory, which allows one to apply a mathematical basis to problems that are usually solved empirically, without using quantitative estimates. for further research, the theory of two-player games (a and b) is used. the outcome of a game, a win or a loss, is characterized by a number (the game price). the principle (theorem) of minimax, which can be formally written: max min , min max , , a b b a v a b v a b� ��� � � � � ��� � �, (2) where a and b are the characteristics of the actions of players a and b; v (a, b) – loss function (payment function). when such an equation occurs, the corresponding value of the function v(a, b) is called the saddle point of the game, which is the intersection of the optimal strategies of players a and b (berninghaus, güth, levati, et al., 2011). at this point, one player's minimum maximum loss coincides with another player's maximum minimum loss. in this case, consider a finite game, i.e., a game in which players a and b have only a finite number of strategies. player a has strategies a1, a2,...,an. player b has strategies в1, в2,…, вm. this is a m×n game. the win of player a in strategies a and b is denoted by аij (tishchenko, 1976). this game can be interpreted as a battle between two enterprises for product sales markets. let one table 1 the most widely used production inventory management systems system characteristics with a fixed delivery size replenishment takes place at the expense of a certain amount of a certain type of resource; the volume of purchases should be not only rational, but also optimal (as a criterion of optimality, a minimum of total costs (use of warehouses, storage costs and transportation costs) for storing a stock of materials and transportation costs are most often used); increasing the delivery time leads to savings in transportation costs; the probable risk of illiquid stocks. with guaranteed delivery size it includes the calculation of the guarantee (insurance), the maximum and the maximum desired stock level; it is aimed at ensuring the need for this type of resource for the time (maximum possible) of the expected delivery delay; the value of the maximum desired stock in this system corresponds to the optimal loading of the warehouse premises while ensuring a minimum of total costs. with a fixed interval between deliveries the system is based on determining the optimal delivery interval; in the practice of printing enterprises, a system with a fixed delivery interval can be used for material resources with a limited shelf life, for example, for the supply of glue to a printing enterprise. in the system under consideration, the delivery time is predetermined and does not change under any circumstances, and the delivery quantity is constantly recalculated. the calculation is based on the expected consumption before the material resource arrives at the company 's warehouse. "just-in-time" inventory management system its main difference is that the supply of material resources is carried out directly at the primary stage of production, and not to the warehouse; it is assumed that production facilities are ready to process materials and semi-finished products from the side almost "from the wheels", as a result of which the volume of production stocks is minimized; in order to assess the effectiveness of the organization of the production process, in addition to the level of costs, it is necessary to take into account the duration of the production cycle of products. baltic journal of economic studies 167 vol. 9 no. 1, 2023 of the enterprises (player a) try to oust the other enterprise (player b), which has two sales markets, from one of them. in a formal entry, the winning function of a given game is set by the ratio: h y x k x y if x y k k y x if x y k , , ; , , � � � �� � � �� � �� � � �� � � � � �� 1 1 2 2 0 0 (3) where х, у – are the amounts of funds allocated by players a and b, respectively, to maintain the markets. player a's strategy is to distribute these funds between two markets. if the amount x is sent to the first market, then the amount 1-х is sent to the second market. at the same time, player b also has a single amount to save the markets, and his strategy will consist in allocating the amount b to the first market and 1-у to the second. suppose that player a, having gained an advantage in one of the markets, receives a profit (a production order) equal to the loss of his funds multiplied by the coefficient characterizing the importance of the market (k1 for the primary market; k2 for the secondary market). dependency graph h x y0,� � from у is a pair of rectilinear segments if x0 0= or x0 1= , one of these segments is drawn into points. in the function graph max k y k y1 21�� � �� , the first term under the maximum sign decreases with increasing y, and the second term increases. therefore, for small values of y, the maximum can be reached on the first term, and for large values of y – on the second term. thus, for such a y*, the minimum value of the maximum is taken for which: k y k y1 21�� � �* * , (4) hence, the following: max , max max ,max max x x y x y h x y k x y k x y k y� � � �� � �� � � � � � � � � �� � � � 1 2 1 1 ,,k y2� � max , max max ,max max x x y x y h x y k x y k x y k y� � � �� � �� � � � � � � � � �� � � � 1 2 1 1 ,,k y2� � (5) therefore, v h x y k y k y y x y x � � � � �� �� �minmax , minmax ,1 21 , (6) in y k k k *� � 1 1 2 (7) thus, what is found in y* is the only optimal strategy of player b. it can be seen that the optimal strategy of player b is to distribute the available funds among the markets and at the same time in proportion to the importance of the markets. in general, the profit is a random variable and its value can be written in the payoff matrix or the efficiency matrix. 6. research results using the methodology of operations research, the authors call the measure of profit аij, performance indicators wij strategy option аі in the conditions of вj. in the efficiency matrix, instead of the decision option, write the strategy option and replace wij by аij. to solve the game m×n means to know for each player such a strategy that its average profit for more games is the largest (vorobyov, 1974). construct the efficiency matrix of a printing enterprise. printing enterprise a plans to purchase paper products for the production of printed products, the need for which depends on the demand of enterprise b. the need for printing paper with reduced demand can be 5 tons; with normal demand – 8 tons; with increased demand – 10 tons. the price of paper for the production of printing products can be: 1) 85 thousand uah/ton with reduced demand; 2) 93 thousand uah/ton with normal demand; 3) 100 thousand uah/ton with increased demand. it also answers the question: what strategy should the company choose to purchase 5 tons, 8 tons, or 10 tons of paper? therefore, the cost matrix is created and nine possible strategies for the company are calculated (table 2). the table shows that the minimum term is -925 thousand; -880 thousand; -850 thousand, and the column maxima are -425 thousand; -680 thousand; -850 thousand, and the maximum minimum term (by columns) coincides with the minimum maximum of columns by terms. thus, the best solution is to buy 10 tons of paper products at the price of 85 thousand uah/ton. 7. conclusions the article proved that many enterprises of the printing industry are unable to resume their work due to the war on the territory of ukraine. many enterprises-consumers of printing products were forced to partially or completely stop work. in addition, the printing industry is dependent on paper imports, which caused additional problems during the war. as a result, most printing houses are working table 2 player expense matrix paper stock for the production of printed products demand в1 (low) в2 (normal) в3 (high) а1=5 а11=-425 thousand а12=-704 thousand а13=925 thousand а2=8 а21=680 thousand а22=-680 thousand а23=880 thousand а3=10 а31=850 thousand а32=-850 thousand а33=850 thousand baltic journal of economic studies 168 vol. 9 no. 1, 2023 to keep customers and maintain equipment, and it will take several years to restore production to pre-war levels. ukrainian printers cannot store raw materials in warehouses because of the constant threat of shelling. the storage conditions for raw materials have also changed (many companies have moved to other locations; logistics within the country have also become more complicated due to restrictions related to curfews, roadblocks, etc.). therefore, the issue of obtaining high quality raw materials in large quantities and at an acceptable price is extremely important for printing enterprises, and sometimes crucial to the existence of the company as a whole. thus, in the article the question of making key management decisions in conditions of uncertainty was examined, namely the study of the feasibility of using the theory of strategic games as a direction for optimizing the equipment of printing houses with material stocks. the article presents approaches to the management of material and technical support and notes that in today 's conditions none of the systems can guarantee the efficiency of the enterprise. the necessity to adapt the printing industry to modern realities leads to the importance of researching the effectiveness of various methods of material resources management. the theory of two-player game was used in the work. the conducted research allows to draw a conclusion about the effectiveness of the application of the theory of strategic games in the management of the material and technical support of the enterprises of the printing industry in the conditions of uncertainty and, if necessary, in making quick managerial decisions. at the same time, the example shows the wide range of possibilities for the development of conditions for the optimization of the equipment of printing enterprises with material reserves with the help of economic and mathematical modeling methods. references: anisimov, v., anisimov, e., & saurenko, t. (2020). enterprise product sales market selection model. e3s web of conferences, 217, 07024. doi: https://10.1051/e3sconf/202021707024 battenberg, h.p., & falkowski, b.j. (1998). on saddlepoints of two-person zero-sum games with applications to data verification tests. international journal of game theory, 27, 561–576. doi: https://doi.org/10.1007/ s001820050090 berninghaus, s., güth, w., levati, m.v. et al. (2011). satisficing search versus aspiration adaptation in sales competition: experimental evidence. int j game theory, 40, 179–198. chen, nok (2022). a description of game theory. journal of education, humanities and social sciences, 2, 199–205. doi: https://doi.org/10.54097/ehss.v2i.787 fang, f., liu, s., basak, a., zhu, q., kiekintveld, c., & kamhoua, c. (2021). introduction to game theory, 21–46. doi: https://doi.org/10.1002/9781119723950.ch2 mironova, g.v. (ed.) (2002). orgnizaciya poligraficheskogo proizvodstva [organization of printing production]. mgup. myerson, roger b. (1991). game theory: analysis of conflict, harvard university press, p. 2. doi: https://doi.org/ 10.2307/j.ctvjsf522 obydiennova, t., antyptseva, o., & dudnieva, i. (2019). impact of resource provision of enterprises on anti-crisis measures. modern economics, 14, 200–205. doi: https://doi.org/10.31521/modecon.v14(2019)-31 tishchenko, n.m. (1976). vvedenie v proektirovanie slozhnyh sistem avtomatiki [introduction to the design of complex automation systems]. moscow: "energiya". vorob'ev, n.i. (1974). teoriya igr. lekciya dlya ekonomistov kibernetikov [game theory. lecture for cybernetics economists]. leningrad: iz-vo leningrad. un.-ta. received on: 3th of february, 2023 accepted on: 21th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 13 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 lviv polytechnic national university, ukraine (corresponding author) e-mail: nataliia.m.khoma@lpnu.ua 2 lviv polytechnic national university, ukraine e-mail: halyna.i.lutsyshyn@lpnu.ua 3 institute of politology, university of gdansk, poland e-mail: jaroslaw.nocon@ug.edu.pl doi: https://doi.org/10.30525/2256-0742/2022-8-5-13-24 compliance of the post-soviet baltic states with the institutional and value requirements of eu membership nataliia khoma1, halyna lutsyshyn2, jaroslaw nocon3 abstract. the compliance of the baltic states with the eu requirements for member states is studied. compliance is determined by the indicators of gender equality, tolerance and effectiveness of anti-corruption policy. a set of problems that hinder the consolidation of democracy in the baltic states is identified. the gradual increase of various ethnic stereotypes and new social phobias in the communities of the baltic states was noted. the authors attribute the problems of democracy quality and discrepancies with eu standards to the peculiarities of political culture and value orientations of the population (dominance of survival values over self-expression values). it is concluded that the baltic states do not fully meet the eu standards at the institutional and value levels. it is argued that institutional reforms have satisfactory results in many areas, but the values of the population are modernizing very slowly towards those specifically defined by the eu. key words: baltic states, quality of democracy, gender equality, tolerance, prevention and counteraction of corruption. jel classification: j16, d73 1. introduction the eu was established as a union of states based on unconditional respect for human dignity, freedom, democracy, equality, the rule of law and other key principles. the treaty on european union (1992) states that democratic values are the unifying principle for the member states. as conceived by the architects of this union, the community of nations of the eu should be characterized by pluralism, non-discrimination, tolerance, justice, gender parity and many other issues. however, the destructive political processes of the last two decades suggest that the fundamental values of the eu are losing their sustainability in many member states (especially from the central and eastern european region). from year to year, the communities of the eu member states record the upward dynamics of intolerance, hate speech, numerous social phobias, various discriminations, etc. these destructive processes actualize the study of the following issues: 1) to what extent do the young democracies of central and eastern europe today meet the standards that the eu expects from each member state? 2) what inconsistencies of the eu's course are reflected in the young democracies of the eu and to what extent do these inconsistencies threaten the stability of the eu as a democratic union of states? 3) do eu countries with a post-totalitarian past continue consistent institutional and value-based reforms after accession to achieve full alignment with the eu? 4) are the eu's efforts sufficient to prevent the member states from departing from democratic principles and values in the context of global deterioration of democracy? these and some other issues are particularly relevant for political science. therefore, the purpose of this paper is to examine the compliance of the three baltic states (estonia, latvia and lithuania) with the eu requirements to the member states. the central and eastern european states that joined the eu in the 2004 enlargement made significant efforts in the late 1990s and early 2000s to meet the copenhagen criteria. but eu membership did not mean the end of democratisation processes. accordingly, reforms aligned with eu policies were expected to continue steadily. however, after may 1, 2004, the motivation for intensive reforms significantly decreased. democratization processes began to be characterized by stagnation or regression. the baltic states are no exception to this trend, baltic journal of economic studies 14 vol. 8 no. 5, 2022 as they do not meet the standards of consolidated democracy. the covid-19 pandemic has further exacerbated the rollback of democracy. this is evidenced by the data of various democracy indices. for example, according to the democracy index 2020, all baltic countries are in the group of imperfect democracies. it is obvious that the historical past, as well as the lack of a stable liberal democratic tradition, led to the formation of the current defective model of democracy. undoubtedly, the course towards european and euro-atlantic integration contributed to the democratization processes, but failed to finally consolidate their achievements. the beginning of the global financial crisis in 2008 became a powerful trigger for stagnation of democratization processes in the eu, including in post-totalitarian member states. many countries witnessed the rise of populism and the coming to power of conservative, nationalist parties. this, in turn, exacerbated democratic regression. the european debt crisis of 2010, the migration crisis of 2015, the covid-19 pandemic and other factors have slowed down further democratic reforms, provoked the growth of intolerance and hate speech. these trends are clearly visible in estonia, latvia and lithuania, although the decline in the quality of democracy here is not as obvious as in hungary or poland. therefore, the processes of stagnation / regression of democratic reforms in these countries in 2004-2020, the extent of their compliance with the eu course is of interest to researchers. 2. methodology on the one hand, the analysis of the baltic states as an integral object of study is justified. they have a common historical background, all three countries almost simultaneously carried out institutional reforms and met the copenhagen criteria, and were admitted to the eu at the same time. today estonia, latvia and lithuania face similar institutional and value barriers on the way to adopting eu standards. conversely, each of the three baltic states emphasizes national approaches to the degree of deepening or resistance to liberal democratic reforms. there are marked differences in the pace of their rapprochement with the eu or increasing confrontation with its institutions. this is due to a number of factors, such as the place and role of nationalist, conservative, populist political forces in each of these states, as well as their interest in a particular issue that needs to be addressed to achieve a higher level of compliance with eu standards. important factors of support or opposition to the post-integration liberal democratic transformation of estonia, latvia and lithuania are the peculiarities of the political and legal culture of the population, the current level of public support for certain aspects of democratic transformation, the political will of the leaders of the baltic states to consistently implement the eu policy at the national level. thus, the research methodology includes not only neo-institutionalism and comparativism, but also an axiological approach. it is important to find out whether there are vestiges of the totalitarian past in the political culture, consciousness of the population of the baltic states, as well as how this destructive historical heritage affects the modern cooperation of estonia, latvia and lithuania with the eu institutions. the study 1) reveals the defects of democracy in the baltic states by a number of indicators, as well as a set of reasons that cause them; 2) considers the scientific hypothesis of stagnation/regression in the processes of compliance of estonia, lithuania and latvia with the eu democratic standards; 3) reveals the differences between the baltic states in terms of continuing democratic reforms and maximum rapprochement with the eu. the indicators of gender equality, tolerance and effectiveness of anticorruption policy were chosen for the analysis. it should be noted that the system of indicators that can be used to assess the compliance of the three baltic states with the eu standards, as well as to identify differences between the baltic states, is much wider. the analysis covers only some of them due to the limited space of this paper. 3. the baltic states as part of the process of pan-european decline in the quality of democracy when the democratization processes in central and eastern europe were just beginning, the political discourse actively hypothesized that the european and euro-atlantic integration of the countries of this region could become an effective mechanism for expanding the range of liberal democracy. conceptually, this is reflected in the approach "democratization through integration" (dimitrova and pridham, 2004). the european perspective was seen as a potentially effective tool to curb extremist, populist tendencies (bayer, 2002), an incentive to increase the quality of democracy (pridham, 2005). the fact that candidate countries have joined the eu has been interpreted in political science discourse as an argument in favor of consolidating democracy (schimmelfennig, 2007; merkel, 2008). the process of european integration was positioned as an important factor in the successful democratic transit of estonia, latvia and lithuania. thus, in the late 1990s – 2000s, a strongly optimistic approach to the role of european integration for the countries of central and eastern europe prevailed. baltic journal of economic studies 15 vol. 8 no. 5, 2022 the onset of the global financial crisis in autumn 2008 was a turning point in assessing the role of european integration for democratization. almost immediately, researchers noted the growth of populism (cristova, 2010; palonen, 2009). according to p. guasti and z. mansfeldová (2018, p. 74), in central and eastern europe’s democracies, indicators of democratic development such as media freedom, the quality of the checks and balances, stability and representativeness of the party system, citizens' approval of democratic norms and procedures, etc. began to deteriorate. however, it should be noted that even before this crisis, scholars paid attention to the decline in the quality of democracy. in particular, i. krastev (2007) stated the "strange death of liberal consensus" in posttotalitarian europe, the displacement of liberal consensus by illiberal populism. obviously, the decline in the quality of democracy is due to a complex set of problems that have been exacerbated by the global financial crisis. the further prospect of democratic transformation after the eu enlargement in 2004 for the new member states was considered in the political discourse under two different scenarios: 1) the first scenario predicted the probability that after exhausting, intensive implementation of the copenhagen criteria for eu accession, post totalitarian states would return to the usual political and legal models. this meant manifestations of neoauthoritarianism, populism, departure from the rule of law, intolerance, etc. against the backdrop of euphoria from the great eu enlargement, doubts have been expressed about the prospects of sustainability of democratic reforms, which were carried out at the request of the european union (dimitrova and pridham, 2004). it was predicted that the most "sensitive" reforms could be reversed after the candidate countries achieve the desired eu membership (dimitrova, 2010). such a forecast should have prompted the eu institutions to introduce new mechanisms to prevent the rollback of liberal democratic reforms, but no serious work was done in this direction. although the eu institutions have repeatedly declared their readiness to invest in deepening the sustainability of neoliberal democracies, the practical dimension of this intention has been insufficient. against the backdrop of increasing challenges to the eu's sustainability, attention to the quality of democracy in the new member states is insufficient. the problems of 2020 – early 2021 have made it very clear that the priority is to save the economy, not democracy. the negotiation process for the adoption of the eu long-term budget for 2021–2027 and nextgeneration eu by the european parliament confirms our statement. it seems that the eu macro-level strategy for democratic progress still needs to be considered; 2) the second scenario (the theory of the "euro straitjacket") assumed that the accession of central and eastern european countries to the eu should have a long-term positive perspective for the consolidation of national democracies. it is clear that this scenario has not been realized. however, the problems of the quality of democracy in the countries of central and eastern europe are expressed in different ways. in some of them (especially the visegrád group) they have reached a dangerous to the eu stability scale, and in others (as in the case of the baltic states) these problems are not threatening but slow down further democratic progress of these states, achieving full compliance with eu institutional and value standards. gradually, the baltic states have become a platform for a "new political opponent of liberal democracy " – a kind of democratic regime, neo-authoritarian in form, with a capitalist economy and a commitment to conservative and nationalist ideology (ignatieff, 2014, pp. 30–33). thus, for the second decade in a row, the post-totalitarian states of central and eastern europe have been experiencing growing defects in democratic progress, in contrast to the democratic improvements they expected from eu membership. the baltic states are part of this threatening process, as they demonstrate the vulnerability of democracy, the high risk of losing its liberal core (dăianu, 2018). researchers explain the strengthening of internal resistance in the baltic states to liberal democracy (and hence to the eu's political course), in particular, by the course imposed on these countries to become "common", for example, like western countries (krastev and holmes, 2018, p. 118). despite the obvious advantages of such a course for states with a totalitarian past, the active import of western standards had negative consequences, primarily of a moral and psychological nature. traditionally, peoples who have been enslaved for a long time react sharply to any demands from outside to recognize their culture as superior to national foreign (multicultural) values. in fact, this is typical for estonia, latvia and lithuania. it is about the post-totalitarian peoples' feeling of inferiority, dependence, lost identity. these processes can explain the growing influence of nationalist, conservative political parties, their support by the electorate, as well as the gradual upward dynamics of various social phobias, hate speech, intolerance, etc. the problems of the quality of democracy in the baltic states (as well as in central and eastern europe as a whole) are due to the relatively short democratic experience. there has never been a strong liberal political culture capable of supporting stable democratic regimes even in the face of growing economic, social and other problems (dawson and hanley, 2016; vachudova and hooghe, 2009). this baltic journal of economic studies 16 vol. 8 no. 5, 2022 makes the region particularly vulnerable to such challenges. in the context of this vulnerability and the growing deterioration of the quality of democracy, it is worthwhile to examine the compliance of the baltic states with the eu requirements for member states. since the declaration of independence, the baltic states have been characterized by a clear pro western orientation and focus on the western european model of socio-economic development. the authors believe that the decisive factor that inevitably determined the vector of evolution of estonia, latvia and lithuania is the consensus among national political elites on foreign policy priorities. the rotation of ruling political parties does not affect the commitment to the european and euro-atlantic course. at the same time, the baltic states are currently facing the task of overcoming the stagnation of democratic transformations and preventing further deterioration of the quality of democracy. 4. compliance of the baltic states with the principle of gender equality the eu has been consistently developing the idea of gender equality since the adoption of the founding treaties of the eu (treaties of rome, 1957). most key eu documents emphasize the importance of gender parity. therefore, the elimination of gender discrimination is a priority for the eu institutions, as (according to eu estimates) no eu member state has yet achieved full equality between women and men, and progress in this direction is slow. this is stated in a union of equality: gender equality strategy 2020–2025 (european commission, 2020). covid-19 has exacerbated gender issues. the eu now expects member states to take active steps to strengthen gender equality: increasing employment opportunities for women and, accordingly, reducing female unemployment; reducing segregation in the labour market; ensuring equal pay for equal work; reconciliation of work and family life for women and men; reintegration of women returning to work after maternity leave; gender balance in decisionmaking; elimination of financial and non-financial barriers that would increase women's participation in the labor market, etc. the eu declares that it aims to maximize the involvement of both men and women in public life. at the same time, the achievement of the eu goals is hampered by the slow progress of most member states, including the baltic states, in strengthening gender equality at the national level. the authors believe that estonia, latvia and lithuania are characterized by a rather hesitant approach to the implementation of the principle of gender equality, which has a conservative basis. in the opinion of the authors, certain stereotypes in the communities of the post-soviet baltic states lead to the emergence of a glass ceiling and glass walls. although estonia has the strongest position in the gender inequality index among the baltic states and has ratified the istanbul convention, the gap with the leading scandinavian countries is significant. culturally, estonia belongs to the group of scandinavian countries, but gender egalitarianism in the society is much lower (alas and kaarelson, 2008, p. 13) than, for example, in norway or sweden. estonian women are faced with the dilemma of reconciling the expectations of a patriarchal, conservative society regarding the role of women with western (liberal-democratic) trends and initiatives aimed at promoting equal opportunities for the genders. estonia has the largest gender pay gap in the eu, new discriminatory employment practices are emerging, feminization of poverty is growing (narusk and kandolin, 1997; hansson and aavik, 2012; roosalu, 2013; saar and helemäe, 2016, p. 325). estonia is a country where it is difficult to achieve a balance between work and family life. there is also a high level of domestic violence, although the state institutions prevent and counteract such illegal actions, and the fight against domestic violence is consistently supported by the head of state k. kaljulaid. the institution of the commissioner for gender equality and nondiscrimination has been operating since 2005, and reports indicate a large number of citizens' appeals that are considered annually, but a separate study is needed to assess the effectiveness of this institution. when the nationalist-conservative party ekre (2019) significantly increased its representation in the riigikogu and joined the coalition government, it sharply intensified anti-gender rhetoric about preserving and protecting traditional values. however, the resignation of the jüri ratas’ government in early 2021 helped to stop the representation of the ekre party in the coalition government. instead, the executive power of estonia was first headed by a woman (k. kallas). there is a situation when in a rather conservative estonia with a pronounced "male face" of politics, the two highest state positions (president and prime minister) are simultaneously held by women. this is the only such case in the world. in addition, for the first time, the estonian government headed by k. kallas has a record number of women (7 out of 15 officials), which is an exemplary example of gender parity. also, according to the results of the last elections in 2019, the representation of women in the estonian parliament has increased. one way or another, despite the mentioned positive aspects in terms of increasing women's representation baltic journal of economic studies 17 vol. 8 no. 5, 2022 in power, specific issues remain relevant for estonia: solving the problem of increasing women's participation in the labor market and ensuring their economic independence; reducing the income gap in wages and pensions; combating gender-based violence and promoting women's rights; introducing gender-oriented budgeting and gender quotas, etc. focusing on lithuania, despite the revival of the women's movement, constant improvement of legislation in accordance with eu norms, the country still has a gap between the theoretical declaration of gender equality and actual gender inequality. lithuania's position in the gender equality index is one of the lowest in the eu. support for traditional gender roles is firmly rooted here. according to a study conducted by the pew research center, for 88% of respondents from lithuania the issue of gender equality is important, while in sweden, france and the netherlands – for 99%, in germany, spain – for 98%, etc. (prc, 2019, p. 90) antigender sentiments are supported by conservative forces (catholic church, right-wing radical parties), which rely on centuries-old patriarchal traditions and stereotypes about gender roles. facts and statistics show that lithuania has not yet reached gender equality standards, and sexism and discrimination against women persist in various forms, mostly latent. there are differences in pay and a noticeable division of employment into "female" and "male" functions. experts and the lithuanian public cannot find a compromise on the implementation of the directive on work-life balance for parents and carers (2019), which provides for additional leave for employees to promote a better work-life balance. according to the estimates, the pace of lithuania's movement towards gender equality is slower than in other baltic states. since 2005, this country has not made significant progress in strengthening gender parity. it has one of the smallest numbers of women in the eu parliaments, although the 2020 elections saw a certain increase (women now make up 27% of the seimas of the republic of lithuania). lithuania has not ratified the istanbul convention. the problems are obvious: gender pay gap; domestic violence; inadequate representation of women in politics; stereotypes about gender roles, etc. there is a lack of understanding of gender quotas as an important tool for reducing the gender gap in politics. it is estimated by m. a. pavilionienė, the lithuanian researcher, that "too many lithuanian women still lack feminist thinking, courage and active involvement in implementing equal opportunities, changing dogmatic and stereotypebased thinking concerning genders, and expanding the concept of women's rights as human rights." (2015, p. 277) this indicates the still significant role of patriarchal approaches to the "inferior" status of women in lithuanian society. in view of the above, it is considered that the value paradigm of lithuanians in terms of gender equality needs to be reformatted. unlike lithuania, latvia is making slow but steady progress in strengthening the principle of gender equality. this conclusion can be drawn from the growing representation of women in government, especially in parliament. at the same time, gender segregation in the labour market and education remains. in addition, the wage gap between men and women persists. gender-based violence remains a serious problem. there are no legal norms in latvia that would enshrine the principle of gender equality. there is also no institution of a specialized ombudsman for gender policy. this distinguishes latvia from other baltic countries. latvia, as well as other baltic countries, is characterized by a focus on creating sustainable institutional mechanisms that would promote the implementation of the principle of gender equality, rather than on changing the value paradigm. latvia's inclusion of the issue of gender equality in the political agenda is motivated not by the internal demand of society for such changes, but by the need to meet external requirements – first as an eu candidate country and since 2004 as an eu member state. this explains why latvia has not yet managed to achieve a strong and consistent gender equality policy. gender equality as a liberal democratic value is slowly taking root in latvia, but it is not accepted by the general public. family values of patriarchal type remain significant, freedom from conservative stereotypes is not stable. latvia's gender progress is hindered by strong conservative attitudes of not only the society, but also the political elite. therefore, it is in the value dimension that it is advisable to look for explanations for latvia's refusal to ratify the istanbul convention, as well as the low efficiency of gender policy in general. obviously, the factor of european integration has prompted the baltic states to launch reforms in terms of implementing the principle of gender equality. however, estonia, latvia and lithuania are still characterized by horizontal and vertical gender segregation, especially in the labour market. the rise of radicalism and conservatism in politics has contributed to the growth of gender-biased rhetoric in recent years. it is noteworthy that such processes rarely lead to public condemnation and public demands to bring hate speech speakers to justice. reforms aimed at implementing gender equality in the baltic states rest on the issue of values, which take a little longer to change than institutional reforms. traditional gender roles, gender stereotypes remain very resistant to change, which is one of the most important reasons for the preservation of baltic journal of economic studies 18 vol. 8 no. 5, 2022 political and legal stereotypes and conservative approaches to gender roles. it seems that in the light of the global coronavirus pandemic, the baltic states have pushed the issue of gender equality to the background. this has made possible the emergence of new discriminatory practices in employment, increased segregation in the labor market, and the feminization of poverty. the authors did not find an active position of the estonian, latvian or lithuanian authorities to support women under quarantine restrictions. thus, the overall progress of the baltic states in promoting gender equality is currently assessed as slow, and some of the eu recommendations are not being implemented. 5. compliance of the baltic states with the principle of tolerance the eu positions tolerance as one of the important preconditions for the functioning of a united europe. eu member states signed the declaration of principles on tolerance (1995). thus, the eu seeks to affirm the value of diversity, "otherness", the right to pluralism of views. at the same time, most young eu democracies, including the baltic states, have problems with ethnic, racial, religious, political, sexual, age, educational and other tolerance. this leads to segregation, neo-racism, xenophobia, migrantophobia, hate speech, pressure on lgbti+ people, etc. according to the eurobarometer survey on discrimination, respondents indicated the following cases of discrimination in their countries: discrimination against roma (61%), harassment on the grounds of ethnicity and skin colour (59%), sexual orientation (53%), religion and belief (47%), disability (44%), age (40%) and gender (35%) (european commission, 2019b). therefore, preventing and countering the growth of anti semitism, islamophobia, xenophobia, violent extremism, hate speech on the internet, etc. remains on the eu agenda. manifestations of intolerance are typical, in particular, for the baltic states. in estonia, it is clearly defined at the institutional level that the fight against all forms of intolerance is the key to estonia's further democratic progress within the eu. there is no rapid upward trend of intolerance (as in the case of some eu countries), but there are problems in certain areas of life. this is evidenced by intolerance in ethnic issues, islamophobia, the spread of hate speech, etc. negative stereotypes about roma persist and there are problems with their full integration into estonian society (viies, 2011). the problem of intolerance towards lgbti+ people is acute. and this is despite the fact that estonia is the most liberal towards sexual minorities in the baltic states and central and eastern europe in general. estonia's progress is evident at the institutional level: the institution of civil partnership for same-sex couples has been legalized; transgender people are allowed to change their legal gender and name; criminal law provides for punishment for public incitement to hatred on the basis of sexual orientation, etc. however, estonians' tolerance towards sexual minorities is more pronounced among certain socio-demographic groups, especially estonian-speaking youth. homophobia in estonia is more evident than the eu average, but significantly lower than in neighbouring latvia and lithuania. this is evidenced by the results of the eurobarometer survey on discrimination (european commission, 2019b): 41% of estonians do not object to same-sex marriage; for comparison, in lithuania – 30%, latvia – 24%; the eu average is 69%. the destructive intolerant dynamics is not least due to the electoral support of estonian radical, populist parties, primarily the conservative people's party of estonia (ekre). this party entered the parliament under the slogan "estonia for estonians". the authors believe that the support of a significant number of estonians for parties that express misogynistic, anti-semitic, xenophobic, homophobic and racist sentiments indicates that liberal democratic values are not yet sufficiently rooted in the political and legal culture. it should be noted that one of the key issues for ekre is the holding of a referendum on the consolidation of the definition of marriage in the estonian constitution as a union of a man and a woman. however, the estonian authorities are aware that holding such a referendum contradicts the eu agenda on the rights of sexual minorities. it is possible that the resignation of prime minister jüri ratas in early 2021, and subsequently the withdrawal of the ekre party from the coalition, was a way to prevent this referendum. in latvia, the following remain problematic in terms of implementation of the principle of tolerance and prevention of manifestations of intolerance: preservation of a high percentage of non-citizens in the structure of the country 's population; marginalization of the roma community; manifestations of anti-semitism, especially in the internet discourse; high level of intolerance towards refugees (migrantophobia, islamophobia); insufficient attention of the state to preventing and counteracting hate speech and weak promotion of counterpropaganda by the state and civil society in response to racist, homophobic, transphobic and other hate speech. intolerance towards sexual minorities remains high. the results of the eurobarometer survey (european commission, 2015) show an extremely baltic journal of economic studies 19 vol. 8 no. 5, 2022 slow but still growing support for same-sex marriage: 19% of respondents, while the eu average is 61%. only 25% of latvians agreed that same-sex relationships are normal (european commission, 2019b). for comparison: in sweden – 95%, in the netherlands – 92%, in denmark – 90% of respondents, but in bulgaria – 20% (the worst indicator in the eu). latvia has the highest level of intolerance towards lgbti+ people in the baltic group. the reasons for these and other problems lie not least in the political and legal culture of the latvian population, which is characterized by a rather pronounced intolerance to "otherness" and instability of liberal democratic values, which are the focus of the eu strengthening. latvians’ movement from survival values to self-expression values is slow (rungule and seņkāne, 2018, p. 95). there are not enough information campaigns aimed at building tolerance. even for professionals who have to meet the standards of tolerance in their work, training activities on hate speech, prevention of intolerance, etc. are extremely poorly organized in latvia (kamenska, 2017). at the same time, some progress has been made at the judicial level. in particular, the constitutional court of the republic of latvia has recently started to take the progressive position that the family is a social institution based on close personal ties that can be identified in social reality, as well as on understanding and respect. this is important for same-sex couples, especially those raising children together (constitutional court of the republic of latvia, 2020). sensitive issues of tolerance in latvia remain issues related to the historical heritage of the country, especially the period of the second world war. first of all, it is about the annual commemoration (at the non-governmental level) of members of the local waffen-ss legion. this issue was highlighted by the european commission against racism and intolerance (ecri, 2012, p. 7, 24–25). the latvian authorities were recommended to oppose the commemoration of those who fought in the waffen-ss and in some way interacted with the nazis. at the same time, the public opinion is dominated by the perception of the legion's activities not as solidarity with nazism (and thus involvement in the holocaust, war crimes), but as a fight against the soviet regime for the restoration of latvia's sovereignty. after the beginning of 2015, in connection with the european migration crisis and the distribution of migrant quotas among the eu member states, cases of xenophobia and social exclusion have become more frequent in latvia, as well as social phobias (migrantophobia, islamophobia) have intensified. the assessment of the attitude to refugees in latvia is not least evidenced by the fact that a significant part of those who fell under the eu quotas soon left the country, moving to western and northern europe. finally, it was latvia that actively supported in 2017 the initiative of the prime minister of poland d. tusk to abolish the eu practice of setting quotas for refugees for the eu member states. analysis of latvia's state policy in the field of combating intolerance leads to the conclusion that it focuses only on certain problematic areas, while many acute, uncomfortable issues are silenced or outright ignored. latvia's legislative framework is not fully in line with eu legislation. some of the eu recommendations to minimize situations that contribute to the spread of intolerant destructive practices have not been implemented. latvian legislation is not yet fully compliant with the ecri general policy recommendation no. 7 on national legislation against racism and racial discrimination on combating racism and racial discrimination in terms of combating racism and racial discrimination (ecri, 2017). as for tolerance in lithuania, it should be noted that this country has been a place of coexistence of many peoples, cultures and religions for hundreds of years. after the declaration of independence, lithuania chose a different mechanism of granting citizenship than estonia and latvia, so there is no group of non-citizens in the structure of the population. at the same time, new ethnic stereotypes and social phobias are being formed. currently, legal mechanisms for the protection of human and civil rights and freedoms are not effectively applied in relation to national minorities, refugees and other vulnerable groups. the competence of law enforcement and judicial bodies is low in terms of responding to hate crimes, hate speech, etc. refugees, national minorities and foreign citizens are victims of hate speech. however, lithuanian society is rather passive in counteracting intolerant practices due to the dominant conservative nature of culture among the population, as well as the instability of liberal democratic values. the segment of right-wing radicals, populists and other organizations that incite hatred on the grounds of anti-semitism, homophobia, etc. is quite active in the structure of lithuanian civil society. lithuanians have not yet managed to overcome the problem of a rather high level of hidden intolerance towards people with different ethnic, racial, sexual and other identities. strong religious conservatism of lithuanians is manifested in a certain intolerance to non-christian religions, which can potentially provoke the growth of islamophobia in lithuania. the manifestations of intolerance in lithuania are homophobia (its level is higher than in estonia and latvia), xenophobia, migrantophobia, etc. manifestations of anti-semitism (beresniova, 2017) baltic journal of economic studies 20 vol. 8 no. 5, 2022 and romaphobia have been repeatedly recorded (kiurė, 2017; poviliunas, 2011). in such circum stances, lithuanian state institutions are currently inconsistent in overcoming intolerance and integrating stigmatized groups. common to all the baltic states in terms of implementation of the principle of tolerance are challenges not only at the institutional level (failure to implement certain eu recommendations in terms of promoting the principle of tolerance), but also at the value level (incomplete perception of liberal democratic values by the population, which the eu is focused on implementing). 6. compliance of the baltic states with the eu anti-corruption objectives anti-corruption values are among the most important for the eu, so preventing and fighting corruption is one of the eu's priorities. the eu interprets corruption as a wide range of illegal actions: it is not only obtaining illegal benefits, but also trading in influence, justice, uncivilized lobbying, conflict of interest, nepotism, favoritism, nepotism and others. although the eu is built on compromises, it takes an uncompromising position on corruption. corruption is positioned as an absolute obstacle to the progress of the united europe. in its anti-corruption report, the european commission estimated the cost of corruption in the eu at around eur 120 billion (european commi ssion, 2014, p. 3). in the political discourse, it is increasingly emphasized that the level of corruption has reached such a level that it poses an existential threat to the democratic integrity and national security of the eu member states, as well as to the unity of the european union itself. therefore, the eu institutions are constantly setting new challenges for the member states and candidate countries in the fight against corruption. in this process, the baltic states demonstrate both successes and failures. the eu expects member states not only to organize effective anti-corruption campaigns, but also to create an atmosphere of total intolerance to corruption in the society, to promote the functioning of the anti-corruption segment of civil society, etc. the next tasks are the fight against money laundering and non-transparent public procurement, protection of corruption whistle blowers, asset recovery, etc. however, the implementation of the eu's tasks in the field of preventing and combating corruption is not always effective in the member states. the baltic states intensively implemented anticorruption reforms at the request of the eu institutions during the membership phase. after accession to the eu, some of them managed to consolidate the results of reforms, but others maintained the functioning of destructive institutions and did not eradicate corruption pragmatism among the general population. while estonia is a leader in the fight against corruption along with the leading eu countries, lithuania has been stagnating in recent years, and latvia has even regressed in anti-corruption processes. this is evidenced by the corruption perceptions index. estonia strengthens its anti-corruption positions every year: 2015 – 23rd place in the world ranking, 2020 – 17th place. lithuania was ranked 36th in the world ranking in 2015 and remained almost at the same level in 2020 (35th place), which is considered as anti-corruption stagnation. latvia's regression is evidenced by the fact that if in 2015 this country was ranked 38th in the corruption perceptions index, by 2020 it worsened its performance to 42nd place (transparency international, 2021). consider in more detail the cases of the baltic states in terms of their compliance with the eu anti-corruption policy. latvia was the first eu candidate country from central and eastern europe to adopt an anti corruption strategy (1998), and since then anticorruption policy has been institutionalized. however, until 2002 anti-corruption reforms were more like imitation reforms. it was only during the implementation of the copenhagen criteria that latvian anti-corruption reforms took shape, in particular, by analogy with the hong kong anticorruption agency, the latvian anti-corruption bureau (knab) was established. however, currently the set of anti-corruption measures is insufficient, as a result of which latvia remains relatively low in the eu in terms of welfare, quality of life, competitiveness. corruption has caused a powerful brain drain, high level of favoritism in the formation of governments and other authorities (mungiu pippidi, 2013). latvia loses at least eur 3.4 billion annually due to corruption (european parliament, 2018). the latvian judiciary and knab have been subjected to political pressure in top corruption cases. many high-profile corruption investigations have not been brought to prosecution. latvia also has obvious problems with media independence, which hampers anti-corruption investigations; weak state audit, etc. the country continues to be influenced by the russian factor, which contributes to the spread of corruption practices (money laundering schemes from russia through latvian banks such as ablv bank). the shadow economy remains significant. corruption risks exist in public procurement, healthcare, construction sector, eu development projects, transport, financing of political parties, etc. even after latvia's accession to the eu, there were cases of political parties baltic journal of economic studies 21 vol. 8 no. 5, 2022 being financed by oligarchic groups and businesses, which made them vulnerable to political corruption. public opinion in latvia is evolving very slowly towards intolerance of corruption practices. this is evidenced by the results of the eurobarometer survey: only one third of latvian respondents (34%) indicated that corruption practices are unacceptable, while in the old european democracies the vast majority of respondents have a negative attitude towards corruption, for example, 84% of finns, 81% of irish, etc. (european commission, 2017) the willingness of latvians to expose corruption is low, and the authors see the reasons for this in the value dimension, the parameters of their political and legal culture. latvians do not demonstrate zero tolerance to corruption, there are cases of electoral support of politicians involved in various corruption cases (for example, the case of nils ušakovs). the anti-corruption segment of the national civil society is also weak. thus, latvia is in the group of countries with a high risk of deepening corruption, in the group of anti-corruption outsiders within the eu (mungiu-pippidi, 2013). however, some reforms are evident, especially in the area of preventing and combating money laundering. corruption remains the main reason that hinders lithuania's democratic development. lithuania is characterized by stagnation in the fight against corruption, although the country has a special anticorruption body – the special investigation service of the republic of lithuania. in general, 93% of respondents indicated that corruption is widespread in the country, but only 52% of respondents condemned unacceptable behaviour; 87% indicated the importance of various informal connections to obtain desired public services (european commission, 2017). lithuanian businesses face extortion much more often than in most eu countries (european commission, 2019a). destructive corruption practices in lithuania are particularly pronounced in the form of high-level corruption. while in most eu countries the main subjects of corruption are politicians and political parties, in lithuania it is state bodies, such as public healthcare institutions, licensing authorities, customs, etc. the shadow economy remains significant (although smaller than in latvia). in lithuania, corruption in public procurement is the highest among the baltic states. the banking sector remains vulnerable to corruption in lithuania, although recently the state control over financial companies has been strengthened and the prevention of money laundering has improved; the country has intensified financial intelligence, in particular in the field of virtual currencies and fintech, the financial technology sector. the lithuanian judicial system ("trade in justice") carries a high risk of corruption. at the same time, political corruption has been minimized in lithuania: financing of parties, politicians and the electoral process by legal entities is prohibited; the law on lobbying has been adopted; the code of conduct for politicians has been adopted (with the imposition of sanctions); various immunities have been minimized, etc. among the baltic states, there is a register of lobbyists only in lithuania (dunčikaitė et al., 2020). however, despite the fact that lobbying in lithuania seems to be regulated, there is no lobbying culture, the practice of actions in the field of lawmaking is carried out exclusively through a registered lobbyist. lithuania has a fairly developed segment of anticorruption organisations in the civil society structure compared to other baltic states. it seems that lithuania is gradually moving away from its perception in the international arena as a country that benefits from corruption, but prevention and counteraction to various destructive practices is still insufficient. instead, estonia has consolidated its position as an anti-corruption leader in the baltic group. this country controls corruption better than many countries with long-term membership in the eu. this is evidenced by estonia's position in the corruption perceptions index. as a result, estonia is ahead of the countries that were integrated into the eu much earlier (france, portugal, italy, greece, etc.) in terms of fighting corruption. it is worth noting that most of the countries that joined the eu during the last enlargements slowed down anti-corruption reforms after gaining membership, but estonia is an exception (kartal, 2014). estonia quickly overcame particularism and moved towards transparent governance practices (mungiu-pippidi, 2017) thanks to the dismantling of corrupt soviet networks in the 1990s, nationwide lustration, large-scale staff turnover and the cleansing of the judiciary (the reforms of prime minister m. laar). it is significant that estonia's anti-corruption progress was achieved without the establishment of a special anti-corruption body. bureaucratic corruption is minimized due to e-government (the x-road system provides 99% of public services online). estonia can well be positioned as an innovator in the development of new mechanisms to prevent and combat corruption. its main success is considered to be the creation of a state and society with a high level of transparency, trust and efficiency. the state makes considerable efforts to raise the level of awareness of estonians about corruption, to build a strong intolerance to any corrupt practices and to promote citizens' awareness of the threats posed by corrupt practices. this fundamentally distinguishes estonia from other baltic states and central and eastern european countries in general. baltic journal of economic studies 22 vol. 8 no. 5, 2022 however, some problems remain: not all corruption cases can be prosecuted; there are difficulties with the seizure of property acquired through corruption (it "disappears" at the stage of investigation). a striking example of corruption that has not yet been eradicated from estonian society and the state was the resignation of jüri ratas's government in early 2021 due to suspicions of corruption on the part of members of the estonian centre party, of which he is the leader. therefore, it is necessary to point out the differences in combating corruption in the baltic states, because estonia focuses on progress, lithuania – on stagnation, latvia – on regression. there are both institutional and value-based reasons for this. the baltic states make different efforts in institutional reforms and in the field of anti corruption socialization of citizens, despite the obvious reason of rootedness of corruption at the value level. the baltic states occupy intermediate positions in the eu in terms of fighting corruption between the leaders of this process (denmark, finland, sweden, etc.) and outsiders (bulgaria, greece, italy, malta, romania, slovakia, hungary, etc.). on the one hand, the baltic states are paying attention to a wide range of problems related to corruption and the eu's recommendations on how to overcome them. on the other hand, there are still problematic issues, some recommendations on combating and preventing corruption, which are regularly voiced by the anti-corruption monitoring body of the council of europe – the group of states against corruption (greco), are not implemented. for example, greco has repeatedly criticized latvia for delaying the regulation of lobbying, unregulated parliamentary ethics, prevention of conflicts of interest, and so on (greco, 2019). the next report on latvia (greco, 2020) states that, apart from the abolition of administrative immunity for parliamentarians, no tangible progress has been made in implementing the recommendations on mps. as for estonia, greco notes that there is currently no code of conduct covering all relevant civil servants (ministers, senior civil servants and political advisers). it also stressed the need to establish clear guidelines for civil servants on the risks of conflict of interest (greco, 2018). 7. conclusions over the past three decades, the elites of latvia and lithuania have demonstrated a strong political will for democratization, and such reforms have been supported by the majority of the population. thanks to pro-democratic external initiatives (primarily from the eu), the baltic states managed to reform the institutional design of the political system, improve legal procedures for political decision-making and achieve other constructive results. at the same time, consolidation of democracy for the baltic states remains a difficult task: in some areas of democratic transformation successes are evident, but in many there is stagnation and even some regression. these processes are significantly influenced by the historical past (long control over other states, the soviet past) and a number of other factors. however, the problem of declining quality of democracy today is a global problem, not unique to the baltic states or central and eastern europe as a whole. according to the authors, the processes of democratic deconsolidation in the baltic states are less pronounced than in other post-totalitarian eu member states, such as the visegrad group. this is primarily reflected in the balanced approach of the baltic states in relations with the eu on such controversial issues as migration quotas, sexual minority rights, etc. the political elites of the baltic states are more inclined to partnership within the eu than to focus on national interests, as in the case of hungary and poland. at the same time, the risk of deterioration of democracy and slowdown of reforms remains. in each of the baltic states, a complex of reasons contributes to this: – in estonia, the deconsolidation of democracy is carried out primarily by the ekre party. this party is getting closer to the hungarian party "fidesz" and its leader v. orban. in recent years, the activity of ethno-populists and other radical political forces has increased. they shape narratives about vulnerable groups (ethnic and sexual minorities, refugees, etc.), promote religious conservatism, attack multicultural values, etc. these are dangerous factors that reduce the quality of democracy. on a positive note, the ekre party is no longer represented in the new government (as of january 2021), but only has a faction in the parliament (19 out of 101 members of the riigikogu); – the sustainability of liberal democracy in latvia has deteriorated after the last parliamentary elections (october 6, 2018), as newly emerged anti-system populist political forces and conservative parties gained support. latvians are characterized by a high level of distrust in traditional parties and state institutions, not least due to large-scale corruption revelations in recent years and ineffective state response to corruption cases. latvian politics continues to be under the destructive influence of oligarchs, although in recent years most oligarchs have been pushed out of big politics; – the moods of euroscepticism, populism, radicalism, etc. do not have significant expression and support in baltic journal of economic studies 23 vol. 8 no. 5, 2022 lithuania. at the same time, at the post-integration stage, democracy is being tested for sustainability. the parliamentary elections in the fall of 2020, against the backdrop of the socio-economic destructive consequences of the pandemic, showed changes in the socio-political mood of lithuanians towards conservatism and populism. the manifestation of various ethnic stereotypes and social phobias (homophobia, migrant phobia, etc.) is growing. in all the baltic states, the problems of the quality of democracy are directly related to the peculiarities of the political culture of the population, which does not yet fully correspond to the values of western european or scandinavian countries. the survival values of estonians, latvians and lithuanians currently dominate over the values of self-expression. the remnants of the previous undemocratic political culture, which contradict the eu value paradigm, are still deeply rooted. another problem for the quality of democracy in the baltic states is the fragile middle class, one of the tasks of which is to ensure the sustainability of democratic transformation. thus, it can be concluded that the baltic states, despite almost two decades of eu membership, still do not meet eu standards at the 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(2011). estonia. promoting social inclusion of roma. a study of national policies. tallinn: tallinn university of technology. received on: 9th of october, 2022 accepted on: 14th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 334 vol. 3, no. 5, 2017 corresponding author: 1 department of statistics, agd and marketing, sumy national agrarian university. e-mail: vamushtai@gmail.com 2 department of statistics, agd and marketing, sumy national agrarian university. e-mail: lena_shumkova@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-334-342 determination of potential opportunities for the food provision with grain production: a ukrainian and european viewpoint valentina mushtay1, olena shumkova2 sumy national agrarian university, ukraine abstract. the purpose of the paper is to determine the potential of the food provision of the sumy region. the agricultural production in the region is not just a complex of the industries, developing independently from each other, but the rational and systematic combination of all elements and factors of production under certain specific natural and economic conditions, the interrelated development of various branches of agriculture, first and foremost, the rational combination of scientifically grounded systems of farming and livestock, the optimal combination of which lies in their rational interconnection. what is important to notice is that between the volumes of agricultural production and food consumption in the agro-industrial countries, there is a direct relationship with the total amount of consumption, because the manufacturers of this production and most of its consumers are the same individuals. along with this, the main problems, which may occur in the growth of production volume in the agrifood complex of the transition economy, could be: the low purchasing power of the population and insufficient level of the development of product promotion infrastructure. having regard to the principles of agricultural location, and in view of a range of the above problems, in our opinion, it stands to reason that the issue of the region selfprovision with the main types of production, which should be affordable to the average consumer, i.e. be solvent in effective demand, is the most pressing. it is essential to put emphasis on the fact that the theoretical and practical aspects of the formation of the regional food policy and the market strategy of their development, the motivational potential of their existence in the market economy environment require further research. the methodology of the study. when conducting this research, we used the statistical records of sumy region for the last 3 years and the statistical records of eu-28 for the last year (derzhavnyi komitet statystyky ukrainy. holovne upravlinnia statystyky v sumskii oblasti, 2016, silske hospodarstvo ukrainy u 2016 rotsi, 2017, agricultural statistics of eu-28, 2017). the regression and index analyses for the development and calculation of the integrated factor of agricultural land adjustment have been used as well. results. after conducting the research, we have determined that the solution to the problem of food provision of ukraine and sumy region and of eu-28 and estonia, latvia, lithuania, in particular, is to increase the efficiency of agricultural land use. taking the abovementioned into consideration, we consider it appropriate to transfer unused arable land to the full-fledged private and owner-operated farms, and private households. however, the large agricultural enterprises in the coming years should seek to play a more significant role in addressing the problems of food provision of the region, especially in a grain crop. practical use. the results of the conducted research will help reallocate land plots among agricultural enterprises of different forms of ownership for their more efficient use and improve food security in the region after the proper implementation of the land reforms. in view of the foregoing, there is a need for the state regulation of the grain market and support for grain sales prices. this necessitates the objective assessment of the potential opportunities on the regional scale for ukraine and europe. key words: potential gross yield, opportunities, resource factors, agricultural land adjustment, food provision. jel classification: q10, q15, q18 baltic journal of economic studies 335 vol. 3, no. 5, 2017 1. introduction the agricultural production in the region is not just a complex of the industries, developing independently from each other, but the rational and systematic combination of all elements and factors of production under certain specific natural and economic conditions, the interrelated development of various branches of agriculture, first and foremost, the rational combination of scientifically grounded systems of farming and livestock, the optimal combination of which lies in their rational interconnection. this combination of industries is based on the rational use of land as the main means of production in agriculture, which requires the monoculture exclusion, and the optimal system of crop rotation. however, the full employment of labour with the consideration of the seasonality of agricultural production requires the combination of crop cultivation with the development of livestock industries and industrial sectors of the agricultural formations. the economic basis of such labour division determines the efficiency of the location of agricultural production on the territory of the country or region in accordance with the principles of food security. in the decree of the cabinet of ministers of ukraine “on principle of the location of competitive agricultural production by naturaleconomic zones, depending on market conditions”, these principles are divided into priority and specific. what is important to notice is that between the volumes of agricultural products and food consumption in the agro-industrial countries, there is a direct relationship with the total amount of consumption because the manufacturers of these products and most of their consumers are the same individuals. along with this, the main problems, which may occur in the growth of production volume in the agri-food complex of the transition economy, could be: the low purchasing power of the population and insufficient level of the development of product promotion infrastructure. having regard to the principles of agricultural location, and in view of a range of the above problems, in our opinion, it stands to reason that the issue of the region self-provision with the main types of products, which should be affordable to an average consumer, i.e. be solvent in effective demand, is the most pressing one. it is essential to put emphasis on the fact that the theoretical and practical aspects of the formation of the regional food policy and the market strategy of their development, the motivational potential of their existence in the market economy environment require further research. the above aspects are to some extent reflected in the scientific works of v. balabanov, v. boiko, yu. kovalenko, p. loiko, v. mykytiuk, g. palamarchuk, yu. parkhomova, g. pidlisetskyi, p. sabluk and others. the majority of authors, such as v. bytov, k.  kozak, l.  stashynska, v. proskura, ye. grygoriev, o.  shevchenko, o. shapovalova and others, agree that the government should develop the effective doctrine of food security as a component of the national security. in view of the foregoing, we believe that food security of the region is one of the main tasks in improving the national development sustainability for the near future. the above reasoning is the convincing argument of the expediency of strengthening the influence of state regulation of the process of manufacture of food products, especially in terms of the region self-provision. against this background, the issue of the development of methodical bases of determining the potential opportunities of the region for the manufacture of agricultural products, in particular, grain, is of relevance. the main directions of improving the food security of the ukrainian regions include: intensive development and increased competitiveness of agro-industrial complex against import on the basis of the integrated assessment of the natural and climatic, and production potential of the region; increase in real income of the population, especially its socially vulnerable groups on the basis of proficiency, employment and labour productivity enhancement, as well as the targeted provision of social institutions, educational institutions, low-income families; promotion of export of food products with high added value rather than raw materials to be processed in ukraine, the widespread use of the non-tariff methods of import regulation; state support of prices for agricultural products through the establishment of reserve funds, subsidies for the infrastructure development and crediting of agricultural enterprises, the compensation of the disparity of prices for agricultural products and resources for their manufacture; development of regional clusters in food production; creation of the national system of information on the condition of regional and external food markets (kozak, 2014). 2. analysis of agricultural market of sumy region sumy region geographically covers two natural zones – forest-steppe and polissia that determines the specialization and location of its agricultural production. the natural and climatic conditions are sufficiently favourable for the successful cultivation of raw material of the main agricultural food products. certain specified criteria of the optimal manufacture of the main types of agricultural products do not exist, with the exception of grain, the optimal amount of which in the region is 1,000 kg per capita (taking into account the needs of the livestock industry). according to the research results, the manufacture of the main agricultural products per capita per almost each product name annually tends to increase in sumy region (table 1). baltic journal of economic studies 336 vol. 3, no. 5, 2017 a more detailed analysis of the production output of the types of products listed in table 1 has made it possible to reveal the general trend over the last six years. the positive growth rate, except for sugar beet and potato, the gross yields of which per capita have decreased annually by 111.0 centners or 39.0% and 5.0 centners or 0.5%, respectively. the production of sunflower and grain crops has increased most significantly. the average annual increase of the above crops in relative measurement accounts for 14.9% and 10.4%. the production of vegetables, meat, and eggs has annually increased approximately with the same intensity (from 2.2% to 2.9%). the slightest average annual growth characterizes the intensity of milk production and accounts for only 0.2% annually. table 1 production of the main types of agricultural food products per capita in sumy region, centner product 2012 2013 2014 2015 2016 the average annual growth (+/-), centner average annual growth rate, % corn 2323.3 3152.7 3492.8 3339.3 3448.0 281.2 110.4 sugar beets 515.5 27.2 68.4 66.7 71.5 -111.0 61.0 sunflower 253.2 368.1 375.7 421.4 441.3 47.0 114.9 potato 982.8 959.4 1175.7 955.3 962.9 -5.0 99.5 vegetables 161.4 166.4 172.2 169.1 181.1 4.9 102.2 meat (in slaughter weight) 55.0 37.1 39.9 39.2 61.6 1.7 102.9 milk 372.1 375.5 378.6 373.4 374.6 0.4 100.2 eggs, pcs. 328.9 373.8 391.2 371.5 362.0 8.3 102.4 the solution of the food problem in ukraine depends primarily on the efficiency of grain production, the level of the development of which largely determines the socio-political and economic stability in the country, its food security. one can judge the level of the grain production development not only by the economic performance of the agro-industrial complex and its sectors but also by the might of the state itself (ambrosov, sabluk, 2000). 3. analysis of agricultural market of the european union the structure of agriculture in the member states of the european union (eu) varies as a function of differences in geology, topography, climate and natural resources, as well as the diversity of regional activities, infrastructure, and social customs. traditionally, agriculture in the eu is divided into crop and livestock production. the range and variety of crops grown across the european union (eu) reflect their heritable traits, as well as the ability of plant breeders to harness those traits to best respond to the myriad of topographic and climatic conditions, pests, and diseases. the statistics on crop production in estonia, latvia, and lithuania are shown in table 2 (agricultural statistics of eu-28, 2017). in 2016, the harvest of crops in the eu decreased by about 4.4% compared to the previous year, which was largely explained by unfavourable climatic conditions. from estonia, latvia, and lithuania in 2016 came less than 1 percent of every type of production. estonia, latvia, and lithuania do not grow peaches, oranges, and sugar beet. the economic relevance of animal production in agricultural accounts is underlined by the fact that it accounts for 43.1% (167 billion eur) of the total eu-28 agricultural output. animal production covers two items: output for animals and animal products. output for animals, which represents 57.5% of animal output, is the value of animals produced either directly for slaughter or used alive for herd renewal or for further table 2 crop production, 2016 product eu-28, thousand tonnes estonia latvia lithuania thousand tonnes percent thousand tonnes percent thousand tonnes percent cereals 301357.9 934.1 0.310 2703.2 0.897 5120.82 1.699 potatoes 55969.8 62.91 0.112 203.6 0.364 344.78 0.616 tomatoes 17956.31 0.36 0.002 5.8 0.032 11.4 0.063 carrots 5593.57 11.14 0.199 14.8 0.265 43.02 0.769 onions 6577.92 0.06 0.001 5.2 0.079 25.01 0.380 apples 12568.46 2.77 0.022 9.8 0.078 57.52 0.458 baltic journal of economic studies 337 vol. 3, no. 5, 2017 growing and fattening. animal products account for the remaining 42.5% and cover eggs, milk, wool, etc. (table 3) (agricultural statistics of eu-28, 2017). in 2016, the production of raw cows’ milk in the eu-28 remained relatively stable, with only a slight increase (+0.2%). similarly, a slight decrease was observed in the number of dairy cows (-0.4%). high decreases were reported in latvia (-5.2%), estonia (-5.0%), lithuania (-4.9%). the apparent milk yield per dairy cow in eu-28 increased by 0.6% (40.2 kg/head), reaching 6 941 kg per dairy cow in 2016. the apparent milk yield grew strongest in estonia (452 kg/head) and in latvia (380 kg/head). in 2016, nearly seven million holdings (6.92 million) reared livestock, representing 56.5% of eu-28 farms. as a proportion of all farms, 23.5% reared pigs, 21.4% bovine animals (cattle, buffaloes, etc.), 18.7% broilers, 7.7% sheep, and 4.4% reared goats. 4. definition of the resource potential of the region in order to define the potential opportunities of the region in relation to the manufacture of grain products, we may use, to a degree, one of three methods for determining the resource potential. its essence reduces itself to the determination of the total resource with the size of the so-called adjusted agricultural land, which by its structure differs significantly in the soil quality. in addition, there are some significant differences in the levels of investments per area unit, the employment rate in individual enterprises or areas, and they often reach twothree-time value. in order to account for these objective differences, we introduce the relative resource provision indicator per area unit and then determine the area of the adjusted agricultural land (myroshnychenko, 1997). we have chosen the quality of agricultural land, the provision with fixed assets and current assets, the supply of labour force given labour productivity as the resource factors. these factors are weighted by the equity ratio. given a large variation range of the characteristics, the value of each resource factor is weighed by the adjustment factor, which, in this case, is determined by the ratio of the magnitude of the corresponding resource of a certain area and the average region value. the adjusted area of agricultural land is determined as the product of the actual area and integrated adjustment factor, calculated according to the following formula (1) (myroshnychenko, 1997): k = 5√(kb*kcl*kca*klf*ker) (1) where k – integrated agricultural land adjustment factor; kb, kcl, kca, klf – factors of adjustment of soil bonitet, capital-labour ratio, current assets value, labour force participation rate per 100 ha of agricultural land; table 3 livestock production, 2016 product eu-28, thousand tonnes estonia latvia lithuania thousand tonnes percent thousand tonnes percent thousand tonnes percent bovine meat 7799.01 9.43 0.121 17.7 0.227 42.29 0.542 pig meat 23440.41 42.82 0.183 31.16 0.133 60.35 0.257 poultry meat 14400.0 0.0 0.0 30.02 0.208 104.1 0.723 drinking milk 30700.0 99.22 0.323 61.98 0.202 93.48 0.304 cream for direct consumption 2770.0 25.65 0.926 35.99 1.299 23.38 0.844 milk powder 2800.0 2.04 0.073 0.0 0.0 36.22 1.294 butter 2400.0 5.14 0.214 7.2 0.300 17.67 0.736 cheese 9616.0 43.29 0.450 38.63 0.402 97.5 1.014 table 4 determination of adjusted arable land area taking into account the influence of resource factors in the districts of sumy region districts area of corrected lands, ths ha deviation from the actual value, ths ha plow land, % area of adjusted arable land, ths ha bilopillia 81.0 -26.0 90.0 72.9 buryn 60.5 -24.0 86.8 52.5 velyka pysarivka 55.1 -3,5 87,0 47,9 hlukhiv 76.7 -22.3 84.4 64.7 konotop 95.3 11.7 83.9 80.0 krasnopillia 52.9 -14.8 83.3 44.1 krolevets 40.6 -17.7 72.9 29.6 lebedyn 99.7 -1.8 73.0 72.8 lypova dolyna 69.6 -1.2 78.0 54.3 nedryhailiv 70.8 2.4 90.2 63.9 okhtyrka 93.9 19.0 88.4 83.0 putyvl 57.3 -9.3 70.4 40.3 romny 123.0 -11.3 83.4 102.6 seredyna-buda 28.3 -25.0 58.0 16.4 sumy 136.5 20.0 80.9 110.4 trostianets 55.8 -1.9 79.9 44.6 shostka 52.1 6.6 67.9 35.4 yampil 24.3 -18.0 75.2 18.3 in the region 1273.4 -117.1 79.6 1033.7 baltic journal of economic studies 338 vol. 3, no. 5, 2017 ker – equity ratio. thus, it has been determined that the area of the adjusted agricultural land is distinctly different from the actual indicators, and these deviations fluctuate significantly by districts (table 4). in relation to the factors and their coefficients – the coefficients of variation are within the acceptable limits (from 25.3% to 40.5%), confirming the objectivity of the performed calculations. depending on the values of the resource factors and the level of financial selfsufficiency, the area of individual districts can be more or less than the actual value. accordingly, the amount of food potential will depend on the degree of influence of the resource factors and the financial self-sufficiency of the district. using the product of the adjusted agricultural land area and the coefficients of its ploughness, we will determine the adjusted arable land area that will be used in further calculations of the potential agricultural production output in sumy region. 5. assessment of the grain potential of sumy region the definition of the importance and relevance of the above issues, and the necessity for their regulation and solutions at the regional level result in the need to develop the system of determination of the grain production potential, which is the basis of the food complex, since it is recognized as the most significant branch of agriculture, the development of which influences, to the fullest extent, the provision of food to the population and, particularly, living standard. based on the research findings, it is worth noting that as of today the grain production is the branch of agriculture that has the most positive dynamics. however, the growth in the production output, both in general and at the regional level, could significantly reduce market prices that would adversely affect the agricultural producers. unfortunately, most of the options of support for grain prices are focused on the current period, i.e. they are of a short-term nature and cannot ensure the stability of their sales policy for producers. the way out is seen in stimulating the demand for the main agricultural product, primarily on the part of the industries, which are traditionally the largest grain consumers, the manufacture of bread products, poultry, cattle fattening, etc. however, it should be noted that today there is the monopolization of markets by foreign trading companies resulting in a change to the structure of wholesale trade not in favour of domestic products. they invest heavily in the creation of the nationwide network of their own structures, use a variety of the protectionist measures to promote their products in the ukrainian market. this is so much the case that these companies use the unfair methods of competition. unfortunately, the ukrainian trading companies and the state regional authorities are not opposed to this process and operate separately that leads to the expansion of food products from abroad and the aggravation of the problem of the sales of domestic products. this passivity could result in losing both food market and food security (grygoriev, 2015). although ukraine has always been and remains the breadbasket of europe, the consumption is partly satisfied by imports. export capacities are expanded through the activities of large agro-industrial formations, which have the possibility of entering the international market. nowadays, such agro-industrial formations in ukraine are the agricultural holdings, which play a crucial role in the ukrainian economy and under the reasoned government policy could be the basis of ensuring food security by the virtue of the socioeconomic development and the formation of ukraine’s image as a highly developed industrial-agrarian country. the volatility of prices for grain products limits the reproductive potential of the agricultural enterprises, that is, makes the destabilizing influence on the financial performance. this situation precludes commodity producers from generating the sales volumes sufficient for the reproduction. thus, the income is unstable, the costs of production are on the rise, and prices are subject to fluctuation (lyshenko, 2015). in view of the foregoing, there is a need for the state regulation of the grain market and support for grain sales prices. this necessitates the objective assessment of the potential opportunities on the regional scale. using the proposed methodology, we can calculate the grain potential of sumy region in terms of districts (table 5 and figure 1). the potential gross yield of grain is determined as the product of the adjusted arable land, the relative share of crop acres in arable land area, and average yields. the magnitude of grain potential is determined by multiplying the potential gross yield by the average marketability coefficient. according to the calculations shown in table 3 and figure 1, the main potential grain producers in the region are romny (14.27%), bilopillia (9.9%), sumy (9.0%), lebedyn (8.24%), and buryn (7.74%) districts, which account for 49.15% of the total regional grain potential. by comparing the actual manufacture of grain products with the potential output in terms of the districts of sumy region, we have calculated the relevant coefficients and determined the coefficients of their selfprovision (table 6). as evidenced by the data of table 4, in all districts of sumy region, the actual volume of grain production is less than potential. the districts closer to the potential level of the manufacture of grain products are shostka (0.968), seredyna-buda (0.950), sumy (0.948), krolevets (0.938), krasnopillia (0.928), hlukhiv (0,913), and konotop (0.911) districts. however, these districts, except for sumy district, are not the baltic journal of economic studies 339 vol. 3, no. 5, 2017 main potential grain producers in the region, since their relative share in total grain sales is significantly less than 8%. such districts as okhtyrka (0.788), lypova dolyna (0.807), velyka pysarivka (0.851), putyvl (0.875), nedryhailiv (0.876), trostianets (0.883), and to the same extent buryn and yampil (0.888) use their production potential least of all. among the main potential grain producers in the region, sumy (0.948) and romny (0.919) districts use their potential to the greatest extent. the level of self-provision of the districts of sumy region with grain products has been calculated by comparing the potential of manufacture of the main types of products and taking into account the net yield table 5 grain potential of the districts of sumy region with the existing structure of crop acreage districts area of adjusted arable land, ths ha the share of sowing area in the area of arable land the coefficient of marketability potential yields, c/ha potential gross tax, ths t bilopillia 72.9 0.780 0.836 65.3 371.3 buryn 52.5 0.916 0.798 63.2 303.9 velyka pysarivka 47,9 0.624 0.779 50.3 150.3 hlukhiv 64.7 0.707 0.764 51.2 234.2 konotop 80.0 0.606 0.816 53.1 257.4 krasnopillia 44.1 0.757 0.731 47.0 156.9 krolevets 29.6 0.716 0.635 56.6 120.0 lebedyn 72.8 0.600 0.844 70.2 306.6 lypova dolyna 54.3 0.596 0.736 59.3 191.9 nedryhailiv 63.9 0.521 0.855 70.9 236.0 okhtyrka 83.0 0.443 0.752 50.5 185.7 putyvl 40.3 0.723 0.707 51.4 149.8 romny 102.6 0.683 0.901 70.9 496.8 seredyna-buda 16.4 0.914 0.645 56.9 85.3 sumy 110.4 0.527 0.893 54.3 315.9 trostianets 44.6 0.614 0.795 60.5 165.7 shostka 35.4 0.754 0.762 42.3 112.9 yampil 18.3 0.748 0.640 40.8 55.8 in the region 1033.7 0.679 0.771 56.4 3996.4 310.4 242.5 117.1 178.9 210.0 114.7 76.2 258.3 141.2 201.9 139.7 105.9 447.6 55.0 282.1 131.7 86.0 35.7 0 50 100 150 200 250 300 350 400 450 500 fig. 1. grain potential of the districts of sumy region baltic journal of economic studies 340 vol. 3, no. 5, 2017 of products with the rational nutritional standards. based on the research findings, it has been established that the food potential of sumy region makes it possible to provide the population with grain products that 7.794 times exceeds the demand for them. yampil, krolevets, and trostianets districts have the smallest indicator of self-provision – 2.338, 3.123 and 4.719, respectively. however, given the fact that the food capacity of lebedyn, romny, buryn, lypova dolyna, and hlukhiv districts more than ten times exceeds the demand, the issue of self-provision is solved at the adequate level. 6. assessment of the grain potential of the european union before the evaluation of the grain potential of the european union, we have to learn about the structure of the land in this region. agriculture, forestry, industry, transport, housing, and other services use land as a natural and/or an economic resource. the land is also an integral part of ecosystems and indispensable for biodiversity and the carbon cycle. land can be divided into two interlinked concepts: land cover refers to the biophysical coverage of land (for example, crops, grass, broad-leaved woods, or built-up areas); land use indicates the socioeconomic use of land (for example, agriculture, forestry, recreation or residential use). land cover and land use data form the basis for spatial and territorial analyses, which are increasingly important for: the planning and management of agricultural, forest, wetland, water and urban areas; nature, biodiversity and soil protection, and the prevention and mitigation of natural hazards and climate change. forests and other wooded areas occupied more than one third (37.7%) of the total area of the eu-28 in 2016, while more than one-fifth of the total area was covered by cropland (22.2%) and by grassland (20.7%). the remaining types of land cover in the eu-28 were much less prevalent, as shrubland occupied 7.1% of the total area, followed by artificial land – which includes built-up areas, roads and railways – which had a 4.2% share. the lowest shares of eu-28 land use were recorded for bare land (3.3%), water areas (3.0%), and wetland areas (1.7%) (figure 2) (agricultural statistics of eu-28, 2017). using the proposed methodology, we can calculate the grain potential for eu-28, estonia, latvia, and lithuania like we have done for the sumy region of ukraine (table 7). according to the calculations, the main potential grain producers between these countries have lithuania. by comparing the grain potential of the baltic countries and the sumy region, it can be stated that this indicator is higher in ukraine. this is due to the fact that agriculture in the regions of ukraine has developed better than in the baltic countries. table 6 comparison of the actual manufacture of grain products with the potential output in the context of the assessment of self-provision of sumy region districts actual gross tax, ths. t. potential gross tax, ths. t. absolute deviation (+/-), ths. t ratios of the actual production volume to the potential ration of self-sufficiency bilopillia 332.3 371.3 -39.0 0.894 7.326 buryn 270.0 303.9 -33.9 0.888 12.135 velyka pysarivka 128.0 150.3 -22.3 0.851 7.846 hlukhiv 214.0 234.2 -20.2 0.913 10.121 konotop 234.6 257.4 -22.8 0.911 8.869 krasnopillia 145.7 156.9 -11.2 0.928 5.486 krolevets 112.6 120.0 -7.4 0.938 3.123 lebedyn 275.2 306.6 -31.4 0.897 15.483 lypova dolyna 154.9 191.9 -37.0 0.807 10.193 nedryhailiv 206.9 236.0 -29.1 0.876 9.616 okhtyrka 146.5 185.7 -39.2 0.788 7.002 putyvl 131.1 149.8 -18.7 0.875 5.383 romny 456.8 496.8 -40.0 0.919 14.975 seredyna-buda 81.1 85.3 -4.2 0.950 5.175 sumy 299.7 315.9 -16.2 0.948 5.057 trostianets 146.4 165.7 -19.3 0.883 4.719 shostka 109.4 112.9 -3.5 0.968 5.462 yampil 49.6 55.8 -6.2 0.888 2.338 in the region 3494.7 3996.4 -501.7 0.895 7.794 baltic journal of economic studies 341 vol. 3, no. 5, 2017 7. conclusions summarizing the above, we believe that the priority direction of the regional development should be an increase in the sales of agricultural products, given the specified potential of manufacture of agricultural food products. the solution to the problem of provision of the country and sumy region, in particular, with food is in the increase in the efficiency of agricultural land use. taking the above mentioned into consideration, we consider it appropriate to transfer unused arable land to the full-fledged private and owner-operated farms, and private households. however, the large agricultural enterprises in the coming years should seek to play a more significant role in addressing the problems of food provision of the region, especially in a grain crop. references: agricultural statistics of eu-28 (2017). retrieved from: http://ec.europa.eu/eurostat/web/agriculture/overview (accessed 23.01.2018) ambrosov, v. a., sabluk, p. t. (2000). problemy ekonomiky ahropromyslovoho kompleksu i formuvannia yoho kadrovoho potentsialu [problems of the economics of agroindustrial complex and the formation of its human resources]. kiev: iae. (in ukrainian) derzhavnyi komitet statystyky ukrainy. holovne upravlinnia statystyky v sumskii oblasti (2016). statystychnyi shchorichnyk sumskoi oblasti za 2015 rik [statistical yearbook of sumy region for 2015], sumy: informatsiinoanalitychne ahentstvo. grygoryev, ye. o. (2015). prodovolcha bezpeka ta osoblyvosti yii formuvannia na rivni rehioniv [food security and features of its formation at the level of regions]. food industry economics, no. 1(25), pp. 13-17. kozak, k. b. (2014). zabezpechennia prodovolchoi bezpeky yak osnovy zhyttiezabezpechennia y pidvyshchennia yakosti zhyttia naselennia [ensuring food security as a basis for life support and improvement of the population quality of life]. food industry economics, no. 3(23), pp. 37-42. 37,7 22,2 20,7 7,1 4,2 3,3 3,0 1,7 57,0 13,5 15,9 1,6 2,0 0,9 4,8 4,4 53,9 14,3 22,5 1,9 1,6 1,2 2,2 2,4 37,9 29,4 24,9 0,8 2,8 1,1 2,0 1,1 woodland cropland grassland shrubland artificial land bare land water wetland eu-28 estonia latvia lithuania fig. 2. the main land cover by land cover type, 2016 (% of total area) table 7 grain potential of the eu-28, estonia, latvia, and lithuania country area of adjusted arable land, ths. ha the share of sowing area in the area of arable land the coefficient of marketability potential yields, c/ha potential gross tax, ths. t. grain potential, ths. t. eu-28 96010,2 0,511 0,862 44,05 42290,75 36454,62 estonia 58384,6 0,498 0,541 26,94 15729,85 94,10 latvia 61844,4 0,477 0,581 27,71 17139,37 147,68 lithuania 127148,6 0,482 0,590 28,44 36158,52 308,17 average value 82459,2 0,486 0,571 27,70 23009,24 183,32 baltic journal of economic studies 342 vol. 3, no. 5, 2017 lyshenko, m. o. (2015). osnovni problemy rozvytku rynku zerna ta metody pidvyshchennia efektyvnosti yoho vyrobnytstva [basic problems of the development of grain market and the methods of improving the efficiency of its production]. bulletin of sumy national agrarian university. scientific journal. series “economics and management”, no. 5(64), pp. 37-45. myroshnychenko, s. (1997). [classification and assessment of lands in the system of cadastral information registry and land registration]. international agricultural journal, no. 5, pp. 8-11. silske hospodarstvo ukrainy u 2016 rotsi (2017). retrieved from: http://www.ukrstat.gov.ua/operativ/menu/ menu_u/sestr.htm (accessed 01.12.2017) baltic journal of economic studies 93 vol. 4, no. 1, 2018 corresponding author: 1 faculty of law, taras shevchenko national university of kyiv. e-mail: gubanof@ukr.net 2 private higher educational institute “college of finance and law”. e-mail: gubanovatamara@ukr.net 3 faculty of law, national university of life and environmental sciences of ukraine. e-mail: olenas.yara@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-93-98 legal regulation of adaptation of the national legislation of ukraine to the eu legislation (acquis communautaire) in the field of public service oleh hubanov1 taras shevchenko national university of kyiv, ukraine tamara hubanova2 private higher educational institute “college of finance and law”, ukraine olena yara3 national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the paper is to analyse the concept of a system, to consider the essence of systems theory in lawmaking. methodology. on the basis of the analysis of components of legal relations in the field of public service and functions of the latter, the specificity of its implementation in the process of adaptation of the national legislation to the eu laws in the field of public service is determined. task-solving related to the development of laws of adequate quality in terms of the guarantee of their effectiveness, system nature and completeness of the actions, which relies on the legislator, is possible only on conditions that systems theory is applied. results of the paper showed that a key feature of legal relations in the field of public service is manifested through their functional purpose – the satisfaction of public interest. this particular feature allows us to refer to them as to a system rather than a complex of separately existent objects. practical implications. the application of systems theory during the implementation of adaptation of the national legislation to the eu in the field of public service implies the necessity to cover all, without any exceptions, components of legal relations in the field of public relations by such processes. value/originality. the research defined that an adequate application of systems theory during the implementation of the adaptation of national legislation to the eu laws in the field of public service is able, quite predictable, and lead to the codification of legal norms, which regulate legal relations in the field of public service. key words: system, systems theory, public service, adaptation of national legislation, eu legislation. jel classification: p19, h83, d72 1. introduction any legislative amendments, including those, which are performed through the adaptation of national legislation to the eu one, have to be based on compliance with the requirements of key principles of lawmaking. thus, the legislator has the task of development of laws of the proper quality in terms of the guarantee of their effectiveness, consistency and completeness of the actions, gaps’ absence, elimination of conflicts of law, etc. (nediukha, hladkova, 2014). their solution during the implementation of the adaptation of national legislation to the eu one in the field of public service is possible solely upon conditions of the application of systems theory. a.m. rysheliuk reveals the significance of adherence to the principle of system nature in lawmaking in more detailed and comprehensive way, dividing it into internal and external one. according to the scientist’s definition, the concept of internal system nature covers the existence of a certain system of disclosure of the normative material within the law, in particular, thematic logic and consistency, the lack of gaps between contentrelated provisions, the absence of repetitions, a clear structure of the law, density and logical completeness of regulation of issues covered by the law, an internal coherence of its provisions. a.m. rysheliuk offers to comprehend an external systems theory as a harmonious baltic journal of economic studies 94 vol. 4, no. 1, 2018 inclusion of an appropriate law in the current system of legislation and its occupation of a logical place in this system, as well as an informative consistency of the provisions of a new law with the provisions of other laws. an element of the external system nature is the requirement for compliance with a sector division of the legislation during development and adoption of the law (rysheliuk). some aspects of the application of systems theory in lawmaking were also studied by the following scholars: bakhrakh d.n., hladkova t., nediukha m., fomitska n.v., shlonska o.o., however, in the context of implementation of the adaptation of national legislation to the eu one in the field of public service, this issue is considered for the first time. taking into account the obvious importance and relevance of the determined problem, we set a goal to consider within this article the essence of systems theory on lawmaking and the specifics of its implementation in the process of adaptation of national legislation to the eu legislation in the field of public service. 2. analysis of the concept of the system we think it expedient to start solving the above tasks with the analysis of an original concept – the concept of a system. the academic explanatory dictionary of the ukrainian language includes about twenty definitions of the notion “system”, however, in the context of this issue, the following are the most acceptable for the purposes of our study: system – a set of any elements, units, parts, united according a common basis, purpose; a construction, a structure that composes a unity of naturally located and functioning parts; an order caused by the correct, systematic arrangement and reciprocity of parts of something (the academic explanatory dictionary of the ukrainian language). fomitska n.v. in case study, devoted to the methodology of systems theory, proposed an author’s definition of the concept of system, which allows us to define the list of key features of the latter: “system is a collection of objects of free form and content, mutually interconnected to each other and united by some regular interaction”. the scholar identifies such characteristics as follows: 1. cohesiveness is a feature that lies in the fact that a system is, first of all, an integral set of elements, that is, components don’t form a unit (system), but conversely, the components of the system are discovered during the unit separation. 2. conventionality of boundaries. the author writes that based on the understanding of a systemic nature of the world, it is not always possible to clearly define the boundaries of this system, separate from the objects of the external environment, which largely determine the quality of the system operation. 3. emergence is the phenomenon of the acquisition by a system of new properties, characteristics, qualities that are alien to any of the objects, which compose it. 4. homeostasis is the ability of a system to function without a significant decline in efficiency for a long time. 5. defined order, interconnection, interaction. in addition, fomitska n.v. identifies the property of the emergence as the most important property of the system (fomitska, 2015). besides these features, the system also has a feature of integrity, due to which it is possible to speak about the emergence of the system itself, which is manifested in acquiring the characteristics that are inherent in the system but not specific to each of its individual components outside of interaction with others. integration is a process and mechanism of unification and cohesiveness of elements, which are characterized by integrity, system-forming variables, factors, connections, etc. (don v.a. (ed.), 2006). on this issue, bakhrakh d.n. notes that all features of a complex system are important, significant, and closely interconnected, besides their interconnection form an integral property of the whole system – system-forming, integrative secondary feature, the existence of which is affected by each of the primary features in a special way. this is one of the properties of complex systems: the interaction of parts of the whole generates such special characteristics, which parts don’t have (bakhrakh, 1989). thereby, the ability of the components to integrative mutual influence has its natural consequence of their unity, which reflects in the unity of the functional purpose of the system, and vice versa: when the system implements its purpose, its components interact as a cohesive whole. thus, the system-forming feature is manifested in its functions, and the very functional purpose of public service is its most essential, key feature. 3. the nature of systems theory based on the above statements, we turn to the consideration of the nature of systems theory. thus, the term “systems theory” covers a group of methods, due to which a real object is described as a set of interacting components. in this case, the general tasks of system researches, as scientists emphasize, are analysis and synthesis of systems. in the process of analysis, the system is separated from the environment, there is determined its composition, structure, functions, integral characteristics, as well as system-forming factors and interconnections with the environment. the synthesis process creates a model of the real system, raises the level of abstract description of the system, and determines the completeness of its composition and structures, description basis, regularities of dynamics and behaviour. the systems theory is applied to a baltic journal of economic studies 95 vol. 4, no. 1, 2018 multitude of objects, the study of individual objects and their components, as well as the properties or integral characteristics of objects (shlonska). in such a way, at the current stage, we have already found a system-forming property that defines the functional purpose of public service as a system. to conduct a proper analysis, we also should, as follows from the above, determine the structure of public service and specify its functions. in turn, in order to determine the structure of public service, first, we will turn to its concept. the legal doctrine has developed two main approaches to the disclosure of the nature of public service: institutional and functional. in accordance with the institutional approach, public service is determined by the specifics of the legal status of entities that carry out activities in a specific area and is considered broadly and narrowly. public service in the broad sense can be carried out by employees of all organizations of the public sector: public authorities (not only executive but also legislative and judicial); state enterprises and institutions; local self-government bodies; public utilities and institutions. that is, the concept of public service includes the activities of employees of all institutions that perform public tasks including the activities of state or municipal doctors, teachers, etc. public service is considered in the narrow sense in the institutional dimension as an activity, primarily, of employees of the bodies of state executive power and executive bodies of local self-government (tymoshchuk, shkolyk (ed.), 2007). the institutional approach is clearly monitored in the definition of public service consolidated in the code of administrative legal proceedings of ukraine: “public service is an activity in state political positions, professional activity of judges, prosecutors, military service, alternative (non-military) service, diplomatic service, another civil service, service in the arc authorities, local self-government bodies” (the verkhovna rada, 2005). at the same time, the legislator totally ignores the key feature of public service – its functional purpose. 4. the functional aspect of public service as we have been defined above, the function for the existence of a system is a key feature that ensures the unity and interrelation of its parts, for this very reason, it is more appropriate to turn to the functional aspect of public service. from this point of view, public service involves activities of many institutions as the tasks of public administration in many countries are performed not only by the bodies and organizations of public (government and municipal) sector but also delegated by public organizations and even by private entities. that is, it is about the extension of the circle of subjects involved in the implementation of public functions and about the determination of boundaries of public service through the implementation of public tasks (tymoshchuk, shkolyk (ed.), 2007). popova o.v. formulated an appropriate, from the standpoint of the functional approach, author’s definition of a public service: “public service should be defined as the realization of power by the people through the fulfilment of tasks and functions of the state, aimed at ensuring public interests by persons on a permanent professional paid basis at the expense of budgetary funds in executive bodies, the apparatus of all branches of government, local self-government bodies on the basis of administrative-legal act of appointment to a post” (popova, 2011). based on this definition, it is possible to identify the key determinant of public service immediately that lies in its purpose, – “the realization of power by the people through the fulfilment of tasks and functions of the state, aimed at ensuring public interests by persons ...” and only then the author refers to the specific features of such subjects, however, as the above definition illustrates, the first and decisive thing is to outline the purpose of public service. consequently, many definitions of public service, developed for today by domestic scholars of administrative issues, can be divided into two groups depending on whether its nature is determined by the nature of activities of entities or the specific legal status of such. after all, the determination of an object (phenomenon, process) means to define a list of features, typical of the genus or species, to which it belongs, and particular or several ones, which allow delimiting the determined object (phenomenon, process) from close or similar to it. from this perspective, the key distinction of public service is absolutely its purpose, which is specified in its functions. that is why we consider the functional approach allows discovering its nature more complete. on the basis of the analysis, we can conclude that public service is considered as a professional activity of subjects with a specific legal status, which allows solving the tasks facing public servants in order to achieve the ultimate goal of satisfaction of the public interest. however, activity is not the only component of public service as a phenomenon, which is a system itself. 5. application of systems theory in the adaptation of national legislation to the eu legislation in turn, adaptation, from the point of view of systems theory, is the process of adjustment of a system to the environment without losing its identity. adaptation has a number of dimensions: social, political, statemanagement. adaptation in public administration is related to the adjustment to the environment of subjects, institutes, methods, and technologies of public administration (don v.a. (ed.), 2006). baltic journal of economic studies 96 vol. 4, no. 1, 2018 in such a manner, the application of systems theory in the adaptation of national legislation to the eu legislation requires that it will be done during determining the legal status of all entities (both public and private) without exception, by defining the order of their activities (taking into account all directions of activity of its subjects without exception) and on the basis of conceptual foundations defining the purpose of public service. consequently, the application of systems theory during the implementation of national legislation adaptation to the eu laws in the field of public service implies that it should cover all, without any exceptions, manifestations and forms of legal relations in the field of public service, which are a unified system and not only public service as a professional activity of public servants. in other words, we should discuss legal relations in the field of public service as a complex system that will allow implementing systems theory in the adaptation of national legislation to the eu laws in the field of public service in full measure. the integrative feature of this system, as we have defined above, is its purpose – satisfaction of public interest. melnyk r .s. interprets public interests as conscious interests of the whole society or its part (territorial communities, state, etc.), which reflect the economic, social, and law-enforcement needs of the population. public interests are not simply a set of individual interests of members of a society or its part. they are a kind of quintessence (combination) of the interests of members of society, that is, they combine only those interests, which are equally important for every member of a society (the interest to breathe clean air, the interest to use safe public transport, the interest of access to urban infrastructure objects, interest to in a safe (noncriminogenic) city, etc.). under a public interest, it is necessary to recognize such an interest, which is “accessible” for any person on an unconditional basis. the public interest is a relatively sustainable category as the belonging of one or another interest to the category of public interest depends on economic, political, social factors that may vary from time to time (kolomoiets, kolpakov (ed.), 2014). ways and directions of the satisfaction of public interest are reflected in the functions of public service, the detailed consideration of which will enable us to disclose the essence of the system-forming feature of the legal relationship in the field of public service – its functional purpose. karpa m.i. carries out a profound analysis of the concept of the post of public service from the position of the functional approach stressing that it is expedient to consider the activity of public authority only taking into account a system nature as its basic characteristic. the author proposes to divide the functions by the forms of activity into: 1) organizational; 2) permissive regulatory; 3) technologically-enforcement; 4)  autho ritative; 5) information; 6)  control; 7)  rulemaking; 8) representative, and others. karpa  m.i. proposes to distinguish such functions by the subjects of implementation: 1) the state service and its officials; 2) local self-government and its officials; 3) state enterprises, institutions and organizations and their officials; 4) other institutions, organizations, enterprises authorized to perform the functions of public service and their officials. according to legal forms of a service career, the researcher defines: 1) law-making; 2) control; 3) organizational; 4) law enforcement functions. along with this, in the context of the implementation of the main objective functions of the public authorities, karpa m.i. defines the following: political, economic, social, cultural, environmental, and humanitarian (karpa, 2013). such a multiplicity in the direction of public service and its appointment is conditioned by the multiplicity of participants in the legal relationships in the field of public service and the specifics of their legal status. all these facts allow us to speak about the plurality of varieties of legal relationships that are in the public service. for example, bednyi o. proposes to mark the following types of public-service relations: 1) the basic public-service relation, within which a public official performs his official duties as defined by the status of a corresponding public service position, and a public authority creates the proper conditions of service activity for an employee and pay for it; 2) publicservice relations connected with the involvement of persons in the public service and their dismissal from the public service; 3) public-service relations related to the assessment of professional knowledge and skills, as well as other characteristics of candidates for posts of public service and civil servants; 4) public-service relations related to the submission and disclosure by applicants for posts of public service and civil servants of information about property, income, expenses, and financial obligations regarding them and their family members; 5) public-service relations related to the conferment of ranks, class ranks, special ranks etc. to public servants; 6) public-service relations related to professional education and advanced training of the level of professional competence of public servants; 7) public-service relations related to the application of disciplinary measures to a public servant; 8) public relations, which are not directly public-service but closely related to their public purpose and content (for example, internal organizational relations in public authorities with regard to the creation (establishment) of posts and the determination of official powers and relations relatively to the consideration and decision in the administrative procedure of public-law disputes on public service matters) (bednyi, 2016). without denying in any way the value of such a scientific approach, it should be emphasized that the above classification reveals the “internal” activity baltic journal of economic studies 97 vol. 4, no. 1, 2018 component of only one category of subjects, public servants, and other institutions belonging to the sector of public relations related to the acceptance of a person to public service, its career and termination, outside of one’s interaction with such subjects as a person and a citizen, a territorial community, the nation of ukraine, whose interests must be satisfied in the process of professional activity of public servants and other institutions that contribute to it. that is why the application of systems thinking during the implementation of the adaptation of national legislation to the eu laws in the field of public service implies that all components of legal relations in the field of public service should be covered, only under this condition it will be possible to achieve the ultimate goal of professional activity of public servants – realization of public interest. the structure of legal relations in the field of public service includes all the components, which are typical for any legal relations: 1) a subject or subject body is a group of people involved in legal relations; 2) an object, that is, it provokes appearance and performance of activity of subjects; 3) a content, that is, legal rights, duties, powers, responsibilities of subjects of legal relations, as well as the structure of content – a way of interconnection arising on the basis of legal rights, duties, powers, responsibilities. the structure of the content of legal relations does not form a connection of its content elements (rights, duties, powers, responsibilities) but forms the legal connection that arises on their basis about claiming something. in other words, this is the legal mutual status of subjects, which determines, shapes their behaviour through corresponding to one another rights and obligations for the satisfaction of their interests; 4) a legal fact, which is the basis for the emergence, change, and termination of legal relations (skakun). 6. conclusions summarizing our research, we emphasize once again that the key, integrative feature of legal relations in the field of public service is revealed through their functional purpose – the satisfaction of public interest. this very feature allows us to speak about them as a system, rather than a complex of individually existing objects (phenomena, processes), which we have been listed above in the framework of the structure’s consideration. thus, the application of systems theory during the implementation of national legislation adaptation to the eu laws in the field of public service implies the necessity of coverage by such processes, without exception, of legal relations in the field of public service: all entities without exception (not only public servants and public authorities but also those segment of the population whose public interest is realized in the process of professional activity of public servants and other subjects contributing to it), a proper and profound determination of the legal status of each of them (and not just the legal status of public servants), order, reason, and conditions of interaction within relations that are formed due to the satisfaction of public interest (including professional activity of public servants). based on the above, we also consider it quite justified to state that the proper application of systems theory during the implementation of the adaptation of national legislation to the eu one in the field of public service legislation is able quite naturally to lead to the codification of the legal norms regulating the legal relations in the field of public service. references: nediukha m., hladkova t. 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(2011) poniattia ta oznaky publichnoi sluzhby v ukraini [concept and features of public service in ukraine]. forum prava, no. 4, pp. 583–587. t.o. kolomoiets, v.k. kolpakov (ed.) (2014) administratyvne pravo ukrainy: slovnyk terminiv [administrative law of ukraine: glossary], k.: vydavnychyi dim «in yure». karpa m.i. (2013) teoretychni aspekty formuvannia kadrovoi polityky v orhanakh publichnoi vlady [theoretic aspects of the formation of personnel policy in public authorities]. efektyvnist derzhavnoho upravlinnia, vol. 36, pp. 27–36. bednyi o. (2016) publichno-sluzhbovi vidnosyny yak skladova predmetu administratyvnoho prava [public-official relations as a component of the subject of administrative law]. publichne pravo, no. 4, pp. 90–95. skakun o.f. teoriia derzhavy i prava : pidruchnyk [theory of state and law: a textbook]. retrieved from: http://books.br.com.ua/ baltic journal of economic studies 185 vol. 3, no. 4, 2017 corresponding author: 1 department of finance, banking and insurance, kherson national technical university. e-mail: nfemerald@ukr.net territorially-oriented model of management of processing enterprises of ukraine nadezhda onikienko1 kherson national technical university, ukraine abstract. the subject of research of this article are the processing enterprises of ukraine. in the period of political and economic instability, when state decentralization is carried out and territorial communities receive greater powers and resources, the issue of building a model of enterprise management is becoming increasingly important. the purpose of the article is to develop an effective model for managing processing enterprises in the relevant direction of the development of the state. methodology. during the analysis it was established that an effective management model for processing enterprises should be consistent with the development strategies of the state and a particular region. these strategies are interrelated and provide for a comprehensive system approach. the study is based on an analysis of the strengths and weaknesses of the region: geographic, economic, industrial. based on the analysis of the strengths of the region, the opportunities for efficient development of processing enterprises in the given territory were determined and a model of territorially-oriented management of enterprises was developed. the model is based on the principles of economic and political development of the region, with the help of which, its opportunities are realized. conclusions. territorial-oriented management of a processing enterprise is an effective model of organization and management. this model covers all spheres of influence on the development of the enterprise. it is based on the interrelation of the territory and the processing enterprise and ensures the receipt of state support within the framework of the approved development strategy for a certain territory. in the proposed model, we observe that at the first stage – the organization of the enterprise, its founder is guided by the geographically attractive location of the enterprise. at the second stage – development, the enterprise developing in accordance with the strategies of development of regions and the state, has the opportunity to receive state support and positively affect the territory, reducing its negative sides, developing it. key words: processing enterprises, geographically-oriented model, effective management, industrial potential, foreign economic relations. jel classification: м21, м29, м11, м20, f42 1. вступление на данном историческом этапе развития экономика украины трансформируется, вектор развития экономических отношений стремится к европейскому. перед государственной властью на каждом уровне стоит задача – сохранить стабильность и обеспечить дальнейшее экономическое развитие регионов и государства. одним из основных направлений развития украины является расширение и упрощение доступа украинских товаров на рынки государств  – членов европейского союза. для осуществления данной цели необходимо приведение системы технического регулирования в соответствие с европейскими требованиями и завершения реформирования системы государственного контроля над безопасностью и качеством пищевых продуктов. важная роль в данном направлении развития экономики и промышленности украины принадлежит перерабатывающим предприятиям. проблематика эффективного управления перерабатывающими предприятиями нашла свое отражение в работах многих украинских исследователей, среди которых базилевич в. д., белорус о.г., боринец с.я., гальчинский а.с., ещенко п.с., пешко а.в., рязанова н.с. и другие. среди зарубежных ученых, разрабатывающих данную тематику, следует отметить л. бальцеровича, т. эдисона, а. зиденберга, т. килликом и др. однако, несмотря на значительный объем научных достижений в этой сфере, некоторые вопросы разработки эффективной модели управления перерабатывающими предприятиями и ее влияние на регион размещения предприятий имеют противоречивый и дискуссионный характер. в период политической и экономической нестабильности, когда осуществляется государственная децентрализация и территориальные общины получают большие полномочия и ресурсы – вопрос построения модели управления предприятиями приbaltic journal of economic studies 186 vol. 3, no. 4, 2017 обретает все большую актуальность. таким образом, научная новизна статьи заключается в разработке эффективной модели управления перерабатывающими предприятиями. целью статьи является разработка модели управления перерабатывающими предприятиями соответствующей целевому направлению развития государства. модель основывается на основных принципах экономического и политического развития региона, с помощью которой реализуются его возможности на основании сильных сторон территории. 2. стратегия устойчивого развития украины и ее регионов для экономического развития украины и регионов президентом украины был подписан указ «о стратегии устойчивого развития «украина-2020» (decree of the president 2015). эта стратегия определяет основные векторы развития экономики, политического устройства, основы деятельности производства. стратегия устойчивого развития предполагает реализацию реформ и программ по направлениям: развитию, безопасности, ответственности, гордости. и одной из первоочередных задачи является реализация программы дерегуляции и развитию предпринимательства. согласно стратегии устойчивого развития «украина-2020» была разработана и утверждена стратегия развития херсонской области на период до 2020 года (strategy for the development of the kherson region 2015), которая предусматривает ускорение темпов развития региона, повышение ее конкурентных позиций. стратегия предусматривает развитие территории херсонской области с соблюдением международных стандартов сохранения и развития окружающей среды. основывается на принципах ресурсосбережения, с учетом действующей системы расселения по принципу ее сохранения и развития. осуществляется приоритетное развитие точек экономического роста, обеспечивающих равномерное продвижение территории области с учетом традиционных направлений экономики и возможности развития отраслей, которые органично сочетаются с уже действующими производствами и дополняют их. реализация стратегии развития херсонской области предусматривает формирование комплексной системы проектов, выполнение которых базируется на осуществлении влияния каждого проекта как на общую ситуацию в херсонской области, так и на ситуацию на уровне территориальных общин. определяющее место в разработке и внедрении мероприятий стратегии развития предоставляется именно территориальным общинам, ведь она разрабатывается на основе представленных ими проектов. для развития перерабатывающих предприятий в рамках стратегии развития херсонской области определены следующие стратегические цели: обеспечение условий для развития перерабатывающей промышленности, содействие развитию сертификационного центра для сельскохозяйственных предприятий, содействие созданию и развитию семейных фермерских хозяйств, финансовая поддержка мероприятий в агропромышленном комплексе путем удешевления кредитов. то есть, по нашему мнению, основными задачами для развития перерабатывающих предприятий являются: улучшение инвестиционного климата, повышение уровня сертификации и стандартизации качества продукции и обеспечения экологических норм продуктов переработки, использования инструментов бюджетного обеспечения для осуществления указанных целей. 3. анализ потенциала региона для построения модели государственной поддержки перерабатывающих предприятий, проанализируем сильные и слабые стороны региона. сильные стороны херсонской области предлагаем условно разделить на территориально-географические, промышленные и экономические. к сильным территориально-географическим сторонам, на наш взгляд, относятся: выход области в черноморско-азовского побережье. по территории области проходит государственная граница протяженностью 458 км, в том числе по морям: черному – 350 км, азовском – 108 км. это является возможностью для развития транспортной инфраструктуры, туризма, а также активного участия в трансграничном сотрудничестве стран черноморского бассейна; значительный транспортный потенциал. присутствуют и развиваются все основные виды транспорта. инфраструктура области включает автомобильный, железнодорожный, водный и воздушный транспорт. функционирует аэропорт с международным статусом. благодаря этому возможные внутригосударственные и внешнегосударственные экономические связи; многообразие природных ресурсов, создает необходимые условия для развития хозяйственной деятельности. имеющиеся земельные и значительные водные ресурсы, в том числе свободные для использования в зоне рекреации; высококачественные южные черноземы; искусственные лесные массивы общей площадью 130,7 тыс. га; полезные ископаемые: известняк, глинистые породы, камни, минеральные воды, соли, значительный потенциал для развития нетрадиционной и возобновляемой энергетики. часть области имеет равнинный рельеф в солончаковых степях, благоприятный для строительства ветрои солнечных элекbaltic journal of economic studies 187 vol. 3, no. 4, 2017 тростанций. количество солнечных дней и скорость ветра обеспечивают высокую рентабельность объектам нетрадиционной энергетики. это является важным фактором развития перерабатывающих предприятий на территории области, так как способствует удешевлению себестоимости произведенной продукции. значительный агропромышленный потенциал, сельскохозяйственный кластер. в структуре земель сельскохозяйственного назначения 49,9% составляют черноземы (южные и обыкновенные). имеющиеся 426,8 гектаров орошаемых земель, предприятий по производству и ремонту сельскохозяйственной техники и оборудования для капельного орошения, мощного трудового потенциала (39% трудоспособного населения  – жители сельской местности). равнина сельскохозяйственных земель благоприятна для ведения крупнотоварного производства. наличие 69 предприятий по переработке сельскохозяйственной продукции и производства пищевых продуктов и напитков, которые имеют хорошую репутацию далеко за пределами украины; обеспеченность трудовыми ресурсами на данном этапе развития экономики, потенциал для подготовки и переподготовки кадров. 65% населения в трудоспособном возрасте является экономически активным, значительная часть населения имеет высшее образование. в области функционируют 26 высших учебных заведений, из них 9  – iii-iv уровней аккредитации и 26 государственных профессионально-технических учебных заведений; высокий интеллектуальный потенциал в сфере апк. наличие высоких технологий в области переработки, которые могут быть использованы как площадки для распространения технологий. имеющиеся научные школы, учреждения сельского хозяйства. сложившаяся добра сортовая база, активно внедряются высокие технологии в перерабатывающее производство. экономическим потенциалом области являются: наличие значительного количества земельных участков, пригодных для введения инвестиционной деятельности на территории области. существует 220  земельных участков общей площадью 8432,52 гектаров преимущественно сельскохозяйственного назначения; экспортоориентированная специфика внешнеторговой деятельности; гибкость рынков урбанизированных территорий области за значительный предпринимательский потенциал (141 человек, занята в предпринимательстве, на 1000 человек населения). исходя из анализа сильных сторон области, можем определить возможности для эффективного развития перерабатывающих предприятий на территории данного региона (рис. 1, 2, 3). так, благодаря выгодному территориально-географическому положению херсонской области, по нашему мнению, открываются перспективы и возможности для перерабатывающих предприятий в данном регионе. такое размещение перерабатывающих предприятий способствует быстрой доставке продуктов переработки к заказчикам, а также способствует развитию и укреплению внешнеэкономических связей перерабатывающих предприятий, благодаря чему они развиваются и имеют положительный экономический эффект. одной из возможностей является удобство доставки материалов, так как область имеет выход к двум морям и значительный транспортный потенциал. такое размещение перерабатывающих предприятий способствует быстрой доставке продуктов переработки к заказчикам, а также способствует развитию и укреплению внешнеэкономических связей перерабатывающих предприятий, благодаря чему перерабатывающие предприятия развиваются и имеют положительный экономический эффект. область имеет значительный потенциал для развития нетрадиционной воспроизведенной энергетики, что может способствовать высвобождению средств для улучшения инвестиционного климата, проведевыход области в черноморско-азовское побережье значительный транспортный потенциал удобство доставки материалов; скорость доставки продуктов переработки; внешнеэкономические торговые связи сильные территориальногеографические стороны региона возможности для развития перерабатывающих предприятий многообразие природных ресурсов рост бюджетной самостоятельности общин; улучшение бизнес-климата; условия стимулирования развития перерабатывающих предприятий значительный потенциал для развития нетрадиционной и возобновляемой энергетики высвобождение средств; улучшение инвестиционного климата; развитие альтернативной энергетики, техническое переоснащение рис. 1. возможности для развития перерабатывающих предприятий благодаря территориально-географическому положению региона источник: разработано автором baltic journal of economic studies 188 vol. 3, no. 4, 2017 ние технического перевооружения. херсонская область характеризуется дифференцированным промышленным потенциалом, стимулирует развитие различных отраслей переработки на ее территории, развивает внешнеэкономические связи, в том числе со странами европейского союза, увеличивает мировой спрос на готовую продукцию перерабатывающих предприятий. в области имеются высшие учебные заведения и центры переподготовки кадров, которые обеспечат перерабатывающим предприятиям высококвалифицированных сотрудников в сфере переработки и эффективный менеджмент. существование значительного количества земельных участков и разнообразие природных ресурсов способствует росту бюджетной самостоятельности общин, так как территориальная община может использовать природные ресурсы территории для своего экономического развития. так как херсонская область является аграрной, то многообразие природных ресурсов и значительное количество земельных участков будет стимулировать развитие перерабатывающих предприятий, в том числе пищевых, предприятий легкой промышленности. то есть, сильные стороны региона, где находится перерабатывающее предприятие, стимулирует развитие такого предприятия. осуществляя деятельность и развиваясь, перерабатывающее предприятие способствует экономической независимости и эффективному развитию территориальной общины, на территории которой оно находится, способствует благоустройству населения общины, принимает участие в решении ее социальных проблем, кадровых вопросов, вопросов привлечения инвесторов и спонсоров. благодаря улучшению инвестиционного климата территориальная община может развиваться, повышать спрос и покупательную способность населения. на ряду с существованием сильных сторон херсонская область имеет также и слабые стороны своего развития. основными проблемными сторонами херсонской области, которые могут помешать развитию перерабатысильные стороны региона в промышленности как фактор развития перерабатывающих предприятий возможности для развития перерабатывающих предприятий дифференцированный промышленный потенциал развитие различных отраслей переработки; улучшение инвестиционного климата; развитые внешнеэкономические связи, в том числе с ес; рост мирового спроса на продукты значительный агропромышленный потенциал обеспеченность трудовыми ресурсами, подготовка и переподготовка кадров кадровый потенциал; высококвалифицированные сотрудники; эффективный менеджмент высокий интеллектуальный потенциал в сфере апк высокие технологии на перерабатывающих предприятиях; рентабельные предприятия; соответствие качества продукции и экологических норм стандартам ес возможности для развития региона сильные экономические стороны региона большое количество земельных участков привлечение инвестиций в перерабатывающие предприятия; стимулирование перерабатывающей отрасли; рост бюджетной самостоятельности общин; стимулирование повышения ответственности за охрану окружающей среды и качества продукции экспортоориентированная специфика внешнеторговой деятельности стимулирование привлечения инвестиций в перерабатывающие предприятия; развитие конкурентоспособных перерабатывающих предприятий гибкость рынков урбанизированных территорий области из-за значительного предпринимательского потенциала улучшение бизнес-климата в регионе; кадровый потенциал рис. 2. возможности для развития перерабатывающих предприятий благодаря сильным сторонам региона в промышленности источник: разработано автором рис. 3. можливости для развития перерабатывающих предприятий благодаря сильным экономическим сторонам региона источник: разработано автором baltic journal of economic studies 189 vol. 3, no. 4, 2017 вающих предприятий, являются: отсутствие системы сбора и утилизации твердых бытовых отходов, высокий уровень физического износа и энергоемкость большинства предприятий области, низкий уровень внедрения ресурсосберегающих технологий, ограниченность трудоустройства в сельской местности, недостаточное количество очистных сооружений и низкий уровень действующих, слабо развита инфраструктура поддержки бизнеса и привлечения инвестиций, недостаточная финансово-кредитная поддержка перерабатывающих предприятий области из бюджетов всех уровней. решению проблемных вопросов экономики региона может способствовать организация новых и развитие действующих перерабатывающих предприятий. так, проблему ограниченности трудоустройства в сельской местности и незначительное количество рабочих мест, которые привлекают молодежь, может решить организация перерабатывающих предприятий в сельской местности. такая местность, исходя из сильных сторон херсонской области, имеет большой ресурсный потенциал, земли пригодны для выращивания агропромышленной продукции, которая является сырьем для перерабатывающих предприятий. такие предприятия усилят территориальные общины населением трудоспособного возраста. то есть, мы можем наблюдать взаимную отдачу и взаимную зависимость перерабатывающих предприятий и региона, в том числе территориальной общины. встречным движением со стороны территориальной общины региона будет предоставление организационной, экономической и других возможных форм поддержки перерабатывающим предприятиям. принимая во внимание выгодное территориально-географическое положение региона (выход области в черноморско-азовского побережья и значительный транспортный потенциал)  – нахождение предприятия в сельской местности не создаст проблем при доставке продуктов переработки. 4. модель управления перерабатывающими предприятиями исходя из проведенного анализа, мы предлагаем территориально – ориентированную модель управления перерабатывающим предприятием. ее использование направлено на взаимную зависимость и взаимной отдачу территории, на которой находится перерабатывающее предприятие и самого предприятия. используя сильные стороны региона, предприятие развивается и наоборот: предприятие предоставляет стимулы для развития данного региона. такая модель основана на двух подходах: на этапе организации предприятия и на этапе развития предприятия. на этапе организации предприятия, первый критерий на который опирается основатель перерабатывающего предприятия – это инвестиционная привлекательность региона. эта категория, в первую очередь, включает в себя – территориально-географические характеристики региона: наличие и плодородие земельных ресурсов для сырья переработки, наличие водоемов для построения очистных сооружений и технического использования предприятием, выход к морским, речным портам, разветвленная транспортная система. важным фактором на сегодняшний день является существование территориальных общин в данном регионе, поскольку они влияют на утверждение стратегий развития территории, приоритетные экономические и промышленные направления. важным фактором для основания перерабатывающего предприятия на определенной территории являются социальные вопросы, демографическая ситуация региона, наличие кадрового потенциала, существование центров образования – подготовки и переподготовки, для специалистов профиля переработки. также важна политическая стабильность, отсутствие военной угрозы, уровень преступности и покупательная способность населения (рис. 4). стимулом организации перерабатывающего предприятия на данной территории являются условия деятельности, которые и являются сильными сторонами определенного региона. на этапе развития предприятия критерием выступает соответствие стратегии регионального развития. данная стратегия – составная часть стратегии развития государства и поэтому должна соответствовать ее основным направлениям и целям. большую роль здесь играют территориальные общины как учредители и практики стратегий. если деятельность предприятия соответствует основным направлениям развития, определенных стратегиями развития, то перерабатывающее предприятие данного региона получит подорганизация предприятия территориальногеографическое положение политическая ситуация природные ресурсы покупательная способность населения демографическая ситуация социальные условия рис. 4. территориально-ориентированное управление перерабатывающим предприятием на этапе организации источник: разработано автором baltic journal of economic studies 190 vol. 3, no. 4, 2017 держку: государственную, региональную, территориальную. это и будет стимулом для развития перерабатывающего предприятия на данной территории. 5. выводы территориально-ориентированное управление перерабатывающим предприятием – это эффективная модель организации и управления. такая модель охватывает все сферы влияния на развитие предприятия. она основана на взаимосвязи территории и перерабатывающего предприятия и обеспечивает получение государственной поддержки в рамках утвержденной стратегии развития определенной территории. в предлагаемой модели, мы наблюдаем, что на первом этапе – организации предприятия, его основатель ориентируется на территориально привлекательное расположение предприятия. на втором этапе – развитие, предприятие развиваясь в соответствии со стратегий развития регионов и государства, имеет возможность получить государственную поддержку, и получив ее, положительно повлиять на территорию, уменьшая ее негативные стороны, развивает ее. наши дальнейшие исследования будут направлены на анализ внедрения территориально-ориентированной модели управления перерабатывающими предприятиями и поиск новых эффективных моделей управления ими. references: bugayenko, n. (2010). sovremennyye tendentsii razvitiya sistemy gosudarstvennoy pomoshchi v yes. statistika ukrainy, 1, 92–98. danieli, p. (2012). sostoyaniye razvitiya predpriyatiy pererabatyvayushchey otrasli v regional'nom aspekte. ekonomika promyshlennosti. 3-4, 22-28. dogovor ob osnovanii yevropeyskogo soobshchestva: zakonodatel'stvo ukrainy. mezhdunarodnyye dokumenty (2005) from: http: //zakon1.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=994_017 ukaz prezidenta ukrainy «o strategii ustoychivogo razvitiya« ukraina-2020» (2015) from: http://zakon3.rada.gov.ua/laws/show/5/2015 strategiya razvitiya khersonskoy oblasti na period do 2020 goda (2015) from: http://khoda.gov.ua/strategiyarozvitku-2020 investytsiynyy potentsial khersons′koyi oblasti (2017) from: http://khoda.gov.ua/departamentzovnishnoekonomichno%25d1%2597-diyalnosti-turizmu-ta-kurortiv надежда оникиенко территориально-ориентированная модель управления перерабатывающими предприятиями украины аннотация. предметом исследования данной статьи являются перерабатывающие предприятия украины. в период политической и экономической нестабильности, когда осуществляется государственная децентрализация и территориальные общины получают большие полномочия и ресурсы, вопрос построения модели управления предприятиями приобретает все большую актуальность. целью статьи является разработка эффективной модели управления перерабатывающими предприятиями соответствующей целевому направлению развития государства. методика. в процессе анализа было установлено, что эффективная модель управления перерабатывающими предприятиями должна соответствовать стратегиям развитиями государства и отдельного региона. эти стратегии взаимосвязаны и предусматривают комплексный системный подход. исследование основано на анализе сильных и слабых сторон региона: территориально-географических, экономических, промышленных. исходя из анализа сильных сторон области, были определены возможности для эффективного развития перерабатывающих предприятий на данной территории и разработана модель территориально-ориентированного управления предприятиями. модель основывается на принципах экономического и политического развития региона, с помощью которой реализуются его возможности. выводы исследования. территориально-ориентированное управление перерабатывающим предприятием – это эффективная модель организации и управления. такая модель охватывает все сферы влияния на развитие предприятия. она основана на взаимосвязи территории и перерабатывающего предприятия и обеспечивает получение государственной поддержки в рамках утвержденной стратегии развития определенной территории. в предлагаемой модели, мы наблюдаем, что на первом этапе – организации предприятия, его основатель ориентируется на территориально привлекательное расположение предприятия. на втором этапе – развитие, предприятие, развиваясь в соответствии со стратегий развития регионов и государства, имеет возможность получить государственную поддержку и положительно повлияет на территорию, уменьшая ее негативные стороны, развивает ее. baltic journal of economic studies 12 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 nicolaus copernicus university, poland (corresponding author) orcid: https://orcid.org/0000-0002-4201-8028 * this research paper is the result of the research project civil disorder in pandemic-ridden european union. it was financially supported by the national science centre, poland [grant number 2021/43/b/hs5/00290]. doi: https://doi.org/10.30525/2256-0742/2023-9-1-12-17 forms of protest in lat via during the pandemic versus the activity of the police* joanna marszałek-kawa1 abstract. the covid-19 pandemic, which broke out on an unprecedented scale in 2020, forced the public authorities to impose a series of restrictions and limitations on constitutional rights and freedoms, which provoked strong reactions, particularly in the democratic world, and encouraged social unrest. the speed of the measures, their scope and the degree of negligence, which undoubtedly affected the lives of millions of people, strengthened social resistance. the research problem in this paper concerns the influence of the pandemic related restrictions introduced in latvia on the mobilisation and demobilisation of demonstrators and the evaluation of the methods used by the latvian police in the conditions of civil disorder caused by these restrictions. the aim of this paper is to examine the violent acts committed by the demonstrators and the forms of protest they used, as well as to analyse the actions of the officers of the services responsible for securing the demonstrations. the author sought answers to two main research questions: what actions did demonstrators take during the pandemic in latvia? how did the security services ensure the safety of the demonstrations and what methods did they use? the study used institutional and legal analysis as well as qualitative source analysis. it also used the method of content analysis, mainly of messages and announcements related to the behaviour of protesters and law enforcement agencies during the period in question. key words: latvia, police, pandemic, protests, civil disorder. jel classification: h76, h80 1. introduction during the pandemic, thousands of people around the world took to the streets to protest against the closures announced by governments. the successive waves of demonstrations were a response to govern ment regulations restricting constitutional rights and freedoms (including mandatory vaccination against covid-19), the main aim of which was to find an effective method of dealing with this unprecedented public health crisis (furman et al., 2020; rak, 2021, p. 17–23). the main research problem addressed by the author concerns the impact of restrictions imposed by the latvian government on the mobilisation and demobilisation of protesters. the author also assesses the extent of violent behaviour on the part of the demonstrators. the aim is to analyse the forms of protest used by the demonstrators and the actions of the security forces to ensure the safety of the demonstrations. it is also worth reflecting on the nature of public protests and the methods used by the latvian police, and assessing the strategy, tactics and options for action in the context of public unrest caused by pandemic-related restrictions. according to jennifer earl, "repression of social movements refers to attempts by groups, individuals or state actors (e.g., military, national and local police) to increase the costs associated with participation in social movements or otherwise restrict social movement activity against social movements." however, as she points out, unjustified and too frequent repression can be counterproductive and lead to an intensification of the activity of these movements. equally dangerous, according to earl, is the fact that the escalation of repression during demonstrations leads to the radicalisation of social attitudes and has a negative impact on civil liberties (earl, 2013; rak, 2020, p. 189–203). it should also be emphasised that the scale of protests is also determined by the way in which the government communicates with society. when the authorities draft legal regulations that imply the introduction of certain restrictions in the sphere of constitutional baltic journal of economic studies 13 vol. 9 no. 1, 2023 rights and freedoms, the way they communicate them to the public contributes to the escalation or de-escalation of protests. as r . kwećko points out, "information contains a specific form of energy formulated in its material representation." (mazur, 2013, p. 317–319) the forms of media communi cation used affect one's sense of security or threat. governments that use the power of mass media, especially in the pre-election period, should be aware that the media help to identify the most pressing and topical issues at home and abroad. in addition, mass media can influence citizens' worldviews, attitudes, social roles and political preferences, and consequently the choices they make (mazur, 2013, p. 317–319). 2. rights and freedoms in latvia in the pandemic era latvia is a parliamentary republic in which democratic power is balanced between the unicameral parliament (saeima), the head of state (the president), the executive (the cabinet) and the judiciary. the directly elected saeima chooses the president. on 12 march 2020, the latvian government declared a state of emergency in response to the growing threat of a pandemic, in accordance with the 2013 law on emergency situations and states of exception (2013). according to art. 4 (1) of the law, the state of emergency is "a special legal regime during which the cabinet has the right to restrict the rights and freedoms of the state administration and local government authorities, natural and legal persons, and to impose additional obligations on them." the government therefore decided to introduce a series of prohibitions and restrictions on civil rights and freedoms, on the grounds of public safety. their main aim was to contain the transmission of the coronavirus. they included restrictions on public gatherings, travel, the functioning of state institutions, schools, shopping, health care, churches, etc. the state of emergency was regulated by two other laws: the civil protection and disaster management act (2016), which defines the competence of the system of civil protection and disaster management subjects, and the epidemio logical safety act (1997). the state of emergency was lifted in april 2022, although a number of restrictions remained in place. prime minister krišjānis kariņš justified the need for the state of emergency by saying that "it is necessary to ensure that our health service can continue to provide quality services to people, it is necessary to ensure that young people can continue their education, it is necessary that our economy continues to function. that's why we need to do everything we can to limit the spread of the disease."(latvian public broadcasting, 2020a). as s. olsen, m. birģelis and l. kadile point out, during the pandemic no amendments were made to the latvian constitution that would significantly change the constitutional system of the state, especially with regard to changing the rules of cooperation between state authorities. it should be noted, however, that the pandemic situation "triggered tensions regarding the division of powers between the executive and the legislature, leading to discussions on the reintroduction of a modified version of article 81 of the satversme. in the past, this article gave the government the right to issue legislative decrees between sessions of the saeima, but it was removed from the constitution more than a decade ago because such powers were being abused and exercised without the necessary justification." (olsen, birģelis, and kadile, 2021) according to the above-mentioned scholars, "the executive's legislative powers played a significant role in dealing with the covid-19 crisis. these powers are reflected in cabinet orders and regulations. cabinet order no. 103 and cabinet order no. 655 included restrictions on the free movement of individuals, private events and meetings, the operation of cultural, exhibition and religious sites, beauty treatment and retail services. in addition, cabinet order no. 103 further empowered the minister of health to restrict access to health services, although this regulation was later criticised for violating the principle of legality." (olsena, birģelis, and kadile, 2021) the constitution of the republic of latvia guarantees the freedom of peaceful assembly. according to art. 103 of the basic law states that "the state shall protect the freedom of peaceful assemblies, street processions and pickets, announced in advance." (constitution of the republic of latvia, 1922) in addition, latvian law prohibits arbitrary arrest and detention and provides for the right of any person to challenge the legality of his or her arrest or detention before a court. the government generally complied with these requirements during the pandemic (the constitution of the republic of latvia, 1922, art. 90–94). according to s. olsen, m. birģelis and l. kadile cabinet, order no. 103 stipulated that all public events, including meetings, processions and pickets, were prohibited (regarding the declaration of the emergency situation, 2020a). informal gatherings, initially limited to 50 people, will also be banned from 25 march 2020, except for outdoor funerals and christenings in special cases (regarding declaration of the emergency situation, 2020a). from 12 may 2020, prearranged events up to 25 participants allowed (regarding the declaration of the emergency situation, 2020a). under order no. 655, adopted on 6 november 2020, public outdoor events such as fireworks, meetings, processions baltic journal of economic studies 14 vol. 9 no. 1, 2023 and pickets were banned from 30 december 2020 to 6 april 2021 (regarding the declaration of emergency situation, 2020b). in turn, regulation no. 360, entitled epidemiological safety measures for the containment of the spread of covid-19 infection, adopted on 9 june 2020, modified the previous rules and, from 7 april 2021, private outdoor gatherings of 10 people from two households and processions and pickets of 10 people were permitted (epidemiological safety measures for the containment of the spread of covid-19 infection, 2020). in latvia, the state police and municipal police forces share responsibility for maintaining internal security. the state border guard, the armed forces, the defence intelligence and security service, the office for the protection of the constitution, the state security service and the national guard are responsible for external security, but they also have some internal security responsibilities. the latvian ombudsman, juris jansons, referring to the principles underlying the new covid-19 regulations in the context of civil rights and freedoms, pointed out that the legislator should ensure a balance between individual and collective interests. he believes that the law on the management of the spread of covid-19 іnfection raises concerns in this regard (baltic news network, 2021a; olsena, birģelis and kadile, 2021). reports on respect for civil rights in 2020–2021 show that the latvian government has generally respected the constitutional right of assembly. however, it should be noted that some additional restrictive legislation was adopted during the pandemic. for example, organisers of demonstrations had to notify the authorities 10 days in advance. authorities could issue permits for demonstrations within 24 hours if longer notice was "reasonably impossible". officials could refuse or modify permits to prevent public disorder. as a result of the covid-19 pandemic, the government introduced several temporary restrictions on public gatherings, which varied according to the perceived risks (united states department of state, 2020, 2021). 3. forms of protest there is no doubt that proper risk assessment and de-escalation measures by the police help to maintain peace and order during protests. anne nassauer identifies four measures that can be used to calm emotions and keep demonstrations peaceful. these include: – full communication and effective police management; – respecting territorial boundaries; – avoiding signs of escalation; – proper recognition of the emotional dynamics of outbreaks of violence (nassauer, 2015, p. 132–152; ellefsen, 2021, p. 87–108). an analysis of media reports shows that during the pandemic, the largest demonstrations took place in the country 's capital and were organised in response to the restrictions introduced by the government. it should be noted that the second wave of protests escalated. the sense of fatigue caused by the restrictions increased the frequency of street protests. prolonged lockdowns and new covid-19 regulations, such as the right of employers to dismiss workers without a valid covid-19 vaccination certificate, triggered social unrest. it should be noted that the riots took different forms. to illustrate the nature of the demonstrations, the author, following kamila rezmer-płotka (2022, p. 58–59), has adopted the following division of the protesters' actions: blockade of key points, buildings, roads, etc. people gathered in front of the government building in riga to protest against the imposition of the state of emergency in spring 2020. in the autumn of the same year (6 november 2020), demonstrators in the centre of the capital waved banners with slogans such as "no to emergency ", "emergency or coup?", "police state – no!". (latvian public broadcasting, 2020b). demonstrations in front of the headquarters of important institutions, combined with verbal calls for protests. on 4 august 2021, an opposition mp, aldis gobzems, issued a public call for residents to protest against the government's amendments to the law on controlling the spread of the covid-19 infection. the residents gathered in front of the saeima building, then stopped at the freedom monument and later went to the government building (baltic news network, 2021b). it should be added here that in 2021 the latvian police fined 2,350 people for organising unauthorised public protests against possible compulsory vaccination measures, such as the demonstration on 13 december 2021 (baltic news network, 2021b). cooperation with other protest groups. the demonstration against compulsory vaccination organised by activists of a new party – la tvia first (lpv) – in old riga on 19 august 2021 was joined by members of the new slesers party. with 5,000 participants, it was reported to be the largest demonstration in latvia since 2009 (euronews, 2021; the baltic times, 2021). on 18 september 2021, a well-known latvian politician and businessman, ainārs šlesers, organised a demonstration attended by 1,000 people. the demonstrators called on latvians, russians, baltic journal of economic studies 15 vol. 9 no. 1, 2023 christians, right-wingers and left-wingers to unite in the fight for voluntary vaccination. slogans such as "freedom!" and " we are the power!" were raised, and the current authorities in latvia were told to leave (baltic news network, 2021c). pickets. on 15 december 2020 a picket against the covid-19 restrictions was held in riga (latvian public broadcasting, klūga, 2020). protests related to violation of traffic rules or unauthorised use of an audible signal and slowing down road traffic, e.g., the demonstration in riga on 14 december 2020 (baltics news, 2020). protests organised by internet activists. on 20 march 2021, members of some facebook groups, such as tautas varas fronte online (people's power front online), held a demonstration in the centre of riga. there were several hundred participants and the leader of the protest was activist valentīns jeremejevs, who had previously been arrested for spreading fake news about covid-19 (spundiņa, latvian public broadcasting, 2021). petitions, lawsuits and acting in more formalised structures. a petition to allow hairdressers and other beauty professionals to return to work; a lawsuit by the book publishers' association, which led to the reopening of bookshops in latvia) (rfi, 2021). performance protests. on 18 february 2021, “haircuts on ice" in latvia to protest against covid-19 related bans (inquirer.net, 2021). 4. police action against the demonstrators it should be emphasised that effective policing in crisis situations should be based above all on peaceful forms of communication and cooperation. as karl a. roberts, brendan j. cox, auke van dijk and brandon del pozo point out, the recommended steps include "engaging with the public in a friendly and supportive manner, explaining the health rules and why they are needed, and encouraging individuals to comply. enforcing the rules through various sanctions is seen as a last resort and is only used when other persuasion methods fail." (roberts et al., 2021, p. 4) demonstrations in response to the introduction of pandemic-related restrictions in latvia were of a more peaceful nature. the police used information campaigns to encourage people to stay at home. in contrast, covid-19-related regulations introduced in some other european countries, which give police enormous powers to unduly restrict protests and provide for draconian penalties for violations, sparked large demonstrations in austria, belgium, croatia, italy and the netherlands. some protests turned violent, leading to dozens of arrests and injuries among demonstrators. such drastic events were not observed in latvia (amnesty interna tional, 2022). however, it should be noted that the police recorded some incidents of smashing the window of a police car and lighting firecrackers, as well as alcohol abuse (latvian public broadcasting, 2021). the police mainly used fines to punish protesters, but also arrested the most active demonstrators. the police tended to use persuasion rather than security measures such as tear gas, water cannon, pepper gas or truncheons. repressive measures included arrests, the construction of barriers and blockades, and the imposition of fines – on 14 december 2020, around 100 people were fined, and the maximum fine allowed by law could reach up to 5,000 euros (baltics news, 2020). the non-repressive measures taken by the latvian police, on the other hand, included: surveillance, cooperation in organising protests with their leaders, patrolling the streets, encouraging people to stay at home by informing them about the dangers related to the transmission of the virus, communicating with the protesters in order to reduce the level of emotion, and spreading the information that "the police are recording what is happening with technical means and will accordingly assess any violations of the epidemio logical restrictions." (spundiņa, latvian public broadcasting, 20/21) the state police stated that they saw a high risk of provocation and escalation of violence in these events and reminded that it was important to observe all epidemiological safety rules and warned that they would assess the responsibility of the organisers (the baltic times, 2021). the police warned against "deliberate gatherings during the state of emergency without considering the risks of covid-19, which is an administrative offence. according to section 225.1 of the criminal code, violation of restrictions and prohibitions imposed during a state of emergency is considered a criminal offence if it causes major damage." (baltic news network, 2021d). it should be emphasised that, despite well-designed procedures for securing demonstrations, some escalation could not be avoided. as a result, criminal proceedings were initiated for assaulting a police officer during a protest. in addition, a number of minor incidents were reported, including a smashed police car window and firecrackers (baltics news, 2021). at media conferences, police representatives stated that the police were strictly against activities where the number of participants exceeded the number considered epidemiologically safe (baltic news net work, 2021c). they said that they had a lot of video material that could be used to identify picketers who baltic journal of economic studies 16 vol. 9 no. 1, 2023 would be punished for violating the covid-19 restrictions (eesti rahvusringhääling, 2021). the head of the latvian state police, ruks, pointed out that "the state police officers are responsible for ensuring public order, preventing crime and all kinds of violations of the law. police officers cannot afford to remain inactive in such situations [...]. the state police have always been and will always be part of society, and police officers, like other members of society, are affected by the pandemic and its consequences. [...]. we ask citizens to show understanding and patience, and not to succumb to provocation and commit a criminal offence in the form of mass gatherings during the covid-19 pandemic, putting their health and the health of others at risk. the police are prepared for any development of these events." " we hope that the latvian people will prove to be responsible and able to meet the challenges posed by this pandemic, and will refrain from responding to provocations aimed at destabilising the situation." "i would like to reiterate that our goal during the pandemic has always been to ensure public safety, not to punish people. let us all take responsibility for ourselves, for each other and for our country!" [...] "they are not freedom fighters. they are just gross violators who do not understand the consequences. we support freedom of expression and human rights. but when limits are crossed and government restrictions are not respected, the police will be tough." (baltic news network, 2021d; eesti rahvusring hääling, 2021). 5. conclusions as mentioned above, public protests against pandemic-related restrictions and mandatory vaccinations took place mainly in riga, but also in some other parts of latvia. they involved representatives of various social groups. although they were not as dramatic or as large as those organised in france, spain or germany, they highlighted the lack of an effective government information campaign on the seriousness of the threat and the steps taken by the authorities. as a result, people took to the streets to express their anger and conspiracy theories grew in popularity. the internet, which was the main source of information about covid-19, was full of fake news filled with fear, uncertainty and a sense of threat. the authorities failed to communicate their policies to society, leading to a decline in trust in the government and social unrest. people criticised both the government's decisions, which they saw as "delayed, ill-considered and inconsistent", and the working methods of the services and institutions responsible for public order and security (kuczyńskazonik, 2021). in this context, it is worth recalling that the crisis of citizens' trust in the state is a serious threat to democratic principles and values. the reality of the pandemic period showed that in many countries of the world, including latvia, political aspects took precedence over the law in the decision-making process. as a result, civil society was seriously damaged – through the restriction of interpersonal relations, social resistance, growing mistrust of the authorities and lack of respect for the law. references: amnesty international (2022). amnesty international report 2021/22. the state of the world’s human rights. available at: https://www.amnesty.org/en/location/europe-and-central-asia/latvia/report-latvia/ baltic news network (2021a). ombudsman: with covid-19, latvia needs a reasonable balance between individual and public interests. available at: https://bnn-news.com/ombudsman-with-covid-19-,latvia-needs-areasonable-balance-between-individual-and-public-interests-227160 baltic news network (2021b). latvian police commence administrative violation procedure against saeima deputy. available at: https://bnn-news.com/latvian-police-commence-administrative-violation-procedure-againstsaeima-deputy-227163 baltic news network (2021c). notorious latvian politicians gather a crowd and protest against "forced vaccination". available at: https://bnn-news.com/notorious-latvian-politicians-gather-a-crowd-and-protest-against-forcedvaccination-228239 baltic news network (2021d). latvian police urge residents to not gather at "events" organized by aldis gobzems. available at: https://bnn-news.com/latvian-police-urge-residents-to-not-gather-at-events-organized-by-aldisgobzems-230870 baltics news (2020). around 100 participants in the picket against the covid-19 restrictions could receive a penalty. available at: https://baltics.news/2020/12/14/around-100-participants-in-the-picket-against-thecovid-19-restrictions-could-receive-a-penalty/ baltics news (2021). initiates criminal proceedings for assaulting a police officer during a protest against mandatory covid-19 vaccination in the center of riga. available at: https://baltics.news/2021/08/19/initiates-criminal-proceedings-for-assaulting-a-police-officer-during-a-protest-against-mandatory-covid-19-vaccination-in-the-center-of-riga/ civil protection and disaster management law (2016). available at: https://likumi.lv/ta/en/en/id/282333civil-protection-and-disaster-management-law earl, j. (2015). repression and social movements. in d.a. snow, d. della porta, b. klandermans, & d. mcadam (eds.), the wiley-blackwell encyclopedia of social and political movements. blackwell publishing ltd. baltic journal of economic studies 17 vol. 9 no. 1, 2023 eesti rahvusringhääling (2021). experts consider police use of force at protests excessive. available at: https://news.err.ee/1608175705/experts-consider-police-use-of-force-at-protests-excessive ellefsen, r . 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(2020). the state of vaccine confidence in poland: a 2019 nationwide cross-sectional survey. international journal of environmental research and public health, 17(12), 4565. doi: https://doi.org/10.3390/ijerph17124565 inquirer.net (2021). haircuts on ice in latvia to protest covid ban. available at: https://newsinfo.inquirer.net/ 1397162/haircuts-on-ice-in-latvia-to-protest-covid-ban kuczyńska-zonik, a. (2021). łotwa: niezadowolenie społeczne i spadek zaufania do rządu. available at: https://ies.lublin.pl/komentarze/lotwa-niezadowolenie-spoleczne-i-spadek-zaufania-do-rzadu/ latvian public broadcasting, klūga, m. (2020). demonstrations might be banned during emergency in latvia. available at: https://eng.lsm.lv/article/politics/politics/demonstrations-might-be-banned-during-emergency-in-latvia.a385458/ latvian public broadcasting (2020a). latvian government to decide about state of emergency on friday. available at: https://eng.lsm.lv/article/society/health/latvian-government-to-decide-about-state-of-emergency-on-friday.a380398/ latvian public broadcasting (2020b). on friday, november 6, around 40 people gathered outside the government building in rīga to protest against the introduction of state of emergency, leta reported. available at: https://eng.lsm.lv/article/society/society/people-gather-to-protest-against-state-of-emergency-in-latvia.a380783/ latvian public broadcasting (2021). thousands protest against ‘compulsory’ vaccination in rīga. available at: https://eng.lsm.lv/article/society/society/thousands-protest-against-compulsory-vaccination-in-riga.a417560/ mazur, j. 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report. available at: https://cutt.ly/w4agozd received on: 4th of february, 2023 accepted on: 16th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 108 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national academy of sciences of ukraine, ukraine; research institute for system statistical studies, ukraine; university of the western cape, republic of south africa e-mail: imantsurov@gmail.com orcid: https://orcid.org/0000-0003-1753-0422 2 kyiv national economic university named after vadym hetman, ukraine; university of the western cape, republic of south africa (corresponding author) e-mail: alinabarvinok1990@gmail.com orcid: https://orcid.org/0000-0002-8047-3478 3 kyiv national economic university named after vadym hetman, ukraine e-mail: vdovgoteles@gmail.com orcid: https://orcid.org/0000-0002-7683-7822 doi: https://doi.org/10.30525/2256-0742/2022-8-5-108-116 integration of the ukrainian economy into the euro-atlantic community in the context of internationalization and globalization processes: concept and assessment igor mantsurov1, alina barvinok2, vadym dovhoteles3 abstract. the purpose of the article is to present the author's point of view on the conceptual apparatus that clarifies the definition of such economic categories as "internationalization", "economic integration", "inclusiveness", "globalization", etc. as a result, the essence of the processes of internationalization and integration of ukraine into the democratized economic system of euro-atlantic countries is revealed. the object of the study is to analyze the complex processes of internationalization, globalization and integration of the ukrainian economy into the competitive environment of euro-atlantic countries. the research methodology is based on general scientific and fundamental provisions of economic theory, international economics and statistics. the conceptual basis of the article is the world economic theories on the assessment of globalization processes in the development of the world economy. processing and analysis of statistical data, modeling and forecasting of the identified trends were carried out using modern software. the most important theoretical and practical results that characterize the scientific novelty of the study and the personal contribution of the author are: identification of significant relationships and interdependencies between the processes of internationalization and international integration; meaningful analysis of the prerequisites for the emergence and deepening of the process of economic integration and the intensity of the influence of centripetal forces; the concept of inclusive growth, which is considered from the perspective of coherence of development goals of countries that form a globally integrated euro-atlantic community. based on the main results of the study, the authors make several important conclusions and recommendations, including the following. taxonomy of categories "internationalization", "economic integration", "inclusiveness", "globalization". based on the analysis of the characteristic features of unions (international economic and full integration), it is proved that the latter require research, analysis and, as a result, the introduction of a common monetary, fiscal, credit policy, etc. one of the essential characteristics of the ability of any country to "fit" into the international system is the compliance of the development goals of such a country with the economic behavior of its government with international standards. key words: internationalization, economic integration, a single and integrated world, globalization, inclusiveness. jel classification: f02, o11, p41 baltic journal of economic studies 109 vol. 8 no. 5, 2022 1. introduction the current stage of ukraine's development is characterized by two main challenges, the intensity of which is convincing. the war unleashed by the russian federation against independent ukraine should take the first place in terms of the power of influence and the level of significance of negative consequences. at the same time, it should be emphasized that the russian federation began building up a military strike group near the ukrainian border and in belarus in early spring 2021. the number of such strike battalion-tactical groups has reached 150 thousand people. and on february 24, 2022, russia attacked ukraine throughout its territory. despite the numerical and military superiority of the russian federation, the armed forces, the national guard, the police, and the territorial defense forces are still resisting. the russian army destroys civilian infrastructure, hospitals, schools, etc. at the same time, western countries are applying more and more sanctions against russia and provide financial, military and humanitarian assistance to ukraine, which, in turn, will negatively affect all components of the systemic development of the countries in the future. the second major challenge is related to the outbreak of covid-19, which was officially declared a pandemic by the who in early march 2020. during this time, the pandemic has significantly affected the components of systemic economic, social and environmental development. in view of the above, the authors believe that in international relations, in particular foreign economic relations, there is no alternative to further integration of ukraine into the world community of euro-atlantic countries. the ultimate goal should be full membership in this integration association of the countries of united europe and nato. the first step in this direction has already been made. as it is known, ukraine has just received the status of a candidate country for accession to the eu. therefore, there is a need for research and systematic analysis of economic integration in relations between ukraine and the countries of the euro-atlantic region. 2. analysis of literary sources and formulation of the problem the latest research and applied developments and theories of european integration belong to such western scholars as: j.yu. stiglitz, l. klein, j. mccormick, a. staab, j. pinder, c. hicks, a.m. poruchnyk, j. friedman, m. castells, a.a. chukhno, a.s. filipenko, o.h. bylorus, d.h. lukyanenko, m.o. honcharenko, v.a. zlenko, i.g. mantsurov, d. north, etc. a significant contribution to the generalization of the theory of european integration b. rosamond the british researcher made, who published the monograph "the theory of european integration." the emphasis is placed on the study of theological issues not only of the founders of the theory of european integration – d. mithpani, j. monet, a. spinelli, e. haatz and others, but also of foreign researchers who present specific theories and concepts of the xx century in terms of the results of integration in europe and the xxi century. ukrainian and foreign scientists from international economics and statistics, political science, ectopic science, and economic management, etc., such as a.m. poruchnyk, j. friedman, m. kastels, a.a. chuhno, a.s. filipenko, o.h. belorus, d.h lukyanenko., v.a. zlenko, i.g. mantsurov, d. north, y.m. pakhomov, s.i. pirozhkov, etc. also deeply analyze the theoretical aspects of european integration, economic and social results of integration processes and their possible conse quences in the short, medium and long term. however, despite the existence of substantial scientific heritage, the problems of patterns of formation and forms of manifestation of internationalization and integration processes, assessment of economic and social consequences of this integration, etc. 3. purpose and objectives of the study the aim of the research is to study scientific approaches to the study of the essence of the processes of internationalization and integration of ukraine into the democratized economic system of euro-atlantic countries, as well as to analyze the consequences of integration. in accordance with the set goal, the authors solved the following tasks: – the conceptual and terminological apparatus has been improved, which clarifies the definition of the economic categories under study and outlines the characteristics of the features that unite these categories and form significant differences between them; – the basics of interrelation and interdependence between the processes of international division of labor, internationalization, international integration and globalization are established; – the preconditions for the emergence and deepening of the process of economic integration and centripetal forces that determine the course of this process are analyzed; – the levels and types of international economic integration are defined; baltic journal of economic studies 110 vol. 8 no. 5, 2022 – the article analyzes the association agreement between ukraine and the european union as an example of international economic integration and the main results of the implementation of this agreement in recent years; – the global concept of inclusive growth is formulated as one of the consequences of the coherence of the goals of the countries that form the integrated community of euro-atlantic states; – conceptual conclusions and proposals are proposed, the implementation of which will contribute to the efficiency of the processes of internationalization and integration of ukraine into the globalized economic system of euro-atlantic countries. 4. research materials and methods research methods are based on general scientific and fundamental provisions of economic theory, international economics and statistics, information and analytical support of management, etc. the methodological basis of the article is the world economic theories on the assessment of globalization processes of the world economy. the specificity of the subject of research and specific research tasks led to the use of general scientific and unique methods of cognition. processing and analysis of actual data, modeling and forecasting of identified trends, etc. were carried out using modern software. the information base of the research is the laws of ukraine, resolutions of the verkhovna rada of ukraine and the cabinet of ministers of ukraine, official publications and methodological materials of the state statistics service, specialized agencies of ukraine, other countries and international organizations, including the oecd, the council of europe, wef, etc., scientific works of domestic and foreign scientists, the authors' calculations and results of scientific research. the object of research is the complex processes of internationalization, globalization and integration of the ukrainian economy into the competitive environment of euro-atlantic countries. 5. research results the most important theoretical and practical results that characterize the scientific novelty of the study and the personal contribution of the author are as follows: – the conceptual and terminological apparatus, which clarifies the definition of such economic categories of economic categories as "internationalization," "economic integration," "unified and integral world," "inclusiveness," and "globalization," etc., has been significantly improved; – significant interrelations and interdependencies, including quantitative ones, between the processes of internationalization, international integration and globalization have been established; – a substantive analysis of the prerequisites for the emergence and deepening of the process of economic integration and the intensity of the influence of centripetal forces that determine the course of this process; – levels (micro-, macro-, mega-, global integration) and types of international economic integration are defined; – analysis of the association agreement between ukraine and the european union and the main economic and social results of the implementation of this agreement in recent years; – the concept of inclusive growth is considered in terms of coherence of development goals of the countries that form a globally integrated euro atlantic community; – based on the results of the study, conceptual conclusions and proposals have been developed, the implementation of which will contribute to increasing the efficiency of the processes of internationalization and integration of ukraine into the globalized economic system of euro-atlantic countries. one of the objectives of the article is to study the components that unite such economic categories as "internationalization", "inclusiveness", "economic integration" and "globalization". throughout the history of mankind, social division not only accompanied economic growth, but also enhanced it, and the level of development of production and the economy as a whole and the efficiency of their functioning depended on the depth of the division of labor. today, further differentiation of the division of labor, deepening of commodity exchange not only between individual producers and territories, but also between countries, inevitably leads to the internationalization of capital and labor. this, in turn, forms the highest form of social division of labor – the international division of labor. absolutely all countries of the world are related to the international division of labor, which leads to the internationalization of the productive forces of society, capital, and labor. it reflects the productive labor force's further development and functional branching. the primary forms include international specialization and international cooperation (belarus, 2003). these two phenomena form a process opposite in nature to the differentiation of the international division of labor, namely economic integration. baltic journal of economic studies 111 vol. 8 no. 5, 2022 the highest form of its reflection is international integration. international economic integration is an effective and promising step in the development of the world economy. it is a qualitatively new and more complex stage of internationalization of economic relations, which ensures convergence of national economies and joint solution of economic problems. internationalization, in accordance with the stages of system processes, is replaced by globalization, which combines the modern higher stage of development of capitalist production relations and the processes of functional unification of the countries of the world into a contradictory unity, which, however, is characterized by a significant number of explosive problems and conflicts. the basis of globalization is formed by interstate relations, the power vertical of which is developed, nevertheless, around the most influential states in terms of the achieved results, their alliances, integrations, etc. thus, globalization differs from internationalization in that it creates a springboard for destroying national borders. it significantly undermines the foundations of national sovereignty and forms a new, global community. under such conditions, globalization and internationalization are quite different processes that combine many standard features. possibly, considering these two different, but at the same time very similar processes, they can be studied and analyzed as stages that follow each other (castells, 2011). it should also be noted that each process of general internationalization of social production (figure 1) has its own personal indicator (level) of labor productivity, socio-economic and environmental development, etc. given the purpose of this study, it is expedient and important to consider in more detail the peculiarities inherent in this process, the primary goal of which is to unite national economies into a globalized system with a sufficiently high level of interaction of its components (belarus, 2001). thus, economic integration is a stage of convergence of state complexes by creating a common economic space for the free movement of goods and services, capital and labor across state borders. state economies, based on the format of the international division of labor, on the production of certain goods and services, merge with each other into the world economic system. taking into account such a conceptual definition of such a phenomenon as economic integration, which is also often (and, it should be noted, not without reason) interpreted as "international economic integration", it is necessary to provide a more thorough political economy definition of this term. in carrying out this crucial task and considering all aspects of such a complex phenomenon, it should be noted that economic integration is at the same time 1) is a fundamentally new type of industrial, social, and interstate relations, which arise as a result of strengthening and deepening the process of international division of labor and are based on the principles of voluntary and mutually beneficial association of different countries in a certain community, the absence of any form of discrimi nation of one or another partner and each of the ncrease in labor productivity, economic and social development of society productive forces of society and their development internationalization of the productive forces of society, capital and labor international economics integration geographical and worldwide (international) division of labor globalization as a process of economic, political, and cultural integration and unification figure 1. interrelation of the processes of international division of labor, internationalization, international integration and globalization source: developed by the authors baltic journal of economic studies 112 vol. 8 no. 5, 2022 national economies and contribute to the formation of the highest level of development of international economic relations; 2) is a new stage of development and forms of manifestation of internationalization of international life; 3) is a process that, even in the conditions of increasing interstate competition, is manifested in the mutual adaptation of components of national economies up to determining the conditions for their mutual substitution under certain conditions, which contributes to the emergence of a synergistic effect and, as a result, the formation of a higher level of satisfaction of social needs through increased productivity. it should be emphasized that economic integration is possible only after the formation of an alliance between two or more countries in order to create a larger economic and political bridgehead. in turn, countries, counting on certain advantages in the socio-economic and political aspects, conclude integration agreements, etc. it would be appropriate to add that integration, as a process, is a minute-byminute and constant work of all departments, bodies, etc. that make certain very important and significant decisions at the national level (grazhevska, 2008). prerequisites for the emergence and deepening of the process of economic integration are the following centripetal forces, which in combined action, form a united economic space: – political and legal; – economic; – institutional; – infrastructural; – socio-cultural, etc. the following characterizes the phenomenon of international economic integration features: – change of the basic principles, tasks and goals of economic interaction of states, which leads to the coordination of national and common economic interests, erasing possible contradictions in the negotiation process, formation of a single international economic space on this basis; – joint solution of emerging socio-economic problems and overcoming problems related to the limitation and lack of resources, rising prices, etc.; – harmonious interaction of production and science, the results of which, obtained in a particular country, quickly become the property of the entire world community under certain conditions that have been previously agreed. international economic integration has several levels of its development with a certain degree of conventionality, the following main levels can be distinguished. i. micro-integration, in which structural units of enterprises and/or enterprises are merged into larger corporations. ii. macro-integration, on the basis of which integrated enterprises, companies, corporations form types of economic activity, which in turn determine the specifics of the national economy. iii. mega-integration, on which international economic and political unions and interstate alliances are formed. iv. the global level at which the interaction of these economic and political unions and interstate associations forms the world economy (friedman, 1989). there are the following types of international economic integration: 1) trade: which is determined by preferential agreements, free trade zones, specifics of customs unions, etc.; 2) industrial: within which common markets, economic and monetary unions function; 3) trade and production: interstate economic unions function in the format of continental and intercontinental integration; 4) political: defines the activities of economic and political unions and interstate associations. the essence of economic integration lies in self-expression in terms of international regulation of socio-economic processes, convergence of internal economic conditions of the participating countries, elimination of political, social and economic obstacles that harm the international movement of goods and services, in the formation of national and regional economic systems, etc. integration is based on the general intertwining of economic development and growth processes at the state level, due to which a single economic mechanism is formed. but it should be added that in non-virtual life there are two trends simultaneously – towards integration and towards disintegration. an example of international integration is european integration, which is a process of economic, political, social, legal and cultural unification of european countries located in europe. according to general trends, this is an extremely complex economic process of establishing close cooperation between european states, which can be considered one of the manifestations of the main trend of the historical development of the xxi century, namely the increase in the level of overall interdependence of countries, especially in the socio-economic and political spheres, and in the future – the unification of related national communities. according to the maastricht treaty (from november 1, 1993), the european union is considered a political and economic union of 28 countries, the location of which is geographically determined by the borders of the european continent. another union, which with a certain degree of conventionality can also be attributed to the eurobaltic journal of economic studies 113 vol. 8 no. 5, 2022 atlantic region, operated on fundamentally different basic principles until october 2018. this union is called "north american free trade agreement" – "nafta" and is the world's largest regional free trade area with a population of about 480 million people and a total gdp of about 25 trillion u.s. dollars, which is about one third of the world's gdp. the principles of nafta existence can be characterized as a rigid system that for a relatively short period of time united unequal in terms of economic development and global importance partners. such inequality of partners and the lack of a perfect structure of state bodies regulating trilateral relations led to the fact that a year ago the leaders of the countries that founded this association, i.e., the united states, canada and mexico, agreed to suspend the terms of integration. thus, it can be assumed that this integration association and regional free trade area ceased to exist (lieutenant, 1994). but, since it existed for a certain period and had certain features, it makes sense to consider the characteristic features of this association. in the authors' opinion, this is fundamentally important, at least from the point of view of economic history and understanding of the principles that determine the existence, and most importantly – the effecti veness of functioning, of integration associations of different nature. the main difference between the eu and nafta is that nafta did not have a sufficiently developed system of state bodies for regulating trilateral relations, which, in turn, satisfied canada and mexico for a certain period because the latter perceived the creation and development of these alliances as a threat to independence own socio-economic and political components of systemic development. as for the association (creation of a union) between the european union and ukraine, there are two main goals, namely: deepening economic integration and deepening political partnership (association) (mantsurov, 2014). it is worth emphasizing that such an aspect as the free trade area is the most necessary component of the association agreement between ukraine and the european union, as it provides for duty-free import and preservation of quotas for duty-free export of almost all types of agricultural products from the eu, etc. at the same time, fta agreements and abolition of customs agreements do not guarantee free access to the eu market for animal products produced in ukraine. the course towards harmonization and regulated changes in the legislative field of technical regulation requires significant financial support and time. a relevant example of such adaptation in poland can be given: the creation of conditions for the meat industry cost 2 billion euros. as for the state electricity market, there are positive effects of this agreement for the state electricity market, namely: increased investment in modernization, creation of a higher level of reliability and quality of electricity supply. it is extremely important that the areas of cooperation between ukraine and the eu defined in the agreement are the basis for financing programs of national projects by international organizations. in particular, one of such projects envisages the creation of the central european gas hub on the basis of ukrainian underground gas storage facilities. this project harmoniously fits into the current eu policy of creating a new target model of the eu gas market, which will reduce gas prices for eastern europe and the baltic states by 20-30%. approximately the same effect should be expected in ukraine. in addition, the gas hub will solve the issue of diversification of gas supplies to ukraine. this will allow attracting more investments in the modernization of the gas transportation system. that, of course, should be assessed only positively. in the opinion of the authors, the signing of the association agreement will have a positive result in terms of stimulating the processes of adaptation of technical, sanitary and phytosanitary standards to the requirements of the european union, as well as providing ukraine with a sufficiently significant foothold for the export of livestock products to the eu member states. therefore, it should be noted that ukraine's accession to the eu is a fundamental basis for reforming all components of systemic development in accordance with european norms and standards. modern foreign trade relations between ukraine and the eu are developing in the context of the entry into force of the association agreement. according to its provisions, the parties committed to eliminate most import duties in bilateral trade during a transition period that will last seven years for the eu (until 2023) and ten years for ukraine (until 2026). upon completion of the transition period, the eu will eliminate duties for ukrainian producers on 95.8% of product groups. as a result, the ukrainian side will abolish duties on 96.5% of product groups. consistent changes in the state of general and mutual renewal and opening of markets were formed not symmetrically, namely: on the part of the european union, aspects of customs regulation were abolished for 94.7% of the industry components and almost 83% of agricultural products, and on the part of ukraine – in general and for the entire product range by almost 50%. thus, a certain conditional proportion of the creation of customs agreements was violated. baltic journal of economic studies 114 vol. 8 no. 5, 2022 along with the existing obstacles of a tariff and non-tariff nature, the access of domestic producers to the eu markets is significantly complicated by restrictions related to access to financial resources. interest rates on export credits and the cost of export insurance in ukraine are much higher than in the eu countries, which puts many ukrainian producers at a distinct disadvantage compared to european producers. in addition, in eu countries preferential conditions for obtaining export credits, insurance and export guarantees are provided by national state agencies – export credit agencies (ecas). the role played by ecas in the development of international trade is constantly growing, as evidenced by the active growth of profits and the scale of activities of leading ecas (north, 1997). given the peculiarities of the current state of ukraine's economy, the need to form proper institu-tional and financial national support for the practical realization of ukraine's export potential through the launch of an effective eca is becoming increasingly important. a significant problem in the development of international relations of the country with the eu is the high complexity of customs procedures and the difference between european countries and ukraine in the implementation of export-import operations. the future relations between ukraine and the eu are shaped by the entry into force of the association agreement. they oblige to eliminate many tariff provisions – in approximately the same proportion, from 95% to 97% of product groups – on both sides. this period will last until 2023 for the eu and until 2026 for ukraine. according to the state statistics service of ukraine, exports of goods from ukraine to the eu countries decreased by 10.3% (usd 18.6 billion) in 2020, but had a positive trend of increase in 2021 by 49.4% (usd 26.8 billion). at the same time, imports were negative in 2020 by 4.6% ($23.9 billion), but also increased in 2021 by 25.2% ($29.0 billion). and despite these dynamics of foreign economic relations, there was a negative balance of ukraine's foreign trade balance (-$5.3 billion in 2020, -$2.2 billion in 2021). compliance of the goals and objectives of the development of a particular country, its economic and political system with international standards is the main characteristic of the reality of this country regarding its entry (integration) into the world community. accordingly, it is necessary to pay attention to the fact that in recent years, the international organization for economic cooperation and development (oecd), which includes 34 countries, a significant number of which are countries of the euro-atlantic region, has created new basic rules for the economic transformation of personal state economies (todorov, 2022). according to this paradigm, the "new approaches" in the oecd coverage will be reflected in the concept that the country 's welfare is formed not only in accordance with the growth of real gdp and material incomes of the population, but also together with the ability of the state to provide the entire population with equal opportunities for the manifestation and formation of its human potential, the interests of all social groups are also taken into account. therefore, this approach is reflected in the main policy documents of the oecd and contributes to weakening the negative and reducing the consequences of destructive contradictions and even conflicts between them. it should be emphasized that, given the importance that the oecd attaches to the implementation of the ideology of inclusive growth in the practice of the governments of oecd member countries, the non-compliance of the economic behavior of the government of any country that is trying to effectively integrate into the circle of these states with the standards of inclusive growth may negate the progress achieved in other areas. to define inclusive growth and measure its parameters, on the recommendation of the oecd, the world economic forum (wef) in davos in 2017 developed a system of indicators and a methodology for calculating the composite index of inclusive growth and development (idi), which is proposed to be used for the general assessment of the state of economic development of countries, social sphere, and environmental protection. using this system of indicators, the world economic forum analyzed the inclusive development of 103 countries in 2018. according to the analysis, the top five countries in terms of inclusive economic growth among developed countries are norway, iceland, luxembourg, switzerland and denmark. lithuania, hungary, azerbaijan, latvia and poland led the group of developing countries. it should be emphasized that more than 50% of the countries analyzing the inclusive development index recorded an annual and significant decline (the study period is 5 years). this indicates the need for further research, analysis and formation of critical strategic aspects for the development of each country separately and the world as a whole. after all, inclusiveness is a human-centered model of development. only the combination of all components (economic, social and environmental) in one mechanism of uniform growth can help create decent living conditions for people. baltic journal of economic studies 115 vol. 8 no. 5, 2022 accordingly, it should be noted that only one ukraine among 103 countries has a negative annual decline in the idi (inclusive development index). the reasons for such trends are a task for further research and reflection. 6. discussion of research results the main scientific results of the article were approved at numerous international and national scientific and practical conferences: "the role of science in the formation of a modern model of state regulation of the economy " (2021, kyiv), "the importance of statistics in the formation of a modern model of economic development" (2021, kyiv), "quantitative methods for the analysis of economic and social consequences" (2021, poland), "statistical methods in socio-economic research – theory and applications" (2021, republic of south africa), etc. (todorov, 2022) some methodological provisions used in the preparation of the article were proposed to the government of ukraine and the un secretariat in geneva. in particular, in the analytical note, "methodological approaches to assessing the degree of physical destruction of construction objects located in the territory affected by the aggression of the russian federation, their cost and the funds required for restoration," and materials sent to the un secretariat in geneva (yeshchenko, 2005). 7. conclusions therefore, it is necessary to pay attention to the fact that, in accordance with the set goals and objectives, the theoretical and methodological foundations in the field of theoretical interpretation of the essence and forms of manifestation of the processes of modernization (internationalization) and integration of the ukrainian economy into the globalized economic system of the euro-atlantic space have been studied and formed. therefore, approaches to the study and analysis of the economic aspects of such a union are being put forward. based on the main results of the study, the following conclusions can be drawn: 1. for the first time the taxonomy of categories "internationalization", "economic integration", "inclusiveness", "globalization" was carried out. 2. it is proved that, in accordance with the generally accepted laws of dialectics, the internationalization of productive forces, capital and labor will be replaced by globalization, which is fundamentally different from the previous one in that it creates the necessary foundations for the destruction of state borders and provides the main aspects for the establishment of a new, global society. 3. for the first time, based on the analysis of the characteristic features of the unions (international economic and full integration), it is proved that the latter requires research, analysis and, as a result, the implementation of a common monetary, fiscal, credit policy, etc. 4. it is proved that a striking example of international integration is the european integration, that is, the creation of the european union. it was emphasized that by establishing economic relations with ukraine, the eu makes considerable efforts to create equal and decent conditions for business. 5. the research allowed to conclude that one of the essential characteristics of the ability of any country to "join" the international system is the compliance of the development goals of such a country with the economic behavior of its govern ment with international standards. 6. the concept of inclusive development proposed by the oecd in accordance with the general integration standards is studied and analyzed. the results of the study reflect the state of inclusive development of ukraine and other european countries and the world as a whole: ukraine ranked 78th overall out of 103 countries in terms of inclusiveness. 7. the study notes that according to the results of the analysis of the level and dynamics of inclusive development, the main priorities for the growth of the state economy of ukraine should be: reducing deformations in macroeconomic processes and improving the relationship between wage growth and productivity growth, etc. acknowledgements: the article was written within the framework of the two grants:1) project of the ministry of education and science of ukraine for young scholars titled “the post-pandemic paradigm of socio-economic development of ukraine in the coordinate system of the digital economy” (2021–2023) (ukrainian state registration number 0121u109496); 2) grant received by the authors at the university of the western cape (republic of south africa), namely the department of statistics and population (the relevant decision was approved by the joint committee of the senate and the council on appointments and promotions (sa2022/5) on 14 june 2022. references: association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other hand. available at: https://www.kmu.gov.ua/ diyalnist/yevropejska-integraciya/ugoda-pro-asociacyu baltic journal of economic studies 116 vol. 8 no. 5, 2022 belarus, o. h. 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(in ukrainian) received on: 14th of october, 2022 accepted on: 28th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 73 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 klaipeda university, lithuania (corresponding author) e-mail: buzarov.andrey@gmail.com orcid: https://orcid.org/0009-0009-5085-8340 doi: https://doi.org/10.30525/2256-0742/2023-9-2-73-90 tendencies of adaptation and integration of immigrants from ukraine in the european union after the aggression of the russian federation against ukraine andrii buzarov1 abstract. while the war launched by the russian federation against ukraine in february 2022 was predicted by many analysts, few predicted the foreseeable problems associated with the settlement of ukrainian migrant flows fleeing the war, both within ukraine and beyond its borders to the european union. both scenarios have been met with unique challenges affecting the settlement of internal and external ukrainian refugees, as well as counterintuitive patterns of success and failure that point to strategies of long-term cohesive integration. the aim of this study is to identify new qualitative aspects and specific features of the integration processes of ukrainian migrants, which are characteristic of the social situation in the european union that has developed after the aggression of the russian federation. particular attention is paid to the new components of social relations, the accumulation of knowledge, which will make it possible to respond to new conflict factors, to develop inclusiveness and tolerance in accordance with the qualitative specificities of refugees arriving in the eu countries as a result of the war. methodology. the system analysis of the institutional and legal framework of the adaptation process of ukrainian refugees in the eu is based on the generalisation of the available official documents, published analytical materials and other types of public information related to the policies of european countries in the area of migration, and the activities of certain communities (organisations) of ukrainians in the eu. the study of behavioural patterns of ukrainian idps and refugees is based on the methods of direct observation of the author and generalisation of case studies. the method of classification of groups of migrants from ukraine was used, taking into account their actual status and the purpose of moving to the eu. due to the author's current extensive humanitarian and journalistic activities in the eu and ukraine, the method of anonymous structured interviews with ukrainian refugees was widely used. results. describing the current state of the institutional processes of adaptation of ukrainians in various european countries, the author concludes that in the initial stages the already existing local ukrainian communities played a significant role in the process of resettlement and adaptation of the refugees, while much depended on the displaced persons' own social and institutional contacts. in the later stages, the central and local authorities of the host countries and international humanitarian organisations played a predominant role. depending on their status in the host country, migrants can be divided into the following groups: migrants who are permanent residents of a particular eu community and have the possibility of returning to their home country; migrants who are permanent residents of a particular eu community and do not have the possibility of returning to their home country; migrants who have been granted collective protection status in the eu but can return or have returned to permanent residence in ukraine. the integration of those groups of migrants from ukraine who plan to stay permanently in european countries should take into account their language, age, educational, labour and social characteristics. key words: forced migrants, collective protection in the eu, adaptation of migrants, integration of migrants, ukrainian community, migration. jel classification: o15, r23 baltic journal of economic studies 74 vol. 9 no. 2, 2023 1. introduction the events that began with the russian federation's aggression against ukraine in february have forced a different perspective on migration in the eu. the scale of the flow of migrants from ukraine to the eu is enormous. the european union has accepted ukrainian refugees, allowing them to enter its 27 member states without visas and live and work there for up to three years. from 24 february 2022 to january 2023, the office of the united nations high commissioner for refugees (unhcr) registered at least 5 million refugees from ukraine in european countries and expects another 2 million refugees by march 2023 (reliefweb, 2023). as of 31 january 2023, unhcr has already registered 8,046,560 refugees from ukraine across europe. this is about 19% of the population of ukraine (according to eurostat for 2021). 4,823,326 refugees registered for temporary protection in europe (cream, 2022). from a geopolitical point of view, the russian federation's war against ukraine and the confrontation between the russian federation and the west as a whole have all the signs of a long-term international crisis. the researchers note: "the mass exodus of ukrainian refugees is no accident – it is part of putin's plan to destabilise europe." (grey, 2022) in this context, it is important to study the problems of adaptation and integration of a large number of ukrainian citizens who have arrived in the eu and who may remain there for a long time due to the protracted war. therefore, many answers to questions related to the process of integration of immigrants into the eu are needed now. researchers at the clingendael institute, who have been tracking conflicts and migration flows in europe since the russia invasion on 24 february, urge policymakers to take more action (ho et al., 2022). they call on societies at both european and national level to better prepare for the long-term protection and social inclusion of the millions of ukrainian refugees on the continent, rather than temporary crisis hosting. researchers identify the following characteristics of the current situation: "the course of the conflict. the chances of a quick ceasefire or end are slim, and a stalemate is more likely. further migration. more refugees are likely to move from neighbouring countries such as poland, slovakia, hungary and romania further into the eu as the conflict continues and economic prospects deteriorate in these countries of first arrival. intention to return. one in four ukrainians wanted to migrate before the war. women and children are relatively less likely to return, especially as the length of stay increases. opportunities for family reunification abroad will be crucial." (ho et al., 2022) discussions on eu migration policy point out that while migrants are a net cost in the short term, they are taxpayers in the long term. some assimilate and settle in the eu, helping to solve the problem of labour shortages and the demographic crisis (zimmermann & vernon, 2023). ukrainians arriving in the eu tend to have a high level of education and work skills. "the limited information currently available on the educational attainment of ukrainian refugees suggests not only that they have a higher proportion of people with higher education than other refugee groups, but also that they are more educated than the population of ukraine as a whole. in the working age population of ukraine in 2020, 56% of women and 43% of men will have higher education... although there is no systematic data on socio-economic characteristics, particularly from eu countries neighbouring ukraine, there is some information on individual host countries. a structured survey of ukrainian refugees in germany, conducted by the federal ministry of the interior and communities in the third week of march, found that of all adults surveyed, 73% had higher education, 19% had completed secondary education and 7% had a low level of education. in spain, 61% of all registered adult ukrainian refugees have higher education, 11% have upper secondary education and 25% have vocational qualifications, while less than 1% have no education." (dumont & lauren, 2022) however, compared to other categories of immigrants, refugees tend to face particular barriers to integration into the labour markets of host countries. due to the forced nature of their migration and the often traumatic experiences associated with it, they often suffer from mental disorders and disabilities. because they didn't decide to migrate before the war started, they generally didn't have the opportunity to prepare for life in a new country, especially to learn the language. they tend to arrive with little attachment or connection to the host country. if they do, this is affected by the fact that they have been trained in a different education system and have experience of different labour market conditions. in addition, many are unable to provide proper documentation of their level of education or skills. from the practice of studying migration processes, it is known that highly educated refugees who have been educated abroad face difficulties in getting their qualifications recognised and valued in the labour markets of the host country. these markets tend to devalue foreign qualifications, which affects employment, leading to overqualification and lower wages (bonfantii & xenogiani, 2014) "migrant skills: use, mismatch and labour market outcomes – first study international survey of adult skills (piaac)", baltic journal of economic studies 75 vol. 9 no. 2, 2023 in the section "mapping economic migration with the labour market. needs" (bonfantii & xenogiani, 2014). from the perspective of employers, hiring refugees can be risky as it can be difficult to assess the skills they possess in terms of formal qualifications, previous work experience and, more generally, understanding their abilities and motivations (oecd/unhcr un (2018) engaging employers in refugee employment – a 10-point multi stakeholder action plan for employers, refugees, governments and civil society (deutsche welle, 2022). all this jeopardizes the prospects for their full socialization in new societies. in the context of the recent official announcements that ukraine has been granted the status of a candidate country for eu membership, as well as the possibility of a simplified procedure for ukraine's accession to the eu, practical and research questions of the following nature naturally arise: what is the future of millions of ukrainians who have been under temporary collective protection in the eu? do ukrainian citizens who have been forced to move to the eu have a status that is indeed higher than that of a refugee, but not yet similar to that of an eu citizen? and can the introduction of directive 2001/55/ec on temporary protection in the event of a massive influx of displaced persons in relation to displaced persons from ukraine be considered a real stage in the integration of ukrainians into the eu in the context of ukraine's future accession to the union? these and other questions will be answered in the future by this study on the process of adaptation and integration of ukrainians into the eu after the events of 24 february. all the above questions are only a small part of the serious multifaceted problem that has arisen, which determines the emergence of many other scientific problems related to this unprecedented situation. the results of scientific research on the integration and reintegration of previous waves of migration to the eu are not fully applicable in this situation, as it concerns the specific composition of migrants (cultural affinity, high education, professional skills, etc.) and the new scale of the process itself. 2. materials and methods the proposed material examines and summarises the institutional aspects of the migration processes caused by the aggression of the russian federation against ukraine in a special aspect – from the point of view of the adaptation experiences of ukrainians in various communities, as well as organisations and centres created by ukrainians and their colleagues from european countries to speed up the process of assistance and adaptation to a new social environment. without going into a deep theoretical analysis of the concepts of "adaptation" and "integration", for the purposes of this study "adaptation" will mean the initial stage of integration, when a foreign citizen first receives an official status and legalises his stay in a particular country. on the other hand, 'integration' implies a deeper incorporation of a given individual into the system of relations of a given society, with the acquisition of the right of temporary or permanent residence. on the basis of an anonymous structured interview and a study of publicly available information on the activities of specific communities (organisations) of ukrainians in the eu, as well as on the basis of various statistical data and reports, a classification of groups of migrants from ukraine was also carried out, taking into account their actual status and the purpose of their move to the eu. the countries and ukrainian communities analysed in this article were selected by the author on the basis of his own humanitarian activities and personal communication with representatives of most of the respective groups of migrants. in order to solve the problems of studying the behaviour of idps from ukraine in ukrainian communities in different eu countries, this work uses, among other things, the "case study " method, which allows for empirical study of objects in a real context, with the possibility of using a variety of quantitative and qualitative data sources and methods of their analysis. r . yin defines this method as an empirical study aimed at studying a modern phenomenon in a real context, especially when the boundaries between the phenomenon and the context are blurred, and the use of multiple sources of evidence (yin, 1984). this method has a heuristic potential for the study of phenomena that constitute a real scientific problem, but about which there is insufficient knowledge at the time of the study. at the same time, it makes it possible to realise the integrity of scientific research, which has a theoretical justification for posing a problem, forming a hypothesis, testing it, modifying it and generating new knowledge. the case study method is also characterised by the cognitive integrity of knowledge, which is expressed in the empirical (collection and primary analysis of data) and theoretical (in relation to the interpretation of results) nature of the study. the method is also characterised by a flexible and adaptable methodological structure, which allows the necessary adjustments to be made to the research process, as well as a holistic approach, which aims to study a holistic phenomenon inseparable from its context, allowing case studies to be used to study complex systems. the case study method is aimed at obtaining unique knowledge about a person, organisations, social and political phenomena in a situation of uncertainty, as it makes it possible to obtain detailed baltic journal of economic studies 76 vol. 9 no. 2, 2023 information about latent processes and mechanisms of social relations. the study of contextual factors makes it possible to study the current dynamics of phenomena from the perspective of changes in the environment and the consequences of the influence of various factors. it is also important that the data obtained through the key study method can be used in subsequent studies. 3. results 3.1. theoretical background 3.1.1. general literature review on theoretical and methodological aspects of migration within ukraine and the eu before the events of february 24, 2022 the study of migration processes has a solid tradition in the european scientific community. the study of migration problems in the economic and demographic sense was carried out by such western scholars as k. carey, w. izard, w. vaditsky, w. alonso, i. lowry, m. greenwood, a. rogers, r . wickerman, l. castro, t. hegerstrand, j. sjaastadom and others. the foundations of sociological approaches to the study of migration are laid in the works of m. weber, k. marx, g. simmel, t. parsons. the concepts of "attraction-pushing", the theory of the migration system of connections (networks), the theory of assimilation, as well as the theory of cultural and ethno-sociological orientations have appeared. modern sociological thought studies the issues of complex interrelations of migration processes and adaptation of migrants to the host social environ ment, conditions of adaptation, factors determining its course, degree, time of adaptation in various types of situations, problems of tolerance and conflict in the context of interaction of ethnic migrants with the local population of the host social communities. obviously, compared to the period 2014–2022, the studied period is not so long for in-depth scientific research. and there are still not enough complex scientific works devoted to the problem of displaced persons from ukraine to the eu, despite the significant attention paid by researchers in almost all european countries, especially taking into account the nature and scale of the emerging social, political and scientific problems. in the historical epicentre of the events, new problematisations of the events are still emerging and appropriate scientific approaches are being developed. it is not surprising that ukrainian scientists are very sensitive to this issue. for example, among the works that studied the problems of temporarily displaced persons in ukraine after the first aggression of the russian federation in 2014, it is possible to highlight the scientific work of o. mikheeva – a sociological study "modern ukrainian internally displaced persons: main causes, strategies". the scientific value of this work lies in the fact that it was actually written immediately after the end of the "hot phase" of the first aggression of the russian federation against ukraine and after the signing of the second package of the minsk agreements in february 2015, when the regional situation was more or less clear from the political point of view and it was possible to study and predict the trends in the resettlement of ukrainian citizens from the occupied regions. o. mikheeva and v. sereda drew attention to the current trends in the process of resettlement of ukrainians from ukraine to the eu: "сultural and social adaptation (more in some regions of ukraine, less in others)... the resettlement process is mainly carried out along an individual path of movement, not within organised groups. accordingly, the main role in the resettlement process is played by the displaced persons' own social and institutional contacts. in the absence of such contacts, the main responsibility lies with voluntary organisations." (mikheeva & sereda, 2015) among other authoritative studies devoted to internally displaced persons in ukraine as a result of the first aggression of the russian federation against ukraine in 2014, one should also highlight the works of e. ivashchenko-stadnik and the study " war and resettlement. the ukrainian case", which deals with the specifics of the relationship between migrants and the local host community. "the issue of mutual respect between host and displaced groups involves not only trust and empathy, but also an equal distribution of civic rights and responsibilities. the data show that after two years of conflict, a significant part of the population of the host country still perceives idps as semi-citizens with limited access to life in society." (ivashchenko stadnik, 2017) individual authors have also made scientifically based attempts to classify different groups of migrants in collective monographs. "thanks to its multidisciplinary approach and consideration of comparative aspects – idps versus displaced persons in russia; idps from donbass and crimea; and idps compared to the rest of the population – this special issue provides insight into the wide range of political, socio-economic, cultural and legal issues related to displacement. this issue touches on three main themes: the attitudes and identities of the displaced; the social and economic integration of the displaced; and the regional context in two parts of donbass." (sasse, 2020) migration has traditionally been an important topic for researchers in the eu. there is a large amount of academic literature on the general baltic journal of economic studies 77 vol. 9 no. 2, 2023 problems of migration. regular reviews of migration scenarios and projections are also carried out by leading specialised institutions, with an increase in such publications in recent decades: "the purpose of these systematic reviews is to assess the state of the literature in terms of scenarios and forecasts of migration, as well as to assess their development. both scenarios and future-oriented publications have increased significantly since the 1990s." (sohst et al., 2020) for this reason, only studies that deal with the process of adaptation and integration of migrants into a particular community will be considered, although the paradigms (blocks) of research can be quite broad: "the emphasis on migration trajectories encompasses several classic dichotomies in migration research: between sending and receiving countries, between temporary and permanent migration, and in the context of forced and voluntary migration." (snel et al., 2021) for example, the issues of migration from eastern and central europe in the context of eu enlargement, as well as the adaptation and integration of migrants, have received considerable attention among eu scholars. the term "undocumented migration" was introduced. "this term means temporary migration abroad with varying degrees of legalisation, without any permanent settlement, mainly related to work in the secondary segment of the labour market in a foreign country." (okólski et al., 2010) in the context of the impact of the events in ukraine and brexit on the eu, some scholars have explored the prospects and orientations of poles to remain in the uk, using the term "social anchor". "by analysing the orientations and strategies of polish migrants in the face of post-brexit uncertainty, we have identified flexible ideal types of relationships between social ties, attitudes towards mobility and risk. we draw attention to the fact that only more 'hybrid' typologies of migrant orientations allow us to capture both trends and types over time and can be applied in the long term." (trabka & pustułka, 2020) "the experience of scientific research of european colleagues in the context of such a phenomenon of relations between migrants abroad and their homeland as "social transfers", as well as the study of the experience of adaptation and integration of ukrainians in poland before the events of 24 february 2022, may be relevant for ukraine in the future. establish a meaningful relationship between the concepts of social transfers and social capital. expanding the resources available to migrants and their home communities is a promising step forward, both in terms of the critical interactions between individuals, families and communities throughout the migration process, and in terms of the social value and impact of remittances." (boccagni & decimo, 2013) " while the local, circular nature of ukrainian migration to poland still dominates, the nature of this mobility is becoming increasingly complex. the number of settled migrants is growing relatively slowly. this change has been particularly noticeable since the beginning of the military conflict in ukraine, but it is also the result of administrative decisions that, in particular, provide incentives for long-term stays and facilitate access to the labour market for special categories of migrants." (brunarska et al., 2016) thus, as can be seen from the above review of the various literature on the subject under study, before 24 february 2022, special scientific studies were published by ukrainian scientists on the issues of adaptation of ukrainian citizens who left crimea, certain regions of donetsk and luhansk oblasts after the occupation of these regions by the russian federation. in these works, many issues relevant to the present time regarding the integration and adaptation of ukrainians in a particular community (community) were studied: relations with the host country, integration into the labour market, psychological aspects of adaptation in a new place, etc. this made it possible to work with more than just some demographic data and to understand the motivation of both people who do not want to return to ukraine and those who returned during 2022 after the events of february 24. as far as european studies are concerned, for the purposes of this study, those scientific works and statistical reports have been taken into account that have examined the trends, background and nature of migration as a whole as a phenomenon, as well as demographic trends prior to the events of 2022. in the eu, the subject of migration is widely studied, and since the mid-1990s migration processes have been studied in a multidisciplinary and more detailed way. over the past 30 years, migration, especially when it occurs outside of regulated patterns and controlled pathways, has been presented and conceptualised in the research literature primarily as a "crisis", an abnormal phenomenon that disrupts the normal course of social and economic activity (martin et al., 2014). in europe, the presentation of migration as a crisis has reinforced a securitized view of migration, making it a major issue on the political agenda of the european union (eu) (with a particular focus on managing forced migration caused by conflicts in syria, iraq, afghanistan, libya) and elsewhere) (estevens, 2018). some definitions of "shelter crisis" or "refugee crisis" semantically refer to "refugees" or "migrants" as the root cause of the "crisis" rather than exploring the true causes of the emergency (crawley & baltic journal of economic studies 78 vol. 9 no. 2, 2023 skleparis, 2017). "a number of other definitions use the concept of crisis as a signifier to explain its consequences for various actors and systems, especially for 'europe', 'the eu' or 'eu member states', such as the 'european refugee crisis', the 'european humanitarian crisis' (carrera et al., 2019), the european 'crisis of solidarity ' (grimmel & giang, 2017), 'europe in crisis', as well as an identity and 'racial crisis mainly stemming from the post-colonial condition of 'europe' as a whole'." (de genova, 2018) the above are examples of studies that have analysed in depth the trends in the transit of migrants, the problems of their adaptation in a new place, the specifics of migration within the eu, the impact of the events in ukraine after 2014 on internal migration in the eu, the concepts of "incomplete migration" and "social transfers", etc. all the results of these studies will be used in the analysis of the forced migration of ukrainians to the eu due to the second aggression of the russian federation against ukraine in 2022. it should also be noted that it is not advisable to conduct such an analysis within the framework of a theory of migration or any research method, since as the problem of studying the adaptation and integration of migrants from ukraine requires a broader interdisciplinary approach, comparative studies of the processes of adaptation and integration of migrants within ukraine and the eu both after the first aggression of the russian federation against ukraine in 2014 and after february 2022, taking into account the practical aspects of the implementation of the directive council 2001/55/ec on temporary protection in the context of law enforcement practice in various eu countries. 3.1.2. study of the problem of adaptation and integration of forced migrants from ukraine to the eu after 24 february 2022, the scale, nature and consequences of migration for ukraine and the eu as a whole have changed significantly. the second aggression of the russian federation against ukraine led to colossal demographic changes within ukraine and a large wave of migrants to eu countries. in the first months of the war, it was difficult for migration researchers around the world to comprehensively track all the dynamics of people's departure from ukraine and their subsequent activities. it should also be noted that the extent and nature of the impact on eu countries of a new wave of refugees, whose socio-cultural characteristics differ from those of african and middle eastern refugees, has not yet had time to fully manifest itself and become the subject of in-depth research. it is necessary to reflect on the current results and the organisational, political and legal decisions taken by the eu countries in order to correct them promptly in order to optimise them. on this occasion, the researchers note: "it is very difficult to follow the movement of our migrants after crossing the border, as the countries bordering ukraine are often transit countries for the movement of migrants to other eu countries. all countries use different methods of studying and registering migrants, use different data on migration, which prevents the development of aggregate migration indicators for our migrants and their stay in the country, etc." (protsyk & mykhalyk, 2018) as migration researcher i. malik rightly notes, "international organisations and various public organisations and structures involved in the analysis of migration processes in the world as a whole did not predict the 'ukrainian migration crisis' in 2022 and did not properly assess the hypothetical risks associated with it." (buchin et al., 2022) following the start of the russian federation's aggression against ukraine, the problem of forced migration from ukraine is being widely discussed in ukraine at various levels. in particular, the issues of adaptation and integration of ukrainians abroad and maintaining ties with them in the face of a possible protracted war are being addressed. for example, research by the ukrainian national institute for strategic studies (nisi) notes that: "the protracted nature of the war, the destruction of ukraine's economic structure and the difficult period of socioeconomic recovery of the state increase the risk that a significant proportion of migrants will not return to their homes. at the same time, the youth population is declining, which threatens to undermine the quality of the country 's demographic potential in the medium and long term. the ongoing war will encourage ukrainians to continue to travel abroad. the intensity and vector of this process will depend on many factors: expansion or narrowing of the scope of hostilities; progress in the de-occupation of the occupied territories; sustainability of local critical infrastructure; direct shelling of settlements by russian troops; emergence of crisis phenomena of a man-made or natural character; level of socio-economic restoration of the liberated territories; changes in the labour market and economic structure of various regions of ukraine, etc." (potapenko et al., 2022) as a number of ukrainian researchers rightly point out, "the situation with immigration in ukraine is complex and it is difficult to make a definitive assessment. there is no doubt that so many displaced persons or international migrants will lead to a real collapse now and after the war." (ostapets & palinchak, 2022) it is obvious that a certain part (perhaps most) of the ukrainian migrants who baltic journal of economic studies 79 vol. 9 no. 2, 2023 have gone to the eu may stay there for a long time. this is also recognised by european researchers, who have begun to rethink migration processes in the eu, taking into account the new realities. moreover, there is great interest in this issue among european researchers. after all, it was not only the number of people trying to leave ukraine in the first weeks of the war that was unique and unprecedented, but also the scale of the challenge the eu faced. as a result, debates and discussions on modernising the existing asylum system for migrants have begun with renewed vigour in the eu: "the eu's response to the war in ukraine and the refugees fleeing the country points to the need to rethink the concept of eu 'solidarity ' in order to combat the racism and discrimination that invariably characterises any eu debate on migration policy and asylum issues." (carrera et al, 2022) a. wolfhardt stated in his report that: "the activation of the temporary protection directive set in motion the process between eu member states and the integration of people who left ukraine. this process is still ongoing, dynamic and constantly implemented by governments in areas of national policy such as education, housing, employment, social security and health... member state governments should therefore see the current crisis as an opportunity to create more comprehensive refugee integration systems, based on taking into account all aspects of integration and providing vital support to all groups with the necessary infrastructure." (wolffhardt, 2022) for example, some researchers, comparing this with the situation at the eu border in relation to the arrival of refugees from the middle east, noted that "the eu was much more hospitable to ukrainians than to asylum seekers from the middle east, africa and afghanistan, who were vehemently refused entry to poland, italy or greece and beyond. often such 'meetings' were held with the participation of the eu border agency frontex... the warm welcome given to ukrainian refugees is impressive, but does not imply a similar attitude towards refugees from other countries. eu members, including poland, hungary and other countries that have welcomed ukrainians, continue to push away other asylum seekers." (karasapan, 2022) as noted in the final report of the european union asylum agency (euaa), "europe's rapid response to the crisis in ukraine and the adoption of protection decisions was made possible because the legal text, in the form of the temporary protection directive (eur-lex 2001), was already ready and available, even though it had never been used before." (euaa, 2022) this made it possible to respond quickly to the wave of migrants from ukraine, as more than 5.1 million people had left ukraine by 23 april, according to the office of the united nations high commissioner for refugees. most people left ukraine between 27 february and 9 march. during this period, 1,649,088 people crossed the border into ukraine, with more than 150,000 leaving the country every day. on 6 march, 210,526 people crossed the border, the highest number in one day. from 17 march onwards, the number of people leaving gradually decreased, indicating a decline in the first wave (filipchuk et al., 2022). although the european commission has decided to extend the temporary protection directive for ukrainians forced to leave for the eu because of the war until at least march 2024 (lutsenko, 2022), many problems with migrants remain unresolved. on the one hand, as swedish analysts have rightly pointed out, the current situation shows that questions of refugee reception are largely political. that is, if there is a clear political will to accept refugees, even very large numbers of people can be accepted and accommodated without undue frustration and political unrest. and accepting refugees is seen as a positive thing rather than a threat (parusel & varfolomieieva, 2022). as the spanish experts note: "in the short term, the reception of refugees creates a problem of coordination between public and private initiatives, while in the medium and long term problems arise in various areas. in the first case, this is due to the integration of newcomers (proper restructuring of the education system, access to housing and employment), in the second to the availability of organisational, administrative and financial resources allocated to these and other refugees. this crisis must not be allowed to monopolise the already meagre capacities to meet the needs of those fleeing conflicts in other parts of the world." (gonzález enríquez, 2022) as the european experts also note, conflicts are possible at the intersection of the application of national legislation: "a fundamental issue affecting all the countries analysed, albeit to varying degrees, is the direct scope of the national temporary protection regime. finally, all the countries analysed offer temporary protection to both nationals and third country nationals, as well as to stateless persons enjoying international protection or its equivalent." (dobiás & homem, 2022) in the context of assisting displaced persons fleeing war, the eu is examining how different applied theories of integration and adaptation of displaced persons are being studied. for example, survival and resilience strategies for this category of refugees (oviedo et al., 2022). as well as the specific forms of operational assistance provided to settlers in poland in the early days of the war (ociepa-kicińska, 2022). thus, analyzing the reaction of various researchers in ukraine and the eu to the wave of migrants from baltic journal of economic studies 80 vol. 9 no. 2, 2023 ukraine caused by the second aggression of the russian federation against ukraine, the following conclusions can be drawn. as part of ukraine, after the events of february 2022, the scientific community is more focused on studying the consequences of the migration of ukrainians abroad and the demographic problems that ukraine may face in the coming years due to the war. within ukraine, the study of the problems of adaptation and integration of ukrainians abroad is now difficult due to the dynamics of the migration process and the lack of accurate statistical and empirical material. at the same time, european researchers, who have more access to migrants from ukraine to the eu, look at the problem much more broadly, both in the context of pan-european problems of international migration and at the level of law enforcement practice within the framework of specific national legislation of an eu member state. analysing specific european researchers from the point of view of their areas of study of the problem, in general, three areas of study of the migration crisis can be distinguished: political perception of the phenomenon of the migration wave from ukraine at the eu level, comparison of this wave with previous migration waves, as well as problems of the integration process of immigrants from ukraine in the eu. the existence of political will among all eu countries has shown that, if desired, the institutions of the union can find quick solutions for accelerated formats for the reception of refugees. effective action by european governments and societies to help ukrainian war refugees also has other aspects to be sensitive to. for example, in an interview with italian public television rai, pope francis said that in europe, refugees from ukraine fleeing war are better received than people from other parts of the world. in response to a journalist's question, he said that refugees were divided into "first and second classes" "according to the colour of their skin" and the country from which they came. " we are racists, that is bad," he said (panarmenian, 2022). judges of the court of appeal in the hague said that the dutch state is violating international standards in organizing the accommodation of asylum seekers. the court of appeal also found that the dutch state had made an unlawful distinction between refugees from ukraine and people seeking shelter from other countries. "both groups are fleeing war and violence and there should be no difference in the reception of these groups," the court said. therefore, the state should treat these groups equally." (dutchnews, 2022) in the policy brief "ukraine: a paradigm shift for the eu's asylum policy?" (rasche, 2022). lukas rashche writes that the current reception of ukrainian refugees is less a paradigm shift in eu asylum and migration policy than an example of the increasing politicisation of access to protection. the researcher concludes that in recent years the eu's common asylum and migration policy has been merged with the aim of deterring arrivals, leading to the systematic use of pushback at the external border. however, the use of force has not stopped with the arrival of ukrainian refugees. ukrainian refugees are being welcomed in poland, while asylum seekers attempting to enter the country from belarus continue to be denied access to protection. given the threat of war on their own borders and close cultural ties, it is understandable that ukrainian refugees are welcomed in neighbouring member states. but the two different border policies also illustrate how the eu treats asylum seekers differently depending on the political context in which they arrive. in light of such issues, jean-christophe dumont and ave loren write in their article "the potential contribution of ukrainian refugees to the workforce in european host countries" that ukrainian refugees "do not fit the stereotypical image of refugees: some of their characteristics are likely to improve their integration prospects, while others, on the contrary, may hinder them" (dumont & lauren, 2022). the authors of the article emphasise that a relatively high proportion of ukrainian refugees have higher education, which in itself gives them good job prospects. they are also better prepared to learn the languages of recipient countries than other illiterate refugees. in addition, ukrainian refugees have experience of working in eastern european countries (mainly poland), which also increases their chances of employment. according to the authors of the article, it should also be taken into account that by the end of 2020, 1.35 million ukrainian citizens will have valid residence permits in the eu. the ukrainian diaspora is the third largest group of third-country nationals in the eu, which can also be seen as a source of employment for a new wave of refugees. finally, eu countries have taken unprecedented measures to facilitate the entry and stay of ukrainian refugees. in most eu member states, persons granted temporary protection are entitled to work without any restrictions or delays once they have obtained a residence permit or, in some countries, a temporary certificate. the balanced integration and adaptation of ukrainian migrants from ukraine should take place without discrimination against other groups of refugees in the eu and taking into account the specificities, trends and realities of the overall economic, regional and geopolitical situation. baltic journal of economic studies 81 vol. 9 no. 2, 2023 3.2. practical results 3.2.1. some features of the general portrait of ukrainian idps according to a structured survey of sentiments (among ukrainian citizens who travelled to europe) conducted by the ukrainian razumkov centre at the transcarpathian border points (march 20-22), the vast majority of refugees (83%) were women, and 67.4% of respondents travelled abroad with children or grandchildren. the largest numbers are from the south-east of ukraine (51.5%) and the north-east, particularly the kharkiv oblast (19%). residents of the city of kyiv and the kyiv oblast accounted for 31%, while residents of the western regions accounted for only 4%. in addition, this express structured interview also showed that 79.2% of refugees wanted to return to ukraine after the war, but about 10% had no such intentions and 11% did not answer the question. at that time, in april 2022, specialists from the national institute of strategic studies of ukraine pointed out that: "the risk of losing part of the population as a result of migration is increasing. and these losses will be mainly at the expense of economically active, educated, young citizens. too many countries to which migrants have gone are interested in replenishing their human resources and are already creating conditions for the consolidation of certain categories of migrants on their territory." (niss, 2022) analysing the situation after 10 months of war, according to new data from the office of the un high commissioner for refugees, as of 8 november 2022, 7,824,440 ukrainian refugees were recorded, registered for temporary protection or similar national protection schemes in europe as of 8 november – 4,699,333. the number of ukrainian refugees registered for temporary protection in countries outside the eu was as follows turkey – 145,000 persons (as of 19 may 2022), united kingdom – 143,100 persons (as of 8 november 2022), switzerland – 68,620 persons (as of 08 november 2022), norway – 31,798 persons (as of 08 november 2022). according to media reports, there are more than 100,000 ukrainian refugees in the united states (as of july 2022) and 32,000 in canada (as of june 2022) (unhcr , 2023). from the above data it can be seen that the majority of migrants are women, mostly from the south-east of ukraine. the data also show that the eu countries are the main region where migrants have gone to settle permanently. the mood of the idps regarding a possible return to ukraine is also dynamic – due to the unstable situation, many of them were in a state of "limbo" and did not finally decide what to do next. the report of the office of the un high commissioner for refugees (summer 2022), which dealt with the study of the average migrant from ukraine on the basis of several focus groups in europe, noted the following: "the majority of respondents have a high level of education (77% have completed technical, vocational or university education), indicating a potential economic contribution to host countries, but lack of knowledge of local languages and childcare needs may limit such opportunities." (unhcr , 2022) thus, the labour skills of ukrainians may be in great demand in the european market, especially due to their high level of education. in this context, the organisation for economic co-operation and development, analysing the labour potential of migrants from ukraine, noted that: "ultimately, the total impact on the labour force in europe is about twice the size of the influx of refugees into the european union in 2014-2017. most of this impact will be seen in a few countries (in relative terms, the czech republic, poland and estonia) and, given the differences in the profile of migrants in 2014–2017 compared to today (with more women and highly educated migrants), the most affected segments of the labour market will differ from each other – probably less unskilled manual labour and more professions in the service sector." (oecd, 2022) for some eu countries, ukrainian immigrants represent a skilled labour force for certain sectors of the economy, especially the service sector. this is particularly confirmed by studies conducted by the norwegian refugee council in poland (nrc, 2022). the next important feature of the general flow of migrants from ukraine to the eu is that many of them are minors. according to the european commission's directorate-general for migration and home affairs, 737,118 ukrainian children will be integrated into the school systems of the european union by the beginning of 2023. it should be noted that these statistics do not include data on the number of ukrainian students in the uk, usa, canada and other countries (migration and home affairs, 2022). according to the ministry of education and science of ukraine, as of 12 september 2022, there were 488,045 school-age children abroad. at the same time, the first deputy minister of education and science of ukraine, andriy vitrenko, at a briefing on 14 october 2022, announced the presence of about 505,000 ukrainian school-age children abroad (educational ombudsman of ukraine, 2022). apparently, more than 500,000 ukrainian children are already part of the eu education system. another important aspect in studying the general profile of a forced migrant from ukraine abroad is their lack of knowledge of the local language. in many eu countries, experts pay attention to creating the necessary additional conditions for ukrainian citizens to learn the language of the host baltic journal of economic studies 82 vol. 9 no. 2, 2023 country. for example, dutch experts point out: "as the situation may remain uncertain for a longer period of time, structural government support for language learning becomes an increasingly urgent need for better integration of refugees into the host society in terms of communication, education and work." (tasbas, 2022) the adaptation of the settlers lasted for the first months of their arrival in the host country, and a generalised portrait of ukrainian refugees in the eu during this period included the following characteristics: a middle-aged woman with higher education (professional, technical or university), knowledge of english (but lack of knowledge of the local language), average income; the presence of their own children, usually two, in rare cases one or three; they are in contact with members of their family (father or mother); about 50% of them look for opportunities to receive mostly free services and free food, and also regularly seek psychological help. 3.2.2. ukrainian communities in the eu as a key indicator of current trends among ukrainian idps this section of the study analyses the data provided by representatives of various ukrainian communities (communities, organisations, groups, etc.) in the eu, both in writing as part of an anonymous structured interview, and collected by the author from various public sources (social networks, official websites, etc.). also of great use were the numerous interviews the author conducted with various activists and volunteers in different eu countries as part of his humanitarian work. the list of communities (organisations) and countries was selected on the basis of the author's personal contacts with most of the organisations studied. it is this data that forms the basis for the application of the "case study " method in this study. the purpose of this method for the study in this section is to clarify the relevance of the characteristics of the image of immigrants from ukraine identified above on the basis of statistical data, as well as to identify additional processes of adaptation and integration within a particular community of an eu country. it will also make it possible to classify groups of migrants on the basis of their actual status and future place of residence. the analysis and generalisations in this section are based on the cases available to the author as a result of his humanitarian and journalistic work. some countries, such as poland and romania, which have received large numbers of migrants and provide a good environment for relevant academic research, are not included in this analysis because the author has not yet had the opportunity to carry out humanitarian work there. in the future, however, these and other countries will be given special attention in the study of the processes of adaptation and integration of ukrainian migrants there. federal republic of germany almost one million ukrainian refugees have arrived in germany since the beginning of the russian armed invasion of ukraine, the federal statistical office reported on 10 october 2022. the statistics cover the period from the end of february to august (romashenko, 2022). in this context, germany is of particular interest for research. for the purposes of this study, ukrainian organisations (communities) of the cities of berlin and augsburg (bavaria) will be used as examples. in an anonymous interview with the author of this article, a representative of one of the ukrainian communities in berlin, based on her observations of the process of adaptation and integration of immigrants, noted the following trends "today, the permanent members of the community are 70-80 family members, including 55 children. at the beginning of the community 's existence there were more participants, but some of them were given accommodation in other parts of berlin. only 4 families have returned to ukraine. most do not have official jobs, so many are registered at the employment centre and attend language courses. children go to kindergartens and schools. they can only get an official job after passing the german language exam. the total training period is about 6 months (a1, a2) and 9 months (b1)." a representative of berlin's ukrainian community also highlighted additional factors in the activities of local migrants: "1) activity of the leader and members of the community in social networks (facebook, instagram, youtube). 2) self-organisation of local ukrainians to realise the creative abilities of community members, especially children. 3) active participation in propaganda activities in favour of ukraine, joint celebration of various anniversaries, collection and sending of humanitarian aid, various information campaigns, etc." in turn, the co-founder and first deputy chairman of one of the ukrainian communities (union) of augsburg noted: "after 24 february 2022, a coordinating headquarters was created on the basis of the community, which formed special committees from among the members of the union (about 40) and volunteers (about 200 at various times) on the effective work of the following areas: 1) humanitarian warehouse for the collection and distribution of aid to ukraine and assistance in the adaptation of newly arrived refugees from ukraine to germany, as well as the provision of psychological and rehabilitation assistance to war victims. baltic journal of economic studies 83 vol. 9 no. 2, 2023 2) active measures to popularise ukrainian culture (concerts, performances, participation in local fairs, cultural events), as well as a saturday school for refugee children from ukraine (more than 300 children). 3) active information and political campaigning, organising meetings, attracting representatives of local parties in support of ukraine is one of the main activities of the community. thanks to the media, sponsors, donors and media partners are mobilised." republic of austria since russia's full-scale invasion began, austria has taken in more than 150,000 ukrainian migrants. many humanitarian centres have been set up to help the ukrainians. many migrants in austria have been granted temporary protection – a blue card. it gives the right to stay legally in the country for one year, to receive medical care and education (tv channel "dom", 2022). traditionally, one of the most attractive cities in austria for permanent residents is vienna. in addition to the general trends (mentioned above) for immigrants from ukraine, which are typical for the whole eu, in austria there are some additional mechanisms for the adaptation of certain groups of immigrants – for example, assistance in adapting to the scientific environment. according to the questionnaire of doctor of economics, professor, representative of the ukrainian community in vienna: "scientific and academic institutions in austria have actively and effectively organised competitions for grants and scholarships in all fields of science in march 2022." she, as one of the scholarship holders, is conducting research on "temporarily displaced persons from ukraine in the european union: social adaptation and integration in the labour market". the professor concluded in her study that: "in vienna, the austrian side is impressed by the level of education of the ukrainians. of the registered temporarily displaced persons, 80% have a higher level of education (bachelor, master and above). this has an impact on business activity, which is increasing every month. linguistic skills are also a distinctive feature, with more than 60 per cent speaking three or four languages, which naturally contributes to social adaptation and entry into the local and international labour market. many ukrainians who took part in the study said they would consider starting their own small or mediumsized business rather than working as contract labour. perhaps this is because they describe their pre-war income levels as average or above average, and they have savings that they can now use." also interesting is the opinion of another respondent to this study, also a representative of the ukrainian community in vienna, the founder of the school, which is based in vienna and operates in accordance with the requirements of the ministry of education of ukraine. the interviewee notes the following: "in general, in austria, children who came from ukraine faced the main problem – this is the language, without language it is difficult to understand subjects in schools, and it is also difficult to establish communication. in austrian schools, russian children are often helped by ukrainian children and thus they are "reconciled" – this sometimes provokes unnecessary conflicts and also forces children to communicate in russian where they should have learned german." for this reason, the interviewee set up a school where 58 children now study. the project helps the children to integrate into the new environment of a foreign country and to continue their education according to local standards. republic of lithuania according to the updated forbes "friends of ukraine" rating, lithuania is one of the top five countries supporting ukraine at various levels (landa, 2022). lithuanians, like representatives of other baltic countries, are genuinely concerned about what is happening in ukraine and are trying to help ukraine in various ways, including assistance to temporarily displaced persons. the lithuanian scientific and journalistic community is very interested in this issue. let's study the data of anonymous structured interviews provided by local activists of ukrainian communities from the cities of klaipeda and kaunas. in the context of adaptation and integration of immigrants from ukraine, the representative of the klaipeda community of ukrainians noted the following trends. "all the idps are in close contact with friends and relatives in ukraine and abroad. many have been granted temporary residence permits, continue to receive financial support from the state, have successfully found jobs and are studying lithuanian at language courses run by various communities (red cross, cultural centres, etc.). as for the children, most of them attend kindergartens and schools (some schools even offer ukrainian classes). for example, a ukrainian sunday school is run at the local ukrainian centre, with 128 children currently studying there. in addition, a volunteer information centre was established on the basis of the centre, together with ukrainian students from a christian university. the work was mainly aimed at collecting humanitarian aid and the resettlement of refugees, their adaptation and the provision of psychological assistance." as part of an anonymous interview, another representative of the ukrainian community in lithuania from kaunas, who was forced to leave donetsk in 2014 for chernihiv, later for kyiv (becoming an internal migrant), and after 24 february 2022, as a father of many children, went to lithuania, where he received temporary protection (temporary baltic journal of economic studies 84 vol. 9 no. 2, 2023 residence permit in the republic of lithuania for temporary protection), noted the high activity of local civil society in lithuania. "local representatives of lithuanian civil society began to actively support the process of adaptation and socialisation of many ukrainians living in lithuania, especially in kaunas. the self-help group started with 40 people and now includes about 155 families. with the direct support of local lithuanian organisations and their partners, and with the help of the active group, the participants, mainly children, systematically receive food and goods several times a month for more than six months. the business community of kaunas helps the group members to find employment in their companies with living wages and minimal language barriers." slovak republic according to the international organisation for migration, from 24 february 2022 to 13 april 2022, the slovak authorities reported 326,997 arrivals from ukraine, of which 301,772 were ukrainian refugees (iom 2022). the ukrainian community in slovakia is quite large and is represented by various slovak or slovak-ukrainian public organisations. in particular, in the structured interview for this article, the director of a slovak public organisation from bratislava, which through its charitable activities has created a large communication field around itself of ukrainians and slovaks who are mobilised to help ukrainians and ukraine, noted the following patterns. "despite great efforts to help the ukrainian community, more attention needs to be paid to the following issues: 1. there needs to be a significant improvement in medical care. due to lack of access, many people prefer to travel to ukraine for treatment, which is more expensive. 2. creation of great opportunities to work in their specialty. in order to achieve this, it is necessary to improve the process of nostrification of documents. 3. improvement of work with disabled people (of various categories) as one of the most pressing problems. for example, the treatment of post traumatic syndrome. 4. more attention must be paid to mothers and children between the ages of two and four. this category already has a need to communicate with peers, but in a foreign country this is difficult." on the basis of the above-mentioned characteristics of the image of migrants from ukraine, as well as the data obtained from an anonymous structured interview with various representatives of ukrainian communities in the eu countries where the author carried out humanitarian activities, it is possible to derive a certain classification of groups of migrants on the basis of their purpose for staying in a particular place (the principle of the settled way of life). it is important to note that attempts to classify immigrants and create their portraits on the basis of various characteristics are regularly made by various researchers, including the author of the article (kozub, 2022). taking into account the actual status of temporarily displaced persons from ukraine to the eu, taking into account legal, social and other aspects, it is obvious that all these people are heterogeneous. some have really left the zones of active hostilities, but some have not. some really need social benefits and protection, but for others it's just extra money on top of their main income. understanding the real status of this or that migrant allows the competent authorities to determine the priority of this or that group and to choose the appropriate means of support. after almost a year of war, an analysis of the migration situation reveals the following conditional groups of migrants, depending on their status and the purpose of their stay in a particular country: 1) internally displaced persons (idps) who reside permanently in a specific community (settlement) of the eu and have the possibility to return home. this includes those temporarily displaced citizens of ukraine who left the country after 24 february 2022, but whose houses were not occupied or were not occupied by the armed forces of ukraine. at the same time, today it is practically difficult to obtain reliable information on how many migrants are registered and how many actually live in a given settlement in the eu. the main reason for this complexity is the permanent migration of part of this group of migrants. 2) internally displaced persons (idps) who live permanently in a particular community (settlement) of the eu and have no possibility to return to their homes. after the liberation of the territories of kyiv, sumy, chernihiv, part of kharkov and kherson regions from the troops of the russian federation, some of the migrants from europe preferred to return to their places of permanent residence. however, there remains a significant number of migrants from the eastern and southern regions (donetsk, lugansk, zaporizhzhia and kherson) who cannot yet return to their homes because they are occupied by the russian federation (buzarov, 2022). 3) idps who have been granted collective protection status in the eu, but who can return or have returned to permanent residence in ukraine. as early as may 2022, ukrainian officials announced that 4.7 million ukrainians had returned to their homeland (tsn, 2022). the norwegian refugee council, in its report on the experiences of idps returning to ukraine from poland, concluded that the majority of idps surveyed (60%) intended to stay in ukraine for at baltic journal of economic studies 85 vol. 9 no. 2, 2023 least two to three months, but many indicated that this decision could change depending on the security situation; 30% said they had not yet made a decision about their plans (dudinska et al., 2022). within this group, it is possible to identify a separate subgroup of migrants who essentially live in two houses. there is a large group of migrants who were granted temporary protection status in the eu in the first months of the war, but who have chosen to return to ukraine for family or work reasons, but who regularly leave for safety reasons. 4) two-time migrants. citizens of ukraine (from donetsk, luhansk oblasts and crimea) who, as a result of hostilities, first became internally displaced persons (idps) in ukraine with the corresponding legal status and, after 24 february 2022, received the status of collective protection in the corres ponding eu country. these citizens, who lost their homes in 2014-2015, were able to start a new life in other regions of ukraine after the first russian aggression. after 24 february 2022, some of them left for the eu, where they received the corresponding protection status, while others remained in ukraine. it should be noted that ukraine has already developed a plan at the state level for the "return of citizens who temporarily resettled, in particular abroad, and their integration into the social and economic life of the state" (cmu, 2022). in july 2022, during a high-level international conference in lugano (switzerland) (urc, 2022) on planning for the recovery of ukraine, the ukrainian authorities presented a draft national recovery plan. one of the priorities is to address the needs of the returning diaspora and idps, including through appropriate social protection measures. the government of ukraine has also recently launched a review of the national strategy for the integration of internally displaced persons. the aim is to adapt the national policy to the current conditions and scale of displacement, and to expand it to include a provision for the return of border refugees. 4. discussion the above analysis of various ukrainian communities, including migrants, that have formed in all eu countries as a result of the second aggression of the russian federation against ukraine could be continued. however, a non abstract analysis of the activity of all ukrainian communities is the subject of this study. thanks to the data regularly processed by the communities, it is possible to identify the real problems of adaptation and integration of immigrants from ukraine that still exist. in addition, a retrospective analysis and comparison of the conditions and environments of various european countries (not only the eu), where the migrants have arrived and are undergoing the initial process of adaptation, is also important. undoubtedly, poland, romania, moldova and other countries have accumulated scientifically invaluable empirical experience in the practical solution of many problems that have arisen in these countries as a result of the unprecedented humanitarian crisis caused by the russian aggression against ukraine. this experience requires a deeper and immediate study in order to develop appropriate recommen dations for the authorities and representatives of civil society in the future, because the legal status of immigrants from ukraine requires the necessary adjustments. as for the results of the analysis of the migrants' questionnaires using the case study method, the data confirm that the main parameters of the image of a forced migrant from ukraine, formed in the first months of the war on the basis of the observations of volunteers and international organisations, are still preserved. these include such facts as the fact that most of the migrants are women with minor children. most of them have higher education, etc. however, some important features characterising certain aspects (stages) of adaptation and integration of forced migrants from ukraine in the eu countries have not been taken into account. such features include, for example, the activity and importance of ukrainian communities in the eu as a kind of initial centres for the adaptation and integration of a certain part of idps. due to many factors, many months after the beginning of the war of the russian federation against ukraine, some of these communities became active subjects of public and international relations in various countries, which gave them the opportunity to accumulate invaluable experience of information and communication in emergency situations. accordingly, the observations and information they have accumulated are exclusive data that can be used as the necessary material for a deeper analysis of the problems of integration and adaptation of immigrants from ukraine to the european environment. in fact, in many cases it was the ukrainian communities abroad, together with local volunteers, who, due to the circumstances, assumed the functions of initial adaptation and further integration of internally displaced persons from ukraine into a specific environment. 5. conclusions unlike the consequences of the first aggression of the russian federation against ukraine in 2014–2015, when most of the internally displaced personsfrom the donetsk and luhansk regions of ukraine and crimea moved to permanent baltic journal of economic studies 86 vol. 9 no. 2, 2023 settlements inside ukraine, the second russian aggression against the ukrainian state in february 2022 led to the forced migration of ukrainians outside ukraine. as a result, eu countries are facing an unprecedented migration challenge, surpassing the scale of a similar crisis caused by the war in syria in 2015–2017. the study shows that in the european community, the migration crisis caused by the large influx of migrants from ukraine has provoked a long overdue discussion in the information, expert and political spheres on the unification and modernisation of the national migration systems of different eu member states. at the same time, the number of registered refugees and people under temporary protection continues to grow, indicating a possible final increase in the number of people who have left ukraine because of the war. in many ways, it is political will that plays the most important role in such unprecedented situations, providing the basis for further steps to be taken. the analysis showed that after the events of 24 february, a specific legal framework was established in the eu, which for many months provided the legal basis for the stay of temporarily displaced persons from ukraine in the eu, as well as an adequate basis for adaptation and integration. the uniqueness of the situation of migrants from ukraine lies in the fact that many ukrainian citizens were de jure integrated in many european countries in the first weeks and months of the war, and the de facto adaptation of these people took place after they received the right of temporary stay. it was found that most of the data on the problems of temporarily displaced persons from ukraine were published in various international reports, sociological studies and journalistic materials. in this regard, various statistical reports and empirical data of authoritative international organisations were studied and analysed in detail, which helped to highlight some characteristic features of the image of a migrant from ukraine. however, special emphasis is put on the study (cases) of the experience of adaptation of internally displaced persons from ukraine by various communities, organisations and centres created by ukrainians and their colleagues from european countries in order to accelerate the process of helping ukrainians who have migrated. it should be noted that a full sociological analysis of the migrants' environment is now difficult. the study revealed the qualitative characteristics (image) of displaced persons in compact settlements as a new group that interacts with various local authorities and civil society in eu countries to establish communication for successful integration. there is evidence that the war of the russian federation against ukraine mobilised a large number of ukrainians living outside their country to support ukraine. they were gradually joined by some migrants who integrated into the respective ukrainian communities in different eu countries. many of these communities have created their own public organisations, foundations, unions, associations for mutual assistance and support of ukraine and ukrainians. based on empirical and practical observations, the signs of the first (the largest) wave of resettlement of people from the war zones to the safe territories of ukraine and abroad were: – chaotic nature of resettlement. in the first days of the war, people from the combat zones left randomly and tried to stop in any place in western ukraine or in the territories bordering ukraine, where there was at least some kind of shelter (volunteers helped a lot), or stayed with acquaintances, friends, relatives, etc.; – active participation in the resettlement of migrants by the authorities of local territorial communities and representatives of local authorities abroad. local communities, represented by locally elected authorities, played a key role not only in the initial resettlement and assistance to migrants, but also in their subsequent ongoing support and partial socialisation. at the same time, the activities of local government representatives were coordinated with various local activists and public figures who became volunteers. this also applies to foreign communities; – active involvement of international humanitarian organisations in assisting displaced persons a major role, especially in the assistance and resettlement of migrants in the areas bordering other european countries, was played by various international organisations, which, with similar experience in other conflicts, were able to establish the appropriate infrastructure in the western regions of ukraine; – a special role in the process of integration and adaptation of immigrants from ukraine is played by ukrainian communities abroad. ukrainian communities in various eu countries have often been the main communicators between the arriving migrants and the local authorities. in addition, the high level of public, informational, huma nitarian and social activity of the ukrainian diaspora abroad has provided a strong mobilisation base to support ukrainians and ukraine. in the course of their activities, these communities have accumulated a great deal of empirical experience. it was also found that the main role in the resettlement process was played by the idps' own social and institutional contacts. in the absence of such contacts, the main responsibility lies with voluntary organisations. in other words, after the beginning of the second aggression of the russian baltic journal of economic studies 87 vol. 9 no. 2, 2023 federation against ukraine, when a part of the ukrainians who travelled to the eu went either to their acquaintances (friends, relatives) who were already living in european countries at that time, or to local voluntary organisations, which helped in the initial assistance and subsequent placement of migrants. in practice, depending on their status in the host country, migrants can be divided into the following groups: migrants permanently residing in a particular community (settlement) of the eu and having the possibility of returning to their home country; migrants permanently residing in a particular community (settlement) of the eu and having no possibility of returning to their home country; migrants who have been granted collective protection status in the eu but who can return or have returned to permanent residence in ukraine; double migrants. it should also be noted that the integration of those groups of migrants from ukraine who plan to stay permanently in european countries should take into account their languages, age, educational, labour and social characteristics. it is obvious that the further full return of migrants to ukraine depends on the extent of the consequences of the russian aggression. there is a possibility that the war and its transition to a state of uncertainty could be prolonged. in such conditions, the countries of the european union, in the context of ukraine's integration into the eu, should develop deeper, accelerated programmes for the integration of ukrainian citizens into the european community at various levels. references: "only 17% of business does not work": shmygal called a shocking number of ukrainians who have already returned to their homeland (2022). tsn, 09 may 2022. available at: https://tsn.ua/ru/ato/ne-rabotaet-tolko-17-biznesashmygal-nazval-shokiruyuschee-kolichestvo-ukraincev-uzhe-vernuvshihsya-na-rodinu-2057254.html appeal court says refugee housing is bad but can’t be solved short term (2022). 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role of socially responsible marketing in the reproduction of the human capital and reduction of its fiktivization processes olena brintseva1 kyiv national economic university named after vadym hetman, ukraine oksana hutsalenko2 vinnytsia national agrarian university, ukraine sergii dmitruk3 kyiv national economic university named after vadym hetman, ukraine abstract. the urgency of the research. before the modern person at different stages of reproduction of the human capital, there are many calls and risks that need to be considered and also to adapt to consequences of their action. target setting. use of marketing tools is rather a perspective direction of improvement of processes of the human capital reproduction. however, improvement of these processes is promoted by only socially responsible marketing. uninvestigated parts of general matters defining. almost unexplored are questions of use of marketing tools in the realization of processes of reproduction of the human capital. the purpose of the paper is to study the use of marketing tools for more effective implementation of reproduction processes of human capital at different stages. the issue of reproduction of human capital is considered in such areas: education, health, and social and labour sphere. methodology. the paper is based on a critical analysis of scientific researches in the sphere of socially responsible marketing and processes of reproduction of human capital. these issues are researched by blagov yu.e., carroll a., hrishnova o.a., kotler p., lantos j., lambin j., libanova e.m., mishchuk h.yu., and others. results. issues of the human capital reproduction are considered in the following spheres: education, healthcare, and social and labour sphere. it is defined that in modern conditions, social responsibility has to become a basis for the creation of all system of the public relations and cover all stages of reproduction of the human capital. socially irresponsible marketing leads to the formation, accumulation, and distribution of the fictitious human capital and other its unproductive forms. practical implications. now reproduction of the human capital in ukraine is rather strongly influenced by fiktivization processes connected with the distribution of its unproductive forms. in this context, socially irresponsible marketing of educational and medical institutions, enterprises-employers, pharmaceutical and intermediary firms, plays a considerable role. socially responsible marketing is impossible without the general spread of the ideology of social responsibility in society. the concept of social responsibility should become widespread in all spheres of public life, should become a fundamental basis of social and labour relations and one of the most important directions for overcoming a systemic socio-economic, political, and military crisis in ukraine. key words: socially responsible marketing, fictitious human capital, human capital reproduction, education, health, social and labour issues. jel classification: m14, m31, o15 1. introduction now processes of reproduction of the human capital happen in rather difficult conditions – reforming of an education system and healthcare, multi-vector changes in the social and labour sphere, changes in the content of labour and its forms related to the development of information and communication technologies, strong influence of system social and economic, political, military crisis. before the modern person at different baltic journal of economic studies 34 vol. 3, no. 5, 2017 stages of formation of labour potential, development, use, and saving of the human capital, there are many calls and risks which need to be considered and also to adapt to consequences of their action. in such conditions, the research of questions of management of reproduction of the human capital at all stages acquires special relevance, increase in the efficiency of processes connected with it is the key to restoration of socially oriented economic growth, expansion of opportunities of productive employment, ensuring the welfare of the population. the use of marketing tools is rather a perspective direction of improvement of processes of reproduction of the human capital. however, only socially responsible marketing helps to improve these processes. marketing, which does not have such a characteristic, provokes and propagates the processes of human capital fiktivization. various aspects of socially responsible marketing are researched by blagov yu.e., carroll a., kotler p., lantos j., lambin j. and others; processes of reproduction of human capital – by hrishnova o.a., libanova e.m., mishchuk h.yu., etc. but almost unexplored are questions of the use of marketing tools in the realization of processes of reproduction of the human capital in various spheres of labour potential/human capital formation, its development, use, and preservation. the purpose of the article is to study the use of marketing tools for more effective implementation of the reproduction processes of human capital at different stages, prevention of its fiktivization. the issue of reproduction of human capital is considered in such areas: education, health, and social and labour spheres. the emphasis is made on the social responsibility of marketing activities at all levels and in all areas of this process. 2. social responsibility of marketing development of the concept of socially responsible marketing has begun rather recently – in the third quarter of the xx century. classical definition of socially responsible marketing at microeconomic level was offered by p. kotler (kotler, 1972, 2008) who, in particular, notes that the concept of socially responsible marketing proclaims a task of the enterprise establishment of requirements, desires, and interests of target markets and their satisfaction more effective and productive than at competitors in the ways, which keep or increase welfare of both the consumer, and society in general. thus, socially responsible marketing is considered as an essential competitive advantage of the enterprise. at the same time, it is an effective remedy for social development. socially responsible marketing is a process of identification and satisfaction of needs of consumers taking into account their real, healthy interests, and also needs of nature of all society, its sustainable development. socially responsible marketing can’t stimulate consumption of harmful production or induce consumers to spend money for services that will not benefit either themselves or society. at the micro level, socially responsible marketing is also considered as a voluntary activity of business structures for the solution of social problems, assistance to the population, territories and, on the one hand, based on decision-making, proceeding from the common humanitarian goals and values of society, and with another – considering objective need of business to be socially responsible, including through active realization and updating of the activity among the population, strengthening its business and social reputation (agramakova, 2011). consideration and satisfaction of social needs is an important prerequisite for the effective marketing activity of any modern enterprise, but especially – state authorities, educational and medical institutions, public organizations. this also applies to people as participants in social and labour relations. it is quite promising to apply socially responsible marketing at the individual level to ensure the processes of reproduction of human capital. in the twenty-first century, when the information is spreading very easily and quickly, social responsibility in marketing activities is of particular importance since any false information, on the one hand, spreads quickly and can bring significant harm to society and, on the other hand, it can be detected rather quickly and lead to significant financial losses. 3. the concept of the fictitious human capital in modern conditions, social responsibility has to become the uniting national idea, a basis for the creation of all system of the public relations, their dominant, and to cover all aspects of the formation of labour potential, development, use, and saving of the human capital. socially irresponsible marketing leads to the formation, accumulation, and distribution of the fictitious human capital and other its unproductive forms. we define a fictitious human capital as a result of unproductive and unlawful investments (or deformed as a result of prolonged non-use) of a person’s current and accumulated stock of fictitious characteristics of health, knowledge, skills, abilities that this person is purposefully employed in social and labour relations, not contributes to the growth of labour productivity, but it affects the growth of income of its owner, reducing the possible profits of the enterprise and national income (hrishnova & brintseva, 2015). fictitious human capital is formed primarily in the field of education and vocational training, healthcare, social and labour sphere. the isolation of these areas as the main characteristics of the processes of human capitalization is due primarily to the fact that in these areas, processes of human capital formation, accumulation, and use are the most dynamically taking place. baltic journal of economic studies 35 vol. 3, no. 5, 2017 4. the role of socially responsible marketing in processes of human capital reproduction depending on the sphere of reproduction of human capital, one can distinguish the following directions for using marketing tools (table 1). formation of labour potential/human capital in the educational sphere requires significant investments, much of which is done by domestic households and individuals. a promising direction for diversifying funding sources is the search for grants for training, internships, participation in various educational events funded by international organizations. the following marketing tools help to increase the efficiency of these processes: self-presentation and self-promotion during participation in various educational events, preparation of qualitative applications for grants, scientific projects. to prevent further fiktivization and the formation of unproductive forms of human capital, the acquisition of fictitious documents about education, marketing at all levels must be virtuous, socially responsible. this applies not only to self-marketing but also to the marketing of educational institutions and various types of educational services because often enough the formation of fictitious capital is promoted not only by the demand for low-quality education but also by the availability of educational institutions that provide such services. within the framework of expanding cooperation between educational institutions and business, the formation of professional competencies for future employees is a promising direction in the development of dual education, that is, the combination of theoretical training in an educational institution and practical – at the enterprise. this gives an opportunity to take full account of special requirements of the workplace to the characteristics of the employee and to form them, as well as to select the most suitable workplace for the person. the social responsibility of marketing in these table 1 the role of socially responsible marketing in processes of human capital reproduction stages and areas of reproduction of human capital sphere of education sphere of healthcare social and labour sphere use of marketing tools for: formation of labour potential / human capital investments for the formation of human capital/labour potential from the state and international organizations; effective self-presentation and selfpromotion during participation in various educational events; responsible marketing of educational institutions; development of the system of higher education in ukraine, ensuring a wider representation of domestic higher education institutions in international rankings, etc. investments for the formation of human capital/ labour potential from the state and international organizations; approval of healthconservation values; promotion of a healthy lifestyle, etc. self-presentation and selfpromotion during education in order to create a positive impression of potential employers; successful internship, obtaining recommendations for further employment, etc. human capital development attraction of investments for the development of human capital from the state, employers, international organizations, public organizations, and non-state funds; establishment of values of comprehensive, harmonious human development in society, etc. the use of human capital expansion of opportunities for further training, acquisition of new competencies during work activity; dual education; obtaining a second higher education, etc. expansion of opportunities for the participation in healthcare-saving measures; expansion of opportunities for obtaining a better social package, which provides greater possibilities for saving health, etc. increase in the volume of providing intermediary services in the labour market (human resources agencies, outsourcing companies, etc.); providing additional competitive advantages in the labour market; socially responsible marketing of employers in the labour market, etc. preservation of human capital establishing a culture of lifelong learning; encouraging entrepreneurs to invest in educational activities for the general population, etc. increased participation in healthcare-saving measures; encouraging entrepreneurs to invest in health-saving measures, etc. establishment of social and labour values in society, the aspiration to use existing human capital as productively as possible; adaptation of workers to new forms of labour organization, which are changing under the influence of information and communication technologies, etc. note. developed by the authors baltic journal of economic studies 36 vol. 3, no. 5, 2017 (as in other) processes requires, first and foremost, the most complete, transparent and honest information about the possibilities of dual education and further employment. more efficient use of human capital will be facilitated by the use of marketing tools to improve the quality and increase the volume of mediation services in the labour market (human resources agencies, outsourcing companies, etc.), providing additional competitive advantages in the labour market, socially responsible marketing of employers in the labour market, etc. at the stage of preserving human capital, it is expedient to use marketing tools in order to establish social and labour values in society, use of available human capital as productively as possible, an adaptation of workers to new forms of labour organization, which are changing under the influence of information and communication technologies, etc. it is necessary to emphasize the decisive role of the individual in the purposeful, effective, rational formation of his human capital. indeed, people often fall victim to ill-fated information in education, healthcare, employment, especially when they are willing to obtain good at a low price, with little effort, bypassing moral norms, etc. but there are ways to check information, look at documents, ask the opinion of those who have already received such dubious services, that is, to force them to get true information. not always consumers take responsibility, and therefore – often suffer from malicious marketing. 5. conclusions and prospects of further developments currently, the processes of reproduction of human capital in ukraine are strongly influenced by the processes of fiktivization, which are associated with the proliferation of its unproductive forms. in this context, the socially irresponsible marketing of educational and medical institutions, employers, and pharmaceutical and intermediary firms plays a significant role. an important factor in the privatization is also the reduction of social responsibility of employees in the formation of their human capital and the implementation of various measures of self-marketing. socially responsible marketing is impossible without the general spread of the ideology of social responsibility in society. the concept of social responsibility should become widespread in all spheres of public life; become a fundamental basis of social and labour relations and one of the most important directions of overcoming a systemic socio-economic, political, and military crisis in ukraine. it is necessary to strive and demand that the marketing information that promotes the competitiveness of the enterprise, organization or employee adequately reflects their objective characteristics and does not lead to the further diversification of the national human capital, the spread of false information, and the formation of a distorted perception of reality in a professional environment. the ideology of social responsibility should become the basis for the renewal of our society and the further development of the economy. it also implies the further development of continuous learning, in particular, the dual system, the spread of ideas of human development, rational consumption, the formation of a model of a healthy lifestyle, spiritual values in the whole society. at the same time, citizens’ awareness of personal responsibility for their own lives, health, education, and competitiveness in the labour market, in particular, rational consumption and a conscious consumer choice, despite the seductive, dubious advertising, are essential. further research requires an assessment of the efficiency of human capital reproduction processes, taking into account the impact of activities of state authorities, enterprises, public organizations, and individual households on their progress; the question of the optimal choice of marketing tools at different stages of reproduction of human capital, as well as various aspects of reducing the process of fiktivization in the field of human capital. references: agramakova, n. v. (2011). suschnost sotsialnoy otvetstvennosti predpriyatiya i sistemyi ee regulirovaniya [the essence of corporate social responsibility and its control system]. business inform, no. 4, pp. 86-88. blagov, yu. e. (2010). korporativnaya sotsialnaya otvetstvennost: evolyutsiya kontseptsiy [corporate social responsibility: evolution of concepts]. st. petersburg: vyisshaya shkola menedzhmenta. (in russian) carroll, a. b. (1979). a three-dimensional conceptual model of corporate social performance. academy of management review, no. 4, pp. 497-505. hrishnova, o. a., brintseva, o. g. (2015). fiktyvnyi liudskyi kapital: sutnist, kharakterni osoblyvosti, chynnyky formuvannia [fictitious human capital: essence, characteristics, formation factors]. demography and social economy, vol. 1 (23), pp. 90-101. hrishnova, o. a. (2014). liudskyi, intelektualnyi i sotsialnyi kapital ukrainy: sutnist, vzaiemozviazok, otsinka, napriamy rozvytku [human, intellectual and social capital of ukraine: essence, interconnection, assessment, directions of development]. social and labour relations: theory and practice, no. 1 (7), pp. 34–40. hrishnova, o. a., mishchuk, h. yu., oliinyk, o. o. (2014). sotsialna vidpovidalnist u trudovykh vidnosynakh: teoriia, praktyka, rehuliuvannia ryzykiv: monohrafiia [social responsibility in labour relations: theory, practice, risk management monograph]. rivne: nuvgp. (in ukrainian) baltic journal of economic studies 37 vol. 3, no. 5, 2017 kotler, p. (2008). marketynh-menedzhment [marketing management]. st. petersburg: piter. (in russian) kotler, p. (1972). what consumerism means for marketers. harvard business review, vol. 50, pp. 48–57. lambin, j.-j. (1996). strategicheskiy marketing. evropeyskaya perspektiva [strategic marketing. european perspective]. st. petersburg: nauka. (in russian) lantos, j. p. (2002). the ethicality of altruistic corporate social responsibility. journal of consumer marketing, vol. 19, no 3, pp. 205–232. libanova, e. m. (2014). liudskyi rozvytok v ukraini: istorychnyi vymir transformatsii derzhavnoi sotsialnoi polityky (kolektyvna monohrafiia) [human development in ukraine: the historical dimension of the transformation of government social policy (collective monograph)]. kyiv: in-t demohrafii ta sots. doslidzh. im. m.v. ptukhy nan ukrainy. (in ukrainian) baltic journal of economic studies 302 vol. 3, no. 4, 2017 corresponding author: 1 department of insurance of banking and risk management, taras shevchenko national university of kyiv. e-mail: sholoiko@ukr.net the role of the world insurance market infrastructure antonina sholoiko1 taras shevchenko national university of kyiv, ukraine abstract. the purpose is to define a role and significance of elements of the world insurance market infrastructure. tasks of the study are the next: to consider the dynamics of development of the world insurance market from 2012 to 2016; to define groups of elements of the world insurance market infrastructure; to characterize elements of the world insurance market infrastructure. methodology. these tasks are done because of using such methods as: grouping of elements of the world insurance market infrastructure; a collection of information about elements of the world insurance market infrastructure; generalization to define role and significance of elements of the world insurance market infrastructure. results. world insurance premiums were increasing and decreasing from 2012 to 2016 and did not exceed 6.3% of gross domestic product. lots of factors influence global insurance premium volume as an indicator of the development of world insurance market. one of them is an activity of the elements of the world insurance market infrastructure. it is necessary to divide them into some groups: a) international insurance associations (associations of organizations connected with insurance but members of such associations do not provide insurance services – international association of insurance supervisors, international association of insurance fraud agencies, global federation of insurance associations, international insurance foundation; b) international associations of insurers (includes associations of insurers and other organizations in a certain area of insurance – international association of deposit insurers, international union of credit and investment insurers, international association of agricultural production insurers, international group of p&i clubs, international union of aerospace insurers, international union of marine insurance, international association of engineering insurers); c) international associations of insurance experts (associations of insurance experts that serve providing of insurance services – international association of insurance professionals, international actuarial association, international association of average adjusters). value. this study has shown that all groups of elements of world insurance market infrastructure play a significant role in the development of the insurance industry because they set such tasks as: facilitate to the global stability, safety, efficiency through the collaboration with national governments and providing members of associations with information, education, consultation and other services. more research is required to consider an activity of elements of european, american, and asian insurance market infrastructure as leading in the world. key words: world insurance market, infrastructure, international insurance associations, international associations of insurers, international associations of insurance experts. jel classification: g22, h54 1. introduction different elements of infrastructure have a considerable impact on the development of the world insurance market and national markets. the various elements of insurance market infrastructure have received an increased interest in publications of g.b. ermolaev (2011), r . lee (2011), t.a. rotova and s.v. zaychuk (2014), o.v. vasiliev (2013) and others. but these studies have tended to focus on nature of insurance market infrastructure and national elements of it rather than on elements of world insurance market infrastructure. therefore this paper attempts to define a role and significance of elements of the world insurance market infrastructure. tasks of the study are the next: to consider the dynamics of development of the world insurance market from 2012 to 2016; to define groups of elements of the world insurance market infrastructure; to characterize elements of the world insurance market infrastructure. these tasks were done because of using such methods as: grouping of elements of the world insurance market baltic journal of economic studies 303 vol. 3, no. 4, 2017 infrastructure; a collection of information about elements of the world insurance market infrastructure; generalization to define role and significance of elements of the world insurance market infrastructure. information for this study was collected from swiss re institute’s publications and official web sites of elements of the world insurance market infrastructure. 2. the world insurance market world insurance premiums were increasing and decreasing from 2012 to 2016 and did not exceed 6.3% in gross domestic product (gdp). the dynamics of world insurance premiums and its share in gdp from 2012 to 2016 is presented in table 1. lots of factors influence global insurance premium volume as an indicator of the development of world insurance market. one of them is an activity of the elements of the world insurance market infrastructure. it is necessary to divide them into some groups: a) international insurance associations such as international association of insurance supervisors (iais), international association of insurance fraud agencies (iaifa), global federation of insurance associations (gfia), international insurance foundation (iif); b) international associations of insurers (international association of deposit insurers (iadi), international union of credit and investment insurers (iucii), international association of agricultural production insurers (aiag), international group of p&i clubs (ig p&i), international union of aerospace insurers (iuai), international union of marine insurance (iumi), international association of engineering insurers (imia)); c) international associations of insurance experts (international association of insurance professionals (іаір), international actuarial association (iaa), international association of average adjusters (іааа) and others). 3. characteristic of elements of the world insurance market infrastructure the first group of the elements of the world insurance market infrastructure is international insurance associations. this group of elements includes associations of organizations connected with insurance but members of such associations do not provide insurance services (table 2). the information from table 2 allows making a conclusion that international insurance associations act mainly on the world level and aims at global stability, safety, and efficiency of the insurance industry. the second group of the elements of the world insurance market infrastructure is international table 1 the dynamics of world insurance premiums and its share in gdp from 2012 to 2016 indicator 2012 2013 2014 2015 2016 tendencies 2013/ 2012 2014/ 2013 2015/ 2014 2016/ 2015 life insurance premium volume, bn usd 2630.27 2545.00 2655.59 2546.94 2617.02 ↓ ↑ ↓ ↑ non-life insurance premium volume, bn usd 1968.68 2048.6 2099.12 2050.74 2115.17 ↑ ↑ ↓ ↑ total premium volume, bn usd 4598.95 4593.6 4754.71 4597.68 4732.19 ↓ ↑ ↓ ↑ share of premiums in gdp (insurance penetration), % 6.5 6.28 6.17 6.23 6.28 ↓ ↓ ↑ ↑ source: compiled by the author based on swiss re institute’s data table 2 characteristic of international insurance associations association characteristic international association of insurance supervisors (established in 1994) unites insurance supervisors and regulators from 140 countries on a voluntary base. the mission of the iais is to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability international association of insurance fraud agencies (established in 1987) coordinates the efforts, training, and education of law enforcement agencies, government bodies, and the insurance industry to more effectively prevent and combat insurance fraud worldwide global federation of insurance associations (established in 2012) represent national and regional insurance associations that serve the general interests of life, health, general insurance and reinsurance companies and make representations to national governments, international regulators, and others on their behalf international insurance foundation brings together all parties, public and private sectors and is an independent centre for research and education. it focuses on global standards for insurance markets. sound and robust insurance markets contribute to economic growth by reducing vulnerability and encouraging risk management source: compiled by the author based on information from: https://www.iaisweb.org/page/about-the-iai; http://www.naic.org/store/free/frd-op. pdf; http://g fiainsurance.org/en/about-us/overview/; https://iifdc.org/?page_id=59 baltic journal of economic studies 304 vol. 3, no. 4, 2017 have a long history, lots of experience and traditions in a certain segment of world insurance market. it is necessary to mention that joint stock company “state export-import bank of ukraine” (ukreximbank) is a member of such an element of the world insurance market infrastructure as international union of credit and investment insurers. ukraine belonged to top 10 countries by claims paid within medium/long term export credit insurance and lending (mlt) and investment insurance (inv) in 2015– 2016 (table 4). increasing of the claims paid is not a positive tendency and points to instability and unreliability in interaction with foreign counteragents. the third group of the elements of the world insurance market infrastructure is international associations of insurance experts. this group of elements includes associations of insurance experts that serve the provision of insurance services (table 5). table 3 characteristic of international associations of insurers association/union characteristic international association of deposit insurers (established in 2002) includes 84 member organizations (deposit insurance organizations), 8 associates (other safety-net organizations from jurisdictions that have developed or are considering developing a deposit insurance system), and 14 partners (organizations that have entered into a cooperative arrangement with iadi in order to pursue iadi’s goals) international union of credit and investment insurers (founded in 1934) international not-for-profit trade association, representing the global export credit and investment insurance industry that includes 84 members (government-backed export credit agencies, private credit and political risk insurers and multilateral institutions from across the globe who provide insurance products, guarantees) international association of agricultural production insurers (established in 1951) founding members, with representatives from france, germany, italy, the netherlands, sweden, and switzerland, set themselves the objectives of improving and expanding coverage and hail insurers’ services through the exchange of information, experience, and statistics international group of p&i clubs (established in 1899) the thirteen principal underwriting associations, which comprise the international group, between them provide liability cover (protection and indemnity) for approximately 90% of the world’s ocean-going tonnage. each group club is an independent, non-profit making mutual insurance association, providing cover for its ship-owner and charterer members against third party liabilities relating to the use and operation of ships international union of aerospace insurers (established in 1934) with membership standing at 77 entities, comprising insurers, reinsurers and associations drawn from 28 different countries, was estimated that at about 90% of the worldwide aerospace insurance cover is written by members of iuai who between them provide coverage for every aspect of aerospace business international union of marine insurance (established in 1874) represents national and international marine insurers and considers issues of interest to the worldwide marine insurance industry. members of iumi are dedicated to maintaining and expanding global trade focusing both on developed and emerging markets international association of engineering insurers (established in 1968) its members are national insurance associations around the world, individual insurance companies, reinsurers and various associate members (loss adjusters, consultants, brokers) all dealing within the engineering insurance market source: compiled by the author based on information from: http://www.iadi.org/en/about-iadi/organisation/; https://www.berneunion.org/stub/ display/8; http://www.aiag-iahi.org/en/about-us/; https://iuai.org/iuai/about/public/about/about.aspx?hkey=d8d8da15-56bb-4d94-8689e2a2803d706d; https://www.igpandi.org/about; https://iumi.com/about/introducing-iumi; https://www.imia.com/the-organisation/ table 5 characteristic of international associations of insurance experts association characteristic international association of insurance professionals (established in 1938) professional association open to individuals in the insurance and risk management industries. iaip is best known for providing insurance education, leadership development and networking opportunities to its members international actuarial association (founded in 1895) it is the worldwide association of professional actuarial associations, with a number of special interest sections for individual actuaries. the iaa exists to encourage the development of a global profession, acknowledged as technically competent and professionally reliable, which will ensure that the public interest is served international association of average adjusters (established in 1961) provides average adjusting and claims consultancy services in the marine environment. the members of this association provide worldwide solutions with sound advice and well-reasoned opinions source: compiled by the author based on information from: http://www.internationalinsuranceprofessionals.org/; http://www.actuaries.org/index. cfm?lang=en&dsp=about&act=index; http://amdadjusters.org/bringing-solutions-to-problems/ table 4 ukraine in top 10 countries by claims paid within mlt and inv insurance in 2016–2016 indicator 2015 2016 mlt claims paid ukraine, usd million 168 228 total, usd million 3252 3008 share of ukraine in total, % 5,17 7,58 inv claims paid ukraine, usd million 8 17 total, usd million 150 300 share of ukraine in total, % 5,33 5,67 source: compiled by the author based on information from: http://cdn.berneunion.org/assets/images/berne-union-2016-yearend-statistics.pdf associations of insurers. this group of elements includes associations of insurers and other organizations in a certain area of insurance (table 3). the most of the international associations of insurers from table 3 were established in xix – xx centuries and baltic journal of economic studies 305 vol. 3, no. 4, 2017 the information from table 5 gives a possibility to generalize that the main goal of international associations of insurance experts is to develop a certain profession connected with insurance and provide a support to members of such associations. it is necessary to highlight that society of actuaries of ukraine is an associate member of international actuarial association since 2001. 4. conclusions in this investigation, the aim was to characterize the role and significance of such groups of elements of world insurance market infrastructure: international insurance associations, international associations of insurers, and international associations of insurance experts. this study has shown that all groups of elements of world insurance market infrastructure play a significant role in the development of the insurance industry because they set such tasks as: facilitate to the global stability, safety, efficiency through collaboration with national governments and providing members of associations by information, education, consultation and other services. more research is required to consider an activity of elements of european, american, and asian insurance market infrastructure as leading in the world. references: ermolaev, g.b. (2011). information transparency and its impact on the development of the insurance market infrastructure. stage: economic theory, analysis, practice, vol. 6, p. 132-141. lee, r . (2011). running the world's markets: the governance of financial infrastructure. princeton: princeton university press, 472 p. rotova, t.a. and zaychuk, s.v. (2014). infrastructure features of the market of health insurance services. ekonomichnyi visnyk universytetu, vol. 23/1, p. 239-244. vasiliev, o.v. (2013). problems of improvement of the infrastructure of insurance market. visnyk chernihivskoho derzhavnoho tekhnolohichnoho universytetu, vol. 2 (66), p. 204-208. www.iaisweb.org. (2017). iaisweb.org. retrieved 31 october 2017, from https://www.iaisweb.org/page/aboutthe-iai www.naic.org. (2017). naic.org. retrieved 31 october 2017, from http://www.naic.org/store/free/frd-op.pdf gfia / about us / overview. (2017). gfiainsurance.org. retrieved 31 october 2017, from http://gfiainsurance.org/ en/about-us/overview/ about international insurance foundation. (2017). iifdc.org. retrieved 31 october 2017, from https://iifdc.org/?page_id=59 about iadi. (2017). iadi.org. retrieved 31 october 2017, from http://www.iadi.org/en/about-iadi/organisation/ about the berne union. (2017). berneunion.org. retrieved 31 october 2017, from https://www.berneunion. org/stub/display/8 about us / aiag. (2017). aiag-iahi.org. retrieved 31 october 2017, from http://www.aiag-iahi.org/en/about-us/ about the group. (2017). igpandi.org. retrieved 31 october 2017, from https://www.igpandi.org/about about us. (2017). iuai.org. retrieved 31 october 2017, from https://iuai.org/iuai/about/public/about/about. aspx?hkey=d8d8da15-56bb-4d94-8689-e2a2803d706d introducing iumi. (2017). iumi.com. retrieved 31 october 2017, from https://iumi.com/about/introducingiumi the organisation. (2017). imia.com. retrieved 31 october 2017, from https://www.imia.com/the-organisation/ international association of insurance professionals. (2017). internationalinsuranceprofessionals.org. retrieved 31 october 2017, from http://www.internationalinsuranceprofessionals.org/ about – index (en). (2017). actuaries.org. retrieved 31 october 2017, from http://www.actuaries.org/ index.cfm?lang=en&dsp=about&act=index about us / amd adjusters / association mondiale de dispacheurs / international association of average adjusters. (2017). amdadjusters.org. retrieved 31 october 2017, from http://amdadjusters.org/bringingsolutions-to-problems swiss re (2013). world insurance in 2012: progressing on the long and winding road to recovery, sigma, no. 3, zurich, switzerland. retrieved from http://media.swissre.com/documents/sigma3_2013_en.pdf swiss re (2014). world insurance in 2013: steering towards recovery, sigma, no. 3, zurich, switzerland. retrieved from http://media.swissre.com/documents/sigma3_2014_en.pdf swiss re (2015). world insurance in 2014: back to life, sigma, no. 4, zurich, switzerland. retrieved from http://media.swissre.com/documents/sigma4_2015_en.pdf swiss re (2016). world insurance in 2015: steady growth amid regional disparities, no. 3, zurich, switzerland. retrieved from http://media.swissre.com/documents/sigma_3_2016_en.pdf swiss re (2017). world insurance in 2016: the china growth engine steams ahead, no. 3, zurich, switzerland. retrieved from http://media.swissre.com/documents/sigma3_2017_en.pdf baltic journal of economic studies 306 vol. 3, no. 4, 2017 антонина шолойко роль инфраструктуры мирового страхового рынка аннотация. целью работы является определение роли и значения элементов инфраструктуры мирового страхового рынка. для достижения цели были поставлены следующие задачи: рассмотреть динамику развития мирового страхового рынка с 2012 по 2016 гг.; определить группы элементов инфраструктуры мирового страхового рынка; охарактеризовать элементы инфраструктуры мирового страхового рынка. методология. поставленные задачи были выполнены через использование таких методов, как: группировка элементов инфраструктуры мирового страхового рынка, сбор информации о элементах инфраструктуры мирового страхового рынка, обобщение для определения роли и значения элементов инфраструктуры мирового страхового рынка. результаты. мировые страховые премии увеличивались и снижались с 2012 по 2016 гг. и не превышали 6,3% в валовом внутреннем продукте. на объем мировых страховых премий как показатель развития мирового страхового рынка влияет множество факторов. одним из них является деятельность элементов инфраструктуры мирового страхового рынка, которые необходимо поделить на несколько групп: a) международные страховые ассоциации (ассоциации организаций, связанных со страхованием, но члены таких ассоциаций не предоставляют страховые услуги – международная ассоциация органов страхового надзора, международная ассоциация агентств по борьбе со страховым мошенничеством, глобальная федерация страховых ассоциаций, международный страховой фонд); b) международные ассоциации страховщиков (ассоциации страховщиков и других организаций из определенной области страхования – международная ассоциация страховщиков депозитов, международный союз страховщиков кредитов и инвестиций, международная ассоциация страховщиков сельскохозяйственного производства, международная группа клубов p&i, международный союз авиакосмических страховщиков, международный союз морского страхования, международная ассоциация страховщиков технических рисков); c) международные ассоциации экспертов в сфере страхования (ассоциация страховых экспертов, которые обслуживают предоставление страховых услуг – международная ассоциация профессионалов по страхованию, международная организация актуариев, международная ассоциация аджастеров). значение. это исследование показало, что все группы элементов инфраструктуры мирового страхового рынка играют значительную роль в развитии страховой отрасли, поскольку они ставят перед собой такие задачи, как: обеспечение глобальной стабильности, безопасности и эффективности посредством сотрудничества с национальными правительствами и предоставления членам ассоциаций информации, образования, консультаций и других услуг. необходимо также провести дополнительные исследования, чтобы рассмотреть деятельность элементов инфраструктуры европейского, американского и азиатского страховых рынков как ведущих в мире. baltic journal of economic studies 148 vol. 4, no. 1, 2018 corresponding author: 1 research institute of public law. e-mail: ndz0909@gmail.com orcid: 0000-0002-2045-9631 2 state research institute of the ministry of internal affairs of ukraine. 3 department of history of state and law, national academy of internal affairs of ukraine doi: https://doi.org/10.30525/2256-0742/2018-4-1-148-155 administrative and legal regulation of banking system in ukraine and foreign countries dmytro zhuravlov1 research institute of public law, ukraine valeria riadinska2 state research institute of the ministry of internal affairs of ukraine, ukraine yevhen durnov3 national academy of internal affairs of ukraine abstract. the purpose of the article is to conduct a comparative analysis of the administrative and legal principles of the functioning of the banking system of ukraine and foreign countries and to determine on this basis ways to improve domestic legislation in this area. the subject of the study is world experience in the field of state regulation of the banking system. methodology. the study is based on a comparison of foreign experience in the legal regulation of the functioning of the banking system on the example of the usa, great britain, japan, germany, and france with the current state of the state regulation of the banking system in ukraine. due to the use of the arsenal of general scientific and special-scientific methods and techniques of scientific knowledge, the content of administrative and legal regulation of the banking system under conditions of reorientation of the country’s economy from the planned form to the market one, liberalization of foreign economic relations, strengthening of integration and globalization processes in the international financial and commodity markets was characterized and determined. results of the comparative legal study showed the inefficiency and excessive “transparency” of the national model of the administrative-legal regulation of the banking system in comparison with foreign systems, as well as the imperfection of the legal and regulatory framework for its functioning. practical implications. administrative and legal principles of functioning of the banking system in certain foreign countries reflect the greater effectiveness of the mechanism of its state regulation in comparison with ukraine. in most countries, this mechanism is oriented to the distribution of regulatory and control powers between the central bank and other government departments, which, in turn, reduces the risk of administrative pressure on individual banking institutions and the banking system as a whole. it is expedient to include this experience in the legal system of our state in order to increase its economic stability. value/originality. a comparative legal study of world experience in the administrative and legal regulation of the functioning of the banking system of ukraine and foreign countries provides a better understanding of prospects for the development of national administrative legislation in this area. key words: administrative and legal regulation, banking system, foreign experience. jel classification: m1, g24 1. relevance ukraine’s acquisition of independence was an initial step towards the evolution of our state and also led to its accession to the world community. the country obtained an opportunity to develop as a social, democratic state, where securing the rights and freedoms of citizens is one of the main prerogatives. at the same time, there was a situation where the regulation in certain spheres of vital activity of society was considerably complicated as a result of the rapid change in the vector of the functioning of the state apparatus, the legal system, etc. for example, a large number of problem points arose in the financial sector of the state, namely, the construction of the banking system. the reorientation of the country’s economy from the planned to the market form has necessitated the development of a fundamentally new baltic journal of economic studies 149 vol. 4, no. 1, 2018 model of legal regulation and practical coordination of the entire array of banking institutions. in this regard, the issue of administrative and legal regulation of the banking system has acquired a high level of relevance in the legal environment. at the same time, one should not forget that in recent years the development of our state is entirely aimed at joining the european environment, which requires a large number of reforms in various areas of ukraine’s functioning, in particular, the banking system. in this context, a scientific analysis of foreign experience in the field of state-legal coordination of this category is appropriate for the purpose of its further implementation within the framework of the national legal system. on the basis of this thesis, we believe it necessary to consider the peculiarities of the administrative and legal regulation of the banking system in ukraine and foreign countries. 2. the degree of development different aspects of the administrative-legal regulation and activity of the banking system as an independent financial-legal category were investigated in the works of many domestic and foreign scholars such as: aharkov  m.m., adamyk b.p., andriiko  o.f., bernaziuk  ya.o., voronova l.k., hetmantsev  d.o., starynskyi m.b., lavrushyn o.i., kovalchuk a.t., kostiuchenko o.a., orliuk o.p., shamrai i.a., shemshuchenko h.yu., and others. instead, a proper scientific review of the foreign experience of administrative and legal regulation of the banking system was not carried out by scientists. the purpose of the article is to conduct a comparative analysis of the administrative and legal regulation of the banking system in ukraine and foreign countries. 3. presentation of the main material administrative-legal regulation of the banking system is a complex legal mechanism, which constitutes a large number of legal rules. at the same time, the mechanism itself is a kind of classical category of legal regulation, which largely determines its specificity. note that in the dictionary literature, the term “regulate” is interpreted as: 1) to order something, manage something, subordinating it to the relevant rules, to a particular system; 2) to demand the normal operation of the machine, installation, mechanism, to ensure the coordinated interaction of the components, parts (bilodid, 1977; explanatory dictionary of contemporary ukrainian language, 2005). in the legal encyclopaedia, edited by shemshuchenko yu.s., the category of legal regulation is defined as one of the main means of state influence on social relations with a view to organizing them in the interests of man, society, and the state. it is a kind of social regulation. the subject of the category are relations, the ordering of which is impossible without the use of the law. in addition, the author emphasizes that legal regulation has the expression in the form of a mechanism, the constituent elements of which are: the rules of law, legal facts, actually legal relations (social relations, mediated by the rules of law), acts of realization of rights and obligations of subjects of social relations and legal sanctions used to violators of the rule of law (shemshuchenko, 1998). it should be noted that the definition described characterizes the category of legal regulation in general. instead, administrative law is one of its varieties, which acquires its own particularities in connection with its membership in a particular legal field. when analysing the content of the administrativelegal regulation mechanism, it is expedient to indicate that, in accordance with the great interpretative dictionary of modern ukrainian language under the general editorship of busel v.t., the term “administer” is interpreted as bureaucratic management, with orders and instructions, instead of specific (busel, 2005). that is, it is about the presence of a power, management aspect within the legal regulation. in addition, the phrase “administrative-legal” shows that the mechanism of legal regulation of this type is carried out through the legal rules of the administrative branch of law. the latter, according to alforov s.m., vashchenko s.v., dolhopolov m.m., and kupin a.p. – a branch of law (a set of legal rules) that regulates, in order to fulfil tasks and functions of the state, public relations of a managerial nature, which consist in the sphere of executive power, the internal organization of other state bodies, as well as in the process of implementation by public organizations, their bodies of external legal-power authorities (alforov, vashchenko, dolhopolova, kupin, 2011). in the scientific environment, there are a large number of views on the content of specifically administrativelegal regulation. for example, malko a.v. believes that the latter – a system of legal means organized in the most consistent manner in order to streamline public relations and promote the satisfaction of interests of subjects of law (malko, matuzov, 2004). according to holosnichenko i.p., it is necessary to understand the mechanism of administrative-legal regulation as the totality of administrative and legal means, by which there is the influence on relations arising in the process of implementation of executive power (holosnichenko, stakhurskyi, 2005). quite meaningful as regards to the characteristics of administrative-legal regulation is the approach of kozlov yu.m. he notes that this mechanism is characterized by legal means of regulatory type, that is, the regulations (including prohibitions), which find their direct expression in the fact that one of the parties to the regulated relationship has been given a certain amount of legally binding powers addressed to baltic journal of economic studies 150 vol. 4, no. 1, 2018 the other party. that is, it is a form of legal mediation of relations, in which one of the parties acts as a manager (the subject of management), and the other – who is managed (the object of management) (kozlov, 2002; khomiachenko, yeriashov, 2014). in turn, lazarenko v.a. to a certain extent shares this opinion. in defining the essence of the administrative and legal regulation of environmental security, the latter emphasizes that it is an integral part of public administration exercised by authorized state bodies, local self-government bodies, and the public, whose authorities are responsible for ensuring environmental security in ukraine (lazarenko, 2010; budnyk, muliavka, 2017). consequently, on the basis of the above-mentioned information, we have formed the proper definition of administrative-legal regulation, according to which, it represents a holistic mechanism, which is expressed in the effect of authorized state bodies on a specific group of social relations, that is, a certain object, carried out on the basis of administrative rules of law and with the help of statutory legal means. in the context of this study, such an object is the social relations in the field of the functioning of the banking system. it should be emphasized that the category of the banking system is differently defined in the legal literature. for example, in the textbook on banking law by kostiuchenko o.a., the banking system is considered as a part of the monetary system, an element of the economic basis of a society that develops in accordance with the laws of a market economy (kostiuchenko, 2006). оrliuk о.p. observes a similar opinion, which indicates that the banking system is an integral part of the credit system of the state, which is a combination of different organizational and legal forms and the specialization of banking institutions operating within a single financial system and a single monetary and credit mechanism in a certain period of time (orliuk, 2005). fomin h.f. offers a slightly different approach to the definition of the banking system. he points out that the banking system is a legally defined set of different types of banks, through which the mobilization of funds of legal entities and individuals is carried out and various services for receiving deposits, calculations, and loans are provided to them (fomin, 2008). quite interesting and broad is the definition that the banking system is interpreted as complex system that belongs to a higher level and that is self-organized and historically formed under the influence of external and internal processes, is an integrated set of institutions that carry out banking activities, and banking institutions that carry out the function of internal management. this system is characterized by reactive legislative and adaptive internal ordering of links between individual elements and the external environment, as well as the ability to actively influence it and its regulatory action (maslennikov, sokolov, 2003; stoiko, 2010). definition of the banking system also exists at the legislative level. in accordance with article 4 of the law of ukraine “on banks and banking”, the banking system of ukraine consists of the national bank of ukraine and other banks, as well as branches of foreign banks established and operating in the territory of ukraine in accordance with the provisions of the current legislation (on banks and banking : law on 07.12.2000 №2121-ііі, 2001). in our opinion, the legislative definition of a banking system is not entirely correct since it does not fully disclose features of this category. so, in our opinion, the banking system is not only a set of all banking institutions that are created and operate in the territory of ukraine in accordance with the current legislation but also a set of legal relations that arise in the field of their functioning. so, after revealing the theoretical content of the mechanism of administrative and legal regulation of the banking system, we can proceed to the analysis of its practical implementation in ukraine and foreign countries. in the territory of our country, the national bank of ukraine (hereinafter – the nbu) plays a key role in the sphere of state influence and coordination of the banking system. the said body is the central bank of the state, the special central body of state administration, legal status, tasks, functions, powers, and principles of organization of which are determined by the constitution and other legislation (on the national bank of ukraine : law on 20.06.1999 №679xiv, 1999). the legislation defines quite a wide range of functions of the nbu, which, for example, includes: ensuring the stability of the monetary unit; development and implementation of monetary policy; implementation of the issue of the national currency of ukraine on the basis of monopoly; providing lending to banks in the last resort; organization of the refinancing system; regulation of payment systems and systems of settlements in the territory of the state, determination of the order and forms of payments, including between banks; conducting bank regulation and supervision on individuality and on a consolidated basis, etc. (on the national bank of ukraine : law on 20.06.1999 №679xiv, 1999; constitution of ukraine : law on 28.06.1996 №254к/96-вр, 1996). it should be noted that according to article 1 of the law of ukraine “on the national bank of ukraine”, the essence of the regulation of the banking system of the national bank is to establish a system of rules governing banks, determine general principles of banking activities, the procedure for conducting banking supervision, the responsibility for violation of banking legislation (on the national bank of ukraine : law on 20.06.1999 №679-xiv, 1999). the basic forms of the administrative and legal regulation of the banking system and activities of banks for today are defined: baltic journal of economic studies 151 vol. 4, no. 1, 2018 1) firstly, administrative regulation, which includes: registration of banks and licensing of their activities; establishment of requirements and restrictions on the activities of banks; application of sanctions of an administrative or financial nature; supervising the activities of banks; providing recommendations on the activities of banks; 2) secondly, indicative regulation, which includes: establishment of mandatory economic standards; definition of the standard of mandatory reserves for banks; establishment of rates of deductions to reserves for covering risks from active banking operations; determination of interest rate policy; refinancing of banks; correspondent relations; management of foreign exchange reserves, including foreign exchange interventions; transactions in securities in the open market; import and export of capital. 3) thirdly, banking supervision (on banks and banking: law on 07.12.2000 №2121-ііі, 2001). the latter form is undoubtedly a priority over others, taking into account the fact that the purpose of banking supervision is the stability of the banking system and the protection of interests of depositors and creditors of the bank regarding the safety of keeping customers’ funds in bank accounts. in addition, the exclusive feature of the administrative and legal regulation in the form of banking supervision is confirmed by the following aspects: the volume of implementation, because in accordance with the law, the nbu’s supervisory activities cover all banking institutions operating in the territory of ukraine, as well as participants of banking groups abroad; the possibility of obtaining information, including conference, from state authorities and other persons for the purposes of banking supervision; the existence of the right to demand from banks and their managers, as well as banking groups, bank group participants, elimination of violations of banking legislation, implementation of regulatory acts of the nbu, etc.; the existence of the right to introduce a special regime of control over the activities of banks and the appointment of curators, and so on (on banks and banking : law on 07.12.2000 №2121-ііі, 2001). some issues of the administrative and legal regulation of the banking system are regulated at the sub-legislative level, namely, in the provisions of the resolutions of the national bank. the resolutions fix the number of regulations and instructions that govern specific aspects of the conduct of banking activities. they are usually of an imperative nature, that is, they require a strict compliance with certain banking institutions and bodies of the nbu. interesting in our opinion is the scientific view of iskizarov o.m., who believes that along with the forms of administrative and legal regulation of the banking system established in the law of ukraine “on banks and banking” and the law of ukraine “on the national bank of ukraine”, certain powers in the realization of this mechanism has the individual deposit guarantee fund. based on the provisions of the law of ukraine “on individuals’ deposit guarantee system”, the scientist emphasizes that this legal act clearly establishes and delimits the powers of the fund and the national bank of ukraine regarding the procedure for withdrawal from the market and the liquidation of insolvent commercial banks. moreover, he notes that the whole section ix of the analysed law is devoted to the coordinating activities of the individual deposit guarantee fund and the national bank of ukraine, which indicates the importance of this issue (iskizarov, 2017; on individuals’ deposit guarantee system : law on 23.02.2012 №4452-vi, 2012). thus, the conducted analysis showed that in ukraine, the mechanism of administrative-legal regulation of the banking system is fully consolidated within the framework of the activities of the national bank of ukraine, which acts as the main body in the mentioned industry. the positive point is that the legislation clearly lays down the authority of the nbu regarding the implementation of the mechanism of state influence on the banking system. instead, some scholars point to the general imperfection of the legal framework of the latter, noting its cumbersome nature. for example, senysh p.m. indicates that the administrative and legal regulation of the banking system is complicated, firstly, by the presence of a large number of legal acts, secondly, by frequent changes and additions to them, and thirdly, the lack of a single codified act on banking activities (senyshch, 2014). that is, there is a situation where the powers of the relevant bodies in the field of state regulation of the banking system are legally enshrined in the provisions of several acts of various hierarchical subordinations at once. their provisions often contradict each other, which ultimately complicates the practical implementation of the mechanism of administrative and legal regulation of the banking system as a whole. world experience in the administrative and legal regulation of the banking system is significantly different from the national one. this, above all, is related to the fact that a large number of foreign countries built their banking systems and mechanisms of influence on them over the ages in terms of a market economy. for example, great britain can rightly be considered the original source of traditions in the field of administrative and legal regulation of the banking system because it was this country in 1694 where the first central bank in the world was created (official website of the bank of england). at the same time, for quite a long time, there was no legislative basis in great britain baltic journal of economic studies 152 vol. 4, no. 1, 2018 regarding the state regulation of the banking system. in particular, banking supervision was carried out on the basis of the joint stock companies act. the result of such a system of regulation was the emergence of large banking associations with a wide system of branches and offices in the country and abroad. since the late 70s, the situation has begun to change, as the control and regulation of the credit and financial sector has been strengthened in the country. in accordance with the 1979 law, the mandatory licensing of commercial banks was introduced and a nationwide deposit protection fund was established. the banking law of 1987 defined the rules for the activities of commercial banks, the procedure for merging banks, and introduced audits (pavliuk, 2015; bus, 2009). to date, the banking system of great britain has a well-developed infrastructure, is based on a strong money market, closely linked to the main financial centres of the world, mainly focused on servicing international economic relations. the bank of england is a financial institution independent of the government. however, it is formally still subordinated to the ministry of finance (podplietnii, 2010). the key powers of the bank of england are: conducting monetary policy and issuing national currency; supporting the stability of the financial system; regulation and supervision of other banks and financial institutions (official website of the bank of england). no less interesting is the mechanism of administrative and legal regulation of the banking system of the united states of america. for a long time, the state influence on the banking system in the usa was superficial and was aimed solely at securing deposits and supporting banking institutions in order to prevent the bankruptcy of the latter. this was due to the fact that in the united states until the xx century, there was virtually no central issuing bank (the encyclopedia americana – international edition, 1997). to date, the administrative and legal regulation of the banking system is carried out on two levels: national and state levels. the central government body in this mechanism is the federal reserve system (hereinafter referred to as the frs). it is comprised of federal reserve banks, as well as the board of governors, serving as the key supervisory and regulatory body within the frs. the latter in its activity implements four main functions, namely: 1) effect on the offer of money and credit; 2) regulation of activities and supervision of financial institutions; 3) the role of the bank and financial representative of the state; 4) the offer of payment services to citizens through deposit-taking institutions (the encyclopedia americana – international edition, 1997; official website of the u.s. federal reserve system; buriak, 2015). that is, unlike many european states, the banking system in the usa is regulated by the federal reserve system – a set of interconnected institutions, but not the only government agency in the person of the central bank. commercial banks in the usa are governed by state law. in addition, each commercial bank is the subject of federal regulation and supervision and also has the right to join the federal reserve system if it meets specific requirements. it should also be noted that the control over banks and their activities at the state level is also laid upon state departments. at the same time, in addition to special local authorities, administrative and legal influence is exercised by decisions of other federal bodies, namely: the u.s. department of justice (merger), the u.s. securities and exchange commission (admission to the stock exchange and issue of shares), the u.s. chamber of commerce (servicing consumers), etc. there are also non-governmental bodies controlling the work of individual groups of credit institutions. for example, such bodies include the american bankers association, the independent community bankers of america, and others (buriak, 2015). despite the fact that the american model of administrative and legal regulation of the banking system is rather complex and, at first glance, not effective, it is this model, based on which the mechanism of state regulation of the banking system of japan is built, of course, with a significant proportion of national characteristics. so, the banking system of japan consists of the central bank, public and private financial institutions. a group of public and private financial institutions includes city banks, trust banks, large regional banks, medium and small regional banks. the central bank manages all the banks of the country. along with the ministry of finance and the federation of economic organizations, it carries out monetary regulation in the country. in addition, the bank of japan solves three main tasks. firstly, it forms the course of the national currency, regulating the volume of money in circulation, maintaining the stable value of the yen inside the country and abroad. secondly, it regulates money circulation by setting interest rates. thirdly, this is a bank that solves the problem of maintaining the stability of the country’s financial system and its sustainable economic development (shapiro, liashenko, 2016). one of the most perfect in the world is the german model of administrative and legal regulation of the banking system (podplietnii, 2010; sarkisiants, 2006). the german banking system in general consists of the federal bank (bundesbank), universal banks, which include private, cooperative, and public law banks and specialized banks, which are private and public law banks. the central place in this system is occupied by the bundesbank. it is entrusted with the implementation of regulation with the help of currency and monetary powers granted to it by law, monetary circulation and baltic journal of economic studies 153 vol. 4, no. 1, 2018 credit provision of the economy in order to maintain the currency stability. in addition, the bundesbank “cares” about the banking performance of the settlement system in the country and abroad. at its disposal, there are a number of monetary and political instruments used by it independently, without interference by other agencies (official website of the federal bank of germany; zlatina, 2010). an important role in the mechanism of administrative and legal regulation of the banking system is played by the central landesbanken (state banks). the task of these agencies is to carry out operations and administrative management in their region. their competence also includes the right to conclude under their responsibility for transactions with land administrations and credit institutions in their region (melnyk, taranhul, hordei, 2010). directly administrative and supervisory powers over the banking system and its individual components in germany are entrusted to the federal office of control, which is subject to instructions and oversight by the federal minister of finance. the control function is not within the competence of the bundesbank in order to prevent administrative pressure on banks. the office is an independent federal supreme body that manages a system of credit institutions, issues licenses for banking activities, establishes mandatory requirements for banking institutions, supervises compliance with banking legislation, and has the right to demand from banks any information, audits, interfere with operational activities, and issue orders for the immediate cessation of operations (zlatina, 2010; starynskyi, 2006). the mechanism of administrative and legal regulation of the banking system in france is characterized by a high level of efficiency. the main feature of the banking system of the specified country is that it is completely under state control. french banks not only have no right to hide from the relevant public services the size and form of accounts and the movement of capital but are obliged to inform them of significant operations, especially with foreign countries (stukalo, lytvyn, derkach, 2014). a key authority in the banking system regulation is the bank of france. the latter has the right to make regulations and to develop rules of professional activity. it is also empowered to give an opinion on all issues of credit policy, participates in the preparation and implementation of activities carried out in this area on the basis of government resolutions. characteristic is the centralization of the entire administrative power in the hands of the head, appointed by decree. the central bank is traditionally the guardian of gold and foreign exchange reserves. the main methods of monetary regulation of the economy and the banking system of france by the central bank are: accounting operations; open market operations; changes in the standards of obligatory reserves of credit institutions in the central bank; control over loans (stukalo, lytvyn, derkach, 2014). along with the bank of france, the committee on banking regulation and the banking commission are responsible for the administrative and legal regulation of the banking system within the limits of its powers. the first body is involved in the development and adoption of legal acts on the coordination of the activities of banks and credit institutions. in essence, the committee adopts mandatory economic standards. in turn, the banking commission ensures the security of the french banking system (oksin, 2014; bank portfolio). 4. conclusions so, having conducted a comparative analysis of the peculiarities of the mechanism of administrative and legal regulation of the banking system in the territory of ukraine and foreign countries, we have come to a number of conclusions. 1. the national experience of state-legal influence on the banking system is based on the consolidation of powers in this area within the framework of activities of the national bank of ukraine. this model of administrative and legal regulation of the banking system is not generally effective and “transparent” in comparison with the foreign model and its implementation is complicated by an imperfect regulatory framework, which provisions are often contradictory. 2. an analysis of foreign experience in the administrative and legal regulation of the banking system has shown that in most countries this mechanism is focused on the distribution of powers between different state authorities. in other words, regulation of the banking system is carried out by several agencies within their authority. the purpose of this approach is to ensure the security of the banking system against the pressure from the central bank of the country. 3. at the same time, excessive allocation of powers between many public authorities can significantly impede the administrative and legal regulation of the banking system. this is most clearly expressed in the experience of the united states. the presence of a large number of regulatory governmental and nongovernmental bodies in addition to a special legal system, which has general federal and state levels, negatively affects the mechanism of state influence on the banking system, causing its bulkiness. in this regard, it is not appropriate to take over and introduce the experience of this country into the legal system of ukraine. as a result, it should be noted that the mechanism of administrative and legal regulation in the territory of our state should be changed. in this context, the experience of germany and france where regulatory baltic journal of economic studies 154 vol. 4, no. 1, 2018 and control powers are shared between the central bank and other government departments, which, in turn, reduces the risk of administrative pressure on individual banking institutions and the banking system as a whole, is most appropriate for implementation. in addition, the construction of an efficient and effective mechanism of administrative and legal regulation of the banking system requires systematization of the current legislation in this area, in order to eliminate contradictions and gaps. references: bilodid i.k. 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(1994). m.: somitek, 750 p. baltic journal of economic studies 202 vol. 4, no. 1, 2018 corresponding author: 1 department of accounting and taxation, volodymyr dahl east ukrainian national university. e-mail: docentklus@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-202-207 accounting and analytical and management tasks for the classification of industrial enterprises yuliia klius1 volodymyr dahl east ukrainian national university, ukraine abstract. modern economic development trends such as globalization of markets, increasing competition, changing consumer demand, shortening life cycle of goods and technologies, increasing demands on their quality, and rising costs of used resources require executives and managers to find effective methods for managing the enterprise activity. ensuring the competitiveness of enterprises under such conditions is impossible without the introduction of the latest management concepts, which necessitates changes and development of functional management, one of which is cost management based on the definition of new criteria for their classification. classification of costs for management purposes should meet the main requirement – be based on signs that allow differentiating costs to manage them in various aspects. it creates preconditions for determining the level of costs by the volume of management, organization of planning, accounting, control, and analysis. the purpose of the article is to consider accounting and analytical, and managerial tasks of the classification of costs of industrial enterprises and their improvement. methodology. the methodological basis of the paper is a set of methods and principles of scientific knowledge, general and special methods and techniques used in the study. the theoretical basis of the research is scientific works of foreign and domestic scientists on cost management, organization of information systems, cost accounting management, cost management methods. the legal basis for the study was the current legislative and regulatory documents governing the formation of costs of enterprises in ukraine. the information base is official statistics, reporting and accounting information of enterprises, resources and publications of the internet, results of our own research. to achieve this purpose, when writing the article, methods of a systematic approach (for research and characterization of the theoretical basis of cost classification) and structural and logical analysis (for defining the criteria for classification of costs of an industrial enterprise) are used. practical implications. the obtained results and the developed recommendations constitute a methodological basis for improving the cost management of industrial enterprises based on the definition of new criteria for their classification. results of the most practical significance include: common features and differences in the approaches to the classification of industrial enterprises’ costs are determined, the objectives of cost classification are determined, the classification of costs by costing articles is considered, the necessity of distinguishing additional attributes of cost classification is substantiated. value/originality. improved classification of costs of an industrial enterprise, which is expanded by additional criterion features (the possibility of management, reflection in accounting and reporting, principle of accepted commitments, place of formation, by the factor of stability), caused by the need to determine the relationship between the size of the enterprise costs and the possibilities of implementing managerial influence on them by managers of different levels, which enables to optimize cost composition and structure, which are reflected in different methods of cost management and are the basis for their choice of agreement. key words: costs, classification, accounting, analysis, management, enterprise. jel classification: m41, м11, м21, l53, о12 1. introduction one of the methods of research of the objects under study is classification, that is, division into classes on the basis of certain general features of objects regular relations between them. the classification of costs allows identifying objectively the existing cost groups, processes of cost formation, and interrelationships between their individual parts. the complexity of the structure and the variety of processes in the formation of costs involves their subdivision by a number of features. depending on goals and methodological approaches, there are several classifications of costs. the baltic journal of economic studies 203 vol. 4, no. 1, 2018 more distinguished the signs of classification, the higher the degree of recognition of objects. cost classification for management purposes should respond to the main requirement – be based on features that allow differentiating costs for cost management in different aspects. it creates preconditions for determining the level of costs of their management objects, an organization of planning, accounting, control, and analysis. issues of classification and grouping of costs according to various features have been studied in detail by domestic scientists and foreign researchers. classification of production costs reveals objectively existing cost groups, processes of their formation, and interrelationships between their separate parts. without classifying costs, it is impossible to solve the problem of managing them in an enterprise. the complexity of the structure and the variety of processes in the formation of costs involves their subdivision by a number of features. to organize an effective system of enterprise management, it is necessary to apply an economically justified cost classification on certain grounds. classification of costs implies their integration into logical groups. this helps not only better predict and take into account costs but also establish the degree of their impact on the level of production efficiency. thus, the purpose of classifying costs is to allocate that part of costs that can be influenced by specialists of the enterprise (organization), managing them, and to satisfy information needs of internal and external users. 2. objectives of cost classification costs as an object of knowledge are well-studied in the foreign theory of accounting and analysis. however, in the theory of domestic literature, scientists and economics-practitioners have not yet come to a common standpoint on what signs could be used to classify production costs and what significance has a particular sign of classification for the solution of analytical and administrative tasks. the classification of costs has purposefulness and is constantly changing under the influence of practical management needs and theoretical research. classification reveals objectively existing cost groups, cost formation processes, and relationships between their separate parts. at present, in the practical activity of the enterprise, management is provided with information on the cost of production in the form of segments of production costs and cost accounting articles, which is clearly not sufficient for the organization of the cost management system. to manage, managers need not just costs, but information about the object of costs – the product, the work, the service, or the type of activity of the enterprise, which need to be defined in relation to their cost production (implementation, provision). cost classification is predominantly purposeful. it is a consequence not only of the practical need for cost management but also one of the tools of theoretical research in this field. classification of costs is not static, constant. under the influence of changes in the needs for cost management, the development of the theory of costs and individual practical aspects of their management, the classification of costs developed all the time, evolved through the introduction of new criteria. in our time, a large number of criteria are used in the classification of enterprise costs. some of them have long been used in cost planning and accounting, since the time of the administratively centralized economy, others have appeared not so long ago in connection with the development of needs for cost management and, to a certain extent, are borrowed from foreign theories and practices. in economic literature, there are 3 to 12 signs of the classification of costs. in general, the full classification of costs in ukrainian systems includes: calculation (stock valuation), decision-making, control. according to many authors, the problem of classifying costs is a variety of features of classifications and the absence of hierarchy. table 1 groups features of the classification of costs according to their traditional use in the domestic and foreign practice of accounting and management. in western countries with a developed market economy, all production costs are usually divided into three elements (as basically there are no detailed classifications): 1) direct costs for materials; 2) direct labour costs; 3) indirect costs (chyzh, 2010). comparing the systems of the classification of costs, which are used in the domestic and foreign accounting, we can talk about the general moments and differences. both in ukraine and abroad, there are classifications of costs into general-overhead, directindirect, variable-fixed for the cost management. however, in foreign countries, each organization in its system of production accounting independently develops and uses its cost nomenclature to manage costs. in the domestic practice, there is the only cost classification for all branches of the economy, which until now was considered a significant advantage of domestic accounting in front of the west. at the same time, both in domestic accounting and abroad, the classification of costs by certain signs is conditional, often one concept is replaced by another (for example, indirect and overhead, general and fixed costs). this can be explained by the pragmatism of western accounting since everything is aimed at creating the conditions for simplification and practical application, which sometimes violates a harmonious system or classification. in the domestic theory and practice, this is related to the dominant idea of the absolute accuracy of the accounting records and different interpretations of the same costs in works of many authors on this issue, without taking into account the practical value. baltic journal of economic studies 204 vol. 4, no. 1, 2018 only system accounting of these conditions can become the main stimulus for developing a holistic theory of cost classification for practical necessity. costs of an enterprise are primarily divided into two main categories that correspond to the functional activities, with which they are related: production costs and non-production (operating) costs. production costs are those determined by the activity of the enterprise and the transformation of physical and raw material resources into the finished product with the help of the labour of production workers in the use of production equipment. they are subdivided into three categories: direct costs on materials, direct labour costs, and total overhead costs. direct costs for the materials of the enterprise include all expenses for those materials that are a part of the final product, making its basis. materials used to create conditions of production or which cannot be linked to a particular product, are not attributable to direct costs but are included in the production overhead. direct labour costs represent the wages of workers directly engaged in product manufacturing, work execution, or the provision of services that can be directly attributed to a specific cost object. production overhead costs are the costs associated with the production process, which cannot be attributed to a specific cost object in an economically feasible way. an example of these costs can be indirect wages, maintenance and repair costs of equipment and production facilities, depreciation and insurance of fixed assets, municipal and rent payments. costs of direct materials, together with the cost of direct labour, form the service value. direct labour costs and production overhead costs in amounts represent conversion costs, that is, costs of processing raw materials for conversion into the finished product. the size of production costs directly depends on the types of work and services provided to consumers and technological processes of their provision. management of such costs is possible only from the position of choice of an assortment of work done and services provided by enterprises. non-productive costs include costs for management, research and development, sales and other business functions. according to the statutory documents in force in ukraine, non-productive costs include administrative costs, expenses for sales, and other operating expenses. the considered features of cost classification are used to calculate their size in order to compile financial statements of an enterprise designed to assess its economic status and make decisions on investing and lending to a business entity and developing a strategy for further development. proceeding from the possibility of tracking the movement of costs to a particular object of calculation, they can be considered as direct and indirect. direct costs are costs that can be directly attributed to a specific cost object. costs that cannot be identified with the specified cost object are indirect costs. depending on how necessary the costs are for the production, they are subdivided into costs included in the production cost and period costs. the production cost includes the costs attributable to the cost of table 1 cost classification signs of classification group of costs domestic accounting by economic elements economic elements of costs: material costs (minus the cost of returns); depreciation of fixed assets; salary (basic and additional); deductions for social insurance; other expenses by net cost items cost accounting items by relation to the technological process general, overhead by composition individual, composite by inclusion in the cost of production of goods direct, indirect by relation to the finished product costs for unfinished production, costs for the finished product by roles in the production process production, non-production by possibility of coverage by plan planned, unplanned foreign accounting by expediency productive (effective), non-productive (ineffective) by relation to the production volume variable, fixed, mixed by the period of occurrence current, one-time by degree of regulation regulated, discretionary (partially regulated), poorly regulated (given) by centres of responsibility controlled, uncontrolled by degree of change in the decision-making process relevant, irrecoverable, prescribed baltic journal of economic studies 205 vol. 4, no. 1, 2018 inventory. such costs are treated as assets until the goods to which they relate will not be sold. at this moment, these costs become the cost of realized products. period costs are costs that are not included in the production cost because they are not necessary for production and are treated as costs of the period in which they were incurred. period costs are administrative expenses, expenses on sales, other operating expenses. in order to provide uniform principles for the formation of the product cost, the costs are grouped according to their intended use by economic elements and calculations. in the process of management, estimates are needed both for providing cost saving by their elements, and for the preparation of material balances, and the development of financial plans. for industrial enterprises, there is a mandatory nomenclature of production costs for economic elements: material costs; labour costs; deductions for social events; amortization; other expenses. 3. cost classification by costing items the grouping of costs according to costing items reflects their composition depending on the allocation of costs and places of their occurrence. enterprises form the production cost according to the following costing items: raw and other materials; fuel for technological needs; power for technological needs; purchased resources, completing products, semifinished products; costs of other material resources; works and services of production character of thirdparty enterprises and organizations; basic wages of production workers; additional wages of production workers; other incentive and compensatory payments; deductions for social events; total production costs; administrative costs; sales costs; other operating expenses. classification by items is mixed. it uses two different identifiers: the direction of activity and its kind, which contradicts the principles of constructing classifications in general. such a classification feature as the frequency of occurrence makes it possible to characterize production costs from the position of the calendar period of their occurrence (current and one-time costs). such a classification is important for management from the point of view of cost recovery: either they are repaid immediately or by the accrual of depreciation. this classification is also important due to the fact that there are different methods of managing these costs. current cost management refers to operational tactical management and one-offs to strategic ones. depending on the expediency, costs in the itemized section are divided into productive and non-productive. productive costs stem from the nature of the enterprise’s production activities and are projected by cost estimates and business plan. these costs are included in the cost of products and services. unproductive costs are not economically inevitable but occur over the lack of technology and organization of production. it is a loss. such costs in the activities of industrial enterprises have a significant proportion. detection and elimination of such costs is an important reserve for reducing the company’s costs. therefore, they should also be considered on certain grounds, which will ensure control over this type of expenditure. signs of the classification of these costs are: the type of resources lost (materials, raw materials, finished products, labour of workers, means of production); the nature of losses (incomplete use of resources, inappropriate use of resources); stage of origin (processes of production, transportation, circulation); sources of cost coverage (cost of works and services, net profit of the enterprise). the cost management information system should identify these costs. unrecognized losses in the information system (occasional losses) increase the cost of services rendered and are untapped opportunities to reduce the cost of the enterprise. in resolving the issue of reducing the losses of industrial enterprises, not only the introduction of resource-saving technologies but also a complete system of information support for cost management, which provides centres of responsibility for losses at all levels of management is of great importance. in the composition of the item, the costs of industrial enterprises can be homogeneous (single-element), consisting of one element of cost, or complex, consisting of several elements. consideration in the management of just one-element costs increases the amount of information in management, which also negatively affects the cost-effectiveness management. from the viewpoint of management, planning, and control, the most important feature for cost classification is how their dynamics changes, depending on changes in production volume or other performance indicators. growth or decrease in the level of activity of the enterprise causes a corresponding change in the determined costs. at the same time, other costs remain unchanged. by dynamics, costs are divided into the following three main categories: variable, fixed, mixed costs. by describing costs by this criterion, it is important to establish not only the dependence on the change in the scope of activities but also the speed of these changes. in order to make decisions on the increase of production volumes, it is necessary to determine the average cost, which includes costs per unit of production of services. although the average aggregate costs give an idea of the cost of production typical for the enterprise unit, they do not allow judging the change in total costs of the baltic journal of economic studies 206 vol. 4, no. 1, 2018 enterprise when the volume of output is changed. the growth of total costs of an enterprise with an increase in their output per unit of production is called marginal costs. this classification allows judging aggregate costs in a different form. average aggregate costs indicate the costs of providing a typical service unit since aggregate costs are shared equally for each unit of services provided or work performed. marginal costs indicate an increase in aggregate costs when providing additional services. classification of costs by costing items has significant differences in the industries, reflecting their specifics. however, there is a typical nomenclature of items. due to the itemized classification, costs can be monitored in terms of planning and accounting at the place of their occurrence and for certain types of products. in addition, for each cost item, you can determine the degree of relation of costs and the set costing item. 4. additional features of cost classification not all classification features proposed in the relevant literature are used and applied in national cost management practices since some features are quite similar in order to allocate costs to independent groups. in this regard, we distinguish 8 classification criteria for cost sharing (which meet the current requirements table 2 additional attributes of cost classification classification attribute types of costs characteristics the object of management 1. ability to control variable cost items that can be sent at the discretion of the department head managed costs (control over the implementation of planning, organization and regulation functions) are primarily subject to the management processinvariable cost items that cannot be managed and which do not depend on the department manager 2. reflection in the accounting and report took place and are reflected in the register and the report actually incurred costs reflected in accounting and management reporting in the course of the cost management process, first and foremost, the second and third group of costs should be identified, since their availability can significantly distort the value of the product cost of the product, and question the reliability of the entire accounting had a place but are not reflected in the accounting and reporting actually incurred costs that are not reflected in the accounting and management reports did not have a place, but are reflected in the accounting and reporting unavailable expenses, reflected in the accounting and reporting з. principle of accepted commitments obligatory are the consequence of earlier commitments. in the near future, nondiscretionary expenses are fixed, they can only be changed after the expiration of the deadline for the accepted commitments management and forecasting, in the first place, must be subject to obligatory costs, because when circumstances change in the future, the costs caused by these circumstances are retained. both cost groups are without returning, that is, ineffective, and therefore should be subject to mandatory control and managementnon-obligatory are subject to earlier obligations, but may change immediately after changes in the obligations of the parties 4. place of formation own costs are made in this subdivision this division allows, in terms of management, to further differentially allocate costs, paying a particular attention to its own costs, and is designed to address the following tasks: ensuring the possibility of managing the costeffectiveness of individual units; increasing the accuracy and degree of detail of the calculation of production cost, especially for complex, heterogeneous production, producing a large assortment of products not own costs incurred by another subdivision 6. by factor of stability fixed for a long time costs that are not subject to change over a long period of time the object of management, first of all, must be often variable costs, the level of which is determined annually in the planning process (control over the implementation of planning, regulation, and analysis functions) often variable costs that vary with a high degree of periodicity baltic journal of economic studies 207 vol. 4, no. 1, 2018 for the transition to the international accounting system), in our opinion, the most objective and useful for the organization of accounting, control, analysis, and cost management: by economic content; by relation to the technological process; by net cost items; by types of products, works, and services; by the method of distribution to the object of production (accounting); by relation to the volume of production; by the duration of action (periodicity of occurrence); by relation to the plan. the classification of costs is a fairly dynamic and open system, and the emergence of new criteria not prevent the use of previously proposed, nor give users the opportunity to select and manage new types of costs, depending on the needs and capabilities of the management system. all types of costs, distinguished by the criteria considered, are used in the management of costs of the enterprise. the given multiplicity of types of expenses should be applied at large enterprises since the division of the whole value of costs of certain types by means of the considered criteria to some extent simplifies the managerial influence on them and thus contributes to their reduction. thus, the classification of costs affects the choice and further application of cost management methods as tools of management influence. but there are other prerequisites for such an option that require appropriate research. the listed classification features are the basis for the formation of the system of classification and choice of management accounting methods that can be used in various enterprises taking into account business peculiarities, including those of machine-building enterprises. at the same time, it is considered possible for an enterprise to independently select those classification characteristics of the grouping of costs that are used by it for further study and analysis of the behaviour of costs in a competitive enterprise, taking into account the specifics of production. the above features of the classification of costs are directed to the choice of the object of control in the production process but do not take into account the factor of the possibility of the impact of each subject on specific costs, that is, do not allow fully realizing the functions of cost management. therefore, in our opinion, it is necessary to introduce additional signs of classification (table 2). the variety of classification cost indicators allows accumulating information about them and using data for various purposes in management production to improve the efficiency of the enterprise. 5. conclusion cost management is not an end in itself, it is absolutely necessary for the company to achieve a certain economic result, increase the efficiency of work. functions of cost management are primary in relation to production, that is, in order to achieve a certain production, economic, technical or another result, firstly it is necessary to incur the costs. the study proved that the prerequisite for effective cost management is their classification, on the basis of which it becomes possible to carry out targeted managerial influences on the corresponding types of costs, the process of their formation, and take into account the interaction between individual types of costs. the study of approaches to cost classification allows asserting that the existing features of cost classification are directed to the choice of the object of management in the production process, but do not take into account the factor of the possibility of each subject’s impact on specific costs, that is, they do not allow fully implementing functions of cost management. therefore, it is proposed to introduce new features of the classification, which allows establishing a link between the level of costs and a certain management function. references: krumwiede kip, r . (1998) abc: why it’s tried and how it succeeds. management accounting: 32. persiy, y. (2017) recommendations for the classification of costs as a prerequisite for managing them. science and society, 1: 112-117. oliinyk, o. (2001) classification of enterprise costs. the journal of zhytomyr state technological institute, 14: 146-152. pohorelov, yu. (2015) using cost management methods: principle approaches. herald of khmelnytskyi national university, 3: 18-24. chyzh, v. (2010) classification of costs in managerial accounting for information management needs. proceedings of scientific works of cherkasy state technological university, 23: 48-54. baltic journal of economic studies 157 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 central research institute of the armed forces of ukraine, ukraine (corresponding author) e-mail: military.technology@icloud.com orcid: https://orcid.org/0000-0003-3542-5407 2 central research institute of the armed forces of ukraine, ukraine e-mail: solosa1@gmail.com orcid: https://orcid.org/0000-0001-8061-8895 doi: https://doi.org/10.30525/2256-0742/2023-9-2-157-163 assessment and forecasting method of state stability volodymyr mozharovskyi1, oleksiy solomytskyi2 abstract. in the article, the authors propose a method for assessing and forecasting the stability of the state. the relevance of the work is due to the complex military and political processes taking place in and around ukraine, attempts at large-scale interference in internal affairs (including by military means), attempts to destroy ukrainian statehood and make the country under total control, and the lack of a methodological apparatus that can be used to assess the state's ability to withstand external and internal threats and preserve its own identity and structural integrity. the authors analyze the content of the concept of "stability", offer their own interpretation of this term and identify the factors that significantly affect it. in accordance with these factors, the article presents a hierarchical system of indicators consisting of two main groups characterizing the ability of the state to withstand internal and external influences, and contains indicators that allow to assess the military capabilities of the country, the level of conflict potential, taking into account ethnic and religious problems, the state of its economy, social and political spheres, the ability of law enforcement agencies to counter internal threats, energy security and the level of corruption. subject of research. assessment and forecasting of state stability. methodology. in order to obtain functions that explicitly describe the dependence of the state's stability on lower-level indicators, the proposed approach involves the use of the theory of experimental design to form a training sample for each of the groups of indicators, followed by its processing using the method of group consideration of arguments. this approach is demanding on the level of competence of experts, but it allows obtaining dependencies that can be used to directly calculate the value of the state's stability indicators, which is of great importance in the preparation and decision-making on ensuring ukraine's national security. the authors propose an integrated approach to forecasting the level of stability, which will make it possible to obtain both exploratory and normative forecasts, and this will increase the validity of decisions on ensuring the national and military security of the state. the purpose. the article outlines the main provisions of the method of assessing and forecasting the stability of the state, which allows obtaining a numerical assessment of stability and forecasting its development over time, taking into account a wide range of indicators covering both civilian and military spheres of the state, and also allows taking into account possible external influences (destructive or positive). results. the article presents the system of indicators by which it is proposed to assess the stability of the state, the general procedure for calculations using the proposed method, and some results of a numerical experiment which confirmed the efficiency of the proposed approach, its sufficiently high accuracy and clarity of the results obtained. the calculations show that ukraine's overall level of stability has declined significantly since 2014, but there is reason to believe that the state has managed to maintain it and even gradually improve it amid large-scale aggression. key words: stability of the state, external and internal threats, military-political situation, method of group consideration of arguments, forecasting. jel classification: с25, с53 baltic journal of economic studies 158 vol. 9 no. 2, 2023 1. introduction the military-political situation in the world, in the region, or between individual countries escalates when economic, diplomatic, and other instruments for regulating and solving internal and external problems exhaust their possibilities and one of the parties resorts to aggression to solve them. in such circumstances, the ability of the state to counter internal and external threats and preserve its independence and territorial integrity is extremely important. after 2014, this became a vital issue for ukraine. in order to determine a strategy for countering threats, it is important to assess the potential of one's own country, to identify its strengths and weaknesses, as well as the conditions under which destructive processes in society and the state can escalate and lead to its destruction. this is especially important when a country is located in an unfriendly environment or is exposed to aggression. therefore, determining the degree of stability of a state is an urgent scientific task. the ability of a state to withstand internal and external threats has been considered in many works sharp, 2010; nayef r .f. al-rodhan, kuepfer, 2007; carment, 2003; milliken, krause, 2002; orel, 2018; reznikova, 2018; goetze, guzina, 2008). however, these works are mostly of a general theoretical nature and do not provide an answer to the question of how exactly the stability or resilience of a state is determined. the most interesting in this regard is the work (goetze, guzina, 2008), which is devoted to the assessment of the stability of the state to maintain the status of a "center of power". the general approach to such an assessment is noteworthy, but it is not without significant drawbacks. the proposed system of indicators does not fully reflect the set of factors that affect the stability of the state, and some of them are questionable (for example, the number of citizens suffering from alcoholism and drug addiction, which is considered a driving force behind internal unrest). most of the indicators reflect purely economic issues, while military and social aspects are hardly considered. the main drawback is that the work does not provide a general form of the function for assessing the stability of the state. at the same time, the problem of forecasting changes in the stability of the state is not addressed at all. the purpose of the article is to outline the main provisions of the method for assessing and forecasting the stability of the state, which would be free from the above shortcomings and would allow obtaining a numerical assessment of stability and forecasting its development over time. 2. the concept of state stability the analysis has shown that there is currently no unified view of such terms as "state resilience" and "state stability ". often, these terms are used to mean the same thing. according to the authors, they are closely related, but not identical. based on the basic definitions of resilience and stability, it is more correct to speak of state stability in the context of the ability to withstand internal and external threats, especially in the event of an aggravation of the military and political situation. indeed, if stability is the ability of a system to function without changing its own structure and to be in equilibrium (paris, 2011), the authors propose that the stability of the state is understood as its ability to function and to be preserved for a long time without drastic changes. in a broader sense, this is a condition of the state characterized by the existence of the necessary prerequisites and factors that ensure the preservation of territorial integrity and inviolability by the state, and the preservation of its identity, civil peace and harmony by society through the achievement of a balance of interests of various social actors and political forces, timely and legitimate resolution of emerging problems and contradictions in the field of politics through the mechanisms and means provided for by law. the stability of the state, as well as the stability of society, is conditioned by the laws of functioning and development of society, the nature and methods of interaction of its subsystems, changes and evolution of which do not cause the destruction of the functional unity of the structure and their balance. the stability of the state is primarily ensured by the political system of society and the effectiveness of its functions, which, in turn, depends on the mass support of citizens. at the same time, one should not forget about military power as an integral part of ensuring stability under the influence of external factors. the main conditions that influence the level of mass support for the existing political regime are: the level of material security and social protection of citizens, the existence of democratic institutions and mechanisms that ensure public participation in the political process, the principle of equality and justice, security and legal guarantees for individuals. the system of laws in force in a society must change in accordance with new conditions and new challenges of the time. an indicator of the stability of a state is its ability to neutralize negative influences and threats from outside (subversion, international terrorism, economic blockade, political pressure, blackmail, disinformation, threat of force, etc.) such negative influences can bring the state into a state of extreme instability and even destroy it. the outbreak of civil war or large-scale political violence by both baltic journal of economic studies 159 vol. 9 no. 2, 2023 supporters and opponents of the existing order is particularly dangerous. that is why an adequate and timely response by the state to threats to its sovereignty, social interests and the security of its citizens is so important. in general, the stability of the state depends on a combination of internal factors and external factors that manifest themselves in the form of potential claims by other countries or blocs (military threat). that is, a state that seeks to preserve its indepen dence and avoid falling under external control must be able to ensure its stability in the face of possible external and internal negative factors. 3. procedure for assessing and forecasting stability as the analysis of recent events shows, the aggravation of the military-political situation between two states does not always lead in an obvious way to an armed conflict. increasingly, pressure on the state is exerted by non-military means (information, economic, social, etc.), including from within the country itself (bohdanovych, pavlovskyi, solomytskyi, 2019). thus, the importance of internal factors, which can sometimes be decisive, is growing significantly. in general, the equation for assessing the level of stability can be written as follows: s f v vins outs� � �, , (1) where vins, vouts – the integral importance of the state's ability to withstand internal and external influence, respectively. the choice of indicators that determine the value of vins, vouts is important. for a comprehensive assessment of the impact, it is proposed to use a modified system of indicators, first proposed in (development of methodological foundations). the novelty of this approach is that the list of indicators is chosen situationally, based on the adversary 's strategy of influence on ukraine. that is, the areas of state activity that will be primarily targeted are identified, and stability is assessed only for these areas. this approach will reduce the amount of calculations and focus on developing recommendations for stabilizing the situation in the most critical areas. the hierarchy of indicators for assessing a country 's ability to protect itself from insider threats, shown in figure 1, will allow experts in the relevant field to use an acceptable number of indicators (romanchenko, butvin, hvozd, solomytskyi, 2018). thus, the ability to withstand internal threats is proposed to be viewed as a function of appearance: v f w i i i iins vd es gini cp pro� � �, , , , . (2) for each country, the indicator of domestic tension wvd is defined as follows: w f i i ivd vc ec s� � �, , . (3) the indicator of the internal conflict situation (ivc) is determined using such indicators as general conflict potential (izcd), ethnic (confessional) (ievd) and political relations (ipvd), and characterizes the level of danger of armed conflict within the state. the overall conflict potential, in turn, is determined by the following partial indicators: ivc is an indicator of internal conflicts; itp is an indicator of territorial manifestation; isr is an indicator of the impact of internal conflicts on the stability of the regime; iivp is an indicator of foreign military presence. ethnic relations are determined by the share of the dominant ethnic group in the country 's population structure (iet). political relations depend on the following indicators: isar – an indicator of the presence of illegal separatist or anti-government movements in the country; iisr – an indicator of the presence of legal secessionist movements in the country; izv – an indicator of attempts at unconstitutional change of power or coups d'état. similarly, other indicators depend on lower-level indicators (zghurovskyi, 2008; zghurovskyi, 2009). given that the stability of the state under the influence of external influence in the event of an aggravation of the military-political situation will depend mainly on the strength of the national armed forces and their ability to withstand the enemy, external stability is proposed to be considered as a function of appearance: v f w w w w w wouts gfp gfp gfp n a gfp gfp gfp n b� �� � �� �� � � � � �1 2 1 2, , , , , , ,�� � v f w w w w w wouts gfp gfp gfp n a gfp gfp gfp n b� �� � �� �� � � � � �1 2 1 2, , , , , , ,�� � , (4) where wgfp n is the nth indicator according to globalfirepower (gfp) (globalfirepower) for countries a and b being compared. the gfp includes values that characterize the armed forces and are related to resources, finances, and geography (55 indicators in total). to determine the explicit form of the functions s, vins, vouts, and other lower-level functions, it is proposed to use the group method of data handling (gmdh), which is intended for mathematical modeling of multivariate data (ivakhnenko, yurachkovsky, 1987). this approach is described in detail in (butvin, solomytskyi, didichenko, 2016; solomytskyi, 2020). based on the results of the obtained statistical data, the level of stability is forecasted for a certain period of time. usually, given the non-stationarity of the processes under study, the forecast horizon does not exceed 3-5 years. in the course of forecasting, two baltic journal of economic studies 160 vol. 9 no. 2, 2023 u pp er (f ir st ) l ev el m ed iu m (s ec on d) le ve l d om es tic te ns io ns (w v d ) e ne rg y se cu ri ty (i e s) l ev el o f c or ru pt io n (i c p ) e ff ec tiv en es s of la w e nf or ce m en t a ge nc ie s (i p ro ) in te rn al c on fl ic t s itu at io n (i vc ) e co no m ic s itu at io n (i ec ) so ci al a nd in st itu tio na l s ta tu s (i s) st at e of th e en er gy s ys te m (e e sy s) e ne rg y in de pe nd en ce (e nz ) e ne rg y ef fi ci en cy o f t he e co no m y (e e e f) d iv er si fi ca tio n (e d f) t he s itu at io n of i d ps b et w ee n th e co m pa re d co un tr ie s (s id p ) r el at iv e m ili ta ry p ow er (p w ri nd x* ) h um an re so ur ce (e p r ) fi na nc in g (e f ) a rm ed f or ce s (e m f ) l og is tic s (e l) sp he re o f p ub lic a dm in is tr at io n (i d u ) e co no m ic s ph er e (i e сs ) d ef en se s ec to r ( i s o b) l aw e nf or ce m en t s ec to r ( i p ro ) lo w er (t hi rd ) l ev el b al an ce d fo re ig n po lic y (s zp ) in te rn al s ta bi lit y (v in s ) e xt er na l s ta bi lit y (v ou ts ) e xt er na l m an ag em en t (v ou ts _c tr l ) st ab ili ty le ve l ( s) fi gu re 1 . th e sy st em o f i nd ic at or s th at d et er m in e th e le ve l o f s ta bi li ty o f t he s ta te . so ur ce : d ev el op ed b y th e a ut ho rs baltic journal of economic studies 161 vol. 9 no. 2, 2023 types of forecasts are developed: exploratory (what will happen if the existing trends continue) and normative (what needs to be done to achieve the desired state (optimization of indicators)). the forecasting is based on the gmdh and will be discussed in more detail in the following publications. the results of the assessment and forecasting are analyzed to determine critical indicators (development of methodological foundations; zghurovskyi, 2008), which will allow developing appropriate recommendations to ensure an appropriate level of stability and eliminate problematic issues in the areas of state activity. 4. practical calculation example a numerical experiment was conducted to evaluate the performance of the proposed approach. thus, the following expression was obtained for the stability level indicator: s v vins outs� � �0 720703 1 96683 3, ,� � . (5) the accuracy of the obtained function is quite high, as the average error modulus (aem) and root mean square error (rmse) are about 0.2, while the coefficient of determination was 0.97. the diagram of the function is shown in figure 2. similarly, the dependencies for the remaining indicators were obtained explicitly, but due to their rather large size, they are not presented in this article. provided that the experts in the respective fields were sufficiently trained, all functionalities had a sufficiently high accuracy (the coefficient of determination in the training sample was not lower than 0.85, and in the test sample – not lower than 0.75). based on the results, an appropriate model was built in the anylogic program, which showed high sensitivity to changes in the input data. on the basis of the obtained data, the change in the level of stability was predicted for the next five years (figure 3). the forecast was developed according to the methodology outlined in (solomytskyi, 2020) for cases of stability as its own time series and as a function of lower-level indicators. the calculations show that the stability of the state remains low, which is primarily due to socio-economic factors and is complicated by the aggression of the russian federation against ukraine, i.e. external influencein the military, information and conflict spheres. the developed regulatory forecast showed that to ensure the required level of stability (s ≥ 3,5), it is necessary to ensure vouts_nec ≥ 3,6 and vins_nec ≥ 3,93, which are not expected to exceed 3.18 and 2.28, respectively (see figure 4). 5. conclusions the proposed method of forecasting the stability of the state in the face of changing circumstances allows quantifying the level of stability of the state 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 s years=f(v,w,e,i,pi,t) s=f(t) figure 3. forecast of changes in the level of stability by 2025 source: developed by the authors figure 2. graph of dependence of the stability level indicator source: developed by the authors 𝑉𝑉𝑉𝑉𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑉𝑉𝑉𝑉𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑆𝑆𝑆𝑆 baltic journal of economic studies 162 vol. 9 no. 2, 2023 0 1 2 3 4 5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 vouts, vins yearvouts vins vouts_nec vins_necvouts vins vouts_nec vins_nec figure 4. results of regulatory forecasting of stability indicators source: developed by the authors under the influence of internal and external factors. it works with a large number of indicators that sufficiently reflect the main factors influencing the stability of the state both from the inside and from the outside, while the indicators in the calculations can be varied depending on the strategy of influencing the state chosen by the enemy. for the first time, it is proposed to take into account the indicator of external governance in various spheres of state activity. the method, based on the theory of planning experiments and gmdh, allows to develop two types of forecasts – exploratory and normative, with different depth of detail. the method will allow to substantiate measures to maintain and increase the stability of the state under the influence of external and internal factors, taking into account the level of financing. the calculations show that ukraine's ability to maintain its own stability is at such a low level that a number of measures need to be taken to improve the situation. at the same time, analyses and calculations have shown that the most critical areas, in addition to the military, due to russia's large scale invasion of ukraine are socio-economic, where the situation is complicated by external influence in the information and internal conflict spheres, as well as a high level of external control in vital areas of the state (politics, economy), and the situation in the religious sphere has recently become more acute. the construction of a normative forecast (the solution of an optimization problem) made it possible to determine the rational values of the indicators on which the stability of the state depends. at the same time, the calculations show that it is impossible to achieve them in the near future if the current level of financing is maintained. another area of research is to determine the appropriate thresholds at which the state is at risk of losing its stability and, as a result, its integrity, or ceasing to exist altogether, and to develop an approach for selecting the indicators necessary for the calculations in each case. references: sharp, g. (2010). from dictatorship to democracy, a conceptual framework for liberation. boston: the albert einstein institution, 99 p. nayef r .f. al-rodhan, & kuepfer, s. (2007). stability of states. uk: editions slatkine, 152 p. carment, d. (2003). assessing state failure: implications for theory and policy. third world quarterly, vol. 24/3, pp. 407–427. milliken, j. & krause, k. (2002). state failure, state collapse, and state reconstruction: concepts, lessons and strategies. development & change, vol. 33/5, pp. 753–774. orel, m. h. (2018). dualistic unity of the state's sustainability and security, approaches to its research and consideration in the formation and functioning of the public administration system. scientific journal of the national security academy, vol. 3–4 (19–20), pp. 46–73. reznikova, o. (2018). formation of state resilience: conclusions for ukraine. bulletin of lviv university. series of philosophical and political studies, vol. 20, pp. 193–199. goetze, c., & guzina, d. (2008). peacebuilding, statebuilding, nationbuilding – turtles all the way down. civil wars 10/4, рр. 319–347. baltic journal of economic studies 163 vol. 9 no. 2, 2023 paris, r . (2011). ordering the world: academic research and policymaking on fragile states. international studies review, vol. 13/1, pp. 58–71. bohdanovych, v. yu., pavlovskyi, o. v., & solomytskyi, o. i. (2019). the impact of the hybrid nature of modern warfare on the spread of the geography of armed conflicts. collection of scientific papers. central research institute of the armed forces of ukraine, vol. 1 (87), pp. 55–66. development of methodological foundations for organizing the functioning of the system of ensuring military security of ukraine in peacetime and wartime: report on the research work "security-b" (interim). stage 2: place and role of the military defense system in the national security system of ukraine / central research institute of the armed forces of ukraine; exec. didichenko v. p.; еxec.: svyda i. yu. et al. kyiv, 2012. 154 р. romanchenko, i. s., butvin, b. l., hvozd, v. i., & solomytskyi, o. i. (2018). a methodological approach to assessing the competence of experts based on binary relations. collection of scientific papers. central research institute of the armed forces of ukraine, vol. 3 (85), pp. 5–14. zghurovskyi, m. z. (2008). global modeling of sustainable development processes in the context of quality and security of life. kyiv: national technical university of ukraine "igor sikorsky kyiv polytechnic institute", 352 р. zghurovskyi, m. z. (2009). analysis of sustainable development – global and regional contexts. р. 2. ukraine in the indicators of sustainable development. kyiv: national technical university of ukraine "igor sikorsky kyiv polytechnic institute", 207 р. globalfirepower. available at: https://www.globalfirepower.com ivakhnenko a. g., & yurachkovsky, y. p. (1987). modeling of complex systems by experimental data. moscow: radio and communications, 120 р. butvin, b. l., solomytskyi, o. i., & didichenko, v. p. (2016). on one of the methods of studying complex organizational and technical systems of military purpose. collection of scientific papers. central research institute of the armed forces of ukraine, vol. 1 (75), pp. 35–47. solomytskyi, o. i. (2020). development of the theory and practice of forecasting the military-political situation: dissertation … doctor of military sciences: 21.02.01. kyiv, 433 р. received on: 07th of march, 2023 accepted on: 29th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 31 vol. 4, no. 1, 2018 corresponding author: 1 department of finance, kyiv cooperative institute of business and law. e-mail: serg.bardash@gmail.com 2 department of economics, finance and entrepreneurship, kherson state university. e-mail: tatiana@osadcha.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-31-38 identification of economic and legal preconditions for rent accounting sergii bardash1 kyiv cooperative institute of business and law, ukraine tetiana osadcha2 kherson state university, ukraine abstract. the urgency of the research consists in the existence of challenging issue regarding the equitable distribution of existing natural resources between existing and future generations, the question of formation, distribution, and use of rent. the economic theory clearly identifies features of rental relations at the government level, but there is no information on accounting reflection of rent as one of the types of income of an economic entity in bookkeeping. level of information content about rental income remains problematic. this leads to a targeted reduction in the availability of information on income from the use of rental resources since none of the forms of existing types of reporting provides any information on any type of rent. the purpose of the research was to specify the accounting component of rent as an economic category, as well as to determine legal and economic preconditions for rent accounting. the methodological basis of the research is the dialectical method of knowing the essence of the rent and rental relations; general scientific methods of scientific knowledge (analysis, abstracting, synthesis, generalization), bibliographic method of transformation of economic essence and legal content of rent and rental relations, analysis of legal acts in the part of implementation of the contract of rent, method of grouping of economic and legal preconditions for establishing an effective segment of rent accounting. scientific results. it was established that transformation of the modern mechanism of fragmentary regulation of rental should occur systematically, with obligatory improvement of accounting methods of rent resources and development of a method for calculating rental income, as well as a taxation system of extra profits taking into account specific sources and conditions for the formation of various types of rent. with the purpose of transformation of rental relations in the part of the improvement of accounting of income including rents, legal and economic preconditions for rent accounting are identified. in particular, it was established that the legal basis for accounting of the results of rental relations is the identification of the entity, to which the object belongs (rent-forming factor (resource)); of the entity that uses the object (rent-forming factor (resource)); of the mechanism of implementation of rental relations; of an indisputable reason for calculating the rental factor (resource), – a contract of rent or other legal instrument regulating rental relations. the main economic preconditions necessary and sufficient for the organization and keeping of rent accounting by the economic entity are as follows: an object, – the rent-forming factor (resource), which the economic entity-rent payer uses (exploits); economic benefit from the use (operation) of such an object; income of the entity that uses (exploits) such an object that includes the rent; rent estimation for determining rental income, a share of rent in income from a certain type of activity and subsequent implementation of rent payment; documenting and accounting of rent accounts (rental income) and rent payment, followed by their reflection in the financial statements of the business entity-rent payer. the practical significance of the research is to identify preconditions for the formation of a rent accounting methodology, as well as to form information support for analysing the competitiveness of business entities and determining their financial stability. key words: rental relations, rent, rent resource, contract of rent, rent accounting. jel classification: m41, p4, q2 baltic journal of economic studies 32 vol. 4, no. 1, 2018 1. introduction the concept of sustainable development is aimed at harmonization of economic, social, environmental components of social development and allows overcoming the consequences of the economic crisis, increasing social development of society, solving the problems of preservation of the environment. one of the problematic issues of the fair distribution of existing natural resources between existing and future generations is the issue of formation, distribution, and use of rent. rental relations are one of the important components of the market economy and, in general terms, are relations that arise between social and economic agents regarding the distribution of rental resources. the theory of rent has undergone a long-term evolution in the development of economic science, in the process of which approaches to the definition of the rent itself have changed. in the most general sense, rent is defined as a special type of stable fixed unearned income, not directly related to any form of entrepreneurial activity, obtained by the owner of limited resources or rights as a result of their exploitation. it is an economic form of enforcement of the property right in its pure form (hurovska, 2011). the economic history of human development testifies that rental relations arose along with private ownership of land. in the process of social development, rental relations have undergone significant transformations, as well as new types of rent have arisen. the above changes testify that issues of rent and rental relations have not lost their urgency, because with the development of modern civilization, the results of redistribution of property objects, including objects that can be rentable. the economic theory clearly identifies features of rental relations at the government level, but there is no information on accounting reflection of rent as one of the types of income of the economic entity in bookkeeping, with the exception of individual publications, in particular, monographs (osadcha, 2016). level of information content about rental income is enough problematic. this leads to a targeted reduction in the availability of information on income from the use of rental resources since none of the forms of existing types of reporting provides any information on any type of rent. lack of attention to rent significantly increases the risk of an inadequate estimation of the financial condition of business entities and affects the objectivity and effectiveness of management decisions. as a result, it is necessary to develop theoretical and methodological provisions and develop organizational and practical provisions of rent accounting, which will enable the formation of comprehensive and reliable information for managing income of the enterprise. 2. review of recent issues some aspects of the transformation of rental relations in post-socialist economies are analysed in the issues of s.  arkhiyereyev, v.  basilevych, a.  hrytsenko, v. dementiev, b. kvasniuk, b. kuzyk, d. lvov, o. nosova, a.  oleynyk, o.  paskhaver, v.  polterovych, p.  sabluk, v. tambovtseva, y. yakovets, and other scientists. however, despite the undeniable achievements of domestic and foreign economic thought in the development of the theory of rent, the problems of the formation and development of rental relations in the economies of the post-soviet countries, imperfect functioning and governmental regulation of rental relations remain not developed enough. another important problem that should be finally solved is the essential identification of rent in the system of accounting concepts since it is impossible to estimate its value and determine the impact of rent on the formation of income of social and economic agents without this aspect. in recent years, issues of accounting as an information source for managing a particular type of rent were raised. thus, the issue of particular types of rent was studied by such authors as s.  vehera, v.  zhuk, i.  zamula, s.  zdan [melnyk], t.  ostapchuk, d.  pankov. highly appreciating the researches of these and other scientists in the field of accounting, it should be recognized that rent as an economic category, with the exception of rent payments, remains outside the conceptual framework of accounting. the research purposes and objectives are to clarify the accounting component of rent as an economic category, as well as the definition of legal and economic preconditions for accounting rent. 3. the statement of basic results permanent transformation of economic relations causes a change in views as to the understanding of rent as an economic category. after analysing a number of scientific works (bodnar; hurovska, 2011; dvihun, 2008; meshcherov, 2006; paskhaver, 1972) devoted to the genesis of the theory of rent, it was established that the views of scientists on the essence of rent in a certain way have evolved. thus, the representatives of classical political economy, in particular, w. petty, a. smith, d. ricardo, j. mill suggested that rent was a product of nature adjusted to the expenditures of resources and labour; accordingly, the natural resource rent had a double understanding of the natural resource rent as a product of nature and product of labour. d. ricardo’s doctrine of rent acquired a theoretical and practical character based on the definition of the value given by a. smith and the views on private ownership of land. according to a number of researchers (a.g. zeldner (zeldner, 2003), r.p. kudiyashova (kudriashova, 2003), v.a. meshcherov (meshcherov, 2006)), from the d. ricardo’s time up to the present, virtually no significant baltic journal of economic studies 33 vol. 4, no. 1, 2018 development in the aspect of the synthesis of the theory of value and rent (bodnar) has occurred, because he defined rent as an economic category and insisted on the mistakes of the mixing of rent with the lease payment, by which he derived rent from the categories of everyday life in the category of economic theory. k. marx and later v. lenin considered rent as added value, which is caused by an excess of the cost over the price of production. rent was considered as a transformed form of value-added, similar to profit, wages, and interest. k. marx saw the emergence of rent as an economic category not in the sphere of production, but in the sphere of distribution, where profit is transformed into rent (bodnar). thus, in the context of the labour theory of value and under the conditions of the market capitalist economy, rent was considered as one of the forms of value added, and as its excess above the average profit in the industry. representatives of the neoclassical school (a.  marshall, e. böhm-bawerk, l. walras) considered rent as the excess profit of the resource over the alternative cost of its use. accordingly, representatives of institutionalism, in particular, j. buchanan, g.  t.  tolleson, a. krueger consider rent as a result of competition-restricting in order to obtain monopoly rights (moshenets, 2009). in the vast majority of countries of the post-soviet area, which adhered to the doctrines of the command and administrative economy in their social and economic life and did not recognize the private ownership of the means of production, the idea of rent understanding was somewhat different from the views of scientists from other countries since rent was seen as “income from capital, land or property that their owners receive on a regular basis without engaging in entrepreneurial activity. …the growth of the number of capitalists who receive rent in the era of imperialism is one of the manifestations of parasitism and decay of capitalism at its monopolistic stage” (economic dictionary, 1973). during the time of independent ukraine, the concept of rent has not changed significantly, since the latter has been considered as: a special type of stable unearned income received from capital, land, property, securities etc., not related to entrepreneurial activity (economic encyclopaedic dictionar, 2006); any income, regularly received from real estate, land, bonds, which does not require entrepreneurial activity from its recipients (modern legal encyclopaedia, 2009); a fee that is established for the use of land and other resources that are the property of other economic entities, provided that their offer is limited (bazylevych, 2008); periodic payment in the form of cash payments or their natural equivalent, carried out in place of the received property (anomalies in the civil law of ukraine, 2007); surplus income, which should be considered as a part of the economic effect of using the economic resources of society (hurovska, 2011); additional profits that the user of natural resources encounters due to the legal use of resources owing to their rarity, restriction and different approaches to the efficiency of use (zakharchuk, 2011). to outline the existing pluralism of thoughts as to the essence of rent, some results of the study set forth in the publication (moshenets, 2009) deserve attention, according to which rent is considered as: the price for the use of land and other natural resources, the quantity of which is limited; any payments to the owner of rights to resources that exceed the income, which can be obtained in the non-monopoly use of these resources, that is, under conditions of market competition; the level of payment for a factor of production that exceeds the minimum payment required to obtain the necessary offer of this factor within the specified method of its use; the fee for any resource, the offer of which is maintained at a constant level without costs, but cannot be increased and, accordingly, does not depend on the price; the form of expression of excess profits received as a result of the exploitation of limited resources not uniform in quality. at the level of modern researches of rental relations, according to t. hurovska (hurovska, 2011), it is possible to distinguish various types of rent, combining them into two groups according to resource sources: 1)  natural rent resource is excess (additional) profit, which arises when using limited natural resources not uniform in quality (kuzyk, 2004); 2) unnatural (economic) rent is an additional profit obtained without the entrepreneurial efforts and labour costs arising from the use of resources that do not belong to natural wealth (natural resources) – financial, intellectual, and administrative (power) resources. however, it is difficult to agree with the view as to the economic rent, which, according to the author of the paper (hurovska, 2011), is income earned without entrepreneurial efforts because the use of, for example, intellectual resources causes certain entrepreneurial efforts and forms certain labour costs. therefore, analysing the above definitions, it should be noted that rent is considered simultaneously as the payment for use of limited resources (some factors of production); surplus income, additional income from the use of a certain resource in the field of management; passive income, which does not require entrepreneurial activity from its recipients. the presented polymorphism of the essence of rent – the lack of a single approach to the definition of rental income – stipulates the fact that rental nature of income was almost not considered until now in the accounting, baltic journal of economic studies 34 vol. 4, no. 1, 2018 because, as s. zdan (melnyk) correctly states, this is a rather complex aspect of the income part of the enterprise, so it is very difficult to determine the size of rent, and as a result, to reflect it in the accounting (zdan (melnyk), 2011). it is worth paying attention to the fact that rent is also considered as a legal concept, namely: risk (aleatory) transaction, according to which the ownership of the property is transfer as a security of future needs of the recipient (anomalies in the civil law of ukraine, 2007); the generalized concept of the contract of rent, the type of independent civil-law obligation, with its general and specific features (anomalies in the civil law of ukraine, 2007); a form of payment as a certain amount of money or other provision provided by the contract of rent (anomalies in the civil law of ukraine, 2007). the latter definition according to the thought set forth in the publication (anomalies in the civil law of ukraine, 2007) should be regarded as a narrow understanding of rent, which itself was reflected in separate legal regulatory instruments. the confirmation of this position is an overview of the legal regulatory documents, according to which rent is an established (fixed) amount paid to the individual periodically during the specified period of the lifetime or for a specified or established period of time in accordance with the obligations to make payments in exchange for an adequate and full remuneration (convention between the government of ukraine and the government of the italian republic...; of the republic of india...; of the federal republic of brazil; agreement between ukraine and the republic of tajikistan...). without excluding a narrow understanding of rent as a legal concept from the scope of considerations, we consider as non-alternative the statement that: “any rent is a form of enforcement of the right of ownership for the respective resource. all types of ... rent are a kind of income received by economic agents by including a monopoly or exclusive right to use a limited resource and, at the same time, limiting access to it by other agents, which is caused by peculiarities of origin, involvement, and use of the resource itself ” (hurovska, 2011). thus, implementation of rental relations is carried out through a special economic mechanism for creation and distribution of value added, which is a set of market, legislative, organizational, administrative, and other measures that affect the behaviour of participants in the field of economic relations and form a material interest in participation in the production process. in such an interpretation, a.o. dvihun (dvihun, 2008) states, the economic mechanism of realization of rental relations can be defined as a separate rent mechanism, which should be understood as a set of production and organizational structures, a system of legal regulations, a set of forms and methods of management, through which the process of creating, distributing, assigning, and withdrawing income from the use of resources is used in accordance with property rights and other resources involved in the production process. consequently, in the broad context, modern rental relations appear as a combination of economic, legal, and psychological (economic and non-economic) relations between participants in agreements on the formation and use of rental resources and income. at the moment, one should agree with the statement that one of the specific features of modern rental relations is “... dependence on institutional principles of enforcement of property rights on the rent-producing resources. modern rental relations appear as a complex system of interactions of agents of a market economy associated with the appropriation of special forms of income from enforcement of exclusive property rights to rental resources (hrazhevska, 2015). taking into account that an important precondition for the effective functioning of rental relations is the control of access to these resources on the basis of clearly defined and protected property rights, the only effective tool for achieving the goal is an accounting of the consequences of rental relations. consideration of the possibility of rent accounting as one of the consequences of rental relations will remain incomplete without considering their legal aspects, in particular, the form of documentary registration of rental relations, the definition of the subject and the subjective composition of rental relations. a significant contribution to the formation of legal regulation of rental relations was made owing to the researches of such scientists as m. apanasiuk, v. baliuk, m. braginsky, v. vitryansky, n. zolotko, r . maidanyk, i. timush, e. yarygin, and others. the importance of legal aspects of rent accounting is that the identification of counteragents becomes relevant, one of which will pay a rent payment from the income/profit, and the other will receive a rent – income (passive or active depending on the circumstances and type of resource). it is also worth remembering that payments will be made only on the basis of legal instruments, in particular, the contract of rent – a civil law contract, according to which one party (the rent recipient) transfers property to the other party (the rent payer), and the rent payer is obliged, in exchange for the property received, to pay periodically to the recipient rent in the form of a certain amount of money or provision of funds for its maintenance in a different form (part 1 of article 371 of the civil code of ukraine) (kharytonov, kalitenko, 2004). in the context of this research, the issue of the subject of rental relations becomes particularly relevant: in particular, what exactly can cause a rent. it should be noted that among the experts in jurisprudence, there is no unity on this issue, as the subject of the contract of rent (rental relations) can be: baltic journal of economic studies 35 vol. 4, no. 1, 2018 any individually determined property not removed from civilian circulation, which has both generic and individual identifiable characteristics, the use of which in the business activity or in order to meet the own needs of the payer of rent contributes to the formation of property income ... except for inalienable intangible benefits, such as personal non-property rights, ideas, intangible results of intellectual activity, services (civil law of ukraine: a series of lectures, 2006); property rights, information, results of intellectual activity, including rights to them, the performance of works and provision of services for the same purpose (sukhanov, 2005); property (not only things and their aggregate, but also property rights and obligations, including information, results of intellectual activity and exclusive rights to them, performance of works and provision of services), which is transferred for the payment of rent, as well as rent itself (as in the form of money and by providing things, performing works or providing services) (civil law of ukraine: study guide, 2005); just the things, because ... the contract of rent differs from other agreements, which are also aimed at the alienation of property to ownership by the fact that its subject cannot be property rights, as well as the right to claim (baliuk); things (including money and securities), an aggregate of individual objects (universitas rerum distantium), as well as property rights, since in the relevant articles on the contract of rent of the civil code of ukraine, there are no restrictions as to what is meant under the property for this type of contract, and also on the basis of the definition of the property stipulated by article 190 of the civil code of ukraine (pospolitak, 2010). to determine preconditions of rent accounting, and hence rental relations, the identification of their subjects is important. according to articles 731, 733 of the civil code of ukraine, which should be applied in conjunction with other articles of chapter 56 of the civil code of ukraine, such entities are: the rent recipient on the one hand – the property owner, who transfers this property to another person in exchange for receiving periodic rent payments in cash or in kind; the rent payer on the other hand – the person acquiring the property rights transferred by the rent recipient in exchange for the obligation to pay rent to the recipient in the form of a certain amount of money or other provision. from the perspective of the right, essential for the realization of rental relations under the terms of the contract of rent is that the rent recipient must be the owner of the property, which is transferred under the rent payment, since this contract is aimed at the transfer of ownership of the property. in case of transfer of property rights under the rent payment, the alienator must be endowed with these rights (that is, they have the right to exercise them) (pospolitak, 2010). important is the fact that the codified law does not limit the subject structure of the participants in the contract of rent. at present, according to article 733 of the civil code of ukraine, parties to the contract of rent may be natural or legal entities. the civil code of ukraine also determines that the payer and the recipient of rents may be both natural and legal entities possessing civil legal capacity and capability, which can in full without any restrictions, act as payers or recipients of rent. some scientists are of the opinion that “the social nature of the contract of rent implies that the recipient of rent must be an entity who does not engage in entrepreneurial activity” (civil code of ukraine, 2004). however, an analysis of the regulations of chapter 56 of the civil code of ukraine, as well as general provisions on obligations and contracts, taking into consideration the basis of formal logic carried out by v. pospolitak and r. khanyk-pospolitak, gave to the researchers sufficient grounds to conclude that there was no restriction on the subject composition of the rent recipients under the civil code of ukraine (pospolitak, 2010). at the moment, it should also be taken into account that both commercial and non-commercial legal entities can be the rent recipients. the fact that rent is considered as an income, which is not related to entrepreneurial activity, does not prevent it from being received by business entities, such as commercial banks (apanasiuk, 2004). natural entities-business entities are actually equated with legal entities in their status. according to article 51 of the civil code of ukraine, legal regulatory instruments regulating the business activity of legal entities are applied to the entrepreneurial activity of natural entities, unless otherwise provided by law or does not follow from the essence of relations. the above is another argument in favour of the fact that individual entrepreneurs can be parties to a contract of rent (pospolitak, 2010). as a result of the research carried out by us, it was established that, in accordance with the current legislation and the absence of direct prohibitions, the parties (entities) of rental relations could be: • natural entity (rent payer) – natural entity (rent recipient); • natural entity (rent payer) – legal entity (rent recipient); • legal entity (rent payer) – natural entity (rent recipient); • legal entity (rent payer) – legal entity (rent recipient). this position is based on the fact that article 732 of the civil code of ukraine does not specify which of the parties can be specific natural entities and legal entities under the contract of rent. this gives grounds for asserting that both the payer and the recipient may be legal and natural entities, as well as, as stated in the publication (pospolitak, 2010), the state and the territorial communities. baltic journal of economic studies 36 vol. 4, no. 1, 2018 taking into account the above, for the purposes of rent accounting, the entities of the rental relations will be participants in the management relations, which, in accordance with the current legislation, are obliged to keep accounting records and prepare financial statements. accordingly, the rent payer will have additional income and expenses associated with the payment of rent, and the rent recipient will have income, which will be subject to tax discharge. within the generalization of individual publications devoted to the legal regulation of rental relations, it was also established that the list of objects that can form rent is limited, since from the standpoint of the classical economy as a source of rent factors of production are considered: classical (labour, land (natural wealth), capital; modern (labour, capital, land, entrepreneurial skills, ecology, information, science). awareness of the complexity, multiple-level system, institutional foundations of development, and important role of rental relations in the modern market economy allows us to depart from the narrow natural-resource interpretation of rent (hrazhevska, 2015). rent as a type of income affects directly the optimization of the use of economic resources by enterprises, is important in determining priorities and shaping development plans. business, focusing on demand satisfaction, defines the prospects, priorities of individual activities in line with potential profits, the size of which largely depends on the existing process of rent identification. the properly constructed process of rent identification contains a number of economic levers of influence on production, through which cooperation between individual links and participants in the production and commercial process, as well as the promotion of technology improvement and resource efficiency, is provided. focusing on long-term and stable development is a priority task of optimizing rental relations. an effective rental mechanism creates a prospect of sustainable development for business through a fair distribution of the added value created, namely through an adequate rate of profit on the use of resources that remains by commodity producers. it also impedes the receipt of economic rent by certain categories of market participants, as it leads to lack of income of the required level by others and negatively affects their motivation for efficient management and rational use of resources. another task of the rental mechanism is the prevention of rent-guided behaviour, when different groups of the market participants, competing for rent, resort to unproductive costs, which can lead to inefficiency of production in general. market participants and, consequently, entities of the process of rent identification, are not only direct participants of resource use, namely, owners of resources, entrepreneurs and enterprises of various forms of ownership, which use these resources, but also intermediary structures and infrastructure organizations, which include wholesalers and exporters of products, banks and stock exchanges and transport companies. various government authorities are also parties to the process of rent identification, whose role consists in the institutional regulation of rental relations at all levels of the production and commercial process, where creation, distribution, assignment, and withdrawal of rent is made. the process of rent identification occurs under the influence of a large number of endogenous and exogenous factors, which determine the behaviour of participants in rental relations, affect the process of creation and distribution of income from the use of resources. at that, exogenous factors such as the legislative and regulatory activity of the government have the decisive influence, as a result of which there is the market infrastructure that creates a system of accumulation and appropriation of rent, the allocation and withdrawal of surplus profits. alongside with that, an endogenous factor such as an improved accounting system that will perform the below-listed task will play a decisive role: formation and provision of complete, timely, and reliable information on rental income for the effective management of the entity’s business and its rental payments to the budgets of different levels; ensuring control over the use of rental resources (rent-forming factor), received rental income of a business entity; creation of sufficient information support for the analysis of rental income. 4. conclusions and perspectives of further research transformation of the modern mechanism of fragmentary regulation of rental relations should occur systematically, with the obligatory improvement of methods of accounting for rental resources and development of a methodology for calculating rental income; system of taxation of extra profits taking into account specific sources and conditions for the formation of various types of rent; institutional regulation of forms of appropriation and withdrawal of rent by providing a clear specification of property rights; norm setting for production; appropriating, and withdrawal of various types of rent, limiting ineffective and stimulating their effective use in order to increase the competitiveness of the national economy and increase the well-being of the ukrainian population. the presented transformation can be realized under the conditions of accounting of results of rental relations. for this purpose, the legal and economic conditions for rent accounting were identified in the carried out research. baltic journal of economic studies 37 vol. 4, no. 1, 2018 in particular, it was established that the legal basis for an accounting of the results of rental relations is the identification of: • entity, to which the object belongs (rent-forming factor (resource)); • entity, which uses the object (rent-forming factor (resource)); • mechanism of implementation of rental relations; • undeniable grounds for calculating the rent-forming factor (resource) – the contract of rent or other legal instrument regulating the rental relations. the economic preconditions necessary and sufficient for arrangement and keeping of rent accounting by the economic entity should include the establishment of: • object – a rent-forming factor (resource), which is used (exploited) by the economic entity-rent payer; • economic benefit from using (exploitation) of such object; • economic advantage from using (exploitation) of such an object; • income of the entity that uses (exploits) such an object that includes rent; • rent estimation for determining rental income, the share of rent in income from a certain type of activity and further implementation of rent payment; • documenting and accounting on the accounts of the rent accounting (rental income) and rent payment, followed by their reflection in the financial statements of the economic entity-rent payer. thus, at the economic entity’s level, rent accounting is necessary for the effective management by the entity itself. based on strategic goals, the owner or user of rental resources that receives a significant amount of rent from their particular type may decide to invest additional costs to improve these resources in order to increase the amount of the rent received or spend them for improving other types of resources that are worse by their properties and do not generate income from their use. so, the introduction of such a category as rent into the accounting system should become one of the topical issues among the scientists-accountants who investigate rental relations in ukraine. prospects for further researches are to improve the mechanism of rent relations on the basis of defined economic and legal preconditions for rent accounting; classification of types of rent, as well as existing proposals as to reflection of rent in the accounting system from the use of existing and innovative rent-forming factors in the economic activity, which will approach to the 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(2000). prices, costs, profits of agricultural production and infrastructure of food markets of ukraine. k.: iae aasu, 585 p. baltic journal of economic studies 192 vol. 7 no. 5, 2021 corresponding author: 1 state scientific institution "institute of education content modernization", ukraine. state higher educational institution kyiv national economic university named after vadym hetman, ukraine. e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 classic private university, ukraine. e-mail: olgagaltsova67@gmail.com orcid: https://orcid.org/0000-0003-0012-0371 3 state scientific institution "institute of education content modernization", ukraine. e-mail: 1spartak@ukr.net orcid: https://orcid.org/0000-0003-0117-294х doi: https://doi.org/10.30525/2256-0742/2021-7-5-192-203 evolution of higher education: prospects – modernization concepts yurii safonov1, olga galtsova2, ievgen bazhenkov3 abstract. the most popular international rankings on the development of higher education in ukraine are presented, which show a mixed situation, namely that in some positions ukraine is among the 50 countries with the strongest higher education systems in the world, but in the number of universities ukrainian educational institutions are not leading. analyzes the dynamics of the distribution of the number of students of higher educational institutions in ukraine in accordance with the international standard classification of education isced 2011. also analyzed the dynamics of higher education institutions at the beginning of the 2019/20 academic year by subordination of institutions, the number of students in higher education institutions by source of funding. the main indicators of postgraduate and doctoral studies in ukraine are given. the indicators of the number of foreign students in ukraine are highlighted, the top 10 countries by origin of foreign students and the most popular universities among foreign students are provided. it is concluded that up to 50% of foreign students are trained in ukraine in medical specialties, the training of foreign students in ukrainian educational institutions is not only the image of the country, but also an important component of investment in the economy. summarizing the current state and trends in the development of higher education in ukraine, were identified current trends in the development of higher education and proposed a strategy for the development of higher education, which provides the maximum efficiency of all resources: organizational, institutional, instrumental, financial, scientific and methodological. key words: higher education, international rating, european higher education area, higher education institutions, research activities, ukrainian state center for international education. jel classification: i20, i21, i25, i28 1. introduction highly professional organization of education in any society is the key to the effective development of the state, as it provides an opportunity for citizens to develop through the training of highly qualified specialists. modern higher education in ukraine has been reforming for many years (volkova, 2021). since the signing of the bologna declaration (2005), higher education has undergone significant changes, both in an attempt to improve the bologna process and strengthen its market orientation. in the process of reform and implementation, problems arise, such as the lack of a balanced interaction between higher education and the mechanisms of labour market regulation. globalization processes are changing the nature and role of higher education in society, the influence of market relations in european higher education is increasing, providing a balanced interaction of higher education and the labor market, which is the key to effective and sustainable economic development. the covid-19 pandemic significantly affected higher education, the national economy, which defined the boundary between education and the economy before and after the pandemic (balakhtar, 2021). today 's dynamic changes in education, especially in higher education, require qualitative changes. higher education reforms actualize the need for highly qualified creative teachers, specialists capable of implementing innovative methods and forms of learning, to carry out creative activities (lypynskyi, 2000). the modern system of quality assurance of higher education in ukraine is formed under the influence baltic journal of economic studies 193 vol. 7 no. 5, 2021 of world changes, particularly globalization and european integration (the needs of society in the development of uniform educational standards and quality control of services). 2. current research, problem analysis changes in higher education, its development and formation became the subjects of dissertations, commemorative publications on the history of universities (lypynskyi, 2000; liapina, 2008; liapina, 2009; liapina, 2009)., some generalized works on the development of education and various studies on different issues based on the sources of the last century (padun, 2002; shekhovtseva, 2019; burovytska, 2016).. in recent years, the organization and functioning of the market of educational services for the training of foreign students is given considerable attention by ukrainian and foreign researchers: kr. bista, w. teichler, o. bilyk, a. verbytska, m. debych and others. the purpose of the study is the analysis and dynamics of higher education development. the rationale for this study is to identify problems and propose a strategy for the development of higher education in ukraine. 3. findings higher education is integrated into the norms of the european system: modularity, selectivity of disciplines, etc. every year the world compiles a ranking of the top 100 higher education institutions (heis), which helps applicants decide where to apply. in the direction of ukraine's integration from the european higher education area (ehea), a new list of specialties was introduced in 2015 (pro zatverdzhennia pereliku haluzei znan i spetsialnostei), which should facilitate academic mobility of students and recognition of diplomas of ukrainian heis. in order to bring the national qualifications framework in line with the european qualifications framework, a draft resolution of the cabinet of ministers of ukraine "on amendments to the resolution of the cabinet of ministers of ukraine from 23.11.2011 № 1341 (as amended by the cabinet of ministers of ukraine from 12.06.2019 № 509)" was developed. approved 142 standards of higher education (97 bachelor's, 45 master's), based on the competence approach and sharing the philosophy of determining the requirements for a specialist, which is the basis of the bologna process and the international project of the european commission "harmonization of educational structures in europe" (perekhidna knyha mon za period z veresnia 2019 po cherven 2020). according to the law of ukraine "on higher education", the purpose of higher education is to obtain a high level of scientific (creative, artistic) professional and general competencies, which are necessary for activity in a particular specialty or in a particular field of knowledge (pro vyshchu osvitu. zakon ukrainy vid 01.07.2014 № 1556-vii). the most significant changes were made to the law of ukraine "on higher education" in regard to the national agency for higher education quality assurance (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). higher education institutions (heis) in ukraine provide the above levels of higher education depending on the type, namely: university, academy, institute, college (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). qs world university rankings is the world's most popular university ranking, created for the convenience of students. the ranking is based on six key indicators: academic prestige (score 40%), reputation among employers (10%), student-to-faculty ratio (the better small-group teaching) (20%), citation of research papers in scopus (20%), and proportion of international students and faculty (5% + 5%) (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). according to the rating of "the good country index" (the good country), among 153 countries in 2020, ukraine ranks 76th and poland 31st. the attrac tiveness and stable demand for higher education is confirmed by the rate of knowledge-intensive employment (global innovation index), where ukraine in 2020 ranked 32nd with a rate of 37.7%, and poland – 28th place with 39.5%, respectively. in 2018, ukraine entered the qs higher education system strength rankings (qs higher education system strength rankings), which determine the countries with the world's strongest higher education systems, where it ranked 44th out of 50 countries, ahead of poland (46th). ukraine received a score of 16.1 out of 100 on the "strength of the system" indicator. the index of accessibility of the higher education system in ukraine is 14.4 out of 100. the indicator "flagship university ", which evaluates the work of the leading educational institution of the country in the qs world university ranking (qs world university ranking), included six ukrainian universities, and ukraine as a whole received a score of 8.5 out of 100. the indicator "economic context" assesses the impact of national investment in higher education, and ukraine has a score of 55.9 out of 100. the u21 ranking of national higher education systems evaluates 50 national higher education systems according to 24 indicators (u21 ranking of national higher education systems). of the 50 countries included in the 2020 ranking, ukraine ranked 36th with an index of 47.8, improving its position from 2014 by 6 positions. ukraine is followed by poland, 32nd place (52.6). the ukrainian higher education system has the highest positions in the module "resources", where baltic journal of economic studies 194 vol. 7 no. 5, 2021 it ranks 27th, the lowest – in the module "results" (42nd place) (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). analysis of the world rankings of higher education in ukraine shows a mixed picture. for example, some positions place ukraine among the 50 countries with the strongest higher education systems in the world, but there are only a few ukrainian institutions in the world's leading university rankings that are not in the top positions. despite the new norms on university autonomy, in fact the heis did not acquire it. according to the eua methodology, the level of autonomy is assessed by four components: academic, financial, organizational, and personnel. unfortunately, ukraine is not listed as a country in the eu autonomy ranking, but the athena project conducted a study of the state of autonomy of ukrainian universities in 2012–2015 (avtonomiia universytetiv ukrainy). the results showed that the legislative changes made some difference in the direction of increasing the level of organizational (from 44% to 68%) and academic autonomy (from 51% to 57%). the level of organizational autonomy associated with the selection of the head, the criteria for his/her candidacy, the procedure for dismissal, the establishment of the term of office, as well as the right of the institution to invite non-employees to its governing bodies, remains low. with regard to academic autonomy, the weakness remains the institution's lack of authority to determine admission regulations. in terms of organizational autonomy ukraine is close to poland (67%), in terms of academic autonomy it falls short of the level of poland (68%) and many other leading countries. they have the highest level of university autonomy in the staffing component (80%), but the existing tariff schedule for public universities significantly reduces personnel autonomy (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky; panych, 2019). summarizing information about the system of higher education in ukraine since 2014. according to the state statistics service of ukraine (state statistics service of ukraine), during 2014–2020 there is a downward trend in all indicators (table 1). the number of university applicants decreased from 1689226 in 2014/2015 to 1439706 in 2019/2020. thus, while in 2014/2015 there were 664 institutions of higher education, in 2019/2020 there were 619 institutions of higher education (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). according to experts, "during the years 2021–2026, the number of school leavers is growing, and by 2031 it will be almost unchanged. we can expect an increase in the potential number of applicants. however, in 10 years, a new wave of decline in the number of graduates will begin, which creates additional risks for the long-term development of higher education" (perekhidna knyha mon za period z veresnia 2019 po cherven 2020; stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky; panych, 2019). let's agree that the demographic crisis, given the age structure of ukraine's population, and because it has a long-term impact, is one of the most significant risks to the higher education system, and the concept of lifelong learning has not gained traction among the population. thus, the current trend threatens the reproduction of intellectual and professional capital and makes the process of innovative development impossible. difficulties with employment after graduation motivate many young people to enroll in foreign universities, as evidenced by the indicators they had before "educational emigration". in the period from 2008 to 2017, the number of ukrainians who went abroad for higher education increased threefold, and the leading country was poland. "educational emigration" to poland is associated with culture, close proximity and eu membership, relatively low prices, and job prospects (education abroad: why ukrainians go to poland and germany; ukrainskyi tsentr otsiniuvannia yakosti osvity 2007–2020). germany is also popular among ukrainian students, and the main advantage is the quality of education and free tuition at state universities. ukrainian students also go to italy, the czech republic, the united states and canada, but the growth rate is not very fast. insufficient number of high-tech industries, unclaimed specialties in natural and technical fields table 1 distribution of the number of students of higher educational institutions in ukraine in accordance with the international standard classification of education isced 2011* levels of education according to isced 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 the short-cycle higher education 5 452 292 427 471 408 732 398 721 383 710 355 994 bachelor's degree or equivalent 6 890 277 855 683 800 450 774 076 746 330 726 336 master's degree or equivalent 7 346 657 322 116 377 572 365 768 392 210 357 376 doctoral studies or equivalent 8 30 31 30 08 27 55 26 32 23 74 26 58 * except for the temporarily occupied territory of the arc, the city of sevastopol, and parts of the territories in donetsk and luhansk regions source: http://www.ukrstat.gov.ua/ baltic journal of economic studies 195 vol. 7 no. 5, 2021 (in 2020 ukraine ranks 35th in the global innovation index / 25.3% of all graduates), in the top-10 directions applied for by applicants only two are informatics and none of the natural, engineering, technological directions for the development of the real economy (ukrainskyi tsentr otsiniuvannia yakosti osvity 2007–2020). the unsatisfactory condition and raw-material orientation of the country 's economy – these factors lead to a distortion of the structure of the contingent of students, who have no guarantee of employment in the future, i.e., there is a gap between the number of trained specialists and the needs of the labour market. almost 88.0% of heis in 2018 were self-employed. "some surveys, in particular, concerning the knowledge of job applicants, show employers' dissatisfaction with the level of knowledge and skills of job applicants. employers consider the disconnection of theoretical knowledge from practice, unpreparedness to work in real business as a significant problem for all graduates" (zvit za rezultatamy analitychnoho doslidzhennia). the problem is confirmed by the results of the skills component of the global competitiveness report 2019 (global competitiveness index), which evaluates the level of training of the current workforce in the country, and the "skills" component ranked ukraine 44th with an index of 69.9. it should be noted that, according to official statistics, there is a high level of quality teaching staff of universities in ukraine. in 2018, in the total number of teachers of universities, institutes, academies 48.7% were candidates, 11.6% were doctors of sciences, and 8.9% were professors (state statistics service of ukraine). the network of higher educational institutions in ukraine is one of the densest: 6.7 heis and 8 colleges, technical colleges and schools per 1 million population. the dynamics of higher education institutions in ukraine is shown in table 2. as of the beginning of 2019/2020, the number of heis increased by 1.4% compared to 2014/2015, i.e., the network of heis as a whole is narrowing (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). it should be noted that the introduction of market relations in ukraine has led to the emergence of free private property, but the main supplier of higher education remains the state. this trend was primarily due to changes in the structure of the country 's economy. since 2019, the strategy of the ministry of education and science of ukraine (mes) has been somewhat transformed, the ministry transforms universities, unites, thereby stimulating increased funding (the new funding system should be a tool "to unite the universities"). the amount of funds depends on the demand for higher education and the number of students. this direction is designed to improve, in particular, the quality of higher education (u21 ranking of national higher education systems). the subordination of heis at the beginning of the 2019/20 academic year is given (table 3). a significant change in ukraine, in the sphere of higher education, is the introduction of an approach to public funding of educational institutions in accordance with the results of their activities. thus, the universities that, among other things, will have higher employment of graduates, will be able to receive more financial support and more international grants, will be included in the international rankings (pro vyshchu osvitu. zakon ukrainy vid 01.07.2014 № 1556-vii; stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). according to the current legislation, (article 78 of the law on education of 05.09.2017 № 2145-viii) “the state provides assignations for education in the amount of at least 7 percent of the gross domestic product from funds of the state and local budgets and other legal sources of funding” (pro osvitu. zakon ukrainy st. 78 vid 05.09.2017 № 2145-viii). the number of students at universities, depending on the sources of funding for their education, is shown in table 4. state expenditures on higher education as a percentage of state expenditures on education in ukraine as a whole amount to 25% and correspond to the level of developed countries. as for the indicator of costs per student in ukraine, in nominal terms, from 2015 to 2019, they increased by more than one and a half times, but, given the devaluation of the national currency, they have decreased significantly. since 2015, the number table 2 dynamics of development of higher educational institutions in ukraine indexes 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 number of institutions (total, units) 664 659 657 661 652 619 number of students (total, individuals) 1 689 226 1 605 270 1 586 754 1 538 565 1 522 250 1 439 706 the number of people admitted to study (total) 361 110 323 064 313 856 323 577 310 326 297 142 number of students graduated from the heis (total) 484 482 447 418 386 668 421 131 412 914 383 865 number of students per 10,000 population* 393 373 373 363 361 343 *the estimated population is used in the calculation. source: http://www.ukrstat.gov.ua/ baltic journal of economic studies 196 vol. 7 no. 5, 2021 of students studying at the expense of the state budget has decreased, for the period 2010–2018 the volume of state orders decreased by 41.8%. the cabinet of ministers of ukraine has developed an innovative mechanism for distributing state budget expenditures among heis, implemented in 2020 (u21 ranking of national higher education systems). but, according to the author, the new mechanism does not contain a specific list of indicators of educational, scientific and international activities of universities, also there are no specific values (coefficients) for further adjustment of their funding. the reduction of state orders weakens the position of regional universities, which due to political, economic and demographic instability can not count on an increase in the number of applicants, so there is an table 3 subordination of institutions of higher education at the beginning of the 2019/20 academic year indexes number of institutions, units number of first-year students number of students, individuals the number of graduates of the heis, individuals number of scientific, academic, and pedagogical workers, individuals total 619 297 142 1 439 706 383 865 156 909 including: ministry of education and science of ukraine 273 222 663 1 062 472 281 811 106 620 ministry of defense of ukraine 1 846 3 886 761 819 ministry of social policy of ukraine 1 13 391 205 115 ministry of youth and sports of ukraine 14 3 487 15 436 3 905 3 364 ministry of healthcare of ukraine 21 11 831 69 831 13 769 13 002 ministry of internal affairs of ukraine 7 8 014 35 388 9 448 2 348 security service of ukraine 1 209 1 216 141 398 ukrainian state construction corporation "ukrbud" 2 314 1 033 315 104 others 184 28 477 127 321 36 222 19 425 private institutions 115 21 288 122 732 37 288 10 714 including the central union of consumer associations of ukraine 11 2 897 13 781 4 951 795 source: http://www.ukrstat.gov.ua/ table 4 number of students in universities by source of funding for their education indexes universities, academies, institutes 2015/16 2018/19 2019/20 number of students, individuals 1 375 160 1 322 324 1 266 121 including studying at the expense of the funds state budget 649 225 570 043 534 967 local budgets 14 722 12 834 10 926 legal entities 9 520 6 850 2 935 individuals 701 693 732 597 717 293 share of students (%) studying at the expense of funds state budget 47,2 43,1 42,3 local budgets 1,1 1,0 0,9 legal entities 0,7 0,5 0,2 individuals 51,0 55,4 56,6 source: http://www.ukrstat.gov.ua/ outflow of students to regional and metropolitan universities. not meeting the requirements of employers and the quality of education, business refuses to fund the training of future specialists. in addition, in the context of falling incomes of the population, the undeveloped education lending market leads to the deterioration of the principle of accessibility of higher education. reduced government spending challenges the fact that industry is a priority for the country. the author agrees that "the indicative cost of higher education has been introduced to enable universities to bring tuition fees for certain specialties into line with real costs and to raise faculty salaries" (postanova kmu "deiaki pytannia zaprovadzhennia indykatyvnoi sobivartosti" vid 03.03.2020 № 191). such initiatives do not correspond to the real state of baltic journal of economic studies 197 vol. 7 no. 5, 2021 solvency of the population, and universities constantly feel the lack of funds not only for development, but also for functioning in general. the reduction in the number of universities led to a decrease in the magistral staff. the number of teaching and research faculty has decreased since 2014/2015, but in 2019/2020 compared to 2018/2019, the number of employees in higher education increased by 0.4%. a significant decrease in the number of applicants, as well as in the number of the magistral staff and the number of universities, academies, and institutes, was caused by the annexation of crimea and military actions in the east of the country (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). the low level of funding affects the financial situation of educators, i.e., there is a wage gap between the higher education sector and other sectors of the economy. salaries of the magistral staff of higher education institutions in ukraine are significantly lower than in the leading countries of the world. there is no incentive for research and innovation; all professional development costs become the educator's concern. "low demand for pedagogical and scientific work by the state, low wages have led to a fall in the prestige of this activity. the rigid dependence of the staff schedule on the number of students also creates risks of employment of scientific and pedagogical workers and contributes to their migration" (ukrainian center for educational quality assessment 2007–2020). the unsatisfactory state of scientific-research work affects the activity of applicants at the scientific level. the number of heis that train postgraduate students decreased significantly (by 9.3%), but the number of heis that train doctoral students increased (by 4.7%). the main indicators of postgraduate and doctoral studies in ukraine are shown in table 5 and table 6. the instability of the number of institutions that train graduate students and doctoral candidates and have specialized boards is due to changes in the procedure for awarding degrees. lack of social guarantees, low wages and lack of opportunities for self-fulfillment of scientists lead to an outflow of young people. the low efficiency of scientific research of universities lowers the rankings of ukraine in relation to other universities of the world's leading countries, so the possibility of the presence of ukrainian universities in the world's leading university rankings is small. the xxi century is characterized by increasing globalization processes, which determine the transformation of all spheres of social life. such modernization is also characteristic of the educational process of higher education, namely the internationalization of education, academic mobility, educational marketing, export/import of educational table 5 the main indicators of postgraduate education in ukraine indexes 2015 2016 2017 2018 2019 the number of research institutes and institutions of higher education that have postgraduate programs, at the end of the year, units 490 481 475 431 417 number of postgraduate students at the end of the year, individuals 28 487 25 963 24 786 22 829 25 245 number of people enrolled in graduate study per year 9 813 6 609 7 274 7 172 7 381 number of graduate students per year 7 493 6 703 6 087 6 401 2 913 including with the defense of a thesis individuals 1 958 1 708 1 438 1 472 751 percent 26,1 25,5 23,6 23,0 25,8 scientific institutions the number of institutions with postgraduate studies at the end of the year, units 256 250 244 210 191 number of graduate students at the end of the year, individuals 3 862 3 125 2 652 2 080 2 211 number of people enrolled in graduate study per year 1 133 574 688 662 601 number of graduate students per year 1 147 1 014 951 852 330 including with the defense of a thesis individuals 140 125 110 99 56 percent 12,2 12,3 11,6 11,6 17,0 institutions of higher education the number of institutions with postgraduate studies at the end of the year, units 234 231 231 221 226 number of graduate students at the end of the year, persons 24 625 22 838 22 134 20 749 23 034 number of persons enrolled in graduate study per year 8 680 6 035 6 586 6 510 6 780 number of graduate students per year 6 346 5 689 5 136 5 549 2 583 including with the defense of a thesis individuals 1 818 1 583 1 328 1 373 695 percent 28,6 27,8 25,9 24,7 26,9 source: http://www.ukrstat.gov.ua/ baltic journal of economic studies 198 vol. 7 no. 5, 2021 services, as well as the development of appropriate information and communication technologies. in this regard, the number of foreign students in the global market of educational services is growing rapidly (londar, shapovalova, pron, 2020). the processes of globalization also manifest themselves in the educational sphere, such as the growing number of foreign students. the presence of a large number of foreign students indicates a high rating of educational institutions and the quality of educational services. admission of foreigners and stateless persons to ukraine in heis is carried out in accordance with the laws of ukraine “on higher education”, “on the legal status of foreigners and stateless persons”, “on foreigners of ukrainian origin”, “about refugees and persons in need of additional or temporary protection", decree of the president of ukraine of june 3, 1994 № 271 "on measures for the development of economic cooperation of the oblasts of ukraine with the adjacent regions of the republic of belarus and the administrative-territorial units of the republic of moldova", resolution of the cabinet of ministers of ukraine no. 684 of september 11, 2013 "issues of employment of foreigners and stateless persons", by the order of the ministry of education and science of ukraine on november 1, 2013 № 1541 "some issues of employment and training (internship) of foreigners and stateless persons", registered with the ministry of justice of ukraine on november 25, 2013, № 2004/24536 (londar, shapovalova, pron, 2020; pro zatverdzhennia umov pryiomu na navchannia do zakladiv vyshchoi osvity ukrainy v 2020 rotsi). education of foreigners in ukrainian universities is carried out in ukrainian, russian or english languages. today in ukraine there are about 400 heis, which train specialists for foreign countries and offer foreign students a wide range of specialties in various knowledge areas. the ukrainian state center for international education (hereafter – uscie) of the ministry of education and science of ukraine is the official state source of information on the training of foreign students. the state enterprise "ukrainian state center for international education" (abbreviated name – uscie) is a state commercial enterprise and belongs to the ministry of education and science of ukraine (ukrainian state center for international education). the number of foreign students coming to ukraine for higher education is constantly increasing. however, with the outbreak of hostilities in ukraine, the number of foreign students began to decline, yet the peak was table 6 the main indicators of doctoral activity in ukraine indexes 2015 2016 2017 2018 2019 the number of research institutes and institutions of higher education that have a doctoral programme, at the end of the year, units 283 282 277 270 253 number of doctoral students at the end of the year, individuals 1 821 1 792 1 646 1 145 1 113 number of persons enrolled in doctoral studies per year 650 584 493 544 511 number of doctoral students per year 563 551 543 963 511 including with the defense of a thesis individuals 169 153 153 232 143 percent 30,0 27,8 28,2 24,1 28,0 scientific institutions the number of research institutes and institutions of higher education that have a doctoral programme, at the end of the year, units 106 106 101 96 85 number of doctoral students at the end of the year, individuals 338 308 272 176 176 number of persons enrolled in doctoral studies per year 105 89 81 94 75 number of doctoral students per year 101 102 103 170 76 including with the defense of a thesis individuals 18 12 15 23 11 percent 17,8 11,8 14,6 13,5 14,5 institutions of higher education the number of research institutes and institutions of higher education that have a doctoral programme, at the end of the year, units 177 176 176 174 168 number of doctoral students at the end of the year, individuals 1 483 1 484 1 374 969 937 number of persons enrolled in doctoral studies per year 545 495 412 450 436 number of doctoral students per year 462 449 440 793 435 including with the defense of a thesis individuals 151 141 138 209 132 percent 32,7 31,4 31,4 26,4 30,3 source: http://www.ukrstat.gov.ua/ baltic journal of economic studies 199 vol. 7 no. 5, 2021 in 2019, when the number of foreign students reached 80 thousand, and in 2020 – more than 76 thousand. this is due to the covid-19 pandemic, which has had a significant impact on higher education and the economy as a whole. the number of foreign students studying in ukraine is given (table 7). the world market for educational services for foreigners is highly competitive and global. there is a risk of losing high positions on the world market due to the failure to make the necessary managerial and legislative decisions to ensure accessibility, as well as the creation of favorable conditions (stratehiia rozvytku vyshchoi osvity v ukraini na 2021–2031 roky). students come to ukraine mainly from asia (including central asia) and africa. the level of secondary education in these countries is not always satisfactory, which creates certain problems in ensuring the quality of higher education for students. the promotion of ukrainian universities in this market will strengthen the position of the country in the global educational system, as well as give stability to the system of higher education. the top-10 countries by origin of foreign students are given (figure 1). today in ukraine there are a large number of students from all over the world (about 155 countries). the interest in the education system in ukraine is not surprising, there are educational institutions of different types: universities, academies, institutes, conservatories, colleges, etc. besides, all of them can be both public and private. the most popular universities among international students are given (figure 2). almost half of the foreign students, 39,841 more precisely, are studying medical professions in ukraine. the average tuition fee for these majors is $4,300 per year per student. for other majors, it is $2,000. taking into account almost 7,000 students in the preparatory division (average tuition fee is $1,500) and more than 2,800 students in graduate studies and master's programs (average cost is $2,000), international students are paying nearly $250 million a year in tuition fees alone. education of foreign students in ukrainian educational institutions is not only the image of the country, but also an important component of foreign investment in the economy. according to rough estimates, a foreign student receiving higher education in ukraine spends at least $6,000-8,000 a year. the ukrainian government seeks to increase the enrollment of foreign students at ukrainian universities because foreign students training on a contractual basis and the cost of tuition fee for foreigners is twice as high as for ukrainian citizens. table 7 the number of foreign students in ukraine indexes 2015 2016 2017 2018 2019 2020 number of foreign students, total (individuals) 63906 64066 66310 75605 80470 76548 the number of heis in ukraine that educate foreign students 185 228 269 443 455 394 source: http://www.ukrstat.gov.ua/ 18095 8832 5322 4628 4227 4065 3999 3048 2107 1585 23,64 11,54 6,95 6,05 5,52 5,3 5,22 3,98 2,75 2,07 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 figure 1. top-10 countries of origin of international students, individuals / % source: http://www.ukrstat.gov.ua/ baltic journal of economic studies 200 vol. 7 no. 5, 2021 the government's desire to increase the number of international students is understandable, since international students are an important source of income. the funds that ukraine receives from foreign students help maintain and even create workplaces in education, and allow the authorities of the universities where they study to invest money in improving the quality of educational services provided by national educational institutions to all students, regardless of citizenship (inozemni studenty v ukraini: osvita chy ekspluatatsiia?). summarizing the above, it can be highlighted the current trends in the development of higher education in ukraine (table 8). analyzing the current state and trends of development of higher education in ukraine, it is necessary to identify priorities for solving problems that will meet today 's challenges for the further development of higher education, proposing a strategy for the development of education (figure 3). 4. conclusion the proposed strategy for the development of higher education in ukraine provides, for condition of maximum efficiency, the use of all resources: organizational, institutional, instrumental, financial, scientific and methodological, etc. 4277 4215 3061 2935 2860 2771 2573 2433 2095 1838 0 500 1000 1500 2000 2500 3000 3500 4000 4500 v.n. karazin kharkiv national university kharkiv national medical university bogomolets national medical university odessa national medical university zaporizhzhia state medical university national pirogov memorial medical university, vinnytsya dnipro state medical university ivan horbachevsky ternopil national medical university of the ministry of health of ukraine bukovinian state medical university taras shevchenko national university of kyiv figure 2. the most popular universities among international students, individuals source: http://www.ukrstat.gov.ua/ table 8 trends in the development of higher education in ukraine advantages disadvantages regulatory affaires for higher education is close to the european higher education area low level of autonomy of higher education institutions human capital unfavorable demographic situation developed network of higher educational institutions an increasing trend toward educational emigration the presence of world-class universities inconsistency between the structure of training to the current and future needs of the labour market higher education system. the mismatch between the skills of freelance graduates and the needs of employers attractiveness for international students low and inefficient financial support for higher education the low prestige of teaching, the loss of human resources weak connection of higher education institutions with science and business source: created by the author baltic journal of economic studies 201 vol. 7 no. 5, 2021 step 1 step 2 step 3 step 4 step 5 improvement of the education management system ensuring a balanced labour market ensuring access to education for different segments of the population integration of science, education and business human resource development tasks: creation of managerial interaction between mes and heis; development of autonomy; balancing the network of heis, taking into account sectoral and regional priorities; financial stabilization. tasks: forecasting the need for specialists in the labour market; cooperation between the education system and the labour market. tasks: building a system of state standards in accordance with the content of the strategic goals of education; ensuring the monitoring of the quality of education; logistics, modernization and implementation of innovative technologies. tasks: development of the innovation ecosystem; improving the funding and commercialization of science; preparation of joint projects of research and academic institutions. tasks: enhancing teacher status; stimulating the professional growth of teachers. results: step 7 step 6  effective management system;  stability in financing the activities of heis;  development of exploratory activities of universities;  raising the rating of scientists;  high quality education;  balance in the labour market;  cessation of the outflow of students;  stable positive dynamics of heis. integration into the european and world educational system the development of a system of "lifelong learning" tasks: providing conditions for integration; internationalization; attracting international students. task: implementing the concept of "lifelong learning" figure 3. strategy for the development of higher education in ukraine source: created by the author references: volkova, s. p. 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[international students in ukraine: education or exploitation?]. available at: http://www.euroosvita.net/prog/print.php/prog/print.php?id=1808 (in ukrainian) baltic journal of economic studies 8 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 grigol robakidze university, georgia (corresponding author) e-mail: irakli.abashidze02@gruni.edu.ge orcid: https://orcid.org/0000-0002-0011-6279 researcherid: hlv-9224-2023 doi: https://doi.org/10.30525/2256-0742/2023-9-2-8-18 permission marketing strategy shaping consumer behaviour through online communication channels irakli abashidze1 abstract. in today's cluttered world, consumers often try to avoid receiving advertising messages through various communication channels. interruptive advertising is losing its effectiveness. as a result, marketers must change their strategies to retain existing customers and attract new audiences. the purpose of this paper is to review various aspects of permission marketing and to outline some of the ways in which it can be used in practice. the object of the study is the concept of permission marketing and its influence on consumer behaviour. similar to other marketing concepts, it is constantly changing and evolving. observation is used as the primary methodology of the study. in addition, the literature review contributes to the analysis of various aspects of the issue. it is one of the concepts that can drastically change the way of communication and create innovative approaches to influence consumer behaviour. today, online communication channels are the most favourable tools for implementing permission marketing policies. however, due to the fluctuating and unpredictable online environment, they can turn from opportunities into reasons for serious complications. therefore, the concept introduced by seth godin in 1999 requires further theoretical research amidst the development of online communication technologies. properly planned and executed, permission marketing campaigns can be effective in influencing consumer behaviour. however, it is a strategy designed for longer periods of time. results. the paper provides a theoretical review of the main aspects of the permission marketing concept: the role of online communication channels, the peculiarities of consumer behaviour and the implementation of permission marketing strategies. in addition, the paper provides a multilateral analysis of the current characteristics of the concept. finally, the paper proposes some recommendations on how to influence consumer behaviour through different online communication channels within the framework of permission marketing policies. key words: permission marketing, consumer behaviour, online communication channels. jel classification: m31 1. introduction in an environment where everyday life is overloaded with an excessive flow of information, consumers' attention and time can be considered one of the most valuable assets a company can possess. companies compete for consumers' attention not only with their direct competitors and the mass media, but also with ordinary consumers. they often use social media channels or virtual communities to share information and build relationships. social media influencers use the same channels and provide unique value to both users and advertisers (lou and yuan, 2019, p. 59). therefore, the high intensity of the information stream is rather an unfavourable condition for conducting efficient advertising campaigns. thus, there is a need to transform marketing policies. in order to meet this challenge, permission-based marketing principles can be considered as the main leverage to gain customers' attention, time and trust. according to seth godin, the author of the concept, permission marketing is "the privilege (not the right) of delivering anticipated, personal and relevant messages to people who actually want to receive them." (godin, 2008) the main philosophy of permissionbased marketing communication is that customers express their willingness and desire to engage with companies without interruptive advertising or any other form of indirect compulsion. this approach is an innovative form of direct marketing based on godin's concept. permission marketing can also be seen as the opposite concept of "interruption marketing", which aims to interrupt the customer's attention with high intensity advertising communication. this approach has proven to be effective in achieving various marketing objectives. however, baltic journal of economic studies 9 vol. 9 no. 2, 2023 in the long term, permission-based marketing communication has the potential to shape consumer behaviour more efficiently, to the benefit of both companies and consumers. permission marketing can be divided into two categories: explicit and implicit. in the case of expressed permission marketing, a consumer provides their contact details to a company in order to receive marketing messages; implied permission marketing occurs when a company has an existing relationship with the consumer. this could include someone who is a current customer or a frequent website visitor (carmicheal, 2019). the main advantage of permission marketing principles over interruptive marketing is that consumers perceive a company in a positive light. in contrast, interruptive communication can lead to negative perceptions, resulting in brand damage and other negative consequences. in addition, consumers are trying to avoid processing large amounts of information. they spend less time searching for alternative solutions (godin, 1999, p. 27). hence the need for new marketing approaches. from this point of view, the effectiveness of permission marketing is undeniable. implementing the concept of permission marketing has the potential to provide a company with a number of benefits: a loyal customer base, a growing number of new customers, positive word-of-mouth online and offline, high roi (return on investment) and growing clv (customer lifetime value). as a result, a company can become increasingly competitive. the main prerequisite for these results is the consumer's consent to receive a marketing message. consequently, companies with a significant number of consenting customers have a competitive advantage over their business rivals (krafft et al., 2017, p. 39). in turn, a growing number of loyal customers provides a strong foundation for increasing brand equity. online channels are the most widely used communication tools between businesses and consumers. digital marketing is therefore the most appropriate strategy for implementing and managing permission marketing policies. however, online marketing communication has its risks and challenges as well as its opportunities. therefore, planning and executing a permission marketing campaign using online communication channels requires prior research and thorough planning. there are a number of aspects that need to be considered: type of online channel, type of target audience, segmentation strategy, online reputation management (orm) strategy and tools, customer relationship management (crm) strategy and tools, analytics, communication style, branding and positioning strategies, content strategy, product and service development strategy. all of the above are part of a company 's overall marketing strategy. consumers may vary in the intensity of their consent to permission marketing communications through online channels. this peculiarity of consumer behaviour is one of the most important factors in permission marketing policy. therefore, a high level of consumer consent is the primary objective when conducting permission marketing campaigns. high permission intensity is characterised by three factors: high information quantity, high information quality and flexibility of information use (krishnamurthy, 2006). customers are willing to share their information in exchange for valuable benefits. therefore, the effectiveness of a permission marketing strategy depends on the brand promise and, more importantly, on the degree to which it matches the consumer's expectations and perceptions. in this case, a consumer will be ready to provide more information of higher quality, which is one of the main prerequisites for the success of permission marketing campaigns. the issue of personal data in permission marketing is essential not only for retaining loyal customers, but also for attracting new audiences. 2. literature review in 1999, seth godin introduced the concept of permission marketing. he proposed a new vision that was completely different from existing approaches to marketing communications. his book "permission marketing, turning strangers into friends, and friends into customers" discusses various aspects of getting customers' attention and managing the communication process. the abundance of information in a customer's daily life makes it extremely difficult to run advertising campaigns due to the high level of competition. as godin notes: "interruption marketing fails because it cannot get enough attention from customers. moving to permission marketing can fundamentally change a company 's entire business model and profit structure." (godin, 1999, p. 40) according to this concept, permission marketing has the potential not only to change the motivations of consumer behaviour, but also to drastically improve a company 's management methods and business results. consumer motivations, perceptions and decisions in permission marketing are very different from those in interruptive communication. therefore, the concept introduced by seth godin is an important research topic for marketing scholars. in addition to the benefits of the concept, it has been criticised for the methods used to obtain consumer permission. "it is not without controversy. by using the right combination of question framing and default answers, companies can gain the consent of almost baltic journal of economic studies 10 vol. 9 no. 2, 2023 any website visitor. this raises privacy concerns for consumers and can affect their trust in permission marketing activities, which can affect the success of the medium." (tezinde et al., 2022, p. 31) this is why the issue of consumer consent is so important. the essence of permission marketing is based on the free will of the consumer. thus, a company 's intentions and methods of obtaining consent must be clear and straightforward. the issue can also be discussed from an ethical perspective. "it is important that companies respect the needs of customers and their right to privacy. companies need to know their customers to ensure deliveries, payments and to avoid fraud." (waring and martinez, 2002, p. 60) as the authors note, ethics is a critical issue in managing the permission marketing communication process for both companies and consumers. the absence of ethical approaches can seriously damage the relationship between a company and its customers. advertising is one of the central issues in permission marketing theory. "advertising is not the reason we pay attention. but marketers have to get us to pay attention for advertising to work. if they don't interrupt our train of thought by planting some sort of seed in our conscious or subconscious mind, the ads fail." (godin, 1999, p. 25) consumer motivations, perceptions and eventual behaviour are not determined by the advertising itself, but by the information to which a consumer is exposed. for this reason, interruptive advertising loses much of its effectiveness when each consumer is exposed to a large number of messages on a daily basis. psychological factors are one of the central issues in advertising communication. marketers must take into account consumers' perceptual peculiarities. in this context, the issue of "perceptual selectivity " is of great importance. this means that people pay attention to only a small proportion of the stimuli to which they are exposed. consumers engage in a form of psychic economy, picking and choosing among stimuli to avoid being overwhelmed by advertising clutter (solomon et al., 2006, p. 47). furthermore, according to the psychology of attention, people voluntarily pay attention to information in contexts that are perceived to be relevant to their goals (argyriou and melewar, 2011, p. 437). accordingly, the need for permissionbased communication is largely determined by the problem of consumer attention. another important aspect of permission marketing theory is consumer expectations of companies. the concept of permission marketing is the idea that people give their permission for the marketer to inform them about its products (kavassalis et al., 2003, p. 56). therefore, consumer expectations of companies can vary. modern consumers do not always perceive products as simple objects of consumption. instead, some types of products may serve additional, personal purposes for consumers. for example, self-expression, creating psychological comfort or even satisfying unconscious desires. permission marketing principles are the most appropriate strategy to meet these expectations. when seth godin first published his book, internet communication was not as widespread as it is today. however, his concept can be fully applied to modern digital marketing communications. moreover, the latest developments in online marketing communications allow marketers to apply permission marketing principles to every channel they use, including mobile marketing and the web 2.0 environment. often the practical application of permission marketing principles is more advanced than its theoretical study. therefore, the issue of permission marketing's influence on consumer behaviour requires further research and analysis. 3. discussion 3.1. online communication channels in permission marketing policy the technical capabilities of online channels allow the implementation of permission marketing policies. as permission marketing requires the transfer of personal data from customers, sales promotion programmes are one of the most suitable marketing tools. sales promotion tools play an important role in encouraging customers to purchase a promoted product. consumer behaviour can be positively induced through the use of various promotional tools (shamout, 2016, p. 81). however, the permission principle requires companies to play by a number of rules. consumers expect value in exchange for their personal information and permission to be contacted for promotional purposes. sales promotion tools such as loyalty programmes, coupons, discounts, competitions and giveaways allow companies to increase sales. the terms and conditions of this type of marketing communication need to be as clear and transparent as possible. one of the most important aspects of this process is that consumers expect a high level of security and personal data protection in every communication channel: website, social media and mobile applications. rapid technological advances are reducing the costs for companies to collect and use consumer data. as a result, new information flows are emerging that may threaten consumer privacy (bleier et al., 2020, p. 6). therefore, one of the primary concerns in implementing permission marketing policies in sales promotion programmes is consumer privacy. the concept of permission marketing is not only based on the provision of consumers' personal data. baltic journal of economic studies 11 vol. 9 no. 2, 2023 implied permission marketing activities occur when a consumer engages in ongoing transactions across a company 's various online touchpoints. this may include visiting a website for various purposes, using a mobile application or being part of a content marketing audience. content marketing has multiple opportunities to attract new customers, retain existing customers and increase conversions. therefore, many companies are interested in increasing the use of the content marketing tool in their marketing policy (patrutiu baltes, 2015, p. 111). the initiator of primary communication through various online channels is a company. however, the content has a particular value to the consumer that motivates them to read blog posts, watch videos, play games or take a quiz. as a result, consumers are deliberately engaged, providing an opportunity for a business to increase brand awareness, conversions and other short and long-term marketing objectives. it is important to analyse how each user's results contribute to the global results in order to determine which measurements do not have a direct relationship with the achievement of conversions (lópez garcía et al., 2019, p. 12). thus, one of the crucial aspects of permission marketing policy is analytics. it can facilitate fully automated marketing, personalise content and introduce location-based personalisation with mobile technologies (davis et al., 2021, p. 450). a variety of sources can provide an organisation's marketing team with an immense amount of consumer data. once collected and thoroughly processed, analytical data allows decisions to be made to improve permission marketing decisions. among other channels, mobile devices are one of the primary channels that generate large amounts of consumer data. companies using mobile social media often have some information about the consumers they are dealing with (yadav et al., 2015, p. 338). in terms of being a channel, mobile provides companies with customers' transactional data, enabling them to analyse and predict customers' needs and wants (shankar et al., 2016). ultimately, proper management of analytics and mobile channels enables a firm to maintain high performance of permission marketing campaigns. on the other hand, mobile devices in permission marketing campaigns can be seen as both an opportunity and a challenge, as it requires dealing with consumer data privacy and complex analytics solutions. one of the opportunities that online channels offer marketers in the context of permission marketing is a high degree of segmentation. customers who have expressed a willingness to be contacted by companies are potential target audiences for a company. however, the first step in this process is to select the right target audience, and not just online. companies need to realise the full and deep integration of online and offline to truly provide a better experience for customers and meet their real demands (zhu and gao, 2019, p. 34). getting the segmentation right and choosing the right audience is important, but not enough to deliver a successful permission-based marketing campaign. delivering on the 'promise' made to customers during communi cation is the key aspect of positive customer experiences for a company 's ongoing marketing success. this is especially true in the age of social media, where customers are often public about their experiences with companies. electronic word of mouth (ewom) can have a significant impact on a company 's reputation and alter its prospects for development, both positively and negatively. a positive reputation is necessary for both small and large companies to remain competitive. permission-based communication to create a positive reputation is suitable for both small and large firms. social media enables small businesses to carry out marketing activities effectively despite limited financial resources (hassan et al., 2015, p. 263). social media channels can be used for a variety of purposes in a permission marketing strategy. for example, as a content marketing medium, to collect customer contact information and as a customer relationship management (crm) tool. the essential success factor for the small business is a good customer relationship, which is accommodated by social media (ainin et al., 2015, p. 573). therefore, marketers should consider social media as a multifunctional communication channel to achieve various marketing objectives, including permission marketing activities. another online channel available to marketers is search engines. the process by which a consumer searches for a product or service is essentially based on giving permission. looking at the stages of the decision-making process, a customer is looking for information about a product and evaluating alternatives. therefore, this is a favourable condition for a company to offer the desired product or service based on permission marketing principles. however, due to the fierce competition for high positions in the serps (search engine results page), companies need to meet customer expectations. in fact, they often need to exceed expectations in order to retain a customer. however, in addition to valuable offers and products, a website should be optimised for search engines. scientific algorithms developed through the computer programming language tend to rank searches according to highly related web pages (nyagadza, 2020). therefore, companies need sophisticated seo knowledge and policies to attract customers through search engines, as the nature of the search process is highly permission-based. one of the most important aspects of permission-based baltic journal of economic studies 12 vol. 9 no. 2, 2023 communication through websites is a clear and transparent cookie policy. cookies can be used to find information files with server logs, tags or navigation bars. this data can be used to segment audiences (saura et al., 2017). companies must obtain consent from website users to use cookies for marketing and analytical purposes. the use of email is one of the ways to conduct direct marketing campaigns. the first stage of conducting an e-mail marketing campaign involves getting potential customers to leave their e-mail addresses through which communication with them can be achieved (grubor et al., 2018, p. 28). permission marketing principles dictate that email addresses should only be collected with the consumer's consent. otherwise, an email marketing campaign can damage a brand's reputation, as unsolicited email messages are perceived by customers as annoying attempts to communicate. messages should not only be permission-based, but also contain a valuable offer to the customer. furthermore, in the context of permission-based communication, one of the essential elements of email marketing is that consumers are given the opportunity to unsubscribe from receiving email messages. in particular, mobile devices and applications offer marketers multiple opportunities for permission based communication. each mobile device is associated with an individual user with a high degree of precision. this allows for personalised communication with individual consumers. for example, various types of promotional programmes can be integrated into a mobile application. this online channel allows marketers to measure customer satisfaction. marketers should be able to increase customer perceived value, as it has a significant impact on customer satisfaction in the case of mobile applications (dovaliene et al., 2015, p. 663), as mobile devices generate a large amount of data on consumer behaviour. the specificity of consumer behaviour is one of the key issues in permission marketing communication strategies. 3.2. consumer behaviour influenced by permission marketing solutions when a company implements a permission marketing policy, it becomes an important part of the brand experience. ultimately, it becomes a critical factor in the formation of consumer impressions, perceptions and overall behaviour. brand experience is essential in the eyes of the consumer to enable him or her to differentiate between products (urdea et al., 2021). the permissionbased relationship between a company and a consumer can become one of its most valuable assets. seth godin, in his book "purple cow: transform your business by being remarkable": "build and leverage a permission asset. once you have the ability to speak directly to your most loyal customers, it becomes much easier to build and sell amazing things." (godin, 2002) this principle is highly effective in online marketing communication channels. consumer behaviour is strongly influenced by their level of awareness. most consumers are aware of companies' intentions. in an interactive digital market environment, companies have the ability to generate customer insights about individual customers and use these insights to target specific customer segments (varadarajan, 2020). consumers are aware that the personal data they provide to companies will be used for commercial purposes. as a result, they not only give permission, but also expect to be contacted. however, these expectations only arise if consumers are satisfied with previous interactions with companies. as a result, permission marketing communications can have a psychological impact on consumers. in general, psychological factors have a huge impact on consumer behaviour. when consumers agree to give companies permission to communicate, they expect to achieve certain goals. these goals are formed on the basis of impressions, emotions and experiences. this is a form of engagement that is a multi-level, multi-dimensional construct that arises from thoughts and feelings about one or more rich experiences involved in achieving a personal goal (calder et al., 2015). these impressions, emotions, thoughts and feelings can change over time. positive experiences are conducive to increasing consumer loyalty to brands. another important psychological factor that plays a crucial role in consumer behaviour is the issue of self-esteem. today 's consumers are often very aware of the commercial intentions of companies and marketing is perceived as a manipulative method. as a result, many consumers have trust issues, especially when it comes to disclosing personal information (dastane, 2020, p. 143). to some extent, this can hinder the implementation of marketing campaigns as consumers try to avoid being manipulated. on the other hand, if a person feels that their decisions and actions are based on independent will, their self-esteem and ego are intact. one of the key requirements of permission marketing is to convince consumers that their decisions and actions are not being manipulated. permission marketing means that consumers have full control over their data and the level of communication with companies. consumers weigh the consequences of disclosing their personal data against the value offered by the marketer (martin and murphy, 2017, p. 145). they expect a worthwhile reward in exchange for disclosing baltic journal of economic studies 13 vol. 9 no. 2, 2023 their personal information. it is paramount that consumers are reassured about the security of their personal data. as a result, positive word-of-mouth (wom) can occur online. wom is considered to be the most important source of information in consumers' purchasing decisions and intended behaviour (huete-alcocer, 2017). consumers are often inclined to engage in conforming behaviour, especially if they are assured that their personal data is well protected. therefore, the effectiveness of permission marketing is highly dependent on privacy policies and positive word-of-mouth across different online platforms. permission marketing has the potential to increase customer loyalty to brands. when the connection and engagement between a consumer and a brand is strong, a consumer can associate themselves with a brand. consumers are often reluctant to invest additional effort in searching for alternative brands. godin comments, " we already have a favourite brand of almost everything. why spend time figuring out how to switch?" (godin, 1999) however, this principle does not apply to all categories of consumers. certain types of consumers are "innovation seekers" by nature. they are constantly looking for new options and opportunities. therefore, consumer behaviour in terms of loyalty can be very different depending on the type of product, the permission marketing solution and, of course, the target audience category. the differences can be caused by the age of the audience, the cultural environment, the level of competition in the markets and personal factors. the intensity of the influence of online channels on consumer behaviour has increased since the mid-2000s, when the concept of web 2.0 was introduced by tim o'reilly. the competitive opportunity for new entrants is to fully exploit the potential of web 2.0. successful companies will create applications that learn from their users (o'reilly, 2005). in some ways, the web 2.0 environment has been a game changer in marketing communications. the advancement of web 2.0 technologies has certainly empowered customers (palacios-marqués et al., 2015, p. 1909). as a result, brands need to adapt their marketing policies to the web 2.0 environment. like other strategies, permission marketing is affected by online communication platforms. consumers are no longer passive recipients of information. instead, they are active individuals who can publicly express their opinions about brands and make decisions based on an analysis of various alternatives. therefore, the characteristics of consumer behaviour in the web 2.0 environment are both an opportunity and a challenge for the implementation of permission marketing policies. as mentioned above, a significant proportion of consumers tend to exhibit conformist behaviour, including cases where behaviour is influenced by the recommendations of other consumers. electronic word of mouth (ewom) campaigns can significantly increase the effectiveness of influencing consumer behaviour when it comes to the issue of trust in a brand. permission marketing solutions are one of the most sensitive issues that can be affected by word-of-mouth across online platforms. therefore, companies should focus on marketing strategies that can increase the amount of wom (e.g., reviews or referral incentives, etc.) (gong et al., 2018, p. 403). furthermore, consumers' perceptions and feelings towards the websites and content created by other consumers are considered as important aspects in influencing consumer behaviour (zhang and benyoucef, 2016, p. 97). this is one of the most beneficial opportunities of web 2.0 for brands. in this context, companies need to have a deeper insight into consumer behaviour and educate consumers about the brand in order to develop effective marketing strategies (zhang, 2015, p. 59). consumers show positive behaviour towards brands that they perceive as responsible, helpful and attentive. analyzing consumer behavior in online communication channels, it should be emphasized that social media is the most exceptional platform in terms of influencing consumer behavior. it is a multidimen sional medium that has essentially become almost everything – content, information, behaviour, people, organisations, institutions (appel et al., 2020, p. 80). opportunities to influence consumer behaviour through permission marketing policies can be tightly integrated with social media platforms. permission marketing only has a fruitful effect on consumer behaviour when it is a holistic approach in a company 's overall marketing strategy. therefore, the implementation of a permission marketing strategy requires thorough planning and consistent execution at every stage of its development. 3.3. implementing a permission marketing strategy in today 's highly competitive markets, companies need competitive advantages to maintain market share and attract new customers. innovative approaches to marketing communications can effectively serve as a competitive advantage. only companies that offer innovation can achieve competitive advantage (dereli, 2015, p. 1367). permission marketing can be used as an innovative approach to managing communications with target audiences. the competitive advantage provided by a permission marketing policy can significantly increase a company's ability to win the competition for loyal customers. baltic journal of economic studies 14 vol. 9 no. 2, 2023 it is important to recognise that different audiences require different approaches to managing permission marketing solutions. in addition, permission marketing allows companies to build highly personalised relationships with customers. while advertising involves impersonal communication, direct marketing seeks to establish a one-to-one personal relationship with the target audience (key and czaplewski, 2017). this is another advantage of permission marketing over mass advertising communication. in addition, as the digital age continues to take hold, personalization is a powerful and influential tool for companies to determine what customers want to buy (behera et al., 2020). personalisation is one of the prerequisites for a successful marketing policy in general. however, the level of personalisation needs to be carefully chosen and based on extensive research into the target audience, their needs, behaviours and demographics. another essential requirement for implementing a permission marketing strategy is the necessary technical infrastructure, managed by qualified professionals. the infrastructure may include, for example, a website, online and offline promotional tools and devices, mobile applications, loyalty card systems, technical support solutions, customer relationship management (crm) tools, data collection and processing software. a key part of the technical delivery of permission marketing management is the secure collection and processing of customer data. today, companies are involved in an increasingly data-driven ecosystem (saura, 2021, p. 100). marketers often have to deal with vast amounts of consumer data to make decisions and plan marketing campaigns. as companies expand their efforts to collect and use customer data, customers are increasingly concerned about their privacy and the potential for harm (martin et al., 2017, p. 37). accordingly, a sense of privacy and protection of personal data are crucial factors for consumers when deciding whether to provide their personal data for commercial purposes. as online communication channels generate large amounts of data, the right analytics policy can play a key role in implementing permission marketing solutions. it requires careful consideration of how commercial value will be generated through web analytics now and in the future (chaffey and patron, 2012, p. 34). in general, marketing has begun to focus more on the development of statistical models and predictive analytics (wedel and kannan, 2016, p. 99). however, in addition to quantitative and statistical data, analytics can provide marketers with qualitative information and predictive insights, differentiating loyal customers in existing audiences and identifying potential loyal customers in 'cold' audiences. the importance of data analytics is increasing as consumer behaviour has evolved over time (sheth, 2021). buying journeys and decision stages are becoming more complex. accordingly, marketers need to collect, process and analyse diverse consumer data to make the right marketing decisions, especially in the case of permission marketing strategies where consumer trust is the key element of ultimate success. as marketers have to deal with consumer trust and personal data, reputational risks arise. online trust is a major factor that contributes to the overall success of a company 's marketing efforts (boateng, 2018). even a small mistake or malfunction in any process can cause a reputational crisis. therefore, an online reputation management (orm) policy is crucial. it helps companies to monitor discussions and sentiments, detect negative word-of-mouth, prevent possible complications and take necessary actions, use feedback data obtained from orm tools to improve products, services, communication and pr activities. managing an orm strategy often requires a significant investment in financial and human resources. small companies cannot afford to deploy large orm systems. but they have smaller challenges. like large companies, they need to develop comprehensive orm management and crisis prevention strategies. otherwise, the unpredictability of consumer behaviour and the fluctuating online environment can seriously damage their brand reputation, especially when it comes to managing permission marketing activities, where communication style and high levels of customer satisfaction are extremely important for survival in a fierce competitive environment. even small companies need to implement an orm strategy. they are more vulnerable to minor crises, whereas large organisations have more survivability potential. the principle of permission-based communication can be exercised through a content marketing strategy. it can be used to support an organisation's inbound marketing strategy, which is based on permission-based communication. the two-way communication capability of digital media can be used to support consumers (hollebeek and macky, 2019, p. 36). the very idea of content marketing is based on the free will of consumers to maintain communication with companies. in this case, permission is not necessarily expressed by providing personal or contact information. instead, if the content is interesting, helpful or otherwise valuable, consumers will choose to give companies their attention and time. consumers' time and attention are valuable assets for businesses. these assets can be converted into various commercial outcomes: brand awareness, positive reputation, support for positioning strategy, brand equity and increased sales. the latter is the most obvious monetised outcome. the rest of the results are intended for the longer term. as for the baltic journal of economic studies 15 vol. 9 no. 2, 2023 content marketing strategy itself, marketers have a number of channels and forms at their disposal: blogging, video content, podcasting, infographics, games, product reviews, guides, calculations, competitions, etc. they can entertain, inspire, educate or persuade consumers, depending on the marketing objective: increasing awareness or sales. content marketing can significantly enhance a company 's permission marketing strategy. however, it requires a high level of expertise and investment of resources. various communication channels can be used, including websites, social media, video portals and mobile devices. mobile devices are the most prevalent platform for marketing communications today. because a mobile device is associated with a single consumer, it allows marketers to maintain personalised, direct and constant communication. therefore, as a communication platform, mobile devices lend themselves perfectly to a permission marketing strategy. permission is a fundamental condition for optin campaigns (berman, 2016, p. 4). consumers and businesses can actively use mobile devices to exchange information, maintain contact, make offers and other transactions. the opportunity to use mobile devices in promotional programmes needs to be emphasised. this can be done through mobile applications. the mobile device is the most common platform used by consumers to disclose their online behaviour. therefore, companies need to take advantage of the various opportunities offered by mobile platforms for successful permission marketing campaigns. 4. analysis a critical component of many communication success stories is a well-developed integrated marketing communications (imc) programme (keller, 2016, p. 286). permission marketing as a stand-alone strategy cannot be effective. it is a unity of activities in a company 's overall marketing policy. each element of imc in all online communication channels must be based on permission principles. in this case, consumers are exhibiting behaviours that align with a company 's long-term marketing objectives. at the same time, the audience attracted by this strategy is highly segmented and active, including in terms of social media wom. one of the key prerequisites for achieving this result is complete alignment between a promise and the consumer experience. marketing is essentially a process of making promises, and the degree of success depends on the quality of the promises fulfilled. this philosophy is critical to the politics of permission marketing. unfulfilled promises can lead not only to failed marketing plans, but also to reputation management complications and even a full-blown pr crisis. this threat is particularly dangerous for brands in the age of social media, where any consumer can spread their opinion about a company. as a result, social media can turn from an opportunity into a serious threat. for customers, integration is a naturally occurring process of perception, repetition and brand learning as they try to make sense of a cluttered world (kerr and patti, 2015, p. 319). to shape customer perceptions in a brand's favour, the consistency and coherence of imc elements is critical. in the event of a pr crisis, brands must have preventive measures in place to deal with complications. this must be part of a pre-established anti-crisis plan as part of the overall marketing policy. increased return on investment (roi) is one of the benefits of permission-based marketing communications. however, this may not happen immediately, as permission marketing is a longterm strategy. in turn, a longer timeframe means an audience of more loyal customers, enabling brands to increase customer lifetime value (clv). this metric is one of the most obvious indicators of a successful brand. in addition, a marketing policy supported by permission-based communication can increase competitiveness. as permission-based communication involves constant communication with consumers, online crm tools play a key role. they enable companies to maintain a high quality of service, thereby creating positive perceptions among customers and influencing their behaviour. in addition to communication and service purposes, online crm tools enable the collection of customer data. by using online crm tools, brands have the opportunity to identify customer needs, wants and requirements. meeting the needs of customers can be done by personalising marketing or treating each customer individually based on their interests and needs (anshari et al., 2019, p. 100). personalisation is one of the most favourable opportunities of online communication channels. brands need to personalise their permission marketing policies in order to increase the efficiency of their communication. however, companies need to carefully choose the degree of personalisation. it needs to be increased gradually, depending on the intensity of customer engagement. it also requires consideration of the different stages of the customer journey and decision-making process. redundant personalisation in the early stages of communication can have a negative impact on consumers' perceptions, decisions and ultimately their behaviour. therefore, personalised communication in a permission marketing policy requires thorough prior analysis of marketing data and careful execution. advertising in the context of permission marketing is often seen as interruptive communication. however, baltic journal of economic studies 16 vol. 9 no. 2, 2023 online communication channels make it possible to conduct permission-based advertising campaigns. this can be achieved through a comprehensive analysis of consumer data and behavioural characteristics. when consumers have a conscious and intense relationship with a brand, they subconsciously expect the brand to advertise to them. in this case, this type of advertising is not perceived as a disruptive attempt to grab their attention, but as an opportunity to learn about new products and services. online touchpoints have the potential to meet the principles of permission marketing. customers react differently to their experiences depending on whether they take place on a website or in a store. companies need to ensure that all touchpoints are integrated (bolton et al., 2022, p. 85). only the unity and full integration of online touchpoints can positively influence consumer behaviour. each touchpoint should be designed with permission in mind. this approach becomes even more important when most consumers are highly informed and aware of brands' marketing policies and commercial intentions. last but not least, companies should realise that the internet has taken away their ability to be irresponsible. moreover, the peculiarities of online communication drastically reduce the effectiveness of interruptive marketing communications. as seth godin predicts, "in the long run, interruptive marketing is doomed as a mass marketing tool." (godin, 1999, p. 43) therefore, brands need to rethink reality and base their marketing policies on permission principles. 5. conclusions based on the literature review, discussion and analysis of the issue, it is possible to formulate recommendations for increasing the effectiveness of permission marketing in influencing consumer behaviour through online communication channels: 1. permission marketing is not an individual campaign. it is a general strategy. therefore, it is necessary to maintain the principles of permission based communication on a regular basis; 2. "customer is king!" their needs, wants and demands must be prioritised when planning permission marketing policies; 3. data analysis across different online channels is one of the keys to success. it is necessary to understand consumer behaviour in order to plan high-impact campaigns; 4. content marketing, together with various forms of permission-based communication, is an effective strategy for attracting segmented audiences and building long-term relationships with them; 5. crm tools are necessary to maintain continuous communication with customers, monitor their behavioural peculiarities and make appropriate decisions based on their feedback; 6. orm strategy and tools are necessary to monitor word-of-mouth on social media and other online platforms, detect potential complications early and make preventive decisions to avoid a full-blown pr crisis; 7. an anti-crisis policy is needed to identify potential risks at different levels of communication: social media, email, promotional tools, crm tools and mobile devices; 8. permission marketing must be an integral part of integrated marketing communications (imc) policy, not a separate set of decisions and activities; 9. permission marketing policy must be supported by relevant technical infrastructure, applications and qualified human resources. similar to other marketing concepts, permission marketing is constantly evolving and changing, especially in the fast-paced digital communication age. therefore, it is necessary to continue theoretical and practical research to improve its methodology to influence consumer behaviour. references: ainin, s., parveen, f., moghavvemi, s., jaafar, n. i., & mohd shuib, n. l. 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(2019). precision retail marketing strategy based on digital marketing model. science journal of business and management, vol. 7, no. 1, pp. 33–37. doi: https://doi.org/10.11648/j.sjbm.20190701.15 received on: 05th of march, 2023 accepted on: 17th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 176 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 mukachevo state university, ukraine e-mail: stegneym@gmail.com orcid: https://orcid.org/0000-0002-4688-6447 2 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 3 mukachevo state university, ukraine e-mail: grv2006.12@gmail.com orcid: https://orcid.org/0000-0003-1109-5896 doi: https://doi.org/10.30525/2256-0742/2022-8-5-176-183 development of the financial market: destabilizing processes, their assessment, and global impact marianna stehnei1, inna irtyshcheva2, halyna mykhalchynets3 abstract. the subject of the study is the process of destabilization of the financial market of ukraine in modern conditions. methodology. the research used general scientific methods, in particular: theoretical generalization, methods of positive and normative analysis, and statistical analysis. the goal is to assess the processes of destabilization of the financial market of ukraine in modern conditions. research conclusion. for the formation of command information oriented to the production of effects in current conditions, it is necessary to provide in mathematical logic: 1) a comprehensive study of static (permanent) characteristics of the financial market as a hierarchically ordered combinatorial system; 2) research of existing trends in the development of the financial market of ukraine according to the elements of its combinatorial structure; 3) specification of critical problems and obstacles to the development of the financial market (according to the elements of its combinatorial structure), which may negatively affect the performance of the financial market. the financial market of ukraine is a complex structure characterized by constant structural changes. currently, the financial market of ukraine is characterized by somewhat contradictory trends of its development, taking place against the background of increasing stochasticity of its environment. naturally, it is necessary to create opportunities to estimate and forecast the flows of financial resources and changes in the financial market associated with these flows by building a complex of models that provide 1) forecasting possible behavioral reactions of the integrated performance of the financial market on the basis of existing trends in changes in the value characteristics of assets under the influence of various influencing factors in stochastic models; 2) step-by-step descriptive numerical representation of data in dynamic programming models to identify possible changes in the structure of the financial market. it is this content of the models that is important because it not only determines the possible directions of strengthening, vulnerability and destabilization of the financial market, such a model basis increases the scientific validity of the developed strategic priorities aimed at preventing destabilization processes on the efficiency of the financial market in the future. key words: financial market, destabilizing processes, global influence. jel classification: с00, с53, g10 1. introduction during 2020–2021, the impact of the global covid-19 pandemic required anti-crisis measures aimed at ensuring the stability and development of the financial market (zolkover, zolotykh, mykhalchynets, nemish, delas, sybirtsev, 2021). within the framework of the strategy for the development of the financial sector of ukraine until 2025 (within the framework of which there is an identification of the concepts "financial sector" and "financial market" (strategy for the development of the financial sector of ukraine until 2025. national bank of ukraine, 2022) – this should contribute to: 1. maximum preservation of such structural proportions and trends in the development of the financial market. 2. to reform and develop the financial market through leading international practices. 3. implementation of measures provided for by the association agreement between ukraine and the eu and other international obligations of ukraine. baltic journal of economic studies 177 vol. 8 no. 5, 2022 at the same time, the strategy for the develop ment of the financial sector of ukraine lacks proposals for specific measures to ensure the results (or the percentage of increase in the monetary value and profitability of assets), which are most important for a stable (one that can preserve its properties for a long time) and developed financial market (according to seven strategic directions: financial stability, macro economic development, financial inclusion, development of financial markets and innovative development. each direction has its own strategic objectives and performance indicators). therefore, authors believe that the financial market efficiency management system as a tool of this strategy for the development of the financial sector of ukraine until 2025 should be interpreted as the transformation of information about the structure and trends of development of the financial market according to the elements of its combinatorial structure into command information focused on the production of effects. in connection with the large-scale invasion of the russian federation into ukraine, the outlined need has become even more urgent. therefore, it is inevitable to adapt the combinatorial structure of the financial market of ukraine to new realities (in particular, in terms of structure, trends in changes in the value of financial assets, etc.), which may lead to a significant decrease in the effects produced by it and to a deterioration of expectations regarding them (at the expense of a decrease in the growth of monetary expression of the value of realized net income). therefore, it is necessary to provide mathematical logic for the formation of command information aimed at the production of effects in current conditions: 1. a comprehensive study of the static (permanent) properties of the financial market as a hierarchically ordered combinatorial system. 2. research of existing trends in the development of the financial market of ukraine according to the elements of its combinatorial structure. 3. specification of critical problems and obstacles to the development of the financial market (according to the elements of its combinatorial structure), which may negatively affect the performance of the financial market. this presentation of information about the financial market of ukraine provides formalization of the model of its development and evaluation of the processes of destabilization of the financial market of ukraine. the purpose of the article is to assess the processes of destabilization of the financial market of ukraine. 3. trends in the development of the currency market of ukraine development trends of the foreign exchange market should be carried out according to its critical operations, which are also highlighted in the statistics of the financial sector. in particular: 1) transactions with foreign currency (including transactions of banks with non-cash foreign currency (from now on – fc), transactions of non-bank institutions with cash fc, transactions of clients of banks with non-cash fc, anonymous cash trans actions of clients of non-bank institutions with fc, exchanges between private individuals, nbu interventions); 2) operations with bank metals (from now on referred to as bm) and investment coins (operations of banks and their customers with non-cash and cash bm and other assets classified as bm), which changed for the better in 2015–2022, although they did not improve radically. the following features of the development of the currency market of ukraine for 2015–2021 are highlighted: 1. growth of the total volume of transactions with fc from 2017 to 2021 for all types of critical transactions (the most significant such growth was observed in 2018–1019, when the purchase of currency increased by 19.5%, and the sale by 21.2%). in 2021, the buying and selling of currency reached record levels. at the same time: the volume of operations of banks with non-cash fc on the foreign exchange market of ukraine on the terms "tod", "volume", "spot" increased from 2018 to 2021; the volumes of interventions of the nbu were somewhat unstable, as they depended on the negative impact of excessive exchange rate volatility and extraordinary events on the foreign exchange market; the volume of cash foreign currency transactions of banks increased from 2015 to 2021 (mainly in 2017/2016 and 2018/2017); the volume of non-cash foreign currency transactions of bank customers increased from 2015 to 2021; the volume of completely anonymous cash transactions decreased from 2019 to 2021, which is directly related to currency liberalization. 2. the growth of the total volume of transactions with foreign currency coincided with the expectations regarding its net purchase of fc. therefore, the balance for the entire period was negative, as the difference between the sale and purchase of foreign currency by the total volume of transactions with it. at the same time, from 2015 to 2019, the net purchase of currency decreased from 10,999.8 to 1,985.2 million dollars. us equivalent, then from 2020, the indicator again entered a digressive trend (in 2021, it reached 4121.1 million us equivalent). baltic journal of economic studies 178 vol. 8 no. 5, 2022 3. growth of the total volume of transactions with bank metals (silver, palladium, platinum, gold) and ukrainian investment coins in 2015–2021. although the volume of such transactions has increased, in comparison with the volume of transactions with foreign exchange it remains insignificant (in 2021 it will be 0.2% of the total volume of transactions on the foreign exchange market), which is due to the difficulties in predicting profits for short transactions, the existing commission for transactions with cash bms of 3-5% (which is higher than the commission for foreign exchange), the fee for storing physical bms, im or account maintenance in non-cash banking metals, possible problems with receiving physical bullion when closing the account. 4. in 2021, the share of operations with non-cash ib was 67%, and with non-cash bm – 41.36% of the total volume of operations with them on the currency market of ukraine. the volume of operations with cash fc is 33%, with cash bm – 58.64% (so the values remain relatively high). 4. assessment of destabilization processes on the financial market of ukraine according to the presented features, the develop ment of the currency market of ukraine is characterized by several key problems that negatively affect its efficiency and can cause destabilization processes, among them: 1) the difficulty of keeping the volatility of the official rate of the nbu hryvnia within +/5% per year, which is caused by the need to ensure compliance with the policy of inflation targeting (in particular, for 2021, the official exchange rate fluctuated between uah 28.4-26.1 (statistics of the financial sector. national bank of ukraine, 2021; official exchange rate of hryvnia against foreign currencies. national bank of ukraine, 2022); 2) the complexity of the process of formation of the money supply within the framework of currency interventions (which is formed by significant volumes of completely anonymous cash transactions of clients of non-banking institutions with fc, exchanges between private individuals are formed for the nbu); 3) the process of displacement of the national currency by a foreign one (in ukraine it is the u.s. dollar). today ukraine is classified as a country with a "highly dollarized" economy; accor ding to the indicator of the share of foreign currency deposits in the monetary aggregate m2, the level of dollarization reaches more than 33% (supervisory statistics. national bank of ukraine, 2022). the process takes place due to a significant number of reasons, including the existing "black market" of the currency; significant amounts of inflows into the country of foreign currency transfers from labor migrants; the high level of inflation in the country; 4) the situation of tension on the borders of ukraine, which was supplemented by a full-scale invasion of the russian federation into ukraine in 2022, the introduction of martial law in ukraine on february 24, 2022, the introduction of temporary restrictions on the purchase of fc at the interbank or its issuance at the bank's cash desk during 2022, and other factors that constitute significant obstacles to the development of the financial market of ukraine. therefore, despite the positive trends in the development of the currency market, its dynamics may significantly deteriorate due to the costs of the invasion of the russian federation into ukraine in 2022 and the consequences of the russian ukrainian war. this, in turn, may lead to a sharp depreciation of the hryvnia against foreign currencies and a corresponding decrease in the profitability of foreign exchange transactions. the deposit market development trends for 2015–2022 were positive in terms of dynamics, but did not improve structurally. at the same time, in the conditions of the russianukrainian war, the deposit market became extremely vulnerable due to the increased need of individuals for cash. currently, the static characteristics and development trends of the deposit market are determined by the following features: 1. an increase in the total volume of deposits attracted by depository corporations (the largest increase is possible in 2019–2021, estimated at 26.4%). by the end of 2022, the total volume of deposits may decrease. for example, by the end of january 2022, individuals – clients of privatbank withdrew uah 11.25 billion from their current accounts and uah 288 million in term deposits (although in the same period in 2021, the bank attracted uah 867 million from individuals. for demand accounts and uah 485 million for term accounts) (sleptsova, 2022). oschadbank gave uah 3.131 billion to citizens from demand accounts and uah 226 million. from time deposits (for the same period in 2021, the bank attracted uah 972 million and uah 752 million, respectively) (sleptsova, 2022). 2. changes in the structure of attraction of deposits by depository corporations in sectors of the economy. in particular, according to the structure of attraction: the share of funds raised from other financial corporations decreased from 3.83% in 2015 to 3% in 2021; the share of funds raised from other deposit corporations decreased from 1.8% in 2015 to 1.1% in 2021; the share of funds raised from non-residents decreased from 5.3% in 2015 to 2% in 2021. from 2015 to 2022, the share of funds raised from households decreases from 54.2 percent in 2015 to 52.3 percent, while the share of funds raised from nonfinancial baltic journal of economic studies 179 vol. 8 no. 5, 2022 corporations increases from 34.99 percent in 2015 to 41.7 percent in 2021. 3. deterioration of the structure of attracting funds for deposits for key operations of depository corporations. the structural indicators were transformed according to the terms of repayment in the direction of increase of the number of funds on demand. with the beginning of the russian ukrainian war, this became the cause of a significant outflow of funds, as depository corporations have the right not to repay term deposits early. however, they are obliged to return deposits on demand. in particular, the share of funds on demand increased from 43.7% in 2015 to 67% in 2021 (however, it was from them that the main outflow of deposits occurred in the first month of the beginning of the ukrainian-russian war), the share of funds involved in 1 year decreased from 36.3% in 2015 to 23.2% in 2021, the share of funds raised for 1-2 years decreased from 16.4% in 2015 to 8.5% in 2021, raising funds for two years decreased from 3.7 to 1.2%, respectively). trends in the development of the credit market in ukraine for 2015–2022 had generally positive dynamics. however, the structural nature of relations between borrowers and creditors did not improve during this period. combined with the economic consequences that exist in the economy, in 2022, as a result of the russian-ukrainian war, further deterioration of the structure and negative dynamics of credit market development is possible, which may negatively affect its performance. the following features of the credit market development were highlighted: 1. current fluctuations in the total volume of loans granted by depository corporations (except for the nbu) for the period marked by a polynomial trend. in particular, the volume of loans granted by depository corporations grew from 2015 to 2018 (in 2015–2016 by 0.8%, in 2016–2017 by 3.7%, in 2018–2017 by 6.1%) and from 2020 to 2021 (by 10%), decreased from 2018 to 2020 (in 2018–2019 by -9.4%, in 2019–2020 by -4.5%). at the same time, the most significant growth in the volume of loans provided by depository corporations was observed in the general public administration sector (characterized by a constant increase in the indicator from 2016 to 2021). in addition, from 2020 to 2021, there was a 69.2% increase in the volume of loans provided by depository corporations to other financial corporations. 2. changes in the structure of loans granted by depository institutions to sectors of the economy, the largest share of which is concentrated in the nonfinancial corporations sector. in particular, according to the structure of loans granted by depository corporations, from 2015 to 2021: the share of loans granted to other financial corporations decreased from 1.5% to 0.9%, to other depository corporations – from 0.7 to 0.3%; the share of loans granted to non-financial corporations decreased from 71 to 69.7%; the share of loans granted to the general public administration sector increased from 0.3 to 2.5%; the share of loans granted to households (households), fpos and ngos serving households increased from 17.1 to 23.6%. in addition, the share of loans granted to non-residents will decline from 3.3% in 2015 to 3% in 2021; 3. changes in the structure of loans provided by depository corporations in terms of repayment terms. therefore, the structural indicators were transformed according to the repayment terms but in the direction of increasing the volume of loans up to the 1st year. the main reason was that from 2015 to 2021, deposit rates decreased. in particular, the share of loans with a maturity of up to 1 year increased from 44.66% in 2015 to 54.38% in 2021, and the share of loans with a maturity of 1 to 5 years decreased from 32.8% in 2015 to 31.3% in 2021, the share of loans with a maturity of 5 years decreased from 22.55% to 14.29%, respectively. these structural changes are related to the short-term nature of deposit institutions' deposit policy. therefore, the critical problems of the deposit and credit markets, which can negatively affect their effectiveness and lead to processes of destabilization of the financial market, are: 1) small amounts of long-term liabilities attracted by depository corporations (in connection with the difficulty of attracting legal entities and households to long-term deposits and increasing the total capital of banks). it should be noted that as of 2021, the funds raised in the total bank resources amounted to 73.06%. therefore, they constituted their main base (most funds on demand). in 2021, the volume of deposits exceeded the volume of loans by 28.95%. however, there is a need for long-term and mediumterm funds. this forces deposit companies to lend to the economy partly at the expense of their capital, which also limits the development of the credit market. 2) limitation of opportunities for attracting funds for deposit from current accounts on demand (in connection with the reaction of clients to the news about the escalation of the russian-ukrainian conflict, other negative information, and the increased need for cash). it should be noted that funds on demand prevailed in attracting funds for deposit for 2015–2021 and at the beginning of 2022. this became the main reason for the sharp decline in funding sources (mykhalchynets, 2018). in particular, deposits of households in national currency for the first quarter. 2022 decreased by 13.1%, and the volume of foreign currency funds baltic journal of economic studies 180 vol. 8 no. 5, 2022 of other financial and non-financial corporations decreased by 10.6% due to the outflow of funds from all groups of banks. the most significant outflows of hryvnia business funds were observed in the first weeks of the war. in the conditions of the russian-ukrainian war, in parallel with the growth of economic uncertainty, the conditions for the development of deposit and credit markets have changed significantly, especially at the present time: the increased risk of loss of depository corporations and other market participants of liabilities (in particular, in 2022 the level of coverage of non-performing loans or npl reserves has increased from 102 to 108%; there is a high probability of a decrease in the quality of assets (which is a source of funding); there is a high probability of a decrease in the volume of lending to the economy (for example, in the first two months of 2022, the volume of the loan portfolio increased by 5.8%, but the decrease in the volume of loans in march leveled the previous growth (mykhalchynets, 2018). during martial law, only short-term loans were granted. the outlined changes will affect the performance of the deposit and credit markets. the trends in the development of the markets for securities and derivative financial instruments and futures contracts (derivatives) for 2015–2021 were rather ambiguous. however, they showed a gradual development, which led to: 1. growth of the total volume of securities (except shares) issued by residents (by economic sectors) and non-residents (in particular, the issue increased from uah 110.760 billion in 2015 to uah 631.151 billion in 2021). the total volume of issued shares registered by the national securities and stock market commission fluctuated significantly. from 2015 to 2017, the indicator increased from uah 1,285, 54.79 million to uah 324,844.24 million. at the same time, the volume of share issues decreased from uah 128,554.79 million in 2015 to uah 42,884.28 million in 2021, which is the result of work on cleaning up the securities market and increasing the transparency of the stock exchange segment (yemelyanova, 2020). at the same time, the total volume of exchange, purchase and sale of securities (excluding shares) began to grow from uah 110,760 million in 2015 to uah 631,151 million in 2021, when the volume of exchange, purchase and sale of shares, derivative financial instruments and term contracts (derivatives) will decrease. 2. constant changes in the characteristics of exchange, purchase and sale of securities, derivative financial instruments and term contracts (derivatives), namely the share of transactions and operations by agreement of the parties on organized and unorganized markets for 2015–2021. in 2021, the volume of transactions on organized markets will amount to 67.05% of the issue of securities, in particular shares (table 1). the functioning of such a market requires the presence of trade organizers and trade organization. at the same time, the number of trade organizers has been decreasing since 2006. in 2015, auctions were held at ten venues (ufb, kmfb, inneks, pfb, umvb, umfb, sefb, pfts, perspektive, ub), and in 2021, auctions were held at only four venues (ub, pfts, umvb, perspective), while their fragmentation is noted, as the same instrument can be traded simultaneously on different platforms at different prices (yemelyanova, 2020). the unorganized market (interbank market, interdealer market, commodity exchanges, where the price is determined by agreement of the parties) accounts for 32.96%. since on such markets are traded securities that have not gone through the listing procedure on the sites of trade organizers, the information secrecy of their issuers remains a problem. this shows positive trends in the increase of the volume of exchange contracts on trading organizations. 3. the basic structure of transactions of the organizational market from 2015 to 2021 was represented by a wide range of securities, financial instruments and term contracts (derivatives), including shares of domestic and foreign issuers, bonds of domestic state and municipal loans, bonds of table 1 volume of exchange, purchase, and sale of securities, financial instruments and futures contracts (derivatives) on organized, and unorganized markets of ukraine, 2015–2021* value of indicators by years 2015 2016 2017 2018 2019 2020 2021 the volume of trading in securities, derivative financial instruments and futures contracts (derivatives) 200771 236953 205803 260871 304966 335410 451961 the volume of issuance of securities, particularly shares 239314,8 474693,94 685840,2 442514 450143,4 660158,8 674035,2 % of transactions in organized markets 83,89 49,92 30,01 58,95 67,75 50,81 67,05 % of business in unorganized markets 16,11 50,08 69,99 41,05 32,25 49,19 32,95 note. * the data exclude the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and part of the temporarily occupied territories of the donetsk and luhansk regions. baltic journal of economic studies 181 vol. 8 no. 5, 2022 business structures, investment certificates, foreign state loan bonds, bonds of a foreign issuer and a foreign state. at the same time, its component evaluation (which characterizes the internal and interspecies relations of elements) reveals the orientation of trades mainly on bonds of domestic state loans, which accounted for 98.2% of trades in 2021. after the end of the russian-ukrainian war, further growth of the share of bonds of domestic state loans in the structure of transactions of the organizational market is possible. in 2021, the lowest percentage of shares (0.123% of the total trading volume) and other securities (1.677% of the total trading volume) was available on the organized markets of securities, financial instruments and futures contracts (derivatives). this makes it impossible to organize long-term investment strategies, and the low percentage of financial instruments and futures contracts limits risk management and hedging strategies. another characteristic feature of the structure of the organized market of ukraine is the predominance of the volume of trading on the secondary market over the volume of trading on the primary market. relevant data on the structure of agreements of the parties of the unorganized market are limited. 3. changes in the structure of exchange, purchase, and sale of securities in sectors of the economy. in particular, in terms of exchange, purchase, and sale of securities other than shares, the largest share of transactions falls on the general public administration sector (the indicator increased from 80.62% in 2015 to 96.13% in 2021). according to other sectors (in particular, the production of tangible and intangible goods and services), the share of operations has become low. in terms of exchange, purchase and sale of shares, the largest share of operations falls on the sectors of financial and nonfinancial corporations (at the same time, the figures of 51% for financial corporations and 42.7% for non-financial corporations in 2015 changed to 44.7% and 50.6%, respectively, in 2021). changes in the structure of exchange, purchase and sale of financial instruments and term contracts (derivatives) cannot be estimated due to lack of data. at the same time, in 2021, the largest share was forwards – 40.27%, futures contracts – 37.4%, and the share of options contracts – 22.3%. 1. changes in the market by repayment structure/ circulation of securities. therefore, by securities (excluding shares), the share of securities with maturities of more than two years increased from 48.9% in 2015 to 59.8% in 2021. by shares, it became high (in 2021, 95, 77%) and remained a share in circulation for more than one year. therefore, the main problems of the markets of securities, derivative financial instruments and futures contracts are their underdevelopment. in addition, the performance of the outlined market is reduced by: 1) a low percentage of other than bonds, domestic government loans, securities, financial instruments and forward contracts (derivatives) on organized markets and their fragmentation; 2) a high percentage of transactions with securities on unorganized markets, where it is impossible to avoid the problems of information secrecy of issuers and temporary suspension of organized markets (during the war only trading in new issues of military discount bonds was allowed); 3) uneven distribution of transactions of purchase and sale of securities by sectors of the economy, which limits the development of the real sector of the economy. in the conditions of the large-scale invasion of the russian federation into ukraine and various restrictions on the operation of the defined markets, the identified problems may aggravate and cause destabilization of the financial market. the structural composition of the real estate market and the development trends for 2015–2021 are positive due to the following development characteristics: 1. growth of the total volume of transactions with property rights on the real estate market. the volume of transactions with property rights to real estate objects: on the primary market will increase from uah 28,907.5 million. in 2015 to uah 102,894.3 million. in 2021 (or by 255%); on the secondary market will increase from uah 102,844 million. in 2015 to uah 170,823 million in 2021. positive dynamics are associated with the growth of the housing price index. the primary real estate market is influenced by the improvement of the business environment and the issuance of construction permits. 2. changes in the structure of transactions with ownership rights in the real estate market. therefore, in 2021 the real estate market will be dominated by transactions with ownership rights to nonresidential real estate. in particular, the share of such transactions is 62% in the primary and 65.8% in the secondary market. from 2015 to 2021, the share of such transactions will gradually increase. by 2021, non-residential real estate will become increasingly liquid for investment and attractive for clients. 3. changes in the real estate market according to the structure of transactions by period. thus, as of 2021, the share of medium-term transactions in the primary market of transactions with ownership rights to residential and nonresidential buildings remains the largest (despite the decrease in the indicator, it is 45.86 and 39.26%, respectively). at the same time, short-term transactions with property rights imply ownership for up to 1 year; baltic journal of economic studies 182 vol. 8 no. 5, 2022 medium-term transactions with property rights imply ownership for 1 to 5 years; long-term transactions with property rights imply ownership for more than 5 years (eu: database, 2020). simultaneously, on the first day of full-scale war, the work of most state registries was suspended (which made many transactions in the real estate market virtually impossible). later the blockade was lifted in most regions of ukraine. initially, the ministry of justice of ukraine (according to the order of may 3, 2022, no. 1760/5) approved a list of 2,832 notaries who were allowed to act on property rights under martial law from may 4. at present, this list is constantly being supplemented. since april, the resolution of the cabinet of ministers of ukraine no. 480 dated april 19, 2022 "on amendments to certain resolutions of the cabinet of ministers of ukraine concerning the activities of notaries and the functioning of unified and state registers, the holder of which is the ministry of justice, under martial law" has introduced a number of amendments to the regulatory acts regulating the rules of access to state registers and the performance of notarial and registration acts in connection with transactions involving property rights, which gradually remove the complete blocking of state registers. the real estate market has resumed, but the structure and dynamics of property transactions may change as a result of the hostilities. the key issues facing the market at the moment are likely to be: 1) transformations of the structure of transactions with property rights in the real estate market; 2) changes in the profitability of operations with property rights; 3) changes in the structure of operations by period. at the same time, it is difficult to predict the nature of the outlined changes. of course, it is difficult to predict the effect of such transformations on the real estate market, since everything depends on the time of the end of the war and on the damage caused to real estate objects as a result of military actions. in the conditions of global challenges (pandemic, russia's war against ukraine) the difficult task of destabilization of the financial market, both external and internal, appears. most of the authors studied the post-war recovery (serbov, pavlenko, irtyshcheva, 2022; irtyshcheva, kramarenko, sirenko, 2022), the other part of the functioning under the influence of global factors (pryshchepa, kardash, yakymchuk, et al. 2020; popadynets, et al. 2021; irtyshcheva, et al. 2022). 4. conclusions the financial market of ukraine is a complex structure characterized by constant structural changes. at present the financial market of ukraine is characterized by rather contradictory trends of its development, taking place against the background of increasing stochasticity of its environment. naturally, it is necessary to create opportunities for estimating and forecasting flows of financial resources and changes in the financial market associated with these flows by building a complex of models that provide 1) forecasting possible behavioral reactions of the integrated performance of the financial market on the basis of existing trends in changes in the value characteristics of assets under the influence of various influencing factors in stochastic models. this is because the trends in the development of the financial market according to its structure are the direct consequences of the stochasticity of the environment, the variability of the character formed by the action of not all but individual factors (which must be reasonably selected, taking into account the available field of influence of factors); 2) step-by-step descriptive-numerical presentation of data in dynamic programming models to identify possible changes in the structure of the financial market. this is because the structure of the financial market forms the sectoral performance of the financial market, which can be regulated through the solution/ achievement of appropriate strategic goals. it is this content of the models that is important because it not only determines the possible directions of strengthening, vulnerability and destabilization of the financial market, such a model basis increases the scientific validity of the developed strategic priorities aimed at preventing destabilization processes on the efficiency of the financial market in the future. references: zolkover, a., zolotykh, i., mykhalchynets, h., nemish, y., delas, v., & sybirtsev, v. (2021). state, trends, challenges and prospects of the modern global foreign exchange market. journal of management information and decision sciences, vol. 24(7), pp. 1–10. strategy for the development of the financial sector of ukraine until 2025. national bank of ukraine. nbu (2022). available at: https://bank.gov.ua/ua/about/develop-strategy serbov, n., pavlenko, o., & irtyshcheva, i. (2022). peculiarities of freshwater resources management: national and european experience and current trends. baltic journal of economic studies, vol. 8(4), рр. 158–164. doi: https://doi.org/10.30525/2256-0742/2022-8-4-158-164 baltic journal of economic studies 183 vol. 8 no. 5, 2022 statistics of the financial sector. national bank of ukraine (2022). available at: https://bank.gov.ua/ua/statistic/ sector-financial/data-sector-financial#2fs pryshchepa, o., kardash, o., yakymchuk, a., et al. 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(2022). trial by war: how bank depositors react to the escalation of the conflict with russia. and is the banking system able to withstand hybrid attacks. banks. finances. policy. available at: https://mind.ua/ publications/20236476-viprobuvannya-vijnoyu-yak-vkladniki-bankiv-reaguyut-na-eskalaciyu-konfliktu-z-rosieyu matrix of paired correlation coefficients of the equation of performance of the market of financial instruments and term contracts in ukraine according to the average yield of derivatives. modelat data array. available at: https://docs.google.com/document/d/1obov7c2iefm13147vesnxgh6nqgtai9f/edit?usp= sharing&ouid=109436958646955679152&rtpof=true&sd=true mykhalchynets, g. t. (2018). practice. solid, dynamic estimate when purchasing capital repairs. prospects and priorities of the development of the economic system in conditions of instability: a collection of theses of reports based on the materials of the international scientific and practical conference (december 15, 2018). ukraine, dnipro. yemelyanova, l. o. (2020). the structure of the stock market of ukraine during 2006–2018. eastern europe: economy, business and management, vol. 2(25), рр. 365–367. popadynets, n., et al. (2021). evaluation of domestic market development in ukraine, international conference on intelligent human systems integration, pp. 357–363. analytical data on the development of the stock market (2022). available at: https://www.nssmc.gov.ua/news/ insights/ irtyshcheva, i., kramarenko, i., & sirenko, i. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, vol. 8, no. 2, рр. 78–82. eu: database (2022). available at: https://login.ey.com/myey/login irtyshcheva, i., pavlenko, o., boiko, y., stehnei, m., kramarenko, i., hryshyna, n., & ishchenko, o. (2022). еvaluation of efficiency of regional public governance in the context of achieving goals of sustainable development. management theory and studies for rural business and infrastructure development, vol. 44(4), рр. 497–505. doi: https://doi.org/10.15544/mts.2022.49 received on: 15th of october, 2022 accepted on: 29th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 271 vol. 4, no. 1, 2018 corresponding author: 1 department of branch law and law enforcement activities, volodymyr vynnychenko central ukrainian state pedagogical university. е-mail: mors200708@ukr.net 2 department of general law disciplines, dnipropetrovsk state university of internal affairs. e-mail: dm_86@mail.ua 3 faculty of law, dnipropetrovsk state university of internal affairs. e-mail: megevska38@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-271-275 state competition policy: concept, legal regulation and mechanisms of its implementation andrii manzhula1 volodymyr vynnychenko central ukrainian state pedagogical university, ukraine dmyto pryputen2, liliia mezhevska3 dnipropetrovsk state university of internal affairs, ukraine abstract. the purpose of the paper is to analyze the definition “state competition policy”, its essence, functions and mechanisms of implementation. the main purpose of competition policy is to ensure and promote the development of competition in the country, minimize market monopolization and ensure the functioning of a market economy through fair competitive methods. all these goals can be achieved only through the use of effective mechanisms and tools for the implementation of competition policy by the state authority. methodology. competition policy of the state, as one of the directions of economic policy, requires revision of the means and mechanisms for its implementation for an effective functioning of the market. there is a need to reconsider the powers of competition authorities and the urgency of application of legislative and regulatory acts providing these issues, for an effective implementation of the competition policy and achievement of the goals. results. despite a considerable amount of various definitions of the concept of state competition policy, its main objectives are to promote competition at the marketplaces, and the promotion and protection of competition. practical implications. the government’s competition policy is an instrument, the effectiveness of which proportionately depends on the functions performed by the state aimed at the achievement of positive results, specifically related to the support of competitive environment in the process of economic activity, support of competition in certain sectors of the economy, prevention of anti-competitive practices etc. value/originality. a significant role in this context is played by introduction of amendments to national competition law and harmonization of this legislation with competition law of member states of the eu. it is necessary to reconsider the competences and powers of competition authorities, their operational efficiency and interaction of bodies with national and international organizations regulating competition protection issues. key words: state competition policy, means of implementation of competition policy, mechanisms of implementation of competition policy, state policy, functions of competition policy. jel classification: e44, h1, k1, k13 1. introduction the effectiveness of a competition policy of the state and the use of viable mechanisms for its implementation is a guarantee of a proper functioning of the market and the growth of the competitiveness of goods and services. the mechanisms of regulation of competition play an important role in guarantee of a competitive environment. in particular, this issue becomes extremely relevant in the context of globalization and openness of the market. many researchers of economy and law who deal with this concept in various broad and narrow terms are engaged in research in this area, emphasizing the main characteristics, directions, goals and mechanisms of the use of methods of competitive struggle. the author analyzed many articles devoted to the mechanisms of the implementation of competition policy, in particular the researches of v. lahutin “competition policy of the state: mechanisms of implementation” (lahutin, 2016), which considers all mechanisms from the perspective of economy, also, the works of h. filyuk were analyzed, in particular, the article “competition policy of the state in the conditions of globalization” (fyliuk, 2009) baltic journal of economic studies 272 vol. 4, no. 1, 2018 as well as the article of p. lazur “peculiarities of the policy of formation of a competitive environment in entrepreneurial activity” (lazur, 2007), etc. however, the author emphasizes the need to consider the problem from a legal point of view. based on the proposed definitions and a detailed analysis of the definitions, the author gives his own concept of competition policy through the prism of functional purpose, emphasizing the need to consolidate the mechanisms of regulation and application of effective methods of competition promotion, prevention of anti-competitive offenses and application of responsibility which is commensurable with the damage caused by such offenses. all these activities should take place at the legislative level and have action-oriented character of application. the article is devoted to the solution of the main tasks as follows: 1. to study the opinions of scholars relatively the definition of state competition policy. 2. to make a detailed analysis of the ukrainian legislation concerning competition regulation, consolidated in european normative legal acts. 3. to consider competition policy of the state through the prism of its functional purpose, which includes in its genesis both static and dynamic directions. 4. to propose effective directions for improvement of the implementation of state competition policy, which should be consolidated at the legislative level. 2. competition as the basis of a market system competition as the basis of the entire market system is an incentive to ensure a vital functioning of the market. a competitive environment in the state can be achieved only due to well-developed state competition policy, which in turn requires a thoroughly elaborated strategy and tactics. the main goal and direction of the state’s economic policy is realization and optimal congruence of interests of business entities and consumers, based on a mixture of private and public interests through methods of competition promotion. the commercial code defines antitrust-competition policy as one of the main directions of the economic policy of the state, the main focus of which is to create an optimal competitive environment for the activity of business entities, maintenance of their interaction under conditions of prevention of discriminatory practices of some entities towards others (hospodarskyi kodeks ukrainy), that is, based on the principle of equality and nondiscrimination, and access to markets for all entities on equal terms. the main objective of competition policy, along with the combination of private and public interests, is the growth of an effective socially oriented market economy based on overcoming monopoly. the real state of competition in the market and free goods turnover, free access to the market of consumers and business entities is possible only by virtue of well-developed mechanisms for the implementation of competition policy, which in turn is achieved by a combination of administrative regulation and the consolidation of effective competitive norms at the legislative level. competition authorities, along with preventive methods, should apply mechanisms for stimulation and development of competition, protection of business entities from manifestation of unfair competition. unfortunately, the realities of the present are such that unfair competition methods largely dominate honest and fair rules of competition, consequently causing a disorder of market functioning. as it follows from the norms of legislation, the main task of the antimonopoly committee of ukraine is to participate in the formation and implementation of competition policy. the law of ukraine “on antimonopoly committee” (pro antymonopolnyi komitet ukrainy) clears up in detail the tasks, powers and competencies of amcu in relation to the implementation of antimonopoly policy of the state. but there is an issue of reconsideration of the mechanisms of practical application of set goals and tasks and introduction of cooperation with executive bodies of state and regional importance. at the same time, v. mahas notes that it is necessary to understand that amcu is unable to solve the issue of market demonopolization independently without implementing a systemic economic policy aimed at removal of the reasons which favour monopolization (mahas, 2017). the growth of competitiveness of the national economy and competitiveness of its own products at the national level, free market access as for consumers as economy entities, reduction of barriers of market entry and exit can be achieved only through reconsideration of legislative provisions and introduction of effective mechanisms in practice. today, we have a situation where the norms consolidated in the current laws do not have effective application, all while generating certain negative consequences of the market activity. on this issue, the author emphasizes the need of reconsideration of legislation in effect and implementation of efficient norms, the primary tasks of which will be to develop both policy documents and strategies for the development of competition in the market. an important point is to overcome monopolized markets in many sectors, to ensure equal opportunities for market entry of all business entities and to remove barriers for market entry, including administrative ones. 3. definition of the concepts “antitrust policy”, “antimonopoly policy”, “competition policy”, “antimonopoly-competition policy” along with the notion “competition policy”, in modern economic science there are the concepts “antitrust policy”, “antimonopoly policy”, “antimonopolycompetition”, etc. baltic journal of economic studies 273 vol. 4, no. 1, 2018 the main focus of antitrust and antimonopoly policy is a strict prohibition of the existence of monopolies and trusts, any kind of conspiracies for which even criminal liability is foreseen. the european model, a more specific name for which is competition policy, allows one to occupy a monopoly (dominant) position on the market, while prohibiting abuse of this dominant position and market power. the ukrainian model is more prone to the european model of competition regulation, while ukrainian legislation does not have a clear definition of this policy. the commercial code is called “antimonopoly-competition policy” (hospodarskyi kodeks ukrainy), while the law of ukraine “on protection of economic competition” defines it as a policy in the field of development of economic competition and restriction of monopoly in economic activity (pro zakhyst ekonomichnoi konkurentsii). today, most scholars insist on the need to balance competition policy with industrial, innovation, investment, pricing and other policies defined in the economic code (lazur, 2007). such international organizations as the wto, the world bank, unctad, wipo, oecd, icap pay attention to the definition of the concept “competition policy”. their cooperation with competent authorities of different countries aimed at harmonization of national competition policies and mechanisms of its implementation (lazur, 2007). analyzed the definition of scientists in relation to the competition policy of the state, in particular, proposed by such scholars as z. borysenko, v. lahutin, h. fyliuk, p. lazur, etc., and the definitions given by the world trade organization and the world bank, the author highlights the main trends of competition policy aimed at prevention and cessation of violations of antimonopoly regulation, with that the main focus is creation of the competition environment. this issue can be realized only through the use of effective methods of influence, the use of the responsibility for these violations by the antimonopoly authorities, along with the introduction of incentive methods for the development of competition. an important aspect is the instrumental nature of competition policy as the desired result will be achieved only due to the use of effective tools. 4. functional use of competition policy, mechanisms of its implementation examining the essence of competition policy, it is important to understand its functional purpose. let’s consider it through the prism of the functions of economic competition, among which are regulatory, stimulating and control-signaling. by the same classification, it is possible to divide the functions of competition policy that have both static and dynamic directions in its genesis. the regulatory function has features of static character and consists in the establishment of rules of competitive practices, which is provided by regulation on the part of anti-monopoly authorities, in order to prevent the concentration of power in one’s hands, regulation and support of the level of competition in the country and prevention of abuses by monopoly entities. the stimulating function should be aimed at motivation of competition participants to improve production, introduce innovations, improve the quality of products, enter the international markets and increase the competitiveness of the national economy. this function has more dynamic aspect in the context of creation of the necessary conditions for the development of competitive national commodity producers that could be worthy competitors in the world markets. along with it, it is impossible to skip the consideration of the control-signaling function, which is a kind of driver of economic development and lies in monitoring of participants of competition over their own production in terms of its efficiency, which due to certain signals on the market in relation to the supply and demand for one or other goods, the possibility of entrance to the new markets or entrance to the markets of potential competitors, induces the business entities to improve their own production. an active policy of the state should be oriented to the interaction of competition policy with industrial, innovative, investment and other areas of economic policy of the state, the main task of which should be to ensure the competitiveness of enterprises both in the domestic and foreign markets as well as the competitiveness of the national economy as a whole. it is impossible to consider competition policy separately from other directions of the economic policy of the state. the main goal should be functioning of the market on the basis of balancing public and private interests, while it is necessary to balance the interests of private entrepreneurs in the normal functioning of their business in the home country and in international markets as well as the state’s interest in maintaining the level of competitiveness of national goods and commodity producers in the world arena. the necessary and important task of realization of the competition policy is overcoming the existing level of monopolized markets, creation of a decent competitive environment, and not only consolidation of this concept at the legislative level. all this requires the use of effective methods of government and a revision of legislative provision on this issue. the norms of national competition law need revising and improving based on the experience of foreign countries. increase of the effectiveness of antimonopoly and competitive regulation can be achieved only through the establishment and implementation of the state concept and the state program of measures of guarantee and support of competitive principles for the functioning of the national economy and assistance of baltic journal of economic studies 274 vol. 4, no. 1, 2018 its long-term competitiveness and will be developed taking into account international standards in this area and agreed with the relevant eu documents. such approach will allow ukraine to continue harmonization of domestic competition law with best international practices and to take into account the conditions for the implementation of competition policy in the context of globalization. the main goals of this concept should be to achieve a reduction of the level of the shadow economy and corruption; reduction of barriers for enter of new business entities to the market, reduction and rationalization of state interference and improvement of control over subjects of natural monopolies, which requires the creation of controlling bodies in those spheres of natural monopolies where they have not yet been created; clear distribution of functions between different controlling structures; bringing the domestic legislative framework in line with international law, etc. it also needs to revise and reconsider the provisions of the law of ukraine “on the development and state support of small and medium business” (pro rozvytok ta derzhavnu pidtrymku maloho i serednoho pidpryiemnytstva v ukraini) in terms of tax legislation and the provision of privileges to small businesses at the development stage. it’s hard for a small business to compete with large giant companies creating artificial barriers for entry. according d. v. zadykhailo, ukraine’s accession to the wto also requires providing the national producers with the highest possible level of competitiveness with the help of active means of state regulation. the problem of guarantee of economic growth due to innovative factors of production with all the very favourable social and environmental consequences of such structural transformations is also impossible without an active state economic policy, appropriate state regulation of economic relations (zadykhailo, 2012). anti-competitive concerted actions, which may even have a global scale, are a real disaster for the economy and for competitive situation in the market. in foreign laws, we find the concept of cartels or cartel conspiracies, which is one of the most dangerous violations of antitrust laws. the european union legislation prohibits the existence of concerted behavior between economic agents which may adversely affect trade between member countries, impede competition within the common market, restrict or distort it as referred to in article 101 of the treaty on the functioning of the european union (pro rozvytok ta derzhavnu pidtrymku maloho i serednoho pidpryiemnytstva v ukraini). in ukraine, the level of anticompetitive conspiracies is quite large, in particular as at the horizontal as at the vertical levels. along with the arrangements that have any written evidence of the existence of a connection between the cartel participants, a situation is often formed where is very difficult to find out the existence of a conspiracy, so-called “gentleman’s agreements”, which have enormous complexity in relation to the evidence base and the possibility to bring offenders to responsibility. cartels have features of stability while each enterprise keeps its autonomy of functioning. the law of ukraine “on protection of economic competition” (pro zakhyst ekonomichnoi konkurentsii) highlights the distortion of bidding results, tenders, auctions, which is a conspiracy between a party and a customer in the field of public procurement, as one of the most popular and widespread forms of anticompetitive concerted actions. even after the introduction into effect of the system of electronic procurement, this type of offenses continues to be the most widespread, and therefore the system of conduction of electronic trade and the law of ukraine “on public procurement” (pro publichni zakupivli) also needs to be improved. the ukrainian legislation highlights a number of violations in the field of protection of economic competition and protection against unfair competition along with the abuse of a monopoly position and anticompetitive concerted actions that lead to violation, restriction or elimination of competition. above mentioned offences have negative consequences for the ukrainian economy, and therefore the author stresses the need to reconsider the rules that regulate the issues and modernize the methods of struggle against the manifestations of antitrust violations and the application of appropriate sanctions. an own base of legal regulation of competitive relations is developed at the level of international regulatory legal acts. it is important to understand that national competition law must be harmonized in some way with european law, but taking into account the peculiarities of national application of legislative norms, there should be its own categorical apparatus, its own means and tools for the implementation of competition policy, and a balanced system of mutual relations. harmonization and, in some cases, unification of competition law at the supranational level takes place, mainly within the framework of intergovernmental organizations. the most famous and most successful example is the european union, which created a single competition law for all member states. 5. conclusion according to the results of the study of the application of effective mechanisms for implementation of a competitive policy for the adequate functioning of a market economy, we can come to the following conclusions. 1. state competition policy has an instrumental nature and its effectiveness proportionally depends on to the performed functions aimed at the achievement of practical results – maintaining the competitive conditions in economic activities, maintaining the state of competition in certain sectors of the economy, prevention of anti-competitive practices, etc. baltic journal of economic studies 275 vol. 4, no. 1, 2018 2. the legal aspect of consolidation of competition policy at the legislative level needs a thoroughly reconsideration and improvement, the main areas of which should be optimization of legal means of guarantee of competition’s decent level, the systematization of competition law and the legal provision of the necessary competencies of the antimonopoly committee of ukraine. improvement of the national competition law and its harmonization with the competition law of the eu countries plays an important role in this sense. 3. the main directions of state competition policy are maintaining the level of competition in the country, which can be achieved only through the application of effective mechanisms of implementation of the policy by the anti-monopoly authorities. 4. the main directions of competition policy should be the overcoming monopoly entities; creation of a real level of competition and reduction of barriers mark entry and exit of new business entities; overcoming the level of corruptions of state bodies; application of more effective mechanisms of combating unfair competition; regulation of the issue of activity of natural monopoly entities and creation of more effective regulators in these spheres; creation of economic conditions for guarantee of international economic competitiveness of national economic entities, etc. these measures can be realized through the proper use of the tools and be clearly differentiated depending on the types of goods, works or services as well as depending on the supply and sale markets. references: borysenko z. (2004) osnovy konkurentnoi polityky: pidruchnyk [basis of competition policy]. kyiv: takson. (in ukrainian) lahutin v. (2016) konkurentna polityka derzhavy: mekhanizmy realizatsii [competitive policy of the state: mechanisms of implementation]. visnyk knteu no. 4, pp. 22-37. fyliuk h. (2009) konkurentna polityka derzhavy v umovakh hlobalizatsii [competition policy of the state in the context of globalization]. visnyk kyivskoho natsionalnoho universytetu im. t. shevchenka, no. 109, pp. 46-53. mahas v. (2017) konkurentsiia – holovna meta ekonomichnoi polityky. [competition is the main objective of economic policy]. proceedings of the stratehiia realizatsii konkurentnoi polityky ukrainy v konteksti yevrointehratsiinykh vyklykiv: materialy mizhnarodnoi naukovo-praktychnoi konferentsii (kyiv, april 27, 2017), kyiv: knuba, pp. 57-60. lazur p. (2007) osoblyvosti polityky formuvannia konkurentnoho seredovyshcha u pidpryiemnytskii diialnosti [peculiarities of the policy of development of competitive environment]. retrieved from: http://www.rusnauka.com/2._snd_2007/economics/19232.doc.htm (accessed 15 december 2017). the verkhovna rada of ukraine (2003) hospodarskyi kodeks ukrainy: zakon ukrainy vid 16.01.2003 r. № 436– iv [the commercial code of ukraine: the law of ukraine dated 16.01.2003 no 436–iv. vidomosti verkhovnoi rady ukrainy, no. 18-22, art. 144. the verkovna rada of ukraine (2016) pro antymonopolnyi komitet ukrainy: zakon ukrainy vid 26.11.1993 r. № 3659–xii [on the antimonopoly committee of ukraine: the law of ukraine dated 26.11.1993 no 3659–xii]. vidomosti verkhovnoi rady ukrainy, no. 50, art. 472. the verkovna rada of ukraine (2016) pro publichni zakupivli : zakon ukrainy vid 25.12.2015 r. № 922-viii [on public procurement: the law of u+kraine dated 25.12.2015 no 922-viii]. vidomosti verkhovnoi rady ukrainy, no. 9, art. 89. the verkovna rada of ukraine (2001), pro zakhyst ekonomichnoi konkurentsii: zakon ukrainy vid 11.01.2001 r. № 2210–iii [on protection of economic competition: the law of ukraine dated 11.01.2001 no 2210–iii]. vidomosti verkhovnoi rady ukrainy, no. 12, art. 64. wto (1999) “the fundamental principles of competition policy: background note by the secretariat”. working group on the interaction between trade and competition policy wt/wgtcp/w/127, june 1999, para 4. khemani, r . shyam (1998) a framework for the design and implementation of competition law and policy. washington: world bank. retrieved from: http://www.oecd.org/regreform/sectors/ aframeworkforthedesignandimplementationofcompetitionlawandpolicy.htm (accessed: 15 december 2017). zadykhailo d. v. (2012) hospodarsko-pravove zabezpechennia ekonomichnoi polityky derzhavy: monohrafiia [economic and legal support of the state economic policy: monograph], kharkiv: yurait, pp. 456. official journal of the european union (2012). consolidated version of the treaty on european union and the treaty on the functioning of the european union, official journal of the european union, pp. 323, 1-390. retrieved from: http://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a12012e%2ftxt the verkhovna rada (2013) pro rozvytok ta derzhavnu pidtrymku maloho i serednoho pidpryiemnytstva v ukraini: zakon ukrainy vid 22.03.2012 r. № 4618vi [on the development and state support of small and medium business in ukraine: the law of ukraine dated 22.03.2012 no 4618-vi]. vidomosti verkhovnoi rady ukrainy, no. 3, art. 23. baltic journal of economic studies 128 vol. 3, no. 4, 2017 corresponding author: 1 faculty of linguistics and translation, international humanitarian university. e-mail: mgukovnipav@ukr.net 2 institute of law, economics and international relations, international humanitarian university. e-mail: mgukovnipav@gmail.com spontaneous socialization as a situational variable in a theory of macroeconomic transformations inna kovalenko1, nikolai kovalenko2 international humanitarian university, ukraine abstract. the purpose of the article is to analyze the reasons for the failure of the macroeconomic and social transformation of society on the example of 1985-1991 restructuring (“perestroika”) in the soviet union. it is proposed to consider spontaneous socialization (ss) as a situational variable, the presence or absence of which significantly affects the success of transformations. the research methodology consists in applying the system approach, as it is understood in management, involving models of m. belbin's command roles and i. adizes's managerial competencies. it is shown that the success of transformations in an organized community depends on its composition in terms of the presence of a certain combination of command roles and managerial competencies. the structure of the last includes numerous habits and stereotypes that have arisen historically and are changing from society to society, often contradicting each other, especially when comparing western and eastern cultures. some command roles and managerial competencies in a particular transformation contribute to success, others lead to failure. for the success of the transformation, a certain "similarity" of the composition of the prevailing command roles and competencies is necessary. the success of the transformation of society essentially depends on the presence or absence of ss, the filling of which is connected with the components of belbin and adizes models. a forceful change in the situation without taking into account the prevailing level of the ss leads to a failure of the transformation in the long run. key words: spontaneous socialization, macroeconomic transformation, situational theories, voluntary associations, m. belbin command roles, i. adizes codes. jel classification: a13, d23, m14 1. introduction the end of the 20th – the beginning of the 21st century was marked by the intensification of the processes of change, accompanied by numerous bankruptcies, mergers, acquisitions, reconfiguration of companies in the world of business, at the global level – the disintegration of old states and the birth of new ones, international alliances, etc. although the conscious transformation of any system always begins with a situational analysis of its internal and external environments, nevertheless, with all the care of such an analysis, many transformations have failed. from the general methodological point of view, this means that, most likely, the problems were not systematically addressed, not all situational factors has been taken into account. the task of identifying situational factors is far from being univocal, as evidenced by a rather large number of situational theories in management, which work each in their field of applicability, leaving many free "gaps" in the space of situations. we propose to expand the list of situational variables, adding to it the factor of spontaneous socialization, whose role is clearly visible in a number of events, especially when carrying out macroeconomic and social transformations. 2. review of the literature the success of reforms in the states that emerged after the collapse of the soviet union depends on the extent to which they are carried out systematically, i.e. the whole set of factors that make up the context of reforms is taken into account – what is the specific situation in which the reforms take place. the situational variables themselves are diverse, they must be identified and different authors combine them into different clusters. among the most developed are the situational theories of r .r . вlake and j.s. mouton (blake, 1978), e. fiedler (fiedler, 1967), p. hersey and k.h. blanchard (hersey, 1996), v.h. vroom and a.g. jago (vroom, 1988, 1992), and others. the nobel laureate in economics f. hayek refers to the essential elements of situations "the customs and conventions" that arise in a society historically (i.e., exist long enough) and "are not the fruit of conscious design" baltic journal of economic studies 129 vol. 3, no. 4, 2017 (that is, they act at the level of the unconscious) (hayek, 2011, p. 29). as examples, he cites local autonomy, family values and voluntary associations. this list can be expanded by adding the various cultural dimensions that were formed in the evolutionary development of society and settled in the person’s unconscious (such as the continuum between the polar states of collectivismindividualism, authoritarian-democratic governance, masculinity-femininity, etc.) (hofstede, 2004; kovalenko, 2016). hayek draws attention to the fact that in order to preserve the "orderly work" of human society, his "non-compulsory customs and conventions" should be considered as “inalienable factors”. when these (along with others) situational variables are not taken into account when carrying out reforms, this leads to serious negative consequences for both particular companies, countries and entire regions. in this paper, we focus on the importance of the factor "voluntary associations", which hayek has pointed out. for the european hayek, associations are natural, as are natural, say, the numerous joint-stock companies and church communities in the world where he lived. meanwhile, for countries of traditional cultures – as antipodes of technogenic countries – conscious association in voluntary communities is not a simple (not "natural") matter. for successful functioning of voluntary associations, some qualities are required from individuals as their components, among which ss plays an essential role (fukuyama, 2004). it means the readiness of strangers to incorporate themselves into formal associations for joint activity in moving towards the stated goal. with a good reason, ss can be regarded as a situational variable: this quality is evolutionary, in different societies the measure of its presence (or absence) varies depending on the specific conditions of the place, time and features of historical development. ss speaks about the extent to which people are able to organize themselves. in a society with a developed ss, people are able to create and maintain vital functions of stable voluntary institutions of different sizes (at the level between the family and the state): churches, trade unions, parties, charitable institutions, various enterprises, etc. the significance of the factor ss is also strengthened by the fact that it positively correlates with the level of economic development: the latter increases with the growth of the first (fukuyama, 2004, p. 249). in economic language, the existence of the ss is equivalent to possessing a special kind of capital, which can be called social capital. you can win it, fight for it, finally, "invest" in a business. the contractual obligations of the company with share capital give the opportunity to start a joint business for those who are not bound by friendship or kinship; however, their further success depends on their willing to cooperate with their colleagues and with other people – that is, from the presence of ss. a rich and complexly organized civil society is not an inevitable consequence of advanced industrial development. on the contrary, countries such as japan, germany, and the united states have become the leading industrial powers largely due to the fact that they had a healthy support in the form of social capital and the ss, and not vice versa (fukuyama, 2004, p. 549). if this capital is available, the transition to the capitalist phase (into which the post-soviet countries entered) is facilitated, if there is none – and market relations are hindered and, if they arise, then in a distorted, deformed form – as happened in post-perestroika countries. the purpose of this work is the operationalization of the concept of ss with the help of management methods developed to study the regularities of the managerial process. 3. statement of the main material management as a methodology created a number of models, the applicability of which went beyond the tasks for which the models have been created. the two of them are m. belbin team roles (belbin, 2004) and i. adizes codes (adizes, 2006) theories. in this article, we will show how these two models can be applied to analyze the reasons for the failures of some societies because of unsuccessful transformations. the work of the manager can be represented in the form of a superposition of certain types of activity (i. adizes) and methods of solving typical management problems (m. belbin). in belbin's model, managerial competencies are called team roles. there are such eight roles: chairman, or coordinator (ch); shaper (sh); plant (pl); monitor (mo); implementer (im); team worker (tw); resource investigator (ri) and completer (co) (belbin, 2004). in the adizes model, the actions of the manager are reduced to four main types: the production of results (p), administration (a), entrepreneurship (e), and the integration of people around achieving the goal (i) (adizes, 2006). each manager is characterized by its own set of four paei codes and eight team roles, which determine to what extent his activity will be successful or failing. it should be taken into account that the identified roles / codes were analyzed in the conditions of existing organizations (adizes, 2006) or artificially created "teams" in the classrooms of business schools (belbin, 2004). we will apply these models both for organizations that are consciously created for joint activities (such as an enterprise, joint-stock company etc.), and for much larger historically emerging communities (such as states or ethnic entities). since joint activities of both systems should be organized, it is at this stage that the composition of groups begins to affect the presence (or absence) of individuals with suitable management characteristics. they should be ready to take the initiative to organize the activity first, and then – to baltic journal of economic studies 130 vol. 3, no. 4, 2017 coordinate it and preserve the organization for more or less long periods of time. as adizes has shown, success in both the short and long term depends largely on the presence of the quality defined by the code i. the manager will show good (and even outstanding) results if he has high values of at least two of paei codes, one of which must be the indicator i. at the same time, belbin showed that although an individual with any team role can exercise managerial activity, but best of all – from the point of view of achieving success – this can be done by individuals who have the roles of the chairman – coordinator (ch) or shaper (sh). since we are interested in long-term success, we will not consider the role of sh – in a typical case, shaper splits the group, does not contribute to its unity. (this is confirmed by statistical analysis: it was shown in (kovalenko, 2014) that the correlation coefficient (cc) connecting i and sh is statistically significant and negative). now a question arises: is there a connection between i and ch competencies or are they independent variables, each of which contributes to effective work? different individuals have different values of i. let us imagine some community s of people with a predominance of large indicator i. they will easily unite themselves around the common cause, provided if there is an individual – organizer or, in the language of team roles, ch. the most favorable situation will arise when one individual has well represented both roles – i and ch. it should be noted that such a combination, generally speaking, is not obligatory one, and whether it is implemented in practice – requires verification. but if i and ch are compatible (in the language of mathematical statistics, the cc that connects them is non-zero and statistically significant), the s community will unite around the dual-role possessor (i-ch) – and a group with a large ss score will emerge. in the language of physics or chemistry, we would say that such a group would have a great binding energy. in a case when the s-community does not have individuals with a high ch value, it is likely that there will be difficulties in creating a stable and able-bodied community. let us return to the question of the compatibility of i and ch, which requires separate consideration. this problem was considered in (kovalenko, 2014), where correlation links between models of managerial competencies have been studied. using the example of university students specializing in economics and management, it has been shown that the cc, which links the role of ch with code i, is zero (with a statistical error of 5%). such a result can be understood qualitatively if to expand the content of the relevant managerial competencies. ch – manager "... is able to identify the abilities and skills of employees and use them in the interests of the cause. he includes them in the decision-making process, gently but persistently directs the discussion in the right direction and ensures that the proposals are relevant to the merits of the case. the coordinator rarely resorts to simply declaring his decision, he is always looking for an opportunity to take into account the interests of all interested parties ... he is emotionally stable, can be assertive if necessary and is a pragmatic person" (kovalenko, 2016, p. 406). at the same time, the i-manager is a soft, sensitive, people-oriented individual, he "... does not want to make decisions on his own. he is not independent and is based on the opinion of the group ... such a manager creates an excellent moral climate, but does not form the goal and direction of work" (adizes, 2006, p. 71). the organization under the management of the i-manager "... lacks formalization and the desire for efficiency ". with such polar characteristics, it is not surprising that the ss connecting these roles is zero. therefore, it is quite real that when people with large indicators of i can gather together, they will not be able to organize themselves, because of the lack of the ch – role. to achieve positive synergy when grouping individuals with high i indicators, it is necessary to "import" an employee with the missing role of ch. we illustrate it with two examples. let us take the usa, for which the ss is large (fukuyama, 2004, p. 548). americans are great organizers. f. fukuyama believes that the traditional impression of americans as supporters of an extremely individualistic approach to life is not entirely true – because of the highly developed ss. the americans, if they are individualists, are very sui generis. they are easily grouped together (for example, in a joint-stock company or church community), but inside of them they defend their right jealously to remain autonomous persons (fukuyama, 2004, p. 92). vivid heroes-individualists in popular western movies, all these "lonely wolves" and "tough nuts", are consistently and resolutely fighting for the common interests of their group. they have a pronounced active role – ch. it can be assumed that in the business world of the united states, the leading team role is the coordinatorchairman, described above. regardless of the level of development of ss, the coordinator-chairman ch will promote further development of ss among employees and leads the team to the achievement of the goal. the second example is taken from the past of the russian empire. history has given russia great natural wealth that cannot be said about the social capital. even at the dawn of its statehood, in the yііі century, the slavic tribes, steeped in endless strife, which exhausted their strength, came to the conclusion that they cannot organize themselves. "our land is large and abundant, but there is no order in it: come and reign and own us", the chronicler wrote of the appeal of the russian princes to the varangians (solov'yov, 1988, p. 120). although historians today believe that such a simplified idea of the formation of a management baltic journal of economic studies 131 vol. 3, no. 4, 2017 system in russia is untrue, the sheer survivability of this legend and the fact of addressing it in the most serious publications testifies to the fact that an important feature of russian society is seized in it – and it seems that this is the underdevelopment of the ss. to organize themselves, for the ancestors of contemporary russians it was necessary to turn to an external force. this fact can be considered as evidence of the lack of sufficient organizational skills in the ancestors of modern russians (in the language of team roles – the role of ch). since that time, the tendency of russians to “import” from outside organizational principles in their actions has been formed. the ancestors of russians guessed that the lack of organizational skills can be compensated for by addressing to those who have them (a kind of "outsourcing"). such people, they believed, in those days were the varangians. as social experience accumulated in society, people more and more acted in accordance with this experience. such a habit was eventually fixed on the unconscious level and today it claims itself in exceptionally large role of the state in the life of society – as an "external" force, which should organize, coordinate the actions of people, turning them into a collective, unification, community. russian history has always been primarily a history of statehood. if for hayek as a representative of western civilization "nonforced customs and conventions" consist in following the principles of individualism – the rights of free individuals to make independent decisions, then for russians natural behavior is associated with submission to state requirements. instead of spontaneous socialization, forced socialization works. this circumstance can be regarded as an evolutionary response to the lack of spontaneous ss in a community that wants to preserve itself as a subject of history. russian scientist a. zinoviev believes that only thanks to the role of the state "... poor human material could function more or less tolerantly in the prevailing historical conditions – no worse than what could be estimated as good. in any case, the russian people could be preserved as a historical people only as a communist people. with any other system, they are doomed to degradation and destruction" (zinov'yev, 2009, p. 208). the tendency to uniting and strengthening the role of the state was exacerbated by external circumstances – threats emanating from numerous conquerors. english historian a. toynbee, describing the west as the "archagressor of the modern era," recalls that russian lands many times have been repeatedly subjected to western aggression throughout the history (he calls 1941, 1915, 1812, 1709, 1610). he believes that the priority of statehood in russia emerged as a response to a constant external threat: "russian authoritarianism is caused by western pressure. western expansion threatened the russian lands, and they were forced to submit to a new yoke, the yoke of the indigenous russian power in moscow, without which they could not survive" (toynbi, 2012). strictly speaking, the proposed interpretation of episodes of russian history from the standpoint of a low representation of the team role ch in the eastern slavs needs experimental confirmation. indirectly, it has been shown by the results of a sociological study of students of the international humanitarian university (ihu), whose ancestors formed their mentality during the times of the russian empire and the soviet union. over the years, ihu has been conducting research to determine the distribution of team roles among students of different faculties (economists, lawyers, linguists). in the latest study (2015), testing students for team roles showed that, with a sample of 106 students from different specialties, the proportion of those with whom the role of ch ranked first or second in the list of 8 roles, varied from 4% (faculty of linguistics and translation) to 11% (faculty of economics and management). at the same time confident first places were occupied by typical "slavic" qualities, expressed by the roles of tw and cw, which describe honest workers and "good people" (dobrovol'ska, 2015). studies of team roles were conducted in small training groups – "teams" that run virtual organizations. their conclusions can be generalized to larger and more realistic entities, which are a collection of more or less large groups controlled by their teams. in each of them, there is a certain set of team roles. depending on the conditions of historical development of this or that community, a certain set of command roles is realized in its administrative part, some of which can be presented frequently, others less frequently, and still others are practically absent. it is quite possible to imagine a situation where for some reason in certain community the role of the coordinator-chairman is poorly represented – and we get a picture recorded by the chronicler for the slavic tribes of the yiii century: they had few coordinators – chairmen. today, this is reflected, in particular, in the fact that the heroes of russians – in life, literature, cinema – are very far from american ideals. for example, today there are a lot more films of psychological, melodramatic stories than blockbusters, the inner world of heroes and the relationships between them are much more important for the plot than external events, they are rather just “kind people” than american "supermen". these are, for example, the heroes of e. ryazanov's films: the disinterestedly honest insurance agent yuri detochkin ("beware of the car"), the modest statistician anatoly efremovich novoseltsev ("office romance"), shy doctor zhenya cherkashin ("the irony of fate"). in the language of the team roles, these characters correspond to the team role that belbin called "team worker" (tw). it is characterized as follows: "this person has the ability to contribute to the creation of good human relationships and is not very attuned to the task. all members of the team are his friends; he creates an atmosphere of unity in the group. he understands people well, their mood baltic journal of economic studies 132 vol. 3, no. 4, 2017 and feelings. he consistently works to achieve harmony and tries to avoid disagreements, to prevent them when the slightest sign appears. he is not inclined to compete" (kovalenko, 2016, p. 416). it follows then that a society consisting primarily of individuals with characteristics i and tw will feel very uncomfortable if in the process of transformation the leaders transfer them to an alien space of rationality, pragmatism and ruthless competition, where other team roles / codes dominate. this experience was carried out once by three top managers of large communities (states) after a night spent in belovezhskaya pushcha (belorussia). over time, these transformations resulted in the destruction of the economy in their organizations (countries), the impoverishment of workers, and large cultural losses. transformation without taking into account the properties of ss cannot be successful. 4. conclusions under macroeconomic and socio-economic transformations involving historically different communities or groups of different sizes, the ss (with its antipode – forced socialization) can be considered as a situational variable. the success of the transformation in the community essentially depends on the presence or absence of ss in it, the filling of which is connected with belbin's team roles and the competence codes of adizes. a forceful change in the situation without taking into account the prevailing level of the ss leads to a failure of the transformation in the long term. for managers (and politicians) it is necessary to know the abc of team roles / codes: a, ch, so, e, i, im, mo, p, pl, ri, sh, tw. further research is needed to find the connections between the various situational variables and belbin and adizes models. references: adizes, i. (2006). kak preodolet' krizisy v menedzhmente. per. s angl. – spb., stokgol'mskaya shkola ekonomiki v sankt-peterburge, 285 p. belbin r .m. management teams: why they succeed or fail / r . meredith belbin. – amsterdam, boston, heidelberg et al.: elsevier, 2004, 201 p. вlake, r .r ., mouton j.s. (1978). the new managerial greed – houston: gulf, 325 p. dobrovol'ska v.í. (2015). osoblivostí rozpodílu komandnikh roley yak faktor vplivu na modernízatsíyní protsesi v ukrai′ní. magísters'ka robota. – odesa, mgu, 89 p. fiedler, f.e. (1967). theory of leadership effectiveness – new york, mcgraw-hill, 310 p. fukuyama f. (2004). doveriye: sotsial'nyye dobrodeteli i put' k protsvetaniyu. per. s angl. – moscow, ooo «izdatel'stvo ast», zao npp «yermak», 730 p. hayek, f.a. (2011). individualizm i ekonomicheskiy poryadok. per. s angl. (2011) – chelyabinsk, sotsium, 394 p. hersey p., blanchard k.h., johnson d.e. (1996). management of organizational behavior – new jersey, prentice hall, 627 p. hofstede g. culture consequences / geert hofstede. – thousand oaks, london, new delhi: sage publications, 2004. – 585 p. kovalenko, i.n., kovalenko, n.p. (2016). nauka i iskusstvo vlasti menedzhera – odessa, feníks, 512 s. kovalenko, i.n., kovalenko, n.p. (2014). korrelyatsionnyye svyazi mezhdu modelyami upravlencheskikh kompetentsiy. – naukoviy vísnik mízhnarodnogo gumanítarnogo uníversitetu, ser. yekonomíka í menedzhment, vol. 7, p. 48-50. solov'yev, s.m. (1988). istoriya rossii s drevneyshikh vremyon, kn. 1, t.1-2 (1988) – moscow, mysl', 797 p. toynbi, a. (2012). o rossii, zapade i kommunizme. [url]: http://colonelcassad.livejournal.com/692154.html. vroom, v.h., jago, a.g. (1992). managing participation: a critical dimension of leadership. in: management and motivation. ed. vroom v.h., deci e.l. – london, penguin books, p. 420-431. vroom, v.h., jago, a.g. (1988). the new leadership – englewood cliffs, new jercey, prentice hall, 239 p. zinov'yev a. planiruyemaya istoriya: zapad. postkommunisticheskaya rossiya. gibel' russkogo kommunizma: [sb.] / aleksandr zinov'yev. – m.: ast moskva, 2009, 542 s. инна коваленко, николай коваленко спонтанная социализация как ситуационная переменная в теории макроэкономических трансформаций аннотация. цель статьи – проанализировать причины неудачи макроэкономической и социальной трансформации общества на примере перестройка 1985-1991 годов в советском союзе. предлагается рассматривать спонтанную социализацию (сс) как ситуационную переменную, наличие или отсутствие которой существенно влияет на успех преобразований. методология исследования заключается в применении системного подхода, как это понимается в менеджменте, с использованием моделей командных ролей м.  белбина и управленческих компетенций и. адизеса. показано, что успех преобразований в baltic journal of economic studies 133 vol. 3, no. 4, 2017 организованном сообществе зависит от его состава с точки зрения наличия определенной комбинации командных ролей и управленческих компетенций. структура последних включает в себя многочисленные привычки и стереотипы, возникшие исторически и изменяющиеся от общества к обществу, часто противоречащие друг другу, особенно при сравнении западных и восточных культур. некоторые командные роли и управленческие компетенции при конкретном преобразовании способствуют успеху, другие – приводят к неудаче. для успеха трансформации необходимо определенное «подобие» состава преобладающих командных ролей и компетенций. успех трансформации общества существенно зависит от наличия или отсутствия сс, наполнение которой связано с компонентами моделей белбина и адизеса. силовое изменение ситуации без учета преобладающего уровня сс приводит к неудаче трансформации в долгосрочной перспективе. baltic journal of economic studies 244 vol. 3, no. 4, 2017 corresponding author: 1 department of accounting and taxation, pereiaslav-khmelnitskyi state pedagogical university named after hryhorii skovoroda. e-mail: devko89@ukr.net analysis of the current state of income and expenditure structure of the population in ukraine svitlana sliusar1 pereiaslav-khmelnitskyi state pedagogical university named after hryhorii skovoroda, ukraine abstract. the article is a study of the current state of the income and expenditure structure of the population in ukraine, in particular, the level of income and expenditure in the context of national integration into the world economy. the purpose of the study in the article is to analyse the current state of the income and expenditure structure of the population in ukraine in the context of national integration into the world economy. the object of the research is the financial provision of the population of ukraine; the subject is the dynamics of the structure of incomes and expenditures of the population of ukraine. methodology. during the writing of the article, the following research methods are used: the search for available methodological and scientific literature, comparison, clarification of causal relationships, systematization, analysis of documentation and results of researchers’ work on the problem of the conducted research and expert evaluation. results. during the research, it is observed that social security and wages rank one of the most important places in the income structure. so they are stressed. social security includes pensions and various types of benefits (temporary disability, pregnancy and childbirth, child care up to 3 years of age, caring for a sick child, burial, assistance for disabled people whose income is less than the established limit of low income, etc.). social security also provides for the provision of assistance in kind (care for the disabled, elderly people in specialized institutions – at boarding houses and at home). in soviet times, all social payments were made exclusively by the state. it is established that sources of financing social protection services and social security, in accordance with the budget code of ukraine, are state and local budgets. expenditures of social orientation include expenditures on health care, spiritual and physical development, education, social protection and social security. we consider the actual structure of income of the population. social payments are second only to wages earned by ukrainians at the expense of the state budget. their share accounts for 36.6% of all incomes. the state budget and other local budgets of ukraine are by their nature social budgets, and their main expenses are the very different social payments. they include both retirement benefits and scholarships, and various social benefits for the period of temporary disability, and compensation for the cost of services for housing and communal services, etc. on the basis of statistical data, it is established that the minimum wage is not even balanced with the size of the consumer basket, the content of which is very scanty. for example, in developed countries, the size of the consumer basket is the basis for determining the size of the subsistence wage and the minimum wage. according to experts, in order for the minimum wage in ukraine to cover the costs of the goods and services listed in the consumer basket, it should increase threefold. reducing the proportion of social benefits in the structure of incomes and increasing the share of social assistance is considered as a positive moment. this indicates an increase in the targeting of social protection measures. the strategy of gradual reduction of the system of privileges will help to improve the system of support of poor people with limited budgetary resources. practical implications. the author of the article analyses the current state of the structure of incomes and expenditures of the population of ukraine, taking into account aspects of national integration into the world economy. the author analyses statistics on income and expenditure of the population and international legal acts on social protection of the population. the conclusion is made on the research direction. value/originality. the article uses the latest statistics concerning the structure of incomes and expenditures of the population of ukraine and the structure of expenditures from the budget on financing of the population. key words: economic system, incomes, expenses, social protection, wages, population, dynamics. jel classification: d31, d63, e24, e31, h51, h55 baltic journal of economic studies 245 vol. 3, no. 4, 2017 1. introduction today, a compliance with international normative legal acts containing the standards of social and economic rights of citizens and regulating the income of the population in ukraine is somewhat unbalanced. accordingly, the question of the economic and legal regulation of financial security, the regulation of incomes and expenses of the population is very relevant today for our country. in social income structure, social security and wages take one of the most important places. the main expenses of the population are the expenses on buying goods, paying for services, accumulation in banks for bank deposits. individual expenses still include deducted personal income taxes. the purpose of the study is to analyse the current state of the income and expenditure structure of the population in ukraine in the context of national integration into the world economy. the methodology of the study consists of: search method, comparison, clarification of causal relationships, systematization, analysis of documentation, and results of researchers on the problem of the conducted research and expert assessment. the research in the article has a clear structure and solves the set tasks: the legal basis of financial provision of the population of ukraine is analysed, in particular, the regulation of the social sphere since it is the most vulnerable and the sphere of wages; sources of financing for the social sphere of the population are determined; the population structure of incomes and expenses for 2017 and dynamics of the previous year are presented; consumer price indexes in 2016–2017 are analysed in the dynamics. 2. the legal basis of the financial provision of the population of ukraine since international legal acts are of particular importance for ukraine, ukraine’s integration into the world economy, globalization processes in the world, and ukraine’s membership in the council of europe require adaptation of national legislation to the standards of the european community, including the rights and freedoms of citizens, the level of their life. ukraine ratified about 30 conventions of the council of europe. the ratification of “european convention for the protection of human rights and fundamental freedoms” and the recognition by ukraine on its territory of the jurisdiction of the european court of human rights in all matters relating to the interpretation and application of the convention, requires the direct application of the convention by courts of general jurisdiction and other entities in our state. the situation regarding implementation of the european social charter in ukraine remains difficult on the part of its actual implementation. ukraine joined 27 articles and 74 paragraphs of the “charter” but significant changes in the state of observance of human rights and freedoms, the achievement of european social standards and the quality of life have not taken place yet (vasylenko, 2017). at the same time, it is noted that national legislation must rely on the standards of international institutions, in particular, the united nations and the international labour organization. this group of normative legal acts should include the universal declaration of human rights of 1948, the international covenant on economic, social, and cultural rights of 1966, the convention of the international labour organization on social protection of 1952, the european social charter of 1961, revised in 1996, ilo convention № 117 “on basic aims and standards of social policy”, 1962, and other documents ratified by ukraine, which define the responsibilities of the state in the social sphere. the ilo convention № 117 guarantees that the state must take all measures to ensure a decent standard of living for citizens, to promote progress in areas such as health care, housing, food security, education, child welfare, the status of women, conditions of labour, remuneration of hired workers and independent producers, protection of migrants’ rights, social security, etc. (budget monitoring, 2014). in recent years, legislative acts, programs, and other normative documents defining the volumes of expenditure of state and local budgets, in particular, on the financing of the population, were mostly taken without proper consideration of the possibilities of the economy and the population to generate budget revenues. this led to a structural imbalance of public finances, significant (hidden and obvious) deficits of the state budget. the gap between the needs and the actual volumes of budget resources can be overcome by suspending certain regulatory legal acts, the expenses on which are not provided in the budgets or foreseen not in full. this will ensure the necessary financing of urgent social programs and, at the same time, prevent the growth of such debts (andreyev, 2017). it is noticed that the legal framework of ukraine, which defines the state social privileges of citizens and the mechanism of their security and is a regulator of incomes and expenditures of the population, is in an improper condition in relation to european normative documents. accordingly, there is no single system legal regulation, regulating the entire social sphere in ukraine. and this fact causes some difficulties. the laws of ukraine guarantee the social protection of certain categories of citizens through the provision of benefits and state social support. however, the system of benefits has been proved to be ineffective in providing social protection. that is why in 2002 the government approved the strategy for replacing the system of benefits for targeted cash assistance, the main task of which was to increase the targeting of benefits through the ordering, the establishment of a clear accounting of preferential categories of citizens, and the definition of the real size of budget expenditures directed to social baltic journal of economic studies 246 vol. 3, no. 4, 2017 protection, however for today the implementation of the strategy for replacing the benefits system targeted cash assistance is suspended (novikov, 2015). it is also observed that relations in the field of the social partnership are actually regulated by the countless amount of contradictory sub-normative legal acts. the dispersion of the legal and regulatory framework for the financial provision of social protection can be resolved by adopting a document that reflects social interests, regulating social relations in the field of social partnership, guaranteeing the rights and freedoms of citizens, contributing to the establishment of a high level of profitability and social protection of the population in our country. such a legal act can be the social code, which should also determine the procedure for the application of state social standards and norms. it will also solve the problems and inconsistencies in the legal regulation of the financial provision of social protection of the population in the post-crisis economy of ukraine. the construction of a sustainable social protection system involves a combination of stability, economic growth, a rigorous discipline of deductions, social partnership, state and private forms of social protection, and the integration of social policy objectives into a macroeconomic strategy (floreskul, 2016). the sources of financing of social protection and social security services, in accordance with the budget code of ukraine, are state and local budgets. expenditures of social orientation include expenditures on health care, spiritual and physical development, education, social protection, and social security. 3. structure of income and expenditure of the population let us consider the actual structure of income (table 1). social payments themselves take second place after wages received by ukrainians at the expense of the state budget. they take about 36.6% of all incomes. the state budget and other local budgets of ukraine are, at bottom of fact, social budgets, and their main expenses are the very different social payments. they include both pensions and scholarships, and various social benefits for the period of temporary disability, and compensation for the cost of services for housing and communal services, etc. during the second quarter of 2017, the individuals received various social benefits worth 86 billion uah from the state budget and pf. the wages, taking into account all bonuses and premiums in the structure of incomes, occupy 47.1% and are one of the main sources of income of ukrainians (state statistics service of ukraine, 2016). according to the official data of the state statistics service of ukraine, according to the results of the second quarter of 2017, the total income of the population amounted to 559 billion uah, although in the per capita calculation it is only about 17 thousand uah. the amount is small, but it is only official income. for a comparison, ten years ago, according to the results of the first quarter of 2007, the income of ukrainians per capita amounted to 1522 uah. it turns out that over ten years the income of the population in dollar equivalent has increased in almost 3.2 times. but the needs of the population have probably increased tenfold, although in the distant 2007 people complained as well that the incomes are small (state statistics service of ukraine, 2016). table 1 income and expenditure of the population of ukraine during the 2nd quarter of 2017, million uah income 559916 100,0 wage 263508 47,1 profit and mixed income 78072 13,9 property income (received) 13470 2,4 social benefits and other benefits current transfers 204866 36,6 including: social assistance 96666 17,3 other current transfers 23793 4,2 social transfers in kind 84407 15,1 expenses and savings 559916 100,0 purchase of goods and services 526830 94,1 property income (paid) 6017 1,1 current taxes on income, property and other current paid transfers 54695 9,7 including: current taxes on income, property, etc. 46047 8,2 payment to social insurance 591 0,1 other current transfers 8057 1,4 accumulation of non-financial assets -7257 -1,3 growth of financial assets -20369 -3,6 among them: growth of money deposits and savings in securities 29948 5,3 saving in foreign currency -30252 -5,4 (-) received loans except repaid ones (-) 559 0,1 (data is given without taking into account the temporarily occupied territory of the autonomous republic of crimea, sevastopol, and a part of the area of the anti-terrorist operation) talking about the structure of population expenditure, according to official figures, about 94.1% of all expenditures of ukrainians are expenses on purchasing goods and paying for services. if you count on a single resident, then the results of the second quarter of 2017 will reach about 10900 uah. ten years ago these figures were 1420 uah. it should be noted that in 2007, the share of expenses for the purchase of goods and services in the expenditure of population was 88.36%. the situation has changed. and it has changed in many respects due to the growth of population’s savings, especially the placement of money for bank baltic journal of economic studies 247 vol. 3, no. 4, 2017 deposits. if in 2007 the share of the growth of financial investments amounted to 2.2% in the expenditure structure of the population, then in the first quarter of 2017 this index was already 7.6%. it turns out that over the past ten years, despite the crisis and various political cataclysms, the population began to tend to put money on deposit, because the incomes allow individuals to accumulate and accumulate (state statistics service of ukraine, 2016). individual expenses still include withholding personal income taxes. at the moment, ukrainians give in the form of various taxes and fees, about 9.7% of their expenses to the state, and ten years ago this figure was 8.9%. we can say that the tax burden has increased: the amount of taxes in absolute numbers has even increased and incomes have also increased over the past ten years. as for other countries and the share of taxes in the structure of the expenditure of individuals, it depends very much on the model of taxation of the country. in the united states, the share of tax payments in the structure of individual expenditures reaches almost 30% but this is due to the fact that a part of the tax burden of business is switched to individuals. a similar model exists in sweden and norway, there is even more share of tax payments in the structure of expenditure. but in hong kong the situation is opposite: the share of tax payments in the population is not higher than 4%. our model of tax sharing between business and individuals is close to the model adopted in russia and other cis countries. regarding temporal differentiation, the beginning of the year is the most active period of income growth. as a rule, incomes and expenditure of individuals grow to the most at the end of the year. but in summer, expense grows more, as there is the growth of the desire to spend more and more money. the main thing is that this desire could be realized at the expense of previously accumulated income. 4. structure of expenditures from the budget on the financing of the population according to the data of the state statistics committee, expenses of the social direction of the consolidated budget at the beginning of 2017 amounted to 154 billion uah, which is 13.5% more than the same indicator of the previous year. the share of expenses on the sociocultural sphere in the consolidated budget amounted to 64.4% in 2017, in particular, the share of expenditures on education amounted to 20.9%, health care – 12.2%, social protection and social security  – 28.6%. in the period of 2007–2017, the share of expenditures of the consolidated budget of social direction tended to increase (fig. 1) (state statistics service of ukraine, 2016). the share of expenditures in the social direction in the state budget amounted to 93.2% in 2017, which is 0,5  percentage points more than the same indicator in 2015. in 2015, this share amounted to 92.7%, which is 1.1 percentage points less than the same indicator in 2014 (it should be noted that in 2007 there was a sharp decline of this indicator to 40.6%, and in 2008 the growth was up to 45.3%, which is explained mainly by a substantial increase in payments for coverage of depreciated monetary savings) (budget monitoring, 2014-2017). local budgets make a much larger share of spending in the socio-cultural field than the state budget. it is explained by the structure of expenditures of local budgets in accordance with the budget code of ukraine. by 2015, this share of local budget expenditures increased by 2.6 percentage points compared to the previous year and amounted to 94.3% (budget monitoring, 2016). and in 2016, this share decreased by 1.2 percentage points to 93.1%, which is a positive factor (law of ukraine, 2013). during the period of 2012–2016, there was a tendency to increase the expenditures of social orientation both from the local budget and consolidated and state budgets. but it should be noted that the growth rate of expenditures on social protection of the state budget was lower than the growth rate of expenditures on education, health care, spiritual and physical development in the period of 2005–2009 (exceeding 100%). in 2008, this rate of growth was the highest among all types of expenditures, which was, as it was already noted, due to a significant increase in payments to cover depreciated cash savings (budget monitoring, 2014-2015). comparing to 2015, in 2016 the growth of expenditures of the state budget in all sectors was observed. the 0 5 10 15 20 25 30 35 budget 2017 (plan) budget 2016(fact) intergovernmental transfers social protection and social security service of debt public order, security and judiciary economic activity education defense national functions healthcare spiritual and physical development environmental protection housing and communal services fig. 1. dynamics of income and expenditure of the consolidated budget of ukraine (nbu, ministry of finance of ukraine) baltic journal of economic studies 248 vol. 3, no. 4, 2017 expenditures of the social budget of the state budget amounted to 287.6 billion uah, which is 16.4 billion uah more than activities in 2014, so there was a 6% increase. such a trend has been observed in recent years, spending on social protection and social security is ranked second only after intergovernmental transfers (budget monitoring, 2016-2017, kudinova, 2016). the largest increase in nominal expenditure in 2015 comparing with 2014 was in the following areas [5]: social protection and social security  – by 13.3  billion uah (or by 17.7%); nationwide functions  – by 6.1  billion uah (or by 13.8%); health care  – by 1.5  billion uah (or by 13,4%). a significant increase in expenditures on social protection and social security can be explained due to an increase in expenses for the payment of pensions (an increase of 18.7 billion uah (by 52.1%) there was also an influence of a significant increase in expenditures to cover the deficit of the pension fund of ukraine (on 12.8 billion uah) (state statistics service of ukraine, 2016). thus, a significant increase in social expenditures took place in 2016 as a result of the expansion of social guarantees, especially the minimum wage and minimum living wage for able-bodied persons in 2016 compared to 2015 increased by 63.7%. 5. equalization of wages and social standards to the consumer price index as for wages, at the beginning of 2017, the minimum wage was 3200 uah (in accordance with the law of ukraine “on state budget of ukraine for 2017”) and prevailed over the average minimum living wage by 3.6%. in fact, this is considered as a positive factor, although the advance of the size of the minimum wage above the average minimum living wage will not lead to a balance between the wage fund and social benefits. as it was evidenced by the experience of european countries, the minimum wage must exceed the minimum living wage by at least 2.5 times. it should also be noted that the growth of the minimum wage, as well as the total size of the minimum wage, is completely “torn off ” from the real economic situation in the country and actually makes it impossible for the individual to stay at an adequate level. in 2017, social standards and guarantees were raised at a higher pace than the inflation rate. the average minimum living wage per person, the minimum wage, and the minimum pension increased by 7.4%. at the same time, the consumer price index for 2017 amounted to 100.5%. consumer price indices for 2016–2017 are shown in fig. 2. according to the rating agency standard & poor’s, the inflation rate in ukraine in 2016 was fixed at 99.9%. it is noted that in coming years – 2018 and 2019 – the world bank forecasts inflation at the level of 95-99% (budget monitoring, 2017). thus, the increase of the minimum pension in ukraine is quite unlikely to be felt by pensioners. talking about wages, its growth almost by 5% is unlikely to block the projected inflation rate. it is said that the growth of prices for goods and services table 2 expenditures for the social protection and social security (budget monitoring, 2017) indexes years 2013 2014 2015 2016 2017 actual expenditures on social protection and social security 78775,4 104534,9 105434,8 125 306,90 145 062,40 the growth rates of the expenditures on social protection and provision in comparison with the corresponding period of the last year, in % 106,3 132,7 100,9 118,8 115,8 101,1 102,1 103,9 104,9 106,2 107,9 108,2 100,9 100,5 101,5 105,1 105,2 104,9 104,8 104,5 106,4 109,4 111,4 112,4 94 96 98 100 102 104 106 108 110 112 114 2017 2016 fig. 2. consumer price index from 2016 to 2017 in the country is much faster than the growth of the minimum, guaranteed by the state, incomes of the population. 6. conclusions thus, social security and wages take one of the most important places in the structure of income. social security includes pensions and various types of benefits (temporary disability, pregnancy and childbirth, child care up to 3 years of age, caring for a sick child, burial, assistance for disabled people whose income is less than the established limit for low income, etc.). social security also provides the assistance in kind (care for the disabled, elderly people in specialized baltic journal of economic studies 249 vol. 3, no. 4, 2017 institutions  – at boarding houses and at home). in soviet times, all social payments were made exclusively by the state. as for wages, the minimum wage is not even balanced with the size of the consumer basket, the content of which is too scanty. for example, in developed countries, the size of the consumer basket is the basis for determining the size of the minimum living wage and the minimum wage. according to experts, in order for the minimum wage in ukraine to cover the costs of the goods and services listed in the consumer basket, it should increase threefold. reducing the proportion of social benefits in the structure of incomes and increasing the share of social assistance is considered as a positive moment. this indicates an increase in the targeting of social protection measures. the strategy of gradual reduction of the system of privileges will help to improve the system of support of poor people with limited budgetary resources. references: andreyev, v. s. (2017). social policy, 1:315. budget monitoring: analysis of budget execution for (2014). electronic resource, liga law: legal portal. – access mode: http://www.ibser.org.ua/sites/default/files/kv_iv_2014_monitoring_ukr.pdf budget monitoring: analysis of budget execution for (2015). electronic resource, liga law: legal portal. – access mode: http://www.ibser.org.ua/sites/default/files/kv_iv_2015_monitoring_ukr.pdf budget monitoring: analysis of budget execution for (2016). electronic resource, liga law: legal portal. – access mode: http://www.ibser.org.ua/sites/default/files/kv_iii_2016_monitoring_ukr_0.pdf budget monitoring: analysis of budget execution for (2017). electronic resource, liga law: legal portal. – access mode: http://www.ibser.org.ua/sites/default/files/kv_i_2017_monitoring_ukr_1.pdf vasilik, o. d. (2014). budget system of ukraine / k.: center of native literature, 355 p. vasylenko, p. (2017). how is the european social charter executed (revised): social policy. – 48 p. state statistics service of ukraine (2016). electronic resource, liga law: legal portal.  – access mode: http://www.ukrstat.gov.ua law of ukraine «on state social assistance to persons without retirement and disabled persons» (2013). document 1727-15, valid, basis 231-18 / information from the verkhovna rada of ukraine (vvr), № 33-34, art. 404 karpenko, a. i. problems of organization of financing of social sphere in ukraine (2015). electronic resource, liga law: legal portal.  – access mode: http://intkonf.org/karpenko-aiproblemi-organizatsiyifinansuvannyasotsialnoyi-sferi-v-ukrayini.html.pdf convention of the international labor organization № 130 (1969). electronic resource, liga law: legal portal. – access mode: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?page=7&amp;user=c395 kudinova, m. m., varuk, v. v. (2016). problems of financing of social protection of the population in ukraine. global and national problems of economy. – 215 р. novikov, v. m. (2015). social transformations: international and national experience: monograph  – k.: nas of ukraine: institute of economics of the national academy of sciences of ukraine. – 253 p. floreskul, n. (2016). legal regulation of financial provision of social protection of population. bulletin of the knetu, № 22 – 144 p. светлана слюсар, ярослав пономаренко анализ структуры доходов и расходов населения украины аннотация. статья является исследованием современного состояния структуры доходов и расходов населения в украине, в том числе уровня доходов и расходов в контексте национальной интеграции в мировой экономики. целью исследования является проведение анализа современного состояния структуры доходов и расходов населения в украине в контексте национальной интеграции в мировой экономики. объектом исследования является финансовое обеспечение населения украины, предметом  – динамика структуры доходов и расходов населения украины. методология. во время написания статьи использованы следующие методы исследования: поисковый по имеющейся методической и научной литературе, сравнение, выяснение причинно-следственных связей, систематизация, анализ документации и результатов деятельности исследователей по проблеме проведенного исследования и экспертная оценка. результаты исследования. в ходе исследования замечено, что в структуре доходов населения социальное обеспечение и заработная плата занимают одно из самых важных мест. на них и сделан упор. социальное обеспечение включает в себя пенсии и различные виды пособий (по временной потере трудоспособности, по беременности и родам, по уходу за ребенком до 3 лет, по уходу за больным ребенком, на погребение, помощь нетрудоспособным лицам, доход которых меньше установленной границы малообеспеченности, и тому подобное). социальное обеспечение предусматривает также предоставление помощи в натуральном baltic journal of economic studies 250 vol. 3, no. 4, 2017 виде (обслуживание инвалидов, людей пожилого возраста в специализированных учреждениях  – домах-интернатах и на дому). в советское время все социальные выплаты осуществляло исключительно государство. установлено, что источниками финансирования услуг социальной защиты и социального обеспечения, согласно бюджетного кодекса украины, являются государственный и местный бюджеты. к  расходам социальной направленности относятся расходы на здравоохранение, духовное и физическое развитие, образование, социальную защиту и социальное обеспечение. нами рассмотрены собственно структуру доходов населения. социальные выплаты занимают второе место после заработной платы, которые получают украинцы за счет госбюджета. на их долю приходится 36,6 % всех доходов населения. госбюджет и другие местные бюджеты украины по своей сути являются социальными бюджетами, и главные их затраты – это именно различные социальные выплаты. они включают и пенсионные выплаты и стипендии, различные социальные пособия на период временной нетрудоспособности, и компенсации стоимости услуг жкх. на базе статистических данных установлено, что минимальная заработная плата даже не балансируется с размером потребительской корзины, содержимое которого слишком мизерный. для примера, в развитых странах именно размер потребительской корзины является базой для определения размера прожиточного минимума и минимальной заработной платы. по свидетельствам экспертов, для того, чтобы минимальная заработная плата в украине покрывала расходы на перечисленные в потребительской корзине необходимые товары и услуги, размер ее должен вырасти втрое. уменьшение удельного веса социальных льгот в структуре доходов населения и роста доли социальной помощи считают положительным моментом. это свидетельствует об усилении адресности мер социальной защиты. стратегия постепенного сокращения системы льгот будет способствовать совершенствованию системы поддержки бедного населения, которое имеет ограниченные бюджетные ресурсы. практическое значение. авторами статьи проведен анализ современного состояния структуры доходов и расходов населения украины, учитывая аспекты национальной интеграции в мировой экономики. авторами проанализированы статистические данные относительно доходов и расходов населения и международно-правовые акты по социальной защите населения. сделан собственный вывод по направлению исследования. значение/оригинальность. в статье использованы последние статистические данные относительно структуры доходов и расходов населения украины и структуры расходов бюджета по финансированию населения. baltic journal of economic studies 91 vol. 3, no. 5, 2017 corresponding author: 1 department of management, admiral makarov national university of shipbuilding. e-mail: natalia.gryshyna@nuos.edu.ua 2 department of economics and industrial management, pervomaisk polytechnic institute, admiral makarov national university of shipbuilding. e-mail: hmarskij@inbox.ru doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-91-96 the conceptual basis for the development of small business potential in the region nataliia hryshyna1 admiral makarov national university of shipbuilding, ukraine iryna khmarska2 pervomaisk polytechnic institute, admiral makarov national university of shipbuilding, ukraine abstract. the article deals with the study of conceptual foundations of the development of the potential of small business in the region. the purpose of the article is to study the essence and features of small business potential and to form conceptual foundations of its development at the regional level. the subject of the research is theoretical, methodological, and practical aspects of the potential of small business in providing a sustainable economic growth. in the course of the research, the following general scientific and special methods are used: dialectical, system analysis, graphical analysis, matrix, mathematical modelling in economics, and logical generalization of results. the essence of the category “small business potential of the region” is studied; it should be understood as a complex system of balanced and mutually related elements in the form of conditions, resources, and opportunities for small business enterprises in the region to conduct production, economic, commercial, and other activities in order to ensure public needs in terms of sustainable economic growth. methodological principles for forming a conceptual model for the development of small business potential and the scheme of generalized stages of its implementation (preparatory, analytical, operational stages and stage of introduction and implementation) are determined, the implementation of which will help to determine the preconditions for the formation of strategic potential, assess its modern quantitative and qualitative composition, and make a forecast of prospects of the use in ensuring sustainable economic growth. it is proposed to use economic and mathematical models, by means of which it is possible to quantitatively describe the connection between the input indicators of the economic system and the performance indicator. in order to substantiate directions of development of the potential of small business in the region in view of its role in creating new jobs and increasing employment as one of the important indicators of sustainable economic growth, it is proposed to build an economic-mathematical model, the main parameters of which are generalized indicators of the level of labour potential, material-technical potential, financial potential, innovation and infrastructure potential. the use of the proposed methodological approach to the substantiation of directions for developing small business potential will determine possibility and probability of selecting necessary measures to improve certain of its structural elements and their consideration in the development of small business development programs, the selection of sources of its financing, which should facilitate the intensification of business activity as an important factor of flexibility of the regional economy, ensuring competitive activities, capable of becoming a foundation for the renovation of economic growth. key words: potential, small business, region, strategic growth priorities. jel classification: m2, r11, l21 1. introduction among the main strategic priorities of ensuring socioeconomic development of ukraine, a shift in emphasis to the fulfilment of inner potential of regions, introduction of effective mechanisms and tools for local and regional development incentives, intensification of business activities are identified. thus, the determination of directions to develop and increase the efficiency of the use of small business potential as an important element of the economic system is one of the prerequisites for the provision of sustainable economic growth. formation of strategic directions of development of small business potential requires developing corresponding conceptual baltic journal of economic studies 92 vol. 3, no. 5, 2017 foundations. the purpose of the article is to study the essence and features of small business potential and to form conceptual foundations of its development at the regional level. the subject of the research is theoretical, methodological, and practical aspects of the potential of small business in providing a sustainable economic growth. research methods are: dialectical – to find regularities, principles, and factors of promoting the development of small business potential; system analysis – to reveal the essence of elements of small business potential; graphical analysis – for a schematic presentation of theoretical and practical provisions of the study; matrix, mathematical modelling in economics, logical generalization of results – to develop recommendations on the formation of conceptual foundations for the development of small business potential of the region. 2. analysis of recent research and publications world economic science pays considerable attention to studying small business as one of the regular factors of socio-economic advance of countries. a fundamental contribution in the theory of entrepreneurship is made by m.  weber, p.  drucker, w.  sombart, r . cantillon, b. karloff, a. marshall, f. knight, j.b. say, b.  szanto, a.  smith, j.  thünen. among domestic scholars and researchers of aspects of small business development, yu.  bazhal, h.  bilous, z.  varnalii, a.  halchynskyi, v.  herasymchuk, a.  danylenko, ya.  zhalilo, s.  zlupko, i.  komarnytskyi, m.  krupka, v.  kuznietsov, i.  lemeshevskyi, v.  onyshchenko, v.  pyla, s.  reverchuk, m.  syzonenko, d.  stechenko, o.  tymchenko, s.  chernenko, and others should be mentioned. to the study of the potential of the small business, in particular, at the regional level, determination of methodological foundations for its evaluation and mechanisms for improving the efficiency of the use, scientific works of domestic scholars such as a.i.  butenko, h.v.  karpinska, ye.v.  lazarieva, v.i. liashenko, i.m. saraieva, n.l. shlafman and others (2014) are devoted. they note that business potential of the region is a complex phenomenon that reflects “a set of framework conditions of entrepreneurial activity, availability of resources and possibilities to carry out this activity, a region’s disposition toward this activity, and the population’s business activity implemented in certain period” (a.i. butenko, n.l. shlafman, ye.v. lazarieva, 2012). the same thought is also observed in studies of o.v. likhanos (2010), who consider that business potential is determined by its socio-economic structure and conditions created for its formation and implementation. however, in justice to results achieved, one can distinguish a number of insufficiently elaborated issues of formation and development of small business potential (sbp) as a strategic factor of socio-economic changes in the economic growth. 3. the essence and structure of small business potential of the region ukrainian choice of the european way of development and an intention to become an associated member of the eu forms new vectors of development and implementation of regional policy. determination of a new role of state regional policy as the main instrument for providing complex development of territories, activation of small and medium business, and job creation in regions serve the main ways of ukraine’s formation as a modern democratic state (derzhavna stratehiia rehionalnoho rozvytku na period do 2020  roku, 2014). these priorities are also mentioned in updated state strategy of regional development for the period until 2020 (2014), which fulfilment will contribute to the acceleration of reformation of certain spheres of regional development, resource mobilization and optimization of their use, increase in the economic initiative and business activity. it should be noted that regional development programs for small and medium business also emphasize on the achievement of these objectives. however, evaluation of the state and problems of functioning of the small business, analysis of the implementation of appropriate development programs of previous periods indicate a low level of their fulfilment, the main cause of which was an insufficient level of financing, law quality of their implementation, weak infrastructure support, etc. (ofitsiinyi sait derzhavnoho komitetu z pytan rehuliatornoi polityky ta pidpryiemnytstva (20062013); ofitsiinyi sait ukrainskoho fondu pidtrymky pidpryiemnytstva). it is worth noting that small business potential as an economic category can be considered from different points of view, highlighting herewith features, regularities, principles, and factors of its formation and use. the main features and regularities of business potential formation include: ‒ interrelation and balance of elements of potential that has to function simultaneously and together; ‒ alternative nature of potential elements that may in one or another way replace each other; ‒ the dynamism of the formation of the potential, which makes it impossible to determine it by mechanical addition of the constituent elements; ‒ entrepreneurial potential can be independently transformed with the emergence of new constituent elements; ‒ flexibility, adaptability, and sustainability of the potential, which will promote the preservation of its integrity when implementing external influences; etc. in our opinion, the concept of “potential of small business” should be considered in the broad sense as an integrated category, which includes entrepreneurial potentials of different levels (entrepreneurial potential of a person, enterprise, region, country). at the same baltic journal of economic studies 93 vol. 3, no. 5, 2017 time, business potential of each next level includes in its composition as the corresponding potentials of lower levels, so the necessary conditions for their formation and implementation. in addition, each of the components of the multi-level structure of the sbp is in a relationship and interaction with the elements of both higher and lower levels. consequently, business potential of a higher level is not the result of a simple summing of potentials of lower levels but has emergent properties, when the effect of these potentials increases, which causes its increase and development. after studying different points of view of domestic and foreign scholars in determining the category of “ business potential” and taking into account the basic properties and regularities of its formation, we propose to understand “the potential of small business in the region” as a comprehensive system of balanced and mutually related elements in the form of conditions, resources, and opportunities for carrying out production and economic, commercial, and other activities by small business enterprises in order to provide public needs in conditions of sustainable economic growth. 4. formation of conceptual foundations for the development of sbp of the region therefore, taking into account all of the above, one should emphasize the need to formulate conceptual foundations for the development of sbp as one of the effective ways for ensuring the economic and social development of both individual regions and the country as a whole. this requires the development of an appropriate concept, which should contain methodological and constructive provisions, identify its main components (the main purpose, priority directions, goals), as well as implementation mechanisms. thus, among the main methodological principles for the formation of such a model, the following should be noted: ‒ the principle of recognition of the priority of entrepreneurial activity and its subordination to solving problems of sustainable development, implementation of an innovative model of economic development; ‒ the principle of ensuring an integrated system approach, according to which the system of support for sbp development should be an appropriate socioeconomic system of goals, tasks, means, and rules for their achievement, conditions of implementation, etc.; ‒ the principle of using the general theory of management, which will allow regulating the sequence of actions and performers of tasks defined for the formation and implementation of the strategy for the development of sbp in the medium and long term; ‒ the principle of flexibility, which involves taking into account multivariate forecasts of the development of individual components of business potential under the influence of changes in the external and internal environment; ‒ the principle of reconciling goals of the state and small business in the direction of intensifying innovation and investment processes, reducing costs, and using resource-saving technologies, focusing on the intensive type of development of large, medium, and small businesses; ‒ the principle of marketing direction of the model for segmentation of the business sector, which will facilitate the effective implementation of measures to support and regulate entrepreneurship. in our opinion, the formation of a model for the development of small business potential involves the implementation of four generalized stages (preparatory, analytical, operational stages, and the stage of introduction and implementation), the implementation of which will help to identify the prerequisites for the formation of strategic potential, assess its current quantitative and qualitative composition, and make a prediction about prospects of using it in ensuring sustainable economic growth (fig. 1). it should be noted that one of the important prerequisites for the formation of a qualitative model for the development of small business potential is the choice of right methods for its development, the main of which, depending on the nature of the information used, are factual, expert, and also mathematical modelling in economics (bondar, 2006; egorova, 1999). according to the authors, for making scientifically grounded decisions, it is expedient to use economic and mathematical models, by means of which it is possible to quantif y the connection between the input indicators of the economic system and the effective indicator. in this study, we use the method of correlation-regression analysis, the stages of which are the definition of the objects under study, the analysis of relations between individual variables, the selection of the rational type of econometric model. to construct a model for the formation of strategic directions for the development of small business potential, data are formed in the form of spatial and temporal sampling. in particular, these data are determined as a result of the survey of small business potential in mykolaiv region using the system of indicators presented in table 1. in order to substantiate directions of the development of small business potential in view of its role in creating new jobs and increasing employment as one of the important indicators of sustainable economic growth, it is proposed to build an economic and mathematical model, the main parameters of which are generalized indicators of the level of labour potential (ктп), material and technical potential (кмтп), financial potential (кфп), innovation and infrastructure potential (кііп). to find out the effect of each of them on the number of working population (у), the definition baltic journal of economic studies 94 vol. 3, no. 5, 2017 fig. 1. generalized chart of the process of formation and realization of strategic directions for the development of small business potential preparatory stage analytical stage operational stage stage of introduction and implementation − analysis of the current state and structure of the available aggregate sbp − evaluation of the level of use of all structural components of sbp − forecasting of the development of sbp trends − substantiation of the main determinants of sbp − identification of additional sources of organizational, infrastructural, and financial support for the development of sbp − development of a program for the implementation of sbp strategic development directions − definition and substantiation of measures for the realization of strategic development directions of sbp − collection of information on the state of constituent elements of the aggregate sbp − identification of problems and developmental preconditions − outlining tasks of the development and support of sbp table 1 the system of individual and generalized indicators of the level of sbp use for the formation of strategic directions of its development block individual indicators of the i-th block generalized indicators block 1 labour potential (ктп) 1.1. number of sbs per 10000 population (х1) ктп= f1 (х1, х2, х3)1.2. number of employees in the sb sector (х2) 1.3. average salary in the sb sector (х3) block 2 material and technical potential (кмтп) 2.1. the share of fa (fixed assets) in the sb sector in the volume of fa of the region’s economy (х4) кмтп=f2 (х4, х5, х6)2.2. the share of ca (current assets) in the sb sector in the volume of ca of the region’s economy (х5) 2.3. the volume of investments in fa of entities of sb (х6) block 3 financial potential (кфп) 3.1. the share of sb in the total volume of sales of products (works, services) in the region (х7) кфп=f3 (х7, х8, х9) 3.2. the share of profitable sbs in the total volume of profitable enterprises of the region (х8) 3.3. operating expenses of entities of sb from sales of products (works, services) (х9) 3.4. receipt of tax payments and other revenues to the budget from sb entities (х10) block 4 innovation and infrastructure potential (кііп) 4.1. infrastructure development costs per capita (х11) кіп=f4 (х11, х12, х13)4.2. the level of security of sbs by infrastructure objects (х12) 4.3. level of business activity (х13) of the relationship between them, an econometric model is constructed: y f k ê ê ê uòï ìï ôï іï= ( ); ; ; ; , where u – stochastic component of the model. according to the data of the observation, the use of potential of small business in certain raions of mykolaiv region, generalized indicators of the level of labour potential (ктп), material and technical potential (кмтп), financial potential (кфп), innovation and infrastructure potential (кііп) (hryshyna, 2016) are determined. in determining the parameters of the econometric model, the method of least squares (1mnk) was used (bondar, baltic journal of economic studies 95 vol. 3, no. 5, 2017 2006; ostrovskyi, hostryk, dobrunik, radova, 2012). in order to select the best specification, we will analyse the constructed models (table 2). table 2 econometric characteristics of the model indicators characteristics of the model linear exponential determination coefficient 0,904 0,927 adjusted coefficient of determination 0,892 0,917 the value of fisher’s criterion 71,18 95,68 critical values of fisher’s criterion 2,69 consequently, the proposed models are adequate, and the criterion for choosing the best of them is the adjusted coefficient of determination, which determined the choice of the exponential model. that is, the relationship between the number of employed population and the generalized indicators of the potential of small business in the region ( k ê ê êòï ìï ôï іï; ; ; ) will describe the exponential function of this type: , , , , ,ê ê ê êòï ìï ôï іï= ⋅ ⋅ ⋅ ⋅ −7 97 0 55 0 78 0 15 0 45ŷ it is worth noting that the calculated values of the determination coefficient r2=0,927, fischer criterion fрозр=71,18 (fтабл = 2,69) and the adjusted coefficient of 0,917 indicate sufficient compliance with the empirical data of the proposed econometric model. in the process of forming strategic directions of the development of sbp, it is necessary to have an information base, which is created at the stage of strategic analysis. conducting a strategic analysis of the status of sbp should meet the requirements of purposefulness, objectivity, timeliness, systemacity. in the market conditions of management at the stage of strategic analysis, the factors of the external environment and the internal environment are systematically analysed in order to determine the current state of the pmp and to identify conditions for its further development. 5. conclusions in order to identify strategic directions of the development of small business potential, a methodical approach based on the use of a multifactorial dynamic model, the implementation of which allows determining the degree of influence of the effectiveness of using its constituent elements (labour, material, technical, financial, innovation and infrastructure potential) on the main indicators of economic growth, is developed. since ensuring such a growth requires the fulfilment of key conditions, among which are: decent living standards, education, equality, long and healthy life, favourable economic and environmental conditions, the very creation of new jobs is a priority in identifying strategic guidelines for the development of small businesses potential. the use of the proposed methodological approach to the substantiation of directions for developing small business potential will determine possibility and probability of selecting necessary measures to improve certain of its structural elements and their consideration in the development of small business development programs, the selection of sources of its financing, which should facilitate the intensification of business activity as an important factor of flexibility of the regional economy, ensuring competitive activities, capable of becoming a foundation for the renovation of economic growth. references: bondar, i. o. (2006). modeliuvannia vzaiemodii mizh malym pidpryiemstvom ta velykym vyrobnychym obiednanniam [modeling the interaction between a small business and a large industrial association]. municipal economy of cities, vol. 73, pр. 280-289. butenko, a. i., shlafman, n. l., lazarieva, ye. v. (2012). potentsial maloho pidpryiemnytstva v paradyhmi staloho rozvytku [potential of small business in the paradigm of sustainable development]. odesa: interprint. [in ukrainian]. butenko, a. i., shlafman, n. l., lazarieva, ye. v., saraieva, i. m., karpynska h. v. & v. v. lukashchuk (2014). zmitsnennia potentsialu maloho pidpryiemnytstva u zabezpechenni staloho rozvytku ukrainskoho prychornomoria [strengthening the potential of small businesses in ensuring the sustainable development of the ukrainian black sea region]. odesa: interprint. [in ukrainian]. derzhavna stratehiia rehionalnoho rozvytku na period do 2020 roku (2014) [state strategy for regional development up to 2020]. retrieved from: http://zakon2.rada.gov.ua/laws/show/385-2014-%d0%bf. egorova, n. e. (1999). modelirovanie deyatel'nosti malogo predpriyatiya, funktsioniruyushchego v ekonomicheskom simbioze s krupnym promyshlennym ob"ektom [modeling the activity of a small enterprise operating in economic symbiosis with a large industrial facility]. economics and mathematical methods, hryshyna, n. v. (2016). pidvyshchennia efektyvnosti vykorystannia potentsialu maloho pidpryiemnytstva u zabezpechenni stiikoho ekonomichnoho zrostannia [improvement of efficiency of small business potential use in supporting region’s sustainable economic growth]. extended abstract of candidate’s thesis. odesa: ipreed nanu [in ukrainian]. likhanos, e. v. (2010). formirovanie predprinimatel'skogo potentsiala kak faktor razvitiya biznes-sfery [formation of entrepreneurial potential as a factor in the development of the business sphere]. extended abstract of candidate’s thesis. stavropol': stgau [in russian]. ofitsiinyi sait derzhavnoho komitetu z pytan rehuliatornoi polityky ta pidpryiemnytstva (2006-2013). uzahalneni zvity pro stan vykonannia rehionalnykh prohram rozvytku maloho pidpryiemnytstva v ukraini. [generalized reports baltic journal of economic studies 96 vol. 3, no. 5, 2017 on the state of implementation of regional programs for the development of small business in ukraine]. retrieved from: http://www.dkrp.gov.ua. ofitsiinyi sait ukrainskoho fondu pidtrymky pidpryiemnytstva [official site of the ukrainian business support foundation]. retrieved from: http://ufpp.gov.ua. ostrovskyi, p. i, hostryk, o. m., dobrunik, t. p., radova, o. v. (2012). modeliuvannia ekonomichnykh protsesiv [models of economical processes]. odesa, oneu. [in ukrainian]. rehionalnyi vymir sotsialno-ekonomichnoho rozvytku i zasady novoi rehionalnoi polityky (2013). [regional dimension of socio-economic development and the foundations of a new regional policy], kyiv: nisd. vol. 2, pp. 17-29. baltic journal of economic studies 110 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: ugsbeplumvs@gmail.com orcid: https://orcid.org/0000-0002-1376-6764 2 odessa state university of internal affairs, ukraine e-mail: 0949470450@ukr.net orcid: https://orcid.org/0000-0002-7214-5212 3 secretariat of the constitutional court of ukraine, ukraine e-mail: beschastnyy.vm@gmail.com orcid: https://orcid.org/0000-0002-4650-7371 doi: https://doi.org/10.30525/2256-0742/2022-8-4-110-116 the role of law enforcement agencies in ensuring national and economic security of ukraine anatolii nikitin1, oleksii vdovychenko2, victor beschastnyy3 abstract. the subject of the study is the institutional, theoretical and methodological aspects of the activities of law enforcement agencies to ensure national and economic security of the state. the methodological foundations of the study of national and economic security in legal science are based on the interdisciplinary nature of this category. the purpose of the study is to determine the role of law enforcement agencies of ukraine in ensuring national and economic security on the basis of research, analysis of current legislation and practice of its application, taking into account the current conditions in ukraine. the publication presents the views of scientists on the definition of the concept of "national security of the state" and the participation of law enforcement agencies of ukraine in its provision. the state, development and ways of reforming the national and economic security of ukraine are one of the most pressing issues for the state today. it is emphasized that the state legal policy in the sphere of national security is based on the provisions of the constitution on the defense of the state, on the definition of the strategic development of ukraine, which is the course towards european and euro-atlantic integration. the problems of determining the place and role of law enforcement agencies in ensuring national and economic security of ukraine are considered on the basis of the analysis of the system of normative legal acts and the results of law enforcement agencies. the main law enforcement agencies that ensure the national security of the state are: the prosecutor's office, the ministry of internal affairs of ukraine, the national police of ukraine, the security service of ukraine, the national anti-corruption bureau of ukraine, the state bureau of investigation, the military law enforcement service in the armed forces of ukraine, the state border protection agencies and others. it is emphasized that all law enforcement agencies of ukraine indirectly ensure the national security of the state. it is concluded that the system of ensuring national security of ukraine, built during the years of independence, has shown its unpreparedness to neutralize real threats to national interests during the armed conflict in ukraine. therefore, in modern conditions, it is necessary to restructure the system of guaranteeing the national security of ukraine, improve the legislative framework of ukraine and the practical activities of law enforcement agencies. key words: strategy, security, national security, economic security, national interests, state legal policy, law enforcement agencies. jel classification: l10, f52 1. introduction further legal development of ukraine as a democratic, independent and sovereign state is primarily related to ensuring its national security. modern global challenges and military threats have caused a radical transformation of the world economic and social order, which is accompanied by a change in political configurations. threats to the realization of national interests arise in various spheres of life of society and the state. thus, in the analytical report of the national institute for strategic studies to the extraordinary address of the president of ukraine to the verkhovna rada of ukraine "on the internal and external situation of ukraine in the sphere of national security " in 2014, it was noted that the system baltic journal of economic studies 111 vol. 8 no. 4, 2022 of ensuring the national security of ukraine was unable to effectively counter russian aggression. among the main reasons for this situation is the inconsistency of the management system of both military formations and law enforcement agencies with the requirements of modern military conflicts, low level of their material, technical and personnel support, etc. (analytical report of the national institute, 2014, p. 7) understanding the need to ensure national security is the most important fundamental value of any society and acts as an object of social activity, embodies and determines its orientation, meaningfulness and effectiveness. taking into account the geopolitical and internal situation, the activities of all state authorities in ukraine should be aimed at forecasting, timely detection, prevention and neutralization of external and internal threats to national security, protection of sovereignty and territorial integrity of ukraine, guaranteeing personal security, constitutional rights and freedoms of man and citizen. law enforcement officers are forced to respond to modern challenges and threats, because the issue of national security in the context of the hybrid war unleashed against us by the russian federation is very important today. given the above, it is obvious that modern law enforcement agencies of ukraine are the subjects of ensuring the national security of the state. currently, in the ukrainian scientific literature there are heated discussions on the essence of national security, the content of the main threats and responses to them. analysis of recent publications shows that the following scholars have studied the issue of ensuring national security of ukraine by law enforcement agencies: v. antonov (2017), o. holovkin (2017), l. kazakova (2021), o. kovalova (2020), m. korniienko (2020), v. makarchuk (2021), yu. mykhailova (2017), o. reznikova (2022), i. skazko (2017), o. sosnin (2021), o. cherednychenko (2022), o. shevchenko (2021) and other. 2. state legal policy in the field of national and economic security the defining principle of the state legal policy in the sphere of national and economic security is the rule of law. the prospects of national develop ment of ukraine are based on the system of national interests and priorities and include the national security strategy of the state, which defines the principles, priority goals, objectives and mechanisms for ensuring the vital interests of the individual, society and the state. the state legal policy in the field of national security has a certain structure that demonstrates the integrity of the system itself and its functional orientation. it is believed that the phrase "national security " was introduced into the political discourse in 1788 by a. hamilton, one of the "founding fathers" of american democracy (reznikova, 2022, p. 55). currently, there are different approaches to the interpretation of this term in scientific and expert circles due to its complex, multicomponent and interdisciplinary nature. formulated and enshrined by the legislator in paragraph 9 of article 1 of the law of ukraine "on national security of ukraine" is an authentic definition of the definition of "national security of ukraine", which means the protection of state sovereignty, territorial integrity, democratic constitutional order and other national interests of ukraine from real and potential threats (on the national security of ukraine, 2018). scientists provide different views on the meaning of this term. thus, o. sosnin understands national security as an indicator of the ability of society and the state, independently or jointly with other friendly countries (peoples, nations), to protect national interests, to deter or eliminate internal and external threats to national sovereignty, territorial integrity, social order and economic development, other important elements of spiritual and material life; the degree of protection of the interests of the individual, society and the state from external and internal threats (sosnin, 2021). the phrase "national security ", according to the author, can be interpreted as: the security of the people, the nation, that is, the population of the country, including both mono-ethnic and multi-ethnic people, when representatives of different nationalities act as fellow citizens; security of society, i.e., the totality of people united by historically determined conditions of common life; security of the state, that is, the organizational and legal form of the union of peoples, the nation, which is a means of conducting common affairs (sosnin, 2021). l. kazakova proposes to understand the national security of ukraine not only in terms of its military component, that is, the actions of the state to protect the state sovereignty, territorial integrity, democratic constitutional order and other national interests of ukraine from real and potential threats, but also as the activities of the state to ensure the protection of human and civil rights and freedoms within the national territory and at the international level (kazakova, 2021, p. 131). national security of the ukrainian state is the subject of v. antonov's monographic study "constitutional and legal foundations of national security of ukraine", in which national security of ukraine is considered as a state of protection of vital interests of a person and a citizen, society and the state, which ensures sustainable development of baltic journal of economic studies 112 vol. 8 no. 4, 2022 society, timely detection, prevention and neutrali zation of real and potential threats to the national interests of the ukrainian state (antonov, 2017, p. 33). the goal of ensuring national security in general is the absence of threats and dangers or their overcoming. if under the influence of a threat society or the state suffered significant losses and destruction, it can be assumed that the ultimate goal of the national security system is not achieved, and the system itself is ineffective (reznikova, 2022, p. 58–59). the system of ensuring national security of ukraine is created and developed in accordance with the constitution of ukraine and other normative legal acts regulating public relations in the field of national security management. in accordance with the law of ukraine "on the fundamentals of national security of ukraine", the legal basis of the state policy in the spheres of national security and defense is the constitution of ukraine, laws of ukraine, international treaties ratified by the verkhovna rada of ukraine, as well as other normative legal acts issued in pursuance of the constitution and laws of ukraine. this policy is aimed at protection: – of human and citizen, their life and dignity, constitutional rights and freedoms, safe living conditions; – of society, its democratic values, welfare and conditions for sustainable development; – of the state – its constitutional order, sovereignty, territorial integrity and inviolability; territory, natural environment, from emergency situations (on national security of ukraine, 2018). the national security strategy of ukraine defines the general principles, priority goals, objectives and mechanisms for protecting the vital interests of the individual, society and the state from external and internal threats. the current national security strategy of ukraine "human security – security of the country " was approved by the decree of the president of ukraine no. 392/2020 of september 14, 2020. taking into account the fundamental national interests defined by the constitution of ukraine and the law of ukraine "on the fundamentals of national security of ukraine", the priorities of national interests of ukraine and ensuring national security are: – protection of independence and state sovereignty; – restoration of territorial integrity within the internationally recognized state border of ukraine; – social development, primarily the development of human capital; – protection of rights, freedoms and legitimate interests of citizens of ukraine; european and euro-atlantic integration (national security strategy of ukraine, 2020). it should be noted that the national security strategy defines the current threats to the national security of ukraine. among the main directions of foreign and domestic policy activities of the state to ensure its national interests and security are the following: – тhe direction of foreign policy of the state is primarily aimed at ensuring independence and state sovereignty, restoration of territorial integrity of ukraine; – ukraine's active participation in the fight against terrorism, proliferation of weapons of mass destruction, international crime, drug dealing, trafficking in human beings, political and religious extremism, illegal migration, cyber threats, negative consequences of climate change, as well as in preventing and overcoming the consequences of natural and man-made emergencies; – ukraine's full membership in the european union and the north atlantic treaty organization (national security strategy of ukraine until 2020). it should be noted that the president of ukraine is the guarantor of the implementation of the strategic course of the state for ukraine's membership in the eu and nato. the implementation of the national security strategy of ukraine is ensured by the cabinet of ministers of ukraine, executive bodies, bodies of the security and defence sector of ukraine, other state bodies in accordance with their competence. the state authorities are guided by the strategy during the development and implementation of legislative acts, concepts, doctrines, strategies, programs, plans and individual measures, conclusion of international treaties and agreements, other international legal documents. the strategy is the basis for the development of planning documents in the areas of national security and defense, which will determine the ways and tools for its implementation. this involves the creation of 15 separate "sectoral" strategies that specify the main directions of the state security policy of ukraine, such as: human development strategy; military security strategy of ukraine; strategy of public security and civil protection of ukraine; economic security strategy; energy security strategy; information security strategy; cyber security strategy of ukraine; foreign policy strategy; state security strategy and others (national security strategy of ukraine, 2020). according to o. shevchenko, ukraine's national security strategy largely eliminates existing conceptual uncertainty and inconsistency in assessments of real and imagined threats and challenges facing our country, as well as ways and means of effective countermeasures (shevchenko, 2021, p. 158). the implementation of the strategy by all state institutions should ensure not only the cessation of aggression baltic journal of economic studies 113 vol. 8 no. 4, 2022 and restoration of the territorial integrity of ukraine within its internationally recognized state border on the basis of international law, but also guarantee a high level of human rights protection. thus, the state legal policy in the sphere of national security is based on the provisions of the constitution on the defense of the state, on the definition of the strategic development of ukraine, which is the course towards european and euro atlantic integration. and in generalized form, national security is the protection of national interests and national values from external and internal threats. 3. legal activities of law enforcement agencies in the field of national and economic security ensuring national security in the context of globalization changes in the world order is a systematic impact on potential and real threats. the legal activity of state institutions belonging to the security and defence sector is to implement the mechanism of ensuring national security. institutions of state power should act exclusively within their powers, implement the duties defined by law. and here a natural question arises regarding the activities of law enforcement agencies in the field of national security. the legislation of ukraine does not contain a clear list of state bodies that are law enforcement agencies, and does not directly define their functions in ensuring national security. the activities of law enforcement agencies are multifaceted, their legal activities are aimed at blocking social deviations, localization of social tensions, legal conflicts. the state of internal security of the state and its ability to withstand external threats depend on how effectively the law enforcement system functions (cherednychenko, 2022, p. 27–28). the national security of ukraine is ensured by a significant number of entities with different legal status, structure and competence. thus, modern researchers include the prosecutor's office, the ministry of internal affairs of ukraine, the national police of ukraine, the security service of ukraine, the national anti-corruption bureau of ukraine, the state bureau of investigation, the military law enforcement service in the armed forces of ukraine, the state border protection bodies and others among the main law enforcement agencies that have a significant impact on ensuring the national security of the state. each of these bodies has a significant impact on ensuring the proper functioning of the national security system of the state (makarchuk, 2021, p. 24). the prosecutor's office of ukraine should be considered as a special subject in the system of ensuring national security, since, in addition to the powers common to all subjects, it exercises: – оrganization and procedural management of pretrial investigation, resolution of other issues in criminal proceedings in accordance with the law, supervision of covert and other investigative and search actions of law enforcement agencies in accordance with the constitution of ukraine; – coordination of activities of law enforcement agencies in the field of combating crime, especially in the fight against organized crime, corruption, which pose a real threat to national security in the field of state security; – functions of the authorized (central) body of ukraine on sending requests for international legal assistance in criminal proceedings during pre-trial investigation and consideration of relevant requests of foreign competent authorities; – representation of the state interests in court in exceptional cases and in the manner prescribed by law (holovkin, skazko, 2017, p. 48). the ministry of internal affairs is the main body in the system of central executive authorities that ensures the formation and implementation of state policy in such areas: – ensuring the protection of human rights and freedoms, interests of society and the state, combating crime, maintaining public safety and order; – protection of the state border of ukraine and protection of the sovereign rights of ukraine in its exclusive (maritime) economic zone; – civil protection, protection of the population and territories from emergencies and prevention of their occurrence, elimination of emergencies; – migration (immigration and emigration), in particular combating illegal (illegal) migration, citizenship, registration of individuals, including refugees and other categories of migrants defined by law (on approval of the regulation on the ministry of internal affairs, 2016; on the fundamentals of national security of ukraine, 2018). the minister of internal affairs of ukraine is an ex officio member of the national security and defence council of ukraine (constitution of ukraine, 1996). defining the national police as a subject of the security and defense sector, the legislator in the law on national security did not prescribe the tasks of the police as a subject of this sector. the main tasks of the national police of ukraine are to ensure public safety and order, protection of human rights and freedoms, interests of society and the state, combating crime, as well as to provide certain types of assistance to persons who for personal, economic, social reasons or as a result of emergency situations need such assistance (on the national police, 2015). the participation of the national police in ensuring territorial security, and territorial defence in particular, is rather vague. among the main areas of territorial defense provided by the police are: strengthening the baltic journal of economic studies 114 vol. 8 no. 4, 2022 protection of public order and security of citizens; preparation for the fight against sabotage and reconnaissance forces, other armed groups, anti-state illegal armed groups and looters; advance preparation in peacetime for the protection and defense in a special period of important objects and communications of vital activity; maintenance of the legal regime of martial law; ensuring the interaction of territorial defense subjects (on approval of the regulation on the ministry of internal affairs, 2015). together with the armed forces of ukraine and other military formations, the units of the national police of ukraine participate in the joint forces operation to repel and deter the armed aggression of the russian federation on the territory of ukraine. the security service of ukraine occupies a special place in the system of law enforcement agencies, due to the specific range of issues within its competence and the wide opportunities that can be used both to establish the rule of law and ensure state security, and to improperly protect the interests of individual politicians. the security service of ukraine is vested with law enforcement functions that directly affect the formation and implementation of state policy in the field of national security. the tasks entrusted to the security service of ukraine significantly distinguish it from other bodies dealing with law enforcement, security and law and order. the legally defined status of the security service of ukraine is a special-purpose state law enforcement agency that ensures the state security of ukraine" (article 1) (on the security service of ukraine, 1992). in today 's difficult conditions, there is an urgent need for the existence and effective operation of specialized anti-corruption institutions that have a wide range of powers in the field of combating corruption, the negative consequences of which pose a real threat to the national economic security of ukraine. the task of the national anti-corruption bureau of ukraine is to combat corruption and other criminal offenses committed by senior officials authorized to perform the functions of the state or local self-government and pose a threat to national security, as well as to take other measures provided by law to combat corruption (on the national anti-corruption bureau of ukraine, 2014). the significance of the state bureau of investigation for national security lies in the fact that it solves the tasks of preventing, detecting, suppressing, solving and investigating the most dangerous crimes committed by officials who hold a particularly responsible position (on the state bureau of investigation, 2015). the establishment of such a body indicates that the state seeks to overcome the criminality of officials of the highest state authorities and law enforcement agencies of ukraine. despite a fairly wide range of subjects of ensuring the national security of ukraine, threats in the foreign policy sphere, in the sphere of state security, threats in the military sphere and in the sphere of state border security of ukraine are of particular concern today (mykhailova, 2017, p. 154). the duty to protect the state sovereignty of ukraine, its territorial integrity, protection and reliable defense of the state border is entrusted to the state border guard service of ukraine. the implementation of the legally established functions is, in its essence, the operational and service activity of the state border guard service of ukraine. the priority task of ensuring national security by the state border guard agencies is to protect and secure the state border, including from manifestations of international organized crime in the form of illegal migration, smuggling, human trafficking, etc. (on the state border guard service of ukraine, 2003) the increased attention to the state border guard service is related to the current threats to national security and violation of the territorial integrity of ukraine. in the conditions of martial law, the military law enforcement service of the armed forces of ukraine is of particular importance for ensuring national security, which ensures law and order and military discipline among the servicemen of the armed forces of ukraine in the places of deployment of military units, prevents offenses in the armed forces of ukraine; protects the life, health, rights and legitimate interests of servicemen, persons liable for military service and employees of the armed forces of ukraine; protects the property of the armed forces of ukraine from theft and other illegal encroach ments; participates in counteracting sabotage and terrorist acts at military facilities (on the military law enforcement service in the armed forces of ukraine, 2002). law enforcement agencies also play an important role in ensuring the economic security of the state. therefore, for a long time the reform of law enforcement agencies of ukraine was aimed at creating a single law enforcement agency in the field of economic security. such a central executive body is the bureau of economic security of ukraine, which is tasked with counteracting offenses that affect the functioning of the state economy. the main tasks of the bureau of economic security of ukraine are: identifying and assessing risks and threats to the economic security of the state; ensuring the economic security of the state by preventing, detecting, suppressing and investigating criminal offenses that infringe on the functioning of the state economy; analysis of information on offenses that infringe on the economic security of the state; preparation of analytical conclusions and recommendations for state bodies in order to improve the baltic journal of economic studies 115 vol. 8 no. 4, 2022 efficiency of their management decisions on the regulation of relations in the economic sphere and others. it is important to emphasize that the activities of such a law enforcement agency are aimed not only at investigation, but also at preventive response measures and in-depth analysis of economic processes in our country. thus, it can be argued that law enforcement agencies play an important role in the system of subjects ensuring national and economic security of the state. this is due to the fact that law enforcement agencies, taking into account their specific sphere of activity, occupy one of the leading places in the fight against threats to the national and economic security of ukraine. it should also be noted that the effecti veness of ensuring national and economic security of ukraine by law enforcement agencies depends on proper interaction and coordination of their legal activities. 4. conclusions national and economic security is extremely important for any state. the system of ensuring national and economic security of ukraine, built during the years of independence, has shown its unpreparedness to neutralize real threats to national interests during the armed conflict in ukraine. ukrainian scientists define the national security of the state as the protection of vital interests of man and citizen, society and the state, which ensures sustainable development of society, timely detection, prevention and neutralization of real and potential threats to national interests. conducting military operations, temporary occupation of the territories led to the emergence of so many social, economic, legal and other problems, which did not exist in all previous years of ukraine's independence. both the subjects of national security and the legislative framework of their activities were not ready for these challenges. analysis of the state of the legislative framework and practical activities of law enforcement agencies on ensuring national security, the current socio political and economic situation in ukraine allows us to state that today a profound restructuring of the system of guaranteeing national security of ukraine is necessary, which will be based on improving both the legislative framework of ukraine and the practical activities of law enforcement agencies. and in connection with the radical change in the security situation that occurred as a result of the military aggression of the russian federation against ukraine, there is a need to review the powers of law enforcement agencies and expand their operational capabilities. references: analytical report of the national institute for strategic studies to the extraordinary address of the president of ukraine to the verkhovna rada of ukraine "on the internal and external situation of ukraine in the sphere of national security ". kyiv: niss, 2014. 148 p. antonov, v. (2017). constitutional and legal principles of national security of ukraine: monograph. kyiv: talcom, 576 p. holovkin, o. v., & skazko, i. r . (2017). the place and role of prosecution bodies in the system of national security of ukraine. state and law. series of legal sciences, vol. 76, pp. 43–55. kazakova, l. o. (2021.) national security of the state: conceptual and categorical apparatus. regional studios, vol. 24, pp. 128–132. the constitution of ukraine: adopted at the v session of the verkhovna rada of ukraine on june 28, 1996. information of the verkhovna rada of ukraine. 1996. № 30. art. 141. available at: https://zakon.rada.gov.ua/ laws/show/254%d0%ba/96-%d0%b2%d1%80#text makarchuk, v. v. (2021). characteristics of law enforcement agencies as subjects of formation and implementation of state policy in the field of national security and defense of states. legal scientific electronic journal, vol. 1, pp. 21–24. mykhailova, yu. o. (2017). the role and place of the state border guard service in the system of subjects of ensuring national security of ukraine. forum of law: electronic scientific professional edition, vol. 4, pp. 152–158. available at: http://nbuv.gov.ua/j-pdf/fp_index.htm_2017_4_26.pdf on the military law enforcement service in the armed forces of ukraine: of 7 march 2002 № 3099-iii. available at: https://zakon.rada.gov.ua/laws/show/3099-14#text on the state bureau of investigation: law of ukraine of 12 november 2015 № 794-viii. available at: https://zakon.rada.gov.ua/laws/show/794-19#text on the state border guard service of ukraine: law of ukraine of 3 april 2003 № 661-iv. available at: https://zakon.rada.gov.ua/laws/show/661-15 on approval of the regulation on the ministry of internal affairs of ukraine: resolution of the cabinet of ministers of ukraine of 28 october 2015 № 878. available at: https://zakon.rada.gov.ua/laws/show/878-2015%d0%bf#text baltic journal of economic studies 116 vol. 8 no. 4, 2022 on the national anti-corruption bureau of ukraine: law of ukraine of 14 october 2014 № 1698-vii. available at: https://zakon.rada.gov.ua/laws/show/1698-18#text on national security of ukraine: law of ukraine of 21 june 2018 № 2469-viii. available at: https://zakon.rada.gov.ua/laws/show/2469-19#n355 on the national police: law of ukraine of 2 july 2015 № 580-viii. available at: https://zakon.rada.gov.ua/ laws/show/580-19#text on the prosecutor's office: law of ukraine of 14 october 2014 № 1697-vii. available at: https://zakon.rada.gov.ua/ laws/show/1697-18#text on the security service of ukraine: law of ukraine of 25.03.1992., №  2229-12. available at: https://zakon.rada.gov.ua/laws/show/2229-12#text reznikova, o. o. (2022). national resilience in a changing security environment: monograph. kyiv: niss, 532 p. sosnin, o. (2021). understanding the essence of national security: worldview, conceptual and scientifictheoretical foundations (part 1). legal bulletin of ukraine. available at: https://lexinform.com.ua/dumkaeksperta/rozuminnya-sutnosti-natsionalnoyi-bezpeky-svitoglyadno-ponyatijni-j-naukovo-teoretychni-zasadychastyna-1/ national security strategy of ukraine "human security – security of the country ": decree of the president of ukraine of 14 september 2020 №  392/2020. available at: https://www.president.gov.ua/documents/ 3922020-35037 cherednychenko, o. (2022). activation of law enforcement agencies as an opportunity to strengthen the security and defense sector of the state in modern conditions. legal bulletin, vol. 1, pp. 27–33. shevchenko, o. a. (2021). evolution of national security strategies of ukraine during the years of independence through the prism of economic security of the state. scientific bulletin of uzhhorod national university. series law, vol. 65, pp. 152–159. kovalova, o. v., korniienko, m. v., & pavliutin, y. v. (2020). the role of public organizations in ensuring national security of ukraine. cuestiones políticas, vol. 37, no. 65, pp. 136–155. received on: 27th of september, 2022 accepted on: 14th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 74 vol. 3, no. 4, 2017 corresponding author: 1 department of management and tourist business, oles honchar dnipro national university. e-mail: zhilenkok@ukr.net investing and production-financial activities of tncs’ in the conditions of globalization kateryna zhylenko1 oles honchar dnipro national university, ukraine annotation. the purpose of the work is an exposure of modern tendencies of investment policy of tnc. research of degree of a particular branch engaged in globalization processes. mathematical, analytical and abstract-logical methods allowed analysing a dynamics, tendencies, and priorities of the direct foreign investment, carried out by tncs. methodology. the methodological base of the research is ukrainian scientific works and foreign scientists and leading specialists, statistical and analytical materials of international organizations. research results testify that there is no any direct dependence between of a particular branch interests in bringing in of dfi and real tendencies of their bringing in. it is analysed, in what industries of the economy of ukraine direct foreign investments bring the most considerable contribution in the process of investing in the fixed assets. for estimation, the indexes of correlation of dfi in industry and investments in the fixed assets (fdi/fсi) are used. practical implication. it is possible to draw a conclusion that without bringing foreign capital into the ukrainian economy it is sufficiently difficult to attain high values of the economy growing and development. taking into account a difficult economic and promissory situation, the best for a country are private direct foreign investments, the main source of which are multinational corporations. the possibility of activation of the attraction of foreign direct investments to ukraine is fully real, given the fact that as a result of economic and political changes, here is created a more favourable situation, than before reforms for the introduction in its economy of great foreign economic entities. at the same time, own large economic structures were formed in ukraine: business concerns, consortia, associations, integrated associations, financial-industrial groups (fig). value/originality. it is impossible not to mark that ukraine lags behind in carrying out market reforms from the countries of central and east europe (cee), from china. however, tendencies, which showed up in aforementioned countries, in relation to attraction and use of foreign direct investments, also come to light in ukraine. foremost, it concerns the creation of favourable investment climate, the presence and degree of favourableness of which characterize the state of the economy of host country overall and also is the indicator of the efficiency of market reforms. key words: foreign direct investments, fixed assets (fdi/fсi), financial-industrial groups, globalization, integrated associations, world economy. jel classification: f23, f21 1. introduction at the present stage of development, transnational corporations are the main force that ensures the integration of the economy of the host country into the world economy. the question arises as to how the national economy should integrate into the world economy, by attracting the capital of foreign tnc’s or by creating powerful corporations and transforming them into transnational ones to protect the country’s interests in the world economy. the beginning of relations between ukraine and the tncs of industrialized countries is often considered to be the external economic reform of 1987 aimed at creating an open economy, expanding the country’s participation in the international division of labour, and developing production cooperation forms. at the first stage, foreign capital was most actively invested in the processing and food industries of ukraine, as well as in the construction of railways, oil production, and smelting of cast iron, and other (at that time) promising sectors. this contributed to the accelerated development of industry in the country. the largest foreign investors of the period under review were the financial and industrial groups of germany and france. the peculiarity of this stage of investing in the ukrainian economy is that it coincided with the trends in the development of the world economy as a whole. at the second stage, ukraine withdrew from the system of the world capitalist economy; its economy was isolated from the world economy. however, the solution of problems of economic development of the economy required significant financial and technical baltic journal of economic studies 75 vol. 3, no. 4, 2017 resources, which the country had not enough. to attract private foreign capital, the government allowed concluding concessions, by which private foreign capital was attracted to such industries and regions that the state could not develop on its own. at the third stage, the foreign investment policy of the ussr was built, first of all, with an orientation toward the economy of countries with a similar political and economic system. during this period, the council for mutual economic assistance (cmea) is being created and strengthened; various forms of economic cooperation with its participants are successfully developing. the main form of such cooperation was the coordination of the long-term and current national economic plans of the cmea member states. however, there were also forms of direct investment and production cooperation (the “druzhba” oil pipeline, the international investment bank for economic cooperation, the international institute of problems of the world socialist system, the single currency – the transferable ruble, the unified energy system, etc.). at the fourth stage, the gradual liberalization of domestic and foreign economic policies began, stemming from the beginning of economic and political reforms in the ussr , which continue to the present day in ukraine. as a result of the liberalization of the economy, ukrainian enterprises were given the right not only to carry out trade operations in the world market but also to act as investors. at the same time, favourable conditions were created for attracting foreign capital in a variety of forms – from completely foreign to joint ventures, including international joint ventures (associations, consortiums, etc.), concessions. only for the 1990s, a number of enterprises with foreign investments increased more than 5.8 times. in addition, these banks often act as the initiator for attracting other forms of capital. such functions of banks with the participation of foreign capital allow russian specialists to rightly assert that all negative phenomena in the field of financial relations, national currencies from the level of national economies are almost completely transferred to the international level. this observation was made with reference to the economic entities of the cis countries, whose mutual calculations gave rise to such a phenomenon as the international crisis of non-payments. but it is also quite true for the banks of industrially developed countries. the mechanism of non-payments, launched at the national level, reproduces itself on an ever-expanding basis at the international level, threatening to curtail the trade and economic ties, restraining the integration processes and impeding the restoration of effective cooperative ties. this observation is also true in the reverse order: international financial crises, due to the involvement of russian banks in the international financial system, generate a financial crisis already at the national level and cause the same negative consequences in the development of its economy. 2. tncs’ investment policy in the works of western researchers, there is an opinion that attracting foreign tncs to the country’s economy may entail an increase in its openness and competitiveness in the world market (unctad, 2013; fournier, j.-m., 2013; wood, s. & reynolds, j., 2014; ietto-gillies, g., 2014). consider, for example, the branches of the ukrainian economy the peculiarities of the impact of foreign tncs on the efficiency and stability of their development, and try to test the hypothesis of the positive influence of the capital of foreign tncs on the development of the economy of the host country. to date, virtually all fdi in the world economy are being carried out by transnational corporations. extensive statistics on foreign direct investment greatly facilitate the task of assessing the potential and prospects for the transnationalization of the national economy (in particular, the transitive economy of ukraine). as for the so-called new forms of expanding the activities of tncs abroad, in official statistics, they practically do not reflect, since the transnational corporations themselves are trying to veil the new technologies with which they are expanding in the global economy. in order to assess the appropriateness of attracting the capital of foreign tncs to various sectors of the ukrainian economy, as well as the prospects for the creation of ukrainian transnational corporations, it is necessary to trace the relationship of foreign direct investment with the efficiency of the country’s economy and efficiency indicators of a corporation focused on expansion abroad from a firm focused on the national economy. there are several aspects of the impact of fdi on the host economy (socio-economic, territorial, sectorial, etc.). in the study, we will identify the sectorial aspect of the impact of fdi of transnational corporations on the ukrainian economy. let us analyse the situation in the field of foreign direct investment in ukraine. the activation of fdi inflow to ukraine was observed from the late 80’s – early 90’s of the xx century. it should be noted that, in the early 90’s of the xx century in the ukrainian economy, there was a deep crisis, and consequently there was a growing need to attract additional capital, especially in the form of fdi, which are investments by foreign investors (the main of which are tncs) directly into the real sector of the economy. the dynamics of import of foreign investment in ukraine by types and countries for the period from 2011 to 2016 is presented in table 1, in fig. 1. it should be noted that despite the growth of absolute fdi, their share in the total volume of foreign investments for the period under review decreased by 20.3%, which reflects a decrease in the propensity of investors to invest in the real sector of the economy. baltic journal of economic studies 76 vol. 3, no. 4, 2017 11773 9560 10958 14258 19780 29699 3361 4260 4429 3980 4002 6781 191 31 145 451 472 401 8221 5269 6384 9827 15306 22517 0 5000 10000 15000 20000 25000 30000 35000 2011 2012 2013 2014 2015 2016 l ev el o f i nv es tm en ts years fi, mln. dol. dfіі, mln. dol. portfolio fі, mln. dol. others fi, mln.dol. fig. 1. dynamics of foreign investments in ukraine, 2011–2016 tncs on the indicators of profitability of the functioning of industries, the following indicators should be used. the main indicator of the importance of foreign direct investment for the functioning of the country’s economy is the share of accumulated foreign direct investment in gdp, calculated by formula 1: fdi fdi gdp gdp stock= , (1) where fdigdp – the share of accumulated fdi in gdp; fdistock ~ the value of accumulated fdi; gdp is the gross domestic product. the degree of participation of foreign capital in the formation of the fixed capital of enterprises in the industry is characterized by the ratio of fdi and investments in fixed assets (both in the industry and in the economy as a whole). this indicator is calculated by formula 2: fdi fdi fci fci inward= , (2) where fdifci is the share of fdi in investments in fixed assets; fdiinward – value volume of imported fdi; fci – investment in fixed assets. next, consider the dynamics of the above indicators for the period from 2011 to 2016. based on the analysis of changes in gdp and fdi, it can be noted that foreign direct investment in the economy of ukraine increased throughout the period under review but at a slower pace than the country’s gross domestic product. for example, gdp continued to grow throughout the period under review, increasing by 405.2% compared to 2011), and fdi amounted to 2016 – 1610.73 billion uah (increased by 213.3% compared to 2011) (government statistic, 2016; unctad world investment report, 2010, 2016). 4. cross-correlation analysis of a particular branch vector of fdi in this regard, the share of fdi in gdp (figure 2) from 2012 to 2013 and from 2015 to 2016 (by 9 and 20%, respectively), however, for the entire period under review, there was a trend towards an increase in the absolute value of fdi, and in 2009 its value was 0.12 units. (i.e., it increased by 100% compared to 2004). it should be noted that the share of fdi in gdp, table 1 dynamics of foreign investments in ukraine, 2011–2016 (government statistic, 2016) type of investments 2011 2012 2013 2014 2015 2016 fi, million dollars. 11773 9560 10958 14258 19780 29699 fdi, million dollars 3361 4260 4429 3980 4002 6781 portfolio fi, million dollars 191 31 145 451 472 401 other fi, million dollars 8221 5269 6384 9827 15306 22517 fdi, % of fi 28,6 44,6 40,4 27,9 20,2 22,8 according to the ukrstat, fdi in various spheres of the economy to the national economy in 2016 reached about 6.8 billion dollars (increased by 101.8% compared to 2007). in hryvnia equivalent, the growth in fdi was 213.3% for the period from 2011 to 2010. in accordance with the forecast of the ukrainian economy developed by the specialists of the ministry of economic development, fdi in ukraine will increase by 5-7% annually (government statistic, 2016). indicative is the fact that in the rating of the investment potential index calculated by unctad experts for 140 countries on the basis of 12 parameters, ukraine rose from 48 positions to 41 (in terms of exporting fdi) and from 95th to 78th place (in terms of fdi imports) for the period from 2001 to 2011. this trend can be seen as leading to improving the investment climate for foreign capital, which increases the attractiveness of the ukrainian economy for the largest suppliers of capital in the global economy – transnational corporations. nevertheless, in the ranking of countries (2016) on the actual import of fdi, ukraine occupies the 128th position, and on the actual export of fdi – 41st place (government statistic, 2016; unctad world investment report, 2010, 2016). the current situation indicates the incomplete use of the ukrainian economy’s capacity to import foreign direct investment, which is mainly due to the continued high risk of investing in ukraine. 3. methodology for determining the degree of transnationalization of the ukrainian economy to determine the degree of transnationalization of the ukrainian economy (the importance of transnational capital for them), as well as the degree of influence of baltic journal of economic studies 77 vol. 3, no. 4, 2017 despite its gradual increase, is still rather insignificant. consequently, one can make a statement about a low degree of participation of foreign direct investment in the creation of the gdp of ukraine. 0,06 0,11 0,10 0,12 0,15 0,12 0,00 0,02 0,04 0,06 0,08 0,10 0,12 0,14 0,16 2011 2012 2013 2014 2015 2016 fdi/gdp fig. 2. change in the share of accumulated fdi in the gdp of ukraine (government statistic, 2016; unctad world investment report, 2010, 2016) further, it is necessary to determine the sectors of the economy of ukraine that are in the greatest need of investments and to track whether fdi is directed to the sectors experiencing the greatest investment hunger. the basic index characterizing the need to attract investment in the industry will be considered the depreciation index of the fixed assets of the industry. we will compile a rating of the branches by the average depreciation of fixed assets (in descending order) for the period from 2011 to 2016. (table 2) (government statistic, 2016; unctad world investment report, 2010, 2016). table 2 rating of economic branches by the average degree of depreciation of fixed assets in ukraine (unctad world investment report, 2010, 2016) place in the rating the sector average depreciation of fixed assets (in %) 1 chemical and petrochemical 58,75 2 mechanical engineering and metal working 53,95 3 oil producing 53,18 4 oil refining 53,03 5 ferrous metallurgy 52,25 6 building materials industry 52,17 7 agricultural production 48,20 8 non-ferrous metallurgy 46,42 9 foodstuffs 37,97 we will analyse, in which branches of economy of ukraine direct foreign investments make the most significant contribution to the process of investing in fixed capital. for estimation, we will use the ratio of fdi to industry and fixed capital investments (fdi/fci). the dynamics of the fdi/fci indicator for the oilproducing, oil refining, chemical and petrochemical industries looks as follows. it is characteristic that for the oil-producing, chemical and petrochemical branches in general, during the period under review, an increase in the indicator occurred (by 15.4% and 450% respectively). at the same time, in the chemical and petrochemical industry, the maximum fdi/fci was reached in 2013 (0,15 units), after which there was a slight decrease for two years, and in 2016 the value of the indicator was 0,12 units (increased by 450% compared to 2011). in the oil industry in the period from 2004 to 2005, there was a sharp increase in the fdi/fci (130.8%) and a further sharp decline from 2012 to 2013 (by 833.3%), however, since 2014 there was a steady tendency towards the growth of the indicator, and its value at the end of the period under consideration amounted to 0.15 units, which is 15.4% higher than the value of 2011. in the oil refining industry during the period from 2011 to 2015, there was a sharp decline in the fdi/fci (from 0.32 to 0.01 or 968.7%), and only between 2015 and 2016 the value of the considered indicator increased by 20% and amounted to 0.05 units at the end of the period under consideration. next, consider the fdi/fci dynamics for the sectors of black, nonferrous metallurgy, and machine building (figure 3). 0,15 0,37 0,32 0,28 0,27 0,31 0,13 0,21 0,15 0,08 0,17 0,27 0,07 0,18 0,16 0,13 0,06 0,09 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 2011 2012 2013 2014 2015 2016 fd i/ fc i years ferrous metallurgy non-ferrous metallurgy mechanical engineering and metal working fig. 3. change in the fdi/fci (sector of black, nonferrous metallurgy, machine building, and metalworking) based on the analysis of graphics data, it can be noted that for all the industries under consideration as a whole for the period from 2011 to 2016, there was a tendency to increase the fdi/fsi. however, within the period under review, the change in the indicator for the three branches was not the same. so, for ferrous metallurgy from 2011 to 2012, a sharp increase in the value of fdi/ fci (by 146.7%) is observed, followed by 2012–2015, there was a gradual decrease (by 27%), and only in the period from 2015 to 2016 the indicator grew by 14.8% and in 2016 it was 0.31 units (it increased by 106.7% as compared to 2011). for non-ferrous metallurgy from 2011 to 2012, an increase in the fdi/fci (61.5%), then from 2012 to 2014, there was observed a significant reduction (by 61.9%) and, in the period from 2014 to 2016, the tendency towards its increase (but more intense – by 237.5%) was renewed. in general, for the whole period under review, the value of the indicator increased by 107.7% and amounted to 0.27 units in 2016. in the baltic journal of economic studies 78 vol. 3, no. 4, 2017 industry of mechanical engineering and metalworking in the period from 2011 to 2012, the fdi/fci increased by 157.1%, then it was reduced by 66.7% until 2015, and only between 2015 and 2016 the tendency towards the growth of the indicator has renewed (by 50%). by the end of the period under review, it was 0.09 units, i.e. increased by 28.6% compared to 2011. the dynamics of the fdi/fci indicator for the food industry, trade, and agricultural production is illustrated in fig. 4. 0,25 0,39 0,48 0,26 0,11 0,11 0,16 0,20 0,16 0,12 0,08 0,17 0,33 1,11 0,68 0,95 0,86 1,46 0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 2011 2012 2013 2014 2015 2016 fd i/ fc i years food industry agricultural production trade fig. 4. dynamics of the fdi/fci indicator for the food industry, trade, and agricultural production (government statistic, 2016; unctad world investment report, 2010, 2016) in the field of agricultural production, during the entire period under review, a slight increase (by 6.25%) was observed. however, during the period, there were significant changes. from 2011 to 2012 the fdi/fci increased by 25%, then it was reduced by 60% by 2015, and in 2016 it was quite intense (by 112.5%). trends in this indicator for the industries under consideration are fundamentally different. for trade and catering, a sharp increase in the indicator was observed (by 348.5%), and for the food industry, there was a significant (by 56%) decrease in fdi/fci over the period from 2011 to 2016 as a whole. nevertheless, in the food industry, the indicator for 2011–2013 retained a tendency for growth (by 92%), then from 2013 to 2016 decreased by 77.1%. in trade and public catering, on the contrary, each year, during the period under review, the trend of the indicator varied to the opposite, however, due to a sharp increase in the indicator in 2011–2012 and 2015–2016 (236 and 720,9% respectively), there was an intensive growth for the period from 2011 to 2016. we now turn to the analysis of trends in the fdi/ fci indicator in the transport and telecommunication sectors of the economy (figure 5). for the transport industry, during the period under review, there was a tendency for the growth of fdi/fci from 2011 to 2012 (from 0,02 to 0,05 units or by 150%), then stagnation followed by a decrease in the indicator to zero in 2015. however, from 2015 to 2016, the value of the indicator increased and amounted to 0.01 units at the end of the period under review (decreased by 50% compared to 2004). it should be noted that the transport industry has the lowest minimum fdi/ fci indicator of all industries under consideration. in the telecommunications sector, there was a sharp (by 600%) jump in the indicator from 2011 to 2013, then its sharp decline (by 74.3%) in 2013-2014 followed by a more flattening (by 44.4%) decline in 2014–2016. at the end of the period under review, the value of the indicator was 0.05 units, i.e. did not change compared to 2011 (table 3). table 3 the rating of industries by the average value of fdi/ fci (government statistic, 2016; unctad world investment report, 2010, 2016). place in the rating the sector mean value fdi/ fci (in items) 1 trade and catering 0,90 2 ferrous metallurgy 0,28 3 food 0,27 4 non-ferrous metallurgy 0,17 5 agricultural production 0,15 6 telecommunications 0,13 8 machine-building and metal working 0,11 9 oil refining 0,10 10 chemical and petrochemical 0,09 11 construction materials industry 0,06 12 transport 0,02 nevertheless, from the sectors, in which there is a close relationship between fdi and the results of the industry, only in the ferrous metallurgy foreign direct investment occupies a significant share in fixed capital investments. therefore, on the basis of the revealed features of the investment of capital of foreign tncs in the sector of the ukrainian economy, it can be concluded that there are divergences in direct foreign investment and development needs of the ukrainian economy sectors. only in some cases, foreign direct investment can be considered as an incentive for the successful functioning and development of the industry. 0,02 0,05 0,05 0,02 0 0,01 0,05 0,2 0,35 0,09 0,05 0,05 0 0,1 0,2 0,3 0,4 2011 2012 2013 2014 2015 2016 fd i/ fc i years transport telecommunication fig. 5. dynamics of the fdi/fci indicator in the transport and telecommunication sectors of the economy (government statistic, 2016; unctad world investment report, 2010, 2016) baltic journal of economic studies 79 vol. 3, no. 4, 2017 it should be emphasized that the admission of foreign capital to the ukrainian economy and the creation of various types of enterprises in its territory with its participation can be regarded as one of the important steps towards the introduction of international production into the practice of economic relations of ukraine with foreign partners, i.e. as the transnationalization of the subjects of its economy. 5. findings in ukraine, as a result of economic and political reforms of the late 80’s and early 90’s, irreversible geopolitical changes took place. this has led in all countries to a deep economic crisis, which continues in some of them to this day. the main features of the crisis were: the fall in gdp and gross industrial output (gdp), hyperinflation, unemployment, the negative balance of payment and trade balances, etc. only by 1997, ukraine was able to reach the positive growth rates of gdp and runway and somewhat reduce inflation, with the actual increase in unemployment and a significant decrease in the positive balance of foreign trade balance. however, even this insignificant economic growth prevailed in 1998 and replaced by a sharp decline in production in all sectors and the deterioration of other macroeconomic indicators. however, from the year of 2000, the positive dynamics of the main macroeconomic indicators of the country was observed. the global financial crisis of 2008 has had a similar impact on ukraine’s national economic system. further transnationalization of the domestic economy is an objective necessity. its development is associated with the evolution of the forms of introduction and activity of transnational capital into ukrainian markets according to the general pattern characteristic of the world economy as a whole: from the placement of its own subsidiaries in ukraine to establish branches and international joint ventures. however, when joint ventures in countries with developed market economies are most often involved, partners with comparable potential, which are international in the field of activity, and each of which can make the same rather than complementary contribution, in ukraine the situation is different. it, as a partner, most often makes an additional contribution. and this means the need for the ukrainian economy to develop its own economic entities adequate to large foreign transnational corporations. 6. conclusions in general, based on the analysis of the situation in the field of foreign direct investment (most of which is carried out by transnational corporations), a number of fundamental conclusions can be drawn about assumptions about the nature of the impact of transnational corporations on the economy of the host country. further transnationalization of the domestic economy is an objective necessity. its development is associated with the evolution of forms of introduction and activity of transnational capital into the ukrainian markets according to the general pattern of the characteristic of the world economy as a whole: from the placement of its own subsidiaries in ukraine to establish branches and international joint ventures. however, when joint ventures in countries with developed market economies are the most often involved, partners with comparable potential, which are in the field of activity, and each of which can be the same rather than complementary contribution. it, as a partner, most often makes an additional contribution to developing its own economic entities. in general, based on the analysis of the situation in the field of foreign direct investment (most of which is carried out by transnational corporations), and a number of fundamental conclusions can be drawn about assumptions about the nature of the impact of transnational corporations on the economy of the host country. first, throughout the period under review, there was an intensive growth of foreign investment in the ukrainian economy. but at the same time, the increase in foreign direct investment was less intensive (their share in the total volume of foreign investments was somewhat reduced), which illustrates the insufficient attractiveness of the real sector of the ukrainian economy for the capital of foreign transnational corporations. secondly, the share of accumulated fdi in ukraine’s gdp, despite the tendency to increase, remains insignificant, which allows us to speak of a low degree of participation of foreign capital in the process of creating the country’s gdp. third, industries most in need of direct investment are engineering and metalworking, chemical and petrochemical, oil refining, ferrous metallurgy, construction materials industry, and agricultural production. in the listed branches, the average level of depreciation of fixed assets (for the period of 2011– 2016) is more than 50%. fourth, the ratio of foreign direct investment to fixed investment is the lowest in the following sectors: chemical and petrochemical, construction materials, and transport (less than 10%). consequently, in the above industries, the capital of foreign tncs plays an insignificant role. fifth, trade and public catering, ferrous metallurgy, food industry, and non-ferrous metallurgy can be identified as sectors of the ukrainian economy, in which the maximum values of the ratio of fdi to gross fixed capital formation are observed. consequently, it can be concluded that foreign direct investment is mainly directed to commodity-producing industries, as well as to industries, in which the rate of return is the highest and the payback period is minimal. baltic journal of economic studies 80 vol. 3, no. 4, 2017 thus, expansion of foreign tncs into the ukrainian economy is observed, which did not become a tool for positive changes and a mechanism that ensures the attraction of sufficient economic resources required by the national economy for the sustainable development. directions of capital investments of foreign transnational corporations practically do not stimulate a deep modernization of the basic structures of the national economy of ukraine but are aimed only at obtaining the maximum rate of profit and achieving the shortest payback periods, irrespective of the impact on the branches of the economy of the host country. references: government statistic (2016). retrieved from www.ukrstat.gov.ua (in ukr.). monetary fund – imf country report (2016). ukraine: first review under the extended arrangement. retrieved from: https://www.imf.org/external/pubs/ft/scr/2016/cr15218.pdf3 (in eng.). samaeva, u. (2015). reality of apk: in the closed corner of raw material curse. newspaper “week’s mirror”. (in ukr.). united nations conference on trade and development (unctad) (2013). world investment report 2013. global value chains: investment and trade for development, geneva: united nations. 12. retrieved from: http:// vasilievaa.narod.ru/ptpu/10_4_99.htm (in eng.). makogon, u.v. (2011). transformation of transnational process in the conditions of increasing indefinite of global economic area: monograph. in u.v. makogon (ed.). donetsk: niss (in ukr.). bolgarova, n.k. & panevnyk, t.m. (2013). transnational process in ukrainian economics. bussinesinform, 12, 33-38 (in ukr.). fournier, j.-m. (2013). the negative effect of regulatory divergence on foreign direct investment. oecd economics department working papers no. 1268. retrieved from: http://dx.doi.org/10.1787/5jrqgvg0dw27-en (in eng.). wood, s. & reynolds, j. (2014). establishing territorial embeddedness within retail transnational corporation (tnc) expansion: the contribution of store development departments. regional studies, 48 (8), pp. 13711390 (in eng.). ietto-gillies, g. (2014). the theory of the transnational corporation at 50+’. economic thought, 3.2, pp. 38-57. retrieved from: http://www.worldeconomicsassociation.org/files/journals/economicthought/wea-et-3-2ietto-gillies.pdf (in eng.). hudym k.m. (2014). priority forms and directions of functioning of the modern international business. economy of ukraine, 6, 77-85 (in ukr.). hudym k.m. (2014). transnationalization as a factor of globalization. visnik knteu, 4, 33-44 (in ukr.). hudym k.m. (2015). modern models of integration of tnc into the agrarian market of the eastern regions of the world. materials of the international science and practice conference “strategy of countries’ economic development in globalization”. dnepropetrovsk, 1, 45-46 (in ukr.). official site of “danone” (2014). danone official journal 3. retrieved from: http://danone.ua/files/issues/ upload/0/3/danews514.pdf (in ukr.). official site of “nestle” (2015). retrieved from: http://www.nestle.ua/aboutus/nestleinukraine (in ukr.). williams, c. & soo hee, l. (2016). knowledge flows in the emerging market mnc: the role of subsidiary hrm practices in korean mncs. international business review, 233–243pp. retrieved from: http://www.sciencedirect. com/science/article/pii/s0969593114001486 (in eng.). hammoud, mohamad s. & nash, douglas p. (2014). what corporations do with foresight european journal of futures research. retrieved from: http://link.springer.com/article/10.1007/s40309-014-0042-9 (in eng.). mitiai, o. & tychyna, p. & lagodiienko, v. (2013). competitiveness of agriculture enterprises as the main factor of sustainable development in agricultural sphere economic annals-xxi. retrieved from: http://soskin.info/ userfiles/file/economic-annals-pdf/s155-0013(13)059.pdf (in eng.). unctad world investment report 2016. retrieved from: www.unctad.org/wir2016. unctad world investment report 2010. retrieved from: www.unctad.org/wir2010. official site of the nbu. retrieved from: https://www.bank.gov.ua/ катерина жиленко инвестиционная и производственно-финансовая деятельность тнк в условиях глобализации аннотация. целью работы является выявление современных тенденций инвестиционной политики тнк. исследование степени отраслевой вовлеченности в глобализационные процессы. математический, аналитический и абстрактно-логический методы позволили проанализировать динамику, тенденции и приоритеты прямого иностранного инвестирования, осуществляемого тнк. методика. методологическую базу исследования составили научные труды отечественных и зарубежных ученых и ведущих специалистов, baltic journal of economic studies 81 vol. 3, no. 4, 2017 статистические и аналитические материалы международных организаций. результаты исследования свидетельствуют о том, что отсутствует прямая зависимость между отраслевыми интересами в привлечении пии и реальными тенденциями их привлечения. проанализировали, в каких из отраслей экономики украины прямые иностранные инвестиции вносят наиболее значительный вклад в процесс инвестирования в основной капитал. для оценки использовали показатели соотношения пии в отрасль и инвестиций в основной капитал (fdi/fсi). практическое значение. можно сделать вывод, что без привлечения в украинскую экономику иностранного капитала достаточно сложно достичь высоких значений экономического роста и развития. с учетом сложной экономической и долговой ситуации наилучшими для страны являются частные прямые иностранные инвестиции, главным источником которых, являются транснациональные корпорации. возможность активизации привлечения прямых иностранных инвестиций в украину полностью реальна, поскольку в результате экономических и политических изменений здесь создана более благоприятная, чем до реформ, ситуация для внедрения в ее экономику крупных иностранных хозяйствующих субъектов. одновременно в украине сформировались собственные большие хозяйственные структуры: концерны, консорциумы, ассоциации, межотраслевые объединения, финансово-промышленные группы (фпг). значение/ригинальность. невозможно не отметить, что украина отстает в проведении рыночных реформ от стран центральной и восточной европы (цве), от китая. однако, тенденции, которые проявились в вышеупомянутых странах, относительно привлечения и использования прямых иностранных инвестиций выявляются и в украине. прежде всего, это касается создания благоприятного инвестиционного климата, наличие и степень благоприятности которого характеризуют состояние экономики принимающей страны в целом, а также является индикатором эффективности рыночных реформ. baltic journal of economic studies 289 vol. 3, no. 5, 2017 corresponding author: 1 department of finance and economic security, dnipropetrovsk national university of railway transport named after academician v. lazaryan. e-mail: vik2005vik@meta.ua 2 department of finance and economic security, dnipropetrovsk national university of railway transport named after academician v. lazaryan. e-mail: g.liudmila22@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-289-293 the institutional content of the human capital of the national economy viktoriia kolomiiets1, liudmila golovkova2 dnipropetrovsk national university of railway transport named after academician v. lazaryan, ukraine abstract. in the current conditions of transformation of traditional institutes and institutions and formation of a new institutional state, the institutional content of human capital as the most valuable resource of the economy changes. along with the existing research, the transformation of the old institutional system and the emergence of new institutes and institutions require an analysis of the updated institutional content of the human capital of the national economy. the purpose of the paper  – to reveal the institutional content of the human capital of the national economy. in the process of work, the following tasks are set and solved: to study economic and institutional conditions of functioning of human capital, to determine the material content of human capital in the context of institutionalism and the process of institutionalization of human capital. methodology. a methodological basis is a dialectical approach. to study the institutional content of human capital, abstract-logical and systemstructural methods are used. results. economic conditions for the formation and functioning of human capital are determined by the instability of the economic situation in ukraine caused by the fall in the gross domestic product, the inappropriate growth of prices and wages, inflation, and military-political confrontation. institutional conditions of ukraine accumulate the following components: those that remained from the previous regimes; transformed components, imported components. the large financial capital, business structures, shadow economy, public sector of the country interact on a fundamentally different institutional basis. the main factor characterizing the institutional development of our country is the uncertainty of limits of institutionalization. the essential institutional conditions for the functioning of human capital are also the absence of a positive or negative experience of existence, coexistence of certain institutions in a certain economy of the country. the institutional content of the human capital of the national economy depends directly on the established institutional system of a particular country, its development. human capital is the embodiment of the individual’s ability to generate income, the amount of abilities, knowledge, qualifications, and skills of an individual employee. human capital can be defined as a synthesis of components of human capital in the manufacturing sector, the research sector, in the education sector. human capital is limited in its actions by the institutional structure of society. the institutional environment of the human capital of the national economy is made of determined rules, norms, and institutions. the close interaction of components of institutional environment must not only occur for the development and efficient functioning of the human capital of the national economy, but its existence is determined by the natural existence of the institutional environment. for the national economy of the country, institutional influence manifests itself as a result of the action of a certain institutional system of human capital and its actual ability to produce a gross product. the unpredictability of human behaviour and actions, which is primarily related to its psychology, causes considerable difficulties in the process of institutionalization of human capital. therefore, the institutionalization of the environment threatens opportunism on the part of human capital. practical implications. the theoretical research should be the basis for the formation of the state policy in the field of human capital management of the national economy, development of a strategy for human capital development, the basis for further research. value/originality. the theoretical study is performed personally by the authors of the scientific article. key words: institutes, institutions, institutional content, human capital, national economy. jel classification: е02, е02, е14, е24, е00 baltic journal of economic studies 290 vol. 3, no. 5, 2017 1. introduction the dynamic development of human capital in the context of the formation of an updated institutional system calls for the consideration of the institutional content of the human capital of the national economy. human capital is a solid foundation, the basis for state development – social, economic, and political. it is the human capital that the position of the state in all types of world markets (political, economic) depends on, as well as the level of development of the country itself. the innovative vector of ukraine is aimed at achieving stable high economic indicators through the use of human capital and for human capital, for a specific individual (radyeva, 2013). the concept of “human capital” in ukraine is considered at various angles of various interpretations. institutional theory has become basic in solving a number of issues of the national economy. in the current conditions of the transformation of traditional institutes and institutions, the formation of a new institutional state becomes an urgent study of the institutional content of human capital. the direction of classical institutionalism was initiated in the writings of t. veblen, developed by j. commons, w. mitchell, j. galbraith. the founders of the modern theory of institutionalism are r . coase, d. north. among the national scholars, a. tkach, a. chukhno, and v. yakubenko thoroughly investigate various aspects of the institutional theory. such ukrainian researchers as d. bohynia, o. bratslavska, v. heiets, o. hrishnova, zh. derii, e. libanova, m. semykina devoted their works to the study of human capital. along with the existing research, the transformation of the old institutional system and the emergence of new institutes and institutions require an analysis of the updated institutional content of the human capital of the national economy. the purpose of the paper – to reveal the institutional content of the human capital of the national economy. in the process of work, the following tasks are set and solved: to study economic and institutional conditions of functioning of human capital, to determine the content of human capital in the context of institutionalism and the process of institutionalization of human capital. methods and methodology of the study. a  methodological basis is a dialectical approach. to study the institutional content of the human capital of the national economy, abstract-logical and systemstructural methods are used. 2. economic conditions for the functioning of human capital the need to define the institutional content of human capital is primarily determined by the existing conditions for the formation of a new human capital of ukraine. transformation of the whole institutional system of the state caused a change in the content of all its components. human capital, when interpreted as a factor in the economic growth of the national economy, must be in constant development. but the political situation in the country caused a negative dynamics of indicators that traditionally determine the development of human capital of the national economy. the economic situation in ukraine is ambiguous. on the one hand, there is a decrease in essential conditions for the functioning of the human capital of the national economy, as highlighted by leading researchers (amosha, 2017). on the other hand, absolute economic indicators are rising. thus, for the last three years (2014–2016), the gross domestic product has grown by 49.6% (verner, 2017). but in the period of 2014–2017, the hryvnia’s depreciation against the dollar was 3.3 times (the rate of the national bank of ukraine as of 09.01.2014 – 799.3 uah for 100 usd, on 02.10.2017 – 2657.8 uah for 100 usd) (ministerstvo finansov ukrainy, 2017). therefore, the growth of the gross domestic product during this period mainly results from rising prices, rather than physical volumes of production. this is evidenced by the negative dynamics of indices of the physical volume of the gross domestic product (from 104.1 in 2010 to 90.2 in 2015) (derzhavna sluzhba statystyky ukrajiny, 2017) and the growth of the consumer price index (124.9 in 2014, 143.3 in 2015, 112.4 in 2016, 112.5 in januarynovember, 2017) (minfin ukrainy, 2017). the general consumer price index for the period from 01.01.2014 to 01.10.2017 amounted to 221.7. the economically active population of ukraine for six years has shrunk by 16.1% from 20.9 million people in 2010 to 18.0 million people in 2016 (derzhavna sluzhba statystyky ukrajiny, 2017). the pace of decline in the employed population of working age is slightly lower – 1.122% (derzhavna sluzhba statystyky ukrajiny, 2017). the state statistics service defines the population of ukraine as of 01.01.2017 as 42.6 million people, as of 01.01.2000, the number of 49.4 million people is declared. thus, there is a reduction in the number of taxpayers. the rate of growth of the average monthly salary from 01.01.2014 to 01.01.2017 was 1.5 – from 3480.00 uah in 2014 to 5183.00 uah in 2016 (verner, 2017). according to official statistics, the unemployment rate of the able-bodied population remains stable high  – 10.0% in the first half of 2017 (verner, 2017). the dollar exchange rate as of 01.10.2017 amounted to 2657.8 uah per 100 usd (at the rate of the national bank of ukraine) (ministerstvo finansov ukrainy, 2017). in the state budget of ukraine for 2018, the dollar is set at 3010.0 uah per 100 usd (minfin, 2017). thus, the economic conditions of the formation and functioning of human capital are conditioned by the instability of the economic situation in ukraine baltic journal of economic studies 291 vol. 3, no. 5, 2017 caused by the fall of the gross domestic product, a 2.2-fold increase in prices, with an increase in the average monthly wage by only 1.5 times, inflation, and the available military-political confrontation. ukraine’s economy is characterized by volatility and uncertainty. 3. institutional conditions for the functioning of human capital the functioning of human capital is limited to existing norms and rules, is subject to certain legislative acts, takes place within the framework of certain organizations and, thus, is institutionalized. the institutional system of ukraine is determined by the following components: those remaining from the previous regimes; transformed components, imported components. in ukraine, there is currently a change, transformation of some institutes into others. ineffective informal institutions are superseded by legitimate norms that transform the behaviour of economic actors. this contributes to the expansion of the institutional field, the achievement of the homogeneity of institutions, the synchronization of their functioning, institutionalization of interaction mechanisms between business and the state (tkach, 2009). there is an import of institutions. according to researchers, the credibility of market institutions imported from developed countries is low (tkach, 2009). the use of these institutes in ukraine, which has its own specific features, contributes to the development of a large-scale shadow component in the economy of ukraine. the current development of society is characterized by a low level of respect for business to power and the failure of authorities to consider the economic contribution of business to the country’s economy. at the same time, the basic institute of private property quickly strengthened and its role in society grew. components of the economic system of ukraine (large financial capital, business structures, shadow economy, public sector) interact with each other in fundamentally different institutional frameworks. the level of public confidence in the power and the state as effective public institutions is falling. at the same time, new for ukraine non-formal institutes (professional associations, public associations, political parties) spread. the main fact that characterizes the institutional development of our country is the uncertainty of limits of institutionalization, which means uncertain temporal and spatial factors, limitedness or unlimitedness of legal framework, the degree of necessary formalization of existing and future institutions, limitedness or permissiveness of their interaction, the mix of economic relations and many other aspects. essential institutional conditions for the functioning of human capital are also the absence of a positive or negative experience of existence and coexistence of certain institutions in a certain economy of a country, which would give grounds for the analysis and expediency of their application. 4. meaning of human capital in the context of institutionalism the institutional content of the human capital of the national economy directly depends on the established institutional system of a particular country, its development. the degree of development of human capital of the national economy always reflects the development of the country in general and, therefore, it is important to make a correlation between the institutional content of human capital and the degree of development of the institutional system of the country. human capital is the embodiment of the individual’s ability to generate income, the amount of abilities, knowledge, qualifications, and skills of an individual employee. like physical capital, human capital can accumulate. it is necessary to depreciate it taking into account that at a certain life stage it will cease to exist or completely or partially lose its own qualities (due to mortality, disqualification). the education sector is an important element of the institutional system that produces human capital in relation to a defined productivity, the proportion of the time of education from the total time of each individual and the average level of human capital that is at the moment. human capital can be defined as a synthesis of components of human capital in the manufacturing sector, human capital in the research sector, human capital in the education sector. the institutional system is characterized by the combination and interconnected functioning of all institutes and institutions. the formation of the human capital of the national economy is directly related to such institutions as tradition and religion, customs and education, family and ideology, mentality and culture, formal laws and penalties, system and level of education, professional activity, and motivation. indirect impact on human capital is provided by such basic economic institutions as private property, competition, transaction costs, contractual relations, and the market. in developed countries, the defining institutions that form the hc are a set of social institutions  – civil society, national interests, which integrate basic economic institutions. the institutional content of human capital is currently being shaped by a number of factors such as the migration of skilled labour, falling skills levels, the active introduction of revolutionary technologies in the manufacturing and services sectors, the projected demographic crisis in the country, the low level of funding for education and health security, lower life expectancy in the country, falling education indexes and living standards. baltic journal of economic studies 292 vol. 3, no. 5, 2017 in order to develop and effectively operate the human capital of the national economy, all elements and components of the institutional system must actively interact. the necessity of active interaction of institutes, mechanisms of realization of rules and norms was pointed by d. north (nort, 2000). it is the intensity of their interaction that explains the revolutionary development of economies of some countries and the protracted gradual path of the backward countries. the inertia of institutional characteristics impedes any changes in the country’s economy and, as a consequence, in the development of the institutionalization of human capital of the national economy. in the long run, economic growth is directly proportional to the expansion of institutions and is inversely proportional to the informal sphere, that is, the more effective the formal institutions and the more satisfied society’s demand for them, the higher the expected and projected economic growth... (tkach, 2009). human capital is limited in its actions by the institutional structure of society. the problem  – overcoming the violation of these institutional constraints, which manifests itself in opportunism. the institutional environment in the institutional theory is considered as a set of fundamental social, political, legal, and economic rules that define the framework for human behaviour (tkach, 2007). by definition, this category is related to a person and limits the scope of human behaviour. the institutional environment of the human capital of the national economy consists of rules (ethical, moral, social, public), norms (legal, legally established), institutions. the leading role in the institutional environment of human capital has always been played by such established institutions as the state, healthcare system, education system, labour. but not less important elements of the institutional environment are informal institutions of the family, education, traditions, mentality and culture, religion. the objectives of the institutional environment are realized through a variety of institutional structures, institutions (organizations). the close interaction of components of the institutional environment must not only occur for the development and efficient functioning of the human capital of the national economy, but its existence is determined by the natural existence of the institutional environment. the institutional environment in its nature is a natural formation based on the example of the family, as opposed to artificial – for example, enterprise. for the national economy of the country, the institutional impact manifests itself as a human capital formed under the influence of a certain institutional system and its actual ability to produce a gross product and is effectively (or ineffectively) used to manage human capital. the impact of human capital on the environment is ambiguous. this is determined by peculiarities of human capital. since human capital is inseparable from a person and belongs to a person, it becomes unique at the personal level of consideration of human capital. at the macroand mega-levels of consideration, human capital also becomes unique as a combination of capital carriers with unique properties. however, we would like to emphasize that the negative feature of human capital  – the impossibility of continuity of this type of capital. researchers note the ability of human capital to develop and accumulate (ghryshnova, 2014). note that the stage of accumulation is inevitably followed by the stage of destruction. 5. institutionalization of human capital according to d. north, the institutionalization of the economy (in general) is a process of formation of formal institutions that limit the behaviour of economic actors and ... agreements, rules of the game, stereotypes of behaviour, traditions... (nort, 2000). the main factor that is the basis for human capital – a person with its skills and abilities. the unpredictability of human behaviour and actions, which is primarily related to its psychology, causes considerable difficulties in the process of institutionalization of human capital. therefore, the formation of new and improvement of existing institutions related to human capital always raise questions about the effectiveness of their application. according to some researchers, only with the presence of a corresponding set of institutes human production capabilities become capital (dolgopolova, 2002). under the influence of institutionalization, the object of influence  – human capital  – is changing. in turn, the consequence of institutionalization is the change and new quality of institutes, institutions, their interactions, change of the institutional environment. transformation and replacement of the institutional environment are possible in evolutionary and revolutionary ways. human capital in the economic system acts as an initiative subject, which can directly affect all economic, political, institutional processes. therefore, the institutionalization of the environment threatens opportunism on the part of human capital, without which, as a rule, no change is made. thus, limits of institutionalization, possible positive or negative effects require further in-depth studies, as it is about the most valuable resource of the national economy of ukraine – human capital. the degree of development of the institutional environment and needs for its further institutionalization need to be analysed. 6. conclusions 1. human capital is a solid foundation, the basis for state development – social, economic, and political. 2. economic conditions for the formation and functioning of human capital are determined by the instability of the economic situation in ukraine baltic journal of economic studies 293 vol. 3, no. 5, 2017 caused by the fall in the gross domestic product, the inappropriate growth of prices and wages, inflation, and military-political confrontation. the ukrainian economy is characterized by volatility and uncertainty. 3. institutional conditions for the formation of human capital have the following features. the institutional system of ukraine is determined by the following components: those that remained from the previous regimes; transformed components; imported components. the large financial capital, business structures, shadow economy, public sector of the country interact on a fundamentally different institutional basis. the institutional development of ukraine is characterized by uncertainty in the limits of institutionalization. 4. the institutional content of the human capital of the national economy depends directly on the existing institutional system of the country, its development. 5. human capital is the embodiment of the individual’s ability to generate income, the amount of abilities, knowledge, qualifications, and skills of an individual employee. human capital can be defined as a synthesis of components of human capital in the productive sector, human capital in the research sector, human capital in the education sector. 6. human capital is limited in its actions by the institutional structure of society. the overcoming, the violation of these institutional constraints, manifested in opportunism, becomes a significant problem of institutionalization of society. 7. the institutional environment of the human capital of the national economy is made of determined rules, norms, and institutions. for the national economy of the country, institutional influence manifests itself as a result of the action of a certain institutional system of human capital and its actual ability to produce a gross product. 8. the unpredictability of human behaviour and actions, which is primarily related to its psychology, causes considerable difficulties in the process of institutionalization of human capital. therefore, the institutionalization of the environment threatens opportunism on the part of human capital, without which, as a rule, no change is made. thus, limits of institutionalization, possible positive or negative effects require further in-depth studies, as it is about the most valuable resource of the national economy of ukraine – human capital. the degree of development of the institutional environment and needs for its further institutionalization need to be analysed. references: amosha,  o.  i., bulyeyev,  i.  p., zemlyankin,  a.  i., zbarazka,  l.  o., kharazishvili,  y.  m. 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[the institutionalization of the economy is a synergetic paradox]. institutional vector of economic development, vol. 2 (1), pp. 7–12. verner,  i.  j. (ed.) (2017). statystychnyj shhorichnyk ukrajiny za 2016 rik [the statistician of ukraine in 2016]. derzhavna sluzhba statystyky ukrajiny [state statistics service of ukraine] (elektronic jornal). retrieved from: www.ukrstat.gov.ua (accessed 01 november 2017). baltic journal of economic studies 162 vol. 3, no. 5, 2017 corresponding author: 1 department of economic theory and competition policy, kyiv national university of trade and economics. e-mail: nnnasta@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-162-169 investment climate evaluation as an effective detection method for negative impacts on country’s development anastasiya ilyina1 kyiv national university of trade and economics, ukraine abstract. the purpose of the paper is to determine the procedure for calculating the investment climate favourableness and, based on its findings, study the nature of the investment climate in ukraine. methodology. in the paper, there were used the following methods: the dialectical method (understanding the investment process and its characteristics as the investment climate components); scientific abstraction, theoretical and empirical analysis (characteristics of the investment climate components and definition of their interconnection based on the corresponding scheme); method of modelling (guiding the formulas for calculating the main investment climate components based on generalizing the theoretical research studies of ukrainian and foreign researchers); method of system analysis (defining issues of the investment climate favourableness in the country as an integral economic system on the example of ukraine); statistical methods (grouping, comparison, dynamic series), used in the study of dynamics of main indicators of economic and social development of ukraine, on the basis of which the dynamics of the calculated ratio of the investment climate favourableness in ukraine was analysed. results of the research study showed that the investment climate is determined on the basis of the ratio of the investment supply and investment demand. the supply of investment resources is an attractive factor for both national and foreign investors in one or another branch of economy, determining the level of investment risks, on which depends the socio-political and economic security of investors. at the same time, the investment demand characterizes the investment intensity level, which reflects the growth rate of investment inflows into one or another branch of the country’s economy. an excess of the investment demand over investment supply in the country reflects the unfavourable investment climate of the country due to the lack of incentives for investment recipients to implement investment projects, and also unregulated interests between the subjects of investment process (state, potential investors, and recipients of investments). in ukraine during the period from 2012 to 2016, the investment climate was unfavourable, as the ratio of the investment climate favourableness was significantly lower than the threshold. practical implications. the calculation of the country’s investment climate favourableness is necessary to be made in order to reflect the effective use of indicators of economic and social development by the state. it is to say the efficient allocation and distribution of the gross domestic product, based on indicators of the amount of wages of hired workers and amount of net taxes on production and imports. according to the appropriate situation, the state should develop a budget plan for the next year with the benchmark for allocating budget expenditures in some sector and providing investment support. in ukraine, the improvement of the investment climate requires the introduction of changes in tax legislation regarding the privileges for certain types of investors and innovation-active enterprises, and also provisions defining the transparency of the investment process. value/originality. the ratio of the investment climate favourableness (ric) should be at least 0.1, where ric ≥ 0.1 means that the investment climate is favourable, ric ≥ 0.1 – neutral, ric ≤ 0.1 – unfavourable, considering that the threshold of the investment attractiveness level (lia) is 10%, investment intensity level (lii) – 100%. key words: investment climate, investment process, investment attractiveness, investment intensity, tax burden, economic and social development. jel classification: e22, h21, o11 baltic journal of economic studies 163 vol. 3, no. 5, 2017 1. introduction in recent years, the economic crisis in ukraine has had a fairly negative impact on the investment potential of the national economy and almost halted the activities of innovation-active business entities. despite the fact that in ukraine the amount of invested funds in the certain branches of the economy is constantly increased, the innovation infrastructure remains undeveloped, the process of job losses is accelerated, and standard of living is decreased. it means that the environment of the investment process of the country has a number of negative factors creating risks for potential investors to incur losses from investing in the implementation of investment projects, especially with long-term and innovation character. due to the factors slowing down the pace of the implementation of investment projects, in particular, a high level of budget deficit, high tax burden, absence of tax privileges, which also cause enterprises to be unable to effectively carry out innovation activities by slowing down the process of acquiring new fixed assets, the attractiveness of ukrainian economy for potential investors is still at a low level. all of this creates a situation where the subjects of investment process have a disagreement on the execution of investment contracts, resulting in a conflict of interests between them, which complicates the process of investment projects implementation and causes unfavourable climate for both investors and recipients of investments. some ukrainian and foreign researchers, in particular, a. damodaran (2012) proving the interconnection between the investment attractiveness and investment intensity, b. erlen and a.j. isaak (2015), studying the investment intensity as one of the key factors in the efficiency of investment, y.v. nefyodova (2010), studying the direct relationship between the investment process and investment climate, l.s. valinurova, o.b.  kazakova, and e.i. iskhakova (2012), considering the components of investment attractiveness and some others did not leave aside the issue of improving the investment climate. however, the question of resolving conflicts of interests between the subjects of the investment process in order to improve the investment climate in ukraine remained open. thus, the issue related to the investment climate remains relevant and requires further research. 2. characteristics of investment process elements forming investment climate the investment climate is a complex of objective economic, social, political, and legal conditions for implementing the investment process at all levels of management on the principles of effectiveness to raise the investment attractiveness of the economic system, processes and economic life’s phenomena of which can take place both within a separate region, industry and/ or enterprise, and country as a whole (fig. 1). so, depending on the internal (development of the competitive environment of entrepreneurship; level of involvement of the population in the investment process; relations between the state and regional investment climate investment attractiveness investment intensity past current future investment potential sociopolitical and economic security of investors investment risks high average low favourable neutral unfavourable investment environment internal external characteristics of investment process elements demand for investment resources supply of investment resources investment volumes with the state participation with the participation on non-state investors fig. 1. interconnection of content elements of investment process as the investment climate components source: the author’s research on the basis of (grynyova, koyuda, lepeyko & koyuda, 2008; gulyaeva & ryabchenko, 2012, p. 23; nefyodova, 2010; valinurova, kazakova & iskhakova, 2012, p. 16) baltic journal of economic studies 164 vol. 3, no. 5, 2017 authorities; attitude of authorities to foreign investors; access to foreign currency loan and so on) and external (wars, bioclimatic conditions, fires, accidents, building collapses and so on) factors of influence on the investment process, the investment climate forms the investment environment, which is divided into internal, dependent on the state and can be changed by it, and external, independent of the state. depending on the situation in the investment environment, the investment climate is divided into: favourable, characterized by a low level of risks of the losses from investment activities (investment risks); neutral, when the level of investment risks is moderate, and unfavourable because of the high level of investment risks. in turn, the investment environment forms the investment attractiveness, which is determined by the supply of investment resources for potential investors and includes a number of indicators of the economic and social development of the country, namely: gross domestic product and its components, consolidated budget deficit, capital investments, including investments at the expense of the state and local budgets. so, the investment attractiveness is a collection of objective features, properties, facilities, and economic opportunities that determine the effective demand for investments in it, i.e. investment intensity. substantially impacting on the investment intensity, which also depends on the state’s regulation of investment environment, the investment attractiveness reflects the assessment of subjects of the investment process, on which depend the socio-political and economic security of investors, and level of their capacity, i.e. investment potential. the investment potential is a material basis for ensuring the economic growth and social development, indicators of which reflect the sufficient level of available investment resources provided for both investment in high-yield objects and covering unforeseen losses from investment activities, the probability of occurrence of which is determined by the level of investment risks. under such conditions, the investment potential is characterized by the economic possibility to provide maximum yield or minimum risk level for a given period of investment (damodaran, 2012; gulyaeva & ryabchenko, 2012; nefyodova, 2010). the investment intensity determines the demand for investment resources and is characterized by the intensity of investments for a certain period, which depends on the investment volumes and its efficiency. as a rule, it is divided into three levels: high level, when the growth rate of investments is higher than normal; average level, which reflects the unchangeable growth rate of investments in two periods, and low level, which is identified as a decrease of investments (grynyova, koyuda, lepeyko & koyuda, 2008; mayo, 2014; nefyodova, 2010). also, the investment intensity is graded in three components, namely: past intensity, which characterizes the intensity of previously implemented investments; current intensity, which defines the pace of economic development and provides an opportunity to predict additional volumes of investments; future intensity orienting the planning of the whole investment process (valinurova, kazakova & iskhakova, 2012). 3. a mathematical formalization of the investment climate components considering the research study of a. damodaran (2012) that the investment climate is reflected by the ratio of the investment supply to investment demand, table 1 formulas of calculation of investment climate indicators component formula of calculation investment attractiveness (investment supply) l gdp bd w t i bi ia pi c = − − − − ∗ ≥( ( ) ) %2 100 10 where: lia – the level of the investment attractiveness of the country, %; gdp – gross domestic product, c. u.; bd – budget deficit volume, c. u.; w – the amount of wages of hired workers, c. u.; tpi – net taxes on production and imports, c. u.; (i-bi)c – the result of the subtraction between total and budget investments of the country, c. u. investment intensity (investment demand) l i i ii i i = ∗ ≥ −1 100 100% where: lii – the level of the investment intensity in the country, %; іi – the amount of total investments in the current period, c. u.; і i-1 – the amount of total investments in the previous period, c. u. investment climate r l l ic ia ii = ≥ 0 1. where: ric – the ratio of the investment climate favourableness in the country; lia – the level of the investment attractiveness of the country, %; lii – the level of the investment intensity in the country, %. source: the author’s research on the basis of (damodaran, 2012; erlen & isaak, 2015, p. 159, valinurova, kazakova & iskhakova, 2012) baltic journal of economic studies 165 vol. 3, no. 5, 2017 let us consider the procedure for calculating these components in table 1. so, proceeding from the fact that l.s. valinurova, o.b. kazakova, and e.i. iskhakova (2012) came to the conclusion that the threshold of the level of the investment attractiveness of the country, region, industry and/or enterprise should be at least 10.0%, and b. erlen and a.j. isaak (2015) established that the threshold of the level of the growth rate of investments in the appropriate economic system reflecting the investment intensity should be not less than standard balanced ratio (100.0%), the threshold of the ratio of the investment climate favourableness as the ratio of the threshold of the investment attractiveness level to the threshold of the investment intensity level should be at least 0.1. the ratio less than 0.1 may indicate the low ability of the economic system to implement investment projects, the factors of which are usually connected with unregulated interests between subjects of the investment process and, consequently, high level of investment risks. 4. the character of interconnections between investment attractiveness and investment intensity taking into account the research studies of a.  damodaran (2012), b. erlen and a.j. isaak (2015), the investment intensity is characterized by the intensity not only of the allocation of investment resources in the reproduction of fixed capital but also creation of preconditions for future placements in order to capitalize the income generated by investment. in this case, the investment intensity reflects not only the dynamics of the achieved volume of investments, their sources and results, but indirectly assesses their efficiency. thus, based on the structuring of the evaluation of the investment intensity level, algorithms of such an evaluation can include the growth rate of funding source (rfs), based on which the investment is implemented in a particular industry of the national economy. the corresponding calculation formula is as follows: r fs i fs i fs f i f i = ≥ − − * * * % 100 100 100 100 1 1 , (1) where fsf – the amount of funding source, under which the investment activity is carried out in the current period, fsf-1 – in the previous period, c. u.; іi – the amount of total investments in the current period, і i-1 – in the previous period, c. u. given the above, the investment intensity characterizes the dynamics of the structure of funding sources, acting as an indicator of results of investing in the economy, which determines the ability of the national investment system to carry out the real and financial investments that materialize in the newly created factors of social production and infrastructure, and increases its level of the investment attractiveness and degree of favourable investment climate of the country. based on the research studies of n.m. gulyaeva and n.k. ryabchenko (2012), a.v. lobunko (2010), o.p.  tishchenko (2011), the growth rate of one or another funding source reflects a current situation in the investment market, including the presence of certain types of risks. so, the growth rate of the share of funding source at the expense of its own funds of enterprises, which is below 100.0%, suggests that the state did not create appropriate conditions that would be sufficient for the effective passing of the investment process. it leads to the emergence of a number of problems that may be related: with decreasing the economic potential (low level of resource availability, lack of free land for productive investment, scientific and technological capacity and infrastructure); with general economic conditions (low rates of development of branches of material production, large volumes of unfinished construction, high level of deterioration of fixed assets, low technological level of construction base); organizational and legal factors (low level of the state decision-making capabilities; adverse conditions of movement of goods, capital, and labour; low business quality management). the growth rate of the share of funding source at the expense of borrowed funds from financial institutions below 100.0% means the increase of the influence on the financial market of negative factors connected with limited access to loans, their high value, the low specific weight of long-term loans, high inflation. the growth rate of the share of funding source at the expense of foreign investors’ funds below 100.0% reflects the weak state influence on foreign economic activities of business entities. as a rule, it is due to the presence of unfavourable organizational and legal conditions connected with an inefficient state policy of foreign investment involvement, low level of development of the market infrastructure and competitive environment, the unfavourable influence of privatization, insignificant export opportunities, and also the insufficient volume of foreign entrepreneurial capital. the growth rate of the share of funding source at the expense of population funds below 100.0% indicates a lack of targeted state policy towards the involvement of the population to the investment process because of the low level of public confidence in the state authorities, low income, social deformations, etc. similar trends in the dynamics of funding sources at the expense of state and local budgets characterize the low degree of financial participation of the state in the investment process, first of all, in terms of ensuring the economic and social development of the country. this situation is a reflection of the impact on the investment process by various negative factors, namely: political (imperfect relations between central and regional authorities, low level of social stability), organizational baltic journal of economic studies 166 vol. 3, no. 5, 2017 and legal (low quality of enforcement, limited awareness of the population, low efficiency of law enforcement agencies) and financial (insignificant revenue part of local budgets, opacity of their expenditures, etc.). thus, the investment at the expense of different funding sources affects not only the total volume of capital investments in the country but also has a huge impact on the investment attractiveness level for both national and foreign potential investors. so, an efficient investment at the expense of its own funds of enterprises increases the job creation, wages of employees and, accordingly, the revenue side of the consolidated budget, which will increase the ability of the state to provide the investment support for innovation projects. an efficient investment at the expense of financial institutions’ funds facilitates the effective process of lending, which will increase the level of trust in banks by business entities, bank profitability and, accordingly, bank liquidity. an efficient investment at the expense of foreign investors’ funds will promote the development of transnational corporations, which will, accordingly, strengthen foreign relations of ukraine. an efficient investment at the expense of the population funds promotes the population to be interested in investment projects, the implementation of which may positively impact on the economic and social development of the country, which motivates individuals to find a high paying job and, accordingly, reduces the level of unemployment. finally, an efficient investment at the expense of the state and local budgets will help reduce the level of investment risks of non-state investors, efficiently allocate and distribute the gross domestic product based on the strategic elaboration of a budget plan for the next year and, consequently, regulate the tax burden on both the population and enterprises, including those who are engaged in innovation activities. 5. analysis of the nature of the investment climate in ukraine it is obvious that the investment climate in ukraine during the last five years has turned out to be unfavourable due to a number of economic disproportions in relations between the state and business entities. this is manifested by the fact that the state tries to provide investment support not constantly but only when the investment intensity of business entities is reduced (table 2). so, the budget investment intensity of the state from 2012 to 2014 was at a level lower than 100%, while the corresponding level of private enterprises exceeded the threshold. in 2015, under the conditions of reduction of the investment intensity level of private enterprises to 95.78%, compared to 2014 (110.54%), and increase in the corresponding growth rate of its share in 2016 to 102.60%, the level of budget investment intensity of the state sharply increased to 202.96%, compared to 2014 (51.43%), when in 2016 the corresponding growth rate of its share fell to 101.79%, despite exceeding the threshold. a similar situation can be observed with trends in the growth rate of the share of capital investments at the expense of local budgets. in most cases, the corresponding phenomenon can be explained by the fact that the investment support from the state causes a side effect on business entities, in particular, private enterprises. that is, during the period of economic stability of private enterprises, the state does not try to stimulate them to implement investments projects, reducing investments risks, while during the period of economic recession the state tries to provide an investment support as much as possible. in this case, private enterprises lose the ability to carry out investment activities effectively without the state interference (the impact of displacement). a completely different situation can be traced to the investment intensity of foreign investors. here, in conditions of stable investment environment at private enterprises, foreign investors in some sense begin to exceed their authority, trying to conclude contracts with national producers as much as possible, and then gradually oust them from ukrainian market. it is indicated by a substantial increase in the investment intensity level of foreign investors by the end of 2014 to 140.99%, and also a slowdown in the investment intensity level of private enterprises in 2015 to 95.78%. at the same time, a similar situation often causes a lack of motivation of the population to implement investment projects, as indicated by a decline in investment intensity level of the population by 2014 to 94.98%, compared with 2013 (121.34%). all of this gradually decreases a confidence of national producers to foreign investors as indicated by reducing the investment intensity level of foreign investors by the end of 2016 to 91.32%. in addition, it reduces the ability of the population to invest, as indicated by a decline in the investment intensity level of the population in 2016 to 71.15%, when in 2015 the corresponding growth rate of its share increased to 116.47%. at the same time, the investment intensity of financial institutions, in particular banks, during the analysed period had moderate fluctuations. these fluctuations can be equated with the phenomenon in which, in a context of diminishing relations with foreign investors, business entities prefer to strengthen relations with financial institutions (banks). this is indicated by the sharp decline in the investment intensity level of financial institutions by the end of 2014 to 64.89% and a gradual increase of the corresponding growth rate by the end of 2016 to 99.37%. in addition, the investment intensity level of financial institutions for almost the whole analysed period was at a level below the threshold. it suggests that the unregulated relationships between subjects of investment process led to a gradual decline in the financial statements of private enterprises and baltic journal of economic studies 167 vol. 3, no. 5, 2017 living standard of the population, weakening of relations with foreign investors, and increase in tax burden by the state on the subjects of investment process in order to replenish the revenue side of the budget. all of this increased the level of bank risks of non-return of investment loans by subjects of the investment process and obtaining large losses of banks. also, the growth rate of the share of capital investments at the expense of other funds for the whole analysed period was below the threshold. it may indicate that the level of the investment intensity of all institutions except private enterprises, banks, foreign investors, and individuals was low and had moderate fluctuations. such institutions may include various types of innovation institutes, including technological policies, technological parks, business incubators, and other institutions that promote the development of innovation infrastructure in the country. however, unfortunately, in ukraine, there is an absence of a sufficient number of innovation institutions that could provide sufficient innovation infrastructure, which, accordingly, negatively affects the investment attractiveness and, consequently, investment climate. thus, an increase in the overall investment intensity level, if there is an appropriate imbalance in the relations between the subjects of the investment process, may negatively affect the investment climate in the country. it is indicated by a rather low ratio of investment climate favourableness in 2012 (0.02) with the investment intensity level of 112.99%, and also gradual decrease in the corresponding ratio from 2014 to 2016 (0.05 and 0.03), with the increase of the investment intensity level for this period from 81.96% to 131.53% respectively. however, a decrease in the overall investment intensity level may also negatively affect the level of investment attractiveness of the country and, accordingly, worsen the investment climate. for example, from 2012 to 2014, the trend of increasing the investment attractiveness level in ukraine was minor (from 2.67% to 3.70%), while the decline in investment intensity level during this period was significant (from 112.99% to 81.96% respectively). so, a significant lack of threshold value of the investment attractiveness level is the main factor of the unfavourable investment climate in ukraine. in 2012, the high tax burden negatively influenced the level of investment attractiveness of ukraine, due to which the lack of threshold value of its level was quite significant (2.67%). according to data from official website of price of the state (2016), due to the increase in the tax burden, the state was forced to increase the amount of subsidies as can be seen on trends of net taxes on production and imports negatively amounted to 10785 million uah. it significantly contributed to table 2 indicators of the investment climate in ukraine from 2012 to 2016 no indicator/year 2012 2013 2014 2015 2016 1 gross domestic product, mln uah 1459096 1522657 1586915 1988544 2385367 1.1 net taxes on production and imports, mln uah -10785 2937 -5 16754 7205 1.2 the amount of wages of hired workers, mln uah 705837 730653 734943 777646 873829 2 budget deficit volume, mln uah 50786 63590 72030 30898 61801 3 total capital investments, mln uah 293692 267728 219420 273116 359216 at the expense of the state budget 17141 6498 2739 6920 9264 at the expense of local budgets 9149 7219 5918 14260 26817 3.1 the share at the expense of its own funds of private enterprises, % 59.73 63.75 70.47 67.50 69.25 the growth rate of funding source, % 101.96 106.73 110.54 95.78 102.60 3.2 the share at the expense of financial institutions’ funds, % 17.06 15.27 9.91 7.59 7.55 the growth rate of funding source, % 104.78 89.50 64.89 76.65 99.37 3.3 the share at the expense of foreign investors’ funds, % 1.72 1.82 2.57 3.00 2.74 the growth rate of funding source, % 62.00 106.22 140.99 116.60 91.32 3.4 the share at the expense of population funds, % 8.73 10.59 10.06 11.71 8.33 the growth rate of funding source, % 115.88 121.34 94.98 116.47 71.15 3.5 the share at the expense of the state budget, % 5.84 2.43 1.25 2.53 2.58 the growth rate of funding source, % 82.47 41.59 51.43 202.96 101.79 3.6 the share at the expense of local budgets, % 3.12 2.70 2.70 5.22 7.47 the growth rate of funding source, % 92.00 86.56 100.03 193.59 142.98 3.7 the share at the expense of other funds, % 3.82 3.45 3.05 2.44 2.09 the growth rate of funding source, % 87.27 90.36 88.43 80.16 85.38 4 the subtraction between total and budget investments, mln uah 267402 254011 210763 251936 323135 5 the investment attractiveness level, % 2.67 2.86 3.70 4.62 4.46 6 the investment intensity level, % 112.99 91.16 81.96 124.47 131.53 7 the ratio of the investment climate favourableness 0.02 0.03 0.05 0.04 0.03 source: the author’s combination and calculations according to websites: state statistics service of ukraine; price of the state (2016) baltic journal of economic studies 168 vol. 3, no. 5, 2017 the increase in the budget deficit volume (up to 50786 million uah), compared with previous periods. all of this forced the state to lower the level of budget investment intensity, as indicated by the fall in the growth rate of the share at the expense of the state budget in 2013 to 41.59%, compared with 2012 (82.47%), when in 2014 there was a slight increase to 51.43%. at the same time, the growth rate of the share at the expense of local budgets decreased in 2013 to 86.56%, compared to 2012 (92.00%), while in 2014 this indicator increased to 100.03%, exceeding the threshold. thus, the increase in the investment climate in 2014 to 0.05 does not say about the economic and social improvement of ukraine, since the investment intensity level has fallen to 81.96%, while the investment attractiveness level has only increased (up to 3.70%) due to the government’s effective tax burden adjustment when the indicator of net taxes on production and imports reached a balanced level (-5 million uah). meanwhile, despite the fact that the investment intensity of the state significantly increased in 2015, as evidenced by a significant increase in the share at the expense of the state budget (up to 202.96%) and local budgets (up to 193.59%), and in 2016 due to a significant increase in the volume of funds at the expense of the state (up to 9264 million uah) and local budgets (up to 26817 million uah), compared with 2015 (6920 million uah and 14260 million uah respectively), remained at the level above the threshold, the subtraction between total capital investments and budget funds by the end of 2016 has only risen. the corresponding situation negatively affected the investment climate in the country, reducing its ratio to 0.03, because, despite the increase of state support, which in our case only has a side effect on the activities of non-state potential investors, the level of investment risks for the relevant group of investors has significantly increased. thus, despite a significant increase in the investment intensity level in 2016 (up to 131.53%), the investment attractiveness level dropped to 4.46%. it was especially influenced by an increase in the budget deficit and also in tax burden, despite the fact that the amount of net taxes on production and imports decreased to 7205 million, uah compared with 2015 (16754 million uah). all of this contributed to deteriorating the investment climate in ukraine. 6. conclusions the investment climate is determined by the ratio of the supply of investment resources for potential investors (investment attractiveness) to the demand for investment resources by recipients of investments (investment intensity). over the past five years, the investment climate in ukraine has been unfavourable. this phenomenon was characterized by the existence of a number of economic imbalances in relations between the subjects of the investment process, namely: private enterprises, financial institutions, population, foreign investors, innovation institutes, and state. in order to improve the investment climate in ukraine, the government should review the tax legislation, in particular, the tax code of ukraine, the enactment of which abolished almost all the tax incentives for technological parks of ukraine, national producers, and foreign investors, and also caused the stretching of the time of participation in the amortization in the calculation of income tax. thus, it is necessary to introduce at least the abolished tax privileges. in turn, this introduction requires including the provisions on transparency of investment, profit from investment, conclusion and termination of investment contracts. it is needed in order to prevent, firstly, the absorption by transnational corporations of national producers, and secondly, – the illegal flow of funds in 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(in russian) baltic journal of economic studies 185 vol. 8 no. 3, 2022 1 belt and road initiative institute for chinese-european studies, guangdong university of petrochemical technology, china e-mail: denis_sviridenko@ukr.net orcid: https://orcid.org/0000-0001-6126-1747 2 national pedagogical dragomanov university, ukraine (corresponding author) e-mail: marja@nesterova.com.ua orcid: https://orcid.org/0000-0001-6703-7797 3 the national university of life and environmental sciences, ukraine e-mail: maryna_dielini@nubip.edu.ua orcid: https://orcid.org/0000-0003-1016-2305 doi: https://doi.org/10.30525/2256-0742/2022-8-3-185-196 changes in social cohesion in the university community in the context of crisis phenomena in society denys svyrydenko1, marja nesterova2, maryna dielini3 abstract. the purpose of this study is to find out the impact of crisis conditions in society, in particular the war and the covid-19 pandemic, on the development of social cohesion of the university community in ukraine using the social cohesion radar research tool. the study was conducted according to the methodology proposed by the social cohesion radar (bertelsmann foundation), which helped to interpret a set of questionnaires received in 2019–2022 in the community of the national pedagogical dragomanov university (npdu), ukraine. the findings showed that the level of cohesion varies moderately by spheres and their size. some tend to increase and some, on the contrary, to decrease. people's acceptance of diversity increased during the pandemic and decreased in both surveys in 2022, and trust in people has a steady upward trend, but the importance of social ties decreases somewhat in crisis conditions, given its growth in non-crisis times. the sphere of communication and its volume have significantly decreased, reflecting a decrease in trust in institutions, identification with them and perception of fair treatment during the pandemic, with these dimensions characterized by uneven changes in non-war and war periods in 2022. the connection with the place of work and study also decreases. this may be due to distance learning and working during certain periods in 2020 and in the wartime period of 2022. orientation towards the common good increases with a slight decline in the military period of 2022. it is noteworthy that civic participation increases in times of crisis. according to the above data, there is an increase in some areas, and it can be said that cohesion slightly increases depending on the area, the group studied and the crisis period. the study showed changes in social stability and communications in the university community of the national pedagogical dragomanov university due to the impact of crisis conditions, in particular, war or pandemic. this study provides an understanding of the values of trust and social cohesion as key drivers of social behavior in different situations of social challenges, including the challenges of the war in ukraine and the pandemic. these results can be used to study the resilience of ukrainian society, to find the main directions and foundations of social stability. key words: education, pandemic, social cohesion, trust, the university community, values, war in ukraine. jel classification: b41, b49, i20, i21, i23, i29 1. introduction modern civilizational shifts, geopolitical crises, including pandemics and military conflicts with global impact, are also becoming an integral part of our social reality and affect social cohesion. in addition, the current challenges facing education, in particular higher education, require immediate solutions for the sustainable development of society. crisis conditions of society are subject to methodological comprehension, practical research and further explication of the results. social cohesion, in particular in educational communities, is currently one of the most relevant areas of research due to the demand of society (nesterova et.al, 2022). the sudden transition of the whole world to quarantine has become a joint effort to overcome an unknown disease. this situation challenges everyone, especially the education system, because it determines the future; it is designed this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 baltic journal of economic studies 186 vol. 8 no. 3, 2022 to prepare a person to overcome any unforeseen problems. it is necessary to understand the situation as interdisciplinary, complex and non-linear, and to find possible directions for the development of education that would help to overcome the sociocultural consequences of the pandemic. such an understanding involves, in particular, the identification of not only limitations, but also opportunities for further social and personal development that have opened up so unexpectedly. the socio-cultural challenges of the covid-19 pandemic in ukraine are exacerbated by division, lack of dialogue, socio-economic inequality, public distrust, distrust of social institutions, etc. even before the pandemic, modern education faced a number of unresolved problems, as there were no strategies for the development of ukrainian society in both public and socio-cultural and educational discourse (oleksiyenko et al., 2020; svyrydenko, 2017). ukrainian higher education is indeed a specific reflection of the socio-cultural landscape, which is usually marked by a number of definitions (postcolonial, post-totalitarian, post-soviet, transitional, etc.) (gomilko et al., 2016; liashenko and rudenko, 2018; svyrydenko and możgin, 2019). this creates special historically and culturally determined challenges for the mechanisms of social cohesion in various spheres of social activity, including higher education. turbulence and unpredictability of social dimensions requires adaptation and modernization of all spheres of public life (colenso, 2005). therefore, it is necessary for all social actors to realize the need to be not only adaptive, but also proactive in this unpredictable, rapidly changing world. the education system should prepare all social actors for this challenge. therefore, one of the ideas of social development is to increase the social activity of educational institutions, especially universities (dzimińska et al., 2018; kantzara, 2016; mozgin, 2019). universities are seen as a "point of growth", as a "trigger" that triggers social change in the desired direction. that is why the authors explore the ability of the npdu to be a socially responsible institution, an effective agent of change. the activity of higher education institutions, in particular universities, is of great importance in changing educational trends (dworkin, 2019; nesterova, 2020). in today 's world, the most viable model of responsibility is the functioning of the university as a "social activist", taking into account not only the challenges of covid-19, but also the threat of the expansion of the war in ukraine. the problem of finding drivers of social cohesion and, accordingly, sustainable development of society is constantly relevant. divided societies, which are under the influence of geopolitical crisis and pandemic pressure, react to every social change with a negative, unstable socio-cultural environment. the task of stimulating stable social self-organization still remains unresolved (nesterova, & dobronravova, 2021). many modern educational studies have revealed new aspects of the impact of the pandemic on the cohesion of the educational community. thus, it has already been proven in educational communities that the intensity and quality of relationships are deeply related to other social indicators and even physical indicators. strong relationships and a sense of connectedness in educational communities (particularly in universities and schools) have been found to be important in promoting subjective wellbeing (bormann and thies, 2019; graham et al., 2016). therefore, since well-being is a prerequisite for facing the challenges of the pandemic, it is necessary to explore (and improve) the level of social cohesion as a type of social bond in university communities (schlesinger et al., 2017). the choice of the research object is due to the fact that universities play an important role in social development, especially in a pandemic. this means that universities should be leaders not only of their educational communities, but also of open society communities. social cohesion is an important social phenomenon and a powerful driver of social change. in turn, education is one of the most important areas of social cohesion. education can also be a focus of social tensions and, at the same time, a focus of social development. the current crisis trends have been significantly intensified and multiplied by the pandemic situation in 2019. first of all, attention is drawn to the problem of virtualization of education in quarantine. virtualization of educational processes is the main task of the modern education system – to offer new standards of teaching and learning technologies. representatives of the university community have to cover many important issues in a pandemic – virtualization and digitalization, physical and social distance, loss of the usual dimension, etc. one of the most urgent and complex problems is disunity, which leads to the division of society and disconnected couples, enterprises and production teams: the latest challenges of social life will affect all levels of social organization. this disunity and the interruption of social communication are manifested in the educational dimension (martins and nunes, 2016). thus, these changes necessitate the study of such complex social phenomena as the concept of social cohesion. although this concept is relatively new, its basic principles were formulated within the council of europe as early as 1990. there are many studies related to the concept, such as "eu social cohesion policy ", "social cohesion radar" (bertelsmann foundation), "social cohesion model", etc. (dragolov et al., 2013) the study of social cohesion is necessary to analyze the parameters of social development management, baltic journal of economic studies 187 vol. 8 no. 3, 2022 as it highlights the "weaknesses" of social relations and other significant problems of social science. social cohesion, as the european experience shows, is one of the factors and guarantors of social stability and tolerant relations between governments and citizens in the context of global economic and political instability. it supports all large-scale organizational, structural, financial and economic changes. for several decades, the development of social cohesion has been one of the most important tasks declared in the documents, protocols and other working materials of the european union. the eu social cohesion policy reflects the importance of this phenomenon for european social development. in general, the eu cohesion policy has a strong impact in many fields, and it complements eu policies such as those dealing with education, employment, energy, etc. in particular, the cohesion policy provides the necessary investment framework and strategy to meet the sustainable development goals (europe 2020, 2010). it is also possible to consider social cohesion as one of the main working values of the european union (support of a complex conglomerate of european countries with different levels of welfare, inclusiveness, etc.) this principle also works in other social dimensions – for example, in territorial and educational communities. it is crucial to note that "cohesion policy has responded quickly and effectively to the crisis with a vital degree of flexibility." (an introduction, 2010) hopefully, it will overcome the pandemic crisis as well. the new social situation of the pandemic has confirmed that the current challenge for all countries (not only for the european union or ukraine) is to revise the real (not declared) set of values. according to this revised set of values, priorities in social and educational policy should be formulated (nesterova et al., 2020, 2022). values determine the level of social cohesion in society and its features as a social phenomenon. social cohesion is based on a set of individual and collective values. through this value platform, social cohesion can integrate modern divided societies and communities at different levels. values are the driving force behind human behaviour and should be central to all social innovations, including education (oder, 2005). the incredible self-organization of ukrainian society now, after the russian invasion, is also based on strong values of freedom, national identity, self-defense, etc. but we can note the duality of the concept of values: "a value is a strong belief that a certain type of behavior is more important in the existing cultural continuum. values exist in the social consciousness and are learned by the individual." (suprun, 1987, p. 162) this duality can be demonstrated by the example of the value of social cohesion, which is perceived by the individual and realized at the level of the whole society. it can also be applied to the value of trust, which is also personalized but "felt" at the highest levels of social organization. trust as a phenomenon is "intrapersonal", it is manifested in the interpersonal space, "transferred" to the space of interpersonal relations. trust lies at the heart of socio-cultural communications and is a platform for interpersonal interactions. it makes these connections between social actors subjective and deeply dialogical. the value dimension of trust is also that communication is not only and not so much informational as interpersonal (nazaruk, 2010). many researchers have demonstrated that trust is a key point of social communication. trust can also be seen as a central element and cognitive basis of social cohesion (budnik, 2018). without the ability to trust other people and institutions, without understanding the need to meet the reasonable expectations of partners, effective social interaction, which is the basis of socio-cultural communication, becomes problematic (kyllönen, 2019). the pandemic situation reinforces this importance of trust even in everyday communication. the specific function of trust as a "suggestive" gateway in human communication is considered in sociological and socio-psychological terms by many researchers who note the existence of a psychological opposition of trust/distrust. thus, trust can be attributed not only to sociological, political and psychological categories, but also to the social sphere, in particular communication, since trust is a condition for social communications based on interaction (doktorova, 2014). the university community is a specific environment where trust plays a crucial role in establishing the required level of partnership and cohesion (watanabe et al., 2017; white, 2018; kapoor et al., 2018). the main purpose of the study is to find out the impact of crisis factors for the stability of society, in particular the covid-19 pandemic and the war in ukraine, on the development of university communities using the tools for measuring social cohesion. 2. methodology of study the research was conducted according to the methodology developed by the social cohesion radar (bertelsmann foundation) (dragolov et al., 2013). the social cohesion model was developed by a group of researchers from jacobs university bremen (germany), who conducted a study supported by the bertelsmann foundation's social accoun tability initiative. they aimed to explore the phenomenon of social cohesion as a longitudinal parameter of social development and conceptually and methodologically present the above approach to the general public for wider public awareness and discussion. originally, the methodology of the baltic journal of economic studies 188 vol. 8 no. 3, 2022 bertelsmann foundation has been published in the report the social cohesion radar – an international comparison of social cohesion (dragolov, 2013). the social cohesion model was developed by a group of researchers from jacobs university bremen (germany), who conducted a study supported by the bertelsmann foundation's social accountability initiative. they aimed to explore the phenomenon of social cohesion as a longitudinal parameter of social development and conceptually and methodologically present the above approach to the general public for wider public awareness and discussion (dragolov et al., 2013). a feature of the social cohesion radar model is the hierarchical structure of indicators that describe the complex concept of social cohesion. it is a structure of generalized domains, each of which is described by three dimensions, which in turn are described by indicators that can be measured separately. thus, the domain "social relations" includes the following dimensions (dragolov et al., 2013): – social networks, – trust in people, – acceptance of diversity. the domain "connectedness" contains the following dimensions (dragolov et al., 2013): – identification, – trust in institutions, – a perception of fairness. the third domain, "focus on the common good", covers the following dimensions (dragolov et al., 2013): – solidarity and helpfulness, – respect for social rules, – civic participation. thus, based on the social cohesion radar methodology, the analysis of social cohesion indicators is based on the following indices (behavioural characteristics). these components of the social cohesion model are described in table 1, see supplementary materials, according to the original approach of the bertelsmann foundation. 3. data collection and analysis the survey was conducted using google forms. the questionnaire was distributed among the staff and students of npdu through social networks. the survey was attended by 112 people, including 47 npdu employees and 65 npdu students. in 2020, 94 respondents took part in the study, including 21 npdu employees and 73 students. in 2022, 156 respondents took part in the study, including 33 npdu employees and 123 students. additionally, in 2022 was held research not only in npdu but also disseminated through other educational institutions and the total number of participants in this research was 363. the survey was conducted voluntarily without compensation for the time spent by respondents. the second study, conducted in may-june 2020, was a continuation and extension of july 2019. in general, the 2020 survey concerns the level of social cohesion in more than five ukrainian higher educational institutes (heis) with more than 300 respondents. this article analyzes only one part of the may-june 2020 survey concerning the university community of the national pedagogical dragomanov university to compare it with previous studies on the same parameters of social communications of trust and social cohesion. the third research (2022) have been conducted twice: in january for the participants of the winter school in the frame of the project’s implementation in the national pedagogical dragomanov university of jean monnet chair "social cultural aspects of european studies" (scaes) 620635-epp-1-20201-ua-eppjmo-chair before russia’s invasion (as a control group) and in june-august, during the war in ukraine. since each dimension of the social cohesion model cannot be measured "directly ", the original bertelsmann foundation study is based on secondary data from another questionnaire (dragolov et al., 2013). however, the cohesion model allows us to collect information from the questionnaire; therefore, our team of researchers developed an adapted questionnaire to obtain the primary data. the questionnaire consists of twenty-seven questions, three questions for each area, and three questions for differentiation – male/female, student/employee of heis (nesterova et al., 2019). twenty-seven questions of the adapted questionnaire were placed in mixed order, excluding the linearity of answers. for each question, the respondent had to rate from 1 to 5 depending on their score. the questions have both an increasing scale, where 1 is a "low level" and 5 is a "high level", and an inverse scale, where 5 is a "low level" and 1 is a "high level". the score of each dimension was formed by calculating the average of three answers to the corresponding questions on an ascending scale (in the case of reverse scale questions, the value of the ascending scale was calculated accordingly). the score for each area was formed by calculating the average of the scores for the three relevant dimensions. besides, along with the calculation of the mean, the standard deviation was calculated, which makes it possible to reflect the spread of responses and how much they may differ from the mean, ensuring the reliability of the results. the calculation was first made for each respondent separately. then the final calculations were made – in general, and differentiated by research groups (employees and students), respectively. baltic journal of economic studies 189 vol. 8 no. 3, 2022 4. findings and discussion in the previous research, the authors had already analysed social cohesion (nesterova et al. 2019, 2020; dielini et al. 2022). the results of the study showed an average level of social cohesion among both students and staff, with slight variations depending on the field of activity. in this study, the authors compare the level of social cohesion of the university community based on the data obtained in the previous survey, during the covid-19 pandemic and during the war in ukraine in 2022 to achieve the purpose of this study. the data obtained from the results of the 2020 and 2022 studies are presented in figure 1. it should be noted that in 2022 two periods are compared: before the russian invasion (this group is considered as a control group) and the period when the war began ( june-august 2022). the figure shows that the highest scoring category among the respondents is the dimension "acceptance of diversity " (4.32 out of a possible 5.00 in 2020, 4.25 in 2022 ( january) and 4.19 in 2022 (war period)), which significantly exceeds other dimensions of this study. this means that both university staff and students perceive a person with different views, different values and lifestyle at an absolutely normal level. but attention should be paid to the decrease of this indicator during the war in 2022. it is noteworthy that it tends to decrease during this analyzed period. analyzing the results by domains, we can conclude that the most represented domain is "social relations" (3.96 in 2020 and 3.94 in 2022 (the period of war), which reflects the focus and importance for respondents of their relations in society. it can be stated that the indicators of this domain have the highest values, except for "social networks" (3.67, 3.90, 4.32 respectively in 2020 and 3.63, 4.01, 4.19 in 2022 (period)). the lowest values in 2020 were in the dimension of "civic participation" (2.45), the same in 2022 (war period) (2.59), "perception of justice" (2.62 in 2020 and 2.76 in 2022 (war period), "identification" (2.86 in 2020 and 3, 08 in 2022 (the period of war), which reflects the lower-than-average level of community involvement in public life, as well as the low level of perception of fair treatment and identification with the university and a sense of connection with it. but in 2022, a positive change can be observed even in this dimension, which indicates a gradual increase in social cohesion indicators. some of them show different results during the year, between the two surveys – the control group in january and the second survey during the war in ukraine. the domain that had the lowest value in this study is "connectedness", which includes the two dimensions described above and reflects the level of connection to the institution (in this case, to the npdu). but it is important to emphasize that it increased after the 2020 survey (during the pandemic) and in january 2022 was equal to 3.19, although during the second survey of this year it decreased again to 3.17. it can be assumed that in crisis conditions, connectivity begins to decline. the third area "focus on the common good" has an average score of 3.29 in 2020 and 3.46 in 2022, where the dimension "respect for social rules" dominates (3.81 in 2020 and 3.96 in 2022). also, at an average level is "solidarity and goodwill" (3.62 in 2020), which indicates a sufficient level of respect for social norms and rules, as well as a sense of responsibility for each other's well-being, especially given its increase in 2022 to 3.84. 3,67 3,90 2,86 3,62 2,45 3,85 3,94 4,324,25 3,37 3,66 2,62 3,813,63 4,01 4,19 3,153,08 3,68 2,76 2,76 3,92 3,84 4,083,96 2,42 2,59 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 5,00 2020 1.2022 06-08.2022 figure 1. the level of social cohesion in npdu by dimensions during the covid-19 pandemic and during the war in 2022 baltic journal of economic studies 190 vol. 8 no. 3, 2022 "civic participation" has already been described above. a more qualitative analysis can be conducted and presented by comparing the results of 2022 and 2020 with the results of 2019. for this purpose, table 2 and table 3 are presented, see supplementary materials, which show the results of social cohesion surveys in the npdu in 2019, 2020 and 2022. table 2 at supplementary materials contains the results of surveys in 2019, 2020 and 2022 in npdu. data are presented in terms of average (av.) and standard deviation (st. dev.). the result of the standard deviation shows how much the results can deviate from the mean. in this case, it is not so significant, except for the indicator "civic participation" in the second and third surveys. the results obtained are indicative and reliable. in this table also present the result of the entire educational community that was surveyed in 2022. this can help to compare also the result of the npdu with the educational community. with the help of the last two tables, the changes that have occurred during this time are shown, as well as the impact of the pandemic and the war in ukraine on the social cohesion of respondents and the comparison of data between the surveyed groups. thus, there were no significant changes in comparison of 2020 with the previous year: domains occupy the same positions in terms of weight of values in general according to the methodology. the domain "social relations" is the most important in both evaluation periods, however, during the pandemic and quarantine it tended to increase (from 3.93 in 2019 to 3.96 in 2020), i.e., in general, social relations became even more critical. at the beginning of 2022, it continued its upward trend and was estimated at 4.01, but after the russian invasion it dropped to 3.94, which is higher than in 2019 but lower than in 2020. for the general education community, it is 3.98, which indicates a slightly higher importance of this dimension for other respondents than for npdu staff. figure 2 presents the domain values in 2019-2020 and in 2022 (wartime survey) in general and by groups. this figure and other figures in this article present data obtained in 2022 during the wartime survey. the dimensions also show growth, except for "social networks" (see figure 3). let us analyze this area and dimensions among the selected groups – employees and students. it can be seen that in 2020, the dimension "acceptance of diversity " (4.35) was the most important and significant for both npdu employees and students (4.28). however, it should be noted that among employees, this dimension decreased (from 4.42 in 2019 to 4.35 in 2020) and continued this trend in 2022 (4.29), while among students, on the contrary, it increased from 4.18 to 4.28 in 2020, i.e., students showed more tolerance towards people who are different from themselves. but this also changed in 2022, when the result of students was even lower than in 2019. it is worth noting that the "trust in people" dimension in general increased from 3.81 in 2019 to 3.90 in 2020 and to 4.01 in 2022, while within the groups it changed slightly. among employees, this dimension decreased in 2020 to 3.46 from 3.70, meaning that employees trusted each other less during the pandemic, although this is 3,93 3,96 3,94 3,91 3,85 4,07 3,95 3,97 3,91 3,06 2,95 3,17 3,02 2,83 3,12 3,09 2,96 3,19 3,24 3,29 3,46 3,17 3,32 3,69 3,29 3,26 3,40 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 2019 2020 2022 2019 2020 2022 2019 2020 2022 in general employees students social relations connectedness focus on the common good figure 2. domain values in 2019–2022 in general and by groups source: (dielini m. et al., 2022) baltic journal of economic studies 191 vol. 8 no. 3, 2022 within the average and does not reflect any significant changes. and in 2022, it exceeded all previous results and was equal to 3.89. among students, however, the level of trust has increased significantly – to 4.00 in 2020 from 3.89 in 2019 and to 4.04 in 2022. thus, during the pandemic, students began to trust each other even more than the previous year. and the same trend during the war. the total result for this dimension has a steady upward trend during 2019–2022. the "social networks" dimension has decreased in general, and the following changes have occurred among the study groups: employees have increased their social networks from 3.62 (2019) to 3.75 (2020) and to 4.03 (2022), and students have had an almost equivalent decrease – to 3.62 in 2020 from 3.77 in 2019 and even more in 2022 – 3.53. these criteria reflect a decrease in the importance of this dimension, but, in general, it has an average importance, so it does not lose its importance. the dimension "social networks" for the entire educational community has almost the same result as for the npdu, but slightly higher – 3.70. if to compare the research of the beginning of 2022 and the middle of this year, it can be seen that social networks were more important before the russian invasion of ukraine (3.85 in january and 3.63 in the middle of the year). it is also worth noting that in 2019 it was higher than in 2020 (during the pandemic), then grew, followed by a drop during the war. it can be concluded that in times of crisis, social networks are less important than in other times. in 2020 and 2022, during the pandemic and its quarantine measures, as well as the war, the dimensions "acceptance of diversity " and "social networks" were more important for employees, and "acceptance of diversity " and "trust in people" were more important for students. in other words, this is different from the situation that was before, when trust in others in the university environment was more important for employees than social connections. the second domain "connectedness", which reflects the connection and trust in one's institution, has the lowest value in both cases, which is generally at an average level, but tends to decrease significantly as the covid-19 pandemic develops and increases in 2022. in 2020, it decreased by 0.11 points compared to the previous year and stands at 2.95. this decrease is noticeable in both groups of respondents, but most pronounced among employees – from 3.02 in 2019 to 2.83 in 2020, which correlates with a decrease in trust in people from the previous domain. there is also a decrease in this area among students – from 3.09 to 2.96. all of these dimensions have decreased (see figure 4). the greatest cohesion is observed in the dimension of "trust in institutions": the indicator decreased to 3.37 from 3.43; among employees – to 3.13 from 3.28, and among students – to 3.40 against 3.55 in the previous year. instead, in 2022, connectedness increased significantly in all groups of respondents: from 2.95 to 3.17 in general, from 2.83 to 3.12 among employees and from 2.96 to 3.19 among students. this means that the crisis state of society has different impacts on different dimensions and areas. the war affects the fact that people feel more connected to the community, trust institutions more, etc. the result of these indicators for the entire educational community is slightly higher than for the npdu – 3.21. but there is an interesting case: this sphere had a higher result before the war than after the invasion (3.19 in january and 3.17 during the war). the dimension "identification" decreased from 2.99 in 2019 to 2.86 in 2020 and increased to 3.08 in 2022 for the npdu as a whole: among employees it 3,71 3,67 3,63 3,62 3,75 3,62 3,53 3,81 3,90 4,01 3,70 3,46 4,03 3,89 3,77 3,89 4,00 4,04 4,28 4,32 4,19 4,42 4,35 4,29 4,18 4,28 4,16 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 5,00 2019 2020 2022 2019 2020 2022 2019 2020 2022 in general employees students social networks trust in people acceptance of diversity figure 3. changes of dimensions by domain "social relations" source: (dielini m. et al., 2022) baltic journal of economic studies 192 vol. 8 no. 3, 2022 decreased to 2.60 in 2020 from 2.90 in the previous year and increased to 3.18 in 2022, and among students it decreased to 2.95 in 2020 from 3.05 in 2019 and reached this result again in 2022. this decrease is significant as it reflects the deterioration of communication with the university community. in the case of employees, this level was below average, although not reaching significantly lower levels. the decline could be caused by quarantine measures, when work and study took place remotely, and therefore identification with the npdu decreased somewhat. but further growth is also significant. it is worth noting that this growth at the beginning of 2022 was 3.15, while after the invasion it dropped again to 3.08. that is, in crisis conditions, it is possible to observe a decrease in this dimension for the second time. the dimension "trust in institutions", which reflects the level of trust in the npdu, ranks first in this area and is equal to 3.68 in 2022 (the period of war) and 3.37 in 2020 against 3.43 in 2019. that is, it fluctuated during this period. by groups, this indicator also slightly decreased in 2020, and for staff it was 3.13 in 2020, which is 0.15 less than the previous year. the same difference is observed among students – 3.40 (2020) vs. 3.55 (2019). this trend reflects a decrease in trust in their institution during the pandemic, which can be explained by the general depressed state of people in such circumstances. in contrast, in 2022, this indicator increased significantly in both analyzed periods: january – 3.66 and during the war – 3.68. analysis by groups during the war and comparison with 2020 shows the same results: in mid-2022, this dimension increased to 3.37 for employees and 3.76 for students. the feeling of fair treatment is manifested in the results of the area "perception of fairness": it is the lowest in all the years studied and also fluctuated: a decrease from 2.76 (2019) to 2.62 (2020) and a subsequent increase to 2.76. the perception of fair treatment by employees decreased from 2.88 in 2019 to 2.76 in 2020 and increased to 2.80 in 2022, and by students – decreased from 2.68 to 2.55 with a subsequent increase in 2022 to 2.75. comparing the control group and the analyzed group in 2022 gives similar results. in general, the result of this domain can be explained by the fact that during the pandemic, a strict quarantine was introduced in the host country and all teaching and learning took place remotely; a person who was depressed at the beginning could transfer their worries about the future to university studies. but before the war, all these restrictions were not so noticeable, people could communicate face-to-face, started to study offline, etc. and the value of this domain grew, while with the beginning and continuation of the war, "connectedness" lost its importance again. for more qualitative conclusions, it is necessary to conduct further in-depth research on the factors of such changes in the cohesion of the survey participants. if to compare the results in this area and dimensions (for the period of war) between the npdu and the whole educational community, we can conclude that there is no big difference, but in some dimensions (identification, trust in institutions) the whole community has slightly higher indicators than the npdu. the area "orientation towards the common good" reflects how people are oriented towards the community as a whole, how they understand dependence on each other and responsibility. in general, the indicator of this area has a slight increase from 3.24 (2019) to 3.29 (2020) and a significant increase in january 2022 to 3.47 with a slight decrease during the war by 0.01 points, but there are some differences between groups 2,99 2,86 3,08 2,90 2,60 3,18 3,05 2,95 3,05 3,43 3,37 3,68 3,28 3,13 3,37 3,55 3,40 3,76 2,76 2,62 2,76 2,88 2,76 2,80 2,68 2,55 2,75 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 2019 2020 2022 2019 2020 2022 2019 2020 2022 in general employees students identification trust in institutions perception of fairness figure 4. changes in the dimensions of the "connectedness" domain source: (dielini m. et al., 2022) baltic journal of economic studies 193 vol. 8 no. 3, 2022 in changes: among staff, this area increased from 3.17 to 3.32 (2020) and to 3.69 (2022 (war period)), and among students, it decreased from 3.17 to 3.26 (2020). ) and to 3.69 (2022 (war period)), and among students it slightly decreased – from 3.29 (2019) to 3.26 (2020) with a further increase to 3.40 in 2022 (war period). these results reflect some small changes in these groups in terms of cohesion towards community orientation, mutual respect for others and responsibility for their actions. figure 5 presents changes in the dimensions of the "orientation towards the common good" domain. the most prominent area in the university community is "respect for social rules" – 3.96 in 2022 vs. 3.81 in 2020 vs. 3.64 in 2019 – which has increased significantly during the quarantine and war and reflects the level of respect and compliance with rules and regulations. but the comparison within 2022 shows that at the beginning of the year, before the russian invasion, "respect for rules" was higher than after the war started. the increase can be explained by the responsible attitude to changes and quarantine requirements among university staff from 3.66 (2019) to 3.98 (2020) and to 4.10 (2022 (war period)), as well as among students – from 3.63 to 3.74 in 2020 and 3.92 in 2022 (war period). thus, respect for norms is growing in both study groups. "solidarity and helpfulness" also ranks high. however, it has decreased compared to 2019 – from 3.67 to 3.62 in 2020 and increased again in january 2022 to 3.92 with a subsequent decrease to 3.84, reflecting a decrease in responsibility for each other and concern for each other's well-being during both the pandemic and the war. changes are also taking place in groups: for employees, this dimension decreased from 3.65 (2019) to 3.51 (2020) and significantly increased in 2022 (war period) to 4.01, and for students it decreased from 3.69 (2019) to 3.60 (2020) with a subsequent increase to 3.79 in 2022 (war period). but it is worth conducting a follow-up study to compare between groups of employees and students between control respondents and respondents who participated in the second study in 2022. "civic engagement", which reflects participation in public or political life, slightly increased during the study period to 2.45 in 2020 and 2.59 in 2022 (war period), but is at a rather low level and exceeds the average only during the war. it is worth noting that the engagement of employees increased from 2.21 (2019) to 2.46 (2020) and to 2.95 (2022 (war period)), while among students, on the contrary, it decreased – from 2.53 to 2.43 in 2020 with an increase to 2.50 in 2022. this indicates that employees become more active members of society during a pandemic, while students are less likely to be socially active during positive changes during war. it is noteworthy that in january 2022, this dimension decreased to 2.42 compared to 2020 with a further increase. this confirmed our assumption about the importance of this dimension in crisis conditions. comparison with the whole educational community shows that within this sphere the difference in the obtained results is not great, but the civic activity of the npdu respondents is higher than in others. 5. conclusions the authors obtained the results by comparing the level of social cohesion of the university community in 2020, which takes place in the context of the covid-19 pandemic, with the indicators of 2019 and 2022, before and after the russian invasion. the data obtained and analyzed in the study showed that the level of cohesion varies moderately 3,67 3,62 3,65 3,51 4,01 3,69 3,81 3,84 3,96 3,66 3,98 4,10 3,63 3,60 3,74 3,79 3,92 2,40 2,45 2,59 2,21 2,46 2,95 2,54 2,43 2,50 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50 2019 2020 2022 2019 2020 2022 2019 2020 2022 in general employees students solidarity and helpfulness respect for social rules civic participation 3,64 figure 5. changes in the dimensions of the "focus on the common good" domain source: (dielini m. et al., 2022) baltic journal of economic studies 194 vol. 8 no. 3, 2022 by areas and their dimensions. some tend to increase, and some, on the contrary, to decrease. people's perception of diversity in each other increased in 2020 and decreased in 2022. trust in people is growing, but the importance of social ties is slightly decreasing. the scope of connections and its volume decreased significantly in 2020, reflecting lower levels of trust in, identification with, and perception of fair treatment by institutions. the connection between work and study is decreasing in all study groups. the reason may be distance learning and work during certain periods in 2020. but in january 2022, this area increased and its result exceeded the result of 2019 with a further decline. there is a growing orientation towards the common good, namely in civic engagement and compliance with social norms. according to the data, in some areas there is an increase, and in some areas, it can be said that cohesion is growing insignificantly, depending on the area and the group studied. the results show that social cohesion does not develop equally in times of crisis: there is a difference in results between the period of the pandemic and the war in ukraine. at the same time, one of the most critical factors of social development – trust and social cohesion – are certain indicators of the adaptability of social systems to the complex challenges of the crisis in society, in particular, the war in ukraine and the covid-19 pandemic. effective social communications, which are formed by interpersonal relationships, are based on the values of trust and social cohesion. the pandemic has shown that its challenges require not only theoretical research, but also practical methods of implementation, development of trust and social cohesion of different types of communities (territorial, educational, etc.). important tasks in this direction are assigned to the educational sphere, in particular to university communities, which should promote the implementation of such values as trust and social cohesion. it is noticed that during quarantine the educational environment is transformed for many reasons. among them are the following: online teaching and learning processes, the virtual dimension of communication, social and physical distancing between teachers and students, lack of non-virtual communication between students, etc. thus, it can be stated that the pandemic has affected the social communications of the university community. the study showed changes in social communications in the educational community of the national pedagogical dragomanov university due to the impact of the pandemic. this study gives insights into the values of trust and social cohesion as key drivers of social behavior in different situations of social challenges, including pandemic challenges. 6. acknowledgements the authors gratefully appreciate all research participants. this study was supported by the belt and road initiative centre for chinese-european studies of the guangdong university of petrochemical technology (maoming, china). the above 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"ukrainian policymaker, 4: 43–51. doi: https://doi.org/10.29202/up/4/7 baltic journal of economic studies 196 vol. 8 no. 3, 2022 supplementary materials table 1 social cohesion model radar (dragolov et al., 2013) domain dimension description (people in this society…) social relations social networks – have strong social networks and connections trust in people – highly trust each other acceptance of diversity – consider individuals with different values and lifestyles on an equal footing connectedness identification – feel a strong connection with the community and identify with it trust in institutions – have high confidence in institutions perception of fairness – feel fair to themselves focus on the common good solidarity and helpfulness – feel responsible for each other and each other’s well-being respect for social rules – respect and adhere to norms and rules civic participation – involvement in social and political life table 2 the overall score for npdu’s social cohesion by domains and dimensions domain and dimensions 2019 2020 01.2022 06-08.2022 av. st. dev. av. st. dev. av. st. dev. av. st. dev. social networks 3.71 0.71 3.67 0.68 3.85 0.80 3.63 0.82 trust in people 3.81 0.67 3.90 0.68 3.94 0.63 4.01 0.61 acceptance of diversity 4.28 0.68 4.32 0.59 4.25 0.71 4.19 0.59 domain "social relations" 3.93 0.49 3.96 0.45 4.01 0.51 3.94 0.54 identification 2.99 0.79 2.86 0.8 3.15 0.81 3.08 0.93 trust in institutions 3.43 0.73 3.37 0.82 3.66 0.70 3.68 0.79 perception of fairness 2.76 0.64 2.62 0.59 2.76 0.59 2.76 0.51 domain "connectedness" 3.06 0.44 2.95 0.56 3.19 0.53 3.17 0.52 solidarity and helpfulness 3.67 0.75 3.62 0.7 3.92 0.72 3.84 0.75 respect for social rules 3.64 0.74 3.81 0.71 4.08 0.69 3.96 0.64 civic participation 2.40 0.98 2.45 1.10 2.42 1.01 2.59 1.01 domain "focus on the common good" 3.24 0.57 3.29 0.66 3.47 0.63 3.46 0.62 table 3 the resulting table for assessing social cohesion in the npdu by groups, 2019–2022 and all educational community in 2022* study 2019 study 2020 study 2022 (war period) domain and dimensions ig* e* s* ig e s ig e s whole ed.com social networks 3.71 3.62 3.77 3.67 3.75 3.62 3.63 4.03 3.53 3.70 trust in people 3.81 3.70 3.89 3.90 3.46 4.00 4.01 3.89 4.04 4.01 acceptance of diversity 4.28 4.42 4.18 4.32 4.35 4.28 4.19 4.29 4.16 4.22 domain "social relations" 3.93 3.91 3.95 3.96 3.85 3.97 3.94 4.07 3.91 3.98 identification 2.99 2.90 3.05 2.86 2.60 2.95 3.08 3.18 3.05 3.14 trust in institutions 3.43 3.28 3.55 3.37 3.13 3.40 3.68 3.37 3.76 3.73 perception of fairness 2.76 2.88 2.68 2.62 2.76 2.55 2.76 2.80 2.75 2.76 domain "connectedness" 3.06 3.02 3.09 2.95 2.83 2.96 3.17 3.12 3.19 3.21 solidarity and helpfulness 3.67 3.65 3.69 3.62 3.51 3.60 3.84 4.01 3.79 3.90 respect for social rules 3.64 3.66 3.63 3.81 3.98 3.74 3.96 4.10 3.92 4.02 civic participation 2.40 2.21 2.53 2.45 2.46 2.43 2.59 2.95 2.50 2.45 domain "focus on the common good" 3.24 3.17 3.29 3.29 3.32 3.26 3.46 3.69 3.40 3.46 *the table is built on the basis of dielini m. et al. 2022 and nesterova et al. 2022 received on: 29th of july, 2022 accepted on: 31th of august, 2022 published on: 30th of september, 2022 baltic journal of economic studies 221 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-221-228 theoretical and legal perspective on certain types of legal liability in cryptocurrency relations oleksii drozd1 national academy of internal affairs, ukraine yaroslav lazur2 uzhhorod national university, ukraine ruslan serbin3 national academy of internal affairs, ukraine abstract. the aim of this article is to study the theoretical, methodological, and legal possibilities of application of certain types of legal responsibility to the relations, which are connected with cryptocurrency (bitcoin). some types of liability in the field of cryptocurrency relations make the subject of the study. methodology. the research is based on a comparison of legal regulation of the sphere of cryptocurrency in ukraine and in foreign countries. advantages and disadvantages of different modes of cryptocurrency turnover are determined: from direct prohibition to granting the status of the official payment system. it is made on the basis of the analysis of peculiarities of the circulation of virtual money in australia, germany, the netherlands, new zealand, singapore, indonesia, china, the russian federation, bolivia, ecuador, thailand, vietnam, the usa, japan, spain, and some other countries. on the basis of the comparative legal study of certain provisions of the civil, administrative, tort, and criminal legislation of ukraine, the possibilities and limits of the application of certain types of legal responsibility to violations in the field of cryptocurrency are determined. the results of the comparative legal study have shown that, unlike most foreign countries, in ukraine, there is no legislative consolidation of the legal status of the virtual currency. in this regard, today in the national legislation, there are no direct rules that would predict the occurrence of administrative, criminal or civil liability for the offenses in the field of cryptocurrency relations. practical impact. since guarantees of compulsory restoration or protection of violated law play an important role in the legal regulation of any social relations, the proper legislative regulation of public relations in the sphere of crypto currency circulation is an urgent problem today, including with the help of establishing liability for the offenses in this field. correlation/authenticity. comparative and legal research of legal regulation of the sphere of crypto currency gives us a better understanding of the most promising directions of development of administrative, criminal, and civil liability in this field. key words: cryptocurrency, legal liability, transaction, licensing, bitcoins, crypto exchange, crypto market. jel classification: d23, d45 corresponding author: 1 department of research work organization, national academy of internal affairs. e-mail: alex0674682444@gmail.com https://orcid.org/0000-0002-4514-6594 2 faculty of law, uzhhorod national university/ e-mail: lazurs1980@gmail.com 3 national academy of internal affairs/ e-mail: r.s.1978@ukr.net 1. problem statement nowadays, the majority of crypto-asset operations are outside the legal field, which is good to some extent, because no one interferes with them. on the other hand, there are risks, of course. in particular, state financial monitoring and control is impossible. this is really undesirable because not all operations related to cryptoassets activities are positive. there is a danger of using cryptocurrencies in transactions that are beyond the law. and it is necessary to create protection against such actions. participants of the crypto market wait from the state not regulation, which is perceived by the it sector as an unwanted interference but defying legal status. under such conditions, legal aspects of certain types of baltic journal of economic studies 222 vol. 3, no. 5, 2017 legal liability for violations in the field of cryptocurrency become of particular relevance. 2. analysis of recent research and publications the study of the phenomenon of cryptocurrency (bitcoin) is revealed in the works of such scholars as: aiganym e.  seitim (aiganym e.  seitim.  (2016), o. s. badzym (badzym, drevush), yu. v. hava (hava), b.  v.  derevianko (derevianko, 2017), a.  r .  drevush (badzym, drevush), i.  m.  doronin (doronin), l.  l.  neskorodzhena (neskorodzhena, 2017), o.  poplavskyi (poplavskyi, 2016), n.  pantielieieva (pantielieieva, 2015). evidently, most of the researches on this problem relate to scientific works of specialists in economics, although the attention of lawyers has recently been attracted. the authors consider theoretical and legal possibilities of applying certain types of legal liability, in particular, civil, administrative, and criminal liability to relations involving cryptocurrency (bitcoin). besides, specific features of such a phenomenon as cryptocurrency (bitcoin) from the perspective of jurisprudence are identified to draw the attention of, first of all, scientists and scholars to possible further scientific research as for the introduction of this phenomenon in modern ukrainian legislation. 3. the main material it is important that cryptocurrency, in terms of national legislation, is not money. in november 2014, the national bank explained that it considered “virtual currency” bitcoin as money surrogate, which was not provided with real value and cannot be used by individuals and legal entities on the territory of ukraine as a means of payment, as this was contrary to the norms of ukrainian legislation. however, the clarification of the nbu does not provide for responsibility for the use of cryptocurrency and, therefore, it is sooner a certain warning than the norm. considering disputes over virtual transactions, courts have agreed that cryptocurrency is neither a thing nor property rights and does not possess any material features at all. throughout the world, the relation to the system of virtual money is significantly different. some countries encourage them in every way (australia, germany, the netherlands, new zealand, singapore), some of them set serious limits for digital money (indonesia, china, russia). at present, direct bans are installed only in bolivia, ecuador, thailand, and vietnam. most governments have opted for neutrality avoiding any decisions regarding the virtual currency. in some countries, for example in japan, cryptocurrency is recognized as a financial asset. meanwhile, electronic money is not considered to be legal tender, but a means of exchange. in canada, on the contrary, you can even get a digital salary. obtained by mining, cryptocurrency is subject to income tax. in 2014, spain recognized bitcoin as an official payment system. this initiative came from the tax inspectorate of the country, which analysed the use of cryptocurrency in the country and concluded that this process should be legalized and taxed. such statistics lead to the conclusion that the recognition of digital currency depends largely on the level of state development. states with a weak economy are not ready to introduce such payment systems. on the contrary, highly developed countries still strive to regulate electronic payments by controlling and taxing them (misnik, 2017). at the same time, some scholars attribute to the main advantages of cryptocurrency: 1) low cost of transfers, which is especially relevant for micro-transmissions and micro-insurance; 2) relative rate of money flow between different users and countries; 3) simplicity and flexibility for the user with a simultaneous security system; 4) public registration of transactions and pseudonymity of accounts ensure both transparency of the system and its secrecy; 5) impossibility to confiscate funds; 6) independence of capital movement from banking system operation; 7) fewer bureaucratic obstacles (poplavskyi, 2016). for example, a scientist, b. v. derevianko, in his studies of cryptocurrency relations distinguishes risks of transactions with cryptocurrency (bitcoins) of citizens and business entities of ukraine. the scientist identifies: technological risks (consist of possible voluntary or enforced refusal of human civilization from modern computers and/or internet technologies); legal risks (one-way refusal and change of services for the placement of a wallet, violation of contract terms, etc.); economic and legal risks (possibility of falling demand for cryptocurrency due to increased demand for real goods, the economic crisis, world war or because of state prohibition and the emergence of a new cryptocurrency) (derevianko, 2017). in our opinion, the most widespread offenses in cryptocurrency relations are: blocking addresses of electronic wallets and electronic exchanges dealing with bitcoins or another cryptocurrency; impossibility to withdraw honestly earned bitcoins from an e-wallet; withdrawal of money from the account on the site and their absence in the e-wallet (violation of transactions); the absence of agreement of the user with the proposed terms of an affiliation contract in creating an e-wallet or registration on the electronic exchange; baltic journal of economic studies 223 vol. 3, no. 5, 2017 thefts of cryptocurrency due to a cyberattack on a crypto-exchange, etc. it is important to consider theoretical and legal possibilities of applying certain types of legal liability, in particular civil, administrative, and criminal liability to relations involving cryptocurrency (bitcoin). in the legal regulation of any social relations, guarantees of enforced restoration or protection of the violated law, in particular, the institute of civil liability, play a significant role. issues of civil liability include defining the amount of liability, and grounds for bringing to civil liability, as well as release, considering the fault of the victim (debtor), etc. (kuznetsova, 2013). in civil law, the imposition of property sanctions on offenders is an inevitable consequence of a civil offense commission and the result of failure or improper performance of civil rights and obligations assumed. the collection of property sanctions for the commission of an offense is considered one of the most effective means for the proper fulfilment of their subjective rights and obligations by participants of civil legal relations, so that civil liability guarantees protection of subjective rights and obligations of parties to civil legal relations, as well as stability of property turnover (bodnar, 2014; bodnar, 2007; odnostoronnia vidmova u dohovirnykh zoboviazanniakh). according to kuznetsova, violation of rights of parties to civil legal relations necessitates the restoration of the violated law, comprising civil liability applying. accordingly, the basis for such a liability is the very violation of subjective civil law (borisova, 2004). moreover, shevchenko emphasizes that it is a civil law that is characterized by the restoration of subjective civil rights of persons protected by law and carried out on various principles and with the help of civil liability (shevchenko, 2012). according to maidanyk, features of civil liability are: a) compensatory nature; b) state condemnation and coercion; c) property nature; direct responsibility of the offender to the victim; sanctions; the possibility of voluntary compensation for damage by the offender without judicial or other state bodies’ intervention (maidanyk, 2013). civilised literature reveals that for the onset of contractual liability, at least two reasons are required: existence of a contractual obligation, formally valid and such that does not violate the law in principle, as well as violation of this obligation, that is its non-execution or its inappropriate execution due to quantity, quality, the term (biriukov, zaika, 2014; zaika, timush, loviak, 2014). it is difficult to disagree with the thesis but to define the contract as one of the grounds of responsibility is not entirely correct. in this context, non-contractual liability is meant. thus, lovik notes that non-contractual obligations arising as a result of a violation of property and personal non-property rights of the subject are intended to ensure the most complete restoration of violated rights at the expense of the perpetrator of damage or at the expense of other persons subject to such a refund by law (loviak, 2014). features of civil liability are: it is always the responsibility of one person to another; it is always property liability; the overall size of responsibility must coincide with the size of injury or damage caused (pushkin, samoilenko, shishka et al. 1996). therefore, civil liability is characterized by the imposition on offenders certain measures that are property sanctions. thus, civil liability can be defined as a measure of legal influence, which is imposed on a person for an offense committed by him/her (gribanov, 1973). thus, in the perspective of the issue under consideration, the possibility of civil liability should be noted. mostly, it will concern cases of compensation for damage arising from contravention of the contractual basis for services to create and maintain e-wallets, cryptoexchanges activity. thus, for example, an agreement on the use of the service pingblockchain.com, where section 7 “warranties and responsibilities of the parties” states: 7.1. the service provides its services on “as is” basis as they are described on pages of the service site and does not offer any additional warranties. 7.2. the service guarantees fulfilment of obligations to the user only within the limits transferred by the user to the service for the transaction. 7.3. the service will do its utmost but does not guarantee that its services will be available 24 hours a day. the service shall not be liable for damages, loss of profit, and other expenses of the user arising in connection with the impossibility of access to the site and services of the service (uhoda pro vykorystannia servisu). therefore, the content of this electronic document neither reflect nor establish the terms of transaction validity, provided for in the civil code of ukraine (hereinafter – the cc of ukraine). thus, article 203 of the cc of ukraine clearly states: the content of transaction cannot contradict the cc of ukraine, other acts of civil law, as well as the interests of the state and society, its moral principles; performing the transaction person must possess necessary civil legal capacity; the expression of the will of transaction participant must be free and consistent with his internal will; the transaction should be carried out as provided for by law; the transaction should be aimed at relevant legal consequences, which are caused by them (tsyvilnyi kodeks ukrainy). the institution of moral harm should not be excluded. for example, for months, a person has been saving baltic journal of economic studies 224 vol. 3, no. 5, 2017 money on an e-wallet, and one day all disappears somewhere. does it make the person suffer morally or mentally? the human factor says “yes”, but from a legal point of view, this fact needs proof. in the relations under consideration, the complexity of civil liability implementation will be in the following. first, claims must be proved in the court, and second, evidence. how should the relevant evidence base for a court inquiry be collected, if everything is presented only electronically? although civil law contains positions on an electronic signature (loviak, 2014), the electronic form of transaction, but cryptocurrency relations have their features, which, unfortunately, are not yet adequately reflected in civil law. on november 10, 2014, the official website of the national bank provided information that cryptocurrencies, in particular, bitcoin, were a monetary surrogate, to be precise, document[s] in the form of banknotes that were different from the monetary unit of ukraine, issued not by the national bank of ukraine and made in order to make payments in economic turnover, in addition to currency values. this is the definition of article 1 of the law of ukraine “on the national bank of ukraine” of may 19, 1999, no. 679-xiv. in accordance with the second part of article 32 of the law, on the territory of ukraine, the use of money surrogates as a means of payment is prohibited. therefore, in contractual relations cryptocurrency as the price of the contract (and this is an essential condition) cannot be applied. although, according to the literal interpretation of article 32, the issue and circulation of cryptocurrency as a money surrogate, in contrast to the issue and circulation of monetary units, are not prohibited in ukraine until such cryptocurrency is offered/accepted by the customers for settlements. under civil law relations, the possibility of legal inheritance of cryptocurrency or its use in credit relations or in relation to collateral cannot be confirmed confidently. although the civil law does not prohibit including cryptocurrency into a will or lay as property rights, and even pay with cryptocurrency for contractual obligations or services. we support the opinion of some scholars that while the state has not decided on the status of cryptocurrency, they must be treated as goods. currently, in ukraine, large deals with cryptocurrencies are being conducted using the barter agreement, for example, the well-known agreement on “selling” an apartment for bitcoin was, in fact, an “exchange”. the barter agreement stipulates that each party undertakes to transfer goods to another party in exchange for other goods (rudenko, sadovnichy). the next type of legal responsibility is administrative. let us draws attention to provisions of the article 155-1 “violation of the procedure for payments” of the code of ukraine on administrative offenses (hereinafter – the cao). thus, violation of the established by law procedure for conducting payments in trade, public catering and services leads to a fine imposed on persons, who carry out payment transactions, from two to five tax-free minimum incomes of citizens and on officials from five to ten non-taxable minimum incomes of citizens (kodeks ukrainy pro administratyvni pravoporushennia). individuals such as business entities or legal entities (their subsidiaries, affiliates other separate units), which carry out transactions in payments in cash and (or) in non-cash form (using payment cards, payment checks, tokens, etc.) when selling goods (services rendered) in trade, catering and services, as well as authorized banks and business entities that execute foreign currency purchase and sale transactions, should be applied registrars of payment transactions. registrar of payment operations is a device or software and hardware with implemented fiscal functions and which is designed to record payment transactions when selling goods (services), operations on purchase and sale of foreign currency and (or) registration number of sold goods (services). registrars of payment transactions include electronic cash registers, electronic cash register recorder, computer-cash systems, electronic taximeter, vending machine, etc. (kodeks ukrainy pro administratyvni pravoporushennia. naukovopraktychnyi komentar). the leading legal point of this norm is consideration of services. after all, relations in cryptocurrency are service. for example, so-called programs, applications (bitcoin faucets) provide an opportunity to accumulate free “satoshi” for further profits. the abovementioned norm concerns business entities. information resources for providing services in cryptocurrency are not business entities, although they provide services as for goods in the form of virtual money. sequentially, according to article 2 of the law of ukraine “on application of registrars of payment transactions in trade, catering and services”, the payment transaction is the receipt of cash, payment cards, payment checks, tokens, etc. from the purchaser at the place of sale of goods (services), the repayment of cash for goods returned by the consumer (service not provided), and in the case of using a bank payment card, execution of corresponding payment transaction document for payment in cashless form for goods (services) by the bank of the purchaser or, in case of return of goods (refusal of service), registration of payment transaction documents for the transfer of funds to purchaser’s bank (pro zastosuvannia reiestratoriv rozrakhunkovykh operatsii u sferi torhivli, hromadskoho kharchuvannia ta posluh). the norms provided for by article 164-2 “violation of financial legislation” and article 166-5 “violation of banking legislation, legislation regulating the transfer of funds in ukraine, regulatory legal acts of the national bank of ukraine or conducting risky baltic journal of economic studies 225 vol. 3, no. 5, 2017 operations that threaten interests of depositors or other lenders of bank” of the cao are both theoretical and applied. for example, article 164-2 of the cao provides for the norm that the concealment in the accounting of currency and other income, unproductive costs and losses, absence of accounting or keeping it with violation of the established procedure, inserting false data to the financial statements, failure to provide financial statements, late or poorly conducted inventory of cash and property, late submission for the consideration or approval of the annual financial plan of the enterprise of the state economy sector and the report on its implementation, obstruction of carrying out audits and inspections by officials of the state financial control body, failure to take measures of compensation for losses from shortages, embezzlement, theft and mismanagement by perpetrators entail imposition of a fine of eight up to fifteen nontaxable minimum incomes of citizens (kodeks ukrainy pro administratyvni pravoporushennia). therefore, the cryptocurrency market may facilitate income concealment, as bidding on crypto-exchange can be anonymous. consequently, the norm of article 166-5 of the cao uses the notion of “performing risky operations”. risk management is a process, by which a bank identifies risks, evaluates their scope, monitors, and controls risk positions, as well as considers the relations between different risk categories. the set of actions on risk management aims at ensuring achievement of such objectives as: risks must be clear and reasonable for the bank and its administration; risks must be within tolerance levels established by the supervisory board; risk-taking decisions must be consistent with the strategic objectives of the bank; risk-taking decisions must be specific and precise; expected profit should offset the risk taken; distribution of capital should correspond to the scope of the risks that the bank is exposed to; incentives to achieve high performance should be consistent with the level of tolerance to risk (kodeks ukrainy pro administratyvni pravoporushennia. naukovo-praktychnyi komentar). unfortunately, risks apply only to banking institutions and the national bank, in particular. thus, it is appropriate to note that certain rules of administrative legislation contain conditional provisions for the regulation of cryptocurrencies in ukraine. some rules of the cao operate with such terms as “service”, “risk”, “non-cash form of payment”, which are inherent in activities in cryptocurrency relations. it is decisive that these terms apply to accredited business entities, while they are not applicable to e-services for the provision of services in the crypto market. positions of administrative liability are complicated by the lack of licenses to engage in such activities. administrative liability application is complicated by the lack of such activity licenses. the regulator of such activity could be the national bank of ukraine or another specially authorized body. under such conditions, it would be possible to apply administrative measures to business entities providing financial services in the market of cryptocurrencies without a license or providing financial services in the market of cryptocurrencies in ukraine. inspection of legislative provisions of the cc of ukraine indicates that it does not contain a direct norm that would strengthen the possibility of criminal liability for violations in cryptocurrencies. noticeably, article 200 “illegal actions with transfer documents, payment cards and other means of access to bank accounts, equipment for their production” of the cc of ukraine considers payment documents. the term “other means of access to bank accounts...” is used in criminal law. other means of access to bank accounts should be considered as any other, but documents for transfer and payment cards, documents or items, using which, with the knowledge and consent of bank employees, a person can access a particular bank account and carry out operations with funds that are located on such account. in particular, this other means is a bank identification card (id card), which is an identifier in the form of a plastic or other type of card containing details specified by the bank, which identify the client and his accounts in the bank (kryminalnyi kodeks ukrainy: naukovo-praktychnyi komentar). for the issue under consideration, provisions of article 190 “fraud” and article 222 “fraud with financial resources” of the cc of ukraine can be relevant. the subject of fraud is characterized by the possibility to be both a stranger’s property and the right to such property. the right to property can be provided for by various documents, such as securities, a power of attorney to dispose of property, debt obligations, wills, etc. the objective side of fraud is seizure of property or acquisition of property rights by deception or abuse of trust. due to fraudulent acts, the victim (an owner, a possessor, a person, who is in charge of property or under whose protection property is located) voluntarily transfers property or the right to property to an offender. the direct involvement of the victim in the transfer of property and the voluntary nature of his/her actions are mandatory indications of fraud that distinguishes it from the theft of property and other crimes against property (kryminalnyi kodeks ukrainy: naukovopraktychnyi komentar). cryptocurrency fraud is a serious problem for such a developed country as the united states, whose bank regulators have drawn attention to the increase of these crimes. having discovered that unregulated virtual currency sphere is very popular among online fraudsters, the new york state department of financial services concluded that this kind of fraud was threatening us national security (shapochka, 2014). baltic journal of economic studies 226 vol. 3, no. 5, 2017 the provision of article 225 “cheating of purchasers and customers” of the cc of ukraine is worthy of attention, as it covers the concept of “another deception”. “another deception” is the use of any of the abovementioned methods, by means of which an offender receives from the purchaser or the customer a higher monetary amount that should have been paid for the goods or service in accordance with the established prices or tariffs. another deception is, in particular, the sale of goods at a price that is higher than established (this way is also called “exceeding established retail prices”), selling of spoiled goods, lower grade goods at a higher price, exceeding the established prices and tariffs for household and communal services provided to the people, etc. the obligatory feature of this crime is the deceptive nature of related actions i.e. they are committed to making an impression of the rightness of offender’s actions on the purchaser or the customer (kryminalnyi kodeks ukrainy: naukovo-praktychnyi komentar). in relations with cryptocurrency (bitcoin), for example, the rate of the electronic money of e-wallet for cryptocurrency transaction to a bank card is often absent or do not correspond to provisions stated by the electronic resource. from the perspective of national security, provisions of article 209 “legalization (laundering) of proceeds of crime” and article 209-1 “intentional violation of requirements of the legislation on prevention and counteraction to legalization (laundering) of proceeds of crime or terrorist financing” of the cc of ukraine are of particular interest. the main direct object of the crime is established, in order to counteract involvement of “dirty” funds in economics, the order of economic activity, as well as the procedure for civil legal transactions in respect of personal and another similar usage of property not related to economic activity. an additional object is the interests of justice, normal functioning of the financial system, principles of fair competition. in this case, currency may be in cash or in non-cash form (on a bank account and their turnover is governed by the law of obligations), be both national and foreign currency. the letter of the nbu dated december 8, 2014, no. 29-208/72889 states that transaction of bitcoin for us dollars or other foreign currency has signs of the so-called financial pyramids functioning and may indicate a potential involvement in the implementation of dubious transactions in accordance with the law on counteraction to legalization (laundering) of proceeds of crime and terrorist financing. countering the crimes of article 209 and article 209-1 of the cc of ukraine is the practice of licensing, which is very common in the united states, japan. considering the issue, the european union is going to adopt the relevant amendments to directive (eu) 2015/849 “on prevention of the use of financial system for the purposes of money laundering or terrorist financing” (plyta). in such positions, we can conclude that the implementation of criminal liability in the field of cryptexchange relations also depends on licensing activities in ukraine. the existence of a license minimizes violations in this area will allow every consumer of services in the field of cryptography to have open information about the issuer, the order of issue and operations on cryptocurrency (bitcoin or its various analogues). therefore, implementation of criminal liability in cryptocurrency relations also depends on licensing activities in ukraine. the presence of a license minimizes violations in this sphere, will allow every consumer of services in cryptocurrency to have open information about the issuer, the order of issue and operations on cryptocurrency (bitcoin or its analogues). 4. conclusions an overview of certain provisions of ukrainian legislation on the possibility of applying certain types of legal liability to violations in cryptocurrency enabled to conclude: 1. in the civil code of ukraine, the cao and the cc of ukraine, currently no direct norms clearly establish the list of unlawful actions or offenses, for which it would be possible to bring offenders to one or another form of legal liability. 2. in relations under consideration, the complexity of civil liability implementation is in the following aspects: ‒ the possibility of its occurrence in contractual and noncontractual obligations without civil-law regulation of specific violations of the latter; ‒ the need to prove their claims in court since other forms of protection of rights in this respect are absent or ineffective; ‒ the complexity of collecting relevant evidence base to recourse to court since all transactions with cryptocurrency are carried out electronically. 3. some rules of the cao operate with terms, such as “service”, “risk”, “non-cash forms of payment”, which are inherent activities in cryptocurrency relations. an important feature is that these terms apply to accredited business entities, which is not true of electronic services in cryptocurrency market. positions of administrative liability are complicated by the absence of licenses on such activities by providers of services in cryptocurrency. 4. criminal liability in cryptocurrency may come for fraudulent actions or legalization (laundering) of proceeds of crime. we can also conclude that the realization of criminal responsibility (correct qualification of criminal offenses) in cryptocurrency relations also depends on licensing activities in ukraine. if cryptocurrency market actors do not have licenses, any slight sale of bitcoin to those, who plan to use it in criminal intent, is not sufficient grounds for a charge of the legalization (laundering) of proceeds of crime, even if the criminal intent is apparent in the sale of cryptocurrency. baltic journal of economic studies 227 vol. 3, no. 5, 2017 future scientific research in this sphere can include the 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(in ukrainian) plyta, a. i. kryptovaliuta: yii pravovyi rezhym, problemy zastosuvannia [cryptocurrency: its legal organization, problems of application]. retrieved from http://ukrainepravo.com/legal_publications/essay-on-it-law/it_law_ plyta_%d1%81ryptocurrency/ (in ukrainian) baltic journal of economic studies 222 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: shvetc@ukr.net orcid: https://orcid.org/0000-0002-1999-9956 2 national academy of internal affairs, ukraine e-mail: evgeniykobko@gmail.com orcid: https://orcid.org/0000-0002-3121-0823 3 odessa state university of internal affairs, ukraine e-mail: 1313sakur@gmail.com orcid: https://orcid.org/0000-0001-6879-7376 doi: https://doi.org/10.30525/2256-0742/2023-9-2-222-229 legal and economic issues of national security management in ukraine: objective values and national interests in the context of war dmytro shvets1, yevhen kobko2, vitaliy sokurenko3 abstract. the war in ukraine has created an unprecedented global humanitarian crisis, with the highest number of refugees and internally displaced persons (idps) in the world, civil infrastructure in ruins, uncontrolled food and water supplies in deserted regions, etc. the war has also led to a radical change in national security governance in ukraine. the main purpose of the article is to analyse current legal and economic issues of national security governance in ukraine at war. the subject of the study is the importance of national security governance in defining national values and interests and in assessing damage in ukraine. the methodology of the research includes the method of descriptive and explanatory study of legal issues of national security governance in ukraine. the study is based on an analysis of legal documents and academic articles. for the purposes of the paper, the analysis of the literature on the subject and the method of document research were used. originally, the regulations regulating the legal issues of national security governance in ukraine were included in the law of ukraine "on national security". the paper modifies the current situation regarding the normative provisions that should be updated. the hypothesis of the paper is that the concept of objective values is constantly evolving and that there is no unified approach to its definition. the practical implications are as follows: the number of refugees from ukraine is still growing, so ukraine should pursue its national interests in the receiving countries in order to protect universal values. as a result, during martial law ukraine civil society set up objective values within its national interests, locking up counter-terrorism and human trafficking. the value/originality of the paper is that it expands the knowledge about the interconnection of objective values and national interests of the state with a special focus on ukraine at war. key words: armed conflict, damage assessment, cultural heritage, national interests, national security governance, national security policy, objective values, war. jel classification: k38, k40 1. introduction during armed conflicts, the issue of formalising objective values within the modern architecture of a state's national security is worth examining. the concept of "national interests" has been legally defined and included in national security laws, while the concept of "objective values" is discussed only in economic terminology. in 2017, lech chojnowsky noted: "since national interests are based on national values, the process of their formulation should begin with an assessment of their current state. if they are fully available to the state, nation, society and citizens, the content of national interests will be expressed in terms describing the behaviour or preservation of such a state, for example, the preservation of the state territory or its integrity. in case of partial or total loss of the basic values, the content of national interests should be formed on the basis of such terms as regaining or restoring, for example, regaining full territorial integrity of the state, or regaining or gaining sovereignty. as in the case of national values, the interests refer to certain issues included in the concept of national security, i.e., the baltic journal of economic studies 223 vol. 9 no. 2, 2023 security of the state, nation, society and citizens." (chojnowski, 2017) l. chojnowski developed his own approach by presenting exemplary national interests and formulating them in relation to certain values of national security. he mentions that the main national values of a democratic state lead to such interests, such as: – national awareness, meaning the sense of belonging to the national community formed in the course of implementing the ideology of nationalism. national awareness leads to the maintenance (restoration, formation) of national awareness, which is the sense of belonging to the national community; – national culture, which refers to the cultural and national heritage that shapes the national awareness and leads to the maintenance (recovery, building, development) of the cultural and national heritage necessary to shape the national awareness; – political sovereignty, i.e., the right of the nation as an identity group to self-determination, that is, having one's own state results in maintaining (regaining, gaining, restoring) the right of the nation as an identity group to self-determination. meanwhile, ari armstrong wonders what objective value means. he says that objective value means "something... objectively valuable if the person seeking the object in question does so rationally, with the aim of genuinely advancing his life and happiness. some, but not all, objective values are also universal values, that is, they are necessary for the life of every human being. for example, food is objectively valuable to everyone because everyone needs food to live. wheat, on the other hand, is objectively valuable only to those who eat it to further their life and happiness; it is not objectively valuable to people who don't care about wheat or to people with celiac disease (indeed, it is objectively harmful to the latter)..." (armstrong, 2014) the panic over the food supply crisis led to a global rise in the price of wheat and grains in 2022, as according to the un, "ukraine provides 90 per cent of the wheat supply in armenia, azerbaijan, eritrea, georgia, mongolia and somalia. ukraine is also a major source of wheat for the world food programme, which provides food aid to 115.5 million people in more than 120 countries." (ukraine and the food and fuel crisis: 4 things to know, 2022) according to statista, "...china was the leading export destination of agricultural products from ukraine secured by the black sea grain initiative, with 5.6 million tonnes. in addition, 4.4 million tonnes went to spain, while turkey ranked third. the agreement between ukraine, russia, turkey and the united nations opened three ukrainian ports to agricultural exports. in general, lowand lower middle-income countries received less than 30 per cent of ukraine's cereal exports." (statista, 2023) the war in ukraine has also altered the eu's agricultural and energy commodity economy. according to the april reuters report, in 2023 "...ukraine's wheat exports are likely to fall 37% to 8.8 million tonnes in the july-june 2023/24 season due to an expected drop in the harvest and ending stocks. in its first forecast for the 2023/24 season, consultancy apk-inform said ukraine's total grain harvest could fall 13% to 45.6 million tonnes, including 16.2 million tonnes of wheat, 5.2 million tonnes of barley and 22.9 million tonnes of maize." (reuters, 2023) according to independent commodity intelligent services (icis) price forecasts and global market analysis): – the eu implemented a voluntary 15% reduction in consumption as russia supplied 20% of the global seaborne ammonia market and russian oil supplied around a quarter of european demand; – the eu ended its dependence on russian crude oil and agreed to ban seaborne imports from 5 december 2022 and petroleum products from 5 february 2023; – european liquefied natural gas (lng) processing began operating at full capacity, with record shipments to europe expected in 2022/23, etc. thus, it can be assumed that this forecast indicates that the current stage of global economic development shapes the global and national security agenda, putting the issue of humanising the development of the international community on the agenda. 2. the complexity of the economic and legal parameters of valuation in economic theory, there are some teething problems in comparing the results of economic and cultural value assessments. economists s. mourato and m. mazzanti have studied the most developed and widely accepted value assessment tools. they examine how social contexts shape heritage and conservation and noted: "the imperative of public participation are issues that challenge conventional notions of the responsibilities of conservation professionals." the authors also confirm that "...despite its obvious benefits to society, cultural heritage is increasingly threatened by degradation and destruction. while some risk factors result from natural environmental causes (such as earthquakes, landslides, volcanism, floods, avalanches, and coastal dynamics), human activities are arguably the most significant pressures for the deterioration and loss of cultural assets. these include tourist and user pressure, unplanned urbanisation, destructive development projects, theft, vandalism, war, air baltic journal of economic studies 224 vol. 9 no. 2, 2023 pollution, vibration and simple neglect. part of the problem is that many cultural goods are not traded in markets: they have a "zero price" and can be enjoyed by many for free. in other words, these so-called non-market cultural resources are valued by society, but in a way that does not translate into a market price – i.e., they are external to markets. the impact of this "market failure" on conservation can be severe: underfunding, with insufficient funds generated to finance conservation; heavy reliance on government support and public subsidies, leaving the conservation of many important cultural assets at the mercy of political whims and overstretched government budgets; overuse, resulting in wear and tear, congestion, vandalism and theft; and the inability to compete on a level playing field with alternative development projects because the economic value of cultural assets appears to be zero or very low." s. mourato and m. mazzanti mention that economic evaluation could precede the use of instruments such as local or national taxes aimed at financing culture, charges aimed at regulating access and raising funds, and voluntary donation mechanisms aimed at raising funds without charging. three levels of relevance and use for economic value estimates have been identified in the sector. the first level is related to economic management issues at the level of cultural institutions and aims at estimating demand schedules, price schedules and price elasticities, prioritising projects, ranking potential investments, and assessing the impacts of pollution, tourism, development, etc. the second level is financial and involves analysing pricing policies, designing incentive schemes to encourage conservation and justifying subsidies. the third level is more politically oriented and aims at estimating values to provide information of strategic policy importance, i.e., to allocate budgets to the cultural sector and cultural institutions according to their relative value, and to distribute resources within the sector where the economic value is higher (mourato, mazzanti, 2002). public international law and international humanitarian law have several norms that respect objective values (e.g., common article 55 of the geneva conventions of 1949, additional protocol ii to the geneva conventions of 1949, unesco convention concerning the protection of the world cultural and natural heritage (1972), etc.) j. pejic states: "both the fourth geneva convention and additional protocol i contain a number of provisions dealing with collective and individual assistance to civilians in occupied territories. the basic rule laid down in the fourth geneva convention is that the occupying power has the duty to ensure the food and medical supplies of the population and should bring in the necessary food, medical supplies and other articles if the resources of the occupied territory are inadequate. foodstuffs available in the occupied territory may be requisitioned in very limited circumstances, in which case the occupying power must ensure that fair value is paid for any goods requisitioned." (pejic, 2001) when examining the fundamental rule of the prohibition of torture or inhuman treatment, it should be remembered that there is no algorithm for individual complaints in international humanitarian law. during armed conflicts, the legal instrument of ihl to protect the rights of civilians is the only effective mechanism to protect objective values and national interests. it is worth mentioning that during the war in ukraine most of the crimes and cases fall under the norms of state responsibility, so h. novytskyi and others suggest that the constitutional doctrine of national security of ukraine today could read as follows "...ukraine is responsible to the citizens of ukraine for its population, the integrity of its territory, the inviolability of its borders, the preservation and increase of the national wealth of ukraine, and the preservation and development of the national identity of the ukrainian people." (novytskyi, shcherbyna, pyvovarov, kartamysheva, & lysodyed, 2022) in the 1950s, h. bowen gave his definition of 'social responsibility ' as the commitment of a company to pursue such policies, make such decisions and adopt such behaviour as are consistent with the prevailing aims and values of society (bowen, 1953). in order to secure the public interest, social responsibility during war corresponds to national security governance and focuses more on national interest than on objective or subjective values. however, international organisations don't have the subjectivity to investigate violations of international human rights law. from a practical point of view, these organisations only provide advice and advocacy. fact-finding commissions or commissions of inquiry, on the other hand, examine documen tation and conduct fact-finding (fact-checking) on crimes against humanity. the events that define the war in ukraine are complex and problematic. in order to investigate and assess the harm caused, in resolution 49/1, adopted by the human rights council on 4 march 2022, on the human rights situation in ukraine in the context of the russian aggression, the human rights council decided to urgently establish an independent international commission of inquiry composed of three human rights experts to be appointed by the president of the human rights council for an initial period of one year. the commission of inquiry was mandated baltic journal of economic studies 225 vol. 9 no. 2, 2023 to complement, consolidate and build upon the work of the un human rights monitoring mission in ukraine (hrmmu), in close coordination with the hrmmu and the office of the un high commissioner for human rights. on 12 may 2022, the human rights council adopted resolution s-34/1 on the deteriorating human rights situation in ukraine as a result of the russian aggression and requested the commission of inquiry to address the events in the areas of kyiv, chernihiv, kharkiv and sumy regions in february and march 2022. on 24 march 2023, the office of the high commissioner for human rights (ohchr) published its thirty-fifth report on the human rights situation in ukraine, covering the period from 1 august 2022 to 31 january 2023. on 14 november 2022, the united nations general assembly adopted the resolution (document a/es-11/l.6) "further development of remedies and reparations for the aggression against ukraine". this resolution specifically recognised the need to establish "an international mechanism for the compensation of loss, damage or injury caused by the internationally wrongful acts of the russian federation". the international valuation standards (ivs 2022), published by the international valuation standards council (ivsc), have long been used globally to determine the value of assets and businesses in myriad compensation adjudications. adherence to the valuation standards set out in ivs 2022 will ensure that the financial values supporting compensation claims are reasonable and defensible, as well as consistent and transparent across sovereign jurisdictions. although the ivs does not explicitly address the issue of valuation of war damage for the purpose of financial compensation, current methods for determining value are directly applicable and can be readily applied. the circumstances of each compensation case will determine which ivs "basis of value" is most applicable (e.g., damage and destruction of assets and enterprises; expropriation of assets and enterprises; economic damage to assets and enterprises) (thomas, simonova, 2022). therefore, the economic assessment of cultural heritage damage is considered to be the most multifaceted issue (ganski, 2019). in ukraine, cultural identity is based on local characteristics and originality, historical background of national minorities in different regions. today, the international identity of ukrainian cultural heritage is concerned with the global support of ukrainian sovereignty and takes a universal approach to modelling the global security system according to ukraine's experience. at the same time, the problem of national security governance in the non controlled regions is characterised by the irrational behaviour of the occupants in the occupied southern and eastern regions. the military doctrine of the russian federation, signed by putin on december 26, 2014, contains a provision that it is no longer possible to intervene in neighbouring countries only in defence of one's own citizens, but also if the authorities of a neighbouring country pursue policies contrary to russia's interests (czaja, 2015). in september 2022, within the framework of the national council for ukraine's recovery from the war, the analytical team of the kyiv school of economics, together with the ministry of community and territorial development of ukraine, the ministry of infrastructure of ukraine, the ministry of health of ukraine, under the coordination of the ministry for reintegration of the temporarily occupied territories of ukraine and in cooperation with other relevant ministries and the national bank of ukraine, prepared a report on the assessment of damages caused by russia's military aggression in ukraine. the overall damage assessment was carried out in accordance with the world bank's methodology and in close cooperation with the world bank's specialist team, taking into account the significant amount of micro-data collected by the specialist authorities, the local civil-military administrations, since the beginning of the full-scale war (kse report, 2022). the national council for the recovery of ukraine from the consequences of the war draft ukraine recovery plan (materials of the "audit of war damage" working group of july, 2022) gives the following figures for 2022: "the unprecedented increase in security risks and the cancellation of civilian flights have a direct impact on the country 's tourist attractiveness, which is currently close to zero. the mining of the coastal zone is bringing domestic beach tourism to a standstill. as of 13 june, the damage to culture, sport and tourism amounts to at least $0.7 billion, or uah 21.9 billion. according to micro data, at least 527 cultural facilities, 36 religious buildings, 49 tourist facilities and 95 sports facilities have been damaged or destroyed. in particular, 32 churches/ temples, 4 monasteries, 253 houses of culture, 31 sports schools, 36 museums and 49 tourist facilities, located mainly in 14 regions, were damaged. important cultural and religious sites were damaged, including the sviatohirsk lavra of the holy dormition, the donetsk academic regional drama theatre (mariupol), the national literary memorial museum of hryhoriy skovoroda, and many others. in addition, some art collections were lost, including a collection of scythian gold baltic journal of economic studies 226 vol. 9 no. 2, 2023 discovered by archaeologists in the 1950s, which was probably removed by the occupation authorities from the melitopol museum of local lore. this assessment is based on the site-by-site list of damaged/destroyed sites provided by witnesses and local administrations, which carries the risk of incomplete data on the list of damaged objects. total damage to water transport infrastructure is estimated at $471 million. this estimate includes both seaport and inland waterway infrastructure destroyed during the war. total losses in culture, sport and tourism amount to at least $4.3 billion. according to experts, some 50,000 people have lost or may lose their jobs in culture and tourism due to the closure of institutions. the emigration of professional communities is also an important factor in the losses. tourism has been hit hard by the war in ukraine. ukraine has lost its foreign tourists, which amounted to 4 million people in 2020. due to active hostilities, the threat of missile attacks and land mines, 13 out of 24 oblasts faced a total or partial cessation of tourism activities. the total recon struction needs for tourism, sport and culture amount to at least $1.6 billion." (the national council for the recovery of ukraine from the consequences of the war draft ukraine recovery plan, 2022) the judicial mechanism for assessing harm can be seen in the judgments in sargsyan v. azerbaijan and chiragov v. armenia, delivered on 16 june 2015 by the grand chamber of the european court of human rights, which protected the rights of families displaced by the conflict in nagorno karabakh in the early 1990s under the european convention. the applicants' complaints about the loss of their homes, land and property were upheld, with the court finding continuing violations of their rights under article 1 of protocol no. 1 (peaceful enjoyment of property), article 8 (right to respect for private and family life and home) and article 13 (right to an effective remedy). with regard to the call for the establishment of a property claims mechanism, the court drew the attention of governments to international standards on property rights (in particular the un pinheiro principles), concluding: "...it appears particularly important to establish a property claims mechanism that should be easily accessible and provide for procedures operating under flexible standards of proof, enabling the applicant and others in his situation to recover their property rights and obtain compensation for the loss of enjoyment thereof." (sargsyan, para. 238, chiragov, para. 199) philip leach also cites precedents for court-ordered redress mechanisms with the 2005 xenides-arestis v. turkey judgment, when the court ordered the turkish government to establish a property redress mechanism within three months, leading to the creation of the immovable property commission (ipc) (which included a former secretary general and deputy secretary general of the council of europe) (sargsyan, para. 216). citing the 2010 court decision in the demopoulos v. turkey case, leach mentions that compensation should, where possible, include non-pecuniary damage as well as damage to and loss of income from usurped property. compensation need not be at full value and may be standardised to facilitate speedier assessment, but must bear a reasonable relationship to actual value. official recognition of usurped property rights is an important part of a remedy, as are measures to provide future legal protection for the restored property rights of displaced persons (leach, 2016, sargsyan, para. 216). 3. assessment of the instruments for ensuring national interests in ukraine: striving for european standards the idea of the national interest is of great importance around the world, and in its simplest definition, the national interest is "the interest of the nation as a whole, regarded as an independent entity separate from the interests of subordinate territories or groups, as well as other nations or supranational groups" (merriam-webster (n.d.)). the law of ukraine "on national security " defines "national security " of ukraine as the protection of state sovereignty, territorial integrity, democratic constitutional order and other national interests of ukraine from real and potential threats, and "national interests of ukraine" as the vital interests of a person, society and the state, which ensure the state sovereignty of ukraine, its progressive democratic development, safe living conditions and well-being of its citizens. ukrainian researchers and experts i. yakoviyk, d. chyzhov, n. karpachova, s. hlushchenko, y. chaliuk stated: "the modern system of public administration in the field of national security requires a number of systemic changes. first of all, the system of regulatory and legal support of the state policy in this area needs to be expanded through the development of sectoral acts, which would form the state security policy in a particular segment of public relations. this refers to state and regional development programmes in a particular area, which would ensure the achievement of tactical goals in a particular segment of state regulation. taken together, they form an integrated system of national security with a synergistic effect of combining various potentials manifested in economic, social, humanitarian and other spheres. secondly, it is necessary to expand the modern baltic journal of economic studies 227 vol. 9 no. 2, 2023 contours of security policy in ukraine by developing and implementing more active (aggressive) mechanisms aimed not only at countering external threats, but also at promoting one's own national and civilisational interests in the geopolitical space. therefore, the current active foreign policy should become an element of ensuring the national security system, maximising it through the effectiveness of geopolitical strategies and trends." (yakoviyk, chyzhov, karpachova, hlushchenko, chaliuk, 2020) this article assumes that such a mechanism already exists. firstly, the law of ukraine "on prevention of threats to national security related to excessive influence of persons with significant economic and political weight in public life (oligarchs)", which defines the legal and organisational framework for the functioning of the system of prevention of threats to national security related to excessive influence of persons with significant economic and political weight in public life (oligarchs), the content and procedure for applying coercive measures to such persons, can become such a mechanism under martial law. secondly, as there have been numerous instances of armed violence in ukraine, the ecthr plays a powerful mechanism for ruling on ukraine's claims of human rights violations by russia in cases such as the following: – ukraine v. russia i (re-crimea nos. 20958/14 and 38334/18) – the events leading up to and following russia's seizure of control of the crimean peninsula from march 2014 and subsequent developments in eastern parts of ukraine; – ukraine v. russia ii (no. 43800/14) – the alleged abduction of three groups of children from eastern parts of ukraine and their temporary transfer to russia between june and august 2014; – ukraine v. russia iii (no. 49537/14) – the echr decision was adopted after the ukrainian government informed the court that it did not wish to pursue the application, as an individual application (no. 49522/14) on the same subject was pending before the echr; – ukraine v. russia iv (no. 42410/15) events in crimea and eastern ukraine as from september 2014; – ukraine and the netherlands v. russia (no. 8019/16, 28525/20 and 11055/22). in the context of the war in ukraine and the country 's integration into the european union, the european convention on human rights has an important role to play. professor of public international law at the jagiellonian university in poland and ad hoc judge at the echr . michal kowalski notes: "the echr does not deal with 'crimes' of any kind; in armed conflicts (in addition to international humanitarian law, which prohibits war crimes), norms guaranteeing fundamental human rights also apply. some arbitrary acts in an armed conflict may be considered as violations of fundamental human rights (right to life; prohibition of torture). and these violations may become the subject of proceedings initiated by an individual or inter-state application to the echr under the european convention on human rights." (crawford, 2020) the justification for a wide margin of appreciation is readily apparent in cases of national security, since this is a vital interest for all states and the court and the commission, remote from the specific context, may well be ill-equipped to identify genuine threats to it. see also appl. no. 21318/93, ochsenberger, where the commission held that the prohibition of nazi views in austrian law was justified under article 10(2) in the interests of national security, territorial integrity and the prevention of disorder and crime; and vereiniging weekblad "bluf !", 9 february 1995, a 306-a, where the court held that the prohibition of an issue of a left-wing magazine containing an outdated confidential security service report could not be justified under the national security exception to article 10(2). agreeing with l. choynowski, "national security management requires the development of a model that corresponds to the real national security system, taking into account all subsystems and interrelationships between them. it can be formed separately by identifying all actors that carry out purposeful activities in the interests of the state's security, taking into account their missions, goals, structures and relationships between them and other actors. the basis for such identification should be legal acts, as they are the basis for the activities of services, guards, inspectors and other entities working in the security sector, and then their integration into smaller and smaller systems until the main system – the national security system – is formulated." (chojnowski, 2017) ukrainian researchers kovalova, o., кorniienko, m., pavliutin y. noted: "strengthening the role of public organisations in ensuring national security requires a comprehensive approach, including legal and organisational lines. within the legal framework it is necessary to: 1) to establish requirements for reporting by the authorities on the proposals of public organisations considered or the reasons for their rejection; 2) to eliminate the scattering of legal norms on the procedure for holding public hearings on various legislative acts; 3) to accelerate the process of adopting the new national security strategy, taking into account the proposals of public organisations, as well as to increase their impact on national security in all areas of identified threats and challenges; 4) to develop and approve a single baltic journal of economic studies 228 vol. 9 no. 2, 2023 form of reporting on the implementation of action plans aimed at implementing the national security strategy; 5) to specify in the law of ukraine "on national security of ukraine" the role and place of public organisations in the system of national security, to determine the forms of participation of public organisations in ensuring national security and the peculiarities of their interaction with the authorities; 6) to provide for the occurrence of responsibility of the subjects for non-fulfilment or improper or untimely fulfilment of the tasks in the field of national security provided by the strategic documents and plans for their implementation." the authors of this article share the opinion of the researchers kovalova o., кorniienko m., pavliutin y., who stated: " within the organisational direction it is necessary to: 1) to ensure the implementation of the legislation on systematic reporting on national security within the competence of each of the state bodies involved in national security; 2) to establish, on the basis of a single standard, continuous monitoring of the implementation of agreements and memoranda of understanding on cooperation in the field of national security between the authorities and public organisations; 3) to transform the practice of consultative situational cooperation into the practice of continuous coordination and strategic cooperation in the field of national security; 4) to create a single register of the names and addresses of persons involved in national security; 5) create a single register of threats as part of ukraine's national security strategy; 6) improve the register of public organisations, in particular, to organise them into directions and forms of activity, to display links to official websites of organisations and to provide public access to it; 7) introduce an effective mechanism for coordinating the involvement of public organisations in national security and providing them with donor support through the creation of a single focal point for the involvement of public organisations in national security." (kovalova, korniienko, pavliutin, 2020) 4. conclusions in the modern stage of the nine-year war in ukraine, national security governance plays much more than an essential role in building or surviving life in different regions of ukraine. fragmented approach is considered as a tool for assessment of intercivilised activities in occupied regions. this paper aims to show that during martial law the assessment of damage to state and private property is included in the cultural and security framework. it defines the legal position of the president of ukraine, the parliament of ukraine and the government of ukraine, the security service of ukraine, the ministry of internal affairs of ukraine and other security institutions in the decision-making process on the creation of new forms of guarantees. this work, apart from its subject, has a subjective scientific value for the peaceful existence of the ukrainian people. besides, ukrainian identity cannot be separated from its people, territory and national values. during the war, the legal regulations on national security contained in normative acts should avoid duplication, on the other hand, it is worthwhile to measure and regulate the productive effect of cross-functional influence of the security forces. the foundations of national security governance in ukraine have the same goals, but have acquired new meanings. that is why the protection of the environment and cultural heritage, as well as the fight against international terrorism and transnational crimes against humanity, are the foundations of the peaceful life of the innocent population of ukraine. this is also the reason why ukraine's political sovereignty depends on cooperation with the united nations in eliminating nuclear weapons and other weapons of mass destruction. references: armstrong, ari (2014). economists’ "subjective value" and ayn rand’s objective value reconciled. available at: https://theobjectivestandard.com/2014/06/economists-subjective-value-ayn-rands-objective-value-reconciled/ bowen, h. p. 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(2020). national security policy in ukraine: a change in the system of power relations of the modern world. revista san grigorio, no. 42, p. 334. available at: https://revista.sangregorio.edu.ec/index.php/revistasangregorio/article/view/1555/22-ivan received on: 15th of march, 2023 accepted on: 30th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 169 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national technical university of ukraine "igor sikorsky kyiv polytechnic institute" ukraine (corresponding author) e-mail: uas.natalya@gmail.com orcid: https://orcid.org/0000-0001-7519-6560 2 national technical university of ukraine "igor sikorsky kyiv polytechnic institute", ukraine e-mail: skydoor13@gmail.com orcid: https://orcid.org/0000-0002-1860-756x researcherid: acx-8552-2022 doi: https://doi.org/10.30525/2256-0742/2023-9-1-169-176 structural reorganisation of a company in a crisis of supply discrepancies nataliia semenchenko1, glib mazhara2 abstract. the relevance of research is determined by the risk of any organisation being affected by the negative effects of overproduction. this requires businessmen to quickly identify and solve related problems by carrying out structural reorganisation of their companies. as such, the main goal of the article is to research the problematic of the overproduction crisis, which is concluded by such objectives as crisis consequences for government and manufacturing organizations evaluation, and development of recommendations regarding the structural reorganization of organizations in the current conditions. the main research methods are graphical and tabular methods, as well as synthesis and analysis in combination in a complex approach, which allows to study crisis processes in order to optimise the company's activity through effective structural reorganisation. the main results of the research are the study of the concept of overproduction crisis and its problematic consequences for the country and the industry. the analysis of the influence of overproduction on the production and trade organisation and the development of proposals for the structural reorganisation of the company in crisis conditions. organisational reconstruction in the modern environment was studied through the use of careful management, careful problem solving, visual management, quick configuration tool, autonomy, process balancing, careful quality assurance, careful human resource usage, careful supply chain management and production flexibility. organisational restructuring can also be aimed at the implementation of digital technology, which can be categorised by the scenarios of forecasting, waste analysis and redistribution. organisational restructuring in the modern environment has been studied through the use of careful management, careful problem solving, visual management, quick configuration tool, autonomy, process balancing, careful quality assurance, careful human resource usage, careful supply chain management, and production flexibility. in order to prevent the influence of crisis occurrence through changes in organisational structure, these procedures were proposed: assembly line load stabilisation, manufacturing analysis and 5s system. the results of this article and the conclusions based on them may be of practical value for students studying the peculiarities of effective financial management in the conditions of crisis, as well as for businessmen interested in maintaining their financial results, maximising profits, preventing crisis problems and optimising business activity through changes in the company structure. key words: business activity optimization, crisis occurrences, organization restructuration, manufacturing overproduction, circular economy. jel classification: d21, d81, l22, q31 1. introduction the overproduction crisis is one of the types of market economy crises in which the balance between production and demand is disturbed due to an excessive amount of goods being produced. it is usually considered one of the phases of the juglar economic cycle (pasinetti, 2021). overproduction harms both the country and various sectors of the economy. the problems caused by overproduction are usually the following (wolf, 2015): decrease in demand for products and services; increase in the level of bankruptcies; decrease in the level of business activity, which is characterised by the closure of nonbankrupt organisations and a low number of new companies; increase in the level of unemployment; decrease in real wages for employees. the abovebaltic journal of economic studies 170 vol. 9 no. 1, 2023 mentioned problems influence each other and create a serious problem. reduced demand leads to higher levels of bankruptcy and lower levels of business activity. these problems lead to unemployment, the high level of which, combined with reduced demand for labour, leads to a reduction in workers' incomes. in these conditions, many organisations are forced to reduce salaries due to low demand for the goods they produce, which in turn forces them to go into a strict savings mode. low salaries, fear of losing their jobs and unemployment force the population to minimise their spending, which has a negative impact on demand (supply chain management, lean 2016). the research on this topic is necessary because of the crisis consequences on the global expansion, which is happening due to the globalisation of the financial system. the chain reaction hinders the activity of various industries and ruins weaker participants in the market. economic crisis has always had a negative impact on society due to the stagnation of changes in the economy. modern research partly investigates the problem of overproduction. for example, hogan and white (2021) studied the peculiarities of the great depression, which was caused by a lack of financial resources for the purchase of overproduced goods. since the amount of gold to which money is tied was limited, there was a financial deficit and consequently a loss of solvency. antónio and blanco-arana (2022) have studied the peculiarities of the 2008 economic crisis, which was also caused by overproduction and ways of economic growth. other authors have explored the circular economy, stressing that it is a key to careful production that will allow the reduction of overproduction in the world. for example, greer, wirth and loorbach (2021) have examined the resource and waste paradox, the practical dilemmas and the consequences of moving the economy towards a closed loop. bimpizas-pinis, bozhinovska, genovese, lowe, pansera, alberich and ramezankhanif (2021) have also investigated the effectiveness of a closed-loop economy in difficult crisis conditions. scarano, sciarrillo, tartaglia, zuzolo and guarino (2022) have studied the circular economy using the example of fruit recyclables as a stable source for restoration and reuse. the main problem of the previous scientific research, concluded in the field of the topic, is their insufficient research of overproduction and ways of organisational structural reorganisation. therefore, the main goal of this scientific research is to study the main features of the overproduction crisis and to develop suggestions or recommendations for business reorganisation in the conditions of crisis, which are implemented through information on overproduction issues for the country and industries, an analysis of overproduction influence on production and commercial enterprises, research of recommendations on reorganisation from other researchers. 2. materials and methods the basis of the methodological approach in the present work consists of such methods as synthesis, analysis and graphical, tabular methods. the analytical method made it possible to divide the subject matter of the study into components, which made it possible to study the peculiarities of the overproduction crisis and the problems it caused. an analysis of the dynamics of the financial characteristics of large companies and retail organisations was also completed. the method was also used to study the recommendations of other researchers on the reorganisation of the company structure. the synthesis method combined the obtained results into a unified system, which allowed to study the optimisation of the organisation's activity in the conditions of the overproduction crisis. in the article, the graphical method was used for data aggregation as well as for the demonstration of results through a picture, which would represent strategies for diversification activity as methods for optimising the company 's activity in conditions of overproduction. the tabular method was also used for aggregation of obtained results, which allowed to demonstrate data on sales dynamics, overpro duction of cars in the period 2019–2021, as well as the level of resources and net profit of the largest companies in the sphere or trade. the scientific research was carried out on the basis of a prepared theoretical base, which is a quality foundation for any further research. the theoretical basis of the research consists of the works of italian, british, american, portuguese and dutch scientists, aimed at the investigation of a number of problems related to the crisis occurrences caused by overproduction, business reorganisation and careful production. the research-experimental basis of the work consists of large and successful automobile brands such as toyota, volkswagen, honda, hyundai and nissan, as well as the largest retail companies in the usa: walmart, amazon, costco, kroger, walgreens boots alliance, home depot. this scientific work was completed in three main stages. in the first stage, a theoretical basis was prepared, which served as a foundation for further scientific research. at this stage, the main features of the overproduction crisis were identified and the problems caused by this crisis were analysed. in the second stage of the research, the dynamics of car production, sales volume and unsold units were studied. an analysis of the net profit dynamics of the baltic journal of economic studies 171 vol. 9 no. 1, 2023 most popular car brands and retail companies in the world was completed. evaluation of overproduction influence on production and trade organisations. in the third stage of this scientific research, on the basis of the obtained results, the conclusions of the scientific approach were deduced, which are results of the completed research and set primary recommendations on structural reorganisation of an enterprise in overproduction crisis conditions. as a whole, the results of the work obtained during the research and formulated on the basis of the conclusions can be used by specialists responsible for the management of the organisation in crisis conditions. 3. results at present, the primary goal of the manufacturing environment is to get goods to the consumer on time while keeping transportation and manufacturing costs low. in other words, companies are trying to maximise their profits by increasing their value to the consumer while using as few resources as possible. manufacturers need to be interested in all business processes and their impact on consumer satisfaction. they also need to be informed about the specifics of raw material supply and control chain management by clarifying the terms of supply, manufacturing and delivery to the end user (lewis, 2000). material reserves can be viewed in three ways: raw materials, production materials and finished products. a lack of these reserves can have a negative impact on the overall and retail sales and on the consumer. therefore, a modern businessman should strive for the most optimal level of reserves. the excess of supply or overproduction may lead to excess of production in relation to paying capacity demand. the result of overproduction is a fall in prices and unsold goods, which causes expenses on production and labour. an end result of improper reserve management is a decrease in net profits in the future (cato and mobley, 2002) (harris and mongiello, 2006). a structural reorganisation of a company can be a way to increase profitability and save market positions. the dynamics of car sales between 2019 and 2021 among the car manufacturing brands are shown in table 1. china, the us and japan are the leading countries in terms of car brands. from 2019 to 2020, almost all countries have slowed down their production process, with the exception of south korea, which has increased its sales volume by 92438 cars. between 2020 and 2021, many countries show an increase in car sales, including china, the us, india, mexico, spain and brazil. countries such as japan, south korea, germany and thailand have reduced their sales volumes. based on table 1, the dynamics of unsold cars in 2019–2021 have been presented in table 2. when analysing the dynamics of unsold cars, it is worth noting that this table shows that consumers are unable to pay. as a result, most of the leading countries in terms of car production and sales have large stocks of unsold cars. the exceptions are china and the us, where demand is higher than supply, although brazil has managed to achieve the same in 2020. negative indicators in some countries may be due to the fulfilment of pre-orders or the sale of older goods. for a clearer understanding of the amount of unsold cars or their overproduction, the author will analyse the dynamics of financial indicators of large and popular companies in the industry, which is shown in table 3. thus, over the last three years, toyota's net profit has risen steadily. no correlation was found between net profit and reserves. for instance, when reserves were reduced by 4.6% in 2020, net profit increased by 8.14%, and then, in 2021, reserves grew larger (by 13.97%) with profits (by 10.2%). the analysis of the volkswagen company did not reveal any trends. for example, in 2020, reserves were reduced by 6.24%, while profits also fell by 36.1%. in 2021, reserves will be reduced by 0.22%, while net profit will increase by 73.5%. in the analysis of honda corporation, no relation ship was found between reserves and net profit. table 1 dynamics of car sales in 2019–2021 country sales volume, pcs 2019 2020 2021 china 25754483 25267553 26248288 usa 17576091 14954053 15493145 japan 5191245 4594956 4445053 india 3816887 2937803 3759539 south korea 1781326 1873764 1707959 mexico 1317730 949145 1014680 germany 3957403 3219304 2921963 spain 1485354 1018001 1019606 brazil 2787955 2058427 2119772 thailand 1029108 804372 774944 table 2 unsold car dynamics 2019–2021 country number of unsold units, pcs 2019 2020 2021 china -55169 -96294 -191045 usa -6655421 -6181405 -6396767 japan 4318102 3378255 3287845 india 698936 455216 636744 south korea 2169263 1633114 1754417 mexico 2433020 2082729 1967041 germany 1040556 493843 431282 spain 1531170 1248776 1235469 brazil 16057 -153254 48502 thailand 984602 622702 910449 baltic journal of economic studies 172 vol. 9 no. 1, 2023 therefore, in 2020, reserves will decrease by 1.65% while net profit will increase by 25.3%. in 2021, the company 's reserves will decrease by 1%, while net profit will increase by 44.3%. in the analysis of hyundai corporation, in 2020, their reserves decreased by 2.83% and their net profit also decreased by 71.2%. in 2021, the increase in their net profit was 109.2%, while their reserves also increased by 2.8%. nissan is the only one of the 5 companies analysed to make a loss. in 2020, their losses were $671216 million, while their reserves increased by 6.6%. in 2021, they reduced the level of reserves by 14.98% and managed to improve their financial result, although they still lost less. as a result, the assessment of the impact on production organisations is unclear, as there was no clear link between production and financial indicators in the automotive companies. the analysis of unsold cars has shown the over-saturation of the market, which, by analysing the most popular car companies, has shown their ability to properly manage crisis conditions. in order to assess the influence of overproduction on trading companies, the authors will examine the retail sector. for this purpose it is necessary to analyse the dynamics of financial indicators of the world's largest companies in this sphere, which are presented in table 4. from 2019 to 2021, walmart has been increasing its reserves and net income, but in one year it has caused net income to fall by 9.21%. therefore, it is not possible to establish a clear link. it is important to note that the company has kept its reserves relatively constant over a three-year period, at around 0.37-1.15%. when analysing amazon, it is important to note that there is a clear trend towards an increase in net profit, but it is possible to link this to an increase in reserves. thus, between 2019 and 2020, the company 's reserve level increased by 16.09%, while net profit also increased by 84%. with a positive tendency to increase reserves, the company also increased its reserves in a span of the next period. therefore, in 2021, the reserves were increased by 37.2%, while the net profit was increased by 56.41% compared to the previous record. table 3 net profit dynamics of the most popular car brands in 2019–2021, in millions of us dollars (investing.com) company 2019 2020 2021 toyota net profit 1882873 2036140 2245261 reserves 2656396 2533892 2888028 volkswagen net profit 13887 8867 15382 stocks 46742 43823 43725 honda net profit 610316 455746 657425 reserves 1586787 1560568 1545600 hyundai net profit 4942356 1424436 2980049 reserves 11663848 11333734 11645641 nissan net profit 319138 -671216 -448697 reserves 1257923 1340423 1139571 note: reserves are generally understood to be reserve raw materials, finished goods and goods in stock, unfinished production, product for resale table 4 net profit dynamics and reserves of the largest retail companies in the world for 2019–2021, in millions of us dollars (the wall street journal. browse companies 2022) company 2019 2020 2021 walmart net profit 6670 14881 13510 reserves 44269 44435 44949 amazon net profit 11588 21331 33364 reserves 20497 23795 32640 costco net profit 3659 4002 5007 reserves 11395 12242 14215 kroger net profit 3076 1640 2556 reserves 6846 7084 7063 walgreens boots alliance net profit 3982 456 2220 reserves 9333 9451 8159 home depot net profit 11121 11242 12866 reserves 13925 14531 16627 note: inventories are generally defined as reserve raw materials, finished goods and goods in stock, unfinished products, products for resale baltic journal of economic studies 173 vol. 9 no. 1, 2023 when analysing the company costco, it is worth noting that they have been slowly increasing their reserves and net profit in all the periods presented, namely: reserves from 2019 to 2020 were increased by 7.43%; from 2020 to 2021 reserves were increased by 16% and net profit in 2020 was more than the previous record by 9.37%, net profit in 2021 – by 25%. kroger did not show a clear trend, as their reserves increased by 3.5% from 2019 to 2020, leading to a 46.68% decrease in net profit. from 2020 to 2021, their reserves decreased slightly, while their net profit increased by 55.8%. when analysing walgreens boots alliance, it is worth noting that from 2019 to 2020, their reserves increased by 12.6%, which caused their net profit to decrease by 88.54%. from 2020 to 2021, their reserves decreased by 13.67%, while their net profit improved by 386.8%. using this company and the previous one as an example, it is possible to determine a negative influence of the increase in reserves on the financial results of the company. home depot has shown a tendency to increase its net profit while increasing its reserves. thus, from 2019 to 2020, their reserves increased by 4.3%, while net profit increased by 1.1%. in 2021, their reserves were greater than the identical level of 14.4%, while net profit also increased by 14.4%. the influence of the commercial organisations is therefore unclear, as there was no clear correlation in the analysis of the reserves and financial indicators of the retail companies. one company has suffered from overproduction, while others do not show any effect of overproduction. however, this is not because they are not affected by overproduction, but because they have an effective management system. as a result of crises in conditions of overproduction, there is a need for structural reorganisation of a company. at present, practically every organisation uses diversification of business activity, which is one of the effective management strategies and indicates optimisation of business activity by risk distribution, usually through expansion of production diversity or provided services (kwon, bae and park, 2021). however, in the conditions of overproduction, it is important to apply special measures for diversification activity reduction, which accelerates the "rehabilitation" of enterprises, included in the structure of an organisation, presented in figure 1. when analysing the strategy or reorganisation, it is important to note that it does not focus attention on liquidation, but on activity aimed at turning unsuccessful production into successful. this strategy is suitable if the reasons for the losses of branches are mostly short-term and the company 's problems are in the target area of activity. this strategy is to be preferred, as the liquidation of disadvantageous branches, which may be temporary, does not affect the long-term strategies. as for the reduction strategy, it is characterised by narrowing the diversification range and reducing the number of organisations included. this strategy should only be used when the director of the company decides that the organisation is too diversified. in this case, it is possible to concentrate efforts on the main area of activity. a diversification reduction strategy is usually implemented by liquidating branches that are too small to make a difference to the net profit of the organisation, or by liquidating companies that are not closely related to the main activity. the liquidation of such production frees the company 's resources, which can be transferred to the liquidation of debts or the improvement of the profitable areas of the organisation's activity (lhabitant, 2017). a portfolio shift strategy is characterised by a radical restructuring of the company 's portfolio and structure. this strategy envisages an activity aimed at rebuilding the organisation's business structure through a series of sales and acquisitions. this diversification strategy involves not only the liquidation of the old company 's activities, but also the creation of new ones. directors exclude not only unstable or weak activities, but also those that belong to unattractive sectors or those that have lost their strategic correspondence with the structure. many tncs, disappointed with the companies they have acquired and those that present certain complications in the direct management of branches, shift their portfolios in order to narrow down the main activity and increase the manageability of the company in general (berrill, campa and figure 1. strategy to reduce diversification activities baltic journal of economic studies 174 vol. 9 no. 1, 2023 o'hagan-luff, 2021). thus, to improve the company 's activity in conditions of crisis, a strategy of diversification reduction can be used for a reorganisation. 4. discussion when comparing modern research of scientists with the results of this analysis of restructuring proposals, it is worth noting that strotmann, baur, börnert and gerwin (2022), using the example of the food service industry, have proposed other approaches to the issues of crisis occurrence influence on its activity. according to them, the change in the organisational structure must be aimed at the use of digital technology, which can be categorised according to a scenario: forecasting tools; waste analysis tools; redistribution tools; food handling action catalogues. the researchers have included intellectual computer software, based on data analysis, in the forecasting tools. by analysing past activity using algorithms combined with external indicators such as day of the week, weather, season, a demand forecast can be made which will increase planning certainty. demand forecasting involves many key processes that can accelerate the change in business strategy by optimising food handling. in order to increase the effectiveness of operational and strategic activities, as well as to ensure continuous process optimisation, continuous analysis is required. waste analysis tools consist of a complex of software and hardware solutions designed for the distribution of catering organisations. based on the collected data, it is possible to perform a retrospective analysis of the amount of waste saved by classifying the origin and number of food waste measurements. waste analysis in a food industry example can be simplified by identifying the primary sources of food waste, which are usually due to overproduction, storage issues or problems, cutlery or service leftovers. cause and effect processes can be identified and measures can be implemented to reduce the amount of food waste and prevent it from occurring. as for the redistribution instruments, they focus on donations to other organisations, companies or clients, or on the resale of leftover food at much lower prices. this instrument can expand the distribution network of the food service organisation by connecting subjects and creating new sales channels. it also accelerates the formation of the necessary attitude of the customers to the leftovers and to the organisation in general. the selection of measures ensures practical assistance in handling food products. these measures range from recipes for leftovers to educational material for customers and employees. these tools can support strategic management as far as operational processes thanks to the overview of digital tools and principles of food waste prevention. the selection of measures allows to identify optimisation perspectives in several processes. other researchers, such as jana and tiwari (2021), in their work on the careful production of clothing, have investigated the restructuring of the organisation in modern conditions through the following elements: careful management in clothing production; careful problem solving; visual management; rapid configuration; autonomy; process balancing; careful quality control; careful personnel; careful supply chain management; flexible manufacturing. by careful management, the authors meant allocating more value while using fewer resources within a given project. careful problem solving is seen by economists as the standardisation of work and cycles consisting of planning, execution, control and interaction, fishbone diagram, reason evaluation and analysis of 5 "why 's". visual control, according to the scientists, will optimise business activity by using tools such as 6s audit, gemba, ando n, visual factory, monitoring panel and various types of diagrams. rapid configuration is also important for organisational restructuring and the successful implementation of flexible and cost-effective manufacturing systems. using apparel manufacturing as an example, economists have shown that in a competitive environment, manufacturers should be able to respond quickly to the dynamics of the fashion industry in order to increase the effectiveness of reconfiguration. a tool such as smed (singleminute exchange of die), which provides an effective and rapid method of production changeover from a current product to a new line and is widely used in the manufacturing sector, can be used for rapid configuration optimisation. the autonomy element is described as a method of autonomation using human intellect. autonomation is a self-sufficient working system designed to prevent user or working system errors by detecting discrepancies, errors and subsequent warnings. thanks to a working system, an inappropriate product or an error is prevented from reaching the next production step. in careful production, autonomy is achieved through the use of the following tools jidoka (humanised automation); poka-yoke (fail-safe or error-proof ); andon (warning). process balancing is another important element in the structural reorganisation of companies in overproduction conditions. a high level of competitiveness forces the organisation to use a "precise time" approach. careful production provides effective tools for balancing business processes, such as heijunka (load stabilisation); kanban (production with unfinished or controlled assembly). careful quality control was described baltic journal of economic studies 175 vol. 9 no. 1, 2023 by the researchers as the application of statistical control principles to the organisation, which included the importance of quality control from design and correspondence. the focus was on process control using statistical methods, which included statistical process control and assessing the quality of batches produced using an introduction to six sigma concepts and acceptance sampling. the prudence of staff was also seen as an important aspect of the organisation of the firm in the face of problems associated with overproduction. the authors emphasised that human resources and diligence make it possible to expand opportunities and support each other. the basis of the prudent supply chain management element is to keep sufficient, but not excessive, reserves of raw materials on hand to have enough resources to keep the operation running while waiting for the next delivery from the supplier. the central idea of flexible manufacturing is to reduce the amount of waste produced while focusing on the needs of people to understand the value of customers. the authors also emphasised that companies in today 's crisis need to organise their work activities in such a way that, based on real feedback from the market, they provide the right products and services, thereby increasing value and efficiency for customers. comparing the conclusions of the research with the results of womack and jones (2003), it is worth noting that in order to prevent overproduction, which is considered one of the most dangerous types of losses, economists studied the structural reorganisation of a company through the implementation of the following procedures: stabilisation of assembly line load; implementation of the 5s system; production analysis. the first procedure is extremely important, because in a modern environment a director should constantly work on reducing costs and production time, while ensuring high production quality. according to scientists, in order to make the production process more efficient and balanced, it is necessary to divide the production into several stages. researchers emphasise that the first stage of stabilising the production line is to analyse the current state of the production of goods, the second stage is to minimise and eliminate operations that do not add value, and the third stage is to stabilise the workflow. implementation of the 5s system includes several steps: – sorting into needed and not needed, removing the non-needed; – solution for a workspace, organization of required instrument storage, which would allow to easily and quickly use them; – sanity; – standardization by the creation of standards and rules; – streamlining, through regular checks and support activities, cultivating the habit of accurately following the rules. as far as the production analysis is concerned, this is what makes it possible to improve the planning system, from the information-preparation stage to the service control procedures. thus, there is no single approach to optimising the company 's activity during the overproduction crisis. each company manager, having faced the problems of overproduction in his organisation, must pay special attention to the analysis of the works of modern researchers, especially those who have conducted their researches in the field of careful manufacture in a specific sphere. in this way he will succeed on the market or keep his present positions. 5. conclusions the analysis of the overproduction crisis in the manufacturing sector has not shown a clear result, as there is no correlation between financial indicators and the level of reserves in the car manufacturing companies. a comparison of unsold cars and an analysis of the largest companies in the car industry have shown that the market is saturated. nevertheless, the organisations studied have shown effective management skills in crisis conditions. the impact of the crisis on commercial organisations is also unclear. analysis has shown that some organisations are negatively affected, while others are not. this shows the importance of rational approaches in the management system. an overproduction crisis can have a negative impact on the functioning of an organisation. therefore, a modern businessman or manager in such conditions must make appropriate decisions on the structural reorganisation of the company. these recommendations have been studied in the research as diversification of the strategy of reduction of the enterprise activity through the strategy of enterprise restructuring and portfolio shift. organisational restructuring can also be aimed at the implementation of digital technology, which can be categorised by the scenarios of forecasting, waste analysis and redistribution. organisational restructuring in the modern environment has been studied through the use of careful management, careful problem solving, visual management, quick configuration tool, autonomy, process balancing, careful quality assurance, careful human resource use, careful supply chain management and production flexibility. in order to prevent the influence of the crisis occurrence on the changes of the organisational structure, the following procedures were proposed: stabilisation of the assembly line load, production analysis and 5s system. materials of the scientific work can be useful for lecturers of financial management, who baltic journal of economic studies 176 vol. 9 no. 1, 2023 take over the new environment of educational sphere professional activity, for specialists in the sphere of management, who want to optimise activity of their enterprise according to the results of modern research authors. further scientific researches can be devoted to the investigation of effectiveness and practicability of careful production and implementation of closed cycle on the organisation, to an analysis of over production in the sphere of services, or the positive influences of the crisis events on the world economy. nataliia semenchenko: idea conceptualization, conceptualization formal analysis, investigation, initial drafting (including main translation), fundraising. glib mazhara: data curation, formal analysis, methodology, software, visualization, writing – review & editing. references: antónio, a., & blanco-arana, m.c. (2022). financial and economic development in the context of the global 2008–09 financial crisis. international economicsm, vol. 169, pp. 30–42. doi: https://doi.org/10.1016/ j.inteco.2021.11.006 berrill, j., campa, d., & o'hagan-luff, m. (2021). firm diversification and earnings management strategies: european evidence. international review of financial analysis, vol. 78, article number: 101955. doi: https://doi.org/10.1016/j.irfa.2021.101955 bimpizas-pinis, m., bozhinovska, e., genovese, a., lowe, b., pansera, m., alberich, j.p., & ramezankhanif, m.j. (2021). is efficiency enough for circular economy? resources, conservation and recycling , vol. 167, article number: 105399. doi: https://doi.org/10.1016/j.resconrec.2021.105399 cato, w.w., & mobley, r .k. (2002). computer-managed maintenance systems. oxford: elsevier. greer, r ., wirth, t., & loorbach, d. (2021). the waste-resource paradox: practical dilemmas and societal implications in the transition to a circular economy. journal of cleaner production, vol. 303, article number: 126831. doi: https://doi.org/10.1016/j.jclepro.2021.126831 harris, p., & mongiello, m. (2006). accounting and financial management. oxford: butterworth-heinemann. doi: https://doi.org/10.4324/9780080492483 hogan, t.l., & white, l.h. (2021). hayek, cassel, and the origins of the great depression. journal of economic behavior&organization, vol. 181, pp. 241–251. doi: https://doi.org/10.1016/j.jebo.2020.12.005 investing.com. finance (2022). available at: https://investing.com/equities is overproduction driving your labor costs out of control? (2016). available at: https://www.cmtc.com/ blog/overproduction-effects-on-labor-cost jana, p., & tiwari, m. (2021). lean tools in apparel manufacturing. oxford: elsevier. kwon, t.h., bae, s.c., & park, s.h. (2021). the interactions of corporate sales growth and diversification strategy: cross-country evidence. journal of international financial markets, institutions and money, vol. 75, article number: 101422. doi: https://doi.org/10.1016/j.intfin.2021.101422 lewis, c.d. (2000). demand forecasting and inventory control. oxford: butterworth-heinemann. doi: https://doi.org/10.4324/9781856179898 lhabitant, f.s. (2017). portfolio diversification. oxford: elsevier. pasinetti, l.l. (2021). economic theory and institutions. structural change and economic dynamics, vol. 56(2021), pp. 438–442. doi: https://doi.org/10.1016/j.strueco.2019.12.005 scarano, p., sciarrillo, r ., tartaglia, m., zuzolo, d., & guarino, c. (2022). circular economy and secondary raw materials from fruits as sustainable source for recovery and reuse. a review. trends in food science& technology, vol. 122, pp. 157–170. doi: https://doi.org/10.3390/su13169294 strotmann, c., baur, v., börnert, n., & gerwin, p. (2022). generation and prevention of food waste in the german food service sector in the covid-19 pandemic – digital approaches to encounter the pandemic related crisis. socio-economic planning sciences, vol. 82, article number: 101104. doi: https://doi.org/ 10.1016/j.seps.2021.101104 the wall street journal. browse companies (2022). available at: https://www.wsj.com/market-data/quotes/ company-list/?mod=nav_top_subsection wolf, m. (2015). the shifts and the shocks: what we've learned and have still to learn from the financial crisis. london: penguin books. womack, p.j., & jones, t.d. (2003). lean thinking : banish waste and create wealth in your corporation. amsterdam: free press. received on: 17th of january, 2023 accepted on: 20th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 421 vol. 3, no. 5, 2017 corresponding author: 1 department of finance and banking, state higher educational institution “priazovskyi state technical university”. e-mail: azsudcom@gmail.com 2 department of marketing and business administration, state higher educational institution “priazovskyi state technical university”. e-mail: gonchar.mariupol@gmail.com 3 department of marketing and business administration, state higher educational institution “priazovskyi state technical university”. e-mail: kalininandkalinin@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-421-430 research on investment appeal and competitive capacity of industrial enterprises of ukraine olena khadzhynova1, victoriya gonchar2, oleksandr kalinin3 state higher educational institution “priazovskyi state technical university”, ukraine abstract. the purpose of the research is an elaboration of theoretical, methodological, and methodical approaches to forming and developing competitive capacity and investment appeal of steel industry enterprises. the achievement of the given purpose has led to the necessity of formulating such scientific research concept, which bottom line is in the relevance of using modern management methods implemented in foreign manufacturing practices. these are innovative economic, technical, organizational, and corporate methods of managing enterprises with the help of developed systems of managing strategic changes in enterprise activities, the steel industry in particular, which will contribute to achieving the high level of effectiveness and competitiveness of domestic business units. the research methodology is based on the combination of theories of managing economic systems in the globalized market economy. the empirical base for the research consists of the works by domestic and foreign scientists on problems of formation and development of strategic change management systems at industrial enterprises, statistical records, companies’ public records in the internet, data of international information agencies, ukrainian legislation on regulating economic activity of enterprises. in carrying out the research, such methods were used as: general academic analysis and synthesis, systemic generalization, statistic and correlation analysis (when justifying the directions of development before carrying out the economic analysis of activities of metallurgical enterprises). there is a conclusion that the industry is concentrated and, consequently, long-term trends are quite predictable, but they require additional clarifications, taking into consideration the uncertainty in the modern state of world economy. it is determined that metallurgy development depends on gbp. the analysis shows that the countries with the high gdp level have quite developed metallurgy. one of the main problems of modern industries (metallurgy included) is the problem of corporate management and its reactions to challenges of the external environment, which is becoming less and less predictable for analysts. we have presented the recommendations on improvement of strategic management to increase the investment appeal. key words: investment appeal, competitiveness, strategic management, industrial enterprises. jel classification: g30, l1, l61 1. introduction industrial enterprises require considerable financial resources to remain competitive. however, investors have to see the financial perspectives of their investments, thus there is an important question about the necessity of creating such mechanisms for managing enterprises, which will demonstrate investors the whole potential and importance of investing their funds in industrial enterprises. the investment appeal of an enterprise is a generalizing index of an investment object from the point of view of investment profitability, developmental prospects, and the level of investment risk. the assessment of investment appeal of industrial and other enterprises is a strategic approach, targeted at the prevention or reduction of financial risk. there are many indicators used for the assessment of investment appeal. they are attributed to many requirements, prominent among which are the following: the amount of investments, their purpose, the nature of business operations of the enterprise, its commercial reputation, and credit history. we have selected metallurgical enterprises for the research subject as they are a demonstrative example of hard (in terms of analytics) and heavy investment industry, where the baltic journal of economic studies 422 vol. 3, no. 5, 2017 demonstration of effective performance indicators is quite relevant for attracting additional investments. analysing the industry on the whole, it can be said that steel industry is still highly concentrated even on a global scale. all significant industrial assets and distribution channels are controlled by various international corporations or powerful national market leaders. ukraine is not an exception here. conclusions have also been drawn and recommendations have been given to national metal producers on the enhancement of investment appeal and competitive capacity in the medium-to-long term. 2. the effectiveness of strategies of industrial enterprises one of the main aspects of the effective attraction of investors is the development of a strategy. on studying the current practice of the operation of the corporations, which have their assets in ukrainian metallurgy, and the results of the expert survey, you can define the main/ basic strategies most common for steel industrial enterprises: strategies, targeted at minimization of labour costs. the final purpose of such enterprises is increasing the competitive capacity of their produce on the global market on the whole. in this case, it will comply with the further export orientation of the produce, which manufacturing is moved to the local market, presenting an opportunity for improving the country’s balance of payments. on the other hand, the declaration of such a strategy might hide the policy of the main corporation targeted at overcoming the protectionist barriers. market-oriented strategies, which are the most common, first of all, for the world leaders whose goal is to get access to serving the global markets. the ukrainian market is attractive for such corporations because of its size and geopolitical situation, which give an opportunity of getting access to the whole regional market of post-soviet countries. the strategy oriented to the search for scarce or cheaper raw materials. such a strategy is characteristic of the corporations operating in mining industries or processing raw materials. they are interested in creating vertically integrated structures by including in them enterprises existing on the territory of ukraine. as for the possible consequences of such corporate strategy for ukraine, this problem should be examined in terms of possibilities for recovery or non-recovery of mentioned resources, and necessity of maintaining national sovereignty over strategically significant ones for the further development of the state. price fluctuations on the global market might cause the considerable deterioration of trade conditions for the country, the significant part of which export is the produce, which prices have sharply declined. the assessment of the concentration level is made on the basis of calculating economic indicators of activities of steel enterprises. the main quantitative characteristic of the market structure is concentration. it is the degree of prevalence of one or several independent business units (manufacturers) in the system of manufacturing fungible goods supplied to the same geographical market. the concentration indexes reflect, in particular, the balance between the number of enterprises and distribution of market shares. the modern economic theory and statistics offer approximately 20 integrative concentration indexes (besanko, dranove, shanley & schaefer, 2009). concentration indexes are based on the comparison of the enterprise size to the size of the market it operates on. the bigger the size of the enterprise in comparison to the scale of the whole market, the higher is the concentration of manufacturers (sellers) in this market. the most common among them are: the herfindahl-hirschman index (hhi) and the tideman-hall index. the maximum value of the tideman-hall index is 1 (when there is a monopoly). the minimum value is 1/n. this index is similar to the herfindahl-hirschman index in its effect but the tideman-hall allows the possibility of ranging enterprises according to the degree of significance, thereby contributing to the deeper analysis of the industry. in order to identify the competitive capacity of domestic steel enterprises, let us calculate the mentioned above indexes for the flat steel market. the analysis of prospects of integration processes and manufacturing cooperation development shows that the vertical intraindustry trade becomes more important. in this case, export and import are products of different stages of the technological process. it is the exchange of parts and components or output within one and the same industry or exchange of parts, components or raw materials into the finished product of the same industry. such a trade takes place when there are discrepancies in production factors of trade partners. the driving forces of growing and developing such a kind of intraindustry trade are mainly suppliedside factors. the basis of the vertical intra-industry trade is detailed and sometimes technological specialization, which gives the chance to fully use the saving from the production scale. the necessary condition for the development of intra-industry trade is the size of the market, ensured by economic integration. thus, intra-industry trade share is often used as one of the characteristics of integration intensity on the territory of the country. there are several indexes measuring intra-industry trade (the verdoorn index, the balas index), but the most common is the index proposed in 1975 by h. grubel and p. lloyd (grubel, herbert; lloyd, peter, 1975). intra-industry trade: the theory and measurement of international trade in differentiated products. the index allows assessing the share of intra-industry trade in the general volume of trade of this country baltic journal of economic studies 423 vol. 3, no. 5, 2017 with another country, a group of countries or with all the other countries of the world. if the industry product k is only exported or only imported, then the value of gruber-lloyd index is 0, which shows the complete absence of intra-industry trade. when countries export and import the equal amount of the same goods, the index value is 1: it means that all the trade has the intraindustrial nature. the technical factor, affecting the index value is the level of data detail: the higher it is, the higher the index value obtained. the herfindahl-hirschman and the tideman-hall indexes show that the global market is still highly concentrated because of mergers and acquisitions among the leading manufacturers of flat steel. the main force in this market will be the vertical integration, which will give considerable competitive advantages over the non-integrated structure. the results of calculations for concentration indexes are given in table 1. we can draw the conclusions that by 2016 most of the countries-steel manufacturers hardly changed their positions. the general tendency is the growth of production capacities of asian countries where the fastest economic growth can be observed and there is a powerful domestic market (china and india in the first place). the main competitive advantage is the opportunity to supply high-quality products like countries of western europe or through competitive price, achieved of scale and productivity of cheap labour (china, india) or cheap resources (rf). the analysis has also shown that because of this industry’s cyclical nature, the appearance of fundamentally new players on the market is unlikely. the conclusions have been drawn according to the concentration of manufacturers on the world market and method of this index calculation (table 2). one of the conclusions is the clear tendency that on the wave of economic recession, mergers of world leaders in flat steel manufacturing can be expected. so, it might be a big threat for the positions of ukrainian enterprises and might cause integration with domestic or foreign enterprises – competitors (or suppliers of raw materials). against this background, it seems that domestic steel enterprises should be protected by the introduction of high customs barriers for foreign goods. as a result, domestic manufacturers do not acquire skills necessary for international competition. the customers suffer, too. enterprise managers should recognize these manifestations, monitor them, and identify development tendencies and possible forms of their influence on the enterprise. based on the share of the produce of steel industry in the volume of ukrainian export, it is logical to assume its impact on the value of export concentration. the empirical research has proved the previously formulated hypothesis, under which there is a very close link between concentration indexes in the metallurgical industry of ukraine. thus, the volume of net export of ukraine is sensitive to opportunistic fluctuations on the world market table 1 the concentration of flat steel market for 2011–2016 country production volume (thousand tons) pace of change, % r qi qi2 r*qi 2011 2016 2011 2016 china 683265 808366 18,31 1 1 45,854 2102,669 0,458 japan 107595 104775 -2,62 2 2 7,22 52,14 0,144 the usa 86247 78465 -9,02 3 4 5,788 33,503 0,173 india 72200 95477 32,24 4 3 4,845 23,478 0,193 russia 68743 70808 3,00 5 5 4,613 21,284 0,23 south korea 68471 68576 0,15 6 6 4,595 21,115 0,275 germany 44288 42080 -4,99 7 7 2,972 8,834 0,208 ukraine 35332 24218 -31,46 8 10 2,371 5,622 0,189 brazil 35162 31275 -11,05 9 9 2,359 5,568 0,212 turkey 34103 33163 -2,76 10 8 2,288 5,238 0,228 total 1235406 1357203 9,86 100 2293,8525 588,12 in the world 1538003 1628049 5,85 the source: calculated by the authors on the basis of the data on www.worldsteel.org. table 2 estimates of concentration indexes of the flat steel market index name index dynamics 2011–2016 concentration level concentration index (cr) 56,87 – 76,08 high on the world flat steel market herfindahlhirschman index (hhi) 941 – 3261 the world market is highly concentrated hall-tideman index (ht) 0,14 – 0,256 medium level of industry concentration grubel-lloyd index 0,109 – 0,224 low level of intraindustry concentration baltic journal of economic studies 424 vol. 3, no. 5, 2017 of steel and ferrous metals. so we can speak about the necessity of conducting integration processes in ukraine, targeted at increasing the product quality and volume of production and export. the main thing is to ensure the organic fitting of the development of international economic ties of ukraine on the whole and those with the eu countries in particular, in the general strategy of the transformation of the ukrainian economy. the main task is to develop our own economic model and select such a set of indicative ratios, which will promote the steady economic growth. meanwhile, the achievement of criteria-based convergence will be only the intermediate stage on the common road. the analysis of strategic requirements in metallurgy, the study of stages of development allowed working out the conceptual model of the system of the impact of determining parameters of the external environment on the strategic changes of enterprises of steel industry (fig. 1). the proposed model provides for conducting an assessment of the impact of external environmental factors in three stages. on the first stage, the enterprise management should decide, which determining parameters of external environment will directly influence the competitive capacity of an enterprise. it would be useful to conduct research on five forces of competition proposed by m.  porter: competitors, substitutes, customers, industrial customers, and suppliers (porter, 2008). on the second stage, external environment changes and their threats are studied, this is the process, which concerns all levels of an enterprise and lasts for several months. the process is so complicated that enterprises cannot cope with the changes, introduced by the government, foreign competitors, and technical progress with its sudden advances. to cope with such changeable tasks, it is suggested that enterprises should production supply stuff management increase in commodity prices, expenses on the search for new suppliers change of pay system, implementin g a system of resistance to change changes in the organizational structure, implementation of adaptive organizational structure cost raise, limitation of output prices, design of new products finance attraction of additional funds, profit decline, additional investment influence of external environment determinants on changes in the domestic environment appearance of new resources the ability of customers to safeguard their own interests competition between existing enterprises appearance of substitutes the ability of suppliers to safeguard their own interests potential competitors customers suppliers substitutes competitive determining parameters of the external environment industrial competitors real potential research on changes of the external environment and their threats fig. 1. the conceptual model of the system of the impact of determining parameters of the external environment on strategic changes of steel industry enterprises baltic journal of economic studies 425 vol. 3, no. 5, 2017 adopt the principle of timely decisions and form the management system by means of ranking strategic tasks. taking into consideration the fact that this stage is essential for the further creation of a system of strategic change management and elaboration of a development strategy of the enterprise, which should take into consideration the development strategy of the corporation, of which it forms a part, there is a need in designing the model of interaction between the enterprise and the corporation on this stage (fig. 2). this system of the impact of determining parameters of strategic management can easily be mastered and used. it includes the following: 1. constant monitoring all the tendencies in external environment: marketing, technical, economic, social, and political. 2. reporting the results of analysis of these tendencies and assessment of the degree of decision urgency to the top management of an enterprise at regular meetings and as new threats emerge and new opportunities are discovered. 3. the top management and the planning department of an enterprise divide all the tasks into three categories: a) urgent and important tasks demanding immediate consideration; b) targets demanding constant monitoring; c) postponed tasks, not worth further consideration. it is proposed to rank the tasks using table 3, which is a simple form of recording the results of this analysis. as can be seen from this form, the next is the time score of appropriate response to each possible development. such a score is obtained by comparing the probable time of event impact with the time the enterprise needs for a timely response. such scores can be used for the classification of events according to the time of response: high (changes require immediate response to events); medium (the proper response to changes can be postponed until the next planning cycle); low (reportedly, the appropriate response can be need to study the domestic environment of the holding need to study the domestic environment of the enterprise research on domestic environment factors need to study the external environment of the holding need to study the external environment of the enterprise research on changes in the external environment and their threats urgent tasks targets postponed tasks real potential division on tasks problem ranking observation do not pay attention correction of plans for strategic changes taking measures fig. 2. the model of interaction between the enterprise and the corporation on the stage of strategic management of intensification of industrial activities baltic journal of economic studies 426 vol. 3, no. 5, 2017 postponed indefinitely  – till obtaining a more accurate assessment of possible consequences). strategic objectives, which consequences are rated, for instance, as ± 3 points on a scale of 1 to 10, are categorized as insignificant and excluded from further consideration. these objectives should be divided according to the degree of significance in compliance with expected consequences. this will result in obtaining the list of key strategic objectives of an enterprise, used for managing the system of strategic changes. this list is corrected by excluding the solved objectives and insignificant consequences, and including new ones. the list of key objectives helps solve problems, especially if these problems are faced for the first time. the challenge is that the number of key objectives sometimes exceeds the enterprise capabilities to address them. methods of identifying key strategic objectives help shorten the list and define priorities within available resources. 4. urgent tasks are given for studying and decisionmaking either to the existing divisions of the enterprise or to special operational units, which can be quickly involved if necessary. 5. decision-making is controlled by the top management with regard to possible strategic and tactical consequences. 6. the top management regularly reviews changes caused by the external environment. stage 3. as shown in fig. 1, the next stage in analysing strategic objectives is the assessment of the impact of potential future consequences of external environment changes on the future results of the enterprise activities. the ideal approach is to assess the impact of the environment changes on the achievement of objectives of the enterprise. however, there is often no necessary information or the method of its assessment is not defined. instead, you can identify consequences of each tendency on a scale from 0 to -10, giving a certain score based on expert judgement. such a judgement is made by a group of experts, which includes enterprise managers and external specialists possessing appropriate knowledge and skills. besides the consequences themselves, it is necessary to assess their probability and time of their appearance. the consequences can be positive (strengths and weaknesses of an enterprise) or negative (risks of losses) or both. the last case demonstrates a degree of uncertainty in assessment or the chance that any consequences might turn out to be both useful (contribute to the achievement of some goals), and harmful (cause poor progressing in the achievement of other goals) for the enterprise. 3. the influence of forecasting on the investment appeal the effective forecasting has always been connected with creating development strategies and investment appeal of enterprises. but forecasting techniques the most effective 15-20 years ago are showing the sharp decline in their effectiveness over the dynamics of economic factors. forecasting of the dynamics in different economic sectors requires modification of methods taking into account individual tendencies characteristic for this or that sector. thus, despite the long-term study, the problem remains relevant and requires constant updating in accordance with current market tendencies. there are three main approaches to methods of forecasting market dynamics: traditional (genetic) – the retrospective analysis of the actual number of requests for services and heuristic heuristics way main tendencies, determining their future amount; classical  – forecast taking into consideration the limited number of dominant factors (usually  – income and prices); modified  – adaptation of the classical approach to modern complex process of generating a demand for service products. in forecasting dynamics of sales of steel industry products for the development of the system of strategic change management, there is a constant need in making difficult decisions connected with considering many quality criteria and restrictions on resources. creation of adaptive systems will allow carrying out the active adaptation to volatile conditions and requirements of the external environment. forecasting for the countries  – exporters of metal products is built on the table 3 consequences of changes in the external environment of an enterprise factor changes time of change consequences speed of appropriate response risks of losses capacities category of strategic objectives n n1 immediately high z11 … z1n m11 … m 1n create a target group n2 the next planning time medium z21 … z2n m21 … m 2n continue monitoring n3 not defined (long) low z31 … z3n m31 … m 3n response postponed baltic journal of economic studies 427 vol. 3, no. 5, 2017 fact that metallurgy in these countries is the leading industry and significantly influences the gross domestic product (gdp). let us make the correlation analysis to check this hypothesis. steel production figures {х} serve as factorial indicators of correlation analysis and gdp data serve as output indicators. the research used the output figures of countries grouped on a geographical basis (table 4), in accordance with the data given by world steel association. the following regions were identified: grouping of countries in the region allows identifying the market tendencies more accurately, in doing so summarizing the number of various tendencies in national markets. the objective of this analysis is the identification of regions where there expected an increase in demand for steel, duration of this dynamics, factors influencing it, and the identification of regions, which are increasing local production and will squeeze out foreign manufacturers, and determination of the time when regions-importers will become exporters. the data for the analysis are output and consumption figures, gdp data on purchasing power at current prices in us dollars, per capita steel consumption. gdp data are used for the identification of general economic tendencies in the regions of the world. the dependence of production on gdp growth is attributed to the use of steel in all sectors of national economy. within the given array of indicators, the correlation rates have been calculated according to the formula: , )y(y)x(x )y)(yx(x =r iii ii xy ∑ ∑ ∑ −− −− 22 (1) where x  – a factorial indicator of steel production data, thousand tons, y – output indicator of the country’s gdp, billion us dollars the assessment of the correlation between the indexes of rolled steel production {x} and gdp by regions of the world {y} (table 5). table 5 assessment of correlation between indexes of rolled steel production {x} and gdp by regions of the world {y} part of the world correlation rate regression equation the eu 0,08 y = -3,7064x + 238796 european countries 0,98 y = 21,421 x 4850,3 cis 0,26 y = 3,9018x + 101131 north america 0,08 y = 1,00158x + 40233 south america 0,28 y = 1,2343x + 40237 africa 0,01 y = -0,337x + 17477 middle east 0,84 y = 7,2417 x + 2927,5 asia 0,98 y = 40,407 x 74492 total 0,94 y = 17,281 x + 136610 the analysis of the dependence of steel production on gdp has shown that the amount of crude steel production is correlated with gdp. the dependence figures are reflecting a steady tendency of gdp growth in the world, which is stimulating the increase in steel production. on average, the world gdp growth on $17,281,000 provides the output growth of 1,000 ton. to figure out the reasons for the absence of correlation in the countries of the eu, cis, south and north america and africa, let us consider per capita consumption of manufactured steel products in these regions. this index is the most accurate in reflecting the level of steel use in a country’s economy, showing the people’s needs for the industrial production. in the most developed regions of the world (countries of north america and the eu) on average 264.57 and 338.5 kg/capita was consumed from 2002 to 2011, the biggest amount of steel per capita was consumed in the united arab emirates in 2008  – 2210.9 kg/capita. according to the conducted research, there was the increase in gdp and production output in those regions of the world where since 2002 the population’s consumption of steel consumption was well behind the consumption in more developed regions: the eu and north american countries. however, rapid economic table 4 the output, grouped on a geographical basis* region 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016/ 2007, % european union 210260 198705 139436 172911 177791 168589 166356 169301 166115 1 62024 -22,94 other europe 30533 31621 29034 33650 39079 39917 38627 38374 35778 37651 23,31 c.i.s. 124169 114345 97691 108200 112663 110739 108408 106079 101552 102410 -17,52 north america 132618 125138 83772 111562 118675 121586 118978 121093 110938 110624 -16,58 south america 48232 47490 37776 43888 48165 46379 45822 45043 43899 40220 -16,61 africa 18675 16970 15400 16624 15696 15337 15963 14885 13701 13099 -29,86 middle east 16452 16646 17766 20000 23230 24979 26967 29986 29429 31480 91,34 asia 758385 784090 811866 918449 995457 1026801 1123646 1139222 1112873 1124704 48,30 oceania 8783 8424 6014 8149 7248 5805 5588 5466 5717 5837 -33,54 world 1348108 1343429 1238755 1433433 1538003 1560131 1650354 1669450 1620001 1628049 20,77 the source: calculated by the authors on the basis of the data on www.worldsteel.org. baltic journal of economic studies 428 vol. 3, no. 5, 2017 growth (2002–2011 gdp growth in countries of europe – 73.3%, middle east – 89.8%, countries of asia – 116%) stimulated domestic demand in the region, which in turn led to the considerable production growth in the regions. it is observed in the countries of asia, europe, and the middle east. the most developed countries: the eu, the usa, canada, japan, south korea where per capita gdp was high during the period in review, experienced only fluctuations of steel consumption, depending on the economic situation in the region. consumption figures in these regions are used as the upper boundary, on reaching which gdp growth stops significantly affecting output and consumption in the regions. the continuation of the tendency for output growth in the regions will lead to the urgent need for new export markets, and that will make them competitors of ukrainian steel industry. as for the countries of south america and africa, they are characterized by low level of production and consumption, without considerable growth tendencies. cis market is characterized by the significant dominance of manufactured products over domestic demand for it. such a situation forces to search for external markets, while domestic consumption is, in fact, underdeveloped (201 kg/capita) is far below that of neighbouring countries of europe (252 kg/capita). according to the obtained data from analysis of correlation of output, gdp, and per capita steel production, the forecast was made as for the output up to 2017. 35% output growth is predicted in the world. the forecast shows that by 2016 per capita consumption in asian countries will exceed the average in the eu in 2002–2011 and then it is possible to expect the decline in production growth rates in the region. this boundary in european and middle eastern countries will be reached by 2018 provided that the current tendencies remain unaffected. the conducted research has allowed creating the forecast of steel production dynamics in the world, of the market of asian, middle eastern and european countries up to 2017 based on general economic tendencies and market demand for metallurgy output from final consumer. the improvement in the effectiveness of forecasting of steel enterprises provides an opportunity for early production reorganization in accordance with increasing demand. the improvement of techniques for predicting regional competition allows raising the level of management information support, which has a positive impact on the quality of devised competition risk mitigation measures. according to the obtained forecast, following current economic trends, it should be expected by 2016–2017, provided the domestic demand is satisfied by steel manufacturers of asian, european, and middle eastern countries. the predicted volume of domestic production, which will ensure market saturation for the countries of europe is estimated at 50047 thousand tons, for the middle east – 25752.98 thousand tons, for asia – 1613941 thousand tons. so far it is rather difficult to assess factors and criteria of effectiveness of a business unit’s activities on different stages of industrial life cycle. it has been empirically identified that those enterprises, which managed to implement their research on the industry’s early development stages, continued to earn the highest profit. it has a lot to do with economies of scale, which is achieved by those who were the earliest to introduce their innovations to the market. thus, as the scientists have shown, the technological advantage, especially on the early stages of industrial development, can become the source of steady competitive benefits in the future. if this variety of approaches is summarized and the development stages of the steel industry are taking into consideration, we can assume that on the whole four main stages of development are identified in the enterprise life cycle: formation, growth, stabilization, and decline, when the last one can turn into the stage of revival. the results of correlation and interaction between the enterprise life cycle and strategic changes of production are demonstrated on the data of metinvest holding llc. for the identification of life cycle stages of metinvest holding llc, the technique is proposed based on the identification of 7 activity indexes, which values can help identify the stage in the life cycle of an industrial enterprise. these are, in particular, the balance structure and dynamics (the correlation between receivables and payables), indexes of financial resilience, solvency indicators, the profitability of sales, and assessment of marketing potential of the enterprise (market share of the enterprise), sales growth rate and the degree of market concentration. restrictions for these indexes have been set (based on statistics on the activities of metallurgical enterprises) with the view to their practical application. the calculations of the sales growth rates within the analysed period will not show the actual situation because 2008–2016 years are considered the time of crisis for the whole metallurgical industry and are characterized by a considerable decline in sales and output accordingly. that is why, to describe the growth rates, it is logical to use performance indexes of the enterprise in comparison with those of the industry. assuming that metinvest holding llc is one of the oldest metallurgical enterprises of the country with a well-organized marketing system, we will consider the sales growth rate above average. 6. the marketing potential of the enterprise (market share). ukraine represents about 3-4% of world metal production. of these, the share of metinvest holding llc is estimated at 55-70%. taking into consideration the fact that there are 15 metallurgical enterprises in ukraine, it can be argued that its share is relatively large. 7. the degree of market concentration as metinvest holding llc is an export-oriented enterprise, the assessment of the degree of market baltic journal of economic studies 429 vol. 3, no. 5, 2017 concentration should be based on the world metallurgy market. this market is represented by a large number of plants, which exceeds the index of 2000 enterprises, so it is considered highly concentrated. the given above calculations allow the conclusion that metinvest holding llc is on the lifecycle stage “stabilization”, that is, our assumptions have been proved. for this stage, we recommend the strategies targeted at long-term perspectives of the stable operation of the enterprise. considering the stage of the life cycle and the need to increase its stability in the long-term perspective, it is recommended to apply the strategy of viability (the strategy of long-term development), aimed at the insurance of stable development and operation rates of the enterprise. within this strategy, one of the main objectives is the introduction of the procedure of recording the impact of external factors. the actions the enterprise management should implement on different stages of the life cycle are described in table 6. table 6 the content of activities of industrial enterprises according to the stage of the lifecycle stable situation crisis situation “formation”, “intensive growth” “stabilization” “decline”, “revival” optimization of business processes maintaining the level of production of competitive goods for the enterprise restructurisation with minimal risk level after reaching zero or close to zero business value improvement of the organizational structure of an enterprise alignment of own management resources with the potential of identified capabilities and shortcomings addressing both creditors’ interests and the minimum demands of enterprise owners improvement of the system of capital and finance management coordination of own capabilities with the interests of segments of consumers commitment to reach the maximum business value identifying the growth points orientation to the target market with the objective to realize own competition benefits in the current market context, it is the appropriate response of enterprise production to the growing factor of uncertainty of external environment that is one of the most relevant and acute problems of functioning and development of any business. strategic changes of an enterprise, consistent with the changes of its external environment are of vital importance. the relevance of these changes is connected with objective modern tendencies that determine the nearest long-term perspectives of market development. thus, strategic changes, as already stated, are the most valuable content of any strategy. all of these strategic changes are the main carriers of the new quality in the process of the enterprise development, and namely strategic changes are the key object of management in realizing both separate functional strategies and corporate strategy on the whole. any change means transferring the change target from one state to another. based on the principles of forecast formation, three groups of methods can be identified: extrapolation, simulation, and expert judgement. extrapolation techniques (the smallest squares, moving averages, exponential smoothing etc.) draw on the statistically sound change tendencies of these or those objects’ quantitative characteristics. extrapolation techniques are one of the most common methods of economic forecasting. extrapolation is defined as a way of estimating, beyond the original observation range, the value of a variable on the basis of its relationship with another variable. simulation methods include techniques of structural, network, matrix, and other ones, which provide an opportunity to obtain forecasting financial data with the help of certain models. methods of expert judgement belong to informalized ones and are used in the case when it is impossible to take into consideration the impact of many factors due to considerable complexity of forecasting objects. when it is impossible to apply formalized forecasting methods, we have to resort to knowledge and experience of experts. the essence of the forecasting technique with the help of sales percentage lies in increase (decrease) index of the income from product sales (services), balancing items and statement on financial performance (except those not depending on the sales’ change) of the same per cent. the assumption about the direct correlation between the income change rates should be verified on the base of empirical data. forecasting using regression method (provided that there is a linear or non-linear correlation between forecast indexes) allows obtaining the future value of the quantitative index, which is random, depending on fluctuations in one or several indicators. forecasting with the help of normative approach is aimed at receiving the optimal balance and statement on financial performance based on the following: capital profitability, liquidity etc. the similar prediction is used to assess those changes in the assets and the sources of their establishment, which are essential in the future to achieve optimal profitability and stable financial situation. the technique of creating projected financial statements based on standard ratios is widely used by the enterprises, the management of which is built on the concept of strategic controlling. sometimes it is useful to make predictions with the help of the method of regulating the items when the baltic journal of economic studies 430 vol. 3, no. 5, 2017 forecast of financial statement items is created taking into consideration the information about future management decisions. in this case, the previously described methods cannot be used because they will lead to the inadequate prediction. strategic management decisions can radically alter the current balance structure; lead to a temporary decline in profitability, if there is a need for technical renovation, scientific research etc. this kind of prediction is used when the enterprise managers make essential, sometimes far from optimal in terms of finance, management decisions, which have a strategic nature and might be life-saving in the context of further competitive pressures. the range of techniques for the preparation of projected financial statements stems from the needs of users of strategic financial information, the main ones of whom are the enterprise managers. the projected reports actually reflect the administration’s idea of how the company will function in the future, taking into account possible changes in economic, social, political, legal, and competitive realities. for the analytics that are directly involved in the preparation of strategic financial information to support decision-making, an essential aspect of training is the possession of the basic tool for creating, processing, and analysing projected financial statements under uncertainty. the ability to prepare projected financial reports and to choose the optimal financial strategy for the future is a guarantee of avoidance of mistakes in business, the basis for management of financial and investment activity of the enterprise. 4. conclusions after the study, it is appropriate to conclude that metallurgy is a rather concentrated industry and, as a result, long-term trends in this area are rather predictable but it requires further refinements in terms of taking into account the uncertainty of the current state of the world economy. the dependence of the development of the metallurgical industry on the gdp indicator is established. the analysis showed that countries with high gdp have a well-developed metallurgy industry. one of the main problems of modern industry (including metallurgy) is the problem of corporate governance and how it responds to challenges of the environment, which is becoming less predictable for analysts. the main scientific and applied components of the advanced research methodology and its scientific concept are as follows: it is proved on the basis of the development results of the method of determining the main characteristics of the implementation degree of the existing modern production enterprises’ potential of the metallurgical industry of ukraine, which, in the conditions of globalization, integration, and convergence processes of the world economy, arose the objective need and possibility of taking into account these strategic processes in the activities of domestic economic entities’ objects, especially of ferrous metallurgy, which will promote not only increase of effective activity of separate industrial enterprises and growth of competitiveness of their products, but also in general, the intensification of the country’s integration into the world economy. the definition of the conceptual model of the influence of environmental determinants on the strategic changes of the ferrous metallurgy enterprises and the model of interaction between the enterprises of this sector and the corporation (holding) on the basis of the use of a methodical approach to the implementation of determinants of strategic management of metallurgy enterprises in the conditions of globalization, integration, and convergence, the introduction of which will contribute to sustainable growth of competitiveness, both for individual enterprises and for the economy as a whole. references: besanko, d., dranove, d., shanley, m., & schaefer, s. (2009). economics of strategy. john wiley & sons. bouchaud, jean-philippe; potters, aguilar (1997). missing information and asset allocation. competitive strategy: techniques for analyzing industries and competitors.  – new york: the free press, 1980 (2nd ed. – new york: free press, 1998. – 397 p. – isbn 978-0-684-84148-9); deming, w. e. (1982). quality, productivity and competitive position. cambridge, ma: massachusetts institute of technology, center for advanced engineering study. goshel j. p., noyria n. (1993). horses for courses: organisation forms for multinational corporations. sloan management review, 23-25. grubel, herbert? g.; lloyd, peter? j. (1975). intra-industry trade: the theory and measurement of international trade in differentiated products. new york: wiley. isbn 0-470-33000-7. inkpen, a. c., ramaswamy, k. (2006). global strategy: creating and sustaining advantage across borders. n.y.: oxford university press. levitt, t. (1983). the globalization of markets. harvard business review, 61, 90-102. porter, m. e. (2008). the five competitive forces that shape strategy, harvard business review, january 2008, pp. 79–93. rowe, h., mason, r . and dickel, k. (1982). strategic management and business policy, a methodological approach, reading, massachusetts: addison wesley publishing co. inc., 155 p. the world steel association official website. retrieved from: https://www.worldsteel.org/en/dam/jcr:3e275c736f11-4e7f-a5d8-23d9bc5c508f/steel+statistical+yearbook+2017.pdf baltic journal of economic studies 176 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 kyiv national economic university named after vadym hetman, ukraine (corresponding author) orcid: https://orcid.org/0000-0003-1016-4853 2 interregional academy of personnel management, ukraine orcid: https://orcid.org/0000-0001-9227-7426 3 kyiv national economic university named after vadym hetman, ukraine orcid: https://orcid.org/0000-0003-4840-1690 doi: https://doi.org/10.30525/2256-0742/2022-8-4-176-184 teamwork as a component of social competence of young scientists tetiana shkoda1, inna semenets-orlova2, volodymyr kyryliuk3 abstract. the research satisfies the current world trends in future jobs, where team work is considered as one of the significant soft skills till 2030. the purpose of the paper is to identify the key team roles, which have leading impact on social competence of young scientists in ukraine. the novelty of the research is represented by the created theoretical model of social competence and its connection with team work. the proposed model includes such blocks as: approaches to definition, structural elements in combination with evaluation criteria, types of an individual’s social competence, functions and levels of social competence as well as approaches to social competence research. the object of the scientific research is the process of using team work tools in social competence management of young scientists’ teams. the research methodology includes such methods: comparative analysis, critical analysis, descriptive analysis, factor analysis, and cluster analysis. the research is based on the results of the special direction of the mass sociological survey of young scientists in ukraine. the limitations of the research are that the period of gathering data covers 2020 year before the war in ukraine. the belbin’s approach to team roles was taken for researching the current state of team work as an important part of social competence of young scientists in ukraine. the obtained results confirmed quite equal distribution of managers’ types in the teams of young scientists. the most important team roles are implementer and team-worker that corresponds to the young scientists’ basic functions. but, such team roles as monitor-evaluator, resource investigator and plant require better development. the practical value of the research for the young scientists’ community is in the use of the levels of team-role orientations in building the young scientists project teams and developing their social competence, which gives the opportunity to improve the education and training of young scientists. the possible directions of the research development are studying of the other approaches to team management, stress management and emotional well-being of young scientists. the possible ways of developing team work in particular and social competence in general in the process of education and training of young scientists are the implementation of special modules of soft skills development. key words: team work, social competence, young scientists, team roles. jel classification: i21, j24 1. introduction young scientists as an important group of science in any country is transforming today under the influence of general global trends in the development of society. the social competence of young scientists trained by educational institutions is now more important than ever for both successful professional and personal development. the importance of social competence is presented in many modern national and international documents and reports, such as: "proposal for a council of europe recommendation on key competences for lifelong learning, 2018/0008 (nle)" (2018); the world economic forum report "the future of jobs" (2018); laws of ukraine "on higher education" (verkhovna rada of ukraine, 2014), "on innovation activity " (verkhovna rada of ukraine, 2002); project "realization of the potential of young scientists in the context of integration of science, education, business" (shkoda et al., 2020), etc. young scientists are at a sensitive age for the formation of social competence. in addition, the contextual nature of cooperation and postgraduate studies or work as a teacher in a higher education institution provides an opportunity to form social baltic journal of economic studies 177 vol. 8 no. 4, 2022 competence that will remain relevant in the future life and activities of the individual. according to a current linkedin survey, for example, soft skills as part of social competence are growing in importance for business success for 80% of respondents, with 89% noting the lack of soft skills among the failed hires in their organization, and 92% saying that soft skills are as important or even more important than hard skills (wef 2019). the term 'soft skills' hardly does justice to the complex combination of abilities it describes: empathy, emotional intelligence, creativity, teamwork, collaboration and communication, to name but a few. this coincides with one of the observations of the world economic forum's future of jobs report (2018), which refers to the importance of "non-cognitive soft skills (that enable) people to use their unique human abilities." the challenge for employers, especially in the field of young science, is that soft skills as part of social competence can be difficult to identify in the recruitment process. unstructured assessment of soft skills prior to hiring is a significant problem: 68% of respondents told linkedin (wef 2019) that the main way they are assessed is by identifying social cues during the interview. research question: today, the world economy is entering a new era of global economic relations, which largely requires workers with new compe tencies in both eu and non-eu countries, including ukraine. at the same time, the eu is promoting the european commission's proposal for a council of europe recommendation on key competences for lifelong learning, 2018/0008 (nle), where social competence is declared as one of the key competences to improve the european framework of key competences. in this study, it is necessary to consistently address the following research question: "how does teamwork affect the social competence of young scientists in ukraine? what are the ways to develop social competence of young scientists in the educational process in ukraine?" 2. theoretical basis social competence is usually considered as social adaptation, performance of social roles, balance between social requirements and personality traits, social behavior, social reality, mastering social experience as a general, collective, integrative concept that indicates the level of socialization of a person, in particular, professional, and has characteristics inherent in wide spheres of human life (zarubinska, 2010), including social responsibility. in the scientific literature there are four general approaches to the operational definition of social competence (rose-krasnor, 1997): 1) specific skills; 2) sociometric status; 3) relationships; and 4) functional outcomes. when using the specific skills approach to social competence, the following attributes are distinguished: social, cognitive, emotional, perceptual-motor and self-systemic. the status approach to social competence is a sociometric assessment that reflects the combined judgment of peers, which is a generalization of the behavioral and affective components of social competence. this approach also demonstrates good temporal stability. but, rose-krasnor l. (1997) does not prove that popularity among colleagues will predict further success. in this context, the author suggests that the popularity of a young scientist in the group does not prove his/her further professional success. the transactional nature of social competence is considered within the relationship-based approach to social competence. it is manifested in both friendship and commitment indices of social competence. according to this approach, social competence depends on the relationships of young scientists, which in turn depend on the skills of both relationship partners. these relationships can be horizontal or vertical (hartup, 1989). in the context of the education and training of young scientists, horizontal relationships can be considered as relationships with other young scientists, where all the relationship partners have approximately the same level of required skills. instead, vertical relationships can be considered as relationships with a teacher or any other person who has a higher level of expertise. the specificity of the functional approach lies in the definition of social goals and objectives. researchers (mcfall, 1982; rose-krasnor, 1997; white, 1979) believe that the functional approach also focuses on the results of social behaviour, as well as on the processes that lead to these results. ma h. k. (2012) considers three important aspects of social competence, which are related to (1) the ability to build positive and healthy interpersonal relationships and resolve interpersonal conflicts, (2) the development of a clear self-identity in general and a group or collective identity (e.g., professional identity) in particular, and (3) the orientation to be a responsible citizen in one's society and a concerned citizen in the world. a. ilie (2010) believes that social competence should be seen as a complex system of social cognition, social motives, social abilities, traditions and skills, and social experiences. it includes the ability to act in a socially acceptable way (sincerity, ability to play roles), cooperation skills (respect for others, sensitivity, freedom from prejudice), establishing contact (creating, developing and breaking up teams, expressing feelings and opinions), baltic journal of economic studies 178 vol. 8 no. 4, 2022 persuasiveness (impression that makes on others, charisma). social competence is defined by d. euler & a. bauer-klebl (2008) as the ability to interact purposefully with others on professional, social or personal topics in specific types of situations. b. greimel-fuhrmann (2013), who agrees with the previous definition, emphasizes that social competence enables competent communication with other people. acmeological research adds to the structure of social competence, in addition to knowledge, skills and abilities, also a spiritual, personal, motivational and value component, which involves social responsibility and the desire for self-realization of the individual in the profession and society as a whole (zinkivskyj, mirskykh, 2008). however, in the author's opinion, social responsibility and professional responsibility fit into the functional approach to the interpretation of social competence, as their presence contributes to the achievement of social goals and solving social problems. according to i. b. zarubinska (2010), the personal component of social competence involves the following abilities and characteristics of the personality: empathy, tolerance, general analytical abilities, internal locus of control, positive self-concept and, accordingly, adequate self-esteem, self-respect, ability to emotional self-regulation. according to the author, these components of the personal component of social competence (zarubinska, 2010) largely correlate with the components of social competence within the framework of rose-krasnor's (1997) specific skills approach. having analyzed the works of varetska o. v. (2014) and zarubinska i. b. (2010), it should be noted that the activity component of social competence includes cognitive, value-motivational, communicative, operational-technological, evaluative, reflective aspects. each of these components of the activity component of social competence has its own elements, which can also be considered as evaluation criteria. there are several criteria for distinguishing the types of social competence of a person in the literature. the most optimal, according to the author, is the classification with the participation of consciousness (trukhin, 2005): unconscious competence, conscious competence, conscious incompe tence and unconscious incompetence. that is, a person may or may not be aware of his or her social competence or incompetence. in the context of social competence, the difference between these two classifications of its types is that, for example, a person who realizes his/her social competence can equally perform both productive (innovative, unusual) tasks and reproductive (repetitive, technical) tasks. whereas a person who does not realize his social competence will more often perform reproductive tasks. the one who is not aware of his social incompetence will tend to overestimate his efforts in performing the tasks, and the one who is aware will tend to underestimate them. based on the analysis of theoretical sources, the authors propose the following model of social competence (figure 1). according to the definition of the world economic forum (wef, 2019), social competence includes such components as leadership, which belongs to the personal component of the proposed model (figure 1), as well as teamwork, which belongs to its activity component. that is why the authors drew attention to the relationship between teamwork and social competence. erpenbeck and rosenstiel (2003) consider social competence as one of the four types of competences and define it as a person's inclination to communicate and cooperate (understanding others, developing others, service orientation, using diversity, political awareness, influence, communication, negotiation and disagreement resolution, leadership, catalyst for change, networking, cooperation and collaboration, teamwork). emotional intelligence as a component of social competence was considered as a basis for the development of organizational leadership during the covid period in educational institutions (semenets-orlova et al., 2021) and can be applied to the target group of young scientists. particular attention was paid to educational changes (semenetsorlova, 2017) as a driver of social competence transformation. the potential of young scientists is considered by researchers (gernego, shkoda, savych, 2021) as an important element of strategic human capital management. the social competence of young scientists is an integrative qualitative category, a personal formation that combines a value understanding of social reality, specific personal qualities, abilities, social knowledge, skills, abilities as a guide to action, subjective readiness to apply social experience in the main spheres of human activity, the ability to make socially promising transformational influences in the scientific field, to analyze their consequences (tyulpa, 2020). there is also an approach that considers the social competence of young scientists within the educational and qualification framework. in particular, monnier m., tschöpe t., srbeny c. et al. (2016) in their study, based on the educational qualification framework and the competencies specified in it, define social competence as a dynamic cognitive concept, that is, something that can be studied. they believe that modeling and measuring social competence is possible only if the focus is on basic "social and emotional-cognitive dispositions" rather baltic journal of economic studies 179 vol. 8 no. 4, 2022 than on social behaviour. social competence is a multidimensional structure that determines the interaction of many competences: communication, assertiveness, ability to accept criticism, etc., and depends on the values, attitudes of the persons involved, as well as on the rules, standards and expectations of professional behavior. the researchers note that socially competent behavior can mean very different things depending on the context and situation. the formation of each component that is part of the structure of social competence of young scientists is associated with the formation of its characteristics and properties as part of a holistic system and involves taking into account a number of criteria. the content of criteria and indicators is determined by the desire for self-realization, the presence of optimal personality qualities. also, the criteria for the formation of social competence of young scientists were determined on the basis of a holistic, systematic understanding of the socialization of the individual, the allocation of its functional and structural components, its definition as a process and result of socializing influences, the adoption of professional and moral values during professional and personal actualization (tyulpa, 2020). formation of social competence of a person takes place in a team (group). it is through interaction in the group that the basic foundations of social competence are accumulated: social knowledge and the ability to apply them in practice. this approach allows to consider social competence as a component of the educational process and as an integral result of such processes as education, development, selfdevelopment, communication and self-realization (riabukha, 2017). the importance of joint teamwork is most clearly underlined by henry ford's statement that the beginning is together, progress is together and success model of social competence approaches to definition specific skills; sociometric status; relationships; functional outcomes structural elements and evaluation criteria based on their content characteristics cognitive, valuable-motivational, operationaltechnological, reflexive-evaluational personal component activity component types of social competence of an individual with the participation of consciousness: unconscious competence, conscious competence, conscious incompetence, unconscious incompetence functions of social competence general functions as functional manifestations of the general competence of the person; specific functions as functional manifestations of social, communicative characteristics and professional activities of the person, including social responsibility levels of social competence low, below average, average, above average, high approaches to social competence research qualitative, quantitative figure 1. model of social competence source: created by the authors on the basis of (varetska, 2014; rose-krasnor, 1997; zarubinska, 2010) baltic journal of economic studies 180 vol. 8 no. 4, 2022 is together (rahimić, perla, 2022). this is practically impossible without a clear division of roles in the team. the idea of group roles was developed in the "team wheel" model developed by margerison (2002). the management process in this model is divided into eight work functions and one area of coordi nation activity, which is called "networking" / "communication". symbolically, the model is represented as a wheel with eight segments and a core. in accordance with these eight core functions, eight types of individual strengths, or team roles, are fixed. a separate role for "rallying" is not allocated, as it is believed that this type of activity can be performed by any team member with developed communication skills. another well-known approach dedicated to the distribution of team roles is the team roles of r .m. belbin (2010, 1996). in teams of young scientists, it is also possible to involve participants belonging to action-oriented roles (shaper, implementer, completionist, finisher), humanoriented roles (coordinator, teamworker, resource explorer) and cerebral roles (organizer, observer, evaluator, specialist). in this study, belbin's approach was investigated by the authors on the example of a target group of young scientists. 3. methodology theoretical part: comparison of literature sources on the following questions: " what is the relationship between teamwork and social competence?" "is teamwork as a component of social competence important for young scientists?" "how can we promote the development of social competencies in the education and training of young scientists?" " what are the challenges facing ukraine in the development of social competence in the education and training of young scientists?" in the practical part the authors used the belbin team role inventory (btri) based on the role theory proposed by r . belbin (belbin, 2010). statistical data processing was performed using the spss statistical software package (v. 22), which included descriptive statistics, factor and cluster analyzes. the sample included 1201 young scientists (respondents were surveyed in 2020 online via google form). 4. results in this study, the authors for the first time identified the orientations of young scientists to team roles (coordinator, shaper, organizer, monitor evaluator, teamworker, implementer, resource researcher, finisher) according to the approach of r . m. belbin (2010, 1996). the analysis of role team orientations of young scientists in training (table 1) shows that in general young scientists are oriented to all team roles, although some of them are more popular than others. table 1 levels of team-role orientations of young scientists (% of the total number of respondents) team roles levels high middle low implementer 58.6 28.8 12.6 teamworker 56.0 32.2 11.8 coordinator 23.8 42.2 34.0 finisher 23.5 37.2 39.3 monitor evaluator 19.7 43.2 37.2 resource investigator 19.4 46.6 34.0 shaper 17.4 41.7 40.9 organizer 16.0 34.5 49.5 source: composed by the authors based on the research results the study found that the heads of educational organizations consider the most important team role to be the role of the executive. a high level of orientation to this role is observed in 58.6% of respondents, which indicates that young scientists have well-developed organizational and coordination skills, i.e., the ability to transform ideas into specific tasks and organize their implementation. the second most important team role was the role of "teamworker", which is oriented by 56.0% of respondents. this team role contributes to reaching agreement in the team, removing misunderstan dings, knowledge of the needs and problems of the teaching staff. this confirms the correspondence of the team roles "implementer" and "teamworker" to the main functions of young scientists. at the same time, much fewer young scientists are oriented towards a more "leadership" team role of the coordinator. thus, only 23.8% of respondents were highly oriented towards this team role. it should be noted that somewhat similar data were obtained in other studies of heads of educational and scientific institutions (karamushka & fil, 2007). the researchers found that a small number of educational managers are oriented to the team role of the coordinator (20.58% of respondents have a high level of orientation to this role). scientists explain this fact by the formalized structure of educational managers, when the main work tasks and decisions are given from the top. also noteworthy is the fact that only 23.5% of respondents have the command role "finisher" at a high level. that is, there is a problem with the implementation of the tasks. this situation, which is quite common in the work of young scientists, may be caused by the need for young scientists to perform different jobs simultaneously when they lack time, baltic journal of economic studies 181 vol. 8 no. 4, 2022 energy and/or resources. in our opinion, the role of the finisher is important for the full cycle of organizational activities. also, young scientists have weak orientations to the team roles of "monitor evaluator" and "resource investigator". only 19.7% and 19.4% of respondents have a high level of orientation to these roles, respectively, although these team roles reflect important functions of young scientists, such as resource search, creation of favorable conditions for new activities, and evaluation of work. no less disturbing, according to the authors, is the weak orientation of young scientists to the team roles of shaper and organizer – only 17.4% and 16.0% of respondents have a high level of orientation to these roles, respectively. this indicates that young scientists have rather weak abilities to unite the efforts of the entire teaching staff and generate new ideas. particularly notable is the fact that the least important for young scientists was the team role of the organizers, although this role is relevant for new and innovative organizational activities and creative approach of scientists to work. taking into account the above, it can be argued that there is a need to strengthen the orientation of young scientists to the team role of the organizers. thus, the data obtained, according to the authors, indicate the need for a certain leveling of team roles performed by young scientists for their flexible use in specific professional situations. this is especially true for the roles of monitor evaluator, resource investigator and organizer, which are responsible for the innovation activities of organizations. since the team-role complementarity (interchangeability) is an important principle of teamwork in educational organizations, the authors conducted a factor analysis of the data reflecting the orientation of young scientists to the main team roles. factor analysis identified three leading factors that reflect the orientation of young scientists to the main team roles (table 2). these factors describe 50.77% of the total variance and include the most closely related indicators. factor 1 ("initiation") explains 18.52% of the total variance of the data, which is bipolar and combines the following team roles: a) on the positive pole – the role of the organizer (0.580); b) on the negative pole – the role of the teamworker (0.743). the positive pole of this factor is the orientation of young scientists to a team role, which ensures the creativity of the team and the generation of innovative and non-standard ideas (organizer). this factor's negative pole is related to emotional leadership, which reach agreement in the group, clears up misunderstandings, and is concerned with the needs and problems of team members (teamworker). factor 2 ("shaping"), which explains 17.53% of the total data variance and is also bipolar, reflects another set of team roles that are necessary for the successful work of teams in the young scientists’ teams, namely: a) at the positive pole are the roles of shaper (0.523), coordinator (0.464), and monitor evaluator (0.441); b) at the negative pole is the role of implementer (0.787). this factor's positive pole reflects young scientists' orientation to the team roles that provide scientists' leadership and team-members' joint efforts (shaper), scientists' ability to highlight different points of view and make well-balanced decisions (coordinator), as well as scientists' ability to analyze situations, make logical conclusions, and provide control (monitor evaluator). this factor's negative pole is related to young scientists' orientation to the team roles that are responsible for the transformation of ideas into specific tasks and for the accomplishment of these tasks (implementer). factor 3 ("search") explains 14.72% of the total data variance and is also bipolar, combining the following team roles: a) at the positive pole is resource investigator (0.800); b) at the negative pole is finisher (0.567). this factor's positive pole reflects the young scientists' orientation to the team role that ensures team's interaction with the external environment (resource investigator). this factor's negative pole is related to the young scientists' orientation to the team role that encourages the team to do everything on time and to complete the job (finisher). thus, the results of factor analysis demonstrated the possibility of a certain "compression" of team role positions, which, according to the authors, can be the basis for modernization of the classical eightrole structure of management teams in educational organizations (belbin, 2010). however, the roles table 2 young scientists' orientations to team roles (based on the results of factor analysis) team roles factor 1 factor 2 factor 3 initiation shaping search organizer 0.580 teamworker -0.743 shaper 0.523 coordinator 0.464 monitor evaluator 0.441 implementer -0.787 resource investigator 0.800 finisher -0.567 source: composed by the authors based on the research results baltic journal of economic studies 182 vol. 8 no. 4, 2022 that belong to opposite poles are obviously directly opposite. therefore, in situations where team members have to perform several roles simultaneously, such performance becomes impossible. further, according to the results of factor analysis, cluster analysis was conducted, which allowed to identify four types of heads of educational organizations with appropriate management styles and orientations to team roles: organizing, forming, researching and initiating (table 3). table 3 young scientists' manager types (in relation to their team-role orientations) factors clusters organizing shaping researching initiating initiation -0.57839 -0.43392 -0.41580 1.18575 shaping -0.38105 1.23621 -0.75490 0.03549 search -1.13413 0.27067 0.81047 -0.15306 source: composed by the authors based on the research results as can be seen from table 3, the types of young scientists who are oriented towards certain "extended" team roles are distributed as follows. the first type (organizing) includes young scientists who have a high negative average value of the factor "search" and a slightly lower negative value of the factor "initiative", which indicates a tendency to perform structured work to its completion within the established limits. the factor "formation" is not manifested. the second type (shaping) is characterized by a high average value of the factor "shaping" and insufficiently expressed by other factors. that is, representatives of this type are focused on leadership, uniting the efforts of team members, interest in different points of view to make informed decisions, control over work. at the same time, such managers are not inclined to search and research. the managers of the third type (researching) have high values on factor "search" and high negative values on factor "shaping" with insignificant values on factor "initiation". that is, young scientists of this type look for options, resources and means to achieve goals in the external and internal environment. at the same time, they are not oriented to developing good relationships in the team and generating new ideas and approaches. the managers of the fourth type (initiating) are characterized by high values for the factor "initiation" and low values for other factors. that is, young scientists belonging to this type are creative, generate innovative and non-standard ideas in the team, have a rich imagination, and are able to solve nonstandard problems. however, they are not able to find resources and build relationships. the authors believe that young scientists of organizing and forming types use mainly traditional management styles in their work, while managers of research and initiative types use mainly innovative management styles. the quantitative distribution of young scientists’ management styles in team relation to young scientists' team roles is given in figure 2. 28,4% 27,6% 22,6% 21,4% initiating researching shaping organizing figure 2. quantitative distribution of management styles of young scientists in the team depending on the team-role orientation of managers (% of the total number of respondents) source: composed by the authors based on the research results as can be seen from figure 1, 21.4% of respondents belong to the organizing type and are quite organized, able to create a favorable working atmosphere in the team and interested in the results of work. 22.6% of young scientists belong to the forming type and are characterized by the ability to transform intentions into concrete action plans and complete the tasks. almost every third young scientist (27.6%) belongs to the research type and is able to establish links with the external and internal environment in order to find new opportunities. leaders of initiative type make up 28.4% of the total number of respondents and are innovators and generators of new ideas, as well as creators of friendly relations between all team members. thus, the data obtained indicate that a little less than half of young scientists (44.0%) use traditional management styles, and a little more than half of them (56.0%) prefer innovative management styles, which indicates a certain need for the development of such an element of social competence as teamworking in the community of young scientists in ukraine. 5. conclusions teamwork is an important element of social competence of young scientists in ukraine. in the theoretical substantiation of this work, the authors proved that social competence is formed in a team and created a model of social competence. teamwork baltic journal of economic studies 183 vol. 8 no. 4, 2022 belongs to the activity part of social competence. that is why in an additional survey, in cooperation with the ngo "resurs", a study of team roles was conducted according to the method of r .m. belbin. the results of this study revealed in more detail and confirmed the main results of the main mass survey of young scientists of the project "realization of the potential of young scientists in the context of integration of science, education and business", where teamwork is one of the most developed soft skills of young scientists (shkoda et al., 2020) at the maximum level. the results of the study, obtained by the authors using cluster analysis, showed that the types of managers are quite evenly distributed in the teams of young scientists: initiative (28.4%), research (27.6%), shaping (22.6%) and organizing (21.4%). factor analysis showed some compression of team roles in the teams of young scientists. but, in general, young scientists need better development of such team roles as monitor evaluator, resource investigator and organizer to increase their social competence. acknowledgements: the materials of the theoretical part of the article are partly based on the results of the oead scholarship project "social competence in the education and training of future vocational teachers. an empirical comparative study on the example of austria and ukraine" (february-july 2019). the materials of the methods and results parts of the article are developed within the framework of the young scientists’ project "realization of the potential of young scientists in the context of integration of science, education and business" (ukrainian state registration number 0120u102126). the team roles’ survey was realized in cooperation with ngo "resurs". references: belbin, r . m. 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november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 191 vol. 3, no. 4, 2017 competitive features in the market structure of housing property with regard to regional definitions kostyantyn pavlov1 lesya ukrainka eastern european national university, ukraine abstract. the subject of research. given the steady demand for residential real estate, the low solvency of the population, and unbalanced development of individual segments of the regional housing market, competition issues and the mechanism of its operation, today is very relevant. real estate is one of the components of the national economy because it carries more than half of total world wealth and its stable functioning is one of the most complex processes of market transformations occurring in the country. active functioning property markets are a prerequisite for the sustainable development of cities and regions of the country. this development is the basis for the effective management of regional and implemented in the system of national governance and local governance. in modern terms, ukraine is at the stage of the market system, one of which is real estate market. from the way, the subject of study is a competitive relationship, and especially their formation in the regional real estate market. methodology. in order to carry out a thorough study, there was elaborated numerous scientific literature authored by leading scientists of ukraine, europe, and the former soviet union camp to define the concepts of “competition”, “regional market”, “real estate”, “residential property”. according to the research of current problems and competitive features in the structure of the real estate market on the basis of regional specificity, a logical systematization of these concepts is made. results of the research allowed us to “carry” a clear parallel between the correlation of factors and competitive impact on the regional real estate market of the potential buyers, the developer and manufacturer of products directly to real estate as an object relationship. practical implications. the article is to study the specific competitive position in the regional real estate market in ukraine and also features of exposure to it by consumers, builders, and direct the product itself – residential properties. the value/originality. in summary, this study can conclude that the mechanism of functioning of the regional real estate market based on the same economic category, and national real estate market, while, at the same time, characterized by institutional and structural asymmetry incomplete. determining the hierarchical order of formation of the real estate market relative to their territorial characteristics and volume allows us to clearly understand the scope and specific measures needed to resolve the competitive environment for them. this study allowed defining and describing the signs and positions of the various forms of competitive real estate market participants. key words: competition, regional market, real estate, residential property, market regulation, competition, developers, developer’s competition, competition between real estate, forming competitive factors. jel classification: d40, d41, d43, l40, l41 corresponding author: 1 department of analytical economics and nature use, lesya ukrainka eastern european national university. e-mail: pavlovkostya@gmail.com 1. вступление экономика украины представляет собой синтез различных, но взаимосвязанных между собой рынков, которые в совокупности своей формируют сложную рыночную структуру. уровень становления и особенности функционирования отдельных сегментов данной структуры, в том числе и рынка недвижимости как на государственном, так и на региональном уровнях, выступают важным аспектом развития рыночных отношений. учитывая постоянно растущий спрос на недвижимость, низкую платежеспособность населения и несбалансированность развития отдельных сегментов региональных рынков жилой недвижимости, вопросы конкуренции и механизма ее функционирования, на сегодня являются весьма актуальными. рынок недвижимости является одной из составляющих государственной экономики, поскольку он несет в себе больше половины всего мирового богатства, а его стабильное функционирование считается одним из самых сложных процессов рыночных преобразований, происходящих в государстве. к тому baltic journal of economic studies 192 vol. 3, no. 4, 2017 же, активное функционирование рынков недвижимости является одним из условий устойчивого развития городов и регионов. в современных условиях, украина находится на этапе становления системы рынков, одним из которых является рынок недвижимости. под данным понятием понимается система отношений между субъектами рынка недвижимости, которая в отличие от существующих, построенная с учетом региональных организационно-экономических основ функционирования для обеспечения эффективного обращения объектов жилой недвижимости между собственниками, а именно: ценообразующих; социальных; стимулирующих; инвестиционных. рынки жилой недвижимости в условиях трансформационных процессов в украине характеризуются институциональной асимметрии и структурной неполнотой, а их кризисное экономическое положение возникшее из-за снижения показателей эффективности экономики, несовершенство финансово-кредитной системы, общий спад производства, падение реальных доходов и усиление социальной стратификации населения закономерно замедляет их развитие. изучая особенности региональных рынков жилой недвижимости, стоит отметить, что механизм их функционирования опирается на те же экономические категории, что и общегосударственный рынок недвижимого имущества. 2. формирования и функционирования региональных рынков региональный рынок жилой недвижимости формируется под влиянием социальных, экономических, природно-климатических, демографических и других факторов. рыночная стоимость объектов недвижимого имущества, в свою очередь, определяется не только существующей конъюнктурой рынка, то есть соотношением спроса и предложения, но и особенностями его функционирования, а именно: возможным уровнем доходности, степени риска инвестирования капитала, возможной цене продажи объекта недвижимости на конкретную дату и т.д. (zolotov & mochenkov, 2008). в процессе интенсивной либерализации в сфере прав собственности на объекты недвижимости в украине начали стихийно развиваться институты посредничества, опережая процесс создания соответствующего регуляторной среды. несмотря на не достаточною отлаженность системы регистрации прав собственности на недвижимое имущество в настоящее время все еще действуют громоздкие и обременительные процедуры технической инвентаризации недвижимости. вместе с тем, в сфере строительства до сих пор остается в силе сложная разрешительная система, хотя и она оказалась недейственна для предотвращения стихийной застройке. оценивая механизм функционирования региональных рынков жилой недвижимости, можно выделить ряд проблем, которые до сих пор для него характерны. в первую очередь, это неравномерность развития отдельных их частей и несовершенство нормативно-правовой базы, регулирующей экономические отношения, возникающие на рынках недвижимость. в результате кризисных явлений в экономике, что характерно для большинства регионов весомым недостатком остается так же низкий уровень платежеспособности населения и инвестиционного потенциала юридических лиц. пока не существует профессиональных подходов к управлению из за отсутствия единого терминологического подхода; отсутствия анализа специфики его экономических законов, определяющих состояние рынка и критериев оценки процессов его развития; неопределенности системы рисков в сфере недвижимости (mann, 2007). к важным недостаткам функционирования региональных рынков жилой недвижимости также следует отнести недостаточную информированность участников рынка, отсутствие единых стандартов на услуги в сфере управления недвижимостью, отсутствие опытных и подготовленных кадров по управлению и работе на рынке недвижимости и т.д. (pavlov, v.i., asaul, a.m., pilipenko, i.i., pavlita, n.v. & krivovozyuk, i.v., 2006). сейчас на рынке жилой недвижимости, как специфическом секторе экономики, имеют место быть следующие закономерности: низкая ликвидность; рост стоимости объектов недвижимости во времени; ограниченное количество покупателей и продавцов; несбалансированность спроса и предложения; слабый уровень исследований; циклический характер развития (krivovozyuk & smolyarchuk, 2009). 3. конкуренция на региональных рынках по мнению асаула а.н., манна р.в., павлова в.и. и других ученых, конкурентоспособность недвижимости – это совокупность характеристик, отличающих их от объектов-аналогов по уровню затрат на его покупку и дальнейшую эксплуатацию, по степени удовлетворения индивидуального потребителя, а также их способность быть выделенными потребителем из других групп аналогичных объектов предлагаемых продавцами, благодаря более высоким потребительским свойствам и технико-экономическим параметрам (mann, 2007). действительно, конкуренция на региональных рынках жилой недвижимости, с одной стороны, является важнейшим условием их существования и развития. именно она заставляет участников рынка постоянно внедрять наиболее эффективные способы производства, предлагать новые концепции и ценовые предложения, осуществлять работу в новых baltic journal of economic studies 193 vol. 3, no. 4, 2017 сегментах. с другой стороны, формы проявления и содержание конкуренции, прежде всего, обусловлены состоянием региональных рынков, их тенденциями и цивилизованностью (mann, 2007). известно, что по своей экономической природе региональный рынок – это совокупность локальных экономических процессов и социальных отношений в сфере оборота административных и территориальных образований с учетом процессов по принятию коммерческих решений. с момента перехода к рыночным экономическим отношениям в украине имеют место изменения роли, а также значения рынка жилой недвижимости в региональном процессе воспроизведения. ведь пропорциональность процесса регионального воспроизводства формируется путем воздействия рыночных факторов вроде: налоговой политики, ценообразования, процентной политики банковских учреждений. региональный рынок жилой недвижимости, как и любой другой, может эффективно функционировать лишь в условиях научно обоснованной системы исследования уровня спроса, закономерностей развития и общих тенденций его функционирования, к которым относятся: общие требования потребителей к качеству объектов жилой недвижимости; общие объемы спроса, а также масштабы этого спроса на отдельные виды объектов жилой недвижимости; сезонность спроса на отдельные виды жилья; структура спроса на один тип жилых объектов от различных застройщиков вообще, изучение спроса на тот или иной тип жилой недвижимости позволяет осуществить анализ и спрогнозировать структуру рынка, его емкость и определить географический аспект дальнейшего его развития. за критериями территориальной организации и сферы обращения в рамках общенационального рынка жилой недвижимости выделяют: межрегиональные; региональные; межобластные; областные; междугородные; городские; сельские (pavlov, 2017). каждый из вышеуказанных рынков характеризуется соответствующей сложившейся и потенциальной инфраструктурой со специфическими признаками их расположения, функционирования, тенденций развития, емкости и товарного воспроизводства. жилая недвижимость, как и любой другой тип недвижимого имущества – это особый вид товара, ведь характеризуется своей долговечностью и фундаментальностью удовлетворяющий при этом одну из самых сложных потребностей потребителя. а совокупность потребительских характеристик объекта жилой недвижимости и внешних его параметров определяют его рыночную ценность. по своим конструктивным характеристикам объекты жилой недвижимости являются уникальными и неповторимыми. в то же время, достаточно сложный процесс передачи прав на него обусловливает низкий уровень ликвидности недвижимости как товара. поскольку региональный рынок жилой недвижимости представляет собой систему социально-экономических отношений, между его субъектами, которые своей деятельностью обеспечивают перераспределение объектов недвижимости, их товарными особенностями являются: не разрывность и связь с местоположением; высокая стоимость; существенная дифференциация потребителей; разнообразие; долгосрочность функционирования; сохранение своих физических качеств в течение всего срока эксплуатации. следует также отметить то, что положение на региональных рынках жилой недвижимости зависит от таких факторов, как: государственная политика по приватизации; уровень развития инфраструктуры обеспечивающей существование рынка и его дальнейшее развитие; государственная и региональная политика по управлению недвижимостью как товаром; территориально-географическая специфика (традиции, криминогенная положение, климатические условия, политическая стабильность). существенное значение для региональных рынков жилой недвижимости так же отыгрывает территориальное расположение жилых объектов на них, поскольку потребитель покупает не только сам объект недвижимости, но и инфраструктуру, которая его окружает: удаленность от магазинов, мест развлечений, места работы и тому подобное; обеспеченность общими социальными услугами (полиция, служба спасения, садики, школы); качество природной среды, что его окружает (качество воздуха и воды, удаленность от промышленных зон) общий вид (технические характеристики зданий и ландшафт и т.д.). исследуя конкурентные характеристики региональных рынков жилой недвижимости следует обратить внимание и на разграничение первичного и вторичного рынков жилой недвижимости, поскольку это их важная структурная особенность. которая характеризуется различным типом конкурентной среды. как известно, первичный рынок – это рынок нового жилья, которое только введено в эксплуатацию. вторичный рынок – это жилье, освобожденное по разным причинам (расширение жилой площади, переезд на другое место жительства и т.д.). в сложившихся условиях в украине и ее регионах, а также различным миграционным процессам актуальность вторичного рынка жилья остается на высоком уровне. предметом предложения на вторичном рынке жилой недвижимости выступают уже существующие объекты жилищного фонда, а его объемы могут baltic journal of economic studies 194 vol. 3, no. 4, 2017 быть ограниченными только количеством жилых объектов, находящихся в частной собственности. продавцами же объектов недвижимости на вторичном рынке в подавляющем большинстве выступают физические лица, соответственно спрос также формируется населением (ovsyannikova, 2012). если же рассматривать рыночную структуру вторичного рынка жилой недвижимости, то можно сделать вывод, что данный рынок в большинстве своём характеризуется совершенной конкуренцией, поскольку на нем действует большое количество покупателей и продавцов, а процесс ценообразования осуществляется на рыночной основе. в свою очередь, первичный рынок, формируясь в сфере жилищного строительства, остается частью рынка строительства. в связи с этим, строительные субъекты становятся экономическим субъектами, а их взаимоотношения не совсем «вписываются» в классическую форму взаимоотношений между участниками рынка по модели «покупатель-продавец». в таких условиях продавцом на первичном рынке жилой недвижимости выступают: заказчик, подрядчик, инвестор, которые, как показывает практика, часто представлены в едином юридическом лице – девелопере, который в то же время осуществляет функции риелтора, и инвестора. можем сделать вывод, что первичный рынок жилой недвижимости характеризуется олигополистической формой. ведь количество продавцов на рынке ограничено, к тому же, как правило, на региональном рынке работает несколько крупных застройщиков, занимают доминирующие позиции – они и определяют структуру и динамику предложения, а также техническую и ценовую политику (ovsyannikova, 2012). на региональных рынках жилой недвижимости украины олигополистическая форма конкуренции является довольно распространенной и имеет такие признаки: неценовая форма конкуренции; ограниченное количество застройщиков-конкурентов на рынке; господство на рынке девелоперских компаний. при таких условиях, в интересах лидирующих на рынке строительных предприятий как можно быстрее пойти по пути картельного сговора по вопросам формирования цены на продукцию, а также использования общих каналов для реализации своей продукции. как следствие предприятия-олигополисты фактически действуют как монопольный игрок на рынке, но при этом на них не распространяются государственные санкции антимонопольного содержания. на сегодня данная модель конкуренции является наименее исследованной, особенно когда речь идет о региональных рынках жилой недвижимости. региональный рынок жилой недвижимости и любого другого товара имеет определенные особенности, а на процесс ценообразования, его структуру и формирование баланса спроса и предложения влияет множество факторов. в некоторых аспектах они поддерживают общие тенденции, присущие определенному региону, а в некоторых характеризуются более глобальным содержанием, отражающим общие процессы, которые имеют место в экономическом положении в масштабах страны в целом. на пример, характерные особенности, центрального региона могут не соответствовать тем процессам, происходящим с положением рынка жилой недвижимости в западном, то южном регионах. в этом и заключается отличие между региональными рынками жилой недвижимости. в целом, нет ничего удивительного в том, что уровень развития рынка жилой недвижимости в городе киев по отдельным параметрам опережает показатели не только других областных центров, городов-миллионников, но и отдельно взятых региональных рынков нашего государства. вместе с тем, стоимость элитного жилья в областных центрах украины может быть сопоставима со стоимостью нового жилья низшего класса в новостройках столицы, поскольку потребитель сегодня все больше внимания уделяет качеству зданий, их комфорту и энергоэффективности. при выборе объекта жилой недвижимости покупателя уже не удовлетворяет избыток жилой площади. есть спрос на новые, а часто и индивидуальные планировки, а также высококачественные отделочные материалы импортного происхождения. вместе с тем, имеют место и значительные различия в самой инфраструктуре предлагаемых жилых объектов на региональных рынках. на сегодня сложилось такое положение на первичном рынке жилой недвижимости в регионах, что особенным спросом пользуется жилье эконом-класса, ведь объемы потенциального потребительского спроса остаются на достаточно высоком уровне. недвижимость премиум-класса там возводится в очень ограниченных объемах и как правило в виде индивидуальных коттеджей по индивидуальным проектам. следует также обратить внимание на то, что за последнее десятилетие активно начали возводить объекты жилой недвижимости в населенных пунктах, территориально расположены в пригороде столицы – в основном это объекты бюджетного класса из монолитных бетонных конструкций. анализируя мировые тенденции развития жилищного строительства можем сделать вывод, что со временем качество жилых объектов, строящихся в разных регионах государства постепенно будут почти сопоставимы с столичным уровнем. конечно, уровень жизни и благосостояния населения в разных частях государства по сравнению с киевом и между собой существенно отличается, а влияет на это как общее экономическое положение определенного региона или их группы, так и тенденции, сложившиеся в определенной области или городе. baltic journal of economic studies 195 vol. 3, no. 4, 2017 влияние на интенсивность, повышении уровня качества, а также объемов жилищного строительства важную роль сыграло то, что на региональные рынки жилой недвижимости "пришли" девелоперы из киева и других крупных «городов-миллионников». ведь благодаря своему мощному финансовому положению они приводят в регионы инвестиции, инновационные строительные технологии и новые, значительно более высокие требования и стандарты качества жилых объектов. такой интерес столичных застройщиков в разных регионах государства вызван меньшей сложностью организации процесса строительства, доступными строительными материалами местного производства и что более важно – дешевыми трудовыми ресурсами, что приводит к большей рентабельности самого процесса строительства. хотя, вместе с тем и объемы жилищного строительства не всегда достаточны для столичных девелоперов, ведь рынок недвижимости любого уровня имеет одни и те же законы и правила  – процесс ценообразования происходит по одним и тем же схемам. конкурентная среда региональных рынков жилой недвижимости – это совокупность рыночных субъектов и факторов, определяющих взаимоотношения между участниками рынка. положение конкурентной среды региональных рынков жилой недвижимости определяется также видом конкуренции, институциональной структурой рынка, развитием различных организационных и правовых форм, а также форм собственности субъектов рынка (novoselov, 2002). в условиях современности, для региональных рынков жилой недвижимости в украине присущи такие структурные типы: регионально-олигополистическая; регионально-монополистическая; деконцентрированная структура региональных рынков. в зависимости от соотношения на региональном рынке жилой недвижимости столичных (городов-миллионников) и местных девелоперов конкурентная структура может быть такой: монополия на региональном рынке столичных (городов-миллионников) девелоперов; доминирование на региональном рынке столичных (городов-миллионников) девелоперов; олигополии на региональном рынке столичных (городов-миллионников) девелоперов; конкурирующие на региональном рынке между собой столичные (городов-миллионников) девелоперы при наличии местных застройщиков; конкурирующие на региональном рынке между собой столичные (городов-миллионников) девелоперы при отсутствии местных застройщиков. образования и существования любого регионального рынка жилой недвижимости в украине, а также условия участия субъектов на нем и их конкурентных взаимоотношений зависят от различных факторов, способствующих этому, или наоборот препятствующим (рисунок 1). факторы влияния спрос (покупатель) предложение (застройщик) -доходы; -цена аренды жилья; -доступность кредитных ресурсов; -наличие и действенность региональных программ по обеспечению жильем; -гарантированность; -субъективная оценка, предпочтения. -уровень технологического обеспечения жилых объектов; -налогообложения; -цены на сырье (строительные материалы); -качество продукции; -гарантийное обслуживание; -государственное содействие; -доступность финансовокредитного обеспечения; -количество участников регионального рынка недвижимости; -территориальное положение. объект взаимоотношений (жилая недвижимость) -конкурентная среда; -территориальное размещение; -качественные характеристики; -уровень энергоэффективности; -цена; -техническое обслуживание (послепродажное); -инфраструктура; -фактический срок эксплуатации. региональный рынок жилой недвижимости рис. 1. факторы влияния на конкурентную среду и взаимоотношения на региональных рынках жилой недвижимости источник: разработано автором baltic journal of economic studies 196 vol. 3, no. 4, 2017 4. факторы влияния конкуренции на спрос конкурентные факторы, которые оказывают влияние на потенциального покупателя (спрос) в момент совершения выбора объектов жилой недвижимости являются: величина постоянных доходов, ведь именно от данного показателя покупатель отталкивается в первую очередь поскольку это влияет на класс, престижность и региональную особенность потенциального жилого объекта; цена на съемное жилье – данный показатель формируется в результате спроса, региональной особенности, местности расположения и технических характеристик объектов; доступность кредитных ресурсов – один из наиболее важных факторов влияния, поскольку финансовый ресурс у покупателей, как правило, ограничен, в связи с чем, возникает потребность в привлечении дополнительных средств. в то же время, интерес финансовых учреждений к жилым объектам как к будущему залогу отличается и зависит от различных факторов – как: местонахождение объекта недвижимости, местных особенностей, его региональной принадлежности, технических характеристик, платежеспособности заемщика, возможных рисков экономического, финансового, социального и техногенного характера; наличие государственных и региональных программ, способствующих обеспеченности населения жильем, а также улучшению условий его проживания. важно отметить то, что наличие и объемы реализации данных программ в отдельных областях различаются, что также оказывает влияние на живость отдельных региональных рынков жилой недвижимости в государстве; гарантированность – данный фактор является обобщающим, ведь несет в себе уверенность покупателя (надежность различных субъектов и институтов на региональном рынке жилой недвижимости, которые обеспечивают надежные условия приобретения и эксплуатации жилых объектов имеющихся на рынке  – застройщика, финансового учреждения, государственных органов). предпочтения – фактор, которым руководствуется покупатель на интуитивном уровне. ведь он является определенной квинт эссенцией из числа возможности, желания и финансовых возможностей покупателя в процессе избрания потенциального объекта для приобретения. 5. факторы влияния конкуренции на объект взаимоотношений если же рассматривать объект недвижимости как отдельный конкурентоформирующий фактор, то следует сосредоточить внимание на таких критериях: конкурентная среда – данный фактор является одним из основных, ведь он является определяющим для конкурентоспособности как отдельного жилого объекта, так и регионального рынка в целом; территориальное размещение – один из ценообразующих факторов, ведь именно размещение объекта жилой недвижимости является основным критерием выбора покупателя; качественные характеристики – данный критерий, также актуален, ведь сегодня, когда региональные рынки жилой недвижимости характеризуются относительным наполнением, покупатель все чаще обращает внимание на материалы, которые были использованы в процессе строительства жилья и его инфраструктурного обеспечения; энергоэффективность – данный критерий тоже является одним из приоритетных, ведь сегодняшние тенденции в сторону подорожания энергоносителей, а также их экологичность приобретают в обществе все большее значение. техническое послепродажное обслуживание жилых объектов – данный критерий тоже приобретает свою актуальность, ведь понятие жэка уходит в прошлое, а новые формы объединений совладельцев жилой недвижимости приобретают немалую популярность, к тому же активно лоббируются на государственном уровне; инфраструктурное окружение жилых объектов – данный фактор играет огромную роль при выборе покупателем потенциального к приобретению жилого объекта, ведь именно инфраструктура что окружает потенциальное жилье будет одной из составляющих качества жизни покупателя недвижимости; фактический эксплуатационный срок – данный фактор также актуален в процессе выбора объекта жилой недвижимости, ведь сегодня существует большое количество технологий, строительных материалов и методов их использования в строительстве. 6. факторы влияния конкуренции на предложение исследуя условия конкурентного соперничества между девелоперами-застройщиками (производителями жилой продукции) следует отметить, оказывающие влияние на конкурентоспособность факторы как самих застройщиков, так и их потенциальной продукции: уровень технологического обеспечения жилых объектов – данный фактор является достаточно дорого стоящим, ведь для высокого уровня его обеспечения застройщику следует использовать новейшие, а иногда и инновационные технологии в процессе строительства; стоимость строительного сырья и трудового ресурса – это основа любого типа, и объема строительства, которая ложится в ценообразование конечной продукции; baltic journal of economic studies 197 vol. 3, no. 4, 2017 качество продукции – данный фактор также на сегодня является актуальным, ведь застройщики часто нивелируют вопрос качества их продукции в пользу сокращения темпов строительства или удешевление непосредственно самого квадратного метра жилой площади; гарантийное обслуживание – это понятие приходит к нам на рынок жилищного строительства не так давно, хотя в развитых странах европы наблюдается уже около десятилетия. речь идет о послепродажном обеспечении эксплуатационных качеств жилого объекта. государственное содействие – также является важным аспектом деятельности строительных компаний на рынке, ведь на каждом региональном рынке жилой недвижимости существуют свои институциональные особенности, а также различие в уровне инициирования со стороны государства и продвижении программ, способствующих обеспечению населения жильем; доступность финансово-кредитного обеспечения. не секрет, что львиная доля всех девелоперов в стране работают на заимствованных средствах, так как процесс строительства достаточно ресурсоемкий, а, следовательно, и зависим от различных финансовокредитных институтов, политика деятельности которых различается в зависимости от региона ее реализации; количество участников на том или ином региональном рынке также играет особое значение, ведь от нее напрямую зависит уровень потенциального рынка сбыта жилых объектов. территориальное расположение – этот фактор влияет на потенциальный рынок участия девелопера, его объемы и возможный рынок сбыта. 7. заключение итак, совершенное в данной статье исследование позволило проанализировать процесс формирования и развития региональных рынков жилой недвижимости, а также определить специфические характеристики их конкурентной среды. проведено четкую параллель и взаимосвязь между факторами конкурентного влияния на региональные рынки жилой недвижимости со стороны потенциального покупателя, застройщика-производителя продукции и непосредственно жилой недвижимости как объекта взаимоотношений. в то же время определена иерархическая последовательность формирования рынков жилой недвижимости относительно их территориальных характеристик и объемов, что дает возможность четко понять масштабы и специфику мер, необходимых для регулирования на них конкурентной среды. references: zolotov, i.v. & mochenkov, a.v., (2008). iskusstvo provedeniya operatsiy s nedvizhimost'yu [the art of real estate operations]. h: rip original, 320. 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(2002). teoriya regional'nykh rynkov: uchebnik. – rostov n/d: feniks; novosibirsk: sibirskoye soglasheniye, 2002 [theory of regional markets]. rostov n / a: phoenix; novosibirsk: siberian agreement, 446 [in russian]. ovsyannikova, t.yu., (2012). konkurentnaya sreda na rynke zhiloy nedvizhimosti: osobennosti i zakonomernosti [competitive environment in the residential real estate market: features and patterns]. bulletin of tomsk state university. economy, 1 (17), 187-193. [in russian]. pavlov, v.i., asaul, a.m., pilipenko, i.i., pavlita, n.v. & krivovozyuk, i.v. (2006). rynok nerukhomosti: navchal′nyy posibnyk [real estate market: textbook]. kyiv: kondor, 336 [in ukrainian]. pavlov k.v. 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(2016) osoblyvosti konkurentnykh vidnosyn na rehional′nykh rynkakh nerukhomosti [features of competitive relations in the regional real estate markets]. naukovyy visnyk uzhhorods′koho universytetu. seriya «ekonomika». zbirnyk naukovykh prats′ 1 (47), 35-38 [in ukrainian]. baltic journal of economic studies 198 vol. 3, no. 4, 2017 константин павлов конкурентные особенности в структуре рынка жилой недвижимости с учетом региональных дефиниций аннотация. цель исследования. учитывая стабильный спрос на объекты жилой недвижимости, низкую платежеспособность населения и несбалансированность развития отдельных сегментов регионального рынка жилой недвижимости, вопросы конкуренции и механизма ее функционирования, на сегодня являются весьма актуальными. рынок недвижимости является одной из составляющих государственной экономики, поскольку он несет в себе больше половины национального богатства, а его стабильное функционирование считается одним из самых сложных процессов рыночных преобразований, происходящих в государстве. активное функционирование региональных рынков жилой недвижимости является одним из условий устойчивого развития городов и регионов страны. это развитие представляет собой основу для эффективного управления регионами, которое осуществляется в системе национального и местного самоуправления. в  современных условиях, украина находится на этапе становления системы рынков, одним из которых является рынок недвижимости. исходя из этого, предметом исследования выступают конкурентные отношения, а также особенности их формирования на региональных рынках жилой недвижимости. методика. ради осуществления тщательного исследования было обработано большое количество научных литературных источников авторства ведущих ученых украины, стран европы и постсоветского лагеря с целью определения понятий: «конкуренция», «региональный рынок», «недвижимость», «жилая недвижимость». ради исследования актуальных проблем и конкурентных особенностей в структуре рынков жилой недвижимости с учетом их региональной специфики осуществлено логическую систематизацию данных понятий. результаты исследования позволили нам «провести» четкую параллель и взаимосвязь между факторами конкурентного влияния на региональные рынки жилой недвижимости со стороны потенциального покупателя, застройщика-производителя продукции и непосредственно жилой недвижимости как объекта взаимоотношений. цель. целью статьи является исследование специфики конкурентного положения на региональных рынках жилой недвижимости в украине, а также особенностей воздействия на них со стороны потребителей, застройщиков и непосредственно самого товара – объектов жилой недвижимости. вывод исследования. резюмируя данное исследование можем сделать вывод, что механизм функционирования региональных рынков жилой недвижимости опирается на те же экономические категории, что и общегосударственный рынок недвижимости. хотя, в то же время характеризуется институциональной асимметрии и структурной неполнотой. определение иерархической последовательности формирования рынков жилой недвижимости относительно их территориальных характеристик и объемов позволяет нам четко понять масштабы и специфику мероприятий, необходимых для урегулирования конкурентной среды на них. данное исследование позволило определить и описать признаки и формы конкурентных позиций различных участников рынков недвижимости. baltic journal of economic studies 91 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: sv.vasiliev2015@gmail.com orcid: https://orcid.org/0000-0003-3226-6981 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: osypenkoruslan1414@gmail.com orcid: https://orcid.org/0009-0006-3533-6219 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: yaholnykoleh123@gmail.com orcid: https://orcid.org/0009-0008-2867-4273 doi: https://doi.org/10.30525/2256-0742/2023-9-2-91-96 transitivity of the state economic policy of ukraine sergii vasyliev1, ruslan osypenko2, oleh yaholnyk3 abstract. the study of the features of the formation and implementation of the state economic policy is aimed at the analysis of the current state of the organization, the stage and perspective of development, the normative support of the national economic policy, and the identification of the advantages and disadvantages of the specified policy. the relevance of the study of the state economic policy lies in the fact that in the conditions of globalization and european integration it is necessary to activate theoretical and practical research in order to solve the most important and priority problems of the country. the subject of the study is the state economic policy of ukraine from the point of view of its transformation with the current challenges of economic interests of the society. this understanding of the problem has led to the formulation of the research objective: theoretical substantiation of the content, principles, model and regulation of economic policy, taking into account the transitivity of the national economic system. the theoretical and methodological basis of the study is the dialectical method of cognition and systematic approach to the study of the problems of state economic policy and its transitivity; scientific works of domestic and foreign scientists based on the application of the abstract-logical method, systematic approach, critical legal approach, etc. it is established that the state economic policy is a component of the general political process, an integral system of measures of the state influence on the economy, the effectiveness of which is manifested in the interconnection of its elements. the transitory nature of the state economic policy, based on the ability of the national economy to expand self-reproduction to meet the needs of the population and the state, and on the other hand, the ability to withstand the destabilizing factors caused by russia's military aggression against ukraine, allows to talk about the formation of a new vector of development of the state economic policy of ukraine. the issues that should be taken into account by public authorities when developing and implementing the state economic policy under martial law are outlined. the need for further research on the institutional foundations of the theoretical approach to justifying the definition of the state economic policy and highlighting the main positions of its constructive formation is substantiated. results. the essence and separate components of the state economic policy are revealed, in particular, the principles of policy formation and the model of the national economy. the priority areas, which should be considered in the development of the state economic policy, were determined. certain problems of implementation of the economic policy in the conditions of martial law were identified. the peculiarities of the normative consolidation of the state economic policy of ukraine are pointed out. recommendations on improvement of the development of the state economic policy are given. key words: state policy, economic policy of the state, models of economic policy, forecasting of economic policy, transitivity of economic policy. jel classification: r38, d04 1. introduction the state economic policy is one of the important components of the vital activities of the society, as its measures are aimed at improving the living standards of citizens and ensuring the social stability of the country and its regions. all this leads the scientific community to pay more attention to the analysis of the implementation and efficiency, transformation aspects and effectiveness of the specified state policy. it should be noted that in modern baltic journal of economic studies 92 vol. 9 no. 2, 2023 conditions in scientific studies of the state economic policy it is necessary to give priority not only to the methods and levers of its influence on socio-economic processes, but also to emphasize the forecasting, organization and monitoring of the functions of each of its elements. the analysis of the latest researches and publi cations shows that the scientific problems of economic policy as a subject of research has aroused and maintained the scientific interest of both foreign scientists (tinbergen j., prescott e., nordihans w., tufle e., niskanen w.a., etc.) and domestic scientists (a. galchynskyi, yu. zaitsev, v. savchuk, l. fedulova, o. shnypko, etc.). however, many scientific and theoretical questions concerning the definition of the essence, principles, features, application of methods and tools, mechanisms of implementation of effective functions of the state economic policy are still insufficiently studied. this makes it necessary to deepen the theoretical and methodological analysis of the concept of state economic policy on the basis of the definition of constructive approaches to its understanding. the purpose of the article is to study the scientific and methodological apparatus of the state economic policy of ukraine, adapted to the modern and promising conditions of the national economy. 2. economic policy as a component of the state policy of ukraine the activity of the state as the most active subject of changing reality is aimed at achieving state goals in various spheres of public life that are of national interest. national interests are the starting point for making state decisions, which determine the goal with which all state decisions must be coordinated, and national interests are embodied in the national development strategy, which is its core. the instrument of implementation of the national development strategy of the state is its national policy. in modern socio-political thought, three main concepts of state policy prevail, namely: 1) pluralistic (emphasizes the process of formation and implementation of state policy in a modern democratic society as a multi-level competition between influential socio-political groups and associations); 2) social choice (considers the socio-politically oriented individual as the main carrier of social activity, and therefore the implementation of state policy is largely influenced by politicians and statesmen at the highest levels of management, acting on the basis of the choice of rational social interest); 3) deterministic (formation and functioning of state policy are determined by economic relations and the corresponding method of production). it is these concepts, as a theoretical research tool, that make it possible to determine a certain logic of identifying the necessary conditions for the development of conceptual foundations for the formation and implementation of state policy in ukraine (kucherenko, 1997). an important role in the study of state policy is played by a number of problems related to the development of society: the formation of the content of state policy, the study of the influence of political and socio-economic factors on its content and functionality, determining the effect of the influence of various institutional structures and political processes on the implementation of policy, implementation and evaluation by society of the consequences of state policy. therefore, the state policy is one of the important components of the vital activities of the society, as its measures are aimed at improving the standard of living of citizens and ensuring the social stability of the country and its regions. at the same time, such a phenomenon as "state policy " in its content is a component of the system, which is formed as a set of interrelated sectoral types of state policy, integrated by relevant principles. therefore, a component of the state policy, whose measures have a certain influence on the development of social processes, is the state economic policy, which can be defined as the state activity in the socio-economic sphere aimed at the realization of national interests. it should be noted that the main principle of coexistence of "state policy " and "state economic policy " is the principle of coherence. it is the principle of coherence that should be manifested in any decision of the state expressing the national economic policy, ensuring the effective functioning of the socio-economic mechanism and the activities of the subjects of the national state policy. 3. state economic policy concept and content the economic policy of the state can be defined as a form of exercise by the state of its own sovereign economic power and relevant functions, which is organizationally institutionalized as a special type and process of activity, and by its mechanism consists in the formation and implementation of an officially approved algorithm for the application of legal means of state influence on the content, structure and dynamics of internal and external economic relations, and on the macroeconomic properties of market equilibrium, through the appropriate correction of the content of the legal economic order, in view of achieving the programmed quantitative and qualitative properties of the functioning of the national economic system, baltic journal of economic studies 93 vol. 9 no. 2, 2023 ensuring the economic power of the people and the sovereignty of ukraine (zadykhailo, 2013). national economic policy is the most complex socio-economic mechanism of the state. the subjects of economic policy are state bodies at all levels of the three branches of government (executive, representative and judicial), which are called upon to satisfy the needs of economic interests – individuals and legal entities – for public goods within the limits of certain powers. four main tasks of the state economic policy can be identified: 1) ensuring the stability of the economic system; 2) providing favorable conditions for economic activity; 3) ensuring control over economic entities; 4) representing and protecting national interests in foreign economic activity. while performing these tasks, the state simultaneously acts as (a) an organizer, establishing norms and rules; (b) a regulator, leveling the level of domestic markets; (c) a controller, exercising control and supervision; (d) a defender, defending national interests in the international arena. at the same time, it should not be forgotten that the state itself is an object of economic activity. the goal of economic policy formation can't be free of conflicts, because any regulatory action inevitably affects someone's interests, changes the motivation of economic behavior of subjects. it should be emphasized that the state economic policy must correspond to the problems, conditions, goals and opportunities of the country. the defining feature of such a policy should be the implementation of an effective mechanism aimed at ensuring the economic security of the state. the conceptual foundations of the state economic policy in this direction can be reduced to the following goals of the state economic policy, which form the basis of the state economic policy: 1) economic growth; 2) determination of the economic state of the state; 3) definition of the strategy; 4) formation of a policy appropriate to the interests of the economic system; 5) determination of the expediency of using state regulatory instruments (chechel, 2009). 4. formation of the national economy model the national economic policy is aimed at creating favorable economic conditions for the life of the state's population, and the correct formation of the economic development model becomes the mechanism for realizing the set goal. the model of the national economy itself can be defined as a reflection of the tendencies of development of individual economic systems, taking into account both the general economic features of the development of society and the specific ones that are peculiar only to this economic system at a certain stage of its development. the national economic model should ensure: 1) national economic security; 2) innovative development of the economy, which increases the level of competitiveness of domestic products and also stimulates the development of all sectors of the economy; 3) structural diversification of the economy, which reduces the dependence of economic development on one sector of the economy and provides stability for the entire economic system of the country; 4) development of priority sectors of the economy, taking into account national interests, which should be based on the existing economic potential and on the implementation of strategic state tasks. the modern model of development of ukraine is characterized by significant deformations of the economy, which indicates structural imbalances in the economy of ukraine. domestic economy should focus on building a development model in its modern general scientific understanding, taking into account national characteristics, global trends in the development of international investment flows, the new global and multipolar financial architecture of the world (usyk, 2019). it is difficult to call ukraine's development model effective, it is characterized by such transformational trends as: decrease in the living standard of the population, lack of gdp growth, low share of exports, use of outdated production technologies, high share of the shadow sector of the economy, etc. the modern model of economic development of ukraine is forced to take into account the crisis condition of the national economy caused by the state of war in the country and its duration. therefore, in the light of the new stage of economic development of ukraine, the importance of scientific substantiation of national economic priorities and formation of effective state economic policy based on them increases. it is important to form a new vision of the selection of priorities based on a clear understanding of the possibilities of anticipatory development. therefore, the model of economic development as a component of the state economic policy of ukraine must take into account all positive and negative challenges of the time, on the basis of which the strategic priorities of the development of the ukrainian economy are formed. as a rule, the strategic priorities include economic, financial and social ones, which will help to achieve a compromise of interests between the subjects of the national economy. baltic journal of economic studies 94 vol. 9 no. 2, 2023 5. the principles on which the state economic policy is based the economic policy of the state is a complex and extremely heterogeneous phenomenon, therefore it is necessary to clearly define the general require ments and principles on which it should be based. as for the requirements for the formation of economic policy, the following can be attributed to them: the existence of a system of clearly formulated goals; scientifically based choice of an alternative line of action; availability of a system of economic policy criteria and indicators; consideration of the influence of external and internal factors, etc. the above-mentioned requirements implement the principles of economic policy. thus, the basic principles of economic policy are scientific, complexity (systematic) of the implementation of economic measures, realism in establishing the relationship between the goals and means of their implemen tation, i.e., a real assessment of the existing economic potential; the principle of a concretehistorical approach to the development of economic policy; the principle of alternative economic policy; clear determination of a long-term goal and definition of the main direction, forms and methods of its achievement. scientists offer various approaches to systema tization of the principles of formation of the state economic policy. for example, the following system is expressed: 1) principles of system analysis (optimality, systematicity, hierarchy, integration); 2) principles of planning (operability, continuity of plans, information security); 3) methodological principles (consistency, development, efficiency, variability, compatibility of alternatives); 4) principles of strategic management (result orientation, future orientation, complexity) (umantsiv, 2020). at the same time, the separation of the following basic principles of modern economic policy received the greatest support in scientific literature: 1) the institutionalization of economic policy as a means of internal ordering of components (institutionalization) of the national economic system; 2) the dialectical interaction of economics and politics, according to which politics reflects the needs for the development of economic relations and becomes a means of realizing these needs; 3) the subjectivity of economic policy; this principle reflects the recognition of the active nature of economic policy, which involves the identification, comparison and coordination of the real interests of economic entities in socio-economic relations. the need for more active state influence on economic processes in ukraine today is obvious. at the same time, the content of economic policy cannot be determined by purely ideological principles, the principle of political expediency, the principle of political rent seeking – the desire to obtain rent through the political process, the principle of taking into account past experience. therefore, the content of economic policy should be appropriate to the existing conditions of social and economic development of society. under these conditions, social populism should not become the main motivation for the government's actions. it cannot, for example, openly resort to systematic statistical disinformation and manipulation of public opinion (lahutin, 2006). 6. normative regulation of state economic policy the state economic policy is directly related to the national legislation, which consists of the following manifestations: 1) the mechanism of economic policy formation and implementation itself has a legal form, functioning on legal grounds and within the limits of defined powers; 2) the state economic policy is a source of legal and legislative policy, acting as a factor in the constant improvement of the content of the legal regulation of economic relations. taking into account the active influence of economic policy on the content of commercial legislation, back in 2003 the economic code of ukraine (commercial code of ukraine) included the "main directions of the state economic policy ". such a step of the legislator seems to us not very justified, since the sphere of regulation of commercial law is only a part of the sphere of economic policy of the state. the law of ukraine "on the principles of domestic and foreign policy ", adopted in 2010, established the principles, priorities and foundations of domestic and foreign policy in certain areas of public life, including the economic sphere. unfortunately, according to its content, this law cannot be considered as the creation of a coherent, stable, functioning mechanism for the formation and implementation of state policy, especially economic policy. it is appropriate to perceive this legal act in the context of the complete fixing of the range of tactical and strategic tasks, which society and the state have put on the agenda as the goals of their own activity, primarily of state authorities. at the same time, the mechanism of formation of such policy, correction and revision of its provisions, taking into account changes in socio-economic and sociobaltic journal of economic studies 95 vol. 9 no. 2, 2023 political life, and even more, the mechanism of its implementation, is not provided by the law itself. an attempt to legislate the phenomenon of "state economic policy " was made in art. 20 of the law of ukraine "on the cabinet of ministers of ukraine". however, the approach used by the legislator reduced the high instrumental potential of the category of "state economic policy " and excluded some of its variants from its scope. the national economic strategy for the period up to 2030, which was adopted by the cabinet of ministers of ukraine in 2021, should be considered as the latest document of strategic importance, reflecting the direction of state economic policy (resolution of the cabinet of ministers of ukraine). this strategy defines a long-term economic vision, principles and values, "red lines" (inadmissible directions of movement), the main directions (vectors) of economic development, and for each of the 20 directions – strategic goals, ways to achieve them, taking into account existing and potential challenges and barriers years, as well as the main tasks of state economic policy and target indicators for the period until 2030. unfortunately, the armed aggression of the russian federation and the imposition of martial law in ukraine have necessitated adjustments in determining the priorities of economic policy development. and if the long-term perspective remains relevant, then the short and medium term must be adjusted. it is time to develop a strategy of economic policy stabilization and its regulatory consolidation. 7. forecasting in the process of formation of the state economic policy the objective necessity of state programming and forecasting of the economy is based on the need for structural changes in the national economy and insufficient efficiency of market mechanisms. the main task of programming and forecasting as a form of state regulation of the economy is to maintain economic balance, influence qualitative changes in the economy and stimulate its development. programming as a form of state regulation of the economy is a special way of state intervention in the economy of a producer of goods, directing it in the currently required direction: it acts as a modern non-administrative method of organizing the economy, since it does not manage market subjects, but only directs their behavior and ensures their independence; the basis of programming is structural regulation from the point of view of the programming object (zadykhailo, 2012). at one time, back in 2000, with the aim of determining the legal, economic and organizational bases for the formation of a complete system of forecasting and program documents for the economic and social development of ukraine, individual branches of the economy and individual administrative and territorial units as a component of the general system of state regulation of economic and social development of the state, the law of ukraine "on state forecasting and development of programs for economic and social development of ukraine" was adopted, which, unfortunately, as practice shows, does not fulfill the functions of a legislative act regulating the procedure for state forecasting of socio-economic processes (the law of ukraine "on state forecasting and development of programs for economic and social development of ukraine"). forecasting in the field of economics is based on specific methods of scientific and prognostic research, which allow to create an appropriate theoretical construction of reality. according to the authors, the most relevant methods for forecasting the state economic policy are modeling, expert assessments, scenario building, extrapolation and interpolation. for the implementation of the process of forecasting, formation of a dominant position (concept) of the development and functioning of public society as a whole and in relation to individual state institutions, the relevant instruments of a legal, economic, financial and organizational nature are of direct importance. there is no doubt that in order to ensure the efficiency and effectiveness of the formation and implementation of the state economic policy for the rehabilitation and reintegration of the de-occupied and war-affected territories, the choice of the state economic policy instruments should be directly related to the socio-economic, political, informational conditions, and also depend on the rigidity of state management actions. the system of these instruments should be based on quality forecasting, reflect the priorities of territorial development and be consistent with national, regional and territorial interests. formation of the state economic policy with the help of the above mentioned forecasting should become a guarantee of its (policy 's) scientific validity, efficiency of application and prospects for the future. 8. transitional nature of the state's economic policy in the scientific studies of domestic and foreign scientists, the meaning of transitivity is interpreted in different ways. as a rule, the concept of transitivity is used for the purpose of generalization baltic journal of economic studies 96 vol. 9 no. 2, 2023 and analysis of the features of management of economic processes in an unstable external environment. however, in a mathematical interpretation, the property of transitivity reflects, first of all, the "portability " of qualitative and quantitative characteristics of any objects to other, interdependent with them objects, taking into account equivalence and order. in this regard, this paper assumes that transition as a social phenomenon is a step-by-step process of society 's transition from the previous state of the main social institutions (economy, politics, ideology) to another, qualitatively different social state. without denying the general goal of the process of transitivity of the national economy, which includes the implementation of a certain modernization and integration into the european and world community in a short historical period, one should also pay attention to the facts related to the emergence of an extraordinary situation in this process, namely the establishment of martial law in the state. the transitional period in the development of society is always a complex, contradictory state of the state, which is connected with the rethinking of the practice of its functioning, and in the modern crisis period there is also a need for operational correction of such a state. therefore, transition is not the same as social progress, it can also mean regressive transition, which generates both negative and positive trends of development. therefore, the components of transitivity of the state economic policy of ukraine in the conditions of martial law receive new accents and content. 9. conclusions the state economic policy of ukraine has a complex character in terms of functional direction of solving interrelated political and socio-economic problems, is capable of timely response to the transformations taking place in the state and society, and is always effective and efficient. the procedure of forming the economic policy of the state has its own legally secured mechanism, which, in accordance with its organizational structure, allows to respond promptly to all external and internal changes of an economic nature. according to the authors, the current conditions in which ukraine finds itself have intensified the processes of transitivity of the national economy, which is manifested in the acceleration of its integration into the world economic system, institutional transformations and globalization of national business. references: kucherenko, o. (1997). state policy: analysis of modern political science concepts. actual problems of reforming public administration in ukraine: materials of the scientific and practical conference. кyiv: national academy for public administration publishing house, pp. 279–281. zadykhailo, d. (2013). economic policy of the state in the system of legal and legislative support. bulletin of the national academy of legal sciences of ukraine, vol. 3 (74), pp. 214–221. chechel, o. m. (2009). the purpose of formulating the state's economic policy. investments: practice and experience, vol. 21, pp. 62–66. usyk, i. o. (2019). structural transformation of the model of economic development of ukraine in the context of globalization challenges: dissertation for the degree of candidate of economic sciences. vinnytsia, 297 р. umantsiv, yu. m. (2020). economic policy of the state: a textbook. kyiv: kyiv national university of trade and economics, 480 р. lahutin, v. (2006). state economic policy: essence, stages, mechanisms. economic theory, vol. 4, pp. 16–26. commercial code of ukraine. available at: https://zakon.rada.gov.ua/laws/show/436-15#text the law of ukraine "on the principles of domestic and foreign policy ". available at: https://zakon.rada.gov.ua/ laws/show/2411-17#text the law of ukraine "on the cabinet of ministers of ukraine". available at: https://zakon.rada.gov.ua/laws/ show/794-18#text resolution of the cabinet of ministers of ukraine dated 03.03.2021. № 179. available at: https://www.kmu.gov.ua/ npas/pro-zatverdzhennya-nacionalnoyi-eko-a179 zadykhailo, d. v. (2012). economic and legal support of the state economic policy: a monograph. kharkiv: urait, 456 p. the law of ukraine "on state forecasting and development of programs for economic and social development of ukraine". available at: https://zakon.rada.gov.ua/laws/show/1602-14#text received on: 07th of march, 2023 accepted on: 15th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 23 vol. 1, no. 2, 2015 development management of territorial economic systems under integration and convergence conditions lesya gazuda1, uzhgorod national university, ukraine abstract. the purpose of the paper is to define managerial approaches to activation of development of territorial economic systems under conditions of integration and convergence. methodology. the study is based on generalisation and substantiation of approaches to the process of development of territorial economic systems under integration and convergence processes. the importance of developing reasonable methods, principles and functions of management, both from the side of central and local administrations, aiming to increase the efficiency of adjustment of territorial economic systems development, improvement of organizational forms in territorial management, including bordering rural territories is underlined. practical implications. the need to use goal-oriented-program and value-regulatory approaches to manage development of territorial economic systems under integration and convergence is substantiated. here, the goal-oriented-program approach provides for the use of the system of methods and principles, which will ensure the orientation of managerial activity of respective regulatory bodies at implementation of different programs and achieving the goals of development of the system taking into consideration its quantitative and qualitative changes. the value-regulatory approach will be directed at creating new (positive) values related to managerial activity within the dimension of certain rules and norms given by the respective scale of values in social development. the need in development of managerial tools ultimately basing on planning as a function of management of the territorial system’s development, as well as developing plans and programs for fulfilment of perspective development of the mentioned system is substantiated. the author’s view is expressed concerning the process of development management of territorial economic system, which is considered as the task-oriented process of influence on its strengthening, developing positive qualitative and quantitative changes in it, which will lead to converting such system into a brand new state due to increasing its life-sustaining activity and potential. value/originality. developing effective managerial approaches is caused by the necessity to regulate integration and convergence processes of development of territorial economic systems according to existing potential, economic and natural conditions of certain territory that will favor their balanced growth. the efficiency of management in the process of development of territorial economic systems will depend on stage wise development of managerial approaches with the use of effective managerial tools. the stage wise development of managerial approaches is based on historical, current and perspective assessment of the level of development of territorial economic system in terms of its matching to the features of integration and convergence processes, on defining outer functional preconditions and outlining the purposes of development of territorial economic system, developing plans and programs of perspective development, their implementation and managing the results. key words: managerial approaches, territorial economic systems, state and local executive bodies, integration, convergence, bordering rural territories. jel classification: r58, p10, f15 corresponding author: 1department of economy of enterprise, uzhgorod national university. e-mail: lesyagazuda@gmail.com 1. introduction reasonable managerial approaches are essential for solving complex problems of perspective development of territorial economic systems under conditions of intensification of integration and convergence processes. differentiation in development of certain territorial systems causes the need in studying specific approaches in managing them, ultimately basing on taking into consideration the potential of the territory and possibilities of its development in future. substantial contribution in the study of processes of managing territorial economic systems has been made by native and foreign scholars gazuda (2014); gerasym chuk, l.  kovalska  (2010); butko (2007), storonyanska, baltic journal of economic studies 24 vol. 1, no. 2, 2015 shultz  (2013), lall, s. yilmaz (2001); spilimbergo, n. xingyuan che (2012) and others. 2. function of management in maintaining development of territorial economic system management as a function is implemented through implementation of the number of managerial actions, that is functions of management (basic functions were substantiated by henri fayol), in particular through planning, organizing, commanding, coordination and control, which are supplemented in the course of development with such functions of management as motivating, directing, research, assessment, decision making etc. considering management as a function is connected with development of the structure, content of all kinds of managerial activities, including their interrelation in space and time (porshneva, rumyanceva, salomatyna, 1999). compared to functional approach to management, the process approach is determined by uniting all kinds of economic activity in one certain territorial system and is aimed at solving important problems in interrelation of each element in the system. the development of territorial economic system is determined by managerial interrelation between the subject and the object of management in the sphere of production, exchange, allocation and consumption, which is supported with a range of additional elements of the system, as financial, institutional, regulative, informational, trading etc. at this, development management of territorial systems requires working out of reasonable methods, principles, functions of management both from the side of the state and local governments, where (vysoczkyj o. y., vysoczka, y. p. and sharov, 2008): public administration as a kind of state activity, is determined by execution of managerial organizational influence by means of using powers of executive bodies through making for implementing and keeping the laws, execution of managerial functions with the aim to provide complex social, economic, cultural development of the state and certain territories, as well as implementing state policies in certain sectors of public life, making for execution of citizen rights and freedoms. timely state interference in development of those systems, the economies of which are in danger (or danger is considered as possible), should be a general objective of development management of territorial economic systems. each of the types of development of territorial economic systems requires effective management from the side of central and local bodies, adequate selection of instruments of management and its implementation, ultimately at bordering rural territories. while considering development at an object of managing territorial economic system, regulative management means managerial influence within defined goals and objectives of management corresponding to defined priorities. we mean development management of territorial economic system as a straightforward process of influencing strengthening of it, providing qualitative and quantitative positive changes in it, leading to transforming of such system in the new state due increasing its sustainability and increase of its potential. management development of territorial economic systems under integration and convergence requires the use of goal-oriented-program approach and valueregulatory approach. goal-oriented-program approach provides for the use of the system of methods and principles, which presuppose directing managerial activities of certain governmental bodies at implementation of different programs and reaching development goals of the system taking into consideration quantitative and qualitative changes in it. value-regulatory approach to development management of territorial economic systems is directed at creating new (positive) values, related to the activity within certain rules and norms given by certain scale of values (kuzmin, 2012). thus, certain goals are defined at the primary stage of development of territorial system, which will further determine existing rules and norms of behavior for all subjects of such system. 3. managerial tools for maintaining effective operation of territorial economic system currently there are certain contradictions as to the problem of what processes of management may arise in future within structural transformations of territorial economic systems, as to the selection of methods of work, which will provide for management in such systems, and improvement of organizational forms of territorial management. theses contradictions have resulted in some problems of development of territorial economic systems, in particular: development disparities of certain systems, resulting in divergent processes and disintegration of common economic space of the state; low specialization level of economy of the territory because of ineffective use of advantages of territorial division of labour and resource potential; imperfect structure of economy of the territory, overwhelming share of primary sector as a soviet heritage and because of imperfect allocation of productive forces. given the mentioned, we consider that the development management of territorial economic systems is aimed at formation of integration and convergence processes in such systems according to given potential and economic and natural conditions at certain territory, promoting their balanced development. at this, the efficiency of development management of territorial economic systems depends on stagewise development of approaches, based on the use of effective instruments of management. the stages of this managerial process are as follows: historical, current and perspective assessment of the development level of territorial economic system with respect of its correspondence with features of integration and convergence processes, defining existing conditions for functioning of the territorial baltic journal of economic studies 25 vol. 1, no. 2, 2015 system, objectives of such functioning and development, working on plans and programs of such development, their implementing and results management. the first stage of management is analysis and assessment of development level of territorial economic system with respect of its correspondence with features of integration and convergence processes. such assessment provides for development level assessment of territorial economic system using the range of individual and generalized indicators; analysis of the asymmetry and convergence levels of bordering rural territories. that will allow substantiating conclusions concerning the level of integration/convergence of analyzed territories, developing measures aimed at stimulation of integration and convergence processes and deciding on the most effective directions of interterritorial integration. the study of given conditions of operation of the system, that is assessment of the environment and factors, which are influencing the development of territorial economic system, is the another important stage of management. vibrant development of economic processes, taking place within territorial systems, requires flexible system of management, its adapting to changeable conditions of external and internal environment. adapting is an essential element for providing life activity of open economic system. therefore, not taking into consideration of this principle counters territorial economic system to vibrant external environment that will lead to systemic economic crisis in future [goncharov., martynov, 2014). it has to be mentioned, that different factors are not of the similar decisive influence for all territorial systems. for example, in one territorial systems factors will have decisive influence, while for development of other territorial systems they will have minor impact. thus, the availability of natural resources (mineral and raw materials) will decide the specialization of the economy of the territory, the structure of its economy, but for other territorial systems different factors like geopolitical location, transport infrastructure and natural conditions will have a decisive impact. developing plans and programs is the next stage in development management of territorial economic systems. the program of development of territorial economic systems is a complex of economic and organizational measures directed at reaching balanced development of territories. implementing them will help to switch to integration and convergence model. developing programs for supporting territories with low development level, working out of clear course for forming, studying, approving, financing and control of implementing programs is an important instrument for providing integration and convergence processes. such programs will concern territories requiring financial assistance in form of direct state investments and budget transfers, provide for introduction of special regimes of investments and innovative activities for economic entities, which are implementing projects within the priority areas of economic activity of the territory. in such case, territories have to keep to reasonable and effective approach in the use of their resource potential, stimulate their population to high-productive activity, while the state in its turn, will take control these processes and manage them in an effective way. this will allow economic subjects at certain territory to concentrate their efforts and resources ultimately at priority types of activity, which will form the “core” if integration buildup. plans and programs of development of territorial economic systems need to be implemented in the form of certain managerial influence. taking into consideration the multipurpose pattern of operation of such systems, it has to be noticed, that in the course of management, a high number of objectives, which differ in parameters, time horizon, content are being set and gained. particular managerial influence has to balance divergent guidelines, create conditions to soften “bottlenecks” and problems arising in the process of achieving objectives and organization of process for executing tasks, which were defined. at this, the special approach is important to the development of the process of managing the results, as a system of management, which should be based on certain style of thinking and behavior oriented at reaching the expected results (shershnyova, 2004). defined above respective objectives are being the key results of operation and development of territorial economic system. the mentioned process includes three stages, they are as follows: the stage for identification of results, at which orientation of the results and the system of required measures are defined for national economy, economy of territories, for people; stage of situational management, where the system of development factors of territorial system is formed and the styles, methods, technologies of management as tools of managerial activity are defined; the stage of results control providing for assessment according to directions of its implementation and working on respective conclusions. development of the process of management of territorial economic systems under integration and convergence conditions causes the need to select managerial tools, methods, functions of the system of management and of the system, aimed at providing their effective implementation. at this case, the effective development of territorial economic systems requires keeping to the following principles of management: balance of social, economic and ecological components, which in complex will provide sustainable development of economic system. transformational structural changes in development of the economy of the territory and the state of environment, as well as economic interests of development of the system and society should be balanced; complexity, that provides for development of the optimal structure of the economic complex of territorial system, specialization of the territorial economy, increasing efficiency; unity, that means integration of all economic entities and resources (elements of the system), into one economic baltic journal of economic studies 26 vol. 1, no. 2, 2015 space of territorial system; integration of all territorial systems into the economic space of the country as a whole; priority principle, according to which the provision of effective development for territorial economic system requires taking into account the priorities of development of the territory, interests of economic entities, territorial community and interests of the country as a whole; versatility, providing for adequate reacting to unforeseeable endogenous changes within the operated system and exogenous changes, caused by external factors; efficiency, providing for productivity in the life of territorial economic system with optimized use of its resource potential. 4. functionality of development management of territorial economic system functionality of the process of managing development of territorial economic systems is determined by certain methods and functions of this process. among the methods for management of territorial economic systems, the following must be outlined: territorial forecasting, financial, and money and credit methods. forecasting of development of the territories is a prognosis of the situation, which is possible in future depending on the implementation of the measures by the state authorities, efficiency of state and local management. territorial forecasting, which is conducted on the base of historical and current analysis of development of territorial economic systems, allows to define the future level and depth of the processes of convergence and integration, activate the role of the state in development of those territories, where such processes are underdeveloped. the state bodies are able to regulate integration and convergence processes by decreasing the levels of differentiation of territorial development, allocating funds at territories, which are perspective from the point of supporting integration processes in the country as a whole. planning of territorial development is a complex of measures undertaken with considering resources, executors, time limits needed for the implementation of measures aiming provision of integration and convergence processes of territorial economic systems. working out the programs of development for the territories gives them necessary targets, allows to define dominating tendencies, their place in interterritorial and international labour division. implementation of such programs provides background for integration of the territories into a united economic space of the state, rapprochement of the levels of their development as a pre-requisite of their convergence. among the economic methods for regulating development of territorial and economic systems, financial and money and credit methods are to be mentioned first. they provide for giving one-time, temporary and constant subsidies, bailouts, tax exemptions for reducing production costs of goods, services in struggling territories, aiming to allocate own investment resources and increase the attractiveness of getting them from external sources (butko, 2013; larina, kisel’nikov, 1999; artemov, 2002). development management of territorial economic system is characterized in the systemic way by the functions of management, i.e. respective types of managerial influence referring to all managerial structures of the region. planning as a function of development management of territorial economic system, consists of systematized efforts of state and local bodies of management, aimed at working out the development strategy of the territory, its formalization in form of strategic, current and operative planning documents, supporting execution of these plans. the basic conditions for planning of territorial economic systems are as follows: need to provide urgent response to changes of conditions, factors, resources, which influence the development of territorial economic system by means of modelling them; need in uniting resources, concentration of productions for the purpose of creating integration buildups; increasing the involvement of territorial economic systems into international division of labour, internationalization of business; need to decrease the territorial differentiation levels as preconditions for convergence processes. 5. conclusions development management of territorial economic systems under integration and convergence processes determines the need to use goal-oriented-program and value-regulatory approaches, involvement of managerial tools of influence on processes of integration and convergence. that will allow to increase and speed-up development processes of studied economic systems, including bordering rural territories, based on taking into consideration their given natural and human potential, uniting interests and efforts of the state, local communities, empowered bodies, aiming to provide balanced development of territorial economic systems of the state and its regions. references gazuda, m. v. (2014). upravlinnya vykorystannyam vidnovlyuvanyx pryrodnyh resursiv u sil`s`komu gospodarstvi: teoriya i praktyka. – agroinkom, no 1-3, р. 61-67. gerasymchuk z. v., koval`s`ka, l. l., hvyshhun, n. v. and others. (2010). regional`ni logistychni systemy: teoriya ta praktyka. – lutsk : rvv lntu. butko, m. p. (2013). efektyvnist` vykorystannya netradycijnyh mozhlyvostej regional`nogo ekonomichnogo prostoru v umovax poglyblennya integraciyi: monografiya. – nizhyn : tov „vydavnycztvo „aspekt-poligraf ”. storonyans’ka, i. and s. shultz. (2007) mizhrehional’na intehratsiya v ukrayini. – l’viv: aral. baltic journal of economic studies 27 vol. 1, no. 2, 2015 spilimbergo, a. and n. xingyuan che. (2012). imf working paper. wp/12/106. lall, s.v. and s. yilmaz. (2001). regional economic convergence: do policy instruments make a difference?. the annals of regional science vol. 35, р. 160. porshneva, a. g., rumyanceva, z. p. and salomatyna, n. a. (1999). upravleny`e organyzacyej (2nd edit.). – moscow : infra-m. vysocz`kyj o. y., vysoczka, y. p. and sharov, c. i. (2008). osnovy derzhavnogo upravlinnya. – dnipropetrovs`k: nmetau. kuzmin, v. m. (2012). zasady i pryncypy integracijnogo upravlinnya terytorial`noyu gromadoyu (teoretychnyj aspekt). – rehional’na ekonomika no 1, р. 47-53. goncharov, v. m., martynov, a. a. (2014). formuvannya adaptyvnoyi systemy komplementarnoho rozvytky apk nf sumiznyh haluzej ekonomiky ukrainy. visnyk ekonomichnoji nauky ukrainy no 1, р. 24-27. shershnyova, z. y. (2004). stratehichne upravlinnya (2nd edit.). – к.: кnеu. larina, n., kisel’nikov, a. (1999). rehional’naya politika v stranah rynochnoj ekonomiki. – мoscow: оао isd-vo „ekonomika”. artemov, v. i. (2002). vyrobnycho-finansovi grupy teritorial’no-galusevoho typu” rehional’na ekonomika no 1, р. 65-75. леся газуда управление развитием территориальных экономических систем в условиях интеграции и конвергенции аннотация. целью работы является выявление управленческих подходов к активизации развития территориальных экономических систем в условиях интеграционноконвергенционных процессов. методология. исследование основано на обобщении и обосновании подходов к процессу регулирования развития территориальных экономических систем в условиях интеграции и конвергенции. определены важность разработки взвешенных методов, принципов, функций управления как со стороны центральных, так и местных органов исполнительной власти с целью повышения эффективности регулирования развития территориальных экономических систем, совершенствования организационных форм территориального управления, в частности сельских приграничных территорий. практические последствия. обоснована необходимость использования программно-целевого и нормативно-ценностного подходов к управлению развитием территориальных экономических систем в процессе интеграции и конвергенции. где, программно-целевой подход будет предусматривать использование системы методов и принципов, которые должны обеспечивать ориентацию управленческой деятельности соответствующих органов управления на выполнение различных программ и достижения целей развития системы с учетом количественных и качественных изменений, происходящих в ней, а нормативно-ценностный метод будет направляться на создание новых (положительных) ценностей связанных с управленческой деятельностью в плоскости определенных правил и норм, задаваемых соответствующей шкалой ценностей общественного развития. при этом оговорена необходимость формирования управленческого инструментария, прежде всего на основе планирования как функции управления процессом развития территориальной системы, так и разработке планов и программ с целью реализации перспективного развития данной системы. подано свое видение процесса управления развитием территориальной экономической системы, под которым будем понимать целенаправленный процесс воздействия на ее укрепление и обеспечение в ней позитивных качественных и количественных сдвигов, приводящий к переводу такой системы в новое состояние из-за повышения ее жизнедеятельности и увеличение потенциала. значение/оригинальность. формирование эффективных управленческих подходов обуславливается необходимостью регулирования интеграционно-конвергенционных процессов развития территориальных экономических систем в соответствии с имеющимся потенциалом экономических и природных условий, которые сложились на определенной территории, что будет способствовать обеспечению их сбалансированного роста. обеспечение эффективности управления в процессе развития территориальных экономических систем будет зависеть от поэтапного формирования управленческих подходов на основе применения результативного управленческого инструментария. поэтапность формирования управленческих подходов базируется на ретроспективной, текущей и перспективной оценке уровня развития территориальной экономической системы через призму соответствия признакам интеграционно-конвергенционных процессов, определения объективных функциональных предпосылок и очерчивания целей развития территориальной системы, разработке планов и программ перспективного роста, их реализации и управления по результатам. baltic journal of economic studies 116 vol. 3, no. 5, 2017 corresponding author: 1 department of public administration and customs administration, university of customs and finance. e-mail: danyulya@i.ua 2 faculty of economic and technical sciences, state higher vocational school memorial of prof. stanislaw tarnowski in tarnobrzeg. e-mail: ibritchenko@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-116-124 adaptation of domestic state governance to international governance models yulya danshina1 university of customs and finance, ukraine igor britchenko2 state higher vocational school memorial of prof. stanislaw tarnowski in tarnobrzeg, poland abstract. the purpose of the article is to provide the evolving international trends of modern management models and authorial vision of model of state governance system in ukraine, its subsystems, in particular, the system of provision of administrative services that is appropriate for the contemporary times. methodology. on the basis of scientific and theoretical approaches to the definitions of terms “state governance” and “public governance”, there was an explanation of considerable difference between them and, taking into consideration, the mentality of ukrainian society and peculiar weak side in self-organization, the authors offered to form authorial model of governance on the basis of historically traditional for ukraine model of state governance and to add some elements of management concepts that proved their significance, efficiency and priority in practice. results. the authors emphasized the following two prevailing modern management models in the international practice: “new state management” and “good governance”. the first concept offered for consideration served as a basis for the semantic content of state activity that reflects more the state of administrative reformation. practical meaning. a practical introduction of management to the domestic model of governance creates the range of contradictions that do not allow implementing herein concept. pursuant to authors, the second one allows in considerable measure to reform state governance, considering historically developed peculiarities of this model. moreover, the involvement of concept herein into introduction of informational and communicational technologies in the process of governance eliminates the necessity of power decentralization, it allows to form real net structure and, at the same, to keep vertical power structure, to involve citizens for formation and taking of management decisions, to form electronic communicational channel of feedback, to provide citizens with electronic administrative services. all indicated advantages of the concept certify about the necessity to reform state governance exactly in this field. meaning/ distinction. this article raises a question about the significance of formation and sequence of state policy in ukraine aimed at creating an information-oriented society, space, as well as informational and technological infrastructure. key words: рublic management, state governance, state management, model of governance, model of management, domestic state. jel classification: h70, h79 1. introduction the process of european integration of ukraine causes the necessity to conduct scientific researches directed to the studying of issues connected with the reformation of state governance, adaptation to the specific european state governance trends, and bringing to conformity a domestic model of governance to the requirements and standards of european union. thus, it is obvious that there is a necessity to conduct researches in order to define ways of state governance reformation in ukraine under the modern conditions of development. the issues of theory, practice and challenging issues of reformation of governance in ukraine within the framework of european integration have been studied by such national scientists as v. averianov, v. bakumenko, s. varnalii, v. vorotin, v. holub, s. dubenko, v. kniazev, b.  kravchenko, h.  nemyria, n.  nizhnik, v.  oluiko, y. surmin, a. tkachuk, a. chemeris. despite a significant quantity of works under this topic, the problematic of following notions and terms interpretation, such as state governance, public governance and management in the state governance is still not enough analysed and they are still of vital baltic journal of economic studies 117 vol. 3, no. 5, 2017 importance. there is also a challenging issue of governance model formation that corresponds to the modern times, taking into consideration the possibilities of information-oriented society. the modern state of domestic state governance requires analysis of international trends of development and reformation of the state governance, a comprehension of subject-matter, and peculiarities of dominant models of governance. during last decades, the broad audience of ukrainian scientists and researchers hold fierce discussions regarding the bureaucratic model of “state governance” that is considered to be inappropriate to the modern times due to the opinion of the overwhelming majority. one of the modern conceptions of the state governance is a “new public management”, which supporters fight their corner of changing the state governance with a state management as its domestic state is being associated only with excessive concentration of power, hierarchical pattern, standard overregulation that is now improper within the framework of conduction of administrative reforms aimed at the implementation of the model of public governance and restriction of the role of state sector (bovaird, loffler, 2003). the second modern conception of the state governance is “good governance” that dominates the first one and represents a more modern variety of streams for development due to the opinion of the authors. taking into consideration the abovementioned, the issue of formation of te model of the state governance that corresponds to international standards assumes a significant importance. the unsettled abovementioned issue makes actual a necessity to conduct researches within the framework of the article. the purpose of this research is a formation of the authorial model of state governance on the basis of two modern management concepts. in order to achieve this purpose, there were set the following tasks: 1) to analyse the available theoretical approaches in the scientific literature to the determination of definitions of “state governance”, “public governance” and management in “state governance”; 2) to create an authorial model of state governance on the basis of positive aspects of modern management concepts and to offer the ways for the development of national model of state governance. 2. theoretical approaches to the determination of definitions of state and public governance during the last seven centuries, from the moment of writing system origin and till the appearance of the information-oriented society, the history of the development of the state governance passed several management revolutions. ukraine, like many other ex-ussr countries, proclaimed a course to create the information-oriented society and infrastructure, protecting it from the cyberthreats and integrating it into the european society. a new reference point connected with a formation of information-oriented society makes actual a range of social and economic issues that correspond to the transformations in all spheres of public life, for example: the processes of preparation and taking the decisions, the subjects and forms of education, structure of labour market, notion of human rights and liberties, national and private security, evaluation of strategic resources and appearance of new forms of multinational relations. the set forth causes the necessity to reform a subjectmatter of the domestic state governance. according to the speech of the president of ukraine, “the insufficient effectiveness of the system of state governance is still one of the biggest problems of ukraine that prevents proper development of our state” (pro vnutrishnie ta zovnishnie stanovyshche ukrainy v 2012 rotsi: shchorichne poslannia prezydenta ukrainy do verkhovnoi rady ukrainy, 2012), accentuating that “during the implementation of ambitious administrative reform, it is necessary to remember its main purpose – the enforcement of rights of the human being and a citizen. a solution to this important problem, in particular, involves the settlement of social relations appeared during the process of administrative services provision to the legal entities and sole proprietors, the improvement of the quality of their provision” (pro vnutrishnie ta zovnishnie... , 2012). it is worth noting that there is a certain dichotomy due to the ambiguity of the translation of the term “public” into the russian language that may be perceived as “state governance” and “public governance”. as a result, all scientific practices connected with a practical application of the term “public” are rather controversial, taking into account the non-conformity of the available interpretation in the national scientific literature to the real conception of their essence, meaning, and integral features of the concept of public governance. it is also worth to pay attention to the notion “management” in itself that is much narrower than state governance and management in itself. taking into account the abovementioned, we offer to carry out the differentiation of terms – state governance, public governance, and management in order to provide the correct semantic meaning of the practical activity of the system administrative services provision in ukraine (fig. 1). nowadays, there is no agreed-upon definition for the term of public governance in ukrainian scientific society (bakumenko, 2002) and, as a result, its meaning is being interpreted in different ways. thus, the encyclopaedia (bevir, 2007) interprets the term “state governance” as activity and concerted actions of government. thus, the notion “activity” may be defined as an activity of authorities of state governance and way of their collaboration through the development and implementation of state policy. baltic journal of economic studies 118 vol. 3, no. 5, 2017 according, to i. rozputenko, the state policy means actions of authorities of state governance in conformity with specific purposes, directions, foundations in order to settle the aggregate amount of the interdependent issues in the specific area of public activity (rozputenko, 2010). the state policy was defined by v. rudik and t. brus as “relatively stable, organized, and purposeful activity of government regarding the certain matter or subject of consideration that is being fulfilled by it directly or indirectly through the authorized agents and it influences the life of society” (romanov, rudik, brus, 2003). a. karpenko (2013) considers the state governance as a series of steps defined by bodies of government in order to settle social issues. the scientist grounds his opinion on the following facts: the first thing is that a policy is a sphere of cooperation of civil society with the usage of bodies of state governance to implement socially significant interests and own necessities; the second thing is that policy is certain tactics of action that are being accepted and followed by authorities pursuant to the chosen direction. a clarification of the main point of the state policy and public policy has a crucial meaning for the further understanding of their essence in the state and public sectors, as a consequence. we offer to define a state policy as a complex of branch of governmental activities in order to create, to strengthen, and to contribute to the legislative, methodological environment, scientific and technical support, organizational, financial and material-and-technical, protective environment and to establish priorities of national scale of development of information-oriented environment and to create conditions for switching to the information-oriented society. in accordance with the law of ukraine “on administrative services”, the state policy in the system of administrative services provision is based upon the following ideas: supremacy, stability, equality, disclosure, and transparency, operational flexibility and effectiveness, availability, safety, justice, etc. (pro administratyvni posluhy, 2012). the basis for abovementioned fundamentals means legal regulations of the constitution of ukraine (konstytutsiia ukrainy, 2016). they stipulate the key rules of government activity. if we return to the term “state governance” and its definition as “cooperation of the government”, national scientists o. amosov and n. gavkalova (2013) offer the definition as “mutual influence of management entity with a sovereign on the public processes and relationship pursuant to the socially significant functions and powers.” this approach is being supported by t. bovaird and he offers the following interpretation: “a way of cooperation of all engaged parties in order to influence the results of state policy” (bovaird, 2003). a national scientist v. bakumenko considers the state governance to be the practical, organizational, and regulatory influence of the state on the social life of people, for which its power is a basis for its regulation, safety, and its transformation (2002). n. nizhnik defines state governance as an activity that is restricted with legislative acts of public authorities and aimed at the practical implementation of social life and assurance of personal security of citizens, a creation of conditions for their financial, cultural, and spiritual development (1997) and “activity that has a character of executive control, the main direction of which is implementation of legislation and subordinate legislation” (1995). all issues of interaction of public governance bodies, participation in legislative and regulatory development processes and in the formation and implementation of state policy were always called as state governance. no doubt, that is why the state governance in the mind of society is associated with bureaucratic hierarchy, dishonest activity, and absence of entrepreneurial spirit (nyzhnyk, 1995). thus, we would like to pay attention to the opinion of scientist t. zheliuk (2012) and the description of public governance in the white paper of european administration. pursuant to them, public governance guarantees the realization of public policy that is a source of transformation from the policy of civil servants’ responsibility directly to the participation of structures of civil society and citizens, where the obligations rest on the politically active part of society and, as a result, there is an individualization of public policy. it is impossible to say the same about a state policy that is a priori the power expression through the interests of fig. 1. the ambivalence of translation of the term “public management” source: own development baltic journal of economic studies 119 vol. 3, no. 5, 2017 the nation, social classes, separate groups of population and, consequently, its efficiency implies rather extensive support of all active bodies, which activity is connected with such policy. thus, taking into consideration the abovementioned, it is fair to say that state and public governance do not possess definite similarities, as the second one has a much more extensive spectrum of activity that covers interests of the whole ukrainian society. so, in our research, we offer to understand the state governance as governance connected with the professional activity of the civil servants’ activity that is directed to the implementation of decisions of the control bodies. moreover, according to the law of ukraine “on state service” (pro derzhavnu sluzhbu, 2016) and “on service in the local government bodies” (pro sluzhbu v orhanakh mistsevoho samovriaduvannia, 2001), the purpose of the professional activity is a quality provision of public services to citizens at the european level. public governance is an activity that covers the implementation of functions of control bodies and is directed to the serving of interests of the whole society. 3. management in the state governance scientists t. boverd and y. loffler (2003) consider management in the state governance as an approach, where management methods are applied in order to use funds efficiently for the provision of public services. in return, this notion covers the implemented types of activity by civil servants in two rather different areas: in the organizations of state sector; in the organizations that provide state services (state, non-commercial and private). the analysis of the range of foreign scientific works allow to acknowledge that state governance and public governance are being interpreted in different ways, moreover, state management possesses the traits, which are unusual for the state governance. background for the promotion of the term “management” in state governance was a book publication named “in search of good governance”. pursuant to the results of conducted analysis of activity organization in the business sector, the researchers defined it as “height of perfection” and they defined general particularities that, in the opinion of many scientists, could be borrowed for reformation of state governance, for example (dyakova, 1986): – the employees of business sector incline to the fast decision-making, but in the bodies of public governance, decisions are always analysed, amended and made after the situation of the enforced solution. bodies of public governance should be more flexible, they should stand away from the traditional patterns of formal reactions, from solid and non-movable organized structures that just make their activity more complicated and, as a result, make it worse; – in order to achieve efficient results in the business sector, it is necessary not only to listen to the requirements of clients but quickly to respond to inquiries. thus, bodies of public governance, as a rule, are monopolists in the provision of certain services that gives them an opportunity to perform negligently their duties, which are aimed at customization of citizens; – it is necessary to support all civil servants to manifest responsibility; – in the business sector, employees are being encouraged to express innovativeness and creativity that may serve to the improvement and development of their activity and performance in general. of course, there is a competitive environment in the organization that is based on the overclaiming among employees. in the area of public governance, the first important thing is the decrease of expenses, not the improvement of the quality of the provided services, thus, there is an atmosphere of innovations that makes people depressed. – in the business sector, the unified system of values prevails for all employees and their motivation is only purposes of the organization. in the state sector, the dynamics of values that are followed by supporters of one party do not allow them to perform their duties efficiently if another party possesses the power. in order to fix this kind of situations, it is necessary to have a basis of professionalism and ability to concentrate on the certain requirements of citizens or local community; – in order to achieve the effectiveness of the organization, it is important to fill own “niche” in the market, thus, the ability to get right direction in that kind of activity, for which it is suitable is the first step. but, the area of activity of bodies of the public governance that was fixed with legislation before cannot be restructured. – business sector has a structure with several hierarchical levels. such an approach contradicts the traditional hierarchic bureaucracy structure with many levels; – the achievement of the main purposes in business sector is controlled vertically, but the choice of tools and methods of achievement of stipulated goals belongs to the lower levels; the reforms that were carried out on the basis of such traits were directed to the enhancement of system efficiency of the state governance and efficient use of state funds through the creation of “small in sizes and competitiveness state sector, increase in the quality of services provided to the population and quick reactions of the state in order to satisfy needs of citizens” (organization for economic cooperation and development, 1993). later, in order to “structurize scientific discussion about the modern changes in the organization and governance by the executive power” (hood, 1991), the scientists started to nominate a concept of “new state management”. despite the term “state management” has been used since 60-70th years of xx century, in accordance with baltic journal of economic studies 120 vol. 3, no. 5, 2017 the conducted analysis by the british researchers s. douson and s. darhi, the word combination “new public management” (npm) was firstly mentioned at the beginning of 90th. almost alongside with the concept of npm, the model “good governance” has been gathering momentum. its main idea supposes a creation of an environment for the stable development of human resources. firstly, it was mentioned at the beginning of 90th on the annual world bank conference in the area of economic development (world bank, 1992). in 97th the program of development of the united nations organization “governance” for the stable development of human resources has been a basis for the creation of separate concept, in terms of which there is understanding of “involvement, transparency, efficiency, equality of rights and supremacy of statute law.” the creation of model “good governance” was influenced with disadvantages of management approach to the state governance that is “one way commitment towards effectiveness” (kolodii, 2008). in other words, all set forth above information may be expressed with principles that characterize these conceptions: – “new state management”  – decentralization; transfer of set of functions in the area of state services provision; the introduction of budgeting system directed to the result; democratization; optimization; competitiveness; efficiency; adaptation of the state apparatus to inquires of business sector and civil society, protection of interests of individuals; – “good governance”  – involvement in the process of state decision-making; consensus during the taking of decisions; long-term vision; feedback; efficiency during the conduction of state policy; responsibility of all participants of this process; transparency; equality of rights; supremacy of statute law. 4. the adaptation of domestic state governance to international governance models taking into consideration the relatively developed problematic of governance, as well as world trends in the management and possibilities of informationoriented society, for example, involvement of civil society in the management area, there is an actualization of usefulness of the authorial model of management that has been formed on the basis of borrowed positive traits of concepts “new public management” and “new governance”. as a basis for the formation of the authorial model of management (picture), there were used criteria of comparison emphasized by a famous researcher of administrative reforms m. barzelay (2002): thus, the first criterion is a focus of the attention. the conducted analyses by the experts of world bank allowed forming the main purposes of conducted administrative reforms (menning, 2003), for which implementation the bodies of state governance have to make the process of management more economical, energetic, and efficient (peters, 2003). but, the essence of the state sector, firstly, supposes the focus on the observation of laws and order, solution of social issues, increase of welfare level. the activity of state apparatus is directed to the tax liability processes, not to the levy of payment for the provision of administrative services, it is not under the laws of competitiveness, and thus, there are no any factors for a decrease of expenses and optimization. ukrainian government corresponds to the support facilities where there is paternalism more towards than a competitiveness that is an integral part of the sphere. admitting the opinion of a. zadoja and y. petrunja (2013), who consider competitiveness as a “rivalry of economic entities for the best realization of their economic interests” and without taking into consideration normal state of market system, where the producers are involved in competitiveness, it may be researched among consumers (stakeholders) as a method of mutual coordination of personal actions of entities without state interference in the process of their activity. but, it is likely that such process will have a meaning of rivalry. supporting the opinion of some scientists, we should note that the concept of state management towards government may be implemented in full extent only in countries, where the executive power before the introduction into the activity of management approaches was behind the structure and ideology of limitation in rights and responsibilities. the second criterion is a type of structure and relations. such methods of public governance as privatization of state services and decentralization of state governance lay the groundwork for the transition from bureaucracy to cooperation in mutual work. thus, such a composition supposes the formation of unique team atmosphere only within the framework of one body of state governance that means a subsystem of state governance. much more interesting and perspective is a direction of model gg – the involvement of society into management, like a forming of unique stakeholders’ atmosphere that prevails over management approach to a great extent. the third criterion is the estimation of own activity. the desire to rationalize management activity causes its estimation that was going pursuant to the volume of implemented resources and quantity of fulfilled works (lyubliyner). the domestic model of state governance is characterized with management decision-making on the basis of the idea “now and for all time” to the stipulated procedure that can be considered as a sign of stability, permanency, and efficiency. the offer of the supporters of management concept to put the economic meaning of efficiency is seen by authors as a misplaced baltic journal of economic studies 121 vol. 3, no. 5, 2017 belief due to the fact that state governance is not aimed at profit maximization. we suppose that it is rather appropriate to estimate the activity of state sector “aimed at result”, where the result should be considered as a process of services provision for the citizens and business after which they are satisfied with the functioning of state apparatus (piters, 1986; osborne, 1992). the fourth criterion is the flexibility of the structure. pursuant to the world practice, the concept of management is directed to the displacement of the traditionally administrative state governance created on the principles of bureaucracy, hierarchy, centralization, stability of state service organization. the npm ideas served as a basis for the formation of social-political nets, where the basis of resources integration witnesses cooperation of state and private institutions in the area of provision of administrative services for the achievement of consensus during the solving of issues, in which both parties are interested. thus, the case is a governance, which idea is “governance without government”. it means the provision of more freedom in the coordination of actions to the public institutions with minimum interference of the centralized government (bezverkhniuk, sakhanenko, topalova, 2008). but, it is necessary to take into consideration that ukrainian community possesses rather a low level of public self-awareness and self-control, thus the refusal in vertical power structure and formation of management horizontal with the provision of absolute rights and freedoms to the communities cannot be implemented. moreover, domestic differentiation, the imperfection of regulatory and legal framework, and low supervision level of execution of the law aggravate formation of the efficient mechanism of public governance. fig. 2. the authorial model of management source: formed by the author on the basis of (barzelay, 2002) baltic journal of economic studies 122 vol. 3, no. 5, 2017 the fifth criterion is a feedback. a feedback with consumers was marked as a key idea of gg concept that allows speaking about its particular significance in this model of governance. a special effectuality and efficiency of its usage provide the involvement of communication technologies (internet, electronic mail) during its process. the priority direction of gg is the informatisation of administrative-management activity and transition to the fully electronic documentation flow. it is impossible to say the same in case of management approach to the state governance, where the electronic communication channel was considered only as a supplement to the administrative processes. the authors support the position to full extent (dunleavy, margetts, bastow, tinkler, 2006) that provides an idea about “transformation of agencies into websites” that provides state electronic services. it is clear that integration of informational and technological resources into the governance activity requires the reformation of social norms. the sixth criterion is differentiation of labour. herein criterion reveals the issue of extremely big quantity of state servants in the bodies of state governance that leads to the improper execution of their functional responsibilities and buck-passing because of the duplication of professional duties. the model of governance npm limited the role of the state sector and assigned a responsibility for the development of extension strategy, execution of monitoring and regulating functions. the conceptual approach of “good governance” to the government, contrariwise, opens possibilities in front of it and abilities to form “net structure” of the governance system. within its framework, the state sector together with citizens generates and actualizes the effective, mutually agreed and task-oriented management. many types of research emphasize that three parties of the model gg serve in the capacity of an equal partner and participant in the formation, acceptance, and implementation of the governance decisions. 5. directions in order to develop a domestic model of state governance the positive trends of evolution of management models, in particular, gg and processes of informatisation allowed electronic management to become an independent concept and it is able to mitigate disadvantages of management approach to the state governance. through the integration of electronic management technologies, the process of provision of administrative services should become more transparent for parties who need them and all departmental barriers that prevent this process are neutralized. in order to form and implement a high technology system of state governance, the ukrainian government has to achieve enough economic, educational, scientific and technological opportunities. the ability of the country to perform such transformations of state governance through the maximum usage of advantages of informational and communicational technologies should be defined pursuant to many parameters, for example: – formation and sequence of state policy implementation regarding the processes of globalization, informatisation, and net creation; – the available system of monitoring and analysis of electronic management development in the system of provision of administrative services; – contribution to the promotion of literacy in the area of informational technologies in society and bodies of public governance that will allow the system to operate under the conditions of developed information-oriented society; – correspondence with european standards of regulatory and legislative affairs of the latest forms of informational and communicational relations in the system; – proper level of material-and-technical maintenance of the informational process in the bodies of state governance; – level of investments in the priority directions of scientific, technical and economic development of the society, social norms of adaptation to changes; – availability of the developed structures of the society – financial, management, investment, educational, trade, etc., which require a relevant informational and technological infrastructure. 6. conclusions thus, the process of evolution of the modern management revolution experienced a range of transformations that is certified with simultaneous co-existence of several management models. in general, in spite of authors’ scepticism towards the introduction of management model, it contributed to the conversion of state governance system, it structured bureaucratic structure and contributed to their response to the requirements of society. in the authors’ opinion, a management approach to the state governance within a framework of the mentality of ukrainian society allowed increasing in a great measure an independence of regional bodies of public governance in the formation of the strategy of social and economic development, during the choice of mechanisms and tools of the regional budget formation. thus, taking into consideration a peculiarity of paradigm of the state governance in ukraine, we offer to supplement a traditional model of management with a model “good governance” that at the present point of time is considered to be dominant on the market as it corresponds to the highest level of development of social and economic systems. especially, it is necessary to concentrate on the model of the derived matter of the concept “electronic management” that firstly, will baltic journal of economic studies 123 vol. 3, no. 5, 2017 most likely allow implementing a customer-focused management, defining its foundations, and involve citizens in the management process and, secondly, making the process of management transparent to the social supervision and regulated. the further directions of modern scientific research are rather advisable to be concentrated on the directions specifications 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(2012). publichne upravlinnia: suchasni realii ta perspektyvy dlia ukrainy [public administration: current realities and prospects for ukraine]. zbirnyk materialiv dopovidei za materialamy naukovo-praktychnoi konferentsii z mizhnarodnoiu uchastiu «publichne upravlinnia ta rehionalna polityka v krainakh tsentralnoi i skhidnoi yevropy» (22 zhovtnia 2012 roku). ternopil: tneu. baltic journal of economic studies 18 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: kuzyanna@ukr.net orcid: https://orcid.org/0000-0003-3957-7387 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: evenkodmvl@gmail.com orcid: https://orcid.org/0000-0002-4286-0629 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: vitaliipastushenko844@gmail.com orcid: https://orcid.org/0009-0000-1252-0992 doi: https://doi.org/10.30525/2256-0742/2023-9-1-18-26 concept and classification of non-banking financial institutions hanna buha1, dmytro yevenko2, vitalii pastushenko3 abstract. the purpose of this article is to define the concept and classification of non-bank financial institutions. subject of the research – concept and classification of non-bank financial institutions. the concept of a non-banking financial institution is presented; the characteristics of a financial institution are defined; the classification of non-banking financial institutions has been carried out; the classification of financial intermediaries has been carried out; the concept of investment funds is defined; the classification of nfis by lending method has been carried out; the functions performed by financial intermediaries between creditor and borrower are defined; the concept of a credit union is presented. credit unions are a relatively new and understudied type of financial institution. looking at them in the context of the system of subjects of administrative law, it should be noted that they occupy a special place because, thanks to them and their activities, the state in a certain way performs its functions and tasks. credit unions do not exist in a legal vacuum, they are not completely separated from the state, they are not subject to regulation by only one branch of the law, nor are they the subject of research in only one branch of the law. credit unions are in constant close interaction with the state, its bodies, systematically feel its influence or the influence of the legal and political processes taking place in the state. methodology – the article uses general scientific methods of formal logic (analysis, synthesis, deduction, induction, analogy, abstraction and modelling). results. the concept of a non-banking financial institution is defined – as a legal entity that is not a bank, has a special legal status of a financial intermediary, is registered in the unified state register of financial institutions on the basis of a licence issued by the national bank of ukraine, provides one or more financial services in the markets of insurance, credit cooperatives, accumulating pension funds, attracting investments from business entities and the population; has been classified as a non-banking financial institution; has demonstrated that important elements of the system of administrative and legal regulation and supervision are in place: requirements for reporting by nfis, conducting scheduled and unscheduled inspections of their activities and ensuring compliance with legal requirements, in particular by applying certain influence measures in case of detection of violations of legislation. key words: non-banking financial institution, the concept of a non-banking financial institution, classification of non-banking financial institutions. jel classification: f38, g20 1. introduction ukraine's transition to a socially oriented market economy requires the creation of a competitive financial sector that will provide the country 's economy with the necessary amount of financial resources to ensure its development. effective functioning of the economy requires constant mobilisation, distribution and redistribution of financial resources between its spheres and sectors. such functions are performed both with the help of the state and with the help of the financial market, which mobilises savings on a voluntary basis, provides loans or investments, and regulates the financial and economic situation of the country. (soloshkina, 2013) the existence of the financial services market is a necessary condition for the development of a modern economy, an indicator of its efficiency and the development of the state. the financial baltic journal of economic studies 19 vol. 9 no. 1, 2023 services market contributes to the financial support of the development of the state economy through the accumulation of funds and other financial assets for the purpose of their effective use and obtaining economic benefits. such a market in ukraine is represented by banks, insurance companies, non-state pension funds, credit unions, pawnshops, investment and leasing companies. a significant part of the financial services market belongs to nfis, which are legal entities other than banks that also provide one or more financial services. the list of financial services provided by nfis is quite diverse. the essence of financial services is to ensure the circulation of financial assets. therefore, this is an entrepreneurial activity, which is not manufacturing, trade or banking. (teslenko, 2019) it should be noted that individual and corporate participants in the financial market carry out their activities by acquiring various financial instruments with the aim of increasing assets and making profits. the provision of financial services on the market is carried out with the active participation of intermediaries, i.e. banks and various non-bank financial institutions. financial institutions that are part of the state's financial system, carry out operations with financial resources and are registered in the appropriate register established by law have the right to carry out operations for the provision of financial services. (buha, 2021; buha, 2022) in the field of domestic scientific research, such scientists as n. versal, a. dovgopolyk, o. kartamysheva, v. kornіeіev, t. teslenko and others have devoted themselves to the issues of the concept and classi fication of non-banking financial institutions. however, the disclosure of a number of problematic issues requires special attention, which emphasises the relevance of the subject of the article. the purpose of this article is to define the concept of a non-banking financial institution; to consider the classification of non-banking financial institutions. 2. the concept of a non-bank financial institution the system of administrative and legal relations for the provision of financial services is characterised by specific and separate state regulation of activities for the provision of financial services, the presence on the main financial markets of a specially authorised body in the sphere of regulation of a separate market, the presence of special economic competence of financial institutions on the basis of licensing. and if the mechanism of state regulation and the role of a specially authorised body do not cause significant contradictions, then it is necessary to consider in detail the special economic competence of financial institutions. general requirements for economic legal relations, which are financial services, are defined in the laws of ukraine. in order to determine the place of nfi in the market of financial services, it is necessary to establish restrictions and requirements of the legal definition of financial services: – financial services include all operations with financial assets, which are carried out in the interest of third parties and in the cases provided for by law, at the expense of financial assets borrowed from other persons, for the purpose of making profit or maintaining the real value of financial assets (part 1, article 1 of the law "on financial services and state regulation of financial services markets"); – the exclusive right or other restrictions on the provision of certain financial services are established by laws on the activity of the relevant financial institution and regulatory legal acts of bodies carrying out state regulation of financial services markets, if there are no additional restrictions in subordinate legal acts – it is possible to qualify the competence as a special economic competence; – except for the activities specified in part 1 of art. 4 of the law of ukraine "on financial services and state regulation of financial services markets", types of activity, financial institutions are prohibited from attracting funds from individuals (except members of such institution) with the obligation to return them, in particular by obtaining a loan, unless it is expressly provided by the law on the activity of the relevant financial institution; – financial services, the provision of which is regulated by other laws, are subject to inclusion in the list specified in part 1 of art. 4 of the law of ukraine "on financial services and state regulation of financial services markets". the provision of financial services not included in the specified list is prohibited. the nbu in accordance with part 3 of art. 4, art. 21 of the law of ukraine "on financial services and state regulation of financial services markets", the nbu may take a decision on the classification of certain activities as financial services or on the impossibility of classifying a separate listed activity as a financial service and on its prohibition on the basis of this (on financial services and state regulation of financial services markets: law of ukraine of 12 july 2001. № 2664-iii; savchuk, 2021). letter of the state committee of ukraine for the development of entrepreneurship № 14/3556 of 02.12.1999 "on consideration of the issue of defining the term "financial and credit and non banking financial institution" (on consideration of the issue of defining the term "financial and credit and non-banking financial institution": letter of the state committee of ukraine on development of entrepreneurship dated 02 december 1999. № 14/3556), a more or less clear definition of a baltic journal of economic studies 20 vol. 9 no. 1, 2023 non-banking financial organisation is given; more precisely, this definition follows from this letter: an enterprise that carries out the activity of providing loans and other financial services and is not obliged by law to create an insurance reserve is a financial and credit institution or nfi. (buha, 2022) the interpretation of this concept is available in two nbu resolutions. moreover, the definitions contained therein are practically the same. according to paragraph 1.4 of the nbu resolution "on approval of the regulations on the procedure for issuing transfer licenses to non-banking financial institutions" dated 26 february 2013 № 57, an nfu is a legal entity that is not a bank under the legislation of ukraine, provides one or more financial services and is registered in the relevant state register of financial institutions in accordance with the procedure established by the legislation of ukraine (on approval of the regulations on the procedure for issuing transfer licenses to non-banking financial institutions: resolution of the national bank of ukraine dated 26 february 2013. № 57). in accordance with clause 9 of the resolution of the national bank of ukraine "on approval of the regulation on the operation of domestic and international payment systems in ukraine" dated 4 february 2014 № 43 (on approval of the regulation on the operation of domestic and international payment systems in ukraine: resolution of the national bank of ukraine dated 4 february 2014 № 43), nfi is a legal entity registered in the relevant state register of financial institutions. 43), an nfi is a legal entity that is registered in the relevant state register of financial institutions and, in accordance with the legislation of ukraine, has obtained a licence to transfer funds in the national currency without opening accounts and, in the case of foreign exchange transactions, a general licence for foreign exchange transactions. the wording "a legal entity that is not a bank" used in the first definition is legally incorrect, so the second of the given definitions should be used as a basis. at the same time, it should be noted that in december 2021 was adopted a new law "on financial services and financial companies", which will enter into force on 1 january 2024 and establishes clear requirements for the work of financial institutions (on financial services and financial companies: draft law of ukraine № 5065 of 15 february 2021), which defines a non-banking financial group as a group of legal entities having a common controller (other than a bank), consisting of two or more financial institutions, in which financial institutions other than the bank perform the predominant activity. 3. characteristics of a financial institution the concept of a financial institution as defined by the legislator and the above considerations allow us to define its characteristics, which include the following: 1. nfis are set up to provide financial services as an exclusive type of activity. 2. in terms of organisational and legal form, nfus are set up as a business partnership (entrepreneurial and non-entrepreneurial) and as a cooperative based on any form of ownership. 3. a legal entity acquires the status of nfi from the date of its registration in the state register of financial institutions. 4. the activities of the nfu in providing financial services are subject to mandatory licensing by the state financial service of ukraine. 5. the nfu is a legal entity with special legal capacity – it is created for the purpose of carrying out certain banking operations. 6. the purpose of nfu activity is to make a profit, as they are usually commercial organisations (buha, 2022). 4. classification of non-banking financial institutions in general, the nfu includes: – credit unions; – pawnshops; – leasing companies; – trust companies; – insurance companies; – institutions for occupational retirement provision; – investment funds and companies; – other legal entities whose sole purpose is the provision of financial services (non-banking financial institutions). in 2021, companies that were not active and voluntarily surrendered their licences left the market. a significant number of companies were removed from the market by the regulator for breaching the requirements of the law. at the same time, the nbu began to take measures against violators of regulatory requirements, in particular by suspending the validity of licences and cancelling them. this helped to improve the discipline of compliance with regulatory requirements in all segments of the non-bank financial market and, in particular, to increase the financial stability of its participants. the nbu set requirements for the ownership structure of financial service providers, requiring all players to disclose their ownership structure and submit this information to the regulator for further analysis. despite the recovery in bank and nfi lending, their contribution to economic growth remains low. baltic journal of economic studies 21 vol. 9 no. 1, 2023 in the corporate sector, the recipients of new bank loans are mainly solvent companies: loans to honest companies that have not defaulted since the beginning of the crisis are growing at a rate of more than 25% per year. the volume of consumer credit is actively growing, but the level of its penetration in ukraine is still significantly below the indicators of other central and eastern european countries. against the background of a decrease in the number of subjects of supervision in the markets of non-banking financial services, in the last two years there has been an increase in the main indicators of development: assets (+22.7%), insurance payments (+40.4%), factoring (+184.8%), loans (+88.6%), the value of leasing contracts (+126%). however, the role of lending in supporting economic growth remains insignificant: according to the results of 2021, the share of bank loans in capital investments is only 7.8%, while the investment of own funds of enterprises is 71% (strategy for the development of the financial sector of ukraine in 2025. national bank of ukraine). 5. classification of financial intermediaries however, in economic and legal science there is no common view on the classification of financial intermediaries. for example, v.v. kornieieiev, taking into account foreign experience and national ukrainian practice, considers it expedient to divide financial intermediaries into two types: banking institutions (various types of banks) and non-banking institutions: investment funds and investment companies; trust companies; insurance companies and pension funds; brokerage and dealer offices; investment funds. (kornieiev, 2000) for its part, n. i. versal notes that nfis, like banking institutions, provide financial intermediation between the borrower and the creditor (interme diation in crediting), as opposed to financial intermediation in settlement. the researcher divides the entire set of financial intermediaries in lending into three main ones: the banking system, the para-banking system and the supra-banking system. the para-banking system includes: credit unions, pawnshops, pension funds, insurance companies, investment funds, financial companies and others. (versal, doroshenko, 2007) k.d. hurova, o.l. shelest and i.v. kolupaіeva (hurova, shelest, kolupaіeva, 2018) consider as non-banking financial and credit institutions such institutions as leasing companies, factoring companies, brokerage and dealer companies, insurance companies, pension funds, finance companies, pawnshops, credit unions, which are mainly consolidated with the list provided by k.f. kovalchuk, n.v. arkhireiska and n.v. valeniuk. they note that credit unions are financial interme diaries in the market of non-banking financial services, as well as financial companies; institutions of accumulative pension provision; pawnshops; leasing companies; insurance companies; trust companies; investment funds (companies); other legal entities whose exclusive type of activity is the provision of financial services; legal entities that do not have the status of financial institutions, but may provide financial services in accordance with the law. (kovalchuk, arkhireiska, valeniuk 2018) according to the direction of activity of credit institutions, s.v. glushchenko divides them into the following types: 1) consumer loans provided by commercial banks and credit cooperatives; 2) consumer loans provided by credit unions, savings banks, pawnshops; 3) card loans provided by commercial banks, which are the main issuers of credit cards; 4) micro (mini) loans for small business representatives provided by commercial banks, credit cooperatives, savings banks, etc.; 5) operational leasing provided by commercial banks, leasing or financial companies; 6) factoring provided by commercial banks, factoring or financial companies. (hlushchenko, 2015) thus, scientists consider the activity of non banking financial and credit institutions as credit and refer these institutions to the subjects of the financial and credit market. for example, k.f. kovalchuk, n.v. arkhireiska and n.v. valeniuk use the term "pawnshop loan", which means a short-term loan secured by movable property that can be quickly realised (kovalchuk, arkhireiska, valeniuk 2018). s.v. hlushchenko proves that the leasing operation has the character of a credit operation, as it corresponds to the principles of timeliness, reversibility and payment upon transfer of the property for use. (hlushchenko, 2015) however, most researchers classify financial intermediaries according to one criterion – their participation in the formation of the money supply – and distinguish two types: a) banks, which are able to influence the money supply through the money multiplier; b) non-bank financial intermediaries, which do not have such ability (savluk, moroz, pukhovkina (2011); on compulsory state social insurance: law of ukraine of 23 september 1999 № 1105-xiv). non-banking financial intermediaries can be classified according to the way in which they work with funds: – legal entities with a special legal status that accumulate funds (insurance organisations, non-governmental pension funds, investment funds, etc.) and grant loans; – legal entities with a special legal status that do not accumulate funds (guarantee institutions, baltic journal of economic studies 22 vol. 9 no. 1, 2023 institutions that carry out transfers of funds, services of accounting firms for the valuation of real estate, etc.). nfis performing payment functions still occupy an insignificant place among financial institutions. (kartamysheva, 2012) 6. investment funds for example, the main providers of investment capital are investment funds. thus, according to the regulation on investment funds and investment companies of ukraine (1994) (regulation on investment funds and investment companies of ukraine: decree of the president of ukraine of 19 february 1994. № 55/94), an investment fund is a legal entity established in the form of a closed joint-stock company in accordance with the requirements set forth in the regulation, which conducts activities exclusively in the field of collective investment. according to the law of ukraine "on joint investment institutions" (2012) (on joint investment institutions : law of ukraine of 05 july 2012. № 5080-vi), investment funds conduct joint investment activities on behalf of and at the expense of participants (shareholders) by investing funds in securities of other issuers, corporate rights, real estate and other assets permitted by the laws of ukraine. pursuant to art. 7 of the law, a joint investment institution, depending on the procedure for carrying out activities, may be: – open – the institution (its asset management company) undertakes to repurchase securities issued by such an institution (its asset management company) at any time at the request of the members of that institution; – interval type – the institution (its asset management company) undertakes, at the request of the participants of this institution, to purchase securities issued by such an institution (its asset management company) during the term (interval) specified in the issue prospectus; – closed type – the institution (its asset management company) does not undertake the obligation to repurchase the securities issued by such an institution (its asset management company) until its termination (on joint investment institutions: law of ukraine of 05 july 2012. № 5080-vi). 7. classification of nfis by credit method the following types of nfis can be distinguished according to the way in which they provide credit: – nfis that provide credit directly to borrowers, their relations with the latter being governed by the relevant credit agreement (credit unions, savings and loan associations, etc.); – nfis providing indirect credit through the purchase of debt securities and their relationship with the borrower are mainly regulated by law (collective investment institutions, pension funds and insurance companies). depending on the administrative subordination to the bodies carrying out state regulation of financial services markets, nfis can be divided into those whose activities are regulated by the national bank of ukraine and the nssmc. nfis can be divided into commercial and noncommercial institutions. undoubtedly, the majority of nfis are commercial, where one of the purposes of the activity is to make a profit, but among them there are also non-commercial institutions, which include credit cooperatives, which are engaged in lending to their members without the purpose of making a profit. according to the authors, the nfu should be divided into: – contractual financial and credit institutions: insurance companies; non-state pension funds; leasing companies; factoring companies; pawnshops; – investment financial and credit institutions: investment funds; financial companies; credit societies; credit unions. 8. functions performed by financial intermediaries between creditors and borrowers researchers identify the following main functions of financial intermediaries between creditors and borrowers: 1) information and advisory services, in the course of which financial intermediaries provide information: to potential creditors – on various investment opportunities for depositors and creditors; to potential borrowers – on the forms and methods of lending in each specific case; 2) transformation functions: – transformation of financial resources by region – balancing the supply and demand for financial resources by region; – the transformation of the amounts – the coordination of the disproportion of the funds raised and placed in terms of size (provision of large loans at the expense of small contributions); – conversion of terms – coordination of long-term needs and short-term commitments, or short-term needs and long-term commitments (provision of long-term loans at the expense of short-term investments or vice versa); – сurrency conversion – attarcting funds in one currency and placing them in another; – risk transformation – the reduction of risks to depositors and creditors arising from direct creditorbaltic journal of economic studies 23 vol. 9 no. 1, 2023 borrower relationships through the diversification, rationing and selection of risks by financial intermediaries; – liquidity transformation – the ability of financial intermediaries, mainly banks, to predict to a certain extent the financial behaviour of clients who can demand the return of funds at any time, which results in a certain part of the financial intermediaries' funds being in liquid form; – control – intermediaries monitor the rational and targeted use of funds by borrowers, which in turn reduces the risks of creditors and depositors (kartamysheva, 2012; versal, 2002). thus, the main function of nfis is the redistri bution of financial resources, in the process of which they perform a number of sub-functions, namely: – consolidation (accumulation) of savings of individual investors (the activity of the nfi leads to the separation of the function of saving and the function of investment, which increases the efficiency of capital allocation. the process of capital circulation through financial intermediaries makes it possible to avoid the difficulties of direct contact between the owners of savings and the borrowers, which arise as a result of discrepancies between the proposed and required amounts of funds, conditions and directions of their use, etc.); – investment; – promoting market equilibrium (through portfolio management of assets, financial intermediaries harmonise the relationship between suppliers and consumers of capital, eliminating the imbalance between the supply and demand for free funds, while ensuring the effective distribution and redistribution of resources in the primary and secondary markets); – ensuring high liquidity of financial investments; – redistribution and reduction of financial risks (nfos reduce investment risks by diversifying and redistributing them across a wide range of financial market participants); – promotion of economic growth through effective placement of investments in the economy, stimulation of entrepreneurial activity (with the help of nfus, temporarily free funds are taken out of circulation and directed to high-tech sectors of the national economy, which contributes to the development of the economy), etc. justifying the important role of financial intermediaries in the functioning of the money market and thus in the development of the economy, m.i. savluk notes that the purpose of these financial institutions is as follows: – to provide each creditor with the opportunity to quickly invest free funds in earning assets, and to provide the borrower with the opportunity to quickly mobilise additional funds necessary for solving production or consumption tasks; – reduction of costs of the money market subjects for formation of free funds, their placement in income assets and borrowing of additional funds, which is carried out by a consolidated representative of the financial market – a financial intermediary. due to the large number of operations performed by financial intermediaries, the cost of each operation is much lower for the intermediaries and the society than if it were performed directly by creditors and borrowers; – decrease of financial risks for the basic subjects of the money market, since a significant part of them is transferred to intermediaries. this is made possible by the wide diversification of intermediary activities and the creation of special insurance and protection systems against financial risks; – increasing the return on loan capital by reducing financial risks, lowering the cost of financial transactions and opening up access to large businesses. this is because intermediaries have the opportunity to channel a significant amount of small savings to finance large, highly profitable operations and projects; – opportunities for intermediaries to provide additional services, in particular, insurance of creditors against various risks, satisfaction of pension needs, provision of housing, acquisition of property rights and management of certain objects, and so forth. (savluk, moroz, pukhovkina 2011) 9. credit unions credit unions are a relatively new and under-studied type of financial institution. looking at them in the context of the system of subjects of administrative law, it should be noted that they occupy a special place, since it is precisely through them that the state carries out its functions and tasks in a certain way. credit unions do not exist in a legal vacuum, they are not completely separate from the state, they are not subject to regulation by only one branch of the law, nor are they the subject of research by only one branch of legal science. credit cooperatives are in constant and close interaction with the state and its bodies, and systematically experience its influence or the influence of legal and political processes taking place in the state. as rightly stated in the textbook "administrative law of ukraine", compiled by the team of authors consisting of y.p. bytіak, v.m. harashchuk, o.v. dіachenko and others, enterprises and institutions performing economic, socio-cultural, administrative-political and other functions to meet the material and spiritual needs of citizens, society and the state must operate within the limits established by the state. the main direction of state activity, where enterprises and institutions are directly related to the state and its institutions, is the executive power (from the local level to the baltic journal of economic studies 24 vol. 9 no. 1, 2023 central bodies of executive power) and local self government. in their relations with these subjects of the state and society, enterprises and institutions solve practically all issues – from their creation, through the implementation of their activities, to their termination. in addition, enterprises and institutions enter into administrative and legal relations with executive authorities and local self-government bodies with regard to operational and accounting results of their activities, statistical reporting, taxes, production and labour safety, fire and environmental safety, sanitary and hygienic standards and requirements for the protection of the health of their employees, the population, consumers of products, protection of the environment from pollution and other harmful effects, compensation for damage caused by irrational use of land and other natural resources and pollution of the environment, payment of fines in appropriate cases, creation of special jobs for persons with limited working capacity and organisation of their professional training, non-core work in case of natural disasters, circumstances related to emergency situations, etc. (bytiak, harashuk, diachenko, 2005) thus, credit unions are undoubtedly subjects of administrative law and their activities are accordingly subject to administrative and legal regulation. according to s.t. honcharuk, the subject of administrative-legal relations is the one in relation to which they arise, develop and terminate. first of all, these are social relations that embody the nature of activity of individual legal subjects (their actions or inactions), the legal consequences of their behaviour, certain legal interests, including property or non-property, etc. (honcharuk, 1995) when considering credit unions from the point of view of the subject of administrative and legal regulation, it should be borne in mind that administrative law is a branch of law, a branch of public law, the main task of which is to ensure general (public) needs and interests in the process of power-management activities, the party in power (or the party with a larger legal personality) of administrative-legal relations should primarily regulate not the behaviour of other subjects (in horizontal relations it cannot actually do this), but the processes related to the realisation of specific public needs in a certain part of the management sphere (administration). thus, credit cooperatives, as subjects of administrative law, in the process of exercising their legal rights, are primarily confronted with public needs and interests represented by the subject of public administration. in turn, there is a kind of opposition between some interests (private) and others (purely public), which are much larger and more significant for society. if these interests are not in conflict with each other, according to normative definitions, the abovementioned needs are realised within the framework of the activity of power administration or in other forms of state activity related to it, the implemen tation of which is regulated by the norms of administrative law. conversely, if the above mentioned groups of interests do not coincide and enter into certain contradictions, the process of their implementation is either terminated or postponed until the causes of these contradictions are eliminated. (dovhopolyk, 2009) 10. conclusions to sum up, an nfi is a non-bank legal entity with the special legal status of a financial intermediary, registered in the single state register of financial institutions on the basis of a licence issued by the nbu, providing one or more financial services in the markets of insurance, credit cooperatives, accumulative pensions, attracting investments from business entities and the population. it should also be mentioned that the financial system is key to the effective functioning of the country 's economy and its economic development. according to the strategy for the development of the financial sector of ukraine until 2025, ukraine must create a financial system capable of ensuring sustainable economic development through effective redistribution of financial resources in the economy based on the development of a fully competitive market environment. at the same time, the reforms of the ukrainian financial sector must be carried out in accordance with international standards, in particular, the comprehensive regulation of market relations requires the implementation of international standards iais, iops and iosco, as well as the requirements of the acts of the european union, in particular, solvency ii, mifid ii and mifir , mar and mad, crr and crdiv, brrd. in this respect, important elements of the system of administrative and legal regulation and supervision are: reporting requirements for nfis, conducting scheduled and unscheduled inspections of their activities, and ensuring compliance with legal requirements, in particular by applying certain influence measures in case of detection of violations of the law. references: soloshkina, i.v. 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(in ukrainian) received on: 17th of january, 2023 accepted on: 29th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 25 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 academy of economic studies of moldova, republic of moldova (corresponding author) e-mail: angelasecrieru@yahoo.com orcid: https://orcid.org/0000-0002-5782-8840 doi: https://doi.org/10.30525/2256-0742/2022-8-5-25-35 local financial autonomy as a prerequisite for improving the provision of public services and goods: the case of the republic of moldova angela secrieru1 abstract. local autonomy, which is a central characteristic of local public administration, has been increasingly valued over the past decades. at the same time, the autonomy of local public administration (lpa) in the republic of moldova, including financial autonomy, is limited. the purpose of this paper is to formulate arguments in favor of the need for fiscal decentralization for the republic of moldova, to assess local public finances through the prism of fiscal autonomy and to formulate prospects for rationalizing local public finances. the general conclusion stated by the study is that the measures that are meant to improve the financial autonomy of lpas cannot be initiated and implemented in an isolated way, without a consistent strategic vision. moreover, these measures cannot avoid the need to reform the local public administration and rational administrative-territorial structure of the republic of moldova. market mechanisms, namely competition and failure, which help to differentiate successful local public administrations from less successful ones, are not yet sufficiently developed in this sector of activity in the republic of moldova. in these conditions, the author proposes to use as a criterion for determining the effectiveness of local public administrations in the republic of moldova the ratio between local budget revenues, excluding transfers and deductions from public revenues, and expenditures related to the provision of public services of general purpose. the methodology used in the preparation of the paper includes the following research tools: monographic research, comparative analysis, retrospective statistical analysis, simple regression. the information base of the study is the statistical data provided by the national bureau of statistics, ministry of finance, national bank of moldova, eurostat databases, etc. key words: budget transfers, decentralization, financial autonomy, local budget, national public budget, own public revenues, public services and goods, state budget. jel classification: h40, h60, h70 1. introduction reforms that promote decentralization by transferring political power and responsibility to the levels of government closest to citizens have been gradually spreading around the world since the 1980s. both local autonomy and decentralization have been recommended by a number of important european and international institutions as key instruments of "good governance". the council of europe adopted the european charter of local self-government (eclsg)1 in 1985, as an international juridical instrument which provides protection, evaluation and promotion of decentralization principles and local autonomy. this ambitious plan "envisages the existence of some local governments with democratically constituted decision-making bodies that enjoy a high degree of autonomy over their powers, how they are exercised and the necessary means to carry out their mission." (coe, 1985) in this regard, financial decentralization, as a solution to the problem of growth and strengthening of financial autonomy, is the subject of increased attention. according to the law on organizing administrativeterritorial units in the republic of moldova, the territory of the republic of moldova is adminis tratively organized into the following administrtiveterritorial units (atus): rayons (districts), cities/ 1 the republic of moldova signed the european charter of local self-government on 2 may 1996 and ratified it completely on 2 october 1997. in the republic of moldova, the charter came into force on 1 february 1998. baltic journal of economic studies 26 vol. 8 no. 5, 2022 towns and villages. the administrtive-territorial organization of the republic of moldova is effected on two levels: villages (communes), sectors and cities/ towns (municipalities) constituting the first level2; rayons (districts), chisinau and balti municipalities constituting the second level3 (law of republic of moldova, 2001). following the logic of the administrative-territorial organization of the republic of moldova, the law on public finance and budgetary-fiscal responsibilitiy defines the structure of the local budget system, which is formed of the first-level local budgets (the budgets of villages/communes, cities/ towns/municipalities, except chisinau and balti municipalities) and the second-level local budgets (rayonal budgets, the central budget of the autonomous territorial unit gagauzia (atu gagauzia), balti and chisinau municipal budgets), which together form the consolidated local budget (law of republic of moldova, 2014). the financial autonomy of lpas in the republic of moldova is limited. financial centralization, which is manifested through the limitation of the share of own revenues in total budget revenues and the consistent increase in the share of transfers, is becoming more and more obvious and alarming. 2. arguing the necessity of financial decentralization the need to carry out and deepen financial decentralization in the republic of moldova is confirmed by at least the following arguments: a) although limited financial autonomy of lpas in the republic of moldova represents a worry and a regret emphasized in all the recommendations formulated by the congress of local and regional authorities of the council of europe (clrace), this aspect remains permanently ignored at the central public administration (cpa) level, not depending on the nature of governing parties. local autonomy is a necessary condition for the ability of local representatives to meet the demands, needs and problems of citizens. hence, local selfgovernment allows for effective delivery of public services, which contributes to the legitimization of local administration. from this perspective, a higher level of autonomy should translate into increased responsibility and responsiveness. eclsg explains the local autonomy as a right and effective capacity of lpa authorities to settle and manage, within the law limits, an important part of public affairs in the interests of local population. at the same time, the constitution of the republic of moldova, the society’s and state’s supreme law, formulates basic principles of lpa in article 109: the public administration in atu is based on the principles of the local economy, decentralization of public services, eligibility of lpa authorities and consulting citizens regarding especially important local problems (constitution of the republic of moldova, 1994). the way in which the republic of moldova respects these principles is reflected in the recommendations of clrace (table 1). thus, as it follows from table 1, clrace recommendations contain some concerns about the tendencies of decentralization and the decline of local democracy in the republic of moldova. although the concern about the limited financial autonomy of lpas in the republic of moldova has existed since 2005, the situation in this area is not improving, but on the contrary is characterized by regression. this evolution suggests the conclusion about the lack of efficient levers on the lpa level, local authority associations, civil society of the republic of moldova to make cpa authorities recant the practice of treating lpas and local public finance as instruments providing competitive advantages during electoral political campaigns. b) when the degree of fiscal decentralization is considered to be reduced, central governments should consider, in cooperation with local governments, some ways to increase the share of own budget revenues of lpas and local revenues transferred through permanent law without any increase in the overall tax burden (clrace, 2005). the analysis of the dynamics of local budget revenues in comparison with gdp and the national public budget (npb) on the example of the republic of moldova shows a constant increase in the level of financial centralization (figure 1). partially, it is explained by the increase of the share of revenues, within the framework of local budgets (lbs), coming from the state budget, namely transfers and deductions from the state taxes and fees4. at the same time, the increase in centralized revenues was not accompanied by increased efforts of lpas to increase the share of their own revenues, although the formula for calculating general purpose transfers encourages this. c) well-designed and implemented fiscal decentralization, including distribution of responsibilities regarding expenses, allocation of income sources to subnational governments (lpas), intergovernmental 2 their total number amounting to 896 atus. 3 their total number being 35 atus. 4 shared taxes with the central and local governments/ baltic journal of economic studies 27 vol. 8 no. 5, 2022 fiscal transfers and local debt policies, can contribute to poverty reduction. at the same time, a poorly implemented decentralization program can be detrimental to poverty reduction goals. the literature on fiscal federalism points out that many, if not most, of the public services that are closely related to poverty reduction are best provided by local governments. incidence studies (which look at recipients of public services) show that some specific sectors, such as education and some public health services, are among those most in need of poverty alleviation (martinez-vazquez, 2001). however, two things tend to make fiscal decentralization policies differ significantly from country to country. the first is the degree of local responsibility for social sectors (education, health, social security). unless social services are transferred to a large extent to the local level, fiscal decentralization is unlikely to have a significant impact on poverty reduction. table 1 concerns and regrets expressed by clrace as regards article 9 from the european charter of local self-government recommendation: un cl ea r d is tr ib ut io n of c om pe te nc es a nd re sp on si bi lit ie s be tw ee n th e lp a le ve ls a nd b et w ee n c pa a nd l pa m aj or im ba la nc e be tw ee n th e lp a re sp on si bi lit ie is a nd th e re so ur ce s a llo ca te d to th em lim ite d fin an ci al a ut on om y th e re so ur ce s o f l oc al a ut ho ri tie s m os tly c om in g fr om tr an sf er s un cl ea r a nd u nt ra ns pa re nt w ay to re di st ri bu te fi na nc ia l re so ur ce s f ro m th e c pa le ve l t o th e lp a o ne , e sp ec ia lly tr an sf er s de ci si on s o f l pa s r eg ar di ng th e lo ca l p ub lic fi na nc e m an ag em en t a re su bj ec t t o th e ap pr ov al b y th e c pa o r ra yo na l o ne s re du ce d fis ca l y ie ld fr om lo ca l f ee s n at io na l d ec en tr al iz at io n st ra te gy im pl em en te d to a sm al l e xt en t c lra c e re co m m en da tio ns # 17 9 (2 00 5) , 3 22 ( 20 12 ) an d 41 1 (2 01 8) h av e no t b ee n m et c om pl et el y th e lo ca l fi sc al sy st em is v er y w ea k la ck o f a de qu at e de lim ita tio n of m un ic ip al la nd a nd pr iv at e/ pu bl ic o ne s, w hi ch d et er m in es im po ss ib ili ty o f th ei r e va lu at io n fo r fi sc al re as on s la ck o f l uc ra tiv e co ns ul tin g m ec ha ni sm s b et w ee n c pa an d lp a s, in cl ud in g fin an ci al p ro bl em s rec 179 (2005)      rec 322 (2012)       rec 436 (2019)         source: developed by the author on the basis of clrace (2005, 2012, 2018, 2019) 8,8 7,8 8,3 7,9 8,3 7,6 7,5 7,5 7,6 8,0 9,1 8,4 27,6 25,4 26,2 25,6 26,1 25,3 26,2 25,2 25,3 26,6 29,2 26,3 10,7 11,0 13,4 13,6 9,4 8,1 8,2 7,3 7,5 7,0 7,4 7,5 0 5 10 15 20 25 30 35 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 share of lb revenues in gdp, % share of lb revenues in npb, % share of lb revenues (-transfers) in npb, % figure 1. level of financial decentralization in the republic of moldova source: ministry of finance, author's own calculation baltic journal of economic studies 28 vol. 8 no. 5, 2022 the second point is that the relationship between the availability of local resources and the effect of service delivery is not necessarily uniform across regions and local governments. (constitution of the republic of moldova, 1994). this is because some local governments use the resources they have at their disposal more efficiently than others, highlighting the importance of local ownership and responsibility in providing public goods and services to the poor (undp, 2005). in an economy with limited resources, such as the economy of the republic of moldova, it is necessary to pay special attention to certain components of an effective poverty reduction strategy, namely the efficient allocation of public expenditures in terms of both cost-effective provision of public services and their provision adapted to the diversified preferences of different segments of the population. d) under conditions when the central government, both for objective and subjective reasons, is not able to expand public expenditures to provide diversified and quality public services at rational prices in accordance with market requirements, it becomes necessary and appropriate to expand localization processes in the republic of moldova, including through fiscal decentralization and involvement of the private sector in the provision of public services. an important aspect of public expenditure allocation is flexibility. in order to protect against shocks, governments should have sufficient flexibility in their annual expenditure allocation decisions. if some expenses are protected (non-discretionary5) and if their share in the total of expenditures is increased, it can be difficult to adjust them during adverse periods, or it can reduce disproportionally unprotected expenses (especially, investment expenses), which are important for a long-term growth. in the republic of moldova, the share of non-discre tionary expenditures in total public expenditures in the period 2021 – september 2022 had a fluctuating upward trend, crossing the 70% mark, with a clear prospect of intensifying this evolution under the influence of russia's military aggression against ukraine (table 2). the reduction of npb expenditure flexibility represents an important argument in favour of extending financial decentralization. e) financial decentralization through asymmetric mechanisms can be a useful tool in ensuring territorial autonomy for ethnic minorities, provided it is successfully designed and implemented. at the same time, numerous studies on this issue point to significant negative consequences of the improper use of financial decentralization in the process of resolving interethnic conflicts, especially in countries with a low level of democracy (tranchant, 2010; faguet et al, 2014). decentralization can address issues related to diversity by offering geographically concentrated groups the power to make their own decisions on subjects of their interest. however, opponents of decentralization argue that it fosters a federalist mentality, undermining efforts to build national unity and identity. decentralization can make vulnerable groups seek greater autonomy. with more power and independence, decentralized zones may realize that they can better manage their affairs on their own. decentralization can offer subnational leaders management experience. around the world, some decentralized regions have declared their independence after they have established their own decentralized institutions. 3. strict budget constraints and fiscal discipline are the main conditions for fiscal decentralization the pace of financial decentralization should be closely linked to the capacity of lpas to effectively perform their functions. the impact of subnational fiscal operations on fiscal discipline depends not only on the share of these operations in total expenditures and revenues, but also on the way they are financed. in this context, it is possible to emphasize the role of transfers from the central government (cpa) in shaping the incentives on the subnational level (lpas). this problem is especially relevant in the context when in almost all countries the share of subnational expenditures exceeds the share of subnational revenues in the central government budget, and transfers from the central government are necessary to cover vertical fiscal imbalances. the impact on fiscal discipline and the quality of fiscal policy are the main challenges faced by 5 non-doscretionary expenditures include personnel expenses and payments related to the public debt service. table 2 non-discretionary expenditures in the total of expenditures and non-financial assets related to the public national budget of the republic of moldova, % 2016 2017 2018 2019 2020 2021 july, 2022 august, 2022 september, 2022 64,0 62,1 62,4 63,4 63,2 65,1 72,3 71,2 69,2 source: ministry of finance, author’s own calculation baltic journal of economic studies 29 vol. 8 no. 5, 2022 countries intending to implement fiscal decen tralization reforms. without "strict budget constraints" that are effectively imposed on subnational governments, the latter may overspend and/or reduce their revenue-raising efforts, ultimately leading to fiscal pressure on the central government. for these reasons, the development of fiscal decentralization reform in the republic of moldova requires a coherent and well-coordinated set of measures. typically, countries tend to change certain aspects of their intergovernmental fiscal relations in an "isolated" manner. if these changes are not assessed and initiated within a comprehensive approach, they may over time create inconsistencies and imbalances between levels of government that undermine the effectiveness of fiscal policy. in countries where there are too many subnational entities or they are too small to be viable (the republic of moldova is an eloquent example in this respect), problems related to the distribution of expenditures, taxes and fees cannot be properly solved if there is no form of territorial reorganization through which subnational authorities are rationalized and their role reoriented. 4. general characteristic of local public finances an important qualitative indicator that characterizes the relative size of local budgets is the ratio of budgetary parameters to the number of population. in 2021, an average of 7,830 lei6 (373 eur) from the revenues of the consolidated local budgets was allocated to a resident of the republic of moldova. if to exclude from the calculation the municipality of chisinau, which accounts for about 25% of the total revenues of the consolidated lbs, in 2021 there were 7,786 lei per inhabitant. these data indicate that the size of local budgets is critically insufficient to stimulate sustainable economic growth at the local level. according to the law on local public finance, the resources of local budgets consist of a combination of revenues and sources of financing of the respective budgets. in turn, the revenues of local budgets consist of 1) general revenues (own revenues; deductions from national taxes and fees, in accordance with the percentage standards; general and special purpose transfers; subsidies for equalization of budgetary provision); 2) own revenues; 3) grants for projects financed from external sources. these revenue sources vary in structure and proportions depending on the level of the local budget under consideration. thus, the law on local public finances defines the sources that fill the revenue part of the budgets of villages, communes, cities and municipalities (except for the municipalities of balti and chisinau); district budgets; central budget of atu gagauzia; municipal budgets of balti and chisinau. in general, the justifications for the ways of distribution and correlation of revenue sources between local budgets of different levels are not based on scientifically sound considerations, but are rather the result of arbitrary decisions and/or obtained as a result of non-transparent political negotiations. at the level of budget revenue sources by categories, only specialpurpose transfers (mainly) and general-purpose transfers with predetermined calculation formulas are legally regulated. as a result, the system of inter-budget relations has pronounced horizontal imbalances. among the 35 second-level atus (atu2) existing on the territory of the republic of moldova, 9 exceed the average of lb’s revenues per inhabitant (6.2 thousand lei), 6 were positioned in 2021 below the value of 5.6 thousand lei. the first factor that should be mentioned to explain this development is of a legal nature and is related to the preferential regime of the autonomous territorial unit of gagauzia as a taxpayer and recipient of public services in comparison with other atus of the second level. figure 2 represents the distribution of first-level atus (atu1) by the local budget revenues per capita ratio recorded in 2021. in 2021 the average first-level lb revenues per capita was 2,708 lei. under these conditions, as follows from the figure, 522 (58%) of atu1 recorded values of this indicator below the average level. although in its report, the monitoring committee cg/mon/2015(29)4 on behalf of the congress of local and regional authorities of the council of europe invited the moldovan authorities to fully implement the national decentralization strategy by the end of 2018, this strategic document has largely remained unimplemented. with regard to financial decentralization, it should be noted that the block of measures aimed at strengthening the revenue base of local budgets and their decision making autonomy, with few exceptions, was practically not implemented. as a result, the share of own revenues in the total structure of lbs revenues has a negative trend (figure 3). the situation with own revenues indicates the effort made by the lpas to strengthen the premises for local economic development. the current methodology for calculating general-purpose transfers (based on fiscal capacity, population and atu’s area) does not make the size of transfers for the following year dependent on the lpa's effort to identify and exploit sources of own income in 6 the average annual exchange rate in 2021 was 20.9830 mdl for 1 eur . baltic journal of economic studies 30 vol. 8 no. 5, 2022 order to increase the financial potential of the local budget (provision applied until 2014/2015). therefore, the cancellation of this dependence creates strong incentives for lpas to increase the contribution of their own revenue sources to the formation of the revenue side of local budgets. moreover, this methodology stimulates the lpa to create jobs at the level of the atu it manages by the fact that the increase in fiscal capacity and the number of inhabitants directly leads to an increase in general purpose transfers and indirectly – the increase in own revenues. although these incentives exist, the share of own revenue in total lb revenues is not only insufficient, but is constantly decreasing. in the structure of atu's own revenues, the largest share is occupied by real estate tax and local taxes. real estate tax is considered the source with the most pronounced financial potential and stability potential among the sources of own revenues that fill local budgets. as can be seen from figure 4, after an increase in 2017 in the contribution of property taxes to consolidated budget revenues, the trend is reversed: in 2018 compared to 2017, this indicator decreased by 0.2, in 2019 compared to 2018 and in 2020 compared to 2019 – by 0.3 each. in 2021, there is an improvement in the situation with property tax revenues: the increase compared to 2020 is 0.6. for the most part, the same dynamics is typical for local fees. thus, local taxes and fees, due to their structure and low tax returns, make a modest contribution to the financial autonomy of lpa in the republic of moldova. figure 2. distribution of first-level atus by local budget revenues per capita, year 2021 source: ministry of finance, author's own calculation 16,1 16,8 17,4 15,3 15,9 17,5 68,6 71,0 70,5 73,7 74,6 71,7 15,3 12,2 12,0 11,0 9,5 10,9 0% 20% 40% 60% 80% 100% 2016 2017 2018 2019 2020 2021 deductions from state taxes and fees transfers from the state budget own revenues, grants, collected revenues figure 3. structure of local budget revenues, in % source: ministry of finance, author’s own calculation baltic journal of economic studies 31 vol. 8 no. 5, 2022 3,0 3,7 3,5 3,2 2,9 3,5 3,3 3,1 3,0 2,7 3,0 3,0 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 2016 2017 2018 2019 2020 2021 % local taxes receipts, in % of total lb revenues property taxes receipts, in % of total lb revenues figure 4. receipts from property taxes and local fees, in % of consolidated local budget revenues source: ministry of finance, author’s own calculation table 3 level of financial autonomy of the lpa in the republic of moldova range of variation indices of financial autonomy own sources of revenue d ed uc tio ns fr om st at e ta xe s a nd fe es ta x on re al e st at e fe e fo r e nt re pr en eu r's p at en t ta x on th e in co m e of n at ur al p er so ns c ar ry in g ou t in de pe nd en t a ct iv ity in th e fie ld o f r et ai l t ra de pr iv at e ta x (a cc or di ng to th e pr op er ty b el on gi ng ) (e st at e) l oc al ta xe s ta xe s o n na tu ra l r es ou rc es extended financial autonomy in the area of own revenue lack of financial autonomy in the area of own income the lpa determine the subjects, the objects and the taxable base lpa establish the rate of taxes / fees lpa set the rate of taxes / fees, but only within a framework allowed by the central public administration (cpa) tax sharing, "splitting" of central/local revenues can be modified only with the agreement of the lpa sharing revenues with quotas unilaterally set by the cpa the cpa sets out the facilities for the lpa revenues, but allows the lpa to establish additional facilities the cpa establishes the facilities for the revenues of the lpa without compensating the lpa for the losses from the noncollection of the amounts lost due to the facilities cpa establishes the rate of taxes / fees the cpa determines the subjects, the objects and the taxable base source: developed by the author on the basis of the legislation of the republic of moldova (fiscal code of republic of moldova, 1997) baltic journal of economic studies 32 vol. 8 no. 5, 2022 table 3, systematizing the provisions of the legislation, leads to the conclusion that the level of financial autonomy of lpa in the republic of moldova is very low. thus, the powers of lpas in the field of admini stration of local taxes and fees are very limited. lsa bodies have limited capacity: (i) modify the levels of the real estate tax or the basis of local taxes and fees stipulated in the fiscal code; (ii) periodic reevaluate of the real estate; (iii) establish its own tax facilities for local taxes and fees. in addition, local authorities have no real rights and levers of influence on taxpayers to ensure the possibility and completeness of payment of local taxes and fees. in this context, it should be noted that in terms of efficiency, oates' "decentralization theorem" states that: "each public service should be provided by the jurisdiction that controls the minimum geographical area that will allow the benefits and costs of such provision to be internalized." (oates, 1972) according to this principle, the functions of taxation, expenditure and regulation should be carried out by lower levels of government unless there is a compelling case for their transfer to higher levels (shah, 1994). 5. prospects for rationalization of local public finances rationalization of local public finances should begin with the definition and formulation of the criterion by which effective solutions should be developed. efficiency is the basic concept of this process. measuring efficiency at the level of lpas in the republic of moldova is a relatively difficult task, once the market mechanisms that help to select the least successful lpas, namely – competition and bankruptcy, have not yet come to be developed in this sector of activity in the republic of moldova. in such circumstances, it is necessary to define other criteria that will be applied to determine the correlation between the results obtained and the efforts of the lpa in managing local public finances. starting from the axiom that financial autonomy is the basic prerequisite for the success of the lpa, the size of the revenues it manages to collect without considering the revenues obtained from the state (transfers and deductions from state taxes) can be considered as the result of an lpa. as an effort, the budgetary expenditure related to the current activity of the lpa can be considered. according to the functional classification, these expenditures are classified as general-purpose public services (functional group 1). for lpas, "general-purpose public services" include services related to the activities of local councils and the executive activities of local government bodies. the structure of expenditures related to the provision of public services of general purpose, according to the economic classification, includes expenditures for personnel, expenditures for the purchase of goods and services necessary to ensure the activities of budgetary institutions, payments for social activities, expenditures for nonfinancial assets (fixed assets, inventories, and so on), etc. the share of expenditures on general-purpose public services (gpss) in total expenditures and non-financial assets (enfa) of the local budget should be limited. at the same time, this indicator is sensitive to the economies of scale: the larger the population (the number of recipients of local public services) in the atu area managed by the respective lpa, the smaller the share of expenditures related to the provision of gpss. that finding is apparent from figure 5. therefore, the share of gpss-related expenditure in the total enfa of the lb is an indicator that measures an efficiency aspect of local public expenditure. by comparing the expenditures related to the gpss (an indicator of effort, which is in the denominator), on the one hand, with the revenues of local budgets without transfers and deductions from national revenues (an indicator of the result, which is in the numerator), on the other hand, an indicator of efficiency is obtained, which can be a criterion indicating the need to rationalize local public finances. figure 6 shows the distribution of the first level atus according to the values recorded by this indicator. the situation starts to be favorable when the indicator value is greater than 1. if the coefficient is equal to 1, it means that for every 1 leu of expenditures related to the gpss, there is 1 leu of local budget revenues (excluding transfers and deductions from state revenues). of the total number of atus1 (896), 445 atus1 (50%) recorded a value of less than 0.5 in 2021. 122 (14%) of atus1 generated at 1 leu of expenditures related to gpss more than 1 leu of local public revenues (without transfers and deductions from the state revenues). as a rule, the best performing lpas are those in municipalities and cities – district residence, but also in some rural areas that have developed local economies generating their own revenues, but also institutional capacities to manage them. at the same time, the problem of small settlements, most of which are objectively deprived of the economic and social basis for ensuring the minimum potential of local public finances, requires a priority solution. in addition to the aspect of pronounced inefficiency that accompanies this problem, the population of the respective settlements does not have access to a wide range of important public baltic journal of economic studies 33 vol. 8 no. 5, 2022 y = 407,85x-0,381 r² = 0,4281 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 sh ar e of e xp en di tu re s an d no nfi na nc ia l a ss et s re la te d to g en er al p ur po se s ta te s er vi ce s in th e to ta l ex pe nd itu re s an d no nfi na nc ia l a ss et s of l b 1, % population, people figure 5. relationship between the share of expenditures and non-financial assets related to general purpose state services in the total non-financial expenditure and assets of lb1 (dependent variable) and the number of population (independent variable), year 2021 source: ministry of finance, author’s own calculation figure 6. distribution of first-level atus by the ratio between local budget revenues without transfers and deductions / expenditures and non-financial assets related to general purpose state services, lei, 2021 source: ministry of finance, author’s own calculation baltic journal of economic studies 34 vol. 8 no. 5, 2022 services. the problem of critical inefficiency in the use of public finances, including local public finances, is a significant shortcoming in the work of all governments of the republic of moldova, which should be urgently addressed by the court of accounts and the parliament of the republic of moldova and solved in the most urgent and energetic way. increase of administrative capacity (population, territory, economic assets, etc.) of the atus of the republic of moldova is a primary objective that determines the way of reconsidering the local public finances. the development and implementation of solutions to rationalize the system of local public finance without increasing the administrative capacity of the atus will not be successful. in this regard, the administrative capacity of the atus in the republic of moldova can be developed by implementing the municipalization7 with the stimulation, at the same time, of the first-level atus to initiate and carry out voluntary "amalgamations", including through a transfer system specially designed for this purpose. the municipalisation will solve the problem of overlapping the competences exercised by first-level lpas and second-level laps, and the increase in administrative capacity, especially of first-level atus, will ensure the prospect of economies of scale, both with a positive impact on the efficiency of local public finance management. according to the model of atus administrative capacity development, which will be developed and adopted for implementation, the system of public finance, including inter-budgetary relations and the system of local public finance, will also be rationalized. at the same time, the logic of constructing the general-purpose transfer system (based on fiscal capacity, population number and atu area, as determinants of gpt) can be preserved. 6. conclusions measures aimed at increasing the financial autonomy of lpas cannot be developed and implemented in isolation, without a consistent strategic vision. moreover, they cannot avoid the need to reform local public administration and rational administrative-territorial structure of the republic of moldova. in this regard, the parliament of the republic of moldova should initiate the elaboration of a strategic policy document that would logically, consistently and in the right sequence address the following interdependent blocks: reform of local public administration; reform of the administrativeterritorial structure; decentralization, including financial decentralization: – in order to ensure the premises for increasing the efficiency of the management of local public finances, it is necessary to develop and strengthen the administrative capacity of the atus in the republic of moldova through municipalization and voluntary "amalgamation" of the atus. municipalisation will also solve the problem of the confusing competences of first-level lpa, second-level lpa and central public administration; – in order to stimulate the voluntary "amalgamation" of the atus, it is necessary to design the transfers to benefit the atus (through a contest of projects) that have decided to "amalgamate"; – the principled reconsideration of the system of deductions from the state revenues and general destination transfers in order to ensure equal treatment between all second-level atus and atu gagauzia, without applying preferential treatments to the latter: the citizens of the republic of moldova must have the same access to local public services regardless of second-level atu they live; – granting the first-level lpa and second-level lpa the freedom to introduce new local taxes and fees or additional quotas to existing ones; – ensuring transparency in the distribution of categories of transfers and other financial resources that are not determined by size and are distributed according to clear principles, rules and formulas defined by law (at least by government decisions); – continuous professional development of local elected officials, financial specialists and accountants in the field of local public finance. acknowledgments. this paper is developed within the project "human rights in the republic of moldova: financial dimension and consolidation through the sufficient public experiences management" (code 20.80009.0807.35), funded through the national agency for research and development of the republic of moldova under the state program 2020–2023. references: congress of local and regional authorities of concil of europe (2005). recommendation 179 on local democracy in moldova. available at: https://rm.coe.int/090000168071a450 congress of local and regional authorities (2012). recommendation 322 local and regional democracy in the republic of moldova. available at: https://rm.coe.int/090000168071b1a6 7 the essence of the concept of municipalization consists of elimination of rayons as second-level atu and their replacement by municipalities, by granting all cities rayon centers the status of municipalities and transforming them into second-level lpas (after the model of chişinău municipality). baltic journal of economic studies 35 vol. 8 no. 5, 2022 congress of local and regional authorities (2018). recommendation 411 fact-finding mission on the situation of local elected representatives in the republic of moldova. available at: https://rm.coe.int/090000168079d680 congress of local and regional authorities (2019). recommendation 436 local and regional democracy in the republic of moldova. available at: https://rm.coe.int/090000168093d89d constitution of the republic of moldova (1994). available at: https://www.legis.md/cautare/getresults?doc_ id=111918&lang=ro council of europe (1985). european charter of local self-government. available on: http://lex.justice.md/ index.php?action=view&view=doc&lang=1&id=357167 faguet, j.-p., fox, a. m., & poeschl, c. (2014). does decentralization strengthen or weaken the state? authority and social learning in a supple state. department of international development, london school of economics and political science, london, uk. fiscal code of republic of moldova (1997). available at: http://www.lex.md/fisc/codfiscaltxtro.htm#articolul%20284 law of republic of moldova "on public finances and budgetary-fiscal responsibility" (2014). available at: http://demo.weblex.md/item/view/iddbtype/1/id/lplp20140725181/specialview/1/ref/mf law of republic of moldova "on local public finances" (2003). available at: http://lex.justice.md/index. php?action=view&view=doc&id=312821 law of republic of moldova "on the administrative-territorial organization of the republic of moldova" (2001). available at: http://lex.justice.md/md/312874/ martinez-vazquez, j. (2001). the impact of budgets on the poor: tax and benefit. international studies program working paper series 01-10, andrew young school of policy studies, georgia state university, atlanta. national decentralization strategy. available at: http://lex.justice.md/viewdoc.php?action=view&view= doc&id=344005&lang=1 oates, w.e. (1972). fiscal federalism. harcourt brace jovanovich, new york. shah, a. (1994). the reform of intergovernmental fiscal relations in developing and emerging market economies, policy and research series no. 23, world bank, washington d.c. tranchant, j. p. (2010). does fiscal decentralization dampen all ethnic conflicts? the heterogeneous impact of fiscal decentralization on local minorities and local majorities. munich personal repec archive. undp (2005). fiscal decentralization and poverty reduction: a primer. available at: https://www.undp.org/arabstates/publications/fiscal-decentralization-and-poverty-reduction received on: 12th of october, 2022 accepted on: 21th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 99 vol. 4, no. 1, 2018 corresponding author: 1 department of management, state university of telecommunications. e-mail: gudzee@ukr.net 2 department of finance, accounting and taxation, phee “european university”. e-mail: nprokopenko@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-99-105 the increase of enterprises’ innovative development based on the net work approach olena gudz1 state university of telecommunications, ukraine nataliya prokopenko2 phee “european university”, ukraine abstract. the purpose of the paper is studying the role and problems of the innovative development of domestic enterprises, discovering the factors that influence these processes. methodology. the methodology for the study was based on logical and historical methods, methods of the system-functional approach, methods of scientific abstraction, systematization, grouping, generalization and formalization, analysis and synthesis, economic and statistical methods, and method of questioning and peer review. results. it is studied the essence and substantiated the expediency of the network approach use, it is outlined its capabilities and limitations, determined the effectiveness of network innovation structures, and developed the proposals for activating the innovative development of enterprises in new dimensions of the economic space based on the network approach. practical implications. the proposed measures will promote the activation of innovative development for domestic enterprises, improve the quality of business chains, competitiveness and management structures, and provide the development of new market segments. value/originality. the information background for the paper was the official data of the state statistics service of ukraine, statistical and financial statements of enterprises, rating estimates by the international agency bloomberg rankings, analytical report “global innovation index” (world intellectual property organization, wipo), the report of the european innovation scoreboard, scientific publications of domestic and foreign researchers, normative reference literature, analytical and logical generalizations and observations of authors, internet information resources. key words: innovations, innovative development, enterprises, network approach, network innovative structures. jel classification: r14, d18, p2 1. introduction in the world, there is a formation of a new type of entrepreneurship, the basis of which are knowledge and information and communication technologies, and which is focused on the activation of innovative development. that is, the speed of building social needs, the intensification of scientific and technological progress, the aggravation of competition and other factors require domestic enterprises to activate the innovative development using new non-traditional approaches. therefore, the activation of innovative development for domestic enterprises based on a network approach, the emergence of which is conditioned by the progress of information and communication technologies and the deployment of business democratization processes, will promote the generation of additional competitive advantages, provide economic benefits, assimilate new market segments, and increase labour productivity. this approach solves a wide range of problems that require qualitative changes in the activities of enterprises since it is “in the network structures and the network principle of the organization of economic activity, a new driver of innovation development of enterprises” is seen (sichkarenko, 2015). based on this, the chosen topic of research is particularly relevant; inhibition of innovative development of domestic enterprises is due to their backwardness, loss of competitiveness, and economic crisis. the issue of enterprises’ transition to an innovative way of development, measures to enhance their innovative activity in scientific publications are covered fairly widely. when considering this problem, researchers most often rely on the development of: j.  schumpeter, c.  oppenlander, p.  drucker, a. anchishkin, n. kondratyev, d. kokurin, j. yakovets, baltic journal of economic studies 100 vol. 4, no. 1, 2018 s. ilyashenko, p. pererva, l. fedulova, a. yastremskaya and others. however, issues of mainstreaming innovative development for enterprises based on the network approach remain the object of lively scientific discussions, which means space for the further development of scientific research. the aim of the article is to highlight the role and problems of innovative development for domestic enterprises, to find out factors affecting these processes, discover the essence and the rationale for the use of a network approach, define its capabilities and limitations, define the effectiveness of network innovation structures, and to develop proposals to enhance the innovative development of enterprises in new dimensions of the economic space based on the network approach. 2. challenges and condition of the innovative development of ukrainian enterprises the need to intensify the innovative development of domestic enterprises is generated, mainly, with the emergence of new challenges and deformations in the economic space. to such challenges and deformations today can be attributed: political instability and conduct of the anti-terrorist operation in the east of the country, saturation of the market and a rapid decline in consumer demand of the population; development of radical qualitative innovations, especially for production technologies; deployment of inflationary processes; expansion of the market assortment; destruction of the banking system, and as a result of the narrowing of business lending; threats of competitors. in contrast to existing challenges and deformations, there is a slowdown in the innovative development of enterprises. so, during the 2014–2016 years, the share of enterprises engaged in innovative activities was 18.4%, incl. technological innovation – 11.8% (5.7% for the product and 10.3% for the process), non-technological  – 13.4% (8.7%  – organizational and 10.2%  – marketing) (popov, 1994). it should be noted that there is a close interdependence between the size of the enterprise and its innovative activity, since additional resources, in particular, a certain number of employees for research and development, are needed to develop innovations. the largest share among technological and nontechnological innovation enterprises was observed in large enterprises (31.4% and 28.1%). by industry, in 2014–2016, the largest share of innovation had information and telecommunications enterprises (22.1%), processing industry enterprises (21.9%), enterprises of financial and insurance activities (21.7%), and enterprises of activities in the field of architecture and engineering (20.1%) (popov, 1994). according to the territorial location, a high level of innovative activity was noted at the enterprises of the rivne, kharkiv regions, and in kyiv. in 2016, enterprises allocated 23.2 billion uah for innovative needs, including the purchase of machinery, equipment, and software in the amount of 19.8 billion uah. almost a third part of enterprises carried out innovative activities to introduce new or substantially improved products or processes. innovations were mainly carried out at the expense of the enterprises’ own funds (89.5%), foreign investors’ funds (3.1%), and other sources (2.9%) (state statistics service of ukraine, 2017). the main partners for enterprises on innovative cooperation were primarily suppliers of equipment, materials, software, and customers (13.7%). the share of enterprises cooperating with scientific institutions was 8.4%. at the same time, we note that the innovative potential of countries is determined by indicators of the availability and growth of the number of doctors and candidates of sciences and an increase in the relative number of persons with higher education (according to which ukraine is among the top ten economically powerful countries). the share of doctors and candidates of science among performers of scientific research was 27.9%, among researchers  – 42.6% (state statistics service of ukraine, 2017). in 2016, the proportion of performers of scientific research in the total number of employed population was 0.60%, including researchers  – 0.39%. according to eurostat, in 2014, this share was high in denmark (3.07% and 2.09%), finland (2.95% and 2.12%), norway (2.73% and 1.90%) (world intellectual property organization, 2017). 3. comparison of indicators of ukrainian enterprises’ innovative development with enterprises from other countries the world does not stop its development in order to give domestic enterprises an opportunity to catch up. the maximum innovation that j. schumpeter defined as “creative destruction” helps to avoid various business problems, and ukraine’s enterprises are characterized by innovative backwardness compared to other countries. for example, according to the european innovation scoreboard in 2016, ukraine was in the last on the level of innovation – the fourth group – “modest innovators” with an index of 0.1889 (maximum 1). compared with other eu countries, the backlog of ukraine is more than 4 times from the first group of “innovation leaders” (the first place in the rating takes sweden  – 0.796). in general, for ukraine, the largest value of this index was observed in 2013  – 0.1893 (european commission, 2017). the low innovation activity of ukrainian enterprises is confirmed by the rating of the international agency bloomberg rankings. so, in 2017, ukraine took the 46th place in the top 50 innovations and economies of the world (innovation index) (in 2015 – 33, 2016 – 41) (bloomberg, 2017). baltic journal of economic studies 101 vol. 4, no. 1, 2018 based on the analytical report “global innovation index” (world intellectual property organization, wipo), according to the country’s innovation rating in relation to gdp, ukraine was classified as lower-middleincome and ranked 64th out of 141 countries (world intellectual property organization, 2017). the share of research and development expenditures in ukraine’s gdp was 0.48%, including 0.16% at the expense of the state budget. in 2015, the same figure in the eu countries averaged 2.03%. the highest rates were shown by sweden  – 3.26%, austria  – 3.07%, denmark  – 3.03%, finland  – 2.90%, germany  – 2.87% (european commission, 2017). that is, it can be argued that domestic enterprises have not yet become on the rails of activating innovative development. the most vulnerable for ukraine are: “political stability and security” (125th place), “easiness of resolving issues of bankruptcy” (113th place), “political environment” (123rd place), “gdp per unit of energy” (115th place). high rankings in the world competitiveness ratings of national economies are held only by those countries whose outstanding achievements are due to attracting the innovation factor: finland, great britain, netherlands, singapore, japan, usa, south korea, ireland (ivchenko, 2007). innovations have the ability to rapidly change entire sectors of the economy and bring tremendous economic, social, and financial benefits to countries that create a supportive environment for them (european commission, 2017). that is, for more effective implementation of their capabilities, enterprises must move from single mastering of innovations to a large-scale integrated process of generation and implementation of innovations, namely, to intensify their innovative development. 4. braking the factors of enterprises’ innovative development managers of enterprises call holding factors that prevented them from mastering innovations in 2014– 2016, namely: low demand for innovation (60.7%), lack of funds (57.1%), lack of ideas or opportunities for innovations (54.7%), high costs for innovation (52.3%), negative experience in innovation development (51.2%), difficulties in attracting state support for innovations (38.5%), unfavourable regulatory framework (34.1%), low competitiveness of the enterprise (34.7%), high competition (31.2%), lack of loans (29.4%), uncertain demand for innovative products (16.4%), absence of skilled labourers (11.76%), absence of reliable partners (8.2%). it should be added to this list that business-units are becoming more and more pluralistic; democratic; interconnections between different business contractors are complicated; it is significantly increasing the uncertainty, threats and risks; globalization is unfolding, the influence of external factors on the state’s internal politics is growing; competitive struggle is intensifying; society it development is intensifying; the confidence of entrepreneurs and the population towards state authorities is falling down. the above requires the revision of traditional approaches to activating the innovative development for enterprises, as they do not meet the challenges of the present, and in the conditions of the information and communication revolution do not provide the expected activation and efficiency of innovative processes. 5. the feasibility and essence substantiation for the network approach now, activation of innovation activity involves an increase in the degree of openness and interaction with partners. multiplicity, versatility, and complexity of such an interaction prove the expediency and effectiveness of the application of the network approach. in fact, a network approach is an answer to the challenges, the changing conditions of enterprises and their expectations in the uncertain and full of threats and information in the economic space. a network approach defines a system of relationships between enterprises without the domination of one of them. in essence, it provides for the use of one of the types of horizontal integration, contributes to the maximum attraction of available resources for the provision of innovative products and services, the development of technological innovations, the development of competencies, competitive advantages, innovation, production, information, and intellectual potential in the contour of a single multi-polar information and communication space. among the significant advantages of the network approach, there should be high organizational capacity, more efficient use of resources, increased competitiveness, expansion of the horizons of opportunities to solve complex innovation problems and improve the quality of services, services for consumers. the network approach is based on the synthesis of several economic theories: resource theory, evolutionary economic theory, management theory, knowledge economy, institutional theory, the doctrine of synergies, the economy of agreements and transactions. hence, the logic of the network approach includes (kelly, 2009) decentralization, synergy, community, free access, concern for network values, maximization of innovation, multidimensional space, lack of discontinuity, technology balance, expansion of the space of innovation opportunities. appropriate is the assertion by paul romer, paul krugman, and kevin kelley (kelly, 1999): the values associated with the network function as stimulants – the perception of the desired behaviour is the basis for creating the network and attracting the following baltic journal of economic studies 102 vol. 4, no. 1, 2018 participants; contribution to overcoming resistance to rapid changes and the spread of innovative behaviour. the use of the network approach as a specific form of organization of innovative business chains began in the middle of the last century as a response to the challenges of scientific and technological progress, deepening the processes of globalization. at the same time, internationalization and integration of economic processes were observed. enterprises of economically powerful countries began actively use various forms of integration, cooperation, and partnership. at the same time, the development of modern ict has provided the formation of information and business communications between enterprises, significantly expanded the opportunities for their interaction. in fact, this form of organization of innovation activity helps enterprises to disseminate information about their innovative projects, supports at various stages of innovation, helps in finding business partners and clients. that is, a hierarchical traditional structure, limited by national, legal, and bureaucratic borders, is replaced by a qualitatively new one, in which each enterprise has almost the same opportunities to attract resources and competences of other members of the network. the meaning of the network organization of innovation activity is concentrated in “the possibility for each of its participants to have equal direct relations with other participants” (zvirko, 2012). network interconnections of enterprises are determined by independence from spatial, time, resource constraints and are based on the capabilities of modern information and communication technologies, competitive advantages and competencies that apply to all enterprises included in it: risk minimization, high intensity of information flows, expansion of business combinations, coordination of innovation chains, multiplication of key competencies, optimal use of common assets. “the network structure is a new model of redistribution of intellectual and production resources, it allows its subjects to minimize the time and material costs of adapting to market conditions.” in conditions where the resources of high-tech enterprises are limited and do not meet the requirements of the competition, it is their network reorganization that allows redistributing the risks and reducing the time and financial costs for the development and implementation of innovations” (moskovkin & rakovskaya-samoylova & kovalenko, 2005). 6. the experience of using a network approach in european countries the european network of business innovation centers (ebn) was established in the early 1980s on the initiative and at the expense of financing by the european commission, it now carries out as a non-governmental non-profit association receiving funds from the eu only with participation in specialized projects on the competition on general grounds. additional funding is provided for the provision of services to partners, contributions of network members and sponsorship. the network comprises almost 150 accredited members and up to 70 associates. their permanent staffs consist of 13 people. the b-apartment is located in brussels. an important function of the network is to manage the quality of business innovation centres: accreditation (by agreement with the eu) to obtain the status of a “european business innovation centers” (eu-bic). the eic, the network of european innovation centres was established in 1987 by the european commission. it united more than 300 organizations in 50 countries of the world, mainly its chambers of commerce, economic development agencies, banks and consulting companies, business associations (castells, 2010). 7. the experience of using a network approach in ukraine at present, the development of network innovation structures in ukraine can be considered fragmentary. there is an attempt to form or expand some network entities at the regional or national level (innovation centres, technology transfer centres, intellectual property commercialization departments, which unite partner and agent networks around them). practically it is an attempt to introduce the experience of the eu countries on the domestic expenses, but their impact on the activation of innovative development for enterprises is not much appreciable. note that there is a tendency to form formal network innovation structures. mostly they perform functions of marketing networks by consulting agencies and the like. the reason for this is inadequate state support, low coverage of potential innovative enterprises, lack of development of intermediary innovative, investment, information structures, transfer and technology transfer centres, low qualification of personnel, lack of skills in the development of partner chains. summarizing the practical experience of using network innovation structures convinces that such a network forms a solid institutional basis for the innovative development of enterprises, creates the necessary information, organizational and economic prerequisites, and accumulates resources for successful innovation activity. it helps to coordinate the activities of enterprises, intermediaries, developers, scientists. its role is to facilitate the continuous flow of new ideas, their development and commercialization, and the practical introduction of innovations in production. baltic journal of economic studies 103 vol. 4, no. 1, 2018 8. advantages and disadvantages of using a network approach to stimulate the innovation development for enterprises it is recognized that the formation of innovative networks has a relatively fast and significant positive effect, which gradually changes the very quality of innovative development of participating enterprises. the effectiveness of innovative networks is ensured by a low level of staff utilization and an optimal cost structure of resources. “networks exclude the duplication of competent workforce and capacities in different sectors, thus avoiding high aggregate costs for the production of end products or for the intra-organizational exchange of services.” the prerequisites for a network configuration without the use of surplus labour are in particular deep segmentation of all members of the network organization. in general, the network has a reserve potential, primarily due to the creation of new configurations or the attraction of additional partners (popov, 1994). at the same time, the innovative network is characterized by the following features: “the rejection of bureaucratization and formalization, the high status of information and personnel integration tools (combination of staff ), the form of communication between the organization itself and other enterprises, for example, by creating internal markets, a small number of hierarchical levels thanks to the transition from a large centralized organization to a number of small organizations with flexible specialized forms of work” (merriden, 2003). despite the conducted research, we are convinced that the implementation of the activation of innovative enterprise development based on the network approach reveals both new opportunities and has a number of limitations. so the following additional possibilities are revealed: increasing the adaptability of enterprises to changing environmental conditions; expansion of info-communication chains; reducing the level of risks and threats; the emergence of a rapid adequate response to changing consumer demand; multiplication of competence; adding competitive advantages; concentration and specialization of the company’s activity on attractive unique processes; optimization of structure and volume of expenditures; avoiding the duplication of staff use; providing creativity and flexibility; attracting the best specialists and partners; combination of interests of the enterprise with interests of the whole network. at the same time, the innovation network generates a number of limitations that need to be considered when forming: lack of material support and social guarantees for its members due to the refusal of any long-term contracts; focus on key competencies, narrow specialization, which does not provide for diversification of activities; excessive dependence on the professionalism of the staff; large risks due to staff turnover; great heterogeneity of participants and partners; danger of excessive complexity of the innovation process; dilution of participation and membership; high dynamics of changes within the network. the formation of an innovative network for the activation of innovative development for enterprises in ukraine is due to the following circumstances: the need to modernize the outdated material and technical base of many enterprises; growth in demand for high technology; wide dissemination and development of icts; availability of highly qualified specialists; the need for the technological renovation of the production; the insufficient level of the development of applied science, which hinders the introduction of innovations; the democratization of business models; the request for new values. the purpose of creating an innovative network should be to increase the level of competitiveness of enterprises by enhancing their innovative development by expanding competencies, sharing resources, infrastructure, reducing the duration of innovation cycles; an increase of competitive advantages; risk reduction; an increase of innovation effectiveness. 9. proposals for the activation of enterprises’ innovative development on the basis of a network approach the innovative network covers the areas of search, generation, and dissemination of ideas and the development and commercialization of innovations; it is a set of enterprises, organizations, objects of innovation infrastructure, public authorities that interact in the process of innovation and operate in the contour of a certain innovation policy. an innovative network is formed by a number of subsystems: 1) education, vocational training and retraining of personnel (including universities, colleges, other institutions of secondary and vocational education, as well as the organization of retraining and professional development of personnel, taking into account the training and retraining of personnel for innovation); 2) subsystem of innovative activity, production and sales of products and services (including small, medium, and large enterprises, branch and regional innovation and technical centres, as well as concerns, corporations, and financial-industrial groups, trade (dealer) networks); 3) a subsystem of technological infrastructure (including centres for the support of innovative entrepreneurship, baltic journal of economic studies 104 vol. 4, no. 1, 2018 technology parks, telecommunications networks, business incubators and business innovation structures, consulting and engineering firms, information centres and technology transfer centres, a system of scientific and technical communications, together with a system of scientific and technical information, demonstration halls); 4) the financial infrastructure (contains organizational and legal mechanisms for financing and resource support for all stages of the innovation cycle with the investment companies, banks and other financial institutions, investment and innovation funds, venture funds, budget financing, if the customer is a state); 5) an information infrastructure subsystem (covering information resources, technologies and systems, information and telecommunications networks, ict market)” (shugurova, 2010). functions of the innovation network are: the promotion of innovative technologies; the search for innovative solutions for small and medium-sized technology-oriented enterprises, the reduction of operational, commercial, systemic, and criminal risks for them; the promotion of technological cooperation; the dissemination of data on research results among potential consumers, technological and organizational assistance expansion of access to these data for all participants of the innovation network, the systematization of technical information, organizations for partners of personnel and educational programs (zgurovsky, 2006). a key role in the development of network innovation structures belongs to the state authorities that establish rules of its functioning and provide legal, organizational, resource support. such a support can be provided through the credit subsidization of innovation activities, the direction of investment funds in venture funds, preferential taxation, accelerated depreciation. thus, network innovation structures allow: improving the transfer of technologies by eliminating various obstacles in joint innovation activities; accelerating development of new technologies; coordinating innovation policy of all participants; generating additional competitive advantages; directing innovation activity in the context of consumer demand and market demands; activating the innovative development for small and medium-sized enterprises. the implementation of advantages of a network approach in the area of activation of innovative development of enterprises is carried out when the following key prerequisites are fulfilled: restructuring the business chains of the participating enterprises themselves, forming network relations and business combinations of joint innovation activities and implementing certain norms of conduct and management regulations in the implementation of joint network projects; development of organizational infrastructure; existence of a high level of technological base development to ensure the effectiveness of communications between network participants. to participate in an innovative network, each enterprise should make appropriate changes: to use new business models based on partnership and trust; to formulate new principles for managing business chains; to develop qualitatively new rules for mutual relations and innovative behaviour. at the same time, the key areas of innovative development of enterprises should be: outsourcing; reduction in the physical size of enterprises with a simultaneous increase in performance indicators; the transformation of technical and economic basis of production; expansion of business combinations; change of values and semantic content of innovative development of the enterprise. thus, it is possible to determine principles of enterprise network participation: “real-time work, which includes parallel work and organization; each employee should have an access to any information about the enterprise; support for the integrity of the enterprise through the creation of a network of teams; creation of a techno-organization conditions for the formation of “virtual” teams whose members may be located at different geographical points” (wilkinson & young, 2002). the well-known rules for the successful individual behaviour of enterprises in networked entities are proposed by kevin kelly: “everything is cheaper as it is perfected. it is worth to invent faster than the innovation becomes usual. it is not necessary to develop a product, but a network of business ties. new species constantly replace the old ones; the constant search for new possibilities, repetitions, copying, and automation depreciate, and originality and creativity grow in price” (kelly, 2009). 10. conclusions the coverage of the role and problems of the innovative development for domestic enterprises, the disclosure of factors influencing these processes, the disclosure of the essence and substantiation of the expediency of using the network approach, the determination of its capabilities and limitations, the determination of the effectiveness of network innovation structures allowed to formulate proposals. the use of such proposals for activating innovative development for enterprises in new dimensions of the economic space based on a network approach will help to stimulate the innovative development of domestic enterprises, effectively organize the rational interaction with partners, improve the quality of business chains, competitiveness of management structures, develop new market segments, improve the technology transfer by eliminating various obstacles in joint innovation, open up the new technologies, coordinate the innovation policy of all participants, generate the additional competitive advantages and competencies, align the innovation activities in the context of the consumer demand and the market demands. baltic journal of economic studies 105 vol. 4, no. 1, 2018 references: zvirko, m.v. 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(1999) nowe reguły nowej gospodarki. dziesięć przełomowych strategii dla świata połączonego siecią [new rules for the new economy. 10 radical strategies for a connected world]. london: penguin. the bloomberg innovation index (2017). bloomberg. retrieved from http://www.bloomberg.com/graphics/2017 innovative-countries/ wilkinson, i., & young l. (2002). on cooperating: firms, relations and networks. sydney university of technology journal of business research. retrieved from http://necsi.edu/events/iccs6/viewpaper.php?id=128 baltic journal of economic studies 89 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 institute for economics and forecasting of the national academy of sciences of ukraine, ukraine (corresponding author) e-mail: kushnksena@gmail.com orcid: https://orcid.org/0000-0002-3853-584x researcherid: aag-5854-2020 2 institute for economics and forecasting of the national academy of sciences of ukraine, ukraine e-mail: ngahovich@gmail.com orcid: https://orcid.org/0000-0002-7754-9080 researcherid: aaf-1984-2020 3 institute for economics and forecasting of the national academy of sciences of ukraine, ukraine e-mail: liliyavenger.iefnasu@gmail.com orcid: https://orcid.org/0000-0003-0554-7438 researcherid: hlh-2280-2023 doi: https://doi.org/10.30525/2256-0742/2023-9-1-89-99 strategic scenarios for sustainable industrial development of ukraine in the post-war period oksana kushnirenko1, nataliia gakhovich2, liliia venger3 abstract. the purpose of the paper is to develop the most probable scenarios and to determine the strategic directions and effective tools for the ukrainian industrial recovery, which will ensure the resistance of the economy in the conditions of military challenges. the method of strategic scenarios allows to find out how the industrial development in ukraine will develop in the course of war and post-war recovery. methodology. the methods of system analysis and logical modeling were used to describe the transition of the ukrainian production from the current situation of military crisis to the target one; structural analysis was used to determine the system of indicators characterizing the resistance of the industry. for this purpose, national (state statistics of ukraine) and international (world bank, eurostat official website) databases characterizing the level and structure of industrial development in the last 5 years were used. the method of calculation takes into account the criteria of changes in indicators: direction (growth/decline occurred); rate of changes based on the cumulative annual growth rate for the period of 5 years. the study was carried out using analytical methods of the influence of trends in the formation of strategic scenarios in unpredictable situations (conditions of wartime uncertainty), to assess changes in the probability of occurrence due to the actual occurrence of one of them, which made it possible to identify trends, justify scenarios and take them into account when analyzing the prospects for industrial development to strengthen the defense capabilities and economic growth of ukraine. the results of the survey showed that the strategic scenarios for the industrial development of ukraine will be adjusted as necessary for the post-war industrial recovery in case of a long-term external military threat to preserve the state sovereignty. the achievement of the set strategic goals depends on the driving forces determining the industrial development in ukraine. as the main indicators characterizing the tendencies of industrial development in ukraine, the indicators reflecting the efficiency of the use of productive forces have been chosen: indicators of industrial production efficiency; labor productivity; indicators characterizing іnnovative development; performance indicators of foreign economic activity and investment development. taking into account the influence of each of the driving forces of industrial development in the conditions of wartime uncertainty, three scenarios of industrial development were developed: a conditionally positive scenario, in which the economic system will gradually stabilize due to the cessation of hostilities and the recovery of production capacities; a conditionally negative scenario, which will be characterized by the disintegration of the economic system, the destruction of energy infrastructure facilities, where negative trends will dominate; a conditionally neutral (basic) scenario, in which the disintegration of the economic system will not reach extreme levels, and industrial production will develop in areas not covered by hostilities. practical implications. the key problem of restoring economic stability in ukraine is to create conditions for favorable development of industrial business, which depends on balanced strategic policy decisions. the transformation of industry into an effective force for the revival of the ukrainian economy in the conditions of the war and post-war period requires a balanced strategic management of the future development, because it is crucial to meet the unprecedented demands of the war on the available resources of the country and to prevent a social, baltic journal of economic studies 90 vol. 9 no. 1, 2023 humanitarian, economic, financial, environmental, military crisis. at the same time, traditional methods of indicative planning cannot take into account all factors of wartime uncertainty, therefore, the rationale of future development vectors based on scenario planning makes it possible to create conditions for minimizing threats and realizing potential opportunities. value/originality. strategic scenarios provide for better economic recovery planning with long-term national priorities, development strategies of related industries and sectors for ensuring the ukrainian manufacturing resistance. key words: strategic scenario, economic stability, uncertainty, strategic planning, industrial development, defense capability. jel classification: l50, l52 1. introduction war changes the role of government and public administration, giving them new powers to respond to threatening challenges. as winston churchill noted in his autobiography, my early life: "the statesman who succumbs to the fever of war must realize that once the signal is given, he is no longer the master of policy, but the slave of unpredictable and uncontrollable events." (churchill, 2020) the question is how to cope with the influx of a significant number of risks, how to make such decisions that will enable the army to perform military tasks and provide the population with conditions for survival and development. one of these answers is a quick response based on management decisions of the country 's leadership as a result of analysis, forecasting, optimization, justification and selection of alternatives from various options for achieving the goal. however, the war in ukraine has led to increased economic uncertainty (anayi, 2022), which makes it difficult to make informed management decisions. rapid change of events during military operations, unpredictability of the aggressor's behavior, risks of military damage complicate management decisions. in such conditions there is no certain probability of achieving the planned result. at the same time, the need for balanced strategic management of future development even in military conditions is growing, because it is crucial to meet the unprecedented demands of the war on the available resources of the country, and to prevent social, humanitarian, economic, financial, environmental, military crises, etc. therefore, the application of flexible methods of strategic planning based on the development of strategic scenarios will allow to optimize insufficient opportunities for analysis, understanding and determination of the current state and prospects. 2. strategic scenarios for post-war reconstruction planning 2.1 strategic planning review the russian-ukrainian war is already being called a "black swan" for the world economic order, which leads to the deterioration of key indicators of socioeconomic development not only in ukraine, but also in the world: rising prices for food, energy resources, fertilizers; inflation and disruption of supply chains; migration of the working population, which in general violates the conditions for achieving the global goals of sustainable development. according to the concept of nassim taleb, a "black swan" is an unexpected, exceptional event that has an extraordinary impact and is subsequently poorly understood and rationalized. (taleb, 2013) according to l. petrashko, "in the russian-ukrainian conflict, the speed and scale of changes are exceptional, and uncertainty is extremely high. it is unclear how the military situation, political process and countermeasures will develop in the world in the short and long term. however, it is already clear that the economic impact of the crisis on energy and food markets will cause disruptions in many countries in europe and around the world, leading to radical global uncertainty. it is extremely difficult to estimate the impact and consequences of the war on the global economic development. (petrashko, 2022) however, the war will end, and the achievement of the desired state requires justified development strategies. and although it is impossible to take into account all factors of uncertainty, the justification of future development vectors based on scenario planning allows to create conditions for minimizing threats and realizing potential opportunities. after all, as scientific works prove, military conflicts can disrupt the existing political balance and allow for institutional changes that were previously impossible. (colin o'reilly, 2015) under conditions of uncertainty, the planning process becomes much more complicated than planning under normal life conditions. among the methods used for planning in such circumstances, scenario planning is worth mentioning. the potential of this method is widely used by international institutions, because scenario planning can be used as a flexible forecasting tool that allows to identify potential risks and prepare for not one, but several possible future alternatives. in particular, the world economic forum constantly publishes research on how various industries may look in the future and baltic journal of economic studies 91 vol. 9 no. 1, 2023 presents strategic implications for key stakeholders and society as a whole. (world economic forum, 2018) the transformation imperatives outlined should help the industry prepare for the challenges of the future in the decision-making process to achieve both operational and strategic goals. in modern ukrainian realities, scenario planning can also be used in the development of industrial development scenarios for the development of the economy in the post-war period. scenario planning is widely used in planning the development of industries and regions, allowing not only to determine the possible future, but also to manage risks and use opportunities. valeriy heyets studied the peculiarities of the economy in unstable conditions, which allow practical use of instability as an immanent property of economic development for the purposes of economic growth. (heiets, 2000) in the works of m.o. kyzym, o.a. gaiman analyzed the difference between the scenario approach to modeling and forecasting and traditional methods of strategic planning and proved the superior perspective of the scenario approach to solving the problems of regional development (kyzym, 2009). v. khaustova (khaustova, 2015) and scientists of the research center for problems of industrial development developed a scenario for the implementation of the industrial policy of ukraine for the period up to 2030. they divided it into three stages: transition to the model of neo-industrial advanced development, growth of high technologies based on high scientific potential with an exportoriented foreign policy with a medium level of concentration of enterprises and clusters (presentation to the fundamental research work report "mechanism of state restructuring industry " 2016). o'connor m., macfarlane m., fisher j. identified challenges and drivers of change relevant to community efforts to improve regional prospects in the wheatbelt of western australia. (o'connor, 2005) in the works of n. baporikar, the importance of improving typical strategic planning methods using the critical success factor method is substantiated and an integrated structure is presented that helps to understand a wide range of interrelated elements that influence the development of a strategy for information technologies. (baporikar, 2015) the results of scenario modeling of the scientific and innovative development of ukraine to determine appropriate methods of its management in the conditions of the new industrial revolution and association with the eu are presented in the works of i. matiushenko. (matiushenko, 2016) a complex combination of different types of scenarios and their generation by bayes estimation methods, which allows for the uncertainty of the parameters to be taken into account, is proposed by bégin jean-françois. (bégin, 2022) summarizing numerous scientific publications in the field of scenario strategy, it is possible to define scenario models that can be used for the purpose of facilitating the planning process and reducing collective prejudices, studying the structure of a complex system, determining the probable directions and magnitude of future changes, identifying development alternatives, and overcoming uncertainty problems. these principles made it possible to apply scenario approaches to justify the vectors of future development of the ukrainian industry in the war and post-war period, which are characterized by considerable uncertainty. in order to understand the possible consequences of certain events and processes, it is important to have an idea of the approximate vectors of future development, not just to guess. assumptions and visualizations are two techniques often used to formulate future development vectors. (ulrich, 2022) however, when it comes to unpredictable changes, such as massive destruction caused by a military invasion, it is strategic vision and scenario planning that can help us rebuild and evolve the industry in the post-war period. it is also important to consider that different stakeholders will have a major influence on the decision-making process for recovery. this should be taken into account when determining the potential outcome in the process of building strategic scenarios of industrial development, as well as understanding which actions should be planned and initiated as a matter of priority. scenario planning is particularly useful when considering the long-term aspects of developing situations in which unexpected changes may disrupt previous trends. pierre vac, one of the pioneers of this method, described it as a discipline for promoting creative and entrepreneurial thinking and action in the context of change, complexity and uncertainty. (thomas j. chermack, 2017) scenario planning, unlike other methods (swot, pest analysis), is compatible with future possible views of the development of events. 2.2 differences between scenarios, forecasts and predictions traditional uncertainty planning methods attempt to determine the "most likely " future based on structured knowledge and basic facts. in cases where there is no concrete data to create a vision of the future, the methods of prediction, forecasting, and regression analysis are not appropriate. in this case, there is a risk of making decisions without a reasonable forecast, which can lead to a huge loss of resources and the probability of a crisis. therefore, in such situations, it is better to adapt, anticipate and act in advance to meet possible challenges, baltic journal of economic studies 92 vol. 9 no. 1, 2023 especially when significant changes are expected. such conditions greatly facilitate the ability of scenario planning to be a tool for expanding the possibilities for making strategic decisions. table 1 illustrates the differences between scenario planning and other planning methods. thus, scenarios are plausible images of the future that illuminate the path from the present to the future (such scenarios are often referred to as "exploratory " or "extrapolative" scenarios), or in the opposite direction, from the future to the present (often referred to as "normative" scenarios). (kolohryvov, 2012) each forecast typically develops several contrasting scenarios, with some room for possible modifications. the number of scenarios developed in different projections varies, but three to five scenarios are typical. although there are many different methodological options for developing scenarios, there are a few common steps that most of them require. the first step is to define the purpose of the scenario study based on the analysis of available information on the state of the system, its external environment, and the main strategic development priorities. the scenario planning process, as defined by the international council of scientific unions (icsu), consists of four stages: 1. at the first stage data are collected from leading authoritative national and international organizations, scientists and other interested parties of information about the main driving forces that will influence the development in the future. this becomes the basis for the analysis of the current state of the object under study and the identification of basic development problems for the prospective period. 2. in the second stage, "trial" scenarios are built by identifying options for possible development dynamics and necessary resources and sources. 3. the third stage is the development of "desired" long-term vision scenarios. 4. in the fourth step, the "desired" scenario is published according to its consequences. 3. determination of relevant factors that will be important for industrial development in war and post-war conditions strategic goals should be formulated taking into account the need for post-war industrial recovery in the conditions of long-term military threat to preserve the state sovereignty of the country, which emphasizes the importance of ensuring a consistently high level of the state's defense capability. it also prioritizes the need for the development of a developed industrial complex to create available resources to meet the needs not only of the civilian population, but also of the army. the key role in ensuring the needs of production capacities of raw materials, in particular from internal sources of extraction, is played by the sustainable development of industry based on the use of primarily internal resources, based on production with high added value for the purposes of the end user, as well as the creation of conditions for the development of energy. the importance of the prospects for the development of industrial activity is also strengthened by the fact that ukraine has a powerful research and development base, which at a high scientific and practical level has the opportunity to support the further competitive development of science-intensive technologies and industries. achievement of the set strategic goal depends on the factors that will shape the development trends of the situation. as the main indicators characterizing the trends of industrial development in ukraine were chosen those indicators that reflect the efficiency of use of productive forces: indicators of efficiency of industrial production: the specific weight of the volume of sold industrial products in gdp (%); labor productivity – the volume of realized industrial products per person employed (uah million per 1 person); added value per employee employed in industry, (uah million per person); capital adequacy – cost of fixed assets per employed person table 1 differences between scenarios, forecasts and predictions scenario forecast foresight probable future probable future the future is built on the past based on uncertainty makes different trends visible based on higher confidence levels based on different trends (complex model with increasing number of trends) based on political pressure/lobbying based on trends, usually one at a time uncertainty illustrated hidden risks and uncertainties well-hidden risks and uncertainties qualitative or quantitative quantitative quantitative and under pressure frequently used frequently used daily strong in the medium to long term and when there is uncertainty strong in the short term and when there is little uncertainty strong in the short term and where there is strong political pressure source: compiled on the basis of (zghurovskyi, 2001) baltic journal of economic studies 93 vol. 9 no. 1, 2023 in industry (million uah per person); energy availability – final energy consumption in industry per employed person (million tons per 1 person); indicators of innovative development – specific weight of the volume of implemented innovative products in the total volume of implemented products of industrial enterprises (%); specific weight of the number of innovatively active enterprises in the total number of industrial enterprises (%); indicators of foreign trade efficiency – specific weight of research and development costs in innovation costs (%) indicators of foreign trade efficiency – the specific weight of high-tech exports in the structure of industrial exports (%); the specific weight of high-tech imports in the structure of industrial imports (%); investment development – the amount of foreign direct investment per person employed in industry (million dollars per person). this choice is due to the fact that a strong industrial base should generate productive and stable employment and, as a result, an increase in the average wage level. in addition, industry must ensure the production of socially important manufactured goods (food, medicine, hygiene products, clothing and footwear, fuel). this makes industrial development an extremely important condition for reducing poverty, supporting the middle class, improving living standards and social stability throughout the country. 4. survey methodology the study was carried out using elements of the method of analyzing the influence of trends in the formation of strategic scenarios in unpredictable situations (conditions of wartime uncertainty) to assess changes in the probability of occurrence of a given set of events due to the actual occurrence of one of them, which allowed to identify trends, justify scenarios and take them into account when analyzing the prospects for industrial development to strengthen the defense capabilities and economic growth of ukraine. for this purpose, national (state statistics of ukraine) and international (world bank, eurostat official website) databases characterizing the level and structure of industrial development in the last 5 years were used. the calculation methodology takes into account the criteria for changing indicators: direction (growth/decline occurred); rate of change. the calculation of trends for measures with quantitative units is based on the cumulative annual growth rate for the 5-year period. as noted by v.i. lyashenko, the systematic study of socio-ecological and economic development should include the determination of the limits of safe existence of the system, therefore an important stage of monitoring the state of development is the determination of thresholds of indicators, which makes it possible to identify potential "danger zones" and levels of danger (acceptable risk (satisfactory) by comparing them / permissible state) – pre-crisis state – crisis state), as well as to determine the conditions necessary to strengthen the economic immunity of the region or state. when developing strategic scenarios of industrial development it is necessary to take into account relevant factors that will be significant for industrial development in war and post-war conditions; to make an assessment of how a combination of certain events will affect the development of the situation within the framework of the specified variables; to evaluate the factors that will shape the trends of the development of the situation within the framework of the specified variables (in particular, both those that will affect the situation in 2022 and those that will be trend-setting in the perspective of the next 3-5 years). the assessment of the previous trends of the industrial development and the determination of the average annual growth rate of the indicators are presented in table 2. the evaluation of the indicators characterizing the industrial development in the post-war period made it possible to determine the most dynamic driving forces shaping the further development trends. in particular, by calculating the average growth rate of selected indicators over 5 years, it was determined that such indicators as labor productivity grew most dynamically (on average there was an increase of 24.7%); wealth (the average annual growth over 5 years was 28.7%); growth in the volume of high-tech imports (on average by 7.1% annually). increased demand in ukraine for imported high-tech means of production resulted in the creation of new production facilities and the expansion of production potential. the following indicator – added value, which is a part of the total value of the product, reflects the real contribution of the enterprise to the creation of a certain product. having determined the factors that make up the added value of products, it can be seen that for enterprises the added value is a cost estimate of their work, and at the macro level the indicator of added value is used in the system of national accounts to calculate the value of gross domestic product and gross regional product. the average annual growth rate of value added per employee was 7.6%. the largest share of added value in the structure of the processing industry of ukraine in 2020 was generated by the food industry (28.5%, equal to uah 157.95 billion), followed by metallurgical production (17.34% or uah 95.84 billion), on the third place mechanical engineering (15.81%, equal to uah 87.392 billion) and production of rubber and plastic products, other non-metallic products (11.7% in the structure of the added value of the baltic journal of economic studies 94 vol. 9 no. 1, 2023 processing industry). that is, these four industries account for almost three quarters (73.4%) of the total value added in the manufacturing sector (kushnirenko, 2022). the analysis of the most influential industries by the indicator of labor attraction confirms the essential importance of industry for the economy of ukraine, because it is also the means to ensure the livelihood of working people and their family members, taxes for local and state budgets, social deductions for the maintenance of pensioners, and finally – to ensure social peace in society. therefore, the development of the most employment-generating industries is of great importance for overcoming the social and economic upheavals of the war. the food industry employs the largest number of workers – 325.6 thousand workers, machine building – 314 thousand workers, metallurgy – 195.4 thousand workers, and the production of rubber and plastic products, other non-metallic products – 134.3 thousand workers. the next criterion is the ability of industry to generate foreign exchange revenues and fill the budget with customs payments. industrial exports occupy an important place in the system of macroeconomic indicators of ukraine's stability – almost a fifth of the total gdp (21.9% in 2021), and customs payments make up a significant part of budget revenues. ukraine is the 46th largest exporter in the world in 2020, specializing in mining, engineering, food, chemical and wood products. thus, in 2021, the growth of exports took place in all groups of manufactured goods and amounted to 43944.8 million dollars or 145.1% in accordance with 2020. among the most influential commodity industrial groups that exported their products are non-precious metals and their products – 15992.5 million usd (36.4% share in the total export of industrial goods), mineral products – 8414.4 million usd (19.1%), machinery, equipment and electrical equipment – 5272.8 million usd (12%). food products – 3788.9 million usd (8.6%), products of the chemical industry – 2816.4 million usd (6.4%). the next important indicator confirming the importance of the processing industry for the industrial development of ukraine is the indicator of investment attractiveness. in 2021, the largest investments were attracted in metallurgy – 1.583 billion usd, food industry – 452.3 million usd, chemical industry – 338.9 million usd and in the production of rubber and plastic products, other non-metallic products – 305.1 million usd, on the other hand, mechanical engineering was marked by a negative value of foreign direct investments, which can be explained by their outflow due to high investment risks. (ivchenko, 2021) thus, the accelerated recovery of such activities as machine-building and the defense industrial complex, metallurgy, food, chemical, pharmaceutical and woodworking industries is currently important. the priorities of the recovery of these industries are the creation of favorable conditions for the development of innovation-oriented industries with a high share of added value and aimed at integration into global value chains. 5. findings taking into account the influence of each of the driving forces on the functioning of industry in the uncertain conditions of wartime, it is possible to propose three scenarios of economic development: table 2 industrial development trends in ukraine for 2016–2020 year indicators 2016 2017 2018 2019 2020 average growth 2020–2016 average rate of change volume of products sold / gross domestic product 90.5 88.1 85.5 75.9 76.7 -15.3↓ -16.7↓ volume of products sold / employees 91.8 112.5 131.4 133.9 148.1 61.4↑ 24.7↑ value added / employees 28.1 35.4 38.2 44.7 43.4 54.2↑ 7.6↑ cost of fixed assets / employees 130.7 105.1 141.2 153.3 184.1 40.9↑ 28.6↑ final energy consumption / employees 0.6 0.6 0.7 0.7 0.7 14.9↑ 0.1↑ share of volume of implemented innovative products in total products sold by industrial companies 1.0 0.7 0.8 1.3 1.9 90.0↑ 0.2↑ share of innovative enterprises in total industrial enterprises 18.9 16.2 16.4 15.8 16.8 -11.1↓ -3.4↓ dir/innovative costs 10.6 23.8 26.3 20.5 24.2 128.7↑ 4.2↑ high-tech export of industrial products/general export of industrial products 18.1 16.8 17.1 18.2 17.7 -2.1↓ -3.5↓ high-tech import of industrial products / general import of industrial products 33.4 33.2 33.3 37.3 39.1 17.1↑ 7.1↑ foreign direct investment/employees 175.6 157.6 214.4 257.3 13.9 -92.1↓ -32.8↓ source: compiled and calculated by the authors based on data from the state statistics service and the world bank baltic journal of economic studies 95 vol. 9 no. 1, 2023 – conditionally positive scenario, in which the economic system will gradually stabilize as a result of the cessation of hostilities, the reconstruction of production capacities will begin; – conditionally negative scenario, which will be characterized by the disintegration of the economic system, destruction of energy infrastructure facilities, where negative trends will dominate; – сonditionally neutral (baseline) scenario, under which the turbulence of the economic system will not reach extreme indicators, although the continuation of the military conflict will occur during 2023 with active hostilities within the occupied regions and gradual displacement of the enemy to the borders of ukraine. the conditionally neutral (baseline) scenario is formed on the basis of a set of assumptions regarding the continuation of the military conflict during 2023 with active hostilities on the brink of conflict and the gradual displacement of the enemy to the borders of ukraine. this will lead to a further depletion of material and labor resources, a decrease in the purchasing power of the population. and although stabilization and reconstruction measures will be carried out on the territory of the liberated regions, an increase in the volume of economic activity can be expected only in certain areas not covered by military operations. even in the regions where there are no active hostilities, economic activity will be hampered by problems with the supply of raw materials, components and semi finished products, material and technical problems, financial difficulties, and disruptions in energy supplies. at the same time, although the security risks will be significantly reduced, there is a threat of destruction of the energy lifeline of industry – energy infrastructure facilities. all this will lead to the fact that the industrial potential will not recover significantly, and the key indicators of industrial development will be able to recover only to 80-85% of the pre-war period. according to the pessimistic scenario, which is based on assumptions about the escalation of the military conflict and the opening of new fronts, in particular on the part of belarus, etc., ukraine may once again become the object of increased russian aggression, the organization of sabotage, provocations, and further destruction of critical infrastructure objects, people's housing, and business assets. this will result in a new wave of labor emigration, physical destruction of infra structure and industrial facilities, and will lead to the impossibility of economic recovery processes, as well as further noticeable reduction of production within 40-50% of the pre-war level. conditionally positive (optimistic) scenario of industrial development is based on the assumptions of the most favorable external (cessation of hostilities, international aid) and internal (activation of growth points) factors of influence: industrialists actively use opportunities in conditions of rapid socio-economic development of the country. basic assumptions for a positive scenario: – the military confrontation on the territory of ukraine shall cease, the territories occupied from february 24, 2022 to the end of 2022 shall be liberated from the enemy; – the macroeconomic situation in the country will stabilize; – systemic reforms will be implemented to harmonize with eu standards in legal, economic, tax, regional, industrial, social, environmental policy, etc; – traditional logistics routes are restored; – many migrant workers would return to work in industrial enterprises or in enterprises that have relocated to other regions; – consumer and production demand will grow. security risks will be significantly reduced, which will help attract investment. financial support for modernization processes will be increased with the help of international partners. conditions will be created for active reconstruction of civil and industrial infrastructure and rehabilitation of domestic production for the needs of the army, which will ensure accelerated development of the defense industrial complex, mining, engineering, light, food, chemical and pharmaceutical industries. ukraine will gradually become a powerful defensecapable state with a developed defense-industrial complex, higher taxes, spending on the army and long-term conscription, i.e., a country that no one will want to attack. all these factors will contribute to the growth of the main indicators by 7-15% compared to the pre-war level. ukraine's economy is expected to stabilize in 2023 and may grow by 15.5%. as the nbu notes, provided that the black sea ports are unblocked, the ukrainian economy will return to growth in 2023–2024. taking into account significant losses of production and human potential, as well as still high security risks, the rate of recovery of the ukrainian economy in 2023–2024 will be about 5-6% per year. (prasad, 2022). it should be noted that the probability of pessimistic and optimistic scenarios is significantly lower than the probability of the outlined basic scenarios. as the experts of the ukrainian prism foreign policy council noted, it is possible to develop most of the basic scenarios by replacing some of them with pessimistic or optimistic options. therefore, ukraine must consider all possibilities in order to be ready. (herasymchuk, 2020) to react adequately in case of deterioration of the situation in any direction or to use the opportunities that baltic journal of economic studies 96 vol. 9 no. 1, 2023 will open in case of more optimistic development of events. to ensure rapid and effective industrial recovery, the following is required: – to ensure priority development of the defense industrial complex as a basis for strengthening the state's defense capabilities, which will become a guarantee of ukraine's security in the future; – to restore industrial sectors whose development requires adequate resources, high potential for efficiency and innovation, and significant social importance (creation of high-paying jobs): food industry, metallurgy, engineering, production of rubber and plastics, other non-metallic products, wood processing, chemical, pharmaceutical industries; – to update and harmonize the current state and industrial strategic documents in accordance with the target priorities of the strategic planning of industrial development adopted in the eu with the aim of their consideration in the strategic documents for the post-war reconstruction of the industrial sector of ukraine; – to improve the state order and procurement systems through the formation of strategic procurement planning, in particular for defense needs, which will contribute to ensuring sustainable growth rates of industrial production and positive structural transformations associated with the increase of the share of manufacturing products and high-tech and scientific products and services in gdp; – to create transparent financing mechanisms for the post-war recovery of the ukrainian economy, in particular development funds for the implementation of industrial recovery programs. the world bank, the london-based center for economic policy research (cepr), the european commission with its "rebuild ukraine" recovery plan, and other institutions provided emergency assistance and offered to contribute to post-war reconstruction; – further formation of favorable conditions for sustainable development of small business on the basis of improvement of forms and methods of state support of this sector of economy (informational, institutional, financial – preferential loans to small and medium business, projects of non-governmental business alliances); – to stimulate export production, including simplified procedures for customs and commercial transactions, to help national producers integrate into global value chains, especially strategic european value chains; – to create attractive conditions for foreign investment in the territory of ukraine by encouraging the relocation of the capacities of foreign companies that have ceased their activities on the territory of the russian federation and belarus, especially in the field of automobile manufacturing, electronics, food industry, etc.; – to promote the development of cooperation with european companies for industrial cooperation, implementation of investment projects and innovative production of high-tech military equipment, agricultural machinery, vehicles, etc., as well as to stimulate the conclusion of concessions and the creation of joint ventures with european transpor tation companies to restore logistics support; – to create conditions for the development of new fields of activity with significant prospects in the global environment for solving the global problems of food shortage, depletion of fossil mineral resources, environmental pollution, improving the quality of life, including by increasing the efficiency of medical care and social security; – to reduce the control and regulatory functions of the state in order to liberalize investments, taking into account the information and economic security of the state. first of all, a large number of legal acts on the promotion of foreign investments should be reviewed and streamlined in order to create the most favorable investment location for european, american and asian investments; – improvement of qualifications and creation of new highly effective and highly paid jobs, which will allow not only to preserve the existing industrial potential, but also to achieve its revival at a higher technological level. adequate wages and decent jobs, combined with programs for the return and reintegration of ukrainian migrants, will allow solving the problems of staffing for industrial recovery, consolidation of the working population and youth; – creation of organizational conditions for the participation of specialized international companies in the process of development of innovative infrastructure in ukraine, capable of bringing relevant competencies and ensuring the integration of the created infrastructure elements into the international system of knowledge and technology production, represented by leading companies and university centers; – formation of a stimulating environment for diffusion of innovations and support of regional producers – clusters for exchange of experience, financing, practice, simplification of access to infrastructure facilities and reduction of transaction costs, activation of innovations (start-ups), development of regional strengths for employment of the population of the community. the development of scientific and innovative potential has become one of the key factors in the successful industrial development of israel, and the created innovative ecosystem, despite the militarization of industrial production, allows active transformation of military technologies into civilian ones. baltic journal of economic studies 97 vol. 9 no. 1, 2023 6. conclusions the war strengthened the importance of forming a strategic vision of future development, in particular, strategic management of industrial development in ukraine. the urgent problem of restoring ukraine's economic stability is to ensure favorable conditions for conducting industrial business, which depends on balanced strategic decisions. the transformation of industry into an effective force for the revival of the ukrainian economy in the conditions of war and post-war period requires balanced strategic management of the future development of the economy, because it is crucial to meet the unprecedented demands of the war on the available resources of the country and to prevent a social, humanitarian, economic, financial, environmental, military crisis, etc. at the same time, traditional methods of indicative planning cannot take into account all factors of uncertainty of the military situation, that is why the justification of future vectors of development on the basis of scenario planning allows to create conditions for minimization of threats and realization of potential opportunities. strategic scenarios of industrial development of ukraine should be formed taking into account the necessity of post-war industrial recovery in the conditions of long-term military threat to preserve the state sovereignty of ukraine, which emphasizes the importance of ensuring a constantly high level of the state defense capability. this additionally prioritizes the need for the development of a developed industrial complex on the priority principles of the eu – green and digital transition. the strategic goal of post-war industrial recovery is the development of a highly industrial society, stimulation of the creation of new jobs and development of entrepreneurship, improvement of the quality and standard of living of the population through the growth of its effective employment and involvement in productive work in the industrial sector, creating conditions that will promote the development of new high-tech industries and innovative systems, taking into account the goals of sustainable development and the prospects of european integration. achievement of the set strategic goal depends on the driving forces of industrial development in ukraine. as the main indicators characterizing the trends of industrial development in ukraine were chosen those indicators reflecting the efficiency of use of productive forces: indicators of industrial production efficiency; labor productivity; indicators characterizing innovative development; indicators of effectiveness of fea; investment development. this choice is due to the fact that a strong industrial base should generate productive and stable employment and, as a result, an increase in the average level of wages. in addition, industry must ensure the production of socially significant industrial goods (food, medicine, hygiene products, clothing and footwear, fuel). taking into account the influence of each of the driving forces on the functioning of industry in the conditions of uncertainty of martial law, three scenarios of industrial development have been developed: a conditionally positive scenario, in which the economic system will gradually stabilize due to the cessation of hostilities, the reconstruction of production capacities will begin; a conditionally negative scenario, which will be characterized by the disintegration of the economic system, the destruction of energy infrastructure facilities, where negative trends will dominate; a conditionally neutral (baseline) scenario, in which the turbulence of the economic system will not reach extreme indicators, and industrial production will develop in territories not covered by hostilities. one of the most important issues facing the government of ukraine and many local governments today is not only the satisfaction of their own needs, but also the restoration of opportunities to fill foreign markets with industrial goods, which depends on the creation of favorable conditions for industrial production. the achievement of these goals depends on the development of strategic plans and roadmaps for the formation of sustainable local production systems based on the european experience. and this, in turn, will help support local business, develop local production with deep processing of raw materials, which will be a guarantee of economic security both during martial law and post-war economic recovery. the industry of ukraine in the post-war period should become a driving force for the creation of a highly developed industrial economy, capable of ensuring the reconstruction of the country and maintaining its defense capability in the long term and the ability to respond quickly to the needs of the state defense. the post-war structural restructuring of ukrainian industry includes not only the restoration of industrial and infrastructural capacities destroyed by the war, but also the structural modernization of industry at the highest technological level, taking into account the preservation of its capabilities for self-sufficiency, export orientation, integration into global value chains, and environmental requirements. baltic journal of economic studies 98 vol. 9 no. 1, 2023 references: anayi, l., bloom, n., bunn, p., mizen, р., thwaites, g., & yotzov, і. 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studies 343 vol. 3, no. 5, 2017 corresponding author: 1 department of economics, finance and entrepreneurship, kherson state university. e-mail: tatiana@osadcha.com 2 department of finance, banking and insurance, kyiv cooperative institute of business and law. e-mail: serg.bardash@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-343-351 identification of the impact of globalization on the development of accounting methodology tetiana osadcha1 kherson state university, ukraine sergii bardash2 kyiv cooperative institute of business and law, ukraine abstract. the relevance of the research consists in the significant lag behind the economies of post-soviet countries from countries of the world, which play the role of driving forces of global economic globalization. incomplete transformation of the institution of property rights, including the rights to specific factors of production, distorted perception of the state participation in the regulation of economic relationships, cause a fragmentary reflection of facts of business life of business units by the accounting system. this shortcoming can be eliminated by identifying the advantages, feasibility of the counterstand and measures to involve the economy of ukraine into the process of economic globalization, as well as determining the priority trends of the transformation of the property institution with the subsequent revision of the accounting methodology. the purpose of the research was to identify the impact of globalization on the development of accounting methodology due to institutional changes in property ownership in the field of management and outline the prerequisites for recognizing the rent as an accounting object. the methodological basis of the research is the dialectical method of knowledge of the essence, preconditions, and consequences of economic globalization as a whole, as well as for its individual subjects; general scientific methods of scientific knowledge (analysis, abstraction, synthesis, generalization) of possible influence of fundamentals and ideas of institutional theory, agency theory, and rent theory on the accounting methodology in order to outline grounds for recognizing the rent as a component of the income of a business unit. scientific results. it is established that the development of globalization processes was accompanied by significant transformations of property relations and changing approaches to the analysis of activities, in particular, with regard to the use of resources, distribution and redistribution of income. solving the problems associated with qualitative characteristics of accounting information depends on the implementation of accounting principles, in particular, the principle of the predominance of substance over form. the possibility of its practical application depends on the implementation of the fundamentals and ideas of institutional theory, agency theory and rent theory at the level of the accounting methodology. the stated approach will precondition a certain change in the economic status of a business unit, making it the owner or user of resources, taking into account the availability of certain elements of property rights, and will provide grounds for consideration of economic processes associated with the use of certain resources, the manifestation of rental relations, and the recognition of the income from them as a rent. taking into consideration the fact that rent is one of the factors of production, theoretical researches in this field should be considered as a basis for research of trends of accounting development, in particular, as to the principles and criteria for recognition of income and assets. the practical significance of the research consists in the development of an income accounting methodology and the determination of financial results of the economic activity, as well as the formation of information support for analysing business unit competitiveness and determining its financial sustainability. significance/originality. the obtained scientific results will form the prospects for further researches, which will consist in identifying the legal preconditions for rent accounting and determining the trends of the transformation of the property institution. this will contribute to the significant social and economic development of countries whose economies have long been in the command and administrative management format, as well as to the legal recognition of the actual economic preconditions for rent accounting. key words: globalization, property institution, accounting methodology, agency theory, rent. jel classification: m41, p4, q2 baltic journal of economic studies 344 vol. 3, no. 5, 2017 1. introduction over the past half-century, the development of the economic relationship is under the influence of globalization processes. the development and use of information and computer technologies and their internationalization are taking place. the growth of gross private capital flows, volumes of gross direct foreign investments, an increase in the share of direct foreign investments in the gross formation of constant capital, their accumulation in gdp, the extent of international trade are observed. the share of value added in gdp created by foreign affiliates and the share of persons employed in foreign affiliates in total employment is constantly increasing. on this basis, the economic activity of transnational corporations is intensified. analysing these and other global economic processes at the level of expert organizations, one can assess the degree of integration of a particular country into the global economy, the index of transnationalization, the index of readiness for the operation in global networks, and other indicators of economic globalization. however, the effects of these trends on the internal economic processes of the business entity on the management subsystems, in particular, on the accounting subsystem, are still insufficiently investigated. the novelty of the research is the hypothesis, which consists in the assumption of the partial use of the methodological potential of accounting for the necessity to improve the competitiveness of the ukrainian economy under the conditions of irreversible world globalization. the purpose of the research is to identify the impact of globalization on the development of accounting methodology due to institutional changes in ownership rights in the field of management and recognition of the rent as a subject of accounting. achieving the determined purpose will allow improving the information support for making managerial decisions at the macro and micro level as to distribution and redistribution of incomes, the part of which is the rent. 2. the state of coverage of the essence of globalization and its impact on the ukrainian economy j. barton, a.s. halchynskyi, b.v. hubskyi, j. galbraith, d.  meadows, a.  toynbee, e.  toffler, j.  stiglitz, a.k.  subotin, j.  forrester, t.  friedman, o.  spengler, y.v.  yakovets and others devoted their researches to the problems of globalization processes. some aspects of the impact of the globalization manifestations on accounting are set out in the researches of s.f.  holov, h.h.  kireitsev, s.f.  lehenchuk, o.m.  petruk, and others. at the same time, they are more concerned with the issues of harmonization and prospects for further development. unnoticed is the problem of transformation of the institutional environment, changes in the nature of economic processes, property relations that are system-forming for the business entity, as they transform essentially their activities requiring changes in the methodology of accounting as a subsystem of management. accounting is an information management subsystem with a wide range of opportunities to achieve specific tasks that are put before it by users of accounting information with various economic and social interests. to the end that this information subsystem fulfils the tasks that it was charged with, it must be properly organized taking into account the factors of both external and internal business environment. at the end of the twentieth century, the economy of ukraine was influenced by a new powerful global process, which was named globalization. this is about a social and economic process, in which geographic boundaries of social and economic, as well as cultural systems disappear, and the population is increasingly aware of the disappearance of these borders. in recent years, this concept has become even more popular in connection with the increasing interdependence of regions and developing scientific and technological progress. at the beginning of the twenty-first century, there were more than 40 thousand financial-industrial groups and transnational corporations (tnc) in the world (subotin, 2004). according to the experts’ estimate, this figure may approach to 50 thousand by 2020. “if we will take into account the so-called “mini tncs”, then all of them now already account for more than 65 thousand” (subotin, 2004). the presented scales and multivariate globalization make it clear that humanity has entered a new era of its development, which will have the character of planetary changes. for the first time, j. mclean used the term “globalization” was in his papers in 1981, and the american sociologist r . robertson determined it later in his papers of 1983–1992 (chub, 2008). under globalization, they consider the process of expanding and deepening the interdependence of countries in all modern spheres of public life. at the present stage, it covered a system of values, religious, cultural, and ideological systems, technology, as well as political formations, that is, there is a significant change in the institutional environment that requires an adequate adaptation of the accounting methodology. in the papers of a. toynbee, i. wallerstein, f. braudel, the starting point of globalization is the beginning of the 1500s. first of all, its start is associated with great geographical discoveries (discovery of america by c.  columbus in 1492, the sea route from europe to india by vasco da gama in 1498, the first round-theworld voyage by f. magellan). “starting from the 1500s,” notes a. toynbee, “people began to live under one roof ” (halchynskyi, 2009). however, according to a. halchynskyi, the year of 1500 should be considered not as a start, but as the beginning of one of the cyclical stages of globalization. baltic journal of economic studies 345 vol. 3, no. 5, 2017 the planetary nature of human creative activity was inherent (of course, in other forms) in the preceding epochs too. humankind had the universality signs at the early stages of its development. the well-known american scientist j. knight writes, “globalization – the growth of global the interdependence  – is virtually as old as the history of humankind” (halchynskyi, 2009). the second stage of globalization is the establishment of a world system, which fulfils itself on the principles of system integrity, interdependence of its structural components based on the vertical subordination, their gradual homogenization, loss of individual definitions and subordination to integral quality (halchynskyi, 2009). in our opinion, being of the ukrainian economy in a state of transformation without a well-defined strategy and tactics of social and economic development makes the state an inertial object of globalization. the ambiguous effects of the reforms carried out that directly or indirectly affect the national economy are the causes of ever-increasing efforts to reinterpret the conceptual frameworks of transformation and to develop their effective course towards the future. assessing the results already achieved, as well as those declared to be achieved in the medium term, it should be noted that the hopes of reducing the gap between ukraine and the eu countries because of reforms do not yet form a sufficient confidence either in social and economic or technological terms. preserving the tendencies of production primitivization and de-intellectualization of labour deprives ukraine of the prospect of becoming a progressive economic state, which provides sufficiently high consumer standards for its population. such a conversion involves development, which is combined with a decrease in the burden on the natural environment, with the expansion of the economy, to the leading roles in which human capital and information technologies pretend. unreadiness for such a development of the socioeconomic system that has been formed over the past 15 years is one of the main factors of the potential success-failure of reforms. one of the most fundamental issues of economic reform is the issue of the driving forces of transformations. since civil society in ukraine is still forming, and this process is long enough, there is not yet the question of its leading role. due to historical circumstances, two leading modernization agents have been formed in ukraine. this is the state that continues to initiate measures to reform the national economy and the large-scale business that arose in the process of these reforms. in recent years, domestic scientists have conducted many studies on the feasibility and methods of entering the economic system of ukraine into a globalized economic space, because these issues are extremely relevant for one of the most economically developed countries of the former ussr . however, there is no straight answer to the above-formulated questions in the papers [(budkin, 2006; hubskyi, 2003; mazur, 2002; filipenkov, 2002; shcherbyna, 2001), because the worldview of the authors on the phenomenon under study has significant differences. at the same time, the issues of economic globalization became extremely relevant for ukraine, as domestic scientists considered the change in its economic system, its entry into a permanent crisis, and the lack of a strategy for its development as a kind of panacea for a significant improvement in the social and economic situation of ukraine. at present, under the “globalization” phenomenon is understood: the degree of economic integration (volume of international trade, international investments, and various payments crossing customs borders); personal contacts (international trips and tourism, volumes of international telephone conversations, mailed items and postal money order, etc.); technology (number of internet users, number of secure internet servers, etc.); involvement in international politics (membership in international organizations, number of embassies, etc.). the definition of the essence of globalization, its forms and principles are connected with a fundamental scientific polemic, which is aggravated by the political, financial, and ideological nature of problems behind it. the presence of these problems causes a subjective re-estimation or underestimation of the real significance of globalization in the modern world. this statement should not be understood as a denial of the phenomenon itself and its significance. both are objectively available but are clarified artificially and one-sidedly” (petruk, 2005). however, the objective content of globalization is the processes heterogeneous in their origin, spheres of manifestation, mechanisms, and consequences. this approach determines the consideration of globalization as a qualitatively independent, complex system of phenomena and relations, integral in its systemic, but contradictory internally. at the heart of globalization is economic globalization, which is considered by individual scientists as a gradual destruction of the national state with the subsequent loss of economic sovereignty (economic encyclopaedic dictionary). sovereign states are increasingly evaluating their vulnerability not in relation to each other but in relation to the forces that are behind their control. this thesis is because the manifestation of globalization is the interaction of national and global social processes, the gradual restriction of national peculiarities and their subordination to the system of global relations, laws, and consistent patterns of such interaction, the integrity of which is provided by supranational structures. one of the signs of economic globalization is the economic integration of national economies – the close baltic journal of economic studies 346 vol. 3, no. 5, 2017 approaching and the gradual unification of national economic systems into some international metasystems within the framework of integration economic groups. however, it should be noted that the integration of the national economy of ukraine is incomplete since now its objective economic basis is not formed  – the internationalization of the technological method of production, including the internationalization of productive forces and technical and economic relations. the technological mode of production in ukraine at the beginning of the xxi century is based mainly on the machine and manual labour, which, in view of the intensive development of automated production in the developed countries of the world, threatens its economic sovereignty. thus, the share of high-tech products in ukraine in 2003 was only 4-6%, while in the world gdp – about 40% (economic encyclopaedic dictionary). therefore, ukraine needs to achieve a high level of competitiveness of the national economic system for an effective entry into the global market. however, based on the results of 2016, ukraine occupies only the 81st position out of 137 ranking countries in the global competitiveness index. in our opinion, one of the most important indicators that make it possible to identify the national economy as an object and, therefore, an outsider of the globalization process, is that there is a “single stable trend over the past 10 years – a reduction of ukraine’s share in world gdp: almost by 2 times over 10 years” (nikolaenko). it should be noted that the above problems, including those that do not allow the national economy to rise significantly in the global competitiveness index, are not the consequences of global economic globalization, they are the consequences of those reforms of government management and the national economy that should be carried out in the near future. the world economic globalization is an inevitable global economic process, but its mandatory nature does not eliminate the problems caused by its implementation. its positive effects are undeniable, but equally indisputable and harmful consequences that it carries in any sphere of human life. if the positive effects include the opening of new markets for goods, works, services of a national producer, the free movement of both labour force and tourists, the deepening of cultural exchange, as well as the strengthening of geopolitical influence on the regional and world scene, then the exacerbation of the following problems should be considered as negative effects: corruption, ecology, and economic crime, as well as the threat to national interests and national security, the problems of the fuel and energy complex, which are extremely relevant to most countries of the world community. however, its main harmful effect is the deepening of the division into countries with advanced technologies and the countries, in which the environmentally hazardous production is concentrated, or those, which are destined to remain raw material appendages of the first. as a result of such a division, the property differentiation, the difference in the material security of the population, the difference in levels and quality of life are deepening. therefore, now ukraine faced the challenge of determining further participation in world integration processes and strategies for further social development. however, existing subjectivity and the lack of clear guidelines in its domestic and foreign policy, imposing ineffective models of interstate cooperation damaged significantly the authority of the state, which forced the president of ukraine, as well as the legislative government to choose: to limit their ambitions to preserve national sovereignty and to accept the economic intervention of transnational corporations and transnational banks in the domestic market, providing appropriate guarantees for investments or, remaining in the outsider social and economic development, to continue manipulating social consciousness by trying to implement the ideals borrowed from the western democracies. however, taking into consideration the determinacy of the world global integration and the geopolitical situation of ukraine, it cannot remain aside from these processes. in case of delay in the definition of clear prospects and ways of the transformation of society, a significant delay in the legal rationing of emerging social relations, it cannot be involved in these processes from the “back-door entrance” (nevmerzhytskyi, 2008). 3. relationship of globalization with the accounting methodology it is important to note that rationalization, standardization, unification relate to the organization and regulation of property relations, which are key to solving the problem of resource allocation and, therefore, create the greatest number of risks for the activities of key players in a global relationship, which are the transnational corporations. on this basis, most researchers who deal with accounting problems conclude that globalization means the incorporation, unification of international accounting standards. as a result, the task is to eliminate the contradictions that currently exist between international and national standards, but during their solving, differences in the phases of development of national and international economic systems, which manifest themselves in the principles of organization and functioning of the business entities, in particular, both at the level of theory and at the level of practice are not taken into account in the majority of cases. at present, this concerns differences in the levels of development of property relations in a particular economic system caused both by the objective factors of historical development, and by the factor of implementation of the provisions of the theory baltic journal of economic studies 347 vol. 3, no. 5, 2017 of property rights in organization and regulation of economic relations. for example, the criterion of recognition of objects, which demanded possession of ownership of it operated for a long time in ukraine at the level of accounting methodology. another approach provides for the study of new accounting objects that arise under the influence of globalization. however, there is an unnoticed shift in the nature of economic relations that cause to look differently at the subject of accounting and its objects, in particular, to note what new processes and relationships need to be reflected. the elaborated system of agreements and contractual relations, which was used as an economic basis for the organization of accounting, cannot be applied to such objects as social capital, intellectual capital and other types of capital that are intangible and play a decisive role in ensuring the effectiveness of activities under conditions of global competition. in particular, it concerns a conceptual approach to the recognition and distribution of revenues from their use in the process of carrying on business activities. it is possible to resolve these and other problems connected with changes in the nature of the use of resources, changes in the formation of incomes and their distribution, generated by globalization, due to improved accounting methodology, in particular, use of the principle of the prevalence of the substance over form. this hypothesis is based on the fact that this principle should be considered as an embodiment of the transformation of emphasis and approaches to building economic relations and trends of rationalization peculiar to globalization. p.l. suk relates the principle of “prevalence of the substance over form”, first of all, with the globalization of the economy, arguing that it is fundamental. “its isolation took place in the process of development of market relations, which found their manifestation in the theory of the owner, firm and business entity. the deepening of corporate relations separates the business owner from the management of the legal entity established by him” (suk, 2011). a similar conclusion was made by t. kucherenko, because in the opinion of the author, the segregation of the principle of the predominance of the substance over form occurred in the process of evolutionary development of capital as the basis of commoditymoney relations, the beginning and the continuation of market forms of management, which was manifested in the theory of the owner and the theory of the business unit (a firm) (kucherenko, 2010). it is worth recognizing that today there is no consensus on what the idea of the predominance of substance over form is. there is even less unity in answering the question about its implementation, taking into account the fact that its legislative consolidation in the system of regulatory accounting did not produce the expected results. perhaps the reason is the fact that, as b.i. valuev states, “the principles were simply transferred to practice from one accounting manual from the usa translated in russia”. however, we believe that the reason is deeper and is associated with economic traditions and the state of implementation of the fundamental provisions of the theory of property rights, the theory of rent, and agency theory in the management practice. s.m.  bychkova, n.v.  generalova, s.f.  holov, s.f. lehenchuk, a.v. ozeran, b. rutherford, y.v. sokolov, p.l.  suk and others devoted certain attention to the problem of implementing the idea of the predominance of substance over form in the accounting methodology. the predominance of substance over form as reworded by the ifrs-conceptual framework that existed before 2010 was presented as a part of the qualitative characteristics of the financial reporting and was considered as one of its fundamental provisions. “in accordance with this principle, in the presentation of events and operations, the accountant should primarily be guided by the content of the transaction, rather than its drawing-up. literally, in paragraph 35 of the principles of compilation of financial statements, the following is stated: “if the information should truly represent transactions and other events, it is necessary that they are accounted in accordance with their content and economic reality and not only their legal form.” in this document, the idea of the predominance of substance over form is presented as one of the components of the qualitative characteristics of reliability (generalova, 2011). in the modern context of doing business, the gradual introduction of the american version of using the concept of the predominance of substance over form in the formation of a converged conceptual framework of accounting, according to which its existence is not denied, however, at the same time, there is no need to distinguish it. the chosen approach provides for understanding the predominance of substance over form as an integral part of the fair presentation of financial statements (lehenchuk, 2011). that is, despite the fact that the new wording of this document does not classify the relevant rule as a fundamental principle, its observance is mandatory in determining assets, liabilities or equity. in assessing them, it is necessary to pay attention to substance and economic reality, and not only to their legal form. thus, in accordance with clause 4.12 of the conceptual foundations of financial framework (conceptual basis for financial reporting), a significant amount of assets (for example, accounts receivable and real estate) is related to legal rights, including property rights. in determining the existence of an asset, the property right is not substantial, thus, for example, a leased property is an asset if the business entity controls the benefits that it provides for obtaining from the property. although the ability of a business entity to control benefits is generally determined by legal rights, however, the item may be baltic journal of economic studies 348 vol. 3, no. 5, 2017 consistent with the definition of assets even when there is no legal control. for example, the know-how obtained in the course of development may correspond to the definition of an asset if the business entity, while keeping it secret, controls the benefits it hopes to obtain from it. a similar approach should be applied when recognizing a particular element of the financial statements. in the fourth section of the stated document, in paragraph 40.6 it is said that the economic substance of the transactions must be taken into account, but not only their legal form. at present, the idea of the predominance of substance over form, what is attributable to the existence of this characteristic in ifrs, is used as a separate principle in the accounting legislation of many countries (azerbaijan, belarus, armenia, kyrgyzstan, china, poland, hungary, and others) (lehenchuk, 2011). referring to the report on adoption of ifrs, n.v. generalova notes that this principle is fixed in the national legislation and the legislation of moldova (generalova, 2011). the system of normative regulation of ukraine has its analogue. the predominance of substance over form as the principle of accounting and financial reporting is enshrined in art. 4 of the law of ukraine “on accounting and financial reporting in ukraine”. it is enshrined in the national regulation (standard) of accounting 1 “general requirements for financial reporting” as a principle for the preparation of financial statements. although the impact of ifrs stipulated a significant extension of the principle of the predominance of substance over form in the world, however, depending on the economic conditions of the country’s development, sometimes there are problems with its adoption (lehenchuk, 2011). the reasons for these problems remain unrevealed, which makes a very complicated process of implementing existing proposals for its implementation in the management practice, including, while conducting an accounting. only the differences in the system of law are mentioned. the concept of the predominance of substance over form, for example, in contrast to the concept of conservatism (prudence), is not an inherent characteristic of the national accounting doctrines but differs depending on the peculiarities of the construction of the national accounting systems. in particular, from the approach to their regulation – rule or principle-oriented. in addition, a significant influence on the application of the principle in foreign countries is carried out by the current system of law (lehenchuk, 2011). two opposed conceptions of capital: property (physical) and resource (financial), as well as the conflict between the two main accounting models: anglo-american and continental-european (ozeran, 2012) are based on the relationship “form  – economic substance”. in ukraine, the papers of s.f. holov (holov, 2007), o.m. petruk (petruk, 2005; petruk, 2006), are devoted to the study of this problem, however, an answer that will overcome obstacles to the implementation of the principle of the predominance of substance over form should be found in the economic plane, but not only in the legal. although in this case, they are essentially intertwined. 4. influence of the theory of property rights and agency theory on the accounting methodology aggravation of this problem in the twentieth century led to a number of theoretical studies. so, in the second half of the twentieth century, the theory of property rights that arose in the so-called “economic imperialism”, a phenomenon characteristic of the neoclassical analysis, consisting in the desire of the neoclassicists to combine all kinds of sciences on the basis of the neoclassical approach with the use of microeconomic tools. the founders of the theory of property rights are deemed to be r . coase and a. alchian. i. barzel, h. demsetz, d. north and others were engaged in the subsequent development of this theory. the theory of property rights, which originates in the anglo-saxon theory of law, in contrast to the continental legal system, allows for fragmentation of property rights and recognizes as property objects not only material but also intangible property. at the heart of the theory is the understanding of property rights as a set of individual powers, known as the “bundle” of property rights, the author of which is a. alchian. the set of the elements of property rights that the entity owns, determines the value of assets. the process of determining the elements of property rights is called the specification of property rights. r . coase explained this phenomenon so, “if the rights to take certain actions can be acquired or sold, they eventually become those who appreciate the opportunities provided by them. in this process, rights will be acquired, divided, and combined so that the activities provided by them bring the income that has the highest market value” (coase, 1993). thus, the main task of the theory of property rights, as western economists formulate it, consists in analysing the interaction between economic and legal systems. e.s. hendriksen and m.f. van breda considered features of the influence of legal proprietary aspects on accounting within the legal or judicial theory. “it connects accounting science with civil law, explaining the subject of accounting as the control of rights and obligations of individuals involved in the economic process. hence the income is not the funds received, but the right to receive them” (hendriksen, 2000). this right is built on a methodological basis, which is formed by the theory of rent. “the science of rent is a science of economic causation, which allows us to trace baltic journal of economic studies 349 vol. 3, no. 5, 2017 products to their sources”,  – argued j.b. clark in his famous work (malyshev, 2012). thus, development of property relations contributed to expanding the range of users of accounting information  – individuals who got a possibility to formulate goals and objectives of accounting. first of all, it applies to investors who acted directly or through intermediaries in the stock markets. this led to the emergence of various methodological conflicts, primarily associated with the recognition of income, assets, and liabilities. at the heart of this conflict lies the practical problem of separating the owner and manager. it is the object of studying by the representatives of agency theory. the “positive” theory of relations between agents addresses the problem of “separation of ownership and control”, which was formulated by a. berle and g. means in the 1930s. among the leading representatives of this concept are w. meckling, m. jensen, y. fama. the centre of its attention is the question: what steps are needed to make the behaviour of agents (hired managers) least deviate from the interests of the principals (owners)?” (chukhno, 2007). solving the problems associated with qualitative characteristics of accounting information depends on the implementation of accounting principles, in particular, the principle of the predominance of substance over form. the possibility of its practical application, in our opinion, depends on the implementation of the main provisions and ideas of institutional theory, agency theory and rent theory at the level of accounting methodology. the practical problems of property relations, as well as theoretical works aimed at their solution based on the methodological basis of agency theory and rent theory, should be considered as the foundation for formation and spread of the principle of the predominance of substance over form. one of the main consequences of the extension of the principle of substance over form, in particular, due to ifrs, was the change in approaches to asset recognition. the attribute of the control, which is used as a criterion for recognition of assets in accounting, changes, in essence, the economic status of an enterprise, making it the owner or user of resources, in terms of the presence of certain elements of property rights. accordingly, individual business processes associated with their involvement and use should be considered as rental relations, and recognition of income from them should be considered as a rent. taking into account the fact that rent belongs to the factors of production, theoretical studies in this field should be considered as a basis for research on the courses of accounting development, in particular, regarding the principles and criteria for recognition of income and assets. advantages of the representatives of agency theory should be used to identify and overcome obstacles in applying the principle of the predominance of substance over form in the management practice. in particular, this applies to the implementation of the requirement for control of the object as a condition for the recognition of assets in accounting. we agree with the conclusion of i.a. yukhymenkonazaruk (yukhymenko-nazaruk, 2014) on the need to use the provisions of the agency theory to improve the theoretical and methodological foundations of accounting. however, its scope should not only bring up the problem of asymmetry of information and associated transaction costs but also cover the implementation of the principles of accounting, in particular, the principle of the predominance of substance over form. thus, the assessment of changes in the environment as factors of development of the accounting methodology should contain the demands of the institutional environment that arise as a result of its development and transformation in addition to studying information requests. given that, one of the most urgent issues of globalization was and remains the issue of property relations, their development and the requirements that they generate should be taken into account when developing a proposal for the development of accounting methodology. adaptation of the accounting system to the changes in the environment, in particular, globalization, should take place in line with the practical implementation of existing theoretical approaches to solving the problem of distribution and redistribution of resources, the nature of ownership and use of which has undergone significant changes. at the level of accounting methodology, it manifests itself in the need to standardize and unify the implementation of the principle of the predominance of substance over form, in particular, regarding the condition of control as one of the main criteria for recognizing objects of accounting. in this case, the subject of accounting should be considered in the interpretation of e.s. hendrickson and m.f. van breda, who understood it through the prism of the interconnection with civil law, namely the control of the rights and obligations of the persons involved in the economic process. based on this fact, the researchers conclude that income is not the funds received, but the right to receive them. this idea should be the basis for changes in the conceptual approach to income recognition, analysis of its structure, sources of formation, distribution, and redistribution, as well as review on the basis of the theory of rent, which takes into account the above features, the essence of the facts of economic life, consideration of which is one of the main accounting tasks. the outlined transformation of accounting is able to solve the practical problem of separating the owner and manager, which has received an urgent relevance under the influence of modern processes in the economy in the context of globalization. baltic journal of economic studies 350 vol. 3, no. 5, 2017 5. conclusions development of the processes of globalization was accompanied by substantial transformations of property relations. as a result, approaches to the analysis of activities, in particular, on the use of resources, distribution, and redistribution of incomes have changed. one of the options for solving this problem is the implementation of the principle of the predominance of substance over form in the accounting methodology, in particular, in terms of the control of the recognition of assets. as a result, there will be a certain change in the economic status of an enterprise, making it the owner or user of resources, given the presence of some elements of the property rights. the above stated provides grounds for considering business processes related to the use of certain resources, the manifestation of rent relations, and the recognition of incomes from them as a rent. to overcome the obstacles in applying the principle of the predominance of substance over form in the management practice at the level of accounting methodology, one should rely on the experience of the representatives of the theory of rent, agency theory, and the theory of institutionalism. prospects for further research are to identify the legal prerequisites for rent accounting and to determine the trends of the transformation of the property institution. this will contribute to the significant social and economic development of countries whose economies have long been in the command and administrative management format, as well as the legal recognition of the actually existing economic prerequisites for rent accounting. references: budkin, v. s. 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(2014). deiaki pytannia rozvytku bukhhalterskoho obliku na osnovi polozhen ahentskoi teorii [some issues of accounting development based on the provisions of the agency theory]. issues of the theory and methodology of accounting, control, and analysis, № 1 (28), p. 333-342. baltic journal of economic studies 251 vol. 3, no. 4, 2017 corresponding author: 1 department of economy, sumy national agrarian university. e-mail: 9264374@gmail.com social capital as the basis for the formation of socio-economic security in rural areas andrii sukhostavets1 sumy national agrarian university, ukraine abstract. social capital is the basis for the definition of the future concept of rural areas management. therefore, one of the most important tasks is to determine the various factors of existence, development, and formation of social capital. one of these factors is the security of rural areas and the definition of how social capital affects it. the analysis of the available scientific works in various areas reveals the lack of consensus in the definition of the category “socio-economic security of rural areas”. this is due to the fact that the definition of social and economic security of rural areas is identified with such concepts as the ability to provide resistance to various internal and external environmental influences. the purpose of the study is to determine the nature of social capital, as well as to study its impact on the socio-economic security of the state. the methodology of the research is based on the monographic method, the method of dialectic cognition, the scenario methods used to find the optimal scenario implementation option; swot-analysis is used to assess the positive or negative impact of social capital on the socio-economic security of rural areas. understanding the essence of socio-economic security has led to the conclusion that it consists of economic, social, environmental and other types of security. the term “social security” in the understanding of researchers usually has two interpretations: traditional (absence of threats to the society) and alternative (absence of threats from the society). it is proved that the social security of the region should be focused on ensuring primarily human rights and freedoms, namely, personal, political, social, economic, cultural, environmental, and family ones. social and economic security should also provide social standards and guarantees, as well as norms. the economic basis of the security of rural areas is manifested in the development of market relations, infrastructure, material and technical base, natural conditions, etc. a market-oriented regional economy does not always ensure the growth of the well-being of all segments of the population in conditions of social and economic stability. inevitably generated unemployment, social problems and other consequences of the competition can cause social fallout. social threats are closely related to each other, while one generates another, forming a vicious circle. but at the same time, the socio-economic security of the society should be considered as the primary one. on the basis of the foregoing, we believe that the social capital of rural areas provides the basic social norms of citizens, which results in the provision of rights to communicate, found organizations, unions, cooperatives; and its high level leads directly to the increase in the socio-economic security of rural areas. directions of our further research will be focused on the development of proposals concerning state support for activities related to the formation of social capital. key words: capital, social capital, security, socio-economic security. jel classification: h82, o21 1. introduction social capital is the basis for the definition of the future concept of rural areas management. therefore, one of the most important tasks is to determine the various factors of existence, development, and formation of social capital. one of these factors is the security of rural areas and the definition of how social capital affects it. the analysis of the available scientific works in various areas reveals the lack of consensus in the definition of the category “socio-economic security of rural areas”. this is due to the fact that the definition of social and economic security of rural areas is identified with such concepts as the ability to provide resistance to various internal and external environmental influences. the purpose of the study is to determine the nature of social capital, as well as to study its impact on the socioeconomic security of the state. the methodology of the research is based on the monographic method, the method of dialectic cognition, the scenario methods used to find the optimal scenario implementation option; swot-analysis is used to assess the positive or negative impact of social capital on the socio-economic security of rural areas. baltic journal of economic studies 252 vol. 3, no. 4, 2017 2. socio-economic security in rural areas the concept of sustainable development determines the structural balance of the socio-ecologinomic system of rural areas. considering the fact that the system has a large structure of hierarchical levels, the main security signs extend to different levels of the system. understanding the essence of socio-economic security has led to the conclusion that it consists of economic, social, environmental, and other types of security. the economic security in rural areas is a systemic concept with inherent features of integrity, synergy, hierarchy, and other properties of the systems’ existence and development. ensuring economic security at all levels is achieved through the implementation of the economic strategy, the success of which depends on the stable functioning, reproduction and development, and harmonious interaction with the external environment. the economic basis for the security of rural areas is manifested in the development of market relations, infrastructure, material and technical base, natural conditions, etc. the most common approach to isolating the components of economic security at the microlevel is the functional one. so, a.v. arefieva and a.v. vasiliev (arefieva, 2001, vasiliev, 2013) identify such components as intellectual, personnel, financial, technical-technological, political and legal, environmental, information, and power. some researchers also add a market component that characterizes the interaction between counterparties. in our opinion, economic security is a combination of the following components, namely, production and financial ones, and the part that characterizes the social aspects should be singled out as a separate component. the social component is closely connected with the economic one and can manifest itself in the form of social relations, which, in turn, lead to real or potential conflict situations. in this case, if any crisis arises, the social sphere in the first turn becomes a destabilizing factor. these processes, in our opinion, require diagnostics and constant monitoring and, in the case of a specific situation, the introduction of immediate enforcement actions. the term “social security” in the understanding of researchers usually has two interpretations: traditional (absence of threats to the society) and alternative (absence of threats from the society). the social security of the region should be focused on ensuring primarily human rights and freedoms, namely, personal, political, social, economic, cultural, environmental, and family ones. social and economic security should also provide social standards and guarantees, as well as norms. the analysis of the available scientific works in a specific area reveals the lack of consensus, and for the most part of the specific scientific publications on the category of “social and economic security in rural areas”. we believe that the social keynote becomes the most important goal of the security assurance processes at all levels and functional areas of activity. the development of the economic and social sphere forms a single interdependent process, whereby the impact on the parameters of national security over the entire range of manifestations of the human transformative activity is made. the social component of economic security is a prerequisite for ensuring the high level of development of productive forces and production relations in accordance with the fundamental principles of the existence of society and its interests. the objects of social security are people, their communities and relationships, relevant social needs, human socialization systems and social infrastructures: education, upbringing, culture, commerce, health care, a way of living. thus, social security is a reliable protection of the vital interests of social agents and groups at the macro and micro levels, preserving and development of human potential, sustention of the effective stimulation of people’s activities, their socialization and life support systems. the high level of social security indicates that the state implements measures to develop the social sphere in accordance with the system of recognized national interests. the most important national interests of ukraine in the social sphere are: guaranteeing of human rights and freedoms in accordance with the constitution; development of society, institutes, and institutions; development of spirituality, high moral principles, intellectual potential, the health of the nation, formation of ethical standards; creation of a competitive, socially oriented market economy and ensuring a stable growth of living standards and welfare of the rural population; ensuring environmental and technogenically safe conditions for the society’s existence. thus, social security emerges as a social phenomenon in the process of resolving the contradiction between such objective reality as danger and the need of the social individual, social groups and communities to prevent it. therefore, there is an acute need for a scientifically grounded study of the level of social security and its establishment in a system of parameters capable of performing the function of directing practical measures to achieve security objectives in the social sphere. 3. the social capital of rural areas social capital is a concept introduced for the first time by pierre bourdieu in his article “the forms of capital”, where he used it to refer to social ties that can act as a resource for obtaining benefits (bourdieu, 2002). the concept of “social capital” is a word combination that baltic journal of economic studies 253 vol. 3, no. 4, 2017 has a special intra-phrase unity, which is characterized by certain grammatical features and a semantic meaning resulting from its components. by studying origins of words “social” and “capital,” one can arrive at the following conclusions: firstly, the analysis of the word social says: social, relating to the life of people and their relations in society, and the capital is “an accumulated economic resource that is included in the processes of reproduction and the rise in value through mutual conversion of its various forms.” in the works of the researcher francis fukuyama, social capital is limited by the level of public trust (“trust”). according to the scientist, social capital is the norms (both formal and informal) or values that make possible collective actions of groups of people (fukuyama, 2005). in his book “trust: the social virtues and creation of prosperity,” francis fukuyama shows that it is trust that is the key characteristic of a modern developed society. these aspects, according to the scientist, apply to both the individual and the social level (trust in public institutions and the state) (fukuyama, 2004). analysis of the understanding of the bulk of scientific works on the definition of the essence of social capital shows the following: james s. coleman believes that social capital, like other forms of capital, is a productive force, through which it is possible to achieve results that otherwise could not be achieved (coleman, 2001). robert d. putnam writes: “the central idea of social capital is social networks and norms of mutual assistance that have value for individuals in networks and have external effects” (putnam, 2001). considering the concept of social capital, it is also necessary to consider what place the social capital occupies in the overall structure of capital. thus, p. bourdieu identifies in the article three basic forms of capital: economic capital, cultural capital and social capital. he believes that social capital is “total actual and potential resources linked to the possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition, in other words, membership in a group” (bourdieu, 2002). p. bourdieu and j. coleman in their studies identified the distinguishing characteristics of social capital in comparison with its other forms. social capital, unlike other types of capital, is an integral element in the structure of social relations. the concept is that having social capital, people interact with other individuals who are the direct sources of benefit to many (bourdieu, 2002). w. woolcock, a social capital researcher on the world bank program, proposed the concept of the idea of “vertical component” of social capital that he added to the existing dichotomy (bonding and bridging – the binding and horizontally linking capitals of r . putnam) the third dimension of the vertically linking social capital, which is a specific case of horizontally linking social capital (woolcock, 1998). according to the scientist, the main property of vertically linking social capital is that it creates opportunities for exchange and relations based on trust and respect between the individuals-representatives of local communities and other corporate agents within a particular civil society, as well as beyond its limits. in 1990, baker gives the following definition of social capital as “a resource that actors derive from specific social structures and then use to pursue their interests; it is created by changes in the relationship among actors” (baker, 1990). “social capital” as a complex definition is interpreted by m. schiff: “social capital is the set of elements of the social structure that affects relations among people and are inputs or arguments of the production and utility function” (schiff, 1995). the economic usefulness of social capital lies in its ability to reduce costs on the transaction, innovation, technology development, information asymmetry, which is achieved through the effective returns from the quality of education, relationships, the improvement of social injustice, the integration of vulnerable segments of the population into public life. social capital, as the basis of the public good, is considered by such scientist as e. slavkova (slavkova, 2010). definitions of social capital indicate that it has the same components as the concept of social security and can be a part of the social and economic security in rural areas. 4. the impact of social capital on the social and economic security in rural areas a market-oriented regional economy does not always ensure the growth of the well-being of all segments of the population in conditions of social and economic stability. inevitably generated unemployment, social problems, and other consequences of the competition can cause social fallout. social threats are closely related to each other, while one generates another, forming a vicious circle. but at the same time, the socio-economic security of the society should be considered as the primary one. considering social capital as the basis for the formation of social and economic security in rural areas, it is principally necessary to characterize the attributes of rural areas. it is necessary to start with natural raw stock. for rural areas, the prominent feature is the land and its characteristics, as well as environmental conditions and the economic situation. next is the presence of subjects of material production and consumption, as well as social and spiritual life, which include the demographic component, the human capital of the area, employment, the availability of social infrastructure (institutions of education, culture, physical education, public amenities, retail, etc.). baltic journal of economic studies 254 vol. 3, no. 4, 2017 tools and instruments of labour, material and technical base; production; agricultural produce, provision of services can be referred to the third characteristics. the fourth feature is a system of means and methods for managing socio-economic processes within the rural area. the system of means and methods of managing social and economic processes within the rural area includes economic mechanisms, the degree of development of market relations, the efficiency of socio-economic policy (including legal protection of human rights and freedoms and the development of measures to prevent the emergence of destructive factors), the development of local government, public organizations, unions, cooperatives, etc. the fifth feature is the place of a rural area in the system of inter-regional economic and political ties, as well as the development of communicative systems (figure 1). the basis of social capital is the formation of groups and trust, which leads to better health and social wellbeing of people. the development of organizations can also become an important factor in improving the quality of people life in a particular community. also, education obtained in groups improves the quality of life, develops social ties, creates additional skills and connections, and thus affects social and economic security. 5. conclusion from the conducted research on the basis of the foregoing, we believe that the social capital of rural areas provides the basic social norms of citizens, which results in the provision of rights to communicate, found organizations, unions, cooperatives; and its high level leads directly to the increase of socio-economic security of rural areas. the directions of our further research will be focused on the development of proposals concerning state support for activities related to the formation of social capital. social and economic security of rural areas attributes of rural areas natural raw materials and resources, natural conditions and economic situation objects of material production and consumption objects and subjects of social and spiritual life tools and instruments of labour, material and technical base; marketable products, industrial and agricultural production, provision of services system of means and methods for managing socio-economic processes within the rural area the place of a rural area in the system of interregional economic and political ties, as well as communication systems development of social capital subjects and objects fig. 1. social capital as a basis for the formation of social and economic security in rural areas (developed by the author on the basis of (krivorotov, 2011, antoshkin, 2014) references: antoshkin v.k. 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(2005). great collapse: human nature and restoration of social order, lviv, calvary, 380 p. fukuyama f. (2004). trust: social virtues and the path to prosperity: trans. with english. – m., llc "publishing house act": cjsc npp "ermak", 730 p. schiff, m. (1995). social capital, labor mobility, and welfare. ration society, vol. 4, р. 157–175. андрей сухоставец социальный капитал как основа формирования социально-экономической безопасности сельских территорий аннотация. целью исследования является определение сущности социального капитала, а также исследования его влияния на социально-экономическую безопасность сельской территории. методика. в основе методологии исследования лежат монографический метод, метод диалектического познания, методы сценария, пространственно которые использовалось для поиска оптимального варианта реализации сценариев; swotанализ использовался для оценки положительного или отрицательного влияния социального капитала на социально-экономическую безопасность сельских территорий. социальный капитал является основой формирования будущей концепции управления сельскими территориями. поэтому одной из важнейших задач является определение различных факторов существования, развития и формирования социального капитала. одним из таких факторов является вопрос безопасности сельских территорий и определение, каким образом на неё влияет социальный капитал. проведённый анализ доступных научных работ в разных плоскостях обнаруживает отсутствие консенсуса в определении категории «социально-экономическая безопасность сельских территорий». это связано с тем, что определение социально-экономической безопасности сельских территорий идентифицируется с такими понятиями как способность обеспечивать отпор различным внутренним и внешним воздействиям окружающей среды. осмысление сущности социально-экономической безопасности привело к выводам, что она состоит из экономической, социальной, экологической и других видов безопасности. термин «социальная безопасность» в понимании исследователей обычно имеет две трактовки: традиционная (отсутствие угроз для социума) и альтернативная (отсутствие угроз со стороны социума). доказано, что социальная безопасность региона должна быть ориентирована на обеспечение в первую очередь прав и свобод человека, а именно личных, политических, социальных, экономических, культурных, экологических, а также семейных. социально-экономическая безопасность также должна обеспечивать социальные стандарты и гарантии, а также нормы. экономическая основа безопасности сельских территорий проявляется в развитии рыночных отношений, инфраструктуры материально-техническая база, природные условия и т.д. рыночно ориентированная региональная экономика не всегда обеспечивает рост благосостояния всех слоев населения в условиях социальной и экономической устойчивости. неизбежно порождаемые ею безработицы, социальные проблемы и другие последствия конкурентной борьбы могут вызвать социальный взрыв. социальные угрозы тесно связаны друг с другом, при этом одна порождает другую, образуя замкнутый круг. но при этом первичной следует считать социально-экономическую безопасность для социума. значение/оригинальность. исходя из вышеизложенного мы считаем, что социальный капитал сельских территорий обеспечивает основные социальные нормативы граждан. они выражаются в обеспечении прав на общение, создание организаций, союзов, кооперативов и его высокий уровень ведет непосредственно к повышению социально-экономической безопасности сельских территорий. направления дальнейших наших исследований будут направлены на разработку предложений, которые касаются государственной поддержки мероприятий связанных с формированием социального капитала. baltic journal of economic studies 38 vol. 3, no. 5, 2017 corresponding author: 1 department of finance and banking, uzhhorod national university. e-mail: vira.vartsaba@gmail.com 2 department of economics and entrepreneurship, hrushevsky carpathian institute interregional academy of personnel management. e-mail: galynaleshuk@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-38-44 evaluation of investment at tractiveness indicators of regions in ukraine vira vartsaba1 uzhhorod national university, ukraine halyna leshuk2 hrushevsky carpathian institute interregional academy of personnel management, ukraine abstract. the theoretical and methodological principles for assessing the investment attractiveness of the regions are the subject of the research. the aims of the research consist in improving the existing approach for measuring the level of investment attractiveness of territorial systems in the direction of taking into account the possible multicollinearity and determining the share of investment attractiveness factors in the aggregate indicator on the basis of calculated values of determination coefficients, which respectively provide to distinguish the priority directions in the formation of regional investment policy aimed at raising the level of investment attractiveness of regions of ukraine. methodology. the article deals with the research of theoretical and methodological approaches to the definition of investment attractiveness of ukrainian regions by means of general scientific methods of analysis: systematization and generalization, induction, deduction. results. to assess the investment climate in the regions of ukraine, an improved existing approach for measuring the level of investment attractiveness of territorial systems is proposed in the direction of taking into account possible multicollinearity and determining the share of factors of investment attractiveness, which is based, in particular, on the selected indicators, in particular: the volume of direct foreign investments per capita (forinv); per capita net exports (netexp); the number of economically active enterprises per 10 000 population (entrp); volumes of industrial production (prom); population income (rev); volume of retail trade turnover per capita (tov); volume of completed construction work (bud). it is proved that the priority and intensity of influence on the indicator of investment into fixed capital per capita of factors of investment attractiveness varies for different regions of ukraine, therefore, according to the conducted analysis, the investment attractiveness of the researched regions are determined by such factors as the volume of direct foreign investments per capita, the volume of net exports per capita, the number of economically active enterprises per 10 000 population, volumes of industrial production, population income, and volume of completed construction work. the dynamics of values of general indicators of investment attractiveness for five regions of western ukraine are determined, which allowed substantiating the absence of a stable positive tendency in any of the regions to change the values of the general indicator of investment attractiveness, as well as establishing the existence of negative trends accumulation in the formation of investment attractiveness factors, which leads to a decrease of indicators of volumes of foreign investments per capita and volumes of investments in fixed capital per capita during the researched period. practical significance. the use of the proposed approach made it possible to obtain competitive, scientifically substantiated results, which could become a methodological basis in the process of planning and practical implementation of the measures to create the investment attractiveness of regions and their territorial systems. the possibility of identifying the priority areas of influence on factors of investment attractiveness in order to increase the volume of investments attraction into the regional economic system is the determining positive side of the proposed approach. key words: investment attractiveness, region, evaluation, indicators. jel classification: r10, r58, е22 baltic journal of economic studies 39 vol. 3, no. 5, 2017 1. introduction in general, investment climate of regional system is characterized by two main components: the investment attractiveness of a region with the following characteristics such as investment potential and regional investment risks, as well as the activity of investment processes in the region. investment activity in a region is the intensity of investments attracting into the real and financial capital of the subjects of the regional economy. investment attractiveness of a region is a set of objective conditions, means, opportunities, and restrictions that determine the intensity of investments attracting into the capital of subjects of the regional system. accordingly, identification of effective levers of management and regulation of processes in social and economic systems that can provide the improvement of the level of investment attractiveness of the respective systems is a priority task in the process of forming a favourable investment climate within a region, as well as the whole country. 2. analysis of recent research and publications the main problems and prospects of development for increasing the investment attractiveness of the regional economy were investigated (bagautdinova n.g. and others, 2014), while they interpreted investments as not only as a source of economic growth but also as a factor of competitiveness of a regional economy. the authors examined the impact of investment attractiveness on the formation of competitive advantages of a territory and have identified the following factors: resource base, climatic conditions, consumer market, legislation (tax, customs, budget etc.), state of the economy, willingness of state authorities for cooperation, availability of necessary infrastructure, protection of investors’ rights, administration of guarantees and so on and so force. in order to attract investments in any state, region or municipality, the authors note one of the most important conditions, that is, effective regulation of investment activity and protection of the investors. the realization of an objective assessment of the investment attractiveness of the territories for the potential investors (shaykheeva d. and others, 2016) disclosed through the use of special geographic information systems (gis). the authors pay attention to the lack of tools for the real attraction of investments, which facilitate the improvement of the economic competitiveness of russian regions. thus they propose a methodology for integrated assessment of investment attractiveness of rural and urban areas of the republic of tatarstan using geographic and information technologies. in the classification of national and regional resources that determine social and economic opportunities of territories, (mustafakulov, 2017) explores the priority directions of ensuring the social and economic development and assesses the value of investment attractiveness of regions with a long-term historical specialization in agricultural production. whereas investments are a major factor of regional and municipal development (damborský m. and others, 2009) point out that the arrival or departure of a significant foreign investor can have a significant impact on the entire city, regional, possibly even national economy. due to the investment attractiveness, problems of investors’ arrival and decision-making processes that are related to them are important, as well as the problems of so-called “rooting”, for example, of inflow of direct foreign investment into the czech republic. simultaneously (kharlamova, 2014) analyses investment opportunities and potential of regions of ukraine. at the same time, the regions are estimated by the level of investment potential and the degree of investment risks, as well as by the experience of previous investment activity in a region. the author proposed the so-called territorial investment marketing, based on results of complex monitoring of the regional investment climate in ukraine. (nikolova l. and others, 2013) considered the effectiveness of the investment process, which, together with the investment risk and investment potential, determines the investment attractiveness of a region and, therefore, the investment climate, characterize the growth of the gross product of a region by investing in physical and human capital. the authors determine the investment attractiveness of a region by comparing two parameters that reflect the conditions of investors’ activity: investment potential and investment risk. thus, in researching the investment opportunities and assessing the investment attractiveness of the territories for potential investors, first of all, the authors focused on the efficiency of the investment process in terms of the correlation between the investment risks and investment potential, while scientific research is rather fragmentary in determining the level of influence of investment attractiveness factors of the regions in ukraine on the indicator the amount of investments in fixed capital per head with the determination of the weight coefficients of each factor; determination of dependency model, as well as appropriate values of determination coefficients for factors of investment attractiveness of the regions in ukraine; the determination of the weight of each of the factors of investment attractiveness in the aggregate indicator on the basis of the calculated values of the determination coefficients; the determination of the priority directions in the formation of regional investment policy directed to raising the level of investment attractiveness of the regions. the purpose of the research is to determine the weightings values of each of the factors of investment attractiveness in the aggregate indicator based on the calculated values of the determination coefficients, baltic journal of economic studies 40 vol. 3, no. 5, 2017 which, accordingly, will allow distinguishing the priority directions in the formation of a regional investment policy directed to raising the level of investment attractiveness of the regions. 3. methodological approaches for assessing the investment attractiveness of regions aimed at obtaining quantify assessment of the level of investment attractiveness of the western ukraine’s regions, we have calculated the general indicators of investment attractiveness. similarly, as in the research (pil'ko, 2015), index of investment attractiveness of a region was determined using the formula of a multidimensional average as the following: ∑ ∑ = == n j j n j н ijj і k pk іnvattr 1 1 j jijн іj pp p σ − = mi ,1= (1) where ∑ ∑ = == n j j n j н ijj і k pk іnvattr 1 1 j jijн іj pp p σ − =   – index of investment attractiveness і – the name of a region; m  – number of regions researched (m = 5); kj  – weight factor j – the indicator taken to assess the investment attractiveness of a region; ∑ ∑ = == n j j n j н ijj і k pk іnvattr 1 1 j jijн іj pp p σ − =  – normalized value, j – an indicator of investment attractiveness, і – name of a region; xj – average arithmetic value, j– features; σ j  – average square deviation value, j – features. at the first stage of the research, for the purpose of assessing the investment attractiveness of the western ukraine’s regions, we have selected the following indicators: the volume of direct foreign investment per head (forinv); the volume of net exports per head (netexp); the number of economically active enterprises per 10 000 of population (entrp); the volumes of industrial production (prom); population income (rev); volume of retail commodity circulation per head (tov); the volume of completed construction work (bud). to ensure the comparability of valuable indicators in space and time, they were taken into account in the analysis conducted at comparable prices. corresponding values of the pair correlation coefficients calculated on the basis of statistical information (website of the state statistics service of ukraine) in five regions between the factors of investment attractiveness and the volume of investments in fixed capital per head in the respective regions are given in table 1. as the results of calculations, the priority and intensity of influence on the indicator of the investment amount in fixed capital per head factors of investment attractiveness vary for different regions. in particular, the indicator of the volume of direct foreign investments is decisive in the formation of investment attractiveness for ivano-frankivsk and ternopil regions. at the same time, this indicator has the smallest impact on the indicator of the volume of investments in fixed capital per head in the chernivtsi region. the indicator of net exports is decisive in determining the investment attractiveness of ivano-frankivsk region, and it is significant for transcarpathian region and practically does not determine the volume of investment inflows in ternopil region. the impact of a number of economically active business entities on the indicators of volumes of investment in fixed assets is significant only for ivanofrankivsk region, and it is moderate for transcarpathian, chernivtsi, and ternopil regions, and it is very weak for lviv region. an indicator of volumes of industrial production is crucial for the formation of investment attractiveness for all the researched regions. a similar conclusion can be made regarding the indicators of the volume of construction work, commodity circulation per head, and income level of the population. previously conducted correlation analysis of the selected indicators calculated on the basis of relevant statistical information for the period of 2010–2016 in lviv, ivano-frankivsk, transcarpathian, ternopil, and chernivtsi regions showed a close linear relationship between the indicator of retail commodity circulation and the rest of the selected indicators. in order to obtain objective information about the level of investment attractiveness of the researched regions, paying a special attention to the unconditional significance of this indicator in the process of research and analysis of investment attractiveness of a region, but taking into account the presence of obvious multicollinearity in the table 1 level of influence of investment attractiveness factors on the indicator of investments volume in fixed capital per head for the period of 2010–2016 region indicator ivano-frankivsk lviv transcarpathian ternopil chernivtsi forinv 0,953578 0,637224 0,712734 0,856981 0,314745 netexp 0,878385 0,451838 0,702651 0,171373 0,528961 entrp 0,716765 0,236998 0,512683 0,617231 0,655 prom 0,837307 0,758836 0,9015 0,881197 0,840663 bud 0,648143 0,938307 0,983799 0,924228 0,777479 tov 0,894129 0,763858 0,903224 0,873514 0,727303 rev 0,82418 0,788102 0,906775 0,940229 0,811318 baltic journal of economic studies 41 vol. 3, no. 5, 2017 array of factors, caused by this indicator, we decided to exclude this indicator from the further analysis. in other words, according to the analysis conducted, the investment attractiveness of the researched regions is determined by such factors as the volume of direct foreign investments per head, the volume of net exports per head, the number of economically active enterprises per 10 000 population, volumes of industrial production, the size of incomes, and the volume of construction works. as the weights values of each of the selected indicators, the values of the determination coefficients between the volume of investment in fixed capital per head and these indicators were taken. in this case, the determination coefficient was calculated on the basis of a model that best approximates the actual distribution to the corresponding form of analytical dependence. accordingly, in order to determine the investment attractiveness indicator of each of the researched regions, the individual weightings coefficients of each of the factors of investment attractiveness in the aggregate indicator have been calculated. as the results of the analysis showed, the weighting coefficients of each of the factors of investment attractiveness have different meanings depending on a region. this is our conclusion after approximating the actual distributions of the values of the investment attractiveness factors and the values of indicators of investment in fixed assets to different forms of analytical dependencies. to choose the form of such dependences, an approximation to the linear, exponential, degree, quadratic, logarithmic, and polynomial curves of 3 and 4 orders was made. a model that is best to describe the interdependence researched was selected based on logical and statistical compliance requirements. taking into account the nature of the models’ behaviour, which is given by polynomial dependencies of higher orders, they were not used in the analysis. the dependency models, as well as the corresponding values of the determination coefficients for investment attractiveness factors, are as follows: ivano-frankivsk region: y x x r= − + =0 041 0 23 0 008 0 9791 2 1 2, , , , , y x x r= − + + =0 051 0 014 0 05 0 8062 2 2 2, , , , , y x x r= − + =−10 0 001 0 11 0 6947 3 2 3 2, , , , y x x r= − + =−5 10 0 0001 0 003 0 7446 4 2 4 2* , , , , y x r= =0 004 0 4055 0 713 2, , ,, y x r= =−7 10 0 7215 6 1152 2* , ,, lviv region: y x x r= − + =0 158 0 174 0 052 0 4271 2 1 2, , , , , y x x r= + + =0 011 0 009 0 006 0 5872 2 2 2, , , , , y x x x r= − + − + =− −3 10 10 0 002 0 604 0 15210 3 3 6 3 2 2* , , , , y x x r= − + =−3 10 0 0001 0 007 0 6236 4 2 4 2* , , , , y x x r= − + =0 001 0 001 0 004 0 8915 2 5 2, , , , , y x x r= − + =−2 10 0 001 0 012 0 8236 6 2 6 2* , , , , transcarpathian region: y x x r= − + =0 373 0 237 0 039 0 8591 2 1 2, , , , , y x x r= + + =0 008 0 004 0 002 0 7482 2 2 2, , , , , y x r= =−10 0 28910 3 2 404 2, , , y e rx= =0 001 0 8250 018 4 2, , ,, y x r= + =0 002 0 001 0 9785 2, ln( ) , , , y x x r= − + =− −5 10 5 10 0 001 0 8897 6 2 5 6 2* * , , , ternopil region: y x x r= − + =8 582 1 092 0 037 0 8251 2 1 2, , , , , y x x x r= − − + + =0 252 0 007 0 007 0 003 0 2252 3 2 2 2 2, , , , , , y x r= =−2 10 0 44510 3 2 304 2* , ,, y x r= =0 0001 0 7884 0 835 2, , ,, y x r= + =0 001 0 001 0 8545 2, , , , y x x r= − + =− −3 10 10 0 002 0 97 6 2 5 6 2* , , , chernivtsi region: y x x x r= − + − + =1963 9 443 64 33 18 0 82 0 8241 3 1 2 1 2, , , , , , y x x r= − + =0 628 0 007 0 002 0 642 3 2 2, , , , , y x x x r= − + − =− −4 10 10 0 012 4 237 0 5289 3 3 5 3 2 3 2* , , , , y x r= + =−3 10 0 001 0 7075 4 2* , , , y x x r= − + =0 0002 0 002 0 6915 2 2, , , , y x r= + =−2 10 0 001 0 6585 6 2* , , , where y  – the volume of investments in fixed capital per head; x1  – the volume of direct foreign investments per head; x2   – the volume of net exports per head; x3   – the number of economically active enterpises per 10  000  population; x4   – volumes of industrial production; x5   – the amount of income of the population; x6  – the volume of completed construction work. based on the calculated values of the determination coefficients, we determined the real proportions (weights) of each of the factors of investment attractiveness in the aggregate indicator (table 2). table 2 weights values of investment attractiveness factors in the aggregate index region weights values of investment attractiveness factors x1 x2 x3 x4 x5 x6 ivano-frankivsk 0,225 0,185 0,159 0,171 0,093 0,167 lviv 0,122 0,167 0,043 0,178 0,254 0,236 transcarpathian 0,187 0,163 0,063 0,18 0,213 0,194 ternopil 0,205 0,056 0,11 0,195 0,212 0,222 chernivtsi 0.204 0,158 0,13 0,175 0,171 0,162 as we can see from table 1, the indicators of values of foreign investment per head, net exports per head and industrial production are crucial in the process of forming the investment attractiveness of ivano-frankivsk region. in other words, the investors in the process of passing decisions about the choice of investment object in ivano-frankivsk region are oriented to export-oriented baltic journal of economic studies 42 vol. 3, no. 5, 2017 types of economic activity, as well as activities, in which foreign investors are already working. at the same time, activities focused on the domestic regional and national market are not investment attractive in ivano-frankivsk region. compared to other investigated regions, the level of investment attractiveness of ivano-frankivsk region is very sensitive to investing in export-oriented activities (18.5%) and amount of foreign investment per head (22.5%). the stimulation of export-oriented industries should become the priority of the formation and practical implementation of regional investment policy. the indicators of the population’s income, the volume of construction works performed, as well as the volume of industrial production will be determinative for the formation of the investment attractiveness of lviv region. accordingly, stimulation of development and investments attractiveness in activities directed to domestic (regional and national market), in particular, construction and industry will be the priority in forming the regional investment policy, aimed at raising the level of investment attractiveness of lviv regional systems. in the process of forming the investment attractiveness of transcarpathian region, measures aimed at raising the level of populations incomes, increasing the volume of executed construction works, as well as the volume of direct foreign investments per head are a priority. in other words, the export potential of transcarpathian region is used only partially, and accordingly, investments in export-oriented activities determine changes in the investment attractiveness of the region by only 16.3% after ivano-frankivsk and lviv regions. almost the same situation takes place in ternopil region. in the formation of investment attractiveness, the most important are the indicators of performance of construction works, the growth of population incomes and the volume of foreign investment per head. accordingly, the actions that are directed to attracting foreign investment in construction and industry, which are oriented on the regional and national markets will have the most positive impact on the investment attractiveness of ternopil region. paradoxically, paying attention to the predominantly agrarian specialization of the region, the impact of investment attraction by the measures on export-oriented activities is very insignificant for the indicator of investment attractiveness (the lowest indicator from all 5 regions is 5.6%). to form the investment attractiveness of chernivtsi region, increase the volume of foreign investment per head, industrial production and population incomes should be the priority areas of regional policy. that is, again, the investment attractiveness of the region is currently determined by the types of economic activity that involve attracting of foreign capital and are oriented towards the domestic (regional and national markets). in other words, efforts of central bodies of state power, as well as local self-government in the direction of the formation of a strategy and practical measures for the implementation of investment policy, should be aimed at the activation and development of these factors and influence levers. 4. evaluation results of investment attractiveness of regions of western ukraine calculated by the formula (1) the values of general indicators of investment attractiveness for five regions of western ukraine for 2010–2016 are shown in table 3. as it can be seen from the dynamics of the values of general indicators of investment attractiveness for five regions of western ukraine (fig. 1-5), there is no established positive trend of changing the values of the general indicator of investment attractiveness in any region. additional values of investment attractiveness indicator reveal a presence of a positive influence of the analysed factors of investment attractiveness on investment processes in the respective region. negative values of the respective indicators reveal the negative influence of factors of investment attractiveness on processes of attracting investment resources to the region. fig. 1. dynamics of values of investment attractiveness indicator of ivano-frankivsk region table 3 general indicators of investment attractiveness of western ukraine regions region 2010 2011 2012 2013 2014 2015 2016 ivano-frankivsk -1,126 -0,462 0,219 0,445 0,463 0,285 0,176 lviv -0,958 -0,037 0,021 0,492 -0,249 0,207 0,523 transcarpathian 1,580 -0,424 -0,452 -0,269 -0,203 -0,436 0,204 ternopil -0,446 0,199 0,579 1,014 -0,038 -1,065 -0,354 chernivtsi -0,774 -0,039 0,546 0,739 0,242 -0,454 -0,258 baltic journal of economic studies 43 vol. 3, no. 5, 2017 fig. 2. dynamics of values of investment attractiveness indicator of lviv region fig. 3. dynamics of values of investment attractiveness indicator of transcarpathian region fig. 4. dynamics of values of investment attractiveness indicator of ternopil region fig. 5. dynamics of values of investment attractiveness indicator of chernivtsi region the harsh deterioration of the value of generalizing investment attractiveness in 2014 and the presence of positive trends in improving the investment attractiveness, started in 2015 are the mutual feature for values dynamics of all regions without exception. the worst situation with investment attractiveness was in transcarpathian region during the period of 2011–2015. accumulation of negative tendencies in the formation of investment attractiveness factors has led to a decrease in the indicators of foreign investments volumes per head and volumes of investments in fixed capital per head during the investigated period. 5. conclusion 1. as a result of researches, particular results of which are presented in this publication, the existing approach to measuring the level of investment attractiveness of the region has been improved and developed in order to take into account possible multi-colourarity and determination of the proportion of investment attractiveness factors. the use of the proposed approach has allowed obtaining the competitive scientific results that can become the basis for planning and practical implementation of measures for the creation of investment attractiveness of regions and their territorial systems. the possibility of identifying the priority areas of influence on investment attractiveness factors in order to increase the volume of the attraction of investments into the regional economic system is a determining positive side of the proposed approach. 2. it should be noted that the practical realization of measures to create the investment attractiveness of regions of western ukraine should be based on the following directions: increase in the investment’s volume in fixed capital per capita; formation and dissemination of measures to attract foreign investment in construction and industry that are oriented to regional and national markets; increase in direct foreign investments per capita; stimulation of export-oriented production in the regions; increase in the investments in agrarian specialization of the regions. 3. prospects for further development of the investment climate assessment of the regions of ukraine will be based on ways formation to increase the investment attractiveness of the regions and to justify the concept of investment support for the development of regional economic systems. references: bagautdinova, n.g., galeeva, g.m., fazlieva, e.p., arzhantseva, n.v. (2014). investment attractiveness of the region as the factor in the formation of competitive advantages. mediterranean journal of social sciences, vol. 5, issue 28, рр. 9-13. damborský, m., řihová, g. (2009). investment attractiveness of the czech republic regions in a period of economic crisis. 3 rd central european conference in regional science, cers, рр. 951-962. kharlamova, g. (2014). investment attractiveness of ukrainian regions: rating assessment and marketing promotion. journal of international studies, vol. 7, no 1, pp. 9-26. baltic journal of economic studies 44 vol. 3, no. 5, 2017 mustafakulov, s. (2017). investment attractiveness of regions: methodic aspects of the definition and classification of impacting factors. european scientific journal, vol.13, no.10, pp. 433-449. nikolova, l., plotnikova, e. (2013). regional investment attractiveness in an unstable and risky environment. innovative solutions: proceedings / 11th global conference on sustainable manufacturing (berlin, germany, 23rd-25th september, 2013), berlin: universitätsverlag der tu berlin, 2013, pp. 159-164. shaykheeva, d., mustafin, r ., panasyuk, m. (2016). assessment of regional investment attractiveness with the use of gis technologies. journal of economics and economic education research, vol 17, issue 2, рр. 270-277. pil'ko, a. d. (2015). modeli analizu kharakteru vzayemozvyazkiv mizh investytsiynoyu skladovoyu ekonomichnoho rozvytku ta pokaznykamy rivnya zhyttya naselennya u konteksti zabezpechennya ekonomichnoyi bezpeky rehionu [analysis models of relationship nature between the investment component of economic development and indicators of living standards of the population in the context of providing the economic security of a region] stratehiyi ekonomichnoho rozvytku: derzhava, rehion, pidpryyemstvo : kolektyvna monohrafiya, pр. 205. (in ukrainian). website of the state statistics service of ukraine. [electronic resource]. retrieved from: http://www.ukrstat.gov.ua. baltic journal of economic studies 164 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 admiral makarov national university of shipbuilding, ukraine (corresponding author) e-mail: rusnak_av@meta.ua orcid: https://orcid.org/0000-0002-3198-2866 researcherid: aac-7821-2019 2 kherson educational-scientific institute of admiral makarov national university of shipbuilding, ukraine e-mail: nira@ukr.net orcid: https://orcid.org/0000-0003-0693-8000 researcherid: e-6131-2018 3 kherson educational-scientific institute of admiral makarov national university of shipbuilding, ukraine e-mail: lenapul@ukr.net orcid: https://orcid.org/0000-0003-2675-8955 researcherid: hmv-5891-2023 doi: https://doi.org/10.30525/2256-0742/2023-9-2-164-171 scientific and methodological approaches to a comprehensive assessment of the competitive potential of enterprises and territories alla rusnak1, iryna nadtochii2, olena pulianovych3 abstract. the purpose of the article is to generalize and substantiate scientific and methodological approaches to a comprehensive assessment of the competitive potential of enterprises and territories. the methodology of the comprehensive study made it possible to determine the features of the competitive potential of an enterprise; to divide into levels the competitive potential as a system with a view to effective management of business entities; to determine the main functions of analyzing the competitive potential of business entities at different levels; to analyze and substantiate the existing approaches to assessing the competitive potential of an enterprise; to summarize the methods of assessing the competitive potential of an enterprise; to supplement the principles of assessing and forming the competitive potential of enterprises; to substantiate the main approaches, methods and indicators for assessing the competitive potential of territories; to develop an algorithm for measuring the competitive potential of a territory to use the knowledge gained in its management. methodology. the main research method used was systematic analysis of scientific and methodological approaches to comprehensive assessment of competitive potential of business entities at various levels, as outlined by the relevance of the work. monographic, structural and logical methods, methods of analysis and synthesis, comparison, etc. were also used. it is determined that competitive potential is a system of capabilities, competencies and resources, under the influence of which a set of internal competitive advantages is formed in dynamics, which include two components: adaptability and innovation, and which are constantly under the influence of external and internal factors and form the level of competitiveness of economic entities at different levels of management. it has been proved that in order to assess the competitive potential of an enterprise it is advisable to identify, systematize and analyze all the elements that are its components: production, management, human resources, marketing, financial, information and innovation potential. the analysis of the characteristics of these components allows their division into levels for a more efficient management of business entities. existing approaches to assessment of competitive potential of the enterprise are analyzed. it is determined that the main functions of the analysis of the competitive potential are: objective assessment of the factors determining the increase of the competitive potential; identification of the factors and causes of the achieved status and results; preparation and justification of management decisions; identification and mobilization of reserves for improvement and increase of the competitive potential. the methods used to assess the competitive potential of a company are generalized. the study of scientific and methodological approaches to the comprehensive assessment of the competitive potential of an enterprise allowed to add the principles that contribute to its increase, such as: the orientation of all and each employee to the action, to the continuation of the started business; the proximity of the enterprise to the customer; the creation of a creative atmosphere in the enterprise; the increase of productivity by using the abilities of the employees and their desire to work; simplicity of the organization, the minimum number of management and administrative staff, etc. the results of the study show baltic journal of economic studies 165 vol. 9 no. 2, 2023 that the competitive potential of an enterprise is a comprehensive comparative characteristic that reflects the degree of predominance of a set of indicators for assessing the capabilities of an enterprise that determine its success in a particular market over a certain period of time in relation to the set of similar indicators of competing enterprises. the competitive potential of a territory is a set of competitive advantages and attractive features of a given territory, which contribute to the efficient use of available and attractive external resources and distinguish the territory from other competitors in terms of its capabilities for effective socio-economic development. practical implications. in order to implement the model of measuring the competitive potential of an area, an algorithm has been developed that includes the following steps: determination of the criterion of the competitive potential of an area; substantiation of the model of factors of the competitive potential of an area; formation of a system of requirements for indicators of the attractiveness of an area by factors; selection of a group of indicators for each factor that meet the requirements and characteristics; creation of a mathematical apparatus for the calculation of indicators in the assessment of factors; calculation of indicators and obtaining generalized assessments by factors; aggregation of generalized assessments by competitiveness factors and integrated assessment of the competitive potential of the territory; typology of territories by the level of competitive potential; reflection of individual territories in the ratings of competitive potential assessments; use of the information obtained for strategic planning purposes. adherence to this sequence and content of work on measuring the competitive potential of the territory will allow to effectively use the knowledge gained in its management. relevance/originality. the application of the integral method of assessing the competitive potential of a company allows to provide an integrated approach to the assessment of the competitiveness of the company's potential and, in practice, to obtain an assessment of its competitive position on the basis of specific indicators. in addition, the application of this approach to the real conditions of a company's operation makes it possible to take into account both the competitiveness of products and the efficiency of the company's production and economic activities. key words: competitive potential, competitiveness, competition, enterprise, territory, assessment, method. jel classification: d41, m21 1. introduction the current state of economic development implies the functioning of entities of different levels of economic activity in conditions of constant competition. a comprehensive assessment of their competitive potential is an important condition for effective functioning. in a situation where many similar business entities operate, it is advisable to correctly identify their competitive potential and competitive advantages. the successful use of these advantages is a key factor in the formation of one's own strategy for the development of enterprises and territories in the competitive environment. in the context of increasing competition, more and more attention is paid to the development of competitive potential. this is due to the fact that competitive potential is the basis on which a business unit is able to maintain and increase its competitiveness in the long term. to date, there are a number of publications by foreign authors that consider various aspects of the concept of "potential" (chen, miller, 2012; gosselin, leysen, verbeke, 2007; de clercq, 2006; sanchez, heene, 2003; sanchez, heene, 2003; smith, ferrier, ndofor, 2001) and note the importance of studying the problems of its assessment. despite significant achievements in the theory and practice of assessing the competitive potential of business entities and their competitive advantages, there are a number of aspects that remain the subject of discussion among economists and require further development. in particular, the scientific and methodological approaches to the comprehensive assessment of the competitive potential of business entities at different levels need to be improved. the novelty of the study lies in the following: delineation of the competitive potential as a system at the level of more efficient management of business entities; development of an algorithm for measuring the competitive potential of the territory to use the knowledge gained in its management. the purpose of the study is to generalize and substantiate scientific and methodological approaches to the comprehensive assessment of the competitive potential of enterprises and territories. the study is based on a systematic analysis of scientific and methodological approaches to the comprehensive assessment of the competitive potential of entities at different levels of management. the main objectives are: to determine the features of the competitive potential of an enterprise; to differentiate the competitive potential as a system at the level of more efficient management of business entities; to determine the main functions of the analysis of the competitive potential of business entities at baltic journal of economic studies 166 vol. 9 no. 2, 2023 different levels; to substantiate the main approaches to assessing the competitive potential of an enterprise; to generalize the methods used to evaluate the competitive potential of an enterprise; to supplement the principles of assessment and formation of the competitive potential of enterprises; to study the main approaches, methods and indicators for assessing the competitive potential of territories; to develop an algorithm and content of work at each stage to implement a model for measuring the competitive potential of a territory. 2. approaches to assessing the competitive potential of an enterprise the multifaceted nature of competition leads to a wide range of approaches and indicators for assessing competitive potential at the micro, meso and macro levels. taken together, they cover both vertical and horizontal objects. the vertical level is represented by individual territories, regions, industries, and countries. the horizontal level includes individual goods, enterprises and activities. competitive potential is a system of capabilities, competencies, and resources that dynamically form a set of internal competitive advantages, including two components: adaptability and innovation, and which are constantly under the influence of external and internal factors and shape the level of competitiveness of business entities of different levels. the assessment of competitive potential is a comprehensive indicator that combines three levels of competitiveness: the micro-level, the meso-level, and the macro-level. an important task in assessing competitive potential is to identify, systematize and analyze all the elements that make up its components: production, management, human resources, marketing, financial, information and innovation potential (simonova, 2011). the competitive potential of an enterprise is a comprehensive comparative characteristic that reflects the degree of predominance of a set of indicators for assessing the capabilities of an enterprise that determine its success in a particular market over a certain period of time in relation to the set of similar indicators of competing enterprises. summarizing the results of the study of the concept of "competitive potential", the author identifies a number of points that are inherent in most approaches: availability of the resource component that is the basis for the formation of the enterprise's potential and its accessibility; availability of tools for transforming the potential into a factor of real competition; comparative analysis of the potentials of competing market participants; consideration of the impact of external forces and the ability of the enterprise to adapt to changing market conditions; and connection with the competitiveness of the enterprise (bieliaieva, 2013). the competitive potential of an enterprise has several features, in particular: 1) competitiveness is not an inherent quality of an enterprise (i.e., its internal, natural quality); it can be identified and assessed only in the presence of competitors (real or potential); 2) this concept is relative, that is, it has different levels in relation to different competitors; 3) the competitiveness of the enterprise's potential is determined by the productivity of the use of resources involved in the production process; 4) the level of the enterprise's competitive potential depends on the level of competitiveness of its components (primarily products), as well as on the overall competitiveness of the industry and the country (fedonin, 2004). the competitive potential of an enterprise simultaneously combines three levels of connections and relations: – competitive potential reflects the past, i.e., the set of characteristics accumulated by the system in the process of its formation and determining the possibility of its functioning and development. in fact, the concept of "resource" is gaining importance; – competitive potential characterizes the level of practical survival and exploitation of existing opportunities. it provides a distinction between realized and unrealized opportunities, i.e. it partially coincides with the concept of "reserve"; – competitive potential is developmental (for the future) (luzhetskyi, 2013). competitive potential is a "multi-element, hierarchical and dynamic system" (simonova, 2011), so it needs to be differentiated into levels for more effective management of business entities (table 1). the division of elements of competitive potential can be the basis for creating a new methodology of its assessment, different from the current one, which consists in calculating each element separately and summarizing the obtained data into one comprehensive indicator, the negative side of which is the repeated consideration of data on the activities of the business entity (i.e., duplication of data during calculation) and the need to reduce the obtained data for each element to common units of measurement. the proposed methodology can be based on the search for two indicators, namely financial and managerial potential, where there is no need to sum them up to compare results with competitors, and it will be possible to compare them separately financial and separately managerial. the comparison will help to determine which of the elements is a strong or weak point in the performance of the business entity and to improve it. baltic journal of economic studies 167 vol. 9 no. 2, 2023 the analysis of existing approaches to the assessment of the competitive potential of a enterprise has revealed a number of shortcomings, including the difficulty of comparability of assessments of individual components of the potential in terms of the simultaneous presence of quantitative and qualitative indicators in the assessment. the integral method of assessing the competitive potential of a enterprise makes it possible to provide an integrated approach to the assessment of the competitiveness of the potential of the enterprise and to obtain an assessment of the competitive position of the enterprise on the basis of specific indicators. the usefulness of this approach lies in the fact that it allows to take into account both the competitiveness of products and the efficiency of production and economic activities of the enterprise in the real conditions of its functioning. in order to calculate the integral indicator of competitiveness, it is first necessary to study the impact of various factors on the competitiveness of the potential of an economic entity (bazyliuk v., bazyliuk k., 2021). in our opinion, the main functions of competitive potential analysis are: objective assessment of resource potential (resource components) and financial condition, as well as financial results, efficiency, business activity of the object of analysis, i.e., factors determining the increase of competitive potential; identification of factors and causes of the achieved condition and results; preparation and justification of management decisions; identification and mobilization of reserves for improvement and increase of competitive potential. the assessment of a company 's competitive potential can be based on the following approaches: resource, performance, reserve, and functional (table 2): based on the literature review, the authors summarize the methods used to assess a company 's competitive potential (table 3). a comprehensive assessment of an enterprise's competitive potential allows to cover all major business processes that take place in various functional areas of its internal environment. the result is a systematic view of the company, which allows to identify all strengths and weaknesses, as well as to develop a comprehensive methodology for assessing the possibilities of long-term development. table 1 components of competitive potential divided into levels level component characteristics і financial potential the amount of the company 's own, borrowed and attracted financial resources at its disposal for current and future expenses. management potential skills and abilities of managers at all levels of management to form, organize and create appropriate conditions for the functioning and development of the socio-economic system of the business entity. іі production potential a set of cost and natural resource characteristics of the production base, expressed in the potential capacity to produce products of a certain composition, technical level and quality in the required quantity. information and innovation potential the unity of organizational, technical and informational capabilities that provide the business entity with scientific personnel and highly qualified specialists to perceive innovations from the outside and implement innovations in the production or organizational structure. marketing potential the ability of an entity to systematically and consistently direct all of its functions (needs and demand identification, production organization, distribution) to meet customer needs and exploit potential markets. human resources potential the ability of employees to generate ideas, create new products, their level of education and qualification, psychophysiological characteristics and motivational potential. source: compiled based on data from (karachyna, pertsata, 2014) table 2 basic approaches to assessing the competitive potential of an enterprise approach characteristics resource the competitive potential is considered as a set of resources, means and production items used in the production of products. the assessment is reduced to determining the cost of available resources, and the degree of utilization is determined by the ratio of the result obtained to the amount of resources used for this purpose. productive it defines competitive potential as a company 's ability to develop and process available resources to meet societal needs. it analyzes and evaluates the maximum amount of goods a company can produce and sell in the market, given the quantity and quality of resources. reserve the competitive potential of a company is considered in terms of reserves for improving the production and economic activity of an economic entity. functional this includes determining the cost/price ratio, capacity utilization, production volumes and profit margins. source: compiled based on data from (matvieiev, 2013) baltic journal of economic studies 168 vol. 9 no. 2, 2023 any system should be based on certain scientific principles. to date, the scientific principles that should guide an enterprise when creating a system for assessing its competitive potential are not fully presented in the scientific literature. to fill this gap, this article offers a fairly complete list of such principles. the assessment and formation of the competitive potential of enterprises should be carried out using the following principles: multiplicity, complexity, simultaneity, hierarchy, equivalence, emergence, communicativeness, necessary diversity, reality, correctness, relativity, creativity, stability, adaptability, uniformity (formation of competitiveness in the context of regional development, 2009). according to the authors, the following principles also contribute to the company 's competitive potential: the focus of each and every employee on action, on continuing the business started; the company 's proximity to the client; creating a creative atmosphere in the company; increasing productivity by using the employees' abilities and their desire to work; demonstrating the importance of common values for the company; the ability to insist on one's own opinion; simplicity of organization, minimum levels of management and administrative staff; the ability to be both soft and tough; the ability to keep the most important issues under tight control and delegate less important ones to subordinates. in order to assess the competitive potential of an enterprise, it is advisable to calculate its competitiveness. in ukraine there is no single generally accepted method of assessing the level of competitiveness of enterprises. enterprises that determine competitiveness calculate it on the basis of their own developments, and the methods used to assess competitiveness remain unknown to other enterprises. it is impossible to establish the reliability of the results of calculations performed at different enterprises using different methods. therefore, it is advisable to summarize the methods of assessing the competitiveness of enterprises that exist in foreign and domestic practice, which can serve as an objective basis for assessing competitiveness and comparability of results for different enterprises (rusnak, nadtochii, 2019). table 3 classification of methods for assessing the competitive potential of an enterprise feature classification group characteristics types of methods in the area of information base formation criterial the information base for the analysis is based on reporting or planning documentation. porter's theory of competitive advantage; space-analysis; gap-analysis; lots-analysis; pims-analysis; mckinsey 's 7s analysis model; ansoff 's method; integral criterion method; taxonomic indicator method expert based on stochastic data estimated by experts step-analysis; swot-analysis; competitiveness analysis according to the 111-555 system; method of comparisons; method of ranks; method of studying the object profile according to the way the final results are displayed graphic provide the highest level of perception of the final results of the assessment, interpreted in graphical objects m. porter's theory of competitive advantage; j.-j. lambin's analysis of the competitiveness of firms; swot analysis; mckinsey 's 7s analysis model; method of studying the object profile mathematical based on certain algorithms for calculating indicators analysis of competitiveness according to the 111-555 system; ansoff 's method; method of comparisons; method of ranks; method of integral criterion logistical the basis is logical assumptions step-analysis; space-analysis; gap-analysis; lots-analysis; pims-analysis according to the possibility of developing management solutions one-dimensional only the actual state of affairs is assessed without taking into account the outflow of previous periods ansoff 's method; method of comparisons; method of integral criterion; method of taxonomic indicator; method of studying the object's profile; zavialov's graphical method strategic based on the creation of dynamic process models the theory of competitive advantage by m. porter; step-analysis; swot-analysis; space-analysis; gap-analysis; lots-analysis; pims-analysis; mckinsey 7s analysis model; ranking method according to the method of evaluation indicative based on the use of a system of indicators to assess the competitive potential step-analysis; space-analysis; gap-analysis; lots-analysis; pims-analysis; competitiveness analysis according to the 111-555 system; ansoff 's method; method of comparisons; method of ranks; method of integral criterion; method of taxonomic indicator matrix allows to approach the analysis systematically, organizing the elements of the system m. porter's theory of competitive advantage; swot analysis; j.-j. lambin's analysis of the competitiveness of firms; mckinsey 's 7s analysis model baltic journal of economic studies 169 vol. 9 no. 2, 2023 these methods can be divided into two groups. according to the first group of methods, the competitiveness of an enterprise is reduced to the determination of the competitiveness of its products, and according to the second group of methods, it is reduced to the selection of a system of indicators (economic, financial, investment, social, etc.), their numerical estimation and obtaining an integral assessment based on them. 3. approaches, methods and indicators for assessing the competitive potential of territories capital inflows are mainly determined by the prospects of the territory and its competitive potential, and do not depend on sectoral decisions taken centrally. each territory has the opportunity to assess its competitive position in order to facilitate participation in the implementation of programs of territorial organization and allocation of productive forces. entrepreneurial capital tends to be directed to those territories and fields of activity where there are better opportunities for competitive production and profitable business organization. there are factorial and integral approaches to assessing the relative competitive potential of territories. the integral approach is mainly based on the evaluation of the main indicators of the territory reflecting its economic development (innovation and investment activities, market development), natural and environmental potential (area, emissions of pollutants into the atmosphere, availability of natural resources), demographic status (population, average age of the population, employment rate, average salary) and other aspects (nadtochii, 2020). practice has developed a number of basic approaches to assessing the competitive potential of territories. these approaches should be divided into the following groups: the integrated approach to the study of competitiveness of territories; the approach based on work parameters; the approach based on the use of indicators of socio-economic development of territories and regions; the approach based on factors of formation of competitiveness of territories and regions; the qualitative approach; the programmatic approach; the approach based on strategic planning; the cluster approach (table 4). to assess the competitiveness and competitive potential of a territory in order to develop measures to improve it, the following integrated methodology should be used 1) use of the global competitiveness index (gci) and the population living standards index (plsi) or the human development index (hdi) to assess the actual competitiveness of the territory; 2) factor analysis of competitive advantages and constraints of the territory 's prospective development (pest-analysis and swot-analysis) to determine promising areas of its development; 3) identification and selection of goals and objectives to improve the competitive potential of the territory. to implement the model for measuring the competitive potential of the territory, the algorithm and content of work at each stage are proposed (figure 1). in the first stage it is necessary to consider the subjects and objects of competition, consumers table 4 main approaches, methods and indicators for assessing the competitive potential of territories approaches methods indicators comprehensive rating index level of competitiveness, dynamics of the current state, type of competitive advantages, competitiveness of enterprises operating in the territory. work parameters statistical the share of wages, living standards, efficiency of the economic system of the territory, investment attractiveness of the territory. socio-economic development of the territories statistical gross regional product per capita, volume of investment in fixed assets, share of average number of employees in small businesses. strategic planning swot analysis pest-analysis strengths, weaknesses, opportunities and threats to the territory. political, economic, social, and technological configuration of the territory. qualitative the axiom of "onedimensionality " indicators depend on the priorities selected for study. programmatic planning (management) methods building a "goal tree" – indicators depend on the goals that are prioritized. factorial rating index capital, resource potential of the territory, index of current and strategic competitiveness.  cluster statistical the growth rate of production of industries in which cluster enterprises are involved; the share of the industry cluster's production in the gross national product. source: compiled based on data from (dmytriieva, 2011) baltic journal of economic studies 170 vol. 9 no. 2, 2023 of the territory and current tasks of socioeconomic policy at the present stage. all this should correspond to the real conditions and capabilities of territories to compete for consumers on the basis of achievable competitive advantages. in the next two stages, it is necessary to form a system of statistical indicators to adequately measure each factor of the model, and the indicators can be either existing in statistics or derived from several other indicators. the official publications of the state statistics service of ukraine contain more than 500 indicators characterizing various socio-economic, demographic, environmental and other properties of territories, but most of these indicators cannot be used to characterize the competitive attractiveness of territories. in order to reduce subjectivity and increase the validity of the inclusion of certain indicators used to measure each of the factors, it is advisable to apply a system of criteria for their selection. the first criterion is the availability of official statistical data for the calculation of the indicator, published annually in official publications of the authorities or specialized institutions. the second criterion for the selection of indicators should be the ability to measure the absolute value of the phenomenon, rather than its incremental values or rating comparisons. the third selection criterion takes into account the property of the indicator to reflect the characteristics of regions that are attractive to several groups of consumers of the territorial socio economic space. the more consumers are interested in improving the competitive characteristics of the territory as measured by a particular indicator, the more valuable it is in reflecting the essence of competitive advantage. 4. conclusions the main functions of analysis of competitive potential of business entities at different levels are defined and substantiated: objective assessment of resource components, financial condition and financial results, efficiency of the object of analysis; identification of factors influencing the achieved condition and results of business entities; development and substantiation of management decisions; identification of reserves for increasing stage i determination of the criterion of the competitive potential of the territory. stage іі substantiation of the model of factors of competitive potential of the territory. stage ііі stage іv selection of a group of indicators for each factor that meet the requirements and properties. stage v formation of a mathematical apparatus for calculating indicators in the assessment of factors. calculation of indicators and obtaining generalized estimates by factors.stagevі stage vіі aggregation of generalized assessments by competitiveness factors and integrated assessment of the competitive potential of the territory. stage vііі typology of territories according to the level of competitive potential (ranking and grouping). stage іх reflect individual territories in the rankings of competitive potential assessments. stage х use of the information obtained for the purposes of strategic planning and management of the territory. formation of a system of requirements for indicators of attractiveness of the territory by factors. figure 1. sequence and content of the work to measure the competitive potential of the territory and use the knowledge gained in its management baltic journal of economic studies 171 vol. 9 no. 2, 2023 the competitive potential of the object of assessment. in order to develop measures to improve the competitive potential of the territory, it is proposed to use an integrated methodology consisting of the following stages: using the methodology of the global competitiveness index and the population living standards index or the human development index to assess the actual competitive potential of the territory; factor analysis of competitive advantages and constraints to the prospective development of the territory; defining and justifying the goals of increasing the competitive potential of the territory and the enterprises operating in it. the variety of approaches to assessing the competitive potential of business units at different levels is due to the different objectives of the assessment. approaches have evolved in line with transformational processes: while earlier periods were characterized by the presence of industrial development factors in the system of indicators, more recently, such parameters as "living standards," "information and management technologies," and "business processes" have been dominant. in the course of the study, the main approaches to assessing the competitive potential of an enterprise and territories were grouped into different groups depending on the objectives of the object of analysis. the use of strategic planning tools within the framework of the approaches allows obtaining additional information that provides new opportunities for managing the competitive potential and competitiveness of entities at different levels of management. prospects for further research are to develop a system-dynamic model for assessing the competitive potential of economic entities at different levels of management in the face of uncertainty and risk of the socio-economic environment of their functioning. references: chen, m., & miller, d. (2012.) competitive dynamics: themes, trends, and a prospective research platform. academy of management annals, vol. 6 ( june), pp. 1–89. gosselin, d., leysen, j., & verbeke, t. (2007). protecting a nation’s economic potential: proposal for a scientific research agenda. ejis, vol. 1. de clercq, m. (2006). economie toegelicht. antwerp: garant uitgevers. sanchez, r ., & heene, a. (2003). the new strategic management: organization, competition, and competence. new york: john wiley & sons. smith, k., ferrier, w., & ndofor, h. (2001). competitive dynamics research: critique and future directions. in m. hitt, r .e. freeman & j. harrison (eds.). handbook of strategic management. london: blackwell publishers. bazyliuk, v. b., & bazyliuk, k. f. (2021). a methodical approach to the integrated assessment of the competitive potential of a manufacturing enterprise. economy and society, vol. 25. doi: https://doi.org/10.32782/25240072/2021-25-85 bieliaieva, n. s. (2013). evaluation methods and the role of the value chain in the formation of the competitive potential of an industrial enterprise. bulletin of khmelnytskyi national university, vol. 4, no. 2, pp. 43–52. karachyna, n. p., & pertsata, l. i. (2014). competitive potential and its role in shaping the competitiveness of an enterprise. economic space, vol. 86, pp. 164–172. luzhetskyi, a. i. (2013). identification of the concept of "competitive potential of an enterprise" and approaches to its management. innovative economy, vol. 8, pp. 125–128. matvieiev, v. v. (2013). methods for assessing the competitive potential of an enterprise. efficient economy, no. 12. available at: http://www.economy.nayka.com.ua/?op=1&z=2630 nadtochii, i. i. (2020). regional aspects of business process management: methodology, modeling, regulations. mykolaiv: ilyon, 352 p. rusnak, a. v., & nadtochii, i. i. (2019). principles and methods of assessing the competitiveness of the enterprise. development of entrepreneurship in an unstable external environment: management, implementation and prospects: a collective monograph / collective of authors. kherson: individual entrepreneur vyshemyrskyi v. s., pp. 182–192. simonova, v. s. (2011). approaches to the definition of the concept of "competitive potential" and its role in shaping the competitiveness of an enterprise. formation of market relations in ukraine, vol. 6, pp. 194–195. fedonin, o. s., riepina, i. m., & oleksiuk, o. i. (2004). enterprise potential: formation and evaluation. kyiv: kneu, 316 p. burkinskyi, b. v. (ed.) (2009). formation of competitiveness in the context of regional development. odesa: institute of market problems and economic and environmental studies of the national academy of sciences of ukraine, 334 р. received on: 11th of march, 2023 accepted on: 30th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 134 vol. 3, no. 4, 2017 corresponding author: 1 department of business strategy, kyiv national economic university named after vadym hetman. e-mail: lezya16@meta.ua features of providing the value of projects for stakeholders under conditions of ukrainian business anastasiia liezina1 kyiv national economic university named after vadym hetman, ukraine abstract. the purpose of the work is to determine the value characteristics for the stakeholders of the project, identify existing types of projects in the field of providing electricity services, and describe the features of providing value in the ukrainian business environment. the system analysis method and analytical method allowed analysing the development of project management from the point of introduction and use of “value” category of the project in practice and considering the features of providing value characteristics for the main stakeholders of the project. methodology. the analysis of the project management system is based on providing value expectations for the project stakeholders in theory and in practice. the development of the electricity supply in the country is of great importance in the economic development of the country during the crisis stages. for the analysis, 3 enterprises were selected, carrying out their economic activities in this area on the territory of the kyiv region. in order to determine the specifics of providing value to project stakeholders at all phases of the life cycle of the project, the main types of projects were identified and their percentage was analysed among the implemented projects at enterprises between 2009 and 2017. the definition of the project product for this field of activity is presented and the main stakeholders of the project are described. the analysis of project implementation provides for the existence of four phases of the life cycle, with a partial provision of value on each of them for interested parties. this indicates that entrepreneurs are not consciously seeking to improve their management skills in order to increase the efficiency of project implementation. relevance/originality. analytical data provide further development of this science in the field of application of value characteristics in the analysis of the effectiveness of projects. in the future, the system analysis of project management in practice makes it possible to assess the degree of the use of scientific developments and fill gaps. key words: project management, value, stakeholders, project product, project life cycle phases. jel classification: d22, m11, o13 1. введение на протяжении последних лет практика управления проектами набирает большей популярности в украинском бизнесе. при этом основных критериев оценки успешности проектов недостаточно для определения и обеспечения всех возможных результатов от проекта. одним из направлений развития данной науки является внедрение и использование категории ценность проекта. на практике возможность обеспечивать ценностные ожидания для заинтересованных сторон является одним из процессов на пути к усовершенствованию и повышению эффективности методов управления проектами. для определения существующей практики в управлении ценностью проекта были выбраны отечественные предприятия, которые осуществляют свою хозяйственную деятельность в рамках реализации проектов по предоставлению услуг в сфере электроснабжения. данная отрасль была выбрана как стратегически важная с точки зрения развития экономики государства. кроме того, опираясь на нормативно-правовую базу украины, а именно закон украины «о  электроэнергетике», гсн в.2.5-27-2006, гсн в 2.2-15, гсту б в.2.5-38:2008 и правила устройства электроустановок, любое новое подключение, реконструкция и переоснащение электротехнического оборудования может быть выполнено только при условии разработки, согласования и реализации проекта по выбранному виду деятельности. соответственно можем утверждать, что применение проектного менеджмента в данной отрасли предоставления услуг повысит эффективность реализованных проектов с точки зрения обеспечения ценности для всех заинтересованных сторон проекта. baltic journal of economic studies 135 vol. 3, no. 4, 2017 2. cоставляющие ценности проекта развитие и становление категории ценность проекта обусловлено разнообразием подходов к определению и, соответственно, к применению термина. среди отечественных и зарубежных ученых следует обратить внимание на высказывания в.а. рача, л.п.  батенко, с.д. бушуева, с. охара, рассела д. арчибальда. все они определяют разные составляющие ценности проекта. к примеру, с. д. бушуев акцентирует внимание на выгодах, полученных от реализации проекта всеми заинтересованными сторонами и определяет ценность, как комплексный показатель (bushuev, 2010). в. а. рач отмечает ценность как уникальные способности продукта проекта обеспечить достижение миссии в социально  – экономической системе (rach, 2010). нам импонирует позиция охара с., который определяет ценность проекта, как обеспечение конкретных ценностей конкретным заинтересованным сторонам проекта (ohara, 2001). поэтому мы считаем, что ценность проекта должна содержать в себе следующие составляющие: соответствие полученных характеристик продукта проекта запланированным и ожидаемым, то есть ценность созданного продукта достаточно удовлетворяет потребности всех стейкхолдеров; соответствие продукта проекта стратегическим целям и задачам компании, то есть способность предоставить компании большую конкурентоспособность; соответствие выполнения проекта установленным критериям «железного треугольника», то есть вовремя, в пределах согласованного бюджета и объемов надлежащего качества; аккумуляция опыта участников проекта и формирование обновленной базы знаний, что приводит к совершенствованию методов и инструментария проектного управления. таким образом можем утверждать, что ценность проекта создается в процессе управления проектом и в процессе создания продукта проекта и имеет соответствующие индивидуальные и общие характеристики (рис. 1). хотим акцентировать внимание на том, что для данной сферы предоставления услуг продуктом проекта является монтаж электроустановки, предназначенной для потребления/трансформации/распределения электрической энергии желаемого напряжения (220/380/10000/35000 в и выше) и заявленной мощности (от 1 квт и выше) переменного тока частотой 50-60 гц, выполненный в соответствии с нормативными требованиями украины (гсн в.2.5-27-2006, гсн в 2.2-15, гсту б в.2.5-38:2008 и правила устройства электроустановок). 3. ценностные ожидания стейкхолдеров проекта основываясь на теории заинтересованных сторон эдварда р. фримена (freeman, 1984) и учитывая практику реализации проектов, их стейкхолдерами являются потребитель, заказчик, куратор, менеджер проекта, члены проектной команды, поставщики и окружение. определим этих стейкхолдеров и их ценностные ожидания в рассматриваемой сфере услуг. 1. потребитель и заказчик  – это чаще всего одно физическое/юридическое лицо, которое имеет жела усовершенствование управления проектных работ; -поддержка деловых связей; -накопление баз данных; -межотраслевой опыт. создание продукта проекта ценность характеристик полученного продукта проекта ценность продукта проекта в контексте решения стратегических задач процесс управления проектом -экологическая безопасность -социальная защита -влияние на культуру общества свойства, которые удовлетворяют ожидания потребителей национальное благосостояние населения; -финансовое влияние на экономику страны; -расширение рынков ценность от соблюдения критериев «железного» треугольника ценностный опыт финансово – экономический результат; -уникальность полученного результата; -ценность от удовлетворения всех стейкхолдеров поддержка репутации компании; -преимущества перед конкурентами; -мотивация членов проектной команды рис. 1. составляющие ценности проекта baltic journal of economic studies 136 vol. 3, no. 4, 2017 ние удовлетворить свои потребности посредством использования электрической энергии. для него ценностью от реализации проекта является получение своевременно и надлежащего качества продукта проекта, то есть установку безопасного электрического устройства соответствующей мощности, которая обеспечит ему постоянное использование электрической энергии, а также возможность получать финансовые поступления от всего сопутствующего оборудования (опор низко и высоковольтных, комплектных трансформаторных подстанций и других зданий и сооружений) посредством предоставления услуг дальнейшего пользования или отчуждения части имеющейся мощности другим стейкхолдерам. 2. куратором является директор предприятия или уполномоченное им лицо, которое предоставляет необходимые услуги в данной отрасли. ценностные аспекты реализации проекта для него проявляются в двух направлениях: обеспечение индивидуальных и коллективных ожиданий. а именно, к первым можно отнести становление деловой репутации, усовершенствование лидерских качеств, накопление опыта руководителя; ко вторым относятся расширение поля деятельности предприятия, преимущества перед конкурентами, развитие технологий, финансовая стабильность и преумножение активов предприятия. 3. менеджер проекта – это главный инженер предприятия, который имеет соответствующее образование, группу допуска по электробезопасности и опыт работы в данной сфере. его ценностные ожидания направлены на поддержание деловой репутации, получение финансовых вознаграждений в виде премий, повышение квалификации и накопление новых знаний, а также создание баланса интересов между всеми участниками команды, что в дальнейшем гарантирует создание ценности для них. 4. членами проектной команды являются представители предприятия либо приглашенные лица из других организаций, которые непосредственно задействованы в реализации проекта. к этим стейкхолдерам относятся: инженер  – проектант, инженер  – сметчик, бухгалтер, исполнитель работ, электромонтеры, водители и эксперты. для них ценностными ожиданиями можно считать получение нового опыта работы в своей и смежных профессиональных областях, обеспечение стабильного финансового дохода, повышение квалификации, опыт деловых взаимосвязей и накопление знаний. 5. поставщиками являются различные фирмы и организации, которые предоставляют необходимые товары и услуги для реализации проекта. практика отечественного бизнеса свидетельствует о том, что к таким относятся предприятия по производству и продаже электрического оборудования и сопутствующих товаров, железобетонных материалов и конструкций, кабельных проводов и комплектующих, электродов и металлических конструкций. для данной группы заинтересованных сторон ценностными ожиданиями можно считать накопление ценностного опыта от сотрудничества с деловыми партнерами, поддержка репутации посредством предоставления качественных товаров и услуг, усовершенствование процессов внедрения своих товаров и услуг на новые рынки, а также финансовая стабильность в результате долгосрочных контрактов. 6. окружением можно считать население – потенциальных индивидуальных потребителей, соседствующих территориально, а также предприятия, представляющие различные рынки, регионы и отрасли страны. главным ценностным аспектом для этих стейкхолдеров является своевременное появление качественного и подходящего количественно продукта проекта на рынке с целью последующего использования. практика украинского бизнеса подтверждает дальнейшую эксплуатацию инженерных зданий и сооружений в таких направлениях: население, которое имеет общие территориальные границы может располагать на взаимодействие с потребителем продукта проекта относительно использования его сооружений (опор низко и высоковольтных, линий электропередачи); население, которое нуждается в переоснащении существующих сетей может рассчитывать на использование средств, передающих электрическую энергию (комплектные трансформаторные подстанции низко и высоковольтных, другие передающие устройства); предприниматели, которые задействованы на других рынках, могут посредством использования сооружения расширять свою деятельность (интернет компании); представители коммунальной собственности, целью которых является благоустройство территорий, могут использовать сооружения для освещения мест общего пользования; модернизация существующих сетей электропередающей организации за счет заказчиков может обеспечить появление новых потребителей и соответственно финансовые поступления для этой организации, что влияет на развитие энергетической отрасли в целом. 4. виды проектов для анализа обеспечения ценностных ожиданий заинтересованных сторон проектов в сфере предоставления услуг по электроснабжению необходимо распределить проекты по видам в данном виде хозяйственной деятельности (табл. 1). для анализа практики выбраны представители рынка предоставления услуг в сфере электроснабжения в киевской области. а именно: ооо «зазимье энерго  – сервис» (лицензия серии ае № 280865), ооо «тера винд» baltic journal of economic studies 137 vol. 3, no. 4, 2017 (лицензия серии ав № 050867) и ооо «тера енерго» (лицензия серии ае № 525589). основанием для этого являются данные главного управления статистики в киевской области. в период с 2009 по 2017 годы эта область входит в пятерку лидеров на рынке строительства инженерных сетей и сооружений. доля выполненных работ представителей данного региона в 2010 и 2012 годах составляет около 20% общей суммы строительства (golovne upravlіnnia statistiki v kiivskіy oblastі, 2017). таблица 1 виды проектов в сфере предоставления услуг по электроснабжению разновидность проекта характеристика проекта *удельный вес в общем количестве, % 1. по характеру лица, которое претендует на мощность: 1.1 проект для физического лица проект обеспечивает стремление физического лица (после подключения – бытовой потребитель) удовлетворить свои потребности в жизнедеятельности надлежащего качества 80,3 1.2 проект для юридического лица проект обеспечивает стремление юридического лица (юридический потребитель) удовлетворить свои потребности в реализации бизнес – идеи 19,7 2. в зависимости от точки подключения: 2.1 проект от сетей энергопередающей организации технические условия (ту) на присоединение к собственным электрическим сетям выдает районное подразделение, в дальнейшем контролирует процесс реализации проекта и заключает двух сторонний договор с потребителем 85,5 2.2. проект от сетей абонентов (физических/юридических лиц) технические условия (ту) на присоединение к собственным электрическим сетям выдает владелец распределительного устройства (комплектной трансформаторной подстанции ктп 10/0,4 кв), в дальнейшем контролирует процесс реализации проекта и дает согласие на заключение потребителем трех стороннего договора с районным подразделением, где выступает передающим звеном электрической энергии 14,5 3. в зависимости от напряжения подключения: 3.1 проект для сетей 0,4 кв техническая документация и монтажные работы выполняются для сетей 0,4 кв 91,6 3.2. проект для сетей 10 кв и ниже техническая документация и монтажные работы выполняется для сетей 10 и 0,4 кв 8,4 3.3 проект для сетей 35 кв и ниже техническая документация и монтажные работы выполняются для сетей 0,4 кв, 10 кв и 35 кв. 0 4. в зависимости от заявленной мощностью подключения: 4.1 проект до 5 квт (включительно) проектом устанавливается необходимость заявленной мощности. по требованиям национальной комиссии, осуществляющей государственное регулирование в сфере энергетики и коммунальных услуг (nkryekp, kiev, 2015) данная мощность является стандартным подключением. предусмотрен монтаж вводно-распределительного учета 42,4 4.2 проект от 5 до 15 квт (включительно) проектом устанавливается необходимость заявленной мощности. по требованиям национальной комиссии, осуществляющей государственное регулирование в сфере энергетики и коммунальных услуг (nkryekp, kiev, 2015) данная мощность является не стандартным подключением. предусмотрен монтаж вводно-распределительного учета 46,4 4.3 проект свыше 15 квт проектом устанавливается необходимость заявленной мощности. по требованиям национальной комиссии, осуществляющей государственное регулирование в сфере энергетики и коммунальных услуг (nkryekp, kiev, 2015.) данная мощность является не стандартным подключением. предусмотрен монтаж вводно-распределительного учета либо ктп 10/0,4 кв 11,2 5. в зависимости от заявленного напряжения: 5.1 проект однофазного подключения (220 в) проект содержит расчеты для однофазной нагрузки 28,5 5.2 проект трех фазного подключения (380 в) проект содержит расчеты для трехфазной нагрузки 71,5 6. в зависимости от масштабов монтажных работ 6.1 монтаж вводно – распределительного устройства (вру) напряжением 0,4 кв проектом предусмотрено выполнение четко регламентируемых работ для строительства вру 0,4 кв 26,7 baltic journal of economic studies 138 vol. 3, no. 4, 2017 таким образом, в данной сфере предоставления услуг среди всего разнообразия проектов, наиболее распространённым является проект внешней электрификации жилого дома от сетей электропередающей организации подключенной мощностью до 15  квт (включительно) трех фазного подключения при условии строительства новых линий электропередачи. менее распространённым можно считать проект строительства и внедрения силовых установок, а именно комплектных трансформаторных подстанций номинального напряжения 10/0,4 кв и сопутствующих сооружений, в виду высокой стоимости данных электроустановок. 5. особенности обеспечения ценности по фазам жизненного цикла проекта для корректного определения ценностных ожиданий и их обеспечения заинтересованным сторонам проекта необходимо представить процесс выполнения наиболее распространённого проекта в условиях бизнес среды украины с распределением по фазам жизненного цикла проекта (рис. 2). проект в данной сфере услуг имеет три фазы жизненного цикла, а именно: инициация, планирование и реализация, завершение. так же следует отметить, что анализ практики реализации проектов определяет важность постпроектного периода с точки зрения накопления всех составляющих ценности от проекта, что таким образом может обеспечивать создание ценности окружению проекта. на первой фазе практика управления проектами акцентирует внимание на взаимодействии заказчика и куратора проекта. их ценностные ожидания обеспечиваются взаимными гарантиями. для заказчика – получить желаемый продукт проекта вовремя, соответствующего качества и количества, для куратора  – обеспечить реализацию проекта, получить финансовые обязательства от заказчика. эти характеристики ценности закреплены соответствующими договорами. важным аспектом определения суммы предоставляемых услуг является составление сметной документации членами проектной команды с помощью программного продукта авк  – 5 последней редакции в твердой форме. это связано с нормативно-правовой базой страны, а именно в соответствии с п. 4.1 «правил определения стоимости проектно-изыскательных работ и экспертизы проектной документации на строительство» (dstu b d.1.1-7:2013, kiev, 2013). к сожалению, реалии украинского бизнеса не обеспечивают все ценностные ожидания для куратора и заказчика. мы полагаем, что для куратора необходимо повышать репутацию своего предприятия, увеличивать активы и обеспечивать стабильный доход, для заказчика также важным является обеспечение этих характеристик, так как его уверенность в предприятии может стать залогом долгосрочного взаимодействия с куратором. вторая фаза жизненного цикла  – планирование и реализация проекта, обусловлена взаимодействием куратора, менеджера проекта, членов проектной команды и поставщиков. практика отечественного бизнеса направлена на обеспечение таких ценностных ожиданий для вышеупомянутых стейкхолдеров, как гарантии финансовых вознаграждений сверх оклада заработной платы, накоплении опыта работы и знаний, частичное повышение квалификации и приращение деловых связей. мы считаем, что наиболее весомым проявлением ценности проекта на данной фазе жизненного цикла должно быть максимальное обеспечение и сбалансированность ценности для каждого участника, что в дальнейшем 6.2 монтаж вру 0,4 кв и линий электропередачи 0,4 кв проектом предусмотрено выполнение четко регламентируемых работ для строительства вру 0,4 кв, установке опор 0,4 кв и линий электропередачи 0,4 кв 41,7 6.3 установка комплектной трансформаторной подстанции (ктп) номинальным напряжением 10/0,4 кв проектом предусмотрено выполнение четко регламентируемых работ для установки ктп 10 / 0,4 кв и строительства необходимого сопутствующего оборудования 7,9 6.4 монтаж линий электропередачи 10 кв проектом предусмотрено выполнение четко регламентируемых работ для установки опор 10 кв и для монтажа сопутствующего оборудования 5,3 6.5 реконструкция линий электропередачи 0,4 кв проектом предусмотрено выполнение четко регламентируемых работ по демонтажу и монтажу опор и линий электропередач 0,4 кв 15,5 6.6 реконструкция линий электропередачи 10 кв проектом предусмотрено выполнение четко регламентируемых работ по демонтажу и монтажу опор и линий электропередач 10 кв 2,9 7. в зависимости от объекта электрификации 7.1 проект внешнего электроснабжение предусмотрены работы по монтажу вру заданной мощности снаружи объекта электрификации 74,5 7.2 проект внутреннего электроснабжение предусмотрены работы по монтажу внутри объекта электрификации в соответствии с заявленной мощностью 25,5 *расчет удельного веса в общем количестве проведен на предприятиях в период 2009-2017 г. г. по результатам реализованных проектов закінчення таблиці 1 baltic journal of economic studies 139 vol. 3, no. 4, 2017 имеет проявление в репутации компании и ее конкурентоспособности на рынке в целом. для этого необходимо более детально рассматривать обязанности и полномочия в соответствии с должностными инструкциями членов проектной команды, разрабатывать коллективные договора, предусматривать адекватность оплаты труда вследствие повышения квалификации членов проектной команды, принимать во внимание договоренности трудового коллектива и обеспечивать заинтересованность членов проектной команды принимать участие в проектах. также стоит акцентировать внимание на поставщиках, которые предоставляют свои товары и услуги на данном этапе жизненного цикла проекта. для них предусмотрено подписание договоров и ответственность по условиям их выполнения. но мы склонны думать, что обеспечение только лишь финансовых гарантий куратора перед поставщиком и предоставление качественных товаров поставщика куратору не может удовлетворить всей ценности. таким образом целесообразным будет поддержка деловой репутации, соблюдение баланса интересов и мотивация участия в проекте для обеих сторон. на третьей фазе жизненного цикла проекта, главными критериями определения ценности для заказчика является своевременное получение надлежащего продукта проекта, для куратора  – оплата услуг по условиям договора. вместе с тем, анализ работы предприятий не показал наличия у них осознанного стремления к обобщению знаний и анализу ошибок выполненных проектов. это свидетельствует о том, что стейкхолдеры не рассматривают накопление опыта как ценностные составляющие реализации проекта. мы полагаем, что накопление такого рода знаний и данных может позитивно влиять на повышение эффективности будущих проектов и является одним из критериев оценки конкурентоспособности предприятия. именно соответствие характеристик, которые были оговорены на фазе инициации, и ответственность команды проекта за их обеспечение i. инициация проекта заказчик (физическое лицо) куратор (директор предприятия) ii. планирование и реализация проекта распоряжение к выполнению поставка материалов заказ материалов поставщик члены проектной команды (исполнитель работ) утверждение распоряжение к выполнению менеджер проекта (главный инженер) утверждение члены проектной команды (электромонтёры) члены проектной команды (инженер-проектировщик инженер-сметчик) выполнение проектно-сметная документация заказчик (получение продукта проекта) куратор (контроль и проверка проекта) iii. завершение распоряжение к выполнению постпроектный период окружение (использование продукта проекта) рис. 2. процесс выполнения проекта по оказанию услуг в сфере электроснабжения baltic journal of economic studies 140 vol. 3, no. 4, 2017 может удовлетворить заказчика в его ценностных ожиданиях. таким образом, куратор, как представитель всей команды, может так же обеспечить свою репутацию и усовершенствовать лидерские качества. постпроектный период, не выделяется в классической теории проектного менеджмента и рассматривается чаще как эксплуатационный период в контексте генерирования денежных потоков. но анализ проектной деятельности украинского бизнеса данной сферы хозяйствования показал актуальность данного этапа и необходимость аккумулировать обеспечение ценности для заинтересованных сторон от проекта с дальнейшим обеспечением ценностных характеристик для окружения проекта. на практике это гарантия удовлетворения ожиданий от продукта проекта проявляется в двух плоскостях: во-первых, постпроектный период является олицетворением обеспечения ценности для заказчика проекта и очень важен для куратора проекта. это связано с нормативно – правовой базой украины. а именно, в связи с «приказом министерства топлива и энергетики украины № 258 от 25.07.2006  г.» и «правилами технической эксплуатации электроустановок потребителей № 1143/13017 от 26.10.2006  г.» (mіnіsterstvo paliva ta energetiki ukraini, 2006) любая электроустановка повышенной опасности должна эксплуатироваться при наличии ответственной особы с соответствующей группой допуска (не ниже 1000в). исходя из этого, в интересах куратора проекта обеспечить все ценностные ожидания заказчика на протяжении предыдущих фаз для последующего взаимодействия и предоставления услуг. этим достигаются такие характеристики ценности, как: для заказчика  – своевременность и качество услуг, финансовая стабильность и уникальность продукта проекта, что приводит в целом к его удовлетворенности; для куратора – обеспечение деловой репутации, финансовый доход предприятия и приоритет перед конкурентами. анализ взаимодействий куратора и заказчика после выполнения проекта на предприятиях, которые анализируются, свидетельствует о наличие договоров о предоставлении услуг по оперативно техническому обслуживанию. но на наш взгляд стоит обратить внимание, почему не все проекты имеют дальнейшее взаимодействие, соответственно не обеспеченны все ценностные ожидания для обеих сторон. во-вторых, ценность продукта проекта, имеет важное значение для такого стейкхолдера, как окружение. обеспечение их ценностных ожиданий от своевременного появления необходимого продукта проекта является важным аспектом развития электросетей и повышения экономического благосостояния страны в целом. 6. выводы в ходе исследования были обобщены подходы к определению категории «ценность» проекта, что позволило определить ее составляющие и место обеспечения, а именно в процессе управления проектом и в процессе создания продукта проекта. при анализе рынка предоставления услуг в сфере электроснабжения нами было резюмировано, что результатом реализации проекта является специфический продукт, а именно монтаж электроустановки. при этом мы пришли к выводу, что заинтересованными сторонами такого проекта являются: заказчиком и потребителем  – физическое (юридическое) лицо; куратором  – директор предприятия; менеджером проекта  – главный инженер предприятия; членами проектной команды  – лица, задействованные в реализации проекта, а именно инженер  – проектант, инженер  – сметчик, бухгалтер, исполнитель работ, электромонтеры, водители и эксперты; поставщиками  – другие представители рынка, предоставляющие свои товары и услуги; окружением  – многие представители, от потенциальных индивидуальных потребителей, соседствующих территориально, до предприятий, представляющие различные рынки, регионы и отрасли страны. анализ показал, что на предприятиях исследуемой отрасли на всех фазах жизненного цикла проекта не обеспечиваются такие ценности, как повышение репутации компании, увеличение активов и обеспечение стабильных доходов, сбалансированность ценности для всех участников проекта, повышение конкурентоспособности предприятия, поддержка деловой репутации и мотивация участия в проекте каждого стейкхолдера. подводя итоги, можем утверждать, что обеспечение ценностных ожиданий в энергетической отрасли частично формируется и создается в связи с отсутствием формального подхода к управлению данной категорией. дальнейшие исследования практики применения инструментального аппарата поможет предоставить рекомендации для более эффективного управления проектами с точки зрения обеспечения ценности проекта. 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(2010). upravlіnnya proektami: praktichnyi aspekt realіzatsіi strategіy regіonalnogo rozvitku: navch. posіb – kiev, s. 276. анастасия лезина особенности обеспечения ценности проектов для стейкхолдеров в условиях украинского бизнеса аннотация. целью работы является определение ценностных характеристик для стейкхолдеров проекта, выделение существующих видов проектов в сфере предоставления услуг по электроснабжению и описание особенностей обеспечения ценности в условиях украинского бизнеса. метод системного анализа и аналитический метод позволили провести анализ развития проектного менеджмента с точки внедрения и использования на практике категории «ценность» проекта и рассмотреть особенности обеспечения ценностных характеристик для основных заинтересованных сторон проекта. методология. анализ системы управления проектами основан на обеспечении ценностных ожиданий для заинтересованных сторон проекта в теории и на практике. развитие сферы электроснабжения в стране имеет важное значения в экономическом становлении страны в период кризисных этапов. для анализа было выбрано 3 предприятия, осуществляющих свою хозяйственную деятельность в данной сфере на территории киевской области. с целью определения особенностей обеспечения ценности для стейкходеров проекта на всех фазах жизненного цикла проекта выделены основные виды проектов и проведен анализ их процентного соотношения среди реализованных проектов на предприятиях в период с 2009 по 2017 год. представлено определение продукта проекта для данной сферы деятельности и описаны основные стейкхолдеры проекта. анализ реализации проектов предусматривает наличие четырех фаз жизненного цикла с частичным обеспечением ценности на каждой из них для заинтересованных сторон. это указывает на не осознанное стремление предпринимателей усовершенствовать свои управленческие навыки с целью повысить эффективность реализации проектов. значимость/оригинальность. аналитические данные обеспечивают дальнейшее развитие данной науки в сфере применения ценностных характеристик при анализе эффективности проектов. в последующем, системный анализ управления проектами на практике позволяет оценить степень использования научных разработок и заполнить пробелы. baltic journal of economic studies 117 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 kyiv national economic university named after vadym hetman, ukraine; bizzbizz inc., canada (corresponding author) e-mail: redko.industries@gmail.com orcid: https://orcid.org/0000-0002-7425-7154 2 kyiv national economic university named after vadym hetman, ukraine; vienna university of economics and business, austria e-mail: oleksandra.moskalenko@kneu.edu.ua orcid: https://orcid.org/0000-0003-1036-5356 3 v. i. vernadsky taurida national university, ukraine; bizzbizz inc., canada e-mail: yana.bizzbizz@gmail.com orcid: https://orcid.org/0000-0002-5009-0062 doi: https://doi.org/10.30525/2256-0742/2022-8-4-117-121 the role of crowdfunding systems during crises and military actions oleh redko1, oleksandra moskalenko2, yana vdodovych3 abstract. this article is about how crowdfunding and crowdinvesting systems can be used during crises and hostilities. this article provides examples of different types of possible crowd-system. research subject. crowdfunding and crowdinvesting systems as the institutional instruments (p2p) which are used during crises and hostilities, among them are as follows: violence crowdfunding systems, general crowdfunding systems, and crowdinvesting systems alike. methodology. the authors used a complex of research methods and approached as interdisciplinary approach, evidence-based approach, and practical business cases. also, general scientific research methods were used (analysis and synthesis of information), as well as an inductive and deductive research methods. the goal of the article is to consider the prospects for the use of crowdfunding platforms as an element of solving the military crisis on the territory of ukraine. conclusions. the special attention was paid to the war crises in ukraine and the situation of the crowdfunding and crowdinvesting systems in ukrainian society. it is provided detailed examples of the use of crowdsourcing systems in ukraine during the war nowadays and explained the need for the creation of an independent ukrainian crowdfunding platform. additionally, the ways of the creation of such a platform are clarified. ukrainian society during the military crisis gained experience in crowdfunding that was not familiar or even available. however, ukrainian society is very actively popularizing crowdfunding or rather its foundations. crowdfunding is currently most common when looking for funding for military needs: from mass arms purchases to financing individual soldiers. in a short time, thanks to the stress of war, many people have made crowdfunding a part of their lives and instilled this habit in society. the first crowdfunding platforms are already appearing to give ukrainians the opportunity to fund some ukrainian startups, companies, and ideas. one of the most difficult elements in creating and launching a crowdfunding platform is not building the platform itself, but integrating it. a decade ago, the creation of a crowdfunding platform and integration of the entire crowdfunding system, was a complicated and costly procedure. the most difficult thing is to integrate the platform into society so that mass use can begin. key words: crowdfunding, crowdinvesting, war in ukraine, solution for crises, solution for hospitalities, covid-19. jel classification: o15, h12 1. introduction over the past few years, covid-19 has shaped our world and changed the economy in which people live today. no sooner had ukraine recovered from the pandemic than it plunged the country into a military crisis that has now brought some new parameters to the economy. the changes showed the transition from the conventional economy to the war economy, which changed industries, laws, and social structure. during this three-year transition, pandemic and war, there was an opportunity to explore these changes and see how new p2p systems, such as crowdfunding, could fit into these rather challenging coming years. baltic journal of economic studies 118 vol. 8 no. 4, 2022 the purpose of this article is to examine the prospects for the use of crowdfunding platforms as an element of resolving the military crisis in ukraine. general scientific methods of research (analysis and synthesis of information on the topic), as well as the inductive method of research, the deductive method and the comparative method were used in writing the article. one of the first uncertainties that appear in the economic picture of a country at war is the erratic behavior of the financial market. (schneider, et al., 2006, p. 625–628). then stocks start to suffer, and brokers look for more stable investments. the first thing that discourages major financial players from investing is government bonds and gold. in addition, stocks of domestic corporations are becoming less attractive in international stock markets, and traders are changing their priority to stocks of corporations that do not come from national economies at war. investors will sell stocks and move to less risky options if the market expects a protracted conflict. thus, a negative collective view of the likely course of events reduces the overall value of the stock market, while the expectation of a favorable course of events makes stocks more attractive. according to the international monetary fund, ukraine's economy, based on gdp, has fallen by about 30-50%, and the war appears to have lasted longer than the world community imagined in its early stages (irtyshchevam et al., 2022, p. 80). one way to smooth things over is to introduce new types of crowdfunding systems that can allow small and medium-sized entrepreneurs and talents to find funding for their projects, survive wartime, and develop their projects on a large scale. such projects can support and provide sustainability for the project owners, their families, and the economy of the country in which these projects are developed. 2. crowdfunding systems that can be used during crises and military actions based on the current economic picture, we can conclude that the economy is feeling the transfor mation in all sectors, and prices are experiencing severe inflation at all stages and in all industries. high rent prices, high food and fuel prices are all hitting the middle class in ukraine hard. if one considers the business sector, the total direct losses of small and medium-sized businesses in ukraine during the full-scale russian invasion are estimated at $64-85 billion. only 15% remained unchanged or even increased from what they were as of february 23 ("during the war, small and medium-sized businesses lost up to $85 billion – experts", 2022). despite such shocking figures, it was noted that after the initial shock had passed, small and medium business in ukraine began to actively renew itself: "since russia's full-scale invasion of our land, almost 150,000 new enterprises have been registered in the country, of which 132,000 are individual entrepre neurs." (schwartz, 2022) the indicators demonstrate once again that small and medium-sized businesses can begin to actively develop during wartime to compensate for the lack of resources and services. as an example, during the war in ukraine, one of the largest shipping companies, nova poshta, opened two branches of its company in poland (eismunt, 2022). however, in addition to these large companies, many individual entrepreneurs have also begun to provide similar services, ahead of large companies. since the beginning of the year, ukrainian citizens have created 10,207 companies in poland ("ukrainians opened 10,000 companies in poland in six months", 2022). and it is when an individual entrepreneur plans to launch a company providing needed services or products that he can find support and funding through a crowdfunding platform. continuing with the delivery service example, imagine ukrainian refugees in europe who would like a safe and familiar delivery service. of course, people would support such an initiative to get a much-needed service. crowdfunding systems are helpful in two scenarios: when people are enjoying a good economy and have some bonus funds to spend on projects, or when people are suffering from a shrinking and falling economy and are looking for a way to use the remaining funds to find a way to survive. probably the second scenario is the most effective for developing a mindset and habit of crowdfunding. this is especially true for funding military purchases. for example, "in the course of the "road of victory " initiative, initiated by kyivstar, okean elzy group and the "come back alive" charitable fund, 14,818,840 hryvnias were collected for 15 pickups by ukrainian military." ("ukrainians collected funds for 15 new pickup trucks for the armed forces", 2022) there are many examples of fundraising and they range from 1,000 hryvnias to six-figure sums. "as of march 5, 2022, a total of almost 10 billion uah equivalent was transferred to the special account opened by the national bank to support the armed forces of ukraine," ("more than uah 10 billion was collected to support the army and humanitarian aid", 2022) and it is worth noting that funding is also actively received on other accounts of various charitable foundations and individuals. the types of crowdfunding (p2p) systems that are used during crises and warfare are as follows: violence crowdfunding systems – began during the war against isis, when crowdfunding systems gave people a psychological opportunity to send financial aid to the u.s. army and thus support actions in the war zone (sunday grove, 2019, p. 89). in ukraine there is a perfect example of the actor serhii prytula, who raised money through the media and the baltic journal of economic studies 119 vol. 8 no. 4, 2022 internet for the power systems under the name bayraktar. he did not use any crowdfunding platform to do this, but he did use the media to raise the funds needed for the war. in the case of the u.s. army and the u.s. society, they used the media and a specific crowdfunding system platform. general crowdfunding systems – such as kickstarter, indiegogo or gofundme are systems that can marketplace your project or talent, but these projects or talents can’t have a violent purpose. in the case of these three aforementioned platforms, it functions and promotes projects through so-called bakers and rewards. bakers are platform users, and rewards are offered by project creators (sometimes recommended by the platform itself ) (shengsheng et al., 2014, p. 2–3). in ukraine, these platforms cannot be used because these platforms are integrated with the country 's financial systems, and in the case of ukraine, because of the large number of fraudulent activities on the internet before and during the war, these organizations have not taken steps towards the ukrainian market. crowdinvesting systems – these are systems that use platforms to bring venture capitalists together and invest in the equity of a project by obtaining some kind of benefit or equity. the best examples are the british platforms crowdcube and seeders (this last one is also a portuguese-based corporation). these platforms offer investors shares in a future or already established limited liability company. but in the case of some countries, where notarized share transfer procedures are more expensive, projects use profit-sharing notes, silent partnerships and profit-sharing loans. the direct difference between crowdfunding and crowdfunding is that in crowdfunding, the backers receive some reward, while in crowdfunding, the backers are not backers, but venture capitalists who expect to receive some monetary and equity contributions (binda, 2017, p. 8–9). in ukraine, such systems also do not yet exist. all three of these systems can be used in times of crisis and during warfare. the first system has some ethical problems that should be dealt with separately. but in the case of the crowdfunding and crowd funding systems, it is clear how they could smooth out a falling economy and rising prices in all sectors. the fact that such systems do not exist in ukraine, and that those that exist in western markets cannot be activated in ukraine, testifies to the incredible niche market, which is absolutely free from competition. during the war in ukraine, the airbnb platform was used to raise money for people affected by shelling. the apartments and houses that were present on the platform were financed by bookies, even without any further sense of actually coming to live there (comerford, 2022). the platform owners and directors permitted this and the bakers used, an absolutely non-crowdfunding platform, to crowdfund for the sake of the citizens of ukraine. now one can only imagine what will happen when ukraine has its own, real system of crowdfunding and crowdfunding, which will make it possible to support this country in times of war, during any impending crisis, as well as in times of peaceful and positive dynamics. after all, examples of mass fundraising are already actively taking place during the seven months of the war. military crowdfunding under the slogan "donate for the armed forces of ukraine" has become part of the lives of many citizens, there are constantly raising funds for various things: cars, weapons, drones, bulletproof vests, tents, etc. the pace of fundraising, governed by the war, became very fast: "in one day the special account of the national bank, opened to collect funds to support the armed forces of ukraine, received almost 300 million hryvnia (in equivalent)." ("in one day, almost uah 300 million was deposited into a special account for collecting funds for the needs of the army ", 2022) 3. how to create and integrate crowdfunding systems in a crisis and hostile environment? one of the most difficult elements in creating and launching a crowdfunding platform is not the creation of the platform itself, but its integration. for example, ten years ago, creating a crowdfunding platform and integrating the entire crowdfunding system was a complicated and expensive procedure. however, this has changed dramatically in the last 3 years, and now you can create a crowdfunding platform using wix, wordpress, themeum, woocommerce, etc. the hardest part is to integrate the platform into society so that mass use begins. the advantage of international platforms, such as kickstarter, is that the platform works in many countries, which means it generates trust among users and receives a mass turnover of users (both innovators and backers). one of the reasons why ukraine as a country cannot use any of the already existing crowdfunding platforms around the world is that these platforms are companies that have to be very responsible for transactions and show their actions very transparently. the ukrainian market is still not cleared of the high level of fraud and digital security problems, which is the reason why for the last year none of the existing crowdfunding platforms allowed ukrainian citizens to register on the platform. this is one of the weighty reasons why there is no big platform in ukraine yet. however, more and more enthusiasts are creating crowdfunding platforms in ukraine like spilnokosht, razomgo, gofunded (tolub, 2021), however, none of these platforms can be called a full-fledged ultimate crowdfunding platform in ukraine, also due to the volume of money turnover within the platforms. empathy, happiness, guilt, and identity are psychological factors that drive backers to fund various projects posted on various crowdfunding baltic journal of economic studies 120 vol. 8 no. 4, 2022 platforms (gerber, et al., 2012, p. 2–3). interpersonal communication and a spark between the one who is needed and the one who supports is a must in such an environment. it can be said that crowdfunding platforms create a sense of community, a sense of ecosystem and belonging to this or that problem, to this or that trend, to this or that moment of happiness, to this or that type of movement. one of the crises that showed the effectiveness of crowdfunding was before the war in ukraine, the covid-19 pandemic. during 2 years of the worst pandemic in the world we expected crowdfunding platforms to appear on the ukrainian market, but it did not happen. meanwhile, in different countries of the world crowdfunding still had a chance to show itself as a well-deserved place of help. just in france, nationwide platforms like leetchi, ulule and kisskissbankbank organized themselves to embrace the different new problems which appeared all through france with the coming of the covid-19 crisis (moine, 2020, p. 1–5). people across the country used these platforms to donate and support the necessary organizations or individuals to adapt to the new reality of the pandemic and confront the problems that began to pile up throughout the region. this case showed how well crowdfunding platforms can solve problems, even hidden ones, and help people band together to create projects and donate the necessary funds to support these projects and help solve problems. crowdfunding platforms were also used during the last covid-19 crisis in china (ho, 2021, p. 4–10). the chinese experience has shown that it is necessary to become emotionally and personally attached to the problems that a particular project solves. the use of photographs, the use of external sites to support the project, the use of social media, and the creation of a problem-solving community were all steps toward success and powerful support for various projects during the pandemic. also, the feeling that these projects were not forgotten and active was a big factor for supporters. crowdfunding platforms are just platforms, they are places where people can meet for a specific purpose, but at the end of the day the users (backers or supporters) are the ones who create a community, upload videos and information about the success of the money invested and the positive results that these money and projects have produced. crowdfunding can be adapted to any type of society, religion, gender or ideology. fintech has opened the door to unite crowds into communities and societies and made it possible to be together and face any crisis or enmity as one nation, one gender, one party, one race, or one group of people. in malaysia, during the covid-19 pandemic, there was created a special islamic crowdfunding system with its own type of rules, which were halal, based on the al shariah and the quran (dzuljastri, 2021, p. 92–99). this shows that crowdfunding can be adapted to a very strict and conservative society with high standards in the area of rules and restrictions. many examples are related to gender crowdfunding. there are many cases in the field of entrepreneurship where women have created their own crowdfunding platforms and systems to continue their projects and fight gender discrimination and specific problems together. during the covid-19 pandemic in south america, there were many cases where women collectively organized their own crowdfunding systems to promote and advance their innovative projects (alva, 2021, p. 2–5). under covid-19 in ukraine it is difficult to find striking examples of the use of crowdfunding in any form, but during the war there are already striking examples of co-financing, not even directly related to the purchase of military equipment. in addition, a whole trend to support ukrainian entrepreneurs and small businesses under the slogan "pidtrymui ukrainske" ("support ukrainian"). at this point, the war has motivated ukrainian society to actively support and develop ukrainian projects, businesses and manufacturers. this trend is great for popularizing crowdfunding, as society is particularly interested in supporting local businesses. 4. conclusions as discussed in this article, ukrainian society during the military crisis had an experience with crowdfunding that was not familiar or even available. however, ukrainian society is very active in popularizing crowdfunding, or rather its basics. currently, crowdfunding is most common when seeking funds for military needs, from massive weapons purchases to funding for individual soldiers. in a short time, thanks to the stress of war, many people have made crowdfunding part of their lives and instilled the habit in society. the first crowdfunding platforms are already appearing to give ukrainians the opportunity to fund some ukrainian startups, companies and ideas. a review and analysis of various fundraisers suggests that a full-fledged crowdfunding platform can become very popular. this is important, among other things, for the popularization of ukrainian arbitrage, which is a popular trend in ukraine. it should be noted that motivation through military stress, combined with pro-ukrainian trends and the digitalization of ukrainian society can give incredible results and possibly bring crowdfunding to a new level of development. baltic journal of economic studies 121 vol. 8 no. 4, 2022 acknowledgements: the article was written within the framework of the grant of the ministry of education and science of ukraine for young scientists titled "the post-pandemic paradigm of socio-economic development of ukraine in the coordinate system of the digital economy " (2021–2023) (ukrainian state registration number 0121u109496). references: alva, e., urcia, m. c., & vivas, v. (2021). entrepreneurial bricolage: crowdfunding for female entrepreneurs during covid-19 pandemic. journal of entrepreneurship in emerging economies, р. 22. binda, j. (2017). crowdfunding as a kind of social support of business ventures. scientific journal wsfip, vol. 2 (1), pp. 5–26. comerford, d. will booking an airbnb help ukraine? why people make counterproductive decisions about charity. the conversation. available at: https://theconversation.com/will-booking-an-airbnb-help-ukraine-whypeople-make-counterproductive-decisions-about-charity-178839 during the war, small and medium-sized businesses lost up to $85 billion – experts. ukrinform. available at: https://www.ukrinform.ua/rubric-economy/3480722-za-cas-vijni-malij-ta-serednij-biznes-vtrativdo-85-milardiv-eksperti.html dzuljastri, a. r ., syamsu, r . z., & qosdan, d. (2021). customers’ representation on islamic crowdfunding as a possible financial solution for the pandemic covid-19 crisis in malaysia. journal of islamic finance special, vol. 10 (1), pp. 92–100. eismunt, v. "nova poshta" opened its first branches in two cities in poland. zahid.net. available at: https://zaxid.net/nova_poshta_vidkrila_pershi_viddilennya_u_dvoh_mistah_polshhi_n1551426 gerber, e., hui, y., & kuo, p. i. (2012). crowdfunding: why people are motivated to post and fund projects on crowdfunding platforms. northwestern university, creative action lab. p. 10. ho, h. c., lim chiu, c., mansumitrchai, s., yuan, s., et. al. (2021). the influence of signals on donation crowdfunding campaign success during covid-19 crisis. int. j. environ. res. public health, 18, 7715. p. 25. in one day, almost uah 300 million was deposited into a special account for collecting funds for the needs of the army. national bank of ukraine. available at: https://bank.gov.ua/ua/news/all/za-odnu-dobu-naspetsrahunok-dlya-zboru-koshtiv-na-potrebi-armiyi-nadiyshlo-mayje-300-mln-grn irtyshcheva, i., kramarenko, i., & sirenko, i. (2022). the economy of war and postwar economic development: world and ukrainian realities. baltic journal of economic studies, vol. 8 (2), pp. 78–82. moine, a., papiasse, d. (2020). evidence from france: how crowdfunding is being used to support the response to covid-19. lse european politics and policy (europp) blog : evidence from france: how crowdfunding is being used to support the response to covid-19. more than uah 10 billion was collected to support the army and humanitarian aid. national bank of ukraine. available at: https://bank.gov.ua/ua/news/all/na-pidtrimku-armiyi-ta-gumanitarnu-dopomogu-zibrano-ponad10-mlrd-grn schneider, g., & troeger, v. e. (2006). stock market reactions to international conflicts. journal of conflict resolution, vol. 50 (5), pp. 623–645. schwartz, d. aid in time of war: how the government can stimulate the development of business. unian. available at: https://www.unian.ua/economics/finance/dopomoga-ukrajincyam-pid-chas-viyni-2022-yakderzhava-mozhe-stimulyuvati-rozvitok-biznesu-novini-ukrajina-11953230.html shengsheng, x., tan x., dong, m., & qi, j. (2014). how to design your project in the online crowdfunding market? evidence from kickstarter. thirty fifth international conference on information systems, auckland. p. 8. sunday grove, n. (2019). weapons of mass participation: social media, violence entrepreneurs, and the politics of crowdfunding for war. european journal of international relations, vol. 25 (1), pp. 86–107. tolub, n. crowdfunding in ukraine: how it works and how it is useful in business. the page. available at: https://thepage.ua/ua/business/kraudfanding-ukrayina-sho-ce-take-yaki-platformi-isnuyut-ta-yaki-perevagi ukrainians collected funds for 15 new pickup trucks for the armed forces. ukrinform. available at: https://www.ukrinform.ua/rubric-uarazom/3562418-ukrainci-zibrali-kosti-na-15-novih-pikapiv-dla-zsu.html ukrainians opened 10,000 companies in poland in six months. uamedia. available at: https://uamedia.eu/ economics/ukrayinci-za-pivroku-vidkrili-u-polshhi-10-tisyac-kompanii-2066 received on: 30th of september, 2022 accepted on: 14th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 156 vol. 4, no. 1, 2018 corresponding author: 1 international economics and marketing department, taras shevchenko national university of kyiv. e-mail: vikzhur@gmail.com 2 international economics and marketing department, taras shevchenko national university of kyiv. e-mail: olgaprygara@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-156-162 consumer behaviour formation in the customized service markets: a case of ukraine victoria zhurylo1, olga prygara2 taras shevchenko national university of kyiv, ukraine abstract. target setting. in modern conditions, in some markets for goods in mass demand, companies are increasingly beginning to introduce customization in marketing activities, which involves the implementation of marketing tools aimed at ensuring a wide differentiation of the trade offer, the establishment of direct communication with the target audience, which provides an opportunity to attract the consumer to the production of goods and to adjust product under its certain requirements. uninvestigated parts of general matters defining. the study of the market behaviour of consumers is a branch of knowledge that is rapidly and dynamically developing and falls within the scope of scientific interests of a large number of scientists. the emphasis in existing studies of consumer market behaviour is made on the study of commodity markets. there are publications devoted to questions of consumer behaviour research in the service markets, but there are practically no publications on the study of behavioural patterns in service markets on an orderly basis. the purpose of the article is to study features of the market behaviour of consumers on the ukrainian market of exclusive confectionery products to order. methodology. the authors of the article conducted a marketing research on the motivation and behaviour of consumers on the ukrainian market of exclusive confectionery products to order. the sample comprised 117 people, of which 71% of the respondents were women, 29% of respondents were men. the statement of basic materials. the main purchasing motives of the consumer who decides to order exclusive confectionery products are investigated and it is revealed that the ordered product is characterized by a high level of emotional consumer value. the description of the customer’s motivation field is presented and consumer risks, which influence the market behaviour of consumers of exclusive desserts, are viewed. according to the results of the study, such existing areas of dissatisfaction of target consumers are identified, namely, design mismatch expectations, unjustified prices, dissatisfaction with taste, the inconsistency of packaging, complex order procedure, which requires time and effort. conclusions. using the results of the conducted marketing research, recommendations for producers of exclusive desserts to reduce possible dissatisfaction of the consumer when ordering exclusive desserts are presented. first of all, manufacturers should try to provide as much as possible a clear description of the offered services, try to visualize and materialize the offer to the consumer, thus reducing his perceived risks. key words: consumer behaviour, buying process, information search, customization. jel classification: d12, d91, d83, ll1 1. introduction the current stage of socio-economic development of our society is characterized by the tendency to individualize the process of consumption in certain commodity markets and services markets. the high intensity of globalization processes and increased competition lead to certain transformational phenomena in the market and information environments, in which the modern consumer is overwhelmed by market information, faces the problem of choosing markets for mass-market products, “tired” from “faceless” goods and complicated choices. this leads to increased consumer demands, the appearance of significantly higher queries regarding the qualitative characteristics of the product, design, ergonomic and aesthetic indicators, the need for individual service. in some markets for goods in mass demand, companies are increasingly beginning to introduce customization in marketing activities, which involves the implementation of marketing tools aimed at ensuring a wide differentiation of the trade offer, the establishment of direct communication with the target audience, which provides the opportunity to attract the consumer to the production of goods and to adjust product under its certain requirements. baltic journal of economic studies 157 vol. 4, no. 1, 2018 2. review of theory and literature recently, the study of the market behaviour of consumers is a branch of knowledge that is rapidly and dynamically developing and falls within the scope of scientific interests of a large number of scientists. during the last decades, a large number of scientific and practical works devoted to this topic have been published. this interest is primarily due to the fact that the problem of market behaviour of consumers is a key issue in marketing activities of companies since the realization of its economic interests directly depends on the company’s ability to predict the actions of the target audience and to influence consumer decisions through the use of communication strategies and marketing tools. among the main areas of consumer behaviour research, which reflect the modern approaches and aspects studied by scientists in previous centuries, including the position of marketing concept, one can distinguish the following: consumer behaviour studies in the classical economic theory, where the focus is done on clarifying the causes economic decisions of a person (a. smith, d. ricardo, h. gossen, k. menger); research of the decision-making process by the consumer under the influence of a set of incentive incentives: marketing, situational, psychological, environmental factors (f.  kotler 1999, 2005, 2008, j.  engell, r .  blackwell, p.  miniard 2006, michael r .  solomon 1992, david a.  statt 1997, g.  foxol); formation of the concept of “demonstrative consumption” as a social phenomenon from the standpoint of socio-economic stratification of society (t. veblen 1899, g. simmel 1905, j. baudrillard 1970, p. bourdieu 2000, a. toffler 2006); studying the impact of cultural aspects and gender factors on consumer behaviour (p. lunt, s. livingstone 1992, h. dittmar 1995); research on the influence of mass communication on consumers, the impact of advertising on consumer behaviour (r . cialdini 2005, a. pratkanis 2007, e. aronson 2001, d. ogilvy 1983); the formation of the concept of “behavioural economics”, in which, with the help of experimental methods, human behaviour is investigated in conditions of uncertainty, which proves that irrational behaviour of a person is not accidental, it is predictable (d. kahneman 2000, a. tversky 1982, 2000, p. slovic 1981, 2007, d. ariely 2010). consequently, the degree of development of the problem is characterized by a rather high level and indicates its relevance and urgency for economic science and society. consumer market behaviour is the human activity associated with the selection, acquisition, and consumption of products or services to meet the current needs. being on the market, the consumer goes through certain stages, namely: awareness of the need, seeking information on possible options for satisfying it, offered in the market, assessing existing market alternatives, buying decisions and consumer reaction to the purchase, which is to evaluate the used product based on the feeling his satisfaction. it is becoming more popular in ukraine to buy exclusive confectionery products for a present and order them on own holidays, this trend contributes to the rapid growth of demand in this market and activates the marketing activities of companies serving this segment. the aim of this article is to study the features of the market behaviour of consumers in the ukrainian market of exclusive confectionery products and describe the stages of the buying process such as need recognition, information search, alternatives evaluation, purchase decision, and post-purchase behaviour. 3. the statement of basic materials the authors of the article conducted a marketing research on the motivation and behaviour of consumers on the ukrainian market of exclusive confectionery products to order. the sample comprised 117 people, of which 71% of the respondents were women, 29% of respondents were men. the sample was formed on an occasional basis: different types of consumers took part in the survey – those who had already ordered confectionery products earlier, and those who never had such experience; those who like sweets and constantly buys it, and those who absolutely do not feel the tendency to consume desserts but consider such a purchase as a gift or element of a desert. let’s consider the details of each of the stages of the consumer buying process: need recognition, information search, evaluation of market alternatives, purchase decisions, and after-purchase evaluation. 4. need recognition according to the results of the study, the main consumer motives of the consumer who decides to order exclusive confectionery products is the desire to make a lovely one, raise your mood, have fun, impress guests. about 85% of respondents said that they ordered a dessert not for personal consumption, but for a gift to their loved ones, colleagues, friends, family holidays or celebrities. the customer pays for the emotional reaction of the person who receives this gift, and even more – for the emotional satisfaction of this reaction. consequently, the ordered product is characterized by a high level of emotional consumer value, which indicates a special attention of the customer and his high involvement in the purchasing process. let’s analyse the concept of value orientations of consumers in the market under study by m. rokeach [1], in which the researcher proposes to consider the values of two types: terminal and instrumental. terminal values are a person’s conviction of the goals and ends of the world, to which he aspires, namely happiness, wisdom, freedom, and so on. instrumental values relate to representations about desirable behaviours aimed at baltic journal of economic studies 158 vol. 4, no. 1, 2018 achieving terminal values (honesty, responsibility, courtesy, etc.). table 1 provides instrumental and terminal values that are inherent to consumers based on the results of the study. consequently, the consumer’s motivation field consists of the following main motives: • the motive of satisfaction with the pleasure of relatives and close people. from 68% to 76% of consumers get pleasure from showing their attention to their relatives and observing their emotional response; • the motive of the product usefulness and safety of consumption. from 46 to 54% of consumers are confident that exclusive confectionery products do not contain artificial flavours, gmos, and other harmful ingredients; • the motive of belonging to a certain group of people who make individual orders and do not consume mass-market products. from 46 to 56% of the target audience associate themselves with a group of people who are aesthetes, have a good taste, can afford to order exclusive desserts; • the motive of freedom and creativity. from 24 to 36% of consumers like to have the freedom to choose, realize their own vision of the product, and not be limited in their choice; • epistemic motive. from 24 to 36% of consumers believe that the order process is associated with the expectations of novelty and new emotions, they try to taste something new and special. 5. information search after the realization of the needs, the consumer faces a choice: where to order an exclusive dessert, which sources to attract to find the necessary information, where to start? therefore, the next stage in consumer behaviour is information search – it is a motivated process of activating a consumer of knowledge stored in his memory (internal search) or acquiring information from external sources (external search). it is not always the consumer who needs external search, sometimes he has enough internal searches to make a purchasing decision, during which there is indirect and direct internal search activity. indirect internal search activity is carried out when the consumer extracts from memory that knowledge that was unconsciously incorporated into his long-term memory. direct internal search activity occurs when the consumer deliberately extracts from the memory information related to a specific problem. the need to attract all possible sources of information and components of a search depends on a number of factors: the existence of a customer’s already established pattern of behaviour, the loyalty to a particular manufacturer/brand/product, the individual’s propensity to innovate and the desire to taste something new, consumer experience and satisfaction/ dissatisfaction with the previous orders and so on. we have determined that in the investigated market the consumer does not always turn to the external search, but always first turns to his own experience of solving the existing problem, then to the memories of the experience of friends and only later – to the external search. the majority of respondents (87% of respondents) noted that the positive past experience of cooperation with a certain confectionery manufacturer on request was a key factor in encouraging them to re-order and save time and effort in solving the problem. nevertheless, certain respondents (36%) noted that after 5-6 orders from the same manufacturer and being satisfied with the quality of the product and service, they are thinking about finding another confectionery, trying table 1 the scale of the value of target consumers of exclusive confectionery products to order instrumental values terminal values high queries: the desire to get a quality product with a special, unique design for the appropriate fee. the happiness of others: when ordering exclusive desserts, a person gets emotional satisfaction precisely because this product brings pleasure and joy to others – those to whom he was appointed as a present or guests on his own holiday. feelings, caring: the desire to make pleasure to relatives. life in beauty (the beauty of art): special desserts are ordered by aesthetes, who understand its value as a work of art, not just as a combination of confectionery ingredients. creativity: an opportunity for the consumer to prove himself through the order of an exclusive dessert, something absolutely unique. health: a person orders a high-quality dessert, in which only natural ingredients are used because they are aware of the value of such foods for their health and the health of their family. ability to love: ordering a product as a manifestation of love for a loved one. public recognition: in fact, the consumption of an exclusive dessert takes place in the environment of other people and in fact is demonstrative. a person is pleased when the people approve of such a choice of product, make compliments on this account, want to follow the example, are interested in the manufacturer. rationalism: it’s rational to spend a certain amount of money on a quality product that is made from natural and safe ingredients. an interesting life: a person seeks to diversify his own life, seeks to receive new emotions even in everyday consumption and to make certain moments in his life special. courage: the ability to dare for something unusual, try something new, risk and experiment with taste and design. cognition: exclusive desserts are every time absolutely new emotions, the search for new tastes and designs. source: compiled by the authors on the results of marketing research baltic journal of economic studies 159 vol. 4, no. 1, 2018 to get “something new and interesting.” consequently, according to the results of the study, the following factors were identified, which determine the need for additional information: 1) consumer loyalty to a brand, which is formed under the influence of high emotional commitment of customers and a high level of satisfaction with the previous order and service; 2) the quality of existing knowledge and the availability of information that directly affects whether the consumer will base his choice only on internal search or still decides to supplement the lack of knowledge by external search; 3) time factor, in the situation when a pre-order was made by the consumer for a long time, therefore, he is not sure that the quality of products is still maintained at the proper level and the confectionery will be able to satisfy all its requirements; 4) the degree of involvement of the consumer in the process of solving the problem, which is mainly determined by the personal significance for the customer as much as possible to meet the existing needs and, accordingly, determines the level of motivation; 5) the individual’s willingness to change the manufacturer and try new tastes. there are two groups of specific factors influencing the external search for information that can lead to an increase or weakening of the user’s search activity – situational and individual factors. table 2 provides a comprehensive matrix of factors of influence on the search for external information on the purchase of exclusive confectionery products. 6. evaluation of market alternatives before taking a final decision in favour of a particular brand, the consumer always assesses existing market alternatives by applying a particular consumer choice strategy. the rules for making consumer decisions are divided into two groups: compensation rules that provide consumer compensation for the low level of some attributes of the product due to the high level of other attributes and non-compensation, which does not allow compensation of low ratings of one attribute with high estimates of another attribute. we have determined that a significant proportion of consumers (82% of respondents) of exclusive confectionery products make a purchasing decision using a noncompensated consumer choice model. they choose exclusive desserts precisely because of the criterion of exclusivity (peculiarities, individuality, specificity), which are not ready to yield, even if other attributes of goods are highly appreciated. among the non-compensation rules, in our opinion, the target consumer’s behaviour is characterized by a disjunctive decision rule when the consumer has the minimum requirements only for the most significant criteria. that is, the consumer shares all attributes of the table 2 the matrix of factors influencing the search for external information by the consumer of exclusive confectionery products direction of influence influencing factors situational factors individual factors increasing search activity social pressure from the surrounding and friends who buy confectionery products on an individual order; high price of the product – confectionery products on an exclusive order are more expensive than usual products; intense competition in the market and a high level of differentiation of the product offer, which complicates the choice of potential consumers; clear competitive positioning by the criterion of a special product group, which distinguishes confectionery products on request from mass-market products. high level of consumer involvement as a consequence of the special significance of the purchase; satisfaction with the process of knowledge, opening of new opportunities when ordering desserts; satisfaction directly from the process of ordering a product, tasting ingredients, developing your own design; focusing on the health benefits of consuming products made of high quality and natural ingredients; belonging to a particular social group that consumes exclusive goods. weakening search activity lack of time in search for market information; influence of a competent specialist / recommendation of friends; complexity of obtaining market information (low level of communication activity of existing manufacturers). high affection for a particular brand (unwillingness to look for something new if there is a confectioner that fully meets the requirements of the consumer); lack of knowledge about the subtleties of the technological process of manufacturing products and the possibilities / restrictions of manufacturers specializing in individual orders; low level of involvement of the consumer in the process of purchase. source: compiled by the authors on the results of marketing research baltic journal of economic studies 160 vol. 4, no. 1, 2018 product on essentially important and secondary, and considers only those variants, which receive from it the best estimation according to certain dominant attributes. thus, even the best positions of the alternative option for non-dominant attributes are not taken into account at all, because it does not compensate for the insufficient level of the dominant attribute. according to the research, it was determined that the customer of exclusive desserts is motivated by such key attributes of the product as the exclusive design, taste and naturalness of the ingredients used. although among these characteristics of the product in the vast majority of respondents the design predominates, and the position in the rating of the significance of the attributes of the taste and the naturalness of the ingredients varies. it is determined that there are a number of biased attitudes and beliefs among target consumers: – the first, exclusive confectionery products “should” be expensive (62% of respondents indicated a high price segment, 32% of respondents – the price segment is above average, 6% of respondents – the average price segment); – the second, exclusive confectionery products are made exclusively of natural and safe ingredients for health (about 89% of respondents adhere to this position); – the third, custom-made confectionery cannot be tasteless, as it is made “with love and with soul” by highlevel professionals (90% of respondents fully agree with this statement). w hen assessing market alternatives and choosing a confectioner, the consumer assesses the risks that the manufacturer has the ability to influence and to use certain tactical actions to reduce their negative impact on the consumer. table 3 provides information on the main types of consumer risks in the market under study and possible consumer actions aimed at preventing these risks and tactical actions of the manufacturer, which are recommended to reduce the risk. table 3 consumer risks affecting the market behaviour of consumers of exclusive desserts the type of risk and its essence possible actions of the consumer to prevent the risk possible tactical actions of the manufacturer, which are recommended to reduce the risk functional the ordered product may not perform the basic functional purpose due to a misunderstanding between the customer and the manufacturer, due to a lack of clearly defined technical specification. describe all wishes and reservations in detail, send referrals, draw a sketch as needed. to maximize the process of drawing up the technical task, to offer testing of samples of the main components of the product, to receive written confirmation of the requirements for the future product. financial the discrepancy between product price and quality, price discrepancy and design. detailed study of the price, components of the value of the order, taking into account the importance and the necessity of each of them. avoiding unjustified overpricing, providing the appropriate high quality at a set price, informing the consumer about all the cost components, about possible additional costs during production social a negative assessment by the representatives of the desired social group, dissatisfaction with those whom the customer planned to impress (taste, design, reputation of the confectionery). studying the reputation of the confectionery through reviews, comments, recommendations of friends and experts. continuous reputation process by demonstrating the satisfaction and loyalty of customers who have already made orders and avoided this risk, disseminating positive brand information through engaging social networks, professional circles, serving social content events to promote the brand. time significant time spent searching for confectionery, discussing all details and ordering. do not waste time searching and turning to a confectioner, where he has already made an order or advised by his friends/colleagues. to trust the professional and not to discuss every detail of the order, choose a ready-made option among the offered provide as much information as possible about the product and pricing policy of the company on its website (on the page on the social network). correctly build communication, develop an algorithm that can create the technical task for each order as quickly and efficiently as possible. availability of testing of the main components of the order. physical health damage over the use of ingredients of poor quality. maximize the composition of products, require quality certificates on the components of the product. carrying out an order in a proven manufacturer’s own experience / based on a positive feedback from an authoritative expert. production of quality products, without the components harmful to human health. obligatory clarification of the fact of the presence of allergic reactions, intolerance of certain components. formation of the image of natural production and a safe brand. source: compiled by the authors according to the research results baltic journal of economic studies 161 vol. 4, no. 1, 2018 7. post-purchase behaviour at the fourth stage of the behavioural process, the consumer directly decides on the order and, on the last, fifth stage, assesses the purchase, based on a sense of satisfaction or dissatisfaction with consumption. consumer satisfaction is a positive opinion of the consumer as to the suitability of the benefits received from consumption of the product in its expectations, which influences its purchasing decisions. the key factors that influence the level of consumer satisfaction include: attributes of the product (the quality of the product perceived by the consumer and its price). mostly, consumers perceive the price of a product as an indicator of its quality: the more expensive it is, the higher quality is. a level of consumers’ profit is one of the key factors that influence forming the target audience. consumers with a low level of profit fully refuse to buy such service on the stage of decision-making about the purchase of dessert or a gift because of the high price, following the position “pastry products shouldn’t be so expensive.” consumers with a middle level of profit make a reasonable choice and use possibilities to save on certain components, follow the position “better, but the best,” buying a small size of the exclusive product instead of large, that it is offered to in ordinary shops. consumers with the level of profit higher than middle are less sensible to the price and follow the principle “let it be expensive, but i can pay for exclusive and quality product, and for the impression of the person whom this dessert is intended to.” consumers with a high level of profit are not sensitive to price, they follow the position “price is not important, there are no limitations on a budget, the main point is to get a unique and delicious product, from which we will get a pleasure.” there is also a psychological perception of the price by the buyer, consisting of determining its fairness or injustice, that is, the correspondence of the value received to the amount of money spent.); quality of service; availability of products (presence of goods in the trading network and ease of purchase); latitude of the product range (variety in meeting needs). if the advertisement or the manufacturer exaggerates both the taste and components of the product, then the expectations of the buyer will be overestimated, and after purchase, it will be either completely satisfied or somewhat disappointed (depends on many factors). the greater the difference between expectations and the actual result, the more disappointed the buyer will be. to avoid this, it is necessary to optimize work with the client, to maximize detail the technical task. but even if the manufacturer, for his part, will make every effort, there is still a risk of dissatisfaction that accompanies individual orders in any sphere, not only in the confectionery industry, since the understanding of these or other concepts may differ from the customer and the performer, because very often the customer himself does not understand what exactly he wants to get as a final result. according to the results of the study, the following areas of dissatisfaction with target consumers are identified: – design mismatch with expectations (12% of respondents); – unjustified price (4% of respondents); – dissatisfaction with taste (4% of respondents); – inconsistency of packaging (9% of respondents); – complicated order procedure, which requires time and effort (8% of respondents). we stand on the position that there is a tradition in ukraine in the consumption of pastries on all holidays and celebrations of personal and domestic character, during a meeting with family and friends. some celebration or holiday is associated for consumers with something special that creates a stimulus to order exclusive pastries. in this situation, rational reasons of behaviour yield irrational and emotions prevail as the main reason for purchase in the consciousness of consumers. modern transformations in consumers’ behaviour in the market of pastries are caused by the influence of situational and individual consumer factors, and also factors of the environment. these factors are: the level of profits of the population, growing demand on the ordering of ready dishes and pastries for the celebration of special events, tradition to order exclusive desserts and use in the meal high-quality and natural products, trust to the quality of products of national producers that are basic suppliers for confectionery industry. after rokeach value scale, the consumer of exclusive desserts has such terminal values as the happiness of friends and family, life in beauty, health, public confession, interesting life and cognition; and corresponding instrumental consumer’s values are high queries, sensitiveness, work, ability to love, rationalism, and braveness. basic situational factors, which strengthen searching activity of consumer, are: social norms and pressure from referent groups and friends, who make an order of exclusive desserts at every case, and accordingly, expect similar behaviour, the high price of the order, intensive competition and high level of differentiation of products in the market. among individual factors that strengthen searching of the consumer activity, it should be noted such factors as high level of consumer’s involvement to the process of purchase, his satisfaction from the process of cognition and process of order, tasting of components, development of consumers’ own design, orientation on benefits for health from the consumption of the products made from high-quality and natural ingredients. basic factors that weaken consumer’s searching activity are a shortage of time on information search, consumer’s preference to a certain brand or producer, the sophisticated process of getting of market baltic journal of economic studies 162 vol. 4, no. 1, 2018 information because of low communication activity of producers in the market. to form the positive attitude of target consumers’ audience to exclusive desserts and to create their personal interest in the following orders, it is necessary to build such integral character of product/brand/ confectionery that would allow the consumer to get great emotional pleasure and feel confidence in a good and right choice. 8. conclusions marketing research on the motivation and behaviour of consumers on the ukrainian market of exclusive confectionery products showed that these products are characterized by high level of emotional consumer value. the consumer’s motivation field consists of the following main motives: motive of satisfaction with the pleasure of relatives and close people; the motive of the product’s usefulness and safety of consumption; the motive of belonging to a certain group of people who make individual orders; the motive of freedom and creativity. areas of dissatisfaction of target consumers while purchasing exclusive confectionery products are design mismatch expectations, unjustified prices, dissatisfaction with taste, the inconsistency of packaging, complex order procedure, which requires time and effort. the existence of dissatisfaction with consumers regarding the discrepancy between the design of the ordered product and the expectations is predictable. it can be explained by the fact that the consumer usually “idealizes” his order, hopes to get something extraordinary and exceptional. we also note that in this case, the manifestations of the effects of gestalt psychology are very clearly manifested: the consumer treats an exclusive dessert not as a combination of the ingredients necessary for his production, but he perceives a holistic image of the final product. in order to reduce potential dissatisfaction of the consumer, companies should try to provide as much as possible clear description of the services offered, try to visualize and materialize the offer to the consumer, thus reducing its perceived risks: • to provide additional details and standardize the process of obtaining an order, receive written confirmation of the requirements for the future product; • to offer consumer testing of the main components of the order, demonstration of its main components; • to inform the consumer about all components of the product cost, and possible additional costs; • to show variants of already existing offers that were previously made and offered to consumers, demonstrate loyalty to customers who have already made an order; • to use the elements of computer graphics to propose to develop for a customer a “graphic model” of the future dessert for the most possible visualization, to offer different design options, packaging; • to build such integral character of product/brand/ confectionery, that would allow the consumer to get great emotional pleasure and feel confidence in a good and right choice. of course, all these proposals will only work in the case of the production of high-quality products, without the content of harmful components, which will create the image of natural production and a safe brand. references: blackwell, r .d., miniard, p.w. & engel j.f. (2006). consumer behaviour. thomson/south-western, 774. hansen, t. (2005). perspectives on consumer decision making: an integrated approach. journal of consumer behaviour, 4(6): 420–437. rokeach m. (1973). the nature of human values: free press, 438. solomon, m.r . (2012). consumer behaviour: buying, having, and being. upper saddle river, nj: pearson education, 640. tsiotsou r .h. & wirtz j. (2011). consumer behaviour in a service context: edward elgar publishing ltd. uk, 93. vandecasteele, b. & geuens, m. (2011). motivated consumer innovativeness: concept, measurement, and validation. advances in consumer research, vol. 38. [url]: http://www.acrwebsite.org/volumes/15867/volumes/ v38/na-38. wells, v.k. (2014). the influence of behavioural psychology on consumer psychology and marketing. journal of marketing management, 30 (11/12): 1119-1158. [url]: http://dx.doi.org/10.1080/0267257x.2014.929161 baltic journal of economic studies 294 vol. 3, no. 5, 2017 corresponding author: 1 department of administrative and commercial law, zaporizhzhia national university. e-mail: t_deputy@ukr.net 2 department of administrative and commercial law, zaporizhzhia national university. e-mail: lyutikovp@gmail.com 3 department of criminal law and justice, zaporizhzhia national university. e-mail: malark777@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-294-297 informal youth associations as a business reality tatiana kolomoets1, pavel liutikov2, mikhail larkin3 zaporizhzhia national university, ukraine abstract. informal youth environment is not only an integral part of today’s reality but also a complex multi-vector problem. the purpose of the article is to study business processes as one of the aspects of the activity of individual youth informal associations. methodology. in the process of work on the article, scientific literature devoted to youth informal associations is analysed. in addition, such theoretical methods as synthesis, comparison, classification are used. the empirical basis for the study is the survey of 1668 representatives of various youth informal groups in 7 cities of ukraine (kyiv, kharkiv, odesa, dnipro, zaporizhzhia, lviv, kherson) during 2016–2017. a special questionnaire was developed. conclusions. on the basis of the analysis of the survey results, informal associations are divided into three groups: youth informal associations, on which people earn (skinheads and hipsters); youth informal associations that earn (freaks, suicidal groups in social networks); youth informal associations, on which people earn and that earn (anime fans, gamers, bikers, football fans). features of their consumer and business opportunities in ukraine are revealed. it is concluded that the “life activity” of informal communities is predetermined not only by some ideas, views, moods, way of life but also by business opportunities and opportunities to make a profit. the originality of the work is that for the first time since ukraine gained independence, youth informal groups are seen as a platform for engaging in entrepreneurial activities. practical significance. the results of the study can be used to further study of various aspects of the youth informal environment. in particular, in the context of combating illegal business activities, tax evasion. key words: youth, informal, consumption, business, earnings. jel classification: d31, j13, l26, м21 1. introduction probably, the eternal problem of any society, the state is the education of young people. each new generation is its own world, its own interests, fears, experiences, its understanding of reality and the place of a human in it. and here one cannot help recalling the words of s. maugham from the novel “of human bondage”: “it is an illusion that youth is happy, an illusion of those who have lost it; but the young know they are wretched for they are full of the truthless ideal which have been instilled into them, and each time they come in contact with the real, they are bruised and wounded. it looks as if they were victims of a conspiracy; for the books they read, ideal by the necessity of selection, and the conversation of their elders, who look back upon the past through a rosy haze of forgetfulness, prepare them for an unreal life. they must discover for themselves that all they have read and all they have been told are lies, lies, lies; and each discovery is another nail driven into the body on the cross of life” (maugham, 2010). the xx century has shown, or rather illustrated, that a disparaging attitude towards the social challenges thrown down to young people can lead to the emergence of various youth informal formations, movements that seek attention and perception from the greater part of society as by the commission of illegal actions (football fans, neo-nazis, radicals, anarchists, religious fanatics, etc.), and propaganda of a certain ideology, ideas, way of life, which do not contain an element of wrongfulness (hipsters, freaks, anime fans, gamers, and others). an informal person is an attempt to show one’s personality, to tell everyone else, the so-called “faceless mass”: “i am a person,” to challenge the world with its endless everyday routine and build all in one line (rybakova, lizunova, 2016). to date, a number of attempts have been made to study youth informal formations, most of which have been implemented in the context of political (boiko, 2001; soroka, 2006; vasilchuk, 2016); historical (blyzniuk, 2010); psycho-pedagogical (bashkatov, 2002; lisovets, baltic journal of economic studies 295 vol. 3, no. 5, 2017 2011), philosophical (levikova, 2002), legal (ershov, 2006; gilinskii, 2010; boiarov, 2014) paradigms. it should be noted that a huge layer of information on informal youth is on the internet. however, the economic underpinnings of the existence of informal youth groups remain little investigated. after all, the informal environment is a huge and business space. the purpose of the article is to study business processes as one of the aspects of the activity of individual youth informal associations. the empirical basis of the survey was the survey of 1668 representatives of various youth informal groups in 7 cities of ukraine (kyiv, kharkiv, odesa, dnipro, zaporizhzhia, lviv, kherson) in 2016–2017 (figure 1), which made it possible to divide youth informal associations from the point of view of business opportunities, the possibility of making profit in three groups: 1) youth informal associations, on which people earn; 2) youth informal associations that earn; 3) youth informal associations, on which people earn, and that earn. 302 282 264 239 207 198 176 0 50 100 150 200 250 300 350 fig. 1. questioning of members of youth informal associations (2016–2017) now we consider it necessary to characterize each of the selected types on the basis of the studied practical material. 2. youth informal associations, on which people earn these include skinheads and hipsters. skinheads do not try to profit from their way of life, ideas, views. they are in fact consumers of their ideology. they spend money on purchasing clothes, footwear of certain brands (for example, dr. martens, ben sherman, fred perry). a relatively large percentage of skinheads in ukraine (approximately 70%) are active football fans and purchase for their own money tickets for matches of their favourite football club, club attributes (scarves, hats), pay for tickets for away matches of the club. if we draw parallels with the skin movement in england, it should be noted that the ukrainian skinheads, so to speak, are less “traditional” than their ancestors. in england  – this is not just a movement, a way of life, but in fact, its mini-society and the economic factor is important here. this is clearly shown in the book of john king (king, 2010). the life of the main characters consists of everything that belongs to the family of skinheads, their like-minded friends: a taxi company, a nightclub and the like; there is a kind of “internal financial turnover” (fig. 2). bars, nightclubs (owner and visitors are skinheads) taxi (owner and taxi drivers shops (clothes, household appliances, etc., owned by skinheads) fig. 2. “internal financial turnover” in the skinhead environment in ukrainian realities, skinheads are simple consumers of their own worldviews. this can be also said about hipsters  – the consumption industry: special brands of clothing (cheap monday, bershka, american apparel, etc.), magazines (kinfolk, vice, etc.), only moleskine notebooks. special places of recreation: coffee houses (“sweeter”, “in the mood”  – kharkiv), bars (“pod asfaltom pliazh” (“under asphalt beach”), “gnezdo bar”  – kyiv). hipsters are victims of fashion and advertising, so they immediately buy everything new and modern from the preferred brands. 3. youth informal associations that earn these are: freaks, groups of suicidal character in social networks. frick – not only a person who is distinguished for his extraordinary, shocking, but also often a real opportunity to self-enrich. freaks receive fees for participating in tv projects, advertising, working as fashion designers, designers, photographers. the absolutely new product of reality is suicidal groups in social networks (“blue whale”, “red owl”, etc.). the purpose of creating such informal communities is to get profit from: – views of suicidal videos; – blackmail for the removal of offensive comments, which were specially written before (there may be hundreds or even thousands); – for leaving in peace (before this, threats to life and health are regularly carried out, blackmail of a group member and his or her close relatives). baltic journal of economic studies 296 vol. 3, no. 5, 2017 4. youth informal associations that earn and on which people earn such, as a result of the conducted research, were: anime fans, gamers, bikers, football fans. today we can safely say that anime is one of the most successful global business projects. anime is quite an expensive hobby. its fans spend money on sewing costly costumes, participating in festivals (for example, in odesa, kharkiv, dnipro). however, anime is also an opportunity to earn on that tailoring and selling clothes, the design of anime characters, organizing and holding festivals, translation and voice over of serials from japanese and other languages. anime stores are open in kyiv, kharkiv, dnipro, lviv, zaporizhzhia. gamers are a special category of people for whom computer games have ceased to be just entertainment, but have become the meaning of life. the price of a gaming computer can go up to several thousand euros, while it is necessary to constantly improve it and replace individual devices. but gamers have a lot of opportunities for earning. for example: 1) as players (team players) 2) a gamer can sell his broadcasts; 3) advertisers can sponsor a gamer; 4) a gamer after the end of his career can become a coach, analyst, manager of the team; 5) as a developer of computer games; 6) at the rates; 7) on trading; 8) as account boosters; 9) by providing services in games; 10) at the dealership, etc. bikers are informal communities of members, united by a love of motorcycles and everything connected with them, including the way of life. representatives of the bike movement, according to the results of the survey, spend about 50% of their earnings on everything related to motorcycles (buying, repairing motorcycles, buying spare parts, paying for repair services), buying clothes, participating in motor exercises, membership fees in biker clubs and so on. of course, bikers have the opportunity to earn money on their way of life. it includes: • services for repair and restoration of motor vehicles; • tailoring and sales of leather clothes and shoes; • organization and holding of motor festivals, runs; • quite often bikers are owners of restaurants, tattoo parlours. football fans. football has long ceased to be just a sporting event. sufficiently capacious about modern football said the famous italian coach arrigo sacchi: “football is the most important thing of all unimportant things.” and an integral part of it is football fans. they are direct consumers of the football industry. so, it can be: 1) purchase of tickets (including football season passes), football tours; 2) purchase of sportswear, goods with the symbols of their favourite club; 3) purchase of certain brands of clothing (for example, stone island, burberry, merc london, lacoste); 4) pay for paid television. 5) visits to pubs, sports bars. according to our information, some football fans can spend up to 90% of their earnings on their “football life”. fans can earn money due to their hobby as follows: – rates; – participation in promotions held by football clubs; – resale of tickets for football matches; – participation in political actions, raider seizures. 5. conclusions emerged initially as “groups of protest”, modern informal associations now represent a complex social product. we made an attempt, based on empirical material, to consider only one of the sides of informality – a business component that allowed: 1. divide informal associations into three groups: – youth informal associations, on which people earn; – youth informal associations that earn; – youth informal associations, on which people earn, and that earn. 2. the most active informal communities as subjects of economic activity were analysed, which made it possible to come to the conclusion that the “life activity” of the specified communities is predetermined not only by some ideas, views, moods, way of life but also business opportunities, opportunities to make a profit. 3. the results of the research can be used to further study the various aspects of the youth informal environment. in particular, in the context of combating illegal business activities, tax evasion. references: bashkatov, i. p. (2002). psikhologiya asotsialno-kriminalnykh grupp podrostkov i molodezhi [psychology of asocial-criminal groups of teenagers and youth]. m.: publishing house of moscow psycho-social institute; voronezh: publishing house npo “modek”, 416 p. blyzniuk, i. v. (2010). suchasnyi molodizhnyi rukh v ukraini (1980-ti  – 2008): istoriohrafiia: avtoref. dys. na zdobuttia nauk. stupenia kand. ist. nauk: spets. 07.00.06 «istoriohrafiia, dzhereloznavstvo ta spetsialni istorychni dystsypliny» [contemporary youth movement in ukraine (1980s  – 2008): historiography: extended thesis abstract for cand. sc. (history): 07.00.06 “historiography, source studies and special historical disciplines”]. pereiaslav-khmelnytskyi, 20 p. baltic journal of economic studies 297 vol. 3, no. 5, 2017 boiko, o. (2001). predtecha rukhu: neformalni orhanizatsii yak faktor hromadsko-politychnoho zhyttia ukrainy u period perebudovy [forerunner of movement: informal organizations as a factor of public-political life of ukraine during the period of perestroika]. liudyna i polityka, № 1: 44-57. boiarov, v. i. (2014). kryminalistychna kharakterystyka kryminalno-karanykh proiaviv ekstremizmu [forensic characteristics of criminal punitive manifestations of extremism]. journal of the academy of advocacy of ukraine. vol. 7, № 4 (25), p.3-8. retrieved from: http://nbuv.gov.ua/ujrn/chaau_2014_7_4_2 vasylchuk, ye .o. (2016). molodizhnyi politychnyi radykalizm ta ekstremizm u suchasnii ukraini: avtoref. dys. na zdobuttia nauk. stupenia dokt. polit. nauk: spets. 23.00.03 «politychna kultura ta ideolohiia» [youth political radicalism and extremism in modern ukraine: extended thesis abstract for cand. sc. (political science): 23.00.03 “political culture and ideology”]. kyiv, 41 p. gilinskii, ya. i. (2010). prestupnost nesovershennoletnikh: kriminologicheskiy analiz [crime of minors: criminological analysis]. kriminalist, № 2(7): 84-90. ershov, v. a. (2006). metodika rassledovaniya prestupleniy protiv zhizni i zdorov'ya grazhdan, sovershaemykh chlenami neformalnykh grupp (dvizheniy): avtoref. dis. na soiskanie uchen. stepeni kand. yurid. nauk: spets.12.00.09 «ugolovnyy protsess, kriminalistika i sudebnaya ekspertiza; operativno-rozysknaya deyatelnost» [the methodology for investigating crimes against the life and health of citizens committed by members of informal groups (movements): extended thesis abstract for cand. sc. ( jurisprudence): 12.00.09 “criminal process, forensic science and forensic examination; operatively-search activity”]. vladivostok, 18 p. king, j. (2010). skinheads: [novel]. m.: ast, astrel, 415 p. levikova, s. i. (2002). fenomen molodezhnoy subkultury (sotsialno-filosofskiy aspekt): dissertatsiya ... doktora filosofskikh nauk: 09.00.11 [the phenomenon of youth subculture (socio-philosophical aspect): thesis for a doctor’s of philosophy degree: 09.00.11]. moscow, 358 p. lisovets, o. v. (2011). teoriia i metodyka roboty z dytiachymy ta molodizhnymy orhanizatsiiamy ukrainy [theory and methodology of work with children’s and youth organizations of ukraine]. k.: pc “akademiia”, 256 p. maugham, s. (2010). of human bondage: [novel: translated from eng.]. m.: ast: astrel, 685 p. rybakova, s. s. tsennostnye orientatsii predstaviteley molodezhnykh subkul'tur v sovremennom obshchestve [value orientations of representatives of youth subcultures in modern society]. electronic resource: https://www.scienceforum.ru/2016/2152/17710. soroka, s. v. (2006). suspilno-politychna diialnist neformalnykh obiednan molodi ukrainy u 1953-1991 rokakh: avtoref. dys. na zdobuttia nauk. stupenia kand. polit. nauk: spets. 23.00.02 «politychni instytuty ta protsesy» [socio-political activity of informal associations of youth of ukraine in 1953–1991: extended thesis abstract for cand. sc. (political science): 23.00.02 “political institutions and processes”]. mykolaiv, 20 p. cherneta, s. yu. (2005). orhanizatsiino-pedahohichni umovy sotsializatsii pidlitkiv u neformalnykh molodizhnykh obiednanniakh: avtoref. dys. na zdobuttia nauk. stupenia kand. ped. nauk: spets. 13.00.05 «sotsialna pedahohika» [organizational-pedagogical conditions of socialization of adolescents in informal youth associations: extended thesis abstract for cand. sc. (pedagogical science): 13.00.05 “social pedagogy”]. kyiv, 18 p. baltic journal of economic studies 184 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 institute of postgraduate education of bogomolets national medical university, ukraine (corresponding author) e-mail: r.titikalo@gmail.com orcid: https://orcid.org/0000-0002-6406-8800 2 kyiv national economic university named after vadym hetman, ukraine e-mail: wwwpav@gmail.com orcid: https://orcid.org/0000-0003-3311-0364 3 zaporizhzhia national university, ukraine e-mail: marinika@ukr.net orcid: https://orcid.org/0000-0001-8538-3140 doi: https://doi.org/10.30525/2256-0742/2022-8-5-184-190 economic and administrative methods of restoration by local governments of the environment of ukraine destroyed as a result of military operations roman tytykalo1, nataliia pavlovska2, maryna andriiets3 abstract. the consequences of the armed conflict in eastern ukraine, in addition to human losses, include significant damage to environmental systems and natural resources. as a result of the russian attack, 20% of ukraine's protected areas totaling about one million hectares were affected. currently, 8 nature reserves and 10 national parks remain under occupation, and due to the hostilities, the protected areas protection services are unable to perform their functions and ensure the conservation of rare species, while some reserves and national parks are on the verge of a humanitarian crisis. the hostilities lead to environmental pollution with heavy metals (titanium, vanadium, strontium) as a result of artillery shelling, poisoning of drinking water and radioactively contaminated waters of the azov and black seas and rivers: dnipro and siverskyi donets as a result of flooding of mines, destruction of vegetation and wildlife. numerous cases of air pollution and potentially serious contamination of groundwater, surface water, and soil have already been reported. due to forest fires, the burning of oil products and industrial facilities, air emissions have already exceeded 67 million tons, so the long-term effects of the war could be even more harmful not only to public health and safety, but also to ecosystems and biodiversity. these problems require an immediate response from the state and authorities. at the same time, local governments are the most prompt and differentiated responders to all problems arising in certain territories. it is they who, using a system of economic and administrative methods, eliminate existing problems and troubles. today, these bodies need immediate financial assistance from the state to implement projects to restore nature reserves, restore forests and territories, etc. there is a need to develop and implement a program for the restoration and revitalization of territories, which should include "guides" for local governments on how to raise funds and other resources to restore destroyed infrastructure. a mechanism for bringing the russian federation as an aggressor state to justice for the damage caused to the environment of ukraine needs to be developed immediately. the author argues that it is necessary to develop a methodology for documenting and assessing environmental damage caused by military operations. it is determined that the problem of environmental restoration is complex, and therefore requires coordination of efforts of all subjects of the hromada and their active participation in this important matter. that is why this study focuses on the problems of bringing to justice those responsible for committing environmental crimes caused by military actions and mechanisms of compensation for the damage caused. key words: economic methods, administrative methods, restoration, military actions, environment, local councils, hromadas, clean water, air, animals, infrastructure, legal liability. jel classification: h11, h30, h61, i38, r50, d72 baltic journal of economic studies 185 vol. 8 no. 5, 2022 1. introduction environmental protection is the main task of any state. accordingly, environmental policy is an integral part of ensuring national security. in the context of russia's military aggression, the issue of environmental protection in ukraine is an acute concern for all public authorities. of all human activities, war has the worst impact on the environment. it should be noted that since the beginning of russia's large-scale invasion of ukraine, more than 230 crimes against the environment have been officially recorded, which poses a threat both to the areas where the fighting is taking place and to the entire world. the chemical toxins of phosphorus bombs, when released into the soil, form salts that increase the migration of phosphorus compounds from the affected area to areas free of hostilities. natural forest fires caused by rocket attacks are destroying large forest areas, especially in enemycontrolled territory. since the beginning of 2022, fires have been recorded in the forests of ukraine on a total area of 5,500 hectares. this figure is 96 times higher than last year. according to environmentalists, burning oil at a multi-tank base releases about as much pollution into the atmosphere as all kyiv's transportation in a month. when liquid fuels (fuel oils) are burned, sulfur dioxide, carbon monoxide, nitrogen oxides, gaseous and solid products of incomplete combustion, vanadium compounds, sodium salts, etc. are released into the air along with flue gases. the combustion of petroleum products is also accompanied by emissions of sulfur oxide, which causes acid rain. shells hitting chemical plants, such as those in rubizhne in luhansk oblast or sumy, have led to nitrogen and ammonia leaks. biodiversity is being destroyed by enemy equipment. these are thousands of plant species listed in the red book of ukraine and protected by law. military operations lead to the death of wild animals. that is why the development of ukraine's environmental policy is of particular importance today, as it is the state strategy in the postwar period in this area that will ensure the quality of the environment and the life of the population, the national and cultural revival of the nation, and the resource and intellectual potential. 2. methodological features of the study of the powers of local hromadas in eliminating the consequences of the war that affected the state of the environment today, the issue of scientific substantiation of the elimination of the consequences of military actions that have affected the state of the environment by local governments is a new, poorly understood problem. since military consequences have unpredictable content and scale, external and hidden internal nature, which affects the possibility of recovery and development. at the same time, the issues of environmental research were studied by such scientists as: v.i. andriytsev, g.i. balyuk, a.g. bobkova, s.m. kravchenko, m.v. krasnova, n.r . malysheva, p.a. muzychenko, v.l. muntyan, v.k. popov, v.a. prylypko, y.i. sayenko, r .g. rozovsky, y.m. todiko, m.v. shulga, etc. the legal status of local self-government bodies was of interest to i. butko, v. golovchenko, p. gural, v. campo, v. kiselychnyk, o. korpan, m. krasnov, v. kuybida, v. chirkin and others. it is worth noting that under martial law, local authorities must have a deep understanding of the dynamics and flexibility in decision-making, possess the necessary knowledge and information to effectively influence the situation and take a highquality approach to environmental restoration. today, local hromadas cannot wait for decisions from above, but must solve environmental issues on their own in their jurisdictions. undoubtedly, these bodies should immediately be granted broader powers to respond quickly to certain events. these ideas are now being voiced in comprehensive reports by the world bank and the european commission, which indicate that it is impossible to study the problem in full today because of the ongoing conflict, the existing occupied territories, and significant destruction. at the same time, the war is ongoing, and its social and economic consequences will continue to intensify and grow. however, reconstruction and recovery must begin now, wherever it is safe and feasible. 3. theoretical and legal foundations of the role of local hromadas in eliminating the consequences of war that affected the environment studying this problem, it should be noted that the ukrainian legislation has a wide range of normative acts that regulate the treatment of environmental objects, their protection and rational use, these are the laws of ukraine "on environmental protection" of june 25, 1991, "on air protection" of october 16, 1992, "on the nature reserve fund of ukraine" of june 16, 1992, "on wildlife" of march 3, 1993, "on plant quarantine" of june 30, 1993, etc. the use and protection of the environment is regulated by codes (land, water, forest, and subsoil). this legislation protects the following: the environment as a set of natural and natural-social conditions and processes; natural resources, both those involved in economic turnover and those not used in the national economy at a given period (land, subsoil, water, air, forest and other vegetation, wildlife), landscapes and other natural complexes (all natural goods that baltic journal of economic studies 186 vol. 8 no. 5, 2022 serve to satisfy human needs); natural territories and objects subject to special protection (territories and objects of the nature reserve fund, health, recreational, water protection purposes, other territories and objects defined in accordance with the legislation of ukraine); human health and life. the legislator has introduced complex mechanisms for the protection of these facilities and their rational use in peacetime, but the legal norms of these acts are not designed for the military operations that are taking place in ukraine, causing damage or destruction of infrastructure, buildings and all living things. for example, the damage and destruction of chemical plants creates the risk of a number of diseases, ranging from shortness of breath to lung, stomach, reproductive and other cancers. the environmental threats created in ukraine by russia's full-scale invasion are exacerbated by the destruction of the country 's industry. one of the most dangerous threats is tailings ponds, which store liquid industrial waste. there are 465 of them in the country, holding more than 6 billion tonnes of waste. and 200 of them are in eastern ukraine, the region hardest hit by the war. the hostilities themselves pose no less of a threat: spilled fuel, destroyed equipment and spent weapons, exploded rockets – all of which contaminate soil and groundwater with chemicals and heavy metals. russian troops are not only creating man-made and environmental disasters, they are also destroying natural areas that are home to rare species and endangered habitats. according to the ukrainian nature conservation group, 44% of the most valuable areas of the nature reserve fund are in the war zone, under the temporary control of the russian invaders or inaccessible to ukraine. these examples show that today there is an urgent need to update legislation in this area, which could quickly respond to the needs of eliminating the consequences of war, restoring the natural environment and cleaning up the ecosystem. development of legal liability mechanisms for environmental damage as an administrative tool of public administration. the system of public administrative bodies in the environmental field also needs to be improved and new approaches adopted, with the hromadas, regional, district and village councils, which make up the system of local self-government, taking the lead. in this study, the focus will be on them, since the functions of these bodies to ensure environmental protection are provided by article 19 of the law of ukraine "on environmental protection" and the law of ukraine "on local self-government in ukraine", in particular, paragraphs 34-38 of article 26, article 33. at the same time, it should be noted that in accordance with the order of the cabinet of ministers of ukraine dated 01 april 2014 № 333-p "on approval of the concept of reform of local self-government and territorial organisation of power in ukraine", their role and responsibility for environmental protection has been significantly expanded and strengthened. accordingly, it is established that it is the local self-government bodies at the regional level that are empowered to ensure environmental protection. accordingly, village, settlement and city councils approve targeted local environmental programmes, local budgets, make amendments to them, in particular for environmental protection measures; establish local taxes and fees, including environmental ones, and their rates in accordance with the tax code of ukraine; create trust funds, including environmental ones, and approve regulations on them; make decisions on granting local loans, privileges in accordance with the current legislation; approve land tax rates in accordance with the tax code of ukraine; approve the amount of payment for the use of natural resources owned by the respective hromadas; decide, in accordance with the law, on granting permission for special use of natural resources of local significance, as well as on cancellation of such permission; decide on the organization of territories and objects of the nature reserve fund of local significance and other territories subject to cultural or scientific value, monuments of nature, history or culture protected by law, making decisions on the announcement of a "season of silence" in places of mass reproduction and rearing of offspring by wild animals with restrictions on economic activity and the extraction of wildlife, making proposals to the relevant state bodies on the announcement of natural and other objects that have ecological, historical, cultural or scientific value, monuments of nature, history or culture protected by law; provide in accordance with the current regulations covers the relevant territory. it should be noted that the legislator also regulates the form of decision-making on environmental protection by district and regional councils – plenary sessions, which may deal with the following issues: regulation of land relations; granting of permits for special use of natural resources of district or regional significance, as well as revocation of such permits; establishing rules for the use of water intake facilities intended to meet the drinking, domestic and other needs of the population, sanitary protection zones for water supply sources, limiting or prohibiting the use of drinking water by enterprises for industrial purposes; to take decisions on the organisation of the territories and objects of the nature protection fund of local importance and of other areas that are subject to special protection; submitting proposals to the relevant state authorities to declare natural and other objects of ecological, historical, cultural or baltic journal of economic studies 187 vol. 8 no. 5, 2022 scientific value as monuments of history or culture protected by law, making decisions on declaring a "season of silence" in places of mass breeding and rearing of offspring by wild animals with restrictions on economic activity and harvesting of wildlife. in addition, such powers include: approval of programs for the socio-economic development of the district and region, which should also take into account the environmental interests of the respective territories, targeted programs for environmental protection and other issues, and hearing reports on their implementation; distribution of funds transferred from the state budget in the form of grants, subsidies, etc. to the district budgets of towns of regional importance, villages, settlements, towns of district importance, which can also be used in the interests of environmental protection, ecological safety and reproduction of natural resources. 4. creation of new mechanisms for local hromadas to deal with the consequences of war on the state of the natural environment the law of ukraine "on environmental protection" stipulates that local councils are responsible for the state of the environment on their territory and within their competence: ensure the implementation of ukraine's environmental policy and the environmental rights of citizens; give consent to the location of enterprises, institutions and organizations on their territory in accordance with the procedure established by law; approves, taking into account environmental requirements, planning and development projects for settlements, their master plans and schemes of industrial hubs; issues (reissues, issues duplicates, revokes) permits for special use of natural resources of local importance in cases provided for by law; establish local environmental programs; organize environmental studies; create and define the status of the nature reserve fund, including currency, funds to finance programs and other environmental protection measures; ensure informing the public about the state of the environment, the functioning of local environmental automated information and analytical systems; organize work on eliminating the environmental consequences of accidents, involve enterprises, institutions and organizations regardless of their subordination and form of ownership, as well as citizens in this work; make decisions on the organization of territories and objects of the nature reserve fund of local importance and other territories subject to special protection; monitor compliance with environmental legislation. an analysis of these powers suggests that local councils have a significant amount of authority over public environmental management. in times of war, their role in restoring ukraine's ecosystem is dominant. consider this statement on the examples of modern reality, what is happening, and the conditions of russian military aggression. thus, according to the world bank and the european commission, the forestry sector, which is managed by local hromadas within their territories, has been significantly affected by the hostilities. as of today, almost 4% of forest plantations have been destroyed, and 38% are inaccessible due to mining. the damage caused to forest plantations and the infrastructure that serves this type of natural environment amounts to almost usd 2.5 billion. the cost of lost ecosystem services due to mining, which makes forests inaccessible, is estimated at usd 739 million. the industry 's rehabilitation and reconstruction needs, including institutional capacity building, equipment improvements, and nursery productivity, are estimated at usd 1.2 billion. along with the destruction or damage to the forest network, nearly 200,000 jobs have been lost as a result, as the area is dangerous and usable equipment cannot be removed due to mined areas. hromadas are gradually eliminating the consequences of the war at the expense of their own budgets. this spring, kyiv foresters have already planted 122,200 pine seedlings in authorized areas of the forest. large saplings of willow, oak, sycamore, mountain ash, robinia pseudoacacia, thuja and shrubs were also planted. in addition, 250 diseased trees were treated with the help of specialists. since the beginning of the year, more than 2,800 trees, almost 22,300 bushes and more than 5 million flowers have been planted in the capital's parks and squares, in an ongoing attempt to repair the damage caused by the military operations. the united nations, which monitors the aftermath of war, says there are about 360 critical sites in the war zone. among the industrial facilities that pose a serious risk of pollution are the following: zaporizhzhia and chornobyl nuclear power plants, avdiyiv coke-chemical plant, torezhsky surfacing hard alloy plant, mariupol metallurgical plant, as well as all ports, oil storage facilities and coal mines. forest fires in the chernobyl exclusion zone are destroying forests and fallow land that have accumulated significant amounts of radionuclides following the 1986 accident. during the occupation of the exclusion zone, fires have already been recorded in natural complexes and abandoned villages over an area of approximately 10,287 hectares, in particular on 28 march 2022, when, after two days without fires, new fires were discovered that covered another 176 hectares of natural ecosystems. oil depot fires release nitrogen oxides, ammonia, sulphur dioxide, benzopyrene, carbon monoxide, hydrogen cyanide vapour, formaldehyde, metals, toxic organic substances and their compounds into the air. these substances also cause oxidation of soil, wood, turf baltic journal of economic studies 188 vol. 8 no. 5, 2022 and metal structures such as bridges. while carbon dioxide and water vapour are non-toxic and only harmful to the climate (both are greenhouse gases), sulphur and nitrogen oxides can cause acid rain, change soil ph, burn vegetation and cause respiratory problems in mammals and birds. after fires/explosions, sulfur settles on the ground, which turns into sulfuric acid after rain. as a result of the hostilities on the territory of ukraine, the aggressor country systematically uses the iskander, tochka-u, x101, kalibr and kinzhal missile defence systems, which contain toxic substances in their fuel components – decilin, ammonium perchlorate, oxirane, propene, butyl, propylene nitrite, etc., as well as their structural components, which, if they remain in the ground for a long time, form dangerous chemical compounds that pose a threat to human life and health, as well as the components of their construction, if they get into the soil, they form dangerous chemical compounds which, if they remain in the soil for a long time, pose a threat to human life and health, create risks of pathogenic changes in the plant and animal world. at the same time, ukraine is currently unable to study the problem systematically because there is still no unified system of state monitoring of air quality. individual subjects of state monitoring collect and use data independently or even restrict access to it. as a result, investigative bodies are unable to quickly use data collected by data owners, such as subjects of state monitoring or economic entities. this complicates and prolongs the process of gathering evidence on which to base charges for further reparations by the aggressor country. the creation of a unified system for rapid monitoring and analysis of air quality in ukraine during the war is also a task of civil security, taking into account the risks and threats to the country from the consequences of hostilities or the use of chemical weapons by the enemy. due to damage to water supply infrastructure, an estimated 1.4 million people in ukraine currently have no access to safe water and a further 4.6 million people have limited access. the health damage caused by the lack of access to safe water (additional deaths from diarrhoea) is estimated at us $138-257 million. it should be noted that the local authorities of various cities and regions are trying to rectify the situation, for example, during the nine months of the war only the brigades of emergency repair works of the kharkiv water supply complex of the kp kharkivvodokanal repaired 814 damages to pipelines, but unfortunately these actions have a life-sustaining, not restorative content. in ukraine today, water can also be used as a weapon, as it has been in other modern armed conflicts. the accumulation of large volumes of water in artificial reservoirs during hostilities is a rather dangerous factor. a breach in the dams of ukrainian reservoirs could flood land and cities far downstream. such a danger for ukraine exists for a significant number of territories, covering hundreds of settlements, in which hundreds of thousands of citizens live. for example, if to consider the main sources of hydrodynamic danger on the largest river, the dnipro, the following should be noted. there are 3 reservoirs in the dnipro economic district (kamyanske, karachunivske, kremenchutske), the dams of which accidents will cause catastrophic consequences for the population of dnipropetrovsk, zaporizhzhia and kirovohrad regions. when the dam of the kamian reservoir breaks, a flood zone with a total area of 769 km2 will be formed, which will include 5 cities (kamyanske, dnipro, novomoskovsk, marganets and nikopol) and 43 rural settlements in 8 districts of the dnipropetrovsk region. also, part of the territory of the zaporizhzhia region with a total area of 342 km2, on which the city of zaporizhzhia and 33 settlements are located, will also be flooded. it will be necessary to evacuate about 500,000 people from the zone of catastrophic flooding. in the kirovohrad region, the reservoir of the kremenchuk hpp (volume 13,500 million m3) poses a significant danger to the population. if its dam is destroyed, an area of 116 km2 with settlements and a population of 28,000 people could be flooded within the region. that is why local hromadas need to develop an evacuation plan for people in case of a threat of reservoir explosions, and conduct a training system based on a coordinated system of actions by various services in the event of threats. as a result of the war, about 20 per cent of the area of all state-protected territories in ukraine is under threat. the threatened areas include 17 ramsar sites (wetlands of international importance) with a total area of 627,300 m2, some 160 areas of the emerald network with an area of 2.5 million hectares, and four biosphere reserves. this situation threatens the strategic objectives of biodiversity conservation, reduces the potential for absorbing greenhouse gases and accelerates the process of desertification. the disappearance of endemic plant and animal species will have significant consequences for biodiversity on a planetary scale. the scale of the potential damage is greater because the conflict began closer to spring, when the animals move in search of mates, food and to rear their young. it should be noted that as a result of hostilities there are many elements of damaged equipment and fuel and lubricants, used or unused small arms, aircraft, artillery ammunition, in particular cartridges, shells, grenades, rockets, mines, bombs, etc., which interact with components of the natural environment: atmospheric air, water, soil cover, which can lead to a man-made emergency if these elements of the baltic journal of economic studies 189 vol. 8 no. 5, 2022 man-made load are left on the ground. in the long term, if urgent action is not taken to eliminate the consequences of the hostilities, the agrobiocenosis will be irreparably damaged and the use of polluted and/or disturbed land for economic activity will become impossible, requiring long-term revitalisation or complete withdrawal. all these problems fall on the shoulders of the local councils, which are obliged to eliminate these consequences from their territories for the livelihood of their hromadas. the use of a system of economic and administrative resources by these bodies will make it possible to restore the natural environment damaged by the war. at the same time, in order to obtain a high quality result, it is necessary to create a counter department for the natural environment in the executive committees of local councils and to give it the authority to carry out geospatial analysis using geoint methods on the basis of remote sensing data of the earth, which are available both in public and commercial access of such web resources as google earth, planet labs, satellogic, earthdata, earth explorer, maxar technologies, the national geoportal of the dzz, etc. by individual areas of interest (aoi). all the information gathered through this mechanism should provide a reliable basis for the subsequent production of digital thematic maps, which will provide a reliable and objective representation of the amount of damage caused to the ground cover during the armed conflict, with a clear differentiation of the impact factors and an approximate assessment of the damage in monetary terms. at the same time, conduct effective environmental monitoring to assess overall environmental damage, take necessary measures to prevent further deterioration and restore ecosystems. prepare and implement a system of environmental rehabilitation measures, in particular with regard to the collection, safe storage and disposal of large quantities of military and other waste. promote the introduction of best practices to ensure the sustainability, revitalisation and development of regions and hromadas, systematically involving representatives of the research and expert community in the development of relevant programmes and projects. post-war reconstruction must take into account: the potential impact of climate change and changes in agricultural management; the introduction of systems to ensure the preservation of groundwater, the reduction of siltation of reservoirs, the construction of modern wastewater treatment systems that allow their reuse; the integration of the results of public networks monitoring the state and quality of the environment into the mechanism of organisation and implementation of state monitoring in the field of atmospheric air protection. development of general and technical requirements for mechanisms of organisation and implementation of alternative public and scientific monitoring in the field of air protection. a special place in decision-making on environmental issues should be given to local self-government bodies, the purpose of which should be the development of strategic directions for sustainable development of hromadas with optimal use of natural resources in favourable environmental conditions, development of environmental policy concepts by the relevant councils. it is also necessary to create opportunities for the development of ecological urban transport, to reduce the number of private cars in settlements and to create conditions for the use of individual ecological transport (electric mopeds, scooters, bicycles, etc.). it is also necessary to contribute to ensuring the stability of rural hromadas in ukraine in the postwar period on the basis of the formation of complex portfolios of innovative projects in the agro-industrial sphere in accordance with the updated goals of local and regional development strategies. to use existing post-war crowdsourcing projects as innovative tools for ensuring public participation in public administration, as a platform for testing the feasibility of ideas set out in the territorial development strategy. in particular, it is necessary to emphasise the need to map the areas affected by military operations and, when determining the extent of environmental damage, to take into account mine contamination as a source of pollution, as well as the cost of demining the area. in order to increase the flexibility of local budgets and the efficiency of decision-making, it is also necessary, first of all, to abolish for the period of martial law the restrictions on the implementation of expenditures due to the free balance of budget funds or the excess of the revenue part of the general fund of the local budget (article 85 of the budgetary code of ukraine); secondly, the right of local state, military, civil-military (if established) administrations, executive committees of village, settlement and city councils to transfer funds from the special fund of the local budget (except for own revenues of budgetary institutions and interbudgetary transfers) to the general fund of the local budget on the basis of the relevant resolution. it is particularly important to adopt the laws "on compensation for damages caused to ukraine by the aggression of the russian federation" and "on criminal punishment of natural persons for the crime of aggression, crimes against humanity and war crimes committed during the aggression of the russian federation against ukraine", which will establish the mechanisms for bringing to justice all military personnel and criminals who have caused grief and suffering to the ukrainian people, the environment and the natural environment of europe. baltic journal of economic studies 190 vol. 8 no. 5, 2022 5. conclusions the war in ukraine united the whole of ukrainian society in a single desire for victory and the restoration of their own country. today, divisions between social classes, political forces and even interest groups have virtually disappeared. at the same time, the patriotic impulse and emotional upsurge that drive ukrainians to victory should not destroy the foundations of healthy rationalism, which is the key not only to the effective management of military logistics, but is also rightly considered one of the cornerstones of the future post-war reconstruction of ukraine and the restoration of the natural environment, improvement of the health of the nation, all of which should be done against the background of the restoration of the state economy. an important aspect is the establishment of properly coordinated interaction between state authorities and local self-government, taking into account the principle of subsidiarity. this is particularly important under martial law conditions, when all links in the power hierarchy naturally gravitate towards centralisation of management decisions. therefore, today 's unconditional priority is to determine the priority tasks to be entrusted to the local self-government bodies of regions and hromadas in order to ensure, on the one hand, their maximum efficiency in managing the resource potential of the respective territories, the restoration of territories and natural landscapes, the environment, with the aim of timely provision of urgent needs of the front and restoration of the economy. hromadas should use both tried and tested management tools and introduce new ones to effectively restore the natural environment destroyed by military operations. the mechanisms for compensating for ukraine's losses during the war, including the restoration of the natural environment, deserve special attention. russia is compensating everything at the expense of the state, the central bank of russia and russian oligarchs. the money will also come from russia's confiscated companies and assets abroad, which will be auctioned off and then transferred to ukraine. references: ecology in war: a ticking time bomb. available at: https://armyinform.com.ua/2022/06/05/ekologiya-v umovah-vijny-bomba-upovilnenoyi-diyi/ on protection of the environment: law of ukraine of 25 june 1991, no. 1264-xii. bulletin of the verkhovna rada of ukraine. 1991. № 41. p. 546. zasyadko, e. month of war. crimes against the environment. available at: https://www.epravda.com.ua/ columns/2022/03/26/684714/ law of ukraine from 21.05.1997. on local self-government in ukraine: law of ukraine of 21 may 1997, no. 280/97-вр. bulletin of the verkhovna rada of ukraine. 1997. № 24. art. 170. law of ukraine from 01.04.2014. on approval of the concept of reforming local self-government and territorial organization of power in ukraine. order of the cabinet of ministers of ukraine of april 01, 2014 № 333-р. ukraine rapid assessment of damage and recovery needs. august, 2022. available at: https://documents1.worldbank.org/curated/en/099545009082226957/pdf/p1788430ed0fce0050b9870be 5ede7337c6.pdf since the beginning of the year, 2,800 trees, over 22 thousand bushes and more than 5 million flowers have been planted in kyiv. available at: https://kyivcity.gov.ua/news/u_kiyevi_z_pochatku_roku_visadili_2800_derev_ ponad_22_tisyachi_kuschiv_i_ponad_5milyoniv_kvitiv/ about russian tactics and weapons: key risks of further war in ukraine – defense express defense express military portal – everything about military affairs. available at: https://defenceua.com/minds_and_ideas/pro_ taktiku_ta_zbroju_rosijan_vijskovij_ekspert_nazivaje_kljuchovi_riziki_podalshoji_vijni_v_ukrajini-6345.html impact of military operations on air quality in ukraine. available at: https://www.savednipro.org/vpliv-voyennixdij-na-yakist-povitrya-v-ukrayini/ official website of kharkiv city council. available at: https://www.city.kharkov.ua/uk/novosti/ofczjno.html oberenko, o. ukrainian water issues under martial law. available at: https://www.irf.ua/ukrayinski-vodnipytannya-v-umovah-voyennogo-stanu-stattya/ vasilieva, m. a., & kovtun, o. a. (2022). organizational aspects of fixing the facts of damage to the soil cover of ukraine in connection with the armed aggression of the russian federation. public management and administration in the conditions of war and in the post-war period in ukraine: materials of the all-ukrainian scientific-practical conference: szvo "umo" of the naps of ukraine. received on: 12th of october, 2022 accepted on: 21th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 97 vol. 3, no. 5, 2017 corresponding author: 1 department of finance, national university of life and environmental sciences of ukraine. e-mail: davidenk@ukr.net 2 department of finance, national university of life and environmental sciences of ukraine. e-mail: y.v.pasich@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-97-102 features of socio-economic development of the baltic states and ukraine nadiia davydenko1, yurii pasichnyk2 national university of life and environmental sciences of ukraine, ukraine abstract. it is proved that ensuring stable economic growth is now an important task for the governments of all countries. the purpose of the study is to compare socio-economic conditions of the baltic states and ukraine in the period of 2006–2016. the subject of the study is peculiarities of social development identified as a result of the analysis of the main components – real gdp, general government spending, and minimum wages. methodology. it is based on views of recognized western economists, as well as works of scholars from the baltic countries and ukraine. the main method of research is systemic, which allows analysing complex open unbalanced socio-economic systems. in the process of research, such methods also used  – comparison, historical, analysis and synthesis, correlation and regression. the views of scholars on the processes of social development are generalized, the dynamics of real gdp are compared, and the correlation-regression analysis of the influence of general government spending and minimum wages on real gdp is performed. in the course of the study, some features of this development are identified by indicators of real gdp, general government spending, minimum wages, and also individual countries. results. it is proved that peculiarities of socio-economic development of the baltic countries and ukraine are an important basis for ensuring the dynamics of this development; they allow forming strategic and current vectors of the development of economies of these countries and, therefore, are socially significant theoretical content. the gdp rates of all countries for the period of 2010–2016 were lower than those that were in 2006–2008, and in relation to ukraine, these rates were significantly lower for the period of 2006–2016, which confirms the presence of significant social problems. the dynamics of real gdp per person demonstrated the weakness of the financial system of ukraine to counteract negative factors, where this figure is less than in the baltic states roughly three times. the indicator of general government spending, % of gdp, showed that after the financial crisis, any of the countries failed to reach the pre-crisis level, and this indicator in the baltic states for 2010–2016 ranged from 35% to 40%, and in ukraine – from 32% up to 35%. according to the index of minimum wages, it is determined that in the baltic states it increased more than three times during the analysed period, and in ukraine it decreased, which was caused both by the global financial crisis and the depreciation of the domestic currency for the period of 2014–2016 more than three times. practical implications. ukraine, in order to increase gdp, is recommended to implement measures of the strategic direction, in particular: to summarize documents of strategic content; form a new strategy of social development for up to 20 years; develop appropriate development programs in view of industry and region; provide priority to an innovation vector of development with a focus on universal values. value/originality. the revealed features of the socio-economic development of the baltic countries and ukraine reflect their national specificity and will contribute to a better understanding of the essence of these processes. key words: socio-economic development, gdp, general government spending, minimum wages. jel classification: a13, b26, g01, g28 1. introduction socio-economic development of any country is formed taking into account its potential opportunities. in the realities of the beginning of the xxi century, some countries have achieved significant success and have provided a high standard of living for the population, while others are in difficult conditions and the welfare of most of the population is negligible. it should be noted that issues of social development were permanently relevant in the research of scholars. so, in 2010, d. arthur for the contribution to macroeconomic research, and a. deaton in 2015 for the analysis of consumption, poverty, and well-being processes were awarded the nobel prize in economics. in the context of identifying baltic journal of economic studies 98 vol. 3, no. 5, 2017 features of socio-economic development, it is relevant to compare the main indicators of this development on the example of the baltic countries  – estonia, lithuania, latvia, and ukraine. after the collapse of the soviet union, these countries chose different vectors of development. estonia, lithuania, latvia in 2004 became members of the eu and nato and at the end of the second decade of the xxi century were able to ensure a stable development and a reasonable standard of living for the population, but ukraine is behind these indicators in recent places in europe. that is why the purpose of the study is to identify peculiarities of socio-economic development of the baltic states and ukraine, and the tasks: to compare the basic indicators of development of these countries; reveal differences in the dynamics of development; determine the effect of minimum wages and general government spending on real gdp in view of these four countries; develop recommendations for a strategic plan for ukraine to increase the rate of real gdp. to carry out the research, an appropriate methodology based on the works of leading economists of the world, scholars of the baltic states and ukraine using a systematic approach is formed. the research stages are developed in a logical sequence, which include searching for statistical data, analysing them, performing analytical calculations, identifying differences in the dynamics of development between countries, developing relevant recommendations for ukraine. 2. review of theory and literature given the peculiarity of the problem, only in the last 100 years, a considerable amount of work has been published in the relevant research areas. of particular significance are works of the classics of economics  – j. r . hicks (1937, 1965), j. scumpeter (1939), p. samuelson (1948), e. domar (1952, 1989), r . solow (1956), r . harrod (1959), e. denison (1962), m. alle (1989). in their papers, they laid the foundations for the theory of economic growth, substantiated the corresponding mechanisms. at the beginning of the xxi century, globalization processes have caused new challenges; taking them into account, the dynamics of development in certain countries acquired certain features. the inability of the entire world community to resist chaotic development was over the global financial crisis of 2007–2009. in the report of the clube of rome prepared by e. weizsaecker and a. wijkman “come on! capitalism, short-termism, population and the destruction of the planet” (2018), it is noted that the current crisis is not cyclical but intensifies. it is not limited to the nature around us but includes social, political, cultural, and moral aspects; besides this, there is a crisis of democracy, ideologies, and the capitalist system. ninety-eight percent of financial transactions are now speculative. in offshore areas, it is hidden from twenty-one to thirty-two trillion dollars. there is a surplus of capital in fictitious but profitable areas, while the directions, on which the future of the planet depends, feel the lack of funds. economists are not able to see the problem because they are still inclined to consider ecological, financial, and industrial capital as equivalents: “while financial capital is increasing  – everything is good.” taking into account new features of development in the xxi century, works of scientists, which highlights national specifics, are published. e. s. reinert (2007) made a meaningful analysis of the causes and conditions of poverty and wealth of different countries; r . gordon (2012) and j. fernald (2014) studied the peculiarities of usa development; p. petrakis, p. kostis, d. valsamis (2013) – eu; j. heller, j. kluge, r . lehmann (2014) – germany. clear scientific interest is caused by the works of scholars from the baltic states and ukraine. thus, some issues of growth dynamics were investigated by: m. kitsing (2016), estonia; j. ramanauskas (2011), lithuania; i. vaidere (2011), latvia; n. davydenko (2015), o. kyrylenko (2013), e. libanova (2012,2015), y. pasichnyk (2016), y. schedrin (2017), o. shevchuk (2015), ukraine. the scholars in these countries analyse processes associated with the policy of governments to ensure the pace of socio-economic development, the efficiency of the use of financial resources, especially in the public sector, the response of business structures to the factors of the impact of internal and external environment, and suggest appropriate measures. 3. analysis of the main indicators of socio-economic development the problem of development in modern realities is sufficiently cleared both in theoretical and practical dimensions, but unpredictable globalization challenges make their adjustments to the specifics of both a country and the entire world community, as evidenced by the financial crisis of a decade ago. taking into account that now all the experience accumulated during the evolution of mankind is being put into the concept “socio-economic development”, and now there are ongoing discussions about the present essence, purpose, components, criteria, mechanisms of realization, strategic guidelines, etc. such discrepancies can be explained by the fact that each individual country is at an appropriate stage of social development, forms its own tasks and strategy, and defines concrete mechanisms of implementation. however, it is clear now that socio-economic development must ensure qualitative changes in society as a whole, both in the production sector and in the spiritual, with the adequate formation of the country’s power and welfare of the population. a set of indicators is used to estimate the level of this development. in this study, to compare development levels, we choose real gdp, general government baltic journal of economic studies 99 vol. 3, no. 5, 2017 spending, and minimum wages. the choice of such indicators is conditioned by traditional approaches, the possibility of obtaining statistical data, the use in the practice of international organizations. regarding real gdp as one of the main indicators, we note that not all scholars consider it the best criterion; however, it is used by all the official statistical services of countries. as a criterion, real gdp is determined in several dimensions: in absolute terms relative to national or other currencies; in relative value to the relevant period; in a comparison in a specified currency per one average resident. in addition, real gdp can be determined according to a certain methodology and also at the level of the administrative unit of a particular country. in this study, we will select real gdp, % to the previous period. the data are given in (fig. 1). -16 -12 -8 -4 0 4 8 12 16 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 estonia lithuania latvia ukraine fig. 1. comparative dynamics of real gdp, % to the previous period source: compiled by the authors according to the statistical services of estonia, lithuania, latvia and ukraine the comparison of these indicators determines the real possibilities of each country to provide the corresponding rates of economic growth. a characteristic feature of all countries was a significant drop in real gdp during the financial crisis of 2008– 2009. it should be noted that, in the post-crisis period, none of them succeeded in achieving the economic growth rates that countries had before the crisis. the difference in this dynamics is that the baltic states have been relatively stable in ensuring annual development, with the exception of 2008–2009, but ukraine had significant periods of decline, in particular, in 2009 and 2014–2015. this situation in ukraine is explained by complex social processes that were caused by the reorientation of the priority of the european vector of development, the tense relations with russia, the loss of a part of the territory, and the significant depreciation of the national currency  – from 8 uah for 1 usd at the end of 2013 to 27 uah for 1 usd at the end of 2016 or more than 3 times. at the same time, these difficulties with the real gdp dynamics were overcome in 2016, and since then ukraine has demonstrated positive growth rates that are in line with the dynamics of the baltic states. for a more consistent definition of the level of economic development of countries, let us compare the gross domestic product in market prices per 1 person in us dollars (fig. 2). 0 2 4 6 8 10 12 14 16 18 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 estonia lithuania latvia ukraine fig. 2. comparative dynamics of real gdp (per person, usd) source: compiled by the authors according to the statistical services of estonia, lithuania, latvia and ukraine the specificity of this indicator is that it reflects real possibilities of the government of the country to provide economic growth, taking into account the population size. as for the baltic countries, there is a tendency of the permanent growth of this indicator, except for 2009. among all countries, estonia leads, the last place belongs to ukraine. it is worth pointing out that the backlog of ukraine from other baltic states continues to increase. the reason for this is the ineffective implementation of reforms. it is worth pointing out that the backlog of ukraine from other baltic states continues to increase. the reason for this is the ineffective implementation of reforms. a significant obstacle to reform in ukraine is a series of social problems in the political, demographic, and legal spheres, which are difficult to overcome. according to provisions of the theory of economic development, the dynamics of this development is formed under the influence of many components  – external and internal factors, defined government policy, investments from different sources of financing, the international situation of financial and commodity markets, etc. the baltic states have the opportunity to use certain advantages of eu membership, which ukraine cannot realize, even taking into account the existence of relevant economic agreements with the eu. from the components that shape the dynamics of economic growth, we choose general government spending, which can be considered as a conditional value of the resource of social development. in total, general government expenditures consist of certain financial resources of central, state and local government bodies, as well as special social insurance funds. this indicator can have different methods of definition, which determines the diversity of approaches of individual baltic journal of economic studies 100 vol. 3, no. 5, 2017 countries to the provision of public goods and services, as well as certain types of social assistance. according to international practice, it can be measured in usd in percent of gdp or per capita. in this study, we make an estimate in % of gdp. data are given in (fig. 3). 30 32 34 36 38 40 42 44 46 48 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 estonia lithuania latvia ukraine fig. 3. general government spending, % of gdp source: compiled by the authors according to the statistical services of estonia, lithuania, latvia and ukraine analysing the level of these expenditures, we conclude that they have a wide range of fluctuations  – both by years and by country. in the period of the financial crisis, all countries experienced their growth, which was the consequence of government actions in support of the poor, in particular on social benefits. ukraine had the lowest level of these expenditures for almost all of the year, despite annual external and internal borrowings of 2-3 billion usd. in this context, we put forward the opinion of b. danylyshyn (2018), who noted that ukraine could gain a lot in terms of state stimulation of economic growth from the works of j.m.  keynes and his contemporaries devoted to the events of the great depression. but instead, the so-called “agents model”, especially the model of “rational agents”, became very popular. this type of modelling suggests that government intervention can be both a cause of the crisis and a reason for a slow post-crisis recovery of the economy. following this popular logic in ukraine, budget stimulation of the economy is also a form of state policy that cannot bring anything good. but everything is not as clear as the supporters of this point present, who on its rationale give a whole list of arguments with links to popular scholars. here is the borrowed idea of the famous economist d. ricardo, according to whom the public, knowing that additional budgetary spending will lead to higher taxes in the future, is already beginning to reduce its costs, saving money for the future. here is also the opinion of contemporary american economists k.  rogoff and k. reinhart that the growth of the economy begins to slow down in the country, which public debt is 90% of gdp and above. also, an important indicator of development is minimum wages. the role of this criterion lies in the ability of the state to establish the most acceptable lower pay limit for work. let us match these limits (fig. 4). 0 50 100 150 200 250 300 350 400 450 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 estonia lithuania latvia ukraine fig. 4. minimum wages, eur/month source: compiled by the authors according to the statistical services of estonia, lithuania, latvia and ukraine comparison of these levels revealed significant differences in the real financial capacity of each country to ensure minimum social standards. so, if the baltic states significantly increased this level for the analysed period more than twice, then in ukraine it even decreased. as for ukraine, it is worth taking into account the depreciation of the national currency in 2014–2016 more than twice. comparison of the analysed indicators revealed the corresponding differences in the dynamics of the basic criteria of socio-economic development. 4. detection of the impact of minimum wages and general government spending on real gdp in view of four countries to determine the impact of minimum wages and general government spending on real gdp in these four countries, let us perform a correlation-regression analysis based on data for 2006–2016. the period of time  – eleven years  – is sufficient to obtain reliable results of the study. the calculations will be performed using the excel software. the influence of minimum wages and general government spending on the rate of formation of real gdp will be determined by means of correlation-regression analysis using data from fig. 1, 3-4. the results are shown in fig. 5. it is found that the greatest influence of minimum wages on real gdp is recorded in ukraine (the determination coefficient – 0.1862); in the baltic countries, this effect is almost not felt. changes in public spending have the largest impact on gdp dynamics in estonia (79.55% of cases), and the smallest  – in ukraine (12.9%). the results of this part of the study confirm the well-known multiplier effect of j. keynes. as for ukraine, the share of general government spending directed to economic baltic journal of economic studies 101 vol. 3, no. 5, 2017 development, in particular, economic programs, does not exceed 10%, which is insufficient and thus does not contribute to economic growth. the coefficient of multiple correlation (r), which characterizes the tightness of the relationship between real gdp and general government and minimum wages, will be calculated according to the formula: r r r = −1 11 ” ” (1) where: δr  – determinant of the matrix of pair correlation coefficients; δr11 – determinant of inter-factor correlation matrix after completing the calculations, we get the following values for each country: estonia: r = − =1 0 136 0 814 0 9126 . . . (2) lithuania: r = − =1 0 449 0 943 0 724 . . . (3) latvia: r = − =1 0 374 0 998 0 7907 . . . (4) ukraine: r �= − =1 0 677 1 0 5677 . . (5) analysing these values, we conclude that the relationship between real gdp and general government and minimum wages is the tightest in estonia and the least tight one – in ukraine. 5. conclusions the identification of the peculiarities of socioeconomic development in the baltic states and ukraine allows forming strategic and current vectors of the development of economies of these countries. analysis of the dynamics of development according to the criteria of real gdp, general government spending, and minimum wages contributed to the identification fig. 5. the influence of general government spending and minimum wages on real gdp source: calculations by the authors according to the statistical services of estonia, lithuania, latvia and ukraine y = -0,4357x1 + 39,673 r² = 0,7955 y = -2,1004x2 + 305,36 r² = 0,0442 0 100 200 300 400 500 -20 -10 0 10 20 estonia general government spending, % of gdp minimum wages, eur/munth y = -0,372x1 + 38,525 r² = 0,3876 y = -2,0174x2 + 255,34 r² = 0,0441 0 100 200 300 400 -20 -10 0 10 20 lithuania general government spending, % of gdp minimum wages, eur/munth y = -0,3443x1 + 38,805 r² = 0,5838 y = -2,6327x2 + 279,64 r² = 0,0573 0 100 200 300 400 500 -20 -10 0 10 20 latvia general government spending, % of gdp minimum wages, eur/munth y = -0,0654x1 + 33,564 r² = 0,129 y = 1,0539x2 + 79,898 r² = 0,1862 0 20 40 60 80 100 120 -20 -10 0 10 ukraine general government spending, % of gdp minimum wages, eur/munth baltic journal of economic studies 102 vol. 3, no. 5, 2017 of significant differences between these countries. the use of economic and analytical apparatus on the dynamics of real gdp demonstrated the impact of relevant indicators on gdp. as a result of the study, peculiarities of this development are identified in terms of countries and specific indicators. the following main results are obtained: according to the gdp dynamics – during the period of the financial crisis, namely in 2009, all countries had a significant decline in gdp – up to 15% compared to 2008, which in general testifies insufficient sustainability to globalization challenges. in addition, the gdp rates of all countries for the period of 2010–2016 are much lower than those that were in 2006–2008. for ukraine in the period of 2006–2016, these rates were significantly lower, which is evidence of problems in the field of public finance security. the comparative dynamics of real gdp per capita confirmed the least stability of the financial system of ukraine to external challenges, where this indicator is smaller than that of the baltic countries, approximately three times. according to the indicator of general government spending, % of gdp per capita, it is revealed that the baltic states had comparable criteria before the world financial crisis, which were determined within the limits of 32-46%, and in ukraine it was within the range of 31-35%. after the financial crisis, none of these countries reached the pre-crisis level, and this indicator in the baltic states for 2010–2016 ranged from 35 to 40%, and in ukraine  – from 32 to 35%. the revealed dynamics is evidence of the influence of negative external and internal factors that were failed to properly neutralize. concerning minimum wages, it is concluded that economically developed countries of the world attach significant importance to the permanent increase of this indicator, which has an important social significance, and all countries are trying to increase it. thus, in the baltic countries, for the analysed period, it has increased more than three times. in ukraine, this figure has decreased, which was determined both by the global financial crisis and the depreciation of the domestic currency in the period of 2014–2016 more than three times. in view of the significant decrease in the indicators of socio-economic development of ukraine in comparison with the baltic states, it is recommended to implement the following measures of the strategic direction: to generalize the existing normative legal documents of strategic content and to form a new strategy of social development for a period of up to 20 years based on a scientifically grounded paradigm; within the framework of the developed strategy, to formulate appropriate development programs in view of sectors and regions for the short-term; as a basis for development, choose an innovative vector focusing on universal human values. the implementation of these measures will contribute to raising the pace of social development, which is now a topical national task for ukraine. identifying the features of development, both for the baltic states and for ukraine, is an urgent socially important task, therefore, it is expedient to continue scientific research in this direction. references: danylyshyn, b. 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(2011). the paradigm of competitiveness and impact of innovations on regional development in the eu. human resources: the main factor of regional development. 2011, issue 5, p. 282-291. baltic journal of economic studies 276 vol. 4, no. 1, 2018 corresponding author: 1 dinternational economic relations department, kyiv national university of trade and economics. e-mail: melnikknteu998@gmail.com 2 international economic relations department, kyiv national university of trade and economics. e-mail: l.kudirko@ukr.net 3 international economic relations department, kyiv national university of trade and economics. e-mail: samsonova.lilija.gov.ua@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-276-282 features of ukraine’s participation in international contractual relations tetiana melnyk1, liudmyla kudyrko2, liliia samsonova3 kyiv national university of trade and economics, ukraine abstract. the article highlights theoretical and practical aspects of economic rivalry escalation between countries in the process of deepening international economic relations, which are not mediated by investments. the purpose of the research is to summarize the empirical data and theoretical developments of the determinants, macroeconomic effects, and peculiarities of the countries’ participation in international production and marketing cooperation through the format of non-investment contractual relations and investigate their potential for ukrainian enterprises. the subject of the research is contractual relations as an instrument for incorporating the country’s enterprises into global value chains. methodology. assessment of competitive advantages of countries integrated into the international subordinate production was carried out using the techniques of vollrath t.l. and g. lafay. results. based on the generalization of empirical data and theoretical studies on the latest trends in deepening economic rivalry among participants in international cooperative relations, there were found out factors of activation of non-investment forms of external expansion by tncs, in particular, the exhaustibility of the extensive way of cross-border production development and investment, and the increased level of investment risks caused by permanent economic crises, political instability, corruption of local elites in the countries where tnc units are localized, regional military conflicts. estimation of the level of comparative advantages according to vollrath t.l. and g. lafay approaches made it possible to identify the competitive positions of the producers of individual countries in the system of international cooperation. estimation shows that among 41 tested countries, the most significant index of the identified comparative advantages in production under contract was demonstrated by the following countries: bangladesh, bolivia, bosnia and herzegovina, paraguay, romania, south korea, hungary, poland. additional testing according to the criteria values of the lafay index confirmed the list of countries with the highest level of advantages honduras, el salvador, nicaragua, poland, romania, morocco, malaysia, hungary, czech republic, china, bolivia, and albania. assessment of the state and potential for the development of international cooperative relations for ukraine allowed us to identify a number of destructive factors, in particular, the lack of a relevant legal framework for contractual relations and the instability of the political and economic situation in the country. practical implications. possibilities for deepening the participation of ukrainian enterprises in the contractual relationship system are related to their resource and technological comparative advantages, in particular, the availability of free production facilities, a relatively high level of production processes automation in comparison with selected african and asian countries; availability of skilled labour force with its relatively low cost to the customer countries. value/originality. the study of the ukrainian enterprises’ participation in the system of international cooperation and the definition of sectoral specifics in the use of cross-border contractual relations make it possible to identify the problems of macroeconomic effects for the national economy. key words: contractual relations, international cooperation, global production networks, subordinate production, theory of comparative advantages, ukraine. jel classification: f01, f02, f14, f23 baltic journal of economic studies 277 vol. 4, no. 1, 2018 1. introduction the current state of the world economy can be characterized by intensive interpenetration and intertwining of trade and production relations between countries at various levels of management, incl. corporate. transnational companies are actively forming new localization centres for their own production, expanding the range of the location of production facilities in new foreign markets. at the same time, the international practice of cross-border movement of capital and production indicated limited traditional investment methods of external expansion that is determined by a number of factors. firstly, the number of countries that can be the object of investment is reduced annually, so the extensive development of cross-border production and investment is exhaustive; secondly, as the last decade shows, in a global recession and the turbulence of global and national development, direct investment is associated with a growing level of risk: permanent economic crises, political instability, corruption of local elites, military conflicts, and other factors are responsible for this process. in this regard, more and more companies are beginning to use methods of organizing their own international production, which are alternative to direct investments. moreover, the tightening competition in the world markets of final goods and services has been transformed into an intensification of economic competition among intermediate products producers. countries compete for the possibility of localizing production at any stage of the technological process, as this issue directly relates to the increase of jobs and its share in value added in global production and distribution networks. the peculiarity of the new stage of the world economic development expresses the high level of the probability of its reformatting in terms of changing key centres of investment, intermediate consumption, and final production, which is connected with the desire of the governments to intensify production on the national territory. the established networks of corporate and non-corporate tncs’ relations can be restructured by removing parts of regions and countries from the global cooperation system in case production is returned to the tnc home-country. ukraine is also included in the system of international contractual relations as an executive country in the processing of intermediate products. there are also risks of production activities decreasing in case of limited non-resident companies orders. now, the scientific and practical problem of assessing the backgrounds and effects of the participation of enterprises of individual national economies in the system of international cooperation is being updated through the mechanism of contractual agreements that are not related to investments. after all, this understanding allows us to assess more critically the feasibility of institutional assistance in localizing production processes and technological stages in the territory of individual states both in terms of its advantages for national economic development and in the plane of destructive impact. the purpose of the research is to summarize the empirical data and theoretical developments on the factors, macroeconomic effects, and peculiarities of the countries’ participation in the relations of international production and marketing cooperation through the format of non-investment contractual relations and the disclosure their potential for ukrainian enterprises. to achieve the goal, it is necessary to solve the following tasks: to study the theoretical foundations about the specifics of the countries’ participation in international cooperation through the format of contractual relations, to analyse the participation of countries in international cooperation on the basis of statistical data, to identify the macroeconomic effects of countries’ participation in the relations of international production and marketing cooperation, and to determine positive and the negative effects of ukrainian enterprises’ participation in international contractual relations. the methodology of the study. assessment of the competitive advantages of countries integrated into the international subordinate production was carried out using the approaches of vollrath t.l. and g. lafay to identify the level of comparative advantages of individual countries in terms of international contract manufacturing. 2. contractual relations in the system of international cooperation the participation of enterprises integrated into the international system of supply-and-demand cooperation acts as a driver of structural changes in many economies of the world, while ties deepening led to both positive and negative changes. empirical studies show that access to a whole range of foreign intermediate goods, which can be parts and components or any other details used in the production of end-use products, at competitive prices is crucial for improving productivity in both the economically developed countries and in dynamically developing, particularly in india and china (miroudot et al., 2009). empirical studies also confirm the fact that enterprisesexecuters of manufacturing services and works under the order of non-residents in developing countries or countries with transitive economies can achieve a greater success in their own markets due to association with higher standards of production organization and business processes that are regulated by foreign orders. the largest exporters and importers of intermediate goods are unchanged from 2010 to 2014. there remain 28 countries of the european union with an indicator of about 30% of total exports/imports of intermediate goods, the second place is occupied by china, the third – by the united states. these countries import and export baltic journal of economic studies 278 vol. 4, no. 1, 2018 more than 60% of the value of intermediate goods in the world. on average, the rest block of the countries (per one country) account for between 2.5 and 0.1 percent of the world of intermediate goods turnover (world bank, 2014). this statistics confirms the fact that countries with different levels of development are involved in the system of international cooperation, the most active from which are the eu states, the usa (acting as leading countries or as contractor countries), and developing countries, mainly from the asian region. the prc occupies a special place, positioning itself as a country with dynamic economic development. the contractual relations of chinese enterprises with foreign customers have become a factor both in the creation of new and development of existing industries in the prc. acquiring rapidly foreign experience and technology, there were established a huge number of companies that began to produce end-use goods that compete with the leading companies from economically developed countries in the world market. an analysis of international experience shows that a business model or strategy of a transnational corporation can incline a company to use a certain type of contractual relations in the system of international production or marketing cooperation. so, in case of franchising, which provides that business model is built on the use of the industrial or intellectual property as the core competence, an exclusive franchise is used for distribution in both domestic and foreign markets (reid, mark, 2008). in pharmacology, the trend towards outsourcing of production stages along the entire value chain encourages tncs to use this format of contractual relationships as contract production. in particular, according to the outsourcing strategy of the international giant pfizer, contractual relations are being formed with about 150 producers (on contract manufacturing terms) all over the world. from 2003 to 2008, pfizer reduced the number of its own enterprises by almost 50% (up to 46 plants). the main considerations in choosing outsourcing were: the supply possibility, the capacities flexibility, cost competitiveness and technology, as well as ensuring the integrity/reliability of the supply chain, product quality, and regulatory compliance (website www.pfizer.com). peculiarities of contract production in some industries, in particular, automotive and electronics, are determined by the fact that the contractual relationship model is matured, and the contract producers turned from suppliers to large tncs with strong competencies and cost advantages. for global automotive brands, investing in their own intermediate production capacity is impractical. for example, denso ( japan), automotive parts manufacturer and foxconn (taiwan province of china), however, electronics contract manufacturers, have huge volumes of operations in many locations, as well as investing heavily in research (cattaneo and et al., 2010). 3. countries’ competitiveness in contract manufacturing contractual relations are the subject of the theory of comparative advantages; therefore, in assessing the extent to which the countries have used contractual relations in their international activities, it was decided to use the methodology for assessing the level of competitiveness of certain types of contractual relations across the world. we use the approach of vollrath t.l. – index of the revealed comparative advantages rca (revealed comparative advantage) (vollrath, 1991) and g. lafay  – index of lfi (lafay, 1992). among the existing types of contractual relations, there was selected the contract manufacturing. this choice is justified by the availability of relevant statistics for selected countries for the selected period, which is provided by the imf database from the countries’ balance of payments. the indices of the revealed comparative advantages and the lfi index for contract manufacturing are given in tables 1 and 2. the value of the rca index in contract manufacturing allows ranking countries from the sample as having the greatest advantages: bangladesh, bolivia, bosnia and herzegovina, honduras, paraguay, romania, republic of korea, hungary, poland. a country that does not have any comparative advantages according to calculations is peru. other countries with a score of 0.1 to 5.0 can be considered as those that have comparative advantages in contract manufacturing. table 1 the index of comparative advantages of contract manufacturing for selected countries, 2007–2015 years № countries rca – index of the revealed comparative advantages 2007 2008 2009 2010 2011 2012 2013 2014 2015 1 albania 4,6 4,6 3,4 6,1 7,1 6,5 4,5 6,1 7,5 2 australia 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 3 austria 2,8 2,3 2,1 1,7 1,9 1,3 2,6 3,1 3,2 4 azerbaijan 4,3 1,5 4,6 4,1 2,2 2,0 0,0 0,0 0,0 5 bangladesh 11,8 4,4 0,4 0,5 0,5 0,5 0,5 0,7 0,6 6 belarus 5,4 3,3 2,9 2,4 2,4 2,0 2,0 1,7 1,4 7 belgium 4,4 3,4 2,9 2,9 3,3 3,5 2,4 2,4 2,7 8 bolivia 13,7 10,7 10,0 8,3 6,1 3,8 3,1 2,7 3,1 9 bosnia and herzegovina 49,2 34,1 18,7 22,4 26,1 22,1 21,1 24,9 22,7 baltic journal of economic studies 279 vol. 4, no. 1, 2018 10 china 9,0 6,9 7,5 7,1 5,6 5,0 4,2 3,1 2,9 11 costa rica 5,9 4,4 6,2 6,5 7,3 7,1 6,0 4,1 1,8 12 côte d'ivoire 8,2 6,8 7,1 6,3 6,5 5,9 6,1 0,0 0,0 13 croatia 4,7 3,8 2,6 2,6 2,4 2,6 1,9 2,0 2,0 14 czech republic 4,8 3,7 3,0 2,6 2,0 2,8 3,7 4,3 4,6 15 dominican republic 26,9 19,3 16,5 1,3 2,5 2,3 0,7 0,7 0,8 16 el salvador 14,8 13,1 15,1 16,2 15,9 12,3 12,0 10,5 13,0 17 france 2,0 1,9 1,8 1,7 2,0 2,5 2,7 3,5 3,9 18 germany 2,4 1,7 1,6 1,8 1,9 1,7 1,4 1,7 1,8 19 honduras 41,8 30,2 30,5 32,6 31,6 27,9 32,0 34,5 38,0 20 hungary 5,5 3,3 2,6 2,8 3,5 4,4 4,6 5,6 6,4 21 iceland 10,3 8,6 6,0 7,7 7,2 6,1 5,9 3,1 2,1 22 india 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,1 0,1 23 indonesia -4,9 -3,2 -3,0 -0,5 1,9 0,6 0,7 0,8 0,7 24 italy 0,9 2,9 3,1 3,3 2,8 2,7 2,8 2,8 2,9 25 republic of korea 4,8 3,6 4,9 4,9 5,7 5,2 5,2 5,4 5,9 26 lithuania 3,6 2,9 5,7 6,0 3,8 2,9 2,8 2,4 2,2 27 luxembourg 0,3 0,1 0,1 0,1 0,1 0,1 0,1 0,1 0,1 28 malaysia 0,0 0,0 0,0 3,6 3,3 2,9 2,7 3,0 3,2 29 morocco 11,2 7,7 10,8 9,5 7,5 7,4 5,5 6,2 6,1 30 netherlands 0,0 0,0 0,0 3,4 4,0 4,0 4,1 4,0 3,9 31 nicaragua 24,6 17,9 19,0 21,1 22,7 23,1 24,6 27,6 26,6 32 paraguay 32,9 8,0 5,2 7,8 9,2 7,9 8,3 10,3 10,0 33 peru -11,7 -8,8 -5,0 -10,7 -15,5 -13,9 -10,8 -5,8 -6,3 34 poland 3,2 1,9 2,6 2,7 3,0 3,1 4,4 5,2 5,5 35 portugal 1,8 1,1 0,9 1,0 1,1 1,2 1,3 1,2 1,0 36 romania 19,5 11,6 9,2 8,8 9,8 8,7 10,5 11,5 11,1 37 russian federation 2,5 2,1 1,9 1,9 1,6 1,3 1,3 1,0 0,9 38 slovakia 0,0 1,5 2,3 2,6 2,8 2,5 2,2 2,4 2,0 39 slovenia 0,4 2,6 1,6 1,8 1,7 2,9 2,2 1,8 1,5 40 switzerland 0,0 0,6 0,6 0,4 0,4 0,6 0,5 0,7 0,7 41 united kingdom 0,1 0,1 0,1 0,2 0,2 0,2 0,9 0,8 0,8 42 ukraine 4,8 3,5 3,4 4,0 5,0 5,3 4,9 5,0 5,3 calculated by the author on the basis of balance of payments end of table 1 table 2 the lfi index, calculated for contract manufacturing (countries of the world), 2007–2015 years № countries lfi – lafay index 2007 2008 2009 2010 2011 2012 2013 2014 2015 1 albania 3,81 4,82 3,33 5,65 6,65 6,09 4,29 5,31 5,82 2 australia 0,02 0,02 0,06 0,04 0,02 0,01 0,01 0,01 0,01 3 austria -1,09 -1,13 -0,50 -0,99 -1,00 -0,98 -1,53 -1,49 -1,41 4 azerbaijan 5,23 2,45 6,21 5,28 3,09 2,66 0,02 0,00 0,01 5 bangladesh 5,25 3,11 0,52 0,70 0,71 0,72 0,77 0,93 0,82 6 belarus 3,33 2,58 2,13 1,78 1,63 1,41 0,99 1,05 0,94 7 belgium 2,70 3,04 2,42 2,01 2,03 1,66 1,27 1,36 1,36 8 bolivia 14,10 18,63 14,95 10,55 7,30 5,10 4,33 3,54 3,50 9 bosnia and herzegovina 29,22 31,23 11,31 9,06 11,57 10,19 9,38 11,29 9,04 10 china 7,94 8,01 8,71 8,08 6,49 6,19 5,31 3,60 3,34 11 costa rica 2,42 2,32 3,63 3,86 3,80 3,79 2,97 1,91 0,85 12 côte d'ivoire 1,15 1,46 1,91 1,46 2,45 2,47 2,74 0,00 0,00 13 croatia -1,13 -1,08 0,64 -0,07 0,21 0,08 0,44 0,67 0,67 14 czech republic 2,37 2,12 2,21 1,87 1,16 1,40 2,45 2,70 2,53 15 dominican republic 9,66 9,75 8,07 1,05 -0,33 -0,28 0,42 0,40 0,43 16 el salvador 11,83 13,53 14,00 14,58 14,09 11,05 10,22 8,08 9,58 17 france 0,27 0,39 0,64 0,68 0,98 0,63 0,42 0,27 0,25 18 germany 0,20 0,30 0,47 0,44 0,31 0,20 0,15 0,24 0,17 baltic journal of economic studies 280 vol. 4, no. 1, 2018 according to the estimated values of the lfi index, the larger its value, the higher the level of benefits in the country. countries with high levels of benefits include honduras, el salvador, nicaragua, poland, romania, morocco, malaysia, hungary, czech republic, china, bolivia, and albania. the lack of competitiveness in production under contract is demonstrated by the republic of korea, austria, and other countries from the sample, which is less than zero. the balance of payments’ statistics shows that the increase in licensing activity in developing countries is spontaneous and is not stable, while developed countries are consistently leaders in licensing. in the process of choosing a country for the implementation of a license, royalties play a decisive role and, on this basis, developing countries and countries with transitional economies in modern reality pay a quarter of the global royalties. the geographic distribution of licensing is wide enough, although south, east, and south-east asia cover about 70% of developing countries and countries with transition economies, followed by latin america and the caribbean, southeast europe, africa, and west asia. in each region, licensing activity is concentrated in several countries, for example, south africa and egypt in africa, brazil and argentina in latin america, and turkey in western asia. the licensing case is more developed in western and south-west asia, in singapore, china, and the province of taiwan. 4. ukraine’s participation in international contractual relations pointing out the peculiarities of ukraine’s integration into the system of international cooperation relations, it is important to note that it has experience of deep industrial and marketing cooperation within the framework of the unified national economic complex of the ussr . after having got independent, ukrainian enterprises began to enter into the production systems of european and a part of asian markets, whose companies act as contract customers. for ukraine, the complexity of the formation of contractual relations is not only consisting of the fact that this is a new phenomenon both in international and national territories but also because there is a lack of experience in building contractual relations with foreign counterparties. obviously, ukrainian companies take a weaker position on many aspects related to contractual relations, although in some areas it is possible to observe the positive consequences of such international cooperation. complications for the development of international cooperation are led by the fact that now in ukraine there is no legislative basis that would resolve all controversial and risky issues of contractual relations. besides, the country generally experiences an unstable political and economic situation, which affects the performance of all spheres of business, and not only activities based on international contractual relations. on the other hand, 19 honduras 26,76 25,84 22,19 24,63 26,00 26,04 27,61 27,50 28,22 20 hungary 2,46 2,45 1,79 1,90 2,05 3,09 2,99 3,31 3,67 21 iceland 8,80 9,03 5,41 6,83 6,50 5,80 5,02 2,48 1,52 22 india 0,00 0,00 0,00 0,00 0,00 0,01 0,00 0,05 0,04 23 indonesia -5,69 -4,60 -4,10 -0,61 2,39 0,81 0,90 0,88 0,79 24 italy 0,07 0,45 0,58 0,91 0,50 0,44 0,47 0,20 0,25 25 republic of korea -0,97 -1,52 -2,55 -2,22 -3,36 -3,00 -2,50 -2,39 -2,34 26 lithuania 2,26 2,55 4,77 4,88 3,04 2,42 0,25 0,64 1,43 27 luxembourg 0,05 0,04 0,04 0,01 0,00 0,01 0,01 0,02 0,03 28 malaysia 0,01 0,00 0,00 3,66 3,34 3,14 2,74 2,84 3,02 29 morocco 5,42 5,26 7,32 6,69 5,57 5,55 3,89 4,20 4,03 30 netherlands 0,00 0,00 0,00 -0,59 -1,25 -1,27 -1,25 -1,33 -1,39 31 nicaragua 21,86 19,60 18,31 19,32 20,37 20,86 22,75 22,62 19,57 32 paraguay 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 33 peru 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 34 poland 2,01 1,60 2,15 2,30 2,38 2,64 3,32 3,57 3,30 35 portugal 0,91 0,65 0,60 0,64 0,65 0,68 0,66 0,61 0,51 36 romania 12,93 9,81 7,22 6,68 7,75 6,53 7,29 7,05 6,31 37 russian federation 1,95 2,25 1,99 2,13 1,70 1,52 1,40 0,98 0,85 38 slovakia 0,00 1,08 1,95 1,57 1,50 1,16 0,97 1,07 0,97 39 slovenia -0,37 1,17 0,69 0,44 0,19 -0,88 0,59 0,81 0,56 40 switzerland -0,03 0,54 0,53 0,40 0,37 0,47 0,47 0,49 0,58 41 united kingdom 0,05 0,09 0,09 0,11 0,11 0,12 0,29 0,24 0,24 42 ukraine 3,62 3,51 3,15 3,48 3,99 4,47 4,15 4,14 4,04 calculated by the author on base of balance of payments end of table 2 baltic journal of economic studies 281 vol. 4, no. 1, 2018 foreign customers of contractual relations are attracted to ukraine with unconditional advantages: firstly, the availability of free production facilities, the automation level of which is much higher than the underdeveloped african and asian countries; secondly, a skilled workforce and, thirdly, it is the low cost of quality labour in relation to labour costs in the contracting countries. given the historical aspects of the contractual relations formation and the specifics of the collection, processing, and submission of information in ukraine, we were able to conduct an analysis of the involvement of ukrainian enterprises in international cooperative relations, taking into account their specific branch structure. by the mode-sectoral structure is understood a combination of contractual relations by types/sector, where a particular type is used in large volumes. the generalization of empirical and statistical information allowed us to distinguish the following typical formats of contractual relations between ukrainian enterprises (executors) and foreign contractors (customers): for apparel industry  – contract manufacturing (tolling, processing of raw materials); in the hotel and restaurant industry  – franchising; in the field of information technology and business process management  – outsourcing; in the field of research and development and the implementation of patents, utility models, and other intellectual property products  – licensing. contract management is almost not common in ukraine as a service for export. also considering peculiarities of land resources management and economic complex in ukraine, contract farming exists in very limited forms. analysis of data from the state statistics service for 2013–2016 showed that the key export positions among contractual relations are operations based on give-and-take raw materials (with a tendency to increase) in chemical products (commodity group vi) and apparel (product groups vii, xi, xii, xx) industries, machinery (commodity group xvi), as well as goods of group x, of which the share made from customer-supplied raw materials, is more than 26% and other productions (commodity group xx). thus, in ukraine, in re-export positions in which the share of products made from customer-supplied raw materials exceeds 50%, only apparel industry product, that is, commodity groups viіi, хі, and хіі. at the same time, there is deepening negative tendency of the share of production from the give-and-take raw materials in the machine-building exports, whose share in the commodity structure of ukrainian exports for this period, on the contrary, it decreased by 0.96%. the imported raw materials for apparel industry (commodity groups viii and хі) prevails, with a tendency to increase during the considered period. in addition to these goods, a significant share in the structure of imports is occupied (with a decline in 2016): various industrial goods (commodity group xx), machinery, equipment and mechanical appliances (commodity group xvi) and polymeric materials, plastics and goods thereof (commodity group vii). as a result, the reduction of commodity imports to ukraine (primarily due to the growth of the foreign exchange rate) creates additional opportunities for the development of national industries in the direction of import substitution of goods for both final and intermediate consumption. however, the intensive growth in imports of tolling raw materials threatens the further functioning of individual industries (primarily textile and machine building). it is important to focus on certain financial aspects of the domestic legislation, in fact, make it impossible to re-direct domestic contractor enterprises to seek other formats of activity as a subject of foreign economic activity, and the country’s budget is deprived of the tax incomes. expenses for operations with give-andtake raw materials for an entrepreneur-performer are recognized in the amount not exceeding the income received from such sale/exchange. therefore, losses under tolling services by the fiscal code are not allowed (regulation (standard) of accounting 21). processing of customer-made raw materials imported by a nonresident to the customs territory of ukraine (subject to further exportation of the products of its processing from the territory of ukraine) is subject to vat at a zero rate (instructions for the application of the plan of accounts for the bookkeeping of assets, capital, liabilities and business operations of enterprises and organizations, 1999). at the same time, a zero vat rate in respect of works (services) for the processing of tolling raw materials is used both by the enterprise, which is determined by the main contractor for the contract on processing of the customer’s raw materials, and for the enterprise involved in the technological process associated with the processing of tolling raw materials into finished products, if it is indicated in the contract for the processing of tolling raw materials. and last, the revenue for the taxation purposes of the processor usually arises only at the cost of its services for processing customersupplied raw materials. summarizing the above, we can draw the following conclusions: firstly, the import duty rate and vat for give-and-take raw materials is 0%; secondly, services for the processing of material resources are also not subject to vat; thirdly, only the income of the processor from the services provided is the basis for the appearance of tax liabilities. thus, only the tax on the results of the activity of processing enterprises settles in the country’s budget. international experience in the use of contractual relations as an instrument for incorporating the national business into the global production and marketing cooperation system confirms the possibility for the executing companies both to climb the technological baltic journal of economic studies 282 vol. 4, no. 1, 2018 progress stages and to preserve their production capabilities in the weakest low-yielding chains of global value creation. this depends upon country’s competitive advantages in locating production processes, institutional support for structural changes in the national economy, the course of economic competition between key producers and customers of international contractual services. 5. conclusions summarizing the conducted research, we can make the following generalizations: • the countries’ participation in the system of international cooperation, including the format of contractual relations not related to investment, contains a number of opportunities in terms of increasing the rate of employment, simplified access to external markets, increasing the level of organizational and technological culture of production processes, nevertheless it is also accompanied by certain challenges, such as: the influence of endogenous factors on the development of the level of manufacturability of national production, the localization of low profitable production processes on the economy national territory; high level of dependence of the national economic dynamics of demand of non-residents; • an assessment of the level of countries’ competitive advantages, taking into account their participation in international contractual relations through subordinate production, has shown the variability of the status of countries as participants in international cooperation: a significant level of comparative advantages can be enjoyed by a country from a group of states with a high level of economic development and developing country or with a transitional economy; • the opportunities for deepening the participation of ukrainian enterprises in the contractual relationship system are related to their resource and technological comparative advantages, in particular, the availability of free production capacity, a relatively high level of automation of production processes for selected african and asian countries; the availability of skilled labour force with the background of its low cost in comparison with the countries-customers. further studies of this problem relate to a more in-depth analysis of the macroeconomic effects of ukraine’s participation in the international cooperation system and the identification of sectoral specifics in the use of cross-border contractual relationships. gratitude. the preparation and writing of the article became possible with the support and funding of the research topic “global imperatives of the international production development #648/20” by the ministry of education and science of ukraine, which was carried out at the international economic relations department of knute in 2016–2018. 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(2010). global value chains in a postcrisis world: a development perspective. washington, dc: the world bank. instrukciya pro zastosuvannya planu rakhunkiv bukhgalterskogo obliku aktyviv, kapitalu, zobovyazan i gospodarskykh operacij pidpryyemstv i organizacij [instructions for the application of the plan of accounts for the bookkeeping of assets, capital, liabilities and business operations of enterprises and organizations]. (1999). kyiv: ministry of finance of ukraine from november 30, no 291. http://dtkt.com.ua. retrieved from: http://dtkt.com.ua/show/2cid06881.html. [in ukrainian] lafay, g. (1992). the measurement of revealed comparative advantages. international trade modeling , london, 209-237. miroudot, s. lanz, r . and a. ragoussis (2009). trade in intermediate goods and services. oecd trade policy working paper, 93. retrieved from: http://www.oecd.org/dataoecd/47/14/44437205.pdf polozennja (standart) buchhalterskoho obliku 21 «vplyv zmin valjutnych kursiv» [regulation (standard) of accounting 21 "the impact of changes in exchange rates"]. http://zakon1.rada.gov.ua. retrieved from: http://zakon1.rada.gov.ua/laws/show/z0515-00. [in ukrainian] reid, mark (2008). a case study analysis of the benetton supply chain. mba paper, university of greenwich business school. site of the international monetary fund. (2007-2015). balance of payments standard presentation by indicator: current account, goods and services, services, manufacturing services on physical inputs owned by others, debit-credit. http://data.imf.org. retrieved from: http://data.imf.org/regular.aspx?key=61468208 site of the pfizer company. www.pfizer.com. retrieved from: www.pfizer.com. site of the world bank. (2014). world intermediate goods exports by country and region. https://wits.worldbank. org. retrieved from: https://wits.worldbank.org/countryprofile/en/country/wld/year/2014/tradeflow/ export/partner/all/product/unctad-sop2 vollrath t.l. (1991). a theoretical evaluation of alternative trade intensity measures of revealed comparative advantage. review of world economics, 127, 265-280. baltic journal of economic studies 117 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: 7431367@ukr.net orcid: https://orcid.org/0000-0001-9441-8552 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: vitvitskyi_ss@ukr.net orcid: https://orcid.org/0000-0002-4884-1883 3 odessa state university of internal affairs, ukraine e-mail: amv22od@gmail.com orcid: https://orcid.org/0000-0001-9437-0421 doi: https://doi.org/10.30525/2256-0742/2022-8-5-117-126 economic and legal principles of commercialization of intellectual property in ukraine serhii medvedenko1, serhii vitvitskyi2, maryna arapaki3 abstract. the subject of the study is the conceptual, theoretical, empirical and methodological foundations of the legal and economic nature of the commercialization of intellectual property in ukraine. methodology. general and special methods of cognition were used in the process of research. the essence of the commercialization of intellectual property was evaluated on the legal and economic level, on the basis of the same and opposite parameters with the help of the dialectical method. the analysis created conditions for a multifaceted study of all characteristic features of the commercialization of intellectual property as an economic and legal phenomenon. the synthesis created conditions for summarizing the characteristic features of this process. the formal legal method allowed to correctly interpret the content of normative legal acts that determine the general legal regime of commercialization of intellectual property and the special legal regime of its forms with regard to their use in civil or economic circulation. the purpose of the article is to determine the economic and legal foundations of the commercialization of intellectual property in ukraine as an economic and legal category at the theoretical and empirical level. the results of the study prove that the commercialization of intellectual property is a form of implementation of scientific developments and innovations in various spheres of human life, which is usually accompanied by obtaining a certain benefit and includes a number of forms of implementation regulated by administrative, civil and economic legislation. conclusion. commercialization of intellectual property in ukraine consists of two conceptual approaches to the study and implementation of an economic and legal nature. economists propose to consider commercialization as one of the constituent stages of the social life process of intellectual property objects along with creation, security and protection. within this approach to the forms of commercialization of intellectual property, the following manifestations are distinguished: 1) use of the corresponding object within the limits of own production, transfer under contracts (licensing, leasing, commercial franchise) to other subjects or entry of rights to the object objects of intellectual property into the authorized capital of the enterprise; 2) capitalization and sale. among the factors that determine the qualitative and quantitative indicators of commercialization, the most important are legislation, state management in this area, and the existence and implementation of measures to stimulate participants in this area. from a normative point of view, the phenomenon of commercialization of intellectual property has gained publicity in various levels of understanding, both from the standpoint of private law and public law. for both components of jurisprudence, the approach is generally accepted, according to which the given issue is considered with a view to ensuring public or private protection of intellectual property rights. attention is paid to the set of tools provided by special legislation to higher education and scientific institutions in the field of commercialization of intellectual property. the provisions of the ukrainian legislation defining the general legal regime of commercialization of intellectual property and the special legal regime of its forms are characterized. key words: commercialization, intellectual property, intellectual property law, forms of commercialization, economic principles, legal principles. jel classification: o34, p48 baltic journal of economic studies 118 vol. 8 no. 5, 2022 1. introduction the results of creative and intellectual activity, as a corresponding good that satisfies the needs of specific users and society, as well as a form of expression of the creator's own creative identity, have always been an integral attribute of humanity and of man in particular. in the conditions of globalization of all spheres of society, the question of finding a place for such benefits has always been a priority, which has become especially acute in the circum stances of diversification of forms of realization of the results of creative and intellectual activity within the framework of manifestations of human coexistence unknown until recently, as an example of various types of computer networks, in particular, the internet. the results of creative and intellectual activity, like any other good, especially those that have a certain material embodiment, have been and are the object of relevant social relations, have been and are the subject of certain agreements made with a certain purpose. at the same time, one of the manifestations of the purpose regarding the circulation of similar goods in civil or economic turnover is the need to obtain a certain economic benefit, profit, which acquires a special color within the economic activity of certain legal entities and individuals. the demand for such objects also creates a corresponding supply, which correlates with a number of other factors. such processes have a socioeconomic and legal nature, which is perceived as a phenomenon of commercialization of intellectual property, which, taking into account the above, requires research from the standpoint of its legal and economic nature. of course, the commercialization of intellectual property could not stay away from the scientific views of economists, as evidenced by the works of: l. oleinikova on the peculiarities of intellectual property as a product in the modern conditions of the development of the economy of ukraine (oleinikova, 2013), e. stanislavik and k. kovtunenko regarding the determination of the place of intellectual property objects in the content of the process of commercialization of the results of innovative activity (stanislavik and kovtunenko, 2011), i. shuba on the classification of forms of commercialization of intellectual property objects (shuba, 2014), i. shushakova on the characteristics of commercialization of intellectual property objects at enterprises (shushakova, 2015), a. kodynetz and l. maidanyk on the stages of commercialization of intellectual property (kodynetz and maidanyk, 2019). the vast majority of legal scholars have studied the commercialization of intellectual property in terms of the legal regime of one or another form of this phenomenon, as well as its other legal manifes tations. thus, h. mydzhyn drew attention to the need to create an effective system of executive authorities, ensuring their optimal structure and competence as a prerequisite for the progressive development of commercialization of intellectual property (mydzhyn, 2021). t. yaroshevska examined the constituent elements of relations with commercialization of objects of industrial property rights (yaroshevska, 2021), and i. okonkwo singled out non-fungible token (nft) as channels of commercialization of intellectual property (okonkwo, 2022). i. yakubivskyy studied the development of commercialization of intellectual property through the widest possible involvement of property rights to objects of intellectual property law in civil turnover (yakubivskyy, 2019), and i. koval projected the formation of the process of commercialization of objects of intellectual property law, created within the scope of activities of higher education institutions (koval, 2014). the above considerations contribute to the actualization of the knowledge of the economic and legal basis of the commercialization of intellectual property in ukraine, which is the subject of this work. 2. economic principles of intellectual property commercialization the commercialization of intellectual property as a socio-economic category has a purely rational meaning, which consists in obtaining the maximum profit from the use of the results of creative and intellectual activity, within the limits of business turnover, whether civil or governmental. it is this pragmatic imprint that can be traced in a number of studies by scientists in the field of economics. in general, the intellectual activity of a person is considered as a behavior aimed at obtaining a certain economically effective result (a new method, technology, means of marketing promotion, means of individualization of a product or service, etc.) (oleinikova, 2013). the given point of view only partially reflects the content of mental behavior of a person, the result of which is the result of creative activity, since not everything that is obtained has the appropriate economic efficiency, to say the least, quite often objects of intellectual property appear without the desire for certain legal consequences, including economic significance. it is proposed that the following characteristics should be attributed to intellectual property: its material essence; its distribution in all spheres of human activity; the temporal limits of the validity of rights to intellectual property objects; the presence of moral wear and tear in the case of the appearance of a new, more advanced technology, method or technique in baltic journal of economic studies 119 vol. 8 no. 5, 2022 the absence of physical wear and tear. the above characteristics are more applicable to industrial property objects. there is a widespread opinion that the stable functioning of the intellectual property market plays an important role in the commercialization of intellectual property objects, which largely depends on such parameters as: legislation, state administration in this area, and the existence and implementation of incentive measures in this area for participants. economists propose to consider commercialization as one of the constituent stages of the process of social life of intellectual property objects along with such as creation, security, protection. such a position fully corresponds to another one existing in the legal sphere, which will be discussed below, since the stages of creation, exercise and termination of the intellectual property right are actually demarcated, where the commercialization of such goods is realized within the middle limits. the position that commercialization is the process of obtaining any benefit from the use of an object of intellectual property, and not only profit, is appropriate. however, in such conditions it is necessary to clarify – the benefit must have an economic shade, which is subject to appropriate assessment from the point of view of the good for which demand is formed. within the economic turnover, the economic effect of the commercialization of intellectual property depends on the amount of additional income received from the use of a similar object in production. according to another approach, the commercialization of intellectual property objects is considered one of the remaining forms of commercialization of innovative activity in the economic sphere (stanislavik and kovtunenko, 2011). to determine the effectiveness of commercialization, general para meters are taken into account, in particular, the results of marketing research on the introduction of innovative products and technologies to the market. therefore, in order to increase the efficiency of commercialization of innovations in the enterprise, including the use of intellectual property objects, the following measures are proposed provision of various state support for patent and inventive activities, creation of innovation funds with appropriate incentive mechanisms within the life stages of these innovations, introduction of various forms of training of employees of enterprises with the aim of increasing literacy in the field of passing through all stages of existence of innovations, introduction of administrative procedures regar ding the accounting of such objects and management of their life in production, creation of a mechanism for transfer of similar technologies and an effective marketing system and sale of goods and services produced using similar innovative developments. it is appropriate to study the measures of state regulation that contribute to the commercialization of intellectual property in comparison with modern developed countries (shushakova, 2015). measures of organizational, financial and regulatory support are proposed. thus, in the eu countries, such tools as the development of the system of cluster scientific associations, technopark systems, and financial support in the aspect of state support of national producers are widely used in the eu countries for organizational support in the framework of state stimulation of the activities of scientific institutions and scientists in the eu countries innovations involved state support for the development of national brands, state support for small and medium enterprises, from regulatory and legal support in the context of stimulation of scientists in the transfer of innovations found a legislative enshrinement of the right of scientists to own shares in companies being formed, taking into account the period of performance of duties of the scientist in state scientific institutions, for entrepreneurship of persons of this category, for benefits in the field of taxation of royalties. such, which has appropriate grounds, is the justification in the economic context of the stages of commercialization of intellectual property, where the following are highlighted: 1) identification of the object of intellectual property, which is mediated by obtaining a law enforcement document; 2) marketing (identification of goods, among others, analysis of the market, sales channels, pricing, audit), which includes the promotion of goods and services on the market using intellectual property objects; 3) evaluation of such a product or service taking into account the intellectual component by cost, market (comparative), income methods; 4) insurance of intellectual property rights; 5) searching for users and concluding contracts with them on the use of intellectual property rights (kodynetz and maidanyk, 2019). obviously, obtaining a security document is a mandatory stage in the case of identification of the relevant object of intellectual property rights, given the nature of the latter. in any case, each stage is mediated by the application of economic parameters to the characteristics of the object of intellectual property, directly or indirectly. the approach from the position of economists to the definition of participants in relations with the commercialization of objects of intellectual property is quite common. in particular, such subjects of this activity are distinguished as: state administration bodies, creators, investors (customers of relevant innovative developments), enterprises (manufacturers of relevant products), competitors in baltic journal of economic studies 120 vol. 8 no. 5, 2022 terms of homogeneity of the manufactured product with an innovative component (stanislavik and kovtunenko, 2011 ). according to another point of view, the subjects of commercialization of intellectual property objects are the state, an enterprise, a higher educational institution, a technology park, an innovation incubator, a natural person, etc. (shushakova, 2015) there is an approach to distinguish groups based on the functional affiliation of such participants, where among them are distinguished developers, intermediaries and buyers of the relevant object. the first group includes independent inventors (creators), scientific and educational institutions, the second group consists of commercialization centers, technology parks and business incubators, and finally the third group includes the state, venture funds and large companies (shuba, 2014). based on the results of the analysis of indicators of commercialization of intellectual property objects in ukraine, it was concluded that the most productive participants of such are research institutions (chugrii, 2017), which is explained by the special legal status of such legal entities according to their statutes and the relevant legal framework. from the point of view of forms of commerciali zation of objects of intellectual property from the position of individual economists there is a simplified approach due to the understanding of such a process as the use of the corresponding object within the limits of own production, transfer under contracts (licensing, leasing, commercial franchise) to other subjects or adding rights to intellectual property objects to the authorized capital of the enterprise (oleinikova, 2013). more fundamental is the position according to which the forms of commercialization of intel lectual property objects are divided into capitali zation and disposal, where the methods of the first are contribution to the statutory fund of the company, accounting, and the second – use in own production, leasing, conclusion of license agreements, franchising, transfer of know-how, creation of a small business based on innovation, engineering – provision of technical assistance, industrial cooperation – transfer of rights within the framework of a joint venture (shuba, 2014). according to a more rational approach, it is proposed to separate the capitalization of intellectual property objects as part of intangible assets as indirect commercialization of intellectual property, which includes contribution to the authorized capital of another enterprise, acquisition of licenses and patents, free acquisition of these objects, acquisition, privatization or unification of enterprises, as well as direct commercialization (shushakova, 2015). the latter includes 1) use in own production through manufacture of corresponding products, including through modernization of the production process and monopolization of sales markets; 2) certain forms of contracts on creation of new objects, their transfer for use on the basis of patents or licenses, franchising, leasing, engineering, commercial concession; 3) specific or qualified forms, for example, on the consequences of assignment of damages for infringement of certain intellectual property rights within the limits of patents or licenses. regarding the forms of commercialization, it is necessary to come to a conclusion about their diversity, where such criteria as: purpose of use can be clearly traced, place in the production cycle, value for the user. among the forms of commercialization that are most significant for society and the development of the economy in terms of specific weight in the composition of capital, preference should be given to contracts as the most dynamic mechanism that mediates the movement of objects of intellectual property in civil and economic turnover, as well as ensuring access to such benefits for a significant number of users and society in general. the above is also confirmed by the statistical data of the authorized body of state management of intellectual property in ukraine. thus, according to the results of activity in this field in 2021, the state enterprise "ukrainian institute of intellectual property " provides the following indicators. in 2021, 1,922 contracts were registered for the transfer of exclusive intellectual property rights to industrial property objects, 212 licenses for their use, of which 98 were open, most of which related to the disposal of property rights to a trademark, while almost 500 such contracts were concluded and registered in respect of copyright works, the vast majority of which related to the disposal of property rights to computer programs (ukrpatent annual report for 2021). with regard to the economic principles of the commercialization of intellectual property, it is necessary to express the following. this socio economic category has a purely rational meaning, which consists in obtaining the maximum profit from the use of the results of creative and intellectual activity within the limits of business turnover, whether civil or economic. the characteristics that make intellectual property marketable include: its material essence; its distri bution in all spheres of human activity; the time limits of validity of rights to intellectual property objects; the presence of moral wear and tear in the case of the appearance of a new, more advanced technology, method or technique in the absence of physical wear and tear. commercialization is considered in the narrow sense as the possibility of using an object of intelbaltic journal of economic studies 121 vol. 8 no. 5, 2022 lectual property for the purpose of obtaining a certain benefit, and in the broad sense as one of the forms of commercialization of innovative activity in the economic sphere. the stages of commercialization, the participants of this process and its forms are highlighted. among the factors that determine the qualitative and quantitative indicators of commercialization, the most important are legislation, state management in this area, and the existence and implementation of measures to stimulate participants in this area. 3. legal principles of commercialization of intellectual property in ukraine since, as mentioned earlier, legislation is a directly proportional lever of society 's influence on the commercialization of intellectual property, it is necessary to address this issue in more detail. from a normative point of view, the phenomenon of commercialization of intellectual property has gained publicity in various levels of understanding, both from the standpoint of private law and from the standpoint of public law. for both components of jurisprudence, the approach is generally accepted, according to which the given question is considered with regard to the provision of public or private law protection of intellectual property rights, respectively. in addition, in the field of economics, the essence of intellectual property as the result of a certain type of activity, which can be appropriated and acts as intellectual capital, is important, and in the field of law – the ability to exercise a set of powers over the created or acquired result of intellectual property at one's discretion and independently of the will of other persons – the right of intellectual property. therefore, jurists study the commercialization of intellectual property objects in the context of providing legal protection to them in the narrow or broad sense, where the first is a system of measures of a judicial and self-governing nature as a reaction to violations, and the second – a system of regulations, contracts, moral principles or customs of business transactions, which in absolute terms outline the circle of abstract rights of subjects of intellectual property law. in the field of public law, more precisely, administrative law, there is an attempt to distinguish the category of commercialization in projection through the essential categories of administrative-legal protection of intellectual property rights (mydzhyn, 2021). when considering the administrative responsibility in the structure of protection of intellectual property rights in its interrelated legal and social aspect, it is noted that it provides an opportunity to overcome the contradictions between the public and private interests of right holders and users inherent in the commercialization of intel lectual property objects. separately, it should be noted that administrative responsibility in the sphere of intellectual activity is applied in the case of committing a socially dangerous, illegal, criminal act (action or inaction) that interferes with the relations between the state and other participants in the commercialization or other use of the object of intellectual property. from the characteristics of the strategic directions of the development of the institute of protection of intellectual property rights, a conclusion is drawn about the regulation of the behavior of the participants in relations in the field of intellectual property, which is ensured by the creation of an effective structure of executive authorities, which correlates with the formation of their optimal structure and competence, as a result what is the progressive development of relations of commercialization of objects of intellectual property. this use of the term, which is the subject of this paper, means the following. from the author's point of view, commercialization is considered to be: 1) a type of use of the object of intellectual property rights; 2) a compromise means of resolving the conflict of public and private interests in the implementation of the content of intellectual property rights; 3) a type of social relations in which the implementation of the content of intellectual property rights is fully ensured. the latter approach was developed in connection with the study of the content of such relations, where the object (invention, utility model, industrial design, trademark, geographical indication, trade name), participants (creators and derivative entities, which may be individuals, legal entities, subjects of public law), as well as the content, which includes the range of personal non-property and property rights (yaroshevska, 2021). the mechanism of cocommercialization of industrial property rights as a type of intellectual property rights is considered as a separate category along with protection. such an opinion can be accepted only in the case of a narrow understanding of the concept of "protection", which is identified with the above-mentioned narrow understanding of the concept of "protection" as a system of measures to respond to the violation of the relevant right, otherwise the commercialization of the object of new intellectual property will be covered by the content of protection, which includes all stages of the existence of the right to the object of intellectual property from the moment of its creation to its termination. the author outlines the problem of commercialization of an object of industrial property created as a result of research and development work at an enterprise, where in fact commercialization is perceived precisely as a set of property rights that baltic journal of economic studies 122 vol. 8 no. 5, 2022 are actually acquired by the customer of the corresponding research and development project – bots. such an opinion is not perfect for the following reasons. first of all, this can be agreed only if the customer is a state scientific institution or a state higher education institution, and even then, if it is an order from the state budget, and the direct executor of such works is also the creator, is a scientific or scientific-pedagogical employee of such an organization, who creates a similar object within the framework of his own work duties, defined by an employment contract, etc. if commercialization is understood as a form of exercise of exclusive property rights over an intellectual property object that provides a corresponding benefit in material form, then there is no problem at all, regardless of the source of funding for such work. in such circumstances, it is clear that the employee is receiving compensation for the work performed, but the question is what portion of the total compensation received for the work performed, which includes other work, constitutes such compensation. when it comes to the organization itself, which is an employer that is actually also the executor of the r&d order, such an organization is also remunerated as part of the financing of its activities from the budget of the relevant level, another problem is that such financing will be somewhat disguised in terms of performing a specific task. the researcher's argumentation is based on the fact that in such circumstances the conditions for commercialization of an object of intellectual property rights are created from the moment of transfer of the property rights to such an object from the creator to the organization, and the latter already gets the opportunity to realize the economic value of the result of creative and intellectual activity through the corresponding contractual relations with other business entities. when such items are transferred free of charge, without corresponding remuneration, it is proposed to recognize such a phenomenon as opposed to commercialization by transfer of knowledge in the part related to know-how. it is correct to consider the commercialization of technology, including the object of intellectual property rights, as a form of technology transfer, which contributes to increasing the level of technological development of society and its participants, and is also directly related to making a profit. in addition to what has been said, it is reasonable to consider that the successful commercialization of industrial property objects is covered by the key interaction of the public administration sector, scientific institutions and industry. however, there are studies that, unlike the previous, rather classical field of commercialization of objects, have revolutionary directions for the implementation of the results of creative intellectual activity, using the example of the spread of non-fungible token (nft) (okonkwo, 2022). it is proposed to use nft as a means of distribution of copyright objects through the internet using digital currency, which is quite innovative and ensures: 1) the efficiency of a single transaction for marketing the object in question; 2) the possibility of simultaneous access to the object by an unlimited number of people; 3) the provision of a set of technological tools for diversifying the forms of marketing. rather, the private-law approach is supported when the commercialization of intellectual property is considered precisely as a diverse involvement of property rights in the objects of intellectual property rights in civil circulation (yakubivskyy, 2019), while one of the manifestations of such involvement is the introduction of a patented invention into production with, among other things, results of creative and intellectual activity. the above distinguishes the static existence of property rights to such an object from the moment of its creation and acquisition of legal protection, passing the patent procedure on the example of an invention, from their dynamic life through mediation, in particular, the conclusion of civil law or economic law contracts. in addition, in such circumstances, the assumption regarding the recognition of commercialization of intellectual property rights in the absence of transfer of property rights to other subjects, but their implementation directly by the creator with the receipt of a certain property benefit, profit, is controversial. the existing positive response to the last assumption indicates the perception of the commercialization of intellectual property in a broader context of options for the possible exercise of property rights of intellectual property, even without making a profit (turchyn, 2020). it is proposed, following the example of the usa, to give priority to the subjects of commercialization of intellectual property, on the example of patenting of inventions at the stage of conception, to establishments and institutions that are financed by the state or joint private-state financing. the following methods of commercialization of intellectual property rights are distinguished: 1) using them in one's own activity; 2) transferring them to other entities; 3) including them in the authorized capital of a legal entity. among the above mentioned methods, more attention is paid to the last one, which describes the organizational and legal forms of similar legal entities, among which scientific parks have a special status. taking into account what has been said about the participants in the commercialization of intellectual property relations, legal scholars pay attention to the question of the place of higher education institutions baltic journal of economic studies 123 vol. 8 no. 5, 2022 and scientific institutions in this process. this approach is a development of the conceptual work of the world intellectual property organization (wipo), which encourages the development of higher education institutions and scientific institutions of their own intellectual property policy. thus, according to the developed wipo intellectual property policy template for universities and research institutions, the commercialization of intellectual property is perceived as any of its implementation, which results in the receipt of any benefit by society, both property and non-property. at the same time, such forms of commercialization are distinguished as: transfer under licenses or contracts, contribution to joint activities or to the authorized capital of relevant organizations, non-profit use, donations, etc. (wipo policy template, 2019). considering this issue, i. koval tried to define commercialization as an economic and legal phenomenon mediated by a set of means of a legal, economic, technical and managerial nature, which are related to commercial activity in the implemen tation of the content of intellectual property rights (koval, 2014). at the same time, attention is drawn to the need to improve the regulatory and legal provision of financing the activities of scientific units of higher education institutions, to determine the mechanism for the latter's use of funds received from such activities, to improve the legal regime of property rights to objects of intellectual property to be commercialized, etc. these considerations are extended in connection with the development of self-governance and selffinancing of higher educational institutions, giving them the opportunity to independently determine the forms and means of commercialization of intellectual property within the limits of educational and scientific activity, where the priority is the activity of organizations of such organizational and legal form aimed at producing knowledge for the benefit of society (suglobov et al., 2021). that is, in essence, it is about introducing elements of control over economic efficiency into the intellectual property management policy, in particular, deter mining the appropriate measures directly within the framework of local regulatory documents, such as the charter of a higher education institution. at the same time, the formation of a system ensuring the maintenance and development of the scientific and technical potential of a higher education institution as a strategic resource and a factor of competitiveness is recognized as a priority task of such a policy. the above mentioned researches of jurists concerning the commercialization of intellectual property can be summarized in the part of its relation with the protection of intellectual property rights, where the problems raised in the legal field are quite valid concerning: the distribution of rights between creators, employers and customers, especially within the framework of carrying out research and development works at the expense of budget funds, regulatory regulation of concluded license, investment and other agreements on transfer of technologies, methods of assessment of rights to objects of intellectual property rights, the role of state institutions in support of intellectual innovations, provision of patent information, etc. the analysis of the theoretical basis will be incomplete without the study of the empirical part on the basis of the relevant legal acts. in fact, if one approaches the nature of commercialization as a type of social relation, the question of its legal regulation comes to the fore. in addition to the aforementioned wipo and international conventions, the regulation of the commercialization of intellectual property is also reflected in the national legislation of ukraine, where administrative and legal regulations regulate the peculiarities of state administration in this area, and civil and economic legislation determines direct forms or methods of commercialization and mechanisms of its implementation. analysis of the fourth book of the civil code of ukraine (the civil code of ukraine as amended on december 1, 2022, no. 435-iv) and relevant special normative acts on the basis of the laws of ukraine "on copyright and related rights" (on copyright and related rights: law of ukraine of december 1, 2022, no. 2811-ix), "on protection of rights to inventions and utility models" (on protection of rights to inventions and utility models: law of ukraine as amended on july 21, 2020, no. 3687xii), "on protection of rights to industrial designs" (on protection of rights to industrial designs: law of ukraine as amended on july 21, 2020, no. 3688-xii), "on protection of rights to trademarks for goods and services" (on protection of rights to trademarks for goods and services: law of ukraine as amended on july 1, 2020, no. 3689-xii), etc. indicates the enumeration of types of personal non-property and property rights in relation to certain objects of law intellectual property, which in their essence are not exhaustive within the limits of the relevant regulations and ensure the scope of commercialization of intellectual property. chapter 16 of the commercial code of ukraine (as amended on july 29, 2022, no. 436-iv of the commercial code of ukraine) defines the scope of commercialization of intellectual property for economic turnover in relation to such objects as an invention, a utility model and industrial design, a trademark, a trade name, a geographical indication, a trade secret, i.e., the results of creative and intellectual activity in the field of science and baltic journal of economic studies 124 vol. 8 no. 5, 2022 technology and in the field of individualization of business entities and the goods and services produced by them. at the same time, it is mentioned that in case of agreements on commercialization of intellectual property, the intellectual property rights to such objects are added to the authorized capital of the business entity as a contribution. taking into account the above and considering the nature of civil and economic contracts as the most common form of commercialization of intellectual property, civil and economic legislation operates in such categories as 1) a contract for the performance of scientific research or research and development works and technological works; 2) transactions on the disposal of intellectual property rights, including a license to use an object of intellectual property rights, a license agreement, an agreement on the creation and use of an object of intellectual property rights by order, an agreement on the transfer of exclusive property rights to intellectual property, other transactions on the disposal of property rights to intellectual property; 3) commercial concession; 4) other contracts that may indirectly involve objects of intellectual property rights in civil or economic turnover (renting, leasing, investment transactions, etc.). in addition to the above, ukrainian legislation contains norms ensuring the management of a number of processes directly or indirectly related to the phenomenon of commercialization of intellectual property. among them is the law of ukraine "on state regulation of activities in the sphere of transfer of technologies" (on state regulation of activities in the sphere of transfer of technologies: law of ukraine as amended on september 20, 2019, no. 143-v), the provisions of which define the legal, economic, organizational and financial principles of state regulation of activities in the sphere of transfer of technologies with the aim of ensuring the effective use of the scientific, technical and intellectual potential of ukraine, the manufacturability of production, the protection of property rights to domestic technologies and/or their components in the territory of countries where their use is planned or implemented, the expansion of international scientific and technical cooperation in this sphere. agreements on transfer of technologies concerning scientific and scientifically applied results, objects of intellectual property rights in their variability have become widespread within the limits of this normative legal act, in the content of which the order and sequence of operations regarding such objects, the process of production, sale and storage of products, provision of services are determined. that is, such contracts can have objects of intellectual property both as a direct and as an indirect subject. the law of ukraine "on the priority directions of innovation activity in ukraine" (on the priority directions of innovation activity in ukraine: law of ukraine as amended on february 1, 2022, no. 3715-vi) is adjacent to the given law within the scope of this study, as it provides an innovative model of economic development through the concentration of state resources, including intel lectual activity, on the priority areas of scientific and technical renewal of production, increasing the competitiveness of ukrainian products on the domestic and foreign markets, as well as in art. 6 of which defines state measures to support the transfer of technologies, in particular through the commercialization of intellectual property. the law of ukraine "on scientific and scientifictechnical activities: law of ukraine as amended on march 30, 2021, no. 848-viii), which provides the legal basis for the creation of mechanisms for the commercialization of the results of scientific research, which are objects of intellectual property rights. the foregoing creates conditions for drawing important conclusions about the legal basis of commercialization of intellectual property rights in ukraine. this category in law is reflected both in the theoretical work of legal scholars and in empirical sources, which are used by normative legal acts, which determine the legal regime of this phenomenon. the national legal system of ukraine in the components of private and public law contains normative regulations regulating the commercia lization of objects of intellectual property rights. legal scholars consider the commercialization of intellectual property objects as: 1) a type of use of the object of intellectual property right; 2) a compromise means of resolving the conflict of public and private interests in the implementation of the content of intellectual property rights; 3) a type of social relations in which the implementation of the content of intellectual property rights is fully ensured. the following methods of commercialization of intellectual property rights are distinguished: 1) use of such rights in one's own activity; 2) transfer of such rights to other entities; 3) their inclusion in the authorized capital of a legal entity. in the legislation of ukraine, administrative-legal norms determine the peculiarities of state management in this area, and civil and economic law determine direct forms or methods of commercialization and mechanisms of its implementation. 4. conclusions the results of this study can be presented as follows. commercialization of intellectual property in ukraine has two conceptual approaches to the study and implementation of an economic and legal nature. baltic journal of economic studies 125 vol. 8 no. 5, 2022 economists propose to consider commercialization as one of the constituent stages of the process of social life of intellectual property objects along with creation, security and protection. the position that commercialization is the process of obtaining any benefit from the use of an object of intellectual property, and not only profit, is appropriate. however, under such conditions, a clarification is necessary – the benefit must have an economic aspect that is subject to appropriate assessment from the point of view of the good for which demand is formed. the position regarding the selection in the economic context of the following stages of commercialization of intellectual property is supported: 1) identification of the object of intellectual property, which is mediated by obtaining a law enforcement document; 2) marketing (identification of the product, etc., analysis of the market, sales channels, pricing, audit), which includes promotion of goods and services to the market using intellectual property objects; 3) evaluation of such a product or service taking into account the intellectual component by cost, market (comparative), income methods; 4) insurance of intellectual property rights; 5) searching for users and concluding contracts with them on the use of intellectual property rights. within this approach to the forms of commercialization of intellectual property, the following manifestations are emphasized: 1) use of the corresponding object within the limits of own production, transfer under contracts (licensing, leasing, commercial franchise) to other subjects or entering rights to the object of intellectual property into the authorized capital of the enterprise; 2) capitalization and sale. among the factors that determine the qualitative and quantitative indicators of commercialization, the most important are legislation, state management in this area, and the existence and implementation of measures to stimulate participants in this area. from a normative point of view, the phenomenon of commercialization of intellectual property has gained publicity in various levels of understanding, both from the standpoint of private law and from the standpoint of public law. for both components of jurisprudence, the approach is generally accepted, according to which the given question is considered with regard to the provision of public or private law protection of intellectual property rights, respectively. legal scholars consider commercialization as: 1) a type of exploitation of the object of intellectual property rights; 2) a compromise means of resolving the conflict of public and private interests in the implementation of the content of intellectual property rights; 3) a type of social relations in which the implementation of the content of intellectual property rights is fully ensured. the constituent elements of such relationships are highlighted, with a special place for scientific and academic institutions among the participants. special attention is paid to the issue of commercialization of intellectual property using the internet. the forms of commercialization of intellectual property proposed by economists are supported. attention is drawn to the set of instruments provided by special legislation for higher education and scientific institutions in the field of commercialization of intellectual property. the provisions of the ukrainian legislation defining the general legal regime of commercialization of intellectual property and the special legal regime of its forms are characterized. references: oleinikova, l. g. 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(2017). komertsializatsiia intelektualnoi vlasnosti yak neobkhidna umova innovatsiinoho rozvytku pidpryiemstva [commercialization of intellectual property as a prerequisite for innovative development enterprise]. black sea economic studies, 17, 137–141. (in ukrainian) ukrpatent annual report for 2021. available at: https://ukrpatent.org/atachs/zvit-eng-2021.pdf turchyn, l. y. (2020). mainovi prava intelektualnoi vlasnosti yak vnesok do statutnoho kapitalu hospodarskykh tovarystv [intellectual property rights as a contribution to the charter capital of the companies]. (phd thesis), lviv: ivan franko national university of lviv. (in ukrainian) wipo policy template (2019). wipo intellectual property policy template for universities and research institutions. suglobov, a. e., orlova, k. s., kalliopin, a. k., katys, p., & novikov, a. v. (2021). intellectual property policy of universities: specific regulation. revista tempos e espacos educacao, 14(33). doi: https://doi.org/10.20952/ revtee.v14i33.16155 the civil code of ukraine as amended on december 1, 2022, № 435-iv. available at: https://zakon.rada.gov.ua/ laws/show/435-15?lang=en#text about copyright and related rights: law of ukraine on december 1, 2022, № 2811-ix. available at: https://zakon.rada.gov.ua/laws/show/2811-20?lang=en#text on protection of rights to inventions and utility models: law of ukraine as amended on july 21, 2020, № 3687-xii. available at: https://zakon.rada.gov.ua/laws/show/3687-12?lang=en#text on protection of rights to industrial designs: law of ukraine as amended on july 21, 2020, № 3688-xii. available at: https://zakon.rada.gov.ua/laws/show/3688-12?lang=en#text on protection of rights to trademarks for goods and services: law of ukraine as amended on july 1, 2020, № 3689-xii. available at: https://zakon.rada.gov.ua/laws/show/3689-12?lang=en#text the commercial code of ukraine as amended on july 29, 2022, № 436-iv. available at: https://zakon.rada.gov.ua/ laws/show/436-15?lang=en#text on state regulation of activity in the sphere of transfer of technologies: law of ukraine as amended on september 20, 2019, № 143-v. available at: https://zakon.rada.gov.ua/laws/show/143-16?lang=en on the priority directions of innovation activity in ukraine: law of ukraine as amended on february 1, 2022, № 3715-vi. available at: https://zakon.rada.gov.ua/laws/show/3715-17?lang=en#text on scientific and scientific-technical activities: law of ukraine as amended on march 30, 2021, № 848-viii. available at: https://zakon.rada.gov.ua/laws/show/848-19?lang=en#text received on: 6th of october, 2022 accepted on: 15th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 82 vol. 3, no. 4, 2017 corresponding author: 1 department of finance, banking and insurance, kherson national technical university. e-mail: anna.zhytchenko@gmail.com 2 department of finance, banking and insurance, kherson national technical university. e-mail: kovalenko45@ukr.net 3 department of finance, banking and insurance, kherson national technical university. e-mail: gannashvorob@ukr.net management of formation and development of intellectual capital of the enterprise ganna zhytchenko1, mykola kovalenko2, ganna shvorob3 kherson national technical university, ukraine abstract. the subject of this research is the external and internal relations of the enterprise regarding the formation of its own intellectual capital. methodological approaches to capital formation are revealed: principles of accounting for development trends of the modern world and national economies, macro and microeconomic conditions for the formation and use, methods of operational and strategic management of capital, economic and social instruments for accounting, regulation, and stimulation of its development. some ways of formation and use of an intellectual capital of the enterprise in the modern business environment are proposed. the article reveals the essence and formulates the concept of the enterprise’s intellectual capital, its structure. the main approaches to the formation of a corporate organizational and economic mechanism for managing intellectual capital are proposed. the results of research on the conditions for the formation and use of intellectual capital at a number of enterprises in the kherson region of ukraine are presented. based on the results of the study of issues of formation and development of the intellectual capital of enterprises, the following conclusions are made: intellectual capital of the enterprise is considered by the authors as a system of relations between different economic entities regarding rational sustainable reproduction, output of products, goods, services on the basis of progressive development of engineering, technology, production organization, increase in corporate incomes and living standards of employees on the basis of personified economic interests of participants in production. these are the materialized and non-materialized resources of the enterprise, formed on the realized knowledge, experience, skills, abilities of employees, relations with consumers, suppliers and other market partners, on the relations between employees and departments of the enterprise, which together determine its possibilities for obtaining value added and rising income. in the structure of the enterprise intellectual capital, human, social, structural, and market capital are distinguished. on the understanding of the essence of these groups of capital – productive, generating human, uniting, mobilizing social, providing with information structural and linking, stimulating market capital, it is proposed to form a corporate system for managing the intellectual capital of an enterprise. to achieve the tasks of managing intellectual capital, it is suggested to adhere to the principles of strategic partnership of enterprise owners, management, and hired professionals, workers; partnership relations between all participants in the production process; formation and application of criteria for assessing the individual contribution of employees, formal and informal groups in the final results of the enterprise; organization of an all-encompassing network of forms of mass participation of workers in the identification and implementation of reserves to improve the efficiency of production and the quality of products, goods, and services. key words: intellectual capital, human capital, knowledge economy. jel classification: d24, m12, a13. 1. вступление в экономической литературе сформировалось мнение большинства исследователей, что наиболее характерными особенностями современного этапа развития экономики, во многом определяющим и ее будущее развитие, являются глобализация экономических отношений, информатизация общества и повышение роли человеческого фактора на производстве. глобализация экономики позволяет корпоративному капиталу проникать во все уголки мира и заставляет местных субъектом хозяйствования рабоbaltic journal of economic studies 83 vol. 3, no. 4, 2017 тать по новым правилам. все актуальнейшими становятся вопросы поиска новых моделей управления корпоративным бизнесом, отраслями национальной экономики. современное общество находится на пути к новому уровню своего развития, достижение которого позволит и называть его по-новому  – информационным. оно уже на данном этапе проявляется, в частности, в таких особенностях как накопление и движение большого количества информации, рост потребности в результатах научных исследований, необходимость в непрерывном образовании населения. экономический базис общества превращается в экономику знаний: именно это определение получает среди экономистов все большее признание и распространение. становление экономики знаний способствует дальнейшему повышению роли человеческого капитала на производстве, его новому восприятию как главного источника, движущей силы роста богатства, прибыли. общепризнанная роль человеческого капитала требует теоретического и практического переосмысления сути капитала предприятия, его структуры, уточнения места человеческого капитала и определения соответствующих инструментов использования новых экономических представлений в процессе расширенного воспроизводства. особенностям современной экономики, исследованию будущих путей ее развития посвящены публикации многих экономистов-исследователей. в частности, известны труды украинских ученых о.  билоуса, в. гееца, в. семиноженка, а. чухно. исследователи в. оникиенко, л. емельяненко, и. терон доказали, что основные последствия инновационного развития связаны с изменением места человека на производстве: изменением содержания, структуры и производительности труда; влиянием на социальную структуру общества, что ведет к количественным и качественным изменениям в профессионально-квалификационном составе рабочей силы, социальных и профессиональных групп; росту требований к управлению и организации деятельности (onikiyenko, 2006). исследования этих и других ученых показали, что информатизация экономики и интеллектуализация труда становятся важными факторами сдвигов в кадровых структурах, обусловливают необходимость формирования интеллектуальной элиты, высококвалифицированных специалистов, способных обеспечить генерирование и эффективное использование научно-технических инноваций, а также высококвалифицированных передатчиков, распространителей информации в системе образования, связи, печати, средств массовой информации. существенные изменения должны произойти в подготовке технического персонала по обслуживанию информационных машин, работников массовых профессий материального производства и сферы услуг, компьютерная грамотность для которых становится необходимой (zhytchenko, 2015). обобщение отечественных и зарубежных публикаций позволяет сформировать достаточно цельное представление об экономике недалекого будущего, о роли человека в ней. однако многие из них представляют, в основном, теоретические исследования, в меньшей степени касаются практики, современных процессов становления будущей экономики. актуальными, в частности, для предприятий украины являются вопросы формирования качественно нового состава, структуры персонала предприятия, использования новых инструментов экономического, социального, других видов и форм мотивации и стимулирования производственной, творческой активности работающих, системного формирования интеллектуального капитала предприятия. 2. менеджмент знаний – новая парадигма управления предприятием п. друкер убежден, что капитализм уступает дорогу «обществу знаний», капитал как основное средство экономики, сменяется знаниями (doyl, 2007). парадигма знаний становится основным способом обеспечения поступательного развития предприятий. концепция экономики знаний становится основной теоретической базой политики экономического роста. суть экономики знаний – это инновации на основе знаний, которые и выступают фундаментальным показателем качества интеллектуального капитала. значение новой парадигмы управления предприятием – менеджмента знаний – определяется также и тем, что, по оценкам специалистов, в среднем практически 80% рыночной стоимости компаний обеспечивает нематериальные активы и корпоративные знания, 95% биржевой стоимости высокотехнологичных организаций приходится на нематериальные активы (kovalenko, 2010). 3. понятие интеллектуального капитала суть интеллектуального капитала как экономической категории определяется как система отношений разных экономических субъектов по поводу рационального устойчивого его воспроизводства на основе прогрессивного развития науки, в целях создания конкурентоспособного производства конкретных товаров, услуг, дохода, повышения жизненного уровня работников на основе персонифицированных экономических интересов субъектов. обобщение имеющихся в экономической литературе дефиниций понятия «интеллектуальный капитал предприятия» дает нам основание для его определения как материализованные и нематериаbaltic journal of economic studies 84 vol. 3, no. 4, 2017 лизованные ресурсы предприятия, сформированные на реализованных знаниях, опыте, умениях, навыках работников, отношениях с другими субъектами хозяйствования и внутренних отношениях между работниками, подразделениями предприятия, которые в совокупности определяют его возможности для получения доданной стоимости. в современных условиях хозяйствования предприятий проявляется особенная роль интеллектуального капитала. она состоит во влиянии каждого из составных элементов данной формы капитала на экономические результаты деятельности предприятия, в частности, на повышение эффективности использования всех ресурсов и, в конечном итоге, эффективности деятельности предприятия, развитие его инновационного потенциала, укрепление конкурентных преимуществ, увеличение рыночной стоимости. 4. структура интеллектуального капитала предприятия задача совершенствования управления интеллектуальным капиталом предприятия требует уточнения его содержания как объекта управления, определения его структурных элементов и признаков. стандартами ifac (международной организации бухгалтеров) интеллектуальный капитал делится на человеческий капитал, капитал отношений и структурный капитал (ifac, 1998). вместе с тем, процесс специализации экономики должен рассматриваться в системе управления предприятием не просто как процесс становления человека на производстве, усвоения им знаний, ценностей и норм, присущих обществу, отдельному трудовому коллективу. в условиях информационной экономики этот процесс превращается в условие и один из базовых факторов развития производства. социализация как инструмент управления экономикой, производственным коллективом может и должен использоваться предприятиями для решения задач повышения эффективности производства (kovalenko, 2012). углубленный анализ сути интеллектуального капитала показывает, что это не только сумма знаний, опыта, профессиональной подготовки и интуиции всех работников предприятия. к этому следует добавить настроенные человеческие связи работающих. социальный капитал как форма отношений между работниками, условие проявления синергетического эффекта взаимодействия человеческого, структурного и рыночного капиталов, позволяет целенаправленно использовать отношения между работниками для развития их производственной творческой активности, решения задач по повышению эффективности, развития предприятия. элементы сути человека на производстве могут быть, по нашему мнению, выделены в отдельную группу элементов интеллектуального капитала предприятия, которая носит название социального капитала (рис. 1). интеллектуальный капитал предприятия человеческий капитал социальный капитал рыночный капитал рис. 1. комплексное видение структуры интеллектуального капитала предприятия 5. теория управления капиталом теоретические основы управления интеллектуальным капиталом предприятия исследованы в публикациях и. нагорной (nahorna, 2012). политэкономический анализ дал возможность автору не только выяснить роль и место человека, его интеллектуального потенциала в процессе производства, формировании прибыли предприятия, но и показать роль социализации экономики, социального капитала как одного из условий, при которых интеллектуальный капитал может развиваться и превращаться на определяющий фактор формирования высоких конечных финансовых результатов работы предприятия (nahorna, 2012). на этой теоретической базе может строиться и система управления интеллектуальным капиталом предприятия, целью которой есть получение прибыли. организационно-экономический механизм управления интеллектуальным капиталом предприятия мы рассматриваем как систему элементов (целей, функций, методов, организационной структуры, субъектов) и объектов (видов интеллектуального капитала), в которой осуществляется целенаправленное преобразование влияния элементов управления на необходимое состояние или реакцию интеллектуальных ресурсов, которая имеет входящие воздействия в форме внешних условий и результирующую реакцию в виде экономического или социального эффекта (matiyiv, 2010). цель работы по совершенствованию системы управления интеллектуальным капиталом предприятия состоит в создании механизма регулирования процессов создания, трансформации и использования новых знаний, результатов интеллектуального труда работников предприятия. сам процесс управления подчиняется задаче достижения стратегических и оперативных целей предприятия. для достижения задач управления интеллектуальным капиталом необходимо придерживаться определенных принципов (lukicheva, 2008): ориентации на достижение результата; зависимости от результата; однократной фиксации информации; обработки информации ее генератором; координации процесса, ведущего к общему результату; baltic journal of economic studies 85 vol. 3, no. 4, 2017 децентрализации при принятии решений; установление контроля за процессом. н. коваленко и и. нагорная дополняют, что система управления интеллектуальным капиталом предприятия создается и функционирует на основе следующих принципов (kovalenko, nahorna, 2012): 1. принцип стратегического партнерства собственников предприятия, менеджмента и наемных специалистов, рабочих: согласование целей каждого работника с целями предприятия, взаимность ожиданий участников производственного процесса, взаимность внутрипроизводственных целей работников-партнеров, общность и адекватность стимулов (распределение прибыли) индивидуальному вкладу в конечные результаты работы предприятия и т.п. 2. партнерские взаимоотношения между всеми участниками производственного процесса: взаимодоверие и взаимопонимание, равноправие, доведение дифференцированных задач по развитию предприятия до каждого работающего, точность прямой и обратной взаимосвязи, формирование внутрифирменных, индивидуальных и групповых взаимоотношений семейного типа. 3. формирование и применение критериев оценки индивидуального вклада работников, формальных и неформальных коллективов (структурных подразделений, творческих групп) в конечные результаты работы предприятия. 4. организация всеохватывающей сети форм массового участия работников в выявлении резервов повышения эффективности производства и качества продукции, разработке и внедрении предложений, мероприятий их реализации на основе добровольности вхождения в них работников, свободного обсуждения производственных проблем, права на собственное решение и его реализацию, обязательность поощрения безотносительно виду (экономический, социальный и т.п.) и размер эффекта от его реализации. информатизация, инновационное направление развития общества, изменение места и роли человека на производстве, процессы интеллектуализации труда требуют новых подходов к управлению участниками производственных, социальных процессов. эти подходы должны учитывать характерные для новой экономики мотивы деятельности людей: участие в управлении производством, желание обновлять продукцию и технологии, совершенствовать методы работы, реализовывать собственный творческий потенциал и самосовершенствоваться. все это требует принципиальных изменений в системе управления предприятием, независимо от формы его собственности. соответственно, менеджеры будущей экономики должны овладевать инструментами, методами организации, стимулирования труда качественно новых работников. речь идет, прежде всего, не о значении и использовании новых знаний работающих на производстве, а о трансформации механизма использования источника этих знаний  – интеллектуального потенциала человека, каждого участника производственного процесса. 6. условия формирования интеллектуального капитала интеллектуальный капитал предприятия формируется и развивается под влиянием разнообразных внешних и внутренних факторов. одним из основных критериев оценки его функционирования и результатов использования является показатель состояния инновационной деятельности или инновационной активности предприятия. инновационная активность промышленных предприятий украины в 2000–2014 годах оставалась невысокой. удельный вес предприятий, занимавшихся внедрением инноваций, снизился за этот период с 18,8% до 10,8% (innovatsiyna aktyvnist promyslovykh pidpryyemstv …, 2016). за показателем удельного веса предприятий, осуществлявших в 2009 году технологический инновации, украина (в 2010 г. – 13,8%, в 2015 г. – 17,3%) заметно отстает от многих стран европы (германия  – 65%, австрия  – 52%, финляндия  – 50%, эстония – 48%, италия – 35%, испания – 33%, франция – 32%). рейтинг украины за субиндексом «инновации» у 2013–2014 годах отвечал 93 месту (the global competitiveness report …, 2013). общепризнанным является утверждение, что научные исследования и разработки являются основной движущей силой инновационного развития хозяйственного комплекса страны. анализ показывает, что количество работ, которые исполнялись научными организациями украины в 2015 году, составило 41,1 тыс., в 2011 году их было выполнено 52,4 тыс. ускорились темпы падения численности исследователей: в 2015 году общая численность работников организаций, занимавшихся научными и научно-техническими работами, составляли 101,6 тыс. человек, что на 27,9% меньше по сравнению с 2010 годом. удельный вес затрат на выполнение научно-исследовательских работ в ввп в странах ес, за данными евростата, возросла с 1,76% в 2005 году до 2,03% в 2014 году. в украине этот показатель уменьшился с 0,99% в 2005 году до 0,65% в 2014 году. в 2015 году он продолжал уменьшаться и составил 0,62% (naukova ta innovatsiyna diyalnist ukrayiny …, 2016). ухудшение макроэкономических условий для инновационной деятельности предприятий связаны с негативными тенденциями, характерными для научно-технической сферы: оттоком научных кадров за пределы страны, значительным сокращением количества, ликвидацией патентных подразделений приватизированных предприятий, не соответствием законодательно-нормативной базы baltic journal of economic studies 86 vol. 3, no. 4, 2017 украины современным потребностям рыночной экономики и др. в стране на протяжении последних 15-ти лет постоянно уменьшаются объемы профессиональной подготовки кадров; в 2014 году новым профессиям было научено 152,5 тыс. работников, или в 2,1 раза меньше против 2000 года (innovatsiyna aktyvnist promyslovykh pidpryyemstv …, 2015). возникла реальная угроза утери наследственности поколений высококвалифицированных специалистов, рабочих – главных источников инновационного развития производственного сектора. 7. процесс формирования интеллектуального капитала на предприятиях практическая реализация изложенных теоретических положений системы управления интеллектуальным капиталом на многих предприятиях украины сдерживается по ряду внутренних причин. в частности, результаты проведенного на предприятиях херсонской области анализа показали низкий удельный вес нематериальных активов в общей сумме активов предприятий. так, в 2016 году на херсонском маслозаводе они составили 0,69%, бериславском машиностроительном заводе – 0,31%, в компании «фридомфарм интернешнл» – 0,22%, в «херсонгазе» – 0,21%, на херсонском хлебокомбинате  – 0,14%. сравнение показателей за три года, показало, что уровень нематериальных активов на исследованных 10-ти предприятиях практически не изменился. их стоимость в балансе новотроицкого маслозавода в 2016 году совсем не отражалась. в  балансе каланчакского маслозавода все три последних года в этой части выставлялись только нули. более глубокий анализ показал, что за имеющимся данными балансов всех предприятий стоит стоимость одноименных нематериальных активов  – приобретенного программного обеспечения для компьютеров. только на украинско-шведском предприятии по переработке и консервированию фруктов и овощей «чумак» на конец 2016 года нематериальные активы составляли 32,63 млн. грн. это 4,5% от общей суммы активов и 18,3% от суммы необоротных активов предприятия. хотя и на этом предприятии удельный вес нематериальных активов в общей сумме активов снизился с 10,4% в 2014 году до 4,5% в 2016 году. в современных условиях хозяйствования, для которых характерны высокий уровень конкуренции на товарных рынках, ускорение темпов обновления продукции, борьба за потребителя, предприятие не в состоянии стабильно и успешно работать, быть конкурентоспособным, если не имеет фирмовой торговой марки, оригинальных зарегистрированных рецептур продукции, патентов, изобретений и т.п. недопонимание роли и значения нематериальных активов на обследованных предприятиях дополняется и рядом других внутренних причин, сдерживающих процесс формирования и развития собственного интеллектуального капитала. к ним возможно отнести: отсутствие должного финансирования, высокие инвестиционные затраты, свертывание внутрикорпоративной системы рационализаторства и изобретательства, высокие кредитные ставки при невысокой рентабельности производства, высокий экономический риск, которые дополняются несовершенством инфраструктуры внедрения научно-технических разработок, недостатком информации о рынке сбыта инновационной продукции, низким уровнем организации собственных маркетинговых исследований. опросом специалистов предприятий выявлено также проблему поиска и применения конкретных инструментов формирования и использования инструментарий формирования и использования интеллектуальных ресурсов инструменты формирования ресурсов инструменты формирования социальной среды раскрытия ресурсов инструменты стимулирования использования ресурсов повышения уровня знаний повышения квалификации организационная культура социальная ответственность мотивация стимулы материальные стимулы моральные рис. 2. базовые группы инструментария формирования, использования и развития интеллектуальных ресурсов предприятия baltic journal of economic studies 87 vol. 3, no. 4, 2017 интеллектуальных ресурсов предприятия. их общая структура и взаимосвязь представлены на рис. 2. 8. выводы проведенное исследование теоретических и практических аспектов формирования и развития интеллектуального капитала предприятия позволяет сделать следующие выводы: информатизация общества, повышение роли человеческого фактора на производстве до качественно нового уровня, другие тенденции в современной экономике определяют особенности экономики завтрашнего дня. ведущие экономисты-исследователи уже сформулировали ее теоретическую базу. она состоит в том, что в «обществе знаний» основное средство экономики – капитал – сменится на знания. знания, интеллектуальный потенциал человека на производстве становятся основным способом обеспечения эффективной деятельности и развития предприятия. интеллектуальный капитал предприятия может рассматриваться как система отношений разных экономических субъектов по поводу рационального устойчивого воспроизводства, выпуска продукции, товаров, услуг на основе прогрессивного развития техники, технологии, организации производства, повышения корпоративных доходов и жизненного уровня работников на основе персонифицированных экономических интересов участников производства. это материализованные и нематериализованные ресурсы предприятия, сформированные на реализованных знаниях, опыте, умениях, навыках работников, отношениях с потребителями, поставщиками и другими партнерами по рынку, на отношениях между работниками, подразделениями предприятия, которые в совокупности определяют его возможности для получения доданной стоимости, повышения доходов. в структуре интеллектуального капитала предприятия различают человеческий, социальный, структурный и рыночный капитал. на осознании сути этих групп капитала – продуктивной, генерирующей человеческого, объединяющей, мобилизующей социального, информационно обеспечивающей структурного и связующей, стимулирующей рыночного капиталов формируется корпоративная система управления интеллектуальным капиталом предприятия. организационно-экономический механизм управления капиталом должен включать в себя систему целей, функций, методов, организационных структур субъектов и объектов  – видов интеллектуального капитала. для достижения задач управления интеллектуальным капиталом необходимо придерживаться принципов стратегического партнерства собственников предприятия, менеджмента и наемных специалистов, рабочих; партнёрских отношений между всеми участниками производственного процесса; формирования и применения критериев оценки индивидуального вклада работников, формальных и неформальных коллективов в конечные результаты работы предприятия; организации всеохватывающей сети форм массового участия работников в выявлении и реализации резервов повышения эффективности производства и качества выпускаемой продукции, товаров, услуг. подходы к управлению должны учитывать характерные для новой экономики мотивы деятельности современного работника  – участие в управлении производством, реализовать собственный творческий потенциал и самосовершенствоваться. интеллектуальный капитал предприятия формируется и развивается под влиянием разнообразных внешних макро-, мезоекономических и внутренних микроэкономических факторов. менеджерам предприятий следует учитывать возможности временного ухудшения внешних условий, связанных с циклическим развитием, кризисным состоянием экономики страны региона, различными негативными долгосрочными и краткосрочными тенденциями в окружающей экономической среде предприятия. исследования показывают, что интеллектуальный потенциал работников предприятий, не смотря на затянувшиеся проблемы, связанные с переходом к новым рыночным условиям хозяйствования, остается достаточно высоким. имеются возможности поэтапного создания системы формирования и управления интеллектуальным капиталом предприятия, соответствующей требованиям экономики недалекого будущего. на большинстве предприятий необходимо начать, как свидетельствуют выводы с проведенных на предприятиях исследований, с осознания сути интеллектуального капитал, его роли для обеспечения конкурентоспособности, эффективной текущей и перспективной деятельности предприятия. перспективы дальнейших исследований и разработок в сфере управления интеллектуальным капиталом предприятия заключаются в необходимости глубоких исследований экономической и социальной среды формирования творческого отношения к труду наемных работников предприятия, методов оценки персонального вклада работников в конечные результаты работы предприятия, организационных форм включения работающих во всеобщий поиск резервов производства и формирование интеллектуального капитала предприятия. baltic journal of economic studies 88 vol. 3, no. 4, 2017 references: doyl, p., shtern f. (2007). marketing, menedzhment i strategii. 4-ye izd. spb: piter: 544. innovatsiyna aktyvnist promyslovykh pidpryyemstv: ekonomichna statystyka (2015). retrieved from: http:// www.ks.ukrstat.gov.ua/ekonomichna-statistika/1750-2-4-nauka-tekhnologiji-ta-innovatsiji/1325-innovacijnaaktivnist-promislovih-pidpriemstv-2000.html ifac (1998). measurement and management of intellectual capital. retrieved from: https://www.ifac-control.org/ publications/1998-2000 zhytchenko, g., ivanova v. (2015). innovatsiyna paradyhma sotsial'no-ekonomichnoho rozvytku ta zminy u kharakteri pratsi. vyshcha osvita, nauka ta vyrobnytstvo: teoriya i praktyka intehratsiyi u sferi finansiv: kolektyvna monohrafiya. kherson: 20-25. zhytchenko, g. (2017). investytsiyi u kompetentnist lyudyny yak shlyakh rozvytku biznesu. finansovi innovatsiyi i shlyakhy pidvyshchennya kompetentnostey fakhivtsiv z finansiv: kolektyvna monohrafiya. kherson: 89-97. kovalenko, m., lysyuk, v., rohalska, n. (2010). formuvannya dodanoyi vartosti transnatsionalnoho produktu: monohrafiya. kherson: 285. kovalenko, m., nahorna, i. (2012). sotsializatsiya ekonomiky y finansovi tsili pidpryyemstva. protses finansuvannya zrostannya ekonomiky ukrayiny: stan i perspektyvy: zbirnyk statey molodykh vchenykh i studentiv. kherson: 7-10. lukicheva, l. (2008). upravleniye intellektual'nym kapitalom: uchebnoye posobiye. m.: omega: 552. matiyiv, i. (2010). osoblyvosti udoskonalennya upravlinnya pidpryyemstvom u suchasnykh umovakh. retrieved from: http://nauka.kushnir.mk.ua/?p=21724 nahorna, i. (2012) hlobalni i rehionalni aspekty finansovykh protsesiv: kolektyvna monohrafiya. kherson: 216. naukova ta innovatsiyna diyalnist ukrayiny (2016). statystychnyy zbirnyk. derzhavnyy komitet statystyky ukrayiny. kyyiv: 217. onikiyenko, v., yemelyanenko, l., teron, i. (2006). innovatsiyna paradyhma sotsialno-ekonomichnoho rozvytku ukrayiny. kyyiv: rvps nan ukrayiny: 480. the global competitiveness report 2013-2014 (2013). retrieved from: www3.weforum.org/docs/wef_ globalcompetitivenessreport_2013-14.pdf анна житченко, николай коваленко, анна швороб управление формированием и развитием интеллектуального капитала предприятия аннотация. предметом данного исследования являются внешние и внутренние отношения предприятия по поводу формирования собственного интеллектуального капитала. раскрыто методологические подходы к формированию капитала: принципы учета тенденций развития современной мировой и национальной экономик, макрои микроэкономических условий формирования и использования, методы оперативного и стратегического управления капиталом, экономические и социальные инструменты учета, регулирования и стимулирования его развития. предложены некоторые способы формирования и использования интеллектуального капитала предприятия в современных условиях хозяйствования. в статье раскрыто суть и сформулировано понятие интеллектуального капитала предприятия, его структура. предложены основные подходы к формированию корпоративного организационно-экономического механизма управления интеллектуальным капиталом. приведены результаты исследования условий формирования и использования интеллектуального капитала на ряде предприятий херсонской области украины. по результатам исследования вопросов формирования и развития интеллектуального капитала предприятий сделаны следующие выводы: интеллектуальный капитал предприятия рассматривается авторами как система отношений разных экономических субъектов по поводу рационального устойчивого воспроизводства, выпуска продукции, товаров, услуг на основе прогрессивного развития техники, технологии, организации производства, повышения корпоративных доходов и жизненного уровня работников на основе персонифицированных экономических интересов участников производства. это материализованные и нематериализованные ресурсы предприятия, сформированные на реализованных знаниях, опыте, умениях, навыках работников, отношениях с потребителями, поставщиками и другими партнерами по рынку, на отношениях между работниками, подразделениями предприятия, которые в совокупности определяют его возможности для получения доданной стоимости, повышения доходов. в структуре интеллектуального капитала предприятия различаются человеческий, социальный, структурный и рыночный капитал. на осознании сути этих групп капитала  – продуктивной, генерирующей человеческого, объединяющей, мобилизующей социального, информационно обеспечивающей структурного и связующей, стимулирующей baltic journal of economic studies 89 vol. 3, no. 4, 2017 рыночного капиталов предложено формировать корпоративную систему управления интеллектуальным капиталом предприятия. для достижения задач управления интеллектуальным капиталом предложено придерживаться принципов стратегического партнерства собственников предприятия, менеджмента и наемных специалистов, рабочих; партнёрских отношений между всеми участниками производственного процесса; формирования и применения критериев оценки индивидуального вклада работников, формальных и неформальных коллективов в конечные результаты работы предприятия; организации всеохватывающей сети форм массового участия работников в выявлении и реализации резервов повышения эффективности производства и качества выпускаемой продукции, товаров, услуг. авторами исследования установлено, что интеллектуальный потенциал работников предприятий, не смотря на затянувшиеся в экономике страны проблемы, связанные с переходом к новым рыночным условиям хозяйствования, остается достаточно высоким. имеются возможности поэтапного создания системы формирования и управления интеллектуальным капиталом предприятия, соответствующей требованиям экономики недалекого будущего. на большинстве предприятий необходимо начать с осознания сути интеллектуального капитал, его роли для обеспечения конкурентоспособности, эффективной текущей и перспективной деятельности предприятия. baltic journal of economic studies 170 vol. 3, no. 5, 2017 corresponding author: 1 department of theoretical and applied economics, lviv polytechnic national university. e-mail: kanthir_02@ukr.net 2 department of accounting and analysis, lviv polytechnic national university. e-mail: marysiaplekan@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-170-174 reform of regulatory policy in the field of supervision of audit activity iryna kantsir1, marija plekan2 lviv polytechnic national university, ukraine abstract. reforming the regulatory system and supervision of audit activity in ukraine is a basic condition for ukraine’s accession to the european community, and the introduction of international standards in the field of audit and supervision of audit activity and quality assurance of audit services should be correlated with the standards of european and world audit practice. the dominant factor in the effective functioning of independent control is the choice of a model of supervision of the mechanism for its implementation; effectiveness of the system of monitoring the quality of audit services; effectiveness of legal and regulatory framework of audit activity. the regulation of audit activity is to coordinate direct and indirect actions aimed at the subject of audit activity with the purpose of ensuring the quality of audit services and minimizing the level of audit risk. the purpose of the research is: analysis of the basic models of regulation of audit activity aimed at improving the legal regulation of economic relations in general and subjects of audit activity in particular. determination of expediency of implementation of public oversight as monitoring of the process of implementation of audit activity in the context of granting the right to conduct audit activities to individuals, implementation of standards of professional ethics and quality control of audit services, permanence of education and imposing sanctions for non-compliance by auditors with the requirements of the current legislation. method (methodology). in the process of research, general scientific and special methods of scientific knowledge are used: abstract-logical (in the disclosure of theoretical and methodological foundations of public oversight); synthesis and system analysis (substantiation of the essential characteristics of the system of public oversight); system analysis and theoretical generalization (definition of institutional prerequisites for the introduction of public regulation in audit activity); logical generalization (to substantiate approaches and proposals on improving the ways for ensuring the quality of audit and optimizing the implementation process of the public oversight body). results. according to the results of the study, an attempt is made to present the author’s understanding of the definition of “state regulation” and “public oversight” in the context of the functioning of subjects of audit activities. the expediency of adjusting the vector of regulatory policy regarding the implementation of international standards in the field of audit and supervision of audit activities and quality assurance of audit services is determined. ways and directions for the implementation of the public supervision body in the audit system of ukraine are outlined. improvement of the financing model of the public oversight body with the purpose of minimization of corruption levers of influence is proposed. practical implications. taking into account the results of the study, it is proposed to provide in the budget code of ukraine and the law of ukraine “on state budget for the current year” a separate article on the costs of partial financing of the public audit oversight board. this, a priori, will reduce the corruption component of its activities and, accordingly, minimize corruption risks. value/originality. for the first time, it is proposed to change the structural component of the financing model of the public audit oversight board and the relevant legislative proposals on clarifying and adjusting the statutes of the current legislation of ukraine. key words: audit activities, state regulation, public oversight, stability, systemic risks. jel classification: м40, m42, m48 baltic journal of economic studies 171 vol. 3, no. 5, 2017 1. introduction in today’s conditions of ukraine’s integration into the global financial space, the reform of the audit system is one of the urgent needs. unification and standardization of the methodology for providing audit services will facilitate the entrance of ukrainian audit entities to the global audit market and increase the level of their competitiveness. a prerequisite for changes in the audit field is the study of foreign practices in regulating audit activity in leading countries. in different countries of the world, its own system of organization and regulation of audit activity is introduced, but its professional regulation and principles of conduct are the same in the vast majority of market economies. the regulation of audit activity is to coordinate direct and indirect actions aimed at the subject of audit activity with the purpose of ensuring the quality of audit services and minimizing the level of audit risk. one of the most significant problems of the present is the identification of features of the audit regulation since the functioning of the audit activity on the basis of ukrainian self-regulation is not sufficiently effective. domestic auditing firms work only in the state field and have no access to the international audit market. 2. models of regulation of audit activity the specifics of the organization of audit activity in different countries are manifested in the degree of power interference and control over the operation of auditors (bondar, 2016). on the basis of content analysis conducted, three basic models of audit activity regulation are outlined: 1) state regulation; 2) self-regulation; 3) public oversight. state regulatory policy in the field of economic activity  – direction of state policy aimed at improving the legal regulation of economic relations, as well as administrative relations between regulators or other state authorities and economic entities, preventing the adoption of economically inappropriate and ineffective regulatory acts, reducing state interference in the activities of business entities, and eliminating obstacles to the development of economic activities carried out within, in the order and in the manner established by the constitution and laws of ukraine (verkhovna rada of ukraine, 2003). in the context of this study, “state regulation of audit activity” is interpreted as a system of measures carried out by the state on behalf of its authorized bodies and officials with a view to purposefully influencing the behaviour of auditors in relation to the systematization of activities, quality assurance and control, and the receipt of scheduled results. the purpose of state regulation of audit activity is: 1) implementation of the state unified audit policy; 2) protection of interests of participants in the market for audit services; 3) creation of favourable conditions for the development of audit activity; 4) ensuring equal access to the market; 5) the equality of rights of participants in the market for audit services and their observance of requirements of the current legislation; 6) supervision over transparency and openness of activities; promoting integration into the world audit space. self-regulation of audit activity  – a kind of control, which is aimed at coordinating the activities of professional auditors, monitoring the efficiency and quality of services rendered, and protecting the interests of consumers. if to adhere to the “letter of the law”, in ukraine audit activity is carried out on the basis of self-regulation, since regulatory functions in the field of the audit are entrusted to the audit chamber of ukraine. according to requirements of the law of ukraine “on auditing activity”, the audit chamber of ukraine is an independent body; a non-profit organization formed on a parity basis by delegation to its members of auditors and representatives of state bodies (verkhovna rada of ukraine, 1993). however, in our opinion, the selfregulation of the audit is rather dubious, because the presence in the acu of ten representatives of public authorities, in addition to the auditors’ representatives, indicates a mixed model of regulation. in fact, the domestic audit existed only at the state level, locally from the world community, because ukraine is not a part of the states whose audit services are recognized on the european market. the most common type of regulation is the combination of external regulation and self-regulation, driven by the common goals of the state and professional associations regarding the professional activity of accountants and the desire to enhance the efficiency of each regulator. at the same time, both the state and professional associations of accountants develop and implement professional institutes in clearly delineated spheres of activity (metelycja, 2013). taking into account the experience of the usa in the context of ineffectiveness only of the principle of self-regulation of audit activity (financial misuse and unreliability of indicators of corporate financial reporting) and the adoption of the public company accounting reform and investor protection act of 2002 (act sarbanes-oxley of 2002, sox) (spedding, 2009), whose mission is to create an independent body that is currently setting external auditing standards in the usa and regulating public accounting for the public company accounting oversight board (pcaob) (moeller, 2009)  – it is advisable to analyse baltic journal of economic studies 172 vol. 3, no. 5, 2017 the implementation of public oversight in the realm of ukrainian audit. the current focus on introducing public oversight over audit activity has begun as a result of a series of corporate financial reporting scandals in the usa, europe, and japan. by 2002, the auditing community in the world was mostly self-regulating. with the adoption of the sarbanesoxley act at the international level, a unified view has been established that auditors cannot properly be selfregulated over the lack of sufficient incentives for this: a conflict of interest, present in the relationship of “auditorclient”; the quality of audit is not always recognized and not always encouraged by market participants accordingly; the basis of unregulated competition may be the price or willingness to compromise, not the quality of the audit (dorosh, 2015). in line with the requirements of the european union for the protection of investors’ rights, directive 2014/56/ ec identified ways to improve public oversight of auditors and audit firms and outlined their powers with an emphasis on their independence (european parliament, council of the european union, 2014) public oversight of audit activity  – monitoring of the process of implementation of audit activity in the context of providing individuals with the right to conduct audit activity, implement professional ethics standards and quality control of audit services, the permanence of education and imposing sanctions on non-compliance by auditors with the requirements of the current legislation. the system of public oversight of audit activities exists in all member states of the eu but varies among themselves in terms of accountability, funding, numerical composition, and ways of delegating representatives. taking, for example, bulgaria, it is necessary to emphasize the state funding of the public oversight body, the commission for public oversight of statutory auditors (cposa), which consists of 5 membersrepresentatives (national assembly of the republic of bulgaria, the minister of finance; the bulgarian national bank; the financial supervision commission; the institute of certified public accountants of bulgaria (icpa)). the public supervision authority of estonia is the supervisory board of public accountants (sbpa), of which 7 members are appointed by agreement with the ministry of finance (at this, two of the experts are practitioners), which is also funded at the expense of budgetary funds. public oversight body (pob) (finland), which is identical by number with the estonian supervisory board of public accountants (sbpa), is coordinated by the government in the context of the appointment of the chair and vice-chair, and operates on a self-financing basis in the form of mandatory annual payments totalling 2,400,000 eur . in our opinion, such a form of public oversight body is the most acceptable, since there is no direct dependence on government influence by means of budget financing. the french high council for statutory audit is quantified from 14 people appointed by the government but operates on a self-financing basis. having carried out a certain monitoring of ways of delegation of authority to members of public oversight bodies and methods of their financing, it is possible to conclude that, in the vast majority of countries, the powers of members of public oversight bodies are delegated by government agencies, the domination of public funding is observed in the states of eastern europe, and self-financing is inherent in the states of western europe (sweden, france, finland, germany, the netherlands). directive 2014/56/ec on 16 april 2014 (european parliament, council of the european union, 2014), which amends and supplements directive 2006/43/ec european parliament, council of the european union, 2006) and regulation (eu) no 537/2014 (european parliament, council of the european union, 2014) are considered to be the main regulatory legal acts of the european union governing the conduct of audit activity in the member states of the european community. 3. transformation of ukrainian legislation in ukraine, audit activity is at the stage of development and reform, since the evolution of audit reaches only 80 years of the last century. during this period, there was a transition from national to international audit standards; the permanent transformation of the current legislation in the context of its unification with the standards of world practice of audit activity is taking place. in compliance with requirements of the european union for the implementation of international standards in the field of audit and supervision of audit activity and quality assurance, in ukraine, the verkhovna rada of ukraine adopted the law “on audit of financial statements and audit activities” on 21 december 2017 and handed over to be signed to the president on 22 january 2018. according to this statutory instrument, the approaches to audit, the principles of regulation and quality assurance of audit services are significantly changed. in order to comply with the requirements of directive 2014/56/ec and regulation (eu) no 537/2014, the definition of “public-interest entities” was introduced into circulation, which defined the enterprises-issuers whose securities are admitted to stock trading, banks, insurers, non-state pension funds, other financial institutions (except other financial institutions and nonstate pension funds belonging to microenterprises and small enterprises) and enterprises belonging to large enterprises (verkhovna rada of ukraine, 1999). at the request of the eu, the classification of enterprises was launched in ukraine with their division baltic journal of economic studies 173 vol. 3, no. 5, 2017 into: microenterprises (book value of assets up to 350 000 euros, sales revenue – up to 700 000 euros, average number of employees  – 10 people); small enterprises (book value of assets up to 4 000 000 euros, sales revenue  – up to 8 000 000 euros, average number of employees  – up to 50 people); medium enterprises (book value of assets up to 20 000 000 euros, sales revenue  – up to 40 000 000 euros, average number of employees – up to 250 people); large enterprises (book value of assets over 20 000 000 euros, sales revenue  – over 40 000 000 euros, average number of employees – more than 250 people) (verkhovna rada of ukraine, 1999). 4. public audit oversight board with the change of regulatory policy, it is envisaged to organize public oversight of audit activities, which will be coordinated by the public audit oversight board. structurally, the public audit oversight board is composed of audit oversight council and quality assurance inspection. this regulatory service will function as a non-profit person of public law. the basic competencies of the public audit oversight board include: supervision of subjects of audit activity; monitoring of the implementation of international standards on auditing; monitoring of the permanent educational process of auditors who carry out the mandatory audit of financial statements; quality control of audit services; coordination of disciplinary proceedings against auditing entities and enforcement of penalties. the public oversight body actually oversees activities of the audit chamber of ukraine, which, in turn, gains the status of a truly independent regulator, because in contrast to the previous methods of forming its composition (20 people, of which 10 persons are representatives of the audit community, 10 persons  – representatives of state authorities). in accordance with the requirements of the adopted, but currently dormant, law “on audit of financial statements and audit activities”, the total number of members of the council of the audit chamber of ukraine is 11 personsprofessional auditors whose work experience is at least five years (verkhovna rada of ukraine, 2017). a feature of the law of ukraine “on audit of financial statements and audit activities” (verkhovna rada of ukraine, 2017) is a way of financing the public audit oversight board, according to which, under each agreement for the provision of audit services of mandatory audit of public-interest entities, subjects of audit activity are obliged to pay defined contributions, in particular: 1) fixed contribution in the amount of three minimum wages established by law on 1 january of the reporting year from each audit report prepared by the subject of audit activity based on the results of the provision of audit services for the mandatory audit to the publicinterest entity; 2) contribution in the percentage of the remuneration amount under an agreement for the provision of audit services for a mandatory audit to public-interest entities, the size of which is determined by the cabinet of ministers of ukraine. it is obvious that self-financing reduces the level of government influence, but in the realities of the ukrainian audit, financing of the public audit oversight board only by retaining contributions from auditors can lead to an increase in obligations of audit firms, which will result in an increase in the level of corruption risks. it is advisable to introduce indirect proportional funding to the public audit oversight board, using the experience of european states. the experience of italy, where the financing model of the public audit oversight board is shaped by the following principles, can be useful: 1) audit of non-pies general accounting office of the state (rgs) carries out public oversight of audit firms that are not of special importance to the state (funded by contributions from participants); 2) audit of pies italian securities and exchange commission (consob) carries out public oversight of firms conducting an audit of public importance (funding is provided through government grants and contributions from participants of the market for audit services). in our opinion, it is necessary to modify approaches to the financing policy of the public audit oversight board, in particular: to introduce indirect proportional funding at the expense of budget funds and contributions of auditors. in particular, financing of the audit oversight council’s activities may be carried out at the expense of the state budget and obligatory contributions of participants the market for audit services, while the financing of the quality assurance inspection – exclusively at the expense of contributions from auditors. 5. findings public oversight is an objective paradigm of audit activity that contributes to the qualitative performance of auditors’ tasks in assuring and minimizing the auditor’s risk in carrying out audit procedures. based on the results of the study of methods of regulating audit activity at the macrolevel, one can conclude that it is expedient to introduce a public oversight institution for the purpose of: monitoring of the process of implementation of audit activity in the context, giving individuals the right to conduct audit work; implementation of standards of professional ethics and quality control of audit services, permanent education; baltic journal of economic studies 174 vol. 3, no. 5, 2017 imposing sanctions for auditors’ non-compliance with requirements of the current legislation. the issue of financing the supervisory authority is debatable since the goal of transformation of legislation in the field of the audit is its unification with the norms of world practice of audit activity and minimization of corruption risks. we remain in the position that the state represented by representative bodies, coordinates, regulates, and protects interests of society and, therefore, should partly finance supervisory authorities. 6. conclusions taking into account the results of the study, it is proposed to provide in the budget code of ukraine and the law of ukraine “on state budget for the current year” a separate article on the costs of partial financing of the public audit oversight board. this, a priori, will reduce the corruption component of its activities and, accordingly, minimize corruption risks. the proposal regarding such an amendment to the current legislative provision will result in a new wording of paragraph 13, article 13 of the law of ukraine “on audit of financial statements and audit activities” (verkhovna rada of ukraine, 2017): “in order to ensure financing of activities of the public audit oversight board, under each agreement for the provision of audit services of mandatory audit of public-interest entities, subjects of audit activity are obliged to pay contributions in favour of the public audit oversight board as follows: 1) fixed contribution in the amount of three minimum wages established by law on 1 january of the reporting year from each audit report prepared by the subject of audit activity based on the results of the provision of audit services for the mandatory audit to the public-interest entity; 2) contribution in percentage of the remuneration amount (excluding value added tax) under agreement for the provision of audit services for mandatory audit to public-interest entities, the size of which is determined by the cabinet of ministers of ukraine based on the estimate of the public audit oversight board, but cannot exceed two percent of the amount of such remuneration.” the following subparagraph 3 shall be appended to paragraph 13, article 13 of the law of ukraine “on audit of financial statements and audit activities”: “the state acting by authorized bodies carries out indirect proportional funding of the public audit oversight board as related to the implementation of state policy in the field of supervision over audit activity in order to provide authority and perform functions by the audit oversight council.” references: bondar, v. p. (2016). systemy orghanizaciji ta reghuljuvannja audytorsjkoji dijaljnosti krajin svitu [systems of organization and regulation of audit activity of countries of the world], mizhnarodnyj zbirnyk naukovykh pracj, vol. 2(11), pp. 5-20. european parliament, council of the european union (2006). directive 2006/43/ec of the european parliament and of the council of 17 may 2006 on statutory audits of annual accounts and consolidated accounts, amending council directives 78/660/eec and 83/349/eec and repealing council directive 84/253/eec. retrieved from: http://eur-lex.europa.eu/eli/dir/2006/43/oj. european parliament, council of the european union (2014). directive 2014/56/eu of the european parliament and of the council of 16 april 2014 amending directive 2006/43/ec on statutory audits of annual accounts and consolidated accounts. retrieved from: http://data.europa.eu/eli/dir/2014/56/oj. european parliament, council of the european union (2014). regulation (eu) no 537/2014 of the european parliament and of the council of 16 april 2014 on specific requirements regarding statutory audit of publicinterest entities and repealing commission decision 2005/909/ec. retrieved from: http://data.europa.eu/eli/ reg/2014/537/oj. dorosh, n. (2015). rozvytok audytorsjkoji dijaljnosti v ukrajini v umovakh jevrointeghracijnykh procesiv [development of audit activity in ukraine in the conditions of euro-integration processes], bulletin of the taras shevchenko national university of kyiv. economy, 10 (175), pp. 17-23. metelitsa, v. м. (2013). mizhnarodni pidkhody do reghuljuvannja bukhghaltersjkoji profesiji [international approaches to accounting profession management], oblik i finansy vol. 3 (61), pp. 35-47. moeller, robert r . (2009). brink’s modern internal auditing: a common body of knowledge, john wiley & sons, inc, p. 794. spedding, linda s. (2009). the due diligence handbook: corporate governance, risk management and business planning, cima-elsevier ltd, linacre house, jordan hill, oxford, p. 710. verkhovna rada of ukraine (1993). pro audytorsjku dijaljnistj [about audit activity]. retrieved from: http:// zakon4.rada.gov.ua/laws/show/3125-12. verkhovna rada of ukraine (1999). pro bukhghaltersjkyj oblik ta finansovu zvitnistj v ukrajini [on accounting and financial reporting in ukraine]. retrieved from: http://zakon5.rada.gov.ua/laws/card/996-14 verkhovna rada of ukraine (2003). pro zasady derzhavnoji reghuljatornoji polityky u sferi ghospodarsjkoji dijaljnosti [on the principles of state regulatory policy in the field of economic activity]. retrieved from: http://zakon0.rada.gov.ua/laws/show/1160-15. verkhovna rada of ukraine (2017). pro audyt finansovoji zvitnosti ta audytorsjku dijaljnistj [on audit of financial reporting and auditing]. retrieved from: w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62776. baltic journal of economic studies 32 vol. 4, no. 2, 2018 corresponding author: 1 department of finances, banking, and insurance, national academy of statistics, accounting and audit. e-mail: bondaruk23@ukr.net 2 department of finances, banking, and insurance, national academy of statistics, accounting and audit. e-mail: natasha_shevchuk_2012@ukr.net 3 department of marketing, management and business administration, pavlo tychyna uman state pedagogical university. e-mail: bondaruk_igor@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-32-39 instability and its government regulation taisiia bondaruk1, nataliia melnychuk2 national academy of statistics, accounting and audit, ukraine igor bondaruk3 pavlo tychyna uman state pedagogical university, ukraine abstract. the research proves that the breach of stability in the economic system, as well as the appearance of the instability phenomenon, arise immediately after losing some balance between the population and government. as the result, the development of the institute of the state with the proper regulative set of instruments, as well as the extending of the international relations can take the instability from microand mezo-levels to macroand meta-levels. it analyses and defines the concepts: state and budget instability. particularly, the definition of the political, financial, social, as well as economic instabilities is enhanced. key problems of state instability, which may occur as a result of unsuccessful government regulation and ineffective management with budgetary funds, are distinguished. the aim of the article is to develop the concept of instability and its types, to determine the causal interconnection for distinguishing the problems of state instability that may influence the state economic development. the target of the research is the theoretical and methodological bases of the instability occurrence and its state regulation. the research methodology. according to the aim set, we determined the methodological basis of the research: the abstract-logical method  – to sum up the theoretical basis of instability; the systemic analysis – to characterize the types of instability; the analysis and synthesis – to estimate the influence of the state instability on the state economic development; the graphics method – to demonstrate final results of the research; economic-statistic – to define the problems of the state instability that may influence the state economic development. conclusions.  it has been proved that instability is the condition of the system that is characterized by the variation that happened through breaking the existing interconnection in it. the instability is that basic feature that characterizes all social and economic processes. the danger occurs when the level of instability in the state exceeds some standards. we determined political, economic, social, financial and budget instabilities as well as gave the authors’ definition of these phenomena after distinguishing the theoretical bases of instability. it has been proved that the government instability consists of these types. we have proposed to determine the government instability as the condition of the state characterized by the constant changes in political, economic, social, financial, and budget spheres because of the factors that influence changes in its structure and functional characteristics accompanied by the phenomena that have a negative influence on the state development in general. the indexes analysis of the international rating and collation of its results with the graphic interpretation of the government instability have helped to prove that ukraine has the low level of the government instability. it has been classified into five groups of problems in the economy. the analysis of the existing problems, the identification of their influence on the instabilities, as well as the clarification of their interconnection gave the possibility to study the influence of the unsuccessful state regulation on the management with budgetary funds. key words: regulation, instability, ukraine, state instability, problems of instability. jel classification: g28, g38 baltic journal of economic studies 33 vol. 4, no. 2, 2018 1. introduction the breach of stability in the economic system, as well as the appearance of the instability phenomenon, arises immediately after losing some balance between the population and government. the government is not fairly often able to conduct policy that reflects the population needs. consequently, the disappointment and indignation are inevitable (2011, р. 69). as the result, the development of the institute of the state with the proper regulative set of instruments, as well as the extending of the international relations can take the instability from microand mezo-levels to macroand meta-levels (khonstantynova, 2013). this problem draws the experts’ attention from different countries. the leading economists and researchers ( j. canes, i. fisher, w. roger, s. shroeder, p. hyman, k. juselius, t. lux, br. sloth, and v. heiets) study the problem of instability and its state regulation. however, despite constant researchers’ and experts’ attention to this sphere, it is impossible to avoid the instability. the problems that are worth additional studying are as following: the lack of systematic view with regard to the nature of instability and its types, the recognition of the problems that may occur because of its existence. this will help to analyse types of instability that may happen and problems they may bring. the aim of the article is to develop the concept of instability and its types, to determine the causal interconnection for distinguishing the problems of state instability that may influence the state economic development. according to the aim of the research, we achieved the following objectives: to study the basic nature of instability; to determine its types and give own definition; to prove the interconnection between different types of instability; to systematize problems of instability that may occur in the sphere of state regulation. the target of the research is the theoretical and methodological bases of the instability occurrence and its state regulation. the research methodology. according to the aim setting, we determined the methodological basis of the research: the abstract-logical method  – to sum up the theoretical basis of instability; the systemic analysis  – to characterize the types of instability; the analysis and synthesis  – to estimate the influence of the state instability on the state economic development; the graphics method  – to demonstrate final results of the research; economic-statistic  – to define the problems of the state instability that may influence the state economic development. the novelty of the research can be concretized in the following statements: – it has been analysed and determined the concepts: the state instability – the condition of the state characterized by the constant changes in political, economic, social, financial and budget spheres because of the factors that influence changes in its structure and functional characteristics accompanied by the phenomena that have a negative influence on the state development in general; budget instability  – the breach of budget system functioning caused by synergetic influence of outer and inner disproportion at all its levels and it leads to the unpredictable phenomena that have the negative influence on the condition of the formation and use of budgetary funds; – it has classified the main problems of state economic development according to the types of state instability (political, economic, social, budget) accompanied by the study of the influence of the unsuccessful state regulation on the management with budgetary funds. 2. the statement of basic materials the primary explanation of the instability differs considerably from the present one. in the last century, j. canes proposed to use this notion. he mentioned that the instability is one of the inner characteristics of the market economy. the theory of j. canes says that saving is the cause of instability and insufficiency of the effective demand for providing full employment, as high incomehunting with the purpose to attract savings can create the speculative motive (canes, 1993). we agree with v. heiets who notes that the instability is the condition of the state characterized by the variations that happened through breaking the existing interconnection in it. it is the immanent peculiarity of the economic development (heiets, 2000). the instability is such a characteristic that reflects social and economic processes. it can be explained primarily by the fact that the economic development is unstable, has the cyclic character. the instability may occur in different types. the existence of the unstable elements cannot threaten the state’s life. the danger may happen only in the case when the level of state instability exceeds certain standards. in today’s life, most of the foreign and national researchers distinguish the following types of instability: financial, economic, political, as well as social. while analysing references, we have defined the financial instability as the main objective for most of the researches (table 1). as it is seen, (table 1) different researchers have analysed the financial instability. having studied all their approaches, we conclude that all of the presented definitions are worth paying our attention. in fact, we can divide them into four groups. the first group comprises the definitions that reflect the positive character of the instability. the researchers of this group consider the instability to be the uncertainty that is natural for the certain period of the economic development (i. popov, p. hyman, d. colander, h. follmer, a. haas, baltic journal of economic studies 34 vol. 4, no. 2, 2018 m. goldberg, k. juselius, a. kirman, t. lux, br. sloth, a.  khirman, d.  collander, h.  phelmer, f.  haas). the second group of the researchers characterizes the instability as the uncertainty that leads to negative consequences (i.  fisher, h.  shynasy, a.  crockett, w. roger, s. shroeder, p. trunin, m. khamenskyh). the third group comprises researchers who think that the financial instability is only connected with the problems in the investment sphere (f.  mishkin, v.  burlachkov, j. guttentag, r . herring). definitions that do not explain completely the concept of the financial instability refer to the fourth group – h. shynasy, z. vasylchenko. thus, we consider to propose own definition of the financial instability. the financial instability is the condition of the market economic system that changes its outer and inner characteristics under the influence of objective and subjective factors, is characterized by the crises occurrence that influences the financial system badly. the financial instability may occur as: declining deposits, selling up for the reduced price, output reducing, the growth of bankrupt enterprises and others. the concept of economic instability in most cases is identified with the macro-economic instability (the loss of mobility, dynamic, and flexibility of the economic system, incapacity to be adapted conveniently and completely to the changes of inner conditions of its functioning and environment (klymko, nesterenko, khanishchenko, 1999) and the economy instability (the lack of full employment guaranteeing, the stable level of prices, inflation (sumarokov, 1996); economy that is considered to be in the state of imbalance as a result of inner and outer factors and is connected with inflationary processes, too expensive credits (hrabchuck, 2012); incompleteness of important processes in market transformations, narrowness of domestic market, great dependence on a foreign market, the low level of economic sovereignty in the conditions of the financial sector’s growing in further prospects without the real one, the backwardness of the economic structure and its power consumption in abundance (rudnytska, 2011). we fully agree with such statements. however, we consider proposing own table 1 approaches to the definition of the economic concept of “financial instability” author definition і. fisher, 1993 the negative dynamics of fundamental indexes. h. shynasy, 2004 the situation in the financial market that prevents or threatens the economic activities. a. crockett, 1997 the situation when the prices variations of financial assets or the inability of the financial institutions to perform their contractual obligations are making worse the economy’s functioning. і. popov, 2012 1) an ability of the financial system to perform effectively its financial functions during the longlasting period and in conditions of uncertainty; 2) a certain condition of the system’s general stability and its particular elements. w. roger, 2008 the situation characterized by three main criteria: 1) prices for some key financial assets are declined considerably from its fundamental bases; 2) functioning of the credit market is broken, consequently, it is declined from the normal level of aggregate expenditure. z. vasylchenko, 2005 the complex characteristic of the bank system condition that distorts or implements partially its concept and the role in the state economic system, as well as performs its functions inadequately or ineffectively. the incapacity to maintain the balance and to renew the inner condition after outer disturbances or the strengthening of the disproportions, any deviation from safe parameters caused by crisis phenomena (economy decrease, financial crisis, economic transformation and others) are manifested. f. mishkin, 1996 the situation when the financial system is under shocks accompanied by such a process when it is unable to transform savings into investments. s. shroeder, s. schroeder, 2009 a special occasion as the consequence of exogenous shocks, markets imperfection and price instability. v. burlachkov, 2009 the situation when the financial system is under shocks and process when it is unable to transform savings into investments. p. hyman, 1992 a characteristic trait of the normal development of the capitalist economy. d. colander, h. follmer, a. haas, m. goldberg, k. juselius, a. kirman, t. lux, br. sloth, 2009 it is immanent in the market economic system and admits to some extents the crisis renovation. the level of instability is connected to the financial innovations and the intensification of interconnections between financial markets in the world. j. guttentag, r . herring, 1984 it is caused by the asymmetry between creditors’ information and debtors as a result of the uncertainty of the return from the investment projects that intensifies the instability in the real economic sector because of the refusal to give money to debtors. p. trunin, m. khamenskyh, 2007 such problems in the financial system of the state (or in total) which have the considerable negative influence on the economic activity. a. khirman, d. collander, h. phelmer, а. haas, 2010 it means that the economic system admits the crisis renovation to some extents. baltic journal of economic studies 35 vol. 4, no. 2, 2018 point of view. economic instability is the lack of balance in the economic system. it causes the violation of structural elements in the economic system’s equilibrium that brings changes in the inner peculiarities of the system itself. the case of economic instability can be found in hryvnia devaluation, escalation of inflation, stagnation in manufacturing, the growth of price goods and services, as well as black economy, low salaries, corruption. the definition of the concept of the political and social instability in different researches has not been found. therefore, we propose own conception of the phenomenon. the political instability can be considered as the condition of the political system of the state characterized by the constant changes in its structural elements. it is unpredictable, as well as hard to prognosticate. the aforementioned characteristics develop negative features of the system. the striking example of the political instability can be perestroika promoted by mikhail gorbachev in early 1990s. in 2014, the fundamental base of the political conflict in ukraine was the failure of trust to the state government. the social instability is the condition of the unbalance in the social sphere, characterized by the variations in social indexes and the lack of the government bodies to react to changes on-the-fly. these changes break the interconnection in the social sphere. the examples of the social instability in ukraine can be migrations of able-bodied ukrainians, the low level of proprietary security, the reduction of the purchasing power of the population, unemployment, social differentiation, quick growth of the poverty, economic and inner-cultural crisis in the society. however, all types of instability are interconnected and influence each other. every type of instability has its forms of manifestations that reflect negatively in the state’s development. the attempt of the government authorities to interfere in the economic development has the sporadic character. the use of all forms of government regulation has anti-effect. the situation is difficult as not only the fact that ukraine is under the conditions of instability but also the approaches to the regulations to be used (they were practiced in the period of the soviet totalitarian system). consequently, ukraine does not have the successful system of the state regulation and this fact leads to the inefficiency in financial recourses management. taking into the consideration the fact that instability is characterized by the uncertainty and unpredictability we propose new definition “government instability”. this will help to research the government instability and its regulation from the point of its systematicity and will influence the effectiveness of the government regulation in general. we propose to define the government instability as the condition of the state characterized by the constant changes in the political, economic, social, financial, and budget spheres under the influence of factors that may change its structure and functional characteristics, as well as caused by different phenomena that influence badly the state development in general. the graphic chart of the government instability can show more detailed characteristics of its nature (chart 1). the proposed interpretation helps to define the level limit between the government stability and instability, to distinguish between different levels of the government instability: high, optimal, low, critical. the area of stability is the high level of socioeconomic, as well as the political development of the state. the utmost zone reflects the optimal level of the optimal the level of the government stability high the level of the government instability low critical chart 1. the graphic interpretation of the government instability source: proposed by the authors baltic journal of economic studies 36 vol. 4, no. 2, 2018 development. it means a level that is safety for every state. the low level of the government stability reflects the critical point. it proves the great possibility of the government instability. the critical level is characterized by the schedule of government stability. it deflects down the utmost zone. the aforementioned facts prove that the state exhausts “the strength reserve” and it may lead to the government instability. the main features of the government instability in ukraine are: – the dysfunction of the government authority  – the state does not have the power to protect its citizens from the violence – the conflict in the eastern part of ukraine; – the dysfunction to provide welfare – the state cannot guarantee that all citizens have the access to the political, economic, and social weals; – the lack of legitimacy  – the state is not sufficient enough with legitimacy, it has the limited support of the population. taking into consideration the main features of the government instability, we propose to define the notion “budget instability”. it will help to distinguish main problems that may occur in the budget sphere as a result of the instability. it is supposed to think that the budget instability is the violation of budget system functioning caused by the synergetic influence of inner and outer disproportions at all its levels and it leads to the unpredictable circumstances that have the negative influence on the formation condition and the use of budgetary funds. the level of government regulation’s effectiveness depends greatly on the availability of the necessary budgetary funds. hence, there is the understanding of the role and importance of the government regulation of the budget instability. this is one of the main priorities of the government authorities’ activities and the necessary condition for the effective budget management (chart 2). the state instability can also be characterized with the help of indexes determined by the international ratings (chart 3). it is considered that the government instability is possible to characterize with the help of the following chart 2. the role of the budget instability in the system of the government regulation in ukraine source: proposed by the authors features of government instability the dysfunction of the government authority – the state does not have the power to protect its citizens from the violence – the conflict in the eastern part of ukraine the dysfunction to provide welfare – the state cannot guarantee that all citizens have the access to the political, economic, and social weals the lack of legitimacy – the state is not sufficient enough with legitimacy, it has the limited support of the population government instability social instability political instability economic instability financial instability budget instability economy government regulation baltic journal of economic studies 37 vol. 4, no. 2, 2018 indexes: country’s incapacity, social progress, happiness, corruption’s awareness, budget clarity, as well as the global index of terrorism. the data given in the chart 3 can clearly explain that ukraine does not the leading position. in comparison to 2018, ukraine lost in 2018: 5 positions of country’s incapacity; 6 – the global index of terrorism; 1  – index of social progress, 9  – index of happiness. the positive moment is that ukraine increases the index of corruption’s awareness to one position, and the index of budget clarity to 15 positions (when comparing 2017 to 2015). the research of the global rating and the comparison of its results with the graphic interpretation of the global instability helped to assume that ukraine has the low level of the government instability. there are a great number of problems at such level. they influence the economic development of the state. we propose to distinguish and classify problems that exist in the economy into five groups according to the types of instability (chart 4). the first group includes problems of budget instability (fiscal deficit, the growth of the state debt, the imperfection of the budget planning). the second group includes problems of financial instability: the growth of the bankrupt enterprises, selling up assets for the much lower price, reduction of output, decrease of deposits. chart 3. the ukrainian position according to the global rating (2017–2018) * done by independent experts in every two years 132 90 64 17 0 2018 157 countries 178 countries 128 countries 115 countries -5 129 130 countries -6 2017 180 countries -1 index of budget clarity index of happiness index of corruption’s awareness 11 global index of terrorism the index of country’s incapacity 1 2015* 61 85 123 130 2017 -9 15 21 39 index of social progress baltic journal of economic studies 38 vol. 4, no. 2, 2018 the second group includes problems that occur as a result of the economic instability (the balance of payments deterioration, the reduction of gdp in dollar’s equivalent, the black sector of the economy, the high level of inflation, corruption, the volume of gdp is behind of the real one). problems of social instability are in the third group. we propose to take the following factors: the decrease of the population employment, the poverty of the bigger part of the population, the increase of the population unemployment, the low level of real salaries. the fourth group comprises problems that occur as a result of the political instability. it includes: not finished restructuring of the judicial system, the annexation of the autonomous republic of the crimea, the war in the eastern part of ukraine. such an approach gives the possibility to analyse the main problems of the economic development of the state. they are based on five groups according to the defined types of the government instability (budget, financial, economic, political, social) and are connected with the analysis of the influence of the ineffective government regulation on the management with budgetary funds. economic instability government instability the black sector of economy the volume of gdp is behind of the real one the high level of inflation the war in the eastern part of ukraine annexation of autonomous republic of the crimea the decrease of the population employment the poverty of the bigger part of the population the increase of the population unemployment the low level of real salaries fiscal deficit budget instability the reduction of gdp in dollar’s equivalent the balance of payments deterioration corruption political instability not finished restructuring of the judicial system financial instability decrease of deposits selling up assets for much lower price reduction of output the growth of the bankrupt enterprises the imperfection of the budget planning social instability the growth of the state debt chart 4. consequences of the instability and its ineffective government regulation source: proposed by the authors baltic journal of economic studies 39 vol. 4, no. 2, 2018 3. conclusions it has been proved that instability is the condition of the system characterized by the variation that happened through breaking the existing interconnection in it. the instability is that basic feature that characterizes all social and economic processes. the danger occurs when the level of instability in the state exceeds some standards. we determined political, economic, social, financial, and budget instabilities, as well as gave the authors’ definition of these phenomena after distinguishing the theoretical bases of instability. it has been proved that the government instability consists of these types. we have proposed to determine the government instability as the condition of the state characterized by the constant changes in political, economic, social, financial, and budget spheres because of the factors that influence changes in its structure and functional characteristics accompanied by the phenomena that have a negative influence on the state development in general. the indexes analysis of the international rating and collation of its results with the graphic interpretation of the government instability have helped to prove that ukraine has the low level of the government instability. it has been classified into five groups of problems in the economy. the analysis of the existing problems, the identification of their influence on the instabilities, as well as the clarification of their interconnection gave the possibility to study the influence of the unsuccessful state regulation on the management with budgetary funds. references: colander d., follmer h., haas a., goldberg m., juselius k., kirman a., lux t., sloth br. 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(2007) monitoring of financial stability in the developing economy (the example of russia). iepp, 5. ukraine in global ratings 2017-2018 (2018). retrieved from: http://uifuture.org/uk/post/ukraina-u-globalnihrejtingah-2017-2018_691 baltic journal of economic studies 160 vol. 1, 2015 strategy features of informatisation society in the countries of the world maryna shumaieva1, taras shevchenko national university of kyiv, ukraine abstract. the relevance of research caused by global informatisation and active formation of open information society. special attention is paid to the unequal distribution of information-communication technologies (ict) between developed countries and in the society. the purpose of the paper is to analyze different strategies and electronic programs for ict implementation in different countries. the paper shows that every country has its own way of development of new technologies and transition to the new information epoch. methodology. article highlights formation policy of information society for selected countries: usa, canada, european union, japan and ukraine. the paper analysis strategies and electronic programs for ict implementation. the comparative analysis and major trends of information society in the world were identified. the historical chronology of adoption of legal acts for development of information society was recreated. different programs that implement ict in all spheres of human activity were examined. the legislation is the foundation of all ict programs that are implemented in the country. less developed countries should analyze and take into the consideration the experience of countries that have already e-government. results. according to the experience of examined countries we can see that the degree of informatisation of the country depends on the direction of the government policy. the formation of the legislative foundation for each country was made approximately in one time but the pace of ict implementation is quite different. the formation on legislation foundation began nearly in one time in each country but the pace of ict implementation are quite different. all countries follow global trends and basic principles of information society formation and in the same time include national aspects into the ict programs. the main aim of ict program is the distribution of information and communication infrastructure in all areas of human activity, implementation of e-commerce, e-government, etc. in table 1 in the paper there is summarize statistics where is shown several aspects of informatisation: the first year of ict regulation, the usage of e-government, expert evaluation of dissemination of ict programs, the percentage of internet users, expenditure on ict (percent of gdp). according to the data we can see how government policy can influence on development of ict in the country. key words: information society, informatisation policy, information and communication technology. jel classification: b41, c02, l63 1. introduction the penetration of information technology in public institutions and increasing the number of software became the impetus for creation of new informatisation programs. each country has its own way of development of new technologies and transition to the new information age. there is a particular level of informatisation in economically developed countries and today’s situation and history of such countries shows the way (their national it programs) that other countries should implement in their economy. the strategy of entering countries the global information society is undoubtedly based on a comparative analysis of the current state of informatisation, information and telecommunication infrastructure and areas of development. 2. the politics of informatisation in usa government of the united states has been paying great attention to the establishment of state institutions for the development of telecommunications since 20-30 years. in those years the act about radio was adopted and after that it was replace with communication act. in 1978 us national telecommunications and information administration was created (ntia). ntia regulates the it-sphere in the united states. specific ntia activities are: • management of ict and the definition of spectrum for commercial use; • administration of grant programs and further deployment and use of broadband and other technologies in america • development of policy on internet economy, including personal information online, copyright protection, corresponding author 1 department of economic cybernetics, taras shevchenko national university of kyiv. e-mail: marina.netesina@gmail.com baltic journal of economic studies 161 vol. 1, 2015 cyber security and global free flow of information online • promotion of security and stability of the domain name on the web with participation on behalf of the us government in internet corporation for assigned names and numbers (icann) • conduction of advanced research of it-area with the federal government and private sector partners. a new era in telecommunications regulation in the united states began when president clinton signed the telecommunications act in 1996 (nicholas economides, 1998). the main purpose of the act is to demonstrate the commitment of the government to it sector and the belief that all citizens should have access to modern telecommunications services at reasonable prices provided by the state through the provision of “universal service” even when competition in the market is increasing. state governments became responsible for the implementation of this strategy. the relationship between state governments was assigned to the federal communications commission (fcc). fcc regulates the domestic and international telecommunication relations in the fifty states and the district of columbia. in 1972 congress has passed a law about the creation of the federal advisory committee for objective and affordable advisory services to citizens. main responsibilities of fcc are development and implementation of ict regulation, processing applications for licenses to supply services and other documents, promoting innovative services, making analysis and solving consumer complains, public safety and national security while using ict, delivering critical information to consumers. universal service fund (usf) was created to subsidize families with low incomes, education and health infrastructure and other public institutions. the discount varies from 20 to 90 percent and is determined using the matrix. a special collection of recommendations was prepared for state government. this collection “recommended decisions” contains description of different events how to implement ict in the society. fcc has developed four programs under the usf for rapid implementation of ict in the society: 1) the program “connect america fund”. the program is formally known as the high cost support. it is a federal program created to ensure that consumers in rural, remote and far highly expendable areas have access to the modern communication networks, broadband internet, fixed and mobile services at prices comparable with urban areas. 2) the program “lifeline”. since 1985 this program provides discounts on telephone service to the category of people with low incomes. 3) the program “e-rate”. the main aim of this program is to connect schools, universities, libraries, medical infrastructure etc. 4) the program "rural health care”. the program provides funding for health care workers. people with medical profession should always have access to telecommunications services that are necessary to provide medical care. us government strategy involves the use of icts in the government. interactive system “open meeting” provides an opportunity to ask questions online and provide various suggestions and proposals to the government and receive a reply via e-mail. in 2002 “electronic government act” was approved by both houses of congress and signed by president of usa. speaking about the development of ict in the united states i should mention about the creation of internet. now the whole world uses this network that was first developed for the armed forces. for over ten years the internet was used only by the academic community and in the mid-1990s it was opened to the public. 3. the politics of informatisation in canada nowadays canada is a world leader in information. canada has one of the highest rates of broadband penetration among oecd (organization for economic co-operation and development). government policy promotes the spread of broadband especially in rural and regional areas. as a result 98% of canadians have access to broadband services. in 1993 the telecommunications act was passed. this act served to strengthen the legal regime for ict which has previously been spread among a number of laws. the most important thing is that the law formulated the objectives of the parliament policy about the development of the ict sector in canada. it should be noted that the act was passed earlier than in the us. the us government took the canadian way. in the 90s information technology association of canada was created. it is the voice of the information technology industry in canada. the association represents a diverse ict community that covers telecommunications and internet services, consulting, ict services, hardware, microelectronics, software and electronic content. community itac contains more than 572 thousand jobs, 140.5 billion dollars revenue, 6.0 billion dollars in r & d investment, 31.4 billion dollars exports and 11.4 billion dollars capital costs. all this is an annual contribution of ict to the economy of canada. there are six priority areas for ict development in canada: the global competitive ability of the knowledge economy in canada, the use of ict, procurement in the public sector, e-health, intelligent regulation and talents. simultaneously with the adoption of the telecommunication act the government formed information highway advisory council (ihac). the goal of ihac is to ensure the development of canada’s strategy to connect to the information superhighway. government has developed a comprehensive program “connecting canadians” ( jake enwright, 2014). the program consists of several blocks each of which includes a system of programs focusing on specific sector of informatisation of the country. one of the units includes programs canada-online and connecting rural canadians. the aim of these programs is to provide internet access to educational, medical, scientific and research institutions by providing subsidies and preferential terms to the access baltic journal of economic studies 162 vol. 1, 2015 of the above institutions. also a special system was created to update obsolete equipment and to provide institutions with upgraded informational devices. another unit of the program “connecting canadians” is focused on e-commerce. this unit is called “canadian electronic commerce strategy”. it contains mainly series of laws to establish protection for consumers and sellers, to make standard-setting for electronic correspondence. the third unit contains applications for e-government development. the main idea of this unit is to create a functioning e-government when all government services can be done online. recently the government of canada presented the new program “digital canada 150”. it is canada’s digital future plan which the country plans to reach its 150th anniversary. the plan consists of five main points ( james moore, 2015): connection of canadians, protecting of canadians, economic opportunities for canadians, e-government, canadian content. government policy is focused on increasing demand for it tools, creating and attracting qualified foreign specialists using the start-up visa, increasing production software, expansion of information and telecommunication infrastructure. 4. the politics of informatisation in eu the european union develops and implements a system of programs to bring the economy of the eu to the forefront in the world, to make better working conditions, to increase the level of social well-being and to make a competitive and dynamic society. beginning from 1994 the european community puts on consideration the building of the information society as one of the priority tasks. the foundation of legislation of ict in the eu became two directives of the european parliament: “about the processing of personal data and the protection of private interests in the field of telecommunications” in 1997 and “about a number of legal aspects of electronic commerce in the internal market” in 1998. europe action plan was launched by the president of the european commission romano prodi in december 1999. this plans gave a new direction in the various eu programs such as ida (electronic data interchange program between administrations) to ensure benefits for citizens and businesses. in march 2000 at the lisbon summit new objectives were defined for the european union for the next decade. the result of the summit became the program “e-europe 2002” (e-europe action plan). the objectives of the program can be grouped into three parts: cheap, fast and secure internet, investment in people and their skills and knowledge, promoting the use of internet. by 2005 the candidate countries for eu accession had to implement program of e-government. also attention should be paid to the program “ida”. the program aims to promote the development and operation of transeuropean networks for the exchange of data between the administrations of the member states and community institutions. the first phase of the program, which began in 1995, contributed the creation of large telematics networks in the areas of employment, health, agriculture, statistics and competition. the second phase of the program (ida ii) was launched in 1999 with the adoption of the two present decisions. the program was redirected toward interaction with the market in order to improve the delivery of online services (e-government) to the european businesses and citizens. the “e-europe 2005” was a logical continuation of a successful plan “e-europe 2002” with more practical goals and funding sources. the main objectives of the program “e-europe 2005” was the creation of modern public services to interact with individuals in real time, electronic government, electronic education, e-health, e dynamic business environment, secure information infrastructure, benchmarking and distribution of broadband access at competitive prices. one of the sources of the financial implementation of this program is the budget of the 6th eu framework program for research and technological development 2003-2006. so-called “framework programs” (fp) are the main organizational structures that coordinate research and technological development in the eu. eight framework programs were already introduced. the budget of fp every next program increases form 3.5 billion euro to 53.22 billion euro (for fp 7). nowadays the eighth framework program is going. the name is “horizon 2020”. the budget of the program is allocated 80 billion euro. the slogan of the program is to turn the european union on the innovation union. following the “e-europe 2002” and “e-europe 2005” the new program started “strategy i2010”. today we see the implementation of the program “e-europe 2020”. digital day procedure (digital agenda, da) is one of the seven main missions of the program “e-europe 2020”. da proposes the following tasks to do for better exploitation of ict potential: 1) creation of a single digital market across the eu 2) increasing interaction and standards, interoperability of devices, applications, data warehousing and creation of appropriate rules for intellectual property rights 3) strengthen policies to combat cybercrime, distribution of child pornography and violation of privacy 4) providing high-speed internet at competitive prices. the eu should create next-generation networks (ngas) – broadband infrastructure 5) promoting digital literacy for various segments of the population, the involvement of young ict specialists and retraining of the unemployed. 5. the politics of informatisation in japan the most rapid development of informatisation in the world is in asian countries such as south korea, taiwan, hong kong, japan and singapore. the asian strategy of informatisation of society will be analyzed on the basis of japan. baltic journal of economic studies 163 vol. 1, 2015 in light of the urgency of adaptation to rapid and drastic changes in the world caused by the use of ict the strategic it headquarters were created in january 2001. after that the program “e-japan” was adopted to establishment formation of advanced information and telecommunications network. in march 2001 the program was complemented with the documents “e-japan: program policy priorities”. the program was designed for 5 years with fairly persistent goals: “japan must take revolutionary yet realistic actions promptly in order to create a “knowledgeemergent society” where everyone can actively utilize it and fully enjoy its benefits. we will strive to establish an environment where the private sector, based on market forces, can exert its full potential and make japan the world’s most advanced it nation within five years.” in june 2001 the program “e-japan 2002” was adopted. already in 2002 all the japanese schools were connected to the internet and computer science became mandatory subjects. in 2003 the new document “e-japan strategy 2” was approved. almost every year the country moved with big steps forward creating new programs, introducing new laws and implementing it to every element of life. in the above document the following sectors of implementation of it were mentioned: health services, nutrition services, a system of communication with immediate response in emergency, a system of remote video communication for seniors, financing of small and medium enterprises for rapid business growth and economy increase, the use of it to create an internationally competitive human resources, creation of electronic information exchange for people seeking employment and landlord, providing open access to administrative information, web pages of all administrations and public relations channel (e-japan strategy ii, 2003). the program “e-japan” every year was updated and enriched. the program contributed a sizeable reduction of tariffs on all kinds of communication. “e-japan” has been changed a number of laws including the main "about telecommunications". one of the interesting laws is the ability to save a mobile phone number while changing one mobile operator to another. in august of 2003 “basic resident register network system” begin to work. it is automated electronic the system of population registration. and in january 2004 electronic systems for tax payment and government feed were implemented. the “electronic government” is actively developing in japan. in 2013 japan government presented the new document “declaration of becoming the most advanced it nation in the world”. 6. the politics of informatisation in ukraine since the middle of last century ukraine has contributed the development of computer technology and the latest technology. in 1925 o.m. schukaryevym invented the idea of mechanization of formal logical operations and built “mechanical thinking machine”. in 1948 s. lebedev explained the structure and principles of digital computers. in the 1950-1980 v. glushkov formulated the basic principles of computer science scientist. in 1997 the ieee computer society awarded glushkov v. and s. lebedev with the medal “pioneer of computer technology”. an excursion into history has shown us that ukraine must be among the leaders who are making the foundation of an information society. but unfortunately we are still far from ideal. a powerful impetus to the development of ukrainian information society became the creation of regulatory legislation. the basic crucial laws were passed: “about electronic documents” (2003), “about electronic digital signature” (2003), “about telecommunications” (2004), “about basic principles of information society in ukraine for 2007-2015” (2007), the resolution of the cabinet of ministers of ukraine “about approval of the national system of indicators of the information society” (2012), the act of the ministry of education and science of ukraine “about the approval of methodology for formation of indicators of the information society” (2012). in 2003 ukraine joined the declaration of principles and plan of action for the development of the information society that was adopted at the world summit in geneva. the logical step forward this direction was the signing the decree by the president of ukraine “about urgent tasks in implementing new information technologies” on the 20th of october, 2005. at the same time the above listed documents are not ideal, they need to be harmonized and to be brought under the eu standards. the first and only time assessment of ukraine’s readiness for e-government was held in 2002. its results have become the basis of the information and analytical component of the national program "e-ukraine". due to objective and subjective reasons the implementation of this program didn’t take place. a lot of time passed, the ict sector significantly changed both information technology and the level of information users’ culture. in 2001 the program “innovation trampling” was initiated. the role of this program is to facilitate the process of sustainable national development and poverty reduction through the use of ict. ukraine also takes part in international telecommunication projects itur (italy – turkey  – ukraine-russia), tae (tran-asia-europe), and other programs. in 2013 ukraine national center for e-governance se "derzhinformresurs" evaluated the electronic readiness of ukraine commissioned by the state agency for science, innovation and informatisation of ukraine. according to the results of the analysis now ukraine has the following development stage: the installation of computer software is done and access to the internet is connected, almost all institutions have a web page. however, business processes in these institutions not related to e-government but almost all institutions are ready to implement it. institutions do not perform the necessary functions of administrative services to citizens and businesses and do not have a sufficient level of electronic interaction even at baltic journal of economic studies 164 vol. 1, 2015 the domestic level. so virtually no elements of electronic democracy are nearly absent. the program of president of ukraine “reform strategy 2020” was recently published. one of reforms in this program is concerning electronic governance. e-government program will be implemented in accordance with the vector of security and development of the information society is according to the vector of pride for ukraine. according to unian (ukrainian independent information agency) ukrainian government plans by 2017 to pass the law about the single electronic interaction system and open data, to implement electronic contactless services and to switch to electronic identification and electronic signatures. the e-government should be implemented by the end of 2016. also one of the tasks of the cabinet is a complete rejection of the paper document. on the basis of materials presented above in table 1 you can see the comparative description of the ict implementation and use. conclusions according to the experience of examined countries we can see that the degree of informatisation of the country depends on the direction of government policy. the formation of the legislative foundation for each country was made approximately in one time but the pace of ict implementation is quite different. the basic principles of information society in each country are unique in some aspects but at the same time ict is implemented due to global trends. so global trends can be considered: • dissemination of information and communication infrastructure in all areas of human activity • establishment of state support by introducing legal regulation and financial delivery. to the national aspects can include: • types of measures for the development and dissemination of ict (they are formed depending on the level of economic development, mentality, etc.) most foreign programs highlight the main characteristic – consideration of all applications of ict (e-commerce, e-government, etc.) not as independent plans but as a basis for the transition to a fully functioning information society. after all the essence of the functioning of the information society is not only the automation of economic management and various processes but the improvement the level of world economy and social development through ict. table 1 comparison of implementation and use of ict №  country usa canada eu japan ukraine implementation 1 the first year of ict regulation 1996 act about telecommunications 1993 telecommunication act 1999 the program “e-europe” 2001 the program “e-japan” 2003-2004 the law “about telecommunications” 2 the usage of e-government implementation in 2002-2005 implementation in 2001-2005 each country in eu has its out time period. great britain (2001-2005) germany (20032005) now the program “european e-government action plan 20112015” takes part. implementation in 2004-2006р the first phase of implementation of e-government will be in 2016. 3 expert evaluation of dissemination of ict programs (scale from 1 to 10) 9 9 8 10 2 4 the percentage of internet users (2014) 86.9 % 94.7 % 76.5 % 86.2 % 41.8 % 5 expenditure on ict (percent of gdp, 2008) 7.36123% 6.60479% 6.31393% 6.68706% 5.92647% references ukraine 2020. strategy development. retrieved from http://www.nbuviap.gov.ua/images/4/str.pdf report «assessment of electronic readiness of ukraine» (2013). state agency for science, innovation and informatisation of ukraine. baltic journal of economic studies 165 vol. 1, 2015 james moore ( july, 2015). digital canada 150. retrieved from http://www.ic.gc.ca/eic/site/028.nsf/eng/home information technology association of canada. retrieved from http://itac.ca/ e-europe action plan. retrieved from http://ec.europa.eu/idabc/en/document/70/5849.html jake enwright ( july, 2014). connecting canadians. retrieved from http://news.gc.ca/web/article-en. do?nid=869539 federal communication commission. retrieved from http://www.fcc.gov universal service program for schools and libraries (e-rate). retrieved from https://www.fcc.gov/guides/ universal-service-program-schools-and-libraries rural health care program. retrieved from https://www.fcc.gov/encyclopedia/rural-health-care lifeline program for low-income consumers. retrieved from https://www.fcc.gov/lifeline universal service for high cost areas  – connect america fund. retrieved from https://www.fcc.gov/ encyclopedia/universal-service-high-cost-areas-connect-america-fund nicholas economides (1998). the telecommunications act of 1996 and its impact. retrieved from http://www.stern.nyu.edu/networks/telco96.html national telecommunication & information administration. retrieved from http://www.ntia.doc.gov/about e-japan: summary. retrieved from http://japan.kantei.go.jp/it/network/0122summary.html e-europe 2005. information society for all. retrieved from http://www.etsi.org/website/document/aboutetsi/ ec_communications/eeurope2005_actionplan.pdf e-japan strategy ii. retrieved from http://japan.kantei.go.jp/policy/it/0702senryaku_e.pdf european commission research & innovations. what is fp7? retrieved from https://ec.europa.eu/research/ fp7/understanding/fp7inbrief/what-is_en.html japan strategy in information and communication technology. retrieved from http://japan.kantei.go.jp/policy/ it/100511_summary.pdf digital agenda in the europe 2020 strategy. retrieved from http://ec.europa.eu/digital-agenda/en/digital-agendaeurope-2020-strategy марина шумаева особенности стратегии информатизации общества в странах мира аннотация. актуальность исследования обусловлена глобальной информатизацией и активным формированием открытого информационного общества. особое внимание уделяется распределению информационно-коммуникационных технологий (икт) между развитыми странами и в обществе в целом. целью работы является анализ различных стратегий и электронных программ для внедрения икт в разных странах. в работе показано, что каждая страна имеет свой собственный путь развития новых технологий и перехода к новой информационной эпохе. методика. в статье рассмотрены политики формирования информационного общества в отобранных странах: сша, канады, европейского союза, японии и украины. проанализированы стратегии и электронные программы внедрения икт, проведен сравнительный анализ и выделены основные тенденции формирования информационного общества в странах мира. была воссоздана историческая хронология принятия правовых актов для развития информационного общества. были рассмотрены различные программы, которые реализуют икт во всех сферах человеческой деятельности. законодательство является основой всех программ в области икт, которые реализуются в стране. менее развитые страны должны проанализировать и принять на рассмотрение опыт стран, которые уже успешно используют икт во всех сфера деятельности. результаты. согласно исследованию можно утверждать, что степень информатизации страны зависит от вектора направления политического режима правительства страны. формирование законодательной базы для каждой страны было сделано примерно в одно время, но темпы внедрения икт весьма различны. все страны следуют глобальным тенденциям и основным принципам формирования информационного общества и в то же время дополняют программы определенными национальными аспектами. основная цель программ икт это распространение информации и коммуникационной инфраструктуры во все области человеческой деятельности, реализация электронной коммерции, электронного правительства, и т.д. в таблице 1 предоставлена сравнительная характеристика внедрения и использования икт: год начала внедрения икт, год начала использования электронного правительства, экспертная оценки распространения программ в области икт, процентах интернет-пользователей, расходы на икт (в процентах от ввп). по данным мы можем увидеть, как государственная политика может повлиять на развитие икт в стране. baltic journal of economic studies 334 vol. 4, no. 1, 2018 corresponding author: 1 department of management in publishing and printing industry, national technical university of ukraine “igor sikorsky kyiv polytechnic institute”. e-mail: lina.shenderivska@gmail.com 2 department of management, national technical university of ukraine “igor sikorsky kyiv polytechnic institute”. e-mail: olgaguk@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-334-344 enterprises development: management model lina shenderivska1, olga guk2 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine abstract. the paper’s purpose is to provide recommendations for the effective managing the companies’ development taking into account the sectoral key elements’ transformation. methodology. the enterprise profits’ econometric simulation is conducted to determine the most significant factors influencing their development. according to the model testing result, their multicollinearity was revealed. to get rid of the multicollinearity phenomenon from the profit models, isolated regressors are excluded, namely, return on assets, material returns, return on equity. to obtain qualitative models with a small error of model parameters estimation and, accordingly, high reliability of the conclusion about the interrelation between the factors of the model and the resulting feature, factors in the income model that are not closely interconnected, that is, not multicollinear, are included. determination coefficients r2 and f-criterion were calculated for model quality checking. the modern printing enterprises of ukraine key elements, connected with integration into the global information space, are analysed. results. the interrelation between a company’s development and earning capacity is identified in the study. the profit importance as the main source for enterprise financing is substantiated. factors that have the greatest impact on the enterprises’ development are labour productivity, financial autonomy, working capital turnover, and the character of their influence is most adequately reflected by the power model. peculiarities of the enterprises’ activity include increased competition at the inter-branch level, poorly developed industrial relations, and the own sources of financing activities shortage. practical implications. based on information on the most significant developmental impact factors, directions for perspective enterprises development for their competitiveness increase are proposed: diversification based on the activity expansion, the enterprises’ organizational structure change, investment development. the actuality of diversification’s activity for profit increase due to new markets development is determined. it was found that corporations are the most acceptable organizational form for the enterprise. the urgency of investment development for printing companies is proved connected with the production modernization’s necessity, ensuring the manufacture of competitive products. value/originality. to ensure the effective enterprises’ development based on development concept, a model for managing the printing companies’ development is worked out. the model for managing the companies’ development is prepared based on the concept that takes into account the peculiarities of enterprise activity and priority directions of their development, improves the directions for enterprises adaptation understanding in the competitiveness growth conditions. key words: earning capacity, profit, development, investment development, concept, management model. jel classification: e22, l11, m11, o20 1. introduction in modern conditions, an aim prerequisite for enterprises functioning is their development, associated with different approaches to its essence. at the heart of the development process is considered the state of the economic system; various types of changes that determine development; diversity of inter-linkages between the factors of all the enterprise’s environments. the enterprise as an object of management gets functions that influence its development, including strategic ones, and is a constant search for development and economic growth directions associated with economic changes. enterprises development is first qualitative changes in its activities and conditions (hvostina, 2015). earning capacity of the enterprise is determined by the social and economic earning capacity level, requires a work’s motivation, a work’s management, a working conditions creation, an enterprise infrastructure development, environmental preservation. all this is important both for product quality and its competitiveness. according baltic journal of economic studies 335 vol. 4, no. 1, 2018 to many scientists, social, economic, and environmental development (bhattacharya et al., 2015; klapper et al., 2016; satterthwaite, 1997) are integrated into sustainable development concept. environmental factors, in turn, impact economic growth, and the demographic situation, birth rate (varvarigos et al., 2017). the authors focus on the study of factors affecting the enterprises’ development, justifying the business development ways, prove the state support urgency for small and medium enterprises. enterprises development is influenced by internal and external factors. the authors substantiated the state policy’s importance for the small and medium enterprises development, suggested the actual state policy directions: the financial instruments implementation, information about promising markets dissemination, topical technologies, ways to save costs for the business entity (taiwo et al., 2012). the state offers a differentiation of support programs for small and medium businesses, distinguishes between the program for lending to small family businesses, programs for attracting graduates to business, micro-lending programs for the unemployed to start their business, long-term loans (5-10 years) to small and medium enterprises at a very low interest rate (oni, 2012). eversole (2004) argues the micro-enterprises role fight poverty, and self-sufficiency of these enterprises owners to improve their conditions. the clusters creation is important for small and medium-sized enterprises development, but this process is complicated over the lack of cluster sizes to compete globally, the lack of resources, an insufficient infrastructure, and the lack of training for cluster managers (lopriore, 2009). conditions for the effective governance in associations are accountability, transparency, consistency, and participation (nwankwo et al., 2012). thus, to a deeper insight in small business enterprises development processes, butler (2006, p. 221) substantiates the typical phases of business development: the initial start-up phase of a new business, the relative stability, the growth and the development, and the need to use different business models for each of these stages. butler (2006, p. 223) proves the gradual delegation of authority topicality, the transition from concentration to operational activity to strategic thinking, the constant acquisition of relevant knowledge and skills that will contribute to long-term growth and the business sustainability; also provides a recommendation for enterprise managers to apply those management principles proper to the business size. in the paper (asian productivity organization, 2007), according to the competitive impact on development, such indicators as effective business models and strategies allowing to enter new markets, aspirations for leadership, an investment activity, and an innovation, are identified. promising areas for small and medium-sized businesses development are defined by a partnership with large companies, entrepreneurship. the work (durowoju, 2014) also justifies the entrepreneurship’s priority, since it can provide long-term competitive advantages. a generalization is made that companies should create entrepreneurial networks for coaching, mentoring in their work (asian productivity organization, 2007). thus, the researchers are the adherents of the competition concept as a partnership, allowing achieving global benefits for the market. development is associated with changes that offer some opportunities for economic growth and create operational risks. companies that implement breakthrough innovations are at the highest risk, as opposed to evolutionary innovations, as they create new markets (goutam et al., 2015). the competition growth impacts on development, therefore, there is a need for continuous management’s improvement by product quality upgrading, the production costs cutting and the business risks reduction. every effective enterprise should offer an innovative product and develop a business model (teece, 2010). the latest technologies adoption ensures the betterquality products production, production operability, productivity gain, and resource intensity reduction. in (sacala, 2014) justified the modern information technology application in enterprise management, identified the actual principles for constructing the enterprise architecture – the ability to adapt to changes, build an efficient resource management system, use the internet possibilities to integrate into the global market space. the current trend in information technology’s development is applications. authors (unhelkar et al., 2010) argue the relevance of applications that integrate or isolate basic functions relevant to consumers, contact groups, business management, such as mobile broadcast, information, transaction, operation, and collaboration for enterprise development, namely, meeting new consumer needs, operational activities effective implementation, raising the competitiveness level. surugiu (2012) justifies the integrated information system usage importance due to such advantages as an accelerating data processing, a speeding-up data in real time, an optimizing the control of business costs distributed on cost centre. the amount of investment affects the qualitative and quantitative increase of economic value added, invents innovation activity. in (ricupero et al., 2001), the sufficient financing for effective actions significance and the competitiveness achievement in global markets has been proven. limited access factors to credit resources are substantiated. the progressive experience of the european union countries in overcoming the barriers in getting loans was established through the creation by small and medium-sized enterprises of mutual guarantee society, funded by its participants and provides financial guarantees to enterprises at their request to banks for getting credit funds. funds baltic journal of economic studies 336 vol. 4, no. 1, 2018 providing financial guarantees are successfully operating in france, italy, spain, and germany. the financing enterprise development issue is also explored by luiz (2000) and proves that growth in production a beneficially influences the credibility of debtees; the orders inflow can be furnished through the participation in tenders for state procurements, the sales networks development, implementation of technical and organizational decisions aimed at increasing in labour productivity (luiz, 2000). thus, speeding-up scientific-and-technological progress, changing market conditions, the need to find sources of investment resources and directions for their efficient use raises theoretical and practical interest in the enterprises’ development. in the development management process, it is necessary to strain after balanced improvement of all enterprise subsystems. increasingly relevant in present-day conditions of domestic economy’s development becomes the development management for printing companies, due to their importance to society to meet its information needs and to ensure access to quality printing products, and several features, such as the predominantly smallscale business, affiliation with publishing activities, a high level of printing equipment cost, material content, import dependence. with the urgency of the enterprises’ development problem to ensure their earning capacity and competitiveness, the authors put and executed the following research objectives: 1) current trends in the printing companies in ukraine development are described; 2) the interrelation between development and earning capacity of the enterprise is substantiated; 3) ways of increasing the enterprise earning capacity development are determined; 4) the management model for enterprises development to ensure their competitiveness in the market in presentday conditions is worked out. 2. influence of development on increasing the printing enterprises earning capacity activity the printing industry enterprises activity is commercial, enterprises are aimed at a profit, and their specialization in the works execution to order all economic branches, in particular, the replication of periodical and non-periodicals, promotional materials, packaging, labels, blanks, etc., forms a significant potential for development. publishing products (books, newspapers, magazines) accompanying people in learning, work, recreation, development, forming its outlook, the level of culture, patriotism, depth and breadth of knowledge, education, competence, thus, the level of self-awareness and the nation’s intellectual potential are formed and developed, affects the human welfare of the population, as a consequence, the country’s reputation. and in conditions of preservation, multiplication and productive use of the nation’s intelligence, an effective socio-economic development of the country takes place and its contribution to world progress is ensured. other types of printing products, for which the information function is determinant as well, are also important. thus, the attended printed matter provides the commodity producers with necessary information about the product; packaging is a necessary element in supply logistics, stationery, despite the electronic media’s expansion, are irreplaceable in creating a corporate culture and style; markings provide effective, relevant navigation, promotional materials serve as information in specific places and time, and so on. such products variety ensures the printing industry’s integration with all spheres of production and human activity. the printing industry is a part of publishing and printing complex since its activities are impossible without the information products or editions manufacture. thus, the printing products market is a part of the information market, which in present-day conditions is characterized by the communications complication in the information space, the products distribution and sales forms diversification, increased market volumes and increased differentiation, transformations in the culture of information consumption, which requires effective strategizing of publishing and printing enterprises development. the printed publishing products manufacturers, integrated into the media market, compete not only with traditional producers of information – radio and television but also with manufacturers, operating on internet platforms  – these are social networks, internet tv, mass media, presented on the internet, electronic, audio editions, blogosphere, mobile applications, telegram channels, online educational courses and more. the publishing market’s structure is closely linked to the economic development level, the education and culture level, on which the level of demand depends and, therefore, the economic status, investment opportunities of publishing and printing enterprises. increase in demand for information products in nonlegible form raise the investment attractiveness of their manufacturers level and leads to a partial capital outflow from manufacturers of traditional printing products, in these conditions, both the publishing and printing companies’ innovation development and the need for state support grows are important. granting tax exemptions, increasing the state orders volume, public investment in scientific and technical support will promote an effective reproductive policy in the industry, and thus attainment the european standards level of development. we have analysed the books and brochures output dynamics in ukraine to determine the production floor trends for 2011–2015 (figure 1). baltic journal of economic studies 337 vol. 4, no. 1, 2018 in 2014–2015, compared with 2013, the tendency was shown to reduce the average books and brochures output and for 2011–2016 this index did not exceed 2 copies, which does not contribute to the full society development. during the analysis, the average circulation did not exceed 2.6 thousand exemplars, and the smallest its value was in 2015  – 1.82 thousand copies. small circulations stimulate printing companies to implement technologies and equipment, alternatives to offset printing, which ensures the earning capacity of small production output. it creates conditions for microenterprises’ development, guided by small circulations, and for industry’s cooperation development since not all entities are capable of performing a complete technological cycle. as the analysis showed, the share of small enterprises in 2015 was 96%, which determines the peculiarities of the printing industry, namely, the competition high level, the shortage of resources for development. the earning capacity of development is influenced by enterprises’ innovative activity. based on a certain share of innovative products in the printing industry from 2011 to 2016, the maximum value of the innovative products’ share was 2.01% in 2012; the minimum is 0.55% in 2015. this is due to the insufficient financing of enterprises. during this period, in the total volume of printing products, the newspapers’ share decreased from 7 to 4%, as the number of newspaper producers decreased by 30%. to ensure earning capacity of publishing activities, a well-established system of interaction between partners is required, which, as the analysis showed, changes in the current period, complemented by the progressive communication tool advancement  – the internet, which affects the earning capacity printing companies’ development. in the unfavourable market conditions context, it is necessary to look for ways to preserve the volumes of production and sales, increase the volume of profit as the main source of development. to determine the internal factors’ influence on the enterprises of the sector activity, we have constructed the net profit econometric models for six printing enterprises (table 1). the enterprises are chosen according to the following criteria: the enterprises’ size, the products’ range, the completeness of the production cycle  – pre-print, printing, and post-printing stages, experience in the market. factors in the model are the labour productivity (x1), the financial autonomy coefficient (x2), the working capital turnover (x3). the obtained power models of table 1 net profit econometric models for enterprises enterprise net profit econometric model llc “bvi-print” у*=0.169 х11.27х2-0.789 х30.614; r2=0.9510; f true=181.108 llc “vistka” у*=13.057 х1-0.387х20.794 х32.569; r2=0.834; f true=46.945 llc “macros” у*=70.869 х10.472х2-0.21 х30.031; r2=0.773; f true=31.901 llc “мega-poligraph” у*=14.67 х10.989х2-0.334 х30.057; r2=0.914; f true=98.787 llc “аvanpost and partners” у*=11.187 х11.008х2-0.092 х30.115; r2=0.906; f true=90.394 llc “univest marketing” у*=5.872 х11.242х2-0.025 х30.711; r2=0.9169; f true=102.955 source: self-developed 1.02 1.36 1.53 1.29 0.85 1.15 y = 0.048x3 0.5513x2 + 1.821x 0.3393 r² = 0.8363 0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 1,60 1,80 2011 2012 2013 2014 2015 2016 a ve ra ge b oo ks a nd b ro ch ur es o ut pu t, ex em pl ar s year fig. 1. dynamics of average books and brochures output per one resident of ukraine (exemplars) for 2011–2016 source: statistical information of the state statistics service of ukraine, built by the author using the ms excel package baltic journal of economic studies 338 vol. 4, no. 1, 2018 net profit manage the economic content of the cobbdouglas production function, where the indicator of labour resources (l) and capital (k) are used as independent variables. to adapt the cobb-douglas function to the functioning of domestic enterprises conditions, we propose to express the labour resources category as an indicator of labour productivity, while the capital category is an indicator of its structure (financial autonomy coefficient) and the efficiency of capital use indicator (working capital turnover). based on the obtained power models of net profit comparison with the cobb-douglas production function, it is determined that they are similar in economic terms. to a greater extent, the profit of llc “bvi-print” is influenced by labour productivity, which is determined based on the elasticity coefficient, whose value is 1.27, with the increase in labour productivity by 1%, the growth rate of net profit is equal to 1.27%, and the smallest impact of labour productivity on profit at llc “vistka” is 0.378. for all investigated enterprises, in addition to llc “vistka”, the negative value of the elasticity coefficient for the indicator of autonomy is defined, with the share of equity capital increase in returns of profit decreases. the elasticity coefficients, determined for the working capital turnover factor, in all enterprises is positive, prevails on the level of elasticity of llc “vistka”  – 2.569, a less noticeable effect of working capital turnover on profit at llc “macros” – 0.031. taking into account the priority of increasing labour productivity to increase the profit of enterprises, the urgent tasks are an expansion of printing enterprises markets both at the expense of orders’ physical growth and more qualitative satisfaction of consumers’ needs, and also updating of the enterprises’ technical equipment. these measures are necessary not only to increase the cash revenues volume of enterprises but also to avoid financial losses. 3. directions to increase the earning capacity of enterprises development substantiation of the earning capacity directions of enterprises development depends on their current state, promising sales markets, industry practices, strategic orientation of enterprises, state policy in the industry, the relevance of a new cooperation forms development. the authors of the article defined such promising directions of development for printing enterprises: – the enterprises’ activity diversification; – the enterprises’ organizational structure change based on their corporatization; – investment development. the need for comprehensive customer satisfaction, the search for new, more profitable sales markets, and the scientific and technological progress implementation are justified by the diversification expediency of enterprises activity based on its expansion. when choosing the enterprise’s diversification, the expected earning capacity and its duration must be considered. diversification allows solving several tasks for the enterprise, namely, profits increase, operational risks reduction, the increase of capacity utilization, intellectual potential of enterprise, efficient use of investment resources. diversified enterprises are characterized by a lower level of profit volatility (pandya et al., 1998). the management of diversification process organization requires the solution several tasks, namely: – management organizational structure achievement compliance with tasks to be solved with an allowance for activity expansion; – possibilities of optimization of diversification processes estimation at the enterprise by the rational allocation of functions, implementation of outsourcing and outstaffing practice in practice; – effective motivation system application. improvement of management organization is occurring due to the program-target organizational structures of management implementation, quality management systems, which promotes the quality improvement, products competitiveness, a rise in profitability. the employees’ functions expansion requires an appropriate remuneration, which should be taken into account by motivation system. therefore, to build an effective motivation system, it is necessary to set fringe benefit expanding functions in the conditions of diversification, to provide high-quality communications by informing employees about the system of incentives and charges. bloom et al. (2010) to progressive incentive systems refers the employees’ participation in profits distribution. to increase the earning capacity of enterprises activity, we offer a better organization form, such as corporatization, based on their activity’s diversification and their own investment sources. in present-day conditions, participants in the publishing and printing complex are inefficiently productively interacting, thus not fully exploiting the potential of economic growth. publishers, without paying due cognizance to the study of demand, prefer the rights purchase to translate world bestsellers, which check the growth of the domestic copyright environment. to save money, publishers organize product sales on their own, and it is expedient to delegate it to wholesale booksellers, which will help to reach a promising sales chain  – network supermarkets. printing enterprises cooperate insufficiently with publishers at the technical publications preparation stage, which adversely influences product quality, cost, and price. book trade organizations pay insufficient attention to the stock management, do not interact with publishers for the purpose of studying the demand for baltic journal of economic studies 339 vol. 4, no. 1, 2018 book products. corporatization will aid in improving the publishing and printing enterprises interaction, thus, better satisfying the consumers’ needs, as an increased competitiveness consequence, earning capacity of development. the need for business consolidation is due to two factors: the lack of own financial resources for large-scale production and technology projects and the limited target markets capacity (kobernyk, 2012). the main motives for the corporations’ creation are the search for ways to increase the earning capacity of business operation, promising investment’s directions, market’s expansion. based on certain motives, the structure of potential participants is substantiated, it is expedient to attract those partners who will strengthen or expand the competitive advantages of the association and will provide an economic earning capacity. it is advisable for printing enterprises to form associations with publishers with highly qualified personnel, commercially successful publishing projects, a significant market share, publishers which apply innovative technologies, provide high-quality products, and focus on consumer inquiries. bookselling establishments, preferably network or wholesale with a broad sales geography and a payment discipline high level may be involved in corporations, which will help reduce sales costs and speed up a capital turnover. determining the goal, setting tasks for corporations is based on the results of the external and internal environment analysis, allowing showing the competitive advantages of enterprises, the possibility of their implementation, and sizing the prospects for further market development. the purpose of corporations is justified based on current and future conditions of development and is defined as the profit’s growth, the preservation or gain of market share, the new markets’ creation. companies taking part in the corporations will maintain their legal independence, required since the peculiarities of publishing and printing companies, which have their own material and technical base and market. integrating the participants of the corporation involves observing such fundamental propositions as common economic rules, real investments, joint creation, and resources application. the uniform rules in corporations, first, need to be established about the price and services payment provided by the participants. the association has additional opportunities for setting discounts on prices since placing orders on one production facility contributes to a reduction in fixed costs, and a price discount is determined in proportion to the amount of expenses saved. the enterprises’ unification within the corporation into a single online platform with further centralized orders distribution taking into account the specialization, technical capabilities, and the enterprises logistics level, allows to meet demand effectively and optimize costs, thus to volume own investment sources. in the enterprises’ context unification, conditions to improve the products quality arise. development of the quality management system is a task of strategic management level, and the formal implementation of quality standards does not guarantee the earning capacity of the quality management system (zajarskas et al., 2010). the products quality is determined by the components, parameters, subjects of quality assurance (figure 2). informational informational and technical technical provision of services complex of components contents and relevance of publication author (orderer) publishing house printing enterprise book selling establishment consumer quality of publication processing, graphic design, readability the accuracy in original reproduction, maintenance of a quality standard marketable condition of publication, assortment of commodities, consultancy support individual perception of quality quality parameter q ua lit y co m po ne nt q ua lit y as su ra nc e su bj ec t fig. 2. the essence of publishing products quality components source: self-developed baltic journal of economic studies 340 vol. 4, no. 1, 2018 an important role in the demand’s generation and publishing products consumption culture belongs to the quality assurance subject. these are customers (authors) or publishers, who must provide relevant content and a quality presentation of textual and graphical information. quality also depends on the technical parameters projected by publishers and embodied by printing companies in the edition size, taking into account product quality standards. final purchasing decision is taken by consumers with a glance to the quality publications parameters, provided by the ordering customers (authors), publishers, printing enterprises, and the booksellers’ service level, respectively, consumers take into account general parameters and individual perceptions of quality. when creating an enterprises’ association, it is advisable to centralize the quality management function, which will encourage maintaining the common high standards of work and craft a positive image of the corporation. in the corporation, to avoid functions duplication, it is expedient for publishing-members of associations to delegate to printing companies the power to choose printing materials suppliers, to determine the rational stock size, which will save on specific costs. another aspect of improving the earning capacity of enterprise development is investment development. as analysis shows, investment development depends on several factors, with the directions of activation of investment activity are determined. these factors include the funding ratio of own sources, the cost of debt, the enterprises’ development state, the material and technical base level. measures aimed at intensifying investment activity identified innovation as investment, product quality improvement, enterprises investment attractiveness upgrade, development of organizational forms of fixed assets use (lease, financial leasing, etc.), amortization usage for functional purposes, rational formation and funding sources use. the investment development of enterprises planning requires determination of investments sources return, the main of which are amortizations, net profit, financial expenses. considering that the loan rate, leasing rate are compensated at the expense of the enterprise, the principal bank loan payment is carried out at the expense of net profit, and the leasing agreement provides for an additional source for compensation  – amortization, so leasing increases the earning capacity of investment, as it contributes to reducing payback, compared with a bank loan. 4. management model for enterprises development management for enterprises development requires appropriate levels of information, resource, and organizational support. at the information support level of management for development, an analysis of the enterprise’s state and the external environment is carried out. the functions of information provision include the necessity determination for changes, setting goals and tasks of management for development. at the second level, for rational resource provision, applications are being developed and implemented to improve the earning capacity of delivery and consumption processes. the third level  – organizational support  – involves an organizational structure’s construction and, on its basis, management functions, taking into account such system development of labour motivation, which will contribute to achieving the goal of management for enterprises development. according to shchekovych et al. (2013), in the process of management for development, monetary, non-monetary, social goals are achieved. the earning capacity of management for enterprises development depends on the prospects of activities that are associated with the strategic directions establishment for their development. at the heart of modelling process of management for development is the concept of printing enterprises development. concept formulation of enterprise development involves their activities goal determination and the tasks for achieving it, substantiating directions of effective enterprises development. in unstable market conditions, as analysis shows, the printing enterprises’ priority tasks are stabilization of production output and profit, the market share preservation, the product quality level, and the personnel turnover reduction. the clear strategic priorities of enterprises definition contribute to their effective development. we have defined the main provisions of the printing enterprises development concept: – european integration processes and increasing the use of existing production capacities based on meeting the needs of the domestic market and enhancing foreign economic activity; – production and certification organization under international quality standards; – modern information technologies introduction for accelerating the orders receiving process and production cycle; – raising the enterprises’ innovation activity level based on production modernization; – production tides between publishing and printing enterprises expansion, and connections within a broader structure to increase the earning capacity of activity; – increasing the ecology in present-day conditions value, which stimulates environmentally safe materials, reducing of waste production; – personnel deficiency of adequate qualification level reduction, which is explained by the rapid change of technologies in the enterprises’ economic activity. taking into account the current state of printing enterprises development, it is necessary to reorient baltic journal of economic studies 341 vol. 4, no. 1, 2018 the tasks of management for development we have identified during the study, namely: – increasing the competitiveness of printing products, comparing with substitute goods, above all, by the price index, explained by the tendency to increase the share of information distributed in electronic form; – strengthening of the domestic resource base, first, to supply consumable materials and equipment, relevant since the high level of import dependence of printing industry; – balancing the industry by the scale of enterprises and the level of mechanization and automation under the current market’s needs, since the technical and technological potential level of many enterprises is not progressive, and there is also a reserve to reduce the product cost by economies semi-fixed costs; – increasing the level of the infrastructure of printing development, publishing market and the earning capacity of promotion of printing and publishing products to foreign markets, since a potential for increasing the printing production competitiveness by improving state support systems, public procurement, financing, logistics, integration in the scientific and technical sphere etc.; – increasing the products consumption culture, necessary to reduce irretrievable waste in the printing products circulation, first, packaging, and reducing environmental pollution with synthetic materials. effective implementation of certain tasks for management for printing enterprises development is possible under the following conditions: state support and publishing, printing industry regulations, the publishing and printing industries integration; protection of the domestic market of printing products by the proper competitiveness level of domestic production; taking into account strategic competitive advantages, goods and services that provide maximum profit to the enterprise, thus, the specialization development and co-operation, and minimization or phase-out of products unprofitable types; enterprises innovation activity stimulation; continuous education as a trend towards improving the education quality. the conceptual management model for development is proposed. the model is based on the example of printing enterprises (figure 3). at the core of the elaboration is the goal to improve the earning capacity of enterprises activity in present-day conditions of rapid changes at macro and micro levels, and elements identified such as diversification processes, change the organizational structure of enterprises, the whole chain customer-producer-consumer creation and the real investments use. diversification processes are aimed at developing new markets, distribution of risks between separate areas of activity, higher use of existing production capacities. it is determined that the diversification implementation requires an integrated approach, namely, the assortment’s expansion, new technologies introduction, changes in management. the diversification type depends on the conditions and objectives of enterprises activity. in the printing industry, it is expedient to diversify in horizontal and mixed directions. horizontal diversification will allow developing the promising products, services, is actually in the conditions of changing the printing products market structure. the mixed diversification, which will help control the chain of the publishing and printing complex, is of great importance: order-supplyproduction-sales, which will save enterprise costs. in the medium and large enterprises of the printing industry, which have sufficient resources for the new business development that is technologically not related to the main production, conglomerate diversification is possible. the second direction proposed by the authors is the corporatization of enterprises. it is determined that the enterprises that will form a corporation will not lose their legal independence. the general principles, on which the companies’ cooperation within the corporation will be organized, are substantiated, the criteria for participants’ selection are determined. the business associations’ creation aims to increase the competitive stability of enterprises through the production scale. the permanent participants’ collaboration will provide a phased solution of tasks of higher production capacity use of printing industry, increasing their activity profitability, and for publishers  – searching an effective production base for publishing products replication. in present-day conditions of integration and globalization processes, a rational distribution of limited investment resources is needed, therefore, the authors proposed a direction  – investment development of enterprises. priority should be given to such key areas as technical and technological modernization to ensure the high-quality production and low cost of products, personalized orders, the market expansion for non-corporative consumers; the advanced technologies introduction, in particular, digital printing, to achieve the economic earning capacity of production of small print runs, is an equivalent of current market trends  – reducing the products circulation; technical support for printing on difficult surfaces to enter new markets. production that is compliant with international quality standards will increase the competitiveness of enterprises and industry, growth in incomes and profits of enterprises allowing increasing financing for production modernization, which will meet the everchanging consumers’ needs, thus reaching new strategic markets and gaining growth the capital return level through real investment in innovative development. the profit is the main indicator, which characterizes the earning capacity of the enterprise activity and baltic journal of economic studies 342 vol. 4, no. 1, 2018 is the main source of development. to determine the prospects of investment development, we have calculated the forecast of the printing enterprises profit based on econometric models. the predicted value of profit decreases. as enterprises do not have enough own sources for financing development and are characterized by a high risk of functioning in conditions of a high level of competition, the objectivity importance in choosing the best investment projects according to technical, economic criteria, etc., increases, thus, on the correct assessment of the investment project at the planning stage, the success of its implementation depends. we have substantiated the criteria for assessing the earning capacity of investments for enterprises. in determining the economic feasibility of using credit investment resources, an indispensable prerequisite is the higher value of investment return, calculated with profit, without deducting the price of the loan payment, compared with the price of the loan. sufficient prerequisite is to exceed the return on investment, calculated with a net profit, over the proportion of loan repayment per unit of the investment period. this condition should be taken into account when calculating the market value of enterprises, in particular, by the whole economic space creation primary areas of management for enterprises development issue of new types of products result ensuring the earning capacity of enterprises activity enterprises development concept diversification corporatization as a voluntary association of participating enterprises investment development change the organization structure of enterprises innovation development competitiveness real investment material and technical base modernization entry into new markets product quality fig. 3. conceptual management model for enterprises development source: self-developed baltic journal of economic studies 343 vol. 4, no. 1, 2018 method of economic value added (eva). accordingly, the earning capacity assessment of investment is based on absolute indicators such as profit, economic result, net present value, and relative indicators, in particular, investment return, which takes into account the sources of investment return. the economic earning capacity accounting of the proposed management model for enterprise development performed on the printing enterprise example is typical for the industry because of its small business scale; promotional products profile, which will save on the sale of a new product by offering it to existing customers; is a promising outlook for joining the corporation. for implementing the horizontal diversification strategy, the volume of investments is 400 thousand uah. the enterprise has a shortage of own financing sources; therefore, is foreseen to conclude a leasing agreement at a price of 16% per year. the payment to the lesser of the principal of the loan is due to the deprecation cost and 60% of net profit. the cash flow is discounted, the upper limit of the discount rate, recommended for the economic conditions of ukraine, is adopted and is 20% per year. the net present value is calculated: npv = + +( ) + +( ) + +( ) + + 84 6 86 5 1 0 05 88 5 1 0 05 90 5 1 0 05 119 1 1 0 2 3 . . . . . . . . .. . . . . 05 121 7 1 0 05 400 118 8 4 5( ) + +( ) − = � � �thousanduah npv = + +( ) + +( ) + +( ) + + 84 6 86 5 1 0 05 88 5 1 0 05 90 5 1 0 05 119 1 1 0 2 3 . . . . . . . . .. . . . . 05 121 7 1 0 05 400 118 8 4 5( ) + +( ) − = � � �thousanduah the project payback period is 1.5 years. for the first year of the project, 240 thousand uah will be reimbursed, for the next six months  – 160 thousand uah. it is also necessary to pay lease price, charged on the balance of the debt, its total amount for 1.5 years is 59.5 thousand uah. based on the calculations performed on the printing enterprise example, it is determined that implementing the proposed development directions will ensure an increase in net income of the company by 1410 thousand uah or 22.3%, a net profit of 270.2 thousand uah, 33.7%, comparing to the level of the base year, the expenses’ profitability will increase by 0.4 percentage points. the all tasks fulfilment related to the management for printing enterprises development will promote to: – ensuring the products high competitiveness in the domestic and foreign markets, high productivity and rhythmic production; investment activity intensification; – corporate culture and the level of labour-management enhancement; – the enterprises’ social image making; – rational use of resources; – providing information security of the country. 5. conclusions the internal and external environments instability causes constant management of changes in enterprises, the effectiveness of which depends on the resources availability, their use efficiency, the achieved state of development. the effective development of enterprises policy is determined by the peculiarities of enterprises development, including the product quality level, demand volume, activity scale, integration processes, investment attractiveness level, etc. over 90% of enterprises are small scale, this limits their financing possibilities from their own and attracted sources, reduces the level of operational stability. printing enterprises carry out orders for corporate and individual customers, and enterprise development requires a clientoriented approach based on meeting the consumers’ needs in terms of production and supply efficiency and ensuring product quality. the analysis of the state and trends of printing enterprises’ development showed that the perspective directions of enterprises development are: diversification based on activity expansion, change in the enterprises’ organizational structure, investment development. creation of corporations will be based on an integrated structure for effective achievement of goals and solving common tasks. creation of corporations, modern methods of work introduction will reduce the production time and receipt of products in the market will help increase its competitiveness, which requires consideration of the life cycle of goods, which in present-day terms is short and depends primarily on demand offer for goods. increasing the earning capacity of printing enterprises requires their investment development, in which innovation is the main form of investment, and investment development is directed primarily at modernizing the material and technical base of enterprises. the printing enterprises development concept, which defines the goals, tasks, and directions of small and medium business enterprises development, is proposed. for the successful implementation of the concept, organizational changes to the development management process are required. based on of the concept, a model management for enterprise development is proposed, which takes into account the directions of effective management and the peculiarities of the printing industry enterprises and the need for constant and complex adaptation to the external and internal environmental conditions, and is aimed at increasing the earning capacity of activity. the model predicts the commodity producers’ corporations creation based on uniform economic rules for all enterprises of the industry. additional expenses directed at a complex of directions on management improvement realization for enterprise development amount to 400 thousand uah. their expediency is evidenced by the lower estimated payback period of investments  – 1.5 years, compared to the normative – 5 years, and the positive net present value of 118.8 thousand uah. baltic journal of economic studies 344 vol. 4, no. 1, 2018 the enterprises of the industry effective activity will allow realizing all conceptual directions of development, and this will promote working conditions improvement, stimulation of labour, productivity increase, competitiveness of production increase. references: bhattacharya, a., oppenheim, j., stern, n. 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(2010), “evaluation of the effectiveness of the quality management system of the service enterprise”, ekonomika ir vadyba – economics and management, no 15, pp. 857-864. baltic journal of economic studies 208 vol. 4, no. 1, 2018 corresponding author: 1 department of management, rivne state university of humanities. e-mail: kniazevich.a@gmail.com 2 department of political economy, kyiv national economic university named after v. hetman. e-mail: kyrylenko.v.i@gmail.com 3 department of finance and economic security, dnipropetrovsk national university of railway transport named after academician v. lazaryan. e-mail: g.liudmila22@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-208-218 innovation infrastructure of ukraine: assessment of the effectiveness of the action and ways of improvement anna kniazevych1 rivne state university of humanities, ukraine volodymyr kyrylenko2 kyiv national economic university named after v. hetman, ukraine ludmila golovkova3 dnipropetrovsk national university of railway transport named after academician v. lazaryan, ukraine abstract. the article substantiates the key role of processes of formation of an effective national innovation system, which directly provides the innovative development of the national economy of the country. the article defines peculiarities of the formation of models of national innovation systems of different countries of the world. the article develops the basic principles, on which the concept of the development of the national innovation system of ukraine is based. one of the main factors, which directly influence the dynamics and pace of the development of the national innovation system, is the degree of the development of the country’s innovation infrastructure. it should be stated that the main elements of the national innovation system of ukraine function in isolation from each other, without any balance in this system, which causes its ineffectiveness. further research should be aimed at establishing a systemic relationship and developing mechanisms for managing the formation and functioning of the national innovation system based on the effective innovation infrastructure of the country. at the stage of the gradual overcoming the economic crisis, the creation of favourable conditions for the fuller realization of the creative and inventive potential of the ukrainian society is gaining a special significance in the innovative market of the country. the susceptibility of the national economy to innovation depends largely on the presence of demand for innovative products from consumers in the market, the acceleration of the dissemination of advanced technologies, including the expansion of the range of innovative active firms in the medium business, the creation of new innovative firms, and the dynamic growth of their scale. the strategy of innovation development is aimed at the formation and functioning of a specific infrastructure to increase the acceptability of the business environment to innovation. significant activation of the market of innovations cannot be carried out without addressing, as necessary, certain markets for innovative services operating in the innovation infrastructure of the country, the economy, etc. the formation of self-sufficient and well-functioning innovative ukrainian infrastructure, which is self-organized, is necessary not only for the harmonization of the functioning of the innovation system and national economy but also for the survival of the country. despite the complexity and ambiguity of the influence of external and internal factors on the establishment and development of innovation infrastructure, the overall positive assessment suggests that, with certain efforts on the part of the state and business, ukraine’s innovative infrastructure can effectively develop and carry out its functions. key words: innovations; national innovation system; innovation infrastructure; models of national innovation systems; market of innovations. jel classification: о100, o310, o320 baltic journal of economic studies 209 vol. 4, no. 1, 2018 1. introduction globalization and the innovative way of world economy’s development in the 21st century are the decisive factors that determine and guide the further development of national economies and their national innovation systems. a key condition for accelerating social and economic development of the country, economy branches, and enterprises is the need to vigorously find and quickly implement in production the most effective innovative proposals. the creation of such conditions ensures the implementation of the innovation process, the ultimate goal of which is the introduction of priority fundamental and applied research, new, advanced technologies, forms of organization of labour and management, based on the achievements of scientific and technological progress. the effectiveness of innovation market functioning is the main regulator of innovation development of the country and of the formation of its innovative infrastructure. the current state and prospects of the development of the innovation market determine the possibilities of a fuller use of the country’s scientific, technical, and educational potential, and the revival of its innovative infrastructure. innovation potential of the country is characterized by the willingness of the society and economy to introduce new technological and social changes under the influence of internal and external factors. the economy of the country is concerned both with the negative effects of the global financial and economic crisis and recent social and political problems. the stabilization and adaptation of the national innovation system and its innovation market in changing realities is of the highest scientific and practical significance. the effectiveness of the market mechanisms for managing innovation and the increase of the innovation activity of enterprises directly depend on the activity of supply and demand in the market of innovative products; therefore, ensuring the effective functioning of innovation infrastructure should begin with the development of the innovation market itself. the modern business environment is becoming more and more dynamic every year, and the competition is becoming more global. the growing development of innovation activity and its transformation into a key factor of social and economic growth raises new challenges to the theory and practice of innovation management in terms of improving the concept of managing the development of national innovation systems. the processes of the formation and functioning of the management of national innovation systems in different countries of the world have been examined in a considerable number of scientific works. different aspects of these processes have been reflected in the research works of foreign and domestic economists, such as a. butenko, n. ivanova, h. itskovits, h. kovaliov, y. lazarieva, p. mykytiuk, l. parashkevova, t. skrypko, l. fedulova, j. christiansen, j. schumpeter, l. yaremko, and others. a considerable number of scientific works have been devoted to the research of problems of formation and development of innovation infrastructure and its main component – the innovation market. these issues were actively researched in the works of such foreign scholars as i.  goriacheva, d.  dorzhiev, n.  ivanov, n.  kalenska, v.  tribushna, r .  chobanova, t.  sherstobytova, j. schumpeter, and others. different aspects of this issue were studied in the works of a number of ukrainian economists, such as s.  illiashenko, m.  kanaieva, v.  soloviov, l.  fedulova, t.  shotik, i.  yanenkova, and many others. constant social and economic changes in the country and in the world put to scientists and business representatives a number of issues related to the need for adjustments, accounting of the dynamics of these changes and their impact on the innovation infrastructure, the specificity of the development of the domestic innovation market. the question of the composition and formation of the modern market of innovations is complex and multidimensional; therefore, despite a significant number of scientific works, it requires further research. 2. models of formation of national innovation systems national innovation systems of different countries, despite the same goal, have a number of essential features. the analysis of the existing types of national innovation systems makes it possible to distinguish between four characteristic models: the euro-atlantic, east asian, alternative, and the model of the “triple helix”. each model can be regarded as a specific and characteristic for a given country mechanism for the production and industrial implementation in the form of products, goods or services. the euro-atlantic model is a model of a national innovation system, the mechanism of action of which extends to all stages of the innovation cycle from the birth of an innovative idea at the levels of highly developed fundamental and applied science and to the final  – the stage of production of innovative products. this model is observed and used in the most developed countries of europe (germany, france, great britain, etc.), which are the leaders in the ratings of competitiveness in the global economy. the east asian model is more focused on the borrowing of innovative technologies in the developed countries than on the support and development of its own fundamental science. insufficient attention to fundamental science is compensated by the high degree of management development and the use of applied scientific and technical products, especially in the field baltic journal of economic studies 210 vol. 4, no. 1, 2018 of electronics and high technologies. such a model of the national innovation system is characteristic for the countries of the east asian region. this, above all, is japan, as well as south korea, hong kong, and taiwan. the alternative model of the national innovation system is used predominantly in agricultural countries that do not possess significant innovative potential in the field of fundamental and applied science and do not have rich reserves of raw materials. these countries focus on the development of agriculture, certain branches of light industry and tourism business in their innovation policies. this model includes the national innovation systems of turkey, thailand, chile, portugal, etc. the alternative model is also typical for countries that do not have sufficient financial capacity to strengthen fundamental and partly applied science, especially in the field of high technology. such countries are looking for less costly ways of innovation development. the model of the “triple helix” can be observed in the usa as a further stage in the development of national innovation system based on the euro-atlantic model and has a fundamental difference from other models not only in the structure but also in the mechanisms of interaction of the constituent elements. today, the processes of forming such a model are beginning to appear in the developed countries of western europe and japan. the theory of “triple helix”, which appeared at the beginning of the 21st century, was created by the professor of newcastle university henry itskovits and the professor of amsterdam university loet leydesdorff. as the scientists assume, “triple helix” best reflects the interaction and interdependence between three key institutions of the national innovation system of the country at all stages of the creation and implementation of an innovative product  – the state, business, and scientific activities. these are the three branches of the genetic component of any national innovation system that evolves through a spiral moving from a lower level of the development to a higher one. the links between universities, business, and government are becoming the basis of the new model of governance, and a university, which is increasing the commercialization of its research, turns into an engine of this “triple helix”. therefore, an entrepreneurial university is the key to future development, the creation of new jobs, achievement of economic growth and stability (itskovits, 2010). as h. itskovits states, “...the main difference between russia and china is in the direction: from russia, the advanced ideas come out to find their further development or introduction in the west, mainly in the united states. in the chinese model, the direction is reversed  – they learn everything new and promising everywhere, bring new ideas and developments to china, refine and commercialize them at home...” (itskovits, 2010). a similar process can be observed now in ukraine, in connection with the lack of funding of fundamental and applied science, universities cease to play the role of the “engine” of the national innovation system. from the point of view of innovation, the theoretical and methodological basis of the national innovation system and its infrastructure is the innovative economy, intellectual property, and the intellectual economy (butnik-siversky, 2011). the economy is innovative if there is a developed infrastructure in the society that provides the creation of national information resources to the extent necessary to support the everaccelerating movement of scientific and technological progress and innovation development, and the society is able to produce all the necessary multi-faceted information, primarily scientific, in order to ensure dynamically stable social and economic development (fedulova, 2009). the national innovation system of ukraine, due to the difficult social and political situation in the country and the lack of sufficient funding for science, can be attributed to an alternative model of the development of national innovation systems. after stabilizing the economic situation, the main task in ukraine’s modern innovation policy is to make the main emphasis in the construction of innovation infrastructure on the formation of new, entrepreneurial models of universities, which, in close cooperation with business and government, will be able to gradually, “in a helix way”, raise national innovation system to a higher level of development. 3. innovation markets as components of the country’s innovation infrastructure the country’s exit from the crisis and economic growth are impossible without a widespread use of the achievements of science and technology and introduction into production of fundamentally new ideas, technologies, innovative products and services. intellectual work is becoming more and more important and operates as the main factor; it is the imperative of realizing the concept of knowledge economy of postindustrial society. knowledge-oriented economy, as the most productive power of the present day, needs to be stimulated and supported concerning both the direct producers of this driving force – scientists, researchers, and inventors of new ideas, proposals, innovation projects, and entrepreneurs who directly transform these ideas into innovations products, goods, and services. as the results of a number of studies prove (sherstobitova, 2009), on average for 100 successful innovations about 75 appear in response to consumer needs, and only 25 appear as a result of the introduction of new ideas that arise in the course of the scientific research and development and constructor works (srdcw). baltic journal of economic studies 211 vol. 4, no. 1, 2018 the results of research and creative activity act as an intellectual product. incorporated into an invention, discovery, scientific reports, patents, innovative projects, innovative proposals, the intellectual product becomes a commodity in the market of innovations and acts as a part of the country’s innovation infrastructure. innovative infrastructure is considered as a dynamic self-regulatory system of markets and entities entering in these markets into certain economic relations within the limits stipulated by laws and normative and legal acts of ukraine and providing the creation of the necessary conditions for the expanded production of innovative products, technologies, and services (kniazevych, 2016). the main goal of the formation and functioning of the country’s innovation infrastructure is the provision of comprehensive innovation activities, preservation and development of the country’s scientific and technological potential in the interests of the society, including overcoming the decline of production, its structural adjustment, changing the nomenclature of products, creating new products and new production processes. the innovation market creates demand and defines the supply of intellectual property products. commoditymoney relations in the market of innovations arise from the moment of fixing scientific and technical ideas, proposals, know-how, srdcw as objects of intellectual property, patents, innovative projects, drawings, technologies, the use of which, in accordance with the current legislation, is allowed only by committing a market act of sale. as the seller in this market, the owner of the intellectual product is officially registered, and the buyer is an enterprise interested in the practical implementation of this product as an innovative product. both the buyer and the seller act in order to obtain a certain economic effect for themselves. an aggregate of regular sales relations between manufacturers of innovative goods and their consumers determines the emergence of an innovation market. the market of innovations, like any other market, is an economic system, in which the coordination and realization of economic interests between sellers and buyers through the mechanism of market prices take place. it refers to one of the specialized types of markets. the conditions for the effective functioning of the market of innovations are a mechanism of competition, which is provided by a wide range of proposals of innovative ideas and projects, and the freedom to choose a partner in economic affairs; the balance of supply and demand; the creation of the developed innovationmarket infrastructure. in addition, the specificity of the innovation market lies in the fact that the value and price of innovations on it are formed under the influence of the economic resultant interaction of factors of particular production, not only the magnitude of aggregate demand and supply (goriacheva, 2005). that is, the demand and supply in the market of innovations are not the main price defining factors. everything depends on the economic factors of a particular production. this definition refers to the specifics of the innovation market exclusively. in the market of innovative services as an integral part of the innovation infrastructure, there is a clear dependence due to peculiarities of the process of production of these services, as well as the specifics of the object of purchase. the peculiarity of the process of manufacturing innovative services is the fact that it can be divided into two stages. the first stage is intellectual and the second is material production. then, the consideration of innovation infrastructure as a market for innovative services implies its delineation in the processes of providing intellectual and material services. the innovation market is the set of organizational and economic relations that arise in the process of exchanging the results of innovation activities and coordinating the interests of participants concerning prices, terms, and scales of this exchange. therefore, the innovation market is the set of innovative types of products and processes, legal entities and individuals who sell or purchase scientific and technical science-intensive products. as a specific sphere of sale, the market of innovations determines as the object of trade technical and socio-economic innovations, rationalization proposals, inventions, patents, technological innovations, and know-how. as a system of economic relations, it is aimed at the development, implementation, and diffusion of innovations at various levels. at the stage of the gradual overcoming the economic crisis, the creation of favourable conditions for the fuller realization of the creative and inventive potential of the ukrainian society is gaining a special significance in the innovative market of the country. the susceptibility of the national economy to innovation depends largely on the presence of demand for innovative products from consumers in the market, the acceleration of the dissemination of advanced technologies, including the expansion of the range of innovative active firms in the medium business, the creation of new innovative firms, and the dynamic growth of their scale. communication factors play a key role in the dissemination of new scientific and technical products. the high level of information exchange and close communication contribute to the rapid diffusion of innovations. active participation in scientific and technical seminars, symposiums, exhibitions provides the acquaintance of the consumer with new products before they are brought to the market, thus forming an innovative demand. in the absence of preliminary information about a new product, the consumer can perceive its appearance on the market in the alerted way and the process of formation of demand will be too baltic journal of economic studies 212 vol. 4, no. 1, 2018 long, which in turn will affect the costs and financial results of the firm. the current state of the markets for innovative services in ukraine and the peculiarities of their further development are determined by the following factors: 1) the need to further expand the number of subjects and objects of innovation infrastructure and to increase the volume and quality of their services; 2) problems of economic development and the scarcity of state and local budgets make impossible the optimal financial support of subjects and objects of innovation infrastructure; 3) the possibility of establishing effective functioning on a commercial basis of service facilities in the structure of innovation infrastructure; 4) the formation of the innovation infrastructure is objectively conditioned by the growth of needs of subjects of innovation in the services provided and the level of the development of the national scientific and technical sphere, the availability of scientific and technical developments that can subsequently be commercialized; 5) further development of the country’s innovation infrastructure is possible on the basis of processes of softening and deepening the service model of the actions of its subjects. the model of innovation infrastructure functioning, consisting of a certain number of innovation markets, is presented in fig. 1. in the process of studying the real state of the markets for innovation infrastructure, we used the deterministic modelling and transformation of factor systems. one of the tasks of factor analysis is modelling the relationship between the performance indicators and factors that determine their magnitude. the results can be factorized into constituent elements (factors) in different ways and presented in the form of various types of deterministic models. the state of markets for innovation infrastructure is influenced by both external and internal factors. to external influence, we refer the crisis state of the economy, the development of processes of technologies transfer and outsourcing, other factors of the international level. internal factors are represented by political, economic, scientific and technical, production and financial peculiarities of the country’s development (graph 1). let us consider in more detail their purpose and principles of the formation. the market of intellectual property objects. in the market economy of a post-industrial society, national wealth is determined not only by the total volume of material resources of the country but also by the knowledge, values obtained in the process of intellectual work of scientists, inventors, researchers. intelligent labour is, without exaggeration, the highest form of human activity associated with the knowledge of the surrounding reality, which begins with the hypothesis or assumption and finishes with obtaining the result in the form of ideas, inventions, discoveries, new knowledge, etc. at the same time, receiving an innovative, useful intellectual product is probabilistic and can be both positive and negative. the most significant and promising inventions, innovative proposals, know-how, results of intellectual work, which are officially legally registered as objects of intellectual property, become a market commodity. intellectual property is an intangible object and intangible resource. their author, which is a scientist, inventor, researcher, or even a whole research organization is the creator of the intellectual property object and receives the exclusive right to use it, and acts as a seller on the market of intellectual property objects. on the other hand, natural and legal persons, who wish to get the right to use these objects in their production activities, act as buyers of intellectual property objects. mutually beneficial commercialization of intellectual products takes place in the process of selling patents, licenses and other objects of intellectual property to interested persons, direct producers of innovative products, goods, and services. in the conditions of globalization of the world economy, the acquisition and commercial use of intellectual property objects become an important factor for the successful use of innovative ideas and the dissemination of new technologies. it facilitates the development of market-based relationships between science and production, licensing trade, technology transfer, and the formation of the market for intellectual property objects. the greatest demand is the technology of manufacturing new types of high-tech products (highly specialized technological installations, pharmaceuticals, newest technology and techniques, etc.). on the effectiveness of the operation of the national market of intellectual property objects, one can draw conclusions on the ratio of the intellectual property represented in the sale of goods in the form of patents, licenses, innovation offers, know-how, and the number of similar goods purchased and used by producers for the production of innovative products, goods, and services. in order to increase the level of intellectual and innovative potential of the country, it is necessary to intensify activities of the intellectual property market, to increase the prestige and payment of intellectual labour. the market for information services. another market in innovative infrastructure, which works in close cooperation and in parallel with the market of intellectual property, is the market for information and expert-consulting services. in this market, the information on the emergence of new scientific and innovative ideas, proposals, developments operates as a commodity; this market offers expert analysis services and the search for the most promising ideas, as well as consulting services for innovative business planning. baltic journal of economic studies 213 vol. 4, no. 1, 2018 communication in the information services market is often interactive. the structure and content of the information market products are varied and extremely changeable. the essence of the information services market can be defined as the set of economic, legal, and social relations that arise in the process of meeting the information needs of producers who wish to set up the production of innovative products, new products, and services and are willing to pay for this information an affordable price. the rapid growth and expansion of the demand for scientific, technical, and economic information, as well as the increased requirements for the content and forms of presentation of information, are the incentives for the development of the market of information and consulting services in the country’s innovation infrastructure. ukraine is taking the first steps towards entering the innovative services market on the international level as an outsourcer for western countries. so, in 2015, the rating “the 2015 global outsourcing 100” included four ukrainian companies engaged in it outsourcing: eleks, miratech, softengi and softserve. in addition, the rating noted foreign companies, which have opened innovation production market demand supply demand supply producers of innovation product consumers of innovation product de m an d su pp ly de m an d su pp ly financial services market de m an d su pp ly de m an d su pp ly labour market banks, venture funds, investment institutions, insurance companies market of production and technological services technological parks, innovation and technological centres, business incubators, innovation industrial complexes universities, personnel training centres information services market information, expert, and consulting centres intellectual property market scientific activity fundamental (academic) applied state service for intellectual property protection fig. 1. the model of country’s innovation infrastructure functioning source: the author’s development baltic journal of economic studies 214 vol. 4, no. 1, 2018 large offices in ukraine: worldwide luxoft, belarusian intectics, american team international services, and softjourn. all this has a positive effect on improving the image of ukraine on the global it market and enhancing its information services. the market for financial services. one of the most important problems for the country’s leadership in the face of a sharp shortage of financial resources is the question of how much and what funds should be allocated for academic research, applied research and innovation. in addition, a part of public funds needs to be allocated among the subjects of innovation infrastructure to support and intensify their activities. the main receivers, for which the innovation infrastructure of the country is created, are innovative active production enterprises, which transform scientific ideas into the benefit and material goods. the current financial situation of most domestic enterprises does not allow allocating as many funds as it is necessary for the purchase of new technologies, for upgrading production equipment and training highly skilled personnel. the volume of the state budget is always limited. the difficulty in deciding on the financing of innovation production is that, above all, that in most cases such investments cannot give a quick return. in addition, investing in research and development, and the organization of innovation production always serve as long-term, strategic decisions that have to be taken considering the overall innovation policy of the state. the mandatory part of state financing of the subjects of innovation infrastructure includes, first of all, financing of the development of fundamental (academic) science. the costs of applied scientific and technical research and design work, research and experimental development, technology and production and technical development of the production of new products can be financed both at the expense of the state budget and at the expense of other sources. such sources of funding may become: • bank and innovation credits; • the issue of securities; • the use of venture capital; • self-financing; • financing of an innovative project from the income received in the process of implementing short-term projects; • leasing of temporarily free assets; • provision of the property of the enterprise on the security of received funds; • sale of licenses for the use of innovative technologies and know-how; • outsourcing in innovation activity as a method of attracting foreign investment; • state incentives, the creation of privileged conditions for external and internal investment in innovation and new technologies. the expansion and maximum possible use of all potential sources of financing is a priority task for the development of the financial services market. the labour market in the structure of innovation infrastructure acts as the regulator of social and economic and labour relations between the state, the employer, and employees on the issues of hiring, use, training and retraining, and the improvement of skills of the workforce in the process of innovation production. innovations in modern technology and systematic updating of manufactured products raise the requirements to the quality of labour resources training and cause the need for continuous training and retraining of personnel. in many regions of the country, there is a shortage of highly skilled specialists, especially managers who have the experience in innovation entrepreneurship. the labour market is entirely dependent on the state of the national economy and the level of unemployment. in 2005–2007, ukraine’s economy was growing, specialists were in deficit, and they dictated their employment conditions to the employers. the state of the labour market has changed dramatically because of recent social, political, and military events in ukraine. the number of vacancies has decreased by almost 20%; the number of migrant workers (internally displaced) in the country is increasing constantly and the unemployment is rising. the outsourcing of hr services from large international companies can be promising for the national innovation system, as it will contribute to the harmonization of the labour market and social interests of ukrainian society. the market for manufacturing and technological services includes services and opportunities provided by innovative enterprises, technological parks, innovation technology centres, innovation and industrial complexes, as well as the centres for the transfer of technologies, centres for the collective use of high-tech equipment. the need to create a market for industrial and technological services in the field of innovation production is determined by the needs of enterprises in obtaining technical and technological assistance, in providing them with production space and equipment necessary for the successful implementation of innovative projects. accompanying support may also be related to the preliminary preparation of material resources, the implementation of resource and energysaving technologies, the provision of innovative products of complete market readiness. in ukraine, over the past decades, there has been a decline in industrial production. the fall of industrial production and especially of high-tech manufacturing industries leads to the degradation and destruction of the national economy and gradual de-industrialization of the national economy. the main production facilities are worn out by 50-60%; new equipment is not installed baltic journal of economic studies 215 vol. 4, no. 1, 2018 due to insufficient funding. acquiring new technologies and improving the quality of products are very slow, which adversely affects the competitiveness of goods in the world market. one of the ways to solve the problems of the manufacturing and technology sector can be the creation of outsourcing companies with large foreign manufacturers of innovative products. outsourcing of production space, equipment, technology, and labour is widely used in many countries around the world. in modern conditions, it is a universally recognized and one of the most effective methods for the development of innovative entrepreneurial activity. for ukraine, outsourcing from leading global companies is an opportunity to attract foreign investors. ukraine can become a wonderful platform for the construction of buildings and production facilities of foreign corporations, which produce cars, electronic high-tech equipment and devices. all this, ultimately, will open up wide opportunities for restructuring and innovation of the national industry. the market for ready-made innovative products. the low demand for ready-made innovative products inside and outside the country is the main reason for the weak development of the market for innovative products. this is due to the low solvency of enterprises where this product could be used, as well as the lack of information, the lack of advertising about the opportunities and quality of new products, the lack of promoting innovative products in the markets. of great importance for solving this problem is the optimization of the combination of a market mechanism with state regulation. state regulation of the market for innovative products can be carried out with both direct and indirect methods, which include economic, informational, legislative, and administrative components. 4. factor model for assessing the effectiveness of innovation infrastructure of ukraine the factor model of the estimation of the external and internal environment and the degree of its influence on the formation of the innovation infrastructure in ukraine is the matrix of evaluation criteria, which indicates the actual state of the research object (table 1). table 1 factor model for assessing the external and internal environment and the degree of their influence on the formation of innovation infrastructure in ukraine № factors and the degree of their positive or negative influence: 0 – no influence; 1 – weak influence; 2 – medium influence; 3 – strong influence. innovation infrastructure markets the total actual (maximum possible) estimate of the impact of each of the operating factors in grades in te lle ct ua l pr op er ty in fo rm at io n se rv ic es fi na nc ia l s er vi ce s l ab ou r pr od uc tio n an d te ch no lo gi ca l se rv ic es in no va tio n pr od uc ts external factors 1. crisis condition of the world economy 0 -1 -2 +2 +1 -2 -2 2. tensions in international relations 0 0 -1 +1 0 -1 -1 3. international transfer of technologies and outsourcing +2 +3 +3 +2 +3 +2 +15 4. membership in the european union and wto +1 +3 +3 +2 +2 +3 +14 internal factors 5. unstable social and political situation -2 -2 -3 -2 -2 -3 -14 6. modern condition of the economy -1 -2 -3 -1 -2 -2 -11 7. state innovation policy +3 +2 +2 +2 +3 +2 +14 8. provision of state financing +1 0 +1 +1 0 0 +3 9. scientific and technological potential of the country +3 +2 +1 +1 +2 +2 +11 10. education and training of personnel +3 +2 0 +3 +2 +2 +12 11. availability of material resources 0 +1 +1 0 +2 +3 +7 12. availability of fuel and energy resources -1 -2 -2 0 -2 -2 -9 13. modern condition of equipment and technologies -2 -2 0 -1 -2 -3 -10 14. innovation potential of entrepreneurship 0 +1 +1 +1 +1 +1 +5 15. the attitude of the society to the innovations +1 +1 0 +1 +1 0 +4 aggregate evaluation of all influencing factors on each innovation infrastructure market in grades +8 +6 +1 +12 +9 +2 +38 (+270) source: the author’s development baltic journal of economic studies 216 vol. 4, no. 1, 2018 it takes into account the weight and assessment of the current state of ukraine’s innovation infrastructure. the results are based on expert judgment. as a result of the study of the environment for the formation of innovation infrastructure, we have received the assessment of the actual state of each of the operating factors – 38 points out of 270 possible, which is 14.08% of the maximum value. determining the factors that influence the efficiency of the ukrainian innovation infrastructure has allowed us to form a system of criteria and indicators for conducting correlation-regression analysis. we have systematized these indicators based on the principle of complex characteristics of all components of the innovation market as a part of the innovation infrastructure of the country (tables 2). the statistical data was systematized according to the selected groups; correlation-regression analysis was carried out, and correlation coefficients were calculated  – paired and general. the calculation of correlation indicators was carried out using the analytical package microsoft excel (kniazevych, 2016). among the obtained indicators, we conduct the selection based on the principle of the highest correlation with the result indicator – the volume of the implemented innovative products and a minimum correlation with each other. the most important results of the assessment of the factors of the country’s innovation infrastructure are: n5 – the number of executed scientific and technical researches; i2  – the number of the received security documents on the results of fundamental research; i3 – the number of the received security documents on the results of applied research; k1  – the capacity of the consulting services market; f1 – total amount of innovation activity financing; g1  – the number of enterprises that were mastering the production of the innovative types of products. with the selected indicators (table 2), we perform regression analysis and determine coefficients of the equation (formula 1). y = 1,957636·x1 + 60,48499·x2  – 26,1292·x3 + 0·x4 – – 0,23786·x5 + 0·x6 = ,957636·x1 + 60,48499·x2 – – 26,1292·x3  – 0,23786·x5, (1) table 2 the system of indicators for finding the dependence of the volume of realized innovative products on the efficiency of innovation market functioning within the innovation infrastructure of ukraine indicators symbols years 2010 2011 2012 2013 2014 the volume of the realized innovation product, million uah y 33697,6 42386,7 36157,7 35891,6 25669,0 the market for innovative scientific and technical proposals, concepts (srdcw) number of organizations carrying out scientific and technical activity, units n1 1303 1255 1208 1143 999 number of employees of the organizations that carry out scientific and technical activities, thousand people n2 141,1 134,7 129,9 123,2 109,6 financing of the scientific sphere, million uah n3 4640,57 5126,81 6126,87 5962,16 5278,52 budget financing of research and development activities, million uah n4 4223,05 4594,07 5450,56 5347,79 4728,91 number of executed scientific and technical researches, thousand units n5 52,0 52,3 52,3 47,9 43,0 budget financing of fundamental research, million uah n6 2403,80 2564,03 3020,84 3023,83 2795,13 budget financing of applied research, million uah n7 1595,62 1746,40 2126,37 2065,82 1823,69 intellectual property market number of received security documents for inventions, units i1 1991 2703 2743 2786 2270 number of received security documents based on the results of fundamental research, units i2 1280 1948 2220 1715 1721 number of received security documents based on the results of applied research, units i3 2546 3725 4619 3148 3203 information services market capacity of the consulting services market, million usd к1 300 337 392 445 490 financial services market total amount of innovation activity financing, million uah f1 8045,5 14334 11481 9562,6 7695,9 the market for ready innovation product number of enterprises that were mastering the production of innovative products, units g1 615 731 704 683 600 number of new technologies, which were bought by industrial enterprises, units g2 707 872 739 651 543 innovation production, number of positions g3 2408 3238 3403 3138 3661 total amount of innovation expenses in industry, million uah g4 8045,5 14333,9 11480,6 9562,6 7695,9 source: developed by the author based on statistic data (the state of science and technology, the results of scientific, technical, innovation activity, technology transfer in 2014, 2015) baltic journal of economic studies 217 vol. 4, no. 1, 2018 у  – the volume of the realized innovative products, million uah; x1  – the number of executed scientific and technical researches, thousand units; x2  – the number of the received security documents on the results of fundamental research, units; x3  – the number of the received security documents on the results of applied research, units; x4  – the capacity of the consulting services market, million usd; x5 – the total amount of innovation activity financing, million uah; x6 – the number of enterprises that were mastering the production of the innovative types of products, units. values of the number of the received security documents based on the results of the fundamental research have the highest level of influence on the resulting indicator. that is, with an increase in the number of the received security documents based on the results of fundamental researches by one unit, the volume of the realized innovative products will increase on average by 60.485 million uah. with an increase in the number of the received security documents on the results of applied research by one unit, the volume of the realized innovative products increases by 1.958 million uah. the constructed model provides an opportunity to predict the state of innovation infrastructure in the future, for this, it is necessary to identify trends in its factors development. the system of indicators for finding the dependence of the volume of the realized innovative products on the efficiency of innovation market functioning within the innovation infrastructure of ukraine is formed. 5. conclusion one of the main factors, which directly influence the dynamics and pace of the development of the national innovation system, is the degree of the development of the country’s innovation infrastructure. it should be stated that the main elements of the national innovation system of ukraine function in isolation from each other, without any balance in this system, which causes its ineffectiveness. further research should be aimed at establishing a systemic relationship and developing mechanisms for managing the formation and functioning of the national innovation system based on the effective innovation infrastructure of the country. at the stage of the gradual overcoming the economic crisis, the creation of favourable conditions for the fuller realization of the creative and inventive potential of the ukrainian society is gaining special significance in the innovative market of the country. the susceptibility of the national economy to innovation depends largely on the presence of demand for innovative products from consumers in the market, the acceleration of the dissemination of advanced technologies, including the expansion of the range of innovative active firms in the medium business, the creation of new innovative firms, and the dynamic growth of their scale. the strategy of innovation development is aimed at the formation and functioning of a specific infrastructure to increase the acceptability of the business environment to innovation. significant activation of the market of innovations cannot be carried out without addressing, as necessary, certain markets for innovative services operating in the innovation infrastructure 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(2015). outlay for commercialization of high-tech products in the context of marketing models of innovation diffusion. bulletin of taras shevchenko national university of kyiv. economics, 7 (172), 6-13 (in ukr.) doi: http://dx.doi.org/10.17721/1728-2667.2015/172-7/1. baltic journal of economic studies 177 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 v.o. sukhomlynskyi mykolaiv national university, ukraine (corresponding author) e-mail: tanyastroyko@gmail.com orcid: https://orcid.org/0000-0002-0044-4651 researcherid: aab-2925-2021 2 v.o. sukhomlynskyi mykolaiv national university, ukraine e-mail: riddlevsvv@gmail.com orcid: https://orcid.org/0000-0002-4772-7261 3 v.o. sukhomlynskyi mykolaiv national university, ukraine e-mail: eudruz@gmail.com orcid: https://orcid.org/0000-0002-9508-4045 doi: https://doi.org/10.30525/2256-0742/2023-9-1-177-183 formation of business ecosystems as a basis for the development of the it industry tetiana stroiko1, victoriіa voloshyna-sidei2, yevhenii druz3 abstract. the purpose of the article is to study business ecosystems from the point of view of their influence on the development of the field of it technologies. modern globalization processes shift the attention of scientists from the traditional fields of production to the field of information and communication services. for existing business models in the it industry, the main issues are adapting to the new workforce and justifying which projects are better from a marketing point of view and which are better from the point of view of optimizing potential and achieving return on investment. the strategic importance of partnerships, networks, alliances and collaborations is growing, opening up new opportunities for attracting assets, mobilizing knowledge and experience, simplifying and accelerating innovation development processes. methodology. modern research methods were used to study business ecosystems in terms of their impact on the development of it technologies: historical, dialectical method of cognition; system analysis, abstract-logical, graphical, statistical. the subject of research are the processes of development of the field of it technologies through the prism of formation of modern business ecosystems. the theoretical basis of this research is the basic provisions of economic theory, national economy, state and regional administration, infrastructure theory. results. business ecosystems, which are the basis for the development of the it sphere, have two general characteristics that distinguish them from other management models. modularity, in which the components of the offer are developed independently, but function as a single whole. customization, in which, unlike the open market model, the participants of the ecosystem usually adapt to it and strive for mutual compatibility. investors see prospects and development potential in ukrainian it companies and therefore invest in it, e-commerce, fintech, other innovative and export-oriented industries. practical implications. the main technological trends in the development of the it industry include: the development of cloud services; the need for various design solutions for cybersecurity; the growing need for remote work solutions; the development of intelligent solutions in the field of security and defense. the main market trends include the focus of it platforms and technical solutions on solving specific business problems; the growing importance and share of services in the product portfolio of companies; and the high adaptability of ukrainian it industry players to changes and challenges in the external environment. key words: it technology industry, technological trends, development of it technologies, innovative industries, business and startup ecosystems. jel classification: o10, o20, o30 1. introduction the field of it technologies has become a strategic branch of the modern global economy. accordingly, the globalization processes are shifting the focus of scientists from the traditional fields of production to the field of information and communication services. in recent decades, the world has witnessed significant changes in the way people and companies are connected and work together. social networks allow billions of people to communicate in a variety of ways. this has enabled new forms of online commerce. now these two trends are converging, driven by the exponential growth of the network of devices connected through the internet of things (greenough, 2015). baltic journal of economic studies 178 vol. 9 no. 1, 2023 as with any revolutionary phenomenon, the evolution of it technologies raises a number of questions and issues that need to be addressed. for existing business models, it is primarily a matter of adapting to the new workforce and justifying which projects are better from a marketing point of view and which are better from the point of view of optimizing potential and getting a return on investment. new industries require new approaches to organizing business processes. the formation of business ecosystems creates new ways of solving economic problems and is a logical step in the development of a systemic approach. ecosystem thinking captures profound transformation processes in the economy and business landscape. the strategic importance of partnerships, networks, alliances and cooperation is growing, opening up new opportunities for attracting assets, mobilizing knowledge and experience, simplifying and accelerating innovation development processes. 2. business ecosystem: theoretical research concept the business ecosystem is a relatively new concept in economics. it comes from biology, when in the 1930s the british botanist arthur tansley (tansley, 1939) introduced the term "ecosystem" to describe a community of organisms that interact with each other and with their environment – air, water, land, and so forth. for personal and community development, organisms must not only compete and fight with each other, but also cooperate. much later, in 1993, james moore (moore, 1993) in the work "predators and prey: a new ecology of competition" applied the concepts of "business ecosystem", "entrepreneurial ecosystem", which then became widely used both in the scientific and business communities . moore offered to consider "the company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. in a business ecosystem, companies coevolve capabilities around a new inno vation: they work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations." recent studies show that in business ecosystems, firms develop mutually beneficial relationships with customers, suppliers, and competitors (iansiti and levien, 2004). at the same time, ecosystems evolve in different ways through self-organization, emergence and co-evolution (peltoniemi and vuori, 2004), and can be connected through innovation in one area (adner, kapoor, 2010) or multilateral cooperation. (leten, 2013; west, wood, 2013) iansiti and levien define a business ecosystem as an interconnected group of organizations in which each member of the ecosystem ultimately shares the fate of the network as a whole, regardless of the power of the participant. in this case, an important feature of the ecosystem is the presence of a platform-services, tools, or technologies that ecosystem participants can use in their activities. (iansiti and levien, 2004) in general, the emergence of the theory of business ecosystems coincided with the active use of information and communication technologies and the globalization of the economy. against the background of the trends preceding the fourth industrial revolution, the life span of business organizations has dramatically decreased. according to j. moore's definition, business ecosystems are dynamic and co-developing communities consisting of various entities that create and receive new content in the process of both interaction and competition. he also explained that just as in biology an ecosystem is "a community of organisms interacting with each other, combined with the environment in which these organisms live and with which they also interact...", in business an ecosystem is "...an economic community based on the foundation of interacting organizations and individuals, organisms of the business world...". (moore, 1996) the theory of business ecosystems is structurally closely related to platforms. in fact, business ecosystems often consist of a collection of platforms on which different products and services are offered to the customer. ecosystems can also include offline services provided to the customer, for example through an office network. this means that the business ecosystem is a broad concept and includes: marketplaces that connect a large number of producers of goods and services with potential customers. for example, in retail: amazon, ebay, taobao; in hospitality: airbnb, tripadvisor, open table; in transportation services: uber, lyft, didi, and for freelancers: upwork, croogster, fiverr. it systems that combine components and applications from multiple vendors on a common platform: microsoft windows, apple ios, android, sap netweaver. offerings that combine components from different market players: video games, e-books, smart home systems, residential solar solutions, self-driving vehicles, 3d printing, iot solutions. offerings that combine services from multiple vendors, such as credit card systems, smart farming or mining solutions. business ecosystems, which are the basis for the development of the it sphere, have two general characteristics that distinguish them from other management models. modularity, in which the components of the offer are developed indepen dently, but function as a single whole. customization, in which, unlike the open market model, the baltic journal of economic studies 179 vol. 9 no. 1, 2023 participants of the ecosystem usually adapt to it and strive for mutual compatibility. 3. the current level of development of the it technology industry in ukraine with the advent of the information age, the issue of detailed analysis of information technologies has become one of the priorities for determining the development of economic growth of the national economy and its regulatory component. the following indices are the most widely used in international practice: information society index (isi), networked readiness index (nri), digital divide index (ddi), digital access index (dai), ict diffusion index (ictdi). to justify the current level of development of it technologies in ukraine, the most interesting is the networked readiness index (nri) consists of four components, such as: – environment sub-index: a) political and regulatory environment (9 indicators); b) business and innovation environment (9 indicators); – readiness sub-index: a) infrastructure (4 indicators); b) accessibility (3 indicators); c) skills (4 indicators); – use sub-index: a) individual use (7 indicators); b) business use (6 indicators); c) use by the government (3 indicators); – impact of sub-indices: a) economic consequences (4 indicators); b) social consequences (4 indicators). the calculation of the overall nri score is based on a sequential aggregation of scores: individual scores are aggregated into bar scores, which are then aggregated into sub-index scores. the index scores are then combined to produce a country 's overall nri score. to aggregate individual indicators, scores for each indicator are normalized to a common scale of 1 to 7. scores for survey-derived indicators are always measured on a scale of 1 to 7, so they do not require aggregation. at each level of aggregation, the normal average indicator (i.e., the arithmetic mean) is used to combine the components. (networked readiness index, 2022) thus, according to the data in table 1, the main players of the world market of information technologies in the conditions of globalization can be singled out the economies that make up groups of leaders from the countries of southeast asia (singapore, south korea and japan), european countries (finland, sweden, norway, the netherlands, switzerland, great britain and luxembourg), as well as the united states of america, whose economies are characterized by a high level of population income. this trend reflects the correlation dependence of the network readiness index on per capita income. therefore, there is a significant correlation between the values of various international indices of the world market of information technologies, which are determined by different methods, and other indicators (karcheva, 2017). according to the networked readiness index (table 1), ukraine made a significant leap in the period from 2020 to 2022, rising from 64th place in 2021 to 50th place in 2022. accordingly, it is one of the four priority sectors for ukraine's export strategy. in 2022, the it industry provided $7.34 billion in foreign exchange earnings to the ukrainian economy (figure 1). the volume of exports increased by $400 million in comparison with the pre-war year 2021. the amount of taxes and fees paid by the it business to the consolidated budget of ukraine is uah 32.2 billion, which is uah 4.4 billion and 16% more than in the previous year. (finbalance, 2022) the growth of the ukrainian segment is not only at the expense of capturing the market share of other countries, but with the help of the development of the entire world market, which is growing at the same speed. table 1 top 10 leading countries by total nri index in 2020–2022 networked readiness index (nri) 2020 2022 country place score country place score sweden 1 82,75 usa 1 80.30 denmark 2 82,19 singapore 2 79.35 singapore 3 81,39 sweden 3 78.91 netherlands 4 81,37 netherlands 4 78.82 switzerland 5 80,41 switzerland 5 78.45 finland 6 80,16 denmark 6 78.26 norway 7 79,39 finland 7 77.90 usa 8 78,91 germany 8 76.11 germany 9 77,48 south korea 9 75.95 great britain 10 76,27 norway 10 75.68 ukraine 64 49,43 ukraine 50 55,71 source: compiled by the author based on data (networked readiness index, 2020; networked readiness index, 2022) baltic journal of economic studies 180 vol. 9 no. 1, 2023 most global companies are now actively considering the ecosystem business model because of its value creation potential: growing the core business, expanding the network and portfolio, and generating revenue from new products and services (dietz, 2020). the integrated network economy could represent a global revenue pool of $60 trillion by 2025, with its share of the total economy potentially increasing from about 1 to 2 percent today to about 30 percent by 2025. (mckinsey & company) 4. business ecosystem: benefits and threats to it technologies today, the it industry is an area where globalization is more visible and present than in any other industry. therefore, it is important that scientific research and development is conducted from a global perspective, building on regional and national advantages and aligning initiatives into agreed contributions. international collaboration not only provides insight into technological developments around the world, but also allows to demonstrate core strengths in line with global perspectives and prepare for new potential markets. the american it market is currently the largest in the world. a large number of global brands and software companies originate from the us. to date, a large number of it market leaders have their headquarters and research centers in the us. today, it is a factor in many other key areas that underpin europe's strategy for economic growth and prosperity. the total global market for it and related communications is huge. the internet is now an integral part of everyday life and the development of societies, not only as an enabling infrastructure, but also as a key factor in shaping the future. the pace of the industry is accelerating as it and communications become an integral part of almost everything people do. as a result, demand is doubling every year as mixed traffic increases. the main research actors are the major european it industries and academic organizations, which jointly identify and define strategic research areas and are the main drivers of established programs and projects. however, there is an increasing need to improve technology transfer from research to innovation and market engagement. for this reason, activities have recently been launched to address the innovation phase and to test new technologies and concepts for future market segments. the use of public private partnerships for innovation and market engagement is promising, but needs to be more carefully designed. when deepening the research, it is necessary to pay attention to the development of the internet and technologies in the leading countries of the world. figure 2. schematically shows the top 10 countries in the world with the dominant role of it. it should be noted that they are the main players in the market of information services. consider why the industry is emerging in these countries. finland has an excellent digital infrastructure, ranked the best in the world by the global information technology report (gitr). with more than 90% of the population using the internet and a high level of innovation, finland benefited from 0 1 2 3 4 5 6 7 8 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1,29 1,5 1,67 1,98 2,49 3,2 4,17 5,03 6,8 7,34 еxport of it services, billion dollars еxport of it services, billion dollars figure 1. dynamics of export of computer services, billion dollars source: (finbalance, 2022) baltic journal of economic studies 181 vol. 9 no. 1, 2023 significant investments in it in the mid-1990s in response to the financial crisis. in singapore, the government's support for a clear digital strategy, an ever-improving it infrastructure, the best online services and the world's highest quality education systems have transformed this city-state into a knowledge-intensive economy with a strong it sector (singapore e-government). sweden reflects a world-class digital infrastructure that is affordable and has a stable business environment despite high tax rates. these strengths have led to excellent use of it by individuals, businesses and government, as well as one of the highest innovation rates in the world. hong kong is well positioned for innovation and entrepreneurship, skills development and increased use of it by both business and government. hong kong has a well-developed infrastructure, which has a positive economic and social impact. south korea is a country that has built its economic success on the it industry. the korean government ranks first in the world in online services. the country 's focus on developing its technological potential as part of its economic development strategy has also enhanced its reputation for innovation. these countries account for more than 80% of the world's demand for information technology products and services, with the remaining 19.56% shared by the rest of the world. this is not to say that these 10 markets are the most attractive, as issues other than size may play a more important role (world bank). in order to visualize the power of the ukrainian it ecosystem, to make it visible, measurable and effective, the ministry of digital transformation of ukraine in 2020 launched the unique 360 tech ecosystem overview platform. this is an online portal for finding business information about it companies, people, investors and, in general, the entire technological ecosystem of ukraine. the collected information includes data on the current figure 2. countries with the most developed it sphere source (world bank) baltic journal of economic studies 182 vol. 9 no. 1, 2023 development of it companies, information on founders and executives, classification of companies by industry, investments and financing, mergers and acquisitions, company news and industry trends. the platform was created on the initiative of the ministry of digital transformation of ukraine, the internet association of ukraine and ukrainian bridge. as part of the project, already existing bases of usf, dou, lift99, we_challenge, center42, unit.city and others were united. the ukrainian it industry is not the only branch of the economy that continues to develop, create new jobs, implement new projects, and attract investments during a full-scale war. 5. it technologies in ukraine: the way of development through dramatic events in the country in the first months of the war, the ukrainian it business tried to survive, to preserve personnel and assets. during 2022, most companies have adapted to life in turbulent conditions and continue to look for new vectors of development. ukraine's economic growth has slowed considerably, and a rapid recovery is not expected. but it is the it sphere that can become the basis of ukraine's post-war development. during the war, the it sector had the largest share in the structure of service exports – 43% (finbalance, 2022). the it sector remained fairly efficient, although it also had to restructure work processes and reduce the pace of development. many had to reduce hiring of specialists, suspend current projects, and prove to new clients that it is possible to do business in ukraine. it is difficult to make predictions in conditions of war. the world economy has completed one of its natural cycles of development, which has been intensified by the pandemic and the war in ukraine. the authors believe that over the next few years, businesses will be more cautious about investing in new companies and partnerships. despite this, most of the funds will still be invested in the it sector, so the demand for it products will remain high. due to high quality, lower development costs and the possibility of remote cooperation, the eastern european market has good prospects. that is why ukrainian companies are already changing their development strategy, in particular, redistributing their client portfolio and entering international markets. markets close to ukraine are chosen for expansion, especially poland, romania and the baltic states. the redistribution of the it market took place, but it mainly affected the labor market – companies reduced the number of open positions, while the number of actively seeking candidates increased. over the past 5 years, investors have been willing to invest in ukrainian it development, the share of product companies in the ukrainian market has grown and has equaled the number of service companies. at the same time, those who invest mainly in early-stage products are more focused on supporting portfolio projects than on finding new ones. nevertheless, both international and ukrainian investors are interested in the it and innovation market. they see prospects and development potential in ukrainian companies and therefore invest in it, e-commerce, fintech and other innovative and export-oriented industries (koriako, 2022). in general, gartner (gartner, 2022) identifies six key it trends that organizations should consider in 2023: – secure access service edge (sase) is a single vendor product sold as an integrated service that enables digital transformation; – sustainable technology encompasses sustainable it in the context of a technology-enabled business and customer sustainability; – platform engineering is the unification of management tools and various components of infrastructure technologies such as application resource management (arm), application performance monitoring (apm), digital experience monitoring (dem), and digital platform conductor (dpc) tools; – wireless value innovation (i&o) can leverage multiple wireless technologies to extend business disruption opportunities beyond connectivity; – industry cloud platforms is not one-size-fits-all. industry clouds are an alternative to enterprises purchasing a variety of cloud offerings, as they provide a pre-integrated solution that coincides with specific vertical market needs; – heated skills competition as digital implemen tation continues to grow, there is a greater demand for a wide variety of skills within i&o organizations. the full-scale war once again confirmed that the future of ukraine lies in innovative industries. business and startup ecosystems are actively developing in the country. the american venture fund blue&yellow heritage fund cooperates with the venture capital company ff vc. it targets ukrainian companies and start-ups. the innovation development fund, which recently came under the control of the ministry of digital transformation of ukraine, is functioning. thanks to its work, the state has already become the largest angel investor in the country. the fund has invested more than $6 million in more than 250 startups in ukraine and eastern europe. baltic journal of economic studies 183 vol. 9 no. 1, 2023 6. conclusions therefore, the main trends of modern it technologies in ukraine can be divided into technological and market trends. they are determined, on the one hand, by the modern development of it technologies in the world, and, on the other hand, by the influence of specific factors of the economic situation in ukraine and traditions of the domestic system integration market. the main technological trends include the following: – development of cloud services; – the need for various design solutions for cyber security; – growing need for remote work solutions; – development of intellectual solutions in the field of security and defense. the main market trends are as follows: – orientation of it platforms and technical solutions to solving specific business problems; – increasing the importance and share of services in the product portfolio of companies; – high adaptability of ukrainian it industry participants to changes and challenges of the external environment. references: greenough, j. (2015) the corporate 'internet of things' will encompass more devices than the smartphone and tablet markets combined. available at: https://finance.yahoo.com/news/corporate-internet-thingsencompass-more-093000387.html tansley, a.g. (1939). the british islands and their vegetation. cambridge: cambridge university press. moore, j.f. (1993). predators and prey: a new ecology of competition. harvard business review, 3, 75–86. iansiti, m., & levien, r . (2004). strategy as ecology. harvard business review, 82(3), 68–78. peltoniemi, m., & vuori, e. (2004). business ecosystem as the new approach to complex adaptive business environments. proceedings of ebrf 2004 in tampere, finland, pp. 267–281. adner, r ., & kapoor, r . (2010). value creation in innovation ecosystems: how the structure of technological interdependence affects firm performance in new technology generations. strategic management journal, 306–333. leten, b. (2013). ip models to orchestrate innovation ecosystems: imec, a public research institute in nano-electronics. california management review, 4, 51–64. west, j., & wood, d. (2013). evolving an open ecosystem: the rise and fall of the symbian platform. advances in strategic management, 30, 27–67. moore, j.f. (1996) the death of competition: leadership and strategy in the age of business ecosystems. new york, ny: harper business. networked readiness index. available at: https://https://networkreadinessindex.org karcheva, h.t., lernatovych, r .ya., & kaveckyj, v.ya. (2017). vykorystannya tekhnolohіyi blokchejn yak faktor pіdvyshhennya efektyvnostі fіnansovoyi sfery [using the blockchain technology as a factor in improving the efficiency of the financial sector]. bankіvska sprava [banking], 2, 110–119. finbalance. news. available at: https://https://finbalance.com.ua/news/eksport-ukranskikh-it-posluh-za-2022rik---rekordni-73-mlrd---asotsiatsiya dietz, m., hamza khan, & istvan rab (2020). how do companies create value from digital ecosystems? available at: https://ttps://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/how-do-companiescreate-value-from-digital-ecosystems worldbank. available at: https://databank.worldbank.org/ introduction to singapore e-government. available at: http://www.egov.gov.sg/egovmasterplans-introduction koriako, v. (2022). povernennia na kruhy svoia ta novi perspektyvy: shcho chekaie na it-haluz [return to normal and new perspectives: what awaits the it industry]. available at: https://www.epravda.com.ua/ columns/2022/11/18/693971 gartner (2022). identifies the top trends impacting infrastructure and operations for 2023 press release. available at: https://www.gartner.com/en/newsroom/press-releases/2022-12-08-gartner-identifies-the-toptrends-impacting-infrastructure-and-operations-for-2023 innovation and development fund (2022). available at: https://idf.solutions/ua/ received on: 12th of february, 2023 accepted on: 16th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 106 vol. 4, no. 1, 2018 corresponding author: 1 department of finance, national university of life and environmental sciences of ukraine. e-mail: davidenk@ukr.net 2 department of finance, national university of life and environmental sciences of ukraine. e-mail: alina.v.bu@online.ua 3 department of finance, national university of food technologies. e-mail: i.demyanenko@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-106-110 investment at tractiveness of agricultural sector of ukrainian region in modern conditions of social and economic development nadiia davydenko1, alina buriak2 national university of life and environmental sciences of ukraine, ukraine inna demianenko3 national university of food technologies, ukraine abstract. it is proved that investment attractiveness of regions is an indisputable factor in the stable socioeconomic development of the country. the purpose of the study is to analyse investment attractiveness of region and to substantiate proposals for improving investment attractiveness of cherkasy region. the subject of the study was peculiarities of formation and expansion of investment potential in the region. methodology. the paper is based on the views of prominent domestic and foreign economists. during the research process, the following methods were used: monographic, historical, analysis and synthesis (in theoretical and empirical studies of investment process); systematic (for the systematization of methodological approaches and indicators of investment attractiveness assessment of the region); statistical and graphics (for the analysis of state and trends of investment processes in ukraine); comparative (for analysing the investment attractiveness of regions). results. the essence of investment attractiveness of region as aggregate characteristic of conditions of a certain territory of the country is determined, which includes assessment of development level of investment infrastructure, human capital, financial opportunities, which significantly affect the formation of profitability of invested fixed assets and investment risks. investment attractiveness of an individual region of ukraine is assessed. it is proved that investigated region is investment-attractive and has a powerful potential for increasing the volume of gross agricultural products and providing the population with quality food products. practical implications. the main problems connected with the receipt of investments into the economy of the region are determined, ways of their solution are revealed. in order to improve investment attractiveness level of cherkasy region, we recommend local authorities to work in the following areas: introduction of free funds accumulation mechanism, in particular, in venture funds; creation of innovative risks insurance system; accumulation of public funds within the framework of social and pension insurance systems and their focus on long-term lending of investment activity; strengthening investment activity of population and ensuring guaranteed protection of their savings. key words: regional economy, investment attractiveness of region, investment potential, investment climate of region. jel classification: q14, m21, r30 1. introduction an important role in investment activity strategy plays a scientifically grounded definition of priority investment directions, their compliance with state interests, program objectives of the national revival of ukraine, rapid overcoming of economic crisis and achievement of stabilization and national economy ’s growth. they are priority directions of scientific and technological progress, on which investment and innovation activities and resources should be aimed at as much as possible. only those countries that are able to provide a high level of science, technology, education, culture, an organization of management and labour discipline can apply for baltic journal of economic studies 107 vol. 4, no. 1, 2018 the development of modern and future high-tech industries (davidenko, 2011). in the ukrainian economy, a difficult situation has arisen in this regard. state that has been depleted as result of corruption, financial crisis, and military actions in the east, loses reliable sources of necessary investments. and now seeking at least with a considerable delay to revive and intensify policy of reproduction as the basis for stabilization and renewal of national commodity production, faced with the opposition of certain political and economic forces. concentration of financial capital in new structures areas, shadow turnover and banking system, which do not seek productive investments, in fact, inhibits reproduction processes, economic stabilization and growth. limited investment resources and unstable capital investment contributed negatively to development and stabilization of the state economy and economy of individual regions. 2. review of theory and literature considering peculiarity of the problem, a large number of works were published on the subject of research. according to a. duka (duka, 2013), mercantilists made one of the first contributions to the formation and development of investment theory. representatives of late mercantilism (mun, serra, montchrestien) asserted the need to invest in those industries that produce export-oriented products in order to achieve positive trade balance (lukyanenko, 2003). establishment of john keynes connection between consumption, investment, and national income, which he made on the basis of the concept of a multiplier, deserves attention. he also deduced the quantitative relationship between investment and national income based on the multiplier effect or multiplier effect (keynes, 2002). among modern scholars problems of current state and possibilities of optimizing investment potential of the region, its investment attractiveness were investigated by domestic and foreign researchers such as v. andriichuk, i. bahrova, l. borshch, i. hryshyna, b. hubskyi, n. davydenko, b. epifanov, h. kozachenko, m. kozoriz, r . coase, p. makarenko, o. margolin, v.  onyshchenko, i. rozeman, b. chub, v. fedorenko, and others. aforementioned scientists have developed sound approaches to implementation of regional investment policy, offered their own methods for assessing the level of investment development of the region and its investment attractiveness. in the works of o. baranovskyi (2004) and v.  petrushevska (2013), reasons for the lack of attraction process efficiency of foreign investments are revealed. researchers such as v. liashenko (2004), y. bazhal (2006) researched topic of investment and investment climate. however, given multidimensional nature of topic under study, many of its aspects have not been thoroughly studied. in particular, the issues of assessing investment attractiveness of ukrainian regions and directions for its improvement remain inadequately investigated. 3. analysis of factors characterizing investment attractiveness of the region regional investment attraction policy is defined as one of the main factors that affect not only economic growth efficiency but also content and form of ukraine’s entry into the world economic system. investment attractiveness of the region is a virtual concept since the desired one does not always correspond to reality. assessing investment attractiveness of a particular region, rating agencies take into account not only the natural and productive potential, availability of labour and financial resources but also (usually as a result of surveys) assessments of the political situation in the region, corruption level of officials, judicial protection of entrepreneurship in the territory, etc. moreover, the opinion of respondents may be polar depending on their personal experience of interaction with structures of state power. in our opinion, investment attractiveness of the region is an aggregate characteristic of certain territory’s conditions of the country, which includes assessment of legal framework development level, investment infrastructure, human capital, a financial capacity that significantly influences the formation of invested capital profitability and investment risks. namely, investment attractiveness of region is a combination of factors that predetermine behaviour of existing and potential investors in investing in region’s economic development. factors that determine investment attractiveness of region are: 1) availability of resource and raw material base and features of natural and climatic conditions; 2) economic and geographical position of the region and its level of infrastructure provision; 3) industrial and scientific specialization of the region; 4) availability of labour potential and level of its qualification; 5) aggregate population purchasing power; 6) development of institutional market structure (exchanges, banks, financial intermediaries, insurance companies, etc.); 7) general state factors (level of political stability, the current system of legislation, taxation system, conditions of activity of foreign investors, etc.). so, let us take a closer look at all of the above components in order to make a real assessment of investment attractiveness of agricultural sector of the economy of cherkasy region. cherkasy region is located in the central part of ukraine; its area is 20.9 thousand square km, which is baltic journal of economic studies 108 vol. 4, no. 1, 2018 3.46% of the state (18th place in the country). in the north, it borders kyiv region, in the south – kirovohrad region, on the east with poltava, and vinnytsia in the west. due to its geographical location, the region is characterized by developed infrastructure. the main document for regional development in the medium-term perspective is cherkasy region development strategy for the period up to 2020, which includes cherkasy region development strategy implementation plan for 2015–2018, which was prepared with the participation of stakeholders of regional development through workshops and discussions that took place during 2014–2015. strategy was developed on the basis of the law of ukraine “on stimulating development of regions”, taking into account state strategy for regional development of ukraine, strategy for sustainable development “ukraine – 2020” and other documents, as well as using the best european and ukrainian experience and experience in implementing the strategy for development of cherkasy region by 2015. between 2010 and 2017, the largest share of all capital investments was used by enterprises of agriculture, forestry, and fisheries (42% in 2016). in 2017, direct investments came from non-residents from 45 countries. main investor countries that account for 94.5% of the total foreign capital include belize, cyprus, germany, the czech republic, france, spain, the united kingdom, estonia, and the netherlands. the agroindustrial complex of the region has potential to increase the volume of gross production of agriculture, providing people with quality food products. over the past five years, cherkasy region’s agriculture is characterized by profitability. the main directions of agriculture: • crop production (grains and technical crops, fruitbearing plantations, vegetables); • livestock breeding (cattle, pigs, poultry). analysis of crop production sector shows that for the years of 2014–2016, crop area for agricultural crops is almost unchanged, with the exception of forage crops, which ceased to grow in 2016 (since yield was very low), which were replaced by fruit and berries 5,500 hectares of land were allocated in the same year of 2016. the largest amount of production is attributed to grain and leguminous crops, namely, 40793.0 thousand tons in 2016, and the smallest one – to fruits and berries. fodder crops, although they had a sown area in 2014 and 2015 more than 100 thousand hectares, did not produce anything. sugar beet (factory) had the highest yield in the cherkasy region. so, from 1 hectare of harvesting area, you can get an average of 460 thousand. potatoes and open-ground vegetables also have high yields, grain and legume with the lowest yield, but due to their cropping area, this region’s culture is sufficiently covered. regarding the livestock sector in the cherkasy region, it reflects the general picture of ukraine: the number of livestock and poultry reduces every year. for example, if we compare the number of cattle in 2016 to 2014, we can say that it decreased by 8.4%. significantly situation is better with a number of poultry and pigs. in general, the cherkasy region is an important part of livestock production of our state because, in terms of meat production, the region occupies the first place in ukraine, milk – 8, and eggs – 9. 4. swot-analysis of investment attractiveness of agricultural sector of cherkasy region’s economy formation of the investment climate in the region depends on improving investment attractiveness. to find out investment attractiveness of agricultural enterprises in the region, it is necessary to determine where exactly the most favourable microclimate of the source: developed by the author on the basis of data of the main department of statistics of cherkasy region baltic journal of economic studies 109 vol. 4, no. 1, 2018 region is. it is based on the definition of investment attractiveness in terms of financial indicators, land use, and volume of external and internal investment in agricultural enterprises. analysis of investment processes suggests that financial resources are invested mainly in large enterprises. however, small and medium-sized farms, which are common for cherkasy region, also require investment. because of agricultural enterprises management specifics in cherkasy region, in the vast majority, there are very small (private peasant farms), small (private peasant farms, farms) and average production (farms, private agricultural enterprises). there are only a few large agricultural farms in cherkasy region (table 1). according to results of 2016, agricultural production was carried out by 569 agricultural enterprises, which cultivated 65 percent of the total area of arable land, 1424 farms, of which 1190 farms have in use more than 151.4 thousand hectares of agricultural land (on average, one enterprise have 127.2 ha of land). according to operational statistics, the volume of gross agricultural production in all categories of farms grew by 2.1%, in agricultural enterprises – by 3.2%. according to volume index, cherkasy region is sixteenth, production per capita – the third, in terms of production – the sixth. the share of agricultural production to the national level is 5.9%. therefore, it is further expedient to assess investment attractiveness of agricultural sector of the economy of cherkasy region using the swot-analysis method. the great advantage of cherkasy region is the presence of large areas of high productive land and favourable natural and climatic conditions that contribute to the cultivation of many crops. in the context of current table 2 swot-analysis of investment attractiveness of agrarian sector of cherkasy region’s economy strong sides week sides 1. moderate natural and climatic conditions for agricultural production. 2. relief of the territory and high-performance soils. 3. favourable geographic location of the region. 4. significant manufacturing experience. 5. availability of old industrial zones for investing. 6. availability of research institutions in branches of the agro-industrial complex. 7. stable development of agro-industrial complex. 8. developed processing sector of agricultural products. 1. significant imbalances between districts’ economic development. 2. high degree of deterioration of material and technical base of enterprises. 3. lack of development of agrarian infrastructure (vegetable and fruit storage). 4. high concentration of agricultural lands (in hands of latifundists), lack of control over the use of land resources. 5. low innovative activity of the economic complex. 6. lack of foreign investment. 7. high share of seasonal unemployed. 8. storage on the territory of the region of unknown, unsuitable, and prohibited for using chemical means of protection of plants (waste, pesticides), requiring urgent disposal. possibilities threats 1. transfer of production from east ukraine in the cherkasy region. 2. output to eu markets 3. devaluation of national currency will enhance the competitiveness of ability of exporters. 4. cooperation with new foreign partners 1. high level of unpredictability of inflation due to the instability of the economy. 2. the inequality of foreign and domestic investors. 3. high cost of borrowed funds. 4. competitive threat associated with the european producers in the market of ukraine. 5. loss of markets focused on russia. 6. loss of personnel associated with the abolition of the visa regime. 7. military operations in the east of ukraine. source: cherkasy region development strategy for the period up to 2020, supplemented by the authors table 1 a number of agricultural enterprises in cherkasy region in 2017 name of district number of agricultural enterprises overall rank in district ranking horodyshche 65 16 drabiv 141 3 zhashkiv 110 10 zvenyhorodka 115 8 zolotonosha 110 10 kamianka 98 11 kaniv 83 14 katerynopil 97 12 korsun-shevchenkivskyi 66 15 lysianka 89 13 mankivka 166 1 monastyryshche 126 4 smila 97 12 talne 115 8 uman 144 2 khrystynivka 66 15 cherkasy 119 7 chyhyryn 49 17 chornobai 123 6 shpola 112 9 vatutine city 2 22 zolotonosha city 21 18 kaniv city 8 21 smila city 14 20 uman city 19 19 cherkasy city 124 5 total in the region 2279 х source: calculated by the authors (main department of statistics of cherkasy region) baltic journal of economic studies 110 vol. 4, no. 1, 2018 alternative energy. presence of large areas of agricultural land can be used to grow energy plants. in addition, there are energy minerals in the region, companies that have the potential for conversion to alternative fuels, energy production opportunities, using natural energy (water, sun). all this together provides opportunities for the development of alternative energy and energy from renewable sources. in order for the investor to make a profitable investment in the agrarian sector of this region, it is necessary to eliminate a number of shortcomings, starting with national and most global ones – improving the socioeconomic situation, stabilizing national currency. a particular attention needs to be paid to the introduction of innovations, which is possible only through legislative and investment support, which in turn will contribute to the development of entire infrastructure. access to eu markets will surely help increase agricultural output and increase the quantity of grain, vegetable and fruit storage, and consolidate region as a stable exporter. all of this will have a positive effect on employment in the region, as jobs will be created that will positively affect the welfare of the population. events (european integration, agreement on the free trade area of ukraine with the eu), a developed sector of processing agricultural products is a significant plus for the region. 5. conclusions investment attractiveness of the region is a set of qualitative and quantitative indicators that comprehensively determine ability to multiply invested capital and is derivative characteristic of investment climate formed under the influence of various factors and determines investors’ desire or refusal to invest in investment object. cherkasy region is a modern investment-attractive region. the agro-industrial complex has powerful potential for increasing the volume of gross agricultural products and providing the population with quality food products. analysis of investment attractiveness of cherkasy region showed that it is satisfactory, has a significant number of profitable commodity producers. availability of raw materials for waste from agrarian sector can be used for further processing in order to create sources of references: most of cherkassy region’s investments are offshore. electronic resource. retrieved from: https://dzvin.news/ bilshist-investytsij-na-cherkaschynu-dayut-ofshory/ main department of statistics of cherkasy region. electronic resource. retrieved from: http://www.ck.ukrstat.gov.ua davydenko, n. (2011). influence of corporate governance system on formation of investment attractiveness of enterprises. scientific bulletin of ukrainian ngo. series "economics, agrarian management, business". 1. p. 203-212. duka, a. (2013). technological modernization of economics in the context of j. schumpeter's theory of economic development. bulletin of the kyiv national university named after taras shevchenko. 144. p. 10-12. keynes, j. (2002). obschaya teoriya zaynyatosti, protsenta i deneg [general theory of employment, interest and money]. moscow: gelios arv. (in russian) lukianenko, d. g. (ed) (2003). mizhnarodna investitsiyna diyalnist [international investment activity]. kyyiv b.i. (in ukrainian) cherkasy region development strategy for the period up to 2020. electronic resource. retrieved from: http: //www.ck-oda.gov.ua/docs/2015/strategy_2020.pdf baltic journal of economic studies 185 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 kherson faculty odessa state university of internal affairs, ukraine e-mail: oleh_shkuts@ukr.net orcid: https://orcid.org/0000-0003-0395-5710 2 odessa state university of internal affairs, ukraine (corresponding author) e-mail: oduvs2015@ukr.net orcid: https://orcid.org/0000-0002-6420-6169 3 odessa state university of internal affairs, ukraine e-mail: m-802@ukr.net orcid: https://orcid.org/0000-0002-5178-084x doi: https://doi.org/10.30525/2256-0742/2022-8-4-185-190 foreign experience in preventing military and economic crimes oleh shkuta1, maksym korniienko2, mykola yankovyi3 abstract. the purpose of the study is to highlight the problematic issues of foreign experience and ways to prevent military and economic crimes. the main content. the article analyzes foreign countries, including the countries of the european union. methodology: the methodological basis of the study is the dialectical method of scientific knowledge, through the application of which the legal, functional, organizational and procedural aspects of methodological approaches to understanding the problematic issues of foreign experience and ways to prevent military and economic crime are considered. conclusions. based on the analyzed foreign experience in the prevention of military crime, the necessity of creating in ukraine a special state body in the structure of the armed forces of ukraine, the main tasks of which should be: determining the main directions of state policy in the field of crime prevention in the armed forces of ukraine; conducting nationwide research to identify the level of latent crime in the armed forces of ukraine; coordination of the activities of state structures and law enforcement agencies to implement measures to combat and prevent crime in the armed forces of ukraine; generalization of the practice of combating crime in the armed forces of ukraine and organization of international cooperation on combating and preventing crime in the military sphere, etc. key words: crime prevention, military and economic crimes, prevention, war in ukraine. jel classification: 1. introduction the unstable position of ukraine in the world political and economic arenas has led to an aggravation of the crime situation in the country. a separate and rather urgent problem has become a sharp increase in the number of criminal offenses of an economic nature, as well as particularly serious crimes committed by servicemen of the armed forces of ukraine. the year 2012 was a turning point for the ukrainian army from the economic point of view, as for the first time the state budget actually allocated uah 14.7 billion (0.98% of ukraine's gdp) for the expenditures of the ministry of defense of ukraine. however, even this amount of money is not enough, as the sustainable development of the armed forces of ukraine requires 1.45% of gdp (21.8 billion uah). it is also necessary to bring the structure of expenditures in the military sphere closer to the best world standards, according to which the ratio of expen ditures on the maintenance of military personnel, their training and development of weapons and military equipment should be 50%: 20%: 30%, respectively (in ukraine in 2012 this ratio was as follows: 82%: 5.7%: 12.3%). according to the scientific centre for the prevention of corruption in the security and defense sector, as of 2018, 2% of whistleblowers disclosed corruption in the ato and military units; 22% of reports concerned other offences rather than corruption (dmytrenko, 2022). strengthening the rule of law, prevention of war crimes, especially under martial law, remains extremely important for ukraine. the concept of implementation of the state policy in the field of crime prevention identifies the main problems that need to be addressed, including: imperfection of legal, organizational, financial, personnel, information support for crime prevention; inadequate level of comprehensive preventive measures aimed at eliminating the causes and baltic journal of economic studies 186 vol. 8 no. 4, 2022 conditions of crime, as well as preventive work with persons prone to commit them. despite the current state of war in ukraine, the issue of prevention of military and economic crimes is insufficiently researched. the purpose of the study is to consider the criminological vector of the problem of prevention of military and economic crimes through the prism of analysis of foreign experience of prevention. 2. literature review insufficient research into the problems of crime prevention in the armed forces and the validity of countermeasures has an extremely negative impact on the effectiveness of the armed forces of ukraine. in criminology, normative legal acts, scientific literature, the terms "prevention", "avoidance", "suppression" and "preventive measures" are used which are similar in meaning. some scholars distinguish between the terms "prevention" and "preventive measures", associating them with different levels, directions and types of activities. thus, a. f. zelinsky defines the concept of "crime prevention" as "a system of measures taken by society to curb the growth of crime and, if possible, to reduce its real level by eliminating and neutralizing its causes and conditions that contribute to it, as well as by preventing and suppressing certain specific crimes." (kovalova, 2020) the relationship between the concepts of "prevention", "termination" and "prevention" was most accurately, according to the authors, revealed by y. f. ivanov and o. m. dzhuzha, who understand crime prevention as a multi-level system of state and public purposeful measures to detect, eliminate, neutralization of the causes and conditions of crime. on this basis, prevention is considered as an activity to eliminate, neutralize or weaken the factors that give rise to crime or contribute to it. termination consists in actions aimed at stopping criminal activity that has already begun and preventing the occurrence of a criminal result. prevention is the activity of the state and society aimed at keeping crime at the lowest possible level by eliminating its causes and conditions, as well as preventing and stopping specific criminal offenses. depending on the hierarchy of causes and conditions of crime, there are three main levels of its prevention: general social, special criminological and individual, which were considered in chapter 3 of the thesis. the main task of the armed forces of any state is to defend its sovereignty and protect it from acts of aggression both from other states and within its borders from various dangers (e.g., terrorist groups, etc.). the creation, maintenance and use of the armed forces is the right of the state, which allows it to remain independent and realize its national interests. the army as an institution of the state appeared with the emergence of the first states of the world. at the same time, the first need for legal regulation of the responsibility of servicemen for military criminal offenses arose (dmytrenko, 2022). not only ukraine, but also a number of other countries are engaged in the reform of the armed forces, and therefore borrowing positive experience of forming their own armed forces, solving social problems among officers dismissed from the army, creating a small professional army with highly qualified specialists, etc. is an extremely important task, especially in the current conditions in ukraine. 3. materials and methods the study is based on the work of foreign and ukrainian researchers on methodological approaches to understanding the problematic issues of preventing military and economic crimes. with the help of the epistemological method, the essence of methodological approaches to understanding the problematic issues and prevention of war crimes was clarified, thanks to the logical and semantic method, the conceptual apparatus was deepened, the essence of the concepts of problematic issues and ways to prevent war crimes was determined. using the system-structural method, the constituent elements of methodological approaches to understanding the problematic issues of international experience and ways to prevent war crimes are investigated. the structural-logical method is used to identify the main problematic issues of international experience and ways to prevent war crimes. 4. results and discussion according to the materials received from the " white book" of the armed forces of ukraine, in 2018, information on 57 persons who committed criminal corruption offenses (in 2017 – 64 persons) was processed, including: 6 criminal offences were registered in the unified register of pre-trial investigations related to misappropriation, embezzlement or seizure of property by abuse of office (article 191 of the criminal code of ukraine); 1 – abuse of power or official position (art. 364 of the criminal code); 22 – acceptance of an offer, promise or receipt of an undue advantage (art. 368 of the criminal code), which are quantitatively the most common in the criminal code; 18 – abuse of influence (art. 369-2 of the criminal code); 6 – theft, misappropriation, extortion of military property or taking possession of it (art. 410 of the criminal code), 4 others. baltic journal of economic studies 187 vol. 8 no. 4, 2022 in 2018, court verdicts (decisions) against 30 people (in 2017 – against 81 people) came into force, including: 24 were convicted (3 – to imprisonment for a fixed term, 18 – to a fine, 3 – released from punishment). in addition, 6 proceedings were closed (2 – amnesty, 2 – expiration of the statute of limitations, 1 – change of circumstances, 1 – due to death). in 2018, 27 persons were dismissed from military service in the armed forces of ukraine for official offences, including: 16 were deprived of military rank and 11 were brought to disciplinary respon sibility. decisions on 15 persons are still being made by the courts. participated in 182 official investigations and anti-corruption inspections (32 in 2017). losses to the state were prevented as a result of the detected facts of corruption offenses in the amount of about uah 27.4 million (in 2017 – uah 22 million). the management of state-owned enterprises was checked for conflicts of interest related to their private enterprises or corporate rights (364 persons were checked, 11 of them were found to work part-time, 45 (12%) – have private enterprises in their personal ownership). according to the decision of the ministry of defence leadership, materials on 51 persons were sent to law enforcement agencies, 18 persons were dismissed from their positions (dmytrenko, 2022). misuse of budget funds is another criminal offence that is often committed in the armed forces of ukraine. illegal use of budget funds today is a negative phenomenon of social reality, which has become widespread in many sectors. the illegal use of budgetary funds is of particular relevance in the armed forces of ukraine. embezzlement of state finances allocated to the ministry of defence of ukraine in the context of the ato/jfo has increased the threat to national security and unity of our state, increased losses of personnel of the armed forces of ukraine, complicated their modernization and reform. the prevalence of this phenomenon actually contributes to the violation of the constitutional rights of all citizens of ukraine, as the state is unable to properly finance certain areas of foreign and domestic policy (dmytrenko, 2022). according to the military prosecutor's office, during 2010-2014, the number of criminal offenses related to the illegal use of budget funds in the armed forces of ukraine increased by almost 2.5 times: from 31 to 72, respectively. during 2016–2020, their number almost tripled. according to the international organization transparency international and nato experts, about 30% of the budget of the defense sector of our country is stolen by corrupt officials (dmytrenko, 2022). the results of inspections of financial and economic activities of the armed forces of ukraine also testify to the scale of the phenomenon of illegal use of budget funds in the military sphere. thus, during 2010–2012, in certain areas of the ministry of defence of ukraine, the control and audit bodies found financial violations and criminal offenses related to the illegal use of budget funds totaling uah 1.3 billion, including those that led to losses of more than uah 200 million (dmytrenko, 2022). in most countries of the world military criminal law is an independent branch of legislation. exceptions are the cis and baltic countries, the republics that were part of the former yugoslavia, as well as bulgaria, hungary, vietnam, people's republic of china, mongolia, poland, romania, czech republic, sweden. in these countries, provisions on military criminal offences are included in the texts of criminal codes in the form of separate sections, paragraphs or chapters. in the criminal codes of the cis countries this section is called "crimes against military service". in ukraine it is chapter xix of the special part of the criminal code of ukraine, which is entitled "criminal offences against the established order of military service (military criminal offences)" (articles 401-435) (dmytrenko, 2020). in most states, including ukraine, azerbaijan, belarus, kazakhstan, the russian federation, etc., the norms of military-criminal law are directly included in the criminal codes, in connection with which there is a fixed concept of military-criminal misconduct, military crime or crime against military service, and they have no fundamental differences between them, including with the definition of military-criminal misconduct formulated in our legislation and set forth in article 401 of the ukrainian criminal code (dmytrenko, 2022). in the countries of the anglo-american (great britain, ireland, canada, australia, new zealand, etc.) and romano-germanic (germany, france, italy, spain, the netherlands, austria, switzerland, etc.) legal families, as noted above, issues related to military-criminal offenses are not regulated by criminal codes (some of them do not have a criminal code as such). in these countries military-criminal law has become an independent branch of law. at the same time in the legislation of this group of countries there is no unified approach to the definition of the term "military-criminal offenses" (dmytrenko, 2022). thus, for example, in the united states, counteraction to offenses in the military sphere and the issue of criminal and disciplinary responsibility of baltic journal of economic studies 188 vol. 8 no. 4, 2022 servicemen is provided by a huge number of norms of military legislation, among which one of the main places is occupied by the uniform code of military justice (1951). the analysis of this legal act gives grounds to assert its punitive nature, since in fact 40% of its norms out of 140 articles reveal the essence of punishable acts, sanctions for their commission and punishment. in addition, the u.s. uniform code of military justice does not contain the concept of a military criminal offense or crime, but does disclose the concept of a "subject of a military criminal offense," which includes a person who has committed a criminal offense as defined in title x of this code, and/or a person who aids, abets, counsels, commands, provides, or ensures the commission of the act, if the act is primarily committed by him (article 77). (uniform code of military justice, 1951) there is no definition of the term "military criminal offence" in france, where the main source of military criminal law is the code of military justice. (code de justice militaire, 2006) there is no definition of the concept of "military criminal offence" in the uk, whose main legal act in this area is the armed forces act (code de justice militaire, 2006). despite this, the british armed forces act implements the principle of the priority of criminal law over criminal procedure and other norms. the first section of the document (articles 1-49) contains exclusively criminal-law provisions. it is devoted to the formulation of criminal offences and general issues of military-criminal law. (armed forces act, 2006) in germany, in the normative legal act wehrstrafgesetz (law "on military punishments"), the norm defining the concept of a military criminal offense, although it exists (§2), is formal and refers to the special part of this law. (wehrstrafgesetz, 1957) this law (wehrstrafgesetz) (law on military punishments) is the main source of military criminal law; the scope of its action is limited to the criminal offenses formulated in the second part of this law and entitled " war crimes". (wehrstrafgesetz, 1957) analyzing the above international normative legal acts, we cannot but agree with ya. s. kulkina that in modern conditions the norms of national and foreign military criminal law remain an important legal means of protecting military service relations from criminal encroachments and protecting the interests of the state in military sphere. the attention of legislators of various states is focused on this, as evidenced by its dynamic development. (dmytrenko, 2022) analysis of foreign experience in combating crime shows that in modern conditions criminal manifestations pose a real threat to democratic development and national security in most countries of the world. criminal elements, with close interregional and international ties, are increasingly directing their efforts at establishing control over the most profitable areas of economic relations. (dmytrenko, 2020) thus, the absence of a unified national concept of combating crime and the lack of coordination between the national, regional, and branch state programs of social prevention in the corresponding areas do not contribute to the prevention of crime among servicemen in the country. this situation does not correspond to the proclaimed constitutional provisions on a social, democratic and law-governed state, since the current situation does not take into account the realities of today, since the fight against war crimes has long ago become a global world problem, which has become not only national, but also international, transnational in nature. (dmytrenko, 2022) over the past decade, there has been an upward trend in the level of crime in this area worldwide, and at the same time there has been a lack of social and legal control measures for the growing criminalization of social relations. in ukraine there is no approved at the state level concept of combating crime, which is due to many economic, social, political, legal and other features and contradictions of the development of market relations in the country: the creation of a system of criminal justice has not been completed; the development of national legislation continues; state institutions are introduced, which should meet the best european and world standards in this sphere of social relations. (shkuta, 2020) in the early 2000s, the dynamics and trends in crime around the world remained virtually unchanged. the activities of organized criminal groups are becoming more and more sophisticated. this situation occurred in spite of the considerable system of international organizations and institutions to combat war crimes, including: the general assembly, the security council, the secretariat (sector) for crime prevention and criminal justice, the economic and social council, the international court of justice, the commission on crime prevention and criminal justice (created in 1991 from the committee on crime prevention and control), regional un research institutes and centers, etc. (dmytrenko, 2022) it is extremely alarming that military crime is growing every year in the world as a whole. for example, according to official data, over the past 10 years the main indicators of this type of crime have been increasing in a large part of european countries. a significant contribution to the fight against crime in the world is made by international non-governmental organizations: the international association of penal law; the international association of baltic journal of economic studies 189 vol. 8 no. 4, 2022 criminology and others. a special place is given to the international criminal police organization (interpol). the fight against crime at the regional level is supported by the council of europe (parliamentary assembly, committee of ministers, european committee on legal cooperation, european committee on crime), the central criminal police agency (europol). the analysis conducted by a. m. klochko testified that the most achievable forms of sharing experience in the fight against crime are: exchange of information on ways of committing, concealing and detecting criminal offenses; special literature; results of scientific research; delegations of practitioners and scientists, etc. the exchange of experience is facilitated by: joint preparation of collections of research papers, scientific and educational literature; information, proposals, and draft legislation; increased international specialization and cooperation in the development of measures aimed at eliminating the causes and conditions that contribute to crime; joint research and implementation of research; and agreement on current and future plans to combat crime among military personnel. (dmytrenko, 2022) in france, the national council for crime prevention was created, composed of members of parliament, mayors, ministers, experts and representatives of the business community. the head of the national council for crime prevention, both general and military, is the prime minister of the country. the council carries out the following tasks: finances crime prevention programs; informs the public about the state of crime; develops national crime control policies; and stimulates state anti-crime initiatives. (dmytrenko, 2022) in britain there is a standing conference on the prevention of military crime, which includes representatives of the confederation of british industry, the chamber of commerce, trade unions, and the association of chief police officers. this organization includes working groups that specialize in preventing crimes among members of the armed forces. (dmytrenko, 2022) a significant achievement of the system of prevention of criminal offenses in developed foreign countries should be recognized as its thorough legal support. state programs include determining the areas of sociological research, developing their methods, training personnel, financing, organizing and conducting preventive measures with an emphasis on early prevention. (dmytrenko, 2021) programs often include a system of special measures of criminological prevention related to criminal, procedural and penitentiary law. a characteristic feature of the fight against crime among military personnel in the united states in recent decades is the desire for centralized planning and coordination of this sphere of activity, the creation of special bodies for this purpose and giving them fairly broad powers. (arkusha, 2019) similar bodies have been established in many countries around the world that systematically analyze the state of affairs in the area of preventing military-criminal offenses and make appropriate recommendations to government structures for making appropriate decisions. for example, austria has an advisory service for crime prevention with 143 regional offices; belgium has a high prevention council; denmark has a high prevention council with 46 organizations. (dmytrenko, 2022) therefore, strengthening the rule of law and the prevention of war crimes remains a very topical problem that requires a separate scientific study and legal regulation. 5. conclusions thus, based on the above, it can be concluded that, using the analyzed foreign experience of prevention of military crimes, it seems necessary to create in the structure of the armed forces of ukraine a special state body, whose main tasks should be: to determine the main directions of state policy in the field of prevention of crime in the armed forces of ukraine; conducting nationwide research to identify the level of latent crime in the armed forces of ukraine; coordinating the activities of state structures and law enforcement agencies in implementing measures to combat and prevent crime in the armed forces of ukraine; generalizing the practice of combating crime in the armed forces of ukraine and organizing international cooperation to combat and prevent crime in the military sphere, etc. references: law of great britain. 2006. armed forces act. аvailable at: http://www.legislation.gov.uk/ukpga/2006/52/ contents law of france. 2006. code de justice militaire. аvailable at: https://www.legifrance.gouv.fr/affichcode.do; jsessionid=7310bcc1b7043f38727a23d0c345c797.tpdila10v_3?cidtexte=legitext000006071360&date larysa arkusha, maksym korniienko, anastasiia berendieieva. criminal activity in ukraine in the light of current conditions. аmazonia investiga . vol. 8 núm. 24: 386 – 391 / diciembre 2019. (web of science 2019) baltic journal of economic studies 190 vol. 8 no. 4, 2022 dmytrenko, n. (2020). criminological characteristics of a person who commits crimes in the armed forces of ukraine. european reforms bulletin, vol. 2, pp. 8–11. dod instruction 5210.91 august 12, 2010. аvailable at: www.dtic.mil/whs/directives/.../521091p.pdf olena kovalova, maksym korniienko, yurii pavliutin. the role of public organizations in ensuring national security of ukraine vol. 37, nº 65 (julio-diciembre) 2020, 136–155 cuestiones políticas esta revista fue editada en formato digital y publicada en julio de 2020, por el fondo editorial serbiluz, universidad del zulia. maracaibo-venezuela. doi: https://doi.org/10.46398/cuestpol.3865.11 iacono, w. g. (2001). forensic ‘lie detection: procedures without scientific basis. journal of forensic psychology practice, vol. 1, no. 1, pp. 75–86. saldziünas, vitas, kovalenka, aleksandras (2013). legal régulation and practice of psychophysiological polygraph examinations in the republic of lithuania. polygraph, vol. 42(3), pp. 137–145. shkuta, o. (2020). crimes in the military sphere: reasons and conditions. european reforms bulletin, vol. 2, pp. 74–77. law of usa (1951). uniform code of military justice. аvailable at: https://www.law.cornell.edu/uscode/text/ 10/subtitle-a/part-ii/chapter-47 law of germany (1957). wehrstrafgesetz. аvailable at: http://www.gesetze-im-internet.de/wstrg dmytrenko, n., & shkuta, o. (2022). crime in the armed forces of ukraine: criminological characteristics and prevention: monograph. kherson, ukraine. armed forces act, 2006. code de justice militaire, 2006. dmytrenko, n. a. (2020). criminological characteristics of a person who commits crimes in the armed forces of ukraine. odessa, ukraine. shkuta, o. o. (2020). crimes in the military sphere: reasons and conditions. odessa, ukraine. uniform code of military justice, 1951. wehrstrafgesetz, 1957. received on: 30th of september, 2022 accepted on: 27th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 431 vol. 3, no. 5, 2017 corresponding author: 1 department of marketing and international trade, national university of life and environmental sciences of ukraine. e-mail: scrim1992@ukr.net 2 department of marketing and international trade, national university of life and environmental sciences of ukraine. e-mail: larin_sla@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-431-435 the current state of the vitiviniculture sector in ukraine katalin tsymbliuk1, yaroslava larina 2 national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the paper is the identification of the current state and trends of the vitiviniculture sector in ukraine. methodology. there was made an analysis of the major indicators’ dynamics of the viticulture development during 1995–2016 years in terms of the assessment of the total vineyards area, productivity, and gross harvest of grapes. there are given results of the analysis of wine production producing dynamics for 2010–2016 years from the position of grape wines classification, namely: producing of grape wine, table wines, producing of champagne and sparkling wines, brandy and fortified wines. results. it was determined that the results of the analysis of the major indicators dynamics of the winemaking (viniculture) development in ukraine show structural changes, the situation of the wine market, and an untapped potential of the industry. practical implications. the domestic viticulture and wine industry must be up to the world standards of production and quality in order to occupy a fitting place among world producers. the achievement of specified goals is only possible in case the industry output is on the sufficiently high level of development that induces to systematic search by scientists, practical farmers, winegrowers and winemakers together with the state support that provides ways and methods for improving the economic, technological, social, and other kinds of industry efficiency. analysis of recent researches and publications. during the last decades, a great number of scientific and practical works in ukraine were published, dedicated to the research of the current state and the development of the viticulture and winemaking industry. the publications of such authors as avidzba a.m., antipov v.p., buzni a.n., harkusha o. m., matchyna i.h., rybintsev. v.a., sabluk p.t., cherven i.i. etc. are particularly noteworthy. however, dynamic changes of the economic situation in the country indicate a necessity of the further examination of the industry and the search for solutions to the problems, which restrain its development. statement of the problem. the previously unsolved parts of the common problem are a separation of factors, which influence the vitiviniculture sector of ukraine and the search for ways of the progressive industry’s development recommencement. key words: viticulture, winemaking, vitiviniculture sector, production indicators, processing of wine materials, wine production. jel classification: l66, q13 1. introduction the viticulture and the winemaking (viniculture) in ukraine are traditional and high-productive industries in the agro-industrial complex and their products are much in demand. the vitiviniculture sector of ukraine is a combined inter-branch system of economy that includes winegrowing and its industrial processing, as well as the manufactures, which maintain this industry. the territorial and the industrial structure, the key indicators of this industry are quite dynamic and changeable, which depend on a number of factors, both natural and market ones. according to the analysis’ results of the dynamics of the vitiviniculture sector development in ukraine, it is significant that despite impediments in the country’s economy, this sector has a large untapped potential for development. 2. viticultural production potential the vitiviniculture sector of ukraine was always an important industry of the agricultural branch and influenced the level of social and economic development of the regions. ukraine is situated in a quite attractive zone for the winegrowing. according to cadastre of ukrainian vineyards, an informational database about agriculture organization of winegrowing, approved of 25th june 2010, in ukraine there are 9 (without baltic journal of economic studies 432 vol. 3, no. 5, 2017 consideration of the temporally occupied territory of the autonomous republic of crimea) emphasized winegrowing zones (macrozones), which are the basis for the region sorting, and 46 naturally winegrowing regions (microzones). at the same time, the vineyard areas in ukraine (area under vines destined for the production of wine grapes, table grapes or dried grapes, in production or awaiting production) decrease every year, from 69.1 thousand hectares (kha) in the 2011 year to 45.1 kha in 2016. after the annexation of crimea, the largest plantation structure, the vineyard area in the fruit-bearing age, is situated in odesa region – 27.4 kha (64%). considerable is the vineyard plantations in mykolaiv – 5.5 kha (13%), kherson  – 4.5 kha (11%), and zakarpattia  – 3.4 kha (8%) regions. in general, 96% of all the vineyard areas are concentrated in 4 regions of the state. these regions give an opportunity to produce unique types of the wine industry from the grown grapes, which are extremely popular in the world. in the rest of the regions, the general vineyard area in the fruit-bearing age doesn’t exceed 300 ha or approximately 4% of the whole part in its structure. in turn, the quite ponderable indicator of the effective growth of the grapes as raw material for the further processing is productivity (yield per ha). in the 2016  year, there were gathered 37.8 thousand tons of grapes in all the agricultural categories, from which 23.1 thousand tons in odesa region, approximately 5.6 thousand tons in mykolaiv, 3.4 thousand tons in kherson, and almost 2.5 thousand tons in zakarpattia regions. the average grape productivity form 1 ha of the plantations in the fruit-bearing age in ukraine in the 2016 year was 88.4 centners (table 1). it was the highest in vinnytsia region (339.7 centner/ hectare), kirovohrad (320.0 centner/ha) and poltava (284.2 centner/ha) regions. the lowest grape productivity from its average indicator in the state is obtained in zhytomyr region (39.9 centner/ha), kharkiv region (61 centner/ha), donetsk region (71.3 centner/ha), zakarpattia region (73.3 centner/ ha), kherson region (75.5 centner/ha), sumy region (79.5 centner/ha), ternopil region (80.5 centner/ha), odesa (84.5 centner/ha), and volyn (87.5 centner/ha) regions. table 1 dynamics of the main indicators of viticulture development in ukraine year vineyards area, thousand hectare productivity, tons/hectare gross harvest of grapes, thousand tons the ratio of the gross collection of grapes to the previous year, % 1995 137,7 3,32 457,3 2000 99,4 5,17 513,8 112,36 2005 80,6 5,49 442,6 86, 14 2010 67,6 6,03 407,9 92,16 2011 69,1 7,55 521,9 127,95 2012 67,9 6,72 456,0 87,37 2013 67,1 8,52 575,4 126,18 2014 48,7 9,86 435,6 75,70 2015 45,4 9,23 386,3 88,68 2016 45,1 8,84 377,8 97,79 source: formed by the authors based on: state statistics service of ukraine (2018). retrieved from http://www.ukrstat.gov.ua the average grape productivity increased by 1.5 times during 2000–2016 years. however, due to the decrease of vineyards areas, its production has also reduced by 1.5 times. at the same time, it is completely possible to raise the production twice in coming years on condition that the current positive dynamics of the grape productivity’s increase is preserved. it is necessary to state that the given indicators for the 2016 year in ukraine are only approximate to the indicators of the contemporary european countries of high-efficiency winegrowing. consider another indicator of viticulture development in ukraine  – the total grape processing into wine materials, which are given in table 2. therefore, the volume of grapes processing into wine materials in ukraine has increased substantially, namely by 30.8% in 2016 in comparison with 2015. the enterprises in odesa region are the leaders in the amounts of grapes processing, which is almost 48% of the total number and the enterprises in mykolaiv region have increased the volume of grapes processing into wine materials by 1.5 times. the decrease of the wine materials production by 25.7% and 10.4%, respectively, is observed in the enterprises of zakarpattia and kherson regions. table 2 the volume of grape processing into wine materials according to regions regions grape processing into wine materials, tons including grapes, tons average grapes purchasing price, uan/ton 2016 in % by 2015 self-grown grape bought grape 2016 in % by 2015 ukraine, total 253856,3 130,8 42469,7 211386,6 5688,0 84,9 zakarpattia 4915,5 74,3 … ¹ … ¹ 6805,5 264,8 mykolaiv 101772,5 229,4 6473,0 95299,5 4341,0 69,3 odesa 121448,8 106,4 28447,1 93001,7 6002,5 98,7 kherson 25719,5 89,4 … ¹ … ¹ 10820,5 100,5 note: ¹ the data is not published for the purpose of enforcing the requirements of the law of state statistics service of ukraine for the confidentiality of information. source: formed by the authors based on: state statistics service of ukraine (2018). retrieved from http://www.ukrstat.gov.ua baltic journal of economic studies 433 vol. 3, no. 5, 2017 the average grapes purchasing price for processing decrease from 6702 uah for 1 ton in 2015 to 5688 uah in 2016 (by 15.1%). it happened on account of grapes’ price decreasing in mykolaiv region  – from 6265 to 4341 uah/ton, or by 30.7% and in odesa region  – from 6079 to 6003 uah/ton, or 1.3%. the rest of the regions indicate an increase of the purchasing price, this indicator is particularly high in zakarpattia region, where it has increased by 164.8%. it must be noted that the amounts of self-grown grapes processing increased by 17.5%, and bought ones by 33.9% in 2016 in comparison with 2015. the important inner particularity of the winemaking enterprises’ economic activity that causes development instability of the winemaking industry is seasonal-climate and raw orientation, which determines a difficulty in providing a stable quality of raw materials. that is to say, the winemaking industry depends directly on the used rawmaterial base that is determined by the quality structure of wine materials, geographical position, as well as seasonality factors and climate conditions (kalaman, 2017). thus, the quality of the wine materials are influenced by a grape productivity, a seasonal orientation (the grape harvest is gathered once a year in autumn), a date of purchase (the latter is the manufacture date, the worse is the quality), a period and preservation conditions (matveev, 2014). therefore, the presence of its own raw base is very important in the process of the winemaking enterprises’ development since the proportion of the grown grapes in ukraine for the wine materials processing is only 16.73%. 3. wine production the industries’ grapes processing amounts and the wine materials’ productions had an unstable dynamics during the period of 2010–2016. the volume of grapes processing into wine materials in ukrainian enterprises in 2016 represented 254 thousand tons, that is, 60 thousand tons or 30,9% more than in 2015; 16.6 million dal. (1 dal. (decilitre) is 10 litres) wine materials have been produced (2.5 million dal. or 17.7% more). 418 354 330 425 229 194 254 30675 25067 23048 28269 15075 14104 16637 0 5000 10000 15000 20000 25000 30000 35000 0 50 100 150 200 250 300 350 400 450 2010 2011 2012 2013 2014 2015 2016 th ou sa nd to ns grapes processing, thousand tons produced wine materials, thousand dal. fig. 1. grapes processing dynamics and wine materials production source: formed by the authors based on: ukrainian statistic yearbook 2016 (2017). ukraine in figures, k.: state statistics service of ukraine: scientific provision of the ukrainian viticulture, 611 p. according to the official data, in winemaking industry, about two hundred enterprises of ukraine are occupied with grapes processing wines, champagne and sparkling wines, and cognacs producing. there are two clearly delineated groups among them: traditional enterprises that possess their own vineyards, and enterprises of a new wave that are exceptionally engaged in bottling wine. consideration of the production of wine and wine materials by regions is given in table 3. the given tables indicate that in comparison with 2015, the total wine materials production was increased by the enterprises in mykolaiv region – 3.9 million dal. (by 123.2%). champagne and sparkling wines were produced of 5.1 million dal., that is, 15.4% more than in 2015, at the same time, the production of cognac wine material (2.1 million dal.) has decreased by 16%. the amounts of the table wines production have considerably increased (8.4 million dal.) – by 73.5%. wine materials production dynamics in ukraine, including for wine production, laying and maturing of wine, is given in figure 2. in 2016 in comparison with 2010, the amount of wine materials production in ukraine decreased twice that was caused by economic crisis condition of the state and the annexation of the ar of crimea. table 3 wine materials production, thousand dal. regions amount of produced wine including 2016 р. in % by 2015 champagne and sparkling cognacs for wine production, laying and maturing table fortified ukraine, total 16637,3 118,0 5086,6 2126,6 8428,6 698,5 zakarpattia 335,6 85,2 326,7 … ¹ mykolaiv 7140,9 223,2 2207,7 159,0 4357,2 417,0 odesa 7403,5 86,8 2713,8 1163,3 3250,9 254,3 kherson 1757,4 89,0 165,0 804,3 493,8 … ¹ note: ¹ the data is not published for the purpose of enforcing the requirements of the law of state statistics service of ukraine for the confidentiality of information. source: formed by the authors based on: ukraine in numbers in 2016 (2017). k.: state statistics service of ukraine. 240 p. baltic journal of economic studies 434 vol. 3, no. 5, 2017 in 2016 in comparison with 2015, the specific weight for the laying, maturing, and production of table wines increased by 38.4%, of champagne and sparkling wines  – by 13.4%; but a part of wine materials for laying, maturing, and production of fortified wines decreased by 54.7% and of cognacs  – by 38.1% in the total winemaking production. 0 2000 4000 6000 8000 10000 12000 14000 16000 2010 2011 2012 2013 2014 2015 2016 th ou sa nd d al . champagne and sparkling cognacs table fortified fig. 2. dynamics of wine production in ukraine source: formed by the authors based on: ukrainian statistic yearbook 2016 (2017). ukraine in figures, k.: state statistics service of ukraine: scientific provision of the ukrainian viticulture, 611 p. 4. international trade the main part of grown grapes is used for the production of various wines. grape wines take a significant place in the world market of alcoholic beverages and the production of high-quality wine is increasing in recent years, which predicts great prospects of this production in the future. nonetheless, the urgent issue of the vitiviniculture sector in ukraine is a negative surplus of the foreign economic trade balance. there were imported 85.3 million usd worth of wines in ukraine that is 1.5 times more than a year before. in the qualitative terms, the deliveries have also increased from 23.3 million litres in 2015 to 43.1 million litres in 2016. the main wine importer in ukraine remains italy, for the second year running. the deliveries reached 24.46 million us dollars (7.35 million litres) there were imported 13.17 million usd worth of french wines (2.73 million litres) georgia is on the 3rd place of the biggest wine importers in ukraine. its deliveries were 12.16 million us dollars (4.58 million litres) that is 5.8 million of bottles. this constitutes more than a 70% increase over those import indicators of 2015. moreover, ukraine has moved into the second place at georgian wines’ import behind the russian federation, overtaking china according to the 2016 results. it is important to emphasize that in 2016 the biggest wine importers included new countries such as lithuania and portugal, thus pushing back argentina and australia. but the export of ukrainian wines abroad decreased in 2016. when in 2015 the deliveries reached 38.2 million us dollars (61.23 million litres), then in 2016 the export was 24.7 million us dollars (31.57 million litres). such a drastic export reduction is caused by deliveries decline to russia that was always a main wine consumer of ukraine. officially, the delivery of the goods to the russian federation fell almost 2.3  times during 2016. there were delivered 11.6 million us dollar worth of wine to the russian federation. the very fact is also that ukrainian producers redirected their export in 2016. chine has become one of the main purchasers – during 2016 there were delivered 1 million us dollar worth of wine (618 thousand litres). georgia, azerbaijan, and germany are among the top five biggest purchasing countries of wine produced in ukraine. ukraine exported 114.4 thousand litres of wine to the eu countries in 2016 that is almost twice more than in 2015. as a result of the 2016 year, poland is leading in importing of ukrainian wine among the eu countries. thus, in 2016 ukraine exported 86.9 thousand litres of wine to poland. the second place is taken by belgium – 18 thousand litres, the third place  – by lithuania  – 4.7  thousand litres of wine. in 2016, ukraine exported up to 209 litres of wine to france. these belong to the particularities of the winemaking industry that influence the behaviour of the industry’s enterprises and the results of its management: a seasonal climate and a raw orientation of the manufacture; a long expenses cycle of production and a financial cycle, a material consumption and a labour intensity of the manufacture; an unevenness of economic activity and an utilization of the productive capacity during a year; a dominance in the structure of the circulating capital of low liquid assets; an exceptionally positional competition character in the industry, a high concentration of the industry, a consolidation tendency existence; a high sensitivity to volatilities of the market condition and a direct dependence on the standard of living and the population’s solvency and so forth (harkusha, 2015). however, contrary to that and ancient traditions, the winemaking in ukraine still has an untapped potential. in recent years, the industry suffers great losses because of an economic downturn and an excessive number of the manufacturing regulatory documents. the vineyard areas are rapidly decreasing year after year. the winemakers complain about an extremely bureaucratic license application procedure, land issues, an absence of the government support and a pressure from the local government, etc. the industry is going through the most difficult time in its history and needs a systemic policy of its management and support. a list of high-priority tasks for the viticulture and winemaking development must be elaborated. firstly, the industry needs a planting of new plantations and a bringing of the viticulture range up to the population and the manufacture demands’ level, in order not to have a necessity in import. secondly, according to expert estimates, a planting of vineyard hectare costs 10 thousand dollars, which is too expensive for the manufacturers, therefore, its development is not possible in the absence of the government support. baltic journal of economic studies 435 vol. 3, no. 5, 2017 5. conclusions the dynamics of the viticulture industry development in ukraine during 2011–2016 indicates a reduction of the vineyards areas from 69.1 thousand ha in 2011 to 45.1 thousand ha in 2016, and also shifting to a providing of the winemaking industry with imported raw materials. big industrial vineyards are mainly concentrated in odesa, kherson, mykolaiv, zakarpattia regions; their share in the total vineyard’s amount of ukraine is 96% from all the plantations. at the same time, 1.5 times productivity growth is observed; the average grape crop capacity from 1 hectare in 2016 was 88.4 centers. however, over the decrease of the vineyard areas, its production has also reduced  – there were gathered 37.8 thousand tons of grapes in all the industry’s categories in 2016. in other words, it had been unable to preserve and to increase the production amount through an average productivity growth on conditions of the essential vineyard area’s reduction. in 2016 in comparison with 2010, the amount of winemaking materials production in ukraine decreased twice that was caused by economic crisis condition of the state and the annexation of the autonomous republic of crimea. the dynamics’ results of the winemaking materials production in ukraine indicate structural changes and the wine market condition that considers a consumer demand. the capacity of the wine market in ukraine is constantly reducing. the production on the external trade wine market has essentially changed in recent years: the production import is moving to decrease, and the export is gathering momentum. the favourable soil and climate conditions and sufficient provision with labour and other resources; the capacity potential of the internal and external wine market; the presence of the intellectual and the productive capital for the implementation of innovative technologies; an urgent need for the government support; a necessity for the reorientation of consumers’ preferences from strong alcohol drinks to wines necessitate improvement and development of the vitiviniculture sector in ukraine. references: cadastre of ukrainian vineyards (2010). k.: minahropolityky, uaan, tsentr derzhrodiuchist. retrieved from: http://eurowine.com.ua/tmp/kadastr/index.php harkusha, o. yu. (2015). mekhanizm rehuliuvannia rozvytku vynorobnoi haluzi ukrainy [the mechanism of regulation of the wine industry ukraine]. kriviy rih: donetsk national university of economics and trade. michael tugan-baranovsky. kalaman, o. & babenko, k. s. (2017). tendentsii rozvytku vynohradarstva i vynorobstva ukrainy ta italii [the developing trends of the italian and ukrainian viticulture and wineries]. journal of economy of the food industry, 9(1), p. 3-9. matveev, v. v. (2014). strukturnyi analiz zabezpechennia vynorobnykh pidpryiemstv syrovynoiu [structural analysis of provision the winemaking enterprises with raw materials]. journal intellect xxi, 4, p. 62-69. state statistics service of ukraine (2018). retrieved from: http://www.ukrstat.gov.ua/ ukrainian statistic yearbook 2016 (2017). ukraine in figures, k.: state statistics service of ukraine: scientific provision of the ukrainian viticulture, 611 p. ukraine in numbers in 2016 (2017). k.: state statistics service of ukraine, 240 p. baltic journal of economic studies 307 vol. 3, no. 4, 2017 corresponding author: 1 department of accounting and audit, faculty of economics, ivan franko national university of lviv. e-mail: nkhocha@ukr.net pat terns of development of relations of land ownership in the agrarian sector of the economy olga shulga1 kyiv national economic university named after vadym hetman, ukraine abstract. every economic system is based on a certain system of relations of property that answers the certain level of development of productive forces. when this system of relations of property stops to provide progress of economic development, there is a necessity to substitute it by a new one. exactly the objective necessity of development of productive forces predetermines the necessity of origin of new, higher pattern of ownership. for every system of relations of property, its own system of contradictions that provides its development is typical. solving these contradictions conduces to the appearance of new adequate forms of further development of the system of property relations. in relation to the agrarian sector of the economy, any contradiction of agrarian relations is a form of expression of contradictions that are based on contradictions of land property relations. this implies that contradiction of relations of land ownership is the basic one in the system of agrarian relations and without its decision, it is impossible to solve all other contradictions of the agrarian sector and to form effective agrarian relations. for this reason, in order to work out an effective agrarian policy on the solution of existing in the agrarian sector contradictions, it is important to find out contradictions and law of development of land property relations in it. the topic of research is contradictions and laws of development of re land property relations in the agrarian sector of the economy. for clarifying these issues, there are applied dialectical, dynamic, systematic, and unity of logical and historical approaches, methods of generalization, analysis and synthesis, etc. the purpose of the article – expose dialectics of contradictions of development of institutional public forms of the functioning of economic systems and property relations in the agrarian sector, to define laws of development of land property relations. the driving forces of the development of any economic system are contradictions between the form of land ownership and the form of land tenure, between the form of land tenure and the form of direct farming, between the owner of the land and the immediate worker on it. the dialectic of the development of institutional social forms of the functioning of economic systems and property relations in the agrarian sector is that the development of land ownership relations leads to changes and transformations in the system of production relations, their transition to a higher stage of socio-economic development, and the emergence of new social forms of functioning of economic systems. in turn, the emergence of new social forms of the functioning of economic systems causes changes in the structure of property ownership on the land, leading to the emergence and dominant position in the agricultural sector of new types and forms of ownership, reflecting the socio-economic nature of the current social system. on the basis of the analysis of the evolution of land ownership relations in various economic systems, one can conclude that their development is characterized by certain patterns: the development and complication of property patterns are constantly underway; each form of ownership by its nature is historical; the emergence of a more developed form of ownership of land does not lead to a complete disappearance of the previous form of ownership; the more specific forms of ownership within a certain mode of production, the stronger are the driving forces and sources of economic system development; as the evolution of property relations weakens the antagonistic nature of social contradictions, there is a convergence of interests of opposing classes, social groups; each functional form of ownership reflects a certain level of development of the productive power of human labour; the means of realization of any type, type or form of ownership is the degree of human freedom; the development of the essential basis of property relations takes place in an evolutionary way, and the change in the legal form of ownership – institutional instruments; institutional forms of property combine both old forms and new; each typical civilization is characterized by a predominant property object that is specific for its conditions of development, which reflects the achieved level of development of the productive labour force of man and the corresponding formative peculiarities of the appropriation of means and production results, etc. key words: land ownership relations, contradictions, agrarian sector, institutional social forms of functioning of economic systems, land use. jel classification: q150:o130, j100, q100, p170:p270:p510, r140 baltic journal of economic studies 308 vol. 3, no. 4, 2017 1. the problem and its connection with important scientific and practical tasks at the heart of each economic system is a certain system of property relations, which corresponds to a certain level of development of productive forces. when this system of property relations ceases to ensure the progress of economic development, there is a need to replace it with a new one. it is the objective need for the development of productive forces that necessitates the emergence of a new, higher form of ownership. each system of property relations is characterized by its own system of contradictions, which ensures its development. the solution of these contradictions leads to the appearance of new adequate forms of further development of the system of property relations. regarding the agrarian sector of the economy, any contradiction in agrarian relations is a form of expression of contradictions based on conflicts of ownership relations with the land. it follows that the contradiction in land ownership relations is fundamental in the system of agrarian relations and, without it, it is impossible to resolve all other contradictions in the agricultural sector and to form effective agricultural relations. that is why, in order to develop an effective agricultural policy to resolve the contradictions existing in the agricultural sector, it is important to clarify the contradictions and patterns of development of land ownership relations. 2. analysis of recent publications on the problem significant contributions to the study of the contradictions of social systems have made such scientists as v. m. heyets, a. a. gritsenko, yu. k. zaitsev, o. m. moskalenko, v. s. savchuk, v. m. tarasevich, a. a. chukhno and others. however, issues that are not nearly investigated are related to the identification and analysis of socio-economic contradictions in the system of agrarian relations of the modern economy, the elucidation of the laws of development of land property relations. the coverage of these issues will allow developing an effective agrarian policy, strategy, and tactics to resolve socio-economic contradictions in the system of agrarian relations. 3. formulation of research objectives the purpose of the paper is to reveal the dialectics of contradictions in the development of institutional social forms of the functioning of economic systems and property relations in the agricultural sector and to determine patterns of development of property ownership relations with the land. in clarifying these issues, there were applied dialectical, dynamic, systematic, and unity of logical and historical approaches, methods of generalization, analysis, and synthesis, etc. on the basis of the analysis of the evolution of land ownership relations in different types of economic systems, the dialectics of contradictions in the development of institutional social forms of the functioning of economic systems and property relations in the agrarian sector were revealed, and patterns of land ownership development were determined. 4. the presentation of the main results and their justification the driving forces of the development of any economic system are contradictions between the form of land ownership and the form of land tenure, between the form of land tenure and the form of direct farming, between the owner of the land and the immediate worker on it. the main one is the first contradiction since ownership and ownership do not coincide. ownership is a relationship between people about the appropriation, functioning, and alienation of life’s benefits, which manifests itself through the possession, use, and disposal of property. ownership is, as a rule, long-term use with the incomplete appropriation of material goods. that is, the owner has more rights than the owner. the second contradiction determines the economic content of specific forms of management, and the third contradiction appears in a real form in conditions where the owner and the landowner are one and the same person. in all other cases, it acts indirectly (filonenko, 1996). evolution of land ownership depending on the historical and functional method of technological transformation of production resources into its results, there are three types of economic systems: pre-industrial, industrial, and post-industrial economic systems (bashnyanin, 1999). each type of economic system is characterized by a certain system of property relations, which is constantly evolving and complicated, gaining new forms of development. in general, land ownership during the history of mankind was in its evolution, three stages (levels) of development: communal – private – social property. we follow how the development of each form of ownership took place in different types of economic systems, which causes the emergence and existence of a particular form of ownership, and which sources of development and driving forces are in each of them. the first form of the functioning of socio-economic relations in preindustrial economic systems was the original herd whose existence was conditioned by the low level of development of productive forces. for this stage of development of society, typical were communal ownership of land and the collective organization of labour and production of members of the primitive community, based on the simple cooperation of labour using the muscular energy of people. the division of labour in the primitive herd was based on sex and age. baltic journal of economic studies 309 vol. 3, no. 4, 2017 an important role in the development of productive forces was played by the emergence of tools for working metal, which allowed increasing productivity of producers and led to the emergence of an additional product, which could now be assigned not only direct producers and members of their families but also other members of society. it served as the basis for the emergence of human exploitation of man, which represented the possibility of appropriating the results of the work of other people to meet their own needs. conditions are created for the formation of a class society. as the productive forces develop, there is a social division of labour: firstly, the tribes that were engaged in cattle breeding distinguished themselves, later the craft was separated from agriculture and animal husbandry. this has led to the emergence and expansion of an exchange not only within communities but also between communities. the exchange becomes more regular, there is money. there is a transition to the application of drag force of working animals and the use of tools of work from metal, there is a tendency to individualization of production. it is possible to parse the ownership relations with the possession, use, and disposal of means of production, including land. usually, the right to own land was fixed by the community, the right to use was granted to individual families, and the right to dispose of the family. in parallel, this is the birth of private ownership of the means of production. in turn, the development of commodity-money relations leads to the expansion of the primitive communal system, the existence of which was conditioned by the need for a social association of people in order to secure a minimum of livelihoods. in place of the original system, the slave system, the material basis of which was the servile work of slaves on the basis of cooperation, comes. the slave system was based on the property of the slaveholders on the means of production, the main productive force  – the slave and the product created by slaves. slaves who worked on large slave farms, the so-called latifundia, were not, on the basis of direct coercion, interested in improving the productivity of their labour. however, for some time, the organization of management on the basis of cooperation of the work of slaves allowed creating a product sufficient not only to meet the needs of the slave and the half-starved existence of slaves but also for the market implementation. despite this, slave farms were mostly natural. along with the large slave farms in agriculture, there were small farms of free peasants, whose production took place in order to meet public needs. their existence was conditioned by the need to preserve the peasant as a warrior and taxpayer, on which the economic, political, and military power of the state depended. free peasants, unlike slaves, were interested in increasing production volumes and improving the quality of their products. however, the low level of development of labour tools caused the low productivity of their labour, resulting in their inferiority to the great slave farms, in which the growth of agricultural production was due to low costs for the maintenance of slaves and the use of the effect of concentration of land and the cooperation of the work of slaves. as a result, small owners were blown up and either got into slavery or went to the city, becoming a pauper or a retinue of senators and rich people. however, over time, dissatisfaction amongst the slaves increased, they began to break the tools, to rise, and the slaveholdings, in turn, began to decline. this was manifested in reducing the area of cultivated land, the spread of extensive forms of farming, etc. it became clear that the technical capabilities of the slave management of the economy were exhausted. slaves were not interested in improving the tools of labour, and free people increasingly preferred classroom philosophy, politics. the contradiction between large farms of slave owners and farms of free small producers has become sharpened. for slave owners, the obvious need was to find ways to increase the interest of slaves in the effective use of tools and improve the results of their work. there was a need to change the form of a combination of a direct manufacturer with means of production. a bet was made to strengthen small individual farms, which were in terms of motivation to work more rational forms of farming but with the preservation of large land tenure. changes in the organization of production in latifundia begin, which begin to be divided into small plots, so-called parcels, rented to small peasants (columns). as a result, the latter, remaining free people fell into a land dependence on the landowner by agreement, which was liquidated at the request of one of the parties. as for slaves, slave-owners began to expand their economic independence, giving slaves land and turning them into dependent colonate type. distributing rental relations in the form of cash and cash payments, as well as outsourcing. thus, the development of the slave system was by way of self-denial of communal property, displacement of its individual form of private property. that is, private property becomes an expression of the transformation of social labour into private labour, isolated commodity producers. now the subject of ownership is not the community as a whole but a separate person. formation of the class of individual owners created the preconditions for the transition to a feudal system, which was called to resolve the contradictions of the slave system. for feudalism, there were three main forms of land tenure: 1) state land ownership of the crown, which remained in the hands of the state after the distribution of land privileged classes; 2) a large private land ownership of feudal lords, landlords and 3) small peasant ownership with the preservation of remnants of communal forms of land tenure. by the end baltic journal of economic studies 310 vol. 3, no. 4, 2017 of the nineteenth century, the private property of the privileged classes and peasant ownership were burdened with legal, economic, and statutory restrictions on the purchase, distribution, inheritance of land, etc. feudal production relations were based on the individual dependence of peasants from feudal lords on the basis of non-economic coercion. however, they differed from similar relations in the era of the slave system, because to some extent contributed to the peasants’ interest in the results of their work. on the one hand, they did not stimulate dependent peasants to improve the results of their labour on the feudal livelihood but, on the other hand, they stimulated them to improve the results of their labour on the land they gave to the exploitation of the feudal lord and on which their farming the purpose of meeting the needs of the family in food and reproducing their own means of production, which they used in their own economy, and in the economy of the feudal lord. in addition, unlike slaves, dependent peasants had their own housing and economic buildings, and the possibility of using some of the lands owned by the rural community (despite its subordination to the feudal lord). feudal production was carried out in two forms – in the form of a bastard and in the form of obsolete households. in the battleship, the whole land of the feudal estate was divided into two parts: one  – the mansion, on which the peasant, with his labour and inventory, created a product that was fully attributed to the feudal lord, and the second was a peasant subdivision, on which the peasantry was created, the product was completely aimed at satisfying needs of the family and play his inventory. in the abandonment of land, almost all the land was transferred to the peasants and was in their abode. the part of the peasants’ products created in the farms was transmitted in the form of a feudal lord, and a part of it was left by the peasant to satisfy the food needs of his family and the reproduction of the inventory. thus, in the conditions of the barter, additional work is carried out forcefully and assigned in the form of working rent, and in the conditions of the obrok system – voluntarily, without coercion and supervision, and is assigned in the form of food rents (chukhno, 2006). as a result of the greater interest of dependent peasants in the results of their work for feudalism, there was a certain development of productive forces that predetermined the development of commodity production and commodity exchange, which in turn led to the formation of the domestic market, the strengthening of trade relations between the city and the village, activation of foreign trade. the feudal economy was increasingly drawn into commoditymoney relations, its closure, and isolation from peasant farms. this led to the transfer of peasants from work and product rents to cash. monetary rent showed a higher level of development of agrarian relations because now the peasant should not only grow the produce but also realize it on the market. in addition, his position changed, it approached the position of the employertenant. thus, the feudal system, albeit characterized by a simple reproduction, but was more progressive in comparison with the slave-owner. he expanded the economic independence of direct producers and brought them closer to the ground, contributing to the greater motivation of their work. under the conditions of further development of commodity-money relations, there was an intensification of the exploitation of the dependent peasantry by the feudal lords. as a result, this negatively affected both the state of affairs in the farms of feudal lords, as well as in the farms of peasants. some peasants who were left without land were forced to go to the city or work in farms rich in peasants, turning into hired workers. this has led to an increase in property and social inequality in the countryside. feudal relations prevented the transition of agriculture to a new mode of production, which required a large number of free hired workers. accordingly, the natural nature of feudal and peasant farms was incompatible with the needs of further economic development, which required new forms of organization of production and labour, a new way of combining direct producers with means of production, overcoming their personal dependence on feudal lords, that is, the replacement of feudal industrial relations with new ones, which would contribute to the development of productive forces and meet the needs for further economic development (chukhno, 2006). thus, as we see, industrial relations in pre-industrial economic systems were based on communal and private non-capitalist property of the means of production. however, the first emerged communal ownership of land. objective reasons for its occurrence and existence were: 1) the emergence of agriculture as an industry, which largely depended on the satisfaction of food in need; 2) the low level of development of productive forces, in which separate individual farming was practically impossible; 3) a low level of production, in which the necessary product for the existence could be created only by joint efforts of members of the community on the basis of the cooperation of their work, etc. (filonenko, 1996). the peculiarity of communal appropriation of land was that people perceived it as given to them by nature, and land ownership actually coincided with land tenure. however, with the transition from the primitive community to the rural (neighbouring), the allocation of a family of general tribal community and the separation of ownership of land from actual land tenure took place. the consequence of this was the emergence of a rural community, the classical form of which was the so-called mark that existed in germany, england, and some other countries. the peculiarity of the brand, inherent in other forms of rural communities, is the separation of land ownership of the family. in parallel, baltic journal of economic studies 311 vol. 3, no. 4, 2017 there is the emergence of private ownership of the land, on which the house was built. according to the village community, each member of the family received a certain portion of the so-called gufa for use, all the land was considered to be the property of the community. scientists assume that at first the sizes of the guf were the same, and communal ownership extended to all types of land. but subsequently, as a result of periodic redistribution of land allotments, the tendency towards the unequal distribution of members of the community began to emerge, and communal use of land spread only to some areas. over time, the community under the pressure of its individual members abandoned the right to periodically redistribute arable land and meadows. however, it did not retreat from all other rights. first, the community transferred its lands to individual families and individuals only for the purpose of their use as arable land or meadows; and secondly, the treasures found in the land, the fossils that lay deeper than the demarcation, belonged to the community; thirdly, all another land that was not a part of the estate, and the arable land (forests, pastures, ponds, hunting, and fishing) remained communal property, and were put into public use, the manner of which was determined jointly by all members of the community; fourth, the community retained the right to control and regulate the use of field lands and meadows (filonenko, 1996). thus, as we see, the foundations of land inequality and the possibility of developing private property on land were laid in the neighbouring community. with the development of large private land tenure community begins to die, and with it disappear also communal forms of land use because of the seizure of communal lands by large landowners. instead, the peasantry, having become dependent on the latter, is transformed from former independent landowners into dependent tenants. however, even after the seizure of communal lands by large landowners and the spread of serfdom to peasants, communal land use continued to persist for a long time, reaching more advanced forms. dependent peasants continued to use communal lands for a long time on the basis of a “fate” or “bastard” community, and with the abolition of serfdom retained their holdings on the basis of private labour property. however, the remnants of communal land use and communal practices are now found in many countries of the world in the form of mussels, communal use of land of mountain pastures, forests and other lands. the agricultural community was a transitional phase to a private property-based society. it should be noted that private ownership of land is a reflection of conditions of land use in the process of formation and development of commodity-money relations. it occurs when an additional product appears in agriculture and when it comes to the possibility of appropriating money for production, in particular land. the feudal relations ensured the initial accumulation of capital, without which capitalism could not be established, which, as a social mode of production, is inherent in industrial economic systems. the driving force that transforms preindustrial economics into industrial is the process of industrialization, that is, the transition of national economies to production based on the use of machines and machinery. it is in the process of initial accumulation of capital and, as a result of the development of the previous mode of production, there is a capitalist system, which was based on the private property of the capitalists on the means of production and the economic (real) dependence of legally free workers from the owners of capital, which, due to the lack of them means of production and livelihoods, are forced to sell to the capitalists their workforce. under capitalism, the destruction of the natural economy and the development of capitalist commodity production; the purpose of production is to become profitable and meet the needs of society; labour is transformed into goods along with other means of production; there is an unprecedented development of productive forces, which is accompanied by constant scientific and technological progress in the field of technology, technology, organization of agricultural production and labour, etc. thus, capitalism has generated economic incentives that have contributed to the scientific and technological progress and the interest of producers in implementing its achievements in production. at first, the capitalist economy was based on the simple co-operation of the work of hired workers, which, ensuring higher productivity of workers compared with the feudal system, eventually allowed to go to the manufactory, and after the industrial revolution of the late xviii –early xix century – to a large machine production, the form of organization, which was the factory. the capitalist organization of labour led to the emergence of a new productive force  – the machines that led to the intensification of the work of hired workers, the intensification of their exploitation. the form of exploitation of hired workers is now supported by their added value, which the capitalist appropriates according to the size of the capital invested. the development of capitalism is accompanied by the mass seizure of property from small producers, the deepening of property and social differentiation in society, the change in the social status of the majority of people who have turned into hired workers and became dependent on the owners of capital, the formation of the labour market, the initial accumulation of capital, etc. as a result of these processes, on the one hand, is the enrichment of the capitalists, and, on the other hand, the impoverishment of hired workers. this is precisely the contradictory nature of the capitalist society, the basis of which is the contradiction between the general logic of historical progress (the latter is the subordination of baltic journal of economic studies 312 vol. 3, no. 4, 2017 the production of human development) and the goal of industrial development. with the growth of production and accumulation of capital began to intensify the processes of concentration and centralization of capital and production, the trend of monopolization. this created conditions for the expansion of a new form of organization of production and labour, which is corporations, and the growth of the role of corporate property, which is realized simultaneously as an individual capitalist private, collective capitalist private and as labour private property. the proliferation of corporate property led to qualitative changes in the interaction of business entities through the convergence of interests of entrepreneurs, hired workers and the state, the development of a partnership between the state and business, social responsibility of business, etc. at the same time, a decrease in the value of individual capitalist property began to be observed. however, after the scientific and technological revolution of the second half of the twentieth century, the situation has changed: medium and small enterprises, which, due to high specialization and mobility, are achieving higher results and higher efficiency compared to large enterprises, they began to grow. the latest scientific and technological revolution has accelerated the changes in the development of the capitalist system, led to the emergence of new trends and patterns. on the one hand, in the conditions of intensification of processes of concentration and centralization of capital, integration, and internationalization of production, there is the existence of large corporations; on the other hand, there is an increase in the number of medium and small enterprises, and the strengthening of competition between them (chukhno, 2006). that is, processes of integration of labour and production, diversification and deconcentration of production, demonopolization and decentralization of production and management, and capitalization processes are supplemented by the processes of socialization; private property acquires forms of collective-private, joint-stock, corporate, etc. appearing intellectual property and spreading its various forms  – personal, individual private, collective, corporate, state property. in addition, there are new forms of relations between economic entities (for example, the system of joint ownership of intellectual capital by all investors). under these conditions, a transition to a new technological mode of production is taking place, where knowledge and information become the main sources of economic growth. the role of the service sector, which provides training for highly skilled workers, is growing, while the scope of material production is narrowing. there is an increase in the proportion of mental labour. accordingly, the role of living, highly skilled labour, the intellectualization of the worker and the socialization of conditions of his work and life, the priority for wage workers become a satisfaction of spiritual needs, and the source of satisfaction of these needs is the social benefits, not just wages. this means that, unlike the previous stages of the development of a capitalist society, which was based on private property and solved private tasks, nowadays, state property and social (social) forms develop alongside it. capitalist society enters the post-industrial era (chukhno, 2006). it should be noted that the mass transition to machinebuilding in the agrarian sector took place later than in the industry. this was mainly due to the coexistence of various forms of ownership in the agrarian sector, inherited from different economic systems, and the lack of sufficient capital from agricultural producers. the massive activization of the processes of industrialization of the agrarian sector in developed countries of the world has been manifested in: • wide complex application of machines and mechanical equipment for the production in all branches of agriculture, which transformed them into one of the organizational forms of industrial production; • the rapid growth of labour productivity; • a significant increase in the concentration and specialization of production, the emergence of new forms of agricultural enterprises similar to those operating in the industry; • rapid concentration of capital operating in the agrarian sector; • rapid and substantial reduction in the number of family farms; at the same time, modern forms of the functioning of private and collective property characteristic of industry (joint-stock, cooperative, collective, but with the domination of private capitalist property) became widespread; • strengthening the processes of integration of agriculture with industrial and financial capital, etc. (zaitsev, savchuk, 2011). as the analysis of the essence and laws of development of the transformation of the economic system of an industrial type and external factors of its development, it is characterized by openness, nonlinearity, flexibility, the ability to respond to changes in the needs of man and society. it is these particularities, according to yu. k. zaitsev and v. s. savchuk, that allowed the capitalist society to respond in a timely manner to the rapid growth of uncompensated environmental disturbances. such a course of transformation shows that the capitalist system has powerful motivational levers that provide sustainability and opportunities for the further development of its economic and social system, as well as the real possibilities for the dynamic functioning of individual stages of the life cycle of economic systems over a long period of time (zaitsev, savchuk, 2011). in the opinion of l. a. griffen, it was socialism that created opportunities for the further development of capitalism, which is aimed only at violence, exploitation. the existence of socialism has enabled baltic journal of economic studies 313 vol. 3, no. 4, 2017 the workers of the capitalist countries to succeed in meeting their demands; contributed to the collapse of the colonial system; forced the capitalist states to intensify integration tendencies in the face of the threat of destruction of the class of the bourgeoisie. however, capitalism has changed more in form than in essence. it continues to strive to exploit others, but now on a global scale, through the exploitation of natural resources and the population of developing countries. for example, the us, which has only 5% of the world’s population, consumes 25% of all energy produced and 40% of natural resources (griffen, 1994). as we see from the foregoing, private capitalist ownership of means of production, including land, is characteristic of market-based economic systems of industrial and post-industrial type. it was historically formed in several ways: the seizure of communal lands; redemption of lands belonging to monarchs or tribal leaders; purchase of land belonging to isolated farmers; seizure of land both in conquered territories and among peasants who were the independent economy. the emergence of private ownership of land was conditioned by the need to develop and use public division of labour. the benefits of private property were due to the fact that it contributed to the redistribution of land in accordance with the needs of social development; optimizing the sizes of farms in accordance with the technical and economic conditions and, therefore, the more effective use of land and technology on the basis of large agricultural enterprises; it created certain conditions for the formation of farms of independent landowners and encouraged them to manifest an economic initiative; land purchase and sale have made it possible to determine the economic value of land. the sooner penetration of market relations into agriculture occurred, the sooner the old forms of feudal land relations were replaced, replaced by new, capitalist ones. however, the complete disappearance of feudal forms of land relations did not take place, therefore today in the western european capitalist countries, there are several ways of development of land relations, among which: 1) english type of land relations, which has developed directly from feudal land ownership and is characterized by concentration of land ownership, the entire separation of land ownership from agriculture and the lack of small land ownership; 2) prussian type of land relations, which also evolved from feudal land ownership with the preservation of latifundia in the hands of landowners. in this type of land relations take place as a large land ownership of large farms, and the small property of the peasants, but neither with it nor with another, there is no separation of land ownership from the agricultural economy; 3) french type of land relations, which preserved a number of historical remnants of feudalism and characterized by the spread of the former feudal latifundia of small land ownership of the peasant or parcel type; 4) north american type of land relations, formed on the basis of the seizure of land and their surplus in the conditions of rapid development of agricultural capitalism (lyashenko, 1930). thus, on the basis of the collapse of feudal farms, based on the feudal form of private ownership of land, there were two types of farms: capitalist-entrepreneurial and peasant. the basis of peasant farms is peasant private ownership of land. peasant ownership of land means consolidating the ownership of those who work on it; the limitedness of its economic and economic capacities associated with the work of the peasant; its dependence on forms of management, which exist on the basis of a large ownership of land. the basis of the emergence of the capitalistentrepreneurial form of land ownership is the transformation of a large feudal property, the subjects of which are the owner of the land, the entrepreneur, the tenant and the hired worker who got rid of the land. under conditions when the landowner is not its immediate owner, he acts as a landlord and receives rent from tenants. with regard to the tenant entrepreneur who acts on the ground and does not own the land, he provides with his own capital the creation of opportunities for the emergence of additional value, some of which later will be assigned to the owner of the land. by destroying the old forms of great feudal land tenure and replacing them with new forms of great capitalist land tenure, the market economy system of industrial and post-industrial type did not lead either to the complete elimination of smallholders or to the full socialization and concentration of agricultural land, as was the case in industry. as a result, along with the remnants of collective communal land tenure and large private land ownership of the era of feudalism, in the agriculture of developed countries, small land tenure of the peasant type and various forms of partial land ownership of the urban population, which in economic terms are eliminated from the forms of small-scale farming, have become widespread, for housekeeping and groceries to meet the needs of the family. the development of parcel land tenure takes place in two directions: on the one hand, in the form of the development of parcel peasant land tenure in general, when former independent peasant farms turn into parcel areas, suitable only as a mansion and a city. on the other hand  – in the form of the distribution of the same parcel around cities and large industrial centres, when small areas are used by city residents as a place to rest like a city and other. revenue from such areas does not play any significant significance at all. from the foregoing, it is clear that the market economy system in general and in particular the capitalization of agriculture does not always lead to the concentration of land ownership. in some circumstances, the process baltic journal of economic studies 314 vol. 3, no. 4, 2017 of capitalization of agriculture is accompanied by a concentration of land ownership and the presence of large sizes of farms, in the opposite case, the fragmentation of land ownership, and the presence of small sizes of land holdings. the problem of land ownership in a capitalist economy is to overcome the monopoly of land ownership, which at a certain stage becomes an obstacle to the further development of capitalist agricultural production. the negative consequence of land ownership and its rental monopoly is the impact on the development of productive forces in agriculture. the distraction of capital for the purchase of land, which leads to a reduction in investments in its cultivation, and the transition to the cultivation of the worst land – these are the main negatives of land ownership for the development of productive forces and agricultural capitalization. that is, in the agricultural sector, the principle of private property conflicts with other basic principles of capitalism  – economic freedom, competition, concentration trends, and socialization. the contradictions between private property and all capitalism do not disappear, even at the high stages of the capitalist process of socialization. the historical mission of the development of capitalism in agriculture was the expansion of the feudal forms of land ownership that it inherited from the previous period and the promotion of a new form of ownership that corresponded to the level of development of productive forces and corresponded to a new mode of production. capitalism, on the one hand, provided employees with personal independence from feudal lords, landlords, and, on the other hand, led to the separation of land from its owner, for whom land now increasingly becomes not the object of capital investment in agricultural production but a source of rental income from ownership to land. land ownership takes on an economic form, turning into an ordinary commodity that is in demand by capitalists and tenants. this form of separation of land from agricultural production is an obstacle to its development and capitalization. another way to overcome the feudal forms of landed property by capitalism is to mobilize land in connection with the growth of mortgage land debt, in which capitalization of rents takes the form of mortgage debt. but if through the mobilization and price of land, capitalism adapts land, as a means of production, to the conditions of capitalist production, then mortgage debt leads to the degeneration of the very nature of land ownership and landowner. it is a question of the fact that obtaining a rent goes not to the landowner but to the bank capital. under such conditions, the landowner turns into an agricultural producer or leaves the capitalist land relations. a complete separation of land tenure from agriculture is through a lease. this is due to the fact that the development of lease relations, on the one hand, involves the presence of tenant entrepreneurs and hired workers, and, on the other hand, the isolation and preservation of the class of landowners. in this regard, the lease may, in some cases, be based not only on capitalist relations but also on the remnants of pre-capitalist relations and forms. accordingly, there are two types of lease: capitalist and non-capitalist. the capitalist lease implies the existence of developed capitalist relations in agriculture, namely: the leasing of land for the purpose of its further exploitation through the use of capital and hired labour in conjunction with the work of family members. the central figure of such a lease is the entrepreneur-tenant, who conducts commodity capitalist production. the non-capitalist lease implies the existence of undeveloped capitalist relations in agriculture and the leasing of land not so much for the purpose of its capitalist exploitation as for the purpose or satisfaction of the food needs of the family, or for the purpose of simple commodity production. the central figure of such a lease is a small producer, a peasant who leads a household to meet their food needs or to market products. despite the prevalence of both types of the lease in different countries, there is a tendency to replace the forms of land relations of the pre-capitalist economy with forms of the capitalist lease. as we see, the development of private ownership of land is an objective process, due to a certain system of contradictions and the need for their solution. the most important of these are: • the possibility of separating property rights, which is a source of non-profit income, from actual land use, which leads to inefficient use of land; • the contradiction between the interests of society in using land and the interests of the landowner; • the contradiction between the distribution of land, caused by the ownership relations with it, and the needs of its new distribution and redistribution, caused by the development of productive forces; • the contradiction between the market and the naturalproduction criteria of the use of land as an expression of contradictions between different methods of management (filonenko, 1996). the above contradictions require the search for solutions. there are three ways of resolving conflicts of private ownership of land in the agrarian sector: nationalization of land and its rents, the creation of collective agricultural enterprises, and the establishment of control by society for the use of land. the first two ways have been realized at the beginning of the last century in post-socialist countries, whose economic relations were based on the social ownership of the means of production, the social forms of organization of production and labour, the direct combination of producers with means of production, the lack of human exploitation, the systematic and proportional development of the economy, ensuring baltic journal of economic studies 315 vol. 3, no. 4, 2017 the comprehensive development of personality and full satisfaction of its needs. in fact, public property has been secreted. under such conditions, direct producers were formal owners, alienated from the means of production and its results, and the removal from management thereof. this undermined their interest in the results of their work. in addition, production under socialism was carried out in accordance with the policy plans, the implementation of which did not contribute to the implementation of scientific and technological progress in agriculture. instead of democratizing public life, its bureaucratization took place, which limited the economic independence of labour collectives. all this led to the development of agriculture on an extensive basis. when the opportunities for such a development were exhausted, the growth rate of production began to fall, and social tension in society would increase. this conditioned the need for a radical restructuring of the system of agrarian relations and, above all, relations of ownership of land. the situation in the agrarian sector was associated with an escalation of supremacy between the form of ownership of land and the forms of real land tenure. the impression was that the associated producers are formal owners, and the land, in essence, is a draw. in this regard, the main link of a radical restructuring of agrarian relations was to resolve this contradiction. however, unfortunately, all the efforts of the reformers focused on the restructuring of land ownership. it was not taken into account that the restructuring of land ownership relations in conditions of the ineffectiveness of public ownership of land should take place not only as a substitute for private property but also through changes and changes in the economic situation of all subjects of agrarian relations – both the owner and employee. thus, in the absence of proper conditions for solving this contradiction, there was a dialectical denial of public ownership and the revival of private ownership of land. in resolving the contradiction of private ownership of socialism was not taken into account: first, that the form of ownership of land is conditioned by the needs of the development of productive forces, and secondly, that the socialization of the land should correspond to the economic interests of the peasants, that is, those who will handle it. the world experience of the restructuring of agrarian relations shows that, firstly, it is not possible to hurry to change the forms of ownership of land, and secondly, such a change should occur along with similar changes in the economy, which makes the transition to new forms of ownership of land more efficient, thirdly, the use of public property and public ownership of land is justified only when they represent one of the prerequisites for resolving the contradiction between the form of ownership of land and the forms of real use of land, etc. today, in developed countries, the resolution of conflicts of private ownership of land takes place by establishing control by the society for the use of land and compliance with the terms of its sale. currently, in all countries, the land legislation provides for the state control over compliance with these conditions. in general, it must be said that the nationalization of land, although in practice, is socially inaccessible to industrial and post-industrial societies, remaining a utopia of social transformation, but its implementation would bring a number of benefits for the development of agriculture since it would free capitalists from the need for unproductive costs for the purchase of land, created would be favourable conditions for the competition of capital in agricultural production, would lead to the disappearance of an absolute and monopoly land rent that, in its own would lead to lower prices for agricultural products, reducing the capitalist costs of production. thus, the dialectic of the development of institutional social forms of functioning of economic systems and property relations in the agrarian sector is that the development of land ownership relations leads to changes and transformations in the system of industrial relations, their transition to the higher stage of socioeconomic development and the emergence of new social forms of functioning of economic systems. in turn, the emergence of new social forms of the functioning of economic systems causes changes in the structure of relations of ownership of land, leading to the emergence and dominant position in the agrarian sector of new types and forms of ownership, reflecting the socioeconomic nature of the prevailing social system. thus, in pre-industrial economic systems, which characterized the low level of development of productive forces, social forms of organization of production and labour were largely dependent on nature and demanded the unification of people into groups in order to meet their needs and needs of the ruling class. under such conditions, the main productive force was a man. in such systems, conditions are created for the exploitation of man by man, new social institutions arise – classes that act as production units that determine the relationship between people in the production process. for market economical systems of an industrial type characterized by a high level of development of productive forces; preserving the division of society into social classes; the economic dependence of legally free employees from the owners of capital, which forces employees to alienate their workforce in order to secure livelihoods for themselves and their families; replacement of private non-capitalist ownership of private capitalist property (corporate, corporate, monopoly, oligopolistic); the main productive force is the machine, the person becomes an appendage to the car; capital and labour are parties to capitalist production relations; strengthening the processes of specialization and concentration of labour baltic journal of economic studies 316 vol. 3, no. 4, 2017 and production, centralization of ownership and management, capitalization and monopolization of production. in a market-based economic system of postindustrial type, there is a transition to automated production; science becomes the main productive force, and important resources are knowledge and information; denied the relationship of personal and economic dependence of man; preconditions are created for ensuring the comprehensive development of the individual and the harmonious combination of the individual with the environment; processes of integration of labour and production, diversification, and deconcentration of production, demonopolization and decentralization of production and management are taking place, and capitalization processes are complemented by socialization processes; private property acquires forms of collective-private, jointstock, corporate; intellectual property appears. if in pre-industrial systems, the main means of agricultural production growth was agricultural capital, industrial – industrial capital, then in the post-industrial – information and knowledge of direct producers. patterns of development of relations of land ownership in addition, on the basis of the analysis of the evolution of land ownership relations in different economic systems, one can conclude that their development is characterized by certain patterns: 1) development and complication of forms of property is constantly underway; 2) each form of ownership by its nature is historical, that is, having arisen as a result of certain circumstances, it with the termination of their actions should be replaced by another, more adequate to the new conditions. conservation of the development of functional forms of property leads to stagnant phenomena, inhibition of social processes; 3) the emergence of a more developed form of ownership of land does not lead to the complete disappearance of the previous form of ownership; 4) the more specific forms of ownership within a certain mode of production, the stronger are the driving forces and sources of economic system development; 5) as the evolution of property relations weakens the antagonistic nature of social contradictions, there is a convergence of interests of opposing classes, social groups. indeed, preindustrial economic systems were based initially on the property of the ruling class on the means of production and the employee (producer), and later on the results of his work; industrial economic systems – only on the property of the capitalist on the means of production, and post-industrial systems – on the property of the workers themselves for their unique abilities (a combination of capital and labour is in place), the social status of man is now largely determined by the level of education; 6) development of property relations has an interesting trend – in the early stages of its development, humanity used common, collective forms of ownership, then, with the development of productive forces, communal property self-denied and displaced by private property, self-development, which takes place in the direction of its socialization (socialization of the nature of labour and production) and the emergence of group and collective forms of private property; 7) each functional form of ownership reflects a certain level of development of the productive power of human labour (but this provision should not be absolutised, as the reasons that determine the logic of property relations at a certain stage of historical development are multidimensional). type and form of ownership should correspond to the level of development and the mode of functioning of the productive forces; 8) a measure of the realization of any type or form of ownership is the degree of human freedom, that is, the form of ownership expresses the degree of freedom of action of man (from full freedom to individual production to its “restriction” by defining the framework of collective or social interests); 9) development of the essential basis of property relations takes place in an evolutionary way, and the change of legal form of ownership – institutional instruments; 10) institutional forms of ownership combine both old forms and new ones; 11) each typical civilization is characterized by a specific for the conditions of its development, the dominant object of property, which reflects the achieved level of development of the productive power of human labour and the corresponding formative peculiarities of the appropriation of means and outputs. thus, in agrarian civilization, the dominant object of the property was land, which, due to the development of the productive power of human labour, gradually evolved from the collective form of human existence into a separate means of its production activity. in the period of development of industrial civilization, the dominant object of the property was created by a man of the instrument of production, and the need for high concentration of them created the gap between labour and property. as a result, means of production, alienated from the workforce, have become capital forms, and labour is the form of commodity. fundamentally new processes in property relations appear with the emergence of post-industrial civilization. here, the main object of property is the information and knowledge that embodies the costs of the intellectual workforce, which, unlike the workforce used in traditional branches of the economy, loses the ability to alienate from its carrier. in addition, materially-conceived means of production in the process of their productive use of human labour acquire qualitatively new social features and turn into a productive force of its labour, a specific object of its individual, personalized property. thus, as we can see, throughout the history of mankind, the development of land ownership relations is closely associated with changes in the institutional baltic journal of economic studies 317 vol. 3, no. 4, 2017 forms of social functioning of economic systems. thus, in pre-industrial economic systems, communal property, exploitative types of private property and state ownership, such as the property of kings, feudal lords and other rulers, took place. in market economical systems of industrial and post-industrial type, along with the state form of ownership, group and collective forms of private property arise and develop. that is, the self-development of private property takes place in the direction of its socialization through the transformation of a single form of capitalist private property into its corporate form. 5. conclusions and prospects for further research the dialectic of the development of institutional social forms of the functioning of economic systems and property relations in the agrarian sector is that the development of land ownership relations leads to changes and transformations in the system of production relations, their transition to a higher stage of socio-economic development, and the emergence of new social forms of functioning of economic systems. in turn, the emergence of new social forms of the functioning of economic systems causes changes in the structure of relations of ownership of land, leading to the emergence and dominant position in the agrarian sector of new types and forms of ownership, reflecting the socio-economic nature of the prevailing social system. on the basis of the analysis of the evolution of land ownership relations in various economic systems, one can conclude that their development is characterized by certain patterns: the development and complication of property patterns are constantly underway; each form of ownership by its nature is historical, that is, arising from the action of certain circumstances, it with the termination of their actions should be replaced by another, more adequate to the new conditions; the emergence of a more developed form of ownership of land does not lead to the complete disappearance of the previous form of ownership; the more specific forms of ownership within a certain mode of production, the stronger are the driving forces and sources of economic system development; as the evolution of property relations weakens the antagonistic nature of social contradictions, there is a convergence of interests of opposing classes, social groups; each functional form of ownership reflects a certain level of development of the productive power of human labour; the means of realization of any type or form of ownership is the degree of human freedom; the development of the essential basis of property relations takes place in an evolutionary way, and the change in the legal form of ownership  – institutional instruments; institutional forms of property combine both old and new forms; each typical civilization is characterized by a dominant property object that is specific for the conditions of its development, which reflects the achieved level of development of the productive labour force of man and the corresponding formative peculiarities of the appropriation of means and production results. further research will be devoted to the development of a model of the economic policy of the state in solving socioeconomic contradictions in the agrarian sector of the modern economy. references: bashnyanin, g. i., kopych, i. m., shevchyk, b. m. (1999). economic systems: problems of structuring and typology. – lviv, co-education, 220 p. griffin, l. a. (1994). dialectics of social development (the experience of modern marxism). second edition.  – kiev, naukova dumka, 116 p. zaitsev, yu. k., savchuk, v. s. (2011). modern political economy (problems and institutional field of the subject and research methodology). – kyiv, kneu, 337, [3] p. lyashchenko, p. i. (1930). the main elements of the social economy of agriculture. – moscow, 400 p. filonenko, o. s. (1996). agrarian relations: content, development, future. – kyiv, vintage, 208 p. chukhno, a. a. (2006). works: in 3 volumes. vol. 2. information post-industrial economics: theory and practice. – kyiv, 512 p. ольга шульга закономерности развития отношений собственности на землю в аграрном секторе экономики аннотация. в основе каждой экономической системы лежит определенная система отношений собственности, соответствующая определенному уровню развития производительных сил. когда эта система отношений собственности перестает обеспечивать прогресс экономического развития, возникает необходимость ее замены на новую. именно объективная потребность развития производительных сил предопределяет необходимость возникновения новой, высшей формы собственности. для каждой системы отношений собственности характерна своя система противоречий, которая обеспечивает ее развитие. baltic journal of economic studies 318 vol. 3, no. 4, 2017 решение этих противоречий ведет к появлению новых адекватных форм дальнейшего развития системы отношений собственности. относительно аграрного сектора экономики, то любое противоречие аграрных отношений является формой выражения противоречий, основанных на противоречиях отношений собственности на землю. отсюда следует, что противоречие отношений собственности на землю является основным в системе аграрных отношений и без его разрешения невозможно разрешить все остальные противоречия аграрного сектора и сформировать эффективные аграрные отношения. именно поэтому, чтобы разработать эффективную аграрную политику по решению существующих в аграрном секторе противоречий, важно выяснить противоречия и закономерности развития в нем отношений собственности на землю. предмет исследования  – противоречия и закономерности развития отношений собственности на землю в аграрном секторе экономики. для выяснения и раскрытия этих вопросов были применены диалектический, динамичный, системный, единства логического и исторического подходы, методы обобщения, анализа и синтеза и др. цель статьи  – раскрыть диалектику противоречий развития институциональных общественных форм функционирования экономических систем и отношений собственности в аграрном секторе, определить закономерности развития отношений собственности на землю. движущими силами развития любой экономической системы является противоречие между формой земельной собственности и формой землевладения, между формой землевладения и формой непосредственной работы на земле, между владельцем земли и непосредственным работником на ней. диалектика развития институциональных общественных форм функционирования экономических систем и отношений собственности в аграрном секторе заключается в том, что развитие отношений собственности на землю ведет к изменениям и преобразованиям в системе производственных отношений, их перехода к высшей стадии общественноэкономического развития и появления новых общественных форм функционирования экономических систем. в свою очередь, появление новых общественных форм функционирования экономических систем обусловливает изменения в структуре отношений собственности на землю, ведет к появлению и господствующему положению в аграрном секторе новых видов и форм собственности, отражая социальноэкономическую природу общественного строя. на основе анализа эволюции отношений собственности на землю в разных экономических системах можно сделать вывод, что для их развития характерны определенные закономерности: постоянно происходит развитие и усложнение форм собственности; каждая форма собственности по своей природе является исторической; чем больше конкретных форм собственности в пределах определенного способа производства, тем сильнее являются движущие силы и источники развития экономической системы; по мере эволюции отношений собственности ослабляется антагонистический характер социальных противоречий, происходит сближение интересов противоположных классов, социальных групп; каждая функциональная форма собственности отражает определенный уровень развития производительной силы труда человека; развитие сущностной основы отношений собственности происходит эволюционным путем, а изменение правовой формы собственности  – институциональными инструментами; институциональные формы собственности сочетают в себе как отжившие формы, так и только что рожденные; каждому типу цивилизации присущ специфический для условий ее развития доминирующий объект собственности, отражающий достигнутый уровень развития производительной силы труда человека и соответствующие формационные особенности присвоения средств и результатов производства и т. д. baltic journal of economic studies 51 vol. 1, no. 2, 2015 diversification as a tool of anti-crisis strategy of development of rural territories in ukraine arthur ilnitsky1, alla chikurova2, podolsky state agrarian technical university, ukraine abstract. the main goal of this work is to study the problems of rural development in a crisis situation and shows one of the outputs of the socio-economic problems of rural development, namely the proposed diversification of production and services. because increased competition in the market requires a search for new effective ways and methods to ensure the survival of enterprises in rural areas in a market environment. one of these methods is the introduction of diversification. diversity own economic and financial activity of various branches in rural areas is carried out not only in the context of globalization of the world economy associated with the interpenetration of capital and technology, but also in times of crisis as a tool of anti-crisis strategy. the effectiveness of its implementation depends on the timely focus on the types of goods and services that are in demand or close to the level of competitiveness. the question of the development strategy involving the development of methods of receiving, processing and communication of information related to the development of new technologies, products, markets and other areas and activities, as well as identify patterns to determine the motivation of diversification as a development strategy in rural areas. the methodological basis for the development of this paper, aimed at the development of rural areas in all its multidimensionality become fundamental research and active discussions among qualified experts and stakeholders, and formed on their basis of decisions of state and local governments targeted the development of production capacity, improve the quality of the environment and improving the quality of human capital in rural areas of ukraine. result. diversification of economic activities in the rural development is not only adequate response to the challenges of a globalizing world economy associated with the interpenetration of capital and technology, but also in times of crisis – is one of the tools of anti-crisis strategy. the effectiveness of diversification depends on timely guidance on the types of goods and services that are in demand or close to the level of competitiveness. the practical value. thus, our proposed mechanism for developing a program of social development will help meet the needs of the population in social infrastructure, solve the problem of territorial distribution of these facilities, to develop concrete measures to improve the functioning of the social infrastructure for various purposes and most importantly – to find ways financing of such programs will allow overcoming disparities of regions of ukraine in general and the regions and districts to provide people with jobs. value/originality. diversification of the rural economy is the key to a significant decrease dependence on agriculture and the development of new economic activities, creating new businesses and investments. it can also help increase employment and income of rural population increased output of high value added, improving the quality of human capital and, finally, help boost rural development. key words: diversification of the rural strategy, rural economy, rural tourism, the problems of development of rural territories. jel classification: j16, o1, o13, o18 1. введение современные тенденции развития сельских территорий украины происходят в направлении сужения сферы приложения труда и несоответствия профессионально-квалифицированной качестве рабочих потребностям работодателей, рост безработицы. проблема диверсификации сфер занятости сельских жителей особенно актуальна в регионах украины с высокой долей крестьян. особую актуальность развитие предпринимательства приобретает в сельской местности украины. поскольку село – это не только место проживания значительной части граждан, но и среду их социального и культурного развития, места работы, быта и т. невозcorresponding author: 1 department of management of organizations and administration, podolsky state agrarian technical university. e-mail: g-unit120590@mail.ru 2 department of management of organizations and administration, podolsky state agrarian technical university. e-mail: alladama@mail.ru baltic journal of economic studies 52 vol. 1, no. 2, 2015 можность сельскохозяйственного производства обеспечить полную занятость и достойный уровень жизни сельских жителей вызывает потребность в поиске решения этих проблем с помощью предпринимательской деятельности. проблема диверсификации, несмотря на повышенное внимание к ней, изучена еще недостаточно. зарубежные ученые и. ансофф, к. боумен, дж. гэлбрейт, д. дэй, п. друкер, т. минтцберг исследовали вопросы стратегии, сбалансирования ассортиментного портфеля, обеспечения финансовой устойчивости. в начале 90-х годов. российские и украинские ученые продолжили изучение этих проблем. незаурядные достижения в этой научной сфере должны а.н.  аронов, в.  а.  гришко, с.м.  ильяшенко, е.а.  козловская, и.м.  кублин, в.  моисеев, и.  немченко, а.н.  петров, р.б.  тян и другие. впрочем, несмотря на исследования данной проблематики названными авторами, остаются серьезные вопросы теоретического и методологического характера во время формирования диверсификационной политики. в странах с развитой рыночной экономикой уделяется большое внимание вопросам развития предпринимательства на селе и его влияния на диверсификацию сельской экономики. весомый вклад в изучение этих проблем сделали такие известные отечественные ученые, как с.  гудзинский, а.  онищенко, м.  орлатый, и.  прокопа, п.  саблук, м.  хвесик, в.  юрчишин, к.  якуба; зарубежные – л.  ван депоель, ж.  уилкин, т.  дуча, х.  каравелле, м.  кларк, т.  лонч и много других. однако, не считая на разноплановость и глубину проведенных исследований, эта проблема остается недостаточно изученной и требует дальнейшего исследования. 2. теоретические аспекты диверсификации диверсификация – это процесс, охватывающий организационные, экономические, правовые изменения на предприятиях и направлен на повышение эффективности производства, снижение количества банкротств, своевременное реагирование на изменения экономической конъюнктуры рынка для обеспечения прибыльности на основе использования рыночных шансов и установления конкурентных преимуществ, укрепления положения предприятия в рыночном сегменте (г ушак з.м., 2009). диверсификация как общественная форма организации производства может обеспечить ряд преимуществ: во-первых, она является важным средством управления финансовыми рисками. во-вторых, диверсификация позволяет полнее использовать свои материальные ресурсы, землю и рабочую силу и благодаря этому смягчить сезонность производства, повысить занятость работников, получить дополнительный доход от своевременной и продуманной отраслевой маневренности, быстрее наращивать объемы производства тех видов продукции, на которые есть спрос и формируется приемлемая цена (томпсон а.а., мл. стрикленд а.дж., 2009). диверсификация может происходить по следующим вариантам: первый – когда диверсификация связана с потребностями потребителей. она представляет собой освоение новой для предприятия технологии с целью продолжить обслуживание традиционного рынка. такой вариант развития диверсификации может осуществляться или путем покупки уже существующей фирмы с новой технологией, или же создание нового производства, опираясь на внутренние источники. нередко, введя продукцию с новой технологией, предприятие теряло лидерство в отрасли. второй вариант диверсификации связан с технологией и заключается в применении традиционной технологии предприятия для удовлетворения новых потребностей. пример – распространение электроники в машиностроении. осуществляется либо путем поглощения (например, автомобильная кампания поглощает электронную), или путем внутреннего развития из-за выхода на новые рынки. третий вариант диверсификации – переход в область, не связанную с текущим бизнесом предприятия, к новым технологиям или потребностей рынка. такую диверсификацию называют еще конгломератной диверсификацией. она осуществляется, как правило, путем приобретения фирмы. то есть создается новый конгломерат, объединяющий предприятия многих отраслей, не связанных между собой технологической цепью. эти предприятия действуют как самостоятельные и только финансово и административно зависят от главного офиса конгломерата (костюк т.а., 2007). однако диверсификация деятельности предприятия не только является инструментом для увеличения реализации услуг, она является инструментом межотраслевого перераспределения финансовых ресурсов, методом оптимизации структурных преобразований в экономике; позволяет снижать негативные последствия финансовых и экономических рисков, повышает адаптивные качестве субъектов хозяйствования на отечественном рынке; является важнейшей составляющей и одновременно одним из главных механизмов процесса реструктуризации и повышения конкурентоспособности компаний; формирует корпоративный класс ведущих менеджеров, принимающих управленческие решения в условиях кризиса и риска. 3. влияние диверсификации на развитие сельских территорий на современном этапе под диверсификацией деятельности предприятия на сельских территориях понимают в широком смысле распределение капиталов между различными объектами, проникновение в новые отрасли и сферы деятельности, расширение географических границ деятельности, расширение ассортимента, номенклатуры продукции предприятия. стратегия диверсификации заключается в уменьшении риска baltic journal of economic studies 53 vol. 1, no. 2, 2015 фирмы с помощью распределения инвестиций и других ресурсов между несколькими направлениями деятельности – производством разнородных товаров и предоставлением различных услуг. современные тенденции развития сельских территорий нашего государства схожи с европейскими и мировыми и происходят в направлении сужения сферы приложения труда. также для украины характерны остаются несоответствие профессионально-квалифицированной качестве рабочих потребностям работодателей и рост безработицы (харчук с. а., 2015). на национальном и региональном уровнях ес параллельно существует несколько концепций (подходов), из которых можно четко выделить три концепции развития сельских территорий, а именно: концепция, которая идентифицирует сельское развитие с общей модернизацией сельского хозяйства и агропродовольственного комплекса. эта концепция берет за основу развитие сектора (отраслевая модель); концепция, которая связывает сельское развитие исключительно с уменьшением различий между наиболее отсталыми сельскими районами и остальной сектотаблица 1 модели развития сельских территорий характеристика модели развития сельских территорий отраслевая перераспределительная территориальная цели политики выравнивание доходов с другими отраслями рост масштабов производства (на уровне предприятия) интенсификация производства (капитал на единицу площади / труда) компенсация влияния неблагоприятных природных и социально-экономических факторов сокращение различий между отсталыми сельскими районами и городскими районами диверсификация доходов сельскохозяйственного предприятия использование внутренних ресурсов территории диверсификация доходов сельскохозяйственных предприятий новые формы сокращения расходов распространение форм диверсифицированных видов деятельности формирование несельскохозяйственных видов деятельности (промышленное и ремесленное производство, услуги и др.) тип привилегированной политики поддержка инвестиций в развитие предприятия прямая поддержка доходов производителей компенсационные выплаты горным и депрессивным районам поддержка инвестиций в развитие сельскохозяйственного предприятия диверсификация источников доходов сельскохозяйственного предприятия поддержка диверсификации доходов политики местного экономического развития поддержка развития инфраструктуры и услуг для местного населения поддержка инвестиций в сельскохозяйственное предприятие роль территорий «контейнер» ресурсов / вложения в сельское хозяйство сельский = сельскохозяйственный пространство дуализм сельский / городской центральная роль слабых сельских территорий (горные районы, депрессивные сельские территории, неблагоприятные районы) внимание критериям определения «слабые сельские районы» внимательное отношение ко всему сельского неоднородность сельских районов в региональном и европейском контексте многомерное определение понятия «сельский» снижение разрыва между слабыми сельскими территориями и городскими районами роль отраслей центральное место сельского хозяйства и профессионального сельскохозяйственного предприятия интеграция сельского хозяйства и агробизнеса в глобальный контекст центральное место сельского хозяйства другие отрасли как возможность диверсифицированного развития сельскохозяйственных предприятий центральное место сельского хозяйства, двигателя процессов сельского развития (первый вариант модели) центральное место других отраслей для диверсификации местной экономики (второй вариант модели) роль социальных структур центральное место профессиональных организаций, организаций производителей доминирование организаций производителей большое внимание в отношении операторов несельскохозяйственных отраслей сельское развитие как процесс с множеством действующих лиц необходимость форм и механизмов управления конфликтами центральное место концепции партнерства центральное место распространение сетей роль институциональных структур концентрация управления политикой в руках администрации области (региональной и национальной) доминирующая роль отраслевой администрации в управлении направлениями политики распространение форм кооперации и / или интеграции с администрацией других отраслей создание форм местного и децентрализованного правительства многоуровневое управление политиками и направлениями развития источник: (kolesnikov, 2014) baltic journal of economic studies 54 vol. 1, no. 2, 2015 рами экономики (концепция сближения, перераспределительная модель). это предполагает развитие, прежде всего, традиционных отраслей (агротуризм, сельский туризм, переработка сельскохозяйственной продукции в самых хозяйствах и т.п.); концепция, которая идентифицирует сельское развитие с развитием сельских районов в целом путем использования всех ресурсов, находящихся на их территории (человеческих, физических, природных, ландшафтных и др.), и интеграции между всеми компонентами и отраслями на местном уровне. эта концепция использует возможности территории в самом широком ее понимании (территориальная модель). этим трем концепциям соответствуют три разные, хотя и не формализованные модели, которые используются для объяснения политики развития сельских территорий (таблица 1). в мировой практике понятие многофункционального развития сельских территорий тесно связано с увеличением доли несельскохозяйственных видов деятельности на селе. опыт зарубежных стран, особенно экономически развитых, указывает на растущую важность несельскохозяйственных видов деятельности на сельских территориях как альтернативных источников доходов и предпосылок дальнейшего социально-экономического развития отдельных местностей. в мире уже в течение нескольких десятилетий происходит активное пропагандирование диверсификации видов экономической деятельности на сельских территориях, традиционно были только местом ведения сельского хозяйства. благодаря активной деятельности в этом направлении в начале xxi века 30-35% доходов домохозяйств на сельских территориях (в частности, 42% в африке, 40% в южной америке и 32% в азии) были получены от осуществления несельскохозяйственных видов экономической деятельности (несельскохозяйственных занятость в сельской местности украины, 2015). украина должна использовать опыт европейских стран, поскольку имеющийся потенциал способен обеспечить развитие сельских территорий, активизировать формирование новых, в том числе несельскохозяйственных видов экономической деятельности. примером диверсификации на сельских территориях является сельский туризм. сельский туризм может стать одним из крупнейших прибыльных видов бизнеса том, что он является одним из самых дешевых и доступных видов туристического отдыха. украинские села имеют большой потенциал, ведь в каждом регионе отмечается разнообразием ландшафтных комплексов, значительным историко-культурным, этническим и генетическим достоянием и именно поэтому рациональное их использование с помощью туристической индустрии следует рассматривать как один из действенных путей преодоления экономических и демографических проблем. 4. выводы для успешной реализации стратегии диверсификации необходимо активное участие и поддержка органов местного самоуправления. во-первых, они могут активно способствовать формированию благоприятной среды для развития бизнеса через механизмы регистрации нового бизнеса, перехода прав собственности на землю, управления коммунальной собственностью и земельными ресурсами. во-вторых, местные власти могут предоставлять некоторые льготы новому бизнесу в налогообложении, привлекать необходимые бюджетные средства на поддержку социально значимых видов деятельности. в-третьих, ведение бизнеса предусматривает получение прибыли. инвестор должен быть уверен, что политика местных органов власти является стабильной и не помешает ему вернуть все вложенные в бизнес ресурсы. таким образом, деятельность органов местного самоуправления является своеобразной гарантией для предпринимателей, их инвестиции экономически оправданы и они имеют перспективы развития на территории общины. в случае нарушения бизнесом прав жителей общины и неэквивалентности выгод, которые получает местное сообщество, органы местного самоуправления должны иметь механизмы прекращения деятельности таких хозяйствующих субъектов. диверсификация сельской экономики должна стать основным инструментом социально-экономического развития сельской экономики, средством обеспечения высокоэффективной хозяйственной деятельности за счет: развития мелкого и среднего предпринимательства на селе и рост самозанятости сельского населения; расширение сфер приложения труда, рост спроса на квалифицированную рабочую силу, повышение мобильности рабочей силы и создание новых рабочих мест; обеспечение бесперебойного производственного процесса и сглаживания сезонности сельскохозяйственного производства; обеспечение устойчивых источников доходов, улучшение материального благосостояния и уровня жизни сельского населения; рост инвестиционного капитала сельской территории; обеспечение сбалансированности социально-экономического развития. именно такой подход связан с европейской моделью сельского хозяйства. references grushak z.m. (2009). diversifikatsiya kak strategiya deyatelnosti. ekonomika, finansyi, pravo, (5): p. 6-9. kolesnikov v. i. (2014). mirovoy opyit razvitiya selskih territoriy. elektronnoe nauchnoe spetsializirovannoe izdanie «effektivnaya ekonomika», (4). [electronic resource]. – retrieved from: http://www.economy.nayka.com.ua/ ?op=1&z=2956 baltic journal of economic studies 55 vol. 1, no. 2, 2015 kostyuk t.a. (2007). diversifikatsiya kak istochnik sinergiynogo effekta. formirovanie ryinochnyih otnosheniy v ukraine, (3): p. 10-13. neselskohozyaystvennyih zanyatost v selskoy mestnosti ukrainyi (2015). institut ekonomicheskih issledovaniy i politicheskih konsultatsiy. [electronic resource]. – retrieved from: http://www.ier.com.ua/files/publications/ policy_papers/german_advisory_group/2005/u13_ukr.pdf tompson a.a., ml. striklend a.dzh. (2009). strategicheskiy menedzhment: kontseptsii i situatsii: uchebnik dlya vuzov. per. s 9-go angl. izd. – m. : infra-m, 928 p. harchuk s. a. (2015). diversifikatsiya ekonomiki kak instrument sovershenstvovaniya razvitiya selskih territoriy. vinnitskiy uchebno-nauchnyiy institut ekonomiki. [electronic resource]. – retrieved from: http://www.economy-confer.com.ua/full-article/1848/ артур ильницкий, алла чикурова диверсификация как один из инструментов антикризисной стратегии развития сельских территорий на украине аннотация. главной целью этой работы является обоснование проблемы развития сельских территорий в условиях кризисной ситуации и показан один из выходов социально-экономической проблемы развития сельской местности, а именно предложено диверсификация производства и услуг. поэтому растущая конкуренция на рынке требует поиска новых эффективных путей и методов для обеспечения выживания предприятий на сельских территориях в условиях рыночной среды. одним из этих методов является внедрение диверсификации. диверсификацию собственной хозяйственно-финансовой деятельности предприятия различных отраслей на сельских территориях проводят не только в условиях глобализации мировой экономики, связанной с взаимопроникновением технологий и капиталов, но и в кризисных условиях как один из инструментов антикризисной стратегии развития. эффективность ее осуществления напрямую зависит от своевременной ориентации на виды товаров, работ, услуг, которые пользуются спросом или приближаются к уровню конкурентоспособности. вопросы стратегии развития предусматривают разработку методики получения, обработки и представления информации, связанной с освоением новых технологий, видов продукции, рынков и других видов и направлений деятельности, а также с выявлением закономерностей по определению мотивации диверсификации как стратегии развития предприятия сельской местности. методологической базой для разработки данной статьи, направленной на комплексное развитие сельских территорий во всей его многомерности и разноаспектности стали основательные научные исследования и активные дискуссии в среде компетентных специалистов и заинтересованных лиц, а также сформированные на их основе решения органов государственной власти и местного самоуправления, ориентированные на развитие производственного потенциала, улучшение качества природной среды и повышение качества человеческого капитала сельских территорий украины. результат. диверсификация экономической деятельности в развитии сельских территорий является адекватным ответом не только на вызовы глобализации мировой экономики, связанной с взаимопроникновением технологий и капиталов, но и в кризисных условиях – один из инструментов антикризисной стратегии развития. эффективность диверсификации напрямую зависит от своевременной ориентации на виды товаров, работ, услуг, которые пользуются спросом или приближаются к уровню конкурентоспособности. практическое значение. таким образом, предложенный нами механизм разработки программы социального развития позволит удовлетворить потребности населения в объектах социальной инфраструктуры, решить проблему территориального размещения этих объектов, разработать конкретные меры по улучшению функционирования социальной инфраструктуры различного назначения и, главное, – найти пути финансирования таких программы, которые позволят преодолеть диспропорции развития областей украины в целом и районов областей и обеспечить население рабочими местами. значение/оригинальность. диверсификация экономики села является ключом к уменьшению значительной зависимости от сельского хозяйства и к развитию новых видов экономической деятельности, создание новых предприятий и привлечения инвестиций. она также может способствовать повышению уровня занятости и доходов сельского населения, увеличению выпуска продукции с высокой добавленной стоимостью, улучшению качества человеческого капитала и, наконец, помочь повысить развитие сельских территорий. baltic journal of economic studies 352 vol. 3, no. 5, 2017 corresponding author: 1 department of economy and business, kyiv national university of technologies and design. e-mail: pavlovvt@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-352-357 innovative development of ukraine’s economy: conceptual principles and provisions of effective management vladyslav pavlov1 kyiv national university of technologies and design, ukraine abstract. the purpose of the article is to study problems and formulate recommendations for ensuring the formation of the model of the innovation economy in ukraine and the formation of principles of effective management of the innovative development of the country. methodology. to achieve these objective, the article used a system of general and special methods of investigation processes and phenomena in their relationship and development, namely, the systematic and structured approach, methods of theoretical analysis and synthesis (for the characteristics of the concepts of “innovation economy”, “innovation development” and other related concepts). thanks to the system-structural approach, innovative economy and innovative development are presented as a set of elements and properties, interactions between them create a new integrity of modern economic relations on a global scale and the scale of a single country (as a part of the global economic environment). results of the survey showed understanding of the role and place of the “innovative economy” as a concept that characterizes conditions of the interaction of economic entities in the modern economy, with taking into account the peculiarities and priorities of the formation of this economic model in countries with a transition economy. ukraine, as a country of transition economy, is at an early stage of formation of an effective system of innovative development, and at this stage resolving conflicts of macro-, meso-, and micro-economic interests and objectives in the economic system is an important factor in overcoming the inertia of development. reference points of the formation and development of innovative economy in ukraine, with taking into account the experience of today’s developed economies should be: high quality of life as a result – its high purchasing power, the ability to buy high-tech products that can be achieved due to the high cost and the quality of human capital; at the same time, the quality of human capital has to be ensured by increasing the level of education and science, which determines the possibility to implement technologies and production mainly in iv-vi technological structure. practical implications. the stimulation of innovation-oriented development of ukraine should be based on the creation of a certain form of interaction between the subjects of the economy within the framework of the management system, built on the principles, ideas, and priorities laid down in the concept of “innovative economy”. these conditions allow creating an environment within the country, characterized by the redundancy of proposals of innovative solutions and as a result, effective implementation in practice the most productive part of them, due to competition, innovation, ideas, technologies, and processes. value/originality. presented instruments of coordination of goals and interests focus on specific, concrete model of development at all levels of the hierarchical subordination of goals and interests through macro, meso, and micro needs establishment, implementation, and wide dissemination of innovation as an essential condition to ensure the competitiveness of enterprises, sectors of the economy at the domestic and foreign markets. key words: innovative economy, innovation, transitive economy, economic development, competitiveness. jel classification: o11, o3, f63 1. introduction the urgency of the research. modern development of the economy and economic scientific thought, as a reflection of the main tendencies of the transformation of socio-economic relations, shows a significant loss of profit position as a classical dominant of explanation of the main goal of economic activity (aghion, 2015; ahlstrom, 2010), the majority of modern scholars and practitioners believe that benefits from the activities of economic actors may not only be profitable, but also, in particular, the formation and development of innovation potential and the need for its implementation, which is baltic journal of economic studies 353 vol. 3, no. 5, 2017 conditioned by the rapid development of knowledge and technological innovations (ahlstrom, 2010). in view of this, the viewpoint on forms and methods of ensuring economic growth is transforming, from maximizing the benefits to business organizers, to the creation of an innovation-based economy, in which knowledge, technologies, and creativity become priorities of development, which is important not only for business but also (and even more) for consumers of products. so, unlike the supporters of the theory of neoclassical economics, theorists of innovative economy offer different perspectives on the causes of economic growth (borrás, 2013), i.e. seeing the foundations of economic growth in optimizing the use of knowledge and technology skills, development, implementation, and dissemination of innovations. growth in the innovation economy, therefore, is the end product of knowledge application (bohashko, 2013; borrás, 2016). stating the aim of the research. in the modern scientific community of countries with transition economy that inherited resource-oriented economic systems, dependent on market conditions and those which feature in today’s global economy may be focused primarily on raw material supply needs of the globalized economy, there is an understanding that traditional, resource-oriented model of economy with limited development potential due to non-renewable natural resources is expedient to transform into a different model, namely the model of “innovation economy”. an alternative to this is isolationist policy, but in the case of transitive economies, transitional nature that determines the direction of development towards the transition to active participation in the international division of labour, this option cannot be regarded as appropriate. for the implementation of “transition” to a model of innovative economy, countries with transition economies should solve several problems of using limited resources, the development of natural and artificial intelligence, the development of effective proportions of material and non-material production, satisfaction of intangible and material needs of society, development, implementation and dissemination of innovation, intellectual property protection. with this in mind, in this article, updated problematic characteristics of conditions and features of innovation-based economic development that significantly associated with the implementation of a model of “innovation economy” in the developed countries as the most effective at this point of the economic basis of socio-economic relations in globalized society. actual scientific researches and issues analysis. david ahlstrom says: “the main purpose of business is to develop new and innovative products and services that generate growth while providing benefits to society” (aghion, 2015). it should also be noted that, according to leading researchers and economists (ahlstrom, 2010; bohashko, 2013; borrás, 2016), a source of effective operation and competitiveness in domestic and international markets in terms of innovation economy are more intangible assets (information, knowledge, qualifications and skills of employees, the relationship between them) than material factors of production. in this situation, there is a need to ensure strategic relevance of the macro, meso, and micro level of development of technical and technological basis of modern production and market needs. central moment of innovation activity of innovation economics subjects, scholars consider the specific activity of the entity that meets the basic stages of development and innovation processes aimed at creating and making high-quality, fundamental changes in their own system of organization, management, production, etc. (aghion, 2015). such an activity is systematic and aimed at implementing innovation through the use of new ideas, knowledge, approaches or transformation of the known research results and practical development of new or improved products (ahlstrom, 2010). in modern scholars conceptual positions regarding the innovation economy, science and technologies transform and make a traditional sphere of material production radically change its own technological base, given the fact that innovation is not based on production in the innovation economy is an unsustainable and unnecessary market (aghion, 2015; ahlstrom, 2010). the concept of innovation economy is also reflected in the increased variability due to constant innovation technologies (bohashko, 2013), increased the mobility of industrial structures (borrás, 2016), strengthening of the internal integration (borrás, 2013), strengthening global competition (borrás, 2015). at the enterprise level, these trends are manifested in virtualization of resources in a global “diversity” of value chains, the concentration of firms in their “key” competencies, and transfer other functions outside contractors, distributing network and virtual organizational forms, spreading the use of creative technologies (brisbane city council, 2013; capello, 2013; dyer-witheford, 2014). it is the implementation of similar, innovative economy in countries with economies in transition should become a reference in order to create favourable conditions for the development of these countries. in particular, the issues of innovative development in developing countries and countries with transition economies are studied in (aghion, 2015; ahlstrom, 2010; bohashko, 2013; edquist, 2015). not researched parts of general matters. instead, systematic studies considering the specifics and trends in countries with transition economy at the moment are still limited and require further development and refinement. given this, there is a need to adjust traditional views on trends and innovative ways of development of the countries with transition economy in terms of baltic journal of economic studies 354 vol. 3, no. 5, 2017 distribution of the model of innovation economy on a global scale. precisely why, the presented research focuses on enriching the scientific understanding of modern economic processes through reflection, theoretical generalization, and structuring issues of innovative economy in the context of innovation-based development as an expedient dominant development in modern conditions of transition economies, giving an individual place to innovative economy in a sense of: 1)  the driving force of innovation-based economies of the world in modern conditions; 2) tool to achieve the goals of developing countries with transition economy by economic methods in the conditions of globalization. as a key driving force of development stands innovation oriented to meet the increasingly growing consumer needs (primarily due to scientific and technical progress) in today’s economy. the research objective. the aim of the article is to study the problems and form recommendations to ensure the establishment of a model of the innovation economy in countries with transition economies in terms of distribution and development of this model in the developed world. achieving those objectives involves solving problems: 1) analysis of the meaning of “innovation economy” as a phenomenon with certain characteristics and properties; 2) studying the influence of features of social and economic relations in ukraine as a country with transition economy on innovative development and opportunities for the effective implementation of the model of “innovation economy” in these countries; 3) forming directions for actions at the macro level, contributing to the formation of innovative economy models in countries with transition economies (on the example of ukraine). solving these problems is supposed to facilitate the places of the model of the innovative economy as the most important priority of innovation-oriented countries with ukraine in today’s globalized world. 2. the statement of basic materials. 2.1. the problem of creating conditions for the formation of models of the innovative economy the history of economic development of recent decades in some countries shows a positive direct connection between the introduction of new technologies and economic growth. thus, since the end of 1970, according to research (aghion, 2015), the united states received a disproportionately significant (compared to the share of the population to the world population) share of global wealth, due to the orientation of the implementation of high-tech innovative changes in the market, demonstrating that technological innovation is central catalyst for sustainable economic development at both the individual and specific market economy and the consequent diffusion of innovation of american business around the world – the global economic system and the global market for goods and services. another example is that it is the realization of the innovative potential of india and china in 1980–2000 years largely explains the growth of their gdp, helped by the development of national innovation systems of these countries due to significant investments in research and development, as well as the distribution of knowledge and personnel development. connecting research sector to business and marketing, creating incentives for innovation, balancing imports of technologies and efforts to create their own high-tech development, these two countries had dynamic economic growth in recent decades (aghion, 2015). the phenomenon of innovation is inextricably linked with the phenomenon of change, news, ideas or reforms that are traditional in nature but are perceived and presented as new. innovations are considered to be a variety of facts, processes, and effects of technical, organizational, social or psychological character (aghion, 2015). the innovation process is the nature of the action, consisting in the occurrence and the first introduction of the new technical, technological, organizational, and other decisions (ahlstrom, 2010). these actions must, as a result of the cooperation of entities involved in the innovation process, generate some value of the innovation formed due to interaction. addressing the problem of creating conditions for the formation of innovative economy models on the example of specific countries – ukraine, we should analyse trends in innovative development characteristic of the country. 2.2. the analysis of trends in innovative development so, presented in fig. 1 data on the dynamics of the share of ukrainian enterprises engaged in innovation in the period of 2000–2015, indicate that the average amount of enterprises engaged in innovation activity in the is 11-18%, this share decreased slightly in the period of 2004–2010, stabilizing after that at 16-17%, so far no significant trend towards an increase (decrease). fig. 1. change in the share of ukrainian enterprises, engaged in innovation activity in 2000–2015 source: based on the state statistics committee of ukraine other characteristics that are studied in this paper and should show trends in innovative activity are an implementation of new technological processes (fig. 2) of industrial enterprises in ukraine. baltic journal of economic studies 355 vol. 3, no. 5, 2017 obvious is a significant reduction in the introduction of innovative products in the first half of the 2000s, after which the indicator stabilized at a level lower than 5000 items. stable is the level of implementation of new equipment, low-waste, and resource-saving technologies. however, the unstable are dynamics of new processes that, after severe upward trend in 2006–2011, in 2012 received a negative direction of development. fig. 2. implemented new processes of industrial enterprises of ukraine in 2000–2015 source: based on the state statistics committee of ukraine analysing according to fig. 3 dynamics of scientific personnel in ukraine for the 1995–2015 years should be noted a fairly substantial reduction in the number of scientists in the country. fig. 3. research personnel in ukraine in the 1995–2015 years source: based on the state statistics committee of ukraine so, in 2015, the number became almost three times less than in 1995, whereas, the number of candidates and doctors in the country increased, which can be explained (in the context of reducing the number of scientists in general) not by improving the quality of science but by the prestige of possession of scientific degrees, often among persons that are directly not related to science (politicians, officials, business representatives). somewhat paradoxical is the situation with data of fig. 3 since 2012, when the number of candidates in the country exceeded the number of scientists, i.e., in the country, having a degree actually ceased to be an indicator of scientists (given that not all scientists are ph.d.), increasingly focusing on the needs of business and public officials who are not working in scientific institutions without creating a scientific results after upholding a thesis. however, the more telling indicator is the proportion of scientific and technical work in ukraine’s gdp (fig. 4), which has a strong tendency to decrease (from 1.36% in 1996 to 0.64% in 2015). obviously, the level at 0.6% of gdp in 2015 is extremely insufficient to consider innovation-oriented country and one that makes efforts to build an innovative economy. fig. 4. the proportion of performed scientific and technical work in ukraine’s gdp in 1996–2015 source: based on the state statistics committee of ukraine so, we need to consider serious limitations on the innovation process in countries with transition economies. so, based on research experience in ukraine and the work of other researchers who have studied the problem of innovation in developing countries and countries with transition economies, among factors that complicate the implementation of the innovation process in the mentioned countries, are the following: 1) low level of human resources to work in sectors that are the basis of innovative economy (information technologies, science, education, telecommunications, sphere of innovative services); 2) limited cooperation of the economy with science; 3) limited financing of innovation due to a limited amount of resources available to countries and companies in the state and lack of priority in financing innovation (results from the implementation of which can often be found only in the medium and long term); 4) a small proportion of businesses focused on new technologies; 5) low competence potential of human resources, lack of qualified personnel, ready for productive activities based on the creation and dissemination of knowledge and innovation; 6) limited intra sectorial cooperation and mutually beneficial exchange of “know-how”; 7) limited access to highly specialized consulting services in the field of new technologies, knowledge transfer, and innovation; 8) low motivation and incentives related to individual workers progress in innovation; 9) low level of legal culture in the field of intellectual property. 2.3. the system of innovative development management of countries with transition economies however, the rapid development of new information technologies and the growing flows of information, including audio, video, data, creating communication links, determine the nature of ukraine’s transition from the current situation that is characterized by practical absence of significant recovery tendencies of innovative activity at the macro level, implementation of some innovative projects for individual companies to develop innovative system at the country level as a prerequisite for the success of the economy. this requires more baltic journal of economic studies 356 vol. 3, no. 5, 2017 resolute replace of the traditional vision of the role and place of ukraine in the world economy, updating the value of innovation to create sustainable companies in the country position in world markets, to ensure the well-being of the population and its growing influence in modern breakthrough changes in technologies, consumer needs. this vision is expedient to be based on achieving certain benchmarks that are inherent in the innovation economy and create conditions and implement measures to achieve these targets. ensure the implementation of initiatives and principles embodied in the concept of an innovative economy will allow the formation of a system of innovative development of the country. this system is an open system of the most important elements to ensure the meaningful progress of the country on the path of innovative development (fig. 5). reference points of the formation and development of innovative economy in ukraine, with taking into account the experience of today’s developed economies should be: high quality of life as a result – its high purchasing power, the ability to buy high-tech products that can be achieved due to the high cost and the quality of human capital; at the same time, the quality of human capital has to be ensured by increasing the level of education and science, which determines the possibility to implement technologies and production mainly in iv-vi technological structure. these conditions allow creating an environment within the country, characterized by the redundancy of proposals of innovative solutions and as a result, effective implementation in practice the most productive part of them, due to competition, innovation, ideas, technologies, and processes. indicators of progress towards the creation of an innovative economy of ukraine should be: increase in the share of innovative enterprises, and as a benchmark for innovative economy – the production of domestically innovative products more than 60-80% of total production; the high competitiveness of enterprises and the national economy and the effectiveness of marketing activities of these companies in foreign markets, and as a result – high economic competitiveness of ukraine. 3. conclusions in today’s world, the economic base of innovative development at the level of economies of individual countries creates “innovation economy”, which should combine the requirements of market rationality of capabilities for creating, widespread introduction, and diffusion of innovation that is the foundation for the growth of consumer needs of the population country and production potential of economic subjects. ukraine, as a country of transition economy, is at an early stage of formation of an effective system of innovative development, and at this stage resolving conflicts of macro, meso, and micro-economic interests and objectives in the economic system is an important factor in overcoming the inertia of development. appropriate instrument of coordination of goals and interests focuses on specific, concrete targets of innovative development of the economy, industries and companies fundamental research applied research development innovations preparation of innovation base (expansion of the production base, attracting of investments ...) the innovations implementation marketing support product sales by companies evaluation of innovation macro level meso level micro level macro level meso level micro level countries industry enterprises fig. 5. the system of innovative development management of countries with transition economies source: developed by the author baltic journal of economic studies 357 vol. 3, no. 5, 2017 model of development at all levels of the hierarchical subordination of goals and interests through macro, meso, and micro needs establishment, implementation, and wide dissemination of innovation as an essential condition to ensure the competitiveness of enterprises, sectors of the economy in domestic and foreign markets. thus, the formation and development of the innovative economy are advisable to see as the main strategic goal of ukraine in modern conditions. progress towards the formation of a similar economic situation in the country will determine the actual possibilities of improving the current state of meso and micro economy, by implementing some of the newest, better than existing, solutions, technologies and ideas in a particular field (economics, marketing, management, technologies, engineering, etc.). it is a key to address expanding market opportunities and strengthening market position at a particular country, industry, and enterprise levels under conditions of purposeful, coordinated at the macro, meso, and micro proactive policy of creating an innovative economy as a model of strategic development of transition economies. references: aghion p., akcigit u., & howitt p. (2015). lessons from schumpeterian growth theory. american economic review, no. 105(5), pp. 94-99. ahlstrom d. (2010). innovation and growth: how business contributes to society. academy of management perspectives, no. 24 (3), pp. 11-24. bohashko, o. l. (2013). the evolution of theoretical approaches to innovation development in the economic science. bulletin of berdyansk university of management and business, vol. 2, no. 22, pp. 23-29. borrás s. (2016). organisations in innovation systems: entrepreneurship, intrapreneurship and public policy. dbp working papers. copenhagen, department of business and politics, copenhagen business school. vol. 19. borrás s. and c. edquist. (2013). the choice of inovation policy instruments. technological forecasting and social change, no. 80(8), pp.1513-1522 borrás s. and c. edquist. (2015). education, training and skills in innovation policy. science and public policy, no. 42(2), pp. 215-227. brisbane city council. (2013). digital brisbane: a strategy for a digitally driven economy. available at: http://www.brisbanemarketing.com.au/business/digital-brisbane/pages/digital-strategies.aspx capello r . and c. lenzi, eds. (2013). territorial patterns of innovation. an inquiry on the knowledge economy in european regions. london, routledge. dyer-witheford n. (2014). the global worker and the digital front. in c. fuchs & m. sandoval, eds. critique, social media and the information society. new york: routledge. edquist c. and j. m. zabala‐iturriagagoitia. (2015). the innovation union scoreboard is flawed: the case of sweden – not the innovation leader of the eu. c. w. p. n., vol. 2015/27. baltic journal of economic studies 97 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state research institute for informatization and modeling of economy, ukraine e-mail: mfertua@gmail.com orcid: https://orcid.org/0000-0002-6281-5788 2 state research institute for informatization and modeling of economy, ukraine (corresponding author) e-mail: zheka1809@gmail.com orcid: https://orcid.org/0000-0001-8076-4374 3 state research institute for informatization and modeling of economy, ukraine e-mail: ruslan@fru.org.ua doi: https://doi.org/10.30525/2256-0742/2023-9-2-97-103 danish experience in combating climate change through public-private partnerships: implications for ukraine igor guzhva1, yevhen ivanov2, ruslan illichov3 abstract. recently, the fight against climate change has become particularly topical on the international agenda, as protracted discussions have finally led to the development of specific mechanisms and plans for decarbonisation in most countries around the world. today, ukraine is suffering from a large-scale russia invasion, which naturally raises questions about ukraine's ability to meet its international climate commitments on time, given the ongoing hostilities and the destruction of many industrial and infrastructural assets. at the same time, the prospect of structural transformation of the economy during post-war reconstruction provides additional opportunities for ukraine to meet its climate commitments and achieve a green transition. the purpose of this article is to generalise the danish experience of introducing one of the most fruitful collaborations between business and government in the field of meeting government decarbonisation targets. the object of the study is the danish system of public-private partnerships, embodied in sectoral climate partnerships created to develop recommendations for improving national climate policy and developing green transition roadmaps for each sector. the study is based on the application of a set of general and specific economic research methods, such as systemic and structural analysis, to identify and argue for specific areas of danish ppps in the climate sector that could be useful for application in ukraine. the research results in a recommendation to create a climate platform on the basis of the association of employers of ukraine. the article describes the structure and objectives of this platform, its main differences and similarities with foreign equivalents, taking into account domestic peculiarities. key words: climate partnerships, greenhouse gas emissions, carbon neutrality, decarbonization, energy efficiency, green transition, climate platform. jel classification: o52, q54, q58 1. introduction for years, denmark has been integrating the environmental agenda into economic policy and promoting a green transition (oecd, 2015). the central government is setting increasingly ambitious targets to reduce greenhouse gas emissions, while local authorities are developing and implementing circular economy strategies. danish companies are increasingly looking for opportunities in the circular economy as a means to increase efficiency and international competitiveness. denmark's leadership in the fight against climate change rests on two pillars: the proactivity of danish society, which has cultivated a high level of environmental awareness for years (denmark has one of the most ambitious commitments among other eu members to increase the share of renewable energy and reduce ghg emissions), and a complex system of stakeholder interaction in the green transition, which enables effective and rapid implementation of relevant initiatives (lund et al., 2012). public-private partnership (ppp) has been an extremely important element of denmark's success in climate policy. since the 1970s, denmark has maintained a tradition of reaching agreements on energy and environmental policy with broad consensus. this has helped to achieve the political stability that is essential to ensure continued baltic journal of economic studies 98 vol. 9 no. 2, 2023 investment and ambitious long-term environmental targets (hansen & enevoldsen, 2022). in this respect, the ppp has proved to be an effective way of developing and implementing mechanisms to address sustainable development issues. the danish ppp model aims to utilise the strengths of all participants in the process, while coordinating the different interests inherent in this type of cooperation. an effective ppp model provides the danish government with broad and active support for business climate initiatives and thus for their effective implementation in industry (lindegaard et al., 2021). the current ppp model is based on the climate act, which was passed in 2020 by 167 of the 179 members of the danish parliament. it commits the incumbent government to work towards reducing denmark's greenhouse gas emissions to 70% below 1990 levels by 2030 and to net zero by 2050 at the latest. the climate act is a major revision of denmark's previous environmental policy (batini et al., 2020). it requires the government to set and regularly revise ten-year interim targets towards the ultimate goal of carbon neutrality. the law also obliges the danish government to develop annual climate action plans that should include specific measures to reduce greenhouse gas emissions for all sectors of the economy: energy, energy efficiency in buildings and utilities, industry, transport, agriculture and forestry (pedersen, 2022). in order to ensure effective implementation of the climate change act, the danish government, together with the private sector, has established 14 climate partnerships representing key sectors of the economy. the idea behind these partnerships is that the business community plays a central role in the green transition and that the government should work closely with it on practical solutions to climate problems, while maintaining a balance between the pace of the green transition and maintaining a high level of competitiveness in the danish economy. the aim of the article is therefore to examine this experience of establishing fruitful public-private cooperation in the field of achieving national climate targets. 2. climate partnerships the danish climate partnerships are a combination of a discussion platform and working groups in which leading representatives from each industry have been tasked with formulating proposals for their contribution to reducing co2 emissions and a roadmap for achieving the respective targets in a way that contributes to maintaining the competitiveness of the danish economy, boosting exports, creating new jobs and increasing prosperity. the climate partnerships aim to develop two types of proposals: action plans that industry could implement itself to reduce its ghg emissions (in particular, optimising supply chains, developing new goods and services, using energy-efficient technologies, introducing business models that support the green transition); and proposals for government to remove barriers and improve the regulatory and institutional framework to facilitate climate investments (mathiasen, 2021). the climate partnerships are led by a representative from a leading private company, with deputies representing other influential bodies and private partners in industry. the chairpersons of all partnerships were appointed by the danish government. business organisations acted as secretariats, providing organisational, information and analytical support for holding meetings and developing proposals. public sector participants in the partnerships were representatives of ministries related to the challenges of the green transition in industry (mainly the ministry of industry, business and financial affairs and the ministry of climate, energy and utilities). the number of stakeholders involved varied from partnership to partnership due to different structures. recommendations and proposals were developed through open discussion with companies and associations in the relevant industries. by the end of 2021, the climate partnerships had developed more than 400 proposals and recommendations, most of which were approved by the government and started to be implemented in the national climate policy (e.g., on energy islands, power-to-x, carbon capture technologies, electrification efforts and new financial models). it should be noted that the proposals from different climate partnerships were not coordinated during the preparation process, which is why a number of proposals are repetitive, cross-sectoral and crossindustry. the government was faced with the task of integrating the proposals received into a single plan for modernising the legal and institutional framework. however, the benefits of climate partnerships go far beyond improving the effectiveness of public policy and lobbying business interests on the green transition. the partnerships have encouraged the private sector to make climate commitments and set long-term climate targets. discussions crystallised new technological solutions and business models that contribute to the green transition (barker, 2022). governments also played an important role, as they were required to provide specific recommendations with clear calculations of the impact of climate decisions on greenhouse gas emission reductions. the publication of the results of the climate partnerships raised the awareness of all economic actors about modern technologies and policies for green modernisation. it also strengthened fruitful baltic journal of economic studies 99 vol. 9 no. 2, 2023 cooperation at both public-private and intra and inter-industry levels to achieve a common goal (ning et al., 2023). climate partnerships have been established in the following sectors: aviation; maritime transport ("blue denmark"); construction; commerce; defence; energy and utilities; energy-intensive industries (cement, metallurgy); finance; food and agriculture; inland transport; life sciences and biotechnology; manufacturing; services, it and consulting; waste, water and recycling. the danish government required the partnerships to present proposals and recommendations in standardised reports with analytical material developed on the basis of official statistical data. thanks to this, the range of received proposals and recommendations as well as climate information on industries are easily provided for generalisation and processing by authorities (nash & steurer, 2022). the structure of the standardised report includes the following: a) description of the industry, current and historical levels of its ghg emissions, sources of emissions and achievements to date in reducing them; b) description of technological, organisational and other mechanisms for further reducing ghg emissions in the industry, quantitative assessment of ghg reductions in the case of using these mechanisms, estimation of costs required to apply these mechanisms; c) arguments for government support and reforms necessary to unlock and promote environmental innovation in the industry. given that danish ghg emissions are insignificant on a global scale, the participants in the partnerships were also asked to propose solutions that would contribute to reducing emissions on an international level, especially in the foreign trade of danish companies (greaker, golombek & hoel, 2019). in addition, according to the intention of the initiators, denmark's proactive climate policy will serve as a guide and model for other countries, encouraging them to activate climate policy and thus accelerate the transition to a carbon-neutral society on a global scale (tyas & prakoso, 2022). other mandatory chapters of the climate partnership reports defined by the authorities are: a) introduction, where partners declare their commitment to the green transition idea and pledge to make the necessary efforts to reduce ghg emissions; b) summary, with key directions and areas of climate action in the industry from the companies' point of view; c) annexes, with statistical data and methodological approaches used to calculate potential ghg reductions. 14 climate partnerships preparing recommendations on decarbonization the of economy input of authorities input of industries / businesses 400+ recommendations and proposals prepared government businesses several recommendations implemented sectoral road maps elaborated figure 1. structure of sectoral climate partnerships in denmark benefits of climate partnerships engagement innovation acceleration co-creation new technological solutions and business models are unlocked in the process of establishing new partnerships and developing recommendations decarbonization and the development of new technologies are accelerated through concrete initiatives and increased awareness collaboration and co-creation across public and private sectors as well as businesses and industries towards one common goal the private sector emphasizes their commitments to establishing long-term climate targets figure 2. benefits of denmark's public-private partnership in the field of green transition (state of green, 2021) baltic journal of economic studies 100 vol. 9 no. 2, 2023 summarising the recommendations of the climate partnerships, one of the key mechanisms to facilitate the green transition, according to the danish private sector, is public procurement. the demand and consumption of the public sector is seen as an effective support for environmentally conscious and climate-friendly industries. therefore, the partnerships emphasise the need to consider product life cycle, carbon footprint of the value chain and other non-price factors in public tenders. the government should also prioritise the procurement of public transport and green fuel vehicles. stable demand from the public sector remains critical for private companies to implement ambitious climate initiatives that increase the cost of their products compared to less environmentally conscious competitors in domestic and foreign markets. the climate partnerships are also committed to changing taxes on heating and electricity and improving the collection of taxes on greenhouse gas emissions. taxation should encourage companies to move away from fossil fuels in favour of renewables, and the funds raised should be used to provide financial support for companies to implement energy efficiency projects and use green technologies. in addition, preferential tariffs or subsidies are expected from the government for green electricity, biogas and other climate-neutral energy sources whose costs are still too high to compete with fossil fuels. danish business also sees the state as a (co-)investor in large-scale projects for developing renewable energy capacity, such as energy islands, power-to-x technologies, integration into existing biogas and biofuel networks, etc. the state is also expected to provide significant funding for r&d related to finding new and improving existing climate solutions. sectors where the green transition is associated with significant technological risks expect significant financial support from the government. this is particularly true for truck manufacturers and inland transport, where the technical and economic feasibility of using electric vehicles or biofuels has not yet been explored. industries that are highly integrated into the global economy, such as shipping, expect the government to work closely with international organisations to develop international incentives for a green transition. these industries need support in the form of radical rebuilding of infrastructure (especially ports), the introduction of environmentally differentiated charges, and government incentives for consumers of their goods and services. the government is also expected to take steps to increase the involvement of smes in the green transition, spread climate awareness by introducing product labelling requirements on carbon footprint and recycled materials, and apply international standards on the use of secondary raw materials. private companies, on the other hand, outlined quantitative and time frames for reducing their ghg emissions and defined specific technological and organisational steps along the way. 3. application of danish experience in ukraine on 30 july 2021, the government of ukraine adopted a new climate target (updated / second nationally determined contribution) to reduce greenhouse gas emissions in ukraine by 65% by 2030 compared to 1990 levels. at the same time, the ministry of environmental protection and natural resources of ukraine was instructed to develop and approve an action plan for the implementation of the ndc-2 within six months. this action plan must include the following: – a roadmap defining the key technological, organisational and regulatory changes needed to achieve the new climate target; – а blueprint for attracting finance from government budgets, private investors and creditors to meet the ndc-2 targets; – a concept for assessing the compliance of projects and programmes financed from the state and local budgets with the climate targets defined in the ndc-2 (ivanyuta & yakushenko, 2022). the primary tables developed by the ministry of environmental protection and natural resources to collect information on measures for ndc-2 implementation clearly indicate that the government has decided to rely primarily on interdepartmental cooperation among executive bodies and interaction with experts, while the business community is expected to be an observer and implementer of state programmes developed by the authorities to promote green technologies in electricity and heating. a ready-made list of transformations and measures in seven sectors will be submitted for public discussion. these sectors are: power and heat, energy supply, industry, transport, buildings, agriculture, waste, land use and forestry (leshchenko, 2023). such an approach alienates the private sector from climate policy, makes the business community and civil society sceptical about the government's climate initiatives, and therefore tends to delay real decisions and steps towards a green transition, leading to ukraine's failure to meet the ndc-2 deadlines. it should be noted that the timeframe set by the government for the development of an action plan for the implementation of the ndc-2 has obviously not been met since july 2022. this provides an opportunity to reorganise the process of preparing this plan and correct its main shortcomings in the area of public-private partnership and interaction baltic journal of economic studies 101 vol. 9 no. 2, 2023 between the state, business and civil society. it is considered expedient to urgently apply the key principles of the danish experience of multi stakeholder cooperation to implement the green transition, namely to create a system of sectoral climate partnerships that bring together business, government and experts to discuss and develop roadmaps, grassroots initiatives and recommen dations for decarbonising the economy. the federation of employers of ukraine (feu), as the most influential business association representing the largest sectors of the national economy (iron and steel, machinery, chemical industry, defence, food and agriculture, textile and clothing, it, media, energy, pharmaceutical production and microbiology, construction, transport, logistics, infrastructure, retail, tourism, utilities, services, etc.), has sufficient potential to become the basis for establishing a public-private partnership on green transition issues. therefore, it's advisable to set up a climate platform. the feu climate platform is a platform for discussion, planning and preparation of the most effective strategic mechanisms for the green transition of the ukrainian economy, taking into account the interests of business, the state and society as a whole. at the stage of developing an action plan for the implementation of the ndc-2, the climate platform should act as a secretariat for sectoral climate partnerships (similar to the confederation of danish industry (di) in denmark's climate partnerships). in contrast to the danish experience, where the government itself was the initiator of the establishment of climate partnerships and appointed their leaders, in ukraine grassroots initiatives by business associations are considered necessary. in view of this, the functions of the feu climate platform as an organiser and secretariat of sectoral climate partnerships should be as follows: – conducting an information and consultation campaign among feu members on the challenges related to ukraine's climate commitments and global (primarily european) trends in climate policy, with the aim of the widest possible, consolidated involvement of the domestic business community in the preparation of the decarbonisation agenda; – business advocacy in the climate dialogue with government: entrepreneurs are primarily interested in maintaining competitiveness in the green transition process, they are most familiar with the latest technological solutions and know-how for decarbonisation in their industries, and they are in a unique position to provide a clear assessment of the resource and time costs of implementation. businesses should therefore have the right to develop roadmaps for achieving sectoral climate targets, and government should listen to them; – involvement of experts, including foreign experts, whose experience is based on effective measures actually implemented in the field of consultancy, accounting and auditing, economic analysis and modelling, to assist entrepreneurs in calculating their current carbon footprint, developing new business models and preparing investment projects aimed at reducing ghg emissions. among other things, this will enable the private sector to determine what proportion of the costs and at what stage can be met by business at its own expense, and where support from government and/or international donors is required. it will also help to justify specific decarbonisation measures by assessing their economic, social and environmental impacts at all levels; – preparation of reports and recommendations for sectoral climate partnerships – combining the results of public-private discussions into coherent and meaningful action plans and standardised reports on the achievement of ukraine's climate goals: analysis of greenhouse gas emissions by the industry 's enterprises, summary of the key factors that determine the dynamics of greenhouse gas emissions in the industry, description and assessment of the industry 's main achievements in the field of decarbonisation; presentation of the industry 's own vision of the green transition process by 2030, explaining what technological, financial and regulatory means are needed to achieve climate goals; a detailed presentation of business initiatives to reduce greenhouse gas emissions in specific production processes of the industry, including implementation costs and an assessment of climate impacts; argumentation of regulatory, resource, organisational and other barriers to achieving the industry 's climate goals; proposals and recommendations for the government to remove the identified obstacles and provide financial and other incentives for the industry on the way to a green transition. the climate platform, as a secretariat organising public-private partnership in the green transition, will provide the business community with an opportunity to formulate an agenda for decarbonisation of the ukrainian economy, systematically influence the legislative and regulatory environment in this area, and provide the authorities with clear guidelines on the main obstacles to the implementation of climate goals. this will help to agree on directions for overcoming relevant challenges, get an idea of the scope and prospects of the state's participation in financial and other support for business in the implementation of green initiatives. as approaches to the green transition are constantly developing, changing and modifying, the feu baltic journal of economic studies 102 vol. 9 no. 2, 2023 climate platform will also function as an office that monitors, analyses and disseminates information on current international and national events related to the decarbonisation of the economy. among the main functions of the climate platform office, the following should be highlighted: – monitoring and analysing international legislation (primarily that of the eu in the context of ukraine's membership candidacy) in the area of decarbonisation, assessing the potential impact of legislative changes on competitiveness, market access, and so forth; – studying approaches to taxation of greenhouse gas emissions in different countries and mechanisms for targeted use of collected budget funds to stimulate the green transition; – monitoring of national legislation and regulatory initiatives in the area of decarbonisation, with a prompt assessment of the potential impact on the private sector and analysis of effectiveness in the context of achieving climate goals; – studying best business practices in the field of decarbonisation: green business models; big data, artificial intelligence, digitalisation; interaction with the public sector and international donors; the latest technological solutions and know-how in the field of renewable energy, energy efficiency, circular economy, and the like; – development and publication of methodological materials on technical aspects of greenhouse gas emissions that assess the economic impact of climate change policies, in particular: standards for converting emissions of various greenhouse gases into carbon dioxide equivalent emissions; standards for greenhouse gas emissions from fossil fuel consumption (coal, gas, oil and petroleum products); assessment of the carbon footprint of goods and services; assessment and simulation of cbam effects; – provision of consulting services on decarbonization and green transition; – gathering and publication of other relevant information on climate policy and decarbonization. broad social consensus on the fight against climate change, coalitions to support the implementation of green initiatives and communication with western partners remain crucial for ukraine to ensure a green transition. in this regard, the climate platform will also serve as a forum for the exchange of ideas and proposals, promotion of climate ideas and networking among all stakeholders. the main functions of the climate platform as a forum are as follows: – holding meetings, conferences, and discussion clubs on green transition to raise environmental awareness among businesses and citizens, and to increase public demand for the implementation of a systemic climate policy; – presentation of successful decarbonisation practices in domestic and foreign companies, excursions to relevant enterprises, and exchange of experience between the participants of the feu and foreign partners; – organisation of meetings between business, government and civil society representatives to summarise the interim results of the implementation of the action plan for the implementation of the ndc-2, as well as to discuss changes and modifi cations to sectoral roadmaps that will inevitably be required for further decarbonisation. in order to ensure maximum transparency and dissemination of information on climate challenges and decarbonisation of the economy, it is also planned to create and support the official website of the climate platform, where (in addition to general information on the nature, purpose and goals of the platform's activities) basic information on issues of green transition in ukraine and the world will be provided, online events will be held and their main results will be presented. 4. conclusions the article presents the concept of a climate platform based on the danish experience of achieving national climate targets by organising ppps in the form of sectoral climate partnerships. within these climate partnerships, representatives of each industry were tasked with formulating specific proposals for their contribution to reducing ghg emissions and with developing a roadmap for achieving climate targets in a way that would help maintain the competitiveness of the danish economy, boost exports, create new jobs and increase welfare. the climate partnerships developed two types of proposals: actions for industry to take to reduce ghg emissions; and recommendations for public authorities to remove barriers and improve the regulatory and institutional framework for tackling climate change. as a result, companies developed their own realistic climate roadmaps and the government received up-to-date recommendations on how to improve policies to support the green transition. as a result, the danish climate partnerships have contributed to the development of more than 400 proposals and recommendations, most of which have become part of government policy. references: barker, a., et al. (2022). towards net zero emissions in denmark. oecd economics department working papers no. 1705. paris: oecd publishing. baltic journal of economic studies 103 vol. 9 no. 2, 2023 batini, n., parry, i., & wingender, p. (2020). climate mitigation policy in denmark: a prototype for other countries. imf working paper no. 2020:235. washington, d.c.: imf. greaker, m., golombek, r ., & hoel, m. (2019). global impact of national climate policy in the nordic countries. calmfors, l., hassler, j., nasiritousi, n., bäckstrand, k. (ed.). nordic economic policy review, pp. 157–202. copenhagen: nordisk ministerrad. hansen, k. b., & enevoldsen, p. (2022). climate politics and renewable energy in denmark 1975–2020. krogh, a., agger, a., triantafillou, p. (ed.). public governance in denmark, pp. 149–167. bingley: emerald publishing limited. ivanyuta, s. p., & yakushenko l. m. (2022). the european green deal and the climate policy of ukraine. smenkovskyi a. yu. (ed). kyiv: national institute of strategic studies. doi: https://doi.org/10.53679/niss-analytrep.2022.12 leshchenko, i. ch. (2023). assessment of the reduction of greenhouse gas emissions by the coal sector of ukraine for implementation of international climate agreements. the problems of general energy, vol. 1–2, pp. 139–149. lindegaard, l. s., funder, m., & friis-hansen, e. (2021). preparatory study for the evaluation of denmark's development cooperation on climate change adaptation. diis working paper no. 2021:02. copenhagen: danish institute for international studies. lund, d. s., sehested, k., hellesen, t., & nellemann, v. (2012). climate change adaptation in denmark: enhancement through collaboration and meta-governance? local environment, vol. 17, pp. 613–628. mathiasen, e. s., & svendsen, g. t. (2021). can public agencies facilitate efficient sustainable energy strategies? a climate partnership model. international journal of sustainable energy, vol. 40:8, pp. 739–754. nash, s. l., & steurer, r . (2022). from symbolism to substance: what the renewal of the danish climate change act tells us about the driving forces behind policy change. environmental politics, vol. 31:3, pp. 453–477. ning, l., abbasi, k. r ., hussain, k. et al. (2023). analyzing the role of green innovation and public private partnerships in achieving sustainable development goals: a novel policy framework. environmental science and pollution research. doi: https://doi.org/10.1007/s11356-023-26414-6 oecd (2015). monitoring the transition to a low-carbon economy. available at: https://www.oecd.org/cfe/leed/ monitoring-green-transition-final2.pdf pedersen, g. w. (2022). integrating climate and energy policies: points of inspiration from the energy transition in denmark. tokyo: cigs. state of green (2021). climate partnerships for a greener future. copenhagen: litotryk. tyas, l. s., & prakoso, h. a. (2022). fighting against climate change: denmark’s effort in reducing global carbon emissions. insignia journal of international relations, vol. 9(2), pp. 110–132. received on: 02th of march, 2023 accepted on: 18th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 199 vol. 3, no. 4, 2017 corresponding author: 1 department of economic and social geography, taras shevchenko national university of kyiv. e-mail: julia_pereguda@ukr.net middle-class formation strategy in the region: practical aspects yuliya pereguda1 taras shevchenko national university of kyiv, ukraine abstract. the purpose of this article is to generalize knowledge about the formation of the middle class in the region, practical aspects of this problem. the author shows details of formation strategy, its social aspects in the view of human geography. also in this paper, the author discloses items in regional development studying, the role of society in it and its structure, tides between processes in society and features of regional placement of productive forces. the main goal of this article is to make an analysis of the middle class in the view of human geography; show aspects of the territorial organization of the middle class, their influence on the economic development. another purpose of this article is to disclose the essence of the mechanism of interaction between middle class and regional development, the interrelation of these two various processes. the methodology of this article is based on the human geography conceptions. the author considers aspects of regional social and economic development of regions: theoretical justification of this process and the analysis of its examples of modern ukrainian economic activity. the thesis of this analysis is that regional development in the country has to be based on a number of the basic principles (they are picked up for the concrete territory and proved). results. the author pays attention to the social and economic methodology of research of the middle class and regional development. she considers features of spatial manifestation of the middle class, and also categories, which anyway characterize it. also, the author makes an analysis of indicators of the middle class, which allow identifying it in its relation to other structural elements of society. value. in the article, there are different points of view to strategy as a category, its role in economic policy and state development. both strategies (development strategy for the territory and strategy as the instrument of regional policy in the country) are also analysed in details. in particular, it is shown how strategy can influence a decision for tasks of regional development, concentration of the available resources. there is analysed in details the available experience of realization of this approach in practice of regional ukrainian policy. also, the author describes special cases when regional development and intensive growth of some industry branches did not promote either increase in the middle class or increase in the level of the general wellbeing. in conclusions, the author has noted the prospect of using such a tool as the strategy of the middle-class formation, management of regional development, and potential opportunities in the solution of the available obstacles. the author proves that at our days in ukraine, increase in the number of the middle class is the most effective tool for the economic growth and regional development. key words: human geography, quality of life, middle class, strategy, region, regional development. jel classification: r 120, l1, r58 i. introduction human geography studies of the middle class in the field of ukrainian geographical science and as in the field of geographical sciences at all are relatively new. the middle class has become the centre of scientific interests of the geographical community a few decades ago. but only over the past ten years, there has been an understanding that it is precisely this element of society that needs to be considered more closely. the urgency of such a research is determined by several circumstances. first, the formation of the middle class and the increase of its share in society are essential, both at the national level and at the level of the region. a high proportion of the middle class stimulates economic growth due to an increase in aggregate demand in the economy, the entrepreneurial activity of the population. secondly, the developed middle class positively influences the social sphere, – crime decreases, social and political stability grows. it is now apparent that territorial communities with a high proportion of the middle class show better development than those, in which the income distribution of the population is uneven. however, the mechanism of communication between the characteristics of the middle class and regional baltic journal of economic studies 200 vol. 3, no. 4, 2017 development is poorly understood. therefore, the purpose of this article is to highlight peculiarities of the formation of the middle class in the region and the basis for the strategy of such a process. within the framework of this goal, the following tasks are identified: to establish approaches to the study of the middle class from sociogeographical positions; to formulate the principles of the strategy of its development; to identify the role of the middle class in regional development. methodological basis of the research is the traditional methodical apparatus of social geography. the vision of the problems of the middle class, its role in regional development is based on conceptual representations about the territorial organization of society, geographical cluster, and the connections between its separate components. the article has a classic structure. it consistently examines the components of the wellknown issues, arguments in favour of different points of view regarding the role of the middle class in the development of the region. the article summarizes the author’s vision of the development strategy of the middle class. 2. the middle class in regional development the question of regional development in social geography is considered in sufficient detail. it is mentioning in many papers (mezentsev, podgrusny, mezentseva, 2015), (voznyak, 2015). currently, there is a consensus among researchers (geographers and economists) on the essence of the concept of regional development, methodological and methodological foundations of its provision. there is also an understanding of the fact that the quality of state policy in this area is not good enough. unfortunately, despite some examples of the implementation of mechanisms for managing regional development (example: the creation of special economic zones, clusters, various forms of border cooperation), a significant progress in the development of an effective mechanism was not achieved. nevertheless, all researchers point out the need to create and implement various levers of regional development management. it is at the regional level that it is possible to reveal the potential of the community, to enable its most active representatives to realize themselves, as well as to create new “points of growth” for the economy. however, the realities of state policy in the country have quickly changed. in 2017, the most urgent factor of regional development in ukraine is the implementation of administrative and territorial reform. after two decades of discussions in the expert and scientific environment, as well as numerous unfinished attempts to reform the administrative-territorial structure of the country, in a rather short period of time, a fundamentally new (for ukraine) model of the territorial system was developed; mainly on the primary level of management. changes have been developed, presented to society, and implemented so quickly that there is currently no unanimous response from the scientific community, as well as a comprehensive understanding of their implications. there are only preliminary assessments and attempts to predict the prospect of the effectiveness of the proposed mechanism (gubeny, koverko, 2017). it is anticipated that the redistribution of resources, levers of management, and areas of responsibility from central government to local will promote regional development and release of local initiatives. as for the role of the middle class, one view dominates among specialists (andronic, 2015). it consists in recognizing the importance of the development of the middle class for the harmonious, sustainable development of the territorial community. our point of view to this is the middle class, its size, and activity of its representatives have only a positive impact on the situation in the community (at least, formally). at the same time, our understanding of the problem indicates that, in ukrainian realities, there are serious obstacles to the development of the middle class. the mechanism for reallocating incomes in ukraine at the regional level is constructed in such a way that in the presence of economic growth in the region, additional income is concentrated in the most prosperous strata of the population. first of all, among those own the most liquid real estate objects, as well as trade and financial institutions. 3. middle-class state policy at present, the study of state policy of the formation of the middle class in ukraine is reduced to the analysis of foreign experience (smaglyuk, 2015). it is recognized that domestic policy in this area has no examples of effective mechanisms, nor the experience of successfully implemented projects. at the same time, it is indicated that there is no alternative to effective policy in this direction. it is alleged that due to the high share of the middle class in the country (more than 50% of the population), sustainable economic growth and self-sufficiency of the population can be achieved. the community, the majority of whose members are representatives of the middle class, “feeds themselves”. in such a community, there is no need for the state to interfere in one form or another in their life. the middle class can take care of local hospitals, building the network of educational institutions, improving the territory. the criteria for allocating the middle class have numbers of generally accepted indicators. of course, the main one is the income per person, as well as the total income per household. but, besides this, there are other indicators that also determine the person’s belonging to the middle class. such indicators are a certain profession, a way of life, type of housing. naturally, according to baltic journal of economic studies 201 vol. 3, no. 4, 2017 such criteria, the middle class in ukraine is in the initial condition. the main lever of middle-class state policy is the creation of a mechanism for the redistribution of income among different groups of the population. it is well-knowing that society itself does not seek to form a balanced system, in which the political influence, fortunes, and access to state decision-making would be weighed down among different social groups. moreover, as the practice has shown (particularly in ukraine), with the insufficient development of state institutions and democratic principles of society, the influence of social groups close to the authorities begins to be used to meet the personal interests of a narrow circle of people. at the same time, it is noted that the community, in which the majority of the population are representatives of the middle class, is able to take over a part of the functions of the state, as well as independently create the preconditions for the economic growth. channels of such an influence are: real estate market, business activity, high social and migration activity of the population. in the dimension of human geography, such an activity (high proportion of middle-class representatives) is expressed in the high level of population mobility, the emergence of specific areas of development, inhabited by representatives of the middle class. 4. methodological basis of middle-class identification in the view of human geography as already noted briefly, the human geography study of the middle class has begun two decades ago, within the framework of research of other problems. among the representatives of the ukrainian human geography school, the middle class is objectively considered either in the study of the characteristics of the population or in the context of studying its qualitative characteristics, in particular, the quality of life. thus, the first attempts of purposeful research of this stratum of society began relatively recently (mezentseva, 2011). at first glance, the study of this phenomenon can be applied the same approaches as for related phenomena and processes of population geography. as indicators suitable for the study of this problem, it is possible to use some of the data that is available, and which in one way or another relate to the middle class. in addition, in the study of the middle class, you can apply a fairly common approach to the knowledge of a geographical object. the study of regional (territorial) distinctions between middle classes of different communities is also popular among researchers of this problem (vasilyuk, 2012). they compare the shares of the middle class in several regions. in human geographic in general, the research on the middle class is much larger. in the leading western geographic schools, an attention was paid much earlier to such a category as the quality of life, and all that associated with it (helbum, 1982). middle class began to be explored as an independent phenomenon much earlier than in the ukrainian scientific school (scott, 2006). in the vision of western scientific schools, the middle class was formed an independent, natural community, which begins to affect to environment systematically and significantly. often, representatives of the middle class of large cities fall in the focus of attention. their habits, preferences, financial possibilities radically change the internal environment of the city. in particular, one of the most striking examples is the peculiarities of the functioning of the real estate market due to the demand for certain types of housing from the side of the middle class. the same effect can be traced in the field of educational services, demand for tourism, certain types of cars, etc. (savage, 1995). however, due to a number of circumstances, a significant contribution to the study of the middle class as an object of human geography was made by representatives of economic sciences, in particular, regional studies (the science of the regional development as independent and unique sociologic and economic systems). for example, (pavlova, 2015) considered the formal structure of the category of quality of life. it has been allocated components of this category, which correspond to spheres of human life and health care (libanova, 2013) considered that the quality of life as a comprehensive indicator, having made a thorough overview of the current state of ukrainian society in the context of this category. the very origin of the concept of the quality of life has sociological and medical roots. it was in the field of medical sciences and public health that the understanding of this category emerged and became widespread (yagensky, sicharuk, 2007). the problem of socio-geographical identification of the middle class is as follows. unlike other human geographical phenomena and objects, the middle class has no forms of spatial expression. it has a population settlement system but representatives of the middle class do not live separately from other groups of the population. it is only possible to make a distinction between persons belonging to the middle class at the macro level. if we talk about the special forms of territorial localization of representatives of the middle class, we should mention only the rather conditional forms of “"territorial behaviour” – that is, the particularities of the settlement of a certain part of the population (in this case, the middle class), and their behaviour within the city. it can be argued that there are certain places visited by middle-class representatives; there are specific movements of middle-class representatives within the city, residential areas, where the share of residents belonging to the middle class is the highest. but, unlike other phenomena, the middle class cannot be considered completely “torn away” from the region (geographical cluster). speaking in everyday language, baltic journal of economic studies 202 vol. 3, no. 4, 2017 the middle class is not separated from the rest of society by the wall but, on the contrary, tightly integrated into the social structure, even at the level of personal ties. the criteria of the middle-class identification are shown in fig. 1. in this context, the criteria are used to identify the middle class within other disciplines and especially human geography. the generally accepted criteria for identifying the middle class in other disciplines (primarily in economics and demography) include quality of life, standard of living, income per person, availability of social services. the identification of the middle class is also an important sociological and psychological factor. the fact is that in different countries, people with a very different status can refer to the middle class. that is, belonging to the middle class – this is a matter of lifestyle, identity itself. especially human geography criteria for identifying individuals that can be attributed to the community of the middle class are specific territorial forms. that forms the cells of the cluster of middle-class representatives. quite arbitrary but they can be called “clusters” of the middle class. that is, it is the place of the largest congestion of its representatives. in this respect, such a method can be compared with the approach in medical geography, when within a single community it is necessary to monitor the carriers of a certain disease, and, while taking into account the unity of this group of people with the community, and certain autonomy, to identify the features of their behaviour. also, to identify the middle class as an independent geographical phenomenon can be on the connections that arise between its cells within the same region. however, in terms of practicality, the middle class is most appropriately identified and investigated on the same methodological basis as other social groups. for example, as is the study of age and gender differences in the community, indicators of education, occupational employment, etc. 5. formation principles of the middle-class development strategy the sense of the problem strategy formation for the middle-class development at the regional level has several aspects. the first aspect is that the distribution of income between social groups depends mainly on the macroeconomic situation in the country, and the share of the middle class is approximately the same everywhere. regional development tools can be done a bit. under such conditions, the strategy for the middleclass development at the regional level should focus more on taking into account and forecasting national trends. the second aspect of strategy formation is the mechanism of economic growth, especially at the regional level. it is clear that an increase in the share of the middle class cannot occur due to the administrative regulation of already existing incomes. a more rational way is to redistribute income from future economic growth. in this point of view, the strategy should provide for the appropriate levers of influence in the subject of strategy implementation. if we are talking about the need for the redistribution of incomes between different groups of population, then such a toolbox should contain means of fiscal policy, through which it can be realized. the third aspect is the necessity to formulate a strategy for each region separately. since the share of the middle class in each region is determined by its specificity, the strategy of the development of the middle class should also take into account such features. for example, if in the region the most intensive development has become the only one specific direction of economic activity (or mining of certain types of minerals, or tourism), then a strategy for the middle-class development must be provided with an appropriate mechanism. it should ensure a proportional distribution of revenues from such activities to the widest sections of the population. regional geographical cluster community middle class human geography criteria for the middleclass identification general criteria of middle class identification quality of life level of life income per one person availability of social services self-assessment and self-identification territorial forms of the middle-class representative resettlement centers spatial relationships between centers of concentration of representatives of the middle class fig. 1. criteria for the middle-class identification in human geography view, and their tides with categories “geographical cluster” and “middle class” source: made by the author baltic journal of economic studies 203 vol. 3, no. 4, 2017 at present, the practice is widespread, when regional development contributes to the growth of welfare of only certain segments of the population, bypassing the majority. eventually, this does not result in an increase in the share of the middle class, but in its reduction due to the increase in the wealth of the most prosperous and the number of people who are below the poverty line. the strategy for middle-class formation in the region should contain the following components (fig.  2). the subjects of the strategy should be, first and foremost, authorized by the authorities responsible for the development of the territory. they can be either regional subdivisions of central executive bodies, or local administration, or elected representative bodies. representatives of civil society and business circles may also be involved. in order for such a strategy to be successful, all those actors (who depend on the development of the middle class in the region), who will be involved in the implementation of this strategy and whose resources will be involved in the degeneration of its provisions, should be involved in its design and implementation. basically, despite the types of the subject of formation, the very strategy of becoming of the middle class should be unique. it is not advisable to parallel development of the strategy by several subjects at once. the objects of strategy forming for the middle-class development at the regional level should be thrown, first of all, by the interested parties. these parties should include the local community (the process of raising the share of the middle class will undoubtedly contribute to the growth of welfare, the improvement of the social infrastructure of the region, and the general acceleration of economic development). in addition, the objects of strategy formation should include the resources are necessary for its realization, the risks of its implementation, the time frames. resources to be involved include mainly the funds of the administrations and authorities that will be “agents” of its implementation. the volume of such resources should not be significantly different from the cost of implementing other state programs. the risks of implementing the strategy are the danger of a significant change in the overall socioeconomic situation in the country, the fundamentals of state policy and the occurrence of regional events (natural disasters, for example). the timeframe for the implementation and timeline for implementing the strategy is an important criterion for its effectiveness. the timing of the implementation of the strategy, as well as the timing of the use of certain tools and methods of influencing the formation of the middle class, should be clearly defined. in the case of implementation of such a strategy in ukraine, terms may be 10, 15, and 20 years. it is this for the most part that the state programs in the country are continuing. the practical aspects of implementing the middle class forming strategy in the region are that it is necessary to develop an effective mechanism for re-directing existing incomes (private enterprises, households, local budgets) in such a way that they contribute to the formation of the middle class and, consequently, more effective models of regional development. the essence of the situation in ukraine is that each region in the country has a potential for the growth and can provide the local community with resources for the necessary development. so, everywhere in ukraine, there are potential growth points – fields of minerals sources, competitive industrial enterprises, territories suitable for the productive agriculture. the problem is that the effectiveness (including in the context of regional development) of such objects is extremely ill. subjects of middle-class forming strategy government society community local government objects of middle-class forming strategy strategy time frames resources risks of development actors results calculation results of middle-class forming strategy system of strategy realization road map of realization final effects calculation fig. 2. principles of middle-class development strategy source: made by the author baltic journal of economic studies 204 vol. 3, no. 4, 2017 one of the sides of the current growth of the ukrainian economy is the uneven distribution of its results. the same can be said about regional development. in addition to well-known aspects of it (for example, ensuring sustainable development, or complex development of all components of the local socio-geographical complex), the fact remains that the need to also seek to increase the size of the middle class. now in ukraine, it turns out that in the case of a rapid growth of the economy of the region or its certain industry (tourism, or the production of natural gas), the impact of such a growth is felt not only by a dummy group of the population. namely, those people are directly working in a growing economic activity, or they are just the most prosperous citizens. of course, we ignore the situation that has emerged in the eastern parts of donetsk and luhansk regions and the republic of crimea since 2014 – this is the object of another study, and in those territories, there are now different situation and completely different problems. 5. conclusion at present, in ukraine, everybody can see a fast decline of the middle class, mainly due to the decline in the level of well-being and the transition of households from the category of those that can be attributed to the middle class (to those that can be considered low-income). first of all, the reasons for such a process are the systemic economic crisis in the country. but not least, the absence of a regional mechanism for promoting the middle-class formation also has a weight. additional revenues, which are coming in one way or another to the region, do not support integrated development. this income becomes the property of a narrow group of people. the middle-class forming strategy in the region should be based on a number of principles. the main of them is taking into account the characteristics of each region and its potential; involvement in the process of development and implementation of the strategy of entities, which in the future will become the main beneficiaries of profit; observance of general human geography principles of development strategy (they are time frame, definition of subjects and objects of its realization). unlike other human geography phenomena, the middle class is more qualitative characteristic of society. it cannot be completely separated from the geographical cluster (even conditionally), as, for example, a large locality, geographical area or industrial complex. the middle class should be considered in the context of regional development. if we talk about the practical speculation in the formation and implementation of the middle-class forming strategy, then on the example of ukraine and its regions it is clearly seen how significant destructive processes are taking place in the region. primarily, it happened because of the lack of a social stratum in the structure of society as a middle class. with its insignificant number, there is a series of very negative processes, both purely economic and social. the first should include the slowdown in the economic development of the region, degradation of infrastructure, and a decline in business activity. among others, we can mention the marginalization of the territorial community, increase the level of crime, and increase the rate of migration. in ukraine, it is possible to observe all of the divination processes. the increase of activities of regional development is currently a topical issue since so far more attention has been paid to the economic growth at the national level and attraction of portfolio investments. it was believed that, with high economic growth, the regions developing would begin as a concomitant process. but the experience has shown that this topic requires a special attention, and cannot be regulated by the same tools. in this context, implementation of the middle class increasing mechanism is one of the most effective ones. references: andronik, o.l. (2015). seredniy klas u systemi sotsial'no-ekonomichnoho rozvytku. visnyk pryazovs'koho derzhavnoho tekhnichnoho universytetu. seriya tekhnichni nauky, vol. 30, p. 403-409. vasylyuk, d.y. (2011) porivnyal'na kharakterystyka rozvytku seredn'oho klasu suspil'stva v karpat·s'komu ekonomichnomu rayoni, aktual'ni problemy rozvytku ekonomiky rehionu, vol. 8, p. 261-267. voznyak, h.v. (2014). suchasni teoriyi ta paradyhmy rehional'noho rozvytku: praktychnyy vymir dlya ukrayiny, hlobal'ni ta natsional'ni problemy ekonomiky, vol. 5, p. 671-676. hubeni, y.e., koverko, y.a. (2017). rozvytok osobystykh selyans'kykh hospodarstv v umovakh administratyvnoyi detsentralizatsiyi, ekonomika apk, vol. 1, p. 68-73. libanova, e.m. (2013). vymiryuvannya yakosti zhyttya v ukrayini: analitychna dopovid'. ptoukha institute for demography and social studies of the national academy of sciences of ukraine, kyiv, ukraine. 48 р. mezentsev, k.v., pidhrushnyy, h.p., mezentseva n.i. (2014). rehional'nyy rozvytok v ukrayini: suspil'noprostorova nerivnist' i polyaryzatsiya. dp «print servis», kyiv, ukraine. 132 р. mezentseva, n.i. (2011) suspil'no-heohrafichne doslidzhennya formuvannya seredn'oho klasu v ukrayini. ekonomichna ta sotsial'na heohrafiya: zbirnyk naukovykh prats', vol. 62, p. 169-177. pavlova, y.o. (2015). struktura yakosti zhyttya naselennya, slobozhans'kyy naukovo-sportyvnyy visnyk, vol. 5, p. 90-94. smahlyuk, v. (2014). derzhavne upravlinnya u sferi formuvannya ta rozvytku seredn'oho klasu v ssha: dosvid dlya ukrayiny, derzhavne upravlinnya ta mistseve samovryaduvannya, vol. 1, p. 205-215. baltic journal of economic studies 205 vol. 3, no. 4, 2017 yahens'kyy, a.v., sichkaruk, i.m. (2007). otsinka yakosti zhyttya u suchasniy medychniy praktytsi. vnutrishnya medytsyna, vol. 3, p. 3-11. helbum, n. (1982). geography and quality of life. annals of the association of american geographers, vol. 4, p. 445-456. scott, s. (2006). the social morphology of skilled migration: the case of british middle class in paris. journal of ethnic and migration studies, vol. 7, p. 1105-1129. savage, m. (1995). property, bureaucracy and culture: middle-class formation in contemporary britain. london: psychology press. 288 p. юлия перегуда формирования среднего класса в регионе: практические аспекты аннотация. целью работы. статья посвящена аспектам формирования среднего класса в регионе, в частности, практическим аспектам данной проблемы. в статье с позиций социально-экономической географии раскрываются аспекты формирования стратегии вообще и социально-экономическим аспектам этой проблемы. так же в данном научном труде анализируется существующие подходы к изучению регионального развития, роль в нем общества и его структуры, связи между процессами в социуме и особенностями регионального размещения производительных сил. естественно, основной аспект в статье сделан на анализе среднего класса с точки зрения экономической географии. выделены аспекты территориальных проявлений формирования среднего класса, его влияния на экономическое развитие. автор статьи в качестве цели задекларировал стремление раскрыть сущность механизма взаимодействия среднего класса и регионального развития, взаимосвязь этих двух различных процессов. методология. в статье рассмотрены аспекты регионального социально-экономического развития регионов, как теоретического обоснования этого процесса, так и анализ его примеров из современной экономической жизни в украине. в основе этого анализа лежит тезис о том, что региональное развитие в стране должно основываться на ряде принципов (подобранны для конкретной территории и обоснованных). в противном случае такое развитие не будет ни продуктивным, ни долгосрочным, не таким, которое бы в полной мере полностью раскрывает потенциал данной территории. автор много внимания уделяет социально-экономической методологии исследования среднего класса и регионального развития. рассмотрены особенности пространственного проявления среднего класса, а так же категории, которые так или иначе его характеризуют. выполнен анализ показателей среднего класса, которые позволяют его идентифицировать по отношению к другим структурным элементам общества. результаты. в статье изложены различные взгляды на стратегию как категорию, ее роль в экономической политике и государственном строительстве. так же подробно проанализирована и стратегия развития территории, и стратегия как инструмент реализации политики в стране. в частности, показано, каким образом стратегия может повлиять на эффективное решение задать регионального развития, концентрации имеющихся ресурсов, достижения максимально возможной эффективности использования имеющегося регионального потенциала. подробно проанализирован имеющийся опыт реализации отмеченного подхода в практике региональной политики в украине. указанно, с какими именно трудностями сталкиваются государственные учреждения, которые внедряют данную политику в стране. рассмотрены частные случаи того, когда региональное развитие, а так же интенсивный рост отдельных отраслей не способствовал ни увеличению среднего класса, ни повышению уровня общего благополучия. в выводах автор отметил перспективу использования такого инструмента, как стратегия формирования среднего класса в управлении развитием региона, и потенциальных возможностях в решении имеющихся препятствий. автор доказывает, что в современных условиях в украине, всяческое способствование увеличению численности среднего класса – основной и наиболее действенный инструмент, который может весомо повлиять на реализацию экономического потенциала региона и экономическому росту. baltic journal of economic studies 412 vol. 3, no. 5, 2017 corresponding author: 1 department of theoretical and applied economics, ukrainian state university of chemical technology. e-mail: sveta_fedulova@ukr.net 2 department of theoretical and applied economics, ukrainian state university of chemical technology. e-mail: v.v.komirna@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-412-420 conceptual approaches to study the innovative development of regional socio-economic systems svitlana fedulova1, vitalina komirna2 ukrainian state university of chemical technology, ukraine abstract. the purpose of the paper is to find out and identify conceptual approaches to the study of the innovative development of regional socio-economic systems to take into account global requirements for global water security. methodology. we used in our study traditional and special methods, including: historical and logical method, abstraction and analogy, and system analysis methods. results. the article deals with the problems of innovative development of regional socio-economic systems. conceptual approaches to the study of the innovative development of these systems are determined. theoretical approaches to regionalization are generalized and the regional typology in world regionalism is presented. the study devotes a sufficient attention to the issues of infrastructure support for regional systems, which is a prerequisite for the functioning and development of such systems. the article focuses on the priority of research of such a component of regional infrastructure as engineering and technical infrastructure. the model of regulation of development of regional socio-economic systems on the basis of infrastructure support with the consideration of world requirements of global water security is offered. practical implications. in recent times, the discussion on the definition of the essence of the concept of “region” is rather lively. the new paradigm of the regional economy represents the region as a variety of spatial systems of various scales. yes, there are ongoing discussions that under the region can be understood as a group of states and small-sized administrative-territorial units. despite the important role played by such regional systems in the economy of many countries, this topic in domestic studies is not given with enough attention. also, in the domestic scientific schools of the regional economy, studies devoted to the problems of patterns and tendencies of the formation and development of regional systems of ukraine, the solution of which can ensure the formation of a system of management of regional development taking into account national interests, are not sufficiently represented. value/originality. this problem in the economic literature is investigated by many domestic scientists who devote a lot of attention to the problems of regional development management, including the following: alymov a. (libanova, khvesyk, 2014), amosha a. (libanova, khvesyk, 2014), burkinsky b. (libanova, khvesyk, 2014), voinarenko m. ( voinarenko, 2011), danylyshyn b. (danylyshyn, 2006), dolishnii m. (dolishnii, 2001), vasylenko v. ( vasylenko, 2016), dubnytskyi v. (fokina-mezentseva, 2012), zakharchenko v. (zakharchenko, 2013), kolodynskyi s. (kolodynskyi, 2011), libanova e. (libanova, khvesyk, 2014), liashenko v. (liashenko, 2012), mykula n. ( tkach, 2012), novikova o. (libanova, khvesyk, 2014), symonenko v. (symonenko, 2016), shevchuk l. (shevchuk, 2011) and others. an overview of existing theoretical and methodological developments in the field of regional development has shown that significant progress has been made in this field both in foreign and domestic science. however, most of these developments have been made without taking into account the latest macroeconomic processes and trends that set the framework for the strategic planning of the sustainable development of regional systems on the basis of new spatial systems – regional socio-economic systems that can provide a new stage in the development of the old industrial economy of ukraine. key words: innovation development, regionalization, regional socio-economic systems, water security, infrastructure. jel classification: r11, r13, r41 baltic journal of economic studies 413 vol. 3, no. 5, 2017 1. introduction the modern economy belongs to open dynamic systems. it differs in its unpredictability because its basic element is a person and whose behaviour is difficult to predict. transformation processes in the development of the economy become practically continuous, which radically changes the task of man as a participant and the main coordinator of the production system. at the forefront is his or her ability to make decisions in a practically continuous transformation process, skilfully using the toolkit of positive feedback mechanisms. in modern conditions, it becomes obvious that the economic system responds (or is forced to react) to the same factors of external influence in different periods of time in different ways. the withdrawal of a significant role for a person in the development of the economic system has formed socio-economic systems, which are also in a state of dynamic equilibrium. it should be noted that these transformational processes take place under the influence of globalization of social development, taking into account policy, economy, and culture, in the process of which the transformation of institutions of state power takes place. a part of state functions goes to a higher hierarchical level to worldwide, international-regional organizations, and transnational corporations. at the same time, there is a tendency to expand the rights of subnational territorial communities (territorial and administrative units of different levels). the global financial crisis of 2008–2009 has become a manifestation of the systemic crisis of the neoliberal model, which was based on the bank rather than production (derhachev, vardomsky, 2010). in the conditions of the crisis, the formation of a multipolar model of the world order began, and regionalization of international relations has increased. the role of regional factors in social production has intensified. in the global geoeconomic system, there are trends in the formation of regional economic groups that use local ethnocultural and other features as the foundation of new development strategies (derhachev, vardomsky, 2010). changing approaches to building a territorial organization of production necessitates a revision of constituent strategies of regional sustainable development. 2. processes of regionalization in a globalized world in the world of science, numerous theoretical approaches to regional development have been created. by the beginning of the 1990s, there were models of regional development within the framework of the capitalist or socialist system. in western models, liberalization of political and economic relations was preferred, and in the soviet-planned, closed economy in the conditions of a rigidly centralized political system. modern conditions of globalization require the formation of new approaches. political economic division of the world into capitalist, socialist, and developing countries also went into history. the world economy is in search for a new spatial configuration (derhachev, vardomsky, 2010). former socialist camp formed a multi-vector group of transitional (transitive) economies. the global economic space is dominated by the united states and the european union and, at the same time, new poles are being formed. among the developing countries, east asian, latin american, and near-eastern new industrialized countries (nic) are singled out (derhachev, vardomsky, 2010). in international economic relations, the benefits are given by states that are capable of creating the optimal balance between processes of globalization and regionalization (fig. 1). the methodological foundation for the study of regional socioeconomic systems is the theory and concept that deals with relations at the macroregional (supra-state) level, country and subregional (in-country). the grouping of existing theory and concept is presented in fig. 2 and 3. multipolar model of world order re gi on al iz at io n of in te rn at io na l r el at io ns regional economic groups world financial crisis 2008–2009 fig. 1. formation of processes of regionalization in a globalized world (the author’s development) newly industrialized countries (south korea, taiwan, hong kong, singapore) have rapidly burst into global markets. the basis of nic’s competitiveness is the ability to produce high-quality products at a low cost, high discipline, and productivity. economic growth is facilitated by the organization of cooperation with foreign capital, including the creation of joint ventures, export industrial zones and technology parks focused on high technologies, first of all, in the field of electronics. in the formation of a multipolar world, the role of a group of the most promising and dynamically developing economies and markets of the world will grow. in general, since the early 1990s, western countries have practically not increased their share in the world gross product, nor in industrial production and international trade. japan has lost its former stability, and the united states has maintained a low growth rate (fig. 4). the largest dynamism was marked by the east asian countries, in the first place china and nic. baltic journal of economic studies 414 vol. 3, no. 5, 2017 world regionalism is expressed in the regionalization of international relations, the transfer of a part of state functions to the international or subnational level. the regions, in the face of their formal and informal institutions, counteract the negative challenges of globalization and act as an independent subject of international relations; the transition from globalization to regionalization of the market and resources is planned. many regional economic groups are created. many developing countries see regional integration as an attempt to confront global competition. however, as the experience shows, the weaker the economy of such groups, the less effective their regionalization (derhachev, vardomsky, 2010). 0 5000 10000 15000 20000 25000 billions of u.s. dollars 1980 1990 1997 2007 2017 2018 2019 2020 2021 2022 fig. 4. nominal gdp, billion dollars of the usa (nominal gdp [electronic resource], kalabekov, 2017) the processes of regionalization direct us to the search for ways of forming competitive regions, among which the most effective is considered a cluster approach. recent advances in civilization development and economic thought argue that competitiveness and geopolitical socio-economic political economy geographic t he or ie s of tr ad iti on al g eo po lit ic s (s ta te ) t he or ie s of n ew g eo po lit ic s (g eo ec on om ic s) t he or ie s of m od er n ge op ol iti cs (c iv ili za tio na l) the theory of social stratification theories of convergence the theory of technological revolutions the theory of informationalism modern theory of growth (theory of endogenous growth) the theory of economic zoning and tic the theory of regional integration the theory of a regional cluster protectionism the doctrine of economic insulation (j.m. keynes) the theory of the catching-up state general regional doctrine (w. izard) theory of the poles (points) of growth theoretical approaches to regionalization the theory of multipolar world order the theory of large spaces the theory of possibilism geo-economic theories: the doctrine of autarky of large spaces the theory of zones of vital interests the doctrine of the worldeconomics the theory of world systems the theory of geoeconomic world monocentrism theory of large multidimensional spaces the east-south theory fundamentalism theories of ethnocentrism the gold bullion theory the concept of polycentrism and the balance of geostrategic forces concept of city development of p. savitsky the concept of cultural and historical regions fig. 2. generalization of theoretical approaches to regionalization (compiled by the author according to (derhachev, vardomsky, 2010) country regional level domestic regional level supranational regional level (regional groupings) fig. 3. the main regional levels in the globalized world space (compiled by the author according to (derhachev, vardomsky, 2010; dobryanska, 2012; global environment outlook, 2007; dobryanska, 2009) baltic journal of economic studies 415 vol. 3, no. 5, 2017 the process of clusterization are inextricably linked and mutually determined (mikula, 2009). in the conditions of the socialist economy, the theory of territorial-industrial complexes (tic) was considered as an alternative to an overly centralized economy, and tic became the objects of state planning. later, in the development of his scientific ideas of competitiveness, m. porter created the theory of industrial clusters. in this theory, the logical continuation of the idea of the territorial-industrial complexes and other concepts of the concentration of production has been found. representations of industrial clusters have been extended in the theory of a regional cluster, which means the territorial agglomeration of firms and companies operating in one or more related industries (voinarenko, 2011). the emergence of clusters, both industrial and regional, turned them into important institutions of the regional socio-economic system, which led to the need to study such processes in the context of the establishment of sustainable development. the support for the cluster initiatives serves as an instrument for stimulating the economic development of depressed regions. positive effects of cluster formation are the development of cooperation and the establishment of partnerships between companies, which in turn activates the generation of innovations, contributes to lower costs and, accordingly, creates additional competitive advantages for the regions. clusters are a key component of national and regional socio-economic development strategies. the necessity of such cooperation is to update the development of information technologies and other communications that weaken the role and limitations of the geographical factor in international relations. the new geography, which is under the influence of globalization, manifests itself in the regionalization and creation of large multidimensional spaces. there is a transformation of international relations, which changes the principles of construction of interstate management systems. the modern and topical theory of large multidimensional spaces seeks to overcome the limited geographic and economic development, creating an effective geospatial at different hierarchical levels (regional grouping, country, subregion). the creation of regions, their merging, consolidation, disintegration, and fragmentation form the essence of processes of regionalization, world and national regionalism. regionalization, both internationally and nationally, is intimately linked to globalization. modern scholars highlight the creation of the following types of regions in world regionalism (see fig. 5). ukraine is a european state based on the location of south-eastern europe between eurasia-russia and central-eastern europe. thus, ukraine is a frontier country, a country with a civilizational breakdown. the borderline bipolarity is manifested in the territory of the country’s geographical centre of europe in the carpathians and the eurasian geopolitical pole in the crimea. for centuries, the world’s empires of the west, the east, the south, and the north formed the geopolitical outpost on such frontiers of the eurasian steppe and the black sea, which provided both military parity and good-neighbourly relations among the peoples. the multidimensional communication space of ukraine as an independent state has three vector directions of development, namely: western vector; eastern vector; southern vector. this three-vector system determines the geoeconomic code of ukraine. the geo-economic code is a multi-vector system of economic relations with the outside world, based on the balance of national interests, including the international and inter-corporate division of labour, which ensures the efficient functioning of the communication framework of the economy. the code is stored in the genetic memory of the multidimensional communication space of the state (region) and changes in the process of transformation of the geopolitical space (derhachev, vardomsky, 2010). cross-border region (euroregion) region-donor regional typology socio-cultural region economic region administrative region geopolitical (conflict) region geopolitical (geostrategic) region fig. 5. regional typology in world regionalism (compiled by the author according to (derhachev, vardomsky, 2010; dobryanska, 2012; dubnytskyi, 2014) baltic journal of economic studies 416 vol. 3, no. 5, 2017 loss of one of the vectors by ukraine will lead to the destruction of a multidimensional communication space. it should be noted that ukraine possesses an extremely high proportion of effective territory in the total area of the country. if we exclude two eurasian states – russia and turkey, then ukraine is the largest in terms of area and length of a european state. compact and mastered territory of the country is characterized by the absence of extreme conditions of life. ukraine has the largest array of chernozems. almost the average position of ukraine between the north pole and the equator and the proximity of the warm sea create favourable comfortable conditions for people’s lives and economic activity. ukraine differs from the countries of europe by the severity of climate (the difference between summer and winter temperatures), and a significant part of the agricultural land is located in the area of risky agriculture. capital construction, including the construction of foundations, the thickness of the walls, the laying of water supply and heating networks in ukraine are much more expensive, compared with other european countries, over the severity of the climate. 3. innovative development of regional socio-economic systems to implement effective financing, a model for regulating the development of regional socio-economic systems is needed. model (french modèle, from lat. modulus – “measure, analogue, sample”) – a system which research serves as a means for obtaining information about another system; the presentation of some real process, device or concept (uemov, 1971). the number of parameters characterizing the behaviour of not only the real system but also its model is very large. to simplify the process of studying real systems, four levels of their models are distinguished, differing in the number and degree of importance of the considered properties and parameters. it is a functional, principle, structural, and parametric model. the model of the principle of action (principal model, conceptual model) characterizes the most significant (principal) relationships and properties of the real system. principal starting positions (methods, methods, directions, etc.) are the basis of any activity or work. taking into account the global requirements of global water security, we propose to regulate the development of regional socio-economic systems on the basis of providing engineering and technical infrastructure. the definition of “regional infrastructure” proposed by the author, namely, “is a fundamental factor in the life support of the regional socio-economic system (pses), consisting of the territorial-sectoral complex of enterprises and activities that provide the needs of the population and territory in the resources, products, jobs, services of social value significance and necessary for the functioning of the system, reproduction and development for the purpose of improving the quality of life” and the world trends of economic development make it possible to give a priority to the development of engineering and technical infrastructure (on functional grounds) as the most important infrastructure of life support regional socio-economic system. therefore, we will concentrate on developing a basic model of regulation of the development of regional socio-economic systems on the basis of infrastructure provision (fig. 6). the process of regulation is a special case of the management process. management – is the process of influence, which is submitted to the entrance of the control object, which ensures such processes in the control object, which will ensure the achievement of a given management goal at its output. regulation is a separate case of management, the purpose of which is to maintain one or more outputs of the control object at a given level. management theory treats regulation as a management activity aimed at eliminating deviations from the given mode of operation and bringing the object of management to the desired state. the content of regulation as a function of management consists in the redistribution of material and technical and financial resources, operational management of the course of the economic process and is based on the principles: rationality; authenticity; clarity; efficiency. the process of regulation, as a partial management case, should, in our view, have the following algorithm for the formation of a methodology (fig. 6). regulation should be based on the developed methodology. in turn, the methodology is the basis for creating a management concept. and the concept forms the appropriate management mechanism. the basic model of regulation of the development of regional socio-economic systems on the basis of infrastructure provision determines subject and object of regulation. subjects of regulation are: 1. regional state administrations. 2. authorities of local self-government. 3. territorial communities. 4. non-governmental and public organizations. 2. business. objects of regulation are the components of regional infrastructure. undoubtedly, in the regulation process, there should be direct and feedback for effective regulation. baltic journal of economic studies 417 vol. 3, no. 5, 2017 the general algorithm for developing the methodology for regulating the development of the rses is presented in fig. 7. 1. assessment of the object of regulation 5. assessment of the status of the management structure 4. assessment of neighbouring and interrelated subjects 3. assessment of the surroundings 2. assessment of the status of the subject of regulation 6. influence of structures of higher order 7. m e t h o d o l o g y fig. 7. the general algorithm for the formation of the methodology for regulating the development of rses (the author’s development) the functioning of the information in management surroundings must be formalized for the formation of the concept of regulation. such formalization can be provided by the following algorithm of action (fig. 8). the established practice is the prevailing current costs for environmental protection, which are 2-3 times higher than capital eco-investments. that is, entrepreneurs are limited to fulfilling the minimum, established by environmental legislation, responsibilities and avoid large-scale measures to ecologize technological processes. on the one hand, this is due to the limited financial resources, on the other – the low efficiency of environmental taxation (vyshnevskyi, zbarazska, zanizdra, chekina, 2016). as noted in the monograph “national model of neoindustrial development of ukraine”, under the general editorship of v. vyshnevskyi, ukraine maintains a high level of human development, that is, it has a high intellectual capital, but gradually loses its technological base of production and natural capital (vyshnevskyi, zbarazska, zanizdra, chekina, 2016). it is noted that one of the most striking trends in the contemporary development of the world economy at the прямий зв’язок balanced development of rses direct connection methodology mechanism concept subject of regulation model of regulation of the development of regional socio-economic systems based on infrastructure supply object of regulation social infrastructure business infrastructure engineering and technical infrastructure information infrastructure innovative infrastructure institutional infrastructure foreign economic infrastructure ecological infrastructure 1. regional state administrations 2. authorities of local selfgovernment 3. territorial communities 4. non-governmental and public organizations 6. business surroundings of influence result of regulation feedback fig. 6. model of regulating the development of regional socio-economic systems on the basis of infrastructure provision (the author’s development) baltic journal of economic studies 418 vol. 3, no. 5, 2017 beginning of the twenty-first century is a revival of active interest in the industrial sector, the purposeful formation of its progressive structure. in the world, there was a clear paradigmatic shift towards the choice of ways to develop national economies. the authors point out (vyshnevskyi, zbarazska, zanizdra, chekina, 2016) that the tasks of the post-industrial style about the priority of the information sector are no longer fulfilled, and the installation of quite tangible material goods, without control of which, the information economy, even in the most developed countries, loses (at least in part) its potential of efficiency and competitiveness. the priority has again been the industrialization, or rather, the neo-industrialization of national economies, the main purpose of which is the transition to a science-intensive “smart” leading production. it is understood as a complex of activities based on the use and coordination of information, automation of computing, software capabilities, sensory devices, computer networks, the use of leading materials and new opportunities open to the natural sciences in the fields of nanotechnology, chemistry, biology, etc. that is, such a leading production includes both new ways of manufacturing already known products (which cannot be refused), and mainly the production of new products using avant-garde technologies (vyshnevskyi, zbarazska, zanizdra, chekina, 2016). 4. findings due to the significant differentiation of the socioeconomic development of the regions, which intensified during the financial and economic crisis of 2008, the problem of creating an effective management system has recently become even more urgent. the entire world economy has a clear tendency to interact with mechanisms of market self-regulation and purposeful-planned development. this is manifested in the planning (regulation) at the level of business entities (business plans) and financial, budget, software and other regulation at the state level. this circumstance is due not only to the fact that in a number of spheres of the economy (defence industry, education, science, culture, etc.), there is no direct connection between the quality of goods, factors of service production, and payment for them. the main reason – in the purely social nature of modern productive forces, in multiple and branched connections and interconnections, which makes it objectively necessary social, state regulation of the economy in the scale of the country and regions. in a high industrial society, the productive forces represent a gigantic production and technological supersystem, in which there are powerful integration processes that reflect a significant increase in social production. in our time, there is a change in the paradigms of regional economic development and regional policy, the search for ways to improve the management of territorial development, new forms, methods, and mechanisms of participation of regional authorities in the management of the territory. the issue of determining the strategic priorities of regional development is extremely important for ensuring sustainable development of the state in order to reduce interregional differentiation and reduce the number of depressed regions. the study devotes sufficient attention to the issues of infrastructure support for regional systems, which is a prerequisite for the functioning and development of such systems. ukraine has a rather outdated system of resettlement and deployment of productive forces that was created under the soviet industrialization project. under such 1. identification of the surroundings factor affecting the system 5. organization of the management structure, which carries the concept of management 4. formation of the target management function (c o n c e p t) 3. formation of the goal vector 2. formation of principles of recognition of such a factor 6. control over the activity of the structure in the management process 7. structure support or liquidation fig. 8. formalization of the functioning of information in the process of regulating the development of the rses (the author’s development) baltic journal of economic studies 419 vol. 3, no. 5, 2017 conditions, the regional infrastructure system, as a security system, is rather worried. the article focuses on the priority of research of such a component of regional infrastructure as engineering and technical infrastructure. in our time, there is a change in the paradigms of regional economic development and regional policy, the search for ways to improve the management of territorial development, new forms, methods, and mechanisms of participation of regional authorities in the management of the territory. 5. conclusions the issue of determining the strategic priorities of regional development is extremely important for ensuring sustainable development of the state in order to reduce interregional differentiation and reduce the number of depressed regions. the study devotes sufficient attention to the issues of infrastructure support for regional systems, which is a prerequisite for the functioning and development of such systems. ukraine has a rather outdated system of resettlement and deployment of productive forces that was created under the soviet industrialization project. under such conditions, the regional infrastructure system, as a security system, is rather worried. the article focuses on the priority of research of such a component of regional infrastructure as engineering and technical infrastructure. the author’s definition of “regional infrastructure” and world business development tendencies give an opportunity to prioritize the development of engineering infrastructure (on a functional basis) as the main infrastructure for the livelihoods of the regional socio-economic system. in today’s conditions, full rehabilitation of depressed areas is not always possible; therefore, we can only talk about improving the situation in depressed areas as a necessary prerequisite for their transition to a new type of development. the constantly growing complexity and multifactorial nature of tasks of regions of ukraine, the need to identify strategic differences in approaches to different types of regions, especially depressed, determine the relevance of improving the methodological foundations of strategic management of regional development. references: danylyshyn, b. m. 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(2013). vykorystannya klasternoho pidkhodu pry formuvanni promyslovoyi polityky [using the cluster approach in the formation of industrial policy]. naukovyy visnyk mizhnarodnoho humanitarnoho universytetu: ser.: ekonomika i menedzhment, vyp. 6, 35-39 [in ukrainian]. retrieved from: http://nbuv.gov.ua/ ujrn/nvmgu_eim_2013_6_8. baltic journal of economic studies 45 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-45-51 theoretical and methodical approaches to the formation and evaluation of the quality of tourist services nataliya vasylykha1, larysa pavlish2 uzhhorod institute of trade and economics, ukraine abstract. the study, the results of which are described in the article, is devoted to analysing and substantiating approaches to the assessment and quality assurance of tourism services, which form their competitiveness, namely factors and indicators of quality. after all, the integration and globalization of the world society determine the development of tourism as a catalyst for these global processes, and world practice has proved that tourism can be an effective way to solve many socio-economic problems. the subject of the study is the peculiarities of assessing the quality of tourist services. methodology. the methodological basis of the work is a system of general scientific and special scientific methods, mainly, in the process of research, there are used such methods as system-analytical and dialectical methods – for the theoretical generalization of the investigated material; structural and logical method – in systematizing factors and indicators of the quality of tourist services. the purpose of the article is a theoretical justification of approaches to the quality of tourist services and optimization of their quality assessment. in the research, approaches to the interpretation of the concept of quality are presented and analysed, features of services in general and tourism in particular are concentrated, and it is suggested to group and classify factors and indicators of their quality. the interpretation of the notion of quality is ambiguous, both in ukrainian and in foreign literary sources, and depends on the point of view on this notion. in our opinion, the most thorough definition characterizes the quality of products and services as a complex feature that determines their suitability to the needs of the consumer. taking into account the specificity of the term “service”, peculiarities determining the approaches to their evaluation are studied, such a service can be considered a product dominated by intangible elements and also there are separate material components. the peculiarity of tourist services is that they provide the satisfaction of financial and intangible (spiritual) tourist needs of the person, which includes transportation services, accommodation services, and other travel services, not related to transportation and accommodation. awareness of factors that determine quality is the starting point for improving it. we carried out an extrapolation of factors of the quality of goods, tourism services as a special type of goods, and made their classification. quality score is a quantitative or qualitative set of specific requirements for the characteristics (properties) of an object that make it possible to implement and verify them. to determine the quality level, we have suggested a classification of quality indicators of tourism service. conclusions. tourist service is considered as a specific activity aimed at creating the conditions for the effective realization and use of tourism product, which is the result of the purposeful activity of the tourist enterprise. factors of the quality of tourist services should be grouped according to peculiarities of their manifestation (forming, restraining and storing), and managing individual determinants (tourism potential, material base, personnel qualification, marketing research on the relevance and life cycle of services, ongoing maintenance of facilities, timely overhaul of production capacities services, measures of ecological and economic stability, introduction of standards of service and analysis of their observance, material interest personnel, using the principles of quality system) can be directed to act on the overall quality. indicators of quality of tourist services are pointers of their quality. establishing the optimal value of a certain quality index (according to the classification suggested in the study) and its comparison with the actual manifestation of this indicator, one can characterize the degree of conformity of the tourist service to its requirements. the latter is aimed at improving the quality of tourist services, and, indirectly, the requirements to them. key words: quality, service, tourist service, quality factors, quality indicators. jel classification: l15, l83, l84 corresponding author: 1 department of commodity research and commercial activities, uzhhorod institute of trade and economics. e-mail: wasylyha@qmail.com 2 department of commodity research and commercial activities, uzhhorod institute of trade and economics. e-mail: pavlish.larisa@gmail.com baltic journal of economic studies 46 vol. 3, no. 5, 2017 1. introduction integration and globalization of society determine the development of tourism as a catalyst for these global processes, which is becoming more and more significant determinant of the socio-economic development of the country. the modern world cannot be imagined without tourism: international organizations are studying, considering and developing ways and opportunities for tourism development, it is planned by national governments, discussed in the media, and in the end, almost every day the average consumer in one way or another touches on tourism. tourism has all the features that define it as an independent branch of the economy that arose in the process of social division of labour and covers all kinds of human activities that are aimed at organizing rest and renew people’s health. at the same time, it is logical that the question arises about the quality of tourism services as a specific product since the problem of assessing the quality of services in general and tourism in particular is due to a number of their specific features. the aim of the study is a theoretical justification of approaches to the quality of tourist services and optimization of their quality assessment. the subject of the study is peculiarities of assessing the quality of tourism services. methodology. the methodological basis of the work is a system of general scientific and special scientific methods; in particular, the following methods were used in the process of research: system-analytical and dialectical methods – for the theoretical generalization of the investigated material; structural-logical method – in systematizing factors and indicators of the quality of tourist services. the approaches to the interpretation of the concept of quality are presented and analysed in the article, features of services in general and tourism services in particular are concentrated, and it is suggested to group and classify factors and indicators of their quality. 2. scientific approaches to the terminology of the quality of tourist services the interpretation of the notion of quality is ambiguous, both in ukrainian and in foreign literary sources, and depends on the point of view on this notion. quality is a philosophical concept, from the terminology of the humanities. in aristotle’s logic, quality is one of the 10 categories, on which aristotle divided all things of reality. as one of such categories, quality is a by-side circumstance with the help of which the thing acquires the qualities of some type; a by-side circumstance that indicates what the thing is (its meaningful qualities and forms) and how it works (its abilities and skills); a by-side circumstance, which is an external valuation form (shynkaruk, 1986). the iso 8402-1986 standard defines quality as a “set of features and characteristics of a product or service that ensures its ability to meet claimed or foreseeable needs.” according to the law “on consumer rights protection” “the proper quality of goods, jobs or services is a property of a product that meets the requirements established for this category of products in the regulatory acts and regulations, and the terms of the contract with the consumer.” according to unwto, quality is a performance at a certain price for any client’s tasks and expectations that are not prohibited by law, while respecting the requirements of safety, hygiene, and availability of services, the harmony of the human and natural environment. thus, the quality of products and services is a complex feature that determines their suitability to the needs of the consumer. taking into account the specificity of the term “service”, it is necessary to note features that determine approaches to their evaluation. services are products that do not have a real, tangible form, “which exist in the form of useful effective work” (prokhorov, 1980). consumption of services mainly occurs at the same time as their production. these are the benefits that cannot be stored and accumulated (mazur, 2011). therefore, unlike the market where products are sold in real form, the services market is directly related to the processes of production and consumption. as the classic of marketing thought p. kotler points out, in this market, there is no transfer of ownership, possession of property (kotler, 2006). it is not characterized by aposteriority (post-production realization), on the basis of which on the other markets surplus goods are periodically accumulated. as the most effective sphere of the market from the point of view of consumer interests, the market of services at the rates of development is increasingly ahead of the market of products manufactured in real form. such an increase in production and service delivery is the main content of post-industrialization – the transition of modern economies to a new high-quality state (bulatov, 2005). prospects for the development of countries and regions in post-industrialization are determined by the development of their market of services, indicators of which become important indicators of socio-economic development. the market of services is a complex part of a single market space, based on the general market principles of management, namely: freedom of choice, customer orientation, competitive nature of relations. at the same time, it is allocated in a separate direction of research, the general principles of management which have a specific character. the market of services is not similar to other markets mainly due to the following reasons: 1) high level of uncertainty of the service, which prevents the sellers from their promotion on the market; baltic journal of economic studies 47 vol. 3, no. 5, 2017 2) the impossibility of comparing and evaluating services until their acquisition. in the economic theory, the service is considered as a special consumer value, expressed in a certain beneficial effect, which satisfies the needs of people and society. services are actions, the result of which is consumed in the process of their provision. they represent the activity of the individual in favour of another person, “purposeful activity, the results of which have a manifestation in the beneficial effect” (lyubitseva, 2006). in commerce, services are labour-intensive, meaningful activities, the results of which are reflected in the useful effect, the specific consumer value. the feature of the service is the coincidence in time and in space of processes of production, sales, and consumption of its consumable value. such a definition is enshrined in the law on protection of consumer rights – the activity of the executor for the provision (transfer) to the consumer of a specified contract of material or intangible good, carried out on individual orders of the consumer to meet his personal needs. services are characterized by specific characteristics that distinguish them from other goods: inseparability from the source, intangibility, insecurity, and instability of quality. the abovementioned characteristics mainly determine the specificity of evaluation and standardization of their quality. to give a comprehensive definition of a service is not an easy task. the difficulty lies in the fact that in practice products are offered that are components of individual services and material goods (for example, passenger air transport services include not only the movement of passengers and luggage in space but also food during the flight). we support the idea that the service can be considered a product dominated by intangible elements and also there are certain material components. in this case, exclusively intangible benefits should be the main motive for the purchase of consumer services. in the basis of the selection of the market for tourist services or the tourist market, which includes the services of the tourist industry, among the markets for other services lie their specificity and peculiarities of the approach to the interpretation. such authors as t. androsovа (2008), a.  chernihovskaya (2007) separate these concepts, based on the fact that in the market for tourist services, in their opinion, there occurs the sale of a specially developed tourist product, while the tourist market is not only a set of services sold but also a corresponding infrastructure that provides its functioning. other authors, in particular, o. lyubitseva, n. kudla identify these concepts. thus, o. lyubitseva points out that “the market of tourist services or the tourist market is an objective basis for the formation of the growth and diversification of social needs and the corresponding deepening of the social division of labour. it is a part of the global services market, its specific component. the tourist market is a sphere of satisfaction of the needs of the population in services related to rest and content of leisure travel” (lyubitseva, 2006). russian author g. yakovlev (2007) believes that “the tourist industry is a collection of facilities, vehicles, catering, entertainment, objects of cognitive, business, recreational, sports, and other activities, organizations that provide excursion services, as well as services of guides’ translators. in the broader understanding, the tourism industry is considered by o. lyubitseva. in the framework of the tourism industry, it includes not only enterprises of the tourism industry, but also other elements and structures involved in the organization of tourist consumption. tourism industry according to o. lyubitseva (2006) includes three subsystems: organizational and institutional, functional and economic, territorial and economic. thus, in the broad sense, the term “tourism industry” includes not only tourist enterprises, hospitality, food, transport facilities, but also state institutions of law, monetary and tax policy, consulting and customs services, tourist resources and population of territories, tourists; and tourism services respectively – the activities to meet the needs of tourists by these enterprises. different definitions of tourist services occur in the professional literature (table 1). mainly, a. kornak and m. montigyer-loyba (2012), under the term tourist services, mean “any exchange or sale of the results of human labour that is related to the direct or indirect satisfaction of needs before and during the trip and at the place of tourist stay, but is not a consequence of the direct production of objects. they depend on the presence of a tourist customer.” somewhat differently this concept is defined by v. gavoretsky (2007), who by the term tourist service understands “any socially useful actions that ensure satisfaction of the material and intangible (spiritual) tourist needs of a man. they are equally related to the maintenance of a tourist (material needs, for example, accommodation, food), and so to his personality (spiritual needs, for example, cultural and entertainment).” in his turn, r . lazarek calls tourism services “any actions, which satisfy the needs of tourists connected with the trip and actualize their purpose in the tourist territory, that is, satisfy the needs of tourists before, during, and after the trip.” in this definition, the author focuses on the goal of tourism services that is to meet the needs of tourists (herasymenko, 2013). in the law of ukraine “on tourism”, there is no special definition of the term “tourist service” but there is given a definition of accompanying and tourism services and goods (1995). accompanying tourism services are understood as services and products designed to meet the needs of consumers, the provision and production baltic journal of economic studies 48 vol. 3, no. 5, 2017 of which will be reduced significantly without their implementation for tourists, and typical tourist services and goods are designed to meet the needs of tourists, the provision and production of which will be significantly reduced without their implementation for tourists. the generalization of approaches to the definition of the essence of tourist services allows us to identify their main functions, namely: economic, which stimulates the development of branches of the economy, increases the standard of living of the population; technological, which serves as a means of delivery of goods to meet the basic needs of tourists and tourist destinations; providing, which creates the appropriate conditions for the consumer (rest, treatment, business, shopping, etc.) outside the place of his permanent residence. according to the recommendations of the world tourism organization unwto, the quality of tourism is interpreted as an element of quality of life during the temporary stay of tourists outside the place of permanent residence. 3. factors of the quality of tourist services awareness of the factors that determine the quality is the starting point for improving it (strokovych, 2010). we will extrapolate the quality of goods and travel services as a special type of goods (fig. 1). as can be seen from the figure, the factors of the quality of tourist services, similar to the goods, are proposed to be divided into three groups. the factors that directly shape the quality of expediency include: tourism potential, material resources of the enterprise and the conditions of service, qualifications of the staff. to the factors that maintain quality, we refer: research on the life cycle of services, ongoing maintenance and overhaul of the material base, the application of measures to preserve the tourism potential, etc. it is expedient to include the development and implementation of service standards, the analysis of the accuracy of their compliance, the material and moral interest of the personnel, and the use of principles of the quality system. analysing the proposed classification of factors of the quality of tourist services, one can mention those that can be regulated and unregulated factors that do not depend on the activity of the enterprise providing the services. and if the enterprise can only indirectly influence the initial tourist potential of the region, then other factors can be optimized by means of certain strategically directed measures. such measures should be based on identified indicators, indicators of the quality of tourist services. table 1 interpretation of concepts “tourist service” and “tourism product” author, source definition of the concept law of ukraine “on tourism” (1995) a tourist product is a pre-designed complex of tourist services that combines not less than two such services that are being sold or offered for sale at a specified price, which includes transportation services, accommodation services, and other travel services not related to transportation and accommodation (services for organizing visits to cultural objects, recreation and entertainment, sale of souvenirs, etc.). international recommendations on tourism statistics (2008) a tourist product is a combination of different aspects (characteristics of places visited, modes of transport, types of accommodation, activities) around a specific centre of interest (excursion to a natural reserve, farm stay, visits to historical sites). glossary of terms on international tourism (2006) tourist product is an orderly set of tourist services, jobs that provide consumption of tourist services and goods. this is a collection of many elements: natural resources, cultural, architectural, geographic places of interest, technological capabilities, equipment, and systems of enterprises of tourism infrastructure. v. kvartalnov (2003, p. 42, 47) tourist services are a segment of the service sector that provides for meeting the needs of people and implementing their activities in their free time: rest, entertainment, travel. a tourist product is a collection of real (consumer items) and non-real (services) consumer values necessary for the full satisfaction of the needs of tourists that appear during their travel. i.m. shkola (2005, p. 9) tourist services are services of subjects of tourist activity in relation to accommodation, food, transport, informational and advertising services, as well as services of cultural, sport, everyday life, entertainment, etc., aimed at satisfying the needs of tourists. tourist product is a complex of tourist services necessary to meet the needs of the tourist during his travel. a.p. durovych (2004, p. 61-62) tourist product is the result of social labour in the form of tourist services, which have a consumer value. in the broad sense, tourist product is any kind of tourist services. tourist services are the purposeful production activity, which satisfies the needs of tourists and does not accept, as a rule, material form. tourist services can be characterized as invisible goods of a special kind. baltic journal of economic studies 49 vol. 3, no. 5, 2017 4. basic indicators of the quality of tourist services quality score is a quantitative or qualitative set of specific requirements for the characteristics (properties) of an object that make it possible to implement and verify them. to determine the quality level, we have suggested the main indicators of the quality of tourist services (fig. 2). consequently, understanding the concept of the quality of tourism services, as a combination of individual indicators, will allow rationally evaluating it and maximally optimizing the standards of service in the tourism industry, taking into account factors of its quality. 5. quality tools for tourist services it should be noted that for measuring travel services, there are: standards, technical and commodity norms, the culture of service, consumer rights protection, etc. at the same time, the standardization itself (state, public, mixed) in the sphere of tourism business should be considered also in the sphere of protection of consumer interests. in conditions of market relations, any activity, including tourism, requires unification and standardization. first of all, it concerns the offered services. what concerns tourism communication, experience, they cannot be a priori standar dized, since one of the main motives of a tourist trip is the desire for acquaintance and direct contact with the unique, original culture of certain people who are spatially localized. therefore, speaking about standardization in the tourism business, one should speak not about the standardization of social and cultural diversity, but about the standardization of levels of comfort – those parties and the properties of services that have a consumer value and, therefore, should have a guaranteed equivalent of quality, comfort, security, etc. all other aspects of the tourist trip are and must be unique, ethnically or regionally conditioned. such standardization is undesirable (alexandrova). however, it should be noted that the quality assessment also depends on the client’s expectations, which in turn is determined by the personal needs of the individual, the client’s prior experience and the exchange of experience between clients. only the client can assess the relevance of the service to their perceptions, the purpose of the service, its duration, availability, speed, and cultural level of service. in order to ensure the high quality of tourist services, enterprises develop and use internal standards of service for the employed, that is aimed at the stability of the provision of tourist services and are unconditional for the performance of a particular enterprise. such standards are organizational and guidance, methodological documents that reflect requirements to goals, organizations, technologies, and the provision of certain types of work. they have a multi-purpose meaning, as they serve the function of the instruction, the textbook for learning and the basis for control. our quality indicators, classified by blocks, can be used as a basis for tourism service standards and, accordingly, used for the purposes mentioned above. factors of the quality of tourist services factors that directly shape the quality of tourism services tourist potential financial base qualification of staff etc. factors that maintain the quality of tourism services marketing research on relevance and life cycle of services current capacity maintenance timely overhaul of production facilities measures for environmental and economic stability factors that stimulate the quality of tourism services introduction of service standards and analysis of their compliance financial interest of the staff the use of the principles of the quality system fig. 1. factors of the quality of tourist services baltic journal of economic studies 50 vol. 3, no. 5, 2017 6. conclusions tourist service is considered as a specific activity aimed at creating the conditions for the effective realization and use of tourism product, which is the result of the purposeful activity of the tourist enterprise. factors of the quality of tourist services should be grouped according to the peculiarities of their manifestation (forming, restraining and storing), and managing individual determinants (tourism potential, material base, personnel qualification, marketing research on the relevance and life cycle of services, ongoing maintenance of facilities, timely overhaul of production capacities services, measures of ecological and economic stability, introduction of standards of service and analysis of their observance, material interest personnel, using the principles of quality system) can be directed to act on the overall quality. indicators of quality of tourist services are pointers of their quality. establishing the optimal value of a certain quality index (according to the classification suggested in the study) and its comparison with the actual manifestation of this indicator can characterize the degree of conformity of the tourist service to its requirements. the latter is aimed at improving the quality of tourist services, and, indirectly, the requirements to them. fig. 2 indicators of quality of tourist services ergonomic indicators indicators of quality of tourist services indicators of purpose the suitability and functionality of the tourist product and individual tourist services: • reaching the aim of the trip; • completeness of service provision; • efficiency of using time in securement tourist services; • etc. indicators of reliability the ability to effectively carry out tourism activities at a given time, modes and conditions: • reliability of concluded transactions; • securement of services according to the programme of the tour; • thoughtful action in case of force majeure. aesthetic indicators the perfection of the securement of tourist services: • harmony, • conformity of style and fashion; • ethics and skill level of the personnel; • value of a tourist service. ecological indicators absence of harmful influence of the environment and on the environment: • security level when getting a tourist service: • ecologically clean destination; • degree of compliance with environmental legislation. correspondence to psychological perception and physical features of a person: • comfort of the interaction of “personnel-tourist”; • convenience of transport, furniture, and other equipment, etc.; • adherence to the moral and ethical positive microclimate. economic indicators relevance to the ratio of “price-quality”: • costs for the development, production, and testing of tourism services; • complexity of service provision; • degree of satisfaction of consumer expectations. baltic journal of economic studies 51 vol. 3, no. 5, 2017 references: aleksandrov, v. v. (2010). turyzm v systemi priorytetiv rehionalnoho rozvytku: monohrafiya [tourism in the system of regional development: monograph]. kharkiv: khnu imeni v.n. karazina (in ukrainian). androsova, t. v., shtal, t. v., opalenyk, a. v. (2008). zakonomirnosti funktsionuvannya rynku turystychnykh posluh [the regularities of the functioning of the tourist services market]. economic strategy and prospects for the development of trade and services. vol.1 (7): economics, pp. 324-331. birzhakov, m. b., nikiforov, v. i. (2006). bolshoy glossariy terminov mezhdunarodnogo turizma [the great glossary of terms for the international tourism], sankt-peterburg: gerda (in russian). bulatov, a. s. (ed.) (2005). mirovaya ekonomika [world economy]. moscow: ekonomist (in russian). chernykhivska, a. v. (2007). napryamy doslidzhennya sfery turystychnykh posluh u formati rehionalnoho rozvytku [areas of study of tourism services in the format of regional development]. scientific journal. vol. 18, pp. 41-45. durovich, a. p. (2004). marketing v turizme (marketing in tourism), minsk: novoe znamya (in russian). gaworecki, w. (2007). tyrystyka [tourism]. warszawa : polskie wydawnicto economiczhe. (in polish). herasymenko, v. h. (ed.) (2013). rynky turystychnykh posluh : stan i tendentsiyi rozvytku : monohrafiya [markets of tourist services: the state and trends of development: monograph]. odesa : astroprynt (in ukrainian). iso 8402:1986. quality – vocabulary. kotler, p. (ed.) (2006). osnovy marketinga [the basics of marketing]. moscow: vilyams. (in russian). kudla, n. ye. (2012). turystychna posluha – skladova produktu [tourist service is a component of the product]. menedzhment turystychnoho pidpryyemstva [management of a tourist enterprise]. retrieved from: http://westudents.com.ua/knigi/602-menedjment-turistichnogo-pdprimstva-kudla-n.html (accessed january 2018). kvartalnov, v. a. (2003). teoriya i praktika turizma [theory and practice of tourism]. moscow: finansy i statistika (in russian). lyubitseva, o. o. (2006). rynok turystychnykh posluh (heoprostorovi aspekty): monohrafiya [market of tourist services (geospatial aspects): a monograph]. kyyiv: alterpres. (in ukrainian). mazur, yu. p. (2011). diyalnist pidpryyemstv na rynku turystychnykh posluh [activity of enterprises in the market of tourist services]. collection of scientific works of uman national university of horticulture, vol.75, part 2: economics, pp. 223-228. mezhdunarodnye rekomendatsii po statistike turizma (2008). [international recommendations on tourism statistics]. retrieved from: http://unstats.un.org/unsd/publication/seriesm/seriesm_83rev1r.pdf (accessed december, 2017). pro turyzm: zakon ukrayiny [the law of ukraine “on tourism”] № 324/95-вр (1995) retrieved from: http://zakon4.rada.gov.ua/laws/show/324/95-вр (accessed december, 2017). prokhorov, a. m. (ed.) (1980). bolshaya sovetskaya entsiklopediya [the great soviet encyclopedia]. moscow: sovetskaya entsiklopediya. (in russian). shkola, i. m. (ed.) (2005). menedzhment turystychnoyi industriyi [management of tourism and industry], chernivtsi : knyhy-xxi (in ukrainian). shynkaruk, v. i. (1986). filosofskyy slovnyk [philosophical dictionary]. kyyiv (in ukrainian). strokovych, h. v. (2010). yakist funktsionuvannya pidpryyemstva: vnutrishni ta zovnishni aspekty : monohrafiya [quality of operation of the enterprise: internal and external aspects]. kharkiv: nua (in ukrainian). yakovlev, g. a. (2007). ekonomika i statistika turizma [economics and statistics of tourism]. moscow: rdl (in russian). baltic journal of economic studies 19 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 university of economics in bratislava, the republic of slovakia (corresponding author) e-mail: mykhaylo.kunychka@euba.sk 2 university of economics in bratislava, the republic of slovakia e-mail: leonid.raneta@euba.sk 3 uzhhorod national university, ukraine e-mail: diana.steblak@uzhnu.edu.ua doi: https://doi.org/10.30525/2256-0742/2023-9-2-19-33 economic diplomacy and its relevance in countries with different income levels: a perspective for transition economies ing. mykhaylo kunychka1, phd; ing. leonid raneta2, phd; diana steblak3, phd abstract. the study of the effectiveness of economic diplomacy has become a popular topic in the field of international economic relations. recent trends are confirmed by a large number of academic studies focusing on the evaluation of the performance of diplomatic and consular offices abroad. this paper represents a new attempt to empirically examine the effectiveness of economic diplomacy using the example of a transition country, based on the activities of ukrainian foreign representations. over the last decade, this eastern european state has experienced significant economic turbulence, political instability and a shift in the vector of foreign economic policy, which is the main impetus for the re-evaluation of its economic diplomacy. using recent data on export flows, the authors apply a gravity model of trade to assess the impact of economic diplomacy on export activity. the results suggest that embassies are a more relevant means of promoting export flows to lowand middle-income countries. key words: economic diplomacy, income level, export promotion, transitive state. jel classification: d31, m51 1. introduction the history of trade facilitation is probably as old as the beginning of economic relations between particular nations. references to the first economic relations of an international nature can be traced back to the old testament, and the trade agreement between solomon and hiram is considered an important diplomatic document of the ancient world. the wellknown english diplomat sir h. nicolson (1988) describes the sending of trade missions from athens to sparta (nicolson harold george, 2012). these political and economic relations between the two city-states can undoubtedly be described as the first manifestations of commercial diplomacy, which became economic diplomacy as such at the beginning of the 20th century. in the modern era of increased competition in the global economy, developed and developing countries are increasingly resorting to the use of government intervention and support for foreign economic relations through the use of diplomatic instruments such as export promotion offices or traditional diplomatic representations abroad. in the context of the ongoing commercialisation of international relations and diplomatic activity, the basic task of this study is to verify the effectiveness of economic diplomacy of a selected economy in the field of export promotion. it must be said that this research reflects theoretical ideas about the effectiveness of economic diplomacy instruments depending on the level of development of the host country. given the theoretical ideas presented below, the authors aim to verify two established hypotheses that the target country 's economic diplomacy is effective in promoting export flows to lowand middle-income countries (h1) and ineffective in promoting exports to high income countries (h2). the extended gravity model of trade is applied to total export destinations over the period 2007–2018. the choice of this period is mainly determined by the final stage of the establishment of diplomatic and consular representations of ukraine and the current framework of individual export flows. the paper follows the logical structure with the introduction of theoretical rationale and literature background, theoretical model, data and empirical results. section one provides a brief introduction to the concept of economic diplomacy and its place in the system of traditional diplomacy. section two baltic journal of economic studies 20 vol. 9 no. 2, 2023 provides a theoretical explanation and justification of government intervention in international trade through economic diplomacy instruments. a literature review and recent studies on the relationship between economic diplomacy and trade flows are included in section three. sections four and five discuss the application of the theoretical model, methodology and data. the empirical results are presented in section six. the last section summarises the findings and contribution of this study. 2. economic and commercial diplomacy: defining the concept as a famous slovak diplomat once said, from a historical perspective, the economic dimension of diplomacy (economic diplomacy) has not developed discreetly, and from prehistory to the present day it has always been the "inherent and therefore continuous part of traditional diplomacy" (králik juraj, 2003). the continuous and sustained interaction of economic and traditional diplomacy is logical because the economic dimension of diplomacy has always been a part of traditional diplomacy. consequently, there is a special link between economic and traditional diplomacy, which makes it possible to draw the close parallels between these two concepts. firstly, economic diplomacy is a practical activity carried out to implement foreign economic policy, and secondly, similarly to traditional diplomacy (rusiňák peter, 2005), it can be seen as an ability to commu nicate and negotiate with foreign partners. the interaction between economic and traditional diplomacy is perceived in the same way by csabay (csabay marek, 2005), who argues that economic diplomacy cannot be understood separately from the overall diplomacy of the state. like kralik, csabay points out that the interaction between the two concepts has developed naturally and inextricably. similar conclusions can be found in the work of rusinak, who sees economic diplomacy as an inherent part of overall diplomacy, and thus wants to clarify the necessity of concentrating the management of foreign economic relations in the foreign office. references to the economic dimension of diplomacy have deep historical roots, but the beginning of the formation and establishment of the concept of economic diplomacy can be traced back only to the beginning of the second half of the 20th century (pajtinka erik, 2007). various definitions of economic diplomacy can be found in domestic and foreign literature, although the final and precise formulation of this term has not been made in literature. this conceptual diversity can be explained in particular by the preferences and interpretations of different academics or diplomatic practitioners, who use the term rather in pursuit of their own research goals. it should be noted that the term economic diplomacy refers to the multinational sense of the word and is based on its tools, methods, activities, etc. in recent decades there has been a controversy over the various established concepts closely related to the term economic diplomacy. terms such as economic diplomacy or commercial diplomacy are of academic interest for the purposes of this study. in fact, some contradictions in the definitions of these terms can be observed in both domestic and foreign literature (pajtinka erik, 2007). the biggest source of confrontation is the definition of terms in different world languages, but also the different interpretation of tools, methods, tasks and activities of economic diplomacy. a more detailed insight into the definition of the concept of economic diplomacy can be found in saner and yiu, lee and hudson, bayne and woolcock or pajtinka (saner raymond, yiu lichia, 2003; lee donna and hudson david, 2004; bayne nicholas, woolcock stephen, 2007; pajtinka erik, 2007). given the diversity of definitions of economic diplomacy, this phenomenon can be divided into a broader and a narrower group of concepts. in a broad sense, the concept of economic diplomacy is a widespread and generalised phenomenon associated with the processes generated by globalisation trends (ornatskij, 1980), so it is not the object of interest for this research. instead, the narrow approach describes this phenomenon from the point of view of the state authorities that aim to fulfil their tasks and functions. saner and yiu (saner raymond, yiu lichia, 2003), for instance, support the thinking of berridge and james and refer the concept of economic diplomacy to economic policy issues such as "work of delegations at standard-setting organizations such as wto…". frequently, "economic diplomacy employs economic resources in pursuit of a particular foreign policy objective." (berridge geoff, james alan, 2003) in addition to economic diplomacy, the term commercial diplomacy is introduced in foreign literature as well. this concept is often concerned with "the work of diplomatic missions in support of the country’s business and finance sectors in their pursuit of economic success and the country’s general objective of national development." (saner raymond, yiu lichia, 2003) according to this definition, commercial diplomacy involves foreign representations like diplomatic missions, which places it in a more specific category. lee and hudson describe commercial diplomacy as the efforts of public officials from foreign ministries and overseas missions, as well as private economic actors who support the business and finance sectors of the economy (lee donna, hudson david, 2004). in addition, economic diplomacy aims to promote investment flows and trade (lee donna, hudson david, 2004). for the purposes of this baltic journal of economic studies 21 vol. 9 no. 2, 2023 paper, the narrow concept of economic diplomacy will be used. 3. economic justification for state intervention criticism of the concept of state regulation of international trade is as old as the introduction of the concept of absolute advantage by adam smith at the end of the 18th century. in the wealth of nations, smith directly expresses his support for laissez faire and sharply criticises any intervention by lawmakers in the free movement of goods (smith adam, 1977). together with the complementary ideas of david ricardo on comparative advantage, smith's ideas are still relevant today and form the main pillars of international economics. ricardo's case on the trade in wine and wool between portugal and england is widely recognised as evidence of the welfare gains that participation in international trade could bring (ricardo david, 2001). according to the simple economic ideas mentioned above, free trade is one of the tools that tend to achieve economic efficiency – the idea inherent in economics of using as little of scarce resources as possible to satisfy as many societal needs and wants as possible (wright victor, 2009). the concept of economic efficiency is a strong argument for trade liberalisation, which is embedded in most models of international economics, including comparative advantage, neoclassical heckscher-ohlin model and other new models of international trade (krugman paul r ., obstfeld maurice and melitz marc, 2012). classical economists such as smith and ricardo, as well as representatives of the neoclassical school of economics, have regularly questioned the artificial management of international trade flows through the instruments of protectionist economic policy, including tariffs, subsidies and other non-standard instruments of promotion such as economic diplomacy. the government interventions in the form of economic or commercial diplomacy on welfare gains are usually compared with trade subsidies (veenstra van marie-lise e. h., yakop mina and bergeijk van peter a. g., 2010; yakop mina and bergeijk van peter a. g., 2011; moons selwyn j. v. and bergeijk van peter a. g., 2017) that initially distort the comparative advantages with artificial movement of factors of production to export promoted inefficient sector. according to the general equilibrium model, the subsidy introduced in the sector with comparative disadvantages as well as in the sector with comparative advantages is likely to suppress the welfare gains from international trade (grančay, martin, tomáš dudáš and martin grešš, 2014) and distort economic efficiency. yakop and van bergeijk point to the argument of neoclassical economists that export subsidies are often granted to the industries that produce uncompetitive products, thus inefficiently allocating part of government financial resources (yakop mina and bergeijk van peter a. g., 2011). as a result, governments allocate their economic diplomacy resources in such an inefficient way that they give a subsidy to certain export industries. just as export subsidies have a negative impact on domestic consumer surplus, so the results of export promotion through economic and commercial diplomacy instruments are also negative. it will be more economically rational for domestic firms to sell subsidised goods abroad than to trade at home, so such a subsidy will raise the prices of exported goods in the domestic market (krugman paul r ., 2012). at the beginning of the second section of this paper, it was shown that the introduction of certain government measures to regulate international trade, such as subsidies, is unlikely to have a positive welfare impact. on the contrary, it is more likely that the implementation of subsidies will worsen the terms of trade and reduce domestic welfare. but do all subsidies have a negative impact on welfare? in some cases, instruments of foreign trade policy such as subsidies or economic and commercial diplomacy can be effective in dealing with economic externalities and market failures – the situation where the free market, for some reason, cannot produce an efficient allocation of goods and services and therefore cannot achieve economic efficiency (stiglitz joseph e., 1989). market failures tend to occur in developed market economies. however, market failures are more likely to occur in developing parts of the world. all types of developing economies suffer from a wide range of market failures, including imperfect markets and incomplete information. as greenwald and stiglitz once pointed out, in the framework of the pareto optimum, the imperfect information environment distorts economic efficiency (greenwald bruce c. and stiglitz joseph e., 1986). market failures are often the result of extremely weak legal and institutional foundations (todaro michael p. and smith stephen c., 2014). inadequate legal frameworks often fail to ensure contract enforcement and property rights. information on factors of production and goods is limited and expensive to obtain. these imperfections are often a barrier to entry for foreign firms. such market imperfections theoretically justify interventionist policies (including economic and trade diplomacy) and, according to some economists, governments can improve economic efficiency by mitigating the negative effects of market failures (krueger anne o., 1990; wright victor, 2009; gil-pareja salvador, llorca rafael and serrano josé a. martínez, 2008). alexander and warwick, for example, provide an economic justification for government intervention in the area of export baltic journal of economic studies 22 vol. 9 no. 2, 2023 promotion, arguing that asymmetric information, productivity spillovers and economies of scale provide the rationale (alexander chris and warwick ken, 2007). barriers such as local preferences, foreign legislation, cultural and linguistic differences are also costly and time-consuming (volpe martincus christian and carballo jerónimo, 2010), thus providing another explanation in favour of trade promotion. in order to trade abroad, exporters face a wide range of barriers, including internal resource constraints, procedural barriers, exogenous barriers, and so forth (ramaswami s. n. and yang y., 1990). lack of knowledge of the competitive environment, the problem of transferring funds and less developed distribution networks, especially in less developed countries, are also relevant. the extent and number of these constraints vary according to the level of development of the target market that the exporter is trying to penetrate. underdeveloped markets often have a large number of informational and exogenous barriers, where macro and micro economic diplomacy can be a useful tool to bridge the information gap. however, trade relations within advanced economies face fewer trade barriers and require less export assistance (veenstra van marie-lise e. h., 2010). particularly for less developed economies, the information asymmetries created by imperfect markets can be replaced by government mechanisms that promote trade through the provision of information by government agents. foreign representations, including embassy networks, consulates, export promotion agencies or chambers of commerce, are often one of the main channels for domestic firms to succeed abroad. a complex approach to export promotion is important here. trade promotion through economic and commercial diplomacy is not complete and needs more general facilitation through a comprehensive export policy. foreign representations often provide only a specific form of support in the early stages of establishing business relations, which may be followed by an increase in mutual trade volumes (afman e. r . and maurel m., 2010). often, government export promotion measures can be useful when some potential exporters have already been selected and their credibility can be compared to the highly competitive environment of international markets. according to ruël, firms rely on state services such as the provision of commercial information, support and promotion of firms during formal and informal negotiations (ruël huub, 2013). foreign representative offices have direct access to large companies; they are funded by the state and often attract public attention at a relatively low cost. 4. literature review the domestic literature background on the current issue, except for a few attempts (ondrejkovič dávid, 2013; raneta leonid and kunychka mykhaylo, 2015), is quite limited; therefore, the conducted research is mainly based on relevant studies of foreign authors. large-scale studies on the rationality of the implementation of economic and commercial diplomacy tools and their effectiveness in trade and investment promotion have been conducted mainly by the international institute of social studies in the hague, or the clingendael institute of international relations. however, there is a relatively limited number of studies that aim to examine the issue of trade facilitation on the basis of a single state via actors of economic and commercial diplomacy, especially the study on the former ussr republics. for example, afman and maurel have conducted a rather rare study on the effectiveness of economic diplomacy in transitive economies (afman e. r . and maurel m.). only a small number of studies have focused on a single economy. for example, head and ries, kang and gil-pareya examine the effectiveness of different economic diplomacy bodies in canada, south korea and spain, respectively (head keith and john ries, 2010; kang kichun, 2011; gil-pareja salvador, llorca rafael and serrano josé a. martínez, 2008). in the field of export promotion by the ukrainian foreign service, the emphasis should be placed on the expansion of embassy staff, although the impact of the daily activities of economic diplomats is closely related to the financial coverage of foreign missions (raneta leonid and kunychka mykhaylo, 2015). tinbergen is considered to be one of the first studies to look at diplomatic activity and trade flows (tinbergen jan, 1962). his contribution was based on a gravity model of trade that included dummy variables for the colonial ties of the target countries. tinbergen showed that there was a positive relationship between diplomatic activity and trade, and was therefore criticised for controlling for a limited number of dummy variables, which could have distorted the results of the gravity model implemented. one of the first contributions to the importance of economic diplomacy in stimulating trade was presented by rose (rose andrew k., 2007). rose systematically examined the relationship between the presence of embassies and the average of export flows for the period 2002–2003. his dataset included 22 exporting countries and 200 export destinations. within the framework of the gravity model, rose found a positive result indicating a 6-10% increase in export flows after the establishment of an additional embassy in the host country. van bergeijk also presented a wide range of research baltic journal of economic studies 23 vol. 9 no. 2, 2023 on the effectiveness of economic diplomacy and export promotion (bergeijk peter a. g. van, 1994). he distinguishes between positive and negative political events in diplomatic relations, thus indicating a positive effect of diplomatic activities on trade. lederman, olarreaga and payton report a useful study in the area of investigating the effect of official state representation on trade flows (lederman daniel, olarreaga marcelo and payton lucy, 2010). the authors' empirical results, based on a global survey of national export promotion agencies in 104 countries, show a statistically significant positive impact on trade flows. each dollar spent on export promotion increases the volume of export flows by 40 usd for the median agency. in the later study, the results also suggest a similar increase in exports after increasing the budget of export promotion agencies (lederman daniel, olarreaga marcelo and payton lucy, 2010). it should be noted, however, that these results are somewhat heterogeneous with respect to different geographical regions, levels of economic development and diplomatic instruments chosen. the crucial difference in the studies conducted on the effectiveness of economic and trade diplomacy is the variation in the targeted foreign representations. lederman, olarreaga and payton or volpe martincus and carballo, for example, use export promotion agencies as an instrument of economic diplomacy (volpe martincus christian and carballo jerónimo, 2010; lederman daniel, olarreaga marcelo and payton lucy, 2010). another study on the activities of foreign representative offices and their impact on trade has been carried out by afman and maurel. the work of these authors follows the methodology of rose (rose andrew k., 2007) and thus examines trade flows between advanced countries, represented by the oecd, and transition economies, including postsoviet states (afman e. r . and maurel m., 2010). an important aspect of the research is the exclusion of intra-group trade flows from the analysis. afman and maurel justify the acceptance of such a dataset by emphasising the emergence of new export opportunities for former planned economies, as trade promotion within the oecd has a well established diplomatic tradition and long experience in promoting exports. yakop and van bergeijk address a similar issue, examining bilateral trade flows between 63 countries in 2006. yakop and van bergeijk consider not only diplomatic and consular support for export flows, but also the influence of embassies on import facilitation. based on the extended gravity equation, these authors find a positive effect of targeted instruments on bilateral trade flows of 6-16%, depending on different specifications of the analysis (yakop mina and bergeijk van peter a. g., 2011). they also point to the relevance of economic diplomacy depending on the income level of the trading countries. yakop and van bergeijk conclude that economic diplomacy is a more relevant trade facilitation tool for developing countries. within the matrix of advanced countries' bilateral trade flows, the results indicate a moderate effect of the chosen economic diplomacy instruments (yakop mina and bergeijk van peter a. g., 2011). the work of van veenstra, yakop and van bergeijk is of particular scholarly interest for the purposes of this paper. an important empirical advance has been made by examining the synergy effect of economic and trade diplomacy in a comprehensive multinational framework. the study of 1242 bilateral trade flows of 36 developed and developing countries points to a positive impact of embassies and consulates on trade. in the overall framework of 36 countries, an additional 10% of embassies and consulates seems to have a positive effect of 0.5-0.9% on trade (veenstra van marie-lise e. h., 2010). an important conclusion is the empirical proof of the theoretical assumption that the instruments of economic and commercial diplomacy are an effective means of trade facilitation for developing countries, and therefore a less efficient tool for promoting business activities within advanced economies. the appropriateness of using the tools of economic diplomacy in relation to the level of development of the home country is justified by the following theoretical concepts. the asymmetry in the distribution of knowledge among countries is greatest between developed and developing countries (yakop mina and bergeijk van peter a. g., 2011; volpe martincus christian and carballo jerónimo, 2010). based on this statement, it can be assumed that the creation of public awareness is more relevant in mutual relations between developed and developing countries. political and economic institutions are less developed outside the rich countries, which implies greater government involvement in the international economic relations of less developed economies. another assertion is related to the interaction of companies within a group of developed economies, where the activities of economic and commercial diplomacy are less essential, since transparent and easily accessible information related to business affairs prevails in these countries. on the contrary, the lack of knowledge of the competitive environment, the problem of transferring funds and the issue of less developed distribution are characteristic of developing countries (ramaswami s. n. and yang y., 1990). this element of market failure leaves room for the implementation of economic and trade diplomacy instruments, thus indicating their relevance for less developed countries. baltic journal of economic studies 24 vol. 9 no. 2, 2023 most of the studies mentioned above present similar results indicating a positive and statistically significant effect of economic and commercial diplomacy on the development of international economic relations and, in particular, on the promotion of trade flows. the main difference is related to different bilateral trade matrices and exogenous variables included in the augmented gravity equation. the overall results are quite heterogeneous, which can be explained by limited data sets, different types of observations and instruments of economic and commercial diplomacy. more recent contributions distinguish between two main types of instruments, including official representations abroad and specific trade agencies. for example, rose, afman and maurel, volpe martincus and carballo or yakop and van bergeijk examine the impact of embassies and consulates (rose andrew k., 2007; afman e. r . and maurel m., 2010; yakop mina and bergeijk van peter a. g., 2011). on the contrary, lederman et al. or kang focus on the relationship between trade flows and export promotion agencies (lederman daniel, olarreaga marcelo and payton lucy, 2010; kang kichun, 2011). despite the differences in the targeted instruments of economic and trade diplomacy, the above authors find a positive and statistically significant effect on trade flows. a complex meta-analysis with more than 30 relevant studies on the impact of economic diplomacy on trade can be found in moons and van bergeijk (moons selwyn j. v. and bergeijk van peter a. g., 2017). a summary of recent publications on the topic of trade promotion using the tools of economic and commercial diplomacy is available in table 1. 5. theoretical model and quantitative methodology the gravity model is one of the most widely used theoretical workhorses of international trade analysis, used to explain bilateral trade flows. in its simplified form, the gravity equation represents the relationship between trade volumes and "gravity " factors such as the economic size of the trading partner and the geographical distance between two trading partners, so that an increase in the economic size of the trading partner leads to a proportional increase in trade flows, and at the same time an increase in the geographical distance between the partners has a negative effect on the volume of trade flows. the gravity model has been known since the second half of the 20th century, when it was introduced by jan tinbergen. the logic behind the gravity model of trade is developed on the basis of newton's theory of gravity, as planets are attracted to each other in proportion to their size and proximity (tinbergen jan, 1962). countries also trade in proportion to their economic mass and proximity (feenstra robert c., 2004). it has been suggested that well-known models of international trade, such as the ricardian or heckscher-ohlin models, which are based on differences in technology between countries or differences in factor endowments, do not provide a sufficient theoretical basis for the concept of gravity. a seminal paper by anderson is regarded as one of the most important attempts to provide a theoretical justification for the gravity model in the economic literature (anderson james e. and van wincoop eric, 2003). anderson's theoretical explanation is based on the assumption that all traded goods are differentiated by country of origin and that preferences are defined by all differentiated goods (bacchetta marc beverelli et al., 2012). this implicitly implies that economies with greater economic mass trade more. geographical distance has been explained by modelling transport costs within the theoretical framework of samuelson's "iceberg" costs, so that higher transport expenditures reduce the volume of trade. other prominent works on the theoretical foundations of the gravity model were introduced by bergstrand or deardorff (bergstrand jeffrey h., 1985; deardorff alan, 1998). anderson and van wincoop, for example, included consumer preference patterns based on constant elasticity of substitution and considered consumers who try to maximise their utility by consuming a wide range of products (anderson james e. and van wincoop eric, 2003). anderson and wincoop's specific gravity equation is considered to be quite precise, as it includes the multilateral trade barrier terms. to achieve the objectives of this research, the log-linear extended version of the gravity equation is used, based on its simple specification: lntij = a + β1lnyi + β2lnyj + β3lndij + εij, (1) where tij denotes trade flows of home country i to its trading partner j, yi and yj represent the economic masses or gdp of home country and its partner respectively. d denotes geographical distance between exporting and importing countries that is traditionally used as proxy for trade costs, ε equals to error term and β represents the estimated parameter. following the logic of gravity model of trade, it is assumed that parameters β1 and β2 will be positive as higher gdp of trading partner predict a higher export. the reason could be the developed transport infrastructure, including roads, airports, ports and other infrastructure hubs. conversely, the parameter β2 will be negative, as trade decreases with increasing physical distance. the simple procedure for estimating the gravity equation is to take the natural logarithms of all variables and obtain a log-linear equation. the log-linear equation allows the estimation to be based on the ordinary least squares method. unlike nonlinear estimation methods, baltic journal of economic studies 25 vol. 9 no. 2, 2023 this method is clearly sufficient for the purposes of this paper. this specification allows a direct interpretation of the estimated parameters, since each parameter can be interpreted as an elasticity (bacchetta marc beverelli et al., 2012). in equation (1), distance is used as a proxy for transport costs and perishability for particulate goods. the vast majority of literature on the gravity model notes that long distance is usually associated with synchronisation costs – lower geographical distance reduces the time and cost of inputs needed for industrial products. communication costs are also part of the distance issue. it is easier for managers and customers to conduct business and exchange more information in face-to-face meetings. it is assumed that it is more efficient to deal through modern communication devices. distance can also be associated with the cost of searching for potential trade opportunities. greater geographical distance is often associated with a greater cultural gap, which can lead to misunderstandings during business meetings and communication. frequently, the issue of distance in gravity equations is also expressed by a common language or former colonial relations. empirical literature suggests that trading partners who share a language and a common historical past tend to trade intensively. it is natural that members of the commonwealth of nations will trade more with each other or with former soviet countries that used to have close economic ties. some of the empirical literature includes adjacency, which is represented by a common border. usually, it is not clear why adjacency is included in gravity equations, as distance is already represented by geographical proximity, but often distances between the economic centres of trading partners are measured, which can be significant, and the issue of border trade is often neglected. to control for adjacency, the issue of a common border, represented by a dummy variable, is often used (rose, 2007). another binary variable is also controlled for in the gravity equation. to capture transport and time costs in addition to geographical distance, the standard gravity model is often extended to include parameters capturing the insular and landlocked nature of the trading partner, reflecting the hypothesis that the costs of trading with an island or landlocked state increase. common language and common colonial relations are added to capture communi cation costs. presumably, trading partners will be more inclined to trade with countries where there is a similar business culture and known business practices. it is much easier to establish business contacts and trade in countries with the same language. for this reason, enterprises are more likely to establish business contacts with suppliers or customers in countries where the business environment is familiar. data on customs unions and free trade agreements are often added to the model (rose andrew k., 2007; yakop mina and bergeijk van peter a. g., 2011; gil-pareja salvador, llorca rafael and serrano josé a. martínez, 2008). current research focuses on estimating the impact of economic diplomacy instruments on the bilateral trade of the target country, and the application of the gravity equation of trade seems to be the best quantitative approach. the choice of the gravity model is well founded by the theoretical and empirical literature mentioned in the previous section of the paper. the extended gravity equation has been repeatedly applied in the scientific papers investigating the relationship between economic diplomacy and trade flows (rose andrew k., 2007; afman e. r . and maurel m., 2010; kang kichun, 2011; yakop mina and bergeijk van peter a. g., 2011). the simplicity of the model is its advantage, as it includes only a limited number of variables, which facilitates the conduct of econometric analysis (bergeijk peter a.g. van, 1994). the applied model allows the inclusion of variables of different nature, including geographical distance, economic power of trading partners and political issues. despite the overwhelming acceptance of the gravity model in the theoretical and empirical literature, it is necessary to point out some limitations of the applied model. firstly, the test data are only used for a specific time series and cross-sectional dataset. only one gravity equation is used to illustrate the total volume of trade, irrespective of the evolution of the terms of trade over time. the heterogeneous nature of bilateral trade relations does not allow to reflect all possible relations as they are not captured in the overall analysis. the disadvantage of the applied model is the quantitative nature of the model, which is not able to take into account the qualitative characteristics of some of the parameters under consideration. in the case of the present study, the model is not able to explain the knowledge and skills of individual diplomatic or consular representatives, such as intuition, talent, education, intellect and diplomatic experience. these unquantifiable parameters are considered as part of a log-normally distributed error term. to examine the relationship between exports and other variables, including standard gravity parameters, multidimensional distance characteristics and instruments of economic diplomacy, an extended log-linear gravity equation defined below is used. the description of each variable and the parameter estimates are presented in table 2 u and j denote the country of origin (ukraine) and destination of the export flows. t denotes the period under study. baltic journal of economic studies 26 vol. 9 no. 2, 2023 ln(tujt) = β0 + β1ln(gdput) + β2ln(gdpjt) + + β3ln(duj) + β4ln(poput) + β5ln(popjt) + + β6comlanguj + β7landluj + β8islanduj + + β9borderuj + β10ln(areau*areaj) + β11comcoluj + + β12rtaujt + β13staffembuj + β14staffgenconuj + + β15honconuj + euj, (2) 6. data description and methodology in order to test the hypothesis that a particular instrument of ukrainian economic diplomacy is effective in promoting export flows to developing countries and less effective in facilitating trade with advanced countries, the two datasets were analysed. there are 133 middleand low-income countries and 66 high-income countries. for each trading partner, 12 years of data were selected. thus, the applied analysis is based on panel data with 199 cross sectional units and 12 time-series units. the 12-year period was chosen according to the main institutional and political constraints. the lower limit is analysed according to the institutional support of the network of foreign offices abroad, which was completely built up until the year 2007, while the upper limit 2018 is defined by the availability of the required data. export statistics were obtained from the united nations council on trade and development (unctad) and cover the period 2007–2018. export flows from ukraine to its trading partners are expressed in thousands of usd. data on gdp per capita and population of the target country and its export destinations were also obtained from the unctad statistical database. population data are expressed in thousands and gdp per capita in usd at current prices and exchange rates. data for variables such as geographical distance, land area, common border, common language and other dummy variables were obtained from the centre d'études prospectives et d'informations internationales (cepii). regarding the distance between the target country and its trading partner, distances based on the calculations of the great circle formula were used (mayer thiery and zignago soledad, 2012). in this paper, the latitude and longitude of the main cities or agglomerations by population are used. russian was chosen as the common language. despite the unofficial status of the russian language in ukraine, almost half of the population speaks russian in their daily lives. the information system on regional trade agreements was used to check ukraine's participation in regional trade agreements with its export destinations. data on regional trade agreements have been added depending on their validity in a particular year under study. the definition and description of the data used can be found in table 2. data on the number of diplomatic and consular staff and the number of honorary consulates were obtained from the official website of the ministry of foreign affairs and foreign missions abroad. all staff numbers were collected through a manual and time-consuming process and cover the years 2013 and 2018. the lack of retrospective data makes it impossible to monitor the number of diplomatic and consular staff over the entire 12-year period. only staff with diplomatic rank, such as ambassador, consul general, counsellor, secretary or attaché, were included in the analysis. despite the fact that an embassy represents the political and economic interests of a country in several countries while being located in only one host country, this study only examines the number of resident embassies. a similar principle has been applied to general and honorary consulates. for honorary consulates, only the number of offices was included in the analysis, as the mfa of ukraine does not provide staff data. permanent missions to international organisations or quasidiplomatic missions (pajtinka erik, 2019), which may have a negative impact on parameter estimates, were not included in this analysis. a particular limitation of the analysis is the limited data, which does not allow us to differentiate the impact of foreign missions on trade facilitation, so this feature is to some extent an imprecision of the applied quantitative methodology. similarly to van bergeijk, groot and yakop, the authors distinguish between several types of foreign representations in the host country, namely embassies, consulates and honorary consulates. according to some prominent works on the effectiveness of economic diplomacy instruments, the role of honorary consulates is often neglected. for instance, van bergeijk, groot and yakop define honorary consulates as "unimportant" foreign representation arguing, "they do not perform their tasks to earn a living , as the career consuls do, but rather fulfill their consular functions alongside their daily work." (bergeijk, peter a.g. van, henri l. f. groot and mina yakop, 2011) honorary consulates, like other consular missions, perform their functions in the host countries in accordance with the vienna convention on consular relations and contribute to the development of economic relations between the home and host countries. some authors exclude honorary consulates from their analysis, but this assessment takes into account the number of honorary consulates in host countries, as honorary consuls often become important figures in the economic environment of the host country, even if they are self-financed and independent of the state budget (rose andrew k., 2007; afman e. r . and maurel m., 2010; veenstra van marie-lise e.h., 2010). in this analysis, the control of consulates, and then honorary consulates, can be justified by their baltic journal of economic studies 27 vol. 9 no. 2, 2023 important position in the host country. the consul general, as head of the consulate general, is a high diplomatic representative and also contributes to the development of economic relations. in order to investigate the effectiveness of economic diplomacy instruments of targeted countries, income groups of host countries were created. all export destinations were divided into groups of countries according to their gross national income per capita. data on gni per capita at current prices and current exchange rates were obtained from the world development indicators database. these groups include low-income countries with gni per capita below 1045 usd, middle-income countries with gni per capita between 1045 and 12746 usd and high-income countries with gni per capita above 12746 usd. the target country is classified as a middle-income country, while the data used correspond to the 2013 world bank classification. 7. comparison of economic diplomacy effectiveness: high vs low and middle-income country groups the income level of the host country is one of the key determinants of the effectiveness of the home country 's economic diplomacy (veenstra, yakop and van bergeijk 2010; yakop, van bergeijk 2011). hidden barriers to trade, such as a lack of trust, cultural differences, inefficient management of public affairs or market failures, are more relevant for less developed countries with lower incomes, thus creating a space for economic diplomacy. in this case, an essential role of economic diplomacy is to compensate for the information deficit by providing commercial information, technical support, assisting companies in negotiations and establishing business contacts. as a result, economic diplomacy is expected to be more effective in lowand middle-income host countries than in high-income developed countries. to test the hypothesis that economic diplomacy is an effective government tool to promote export flows in lowand middle-income countries and not in high income countries, the extended gravity model of trade (equation 2) was applied to each of the datasets. the first set includes high-income export destinations, while the second set consists of lowand middle-income trading partners. the results of the regression analysis are summarised in tables 3 and 4. the results of the regression analysis show that the r-squares for the models are 0.75 and 0.69 respectively (see table 3 and table 4), indicating that the regression function explains about 70% of the variability of exports in the linear models examined. the remainder represents unexplained variability and the effect of unspecified factors. the effect of each explanatory variable varies according to the data sets or income groups examined. there is a significant difference in the β-coefficients across income groups. in the high-income group, 7 negative coefficients appeared, while in the middle and low-income countries the number of negative coefficients was 6. with regard to the objectives of this study, the staff of the consulates general seemed to be of interest, since β-coefficients have a negative effect on ukrainian export flows. during the period 2007–2018, 792 export flows to high-income countries were recorded, while up to 1596 flows were observed in the lowand middle-income group. however, the difference in the number of export flows does not pose a serious problem for the estimation of the target coefficients, as the number of flows available is still sufficient to verify the effectiveness of economic diplomacy in promoting exports. in order to test the hypothesis that ukrainian economic diplomacy is effective in promoting exports to lowand middle-income countries and ineffective in promoting exports to high-income countries, a comparative analysis of the effectiveness of diplomatic actors was conducted. the generated log-linear gravity equation suffers from heteroskedasticity, the distribution-free wald test for heteroskedasticity showed that heteroskedasticity is present. there is a large variability in the trade flow data (dependent variable), not only because of different trade priorities, but also because of the objective bias imposed by the size of the economy. to deal with this, the authors use panel econometric methods, which could be more informative and allow more degrees of freedom, increasing the efficiency of the estimators. the breusch-pagan test statistic shows that the p-value is low and it counts against the null hypothesis that the pooled ols model is appropriate in favour of the random effects alternative. the results for the panel data with random effects model (see table 3) show a low significance of the targeted independent variables (staffemb, staffgencon, honcons). this result is in line with the above-mentioned assumption that economic diplomacy is less effective with developed countries. the hausman test statistic showed a high p-value in favour of the null hypothesis that the random effects model is consistent and not in favour of the fixed effects model. the hausman test did not reject the null hypothesis and random effects is the correct procedure. the authors add the results of the country fixed effects model for comparison (see table 3). as regards the interpretation of the coefficients, it can be said with a high degree of confidence that the gdp of ukraine and the population of the partner country have a strong positive impact on exports. the larger the population (l_popj) of the baltic journal of economic studies 28 vol. 9 no. 2, 2023 trading partner, the higher the export flows. distance has a negative coefficient, which is in line with expectations: as distance increases (l_d), trade flows decrease. each percentage point change in gdp per capita is associated with a 1.3% increase in exports to high-income countries (taking into account the error from 1.073 to 1.5269% change). other variables did not show any relevant significance for the group of high-income countries. the group of lowand middle-income countries was of particular interest to the present study because the income level of the host country is one of the key determinants of the effectiveness of the home country 's economic diplomacy. developed economies with highly competitive markets are subject to fewer market imperfections that could be addressed by the work of the diplomatic mission. the group of lowand middle-income countries was of interest for the present study because the income level of the host country is one of the crucial determinants of the effectiveness of the home country 's economic diplomacy. table 4 shows that the pooled ols model showed statistical significance for 11 out of 15 regressors. the model consisted of 1591 observations with 133 cross-sectional units, but since it also suffers from heteroskedasticity as in the case of high-income countries, the distribution free wald test for heteroskedasticity indicated the presence of heteroskedasticity. the breusch-pagan test statistic for lowand middle-income countries showed a low p-value and it counts against the null hypothesis that the pooled ols model is appropriate in favour of the random effects alternative. the random effects model was used. as shown in table 4, out of 15 explanatory variables, 8 showed statistically significant results. the hausman test statistic showed a high p-value, which is in favour of the null hypothesis that the random effects model is consistent, and not in favour of the fixed effects. the hausman test did not reject the null and the random effect is the correct procedure. independent variables such as the level of gdp per capita and the population of the trading partner (gdpupc, gdpjpc, popj) have a strong positive elasticity with a statistically significant result. such variables as distance, landlocked, and island with statistically significant negative elasticity turned out to be as expected in the assumptions. an exception was the variable border, which expected a positive elasticity, but the result showed a negative significant result, which could be explained by a massive shift of ukraine's export flows from neighbouring countries to world markets. no serious significance was reported for changes in the population of ukraine (popu), common language (comlang) in the current global environment is significant for ukraine, geographical area (areauareaj), common colony (comcol) and regional trade agreement (rta) proved to be non-significant explanatory variables. the main interest of the study is economic diplomacy, and in the case of lowand middle income countries, embassy staff is found to be statistically significant. it was found that each diplomatic staff member in lowand middle-income countries is associated with a change in exports from 5.27 to 12.3%, taking into account the standard error of 0.03502. even in the country fixed effects model, diplomatic personnel showed statistically significant results, which means that this relationship is also robust at the country level. in many cases where there is no diplomatic representation, the change from zero to one would be identical to the establishment of an embassy. the other two regressors of economic diplomacy, the staff of general consulates and honorary consulates (staffgencon and honcons), turned out to be statistically insignificant. this was in line with the expectation that these missions don't prioritise economic diplomacy. the discussion of these results could be based on the fact that it can be argued that trade determines the intensity of diplomatic relations and that it is the main factor and vice versa. in recent history, ukraine has experienced a great drama and has made a turn in its foreign policy priorities, which can be traced back to the logic of the unfolding of history. until 2014, the russian federation was one of ukraine's main export partners (before 2014, exports amounted to 15-20 billion usd per year). after the annexation of the crimean peninsula and the war in donbass, it is possible to argue that the diplomatic mission immediately turned into a formality. in the words of the minister of foreign affairs, pavel klimkin: "in fact, we don't have diplomatic relations, it's a formality, because our diplomats in russia by definition cannot carry out diplomatic activities in an aggressor country." (rbc, 2018) in recent years, the value of trade with russia has been steadily declining, from $15 billion in 2013 to $3.6 billion in 2018. it is clear that the diplomatic service has changed its position in response to the crisis. as a result, ukraine's exports to russia have fallen drastically by more than 70%. the crisis between ukraine and russia outweighed all other factors and led to a decline in exports and a halt in diplomatic activity. the model in this paper shows that from an economic diplomacy perspective, the group of lowand middle-income countries is highly correlated with exports. these findings can help policy makers in ukraine to better adjust their export promotion strategy to achieve the best possible outcome in trade relations. baltic journal of economic studies 29 vol. 9 no. 2, 2023 8. conclusions this paper examines the impact of economic diplomacy on ukrainian export flows. it uses a stacked time series panel with 199 cross sections and a time series of 12 years (from 2007 to 2018), resulting in a total of 2383 observations. the applied gravity model of trade allows to control for three different types of parameters: economic variables (gdp and trade agreements), non-economic parameters (common language, colonial background, geographical parameters such as distance, common border or landlockedness) and parameters assessing the added value of diplomatic representations such as embassies, general consulates and honorary consulates. in addition, to achieve the goal of the main hypothesis, two groups of countries were identified. the first group consists of high-income countries and the second of lowand middle income countries. this division is necessary to understand the relevance of foreign missions in relation to income levels. the added value of the paper is that it examines the impact of different foreign representations on the export flows of transitive states. the model used shows mixed but at the same time expected results. the results show that there is no significant relationship between diplomatic personnel and exports in the group of high-income countries. this is consistent with the hypothesis that economic diplomacy is more effective in the case of developing countries and less effective in highly competitive developed economies. on the other hand, the group of lowand middleincome countries showed a statistically significant result. the coefficient of elasticity for embassy staff is positive, suggesting that each diplomatic staff member leads to a 5.27-12.3% increase in exports, although in many cases this change of one unit would imply the establishment of an embassy if one did not exist. general consulates and honorary consulates proved to be statistically insignificant, both for high-income countries and for low and middle-income countries. the hypothesis that ukrainian economic diplomacy is effective in promoting exports to developing countries and less effective in facilitating trade with advanced countries is confirmed by the statistical results for the two different groups of countries. we can argue about the scale of the impact, but conceptually, there is a clear difference in effectiveness. although a positive and statistically significant result was found for the group of lowand middle-income countries, the result was not statistically significant for the group of highincome countries. the increase in the number of diplomats should not be taken blindly as a statistical indicator, but should also be considered in the light of an important qualitative condition (the professionalism of diplomats and their competence and ability to fulfil their agenda). at the same time, the heterogeneity of export markets should not be forgotten. an increase in export-promoting activities in key export destinations can produce positive results that outweigh the potential costs. in this context, there are opportunities for further research that could include the budgetary side of individual embassies as well as their strategic priorities. however, the financing aspect of individual embassies was not elaborated in this research due to the lack of relevant data on the internal budget of the ministry of foreign affairs of ukraine. references: afman e. r . and maurel m., "diplomatic relations and trade reorientation in transition countries," in the gravity model in international trade: advances and applications, edited by bergeijk van peter a. g. and brakman steven, 278–95. cambridge: cambridge university press (2010):278. doi: https://doi.org/1017/ cbo9780511762109.010 alexander chris and warwick ken, "governments, exports and growth: responding to the challenges and opportunities of globalization," world economy, 30, no. 1 (2007): 177–194. anderson james e. and van wincoop eric. 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and trade (clingendael: netherlands institute of international relations clingendael, 2010). volpe martincus christian and carballo jerónimo, "export promotion: bundled services work better," the world economy, 33, no. 12 (2010): 1718–1756. wright victor, economic rationales for government intervention (tatura: victorian government department of primary industries, 2009), 6, isbn 978-1-74217-838-7 yakop mina and bergeijk van peter a. g., "economic diplomacy, trade and developing countries," cambridge journal of regions, economy and society, 4, no. 2, (2011): 253–267. annexes table 1 recent publications on the relevance of economic diplomacy in promoting international trade author year of publication targeted region diplomatic instruments investigated period theoretical model rose 2007 developed and emerging countries embassies and consulates 2002–2003 gravity model segura-cayuela and vilarrubia 2008 developed and developing countries embassies and consulates 1999 gravity model afman and maurel 2010 oecd and transition economies embassies and consulates 1995, 2000, 2005 gravity model yakop and van bergeijk 2011 oecd and developing countries embassies and consulates 2006 gravity model kang 2011 south korea export promotion office 1994–2004 gravity model van veenstra et al. 2010 oecd and developing countries embassies, consulates and epa 2006 gravity model gil-pareya et al. 2011 spain embassies, consulates and export promotion offices 1995–2010 gravity model ondrejkovic 2013 france embassies and consulates 2007–-2011 gravity model raneta and kunychka 2015 ukraine embassies, consulates and honorary consulates 2007–2013 gravity model source: processed and edited by the authors on the basis of moons and van bergeijk study (moons selwyn j. v. and bergeijk van peter a. g., 2017) baltic journal of economic studies 32 vol. 9 no. 2, 2023 table 2 definition of variables in the extended equation of gravity no. variable description measurement unit source assumption of parameter estimates 1. tuj ukrainian exports to trading partner thousands usd unctad 2. gdpu gdp per capita in ukraine thousand usd, current prices unctad β1 > 0 3. gdpj gdp per capita in export destination usd, current prices unctad β2 > 0 4. duj geographical distance between ukraine and export destination kilometers cepii β3 < 0 5. popu population thousands unctad β4 > 0 6. popj population thousands unctad β5 > 0 7. comlanguj common language binary cepii β6 > 0 8. landluj landlocked character of trading partner binary cepii β7 < 0 9. islanduj island character of trading partner binary cepii β8 < 0 10. borderuj represents the variable if trading partner have a common border with ukraine binary cepii β9 > 0 11. areau*areaj the land area of ukraine and its trading partner square kilometers cepii β10 < 0 12. comcoluj represents the variable if ukraine and its trading partner were the one political entity in the past binary cepii β11 > 0 13. rtauj represents the variable if ukraine has a regional trade agreement with its trading partner binary wto β12 > 0 14. staff embuj number of diplomatic staff in host country number of persons mfa of ukraine β13 > 0 15. staffgenconuj number of consular staff in host country number of persons mfa of ukraine β14 > 0 16. honconuj number of honorary consulates in host country number of consular units mfa of ukraine β15 > 0 source: processed by the authors table 3 regression output (high-income countries) using 792 observations, included 66 cross-sectional units, time-series length = 12 dependent variable: l_exort1 pooled ols random effects estimator fixed effects coefficient p-value coefficient p-value coefficient p-value const −0,941043 0,9862 −6,72694 0,8422 18,2155 0,6653 l_gdpupc 1,31092 0,0009 1,30071 1,44e-08 *** 1,30285 1,97e-08 *** l_gdpjpc −0,426144 0,0059 −0,303722 0,2453 −0,341794 0,2688 l_d −1,85401 <0,0001 −1,98540 7,11e-07 *** l_popu 1,22326 0,8128 1,70393 0,5846 −1,28421 0,7196 l_popj 1,24845 <0,0001 1,21226 3,18e-010 *** −0,284802 0,712 comlang −0,612656 0,68 −2,58066 0,4615 landl −0,812278 0,0147 −0,896658 0,3893 island 0,337993 0,1293 0,299425 0,6716 border 1,02398 0,1629 1,21778 0,5921 l_areauareaj −0,162324 <0,0001 −0,118131 0,3384 comcol −0,0295325 0,9477 −0,00765914 0,9956 rta 0,170735 0,741 0,0533623 0,8985 0,0686128 0,8723 staff emb 0,0583679 0,0334 0,00158779 0,9663 −0,000923709 0,9825 staffgencon −0,0688582 0,1271 0,0256837 0,5917 0,0335525 0,5064 honcons 0,114756 0,1624 0,108475 0,3634 0,107058 0,4557 r2 0,753231 p-value(f) 9,9e-224 source: compiled by the authors based on the data collected baltic journal of economic studies 33 vol. 9 no. 2, 2023 table 4 regression output (middleand low-income countries) using 1591 observations, included 133 cross-sectional units, time-series length: minimum 7, maximum 12 dependent variable: l_export1 pooled ols random effects estimator fixed effects estimator coefficient p-value coefficient p-value coefficient p-value const 10,4923 0,7931 24,174 0,4164 46,667 0,1792 l_gdpupc 0,964122 0,0008 0,971732 1,34e-07 *** 0,967545 1,85e-07 *** l_gdpjpc 0,66687 <0,0001 0,574332 6,62e-06 *** 0,479798 0,0078 *** l_d −1,79786 <0,0001 −1,75234 2,11e-08 *** l_popu −0,835842 0,8261 −2,22944 0,4214 −4,92659 0,1143 l_popj 1,05298 <0,0001 0,869663 1,19e-09 *** 0,315252 0,277 comlang 0,270626 0,5663 0,0322947 0,9809 landl −1,34605 <0,0001 −1,45283 0,0009 *** island −1,02752 <0,0001 −1,04237 0,0640 * border −1,52926 0,0003 −1,93066 0,0934 * l_areauareaj 0,007658 0,8804 0,135683 0,3119 comcol 2,37963 0,0005 2,08879 0,1412 rta 0,003118 0,9959 0,41755 0,6309 0,557221 0,5703 staff emb 0,078102 0,0009 0,0877665 0,0123 ** 0,105753 0,0253 ** staffgencon −0,361199 <0,0001 −0,0366140 0,7743 0,159002 0,3314 honcons 0,326202 <0,0001 0,1068 0,3727 −0,0110511 0,9384 r2 0,696185 p-value(f) 0,000000 source: compiled by the authors based on the data collected received on: 06th of march, 2023 accepted on: 22th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 298 vol. 3, no. 5, 2017 corresponding author: 1 department of audit and economic analysis, university of state fiscal service of ukraine. e-mail: mitem@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-298-303 influence of subjectivism on the effectiveness of state financial control in the area of budget allocation tetiana mishchenko1 university of state fiscal service of ukraine, ukraine abstract. the purpose of the article is to study the impact of subjects of state financial control, primarily internal, over the budget on all levels of executive power, in order to eliminate subjectivity in their actions and increase the efficiency of public finances in general. method. the study, which requires a deeper consideration of the issue of transformation of the content of the role performed by subjects of state financial control, primarily internal, in the presence of crisis phenomena in the economy. methodology. the study of this issue is based on the analysis of the performance of the state audit service of ukraine in identifying violations that led to losses of financial and material resources for the period of 2011–2017. results. in our opinion, the dynamics of a constant decrease in the size of eliminated financial violations testifies to the insignificant effectiveness of the implemented control measures. the lowest, according to statistical indicators, is an indicator of elimination of financial violations in recent years, as well, the number of financial audits has also decreased significantly. moreover, the number of inspections in individual cases had no effect on the final result. at the same time, the transition to new standards of inspections, with a view to deregulating and reducing the level of subjectivism, is less effective, but more transparent, which is positive in a slowdown of the economy, despite a certain reduction, but there is a significant level of corruption. subjectivity in the actions of the controlling bodies can exert significant pressure on the entities subject to their supervision. therefore, in order to achieve an optimal balance between the effectiveness of control measures and the reduction of pressure on economic entities, it is necessary to bring the existing system to standards that correspond to the level of developed countries. currently, the process of changing approaches to inspections is based on the selection of objects that are subject to inspections based on a prior assessment of risks. practical implications. the domestic system of internal state financial control is characterized by a significant level of subjectivism. it is substantiated that the reorganization of the system of internal state financial control is directly related to the reorganization of the entire system of public finances, in particular, one of its most important components – the system of state purchases. key words: state financial control, public finances, budget, elimination of financial violations, state audit service of ukraine. jel classification: h61, h72, h83 1. introduction state financial control is the main factor, on which the entire system of public finances is based. the effectiveness of the implementation of state financial control is directly related to the entities that implement it. during all years of independence, the quality of public financial control causes considerable debate and controversy, because subjectivism in this area can lead to both positive and negative impacts on the budget sphere in general. the urgency of this problem is also determined by the fact that the reduction of the influence of subjectivity on state financial control positively affects the reform of the entire state sector of the economy, which was launched and implemented in recent years. all this will contribute to the unification and coherence of public finance control at all levels. the implementation of the state financial control should aim at: achieving the main strategic national development goals; optimizing the use of budget funds by state authorities, including controllers; effective allocation of budgetary resources necessary for the exercise of state functions; ensuring the reduction of financial security imbalances between different territories and social groups; minimizing risks that may arise in the field of public administration. baltic journal of economic studies 299 vol. 3, no. 5, 2017 the issues of fairness and transparency of redistribution of budget resources are particularly acute during times of aggravation of the crisis phenomena that are peculiar for ukraine in recent years. in addition, the latest economic and profound socio-political crisis calls for increased control over the sphere of state expenditures, which is directly the competence of state financial control. therefore, subjectivity in the field of state financial control in terms of deceleration of economic growth and revenues to the state budget should be kept to a minimum. taking into account the above, one can state that the problem under investigation is extremely relevant for ukraine and needs more detailed consideration. the issue of the role and importance of subjects of state financial control in terms of ensuring the redistribution of budget funds is relevant not only for ukraine but also for other countries. so, scholars of other countries, who consider the role and functions of subjects of state regulation, include: а.м.  babich, v.v.  burtsev, l.i.  voronina, ye.yu.  hrachova, a.v.  krykunov.  a considerable attention is paid to the research of this issue by domestic scientists, including: n.s.  vitvytska, n.h.  vyhovska, h.v.  dmytrenko, i.k.  drozd, v.p. dudko, ye.v. kaliuha, and other scholars. despite a large number of scientific papers on the role and place of the subjects of state control in the context of the provision of redistribution of budget funds, some aspects of this issue are still insufficiently researched. thus, a deeper consideration is required for issues of transformation of the content of the role performed by subjects of state financial control, primarily internal, in the presence of crisis phenomena in the economy. also, insufficient attention is paid to mechanisms of minimization of the influence of subjectivity in the field of control over budgetary funds, including, in order to strengthen financial discipline on the part of executive authorities of all levels. 2. subjects of internal state financial control in the vast majority of developed countries, including ukraine, state financial control is based on the principles approved by the lima congress. ukraine, along with other countries, is a full member of the congress and signed the declaration, which provides for transparency in the use and disposal of budget funds (stefaniuk, 2011). the main lima principles include: preliminary and factual control, independent external and internal control, financial independence, investigative character, accountability, control over the receipt of taxes, public procurement openness principle. these principles, if fully implemented, can ensure the transparency of state financial control. in ukraine, in accordance with article 95 of the constitution, it is envisaged that the budget system should be based on the principles of fairness and impartiality of redistribution of public financial resources among all citizens, as well as local communities (constitution of ukraine, 1996). at the same time, the position declared in the constitution is not always implemented in practice, which is primarily related to a significant number of subjective factors. state financial control is carried out on behalf of the state by authorized entities and is divided into internal and external. internal state financial control is implemented at the level of executive power, while the external – by independent and authorized bodies within the constitution (polishchuk, 2014). internal state financial control plays a special role in the context of the study of subjectivism in controlling the distribution of budgetary funds, since it is on the actors that carry it out, for the most part, the transparency and efficiency of the redistribution of public finances depend, as well as whether violations will be systemic or vice versa will be effectively eliminated in the future. internal financial control is still divided into government and departmental, and the main subjects that carry it out are: state audit service of ukraine, ministry of finance of ukraine, state financial monitoring service of ukraine, state fiscal service of ukraine, state treasury service of ukraine. the main subject of internal state financial control is the state audit service of ukraine. this body of state power has undergone a long-term evolution of its own development and replaced two previous ones: the main control and audit office of ukraine, which existed until 2011, and later – the state financial intelligence of ukraine, which lasted until 2015. these subjects of the state financial control over a long period of time were given sufficiently wide powers and practically carried out inspections autonomously from the ministry of finance of ukraine. the problem of functioning of the predecessors of the state audit service of ukraine was primarily in the field of their activities in relation to controlled entities, which in particular were and still exist: all executive authorities; departments and ministries; state trust funds; budgetary institutions; other economic entities connected with budget funds through the system of state purchases. the greatest subjectivism in the actions of the predecessors of the current state audit service was connected with the verification of business entities that had a connection with the receipt of funds from any budget because of the system of public procurement existing for a certain period of time. the very issues related to the conduct of inspections of economic entities that were related to the field of procurement were the most controversial. the number of such inspections was not only high, but it also had a significant negative impact on business entities, as it could lead to a lengthy procedure. in addition, the lack of a single set of rules for selecting entities subject to inspections deepened the baltic journal of economic studies 300 vol. 3, no. 5, 2017 subjectivity in the implementation of control and audit activities. another factor contributing to this was the fact that such actions could also be initiated by direct orders and appeals of the president of ukraine, the presidential secretariat, the cabinet of ministers, the verkhovna rada, and people’s deputies of ukraine. starting from 2014, this factor of influence was eliminated, and indicators on the availability of audits initiated by these entities are not reflected in the statistics of activities of the state audit service. the reformation started in 2011, despite the fact that it was aimed at certain changes in approaches existing during all previous years, was of a limited nature over the practical absence of changes in other areas related to the implementation of state financial control. starting in 2014, the reform of the state branch of government and structural elements that belonged to it began. in the context of the implementation of reforms and the approximation of internal financial control to a level that would meet european standards, the state financial inspection of ukraine was transformed into the state audit service of ukraine (in accordance with the decree of the cabinet of ministers of ukraine “on establishment of the state audit service” № 868 on 28 october 2015). one of the main reasons for such changes was the need to put into practice requirements of the european union regarding the optimization of the number and improvement of the quality of controlling bodies in order to ensure a more effective fight against corruption. in this context, a significant reduction (up to 50%) in the number of employees of the state audit service was envisaged. 3. analysis of results of control measures in order to identify the effectiveness of the functioning of the state audit service, in comparison with the state financial inspection of ukraine, it is necessary to compare indicators of their activity in recent years, starting with the existence of the latter in 2011. let us consider in more detail the results of the revealed financial violations, which led to losses of financial and material resources in the period from 2011 to 2017 (state financial inspection of ukraine, 2011–2013; state audit service of ukraine, 2016–2017). according to data shown in fig. 1, it can be concluded that the largest amounts of financial violations were detected in 2014 when tendencies towards a gradual reform of the system of elements of the government branch began. at the same time, in recent years since 2014, there were trends in reducing the number of identified financial violations. moreover, this reduction was applied to almost all directions, and in some of them, in particular, such as shortfall of financial resources and illegal expenses, in 2017, compared with 2014, decreased by 4.9 times (from 3159447.97  thousand uah in 2014 to 642868.39 thousand uah in 2017) and 3.4 times (from 3888086.69 thousand uah in 2014 to 1122603.30 thousand uah in 2017) (state audit service of ukraine, 2016–2017). at the same time, an attention should be paid to tendencies of recent years in relation to changes in the number of control measures carried out (fig. 2). as it can be seen from fig. 2, similar to the results of detected financial violations, the largest number was observed in 2014, after which it began to decrease 0 500000 1000000 1500000 2000000 2500000 3000000 3500000 4000000 2011 2012 2013 2014 2015 2016 2017 1519165,19 813605,11 1276035,67 3159447,97 790528,56 1298099,2 642868,39 2260289,72 2486291,63 2067988,31 3888086,69 2737244,98 1070963,19 1122603,3 537477,07 315152,62 216464,26 301570,96 260625,46 80104,8 24112,69 shortfall of financial resources inappropriate expenditures of state resources illegal expenses deficiencies fig. 1. results of revealed financial violations, which led to losses of financial and material resources for the period of 2011–2017 (in thousand uah) baltic journal of economic studies 301 vol. 3, no. 5, 2017 rapidly. in comparison with 2014, in 2017 the number of control measures decreased by almost 10 times (from 23802 in 2014 to 2181 in 2017) (state audit service of ukraine, 2016–2017). reducing the number of control measures is associated with changing approaches to their implementation. thus, starting in 2012, a planned approach to control and audit activity, which involves risk assessment, using various kinds of information regarding the existence of violations of financial discipline, monitoring, civil society appeals, etc., began to be implemented. it is on this basis that the selection of objects that fall under control measures should be carried out (luchko, 2015). the orientation of the state audit service is not on the quantity but on the scope of economic activities that bear the greatest risks and the analysis of the largest financial flows, as the object of control should provide significant control effectiveness in practice. let us consider the most important quantitative indicators that directly relate to the elimination of identified financial violations in table 1. based on the data presented in table 1, an attention is paid to the continuous and rapid reduction of the effectiveness of elimination of financial violations for the investigated period of existence of the state financial inspection of ukraine and from 2015  – the state audit service. such indicators were the lowest in 2016. thus, compared to 2011, the amount of eliminated financial violations decreased by 13.4  times (from 8190738.9  thousand uah in 2011 to 611508.9  thousand uah in 2016) (state financial inspection of ukraine, 2011–2013; state audit service of ukraine, 2016–2017). fig. 2. indicators of changes in the number of control measures in 2011–2017 (number) 2011 2012 2013 2014 2015 2016 2017 conducted control measures (total) 13388 9500 6460 23802 4002 2668 2181 audits of financial and economic activity 12376 9086 6040 9804 3692 2361 1809 conducted counter verifications 28908 33059 30244 28517 16320 10308 6122 0 5000 10000 15000 20000 25000 30000 35000 table 1 financial indicators that characterize the state of elimination of identified violations during 2011–2017 (in thousand uah) indicators 2011 2012 2013 2014 2015 2016 2017 eliminated financial violations that resulted in the loss of financial and material resources (total) 8190738,9 1927480,5 1474001,7 990262,8 752977,7 611508,9 787975,48 received financial resources (total) to budgets and trust funds 653664,8 731538,6 389903,8 252942,5 203841,8 141281,3 225219,63 reimbursed and renewed expenses of financial and material resources (total), including: 7537074,1 1195941,9 1084097,8 737320,3 549135,9 470227,6 562755,85 inappropriate expenditures of state resources 2569379 91711,8 97099,1 96448 51054 54529,6 119802,96 illegal expenses 4927180,85 1075361,4 854049,54 620644,3 478498 407410,8 434263,00 deficiencies 40514,2 28458,8 132949,2 20227,9 19583,7 8287,1 8689,89 source: compiled on the basis of (state financial inspection of ukraine, 2011–2013; state audit service of ukraine, 2016–2017) baltic journal of economic studies 302 vol. 3, no. 5, 2017 also, the size of reimbursements and renewal of financial resources, which make up the predominant part of the overall structure of elimination of financial violations, has significantly decreased. during 2011–2017, this indicator decreased by 13  times (from 7537074,1 thousand uah in 2011 to 562755,85  thousand uah in 2017) (state financial inspection of ukraine, 2011–2013; state audit service of ukraine of ukraine, 2016–2017). 4. new approaches to internal financial control the change in approaches to internal financial control was aimed at two main objectives: 1. to reduce fiscal pressure on business entities and, thus, to introduce deregulation processes in this field; 2. reducing the number of inspections and using an approach that involves determining risk, improve their quality (pikhotskyi, 2015). analysing statistical data for recent years, in our opinion, the dynamics of a constant decrease in the size of eliminated financial violations testifies to the insignificant effectiveness of the implemented control measures. moreover, the number of inspections in individual cases had no effect on the final result. thus, in particular, the largest number of control measures for the research period of 2011–2017 was in 2014 and amounted to 23802, while the financial result in the form of elimination of financial violations was only 1.2 times higher than in 2017, when the number of inspections carried out was lower than 11 times (state audit service of ukraine, 2016–2017). it should also be noted that throughout the years since the establishment in 1993 of the first body that implemented the internal state financial control (state control and audit service of ukraine) and to this day, even in a slightly reformed structure of the state audit service, there is a significant subjectivity in the implementation of control measures. this is determined by the very specific nature of changes and the selective nature of these processes. in view of the results of the research, general results of recent years are also controversial. at the same time, it is also evident that although the existing to 2011 approach to the implementation of control measures had a strict administrative character, but was more effective, according to statistical data. so for a comparison, by the time of the first restructuring in 2010, the amount of eliminated financial violations was 2.4 times higher than in 2011 (when the state financial inspection of ukraine was created) and 25.8 times more than in 2015. (when the state audit service of ukraine operating today was created) (state financial inspection of ukraine, 2011– 2013; state audit service of ukraine, 2016–2017). thus, we can conclude that the effectiveness of state control is rapidly reducing, which may be quite dangerous in terms of a slowdown of the economy, despite some reduction, but still a significant level of corruption. however, quantitative results are not such as to exclusively characterize the current state of state financial control, as well as changes that take place in this area. this is associated with the fact that the reform of state financial control is not a separate process, but only one of the components of gradual introduction of the latest changes in the area of efficient allocation of budget funds. positive changes, in particular, in launching the electronic public procurement system, in case of further comprehensive implementation and expansion, will have a direct impact on changing the approaches to conducting financial audits of business entities that participate in this system. such changes, among other things, will contribute to the gradual reduction of the subjective influence on the audit process. at the same time, these changes can be realized with the implementation of further measures to reform all branches of state power and their key elements. 5. conclusions the study of the role and significance of subjects of internal state control over the system of public finances has made it possible to draw the following conclusions: – state financial control plays an important role in increasing the efficiency of distribution and redistribution of budget funds, while internal state financial control is the basis, on which the whole system of state finance management is built; – the domestic system of internal financial control has the essential level of subjectivity, which for a long period of time was conditioned by the approach to audits, the content of which was reflected in the coverage of as many economic entities as possible; – according to statistical indicators, before the first reformation in 2011, internal state financial control was the most effective, which, in particular, is testified by the elimination of financial violations, along with this, although the transition to new standards of inspections in order to deregulate and reduce the level of subjectivity is less effective but more transparent; – the lowest, according to the statistical indicators, is an indicator of elimination of financial violations in recent years, as well, the number of financial audits itself has also significantly decreased. at the same time, such changes may also be related to another stage of the reform of the subject of internal state control in 2015, which resulted in the creation of the state audit service of ukraine, which number of employees, as compared with previous years, was significantly reduced. the prospect of a further study of the topic is to determine milestones of the completion of the transition of the existing system of state financial control in ukraine to european standards of transparency and quality of implementation of functions entrusted to it. it is also promising to study the influence of external factors on changes in the system of state financial control, which, on the other hand, determines the further vector of such changes. baltic journal of economic studies 303 vol. 3, no. 5, 2017 references: stefaniuk, i. 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(in ukrainian) baltic journal of economic studies 128 vol. 5, no. 5, 2019 corresponding author: 1 sumy national agrarian university, ukraine. e-mail: nadijapilipenko70@gmail.com orcid: http://orcid.org/0000-0002-1064-389x researcherid: w-2652-2018 2 sumy national agrarian university, ukraine. e-mail: klietsovanataliia@gmail.com orcid: https://orcid.org/0000-0003-4910-8912 researcherid: https://publons.com/researcher/3071033/nataliia-klietsova/ 3 kyiv national university of trade and economic, ukraine. e-mail: irina.sumy.77@gmail.com orcid: https://orcid.org/0000-0002-1775-9473 researcherid: m-5947-2016 doi: https://doi.org/10.30525/2256-0742/2019-5-5-128-135 an empirical analysis of competitiveness factors of the region’s agrarian sector nadiia pylypenko1, nataliia klietsova2, iryna stoianenko3 abstract. purpose. the analysis of theoretical concepts of sustainable competitive advantage, the assessment of the competitive advantages of the agricultural sector in the region and identification of the opportunities to provide competitive advantages under conditions of instability as well as a changeable business environment. results. two opposite concepts of sustainable competitive advantages’ sources are analyzed. the first one is resource-oriented, the second one – based on the influence of the external environment on the competitive position of the company. it is found out that in modern conditions, the concept based on the resource approach is more adequate for the agrarian sector as the business features in agriculture predetermine the considerable resources’ immobility. in agriculture, due to the specificity of rural settlements, the combination of the basic resources (land, machinery, people) causes a quite rigid configuration that cannot be changed quickly enough. but the resources themselves are not a source of competitive advantage; the ability to use available resources effectively is important. the authors propose a method for comparing the security and efficiency of the basic resources’ usage in agriculture by region. under the framework of the methods, it was put the index method that allows comparing individual indicators and defining the integral index. the authors used such indicators as energy capacity, tractors and labour resources per one hectare of agricultural land to estimate resource availability. resource efficiency is characterized by labour productivity indicators (gross production per one average annual employee) and land productivity (gross production per one hectare of agricultural land). the integral indices were calculated based on the geometric mean. there was done the comparative analysis of the provisions of basic resources and the efficiency of their usage by agricultural enterprises of sumy region, neighbouring regions as well as the average industry indicators based on the proposed methodology. the analysis confirmed the existence of sustainable competitive advantages in the regional context and found that the leading resource is not natural characteristics, but effective management, which provides the highest efficiency of management. conclusions. taking into account the rapid changes in the business environment, any competitive advantage can quickly turn from sustainable to unstable. an assessment of the competitive advantages of the agrarian sector in the region has shown that to provide a sustainable position, it is first and foremost necessary to focus on reducing the costs and use innovations. under conditions of rapid technological change, the main resource is human ones that can produce certain knowledge and innovative solutions. the proposed method of calculation of the integral indicators of resource availability and efficiency of their usage allows evaluating the existence of competitive advantages objectively and can be used both for the development of competitive strategies of agricultural enterprises and the preparation and decision-making at the level of central and regional authorities. key words: competitive advantage, resource efficiency, agrarian sector, competitive advantage assessment, competitive strategies. jel classification: q13, r13, d24 baltic journal of economic studies 129 vol. 5, no. 5, 2019 1. introduction instability of economic development, both of global economic space and national economies, increased competition, rapid technological changes require constant response to provide the competitiveness of companies. recent changes in the agricultural sector in ukraine indicate that there are negative trends in the number of enterprises, the number of employees involved in agriculture and a significant reduction in the production of livestock products. the above is caused by a number of factors: the significant monopolization of the agrarian sector has led the large producers to concentrate on growing only certain highly profitable crops whose production process is almost completely mechanized. more than ever, there is the problem of food security and the provision of livestock products to the population. small-scale farmers, who can solve these problems, are unable to compete with large agricultural holdings that have large areas of agricultural land in their use and are more efficient and competitive due to the significant cost and production benefits of exportoriented crops. research on the competitive position of small agricultural enterprises has identified weaknesses in their activities (pylypenko, 2016). therefore, there are two types of producers in the agrarian sector of ukraine: large agricultural enterprises that, through economies of scale, ensure high production efficiency, have access to foreign markets and occupy a dominant position in the industry; and small agricultural enterprises that have small areas of agricultural land and do not occupy a dominant position in the market but, at the same time, perform an important social village conservation function (hadzalo, 2015). ensuring further development of such small village conservation enterprises is possible on the basis of achievement of sustainable competitive advantages. in this regard, there is a need to find new ways and methods of providing the competitive advantages of small farmers. the development of areas of competition and the search for new sources of competitive advantage based on their assessment is quite relevant in the current environment. a significant contribution to the research of competitiveness issues, evaluation and search of areas of functioning of competitive advantages has been made by barney j., wang h., hart s., yudanov а., mugera a., grant r ., hamel g., wernerfelt b., porter m. and others. but their concepts of providing competitive advantages are not sufficiently adapted to the conditions of doing business by agricultural producers in the ukrainian realities. the urgency of this problem determined the purpose and objectives of the research. the purpose of the study is to analyze theoretical concepts on the formation of sustainable competitive advantages, assess the competitive advantages of the agricultural sector of the region and identify opportunities to provide competitive advantages in the conditions of instability and changes in the business environment. 2. theoretical aspects of competitive advantages’ formation attention to competitive advantage is increasing, and new features are emerging with particular emphasis on competitiveness such as sustainability (barney, 1991; vinayan, gowrie, jayashree, sreenivasan & marthandan, govindan, 2012). the development of a competitive strategy, as a decisive factor in the successful development of any entity, is a sustainable competitive advantage. the rapid technological development that is happening around the world leads to the search for new factors of influence on competitive advantages, as all the new factors of their provision such as innovative development and organizational culture of companies came to the fore (vinayan, gowrie, jayashree, sreenivasan & marthandan, govindan, 2012). there are two opposite concepts of the sources of sustainable competitive advantage in the scientific literature: the resource-based approach of sustainable competitive advantage (barney, 2011) and models based on the research of the environmental impact of a firm’s competitive position (porter, 1985). from the standpoint of the proponents of the resource approach (barney, 1991), a source of sustainable competitive advantage is resources that are endowed with a set of attributes, such as rarity, infirmity and uniqueness. the presence of these special features is reflected in the immaturity of resources, which protects the firm from copying and imitation of its economic behavior by competitors. peteraf (1993) considers the main criterion for sustainable competitive advantage is immobility and long-term constraint. the more resource is available in the market, the less unstable the competitive advantages will be. the sustainability of competitive advantages depends not on the calendar period but on whether the competitive advantage remains after the efforts of competitors to follow it. if the firm’s resources are homogeneous and mobile, sustainable competitive advantage cannot be secured. therefore, according to proponents of resource theory, the search for sources of sustainable competitive advantage should focus on the heterogeneity and infallibility of resources. according to porter’s point (porter, 1985), the firm’s competitive position depends on the particular industry to which it belongs. he assumed that resources in one industry were identical and that their heterogeneity was a temporary phenomenon. porter’s “five forces” model explains the influence of external factors on the competitive environment of firms in the industry. the total impact of these forces depends on the type of industry. in those industries where one of the forces baltic journal of economic studies 130 vol. 5, no. 5, 2019 is active enough, only a small number of firms can count on high profits. porter has two competitive advantages: low cost and product differentiation. but there are contradictions when using these two types, as differentiation implies cost increases, which can lead to a loss of competitive advantage in the form of lower prices for a particular segment of the market, but those firms that are able to combine the two types successfully will be rewarded in the form of sustainable competitive positions. it is clear that such a combination should not be copied by competitors. according to porter, the basic components of competitive advantage are specialized activities. an activity-based approach allows you to analyze the firm’s competitive advantage. a potential source of competitive advantage is a successful combination of different activities. competitive advantages are the result of the implementation of a set of individual activities of the firm. the small number of activities creates the conditions for copying and imitation of the behavior of the firm by other competitors. it is through activities that determine the resources that a firm must acquire. that is, the selection of resources by the firm is made after the analysis of the competitive environment and the choice of strategy. in order to ensure sustainable competitive advantage, a firm must create barriers that make it difficult to imitate its actions by competitors. the existence of barriers, even with the uniformity of resources, according to porter, provides an opportunity for the firm to gain competitive advantage, but barney notes that barriers are only possible in the case of differences in resources, between firms in the industry and firms that trying to enter the industry. that is, barriers are a source of competitive advantage, only in the case of heterogeneous distribution of resources. therefore, porter’s theory of competitive advantage is focused on external factors of competitive advantage. the reason for the heterogeneity of firms was the structure of the industry in which they work. however, within one industry, firms are significantly different, especially in agriculture. the instability and uncertainty of the sectorial structure due to the transformation processes caused by globalization and rapid technological development have led to a weakening of the dominance of this concept. critics of this concept, the founders of the resource approach (barney, 2011; wernerfelt, 1984; prahalad & hamel, 1990; grant, 1991), consider that it does not pay enough attention to influence on competitive advantages of the firm’s internal signs. wang (2014) notes that porter’s “five forces” model has limitations as it implies the existence of a perfectly competitive market that is virtually non-existent in our current environment. wernerfeld, unlike porter, views the firm’s activities in terms of resources rather than products. he views the firm as an aggregate of assets and resources. availability and substitutability of the resource will reduce the profitability of its owners. if the production of the resource itself and its component is monopolized, it will reduce the income of other producers who do not have such a resource. it’s nothing like a resource barrier that is similar to traditional entry barriers. it is important to strike a balance between the exploitation of existing resources and the development of new ones (wernerfelt, 1984). according to hamel and prahalad, who have extended the resource theory, the production of a unique product is driven by new knowledge that arises from the effective combination of available resources, knowledge and processes. that is, the ability to produce new knowledge and use it to grow a company and adapt to the environment faster and better than its competitors is the only source of sustainable competitive advantage. knowledge, skills, organizational culture cannot be copied by other competitors. thus, a firm’s economic growth provides the company’s management with the ability to transform existing resources into competencies. the competencies will ensure the adaptation of the company to the changing market conditions and the compliance of internal and external conditions. high adaptability is closely linked to the continuous process of acquiring and producing new knowledge (prahalad & hamel, 1990). a similar view is expressed by urlich and lake (1991), who believe that it is more important to focus on managing core competencies in business planning than in the market or the product. grant (1991) considers the capabilities of the firm, the source of which to be a major source of competitive advantage. companies whose strategies were based on internal resources had a better adaptation to changes in the external environment. but in his view, resources themselves are not a source of concrete benefits. resource characteristics such as poor mobility, difficulty of reproduction, durability and transparency are the reasons for the success of the enterprise in the long run. the faster the resources are depreciated, the less their longevity. the higher the transparency, it is less likely for competitors to identify which resources underlie this competitive advantage. imperfect mobility is manifested in the fact that moving resources from one company to another will not produce the same result. providing resources with the necessary characteristics and capabilities to use them effectively is ensured by a special, non-imitable kind of resource – the competencies or abilities whose involvement in the organization makes them inseparable from it (grant, 1996). therefore, learning from the experience and trying to copy it from other companies should not produce results. access to machinery and equipment is not a differentiating factor, but the ability to use existing resources effectively is important (mugera, 2012). barney (1991) also denies the existence of sustainable competitive advantages of the innovator, as the uniformity of resources will not be an obstacle in the future for imitation of competitors in their activities. baltic journal of economic studies 131 vol. 5, no. 5, 2019 barriers to entry into the industry also do not provide sustainable competitive advantage. but, at the same time, the existence of barriers is the result of firms implementing strategies that cannot be applied by firms that want to enter the industry. therefore, barriers exist only when firms are different in their resources. that is, the source of competitive advantage is the unique combination of resources available to the firm. it is the uniqueness of the combination, which is provided through the most important resource – knowledge, makes it impossible for them to be imitated by other companies. thus, resource potential is a source of distinction for firms, as evidenced by the fact that under the same conditions of operation provide different results within the same branch of the enterprise. but physical capital and technology can be a source of competitive advantage only if the firm has unique social capital. achieving sustainable competitive advantage is possible through the following aspects (effective supply chain management, product and innovation differentiation, organizational responsiveness; cost of leadership that delivers lower prices). sustained competitive advantage creates unique resources combined with a suite of appropriate management actions and decisions. resources should be rare, irreplaceable, heterogeneous, immutable, and nontransferable (vinayan, gowrie, jayashree, sreenivasan & marthandan, govindan, 2012). resources that do not increase a firm’s revenue or reduce its costs are not a source of competitive advantage. resources that are valuable and rare are a source of temporary competitive advantage. resources that are valuable, rare and expensive to be imitated can be a source of sustainable competitive advantage. if competitive advantages can be copied by other firms, they are unsustainable (barney, ketchen & wright, 2011). 3. comparative analysis of the competitive advantages of the agricultural sector in the regional dimension today, the agrarian sector is very labor-intensive and benefits from natural resources. but it has a negative impact on the environment and cannot be a source of sustainable competitive advantage. physical resources can only give temporary benefits (barney, ketchen & wright, 2011). hart (1995) examined the relationship between opportunities for pollution prevention, product management and sustainable development. he investigated the impact of the environment on the formation of competitive advantages. environment is a component of resource theory. constraints created by the environment will be an important factor in the firm’s new resources. only environmentally oriented resources will be a source of sustainable competitive advantage in the future. thus, environmental friendliness can be an important competitive advantage. establishing statespecific environmental requirements may be an external barrier to entry into the industry. therefore, businesses will have a competitive advantage if they use new environmental technologies. there are four main types of competitive strategies. the first strategy is the force acting in the field of largescale production of goods and services. this means that the company has relatively affordable prices and low costs. the second strategy is adaptable. if the firm is focused on small business, then it is likely that you will need to follow this strategy. the third strategy is a niche. this strategy involves deep specialization of production. the fourth strategy is innovative. it is not the firm that adapts to the market, but the market becomes completely different after the advent of this company (yudanov, 2000). according to m. porter (1985), when choosing a competitive cost advantage, an enterprise should focus on manufacturing products that have competitors, but it should produce them at relatively lower costs than competitors. choosing a competitive advantage strategy based on product differentiation, one should be ready for the ability to produce and deliver unique products to the buyer, with after-sales service, that is, constant contact with customers is required, which involves exploring consumer needs. the combination of these two strategies is complicated but quite profitable and possible due to innovation. but in order to pursue an appropriate competitive strategy and acquire the necessary resources that will provide a lasting competitive advantage, the relationship between resources and competitive advantage must be understood. to evaluate the competitive advantage, we have proposed an integral coefficient that takes into account the industry’s potential and efficiency. the integral coefficient consists of several components, which gives the opportunity to identify problems in a particular area. in agriculture, the main resources are land, machinery and people. the combination of these resources, due to the specificity of rural settlements, causes a certain, rather rigid configuration that cannot be changed, as a rule, quickly enough. this is especially true for small and medium-sized enterprises, which, unlike agricultural holdings, do not have sufficient investment resources for cardinal and rapid change. regional features have remained so for decades. comparative analysis of the level of provision of basic logistical, natural and human resources of agricultural enterprises of sumy region and neighboring regions and within the industry, in general, is presented in table 1. the analysis shows that the provision of basic resources has been deteriorating in recent years, with this trend is typical for the whole industry as well as for individual regions. baltic journal of economic studies 132 vol. 5, no. 5, 2019 if we compare with the eu countries – the neighbors of ukraine, it should be noted that the availability of arable land tractors in ukraine is almost 12 times less than in poland, and almost 6 times less than in hungary. at the same time, ukraine has a much higher agricultural land load per worker. all the above shows the much worse competitive position of ukrainian farmers in the supply of basic energy resources. to a certain extent, this is due to the dominance of small family farms in poland compared to the dominance of agricultural holdings in ukraine. thus, in poland large farms (more than 100 hectares of land) owned 22% of all lands, while in some other countries of eastern europe this share was dominant: in bulgaria – 82%, in estonia – 73% (markitanenko, 2018). in order to be able to compare resource availability indicators by region and estimate their dynamics, we calculated security indices by taking the industry average values for 1, and the corresponding indices were calculated by formula 1 for the regions. іsecіj = пregіj/пavі, (1) where іsecіj – security index of the j-th region i-th resource пjregі – security indicator for the i-th resource of the j-th region пavі – security indicator of the i-th resource on the average in ukraine then it is determined the geometric mean of integral index of resource availability (formula 2). іsecj = і і іåj òj lj* *3 (2) where іsecj – integral index of resource security of the j-th region іеj – energy supply index of the j-th region ітj – index of supply of tractors of the j-th region іlj – j-th region labor supply index the results of the calculations are shown in figure1. as evidenced by fig., there are almost no relative changes in the resource indices in the dynamics, so it can be concluded that the competitive advantage in the provision of material and labor resources is relatively stable, since the low labor mobility and high immobility of the land resources make it impossible to overcome the backlog from competitors in the short term. resource efficiency in agriculture is characterized primarily by labor productivity indicators (gross output per 1 average annual worker) and land productivity (gross output per 1 hectare of agricultural land). as a result of the analysis, labor and land productivity indices were calculated as well as an integral index of resource efficiency (formulas 3–5) іlpj = lpjreg/lpav, (3) where іlpj –labor productivity index of the j-th region lpjreg –labor productivity indicator of the j-th region lpav – the indicator of labor productivity on the average across ukraine іlpj = lpjreg/lpav, (4) where іlpj – index of land productivity of the j-th region lpjreg – the indicator of land productivity in the j-th region lpav – the indicator of land productivity on average in ukraine іеrj = і іlpj lpj*2 (5) where іеrj – integral index of resource efficiency of j-th region the dynamics of the integral efficiency index is shown in figure 2. despite some fluctuations, there is a general tendency to exceed the resource efficiency index in sumy oblast table 1 level of basic resources’ provision of agricultural enterprises indicators 2013 2014 2015 2016 2017 2013-2017 average en er gy ca pa ci ty , k w / ha ukraine 2,02 1,91 1,51 1,66 1,59 1,74 sumy region 2,29 1,36 1,35 1,43 1,42 1,57 chernihiv region 1,51 1,39 1,33 1,25 1,27 1,35 poltava region 1,94 2,02 1,86 1,93 1,78 1,91 kharkiv region 1,82 1,89 1,65 1,76 1,68 1,76 it a cc ou nt s pe r 1 tr ac to r of a gr ic ul tu ra l la nd , h a ukraine 160 169 168 161 166 165 sumy region 189 197 206 192 193 195 chernihiv region 186 204 217 232 235 215 poltava region 135 131 139 135 149 138 kharkiv region 147 141 162 155 159 153 n um be r o f em pl oy ee s p er 10 00 h ec ta re s, pe rs on s ukraine 31,0 29,9 29,7 26,6 25,9 28,6 sumy region 25,2 25,3 25,5 25,2 23,7 25,0 chernihiv region 30,5 30,3 28,6 23,0 23,6 27,0 poltava region 41,0 41,8 40,5 34,5 30,7 37,6 kharkiv region 29,1 30,3 26,0 22,1 22,4 25,8 source: the authors calculated on the basis of data (derzhavna sluzhba statystyky, 2019) baltic journal of economic studies 133 vol. 5, no. 5, 2019 0,91 0,80 0,86 0,88 0,89 0,87 1,20 1,00 0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 2013 2014 2015 2016 2017 2013-2017 average sumy region chernihiv region poltava region kharkiv region 0,83 figure 1. dynamics of the integral index of resource security for 2013–2017 source: calculated by the authors 1,26 1,25 1,24 1,09 1,13 1,19 0,97 1,03 1,06 0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 2013 2014 2015 2016 2017 2013-2017 average sumy region chernihiv region poltava region kharkiv region 0,91 0,80 0,86 0,88 0,89 0,87 1,26 1,25 1,24 1,09 1,13 1,19 2013 2014 2015 2016 2017 2013-2017 average integral resource availability index integral index of resource efficiency 1,03 1,12 1,07 0,91 1,13 1,00 0,85 0,93 0,00 0,20 0,40 0,60 0,80 1,00 1,20 sumy region chernihiv region poltava region kharkiv region salary index integral index of resource efficiency figure 2. dynamics of the integral index of resource efficiency source: calculated by the authors 1,26 1,25 1,24 1,09 1,13 1,19 0,97 1,03 1,06 0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 2013 2014 2015 2016 2017 2013-2017 average sumy region chernihiv region poltava region kharkiv region 0,91 0,80 0,86 0,88 0,89 0,87 1,26 1,25 1,24 1,09 1,13 1,19 2013 2014 2015 2016 2017 2013-2017 average integral resource availability index integral index of resource efficiency 1,03 1,12 1,07 0,91 1,13 1,00 0,85 0,93 0,00 0,20 0,40 0,60 0,80 1,00 1,20 sumy region chernihiv region poltava region kharkiv region salary index integral index of resource efficiency figure 3. dynamics of integral indices of security and efficiency of use of agricultural resources enterprises of sumy region for the period 2013–2017 source: calculated by the authors baltic journal of economic studies 134 vol. 5, no. 5, 2019 compared to both neighboring regions and industry average values. comparing the dynamics of the integral indices of security and efficiency of resource use (figure 3), we conclude that agricultural enterprises of sumy region use resources much more effectively than in ukraine as a whole. and over the years, the trend is practically unchanged, which indicates the existence of sustainable competitive advantages. it is logical to assume that the basis for this is the available human potential since, in terms of natural resources, none neighboring region concedes to sumy but also has certain advantages. at the same time, analyzing the level of remuneration in the agricultural sector enterprises, we see a rather contradictory trend (table 2). wage growth rates in sumy region are inferior to chernihiv region only, but the wage level is lower than in chernihiv and poltava regions. in this case, an optimal solution to the problem of labor resources’ motivation in wages at agricultural enterprises can be considered the adjustment of the employee’s salary tax scheme that will help the owners of the business to raise employees’ wages (klietsova, 2018). if we determine the wage index using the method described above and compare it with the integral index of resource efficiency (figure 4), we can see that in agriculture of sumy and kharkiv regions it is underpaid, and in chernihiv and poltava regions it is overpaid. given the rapid changes in the business environment, any competitive advantage can quickly turn from sustainable to unstable. therefore, the ability of business entities to respond quickly and adapt to changes in the business environment is one of the most important characteristics that will provide a sustainable position. the more effective the adaptation mechanism of the enterprise is, the more stable its position in the market can be. the basis for ensuring an effective adaptation mechanism is a clearly defined set of resources, but not every resource can carry adaptability characteristics. in the conditions of rapid technological changes, the most important resource is still human resources that can produce certain knowledge and innovative solutions. 4. conclusions 1. every concept has its advantages and disadvantages, but the combination of the two approaches and their practical usage by agricultural enterprises will provide the high efficiency of the competitive advantage mechanism. 2. an assessment of the competitive advantages of the agrarian sector in the region has shown that to provide a sustainable position, it is first and foremost necessary to pay attention to the cost reduction and innovation. 3. human resources, which can produce certain knowledge and innovative solutions, are the main table 2 dynamics of the average monthly wage in agriculture for the period 2013–2017, uah regions 2013 2014 2015 2016 2017 2017 in % to 2013 ukraine 2270 2476 3140 3916 5761 254 sumy region 2143 2391 3134 3724 5936 277 chernihiv region 2157 2521 3522 4600 6436 298 poltava region 2404 2631 3390 4452 6136 255 kharkiv region 2396 2601 3089 3654 5259 219 source: the authors calculated on the basis of data (derzhavna sluzhba statystyky, 2019) 1,26 1,25 1,24 1,09 1,13 1,19 0,97 1,03 1,06 0,00 0,20 0,40 0,60 0,80 1,00 1,20 1,40 2013 2014 2015 2016 2017 2013-2017 average sumy region chernihiv region poltava region kharkiv region 0,91 0,80 0,86 0,88 0,89 0,87 1,26 1,25 1,24 1,09 1,13 1,19 2013 2014 2015 2016 2017 2013-2017 average integral resource availability index integral index of resource efficiency 1,03 1,12 1,07 0,91 1,13 1,00 0,85 0,93 0,00 0,20 0,40 0,60 0,80 1,00 1,20 sumy region chernihiv region poltava region kharkiv region salary index integral index of resource efficiency figure 4. comparison of the integrated resource efficiency index and the salary index by regions, 2017 source: calculated by the authors baltic journal of economic studies 135 vol. 5, no. 5, 2019 resource in agriculture, capable of providing sustainable competitive advantages in the conditions of rapid technological changes. 4. the proposed author’s method of calculation of integral indicators of 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(2018). improvement of the ukrainian labor legislation concerning the hired workers’ employment protection in the context of european integration. nauchni trudove (university of national and world economy, sofia, bulgaria), 2, 251–264. baltic journal of economic studies 27 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: ppvr@ukr.net orcid: https://orcid.org/0000-0002-0655-5256 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: svirpavlo16@gmail.com orcid: https://orcid.org/0009-0004-1150-9512 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: tkacenkoroman668@gmail.com orcid: https://orcid.org/0009-0007-8097-4348 doi: https://doi.org/10.30525/2256-0742/2023-9-1-27-34 de-shadowing of the economy in the field of non-bank financial institutions volodymyr buha1, pavlo svir2, roman tkachenko3 abstract. the purpose of the article is to define the de-shadowing of the economy in the sphere of non-bank financial institutions. the author presents the peculiarities of the domestic shadow economy and defines the concept of the shadow economy in the non-banking financial sector, identifies the components of the shadow economy, and proposes measures to overcome shadow economic processes. subject of the research – de-shadowing economy in the sphere of activities of non-banking financial institutions. the shadow economy in the nfi is a complex socio-economic phenomenon, which is presented as a set of uncontrolled and unregulated, both illegal and legal, but immoral financial and economic relations in the sphere of activity of the nfi, which are in conflict with the legislation in force and are characterised by deliberate illegal acts of individuals, committed with the aim of concealing their income from the state and its bodies, making profits, evading taxes, etc. the shadow economy has three components: the informal, the hidden and the underground (criminal) economy. the informal economy is characterised by unregulated production of goods and provision of services; the hidden economy is the legal production and sale of unregistered goods and services; the underground (criminal) economy – prohibited activities (corruption, drug trafficking, etc.). methodology – the article uses general scientific methods of formal logic (analysis, synthesis, deduction, induction, analogy, abstraction and modeling). it should be noted that the content analysis method made it possible to determine the influence of the shadow economy on the commission of violations in the field of activity of nfis, to show in a qualitative and quantitative ratio, in general, the trends in the level of spread of violations in their activities. results. the definition of the concept of the shadow economy in the non-banking financial sphere is given – it is a complex socio economic phenomenon, which is a set of uncontrolled and unregulated, both illegal and legal, but immoral financial and economic relations in the sphere of activity of nfis, which are in conflict with the legislation in force and are characterised by deliberate illegal actions of persons with the purpose of concealing their income from the state and its bodies, making profits, evading taxes, etc.; the components of the shadow economy are defined; it has been proved that ukraine has a fairly extensive shadow economy in its economy, which actually serves as the basis of the country's entire financial policy. the nbu acts as a state regulator of social relations arising during the conduct of economic activities related to finance (public or private). key words: de-shadowing economy, shadow economy in the non-banking financial sphere, components of shadow economy. jel classification: f38, g20 1. introduction the shadow economy remains one of the most significant threats to the economic security of the state, exacerbating the socio-economic crisis in ukraine and negatively affecting its international image. therefore, the development of effective mechanisms for bringing the economic and financial spheres out of the shadows, the search for and return to legal circulation of assets illegally removed from it, and the protection of property rights are priority directions for the implementation of state policy in the field of law enforcement. (buha, 2022) baltic journal of economic studies 28 vol. 9 no. 1, 2023 the growth of the shadow economy and the criminalisation of almost all spheres of economic activity hinders the development of market relations in ukraine, threatens the national interests and national security of the state, undermines the confidence of citizens in democratic institutions and values, causes concern in society and critical assessments by international experts. (buha, 2022) it should be noted that the peculiarities of the domestic shadow economy are a consequence of its formation and development during the soviet period. under the conditions of the administrative command planned economy system in the former ussr , shadowy relations became the basis for organised crime and corruption, which are inextricably linked, causing at the same time the interdependence of corruption offences with the receipt of significant material benefits. the globalisation of financial systems, the development of international banking networks, electronic telecommunication systems and transaction networks have created conditions for the use of financial instruments for the purpose of laundering funds obtained by criminal means. (buha, 2022) in the field of domestic scientific research, the works of such scientists as a. bazyliuk, yu. dmytrenko, o. nadon, o. sidelnyk, i. khytra, etc. are devoted to the issue of bringing the economy out of the shadows in the sphere of activity of non-banking financial institutions. however, the disclosure of a number of problematic issues requires special attention, which emphasises the relevance of the subject of the article. the purpose of the article is to determine the process of de-shadowing economy in the sphere of activities of non-banking financial institutions. 2. characteristics of the domestic shadow economy the task of economists, lawyers or other specialists who deal with the shadow economy is to stop the shadow processes by creating economic, organisational and legal conditions for de-shadowing the economy. however, this can only be done through the joint efforts of economists and lawyers under the conditions of an integrated approach. economists will not be able to develop an effective economic model of the conditions for de-shadowing the economy if they do not take into account the peculiarities of the country 's organisational and legal environment. lawyers will not be able to create effective legal forms and appropriate organisational and legal infrastructure of preventive influence on economic and organisational and legal causes of shadow economy without knowledge of economic patterns, financial, legal, organisational and management technologies of financial and economic circulation of things, rights and actions. in this regard, it can be denied that such an approach is extensive, since it is impossible to know the whole block of economic, organisational, management and legal sciences. however, the information necessary to determine the objecttechnological, subject and causal structure of the shadow economy can be found precisely in these fields. at the same time, the practical experts of law enforcement bodies, who combat shadow criminality, must have such information, otherwise they will simply not be able to detect and expose a specific shadow criminality. accordingly, the training of such specialists at the administrative level, who are called upon to create economic conditions and organisational and legal infrastructure for the de-shadowing of the economy, requires a complex approach. on the other hand, such training is necessary both for researchers who study the phenomenon of the shadow economy and for government officials who don't always make balanced economic decisions that lead to the globalisation of shadow processes. this is evidenced by the above analysis of shadow processes and problems of defining the concept and structure of the shadow economy. in addition, it is important for researchers of the shadow economy to know these disciplines precisely in the part that reflects the economic, organisational, financial and legal aspects of the essence of the "shadow economy ". that is, it is about the development of praxeological principles of internalisation of the knowledge developed in these sciences and their integration in a special interdisciplinary theory, which in the elements of its subject and scientific and practical tasks would reflect the economic, organizational, legal and criminogenic aspects of this phenomenon and would become a synthesized methodological basis of complex сognition of the object-technological essence of shadow processes, their structure, subject and causal structure. it should be noted that praxeology is the science of the principles and methods of effective human activity. research in the field of praxeology is concerned with the fundamentals of organising people's joint activities in terms of decision-making, motivation and implementation of both collective and individual actions. the fundamentals of the use of computers and other modern technical means in management are also studied. some ukrainian academics also advocate a comprehensive approach to understanding and combating the shadow economy. in particular, scientists from the research institute of the ministry of economy of ukraine a.v. bazyliuk and s.o. kovalenko note that "narrowly focused measures... only aggravate crisis phenomena, which contributes to the expansion of the shadow economy. in the current situation it is necessary to apply baltic journal of economic studies 29 vol. 9 no. 1, 2023 a comprehensive approach... aimed at changing the motives of behaviour of all subjects of society...". (bazyliuk, kovalenko, 1998) thus, the shadow economy remains one of the most significant threats to the economic security of the state, which exacerbates the socio-economic crisis in ukraine and negatively affects its international image. that is why the development of effective mechanisms for the de-shadowing of economic and financial spheres, the search for and return to legal circulation of assets illegally removed from these spheres, and the protection of property rights are priority directions for the implementation of state policy in the field of law enforcement. the peculiarities of the domestic shadow economy are a consequence of its formation and development during the soviet period. under the conditions of the administrativecommand planned economy system in the former ussr , the shadow economy became the basis for organised crime and corruption. 3. the concept of the shadow economy in the non-banking financial sector the shadow economy in the nfs is a complex socio-economic phenomenon, which is presented as a set of uncontrolled and unregulated, both illegal and legal, but immoral financial and economic relations in the sphere of activity of the nfi, which are in conflict with the legislation in force and are characterised by deliberate illegal actions of individuals, committed with the aim of concealing their income from the state and its bodies, making profits, evading taxes, etc. 4. components of the shadow economy the shadow economy has three components: the informal, the hidden and the underground (criminal) economy. the informal economy is characterised by unregulated production of goods and provision of services; the hidden economy is the legal production and sale of unregistered goods and services; the underground (criminal) economy – prohibited activities (corruption, drug trafficking, etc.). as noted by s.s. cherniavskyi and v.a. nekrasov, any legal economic activity can belong to the sphere of shadow economy. at the same time, the highest level of shadow economic activity is appropriate to: production and distribution activities, in particular productive capital; investment activity; banking, exchange, insurance activities; resource extraction and distribution activities; spheres of service provision (in education, medicine, etc.); any intermediary activity. (shadow economy in ukraine: state, trends, ways of overcoming: analytical review, 2017) 5. measures to overcome shadow economy processes the state is trying to take all possible measures to overcome the shadow economy processes. thus, in accordance with the requirements of the international community, the regulation on the application of measures of influence by the national bank of ukraine on institutions for violation of the legislation on financial monitoring (2020) (on prevention and counteracting the legalisation (laundering) of proceeds from crime, financing of terrorism and financing of the proliferation of weapons of mass destruction: law of ukraine of 06 december 2019. № 361-ix), was adopted with the aim of determining the procedure of influence measures to be applied by the nbu provided by the law of ukraine "on prevention and counteraction of legalisation (laundering) of proceeds from crime, financing of terrorism and financing of the proliferation of weapons of mass destruction" (on prevention and counteraction of legalisation (laundering) of proceeds from crime, financing of terrorism and financing of the proliferation of weapons of mass destruction: law of ukraine of 06 december 2019. № 361-ix), measures of influence, presenting requirements for violations of the legislation on financial monitoring by institutions, as well as monitoring their implementation. the requirements of this regulation can be applied to insurers (reinsurers), insurance (reinsurance) brokers, credit unions, pawnshops, and other financial institutions (with the exception of financial institutions and other legal entities in respect of which state regulation and supervision in the field of prevention and countermeasures is carried out by other subjects of state financial supervision); payment organisations, participants or members of payment systems providing financial services on the basis of relevant licences or registration documents; postal operators; other institutions providing services for money transfer and currency transactions; branches or representative offices of foreign economic entities providing financial services on the territory of ukraine; other legal entities that are not financial institutions by their legal status, but provide certain financial services. this regulation establishes the procedure for the application of the nbu to the institutions of influence measures provided for by art. 32 of the law, namely written warning. in accordance with chapter iii, paragraphs 21-22 of the regulations, the nbu issues a written warning to the nfi, expressing its concern about the nfi's situation, specifying the violations of law committed, the shortcomings in the nfi's work and, if necessary, the specific measures to be taken within a certain period of time in order baltic journal of economic studies 30 vol. 9 no. 1, 2023 to remedy and/or prevent them in the future. the nfi is obliged to submit a response to the nbu within five working days from the date of receipt of the written warning, indicating the period within which it undertakes to resolve the identified problems, eliminate the violations and/or take measures to prevent such violations in the future. within 20 calendar days from the date of receipt of the institution's obligations to eliminate violations, the nbu has the right to make comments on them, which the institution is obliged to take into account (regulations on the application of influence measures by the national bank of ukraine against institutions for violation of legislation on financial supervision): resolution of the board of the national bank of ukraine of 28 july 2020. № 106); cancellation of the licence and/or other documents granting the right to carry out activities, with the performance of which the entity acquires the status of nfi; imposing on the nfi the obligation to suspend an official from work. according to chapter iii, sections 33-35 of the regulation, the nbu has the right to take a decision on the suspension of the following officials of the institution: the head(s) of the nfi; the responsible employee. the decision on suspension shall be notified to the institution no later than the next working day following the date of its adoption. no later than three working days from the date of receipt of the decision on suspension, the nfi notifies the nbu by e-mail about the official who will perform the duties of the suspended official, specifying the details of the decision(s) taken by the competent body (official) of the institution (regulations on the application by the national bank of ukraine of influence measures against institutions for violation of legislation on financial supervision): resolution of the board of the national bank of ukraine of 28 july 2020. № 106). pursuant to chapter iii, paragraph 27 of the regulation, the nfi is obliged to notify the nbu of the payment of the fine no later than on the next working day after the payment of the fine via the nbu's e-mail and, on the same day, to send to the nbu an electronic copy of the settlement document on the payment of the fine, certified by a qualified electronic signature of the authorised person of the nfi. if it is not possible to send a copy of the settlement document on payment of the fine in the form of an electronic document, its certified copy shall be sent to the nbu by registered mail with advice of delivery (regulation on the application by the national bank of ukraine of influence measures against institutions for violation of legislation on financial supervision): resolution of the board of the national bank of ukraine of 28 july 2020. № 106): 1) conclusion of a written agreement with the nfi, in which the nfi undertakes to pay a specified financial obligation and to take measures to eliminate and/or prevent further infringements of legal requirements in the field of prevention and countermeasures, to ensure an increase in the effectiveness of the operation and/or adequacy of the risk management system, etc.; 2) submission of the nbu pursuant to art. 18 of the law on requirements for the implementation by the nbu of legislation in the field of prevention and countermeasures against legalisation (laundering) of proceeds from crime, financing of terrorism and financing of proliferation of weapons of mass destruction; 3) implementation by the nbu of control over the implementation by institutions of decisions on the application of influence measures, written requirements. 6. effectiveness of the de-shadowing process the effectiveness of the de-shadowing process of the involved financial investments depends on the state's ability to create safe, stable and favourable conditions, which will allow the nfi to increase economic and investment activity in the legal economy, functioning in accordance with the principle of maintaining fair economic competition on the market. it is worth paying attention to the statement of yu. m. dmytrenko, who notes that the work of the nbu is primarily public, its essence is financial activity regulated by financial and legal norms concerning the formation and implementation of monetary and currency policy in the state; the structure, functioning and control of the nonbanking system with the aim of stable and effective organisation of the use of public funds and creation of favourable conditions for the development of the money market of ukraine. (dmytrenko, 2012) the nbu has special functions in comparison with the nfi, in particular in ensuring the functioning of the national economic security system. in particular, it is appropriate to allow a person authorised by the state to influence the activities of the nfi on the basis and in the manner established by law. in this way, the nbu shall simultaneously influence the work of the banking and non-banking systems in order to increase their efficiency and ensure their necessary stability. at the same time, academic circles are expressing assumptions about the need to strengthen the monitoring function of the nbu. for example, i.ya. khytra argues that the nbu should be given more freedom in implementing monetary policy and supervising the financial sector in order to ensure high-quality administrative and legal support for the nfi's activities. (khytra, 2011) baltic journal of economic studies 31 vol. 9 no. 1, 2023 taking into account the current changes in the world market of financial services, the need to adapt the requirements of the eu directives and to reflect them in the national legislation, the organisational principles of ensuring safety in the market of nonbanking financial services are aimed at the following: obligatory maintenance of information on market participants; establishment of a uniform approach to the regulation of legal relations related to the licensing of certain types of activities; determination of the order of legal succession according to concluded contracts; analysis of the activities of market participants (capital, liabilities, reserves, profitability, liquidity and other key indicators of market activity); determination of the order of legal succession according to concluded contracts; analysis of the activity of market participants (capital, liabilities, reserves, profitability, liquidity and other key indicators of market activity); creation of transparency in the activities of the components of non-banking financial services; creation of a mechanism for protecting clients in this market and strengthening their confidence, provision of quality services; permanent financial monitoring; development of standard training programmes for the personnel of financial institutions and constant control over the completion of this line of work and acceptance of the final nbu examination. implementation of the task regarding improving the quality of financial services provided by nfi must be carried out in view of the needs of potential clients. the nfi and nbu should be the entities that will ensure the fulfillment of this task. nfis can achieve a high level of financial services provision due to the following factors: increasing the speed of nfi customer service; ensuring the quality (completeness, nature) and comprehensiveness of information and consulting on the features, benefits and economic characteristics of the financial service; urgency and timeliness of financial transactions; professionalism and qualification of personnel, absence of errors in customer service and financial transaction processing; nfi operation mode, oriented to the needs of potential clients; individual approach to client needs; completeness, reliability and timeliness of fulfilment of obligations, and so on. (sidelnyk, 2011) 7. quality of non-banking financial services the quality of non-bank financial services is ensured by the efficiency of internal work processes, the level of motivation of employees, labour productivity, the level of costs of correcting errors and other criteria arising in the provision of financial services. these requirements should be taken into account when designing the development strategy of the nfi. the provision of quality services depends to a large extent on the qualifications and professionalism of nfi employees. in this case, it is possible to adopt the experience of domestic banks and foreign financial institutions in the use of the "secret client" method, which will contribute to the formation of professional skills of nfi employees. this method makes it possible to formulate the main problems and shortcomings in the service provided to clients in the work of the nfu, to reveal the priority directions of further work to improve the quality of the services provided, to assess the strengths and weaknesses of the employees, as well as to outline the main approaches and directions for improving the qualification of the employees. the training of professional and qualified staff of the nfi falls to some extent within the competence of the nbu. in particular, the first steps have been taken in this area to formulate standard programmes for improving the qualifications of managers and chief accountants of financial institutions and their practical implementation, but it is also necessary to expand this area of work (financial stability report 2021): – to introduce the obligation for employees to certify their compliance with their positions and with the areas of activity of the nfі: insurance, nongovernmental pension funds, credit and deposit transactions, securities transactions, and so forth; – to initiate the creation of training courses for specialists in higher education institutions in accordance with the needs that have emerged in the financial services market and that meet the requirements for nfi employees (specialists in nongovernmental pension provision, insurance, work with securities, specialists in leasing and factoring); – to initiate and conduct round tables, conferences, seminars, press conferences on the development of the non-banking financial sector and specific types of nfis, involving leading industry experts, academics, potential investors and clients in these events. 8. the trust of the population is the most important factor that characterises the work of the nfi among the many factors that characterise the activity of nfis (economic, legal, organisational, human, etc.), the psychological factor of public confidence is particularly important. at present, there is a tendency for citizens to lose confidence in the state and in financial institutions, which in many cases they do not dare to transfer to financial intermediaries. they need guarantees, respect for them as customers and confidence that the state will protect their personal savings if a financial institution makes a mistake. baltic journal of economic studies 32 vol. 9 no. 1, 2023 the issue under consideration is quite complex, as the confidence of the population is expressed in two aspects, namely confidence in the national currency and confidence in the nfi. insufficient attention to this issue may significantly slow down the development of the financial services market in the near future. confidence in the national currency must be built first and foremost on the basis of the macroeconomic policy conducted by the government and the nbu. after all, with a high level of confidence, the processes of dollarisation of savings slow down, the capitalisation of the population's income is revived, the demand for money and the supply of money and capital on the financial market increase, and the resource base of financial intermediaries grows. the key problem of the financial market in ukraine today is the low level of participation of the population's funds in the formation of the resource base of financial intermediaries, despite the significant growth of the population's income. looking at the experience of other countries, it can be concluded that households are often the only sellers of money on the financial market. all other sectors of the economy, including businesses, central and local government, financial institutions, etc., are additionally financed at their expense. the main factors that negatively affect the formation of the population's income and increase the population's savings and its participation in the development of the financial market are: the low level of wages and the gap between the average monthly wage and the subsistence minimum of the population; the excessive differentiation of the population in terms of monetary income. the solution of the problem of creating confidence in the nfi requires the development and implementation of special state programmes, which should reflect the mechanisms for solving such problematic issues: the introduction of specific forms of responsibility of state structures for making management decisions, the implementation of which violates the property rights of business entities and the population; increasing the responsibility of officials, employees of financial institutions, other subjects of the financial market, whose actions reduce the financial stability and economic reliability of the institutions managed by them; increasing the requirements for entities regarding the level of capitalisation of the financial services market, including nfis; ensuring transparency in the formation and use of cash flows formed at the expense of investors' and clients' funds; maintaining new forms of state guarantees regarding the protection of the rights of consumers of financial services, their timely and complete receipt of these services. the first step in this direction was the adoption of the financial sector development strategy of ukraine until 2025. 9. low level of information transparency in ukraine's financial services markets in connection with the shadowing of the nfs, it is necessary to pay attention to the fact that there is a low level of information transparency in the markets of financial services in ukraine. financial institutions providing financial services do not provide complete, reliable, accessible and comparative information about the costs and conditions of providing such services, the risks and benefits associated with them, while consumers of financial services try to manipulate information about their own financial and property status and obligations of a financial nature in order to obtain such services or to avoid property liability related to them. the results of sociological research conducted in ukraine indicate a low level of financial literacy and awareness among citizens, who have to acquire knowledge about financial institutions and their services on their own. in some cases, financial institutions take advantage of the generally low level of public awareness of financial services to transfer most of the risks of providing such services to their consumers, resulting in negative public attitudes towards financial markets and their professional participants, mistrust of financial institutions, and reluctance to use them as a means of securing savings and increasing wealth. moreover, the least informed are the most vulnerable groups of the population, especially pensioners. at the same time, age, level of education or income are not the main factors influencing the level of financial literacy of consumers of financial services. 10. principles with which the nfi information system must comply the nfi's information system must comply with the following principles: accessibility (investors and shareholders of the nfi or members of credit unions, potential consumers must receive all disclosed information without delay or complication); openness (dissemination of information through the internet and mass media); clarity (statutory and other internal documents of the company must contain clear wording); completeness (based on the declaration of openness of the information sphere and ethical actions of all financial market participants); unity (rely on state support and a legal framework that would indicate responsibility not only for refusal to provide information, but also in case of late submission). 11. effectiveness of shadow process prevention the effectiveness of the prevention of shadow processes depends not only on objective factors baltic journal of economic studies 33 vol. 9 no. 1, 2023 (improvement of legislation, optimisation of the interaction between the various supervisory bodies, implementation of a transparent information policy, etc.), but also on the correct level of organisation of this activity at the state level. this, in turn, requires the development of new approaches to the reform of the relevant services involved in nfi oversight. the structure and functioning of the bodies and services responsible for monitoring compliance with legislation on financial and economic activities and combating financial crime no longer meet the modern requirements of society. for example, one of the regulatory and legal shortcomings affecting the level of financial crime is the lack of clear specialisation of control bodies at the legislative level, which in fact leads to a duplication of functions due to their various structural subdivisions. an equally difficult task in the prevention and termination of the offences detected by the nbu is the search for legal grounds for the involvement of specialists in control bodies or other specialised institutions. 12. conclusions thus, ukraine has a fairly extensive financial sector of the economy, which actually serves as the basis for the entire financial policy of the country. the nbu acts as a state regulator of social relations arising during the conduct of economic activities related to finance (public or private). accordingly, the national bank of ukraine, as an entity of the state's economic security system, has a special status, special powers and a corresponding range of responsibilities with respect to the financial sector of the economy and performs regulatory, supervisory and other functions defined by national legislation. the work of the nbu itself, as a regulator and independent body of state administration, covers the entire cycle of management actions and decisions in the nfs, in particular, with regard to taking measures to counteract existing and potential threats in the field of financial security. such a special place of the state financial institution in the system of economic security of the country gives it a legal opportunity to determine the conditions for the implementation of non-banking activities in ukraine, to analyse and evaluate the results of work, to supervise and control their implementation, to correct its own actions and the actions of the nfi, to apply measures of influence on violators of legislation. (nadon, 2017) taking into account the role of the national bank of ukraine in the economic security system of ukraine, centralisation of management activities is a necessary condition for effective state influence on the entities of the non-banking system. this is also logically determined by the principles of the structure and functioning of the nfs. references: buha, h.s. (2022). vplyv tinovoi ekonomiky na vchynennia pravoporushen u sferi diialnosti nebankivskykh finansovykh ustanov [the influence of the shadow economy on the commission of offenses in the field of activity of non-banking financial institutions]. european perspectives, vol. 1, pp. 40–46. bazyliuk, a.v., & kovalenko, s.o. (1998). tinova ekonomika v ukraini [shadow economy in ukraine]. kyiv: ndei minekonomiky ukrainy, 206 p. cherniavskyi, s.s., nekrasov, v.a., tytko, a.v., etc. (2017). tinova ekonomika v ukraini: stan, tendentsii, shliakhy podolannia: analit. ohliad [shadow economy in ukraine: state, trends, ways of overcoming: analyt. review]. kyiv, 152 p. polozhennia pro zastosuvannia natsionalnym bankom ukrainy zakhodiv vplyvu do ustanov za porushennia zakonodavstva z pytan finansovoho monitorynhu [regulations on the application by the national bank of ukraine of influence measures against institutions for violation of legislation on financial monitoring]: resolution of the board of the national bank of ukraine dated july 28, 2020. № 106. available at: https://zakon.rada.gov.ua/laws/show/v0106500-20#text pro zapobihannia ta protydiiu lehalizatsii (vidmyvanniu) dokhodiv, oderzhanykh zlochynnym shliakhom, finansuvanniu teroryzmu ta finansuvanniu rozpovsiudzhennia zbroi masovoho znyshchennia [on preventing and counteracting the legalization (laundering) of proceeds from crime, the financing of terrorism and the financing of the proliferation of weapons of mass destruction]: law of ukraine dated december 06, 2019. № 361-ix. available at: https://zakon.rada.gov.ua/laws/show/361-20#text dmytrenko, yu.m. (2012). finansovo-pravovi zasady diialnosti natsionalnoho banku ukrainy [financial and legal foundations of the activities of the national bank of ukraine]: dis. … cand. legal sciences: 12.00.07. kharkiv, 224 p. khytra, i.ya. (2011). administratyvno-pravove zabezpechennia diialnosti bankiv v ukraini [administrative and legal support of the activities of banks in ukraine]: avtoref. dis. … cand. legal sciences: 12.00.07. kyiv, 20 p. sidelnyk, o.p. (2011). pozytsionuvannia nebankivskykh finansovykh ustanov na rynku finansovykh posluh yak faktor pidvyshchennia yikh konkurentospromozhnosti [positioning of non-banking financial institutions in the financial services market as a factor in increasing their competitiveness]. bulletin of the university of banking of the national bank of ukraine, vol. 2 (11), pp. 237–241. baltic journal of economic studies 34 vol. 9 no. 1, 2023 zvit pro finansovu stabilnist za 2021 rik [financial stability report 2021]. national bank of ukraine. available at: https://bank.gov.ua/ua/news/all/zvit-pro-finansovu-stabilnist-gruden-2021-roku nadon, o.v. (2017). pravove stanovyshche natsionalnoho banku ukrainy yak subiekta zabezpechennia finansovoi bezpeky bankiv v ukraini [legal status of the national bank as a subject of ensuring the financial security of banks in ukraine]. scientific notes of the lviv university of business and law: a collection of scientific papers on legal sciences, vol. 16, pp. 82–87. received on: 12th of february, 2023 accepted on: 19th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 163 vol. 4, no. 1, 2018 corresponding author: 1 department of finance and entrepreneurship, sumy state university. e-mail: l.zaharkina@finance.sumdu.edu.ua 2 department of finance and entrepreneurship, sumy state university. e-mail: m.abramchuk@finance.sumdu.edu.ua * this work was supported by the ministry of education and science of ukraine (project no. 0117u003922 “innovative drivers of national economic security: structural modelling and forecasting”) doi: https://doi.org/10.30525/2256-0742/2018-4-1-163-168 the correctness of the capm-model application in the ukrainian reality in terms of investors financial security* liudmyla zakharkina1, maryna abramchuk 2 sumy state university, ukraine abstract. purpose. the purpose of this article is the research of correctness of capm-model application in the ukrainian stock market and the analysis of the time factor’s influence on the results of this model application. this problem acquires a special relevance for the provision of the investors’ financial security, who act in the conditions of significant uncertainty and high risk of the ukrainian stock market. methodology. in this work, methods of dynamic lines’ analysis, statistical, structural, comparative, correlation-regressive analysis were used. as the initial data during the research of profitability of the ukrainian enterprises’ shares, the data of the exchanging prices of the ukrainian emitters’ securities, according to the results of the trades in the public jsc “ukrainian exchange”, were used. results. contemporary approaches to the capm-model application in the markets, which are being developed, were analysed. as the result of this analysis, it was revealed that most of the scientific researches in this area emphasize incorrectness and unreliability of the results as to the prediction of the profitability indexes on such markets. calculation of the β-coefficient for the ukrainian emitters’ securities for the various investments’ horizon periods was done. the results of the calculation showed that the value of the β-coefficient varies greatly on the terms of investment and is not of the strictly consistent pattern. stock market profitability per month based on ux-index and considering the investment horizon period was calculated. the expected profitability of the ukrainian emitters’ securities was distinguished and compared to their real rate of returns. during the profitability analysis in the investment intervals, exponential moving average with its further shift for a month was used. it gave an opportunity to distinguish an average monthly profitability in the various investment horizon periods (1 till 12 months). practical significance. the application of the suggested approach can become an additional technique for the estimation of the investment attractiveness of securities of the stock market emitters in the various investment horizon periods that, in its turn, will increase the safety of such investment. conclusions. the conclusion was made as to the correctness of the capm-model application in the ukrainian reality, according to which it is almost impossible to define the exact regularity of the behaviour of indexes of the expected and real profitability depending on the investment horizon period. it casts doubt on the possibility of the appropriate and correct application of the capmmodel in the ukrainian stock market. this conclusion, in general, coincides with the conclusions of many scientists, who conducted similar researches in the stock markets of other developing countries. key words: stock market, profitability, beta-coefficient, stock index, investment horizon. jel classification: g10, g14 1. introduction one of the widely-discussed topics of the stock market is the issue of the manifold definition of the relation of profitability to risks, that is common for different financial investment tools. investigation of this point started in the 1950s (markowitz, 1952; sharpe, 1964) and was developed later by such wellknown scientists and experts (treynor, 1962; lintner, 1965; mossin, 1966; black, jensen, scholes, 1972) and others and, as the result of their scientific researches, the contemporary model of the capital assets estimation (capm) was formed. later, this model was corrected baltic journal of economic studies 164 vol. 4, no. 1, 2018 and modified considering different conditions of the stock markets. despite the huge quantity of the research papers in this sphere, there appears the necessity to check the possibility of the application of the capm-model in the ukrainian stock market, which is much more fluctuating and unstable then contemporary european markets, according to the studies (zakharkin, zakharkina, antoniuk, 2017). especial interest in such studies is paid to the problem of considering investment horizon period, as in the majority of the research works the profitability of the market tools is measured annually, though at the same time very often financial investors work within much shorter investment periods. the reasons for this are fast movement and fluctuating of the contemporary stock markets that make investors re-structure investment portfolio. thus, the research works in this field are very relative. they go in line with “complex program of development of ukrainian financial sector till 2020”, the main purpose of which is the creation of the financial system that is able to provide stable economic development by means of effective re-distribution of the financial resources in the economics based on the development of the appropriate market competitive environment according to the eu standards. the aim of the study is a study of the correctness of the capm-model application in the ukrainian stock market and influence of the time factors on the results of this model application. the subject of the study is theoretical, methodical, and practical aspects of the capm-model application in the ukrainian stock market based on the estimation of the profitability indexes of the securities, which, in its turn, is an indicator of the decision-making for the financial investors. 2. analysis of the global approaches to the capm-model application active investigations as to the possibilities of application of capm-model and its modifications go back to the 1970s, among which one can distinguish classical works (black, jensen, scholes, 1972; fama, french, 1992), which the background and the main issues of this model were settled. the further scientific works of this sphere were devoted to the critical analysis of the model and ways of its improvement. for example, in the paper (roll, 1977), the issues of market portfolio and assessment of its profitability were examined. as the portfolio, the appropriate stock indexes were used. along with that, the choice of such portfolio will influence on the result of the calculation of the β-coefficient, and consequently, the total result of the application of this model. the issues of the distinguishing of the β-coefficient, which is the key characteristic of the capm-model and problems of its stability, are examined in the works (levy, 1971, blume, 1975, scholes, williams 1977). researches of these scientists showed irregularity of the approach, on which the calculation of β-coefficient was based, for the prediction of future profitability and risks of the financial actives  – definite shares. along with that, for the investment portfolio, the value of the β-coefficient is quite stable and tends to one with time that means that the risk tends to the mid-market rate. recently, studies of the possibilities and special features of the capm-model application in the developing markets became widely spread. along with this, the majority of the authors emphasize the incorrectness and unreliability of the results as to the expected profitability indexes in such markets. this is explained by the difficulties of definition and substantiation of the basic characteristics of the model (riskless profitability, expected market profitability, β-coefficient) because of the underdevelopment of appropriate stock markets, absence of their informational effect, specific set of risks, that is characteristic to the developing economies. very important factor, which influences the results of the capm-model application, is the orientation on the investment horizon periods, issues of consideration of which were studied in works (merton, 1973; harvey, 1989; robertson, wright, 1998; ibbotson, chen, 2002; gibson, 2013) and by others. the results of the researches of these scientists, which were conducted on the factual basis of american stock market, showed that in different investment horizon periods, there exist different interconnections between profitability and risks of financial assets, which differ greatly both within the type of assets (shares, stocks, treasury bills) and within duration of investment horizon periods. similar investigations were conducted by the russian scientists (berzon 2014; abramov, radygin, chernova 2015, boyarskiy 2016), who, taking as an example young developing russian market (which is very much alike with ukrainian one), analysed the time factors of influence on the profitability and risk in the stock market and came to various and sometimes controversy conclusions, as to the investment attractiveness of different financial tools. among ukrainian scientists, who made a valuable impact into the development of methodology and practice of decision of stated above problems, one can distinguish works (diakonov, oleksich, 2010; zavorotnii, 2014; kukhta, 2005; lukianenko, 2007). despite the presence of these and other publications, the actual absence of the studies of the behaviour of capm-model components in ukrainian stock market substantiates the relevance of this paper. the issue of the influence of investment horizon periods on the capmmodel characteristics and, first of all, on the value of β-coefficient, which measures the securities’ volatility relative to the mid-market risks. baltic journal of economic studies 165 vol. 4, no. 1, 2018 3. application of concepts of the capm-model to the securities of ukrainian emitters as it is known, capm-model characterizes the process of formation of the market price on definite securities (other objects of real and financial investments) in conditions of the perfect capital market and considering systematic risks, which are not diversified. according to it the expected asset profitability, that is assets portfolio, is equal to the sum of riskless interest rate and awards for the investment risks in the definite asset, which is defined as the multiplication of the systematic risk level, characteristic for this asset and midmarket award for risks (sharpe, 1964; capital asset pricing model): ifmfi rrrr β⋅−+= )( (1) where ri – expected profitability of i-asset; rf – profitability of the riskless asset; rm – expected market profitability; βi  – β-coefficient of і-asset, which estimates the rate of its profitability to the fluctuations of the market profitability (mertens, 1997), or measures the systematic risks (market risk). β-coefficient can be calculated relatively to the definite shares, other investment objects or investment portfolio. to calculate β-coefficient, it is necessary to process statistical data, which characterize variations (fluctuations) of the efficiency of the chosen investment object for several previous periods, riskless interest rate, and an average profitability of the market portfolio. for this, it is necessary to calculate such indexes: – mean square (standard) deviation of values of analysed asset’s efficiency in the definite periods from the average asset efficiency during the studied period; – the correlation coefficient, strong connection between the rate of profitability of the studied asset and the average rate of profitability in the market in general; – mean square (standard) deviation of the profitability of the investments (rm) in the market in general (capital asset pricing model). the commonly-known equation for the calculation of the β-coefficient can be written as follows (kojefficient beta. formula. sovremennye modifikacii): 2 ),( m mi rrcov σ β = (2) where ri – profitability of i-asset; rm – market profitability; σm2 – distribution of the market profitability. at this, asset profitability and market profitability are defined according to the data of historical observations. as the input data during the examination of profitability of ukrainian enterprises shares, the data about the stock rates of ukrainian emitters’ securities according to the results of the trades in the jsc “ukrainian exchange” were used. for calculation of historical data of the market profitability, the ux index of ukrainian shares was used. calculations were based on the five-year period from 1 january till 31 december 2016. on this horizon period, the studies were conducted in such possible investment intervals: 1, 2 … 12 months. in the profitability analysis in the investment intervals, exponential moving average with its further shift for 1 month was used. such an investigation technique was chosen considering the existing analogue approach presented in works by (berzon 2014; boyarskiy 2016) and by other scientists. calculation of market tools’ profitability per month was done with the help of formula: ,100 )( 0 0 × ⋅ − = ti ii r iim (3) where rim – profitability per month in і-period; іі  – securities exchange rate (ux index) at the beginning of investment period; і0 – securities exchange rate (ux index) at the end of investment period; t – the number of months in the investment period. β-coefficient calculation for various investment horizon periods was done using the possibilities of excel program. for example, for the public jsc raiffeisen y = 1,0527x + 0,0138 r2 = 0,5199 -40,00% -30,00% -20,00% -10,00% 0,00% 10,00% 20,00% 30,00% 40,00% -40,00% -30,00% -20,00% -10,00% 0,00% 10,00% 20,00% fig. 1. results of the β-coefficient calculation for the public jsc raiffeisen bank aval for the investment horizon period 1 month (2012–2016) source: compiled by the authors baltic journal of economic studies 166 vol. 4, no. 1, 2018 bank aval, the results of the β-coefficient calculations for the investment horizon period 1 month is the following (presented in fig. 1). β-coefficient is equal to 1,0527. similar calculations were done for 10 ukrainian securities emitters for various investment horizon periods. results of the calculations are presented in table 1. the further investigation of the correctness of application of the capm-model in ukrainian market was conducted by calculation of the expected profitability of the ukrainian emitters’ securities using formula 1 and comparing it to the actual profitability indexes (ria), which were shown by the securities in 2017. at this, as the riskless profitability, there was accepted the profitability of the bond certificate of domestic government loan (bcdgl), which was equal to 14% annually in 2017 (in hryvnia), which constitutes 1.17% monthly. the procedure of distinguishing the expected profitability in formula 1 settles definite questions. generalizing the contemporary scientificmethodological approaches to the definition of such profitability and considering that this investigation is based on its actual indexes for 2017, there was calculated the monthly profitability based on the ux-index and considering investment horizon periods. calculation results are presented in table 2. thus, substituting the stated above data into formula  1, the expected value of the listed above ukrainian emitters’ securities for 2017 was calculated and it was compared to the real profitability of the securities in various investment horizon periods – from 1 till 12 months. the results of these calculations are stated in table 3. the difference between the real and expected profitability presents the coefficient α (αі), table 1 β-coefficients of the ukrainian emitters’ securities in various investment horizon periods (based on 2012–2016 data) emitters’ securities investment horizon periods (months) 1m. 2 m. 3 m. 4 m. 5 m. 6 m. 7 m. 8 m. 9 m. 10 m. 11 m. 12 m. pjsc raiffeisen bank aval 1,05 1,22 1,24 1,32 1,39 1,42 1,49 1,54 1,60 1,68 1,74 1,84 pjsc “ukrsotsbank” 0,72 0,50 0,41 0,39 0,33 0,41 0,45 0,46 0,49 0,53 0,57 0,58 pjsc “ukrtelekom” 0,38 0,64 0,64 0,61 0,65 0,63 0,58 0,53 0,46 0,47 0,42 0,39 pjsc “dtek dniprooblenerho” 0,11 0,37 0,39 0,57 0,81 0,99 1,12 1,24 1,75 2,25 2,25 2,59 pjsc “dtek dneproenergo” 0,66 0,93 0,79 0,90 1,17 1,40 1,56 1,76 2,04 2,28 2,33 2,43 pjsc “centrenergo” 1,14 1,22 1,19 1,15 1,16 1,13 1,15 1,13 1,11 1,05 1,01 0,98 pjsc “motor sich” 0,85 0,78 0,74 0,66 0,59 0,58 0,57 0,58 0,56 0,55 0,55 0,55 pjsc “ukrnafta” 1,36 1,54 1,62 1,64 1,70 1,76 1,72 1,63 1,56 1,47 1,39 1,28 pjsc “kryukov railway car building works” 0,69 0,67 0,62 0,60 0,63 0,66 0,64 0,61 0,60 0,60 0,57 0,53 pjsc “automobile company” bogdan motors” 1,09 1,51 1,67 1,64 1,75 1,65 1,58 1,48 1,37 1,32 1,19 1,14 source: compiled by the authors table 2 monthly profitability of ukrainian stock market in 2017 (based on the ux index) in various horizon periods, % investment horizon periods (months) 1m. 2 m. 3 m. 4 m. 5 m. 6 m. 7 m. 8 m. 9 m. 10 m. 11 m. 12 m. 4,61 4,51 4,34 4,03 3,96 4,19 4,27 4,19 4,42 4,91 5,32 5,80 source: calculated by the authors table 3 expected and real monthly profitability of the ukrainian emitters’ securities in various investment horizon periods in 2017, % emitters’ securities investment horizon periods (months) 1m. 2 m. 3 m. 4 m. 5 m. 6 m. 7 m. 8 m. 9 m. 10 m. 11 m. 12 m. pjsc raiffeisen bank aval ri 4,80 5,24 5,10 4,95 5,04 5,47 5,78 5,83 6,38 7,45 8,39 9,68 ria 7,89 8,53 8,92 7,54 6,99 7,44 7,85 7,90 8,61 9,98 9,83 9,95 αі 3,09 3,30 3,82 2,59 1,94 1,97 2,07 2,07 2,23 2,53 1,44 0,27 pjsc “ukrsotsbank” ri 3,65 2,83 2,48 2,27 2,08 2,42 2,58 2,57 2,77 3,13 3,52 3,84 ria 3,37 3,43 3,53 2,95 2,68 2,57 2,53 2,75 3,12 3,72 3,63 3,51 αі -0,27 0,61 1,04 0,67 0,61 0,15 -0,05 0,18 0,35 0,59 0,11 -0,33 baltic journal of economic studies 167 vol. 4, no. 1, 2018 which characterize the excess profitability witness about the underestimation or overestimation of the financial assets (mertens, 1997). 4. conclusions summarizing the conducted research, it can be stated that the application of the capm-model in ukrainian stock market does not give the reliable results in any investment horizon period. the closest to the real value expected profitability result was shown by the shares of the emitters of the bank group  – public jsc raiffeisen bank aval and public jsc “ukrsocbank”. the securities of all other investigated ukrainian emitters are characterized by the great value deviation of the real profitability from the expected one that is proved by the high value of the coefficient α, which, sometimes, gets abnormal values (for example: public jsc “dtek dniprooblenergo” and public jsc “dtek dniproenergo”). at this, it is almost impossible to state the clear consistency of behaviour of indexes of expected and real profitability depending on the investment horizon periods. it casts doubt on the possibility of the adequate and correct application of the capm-model in ukrainian stock market. this conclusion, in general, coincides with the conclusions of many scientists, who conducted similar studies in the stock markets of other developing countries. considering what is stated above, the perspective of the further researches is an attempt to adapt the capmmodel to ukrainian realities, through taking into account the factors, which influence the profitability of the securities in ukrainian stock market. pjsc “ukrtelekom” ri 2,48 3,30 3,18 2,90 2,98 3,06 2,98 2,76 2,67 2,91 2,93 2,99 ria 0,77 0,37 0,85 1,23 1,10 1,11 1,13 1,08 1,09 0,74 0,12 0,29 αі -1,72 -2,93 -2,33 -1,67 -1,88 -1,95 -1,85 -1,68 -1,58 -2,17 -2,81 -2,70 pjsc “dtek dniprooblenerho” ri 1,55 2,42 2,41 2,79 3,43 4,15 4,65 4,90 6,86 9,59 10,51 13,18 ria 16,57 19,00 17,93 20,44 22,38 23,10 25,56 30,36 27,00 20,50 20,99 13,01 αі 15,01 16,58 15,51 17,65 18,95 18,96 20,91 25,45 20,14 10,90 10,47 -0,17 pjsc “dtek dneproenergo” ri 3,45 4,28 3,66 3,74 4,44 5,40 6,02 6,48 7,80 9,69 10,84 12,43 ria 15,07 18,34 21,32 25,64 28,77 26,92 24,54 25,51 23,72 18,47 17,14 19,43 αі 11,62 14,06 17,65 21,90 24,33 21,52 18,52 19,03 15,92 8,79 6,29 6,99 pjsc “centrenergo” ri 5,10 5,25 4,95 4,46 4,41 4,59 4,75 4,59 4,76 5,09 5,38 5,73 ria 1,88 1,21 0,82 0,57 0,65 0,86 0,88 0,68 0,56 0,75 1,12 1,86 αі -3,22 -4,04 -4,13 -3,89 -3,76 -3,74 -3,87 -3,91 -4,20 -4,34 -4,26 -3,87 pjsc “motor sich” ri 4,08 3,77 3,53 3,07 2,80 2,92 2,94 2,90 2,99 3,24 3,45 3,71 ria 6,09 5,88 5,57 5,67 5,70 5,79 5,94 6,10 6,35 6,61 7,38 8,25 αі 2,01 2,11 2,04 2,60 2,90 2,87 3,00 3,20 3,35 3,37 3,93 4,54 pjsc “ukrnafta” ri 5,87 6,32 6,32 5,85 5,91 6,48 6,52 6,10 6,23 6,68 6,93 7,10 ria 3,04 2,99 2,32 2,35 2,66 2,81 2,74 2,55 2,29 2,07 2,62 2,69 αі -2,82 -3,33 -4,00 -3,50 -3,25 -3,68 -3,78 -3,55 -3,94 -4,61 -4,30 -4,41 pjsc “kryukov railway car building works” ri 3,56 3,42 3,15 2,87 2,94 3,17 3,16 3,02 3,12 3,41 3,52 3,62 ria 1,96 0,65 0,48 0,67 0,31 0,42 0,43 0,28 0,57 0,39 0,50 1,64 αі -1,60 -2,77 -2,67 -2,21 -2,63 -2,74 -2,73 -2,74 -2,56 -3,02 -3,02 -1,99 pjsc “automobile company” bogdan motors” ri 4,92 6,21 6,49 5,86 6,05 6,16 6,08 5,65 5,63 6,12 6,09 6,47 ria 3,34 1,77 1,08 0,64 0,93 0,97 1,08 0,93 0,44 0,79 1,20 2,64 αі -1,58 -4,44 -5,41 -5,22 -5,12 -5,18 -5,00 -4,71 -5,19 -5,33 -4,89 -3,83 source: calculated by the authors end of table 3 references: markowitz, н. 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(1997). investicii: kurs lekcij po sovremennoj finansovoj teorii [investment: course of lectures on modern financial theory]. kiev:: investment agensy of kiev (in russian) kojefficient beta. formula. sovremennye modifikacii [β-coefficient. formula. modern modifications]. retrieved from http://finzz.ru/koefficient-beta-formula-raschet-v-excel.html (in russian) sait ukrainskoi birzhi [site of ukrainian exchange]. retrieved from http://www.ux.ua/ua/ (in ukrainian) baltic journal of economic studies 90 vol. 3, no. 4, 2017 corresponding author: 1 department of finance, money circulation and credit, ivan franko national university of lviv. e-mail: olga_zamaslo@ukr.net the role of the corporate income tax in the state budget revenues of ukraine olha zamaslo1 ivan franko national university of lviv, ukraine abstract. the purpose of the article is to determine the trends of the functioning of the corporate income tax in the system of state revenue, assess its tax transformations, and determine the tax efficiency. on that basis, determining prospects of income tax in the national system of business entities taxation and developing proposals for improving the mechanism of taxation in ukraine. methodology. the theoretical and methodological base of scientific research of national and foreign scholars on the analysis of corporate income tax, official statistical data of the ministry of finance of ukraine and state fiscal service of ukraine. to ensure the authenticity and validity of the research results to the goal, the following methods are used: induction and deduction  – during theoretical generalizations and conclusions; analogy method – when comparing the foreign experience of administration of corporate income tax; economics and statistics as methods of the macroeconomic situation of ukraine analysing. results. in the article, the corporate income tax is investigated. the macroeconomic situation in ukraine is analysed. reasonable steps for the further use of the european countries experience for ukraine are founded. practical implications. the results of this study can be used by state authorities in developing tax policy directions in ukraine. value/originality of the results is a complex theoretical and practical analysis of the corporate income tax in ukraine. further research should relate to the improvement of its own system of income taxation. in the process of its implementation, it is necessary to use the experience of european countries. key words: state budget, corporate income tax, tax policy, tax incentives. jel classification: h60, h25, o23, h26 1. introduction in the current economic situation in ukraine, there is an urgent question about the reform of the corporate income tax. state and business are not satisfied with the current system of taxation of corporate profits. the government complains of massive tax evasion through the “shadow business” and its “minimization” by all possible means, resulting in a loss of revenue. business is indignant about the complexity of administration of income tax, the pressure from the fiscal authorities, and transfer of the tax burden from corporate income tax for a small number of honest taxpayers. however, the income tax has great opportunities to regulate and stimulate business activity. government is able to stimulate a revival of investment and innovation and promote competition by using income tax. unfortunately, we do not see this trend at the moment. to be able to resolve this situation, we need to analyse the current state of corporate income taxation in ukraine. in this case, we must take into account international experience of developed countries in order to suggest an approach to the transformation of the tax with minimal losses for businesses and state and solving the problem of reducing the fiscal efficiency of corporate income tax. ukrainian scientists in recent years have increasingly focused on improving the system of taxation of corporate profits in ukraine. while paying tribute to the considerable achievements of scientists in solving the problems of reforming the tax system in general, and income tax in particular, we would like to note that the practice of implementing changes is characterized by many contradictions, and therefore, the topic of the study is still relevant in the future. corporate income tax is one of the main items of revenue of the state budget. it is paid by legal entities on profits derived from the sale of goods (works, services), fixed assets, intangible assets, securities and others. corporate income tax is one of the four budget forming taxes and plays an important regulatory role in the economic system of the country. the main purpose of this tax is to regulate business activities, promote investment processes, and increase capital entities. 2. different rates of income tax and its share of gdp but, despite such opportunities, the present state of income tax does not meet the tasks assigned to it. an baltic journal of economic studies 91 vol. 3, no. 4, 2017 indication of this is reducing the fiscal effectiveness of income tax, i.e. reducing its share in gdp, budget revenues, and tax revenues. the reduction of the corporate income tax rate may be considered in the fig. 1. 23% 21% 19% 18% from april 1, 2011 to december 31, 2011 from january 1, 2012 to december 31, 2012 from january 1, 2013 to december 31, 2014 from january 1, 2014 untill today fig. 1. the dynamic of corporate income tax rate for the 2011–2017 years, % source: based on data of the tax code of ukraine as we can see, the reduced tendency stopped in 2015. according to the law of ukraine on 19.12.2013 number 317 “on amendments to the tax code of ukraine regarding several taxes,” it was planned that in 2015 corporate income tax rate will be 17% and in 2016  – 16%. however, these changes did not take place so far. to compare the tax policy of ukraine and other countries, let us consider the tax rate on profits of enterprises in the european union countries (fig. 2). 21,94 0 5 10 15 20 25 30 35 40 m al ta fr an ce be lg iu m g re ec e it al y a us tr ia n or w ay sw ed en d en m ar k a ve ra ge po rt ug al lu xe m bo ur g fi nl an d u ni te d ki ng do m es to ni a cr oa tia po la nd cz ec h re pu bl ic ro m an ia g er m an y la tv ia li th ua ni a bu lg ar ia fig. 2. corporate tax rate in eu countries in 2016, % source: based on data of taxation trends in the european union as we can see, the average corporate tax rate in 2016 in europe is determined by 21.94%. the highest rate of corporate tax is in countries such as malta  – 35%, france  – 33.33%, belgium  – 33%, and greece  – 29%. the lowest tax rate on corporate income of 10% is observed in bulgaria, lithuania, latvia, and germany – 15%. table 1 dynamics of the share of corporate income tax in gdp in the eu countries in 2009–2015, % country 2009 2010 2011 2012 2013 2014 2015 germany 2.5 1.9 2.1 2.4 2.5 2.5 2.4 poland 2.7 2.3 1.9 2.0 2.1 1.8 1.7 austria 2.6 1.8 2.0 2.1 2.1 2.2 2.2 france 3.0 1.8 2.3 2.6 2.7 2.8 2.7 bulgaria 3.0 2.4 1.9 1.8 1.7 2.1 2.0 netherlands 3.3 2.2 2.3 2.2 2.1 2.1 2.6 latvia 3.0 1.6 1.0 1.4 1.6 1.6 1.5 czech republic 4.0 3.4 3.2 3.2 3.3 3.4 4 romania 2.9 2.4 2.0 2.3 1.9 2.0 2.2 italy 2.9 2.4 2.3 2.2 2.3 2.5 2.2 hungary 2.6 2.1 1.2 1.1 1.3 1.2 1.4 finland 3.3 1.9 2.4 2.6 2.1 2.4 1.9 sweden 2.8 2.8 3.2 3.1 2.6 2.7 2.7 portugal 3.5 2.7 2.7 3.1 2.7 3.3 2.8 united kingdom 3.4 2.6 2.9 2.9 2.7 2.5 2.4 greece 2.1 2.5 2.5 2.1 1.1 1.1 1.9 norway 12.0 8.9 9.9 10.7 10.3 8.3 6.9 estonia 1.6 1.8 1.3 1.2 1.4 1.7 1.7 belgium 3.3 2.3 2.5 2.8 3.0 3.1 3.2 denmark 2.6 1.9 2.3 2.2 2.6 2.8 2.7 croatia 2.9 2.6 1.9 2.3 2.0 2.0 1.8 lithuania 2.7 1.8 1.0 0.8 1.3 1.4 1.4 malta 6.0 5.9 5.9 5.7 5.3 5.8 6.2 luxembourg 5.3 5.7 5.8 5.1 5.2 4.8 4.4 source: based on data of taxation trends in the european union baltic journal of economic studies 92 vol. 3, no. 4, 2017 in the total tax revenue of the eu, the average value of corporate tax income decreased from 3.7% to 2.7% of gdp during 2009–2015 years (table 1). according to the different nature of the income of individuals and entities, the fiscal function of income taxation in europe relies mainly on individual tax, whose share in gdp is higher than the corporate tax share and in the total tax revenues. this is explained by a broader tax base for personal income tax and the establishment of lower income tax rates on purpose of the struggle for resources on the world market. there are two main reasons why corporate income tax is less effective. firstly, because of the shift from direct taxation to indirect, which began with the financial crisis in 2008, when the budgets of many countries had begun to suffer due to reduced revenues from taxes on income. secondly, because of the tax evasion through the nebulosity of the tax base and the use of different schemes of tax planning by multinational companies. 3. macroeconomic situation in ukraine as the data demonstrate in fig. 3, the share of corporate income tax in gdp of ukraine is close to the european average. 14,2 12,9 12,8 9,1 6,0 7,7 7,0 4,2 4,0 3,8 2,6 2,0 2,5 2,4 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 2011 2012 2013 2014 2015 2016 2017 (plan) share of corporate income tax in the consolidated budget share of corporate income tax in the gdp fig. 3. the shares of the corporate income tax in the consolidated budget and in gdp of ukraine in 2011–2017, % source: based on data of the ministry of finance of ukraine according to reports of the ministry of finance of ukraine, the reduction of corporate tax share in the consolidated budget of the country is explained by the unfavourable macroeconomic situation. this implies the following: the reduction of industrial production. thus, the index of industrial production in 2013 was equal to 96.6% compared to 102.4% in 2012, in 2014 and 2015 it had decreased to 95.8% and 80.0% in accordance, however, in 2016 there was a rapid increase to 98.6 %; the state budget deficit in the amount of 64.7 billion uah or 4.45% of gdp in 2013, amounting to 78.05 billion uah, or 4.95% of gdp in 2014, 45.16 billion uah, or 2.28% of gdp in 2015 and 79.1 billion uah, or 2.94% of gdp in 2016; exceeding borrowing over repayments. in 2016, the country should pay the external debt of about 9 billion usd, including 6 billion usd for the imf loans. by the end of 2017, the expected volume of public debt will reach 2.3 trillion uah, which is approximately 66.4% of gdp; an unstable trade balance. thus, the difference between the value of imported and exported goods and services for a long time have had a negative value. for example, in 2012 it reached 9% of gdp, which is higher than during the time of crisis in 2008. although in 2015 and 2016 the balance of payments was in surplus of 849 million usd and 1.3 billion usd respectively; the country’s energy dependence and volatility in global markets of metallurgy and oil industry. fiscal value of corporate income tax can also be seen as the ability to create the budgetary resources in order to provide socially necessary expenditure. important in this context is to determine the dynamics of corporate income tax revenues. the fig. 4 shows that there was a slight increase in revenues during 2010–2012. thus, the stability in income tax indicates that enterprises of ukraine gradually had improved their effective performance after the crisis period. the smallest increase in revenues compared to the previous period was observed in 2014. this phenomenon can be explained by a decrease in rates of corporate income tax from january 1, 2014, from 19% to 18%, as well as by the temporary exemption from taxation of certain economic activities. in particular, this applies to biofuel producers for the period until january 1, 2015, gas companies until january 1, 2020, light industry, power industry, shipbuilding, aircraft, machinery for agriculture  – from january 1, 2011 to 2020. there was a condition set for such enterprises in the tax code: funds which were freed from taxation must be directed on increasing the production, logistics upgrading, and implementation of new technologies. 55 097 55 793 54 994 40 201 39 053 60 223 136,5 101,3 98,6 73,1 97,1 154,2 0,0 20,0 40,0 60,0 80,0 100,0 120,0 140,0 160,0 180,0 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 2011 2012 2013 2014 2015 2016 corpotare income tax, million uah the growth of corporate income tax compared to the previous period,% fig. 4. the dynamics of corporate income tax revenues in the 2011–2016 years. source: based on data of the ministry of finance of ukraine another reason for this decline can be explained by the lack of consistency in the corporate tax privileges. the classical theory of effective taxation says that to baltic journal of economic studies 93 vol. 3, no. 4, 2017 maximize the positive effect of rates reduction one should reduce the tax benefits. in return, with the sharp decrease in corporate income tax rates government significantly expands the list of privileges, exemptions, and preferences, particularly through special tax regimes. the positive dynamics of corporate income tax revenues in 2016 can be primarily explained by the depreciation of the money supply (the inflation level in 2015 was 143.3%, in 2016  – 112.4%). also, such a growth is caused by the transition to quarterly tax payments that are set for 2016. in particular, in november the income tax was accounted for the results of the third quarter of 2016. furthermore, according to subsection 4 of the xx section of tax code, enterprises had to pay an advance payment of corporate income tax in the amount of 2/9 of the tax accrued for three quarters of 2016. if we consider the income tax in terms of its individual components, it is evident that growth occurred in all sectors. the largest increase in revenues is showed by private businesses (12.0 billion or 61.5%), despite the fact that in the previous year this sector had the most significant reduction. state-owned enterprises and financial institutions (banks and insurance companies) increased tax payments more than double (fig. 5). 0 5 10 15 20 25 30 35 2015 2016 4,2 8,5 9,4 11,3 1,4 2,8 19,5 31,6 0,3 0,2 bi lli on u a h state-owned enterprises enterprises with foreign capital banks and insurance compani private businesses other fig. 5. income tax revenues of the different ownerships’ enterprises in 2015-2016. source: based on data of analysis of budget performance for 2016. budget monitoring it is also important to pay attention to the fulfilment of the plan of corporate income tax payments to the budget of ukraine. table 2 shows that the actual volume of revenues from 2011 to 2016 was whether higher than plan or very close to it. in 2011, the annual target for income tax was executed by 114.9%. this increase occurred despite the reduction of the tax rate by 2% (from 25% to 23%) on january 1, 2011. since 2012, due to the difficult economic and political situation in ukraine, the plan was underexecuted. in 2015, there was even a greater decline in the tax revenues with the underperformance of the plan by almost 5%. the main reason was the strengthening of socio-economic instability in the country, and as a result, a significant percentage of tax evasion. positive growth in corporate income tax revenues in 2016 can be explained by the general increase of business activity in the country. the number of entities of different legal forms on december 1, 2016, was 1,179,553, which is 62,599 more than in 2015. fiscal policy on income tax is a factor stimulating the business activity of all entities that should be conducted carefully. besides, it should be one of the tools of creating a favourable climate for attracting investment. the problem of increasing the revenue base of the state budget, in particular, due to tax business profits should be resolved comprehensively, taking into account the tax burden on business and with regard to optimum revenue from the tax on business profits to the state budget. 4. conclusions the general there is an improvement in the payment of income tax to the budget, although there are some drawbacks. first of all, it concerns an extensive system of preferential tax treatment, which expanded to threatening dimensions for the competition and for the national security. strong fiscal reserves are in the tax preferences. the decline in tax rates, while expanding the list of tax benefits provided by the tax code, gives grounds to assert the absence of a clear state strategy to ensure stable sources of budgetary resources to finance socially necessary expenditure. improving the taxation of corporate profits in ukraine must have a systemic nature. hasty and uncoordinated attempts to rectify the situation by correction current tax law will lead not only to the loss of confidence of domestic taxpayers and foreign investors but also it will trigger massive table 2 the fulfilment of the plan of corporate income tax payments to the budget of ukraine in 2011–2016, billion uah* 2011 2012 2013 2014 2015 2016 plan 47,93 56,79 56,79 41,01 36,92 46,92 fact 55,09 54,46 54,92 40,06 34,7 54,3 performed,% 114,9 95,9 96,7 99,9 94,3 111,9 *source: based on data of the ministry of finance of ukraine baltic journal of economic studies 94 vol. 3, no. 4, 2017 tax evasion and, consequently, further reduction in the fiscal efficiency of corporate income tax. it is necessary to further reform the tax system relative to an optimal tax rate and eliminating unjustified privileges, optimize the tax base and improving the process of tax administration. also, the continuous analysis of statistical information on income tax is needed, because it will give an opportunity to make early predictions and quickly respond to changes in the level of income that will indicate the feasibility and effectiveness of various reforms in the tax area. establishing simple and transparent rules for calculating the tax object eliminates a manifestation of discretion in the tax laws, reduce the number of audits, tax disputes, and minimize pressure on business by the fiscal authorities. due to the fact that the tax authorities do not need to check all the operations of the enterprise, as just launched capital is controlled, it will give an opportunity to respond quickly to the possible illegal withdrawal of money from the system. charging tax must be performed based on the actual value of the property tax for the quarter, setting a quarterly tax period. this is justified by the fact that when determining the tax and its payment sources  – income – coincide in time. corporate income tax is one of the most powerful sources of budgetary resources and provides the state with full funding of core functions. the analysis shows that fiscal policy on income tax motivates business activity of all entities that should be conducted carefully. besides, it should be one of the tools of creating a favourable climate for attracting investment. it is also necessary to further reform the tax system relative to an optimal tax rate and eliminating unjustified privileges, optimize the tax base, and improving the process of tax administration. implementation of the measures proposed above will have the following positive effects, including: attracting foreign investment in the business and the suspension of capital flight abroad; simplifying the administration of income tax for enterprises; creating huge internal investment resources without foreign loans; elimination of business from the “shadow” and simplification of the administration of corporate income tax, resulting in increased revenue. references: podatkovyi kodeks ukrainy [tax code ukraine]. 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(2016). ec.europa.eu. retrieved from: http://ec.europa.eu/taxation_ customs/business/economic-analysis-taxation/taxation-trends-eu-union/country-chapters_en [in english]. ольга замасло роль налога на прибыль предприятий в доходах государственного бюджета украины аннотация. цель статьи  – определение тенденций функционирования налога на прибыль предприятий в системе государственных доходов, оценки его налоговых трансформаций и определения налоговой эффективности. определить перспективы налогообложения подоходного налога в национальной системе налогообложения субъектов хозяйствования и разрабатывать предложения по совершенствованию механизма подоходного налогообложения в украине. методология. теоретическая и методологическая база научных исследований отечественных и зарубежных ученых по анализу налога на прибыль предприятий, официальные статистические данные министерства финансов украины и государственной фискальной службы украины. для обеспечения достоверности и обоснованности результатов исследований для достижения цели были использованы следующие методы: индукция и дедукция во время теоретических обобщений и выводов; метод аналогии  – при сравнении зарубежного опыта администрирования налога на прибыль предприятий; экономики и статистики как методы исследований макроэкономической ситуации в украине. результаты. в статье исследуется налог на прибыль предприятий. анализируется макроэкономическая ситуация в украине. основаны разумные шаги по дальнейшему использованию baltic journal of economic studies 95 vol. 3, no. 4, 2017 опыта налогообложения в европейских странах для украины. практическое значение. результаты этого исследования могут быть использованы государственными органами при разработке направлений налоговой политики в украине. значение/оригинальность – сложный теоретический и практический анализ налога на прибыль предприятий в украине. дальнейшие исследования должны касаться усовершенствования собственной системы подоходного налогообложения. в процессе ее реализации необходимо использовать опыт европейских стран. baltic journal of economic studies 230 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state organization "institute of the economy and forecasting of the national academy of sciences of ukraine", ukraine (corresponding author) e-mail: sv.shumska@gmail.com orcid: https://orcid.org/0000-0002-3106-1928 2 national university of kyiv-mohyla academy, ukraine e-mail: a.gaidai@ukma.edu.ua orcid: https://orcid.org/0000-0002-9220-4072 3 state organization "institute of the economy and forecasting of the national academy of sciences of ukraine", ukraine e-mail: vikosa72@gmail.com orcid: https://orcid.org/0000-0003-2265-4614 doi: https://doi.org/10.30525/2256-0742/2023-9-2-230-241 welfare of the ukrainian population: assessment of the level and impact of key factors svitlana shumska1, anastasiia gaidai2, viktoriіa blyzniuk3 abstract. the purpose of this article is to identify the problems that limit the growth of welfare in ukraine and to provide quantitative estimates of the impact of key factors that influence its level and development trend, taking into account the proposed three-level approach to determining the components of human welfare. methodology. in order to assess the level and dynamics of changes in the well-being of the ukrainian population, methods of statistical information analysis, results of sociological surveys and econometric modeling were used. results. based on the generalization of theoretical concepts of formation and methods of assessing welfare, the article presents the author's three-level approach to determining the components of human welfare, which includes: the basic or material level, the medium or psychological-emotional level, as well as the higher or spiritual level. estimates of the pre-war level of welfare of ukrainians are presented based on the analysis of the results of implementing the task of reducing poverty in ukraine within the framework of achieving the sustainable development goals (sdg1 – no poverty) as important landmarks on the road to european integration. the results of regression analysis and quantitative assessments of the impact of the key macroeconomic indicators (consumer price inflation, unemployment rate, foreign debt), as well as the indicator of crisis phenomena on the welfare of ukrainians at different time intervals confirmed the importance of the selected factors explaining the trend of changes in the well-being of the population. the article reflects the negative impact of external factors on the welfare of ukrainians, namely covid-19 and russia's military aggression. the results of sociological surveys are presented, confirming the negative effects of the pandemic and the terrible consequences of the military invasion of ukraine; showing the losses that will have a long-term impact on various aspects of the lives of ukrainians. the importance of humanitarian and charitable international assistance to ukraine was emphasized. practical value. an extended interpretation of the structure of the concept of well-being allows to consider in practice a wide range of factors that determine it, as well as its quantitative assessments, which are necessary for the justification of policy measures aimed at restoring the level of well-being of ukrainians as a result of covid-19 and military aggression, as well as increasing their welfare in the post-war period. key words: welfare components, sustainable development goals, regression model, welfare determinants, external factors, international aid. jel classification: i31, i32, c22, d62, d63, f35 1. introduction the desire to increase the level of one's welfare reflects the existential essence of a human being, which is determined by nature and encourages a person to development, self-improvement, searching for new and better opportunities, as well as discovering not only oneself, but also the surrounding world and the relationships in it. it is worth noting that in different periods of human evolution and with the development of economic thought, the concept of welfare has been significantly transformed, both in its definition and in the approaches and methods of its measurement, and this process continues to this day. from the total dominance of the material component to the baltic journal of economic studies 231 vol. 9 no. 2, 2023 subjective assessment of an individual's satisfaction with life, there are many indicators of well-being today, including alternative ones developed by individual scientists and international institutions. however, there is still no single agreed approach to determining the level of welfare of the population, which would reflect the extent to which the full range of needs of a modern society or country are met. since welfare is a complex category and apparently quite dynamic, which is evident from the development of this concept, the definition of its components and influencing factors was, is, and obviously will remain one of the most important areas of research (pinchuk, 2021; glubish, 2016). for ukraine, the issue of ensuring the welfare of its citizens today is extremely acute, as far as the background of accumulated problems in the economy (heyets, skrypnychenko & shumska, 2020; shumska & pinchuk, 2014; shumska & nezhyvenko, 2013), together with global challenges related to the spread of covid-19, and finally the tragic events of the war in 2022, have dramatically reduced not only the material level of people, conditions and opportunities for doing business, but also made an unprecedented attack on such basic pillars of welfare as a sense of security, safety, and emotional and psychological stability of people. before the military invasion of the russian federation, ukraine was faced with the task of reducing the gap in the quality of life and socioeconomic development with the eu countries on the way to european integration, but today the priority is to ensure the critically necessary conditions for the life of the population, although the main aspects of the social consequences of this aggression are also discussed (heyets, blyzniuk & nykyforuk, 2022). after the war, ukraine will have to face difficult challenges that will stand in the way of economic recovery, which will require an assessment of losses, available resources and the potential of internal capabilities. in this context, raising the level and quality of life will be a difficult and extremely urgent task for ukraine, which should occupy a worthy place in the european family of the global world, also in terms of the level of welfare of ukrainians. based on the three-level structure of welfare components, the article aims to identify the constraints on welfare growth in ukraine and also to estimate the extent of influence of the main factors influencing its development trend. the mentioned goal is achieved through the following tasks: first of all, the theoretical concept of three levels of human welfare components is disclosed; the current basic level of welfare in ukraine is evaluated through the analysis of the achievement of sustainable development goals presented in the third section; the impact of the main macroeconomic indicators and crisis phenomena on the level of welfare in ukraine is estimated with the regression model analysis in the fourth section; in the next section, the impact of such negative external factors as the covid-19 pandemic and military expansion on the welfare of ukrainians is analyzed; and the last section is devoted to the evaluation of international assistance to ukraine with a focus on its counterbalance to the consequences of negative externalities and its relationship with the upper level of the welfare components described in the second section. 2. theoretical aspects and methodological approaches one of the positive achievements of modern economic thinking is giving human being the dominant role in economic relations, recognizing the important fact that man is not only a consumer on the one hand and a factor of production on the other, but also the unique source of innovative thinking and thus of technical progress. moreover, humankind is the decisive factor of moral and ethical principles in the world, which determines the level of comfort and effectiveness of cooperation between the members of society, and consequently the level of public welfare. these recent changes prove that human beings do not exist for the development of the economy, but on the contrary – the economy should support the growth of people's welfare. thus, the subject of welfare research has made its evolutionary path from the personal welfare of the exact individual (pareto, 1964; glubish, 2016; sismondi, 1936; buchanan, musgrave, 2004; menger, 1992) to the social (smith, 1962; pigou, 1985) and human welfare (stiglitz, sen & fitoussi, 2009; borshchenko, 2018; world bank, 2018), which can now be reasonably considered as complementary, as they form the only unity. modern welfare research should apply a multilevel approach to the study of this complex concept. it is important to consider that the meaning of human "welfare" goes far beyond its material prosperity, which is obviously its basic level. in addition to this rudimentary or material level of people's welfare, there is also a middle level, which includes emotional and professional components, and an upper or spiritual level. it is noteworthy that most of the categories of medium and high levels of welfare consist of individual or social indicators, which significantly reduces the possibilities of their economic study. nevertheless, it is necessary to remember that all these categories have a remarkable influence on the feeling of "welfare" in today 's reality. considering the research results of pareto (1964), sen, stiglitz, and fitoussi (2009), mahbub ul haq baltic journal of economic studies 232 vol. 9 no. 2, 2023 (1995; duraj, 2017), ukrainian economists chechel (2011), glubish (2016), guz (2012), and pryjmak (2011) on the idea that the influencing factors of people's welfare go far beyond material aspects, the modern components of human welfare should be highlighted. these determinants of welfare could be into three levels: basic or material, middle, which includes emotional and professional aspects, and upper or spiritual. most of the components are interrelated, as illustrated in figure 1 below (1). the basic level of human life consists of two main parts: material and immaterial, which is related to the feeling of security. the material element of welfare consists of the basic level of material comfort that is sufficient for human life, including housing, food, necessary clothing for the whole family, as well as educational and medical services. quantitative indicators for the assessment of people's material security could be the following: the value of the consumer basket as a share of household income; the share of the population living below the poverty line and the level of social payments to such poor subgroups in relation to the officially set subsistence minimum; government debt for social payments; the share of the population with their own home; the affordability of housing for people with the average wage in the country, which could be assessed as the ratio of the average cost of housing rent to household income; the level of financial inclusion in the country. today, examples of evaluation of the level of educational and medical services in a country could be human capital index, developed and calculated by the world bank, and human development index, used by the un. despite the fact that they use slightly different methodologies, both indexes indicate the possibility of a person to reach the age of adulthood and obtain a basic level of education. it is important to remember that the material component is not the main determinant of people's welfare. assessing the level of material security means evaluating the extent to which basic physiological needs are met and whether the person or social group is not suffering from poverty. because greater material welfare does not always translate into greater life satisfaction, this trend persists only until a certain level of "basic" living comfort is achieved, including housing, food, clothing, access to education and medical care. another important component of welfare, which constitutes its basic level, although it is seldom mentioned in connection with welfare, is the level of personal safety, i.e., to what extent a person feels safe in various spheres of life – on the street, at home, at work, in business and in education (pinchuk, 2021). to assess this safety element, one could use a set of indicators that determine social, institutional, and environmental development, such as: the country 's crime rate; the transparency of business operations; the likelihood of attacks on private businesses; the level of domestic violence; the fairness of the judicial system; the practice of complying with labor laws; the level of air, water, and soil pollution; figure 1. welfare components source: developed by the authors baltic journal of economic studies 233 vol. 9 no. 2, 2023 the accessibility of drinking water; and the level of radiation. it is worth emphasizing that for most of the mentioned criteria it is difficult to apply quantitative approach, while most of the categories could be measured with the integrated indices. moreover, when interpreting most of the mentioned indicators it is necessary to take into account the following methodological complexity: absence of facts for some violations could mean that they are so widespread in the society that they are considered as normal life, and that is why nobody reports about them nor seeks legal protection. such situation could be observed with regard to domestic violence, as well as with regard to violations of labor law or attacks on business. the next level of human "welfare" is the middle one, which consists of the emotional and professional satisfaction of the individual. it is important to emphasize that realization at this level is highly dependent on success at the previous level. obviously, it is difficult to imagine a happy and psychologically stable person who plans his professional develop ment, suffers from poverty, struggles with a serious disease, or feels in danger at home or on the street. that is why the first two elements form the socalled "basic" level of individual welfare, which is a rudimentary condition for further formation of welfare in other spheres of life, middle and higher. such a close relationship is illustrated in figure 1 by the large intersection segments of the basic and middle circles. emotional element of welfare presupposes existence of warm relations with other people, mostly with the closest ones, and stable personal psychological health. in addition to sufficient level of material comfort of the family, affordable and accessible educational and medical services, which are also included in the material circle, among the factors influencing the emotional welfare of a person could be mentioned: healthy work-life balance, sufficient free time for leisure, level of job satisfaction and healthy family atmosphere. meanwhile, the successful realization in the professional part of the welfare presupposes the possibility of professional growth, satisfying work atmosphere, comfortable working conditions and adequate remuneration reflecting the value of the spent efforts. it is noteworthy that most of the categories of the middle level seem to be beyond measurable indicators, since they depend mainly on the perception of individuals. nevertheless, some integral indices could be used for estimation of this level of human welfare, for example, the index of happiness. a higher level of the components of human welfare becomes relevant mostly when a person feels a sufficient level of satisfaction in the previous categories (pinchuk, 2021). in other words, if a person is certain that his or her family 's basic material and educational needs are met, that work conditions and results are adequate, that everyone in the immediate environment feels generally safe and has mostly warm relationships with each other – then the person is more likely to feel the need for such aspects of his or her life as self-actualization and self-expression. self-realization can be reflected in the feeling of usefulness of one's work, contribution to a common cause, the possibility of realizing one's plan, project or idea, as well as the feeling of influence of one's actions through the exercise of the right to vote, the possibility of participating in local self-government, or public protests that can have a real impact on state decisions or the direction of government programs. there is some overlap with aspects of the security circle (figure 1), such as the level of state corruption, the realization of citizens' rights and freedoms, and the effectiveness of the judicial system. the possibility of free self-expression requires a high level of tolerance in society for marginal cultural, aesthetic, religious, and other human manifestations. it is fair to mention that aspects of self-expression and selfrealization are to some extent available to a person at the medium and basic levels of welfare, for example, when choosing a profession (realization) or simply in the daily creation of one's external image (selfexpression). however, in everyday expression, these two aspects have a more superficial nature, and at the highest level a depth focus is considered on those aspects that motivate a person to act, for example: participation in public actions, or expressing one's ideas or thoughts to society through creativity. as a separate circle of the highest level of human welfare it is worth to emphasize "the desire to do good deeds without reward", or charity, which can appear in a person, generally, in case of effective realization at all other levels of his/her "good being" (pinchuk, 2021). it is truly said that "altruism is the highest degree of selfishness", for it is difficult to find anything that can please a person more than helping another, provided that such help is a sincere desire of the person himself and not a manifestation of a sense of duty or guilt. in fact, satisfaction from good deeds is available in almost all areas of a person's life, but it is obvious that the likelihood of feeling such a desire is significantly reduced when the entire focus of attention is directed toward solving personal material, health, or emotional problems. among the factors that can contribute to the manifestation of altruism in a society are the active social positions of citizens, the popularity of social and environmental projects, the level of intensity of charitable activities, as well as the high level of realization of human rights and freedoms in such a society. it should be noted that the categories of the higher level of human welfare, such as the desire for selfbaltic journal of economic studies 234 vol. 9 no. 2, 2023 realization and good deeds, are not relevant to all people who have effectively satisfied their basic and middle levels. often, after reaching a certain sufficient material and emotional level, an individual desires to further increase the material component. however, many socio-psychological studies show that the satisfaction of increasing material wealth has a short term effect, which over time leads a person into a vicious circle of obsession with more and more wealth, which brings less and less pleasure, confirming the law of diminishing marginal utility. in contrast to this vicious circle, realization in the higher categories of welfare described above brings to any person an incomparable sense of self-importance, usefulness, necessity, importance of his or her existence, and need for other people – which together or individually provides many times more happiness than any material possessions, of course only if that person is not below the poverty line and has no other serious threats to his or her existence. 3. the welfare of ukrainians measured by sustainable development goals indicators in the context of ukraine's transition to sustainable economic growth, special attention is paid to the implementation of the goals and targets of the sustainable development goals (sdgs) as important milestones on the way to european integration and improvement of the country 's welfare. as evidenced by the analysis of the degree of incorporation of the sdgs presented in the "voluntary national review of ukraine's progress in achieving the sustainable development goals" (2022): a total of 17 goals and 86 national tasks of the sdgs are incorporated in 162 regulatory and legislative acts of the government, 1394 tasks and 4296 measures directed to the implementation of the mentioned goals and objectives are established in these acts. however, despite a large number of state strategic documents and a large volume of tasks and implemented measures, ukraine has managed to make progress on 15 of the 17 goals. progress is not uniform across all goals. some goals have already been achieved by 80% or more (sdg1, sdg3, sdg4, sdg5), progress for four goals is in the range of 60-80% (sdg2, sdg6, sdg8 and sdg16), for some others progress is in the range of 20-60% (sdg7, sdg11, sdg12, and sdg17), and for the remaining goals (sdg9, sdg10, sdg13, sdg14, and sdg15), it is currently unlikely that the benchmarks will be met by 2020 (less than 20%). from the point of view of increasing the level of welfare of the ukrainian society and the country, the most pressing issue is to achieve the following goals: sdg 1 – no poverty; sdg 3 – good health and welfare; sdg 8 – decent work and economic growth; sdg 10 – reduce inequalities; sdg 11 – sustainable cities and communities; sdg 16 – peace and justice – strong institutions; sdg 17 – partnerships for the goals. table 1 presents three key indicators that reflect the results of monitoring the implementation of the task of reducing the level of poverty in ukraine within the framework of achieving sdg1 (no poverty). as evidenced by the dynamics of two indicators, the target benchmarks were not achieved. according to domestic experts, the reasons for the lack of progress in poverty reduction in ukraine are the following (voluntary national review on sdg achievement, 2022): a) the limited financial capacity of the budget, which does not allow for a relevant increase in the level of social standards, in particular the subsistence minimum, which is the basis for determining the level of state social guarantees (this hinders the increase in income of citizens, first of all those who receive income at the lowest level); b) insufficient coverage of poor citizens with assistance, since not all citizens who are poor apply for state social assistance; c) limited financial resources of the pension system due to high demographic burden and shadow employment; d) insufficient social services at the place of residence of citizens (in communities) that would meet their needs; e) chronic underfunding of social infrastructure sectors (first of all health care), which forces the population to spend more money on necessary services. since the growth rates of real incomes of the population do not cover the decrease in state table 1 the fact and target benchmarks for the achievement of sdg1 indicators 2015 2016 2017 2018 2019 2020 2021 benchmarks 2020 2025 2030 percentage of population whose average total per capita equivalent expenditure is below the actual (estimated) subsistence minimum, %. 58,3 58,6 47,3 43,2 41,3 47,2 39,1 30 20 15 proportion of people whose daily consumption is less than usd 5.05 ppp, %. 2,4 2 1,9 1,8 0,3 0,2 0,4 0,5 0 0 share of the poor population receiving government social assistance in the total number of poor, %. 63,0 70,3 73,6 72,0 57,4 55,5 65 75 85 source: voluntary national review on sdg achievement, 2022 baltic journal of economic studies 235 vol. 9 no. 2, 2023 financing of the social sphere, the share of conditionally free funds (including for development) in households remains at a low level (voluntary national review on sdg achievement, 2022). this determines their low ability to withstand both internal and external challenges. 4. models for estimating the impact of the main macroeconomic factors and the crisis component on the level of welfare of the ukrainian population in order to study the possibilities of increasing the living standards of the ukrainian population through the application of macroeconomic policy tools, it is necessary to determine the nature and extent of the relationship between the level of welfare of ukraine and its main macroeconomic indicators, as well as the crisis factor, at various stages of ukraine's development. for this purpose, singleand multifactor linear regression models were constructed with the following basic specification: y = const + c1* x1 + c2 * x2 + c3 * x3 + с4 * x4, (1) where: y is a dependent proxy variable representing the welfare of the ukrainian population: gdp_ ppp – gdp per capita in u.s. dollars at purchasing power parity; rndn – changes in the real disposable income of the population (in % compared to the previous year). independent factors x1, x2, x3, x4 explain the trend of welfare changes: x1 – consumer price inflation (as a percentage change in the consumer price index compared to the level of the previous year); x2 – unemployment rate (as a percentage change in the share of unemployed population in the economically active population, compared to the previous year); x3 – foreign debt (as a percentage of gross national income); х4 – indicator of crisis phenomena (dummy variable that takes the value of 1 in the periods with negative change trend of real gdp compared to the previous year and the value of 0 in the case of positive rates of economic dynamics); c1, c2, c3, c4 are coefficients of independent variables. all models include the constants (const), which reflect the cumulative effect of the influence of all other factors that affect the dependent variable, but are not included in the model. table 2 shows the results of the regression analysis and quantitative estimates of the impact of the above-mentioned macroeconomic indicators and crisis phenomena on the welfare of the ukrainian population at different time intervals. the analysis of the statistical characteristics of these models empirically confirms the existence of a statistically significant influence of the selected factors on the level of welfare in ukraine. the influence of the crisis variable, which reflects the decrease in gdp growth rates in models 1 and 2, built on the data of the periods 1995–2021 and 1995–2015, respectively, when the crises of 2008–2009 and 2014–2015 had an internal economic character, is evidenced by the negative coefficients of the x4 variable in models 1 and 2. the covid-19 pandemic crisis for the period 2020–2021 was of a more complex nature, as it included a social and humanitarian background in addition to the economic one. a negative coefficient for the indicator of crisis phenomena in model 3 for the period 2012–2021 reflects a significant reduction in the real disposable income of the population in times of crisis for the period 2012–2021. this means that the income of the population shows a significant decrease due to the negative impact of both endogenous and exogenous crisis phenomena. the adequacy and stability of the presented models, the significance of their indicators and the economic validity of the dependent variables table 2 statistical characteristics of regression models assessing the influence of the main macroeconomic indicators and the crisis factor on the level of welfare in ukraine model 1 model 2 model 3 dependent variable (y) ln(gdp_ppp) ln(gdp_ppp) rndn variable (х) coefficient* x1 -0.0011 -0.0010 x2 -0.0872 -0.0899 x3 0.0050 0.0052 х4 -0.0879 -0.1002 -17.29048 const 9.7236 9.7129 8.157143 r-squared 0.8371 0.9298 0.596795 prob.(f-statistic) 0.0000 0.0000 0.008810 sample 1995–2021 1995–2015 2012–2021 *all factors are statistically significant (p<0.08). source: calculated by the authors using eviews.9 software on the basis of statistical information from the globaleconomy database (2022) and the database of the state committee of statistics of ukraine (2022) baltic journal of economic studies 236 vol. 9 no. 2, 2023 show that the level of welfare in ukraine is significantly influenced by the main macroeconomic factors: inflation, unemployment rate and the amount of foreign debt, as well as economic crises, which emphasizes the influential role of state regulation of macroeconomic processes of the country for the welfare of its population by defining and achieving strategically oriented goals, including overcoming cyclical or unpredictable economic crises. 5. external factors of influence in addition to internal factors, various external factors have a significant impact on the welfare of ukrainians. at the current stage of ukraine's development, covid-19 and russia's military aggression have become serious external threats. it is worth emphasizing that in response to the very strong negative impact of these factors, another external factor acts – international humanitarian and financial aid, the positive role of which significantly reduces the scale of destructive consequences of external shoks – war and pandemic. the realization of a global risk – the spread of the covid-19 virus in ukraine – led to a decrease in the real resource base for the formation of people's welfare. thus, although the growth of gross household incomes in nominal terms showed an upward trend, their real incomes began to decline. after the growing trend of the real disposable income of the population in ukraine and the stabilization of its changes in 2017–2018 at the level of 10.9% per year (figure 2), the pace slowed down to 4.5-4.3% in 2020–2021 due to the negative impact of the covid-19 pandemic (real national disposable income data obtained from the state statistics service of ukraine in september 2022). as a result of the government's implementation of a set of measures to contain the pandemic in the covid years, nominal household income in 2021 amounted to uah 4698.6 billion, expenditures – uah 4876.0 billion, savings decreased by uah 177.4 billion; disposable income per capita amounted to uah 86016 (household income and expenditure retrieved from state statistics service of ukraine on 20th of september, 2022). it is worth noting that the pandemic affected different strata of the population differently, increasing stratification according to indicators of average per capita expenditure and resources, which is reflected in the increase of differentiation of the population (households) in terms of material well-being (table 2) in 2021 compared to the prepandemic period in 2018. the various effects of the consequences of covid-19 on the budgets of ukrainian families are confirmed by various surveys. for example, according to the international research project "eurasia barometer" (2022), conducted by the "social monitoring center", the existence of negative impact was confirmed based on the answers of different categories of respondents (by income, social status, employment, place of residence) with the difference that the content and scope of the needs they used to satisfy vary significantly (balakireva, dmytruk, 2021). -20,4 2,0 10,9 10,9 9,0 4,5 4,3 -25 -20 -15 -10 -5 0 5 10 15 2015 2016 2017 2018 2019 2020 2021 figure 2. changes in the real disposable income of the population of ukraine (in % compared to the previous year) data: retrieved from the database of the state statistics service of ukraine (accessed september 20, 2022) table 3 differentiation of household living standards in 2018–2021* 2018 2019 2020 2021 quintile ratio of differentiation of total population income, times 2,0 2,1 2,0 2,1 quintile ratio of funds (by total income), times 3,3 3,5 3,5 3,5 * excluding the temporarily occupied territories of the autonomous republic of crimea and the city of sevastopol; part of the temporarily occupied territories of the donetsk and luhansk regions. data: retrieved from the database of the state statistics service of ukraine (accessed september 20, 2022) baltic journal of economic studies 237 vol. 9 no. 2, 2023 the respondents' answers1 to the question about the negative impact of the pandemic on their family budget were distributed as follows (balakireva, dmytruk, 2021): a) 40.5% in the affirmative, 8.7% of them noted the presence of a "very serious" negative impact, and 31.8% of respondents declared the presence of a "serious" negative impact; b) more than a third (35.6%) also noted the negative impact of the pandemic on their family budget, but assessed it as "not very serious"; c) only one in five (22.2%) denied the presence of a negative impact on their family budget. in particular, the negative ("very serious" or "serious") impact on budgets was felt most by employed respondents (42.6%) and those who rated their social status as the highest – 56.6%; respondents who rated their income as covering their needs well and allowing them to save a lot – 49.0% (balakireva, dmytruk, 2021). the pandemic had a smaller impact on the budgets of rural families (balakireva, dmytruk, 2021). among the respondents in rural areas, the percentage of people who noted a "very serious" or "serious" negative impact of the pandemic on the family budget was 36.3%; at the same time, in regional centers this indicator reaches 43.8%, in cities – 41.2%. residents of eastern ukraine felt the negative impact on their budgets more acutely (44.5% chose the answer "very serious" or "serious" negative impact), in the south of the country the specific weight of such answers is the lowest among other regions and accordingly amounts to 35.1% (balakireva, dmytruk, 2021). an external factor such as russia's military aggression has an extremely large negative impact on the sustainable development of ukraine and the welfare of each ukrainian. as a result of the war, different regions of ukraine are facing a variety of challenges, such as: humanitarian problems, survival and losses among civilians are intensely felt in the zones of active hostilities. the office of the united nations high commissioner for human rights (ohchr) recorded 13212 cases of death or injury of civilians in ukraine for the period from february 24 to august 14, 2022, including 5514 dead and 7698 wounded, and the dead also include children (147 girls, 170 boys, and 39 children whose sex could not be recognized) (august, 2022). the loss of people, an important component of the national wealth of ukraine, from the first days of the war was supplemented by the destruction of the social infrastructure, which was the basis for ensuring the welfare of the nation. as a result of the hostilities from february to september 2022, the russian occupants damaged, destroyed or captured at least: 978 medical facilities, including 24 private medical facilities, 1270 schools, 786 kindergartens, 775 cultural facilities, 80 religious buildings, 149 tourist facilities and 153 sports facilities in the total estimated amount of 127.0 billion usd (see the report of the project "russia will pay " of the kse institute, figure 3. results of the survey on the problems of ukrainians since the beginning of the full-scale war source: nationwide telephone survey conducted by the kyiv international institute of sociology, august 2-9, 2022 1 the sample population of the monitoring survey is representative by basic socio-demographic indicators for the adult population of ukraine. the method of collecting information is individual face-to-face interview at the respondent's place of residence. the survey was conducted from october 20 to october 27, 2021 in 24 regions of ukraine and kyiv. in total, 1,509 respondents were interviewed. baltic journal of economic studies 238 vol. 9 no. 2, 2023 september 2022). the largest number of destroyed educational institutions was observed in donetsk, kharkiv, luhansk and kyiv regions. in more secure areas, the destruction of economic links and infrastructure, massive internal displacement and refugee flows have led to largescale job and income losses. the international labour organization (ilo) estimates that 30% of all jobs have been lost since the beginning of the war. as of august 2022, about 33% have lost their jobs, and 70% of ukrainians say they have suffered financially due to russia's full-scale war against ukraine. this is evidenced by the data of a telephone survey conducted by the kyiv international institute of sociology (the study was made possible with the financial support of the united states agency for international development (usaid), sweden, and the ministry of international affairs of canada) (nationwide telephone survey, august, 2022). previously, in may, the rate of those reporting a decrease in income was 66%. some financial difficulties were reported by 40% of men and 35% of women, and serious difficulties by 34% of men and 26% of women. of those surveyed, 95% said they could not live comfortably on their current income (nationwide telephone survey, august, 2022). not only the financial losses of ukrainians indicate a decrease in people's welfare. according to the above-mentioned data of the telephone survey, in may-august 2022 the share of people who had to face the loss of housing increased from 6% to 9%, and together with the loss of other property this percentage increased accordingly from 8% to 10%. in addition to economic problems, ukrainians also suffer from other problems caused by the war, including: deterioration of mental health (64%), deterioration of physical health (48%), loss of friends or relatives (28%), as shown in figure 3. nevertheless, there are some encouraging facts that show the character of ukrainians and the importance of the components of the upper level of welfare (see figure 1). among these factors, the following should be emphasized: firstly, since the beginning of the full-scale invasion of russia, more than 81% of ukrainians surveyed donated money to the armed forces, 60% donated money for humanitarian needs, 54% of ukrainians provided shelter or helped internally displaced persons, 37% volunteered (nationwide telephone survey, august, 2022); secondly, during the first four months after the launch of the state crowdfunding platform united24, donors from all over the world made charitable contributions and thus collected over 180 million usd of accumulated financial help for ukraine. residents of 110 countries have joined united24 during the operation of the platform. the largest number of donations came from the usa, germany, france, great britain and canada (pavlysh, september 2022). 6. international humanitarian and financial assistance taking into account experts' estimates of 3045% reduction of ukrainian gdp in 2022, the intensification of pressure on the social system observed during the large-scale aggression in ukraine as an inevitable consequence of simultaneous decrease in revenues and increase in budget expenditures. international partners support ukraine in solving this problem by providing significant amounts of financial assistance during the war, including direct financing of ukraine's budget expenditures (except for those for military purposes). according to the operational data of the ministry of finance of ukraine as of july 27, 2022, half of the budget expenditures, i.e., 12.7 billion usd, were financed by external resources: ifo (imf, world bank, eib) – 11.7%, foreign countries (bilateral agreements, grants and guarantees) – 38.6%. international support from various countries and world institutions allowed ukraine to stand up and partially meet its financial, military and humanitarian needs. the data in table 4 show the assessment of the assistance received by experts of the national bank of ukraine (nbu database, 2022) based on the table 4 official assistance committed to ukraine from end january to end november 2022 in billions of euros financial military humanitarian total eu institutions* 30,32 1,57 3,10 34,99 usa 15,05 9,90 22,86 47,82 ifis** 9,77 0,00 0,00 9,77 eu stsats 4,39 3,85 8,61 16,84 uk 2,55 0,40 4,13 7,08 other countries*** 3,06 1,03 2,27 6,37 note: * european commission, eu council and european peace facility funds, including the announced 18-billion-euro package. ** imf, world bank, ebrd, un. assistance under multi-donor programs is counted as individual country assistance. *** australia, canada, new zealand, norway, south korea, taibei, turkey, switzerland and japan. source: data from the nbu and the kiel institute for the world economy baltic journal of economic studies 239 vol. 9 no. 2, 2023 research of the kiel institute for the world economy (antezza et al., 2022). from the point of view of ensuring an adequate level of welfare, among the quantitative assessments of international assistance, the amount of financial and humanitarian support received by ukraine deserves attention. in this case, humanitarian aid refers to assistance to the civilian population (mainly food, medicine, and other relief items), and financial support includes grants, loans, and loan guarantees, mostly provided to the government of ukraine. in addition to state monetary payments to the population, ukraine has agreed with international organizations such as unicef, unhcr , the world food program, the international committee of the red cross, and the international organization for migration to provide additional direct assistance to the most affected categories of ukrainians. support from the funds of these programs, totaling 9.6 billion hryvnias, will receive more than 2 million people from the most vulnerable categories, affected by the war, through monthly payments in the amount of 2200-2500 hryvnias for a period of 1-3 months (demchuk, 2022). such groups include large families, families raising children with disabilities, low-income seniors and others. each of the mentioned categories of people is agreed to be taken over by one of the international organizations, which provides them with a monetary payment (demchuk, 2022). the importance and directions of financial support from the first month of the invasion and hostilities are proved by the results of the sociological survey "financial support during the war", which was conducted from march 18 to 24 in cooperation with unicef. the results of this survey2, in which 5370 u-reporters aged 14-34 participated, were used to develop a financial assistance program for young people and families from ukraine who suffered from the russia attack (demchuk, 2022). as of march 24, almost half of the respondents (41.8%) were forced to leave their permanent residence in ukraine, of which 24.9% temporarily changed their current place of residence within ukraine, and 16.9% – temporarily settled in another country; 48.2% of respondents remained in their permanent place of residence in ukraine; others – 10% (demchuk, 2022). according to the analysis of the results after one month of war almost 40% of ukrainians needed material help, mainly in the form of food, more than 27% confirmed difficulties with accommodation, 19% suffered from the lack of medicines, 18% mentioned the need for clothes, more than 13% needed hygiene products, and problems with other necessities declared 10.7% of respondents. 82.4% of young people preferred to receive financial assistance in the form of humanitarian aid, and the rest 17.6% chose the form of goods and services. finally, taking into account the abovementioned results of the survey, 75.1% of respondents received help in the form of cash and non-cash options (cards), and 24.9% in the form of goods and services (demchuk, 2022). the absolute majority of respondents (96.1%) indicated that the assistance met their needs (fully – 51.5%; partially – 44.7%). respondents used the financial assistance to meet the following needs: food – 50.8%; charity – 26.9%; housing – 22.9%; hygiene products – 19.3%; clothing – 11.3%; relocation – 10%; medicines – 9.3%; community services – 6.6%; did not spend – 14% (demchuk, 2022). according to the european commission, as of august 11, 2022, the delivery of 66224 tons of aid in the form of goods from 30 countries to ukraine has already been coordinated through the eu civil protection mechanism (european pravda, august 8, 2022). among the latest offers of material aid to ukraine from eu members through the abovementioned mechanism are hospital beds and hygiene kits from austria, an ambulance and medical equipment from norway, shelter equipment from finland, personal protective equipment from germany, medicines from the czech republic and slovakia, power generators from italy and power supply equipment from france (european pravda, august 8, 2012). the eu and its member states also continue to support ukraine and its health system. in particular, 501.12 thousand doses of pfizer/biontech ultra frozen vaccine (adapted to the omicron strain) have already been delivered from sweden as part of the european vaccine distribution system, according to the eu mission in ukraine. in addition, poland plans to transfer about 1 million doses of the coronavirus vaccine, as well as 100 thousand doses of the vaccine against measles, mumps and rubella (european pravda, august 8, 2022). the given examples show that despite the significant negative consequences of such external factors as the covid-19 pandemic and the large-scale military aggression of the russian federation, the effects of humanitarian and financial 2 the u-report project is an interactive tool for conducting weekly topical surveys among teenagers and young people via facebook messenger, telegram, viber. the results of the surveys are used in the activities of government institutions, public associations and international organizations. u-report is conducted in 89 countries of the world and has more than 16 million participants. in ukraine, the number of u-reporters exceeds 103,200 and is constantly growing. during the 5 years of the project's existence, the u-report team launched more than 175 surveys on topical issues for young people and conducted more than 400 presentations and trainings across ukraine. this survey was conducted from march 18-24, 2022 in cooperation with unicef. 5,370 u-reporters aged 14-34 participated. baltic journal of economic studies 240 vol. 9 no. 2, 2023 aid from individuals, governments of various countries and international financial organizations gave ukrainians an opportunity to persevere, maintain the essential conditions of life, adapt to new difficult circumstances, develop plans for post-war reconstruction of ukraine and further improvement of welfare. 7. conclusions the systematic approach to assessing the welfare of an individual, a population and a country is based on a multidimensional definition, which is the essence of this concept, as it reflects the state and values of modern society, which are dynamically changing. in this context, the material component of welfare, which rightly constitutes its basic level and remains historically extremely important, today must be supplemented by immaterial, spiritual components, which outline the medium and higher levels of human welfare, the implementation and evaluation of which in practice still largely depend on successes at the basic level. modern assessments of the level of welfare of the population of ukraine are significantly influenced by internal macroeconomic factors, in particular inflation, unemployment, debt; level of social development, as well as external, global factors, crisis phenomena. understanding their interrelationships highlights the important role of state regulation of macroeconomic processes and implementation of the social quality management approach in the country, which directly affects the growth of the population's welfare by defining and implementing tasks to overcome cyclical or unpredictable economic shocks, as well as achieving strategic goals on the way to sustainable inclusive development. further scientific research will focus on the study of world experience and evaluation of the impact of macroeconomic policy instruments and the concept of social quality, which ensure the improvement of the country 's welfare. references: antezza, a., bushnell, k., frank, a., frank, p., franz, l., kharitonov, i., rebinskaya, e., & trebesch, c. 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(2022, august). united nations human rights monitoring mission in ukraine. available at: https://ukraine.un.org/sites/default/files/2022-08/ukraine%20-%20civilian%20 casualty%20update%20as%20of%2014%20august%202022%20eng.pdf ul haq, mahbub (1995). reflections on human development. new york: oxford university press. voluntary national review of progress towards achievement of the sustainable development goals in ukraine. available at: https://sustainabledevelopment.un.org/content/documents/26295vnr_2020_ukraine_report.pdf world bank (2018). the human capital project. world bank, washington, dc. available at: https://openknowledge. worldbank.org/handle/10986/30498received on: 09th of march, 2023 received on: 09th of march, 2023 accepted on: 23th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 49 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 o. m. beketov national university of urban economy in kharkiv, ukraine (corresponding author) orcid: https://orcid.org/0000-0002-4125-3931 2 v. n. karazin kharkiv national university, ukraine orcid: https://orcid.org/0000-0002-5535-8494 doi: https://doi.org/10.30525/2256-0742/2022-8-5-49-57 analysis of the current state and main trends in the real estate market of ukraine ihor biletskyi1, hanna doroshenko2 abstract. the subject of the study is the processes of the current state and the main trends in the real estate market of ukraine. methodology. the research was conducted using general scientific methods, in particular: theoretical generalization, methods of positive and normative analysis, statistical analysis. the goal is to analyze the processes of the current state and the main trends in the real estate market of ukraine. research conclusion. the main trends in the real estate market of ukraine are highlighted. the legal features ensuring the real estate industry are determined: restrictions and simplifications concerning the functioning of the real estate market. trends in the formation of real estate prices on the primary and secondary market are highlighted. the structure of the primary and secondary market by types of real estate planning and by types of housing was analyzed. it is emphasized that the buyers, as before the war, need compact quarters or mixed type of buildings of different floors, in which, in addition to housing, all necessary infrastructure is provided (grocery stores, cafes, pharmacies, schools, kindergartens, playgrounds, recreation areas, offices, etc.). however, due to the war, specific requirements are added to the standard ones, such as the safety of the complex, for example, the presence of underground parking adapted for bomb shelters, etc. the price of apartments has already increased, especially in hryvnia equivalent. the average price per square meter is higher than in february, 2022. the growth trend will continue in the post-war period. after all, the price is directly affected by the buying mood of customers, the weakening of the hryvnia against the dollar, the pace of construction recovery, and the remoteness of the region from hostilities. taking into account the rising cost of construction materials and complicated logistics, the price per square meter for new construction projects will increase significantly. in addition, new players are entering the real estate market, such as temporarily displaced persons who have adapted and plan to stay, workers who have moved due to company relocations, and investors who have decided to protect their investments. the significant slowdown in the pace of construction, the lack of new facilities, despite weak demand, will lead to a certain shortage of high quality residential projects and, consequently, a shortage of comfortable and liquid residential properties on the market. ukraine expects a decrease in the purchasing power of the population and, accordingly, a decrease in the opportunities to purchase real estate. the way to avoid these complications is the intervention of the state and local self government bodies, for example, communal housing, which will belong to the community, can be rented on a long-term basis to vulnerable sections of the population, immigrants and those groups of people who need it but cannot afford to buy it. key words: real estate, residential real estate, primary real estate market, secondary real estate market, new building, construction. jel classification: l10, l85, r31 1. introduction destroyed towns and villages, damaged residential and non-residential buildings, together with these destructive processes of continuous construction of new objects are a complex sphere of the ukrainian real estate market. armed military aggression and its terrible consequences are also reflected on the real estate market. more than one million ukrainian families have lost their homes: about 150,000 residential buildings have been destroyed. unfortunately, this number is increasing every day. in addition, there are other difficulties in the field of real estate that require detailed study to find ways for further solutions. predictive trends in the functioning of baltic journal of economic studies 50 vol. 8 no. 5, 2022 the real estate market, such as new buildings and secondary housing are given. the main researches in the field of the real estate market in the complicated, dynamic and uncertain period of the war in ukraine are carried out mainly by consulting and real estate companies. however, taking into account the fact that the real estate market is developing very dynamically and the uncertainty of the conditions due to military actions, it requires systematic research on the trends and prospects of its development. also in the legal regulation of the real estate industry, namely construction, dubious norms have been introduced that raise questions and can have both positive consequences and become a problem for the quality of new buildings: the requirements for the quality of building materials and the execution of construction activities have been simplified. in other words, one does not need a license to build now; it is enough to submit a declaration to the local government and obtain the right to build (the order is valid for the duration of the war and three months after its end). the purpose of the study is to analyze the current state and main trends in the real estate market in ukraine. 2. main trends of the real estate market in ukraine since april, 2022, the real estate market began to recover: namely, housing rentals began to grow actively. however, the residential rental market has undergone changes, the main feature of which is that a large number of people, who did not plan, had to rent out their apartments. such owners are more loyal in terms of prices, but they are demanding in the choice of tenants: the main requirements for them are the maintenance and care of the property. with the beginning of full-scale war, there was a need to protect information, so the state introduced certain restrictions, in particular, access to registers of property rights to real estate, registers of construction activities and public cadastral maps were closed. thus, for a certain period of time (namely, in the spring of 2022) there was no possibility to see information, sell, alienate, register ownership and perform other activities in the field of real estate. later, some functions were restored, but there are certain restrictions: the permission to perform material acts of alienation of real estate objects, as well as to perform state registration of rights, was granted not to all notaries, but to a limited list published on the website of the ministry of justice. in addition, there is a restriction on concluding sale and purchase agreements only if more than 30 days have elapsed since the state registration. in addition, a condition was introduced for the sale of real estate on the basis of a power of attorney: more than one month should have passed since its issuance (state registration of real estate and businesses: important updates in wartime, 2022). also, in the field of real estate regulation, the law "on guaranteeing rights to real estate objects to be built in the future" was adopted, according to which in order for the builder to be able to sell an apartment that has not yet been built, the investor must first register this object (i.e., the right to this apartment as an object of residential real estate) in the register of rights to real estate. thus, investors are protected from repeated resale. also, according to this law, the contract can be terminated with a full refund if the builder delays the commissioning of the building for more than 6 months (on guaranteeing property rights to real estate objects to be built in the future, 2022). another innovation, necessitated by the destruction caused by the war, is the creation of a register of damaged and destroyed housing. in this way, a census of property will be carried out for the possibility of state compensation for such property and housing in the future (fixing the destruction of private property by own means – clarification for municipalities, 2022). real estate is closely related to urban planning. there were also changes in this area, especially during the war period, and within a year after the end of the war, a rule was introduced regarding the permission to build premises without a building permit: individual, residential, garden, country houses, as well as buildings and structures not higher than two stories and on the area of up to 500 m² (some issues of the implementation of permit and registration procedures in construction under martial law, 2022). one of the most difficult stages of construction is the approval of urban planning conditions. today, if the architecture and construction authority does not issue or refuses to issue urban planning conditions within 10 days, on the eleventh day such conditions are considered not issued and a person can build without them without violating the law. the verkhovna rada of ukraine adopted the draft law no. 7683 "on amendments to the tax code of ukraine on taxation of transactions with real estate objects to be built in the future, 2022" to facilitate the population's access to new housing, reduce the tax burden on its acquisition, as well as to create transparent and balanced conditions for investment in real estate. baltic journal of economic studies 51 vol. 8 no. 5, 2022 3. analysis of the current state and prospects of the real estate market real estate prices continue to rise. the reason is not only the devaluation of the national currency, but also the destruction of the logistics system, internal agreements, problems with construction materials. in the short term, housing is becoming increasingly unaffordable, but a large number of builders are returning to work. thus, despite the difficult situation in ukraine, as of august 2022, almost half (about 42%) of new buildings continue or resume construction, which is 20% more than in the spring. however, more than 35% of new buildings have changed their commissioning dates. approximately 8% have completely stopped construction for the period of martial law, 2% were only engaged in restoration work. as for the positive dynamics, in august 2022 67% of sales departments of new buildings resumed their work, which is 17% more than in the spring, and already in october 2022 the share of working sales departments increased to 72%, i.e., the ukrainian market of primary real estate shows a clear trend of market recovery. most of them are located in cherkasy, ternopil and chernivtsi regions. most of them are new buildings of comfort class (more than 61%) (analytics of the ukrainian marketplace dom.ria, 2022). analyzing offers for active sale by types of housing on the primary real estate market, it can be outlined that in the summer ¾ of the market were residential complexes (74%, but compared to the spring, their share decreased by 7%), 15% of the primary market was occupied by townhouses (since the spring their number increased by 6%), 10% of the market of new buildings were cottages (2% more than in the spring) and 1% of business centers (by 1% less than in the spring) (figure 1). analyzing sales offers by type of layout, the majority of offers, almost half (namely 44%), were one-bedroom apartments; two-bedroom apartments – 39% of offers; three-bedroom apartments – 16%; only 1% of offers occupied more than three rooms (figure 2). the analysis of residential real estate prices on the primary market showed that the prices of 81% of new buildings increased in the summer, while the value of 16% of new buildings did not change at all. zakarpattia region is one of the leaders in the growth of prices for new buildings. a square meter in a one-room apartment can be purchased for 37.3 thousand hryvnia, which is 76% more than in 2021. the lowest average price per square meter in sumy region (16.3 thousand hryvnia). this is 13% more than last year (figure 3, table 1). in august 2022, the average cost of housing in the primary market of ukraine was 27,349 uah per 1 m², while in the secondary market it was 35,833 usd, according to the analysis of the ukrainian marketplace dom.ria. however, considering certain regions, for example, kyiv at the end of august, the price starts at 41,803 hryvnia per 1 m² (figure 3, table 1). as for the secondary real estate market, if to compare the number of offers for sale in the spring and summer, positive dynamics can be observed in all the regions of ukraine. thus, in kyiv oblast, the number of offers increased by 814%. among the leaders there are also the city of kyiv with an increase of 821%, kirovohrad oblast – 928%, and poltava oblast – 880% (figure 4). the significant increase is due to the fact that there was a noticeable pause in the market in the spring due to a major invasion. the analysis of sales on the secondary real estate market by type of dwelling shows the following structure: 78% apartments, 13% houses, 4% commercial real estate and 4% other real estate (figure 5). housing complexes; 74% tenhouses; 15% cottage towns; 10% business centers; 1% one-bedroom; 44% two-bedroom; 39% threebedroom; 16% more than threebedrooms; 1% figure 1. active sales listings by housing type in the primary real estate market (analytics of the ukrainian marketplace dom.ria, 2022) figure 2. active sales offers by type of layout in the primary real estate market (analytics of the ukrainian marketplace dom.ria, 2022) baltic journal of economic studies 52 vol. 8 no. 5, 2022 0 10000 20000 30000 40000 50000 60000 70000 ipr ovi nn yts ia ob las t vo lyn pe tr o po r o a izh ttia b o las t v bl a ri vn e ast o bla st te rnosu my o b o bla st kh a pil o las t me lny tsrk iv ob las t ky i bla s kh ch erk as ch ern i c o y t o bla st he rni vts i o bla st hiv bl o b ast las t ov sk dn zh yto m zaz ak arp bla st yr o bla s o t n fr an kiz hia bla o st vs k bla iva lai v b od esa po lta o las t bl o ast ky iv ob lass t v o oh t bla st ky iv (ci rad ki ro my ko o lv iv o ty) bla st one-bedroom, two-bedroom, three-bedroom, four-bedroom and more figure 3. dynamics of the average real estate price on the primary market depending on the type of planning, uah for 1 m² (analytics of the ukrainian marketplace dom.ria, 2022) table 1 change in the average price on the primary real estate market depending on the type of planning (analytics of the ukrainian marketplace dom.ria, 2022) oblast one-bedroom two-bedroom three-bedroom four-bedroom and more vinnytsia oblast +25% +28% +22% +24% volyn oblast +23% +23% +22% +11% dnipropetrovsk oblast +25% +31% +31% -6% zhytomyr oblast +22% +28% +18% +21% zakarpattia oblast +52% +49% +34% +80% zaporizhzhia oblast +18% +21% +17% no apartments ivano-frankivsk oblast +38% +40% +40% +50% kyiv oblast +20% +21% +25% +45% kyiv (city) +20% +19% +20% +13% kirovohrad oblast +53% +43% +43% no apartments lviv oblast +34% +33% +37% +47% mykolaiv oblast +48% +55% +45% +47% odesa oblast +29% +24% +15% +56% poltava oblast +16% +20% +26% +37% rivne oblast +37% +33% +33% +19% sumy oblast -10% -15% -36% no apartments ternopil oblast +24% +24% +24% +21% kharkiv oblast +38% +17% no apartments no apartments khmelnytskyi oblast +32% +26% +26% +46% cherkasy oblast +16% +15% +10% +0% chernivtsi oblast +35% +38% +45% +45% chernihiv oblast -9% +1% +23% no apartments the average price of a one-bedroom apartment on the secondary market in ukraine is usd 35,833. in kyiv, for example, the average cost of a one bedroom apartment is usd 80,585, and a threebedroom apartment is usd 117,470. another trend is the increase (and in some cases decrease) in the demand for real estate in cottage towns. in the western regions of ukraine, at the beginning of the war, demand fell by 20-79%, but in zakarpattia, lviv and ivano-frankivsk oblasts it recovered; there is a demand for cheap townhouses with repairs among immigrants from kharkiv and mykolaiv oblasts. in central ukraine the demand decreased from 50 to 70%. the analysis of several districts of kyiv oblast showed that the demand in brovarsky and boryspilsky districts decreased from 20% to 80%, and in vasylkivskyi it decreased by 100%. this is due to the fact that many cottage towns of the "cottage" type are being built in this area, which are very expensive and currently not in demand (country real estate portal zagorodna.com, 2022). baltic journal of economic studies 53 vol. 8 no. 5, 2022 there is also a lot of pent-up demand in this market: buyers are waiting for the market to crash and prices to fall in order to invest profitably. it is obvious that in conditions of war and uncertainty people are afraid to invest in houses. for example, in the ivano-frankivsk region the cost of 1 square meter is 118%. this is due to the fact that near bukovel there are many cottage towns with high prices in the region (figure 7). the cost of housing in cottage towns depends on the type of property (figure 8). in addition, a further decrease in demand and cost of real estate in suburban cities is predicted. among the reasons, there is high competition among developers of suburban real estate in cities with population over one million and their suburbs, a decrease in real incomes of ukrainians, lack of mortgage lending on the primary market in the suburban real estate segment, a decrease in solvent demand (country real estate portal zagorodna.com, 2022). according to experts, the volume of the pre-war real estate market was 3-4 billion dollars per year. in addition, the additional housing needs as a result of the war are estimated at about $50 billion. and with only internal resources, the reconstruction of the country will take decades. therefore, the most expedient way of development is cooperation with international funds and organizations. today there is already active cooperation with international and national funds, especially from the usa. cooperation is carried out in two main directions: 1) state funds – grants from the american government for projects that will be carried out in ukraine regarding the restoration of various categories of buildings: residential, private and apartment buildings; kindergartens, schools, hospitals. funds will be the recipients of grants, which will be issued on a competitive basis. there is information that at this time state funds cannot provide aid to ukraine, because the hostilities have not yet ended. funds can apply, but the implementation of projects will take place only after the end of hostilities or some other solution is found. 2) grants from private foundations and foundations created to support ukraine, with much smaller 92 8% 88 0% 82 1% 81 4% 58 0% 50 3% 43 7% 36 2% 32 9% 31 6% 28 5% 25 0% 20 9% 20 6% 20 2% 17 9% 16 7% 15 9% 12 0% 82 % 81 % 61 % 0% 100% 200% 300% 400% 500% 600% 700% 800% 900% 1000% ki rov oh rad o bla st po lta va o bla st ky iv (ci ty) vi nn yts ia ob las t vo lyn o bla st dn ipr op etr ov sk o bla st zh yto my r o bla st za ka rpa ttia o bla st za po riz hz hia o bla st iva no -f ran kiv sk o bla st ky iv ob las t lv iv ob las t m yk ola iv ob las t od esa o bla st ri vn e o bla st su my o bla st te rno pil o bla st kh ark iv ob las t kh me lny tsk yi ob las t ch erk asy o bla st ch ern ivt si ob las t ch ern ihi v o bla st figure 4. dynamics of price changes on the secondary real estate market (difference between spring and summer 2022) (analytics of the ukrainian marketplace dom.ria, 2022) apartments; 79% houses; 13% commercial real estate; 4% other real estate; 4% figure 5. active sales listings by housing type on the secondary real estate market (analytics of the ukrainian marketplace dom.ria, 2022) baltic journal of economic studies 54 vol. 8 no. 5, 2022 0 20000 40000 60000 80000 100000 120000 140000 v in ny ts ia o bl as t v ol yn o bl as t d ni pr op et ro vs k o bl as t z hy to m yr o bl as t z ak ar pa tti a o bl as t z ap or iz hz hi a o bl as t iv an ofr an ki vs k o bl as t k yi v o bl as t k yi v (c ity ) k ir ov oh ra d o bl as t l vi v o bl as t m yk ol ai v o bl as t o de sa o bl as t po lta va o bl as t r iv ne o bl as t su m y o bl as t t er no pi l o bl as t k ha rk iv o bl as t k hm el ny ts ky i o bl as t c he rk as y o bl as t c he rn iv ts i o bl as t c he rn ih iv o bl as t one-bedroom, two-bedroom, three-bedroom figure 6. dynamics of the average real estate price on secondary primary market depending on the type of planning, usd (analytics of the ukrainian marketplace dom.ria, 2022) 14820 14588 20726 13160 24540 18658 23679 25753 33519 11960 18311 19797 33406 23627 13132 13747 10435 30393 14386 16051 14499 15828 27661 26827 32602 19559 39563 26415 51834 36511 44067 25506 24461 34298 32968 34411 21735 22306 17868 33616 23036 26799 32524 21700 kyiv oblast ivano-frankivsk oblast zaporizhzhia oblast zakarpattia oblast zhytomyr oblast dnipropetrovsk oblast volyn oblast vinnytsia oblast kyiv (city) chernihiv oblast chernivtsi oblast cherkasy oblast khmelnytskyi oblast kharkiv oblast ternopil oblast sumy oblast rivne oblast poltava oblast odesa oblast mykolaiv oblast lviv oblast kirovohrad oblast january august figure 7. price comparison in cottage towns of ukraine ( january-august 2022), uah for 1 m² (country real estate portal zagorodna.com, 2022) amounts. it is likely that money from such organizations will be directed to small towns and villages for the implementation of projects in one area. or the fund will be responsible for a certain direction. for example, it will sponsor the replacement of damaged windows and doors. there is still no general vision of regulation of these processes. the only requirement that international partners already have is the reliability of the funds through which the projects will be implemented. these are either funds with a history, or funds that have passed an audit, or funds that work in partnership with government agencies. in addition, in the near future a new major buyer will appear on the residential real estate market of ukraine, the state, which will buy and rent baltic journal of economic studies 55 vol. 8 no. 5, 2022 apartments for ukrainians who lost their homes during the war. the issue of housing will be particularly acute after the end of the war in ukraine. the significant slowdown in the pace of construction, the lack of new facilities, and the weak demand will lead to a certain shortage of high-quality residential projects and, accordingly, a shortage of comfortable and liquid residential real estate on the market. ukraine expects a reduction in the purchasing power of the population and a decrease in the opportunities to purchase real estate. in addition, hundreds of thousands of ukrainians are already in need of new housing due to the destruction of housing stock as a result of the war. unfortunately, they cannot afford to buy it right now, not to mention the rising prices. the way out of such a situation is the intervention of the state and local self-government bodies, for example, communal housing, which will belong to the community, can be rented on a long-term basis to vulnerable sections of the population, immigrants and those groups of people who need it but cannot afford to buy it. local governments will have a tool to influence the rental market by regulating rental prices and, to some extent, the cost of primary housing. local governments will be able to purchase such municipal real estate objects on the modern market with the help of state guarantees or inter national grants, which will give a certain chance to revive the market itself. the second direction, which also requires the participation of the state, is the mortgage or housing lease. today there are some similar programs in the youth credit fund, which work quite successfully, although they have a great lack of funding. security is the main factor that will influence the recovery of the real estate market in the early stages. new categories of buyers are emerging in the western regions of ukraine, which will have a direct impact on the market's recovery (figure 9). in this regard, the real estate market in the western regions of the country will recover quickly enough, in kyiv it will, but only after the security problem is solved. in other regions, especially those affected by shelling, the recovery of the real estate market will depend on the future confidence of the people living there and (very importantly) the support of the state. since october, 2022, the state program "yeoselia" is gaining momentum. it is about the opportunity to get housing in a mortgage at 3% per annum. in 2022 it can be used by military personnel and law enforcement officers, teachers, scientists and doctors. to get a mortgage for housing, it is necessary to apply to banks that cooperate with the state in this program. there are a number of requirements for applicants. in particular, the area for one person is no more than 52.5 m2 of the total area, and additional 21 m2 for each subsequent family member. 0 10000 20000 30000 40000 50000 villa quadrex duplex cottage townhouse figure 8. prices in different types of real estate in cottage towns (august, 2022), uah for 1 m² (how much is housing in cottage towns of ukraine now (infographics), 2022) new categories of buyers that will directly affect the recovery of the real estate market in ukraine temporarily displaced persons who have lived in new cities for an extended period of time, have adapted and are now ready to continue their lives here and have the resources to do so. employees of companies that have relocated to western ukraine. investors who want to own apartments in western ukraine because of the security factor. figure 9. new categories of buyers that will directly affect the recovery of the real estate market in ukraine baltic journal of economic studies 56 vol. 8 no. 5, 2022 the eoselya program is implemented by the ministry of economy of ukraine together with the ministry of digital transformation and ukrfinzhitlo. in general, it is very difficult to predict the development of the real estate market in ukraine, because very contradictory trends are observed. for example, according to the survey data, in april 64% of ukrainians planned to live in their native cities after the end of the war, and already in august the number of such people decreased to the figure of 56%; 28% of respondents in april planned to live in another city of ukraine, and in august such people made up 35%; about 8-9% of respondents plan to live abroad (figure 10). in modern transformational conditions the organizational structure, powers and, accordingly, requirements to bodies of public administration and local government change significantly. in front of regions other than ensuring economic and social functioning at the proper level, there is a new range of tasks of promoting sustainable economic and social development areas, innovation and transition to new models of resource use based on their effective reproduction, economic use and environmental safety (irtyshcheva, pavlenko, boiko et al., 2022). for almost three years, the world economy has been recovering from the effects of the coronavirus 64% 28% 8% 56% 35% 9% in one's hometown in another city of ukraine abroad april august figure 10. results of a survey of ukrainians regarding their place of residence after the end of the war (analytics of the ukrainian marketplace dom.ria, 2022) pandemic, as has the economy of ukraine. unexpectedly, at the turn of the twenty-first century, the neighboring country attacked to seize large swaths of territory, leading to the ukrainian defense of its lands. russia's war against ukraine led to the transition to a war economy. developed countries have supported ukraine in the fight against the aggressor by imposing a significant number of sanctions, which is a record. the imposition of sanctions has affected both the aggressor's economy and the world economy as a whole (irtyshcheva, kramarenko, sirenko, 2022). 4. conclusions in general, demand trends will not change radically: buyers, as before the war, will need compact neighborhoods or mixed-use buildings with different levels, where, in addition to housing, all the necessary infrastructure is provided (grocery stores, cafes, pharmacies, schools, kindergartens, playgrounds, recreational areas, offices, etc.). however, due to the war, specific requirements will be added to the standard ones, such as the security of the complex, for example, the presence of underground parking adapted for bomb shelters, etc. the price of apartments has already increased, especially in hryvnia equivalent. the average price per square meter is higher than in february. in the post-war period, the growth trend will continue. after all, the price is directly affected by the buying mood of customers, the weakening of the hryvnia against the dollar, the pace of construction recovery and the remoteness of the region from hostilities. add to this the rising cost of building materials and complicated logistics, and the price per square meter for new construction projects will increase significantly. in addition, new players are entering the real estate market, such as temporarily displaced persons who have adapted and plan to stay, workers who have been displaced due to company relocations, and investors who have decided to protect their investments. references: state registration of real estate and business: important updates in wartime (2022). available at: https://biz.ligazakon.net/news/210389_derzhrestratsya-nerukhomost--bznesu-vazhliv-onovlennya-u-vyskoviy-chas on guaranteeing property rights to real estate objects that will be built in the future: law of ukraine no. 2518-ix dated august 15, 2022. available at: https://zakon.rada.gov.ua/laws/show/2518-20#text fixing the destruction of private property by own means – clarification for communities (2022). available at: https://decentralization.gov.ua/news/15206 some issues of the implementation of permit and registration procedures in construction under martial law: cabinet resolution no. 722 of 06/24/2022. available at: https://ips.ligazakon.net/document/ v iew/kp220722?utm_source=b i z .l igazakon.net&utm_med ium=new s&utm_content=b i zpress02&_ ga=2.17215610.235268528.1672476207-2059458898.1671782379 draft law on amendments to the tax code of ukraine on taxation of transactions with real estate objects to be built in the future no. 7683 dated august 18, 2022. available at: https://itd.rada.gov.ua/billinfo/bills/ card/40262 analytics of the ukrainian marketplace dom.ria (2022). available at: https://dom.ria.com/uk/ baltic journal of economic studies 57 vol. 8 no. 5, 2022 country real estate portal zagorodna.com (2022). available at: 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(2019). ltv policy as a macroprudential tool and its effects on residential mortgage loans. journal of financial intermediation, vol. 37, pp. 89–103. zhang, b. (2020). social policies, financial markets and the multi-scalar governance of affordable housing in toronto. urban studies, vol. 57(13), pp. 2628–2645. received on: 10th of october, 2022 accepted on: 25th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 256 vol. 3, no. 4, 2017 corresponding author: 1 department of finance, ivano-frankivsk national technical university of oil and gas. email: i.fadyeyeva@gmail.com 2 department of finance, ivano-frankivsk national technical university of oil and gas. email: oksankagr@gmail.com fuzzy modelling in risk assessment of oil and gas production enterprises’ activity iryna fadyeyeva1, oksana gryniuk2 ivano-frankivsk national technical university of oil and gas, ukraine abstract. the purpose of the article is to develop a fuzzy model of assessment of risks of activities of oil and gas production enterprises. methodology. due to a large number of factors, influencing the probability of risk occurrence, and in order to obtain a comprehensive indicator during the research, we have applied a fuzzy cascade model of the mamdani type. research results. in the conditions of instability and constant uncertainty of oil and gas production processes, identification and forecasting of the occurrence of risks of operations of oil and gas production enterprises by traditional mathematical methods of modelling provide no required reliability and accuracy of forecasting. in this regard, we propose an integral assessment and application of the fuzzy logic methodology for obtaining the required results for the adoption of effective managerial decisions. despite the complexity of the mathematical apparatus, risk assessment on the basis of the theory of fuzzy sets makes it possible to create a sufficiently flexible model, which will operate with a large number of input arguments and give as a resultant variable a value, which can be considered to be objective with some degree of approximation. practical importance. the step-by-step addition of each group of risk factors to the model allows obtaining reliable results of the probability of occurrence of risk events on a real-time basis, which significantly reduces the company’s losses. value/originality. according to the results of the research, the mamdani-type fuzzy cascade model of the assessment of risks of the activities of the oil and gas production enterprises is developed for the first time. key words: risk assessment, risk factors, fuzzy logic, uncertain data, oil and gas production enterprise. jel classification: c63, g32 1. introduction the oil and gas production enterprise is a typical example of a complex system. the complexity of the management of such an enterprise, in particular, the management of risks, associated with the activities of this entity, is due to the fact that it is a dynamic system with a set of ambiguous data. according to m.v. nikolaichuk, the dynamic nature of the enterprise’s operating environment and internal business processes requires management to make managerial decisions, primarily in a context of uncertainty, which, in the current market, contributes to the implementation of risk factors (nikolaichuk, 2013). in this regard, there is an objective need to implement the risk controlling system into the enterprise management system. the risk controlling system should ensure the adaptation of enterprise to changing internal and external conditions while maintaining certain stability and ensuring stable operation (yakupova & magomedova, 2008). we consider risk controlling as a controlling subsystem, designed to provide the risk management of the company with the relevant information on risks, to develop a methodology, which is optimal for the analysis and assessment of enterprise risks by risk management system in order to support management in the process of making operational and strategic decisions. the main difficulty in assessing the risk is the heterogeneity of the input data on the current state of the equipment (underground and ground), information on maintenance, the environmental consequences of oil production, etc. the task becomes significantly complicated by the dynamics of risk-forming factors, which determine the current level of risk of the activities of the oil and gas production enterprise. analysis of modern methods of risk assessment has shown that there is a need to develop models for assessing the risks of the enterprises’ activities, which could take into account the uncertainty and vagueness of information on key risk-forming factors, the limitations of statistical information, expert opinion, etc. first of all, when assessing the risks of an enterprise, it is required to investigate the dependencies between risk factors. statistical methods for the determination of dependencies are used when there is statistical data for baltic journal of economic studies 257 vol. 3, no. 4, 2017 past periods, expert methods are used when there is no statistical information available. if there is no statistical data to describe certain risk factors or it is difficult to determine the dependencies between them in the form of a mathematical model, it is offered to use fuzzy logic apparatus for its assessment (babak, 2008). fuzzy logic tools make it possible to assess the level of risk on the basis of quantitative and qualitative indicators, expert knowledge; use fuzzy input data; describe the indicators, the values of which are continuously changing in time; take into account the nonlinearity of development of processes; not clearly formulate the assessment criteria. due to the facts mentioned above, the necessity for the formation of the model of assessment of risk level of oil and gas production enterprises on the basis of the fuzzy logic inference algorithm is justified, which, in our opinion, is one of the tasks of its risk controlling system. the primary task in the formation of the risk assessment model is to determine the list of input factors. 2. identification of risks and risk-forming factors the occurrence of risks is possible upon the availability of causes (processes, phenomena), which contribute to its occurrence. such phenomena are usually named as risk-forming factors. based on the analysis, we identified six groups of risks of activities of oil and gas production enterprises and its respective risk factors (gryniuk, 2016). it is obvious that the given list of risk-forming factors does not pretend to be absolutely correct and complete. in addition, it fully reveals the possible causes of the occurrence of risk events at oil and gas production enterprises in comparison with those, which can be found in research works of scientists in this area of research. expert assessment is carried out for quantitative assessment and analysis of the impact of factors on the level of risk of the enterprise’s activities. experts have determined the probability of the occurrence of a riskforming factor and the level of negative consequences caused by it (gryniuk, 2016). for the purpose of reliable determination of significant and screening of nonsignificant factors of specific risks of the activities of oil and gas production enterprises, a full factorial experiment of 2k type is used. according to the results of the experiment, 11 non-significant factors are identified; it is suggested to exclude it from the risk assessment model of the activities of oil and gas production enterprises. other factors are the input variables of the model, formed on the basis of the fuzzy set theory. 3. fundamentals of application of fuzzy logic for risk assessment it should be noted, that the potential of working with the fuzzy logic mechanism has not yet been achieved in the field of risk assessment of oil and gas production enterprises, thus, in our opinion, its application is relevant. in the source (zadeh, 1976), the fuzzy model is represented as a set of linguistic rules, each of which is defined using the tuple <t, u, x, y, i, f>, where t is the set of linguistic terms, u is the set of universes of fuzzy variables, x is the set of input data, y is the set of initial data, and i is the method of fuzzy implication, f is the methods of fuzzification and defuzzification. according to the methodology of the theory of fuzzy sets and fuzzy logic, data flows undergo the appropriate processing – fuzzification and defuzzification (fig. 1). y output variable expert knowledge mechanism of fuzzy transformation of input data and expert knowledge into a risk assessment indication registration signalling rule database fuzzification inference defuzzification data processing instruction 𝑥𝑥𝑥𝑥1 𝑥𝑥𝑥𝑥2 𝑥𝑥𝑥𝑥𝑛𝑛𝑛𝑛 . . . input data x 𝑥𝑥𝑥𝑥𝑖𝑖𝑖𝑖 µ𝑥𝑥𝑥𝑥𝑖𝑖𝑖𝑖 µ𝑦𝑦𝑦𝑦𝑖𝑖𝑖𝑖 𝑦𝑦𝑦𝑦𝑖𝑖𝑖𝑖 fig. 1. components of controller with fuzzy algorithm: x1 , y1  – membership functions x1 , y1 respectively source: developed by the author on the basis of leonenkov, 2005 baltic journal of economic studies 258 vol. 3, no. 4, 2017 in the source (leonenkov, 2005) it is stated that several algorithms are proposed to obtain conclusions in systems of fuzzy inference, the description of which is based on the division of the output process by a series of successive stages: 1. formation of the rule database of fuzzy inference systems. 2. fuzzification of input variables. 3. aggregation of sub-conditions in fuzzy conditionaction rules. 4. activation or composition of sub-conclusions in fuzzy condition-action rules. 5. accumulation of conclusions of fuzzy conditionaction rules. 6. defuzzification of output variables. variables, used in fuzzy statements of the subconditions of fuzzy inference rules are named as input linguistic variables, in its turn, variables, used in statements of sub-conclusions, are named as output linguistic variables. the corresponding term sets and membership functions must be given to each variable. the information at the input is transformed so that the tasks of linguistic variables allow defining a control rule and a linguistic variable, which corresponds to the output value of the fuzzy controller. input information processing consists of the following basic procedures: – fuzzification, that is, the determination of linguistic variables x and its membership functions μ(x), where x is a continuous base variable; х ∈ х; 0 ≤ μ(х) ≤ 1; – interference, that is, the determination of control rules and linguistic variable corresponding to the signal at the output; – defuzzification, that is, the transformation of linguistic variables at the output into a continuous signal. when using the fuzzy set theory, selection of membership functions is very important. the main types of membership functions are piecewise linear (triangular, trapezoidal), z-shaped, s-shaped, and p-shaped membership functions. for the formation of a fuzzy model of risk assessment of activities of oil and gas enterprises, we have chosen a triangular membership function because it requires only three parameters to be determined, and it is calculated faster than the membership functions of other types. it should be noted that the above stages of fuzzy inference can be implemented in an ambiguous way since it includes separate parameters, which must be fixed or specified. thus, the choice of specific variants of the parameters of each stage determines an algorithm, which fully implements the fuzzy inference in the systems of fuzzy production rules (leonenkov, 2005). as yet, several algorithms of fuzzy inference have been proposed: mamdani, tsukamoto, sugeno and larsen. the formation of the rules database is proposed to be carried out based on the mamdani algorithm. the choice of mamdani’s fuzzy inference system is explained by the ease of interpretation of the membership functions using the linguistic variables and by the obtaining of clear number output (seredyuk, 2011). 4. generation of fuzzy models based on experimental data data for logical processing is received from both fuzzification in the form of justified fuzzy ranges of controlled values of input factors, and from the rule database, that is, from the user (fig. 1). data is received from the user as a set of logical rules of the mamdani type, which have the following structure: r if a a a then b b bn m: , , , , , ,� � �1 2 1 2…( ) …( ) , where a a an1 2, , ,⊃ � – antecedent; n – number of input variables; b b bm1 2, , ,⊃  – consequent, m – number of output variables. the number of terms, used to assess the risk factors, is taken to be equal to three, namely: h  – “high”, m  – “medium”, l – “low”. the total number of individual fuzzy rules n in the rules database is determined by the product: n l l= ×1 2 , where l l1 2,  – number of terms of output data x x1 2, . we take the number of terms for each input variable to be l1 = l2 = 3, then n = 9. the number of linguistic variables for the output value ys is equal to three. the initial point for the development of the appropriate mamdani-type rule database is a linguistic description of the process of risk formation of the production and economic activity of oil and gas production enterprises in the context of the uncertainty of the business environment. the rules directly describe the dependence of the level of risk (rr) on changes in risk factors at oil and gas production enterprises. the general form of the set of fuzzy rules r k nk( ) = …, , , ,� � �1 2 is as follows (shtovba, 2007): r if x is a and x is a and and x is a thenk k k n n k( ) …: � � � � � � � � � � � �1 1 2 2 y isb and y isb and and y isbk k m m k 1 1 2 2� � � � � � � � � �� ⊃ , where r k nk( ) = …( )� � � �1 2, , ,  – k-th rule; ai k , bj k   – linguistic terms  – fuzzy subsets, which are defined by the piecewise linear triangular membership functions, a x r i ni k i� � � � �, , , , ;= …1 2 b y r j mj k j� � � � �, , , ,= …1 2 ; x x xn1 2, , ,� �⊃  – input variables of the linguistic model, in particular � � � � � � �x x x x x x xn t n1 2 1 2, , , , , ,…( ) = … , y y ym1 2, , ,� �⊃   – output variables of k-th rule, in particular y y y yy y ym t m1 2 1 2, , , , , ,� � � � �…( ) = … , r – the set of real numbers. baltic journal of economic studies 259 vol. 3, no. 4, 2017 let us also assume that ai k , bj k are numbered. the symbols x i ni, , , ,� � �= …1 2 and y j mj, , , ,� � �= …1 2 are respectively marked spaces of the input and output variables. the rules contain expert knowledge of what to do if one of the properties, formulated during fuzzification, has become valid. the results are combined (aggregated) by the operators and and or . the operator “and” (conjunction) is determined by the following relation: µ µ µx and x x xx min x x1 2 1 2� � �( ) = ( ) ( ){ }; , (1) and operator “or” (disjunction) is determined by the following relation: µ µ µx or x x xx x x1 2 1 2� � � �( ) = ( ) ( ){ }max ; . logical conclusion will be performed according to the first relation. for the investigated object (oil and gas production enterprises), there have been proposed the spaces of input variables (risk factors) and output variables (risk levels), containing the finite set of linguistic terms with triangular membership functions (trimf), the triangular membership function has the following analytic expression (shtovba, 2007): µ x x aàáîx c x a b a a x b c x c b b x c ( ) = ≤ ≥ − − < ≤ − − < <          0, , , , , , � � � � � (2) where (a, c) is the fuzzy set carrier  – a pessimistic estimation of the fuzzy number; b is the maximum coordinate – optimistic estimation of the fuzzy number. membership functions are built by the method of processing of expert information in the environment of fuzzy logic toolbox (matlab). the linguistic model for the risk detection system with n inputs and 1 output will be found as a set of linguistic rules with all possible combinations of fuzzy values in the antecedent. for this purpose, let us take that the specific rules r k nk( ) = …, , , ,� � �1 2 are interconnected by an operator “or” and it is taken into account that y y ym1 2, , ,� �⊃ are mutually independent. this allows using fuzzy rules with a scalar output for two input variables and one output variable in the following form: r if x is a and x is a then yisbk k k k( ) : � � � � � � � � �� �1 1 2 2 , (3) where b y randk nk i≤ = …� � � �1 2, , , . for linguistic terms � � �a l m hi k = { }, , and b l m hj k = { }, ,� � , the rule database of the mamdani-type will have the form shown in table 1. table 1 rule database of the mamdani-type rd(1) y(1) х1 l m h х2 l l l m m l m h h m h h based on the rule database, a linguistic model is formulated out of 9 rules: r(1): if x1 is l and x2 is l then y (1) is l, r(2): if x1 is m and x2 is l then y (1) is l, r(3): if x1 is h and x2 is l then y (1) is m, r(4): if x1 is l and x2 is m then y (1) is l, r(5): if x1 is m and x2 is m then y (1) is m, (4) r(6): if x1 is h and x2 is m then y (1) is h, r(7): if x1 is l and x2 is h then y (1) is m, r(8): if x1 is m and x2 is h then y (1) is h, r(9): if x1 is h and x2 is h then y (1) is h. the antecedents of the rules contain a set of conditions for the occurrence of risk factors, while the consequences contain conclusions about the level of risk. for cases, where the number of risk factors is more than two, the number of rules in the knowledge base can be reduced by identif ying the dominant input variables, non-dominant input variables and input variables for optimization. this is achieved by applying the cascade method (fig. 2) of the synthesis of rules. if for example, risk factors are equal to 4, then the rule database, which is given in table 2, should be supplemented by two rule databases: rd2 and rd3. table 2 rule database of the mamdani-type rd(2) y(2) y(1) l m h x3 l l l m m l m h h m h h 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅(1) 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅(2) 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅(3) 𝑥𝑥𝑥𝑥2 𝑥𝑥𝑥𝑥1 𝑌𝑌𝑌𝑌(1) 𝑌𝑌𝑌𝑌(2) 𝑥𝑥𝑥𝑥3 𝑥𝑥𝑥𝑥4 … 𝑌𝑌𝑌𝑌(3) 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅(𝑛𝑛𝑛𝑛) 𝑥𝑥𝑥𝑥𝑛𝑛𝑛𝑛 𝑌𝑌𝑌𝑌1 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅1 fig. 2. cascade method of formation of rule database rd 1( ) source: source: the authors’ own development baltic journal of economic studies 260 vol. 3, no. 4, 2017 table 3 rule database of the mamdani-type rd(3) y(3) y(2) l m h x4 l l l m m l m h h m h h based on the rule databases rd(2) and rd(3), a linguistic model is formulated out of 18 rules: r(10): if y(1) is l and x3 is l then y (2) is l, r(11): if y(1) is m and x3 is l then y (2) is l, r(12): if y(1) is h and x3 is l then y (2) is m, r(13): if y(1) is l and x3 is m then y (2) is l, r(14): if y(1) is m and x3 is m then y (2) is m, r(15): if y(1) is h and x3 is m then y (2) is h, r(16): if y(1) is l and x3 is h then y (2) is m, r(17): if y(1) is m and x3 is h then y (2) is h, r(18): if y(1) is h and x3 is h then y (2) is h, r(19): if y(2) is l and x4 is l then y (3) is l, (5) r(20): if y(2) is m and x4 is l then y (3) is l, r(21): if y(2) is h and x4 is l then y (3) is m, r(22): if y(2) is l and x4 is m then y (3) is l, r(23): if y(2) is m and x4 is m then y (3) is m, r(24): if y(2) is h and x4 is m then y (3) is h, r(25): if y(2) is l and x4 is h then y (3) is m, r(26): if y(2) is m and x4 is h then y (3) is h, r(27): if y(2) is h and x4 is h then y (3) is h. each rule of this knowledge base simulates one type of risk. the structure of the output fuzzy ranges is similar to the input ones, that is: the input variables are the probability of occurrence of the risk factor: “low”, “medium”, “high” and the degree of its negative impact: “insignificant”, “moderate”, “significant”; output data of inference – the level of risk: “low”, “medium”, “high”. the rules regulate the interrelation of the fuzzification data with the data of logical processing and are clear statements. operations if (condition) and then (action) works with fuzzy data, so, although the rule is clear, the result can only be fuzzy. that is, the data of logical processing is fuzzy data. operations over the data are carried out by operators, which convert the intermediate results into the actions of fuzzy outputs. by using the formulated risk detection rules, the value of the output variable y can be obtained. in this regard, it is required to use the function of the membership of the variable y in the set, created as a result of the logical conclusion operation over the sets, included in the rule system (5). the operation “and” in the rules (5) corresponds to the intersection of sets, and the result of applying all the rules corresponds to the operation of the union of sets (pupkov, egupov, & gavrilov, 2002). the membership function for the union of two sets, for example, m and l (rule r(2)), is as follows: µ µ µx x x x1 2 1 2∩ = ( )min , ,� � (6) i.e., each value of the function of the membership of intersection of the sets is equal to the smallest value of the two ones, placed in the expression (6) in the brackets (uskov & kuzmin, 2004). the membership function for the intersection of the same sets has the following form (uskov & kuzmin, 2004): µ µ µx x x x1 2 1 2∪ = ( )max ,� � . (7) the membership functions for each of the sets l, m, h, included in the fuzzy variable y in the rules (4) can be written as follows (rutkovskaya, pilinskiy, & rutkovskiy, 2006): � �µ µ µ µ r y x x y y x x1 1 1 1 1 2 1 1 1 1 2( ) ( ) ( ) ( ) ( ) ( )( ) = ( ) ( ) ( )( ){ }min ,min , ,, µ µ µ µ r y x x y y x x2 2 1 1 2 2 2 1 1 1 2( ) ( ) ( ) ( ) ( ) ( )( ) = ( ) ( ) ( )( ){ }min ,min , ,� (8) … … … … … … … … … … … …, µ µ µ µ r y x x y y x x9 9 1 1 9 2 9 1 1 1 2( ) ( ) ( ) ( ) ( ) ( )( ) = ( ) ( ) ( )( ){ }min ,min , .� in this case, each of the nine equations corresponds to one of the rules (4). the resulting membership function for y(1), obtained after applying all nine rules, has been found in accordance with (7) as a union of the membership functions of all rules (4): µ µ µ µ µr r r r ry y y y y 1 1 1 1 1 2 3 9 ( ) ( ) ( ) ( )( ) = ( ) ( ) ( ) …( ) ( ) ( ) ( )max , , , ,� � 11( )( ){ }. (9) the results of the inference are subject to defuzzification. having fuzzy ranges, it is required to get the result, which is clear for the computer and the user. the calculation of the variable y(1) at the output is made for each separate input variable, for which the membership function is µxi > 0. the logical conclusion is performed in accordance with the relation (1). the value of y(1) is calculated using the minimax method of “centroid” (mamdani method) or on the basis of the probabilistic interpretation of the theory of fuzzy sets, when the value y(1) can be obtained using the following formula by analogy with mathematical expectations (rutkovskaya, pilinskiy, & rutkovskiy, 2006): y y y dy y y y y y min max min max 1 1 1 1 1 1 1 1 1 ( ) ( ) ( ) ( ) ( ) = ( ) ( ) ( ) ( ) ( ) ( ) ∫ ∫ µ µ ddy 1( ) . (10) each rule database rd(i) forms information on the presence of risk r(yi), i = 1,2,..,6, i.e. r y y y y y y y1 1 2 3 4 5 6( ) ( ) ( ) ( ) ( ) ( ) ( )( ) = ∪ ∪ ∪ . (11) then, the assessment of risk r for oil and gas production enterprises, formed by each rule database rd (fig. 3), will be as follows: r y y y y y y y( ) = ∪ ∪ ∪ ∪ ∪1 2 3 4 5 6. (12) the criterion for the risk of production and economic activity of oil and gas production enterprises is the value r ∈ [0, 1]. the greater is the value of this criterion, the much more risk. risk factors are indicated by х1, х2,.., хn. then the model of risks of production and economic baltic journal of economic studies 261 vol. 3, no. 4, 2017 fig. 3. structure of inputs and outputs of the system of identification or risks of activities of oil and gas production enterprises source: the authors’ own development logic or risk assessment r r ∈ [0, 1] l m h 𝑌𝑌𝑌𝑌6 𝑌𝑌𝑌𝑌5 𝑌𝑌𝑌𝑌4 𝑌𝑌𝑌𝑌3 𝑌𝑌𝑌𝑌2 𝑌𝑌𝑌𝑌1 y factors of risk 0÷1 y6 y5 y4 risk analysis, selection and implementation of risk management techniques decision classes 𝐿𝐿𝐿𝐿1 𝐿𝐿𝐿𝐿2 𝐿𝐿𝐿𝐿3 block of logic output r ∈ [0, 1] 𝒇𝒇𝒇𝒇𝑹𝑹𝑹𝑹 𝒇𝒇𝒇𝒇𝒀𝒀𝒀𝒀𝟏𝟏𝟏𝟏 𝒇𝒇𝒇𝒇𝒀𝒀𝒀𝒀𝟐𝟐𝟐𝟐 𝒇𝒇𝒇𝒇𝒀𝒀𝒀𝒀𝟑𝟑𝟑𝟑 𝒇𝒇𝒇𝒇𝒀𝒀𝒀𝒀𝟒𝟒𝟒𝟒 𝒇𝒇𝒇𝒇𝒀𝒀𝒀𝒀𝟓𝟓𝟓𝟓 𝒇𝒇𝒇𝒇𝒀𝒀𝒀𝒀𝟔𝟔𝟔𝟔 𝑥𝑥𝑥𝑥1 𝑥𝑥𝑥𝑥2 𝑥𝑥𝑥𝑥3 𝑥𝑥𝑥𝑥4 𝑥𝑥𝑥𝑥5 𝑥𝑥𝑥𝑥6 𝑥𝑥𝑥𝑥7 𝑥𝑥𝑥𝑥8 𝑥𝑥𝑥𝑥9 𝑥𝑥𝑥𝑥10 𝑥𝑥𝑥𝑥11 𝑥𝑥𝑥𝑥12 𝑥𝑥𝑥𝑥13 𝑥𝑥𝑥𝑥14 𝑥𝑥𝑥𝑥15 𝑥𝑥𝑥𝑥16 𝑥𝑥𝑥𝑥17 𝑥𝑥𝑥𝑥18 𝑥𝑥𝑥𝑥19 𝑥𝑥𝑥𝑥20 𝑥𝑥𝑥𝑥21 𝑥𝑥𝑥𝑥22 𝑥𝑥𝑥𝑥23 𝑥𝑥𝑥𝑥24 𝑥𝑥𝑥𝑥25 𝑥𝑥𝑥𝑥26 𝑥𝑥𝑥𝑥27 𝑥𝑥𝑥𝑥28 𝑥𝑥𝑥𝑥29 y1 y2 y3 fig. 4. the hierarchical structure of the risk factors of production and economic activity of oil and gas production enterprises source: the authors’ own development baltic journal of economic studies 262 vol. 3, no. 4, 2017 activity of oil and gas production enterprises is presented as a functional mapping of the following form: x x x x rn= …( ) → ∈ [ ]1 2 0 1, , , , ,� � � (13) where х – vector of risk factors. the general hierarchical structure of the risk factors of production and economic activity of oil and gas production enterprises is presented in fig. 4 in the form of a logical conclusion tree. elements of logical conclusion: – the root of the tree  – the risk of production and economic activity of the oil and gas production enterprises in the conditions of the uncertainty of business environment (r); – terminal vertices – individual risk factors (х1, х2,.., х29); – non-terminal vertices (double circles) – convolutions of risk factors; – edges of a graph, originating from non-terminal vertices – initial variables of the rule database (y1, y2, y3, y4, y5, y6); – convolutions f f f f f f fy y y y y y r1 2 3 4 5 6, , , , , ,� � � � � �� are made by logical conclusion based on fuzzy knowledge bases of mamdani type. fuzzy model of risk assessment of production and economic activity of oil and gas production enterprises in conditions of the uncertainty of the business environment is realized by 7 systems of fuzzy conclusion: 1) y1  – fuzzy system of modelling of factors of production and technological risk; 2) y2 – fuzzy system for modelling of human influence as a risk factor; 3) y3  – fuzzy system of modelling of information risk factors; 4) y4 – fuzzy system of modelling of environmental risk factors; 5) y5 – fuzzy system of modelling of the geological risk factors; 6) y6  – fuzzy system of modelling of economic risk factors; 7) r  – fuzzy system of prediction of risk of oil and gas production enterprises. simulation modelling of the developed method of assessment of risks of oil and gas production enterprises is carried out by the software module fuzzy logic toolbox for matlaв 6.5. for visualization of mamdani’s fuzzy conclusion in the rule viewer and creation of “inputoutput” surfaces for the mamdani knowledge base in the surface viewer, when the number of input factors is 2 ÷ 6, a cascade model structure for the modelling of risks (fig. 5) and a simulation model have been created in matlab + simulinc (fig. 6). y5 x6 x5 x4 x3 x2 x1 y4 x5 y3 x4 y2 x3 y1 x2 x1 y3 x4 y2 x3 y2 x3 y1 x2 x1 1 y1 x2 x1 1 2 y1 x2 x1 1 2 3 1 2 3 4 y4 y3 y2 y1 1 2 3 4 5 fig. 5. cascade model structure for the modelling of risks source: authors’ own development fig. 6. a simulation model for investigating the risks of oil and gas production enterprises with the use of the cascade model structure baltic journal of economic studies 263 vol. 3, no. 4, 2017 figure 7 shows the visualization windows of “inputoutput” surfaces for the mamdani knowledge base in the surface viewer, obtained at the outputs of the simulation model scope 1, scope 2, scope 3, scope 4, scope 5. it should be noted that the model of assessment of risks of production and economic activity of oil and gas production enterprises is based only on expert data; therefore, there may be a discrepancy between the theoretical results of the fuzzy conclusion and the expert data. in order to ensure the higher accuracy of results, parametric identification of the fuzzy model must be carried out on the basis of experimental data of industrial researches. fig. 7. surfaces “input-output” for the mamdani knowledge base in the surface viewer, obtained at the outputs of the simulation model scope 1, scope 2, scope 3, scope 4, scope 5 source: the authors’ own development baltic journal of economic studies 264 vol. 3, no. 4, 2017 5. conclusions according to the results of our research, we have developed a cascade model of assessment of risks of activities of oil and gas production enterprises. in conclusion, we note several important points. firstly, the main advantage of this approach is that it can remove the restrictions on the number of input variables and effectively use both quantitative and qualitative estimates of input parameters, each of which can be obtained from an individual specialist. secondly, the fuzzy logic mechanism also allows taking into account the reliability and quality of the input information through the weight of the rules. despite the complexity of the mathematical apparatus, risk assessment on the basis of the theory of fuzzy sets makes it possible to create a sufficiently flexible model, which will operate with a large number of input arguments and give as a resultant variable a value, which can be considered to be objective with some degree of approximation. we consider it necessary to implement the developed model of risk assessment in the risk management system of oil and gas production enterprises. references: babak, i. n. 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(1996). fuzzy sets, fuzzy logic, and fuzzy systems: selected papers. edited by george j. klir & bo yuan. singapore; river edge, n. j.: world scientific. марина фадеева, оксана гринюк нечеткое моделирование оценки рисков деятельности нефтегазо добывающих предприятий аннотация. целью работы является разработка нечеткой модели оценки рисков деятельности нефтегазодобывающих предприятий. методика. в связи с большим количеством факторов, влияющих на вероятность наступления рисков и с целью получения комплексного показателя в работе нами применена нечеткая каскадная модель типа мамдани. результаты исследования. в условиях нестабильности и перманентной неопределенности процессов добычи нефти и газа идентификация и прогнозирование наступления рисков операционной деятельности нефтегазодобывающих предприятий традиционными математическими методами моделирования не дают необходимой достоверности и точности прогнозирования. в связи с этим нами предложено интегральное оценивание и применения методологии нечеткой логики для получения необходимых результатов для принятия эффективных управленческих решений. несмотря на сложность математического аппарата, оценивание рисков на основе теории нечётких множеств позволяет создать достаточно гибкую модель, которая будет оперировать большим количеством входных аргументов и давать в качестве результирующей переменной значение, которое можно считать объективным с некоторой степенью приближения. практическое значение. пошаговое добавление каждой группы риск-образующих факторов модели позволяет получить достоверные результаты вероятности наступления рисковых ситуаций в режиме реального времени, что значительно снижает убытки предприятия. значение/оригинальность. по итогам проведенного исследования впервые разработана нечеткая каскадная модель оценки рисков деятельности нефтегазодобывающих предприятий типа мамдани. baltic journal of economic studies 142 vol. 3, no. 4, 2017 corresponding author: 1 department of economy and enterprise, hrushevsky carpathian institute, interregional academy of personnel management. e-mail: galynaleshuk@gmail.com monitoring mechanism for investment development of regions’ infrastructure halyna leshuk1 hrushevsky carpathian institute, interregional academy of personnel management, ukraine abstract. the subject of the research is the theoretical and methodological principles of the monitoring mechanism of investment development of regions’ infrastructure. the objectives of the research are the generalization of theoretical and methodological bases of monitoring mechanism of investment development of regions’ infrastructure, as well as analysis of the current trends of investment development of the infrastructure in the regions of ukraine with the identification of positive and negative trends. methodology. the article deals with theoretical and methodological approaches to the definition of conceptual foundations of the mechanism of monitoring the investment development of the regions’ infrastructure with the help of general scientific methods of analysis: systematization and generalization, induction, and deduction. results. it is proposed to interpret a monitor of the investment development of the regional infrastructure (idri) as a systematic and complex measurement of the indicators of regional infrastructure development, the number of implemented investment projects, monitoring compliance with the developed strategic regional programs and concepts, which will ultimately help to effectively and efficiently regulate the detected deviations and passing the appropriate decisions. the idri monitoring mechanism should also provide a possibility of creating a system for collecting and analysing data concerning the assessment of infrastructure objects by the territorial community, which will allow potential investors to focus not only on analytical data on monitoring of regional authorities but also to take into account the public interest in a particular region. the general principles of the monitoring mechanism of investment development of the regions infrastructure are proposed in the following directions: complex and system monitoring and data collection concerning the development of the regions’ infrastructure, while the aggregate of indicators should reflect the change in the level of investment potential as a result of the implementation of measures and implementation of investment projects for the development of regions’ infrastructure; assessing the level of effectiveness of regional infrastructure functioning, using comparative analysis procedures – the concept of benchmarking, which will allow reducing costs of improvement processes accordingly, as the best experience of management of other territories is studied and evaluated in order to use the acquired knowledge in the activities of the authorities. conclusions. the researched theoretical and methodological principles of the monitoring mechanism of the investment development of the regions’ infrastructure enable to substantiate the necessity of implementation of complex and system monitoring of the functioning of the infrastructure complex and the investment potential of regions. the researched tendencies of investment development of the ukrainian regions’ infrastructure allowed establishing significant spatial asymmetries, which negatively affects the implementation of both national development strategies and regional programs and concepts. thus, the main directions of the monitoring mechanism of the investment development of the region’s infrastructure in the composition should be based on analytical observation not only of the regional authorities but also potential investors and the territorial community. practical meaning. on the basis of official static monitoring data of investment support and the level of development of the infrastructure complex of ukrainian regions, trends of investment development of the regions infrastructure are investigated in the article, which allows noting about significant territorial imbalances as a level of investment support, as well as the efficiency of the functioning of the regions infrastructure complex, and this determines the need for the development of comprehensive regional development programs and proper control over their implementation in relation to investment regional infrastructure support. the system implementation of the mechanism for monitoring over the investment development of the regional infrastructure will facilitate the adoption of effective management decisions for all participants in the process, namely, the territorial community, investors, and regional authorities, which will increase the investment attractiveness of regions and the development of the ukrainian regions’ infrastructure. key words: monitoring, infrastructure, investment development, mechanism, region. jel classification: r10, r58, е22 baltic journal of economic studies 143 vol. 3, no. 4, 2017 1. introduction in order to ensure efficient management of the monitoring mechanism for the investment development of the region’s infrastructure (idri) and the ability to monitor and correct the deviations in the implementation of regional programs and the planning of infrastructure projects in a timely manner, an effective feedback system should be developed through the implementation of monitoring and evaluation. monitoring is a constant process of gathering data about the process and indicators of the measures implementation, which may be achieved during the implementation of the management mechanism, implementation of infrastructure development programs adopted within this mechanism, implementation of infrastructure projects. data received during the monitoring process can be the basis for assessing the investing effectiveness in infrastructure objects of the regions within the mechanism. generally, two main types of monitoring are defined (lohutova, 2006): 1. situation monitoring allows you to establish and fix the situation in the investigated phenomenon or process. it also involves collecting information about general trends in infrastructure development, changes in state infrastructure policy, institutional changes, etc. 2. process monitoring represents the process of supervision over the implementation of the program (in whole or in part) and obtaining certain results for the short or long term. in the scientific literature, monitoring is a process of tracking or measuring what is happening in the infrastructure sector of a region, it is a combination of internal monitoring designed to check the degree of progress in selected strategic areas to the main goal of the management mechanism and the achievement of individual goals, and external monitoring that involves the collection of information for a wider context, such as: changes in the state legislation, state policy, the situation in industries and neighbouring regions that have a strategic significance for the infrastructure for this region, the trends and dynamics of the region’s social and economic development, institutional changes, etc., and ensures the implementation of the mechanism for managing the competitiveness of a region through the development of its infrastructure in accordance with the interests and capabilities of the stakeholders in the region (lohutova, 2006; manylich, 2005). thus, it is proposed to interpret a monitor of the investment development of the region's infrastructure (idri) as a systematic and complex measurement of the indicators of regional infrastructure development, the number of implemented investment projects, monitoring compliance with the developed strategic regional programs and concepts, which will ultimately help to effectively and efficiently regulate the detected deviations. the idri monitoring mechanism should also provide for the possibility of creating a system for collecting and analysing data based on the assessment of the effectiveness of the infrastructure objects functioning by the territorial community, which will ultimately enable to focus the potential investors not only on analytical data on monitoring of regional authorities but also to take into account real public opinion. 2. methodological approaches to regional development monitoring: indicators, criteria, and indexes the purpose of monitoring development, as milashovska o.i. (milashovs'ka, 2010) noted, is to provide a regional (joint) working group with a monitoring management tool. indicators are these indexes that monitor and determine the level of social and economic development and the level of progress in fulfilling the specific objectives of the joint strategy and the expected results achievement. indicators describe the results of the project in operationally measurable quantities. it should be noted that, for many economic processes, it is characteristic that changes from the influence of certain phenomena or factors do not appear immediately but become noticeable only after a certain period of time. in particular, most often the gross regional product acts as a unified indicator of the social and economic development of a region, which is under a significant impact of the investment volume attracted to a region. while selecting the criteria for the regional capacity monitoring, hrabánková m., svatošová l., boháčková i. (hrabánková m., svatošová l., boháčková i., 2005) noted that for the objective monitoring of regional development, it is not possible to make only a simple statistical analysis that characterize the criteria development, it is advisable to use a target method that would include the dynamics of observed development in certain objects of actual and time communication. this method can be called the process analysis or analysis of selected social and economic and demographic processes, which the authors have adequately tested on the basis of an analysis of structural changes that take place in the regions of the czech republic. while investigating the quantitative and qualitative characteristics of economic structure at the transcarpathian region, panko m. (pan'ko, 2014) has analyzed the indicators that can be used to assess the efficiency of the regional economy structure, justifying the possibility of optimizing the indicators of the economic component of the regional economy structure by developing a complex restructuring program for the production structure. adoption of rational administrative decisions in the field of regulation of regional development is baltic journal of economic studies 144 vol. 3, no. 4, 2017 impossible without monitoring organization of the state of social and economic development of the regions, as kozhanova e.p. (kozhanova, 2016) pointed. monitoring allows timely response to the problems that arose through the adoption of certain managerial decisions aimed at issues resolving. according to the authors’ thought, monitoring and assessment of the regions state should provide the application of indicators system that adequately and comprehensively characterizes the development of the regions, its certain territories and sectors, the living standards of the population, the demographic situation, and the attractiveness of the regions for investment attracting. the system of monitoring indicators and evaluation of the regions’ status matvienko p. suggests to group according to the following blocks: indicators of the efficient use of available resources in the region; indicators of social development; indicators of investment attractiveness of a region; indicators of ecological development (matviyenko, 2007). it should be noted that the author does not take into account the level of development and efficiency of the infrastructure complex functioning in the region, which greatly affects the overall social and economic development and investment attractiveness of the regions. the authors of the scientific research (burtseva t.a., aleshnikova v.i., dubovik m.v., naidenkova k.v., kovalchuk n.b., repetskaya n.v., kuzmina o.g., surkov a.a., bershadskaya o.i. & smirennikova a.v., 2016) have substantiated the procedures that ensure the implementation of statistical research and monitoring of investment development of russian regions. they have developed a methodological basis for assessing the investment development of the russian regions to ensure that their own resources are used more efficiently and aimed to achieve the goals of economic development while identifying the russian regions, which are “investment points” of growth and regions where investments are inefficiently used to achieve development goals. sokolov a.g. and others, (sokolov a.g.e., kvyatkovskaya i.y., & zimenkova a.e.e., 2011) emphasize the need to develop the preventive measures to change the investment risk, which is possible if an adequate information environment exists in a region, based on the operation of an information system for monitoring investment risks in the region. a  single regional information space creation should be one of the directions of development of investment infrastructure in the region and provide systemic risk management at all levels of the hierarchy, based on the integration of information resources of investment market participants. the development of a methodological approach that allows obtaining relevant information about a potential recipient of investment on an example of the agro-industrial complex in terms of its territory was investigated by manzhosova i.b. and others (manzhosova i.b., rodina e.v., dolgopolova a.f., shepet i.p., & ryabov v.n., 2016). the proposed approach is based on the diagnostics of the system of developed indicators of territories differentiation according to the level of their investment development. the authors formed the linguistic characteristics and economic interpretation of the selected classification groups, as well as a separate monitoring stage, which allows identifying a specific economic entity for investing money on the basis of the formation of investment passports of the potential recipients. the implementation of quantitative methods in regional analysis, according to gradea c. (gradea, 2013), can also provide an understanding of both changes in regional economic indicators and interdependencies between economic sectors, including the use of predictions to check the potential future development of a region. qualitative methods also allow explaining the causes of regional development in a region and improving the ability of analysts to reflect on the results and economic opportunities of the future based on collective experience, wisdom, and judgment of the regional economy subjects. the problem of effective control over territories in the context of regionalization of processes of social and economic development, as noted by usenko l. and others (usenko l.n., usenko a.m., uryadova  t.n., bashkatova t.y.a., & beliaeva s.v., 2017), includes the search for optimal forms, methods, and tools for obtaining the necessary information while decisions passing in the field of public administration. nowadays there are no common technical approaches for monitoring social and economic development as an effective tool for determining the degree of asymmetry of the development of mesoeconomic systems and assessing the impact of the implemented strategic programs. the authors of the research proposed a theoretical model for monitoring the social and economic development of a region, based on a set of interconnected basic components: functions, monitoring objects, and requirements for its realization and main goals. according to bobrysheva a.n. and others (bobryshev a.n., kazakov m.yu., 2011), the main tasks facing the monitoring of the effectiveness of regional social and economic systems functioning, are: search for ways and reserves to increase the rational use of all kinds of resources; identification of optimality of managerial decisions under the influence of crisis phenomena in certain industries and in regions of the economy as a whole; search for the relevant information for the purpose of implementing program-targeted activities at the level of a region or a separate territory; detection of the marginal utility of the interaction between individual business entities and other elements of the regional social and economic system; diagnostics of baltic journal of economic studies 145 vol. 3, no. 4, 2017 the results of infrastructure provision of specialization areas; analysis of the degree of social and economic effects of the development of individual territories and the region as a whole achievement; escalation of investment attractiveness of individual territories by increasing image and reputation characteristics of a region; production of relevant data to achieve maximum competitive advantage, oriented to the output of individual enterprises, within the framework of the identified growth points, to new geographic segments. the analysis of scientific developments regarding the development and implementation of the mechanism for the monitoring and evaluation of regions development indicates the dominant direction of research in the field of social and economic development and the practical absence of mechanisms for taking into account the level of infrastructure development in the regions or the effectiveness of their functioning, thus, the actuality of this research is to substantiate the necessity to formulate a process monitoring in the direction of investment support of infrastructure development of ukrainian regions. 3. monitoring results of the social and economic development of ukrainian regions during 2015–2016 the monitoring results of the social and economic development of the regions for 2016 in the direction of “investment development” (ministerstvo rehional'noho rozvytku, budivnytstva ta zhytlovo-komunal'noho hospodarstva ukrayiny) (in the list of evaluation indicators given in annex 2 to the resolution of the cabinet of ministers of ukraine dated on october 21, 2015 no. 856 “on approval of the procedure and methodology for monitoring and evaluation of the effectiveness of the implementation of state regional policy”), fig. 1, are based in particular on the following indicators of the direction: 1) capital investment index, percentages to the previous year; 2) the volume of capital investments (except of investments from the state budget) per head of population as an incremental result of the beginning of the year, uah; 3) the rate of growth (decrease) in the volume of direct foreign investment (share capital), percentage to the amount at the beginning of the year; 4) the volume of direct foreign investments per head as an incremental result of the beginning of the investment, usd. at the same time, the trends of the capital investment index during 2016 to the previous year by the regions indicate a positive dynamics in the odesa region, 63.4%; mykolaiv region, 47.6%; kirovohrad region, 47.0%. nevertheless, the negative dynamics is observed in ivano-frankivsk region, -34.7%; chernivtsi region, -14.1%; rivne region, -8.8%; transcarpathian region, -6.1%. according to the volume of capital investments (except for investments from the state budget) per head, as an incremental result of the beginning of the year, the city of kyiv is a leader –32922,5 uah and the absolute negative dynamics in luhansk region  – 1257,8 uah. the rate of growth (decrease) in the volume of direct foreign investments (share capital) is positively monitored in chernihiv region, 161.5% up to the beginning of the year, and absolutely negative in luhansk region, -14.6%. the volume of direct foreign investments (share capital) per head is growing at the beginning of the investment in positive dynamics in the city of kyiv – 7468,8 usd, and absolutely negative in ternopil region. – 45.8 usd. fig. 1. the monitoring results in the direction of “investment development” of the regions of ukraine for 2016 source: formed on the basis of data (ministerstvo rehional'noho rozvytku, budivnytstva ta zhytlovo-komunal'noho hospodarstva ukrayiny) baltic journal of economic studies 146 vol. 3, no. 4, 2017 monitoring of social and economic development of the regions for 2016 in the direction of “infrastructure development” (ministerstvo rehional'noho rozvytku, budivnytstva ta zhytlovo-komunal'noho hospodarstva ukrayiny) (in the list of evaluation indicators given in annex 2 to the resolution of the cabinet of ministers of ukraine dated on october 21, 2015 no. 856 “on approval of the procedure and methodology for monitoring and evaluation of the effectiveness of the implementation of state regional policy”) is presented in fig. 2 according to the following indicators of the direction: 1) the density of public highways with a solid coverage of state and local importance in a region, kilometres per thousand square kilometres; 2) the volume of cargo turnover of road and rail transport, thousand tons of kilometres per 1000 population; 3)  the proportion of urban households having access to the internet at home, as a percentage of the total number of such households; 4) the proportion of rural households with internet access at home, as a percentage of the total number of such households; 5) the rate of growth (decrease) in the volume of residential housing accepted, the percentage of the corresponding period of the previous year; 6) the total area of the housing stock per head, sq. meters. it should be noted that in the infrastructure development of the regions, the transport connection is a significant criterion, in particular, by the density of public highways with a solid coverage of state and local importance, lviv region occupies leading positions  – 376.2 cl. per thousand sq. cl.; negative trends are observed in the kherson region – 174.3 cl. per thousand sq. cl.; mykolaiv region – 194.5 174.3 cl. per thousand sq. cl.; chernihiv region – 226.7 cl. per thousand sq. cl. at the same time, the volume of cargo turnover of road and rail transport – the positive trends are in kirovohrad region – 21329,3 thousand of tons-cl. per 1,000 people and totally negative in luhansk region – 993,9 thousand tons-cl. per 1000 population; kherson region – 1081,9 thousand tons-cl. per 1000 population. the information value, in particular for potential investors, the indicator analysis of the share of urban households and rural households with internet access at home are the controversial issues in the report of the ministry of regional development, construction, housing and utilities of ukraine “monitoring of the social and economic development of the regions for 2016” by the direction of “infrastructure development” (ministerstvo rehional'noho rozvytku, budivnytstva ta zhytlovo-komunal'noho hospodarstva ukrayiny). the monitoring results of the regions both in the directions of “investment development” and “infrastructure development” indicate a significant spatial asymmetry of idri, which negatively affects the implementation of both national development strategies and regional programs and concepts. thus, the generalized comparative monitoring of the regions of ukraine by the directions of “investment development” and “infrastructure development” (figure 3) shows the following: the impairment of the financial position of producers and the lending reduction; insufficient institutional provision of investment policy in the regions; imperfection of tools for disclosing the internal potential of the regions through regional strategies; the decline of the volumes of investment attractiveness due to the impairment of the social and economic situation in the country and the decline in the investment attractiveness of the regions of fig. 2. the monitoring results in the direction of “infrastructure development” of the regions of ukraine for 2016 source: formed on the basis of data (ministerstvo rehional'noho rozvytku, budivnytstva ta zhytlovo-komunal'noho hospodarstva ukrayiny) baltic journal of economic studies 147 vol. 3, no. 4, 2017 eastern ukraine through the conduct of hostilities on their territory; inefficiency of separate instruments of capital projects financing; low efficiency of investment distribution, and low return on investment. 4. general principles of monitoring mechanism of investment development of the regions’ infrastructure (idri) i. complex and system observation and data collection of idri. for the analysis of the development level of the infrastructure complex of the regions and investment activity, the objective indicators are required, the source of which should be a monitoring system, built on the modern systems of accounting, collection, storage, and processing of data. during idri monitoring, there is a need to obtain information, which is representative of various infrastructure objects and potential investors. the developed set of indicators should reflect the change in the level of investment potential as a result of the implementation of measures and implementation of investment projects for the development of regional infrastructure. ii. estimation of the efficiency level of the regional infrastructure functioning. it should be noted that there are no complex indicators for assessing the development and functioning of the infrastructure complex of the regions that would distinguish one region from another, both by external and internal parameters. therefore, there is a need to find an approach and develop methods for assessing the level of effectiveness of the development and operation of the infrastructure complex of the regions, which would enable the complex consideration of all aspects of the research of the idri and help to identify the causes of inefficient infrastructure development. an efficiency analysis of the development and operation of the infrastructure complex of the regions is possible only under condition that benchmarking procedures will be used – concept of benchmarking. benchmarking allows you to find strategies and practices that have helped some entity to achieve results in improving performance. benchmarking equally involves evaluation and comparison. the system of benchmarking should provide: a systematic comparative analysis of the infrastructure objects indicators, trends in their changes, and determination of the efficiency level of their functioning; identification of the causes of inefficient functioning of infrastructure objects and ways of their elimination; analysis of the dynamics of the level of idri as a reflection of the effectiveness of management actions to increase the investment potential of the regions. information, gathered in the process of benchmarking, should be the basis for further enhancing the level of idri and used for planning an effective idri, as well as controlling the functioning of infrastructure objects and the effectiveness of the decisions taken. implementation of benchmarking allows reducing the cost of improvement processes because the best experience of managing of other territories is studied and evaluated in order to use the acquired knowledge in the activities of the authorities. at the same time, the main advantages of benchmarking using to improve the infrastructure fig. 3. place of the regions by the direction of the idri for 2015–2016 source: formed on the basis of data (ministerstvo rehional'noho rozvytku, budivnytstva ta zhytlovo-komunal'noho hospodarstva ukrayiny) baltic journal of economic studies 148 vol. 3, no. 4, 2017 provision of regional development are: successful use in various spheres of activity as one of the most common management methods; use of benchmarking can save resources for the infrastructure development by finding ready-made solutions or their “semi-finished products”; the effectiveness of benchmarking depends on the justification of the choice of objects required for a comparison, and a detailed analysis of the individual components of the process of infrastructure development management; increasing the effectiveness of benchmarking applying is possible if the information base is expanded (butyrs'ka i. v., 2005). thus, the systemic implementation of the idri monitoring mechanism will facilitate to the adoption of effective management decisions aimed at increasing of the investment attractiveness of the regions and, accordingly, the development of the infrastructure of the regions of ukraine. 5. conclusions consequently, the idri monitoring system should provide a clear definition of the form of its implementation with the definition of resulting indicators monitoring, monitoring of the programs and projects for the regions’ infrastructure development. based on the results of idri monitoring, it is necessary to evaluate and review the results of management of investment potential and regions policy on the basis of its infrastructure development. at the same time, the main principles of the formation of the idri monitoring mechanism are: orientation of the monitoring system to the implementation of the regional development strategy, which provides for the primary control and management of the main (strategic) deviations, that is, the accounting of a rate for a limited number of controlled indicative parameters; multifunctionality of monitoring – supervision and control is carried out in many indicators, taking into account their interconnection and interdependence, that is, the formation of a limited range of interrelated indicators should be provided, so-called evaluation directions; the orientation of monitoring for the quantitative assessment of parameters, which determines the uniqueness of the conclusions and management actions that are formed on its basis; careful selection of controlled parameters to prevent the redundant actions that lead to increased analytical and managerial costs. undoubtedly, the systemic and complex results of idri monitoring are an important source of information for the potential investors but, for the improvement of the investment climate of the ukrainian regions, a complex program for ensuring an effective investment policy within the declared priorities of the social and economic regions’ development is not enough, but it is necessary to have also regional plans to increase the investment attractiveness of the regions taking into account the peculiarities of current ratings of investment attractiveness, the implementation of the practice of all agreements concluding between all interested parties of the idri, namely, investors, regional authorities and the territorial community regarding mutual obligations. references: bobryshev, a. n., kazakov, m. yu. 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(2017). monitoring methodology for socio-economic development of a region (through the example of the south of russia regions). revista espacios, 38(23). галина лещук механизм мониторинга инвестиционного развития инфраструктуры регионов аннотация. предметом исследования является теоретико-методологические основы механизма мониторинга инвестиционного развития инфраструктуры регионов. цели исследования заключаются в обобщении теоретико-методологических основ механизма мониторинга инвестиционного развития инфраструктуры регионов, а также анализе современных тенденций инвестиционного развития инфраструктуры регионов украины с выделением положительных и отрицательных тенденций. методология. в статье рассмотрены теоретико-методологические подходы к определению концептуальных основ механизма мониторинга инвестиционного развития инфраструктуры регионов с помощью общенаучных методов анализа: систематизации и обобщения, индукции, дедукции. результаты. предложено мониторинг инвестиционного развития инфраструктуры регионов трактовать как системное и комплексное измерения индикаторов инфраструктурного развития регионов, количества реализованных инвестиционных проектов, наблюдения соответствия соблюдения разработанным стратегических региональных программ и концепций, в итоге будет способствовать эффективному и оперативному регулированию выявленных отклонений и принятия соответствующих решений. механизм мониторинга инвестиционного развития инфраструктуры регионов должен также предусматривать возможность создания системы сбора и анализа данных по оценке инфраструктурных объектов территориальной общиной, позволит для потенциальных инвесторов ориентироваться не только на аналитические данные мониторинга органов управления региона, но и учитывать общественный интерес в том или ином регионе. предложены общие принципы механизма мониторинга инвестиционного развития инфраструктуры регионов интерпретировать по направлениям: комплексного и системного наблюдения и сбора данных по развитию инфраструктуры регионов, при этом сложившаяся совокупность показателей должна отражать изменение уровня инвестиционного потенциала в результате внедрения мероприятий и реализуемость инвестиционных проектов развития инфраструктуры регионов; оценивания уровня эффективности функционирования инфраструктуры регионов при условии использования процедур сравнительного анализа концепции бенчмаркинга, что соответствующим образом позволит уменьшить затраты на процессы совершенствования, поскольку изучается и оценивается лучший опыт управления другими территориями с целью использования полученных знаний в деятельности органов власти. выводы. исследованы теоретико-методологические основы механизма мониторинга инвестиционного развития инфраструктуры регионов позволили обосновать необходимость имплементации комплексного и системного наблюдения функционирования инфраструктурного комплекса и инвестиционного потенциала регионов. проанализированы тенденции инвестиционного развития инфраструктуры регионов украины позволили установить значительные пространственные асимметрии, негативно влияет на реализуемость как общегосударственных стратегий развития, так и региональных программ и концепций. от так основные направления механизма мониторинга инвестиционного развития инфраструктуры регионов в композиции должны основываться на аналитическом наблюдении не только органов регионального управления, но и потенциальных инвесторов и территориальной общины. практическое значение. на основе официальных baltic journal of economic studies 150 vol. 3, no. 4, 2017 статистических данных мониторинга инвестиционного обеспечения и уровня развития инфраструктурного комплекса регионов украины в статье исследовано тенденции инвестиционного развития инфраструктуры регионов, позволяет утверждать о значительных территориальных диспропорциях как уровня инвестиционного обеспечения, так и эффективности функционирования инфраструктурного комплекса регионов, а от так предопределяет необходимость разработки комплексных программ регионального развития и надлежащего контроля их реализации по инвестиционного обеспечения инфраструктуры регионов. системная имплементация механизма мониторинга инвестиционного развития инфраструктуры регионов будет способствовать принятию результативных управленческих решений для всех участников данного процесса, а именно территориальной общины, инвесторов, региональных органов власти, в соответствии повышать инвестиционную привлекательность регионов и развитие инфраструктуры регионов украины. baltic journal of economic studies 191 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 institute of postgraduate education of bogomolets national medical university, ukraine (corresponding author) e-mail: r.titikalo@gmail.com orcid: https://orcid.org/0000-0002-6406-8800 2 kyiv national economic university named after vadym hetman, ukraine e-mail: wwwpav@gmail.com orcid: https://orcid.org/0000-0003-3311-0364 3 yaroslav mudryi national law university, ukraine e-mail: кovalenkolara2@gmail.com orcid: https://orcid.org/0000-0001-8788-4002 doi: https://doi.org/10.30525/2256-0742/2022-8-5-191-197 legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of the hromada roman tytykalo1, nataliia pavlovska2, larisa kovalenko3 abstract. local self-government is the leading institution of every developed, democratic society. local selfgovernment is an expression of the legitimate will of the population of a particular administrative and legal unit. that is why the exercise of powers and competence by local self-government bodies and officials is in fact an expression of the will of the population. in times of war, local governments are the closest to the needs of the population. this entity should respond comprehensively, as quickly and effectively as possible to the needs of its constituents. in order to develop the hromada, local self-government bodies are authorized to develop and adopt short-term and long-term (strategies) for the socio-economic development of the hromada. the level and quality of life of the population in a certain territory depends entirely on its successful implementation. the issue of the effectiveness of socio-economic programs of local self-government will be particularly acute in the postwar period, when it will be necessary to rebuild postwar ukraine and its hromadas. the participation, professionalism, and responsibility of local government executive bodies and their officials will play a crucial role in this process. the authors emphasizes the need for more detailed legislative regulation of the issue of legal liability of executive bodies of local self-government and their officials. given the above, it seems necessary to provide for the liability of executive bodies of local self-government and their officials for failure to implement programs of socio-economic development of a hromada. key words: local self-government, executive committee of the local self-government body, hromada, abalgamated hromada, legal responsibility, offense, illegal act, subject of offense. jel classification: h11, h30, h61, i38, r50, d72 1. introduction local self-government bodies and officials are the entities that are closest to the population, as they express its will and their activities are aimed at meeting the needs of a particular hromada. in order to fulfill their tasks, local governments develop and adopt program documents that allow them to develop a particular area: social, economic, cultural, housing and communal, healthcare, etc. one of the important areas is the socio-economic development of a particular region. the socio-economic development of local self-government is determined within a certain hromada or amalgamated hromada. a program for the socio-economic development of a hromada is a programmatic document that defines tasks, goals, directions, stages of implementation, a system of measures, responsible entities, sources of funding, and other issues. local self-government officials are the main entity that forms and subse quently fulfills the obligation to implement the program of socio-economic development of the hromada. the law stipulates that in case of nonperformance or improper performance of official duties by local government officials, they are legally liable. so, consider what types of legal liability may be imposed on officials and local governments for failure to perform or improper performance of their duties in relation to the social and cultural development of a particular hromada. baltic journal of economic studies 192 vol. 8 no. 5, 2022 2. methodological peculiarities of the study of legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of a hromada the primary determining factor that scientists turn to when clarifying the essence, content and legal nature of any concept or phenomenon is the methodology of scientific research. determining it is an important and complex process, because both the result and the scientific value of the research depend on how logical, complete and objectively correct the methods are. representatives of different scientific schools, regardless of their conceptual position, pay attention to this. the methodology in general should be considered from the worldview, ontological and epistemological points of view. "methodology " (from the greek methodos – method, technique and logos – science, knowledge) is a teaching about the rules of thinking during the creation of a theory of science (the problem of the method of cognition). in general, domestic legal science considers methodology as a doctrine of the scientific method of cognition or as a system of scientific principles on which research is based and a set of cognitive tools, methods and techniques is selected (methodology and organization of scientific research). summarizing the above, it can be concluded that 1) methodology and method are related to each other as a whole and a part, as a general and a particular, as a system and its component; 2) methodological knowledge exists as a set of philosophical, general scientific, and special methods of scientific knowledge; 3) the methodology is inextricably linked to the choice of a method of obtaining new knowledge about a subject or phenomenon; 4) the methodology of scientific knowledge of restrictions in administrative law is part of the totality of methodologies of branch sciences and reflects the main features of this system and its tools (chorna, 2019). the main elements of methodology as a general theoretical category are various general scientific and special methods, which, like potential areas of research, can be classified according to various criteria. thus, the method is a structural component of the concept of methodology. "method", like "methodology ", is translated from greek as a method, a way of research. it is an instrument of the subject used by him/her to cognize the object. in scientific activity, it is the knowledge that is used to obtain new knowledge. that is, one and the same piece of knowledge can be viewed: a) as a theory, as knowledge that is being developed; b) as a method of knowledge by which the theory is developed (tosaka dziun, 1983). in any case, the method is a tool for obtaining knowledge about the studied concept or phenomenon in the scientific field. the method of dialectical materialism is one of the philosophical methods used, in particular, to understand general theoretical categories. its application in the study of the activities of local government officials, in particular, allows to determine the compliance of their activities with the program goals and objectives for the socio-economic development of the hromada. the method of abstraction means to turn away from the richness of the content of a particular phenomenon, to deliberately overlook many aspects and features of the phenomenon, but to reveal the typical, most characteristic and essential in the phenomenon, to determine the laws by which it exists, that is, to reveal it as a scientific category (horskyi, 1961). thanks to the abstract concepts connected by the logical system of legal theory, it is possible to express legal reality in all its completeness and specificity (vasylev, 1976). thus, without abstraction, it is impossible to reach the categorical level of reality. application of the method of abstraction in the study of the powers and competence of local government officials from among the subjects of public administration in the socio-economic sphere. the use of the methods of analysis and synthesis is to study a concept or phenomenon in the process of moving from the concrete to the abstract. the use of the analysis method allows to fully scan the essence of the category under study, while the synthesis method helps to isolate the meaning in the concept or phenomenon under study. to determine the qualitative and quantitative indicators of the implementation of socio-economic development programs by officials and local governments. the structural method consists in establishing the structure as a set of connections. the method of structuralism is widely used in the study of the types of program goals for the socio-economic development of hromadas and their characteristics. the functional method is used to study the functions specific to officials and local self government bodies. it is used to study the real activities of officials and local self-government bodies in the process of implementing legal requirements declared in the programs of socioeconomic development of the hromada. today, the method of system analysis (or systemic approach) is considered a universal tool for cognitive activity. in fact, it has become a general scientific principle that generally allows for a systematic and comprehensive approach to the study of legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of a hromada. baltic journal of economic studies 193 vol. 8 no. 5, 2022 synergetic method. studies of the development of open complex systems under the influence of internal and external factors have identified the problem of their self-organization. the term "synergetics" has been used to refer to the processes of self-organization. the task of synergetics is to identify spontaneously formed structures, structures formed as a result of self-organization during the study of systems (chorna, 2019). method of interpretation and hermeneutics. when discussing the correlation between the concepts of "interpretation" and "hermeneutics", one should proceed from the fact that the problems of interpretation are considered within the framework of legal hermeneutics through the categories of "explanation", "meaning", "understanding", "text", "language", "interpretation", and "hermeneutic circle". hermeneutics (greek: hermenēuo explain, interpret) is the art of interpreting texts that are based on the grammatical study of language, the study of specific genres and styles of literary works and related historical events (tsalin, 2002). these methods were used to analyze the provisions of the programs of socio-economic development of the hromada and the results of their implementation by local government officials. thus, the application of the above methods made it possible to fully define the key conceptual and categorical definitions of legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of a hromada. at the same time, it should be noted that the methods discussed above do not exhaust the methodological diversity of approaches to understanding the essence of legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of a hromada. 3. the role of the state in the socio-economic development of the hromada the state provides financial support for the voluntary amalgamation of hromadas of villages, towns, cities and accession of amalgamated hromadas by providing funds to the amalgamated hromada in the form of subventions for the formation of the relevant infrastructure in accordance with the plan of socio-economic development of such hromada. proposals for the provision of financial support to an amalgamated hromada are submitted by the council of ministers of the autonomous republic of crimea, the relevant regional state administration upon the submission of the village, settlement, city council of the amalgamated hromada to the cabinet of ministers of ukraine no later than july 15 of the year preceding the budget period in which such financial support is planned to be provided. the total amount of financial support is distributed among the budgets of the ahs in proportion to the area of the ah and the number of rural residents in the ah, with equal weight given to both factors. the total amount of the subvention for the formation of the relevant infrastructure of the amalgamated hromadas is determined by the law on the state budget of ukraine. the procedure for granting subventions from the state budget to ahs is established by the cabinet of ministers of ukraine (about voluntary consolidation of hromadas). 4. procedure and competence of local self-government bodies and officials to formulate short-term and long-term programs of socio-economic development of hromada the competence of executive bodies of local self-government includes approval of programs for the socio-economic and cultural development of the respective districts; participation in the discussion of the strategy for the development of hromadas in terms of inter-municipal cooperation within the district (on the principles of the state regional policy). according to the methodological recommendations for the formation and implementation of forecast and program documents for the socio-economic development of the amalgamated hromada, program documents developed and adopted by authorized local government entities may be short-term and long-term. if to speak about a short-term program of socioeconomic development, then in this case it is a plan (program) of socio-economic development of the amalgamated hromada, which is a document that defines strategic goals and priorities for the development of the amalgamated hromada for the short and medium term (3 to 5 years), specifies tasks and measures within such goals and priorities, responsible executors and deadlines for the implementation of measures, funding amounts, sources of funding and indicators for assessing the effectiveness of the plan's measures. at the same time, if talking about a long-term program of socio economic development, it is a strategy for the development of the amalgamated hromada, which is a document that defines strategic and operational goals, indicators (indicators) of their achievement, priorities and tasks for sustainable economic and social development of the amalgamated hromada for a long-term period (7 years) (methodological recommendations on the formation…). it should be noted that the development strategy of an amalgamated hromada is part of the state regional policy. baltic journal of economic studies 194 vol. 8 no. 5, 2022 local self-government bodies are subjects of state regional policy and subjects of development and formation of programs for socio-economic development of the hromada. the state regional policy is a system of goals, measures, means and coordinated actions of central and local executive authorities, authorities of the autonomous republic of crimea, local self-government bodies and their officials to ensure a high level of quality of life throughout ukraine, taking into account the natural, historical, environmental, economic, geographical, demographic and other features of the regions, their ethnic and cultural identity. the state regional policy is aimed, among other things, at improving the material, financial, informational, personnel and other resource support for the development of regions, and facilitating the exercise of powers by local governments. in order to plan the restoration and stimulate the development of regions and territories, as well as to introduce special mechanisms and tools, the executive authorities and local governments have identified the following functional types of territories: 1) restoration territories; 2) regional growth poles; 3) territories with special development conditions; 4) sustainable development territories (on the principles of the state regional policy). at the same time, local governments and their officials are the entities that are legally responsible for their implementation. however, it should be emphasized that the provisions of the current legislation governing local self-government relations do not define either the types or the grounds for bringing local governments and their officials to legal liability for failure to implement or improper implementation of socio-economic development programs. it should also be noted that there are ongoing academic discussions in the legal literature on the procedure for holding officials accountable for failure to implement program documents. 5. principles for determining the participation of local self-government bodies and officials in the formation of programs for the socioeconomic development of the hromada the forecast of economic and social development is a means of justifying the choice of a particular strategy and making specific decisions by public authorities and local governments to regulate socioeconomic processes. local self-government bodies and their officials, when formulating programs for the socio-economic development of a hromada, are guided by the fundamental principles underlying the state regional policy and local self-government policy for the economic, cultural, and social development of a particular hromada. according to the authors, these principles include: – the principle of openness, which means that forecast and program documents of economic and social development are available to the public. information about the goals, priorities and indicators of these documents provides business entities with the necessary guidance for planning their production activities; – the principle of independence, which means that local executive authorities and local self-government bodies are responsible for the development, approval and implementation of forecast and program documents for the economic and social development of their respective administrative and territorial units within their powers. forecasting and development of economic and social development programs ensures coordination of the activities of executive authorities and local governments; – the principle of equality, which means respecting the rights and taking into account the interests of local governments and business entities of all forms of ownership; – the principle of observance of national interests, which means that executive authorities and local self-government bodies should develop forecast and program documents for economic and social development based on the need to ensure the implementation of national socio-economic policy and economic security of the state (on state forecasting and development of programs for economic and social development of ukraine). however, the system of these principles is not exhaustive, as local self-government takes into account the peculiarities of the state regional policy when formulating and implementing socio-economic development programs: 1) legality; 2) cooperation; 3) parity; 4) openness; 5) subsidiarity; 6) coordination; 7) cohesion; 8) historical continuity; 9) ethno-cultural development; 10) sustainable development; 11) objectivity; 12) equal rights and opportunities for women and men; 13) inclusiveness; 14) integrated development. 6. principles of legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of the hromada 6.1. local self-government bodies and their officials as responsible entities for the implementation of programs of socioeconomic development of the hromada the activities of local government officials in formulating and adopting a socio-economic development program are regulated by law. thus, article 26 of the law of ukraine "on local selfbaltic journal of economic studies 195 vol. 8 no. 5, 2022 government" stipulates that exclusively at the plenary meetings of the village, township, and city councils issues are resolved, including the approval of programs of socio-economic and cultural development of the relevant administrative-territorial units, target programs from other issues of local self-government. article 18 of the law of ukraine "on state forecasting and development of programs for economic and social development of ukraine" defines that local self-government bodies develop forecasts of the economic and social development of the autonomous republic of crimea, regions, districts and cities for the medium-term period, programs of economic and social development of the autonomous republic crimea, oblasts, districts and cities for a short-term period and provide control over the implementation of relevant indicators of economic and social development programs of the autonomous republic of crimea, oblasts, districts and cities for a short-term period (on state forecasting and development of programs for economic and social development of ukraine). the competent local self-government entities are empowered to monitor the implementation of programs for the socio-economic development of the hromada. the content of monitoring the implementation of programs for the socio-economic development of a hromada is a set of measures for recording, collecting, analyzing and summarizing information from competent entities, which is carried out in order to track and analyze territorial trends, dynamics and structural changes in accordance with the goals, directions and objectives of the state regional policy. the objects of monitoring are socio-economic processes and the results of socio-economic development of hromadas and amalgamated hromadas. article 27 of the law of ukraine "on local selfgovernment" clearly defines the list of own and delegated powers of executive bodies of village, town and city councils. in other words, this provision regulates the list of rights and professional duties that these entities must fulfill. having carried out a legal analysis of this provision, it is possible to distinguish actions in the field of socio-economic development of local selfgovernment for which local self-government bodies and officials may be held legally liable: 1) failure to prepare or untimely preparation of programs for the socio-economic and cultural development of villages, towns, cities, and targeted programs on other self-government issues, submission of them for approval by the council, organization of their implementation; submission of reports to the council on the progress and results of the implementation of these programs; 2) failure to ensure balanced economic and social development of the respective territory, efficient use of natural, labor and financial resources; 2-1) failure to promote and efficiently use territories and facilities for the needs of cinematography, untimely development of local programs of financial support for cinematography and local programs for using the potential of the local cinematography service sector; 2-2) coordination with cinematography entities on issues related to filming on the territory of the respective hromada at the request of film commissions; 3) failure to draw up balances of financial, labor resources, monetary income and expenditures necessary for managing the socio-economic and cultural development of the respective territory; 4) untimely review of draft plans of enterprises and organizations belonging to the municipal property of the respective hromadas, submission of comments and suggestions to them, and control over their implementation; 5) failure to submit or untimely submission to district and regional councils of the necessary indicators and proposals to the programs of socio-economic and cultural development of the respective districts and regions, as well as to the plans of enterprises, institutions and organizations, regardless of ownership, located in the respective territory, on issues related to the socio-economic and cultural development of the territory, meeting the needs of the population; 6) involvement on a contractual basis of enterprises, institutions and organizations, regardless of ownership, in the integrated socio-economic development of villages, towns and cities, and coordination of this work in the respective territory; 7) not placing orders on a contractual basis for the production of products, performance of works (services) necessary for the hromada at enterprises, institutions and organizations; 8) misuse of social assistance funds for persons with disabilities, determination of the procedure and conditions for spending these funds (on local selfgovernment); 9) improper disposal of municipal property; 10) delay in reviewing and approving plans of enterprises, institutions and organizations that are not municipally owned by the respective hromadas, the implementation of which may cause negative social, demographic, environmental and other consequences, preparing conclusions and submitting proposals to the relevant authorities; 11) inadequate maintenance of statistical records of citizens permanently or temporarily residing in the relevant territory; 12) inappropriate provision of administrative services by executive authorities through administrative service centers (on local self-government). baltic journal of economic studies 196 vol. 8 no. 5, 2022 it should be noted that the legal fact of bringing local self-government bodies and officials to legal liability is a court decision (chorna, batanova, kitsen, 2020). 6.2. political liability of local governments and their officials for failure to implement programs of socio-economic development of the hromada determining the grounds for legal liability of local self-government bodies and officials is an important issue for the realization of public responsibility. after all, these entities represent the interests of the population of a certain hromada and are an important guarantee of the rule of law. it should be noted that in a number of countries (estonia, latvia, lithuania), the inability of local governments to fulfill their powers is grounds for dissolution of the entire council. local self-government bodies and officials are responsible for their activities to the hromada, the state, legal entities and individuals. the grounds, types and procedure for liability of local self government bodies and officials are determined by the legislation of ukraine. legislation defines several components of political responsibility of local self-government bodies and officials. in particular, these are: 1) responsibility of local self-government bodies and officials to hromadas stipulates that local self government bodies and officials are accountable, controlled and responsible to hromadas. they periodically, but at least twice a year, inform the population about the implementation of socioeconomic and cultural development programs, the local budget, and other local issues, and report to local hromadas on their activities. a hromada may at any time early terminate the powers of local selfgovernment bodies and officials if they violate the constitution or laws of ukraine, restrict the rights and freedoms of citizens, or fail to ensure the exercise of the powers granted to them by law (on local self-government); 2) the responsibility of local self-government bodies and officials to the state stipulates that local selfgovernment bodies and officials are accountable to the relevant executive authorities in the exercise of their delegated powers. one of the forms of responsibility of executive committees and officials of local self-government bodies to the population is the early termination of powers, which retains its importance as an element of municipal democracy. 6.3. сivil liability of local self-government bodies and officials for failure to implement programs of socio-economic development of the hromada local self-government bodies and their officials may be held civilly liable for failure to implement programs for the socio-economic development of a hromada if such actions have caused damage to legal entities and individuals. damage caused is compensated at the expense of the local budget, and as a result of illegal decisions, actions or inaction of local self-government officials – at their own expense in accordance with the procedure established by law. disputes on the restoration of violated rights of legal entities and individuals arising from decisions, actions or inaction of local self-government bodies or officials are resolved in court. 6.4. municipal legal liability of local self-government bodies and officials for failure to implement programs of socio-economic development of a hromada the national program for the development of small towns obliges local governments and their local officials to ensure the development of local programs for the socio-economic and environmental development of small towns, and to adjust master plans, develop local development rules, strengthen the interaction of local governments with state, municipal and private enterprises on the development of small towns, effectively use the powers of local governments to generate their own revenues, promote the development of small towns, and ensure the implementation of the above programs. failure to fulfill (or ineffective fulfillment of ) the above tasks of local governments is a violation of the law of ukraine "on approval of the national program for the development of small cities" and, accordingly, may result in municipal liability in the form of early termination of powers of local governments and their officials. it should be noted that under the current legislation, the legislator does not distinguish such a type of legal liability as municipal liability. however, given the importance and role of local governments and their officials, the issue of applying liability measures to them is gaining increased attention and relevance. 7. conclusions in wartime, local governments are the closest to the needs of the population. this entity should baltic journal of economic studies 197 vol. 8 no. 5, 2022 respond comprehensively, as quickly and effectively as possible to the needs of its constituents. in order to develop the hromada, local governments are authorized to develop and adopt short-term and long-term strategies for the socio-economic development of the hromada. the level and quality of life of the population in a certain territory depends entirely on the successful implementation of these strategies. the issue of the effectiveness of socio-economic programs of local self-government will be particularly acute in the postwar period, when it will be necessary to rebuild postwar ukraine and its hromadas. the participation, professionalism and responsibility of local government executive bodies and their officials are crucial in this process. it was noted that local governments and their officials are entities that are legally responsible for failure to fulfill their tasks. however, it should be emphasized that the provisions of the current legislation governing local self-government relations do not define either the types or the grounds for bringing local governments and their officials to legal liability for failure to implement or improper implementation of socio-economic development programs. it should also be noted that there are ongoing academic discussions in the legal literature on the procedure for holding officials accountable for failure to implement program documents. the author emphasizes the need for a more detailed legislative regulation of the issue of legal liability of executive bodies of local self government and their officials. given the above, it seems necessary to provide for the liability of executive bodies of local self-government and their officials for failure to implement programs of socio-economic development of the hromada. references: the problem of the method of cognition. empiricism and rationalism. introduction to philosophy: online learning materials. available at: https://pidru4niki.com/ methodology and organization of scientific research. available at: http://book.net/book_methodology-andorganization-of-scientific-research_1046/ chorna, v. h. (2019). restrictions in administrative law: a dissertation for the degree of doctor of science in the specialty 12.00.07 "administrative law and process; financial law; information law". kharkiv national university of internal affairs. kharkiv, 517 р. tosaka dziun (1983). theory of scienc. moscow: science, 192 p. horskyi, d. p. (1961). issues of abstraction and education of concepts. moscow: yzd. an ussr , 351 p. vasylev, a. m. (1976). legal categories. methodological aspects of developing a system of categories of legal theory. moscow: legal literature, 265 р. tsalin, s. d. (2002). dictionary of logic terms. kharkiv: osnova, 184 р. about voluntary consolidation of hromadas: law of ukraine no. 157-viii of july 5, 2015. bulletins of the verkhovna rada, 2015. № 13. art. 91. available at: https://zakon.rada.gov.ua/rada/show/157-19#text methodological recommendations on the formation and implementation of forecast and program documents for the socio-economic development of the amalgamated hromadas: approved by the order of the ministry of regional development, construction, housing and communal services of ukraine of 30.03.2016 no. 75. available at: https://zakon.rada.gov.ua/rada/show/v0075858-16#text on the principles of the state regional policy: law of ukraine no. 156-viii of february 5, 2015. bulletin of the verkhovna rada. № 13. art. 90. available at: https://zakon.rada.gov.ua/rada/show/156-19#text on state forecasting and development of programs for economic and social development of ukraine: law of ukraine of march 23, 2000, 1602-iii. bulletin of the verkhovna rada of ukraine. 2000. № 25. art. 195. available at: https://zakon.rada.gov.ua/rada/show/1602-14#text on local self-government: law of ukraine of may 21, 1997, no. 280/97-vr . bulletin of the verkhovna rada of ukraine. 1997. № 24. art. 170. viktoriia chorna, liudmyla batanova, nataliia kitsen. jurisdiction of court protection of environmental rights of member of hromadas in land disputes with local councils. journal of law and political sciences, vol. 24, issue 3, pр. 136–159. published: jun 2020. wos:000546191500007 on approval of the national program for the development of small towns: law of ukraine of march 4, 2004, no. 1580-iv. bulletin of the verkhovna rada of ukraine. 2004. № 24. art. 332. received on: 10th of october, 2022 accepted on: 26th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 172 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 researcherid: gpk-4326-2022 2 state scientific institution "institute of education content modernization", ukraine e-mail: bazhenkov@ukr.net orcid: https://orcid.org/0000-0003-0117-294x 3 state scientific institution "institute of education content modernization", ukraine e-mail: zsv@bigmir.net orcid: https://orcid.org/0000-0002-6133-1087 researcherid: s-2638-2017 * the article was written in accordance with scientific topic no. 0122u002363 doi: https://doi.org/10.30525/2256-0742/2023-9-2-172-180 publishing school textbooks: international policy and practical scenarios* yuriy safonov1, ievgen bazhenkov2, svitlana zaiets3 abstract. the article presents the factors of the international policy of publication and provision of school textbooks at the national, regional and local levels in the context of modern requirements for the quality of education. such research methods as analytical review, comparison, analysis, generalization, interpretation, synthesis were used. an analysis of existing problems and possible ways of improving the quality and objectivity of the system of textbook provision was carried out. the scientific and methodological approaches and practical recommendations of international organizations on the formation of textbook publishing policy, the role of central authorities, local self-government, private organizations, the public and parents of students in the financing, development and distribution of textbooks are considered. the peculiarities of textbook publishing in countries working with the system of centralized state publication, state approval of a list of textbooks by choice, mixed system and open market are analyzed. the similarities and differences of the main changes over the last 20-30 years in the position of countries regarding textbooks (with an emphasis on leading asian countries) are identified in terms of types of policies, processes of approval and control of production, distribution of textbooks, priorities in providing students with textbooks. the analysis confirmed that in most countries there is a change in the role of central and local self-government, the private sector, parents and the public in the development and distribution of textbooks, as well as the interaction of subjects of educational book publishing. recommendations for improving the process of textbook publishing have been developed based on the experience of the outlined work in the countries of the world. key words: quality of education, policy of educational book publishing, school textbooks, printing, foreign book publishing experience. jel classification: h50, h52, i28 1. introduction the issue of the quality of education is always acute and relevant and determines the vector of state policy in the field of education. the education for sustainable development 2030 roadmap focuses renewed attention on education and the need to transform all aspects of the learning environment for sustainable development, enabling students to live what they learn and learn what they live (unesco, 2020). the unesco education 2030 framework agreement for the period up to 2030 sets out guiding principles for ensuring inclusive and equitable quality education and promoting lifelong learning for all, as well as commitments by states in this area (unesco, 2021). school textbooks are a key factor in any plan to improve the quality of education. textbooks shape the thinking and values of students, thus influencing their worldview, social cohesion, and national development. the textbook is not the only source of information, but it is the core of basic knowledge, the entry point into the field of certain knowledge. the development of textbooks is a task of national importance. baltic journal of economic studies 173 vol. 9 no. 2, 2023 unesco's comprehensive strategy for textbooks and learning materials notes that the issues surrounding the development and use of textbooks are complex and often controversial. however, the main purpose of textbooks – to impart knowledge, values, attitudes, skills and behaviours – is constant (unesco, 2005). according to unesco's global framework for policy development, textbooks and learning resources must adapt to the challenges of societal evolution, new technologies, and global commitments to sustainable development (unesco, 2016). countries with the most successful education systems, such as finland, singapore, and china (shanghai), have the brightest textbooks (smart, jagannathan, 2018). at the same time, the countries with the best results in the field of education have made significant changes in the processes of publishing and providing textbooks in the last ten years. obviously, there is a relationship between countries' textbook policies, the immediate learning process in the classroom, and learning outcomes. textbooks are critical. they are purchased and used in large numbers, and governments take responsibility for their provision by guaranteeing education for all. therefore, the national textbook policy is crucial and answers the following questions: will the government provide textbooks for all students? when textbooks are published, will they be sold, loaned, or given free to all students? will there be textbooks for all subjects or just some subjects? how many years will the textbook be officially used in schools? etc. politicians, teachers, the media and other education stakeholders are calling for a change in the way textbooks are published (often because of their low quality). only valid and convincing research can make a difference in the direction of improving the content of textbooks, which in turn will inform curriculum developers and relevant government institutions on how best to strike a balance in the production of quality textbooks. a carefully planned policy on textbooks and learning resources based on sound educational principles is needed. the need for a comprehensive strategy to address textbook development and revision issues is becoming increasingly urgent. the role of central authorities, local governments, private organizations, the public and parents of students in the financing, development and distribution of textbooks in the countries of the world is different, but it is necessary to determine the patterns and trends in the development of potential and experience at each stage of their publication, this will help to form a general idea about the policy book publishing. the purpose of the article is to analyze the basic trends in the field of publishing school textbooks, synthesis of the interaction of subjects of educational book publishing, existing problems, ways to improve the quality and objectivity of the system of providing textbooks for school education, developing recommendations for improving the process of publishing school textbooks through work experience in the countries of the world. 2. literature review since the publication of unesco's comprehensive strategy on textbooks and learning materials in 2005, the role of textbooks in teaching and learning has undergone a profound transformation. since 2014, unesco has renewed its efforts to help policymakers and educators around the world develop sustainable textbook and learning materials publishing systems that are more responsive to the needs of today 's learners, inclusive and engaging for learners of all ages, at all levels of ability, and in all types of learning environments. to help bridge the gap between theory and practice, unesco intends to use a variety of formats to expand its activities in textbook and learning resource development. communication channels will include a dedicated web portal, a community of practice with regular blogs and discussion forums, and a multilingual e-newsletter for researchers, educators, textbook authors, publishers and curriculum planners. unesco, together with the georg eckert institute for international textbook studies, has prepared a manual on textbook research and review, which has been a tool for peacebuilding approaches for educational experts – researchers, textbook authors, teachers, curriculum developers – who have been analyzing, comparing and developing educational media in a national or international context for 13 years (pingel, 2010). in addition to unesco, unicef, the global partnership for education (gpe), the georg eckert institute for international textbook research (gei), the international association for research on textbooks and educational media (iartem), the association for the development of education in africa (adea) the arab bureau of education in the gulf states (abegs), the arab league educational, cultural and scientific organization (alecso), the asia-pacific center of education for international understanding (apceiu), the council of europe, and the islamic educational, cultural and scientific organization (isesco), among others. global research by international organizations and analysis of the importance of textbooks show their impact on learning outcomes in many countries around the world. baltic journal of economic studies 174 vol. 9 no. 2, 2023 the work of unesco and other international organizations in the field of creation, publication and distribution of textbooks, directions of use of this experience in foreign countries and prospects of use of positive ideas in ukraine are described in detail in the doctoral thesis of i. chekriy (chekriy, 2020). the process of creating textbooks has been the subject of research at every stage of social development. the works of ya. kodliuk (kodliuk, 2004) are devoted to the creation of the concept of textbooks for the ukrainian school and the development of innovative approaches to their preparation, which revealed the conceptual apparatus of textbook creation and the conceptual foundations of textbook research. the principles of functioning of textbook systems that existed in different regions and chronological intervals, the peculiarities of government policies in the field of education, the role of textbook publishing in the development of the educational system, management mechanisms at various levels (federal, state, local), including economic mechanisms aimed at supporting the processes of textbook creation and textbook publishing are revealed in the works of researchers h. dryndak (dryndak, 2002), i. strazhnikova (strazhnikova, 2014), o. hlushko (hlushko, 2017), o. lavrut (lavrut, 2016), o. elbrekht (elbrekht, 2020) and others. in ukraine, the history and theory of the creation of pedagogical literature is also studied for individual academic disciplines. in particular, this issue has been addressed by m. golovko (golovko, 2016), i. smagin (smagin, 2009), and many others. among the modern foreign researchers who have identified the relationship between textbook content and learning outcomes in several asian countries, have studied the integration of singapore's mathematics and science textbooks, japan's focus on problem solving in mathematics textbooks, and china's approach to mathematics textbooks should be mentioned g. clement (2017), j. vasagar (2016), b. camden (2017). the main trends in world educational publishing were considered by b. karimova, r . mikhalev, a. duysebek (2017) and others. at the same time, the aspects and trends of the policy formation of the publication of school textbooks from the point of view of the changes in the economic and educational conditions in the countries have not yet been considered by domestic scientists. according to a. dziatkovskii (2023), an urgent task is the development of a strategy of publishing educational books with a clear formulation of the content for each level of education, continuity for all levels of education, development of specific general guidelines for textbook authors. thus, the revision of textbook content and approaches to its publication has a long history of success, but the time has come to take into account the changing role of textbooks in the educational process to meet the diverse needs of all students in a wide range of cultural contexts, economic and educational conditions. it is necessary to develop a policy for the publication and distribution of textbooks that meets the urgent needs of communities due to the long-term effects of economic instability, rapid urbanization, environmental degradation, suffering from violent conflict or natural disasters. 3. generalization of the main statements the system of textbook production, distribution and use is not static, but a dynamic process that is constantly changing and improving. meaningful, constructive change requires openness to new ideas and approaches, and acceptance of innovations, including those initiated by teachers, parents, and communities. accordingly, it requires a well functioning apparatus for managing the production, selection, and review processes, as well as for the professional development of authors, illustrators, designers, editors, and teachers to produce quality materials and resources. a comprehensive textbook policy covers all elements of the textbook production chain: curriculum structure; professional development programs; and textbook development, financing, production, distribution, management, and use. policy development can provide a valuable framework for all actors, describing the roles of each stakeholder and setting high quality standards at each stage. all aspects of textbook policy should be designed to improve learning outcomes and ensure the provision of adequate numbers of textbooks and other teaching and learning materials at a reasonable cost and in a timely manner. the global partnership for education (gpe) has developed recommendations for policymakers and other decision-makers to improve investment in education (de guzmán, alfonso, 2022). according to the world bank, textbook publishing is a multi-step process in all countries. schematically, the publishing process includes manuscript preparation, printing, production, delivery, and distribution of textbooks. the processes of curriculum planning and development precede the publication of textbooks. the processes of professional development and certification of teachers follow the provision of books (table 1). in all countries, without exception, there are various problems throughout the textbook publishing cycle. moreover, the whole cycle of textbook production baltic journal of economic studies 175 vol. 9 no. 2, 2023 table 1 the school textbook publishing cycle: from curriculum to impact assessment no. stage name component actions of the stage recommended options for action 1. curriculum planning, development or revision, textbook publishing program determination of the purpose of the curriculum, the policy of providing educational materials details of the plan. establish requirements for the preparation of textbooks at the highest level of quality. linking the goal of implementation of the initial plan with the annual financial plan, further detailing the implementation of the curriculum by quarters, and coordinating with procurement plans. determine the number of academic years during which the curriculum will remain unchanged. student progress monitoring reviewing the curriculum updating the program, assessing the state of education and availability of textbooks 2. textbook manuscript preparation creating a structural and logical scheme concluding contracts with individuals, including freelance authors, retired teachers; organizing their interaction with experienced writers, publishers who know how to work with authors, write, and interact productively with ministry of education and science reviewers and others involved in the manuscript development process. writing the content of a textbook, teacher's manual testing the material in classrooms reviewing the content, approving the manuscript for publication 3. preparation for textbook publication editing of author's manuscripts selection of publishers able to ensure effective printing of the textbook according to parameters: design (i.e., "look"), appropriate font size for the age and level of students, teachers; the type of illustrations used, the need for color printing; the number of pages (volume) of the textbook in accordance with the requirements of the curriculum; the term of use of the textbook (its physical life); number of copies for distribution and reservation; type of paper and its characteristics, binding and packaging, and modes of delivery and distribution. textbook layout, typesetting, illustrations, page layout verification of compliance with technical specifications, competitive evaluation, determination of circulation proofreading, corrections, review, approval before printing 4. purchases* clarification of production and distribution proposals to achieve value for money in book purchases, the government should establish technical specifications that maximize savings and meet international standards for materials (paper) and processes (printing, binding). conduct procurement using free, open and competitive procedures. for large-volume contracts, consider prequalifying potential suppliers with respect to their financial and technical ability to meet the terms of the contract. for medium-volume orders, analyze the financial and technical capabilities of contractors. evaluation of quality, prices contractual procedure check, payments 5. printing, publishing house paper procurement procure printing services only from local vendors to support the local publishing industry, or from international vendors at the best quality and price. printing, brochures, packaging delivery, ground transportation to publishing houses 6. distribution warehousing using the services of another governmental or parastatal agency for the distribution of educational materials, including textbooks. using the ministry of education's storage and transportation vehicles and personnel to deliver books to schools. contracting this service with private sector companies to forward books to regional or district offices or deliver them directly to schools. once the books are delivered to local offices, school communities sometimes take responsibility for their distribution, using funds provided by the government or their own resources. marketing, sales promotion delivery to regions, local offices, schools, bookstores distribution or collection in schools 7. teacher training, certification familiarizing teachers with new materials the ministry of education provides training for classroom teachers, school principals, and local education administrators on curriculum changes, textbook inventory management, effective use of new textbooks, and care and storage of educational materials. the options here are to provide the training as: a special short course to familiarize teachers and administrators with the new instructional requirements of using the new textbooks; the national professional development program for teachers. impact evaluations involving complex study design, fieldwork, and quantitative analysis are best conducted by experienced, wellequipped, and well-staffed research organizations. evaluating program effectiveness or impact on learning feedback of the results obtained to the planning and development of the educational program * procurement is not a separate stage of textbook publishing, but a process inherent in each stage of the cycle, the largest of which is publishing and distribution. source: compiled by the authors according to (de guzmán, alfonso. teachers and teaching gpe value for money guidance note, 2022) baltic journal of economic studies 176 vol. 9 no. 2, 2023 and distribution works in such a way that a problem at one stage has a ripple effect on the rest of the chain. the analysis of publications confirmed that in most countries the government is trying to manage the textbook publishing process on its own. however, governments need to develop a holistic approach to solving problems, rather than solutions aimed at solving individual problem areas. an artificial, one-off approach can strengthen one link and neglect other parts of the book chain. examples of successful practices in educational publishing show that problems disappear when the book industry becomes a strategic partner of government. in different countries, the state participates in the development and regulation of the educational publishing market in different ways. according to experts in the field of education, the ideal system allows to reduce the role of the state to the minimum and to leave the main part of activity to the educational publishing market. in the field of state regulation, the main tasks remain: development of educational standards, curricula and requirements for graduate education (organization of state exams); responsibility for providing educational programs with textbooks and certification of their content. textbook requirements rest with publishers, while teachers are responsible for selecting textbooks and communicating their content to students. this practice has developed in the united kingdom, the scandinavian countries, australia, new zealand, and south africa. however, even in such an ideal environment, there must be a regulatory mechanism, and the state must be able to determine which textbooks can be used and which cannot. this practice exists in the rest of western europe, especially in the countries of eastern europe. 4. discussion over the past 30-40 years, the global trend in textbook policy has been toward greater liberalization of state-produced textbooks. in particular, oecd countries have moved from state-approved textbook lists to open markets. for example, finland moved from a centralized to an open system in the 1980s, singapore and sweden in the 1990s (bruillard, aamotsbakken, knudsen, horsley, 2005). commercial publishers play an important role in open systems. the impact of a competitive multivariate textbook market, where the customer is the driving force, is undeniable from the point of view of continuous improvement of textbook content. in such a system, publishers and authors must constantly strive for improvement in order to be successful. however, the transition to such a system must be carefully managed so that all entities can perform their functions effectively and there are no disruptions in student learning and teacher support. currently, countries around the world have varying degrees of autonomy in textbook selection. some asian countries have policies where textbook changes are reviewed and approved by the ministry of education. however, most european countries do not have a pre-approved list of textbooks, so public schools are free to choose their textbooks, as are private schools that receive public funding. the main differences are whether there is a system of recommended textbooks or whether schools are completely free to choose books. pisa results confirm that school autonomy in determining curricula and assessment systems has a positive impact on the overall effectiveness of the education system. for example, education systems that give schools more authority to make decisions about assessment policies, courses offered, content, and textbooks used tend to be better performing education systems (oecd, 2019). textbook policy follows education policy. in particular, while many countries in europe, north america, and australia have expressed admiration for aspects of high-performing east asian education systems, policymakers in those same asian systems are now determined to reduce their focus on "achievement" and change the trajectory of textbook policy. although textbook publishing policies are primarily influenced by the political condition of the state, there is no relationship between political systems that have liberal, liberalized, or mixed textbook publishing policies. in addition, the territorial location of countries does not affect the degree of centralization or liberalization of their education policies, there are many examples of mixed models from the perspective of textbook publishing policies, and there is no single direction of movement (table 2). the most centralized systems operate in the states of central and south asia, in the countries of the former soviet union. bangladesh, india, nepal, and sri lanka have systems in which textbooks are free and cheaply produced. in bangladesh and india, textbooks are single-use only. outside of asia, many countries in the arab world also follow a policy of cheap, low-yield textbooks that are reprinted every year. a unique feature of the countries of the indian subcontinent is that many schools are not in the public sector, and therefore there is a viable for-profit educational publishing sector. many countries in east and southeast asia (notably japan, vietnam) have moved or are moving to a stateapproved textbook list system, in which commercial publishers must meet criteria set by the ministry of baltic journal of economic studies 177 vol. 9 no. 2, 2023 education (moe) and compete to promote their approved textbooks. in the people's republic of china, no publisher is purely private. in other cases, the ministry of education publishes individual textbooks in competition with commercial publishers. in indonesia's policy, books developed by the ministry of education compete with books developed by third parties for support for use in schools. in bangladesh, the bureaucratic response to the publication of textbooks by commercial publishers was mixed. although the government supported the policy, the publication of government textbooks continued, which eventually became a barrier to the private sector. in countries that have adopted textbook-of-choice policies, there is a rapidly growing educational publishing industry and publishers that participate in international associations and book fairs. some high-performing asian education systems have adopted a hybrid approach in which the ministry of education retains some responsibility for publishing textbooks in subjects in which the government has a national interest. in the republic of korea, textbook policy began to be liberalized in the 1990s: elementary schools can now choose between textbooks "approved" by the mo, for which schools can use their textbook funds, and "approved" textbooks, for which the school must raise its own funds. the content of subject textbooks (except english) for elementary schools in south korea continues to be developed by the mo, and manuscripts are submitted to publishers for editing, design, production, and delivery. mixed approaches often lead to tensions between state-owned publishers and the private sector. textbook publishing requires appropriate policies and governance that support the development of national publishing capacity and encourage new ideas from within and outside the country. in incremental steps, the government should evaluate the development of national commercial publishing capacity – this can minimize the risks associated with textbook costs. countries with centralized systems experience the most criticism of their textbooks in the media. to successfully publish textbooks under a hybrid model, such as in the republic of korea, moes need publishing skills and operations similar to those of the private sector. very few moes in countries without a strong commercial educational table 2 distribution of countries by type of textbook publishing system system type features countries centralized state publication the government, the ministry of education, fully controls the process of publishing textbooks by stages: manuscript preparation, prepress preparation and printing. in tajikistan and kyrgyzstan the first two stages are carried out by the government, in uzbekistan tenders are held for each stage. india, bangladesh, iran, vietnam (although there are plans to move to an alternative textbook policy), kyrgyzstan, tajikistan, uzbekistan, hungary. the system of state approval of the list of optional textbooks in most countries, schools select textbooks from a recommended list. the exceptions are japan (primary and secondary schools), where a local school board consisting of principals, head teachers, classroom teachers, and parents makes the selection on behalf of local schools, and china, where the decision is made by a provincial education department or city government. with the transition from a fully centralized system, with no real opportunity for schools to choose textbooks themselves, to a system of an approved list of textbooks of choice, publishers usually begin to actively develop in response to new opportunities for their business. usa (some states), germany (most states), austria, czech republic, chile, japan, prc, indonesia, hong kong, singapore, turkey, georgia mixed system the government issues textbooks for primary schools, and at later stages of schooling there is a state-approved list of textbooks from which to choose. independent selection of textbooks can be part of the autonomy of schools (administrative and professional), regardless of whether they operate in the system of state approval of the list of textbooks by choice or in the system of the open market. in this model, the school can become a driving force for continuous improvement of textbook quality. south korea, poland open market publishers may produce textbooks according to their own commercial priorities and sell them directly to schools. the federal government does not impose educational materials and methods of their selection on local authorities, but finances projects, studies the creation of educational programs and the production of educational materials, makes appropriate recommendations for their adoption and use. in some schools the opinion of parents' committees plays a dominant role in the organization of the educational process, up to the selection of programs and teaching methods. there is no single scheme of textbook adoption, there are different approaches. uk, usa (some states), australia, france, canada, netherlands, sweden, denmark, finland, italy, spain source: compiled by the authors according to (smart, jagannathan, 2018) baltic journal of economic studies 178 vol. 9 no. 2, 2023 publishing sector have been able to produce high quality textbooks. the combination of political necessity, economic efficiency, and the technical capabilities of publishers serves as the rationale for choosing a policy of liberalization or centralization. sometimes governments abandon a fully open market system and return to a system of government approval of a list of optional textbooks. one example is portugal, whose government introduced public evaluation and approval of a list of optional textbooks into a previously unregulated system in 2006 in response to the country 's low pisa scores ( joana de sousa and maria de lourdes dionísio, 2009). accordingly, countries around the world have adopted varying degrees of autonomy in the publication and selection of textbooks. asian countries typically have a policy whereby textbooks are evaluated and approved by the moe for selection by users. in contrast, in most european countries there is no prior approval: a school can use any textbook it wants, and public schools operate in the same way as private schools, but with public funding. 5. conclusions in most countries, the algorithm of modern textbook publishing is a fairly clear system, which includes the following elements: textbook writing and authorship; printing, publishing, and polygraphy; textbook distribution and use by teachers and students. despite recent advances in technology, the importance of textbooks has not diminished. the rationale for textbook publishing policies is valuable in that it can inform difficult decisions about investing in new technologies to support teaching and learning, while preserving and updating traditional textbooks and learning materials. a continually updated textbook policy can facilitate the allocation of budget resources between traditional print textbooks and digital materials; ensure consistency between curriculum, educational processes, and educational goals; and introduce innovation into the teaching and learning process. a well-designed textbook policy will help bridge the gap between print and digital materials and align textbooks to support improved student learning. most asian countries that have shown high results in international education assessments over the past 20 years have made changes to their textbook policies over this period, which have become integrated and comprehensively cover all stages of the school textbook cycle (curriculum, textbook writing, teacher training, pedagogy, student monitoring and assessment, etc.) and are characterized by the following innovations: a significant increase in the number of school textbook authors by involving teachers and methodologists with experience working in schools; acceleration of the pace of updating the content of school textbooks; creation and approval of a new, more objective model of examination of educational publications and a fundamentally new system of their evaluation according to the criteria proposed by the professional community; determination of quality criteria of the "new generation textbook", development of conceptual bases for the creation and publication of new types of textbooks; demonopolization of the market of educational literature and, as a result, development of competition between publishing houses, stimulation of improvement of quality of educational publications and limitation of increase of their prices, prediction of mechanisms to prevent oligopolization of the book market. the analysis of the policy of publishing textbooks of a number of foreign countries in the context of modern requirements for the quality of education showed that there is no universal publishing policy, the needs of each country correspond to its context – structural and content characteristics of educational publications, design, methodological features of the content of educational materials, illustrative materials used in textbooks, as a rule, reflect the ideology and educational policy of the country, national specifics and language (karimova, mikhalev, duysebek, 2017). in countries where the planning of textbook production and distribution does not take into account sustainable development, textbooks may be produced with high polygraphic quality (four-color printing, attractive illustrations, thick paper and hard covers), but at the same time they may be of low quality in terms of content because they do not match the level or cultural background of the students, may be gender biased, or may not relate to the cultural context of the students. clearly, textbook publishing policies that maintain tight control over production and printing facilities have economic consequences. if local publishers are not given the opportunity to produce and distribute textbooks and learning resources, the potential for developing and sustaining the supply of books and reading materials for the wider community is also greatly reduced. the right policy combined with good practice leads to the desired sustainable result. by studying the advanced processes of textbook publishing in different countries (especially on the issues of: textbook review, vetting and selection; textbook financing scenarios; strategies for their acquisition, avoidance and prevention of risks – components that should be included in national textbook policies), governments can obtain useful technical advice on best practices for developing and financing textbook publishing projects. baltic journal of economic studies 179 vol. 9 no. 2, 2023 international organizations, in particular unesco, support governments in formulating appropriate textbook publishing policies through the implementation of practices, with regular blogs and discussion forums, as well as a multilingual e-newsletter for researchers, teachers, textbook authors, publishers and curriculum planners. effective collaboration between the public and private sectors and civil society can be a powerful catalyst for textbook provision. it is therefore important to study the experiences of countries that are doing this effectively. references: education for sustainable development: a roadmap (2020). publisher: paris, unesco. available at: https://unesdoc.unesco.org/ark:/48223/pf0000374802 analysis of textbook policy in uzbekistan. ministry of public education of the republic of uzbekistan. united nations children’s fund in uzbekistan (2020). available at: https://www.unicef.org/uzbekistan/media/3741/ file/analyses%20textbook%20eng%20onepage.pdf 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(october, 2005). caught in the web or lost in the textbook? eighth international conference on learning and educational media. caen. available at: https://iartemblog.files.wordpress.com/2012/03/8th_iartem_2005-conference.pdf camden, b. (2017). single textbook approved for maths mastery teaching. schools week. available at: https://www.linkedin.com/pulse/single-textbook-approved-maths-mastery-teaching-grace-rowley/ chekriy, і. (2020). organizational and pedagogical activity of unesco in the field of school textbook creation: dissertation. ph.d. pedagogical sciences: 13.00.01; ternopil national pedagogical university named after v. hnatyuk. (in ukrainian) clement, g. f. (2017). exploring the influence of the singapore modeling method on prospective elementary teachers in a university mathematics course. publisher: atlanta: georgia state university. available at: https://scholarworks.gsu.edu/cgi/viewcontent.cgi?article=1035&context=ece_diss de guzmán, alfonso (2022). teachers and teaching gpe value for money guidance note. available at: https://assets.globalpartnership.org/s3fs-public/document/file/2022-08-value-money-guidance-note-teachersteaching.pdf ?versionid=hlr .yknh6jqf ejxitxo0a.7jzvo308.t dryndak, h. (2002). theory and practice of creating school textbooks on the native language for primary classes in the 1940s of the xx century. bulletin of the prykarpatsky university: pedagogy. vol. vii. ivano-frankivsk: plai, pp. 141–147. (in ukrainian) dziatkovskii, a. ( january 17-20, 2023). artificial intelligence and blockchain for modernise textbooks. the 2th international scientific and practical conference "modern education using the latest technologies". publisher: lisbon, portugal. international science group. 504 p. elbrekht, o. (2020). textbooks provision management of school education in the usa as a system. research notes. series "psychology and pedagogy research" (nizhyn mykola gogol state university), vol. 2, pp. 109–120. (in ukrainian) framework for the implementation of education for sustainable development (esd) beyond 2019 (2021). publisher: paris, unesco. available at: https://unesdoc.unesco.org/ark:/48223/pf0000370215.locale=en golovko, m. v. (2016). development of criterion basis of evaluation of physics textbook for general school. naukovi zapysky seriia: problemy metodyky fizyko-matematychnoi i tekhnolohichnoi osvity, vol. 9(ii), pp. 92–99. (in ukrainian) hlushko, o. (2017). genesis of textbook development sector in the ukrainian diaspora of the usa. problems of the modern textbook, vol. 18, pp. 13–21. available at: http://nbuv.gov.ua/ujrn/psp_2017_18_4 (in ukrainian) joana de sousa & maria de lourdes dionísio (2009). between the market and the school: textbook approval, selection and evaluation in portugal. available at: http://repositorium.sdum.uminho.pt/bitstream/ 1822/12663/1/sousa%20%26%20dioni%cc%81sio%2c%202010.pdf karimova, b. s., mikhalev, r . k., & duysebek, a. t. (2017). world training curriculum, major trends. bulletin kazakh national pedagogical university after abai series "pedagogical sciences", vol. 3(55), pp. 19–25. available at: https://kaznpu.kz/docs/vestnik/seriya_ped_nauki/ped_nauki_3_vestnik_2017.pdf (in russian) kodliuk, ya. p. (2004). textbook for primary school: theory and practice. ternopil: textbooks and manuals, 288 p. (in ukrainian) lavrut, o. (2016). creation of textbooks in the ukrainian ssr during the 1940s–60s: methodological and organizational problems. historical and political studies. vinnitsa: donetsk national university named after v. stus, vol. 1 (59), pp. 52–68. (in ukrainian) oecd (2019). "pisa 2018 reading framework", in pisa 2018 assessment and analytical framework, oecd publishing, paris. doi: https://doi.org/10.1787/5c07e4f1-en pingel, falk (2010). unesco guidebook on textbook research and textbook revision. parisbraunschweig: united nations educational, scientific and cultural organization i georg eckert institute for international textbook research. available at: https://unesdoc.unesco.org/ark:/48223/pf0000117188/pdf/ 117188eng.pdf.multi baltic journal of economic studies 180 vol. 9 no. 2, 2023 smagin, i. i. (2009). methodological bases of the theory and practice analysis of creation of school textbooks on social science subjects. visnyk zhytomyrskoho derzhavnoho universytetu. pedahohichni nauky, vol. 45, pp. 10–14. available at: http://eprints.zu.edu.ua/3045/1/2_45.pdf (in ukrainian) smart, a., & jagannathan, s. (2018). textbook policies in asia: development, publishing, printing, distribution, and future implications. publisher: manila: asian development bank, 98 p. strazhnikova, i. (2014). theoretical and methodological deposit of scientists in the process of creating text-books of the western region of ukraine (second half of the хх – the beginning of ххі century). pedagogy of creative personality formation in higher and secondary schools, vol. 38 (91), pp. 71–78. (in ukrainian) textbooks and learning resources: a global framework for policy development (2016). publisher: paris, unesco. available at: https://unesdoc.unesco.org/ark:/48223/pf0000232222_eng unesco education sector, division for the promotion of quality education, section of education for peace and human rights. a comprehensive strategy for textbooks and learning materials (2005). publisher: paris, unesco. available at: https://inee.org/sites/default/files/resources/unesco-comprehensive_strategy_ for_textbooks_2005.pdf vasagar, j. (22 july 2016). why singapore’s kids are so good at maths. financial times. available at: https://www.ft.com/content/2e4c61f2-4ec8-11e6-8172-e39ecd3b86fc received on: 06th of march, 2023 accepted on: 16th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 108 vol. 3, no. 5, 2017 corresponding author: 1 department of public administration and customs administration, university of customs and finance. e-mail: danyulya@i.ua 2 faculty of economic and technical sciences, state higher vocational school memorial of prof. stanislaw tarnowski in tarnobrzeg. e-mail: ibritchenko@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-108-115 net structure of subject-to-subject relations in the management of the system of administrative services provision yulya danshina1 university of customs and finance, ukraine igor britchenko2 state higher vocational school memorial of prof. stanislaw tarnowski in tarnobrzeg, poland abstract. the purpose of the work is to form the net structure of management of the system of administrative services provision on the basis of implementation of subject-to-subject interactions between state sector and civil society. methodology. the methodology basis for the investigation is the abstract-logical analysis of theoretical and methodological backgrounds for management of relations and interactions. for the theoretical generalization and formation of net structure, there are used scientific recommendations of ukrainian scientists regarding the necessity to implement subject-to-subject relations in the system of administrative services provision. results. the investigations allowed confirming that the hierarchical structure of the state governance system does not give an opportunity to implement equal interaction between a subject of provision and a subject of an appeal as these relations have one  – way communication and the feedback channel has a formal character. moreover, the civil society is not considered by state sector to be a source of methods and ways to develop the system of state governance, in particular, the management system of administrative services provision. practical meaning. the net structure of management will allow implementing the subject-subject relations in the system, under which the actions of the subject of provision  – that means state sector  – will be directed to the realization of rights and interests of the subjects of appeal. in their turn, apart from the performance of all legislative responsibilities that they should perform, they can carry out activities directed to the development of management activity in the system of administrative services provision and the whole system of state governance as an integral system of management. meaning/distinction. the provided model of the net structure will allow involving citizens in the processes of state governance and increasing the impact of the civil sector during the making of state and management decisions and, as a result, to confirm subject-to-subject positions in the relations. key words: management, system, net management, hierarchical management, subject of provision, subject of appeal. jel classification: h70, h73, h79 1. introduction during the last twenty years, ukrainian independent state is trying to form high-quality, clear, effective, decentralized management of the system of providing administrative services. however, the necessity of building powerful interrelations between the civilian sector and the state sector stipulates the search for such a management model that would, on the one hand, correspond with the spirit of modernity, on the other hand  – would not destroy the unity of three principles of the native system of state administration – permanence, anonymousness, and neutrality (mohov, oujen, 2000). therefore, we consider that an attempt to interpret, sift, and analyse the specificity of the network structure of the management of the system of providing administrative services and the process of interaction between the “subject of applying” and the “subject of providing” through the category “subjectsubject relations” is relevant and has a certain potential of scientific novelty and innovative recommendations for their improvement. the necessity of the above is reflected in domestic studies of the mechanisms of state administration (nyzhnyk, lelikov, mosov, 2001), in which it is emphasized that this is “... the relationship baltic journal of economic studies 109 vol. 3, no. 5, 2017 between two interconnected processes, when the first of them is a general one, and the second is specific, intended to realize the first...” 2. the hierarchical structure of subject-object relations the existence of systems with different patterns of construction, functioning and developing under different conditions, varying in the degree of structure ordering and depth of cognition (nechiporenko, 1977) led to an impressive number of definitions of the term “system”. in the encyclopaedia of state administration (surmin, nadolishnii, 2011) “system” is considered as a set of elements, characterized by the structure, connections and functions that ensure its intentional development as a whole. system is the opposite of chaos, disorder, disorganization; is characterized by such features as aggregate, plural number, integrity, orderliness, organization, hierarchy; is a combined set of elements (subsystems), which are expectedly connected with each other and with the objects of the environment; has different scales (micro-, macro-, meta-, mega-system), degree of complexity (simple, complex), nature (social, technical, physical, biological, chemical), openness form (open, closed), origin (artificial, natural), organization and adaptability; it is a complex of megasystems, subsystems, elements, components and their properties, the interaction between which predetermines the appearance of a qualitatively new integrity (mochernyi, 2006). summarizing the abovementioned definitions, should be noted the lack of a universally recognized scientific approach to the definition of the term “system” and the presence in the existing interpretations of similarities, the main features in its definition, which must be taken into account in the course of the research, namely: system is a process of interaction of its interconnected components between each other and with the environment; system has a certain goal  – the achievement of a qualitatively new state, level of integrity, and so on; system is characterized by structural elements (public institutions, people, subsystems, etc.) and management processes that are aimed at increasing the level of orderliness, organization of these elements and interaction with socio-economic, political, and other systems. considering the dichotomous nature of the concept of the term “system”, on the one hand, as an indicator of the reality of existing phenomena, on the other hand, as a method of studying and objectifying of phenomena, that is, as a subjective model of reality (korikov, pavlov, 2008), in our study the most decentish is the approach of n. buslenko (1978), which lies in identifying the main characteristics that define a certain component as a system. to such characteristics, in particular, refer: – presence of a certain amount of interconnected subsystems, functions that they realize, and directions for achieving specified goals of functioning; – permissibility of system dismembering into subsystems, functioning of which is aimed at the realization of the system goal; – obligatory presence of: management, extensive information network, dynamic information flows; – interaction with the environment under all conditions. the system of providing administrative services consists of the state sector, which includes the providers of administrative services, those are, as a rule, executive authorities, and non-state sector  – the recipients of administrative service, those are individuals and legal entities. taking into account the provisions of the law (pro administratyvni poslugy, 2012), regulating the sphere of providing administrative services, which determinates the provider as a “subject of providing” and the recipient – as a “subject of applying”, thereby puts in the structure of the system of providing administrative services “subject-subject relations”. supporters of the integration of the “feedback” defend the reasonability of organization of such relations between the elements of the socio-economic system (petrenko, dzvinchuk, nemchuk, 2012), however, studies of this phenomenon in the system of providing administrative services are limited to subject-object relations, that is, on a unilateral basis, in which: the subject of management or the management system is the subject of providing, that is, the state administrative authority, the subdivision of administrative authority or the designated person, suggesting and accepting state and administrative decisions concerning the implementation of the controlled impact on subordinate objects of management or regulation of certain processes and relationships. and the object of management or a managed system is the subject of applying, that is, a society as a whole, processes, relations in various fields, spheres of activity, branches of public life, organizations, associations on which the activities of the relevant subjects of management are directed; a set of connections of a system of management relations in their interaction. according to the constitution of ukraine (2016), there are three types of authorities, directly providing state administration and state-management activity aimed at providing administrative services: ‒ central  – verkhovna rada of ukraine, cabinet of ministers of ukraine, ministries and institutions, the status of which is considered to be state; ‒ zonal – regional, district, city state administrations of kyiv and sevastopol, autonomous republic of crimea, and territorial bodies of central executive authorities; ‒ local  – rural, settlement, city, district councils, including kyiv and sevastopol, autonomous republic of crimea councils. baltic journal of economic studies vol. 3, no. 5, 2017 110 the interaction of these authorities is directed, first of all, to the realization of interaction in the system of providing administrative services of ukraine as an activity on ensuring the realization of the rights and freedoms of citizens. in our study, we rely on the simultaneous use of terms of state and public administration authorities depending on the subject-matter of the represented context. the structure of the state administration of the system has a pronounced hierarchy (figure 1), where a higher hierarchical level affects the lower level, despite the partial delegation of management functions. relations between levels are dependent on the laws of subordination; levels are unequal and interact with each other according to the principle of “powersubordination” (oslavskyi, 2009). it also should be pointed out that, despite the generally widespread understanding that the process of improving the system of providing administrative services is closely connected with the opinion and attitude of subjects of applying to the activity processes of the subjects of the providing, most theoretical models, practical recommendations, and methodological developments on the formation and improvement of the system is exclusively on the subject-objective positions, and the feedback in these relations is considered exclusively as a channel for complaints and negative reviews by citizens concerning the functioning and performance of their duties by subjects. as a rule, goals, tasks, functions, methods, levers, tools, incentives, motives, structures, and so on are chosen as a topic for the research, improvement and modernization. thus, in writing of scientists i. koliushko (2009) and v. tymoshchuk (2015), the organizational and legal grounds of administrative services during the period of administrative reform are examined. the authors believe that the system of providing administrative services in ukraine is non-clear, irrational, and is one that does not fully take into account the interests of ukrainian society. scientists emphasize the need for creating an effective and high-quality procedure for providing administrative services to citizens because exactly for the quality of the provided services each person assesses the state’s concern for him. v. bakumenko, yu. kalnish, s. kravchenko, and other scientists are convinced (2005) that the main tasks of administrative reform are the formation of an effective system of public administration; the providing of quality services to citizens at a level corresponding to european standards; optimal usage of public funds and the ability to react to socio-economic and foreign policy provocation timely and adequately. a. obolenskyi (2005) considers as one of the main tasks of the ukrainian state the providing quality administrative services to civil society. the scientist focuses on the need for detailed study of the statutory and legal regulating of the mechanism of state administration of the system of providing administrative services, their list, cost, criteria for assessing the quality of their providing, etc. researchers a. lipentsev and yu. zhuk assert that the system of providing administrative services in ukraine requires further improvement and legal response, because, first of all, it depends on the effectiveness of state administration authorities, state servants, and officials who are directly involved in the providing of administrative services (2015). during the developing of the formation concept of the system of providing administrative services by state administration authorities in ukraine, t. burenko (2011) defines such principles for further improvement: – measuring the effectiveness of the state administration authorities activity, based on the results of the developed correspondent criteria of resulting quality for each state service; – the work of state administration authority for the needs of the subjects of applying; zonal level level central level level sp local level level sp sp sa sp sa – subject of providing – subject of applying – hierarchic interaction – applicative interaction fig. 1. the hierarchical structure of management of subject-object relations baltic journal of economic studies 111 vol. 3, no. 5, 2017 – maximum satisfaction with legal requirements of recipients of subjects of applying at minimum costs; – application of audit elements of activity of the state administration authorities; – activation and consolidation of state, private and public sectors in the development and realization of policies on providing of administrative services by state administration authority. existing scientific researches in ukraine reflect the content of the system of providing administrative services as a complex socio-economic system consisting of a set of elements and relationships of subject-object relations that are regulated by statutory and legal acts in the state-administration activity of the subjects of management, activity of which is aimed at satisfying the public interest in reviewing the application of an individual or legal entity and issuing an administrative act to ensure the rights and legal interests and/or to implement certain statutory duties. 3. the network structure of subject-object relations it is quite obvious that a symmetrical model is also up for consideration, in which the subject of applying acts as a subject of management and the management system, and the subject of providing  – as the object of management and the controlled system, the essence of which is to be thoroughly studied in order to identify opportunities for improving and modernizing processes of state administration, by the participation of the subject of applying in the processes of state administration and influence on the adoption of managerial decisions. a network structure is a set of interrelated subjects, the specific content of which depends on the nature of the system. the network form allows adapting quickly to external dynamic conditions. according to the opinion of m. castells, the society is in the dissemination of the network organizational culture, which up to now has not claimed to be the dominant role but in terms of efficiency is higher than the hierarchical one. “the networks constitute a new social morphology of our societies and the spread of “networked” logic largely affects the course and outcome of the processes associated with production, everyday life, culture, and power” (stanovlenie obshhestva setevyh struktur). under this approach, not only state structures but also civil society should have a right to receive and analyse information on state-management activity, participate in the adoption of relevant decisions, and not only control their implementation and monitor the quality of administrative services but also introduce and realize proposals for improving administration activity. represented information demonstrates obvious that in order to have the state administration system, which corresponds to an adequate state in relation to the modern international tendencies of the information society, it is necessary to promote the rise and construction of civil society institutions that adequately ensure the clearness of the activity of state administration authorities, protect public interests and would be able to realize their rights and freedoms. despite its importance, the constitution of ukraine does not contain the definition of this term; only some of its elements are reflected, such as private property, market economy, human rights, political pluralism, freedom of speech, multiplicity of parties, etc., however, the constitution (2016) contains the fundamental principles of “civil society”, for example, art. 8 enshrined the rule of law. the construction of a civil society in ukraine will allow the relationship between the subject of applying and the subject of providing to reach a new level, primarily characterized by the quality of the providing of administrative services by state administration authorities. prominent ukrainian scientist b. kistiakovskyi long before the beginning of the state administration reform in ukraine noted that “the basic component of the system of human rights and freedoms is the individual’s right to positive services from the state” (1998). however, only in 2009–2010 this assertion acquires significance and becomes the fundamental principle of the modern system of state administration in ukraine. the paradigm of modern state administration being under reform is perfectly considered by the native scientist v. averianov, representing it as an “integral set of coordinated measures aimed at significantly increasing the level of controllability of vital processes in society through scientifically based creation of an effective mechanism of state administration, development of administrative legislation, improvement personnel, informational-technical and financial-economic support of organization of executive government and local self-administration” (averjanov, 2004). from modern approaches to the content of the term “civil society” interesting are the following: – the society of self-expression of free active citizens and on the voluntary basis of formed associations and organizations that do not pursue commercial goals, which are not dependent on direct intervention and regulation by the state sector and the business sector, as well as other external factors (easton, 1965); – one of the guarantors of observance of human rights, the totality of public relations of an integral state but beyond the power-state and commercial structures (barenbojm, 2010). under this approach, the system of providing administrative services remains a complex socioeconomic system, but consists of a set of elements and interconnections of subject-object relations, in which the activity of subjects of applying, civil society, and just interested individuals is aimed at searching for methods and ways to improve the system of state administration. baltic journal of economic studies 112 vol. 3, no. 5, 2017 4. hierarchic and network structure of subject-subject relations a quite difficult problem is the connection of elements → subsystem → system into an integrated model that would adequately describe the system functioning taking into account the interaction of its various subsystems. this is connected both with the complexity of the state administration system, system of providing administrative services and with the incomplete study of all the laws of their functioning. the management of the system of providing administrative services, which is, on the one hand, connected by the communication channels with many other systems and is a subsystem of the state administration system, on the other hand  – is itself a complex system characterized by heterogeneous infrastructure and requires a rethinking of the ways of improvement, the transformation of which leads to significant transformations in social and economic relations, which naturally affects its structure, which becomes more complex, because the network is superimposed on the hierarchical structure, forming a complex hierarchical-network structure (fig. 2). the complexity of the system is determined by the number of levels of system partitioning into subsystems, the uniqueness of the elements that form them, the set of functions performed by them, the number of interactions with other, multiplicity, and heterogeneity of reactions to the influence of external and internal factors, all this indicates the relativity of the concept of complexity and blurring of the “complexity limit” (barabási, 2007). in this way, under a hierarchic network structure, we mean a system, in which each subsystem at a certain level is a system, in other words, a network subnet. however, the above level, except influencing the underlying level, interacts with it, by acquiring new properties from the network subnet, which they did not have in the isolated state, the possession of which allows the system to be endowed with new, significant qualities (volkova, denisov, 2014). management of the system of providing administrative services, which has a hierarchical-network structure, we consider as more difficult than hierarchical. however, such a structure is temporary, because it is considered by us, exclusively as a transitional form to the network structure of the system of providing administrative services, which assumes a simpler form than a hierarchical. 5. the network structure of subject-subject relations the key factor in the availability of subject-subject relations in management (figure 3) is the receipt from civil society of not only the quality requirements of zonal level level sp c sc – subject of providing – citizen – civil society – hierarchic interaction – network interinstitutional interaction – collaborative interaction – applicative interaction – network interaction of citizens – stakeholder interaction central level level sp sp sp sp sp sp sp sp sp local level sp sa c sc c sa fig. 2. hierarchic and network structure of subject-subject relations baltic journal of economic studies 113 vol. 3, no. 5, 2017 management processes, the quality of providing administrative services, information as responses to subjects of treatment, participation in voting, but also knowledge and opportunities to implement ways to improve the management of the system of providing administrative services. an attempt to reveal the content of the process of interrelations between the “subject of applying” and the “subject of providing” was made by d. sukhinin. however, the proposed scheme interpretation of “... the process of ensuring the quality of activity for the providing of municipal services”, which took into account the requirements of the “methodology for describing processes idefo” (popov, 2011), despite the importance and general character, does not reveal the essence of the process itself. the scheme of the researcher, like in most domestic studies of various possibilities and aspects of improving public administration, “subject-subject relations” uses a theoretical axiom as a defined givenness. taking into account that subject-subject relations will allow the system to determine “... deviations of the system from a certain state for the formation of a control action” (hlushkov, 1973), but “... the existence of channels for the receiving by the authorities information about the assessment of certain aspects of its activities by the population, public organizations, business circles, other government structures” (kovalevich, 2008), makes it possible to assert that the participation of citizens in the processes of state administration and the influence on the adoption of managerial decisions will allow the processes of self-organization, self-regulation, and selfmanagement in social systems to become possible. exactly in this regard, the formation of the network structure of subject-subject relations in management is the priority task of any participant and subjects of the system of providing administrative services. after all, “... the system of state administration is integral, consisting of certain interconnected subsystems, a set of elements that form a certain unity, integrity, and function in the interrelations and interconnections among themselves” (bakumenko, beznosenko, varzar, knjazev, kravchenko, shtyk, 2002). 6. conclusions the current state of management of the system of providing administrative services is analysed and it is determined that most of the domestic scientific research is devoted to the study of subject-object relations, despite the fact that the system of providing administrative services has a subject-subject structure, and management can be viewed in a symmetrical direction. taking into consideration that the system of state administration is a coherent system, it is proposed to implement the network structure of subject-subject relations, in which the result of interaction, on the one hand, will be activity aimed directly at the providing fig. 3. the network structure of subject-subject relations in the management of the system of providing administrative services sp c cs – subject of providing – citizen – civil society – network interinstitutional interaction – collaborative interaction – applicative interaction – network interaction of citizens – stakeholders interaction sp sp sp sp sp c c cs c sa – subject of applying sa central level level baltic journal of economic studies 114 vol. 3, no. 5, 2017 administrative services and all the processes associated with this activity, namely, ensuring quality, transparency etc., on the other hand – activity aimed at improving 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(2014). teoriya sistem i sistemnyy analiz [theory of systems and system analysis], no. 2. moskva: yurayt. baltic journal of economic studies 175 vol. 3, no. 5, 2017 corresponding author: 1 department of marketing, national aviation university. e-mail: tatiana.kniazieva2017@gmail.com 2 department of marketing, national aviation university. e-mail: kup@gmail.com 3 department of marketing, national aviation university. e-mail: s_f_smerichevsky@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-175-182 method of strategic planning and management decision-making considering the life cycle theory tetiana kniazieva1, yuriy kolbushkin2, sergiy smerichevskiy3 national aviation university, ukraine abstract. the subject of the study is a set of theoretical and methodological aspects of development strategy formed for objects (country, region, branch, enterprise) on the basis of the life cycles theory under the external environment uncertainty. the methodology of strategic planning under the external environment uncertainty with the consideration of the life cycle theory includes: the definition of key criteria for assessing the product lifecycle, the definition of the limits scope for the solvable problem, the definition of parameters of models stability, the formation of models for analysis, setting the problem under uncertainty, the mechanism of step-by-step adjustment, and effectiveness assessment of strategic decisions based on strategies, the algorithm for the integrated assessment of the strategies effectiveness taking into account the uncertainty factors. strategic planning is not characterized by temporal intervals but by a set of strategies, each of which is determined by the ways of achieving the main object objectives. for a rapid analysis of the product life cycle, the external indicators are used, such as: the growth rate of the product market, the relative growth rate of the product (compared to the growth rate of the entire market of the region or country), the firm market share, the firm relative market share (compared to the market share of leading competitor), and internal indicators, such as: the dynamics of enterprise revenue by product, the dynamics of company profits by product, the dynamics of enterprise profitability by product, the dynamics of enterprise investment. for each indicator that describes the enterprise performance, the directions of change are taken: α – growth, const – constant or β – decrease. the methodology involves a certain sequence of studying the product life cycle in retrospect and at the current moment, then the modelling and development of options for shortand long-term strategies implementation are made. results of the survey are to substantiate the methodology of strategic planning under conditions of external environment uncertainty with the consideration of the life cycle theory. practical implications: the possibilities of using life-cycle models allow: 1. reasonably predicting sales and plan production program; 2. determining the basic strategies at different stages of development; 3. determining the sequence of stages of enterprise development; 4. ensuring harmonious interaction of organizational characteristics with the external environment factors that influence the process of organizational development. increasing the sustainability of the organization’s development can be achieved by re-establishment of dynamic changes in the plan in terms of using effective methods for forecasting with the consideration of the life cycle theory. it is necessary to take into account the interconnection between all levels of life cycles: industry, technology, enterprises, product; ensuring the competitive advantage of the organization. using the theory of optimal solutions making in uncertain conditions under the analysis of long-term projects allows transferring qualitative factors into quantitative indicators that can be used in the future to bring investment projects to the same kind and choose the best. in conditions of increased uncertainty of the external environment, it is necessary to develop the theory of enterprise management, taking into account its life cycle, as well as the life cycle of its separate elements and processes at all levels. combination of strategic management with the life cycles theory will increase the objectivity and effectiveness of taken management decisions. the accounting of the organization life cycles in strategic planning allows choosing an effective strategy. key words: life cycle, portfolio analysis, strategic areas of management, financial results, management decisions efficiency. jel classification: d15, е32, l1 baltic journal of economic studies 176 vol. 3, no. 5, 2017 1. introduction it is important to note a significant contribution to the development of the strategic planning theory and practice of such foreign experts as i. ansoff, m. weber, h.-l. gantt, m.-h. mescon, f.-w. taylor, h. fayol and others; domestic scientists-economists: o.  amosha, v. heiets, b. danylyshyn, m. dolyshnyi, m. melnikova, a.  muzychenko, o.  povagny, etc.  to the theme of life cycles theory, many works of domestic and foreign authors are devoted: i.  k.  adizes, l.  greiner, d.  katz, r .-f.  kahn, h.  lippitt, t.  malaya, o.  minochkina, yu.  shambel. most of the work focuses either on the common use of the life cycles theory and forecasting or on the application of the life cycles theory in the system of strategic planning and management. at the same time, the issue of strategic planning integrated study of the life cycles theory and the uncontrolled external conditions accounting remain insufficiently studied despite a large number of works in this area. from the point of view of practical implementation among the most actual and complicated tasks, the following can be named: 1. application of the life cycles theory in quantitative prediction of the economic systems development. 2. identification of factors that determine the stage of the system’s lifecycle and key factors that influence the development of the system at each stage of the life cycle, management of the life cycle system. 3. instruments for determining the stages of the development of the system life cycle. 4. accounting for uncontrolled and controlled factors in the formation of a system development strategy based on the life cycle theory. 5. adjustment of the life cycles of the system elements (for example, when forming an optimal market portfolio that consists of the organization strategic business units). the purpose of the research is to reason the strategic planning methodology under an undefined external environment with the consideration of the life cycle theory. the scientific novelty of the research is to improve strategic planning in conditions of undefined external environment taking into account the life cycle theory of the object that includes: the definition of key criteria for the product life cycle assessment, the definition of the scope of limits for the solvable problem, the definition of parameters of models stability, forming models for analysis, the mechanism of step-by-step adjustment and assessment of strategic decisions effectiveness on strategies. the methodology assumes a certain sequence of the product lifecycle study in retrospect and at the current moment. then the short and long-term strategies modelling and development of options for their implementation are made. the life cycles theory has been applied in relation to different systems and processes: countries, regions, industries, types of activities, enterprises and organizations, technologies, strategic business units, manufactured products, etc. there are over 1.5 thousands of different types of economic life cycles of systems. among the most famous are greiner growth phases, joseph kitchin inventory cycles, jaglar’s machinery and equipment investment cycles, kuznets cycles, kondratiev cycles. the following issues are considered in the research: the theoretical aspects of strategic planning and management at the modern stage are discussed, the necessity of taking into account the stages of life cycles in strategic planning is reasoned, method of strategic planning of the life cycle stages is improved, an algorithm of strategic planning under conditions of an indefinite external environment and accounting uncontrolled factors is formulated. economic history and modern economic practice indicate that the rise and fall of business activity at the megaand macro-levels are largely conditioned by two factors: scientific discoveries in the production means; great (sharp) changes in the political superstructure and economic relations of the states. the analysis of micro-level cyclic fluctuations is carried out on the basis of life cycle product models, the organization’s life cycle, the technology life cycle, etc. from the practical point of view, the applicability of the life cycles theory in the strategic planning of business entities is especially interesting. 2. theoretical aspects of strategic planning and management at the present stage the modern concept of strategic management assumes the governance by various economic systems (country-region-company). as a result of the evolution of the corporate planning eras, when the management concepts were influenced by changes in production and the environment in the 60s and 70s of the xx century, the basis of strategic management was formed. currently, the methods of strategic management are used by the government, the cities and regions administration, large corporations, state enterprises, various non-profit organizations. strategic management methods allow using and developing the competitive advantages of the economic system in unstable external environments. with large flows of information, a high degree of external environment uncertainty or variability, there is a need to systematize information throughout the life cycle of the analysed object. the effectiveness of implementing cals-technologies for ordering, encoding, classifying, storing, and transmitting information over life cycle stages is highly appreciated. comprehensive accounting and information usage allow creating the necessary base for analysis, forecasting, and planning of the company’s activity, increasing the validity of strategy development, revealing false strategies, making it possible to adjust the enterprise plans and budgets in time. the effectiveness and the possible set of strategies depend on the stage of the object life cycle. the baltic journal of economic studies 177 vol. 3, no. 5, 2017 following can be pointed as the main life cycles stages: 1 – formation (creation, origin, emergence), 2 – development (intensive growth), 3 – stabilization (maturity), 4 – crisis (decline, aging, liquidation). for example, the enterprise features depending on the life cycle stage clearly demonstrate the difference in requirements for the strategies formation (table 1.1). if on the first stages of the company’s lifecycle flexibility and adaptation to changes are high, the company is able to modify and correct the strategy quickly, and then at the next stages, the high inertia of the existing organizational and management structure exists. at the early stages of the company’s development, there is a high probability of a bankruptcy over the internal weakness of the company in comparison with existing competitors, at the next stages, the probability of the crisis is determined by the degree of inertia to external changes. an example of the formation of basic strategies at each stage of the life cycle is given in table 1.2. 3. reasons to consider life cycles stages in strategic planning when considering the life cycles theory, one operates the following concepts: development, sustainable development, organizational development, organizational changes, systems development laws, life cycle stages, etc. there are four main approaches for managing organization’s development related to the theoretical description of the enterprise operation: firm’s neoclassical, institutional, evolutionary and entrepreneurial theories. various aspects of the enterprise activity are the objects of attention of each of the listed theories. for example, the neoclassical theory considers an enterprise as a table 1.1 features of the strategies formation at different stages of the company’s lifecycle stage name entrepreneurship stage collectivity stage formalization and management stage stage of structure creation decline stage stage feature unclear goals, high creative possibilities informal communication and structure; high commitment rules formalization; stable structure; emphasis on efficiency structure complication; decentralization; diversified markets; uniqueness high personnel turnover; growing conflicts focus of stage strategy the strategy is aimed at: identifying consumer needs, survival, and concentrated growth the strategy is aimed at: expanding the contact audience, integrated growth the strategy is aimed at: conformity to the external environment and ongoing changes, balanced growth, image formation the strategy is aimed at: the formation of an optimal portfolio, effective investments redistribution, coordination, social factors, differentiated growth the strategy is aimed at: survival, resources mobilization, search for the ways and means to resist the crisis, elimination, harvesting, costs reduction source: systematized by the authors taking into consideration (chandler, 2015; chaffee, 2011; meier, 2015) table 1.2 basic strategies at different stages of the lifecycle lifecycle stage strategies note creation and development start business strategies, market penetration strategy, and survival strategy capital attraction, production base forming, free market segments identification, competitors fighting, maximal risk growth the increase of production strategy, range expanding strategy, sales and profitability growth strategy, integration strategy (market segment seizure) additional capital attraction, production base development, market infrastructure establishment, profitability growth, own market segment definition, average risk stabilization sustainable growth strategy, stability strategy, the strategy of competitive position keeping (maintaining), the strategy of keeping the achieved profit level, minimizing costs strategy, conservative strategies the stable financial condition, organizational and industrial structures are formed, communications in the external environment are established aging loss-making practices eliminating strategy, over-the-counter assets eliminating strategy. reducing production volumes strategy. improving products, technology, business strategy. effective market portfolio formation strategy fixed assets depreciation, product competitiveness deterioration, lack of financial resources renaissance cost reduction strategy. survival strategy. unprofitable directions elimination. modernization of existing and creation of new production management strategy adjustment. financial resources involvement, new technologies search and introduction, market positions restoration source: developed by the authors taking into account (higgins, 1993; kotler, 1991) baltic journal of economic studies 178 vol. 3, no. 5, 2017 “black box”, which converse the output resources into products; institutional theory pays much attention to operating costs savings; evolutionary theory suggests that the goal of any organization should be the development of organizational features according to the environment variables; entrepreneurial theory studies the relationship between the entrepreneur and his business. all this speaks about the variety of views on the process of managing the enterprise sustainable development. the main task of the research in the field of life cycles building and the main approaches to the management of enterprises development studying is to identify the key factors that determine the development process. in conditions of increased external environment uncertainty, it is necessary to develop the enterprise management theory, taking into account its life cycle, as well as the life cycle of its separate elements and processes at all levels. the combination of strategic management with the life cycles theory will increase the objectivity and effectiveness of the management decisions taken. accounting of organization life cycles in strategic planning allows choosing an effective strategy. there are many different growth models of the enterprise (organization) and their classifications: lifecycle models of adizes; stage models of lippitt and schmidt phases; evolutionary models (grainer’s evolutionary models); transformation models (transition models of hofer, charan, christensen). the listed models are mostly symbolic, they do not contain the quantitative criteria for describing the life cycle stages, and the transition to the next stage is explained by the crisis in the system. the modern approach to build organization life cycle involves such qualitative indicators as intangible assets: a strong brand, knowledge and experience of key employees, relations with clients and partners, use of advanced technologies, etc. the products, technology, and demand of life cycle accounting allow coordinating the enterprise products range with its production capacity, new technologies and market demand under strategic planning. the modern approach to the creation of the organization life cycle involves such qualitative indicators as intangible assets: strong brand, knowledge and experience of key employees, relations with clients and partners, use of advanced technologies, etc. interest is the ratio of the different types of life cycles duration (table 1.3). analysis of the life cycles types in the industry, demand, technology, enterprise (organization), product focuses on identity problems of the practical application of different types of life cycles. as a result, a number of situations may be considered (rumelt, 2014): 1) industry, technology, enterprise (organization), and product – all of them are at one stage (for example, the stages of origin or growth, maturity, decline). 2) stages of the industry, technology, enterprise (organization), and product are different. the main reason for the differences in the life cycle stages of the industry, demand, technology, enterprise, product lays in the duration difference of the life cycles stages and the objects under study. many aspects of the life cycle analysis are determined by the peculiarities of the country or industry. there are industries where the product characteristics have been already formed by demand and practically unchanged, but products output technologies are rapidly changed due to the high level of competition. sometimes, on the contrary, the technology used to produce one type of product continues to be used for the production of other product types related to a completely different field of activity (for example, many inventions in the field of chemistry are used further in medicine, food industry, etc.) (schendel, 2002). demand can be satisfied by one type of product or service throughout all life cycle, in this case, the duration of demand life cycle and product lifecycle coincide. demand during its life cycle can also be met by several types of products or services. comprehensive life cycle accounting of the industry, technology, enterprise, the product will improve the efficiency of the decisions made at all levels of enterprise management, as well as provide an opportunity to form an optimal strategic portfolio for the enterprise. 4. strategic planning methodology for life cycle stages to create the proper strategy for a particular product selection, it is necessary previously consider the trajectory of its development that is its life cycle. to do this, it is necessary to systematize the task solutions: to determine the set of key indicators, the range of their changes, and then consider all possible situations. table 1.3 alternative life cycle theories type of life cycle characteristic duration need the main condition for the buyer appearance uncertain demand specific solution for the need satisfaction problem very long period technology scientific and technical capabilities short period product product created with using special technical solutions more short period product modification the main model type very short period trade mark name assigned by the manufacturer to the product long period source: developed by the authors taking into account (pearse, 1985; steiner, 2007) baltic journal of economic studies 179 vol. 3, no. 5, 2017 for a rapid analysis of the product lifecycle, the external indicators are used: the product market growth rate, the product relative growth rate (in comparison with the growth rate of the entire market of the region or the country), the firm market share, the firm relative market share (compared with the share of leading competitor), and internal indicators: the dynamics of enterprise revenue by product, the dynamics of company profits by product, the dynamics of enterprise profitability by product, the dynamics of enterprise investment. this is a standard list of factors used for portfolio analysis. such a set is reasoned by its visibility, possibility of quantitative accounting over time, relative ease of getting. other indexes for strategies adopting can be used at the qualitative level, for example, technological change, political, macroeconomic factors, etc. for each indicator that describes the enterprise performance, the directions of change are taken: α – growth, const – constant or β – decrease. the methodology involves a certain sequence of studying the product life cycle in retrospect and at the current moment, then the modelling and development of options for short and long-term strategies implementation are made. the method of enterprise product strategic planning at the stages of the life cycle involves the following algorithm, presented in figure 1.1. the construction of these models can be used to select a limited number of the product key parameters of the business entity. further development of models assumes the probability tasks for the economic entity state, taking into account uncontrolled and controlled factors. 5. strategic planning under indefinite external environment: uncontrolled factors accounting all factors variety is divided into related, unrelated, controlled, and uncontrolled. there are several possible situations, combinations of strategies and uncontrolled factors, in which the effect is determined. uncontrolled factors accounting is especially important for the evaluation of innovative and risk strategies or strategies adopted for a dynamic external environment. the strategy assessment is determined on the basis of the project effect that implements the strategy under specific conditions. the definition of strategic project fig. 1.1 the methodology of the enterprise product strategic planning at the life cycle stages (improved by the authors with taking into account (mintzberg, 2008; rumelt, 2014)) і stage: task setting: definition of key criteria for assessing the product life cycle, definition of the limits scope for the solvable problem, definition of parameters for developed models stability, forming models for analysis іі stage: forming models for analysis: model 1. improvement of the company’s competitive position in the market in retrospect. model 2. stable company’s competitive position in the market in retrospect. model 3. deterioration of the competitive position in retrospect. model 4. improvement of the company’s competitive position in the market at the moment. model 5. stable company’s competitive position in the market at the moment. model 6. deterioration of the competitive position at the moment. ііі stage: situations and base strategies for every model forming: situation 1. growing market capture strategy (leader follower strategy in the growing market). situation 2. falling market capture strategy (leader follower strategy in the falling market). situation 3. competitive position keeping strategy on a growing market (strategy of maintaining a competitive position in a growing market). situation 4. competitive position keeping strategy on a falling market (strategy to maintaining a competitive position on the falling market). situation 5. exit strategy from growing market (forecast of foreclosure from growing market). situation 6. exit strategy from falling market (forecast of foreclosure from falling market). iv stage: optimal strategy selection v stage: development of a mechanism for optimal strategy implementation and adjustment for every stage of the life cycle with consideration of uncontrolled factors baltic journal of economic studies 180 vol. 3, no. 5, 2017 effect is based on the cash flows theory. the main feature of this theory is taking into account the time factor when the most effective project is selected. the need to record the time factor is reasoned by the fact that the useful results and costs, distributed in time, have different values. investments (in particular, capital investments) and operating costs can be distributed in time in different ways. usually, it is assumed that the time factor should be taken into account when analysing projects with several years duration. however, under market conditions and unstable economy (transition economies), economic processes become much more dynamic. the uncertainty factor of the analysed processes significantly increases. the performance criteria for assessing the effectiveness of long-term projects are: economic effect (net present value), profitability index, internal rate of return, investment return period. the risk and uncertainty factors get the first place under assessing qualitative criteria. the larger the investment project in terms of scale, time, territory, the more sophisticated technologies are used in it, the more unstable situation for the project implementation, the more important role the quality factors in the projects evaluation play. the importance of selection by quantitative criteria is reduced over the lack of reliable data and the possibility to predict them. therefore, the need for selection and ranking based on quantitative criteria for mathematical accuracy of their calculation is reduced. with high instability, the unpredictability of a number of investment project features the necessity to take into account the uncertainty factor is set in the first place. this is especially important for the instability of the transition period of the domestic economy and the uncertainty of the environmental factors influence on the process of strategy implementation. use of the theory of optimal decision-making under uncertainty for the analysis of long-term projects allows transferring the qualitative factors into quantitative indicators, which can be used in the future to bring investment projects to the same kind and choose the best one. based on the above, there is a need for a comprehensive consideration of time, uncertainty, and risk factors. to solve this problem, it is necessary to develop a methodology, principles, and methods for selecting effective projects taking into account these factors. the methodology for strategic planning under indefinite environmental conditions taking into account the temporary factor is given below. the methodology includes: 1. justification of the need to take into account time and uncertainty factors for assessing the strategy when using a profitable approach. 2. mechanism of step-by-step adjustment and evaluation of the strategic decisions effectiveness. 3. the algorithm of complex estimation of strategies efficiency indicators taking into account factors of uncertainty and time. setting a task in conditions of uncertainty implies a multivariable solution for each time interval. this situation is the most realistic, especially for the unstable economy, transition economy, as well as for innovative projects, within which the strategy is implemented. in order to account all options for task solution, development of step-by-step adjustment mechanism and strategic decisions effectiveness evaluation are necessary. the methodology of multi-step processes under uncertainty has been considered in many works (mintzberg, 2008; pearse, 1985; steiner, 2007). we will use a methodology for developing a mechanism for step-by-step adjustment and evaluation of the strategic decisions effectiveness under uncertainty (table 1.5). the latter task setting increases the requirements for a set of output data, a choice of different values of the effect at the same ratio of controlled and uncontrolled factors at different times, at different stages. table 1.4 the methodology of step-by-step adjustment and evaluation of the strategic decisions effectiveness under uncertainty stage features stage economic expression note 1. indicators of effectiveness, by which the strategy can be evaluated, are determined å e e ek= { , ,..., }1 2 quantitative performance indicators include: additional profit, revenue, or cost decrease by using a new business strategy in the existing market; profit, capital investments profitability at strategy commercialization on a new market, in a new product. 2. many factors that influence the selected performance indicators are formed f f f ff= { , ,..., }1 2 it is chosen the principle of the decisions making optimality depending on the conditions: nothing is known about the probability of environmental factors; the probability of the environmental factors influence is known; it is necessary to exclude any risk; risk is allowed; the solution is implemented one or a small number times; the decision is realized many times, etc. 3. horizon of calculation is determined ò ti i g = = ∑ 1 the maximum horizon of calculation for the strategy implementation depends on the stability of the external environment, industry, type of strategy. baltic journal of economic studies 181 vol. 3, no. 5, 2017 however, the set of task solution allows: taking into account all the diversity of strategies and environmental factors at each stage of time; determining the effect for a number of years (stages) with a variety of participants’ (decision-makers) behaviour. 6. conclusions the growing dynamics and uncertainty of external environment require the search for new management and decision-making methods that provide the enterprise (organization) with the ability to react quickly and with minimum expenses to the changes in the external environment. continuous, unpredictable changes are an indispensable condition of the modern business. ups and downs of business activity at different levels of macroand micro-environment within the organization are conditioned with various factors that should be taken into account in the management process. it is necessary to consider laws of systems development and life cycle at all management levels. the duration and cycle stages of each economic system depend on factors that can be classified into external and internal, managed and unmanaged. an issue of unmanaged factors forecasting and effective strategies developing for managing both the system life cycle and its elements life cycle arises. there are many models and methods for managing the enterprise development: network planning, business planning, scheduling, financial planning, operations research, etc. they allow solving managerial tasks under the condition that the factors that influence the future of the enterprise are constant or can be predicted with some degree of probability. however, with the uncertainty of environmental factors that grows, the efficiency of these models and methods is reduced and additional methods that would allow solving tasks in conditions of uncertainty and would increase the strategic planning accuracy and validity are needed. the application of life cycle models allow: reasonably forecast sales and plan a production program; determine the basic strategies at different stages of development; determine the sequence of stages of enterprise development; provide harmonious interaction of organizational features and factors of the external environment, which influence the process of organizational development. the increase of organization development stability can be achieved by transforming the dynamic changes into the planned ones based on the application of effective prediction methods with taking into account the life cycle theory. in order to ensure the organization competitive advantage, it is necessary to take into account the interconnection of life cycles at all levels: industry, technology, enterprise, product. the proposed methodology of strategic planning in the context of indefinite external environment taking into account the life cycle theory is systematized in this field and can be applied at the level of enterprises, organizations, industries, and regions in order to increase the validity of management decision-making in strategic planning. the strategic planning methodology under conditions of indefinite external environment taking into account the life cycle theory includes: reasoning the necessity 4. calculation interval is determined t t t tg= { , ,..., }1 2 the interval or the calculation stage forms the part of the calculation horizon. as a stage of calculation, year, quarter, month can be adopted. the calculation stage can be chosen based on the assumption that for this time period the impact and the set of external and internal factors will remain unchanged. if it is assumed that the influence and set of external and internal factors will remain unchanged throughout the calculation horizon, then the calculation stage equals the calculation horizon. 5. the prevailing set of f factors is divided into controlled (managed) and uncontrolled (unmanaged) factors for each stage of calculation x x x xg n= { , ,..., }1 2 – plenty of controlled factors for the gth stage of calculation; x y y yg m= { , ,..., }1 2 – plenty of external environment factors for the gth stage of calculation controlled factors may be: products technological parameters, products types, output volumes, etc. the factors of external environment can be: products prices, demand volume, analogues or substitutes appearance, new competitors’ emergence, etc. the influence of controlled and uncontrolled factors on performance indicators is determined for each stage of calculation. 6. efficiency matrix for each stage is formed || ( , ) ||, || ( , ) ||,..., || ( , ) ||e x y e x y e x yg g g 1 1 1 2 2 2 7. the plenty of choosing criteria for optimal solution is formed principles and criteria for the optimal solution choosing in conditions of uncertainty: principles of optimism, pessimism, guaranteed result, guaranteed losses, savage, bayes-laplace criteria and others. the most suitable criterion for each stage is determined. 8. the effect at each stage is determined, and its reduction to one moment of time is carried out. 9. strategy evaluation is carried out on the base of the obtained effect for the entire calculation horizon. 10. adaptation element provides the possibility of adjustment of strategic decisions at each subsequent stage of evaluation based on the changes that took place in the previous stages. source: developed by the authors taking into account (mintzberg , 2008; pearse, 1985; steiner, 2007) baltic journal of economic studies 182 vol. 3, no. 5, 2017 to consider factors of time and uncertainty in strategic planning; task setting in conditions of uncertainty; mechanism of step-by-step adjustment and evaluation of strategic decisions and strategies effectiveness in time; algorithm of complex estimation of strategy effectiveness indicators with taking into account uncertainty and time factors. strategic planning is not characterized by temporary intervals but with a set of strategies, each of which is determined by ways of achieving the main enterprise objectives. references: chaffee, e. (2011). three models of strategy. academy of management review, vol. 10 (1), р. 89–98. chandler, a. d. (2015). strategy and structure. – cambridge mit press, 480 p. higgins, j. m. (1993). organizational policy and strategic management. text and cases, 2-nd ed. – chicago: the dryden press. – 237 p. mintzberg, h. (2008). the strategy process. – boston: brian quinn, р. 5-13. kotler, ph. (1991). marketing management: analysis, planning, implementation, and control. – nj, englewood cliffs: prentice-hall international, inc., 1991, 896 р. meier, g. м. (2015). leading issues in economic development. – oxford university press, 672 p. rumelt, r . p. (2014). strategy, structure, and economic performance. – boston : harvard business school press, 2014. – 462 p. pearse, j. a. (1985). strategic management. 2-nd ed. – homtwood iii : richard d.irwin, 268 p. schendel, d. e. 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(2007). management policy and strategic: text, reading and gases – n.y.: mcmillan, 243 р. baltic journal of economic studies 100 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national aviation university, ukraine (corresponding aurthor) e-mail: kafedra_mm@ukr.net orcid: https://orcid.org/0000-0003-3437-2067 2 taras shevchenko national university of kyiv, ukraine e-mail: andriy.onyshchenko@ukr.net orcid: https://orcid.org/0000-0002-3194-1116 3 taras shevchenko national university of kyiv, ukraine e-mail: ap080011@gmail.com orcid: https://orcid.org/0000-0003-3194-0372 doi: https://doi.org/10.30525/2256-0742/2023-9-1-100-112 economic challenges of sustainable development goals in ukraine olena lytvyn1, andrii onyshchenko2, oleksandr ostapenko3 abstract. the united nations 2030 agenda and its sustainable development goals pose new challenges for ukrainian businesses, which need to adapt their operations and strategies to the requirements of the sdgs. the purpose of this paper is to highlight the role of economic challenges and business opportunities of the sdgs for the ukrainian economy. in particular, it assesses whether the sdgs can realistically be achieved after the covid-19 pandemic and the war with the russian federation. methodology. more generally, the framework allows to assess the macroeconomic coherence with the development strategies of ukraine. the basic trends of the sdgs for ukraine are summarized, and the estimation model of the progress in achieving the sdgs is carried out. the impact of the covid-19 pandemic on the economy of ukraine is studied. results. the results show that the economic challenges after the covid-19 pandemic and the war include ethical, social, financial, and legal aspects that meet the requirements of sustainable development, which is a very high priority for the community in ukraine. practical implications. a comparative analysis of the activity of ukrainian enterprises during quarantine is made on the basis of research data and those for official statistics. value/originality. according to this study, ukraine will need 5-7 years to regain the potential lost during the covid-19 pandemic and the war. the actions of the government and the national bank of ukraine continue to support the economic mitigation of the negative effects of the war. the research is based on the economic issues that show how the sdgs can be achieved in the country under different policy scenarios, including modernization of production, development of innovation, increasing export potential, and support from the international community, especially the eu and the us. the assessment of the progress in the implementation of the sdgs in ukraine showed their significant indicators, such as: the share of exports of goods whose production uses technologies of high and mediumhigh level in the total exports of goods; ukraine's position as assessed by the global innovation index; the increase in employment; the creation of institutional and financial capacities for self-realization of the potential of the economically active population and the development of the creative economy; development of high-quality, reliable, sustainable and accessible infrastructure based on the use of innovative technologies, including environmentally friendly means of transport; ensuring the development of sustainable food production systems that contribute to the preservation of ecosystems and the gradual improvement of the quality of land and soil, primarily through innovative technologies; doubling agricultural productivity, primarily through innovative technologies; mobilization of additional financial resources through the promotion of foreign and domestic investment. other sdgs showed low improvement and likelihood. key words: economic challenges, sustainable development goals, estimation model of sdgs’ achievement progress, covid-19 pandemic, war. jel classification: f02, f17, o11 1. introduction in 2017, ukraine completed the adaptation of the "sustainable development goals to 2030" adopted by the united nations on september 25, 2015 (un 2015). as a result, the national report "sustainable development goals: ukraine" was prepared, which baltic journal of economic studies 101 vol. 9 no. 1, 2023 included a list of adapted tasks and indicators for their monitoring, providing guidelines for ukraine's development until 2030. (ministry of economic development 2017) the next step for businesses was their implementation after the adaptation of the sdgs, including their integration into national and local development strategies and programs. the covid-19 pandemic plunged the world into a deep recession, infecting 140 million people and killing over 3 million by mid-april 2021. millions of people were pushed into extreme poverty in the short term and even more in the medium term. (dora benedek et al., 2021) the impact of the covid-19 pandemic on ukraine's development reemphasized the importance of reforms to promote sustainable and inclusive growth in the country. the purpose was to develop and make decisions that would help businesses and the economy to survive the crisis caused by the pandemic with minor losses. in 2022, the war in ukraine caused a major humanitarian crisis affecting millions of people. the associated economic shocks and their impact on global commodity, trade and financial markets also had a significant impact on economic outcomes and livelihoods. the ukrainian government should continue to implement structural reforms to raise potential growth and increase public resources by improving the tax system and spending efficiency. they should also reinvigorate strategies to facilitate private investment in the sdgs. the paper provides recommendations on how to take the sdgs into account in the further development of business, creating long-term value, positive social and environmental impact, and building functional partnerships with all stakeholders: employees, consumers, communities, etc. in addition, the paper aims to highlight the role of the economic challenges and business opportunities of the sdgs for the ukrainian economy. in particular, the framework assesses whether and how the sdgs can realistically be achieved after the covid-19 pandemic and war. more generally, the framework allows for the assessment of macroeconomic coherence with ukraine's development strategies. the research is based on the economic issues that show how the sdgs can be achieved in the country under different policy scenarios, including modernization of production, development of innovation, increase in export potential, and support from the international community, especially from european countries and the us. the results show that the economic challenges were multifaceted, helping the government to mobilize additional financial resources by promoting foreign and domestic investment and illustrating the potential impact of comprehensive development policies. the paper is suitable for the analysis of a variety of long-term economic issues. it allows the simulation of different development paths consistent with domestic policies to increase available public and private resources for ukraine's development, and alternative scenarios for international contributions. this publication will be useful for government officials, ministries, international organizations, academics, public figures and those interested in strategic planning for sustainable development in ukraine. 2. literature analysis a number of studies and scientific publications of leading research institutions and scholars are devoted to determining the problems, prospects, and consequences of the economic challenges of the sdgs. the evaluation of modern research publications allows to distinguish fundamental trends in six areas, which may be important for ukraine to achieve the 2030 agenda (figure 1). these six trends relate to (i) poverty and inequalities, (ii) demography, (iii) environmental degradation and climate change, (iv) shocks and crises, (v) development cooperation and financing for development, and (vi) technological innovation. katja freistein and bettina mahlert (2016) suggest that the recently adopted sustainable development goals include various explicit and implicit goals that address inequality. however, the sdgs go much further than previous development goals in addressing inequality as a central issue. ignacio saiz & kate donald (2017) argue that economic inequality has risen to unprecedented levels in recent years, posing new threats to the full range of human rights. against this backdrop, the 2030 agenda includes a goal aimed at reducing inequalities of all kinds within and between countries. one of the most transformative aspects of the new sustainable development agenda, sdg10, can bring about a much-needed paradigm shift in how development efforts are pursued to realize human rights and reduce inequalities. drimmelen r . (2013) provides an overview of the different ways in which companies can earn money with sustainable practices. when a company switches to a more sustainable way of working, upfront investments and costs often increase, and products and markets change. it requires a shift to new business models. the challenge is to contribute to all three sustainability goals of the business model: environmental, economic and social. business models are grouped into four categories that correlate with the four strategies a company can choose to implement sustainable practices: ecoefficiency strategy, beyond compliance leadership strategy, eco-branding strategy, and environmental baltic journal of economic studies 102 vol. 9 no. 1, 2023 cost leadership strategy. doing so is challenging, and not many companies manage to strike the right balance. the conceptual study by adams, carol a. (2017) provides a framework for incorporating sustainable development issues into an organization's decisions, strategies, and business model by considering the risks and opportunities presented by the external environment. the sustainable development issues that gave rise to the sustainable development goals pose constraints on the availability of capital on which businesses rely. dora benedek, edward r . gemayel, abdelhak s. senhadji and alexander f. tieman have found that the covid-19 pandemic has hit countries' development agendas hard. the ensuing recession pushed millions of people into extreme poverty, and reduced government resources available for spending on achieving the united nations sustainable development goals (sdgs). using a newly developed dynamic macroeconomic framework, the authors assess the current state of sdg financing in five key development areas: education, health, roads, electricity, and water and sanitation. they believe that policies should support a favorable business climate to catalyze increased private finance. private investment can make a significant contribution to economic growth and development. in addition to taxes, governments can increase revenues from other sources through more robust management of public assets. (dora benedek et al., 2021) according to these scholars, macroeconomic and sociopolitical conditions are key determinants of credit risk and foreign investment. weak institutions and high levels of corruption increase the risk of asset loss and pose a high reputational risk to investors. in effect, this reduces the risk-adjusted return on private investment. countries with weak governance and regulatory environments should strengthen their institutional frameworks to improve the clarity and transparency of the regulatory and legal framework and to ensure consistent enforcement of contracts and property rights. (dora benedek et al., 2021) however, the existing international business research is largely silent on the role of the private sector in achieving global policy goals. jan anton van zanten and rob van tulder (2018) have found that the sustainable development goals cannot be achieved without the contribution of multinational enterprises (mnes). their exploratory survey suggests that mnes are more engaged with sdg targets that are actionable within their value chain operations than those outside, and more engaged with sdg targets that "avoid harm" than those that "do good." differences in sdg engagement based on mnes' home and host countries and industry sectors. peter jones, david hillier, and daphne comfort suggest that leading financial services firms are in a powerful position to play an essential role in achieving the sdgs. however, if the financial services industry is to play an essential role in facilitating the transition to a sustainable global future, it faces a number of fundamental challenges. to address these challenges, the industry 's leading players would be well advised to develop a coherent, coordinated and proactive approach to the sdgs, and to communicate their policies effectively to all their stakeholders. (peter jones et al., 2017) assunta di vaio, palladino r ., hassan r ., and escobar o. discuss the relationship between artificial intelligence and rapid developments in machine learning and sustainable development. specifically, they aim to understand whether this branch of computer science can influence production and consumption patterns to achieve sustainable resource management in line with the sustainable development goals (sdgs) outlined in the un 2030 agenda. (assunta di vaio et al. 2020) johannes w.h. van der waal, thomas thijssens, and karen maas aim to explore innovative contributions to the sdgs by assessing the level of sdg-relevant innovation by the world's largest poverty and inequalities environmental degradation and climate change basic trends in sdgs shocks and crises demography development cooperation and financing for development technological innovation figure 1. fundamental trends in the sdgs for ukraine sources: compiled by the authors based on (united nations, 2015) baltic journal of economic studies 103 vol. 9 no. 1, 2023 multinational corporations. the researchers have developed a method to identify sdg-relevant patent applications, distinguishing between "green" patents related to environmental issues and "blue" patents related to "improving conditions" and addressing unmet sustainable development needs. in addition, they investigated whether the level of sdg-relevant innovation is systematically associated with various company characteristics. their study attempts to quantify the real impact of companies' sustainability strategies by identifying their sustainable patents and associating them with company characteristics, using a new method for identifying sustainable patents. furthermore, sdg-relevant innovation goes beyond green innovation to include the full range of technological innovations related to the broad range of sdgs. ( johannes w.h. et al., 2021) however, despite numerous studies by scholars and practitioners on this issue, there is a need to identify a clear direction of the economic challenges and business opportunities of the sdgs in ukraine and whether the sdgs can realistically be achieved after the covid-19 pandemic and the war with the russian federation. 3. economic challenges of the sdgs in ukraine the 2030 agenda for sustainable development is committed to promoting development in a balanced way – economically, environmentally and socially (un 2015). it provides clear direction on 17 sustainable development goals (sdgs) and 169 targets to realize the economic and social dimensions (figure 2). in ukraine, the government started working on the sdgs in 2015. the first step was to adapt them, taking into account the specifics of national development. while developing a strategic framework for the sustainable development of ukraine until 2030, the ministry of economy launched an inclusive federal process of localization of the sdgs, which lasted in 2016–2017 and involved the respective line ministries, un agencies in ukraine, international organizations, ngos and the business community. the national baseline report "sustainable development goals: ukraine" (ministry of economy, 2017) led to the establishment of national goals, forecasts, and the selection of sdg indicators. it provided a basis for the national sdg system in ukraine, which defined 86 goals and 183 indicators of national development. it established target values for the 2030 horizon, as well as intermediate values for 2025. the situation was exacerbated by challenges related to covid-19. according to the ministry of development of economy, trade and agriculture of ukraine (2019, p. 6), ukraine made progress in 15 out of 17 sdgs. the main achievement was the reduction of poverty, from 58.3 percent in 2015 to 43.2 percent in 2018. significant progress was made by increasing wage standards and population coverage with housing subsidies (from 12% in 2014 to 64% in 2017). ukraine implemented the "new ukrainian school" reform and joined the pisa-2018 international education quality survey. ukraine introduced small and full-scale electricity markets in 2019. due to improved conditions for the development of small and medium-sized businesses in 2016–2019, the positive balance of foreign trade in ict services increased by 2.5 times and high-speed 4g internet was introduced. it was found that ukraine has ensured steady gdp growth by modernizing production, developing innovation, increasing export potential and exporting products with high added value (table 1). the average annual growth rate of real gdp in 2016–2019 was 2.9%, including per capita – by 3.4% due to accelerated investment growth. the share of sme production costs in value added increased from 58.1% in 2015 to 64.3% in 2018. ukraine's place in the doing business index ranking improved by 17 positions in 2019 compared to 47 in 2015. according to the authors, the country has increased production efficiency through sustainable development and competitive high-tech industries. the government mobilized additional financial resources by promoting foreign and domestic investments until 2022. at the same time, ukraine created institutional and financial capacities for the self-realization of the potential of the economically active population and the development of the creative economy. in 2020, the national bank of ukraine kept the discount rate at 6% per annum. according to the nbu, the balance of inflationary factors and risks did not indicate any reason to lower the rate and expected inflation to accelerate to 4.7% by the end of 2020 (nbu, 2020). in june 2020, the number of hryvnia funds on the accounts of the population increased by 8.9 billion uah (by 2.5% m/m), business – by 17.9 billion uah (5.6% m/m). the dynamics of balances in foreign currency accounts was less pronounced: individuals increased them by usd 32 million (0.3% m/m), but business decreased them – by usd 139 million (1.8% m/m). in general, the annual growth of the deposit base of the banking system was 24%. in authors’ opinion, the collapse of oil prices (up to 25 usd/barrel brent on april 1, 2020) was good news for ukraine's balance of payments. energy accounted for about 25% of the structure of imports, but oil accounted for about 40% of this amount. baltic journal of economic studies 104 vol. 9 no. 1, 2023 end of poverty in all its forms everywhere sustainable development goals reduce inequality among countries build resilient infrastructure, promote inclusive and sustainable industrialization eradication of hunger, achievement of food security and improved nutrition, and promotion of sustainable agriculture ensure healthy lives and promote well-being for all at all ages ensure inclusive quality education and promote learning opportunities achieve gender equality and empower all women and girls ensure availability and sustainable management of water and sanitation for all ensure access to affordable, reliable, sustainable and modern energy for all promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all strengthening the means of implementation and revitalizing the global partnership for s ustainable take urgent action to combat climate change and its impact make cities and human settlements inclusive, safe, and sustainable conserve and sustainably use the oceans, seas and marine resources for sustainable development protect, restore and promote sustainable use of terrestrial ecosystems, sustainably promote peaceful societies for sustainable development, provide access to justice for all and build effective institutions at all levels ensure sustainable consumption and production patterns figure 2. sustainable development goals sources: compiled by the authors based on (united nations, 2015) the authors believe that low incomes in the economy had both advantages and disadvantages. according to the nbu, in may 2020 the consumer price index (cpi) increased by 0.3%, food prices – by 1.2% due to the decrease in natural gas prices by 16.8%, and fuel prices by 8.6%. more than half of the cost of the consumer basket in ukraine consisted of food, alcohol, and cigarettes. this meant that even in a crisis, consumer demand would not collapse as much as in developed eu countries. baltic journal of economic studies 105 vol. 9 no. 1, 2023 table 1 progress in the implementation of the sdgs in ukraine target indicator 2015 2016 2017 2018 2019 2025 2030 1. ensure steady gdp growth by modernizing production, developing innovation, increasing export potential and exporting high value-added products. gdp volume index, % 90.2 102.4 102.5 103.4 103.2 106 107 1.1. gross fixed capital formation as a percentage of gdp, % 13.5 15.5 15.8 17.7 18.0 28.0 22.0 1.2. share of exports of goods whose production uses high and medium-high technology in total exports of goods, % 19.2 17.3 16.8 17.0 16.4 28.0 30.0 1.3. ukraine's position in the global innovation index 64 56 50 43 47 45 40 2. increasing the efficiency of production of production based on sustainable development and the development of competitive high-tech industries. 2.1. labor productivity index, % 99.2 103.5 103.2 102.1 101.9 103,6 105,8 3. increase employment. 3.1. employment rate among those aged 20–64, % 64.4 64.2 64.2 65.6 66.9 68.0 70.0 4. creation of institutional and financial capacities for the self-realization of the potential of the economically active population and the development of the creative economy. 4.1. share of value added to production costs of smes, % of total value added to production costs 58.1 62.3 62.6 64.3 66.5 75.0 80.0 5. to develop high quality, reliable, sustainable and accessible infrastructure based on the use of innovative technologies, including environmentally friendly means of transportation. 5.1. volume of goods transported, million tons 1,474 1,543 1,582 1,643 1,650 1,750 1,900 6. ensure the development of sustainable food production systems that contribute to the conservation of ecosystems and the progressive improvement of land and soil quality, primarily through innovative technologies. 6.1. the food production index, % 88.6 108.9 107.1 98.5 103.9 103.0 103.0 7. double agricultural productivity, primarily through innovative technologies. 7.1. index of agricultural production, % 95.2 106.3 97.8 108.1 101.1 102.0 102.0 8. mobilize additional financial resources by encouraging foreign and domestic investment. 8.1. ratio of private remittances from abroad to gdp, % 7.6 8.1 8.2 8.5 7.8 6.0 6.0 sources: compiled by the authors based on (ministry for development of economy, 2019) annual inflation slowed to 1.7%, which was the lowest since the beginning of 2014. despite the covid-19 pandemic, in june 2020 the production in the ukrainian industry decreased only by 5.6% yoy. this was a significant improvement in dynamics after a decline of 16.2% yoy in april and 12.2% yoy in may 2020. some industries have even reached positive dynamics: food (+0.8% yoy), coke chemistry and oil production (+7.7% yoy), and chemical industry (+1.1% yoy) (nbu, 2020). in 2020 ukraine put record volumes of grain in foreign markets. according to the state statistics service of ukraine, in the marketing year 2019/20 ( july 2019 – june 2020) ukraine exported 56.7 million tons of grain and legumes. it was an absolute record in the history of the country compared to the previous 2018/19 my. the volume of grain exports amounted to 50 million tons. in 2019/20 my, the historical records of exports of two main grain crops were reached – wheat 20.5 million tons and maize 30.3 million tons (state statistics, 2020). according to the authors, ukraine has ensured sustainable food production systems that have contributed to the preservation of ecosystems and gradually improved the quality of land and soil, mainly through innovative technologies. the country has doubled its agricultural productivity, primarily through innovative technologies. among the positive industrial trends, only those measured by global indicators could be noted, in particular, the growth of the share of small enterprises in the total value-added industry from 5.2% in 2015 to 8.5% in 2018. the authors believe baltic journal of economic studies 106 vol. 9 no. 1, 2023 that the increase in the share of such enterprises had a positive impact on industrial production in ukraine, as this group of enterprises was more stable. this strengthened the role of small businesses in the development of the industry. these current startups were able to generate breakthrough innovations, which increased the potential to accelerate technological modernization and competitiveness. there was also a positive trend of increasing exports of high and medium-high tech goods by 29.7% in 2017–2019. however, it was not enough to compensate for the losses incurred in 2013–2016 due to the decrease in exports of these goods by 66.2%. the share of these goods in total exports of goods was only 16.3% in 2019 and did not reach the level of 2015 (19.2%). at the same time, the dynamics of high-tech exports accelerated significantly. according to the nbu, the positive balance of telecommunications, computer and information services increased by 2.5 times (from usd 1.5 billion in 2015 to usd 3.6 billion in 2019). their share in the export of services increased from 16.9% in 2015 to 25% in 2019, and their markets were formed primarily in technologically advanced countries. in particular, according to the state statistics service of ukraine, in 2013 the usa accounted for 24.1% in the structure of exports of telecommunications, computer and information services, while the markets of russia, kazakhstan and belarus – only 16.1%. the medium progress and probability were determined by the 1st (1.1) and 2nd targets. the assessment of the progress in the implementation of the sdgs in ukraine showed their significant indicators for such targets as: the 1st (1.2 and 1.3), and the 3-8 targets (table 1). other sdgs had low improvement and probability. 4. the impact of the covid-19 pandemic and the war on business opportunities in business opportunities in ukraine on march 12, 2020, the government introduced a quarantine in ukraine to combat the spread of the coronavirus infection covid-19. in particular, the work of subways in kyiv, kharkiv and dnipro was stopped; the movement of land transport in the cities was also interrupted. intercity and interregional automobile, railway, and air transportation were suspended. (cabinet of ministers, 2020) on march 28, 2020, ukraine completely closed the border for regular traffic, including air traffic. on april 24, 2020, the prime minister of ukraine announced a plan to end quarantine in ukraine, which consisted of five stages. the first – easing of quarantine restrictions in ukraine began on may 11, 2020. the cabinet of ministers allowed some commercial and public service facilities to operate. the second phase of quarantine mitigation began on may 22, 2020. the adaptive quarantine was applied until august 31, 2020, it was extended in the fall in eight regions of the country. the government divided the country into four zones according to the number of sick people: red, orange, yellow and green. therefore, in march 2020, the union of ukrainian entrepreneurs (sup) established a covid-19 business headquarters, the purpose of which was to work out and implement decisions that would help business and the economy to survive the crisis caused by the pandemic with minor losses (sup, 2020). together with the leaders of associations and clubs from different regions of the country, it was decided to unite the efforts of all ukrainian businesses to communicate quickly and effectively with the authorities at all levels to find solutions that could help prevent the collapse of the economy. micro, small, and medium enterprises constituted the majority of the structure of the union of ukrainian entrepreneurs. the main activity of the members was retail and wholesale trade, i.e. consulting, marketing and advertising services, nonbanking financial services, production of equipment, furniture and engineering, services, construction and architecture, it companies, educational services and others. there were representatives from all regions except the occupied territories, and 17% of respondents had offices throughout ukraine. in addition to the government, sup decided to help small and medium businesses survive the crisis caused by covid-19. during the pandemic, many ukrainian entrepreneurs found it increasingly difficult to find money to pay wages to employees and to pay taxes. however, most of them tried to provide medical institutions, doctors, citizens with everything necessary to fight the pandemic. the attitude to the prolongation of quarantine in ukraine until august 31, 2020 was more pessimistic among entrepreneurs – 42% of businessmen, those who did not decide – 30%. only one in four considered it necessary to continue the restrictive measures during the pandemic. 48% of businessmen thought that it is necessary to relax the restrictive measures (quarantine only for the elderly or people with weak immunity), 33% thought that it is better to apply an individual approach to a certain area. only 1% of the respondents expected a complete abolition of quarantine. (sup, 2020) nearly 60% of entrepreneurs continued to work during the restrictions (mainly large and medium enterprises), the others – 29% stopped working (typical for micro-enterprises). at the same time, 51% of the enterprises were able to continue working baltic journal of economic studies 107 vol. 9 no. 1, 2023 for only one month, and every fourth enterprise was able to work for 2-3 months during the quarantine and not go bankrupt; 6% of the entrepreneurs closed their business completely (mainly micro and small enterprises) (figure 3). only 3% of respondents said that their business could operate for a long time under the necessary conditions (rental vacation, remote access for employees, review of the business model, etc.). one third of the entrepreneurs (mainly microentrepreneurs) reported a 90-100% drop in income since the beginning of the quarantine. the same entrepreneurs have already laid off up to 50% of their staff. small and medium business owners reported a 25-50% decrease in income compared to the prequarantine period and have already laid off 10 to 25% of their employees. losses of profit of large enterprises were 10-25%; there was a staff reduction of 25% by the end of restrictive measures in 2020 (sup, 2020). one of the first negative consequences of the epidemic and the fall of the economy was the state budget, which had problems with tax revenues even without the quarantine. in the spring of 2020, the situation was not so critical, but tax revenues were already 14% behind schedule and barely exceeded the figures for the first quarter of 2019. the service sector – restaurants, air transport and shopping centers – had a smaller share in the structure of gdp than in the eu. the crisis that affected these businesses did not affect the ukrainian economy as much as in the eu. at the same time, household consumption, a key driver of gdp growth in recent years, has fallen sharply. the quarantine left the ukrainian economy with almost no chance to grow in 2020. the transport, retail and industrial sectors suffered the most. for farmers, who accounted for about 35% of the structure of ukrainian exports, the pandemic even played into their hands. the industry was unlikely to face a decline in global demand in 2020, while the onslaught of food demand from entire countries could not be ruled out. metallurgists risked a difficult situation, but a devalued hryvnia would partially help them. according to authors, the pandemic crisis may divide countries not into rich and poor, but into developed and developing ones. it could divide the countries into those with synergy between the government and the central bank and those where there is a kind of bipolar scattering of state regulation in the form of separation of the government and so-called independence of the central bank. the conditions of the post-quarantine economy would require enormous incentives and devaluation measures from ukraine. developed countries prepared packages that would amortize the crisis – 20-25% of gdp, in developing countries – 10-15%. ukraine created a reserve fund of 60 billion uah (1.5% of gdp), but it was not enough. the actions of the parliament of ukraine significantly supported small businesses during the pandemic in 2020–2022. it adopted three packages of legislative initiatives that had a positive impact on business. they concerned the exemption of small businesses from the single social contribution, the abolition of inspections and penalties for various violations. at the same time, according to the authors, the cabinet of ministers of ukraine introduced a very strict lockdown throughout the country, despite the level of mobility in each region. as a result, public transportation and air traffic were stopped, and borders were closed. all the harmful consequences of such decisions were not calculated. according to kpmg's ceo outlook (2020), the transformation of the economy through a pandemic has led to radical changes in approaches to working with human capital and changes in the skills required of employees. the massive acceleration of focal digitalization is occurring. business needed people who could implement digital technologies in companies, have been working, 58% ready to stop their business, 29% difficult to say, 13% 1 month, 51% 2-3 months, 25% 4-6 months, 4% stopped business, 6% 1 year 1% difficult to say, 13% figure 3. the activity of ukrainian business during quarantine in 2020 sources: compiled by the authors based on the sup baltic journal of economic studies 108 vol. 9 no. 1, 2023 work digitally with each other, with customers and suppliers, and create added value. according to the survey, 42% of ukrainian managers (69% globally) plan to reduce office space and introduce remote working for some employees after the pandemic. this could become a new norm and lead to a revision of the qualification requirements for employees. some skills and jobs would become obsolete, lose relevance, and become a thing of the past. on the other hand, remote work expanded the potential pool of human resources, and companies actively changed hiring strategies and planned work formats. most ceos expected their companies to grow profitably over the next three years, which could be directly related to how quickly they could make the necessary digital changes. unfortunately, on february 24, 2022, the russian invasion of ukraine began, resulting in massive loss of life, population displacement, and significant infrastructure damage. the impact on economic activity was enormous: real gdp contracted sharply, inflation rose significantly, trade was severely disrupted, and the fiscal deficit widened to unprecedented levels. in the immediate aftermath of the invasion, the authorities moved quickly to adjust monetary and exchange rate policies to preserve financial and exchange rate stability. more recently, the exchange rate has been devalued to reverse a significant loss of international reserves, which has helped to stabilize foreign exchange reserves and maintain overall macroeconomic and financial stability. fiscal policy has been geared to prioritize spending on defense, social services, humanitarian needs, and, where possible, some repair of critical infrastructure. the war is estimated to have affected areas that accounted for about 15 percent of prewar gdp, compared with about 40 percent in march 2022 (imf, 2022). economic activity, policies, and fiscal and external financing gaps continued to be driven by war-related developments. the current account moved into surplus as substantial current transfers (grants) more than offset the large and widening trade deficit. trade fell sharply as the war initially disrupted activity, but as the conflict became more localized, imports recovered faster than exports. the loss of critical seaports (such as mariupol) and the blockade of the black sea coast prevented bulk shipments of agricultural and metallurgical goods in july 2022. agricultural exports rebounded somewhat in august, aided by the grain corridor allowing exports via seaports, but remain about 30 percent below 2021 levels. meanwhile, imports have fallen less than exports, by 20 percent year-over-year, reflecting continued demand for essentials such as fuel and equipment. in particular, ukraine experienced a significant shortfall in grain export receipts in 2022. ukraine's cereal export volume was around 30.5 million tons (mt) in 2022, compared to 50.8 mt in 2021, resulting in a shock to export receipts of more than usd 4 billion, contributing to the large external financing gap. critical current public sector spending had a large import component for fuel, medicines, and equipment to rehabilitate damaged critical infrastructure. in 2022, limited export capacity, loss of access to international capital markets, capital outflows, foreign exchange transactions by ukrainian migrants, and a decline in fdi inflows also contributed to the large external financing gap. in addition to a large loss of life, more than one-third of ukrainians have either left the country or been internally displaced, and infrastructure damage is estimated at around 60 percent of 2021 gdp (imf, 2022). in addition to the emergency measures taken immediately after the outbreak of the war, the devaluation of the exchange rate in july 2022, following an increase in the nbu's key policy rate from 10 to 25 percent in june, together with a tightening of capital controls, helped to boost international reserves. nbu purchases of government war bonds in the primary market were largely sterilized and base money growth remained contained. in 2022 ukrainian business remained an active participant in the fight for ukraine's independence, 93% of companies were involved in helping the country during the war, including 67.1% who joined the volunteer activity. in addition, ukrainian entrepreneurs showed positive signs of recovery. 70% of enterprises were fully or partially active, and 15.6% did not change the scope of work or even increased it (cid, 2022). ukraine's small and medium-sized businesses continued to recover at the end of 2022. the ukrainian business index (33.9) increased, indicating that businesses have begun to restore employment, build inventories, and expand their customer base. 28% of employees were laid off by smes since the end of february 2022. business expectations for performance in 2022 remained at half (54%) of the previous year's sales. it was also influenced by the unpredictability of development and government actions, as well as the actual lack of access to financial resources to replenish working capital and implement development projects (cid, 2022). the lack of financial resources in the country – namely, insolvency of customers, unavailability of credit funds and business equity, etc. – was the biggest obstacle to business recovery during the war. baltic journal of economic studies 109 vol. 9 no. 1, 2023 5. survey methodology and findings according to the methodology for calculating an integral estimate of progress in achieving the goals, the ministry of development of economy, trade and agriculture of ukraine (2019, p. 17) has introduced an innovative method for ukraine. it is a methodology for detailed estimation of each of the 17 goals in terms of national indicators. based on calculations according to this methodology, analysis of estimated data, and their comparison with the target values of indicators for 2020, the goals are ranked in terms of their probability of achievement (high, medium, low, and very low). as a result, ukraine has managed to ensure progress in 15 out of 17 goals. the calculation methodology takes into account three criteria of the indicator's movement, such as direction (activity is goal-oriented or not); speed (movement is fast, slow, steady, etc.); pace (action requires average acceleration, significant, etc.). the index is calculated for a medium trend based on the analysis of changes in the indicator over the last five years and requires at least three years of data. this method involves three successive steps: calculation of the average annual growth rate; calculation of the required (target/theoretical) growth rate to reach the target; calculation of the ratio between the required and actual growth rates. as a result, the degree of achievement for some goals varies somewhat: 80% – on track (high likelihood of success); 60-80% – needs specific acceleration (medium likelihood of success); 20-60% – needs significant acceleration (low likelihood of success); 20% – unattainable even if this momentum is maintained (unattainable by 2020) (figure 4). the first stage shows that the progress estimate is calculated for each indicator for which there is sufficient data for calculation (there is data for the five-year period 2015–2020, where 2015 is a base year and 2020 is a target year). the second step shows that the target value is calculated for all indicators for which 2020 is also a target year. it is calculated as the sum of the average weighted value of each hand (its contribution to the achievement of the goal). all indicators are given equal weight and progress can be assessed. the third stage shows the calculated indicator for each goal, which serves as the basis for ranking all 17 goals. the fourth step shows that several indicators are not targets for 2020. therefore, existing progress is assessed. therefore, the progress estimate for these goals is revised with additional scores. as a result, the forecast increases by one category for one goal and decreases for five goals. according to the un agenda (2015, pp. 8–10), the main economic challenges are: (і) building a strong economic foundation for all countries with sustainable economic growth essential for their prosperity; (іі) building dynamic, sustainable, innovative and people-centered economies, promoting youth employment and women's economic empowerment; (ііі) benefiting from a healthy and educated workforce with the knowledge and skills needed for productive and fulfilling work and full participation in society; (iv) to strengthen the productive capacities of least developed countries in all sectors, including through structural transformation; (v) to adopt policies which increase productive capacities and employment; financial inclusion; sustainable agriculture and industrial development; access to affordable and modern energy services; sustainable transport systems and resilient infrastructure; (vi) to make fundamental changes in the way of its production and consumtion goods and services; (vii) to accelerate the reduction of global greenhouse gas emissions and addressing adaptation to the adverse impacts of climate change, to tackle water pollution and strengthen cooperation on land degradation and drought; (viii) to refrain from applying any unilateral economic, financial or trade measures not in accordance with international law and the charter of the united nations that impede the full achievement of economic and social development. according to the authors, based on these un sdgs, ukraine should achieve higher levels of economic productivity through diversification, technological modernization and innovation, including a focus on high value-added sectors and labor-intensive industries after the war. it should also be noted that the country should strive to decouple economic growth from environmental degradation in accordance with the 10-year framework of programs on sustainable consumption and production. one of the most prominent features of these goals is to strengthen the capacity of domestic financial institutions to promote and expand access to banking, insurance, and financial services for all types of businesses. according to the goals of the un agenda (2015, p. 20), each country must promote inclusive and sustainable industrialization and significantly increase the share of industry in employment and gross domestic product. in this case, ukraine should improve the access of small industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets, especially after the war. in terms of upgrading infrastructure and retrofitting industries, the government is required to make them sustainable, with greater efficiency in resource use and greater adoption of clean and environmentally friendly technologies and industrial processes. baltic journal of economic studies 110 vol. 9 no. 1, 2023 significant progress: considerable probability medium progress: moderate probability eradicating poverty low progress: low probability small probability healthy living and well-being gender equalityquality education affordable and clean energy sustainable development of cities and communities reduce inequality industry, innovation and infrastructure protect and restore terrestrial ecosystems ending hunger, promoting sustainable agriculture clean water and sanitation decent work and economic growth peace, justice and strong institutions sustainable consumption and production partnership for sustainable development conserve marine resources figure 4. estimation model of the sdgs’ achievement progress in ukraine sources: developed by the authors based on (ministry for development of economy, 2019) the cabinet of ministers presented the state "economic stimulus program to overcome the negative consequences caused by covid-19" (cabinet of ministers, 2020). the purpose of the program was to introduce a comprehensive system of measures to stabilize the sustainable development of the ukrainian economy, increase employment by preserving existing jobs and stimulating the creation of new ones. the government planned 230 measures, some of which have already been implemented. it was a "road map" based on the proposals of ministries, local authorities, business representatives and leading experts. measures have been developed to support the economy in many sectors, such as industry, agriculture, energy, transport and infrastructure, information and communication technologies, services (trade, hotels and restaurants, education, creative industries, personal services). the program also includes support for small and medium enterprises, foreign exchange stimulation and investment attraction. thus, the national bank of ukraine began to ease monetary policy quite sharply. in 2020 the discount rate fell to 8% over the year. financial incentives through monetary policy (in particular, lower interest rates on loans) were used by all countries, and ukraine was no exception. in 2022, the nbu introduced administrative fx controls and capital controls to preserve fx liquidity and channel it to baltic journal of economic studies 111 vol. 9 no. 1, 2023 priority imports. limited interbank fx trading was allowed to facilitate the purchase of critical imports. banks could access unsecured funding with a maturity of up to one year for up to 30 percent of their retail deposits at end-january (imf, 2022). in 2022, nbu enforcement actions have been suspended for violations of prudential requirements related to capital, liquidity, credit risk, net open fx positions, and for delays in prudential reporting. audits of banks' financial statements and regular bank stress tests have been postponed. loans restructured during the martial law period were exempted from reclassification for credit risk, some regulatory risk weights were reduced, and banks were prohibited from lending to related parties, capital distributions (dividends and share buybacks), and bonus payments. despite all these efforts and large external official multilateral and bilateral support, a prolonged war would exacerbate infrastructure damage, population displacement, economic hardship and an increase in poverty. further pressure on gas stocks and contingent liabilities of state-owned energy companies and the banking sector could add to the already high financing needs. 6. conclusions according to the authors, as part of sustainable development, post-war companies should increase their activities in the field of renewable energy and ecology, as well as support environmental projects in any way possible, thus contributing to the achievement of the 6th, 7th and 13th global goals for sustainable development, which the united nations has set for 2015. ukrainian companies should be aware of their environmental impact and strive to reduce it by developing their sustainability orientation, including sustainable business and sustainable management. today, companies and individuals who want to start or support sustainable projects in ukraine face two major challenges: lack of support from local and state authorities; and inefficient and ineffective legal framework and policies, e.g. lack of laws and regulations on environmental protection, lack of fiscal, economic and industrial policies in the field that would facilitate the implementation and operation of green initiatives. in addition to the war, businesses face problems in attracting investment, corporate, tax and intellectual property issues. despite these problems, business should support the following sectors: renewable energy, low-carbon transportation, low-carbon buildings, sustainable water and waste management, sustainable land use, and climate change. the authors estimate that ukraine will need 5-7 years to recover the potential lost during the covid-19 pandemic and the war. the arguments presented suggest that the systemic issues of economic challenges to implementation are as follows: (i) policy and institutional coherence, (ii) multi-stakeholder partnerships, (iii) data, monitoring and accountability. according to the paper, ukraine should strengthen its macroeconomic stability, including by coordinating policies and strengthening multilateral partnerships that mobilize technical and financial resources to support the achievement of the sdgs in the post-war 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(2018). multinational enterprises and the sustainable development goals: an institutional approach to corporate engagement. journal of international business policy, 1: 208–233. union of ukrainian entrepreneurs – sup (2020). covid-19 business headquarters. available at: https://sup.org.ua/en/news/414 united nations (2015). transforming our world: the 2030 agenda for sustainable development (a/res/70/1). new york, pр. 8–29. received on: 2th of february, 2023 accepted on: 19th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 184 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 zaporizhzhia national university, ukraine (corresponding author) e-mail: liliia_khorishko@ukr.net orcid: https://orcid.org/0000-0002-0618-976x 2 zaporizhzhia national university, ukraine e-mail: ngml@ukr.net orcid: https://orcid.org/0000-0003-0872-9333 3 zaporizhzhia national university, ukraine e-mail: juliiamalovana@gmail.com orcid: https://orcid.org/0000-0003-0334-2412 doi: https://doi.org/10.30525/2256-0742/2023-9-1-184-188 estonian energy policy in the context of modern challenges liliia khorishko1, natalia horlo2, yuliia malovana3 abstract. in today's political reality, the resilience and sustainability of estonia's development depends on its ability to respond adequately to existing challenges and threats. given the historical peculiarities of the development of the energy sector and the resulting dependence on russian energy resources, energy independence is a key issue of national security. this raises the issue of developing the basic principles of energy policy, including the creation of new, potentially profitable gas and energy markets and the development of renewable energy. in developing its national energy sector, estonia is taking into account eu initiatives aimed at overcoming dependence on russian energy resources and transitioning to climate-neutral production. the subject of the study is the content and peculiarities of the estonian energy policy formation. the purpose of the paper is to identify key areas and mechanisms for the implementation of estonia's energy policy in the context of today's challenges. research methodology: systematic approach, methods of analysis and generalization. the content of estonia's energy policy is set out in a number of important documents, including the strategy estonia 2035 and the national energy development plan until 2030. the key areas of energy policy implementation are synchronization with the power grid of continental europe, participation in the formation of the european energy and gas market, renewable energy, development of cross-border cooperation in the energy sector, fulfillment of obligations under the european green deal to reduce co2 emissions, and the role of shale production in idaviru county. the issue of energy sustainability of estonia and other countries in the baltic-finnish region is a key issue on the eu energy agenda. this is evidenced by the active public diplomacy of eu leaders to intensify crossborder cooperation of energy sector stakeholders in order to completely abandon russian energy resources under the repowereu plan and to intensify the transition to climate-neutral production in the context of the european green deal. the eu's main energy security initiative is the baltic energy market interconnection plan (bemip), which implements various projects. estonia uses both economic and political mechanisms to implement its energy policy. economic mechanisms include active participation in strategic projects (baltic synchronization, balticconnector), 75% of which are financed by the connecting europe facility. the potential of cross-border cooperation, especially with the countries of the baltic-finnish region, aimed at intensifying the development of renewable energy and regional energy and gas markets, is actively used. estonian government officials pay considerable attention to the formation of dialogue and cooperation among energy sector stakeholders, which is evidenced by their participation in various special events and declaration of their intentions for mutually beneficial cooperation in the energy sector. research findings: the key areas of implementation of the estonian energy policy are synchronization with the eu energy system, participation in the formation of regional gas and energy markets, and intensification of energy production from renewable sources. the implementation of estonia's energy policy is correlated with eu initiatives and is carried out through a number of economic and political mechanisms. key words: renewable energy, energy policy, energy market, public diplomacy, regional development, cross-border cooperation. jel classification: q28, q48, q54, q57, r58 baltic journal of economic studies 185 vol. 9 no. 1, 2023 1. introduction in today 's political reality, energy security is a key aspect of national security that determines the level of resilience and sustainability of state development. energy sustainability has become especially important for modern states in the context of russia's full-scale invasion of ukraine, which has actualized the need to develop effective mechanisms for implementing energy policy. in this context, energy independence is considered a component of estonia's national security, given the country 's historical dependence on russian energy resources and the existing practice of using energy as a mechanism of manipulation and pressure. this raises the issue of optimizing the national energy policy, the key aspects of which should include integration into the european gas and energy markets, renewable energy and cross-border cooperation. in general, the issue of energy security in the balticfinnish region is a key issue on the eu energy agenda, given the sanctions policy against the russian energy sector due to the full-scale invasion of ukraine. at the same time, eu leaders are making significant efforts to strategize the development of the energy sector and optimize key areas of energy policy, taking into account the goals of the european green deal. achieving climate neutrality is seen as a key factor in increasing the competitiveness of the economy and the energy sustainability of the eu in the context of implementing the global leadership strategy. therefore, the need for an adequate response to threats and challenges raises the question of the effectiveness of the formation and implementation of estonia's energy policy as a guarantee of energy sustainability and sustainable development. the main purpose of the research is to identify the key areas and mechanisms for the implementation of estonia's energy policy in the context of today 's challenges. the complexity of the study lies in specifying the content of estonia's energy policy in the context of current challenges, including full-scale russia's aggression in ukraine and the fulfillment of its obligations under the european green deal. a systematic approach to the study will help to specify the key areas of estonia's energy policy in the context of meeting today 's challenges. the method of analysis will help to clarify the content of the energy policy, directions and mechanisms of its implementation. the application of the generalization method will help to specify the final results of the study. 2. main directions of the estonian energy policy the content of estonia's energy policy is defined in the strategy "estonia 2035" (estonian government, 2021), including ensuring the sustainability of the energy security system and the reliability of energy supply in the context of the transition to climate neutral energy production. first of all, it is about reducing the energy production from oil shale and increasing the share of renewable energy through the development of wind power. in this context, considerable attention is paid to measures to neutralize the socio-economic consequences of the reduction of oil shale production for the development of the ida-viru district. according to the national energy development plan until 2030, estonia has ambitious goals to increase the share of renewable energy sources in final consumption to 50%, reduce greenhouse gas emissions from the energy sector by at least 70% by 2030, and gradually increase this figure to 80% by 2050. achieving these targets will require decisive and timely action to decarbonize the electricity and transport sectors (iea, 2019). at the same time, estonian officials have initiated the preparation of the energy sector development plan until 2035, which aims to update the trends, goals and directions of the national economy in line with the new realities associated with the eu's movement towards climate-neutral production, energy efficiency and energy security (ministry of economic affairs and communications, 2021). there are key areas in the implementation of the energy policy aimed at ensuring estonia's energy security and sustainability. first, the completion of the processes of synchronization with the energy grid of continental europe, as well as the intensification of the participation in the functioning of the european energy and gas markets in order to overcome the dependence on russian energy resources. second, the fulfillment of commitments under the european green deal to reduce co2 emissions and the role of shale production in the energy sector. third, the development of renewable energies and an increase in their share of final consumption in households and transport. 3. economic and political mechanisms for implementing energy policy of estonia the issue of energy sustainability of estonia and other baltic-finnish countries is on the eu agenda as an important component of sustainable development and the ability to respond effectively to global challenges. eu leaders are actively using the potential of public diplomacy to intensify dialogue and cooperation among stakeholders in the energy sector. at the energy security summit in copenhagen, ursula von der leyen called for increased cooperation to create effective regional energy and gas markets, expand the use of renewable energy to complete the greening of the economy, and strengthen the baltic journal of economic studies 186 vol. 9 no. 1, 2023 eu's energy independence from russian energy resources (european commission, 2022). the summit participants (including the prime minister of estonia) signed the marienborg declaration (baltic sea energy summit, 2022), which provides for increased imports of liquefied natural gas and liquefied biogas by sea, the development of offshore wind energy production in the baltic sea region, and research into the possibilities of implementing cross-border renewable energy projects. in recognition of current and future energy security risks, the eu provides funding for strategic projects. in this context, an initiative to implement the baltic energy market interconnection plan (bemip) was launched in 2009 (with subsequent extensions in 2015 and 2021) with the aim of creating an effective system of regional cooperation to overcome dependence on russian energy resources (european commission, 2009). the plan provides for the gradual implementation of projects, including in estonia, aimed at the development and further synchronization of regional energy and gas markets, increasing the final consumption of renewable energy in the context of achieving the goals of the european green deal program. as part of the bemip initiative, the baltic synchronization project is being implemented, involving estonia, lithuania, latvia and poland. the aim of the project is to synchronize the energy system of the baltic countries with continental europe. the european commission has given the project the highest priority status, which is why 75% of the financing will be provided by the connecting europe facility and the remaining 25% by investments (see table 1). in total, about 30 investment objects in estonia will be financed under the synchronization project. estonia has been quite successful in integrating into the european gas market, increasing its independence from russian gas supplies. since 2015, consistent steps have been taken to create a unified regional gas market with the participation of estonia, latvia, lithuania and finland (directorategeneral for energy, 2020). this will be the first cross-border gas market in the eu, which will increase the ability of the participating countries to use existing and build new gas transport infra structure necessary to improve the quality of service, stabilize gas prices and increase energy resilience in the baltic-finnish region. in cooperation with finland, the balticconnector project was implemented and included in the trans-european energy networks (еlering, 2020). the estimated cost of the project was eur 206 million, 75% of which was financed by the european commission. it enabled the interconnection of the finnish and estonian gas transmission networks, contributing to the diversification of gas supply routes and the expansion of the use of renewable energy (biomethane). the project also included the modernization of the interconnector between estonia and latvia, including the installation of a compressor and metering station in estonia. estonia and finland signed a memorandum of understanding and cooperation on the organization of additional supplies of lng (ministry of economic affairs and communications, 2022). the cooperation includes the joint chartering of a 30 twh per year floating storage and regasification unit (fsru) and the construction of port and onshore infrastructure to ensure its operation. the signed memorandum is intended to synchronize the efforts of these states to implement the repowereu plan (european commission, 2022) aimed at overcoming europe's dependence on russian energy resources in the context of russia's invasion of ukraine. the implementation of the estonian-latvian cross-border offshore wind project elwind in the baltic sea has started (еlwind, 2020). it foresees a hybrid grid connection of the estonian and latvian power systems and the construction of two offshore wind power plants to generate renewable electricity in the range of 3-3.5 twh per year. the elwind project will help to expand the use of wind energy resources, which will significantly reduce co2 emissions. currently, estonia has received a grant from the eu in the amount of 99 thousand euros to conduct research on the cost of the project, take into account possible environmental impacts and forecast the benefits of obtaining table 1 investment fund of the baltic synchronization project stages of financing amount of investment in the project, million euros investment objects in estonia 1 430 renewal of the internal power network and construction of a synchronous compensator 2 700 construction of two synchronous compensators 3 230 upgrading of it, control and monitoring systems at the control center, upgrading of the control and monitoring system for the estlink 1 and 2 submarine cables and improvement of substation continuity source: еlering.ее (2020) baltic journal of economic studies 187 vol. 9 no. 1, 2023 additional sources of renewable energy production (ecieea, 2022). this project is included in the cb res list, which is promising in the context of obtaining funding under the connecting europe facility. enefit green, one of the most important producers of electricity from renewable sources in the baltic region, plays an important role in the development of renewable energy in estonia. enefit green is planning to implement several projects in estonia. first, the construction of estonia's first hybrid solar and wind power plant in purtse, which will help synchronize the production of energy from renewable sources at different times of the year. its estimated capacity will be 78 gw, which will meet the needs of about 24 thousand consumers (enefit green, 2022). second, the construction of a modern wind farm in sopi tootsi with a capacity of 255 mw, which will double the production of wind energy in estonia. enefit green has signed an agreement with seb and nordic investment bank for eur 325 million, part of which will be used to implement these projects (seb, 2023). it should be noted that estonia is one of the eu leaders in the field of renewable energy. in 2017, the share of renewable energy in gross final consumption was 29.2%, which significantly exceeded the target of 25% planned for 2020. according to eu directive 2018/2001 (european commission, 2018), which regulates the development and use of renewable energy, member states must increase the share of renewable energy consumption by increasing its production to 27%. at the same time, states that manage to exceed the existing targets can carry out a statistical transfer of renewable energy. in this context, estonia has a successful experience of cooperation with luxembourg on the transfer of 300 gwh (2018) and 400 gwh (2020) for a total of 10.5 million euros (iea, 2019). in 2020, estonia also received a benefit of eur 37.5 million for similar cooperation on the transfer of renewable energy to ireland (horgan, 2019). the estonian government is using the proceeds to reduce tariffs and implement a national renewable energy program that includes modernizing wind turbines, increasing the use of biogas and biomass in power generation, and developing solar and hydroelectric power. at the same time, the transition to renewable energy sources requires solving a number of socioeconomic problems in certain regions. ida-virumaa is home to one of the world's largest oil shale mines, resulting in a high level of employment in oil shale mining and electricity and heat production. the closure of oil shale development means the layoff or retraining of a significant number of professionals. the european commission is providing estonia with €354 million in grants under the territorial fair transition plan to support national initiatives for the development of this region (european commission, 2022). in this context, the estonian ministry of finance, in cooperation with the estonian nature fund, the estonian green movement and the environmental law center, has developed the "fair transition of ida-viru county in the field of renewable energy and energy efficiency " plan. the plan provides financial support for the development of small businesses in order to diversify the labor market, retrain professionals, and stimulate regional solar energy development. thus, a key aspect of estonian energy policy is to overcome the energy sector's dependence on russian influence. in this context, estonian officials are focusing on the synchronized use of economic and political mechanisms to ensure energy sustainability by intensifying the processes of engagement in the european energy and gas markets. this means using the resource potential of eu financial mechanisms, attracting investments, and intensifying public diplomacy to deepen partnerships with stakeholders in the field of energy security. 4. conclusions estonia's energy policy aims to ensure the sustainable development and energy security of the country, as well as the ability to respond adequately to current challenges, including the green economic transition and the russian invasion of ukraine. the issue of energy sustainability of estonia and the baltic-finnish region is a key issue on the eu agenda. in this context, the european commission initiated the bemip strategic plan, which envisages gradual steps towards the formation and functioning of energy and gas markets and the expansion of renewable energy consumption opportunities to ensure energy independence. the invasion of ukraine by russian troops forced eu leaders to adopt the repowereu plan aimed at accelerating the green economic transition and member states' refusal to buy russian energy resources. the key areas of implementation of the estonian energy policy are related to the formation of regional energy and gas markets, the construction and development of gas and energy infrastructure, and the increase of energy production from renewable sources. in this context, estonia is actively involved in the implementation of projects such as balticconnector, baltic synchronization and elwind. the eu actively supports their implementation through the financial resources of the connecting europe facility. estonian officials are also using the potential of public diplomacy to establish mutually beneficial partnerships and cooperation with other eu member states in the energy sector. baltic journal of economic studies 188 vol. 9 no. 1, 2023 references: baltic sea energy summit (2022). the marienborg declaration. available at: https://www.regeringen.dk/ media/11544/the-marienborg-declaration-_300822.pdf (accessed january 4, 2023). directorate-general for energy (2020). baltic regional gas market roadmap will mark first cross-border merger between 4 eu countries. available at: https://commission.europa.eu/news/baltic-regional-gas-market-roadmapwill-mark-first-cross-border-merger-between-4-eu-countries-2020-04-20_en (accessed december 29, 2022). ecieea (2022). cef energy: eu invests around eur 300.000 in studies for future cross-border renewable energy projects. available at: https://cinea.ec.europa.eu/news-events/news/cef-energy-eu-invests-around-eur300000-studies-future-cross-border-renewable-energy-projects-2022-08-30_en (accessed january 2, 2023). еlering.ее (2020). balticconnector. available at: https://elering.ee/en/balticconnector (accessed january 3, 2023). еlering.ее (2020). synchronisation with continental europe. available at: https://elering.ee/en/synchronizationcontinental-europe (accessed december 27, 2022). еlwind (2020). bring baltic's wind together. available at: https://elwindoffshore.eu/ (accessed january 2, 2023). enefit green (2022). enefit green will lay the cornerstone of purtse wind farm in estonia. available at: https://enefitgreen.ee/en/uudised/purtses-saab-nurgakivi-ule-aastate-eestisse-rajatav-suurem-tuulepark (accessed january 2, 2023). estonian government (2021). economy and climate. available at: https://valitsus.ee/en/estonia-2035development-strategy/necessary-changes/economy-and-climate (accessed january 6, 2023). european commission (2009). baltic energy market interconnection plan. available at: https://energy.ec.europa.eu/ topics/infrastructure/high-level-groups/baltic-energy-market-interconnection-plan_en (accessed december 27, 2022). european commission (2018). directive (eu) 2018/2001 of the european parliament and of the council of 11 december 2018 on the promotion of the use of energy from renewable sources. available at: https://eur-lex. europa.eu/legal-content/en/txt/pdf/?uri=celex:02018l2001-20220607&from=et (accessed december 29, 2022). european commission (2022). repowereu: affordable, secure and sustainable energy for europe. available at: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereuaffordable-secure-and-sustainable-energy-europe_en (accessed december 29, 2022). european commission (2022). statement by president von der leyen at the baltic sea summit. available at: https://ec.europa.eu/commission/presscorner/detail/en/statement_22_5245 (accessed january 2, 2023). european commission (2022). eu cohesion policy: €354 million for estonia to phase out oil shale in energy production. available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5963 (accessed january 3, 2023). horgan-jones j. ireland to pay denmark, estonia €50m for "statistical" renewable energy transfer. available at: https://www.irishtimes.com/news/ireland/irish-news/ireland-to-pay-denmark-estonia-50m-forstatistical-renewable-energy-transfer-1.4418420 (accessed december 29, 2022). iea (2019). energy policies of iea countries. estonia 2019 review. available at: https://iea.blob.core.windows.net/ assets/21965e0d-c9a9-4617-b1ad-5b4539d91ad7/estonia_2019_review.pdf (accessed december 27, 2022). ministry of economic affairs and communications (2022). estonia and finland enter into cooperation agreement for floating lng terminal. available at: https://www.mkm.ee/en/news/estonia-and-finland-entercooperation-agreement-floating-lng-terminal (accessed december 29, 2022). ministry of economic affairs and communications (2021). energy economy development plan. available at: https://mkm.ee/energeetika-ja-maavarad/energiamajandus/energiamajanduse-arengukava (accessed december 29, 2022). seb (2023). enefit green signed agreements with seb and nordic investment bank to raise debt financing. available at: https://www.seb.ee/en/enefit-green-signed-agreements-seb-and-nordic-investment-bank-raisedebt-financing (accessed january 2, 2023). received on: 11th of january, 2023 accepted on: 20th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 1 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-1-5 analysis of crisis level in regions of ukraine irina abramova1, alla tendyuk2, lyudmila stryszeus3 lutsk national technical university, ukraine abstract. the purpose of the paper is to identify the crisis level in regions of ukraine in 2013–2015. the article also determines features, causes, and development of crisis situations in the regions of ukraine and proposes measures to prevent the emergence and development of crisis situations or their disposal. methodology. the basis for assessing the level of crisis in the socio-economic development of the region is to determine the level of deviation of actual indicators from the threshold values of socio-economic security. such an assessment needs justification for the deviation of the actual indicators from the threshold values of socioeconomic security, which will correspond to a certain state of the depth of the crisis. the non-crisis zone characterizes the region as a powerful territorial centre of the country in the social and economic aspects. actual indicators of the socio-economic development of this region are higher than the threshold values. given the slowdown in the region’s development, the lack of innovative mechanisms for increasing economic potential, and the expansion of social programs for the population, this region may become a pre-crisis zone. a quantitative indicator of the zone of pre-crisis state, its threshold is numerical measurements, characterized by a 25-percent deviation from the threshold level of the non-crisis zone, which corresponds to the limits of indicators from 1.0 to 0.75. the growth of the same pace of socio-economic development, the implementation of effective measures of crisis management will lead to the transition of the region into a non-crisis zone. with a further fall in the level of socio-economic development, the region will fall into a zone of moderate crisis. in order to return to a precrisis state, regional authorities should develop a reactive anti-crisis strategy and effective rehabilitation programs. a quantitative indicator of this zone, its threshold is numerical measurements, which corresponds to the limits of the indicators from 0.75 to 0.5. the timely implementation of liquidation measures to neutralize the effects of the existing ones and prevent new crises will lead to the transition of the region into a zone of deep crisis. the zone of deep crisis is characterized by a partial destruction of the socio-economic system of the region. out of such a situation requires the use of systemic measures of anti-crisis state and regional management with the assistance of foreign aid. a quantitative indicator of this zone, its threshold is numerical measure, which is limited to 75 percent deviation from the threshold level of the non-crisis zone, which corresponds to the limits of indicators from 0.5 to 0.25. the zone of bankruptcy involves the complete destruction of the region as a social and economic system. the reasons for such a situation are force majeure circumstances (wars, natural disasters, man-made disasters, etc.). such a state of the region is characterized by the cessation of the work of enterprises and organizations, the economic and social devastation of the region, the intensification of migration processes. the solution to the current situation is targeted state crisis management. a numerical indicator of this zone, its threshold is considered numerical measurements, characterized by more than 75 percent deviation from the threshold level of the non-crisis zone, which corresponds to the limits of indicators from 0.25 to 0.0. results of the survey showed that there was a moderate level of crisis according to economic parameters with a high risk of transition into a deep crisis in 14 of 27 regions as of 2015. practical implications. thus, the conducted analysis on the crisis of socio-economic development of ukraine’s regions made it possible to detect the level of its depth according to social and economic parameters and to determine the weakest areas that need the most support and display in anti-crisis regional management. value/originality. the conducted grouping requires the use of a differentiated approach to the selection of strategies for regional crisis management from the standpoint of crisis prevention, the withdrawal of the region from the crisis and management of its consequences. key words: crisis, crisis management, region, anti-crisis measures, crisis notification. jel classification: r11, r12, r58 corresponding author: 1 department of management, lutsk national technical university. e-mail: i.abramova@lntu.edu.ua 2 department of management, lutsk national technical university. e-mail: ten-alla@yandex.ru 3 department of management, lutsk national technical university. e-mail: lyuda-strizheus@yandex.ru baltic journal of economic studies 2 vol. 3, no. 5, 2017 1. introduction the urgency of the research. in recent years, there has been a sharp increase in crisis situations in ukraine. inflationary processes enclosed the entire system of credit, financial, and banking activities, business is reducing, the labour migration to countries of near and far abroad is increasing, and the share of the shadow economy is growing. these processes prevent the country and its regions from overcoming the crisis and make it even more protracted and deep, as well as create an unstable economic environment and social tension. it is necessary to make a fundamental restructuring of the economy of state regions, a redistribution of capital from the old forms of economic activity to new ones. if the crisis occurs, it is expected to use it as a method of restructuring the economy of the region. otherwise, the further aggravation of contradictions will occur in all spheres of life. the depth and nature of crisis could threaten the very existence of the regional socioeconomic system. analysis of studies and publications. crisis regions are a new problem for the economy of ukraine that will eventually only become actual. features of the crisis course in ukraine led national researchers to an intense and in-depth research of a true phenomenon of the crisis of state development and nature of crisis processes that took place and are still ongoing in the regions of ukraine. the contribution to the study on the emergence and development of crises at the meso and macro levels was made by the following ukrainian researchers as o. baranovskyi (baranovskyi, 2009), t.  mirzodaieva (mirzodaieva, 2005), s. herasymchuk (herasymchuk, 2010), s. maiurenko (maiurenko, 2011), n. holiad (holiad, 2004), b.  udovychenko (udovychenko, 2011), m. butko (butko, 2011), t. honcharova (honcharova, 2004), and others. works of these researchers, along with many other prominent scholars, gave the ground to formulate their own vision, which is reflected in this article, based on official data of the state statistics service of ukraine (www.ukrstat. gov.ua). the aim of the study is to identify problems and evaluate the crisis situation of economic and social spheres of ukraine’s regions, examine features of crisis situations in regions of our country. 2. assessment of crisis level of regions of ukraine according to the economic parameter it is proposed to consider indicators to assess the crisis level of regions of ukraine according to economic parameters for 2001–2015, which are preferential for the support of the socio-economic development of ukraine. in this context, the list of indicators of crisislevel assessment of the socio-economic development of the region should be as wide as possible, as the crisis is a systemic phenomenon and the more problematic positions would be found, the better. however, indicators of crisis-level assessment of regional development should reflect the severity of the crisis, resource capabilities of critical regions, the aggravation of basic parameters of life quality, and the concession of social services. as already noted, the assessment of crisis level of the socio-economic development of the region is realized through the indicative method, which is conducted by comparing actual and threshold values of social and economic security of the region. the calculation of crisis depth of regions of ukraine according to economic parameters is shown in table 1. the analysis showed that there was a moderate level of crisis according to economic parameters with a high risk of transition into a deep crisis in 15 of 27 regions as of 2015. this situation is extremely negative, as it affirms the lack of implementation of anti-crisis measures of a preventive nature into the regional management. the high level of crisis according to economic parameters is caused by the low level of fixed capital investment, which makes it impossible to fully develop the material and technical potential of the region and to ensure the growth of its economy. factors of fixed capital investment are economic interests of investors, geopolitical position of the region, the payback period of investment resources, investment appeal of the region, which is not always provided and provokes crisis situations in its economic development. among the regions of ukraine, the most indications of the economic crisis are observed in volyn region. the assessment has shown that there are indicators of crisis processes in volyn region that characterize the low level of innovative activity of industrial enterprises, a significant amount of transfers in the structure of grp, low level of grp, low level of export, high level of import, and a significant share of loss-making enterprises. this situation is typical for most regions, which are in the area of moderate crisis. the causes of crisis of economic development in these regions are technical and technological backwardness of major industrial assets, low technological structure of the economy with low share of high technology products, the lack of innovative activity, that all determine the high amount of energy and raw materials, physical and moral obsolescence of equipment and technologies, unprofitableness of enterprises and low competitiveness of the products on the world markets. dnipropetrovsk and poltava regions, as well as the city of kyiv, were in the non-crisis area according to economic parameters during 2013–2015. however, these regions have a very low share of innovative products, mainly industrial; the share of loss-making enterprises in the economy of the region is quite high, which creates conditions for their transition to the pre-crisis state. accordingly, a serious threat of emergence and development of crisis situations is traced in these regions in case of proceeding the policy on neglecting innovations, stimulating the export activity, the absence of measures to upgrade the technical and technological base. baltic journal of economic studies 3 vol. 3, no. 5, 2017 table 1 assessment of crisis level of regions of ukraine according to economic parameters for 2013–2015, % region of ukraine r eg io na l s ha re o f g r p in g d p of th e st at e, % e xp or tim po rt c ov er ag e ra tio fi xe d ca pi ta l i nv es tm en t, % b ef or e g r p l ev el o f w ea r a nd te ar , % sh ar e of so ld in no va tiv e pr od uc ts in g en er al o ut pu t, % sh ar e of lo ss -m ak in g en te rp ri se s i n al l s ec to rs o f th e ec on om y of re gi on sh ar e of e xp or t i n g r p of th e re gi on , % sh ar e of im po rt in g r p of th e re gi on , % th e ra tio o f t ra ns fe rs fr om th e st at e bu dg et to g r p, % a ve ra ge le ve l crisis status vinnytsia -39,5 55,3 -3,4 -10,2 -91,7 -38,6 -65,3 107,9 -60,9 -22,2 preceding a crisis volyn -61,8 -46,5 -1,1 30,9 -76,0 -42,6 -49,2 -40,2 -67,7 -46,6 moderate crisis dnipropetrovsk 174,3 63,8 -12,3 -3,1 -83,7 -56,3 18,3 -33,7 45,5 6,8 no crisis donetsk 233,8 228,9 -22,7 5,9 -68,3 -50,2 -34,7 16,4 24,2 -38,3 moderate crisis zhytomyr -55,7 20,4 -3,0 19,7 -73,3 -44,7 -64,1 58,5 -65,2 -30,2 moderate crisis zakarpattia -60,5 -23,8 -5,8 21,0 -43,7 -22,8 9,2 -64,0 -70,5 -38,0 moderate crisis zaporizhzhia 13,2 73,1 -5,9 -0,9 -60,3 -52,7 25,2 -35,7 -11,9 -13,2 preceding a crisis ivano-frankivsk -47,0 7,6 24,9 22,4 -64,7 -35,3 -45,2 -4,1 -63,5 -31,2 moderate crisis kyiv 3,0 -63,9 79,6 47,2 -84,3 -40,6 -52,8 -52,3 -19,8 -29,5 moderate crisis kirovohrad -59,1 73,8 0,0 -5,0 -67,3 -29,4 -68,3 177,0 -58,1 -11,4 preceding a crisis luhansk 15,9 186,9 -0,6 10,1 -74,3 -50,8 -19,2 19,8 -25,4 -4,4 preceding a crisis lviv 5,4 -46,6 53,5 12,6 -82,0 -43,8 -61,8 -31,3 -51,0 -35,1 moderate crisis mykolaiv -42,6 100,5 12,6 1,5 -66,3 -46,3 -4,1 -3,3 -41,0 -17,3 preceding a crisis odesa 31,4 -53,5 12,4 17,4 -73,7 -47,2 -49,8 -45,1 -22,9 -33,0 moderate crisis poltava -0,3 135,8 22,8 -9,5 -46,7 -48,2 -18,2 41,8 -3,1 0,05 no crisis rivne -57,8 1,6 0,5 27,8 -94,3 -45,8 -60,8 27,2 -66,4 -36,1 moderate crisis sumy -52,7 68,1 -17,9 2,5 3,3 -45,9 -35,3 24,6 -50,7 -21,4 preceding a crisis ternopil -67,6 -32,1 -3,6 29,5 -67,7 -35,6 -81,8 89,4 -71,3 -34,5 moderate crisis kharkiv 64,2 -33,0 -7,2 -12,7 -49,3 -48,9 -62,6 -2,3 -12,3 -25,6 moderate crisis kherson -62,2 80,4 -9,5 -2,5 -65,0 -42,9 -66,6 156,4 -62,8 -15,3 preceding a crisis khmelnytskyi -52,7 -14,0 8,3 22,2 -79,3 -41,1 -72,2 43,7 -64,9 -35,0 moderate crisis cherkasy -45,6 53,0 7,6 1,3 -91,0 -39,5 -50,4 35,7 -53,1 -26,6 moderate crisis chernivtsi -73,6 -0,4 27,6 40,2 -68,3 -41,1 -78,0 100,8 -74,0 -27,0 moderate crisis chernihiv -55,7 6,1 -21,2 0,3 -82,0 -45,9 -66,3 44,0 -57,3 -36,8 moderate crisis * calculated by the author according to the data (www.ukrstat.gov.ua) baltic journal of economic studies 4 vol. 3, no. 5, 2017 3. assessment of crisis level of regions of ukraine according to the social parameter in order to determine the crisis level of regions of ukraine, it is necessary to analyse the crisis level of regions according to indicators of social development. the calculation of crisis depth of regions of ukraine according to social parameters is shown in table 2. regions that are in a deep crisis according to social parameters as of 2015 were dnipropetrovsk, donetsk, zaporizhzhia, luhansk and mykolaiv, and the autonomous republic of crimea, where the deviation level from the threshold non-crisis state is more than 50%. the social tension in these regions is pretty high, which is the reason that the conflict situations arise as a result of poor quality of life over the last decade. table 2 assessment of crisis level of regions of ukraine according to social parameters for 2013–2016, % region of ukraine h ou si ng , m 2 pe r in ha bi ta nt u ne m pl oy m en t r at e sh ar e of e m pl oy ab le po pu la tio n in to ta l nu m be r o f p op ul at io n, % m or ta lit y ra te sh ar e of p op ul at io n w ith pe r c ap ita in co m e be lo w po ve rt y lin e ed uc at io n ex pa ns es , % be fo re g r p h ea lth ca re e xp an se s, % b ef or e g r p c ul tu re a nd a rt e xp an se s, % b ef or e g r p b ir th ra te a ve ra ge le ve l crisis status vinnytsia 31,6 -13,8 14,4 -52,0 -75,9 -30,4 -53,2 -87,1 -39,0 -33,9 moderate crisis volyn 1,2 -18,1 15,8 -44,3 -84,4 -20,4 -53,6 -86,1 -18,0 -34,2 moderate crisis dnipropetrovsk 15,6 14,3 15,3 -52,2 -67,1 -71,7 -78,0 -95,0 -39,1 -50,2 deep crisis donetsk 11,8 -2,1 15,8 -53,4 -64,5 -73,5 -75,0 -94,3 -46,5 -52,4 deep crisis zhytomyr 21,2 -26,7 17,6 -54,2 -78,5 -18,9 -49,0 -86,3 -34,3 -34,3 moderate crisis zakarpattia 11,3 -12,1 15,4 -36,2 -80,0 -5,9 -48,4 -83,4 -16,9 -28,5 moderate crisis zaporizhzhia 10,6 1,6 15,5 -49,7 -71,0 -62,6 -71,5 -93,2 -42,5 -50,3 deep crisis ivano-frankivsk 15,1 -16,2 3,9 -38,1 -78,9 -31,8 -53,6 -85,2 -29,8 -35,0 moderate crisis kyiv 51,6 5,9 14,6 -53,2 -73,5 -57,2 -70,6 -90,7 -35,1 -34,3 moderate crisis kirovohrad 20,8 -18,8 14,3 -54,8 -78,9 -33,2 -56,1 -87,1 -41,4 -37,3 moderate crisis luhansk 18,0 -0,2 11,2 -53,6 -73,3 -63,9 -64,8 -91,0 -47,8 -50,6 deep crisis lviv 3,9 -12,4 12,8 -39,0 -77,3 -39,2 -61,7 -87,8 -34,5 -37,2 moderate crisis mykolaiv 7,8 -18,5 16,5 -49,5 -69,9 -47,1 -66,7 -89,8 -38,2 -50,1 deep crisis odesa 9,2 27,0 10,0 -48,1 -75,7 -60,7 -72,0 -91,5 -32,4 -37,1 moderate crisis poltava 21,8 -14,0 15,7 -55,0 -76,4 -64,2 -74,1 -92,7 -46,1 -42,8 moderate crisis rivne 4,1 -30,9 14,7 -40,4 -81,2 -22,2 -53,1 -85,3 -15,0 -34,4 moderate crisis sumy 14,3 -19,7 15,8 -55,3 -78,1 -40,9 -57,4 -88,8 -48,6 -39,9 moderate crisis ternopil 13,2 -27,9 6,7 -44,8 -83,4 -11,9 -45,4 -81,1 -35,7 -34,5 moderate crisis kharkiv 12,5 7,5 15,5 -48,7 -68,6 -64,6 -73,0 -92,7 -45,9 -39,8 moderate crisis kherson 13,0 -20,1 16,5 -48,6 -78,6 -21,9 -52,3 -86,0 -36,8 -35,0 moderate crisis khmelnytskyi 22,6 -18,7 16,4 -51,3 -78,9 -20,3 -51,9 -84,0 -38,1 -33,8 moderate crisis cherkasy 30,1 -24,4 16,4 -54,0 -72,3 -38,9 -58,2 -87,6 -45,8 -37,2 moderate crisis chernivtsi 11,3 -20,2 12,2 -39,4 -77,9 -7,7 -41,9 -82,2 -29,9 -30,6 moderate crisis chernihiv 25,5 -23,6 18,3 -60,5 -76,1 -36,5 -54,2 -85,3 -48,4 -37,9 moderate crisis kyiv city 3,9 49,7 21,7 -24,3 -32,0 -84,8 -87,9 -96,5 -35,4 -31,7 moderate crisis sevastopol city 2,6 42,9 3,4 -38,3 22,1 -51,4 -64,0 -84,4 -44,6 -33,5 moderate crisis * calculated by the author according to the data (www.ukrstat.gov.ua) 4. conclusions therefore, by generalizing the conducted analysis on the crisis level according to economic parameters, it can be argued that the causes of the crisis, in the most of industrial regions of central and eastern ukraine, are the following: – business contractions in the economy of regions as a whole; – high levels of corruption and shadow economy; – the decrease of purchasing capacity of the region population; – poor engineering and technical equipment of regions over the high level of wear and tear and low level of fixed capital investments; – low innovation activity of enterprises in the region; – the high amount of energy and raw materials, the dominance of industries of primary processing, especially in regions oriented to export. baltic journal of economic studies 5 vol. 3, no. 5, 2017 the main causes of crisis situations, in addition to the above mentioned, for a number of regions of ukraine (as volyn, zakarpattia, ivano-frankivsk, ternopil, khmelnytskyi, chernivtsi, cherkasy) that were in the area of moderate crisis according to economic parameters, are the following: – remoteness from economic centres and raw material bases; – lack of developed social and industrial infrastructures that makes the region unattractive to qualified labour force; – historically formed conditions of operation, as a result, regions were not included to those of primary importance, those that are involved in the implementation of major social and economic programs; – low efficiency of capital investments. thus, the conducted analysis on the crisis of socioeconomic development of ukraine’s regions made it possible to detect the level of its depth according to the social and economic parameters and to determine the weakest areas that need the most support and display in anti-crisis regional management. regional development is made in times of crisis at the state level, so there is an actual need to search and develop new strategies for socio-economic development, the implementation of which will create conditions for improving the quality of life in regions of ukraine. references: baranovskyi, o. i. (2009). fіnansovі kryzy: peredumovy, naslіdky і shliakhy zapobіhannia [financial crisis: background, consequences and ways of prevention]. kyiv: knpeu [in ukrainian] mirzodaieva, t. v. (2005). orhanіzatsіino-ekonomіchnyi mekhanіzm reguliuvannia regіonalnogo rozvytku ukrainy [the organizational and economic mechanism of regulation of regional development of ukraine]. nauka moloda – young science, ternopil: tneu, no. 4:19-22. [in ukrainian] herasymchuk, z. v., abramova, i. o. (2010). teoretychnі pіdkhody do traktuvannia sutnostі poniattia “kryza sotsіalnoekonomіchnoho rozvytku rehionu” [theoretical approaches to the interpretation of the essence of the concept of “crisis of socio-economic development of the region”]. proc. of lntu “economics: regional economy”, vol. 7 (27), part 2, lutsk: lntu, pp. 147-155. [in ukrainian] maiurenko, s. o. (2011) іnstytutsіonalna skladova antykryzovoho upravlіnnia regіonalnoiu hospodarskoiu systemoiu [institutional component of crisis management of regional economic system]. the economy and the region. poltava, no. 3 (30):49-53. [in ukrainian] holiad, n. y. (2004). metodika antikrizisnogo upravleniia regionom [the methodology of crisis management of the region]. kremenchuk: rehionalni perspektyvy [regional outlooks], no. 6 (43):25-27. [in russian] udovychenko, v. p., maiurenko, s. o. (2011). vplyv fіnansovo-ekonomіchnoyi kryzy na mіstsevyi sotsіalnoekonomіchnyi rozvytok z urakhuvanniam mіzhnarodnoho dosvіdu [impact of financial crisis on the local socioeconomic development in the context of international experience]. economic journal-xxi, no. 3-4: 62-65. [in ukrainian] butko, m. p., maiurenko, s. o. (2011). teoretychnі zasady kryzovykh yavyshch v ekonomіtsі [the theoretical basis of the economic crisis]. the economy and the state, no. 4: 4-7. [in ukrainian] honcharova, t. a. (2004). derzhavna pіdtrymka іnnovatsіinoho rozvytku regіonіv [state support of innovative development of regions]. proc. of the donetsk state academy of management “state administration”. donetsk: donsum, pp. 17-26. [in ukrainian] state statistics service of ukraine (n.d.).  bahatohaluzeva statystychna informatsiia [diversified statistical information]. retrieved from: http://www.ukrstat.gov.ua/ [in ukrainian] baltic journal of economic studies 40 vol. 4, no. 2, 2018 corresponding author: 1 department of accounting, audit and financial and economic safety management, dnipropetrovsk state agrarian and economic university. e-mail: bondarchuk-nv@ukr.net 2 department of accounting, audit and financial and economic safety management, dnipropetrovsk state agrarian and economic university. e-mail: bondarchuk-nv@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-40-46 impact of operating costs on economic phenomena and the possibility of their optimization at processors nataliya bondarchuk1, lesya vasiljeva2 dnipropetrovsk state agrarian and economic university, ukraine abstract. in conditions of self-repayment and self-financing, the profit maximization and production efficiency increase become the main aim of enterprises. under the impact of deflationary conditions and many other reasons, the prices fixation at a certain level is necessary for the maintenance of the effectual demand and supply. in this case, the effective system of production costs management becomes necessary for the maintenance of profitability level and reaching the high indicators of enterprise operations. the forecasting of leading economic indicators is an important operations direction of any sphere in modern economic conditions. the aim of this article is to research the impact of costs on the economic phenomena of enterprises of processing sphere and give the opportunity for their optimization. the theoretic, methodical, and application issues relating to the management of costs and their optimization at enterprises of processing sphere are the goal of the research. methodology. in the article writing, the following methods were used: abstract-logical, monographic, economic and mathematical. results. the enterprise costs are not only an indicator of its profitability determination, and an indicator, with the help of which there is a possibility to determine the enterprise’s development level as well. it is stated that the basic mechanism of processing industry enterprises operation is a management system, and the costs management is one of the main functions of it. the development of measures for the production costs decrease is the main element of the costs management system at the enterprise. the search for suppliers of the reliable operating resources; manufactured products variety improvement; labour organization and selling improvement; labour efficiency increase; maximum involvement of additional income and available assets (lease of areas, not currently used by the business entity that will result in additional income and, thus, reduce the cost of maintenance of these premises or equipment); permanent control over the enterprise’s costs; increase of efficiency of internal costs management, basing the timely and qualitative analysis are used for the purpose of optimization of the operational costs at enterprises of processing industry. practical implications. the multicriteria optimization model of enterprise costs has been developed for the costs management at the enterprises of the processing industry. its essence is to find the optimal plan for the production of sausage products and the volume of renewal of production resources in the conditions of limitation of production costs. the implementation of this model consists from three stages: 1) the volumes of production of sausage products, subject to search, are determined by the variables, with dual indexation; 2) the restrictions for the created model are determined; 3) the target functions of the created model are determined. value/originally. the optimization of production costs and management of the output plan of the meat processing and packing plant products allows the provision of a rational structure of meat products and form the volumes of their renewal with the resources during the minimization of the deviation of a new production plan relative to current one. key words: production costs, enterprises of processing industry, costs optimization, optimization model. jel classification: c53, m11, m21 baltic journal of economic studies 41 vol. 4, no. 2, 2018 1. introduction the forecasting of the main economic indicators is an important direction of the activity of any sphere in modern economic conditions. the degree of use of labour, material and other resources is crystallized in the enterprise costs. their amount is featured by the results of materialized economic relations of production entities, acting independently at their discretion according to the economic interests. in current conditions, the production costs cannot be considered as only technical and economic, and accounting categories already. the consistency and separate economic laws are demonstrated in amount, structure, time-space of costs. in particular: of timesaving, labour efficiency increase, distribution by the results of materialized and living labour and others. the production costs are the subject of important and continuous care in the theory of reproduction, as they relate directly to the production practice, are aimed at its specific analysis and the development of recommendations for managers and teams. as a result, the issues of optimization of production costs at the micro level become of particular importance. the research of the impact of costs on economic phenomena of enterprises of processing industry and the opportunity of their optimization bringing are the aims of this article. the theoretic, methodical, and application issues regarding the costs management and their optimization at the enterprises of processing industry are the subject of research. the observing the changes and research of production costs, timely determination of their level is one of the reliable channels for competition in a market economy’s analysing. after all, entrepreneurship is not only creativity for the creation of consumer goods but also persistent, purposeful management of the resources of the production subjects. therefore, disclosing the content of this research, it is necessary to determine the economic content of costs first and their impact on the economic phenomena, to consider the possible ways of optimization of enterprises production costs of the processing industry, and we will develop the multicriteria optimization model of enterprises production costs of the processing industry. 2. the essence of production costs and their impact on economic phenomena production costs are a complex multilateral phenomenon that can be considered from different sides. the production costs are divided into the social costs and the enterprise costs from the standpoint of socio-economic relations. from the point of view of society, the costs include all living and materialized labour, which obtain the form of price of finished goods and form the price structure of a social product. the latter is one of the most important problems in the research of social reproduction. the production costs of a separate manufacturer are the payments to the resources owners (means of production, labour) carried out by the business entity in order to attract them to its production. the costs include the cost of raw materials, materials, components, services, and other material resources, the cost of wages for the production of finished goods. it is necessary to emphasize that costs are the resources spending, which has obtained the price form in the competitive market. that is why the economic understanding of the production costs is based on the fact of the exclusivity of resources and the possibility of their alternative use. the economic costs of any resource, used to produce a product, are equal to its price at the best of all alternative uses. they can be external (explicit) and internal (implicit). explicit costs, associated with payments to suppliers of production factors, the purchase of resources from outside parties. there are many concepts of production costs. in his time, a. smith introduced the concept of absolute costs (smith, 2007), and d. ricardo became the author of the theory of comparative advantages (ricardo, 1995). they meant the public average costs per unit of output as a term “costs”. the costs are also defined as the price of production, taking into account rental payments. according to the marxist theory, the production costs are the amount of the goods value to the capitalist that is the amount of his costs for the purchase of means of production and labour. criticizing a. smith, k. marx noted “... a. smith has one-sided interpretations of the social product or the position of certain labour (in this case, the annual public product acted as the whole amount of produced in a year of use values) or from the side of abstract labour (from this point, the public product was meant by smith as a newly created value)” (marx, 1983). at the end of the xix century, new concepts of costs appeared. marginists consider costs as a phenomenon, based on marginal utility (menger, wieser, 1992). the amount paid by the enterprise for the factors of production is determined by the marginal utility they have on behalf of the seller. the transition to the mathematical basis of the concept of the theory of alternative possibilities, according to which the actual production costs are the greatest utility of the benefits that society could receive in the case when it used the spent resources in the other way, contributed to the emergence of the theory of costs minimization. in addition to the theory of marginal utility of costs in the economy, the institutional theory of costs is also met. it is represented in the works of j.b. clark. in a due time, the theory of transaction costs, associated with the turnover (costs for the sale of goods, advertising, etc.) became popular (clark, 1992). r . coase (coase, 2000) is considered the founder of this theory. baltic journal of economic studies 42 vol. 4, no. 2, 2018 the concept of costs in the work of j. m. keynes “the general theory of employment” became widely known. in his work, the author distinguishes the following value elements of the product: a) the use costs; b) factorial costs; c) additional costs; d) total income of enterprises (keynes, 1978). m. tugan-baranovskiy was the first who has combined the labour and consumer theories of value in the ukrainian economic literature. the concept “value”, as a result of costs of means and products, and “labour value”, as a result of the living labour expenses, was introduced (tugan-baranovskiy, 2003). the formation of the enterprise costs can be both extensive and intensive. extensive costs formation focuses on attracting the additional resources. the intensification provides that the production results increase faster than costs. that is, the production involves relatively fewer resources in order to obtain more significant results. thus, the main task of the degree of production intensification analysis is the search for reserves of the extensive and intensive level of costs formation and, as a result, a decrease of production costs. in fact, there cannot be only intensive and extensive type of development. it will be more correct to talk about a predominantly intensive or predominantly extensive type of development. a certain increase in efficiency and cost reduction may be available also in predominantly extensive type. the intensification of all resources use, providing the decrease of production costs in the processing of agricultural products industry, depends on the solution of two interrelated problems: – the search and rational use of financing amounts regarding the creation of new powers, more efficient labour instruments, renewal and technical upgrade of capabilities; – the intense use of available resources and improvement of this process management mechanism. more complete and rational use of resources and production powers of agricultural products processing industry will assist in the improvement of all its technical and economic indicators, an increase of labour efficiency, the yield on capital investments increase. the economic activity run by economic entities in current market conditions has led to a radical rethinking of content, methods, and tools for costs formation. in the new conditions of enterprises functioning, it is necessary to include a charge for compulsory medical insurance, payments for insurance of means of production, life and health of employees, other insurance contributions to costs. in conditions when the entrepreneurs become business entities, to our mind, the costs should include a part of the profit, which makes insurance contributions of entrepreneurial income. in addition to the economic approach to determining the costs of an enterprise, there is also a so-called accounting approach, according to which costs should be understood as actually consumed production factors for the production of a certain number of products at the prices of their purchase. the costs are considered as the products cost in the accounting and statistical reporting documents. the systems of costs formation in the accounting approach are featured by two main indicators, which can be used as the basis of their classification: 1. by the completeness of the costs inclusion to the products costs: – complete costs accounting system – the traditional system, according to which the total amount of costs is related to objects of calculation, and thus their full cost is determined; – incomplete costs accounting system – in this case, only a part of total costs by aby feature (“direct-costing”) is related to the calculation objects. 2. by degree of costs rate setting: – the system of accounting of actual costs provides the representation of business processes and costs, incurred during the accounting period; – normative-planned cost accounting system provides planning of future enterprise costs, based on current norms and fixing deviations of actual costs from the planned (“standard-cost”) (druri, 1998; golov, 2004). 3. directions of optimization of production costs of processing industry enterprises lack of due management of all production resources at the enterprise almost always leads to a crisis in those cases, when most of the resources are spent for current consumption, payment of debts and interest on them. each separate enterprise cannot maintain its position in markets for a long time with such financial indicators. management of production costs, in this case, should be directed to the increase of the production efficiency through the use of high-tech and resource-saving technologies. as a rule, the production activity of the processing industry enterprises has a continuous nature and is accompanied by the presence of uncompleted production at the end of the calculation period. the amount of permissible and necessary volume of uncompleted production is calculated taking into account the length of the production cycle of the output and the type of production. in this case, the main task of cost formation is the determination and counting of all factors, at which the set volume of production will be produced with minimal cost. the basic mechanism of operation of enterprises of the processing industry is a management system, one of the main functions of which is cost management. the cost of an enterprise is not only an indicator for determining its profitability but also an indicator that allows us to assess the level of enterprise development, baltic journal of economic studies 43 vol. 4, no. 2, 2018 the structure and range of production opportunities, etc. (bedrinets, 2013). the costs of the enterprise are the basis for the formation of its profits, and in current market conditions, the operation of the processing industry enterprise is impossible without a system of costs planning and control. the goal of the analysis of the activities costs of such enterprises is to comprehensively assess the actual data, their optimization and management decisions explanation for further rationalization. analysis can be based on the principles of the system, complex, and cybernetic approaches: an important component of the cost management system at the enterprise is the development of measures to reduce the production cost, which, in the further research, will be shown on the example of the enterprises of the processing industry. in order to optimize operating costs in the processing industry, you can use the following measures: – search for reliable suppliers of productive resources; – improvement of the range of products; – improvement of the organization of labour and marketing activities; – increase in labour productivity; – maximal attraction of additional income from free assets (lease of areas that are not currently used by the business entity, which will bring additional income and, thus, reduce the cost of maintaining these premises or equipment); – permanent control over the expenses of the enterprise; – increasing the efficiency of internal cost management based on the timely and qualitatively conducted analysis (prisyazhnyuk, 2016). one of the directions of optimization of production costs is the application of economic and mathematical models of monitoring management of replenishment of resources and production plan. 4. research methodology in order to optimize the costs of the processing industry enterprises, we suggest the following methodology and the economic-mathematical model of the monitoring management of replenishment of resources and the plan for producing meat products, which has the appearance of a multicriteria optimization task. the resources, necessary for the production of meat products will be classified according to the following types: – raw materials; – technical (equipment, parts for its repair, structures); – power (electricity, fuel); – labour (employees by level of qualification); – financial (own funds of the meat processing and packing plant and loans for the purchase and payment of the said resources for sale of manufactured products). let us relatively limit the scope of the meat processing and packing plant by the manufacture of 14 types of sausage products that the meat processing and packing plant can produce: stuffed, boiled sausages, sausages, bockwurst, meat loaves, liver, blood sausages, pastes, saltisons, chillies, semi-smoked, boiled smoked, smoked and dried sausages (rogov, zabashta, kazulin, 2000). according to (rogov, zabashta, kazulin, 2000), the raw material for sausages is meat (mainly beef and pork); by-products (beef and pork lungs, liver, heart, kidneys, brains, etc.); blood products; protein preparations of animal origin; soy supplements; spin and other animal and vegetable fats; eggs; wheat flour; groats; salting ingredients (salt, sugar, sodium nitrate); spicy flavouring mixes. the raw materials also include the shell for sausage products, which is natural (intestinal) and artificial. we also understand the technical equipment of the meat processing and packing plant: – the equipment for receiving raw materials (mechanisms for unloading of transport, weighing equipment, hanging conveyors, floor wheel transport); – equipment for the preparation of meat raw material for industrial processing (washing machines, carcasses, conveyors for rolling and hulling of meat, machines for removing skins from spits, spit coolers); – equipment for cutting, salting, and maturation of meat (choppers, machines for crushing of frozen blocks, cutting of spoke, mixers for meat salting, units for crushing, equipment for maturation of meat); – currently mechanized production line of sausage products: – equipment for making minced meat (mixers, shredders, cutters, colloid mills); – equipment for the production of sausage products (screw syringes, eccentric-shovel-shaped, and piston machines; transwraps and units for production of sausages in cutting shells; pentaflex, belkosin, cellophane; machines for making sausage products with the formation of vesicant cellophane and sleeve cover; units for binding and bracing of bars); – heat treatment equipment (smoke generators, rotary ovens, cooking boilers and cabinets); – equipment for storage of finished products for dispatch (storage units, containers, mechanized expedition). monitoring, as a systematic observation of changes in the market environment in the sphere of meat products manufacture, will reflect random current fluctuations (possibly due to known probabilities) of factors of production and sales of sausage products, namely: – the cost of the listed raw materials; – the costs of replenishing technical and energy resources; – the cost of finished products; – interests in attracting the additional financial resources; baltic journal of economic studies 44 vol. 4, no. 2, 2018 – signed contracts for the supply of certain meat products. it is necessary to emphasize for each of the listed resources: – available volumes; – unknown amounts of replenishment of resources, the search of which is an integral part of the solution goal of this task; – current costs of the units of the volume of replenished resources in accordance with market monitoring data. let us assume that the meat processing and packing plant is provided with a data block relating to: – current range and volumes of finished meat products; – the cost of changes in the production plan (by attracting the additional or dismissed redundant employees, setting up new lines, adapting the equipment, refusing from raw material suppliers services, conducting promotional campaigns of new products, additional monitoring analysis of the products consumers market, the establishment of new contacts in the trading network). moreover, according to monitoring data, there are known: – list of current selling prices of meat products in the consumption market; – the cost of producing units of this product at this meat processing and packing plant. the goal of the production activity of the meat processing and packing plant may be subject to various criteria, the list of which may include: – reduction of total cost of finished goods at the expense of minimization of costs of production resources; – maximization of profits from the sale of meat products; – minimization of the deviation of the developed production plan from the current one; – reduction of costs for replenishment of production resources; – improving the quality of production, which can be estimated by increasing the profit from higher grades products, from environmentally friendly, nontransgenic products, in attractive packaging, etc. so, it is necessary to find the optimal plan for the production of sausage products and the amount of replenishment of resources in order to satisfy the listed criteria, in the conditions of limiting the production costs for the corresponding resources and executing orders for certain products of the meat processing and packing plant. note that in general, there will be no plan for the production of sausage products in the meat processing and packing plant, which simultaneously meets all listed criteria. therefore, we will be interested in finding a set of so-called unimproved plans. taking into account all the above, we will develop a model of the described economic problem of processing of agricultural products in the form of a multi-criteria optimization task. the implementation of this model consists of three stages. і stage. the volumes of production of sausages products, which are subject to search, are determined by variables, with double indexation. іі stage. the restrictions for the developed model are determined. before describing the restrictions of the developed model, we define some parameters and coefficients related to the previous results of the meat processing and packing plant operation and the data of the current monitoring observations. the restrictions of the developed model will not give the opportunity to spend more resources in the production process, than their available and replenished volumes, as well as the mandatory nature of the execution of orders for certain types of sausage products. the main restrictions include: raw materials, technical, energy, labour, financial resources, and custom-made restrictions. ііі stage. determination of the target functions of the developed model. thus, the economic-mathematical model of the monitoring management of replenishment of resources and production plan at the meat processing and packing plant acquires the finished form of such a multi-criteria optimization problem: find: xij , j ji= 1.. , i = 1 14.. , and ykq , q qk= 1.. , k = 1 5.. , at which: c xij ijj ji i → == ∑∑ min.... 11 14 , (1) ( ) max .... b c xij ij ijj ji i − → == ∑∑ 11 14 , (2) w x x xij ij ijj ji i ( )( ) min ....  − → == ∑∑ 2 11 14 (3) (or w x x xij ij ijj ji i ( ) | | min....  − →== ∑∑ 11 14 ), d ykq kqq qk k → == ∑∑ min.... 11 5 , (4) s b xij ij ijj ji i → == ∑∑ max.... 11 14 (5) are reached at restrictions: a x y yij kq j ji ij kq kqi== ∑∑ ≤ +11 14 .... ,, q qk= 1.. , k = 1 5.. , (6) x zij ij≥ , j ji= 1.. , i = 1 14.. , (7) xij ≥ 0 , j ji= 1.. , i = 1 14.. , (8) ykq ≥ 0 , q qk= 1.. , k = 1 5.. , (9) ykq , q qk= 1.. , k = 2 4, – integral values. (10) to solve the problem (1)-(10), the linear convolution of its criteria with positive weighing factors should be used α α1 5, ..., , where αmm ==∑ 11 5.. , that is, to move from the model (1)-(10) to the parametric singlecriterion optimization problem: find: xij , j ji= 1.. , i = 1 14.. , and ykq , q qk= 1.. , k = 1 5.. , at which: α1 11 14( ).... c xij ijj ji i −== ∑∑ α2 11 14( ( ) ).... b c xij ij ijj ji i − +== ∑∑ + − + == ∑∑α3 2 11 14 ( ( )( ) ) .... w x x xij ij ijj ji i   baltic journal of economic studies 45 vol. 4, no. 2, 2018 + − == ∑∑α4 11 5( ).... d ykq kqq qk k – α5 11 14( ) min.... s b xij ij ijj ji i →== ∑∑ (11) (or α1 11 14( ).... c xij ijj ji i −== ∑∑ α2 11 14( ( ) ).... b c xij ij ijj ji i − +== ∑∑ + − + == ∑∑α3 11 14( ( ) | |).... w x x xij ij ijj ji i   + − == ∑∑α4 11 5( ).... d ykq kqq qk k α5 11 14( ) min.... s b xij ij ijj ji i →== ∑∑ ) is reached at restrictions (6)-(10). it should be noted that the equivalent record to (11) has a form: − + == ∑∑α1 11 14( ).... c xij ijj ji i α2 11 14( ( ) ).... b c xij ij ijj ji i − −== ∑∑ − − − == ∑∑α3 2 11 14 ( ( )( ) ) .... w x x xij ij ijj ji i   − + == ∑∑α4 11 5( ).... d ykq kqq qk k α5 11 14( ) max.... s b xij ij ijj ji i →== ∑∑ (or − + == ∑∑α1 11 14( ).... c xij ijj ji i α2 11 14( ( ) ).... b c xij ij ijj ji i − −== ∑∑ − − − == ∑∑α3 11 14( ( ) | |).... w x x xij ij ijj ji i   − + == ∑∑α4 11 5( ).... d ykq kqq qk k α5 11 14( ) max.... s b xij ij ijj ji i →== ∑∑ ) the excel table (a part of the application programs of microsoft office) is a convenient way to solve the problem (6)-(10), (11). in the economic sense, the parameters α α1 5, ..., will set different weights of criteria (1)-(5) according to the needs of the meat processing and packing plant under the conditions of the current state of the meat products market according to monitoring observations, which will allow searching for unimproved plans for the production of sausages products and the amount of replenishment of their resource support. 5. findings the production costs optimization and the management of the products output plan of the meat processing and packing plants can provide a rational structure of meat products and to form the volumes of their replenishment with resources during the minimization of deviation of a new production plan from the current one. the value сij – the price of a unit of weight of sausage products of the i-type of j-name. therefore, the criterion (1) is associated with minimization of total costs for the production of sausage meat products. the value bij – is a current market price of selling of the unit of the weight of sausage products of і-type of j-name. that is why the criterion (2) is intended for the search for the maximum profit from selling sausage products. the coefficient x͂ij – is a known current volume of products manufacturing of і-type of j-name, and w(x͂ij) – set money costs of the meat processing and packing plant for the change for a unit of weight of the current plan of sausage products production of і-type of j-name. then the target function (3) is associated with the minimization of deviation of new production plan of meat processing and packing plant from the previous one. the deviation dkg – is a current cost of the resource replenishment of k-type of g-name per the unit of volume. then, the target function (4) sets the minimum costs for the resource supply of sausage production of this meat processing and packing plant. the parameter sij is featured by grade and qualitative features of the sausage products. that is why the criterion (5) is associated with the maximization of profit from the sale of high-quality sausage products of higher grades. in restrictions (6), (7) the value ykg – sets the current volumes of resources of k-type of g-name, aijkg – resources expenses of k-type of g-name for the production of a unit of weight of sausage products of і-type of j-name, zij – the volumes of order for the і-type of j-name. applied calculations by the model (1)-(10) can be carried out in the framework of microsoft excel electronic table. this method takes into account the maximum use of available resources and the ability of modern computers and allows getting the planned values of production costs. 6. conclusions it was established that production costs are a complex multilateral phenomenon that can be considered from different sides. the basic mechanism of operation of enterprises of the processing industry is the control system, one of the main functions of which is cost management. enterprise costs are not only an indicator for determining its profitability but also an indicator that allows us to assess the degree of enterprise development, the structure and range of production opportunities, etc. costs of production from the standpoint of socioeconomic relations are divided into the costs of society and the cost of the enterprise. from the point of view of society, costs include all living and materialized labour, which obtains the form of price of finished goods and forms the value structure of a social product. the latter is one of the most important problems in the study of social reproduction or the reimbursement of a product in both natural and material and cost forms. in order to optimize the operating costs of enterprises in the processing industry, use: – search for reliable suppliers of production resources; – improvement of the assortment of products; – improvement of the labour organization and marketing activities; – increase in labour productivity; – maximal attraction of additional profit from free assets (lease of areas that are not currently used by the entity, which will cause additional profit and, thus, reduce the cost of maintaining these premises or equipment); – permanent control over the expenses of the enterprise; – increase in the efficiency of internal cost management based on the timely and qualitatively conducted analysis. baltic journal of economic studies 46 vol. 4, no. 2, 2018 in order to optimize costs in processing industry enterprises, a methodology and economic and mathematical model of the monitoring management of replenishment of resources and a plan for producing of meat products, which has the form of a multicriteria optimization problem, have been developed. the implementation of this model consists of three stages: 1) determine the volume of production of sausage products, which is subject to search, by dual indexation; 2) determine restrictions for the developed model; 3) determine target functions of the developed model. optimization of production costs and management of the output plan of the meat processing and packing plant can provide a rational structure of meat products and form volumes of renewal of their resources while minimizing the deviation of a new production plan from the current one. references: bedrinets, m.d. (2013) efektivnіst dіyalnostі subektіv pіdpriemnitstva v suchasnikh umovakh gospodaryuvannya [efficiency of activity of subjects of entrepreneurship in modern economic conditions]. business inform, no. 4, pp. 183-190 (in ukrainian). coase, r .g. (2000) priroda firmi. [nature of the firm]. st.petersburg: economic school (in russian). druri, k. (1998) vvedenie v upravlencheskiy i proizvodstvenniy uchet. [introduction to management and production accounting]. moscow: izdatelskoe obedinenie «yuniti» (in russian). golov, s.f. (2004) upravlіnskіy oblіk. [management accounting]. kiyv: libra (in ukranian). keynes, j.m. (1978) obshchaya teoriya zanyatosti protsenta i deneg. [general theory of employment of interest and money]. moscow: progress (in russian). clark, j.b. (1992) raspredelenie bogatstva [distribution of wealth]. moscow: economika (in russian). marx, k. (1983) kapital. kritika politicheskoj ekonomii: (protsess proizvodstva kapitala). [capital. critique of political economy [the production process of capital]. moscow: politizdat (in russian). middlton, d. (1997) bukhgalterskiy uchet i prinyatie finansovykh resheniy. [accounting and financial decision making]. moscow: izdatelskoe obedinenie «yuniti» (in russian). prisyazhnyuk, l.g. (2016) optimіzatsіya vitrat pіdpriemstv mashinobudіvnoi galuzі za dopomogoyu іnformatsіynikh tekhnologіy ta optimіzatsіi upravlіnnya zapasami [optimization of the costs of machinery and equipment for the additional use of information technology and optimization of inventory management]. investments: practice and experience, no. 20, pp. 76-79 (in ukrainian). smith, a. (2007) issledovanie o prirode i prichine bogatstva narodov [an inquiry into the nature and cause of the wealth of nations]. moscow: eksmo&press (in russian). ricardo, d. (1995) stati i rechi o denezhnom obrashcheni i bankakh. [articles and speeches on monetary circulation and banks]. moscow: gaspolitizdat (in russian). rogov, i.a., zabashta, a.g. kazulin, g.p. (2000) obshchaya tekhnologiya myasa i myasoproduktov. [general technology of meat and meat products]. moscow: kolos (in russian). tugan-baranovskiy, m. (2003) osnovi polinichnoi ekonomii. [the basis of the political economy]. lviv: vid. centr lnu im. ivana franka (in ukrainian). wieser, f. menger, k. bem. e. (1992) teoriya obshchestvennogo khozyaystva. [a theory of social economy] moscow: economics (in russian). baltic journal of economic studies 13 vol. 3, no. 3, 2017 development of scenarios for democratic transformations of socio-economic relations in ukraine tetyana calinescu1 private institution of higher education “zaporizhzhya institute of economics and information technologies”, ukraine olena zelenko2 volodymyr dahl east ukrainian national university, ukraine abstract. the purpose of this research is a choice of descriptions, which is necessary to take into account for the development of scenarios for democratic transformations of socio-economic relations in ukraine. the bases of this research are theoretical and practical aspects of the development of scenarios for the transformation of social and economic relations in the different regions of ukraine. at the heart of the research methodology, there are methods of scenario, space-vector modelling, which was used for the search for an optimal variant of scenarios realization and satisfaction compromise of necessities for different scenarios. also logical and economic-mathematical analysis was used for the exposure of connections between the necessities of population in different regions and their priority; swot-analysis was used for the exposure of factors, which positively or negatively influence on the satisfaction of regional population necessities; correlation analysis was used for the construction of optimum vector, what will satisfy all necessities and reflect on the level of relations. results. the research confirms that efficiency of achievement for the chosen scenarios depended on the level of limitations for situations, in which the scenarios will be realized. problems to be solved during the development of some scenarios are the determination of relevant variable indicators and degree of cooperation; the degree of controllability of the variable indicators; the level of boundedness in achieving the assigned tasks. the analysis of existent scenarios for the development of social and economic relations in ukraine shows the presence of the three main components: external terms, instruments, and results which set limits in the development of events, show orienteers of achievement and compel to make decisions for the settlement of nascent instability. the importance of establishing the tightness of the connection between the availability of certain knowledge in society and the needs that they generate and vice versa is proved. in this research was offered the mechanism of searching a single optimal variant of the scenario realization, which will bring the best socio-economic effect according to orienteers, which are the main priorities in society. it is proved that today’s reality in ukraine is beyond those socio-economic relations existed in a world community. scenarios of regions’ development, which were formed without taking into account the real possibilities, existing in every separate region, instruments and facilities, can simply shut off society from important priorities and tasks. such scenarios will not allow society to perceive adequately the state doctrines of development due to uneven development, information vacuum of the population, insufficiency of regions resource potential for self-providing of the further progress. practical implications. the practical value of the research is grounded on methodical and pragmatic instruments for searching the compromise decisions during scenarios forming process for the design of social and economic relations in different regions of ukraine, which unite the entire ukrainian nation for the solution of priority tasks, which will provide a maximal socio-economic effect. value/originality. the conducted research allowed getting some results, such as: the scenarios of socio-economic relations should be formed around national ideas; the process of scenarios development should detail implementation and realization of scenarios, on the basis of priority programs, which are satisfying the necessities of society. it is necessary to choose the priority of the programs according to the degree of its optimality and existent limits in the system of social and economic relations. optimality is determined by the selected society land-marks, which characterize expectations of the population. key words: scenarios, transformations, priorities, necessities, compromise, optimum. jel classification: a13, c02, r11 corresponding author: 1 department of accounting and taxation, private institution of higher education “zaporizhzhya institute of economics and information technologies”. e-mail: tetyana.calinescu@gmail.com 2 department of world economy and tourism, volodymyr dahl east ukrainian national university. e-mail: zelenko.olena@gmail.com baltic journal of economic studies 14 vol. 3, no. 3, 2017 1. introduction any scenario can be interpreted as a series of interconnected extrapolations of the past, taking into account some projections (assumptions) for the future (akcoff, 1985). this is a hypothetical sequence of events, which shows how the future state of the analysed object can be developed step by step from the existing or any given situation (mukhin, 2009). moreover, such a forecast of future situation in society presents the probability of occurrence of events with a certain share: 1) the implementation of planned democratic transformations or without them; 2) obtaining the expected effective or negative consequences from creative activity within the framework of modern socio-economic relations. success, the degree of approximation of basic scenarios (without interference in the evolution of socio-economic relations) to the ideal (the most effective, desired, supporting the majority) depends on creative approaches to it, the level of creativity, the ingenuity of its developers’ efforts. the degree of applied creativity depends on how deeply, qualitatively, and quantitatively the nature of the decision for the selected scenarios is evaluated. unfortunately, in the territory of the post-soviet space states, the scenario analysis has not yet received a wide circulation; here the traditional methods of plans building and forecasts still prevail. although in many other countries, scenario modelling is considered as one of the main tools for strategic forecasting (lindgren & bandhold, 2009). indeed, the scenario method is based on the use of logical-heuristic analysis in conjunction with formal approaches, including tools of economic and mathematical modelling. according to many experts (zgurovskiy & pereverza, 2009); scenarios method gives the opportunity to avoid the “tunnel vision”, eliminates the problem of non-alternative events development concerning any object of research. the situations for scenarios analyses are affected by different variables indicators that have varying degrees of relevance and control. therefore, the result (p) of any scenario can be defined as: р = f (кп, нп) → max, (1) where, f is a function of kn-controlled and hn-uncontrolled variables; max is the desired maximum, to which the result tends. the effectiveness of achieving the selected scenarios depends on the degree of constraints in the scenarios situations. hence, the main problems need to be addressed when developing any scenarios: • the definition of relevant variables indicators and the degree of interaction in the studied situations; • the degree of control over variables indicators; • levels of limited achievement for assigned tasks. 2. results of previous researches starting to develop scenarios, it should be noted that today’s economic foreign (akcoff, 1985; everett, 2009) and domestic (ukraine 2030, 2017; kolenda, cherchyk l. m. &gavryluk, 2013; sotnichenko, 2015) science and practice, including the author’s works (calinescu, antipov, kushal, 2016; calinescu, alioshkina, 2016) have many different scenario approaches to the methodology of construction, the style of formation and structure of various systems connection and relationships in society, both at the state and at the regional, local level (the level of various economic entities). the world economic forum in davos forecasts three scenarios for the development of modern socioeconomic relations in ukraine (ukraine 2030, 2017): 1) “back to the future”, which provides unfavourable external socio-economic conditions but stable reforms in ukrainian society; 2) “lost in a situation”, predicting an unfavourable situation in both cases; 3) “the beginning of a favourable cycle”, emphasizing the full positive impact on the situation in ukraine from different sides. these scenarios include three main components  – external conditions, tools, and results, which set constraints in the development of events and designate the achievement benchmarks, make subsequent decisions to resolve the emerging instability. but the conducted research “forsyte-2016” in ukraine predicts the development of events according to the following scenarios (ukraine 2030, 2017): a) optimistic (with a probability of reaching 15%), b) “preserving the crisis” (respectively, the probability is 30%), c) “sovereign default” (30% respectively), d) “collapse” (5%). the implementation of the above scenarios in the medium term (until 2020) made it possible to develop long-term scenarios of social and economic relations for the leading research institutions of ukraine until 2030, namely (ukraine 2030, 2017): “balanced development”, “alien subjectivity”, “grey zone”, “disintegration” with the forecasted by the international monetary fund an annual development level of 3%. of course, such prospects do not inspire much optimism, so there is a need to develop fundamentally new approaches to the formation of scenarios of socio-economic relations. proceeding from the foregoing, the purpose of this study is to determine the characteristics that should be taken into account for developing scenarios process in the context of democratic transformations of social and economic relations in ukraine. such characteristics in the construction of scenarios include: the degree of optimality, the achievement of satisfactory results, and the reduction of restrictions in the context of the implementation of the selected benchmarks for the democratic transformation. baltic journal of economic studies 15 vol. 3, no. 3, 2017 3. theoretical bases of scenarios development the conducted studies confirm the truths expressed by the ancient greek figure sophocles in 400 bc that everyone should study in practice because although you think you know, there is no certainty until you check (everett, 2009). therefore, these studies are conducted within the framework of research topics, carried out at volodymyr dahl east ukrainian national university “development of democratic mechanisms for selfprovision of society socio-economic transformations”, approved by the ministry of education and science in ukraine. any forecasting method, including the scenario method, should comply with the following principles: • the principle of systematicity (consideration of the object of forecasting and all its components in conjunction with the surrounding environment, which exerts its influence and affects the process of vital activity of the object); • the principle of consistency (forecasts for a short period for the investigated object should be logically interconnected within forecasts of its life activity for a long-term period); • the principle of variance (assumes the presence of at least two variants of the forecast, corresponding to different states of object elements and components of its environment, the more options, the higher the probability of determining the most optimal forecast); • the principle of verifiability (compliance with reliability and accuracy, as well as the validity of the forecast); • the principle of adaptability (any forecast should be flexible, in case of changing conditions, it should be possible to adjust the forecast); • the principle of efficiency (the cost of developing a forecast should be covered by the received positive social and economic effect from its implementation). experience in the development of various scenarios emphasizes the need to involve in this process and bring any scenario to the ideal state, using a wide range of innovative tools, diffuse (penetrating) technologies for making typical decisions that reduce time and resources. although, for the application of existing historical domestic or foreign experience, certain prerequisites have to exist (everett, 2009): a. knowledge, which formulates ideas about scenarios and their components. this is the knowledge that developers of any scenarios should possess. b. beliefs that population has, which are influencing on perception, support, and satisfaction degree of the developed scenarios to the citizens’ needs. c. the availability of collective and collegiality in making decisions regarding the selection of scenarios from a certain set of alternatives, if there are differences in points of view on the formation and implementation of scenarios. d. confirmation – it is a practical test of valid scenarios that use innovative tools. from this sequence of assumptions, the most important are the answer to the question: what is primary  – the needs and their satisfaction in the process of socio-economic relations or innovative knowledge that need to be implemented into practice? it is impossible to answer this question unequivocally, proceeding from the fact that: • on the one hand, people are so organized that they perceive with caution any changes, new knowledge, and even more innovative, until they are convinced that they meet their needs (everett, 2009); • on the other hand, needs are the result of dissatisfaction, an annoyance that it is impossible to have what you want (everett, 2009). sometimes needs arise when the positives of applying some innovative knowledge are known. k1 ~ n1 k2 ~ n2 k3 ~ n3 k4 ~ n4 k5 ~ n5 k7…n~ n7…n k6 ~ n6 fig. 1. oriented graph of the relationship between the components of innovative knowledge and the needs source: developed by the authors, taking into account (sotnichenko, 2015) baltic journal of economic studies 16 vol. 3, no. 3, 2017 so, there is a relationship between knowledge and needs: knowledge creates certain needs of the population and vice versa, the needs arise because of the special attractiveness of some innovative knowledge. in this case, it is particularly important to establish not so much the prioritization of knowledge and needs as how to accurately determine the tightness of the connection between the availability of certain knowledge in society and the needs that they generate and vice versa. fig.  1 presents a conditional relationship between the components of certain innovative knowledge and the needs that they can generate. fig. 1 presents expected connection and the mutual dependence of k ~ n between knowledge (k) and needs (n) in the form of an oriented graph. numbers from 1 to 7 and till n can be any area of innovative knowledge and related needs. for example, 1 – this is an area of economic knowledge that corresponds to socioeconomic needs, n1 = {n11, n12, n13 ..., n1n}, namely n11  – presence of a developed labour market; n12  – presence of a developed transport infrastructure; n13 – presence of a stable functioning banking system, etc. the oriented graph, presented in fig. 1, shows possible links between the elements included in the composition of the scenario. the components correspond to the indicated vertices, and the arrows show the directions of the possible influence of all the elements on each other, as well as feedbacks. a similar graph can be represented by a matrix of incidents or a similar compatibility matrix (see table 1). it follows from the matrix (table 1) that the intersection of a row and a column means obtaining some result with a positive, negative or zero value. for any scenario, it is important to determine the limits that each structural element can reach, and find the optimal effect that can be obtained after the completion of its implementation. fig. 2 represents schematically the process of searching for a single optimal variant of the chosen scenario that will bring the best socio-economic effect (optimum) to the benchmarks that are the main components and, at the same time, the main priorities in the society. the set of these components can be either universal or unique, depending on the situation, in which the scenario is prepared and implemented. each of the components has its limitations (optima), which are achieved through compromise solutions, using vector optimization tools (see fig. 3). the trajectory described by the optimality vector (see figures 3a, b, c, d) may have different directions but the main condition that it has to fulfil is to be maximally positive. if there is a negative trend, then it is necessary to seek compromises, establish a dialogue and, based on its results, develop incentive measures that will be interested for all stakeholders of negotiations. there are also options for changing and adjusting scenarios in accordance with the conditions for the transformation of socio-economic relations in the society. it follows from fig. 2 and 3, what the optimum can be achieved only if there is certain knowledge level of those principles that allows reaching a compromise. the emerging problems in scenarios implementation require a certain agreement, a search for a compromise. but not all participants of the scenario can perceive the existing problems. they may not even guess about their presence, so they do not try to coordinate them, make compromises, as they do not meet their needs. this is because the problems are subjective and, level of knowledge and economic needs level of knowledge and social needs level of knowledge and safety needs i ii iii iv notation: і  – achievement of a compromise (a field of restrictions) in setting the level of satisfaction within economic and social needs; іі  – achievement of a compromise (a field of restrictions) in settling the level of satisfaction with economic needs and en-suring the safety of human life; ііі – achievement of a compromise (the field of restrictions) in setting the level of satisfaction with social needs and ensuring the safety of human life; іv – optimum, at which all differences in the level of needs are regulated. fig. 2. expected scheme for achieving a unified optimum within the chosen scenario source: developed by the authors, taking into account (kolenda & cherchyk & gavryluk, 2013) table 1 matrix of compatibility for structural elements included in the scenario scenario structural elements k1 ~ n1 k2 ~ n2 … kn~ nn k1 ~ n1 0 1 1 1 k2 ~ n2 1 0 1 1 … -1 1 0 1 kn ~ nn -1 -1 1 0 source: developed by the authors, taking into account (sotnichenko, 2015) baltic journal of economic studies 17 vol. 3, no. 3, 2017 as a rule, determined by the experts of a particular project  – scenario element. therefore, there are main requirements that have to be presented to the knowledge level for any scenarios: • awareness of all the participants in the scenario about its essence, significance, and structural components; • procedural knowledge, to which each participant aspires, based on those decisions that he/she should take concerning interesting for him/her procedures in the scenario; • knowledge of the scenario basics, which all participants must have if they are convinced of its correctness and interested persons in its obligatory achievement. each of these knowledge levels, as well as the degree of competence of each participant, plays a significant role in the implementation of the scenario, the achievement of compromises at individual stages, the identification of those opportunities that allow removing certain limitations, overcoming barriers to obtaining the optimal, most effective result in the process of democratic transformation of socioeconomic relations. 4. the scenario of socio-economic transformation for luhansk region in ukraine today, the main problem of reformatting the society in ukraine in the context of decentralization is vested on regional authorities. this issue is especially acute in the eastern regions  – in the territory of the ukrainian donbas, where an open military conflict is taking place to this day, and a large number of internally displaced persons (because they left the zone of active hostilities). the socio-economic situation here has sharply deteriorated and the authorities face the task of forming an objective forecast. the worst situation is in the luhansk region, where according to preliminary data from the state statistical service, and according to calculations of expert analysts (kramar, 2017), the level of gross regional product (grp) in 2016 relatively to the same indicator in 2013 notation: k–level of knowledge, which should be available when searching for compromises; ok – optimum of knowledge; e – economic needs; oekon – optimum of economic needs: soc – social needs; osoc – optimum of social needs; saf – safety of human life; osaf – optimum of life safety; oecon, osoc, osaf – trajectory that the optimal efficiency vector describes when implementing the selected scenario. osock, osafk, oeconk  – trajectory that describes a vector of optimal efficiency that satisfies all needs on the basis of the required level of knowledge. fig. 3. approximate options of finding the best scenarios source: developed by the authors, taking into account (kolenda & cherchyk & gavryluk, 2013) econ soc k оk оso оecon soc оk оso k saf оsaf soc оeconk оsoc econ saf оsafk econ k saf оk оecon оsa econ soc k оk оso оecon soc оk оso k saf оsaf soc оeconk оsoc econ saf оsafk econ k saf оk оecon оsab) scheme of direction for the vector of compromise setting the satisfaction level within economic and social needs a) scheme of direction for the vector of compromise setting the satisfaction level within economic and safety needs d) scheme of direction for the vector of compromise setting the satisfaction level within social and safety needs c) scheme of obtaining the optimum vector satisfying all needs baltic journal of economic studies 18 vol. 3, no. 3, 2017 (the year before the start of the military conflict) was only 36,5%. for comparison, the same figure for the donetsk region (which also suffers social and economic losses from the military conflict) is almost 42%. taking into account the above facts, it can be concluded that currently, the luhansk region is a region that deserves the greatest attention from both local experts and national authorities. an attempt to predict the situation in this territory was made in october 2016, when the strategy for development of the luhansk region until 2020 was approved (strategy, 2016) but it should be noted that this document raises many questions that will be discussed below. to implement an objective forecast, it is always necessary to analyse the current situation in the region, study the dynamics of key development indicators for this territory. there are a lot of such indicators but we limit them to only six, presented in table 2. indicators, presented in the table, were selected not by the chance. to achieve consensus, the interests of all participants in socio-economic relations have to be taken into account. the main participants are government bodies, business, and community. the interests of each group can be reflected through certain indicators. to implement the forecast, six indicators were selected, available from open sources of aggregated statistical information, which directly or indirectly reflect the situation in order to satisfy the interests of each group: 1) business interests: volume of sold products (goods, works, services) per one full-time employee. over the past five years, this indicator behaves nonlinearly, and, unfortunately, the positive dynamics of 2014 was completely levelled by the failed 2015. according to preliminary data, the situation could be improved significantly in 2016 but such a positive result cannot be explained by an increase in labour productivity but the reduction in the number of staff by the end of the analysed period (in 2016, only 150,2 thousand people, compared with 526,8 thousand in 2012 (main administration of statistics in luhansk region); financial result of the enterprises’ activities before taxation. we cannot even talk about positive dynamics, in five years the losses of regional enterprises grew 4,3 times; 2) the interests of the community (the bigger part of the population that participates in economic relations as hired workers): the coefficient of staff turnover by dismissed. this indicator indirectly shows the level of comfort and safety at the workplace; in recent years, this indicator was at the level of 30-34%. the maximum value was fixed in 2014 when the population of the region left this territory massively in connection with the beginning of an open military conflict. in 2016, this indicator has slightly decreased but its level still remains high; average monthly nominal wage. throughout the analysed period, this indicator shows a stable positive dynamics and it increased 1,5 times. however, we should not forget that during the same period, the inflation rate has sharply increased, and the national currency has depreciated in 3 times against the dollar. this fact affects the level and quality of life; 3) interests of authorities: gross regional product per capita. the complex indicator characterizing the volume of gross added value per inhabitant, produced in the region, indirectly indicates the welfare of the territory. however, according to the data, presented in table 2, this indicator was reduced five times. a number of registered offenses; in fact, this is an indicator of social tension in the society. its maximum value was fixed in 2014 when the peak of the activity of military operations. in 2016, it decreased almost 2.5 times compared to 2014, what was caused by the absence of offenses records on the region territory that is not controlled by ukraine. but it is necessary to note that even in comparison with 2015, there is still a positive trend, which already indicates a stabilization of the situation, as well as a slow reduction of social tensions in the region. to correlate our indicators with the scheme for constructing an optimum of social and economic transformation, we will determine their belonging to three groups of social needs. so, the economic needs of the region are reflected through indicators that represent table 2 indicators of the socio-economic development in luhansk region indicator 2012 2013 2014 2015 2016 volume of products sold (goods, works, services) per one regular employee, ths. uah 222,685 207,352 279,930 200,255 299,329* financial result of enterprises before taxation, ths. uah -5846538,2 -8357287,4 -46595667,5 -51543091,5 -25249824,0 coefficient of staff turnover by dismissal,% 28,9 32,2 34,9 30,8 25,8 average monthly nominal salary, uah 3090 3337 3377 3427 4637 grp per capita in actual prices, uah 25950 24514 14079 10778 9163* number of registered offenses 26562 39757 29614 12537 12290 * – preliminary data source: (kramar, 2017; main administration of statistics in luhansk region) baltic journal of economic studies 19 vol. 3, no. 3, 2017 the interests of the business: the volume of sold goods (goods, works, services) per one regular employee and the financial result of the enterprise’s activity before taxation. social indicators correspond to the average monthly salary, and the gross regional product per capita since both indicators characterize the level and quality of life in the region. safety of vital activity is reflected through the number of recorded offenses and coefficient of staff turnover by dismissed. the next step is to identify the dependencies between the presented indicators. for this task, we use the coefficient of pearson’s pair correlation (rudenko, 2012), which is calculated with the formula: 1 2 2 1 ( )( ) ( ) ( ) n i i i xy n i i i x x y y r x x y y = = − − = − − ∑ ∑ , (2) where n – number of observations; xi–i-th observed value of the independent random variable; yi–i-th observed value of the dependent random variable; rxy – coefficient of pair correlation. the value of the correlation coefficient varies from -1 to 1. the closer the result to the boundary values, the stronger the relationship between the quantities. so, the closer the value of the coefficient to zero, the weaker the relationship. if the obtained coefficient is in the range from -0.5 to 0.5, then such a result is considered to be statistically insignificant and, in fact, there is no any correlation between the investigated factors. the positive value of the coefficient indicates a direct relationship; the negative value indicates a reverse relationship. the results of calculations for the coefficient of pair correlation are presented in table 3. the obtained results indicate the following: 1) the size of the average wage: directly heavily depends on the volume of products sold (goods, works, services) per one full-time employee (rxy = 0.71), with its increase, the average wage in the region also grows; stable reverse dependence on the turnover ratio for dismissed (rxy= -0.66). the lower the ratio, the higher the average monthly salary in the region. this phenomenon is easily explained. after dismissal, not every person immediately moves to a new workplace, moreover, in our society a whole “stratum” of the population has formed, which figuratively can be called “social and economic parasites”  – people who knowingly do not seek a new job, receiving unemployment benefits. on the other hand, a decrease in the turnover ratio by dismissed testifies about satisfaction of both employers and workers, who gain positive experience, improve their qualification, labour productivity; as a result  – an increase in the volume of sales per worker and increase in wages; 2) grp per capita: directly depends on the financial performance of the enterprises in the region before taxation. this relationship does not require special explanation since this indicator is the source of formation for gross added value, produced in the region. according to the results of the correlation analysis, this particular relationship is the strongest (rxy = 0.79); stable reverse dependence on the amount of wages (rxy = -0,67). this relationship is easily explained since the gross added value of all types of economic activity in the region is calculated as the difference between the output and the intermediate consumption of each type of economic activity, among them is the wages cost. thus, there is a need to find a balance between personal and social satisfaction of socio-economic needs for the sustainable development; 3) number of registered offenses: strong direct relationship with the grp per capita (rxy = 0,78). at first glance, it is the paradoxical situation, nevertheless, it is explained very easily within the framework of our mentality. no wonder we say “the appetites are growing with growing incomes”. the temptation to “get everything at once” with an improvement in the social and economic situation in the region is increasing for both indigenous people and migrant visitors  – seekers of a “bright future”, among whom not all are law-abiding citizens. this phenomenon is easily confirmed by facts from the life of the state’s capitals, where one of the highest gross regional product per capita but a huge number of “guest performers” who are hungry for quick profit and not always in a legal way. the loudest economic crimes are also recorded precisely in socially and economically developed regions. table 3 coefficients of pair correlation between economic, social indicators and indicators of safety in luhansk region econ1 econ2 saf1 soc1 soc2 saf2 econ1 1 econ2 -0,17 1 saf1 -0,23 -0,35 1 soc1 0,71 -0,10 -0,66 1 soc2 -0,52 0,79 0,19 -0,67 1 saf2 -0,27 0,50 0,61 -0,60 0,78 1 econ1 volume of sold goods (goods, works, services) per one full-time employee econ2 financial result of enterprises’ activities before taxation saf1 coefficient of staff turnover by dismissed soc1 average monthly nominal wage soc2 grp per capita saf2 number of recorded offenses mediated relationship stable relationship strong relationship source: calculated by the authors baltic journal of economic studies 20 vol. 3, no. 3, 2017 indirect direct dependence on the turnover personnel rate by dismissed (rxy = 0.61). the connection is not very stable but it exists and it is explained quite simply: among all the dismissed there is always a certain part of the persons who fell under the reduction, were dismissed in spite of their own doing, not all dismissed immediately find a new place of work; this circumstance can negatively affect both the social status and the psychological state of a person, pushing him to inadequate actions and, ultimately, to offenses; indirect reverse dependence on the level of the average wage (rxy = -0.60). of course, we cannot talk about direct dependence in this case; it is understandable even without calculating the correlation coefficient. however, the lower the level of average wages, the greater the likelihood of offenses, both in the workplace and in everyday life, due to the growth of social tension. the obtained results of the correlation analysis are also interesting because they support the idea underlying the construction of the optimum vector satisfying all needs (fig. 3d). correlation analysis confirmed that the presented scheme  – an economic component of development is not the goal of territory development but it is a basis, whose state reflects the level of social indicators and indicators of life safety. for the formation of scenarios for the transformation of socio-economic relations in the territory of luhansk region, a well-known tool is used  – swot-analysis, which allows identifying factors that positively or negatively affect the indicators of interest. the strategy for the development of the luhansk oblast until 2020 presents the results of this analysis (strategy, 2016), but they raise some doubts, first of all, because of the violation of the conduct methodology: in each group of parties there should be no more than 10 (in this variant, there are 16 weaknesses suggested by the developers), otherwise the procedure of further actions becomes much more complicated, it becomes cumbersome, loses its objectivity and leads, in the final analysis, to the dispersion of resources for problems elimination. so we have inefficient use of resources. therefore, table 4 presents a new version of the swot analysis. the obtained swot-analysis results are presented in the form of a matrix (see table 5). the field of intersection between strengths and opportunities shows opportunities that can be amplified table 4 swot-analysis strengths (s) 1. high resource and natural-recreational potential. 2. the presence of a research and production cluster in severodonetsk, lisichansk, rubezhnoye. 3. restoring the work of all state institutions, social infrastructure facilities, educational institutions, moved to the territory controlled by ukraine. 4. significant potential for the development of agriculture (the availability of fertile soils, a large number of agricultural producers) 5. high concentration of qualified specialists – internally displaced persons who have an active civil position and ready to take an active part in the development of their region. 6. the presence of international and humanitarian missions providing economic, social, and technical assistance. weaknesses (w) 1. a part of the region, including the regional centre, is not under the control of the ukrainian authorities. 2. significant losses of the material, technical, and information base required for the normal operation of public services and other displaced organizations, as well as for the operation of the industrial and agricultural regional complex. 3. destroyed infrastructure of the region (problem of transport communication, energy, and water supply) 4. loss of old economic relationships, markets. 5. use in the production of obsolete energy-intensive technologies. 6. unsatisfactory state of the environment (pollution of water, land resources) 7. the physical threat to the lives of civilians due to the presence of not neutralized military shells. 9. absence of an integrated information field 10. violation of human rights and freedoms. opportunities (o) 1. completion of the military conflict. 2. implementation of the national decentralization reform 3. the attraction of foreign specialists and specialists from other regions of ukraine. 4. implementation of sme development programs. access to new markets. 5. informatization of public life in the region and the process of its management. 6. the attraction of additional financial resources from state funds for the regional development. 7. the possibility of attracting additional financial resources through the participation in international donor programs for the social and economic development of regional communities. threats (t) 1. escalation of military conflict 2. active decentralization in all spheres of life: an increase of already large number of responsibilities for local authorities 3. emigration of youth to more prosperous regions of the country 4. the negative image of the region, as one of the most dangerous territories for visitors. 5. low level of investment attractiveness of the territory. 6. loss of trust on the part of the inhabitants of territories beyond ukraine’s control. 7. the negative impact of the national economic crisis. 8. loss of political support from partner countries. 9. formal nature and lack of financing for normative and legislative acts and programs to support internally displaced persons for housing need. source: developed by the authors on the basis of (strategy, 2016) baltic journal of economic studies 21 vol. 3, no. 3, 2017 under the influence of strengths. the field of intersection between strengths and threats demonstrates, which threat can be neutralized, due to certain strengths. the field of intersection between weaknesses and opportunities demonstrates what opportunities are reduced under the influence of specific weaknesses. the last quadrant shows what threats are amplified under the influence of certain weaknesses. based on the results of the analysis, the following conclusions can be drawn concerning possible scenarios for the transformation of socio-economic relationships in the luhansk region: 1. the impact of negative development factors (weaknesses) is more tangible than positive (30 negative versus 25 positive identified relationships). therefore, the probability of a pessimistic scenario (absence of any vector of positive social and economic development) is slightly higher (55%) than optimistic (45%). 2. the key strengths of the region include: 1) a high concentration of qualified specialists  – internally displaced persons who have an active civil position and ready to take an active part in the development process of their region; 2) the presence of international and humanitarian missions providing economic, social, and technical assistance. 3. the key weaknesses include: 1) destroyed infrastructure of the region (the problem of transport, energy, and water supply); 2) lack of an integrated information field; 3) violation of human rights and freedoms. 4. based on the problems identified in the region, the most relevant optimistic scenario in the form of an optimum scheme oriented to the initial satisfaction of economic needs and safety needs. the main tool for the formation of this scenario is human capital, which is still available in the region. therefore, the retention of specialists (and, according to the correlation analysis, a reduction of staff turnover coefficient by dismissed workers), as well as the active involvement of international technical assistance projects and grant schemes – tasks that will overcome the economic crises and safety problems, and in the future will form the basis for the satisfaction of social needs of the region inhabitants. 5. conclusions conducted researches allow stating that scenarios for the development of social and economic relations in ukraine are based in the majority on assumptions, which are predicted by international institutions. today ’s reality in ukraine goes beyond those economic theories, models, phenomena, and socio-economic relations that already exist in the world community (rainer, 2015). the proposed development scenarios (ukraine 2030, 2017), without taking into account the real opportunities in each region, tools, and means, can simply fence off society from those important priorities and tasks that will not allow them to perceive adequately the state table 5 matrix of swot-analysis of the socio-economic state of luhansk region o1 o2 o3 o4 o5 o6 o7 o8 t1 t2 t3 t4 t5 t6 t7 t8 t9 s1                                   s2                                   s3                                   s4                                   s5                                   s6                                   w1                                   w2                                   w3                                   w4                                   w5                                   w6                                   w7                                   w8                                   w9                                   the influence of the relevant strengths, weaknesses on the relevant opportunities or threats source: formed by the authors on the basis of (zgurovskiy & pereverza, 2009) baltic journal of economic studies 22 vol. 3, no. 3, 2017 development doctrines due to uneven development, lack of public awareness, insufficiency of resource regions potential for self-sufficiency of their further development, etc. however, the completed study concluded that: 1. scenarios of socio-economic relations should be formed around national ideas that emphasize the observance and protection of the citizens’ interests, the uniqueness, specificity, and exclusivity of democratic transformations in ukraine. 2. during the process of forming scenarios, it is necessar y to take into account the world experience, which uses innovative tools that allow detailed implementation of scenarios, based on the priority of included programs that meet the needs of society. 3. priority of programs should be chosen according to the degree of their optimality and existing limitations in the system of socio-economic relations. 4. optimality is established according to the targets, chosen by society, which characterizes expectations of the population. the directions of further research will be related to the search for unique features that influence the structural elements and create the need to search for compromise solutions in the formation of scenarios for the development of social and economic relations in different regions of ukraine, especially those that are adjacent to the areas of antiterrorist operations. and, at the same time, the search for unified compromise solutions that unite the entire ukrainian nation for the solution of the only priority and important tasks that ensure maximum socio-economic impact. references: ackoff, russel l. (1985). creating the corporative future. plan or be balansed. moscow:”progress”, 328. calinescu, t.v. & antipov, o.m. & kushal, i.m. (2016). strategy of social development: mechanism of making decision: monograph. severodonetsk: published of volodymyr dahl eunu, 320. calinescu, t. & alyoshkina, l. (2016). design of scenarios the stimulation by realization of socio-economic policy. management and education, bulgaria, 12, vol.1: 5 – 9. everett, m. rogers (2009). diffusion of innovations. kyiv: published house “kyiv-mogylianska academy”, 591. kolenda, n.v. & cherchyk, l. m. & gavryluk, o. j. (2013). social and ecological safety and its influence on the recreation of population: monograph. lutsk: teren, 264. kramar, o. (2017). uneven renewal. economic increase in regions week.ua. electronic source. july, 28. retrieved from: http://tyzhden.ua/economics/196756 lindgren, m. & bandhold, h. (2009). the scenario planning. connection between the future and strategy. moscow: olympus-business, 256. main administration of statistics in luhansk region: the official site. electronic resource. retrieved from: http://www.lg.ukrstat.gov.ua mukhin, s.v. (2009). methodology of development the scenarios of socio-economic development. bulletin of тsu, 7(75): 75 – 82. sotnichenko, l.l. (2015). management of development the infrastructural providing of region competitiveness: theory, methodology, practice: monograph. odesa: fpb grin d.s., 524. strategy for development of luhansk region until 2020 (2016). severodonetsk: luhansk regional state, regional military-civil administration, 128. rudenko, i.m. (2012). mathematical statistics. text book. kyiv: center of educational literature, 304. rainer, erick s. (2015). as rich countries were enriched… and why poor countries remain poor. kyiv: теmpora, 444. ukraine 2030: doctrine of the balanced development (2017). lviv: kalvaria, 168. zgurovskiy. m. & pereverza, k. (2009). methods of construction the scenarios of development of ukraine with the use of swot-analysis. system researches and information technologies, 2: 7 – 17. татьяна калинеску, елена зеленко развитие сценариев демократических трансформаций социальноэкономических отношений в украине аннотация. цель исследования  – выбор характеристик, которые следует учитывать при разработке сценариев демократических трансформаций социально-экономических отношений в украине. предметом исследования являются теоретические и прикладные аспекты разработки сценариев трансформации социально-экономических отношений в разных регионах украины. в основе методологии исследования лежат методы сценарного, пространственного векторного моделирования  – для поиска оптимального варианта реализации сценариев и нахождения компромисса при удовлетворении потребностей за разными сценариями; логико-эвристического, экономико-математического анализа  – для выявления взаимосвязей между потребностями населения различных регионов и их приоритетности; swot-анализ – для выявления baltic journal of economic studies 23 vol. 3, no. 3, 2017 факторов позитивно или негативно влияющие на удовлетворение потребностей населения региона; корреляционного анализ  – для построения вектора оптимума, удовлетворяющего все потребности и, отражения уровня отношений. результаты. исследование подтвердило, что эффективность достижения выбранных сценариев зависит от степени ограничений в рамках ситуаций, в которых реализуются сценарии. проблемы, которые следует решать при разработке каких-либо сценариев, состоят в определении: релевантных переменных, степени их взаимодействия и подконтрольности, уровня ограниченности достижения поставленных задач. анализ существующих сценариев развития социально-экономических отношений в украине показал наличие трех основных оставляющих: внешние условия, инструменты и результаты, которые устанавливают ограничения в развитии событий, обозначают ориентиры достижения и заставляют принимать решения по урегулированию возникающей нестабильности. обоснована важность установления тесноты связи между наличием определенных знаний в обществе и потребностями, которые они порождают и наоборот. предложен механизм поиска единого оптимального варианта реализации сценария, который принесет наилучший социально-экономический эффект по ориентирам, являющимися главными приоритетами в обществе. доведено, что сегодняшняя реальность в украине выходит за рамки тех социально-экономических отношений, которые существуют в мировом сообществе. сформированные сценарии развития регионов без учета реальных возможностей, существующих в каждом отдельном регионе, инструментов и средств, могут отгородить общество от тех важных приоритетов и задач; не позволяют обществу адекватно воспринимать государственные доктрины по причинам неравномерности развития, отсутствия информированности населения, недостаточности ресурсного потенциала регионов для самообеспечения своего дальнейшего прогресса. практическое значение исследования состоит в предоставлении методико-прикладных инструментов поиска компромиссных решений при формировании сценариев развития социально-экономических отношений в разных регионах украины, которые объединяют всю украинскую нацию для решения приоритетных задач, обеспечивающих максимальный социальноэкономический эффект. значение/оригинальность. проведенное исследование позволило подтвердить полученные результаты: сценарии социально-экономических отношений должны формироваться вокруг национальных идей; процесс формирования сценариев должен детализировать выполнение и реализацию сценариев, исходя из приоритетности, включенных в них программ, удовлетворяющих потребности общества; приоритетность программ следует выбирать по степени их оптимальности и существующих ограничений в системе социально-экономических отношений; оптимальность устанавливается по выбранным обществом ориентирам, характеризующим ожидания населения. baltic journal of economic studies 436 vol. 3, no. 5, 2017 corresponding author: 1 department of tourism and administration, poltava national technical yuri kondratyuk university. e-mail: irinachernysh@gmail.com 2 department of tourism and administration, poltava national technical yuri kondratyuk university. e-mail: mahovkavika@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-436-442 scientific and methodological aspects of business management and organizational development of the tourism sector enterprises of poltava region in the context of sustainable development iryna chernysh1, viktoriya makhovka2 poltava national technical yuri kondratyuk university, ukraine abstract. the purpose of the paper is to summarise and present the scientific-methodological and conceptual aspects of business management and organizational development of tourist enterprises of poltava region in the context of sustainable growth. methodology. the methodological basis of the research is general scientific research methods: methods of scientific analysis and synthesis, in particular, system-logical analysis of the influence of modern information and innovative technologies on the organizational development of tourism enterprises that allows creating the prerequisites for sustainable development. the rationale for the introduction of a virtual cluster based on the process and system approaches, where the main source of information is the scientific works of foreign and domestic scientists and practitioners. results. the structural-logical scheme of organizational and economic support of the virtual association of tourist enterprises of the poltava region is formed. the main participants of the virtual association of tourist enterprises of the poltava region are singled out. scientific novelty. the expediency of creating a virtual association of tourist enterprises of the poltava region as an instrument of organizational development in the context of modern, global trends in the development of the tourist sphere is substantiated. participants of the virtual association, goals and objectives, principles are singled out. it is determined, which priority tasks of the poltava region will the virtual association able to solve. practical implications. it is determined by the possibility of using these research results in the development of regional tourism development programs in the poltava region and the establishment of projects for the development of tourism enterprises. conclusions. the choice of such a form as a voluntary tourist virtual association is due to the fact that, as world practice shows, it will help to reduce “information gaps” between the market of tourist services and modern realities. virtual association of tourism enterprises should function on the principle of self-financing. the selection of the proposed association as the main link of the information and logistics link of the poltava region will allow diversifying sources of financing (public organizations, tourism enterprises, regional budget funds). the purpose of the virtual association will be: to increase the level and the capacity of participants of the association by facilitating the exchange of information, experience; accumulation of data on goods and services of tourism enterprises, which are a composite tourist product of the poltava region as a tourist destination; ensuring the interrelation between the participants of the association at the local, regional, and national levels for the promotion of tourism services, defining the range of activities where the interrelations between the participants of the association are necessary (transportation, organization of excursions, leisure, provision of medical and recreational services, advertising like that). thus, the introduction of the proposed virtual association of tourist enterprises will ensure the joint coordinated activities of all participants in the tourism services market, other institutions and organizations and public authorities on the basis of the integration approach. at the level of a tourist enterprise, the functioning of the proposed association will solve problems of information and marketing support, which will help to improve the effectiveness of their management. a promising direction of the study is the development of the organizational and economic mechanism of a virtual association of tourist enterprises in the poltava region. key words: tourist enterprise, virtual association, sustainable development, organizational development, region. jel classification: l83, z32, q01 baltic journal of economic studies 437 vol. 3, no. 5, 2017 1. introduction at the present stage of organizational development of socio-economic systems in the tourism industry, in the conditions of a high level of competition, a gradual transition from a traditional management model (tour operator-client) to a virtual one (virtual platformclient) takes place. this is due to a number of trends at the international level: globalization, quality of service, degree of customer satisfaction, price, accessibility, comfort, emotionality of recreation services, and the like. these factors over the past decades are significantly transformed under the influence of information and innovative technologies that allow ensuring the stability of the relationship between tour operators and customers (tourists). in the 21st century, information and innovative technologies contribute to the development of the tourism sector as they increase the availability of tourism. this, global computer reservation systems, integrated communication networks, multimedia systems, smart cards, management information systems, etc. are aimed at developing the tourist services market of tourist infrastructure, contributing to the development of hospitality in different countries of the world. museums and cities create their own websites and virtual tours, which, on the one hand, increases the availability of tourist facilities and, on the other hand, contributes to solving a number of pressing problems. in particular, this reduces the burden on the environment and levelling the current risks of the 2008 financial crisis on the socioeconomic situation of individual countries of the world (hliebova, 2016). therefore, in recent years, the issue of information and innovation technologies has received a considerable attention at the international level. it should be noted that at the annual international consumer electronics show (ces), leading experts proposed the development of various information and technology products designed to simplify and timely prevent possible desires and needs of travellers. so, with the help of the service streetview now it is possible not only to make virtual tours online but also to preview tourist objects, places, routes. at the ces, virtual technologies were offered that would allow, for example, air carriers to determine in real life the needs of passengers in the cabin of the aircraft, and the accommodation facilities already use these novelties so that the guest could choose and equip the room before arrival in accordance with their own needs and tastes (makhovka, 2017). thus, in recent decades, it is the processes of globalization and internationalization through information and innovative technologies that open up both opportunities for the sustainable development of tourism enterprises and also necessitate a continuous organizational development, taking into account national peculiarities. in particular, in ukraine in the strategy for the development of tourism and resorts for the period until 2026 (resolution of the cabinet of ministers of ukraine “strategy for the development of tourism and resorts for the period up to 2026”, 2017), the need to create information and marketing support for the tourist infrastructure and development of staffing is emphasized. in the context of these tasks, it is advisable to study the possibilities of creating and developing virtual regional tourist associations, which will create a single information space that will increase the investment attractiveness of the tourism industry, not only for the development of domestic tourism but also at the international level. it is crucial to create attractive tourist destinations on a global level. in the direction of the organizational development of modern tourist enterprises based on market demand and the current legislation on the use of information and innovative technologies, it will create favourable conditions for attracting foreign and domestic investments, grants, carry out constant monitoring of the domestic tourism market, analyse tourism resources of the region and popularize cultural heritage and spiritual achievements in poltava region. in 2017, the first national project “zruchno travel” was created. this portal has combined travel services, a base of tourist resources, destinations, and places where you can find a place to relax, leave feedback about the restaurant, hotel, and event. this creates prerequisites for the need for the further organizational development of the tourism sector, the constant updating of information on tourist activities, the development of new tourist routes and the like. thus, each region has an opportunity to develop its tourism industry and create a single information space but the need for an independent solution to the problems of updating information on its tourism potential. to a certain extent, the further development of the information space in terms of tourism opportunities of the regions and the use of their potential will depend on the solution of a number of organizational tasks for human and infrastructural support. 2. statement of the main material of the study at the present stage, the globalization and development of it technologies have made possible to create a rapid development of the tourism industry in the world and has revealed new opportunities to improve the quality of service and the emotionality of services. according to the world tourism organization (wto), the share of tourism in the creation of the gross national product (gnp) of the countries of the world in 2015 reached 11-12%. in addition, the results of the conducted studies of the wto provide that the tourist movement by 2020 will grow up to 1 600 000 000 tourists a year, which will spend 2 trillion us dollars, that is, 5 billion a day. together with the telecommunications industry, information technologies, tourism will ensure baltic journal of economic studies 438 vol. 3, no. 5, 2017 economic growth in the 21st century. the key factors for success are price, quality, animation, and the complexity of services. for ukraine, which has significant tourist and recreational resources, the deterrent factor in the development of the tourism industry in ukraine in general and in the poltava region in particular is the insufficient level of use of modern innovative information technologies in the tourism sector that is confirmed by the low level of development of information and communication infrastructure in the tourism sector; lack of relevant information databases, whose profile is focused on tourism and tourism activities in the region; lack of effective advertising policy and limited information on the tourist product of the poltava region in interregional, state, and international markets in english; imperfection of the mechanism of information and communication exchange between the subjects of the entrepreneurial sphere of tourism and the external environment by means of the internet network; low level of development of virtual tourist enterprises and centres; lack of a state electronic system for providing tourism operators with operational information on changes in demand, supply, prices, tariffs on tourism goods and services, and the like. in conditions of growing social and economic instability, tourist organizations and enterprises are forced to search for new forms of organization and conduct of economic activities that allow: minimizing costs; promoting modern tourist products; forming a permanent customer base; improving the image of the enterprise; having feedback from key customers. these tasks can be solved by introducing new information and communication environments that, with the help of unique technologies based on interactivity, multimedia, globality, anonymity, asynchrony, low marginal costs, ensure communication fig. 1. proposed modern forms of the organization of information and analytical support of management of tourist enterprises in ukraine [the author’s development] virtual tourist information centres  information on tourist opportunities in the region;  accommodation of virtual tours;  information about tourist resources, tourist sites, and tourist infrastructure of a certain region;  information on tourist enterprises (address, contact information, partner information, customer references, etc.);  advertising and promotion of the tourist product;  inform potential investors about investment projects and investment climate in the region. virtual business incubators virtual libraries virtual help in order to stimulate the development of tourism activities on the electronic resource, it is proposed to create training and educational programs for opening and running economic activities, as well as on-line mode of providing effective management advice, ideas for business, presentation of successful business experience, providing information on changes in legislation and administrative services of state authorities.  accumulation of information used is the result of research activities in the tourism industry and educational and practical activities related to the training of tourism specialists.  presentation of scientific developments, research materials aimed at improving and developing the tourism industry. for example, the tourist library “all about tourism” (access mode: http://tourlib.net/). contain information about:  registration of entry documents (foreign passports, visas, etc.), addresses of embassies, features of culture, political system, language, currency, religion, and other countries of tourist destination;  legislative provision of tourism security and rights of tourists as consumers of tourist services and the like.  rendering of consulting services to tourists and subjects of tourist activity (legal, managerial-organizational, marketing). contain information about: accumulate information about the museum, the history of its creation, information about the priceless memories of history, culture, and the arts. virtual museums baltic journal of economic studies 439 vol. 3, no. 5, 2017 of individuals. such “social” associations are formed as the points of intersection of users having common interests (discussions, conferences, etc.) arise or they show interest in a particular topic. on these basic theses, further “zones of mutual interest” are built that promote mutual understanding and readiness to accept new values (dzyundzyuk, 2011). we believe that in the period of shortage of financial resources and the growing need to save them, modern information technologies contain opportunities for the development of virtual tourist enterprises, in particular, those that provide services for rural (green) tourism, characterized by the dominance of small businesses, unstable income, minimal (or lack) of advertising. negative is the local information vacuum about the activities of international organizations and introduced projects in the tourism field (astafieva, 2002). therefore, in the context of the unfolding of the global financial crisis, one of the most promising forms of economic integration of tourism enterprises is the formation of virtual tourist associations, represent groups of business structures, firms, organizations and institutions operating in tourism and related business spheres (figure 1), which will ensure the development of international (inbound) and domestic tourism both in ukraine and in the poltava region, in particular. the purpose of the virtual association is: – raising the level and capacity of the participants in the association by facilitating the exchange of information and experience; – accumulation of data on goods and services of tourism enterprises, which are a composite tourist product of the poltava region as a tourist destination; – ensuring the interrelation between the participants of the association at the local, regional, and national levels for the promotion of tourist services, identifying the range of activities where the relationship between the participants of the association is necessary (transportation, organization of excursions, leisure, health services, advertisements, and like that); – holding joint organizational events to concentrate efforts aimed at implementing regional programs for the development of tourism and rural areas, namely seminars, trainings, fairs, conferences. the creation in the poltava region of a virtual association of tourism enterprises provides for: – organization of joint activities of tourism entities, state regional authorities, educational institutions, and other business entities for close cooperation, the purpose of which will be to actively promote the sustainable development of tourism in the region; – creation of favourable conditions for the interest of tourists in the consumption of tourist products; – increasing the investment attractiveness of the tourism industry, poltava region; – effective promotion of the region’s tourism product at the international level; – increasing awareness of owners of tourism enterprises and tour operators on innovation and innovative technologies in the tourism industry; – formation of a unified information base on innovation and innovative technologies that have received a practical application in tourist enterprises of poltava region; – formation of a positive image among consumers in tourism enterprises engaged in innovation activities; – support for the organization and implementation of innovative technologies or innovations in tourism enterprises; – educational institutions to expand the base of practices in the training of tourism specialists and to form not only theoretical knowledge but also practical skills and develop students’ positive attitude to entrepreneurship; – increasing revenues to budgets by increasing the profitability of tourism activities; – raising the level of qualification and professional development, intellectual and scientific potential of specialists in the sphere of tourism; – attraction of funds for the preservation of cultural heritage. so, the distinctive feature of the proposed virtual association is the information-analytical direction and multi-level orientation to organizational and analytical support for the development of the tourism industry and the social and economic sphere of the region. specialization of the virtual association of tourist enterprises should be directed not only to a certain type of tourism but also to the integrated tourism product of the poltava region and to provide for stimulating the development of rural (green), historical, cultural, (educational, educational), religious, sports, ethnic, hunting, event (festival) tourism. from the organizational and managerial point of view of creating a voluntary tourist association of tourist enterprises of the poltava region in a virtual plane are: first, it is economically advantageous since it will help to save financial costs and share resources, exchange experience, will significantly improve the effectiveness of anti-crisis management of tourism enterprises in the global financial crisis; secondly, it will help to increase the adaptability, flexibility, and dynamism of business processes between the participants in a virtual association of tourism enterprises and to optimize the process of ensuring the development of the tourism industry in the poltava region. thirdly, virtual reality, depending on the context and goals of creation, can act for a person in different ways: to be an information and communication medium and an artistic and aesthetic space; create a game situation and at the same time include in it fragments of real life, strengthening the complexity of understanding and assessing what is happening; form a special psychological baltic journal of economic studies 440 vol. 3, no. 5, 2017 state that reveals in a person the world of new emotions and sensations, blurs the line between the real and the surreal; be a special educational environment; and, finally, to act as a quasi socium  – a special type of “unrealistically existing” sociocultural space, a kind of being-mode “virtual person” [hliebova, 2016]. it is the virtual tourist association that will allow us to take into account the current trends in the development of the tourism industry, which are the catalyst for further organizational changes: 1) creation and use of virtual tours (ukraine in 3d, traveling by ukraine, carpathians in 3d, museums of ukraine online, etc.); 2) additions to the tourist reality (for example, along the streets of prague, you can go through 13 prague spooks, which can be seen using google streetview). in ukraine, namely in poltava, there is developed a route using qr codes “path of legends”. so, the proposed virtual voluntary tourism association acts as an innovative new form of organization of joint activity of enterprises in the sphere of tourism, allows them to ensure their high competitiveness, reduce the level of costs and increase the efficiency of economic activity and sustainable development of the region. it is advisable to propose the formation of the following composition of the main participants of the virtual tourist voluntary association of the poltava region (fig. 2). at the same time, this approach allows you to go beyond the simple exchange of data between computers and, finally, create a network similar to a giant virtual computer accessible in remote access from anywhere, regardless of the user’s location. this will not only solve specific applications but also offer services to find the necessary resources, gather information about the status of resources, store and deliver data. the efficiency and effectiveness of the association are confirmed by the formation of a competitive tourist product and the level of development of the tourism industry as a whole and maximum consideration of interests of all stakeholders in the virtual association of tourist enterprises in the poltava region (table 1). in the opinion of the authors, the creation of a voluntary virtual tourism association will improve the quality of organizational, coordination, information, communication, reference, innovative scientific, practical, and educational functions; ensure the development of the tourist industry in the poltava region by promoting tourism products and informing about the tourism opportunities of the poltava region. virtual association of tourism enterprises should function on the principle of self-financing. the selection of the proposed association as the main link of the information and logistics link of the poltava region will allow diversifying sources of financing (public participants of the virtual association of travel companies of poltava region accommodation and catering facilities sanatorium-and-spa institutions private investors tourist information centers enterprises and organizations of tourist activity (travel agents and tour operators, excursion bureaus) institutions of the entertainment industry and tourist attraction green tourism homesteads and farmsteads financial institutions territorial communities bodies of state authority and local self-government establishments for trade, municipal, and household services educational establishments and science establishments for the sale of souvenirs (workshops) transport companies museums ngos fig. 2. virtual association of tourist enterprises of the poltava region (developed by the author) baltic journal of economic studies 441 vol. 3, no. 5, 2017 organizations, tourism enterprises, regional budget funds). also, a virtual association of tourist enterprises will promote active cooperation with national, international institutions and organizations. this will increase the competitiveness index in the field of travel and tourism, which is determined by international organizations (the world tourism organization (unwto), the world travel and tourism council (wttc), the international air transport association (iata), the international union for conservation of nature (iucn)). this indicator is formed on the basis of a number of indicators, which are grouped into 14 components and combined into 4 sub-indexes, characterizing the favourable environment in the country for tourism development, public policy, infrastructure, and available natural and cultural resources. ukraine in the travel and tourism competitiveness index 2017 received an assessment of 3.5 points out of seven possible and was on the 88th place. in the previous rating of 2015, no studies of ukraine on this index were conducted. at the same time, compared to the available estimate for 2013, when we occupied 76th place out of 140 countries, we lost 12 positions. the contribution of the tourism industry of ukraine by experts is estimated at 1,300,000 usd or 1.4% of gdp, in the ukrainian tourism sector employs 214.4 thousand people or 1.2% of the total number of employees. for comparison, in poland the tourist sphere is estimated at almost 8 million usd or 1.7% of gdp, employment  – 275.4 thousand people or 1.7%; in turkey – 35.9 million usd or 5% of gdp, employment – almost 600 thousand people or 2.3% of the employed population. as the analysis of research data shows, in our country, the business environment does not contribute to the development of tourism, as evidenced by the 124th place in this component. the security level in the country has a negative influence – 127th place. unfortunately, directly the sphere of tourism in ukraine is also not considered a priority, in particular, according to the indicator “the priority of tourism development for the government of the country,” experts took us to 122nd place. competitive advantages in this rating, as well as in many others, are the assessment of human resources and labour market (41 steps) and health and hygiene – 8th place. thus, the formation of a tourist association will reduce “information gaps” between tourist enterprises and tourists. since there is a large tourist potential in ukraine, its effectiveness remains low. therefore, the integration of virtual associations with modern smart technologies that are introduced in the world economy and in ukraine will solve a number of problems related to ensuring the quality of services (in hotels, restaurants, museums, during transportation, visiting festivals, conferences, and other events). to create prerequisites for sustainable development since smart technologies at the city level are realized through the concept of table 1 the system of interests of participants of a virtual association of tourist enterprises in the poltava region participant participant interest bodies of the state regional authority (administration)  increase in budget revenues from taxes;  increasing social and economic development of the region;  the emergence of new forms of economic activity in rural areas through the development of services, in particular rural (green) tourism;  political and socio-economic importance since the proposed association of tourism enterprises should be considered as a form of social responsibility (obligation) to the population;  the possibility of creating conditions for the diversification of economic growth in the region;  a new modern form of interaction between the state and business on the basis of public-private partnership;  the possibility of a real effective management impact on socio-economic processes in the field of tourism activities in the region. entrepreneurial sector  increase of economic subjects of entrepreneurial activity;  growth of business activity and balance of competitive forces;  increasing the role of social responsibility of enterprises engaged in tourism;  establishment of close, conscientious, legitimate relationships between participants in the tourism market  the ability to quickly efficiently sell goods and services by enterprises. household sector  diversification of economic activities and sources of profit for households in rural areas through the development of rural (green) tourism;  growth in meeting the demand for tourism services in the region. educational and scientific sector  possibility of practical implementation of scientific achievements in the field of tourism;  training of specialists for the tourism industry, which will provide new jobs created by qualified personnel. all members of the association  ensuring economic, social, technological efficiency from tourism:  ensuring the integration, synergy effect from joint activities;  stimulation of introduction of innovative technologies in the sphere of tourism business;  accumulation of resources and attraction of investments. baltic journal of economic studies 442 vol. 3, no. 5, 2017 “smart city ”. it includes “smart economy ”, “smart mobility ”, “reasonable environment”, “smart people”, “reasonable living”, “reasonable management”. for example, sokolovska o.o. (sokolovska, 2014) notes that the city in order to support sustainable development requires a new quality of solutions based on the widespread use of information technologies that ensure the economic and environmental use of urban life systems. it allows modernizing the city ’s infrastructure with fundamentally new opportunities for centralized management, new levels of services and security. today, the concept of smart city has been introduced in many cities of the touristdeveloped countries: spain, the united arab emirates, germany, china, and south korea. this allows forming the competitiveness of tourist services both in the national and international markets. in the smart city concept, tourism priorities are: clustering of the tourist community of the city, the creation of a tourist mobile application, the use of qr codes for all tourist sites, the single tourist ticket, the placement of web cameras at the main tourist sites of the city, the installation of electronic displays in museums information in different languages, providing mobility of tourists with physiological disabilities. 3. conclusions the study allowed substantiating the role and importance of a virtual association of tourist enterprises in poltava, which will create the prerequisites for sustainable development and create the competitive advantages of a tourist product that is offered for domestic and foreign tourists. now there is a lot of information about tourist and recreational resources in ukraine and rhodium tourism but in most cases, the information is outdated or untrue. the absence of integration mechanisms between the main participants of the tourism market leads to the fact that the efficiency of using the tourist potential of not only the poltava region but also ukraine is low. this confirms the importance of the competitiveness index in the sphere of travel and tourism in ukraine in 2017 significantly deteriorated compared to 2015. a promising direction of the research is the development of an integration mechanism for cooperation between tourist enterprises (hotels, restaurants), museums, theatres, the local community, state authorities and universities within the framework of the “smart city” concept. in the poltava region, local self-government bodies actively work in this direction, actualizing the introduction of virtual forms of organizing the activities of tourist enterprises. references: astafieva, o. n. (2002). sinergeticheskiy podkhod k issledovaniyu sotsiokulturnykh protsessov: vozmozhnosti i predely [synergetic approach to the study of socio-cultural processes: opportunities and limits]. moskow: rags. (in russian) bondarenko, m. p. (2011). positioning of ukraine in the international tourist market. economic journal  – xxi, no. 1-2, p. 47-50. dzyundzyuk, v. b. (2011). virtualni spivtovarystva: potencijna zagroza dlja nacionalnoi bezpeky [virtual communities: a potential threat to national security]. state construction, no. 1. hliebova, a. o. (2016). globalni ta nacionalni problemy ekonomiky [informational and innovative technologies in the processes of tourist services]. global and national problems of the economy, no. 13, pp. 230-236. makhovka, v. m. (2017). interaktyvni ta smart-tehnologii v turyzmi [interactive and smart technologies in tourism]. methodology and practice of sustainable tourism development: a monograph under the general edition by chernysh i. v. poltava, pp. 154-161. museum of ukraine online. retrieved from: http://incognita.day.kiev.ua resolution of the cabinet of ministers of ukraine "strategy for the development of tourism and resorts for the period up to 2026" (2017). kyiv: informatsiino-analitychne ahentstvo. sokolovska, o. o. (2014). smart city: vykorystannja informacijno-komunikatyvnyh tehnologij u miscevomu samovrjaduvanni [smart city: use of information and communication technologies in local self-government]. aspects of public administration, no. 11-12, pp. 77-85. tkachenko, t. i. (2015). smart-misto: innovacijna turystychna destynacija [smart city: an innovative tourist destination]. proceedings of the vii international scientific and practical conference on the occasion of the 10th anniversary of the department of tourism business (november 20, 2015), kharkiv, ukraine, pp. 248-250. travel to ukraine. retrieved from: http: //www.3dmaps.com.ua ukraine 3d. retrieved from: http://ukraine3d.com/ rating estimates of the competitiveness of ukrainian tourism 2017. retrieved from: http://edclub.com.ua/ analityka/reytyngovi-ocinky-konkurentospromozhnosti-ukrayinskogo-turyzmu-2017 baltic journal of economic studies 219 vol. 4, no. 1, 2018 corresponding author: 1 department of applied economics, odessa institute of trade and economics of kyiv national university of trade and economics. e-mail: victor-koval@ukr.net 2 department of finance, banking and insurance, odessa institute of trade and economics of kyiv national university of trade and economics. e-mail: slobodianiuk@gmail.com 3 department of economy of enterprise and organization of entrepreneurial activity, odessa national economic university. e-mail: vladimir_ya@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-219-226 production forecasting and evaluation of investments using allen t wo-factor production function viktor koval1, olha slobodianiuk2 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine volodymyr yankovyi3 odessa national economic university, ukraine abstract. the purpose of the article is to substantiate and systematize theoretical knowledge about allen production function and it is an attempt to apply it in the tasks of modelling, analysis, and production forecasting at enterprises. methodology. in the presented work, estimation’s questions of unknown parameters of allen function based on the least squares method and regression analysis on the basis of standard programs of the excel are discussed; its belonging to neoclassical functions, as well as the most important economic and mathematical characteristics. in particular, in the framework of allen production function, the formulas for average return of resources (capital productivity and productivity), marginal returns of resources, elasticity of output on factors need for productive resources, when there is a production output and one of the factors is given, also the replacement of resources (capital assets), the marginal rate of substitution of factors, the elasticity of replacement of resources (labour with capital). results. based on the assumption that allen function belongs to the group of substitutional functions according to the equivalence principle, the formula of optimal capital formation is determined, which maximizes output at given total capital expenditures on the main production funds and labour remuneration (minimizes the total capital expenditures for a given volume of production). in addition, the calculation formulas for determining the maximum output (minimum total cost of capital) in terms of optimal capital stock are given. all the above indicators are summarized in the summary table of the main economic and mathematical characteristics of allen production function. practical implications. in the case when the model is based on empirical data that varies in time, for example, at one enterprise in a number of years, we are proposed to use the dynamic allen production function, which explicitly includes the time factor. in both cases, the volume of the information base (sample size) is determined, which will ensure the representativeness of future conclusions regarding unknown parameters that are subject to evaluation. the article also considers allen production function as an instrument for evaluating the economic efficiency of future investment in production in the usual and dynamic variants. value/originality. the obtained theoretical and methodological aspects of allen two-factor production function are illustrated in a practical example of construction, economic interpretation, and practical use of the model. key words: economic system, allen production function, equimarginal principle, investments, dynamics. jel classification: c61, c65, d20, d24 1. introduction the structural nature of factors, which influence the slowdown in the rate of return on investment and the changing conditions of the functioning of the economy, necessitates the improvement of its research methods on the basis of the development of constructing production functions’ methods. for the simulation of production processes in the economy, the production functions of investment description are used, which as a factor of production affects dynamics of output. the assessment of investment as an indicator of the state of production efficiency is one of the main baltic journal of economic studies 220 vol. 4, no. 1, 2018 indicators determining the effectiveness of measures for modernization and restoration of fixed assets. that’s why the use of production functions will allow assessing the impact of individual production factors on the efficiency of production. unlike the most popular economic researches of the cobb-douglas production functions and functions with constant substitution elasticity of resources, the practical application of allen production function is quite rare in the national scientific literature devoted to mathematical and statistical modelling and forecasting. allen two-factor production function is described by a mathematical model: y a kl a k a l= − −0 1 2 2 2, (1) allen two-factor production function describes the dependence of output y in value terms on the cost of the main productive funds k and the payment of labour l, in the economic literature can only be found that it has two properties: 1) growth rates of the marginal productivity of factors are constant; 2) function (1) is homogeneous. the first property of allen production function is easily verified if we will find the second partial derivatives of each factor: ∂ ∂ = − ∂ ∂ = − 2 2 1 2 2 2 2 2 y k a y l à; . (2) the second property is also no doubt. to check it, we increase each production factor by λ times. then the new output of y1 by formula (1) will increase λ2 times: y1 = a0λ2kl – a1λ2k2 – a2λ2l2 = λ2y, (3) it is mean that allen production function is a homogeneous function with a homogeneity coefficient 2. in addition, it is known that provided a1, a2> 0 the production function (1) is intended for a formal description of production processes, in which the excessive growth of any of the factors negatively affects the volume of output. usually, such a feature is used to describe small-scale market and production systems with limited resources processing capabilities. today, this is all that can actually be learned about allen production function, although, in our opinion, the role of this function is highly underestimated as, in the conditions of the permanent crisis of the domestic economy, this behaviour is typical for the production of most industrial enterprises. 2. analysis of recent research and publications the theory and practice of using two-factor production functions in the economy have been the subject of research by many foreign and domestic scientists for a hundred years. since the construction of production functions allows you to determine the impact of each resource on the result of production and provide a forecast for changes in production volume with changes in the volume of resources. the most popular economic research of the production function is the cobb-douglas function (cobb, 1928) for analysing the magnitude of capital and labour on the volume of production in the industry based on the definition of the optimum of the commodity producer in the classical and dynamic variants. the cobbdouglas function is used to describe the dependence of production on its production factors. the works of the authors griliches & mairesse (1995) and others are devoted to the analysis of the economy as a level of industries, and the level of the enterprise on the basis of the production function of cobb-douglas. the question of the definition of essence and conditions for maximizing neoclassical production functions with the definition of the level of the optimal capital stock was considered in publications by perloff (2014), debertin (2012). debertin (2012) examines algebraic conditions for maximizing neoclassical production functions on the basis of multiplicative production models. however, in his work, he explores local extremes and maximum on the basis of saddle points of production functions, but without an assessment of the impact on the output of the assets’ level in the framework of investigated production functions. chetyrkin & klas (1986) depicts the output function as a function of y = f (k, l), which reflects the dependence of productivity on factors including capital stock. determination of capital stock’s optimum at the enterprise is the receipt of a given volume of production on the basis of production functions’ corresponding isoquant, and economic possibilities of the enterprise are given by isocost production functions. in practice, other production functions are also used, in particular, leontief functions, which are used to simulate deterministic production processes, which do not allow deviations from the established norms of resource use per unit of output. investigation of the model of the production process based on two-factor production functions according to kleiner (1986) characterizes a stable quantitative dependence between the indicators of resources and output. among modern scholars should be noted hrabovetskyi (2006), pavelescu (2011), lewin (2000), mazzi and lemoine (2010), solow (1957), shumska (2007a). among the authors who have recently been using production functions, generalized by the ce-function, it is necessary to note the work of shumska (2007b). however, there is no systematic approach to the solution of the problem in the modern economic literature. the baltic journal of economic studies 221 vol. 4, no. 1, 2018 ces-function is the most common one and is used in the absence of complete information on the level of interchangeability of production factors and can, therefore, be used to model systems of any level. allen function is intended to describe production processes, in which excessive growth of one factor affects the volume of production. the mention of the existence in the theory of allen production functions can be found in the works of borovskyi (2008), shumska (2007b). but all of them are without exception limited to the statement of the above two properties of production functions (1), as well as an indication of the area of its possible use. and all authors give practically the same brief information. as for the methods of estimating the unknown parameters of allen two-factor production functions a0, a1, a2, their economic interpretation, the membership of the production functions (1) to neoclassical functions, their more important economic and mathematical characteristics and other theoretical and practical issues, all of them were left out of the attention of specialists in the field of econometric modelling and forecasting. 3. setting targets the purpose of the study is to develop and systematize theoretical knowledge of allen production function and attempt to apply it in the tasks of modelling, analysis, and production forecasting at enterprises. 4. analysis of the apparatus of the production function and the problem of constructing a model of economic growth simulation of a dynamic production function. let us start with methods of estimating unknown parameters of production function (1) a0, a1, a2. enter the following notation: k2 = х; l2 =z; kl = xz . then the expression (1) is represented as follows: y a xz a x a z= − −0 1 2 . (4) obviously, equation (4) is a simple linear function of variables х, z and xz , and estimation of unknown parameters a0, a1, a2 is reduced to the use of the usual least squares method on the basis of standard regression analysis programs, for example, in the excel, or in a program package statistica. it is mean, there are no special problems: it is enough to calculate the variables according to empirical data х, z, xz and carry out a well-known procedure for evaluating regression coefficients. in this case, the accuracy of the constructed model is characterized by the magnitude of the determination coefficient r2 (0 ≤ r2 ≤ 1). allen production function does not apply to neoclassical functions, since conditions f (k, 0) = 0, f (0, l) = 0 are not fulfilled: f (k, 0) = -a1k2; f (0, l) = -a2l2. (5) this means that when a1, a2 < 0 production function (1) involves production output y only at the expense of one production factor k or l, that is, the elasticity of their replacement goes to infinity (σlк → ∞), which is characteristic of a linear function y à a kl a k a l− = + +3 0 1 2 2 2 . consider the more important economic and mathematical characteristics of allen production function. 1) average returns of the unit of each factor (return on capital and productivity): y k a kl a k a l k a l a k a l l k = − − = − −       0 1 2 2 2 0 1 2 , y l a kl a k a l l a k a k k l a l= − − = −       − 0 1 2 2 2 0 1 2 . (6) 2) the marginal productivity of capital (мрк) and marginal productivity of labour (мрl), which show how much output will increase y with an increase in the corresponding factor per unit: mp y k a l a ê mp y l à ê à l k l = ∂ ∂ = − = ∂ ∂ = − 0 1 0 2 2 2 ; . (7) 3) product elasticity y by factors к, l, which shows how many percents changes the average output of products when the value of the corresponding factor is changed by one percent: e y y ê ê y k y k a l a k a l a k a l l k ê = ∂ ∂ = ∂ ∂ = − − −       : : ,0 1 0 1 2 2 e y y l l y l y l a k a l a k a k k l a l l = ∂ ∂ = ∂ ∂ = − −       − : : .0 2 0 1 2 2 (8) that is, the elasticity of output y by factors к, l represents the ratio of the marginal impact and the average return of each factor. 4) the need for production factors when output y and one of the resources is given: k f y l a l d a äå d a l a y a l l f y l a k d = = − ± = ( ) − +( ) = = − ± ( , ) , ; ( , ) 0 1 0 2 1 2 2 0 2 4 2aa äå d a k a y a k 2 0 2 2 1 24, .= ( ) − +( ) (9) here we mean that determinants of the corresponding square equations d ≥ 0. if d = 0 solutions (9) are simplified: k f y l a l a l f y k a k a = = − = = −( , ) , ( , )0 1 0 22 2 (10) and the need for resources does not depend on the volume of output. 5) replacement of factors (capital stock f= k l ) as the ratio of resources found on the basis of formulas (9) or (10). 6) marginal rate of substitution of factors as a ratio of marginal returns of production factors (7): baltic journal of economic studies 222 vol. 4, no. 1, 2018 mrs mp mp à k a l à l à k a k l a a a k l a f a a lk l k = = − − = − − = − − 0 2 0 1 0 2 0 1 0 2 0 2 2 2 2 2 2aa f1 . (11) obviously, the condition must be fulfilled a0 ≠ 2a1f, and capital stock f is taken on average in the aggregate of observation levels. 7) the elasticity of the substitution of factors (labour by capital) taking into account the formula (11): σ lk lk lk lk lk k l k l mrs mrs k l mrs mrs k l a f = ∂       ∂ = ∂       ∂ =: ( ) ( ) 0 −−( ) −( ) −( ) + −( ) 2 2 2 2 2 2 0 1 0 0 1 1 0 2 a a a f f a a a f a a f a[ ] . σ lk lk lk lk lk k l k l mrs mrs k l mrs mrs k l a f = ∂       ∂ = ∂       ∂ =: ( ) ( ) 0 −−( ) −( ) −( ) + −( ) 2 2 2 2 2 2 0 1 0 0 1 1 0 2 a a a f f a a a f a a f a[ ] . (12) this means that, in the framework of allen production function, the elasticity of the substitution of factors, in contrast to the cobb-douglas production function and other neoclassical functions, has a rather complex expression (12). it can be represented in terms of the marginal impact of production factors (7): σ lk l k k l mp mp k a mp a mp = −( )0 12 (13) under conditions к ≠ 0, a0≠ 2а1mrslk. 5. an analysis of the production process and the problem of constructing a model of economic growth allen two-factor production function belongs to a group of substitutional functions, that is, it is assumed that the productive resources k, l are to some extent interchangeable. this means that a certain amount of one production factor can be offset by the corresponding amount of another (formulas (9) – (11) with constant output y. and at zero the value of one of the production factors provided a1, a2< 0, the elasticity of the substitution of the production function (1) goes to infinity (formula (5), that is, behaves like a linear function. this property is called the assumption of non-zero replacement of resources. in other words, for allen production function, a fair relation a k l a k a l a k l a k a l0 1 2 2 2 0 1 2 2 2( ) ( ) ( ) ( )+ ′ − + ′ − = + ′′ − − + ′′∆ ∆ ∆ ∆ a k l a k a l a k l a k a l0 1 2 2 2 0 1 2 2 2( ) ( ) ( ) ( )+ ′ − + ′ − = + ′′ − − + ′′∆ ∆ ∆ ∆ , (14) that is marginal products of capital mpk and labour mpl (7) within the framework of the production function (1) differ from zero, and the marginal rate of substitution of production factors mrslк (11) exists in the form of a certain real non-reactive number. therefore, based on the rule we have developed for determining the optimal capital stock f*, which maximizes production output y. given the total amount of capital expenditures by the equimarginal principle, one can find the value f* in the framework of allen production function (florin, 2011; lemoine, mazzi, monperrusveroni, & reynès, 2010). to this end, the marginal rate of substitution of factors mrslk equate to unity: mrs a f a a a f lk = − − =0 2 0 1 2 2 1. (15) where f* is equal to: f à a à à ∗ = + + 0 2 0 1 2 2 . (16) it is clear that this requirement must be met а0 ≠ -2а1. consequently, when investing in factors k and l in the proportion (16), the production process, which is adequately described by the production function (1), will ensure the maximum output ymax. expressing к (l) from formula (16) and substituting into a production function (1), we find the maximum production output at the point of optimal capital stock on the condition of the adequacy of allen function for the economic phenomenon being investigated: k l a a a a y à l a a a a a l a a a a max= + + = + + − + +     0 2 0 1 0 2 0 2 0 1 1 2 0 2 0 1 2 2 2 2 2 2 ,   − = + + = + + − − 2 2 2 0 1 0 2 0 2 0 1 0 2 1 2 2 2 02 2 2 2 a l l k a a a a y à k a a a a a k a k a max ; ++ +       2 2 1 0 2 2 a a a . (17) taking into account (16), as well as expressions к, l from (17) we find the minimum total cost of capital сmin= к + l for allen production function in the event of a given production y and optimal asset management: 1) because of the specified labour costs l: c ê l l a a a a l a a a a a min = + = + + + = + + +      ( ) ; 0 2 0 1 0 1 2 0 1 2 2 1 2 2 (18) 2) because of the specified costs, sent to the main productive assets к: c l k k a a a a k a a a a a min = + = + + + = + + +      ( ) . 0 1 0 2 0 1 2 0 2 2 2 1 2 2 (19) summarizing results of formulas (6) (19), in table 1, we present the main economic-mathematical parameters of allen production function (1). equations (1) and (4) are usually used in the case of modelling the variation of empirical data in space, for example, when they are based on annual financial and statistical information for a group of enterprises. when the model is based on empirical data that varies in time (for example, one enterprise in a number of years), then it is necessary to use the allen dynamic production function. in this case, the equation (1) takes the form: y a kl a k a l t= − − +0 1 2 2 2 ω , (20) where ω – an average annual absolute increase of production y at the expense of all factors other than к & l; t – time factor (t = 1, 2, …, n). the magnitude of the quantitative parameter ω reflects all those qualitative changes that occur in the economy and are not related to the factors of “basic baltic journal of economic studies 223 vol. 4, no. 1, 2018 productive assets” and “labour”. it characterizes the general economic conditions of reproduction at a specific production (in the enterprise, in the region, in the country) at a given time interval. all unknown coefficients of regression a0, a1, a2, ω of models (20) are determined similarly to the previous case – based on standard regression analysis programs. in both situations, the volume of the information base (sample size) should be 3-4 times more than the number of unknown parameters to be evaluated. that is, for the model (4), it is 9-12 points, for the model (20) – 12-16 observations. 6. allen production function as an instrument for assessing the economic efficiency of investment in production certain scientific and practical interest acquires allen production function as an instrument for assessing the economic efficiency of future investment in production. consider the effect of the values of the coefficients of the production function (1) on the value of the total future capital investment c = k + l. the main reason for this reasoning is that future profits p (к, l) should be a positive value: p(к, l) = y – c = a0kl– а1к2 – а2l2 – c > 0. (21) in the opposite case, investments in a market economy lose all meaning. immediately note that the values k, l as a part of the overall future capital investment c it is expedient to take in the ratio of an optimal capital stock (16): k à à à à à c l à à à à à c= + + + ⋅ = + + + ⋅ 0 5 0 50 2 0 1 2 0 1 0 1 2 , ; , . (22) it is easy to verify that the costs of basic productive assets and labour (22) satisfy the ratio (16), and their sum equals investment с. enter the following notation: 0 5 0 50 2 0 1 2 0 1 0 1 2 , ; , . à à à à à s à à à à à t + + + = + + + = (23) table 1 basic economic and mathematical characteristics of allen production function indicator к l 1. average return y k a l a k a l l k = − −      0 1 2 y l a k a k k l a l= −       −0 1 2 2. marginal return mp a l a êk = −0 12 mp à ê à ll = −0 22 3. elasticity of product release, % e a l a k a l a k a l l k ê = − − −       0 1 0 1 2 2 e a k a l a k a k k l a l l = − −       − 0 2 0 1 2 2 4. the need for production resources k a l d a äå d a l a y a l = − ± = ( ) − +( ) 0 1 0 2 1 2 2 2 4 , l a k d a äå d a k a y a k = − ± = ( ) − +( ) 0 2 0 2 2 1 2 2 4 , 5. replacement of factors (capital stock) f ê l = 6. marginal rate of factors’ replacement mrs a f a a a f lk = − − 0 2 0 1 2 2 7. elasticity of factors’ replacement σ lk l k k l mp mp k a mp a mp = −( )0 12 8. optimal capital stock f à a à à ∗ = + + 0 2 0 1 2 2 9. maximum issue products given total cost capital and optimal capital stock y à k a a a a a k a k a a a a max = + + − − − + +       0 2 0 1 0 2 1 2 2 2 0 1 0 2 2 2 2 2 2 y à l a a a a a l a a a a a l max = + + − + +       − 0 2 0 2 0 1 1 2 0 2 0 1 2 2 2 2 2 2 2 10. minimal total capital expenditure at given release products and optimal capital stock c k a a a a a min = + + + 2 2 0 1 2 0 2 ( ) c l a a a a a min = + + + 2 2 0 1 2 0 1 ( ) source: own development baltic journal of economic studies 224 vol. 4, no. 1, 2018 then к, l from the expression (22) are represented as follows: k = sc, l = tc. we will substitute them into inequality (21): p (к, l) = a0stc2– а1s2c2 – а2t2c2 – c > 0. (24) from the relation (24) follows: p(к, l) = с(a0st– а1s2 – а2t2)> 1. (25) so, future profits p (к, l) will be positive when the requirement is fulfilled: с > (a0st– а1s2 – а2t2)-1. (26) the inequality (26) determines the lower boundary of the future investment s. thus, investing in production, which is adequately described by the production function (1), will be costeffective if the future investment c satisfies the following condition: с > (a0st– а1s2 – а2t2)-1. (27) consider now the case of applying the allen dynamic production function (20). in this situation, it is possible to estimate the minimum payback period of the future investment. it is easy to show that, in order to obtain a positive return on investment, the payback period must satisfy the inequality: t c a stc as c at c> − + + ω ( ).1 0 1 2 2 2 (28) it is supposed that the production of additional products is carried out in conditions of optimal capital stock when capital investments are distributed in proportion (22). we illustrate the procedure of construction, economic interpretation and practical use of allen production function, according to the statistical reporting of the enterprise “x” for 2005–2015 (table 2). table 2 outgoing data for modelling the dependence of production output of enterprise “x” from capital costs on basic production funds and pay years y, thousand uan k, thousand uan l, thousand uan t k/l 2005 14820 13978 851 1 16,425 2006 23439 14690 1401 2 10,485 2007 40538 17644,5 2409 3 7,324 2008 46790 23492,5 2839 4 8,275 2009 42603 26834 3502 5 7,662 2010 43214 16039 4913 6 3,265 2011 53988 18121 7940 7 2,282 2012 68049 18326 9202 8 1,992 2013 67577 21624 9959 9 2,171 2014 60321 23747 10591 10 2,242 2015 56149 26084,5 12293 11 2,122 since the source data is presented in the form of time series, we will apply a dynamic model (20). as a result of calculations, the following equation was obtained: y = 0,0010709kl 0,0001005k2 0,0015433l2 + 10366,9983t, (29) where y – realized products of the enterprise, thousand uah. the allen dynamic production function (29), built on 11 observations, was statistically reliable as a whole (f – fisher’s criterion 12.19 with a probability of error 0.005) and on individual coefficients according to student’s criterion (probability of error does not exceed 0.08). determination factor r2 = 0,8905 indicates that more than 89.6% of the time variation of the product sold is adequately described by the equation (29). although small but positive values of the coefficients а1, а2 indicate that with the growth of production factors k, l the output of meat products in time gradually diminished. model parameter ω shows the absolute annual growth of sales in the amount of 10366.99 thousand uah that the enterprise “x” received at the expense of all factors, except к & l. the main of them was the growth of prices for products of the enterprise, especially in recent years. by formula (16) we find the optimal capital stock at the enterprise for the study period of time: f à a à à ∗ = + + = + × + × 0 2 0 1 2 2 0 0010709 2 0 0015433 0 0010709 2 0 0001005 , , , , == 3 269, . if you look at the initial data of the enterprise “x”, then we can see that the actual capital stock in general exceeds the optimal. this means that the productive assets for enterprises “x” are in surplus. find the average marginal rate of replacement of mrslk resources at the enterprise for the entire study period: mrs a f a a a f lk = − − = × − × − 0 2 0 1 2 2 0 0010709 3 347 2 0 0015433 0 0010709 , , , , 22 0 0001005 3 347 1 250 × × = , , , . mrs a f a a a f lk = − − = × − × − 0 2 0 1 2 2 0 0010709 3 347 2 0 0015433 0 0010709 , , , , 22 0 0001005 3 347 1 250 × × = , , , . value mrslk = 1,25 > 1 confirms the conclusion about the suboptimal capital stock at the initial stage (2005–2009) of the investigated period and the excess of capital invested in production funds for enterprises “x” in comparison with labour costs. therefore, the question arises: what revenues from the sale of the enterprise “x” would have received, for example, in 2009, with the optimal capital stock of 3.269 and actual labour costs of 3502 thousand uah? in answering this question, we will use the first of formulas (17), taking into account that the allen dynamic production function with a plural ωt' (t' – the number of the year corresponding to the research year): y l a f a f a tmax = − − + ′ = = × − ∗ ∗2 0 1 2 2 23502 0 0010709 3 269 0 0001 [ ( ) ] [ , , , ω 0005 3 269 0 0015433 10366 998 5 62665 74 2× − + + × = ( , ) , ] , , . y l a f a f a tmax = − − + ′ = = × − ∗ ∗2 0 1 2 2 23502 0 0010709 3 269 0 0001 [ ( ) ] [ , , , ω 0005 3 269 0 0015433 10366 998 5 62665 74 2× − + + × = ( , ) , ] , , . y l a f a f a tmax = − − + ′ = = × − ∗ ∗2 0 1 2 2 23502 0 0010709 3 269 0 0001 [ ( ) ] [ , , , ω 0005 3 269 0 0015433 10366 998 5 62665 74 2× − + + × = ( , ) , ] , , . note that in 2009, the sale to enterprises “x” amounted to 42603 thousand uah. consequently, baltic journal of economic studies 225 vol. 4, no. 1, 2018 reserve for the growth of products sold at the expense of optimizing capital stock (primarily due to the sale of part of unused basic production assets) amounted to approximately 62666 42603 = 20063 thousand uah. in 2012, the sale to enterprises “x” amounted to 68049 thousand uah. therefore, the reserve for the growth of products sold at the expense of optimization of capital stock (primarily due to the sale of part of unused basic production assets) amounted to approximately 157717 68049 = 89668 thousand uah. similar calculations of hidden reserves of sales of the enterprise “x” can be made for all years of the period of nonoptimal capital stock. 7. conclusion analysis of production based on the application of the usual and dynamic allen production function, which adequately describes the economic object in conditions of production factors’ growth and reduction of production, showed the necessity and relevance of their application. in turn, the use of the apparatus of production functions as a tool for analysing the economic efficiency of future investment in the enterprise production has a great potential for development. however, when conducting an economic analysis and forecasting the development of production and investment, there is a problem of aggregating economic indicators for economic and mathematical modelling (koval, v., prymush, y., & popova, v., 2017). the application of the allen dynamic production function allows us to estimate the minimum payback period of the future investment. it is proved that the production of additional products is carried out under conditions of optimal capital stock when capital investments are distributed in a corresponding proportion and will ensure the maximum output of ymax products. the obtained results provide the necessary basis for constructing economic growth models based on the quantitative expression of the volume of the product using the corresponding production function. the proposed apparatus of production functions remains relevant in the study of investment valuation since it serves as the optimal means for establishing a change in indicators of economic dynamics. on the basis of models of production functions, including allen production function, the modelling of the dependence of the output of the enterprise on capital expenditures on the main productive assets and labour remuneration was performed. as prospects for further scientific advances in this area, we see a more detailed study of the allen dynamic production function, since it is suitable for modelling production at individual enterprises in the context of crisis phenomena characteristic of the modern ukrainian economy. references: borovskyi, d. n. 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(2007b). the instrument of production function in the exploration of the ukrainian economy. economic of forecasting, 4: 104-123. baltic journal of economic studies 226 vol. 4, no. 1, 2018 solow, r . m. (1957). technical change and the aggregate production function. the review of economics and statistic, 39 (3): 312-320. turner, k., lange, i., lecca, p., & jung, ha s. (2012), econometric estimation of nested production functions and testing in a computable general equilibrium analysis of economy-wide rebound effects. stirling economics discussion paper 2012-08, stirling management school, university of stirling. retrieved from http://www.management.stir.ac.uk/research/economics/working-papers. yankovyi, v. o. (2017). finding the optimum of the commodity producer in the framework of n-factor production functions. market infrastructure, 7: 430-436. baltic journal of economic studies 283 vol. 4, no. 1, 2018 corresponding author: 1 department of labour and commercial law, kharkiv national university of internal affairs. e-mail: podorozniy@ukr.net 2 department of administrative, financial, and information law, uzhhorod national university. e-mail: boldizarso.gmail.com 3 department of criminal law and procedure, uzhhorod national university. e-mail: sov@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-283-292 formation of european integration development strategy of ukraine yevhen podorozhnii1 kharkiv national university of internal affairs, ukraine sandra boldizhar2, olexandr sofilkanich3 uzhhorod national university, ukraine abstract. today european integration is a strategic course of ukraine, its speed increases. it obliges to pay attention to the consequences of european integration. european integration, that is, formation and further strengthening of ties with european countries, has a complex nature (economic, political, social, cultural, etc.) at all levels – transnational, interregional, between separate economic entities. the relevance of the article’s topic is determined by objective nature of european integration process in ukrainian economy and complex nature of consequences of this process. the purpose of the article is the analysis of the influence of european integration process on the economic development of the country on the basis of scenario approach. the presence of essential regional imbalances in the socio-economic development in ukraine requires differentiated approaches to the elaboration of development measures aimed at promoting the creation of free trade area, as well as strengthening economic and sectoral cooperation between ukraine and the eu. thus, there appears a necessity to monitor and evaluate progress of economic reforms in regions of ukraine in the context of european integration processes in order to reveal strengths and weaknesses, to substantiate priorities and means of their achievement, as well as possibility of their timely adjustment for improving the region’s ability to follow the vector of european integration. for the purpose implementation, it seems most appropriate to calculate an integral value – european integration index (ір). in the most general terms, the index is a relative magnitude, designed to fulfil the role of a generalized measure of a certain phenomenon, which is formed under the influence of heterogeneous components, which cannot be directly summed up. european integration consequences for the economy of ukraine are considered and it is shown that these consequences can have not only a positive nature in the form of new opportunities and open markets but also pose a threat. scenarios for changing the national economy of ukraine as a result of the influence of european integration processes are determined. a description for each of these scenarios is provided. assessment of such scenarios is done according to criteria of desirability, probability, and time of realization. a relation between the considered scenarios for changing the national economy of ukraine over the influence of european integration processes taking into account probabilistic cause-and-effect relationships between individual scenarios is shown. consequences of these scenarios for the economic development of ukraine are presented. the research result is the detection and characteristic of scenarios of changes in the economy of ukraine as a result of the influence of european integration processes, as well as the characteristic of the influence of such scenarios on the country’s economic development. scientific novelty of research results is defining scenarios of changes in ukrainian economy under the influence of european integration processes, characteristics of these scenarios and relations among them taking into account the influence of such scenarios on the country’s economic security. the practical value of research results is considered a possibility to provide adaptation of regions of ukraine to the consequences of european integration processes in the economic and legal field. key words: european integration, economic development, national security, infrastructure, planning policy, regional economic activity. jel classification: e01, h56, o18, o21, r11 baltic journal of economic studies 284 vol. 4, no. 1, 2018 1. introduction one of the objective trends in the modern economy of ukraine is european integration, i.e. formation and further strengthening of relations with countries of the eu at all levels – interstate, interregional, among separate economic entities. today european integration is a strategic course of ukraine, its speed increases. it obliges to pay attention to the challenges and threats of european integration for the formation of a modern strategy of european integration development of ukraine. relevant is the issue of the establishment of friendly, partnership relations between the eu and ukraine. european union is an active participant in the modern geopolitical space. european unification is one of the most significant geopolitical events of the xx century. as a result of a large-scale and deep integration, european union has become a powerful geopolitical centre. the main task of ukraine is to return to european civilizational space. specific geopolitical location and history of long-term cooperation with european countries determine the interest of ukraine in an active participation towards european integration processes. activation of european integration processes means a more intensive inclusion of ukraine in the international cooperation in relation to conflict resolution and counteraction to the latest threats to international security. the purpose of the research is the analysis of the current state of development of european integration processes and formation of adaptive directions from a strategic perspective. the main objectives are the formation of such a strategic scenario that would allow: conducting an adequate analysis of the current state of ukrainian development; creating opportunities for regular monitoring of the state and directions of ukraine’s movement in a specific vector; and the main one, proposing modern directions for the integration of ukraine into european space. 2. the methodology of research full involvement of ukraine in the european community involves creating and maintaining conditions for strengthening economic and trade relations, which will facilitate the gradual integration of the national economy into the european market. the presence of essential regional imbalances in the socio-economic development in ukraine requires differentiated approaches to the elaboration of measures of regional development designed to facilitate the creation of free trade area, as well as strengthen economic and sectoral cooperation between ukraine and the eu (ivankiv, 2015; european integration, 2011). thus, there appears a necessity to monitor and evaluate progress of economic reforms in regions of ukraine, to substantiate priorities and means of their achievement, as well as possibilities of their timely adjustment for improving the ability to follow the vector of european integration (avanasova, 2016; hluschenko, tuleninova, 2016). given the civilizational choice of ukraine and confession of european democratic values, in june 1998, the president approved by his decree the strategy of ukraine’s integration into the european union. on its basis, practical, purposeful, and consecutive steps on the realization of the goal of gaining full membership in the european union were developed. so, the message of the president of ukraine to the verkhovna rada “european choice. conceptual bases of the strategy of economic and social development of ukraine for 2002–2011” outlines the plan of concrete actions of the authorities. in addition to the tasks for creating the preconditions for joining the eu, the task of bringing the legislation of ukraine in line with the eu legal requirements in priority areas is also distinguished. however, ukraine has not fulfilled a number of commitments to the council of europe. today there is a need to prepare and adopt several hundreds of laws. most of the draft bills were prepared and submitted to the verkhovna rada in the prescribed manner several years ago but, for various purposes, they are waiting for consideration for a long time. bills aimed at the realization of social, cultural, and other rights and freedoms of man and citizen are considered as the priority ones. given the conceptual approach, adaptation of ukrainian legislation to the legislation of the eu is to converge with the modern european system of law, which will ensure the development of the political, entrepreneurial, social, cultural activity of citizens of our state, its economic development within the framework of the eu, and will contribute to the gradual growth of the welfare of citizens, bringing it to a level that has developed in the eu member states. adaptation of the legislation of ukraine envisages reformation of its legal system and gradual alignment with european standards and covers private, customs, labour, financial legislation, laws on intellectual property, labour protection, life and health protection, environment, consumer protection, technical rules and standards, transport, as well as other sectors identified in the partnership and cooperation agreement. while considering prospects of the introduction of ideas of sustainable development in the consciousness of ukrainian citizens, it should be recognized that for a long time, being in a transitive state, our society needs more regulatory concretization of measures on harmonization of relations with the eu and within the country. modern science proposes a wide toolkit for determining the state and dynamics of processes taking place in various spheres of society. however, now there are no studies related to measuring progressive changes in the economic sphere in terms of achieving the main baltic journal of economic studies 285 vol. 4, no. 1, 2018 objectives of the association agreement between ukraine and the european union (avanasova, 2016). given the special relevance of the issue associated with the fulfilment of the basic provisions of the association agreement between ukraine and the eu (the association agenda, 16.03.2015) and the association agenda (association agreement, 27.06.2014), it becomes necessary to develop a methodology that allows quantifying progress in the implementation of relevant economic reforms in regions of ukraine (the eu-ukraine association agenda on 16.03.2015). for the research realization, the most expedient seems the calculation of the integral index of european integration progress (ір). in the most general terms, the index is a relative magnitude, designed to fulfil the role of a generalized measure of a certain phenomenon, which is formed under the influence of heterogeneous components, which cannot be directly summed up. then ір can be defined as a relative integrated magnitude that is calculated on the basis of aggregation of individual indicators that reflect the effectiveness of achieving the main objectives of economic integration with the eu in the regional dimension (derij, zosymenko, 2016). given the foregoing, one should dwell on the way of calculating ір, which: – allows going to scale with a range from -1 to 1 or from 0 to 1 as it limits the maximum level of european integration development of the region for a certain period, which allows using it as a benchmark for determining the position of one region compared to other regions of ukraine. the calculation by the geometric mean method is impossible if the values of normalized partial coefficients will fluctuate in the interval [-1; 1]; – provides a possibility of the use weighing coefficients that reflect the extent, to which each component is affected, reflecting the effectiveness of achieving the main objectives of economic integration with the eu in a regional dimension; – allows calculating ір even in the case of acquiring zero value by one of its component indicators. given all the above, we consider the most appropriate to use the weighted arithmetic mean for the calculation of the european integration index (korobov, 2016; pryimak, 2009). in order to determine directions of the formation of development strategy, to calculate ір, it is necessary to choose indicators, which, according to the eu-ukraine association agreement, can be combined into two main directions: i. trade and trade-related issues; ii. economic and sectoral cooperation. each of them will include the corresponding package of indicators, which reflect the priority directions of reforms (figure 1). for their description, it is necessary to select public statistical indicators, information about which is in open access: 1.1. trade in commodities. as one of the conditions for the functioning of the free trade zone between ukraine and the eu is to ensure the free access of ukrainianorigin goods to the countries of the european union and vice versa, indicators were selected as quantitative indicators of this process: the share of export of goods to the eu countries in total, %; the share of import of goods from the eu countries in total, %. і. trade and traderelated issues іі. economic and industrial cooperation 1.1. trade in commodities; 1.2. sanitary and phytosanitary measures; 1.3. trade in services; 1.4. intellectual property; 1.5. streamlining of custom procedures; 1.6. transparency of regulation. 2.1. cooperation in the field of energy; 2.2. state internal financial control; 2.3. transport; 2.4. environment; 2.5. industrial policy; 2.6. financial services; 2.7. information society; 2.8. tourism; 2.9. agriculture; 2.10. science, technology, and innovations; 2.11. cooperation on civil society issues. d ir ec tio ns o f e co no m ic re fo rm s fig. 1. directions of economic development determined by the association agreement between ukraine and the eu (formed by the author based on: korobov, 2016; pogorelov, adamenko, 2015; koriavets, 2017) baltic journal of economic studies 286 vol. 4, no. 1, 2018 1.2. sanitary and phytosanitary measures. to the indicators that indirectly display economic results of approximation of ukrainian legislation in the field of sanitary and phytosanitary measures to the eu legislation, we included indicators reflecting the number of objects, which are granted by the state food and veterinary service with the right to export food products (dairy products, meat products, eggs and egg products, honey and beekeeping products, mayonnaise, mayonnaise sauces, and margarine) to the eu countries. 1.3. trade in services and investments. an important direction of the state policy in the area of business establishment, trade in services, and e-commerce should be, in particular, simplification of the creation and operation of companies, branches, and representative establishments, protection of investors’ rights due to further approximation of the legislation in these areas to the legislation, standards, and practices of the eu. the main indices of the growth of such indicators, such as: the share of exports of services to eu countries, %; the share of imports from eu countries, %; the share of direct investments of non-residents from the eu in the region in the total volume, %. 1.4. intellectual property. one of the priority vectors of reforms in ukraine in terms of european integration is the improvement of the national legislation taking into account the best world practice. the result of this should be the transformation of intellectual property into a strategic resource in the system of forming national wealth and improving the competitiveness of the economy of ukraine, acceleration of innovative development and integration of ukraine into international economic space. accordingly, to resulting statistical indicators that reflect the efficiency of mechanisms of obtaining legal protection in the field of intellectual property, the creation of favourable investment climate, we propose to include the following: the number of applications for inventions; the number of applications for utility models from national applicants. 1.5. streamlining of customs procedures and promotion of trade. since the reformation of customs sphere is carried out on the basis of a new edition of the customs code of ukraine, which is developed taking into account provisions of the international convention on the simplification and harmonization of customs procedures, the convention on temporary admission, the union customs code, the only factor that can influence customs procedures is human one. it is possible to indirectly reflect such a negative influence at the regional level with the help of analysis of indicators of the number of appeals of individuals and legal entities in the light of zones of customs activities. another important goal in the context of european integration of ukraine is to reduce the number of points of coincidence of business and state, which is advisable to show by using an indicator of the number of inspections of business entities by the tax and customs audit department relative to the number of economic entities. 1.6. transparency of regulation. an indicator that, in our view, reflects the transparency of regulation is the number of suspended violations in the form of anticompetitive actions of authorities in the regional context. 2.1. cooperation in the field of energy. taking into consideration that the main purpose of cooperation of ukraine and the eu countries is to improve energy security, competitiveness, and stability, performance indicators by this package of reforms were selected as a statistical indicator – disincentive: losses of energetic material and petroleum refinery products in the process of distribution, transportation, percentage to total volume. on the other hand, cooperation in the field of energy is aimed at providing available energetic resources for consumers, thus the second indicator having a chilling effect on the index was selected as a level of arrears for the payment of housing and communal services, %. 2.2. state internal financial control. cooperation in the field of public finance management is directed to providing development of fiscal policy and reliable systems of internal control and external audit, which are grounded on international standards, as well as meet the fundamental principles of accountability, transparency, economy, efficiency, and effectiveness. thus, the main signs of progressiveness in this area should be a reduction of the following indicators: illegal and not for the intended purpose spent costs, shortage (theft) of funds and material values, thousand uah; the volume of foregone financial resources, thousand uah. 2.3. transport. so far as basic vectors of cooperation in the field of transport include, in particular, the implementation of efficient and safe transportation, as well as the strengthening of the main transport links between the territories of the parties, thus the list of indicators of this package of reforms includes the following statistical indicators: the share of exports of transport services to the total volume of exports of services to eu countries, %; the share of import of transport services in the total volume of imports of services from the eu countries, %. the indicator of the number of traffic accidents on the roads and streets of the region in relation to the passenger traffic of the ground type of transport (units per million pass. km) was chosen due to the importance of achieving the task of increasing the efficiency and safety of transportation. 2.4. environment. implementation of long-term objectives of sustainable development and green economy envisages the availability of proper investment provision of ecologization processes in regions of ukraine. thus indicator by this package is identified as an indicator of the share of capital investment in the protection and rational use of natural resources in the total volume, %. baltic journal of economic studies 287 vol. 4, no. 1, 2018 2.5. industrial policy. a priority direction of the cooperation of ukraine and the eu in the industry and business is to improve conditions for entrepreneurial activity. thus, positive achievements in this area should appear in the growth of such indicators as: the share of foreign direct investments in the industry in the total volume, %; the share of exports of services for the processing of material resources in the total volume of exports of services, %; the share of imports of services for the processing of material resources in the total volume of imports of services, %; the share of exports of industrial products in total exports of goods to the eu countries, %; the share of imports of industrial products in total imports of goods from the eu countries, %. 2.6. financial services. given the importance of the development of the financial services sphere for the establishment of a full-fledged market economy to evaluate the effectiveness of reforms by this package, it is expedient to use the indicators: the share of exports of financial services in the total volume of exports of services, %; the share of imports of financial services in the total volume of imports of services, %; the share of enterprises providing financial services and insurance services in the total number of enterprises, %. 2.7. information society. cooperation in this field covers, in particular, promoting broadband access, improving network security and widespread use of computer and information technologies by individuals, business, and administrative authorities due to the development of local internet resources and the introduction of online services. therefore, as statistical indicators, we have chosen indicators: the share of enterprises using computers in the total number of enterprises, %; the share of employees who used computers among the total number of employees, %; the share of enterprises having access to the internet, in the total number of enterprises using computers, %; the share of enterprises having a website or homepage in the total number of enterprises having internet access, %; the share of enterprises that carried out automated data exchange in the total number of enterprises using computers, %; the share of subscribers of the internet in the total population, %; the share of mobile communication subscribers in the total population, %; rits index of the level of it penetration into the life of society. 2.8. tourism. by this package, economic reforms should be aimed at the promotion and development of tourism products and markets, infrastructure, human resources, and institutional structures, building capacity in the tourism industry in order to improve the quality of provision of tourism services. in the structure of the indicators, which allow quantifying the effectiveness of reforms in the field of tourism, we include: the share of subjects of tourism activity in the total number of economic entities, %; the number of tourists served by subjects of tourism activity; the share of exports of services connected with travel in the total volume of exports of services, %; the share of imports of services related to travel in the total volume of imports of services, %. 2.9. agriculture. reforms in this package are directed to the improvement of competitiveness of agriculture and efficiency and transparency of markets, as well as conditions for investing, sharing best practices on policy support mechanisms in the field of agriculture and rural development. statistical indicators of the effectiveness of reforms are indicators: agricultural production per 1 person, uah; labour productivity in agricultural enterprises per 1 employed, uah; the level of profitability of agricultural production in agricultural enterprises, %; the share of small and medium enterprises, as a percentage of the total number of agricultural enterprises; the share of foreign direct investment in agriculture in total, %. 2.10. science, technology, and innovations. cooperation in this area should help ukraine in the support of reformation and reorganization of the system of management of scientific sphere and research institutions (in particular, in the development of its potential as regards development of science and technology) for the purpose of promoting the development of the competitive economy and knowledge-based society. taking this into consideration, we have selected such indicators of the effectiveness of reforms in terms of their impact on creating favourable conditions for the elaboration, development, and commercialization of innovations by business entities: the share of organizations performing scientific and scientific-technical work in the total number of enterprises, %; the share of industrial enterprises engaged in innovation activities, as a percentage of the total number of industrial enterprises; the share of financing of scientific and scientific and technical works at the expense of foreign countries, %; the quantity of introduced new technological processes at industrial enterprises; the quantity of mastered innovative types of products at industrial enterprises; the share of the realized innovative production of industry in the total volume of industrial products, % 2.11. cooperation on civil society issues. as far as reforms of this package are intended to promote the process of institutional building and consolidation of organizations of civil society, as a quantitative indicator baltic journal of economic studies 288 vol. 4, no. 1, 2018 of progressive changes, the indicator of the number of legalized civic organizations in relation to the population of the region was chosen. then in the general form, the formula for calculating the european integration index takes the form (1) (pryimak, 2009; korobov, 2016): * * 2 + = t ep n wt n we i (1) ір – the index of european integration economic progress of the region; nt – an indicator characterizing the direction of reforming “trade and related areas”; nе – an indicator characterizing the direction of reforming “economic and sectoral cooperation”; wt, we – weighting coefficients, direction levers, which are appropriately formed by the expert evaluation method. it is clear that integrated index can be calculated only in the case when the value of each of the primary indicators will be reduced to the same dimension. to do this, it is needed to normalize them. among the methods of normalization, we selected the min-max method, which allows avoiding the distorting effect of extremely large values and reduces all data to one range within 0 and 1. for the normalization of indicatorsstimulants, one should use formula (2), and for indicators-disincentives – formula (3). min max min − = − ij i ij i i x x y x x (2) yij – dimensionless (normalized) value of the i-th statistical indicator in the j-th region; xij – the value of the i-th statistical indicator in the j-th region; xmin and xmax – the minimum and maximum values of the i-th statistical indicator. min max min − = − i ij ij i i x x y x x (3) this method, although somewhat complicates the process of calculation in dynamics, at the same time, allows more adequately reflecting the amplitude of fluctuations of the corresponding quantities. in addition, the min-max method allows better data transfer in cases where the values of statistical data are close to each other by fields. 3. results and discussion as a result of conducted calculations and research, the european integration index for each region (eiir) is obtained, which consists of two intermediate indices for reform directions, which, in turn, consist of indices for each individual reform package within the respective direction. the research is conducted within the project “visegrád group countries’ assistance in assessing economic reforms in regions of ukraine in terms of the eu integration” that was carried out by the polissya foundation for international and regional studies (chernihiv), the association of regional analytical centres with the support of the international visegrád fund (slovakia), the research centre of the slovak foreign policy association (slovakia), the international centre for democratic transition icdt (hungary), polish-ukrainian cooperation foundation pauci (poland), the policy association for an open society pasos (czech republic), and chernihiv national university of technology (koriavets, 2017; honcharenko, bohatyrenko, bakal, vynokurova, halimuk, hejderova, 2017). table 1 analysis of dynamics of changes of the index of european integration economic progress of the regions of ukraine, 2014–2016 region rating for 2016 rating for 2015 rating for 2014 1 chernivtsi 0,4960 0,4309 0,4151 2 volyn 0,4760 0,4370 0,3021 3 ternopil 0,4649 0,4262 0,3937 4 lviv 0,4518 0,4982 0,4828 5 ivano-frankivsk 0,4369 0,4081 0,4021 6 transcarpathian 0,4341 0,4699 0,4144 7 chernihiv 0,3983 0,3115 0,2851 8 rivne 0,3952 0,3359 0,2332 9 sumy 0,3932 0,4136 0,2674 10 kyiv 0,3684 0,3727 0,3288 11 zhytomyr 0,3604 0,3908 0,2616 12 kherson 0,3546 0,3634 0,2404 13 zaporizhzhia 0,3298 0,3193 0,3162 14 cherkasy 0,3292 0,3299 0,2480 15 khmelnytskyi 0,3288 0,3129 0,2388 16 vinnytsia 0,3114 0,2892 0,2328 17 dnipropetrovsk 0,3063 0,3368 0,2935 18 odesa 0,3045 0,3214 0,2884 19 poltava 0,3045 0,2668 0,2887 20 kharkiv 0,2916 0,2755 0,2495 21 luhansk 0,2862 0,2056 0,2261 22 mykolaiv 0,2699 0,2127 0,2110 23 kirovohrad 0,2028 0,2027 0,2017 24 donetsk 0,1520 0,1121 0,1001 table is made by the author based on: (koriavets, 2017; korobov, 2016; kozachenko, adamenko, 2015) the research conducted indicates the insufficient use of the potential of european integration of regions of south-ukrainian region (odesa, kherson, and especially mykolaiv region), the presence of numerous imbalances in meaningful components of the system process. the most priority are carpathian regions, regions of the central part of ukraine have the mean values. baltic journal of economic studies 289 vol. 4, no. 1, 2018 among the most important imbalances, there is lack of institutional support for european integration, which negatively influences both the european integration index, which is the quintessence and generalization of such a support, as well as the effectiveness by purely economic components. the second imbalance is unevenly distributed financing of economic relations between the regions and the eu, as well as import substitution, especially for goods with high value added. additional asymmetry of corresponding flows is illustrated by examples of such indicators as: the number of transfers from the eu, the share of accumulated investments of non-residents in the regions, and so on. the analysis conducted only confirms the general conclusions about the state of reforms in the direction of the european integration economic progress of the regions. the process of ukraine’s integration into the european community continues. such a process cannot be considered in a specified manner, i.e. only in one plane (economic, political or cultural). it is complex in essence, and its consequences have different nature. such consequences may be both positive and negative. using the method of scenario analysis in the most general terms, the consequences of the european integration for the economy of ukraine in general are presented in figure 2 (tarasiuk, 2013; marmazov, pilyayev, 2013; draškovic, draškovic, 2012). it is appropriate to investigate the influence of european integration process on the development of ukraine step by step. at the first stage, one should study how european integration will influence the national economy, its state, and processes that make a significant impact on the economic development of enterprises. to conduct an analysis of the influence of european integration on the economic development of ukraine, let us use the scenario method that provides an opportunity to identify the most probable scenarios. at the second stage, it is necessary to consider what threats to economic development each of the scenarios of changes in the economy of ukraine over the processes of european integration has. formation of such scenarios is possible (table 2) (three scenarios for the development of ukraine-eu relations after the elections, 2012; yermolaiev, parakhonskyj, yavorska, reznikova [ta in.], 2012; elements of the eu strategy for ukraine (czech view: policy statement), 2013). names of scenarios to some extent reflect their essence. certainly, the scenarios provided do not exhaust all possible ones and the given list of scenarios cannot be considered as closed, that is, finally formed. the proposed list of scenarios demonstrates possibilities of determining changes in the economy of ukraine over the processes of european integration. each of the scenarios in table 2 should receive a qualitative assessment. it is proposed to be given by the following criteria: – the desirability of scenarios (on a five-point scale, where 1 means an extreme reluctance and threat to the national economy, and 5 is a positive and desirable scenario); – the probability of implementation of the scenario (on the three-position qualitative scale “high”, “average”, “low”); – time of implementation of the scenario. the choice of the latter criterion is determined by the fact that the consequences of european integration are not immediately evident. thus, it is expedient to european integration consequences for the economy of ukraine activation of tourism and education sectors reorientation of enterprises to new markets the growth of the openness of european labour markets simplifying access to financial resources the probability of rising unemployment over the introduction of new technologies structural deformations in the national economy the probability of activating outflow of capital aggravation of competition in various sectors of the economy the growth of ukraine’s dependence on foreign suppliers and investors participation of ukraine in transnational transport corridors increasing influence of transnational companies on the ukrainian economy activation of investment processes fig. 2. determining the consequences of european integration for the ukrainian economy baltic journal of economic studies 290 vol. 4, no. 1, 2018 consider two horizon periods – mid-term and long-term. characteristics of scenarios of changes in the national economy according to the results of the influence of european integration processes are provided in table 3. it is evident that scenarios presented in table 2 cannot be implemented simultaneously. separation of scenarios according to the criteria “time of implementation of the scenario” and “probability of implementation of the scenario” allows building a scenario map. an analytical study of the scenarios of changes in the national economy as a result of the influence of the processes of european integration provides the basis for the following conclusions: – in the mid-term period, only one scenario out of four considered – investment sea – will be favourable for domestic enterprises. other scenarios, although some of them are scarcely probable, will make problems for domestic enterprises, including in providing economic security; – in the long-term period, in spite of positive consequences for the national economy due to european integration, the scenario of capturing the national economy with foreign transnational companies is quite likely. such a scenario for the economic security of enterprises that will not be of interest to transnational companies is threatening; – the scenario of flowering of the national economy is possible under thre condition of the previous realization table 2 scenarios of ukraine’s economic changes as a result of the influence of european integration processes scenario’s name brief description 1. capture of the national economy by tncs transnational companies, through mergers and acquisitions, occupy a dominant position in the ukrainian economy. the most attractive sectors of the economy go beyond the control of state administration bodies and move on the basis of the ownership right to tncs. 2. development of the national economy all segments of the national economy, due to the inflow of investments, new technologies, entering new markets, are essentially qualitatively and quantitatively growing. national gdp is increasing. 3. investment sea significant volumes of foreign investment have a health impact on the domestic economy, which allows improving its state at the expense of openness of new markets and access to new resources. 4. intervention and assignment of quotas there is a competitive intervention of foreign producers in the ukrainian market, which results in a reduction in the share of national producers. at the same time, the access of ukrainian producers to foreign markets is limited to using the quota mechanism. 5. specialization only certain segments and sectors of the national economy, thanks to the international division of labour and the existing competitive advantages, will be able to develop. in other segments, over the domination of foreign manufacturers, stagnation will take place. 6. tariff deficit the domestic market raises prices for a significant list of goods at the expense of equalization of prices in the ukrainian and foreign markets. products whose prices in foreign markets are higher than prices in the ukrainian market are exported, which may lead to a commodity deficit in the national market. 7. agrarian development of the national economy serious development at the expense of new technologies and openness of the new markets of the agrarian sector of the ukrainian economy. other segments of the national economy are developing slowly and gradually moving along the path of stagnation. 8. shortage of skilled manpower a significant number of qualified specialists, through the simplification of employment abroad, leave the ukrainian labour market, which is why domestic enterprises are starting to experience shortages of skilled personnel. 9. no significant change serious changes in the ukrainian economy due to institutional reasons, despite an access to new resources and opportunities, will not happen. cases of a successful exit of domestic enterprises into foreign markets and successful partnerships with foreign producers will remain rare. compiled by the author table 3 assessment of scenarios of changes in the ukrainian economy as a result of the influence of integration processes scenario’s name desirability of scenario implementation probability of scenario implementation time of scenario implementation 1. capture of the national economy by tncs 2 average long-term 2. flowering of the national economy 5 low long-term 3. investment sea 4 average mid-term 4. intervention and assignment of quotas 1 average mid-term 5. specialization 3 average long-term 6. commodity shortage 2 low mid-term 7. agrarian development of the economy 2 average long-term 8. shortage of skilled manpower 1 low mid-term 9. no significant change 2 high long-term compiled by the author baltic journal of economic studies 291 vol. 4, no. 1, 2018 of the scenario of investment sea, which envisages significant foreign investment inflow in ukraine. however, foreign investments are always targeted, that is, funds are invested in enterprises, which, according to certain criteria, are selected by foreign investors. if the enterprise does not meet the criteria of foreign investors, then it will not receive these investments, which will negatively affect its economic security. – other mid-term scenarios do not allow entering the path of sustainable development of the national economy and economic security; – in the long-term period, there is a significant scenario uncertainty since the relation between scenarios with long-term and mid-term periods of implementation is very close and, at the same time, absolutely uncertain; – the scenario of the specialization of the domestic economy as a result of the international division of labour is likely in the whole set of scenarios. a partial kind of such a scenario is the agrarian development of the ukrainian economy, which will negatively affect the economic security of enterprises by other types of economic activities, which are not related to agriculture directly or indirectly; – probable is the scenario of the lack of significant changes in the domestic economy regardless of all european integration process of ukraine. the basics of such a scenario are largely laid down by actions of the government today – lack of real reforms, an effective fight against corruption, and political stability. the given scenarios of changes in the national economy due to the influence of the processes of european integration may be of interest to the study, it is especially important to consider the issue of influence on the economic security of domestic enterprises. 4. conclusions the research conducted allowed selecting a toolkit that can be used for evaluating the progress of economic reforms in the context of european integration and identifying the directions of activation of economic security of the country as a whole and individually by regions. in order to calculate the integral index (european integration index), it is proposed to use the method of the weighted arithmetic mean. the effectiveness of european integration of the region depends, on the one hand, on the effectiveness of reforms by the direction i: trade and trade-related issues and, on the other hand, on the effectiveness of reforms by the direction ii: economic and sectoral cooperation. each of them includes corresponding blocks of indicators reflecting reforms’ priority directions. for their description, the statistical indicators, information about which is in open access, were selected. the promising direction of further research is to conduct a comparative analysis of integrated indexes of european integration of regions, values of their subscripts by the main directions of reforms. according to the provisions set forth, the following conclusions can be drawn: – european integration is an objective process, which takes place at the level of the national economy, and individual enterprises cannot significantly affect it; – european integration as an objective process has a set of consequences for all facets in ukraine; – european integration consequences form both opportunities and threats to domestic enterprises; – overcoming or neutralization of threats to the economic security of domestic enterprises as a result of european integration opens up new opportunities for them, strengthens their positions (including in the markets), and the realization of threats, on the contrary, weakens them; – european integration processes for the economy of ukraine can develop according to provided interrelated scenarios that are evaluated according to the proposed criteria; – consequences of implementation, which can influence the economic security of ukraine, are determined for each of the presented scenarios of changes to the national economy as a result of the influence of european integration processes. the practice of the eu-ukraine cooperation in the field of justice testifies about the inconsistency, delay in government legislative harmonization measures. that is why it is necessary to combine the efforts of the centre for democratization of society (public organization) and the ministry of foreign affairs of ukraine during the implementation of the project “assistance to executive authorities of ukraine in the implementation of the strategy of ukraine’s integration into the european union.” support on the side of the eu provides for two components – the counselling assistance on issues of planning and the transformation of the legal and institutional framework, which is the basis of the civil service, in order to improve activities of government structures, increase their capacity and professional level. it is necessary to reform administrative structures and mechanisms of their activity, determine political responsibility and administrative capacity of authorities to ensure the implementation and enforcement of cooperation agreements with the eu. we consider that difficulties in the process of adaptation of domestic legal environment to the eu legal framework to a great extent appear due to the extralow level of legal consciousness of society, first of all, its political and economic management that, in its turn, is influenced by the lack of sustainable, organizational, and legally provided concept of legal protection of the population. results of the analysis of implementation of each scenario of changes to the national economy as a result of influence of european integration processes are of interest both in the context of determining prospects of the domestic economy when switching from one baltic journal of economic studies 292 vol. 4, no. 1, 2018 scenario to another, and in the view of providing economic security of domestic enterprises according to the results of identification of fairly actualized scenario. further research directions are based on possibilities to develop a strategic map of ukraine’s development scenarios in the context of european integration. references: avanasova n.e. 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(2012). economic security of entrepreneurs: a manual, kiev:beam (in ukrainian). baltic journal of economic studies 104 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 lviv state university of physical culture, ukraine e-mail: ulyna1@ukr.net orcid: https://orcid.org/0000-0003-0004-1462 2 lviv state university of physical culture, ukraine (corresponding author) e-mail: maria_pas@ukr.net orcid: https://orcid.org/0000-0002-9208-1092 3 lviv state university of physical culture, ukraine e-mail: oradzimovska@gmail.com orcid: https://orcid.org/0000-0003-0190-0740 doi: https://doi.org/10.30525/2256-0742/2023-9-2-104-109 practical aspect of hospitality staff creativity uliana huzar1, mariia paska2, olha radzimovska3 abstract. the subject of the study is the theoretical and applied aspects of the formation of creativity of personnel in hospitality industry establishments. methodology. in the research process, general and special research methods were used, in particular: general and special scientific methods – to ensure the achievement of this goal; abstract-logical and dialectical methods of analysis – to substantiate theoretical propositions and conclusions. the method of collecting information – a sociological survey – was used for the practical identification of the research results. the aim of the article is to determine the main aspects of personnel creativity formation and its impact on the success of hospitality establishments. the results of the study showed that the key qualities of human creativity are the production of ideas, adaptation and flexibility to changes, the ability to take risks, and the creativity of personnel helps to solve administrative problems in the organization, adaptation and flexibility to changes, increases the level of competitiveness of hospitality industry establishments in a competitive environment. conclusions. human creativity is manifested not only in a person's ability to produce new ideas, solutions, projects, but also in flexibility, adaptability to environmental conditions that arise in the process of life. the management of hospitality institutions should pay more attention to the process of training their employees, improving their qualifications in order to gain a deeper understanding of the concept of human creativity, which will allow the team, based on the knowledge gained, to clearly understand how to show their creativity. today, in the conditions of war in ukraine, the situation of the state in general indicates a high level of creativity of employees in the hospitality sector, because flexibility and adaptation to changes, production of new ideas, self-education in conditions of war are the best indicators of the activity of institutions in terms of the level of creativity of personnel. motivation for creativity should be both internal and external, because employees who feel internal motivation to perform tasks are doing work for pleasure and out of their own interest or desire to overcome a particular individual challenge, and external motivation is associated with external incentives, goals, or pressures that can motivate an employee to perform a particular task. the process of managing the creativity of employees in catering organizations should be preceded by a step-by-step method of determining the ability of employees to think creatively and whether the management style is typical for a given organization today. only after the analysis of these factors it is necessary to formulate methods of stimulating the development of creativity of employees. the results of the study show that the most effective methods of stimulating the creativity of employees in the hospitality industry are the management's trust in the employees, the ability to listen to their ideas, joint team-building activities, and care for the physical health of the employees. key words: creativity, idea, flexibility, adaptability, risk, hospitality industry, motivation, war. jel classification: m54, l80 1. introduction the rapid development of civilization shows that human creativity is able to change and develop under the influence of certain aspects, events, etc. studying the evolution of mankind, one can see the great creative potential of humankind, which is manifested in human interaction with the environment (making tools such as bows, spears, knives), adaptation to difficult operating conditions (development of ideas, exchange of ideas, introduction of innovations). baltic journal of economic studies 105 vol. 9 no. 2, 2023 today, the creativity of personnel can be considered the best method and strategic way to achieve success in business, to face risks and problems that arise in the company. the creativity of employees in the hospitality industry is particularly relevant, because it is one of the most important criteria for evaluating the success and competitiveness of the organization, as it manifests itself in the provision of a suitable working environment, transforming the acquired knowledge and skills into effective results that meet the wishes of guests. progress in all aspects of life requires constant work on the development of creativity of employees, encouraging the creation of new ideas, projects, innovative decisions, forming new team relationships within the team and with guests. the analysis of scientific publications shows that the works of many foreign and domestic scientists are generally devoted to the study of creativity. issues of personnel creativity are described in the scientific works of v. brych (brych, 2018), t. bashuk, m. khyzhnyak (bashuk, 2013), c. dimitrovaburlayenko (dimitrova-burlayenko, 2017) and others. theoretical and practical aspects of personnel creativity formation are reflected in the works of d. veretenko, n. prokopenko, o. harun, a. p. yehorshin and i. v. guskova. the works of d. krikunenko (krikunenko, 2012), n. ivanova (ivanova, 2022), d. kucherenko (ivanova, 2022), k. protsak (protsak, 2016), and o. prosovich (protsak, 2016) are devoted to approaches to the development and management of personnel creativity. however, despite the research on creativity in general and staff creativity, the problem of understanding staff creativity in hospitality organizations and its impact on organizational success remains unexplored. the aim of the study is to determine the main aspects of personnel creativity formation and its impact on the success of hospitality industry establishments. 2. retrospective and modern analysis of research on personnel creativity one of the first authors to describe the essence of creativity was the psychologist e. torrens, who defined the term creativity as the process of developing sensitivity to problems, to the deficit or disharmony of existing knowledge, which motivates a person to look for a new and optimal way of solving them. according to professor torrens, the creative act is divided into the perception of a problem, the search for a solution, the emergence and formulation of hypotheses, the verification of hypotheses, their modification and the finding of the result (doktor e. pol torrans, 2023). a. maslow played a significant role in improving the concept of "creativity ", who understood creativity as a natural characteristic of a person that develops independently and is characterized by the full use of talents, abilities and opportunities (abrakham maslou, 2020). researcher d. renzulli characterizes creativity as a feature of human behavior that is expressed in original ways of obtaining a product: achieving a solution to a social or economic problem as a result of new approaches to it from different points of view (renzulli, 1977). accordingly, the authors define the creativity of personnel as the ability to use intellectual capital and obtain results in the form of a new product, process, service (innovation) (hrabovsʹka, 2017). according to the authors, creativity is manifested not only in a person's ability to generate new ideas, solutions, and projects, but also in flexibility and adaptability to environmental conditions that arise in the course of life. thus, the authors offer their own interpretation of creativity as a feature of human behavior that is accompanied by flexibility and adaptability to the conditions dictated by the present, the ability to produce new ideas, solutions, projects and their successful transformation into real results. in other words, the authors propose to consider creativity not only as an imaginary human property, but also as the ability to turn one's own ideas into a real result. researchers of creative management and economics emphasize three components of creativity: the creative component (the ability to create fundamentally new forms or a new combination of already known elements), the fundamental nature of a creative idea (creativity should lead to fundamental changes in the nature of competition or consumption in a given market), and result orientation (donets, 2006). in recent years, ukrainian business has suffered significant losses, first due to the pandemic, and today – due to active hostilities on the part of russia. the hospitality industry has suffered almost the greatest losses. on the brink of economic collapse, the hotel and restaurant business is now more than ever forced to show creativity, flexibility and initiative in order to maintain financial stability. therefore, the importance of studying the influence of staff creativity on the activities of hospitality establishments is extremely important. for a deeper study of creativity and in accordance with the analysis of scientific sources, it is suggested to highlight the following manifestations of creativity: 1. flexibility and adaptability to change. this manifestation of creativity indicates a person's ability to produce new ideas (solutions, projects) in accordance with changes in the environment, which should improve the results of previous work. for example, the war in ukraine caused a lot of damage in the hotel and restaurant business, which led to the closure of many restaurants and hotels in februarymarch 2022. the war hit the southern and eastern regions the hardest, and by the end of may 2022, baltic journal of economic studies 106 vol. 9 no. 2, 2023 37% of ukraine's catering establishments had closed, the sector had lost 60% of its workers, and profits had been cut by more than half (how the ukrainian restaurant business is adapting to the challenges of war: analysis, 2022). thanks to the creativity of the management and the employees of the hospitality industry, the restaurant and hotel business is recovering today, as more than 2,000 new establishments have been created, which shows that each employee has managed to adapt to difficult changes in the environment, to be flexible in certain decisions, and to produce new ideas, among which the voluntary work in restaurants occupies an important place. 2. degree of change. according to the authors, human creativity can be manifested in two degrees of change – radical and gradual. in the first case, creativity is seen as the development of new technologies, programs, products, etc. incremental change is characterized by the improvement of the existing technology, program, product. but both degrees of change are a manifestation of human creativity. for example, the state of war in ukraine forced the owners of the hotel and restaurant business to radically revise the development strategy and concept of their establishments, which made it possible to make the appropriate decision – to close or change the "rules". accordingly, the market was left to the enterprises that were able to radically change the concept of their own institution and organize a team, or there was a cooperation of institutions of different spheres of activity (a coffee shop and a bookstore). 3. focus on the result. according to the authors, a person's creativity is never in "standby mode" but manifests itself in real actions that encourage them to "turn on." that is why creative staff at enterprises will not be afraid to communicate their ideas to management, take risks, make certain decisions, and analyze their mistakes. 3. practical aspect of the impact of staff creativity on the activities of hospitality industry institutions to more effectively achieve the goal of this study, a survey was conducted, the main purpose of which was to identify the impact of staff creativity on the activation of hospitality industry establishments. the main hypotheses of the questionnaire were determined: the creativity of employees contributes to the solution of administrative problems in the organization, adaptation and flexibility to changes; the creativity of employees increases the level of competitiveness of hospitality industry establishments in a competitive environment; the key qualities of creativity are the production of ideas, adaptation and flexibility to changes, the ability to take risks. the research was conducted online using a google form, the link to the questionnaire was distributed through social networks, telegram and viber groups, and e-mail. the survey was conducted between march 25, 2023 and april 10, 2023. the survey involved 60 employees of the hospitality industry and more than 10 hospitality enterprises in lviv oblast in particular: restaurant "defiliada" (city of novoiavorivsk, yavoriv district), restaurant "andreano" (city of novoiavorivsk, yavoriv district), restaurant and recreation complex "lake district" (pustomyty, lviv oblast), restaurant "zharovnia" na zamku (lviv), restaurant "boykivska gostyna" (lviv), "gazda group" (lviv), restaurant " wine & meat" (lviv), restaurant " med" (lviv), restaurants "rebernia" of the chain "emotions !fest holding" (lviv), restaurant "stargorod" (lviv), restaurant "marinad meat bar" (lviv), restaurant "nota bene" (lviv). among the respondents, 22.4% (13 people) are owners, managers of the establishment; 31% (18 people) are administrators, 46.6% (29 people) are waiters, bartenders, baristas, chefs, cooks. the results of the study show that hospitality workers identify creativity at a very superficial level, as most of them (59.3%) believe that employee creativity is manifested either through the production of a new idea, project, or self development and self-learning, or adaptation and flexibility to introduce certain changes in the institution (figure 1). on the other hand, 40.7% of respondents believe that all of the skills listed are evidence of an employee's creativity. thus, it is believed that based on the results of this issue, the management of hospitality industry institutions should pay more attention to the process of training their employees, improving their skills to gain a deeper understanding of the concept of human creativity, which will allow the team to clearly understand how to show their creative potential based on the knowledge gained. one of the main goals of the strategic development of today 's hospitality industry enterprises should be the effective management of employees' creativity, which should be based on the following principles: helping employees to achieve the best results by maintaining their interest; the responsibility of managers to increase creativity and eliminate the arbitrary division into administrative and creative workers. according to the results of the study, today 57.6% of catering enterprises use methods to stimulate the creativity of employees, 35.6% – partially, which is a positive dynamic. among the main methods of stimulation, the most popular are salary increases and payment of bonuses baltic journal of economic studies 107 vol. 9 no. 2, 2023 (48.3%), as well as praise in front of the team (15.5%), free participation in trainings, courses (13.8%), free meals (5.2%), less active methods are subscriptions to sports facilities, trips on expeditions, rest in thematic places. it is worth noting that 91.5% of respondents believe that the creativity of employees contributes to solving administrative problems in the hospitality industry. thus, the company 's management should pay considerable attention to staff creativity management and motivate its development. according to the authors, the choice of methods for stimulating staff creativity depends on the individual characteristics of each team member. in order to determine such methods, it is suggested to make a psychological portrait of each employee and to create an appropriate database of such information, on the basis of which incentive methods can be developed in accordance with the individual characteristics of a person. each person's creativity is influenced by many factors, including experience, culture, environment, education, mindset, intrinsic and extrinsic motivation, monetary rewards, etc. according to steve jobs, the founder of apple corporation, creativity is most influenced by experience, “creativity is just connecting things. when you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. it seemed obvious to them after a while. that’s because they were able to connect experiences they’ve had and synthesize new things. and the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people.” (what is creativity and how is it formed? 2021). according to tereza amabail's model, in addition to experience in a particular field, creativity requires creative thinking skills that promote independence, risk, and new perspectives on problems, as well as motivation, such as the willingness to address a problem from internal motivations (curiosity, love of work, satisfaction from finding non-standard decisions, etc.), rather than from rewards or external observation (voytushenko, 2019). no less important factor influencing creativity is the environment: family, educational system, professional team, friendly atmosphere, general condition and development of the state. today, in the conditions of war in ukraine, the general state of the country indicates a high level of creativity of employees in the hospitality sector, because flexibility and adaptation to changes, production of new ideas, self-education in conditions of war are the best indicators of the activity of institutions in terms of the level of creativity of personnel. the results of the survey (figure 2) show that the environment (52.5%), motivation (49.2%) and monetary reward (45.8%) have a greater influence on the development of creativity in hospitality workers. unfortunately, education has minimal influence on human creativity (8.6%). these data do not have a positive dynamic, because they indicate a negative influence on the development of human creativity, although, in fact, thanks to education it is possible to teach creative thinking algorithms and encourage independent search for answers. scientists claim that a monetary reward cannot be the motivation of a creative person, because it is much more important for a representative of the creative class to receive favorable working conditions and to get satisfaction from the results of his work. therefore, the management of catering establishments should pay attention to the methods of stimulating the creativity of employees and take appropriate measures. it is also worth noting that the motivation for creativity should be both internal and external, because employees who feel internal motivation to perform tasks are doing the work for pleasure and out of their own interest or desire to overcome a certain individual challenge, and on the other hand, extrinsic motivation is related to external incentives, goals or pressures that can motivate an employee to perform a certain task. much of the research literature is devoted to identifying the traits that characterize "creative people. research has shown that many creative people share a set of basic (core) characteristics, but above all it is "openness" – both "openness to figure 1. " what, in your opinion, is the evidence of an employee's creativity?" baltic journal of economic studies 108 vol. 9 no. 2, 2023 experience" and "openness to intelligence". that is, it is the only personality dimension that is significantly and positively correlated with creative achievement in all areas (pisa-2021, 2022). it is thanks to openness to experience, intelligence that a person is able to produce new ideas, projects, etc. perseverance, resilience, and creative self-efficacy have been identified as attitudes that influence creativity by providing a person with both a strong sense of purpose, a clear vision of goals, and a belief in one's ability to achieve those goals (pisa-2021, 2022). the research shows that most of the respondents can be considered creative individuals, as 57.6% often produce new ideas, 83.1% like to take risks, 83.1% know how to be "original" in their work, 69.5% always achieve their goal, 91.5% believe in a positive result when they start a new business. sternberg r . believes that creativity includes an individual's ability to take reasonable risks, willingness to overcome obstacles, internal motivation, tolerance of uncertainty, readiness to oppose the opinion of others (pavlenko, 2016). therefore, the results of the survey confirm the assumptions above, as 83.1% of the respondents like to take risks, 96.6% analyze their own mistakes and are self-critical in the performance of tasks. 4. conclusions the process of managing the creativity of employees in catering enterprises should be preceded by a step-by-step method of determining the ability of employees to think creatively and whether the management style is typical for the given enterprise today. only after the analysis of these factors it is necessary to formulate methods of stimulating the development of creativity of employees. the results of the study show that the most effective methods of stimulating the creativity of employees in the hospitality sector are management's trust in employees, the ability to listen to their ideas, joint team-building activities, care for the physical health of employees (subscriptions to the gym, swimming pool, etc.). in today 's difficult operating conditions, it is not enough for hospitality establishments to provide quality services in order to be successful in their field, as there are more and more similar services on the market and competitors every year. therefore, the creation of a unique service and the adoption of effective, extraordinary creative solutions come to the fore. the analysis of the conducted research shows the confirmation of the hypotheses regarding the survey, namely that the key qualities of creativity are the production of ideas, adaptation and flexibility to changes, the ability to take risks, and the creativity of personnel helps to solve administrative problems in the organization, adaptation and flexibility to changes, increases the level of competitiveness institutions of the hospitality industry in a competitive environment. figure 2. factors influencing the creativity of hospitality industry staff references: brych, v. (2018). creative management. ternopil: wunu, 220 р. (in ukrainian) bashuk, t., & khyzhnyak, м. (2013). stimulating and developing staff creativity. marketing and management of innovations, vol. 1, pp. 150–160. available at: http://nbuv.gov.ua/ujrn/mimi_2013_1_15 baltic journal of economic studies 109 vol. 9 no. 2, 2023 dimitrova-burlayenko, s. (2017). definitions of the terms "creativity " and "creativity " in modern scientific discourses. pedagogical sciences, vol. 135, pp. 82–89. (in ukrainian) krikunenko, d. (2012). management of the process of formation of staff creativity as a factor of innovative development of the enterprise. available at: https://mmi.fem.sumdu.edu.ua/sites/default/files/mmi 2012_4_209_216.pdf ivanova, n., kucherenko, d., kuznetsova, t., rasulova, a., & salimon, o. (2022). creative staff as a factor of enterprise success. financial and credit activity problems of theory and practice, vol. 3, 44, pp. 243–250. protsak, k., & prosovich, o. 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(in ukrainian) how the ukrainian restaurant business is adapting to the challenges of war: analysis (2022). available at: https://business.rayon.in.ua/news/547964-yak-ukrainskiy-restoranniy-biznes-adaptuetsya-do-viklikiv-viynidoslidzhennya what is creativity and how is it formed? (2021). available at: https://www.facebook.com/prosteerua/photos/ a.530723307387639/1174230193036944/?paipv=0&eav=afa471ubjrwv7x xnhyt23ozdf w zcftt_ euhioofm0wtiw4c7hhnodgstkx05emlyeca&_rdr voytushenko, a. (2019). the concept of creativity in project management. available at: http://urss.knuba.edu.ua/ files/zbirnyk-37/4.pdf pisa-2021: framework document on the assessment of creative thinking (draft version, third edition). kyiv: ukrainian center for educational quality assessment, 131 p. (in ukrainian) pavlenko, v. (2016). creativity: essential characteristic of the concept. creative pedagogy: [scientific and methodological journal], vol. 11, pp. 120–131. (in ukrainian) received on: 10th of march, 2023 accepted on: 21th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 18 vol. 3, no. 4, 2017 internal control and audit of enterprises’ compliance with customs requirements while con-ducting foreign economic activity olena vakulchyk1, valeriia fesenko2, oksana knyshek3 university of customs and finance, ukraine abstract. evaluation of the reliability of enterprises engaged in the foreign economic activity and simplifying of customs procedures have become a relevant issue in the context of globalization. the capabilities and preferences of the “authorized economic operator” status are the cause of a new challenge for managers of enterprises – creation of an internal control system to ensure a systematic monitoring of the conditions of customs compliance standards of reliability and safety, which would allow identifying risks of loss of the “authorized economic operator” status. the purpose of the scientific paper is to improve the internal control system of an enterprise engaged in foreign economic activity in the process of obtaining and saving the “authorized economic operator” status in accordance with the international custom requirements for safety and reliability. methodology. the research is based on the methods of logical and analytical modelling of the impact assessment of individual factors on the value of the generalization indicator. the results are tested on the internal accounting data of the existing machine-building enterprises. results. the paper shows the results of adapting the concept of coso to the system of internal control of the foreign economic activity of the enterprise in the process of obtaining or retaining the “authorized economic operator” status. the internal control system within the concept of coso should ensure the achievement of the objectives – operations, reporting, and compliance. the criteria for estimating the objective “compliance” for an enterprise engaged in foreign economic activity can be an integral indicator of compliance. value/originality. it is suggested to perform internal control of an enterprise’s compliance with customs requirements based on the analysis of deviations of the compliance integral indicator. practical implications. the result of control is to perform a steady in-crease in the integral index or stable maintenance of the already achieved indicator that will allow a company to maintain the “authorized economic operator” status and perform foreign economic activities with simplified procedures. the indicators of total negative deviations and relative potential of rating are proposed in the paper. total negative deviations by factors determine the degree of loss of quality characteristics of a company. the indicator of relative potential rating determines the percentage increase in the rating. results of deviations evaluation by the blocks of the integral index of compliance will allow determining the certain aspect of a company activity, which did not meet customs standards for the current period, and a responsible person who did not take care about the fulfilment of requirements of customs standards, which introduces the risk of loss (non-receipt) of the “authorized economic operator” status. key words: internal control, audit, authorized economic operator, foreign economic activity, customs requirements, customs standards of reliability and security, compliance control, coso. jel classification: f10, m21, f20 corresponding author: 1 department of accounting, audit, analysis and taxation, university of customs and finance. e-mail: elvak2016@gmail.com 2 department of accounting, audit, analysis and taxation, university of customs and finance. e-mail: fesenkovalery@i.ua 3 department of accounting, audit, analysis and taxation, university of customs and finance. e-mail: knishek.oksana@gmail.com 1. introduction intensification of international trade in the context of globalization and the process of implementation of international custom standards in different countries are stipulating the questions of internal control of compliance with customs requirements and grade the reliability of companies engaged in international trade. the most important issue for companies and customs authorities is the procedures of getting the “authorized economic operator” status. receiving the status and organization of effective internal control in companiesparticipants of international trade can help them simplify customs procedures and facilitate the foreign economic activity. the customs external control of baltic journal of economic studies 19 vol. 3, no. 4, 2017 the reliability of such companies is important on the one hand but the internal monitoring of compliance with customs requirements and evaluation of potential losses inside the company are more important from the point of view of the company management staff. the question of simplification of customs procedures for companies was studied in the works of ukrainian researchers (tereshchenko, 2010), (vakulchyk, 2014), (dubitskiy, 2016). the research into internal control procedures and the “authorized economic operator” status indicate that most scientists consider only the problem itself and create the institute of “authorized economic operator” to simplify procedures for foreign trade. the issue of the formation of the internal control system of quality characteristics of a company and its compliance with customs requirements has not been sufficiently investigated yet. the scientific originality of this research is that it proposes to improve the internal control over enterprises in order to control their compliance with customs requirements. the control and analysis of compliance of an enterprise with the customs requirements are proposed to be carried out on the basis of analysis of deviations from the integrated compliance indicator. the result of control is to perform a steady increase in the integral index or stable maintenance of the already achieved indicator that will allow a company to maintain the “authorized economic operator” status and perform foreign economic activities with simplified procedures. the indicators of total negative deviations and relative potential of rating are proposed in the paper. the purpose of the paper is to improve the internal control system of an enterprise engaged in foreign economic activity in the process of obtaining and saving the “authorized economic operator” status in accordance with the international customs requirements for safety and reliability. the research is based on the methods of logical and analytical modelling of the impact assessment of individual factors on the value of the generalization indicator. the results are tested on the internal accounting data of the existing machine-building enterprises. 2. formation of the system of internal control of the enterprise within the framework of the coso concept at present in many countries, including ukraine, there are no legislative and regulatory requirements concerning the organization of internal control within enterprises with foreign economic activity. but the international professional community recognized the appropriateness and necessity of implementing an internal control throughout organizations and considers an internal control management system to be an indispensable element of any organization. especially these requirements apply to public companies and companies that enter international markets. there are several international concepts of internal control within organizations, which differ in the subjects of its implementation, components, and targeting. the analysis of existing internal control concepts in the international practice made it possible to determine that each concept has its specific properties depending on the aim of the control. for example, cobit (control objectives for information and related technologies) is oriented to management through information technology and focuses on information security and control. the concept of internal control sac (control and audit systems) is more focused on supporting internal auditors as representatives of the owners of a company. in addition to international standards of quality control, audits, reviews and other related services, there are assurance requirements for internal control systems of organizations’ reporting audited by external auditors. all existing concepts are developed for the use by different persons (internal auditors, external auditors, itworkers, etc.) and have a lot in common. the concept, which could be a basis for the internal control of the foreign economic activity, is an international concept of internal control by the committee of sponsoring organizations coso. the latest edition of coso was described in the document “integrated foundation of internal controls” in 2013 (coso, 2013). the advantage of this concept is focusing on any activity and adaptability to any organization. the internal control system within the coso concept should ensure the achievement of the objectives – operations, reporting , compliance. under the coso concept, an internal control system is a process organized and implemented by the leadership (top management of companies, the board of directors) and other members of an organization in order to provide reasonable assurance of achieving the objectives of internal control (see above). this means that the organization of internal control and its operation is aimed at identifying and eliminating any risks of economic activities that threaten the achievement of those objectives. in our opinion, in this study, it would be appropriate to adapt the coso concept to the system of internal control of foreign economic activity within an enterprise. this solution will allow controlling the effectiveness of internal control and ensure the confidence of supervisory authorities according to the internationally recognized requirements. the objectives of the internal control under the coso concept of foreign economic activity are in figure 1. under the coso concept, the internal control system consists of five elements: control environment, risk assessment, control activities, information and communication, monitoring activities. to form a proper control environment within the system of internal control of compliance, primarily it is advisable to develop and approve an order of the formation of general concepts (strategy), as well as baltic journal of economic studies 20 vol. 3, no. 4, 2017 control centres responsible for achieving the objectives of foreign trade activity with the adoption of major powers and obligations, first of all, of managerial personnel. in addition, the organizational structure of a company management should provide centres of responsibility (departments or officials) with a defined list of responsibilities and commitments and targets of their actions. the environment control is also created to include the main aspects that contribute to a maximum efficiency control: an organizational aspect, which is the separation of duties, where internal controllers form the authority to control and have an access to relevant information officers (responsible centres) and assets, as well as the procedure of appointment of internal controllers, the right to choose the procedures and schedule of inspections; an economic aspect, which is to build a system of motivation and prevent a participation of controllers in collusion with officials; an ethical dimension, that is adherence to the principles of integrity, objectivity, confidentiality and professional competence in accordance with the code of ethics for professional accountants. in practice, the organization and control of foreign trade within modern enterprises in ukraine provide separate centres of responsibility for achieving the planned results or fulfilment of customs requirements. building the organizational management structure for the purposes of foreign economic activity should be comprehensive and systematic as well as take into account the following: a general strategy of economic activity, long-term and operational goals of foreign economic activity, performance criteria of foreign economic activity, specific procedures and policies to achieve the objectives, responsibility centres with define responsibilities and obligations as well as relationships between the centres of responsibility. in our opinion, the above-listed components of the organizational management structure must be clearly spelled out in the relevant orders, which determine the appropriate mechanisms for implementing powers and obligations, as well as stringent criteria for evaluating results and motivation mechanisms. risk assessment activities within the system of internal control are implemented by each thematic unit separately and consist of procedures for the identification, evaluation, analysis, and risk management: violation of the law, uncertainty reporting and accounting, loss of ability to pay and deteriorating financial condition, violation of standards of reliability and security, loss of competence. the implementation of this element of the internal control of compliance is ensured by the responsible centres liable for the internal control system. the element of internal control “monitoring control procedures” includes requirements to assess whether effective procedures are involved and to what extent the main objectives of internal control are achieved. 3. development of a model for analysing deviations from the integral index we propose to use the control and analyse deviations from the integral index for an organization to monitor internal control procedures as a part of the internal control of compliance requirements for enterprises. the integral index of compliance was developed and proposed in the studies of o. vakulchik and o. knyshek (3): int = (∑dj=1 bj)/ d, (1) fig. 1. the objectives and criteria of internal control under the coso concept for an enterprise engaged in the foreign economic activity source: elaborated by the authors the effectiveness of operations, achievement of operational and financial goals, and provision of asset protection (operations) reliability and transparency of financial and non-financial reporting (internal and external) (reporting) compliance with legal and regulatory requirements (compliance) the effectiveness of foreign economic activity of an enterprise matching the quality characteristics of an enterprise engaged in foreign economic activity with customs requirements of reliability and safety coso purpose criteria the relative and absolute indicators of efficiency of foreign economic activity the overall indicator according to customs requirements of reliability and safety int baltic journal of economic studies 21 vol. 3, no. 4, 2017 where int – integral index of compliance; j – thematic block for evaluation; bj – result of evaluation of the j thematic block of an enterprise; d – number of thematic blocks for the evaluation (there are 5 thematic blocks: compliance with laws and regulations; reporting and accounting; ability to pay and financial status; compliance with safety and security standards; competence and practical skills). the results of the integral index evaluation allow diagnosing the level of compliance of an enterprise with the eligibility criteria for applicants to be considered an “authorized economic operator”. in case of negative assessment results, there are questions of development of management actions to achieve compliance with the trade community safety requirements, in particular, the development of effective monitoring of the implementation of management decisions. even in case of positive results of the assessment, there is still a question concerning an internal control to maintain the achieved level of enterprise compliance with the standards of reliability and security by all the necessary blocks. monitoring compliance with rating evaluation should be aimed at determining the degree of deviation from the requirements (degree of non-compliance with customs requirements), identification of responsibilities (particular individual decision maker) and the development and implementation of administrative influence on the system of foreign economic activities to address deficiencies of the system. the result of control is to perform a steady increase in the integral index or stable maintenance of the already achieved indicator that will allow a company to maintain the “authorized economic operator” status and perform foreign trade activities with simplified procedures. the scheme of monitoring compliance with internal control procedures of customs requirements is presented in figure 2. the key issue in the implementation of the monitoring is to determine deviations from the integral index by components (step 3) to identify factors of negative influence and development management decisions to eliminate deviations and ensure sustainable growth value of the integral indicator. the total deviation integral index can be described by the formula: δ inta = δ intaβ1 + δ int a β2 + + δ intaβ3 + δ int a β4 + δ int a β5, (2) where δ inta – total deviation from the integral indicator for a reporting period (actual) different from the planned (plan), δ intaβ1 – deviation from the integral index value due to the violation of legislation in the analysed period (positive or negative), δ intaβ2 – deviation from the integral index value due to the failings of the reporting and accounting of goods and vehicles (positive or negative), δ intaβ3 – deviation from the integral index value due to deterioration of solvency and financial condition in the analysed period (positive or negative), δ intaβ4 – deviation from the integral index value due to non-compliance with safety and security (positive or negative), δ intaβ5 – deviation from the integral index value by reducing the level of professional qualifications and competence (positive or negative). deviations from the integral indicator value in the reporting period due to variations in the estimates for the components of the integral index are calculated using the formula: δ intaβj = (βj aβj p)/5, (3) where δ intaβj – deviation from the integral index value by reducing/increasing a component score for the integral index, j – thematic unit integral index (including 5 blocks), βj a – actual value of scoring j-th component of the integral index, βj p – planned importance of scoring the j-th component of the integral index. the results of evaluation of deviations from the integral index for companies are in table 1. the negative deviation from the integral index shows the fig. 2. the monitoring scheme of customs requirements for the compliance by int index source: elaborated by the authors step 1. determination of the minimum value int step 3. identifying deviations from the current value of the minimum value int step 4. develop and implement control activities aimed at eliminating deviations step 6. calculation of int in the next period negative deviations positive deviations step 5. control activities for preserving the “authorized economic operator” status step 2. the calculation of the current value int baltic journal of economic studies 22 vol. 3, no. 4, 2017 risk of loss of the “authorized economic operator” status (if the company has already received such a status) or reducing the likelihood of “authorized economic operator” status (if an enterprise expects to receive such status). a positive deviation from the integral index indicates the degree of increase of compliance with customs requirements. the detailed analysis of variations can provide more relevant information to manage and control parameters of compliance standards. definition of deviations from the integral indicator by components allows identifying centres of responsibility and the reasons for non-compliance with customs diagnostics. evaluation results for the deviation units allow determining the aspects of a company, which did not meet customs standards for the current period and a responsible person who did not provide the requirements of customs standards. this is the risk of loss (non-receipt) of the “authorized economic operator” status. total negative deviations by factors of influence on int determine the degree of loss of quality characteristics of a company in the current period compared with the basic one, which allows determining int value a company could reach by means of maintaining quality characteristics at the achieved level. the indicator of relative potential rating determines the percentage increase in the rating of an enterprise’s “authorized economic operator” status subject to elimination of negative factors and support of quality characteristics at the achieved level. for example, for pjsc “dnipropetrovsk railway switch plant” int2015, it was 2.558 points due to training and professional competence of staff (unit 5). but the level of solvency decreased, which negatively affected the overall integral index. if the management of this company improves the ability to pay and its financial position, the rating of the company will increase by 3.1% from the already achieved level. a person who can influence the level of solvency and ensure the improvement of the performance is cfo (a financial manager). in lc “kompresormash” the integral index int2015 increased by 0.386 and 2.22 points. the evaluation of deviations shows that there were no negative impacts on the integrated assessment indicator in 2015 and, therefore, it continues applying sufficient management procedures to support the achieved quality characteristics of the company. companies will be able to achieve an increase in ranking the “authorized economic operator” status by taking additional measures aimed at increasing the level of compliance by the rating units. 4. conclusions the monitoring of compliance with customs diagnostics should be aimed at determining the degree of deviation from the requirements (degree of noncompliance with customs diagnostics), identification of responsibilities (particular individual decision maker) and development and implementation of administrative influence on the system of foreign economic activities to address deficiencies of the system. the result of control is to perform a steady increase in the integral index of customs diagnostics or stable maintenance of the already achieved indicator that will allow the company to maintain the “authorized economic operator” status and perform a foreign table 1 the results of evaluation of deviations from the integral index for companies indicators public jointstock company “dnipropetrovsky strilotchny zavod” limited company “compressormash” public joint-stock company “poltava turbomechanical plant” 2013 2014 2015 2013 2014 2015 2013 2014 2015 int 2,36 2,438 2,558 1,862 1,834 2,22 2,08 2,192 2,34 deviations: 2014/2013 2015/2014 2014/2013 2015/2014 2014/2013 2015/2014 δ intaβ1 -0,050 0 -0,050 0,100 -0,100 0,050 δ intaβ2 0,028 0 -0,058 0,086 -0,030 0,058 δ intaβ3 -0,020 -0,080 0 0 -0,080 0,160 δ intaβ4 0,120 0 0,080 0 0,120 0,080 δ intaβ5 0 0,200 0 0,200 0,200 -0,200 δ inta 0,078 0,120 -0,028 0,386 0,110 0,148 ∑ negative deviations – risks of losing the “authorized economic operator” status -0,070 -0,080 -0,108 0 -0,210 -0,200 int without negative deviations 2014 2015 2014 2015 2014 2015 2,508 2,638 1,942 2,220 2,402 2,540 relative potential of rating 2,9% 3,1% 5,9% 0 9,6% 8,6% the relative index of lost ranking 18,7% 14,7% 38,9% 26% 26,9% 22% source: calculated by the authors based on the annual reports of enterprises baltic journal of economic studies 23 vol. 3, no. 4, 2017 economic activity with simplified procedures. evaluation results for the deviation units will allow the integral index to determine compliance aspect of the company, which did not meet customs standards for the current period, and a responsible person who did not provide the requirements of customs standards, which created the risk of loss (non-receipt) of the “authorized economic operator” status. references: tereschenko, s., symonova, h., & khablo h. (2010). international standards regarding the status of authorized economic operator. mytna bezpeka (customs security), 2, 71-80 (in ukr.) vakul'chyk, о., knyshek, o., & petrosian, a. (2014). integral assessment of the financial condition of entities in the status of authorized economic operator. visnyk amsu (bulletin of the academy of customs ukraine), 1, 98-105 (in ukr.) vakul'chyk, о., & knyshek, o. (2016). integral-rating evaluation and analysis of qualitative characteristics of the enterprises with international business activity. ekonomichnyj prostir (economic space),113, 92-103 (in ukr.) dubitskiy, d., zhelyakova, a., (2016). evaluation of the effectiveness of obtaining the status of authorized economic operator. efekty`vna ekonomika (efficient economy), 11. retrieved from: http://www.economy.nayka.com. ua/?op=1&z=5256 (in ukr.) drej, v. (2013). international regulation of internal audit in enterprises. ekonomichnyj prostir (economic space),80, 167–175 (in ukr.) marchuk, u. (2016). relationship of operational control and operational accounting. ekonomichnyj chasopys (economic annals), 161 (9-10), 91-94 committee of sponsoring organizations of the tread way commission. internal control. integrated framework. retrieved from: http://www.coso.org/documents/coso%202013%20icfr%20executive_summary.pdf елена вакульчик, валерия фесенко, оксана книшек внутренний контроль и аудит соответствия предприятия таможенным требования при осуществлении внешнеэкономической деятельности аннотация. оценка надежности предприятий, занимающихся внешнеэкономической деятельностью и необходимость упрощения таможенных процедур являются актуальной проблемой в контексте глобализации. возможности и преимущества, которые возникают при получении предприятиями статуса «уполномоченный экономический оператор» обуславливают формирование новых задач для менеджеров предприятий создания системы внутреннего контроля для систематического мониторинга соблюдения предприятием таможенных норм по надежности и безопасности. это позволило бы выявлять риски потери статуса «уполномоченный экономический оператор». целью работы является совершенствование системы внутреннего контроля предприятия, занимающегося внешнеэкономической деятельностью, в процессе получения и сохранения статуса «уполномоченный экономический оператор» в соответствии с международными таможенными требованиями безопасности и надежности. методика. исследование основано на методах логического и аналитического моделирования оценки воздействия отдельных факторов на значение обобщающего показателя. результаты апробированы на внутренних учетных данных существующих машиностроительных предприятий. результаты. в статье представлены результаты адаптации концепции coso к системе внутреннего контроля предприятия при совершении внешнеэкономической деятельностью в процессе получения или сохранения статуса «уполномоченный экономический оператор». система внутреннего контроля в рамках концепции coso должна обеспечивать достижение целей по отражению операций, формированию отчетности и соблюдения требований. значение/оригинальность. предлагается осуществлять внутренний контроль соответствия предприятия требованиям таможенных органов на основе анализа отклонений интегрального показателя соответствия. практическое значение. результатом контроля является постоянное увеличение интегрального индекса или стабильное поддержание уже достигнутого показателя, который позволит компании поддерживать статус «уполномоченный экономический оператор» и осуществлять внешнеэкономическую деятельность с помощью упрощенных процедур. суммарное отрицательное отклонение по факторам определяет степень потери качественных характеристик компании. показатель рейтинга относительного потенциала определяет процентное увеличение рейтинга предприятия. результаты оценки отклонений по блокам интегрального показателя совместимости позволят определить определенный аспект деятельности компании, который не соответствовал стандартам на текущий период. а также позволит идентифицировать ответственное лицо, которое не обеспечило выполнение требований таможенных стандартов, что приведет к риску потери (не получения) статуса «уполномоченный экономический оператор». baltic journal of economic studies 111 vol. 4, no. 1, 2018 corresponding author: 1 department of public administration and customs administration, university of customs and finance. e-mail: danyulya@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-1-111-117 formation of “electronic office” model of administrative services provision yulya danshina1 university of customs and finance, ukraine abstract. the purpose of the work is to form the model of “electronic office” of administrative services provision and justification of advantages of office on the basis of conducted comparative analysis of the existing models of administrative services provision in ukraine – “departmental” and “integrated”. methodology. a methodological basis for investigation is the logical analysis of theoretical and methodological backgrounds for management over administrative services provision process. for theoretical generalization and formation of the model of “electronic office”, there are used scientific recommendations of ukrainian scientists regarding the necessity to transform the process of administrative services provision into the electronic form. results. the investigations allowed confirming that the model of “electronic office” gives an opportunity to implement equal interaction between a subject of provision and a subject of an appeal as electronization of governance allows organizing an effective feedback channel. moreover, the model of “electronic office” allows considering citizens as a source of methods and ways to develop management over administrative services provision system. practical meaning. the model of “electronic office” of administrative services provision gives to subjects of provision and subjects of appeal opportunity to effectuate interrelationship during the management of the system of administrative services provision. meaning/ distinction. the provided model will give an opportunity to involve active citizens in the processes of state governance and to increase their impact on the processes of electronization of national – governance activity. key words: management, process, procedure, e-governance, model of governance, subject of provision, subject of appeal. jel classification: d72, d73 1. introduction the modern state of the system of administrative services provision requires reinterpretation of ways to improve and develop the model of the system of administrative services provision that corresponds to the spirit of modernity and the requirements of the information society. in the modern information society, the processes of electronization cover all sectors of the economy with enormous speed, thereby forming a system of relationships of a new format. a system of administrative services provision is not an exception too. however, the processes of electronization in the system make more complicated the range of issues of a different type (economic, regulatory, informational, technological) that are primarily subject to be settled, before the conduction of transformations of the present system of administrative services provision into the electronic form. besides, the transformation requires significant financial, human, information, and other resources. however, in the long term, “electronic office” of administrative services provision will be able to settle not only a range of issues that have been typical for the system during many years, but also to reveal wide range of new opportunities both for the parties of administrative services provision and for the parties of referral. 2. analysis of the latest researches and publications devoted to the process of administrative services provision primarily, the achievement of the objective of herein investigation means a description of the process of administrative services provision, so we need to differentiate the definitions of terms “process” and “procedure”. a. lipentseva and y. zhuk strongly believe that the process of an administrative services provision in ukraine needs to be processed and regulated by legislation as it, firstly, depends on the operating efficiency of the authorities of state governance, state employees and officials, who are directly involved in the baltic journal of economic studies 112 vol. 4, no. 1, 2018 process of administrative services provision (lipentsev, 2015). v. tymoshchuk (2012; 2015) study the organizational basis for administrative services provision, particularly, during the period of administrative reforms, considering the process of the administrative services provision to be not clear, impractical, and they suppose that this process does not respect interests of citizens. the authors emphasize the necessity to form a high-quality mechanism of administrative services provision to the population, as each citizen estimates care of government pursuant to the quality of administrative services provision. the official sources (sistemy menedzhmenta kachestva, 2015) define the process as one or several correlated types of activity that absorb “inputs” in order to obtain results. within the frame of herein context, the result is considered to be an output. as a rule, the outputs of one process are the inputs for other processes. pursuant to these sources (sistemy menedzhmenta, 2015), a procedure is a certain standardization of activity or process implementation. thus, a process is a set of activities, and a procedure is a regulation of activity or process implementation. correspondingly, in order to start the process of service provision, a party of referral needs to make an application for a certain administrative service. pursuant to the information card, a party of referral sends an application to the relevant party of services provision. if he/she chooses an electronic communication channel, the process of service provision is being significantly simplified, but in a greater degree, it will depend on the set of factors connected with the technological compatibility of information systems of the state governance. a completed application needs to be considered as an output of party of referral activity and a starting point for the decision-making procedure by a party of services provision. during the decision-making process, a party of referral is guided with a relevant technological card. if there is an application for the compound service, the process of services provision is being extended by a number of procedures that are equal to the number of services included in the compound service. a supposed positive result of the party of services provision activity is an administrative act that may be considered as an output and, correspondingly, the end of the whole process of administrative services provision. the analytical report to the annual message of the president of ukraine to verkhovna rada of ukraine “about the domestic and international position of ukraine in 2017” (pro vnutrishnie ta zovnishnie stanovyshche ukrainy v 2017 rotsi, 2017) contains information about the initiative of state migration service of ukraine to the legislation of ukraine. pursuant to this initiative, there has been put a set of changes about the delegation of functions to the local authorities of state governance connected with the registration of individual entities and de-registration at the place of residence. there is also data about the authorization of administrative service centres (hereinafter  – asc) created by local authorities of state governance with a right to compile and issue passports of the citizen of ukraine in the card form and passports of the citizen of ukraine for leaving abroad with contact-free electronic data storage device. 3. the modern state of the process of administrative services provision on the example of receipt of passport of the citizen of ukraine for leaving abroad, we offer to consider the organizational aspect of electronic state governance in the system of administrative services provision. after the entering into force of visa-free regime between ukraine and eu countries, the excitement for receipt of the passport for leaving abroad provoked a range of problems that were not foreseen both by a system of administrative services provision and by a super system – a system of state governance. so, the process of getting the international passport starts from the moment of application submission for the service. a submission of application in the electronic form cannot be implemented through any information technology system resources, especially websites of subdivisions of the state migration service of ukraine, unified state portal of administrative services, and portal of state services igov. all abovementioned resources suppose only the possibility to use a service of the electronic queue. inaugural project “electronic queue” has been operating only in several cities of ukraine: kyiv, lviv, dnipro, odesa, and ternopil. it is worth to remark that with consideration of excitement for the considered service, a demand for this service is surpassing supply. the existing situation that may be considered as first attempts to introduce e-governance in the system of administrative services provision allowed entrepreneurially-inclined citizens to organize their business. the idea of this business is to follow and to reserve a free place in the electronic queues on the electronic resources, having into possession the necessary data about the party of referral. due to the fact that new free dates and time in the electronic queues are being formed only once per 24-hours day at an unascertained time, it is impossible to reserve a place for yourself. all these conditions make demand and price increase for the service “to reserve a place” from the sites of private advertisements and it destroys again the credibility of the citizens to the state authorities and their expectations that e-governance will allow settling the range of issues, including corruptive ones. consequently, a maximum that can be gained from the electronic resources is to obtain requisites for baltic journal of economic studies 113 vol. 4, no. 1, 2018 the preliminary payment transactions, patterns of applications that should be printed out beforehand and completed before the submission. but such conditions for the organizational aspect are not in compliance with “service-oriented state policy” declared by the managerial approach. but, of course, if we compare it with a bureaucratic approach for process organization of administrative service provision, the abundance of forms and access to the current accounts and requisites of the party of services provision may be estimated as an “over-the-top service”. taking into consideration that it is impossible to submit an application, necessary documents and confirmation of payment distantly, the procedure will be taking place in one of the subdivisions of the state migration service of ukraine that has an opportunity to draw-up the passport or through asc. when a party of services provision accepts an application, the process of provision of considered administrative service may be controlled by a party of referral through the website of state migration service of ukraine. through the relevant services for requested information and after the completion of several fields designated for the personal information, a party of referral obtains the information about the stage of consideration of his application, for example: the documents were accepted; there is a data check; a permit for personalization was given; a confirmation of the technical capability of personalization; data is personalized; the document is ready. at this stage, advantages of e-governance for parties of referral are finished. the parties of services provision do not have almost any advantages from e-governance, not due to the fact that their activity process is connected with high technologies, but because of the necessity to print out all documents and to effect necessary procedures with them, then they need to scan documents and etc. such a state of things is called as “ukrainian” e-governance. in that context, there is an urgency to analyse three models of system operation of administrative services provision: “departmental office”, “integrated office” and “electronic office” in order to estimate the established internal environment that is suitable for the formation and development of the appropriate directions. in order to define prospects of each of the offered models, we offer to consider positive and negative sides and to define all pros and cons. by way of comparison, we offer to take as a basis a following range of criteria: purpose, main task of the model, organizational principle, roles of party of referral and party of services provision in models, personnel skill level, database organization and management, availability, schedule of work, regulation of queue, way to identify a person, submission of documents, related services, possibility to control the process, feedback. the application for administrative service in the “departmental office” leads to the negative attitude from the side of parties of referral towards the parties of services provision and pursuant to the questionnaire (fond “demokratychni initsiatyvy” im. ilka kucheriva, 2015), the consequences are determined with the following factors: a necessity to visit office for several times (30%); paper chase during the consideration of appeal (28%); a necessity to collect necessary data by yourself from other offices (20%). moreover, a “departmental office” has a range of problems of the following nature: – the complexity of procedures and contradictory legal and regulatory framework; – territorial lack of integration of different authorities of state governance that provide administrative services; – territorial inaccessibility for the parties of referral from villages; – artificial “fragmentation” of administrative services by separate “chargeable services”; – rearrangement of responsibilities related to the collection of references, approvals, agreements and etc. to the parties of referral by authorities of state governance; – unreasonably big amounts of charges for separate types of administrative services; – limited number of days and limited time period for reception of citizens; – unreasonably long terms for the provision of separate administrative services; – problems with access to information that is necessary in order to obtain administrative services and etc. (zhuravel, 2016). a comprehensive settlement of these issues was a policy of powers decentralization in the area of administrative services provision for the local level to the authorities of state governance, particularly, through the delegation instruments. in spite of the necessity to coordinate such actions with reform of the local self-governance and administrative and territorial structure, there were attempts to transfer part of basic administrative services to the local level, as decentralization was defined as a practical mechanism to enhance the influence of the society on the parties of administrative services provision. in order to justify a necessity to conduct a declared policy, the advantages of decentralization are considered to be the following: – enhancement of influence of the society on the quality of services; – efficient organization of services provision (a head possesses the relevant power and responsibility); – efficient use of public resources (personnel, premises, equipment technology, etc.). but, till nowadays, some cities of ukraine do not have enough technical, financial, and personnel resources in order to accept the delegated powers. the result of such unreadiness – is an assignment of one responsible person from the number of staff of the local authority baltic journal of economic studies 114 vol. 4, no. 1, 2018 of state governance to perform functions for the whole “integrated office” (dromashko, 2016). starting from 2008, due to the initiative of local authorities of self-governance, there were formed first “integrated offices”  – centres of administrative services provision, which main functional purpose became a fast and comfortable provision of all necessary administrative services to the party of referral. the application forms for most administrative services are supposed to be accepted in one place, and a direct consideration of appeal and the provision of result should be performed by different authorized bodies of state governance. giving it in other words, a party of referral during the appeal to “integrated office” provides an application and minimum list of the required documents and afterward, in a period stipulated by legislation, he/she will take a result of all actions that are being performed by “back office”. thus, a party of referral does not participate in the decisionmaking process and its result, which realization is under the responsibility of state employees and officials of the authorities of state government that is being coordinated by an administrator. so, an administrator is considered to be a main state “intermediary”, which makes impossible a direct contact of the party of referral with a party of administrative services provision and, thus, it excludes a corruption element. there is also a simplified access and conditions for services receipt and time period for execution of such services is becoming considerably shorter. the first “integrated office” under the name “centre of administrative services” transparent office” was set up in vinnytsia city. the list of administrative services that were provided by this office included all types of services of vinnytsia city council and local authorities of state governance. at the legislative level, there were defined the main requirements for such offices, the principles and order of their functioning. pursuant to many legislative provisions, there is an idea that such an office should provide a wide range of services, but the certain list of administrative services of the “integrated office” is being defined by an authority that created it (pro administratyvni posluhy: zakon ukrainy № 5203-vi, 2012). from the perspective of interest of the parties of referral, the “integrated office” should certainly provide basic administrative services and, in general, as many services, as it is possible. the main tool for the integration of basic services into the “integrated office” is an approved list by the cabinet of ministers of ukraine (deiaki pytannia nadannia administratyvnykh posluh orhaniv vykonavchoi vlady cherez tsentry nadannia administratyvnykh posluh: rozporiadzhennia kabinetu ministriv ukrainy № 523-p, 2014),, but for its realization there should be done changes in the special relative laws that allowed providing “fast” administrative services and administrative services by administrator and/or representative of parties of administrative services provision in the “integrated office”. the basic administrative services include the following actions: – registration of births, deaths, and marriages; – registration of place of residence and issue (exchange) of passport (identification) documents (“domestic” and “for leaving abroad”); – registration of title to real property, particularly for the land plot; – registration of business entities; – registration of transport vehicles and issue (exchange) of driver’s licenses etc.; – social administrative services (public welfare payments, subsidies, etc.). there were also legislatively defined requirements regarding the time of reception of parties of referral in asc and pursuant to these requirements, the time of reception is not divided by hours for consultations and hours for the acceptance of documents. it is worth to draw a special attention to the requirements concerning the premise of centre. according to these requirements, a premise is being divided into open and private parts. open part is designed for reception, advisory work, information distribution, and services provision to the parties of referral. besides, the service sector should be created pursuant to the principle of demonstrativeness of working places location, so-called “open space”, but it should not be like cabinet system that we can observe in the “departmental office”. it’s worth to remark that regarding the issue “onestop-shop” or offices that are operating in accordance with the principle “joint office”, ukraine was guided by experience of such countries as germany  – offices for citizens, poland  – service departments for citizens, canada – integrated office, in other words, by countries, which territories and number of population is similar to ukrainian parameters. in general, the idea of “integrated office” obviously has a set of advantages that can be defined as positive sides, for example: integration under the principle of “joint office”; actions under the principle “one-stop-shop”; territorial availability; open space; extended work schedule; electronic control of queue; related services. so, the policy of decentralization through the introduction of “integrated offices” was not expected by both authorities and asc. during the process of official services transmission to the “integrated offices”, there was lack of collaboration and opposition from the side of some authorities of state governance. besides, the “integrated offices” faced with many organizational and procedural matters on the way towards efficient administrative services provision, particularly, lack of staff, knowledge and skills, the absence of technical and technological equipment in the premises, absence of documents forms to provide delegate services. the level baltic journal of economic studies 115 vol. 4, no. 1, 2018 of development of “integrated offices” in the country is in an uneven manner. the best-known champions are centres in lutsk, ivano-frankivsk, vinnytsia, kyiv or kharkiv and there are many others that are less efficient, especially of the community-based level, where technical and resource maintenance is much worst in comparison with other cities. that is why, the “integrated offices” that were initially established for corruption level minimization, better transparency and convenience in services provision to the parties of referral did not achieve the defined purposes and a decentralization policy may be considered to be a failure. the abovementioned data allows making a conclusion that “integrated office” has some crucial drawbacks, such as: lack of interaction with parties of services provision; unjustified refusals from the parties of services provision; logistical problems connected with transmission of documents; failures to meet a deadline regarding the solution of cases; necessity to work with different informational systems; absence of approved rules and regulations, list of services, informational and technological cards at the moment of establishment of “integrated office”; presence of separate schedule for services, provided by different structural subdivisions; necessity to provide different parties of administrative services provision with permanent working places that require additional non-human resources; parallel acceptance of documents outside the territory of “integrated office”; non-coordination of permissive legislation in the area of business activities and legislation about administrative services; status and professional integrity of the administrators of “integrated office”. in conclusion about the usefulness of “integrated offices” operation, it is necessary to note that modern information technology and international tendencies in all spheres of activities of the society show a process of getting rid of intermediation if the process can be automated. the role of “integrated office” involves this matter too. nowadays, human life and activities are based on the wide usage of information & communication technology (hereinafter  – ict) that essentially make life easier. taking into consideration a person from the informational society, there are being formed new requirements to the system of administrative services provision and created a background for the integration of “departmental offices” and their transformation into the “electronic office”. 4. formation of the model of “electronic office” of administrative services provision within the framework of reformations in system of administrative services provision, the introduction of technology of “e-governance” that means information distribution among the parties of referral regarding the procedures and possible results of process through information terminals, call-centres of state governance authorities, and creation of portal of administrative services provision allow affirming about signs of appearance of the third model of system of administrative services provision – “electronic office”. “e-model” of the system of administrative services provision means the automated process of administrative service provision, ranging from the standard information provision to the completion of financial and other transactions, using electronic servers of informational and communicational resources that ensure distant interaction. such a model of system will allow performing the provision of administrative services through single access point  – portal, with the help of integration of “departmental offices” in it, informational system of interdepartmental electronic interaction between authorities of state governance and formed electronic registers directly within the mode 24/7, through the usage of application on the personal device of party of referral. the informational systems should provide request processing of the parties of referral and search of the authorized body of state government to provide the relevant service, to bring information to applicant’s knowledge in online mode with the help of ict. on the basis of abovementioned data, we can make a conclusion that operation of “integrated offices” minimized conditions of the system corruption to a certain degree that made consumers satisfied. the usefulness of “integrated offices” operation on the territory of ukraine is not clear as they were not able to settle any problems in full measure that are peculiar to “departmental office”. such showings as saving of time for visits of different parties of services provision, possibility to choose convenient time in order to visit office, high informativeness in the office and comfort in general are rather shady too, as in order to obtain service through “electronic office” you need much less time and it has been functioning in the mode 24/7. besides, most of the citizens prefer to obtain administrative services through ict, and each year will show the increase of these matters, as the younger generation of citizens is completely into the informational and communicational technology. during the establishment of “electronic office”, it is necessary to concentrate all efforts on the regulation of problems of “departmental offices” as authorities are able to ensure the following things, for which there were created asc: open space of the premises, conditions for incapacitated people, electronic queue, information provision, relevant services and etc. within this context, a direction for process development of administrative services provision is a policy of “services privatization” that is very popular in many western countries. in accordance with the baltic journal of economic studies 116 vol. 4, no. 1, 2018 managerial concept, a “privatization” – is an introduction of competition, but what is the essence of such a kind of concept is not clear as parties of services provision are monopolists. in spite of the adoption of the law of ukraine in 2012 “on administrative services” (pro administratyvni posluhy, 2012), pursuant to provision of which, all cities of region subordination and district state administrations are obliged to create asc; many necessary administrative services till now are being provided through the territorial bodies of state governance and subdivisions of different ministries. thus, the bodies of state governance persistently defend the policy of privatization that supposes to keep a possibility to provide a part of administrative services that are under their competence though own subdivisions or “offices”. against this background, there are now latest initiatives, for example, the introduction by the cabinet of ministers of ukraine to the verkhovna rada of ukraine a project of law “on services and service centres of the ministry of internal affairs of ukraine” (pro servisni posluhy ta servisni tsentry ministerstva vnutrishnikh sprav ukrainy. zakonoproekt no. 2567, 2015), that foresees a creation of chain of “service centres” of the ministry of internal affairs of ukraine, draft of legislation of the ministry of justice of ukraine regarding “competition” in the area of registration administrative services of property and business (pro vnesennia zmin do deiakykh zakonodavchykh aktiv ukrainy shchodo sproshchennia umov vedennia biznesu (derehuliatsiia), 2015), separate passport offices of the state migration service of ukraine and etc. that, on the one hand, make unimpaired operation of asc more difficult but, on the other hand, lead to the development of governance activity. there are no doubts that the electronization processes in the “departmental offices” will lead to the establishment of “electronic office” and their obvious advantages will allow creating a basis in order to form and to develop it infrastructure of “electronic office” and to solve problems of ukrainian system of administrative services provision connected with fight against corruption; transparency of legislative process regulation of separate service provision and its payment; and proper state control over the justifiability and quality of services. 5. advantages of the model of “electronic office” moreover, due to the narrow area of expertise of personnel in the “departmental offices”, the level of advisory work and service rate in the specific process or procedure may be extremely high. the “departmental offices”, as a rule, have better technical and technological software and access to the registers that gives an opportunity to provide “quick services” (extracts, abstracts issue) immediately and, in some cases, to provide even completed documents. the model of “electronic office” against the background of models “departmental office” and “integrated office” is being characterized with the widest variety of advantages that makes possible to define it as a promising trend for the further development of administrative services provision system. pursuant to the obtained data, a number of advantages of the model of “electronic office” cannot be contested by any of the abovementioned models, that is: – introduction of the integral it infrastructure of the whole system of administrative services provision; – possibility of the electronic interaction of parties of services provision with all life spheres of the party of referral; – to possess current database organization and management (legislative and other legal acts and regulations); – reduction of expenses for the creation and operation of “integrated offices”; – possibility to develop the multinational provision of administrative services; – absence of problems connected with interoperability of sites of authorities of state governance; – possibility of application programmatic interface; – possibility to introduce efficient instruments to involve citizens and parties of referral to the processes of administration development over the system of administrative services provision. but, at nowadays’ development stage of “electronic office”, the most important factor is a necessity to define clearly state policy and its order. in particular, it is necessary to follow strictly the declared in ukraine strategic approach of development policy of e-governance and introduction of ict. 6. conclusions the conducted analysis definitely shows advantages of the “electronic office” model of administrative services provision. a party of referral has a possibility not only to order and obtain different administrative services in electronic format but to interact with authorities of state governance on a distant basis. from the perspective of parties of services provision, an “electronic office” means a preservation of state financial assets as the creation of comfortable conditions for the reception of visitors in one “integrated office” requires considerable amounts of money, especially for the creation of the same conditions and territorial availability for several separate “departmental offices”. the “electronic office” model  – is a considerable improvement of services quality, operational efficiency during their provision, consistent saving of human resources and financial assets, complete exclusion of the corruption element, and the main advantage is a baltic journal of economic studies 117 vol. 4, no. 1, 2018 possibility to involve parties of referral and citizens to take part in formation and development of state governance of the system of administrative services provision. a special attention should be paid to ict during the governance over the system of administrative services provision. nowadays, they have substantial advantages and drawbacks, but in view of the abovementioned data, we can confirm that they have more negative moments at the present point in time and, in fact, they have been developing spontaneously. pursuant to our opinion, ict in the process of governance will give an opportunity to the system of administrative services provision to operate properly under the following conditions: – when the provisions of the ukrainian and international legislation in the area of administrative services provision will be coordinated; – the process of administrative services provision will be simplified and after that, it will be performed in electronic form; – after development and systematization of e-governance regulation in ukraine in general. references: deiaki pytannia nadannia administratyvnykh posluh orhaniv vykonavchoi vlady cherez tsentry nadannia administratyvnykh posluh: rozporiadzhennia kabinetu ministriv ukrainy № 523-p [some issues of providing administrative services to executive authorities through the centers for the provision of administrative services: order of the cabinet of ministers of ukraine dated may 16, 2014 no. 523-p]. 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(shveitsarsko-ukrainskyi proekt «pidtrymka detsentralizatsii v ukraini – despro») [administrative services: a guide. (swiss-ukrainian project "support for decentralization in ukraine – despro")]. kyiv: tov sofiia-a. tymoshchuk, v. (2015) nadannia administratyvnykh posluh u munitsypalnomu sektori. [provision of administrative services in the municipal sector] (navchalnyi posibnyk dlia posadovykh osib mistsevoho samovriaduvannia). v. tymoshchuk (ed.). asotsiatsiia mist ukrainy [association of ukrainian cities]. kyiv: vi en ei. zhuravel, t.v. (2016). (ed.). aktualni pytannia nadannia administratyvnykh posluh [topical issues of providing administrative services]. zbirnyk normatyvno-pravovykh ta informatsiino-analitychnykh dokumentiv. kyiv. baltic journal of economic studies 127 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 centre of eu studies of social innovation in education; ukrainian state dragomanov university, ukraine (corresponding author) e-mail: marja@nesterova.com.ua orcid: https://orcid.org/0000-0001-6703-7797 2 centre of intercultural studies, university of verona, italy e-mail: agostino.portera@univr.it orcid: https://orcid.org/0000-0002-6356-5688 3 centre of intercultural studies, university of verona, italy e-mail: marta.milani@univr.it orcid: https://orcid.org/0000-0002-8767-4045 doi: https://doi.org/10.30525/2256-0742/2022-8-5-127-138 diversity and intercultural competence for sustainable community development marja nesterova1, agostino portera2, marta milani3 abstract. the relevance of the research topic is that modern societies are diverse and face several challenges that appear to threaten sustainable community development. many of them are related to diversity and intercultural communication issues. the purpose of the article is to determine the main aspects and practical applications of diversity and intercultural competence in the focus of community sustainable development. the objectives are to look through recent publications dedicated to the various aspects of intercultural competence and diversity competence; to analyze and summarize the models of intercultural communication and competence described in recent publications, as well as diversity competences; to formulate the basic principles of diversity management for sustainable development of educational and business communities. study results. the article outlines the main features of different models of intercultural and diversity competence. the main approaches to intercultural and diversity competence in the educational and business spheres are investigated. a set of key values and key diversity competencies is presented. part of the study of social cohesion was the change in the parameters of intercultural and diversity competence in a crisis society. methodology of the research. the theoretical foundations of diversity management are based on a comparative analysis of recent publications on this issue and the results of modern social practice of organizations in the field of diversity management. the methodological and practical foundations of the above research are based on the previous intercultural and social cohesion studies at the national pedagogical dragomanov university (now ukrainian state dragomanov university). the social cohesion radar model has been adopted for practical research in the educational community. this made it possible to present some indicators of social cohesion – "acceptance of diversity" and "trust" as key factors for successful communication, social relations, and, consequently, community development. this model provides an understanding of "acceptance of diversity" and "trust" as key components of social cohesion and monitoring their status in different situations of social challenges, including the challenges of the war in ukraine and the pandemic. a working analogy of the diversity radar model for monitoring and assessing diversity intelligence in a community is presented. practical significance of the research. the study identified the level of acceptance of multicultural diversity in the community and outlined weaknesses for further strengthening with appropriate social and educational tools. the article collects and analyzes various diversity competencies and practical steps to develop diverse and sustainable communities, especially educational ones. key words: community, diversity competence, education, intercultural competence, sustainable community development. jel classification: b41, b49, i20, i21, i23, i29 1. introduction despite geopolitical crises and regional military conflicts, the modern world is based on the knowledge economy and the needs of the global labor market. growing migration flows require the management of intercultural conflicts in host communities, as well as addressing education and healthcare issues. therefore, intercultural communication is a daily practice baltic journal of economic studies 128 vol. 8 no. 5, 2022 request (nesterova et. al, 2019), and it actualizes the research of the different levels of intercultural competence as a complex social phenomenon. the above-mentioned approach argues that misunderstandings and lack of tolerance can be the result of ethnocentric behavior. this behavior is typical in dealing with people of different cultural backgrounds. this situation is quite common in the modern educational environment (in particular, in higher education) around the world due to globalization processes, migration, and military conflicts (andrushchenko et. al., 2022, p. 18). the same situation can be observed in the business sphere: the impact of the pandemic with its sudden transition of the whole world to quarantine and a virtual global environment, the requirement of globalization for organizations to internalize the needs of many societies. "this business goal can be achieved by establishing clear institutional and business values. in this way, environmental responsibility, talent retention and purposeful operations provide strategic direction and motivation for business diversity across many cultures. in the context of globalization and the expansion of international trade, it is hardly possible to find an organization operating in a single business and cultural environment." (alexandrova, 2016, p. 10) the current crisis conditions in which countries (not only the european union or ukraine) are experiencing mean that they need to reconsider their real (not declared) set of v alues. according to this revised set of values, priorities in social and educational policy should be determined (nesterova et al., 2020). values determine the level of social cohesion in a society and its characteristics as a social phenomenon. social cohesion is based on a set of individual and collective values. therefore, it is able to integrate modern divided societies and different types of communities. the turbulent and changing social reality requires us to be not only adaptive but also proactive in an unpredictable and rapidly changing world (nesterova et. al., 2021). this proactivity should be correlated with the principles of sustainable development. although the goals and objectives of sustainable development are common to the entire global community, there are certain problems with their practical implementation. for example, it can be seen that individual states and their regional communities are concerned only with their own current (mainly socio-economic) problems, which leads to disunity. this is often combined with the low moral and intellectual level of many contemporary civic leaders, top managers of international and regional organizations, local or national communities. "dissatisfied employees with no prospects for development lead to inefficiency and low productivity of the company, so systematic problem solving can save it from gradual decline. the model of human democracy in an organization is a humanistic view of people, relationships, empowerment, competence development, "people first"; look at anthropocratic management 3.0 as biblical leaders." (cherep et. al., 2022, p. 218) but leaders must be able to change themselves and their organizations in the right way. this means being able to ensure not only effective change management, but also diversity management. the concept of diversity management has changed since the early 1960s. diversity management used to focus on historically disadvantaged groups such as women and minorities, but the concept of diversity management has expanded as awareness of differences has grown and become more visible (i.e., sexual and gender diversity, age and other grounds of discrimination). "the grounds for potential discrimination recognized by eu law, in particular the eu charter of fundamental rights, are sex, race, color, ethnic or social origin, genetic characteristics, language, religion or belief, political or other opinion, membership of a national minority, property, birth, disability, age or sexual orientation. it is important to keep track of these grounds in order to promote еdi in academic circles." (siri et. al., 2022, p. 2 of 16) 2. intercultural communication and intercultural competence the concept of intercultural competence and intercultural communication has always been in the scope of international researchers – d. deardorff, g. hofstede, e. holl, f. klakhone, p. levice, f. strodeback, and f. trompenarce. also, the understanding of intercultural competence has been enhanced by ukrainian researchers – n. almazova, g. antipova, n. demianenko, t. kolosovska, and others (alexandrova, 2016). one of the most relevant focuses of intercultural studies is the concept of "tolerance". in the sphere of dialogue and other communicative interactions, it is seen as the so-called "passive tolerance" or indifference to the other (a partner in dialogue or communication). in modern scientific discourse, this concept is replaced by the term "intercultural diversity ". thus, it is a kind of transition of meanings – from primary tolerance (in fact, isolation and alienation) to the belief that there are many cultural traditions and practices, as well as the need for such diversity. cultural diversity argues that unification and leveling to a similar form of cultural traditions is a radical mistake. to implement these principles, it is necessary to organize a social life where differences do not lead to a common norm, but to a belief in the dynamics of the content of normativity. the effectiveness of baltic journal of economic studies 129 vol. 8 no. 5, 2022 integrity lies in affirming the value of each culture and its specificity. "this is due to the current state of civilization, which requires maximum diversity in the use of various resources, including social, cultural and intellectual capital. according to this belief, different cultural identities must necessarily have certain social advantages, the draw of which has formed the unity of the world community." (andrushchenko et al., 2022, p. 16) this approach in intercultural studies discovers the cognitive mechanisms of intercultural communication and intercultural competence accordingly. there was some practical research in the educational community of national pedagogical dragomanov university, kyiv, ukraine (which now it has been transformed into the ukrainian state dragomanov university). one of them (based on this model of intercultural communication) has analyzed the level of tolerance, readiness, and perspective of action among students of the university community of national pedagogical dragomanov university (npdu). the research identified the level of acceptance of multicultural diversity in the community and marked the weak points for further strengthening by appropriate social and educational tools (andrushchenko et. al., 2022). one of the well-known models of intercultural competence is the darla deardorff model of intercultural competence (2006). this model is based on five elements: attitudes, knowledge, skills, internal outcomes, and external outcomes. this model is similar to the intercultural communication model described above with its cognitive and pragmatic aspects, as it promotes the development of intercultural competence and the assessment of learning outcomes. 1. attitudes: respect, openness, and curiosity are foundational for the development of knowledge and skills needed for intercultural competence. 2. knowledge: cultural self-awareness, culture specific knowledge, deep cultural knowledge (understanding of other world views), and sociolinguistic awareness are fundamental to intercultural competence as understanding the world from others’ perspectives. 3. skills: observing, listening, evaluating, analyzing, interpreting, and relating are necessary for processing knowledge and understanding of information. 4. internal outcomes: the abilities, which allow individuals to achieve intercultural competence to some degree – the attitudes, knowledge, and skills lead to an internal outcome that consists of flexibility, adaptability, and empathy. 5. external outcomes: the behavior and communication skills demonstrated by an individual based on their attitudes, knowledge, skills, and internal outcomes are the external outcomes experienced by others. effective and appropriate behavior and communication are the visible external outcomes of intercultural competence. this model includes the internal and external outcomes and consists of 5 dimensions. there are some more simple intercultural models, for instance, model with 3 dimensions – attitudes, knowledge, skills (portera, 2017). also, there are models and theories more complex, including communication aspects. one of them is intercultural communication competence (icc): "the literature and theories related to intercultural communication competence (icc) were reviewed and twelve axioms were identified: (1) icc requires identity, socialization, and safety; (2) icc is boosted when learners are provided opportunities to learn and reflect; (3) learners need the right attitude and cultural skills to develop icc; (4) cross-cultural awareness helps immerse students’ intercultural communicative competence (icc); (5) icc needs accommodating table 1 conceptualization of cognitive focuses of intercultural communication levels of analytics / category differentiation conceptualization knowledge/ opinion value of culture (cv) knowledge of the value of the content of each culture understanding the value of culture in worldview principles and beliefs, knowledge of the values of one's own culture and other culturesvalue of collaboration (colv) knowledge of the value of interaction in a diverse field of cultures practice / activity motivation of activity (am) attitude to interaction in a multicultural environment willingness to interact with representatives of other cultures, activity in the context of intercultural communicationrealization of activity (ar) real participation in intercultural communication promotion / perspectives plurality of cultures (pc) belief in the uniqueness of each culture assessment of understanding and readiness to participate in intercultural dialogue in the context of education and self-realizationunity of cultural practices (cp) belief in the possibility of integration into a single semantic field of different cultural practices source: (andrushchenko et. al., 2021) baltic journal of economic studies 130 vol. 8 no. 5, 2022 linguistic and non-linguistic aspects in elt; (6) icc is language learning (to learn and not to do is really not to learn); (7) there are various teaching models for icc development; (8) curriculum updating is needed for the successful acquisition of icc; (9) utilizing technology enhances icc; (10) teachers need to be proactive and flexible to enhance leaners’ icc; (11) teachers face challenges towards icc, and (12) teacher training will boost their confidence in refining learners’ icc." (samifrati, gumanit, 2021; p. 147) 3. diversity competence/intelligence and diversity management diversity intelligence (di) or diversity competence (dc) is derived from the idea that there is very little knowledge (and much ignorance) about what diversity is: "diversity competence is the ability to navigate the broad social, cultural, racial and other human diversity and to understand and appropriately use the broad knowledge of diversity among employees with protected characteristics in the workplace. diversity competence is a combination of cultural, emotional and diversity intelligence. it is the ability to understand the set of values, behaviors, attitudes and practices in an organization or system that allows to work effectively with employees and groups from different backgrounds." (gnagniko, 2021) it is closely related to other types of intelligence. thus, integrating diversity intelligence along with emotional, cultural and intellectual intelligence can enhance the effectiveness of a diversity strategy. intelligent action can increase the effectiveness of diversity efforts and eliminate ineffective diversity initiatives. without a clear understanding of diversity, leaders do not have the full toolkit to realize organizational goals (hughes, 2016). for community development, it is necessary to develop diversity competence and implement a sustainable and integrated strategy that recognizes the value of diversity. "diversity competence is not just an additional competence, it can be seen as a "specialty qualification" that allows professionals to fulfill the general requirements of their profession in complex situations and when interacting with highly diverse patients." (ziegler, 2022) there are many organizations around the world that promote the values of diversity management for sustainable communities. some of them focus on education as a way to promote. some of them focus on education as a way to promote: for example, the canadian charity learning for a sustainable future (lsf) has been working for over 30 years to integrate sustainability education into canada's school system. the main task is empowering children to change the world in partnership with educators, youth, authorities, business organizations, and community members (www.lsf-lst.ca). another canadian organization focused on diversity issues – the supplier diversity alliance canada (sdac) – supports and informs governments, businesses, and key stake holders on the importance of inclusive procurement policies and practices through supplier diversity, leading to value with economic growth and social impact. supplier diversity is defined as the inclusion of underrepresented groups (such as gender, ethnic or sexual minorities, veterans, people with disabilities, etc.) in the supply chain or in the procurement process of public authorities or large corporations that are traditionally excluded. this is a very important aspect of sustainable community development, as organizations and governments create value in historically disadvantaged communities by creating jobs, expanding economic opportunities, and increasing purchasing power among these commu nities. by procuring goods and services from these diverse suppliers, there are other benefits, such as innovation, flexibility, cost savings, etc. this social inclusion program – supplier diversity – came to canada from the usa, where it is supported at federal, state, and municipal levels for more than 40 years. since 2015 many local authorities and corporations support supplier diversity in canada to help businesses and governments connect with their communities, drive innovation, build social cohesion and prosperity in diverse communities, etc. (www.supplierdiversityalliance.ca) another internati onal organization, diversity in sustainable development, based in canada, aims to change the broader sustainability ecosystem to create an inclusive sector for underrepresented groups. the organi zation's vision is a sustainable and prosperous world built on the principles of equity and inclusion. and its practitioners of managing diversity for sustainable communities embrace these values: 1. championing diversity – honoring individual identities and drawing on the differences can greatly enrich the sustainability sector. 2. ensuring equity – ensure everyone has access to the same opportunities. 3. cultivating continuous learning – when addressing complex issues have the curiosity and interest to keep learning and unlearning with humility. 4. activating systemic thinking – systemic lens to diagnose and solve complex challenges. 5. driving collaboration – the most important issues cannot be solved alone and they must be co-created with the people affected. 6. embedding transparency – transparent internal and external communications with honesty, integrity, consistency, and respect. baltic journal of economic studies 131 vol. 8 no. 5, 2022 7. creating impact – prioritizing constructive actions that create a lasting, meaningful, and positive impact (www.diversityinsustainability.com). ideas to improve diversity and inclusion in the uk are supported and implemented by many organi zations. one of them is diversity uk, a charity founded in 2012 that researches, advocates and promotes these ideas. this evidence-based initiative aims to increase civic engagement and improve social cohesion and community development through the perception of ethnic minorities in the uk (www.diversityuk.org). the institute of equality and diversity professionals is also registered in the uk. it was officially launched in birmingham on january 26, 2009, when the learning and skills council conducted a study that identified the need for such an organization to promote excellence in professional practice in the field of equality, diversity and human rights. for this research, it is important that this organization provides a definition of equality and diversity professionals (it includes, but is not limited to): "practitioners working in the sector, for example, as employees, consultants, trainers and academics. board members with an equality portfolio. managers who must deliver equality and human rights outcomes as part of their main tasks. unpaid volunteers who advise public, private and third sector businesses on delivering equality and human rights outcomes." (www.iedp.org.uk) diversity competence is a specific (professional) set of skills in the healthcare sector due to modern globalization and migration processes. this field is at the forefront of the challenges of a rapidly changing world with clear signs of geopolitical crisis. therefore, there are some actual questions, such as: " what competencies should health professionals possess to take good care of all their patients in evermore diverse, modern, differentiated, plural and democratic societies that include migrants and (ethnic) minorities? additionally, since there are different concepts and potentially extensive lists of skills to be fostered: what are the most important skills to ensure everyone is being taken care of equally?" (ziegler, 2022) this context calls for a change in terminology – from "intercultural" to "diversity " – as well as more research to clarify which competencies are most important and thus the goals of teaching. in addition, it is important to define what diversity competence is, especially in relation to caring for migrants and patients from (ethnic) minorities, and which competences are prioritized for them. in the field of health, a modified two-round delphi study was conducted and 31 clinical and academic migrant health experts from 13 european countries were asked this question. the expert group reached consensus on many competencies, especially on attitudes and practical skills (ziegler, 2022). this allows to create a constructive model of diversity competence, which is presented in table 2 below. table 2 key diversity competences in health care affective dimension cognitive dimension pragmatic dimension – respectfulness – empathy – diversity awareness – reflection of own biases – knowledge about social determinants of health – ethical and human rights-based approach – attentive listening and observation – understandable communication – professional work with interpreters – individual, needbased care – finding solutions with the patient source: (ziegler et. al., 2022) although this model of diversity core competencies was developed for the social care sector, it can be successfully researched and applied in other areas of the social dimension (specialized, such as social work, or generalized to the whole society). there are some similarities with the intercultural competence model approach: "affective dimension" is similar to "attitudes", "cognitive dimension" is similar to "knowledge", and "pragmatic dimension" is similar to "skills" from deardorff ’s (2006) and portera’s (2013) intercultural competence models. 4. diversity management and intercultural competences in business field in today 's global economy, the combination of business internationalization and workforce diversity (the presence of more women, as well as ethnic groups, people with disabilities and minorities in the workplace) poses new challenges for companies, especially in terms of how to integrate and manage such a heterogeneous environment (portera, 2022; bauman and portera, 2021; van knippenberg et al., 2010). the main obstacles to implementing inclusive policies in the workplace include prejudice (biased views), discrimination (biased behavior), and inadequate consideration of age, gender, ethnicity, or other personal characteristics. in fact, while it is true that culture is communication, that it symbolically represents the world and provides the ability to ascribe meaning to reality, it is also true that culture is primarily an implicit and non-verbal phenomenon, as most of its aspects are learned through observation and imitation rather than through education and explicit verbal expression. the basic level of culture is communicated implicitly, without awareness, mainly through non-verbal means (li, 2022; hall, 1959). baltic journal of economic studies 132 vol. 8 no. 5, 2022 interaction between people from different cultures is marked by moments of asynchrony, manifested in silences, overlaps, unexpected reactions, and interruptions, which demonstrate the difficulty of establishing and maintaining conversational cooperation through multiple communication conventions. the protagonists of the interaction, usually unaware of both socio-cultural categories and their own and other people's communication conventions that affect the quality of the relationship, have only a sense of a failed encounter, the true reasons for which are rarely identified. often, the explanation for this failure is psychological rather than sociological or cultural: the interlocutor is perceived (and classified) as uncooperative, aggressive, slow, rude, incompetent, or uncooperative. repeated meetings of this kind with people belonging to the same group (ethnic, cultural, national, gender, age cohort, social status, labor specialization, etc.) can lead to the confirmation or formation of stereotypes and prejudices that can profoundly affect interpersonal relationships and professional cooperation. cox (2001) also identified further reasons for the failures to leverage and manage diversity: to begin with, organizations tend to hire people who are perceived as fitting the existing culture of their company and exert strong pressure on new employees to assimilate to existing organizational norms (assimilation), with the result that members who have high cultural distance from prevailing norms of the work culture tend to leave the organization or feel compelled to embrace them in order to be accepted. in addition, the so-called "new resources approach" was not accompanied by appropriate changes in other elements of the system. this approach implies changing the composition of human resources (e.g., introducing more foreign nationals to the board and/or recruiting more women, etc.) without taking into account that the systems are highly interdependent and that any change in one element requires adjustments in all others. in addition, the third main reason for failure is a lack of understanding of the shape of the learning curve for leveraging diversity: the term "learning curve" is used to reflect the development of an organization and its members towards competence and the perception of diversity as an important resource. according to the author, leaders often believe and see steepness rather than flatness, achieving a high level of competence occurs in a short period of time, while its acquisition and development is long, complex, dynamic and covers the whole life of a person (portera, 2017; milani, 2017). this is why, as carnevale and stone (1995) point out, meaningful diversity management, as opposed to mere training aimed at promoting respect for diversity but not stopping to evaluate dialogic and transformative practices for full inclusion, requires a radical change in basic assumptions, models and structures, as well as the acquisition of appropriate intercultural competence. when analyzing scientific literature, various definitions of intercultural competence are encountered (deardorff, 2011). in fact, over the past two decades, scholars have been actively studying this concept and its development, defining and inter preting the concept in different ways. it can be defined as a combination of attitudes, knowledge, understanding and skills applied through actions that enable one, individually or with others, to understand and respect culturally and linguis tically diverse people and to respond appropriately, effectively and respectfully when interacting with them. as well as understanding oneself and one's multiple cultural identities through encounters with different cultures (barrett et al., 2013). thus, intercultural competence is multi-layered, and it basically consists of three interrelated dimensions (portera & grant, 2017; lakerveld & gussen, 2011): 1) knowledge, which is the codified knowledge that a person should have about their own and other cultures or social groups, their customs, values, and norms of behavior, and be able to compare them with their own culture (byram, 1997). 2) attitude includes openness, curiosity, reciprocal and quality interaction between different groups, social classes, gender, or ethnicity, as well as willingness to communicate with and to learn from them. 3) skills refers to the ability to apply knowledge by means physical and/or mental abilities for the execution of a task, but also the ability to interpret and relate as well as skills of discovery and interaction. many models have been developed – within different disciplines and fields (e.g., education, psychology, management, sociology, etc.) – to explain the main components of intercultural competence and how they interact with each other. this article will offer some of the most significant examples, especially for the field of intercultural leadership. balloi (2021) conducted a study involving 3 organizations, 1 large company and 2 multinationals with 34 managers and hr partners to identify and develop a heuristic model of intercultural competence from managers' practices and understand how such a model can be used to promote effective diversity management (dm) practices. the intercultural competence model is intended as a reference for an assessment system related to inclusive leadership and management learning and consists of five domains: 1) personality (attitudes and self-awareness); 2) skills; 3) knowledge; 4) values, brand culture and identity; and 5) the landscape of international rights related to diversity in the workplace. in particular, the elements that baltic journal of economic studies 133 vol. 8 no. 5, 2022 make up the sphere of self are: understanding the person; listening; respect; empathy; openness; irony; sensitivity; decentralization; withdrawal from judgment; patience; humility; flexibility; acceptance; curiosity. in particular, two categories are quite interesting: understanding people, as managers in the companies surveyed appear to have this attitude rather than focusing solely on the cultural aspects of diversity; and irony, which is a positive lever (but should be used carefully and judiciously) for managing diversity. on the other hand, selfawareness refers to the extent to which a person is aware of his or her weaknesses, interpersonal skills, philosophy, and values, as well as how past experiences affect one's personality. within the skills dimension, the following categories were then identified: giving value and attention to the person; including people; managing conflict; valuing diversity; recognizing the strengths of workers; recognizing and managing the critical elements of the context and of the person; promoting reflection in workers; integrating the point of view of others; observation; mediation; confrontation and dialogue; managing diversity by overcoming the problematic issue; involving people; setting a positive example; searching for shared horizons and meanings; transparency and clarity; stimulating workers to put themselves in the other person’s shoes; managing discrimination; increasing other people’s motivation; reducing and managing prejudice or stereotyping; changing one’s own vision; managing one’s own and others’ emotional dimension; valuing the group in diversity manage ment and inclusion practices. as for the knowledge, there are aspects relating to intercultural communication, knowledge of at least one foreign language or understanding of the cultural references of the other. the latter category seems to refer to a deep knowledge of culture, which goes beyond its surface aspects (deardorff, 2009). both values and corporate identity appear as dimensions that emphasize knowledge, awareness and practical application in management. this means that they are present both in the realm of knowledge and in the realm of knowledge of how to act, in terms of the ability to know how to use them in everyday practice. finally, the inclusion of a reference to the value-based mechanisms derived from the recognition of international rights recalls the realization that a common value base on diversity is needed today more than ever in a complex and multicultural society. portera’s (2013) interactive model of intercultural competencies also originates from empirical research; specifically, it was tested within the context of a master’s degree program in intercultural competencies for the fields of business, law, healthcare, and education. and, as in balloi’s model, the self dimension is considered the basic element to access the other dimensions comprise the competence. in fact, the center contains the self zone, which includes the fundamental human needs (portera, 1995), the theory of quality of life (albertini, 2000), pascal’s tetragram, and the theory of multiple intelligences (gardner, 1993). this area also includes attitudes such as openness, sensitivity, decentralization, curiosity, humility, flexibility, respect, responsibility, critical thinking, acceptance, empathy, and congruence. around the self zone are the knowledge categories: cultural self-awareness, knowledge of one's own culture and the culture of others, verbal-linguistic, non-verbal and paraverbal knowledge, disciplinary and interdisciplinary knowledge. the category of skills includes linguistic and communication skills. also important are the ability to observe, analyze, and interpret subjective and empirical reality, establish positive relationships, collaborate, and participate in an open and inclusive group. on the contrary, the chinese model of inter cultural leadership competence by chen and ran (2009) is not the outcome of empirical research but is based on the theoretical assumptions of the chinese philosophical approach that promotes the leadership competence paradigm, whose characterizing features are: the holistic approach; the collectivist approach to the person; the subjective, intuitive, and non-linear methodological approach. there are several components: 1) self-cultivation, which represents the "unceasing process of educating, liberating and purifying personality characteristics" (pp. 200–201). these characteristics are mainly identified in empathy, which, according to the authors, allows unity to be integrated with diversity and specificity to be identified with universality; it allows the leader to share the symbols of communication and project himself into the thinking of another person, using the same emotions and feelings. this component, in turn, consists of sensitivity and creativity. the former is the merging of diversity into unity, the latter is the expansion from unity to diversity; 2) depth of context, which requires leaders to broaden their perspective and reduce prejudices and stereotypes. in turn, this part consists of multicultural thinking, which is an approach to reducing ethnocentrism, and ecological mapping, as well as the ability to recognize the existence of different contexts in which ambiguous situations can be reduced; 3) action agility – the ability to effectively initiate and complete verbal and non-verbal interactions. this area consists of coordinating shi, wei, ji and interaction adroitness. shi represents the ability of leaders to manage temporal contingency in relationships and at various stages baltic journal of economic studies 134 vol. 8 no. 5, 2022 of communication. wei is the temporal contingency required for leaders to determine the appropriate communication space. ji promotes the ability to make explicit and hidden aspects understood in communication. interaction adroitness is the ability to align with other people. although it is not possible to get a prescriptive set of characteristics that would guarantee with certainty competence in any multicultural relationship and situation (milani, 2015; fantini, 2000), it is nevertheless possible to indicate the fundamental elements that are likely to constitute the premises for a positive encounter, in which the risk of misunderstanding is not denied but sought to be overcome by opening up avenues of mutual understanding. for this reason, well-managed diversity – through the development of intercultural competence – can lead to better results/effects on a variety of dimensions (cox, 2001; mor barak, 2000): improving problem solving and decision making, creativity and innovation; increasing of organizational flexibility; maintenance of better relationships with clients and employees (through positive conflicts management); occupation of new segments; overall enhancement of job satisfaction. 5. intercultural and diversity studies in educational community there are many benefits to enhancing equality, diversity, and inclusion in educational communities. it helps to focus on the well-being of students and faculty at universities and other educational institutions. "improving equality, diversity, and inclusion will contribute to community building by enhancing the sense of belonging of everyone who comes to work or study there, which in turn can increase their commitment and performance. in addition, by fully embracing and valuing diversity, universities can ensure their long-term relevance in a rapidly changing world and increase their already significant global impact." (butendijk et. al., 2019, p. 3) theoretical aspects of intercultural competence in education are widely discussed by many researchers (portera, 2017, milani, 2016). some initiatives to ensure the sustainability of educational communities based on the promotion of equality, diversity and inclusion have not been integrated. thus, there are three important gaps that need to be filled: 1. existing efforts to address the common barriers faced by all underrepresented groups, including women, sexual, ethnic and cultural minorities, people with disabilities, and other members of the university community, are not sufficiently synergistic. 2. many efforts have been focused either on student or staff problems rather than on meeting the needs of the university community as a whole. 3. the value of building inclusivity into the teaching curriculum or the design of research and innovation programs (which reflects, how considerations of sex/gender and/or minority perspectives could impact the research and teaching issues) often is not sufficiently central to address institutional issues of diversity and inclusion. also, the increasing "classical" indicator of the diversity of students in educational communities cannot be considered an indicator of greater "equality " and "diversity " within the higher educational system (siri et. al., 2022). therefore, it is necessary to monitor and evaluate diversity in communities and, accordingly, develop an appropriate methodology. this study of intercultural diversity was conducted according to the methodology developed by the bertelsmann stiftung social cohesion radar and adopted for research on community development and social cohesion (nesterova et. al., 2019, 2020, dielini et. al., 2022, svyridenko et. al., 2022). a feature of the social cohesion radar model is the hierarchical structure of these indicators, which describes different aspects and components of the complex concept of social cohesion. this model is a structure of generalized domains, each of which is described by three dimensions, and each of these three dimensions is described by indicators that can be measured separately. the first area is very important for intercultural and diversity studies with a focus on community development. this is the domain "social relations", which includes the following dimensions: – social networks; – trust in people: – acceptance of diversity. the domain "connectedness" involves the following dimensions: – identification; – trust in institutions; – perception of fairness. the third domain, "focus on common good", covers the following dimensions: – solidarity and helpfulness; – respect for social rules; – civic participation. this social cohesion radar methodology with the analysis of social cohesion indicators is based on behavioral characteristics that are very important for social cohesion and sustainable community development (dragolov et. al., 2014). the author's adaptation to identify the above behavioral characteristics for different types of communities is presented: first of all, educational communities. this helps to conduct practical research on an important social phenomenon related to social cohesion – trust, acceptance of diversity, social ties, etc. baltic journal of economic studies 135 vol. 8 no. 5, 2022 in the practical research the analysis of diversity level has been conducted and presented by comparing the results of 2022 with the results of 2019 and 2020 in the studies of social cohesion in the national pedagogical dragomanov university (npdu) – now ukrainian dragomanov state university (dielini et. al., 2022; svyridenko et. al., 2022). as can be seen from figure 1 below, it shows that the most represented dimension among the respondents is "acceptance of diversity ", which is significantly higher than other dimensions of this model of social cohesion. this indicates that both university staff and students perceive people with different views, values and lifestyles as absolutely normal. in 2020, during the pandemic and quarantine activities, the dimensions of "acceptance of diversity " and "social networks" were more important for employees, and for students – "acceptance of diversity " and "trust in people". this situation differs from the situation a year earlier, when trust in others in the university environment was more important to employees than social ties. the findings compare the level of social cohesion of the university community in 2020, which took place in the context of the covid-19 pandemic, with the indicators of 2019 and 2022, before and after the war. the data obtained and analyzed showed that the level of cohesion varies moderately across domains and their sizes. some tend to increase, while others tend to decrease. people's acceptance of diversity increased in 2020 and decreased in 2022. trust in people is growing, but the importance of social ties is slightly decreasing. generally, the level of acceptance of diversity is relatively high for all years and groups even during crisis conditions in society (svyridenko et. al, 2022). these parameters of social relations reflect the sustainability of the educational community, and their changes in different social conditions help to better understand the basic principles of social cohesion, trust development, and, consequently, community sustainability. this confirmed the assertion that sustainable community development is based on all three dimensions, and that trust (in this study, the parameter "trust in people") is a key factor in social cohesion and sustainable community development (nesterova et. al., 2020). the above study, based on the social cohesion radar model, demonstrates the role of acceptance of diversity and trust in social cohesion. it also shows the role of diversity as a key factor in successful communication, social relations and, consequently, community development. the social cohesion radar model provides a better understanding of diversity and tools for monitoring its state in different situations of social challenges, including the war in ukraine and the pandemic. it is a working analogy for the further development of the diversity radar model for monitoring and assessing diversity intelligence in communities. also, according to the informal answers to the questionnaire, it is possible to summarize the general opinion about the importance of leadership in the community for its sustainable development: "one of the most powerful ways to achieve sustainable change throughout an organization is through clear and visible leadership from the top." (buitendijk et. al., 2019, p. 11). therefore, it is possible to agree on the following important steps on the value-based path to an equal, diverse educational environment: 1. provide the importance of trust. leaders have to send powerful messages to the entire community that they are empathic to issues facing under privileged groups and willing to prioritize solutions. this will build trust in their leadership and change management. 2. monitor and measure the impact of present programs of change, using the power of empathy, being open, and listening to shared experiences in a safe and respectful environment. 3,71 3,67 3,63 3,62 3,75 4,03 3,77 3,62 3,53 3,81 3,90 4,01 3,70 3,46 3,89 3,89 4,00 4,04 4,28 4,32 4,19 4,42 4,35 4,29 4,18 4,28 4,16 0,00 1,00 2,00 3,00 4,00 5,00 2019 2020 2022 2019 2020 2022 2019 2020 2022 in general employees students social networks trust in people acceptance of diversity figure 1. changes of dimensions by domain "social relations" source: (dielini et. al., 2022) baltic journal of economic studies 136 vol. 8 no. 5, 2022 3. develop a holistic, synergistic, and sustainable approach (and appreciate formal strategy) to inequality and lack of inclusion. 4. lead by example and communicate from the highest levels of leadership the need for change and the potential benefits of increased equality, diversity, and inclusion (buitendijk et. al., 2019, p. 3). these steps can be applied to other types of communities (social, local/territorial, ethnic, etc.) to understand and improve their sustainable development. in this case (as in the case study described above), the educational community plays the role of a dynamic, complex social structure that is governed by typical social parameters and may be characterized by features of diversity. 6. conclusions modern society is facing a number of challenges that threaten sustainable development: globalization and digital transformation of business and education, radical changes in social relations, declining tolerance, rising levels of hatred, social inequality, rapidly growing flows of migrants and refugees leading to cultural, religious and ethnic diversity and conflicts, the global economic crisis, etc. the war in ukraine has exacerbated these issues, but the upcoming recovery period will also emphasize social resilience, particularly in the context of intercultural communication and diversity. modern communities are diverse, and their development should be guided by the principles of diversity management. sustainable community development leads to a socially, environmentally, and economically sustainable community (society) with engaged community members (citizens) who think and act responsibly, especially for future generations. this vision requires promoting the ideas of intercultural and diversity competence in communities. to do this, it is necessary to start with a self-assessment of the current level of diversity and intercultural intelligence in the community. all mutual interactions should be based on a solid foundation and a clear sense of identity (ethnic, cultural, religious, etc.). strong and positive selfawareness and self-esteem are the basis for effective social interaction and personal development. awareness of intercultural and/or diversity means recognizing the discomfort associated with differences in race, religion, age, sexual orientation, ethnicity, etc. it is therefore important that diversity competence values differences without trying to make everyone the same. this is a realization of the principle of sustainability of complex systems – unity in diversity. the next key point is to integrate diversity competence into leadership and community development plans. the study of diversity in educational communities based on the social cohesion radar model gives us a better understanding of diversity and tools to monitor its status in different situations of social challenges, including the challenges of the war in ukraine and the pandemic. in addition, this approach provides a working analogy for the further development of the diversity radar model for monitoring and assessing diversity competence in educational and other communities. thus, it is possible to define some tasks for the modern educational system: the first task for educational communities is to become the guardians of the best practices of sustainable development and successful diversity management; the second is to provide education (formal or informal) in the field of intercultural and diversity competence. community leaders working in the field of equality, diversity and human rights (these areas are integrated into the whole society) need intercultural and diversity competencies. to develop these competencies, practitioners need access to quality training, professional development, assessment, networking opportunities, etc. a broad understanding of diversity will allow for the successful implementation of its principles in various spheres of public life. 7. acknowledgments the above research is part of the project’s implementation in the national pedagogical dragomanov university (ukrainian state dragomanov university) of jean monnet chair "socialcultural aspects of european studies" (scaes) 620635-epp-1-2020-1-ua-eppjmo-chair and jean monnet centre of excellence "eu studies of social innovation in education" (essie) jean monnet centre of excellence essie 101085552 – erasmusjmo-2022-coe. the above projects have been funded with the support of the erasmus+ programme of the european union. the european commission's support for the production of this publication does not constitute an endorsement of the contents, which reflect the views only of the authors, and the commission cannot be held responsible for any use which may be made of the information contained therein. 8. conflict of interests the authors declare no conflict of interest. baltic journal of economic studies 137 vol. 8 no. 5, 2022 references: albertini, g. 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(2022). diversity competence in healthcare: experts’ views on the most important skills in caring for migrant and minority patients. societies, 12(2), 43. doi: https://doi.org/10.3390/soc12020043 received on: 9th of october, 2022 accepted on: 26th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 24 vol. 3, no. 3, 2017 comparative social policy in ukraine and japan under the conditions of modern economic world development maryna kalnytska1 lviv university of trade and economics, ukraine abstract. the purpose of the paper. an analysis of the national social policy in ukraine and japan, based on research, making recommendations for the improvement of the social policy situation in ukraine. methodology. the theoretical and methodological base of scientific research made of national and foreign scholars on the analysis of social policy, official statistical data of the state statistics committee of ukraine, reports of the nbu and central bank of japan. to ensure the authenticity and validity of the research results to the goal, the following methods are used: induction and deduction – during theoretical generalizations and conclusions; analogy method – when comparing foreign experience of social policy; economics and statistics as methods of macroeconomic policy of ukraine analysing; retrospective analysis, which determines social policy; methods of system analysis and synthesis. results. in the article, social policy in ukraine and japan is investigated. the macroeconomic situation in each country is analysed. reasonable steps for the further using of the investigated country experience for ukraine are founded. a particular attention to the normative acts improvement is given. practical implications. the results of this study can be used by public authorities, such as the ministry of finance, state statistical agencies. value/originality of the results is a complex theoretical and practical analysis of social policy in ukraine and japan. for the first time, comparative social policy in ukraine and japan is analysed. further research should relate to the construction of an own social policy model. in the process of its implementation, it is necessary to use the experience of foreign countries. kеу words: social policy, budget and fiscal policy, social activities, european social models. jel classification: o35, g18, o18, o21 1. introduction the preamble of the european social charter states that the purpose of the social policy is to ensure social rights in order to increase the standard of living and social well-being of the population. to build a model of social policy of ukraine, its main characteristics should be: reducing poverty and strengthening the position and role of the middle class; strengthening the competitiveness of the national economy on the basis of an innovative model of development and implementation of effective state anti-corruption policy; an outright increase in the level of incomes of citizens in comparison with inflation; reduction of financially unprofitable benefits; increase in the level of employment of the population and prevention of the loss of qualified personnel. the movement of ukraine through the european integration should be accompanied by progress in human development and, accordingly, the provision of disabled members of society, life expectancy, education, culture and spirituality, and the availability of quality social services. in modern conditions, the following scientific problems need to be thoroughly developed: the methodology for assessing the socio-economic efficiency of state social programs, the study of the impact of social measures on indicators of social development, in particular, on the living standards of the population, demographic development, assessment of direct and indirect consequences of the introduction of certain social programs. among the unresolved problems of social policy in ukraine is the need to develop a strategy for its reform in accordance with the eu standards, which updates new developments on this topic, since the existing developments relate primarily to solving urgent specific social problems. an urgent attempt is being made to justify those changes in ukraine’s social policy, which could accelerate its entry into the eu (pidlypna, 2015). corresponding author: 1 department of theoretical and applied economics, lviv university of trade and economics. e-mail: natdumich@meta.ua baltic journal of economic studies 25 vol. 3, no. 3, 2017 2. the main characteristics of construction of the model of the social policy of japan the generalization of the historical experience of different countries convincingly proves that the factors of objective rejection of economic reforms are primarily due to the inability of society to provide a flow of scientific and technological innovations, mastering and disseminating new technologies. therefore, the effective transition of the market and the implementation of known principles of functioning of developed economies is almost impossible without solving the problem of ensuring conditions for the technological change and accelerating the innovation process. a significant importance in raising the technological level of economic development is the choice of enterprises in the areas of innovation activity. based on the established programs, enterprises and venture companies take into account that the development of these industries is one of the main priorities of the state strategy. in 2015, the national institute for scientific and technical policy (nistep) of japan (科学技術政 策研究所) presented the next forecast of the world scientific and technological development for the period up to 2035, highlighting 130 major innovation directions and establishing a correspondence between the system of priorities of innovation development and its innovations in force in the country directions. the vast majority of basic research in japan, as well as in other developed countries, is conducted in universities and state laboratories. the main share of r&d expenditures in japan comes from the private sector, which is interested mainly in their applied nature. this approach has ensured japan’s greatest successes in those areas of technological progress that are associated with the production of consumer goods of mass demand. in the field of fundamental research and non-mass production, japan is lagging behind other developed countries (井上貞彦有, 2014). japan’s national innovation system is largely aimed at the full use of human potential. in this regard, scientifictechnical and organizational innovations in japan are concentrated in four main areas: first, providing the economy with more productive means of labour and further improving labour-saving technologies. scientific progress and the improvement of the organization of work, as before, remain the decisive factors of economic growth. secondly, the creation of such techniques and technologies that would allow effectively including additional labour resources in the economic process, above all, the work of older women and men. thirdly, finding solutions to the problems of an aging society. for japan and, in the long run, for the most developed countries, this is one of the most important problems. fourthly, creating for the lovers of various tools that can mitigate many old age problems. by targeting its national innovation system to address demographic issues, japan also seeks to respond to global challenges, including increasing competition in global markets. japan’s main rivals are the united states and fast-moving china. in response to these challenges, japan focuses on the development and multiplication of its intellectual capital, striving to improve and develop national innovation system on its basis (gavryliuk, 2012). 3. features of japan’s national innovation system in general, it can be stated that the characteristic feature of japan’s national innovation system is that it has been consistently formed and developed since the middle of the 20th century, after several stages. at the same time, at each stage, government bodies and business circles acted in a fairly coherent manner, strengthening the financial, personnel and material resources of science, while keeping in focus the constant updating of equipment, improvement of production and organizational technologies, developing a quality control system, raising the organic need for the improvement of qualifications and active use of new knowledge. considering japan’s policy on developing an innovative economy, the distinction between “state innovation policy” and “state science and technology policy” should be distinguished. innovation policy focuses mainly on supporting innovation in the private sector: on the development of applied science, creation and improvement of the system of providing private information companies with the latest scientific and technological achievements, as well as to facilitate the commercialization of the latter. an important feature of the japanese system for building innovative activities in private companies is its focus on ensuring the most effective interaction of all major stages of the innovation process  – r&d, production, and marketing (松原康雄, 2017). at present, japan is at the stage of transition to a fundamentally new model of innovation development, which is intended to provide it with the position of the economic and scientific and technical leader at the expense of commercial realization by national companies of scientific advancements and developments that were not previously used by competitors. the most important feature of the new national innovation system is the implementation of the concept of “intellectual creation” developed in the country. it should be noted that, despite the significant successes of japan’s state policy in the formation of national innovation system and significant results from its implementation, while the cardinal transition from the former model of borrowing foreign achievements and their adaptation, localization, and improvement did not take place. japan continues to actively borrow baltic journal of economic studies 26 vol. 3, no. 3, 2017 foreign technology and know-how. at the same time, japan’s state policy on the development of an innovative economy has a significant potential, which is reflected in the social orientation of a number of innovative processes, as opposed to purely technocratic approaches to its development (bandura, 2016). state social assistance provides for the provision of social assistance, subsidies, social services and essential goods to low-income families, single citizens, as well as other categories of citizens. social assistance is directly related to such tools as social assistance, pensions, and benefits. social service is the activity of special support services, provision of social-household, social and medical, psychological and pedagogical, social and legal services and material assistance, social adaptation and rehabilitation of people with difficult living conditions. 4. models of social policy the united states, canada, and australia are an example of a liberal welfare state with moderate social protection, which transfers its functions to civil society as a social assistance subject. france, germany, and italy belong to the conservative corporatist model of the welfare state. for this model, the principle of subsidiarity is decisive, according to which the human resources should come first of all to the institutions of civil society, and only in the event of their inefficiency, the state. great importance for this model is acquired by the insurance system. the social-democratic (scandinavian) model of the welfare state can be seen in sweden, denmark, norway, and the netherlands. such a model implies the expansion of social rights and the elimination of social inequality. it is based on providing welfare for all members of society. that is, a person has the full right to receive social benefits regardless of the level of his/her income – just because he/she is a citizen of this country. european countries were under the influence of the social-democratic movement and, accordingly, the social states of europe tended to a social-democratic model or a certain synthesis of the liberal and socialdemocratic model (esping-andersen, 1990). consequently, we can state that, in general, there are two models of a social state, and hence social policy: liberal and socio-democratic. but the reform of the social-democratic model of a social state that offers us a social-democratic model of social policy and the creation of such a concept, based on a combination of classical ideas of social democracy, to which solidarity and social justice can be included, with the new approaches that will provide solutions to those problems that the social state faces today. due to the fact that the problem of employment is one of the acute social problems, methods and instruments of labour market regulation occupy a special place in the system of social policy. the state legislatively defines the terms of employment and the general conditions for the conclusion of collective labour agreements, assumes the organization of the system of education, vocational training and retraining of employees. at the expense of state subsidies, the mobility of workers is encouraged, the development of small and medium-sized businesses is encouraged, and entrepreneurs who create new jobs are privileged. during periods of crisis, the state is resorting to the use of public works. the european model has been implemented in some countries of continental europe: germany, austria, france, belgium, the netherlands, switzerland; anglosaxon model  – in the usa, canada, ireland, australia, new zealand, the uk; east asia  – in japan, south korea, hong kong, singapore; scandinavian  – in sweden, denmark, norway, and finland. for example, the anglo-saxon model, based on the neo-liberal doctrine, focuses on the market distribution of revenues with minimal state intervention in their regulation. the reason for this approach, which was widespread in the early 80’s of the xx century, was the need to strengthen the competitiveness of the economy. on the one hand, this involved the curtailment of public activity in relation to equalization of incomes; on the other hand, the reduction of the tax burden had a stimulating effect on the private sector. in any case, the success of this model largely relied on developed public organizations protecting interests, including social, various civic groups. in the scandinavian model, the market is a selforganizing system, in which the state acts as one of the business entities. the policy of redistribution is egalitarian in nature, and social goals have a priority over economic ones, so the budget is redistributed to 60% of gdp. for this model, a smaller hierarchy of wages, a large tax burden and a progressive income tax, which leads to equalization of wage earnings, even before receiving social transfers, is typical. in the east asian model, institutionalized general insurance for the right to receive health care and pension insurance. for example, in japan, there is a large variety of insurance systems, due to the long evolution of the national model. social insurance in japan began to evolve in the form of various types of mutual assistance for workers at the place of their work in order to disperse risks. later, this system was transformed into a system of insurance, which is subject to all the employees of hired labour and then distributed to citizens engaged in the independent entrepreneurial activity. models of welfare states that have developed in different countries show quite convincingly that, on the one hand, the achievement of the same goals of social policy is possible by different methods and, on the other hand, it allows revealing different aspects with the purpose, to which countries on different stages of evolution seek in their social policy, to show general and special in models of social policy. baltic journal of economic studies 27 vol. 3, no. 3, 2017 all considered models can be conventionally grouped into three types of social policy – institutional (anglosaxon and east asian model); the institutional type implies that the state comes to the aid of a person only when there is no other alternative in the person of the market, different institutions of mutual assistance and charity, families and relatives. that is, the state essentially becomes the last institution to provide support to the needy. moreover, the fact that a person was in a difficult situation is considered primarily as his personal failure (liuta, 2016). the nordic model (denmark, sweden, the netherlands) is characterized by a high level of social protection and the universal nature of assistance, with significant fiscal revenues in the labour market. the anglo-saxon model has a universal type of assistance only in exceptional cases, in particular, cash benefits are primarily intended to support people of working age. compared to the two above, the asian models of labour relations, which are typical for japan and china, are very specific. the japanese model of social-labour relations is inherent in a number of purely national: • unique systems of growth and promotion of workers; • the high level of development of patriotism and related methods of the motivation of work; • direct dependence of the size of wages and social payments on the duration of work on a firm; • the extension of the principle of lifelong employment of an employee, when the employment of a permanent worker is guaranteed by the employer company until they reach the age of 55–60 years. the japanese model of labour relations is characterized by the support of employees’ sense of belonging to the firm, which is stimulated by special forms of social assistance. among them, such as wage increases in the case of the creation of a family or the birth of a child, the purchase of housing for the employee by the company or payment of a loan for its purchase. a characteristic feature of this model is a special strategy for preventing unemployment on the basis of maintaining the accounting number by transferring employees to other firms of the firm, as well as for a shorter working day. however, in addition to large corporations pursuing a lifelong employment policy, there are many small firms in japan, where employees do not have any employment guarantees at all. another feature – a slight differentiation of wages between low-skilled and highly skilled workers (not more than 4 times). the study of models of state regulation of social and labour relations of the leading countries of the world testifies to their diversity and peculiarity due to certain historical and political peculiarities of the formation and development of these countries. however, when comparing them, a set of features and characteristics common to the countries of individual regions of the world are revealed. this allowed identifying several major regional models of state regulation of social and labour relations. a consideration of anglo-saxon, european, and japanese model of the state regulation of social and labour relations shows that they are characterized by a rejection of strict regulation in the stable and long existence of the guaranteed protection of workers’ rights. another peculiarity is the flexibility of the state regulation of social and labour relations, the easing of direct state interference and the support for the development of partnerships between employers and employees (pavlyuk, matsenko, krichevskaya, 2015). the current state of ukraine is accompanied by acute social and economic problems that cause serious changes in the quality of life, as reflected in the difficult economic situation of the population, deterioration of physical health, life expectancy reduction, increasing income differentiation of various groups, the deterioration of social security, social security, reducing real wages, average pension of a dangerous situation in the social sphere. the lack of a systematic approach to the formation of state social policy, social guarantees, advanced selection of tools of social policy priorities and mechanisms for its implementation has led to the fragmentation of solving urgent social problems. most social policy measures have a declarative character and are not fully implemented. thus, in 2016–2017, it was supposed to implement such measures: • raising the level of average wages in the budget sphere; • the introduction of a new mechanism for financing social services; • substantiated increase of the minimum wage taking into account proposals of social partners; • stimulation of the development of non-state pension provision, the introduction of joint investment programs; • an increase in the provision of social services to families with children;  – raising the level of social protection of orphan children; • improvement of provision of social services to single elderly people, people with disabilities of all categories, families with children, orphans; • creation of a unified information and analytical system of accounting and management of social funds and introduction of electronic social cards; • a gradual increase in the amount of state aid in order to reduce the incomes of low-income citizens to the level of the corresponding subsistence minimum. consequently, the implementation of a strategic course to achieve european standards of living in ukraine should be based, first of all, on a radical improvement of the quality and efficiency of providing social services, the creation and implementation of legal and organizational conditions for preventing a decrease baltic journal of economic studies 28 vol. 3, no. 3, 2017 in the standard of living of the population of ukraine (palamarchuk, palamarchuk, 2015). social policy in the modern civilized world cannot be considered without a close relationship with global change and global challenges, which are based on general social progress and universal human security. global development problems related to the deterioration of the environment, the deepening of inequality, the maintenance of significant poverty and social exclusion risks, social and military conflicts, and the spread of terrorism – cannot be solved without uniting the efforts of all mankind. ukraine, in an effort to integrate into the european space and building its own development strategy, must clearly understand both national capabilities and external factors of influence. the guiding idea of the effectiveness of social policy should be the desire to establish social justice in society and to ensure sustainable human development that does not impair conditions and opportunities for future generations. at the present stage of development of society, the essence of state social policy is interpreted as the activity of the state in maintaining relations between social groups; creation of conditions for ensuring the welfare and acceptable standard of living of members of society; revision of social guarantees. traditional interpretations of social policy consist in its understanding as a part of the internal policy of the state, since the real social policy is defined as the properties of a particular historical period, as well as the national-cultural features of a particular society. at the same time, modern globalization tendencies, which become irreversible, change traditional perceptions and perceptions of values: social interaction becomes stronger and more valuable, which is the source of the formation of social capital, otherwise responsibility is allocated. changes include the interpretation of basic social concepts, in particular, social policy, which ceases to be closed national boundaries. the model of social justice in japan differs significantly from european and american. in japan, the proper distribution and proper implementation of the social role are very important. for japanese, the search for the correspondence between a social position and a characteristic is characteristic, and this is what manifests itself and claims to be fair in society. another aspect of justice in japanese is the philanthropy of a confucianbased government: “there is, therefore, no gap between the ruling class and the subordinates; a just social exchange is established between them: the ruler gives the people the benefit and receives reign. the japanese type of government is based on the interdependence of the ruling and subordinates, so the magnificent life of the ruler will cause the loss of power.” so, as in japan, in china, the content of social justice is based on the idea of confucianism (harmonious development based on “great unity” and “great prosperity”, achievement of the dream of equality). at the same time, the egalitarian idea is combined with the idea of a social hierarchy. that is, from ancient times in china, considered a fair society, which is divided into those who work and produce, and those who manage. everyone must fulfil his duties well: the state must be strong and centralized; officials must ensure order (in particular, some economic equality). criteria of social growth of personality were ability, literacy, and intelligence. 5. social policy in ukraine recently, social policy in ukraine is aimed at reducing differentiation in the incomes of citizens, increasing the fairness, accessibility and targeting of the system of social protection of the person and raising the level of state social standards and guarantees. in the state budget of ukraine for 2017, an increase in minimum social standards was planned twice a year. in general, it is planned that the minimum wages, pensions, and other social benefits will increase by 12%. during 2016, the privileges were cancelled for all people’s deputies, ministers, judges, prosecutors, and other officials. since july 2016, benefits to nearly three million citizens are provided solely on the basis of income, and since june, special pensions have been abolished for officials, and the appointment of all types of pensions is for all according to the rules of a single law. obviously, these last and other successive steps in social policy will make possible significant changes in terms of asserting and strengthening social justice in ukrainian society, the achievement of which is the fundamental basis of the effectiveness of national social policy (mnych, 2015). through social changes, social issues in ukraine are attracting increasing attention in social and political activities. however, the effectiveness of socio-political decisions to a large extent depends on its scientific justification. despite the fact that the definition of “social policy” gives neither philosophical nor political science nor sociological dictionaries, a close attention to the theoretical and practical problems of social management, social sphere, social relations gives an opportunity to generalize the question of the essential definition of social policy. ukraine integrates into a global society in the context of developing new approaches to the content of social relations. accordingly, the european union has endorsed the following social criteria, by which the social policy of the state should be formed and implemented (broadening the freedom to choose a way of life, life benefits, opportunities for education and creativity, raising the level of material well-being and quality of life, improving health and increasing the duration of work activity, increasing the life expectancy, strengthening national and social security). social justice can exist only in a socially just state, which assumes responsibility for every citizen and seeks baltic journal of economic studies 29 vol. 3, no. 3, 2017 to ensure decent living conditions for each person, social protection, opportunities for the self-realization in society. according to eighth secretary-general of the united nations (2007–2016) ban ki-moon, social justice is a basic principle of peaceful and prosperous existence, both directly in the countries themselves and in the relations between them. the un supports the principles of social justice, promotion of equality between women and men or the rights of indigenous peoples and migrants. consequently, social justice is the socio-psychological perception of the principles and forms of organization of society, which is in the interests of people and social groups, that is, a generalized moral assessment of social relations. social justice is an important socio-economic value of society, without which it is impossible to ensure effective economic development. the idea of compliance, adequacy, and equivalence of income. the european union’s activities in the social sphere have evolved on the basis of the strategic provisions in the four documents of social orientation: white paper “european social policy: a road to the union”, white paper “on growth, competitiveness and employment: challenges and ways to accession to the xxi”, green paper “european social policy: thoughts for the union” and the european social charter. the main objective of the white paper “european social policy: the way to the union” was to expand and open prospects for joint activities in the social sphere, not to restrict the activities of member states to raise the standard of living of their citizens and not to encroach on their responsibility in this area. a great deal of importance was attached to the dialogue at the european level. the socioeconomic situation in the eu, which is associated with high unemployment, required rapid and concrete measures to stabilize the situation. accordingly, the green paper “european social policy: thoughts for the union” was created to help with this. one of the conceptual conclusions of the green paper was that the implementation of the european union’s social policy is incompatible with the idea of limiting social progress in order to strengthen the competitiveness of the economy. 5. findings thus, the european and japanese social models are capable of ensuring economic growth and the continuous improvement of living conditions for people and labour in ukraine. this implies full employment, the creation of high-quality jobs, equality of chances, social protection for people, social adaptation and participation of citizens in making all decisions. by preaching the principles of the functioning of the european community, we need to use them effectively even in today’s economic conditions. consequently, an important task of the state’s social policy is to ensure the reproduction of social resources, which, in turn, ensure the integrity, dynamism, stability of the social sphere, achievement of the corresponding social level, social solidarity in society (didyk, 2010). the initiated reform of the social protection sphere in ukraine requires urgent steps by the state to strengthen the role of non-state institutions in the transition of our country to market relations, social policy becomes an important factor in the success of new transformations. 6. conclusions according to the author, certain systemic deficiencies are prevalent due to the disadvantages of the state regulation of the functioning and development of the social sphere in ukraine. the most dominant of them seems expedient to determine: the lack of responsibility and the lack of normative and methodological support for monitoring and adjusting the levels of social standards and the adequacy of their provision (it is said that norms and provisions of most social standards are objectively outdated and do not correspond to the realities of the current time, as well as mechanisms for their timely adjustment, as well as monitoring of the implementation of existing ones); lack of real qualitative reforms in pension systems, education and science, medicine, housing and communal services; unjustified provisions and prohibitively unproductive nature of subsidies, population (a situation in which more than 20% of the population enjoys the benefits threatens complete collapse of payments for services to populations and discourages an objective to improve energy efficiency, resource consumption costs as compensated by the state); over-regulation and fiscal burdens of citizens’ incomes (which are not withdrawn from the shadow, and entrepreneurial income is so taxed that entrepreneurs also do not intend to report it); ineffectiveness of the policy of supporting the creation of jobs, regulation of employment, wages, financing of socio-cultural measures; “weakness” of the policy of regulating the domestic consumer market and its conditions, which makes it impossible to hinder the growth of prices; lack of real investment programs supporting youth construction; inefficiency of the programs of restraining foreign migration. in ukraine, the activity on the strategy and programming of public policy in the social sphere is carried out declaratively, without structural connectivity, which manifested itself in the presence of accepted doctrines: the doctrine of the collective governance, doctrine of youth policy of ukraine and strategies: regional development strategy for the period up to 2020, strategy for the sustainable development of ukraine 2020, national strategy for promoting civil society in ukraine for 2016–2020, national strategy for health care reform in ukraine for the period of 2015– baltic journal of economic studies 30 vol. 3, no. 3, 2017 2020, the national program for the development of occupations in ukraine for 2012–2021, the strategy for mainstream cadre policy for 2012–2020, the strategy for the development of the state youth policy for the period until 2020, poverty reduction strategy for the period up to 2020. however, this activity is not sufficiently effective, which is conditioned by the absence of a single political will and vision of the social vector of the way of development of ukraine as central legislative and executive power, as well as of local self-government bodies, which makes it impossible to carry out the social policy reform in the state effectively, and the preparation itself for the implementation of the outlined in the program and strategic documents of the state social policy alone leads to significant negative social, and secondarily – economic consequences. it is proved that the formation of the social sphere system requires the creation of the necessary internal elements and interrelationships between them. at the same time, the social sphere is an open system and external challenges and threats affect its functioning. under the conditions of globalization, the external challenges of the social sphere of ukraine have become much more intense and aggravated. its main manifestations were: increased volumes of illegal migration from lowdevelopment countries to the eu; the intensification of external labour migration from the countries of central and eastern europe to the states of central and western europe; aggravation of overpopulation and food shortages; the deterioration of the global environmental environment; the emergence and rapid spread of biological and infectious diseases; increasing the level of dependence of the social sphere on the global information and communication environment; the development of international terrorism and the strengthening of social instability; the growth of organized transnational crime; the deterioration of the structural characteristics of labour supply through the deepening of dependence on the international labour market; strengthening the influence of external political pressure on the socio-economic development. it is established that the means of counteracting the main external challenges of the social sphere of ukraine are to formulate and implement a unified, centralized, strategically oriented policy of levelling up the threats of activation of migration processes; improvement of cooperation with eu countries on the legalization of labour migration, transition to circular labour migration; realization of the potential of domestic agricultural sector by implementing a strategically balanced policy of strengthening its competitiveness; solving problems of household waste recycling, waste reduction and energy efficiency improvement, transition to clean renewable energy sources; reforming and modernizing domestic medicine with an emphasis on countering global diseases and implementing the potential of domestic science; introduction of an integrated approach to the interaction of special services, timely detection and prevention of terrorist acts; development of the system of informatization and intellectualization of the domestic system of social sphere. references: bandura, i.s. (2016). tools and models of state social policy in different countries. investments: practice and experience, vol. 13, p. 94–96. boguslavska, s.i. (2013). social policy in the conditions of market relations. financial space, vol. 2, issue 10, p. 106–110. didyk, s.m. (2010). foreign experience in financing the protection of the population. bulletin of the khmelnytsky national university, vol. 4, issue 1, p. 127-129. esping-andersen, g. (1990). three worlds of welfare capitalism, london/gosta esping-andersen. – new jersay, princeton university press, 33 p. gavryliuk, r .p. (2012). state policy of japan in the field of innovation economy development. economy and state, vol. 10, p. 46–49. kogut, v.i. (2015). factors of formation of social policy’s models in the context of interaction’s problem of state and non-governmental organizations of social sphere. theory and practice of public administration and local selfgovernment, vol. 1, p. 40–53. liuta, l.p. (2016). modern models of social policy as an instrument for ensuring the environmental friendliness of social life. actual problems of psychology, vol. 7, issue 36, p. 242-250. mnych, m.v. (2015). social policy of the state in conditions of associate membership in the eu. ukrainian society, vol. 3, issue 54, p. 114–124. motonyuk, u.i. (2016). social policy as a necessary condition for the functioning of a social state. economy and the state, vol. 12, p. 23–26. palamarchuk, n.o., palamarchuk, d.m. (2015). eu social policy: prospects for cooperation with ukraine. young scientist, vol. 12, issue 2, p. 125-128. pavlyuk t.i., matsenko, a.a., krichevskaya, o.a. (2015). social policy of ukraine: status and prospects of development. young scientist, vol. 12, issue 2, p. 122–125. pidlypna, g.p. (2015). to the question of formation of the state policy in the field of population’s social protection. scientific herald of mukachevo state university, vol. 2, issue 4, p. 35–40. baltic journal of economic studies 31 vol. 3, no. 3, 2017 井上貞彦有・効な政策科学・総合政策論をめざして―「公共性」の哲学による現実性ある政策 科学へ・総合政策論叢』第・8号（2014年12月）・ページ: 1–17 (inoue sadahiko yuu koona seisaku kagaku soogoo seisaku-ron o mezashite -`kookyoo-sei' no tetsugaku ni yoru genjitsu-sei aru seisaku kagaku e soogoo seisaku ronsoo” dai 8-goo (2014-nen 12 tsuki) peeji: 1–17.) 松原康雄・少子化社会における虐待対応・医療と社会・27(1)号（2017年1月)・ページ: 53–61 (matsubara yasuo shooshika shakai ni okeru gyakutai taioo iryoo to shakai 27 (1)-goo (2017-nen 1 tsuki) peeji: 53–61.) марина кальницкая сравнительная социальная политика в украине и японии в условиях современного экономического развития мира аннотация. цель статьи  – анализ национальной социальной политики в украине и японии на основе исследований, выработка рекомендаций по улучшению ситуации в социальной политике в украине. методика. теоретическая и методологическая база научных исследований отечественных и зарубежных ученых по анализу социальной политики, официальные статистические данные государственного комитета статистики украины, сообщает нбу и центральный банк японии. чтобы обеспечить достоверность и обоснованность результатов исследований для достижения цели, были использованы следующие методы: индукция и дедукция  – во время теоретических обобщений и выводов; метод аналогии  – при сравнении зарубежного опыта социальной политики; экономика и статистика как аналитические методы макроэкономической политики украины; ретроспективный анализ, определяющий социальную политику; методы системного анализа и синтеза. результаты. в статье исследуется социальная политика в украине и японии. проанализирована макроэкономическая ситуация в каждой стране. основаны разумные шаги по дальнейшему использованию изученного опыта страны для украины. особое внимание уделяется улучшению нормативных актов. практическое значение. результаты этого исследования могут быть использованы государственными органами, такими как министерство финансов, государственные статистические агентства. значение/оригинальность – сложный теоретический и практический анализ социальной политики в украине и японии. впервые проанализирована сравнительная социальная политика в украине и японии. дальнейшие исследования должны относиться к построению собственной модели социальной политики. в процессе его реализации необходимо использовать опыт зарубежных стран. baltic journal of economic studies 229 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-229-237 implementing business social responsibility in ukraine: companies’ cases and state assistance victoria krykun1, anton nanavov2, olena pryiatelchuk3 institute of international relations of taras shevchenko national university of kyiv, ukraine abstract. the idea of socialization of economic state and corporate policy has become commonplace worldwide. within the framework of these processes, research and evaluation of the effectiveness of the steps implemented by ukraine in this area are relevant. in ukraine, the idea of social responsibility established only little more than 10 years ago and fulfils the function of company’s promotion more than the responsibility of entrepreneurs for their business activities. big amount of ukrainian companies fulfil some activities in the sphere of social responsibility irregularly and in more cases with one aim to improve reputation. thus, the purpose of the article is to determine the modern state of business social responsibility institution in ukraine, its implementation in the business sphere, explore social element in a comprehensive government system of ukraine. the subject of the study is the issue of assessing the preconditions, calculating the effectiveness, describing the features and practices of the implementation of business social responsibility in ukraine under the condition of state assistance. methodology. the paper is based on statistical information from public sources, reports of different international and ukrainian companies, organizations, and institutions, which are used to stress and underline the main crucial points of research. in the article, the authors propose a regression model of the correlation between the net profit of ukrainian companies and various forms of internal social activity of business entities. conclusions. on the basis of regression model and analysis of financial, non-financial reports and official press releases of ukrainian companies, it is investigated that internal social activity of the enterprise positively affects the net financial profit, and on the contrary, the general approach of companies to the external business social responsibility indicates the disparity between net profit and the expenses for social responsibility projects for local communities. with the increase of their profits, companies allocate more funds and in some cases even reduce their spending on external social activity. ukrainian companies are still at the first stage of the development of csr, which manifests itself only in the production of the product and meeting the needs of their consumers and employees. therefore, the business, which wants to be successful, is interested in a good partnership with all its stakeholders, especially in such as state, which should help and motivate companies, through financial and non-financial incentives, to implement the institution of social responsibility in its activities. the aspect of the state socio-economic policy is realized through specific, typical programs of social protection and security, which are considered in the article. key words: business social responsibility, internal and external social responsibility, social economy, sustainable development, state system of social protection and welfare. jel classification: m14, f20, а13, h53, h54 corresponding author: 1 department of international business, institute of international relations of taras shevchenko national university of kyiv. e-mail: va.krykun@gmail.com 2 department of world economy and international economic relations, institute of international relations of taras shevchenko national university of kyiv. e-mail: ananavov@ukr.net 3 department of international business, institute of international relations of taras shevchenko national university of kyiv. e-mail: pryyatelchuk@gmail.com 1. introduction sustainable development of the economy and society in general, implementation of the concept of welfare, and construction of socially-oriented economic systems have long been the main vectors of the world community. the idea of socialization of economic state and corporate policy has become commonplace. within the framework of these processes, research and evaluation of the effectiveness of steps implemented by ukraine in this area are urgent. business social responsibility has long been the main requirement from society, the object of control and management by the state and a guarantee baltic journal of economic studies 230 vol. 3, no. 5, 2017 of profitable activity for the business entities themselves. there are a lot of benefits, which ukraine, national business, and our society may get because of realization of concrete activities in this sphere. among them are the positive indicators of economic development, formation of a good level of social welfare, where the proper level of consumer demand is possible, and also increase of companies’ productivity thanks to a number of competitive advantages and creation of prospects (social, economic, technological, and resource) for its further development. the purpose of the article is to determine the modern state of business social responsibility institution in ukraine, its implementation in the business sphere, explore social element in a comprehensive government system of ukraine. one of the tasks of this article was to investigate if internal and external social activities of the enterprise positively affect the net financial profit. for this target, the authors propose a regression model of the correlation between the net profit of ukrainian companies and various forms of internal social activity of business entities. this article is based on different works of such economists as h. bowen (1953), p. drucker (1984), k.  davis (1960), j. mcguire (1963), m. friedman (1970), a. carroll (1991), e. freeman (1984, 2010), r . ackoff (1999), a. mendelow (1991), who argued to be the fathers of business social responsibility concept thanks to definitions, economic approaches, and evolutional development of this idea. h. bowen (bowen, 1953) was first to set the definition of the social responsibilities of businessmen: “it refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action, which are desirable in terms of the objectives and values of our society.” the ideas of business responsibilities also were coined in works by p. drucker (drucker, 1984) who stressed on the necessity to turn social problems into economic opportunities. k. davis (davis, 1960) also suggested that idea of social responsibility should be seen in a managerial context. furthermore, he became famous thanks to his statement that “social responsibilities of businessmen need to be commensurate with their social power.” a big contribution to the csr as an economic category was made by a. carroll (carroll, 1991), who depicted it as a pyramid of four kinds of social responsibilities: economic, legal, ethical, and philanthropic. during the 1990s, the major theme of business social responsibility was a creation and development of stakeholder theory, which describes methods, by which management can give due regard to the interests of those groups, by such economists as e. freeman (freeman, 1984), r . ackoff (ackoff, 1999), and a. mendelow (mendelow, 1991). questions of the socialization of the state governance system, creation the social economy on this basis, were raised both by the old economists and philosophers like proudhon, aristotle, and are the main objects of research by leading economists of our time, in particular f. fukuyama (2002), which focuses on the formation of social capital of the state; nobel laureates e. roth and l. shapley (2012) who study the problems of stable distribution in a free market between all business entities and members of society; j. tirole (2014) who focuses on the study of activities of transnational corporations in the interests of society in order to support the state policy of generating welfare; a. deaton (2015), who conducts a comprehensive analysis of consumption, poverty, and well-being. 2. evolution of business social responsibility concept the development of the concept of business social responsibility can be dated to the times of ancient egypt, greece, roman empire, the middle ages. various historical sources indicate that even then there were manufacturers who felt their responsibility to the society: they paid taxes conscientiously, produced products of good quality, did not deceive consumers and workers. since then, the essential basis for the notion of business social responsibility in the modern sense there is moral, ethical, and religious postulates. principles of business social responsibility originated from the religious ideas of different confessions (vittenberg, 2011). thus, the bible condemns inefficiency and laziness, and vice versa, the efficient work of farmers, craftsmen, and merchants is encouraged. it is coined in the bible, that only personal work can be the basis of human well-being. even the first mention of the need to pay taxes also was recorded in this religious document. religious islamic documents state that the financial system of these countries has a clear social orientation in accordance with the moral and ethical principles, and the principles which are set forth in the quran. a striking example of such social ideas is the prohibition of “game over time”. any futures agreements that involve the risk that the future product will be of bad quality, and there may be a conflict between the seller and the buyer. the modern history of business social responsibility dated from the twentieth century. the impetus for its development was the rapid growth of philanthropy, which took place at the end of the nineteenth century. among the well-known philanthropists of this historical period, one may recall henry ford, the founder of ford motor corporation and initiator of significant positive changes in the professional and social life of his workers; mother teresa, the founder of the missionaries of charity, which today operates in 133 countries, and winner of nobel prize “for work undertaken in the struggle to overcome poverty and distress in the world, which also constitute a threat to peace”; john davison rockefeller, an american businessman, the world’s first dollar billionaire and philanthropist who has funded various educational, medical, and cultural projects baltic journal of economic studies 231 vol. 3, no. 5, 2017 throughout his life; evangelos zappas, initiator and sponsor of the renovated olympic games, and finally, mykola tereshchenko, a well-known ukrainian “sugar” entrepreneur and philanthropist, who donated his money to help children, sick and homeless people, built hospitals, shelters, and invested into wonderful works of architectural art. the founder of the concept of business social responsibility is considered to be howard bowen, who in 1953 published his monograph entitled “social responsibility of businessmen”. he wrote: “it refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society” (bowen, 1953). the ideas of this concept were also stated by the well-known scientist in the field of management peter drucker. after publication of works by h. bowen and p. drucker, the active development of the modern theory of socially responsible business in western science began. there were dozens of scientific papers during 1960s-1980s, in which the theory of bsr was developed, the experience of socially responsible companies was summarized, and national and regional models were explored. thus, k. davis, one of the researchers of this concept in 1960, wrote: “those who do not use power in a manner which society considers responsible will tend to lose it” (davis, 1960). another scientist, j. mcguire, argued that the company should be involved in politics, the welfare of society, education, the happiness of its workers and, in general, in the whole social world about it. therefore, a business must act “justly,” as a proper citizen should (mcguire, 1963). the company is not responsible for solving all existing problems but is responsible for solving those problems that it generates which are related to its activities and affect its interests. 3. regression analysis of the internal social activity of business entities in ukraine the concept of business social responsibility as a term in nowadays meaning appeared in second half of 20th century in america and europe as the indicator of prosperous and stable business. in ukraine, the idea of social responsibility established only little more than 10 years ago and fulfils the function of company’s promotion more than the responsibility of entrepreneurs for their business activities. big amount of ukrainian companies fulfil some activities in the sphere of social responsibility irregularly and in more cases with one aim – to improve reputation. however, this process should be regular and take into account not only the interests of the company but also interests of all stakeholders such as workers, consumers, and all society. as business appeared during the development of society and its needs, it should be responsible to society and meet certain social expectations. thus, bsr is the promotion of responsible business practices that bring benefits to society, supporting social, economic, and environmental aspects of sustainable development and at the same moment enabling a business to improve its financial performance, strengthen its competitive position, customer loyalty, and market stability. in this article, the authors will try to confirm or refute this thesis, based on the realities of the ukrainian market. it seems appropriate to divide different business social activities in the ukrainian market according to the approach of the stakeholder’s theory, proposed by e. freeman (freeman, 2010) into two dimensions – internal (social programs and payments, which are directed to company employees, management, shareholders) and external (social programs and expenses, which are directed to local communities and society). also, we consider in the article the social orientation of the ukrainian state policy and its adoption by companies. based on our assumption that business social responsibility directly affects its profitability, the authors developed a regression model of the correlation between the net profit of ukrainian companies and various forms of internal social activity of business entities. under conditions of significant lack of available data on key indicators of financial activity of companies and in order to ensure comparability of the surveyed data, the statistical base was formed on the basis of the 2015 year and consists of standard financial reports such as the balance sheet (the statement of financial position), the statement of financial results (statement of total income) and cash flow statement. it should be noted that a number of ukrainian companies (such as scm, dtek, ostchem) publish their reports in the form of a final report of the audit company (ernst and young, pricewaterhousecoopers), which makes it impossible to use a unified approach to form the statistical base of the study. thus, the dependent variable of regression – net profit (np) – consists of data in the line 2350, and independent variables – deductions for social activities (dsa) and compensation of employees (dce)  – in lines 3110 and 2505, respectively. internet sites of many companies under consideration have a corresponding section  – “social responsibility” with some companies even publishing sustainable development strategies that take into account the environment preservation and support rendered to the disadvantaged and vulnerable social groups. the regression was assumed to include one more section  – line 1505 of the balance sheet “pension provisioning” bot only one company arcelormittal made such payments in 2015 that is why this variable was excluded from the model as unrepresentative. since social responsibility is not very widespread practice in ukraine, the authors suggest adding to regression so-called “dummy” variable that should be regarded an index of social practices of company  – sustainable development strategies, educational or health care baltic journal of economic studies 232 vol. 3, no. 5, 2017 programmes funding etc. especially should be noted that it is not possible to identify correctly the amount of such payments because they are not displayed on the balance sheet. that is why the social responsibility index was added to the regression, we propose to calculate it as follows: іs.r.=іs.d.+іs.p., (1) where іs.r. – social responsibility index, іs.d. – sustainable development strategy index, іs.p.  – social programmes index. consequently, the total value of index may vary within the ranks [0…2] with every separate component index equalling “1” if company exercises the corresponding programmes and “0” if it doesn’t. taking into account the fact that the dimensions of the values under consideration vary from hundreds of millions to hundreds of thousands, there is a problem of matching data in regression, since the dummy variable has a maximum value of “2”. in this context, the initial data is proposed to be logarithmic on the basis of 10, i.e., translate them into a scale comparable to the index value (table 1). in our opinion, the fact that enterprises in ukraine carry out appropriate social activities deserves great attention and, therefore, in the regression, the corresponding variable will be presented in values comparable to dependent and other independent variables. thus, the equation of regression, in this case, will be: y=3,06-0,5x1+0,74x2+0,43x3, (2) where y  – net financial profit, x1  – deductions for social events, x2 – salary expenses, x3 – index of corporate social responsibility. the value of the coefficients before each of the factors indicates the degree of influence of one of the factors (provided that the rest are unchanged) on the nft (net financial profit). the coefficient before the 2nd factor is negative, which indicates the presence of an inverse relationship between the independent and depending variable, that is, an increase in the value of the factor by 1% leads to a decrease in the nft. the obtained result corresponds to reality, which is a confirmation of the adequacy of the proposed model since tax payments, directly and indirectly, affect the nft. of the two factors that have a positive impact on the nft, the most important is the value of the se (salary expenses), an increase of which by 1% provides an increase of nft by about 0.74%, what is obviously due to an increase in the intensity and quality of workers’ work, who get relatively higher wages. the internal social activity of the enterprise, thus, positively affects the nft, i.e., the proposed hypothesis of the presence of direct dependence is confirmed empirically. 4. managing external business social responsibility in ukraine having considered selected companies in terms of the second, external direction of socially responsible activities, it should be noted that only three of them have published non-financial reports that illustrate and provide financial data on expenditures in the territory of ukraine. some companies unregularly publish press releases that very discretely and partly describe their social projects for local communities. for example, in 2016 okko (okko, 2016, 2015, 2014), in the sphere of its external social projects, was collective in gathering used things for the low income people, which were given to volunteer associations, which had already distributed them to people from settlements located near the line of separation of hostilities, homeless people, forced migrants, boarding schools and shelters. also, the company became one of the winners of the “charitable ukraine-2016” contest on the initiative “christmas coffee is your good thing”. during this contest, the company has transferred a part of the funds from the sale of coffee and other hot drinks for medicines for cancer patients. table 1 logarithmic values of initial data of linear regression company net financial profit deductions for social events salary expenses index of social responsibility deloitte 4,852656847 4,159958003 5,13370493 1 interpipe 5,596304536 4,582438377 5,501238697 2 naftogaz 4,42372088 4,814846669 5,793884635 0 carlsberg 5,927290273 4,916527641 5,386926807 1 kpmg 4,23530114 3,986637396 4,979297923 1 lagoda 3,696793085 3,943247125 4,311287539 1 fozzy group 5,999830592 1,986771734 3,913018684 1 ukrposhta 4,610936831 2,868644438 3,29907126 0 zaporizhstal 3,91360195 2,683047038 3,076276255 0 оkkо 5,606175994 4,477352817 5,218059989 2 mts 6,384293007 5,245885113 5,734551019 1 ukravto 4,672725745 4,761852694 5,259641653 1 source: calculated by the authors based on the data (deloitte ukraine, 2016; interpipe, 2016; carlsberg ukraine, 2016; kpmg, 2016; lagoda, 2013; fozzy group, 2016; ukrposhta, 2015; zaporizhstal, 2013; naftogaz, 2015; okko, 2015; мтs ukraine, 2016; ukravto, 2016) baltic journal of economic studies 233 vol. 3, no. 5, 2017 zaporizhstal company is more consistent in its external social responsibility policy. for several years, the project “we are the city” (zaporizhstal, 2016, 2015, 2014) has been realizing aimed to help the cossacks. for those cossacks, who are not indifferent to their land, their history, their city, and since 2012, it provides organizational and financial assistance to initiative social and ecological movement “save the dnieper together!” the goal is to clean up the dnieper river, coastal areas, landscaping and restoration of living resources of waters and the implementation of other creative ideas in the movement. in their social report, kpmg (kpmg, 2016, 2015, 2014) states that considering work with local communities is the foundation of its corporate social responsibility. since 2011, kpmg in ukraine has been helping disabled children from the centre for social rehabilitation of disabled children in slavutych, since 2012 pleasure pupils of kyiv kindergarten № 591, which is attended by children with disorders of locomotor apparatus and infantile cerebral paralysis. employees of the company hold an annual charity fair of homemade cakes for the day of st. nicholas raising funds for “butterfly children”  – children with epidermolysis bullosa, who traditionally take part in “day of the donor” and the charity sports races. carlsberg ukraine recognizes in their social report that interaction with local communities each year is becoming more strategic in nature to improve their reputation (carlsberg ukraine, 2016, 2015, 2014). therefore, the company participates in the projects in the sphere of environmental protection, education, sports, culture, and charity. also, carlsberg ukraine provides assistance to several orphanages in kyiv, zaporizhzhia and sumy region. analysing financial and non-financial reports and official press releases of the above companies, we chose three indicators that characterize the general approach of many ukrainian companies to the social responsibility of business, that is, net profit, taxes and fees paid by the company, and the expenses for social responsibility projects for local communities (table 2). figure 1 illustrates a balance between the net income and spending social responsibility projects for local communities, companies kpmg-ukraine, okko, carlsberg ukraine, and zaporizhstal. these charts indicate the disparity between these two indicators. with the increase of their profits, the companies allocate more funds and in some cases even reduce their spending on external social activity. in our opinion, in this case, it would be good to use carroll’s pyramid (carroll, 1991) of social responsibility. using this pyramid, we can characterize the stages on which the ukrainian companies are. this pyramid consists of four levels of social responsibility: economic, legal, ethical and discretionary. according to carroll’s pyramid, economic responsibility is the basic function of the enterprise market as a producer of goods and services that can meet the needs of consumers and make a profit. legal liability  – the necessity to be law-abiding in the conditions of market economy, the compliance of actions of the enterprise with the expectations of society, which are enshrined in legal norms. ethical responsibility requires dealing business according to the expectations of society that are not fixed in legal acts and regulations but also based on the norms of morality. and, finally, discretionary (philanthropic) responsibility – refers the company’s activities to support and develop the welfare of society through its voluntary participation in the implementation of social programs. so, if a firm is socially responsible, it should be profitable, legitimate, ethical, and be a good corporate citizen. according to this classification, ukrainian companies are still on the first step of the pyramid, producing a table 2 some financial indicators of the companies kpmg-ukraine, okko, carlsberg ukraine and zaporizhstal 2012 2013 2014 2015 2016 kpmgukraine net income (thousand) n.a. 300 143 7464 17191 taxes and fees paid by the company, (thousand) n.a. 20762 21252 33387 48967 costs at the cost price n.a. 26315 140744 27479 30982 окко net income (thousand) n.a. 404000 -885000 77000 316000 taxes and fees paid by the company, (thousand) n.a. 2180000 4400000 6130000 n.a. costs at the cost price n.a. 1767000 600000 carlsberg net income (thousand) 513 000 621 000 846 000 929 000 n.a. taxes and fees paid by the company, (thousand) 1 200 000 1 193 000 1 337 000 1 460 000 n.a. costs at the cost price 2000000 619551 n.a. zaporizhstal net income (thousand) n.a. 8196 1121000 1804000 4000000 taxes and fees paid by the company, (thousand) n.a. 1080000 1400000 2 500 000 3200000 costs at the cost price n.a. 700 1100 1700 2300 source: official press releases, financial and non-financial reports of the companies (okko, 2016, 2015, 2014; zaporizhstal, 2016, 2015, 2014; kpmg, 2016, 2015, 2014; carlsberg ukraine, 2016, 2015, 2014) baltic journal of economic studies 234 vol. 3, no. 5, 2017 product and satisfying the needs of its consumers and employees. in most companies, external social projects are implemented unsystematically and without any link to the strategic social plans of local communities and their problems. 5. business social responsibility and ukrainian government policy any business always functions in a special social environment and not only influences on it with its production, goods, services, technologies, but also depends on it. interdependence of society and business through socially responsible projects and taking into account public interests and expectations manifests itself in increasing loyalty to the company, and hence the growth of profitability. therefore, the business, which wants to be successful, is interested in a good partnership with all its stakeholders. today, ukraine is gradually becoming aware of the need to implement the principles of social responsibility in management and the gradual transition to the provisions of this concept. but, in our opinion, such a transition is impossible without the support of the state, which should help and motivate companies, through financial and nonfinancial incentives, to implement the institution of social responsibility in its activities. the key to this process is the role of a state. accepting it, a state should not just monitor, coordinate, and stimulate responsible behaviour of business entities, but also be socially responsible personally, that is, to conduct a socialized, socially responsible state economic policy. elements of the socialization of the state’s economic policy in the modern world economy can be traced throughout the world’s history, in particular, such as old-roman laws of the times of the gracchus brothers; certain elements of the social state are also observed in the middle ages when social policy was based on four main institutions: family, church, monarch, and corporation (deaton, 2013). during xvi-xviii centuries, the formation of a new model of a social state took place. in the absence of any social protection institutions, the state resorted to the repressive practice of solving social issues. however, at the time of the enlightenment era, the question about the humanization of state policy arose. the origins of the “social economy” theory dates back to the xviii century, namely the philosophical and ideological quest for the concept of a new “social economy”, which establishes democratic control over capital society in order to limit the negative effects of a free market on society (hamari, sjöklint, ukkonen, 2016). the participants in this discussion were utopian socialists and founders of the cooperative philosophy of wilson owen, a. n. de saintsimon, j.b. fourier and p.-j. proudhon. nowadays in the modern world, the concept of a social economy, a socially oriented market economy, market self-governing socialism, etc. has acquired a peculiar philosophy of public administration, which, despite the similarity of the definition, has little in common with socialism and its principle “from each according to possibilities and to each according fig. 1. correlation between net profit and costs of socially responsible projects for local communities by kpmgukraine, okko, carlsberg ukraine, and zaporizhstal, according to companies’ financial data (okko, 2016, 2015, 2014; zaporizhstal, 2016, 2015, 2014; kpmg, 2016, 2015, 2014; carlsberg ukraine, 2016, 2015, 2014) baltic journal of economic studies 235 vol. 3, no. 5, 2017 to needs.” the construction of the social economy involves state administration and socio-economic organization on the principle of welfare, the economic activity of all members of society, legal stability and social security of citizens. the implementation of the concept of a social economy, especially in societies that require a fundamental restructuring of the existing political system, must be accompanied by its complete renovation and democratization of the entire economic life of society (khan, muttakin, siddiqui, 2013). in the conditions of the functioning of the socialized economic system, the shortcomings of the market economy are offset by state regulation, in particular, by the direct participation of the state in the provision of social benefits. the aspect of the state socio-economic policy is realized through specific, typical programs of social protection and security. the main areas of social security and protection of the population of ukraine are: social protection in case of impunity; social protection of pensioners; social protection of veterans of war and labour; social protection of the family, children, and youth; social protection of the unemployed; help in solving a housing problem, which includes housing maintenance and housing assistance; social protection of other categories of the population; research and development in the field of social protection; other activities in the field of social protection. the amount of money spent on social protection of the population depends on the financial capacity of the state, which is determined by the volume of gdp and scientifically substantiated optimum volume of the consumption fund. in making social payments, the state adheres to certain parameters. funding of expenditures for social protection and social security in ukraine is carried out at the expense of state and local budgets, funds of state target and nonstate funds, territorial and municipal loans, insurance companies, as well as finance companies that indirectly support social programs. implementation of any social programs requires the corresponding financial resources, which according to the current state of the national economy is not enough. the problem is not even in the amount of these resources but in the ability to properly dispose of them. this is the main task of financial support for programs and measures of social policy in ukraine. in order to fulfil its functions, in particular in the field of social policy, the state should have sufficient funds, which are formed by redistribution of gdp, and the main mechanism through which this redistribution is realized is budget (financial and economic analysis office in the vru, 2017). over the past five years, expenditures on social protection of the population and social security have increased annually (table 3). a significant increase in funding for social protection and social security is due to government policies aimed at raising social standards of living for citizens, and accordingly, increasing their income and protecting it from depreciation. at the expense of raising social standards and, accordingly, the citizens’ ability to pay, it is expected that it will stimulate domestic demand, which should be a factor of future economic growth. however, the indicators of this growth are rather heterogeneous, the growth rate in certain areas, unfortunately, has a negative character of the indicators (table 4). at the same time, the directions themselves, as well as the amount of their funding, are rather ambiguous. in particular, the world experience of leading countries in the field of social economy implementation (sweden, denmark, finland, the netherlands, germany) shows the expediency of supporting families and youth, expansion of valeological and recreational programs, which would in the future create a stable economic system with a high level general welfare, and not excessive social support for some of the most vulnerable groups of the population. the state strategy for sustainable development “ukraine 2020” defines the directions of activity, based on the understanding that the level of economic development and welfare of the population does not table 3 state budget expenditures for the 2013–2017 years by functional classification, million uah expenditures 2013 (fact) 2014 (fact) 2015 (fact) 2016 (fact) 2017 (plan) state functions 59979 65836,5 103116,7 117925,6 168122,2 defence 16186 50056,7 52005,0 60263,0 69666,7 public order, security and judiciary 38829 44617,2 54643,4 71671,1 81258,6 economic activity 42759 34410,8 37135,4 31412,3 96659,9 environmental protection 4275 2597,4 4053,0 4771,6 8222,6 housing and communal services 51 111,5 21,5 12,5 24003,1 healthcare 12966 10475,8 11450,4 12456,3 97111,5 spiritual and physical development 4597 4871,8 6619,2 4958,9 23421,1 education 32495 28674,6 30185,7 34825,4 178348,4 social protection and social security 89141 80549,1 103700,9 151965,5 272090,2 between-budget transfer 118566 130600,7 173980,0 195395,4 --total 419844 430108,8 576911,4 684743,4 1018904,4 source: formed by the author on the basis of the data of the state treasury of ukraine baltic journal of economic studies 236 vol. 3, no. 5, 2017 correspond to the natural, scientific and technical, agricultural and industrial potential of ukraine and the qualification and educational level of the population, socio-historical and cultural traditions of the ukrainian people. however, progress in this issue is possible only with the active participation of business structures operating in the territory of ukraine. mainly in state programs of social development, the focus is on supporting young people, families with small children, pensioners, people with disabilities, patients, creating a system of targeted assistance or introducing valeological measures to prevent negative trends in the future. investigating the activity of individual companies in this area indicates that the vast majority of them participate in activities in the main areas identified by the state strategy. however, they all determine, at their own discretion, the scope of the project and methods for its implementation, based on the specifics, preferences, and priorities of the companies. in particular, interpipe steel provides support to social, cultural, and educational initiatives aimed at developing and improving the standard of living of citizens, and together with fozzi group corporation is an active participant in the program “operational response to the social and economic problems of internally displaced persons in ukraine”. the purpose of this program is to ensure employment of migrants and increase competitiveness in the labour market by implementing a set of interrelated tasks and measures for creating new jobs, providing state guarantees and efficient use of labour force, which will help to reduce social tension in society, solve their issues of material support. ukrposhta company implements a number of programs, carrying out important socially significant tasks, in particular in the area of housing subsidies, by developing a simplified mechanism for filing subsidies through the mail. currently, more than 4 million families have already used this service. the new carlsberg foundation implements educational projects in the field of business education for promising young people. and, with the support of deloitte, a social development index has been increased, which consists of indicators of the environment and social development, which are united in three directions of social progress: basic human needs, well-being, and opportunities. 6. conclusions today the concept of social responsibility is extremely relevant in the field of international business. this approach analyses and examines the social, legal, political, corporate, ethical, and environmental components of the business, which eventually increasingly affect the profitability of economic actors. in turn, the analysis and understanding of the relationship between business and its external and internal stakeholders help to predict trends in its environment and protect itself from possible risks. after analysing the ukrainian realities of integration of the social component into the enterprise management system, it is possible to conclude that ukrainian companies are still at the first stage of the development of csr , which manifests itself only in the production of the product and meeting the needs of their consumers and employees. in most companies, external social projects are systematically and exist without any reference to the strategic plans of social development of local communities and their urgent problems. with the increase in their profits, companies do not allocate more money, and in some cases even reduce their costs for external social activity. but at the same time, the authors empirically found, on the example of several companies, the existence of a positive influence of various forms of social responsibility (internal and external) on the net financial profit of ukrainian enterprises. the process of transition of the ukrainian market system from the traditional classical to the mixed socially-oriented involves all the participants – national and international business, the state, international organizations and ordinary citizens. such process can be successful only with the awareness by the companies of the need to be socially responsible and effective in line with this because their feasibility is peremptory in modern conditions. table 4 expenditures for social protection and social security for 2015–2016, billion uah / % directions 2015 2016 growth rate social protection in case of incapacity 1,15 1,23 +6,96% social protection of pensioners 80,81 144,89 +79,3% social protection of veterans of war and labour 1,18 1,28 +8,47% social protection of the family, children, and youth 0,03 0,04 +33,33% social protection of the unemployed 0,07 0,05 -28,57% assistance in solving housing issues 1,75 1,45 -17,14% social protection of other categories of the population 5,53 4,94 -10,6% fundamental and applied research and development in the field of social protection 0,02 0,01 -50,0% other activities in the field of social protection 0,34 0,29 -14,71% source: budget dairy. 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(2016, 2015, 2014). reports on social policy of the company zaporizhstal. retrieved from: http://www.zaporizhstal.com/uk/vidpovidalnist/socialna-politika (in ukr) baltic journal of economic studies 4 vol. 1, no. 2, 2015 economic effect of introduction of modular technology in railway industry artem bilous1, taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to explore the current state of the railway engineering industry in the world, the problems of its development prospects, especially the introduction of the modular process technology and economic impact of its introduction. methodology. the research is based on statistical information from public sources, which is used to confirm the veracity of the thesis put forward about the feasibility of further implementation of the principle of modularity in the railway engineering sector. data was also obtained from the websites of manufacturers of railway equipment. also, in the study of the issue, analytical articles on the economic development of the sector of railway engineering in the world were used. results of the research showed that today, in transport engineering industry, in particular – in the railway engineering, there is a problem of inefficient implementation and use of technological developments, which are used in the manufacture of railway rolling stock. many technical solutions are duplicated, leading to more time and financial costs. at the same time, there is no free access to information about existing technical solutions, which significantly slows down the development of rail transport. one of the main solutions to the problem is the use of modular technology in the design and manufacture of rolling stock. leading global manufacturers have already begun to use the modules in the production of their rolling stock, but the technology is not yet sufficiently developed and finds its realization only in reducing the costs of production of rolling stock by specific manufacturers. the full benefits of the new technology have not yet been obtained by producers and operators. thus, there is a considerable margin for the implementation of modular technology in the production of railway vehicles, which will result in further reducing both production costs and the costs of maintenance, operation and repair of rolling stock. practical implications. the introduction of a modular system in the design, manufacture and operation of rolling stock will lead to a significant breakthrough in the development of the railway sector, reduce the cost of production and maintenance of railway equipment. together with the inter-company exchange of technology and experience it will contribute to intensification of production and the development of new trends in the railway sector. value/originality. these data show that the modular technology of the production construction has broad application prospects, while it does not require a significant capital investment. this approach can be applied to various types of rolling stock, as well as, potentially, to other industries. the achievements obtained in the railway sector will find their application in other fields of transport engineering. key words: railway engineering industry, rolling stock, modular technology, management, efficiency, new technologies. jel classification: e23, l62, m11, o18 corresponding author: 1 department of international business, institute of international relations of taras shevchenko national university of kyiv. e-mail: bilousartem@ukr.net 1. introduction modern railway machine-building complex was formed in the twentieth century as an extremely complex system with its own laws of development. a large proportion of railway engineering among engineering industries makes it a significant in the national economy. development of railway engineering largely occurred spontaneously, which ultimately made it wasteful in expenditure of mater ials, energy and labor resources, negative impact on the environment, inertia to changing demands of society. and the further the railway engineering develops, the stronger its negative sides are. in this regard to the problem of improving the industry aimed at improving its efficiency becomes paramount. at present, there is a distinguished individual tasks solution to this problem such as increased productivity, quality of rolling stock, reducing its material consumption, introduction of energy saving technologies, etc. this approach to the problem can not radically change the existing situation in the railway industry and calls for baltic journal of economic studies 5 vol. 1, no. 2, 2015 a new science and technology policy. it is necessary, firstly, to implement systematic approach to solving problems, and secondly, it must be resolved in a way that satisfies both the requirements of society and the needs of each company separately. 2. general view of technical problems carrying out such scientific and technical policy requires management of the development of railway engineering complex, for which it is necessary to introduce organizational rise in construction of engineering production. the solution can be administrative, but should be based on the results of in-depth study of the laws of engineering. the task requires the understanding of common systemic shortcomings of modern engineering production. these include: duplication of technological development support (processes, machinery, equipment); excessive variety of technological software; loss of technological knowledge; incomplete use of the opportunities of technological support (process equipment and tooling); offensive obsolescence of technological equipment earlier terms of their physical deterioration. duplication of technological development software is as follows. almost any unit of rolling stock comprises 50-70% of the general purpose parts such as shafts, axles, bushings, couplings, gears, covers, levers, strips, bodies and so on. products also contain a lot of similar mechanisms and arrangements – spindle units, bearings, gearboxes, typical connection details. hence, on average, each railway producing company within the general machine-building complex has total range of manufactured parts and assembly units for more than 50% very close to other companies and often identical in its design execution and technical requirements. as a result, for the manufacture of each of them, enterprises duplicate most of technological facilities. ultimately, at almost all machine-building enterprises, the majority of engineering and technical specialists annually perform the same work, solve the same problems ( jacobs, f. robert, berry, william, whybark, d. clay, 2011). excessive diversity of technological support, which is growing steadily, is that different enterprises and even in different departments of one company for manufacturing similar products develop different technological support. this is due to the fact that companies differ in composition of technological equipment involved in the development of various professionals with different skill levels with no information on these developments. as a result, for the manufacture of each product (parts, assembly unit) hundreds of different types of processes and tooling can be developed, and often different technological equipment. a large amount of work es performed, huge sums of money sometimes are spent, production process is being complicated, since number of new technological processes, equipment and tools is increasing. however, most of them are already known solution, and comparing them with the technical and economic characteristics shows that they differ little from each other in their effectiveness. among this variety there are also innovative solutions that can give a great effect, but they drop out of sight in the mass solutions. so, instead of focusing time of highly skilled staff on creating innovative technologies and techniques, there is a dispersion of forces, infinite duplication of work that entails unjustified increase in the variety of technological support (kahn, kenneth b., 2012). loss of technological knowledge is that due to imperfections in the organization of information on development, many decisions are unpublished, and among the huge flow of papers it is difficult, and sometimes impossible, to find the information you need to solve specific problems. especially the lack of information affects the manufacture of special components and assemblies requiring original technologies. development and implementation of technologies usually associated with high labor costs, require skilled developers and long time for implementation. after discontinuation of production, information about this technology is often inaccessible due to lack of papers or difficulties to find them in the huge flow of information. as a result, he experience, obtained costly, appears lost and not used by other companies. partial use of the opportunities of technological equipment is a common occurrence when all processing equipment, except equipment which is used in mass production, has to some extent redundant technological and technical capabilities at a particular workplace. the closer to the type of production of the single unit, the greater this excess is. redundancy of equipment capabilities is that at every moment of equipment its capabilities is used only partially. for example, universal lathes for 87% of their service life use only 20% of installed capacity of main drive, within 19% of their service life they use up to 75% and only within 1% over the life they use 100% of installed capacity. and the higher the versatility of equipment is, the greater the proportion of unused capacity appears. a similar pattern is observed with other technical and technological characteristics of technological equipment (wilson, lonnie, 2009). at the same time, the presence of excess capacity leads to higher cost of equipment and maintenance costs. for example, the cost of a processing center reaches hundreds of thousands of dollars (greasley, andrew, 2009). appearance of obsolescence in technological equipment is earlier than terms of their physical deterioration and also widespread. indeed, in modern circumstances, a rapid change in the range of products applies to most of technological equipment, obsolescence of which occurs much faster than their physical deterioration. baltic journal of economic studies 6 vol. 1, no. 2, 2015 in this regard, there is a contradiction when, on the one hand, there is need to replace obsolete equipment, and on the other is the physical condition of equipment which allows to exploit it for a long time. in these circumstances, it is difficult to give up expensive equipment, especially the creation of new equipment associated with large labor and material costs and long term. the above deficiencies have common, ambitious character and are just both for the entire machine production and directly for railway engineering. all this leads to huge unproductive expenditure of labor, materials and energy and, if effective measures to eliminate these deficiencies are not taken, in the nearest future railway engineering could turn into a loss-making industry. therefore, modern railway engineering production is characterized by production of large numbers of the same or very close to each other such parts, machinery, devices that are included in various products at different manufacturings; significant duplication of technological preparation of production; unjustifiably huge variety of processes, equipment and facilities; huge annual renovation of physically worn technological facilities; low demand for technological equipment and technical capabilities. 3. introduction of modular technology the analysis of engineering production showed that, to minimize the above mentioned deficiencies, its radical restructuring is needed. these objectives shall be addressed in conjunction with the system approach. organizing principle shall firstly be entered into the building of the railway production, as that should be taken in the construction of modular parts of the production chain: product – manufacturing process – technological system – workplace. at the same time the accumulated experience of modularity creates favorable conditions for its widespread introduction in railway engineering. it is time to move from accidental use of modular construction principle in individual objects to implementation of a systematic approach when rolling stock and funds for its technological support shall be based on relevant modules combined into a single system. the implementation of this approach will give the effect of engineering production efficiency far above from what is available today. implementing of modular principle in the railway production from the view of system approach requires the development of the following: the substitution of rail production facility with many modules; general principles of the rolling stock production of modules and means of their technological support (processes, machinery, equipment); terminology providing; unification methods of product modules and means of technological support; methods for evaluation of the effectiveness of modular construction of products and means of technological support (lehmann, donald r ., 2004). introduction of the modular principle starts with the same modular construction of vehicles. in this case, modules shall include such immutable elements that make up any items, for example, cabs, boggies, towing equipment, even bodies. in this case the modular principle becomes general in nature and will be effective for the entire engineering, and directly for the railway sub-sector. this module of rolling stock shall be characterized with uniqueness, high resistance over time, described with minimum set of characteristics and a differ in a little nomenclature. the uniqueness of module provides a unified description of any products regardless of their purpose, high stability over time ensures their long-term use, and a small set of features and a narrow range of typing helps to unify modules. since the product’s smallest element is a detail, it is logical to accept it as such a module. however, it is not possible because of the huge variety of constructive details, many characteristics describing them, so it should be found at a higher level. analysis of the details’ execution their official functions allows to make an important conclusion that a detail performs it official appointment, mostly by combinations of surfaces and only in some cases with individual surfaces. therefore, the detail can be represented as a set of combinations of surfaces (rarely, some surfaces) with the official designation. in this regard, the concept of the module surface of details was introduced, which refers to a combination of objectively existing surfaces (or individual surface), designed to jointly execute the appropriate utility function and provide details of last structural form, due to the requirements of operation and production. 4. modular design of modern locomotives the modular design of the rolling stock is a transient quick-access sections containing frames within which there is equipment of same purpose. thus, it is possible to assemble a particular purpose locomotive of certain basic sections, in each case creating a customized design. standard units are collected in one frame sections are formed into one group to perform servicing operations. at the initial stage of transition to modules, the traditional way of threaded connections is used. at a higher level, the inside equipment of the module will dock with quick basic ground connections ( jacobs, f. robert, berry, william, whybark, d. clay, 2011). modular design of a locomotive allows: • increase productivity of locomotive to operate in different modes; • reduce the cost of production of new locomotives, as well as maintenance and repair in depots and locomotive repair enterprises; • unify modules for different types of locomotives; • increase reliability, maintainability of equipment extend its life; baltic journal of economic studies 7 vol. 1, no. 2, 2015 • significantly decrease the quantity of staff; • reduce the human factor in installation and verification of modules; • introduce progressive methods of modern diagnostics of equipment of individual modules; • reduce cycle of maintenance and repair, providing the opportunity to replace any module within minutes at the locomotives maintenance points; • ensure simplicity and efficiency of modules transportation between the locomotive and repair depot; • provide convenience and ease of assembly and installation of modules; • provide aesthetic and ergonomic view of the engine room, remove protruding parts, pipelines and details of mechanisms; • introduce new concepts of manipulators for basic operations of removing and installing modules in sections, providing the possibility of using unmanned technologies on major maintenance operations; • ensure maximum operational readiness for operation of locomotives; • create a universal design and technological solutions of modules for different types of locomotives depending on customer needs; • apply full remote control of a locomotive (v. n. balabyn, f. vynkler, 2012). these locomotives will differ with high reliability, adaptability, uniformity, have the necessary potential for further improvement. in addition, the modular design allows to change the configuration and connections within sections depending on the regional and environmental requirements, as well as operational work features. the modular design principle can be considered as an example of an electric dc locomotive 2es6 produced in russia at the factory “ural locomotives” under german technology in partnership with siemens ag. placement of electric equipment in the electric locomotive 2es6 is made under construction design principle, and all the space in body is conventionally divided into sections both in the vertical horizontal planes. the technical result is the improvement of the use of interior body space, maximum use of load-bearing structures and frameworks of bogies and body as grounds for mounting of equipment, reducing the range of spare parts, equipment and devices for repairing locomotive in compliance with safety requirements. the technical result is achieved with the equipment which is installed according to modular principle when building a body of locomotive, namely the maximum possible number of associations of machinery according to their functional parameters in the module, namely: the first module provides power to engines of the first bogie, namely is used to convert electrical energy of dc into 3-phase ac voltage with adjustable amplitude and frequency. it includes traction transformer, network filter and cooling tower for cooling the equipment. also, this module includes a device for cooling the traction motors of the first bogie. the second module provides power to the engines of the second bogie, and it is used to convert electrical energy of dc into 3-phase ac voltage adjustable amplitude and frequency, which includes traction transformer, network filter and cooling tower for cooling the equipment. also, this module includes a device for cooling the traction motors of the second bogie. the third module is intended for operation of power and low-voltage equipment and to protect from electric overload and short circuit, which includes a cabinet with breakers, high voltage equipment cabinet, cabinet with low-voltage equipment, power converter control circuit block and auxiliary transformers. the fourth module is a source of compressed air on the electric locomotive, which includes two compressor units, consisting of the main and auxiliary compressors. the fifth module includes sanitary ware such as wash basin, bio-toilet. 5. conclusions thus, the railway production on the principles of modular technology allows: to reduce for several times the complexity of technological preparation of production; reduce the cost of technological equipment by reducing its diversity and opportunities in the reallocation to reflow manufacturing of other products; reduce the number of adjustments, settings and the complexity of making the transition to new products; to increase productivity of processes in the manufacture of products in terms of production of different series through a combination of conversion, application of advanced methods of assembly and processing of details specific to multiseries production; in terms of the production of large series of products, to move quickly to production of new products by creating new technological means by arrangement of available modules; improvement the quality of manufactured products with building their processes with proven process modules etc. references alstom power signed an agreement on scientific and technical cooperation with gdansk university of technology. – [electronic resource]. – retrieved from: http://www.alstom.com/press-centre/2012/4/alstompower-signed-angreement-on-scientific-and-technical-cooperation-with-gdask-university-of-technology/ sokolenko, s. i. (1999). hlobalizatsiya i ekonomika ukrayiny. – k.: lohos. bazrov, b.m. (2001). modul’naya tekhnolohyya v mashynostroenyy. – m.: mashynostroenye. baltic journal of economic studies 8 vol. 1, no. 2, 2015 balabyn, v.n., vynkler, f. (2012). pryntsypy modul’nosty v proektyrovanyy sovremennykh avtonomnykh lokomotyvov. nauka i transport, № 3. web-site of «uralskie lokomotivy» plant. retrieved from: http://ulkm.ru/produkciya/gruzovoj-elektrovoz-2es6/ balabyn, v.n. (2009). perspektyvy razvytyya teplovoznykh dyzeley novoho pokolenyya. zh-l «tyazheloe mashynostroenye. balabyn, v.n. (2012). modul’naya konstruktsyya perspektyvnykh avtonomnykh lokomotyvov. sovremennyy transport: infrastruktura, innovatsyy, intellektual’nye sistemy: tr. mezhdunarodnoy akademii transporta. sanktpeterburg. jacobs, f. robert, berry, william, whybark, d. clay. (2011). manufacturing planning and control for supply chain management. – mcgraw-hill professional publishing. lehmann, donald r ., winer, russell s. (2004). product management. – mcgraw-hill college. kahn, kenneth b. (2012). product planning essentials. – m.e. sharpe. breyfogle, forrest w., iii, breyfogle, forrest w. (2003). implementing six sigma smarter solutions using statistical methods. – john wiley & sons inc. greasley, andrew (2009). operations management. – wiley & sons, incorporated, john. wilson, lonnie (2009). how to implement lean manufacturing. – mcgraw-hill professional publishing. hill, alex, hill, terry. essential operations management. – palgrave macmillan, 2011. артем билоус экономический эффект внедрения модульной технологии на железно дорожном производстве аннотация. целью работы является исследование современного состояния отрасли железнодорожного машиностроения в мире, проблемы перспективы его развития, особенности внедрения модульной производственной технологии и экономический эффект от ее внедрения. методика. исследование основано на статистической информации из открытых источников, которая используется для подтверждения правдивости выдвинутого тезиса о целесообразности дальнейшего внедрения принципа модульности в отрасли железнодорожного машиностроения. данные также были получены с веб-сайтов производителей железнодорожной техники. также, при исследовании вопроса использовались аналитические экономические статьи по вопросам развития отрасли железнодорожного машиностроения в мире. результаты исследования показали, что сегодня в отрасли транспортного машиностроения, и в частности – в железнодорожном машиностроении, существует проблема неэффективного внедрения и использования технических разработок, которые используются при производстве подвижного состава железных дорог. многие технические решения дублируются, что приводит к большим временным и финансовым затратам. в то же время, отсутствует свободный доступ к информации о существующих технических решениях, что существенно замедляет развитие железнодорожного транспорта. одним из основных вариантов решения возникшей проблемы является применение модульной технологии при проектировании и производстве подвижного состава. ведущие мировые производители уже начали использовать модули в производстве своего подвижного состава, однако эта технология еще недостаточно развита и находит свою реализацию только в снижении издержек на производство подвижного состава конкретным производителем. полной выгоды от новой технологии производители и эксплуатационники еще не получают. таким образом, существует значительный запас по внедрению модульной технологии в производство железнодорожной техники, что приведет в дальнейшем к снижению как производственных затрат, так и затрат на содержание, эксплуатацию и ремонт подвижного состава. практическое значение. внедрение модульной системы в разработку, производство и эксплуатацию железнодорожного подвижного состава приведет к значительному рывку в развитии железнодорожной отрасли, удешевлению производства и обслуживания железнодорожной техники. вместе с межфирмовым обменом технологиями и опытом это поспособствует активизации производства и освоения новых направлений в железнодорожной сфере. значение/оригинальность. полученные данные показывают, что модульная технология построения производства имеет широкие перспективы применения, при этом не требуя значительных капиталовложений. данный подход может применяться к различным типам железнодорожного подвижного состава, а также, в перспективе, к другим отраслям промышленности. наработки, полученные в железнодорожной отрасли найдут свое применение в других сферах транспортного машиностроения. baltic journal of economic studies 96 vol. 3, no. 4, 2017 corresponding author: 1 department of finance, national university of life and environmental sciences of ukraine. e-mail: anya_ivanova91@ukr.net an evaluation of the domestic financial supervisory authorities in land relations in ukraine anya ivanova1 national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the article is to study the efficiency and quality of the state financial control of land relations in ukraine and to identify problems. methodological basis of the research is general scientific and special methods of knowledge of phenomena and processes in the system of state financial control. the method of expert estimations was used during the identification problems of functioning of the state financial control system in the field of land relations. system and structural-functional approaches are used to analyse the possibilities of organization and functioning of the state financial control system in ukraine. results the article analyses the level of economic crime in enterprises, institutions, organizations working in the land relations field. the main tasks of the state financial control over the land use and protection and the characteristic schemes of committing crimes in the field of land relations are determined. government financial control (gfc) problems in the field of land relations are consolidated and underscored on the basis of research on the crime indicators and the losses incurred by the state. the practical value of the research is the possibility of using its results in improving the activities of the state financial control bodies in ukraine at the state and local levels, as well as in teaching relevant professional disciplines. key words: land relations, state financial control, material losses, economic crime, agricultural land. jel classification: o10, q15 1. introduction state financial control is a priority area of financial relations development as an instrument for ensuring the most complete amount of funds to the state budget, their rational use, and management of state property. in modern conditions, a number of systemic problems in the state financial control system have been formed due to the existence of shortcomings in the regulatory, organizational, technical, information, and personnel provision, that lead to inefficient management of state property and the use of budgetary resources. as a part of the types of control measures of state financial control, audits of a certain complex or separate issues of financial and economic activity prevail, which does not provide a preventive in nature of the state financial control in ukraine. the problem of an establishment of an effective system of state financial control in the system of land relations has an important place in scientific researches of scientists-economists, namely, in the works of scientists: n.  m.  davydenko, v.  s.  diesperov, a.  g.  martin, d.  a.  mishchenko, p.  i.  pushkarenko, o.p. svetlichny, v. slauta, m. m. fedorov. the systematization of scientific literature makes it possible to conclude that there is a thorough theoretical basis associated with the development of land tenure and its regulation. at the same time, an insufficient attention is paid to issues of state financial control of land relations as an important function of state regulation, which generates a significant number of budgetary irregularities in this area. in the field of land use, control is seen as a way of rule of law in the land use. the main tasks of the state financial control over land use and protection are the following: − law enforcement by the state authorities, local selfgovernment bodies, natural and legal persons of the land legislation of ukraine; − ensuring the implementation of state policy in the field of protection and rational use of land; − prevention of violation of ukrainian legislation in the field of land use and protection, timely detection of such violations and taking appropriate measures to address them; − enforcing standards and regulations in land use and protection by landowners and land users, prevention of land contamination and soil fertility reduction, deterioration of the state of flora and fauna, water and other natural resources. 2. evaluating the level of economic crime in the field of land relations the high level of economic crime in ukraine and, in particular, in the field of land relations allows us to conclude that the system of implementation of state baltic journal of economic studies 97 vol. 3, no. 4, 2017 financial control is imperfect, as evidenced by the following data (table 1). in analysing the trend in the indicators of crime in the field of land relations during 2015 – september 2017, identified that the total number of crimes committed amounted to 1482. this suggests that crime in the field of land relations has assumed alarming proportions for society. it is worth noting that there is a constant increase in crimes in absolute terms, indicating the existence of legal defects in land legislation, which is used by criminals. as for the amount of material damage, there is a more negative situation, especially at the end of september 2017, namely, the amount of losses has increased by more than 5 times. the dynamics of crime and losses are presented in fig. 1, where it is possible to clearly observe a significant increase in the number of criminal offenses (107.71%) and the amount of losses incurred (525.95%) in the system of land relations, which indicates the high price of the committed violation in the field of land relations. so the average damage for 1 crime in 2015 and 2016 amounted to 17.15 thousand uah and 16.93 thousand uah respectively, and at the end of september 2017 – 82.71 thousand uah. it is also worth noting that one-third of criminal offenses in the field of land relations in ukraine constitute violations of land privatization. 420 440 460 480 500 520 540 0 10000 20000 30000 40000 50000 december 2015 december 2016 september 2017 the amount of material losses, thousand uah the quantity of crimes, pcs fig. 1. dynamics of crime and losses incurred in the field of land relations in ukraine written by: [reports of the general prosecutor’s office of ukraine for 2015 – september 2017] an assessment of the level of economic crime in the field of land relations makes it possible to determine that the characteristic patterns of crimes in the field of land relations are: − abuse of officials in the registration of land plots; − land-grabbing; − illegal transfer of agricultural land to other categories: − urbanization of agricultural land; − lower rates of rent payments, illegal land lease; − alienation of agricultural land by peasants at a price much lower than economically justified; − inefficient and inappropriate land use, which does not contribute to the restoration of agricultural land. the presence of such a high level of economic crime, which is present in the field of land relations, makes it possible to distinguish the following reasons of their appearance: the lack of a comprehensive solution to the problems of the formation of new land relations (busyok, 2010), (svitlychny, 2011), the lack of perfect instruments for regulating the land market (fedorov, 2009), (mishchenko, 2011), high level of speculative actions with land (mishchenko, 2011); outdated economic mechanism of regulation of land relations (fedorov, 2009), conflict of interests of different layers of society (davidenko, 2016); undeveloped automated system of state land cadastre management; the lack of a mechanism for economic incentives for the land use and protection (pushkarenko, 2010). 3. implementation of the state financial control in the field of land relations in ukraine by providing control in the field of land relations with the use of budgetary funds, the state of public and communal property, the state financial control bodies, within the limits of the powers granted to them by the law, investigate the main tendencies in the management of public property, the realization of transactions with state property and funds. the state financial control of land relations by allocating and using budget funds at the level of the table 1 the crime indicators at enterprises, institutions, organizations working in the field of land relations crimes committed at enterprises, institutions, organizations as of criminal offenses reported in the reporting period, pcs established amount of material losses (in ths. uah) repayment is provided (in ths. uah) refunded arrested on property total: 31.12.2015 52687 705789,54 389256,65 25786,56 31.12.2016 47833 630977,74 405885,62 264429,49 30.09.2017 42976 8 522 606,16 225 650,12 223 090,65 related to land relations: 31.12.2015 458 7856,57 201,57 7089,75 31.12.2016 493 8350,67 214,00 7194,23 30.09.2017 531 43 920,74 972,12 35 224,72 including privatization of land 31.12.2015 181 5896,45 103,05 6587,58 31.12.2016 188 6103,86 214,00 5429,23 30.09.2017 205 5 118,70 0,00 5 491,11 written by: [reports of the general prosecutor’s office of ukraine for 2015 – september 2017] baltic journal of economic studies 98 vol. 3, no. 4, 2017 ministry of agrarian policy and food and at the level of the state land agency is carried out by the bodies of the state financial intelligence, treasury of ukraine, the accounting chamber and internal audit departments (departmental control) (svitlychny, 2011). thus, in 2013–2015, by the state service of intelligence (ssi) inspections averaged 826.5 billion usd of financial and material resources, and in 2016, it was checked to use almost 465.4 billion uah. in the calculation of this indicator per one checked facility, the corresponding indicator grew 1.7 times – from 112.4 million uah in 2013 to 193.3 million uah in 2016. in particular, revisions of certain issues of financial and economic activity in the field of agroindustrial complex of the national academy of agrarian sciences of ukraine and 102 enterprises and institutions under its management, the activities of the public joint stock company “agrarian fund”, state enterprise “state standby seed fund of ukraine”, state enterprise “state committee of ukraine”, ministry of ecology and natural resources of ukraine, public joint stock company “state food and grain corporation of ukraine”, and pjsc “agrarian fund”, state specialized budget establishment “agrarian fund” are conducted. the question of the legality and effectiveness of the use of budget funds and property by the njsc “ukragroleasing”, as well as activities of enterprises, institutions, and organizations belonging to the sphere of management of the state agency of water resources of ukraine, ministry of agrarian policy and food of ukraine, state service of geology and subsoil of ukraine covered by the control. the most scale and widespread financial violations that resulted in the loss of resources are the following (reports of the state audit office of ukraine for the 2013–2016 years): − the sale by economic entities of goods, works or services (except for the use, rent) free of charge or at low prices – almost 351.8 million uah; − illegal expenses due to the payment of overvalued costs of performed works and/or services rendered, as well as exceeding the amount or value of purchased goods – 264.6 million uah; − non-payment and non-transfer (incomplete transfer) of revenues to the general and special (except for the special fund of budget institutions) budget funds – almost 206.6 million uah; − non-payment and non-transfer of a part of the profit to the budget by state and municipal enterprises by more than 156,9 million uah; − illegal payments to individuals (compensation, benefits, privileges and subsidies, pensions, scholarships), including those who did not have the right to receive them or in excess of over 148.9 million uah; − non-targeted expenses – almost 140,1 million uah; − the write-off of funds for expenditures/expenses without obtaining goods, works or services or in volumes higher than their actual value – more than uah 138.6 million; − illegal (extra) wage payments – more than 111.7 million uah; − lack of resources and property values – 80.1 million uah; − non-payment and/or taking no measures for collecting amounts of penalties stipulated by the terms of the agreement – 71.3 million uah; − illegal alienation of property – 68.3 million uah; − the unreasonable covering of expenses of individuals or legal entities, including in the absence of accounts receivable – more than 58.6 million uah; − loss of income due to the write-off of accounts receivable – almost 55.4 million uah; − excessive allocation (receipt) of budget funds to legal entities, recipients as a result of an overstatement of relevant calculations or those who did not have the right to receive them – 51.4 million uah; − liquidation (destruction, disassembly) of property, conducted contrary to the legislation – more than 51.3 million uah; − coverage at the expense of the general fund of the cost estimate of the special fund (without the restoration of cash fund expenditures of the general fund) – almost 46.0 million uah; − payment of contributions to the state target funds for illegal sums for the remuneration of labour or at an excessive rate of collection – almost 42.7 million uah; − lack of income from the sale of free-of-charge goods and services by budget institutions – over 29,0 million uah; − overdue write-off for an accounting of intangible assets that are not available – 23.4 million uah; − lack of proper receipt by the entities of the property received for the use, lease – 22.7 million uah; fig. 2. the volumes covered by the control of financial and material resources in 2013–2016 written by: (reports of the state audit office of ukraine for the 2013–2016 years) baltic journal of economic studies 99 vol. 3, no. 4, 2017 − implementation of expenses for the charitable, sponsorship, and other non-repayable assistance exceeding specified volumes or exceeding the maximum amount – 22.6 million uah; − implementation at the expense of the budget of one level of expenditures, which, in accordance with the budget law, should be carried out from the budget of another level – 22.4 million uah, etc. the main reasons for such violations are the poor quality of internal control and the irresponsible attitude of many spending units and managers of enterprises, institutions, and organizations. 4. problems in the work of domestic bodies of state financial control state financial control is one of the most important functions of public administration; it provides an objective assessment of the financial system reality and the impact on financial management through detecting deviations from accepted legal standards regarding the management of financial resources and individual state-owned objects; it analyses the financial conditions and, in the case of derogations, develops and applies appropriate corrective and preventive measures in a timely manner. the effectiveness of public financial control cannot be measured by the number of inspections or the number of objects subject to control or the number of decisions taken under the control. and even the amount of imposed sanctions cannot be the basis for the recognition of effective and functioning control. the main criteria are the real results achieved – the normal, proper functioning of the controlling object in the future, preventing them violations of financial discipline. the main areas of efficiency improvement are not only reducing the number of inspections but also improving their quality, efficiency, complex inspections. in this way, financial control bodies must evolve. the ineffectiveness of state control in the field of land relations is also complicated by the unclear delineating of communal, state, and private property. at the same time, state institutions that have to implement the state policy on land reform issues redirect responsibility to each other (davidenko, 2016). 5. conclusions repeated organizational changes in the system of central bodies whose powers include, in particular, the implementation of state policy in the field of land relations, the land use and protection, as well as the reorganization of the central body that forms such a policy and coordinates its implementation, did not contribute to the proper implementation of land reform and providing appropriate internal control, which leads to increasing the level of economic crime in enterprises, institutions, organizations that work in the field of land tenure. in general, the current state of control institutions is characterized by the fact that the formation of a gfc system that meets the requirements of economic development and the system of government of the country has not yet been completed. there is not enough a legal control base. the state control does not cover all of its proper means, especially in terms of their use. the organization of control is characterized not by the orderliness, duplication of audits and inspections. lists of financial violations in existing classifiers are poorly justified economically and legally. there are no violations that caused a real loss of the budget or the budget recipient. in such circumstances, gfcs cease to be an effective tool in the fight against corruption. the practical value of the research is the possibility of using its results in improving the activities of the state financial control bodies in ukraine at the state and local levels, as well as in teaching the relevant professional disciplines. the direction of further research is the development of a holistic mechanism for the implementation of state financial control in ukraine, taking into account current transformations. references: reports of the general prosecutor's office of ukraine for 2015-september 2017. – retrieved from: http://www.gp.gov.ua/ reports of the state audit office of ukraine for 2013-2016 years. retrieved from: http://www.dkrs.gov.ua/kru/ uk/index busyok d.v. (2010) legal regulation of the procedure for the implementation of public administration in the field of use and protection of land. journal of the kyiv university of law, №3: 210-214. davydenko n.m. (2015) corporate control in the conditions of financial instability. economic forum, №3: 368-372. davidenko n.m. (2016) financial mechanism of activity of agrarian business entities: [monograph] / edited by prof. n.m. davydenko – k.: cp "komprint", 2016. – 318 p. diesperov v. s. (2010) land as the main natural resource of rural territories and the country. economy of the agroindustrial complex, №9: 102-109. martin a. g. (2008) state regulation of the land market: principles, tasks and mechanisms. land management and cadastre, №1:35-41. baltic journal of economic studies 100 vol. 3, no. 4, 2017 mishchenko d. a. (2011) state regulation of land market development in kraine. investments: practice and experience, № 18:121-124. pushkarenko p.i.(2010) economic and legal principles of the formation of the land market and the problems of its shadowization. financial law, №2 (12): 23-26. svitlychny o.p. (2011) implementation and ways of completing the land reform in ukraine. scientific bulletin of the national university of bioresources and nature management of ukraine. series: right, voice over 157 part 1. slauta v. (2010) the state should establish the legal basis for the introduction of the market of agricultural land. land law of ukraine, №11: 5-9. fedorov m.m. (2009) transformation of land relations to market conditions (report). economy of agroindustrial complex, № 3: 4-17. аня иванова оценка государственных органов финансового контроля в сфере земельных отношений в украине аннотация. целью статьи является исследование эффективности и качества государственного финансового контроля земельных отношений в украине и определение проблем. методологической основой исследования является общенаучные и специальные методы познания явлений и процессов в системе государственного финансового контроля. при обнаружении проблем функционирования системы государственного финансового контроля в сфере земельных отношений применен метод экспертных оценок. системный и структурнофункциональный подходы использованы для анализа возможностей организации и функционирования системы государственного финансового контроля в украине. результаты. в статье проведен анализ уровня экономической преступности на предприятиях, учреждениях, организациях, осуществляющих деятельность в сфере земельных отношений. определены основные задачами государственного контроля за использованием и охраной земель и характерные схемы совершения преступлений в сфере земельных. выделены и обобщены проблемы дфк в сфере земельных отношений на основе исследования состояния преступности и понесенных государством убытков. практическое значение проведенного исследования заключается в возможности использования его результатов в ходе совершенствования деятельности органов государственного финансового контроля в украине на государственном и местном уровнях, а также при преподавании соответствующих профессиональных дисциплин. baltic journal of economic studies 358 vol. 3, no. 5, 2017 corresponding author: 1 department of accounting and audit, poltava national technical yuri kondratyuk university. e-mail: yspogorelov@gmail.com 2 department of management and marketing, volodymyr dahl east ukrainian national university. e-mail: ivchenkoevg85@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-358-366 the economic security of enterprises in the luhansk region in conditions of post-conflict transformation yuriy pogorelov1 poltava national technical yuri kondratyuk university, ukraine yevhen ivchenko2 volodymyr dahl east ukrainian national university, ukraine abstract. the purpose of the paper is to research and present economic security of enterprises in luhansk region (eastern part of ukraine) and perspective of future threats for such enterprises in conditions of post-conflict transformation in the east of ukraine. methodology. the survey is based on a comparison of official statistic data on state and regional level (luhansk region, ukraine) for last 4 years (2013–2016) that cover a period of post-conflict transformation in the east of ukraine, identifying with method of scenario analysis and expert method the main threats to enterprises of luhansk region and their effects. results of the survey showed that economic post-conflict transformation in the east of ukraine has a great negative effect both on the national economy of ukraine and its economic security. at the macrolevel, such economic post-conflict transformation caused a significant decrease of export and import operations, salaries, enterprises personnel, and quantity of economic agents that have any economic activity in luhansk region. last 2 years, some positive changes are identified. but they do not have a trend character. at the microlevel, such economic post-conflict transformation is characterized by decreasing production and capital investments. post-conflict transformation in the east of ukraine caused to emerging specific threats for enterprises in luhansk region. such threats are identified and described. practical implications. identifying economic trends in luhansk region as the results of post-conflict transformation in the east of ukraine is useful both for improving state regulation and support for the economy. ukrainian enterprises using information about identified threats are able to become ready to neutralize such most critical threats to prepare for them or to avoid them to diminish their impact on enterprises activity. value/originality. described dynamics of economic indicators of luhansk region during last 4 years comprehensively show the depth of negative changes of economic security of enterprises in the luhansk region in conditions of post-conflict transformation in the east of ukraine. identified threats that emerged in conditions of post-conflict transformation in the east of ukraine are specified and described. key words: enterprise, post-conflict transformation, economic security, threat. jel classification: d22, h56, m21 1. introduction since the 90s of the 20th century, the category of economic security has become one of the most fundamental categories in modern national and international economics. economic security is of great interest to scientists at its all levels “state  – region  – enterprise”. this is due to the fact that economic security is the most important element of national security and provides competitiveness of the national economy. exactly the achievement of independence of ukraine, the emergence of market economy and protection of economic interests at the state level and the level of economic entities to a certain extent served as the starting point for the development of this scientific direction. the process of understanding of security and consolidation of its importance at all levels in ukraine was also followed by the creation of legal documents. in particular, article 17 of the constitution of ukraine (constitution of ukraine) states that economic security is the same important for a person, society, and state, and ensuring the economic security of ukraine is considered to be the baltic journal of economic studies 359 vol. 3, no. 5, 2017 most important function of the state, of all ukrainian people, especially in the state of armed conflict on the territory of our state. ensuring economic security of the country is not a prerogative right of a separate state department or agency. it should be supported by a whole system of state bodies and economic structures that are acting nowadays. as a separate category, economic security is considered at the level of an individual enterprise. the analysis of the issues of economic security at the enterprise level is important as an enterprise as a socialeconomic system plays a significant role in ensuring competitiveness and is a prerequisite for achieving and maintaining state financial results of activity not only of an individual enterprise but also providing stable development of the national economy of any state as a whole. the role of economic security of an enterprise as an economic category becomes even more serious in the conditions of complex post-conflict transformations that are the results of geopolitical crises. an example of such a situation is the activity of the enterprises of luhansk region (the east of ukraine) in the conditions of post-conflict transformation. recently the situation in the east of ukraine is characterized by the fact that post-conflict transformations lead to structural transformations in enterprise and in the economy of the region as a whole. such transformations are challenging and threatening for the economic security at all levels  – from a separate enterprise to the national economy – and need to be analysed, at least as a negative example, to prevent the repetition of similar situations. 2. research methodology methodological basis of the article is the set of methods of scientific knowledge, general methods, techniques, and principles. the statistical method and the method of scenario analysis were used to obtain the results of the research. the theoretical basis of the work is the fundamental provisions of economic security science and the theory of an enterprise. figures for the formations of the provisions and results of the study were based on the statistical data, in particular, data of the state statistics service of ukraine (main administration of statistics in ukraine: the official site; main administration of statistics in luhansk region: the official site; ministry of economic trade and development of ukraine: the official site; gross domestic product of ukraine, structure and dynamics), reports and documents of state authorities in luhansk region (strategy for development of luhansk region; strategy for development of luhansk region until 2020, 2016), reports of the international organizations operating in ukraine (website of world bank). 3. results 3.1. ensuring the economic security as a prerequisite for sustainable development the world experience shows the fact that even when the development of the economy was without ensuring its security (brazil in the 60s, egypt and poland in the 70s, mexico in the 80s, turkey, thailand, indonesia in the 90s of the 20th century; argentine at the beginning of the 21st century), it was quite unstable, and the period of economic growth lasted not so long and ended with the economic crisis (humeniuk, 2014). a. m. humeniuk states that economic security is the dominant or at least the most important characteristics of the economy, and the aim of economic development, in this case, is to ensure its security (humeniuk, 2014). however, it is not right to fully agree with such point of view, as the absolutisation of economic security leads to the preventing of the development of the economic system, which is presented in the paper (ljashenko, 2008). economic security is connected with development, ensures its sustainability, but there is no reason to absolutise economic security. security is essential for the functioning and development of the economic system, and the development of the economic system creates prerequisites for its security (mojsejenko, marchenko, 2011). s. v. kavun considers the close connection between economic security and the development of an enterprise. in his opinion, economic security of economic entities provides stable development, balanced and permanent, which is achieved through the use of all kinds of resources and opportunities, which guarantees the most effective their usage for stable functioning and dynamic scientific and technical, social development, prevention of internal threats (kavun, 2009). however, after a certain level, the effort to ensure the economic security of a particular system hinders its development and even prevents positive changes, becomes the inhibitor of development and creates particular threats. paradoxically, but the very attempts to ensure the economic security of a particular system becomes the factor of the decreasing of such security since it constrains the system, restricts its adaptive reactions and the introduction of even positive changes. after all, if one understands security only as safety, it turns out that the development of the economy is complete. such an approach means that the functioning of any economic system will have a digression character. in this case, at the macro level, the international economic relations will be formed between the states, which have secured the national economy or will continue to weaken until they are fully terminated. the very concept of economic security is quite complex. on the basis of (lynnyk & artemenko, 2013; zubok, rubcov, jaremenko, ghusarov & chernov, 2012; prus, 2014; kozachenko, 2015), it is arguable that nowadays baltic journal of economic studies 360 vol. 3, no. 5, 2017 there is a set of approaches to the explanation of economic security. they are protective, competitive, procedural, harmonious, and so on. each of them has its own argumentation and can be used to explain economic security. economic security as a category in general has an attributive character and characterizes state, needs, conditions of activity at an enterprise (illjashenko, 2016). for an enterprise, economic security is one of the fundamentally important categories of its activity. its absence can prevent from achieving positive financial results of an enterprise (for example, in case of armed conflict as a threat) and also affect the ability of longterm operation of an enterprise. but taking into account that an enterprise is an atomic agent of any national economy, the category of national security is vitally important not only for a separate enterprise but also for a region and a state, as the absence of economic security can influence negatively the functioning of the economic system as a whole. consequently, the economic security at all levels, from an individual enterprise to the whole state, is the important condition for sustainable development and the prerequisite for long-term functioning. 3.2. the main macroeconomic conditions of activity of enterprises of luhansk region events on the territory of the crimean peninsula since the beginning of 2014 and the armed conflict in the south-eastern regions of ukraine are those transformational processes at the macro level, which completely change the operating conditions of enterprises in luhansk and donetsk regions. such challenges and threats in ukraine need the research of the consequences for the economic security of regional enterprises and the issues of its ensuring. such events led to the formation of the post-conflict transformation at all levels of the ukrainian economy. in this case, the post-conflict transformation is proposed to understand as the adaptive reaction of the ukrainian economy at all its levels to armed conflict in the south-eastern regions of ukraine in the form of processes (often degradation) of changes in production, the location of production capacities, capital investments, etc. in the result of loss of control over the certain parts of donetsk and luhansk regions (that is almost 25% of the economic potential of ukraine (ghorbulin, vlasjuk, libanova, ljashenko, 2015), the cumulative economic losses of ukraine in the period of 2014–2016 exceeded 50% of gdp (main administration of statistics in ukraine: the official site; ghorbulin, 2017). the loss of control by the ukrainian authorities has led to the significant structural shifts in the economy of these regions and ukraine as a whole, which also declines the level of economic security, the reduction of solvent demand, and the decline of the industrial sector. in such conditions, there was a substantial, almost half decrease of the role and the place of ukraine in the world economy. in 2015, the share of ukrainian gdp in world gdp reduced to half its amount compared to 2013,  – to 0.12% and by 2.5 times compared to 2008 (0.26% of world gdp) (figure 1) (main administration of statistics in ukraine: the official site; gross domestic product of ukraine, structure and dynamics; website of world bank). the decline in the ukrainian economy was accompanied by a dramatic decline in its export potential and, according to the results of 2015, ukraine’s commodity export amounted to 0.23% of world exports, what is 1.5 times and 1.8 times less than in 2013 and 2008 (ghorbulin, 2017). according to the expert estimates of the national institute for strategic studies, losses of the consolidation budget in the result of the annexation of crimea and the occupation of the donbas region during 2013–2014 are about 5 billion dollars, in particular, 4 billion dollars in tax revenues (ghorbulin, vlasjuk, libanova, ljashenko, 2015, p. 162). direct investments in ukraine began to fall before the events of 2014. in 2013, foreign direct investments 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 2008 2009 2010 2011 2012 2013 2014 2015 2016 fig. 1. nominal gdp of ukraine from 2008 to 2016, million usd source: created by the author, based on the world bank 2016 (website of world bank) baltic journal of economic studies 361 vol. 3, no. 5, 2017 were reduced by 46.4% from 8.4 billion usd in 2012 as a result of a reduction in demand for ukrainian exports, worsening of the political situation and economic uncertainty in ukraine. similar fall of global investment flows was in 2009 as a result of world financial crisis. then foreign direct investments in ukraine were reduced by 56%. however, the fall of foreign direct investments in ukraine by more than ten times in 2014 became unprecedented both in the history of ukraine and in comparison with neighbouring countries. even taking into account the growth in 2015 (2.96 billion usd) and during the 6 months in 2016 (2.13 billion usd), foreign direct investments haven’t still reached the level of 2013 and all the more the level of 2012 (direct investments in ukraine: war and peace). in addition, this growth is largely due to the capitalization increase of banks with foreign capital (tarasenko, 2017, p. 184-185). consequently, both gdp figures and the indicator of foreign direct investments in ukraine during 2013–2016 showed steady negative dynamics. negative economic processes, high level of threats, challenges, and a large number of issues in the ukrainian economy affect the level of economic security insurance in ukraine (figure 2). according to the methodological recommendations for calculating the level of economic security in ukraine, approved by decree of the ministry of economic development and trade of ukraine no. 1277 on october 29, 2013 (methodological recommendations for the calculation of level of ukraine’s economic security, 2013), the integral indicator of economic security should stay at the level of 60-79% that is satisfactory zone of economic security. it should be noted, that the level of economic security was below the corresponding level before the beginning of military activities in the east of ukraine, but with the beginning of such actions, it continued to decrease. 3.3. the activity of enterprises in luhansk region in the context of post-conflict transformation based on the dynamics of macroeconomic indicators of ukraine during 2013–2016, it is possible to make a preliminary conclusion about the difficult conditions of functioning of domestic enterprises, and the enterprises of the luhansk region in particular. such complex conditions further deteriorate structural features of the economy of the east of ukraine. as it is stated in the state strategy of regional development for the period up to 2020, approved by decree of the cabinet of ministers of ukraine dated august 6, 2014 no. 385 (state strategy of regional development for the period until 2020, 2014), backward technology base and industry’s monofunctionality in donetsk and luhansk regions, raw materials nature of export and its focus mainly on the russian market conserve the imperfect structure of the economy, dependence on external markets, particularly energy resources. state industrial policy, which was based on preferences for specific territories and companies in the coal and steel industry, did not enhance the competitiveness of these regions. policies of local authorities have led to the closed nature of the regional markets and their actual integration into the russian market. as a result, in addition to the economic problems of these regions against the background of relatively high average wages compared to other regions, there increased intra-regional disparities with regard to the development of infrastructure, public services in education, culture, health, environment, and others. developing are mainly regional centres, and mining and rural areas are in decline. the result of these trends is a significant stratification of the population by income, unemployment, the social discontent of residents in the regions, the creation of grounds for separatism manifestations (state strategy of regional development for the period until 2020, 2014). general level of economical security of ukraine 49,00% 45,00% 43,00% 48,00% 50,00% 0,42 0,44 0,46 0,48 0,5 0,52 2010 2011 2012 2013 2014 2015 2016 general level of economical security of ukraine fig. 2. dynamics of the integral indicator of the level of economic security of ukraine in 2011–2015, % source: according to the ministry of economic development and trade of ukraine (ministry of economic trade and development of ukraine: the official site; boghma, 2016) baltic journal of economic studies 362 vol. 3, no. 5, 2017 according to the luhansk region development strategy for the period until 2020 (strategy for development of luhansk region until 2020, 2016) the strategic goal for the development of the region is the rehabilitation of the economy and sustainable development. the economic development, in its turn, depends on the extent, to which business entities are capable of producing competitively viable on world markets production and is able to provide an appropriate level of economic security. today’s situation requires enterprises to implement modern instruments for the protection of their activity. ensuring the economic security of each enterprise becomes one of the main goals of managing enterprises and the region as the most important elements of national security. the sharp deterioration in the region’s economic situation (except objective factors) resulted from the unbalanced development of its northern and southern districts. the government-controlled area contains 25.9% of the total number of industrial enterprises, mainly engaged in the production of chemicals and chemical products, refined petroleum products, paper and paper products, and mining, as well as small enterprises producing textiles, clothing, and food products. the major industrial enterprises are located in severodonetsk city, rubizhne city, lysychansk city, kreminna city, and there are agricultural companies and small food processing enterprises in the northern parts of the region. machine building, metallurgical production, fabricated metal products enterprises, and enterprises engaged in extracting anthracite thermal coal remained in the non-government controlled area. some industrial enterprises (such as alchevsk metallurgical plant private joint stock company) re-registered in the governmentcontrolled area, submit the statistical and tax reporting under ukrainian legislation, and pay taxes to the appropriate budgets, but their production facilities remain in the temporarily occupied territory (strategy for development of luhansk region until 2020, 2016). prior to the anti-terrorist operation, luhansk region had significant economic potential and was one of the five strongest industrial and economic regions in ukraine. in the context of the general economic crisis, the armed conflict in eastern ukraine has significantly worsened the economic situation in luhansk region for january-december 2015 compared to januarydecember 2014: • industrial production index fell by 66% (in ukraine as a whole it fell by 13.0%); • agricultural production index fell by 19.6% (in ukraine by 4.8%); • capital investment declined by 73.9% (in ukraine by 1.7%); • the volume of exports reduced by 86.4% (in ukraine by 29.3%); • foreign direct investment declined by 13.2% (in ukraine by 5.5%) (main administration of statistics in ukraine: the official site; strategy for development of luhansk region until 2020, 2016). the negative dynamics of economic indicators in luhansk region is even greater than in ukraine as a whole. figure 3 shows the dynamics of foreign trade in luhansk region in recent years. 0 1000 2000 3000 4000 2013 2014 2015 2016 the volume of foreign trade in the luhansk region, uah thou. volume of exports of goods volume of import of goods fig. 3. the amount of foreign trade in luhansk region source: created by the author, based on state statistics service of ukraine. retrieved december 1, 2016, from http://ukrstat.gov.ua it is clear that since the beginning of the armed conflict in the east of ukraine, the amount of import and export has reduced greatly. for a more detailed analysis of the post-conflict transformation of luhansk region’s economy, we will analyse some of the quantitative indicators of the functioning of enterprises in this region and compare periods before the beginning of armed conflict till the present time (table 1). data analysis in table 1 allows us to conclude that in the result of the armed conflict, which has taken place for more than three years in the luhansk region, all the main indicators of activity of enterprises have reduced by almost three times. the number of enterprises in luhansk region before and after armed conflict has been decreased by 71.6%. since 2015, there has been a postconflict transformation of the economy and a slight growth nearly by 9% over two years. in 2015, the gross regional product of luhansk region fell to 14079 uah per person (main administration of statistics in luhansk region: the official site), which is the lowest index among all regions of ukraine. according to the results of the monitoring of the socioeconomic development of regions of ukraine, luhansk region took the 24th place by 12 complex indicators, which is the last but one (strategy for development of luhansk region until 2020, 2016). table 1 shows the dynamics of the enterprises of all branches, but it is necessary to study the production itself. as of 01.01.2016, 489 industrial enterprises operated on the territory under the control of the ukrainian authorities, (48.0% of the total number of industrial enterprises before the beginning of the antiterrorist operation): 9 large enterprises, 99 medium enterprises and 381 small enterprises (strategy for development of luhansk region until 2020, 2016; baltic journal of economic studies 363 vol. 3, no. 5, 2017 main administration of statistics in luhansk region: the official site). the industrial production index in lugansk region in january-december 2014 compared to the corresponding period of 2013 was 58.0%. the index of industrial production in luhansk region in januarydecember 2015 compared to january-december 2014 was 34.0%. the amount of industrial products sold in luhansk region in january-december 2014 was 45.4 billion uah, which is by 22.3 billion uah less than in the corresponding period of the previous year (67.7 billion uah). in the national amount of sold products, this indicator is 3.8%, for which the region ranks 8th among the regions of ukraine (in 2013 – the 5th place). the amount of industrial production sold in januarydecember 2015 was 24.8 billion uah, which is 1.7% of the national economy (strategy for development of luhansk region until 2020, 2016; main administration of statistics in luhansk region: the official site). consequently, based on these data, it is possible to make a conclusion not only about the negative dynamics of absolute indicators of enterprises in luhansk region but also about the significant structural changes in the ukrainian economy as a consequence of the postconflict transformation in ukraine. 3.4 modern threats and risks to the economic safety of enterprises in luhansk region it is clear that the situation that has taken place in the east of ukraine negatively affects the economic security of enterprises, causes new threats and challenges to them. it is necessary to study such threats and challenges, their nature in order to enable ukrainian enterprises to resist them and to maintain the state of economic security. generally, the threats to enterprises are divided into general and specific. general threats (saturation of the market, illicit mergers and acquisitions, resource shortage, etc.) are well-known and do not call for further study. therefore, it would seem advisable to study specific threats to enterprises in luhansk region in the context of post-conflict transformation. figure 4 shows such threats. the presented threats are based on the scenario analysis and the expert survey method. the respondents are middle and top management executives of the enterprises located in luhansk region. the group of experts is 37 people from 16 middle and large enterprises of different industry affiliates. the survey was conducted during the 3rd quarter of 2017. it is necessary to describe the following groups of threats to enterprises of lugansk region in the context of the post-conflict transformation in order to determine measures, which are necessary to be taken by the enterprise to overcome such threats as a maximum and, as a minimum, to determine the principal plan of actions of the enterprise. such a description of some groups of threats is shown in table 2. commenting on table 2, it should be noted that there is no opportunity for ukrainian enterprises to resist the impact of most of the mentioned threats and the only one plan of actions is the adaptation to new operating conditions. at the same time, the impact of some of these threats is possible if not to resist but to reduce by the certain plan of actions of the enterprises. in order to secure the enterprises of luhansk region from the impact of such threats, it is proposed to predetermine the plan of actions at the level of each enterprise on the basis of the tuple. for this matter, it is convenient to use such a tool as a tuple in the form of sc = <thr, act, subj, res>, where sc is a plan of actions of an enterprise to resist certain threats or to reduce their impact; thr is a description of a certain threat, which is defined empirically, based on scenario analysis or expert survey; act are specific actions of an enterprise in response to a certain threat; subj is a subject of action from the number of managerial bodies in an enterprise who will directly deal with the neutralization of the identified threat or the reduction of its impact; res table 1 the main indicators of the activity of enterprises in luhansk region indicators of the activity of enterprises year 2012* 2013* 2014** 2015** 2016** 1 number of enterprises, entities 10732 11385 3233 3354 3526 2 amount of sold products (goods, services) of enterprises, million uah 117310,4 104236,0 45796,5 34583,9 48333,1 3 number of employees employed at enterprises, thousand people 357,2 335,9 130,2 111,9 104,4 4 number of employees at enterprises, thousand people 354,1 332,8 129,2 110,9 103,3 5 labour costs, million uah 117344,9 127348,7 6205,1 5033,1 5671,3 note: *data are given excluding the results of the activity of banks and state-financed establishments, excluding the change of the main type of economic activity at enterprises. **excluding the results of activity of banks, state-financed establishments and the part of the area where the anti-terrorist operation is being conducted. source: created by the author, based on state statistics service of ukraine. retrieved december 1, 2016, from http://ukrstat.gov.ua baltic journal of economic studies 364 vol. 3, no. 5, 2017 threats to enterprises of luhansk region general threats energy threats threats of economic nature complicated geopolitical conditions isolation of luhansk region from the united power grid of ukraine inability to attract investment frozen military conflict dependence on energy from abroad fall in effective demand of the population lack of clear system of legal protection of private enterprise reduction of the internal resource and raw material base of the fuel and energy complex raw material export and its orientation mainly to the russian market instability of the financial and credit system domination of power-consuming industries inflation forced militarization of the economy low level of implementation of energyefficient technologies violation of traditional economic relations between producers and consumers loss of sales markets transport threats threats of socio-demographic nature limited access to investment, financial, property, natural resources temporary cessation of cargo movement through a collision line uncontrolled and unpredictable migration processes limited railway communications on the territory under the control of ukrainian authorities lack of labour power, shady employment lack of modern technology and equipment complicated demographic situation, quantitatively and structurally loss of a part of scientific and pedagogical potential lack of air traffic on the area threats of a scientific and technical nature complicated transport and logistics connection for the population and business entities fig. 4. threats to enterprises of luhansk region in the context of post-conflict transformation source: created by the author, based on (strategy for development of luhansk region until 2020, 2016; lynnyk, artemenko, 2013; ghorbulin, vlasjuk, libanova, ljashenko, 2015; ghorbulin, 2017; tarasenko, 2017) table 2 the description of the main threats (groups of threats) to enterprises of luhansk region in the context of the post-conflict transformation group of threats nature of impact the possibility of an enterprise to resist the impact of threats the level of negative impact on the activity of enterprises in the current period the main plan of actions general threats long-term absent high adaptation energy threats long-term absent high adaptation, technical re-equipment, implementation of energy-efficient technologies threats of economic nature medium-term absent high search for new markets, reorganization of production transport threats medium-term limited medium search for new logistics routes threats of sociodemographic nature long-term absent medium adaptation threats of a scientific and technical nature medium-term limited law search for resources in other regions of ukraine source: suggested by the authors baltic journal of economic studies 365 vol. 3, no. 5, 2017 are necessary resources of different nature (financial, human, technical) to respond to the threat and sources of obtaining such resources by an enterprise. defining of the plan of actions for enterprises in luhansk region in the context of post-conflict transformation will not allow resisting all threats, but will allow preventively identifying the necessary actions for responding to such threats and positively affect the economic security of such enterprises. 4. conclusions economic security at all levels  – from the individual enterprise to the national economy, is an independent important category which is essentially linked to sustainable development. it has been shown that the armed conflict in the east of ukraine led to negative economic consequences both at the level of economy of ukraine as a whole and of the economy of luhansk region during 2014– 2016. although recently economic indicators of luhansk region have improved due to post-conflict transformation, the general situation of the economy of luhansk region in the context of the conflict in the east of ukraine remains negative. in the context of the post-conflict transformation, the enterprises of luhansk region have substantially reduced the main indicators of their economic activity. the economic security of the enterprises of luhansk region has been decreased, as well as a result of actualization of threats. such threats have specific nature and arose as the result of the postconflict transformation in ukraine. the main threats to enterprises of luhansk region, which negatively affected their economic security, are general threats, energetic, economic, transport threats, and threats of sociodemographic and scientific and technical nature. for an individual enterprise of luhansk region, some of these threats are unsustainable and the only one way for such enterprise is an adaptation. however, it is possible to reduce the negative impact of some threats. for this matter, it is proposed to develop a plan of actions in the presented tuple form, which are aimed at reducing the negative impact of a particular threat. to resist a significant number of threats to enterprises of luhansk region, the actions of the government are necessary, and without them and without normalization of the situation in the east of ukraine, such threats remain actual and unsustainable for each individual enterprise. references: boghma, o. s. (2016). analiz rivnja ekonomichnoji bezpeky ukrajiny za osnovnymy skladovymy [analysis of the level of economic security of ukraine on the main components]. visnyk of uzhhorod national university, 8(1): 11-14. constitution of ukraine: law of ukraine, june 28, 1996 (1996). vidomosti. verkhovnoyi rady ukrayiny [bulletin of the verkhovna rada of ukraine], 30, 141. (in ukr.) direct investments in ukraine: war and peace: electronic resource. retrieved from: http://dia.dp.gov.ua/pryamiinozemni-investiciї-v-ukraїni-vijna-i-mir. ghorbulin, v. p. (2017). svitova ghibrydna vijna: ukrajinsjkyj front [the world hybrid war: the ukrainian front], kharkiv: folio, 496 p. ghorbulin, v. p., vlasjuk, o. s., libanova e. m., ljashenko o. m. (2015). donbas i krym: cina povernennja [donbass and crimea: the price of return], kyiv : niss, 474 p. humeniuk, a. m. 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(2015). ekonomichna bezpeka pidpryjemstva: analiz najavnykh vyznachenj [economic security of an enterprise: an analysis of existing definitions] visnyk of poltava university of economics and trade. 69: 90–95. ljashenko, a. n. (2008). vzaimoobuslovlennost i vzaimozavisimost ekonomicheskoy bezopasnosti i razvitiya predpriyatiya [interdependence and interdependence of economic security and enterprise development]. visnyk of donetsk state university of management, 45: 162-171. [in ukrainian] lynnyk, o. i., artemenko, n. v. (2013). strateghija ekonomichnoji bezpeky pidpryjemstva jak faktor zmenshennja vplyvu zovnishnikh ta vnutrishnikh zaghroz [the strategy of economic security of the enterprise as a factor of reducing the impact of external and internal threats]. visnyk of ntu “khpi”, 1040: 159-169. main administration of statistics in luhansk region: the official site. electronic resource. retrieved from: http://www.ukrstat.gov.ua main administration of statistics in ukraine: the official site. electronic resource. retrieved from: http://www.lg.ukrstat.gov.ua baltic journal of economic studies 366 vol. 3, no. 5, 2017 methodological recommendations for the calculation of level of ukraine's economic security approved by the ministry of economic development and. trade of ukraine 29.10.2013, № 1277. electronic resource. retrieved from: http://www.me.gov.ua/documents/list?lang=uk-ua&tag=metodichni rekomendatsii ministry of economic trade and development of ukraine: the official site. electronic resource. retrieved from: http://www.me.gov.ua/ mojsejenko, i. p., marchenko, o. m. (2011). upravlinnja finansovo-ekonomichnoju bezpekoju pidpryjemstva [management of financial and economic security of an enterprise]. lviv: lviv derzhavniy universitet vnutrishnich sprav, 380 p. prus, n. v. (2014). systema ekonomichnoji bezpeky pidpryjemstva: ponjattja, sutnistj, pryncypy [system of economic security of the enterprise: concept, essence, principles], global and national issues of economics, vol. 2, pp. 675-679 retrieved from: http://www.global-national.in.ua/archive/2-2014/138.pdf state strategy of regional development for the period until 2020, approved by decree of the cabinet of ministers of ukraine on 6 august 2014, № 385 : the official site of verkhovna rada of ukraine. electronic resource. retrieved from: http://zakon2.rada.gov.ua/laws/show/385-2014-%d0%bf#n11 strategy for development of luhansk region until 2020 (2016). severodonetsk: luhansk regional state administration, 126 p. strategy for development of luhansk region. electronic resource. retrieved from: https://strategy2020.lg.ua tarasenko, o. ju. (2017). ekonomichna bezpeka ukrajiny: zaghrozy ta perspektyvy zabezpechennja [ukraine's economic security: threats and security prospects ]. visnyk dsea. 40: 65-72. website of world bank. (n.d.). retrieved from: http://www.worldbank.org zubok, m. i., rubcov, v.s., jaremenko, s. m., ghusarov v.gh., chernov (2012). ekonomichna bezpeka subjektiv pidpryjemnyctva [economic security of entrepreneurs]. kyiv: mizhnarodniy fond sotsial’noyi adaptatsii, 226 p. baltic journal of economic studies 376 vol. 3, no. 5, 2017 corresponding author: 1 department of international economic relations, ivan franko national university of lviv. e-mail: iryna.prykhodko2015@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-376-382 theories of the spatial economics in terms of economic integration iryna prykhodko1 ivan franko national university of lviv, ukraine abstract. the purpose of the study is to clarify theories of “spatial economics” and to analyse the theory of “new economic geography”, in particular, to find out peculiarities of the spatial economics theories applying in the context of integration of ukraine into the european union and to simulate theoretically the consequences of ukraine’s accession to this integration group. methodology. the theoretical and methodological basis of the research is the principles of the spatial economics theories, scientific works and researches of domestic and foreign scientists. the methodological grounds for the study are both general scientific and special scientific methods, which in the complex are used to achieve the purpose of the study. the historical-evolutionary and critical-constructive analysis, theoretical generalization (in the study of approaches to the analysis of the spatial economics theories); induction, deduction, generalization and comparison (in the study of the main principles of the theories of spatial economics using in terms of economic integration); abstract-logical and graphic interpretation (in the study of the peculiarities of integration of ukraine into the european union) are used. results. the basic idea of the spatial economics theory is that the size of the market interacts with economies of scale at the firm level and transport costs, and forms the division of economic activity of the country in a spatial aspect. applying the basic principles of the spatial economics theories to ukraine made it possible to distinguish several main features: the difference in the country regions development; the probability of becoming a new “periphery” of the european union; the relations between ukraine and european union in the “centre-periphery” aspect depend on the economy’s openness and the cross-border interaction of ukraine with the so-called “eastern periphery” of the european union. practical implications are to develop recommendations for the successful economic integration of ukraine into the european union. value/originality is the theoretical generalization and development of the concepts of spatial economics in the international economic integration process. the highlighted theoretical positions can be used for further study of theories of spatial economics. key words: international economic integration, theory of new economic geography, periphery, spatial economics, economies of scale, economic growth. jel classification: f02, f15, f43 1. introduction the spatial theories of international trade and “new economic geography” theory make it possible to reveal the nature and peculiarities of the international economic integration process. the high level of interregional differentiation determines the urgency of the research of the european integration process within the theories of spatial economics. the first spatial theory of economics model is described by j. von thünen in “the isolated state in relation to agriculture and political economy” (thünen, 1826). graphically the model is presented in the form of six concentric circles, where each next circle includes the previous one and indicates the use of land around the market centre: a) the “free” economy; b) the forestry, which supplies products to the “centre” (1st circle); c) the farm with the typical crop rotation cycle; d) the economy is based on the main products of circle such as crops, land is used less intensively than in the previous circle; e) classical three-field grain farming; f ) extensive stockbreeding, the agriculture only for consumer purposes. j. von thünen described in his model the combination and interaction of three factors of production placement: the agricultural products prices, rent, and distance to the market (thünen, 1826). the main idea of j. von thünen is the denial of absolutely advantageous use of land existence because it depends on natural, social, and economic conditions. the distance from the “centre” causes the farming baltic journal of economic studies 377 vol. 3, no. 5, 2017 extensiveness, increases the transportation costs, and the cost of output per unit, although the market value of grain is approximately the same in all land systems. another model divides “world economy” into “the main centre” and “external peripheral areas”. “the main centre” indicates the greatest capital, goods and labour concentration, and the nature of the interaction between central and peripheral structures is determined by the flows’ direction, transforming the space into a kind of force field. the “peripherals” imports the capital by converting it into the cheap resources and the cheap consumption. the “centre” imposes to the “periphery” its value of standards so that “peripheral” territories receive the status of “developing countries” (alhovitska, 2008). w. christaller (christaller, 1933) described the spatial laws of cities location, which are needed to improve the territorial organization of society and to improve the administrative-territorial order of germany in his work “the central place in southern germany”. under “the central place” w. christaller understood a big city, a metropolis that is provided with all necessary goods by the cities around. the main assumption of christaller’s model is: the small cells settlements that are perfectly placed and form a regular triangular mesh, zones of goods’ sale are evenly distributed and have the shortest way to the consumers. one can say that in any “centre” we have the same number of “cells” (settlements). w. christaller has also introduced the concept of “range of services and products sales” that determinates the low profitability limit and the production efficiency and indicated three levels of the settlements’ size: the settlement oriented on the sale; the transport orientation, and the administrative orientation. the “centre-periphery” concept in the classical form was proposed by j. friedmann in “regional development policy: a case study of venezuela” (friedmann, 1966). j. friedmann’s model determines the “centre” as a developed city with the latest technologies, and the “periphery” means the less developed area around that supplies resources to the “centre” and at the same time consumes the new technologies. j. friedmann distinguished four types of economic districts: the core districts with highly developed branches of economy, high technologies and fast modern innovations; the rapidly developing peripheral regions that use the innovations of the core regions; the new territories development areas; the depressed areas – the underdeveloped areas of the distant periphery. j. friedmann divides “centre-periphery” relations into four levels: 1) the country territory with a certain number of core districts with the certain influence spheres; 2) the most significant core forms around a polarized region with a wide periphery; 3) peripheral regions that grow into the regional cores; 4) interperipheral relations (friedmann, 1966). the economy of two regions and two factors of production were proposed by j.-f. tyss (tyss, 2013). one production factor (unskilled labour) is spatial and fixed and is used as a resource in the traditional sector. the second factor (skilled labour) is spatially mobile and is used as a resource in the industrial sector. in the so-called “centre-periphery” model, two main effects are present: companies’ effect and labour effect. the scientist suggested the existence of two different regions’ sizes; the larger one presents the high demand for the manufactured goods that increases the number of firms with highly paid workers. the growing assortment of the local production is the result of the increasing number of firms. this region attracts new workers causing cumulative causality process that leads to the accumulation of firms and skilled workers in the same region  – “in the centre”, while the second region becomes the “periphery” territory. 2. the scale effect in spatial economics theories p. krugman proved that the economies of scale in production along with consumers needs for the diversity can promote trade between the countries, which are identical from the point of view of technology and the factors of production provision (krugman, 1991). the world market allows some circumstances where the large states with low income have more opportunities to benefit from trade than small countries with low income. for example, in case of trade in goods where production involves increasing the scale of the return flow, large countries should have an advantage because of their internal markets capacious facilitate the realization of scale (dovbenko, 2008). the overall international economic integration effect is a set of the diversified effects in the short and long terms (mokiy, chornyy, yuzba, 2008). in addition to benefits associated with the trade balances settlement, countries benefit from the specialization, economies of scale, and welfare growth. economies of scale effects are directly related to the markets sizes, which increase with a free trade area and customs union creation. reducing costs and respectively commodity prices reducing cause the internal and external demand growth and, in turn, stimulate innovation and lead to a general acceleration of economic growth. another advantage is the increase of inter-company competition as a result of the trade barriers removal. the maximization of these effects is achieved within the scope of a single internal market functioning in the integration association, the economic and monetary union (mokiy, chornyy, yuzba, 2008). i. lishchynskyi notes the following pattern: the greater positive effect of scale causes the more incentives for the agglomeration arise. firms try to reduce their costs by the consolidating production and placing near the most important suppliers (lishchynskyi, 2009). according to e. helpman, the bigger country benefits from economies of scale and it should be expected that these benefits will take the form of relatively lower baltic journal of economic studies 378 vol. 3, no. 5, 2017 prices for industrial products. consequently, one can note, that in the case when two countries are in autarky conditions and are identical in all respects, except their sizes, the larger country will have a relatively lower price for the industrial goods. however, if these countries begin to trade with each other, trade between them will not be inter-sectoral, but intra-industry. g. grubel and p. lloyd proposed an intra-industry trade index (iit), known as the grubel-lloyd’s index (grubel, lloyd, 1975): iit x x x x ijk ijk ikj ijk ikj = { } + 2min , , (1) і – industry index j; k – country index; xijk  – export of products from the industry і from country j to country k. the index can get 0 (when there is no intra-industry trade) or 1 (in case of intra-industry trade). p. krugman’s approach is based on the function of benefits of dixit-stiglitz (dixit, stiglitz, 1997). in simplified form, this function is: u x i n =       = ∑ σ σ 1 1 ,..., . (2) function (2) makes it possible to make models with any number of similar but different goods і, and the substitution elasticity of products is uniquely determined by the parameter σ. demand for goods і depends on its price pi and prices for other goods pj are as follows: x kpi i= − − 1 1 σ , (3) k y pj j n = − − = ∑ σ σ1 1,..., , (4) where y – total income/expenses of consumers; the indicator in the denominator (4) can be interpreted as a general index of prices. a similar preferences function is quite convenient for monopolistic competition modelling case: each firm produces its goods i; since the goods are slightly different, firms sell their goods at a price that exceeds the marginal cost, which allows them to cover the constant production costs. the number of firms (and, accordingly, goods) is n endogenous. p. krugman’s approach (krugman, 1991) differs from the positions of his predecessors of the study because he builds his analysis on the assumption that the only factor of production is labour. paul krugman’s main idea is the assertion that economies of scale can be an independent cause of international trade, even in case of the comparative advantages absence. consequently, let l be the only production factor, then all costs can be treated as labour costs: l n f cx= +( ) , (5) n l f = σ . (6) when a country begins to trade, internal firms continue to produce their own goods but domestic consumers buy foreign goods too. at the same time, trade benefits arise not because of differences between countries, according to the traditional theory of international trade but due to the similarity of countries. suppose, two countries do not differ in production (expenses) conditions and consumer tastes and use respectively l 1 and l 2 . in the autarky conditions, the number of goods (brands) is: n l f 1 1= σ , n l f 2 2= σ . (7) when countries begin to trade, with full employment, the total number of goods (brands) becomes the same: l l f n n1 2 1 2 + = + σ . (8) this situation is favourable for consumers because of the goods usefulness enhancement along with stable prices and the wide assortment of goods. as for the transport costs between the two regions, p. krugman proposed two assumptions: 1) transportation costs of agricultural products are zero; 2) transportation costs for industrial goods are in the form of so-called “iceberg”. p. krugman predicted that the transport costs for the transportation of goods are quite high and it is not favourable for the transportation of goods between regions. in this case, the regional economy shows the symmetrical structure of production. in case of trade barriers absence between the countries (tariff and nontariff ), and the transportation costs are minimized, in economic terms, the supplier firms have a little difference between the consumers inside the country and outside it (matveenko, 2011). the integration effects according to the theory of p. krugman are: the number of firms represented in the market of each country increases and foreign producers enter the market; the total number of firms in the world decrease; the remaining firms in the market become larger, and as a result, more efficient. consequently, the trade barriers abolition leads to the consolidation of firms. at the same time, integration has some negative consequences: many firms of the integration group will disappear. p. krugman assumed that, conversely, all participants would benefit from the integration due to the average production cost reducing and the increasing of the range of products on the market. in turn, k. lancaster showed that due to economies of scale the equivalent number of differentiated goods will be larger because of the larger market. accordingly, it can be assumed that the intra-industry trade volume will be positively correlated with the national market size, that is, it will be larger in a country that has common borders with its trading partners. the use of variables such as distance and borders allows testing the hypothesis that, in addition to the importance of distances for intrabaltic journal of economic studies 379 vol. 3, no. 5, 2017 industry trade, common borders are important too (lancaster, 1980). p. falvey discovered that the intra-industry trade volume varies conversely in relation to the tariffs changes and trade restrictions in general (falvey, 2007). a. yermalonok and y. semak in their studies consider synergistic effects of the economic integration (yermalonok, semak, 2008). analysing the regional integration economic effects, they came to the conclusion that the agglomeration and emergent effects are the main mechanisms for the synergistic integration effect creating. the agglomeration effect is associated with the quantitative indicators increase, while it is noted the transformation of the quantitative indicators into the qualitative ones and it is expressed in economies of scale. an emergent effect is related to the integration union essence as a system by reverse relations. at the same time, both positive and negative effects are possible. one can say that joining the integration union creates a single market with the major firms that are the most effective and able to withstand the competitive pressure. in addition, the removal of political and economic barriers leads to the increasing trade between the members of the integration union and the reducing transaction costs. the scale effect can be viewed through the prism of dynamic effects. in the short run, one should not expect significant positive results, but inefficient companies will gradually disappear from the internal market, the foreign direct investment inflow will increase and the technology will change, etc. a new theory argues that the main part of the trade exchange, particularly the intra-industry trade between countries with the similar specialization is formed rather by the increasing returns on scale production and not by using the national advantages factors. the demand for products is decisive in the growth rate of production. p. krugman predicts that the imperfect competition and the increasing returns make some opportunities for the strategic trade programs introduction to create the comparative advantages by the promotion and supporting those sectors where economies of scale is possible (smal, 2009). the traditional concepts of expansion and redirection of trade flows are realized in cases of economies of scale at the enterprise level but they need to be supplemented by new ones, namely: the cost reduction effect and the decrease of trading activity. the first one is related to the average production costs decrease with the growth of domestic production output due to the formation of integration areas, the second one – with the cheap import substitution from non-member countries by domestic products, which became cheaper due to economies of scale. the effect of costs reducing is stronger than the decrease of trading activity effect, and, therefore, it does not exclude the possibility of obtaining net benefits (kavtsenyuk, 2008). economies of scale are directly related to the size of the market, which increases with the free trade area creation, a customs union creation and so on. the costs reduction and, correspondingly, commodity prices reduction help to increase both internal and external demand and, in turn, stimulates innovations and leads to the economic growth. another advantage is the revival of inter-firm competition, which is caused by the trade barriers removal. it is possible to maximize these effects within the framework of common market, economic and monetary unions of the integration association. a. filipenko refers the technological upgrades to the advantages too (filipenko, 2005). the most obvious consequence of the customs union is the expansion of the market. market expansion promotes the economies of scale in many industries, which cannot be achieved on narrow national markets. 3. the “centre-periphery” model in the european integration process we highlight some peculiarities of the eu enlargement process: countries are integrating into the european union gradually moving from the free trade area to the political and economic unions, and each country needs different time for it; the eu is not a homogeneous integration group (there are rich and poor countries in political and economic aspects); the complete successful integration of countries into the eu is possible within the overcoming of obstacles on the way to this integration group. the eu countries are represented as a “core of gravity” (core 1) (fig. 1). cores 1 and 2 are highly developed member countries. the european union, in particular, can distinguish the central core 1, which consists of only six founding countries, but with the greatest political influence on the processes taking place within the framework of the integration group. the countries integrated in (and after) 2004 are shown in the core 3, as well as the countries in core 4 belong to the so-called “internal periphery”, and have no significant impact on the integration process acceleration and cannot obtain all rights and benefits without a transitional period. core 3 includes countries that form the internal periphery (the eu member states integrated after 2004 – poland, hungary, cyprus, slovakia, czech republic, slovenia, estonia, latvia, lithuania, malta). core 4 includes non-member countries but with a chance of successful integration through fulfilling certain conditions and overcoming the internal political and economic barriers. the peculiarity of the core 4 is that a country may remain outside the integration group for a long time or never integrate. countries that form baltic journal of economic studies 380 vol. 3, no. 5, 2017 the external periphery are candidate countries – albania, bosnia and herzegovina, montenegro, moldova); association agreement between the european union and ukraine gives an opportunity to the ukrainian enterprises to receive free access to the market of the eu member states and, consequently, the benefits arising from the growth of sales of ukrainian products. however, on the other hand, the inflow of european goods to ukraine is expected. it is supposed, p.  krugman’s open economy model implies ukraine’s integration into the eu. in case of the ukrainian market opening for eu member states, the demand curve d and the supply curve s of the industry will take the form represented in fig. 2 with the opening of the ukrainian market for goods from eu countries, the supply curve s will move to position s1, which, in turn, will mean an increase in the number of firms in the ukrainian market. the increase in the number of goods from the eu market will cause the price reduction in the internal market of ukraine to p1. due to the scale effect growth and the demand growth on the large assortment of products, even countries with similar economies and production structure can benefit because they trade in differentiated goods. fig. 2. open economy model of p. krugman source: (krugman, 1991) p. krugman argued that the labour market is characterized by the high level of interregional migration, which promotes the integration of firms and workers in the integration process with a positive effect of scale and trade costs (krugman, 1991). in the “core-periphery” model of p. krugman (izotov, 2013), it is assumed the existence of two types of production in two regions. according to the model, all individuals in the economy jointly participate in the formation of cobb-douglas function of utility: u c ñì à= −µ µ1 , (9) where ñà  – agricultural products consumption; ñì  – consumption of the aggregate value of the industrial product. in equation (9), an industrial product will always have a share of costs μ, which is one of the key parameters that determine convergence or divergence of regions. suppose, there are two regions  – ukraine and the eu. ukraine acts as the single largest region and the european union unites 28 regions that act as the only entity. the next assumption is the abolition of all trade restrictions. so, we can assume two varieties of developments: a) the european union “entices” the labour force and the main types of production, and ukraine will remain an agrarian periphery. b) the european union will enter the ukrainian market and place some types of production here, the inflow of labour force will increase, and foreign direct investment will grow. the positive effect of scale will encourage firms from the eu to deploy their production facilities on the territory of ukraine and serve more consumers at a distance. the main idea of p. krugman predicts the competition growth in the internal market of goods and labour with the new firm appearance and it will reduce the company’s profits but the increasing demand for more expensive labour will increase the goods differentiation. fig. 1. the “centre-periphery” model in the european union source: made by the author baltic journal of economic studies 381 vol. 3, no. 5, 2017 the migration in the economic integration process will lead to a fall in labour competition that will increase the company’s profits and encourage it to place the production here in order to get the benefits of return on growth scale. f. graham argues that, in the economic integration process, a small country will be filled with goods manufactured in sectors with a high level of positive scale effect of a large country (graham, 1923). the low level of economic integration provides a single equilibrium with an equable labour division in both regions. the reduced trading costs make possible three equilibrium situations in the industrial location model: one is unstable  – with an equable labour distribution, and two stable ones – with a labour force concentration in one of two regions. at an average level of integration, the centripetal forces are too weak to unbalance the initial symmetric equilibrium. according to p. krugman, the scale effect exists exclusively at the firm level and the centrifugal factors that make firms focus on the goods production in one region, arise from three components: scale effect, transport costs, and mobility of factors production. the company will produce goods near the markets for minimal transport costs. in addition, p. krugman outlined two groups of factors of the competitive advantages of the territories: 1) natural resources availability, favourable geographic and transport location, which allows minimizing transport costs; 2) artificially created advantages of the country (agglomeration effect due to the population density, which provides economies of scale), population mobility, developed infrastructure, etc. (krugman, 1991). 4. conclusion analysing the theory of “new economic geography” in the light of ukraine’s integration to the eu, one can come to the conclusions: the deeper economic integration into the european union cause the greater inclusion of “peripheries” to the main territory, while “centre-countries” tend to close their borders. ukraine is the complicated case because of the war with russia. for the european union, ukraine has a status of the “periphery” not only in the geographical terms but because of the socio-economic indicators. today, we can assume that the eu members that have joined the eu in 2004 are the “eastern periphery”, while the ukrainian integration to the eu will inevitably arise the competition among “peripheries”. the european integration process provides the territorial division of the country rather provisional. each region of ukraine will have the disunity from the administrative functions. the “centre”-regions will grow faster due to the agglomeration effect and the specialization (production) of goods in the so-called “new” sectors and due to its geographical location. the “peripheral” territories that are specialized in the traditional goods production will benefit from the overall 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(2013). the space of economic activity determination due to the transportation costs. economics and geography – spb: international socio-economic centre of research “leontief centre”, 314 p. yermalenok, a. e., semak, e. a. (2008). mezhdunarodnye integratsionnye obedineniya: sinergeticheskiy effekt [international integration unions: synergetic effect]. belarus and world economic processes, vol. 5, p. 155-165. baltic journal of economic studies 181 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 researcherid: gpk-4326-2022 2 odessa national medical university, ukraine e-mail: viktoriyaborshch@gmail.com orcid: https://orcid.org/0000-0001-6400-7840 3 it step university, ukraine e-mail: e_research@ukr.net orcid: https://orcid.org/0000-0002-9741-9726 doi: https://doi.org/10.30525/2256-0742/2023-9-2-181-185 conceptualism of the organization of educational and methodical activity as a key model for ensuring the quality of education* yuriy safonov1, viktoriia borshch2, alexander melnikov3 abstract. the main purpose of the paper is to analyze the process of the organization of educational and methodical activity of educational institutions as a key model for ensuring the quality of education. methodology. this study combines the analysis of organizational and methodical activity in different ukrainian educational institutions and the analysis of their organizational tools. the method of qualimetric scales for measuring organizational and methodical activity proposed in this study can be used in organizing quality control of methodical support and support of educational programs at various levels. the background for this analysis is the data of odessa national medical university, kyiv national economic university named after vadym hetman, yuriy fedkovych chernivtsi national university. findings. in the article the problem of assessment of quality of education in general was considered. the authors have analyzed the problem of assessment of quality of educational and methodical support. in the paper the basic principles of formation of educational and methodical complex and defined levels of assimilation of educational material were revealed. the authors have considered the criteria of assessment of quality of educational and methodical complex. the frequency of their use is determined. on the basis of the frequency of use the criteria for evaluation of the pedagogical and methodical complex in educational institutions are identified and described. practical implications. the results of the research are a methodological and practical basis for improvement of the organizational mechanism of educational and methodical activity of educational institutions. the results of the conducted research could be a framework for formation of effective educational system in ukraine, providing constant development of the system of ensuring the quality of education. the main proposals could be used by the ministry of education and science of ukraine, also they should be taken into consideration by educational institutions. key words: education, educational institution, educational and methodical activity, educational and methodical complex, quality of education. jel classification: i20, i23 1. introduction the effectiveness of professional training of future specialists trained in various educational fields depends largely on the level of pedagogical and methodical work of an educational institution, which is the key area of activity of any educational institution. the transformation of the ukrainian society, its informational progress, integration into the european and world educational space, changes in the educational paradigm of education, rethinking of the value orientations in psychological and pedagogical science, search and implementation of innovative educational technologies determine the main directions of pedagogical and methodical work of an educational institution. * the article was written in accordance with scientific topic no. 0122u002363 baltic journal of economic studies 182 vol. 9 no. 2, 2023 educational and methodical work as one of the key elements of ensuring the quality of education must be organized and carried out as a holistic system of actions and measures aimed at ensuring the quality of professional training of students, improving the qualifications and professionalism of each educational staff, activating the creative potential of educators and students. the modern system of elementary and methodical work should be based on the achievements of pedagogical science, advanced pedagogical experience, quantitative and qualitative analysis of the educational process and include analytical, diagnostic, research, scientific, practical and informational activities. educational and methodical work is a tool to organize and support the educational process, it gives a fairly complete picture of both the amount of learning content to be mastered, and the most appropriate ways and means of building the educational process. a modern student should receive not only a "storage medium", but a guide that helps to understand the huge flow of information. such work in universities is carried out in accordance with the following regulatory documents: the law of ukraine "on education", the decree of the ministry of education of ukraine dated 02.06.1993 no. 161 "on approval of the regulation on the organization of the educational process in higher educational institutions", the resolutions of the cabinet of ministers of ukraine dated 09.05.1996 no. 1074 "on approval of regulations on state higher education institutions", the resolutions of the cabinet of ministers of ukraine dated 07.08.1998 no. 1247 "on the development of state standards of higher education", the resolutions of the cabinet of ministers of 20.01.1998 no. 65 "on approval of the regulation on educational and qualification levels (degree education)" and other internal regulatory acts. in accordance with the main ideas of the bologna process, the educational and methodological work is aimed at the implementation of the european credit transfer system, which in turn ensures the formation of competitive graduates in accordance with the directions of professional training. therefore, the study of the organization of pedagogical and methodical work in educational institutions is extremely important for ensuring the quality of education at the national and international levels. 2. methods and materials used this study combines the analysis of organizational and methodical activity in different ukrainian educational institutions and the analysis of their organizational tools. the method of qualimetric scales for measuring organizational and methodical activity proposed in this study can be used in organizing quality control of methodical support and support of educational programs at various levels. the background for this analysis is the data of odessa national medical university, kyiv national economic university named after vadym hetman, yuriy fedkovych chernivtsi national university. 3. discussion and research results the problem of the quality of education has been one of the central issues for many years. however, its relevance and interest in its positive solution is manifested especially in connection with the development of such large-scale educational projects as accreditation and the formation of educational standards. for this study, a dual approach to the problem of organizing teaching and methodological work as an element of the quality of education through a combination of quality assurance and its evaluation seems relevant. the quality of education depends on two levels of relations: internal (intra-systemic) and external (supra-systemic). the first level provides a structural analysis of the content of the standard, the second one provides the relationship of the subjects of the educational process, such as the state, society, social partners, interested in the quality of education of students. hence the following basic principles for the design of educational and methodological support: 1) the principle of determining the mechanism of interaction between the system and the environment requires creation of educational and methodical complex for implementation of the educational standard; 2) the principle of hierarchy provides for the implementation of continuity of educational material; 3) the principle of dynamics provides for the expansion of the developmental space, the creation of conditions for the integration of the student's personality into the modern educational space. the source for identification of criteria of quality of educational and methodical complex is the idea of representation of quality of education in the form of levels of mastering of knowledge and skills. thus, there is the following characteristic of levels of assimilation as a sequence of mastering experiences and a measure of progress in mastering the content of the subject. based on this characteristic, four levels of assimilation of the material can be distinguished. at the first level, a person's ability to recognize, recall, and reacquaint with previously studied material is manifested. at the second level, the student must be able to baltic journal of economic studies 183 vol. 9 no. 2, 2023 reproduce the material, or individual aspects of it, independently and without external prompting. at the third level, the student must solve specific problems, transforming the material in familiar and unfamiliar situations within the framework of the material studied. the transfer of knowledge is limited by the age characteristics of the student and does not apply to the entire academic subject. at the fourth level, the student must independently construct and transform the material, transfer the information received to the solution of a wide class of problems in new situations. different authors distinguish such characteristics of the quality of knowledge assimilation as correctness, accuracy, completeness, generalization, depth, consistency, systematicity, strength, effectiveness of knowledge, etc. on the basis of these levels and the quality of assimilation of the material it is possible to identify the criteria which the educational and methodical complex should have. the educational and methodical complex of the educational process should be diverse, correspond to the variable educational programs, be developed for all types of educational activities of students and, above all, be distinguished by its complexity. the requirements to the content of individual components of the educational and methodical complex depend on the type of educational and methodical material, but an integrated approach should be common. when choosing the main educational and methodological complex, one should be guided by various criteria, but the authors believe that the following should be the leading ones: – is this course a complete educational and methodical complex or is it necessary to select/compile the missing components? – does the educational and methodical complex meet the requirements of national regulations? – does this complex correspond to the age of the students, the possible context of their activities, their real interests, needs and possibilities? – does the complex sufficiently develop the necessary professional skills and abilities? in the didactic aspect, attention is drawn to 4 main groups of requirements related to the leading functions that the educational and methodological complex should perform: 1. compliance with the requirements of the educational process (taking into account the requirements of the educational program, patterns of assimilation, interaction of all components of the educational program). 2. purposefulness (goal orientation, allocation of threshold levels of skills, integrity of the elements of the educational and methodological complex). 3. focus on the student (taking into account individual and age characteristics, relying on the intellectual abilities and learning level of the student, creating optimal conditions for independent work, a variety of work methods and types of educational activities). 4. motivation (stimulation of cognitive activity, presentation of problems, personal significance of educational material and consideration of communicative needs of students, extensive use of means of designing educational and methodological complex). these characteristics should be considered as invariable, i.e., characteristic for all types of educational and methodical complexes. in accordance with the analyzed literature, the following criteria have been identified for the optimal evaluation of the educational and methodological complex: 1) scientific nature – validity and reliability of the content of educational and methodical support; 2) accessibility – the possibility of easy access to all components of educational and methodological support, as well as the clarity of their content for all participants of the educational process; 3) visibility – the presence in the educational and methodical support of tables, diagrams, multimedia materials that develop figurative thinking and influence visual, auditory perception of the material; 4) a systematic approach to content – all elements of educational and methodological support should be interconnected; 5) implementation of the principle of continuity of the studied material – the study of new material must be justified by the previous one; 6) completeness – the number of components of educational and methodical support, whether it is worth expanding it or not; 7) the possibility of providing differentiation and individualization of education – the possibility of taking into account the individual characteristics of the student and the possibility of implementing separate (group) education; 8) achievement of personal, subject and meta-subject results (orientation to program learning outcomes) – educational and methodical support should design the educational process in such a way that the results required by the educational standard are achieved; 9) the implementation of problematic and studentcentered approaches in education – educational and methodical support should be aimed at the comprehensive development of the individual and include problematic creative tasks that would contribute to such development; 10) purposefulness – orientation toward a specific goal. the intra-university quality management system of educational and methodical activity should include the development of qualimetric scales for measuring certain types of activities and for measuring the quality of activities of individual management baltic journal of economic studies 184 vol. 9 no. 2, 2023 objects. assuming that it is necessary to evaluate the quality of the educational and methodical complex of the educational program as a whole and each discipline separately, then it becomes necessary to develop objective indicators and criteria for measuring the quality of this complex of academic disciplines and educational programs. for indicators of the subprocess of educational and methodical complex of educational programs, indicators are taken, which, first, can be objectively evaluated each separately, and, secondly, they must be managed, i.e., purposefully changed by improvement. each university can independently determine and form the set of indicators. the method proposed in this study can be used in the organization of quality control of methodological support and support of educational programs at various levels. each object of methodological work must have its own qualimetric scale, which is formed taking into account the requirements of the academic council of the university, the ministry of education and science, licensing and accreditation indicators. the indicators characterizing the objects of management of the subprocesses of methodological work are largely incommensurable with each other, since they reflect different types of methodological work and have different meanings. to resolve this conflict, the following indicator is proposed to be introduced: methodical support of the educational discipline (ms): ms = work program + books’ provision + + educational & methodical complex + + educational & control methods the work program contains 4 components: the structure of the discipline, the time norms, the work intensity of the discipline, the content of the discipline. books' provision contains 4 components: coefficient of books' provision of the main content of the discipline, books' supply of independent work, additional literature, novelty. educational & methodical complex contains 6 components: structure, intermediate control, knowledge assessment tools, recommendations, methodological documentation, work design samples. educational & control methods contains 3 components: teaching methods and technology, methods for organizing independent work, methods for monitoring learning outcomes. for each of the components, weighting coefficients must be formed by an expert method. they allow to estimate the importance of each component, the value of various activities and to take into account the requirements of regulatory documents. then the method of ranking should be applied to each educational and methodological complex of the academic discipline. using the proposed method of assessing the quality of methodical support of academic disciplines, it is possible to easily assess the quality of the educational and methodical complex of the educational program as a whole and, accordingly, to determine its place in the ranking of educational programs of the university. as the indicators of licensing and accreditation of activities of educational institutions change, it becomes necessary to make adjustments to the system of evaluation of educational and methodological complexes and other sub-processes of methodological work. for this purpose in the algorithm for evaluation of objects of subprocesses of methodical work "regulation points" of the assessment system with weight coefficients are provided, which allow the educational institution to flexibly change the estimation of qualitative characteristics in order to focus on one or another type of methodical activity. the data of the monitoring of the indicators of educational and methodological activities are the information base for the management decisions of the university administration for the optimization of the internal quality assurance of education, as well as for the system of implementation of the educational process for individual educational programs. if the monitoring is carried out systematically, including the constant measurement of the proposed indicator of educational and methodical activities, then the point of control should be the comparison of the actually achieved results with the planned ones. control is carried out not only by evaluating indicators, but also in the form of questionnaires, tests, observations, interviews, verification of documentation, reports, focus groups. 4. conclusions methodical work is carried out in accordance with the approved current plan of educational institution, in which such a form of assessment should be included. implementation of the above proposed method of quality assessment of educational and methodological complex of educational programs on the basis of monitoring of subprocesses of methodological work of educational institution with administrative support allows to obtain information quickly. this method is one of the stages of the process approach to management of educational and methodological work within the internal system of quality assurance of education. this method solves the problems of assessing the quality of education, conducting the educational process as a whole in the educational institution and in its structural divisions, the level of scientific, organizational and educational work performed and development of uniform pedagogical requirements, in the absence of which it is impossible to count on achieving high rates of the educational process. baltic journal of economic studies 185 vol. 9 no. 2, 2023 references: blättler, a., & santa, r . 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(2021). features of strategic planning in the management system of medical universities. higher education quality assurance: global trends and regional aspects. proceedings of v central asian international forum dedicated to the 10th anniversary of iaar. october 1-2, pp. 30–35. received on: 10th of march, 2023 accepted on: 18th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 265 vol. 3, no. 4, 2017 corresponding author: 1 department of management, national metallurgical academy of ukraine. e-mail: fonarevat@ukr.net 2 department of management, national mining university. e-mail: vi_chernyak@ukr.net system basis for studying the interaction of national and individual human capital tetiana fonarova1 national metallurgical academy of ukraine, ukraine vladimir chernyak2 national mining university, ukraine abstract. the objective of the paper is the systematisation of features of the display and study of human capital assets, depending on the level, where it functions and is transformed from one form to another, as well as the definition and evaluation of the basic cost parameters that reproduce the characteristics of this capital at different levels. methodology. the study is built on the provisions and principles of the system approach and justified quantitative calculations of indicators of individual human capital carried out on the basis of statistics development of the ukrainian economy during the period from 2002 to 2016. results of the studies have shown that while the cost of individual human capital, having a generally positive trend of changes, increased almost fifteen times from 2002 to 2016, the efficiency of its use had a stable dynamics, changing annually by 18% at most. at the same time, the cost of using human capital did not exceed the bank lending rate. practical implications. the final provisions and results of the study can be used to formulate a methodology for assessing human capital in the management of costs and personnel of enterprises, organizations, and institutions. value/originality. the data obtained provide a better understanding of the processes of development and realization of the human potential of social and economic entities of any scale and national economy, as well as enterprises of ukraine in particular. key words: human capital, systematisation, individual human capital, national human capital, price and efficiency of use. jel classification: o15, e24 1. introduction at present, the field of research on the problem of “human capital assets” has expanded from a narrow issue of investment in the development of personnel to supereconomical scales and attracts the attention of both economists and specialists in sociology, psychology, management, philosophy of science and the like. accordingly, there are certain differences in approaches to formulating the definitions of this category. labour resources, human resources, work force, personnel, human capital, labour potential, employment potential, workforce capacity, intellectual potential – are a complex of concepts, which today are most often used in scientific literature in dealing with the need to assess the effectiveness of the use of human capital. the lack of clear definitions and boundaries for different classification groups, as well as the possibility of the flow of human capital from one form to another, necessitate the search for appropriate classification characteristics and methods for distinguishing its varieties. the issue of who and what price to pay for the use of human capital, as well as the issue of the effectiveness of its functioning and development, is still open. the objective of the paper is the systematisation of features of the display and study of human capital assets, depending on the level where it functions and is transformed from one form to another, as well as the definition and evaluation of the basic cost parameters that reproduce the characteristics of this capital at different levels. the basis for the quantitative assessment was the indicators of the development of the economy of ukraine in the period from 2002 to 2016. 2. the modern basis of research on human capital the modern “theory of human capital” is the direction of economic science, in which the human component of economic systems of different scale is considered in terms of value and price and differs inherently in three levels (vasilchenko, grinenko, grishnova, & kerb, 2005): baltic journal of economic studies 266 vol. 3, no. 4, 2017 on the personal level, the human capital is the knowledge and skills that a person has received through education, training, practical experience (using his natural abilities), and through which he or she can provide valuable production services to other people. at this level, human capital can be compared to other types of personal property (material possessions, money, securities) that yields income, and we call it personal or private human capital; on the microeconomic level, human capital is the cumulative qualifications and professional capabilities of all employees of the enterprise, as well as the company’s achievements in the effective organization of labour and staff development. at this level, the human capital is associated with the production and commercial capital assets of the enterprise, thus the profit is derived from effective management of all types of capital assets; on the macroeconomic level, human capital includes the accumulated investments in such areas as education, training and retraining, vocational guidance and job placement service, rehabilitation, etc., is a substantial part of the national wealth of the country, and we call it the national human capital. this level includes all the sum of human capital of all companies and all citizens (without double counting), as well as national wealth includes the wealth of all citizens and all legal entities. at the same time, in world practice, there are three principal approaches to the accounting and evaluation of human capital (resler, 2015): 1) cost-based, according to which human capital is formed on account of investing in people (education, professional training, health, etc.); 2) output-based, according to which human capital is defined as the ability to use the acquired knowledge, skills, talents, abilities of people in economic activity, and to get income or capital gains from such use; 3) social-based, which defines human capital as a reserve of abilities, health, knowledge, skills, experience, motivation, the mobility of individuals. each socio-economic entity, due to the nature of its activities and the individuality of the organizational structure can independently determine its indicators system to calculate the cost of human capital and, on this basis, build personnel development strategy. at the same time, modern developments do not provide for the study of clear relationships between the levels and the possibilities of transforming the capital from one level to another. the issues of determining the price and the effectiveness of the use of human capital remain disputable, which can be illustrated by a number of facts of the kind, for example, given in the revolutionary wealth book (toffler, toffler, 2008): “the usa annually spends 400 billion dollars on education from preschool to secondary inclusive, i.e. about 7,000 dollars per student. however, 60 per cent of secondary school pupils cannot read well enough to study the textbooks, one-third of school leavers have no mathematics knowledge, necessary for a novice carpenter, and almost a third of young people cannot show the pacific ocean on the map.” 3. systematization of levels of human capital the problem of multi-levelling is mainly determined either by the absence or incorrect use of the system approach, ignoring two system factors: 1) systematicity is the result of a manifestation of “thinking” as a property of consciousness, and not the property of the entire world as a whole. and according to the phases of consciousness development, it is necessary to distinguish: the systems of individual consciousness (sic), systems of group consciousness (sgc), and systems of mass consciousness (smc). and the preservation of such a triune in the analysis of socioeconomic phenomena and processes is a precondition for the systemic approach implementation. in the “spaces of measures and values” of each level, “own” semantic constructions (syntagmas) are formed, the matching or mismatching of which in the overall interrelation determines the effectiveness of the cognitive activity. generally, sustainable systems of particular objects are generated only during large time intervals – e.g. in the course of any professional activity. at the same time, in relation to other, temporary impulses of life activity, it is often difficult or even impossible to consider effective system thinking. we entangle our life activity in a network of laws (norms, rules), forgetting that these laws are not “the very essence” of things, but only “measures and meanings,” which we attribute to this essence. we form these “measures and meanings” within the framework of human perception, accessible to us. those are the “measures and meanings", which are “convenient” (because it is customary) to operate for our human thinking. 2) all changes in any community take place under the influence of: a) natural evolutionary mechanisms of development (self-organization); b) socially conditioned mechanisms of development. the social mechanism of development functions on the basis of operating with “senses” (“measures and meanings”, “syntagmas”). the semantic meaning these individuals and groups assign to the surrounding objects and phenomena, and the degree to which these values match in different dimensions (sic, sgc, smc) determine the “effectiveness” of the development of society and of a particular individual in it. the “meaning” of any thing, process or phenomenon is subjective. the object itself exists separately as an attractor, and its meaning, attributed by us, the “humans” – exists on its own as well. a purposeful change of things, processes, and phenomena is the management, and a purposeful alteration of their “meaning” is the manipulation. what baltic journal of economic studies 267 vol. 3, no. 4, 2017 we now call management is actually “management + manipulation”. therefore, the designed criteria for the development of a community, along with “artificial” socio-economic indicators must include the ones reflecting the natural essence of the human itself. based on these criteria, the “value parity” of various “subjects of knowledge” is formed in the social field of “research and practice” relationships of the members of society. the same relationship is established in all spheres of “socio-psychological” interactions of the members (subjects) of society. as a result, the “flows of values” are formed in the society (smc), exerting a positive or negative influence on the development of affective, cognitive, and conative abilities of the sic. the process of operating the “senses” itself takes place in the three-dimensional space of states of consciousness: individual, group, and mass. and each axis of this space represents “its own folded system”: three-dimensional (sic), five-dimensional (sgc), and eight-dimensional (smc). the natural process of the consciousness evolution is inherently a consistent increase in the dimensionality of the space of its states. moreover, one should also take into account that the logic and “technique” of operating “senses” in the systems of individual, group, and mass consciousness are different. the sic-sgc-smc chain on a large scale of time is a part of the natural evolutionary process, carried out on the basis of natural mechanisms of self-organization. within the same time interval and a specific social structure, the actions of particular individuals and groups act as the organizational mechanism of development. the “systems of mass consciousness” have become a “product” of their activities and through the feedback channels they are gaining the ability to influence behavioural algorithms of other individuals and groups. w hen the direct connection (sic-sgc-smc) is the dominant influence on the object, then we can talk about the “object management”. if, when trying to influence the individual, the feedback (smcsgc-sic) is the top priority, it is nothing else but “social manipulation”. the fact is that for an individual there is no direct connection with the society, he or she identifies himself or herself with the “mass” only through his/her role and place in the “group”. at the same time, the motivator for group behaviour is the need to occupy such an “energetic position” that corresponds to the psychological type of the given individual at the current time. from the above provisions, it should be understood that no matter, which level of human capital we plan to explore, the basic structural element must always be the “individual human capital”, which has its value and efficiency of use, depending on which socio-economic group it belongs. 4. smc, the national human capital level certainly, the evaluation of human capital indicators at each of the levels has its own specific features, but their overall scale and quantitative characteristics define the level of national human capital. to assess the national human capital, the human potential index and the value of national human capital are currently used. the human potential index (hpi) of a country or region is calculated by three indicators: gdp (or grp), life expectancy and literacy of the population. the value of national human capital (vnhc) of the countries of the world is estimated by specialists of the world bank using the cost-based method. estimates of the components of the costs of the state, families, entrepreneurs, and various funds are used. they allow determining the current annual expenses of the society for the reproduction of human capital. meanwhile, the specialists – users of this information, note certain difficulties in the comparative evaluation of vnhc of countries with unequal levels of development. the human capital of the underdeveloped country and the developed country has substantially different productivity per capital unit, as well as quite different quality. partially this problem is removed by the global human capital index (ghci), which is published annually as a part of the report at the world economic forum. however, as a relative indicator, the index does not allow for the projection on the individual and group levels of human capital. when investigating this issue, the russian scientist y.a. korchagin (korchagin, 2011) suggested a method for determining the value of national human capital. he introduced the concept of the accumulated value of human capital (avhc), which can be calculated by the formula suggested as follows: avhc gdp і sh mchc å iv= × × × , (1) where gdp – the country’s gross domestic product; іchc å – the index of the effectiveness of the country’s human capital; shiv – the share of innovative economy in the country; m – the number of years in the period for which the avhc is calculated. to calculate the index of the effectiveness of human capital, y.a. korchagin uses such data of international organizations as the index of economic freedom (ief), the index of the quality of life of the population (ql), the index of human potential development (hdi); as well as the index of science and synergetics; index of inflow of hc (human capital) from the outside of the subject (outflow from it); the quality index of the accumulated hc (calculated by the group of indicators and indices), the index of effectiveness of the elite and the shadow economy; index of the raw economy, reflecting the type of predominating raw materials economy and the dependence of the industrial and resource-based economy country on the raw materials exports. baltic journal of economic studies 268 vol. 3, no. 4, 2017 in this interpretation, the indicator of national human capital allows us to form its projection on the system level of individual human capital. 5. sic, the level of individual human capital relying on the logic of assessing the value of national human capital, we put it as follows: vihc gdp і mchc å= × ×1 , (2) where: vihc is the value of individual human capital; gdp1 – is the gross domestic product per capita in ukraine; m – is the work experience of an individual employee; іchc å – is the index of the effectiveness of individual human capital. for the index of individual human capital effectiveness, we put it as follows: і gross value added gdp available income ofpopulation chc å = . (3) based on the statistical data, we can also calculate the average value of use (credit granting) in the national economy of individual human capital ò ñð% , which is expressed as a percentage of its value: ò ts of employees labour payment products manufacture ñð % cos %= ×100 . ( 4 ) using statistic data of the office for national statistics of ukraine, the calculations are based on the obtained (2-4) formulas. the results of calculations are provided in table 1. when analysing the dynamics of the calculated indicators of the individual human capital assessment (see fig. 1, 2), a special attention should be paid to changes in the index of the effectiveness of individual human capital and the value of individual human capital. the diagram in figure 1 shows that while the cost of individual human capital, with a generally positive trend of change, increased almost 15 times between 2002 and 2016, the effectiveness of its use has a stable dynamics, changing annually by 18% at most. if individual human capital is considered as the property of the employee, the market value of his/ her labour and the income from the investments in his/her development by the enterprise constitute the price that the enterprise pays for the possibility of using (borrowing) the individual human capital and, according to the theor y of interest, is defined as the share (percentage) of the principal amount of capital. at this point, attention should be paid to the fact that the interest, as a price of monetary capital, is an irrational form of price, quite contrary to the concept of the commodity price. thus, the price of the goods corresponds to its cost (i.e. economic costs). the price of borrowed capital does not express its value but the cost of the service, provided by the borrowed capital at the time of its participation in the production process, as its time factor. table 1 calculation of value indices of individual human capital in ukraine, thousands, uah year issue *, million uah gross value added *. million uah including wages of hired employees*, million uah available income of the population*, million uah gdp1 *, thousand uah / 1 person іchc å ** vihc , excluding working experience **, thousand uah ò ñð% **, % 2002 504,008 201,194 103,117 141,618 4,855 1.421 6,656 20.46 2003 603,704 240,217 122,188 162,578 5,801 1.478 8,261 20.24 2004 809,988 313,046 157,450 212,033 7,535 1.476 10,738 19.44 2005 995,630 388,601 216,600 298,275 9,709 1.303 12,210 21.76 2006 1,182,179 474,123 268,631 363,586 12,076 1.304 15,166 22.72 2007 1,565,055 634,794 351,936 470,953 16,150 1.348 20,887 22.49 2008 2,072,172 824,176 470,464 634,493 21,419 1.299 26,622 22.70 2009 1,955,685 796,481 451,343 661,915 20,564 1.203 23,864 23.08 2010 2,594,833 1,120,585 540,651 847,949 24,798 1.321 32,758 20.84 2011 3,147,953 1,349,178 636,722 988,983 29,980 1.364 40,899 20.23 2012 3,347,592 1,459,096 736,495 1,149,244 32,480 1.270 41,237 22.00 2013 3,375,851 1,522,657 763,187 1,215,457 33,965 1.253 42,549 22.61 2014** 3,558,223 1,586,915 734,943 1,151,656 36,904 1.278 50,852 20.65 2015** 4,488,398 1,988,544 777,646 1,330,089 46,413 1.495 69,290 17.33 2016** 4,984,600 2,358,971 986,770 1,519,574 55.557 1.552 86,277 19.80 * data of the office for national statistics of ukraine ** (excluding the temporarily occupied territory of the autonomous republic of crimea and the city of sevastopol, to 2014–2015 – also without taking into account the ato territory) *** author’s calculations baltic journal of economic studies 269 vol. 3, no. 4, 2017 when the individual income (dind) of an individual worker is defined as a result of fulfilment (that is, the capital) of his/her human potential, through a tariff rate (tr) or official salary plus additional income (ai) in the form of various kinds of rewards, extra payments, bonuses, etc., then the following formula can be used for the calculation of individual human capital value: vihc ò tr ai× = +% (5) where т% is the price of using (credit granting) of individual human capital expressed as a percentage of its value. the analysis of the price of using individual human capital (i.e. a conventional credit rate, at which the employee lends his/her human capital to the enterprise) shows (see fig. 2) that it roughly corresponds to the current rates, at which domestic banks lend to our enterprises. therefore, the estimated value of individual human capital at the end of 2016 was 19.8% compared to the average bank rate, which at the same time period reached 25.6% per annum. thus, we represented the basic parameters of individual human capital, which determine the value and effectiveness of its use, and also allow their projection to higher (group and mass) levels of its research. 6. conclusions methodological basis of modern human capital research relies on the combination of various provisions, among which the most important is the concept of multilevel nature of its structure, as well as the assessment of value and effectiveness of its use. the above provisions of the system approach demonstrate that irrespective of the level of human capital to be explored, the basic structural element must always be the “individual human capital” with its value and efficiency of use, depending on the socio-economic group it belongs to. based on statistical data of ukraine’s economy, the methods of determining the main parameters of individual human capital, establishing the value and efficiency of its use, have been provided. results of the calculations have shown that while the value of individual human capital, having a generally positive trend of changes, increased almost fifteenfold from 2002 to 2016, the efficiency of its use had a stable dynamics, changing annually by 18% at most. at the same time, the price of using human capital did not exceed the bank lending rate. fig. 1. the dynamics of value (line 1) and effectiveness (line 2) of the human capital in ukraine for 2002–2016 (* excluding the temporarily occupied territory of crimea and sevastopol, to 2014–2015 – also without taking into account the ato territory) fig. 2. dynamics of the prices of using the individual human capital in ukraine for 2002–2016 (* excluding the temporarily occupied territory of the autonomous republic of crimea and the city of sevastopol, to 2014–2015 – also without taking into account the ato territory) 0,000 0,200 0,400 0,600 0,800 1,000 1,200 1,400 1,600 1,800 0,000 10,000 20,000 30,000 40,000 50,000 60,000 ряд1 ряд2 линейная (ряд1) линейная (ряд2) 0,00 5,00 10,00 15,00 20,00 25,00 references: korchagin y. (2011). efficiency of the national human capital: the method of measurement. retrieved from: http://www.lerc.ru/?part=articles&art=3&page=29 resler m.v. (2015). human capital as an object of accounting. scientific herald of the international humanitarian university. series: economics and management, 12, 231-234. toffler a., & toffler h. (2008). revolutionary wealth. m.: ast; ast moskva, p. 306. vasilchenko v., grinenko a., grishnova o., & kerb l. (2005). management of labor potential. kneu, 403 p. retrieved from: http://buklib.net/books/31304/ baltic journal of economic studies 270 vol. 3, no. 4, 2017 татьяна фонарева, владимир черняк системные основания изучения взаимосвязи национального и индивидуального человеческого капитала аннотация. целью работы является систематизация особенностей проявления и изучения человеческого капитала в зависимости от того уровня где он функционирует и трансформируется из одной формы в другую, определение и оценка основных стоимостных параметров, которые воспроизводят характеристики этого капитала на разных уровнях. методика. исследование построено на положениях и принципах системного подхода и обосновывается количественными расчетами показателей индивидуального человеческого капитала, проведенных на основе статистических данных развития экономики украины в период с 2002 по 2016 годы. результаты исследования показали, что в то время, как стоимость индивидуального человеческого капитала, имея в целом положительную тенденцию изменений, в период с 2002 года по 2016 год увеличилась почти в 15 раза, эффективность его использования имела устойчивую динамику, ежегодно изменяясь не более чем на 18 %. при этом цена использования человеческого капитала не превышала банковской ставки кредитования. практическое значение. конечные положения и результаты исследования могут быть использованы для формирования методики оценки человеческого капитала в управлении стоимостью и персоналом предприятий, организаций и учреждений. значение/оригинальность. полученные данные способны обеспечить лучшее понимание процессов развития и реализации человеческого потенциала социально-экономических субъектов любого масштаба и национальной экономики, а также предприятий украины, в частности. baltic journal of economic studies 206 vol. 3, no. 4, 2017 corresponding author: 1 research centre for industrial problems of development, national academy of sciences of ukraine. e-mail: mira37cle@gmail.com digitalization process in ukraine as a prerequisite for the smart city concept development anna pozdniakova1 national academy of sciences of ukraine, ukraine abstract. the paper aims to review smart city building process in ukraine, its successful examples, and possible drawbacks on the way and based on this suggests the steps country should undertake for the future development of this concept. taking into account that spreading of icts (digitalization) plays an important role in laying the foundation for smart solutions’ development and usage, we have also provided an overview of this process in ukraine and compared ukraine’s positions on the global arena. to do this, we have used a number of international indexes (ict development index, networked readiness index, global innovation index, e-government development index, e-participation index) to show an objective picture and to cover as many aspects as possible (ict readiness, ict usage, ict skills, and other features build on top of these). lack of the required infrastructure and equal proper access to icts within the country is one of the major issues ukraine has to deal with right now. we have also compared current positions of ukraine against the target values specified in the strategy of information society development of ukraine-2020. the research is based on the method of theoretical, logical, and systematic analysis of the literature (articles, strategies and agendas, international indexes etc.) along with the methods of comparative analysis that allow comparing smart solutions among the selected cities. we have composed a comparison table for successful smart solutions available currently in ukraine for the selected cities (kyiv, lviv, kharkiv, ivano-frankivsk, vinnytsia, dnipro) within different areas. we have also conducted a swot-analysis to reveal strong and weak points for the further concept development, as well as the possible consequences and risks. the article suggests the steps for further successful development of smart city concept in ukraine. these steps should encourage the dialogue on the topic within our country. we believe that cooperation of all stakeholders on the national level is necessary to 1) establish a common platform for sharing best practices and spreading successful solutions faster; 2) develop a measurement tool to compare both the progress among different cities and the progress for the specific city within some time period. while locally each city should work on its own smart city agenda and roadmap, ensuring the interests of all groups is taken into account. but of course, active dialogue on both city and national levels, as well as within the axis government – industry – university – civil society is a core component of smart city building process. key words: digitalization, smart city, smart solution, urban development, icts. jel classification: o33, o35, p25, r11 1. introduction development of the cities in the xxi century is characterized by the number of trends such as individualism and customization, acceleration of all processes based on the application of icts, demographic changes (ageing of population in some countries along with the high birth rates in others), urbanization and migration processes (by 2050 around 70% of the population will live in cities) etc. cities encounter a number of urban challenges, such as pollution (80% of co2 are produced in cities), congestion, lack and waste of resources, unemployment, poor health systems etc. (pwc, 2005). thus, nowadays, many cities worldwide try to find the ways to overcome these challenges aiming to become smart and sustainable. “smart city” concept, which emerged in 90th, holds an enormous promise here. however, to date, there is no one commonly accepted definition. typically the term connects icts application with economic, social, political, and cultural transformations in cities. icts are widely used for the development; they allow creating more opportunities for the education, citizens’ engagement in decision-making, accelerating the flow of information, improving information management and encouraging transparency and accountability etc. that said, smartness is not only about icts usage since icts is just a tool on the way to a far-reaching goal  – sustainability itself. after studying more than baltic journal of economic studies 207 vol. 3, no. 4, 2017 100 definitions from different sources, itu (international telecommunication union) suggested the following definition for a smart sustainable city: “a smart sustainable city is an innovative city that uses icts and other means to improve quality of life, efficiency of urban operation and services, and competitiveness, while ensuring that it meets the needs of present and future generations with respect to economic, social, and environmental aspects”. they have identified 6 factors that are crucial for smart sustainable cities building and development: smart living, smart people, smart environment and sustainability, smart governance, smart mobility, and smart economy. right now numerous academic, private and state actors are developing and implementing smart solutions within these 6 areas (itu-t, 2014). according to ihs technology, by 2025 we will have at least 88 smart cities worldwide. they define smart cities as cities that have deployed – or are currently piloting – the integration of information, communications, and technology (ict) solutions across three or more different functional areas of a city (mobile and transport, energy and sustainability, physical infrastructure, governance, safety, and security). digital agenda of ukraine-2020 identifies “smart city” as a model based on overwhelming usage of digital technologies to solve current issues of cities, to ensure their sustainable development and to raise citizens’ quality of life. thus, digitalization process is fairly enough considered as a prerequisite for building smart cities. current research aims to provide an overview and comparison of icts development positions of ukraine, in particular, in the global market and connected to it opportunities for making ukrainian cities smarter and more citizenoriented, as well as the suggestion of steps to make the process more efficient. in order to address this aim, the paper sets the following research objectives: to review our icts development positions in the international market; to discuss the worldwide trends in digitization and their impact for ukraine; to review smart solutions that are already presented in ukraine and compare the availability of smart solutions within 5 selected ukrainian cities; to conduct swot-analysis for smart city concept development in ukraine; to build a cooperation matrix for the main stakeholders and their contributions; to suggest steps for further smart city concept evolvement in ukraine. 2. digitalization of ukraine digitalization accelerates economic and social processes, making them more efficient and transparent. nowadays, it industry of ukraine generates around 2-3% of gdp. one of the major issues ukraine encounters today is a lack of digitalization, especially in small towns, where this problem is also aggravated by the lack of computer skills/literacy and table 1 indexes measuring icts development and readiness of ukraine index responsible entity what measures ukraine’s position ict development index 2016 itu (1) ict readiness (the level of networked infrastructure and access to icts); (2) ict use (intensity); (3) ict skills. 76/175 networked readiness index (nri) 2016 world economic forum (wef) (1) environment for the technology use and creation (political, regulatory, business, and innovation); (2) networked readiness in terms of ict infrastructure, affordability, and skills; (3) technology adoption/usage by the three groups of stakeholders (government, private sector, and individuals); (4) the economic and social impact of new technologies. 64/139 global innovation index (gii) 2016 cornell university, insead, world intellectual property organization innovation input sub-index: 1.1 institutions; 1.2. human capital and research; 1.3. infrastructure; 1.4. market sophistication; 1.5. business sophistication. (2) innovation output sub-index: 2.1. knowledge and technology outputs; 2.1. creative outputs. 56/128 e-government development index 2016 (egdi) uno (1) provision of online services, (2) telecommunication connectivity, (3) human capacity. 62/193 baltic journal of economic studies 208 vol. 3, no. 4, 2017 table 2 indexes comparison within the selected countries index/country ukraine poland germany georgia russia ict development index 5.33 6.65 8.31 5.59 6.95 ict access 5.58 7.09 9.09 6.29 7.23 ict use 2.57 5.35 7.49 4 5.87 ict skills 8.57 8.35 8.36 7.34 8.55 egdi 0.60 0.61 0.72 0.82 0.72 online service index 0.58 0.64 0.84 0.70 0.73 telecommunication infrastructure index 0.39 0.42 0.73 0.58 0.61 human capital index 0.84 0.77 0.88 0.87 0.82 e-participation index 0.75 0.88 0.76 0.56 0.75 the networked readiness index 4.17 4.50 5.55 4.25 4.54 the global innovation index (gii) 35.7 40.2 57.9 33.9 38.5 source: compiled by the author, based on: measuring the information society report 2016, itu; networked readiness index 2016; un e-government survey 2016 e-participation index 2016 uno (1) e-information: enabling participation by providing citizens with public information and access to information without or upon demand; (2) e-consultation: engaging citizens in contributions to and deliberation on public policies and services; (3) e-decision-making: empowering citizens through co-design of policy option and co-production of service components and delivery modalities. 32/191 source: compiled by the author, based on: measuring the information society report 2015, itu; networked readiness index 2016; un e-government survey 2016 information availability for the citizens. according to the international telecommunication union, only 49% of individuals use the internet, while only 56% of households use computers (itu-t, 2016). right now there is a 30% gap in broadband access between the city and village (digital agenda of ukraine, 2016). we have checked and compared ukrainian positions in a number of international rankings with the selected countries that have a different level of development (poland, georgia, russia, germany) to provide a general overview of icts development trends, usage, and application among countries. in table 1, general information about the indexes used and what they are measuring is provided. the strategy of information society development in ukraine-2020 sets the following targets for our country: wef networked readiness index  – 40th place, un e-government index – 50th place, the global innovation index (gii) – 40th place. a comparison of different indexes and their composites shows that ukraine has rather poor positions in terms of information telecommunication infrastructure development, our positions are worse than those of georgia and russia (see table 2). but our country has one of the best positions in terms of human capital development and skills, which has to do with the transformations of the national education policy (an increase of government order for ict specialties), encouragement of public-private partnership, implementation of basic programming class in high school etc. it is worth mentioning that right now ukraine is in a situation with the maximum digitalization of international economies by ukrainian it companies/ specialists and minimum digitalization of our own economy since many talented developers choose to work for the international market. moreover, brain drain is a sad tendency in ukraine since around 10 000 it specialists have already left the country in 2016, while it is estimated that 1 developer generates around 1 million dollars “product” he/she produces, which works for the international market instead of the national one (digital agenda of ukraine, 2016). obviously, we cannot talk about successful implementation of smart cities concept till we fully digitalize the country, laying the necessary foundation. moreover, the country should deal with the digital gap between smaller cities (suburbs) and centres, as well as between people of different ages, backgrounds, incomes etc. below, the key drivers of the current stage of digitalization worldwide along with the opportunities and challenges they impose on ukraine are outlined (fig. 1). end of table 1 baltic journal of economic studies 209 vol. 3, no. 4, 2017 3. smart cities of ukraine “smart city” concept gained its popularity in ukraine due to a number of reasons  – qualified it specialists that would like to change the country for the better; challenging urbanization problems; intensification of decentralization processes that provide cities with more power in decision-making and desire of simple citizens to live in responsive, resilient and user-friendly cities. smart cities are believed to be a tool to improve the quality of services provided to citizens, raise the efficiency, and cut costs of municipalities, contribute to overall economic growth and development. people in ukraine yearn for changes and while on the national level, there is still a huge level of uncertainty (economic, social, political, security); on the local level  – volunteers, businesses, and city administrations together managed to implement a number of successful smart solutions. this corresponds to the world trend in moving towards “smart city 3.0” concept, in which citizens are actively involved into the process of development and closely cooperate with public and business sectors. the concept actively evolves in kyiv, kharkiv, lviv, vinnytsia, and dnipro. but around 15 cities of ukraine nowadays already have relevant projects. volunteers and creative society are believed to be the main driving force of the concept in ukraine. the active phase of development took place in 2015 when ict competence centre, igov (conversion of state services into online format) and prozorro (public e-procurement system) active groups have emerged. below we described the data becomes the main driver of the competitiveness. trends opportunitieschallenges 1) lack of regulations, standards, skills and experience for collection, storage and usage of data; 2) intellectual property issues; 3) cyber security risks; 1) development of new industries; 2) new jobs creation; 3) establishment of the effective governance and anti-corruption tool. active spreading and usage of “internet of things” concept. 1) lack of awareness and experience in this area; 2) startups are orientated to external market; 4) lack of professionals and unprepared education system. 1) lack of the vision, strategy and initiatives to digitalize economy and different areas of life in general; 2) lack of innovative skills cultivation in schools, universities and economy sectors. 1) financial barriers for ukrainian companies that work on international markets (smooth money transfer to accounts opened in ukraine); 2) legal obstacles. 1) lack of legislation for cloud services; 2) lack of strategy; 3) lack of the local cloud service providers of the highest security level. digital transformations, switching from analog to digital systems. emergence and spreading of new business-models that belong to “shared economy” business model. virtualization of physical it infrastructure and switching to service models (usage of cloud services and softwaredefined architecture). 1) increase of efficiency for many sectors of economy and business processes in general; 2) investment attraction; 3) incremental and transformational innovations. 1) increase of competitiveness of different sectors; 2) development of digital economy, labor market etc. 3) spread of innovative entrepreneurship. 1) easier start for new businesses (no big investments are necessary); 2) easier launching of internet projects, creation of new market places, expansion of consumer markets for ukrainian products and services; 1) fast and cheap way to install and use the necessary digital infrastructure for business/government/society; 2) effective infrastructure building for the whole country. fig. 1. the main trends in the digital world, ukrainian aspect source: compiled by the author, based on: digital agenda of ukraine-2020 baltic journal of economic studies 210 vol. 3, no. 4, 2017 most prominent and successful initiatives that currently function in ukraine: 1. participatory budget  – a democratic process that allows every citizen to participate in the distribution of the local budget through the creation of projects to improve the city and/or vote for them. any resident may submit a project related to the improvement of city life to participate in the competition, win the vote, and watch how the project will be implemented. 2. open budget – online system that provides a realtime opportunity to all stakeholders to monitor the revenues and expenditures of the city budget, including the spending of public funds. it was launched in 2014; now around 40 cities connected it to their web-sites. 3. igov  – a non-profit, open-source project for providing different administrative services online to cut the bureaucracy and corruption. 4. u-muni  – system for the optimization of energy costs, which is designed primarily for businesses, office buildings, and municipalities. heads of agencies using the system can quickly collect data on resource consumption in buildings, deeply analyse the effectiveness of their use and quickly respond to anomalies. for municipalities, the company provides 1 year preferential subscription period free of charge. 5. navizor  – service that allows rating the quality of roads and planning your trip in the best way, taking into account the pitfalls. 6. e-health – a system, which aims to ease the access to medical services for patients and data processing and handling for doctors. partly, using different providers, this already works in several ukrainian cities but works on the establishment of the unified platform are still underway. table 3 smart solutions comparison within 6 ukrainian cities area smart solution vinnytsia dnipro kyiv kharkiv lviv ivanofrankivsk economy interactive map of street kiosks + + + + public e-procurement system (prozorro) + + + + + + mobility gps monitoring of public transport + + + + electronic scoreboards on transport stops + + + + + online tool to rate the quality of roads (navizor) + + + + + + smart traffic lights + + e-ticket in progress parking map + + + governance contact the mayor + + + + + betatesting electronic appointment to officials + + + + + open budget + + + + + + participation budget + + + in progress + + online administrative services (igov service) + + + + + + e-petition + + + + + + e-declaration + + + + + + people qr codes for tourists + + + + + + electronic tourist guides + + + + + wifi spots + + + + + + way of living electronic citizen card + + + + online map of emergency works + + + + + + video surveillance system + + + + + + bike path + + in progress electronic queue/registration to kindergarten + + + + + + donorua + + + + + + monitoring centre with access and control for all cameras + e-health in progress + + environment “where to hand over the waste” + + + + + + technological project for energy efficiency (u-muni) + sorting waste + + + + + + source: compiled by the author, based on the web-sites of kharkiv, dnipro, kyiv, lviv, vinnytsia, ivano-frankivsk municipalities baltic journal of economic studies 211 vol. 3, no. 4, 2017 7. e-petition  – a service allows simple citizens to reach the city council with their initiatives. thus, in case of receiving n number of signatures within n days, the responsible officials from the city council should consider initiative and official response should be issued. 8. access to the truth (dostup.pravda) – a platform to submit an e-request for the access to public information, was launched in 2014 by civic organization centre ua. all the requests automatically become publicly available, as well as the answers to them. 9. the online platform of informal education in ukraine – any registered provider can leave information about courses, master-classes within different regions of ukraine, and any user may filter the available possibilities per his/her needs. it was launched in 2017. 10. “rozumne misto” platform  – a nationwide internet-platform for e-governance and e-democracy to be applied to mature communities, as well as a great tool for the cooperation between state, business and civil society sectors. the project includes a set of microservices that easily can be adapted and applied to any of the cities. right now the system includes 729 towns; around 80 of them use different modules. the project includes 11 modules: mapping housing and communal service defects, e-petition service, administrative e-services integrated with igov, open finances information integrated with e-data, open budget, smart apartment building co-owners association, which includes warm, comfortable, and energy-efficient buildings etc., medicine database, e-procurement, blood donation service, city news and surveys. we have built a comparative table to show the developed and implemented smart solutions among the ukrainian cities that are believed to be flagmans of the movement. there are other numerous innovative solutions that are applied in different cities of ukraine  – in kyiv, there is a street that is supposed to be a testbed for smart solutions application and cooperation between it service providers, civil society and city administration (melnykova smart street); kropyvnytskyi city – the first city to launch smart lights system by owlet, innovative city within city in kyiv  – “unit city” project, ivanofrankivsk created a platform to enhance accessibility for people with disabilities “accessible ivano-frankivsk”, establishment of city dashboard with statistics in lviv etc. it is planned to launch iot in cooperation with cisco next year and cover the country with not expensive sensors to monitor free parking spaces, garbage bins filling etc. below we have summarized the main strengths and weaknesses ukraine possesses on the way of smart city concept development and implementation (see table 4). active cooperation between all stakeholders plays a crucial role during the process; we have built a cooperation matrix for the main actors, outlining their core contributions to the process (fig 2). academic sector is presented by various research institutions and universities; industry  – interested companies (more often in it sector) that play a role of testbeds (google, microsoft, huawei etc.) and also possess financial resources; government sector – different state institutions, agencies and officials, e.g. state agency of e-government of ukraine, state informatization agency, municipalities, committees etc.; third sector includes civil society that engages in co-creation of smart sustainable cities (igov, prozorro group, rozumne misto and etc.), as well as simple citizens that create the demand and provide a feedback for the smart solutions implemented. table 4 swot-analysis for the smart city concept development in ukraine positive negative internal strengths 1) profound amount of creative and talented activists and volunteers; 2) highly-qualified it specialists; 3) good computer literacy level among citizens; 4) a society ready and willing for changes. 5) demand for making cities smarter and more user-friendly. weaknesses 1) lack of holistic approach both on the city and state levels; 2) lack of proper ict infrastructure, security systems, identification tools etc.; 3) lack of the needed skills and qualified personnel on the executive level; 4) lack of financial resources and lack of studied best practices applied worldwide. external opportunities 1) active development of start-ups movement; 2) spreading of “shared economy” ideas; 3) new business market opportunities; 4) citizen-centric governance establishment; 5) cut of bureaucracy and corruption on the city level; 6) active cooperation with foreign cities, best practices exchanges, and common cooperation platforms establishment. threats 1) disintegration of national digital system due to the establishment of separate data centres, identification systems, development of individual strategies and policies within individual cities etc.; 2) confusing simple automatization process with real smartization in cities; 3) information security and privacy issues; 4) shifting final focus from the “person” to “profit”. source: made by the author baltic journal of economic studies 212 vol. 3, no. 4, 2017 levels national city vision, goals, stategy. i capabilities assessment, “gap analysis”. ii performance measurement tool “ukrainian smart cities” iii developing and implementing roadmap. iv enabling capabilities + service transformation. establishment of the platform for ukrainian smart cities. v fig. 3. the algorithm to make cities smarter source: compiled by the author, based on making cities smarter, bsi fig. 2. main actors cooperation matrix source: compiled by author, based on deakin, m. triple helix (2014) baltic journal of economic studies 213 vol. 3, no. 4, 2017 bsi (british standards institution) has developed a route to a smarter city establishment, which can be applied in ukraine with some adjustments (see fig. 3). it is important to begin with a common vision and strategy, common within the country but with some particularities in specific cities. after this, each city is to conduct an analysis of its capabilities, strong points, weaknesses, and threats. during the next stage, performance measurement tool should be created in cooperation with other cities and coordination on a state level, in order to check the progress and to compare cities with each other. each city should develop its own roadmap that after the implementation will allow realizing the potential of the cities to the fullest and changing the way services are provided and consumed. moreover, it is important within the whole process to have established a common platform for ukrainian smart cities to share best practices, organize roundtables and conferences etc. among the 6 cities we selected for the smart solutions comparison, we found only 1 city (kyiv) that possesses smart city agenda (developed in 2015) and only 2 cities that have digital transformation agendas (lviv and dnipro), other cities have a common development strategy but we failed to find separate agendas for the digitalization or smartization processes of regions. currently ukrainian cities, unfortunately, do not take part in any international rankings of smart and sustainable cities. we also do not have a holistic and overwhelming approach to measure the progress of cities within our country. but some first successful steps on the way include: 1) ranking of comfortable cities in ukraine, 2016 by focus.ua group. the research covers 22 cities and 4 main categories: economy (level of average salary, consumers price index, housing prices, renting prices, the ratio of resumes to vacancies, investment attractiveness of city); safety (overall level of crime, level of serious crimes, level of terrorist threat); transport infrastructure (number of air connections, number of railway connections, number of roads with international and national importance), environment (air pollution, level of dangerous waste), public opinion on the quality of city services and the most comfortable city in ukraine. leading cities include lviv, kyiv, khmelnytskyi, vinnytsia, lutsk, ivano-frankivsk, ternopil, uzhhorod, kharkiv, rivne. 2) transparent cities ranking, 2017 by transparency international. measures the transparency of the hundred largest cities and develop a local government transparency ranking. all cities are measured by 91 indicators according to 13 areas: information about the work of municipal authorities; public participation; public procurement policy; housing policy; budgeting and public contracts; grants and funding; social services; human resources; professional ethics and conflict of interests; land use and construction policy; municipal businesses; municipal property; education (transparency international, 2017). the top-5 leading cities include: lviv, kropyvnytskyi, ivano-frankivsk, mykolaiv, kyiv. however, both systems have their drawbacks, like the lack of holistic approach and measuring only particular areas, they do not measure dynamically on a constant basis, ignore small cities etc. 4. conclusions ukrainian cities have recently joined the global movement for the smart sustainable cities’ development and shifting responsibilities and powers from the centre to the cities. we do have many successful examples already implemented on the basis of active cooperation between civil society, industry, and government sector. among the hindering factors, we can outline: digital gap along with skills gap among the rural and urban areas, lack of best practices exchange on the municipal level between different cities, low financing etc. but at the same time, positions of ukraine on the international arena demonstrate the availability of highly qualified human resources that can be a foundation for future successful developments. the country should create conditions to avoid brain drain of specialists and encourage them to invest and rebuild their own country and cities. the work on both local and national levels is necessary to establish a dialogue platform for cities, as well as to introduce a measurement tool for progress. an active role of all stakeholders is anticipated since they contribute in different domains: academic sector provides think tank forces; industries possess financial capital; the third sector is good in ideas generation, awareness raising and forming the demand for the most needed solutions. and on top of this government sector is responsible for monitoring, standards development and security questions. baltic journal of economic studies 214 vol. 3, no. 4, 2017 references: cities of the future. 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(2016). electronic resources. retrieved from: http://decentralization.gov.ua/pics/upload/311-d3aee2c6d6c04f325ab07521a92a7890.pdf анна позднякова процесс «дигитализации» украины как предпосылка для развития концепции умных городов аннотация. целью статьи является рассмотрение процесса построения умных город в украине, успешных примеров и возможных проблем на данном пути. на основе данного анализа предлагаются шаги для будущего развития концепции в украине. принимая во внимание, что распространение икт (дигитализации) играет важную роль в закладывании основ для разработки и использования умных решений, мы также приводим обзор данного процесса в украине и сравниваем ее позиции на мировой арене. для данного анализа мы используем ряд международных индексов (индекс развития икт, индекс сетевой готовности, мировой инновационный индекс, индекс е-управления, индекс е-участия) чтобы показать объективную картину и охватить как можно больше аспектов (икт готовность, использование, навыки, а также дополнительные аспекты, базирующиеся на них). нехватка инфраструктуры необходимого качества и равного доступа к икт в рамках страны является одной из основных проблем, которая требует решения в нашей стране на данный момент. мы также сравнили текущие позиции украины с целевыми показателями, которые отмечены baltic journal of economic studies 215 vol. 3, no. 4, 2017 в стратегии развития информационного общества украины-2020. в исследовании используются методы теоретического, логического и систематического анализа информации (статей, стратегий и концепции, международных индексов), наряду с методами сравнительного анализа, которые позволяют сопоставить умные решения среди выбранных городов. мы составили сравнительную таблицу для успешных умных решений, которые на данный момент присутствуют в украине для выбранных городов (киев, львов, харьков, ивано-франковск, винница, днепр) в разных секторах. был проведен swot анализ с целью определить сильные и слабые факторы развития концепции, а также возможные риски. в статье предложены последующие шаги, необходимые для успешного развития концепции умных городов в украине. мы верим, что кооперация всех заинтересованных сторон на национальном уровне необходима для 1) создания общей платформы лучших практик и обмена опытом; 2) создания инструмента отслеживания прогресса разных городов, а также динамического прогресса для отдельных городов в течении определенного временного интервала. в тоже время на местах городам рекомендуется разработать стратегию умного города и дорожную карту развития, принимая во внимания интересы всех групп. активный диалог как на национальном, так и на местном уровнях, а также в рамках оси государственный сектор  – бизнес  – академический сектор – гражданское общество является основным компонентом построения умных городов в украине. baltic journal of economic studies 169 vol. 4, no. 1, 2018 corresponding author: 1 department of labour law and social security law, taras shevchenko national university of kyiv. e-mail: nikolainshin@ gmail.com 2 kharkiv national university of internal affairs. e-mail: mogilewskiu@gmail.com 3 scientific and research work unit, national academy of internal affairs of ukraine. e-mail: alex0674682444@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-169-174 the issue of cryptocurrency legal regulation in ukraine and all over the world: a comparative analysis mykola inshyn1 taras shevchenko national university of kyiv, ukraine leonid mohilevskyi2 kharkiv national university of internal affairs, ukraine oleksii drozd3 national academy of internal affairs of ukraine, ukraine abstract. as soon as the usage of cryptocurrency in the last few years has been gaining popularity all over the world, and this global trend has affected ukraine, the purpose of the paper is to examine the essence of cryptocurrency, to identify the issues of its legal regulation in ukraine, as well as using the analysis of world experience in this sphere, to identify ways of the improvement for relevant domestic legislation. the authors have indicated that the cryptocurrency market (or “virtual” money) operates successfully and provides an opportunity to analyse dynamics of the cost, supply, and demand of about 90-100 different cryptocurrency. problem’s setting. the authors of the paper have emphasized that despite increasing popularity of cryptocurrency in ukraine and throughout the world, there is no single clear definition of this concept. therefore, the authors of this article state that cryptocurrency is a digital decentralized currency, a unit of which is a coin cryptographically protected against tampering since it is encrypted information that cannot be copied, while all information about transactions is stored in the blockchain system. methodology. the study primarily uses comparative methods for the purposes of examination of the approaches taken under different jurisdictions towards cryptocurrency. additionally, analysis of the body of theoretical literature on the matter was conducted. results of the study allowed drawing several conclusions on the prospects of further development of the legal framework for cryptocurrencies in ukraine since nowadays the country is neutral in the issue of using and regulating cryptocurrency and consequently it is losing precious time, because: first, potentially loses money, which could enter the state budget from individuals, who receive income from transactions on cryptocurrency markets; and secondly, the state runs a risk of citizens’ rights violation because of no real instruments for their protection. practical implications of these are proposals to adopt certain amendments to the current legislation in this sphere, including setting up control over brokerage of cryptocurrency, licensing of the industry, and legal definition of the cryptocurrency for the purposes of taxation, etc. value/originality. the paper represents one of the first comprehensive studies of the current state and prospects of development of the legal framework for the cryptocurrency in ukraine. its conclusions provide both proposals for the development of legislation in this sphere and may serve as a basis for the future studies of this topic. key words: cryptocurrency, blockchain, transaction. jel classification: k24, k34 baltic journal of economic studies 170 vol. 4, no. 1, 2018 1. introduction the beginning of the 21st century is marked by a rapid development of information technology, which inevitably has caused the emergence of new institutions. one of these institutions is the cryptocurrency market. in the last few years, the use of cryptocurrency has been gaining popularity all over the world, and this global trend has affected ukraine certainly. even though the national bank of ukraine has determined cryptocurrency, in particular, bitcoin, as a “money surrogate”, people are becoming interested in it (cryptocurrency) more. thus, in mid-2016, one of the largest banks in ukraine provided the opportunity to buy and sell the most common cryptocurrency bitcoin. moreover, almost in a year, in ukraine, for the first time in the world, an agreement on sale and purchase of real estate for cryptocurrency (etherеum) was signed. from the us, the owner of the apartment in kyiv sold his property through his representative. this fact confirms the undisputed popularity of cryptocurrency in the state. however, ukraine has many problematic issues in this sphere; in particular, it concerns legal regulation of cryptocurrency usage. 2. definition of the cryptocurrency to begin with, it is important to define the essence of the concept “cryptocurrency ”. the first cryptocurrency appeared in 2008, when the anonym (a programmer or a group of programmers, whose identities are still unknown) under the pseudonym satoshi nakamoto described initially operation of the payment system in the form of a peer-to-peer network, which was presented by him as an open code of the client program bitcoin on the internet in 2009 (official website of bitcoin, n.d.). lubenets, a programmer, explains the meaning of the concept “cryptocurrency ” in terms of information technology and notes that this category means the type of digital currency, based on complex calculations of a function, which can be verified easily by reverse mathematical actions, while the main scheme of its emission is the proof of execution principle (lubenets, 2014). it is worth noting that today a very large number of cryptocurrency exists. cryptocurrency market (or “virtual” money) operates successfully and provides an opportunity to analyse dynamics of the cost, supply, and demand of about 90-100 different cryptocurrency. among the largest in terms of capitalization cryptocurrency, such as bitcoin, ethereum, ethereum classic, dash, ripple, monero, litecoin, nem, augur, maidsafecoin, and others (the exchange rate of bitcoin, n.d.). the most common and most expensive cryptocurrency is bitcoin. the term “bitcoin” is formed by merging the words: “ bit” (a unit of computer memory) and “coin” (money) (likhachov, 2017). despite increasing popularity of cryptocurrency in ukraine and throughout the world, a single clear definition of this concept has not been provided for yet. this article maintains that cryptocurrency is a digital decentralized currency, a unit of which is a coin cryptographically protected against tampering, since it is an encrypted information that cannot be copied, while all information about transactions is stored in the blockchain system (cryptocurrency: collect in the crypt, n.d.). according to nikitin, cryptocurrency, for example, bitcoin, possesses following features: 1) it is an electronic monetary unit, a virtual means for mutual settlements and accumulation; 2) it does not depend on any national currency; 3) bitcoin is based on the “peering principle” that determines decentralization of bitcoin, that is, its separation from administration by any government agency; 4) zero intrinsic value (nikitin, 2014). frequently, ordinary citizens identify cryptocurrency with “electronic money,” which is not correct certainly. therefore, in order to avoid confusion in this matter, the viewpoint of senior lawyer of the international company “leman international law group” s.  nakonechnyi is worth noting, whereby the main differences between cryptocurrency and electronic money are: first, cryptocurrency does not mean debt obligations of its owner, holder or issuer (in fact, the issuer of cryptocurrency does not exist at all); second, cryptocurrency system has neither a single emission centre nor a central administrator; third, payments within certain cryptocurrency system can be made completely anonymous, that is, payers and recipients of cryptocurrency are not under control by any third party, including public authorities (because electronic keys, which are used for the identification of the parties of cryptocurrency payments, do not contain any personal data of such participants of payments, and therefore, it is impossible to identify such parties of cryptocurrency payments); fourth, possible creation of new cryptocurrency types or increase of cryptocurrency within one cryptocurrency system (mining) that lead to enlargement of the number of cryptocurrency units without any further affixed obligations to ensure such cryptocurrency, as well as ability of provision based on mathematical algorithms using the calculating power of computers of persons, who mine cryptocurrency additional units. accordingly, the rate of new cryptocurrency unit generation decreases together with the increase in total weight of cryptocurrency, while in case of reaching a certain total number of units, generation of additional cryptocurrency units will be technically impossible (for example, in the case of achieving 21 million bitcoins); fifth, legally electronic money is tied to a sovereign national currency and the issuer, while cryptocurrency cannot be tied to any currency of the world, and in essence, is an independent currency (nakonechnyi, 2017). baltic journal of economic studies 171 vol. 4, no. 1, 2018 3. current legal status of cryptocurrency in ukraine in ukraine, an attitude to any cryptocurrency is ambiguous, while lawyers and economists assess its existence and active use differently. in particular, the former see only shortcomings in it and the latter note mainly positive points. therefore, scientists advocate cryptocurrency as an alternative expression of normal currency with several advantages (bitcoin system: pros and cons, 2015): 1) cryptocurrency transactions are completely anonymous and confidential. all transaction information is encrypted in a set of characters, personal data is not linked up to a cryptocurrency wallet; 2) each cryptocurrency unit has a unique code and is protected against forgery; 3) cryptocurrency is decentralized, with no control centre, which is why the founder of digital money or any financial institution cannot affect its existence. the users of electronic wallets regulate currency exchange and transactions; 4) each unit of cryptocurrency is not tied up to any of the banks that significantly reduces commission for transactions. the commission is usually the cost of energy resources spent on the transaction; 5) the absence of a bind to banks contributes to a significant reduction in time expenditures for cryptocurrency transactions. usually confirmation of cryptocurrency transactions comes in a few seconds; 6) transactions are carried out directly between different owners of electronic wallets that contributes to speeding up of transactions and decreasing of commission; 7) the emission of most of the cryptocurrency types has the maximum threshold caused by the finite number of all possible combinations of characters that form each new cryptocurrency unit. this contributes to the reduction of unjustified money supply in circulation and reduction of inflation (bitcoin system: pros and cons, 2015). the aforementioned opinion is substantiated and undoubtedly worthy of attention. however, despite seeming advantages, lawyers are sceptical about cryptocurrency. for example, andrii chornous, a lawyer at the international law firm “integrites”, notes the negative court practice in bitcoin cases. according to him, only a clear definition of cryptocurrency in the regulations can correct this situation (bitcoin in ukraine: legal status, n.d.). k. nikitin, a russian lawyer, concludes that bitcoin is a money surrogate and refers to an information message from russian financial monitoring service “on cryptocurrency use” of 06 february 2014, which directly states this term (“money surrogate”) and emphasizes that the price for bitcoin is determined solely by speculative actions, which create a risk of loss of value and, as a consequence, violation of rights of individuals holding bitcoin (nikitin, 2014). moreover, not only lawyers have a negative attitude towards cryptocurrency. thus, in a letter of the nbu no. 29-208/72889, dated 2014, december 08, the issuance of the virtual currency bitcoin is provided for as one that has no intrinsic value, is not a liability of any individual or institution, nor backed by any authority. therefore, according to the nbu, bitcoin is a money surrogate, which has no intrinsic value. the national bank emphasizes that purchase and sale of bitcoin for us dollars or other foreign currency have signs of the so-called “financial pyramids” functioning and may indicate a potential involvement in dubious transactions in accordance with the legislation on counteraction to legalization (laundering) of proceeds from crime and terrorist financing (national bank of ukraine, 2014). moreover, in the above-mentioned letter, the nbu warns citizens and legal entities about exchange of virtual currencies for goods or cash, as this implicates the risk of complete loss of funds in such transactions, as well as the risk of involving such persons in activities, related to the legalization (laundering) of proceeds from crime and terrorist financing. in order to protect the rights of consumers, safety of funds transfer, the national bank of ukraine recommends citizens to use only services of those payment systems, transaction systems, included by the national bank of ukraine to the register of payment systems, transaction systems, participants of these systems, and payment service providers (national bank of ukraine, 2014). therefore, summing up the above, the following can be stated: – first, from an economic perspective, cryptocurrency is an interesting phenomenon, which has a number of positive features and advantages over other currencies, for example: it is not influenced by inflation in any way; using it each person can earn profits (obviously aware of certain risks); – second, its use entails certain risks for cryptocurrency holders. thus, one of the main risks is almost no legal protection of the rights of citizens in case of committing offenses against them in this sphere (drozd et al., 2017); – third, the use of cryptocurrency may entail a number of negative consequences for the state, in particular: 1) taking into account the peculiarity of using cryptocurrency (such as anonymity, etc.), it is possible to “launder” money gained criminally; 2) a person can withdraw money from ukraine, avoiding payment of taxes and other obligatory payments; 3)  payment of income tax, which individuals receive from cryptocurrency transactions, is undeveloped; – fourth, the essence of cryptocurrency (for example, bitcoin) is a kind of start-up, and that is why it is difficult to predict its further development. therefore, there are two ways to solve the abovementioned issues. the first is to ban completely the use of cryptocurrency in ukraine with subsequent blocking of relevant sites. however, in practice, this method has turned out to be ineffective because the experience of blocking social networks “mail. baltic journal of economic studies 172 vol. 4, no. 1, 2018 ru” “вконтакте” [“vkontakte”], “одноклассники” [“odnoklassniki”] etc. showed that interested parties could use special freely accessible programs that allow bypassing these restrictions. therefore, the state should create an appropriate legal framework for resolving issues related to cryptocurrency in ukraine. this requires analysis of the experience of those countries that have already paid attention to this issue at the legislative level. 4. overview of the approaches towards cryptocurrency regulation across the globe therefore, considering european experience in regulating the use of cryptocurrency, germany should be mentioned first. the federal financial supervisory authority defines virtual currencies as financial instruments. according to german law, they are a form of “private money” that can be taxed as capital. the creation of virtual money, as well as their use as a means of payment, does not require any permission. if virtual money is sold, it is considered a financial instrument and needs to be licensed in accordance with the german banking act (kreditwesengesetz, kwg). any commercial use of the virtual currency requires licensing (comparative review of foreign legislation, n.d.). it should be noted that cryptocurrency in germany is subject to 25 percent tax on capital gains but it is held only if the income has been obtained within one year after receiving bitcoin. thus, if the sale of bitcoin is held more than a year after purchase, it will not be taxed on capital gains and the transaction will be treated as “private sale”. in germany, bitcoin is considered an analogue of other investment instruments such as stocks or bonds (tax on cryptocurrency, 2017). therefore, summing up germany’s experience in regulating cryptocurrency, it is worth noting that in this state, cryptocurrency is recognized as one of the varieties of currency, which undoubtedly confirms its popularity. in addition, most germans who use cryptocurrency avoid 25% of income tax when dealing with it. so far, the authorities of germany should decide on how to develop legal regulation to solve avoiding income tax. another interesting example is the experience of the uk, where, in 2015, was stated that the government would take a direct part in regulating the activity of bitcoin and introducing innovations in the country. thus, in 2017, the exchequer published a project of a financial innovative plan, in which the government supported digital currency exchange, and would promote the creation of an appropriate environment for virtual money (leshchyshyn, 2017). the bank of england does not consider virtual currency as a threat to the monetary or financial stability of the united kingdom, but the government will necessarily take a direct part in controlling and monitoring the situation of bitcoin and other cryptocurrencies in the uk market. this suggests a possibility of integrating cryptocurrency technologies into current payment system and improving it, as well as making a foreign exchange policy flexible (leshchyshyn, 2017; deciphering cryptocurrencies, n.d.). moreover, the bank of england has chosen a group of researchers to study the possibility of issuing cryptocurrency by the central bank. in order to prevent volatility, observed in bitcoin, cryptocurrency will be supported by the bank of england and will be tied to the pound sterling, the national currency of the country. the bank expects that the research institution will report on findings in mid2018. such an idea seems quite promising because the creation of a national cryptocurrency will allow, first, effective state control over its circulation, and second, give additional guarantees to citizens and the state. the experience of the united states of america, where bitcoin is recognized as one of the types of payments in e-commerce, cannot be overlooked. in the united states, cases of salaries for civil servants in bitcoin are frequent. in addition, bitcoin is accepted for payment in many restaurants, hotels, and stores in a number of countries around the world. most scholars state that the united states of america is one of the most convenient countries in the world for cryptocurrency business. in this country, large hedge funds, exchanges, and other companies related to cryptography are incorporated and for many goods and services, one can pay not only fiat currency (money, which nominal value is established and guaranteed by the state) or electronic money but also digital. in the united states, atms, which allow fiduciary money and cryptocurrency to be exchanged, are also available (cryptocurrency in the world, 2017). regarding the legal regulation of cryptocurrency, the state of california was the first to allow the use of cryptocurrency by adopting assembly bill 129. this law provides for a corporation, association or individual to participate in circulation, as money, anything that differs from lawful payment systems. nevertheless, assembly bill 129 does not regulate the introduction of cryptocurrency. in new york, in august 2015, the department of financial services was provided for the legal regulation in the new york codes, rules and regulations. adoption of bitlicense, a license to enter cryptocurrency business, possesses both upsides and downsides (comparative review of foreign legislation, n.d.; torpey, n.d.). as for the us litigation practice, decisions of judges of different states lead to the conclusion that the result of cases differs significantly sometimes. decisions of the district court judge of the eastern district of texas and the district court of florida serve as an example. in the first case, bitcoin was determined as currency and certain legislation to transactions with this cryptocurrency was applied. in the second case, the court ruled and proclaimed the opposite, which led to the removal of charges regarding the legalization (laundering) of proceeds from crime (comparative review of foreign legislation, n.d.; torpey, n.d.). therefore, united baltic journal of economic studies 173 vol. 4, no. 1, 2018 states legislation on cryptocurrency is one of the most developed in the world. nevertheless, two aspects may be of special consideration to ukraine: first, nowadays the united states works actively on the unification of cryptocurrency, in particular, a system of an equal solution of court cases is being formed; and second, in this country, cryptocurrency is considered the property for tax purposes. reference should be made to the experience of japan, which is a global leader in innovation. it is japan, as mentioned above, where the pseudonym of the founder of bitcoin, satoshi nakamoto, reaches its linguistic roots. in april 2017, japan legalized cryptocurrency as a form of payment, which is why the interest in bitcoin continues to grow steadily in the country. in addition, according to company statements in cryptocurrency, such as coincheck, this year, thousands of traders would start accepting a virtual currency for payment. it should be noted that, in japan, the japan authority of digital asset operates as a self-regulating body. in the same year, the law on regulation of exchanges operation was passed: they must be registered at the financial services agency, which can monitor such a business and apply administrative measures in relation to it. in accordance with this law, cryptocurrency is a value similar to assets (cryptocurrency in the world, 2017). from the beginning of january 2018, in japan, there is a “cryptocurrency boom” because everybody buys it up, while the japanese almost refuse from the real currency. this is primarily due to the legalization of cryptocurrency in the state. thus, japan, in comparison with other countries of the world, has made tremendous strides in cryptocurrency usage and legislation that regulates it. this can be explained by the following: first, japan has been the source of global innovation in various spheres for the last decades; second, the high internal discipline of the japanese, which is of importance in cryptocurrency usage; third, in this country, two types of cryptocurrency have been legalized. as regards benefits of japan’s experience in ukraine, the introduction of a supervisory authority, which would oversee and monitor cryptocurrency exchange activities to prevent violations of the rights of citizens in transactions on this exchange, would be helpful. on the contrary, in another eastern country, the people’s republic of china, chinese authorities began to restrict cryptocurrency circulation. at the end of september 2017, the people’s bank of china has banned the sale of cryptocurrency within the country. two leading exchanges in china were warned about trading cessation; for the fear of persecution, bitcoin owners began to transfer chats from the wechat, controlled by authorities, to the illegal telegram. in addition, the people’s bank of china has announced illegal operations related to ico. officials explained that such investment carried financial risks and sometimes turned out to be fraud. the authorities ordered to stop all campaigns. organizations and individuals, who have already completed investment, have to return funds to investors (china kills bitcoin, 2018). such actions by the authorities of the people’s republic of china caused the collapse of bitcoin exchange rate by almost two thousand dollars in two weeks. on september 1, bitcoin costs five thousand dollars, once again updating the historical maximum. three days later, the exchange rate of cryptocurrency began to decline sharply. the actions of the chinese authorities had such a significant impact on cryptocurrency because two-thirds of all bitcoin is mined in this country (mainly because of cheap electricity) (china collapsed the exchange rate, 2017). among the main reasons of ban on cryptocurrency by chinese authorities, several factors need to be mentioned: first, the cryptocurrency mining requires extra electricity costs; second, during the years of the growth of this currency, the state became aware that this currency was not backed up and carried financial risks, in particular, money laundering. thus, china was one of the first countries in the world that decided radically on the issue of cryptocurrency completely banning it. therefore, compliance with this provision in the people’s republic of china is beyond question due to citizens’ mentality of high internal discipline and respect for authorities’ orders, prohibitions, etc. 5. conclusions considering all the material presented in this scientific research, it is worth noting that the issue of legal regulation of cryptocurrency is relevant not only in ukraine but also in many other countries of the world. nowadays, ukraine is neutral on the issue of using and regulating cryptocurrency and consequently it is losing precious time, because: first, potentially loses money, which could enter the state budget from individuals, who receive income from transactions on cryptocurrency markets; and second, the state runs a risk of citizens’ rights violation, because of no real instruments for their protection. as for other countries’ experience in the legal regulation of cryptocurrency, the following positive points can be used in ukraine: to introduce a system of strict control over brokerage firms dealing with cryptocurrency (experience in japan); to take a tough position regarding the status of cryptocurrency in ukraine; to introduce licensing of cryptocurrency exchanges (germany, japan); to define cryptocurrency as a property for tax purposes (us and german’s experience); to adopt laws and regulations on relations in this area and protect the rights of citizens from violations against them; to establish liability for the violation of the relevant legislation. baltic journal of economic studies 174 vol. 4, no. 1, 2018 references: official website of bitcoin. 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(n. d.). retrieved from: http://radako.com.ua/news/bitcoin-v-ukrayini-pravoviy-status (in ukrainian) shchodo vidnesennia operatsii z virtualnoiu valyutoiu/kryptovaliutoiu "bitcoin" do operatsii z torhivli inozemnoiu valiutoiu [on assignment of transactions with virtual currency/cryptocurrency bitcoin foreign currency exchange]. lyst natsionalnoho banku ukrainy vid 08.12.2014 № 29-208/7288910 [a letter of the national bank of ukraine of 12 august 2014, 29-208/72889]. retrieved from: http://zakon5.rada.gov.ua/laws/show/v2889500-14 (in ukrainian) drozd,  o., lazur,  ya., serbin,  r . 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(n. d.) retrieved from: http://euinfocenter.rada.gov.ua/uploads/documents/29283.pdf (in ukrainian) nalog na kriptovaliutu: gde i skolko nado platit za operatsii v bitkoinakh [tax on cryptocurrency: where and how much do you have to pay for transactions in bitcoin]. (2017, september 29). retrieved from: https://ru.insider.pro/ tutorials/2017-09-29/nalog-na-kriptovalyutu-gde-i-skolko-nado-platit-za-operacii-v-bitkoinah/ (in russian) leshchyshyn, m. m. (2017). svitovyi dosvid normatyvno-pravovoho rehuliuvannia vykorystannia bitcoin v platizhnii systemi [worldwide experience in regulating the use of bitcoin in payment system]. retrieved from: https://conferencekneu.wordpress.com/2017/04/20/лещишин-м-м-світовий-досвід-нормативн/ (in ukrainian) deciphering cryptocurrencies. a global legal and regulatory guide. (n. d.) retrieved  from: https:// sites-nortonrosefulbright.vuturevx.com/620/12375/uploads/chapter-6—regulation-of-cryptocurrencies.pdf kryptovaliuta v sviti: stan, rehuliuvannia i perspektyvy [cryptocurrency in the world: state, regulation and prospects]. (2017, 13 june). machines for business nowadays. retrieved from: http://mbnpro.com.ua/криптовалюта-в-світістан-регулювання-і-перспективи (in ukrainian) torpey, k. (n. d.). the united states is falling behind in bitcoin regulation. bitcoin magazine. retrieved from: https://bitcoinmagazine.com/articles/the-united-states-is-falling-behind-in-bitcoinregulation-1461604211/ kytai ubivaet bitkoin: kryptovaliuta obvalilas i riskuet skhlopnutsia [china kills bitcoin: cryptocurrency collapsed and risks failing]. lenta.ru. economy, 16 january 2018. retrieved from: https://lenta.ru/articles/2017/09/15/ chinabit/ (in russian) kitay obvalil kurs bitkoina (pochti na dve tysiachi dollarov za dve nedeli!). chto proiskhodit? [china collapsed the exchange rate of bitcoin (almost two thousand dollars in two weeks!). what is happening?] (2017, september 15). retrieved from: https://meduza.io/feature/2017/09/15/kitay-obvalil-kurs-kriptovalyut-pochti-na-dve-tysyachidollarov-za-dve-nedeli-chto-proishodit (in russian) baltic journal of economic studies 39 vol. 4, no. 1, 2018 corresponding author: 1 first deputy minister of justice of ukraine, ministry of justice of ukraine. e-mail: nsevostianova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-39-48 formation of modern model of budget management based on methods of public administration natalia bernatska1 ministry of justice of ukraine, ukraine abstract. the review of scientific studies and publications confirms that in ukraine, the interest of scientists in the theoretical and practical problems of budget management is growing. domestic and foreign scientists have repeatedly drawn attention to the need for full and timely disclosure of the state of the formation and use of financial resources of society. the foreign experts studied foreign experience and grounded measures that could and should contribute to the achievement of the effectiveness of this process, the methods of ensuring transparency of the state budget and involving the public as the subject of control over the use of budgetary resources, in particular, public hearings, “e-government”, are an area public administration. budget management is an important instrument of state regulation of the activity of authorities. according to the analysis, one can see that today it is necessary to distinguish the following types of budget support as: informational, organizational, methodical, and regulatory. the state implements a policy of budgetary management with the help of management bodies. there is a close interconnection between representative, national, and operational management bodies. the principle of transparency of the budget system (in conjunction with its publicity) is enshrined in article 7 of the budget code of ukraine. an attention is drawn to the fact that the budget system as a “totality of the state budget and local budgets” is transparent by definition. it is fair to note that insufficient transparency of the budget process is not only a domestic problem. the board of directors of the imf approved one of twelve internationally recognized financial standards – the code of good practices on fiscal transparency. an assessment of the state of implementation of the principle of publicity and transparency in the budget management of ukraine makes it possible to draw the following conclusions: 1. the content of the principle of publicity and transparency in the text of the budget code of ukraine should be amended by formulating it as a principle of the budget process, while it is necessary to specify the ways of its practical implementation. 2. the full implementation of the principle of publicity and transparency of the budget process will increase the level of trust of citizens to the authorities of different levels, which is one of the factors of successful implementation of the state social and economic policy, and will deepen the democratic principles of the formation and development of ukrainian society. 3. the lack of transparency of budget information at the planning stage significantly impairs the ability to manage budget resources, primarily at the local level, exacerbating the problem of full budget financing, especially at the end of the budget period. 4. budget information for an overwhelming majority of stakeholders remains inaccessible, inaccurate, untimely, and incomplete in ukraine, which led to a deterioration of ukraine’s position in the international rating by the open budget index. 5. improving the transparency of the budget process can be achieved through the use of the above measures. their implementation will serve not only to improve the quality of the budget process and the effectiveness of budget management but also to establish harmonious social relations. at the same time, the task of developing further directions of increasing publicity and transparency of the mechanism of functioning of the entire system of public finances in ukraine remains relevant. key words: budget management, budget process, local budgets, transparency, open budget index, public administration. jel classification: h 530, h750, d730, m100 baltic journal of economic studies 40 vol. 4, no. 1, 2018 1. introduction the development of democratic processes in ukraine relates to various aspects of social life, including the functioning of its budgetary system. the financial resources accumulated by it, by definition, should be aimed at satisfying the needs of the entire society and its separate territorially determined components. however, insufficiently high, often unpredictable efficiency of the use of budgetary resources in ukraine puts on the agenda the task of improving the functioning of the budget management system in general and improving the mechanism of action of its individual elements. one of such potentially effective measures is to ensure transparency of government decisions that are taken at some stage of planning and execution of the state budget. however, despite the passage of the budget system of ukraine of different stages of its formation and development, the issue of the transparency of the budget process, unfortunately, remains relevant for the third decade (demyanyuk, 2009; prozorist byudzhetu, 2017). the review of scientific studies and publications confirms that in ukraine, the interest of scientists in the theoretical and practical problems of budget management is growing. domestic and foreign scientists have repeatedly drawn attention to the need for full and timely disclosure of information on the state of the formation and use of financial resources of society (yaroshevych, shpak, matviyishyn, 2012; kyrylenko, 2015; bulhakova, baranovskyy, kucher ta in., 2010). leading experts studied foreign experience and grounded measures that could and should contribute to the achievement of the effectiveness of this process, the methods of ensuring transparency of the state budget and involving the public as the subject of control over the use of budgetary resources, in particular, public hearings, “e-government”, are an area public administration (zhalilo, moldovan, shevchenko, 2010). however, the relevant issues of forming a full-fledged mechanism for the disclosure of budget information remain unresolved. the difficult situation of the financial system of the state, as well as the peculiarities of the socio-political processes taking place in the country, exacerbate the problem of non-transparency of quantitative and qualitative characteristics of monetary flows that are administered by the bodies of national and local authorities in ukraine. this requires the intensification of scientific research in the field of budget process and the appropriate justification of possibilities for expanding public access to budget information (demyanyshyn vasyl, 2008). the author aims to deepen the content of the transparency of the budget process, to form an adaptive model of budget management using modern tools of public administration. 2. the methodology of research budget management is an important instrument of state regulation of the activity of authorities. at the same time, the effective organization of the budget control system promotes the realization of goals, timely detection and elimination of deviations, creates a motivation for the effective performance of its duties by state and local authorities, allows detecting negative trends in the management process in a timely manner, reducing the risk of occurrence of negative phenomena during the formation and use of financial resources of the budget, and also maintaining the efficiency of management of financial resources at an appropriate level. the main objective of budget management is to ensure effective and efficient management of financial budget support budget management system bodies managing the budget process budget planning budget execution accounting budget execution reporting control over budget execution information support organizational support methodical support regulatory support fig. 1. component model of budget management source: formed by the author baltic journal of economic studies 41 vol. 4, no. 1, 2018 resources in the budget sphere. budget management is a fairly young industry of the economic science that is rapidly developing. it represents a complex, multilevel system (fig. 1). in addition to the management bodies, the budget management system also includes other components: planning, accounting, reporting, control, and budget support (fig. 1). all of these components are closely interconnected in the budget process, each occupies a very important place, since the execution of the budget means to form its deficit-free part (to ensure the receipt of taxes and payments, in accordance with the current legislation), to effectively finance the expenditures approved in the budget, provide effective management of financial resources in the budget sphere (babych, 2011). extremely important is the budget support that enables to regulate relations of providing the population with the necessary set of knowledge on the formation and use of financial resources of budgets of different levels. in accordance with fig. 1, it can be seen that today it is necessary to distinguish the following types of budget support as: informational, organizational, methodical, and regulatory. information provision provides a meaningful, reliable, and operational information base, which serves as the basis for making optimal managerial decisions regarding the use of budget funds by authorized bodies. organizational support involves the creation (improvement) of existing and ensuring the effective functioning of individual elements of the organizational system of the budget management, as well as an organizational mechanism for managing budget funds or their aggregate in general in accordance with the chosen strategies in such a way that these organizational elements of the system act as elements of strategic development of the country in general. methodical support – a set of documents of organizational, organizational and methodological, organizational and administrative, technical, technical and economic, and economic nature, as well as reference materials and other documents approved by the authorities in accordance with the established procedure for the efficient and targeted use of budget funds. regulatory support is a type of support that includes laws and regulations that regulate fiscal relations in ukraine and helps to find ways to improve existing and emerging new legal regulations necessary for fundamentally new tasks in the field of budget management. among the most important legislative acts, the budget code of ukraine occupies a special place, which in a complex combines and regulates all stages of the budget process and defines the general principles of management of financial resources. as can be seen from fig. 1, the state implements a policy of budgetary management with the help of management bodies. there is a close interconnection between representative, national, and operational management bodies. so, the verkhovna rada of ukraine fig. 2. the organizational structure of budget management national operational management public administration bodies representative president of ukraine ministry of finance of ukraine accounting chamber of ukraine state treasury of ukraine state fiscal service of ukraine state financial inspection legislature verkhovna rada of ukraine local self-government bodies the executive cabinet of ministers of ukraine state administrations, regional, district baltic journal of economic studies 42 vol. 4, no. 1, 2018 adopts the law of ukraine on state budget for the current year, the president of ukraine signs laws and decrees. in turn, the cabinet of ministers of ukraine ensures the implementation of the budget of ukraine, and the ministry of finance of ukraine conducts the general organization and management of the execution of the state budget, coordinates activities of the participants in the budget process (blishchuk, 2011). we believe that depending on the role and functions, it is worthwhile to distinguish three groups of bodies that carry out budget management (figure 2): representative; national; operational management bodies. to date, each management system, including the budget one, consists of two interrelated parts – the object and the subject of management. the object of budget management is the state and local budgets, and the subject – the system of representative, legislative, and executive authorities, which are endowed with the respective rights and powers in the field of budget process management. each part plays an extremely important role. without an object, the process of managing financial resources in the budget sphere is impossible. and the activity of subjects of management determines the quality and effectiveness of budget management. management of public finances is not an end in itself but serves as a mandatory element of the regulatory system, the purpose of which is to identify in a timely manner deviations from accepted standards, violations of the principles of legality, efficiency, expediency, which would allow to make appropriate corrections on a case-by-case basis, strengthen the responsibility of authorized persons, get damages and prevent or, at least, complicate the recurrence of detected violations in the future (khomutenko, baranova, dubovyk, 2014). 3. results and discussion on the basis of the generalization of the above definitions, it is possible to propose definitions of budgetary management as a system for the development and implementation of managerial decisions in the process of formation and use of centralized cash resources (funds) of the state and its territorial and administrative units. budget management includes budget forecasting, planning, justification of the draft budget of different levels, consideration of submitted projects, their revision, approval, amendments to approved budgets, budget execution, monitoring, analysis, reporting. in the process of budget management, there is formation (design, review, and approval) and budget execution, control of budget discipline, as well as preparation, consideration, and approval of the report on execution. it is important to understand that the budget, as the main financial document of the state or a certain territorial entity, must meet certain criteria (that is, contain legally established parameters). l.i. didkivska and l.s. holovko determine the following main parameters of the budget: absolute size; the share of gdp reallocated through the budget; volume and structure of funding sources; volume and structure of budget expenditures; the ratio of revenues and expenditures of the state (kovalchuk, kozenkov, kozenkova, yakubova, 2011). it should be noted that the budget is a lever of the influence of the state on various aspects of the economic life of society, that is, it acts as a means of economic regulation. with the help of budgetary levers, the income of the population and the corporate sector, inflation, employment, and consumer activity can be regulated. experts point to significant budget opportunities in implementing state investment and innovation-technology policy. in a modern economy, the budget is one of the main instruments of the state apparatus for the conduct of state policy (primarily in the socio-economic sphere). thereat, the following levers of fiscal policy are used: taxes, fees, expenditures financing, budget deficits, budget debt, etc. the process of forming budget revenues and expenditures is inextricably linked with the main results of the economic development of the state or its regions, as well as subjects of budget legal relations – taxpayers, managers of budget funds, etc. organization of budget management in the country depends on many factors: political structure, management traditions, peculiarities of economic and financial development, chosen fiscal policy, etc. before science, the question arose about the generalization of budget management models, which should be based on certain general principles. “the ideal model of fiscal management, – as rightly stated, –presupposes compliance with the rules for the formation and implementation of the budget on the basis of commonly accepted principles that are in line with the values of a democratic and ruleof-law state, civil society, market economy (boyarko, dekhtyar, deyneka, 2012). these principles, formed in the course of the evolution of financial theory and practice, as the basis for the construction of the budget and the organization of the budget process, include the completeness, unity, and periodicity of the budget, its reality, transparency, and openness” (demyanyuk, 2009). it is clear that these principles can (and should) be implemented precisely in the process of budget management, that is, the implementation of certain management procedures. the principle of transparency of the budget system (in conjunction with its publicity) is enshrined in article 7 of the budget code of ukraine. the fact draws attention that the budget system as a “totality of the state budget and local budgets” (para 2.1.5. of the budget code of ukraine) is transparent already by definition (stepanova, 2015). baltic journal of economic studies 43 vol. 4, no. 1, 2018 the content of the state budget and local budgets is obvious; the composition of the latter is clearly regulated by law (para 2.1.34 of the budget code of ukraine). at the same time, there are no differences in the treatment of the state budget and local budgets, which are fixed by provisions of the financial theory, and their implementation in practice (as is often the case in domestic realities). therefore, the author believes that the content of the legislatively defined principle of publicity and transparency concerns not the general budget system of the country, that is, immobilized indicators of income and expenditure part of budgets of different levels, their financing, but those decisions and measures that led to the emergence of such indicators. this is precisely about the budget process – an activity involving various actors – “organizations, institutions, and officials with budgetary powers” (para 19.3 of the budget code of ukraine). in this regard, it is advisable to support the proposal of domestic scientists to clarify the place, as well as ways to implement the principle of publicity and transparency in the budgetary sphere on the above principles (yaremenka, 2016; zhalilo, moldovan, shevchenko, 2010; frolov, 2018). the content of clarity (transparency – in foreign terminology) in the budget process needs a deeper understanding. note that specialists in the state budget used and use different terms, which include informing the public, voters about the planned and actual state of the main financial plan of the state, namely: publicity, transparency, and truthfulness. the last two terms indicate that “all revenue and all expenses, without any futile concealment or secret definitions, should be indicated in the budget” (frolov, 2018). such an interpretation of the transparency of the state budget raises the issue of its degree. naturally, it is precisely the requirements of ensuring state security that is the determining criterion of the limit, to which information about incoming and outgoing flows of budget resources should be disclosed to the public. such an approach is found in article 31 of the budget code of ukraine “secret expenditures”. at the same time, the content of the latter, envisaged for the activities of state authorities, in the interests of national security, their potentially possible structure, and size are not defined by law. this allows the central authorities to manipulate budget indicators in certain political and economic circumstances, artificially narrowing public access to relevant data, primarily about the use of public funds. contrary to the above, the concept of “secret expenditures”, regulated by law, does not apply to local budgets, which in fact should mean full and timely disclosure of budget information by local selfgovernment bodies and executive bodies at the local level. however, in many cases, if there is a desire to be informed about the state of income and expenditure of local budgets, there are artificial barriers, up to the appearance of administrative indications regarding the metered provision of information on budget indicators. in addition, not only the volume (quantity) but also the quality of the latter often generates more questions than answers to them. thus, the indicators of the state budget and local budgets, as a rule, are presented in aggregate, without proper detail and specification on the sources of income and the purposeful allocation of budgetary resources. at the same time, revenue budget information, which would be measured on a scale at least up to 1,0 thousand uah, is practically inaccessible. of course, for a financial plan, the balance of which is measured by hundreds of billions of hryvnias, the figure of one or even ten thousand hryvnias is negligible. but such sums reflect financing of not just a separate branch of the national economy or a manager of budgetary funds (that is, one or another budgetary institution). in the end, both the recipients of budget resources and their real producers are specific citizens (objectively, taxpayers), the size of their many needs is often measured by these indicators. in many developed countries, the situation is the opposite. for example, in germany, the “price of a line”, that is, the requirement to detail articles of the state budget in amounts is 10 euros. therefore, german citizens know how the state budget is being formed and what almost every euro is used for (mykhaylenko, 2010). unlike them, our fellow citizens have to confine themselves to inadequate budget information. its low quality is also determined by the fact that the public administration of various levels reveals, as a rule, its own achievements, that is, the positive results of the implementation of budget policy. of course, first of all, such data are a reflection of the overall effectiveness of authorities. however, the one-sided presentation of financial, including budget information, on the one hand, is in fact half-truth, on the other hand, does not allow society to respond adequately to the various challenges and threats that are the result of the crisis conditions of the development of the national economy. in general, there are additional grounds for an extremely critical (often novolescent) assessment of actions of government structures, instead of proper understanding and acceptance of anti-crisis socioeconomic measures (painful – in the short term, but productive – over a longer period of time). we believe that knowledge of the real state of affairs in the national economy and the corresponding readiness of society to overcome financial difficulties can become one of the factors of the potential increase of the effectiveness of the state social and economic policy and its budgetary vector. indeed, this approach is likely to maintain a high level of public confidence in the authorities, which is an important factor in the successful implementation of their financial policy, above all. baltic journal of economic studies 44 vol. 4, no. 1, 2018 unfortunately, today in ukraine, there is a low level of institutional trust in such constituents as the state (government and local authorities) and business, while mass media with a high level of trust are often controlled by the state, business or their interrelated oligarchic noninstitutional associations, their irresponsible behaviour in relation to the future is not ruled out, which will lead to a recurrence of the crisis, as well as the inappropriate use of natural and social resources through deception (zaychykova, 2014). this creates a closed circle of negative phenomena, which lead to the failure to fulfil their functions as budgetary management, so the administrative direction of public servants – public administration (fig. 3). opacity of financial policy low level of public trust ineffective use of financial (including budget) resources fig. 3. creating a range of negative phenomena of budget management and public administration source: formed by the author particularly, the influence of the factor of trust increases at the territorial level, where the connections between the community members (institutions, voters, administrative apparatus) are significantly stronger than at the state level and, accordingly, at the level of national government bodies. therefore, confidence in, first of all, mechanisms for using financial resources of the territory, in which local self-government bodies are involved, potentially creates additional opportunities and incentives for direct donors of such funds – taxpayers – to participate in the formation of these resources in the future. on the other hand, the opacity of the budget process, especially at the local level, is one of the obstacles to, for example, investment activities of local governments, as well as their borrowings to local budgets (recall, the budget code of ukraine provides such a possibility only for the development budget, in others words, primarily for the purpose of investing). after all, any creditor (whether it represents a purely banking sector of the country or an investor in the securities market) needs to minimize the risks of placing its own financial resources. it is to a large extent ensured by the borrower (in our case, a local government), which, among other things, provides for obtaining detailed information on the state of local finances and, in particular, local budgets in the respective territory. in this regard, we note that the principle of transparency implies the disclosure of various components of budget information (indicators of income, expenditure and lending, budget financing), not only on the basis of the results obtained but also on all other stages of the budget process. thus, the executive bodies of the state as a whole comply with articles 58-62, 80 of the budget code of ukraine, forming and publishing reports on the implementation of the state budget of ukraine and local budgets. however, the socio-economic indicators that serve as the starting point for planning the indicators of the respective budgets are absolutely inadequate, obscure, inaccessible, and in most cases inaccessible. this is particularly relevant in the context of the actual cessation of fiscal decentralization policies and narrowing the scope of local self-government in ukraine, when not that ordinary voters but also local financiers, lack information on the origin of certain numerical data verified by the government from the ministry of ukraine’s finances as budgetary benchmarks. this situation leads to the ineffectiveness of managing budget resources at the local level throughout the entire budget period: the need for constant changes and additions to budget indicators, permanent search for new sources of income, lobbying central government decisions on providing additional subsidies and subventions, etc. particularly significant for taxpayer citizens is administrative pressure on budget funds managers to increase their income from a special fund, which often takes the form of charitable contributions, that is, seizures from individual or family income of consumers of services of such budgetary institutions. for example, in the odesa region, the indicator of the plan implementation for such own revenues of budget institutions as charitable contributions, in 2014, was executed by 353.7%, and in 2016 – by 490.7%. at the same time, their share in own revenues of spending units exceeded 35.0%. the increase in the weight of own revenues of budget institutions in ukraine as a whole is reflected in figures 4 and 5. during january-december 2017, the revenues to the general fund of local budgets of ukraine (excluding intergovernmental transfers) amounted to 192.0 billion uah, which is higher than the ministry of finance’s estimated figures by 21.3 billion uah. compared to 2016, revenues grew by 45.4 billion uah or by +31%. fig. 4. own revenues of local budgets (billion uah) for 2014–2017 source: formed on the basis of mistsevi byudzhety: eksperty pidbyly pershi pidsumky 2017 roku this indicates an increase in the interest of local self-government bodies in increasing revenues to baltic journal of economic studies 45 vol. 4, no. 1, 2018 local budgets, implementing measures to find reserves for their filling and improving the efficiency of administration of taxes and fees. the share of financial resources receiving local budgets from the state budget reaches 50%, that is, local authorities have a half of the financial resources of the consolidated budget. fig. 5. the share of local budgets (with transfers) in the consolidated budget of ukraine (%) source: formed on the basis of mistsevi byudzhety: eksperty pidbyly pershi pidsumky 2017 roku the share of local budgets in the consolidated budget reaches 50%, that is, local authorities have a significant financial resource to effectively manage and direct them for community development (in relations with the state – 50/50). such growth rates of local budget revenues are attributable to government actions aimed at financial decentralization. new conditions have raised the interest of local self-government bodies to increase revenues to local budgets, to take measures to find reserves for their filling, and to increase the efficiency of administering taxes and fees. in addition, today, local self-government gradually departs from the previously existing consumer position. today, they are replacing the expectations of subsidies by active actions in creating an effective management apparatus, directing funds for community development, analysing the spending of budget funds, and preventing instances of their inefficient, irrational use. it is fair to note that insufficient transparency of the budget process is not only a domestic problem. the board of directors of the imf approved one of twelve internationally recognized financial standards – the code of good practices on fiscal transparency (indeks vidkrytosti byudzhetu 2012-2016). taking into account its provisions, the international budget partnership, established in 1997, initiated an assessment of the open budget index. it determines whether the government provides public access to eight major budget documents and whether they are clear, timely, and useful. these documents are a budget declaration, draft budget, budget, budget for citizens, quarterly reports on budget execution, semi-annual report, annual report, and audit report. according to the open budget index in 2016, ukraine has occupied a rather high 19th place in a sample of 94 countries. at the same time, it outpaced all other cis countries and georgia, as well as some of the member countries of the european union. ukraine’s score increased from 55 points in 2008 to 62 points in 2016, largely due to the publication of information on the draft budget (indeks vidkrytosti byudzhetu 2012-2016). in addition, as noted in the review, the government of ukraine published during the year budget reports that meet international standards (indeks vidkrytosti byudzhetu 2012-2016). however, according to a similar assessment in 2012, ukraine ranked 35th among 100  countries, having received 54 points out of 100  possible. this figure turned out to be higher than the average score of 43 points for all the countries under study but lower than the neighbouring countries, in particular, bulgaria, poland, russia, slovakia, and the czech republic. the main claim of the international budget partnership to ukraine is the lack of a so-called civil budget, that is, the government’s explanations for articles on income and expenses in a clear form. the concept of a “civil budget” is associated with the fact that its main conceptual provisions are formed as a result of the active participation of individuals and independent nongovernmental organizations through broad discussion and provision of appropriate proposals or comments. the final version of the draft civil budget is presented on the internet in a generalized way to ensure a simple perception of its content by a broad general population of the country. the method of formation and focus on public awareness determine the corresponding name of such a version of the budget – “civil budget” (frolov, 2018). as we can see, ensuring a high level of transparency of the budget process is directly linked to the formation of a real, and not declared, civil society in ukraine. public hearings on budgetary or tax issues, organized by both central and local authorities, have been repeatedly criticized by specialists. however, the problem of activating the civic initiative in the budget process, the development of its forms and methods requires additional scientific research. the revealed difficulties in ensuring the publicity and transparency of the budget process objectively require the adoption of effective measures aimed at overcoming them. in january 2011, the cabinet of ministers of ukraine prepared a draft concept of the state target program for creation and development of the integrated information and analytical system “transparent budget”, the fifth (last) stage of implementation of which provided for its final term for the second quarter of 2013 (concept of the state target program, 2013). unfortunately, the concept remained the project. such a participation, probably, also awaits the draft law “on openness of the use of public funds”, introduced to the verkhovna rada of ukraine by a group of people’s deputies in may 2013 (concept of the state target program, 2013). in addition, the implementation of such legislative and regulatory documents requires, as their baltic journal of economic studies 46 vol. 4, no. 1, 2018 authors have predicted, proper financial and material security. thus, the financing of activities related to the creation and development of an integrated information and analytical system “transparent budget” provided for by the aforementioned concept required 50.0 million uah (at current prices of 2011) (mistsevi byudzhety: eksperty pidbyly pershi pidsumky, 2017). according to calculations of the authors of the draft, its implementation is estimated at 0.5 million uah at the stage of development and testing, and it was planned to spend 3.0 million uah annually for the maintenance of the web-portal. of course, an increased level of control over public funds would help to compensate for planned expenditures by additional revenues to the state budget. for example, according to expert estimates, it would be possible to use 30-40 billion uah more effectively in the field of public procurement (indeks vidkrytosti byudzhetu 2012-2016). however, in the context of the crisis of the domestic system of public finances, the permanent deficit of the state budget to find an additional resource for these legislative innovations, of course, it is extremely difficult. this explains why initiatives to improve the transparency of the budget process in ukraine tend to remain initiatives. it is therefore advisable to pay attention to those proposals that, according to the calculations of the international centre for policy studies, practically do not require significant additional costs for the implementation of the necessary measures, namely: – publish an annual report, which is currently being prepared only for internal use; – make and publish a budget for citizens; – include a detailed description of the macroeconomic and fiscal environment in the current state budget; – submit the data in the draft state budget: 1) about the actual expenditures for the previous year, in particular, by individual programs, as well as the planned expenditures by economic and departmental classification; 2) about the non-tax revenues of the budget and the state debt for the past fiscal year; 3) on the impact of various macroeconomic assumptions on budget execution; 4) about the relationship of the budget with the declared government objectives of the policy and performance indicators of budget programs; 5) on the use of extrabudgetary funds in both financial and in-kind form (in particular, regarding sources of donor assistance); – include information at the program level in the current budget; – to provide information on the structure of public debt in the report on budget execution throughout the year; – in the annual reports, explain the difference between the planned and actual level of expenditures; – in the audit reports on the budget, provide information on the actions that the executive authority conducts to implement the audit recommendations. expanding the list of mandatory disclosure of budget information, such as the inclusion of planned calculations of indicators of the main items of income and expenditure, is absolutely possible in the current informational environment, which involves simplifying the mechanisms of communication through the use of technical means. 4. conclusions thus, today’s budget management can be considered as: the science of management; a budget management system that is represented by a combination of two elements – objects and subjects of management; art that “arm” managers with specific tools in the budget sphere; one of the areas of financial management; multi-level system of budget process management. however, in our opinion, it is expedient to consider that this is a set of interrelated functions, principles, methods, techniques, and procedures used by the authorized authorities. using all the components of budget management, the state plans and manages the key budget indicators, which allows taking into account the budget’s ability to influence sustained economic dynamics, employment, investment, innovation, and equalization of regional development. budget management is aimed at ensuring the effective implementation of the procedures for the drafting, review, approval, and execution of the budget to achieve economic and social benefits in terms of the changing environment. understanding the essence of the budget and other public financial resources as public funds objectively makes it possible to have information about their state (formation, distribution, and use) by any citizen of the country, especially if he or she is also a taxpayer at the same time. assessment of the state of implementation of the principle of publicity and transparency in the budget management of ukraine makes it possible to draw the following conclusions: 1. the content of the principle of publicity and transparency in the text of the budget code of ukraine should be amended by formulating it as a principle of the budget process, rather than the principle of the budgetary system of ukraine; herewith it is necessary to specify the methods of its practical implementation. 2. the full implementation of the principle of publicity and transparency of the budget process will contribute to increasing the level of trust of citizens to the authorities of different levels, which is one of the factors of successful implementation of the state social and economic policy, and will deepen the democratic principles of the formation and development of ukrainian society. baltic journal of economic studies 47 vol. 4, no. 1, 2018 3. the lack of transparency of budget information at the planning stage significantly impairs the ability to manage budget resources, primarily at the local level, exacerbating the problem of full budget financing, especially at the end of the budget period. 4. budget information for an overwhelming majority of stakeholders remains inaccessible, inaccurate, untimely, and incomplete in ukraine, which led to a deterioration of ukraine’s position in the international rating by the open budget index. 5. improving the transparency of the budget process can be achieved through the use of the above measures. their implementation will serve not only to improve the quality of the budget process and the effectiveness of budget management but also to establish harmonious social relations. at the same time, the task of developing further directions of increasing publicity and transparency of the mechanism of functioning of the entire system of public finances in ukraine remains relevant. references: babych t. s. 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[budget system: subhead]. ternopil: tneu. zaychykova v.v (2014). funktsiyi mistsevykh finansovykh orhaniv v umovakh byudzhetnoyi reform [functions of local financial institutions under the conditions of budget reform]. finansy ukrayiny. – finances of ukraine. no 6, pp. 72-79. zhalilo ya. a., moldovan o. o., shevchenko o. v.; za red. ya. a. zhalila (2010). nova arkhitektura byudzhetnoyi systemy ukrayiny: ryzyky ta mozhlyvosti dlya ekonomichnoho zrostannya [the new architecture of ukraine's budget system: risks and opportunities for economic growth]. kyiv: nisd/niss. baltic journal of economic studies 38 vol. 3, no. 4, 2017 corresponding author: 1 department of management and marketing, volodymyr dahl east ukrainian national university. e-mail: cxid@i.ua the management of business activity of enterprises: scientific and economic analytics maksym hodiashchev1 volodymyr dahl east ukrainian national university, ukraine abstract. the main purpose of the paper is to comprehensively study and analyse theoretical aspects of management of business activity of enterprises, revealing their main disadvantages and differences. the research methods will allow developing a categorical apparatus for the management of business activity of enterprises. methodology. the research is based on the analysis of scientific works of domestic and foreign scientists and economists concerning business activity as an economic category and its management, approaches and directions of such management. results of the research are showed that management of business activity covers various areas of activity of enterprises. such areas can be production, financial, innovative, social, environmental etc. in the process of analysing economic literature, it is determined that most scholars focus on two main aspects of managing business activity: socioeconomic management and management of the efficiency of economic activity. it is determined that each aspect of management of business activity is characterized by appropriate methods of conducting. among methods of socio-economic management of the enterprise are followed: material and moral stimulation of personnel; social regulation; economic calculation; balance method; method of financing; price regulation; lending. considered also psychological and organizational-administrative methods for the management of business activity. the second aspect of management of business activity aimed at managing the efficiency of economic activity is characterized by the achievement of the necessary discursive effect that is the direct satisfaction of the owners of enterprises. the article also substantiates the importance of studying tools of managerial influence on the business activity of enterprises, which in the process of research are divided into five main groups: economic, ecological, financial, psychological, and management audit. practical implications. modern scientific scholars are characterized by the insufficient development of views on the management of business activity of enterprises since it distinguishes only two of its main aspects: as socio-economic management and management of the efficiency of economic activity which differ in methods and ways of management. therefore, an enterprise cannot carry out an effective assessment of the factors that effect on the level of business activity and make quality management decisions. value/ originality. research of theoretical aspects management of business activity of enterprises allowed formulating the actual definition of this category. the author’s interpretation of this definition is characterized by systemic and comprehensiveness and logically outlines the main management actions, their focus, and the period of applying, that is the novelty and relevance of the research. key words: business activity, management, enterprise, directions, methods, tools. jel classification: m10, p13, c65 1. introduction the activity of modern enterprises is carried out the conditions of global integration of the domestic economy into the world economic space. therefore, it is accompanied by an unstable nature of trends and phenomena that affect the condition and dynamics of the development of the industrial-economic system, its orientation. this situation creates new requirements for the operation of enterprises, their ability to react quickly and adapt to the factors of a changing market environment, optimally using available resources and management tools to achieve large-scale enterprises goals. that is why in modern economic conditions one of the determining categories of successful development of enterprises is business activity, the character of which demonstrates in all aspects of their activity. the essence and content of business activity include many aspects and criterion features, therefore, its high-quality management will provide an increase of potential of enterprises, minimization of possible risks and failures in conditions of uncertainty. objectivity and accuracy of determining the level of business activity affect the effectiveness of the management decisions that depend on the activity of using material and baltic journal of economic studies 39 vol. 3, no. 4, 2017 financial resources, the level of personnel development, innovation and market activity, etc. such conditions determine the research of business activity as a system management category that consists of many indicators of individual spheres of enterprise’s activity, and its formation depends on a set of management methods and procedures. research on the essence of the business activity of enterprises, its formation, and development are reflected in the writings of many scholars-theorists and economists, among which such authors as: i.  ansoff, r .  bradley, l.  dashkov, n.  meshkova, a.  zaikin, r .  fathutdinov and other scientists. some of them research the management of business activity and methods of its improvement. the other ones are engaged in the problems of increasing the business activity of enterprises and its estimation. in their works, scientists determine the indicator of business activity, its components, the methodology of evaluation, etc. despite a large number of publications on increasing business activity of enterprises, most of them are narrowly oriented, and differ in the approaches and nature of research. theoretical and methodical aspects concerning ensuring the optimal level of business activity of enterprises by different functional zones (production, personnel, innovations, etc.), development of management tools for its achievement remain insufficiently studied. the outlined problem determines the relevance of the research, its significance for the successful management of enterprises. 2. some aspects of the management of business activity of enterprises it is proved that business activity as a process related to the results of activity of the enterprise, its potential, and competitiveness. that is why the management of business activity must occupy a leading position in the whole management system of the enterprise because it creates the appropriate conditions for the growth of its value. the term “management of business activity enterprise” can be considered as the impact of the management entity to the current plans for the formation, distribution, and redistribution of all kinds of available resources to continuously improve enterprise efficiency at the micro and macro levels. management of business activity covers various spheres of activity. these spheres may be industrial, financial, innovation, social, environmental, and so on. in an analysis of the economic literature, it is determined that most scientists are focused on two main spheres of the management of business activity: 1) socio-economic management; 2) management of the efficiency of economic activity. the defining essence of the first direction of the management of the business activities of enterprises – socio-economic management is to provide the expected overall effect. in this case, the impact of industrial and economic activities is analysed. a significance of social and economic management is determined in proportion to its economic and social aspects. in this context, the economic aspect is considered as a meaningful impact on the relevant structural elements of the company, namely, the system of relations between the personnel, resources (financial, material, information, etc.), results management, for the purpose of to ensure its effectiveness, competitiveness, increasing cost and so on. such actions by the management of companies can be made with the right management, development targets, and measures for their use and control. the methods of management of business activity are considered as a set of ways and means, by which the managing entity (enterprise) may affect the object for a particular purpose. they also describe a complete act of influence on any object management (business activity). the main methods of economic management are financial incentives for staff; economic calculation; balance method; method of financing; price controls; lending. financial incentives for the staff include different forms and systems of wages, making of bonuses for employees. it is carried out in addition to the existing system of hourly and piece-rate wages to encourage employees to effective work, achieve high-end results of production and accelerating scientific and technological progress, which are the structural components of business activity (poliscshuk, 2011). economic calculation is a method of keeping the company, in which each company compares cash expenses and results of production (services), seek to recover costs by own income, that is ensuring selfsufficiency and optimal profitability. thereby the achievement of a financial and economic component of business activity is ensured. the balance method is a method that is used to the planning of business activity to achieve balance in the areas of production and personal consumption by matching resources (material, labour, financial) and the need for them. the system of these resources in the management of business activities allows ensuring a balance of individual sections and planning for the economic and social development in general. with balance method economic ties, the proportion of the production cycle are disclosed, bottlenecks and distortions are identified, and imbalances quantitative parameters in different levels of economic activity are established. the method of financing is a combination of techniques and trends aimed at enterprises emphasize on internal financial sources and resources forming business activity at a time when external sources play a supporting and regulating role. the main methods of financing of the modern enterprises are self-financing, baltic journal of economic studies 40 vol. 3, no. 4, 2017 public financing, investment, progressive finance, credit provision (lanova, 2010). pricing of the company is the process of setting prices for a particular product. the price of the company’s products is largely determined by external factors including the impact of competition, participants of the channels of movement of goods (suppliers, intermediaries), state policy (makarovskaya, 2013). thus, the main determinants of the economic aspects, the management of enterprises is to create conditions and implement specified measures to ensure positive economic activity, optimal use of potential and existing resource of an enterprise aimed at the organization of business activity. regarding social management of business activity in the overall management is considered the management that enterprises carried out concerning the staff to implement the motives of social behaviour. among the methods that can be used in the process of social management are emphasized the social normalization and regulation; mental stimulation, motivation techniques; psychological methods; methods of economic incentives; organizational and administrative methods. the social normalization and regulation is a scientifically substantiated organization of social processes through social rules and norms that determine the order behaviour of individuals and groups in the team, which help to maintain business activity in the framework of social justice in the team and improve social relations between the employees. their means are collective contracts, agreements, mutual obligations, internal regulations, statutes (sections are governing the behaviour of civil servants), the rules of etiquette, rituals, priority social needs depending on seniority or industrial activity etc. moral incentives are most developed subsystem spiritual work incentives based on spiritual values of a specific person. the essence of moral incentives is the transfer of information about human achievements, the results of the social environment. while the source of information on the merits, employees are subjects of management; the receiver is the object of incentives, employee, and collective; communication channel is communication tools (stupishina, 2009). motivation is a call to action; the dynamic process of a physiological and psychological plan that controls human behaviour and determining its organization, activity, and stability; human capacity to actively meet their needs. in the management of business activity, motivation is a process of incentives for workers to effectively carry out activities aimed at achieving the purpose of the company. motivation is necessary for the effective implementation of the decisions and tasks about the management of business activity. psychological methods in the management of business activities used to harmonize relations firms and workers, establish the most favourable psychological climate. they include the humanization of work (elimination of monotony, colour spaces and colour equipment, use of specially neat music); psychological motivations (to encourage creativity, initiative, and independence); meet professional interests, improving the creative content of work; development of a goal for the psychological characteristics and development of the necessary psychological traits; completing of small groups by the criterion of psychological compatibility of employees; establishment of normal relations between managers and subordinates. economic methods of management of the business activities occupy an important place in the system of management methods. this is because management relations are determined primarily by economic relations, which are based on objective needs and interests of people. the task of stimulating business activity is very hard. first, it is needed to achieve the increasing industrial activity, encourage the search for innovative solutions to create and maintain an atmosphere of corporate spirit. secondly, in a market economy, not only industrial and economic processes are important but also its business results, reflected in specific performance indicators of business activity: revenue growth, reducing costs, improving product quality. commercial criterion is crucial to assess the importance of personnel labour of the company. thus, the modern approach of companies to stimulate labour is determined by two main points – the desire to intensify the most creative person and send these activities to achieve concrete economic results. organizational and administrative management methods in business activity are a set of techniques and methods of direct managerial influence on the relations of people in the workplace. they implement one of the most important functions of management – the function of the organization. by that means the task of organizational and administrative activity is coordination of actions of subordinates. without organizational and administrative influence methods of economic management cannot be realized because they provide clarity and order discipline of the team. the second aspect of management of business activity aimed at efficient management of economic activities and characterized of achieving the desired effect of discourse, i.e. the immediate satisfaction the interests of owners. managing of business activity is a process aimed at ensuring the sustainable and continuous improvement of enterprise efficiency. the main ways of increasing efficiency include accelerating scientific and technological progress, the implementation of technical reconstruction of production; improving the structure, forms of organization and production management; improved utilization of assets; increased productivity; reducing production costs; increasing profits; improving organizational and technical level of enterprises and economic work at all levels of management (goncharuk, 2014). baltic journal of economic studies 41 vol. 3, no. 4, 2017 based on the analysis of the directions of management of business activity of enterprises, it is possible to systematize them and present them in fig. 1. 3. tools of managerial influence on business activity any enterprise that aspires to maintain a high level of business activity is interested in the possibility of its independent management. therefore, apart from the factors influencing this category, the study of instruments of managerial influence on business activity is updated, with the help of which, as practice shows, the ways of achieving the set goals are realized; a compliance of administrative decisions of the mission of the enterprise and strategic goals of business activity is established. research conducted in the field of management of business activity management of enterprises shows that to date, the study of the appropriate management tools is given with insufficient attention both from the side of scientists and managerial staff of enterprises. analysis of economic literature proves the existence of problems with regard to the existing management tools, which are reflected in their composition and structure, indicators, the methodology of application, adaptation opportunities to the conditions of enterprise management, etc. l.v. frolova and o.o. niitenko see disadvantages in the formation of the theoretical basis of the instruments of managerial influence on business activity. they substantiate the “need to improve the theoretical and methodological tools for the management of business activity of the enterprise”. o. oliynyk agrees with the authors; at the same time, he emphasizes by the theoretical peculiarities of the instruments of managerial influence, which are formed under the influence of socio-economic transformations (oliynyk, 2010). he also notes the problem in the ambiguity of the components of administrative architectonics, their visual representation, which are used in the analysis of business activity with its economic nature. the most of the scientists in their works prefer economic and financial instruments of managerial influence. among the economic instruments of managerial influence on the business activity of the enterprise, one of the most widespread is economic analysis, intended to transform the information, which is provided to users in useful, i.e. suitable for making managerial decisions. i. wagner considers economic analysis as a system that reflects the process of influence on reality where is forming the method of using the subject of the properties of objects and the relationship between them in solving management problems through the relationship of appropriate methods, organizational forms, technologies (wagner, 2013). the author examines the economic analysis from the point of view of practical activity that is the preliminary stage of decision-making in relation to the management of business activity, as well as their analytical substantiation. such an activity can be carried business activity this is a combined indicator that allows in the retrospect to evaluate enterprise activity by means of features that characterize complex socio-economic, industrial, technical and technological systems in the conditions of business environment variability, and reflects the quality of the enterprise’s use of its potential for further management decisions some aspects of management of business activity social and economic management of the enterprise management of the efficiency of economic activity social character of management: social rationing; social regulation; moral stimulation; methods of motivation psychological methods methods of economic stimulation; organizational and administrative methods; methods of selfmanagement economic character of management: economic calculation; balance; financing; lending; price regulation; material incentives for the staff accelerating scientific and technological progress; improvement of the management of production; improvement of the use of production assets; increase of labour productivity; reduction of production cost; increase in profits; increase of the organizationaltechnical level of the enterprise and economic work at all levels of management fig. 1. some aspects of management of business activity of enterprises baltic journal of economic studies 42 vol. 3, no. 4, 2017 out not only in relation to the management of business activity as a category but also its separate problematic aspects (financial, personnel, production, etc.). undeniably, economic analysis can be considered as an important tool for managing business activity since it serves to solve its economic problems. at the same time, it cannot ensure the adoption of quality managerial decisions in relation to other (non-economic) aspects of business activity. therefore, it is expedient to use other management tools in relation to the business activity. the needs of enterprises in ensuring a high level of their business activity require a comprehensive study of financial instruments of managerial influence aimed at the realization of this task. it should be noted that the financial aspect of the business activity is rather complex from the managerial point of view since it is carried out in the following directions: efficient management of financial resources (their formation, accumulation, orientation), cash flows, profits (the possibility of capitalization), etc. the main financial instruments of managerial influence on the business activity of enterprises include: 1) financial assets (cash, equity instruments of other enterprises and own enterprise, contracts for the receipt or exchange of financial assets of other enterprises, accounts receivable, financial market instruments, etc.); 2) financial obligations (debt and equity financial instruments, risk-free financial instruments); 3) equity instruments (profits, reserves, issuing securities, etc.). noting the specific features of the development of enterprises in the context of their business activity, the formation of financial instruments of managerial influence on this category should be carried out taking into account the indicators that characterize it. a significant number of researchers associated the problem of ensuring the necessary level of business activity with the environmental factors of economic activity of enterprises, and therefore, distinguish the environmental instruments of managerial influence on business activity. among such instruments, the most significant are the following: 1) emas environmental management system – application of the european scheme of environmental certification and environmental audit by domestic enterprises. it is used for the purpose of improving the ecological status in general and produced products in particular, increasing the ecological activity of enterprises; 2) assessment of environmental impacts that is carried out by enterprises by assessing plans and programs of environmental production at the stages of their development and approval; 3) eco-labelling of products is conducted by enterprises to increase their business activity in commodity markets through reducing the negative impact of manufactured products on consumers and the environment; 4) agreements and contracts of enterprises on environmental protection. they are intended for the improvement of those aspects of the business activity that are connected with the ecological activity of enterprises. for enterprises, which aspire to achieve a stable high level of business activity, it is necessary to mobilize resources and steer earmarked use of environmental tools of managerial influence on business activity. some scholars among the tools of managerial influence on the business activity to a greater extent distinguish psychological tools, which include: development of the concept of management of business activity of staff; psychological audit; career management of business activity of the personnel; formation of corporate culture of business activity of the enterprise; conducting effective personnel policy of business activity of personnel, etc. the list of these tools does not end there as mentioned above. at the same time, modern enterprises in their activities are limited to the use of certain psychological tools of managerial influence on business activity but not the totality of their application. this situation is due to the high cost of their implementation, the inability or incompetence of management to effectively organize the procedure for implementing psychological instruments of managerial influence on business activity. in this case, there is a lack of using only this group of tools to achieve a high level of business activity of enterprises. an important role in ensuring a proper level of business activity has recently become managerial audit as a tool of managerial influence. practice shows the lack of development of management those tools, which help the timely detection of deviations from the goals, poor management decisions aimed at implementing measures to ensure the high level of business activity of enterprises. unlike other tools of managerial influence on business activity, management audit is aimed at assessing the effectiveness of administrative providing of business activity. its main purpose is an independent objective assessment of the level of preparedness the personnel to the qualitative, efficient implementation of the defined circle of tasks concerning on achievement of the high level of business activity. among the analysed tools of managerial influence on the business activity of enterprises, management audit serves as one of the leading tools since it complexly determines the nature of management of the business activity taking into account the specifics of the activities of enterprises and the corresponding composition of audit procedures. they are verification of financial indicators of business activity of the enterprise, rational use of available resources, implementation of investment, innovation, social, environmental, and others development programs, the effectiveness of managerial decisions in relation to business activity in baltic journal of economic studies 43 vol. 3, no. 4, 2017 dynamics. ultimately, a reasonable forecast of the results of the management audit is carried out; alternative options for improving the level of business activity of the enterprise are offered. analysing the tools available in the scientific literature for managing the business activity of enterprises, the most of scientists focus on certain specific influence tools on this category (financial, economic, environmental, etc.), which, of course, are very important but their separate studying does not give a comprehensive characteristic about the totality and content of such tools, which are aimed at solving the tasks and goals of ensuring the high level of business activity of enterprises. in this case, it is expedient to visualize and systematize the structure of tools for managing the business activity of enterprises (figure 2). the analysis makes it possible to systematize certain tools of managerial influence on the business activity of enterprises and group them into five main groups: economic, financial, psychological, environmental instruments, and management audit. the use of these tools by enterprises is possible both in aggregate and separately, depending on the problem areas of business activity. each of the dedicated tools of managerial influence on business activity is characterized by its own content and purpose and is important for the successful implementation of measures to manage the business activity of enterprises. 4. conclusions modern scientific scholars are characterized by the underdevelopment of views on the management of business activity since only isolates its two main areas: a socio-economic management and performance management of economic activities, which are varied by methods and ways of management. thus, the company cannot conduct a qualitative assessment of factors affecting the level of business activity and, therefore, make quality management decisions. the theoretical aspects of business activities of enterprises allowed forming the own definition of this category. thus, management of business activity is a complex of measures (organizational, analytical, control) about the regulation of the intensity using and adaptation potential of enterprises, which are aimed at the coordination (correlation) of their activities with the requirements of a dynamic environment. this interpretation of the definition makes logical outlines the main management measures, their direction, and period of application. thus, “business activity” is one of the main impacts, which allows the assessment of its financial condition, helps identify strengths and weaknesses for strategy development, characterizes the use of capacity, and determines the position on the market, its competitive position. management of business activity of enterprises 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(2013) economic analysis as a modern tool for making strategic management decisions. retrieved from http://nbuv.gov.ua/ujrn/vlnau_econ_2013_20(1)__9. максим годящев управление деловой активностью предприятий: научно-экономическая аналитика аннотация. главная цель статьи заключается во всестороннем исследовании и анализе теоретических аспектов по вопросам управления деловой активностью предприятий, выявлении основных недостатков и разногласий. методы исследования позволят развить категориальный аппарат по управлению деловой активности предприятий. методика. исследование базируется на анализе научных трудов отечественных и зарубежных ученых и экономистов по вопросам, касающимся деловой активности как экономической категории и ее управления, подходов и направлений такого управления. результаты исследования показывают, что управление деловой активностью охватывает различные сферы деятельности предприятий. такими сферами могут быть: производственная, финансовая, инновационная, социальная, экологическая и т. д. в процессе анализа экономической литературы было установлено, что работы большинства ученых сосредоточены на двух основных аспектах управления деловой активностью: социально-экономическом управлении и управлении эффективностью экономической деятельности. установлено, что каждый аспект управления деловой активностью характеризуется соответствующими методами проведения. среди методов социально-экономического управления предприятием выделены следующие: материальное и моральное стимулирование персонала; социальное регулирование; экономический расчет; балансовый метод; метод финансирования; регулирование цен; кредитование. рассмотрены также психологические и организационно-управленческие методы управления деловой активностью. второй аспект управления деловой активностью, направленный на управление эффективностью экономической деятельности, характеризуется достижением необходимого дискурсивного эффекта, который прямо удовлетворяет владельцев предприятий. в статье также обоснована важность изучения инструментов управленческого воздействия на деловую активность предприятий, которые в процессе исследования распределены на пять основных групп: экономические, экологические, финансовые, психологические, а также управленческий аудит. практическое значение. исследования современных ученых характеризуются недостаточным развитием взглядов на управление деловой активностью предприятий, поскольку выделяют только два основных его аспекта: социально-экономическое управление и управление эффективностью экономической деятельности, которые различаются методами и способами управления. поэтому предприятие не может провести эффективную оценку факторов, влияющих на уровень деловой активности, и принимать качественные управленческие решения. значение/оригинальность. исследование теоретических аспектов управления деловой активностью предприятий позволило сформулировать актуальное определение этой категории. авторское толкование этого определения характеризуется системностью и всесторонностью, и логически излагает основные управленческие мероприятия, их направленность и период применения, что составляет новизну и актуальность исследования. baltic journal of economic studies 151 vol. 3, no. 4, 2017 corresponding author: 1 department of international economic relations, lutsk national technical university. e-mail: olenalutak@gmail.com 2 department of international economic relations, lutsk national technical university. e-mail: larysa.savosh9@gmail.com 3 department of international economic relations, lutsk national technical university. e-mail: o.baula@lntu.edu.ua features of the use of alternative energy sources in ukraine and the world olena liutak1, larysa savosh2, olena baula3 lutsk national technical university, ukraine abstract. the purpose of the work is to consider the theoretical applied foundations of the use of alternative sources of energy in ukraine and the world, the study of the theoretical bases, and specificity of the use of existing alternative energy sources in the context of globalization, the world practice of the use of alternative sources of energy; lighted up the features of the use of alternative energy sources in ukraine in modern conditions. a special attention is focused on the analysis of energy efficiency of ukrainian regions and its determinants, and investigated the general trend regarding the situation in the oil market and investment in renewable energy. methodology the study is based on the indicators of renewable energy and energy efficiency of the regions of ukraine in 2015 and the inclusion of indicators of the average oil price, investment in renewable energy sources, the rate of growth of prices, growth rates of investments in 2004–2016. in general, in mainland ukraine, there are several dozens of solar power plants capacity from 1 to 15 mw, and more than a dozen ses have a capacity from 20 to 120 mw (some under construction). thanks to a special “green tariff ”, which is valid since 2011, solar energy has become a lucrative business that has attracted foreign investors. according to statistics, the volume of commissioning of new solar power plants in 2013 almost doubled compared to 2012. results. it is determined that an important element of policy implementation in the field of energy saving and use of alternative sources is the introduction of financial, organizational and economic activities that give the opportunity to implement principles of sustainable development in public administration, and in terms of decentralization – by local governments. in the management, the determining are such policies in the field of energy efficiency as: pricing mechanisms; mechanisms of regulation and control; financial measures and fiscal incentives; mechanisms of development and transformation of the market; technological development; business development and capacity building (creation of energy service companies (escos); the curriculum; the development of industry of energy efficiency); financial recovery. key words: alternative sources of energy, renewable energy, energy, energy security, green fare, energy efficiency. jel classification: o44, e01, p25 1. introduction the development and use of alternative and renewable sources of energy is an important factor to enhance energy security and reduce the negative anthropogenic impact on the environment. the importance of studying the development of alternative energy is obvious because it plays a crucial role in reducing greenhouse emissions, reducing the negative impact on the environment, increases energy security, helps to reduce the dependence on energy imports. alternative energy, built on the use of inexhaustible energy sources, can become a “key” that will open the door to independence in the gas and fuel sectors. if the twentieth-century scientists call “oil” one, the twenty-first century can really be an era of renewable energy. ukraine has large reserves of almost all types of alternative energy, thus it may become one of the most developed independent countries from exporters in the future. to the problem of renewable energy are devoted the works of such leading scholars as: s.  p.  denysiuk, v.  a.  zhovtiansky, d.  v.  zerkalov, a. m. liashenko, v. m. oleiko. among the works of the foreign researchers, scientifically and practically interest have the works of d.  boyls, john.  tweidel, s.  zakolei, h. a. atamanchuk, b. horieva, p. smith, p. thompson, h. scheer, and others. the main purpose of this article is to study peculiarities of using alternative sources of energy in ukraine and the world, to determine the theoretical basis and the specific baltic journal of economic studies 152 vol. 3, no. 4, 2017 use of existing sources of alternative energy in the context of globalization, the global practice of using alternative sources of energy, lighting, the use of alternative energy sources in ukraine in modern conditions. 2. presentation of the basic material it should be noted that in contrast to economically developed countries where energy saving is an element of regional sustainable development policy, in ukraine the question of energy efficiency of regions and increase of their efficiency is not a priority of regional policy, and certainly is not considered in the context of ensuring sustainable development of the regions. in this regard, the regions of ukraine suffer from low energy efficiency and, consequently, excessive energy consumption, a high degree of dependence on external conventional energy sources, the prices, which in recent times are constantly growing, instability and opacity of the regulatory policy in the energy sector. it should be noted that in the terms of today conditions the use of renewable energy sources is one of the most promising solutions to the growing problems of energy supply and sustainable development of the state in general and its regions in particular. table 1 renewable energy and energy efficiency of regions of ukraine, 2015 name of the region pl ac e of re gi on b y di re ct io n the share of equipment of apartment houses by houseto-metering devices of thermal energy, the percentage of the total number of apartment buildings that are subject of equipment the share of the total capacity of boiler houses on alternative fuels in the region, the percentage of the total capacity of boiler houses of the region the percentage of households that have entered into loan agreements in the framework of mechanisms to support energy efficiency measures in the residential sector at the expense of the state budget (including the co-financing from the local budgets), the percentage of the total number of households in the region % place according to evaluation % place according to evaluation % place according to evaluation vinnytsia 3 65,3 2 3,7 6 0,5 8-13 volyn 8 25,9 17 5,0 4 0,5 8-13 dnipropetrovsk 20 40,6 12 0,8 13-14 0,3 17-25 donetsk 22 36,5 13 0,7 15-18 0,3 17-25 zhytomyr 14 20,3 22 0,9 12 0,7 2-4 zakarpattia 19 0,7 15-18 0,6 5-7 zaporizhzhia 10 56,8 3 1,6 10 0,3 17-25 ivano-frankivsk 2 42,6 9 6,3 2 0,5 8-13 kyiv 13 14 3,1 7 0,3 17-25 kirovohrad 7 42,1 10 4-9 5 0,4 14-16 luhansk 25 14,5 23 0,03 23-25 0,3 17-25 lviv 6 68,6 1 0,4 20 0,7 2-4 mykolaiv 12 50,5 7 1,9 9 0,3 17-25 odesa 24 24,0 18 0,1 21 0,3 17-25 poltava 23 22,1 21 0,7 15-18 0,4 14-16 rivne 4 33,1 16 5,1 3 0,7 2-4 sumy 5 40,7 11 0,03 23-25 1,1 1 ternopil 15 5,8 24 3,0 8 0,6 5-7 kharkiv 1 55,4 5 6,8 1 0,3 17-25 kherson 16 48,7 8 0,04 22 0,4 14-16 khmelnytskyi 9 56,5 4 0,6 19 0,5 8-13 cherkasy 21 23,9 19-20 0,8 13-14 0,5 8-13 chernivtsi 17 23,9 19-20 0,7 15-18 0,6 5-7 chernihiv 18 35,4 15 0,03 23-25 0,5 8-13 city of kyiv 11 55,2 6 1,5 11 0,3 17-25 baltic journal of economic studies 153 vol. 3, no. 4, 2017 the primary element of the research is to assess the potential of using alternative sources as the state as a whole and in individual regions, which are characterized by respective capabilities. one of the tools of the analysis of efficiency is a rating, which is based on the methodology of the international energy agency (iea) and determines the efficiency of energy use in each region of ukraine, concerning the structure of the regional economy. the energy consumption of the region is divided into the final consumption of energy in 10 sectors of the processing industry, agriculture, mining industry, construction, services sector and housing, for each of which is an indicator of efficiency. evaluation is performed based on the comparison of the final energy consumption of regions with similar indicators of the countries of the european union (eu), which are used as a conditional model of energy efficiency for ukraine. the gap between the energy consumption of the region and the benchmark determines the potential of each region for energy efficiency: what it is, the lower the energy efficiency of the region, the greater the amount of energy you can save on the condition of approximation to eu standards. the rating also gives an answer to the question on what factors changes in energy consumption depend. in particular, it determines how the energy consumption of the region is affected by changes in energy intensity, decline/increase in business activity and structural changes in the economy of the region. in 2015, the energy efficiency rating of regions of ukraine looked like this (table 1). many large corporations consistently develop and support energy efficiency, encourage the discussion and dissemination of modern practices in society, cooperate with public organizations. one of the main initiatives in this direction is the annual observance of the energy efficiency rating of ukrainian regions, ukrainian energy index, the purpose of which is to determine how energy efficient is our country and its separate regions, and what potential we have to increase the level of energy efficiency. in general, alternative energy sources, renewable energy sources, which include: solar, geothermal, wind, hydropower, biomass energy, gas from organic waste, gas of sewage stations, biogas and secondary energy resources, which include blast furnace and coke gases, methane gas degasification of coal deposits, transformation of waste energy potential of technological processes are widely used in modern society in parallel with the increase in the price of oil and gas increases and the volume of investment in renewable energy (table 2). at the present stage of development of world oil market, prices are formed on exchanges based on supply and demand, as well as under the influence of factors that shape the supply and demand. the demand for oil is determined primarily by the growth rate of the world economy, as well as a number of other factors, including structural characteristics of the demand for oil, energy and oil capacity of economy, climatic (weather) conditions, the level of efficiency of energy-consuming technologies and the relative competitiveness of other fuels. the supply of oil on the world market is determined by world demand, geological, and technological factors, structural characteristics of world production and exports of oil, politics of oil-producing states, as well as a number of other factors, including factors of a random nature, such as military action in the regions of oil production. common power supply problems, certain issues that affect them, are under constant attention of world international organizations, first, and foremost energy ones. they are the international energy agency (iea), world energy council (wec), international atomic energy agency (iaea), statistical department of the european commission (eurostat), cis electric power council, and others. the solar energy sector in alternative energy is one of the rapidly growing. this type of energy is available in almost every corner of our planet. it attracts investors for its sustainability, without prejudice to the biosphere can be used about 3% of the solar flux arriving at the earth. this will give the energy capacity of 1000 billion kwh, 100 times the current capacity of energy production in the world. today about 90% of the world’s solar energy market is based on silicon technology. the benefits of manufacturing solar panels (pv modules) using silicon technology are sufficient availability of silicon in nature, its chemical stability, and the absence of any toxic effects on people and the environment. with a combination of a photomodulation solar power plant whose capacity depends on the number of mounted solar panels. such solar modules can be placed on the roofs and facades of buildings that will meet household needs for electricity. one of the world leaders in the use of solar energy is china. table 2 global investment in renewable energy years the average oil price, $/bar investment in renewable energy, billion us dollars growth of prise rates, % the growth rate of investment, % 2004 35 62 0 2005 52 88 48,57 41,94 2006 63 130 21,15 47,73 2007 57 183 -9,52 40,77 2008 133 205 133,33 12,02 2009 45 207 -66,17 0,98 2010 89 276 97,78 33,33 2011 117 317 31,46 14,86 2012 120 291 2,56 -8,20 2013 110 269 -8,33 -7,56 2014 87 315 -20,91 17,10 2015 65 349 -25,29 10,79 2016 53 387 -18,46 10,89 baltic journal of economic studies 154 vol. 3, no. 4, 2017 the annual technically achievable energy potential of solar energy in ukraine is equivalent to 6 million tons of standard fuel; its use would allow replacing about 5 billion m3 of natural gas. today, the country established its own production of highly efficient silicon solar cells with efficiency up to 20%. in ukraine, five solar power plants are commissioned. one of them, up to date, the largest in the cis, 7.5 mw in the village of dzherelne (crimea) – it was designed and built by an austrian company activsolar. in the crimea, solar energy is most prevalent. in 2011, there were commissioned a photovoltaic solar power station “perove”, which is located in the area more than 200 of gait produces 105,56 mw of electricity. at that time, the plant became the largest in the world among its own kind. in general, in mainland ukraine, there are several dozens of solar power plants capacity from 1 to 15 mw, and more than a dozen ses have a capacity from 20 to 120 mw (some under construction). thanks to a special “green tariff ”, which is valid since 2011, solar energy has become a lucrative business that has attracted foreign investors. according to statistics, the volume of commissioning of new solar power plants in 2013 almost doubled compared to 2012. wind energy is the alternative energy industry, specializing in the conversion of kinetic wind energy into electrical energy. now, most of the world is trying to take advantage of this kind of energy, looking for the most affordable and economical ways of wind use. for example, in germany, austria, and switzerland wind turbines are already used. with their help, individual settlements are fed. in germany, 7% of all energy that is consumed is produced using renewable energy sources, with 4% accounted for by wind generators. one reason for this is the purposeful state policy on the development of alternative energy. so, a few years ago in this country, a law was passed, which aims at the expansion of alternative energy. it suggests that all operators, for example, solar panels receive from the government compensation of 50–52 cents per produced kilowatt-hour of electricity. for other installations and wind generators and turbines – there are lower tariffs. ukraine has areas with constant strong winds; making wind energy development has a rationale. even despite the higher cost of wind energy (compared to traditional), the use of wind energy is economically feasible in the steppe (particularly coastal) and mountain regions (mykolaiv, kharkiv, odesa, luhansk, and donetsk region, as well as the mountainous areas of the carpathians and of the annexed crimea). according to estimates, wind power could provide ukraine with 15% of the total electricity requirements (zavalion, 2013). as in the case of solar, wind power also has a “green tariff ”. because of that, during 2013, the share of wind energy has actually doubled, despite the fact that wind energy from the point of view of “business” is less profitable than solar. it is worth noting that wind energy in ukraine was developed and to the establishment of “green tariff ”. therefore, in 1992, construction began on donuzlavska wind power plant (crimea), which now generates more than 17 mw of electricity. among other powerful wind power plants can be noted botievska wind farm (zaporizhia region) with a capacity of 200  mw, novoayovska wind farm (donetsk region) with a capacity of 79.3 mw (kravchenko d.v.). despite the rapid development of wind energy, its fate for energy barely crosses the mark of 1% of the total electricity generated in ukraine. this figure is very small; however, it implicitly will grow. this will not only contribute to “green tariff ” but also a constant rise in prices of mineral resources (namely fuel burning on thermal power station now provides more than a third of our electricity needs) (yandulsky, 2013). in the world is built a large number of hydropower plants that produce up to 5% of the total electricity, and in some countries, the share of electricity generated from hydropower is much higher. brazil ranks third in the world after china and canada on the installation of generating units and on the provision of the hydropower resources in second place is russia, after china. hydropower in ukraine began with the construction of the largest in europe at the time of the dnieper hpp – 560 mw. in 2009, commissioned two small hydropower plants: lotashovska power small hpp of 315 kw in the cherkasy region and yablunetska small hpp capacity of 1000 kw in chernivtsi region (voronovsky, 2010). the potential of small hydropower in ukraine has more than 63 thousand small rivers and watercourses with a total length of 135.8 thousand. the greatest potential of small rivers in ukraine is concentrated in the carpathian region (shidlovsky ak, 2013, p.  301). modern state of small hydropower in ukraine is represented by 70 small hydro power plants, among them such relatively powerful stations as gaivoronska, tereble-rykska, steblivska, korsun-shevchenkivska, ladyzhenska, and others; technical condition of existing hpps is significantly or completely worn out main hydropower, hydraulic, and electrical equipment; the presence of faults in the waterfront buildings, which may cause emergency situations; increase of water intake for non-energy uses; silting of reservoirs; erosion of fasteners spillway and coastal areas of lower bays; small hydropower in ukraine through its negligible share (0.2 per cent) in the total energy balance may not significantly affect the conditions of supply of the country. however, the exploitation of small hydropower plants produces about 250 million kwh hours of electricity per year, equivalent to annual savings of up to 75 thousand tons of scarce fossil fuels (biofuels, 2016). bioenergy – energy sector based on the use of biofuel that is created using biomass. biomass is a constant or a variable substance of animal or vegetable origin, subject to biodegradation, which occurs from the products and wastes of agricultural and forest production, and baltic journal of economic studies 155 vol. 3, no. 4, 2017 industrial production. the production of electricity and heat from solid biomass is carried out by combustion of solid fuel fired boilers with the steam of high pressure. this process is carried out by using biomass power plants. the annual growth of biomass in the world is estimated at 200 billion tons (in terms of dry substance), which is energetically equivalent to 80 billion tons of oil. one of the sources of biomass is a forest. in the processing of timber, there is 3-4 billion tons of waste, the energy equivalent of which is 1.1-1.2 billion tons of oil. world energy demand (11 billion tons) is only 12% of the energy of the annual world biomass growth. the proportion and amount of biomass used for energy declines, which can be explained by the relatively low calorific value of biomass due to its high content of water. most noteworthy of conversion of biomass and organic waste for biogas, since in this case, in addition to fuel, produces a valuable organic fertilizer. in china, secondgeneration biofuels are very popular. now scientists are working on the development of a new type of producing energy from algae. by 2020, china plans to produce up to 12 million tons of aviation biofuel a year. in the energy balance of china, renewable energy sources (sun, wind, and water) are 30%. the european union use not only energy resources from landfills, agricultural or timber production but also specifically grown energy crops growing. the most favourable energy crops for solid biofuel are willow and poplar. in sweden and denmark, for example, they are used in local heating systems for the combined production of heat and electrical energy. remap is an analytical approach to the evaluation of the differences between current national plans for renewable energy development, potential additional development opportunities for renewable energy until 2030 and the se4all goal of doubling the share of energy from renewable sources by 2030 on a global scale. in june 2014 in the framework of remap 2030, 26 countries are evaluated: australia, brazil, canada, china, denmark, ecuador, france, germany, india, indonesia, italy, japan, malaysia, mexico, morocco, nigeria, russia, saudi arabia, south africa, south korea, tonga, turkey, ukraine, united arab emirates, united kingdom, and united states of america (statystka, 2015). an important element of policy implementation in the field of energy saving and use of alternative sources is the introduction of financial, organizational and economic activities that give the opportunity to implement the principles of sustainable development in public administration, and decentralization and local governments. as noted by denisyuk s.p. (denisyuk, 2013) in the management, the defining are such policies in the field of energy efficiency: – pricing mechanisms (variable tariffs where a higher level of consumption have a higher unit cost); – mechanisms of regulation and control (compulsory activities such as energy audit and control of energy consumption; minimum energy standards, targets to reduce energy consumption, the liabilities of private companies for investment in energy efficiency); – financial measures and fiscal incentives (grants, subsidies and tax incentives for the investment in energy efficiency; direct procurement of goods and services for energy efficiency); – mechanisms of development and transformation of the market (media companies, the inclusion of energy efficiency in school curricula; labelling of appliances and certification of buildings); – technological development (development and demonstration of energy efficiency technologies); – business development and capacity building (creation of energy service companies (escos); the curriculum; the development of the industry of energy efficiency); financial recovery (revolving funds for energy efficiency investments; funds for training projects; funds raised for financing). 3. conclusions in ukraine, there are a sufficient number of economic, technological, and social needs in the use of alternative energy sources. however, there is a lack of funding and the imperfection of the legal base in this issue on the one hand, and a number of laws and acts, the direction of which is the promotion and implementation of the country’s potential in energy efficiency, energy independence, and energy security of the country as a whole. the question assumes high relevance in our country, however, is not relegated to the background in developed countries, so the eu itself has a high level of adoption and use of renewable energy sources that allows ukraine as a state that wants to meet requirements of the eu quite easy to obtain and learn from the experience in this matter, which will have a positive impact on the economy of the state, and to a certain extent, everyone in ukraine. references: biofuels [electronic resource]. – access mode: http://energetyka.com.ua/biotoplivo/532-biopalyvo denisyuk s.p. (2013). features of energy efficiency policy and priorities of ukraine. power engineering: economics, technology, ecology, 3: 7–19. during the year in the world in alternative energy investments of $270 billion [electronic resource]. – access mode: http://eircenter.com/news/za-rik-v-alternativnu-energetiku-investovano-$270-mlrd/ energy: past, present and future. [electronic resource]. – access mode: http://energetika.in.ua/ru/books/book-1/ part-2/section-8/107 baltic journal of economic studies 156 vol. 3, no. 4, 2017 kravchenko d.v. current state and prospects of development of wind energy in [electronic resource]. – access mode: http://www.confcontact.com/2009ip/kravch.htm ratner v.m. (2013). solar power plant–facility of power system. thermal solar systems, the potential of the south of ukraine (odessa, mykolaiv, kherson regions). electric networks and systems, 3: 40-48. the prospects of renewable energy in ukraine until 2030. [electronic resource]. – access mode: http://saee.gov.ua/sites/default/files/ukr%20irena% 20remap%2 0_%202015.pdf shidlovsky a.k. (2013). energy efficiency and renewable sources of energy, 559. shishkina i.o. (2013). alternative energy sources the world market: current status and prospects. economy of industry, 1(2): 103-109. voronovsky g.k. (2010). energy of the world and ukraine. facts and figures, 404. yandulsky o.s. (2013). features of the analysis of modes of electric power systems with wind power plants. the world of technology and technology, 6: 24-25. zavalion yu. (2013). ukraine is the leader among the cis countries in implementation of wind turbines. ecology of the enterprise, 10: 58-64. wikipedia [electronic resource]. – access mode: //https://ru.wikipedia.org/wiki/ елена лютак, лариса савош, елена баула особенности использования альтернативных источников энергоресурсов в украине и мире аннотация. целью работы является рассмотрение теоретико-прикладных основ использования альтернативных источников энергоресурсов в украине и мире, исследования теоретических основ и специфики использования существующих источников альтернативной энергетики в условиях глобализации, мировая практика использования альтернативных источников энергоресурсов, освещены особенности использования альтернативных источников энергии в украине в современных условиях. особое внимание сосредоточено на анализе энергоэффективности регионов украины и факторов, ее определяющих, а также исследованы общий тренд по конъюнктуры на рынке нефти и объемов инвестиций в возобновляемую энергетику. методика. исследование основано на показателях возобновляемой энергетики и энергоэффективности регионов украины в 2015 году и включение показателей средняя цена нефти, инвестиции в возобновляемые источников по энергии, темпы роста цены, темпы роста инвестиций в 2004-2016 гг. всего на материковые украине насчитывается несколько десятков солнечных электростанций мощностью от 1 до 15 мвт, а больше дюжины сэс имеют мощность от 20 до 120 мвт (некоторые только строятся). благодаря специальному «зеленому тарифу», который действует с 2011 года, солнечная энергетика стала прибыльным бизнесом привлекло иностранных инвесторов. по статистике, объем ввода в строй новых солнечных электростанций в 2013 году почти удвоился по сравнению с 2012-ым. результаты определили, что важным элементом реализации политики в сфере энергосбережения и использования альтернативных источников является внедрение финансовых, организационных и экономических мер, которые позволяют внедрять принципы устойчивого развития в государственном управлении, а в условиях децентрализации и органами местного самоуправления. в управлении определяющими являются такие меры политики в области энергоэффективности: механизмы ценообразования; механизмы регулирования и контроля; финансовые меры и налоговые стимулы; механизмы развития и преобразования рынка; технологическое развитие; коммерческое развитие и создание потенциала (создание энергосервисных компаний (эско), учебные программы, развитие индустрии энергоэффективности) финансовое восстановления. baltic journal of economic studies 52 vol. 3, no. 5, 2017 corresponding author: 1 department of finance and financial and economic security management, kyiv national university of technologies and design. e-mail: a.vergun@bigmir.net 2 department of accounting and audit, kyiv national university of technologies and design. e-mail: vergunm@bigmir.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-52-60 strategic management analysis in the eu countries antonina verhun1, mykhaylo verhun2 kyiv national university of technologies and design, ukraine abstract. the concept of national and regional development strategies for small and medium-sized enterprises (smes) are studied for a long time, as small and medium businesses are the foundation of the economy and the basis for effective country functioning. the business development program of the european union countries is particularly interesting because there are several levels that correspond to each other and give full effect on the smes development. the eu standards are higher than in non-eu countries; therefore, it is worth considering legislative documents, as well as statistics showing the indicators of openness and access to the development of small and medium-sized enterprises (smes). the complexity and comparative novelty of studying such a problem in ukraine led to the need to explore sources of information in the original language due to the lack of information in ukrainian or russian. all these suggest that the problem of creating strategies at the national and regional level is more relevant and important to study in the west that demonstrates the current state. the subject of the study is to analyse the effectiveness of implementing strategies for the development of small and medium-sized enterprises as well as the impact of national and regional policies on their functioning and development in the european union countries. methodology. the authors highlighted the peculiarities and main features of the development strategies implementation for small and medium-sized enterprises in the eu countries through a comparative analysis of the legislative framework, statistical and other data that help assess the performance and effectiveness of the implemented strategies. the content analysis helps to identify peculiarities of the implemented strategies in quantitative and qualitative forms. the thorough analysis using the above-mentioned methods allowed doing a qualitative study of national and regional strategies in the context of the development of small and medium-sized businesses in the eu countries. practical importance is that the results of this study will lead to a wider acquaintance with progressive strategic methods of management of small and medium-sized enterprises. this will enable the plan development of concrete actions to improve the efficiency of enterprise management in less developed countries. in turn, raising awareness on this issue will reduce the number of inefficient and non-innovative enterprises. scientific novelty of the article is to determine the theoretical basis of the differences that at the current development stage are increasingly manifested as certain contradictions in the compilation and improvement of small and medium-sized enterprises, development of strategies at the national and regional levels. small and medium-sized enterprises, in their turn, have a wider access to their development. conclusions. as a result of the main development strategies of small and medium-sized enterprises of the eu countries, there should be identified the differences and common features of different strategies for innovations of small and medium-sized enterprises. the interaction of the national and regional strategy with actual results and existing strategies is explored. key words: strategic management of enterprises, national and regional strategies, development of small and medium-sized enterprises. jel classification: l100, o018, e610, f200, f430 1. introduction consideration of the creation conditions, development and performance of small and mediumsized enterprises in the economies of the european union countries remain relevant, as enterprises cooperate with each other, regardless of the boundaries and cultural or economic differences. the central place is taken by the state policy that stimulates, supports small businesses with various types of benefits, loans, grants, cooperation encouragement and the experience from other countries. not only a strategy that is a desirable situation in the future where the enterprise or country should be, but also valid actions that are available for enterprises. a particular attention should baltic journal of economic studies 53 vol. 3, no. 5, 2017 be paid to stimulating the development of small and medium-sized enterprises in underdeveloped regions and districts to create new types of businesses, providing technical and financial support. a promising trend is that the emphasis is done on the region strengths, but the weaknesses are taken into account, and there is being developed the strategy of innovation development, which is already a necessity of the modern age. that is, the development of alternative energy sources, the maintenance of a sustainable environment, the natural resources protection are the industries that are receiving the most attention at the moment. the credit availability, the barrier absence to create bureaucracy and corruption are positive factors for the development of the core of the economy  – small and medium-sized businesses. one of the main categories in business is the longterm planning strategy, indicating the activity goals, the timing of their achievement, tactical plans, and resources that will give a complete picture of how the company or any enterprise sees itself through a certain time interval. a peculiarity is the necessity to adapt the company activities, the production of products or the provision of services for certain regions or countries, for the efficiency and appropriateness of providing their services or goods. business strategy is a strategy of business units that determines the direction of action to ensure competitive advantages in a specific area of the organization (horielov & bolshenko, 2010). that is, starting any commercial activity, the entrepreneur should be responsible not only for the beginning of his own enterprise performance but also for further development, the activity direction, that is, the perspective of 3-5 years (sometimes more). in the literature concerning strategic planning, there are two opposing views on the understanding of the strategy. in the first case, the strategy is a concrete long-term plan to achieve a specific goal, and strategy development is the process of finding a specific goal and drawing up a long-term plan. this approach is based on the fact that all emerging changes are predictable, the processes occurring in the environment are deterministic and fall for complete control and management. in the second case, the strategy refers to the longterm qualitatively defined direction of the enterprise development concerning the sphere, means and forms of its activities, the system of internal relations, as well as the enterprise position in the environment (business strategy). the company strategy is a comprehensive management plan that should strengthen the company position in the market and ensure coordination, attraction, and satisfaction of consumers, successful competition and the achievement of global goals. the strategy development process is based on a thorough study of all possible fields of development and activity, and consists of choosing a common direction, mastering the markets served by needs, competition methods, attracted resources and business models. in other words, the strategy means the company’s choice of its path of development, markets, competition methods, and doing business (examples of business strategies for leading companies in the world). in other words, the strategy is an integral part of the company’s development; it determines the movement direction, taking into account all the information on the advantages and disadvantages. it is important not to forget that the choice of strategy and the possibility of enterprise development are also dependent on state policy and landmarks set by the state itself. that is, the creation of all prerequisites for development is very important for the enterprise performance and their enrichment of the country’s economy. this paper concerns smes  – small and medium-sized enterprises, as they are the basis of any country’s economy. in the developed countries, the share of small and medium-sized enterprises is more than 90%. this is an indicator of the population employment, the population involvement in business processes and the enrichment of their own country’s economy. during globalization, we are witnessing the cooperation of smes with foreign smes and this expands borders, facilitates international trade. however, one should pay attention to the possible barriers that cover international treaties or their absence, taxes and customs duties, which in its turn complicates the trade and does not contribute to the economic development. it is impossible to predict all possible events that may occur during the strategy implementation. therefore, it is necessary to use generalized, incomplete and inaccurate information while choosing among various alternatives. in the search process, concrete alternatives are revealed; more information that is accurate appears and can cast doubt on the original choice. the successful strategy implementation is impossible without a constant feedback. such concepts as strategies and benchmarks should not be confused. the benchmark is the goal that the company seeks to achieve, and the strategy is a means to achieve the goal. benchmarks are a higher level of decision-making. a strategy is justified by one set of benchmarks will not be the same if the organization’s benchmarks are changed. after all, the strategy and benchmarks are interchangeable at both individual moments and at different levels of the organization. some performance parameters (for example, market share) at one point can serve as benchmarks for the firm, and in the other, they will become its strategy. further, since the benchmarks and strategies are made within the organization, a typical hierarchy arises: the upper levels of control are strategy elements, on the bottom they turn into benchmarks (sumina, guseynov, 2016). therefore, a regional policy is very important for modern smes development. it encourages development, baltic journal of economic studies 54 vol. 3, no. 5, 2017 innovations, attracts resources and capital, especially for the least developed regions. therefore, when there is a talk about business development, we should first of all look at the development of regional or national strategies and how they encourage their own smes. when we talk about business activity, the enterprise strategy must start with its origins, namely, the strategy of stimulating entrepreneurial activity at the state level or at the level of the european union as a whole. this is very important when the state adopts a policy direction that regulates and encourages entrepreneurs to establish enterprises. nevertheless, the vast majority of the eu countries encourage small and medium-sized businesses, and there are several reasons for this. the first reason is historical. after world war ii, europe did not immediately recover from those losses and consequences, and in the late 1960s, the european union had to stimulate small businesses in order to accelerate economic growth. large companies were subject to severe restrictions on their activities for a number of reasons. in most cases, because they did not want to participate in the development programs of the undeveloped areas, in the process of automation they reduced a large number of workplaces, there was a problem of environmental pollution. in addition, innovation activities also started to decrease. all of these factors have been combined to stimulate small and medium-sized businesses, which in its turn, for the 21st century, have proven that small and medium-sized businesses account 85% of the gdp of the european union (dryha, 2009). first, it is worth noting that small business act for europe is the backbone of the eu policy on smes, based on the think small first principle (europe 2020 a strategy for smart, sustainable and inclusive growth, 2010). this principle includes self-advisory and compilation of smes opinions, a legislative regulation that refutes business procedures, sba test that analyses implications of the introduction of some legislative acts for smes, and the work of sme messengers promoting sme legal acts and policies. among the successful and promising programs for stimulating smes development is horizon 2020, which has been operating since 2014. the main ideas of the program are not only the attraction of a larger number of sba enterprises but also the innovation stimulations, which has already become an integral part of the development of any enterprise. consequently, the horizon 2020 program finances sba in the amount of 8 billion euros, and advocates joint research and innovation projects (between the eu countries and partners) (smes). that is, such an initiative involves the creation of innovation union, which in its turn involves the development of innovations at the local, regional, and national levels. problems that are central and need to be addressed in the future are energy, transport, climate change, rational use of resources, health, environmental products. in addition, it is planned to expand and improve intellectual property rights (arabey, 2010). moreover, the involvement of educational institutions and a creative approach to learning and the use of skills acquired during the training period is also a priority for the eu countries. the strategy encourages young graduates to innovate through scholarships and financial assistance, as well as ongoing consultations and trainings. all these and much more are aimed at implementing the following principles by 2020: smart economy’s development based on knowledge and innovations; sustainable growth  – encouraging productive use of resources, “green” and more competitive economies; inclusive growth  – promoting economies with high levels of employment that coordinate economic, social, and territorial growth (the small business act for europe). another initiative of cosme (the competitiveness of enterprises and small and medium-sized enterprises) will provide financial assistance and guarantees for small and medium-sized businesses at all stages of the enterprise establishment. this program also helps entrepreneurs with training, education and advice to support their activities. you can also add that the program is aimed at creating the right environment for creating and running a business (annual report on european smes 2015/2016, 2016). looking at the growth of smes in 2013–2015, it can be seen the following: from -1% in 2013 to 1.1% in 2014 and 1.5% in 2015. for comparison, one can draw attention to the level of large enterprises growth: from 0.3% to 1% in 2014 and 1.3% in 2015. that is, smes have started to develop more dynamically (eu status report 2016: strengthening european investment for jobs and growth, 2016). it is possible to trace the employment growth and the level of the added value in the eu countries. the employment grew from -1% (2013) to 1.5% (2015), and the added value increased from 1.45% (2013) to 5.7% (2015). that is, we see a clear growth and progress made by the eu countries after the adoption of smes stimulus programs. it is also worth noting the new eu strategy, which covers the regulation of foreign investment by 2030. it provides advice on the creation of a new european external investment plan, in order to maintain employment levels in europe, as well as throughout the world. according to this plan, the european strategic investment fund is expected to attract 116 billion euro in 26 member countries for more than 200 000 small and medium-sized enterprises (arutyunova, 2010). that is why we see that the framework for legislative regulation and stimulation of smes has had the result, so for the full analysis and comparison of the strategies baltic journal of economic studies 55 vol. 3, no. 5, 2017 of the eu countries, it is necessary to consider the enterprises of some countries and to analyse the state strategies of business stimulation. at present, the general attention of the business towards the strategy is rapidly increasing. the methods of network strategic planning are being developed and implemented when the strategy is formed simultaneously and agreed on several technologically or functionally related enterprises. there are whole "clumps" of territorially close or functionally related enterprises operating on the basis of an agreed strategic perspective (such groups of companies have been called "business systems"). at the same time, the strategies are rarely complex in nature, which significantly reduces their reality, effectiveness and efficiency. that is, the company strategy is the central part of the entire enterprise, sets the main directions, goals and a general sense of the business existence. it is important to choose the right strategy, which can provide new competitive advantages, development in the modern period, and plays the main role of any enterprise  – to make a profit. the conclusion can be implied that the enterprise strategy and the potential for enterprise development depend on a properly chosen national strategy, so one should look more closely at the examples of the european union and other foreign countries to understand, which strategies are promising and which directions are important for the successful development. 2. strategic development analysis of smes in poland national strategies for encouraging smes are a very important issue for the eu that seeks to develop basic things to achieve enormous success at the highest level. polish experience shows that in 2014 the growth of the added value was at the level of 4.6%, and by 2015 6.9%. the workplace creation in 2008-2014 was 4,6%, and in 2015  – 1.6%. the forecasts for the same indicators for 2016–2017 are 0.2% the added value and 4.8% for workplace creation. as a whole, in 2015 for 100 inhabitants, there are 4.1% of companies (small and medium enterprises in poland  – obstacles and development). the main trends in the enterprises’ development in poland are: the sector in poland is smaller than in the other eu countries and the number of enterprises is the smallest among the other eu countries. the profit is 36%, which is one third less than the big companies receive; the most widespread are companies engaged in industry and trade; small and medium-sized enterprises take three times more loans from banks, which in turn leads to the fact that among the debtors, there are more smes than large companies; smes have the same average growth rate as big businesses, but they are more dependent on market fluctuations, so the added value has not returned to the level of 2014; smes development is focused on improving productivity because they make better use of resources and workforce. this leads to the conclusion that the contribution of polish smes to innovative development is greater than in the added value; smes invest more in people than in equipment. smes allocate one-third of their profits to people, so the number of the involved in smes is constantly increasing; the biggest barrier to growth is large taxes and bureaucracy; the access to bank loans is much easier than in the other eu countries. as a result, the enterprises that receive loans are twice as likely to spend on innovation; smes have a problem in finding qualified staff that has the necessary knowledge and skills in managing smes. but despite this, polish companies rarely encourage their employees to acquire additional skills; small businesses are slowly developing. it should be noted that there is no state regulation of smes in poland. the valid documents fall within the jurisdiction of the entire eu. the promotion of smes development is provided by the eu funds. at the state level, there are government agencies and ministries that have financial assistance programs primarily for innovation and human capital, as well as counselling, training, and development. there are also regional programs, but among them are priority projects of an innovative nature. polish business development agency (pbda) operates in poland, which manages budget funds and funds allocated by the eu to implement programs. it also provides counselling, information, training, and financial services. the state strategy focuses on such priority tasks as increasing innovation, developing small businesses in the eastern regions of the country, improving the workers’ skills, reducing bureaucratic procedures, and opening a wider access to business development. the negative phenomena of smes development are (as a percentage): taxes size (20%); tax collection system (8%); labour legislation (9%); political instability (9%); access to finance (13%); workforce insufficient qualification (3%); business licensing and permissions (3%); corruption (3%) (21). on the example of warmian-masurian province, the strategy of small business development until 2025 was developed. this region is industrial only for 33%, which is below the average in poland – 33.5% (annual report on european smes 2015/2016, 2016). it has baltic journal of economic studies 56 vol. 3, no. 5, 2017 the highest unemployment rate and the lowest gdp. it is assumed that the gdp of this province will grow from 0.06% (2010) to 0.7% by the end of 2020. and the number of innovative enterprises will increase from 12.4% (2011) to 22% (2020) (bei, tomson, 2013). in order to develop a strategy, there were conducted analyses of the positive aspects of this region and its benefits. it is a clean environment, therefore, the potential for the development of tourism and light industry (food, forestry) is most likely. in addition, there is potential for the renewable energy development sources. in the region, the presence of foreign investors is small. on this basis, some priority goals are developed. the first goal is an effective smes support policy that is benefits, financial support, and easier access to information and technological innovations. the second one is the involvement of a large number of domestic and foreign investors – programs for attracting investment, creating economic zones. the third goal is the involvement of public organizations of entrepreneurship  – promoting entrepreneurship at the school level, educational programs and activities of organizations. the fourth one is increasing the economic potential of small enterprises competitiveness  – the creation of innovation centres, research centres, technology parks, and support for innovation initiatives. the fifth goal is the development of the information society  – the computerization and increase of the internet access (measures to stimulate business and employment in vses and smes, 2015). therefore, a detailed analysis, identifying strengths and weaknesses, as well as thinking for the future, helps to find ways to create a strategy, identify the priority goals and objectives, without which this strategy will not work. it is very important to set real goals and allocate enough time for their implementation. 3. development analysis of small and medium-sized business in france another country, which strategy will be considered, is france. during 2014, the added value of smes was 0.3%, and in 2015 it was 2.6%, the number of enterprises per 100 inhabitants was at the level of 4.5. if to consider the workplace creation, then it can be seen that for the period of 2008–2014, 17.9% of workplaces were created, but 2015 represents only 0.1%. taking into account the common features, it should be noted that less than 50% of the population is involved in smes. small and medium-sized enterprises represent 99.8% of french business (sme investment and innovation france, germany, italy and spain, 2015). when it comes to investment and innovation, one can note the following: weak economy of recent years has led to a reduction in the allocation of funds for innovation due to fears of uncertain economic conditions; another problem is reducing the demand for smes and small profits; for a long time investments were high, but they went to construction, so we can talk about a decline in smes investment; french innovators show good results but still remain below the eu average (sme performance review, 2016). speaking about state regulation, it should be noted that smes are involved in the ministry of small and medium-sized business, trade and crafts, and regional offices. france is actively implementing the principles of small business act for europe. in 2015 and the first half of 2016, 3 out of 10 principles were implemented (measures to stimulate business and employment in vses and smes, 2016). in the summer of 2016, the prime minister of france said that starting from 2017 the tax rate would decrease from 33% to 28%. however, he did not mention whoever this reduction will be applied, it is only a part of those whose income does not exceed a little more than 38 thousand euros. moreover, the tax on credit will increase from 6% to 7% (summary of french regions' regional innovation strategies, 2012). nevertheless, despite this, it is argued that the “smes test” is not yet sufficiently developed, which determines the impact of the adopted laws on the actual state of affairs. to review the strategy for the poorly developed region, the authors chose the province of auvergne, which is on the level 20 according to the french economy with the lowest gdp and employment rates (auvergne smart specialisation strategy, 2014). the location without access to the sea, inside the country, is not very favourable. however, it is necessary to dismantle the weaknesses and strengths. weaknesses can be determined such factors as the outflow of the able-bodied population, a large number of microenterprises that do not have a certain structure, are family businesses and are not engaged in innovation, insufficient research into innovations in industries that are dominant in the region  – chemical, machine building, metallurgy, not effective regional policy that does not contribute to business development. strengths are the presence of private research companies, good results in implementing the allocation of funds from the funds for smes development, the basis for conducting research. therefore, with the help of structural funds and the cohesion fund (2014-2020), a smart specialization program was selected. the province auvergne has developed five priority goals: the first goal is to produce and supply the market with more health and well-being products. the second goal is to develop new products and services for sustainable agricultural production. the third goal is to improve the attractiveness of the area by establishing sustainable living spaces. the fourth goal is to ensure physical and baltic journal of economic studies 57 vol. 3, no. 5, 2017 digital tracking of events. the fifth goal is to strengthen the information gathering and analysis system and the enforcement system (regional council of auvergne). for this in 2014, 10% of the budget funds went to the development of regional programs. since that year, a program called “digital auvergne” has been launched, which is developing high-speed networks throughout the region. all priority development directions are initiated by the executive service of regional council (profile the sme sector in germany, 2015). that, france is trying to lower taxes and encourage the opening of new smes to launch the economy and its growth after an all-embracing crisis throughout the european union. a detailed program for the development of economically backward regions and close monitoring of its implementation by the eu government structures will help to see the outcome of reforms in the near future. 3. germany’s experience in implementing smes reforms in germany, smes account for 99.7% of all commercial enterprises, with 2.7 enterprises per 100 inhabitants. in 2014, gdp growth was 3.8%, and in 2015 it was 4.2%. regarding employment, in the period from 2008 to 2014, it was 20.2%, and in 2015 it was 1%, but the total number of working people at smes was 68% of the total able-bodied population (the german mittelstand – an overview, 2012). the most important thing to note when it comes to the development of smes in germany is the so-called mittelstände, which are the backbone of the german economy because they are family businesses. they are characterized by a high degree of managerial interest as a result, a high degree of specialization, flexible decisionmaking, long-term focus on responsible organizational culture, long-term training and additional education, decentralized presence (the central innovation programmers for smes, 2017). in addition to public policy and the eu policies, such a program of encouragement is the central innovation program of smes for those enterprises wishing to develop new or thoroughly improve the existing products, processes or technical services. the program was presented in 2008, with a rethinking of the principles in 2015 and will be in place by the end of 2019. all smes with a number of workforce up to 499 can apply for individual assistance or in co-operation with other enterprises. there is also a special regulation for transnational projects, which includes the irasme network, a network of ministries and sponsoring agencies that are coordinators or holders of national or regional collaborative research programs between smes. the research and technology companies are also invited to participate. there are also international cooperation agreements with foreign partners, but only german companies can receive funding (regional innovation strategy 2020 for mecklenburgwestern pomerania, 2014). looking at regional development strategies, it is possible to have a look at mecklenburg-vorpommern, which in 2013 contributed 1.83% to the national gdp and 11.2% of unemployment, which took the 2nd place in the number of the unemployed after berlin (auvergne smart specialisation strategy, 2014). the regional development program for 2014–2015 was presented in 2013. the swot analysis identified the following priority areas: energy and climate; sustainable development and new materials; health and biomedical sciences; food industry; mobility; information and communication technologies. the main activities were also highlighted, among them the strengthening of state support towards smes, the provision of venture capital for r&d, the maintenance of the establishment of industrial parks, and platforms for discussing further initiatives (op mecklenburgvorpommern erdf 2014-2020, 2014). there were also indicated expected results: at least 150 projects at enterprises collaborating with research centres; more than 5,500 workplaces; investments support in 380 smes in the amount of more than 600 million euros; reduction of carbon dioxide emissions by the equivalent of more than 20 thousand tons of co2; 250 km of new or expanded cycling lanes (along with municipal roads) and 200 km of new or expanded leisure cycling lanes; 80 thousand sq. m of created or restored open space; 200 new or upgraded public and educational infrastructure in 230 thousand square meters (unemployment rates, seasonally adjusted). that is, the german economy has its own “trump cards” to increase and sustain the productivity of smes or to encourage their performance. the state of the economy, from which the regional development programs began to operate, was one of the best in the whole eu, so the results for 2020 should be very positive. 4. greece’s regional strategies for smes support it would be interesting to consider the regional strategies of countries, which are in debt crisis. let us consider the example of greece, which has been in a state of crisis for a long time and is now faced with difficult times of debt obligations and negotiations with creditors. for the period of 2008–2014, the level of employment reached 24.3%. now the indicator has not changed baltic journal of economic studies 58 vol. 3, no. 5, 2017 significantly 23.5% (the central innovation programme for smes, 2017). the added value for smes for the period 2008–2014 is -0.7%. according to 2015, it is -1%. however, for 100 inhabitants there are 6.5 smes. it should be noted that microenterprises are the basis of the greek economy (2016 sba fact sheet greece, 2016). in general, smes are ¾ of the added value and 90% of employment in the country (the small business act for europe). nevertheless, smes have not been able to reach the level of large firms, which saw an increase of 19% from 2008 to 2015. such an indicator as access to financial resources is the lowest in greece in the eu countries. moreover, this means that credit financing is not sufficient for the development of smes in the country, including venture capital. in addition, their debt is gradually increasing. the initiatives launched by greece at the state level try to remedy the situation and improve the state of the economy. the eu programs and commitments to lenders are aimed at the overall development of the economy and the focus on innovations. one of these is research and innovation strategies for smart specialization (ris3), implemented by 1 national and 13 regional strategies, focusing on the following areas: agri-food; health and medicine; information and communication technologies; power engineering; environment and sustainable development; transport; materials and construction; tourism, culture, creative industries. the strategy for the introduction of these strategies has created a specialty strategy council of smart specialization, consisting of representatives of ministries and regional bodies, as well as regional councils in 13 regions of greece (op competitiveness, entrepreneurship and innovation, 2017). the program of competitiveness, entrepreneurship and innovation is very interesting and it is a detailed plan and continuation of the program mentioned above. the priorities are: entrepreneurship development support with sectorial priorities; adaptation of workers, enterprises and business environment to new development requirements; mechanism development for supporting entrepreneurship; technical support. among the expected results: increased r&d and innovation costs from 0.34% to 0.51% of gdp in all regions; introduction facilitating of information and communication technologies for smes; the internet speed increase; help more than 1000 companies to develop new products; help at least 22.5 thousand enterprises and create more than 8 thousand workplaces; increase the use of alternative energy sources, improve energy efficiency, etc. (local analysis north aegean greece, 2017). it is interesting to consider an operational program aimed at developing the region that brings the country’s lowest gdp profits  – the north aegean islands. the swot method has identified strengths and weaknesses. among the strengths, there are natural and cultural resources, the availability of powerful educational resources and the research base, the presence of greek banks. but each of these strengths has a negative side, for example, insufficient investment in natural resources to save them, insufficient investment in education and research, and limited cooperation between educational institutions and enterprises (north aegean op, 2014). basing on these data, a strategy for 2014–2020 was developed, aimed at: entrepreneurship support and stimulation, especially smes; entrepreneurship and investment involvement in research and development; strengthening the role of information and communication technologies; employment increase and more people attraction; health and social security improvement; environmental protection and sustainable development. the expected results: support for 35 new smes and encouraging cooperation of 15 enterprises with educational institutions; creation of 140 workplaces, etc. (small and medium enterprises in poland – obstacles and development). that is, greek strategies, as well as the eu-wide regional development strategies, are also detailed and look very successful, but only actual results will show the effectiveness of the chosen and implemented strategies, taking into account the deep economic crisis in greece, which is one of the most serious. considering the eu strategies, we see the hierarchy of decision-making – the overall strategy of the european union goes to others, “lower” levels  – national, and those are divided into regional ones. each level has its own control and enforcement authorities, so it is easy to follow responsibility, and who is responsible for it. it can be concluded that smes support and development strategies are present at different levels in the eu countries. there is a level of the union and there is a national level. the strategies are detailed, very clearly developed, which must make their result in their implementation. however, according to already existing results, we can say that the success of such changes and the implementation of strategies depending on the general situation in the country that the above examples have demonstrated. baltic journal of economic studies 59 vol. 3, no. 5, 2017 5. conclusions the key principles for developing a strategy for small and medium-sized enterprises is a documentary level in the form of laws both national and regional strategies, financing business incubators and encouraging the opening of innovative enterprises for those regions in need. it also includes attraction of foreign capital and stimulation of cooperation within the eu and with the countries-eu partners are a powerful policy for smes development and innovation, which is a priority in the modern era. having analysed the existing strategies and the results, it can be said that these results reflect the general tendency of the enterprise development. for example, in germany, small family businesses formed the basis for the development and growth of the economy after world war ii. the protracted crisis in greece, which has led to an unsatisfactory state and still requires radical actions, gives such a reality where the promotion of small and medium-sized businesses is not very effective since the population is in poor financial position and lending is not sufficiently developed to provide the opportunity to finance entrepreneurs. the same approach can be applied to poland, where small and medium-sized businesses are developed, but there are still obstacles that prevent more people from engaging. the conclusion can be drawn that the presence of smes, the level of their development is an indicator of the development of the whole country and the economy as a whole. the mechanism of stimulation, promotion of small 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(march 2017). retrieved from: http://ec.europa.eu/eurostat/statisticsexplained/index.php/file:unemployment_rates,_seasonally_adjusted,_march_2017_(%25)_f2.png (accessed january 2018) baltic journal of economic studies 345 vol. 4, no. 1, 2018 corresponding author: 1 department of accounting and audit, donetsk national university of economics and trade named after mykhailo tugan-baranovsky. e-mail: shendrigorenko@donnuet.edu.ua 2 department of accounting and audit, donetsk national university of economics and trade named after mykhailo tugan-baranovsky. e-mail: shevchenko@donnuet.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-1-345-349 urgent issues of organization of audit activity in ukraine and directions for their solutions maryna shendryhorenko1, liubov shevchenko2 donetsk national university of economics and trade named after mykhailo tugan-baranovsky, ukraine abstract. in conditions of economic uncertainty and competition, the importance of objective economic control increases both from owners and supervisors. reliable financial reporting provides the possibility of making conscious economic decisions, warns of operations associated with increased risk. the opinion of the auditor increases the trust in the financial activity of the company and the general loyalty to business by the stakeholders – owners, investors, potential customers, suppliers, authorities. therefore, the issue of the exclusion of the corruption component between the audit firm and the client company during the organization and conduct of the audit is a topical issue in many countries of the world, including ukraine. the purpose of the paper is to substantiate the theoretical principles and practical recommendations for the organization of audit activity and overcoming corruption in the economic sphere in ukraine. methodology. the methodological basis of research is general scientific and special methods of knowledge. to determine the current state of audit in ukraine, quantitative changes in the dynamics of audit firms and certified auditors, applied methods of synthesis, comparison, grouping. for isolating problems that arise in the market of audit services, methods of specificity and abstraction are used. the method of analysis was the basis for determining the main factors of corruption in the audit sector and its impact on the dynamics of ukraine’s economic development. the dialectical method, synthesis, and abstraction have been used to formulate proposals for improving the order, in which services are provided in the audit field. a tabular method was used to reflect the systematic results of the consolidation and grouping of indexes of corruption perception index in ukraine in 2013–2017. the graphical method was used to visually reproduce the dynamics of the change in the perceptions of corruption in ukraine, the usa and poland in 2013–2017, and the changes in the number of audit firms and certified auditors in ukraine in 2012–2016. results. the results of the study substantiated the need to improve the legislative and regulatory framework that regulates audit activity. the main factors that negatively influence the audit activity and contribute to the development of corruption in ukraine are identified. the proposals on improvement of the situation in the market of audit services, as well as increase of efficiency of auditors’ activity are given. practical implications. the pragmatic value of the research results is the possibility of their use for developing strategic measures to improve the audit activity in ukraine, bringing the quality of domestic audit closer to the level of audit in eu countries. value/originality. it is proposed to implement a set of legislative and regulatory changes to improve the organization and implementation of audit practices in ukraine to minimize the corruption component in order to ensure the transparency of the audit process. key words: audit, audit activity, control, corruption, economy. jel classification: m42, l84, o44 1. introduction corruption constrains economic development, weakens democratic institutions and the principles of law, violates public order, and destroys public confidence, thereby contributing to the rampancy of the organized crime and other negative phenomena. the annual volume of bribes in the world economy is estimated at one trillion us dollars. the world economy loses another 2.6 trillion us dollars due to corrupt activities. those funds represent more than five percent of the global gross domestic product (gdp). according to the united nations development program, in the developing countries, corruption-related losses exceed 10 times the official development assistance (state audit service of ukraine, 2017). baltic journal of economic studies 346 vol. 4, no. 1, 2018 at present, the size of the shadow economy in ukraine exceeds 33% of the official gdp (ministry of economic development and trade of ukraine, 2017). analysing the situation, one can come to the conclusion that corruption in ukraine affects all the state bodies, including those that are called to fight it: courts, prosecutors, other law enforcement agencies, etc. a significant problem of the modern economy as regards to the legal field is the identification of trends in the development of the independent external audit. after the most high-profile corruption scandals involving leading audit firms over the last 10 years, the issue of bringing to justice the auditors who mistakenly or deliberately delivered positive audit opinions where that should not have been done has become relevantly poignant. that being the case, the main protective argument of the management of audit firms is that at the time of rendering its services, a respective firm positioned itself as an audit one (by its nature and qualification), while in the event of liability under the audit contract that firm presented itself as a consulting one ostensibly providing only consultancy services. the financial crisis has revealed weak points in various sectors of the economy. in particular, audit scholars and practitioners have not yet given a reasoned answer to the following question: why is there in the statistics of bankrupt business entities a substantial share of companies that enjoyed a positive audit opinion of their performance? the answer to that question and suggestions how to deal with such a problem are presented in the current study. the main objective of the study conducted was to substantiate the theoretical principles and practical recommendations for organizing the audit activity and overcoming corruption in the economic sphere of ukraine. a relevant scientific research involves the following tasks: an analysis of the current state of external audit and the facts of corruption schemes in the economy sectors; the identification of the main issues affecting the quality of audits and being the result of fraud on the part of the management of companies; formulating suggestions for the improvement of the audit activity organization to prevent corruption schemes from coming into being. the scientific novelty of this study is the identification of the main factors of the negative impact of corruption on the economy and the substantiation of proposals to improve the quality and efficiency of the audit activity in ukraine. 2. the current state of corruption in ukraine the state and efficiency of the economic environment in ukraine are determined by a number of positive and negative trends. the level of corruption and the shadow economy in ukraine is one of the factors that have a direct negative impact on the efficient functioning of the economic and social sphere, on the level of investment attractiveness of ukraine and its competitiveness as an entity of international relations. in order to understand the degree of impact of the level of corruption and the efficiency of anticorruption policies in ukraine, let us analyse the dynamics of change in the corruption perceptions index in ukraine over five years (table 1, figure 1). table 1 corruption perceptions index in ukraine indices value by years 2013 2014 2015 2016 2017 corruption perceptions index 25 26 27 29 30 source: compiled by the authors on the basis of a generalization of data of the international organization “transparency international” for the period from 2013 until 2017 0 10 20 30 40 50 60 70 80 2013 2014 2015 2016 2017 in de x ra ti ng v al ue years ukraine usa poland fig. 1. dynamics of change in the corruption perceptions index in ukraine, the usa, and poland from 2013 until 2017 source: compiled by the authors on the basis of a generalization of data of the international organization “transparency international” for the period from 2013 until 2017 when analysing the data obtained, it can be concluded that the level of perception of corruption and combating it in ukraine over the five years has been at a fairly low level, with a slight upward trend. the existence of a “developed corruption network” in ukraine at the level of small, medium, and large businesses can be explained by the relevant factors, the most important of which is the fact that the large businesses are owned by the so-called oligarchic clans that are interested in the submission and disclosure of “their own reliable” information about the financial and property situation of the companies under their control. according to the estimates by the ngo “institute of social and economic transformation”, due to the introduction of various corruption schemes, ukraine’s budgetary shortfall stands at more than 180 billion uah per year (institute of social and economic transformation, 2017). that figure looks quite impressive in the context of the hybrid war, which ukraine has been forced to wage for more than three years now. after all, those funds, even in baltic journal of economic studies 347 vol. 4, no. 1, 2018 spite of the low institutional capacity of the state bodies, could contribute to strengthening the country’s defence capability, restoring its infrastructure potential, and improving the level of public education and healthcare. 3. negative experience of audit companies’ activities in ukraine one of the ways for reducing corruption in the private sector and in the field of financial services is to organize and ensure efficient audit work. independent audit as an individual economic phenomenon has already existed in ukraine for almost 25 years. during that period, an independent audit has proved to be an objective tool for controlling the activities of companies belonging to the private sector. still, it is impossible to deny the existence of facts of corruption in the activities of audit firms. a vivid example of that phenomenon was the incident involving a famous audit firm, a member of the big four, i.e. pricewaterhousecoopers, which became the most high-profile development in the audit industry in 2017: the national bank of ukraine (nbu) strokes pricewaterhousecoopers (audit) llc (kyiv), a ukrainian subsidiary of pwc, off the register of audit firms that have the right to conduct bank audits. the decision was made by the board of the national bank on the basis of a submission by the nbu committee on bank audit. a report says that the reason for that decision was the ungrounded confirmation by pricewaterhousecoopers (audit) llc of inaccurate information regarding financial and business activities of the pjsc cb “privatbank” (kyiv), in particular, regarding the latter’s size of credit risk and regulatory capital (interfax-ukraine news agency, 2017). “the findings of the pricewaterhousecoopers (audit) did not reflect the genuine risks of privatbank’s operations, which led to the adjudication of that financial institution as insolvent, its nationalization and substantial expenditure by the state on its capitalization,” the national bank of ukraine press release says (interfax-ukraine news agency, 2017). another example is the bdo llc (a ukrainian subsidiary of bdo international limited), which was struck off the register of audit firms that have the right to conduct audits of banks, due to a scandal with inaccurate information regarding financial and economic activities of pjsc “diamantbank”, pjsc “bank for investments and savings”, and pjsc “cb “globus” for the year 2015. as stated in the official press release of the nbu dated august 11, 2016, “the national bank of ukraine has for the second year in a row revealed a number of irregularities in the operations of the audit firm that were related to the company’s improper performance of its duties as an auditor. thus, as a result of the analysis of the relevant audit findings, the regulator has disclosed the facts that evidence the confirmation by the bdo llc of inaccurate information contained in the annual financial statements of some banks for the year 2015. what is more, in contravention of the requirements of article 70 of the law of ukraine “on banks and banking activity”, bdo llc did not notify the nbu in writing of the misstatements in financial reporting, irregularities and deficiencies in the operation of the bank, including significant losses of regulatory capital, that had been disclosed during the audit and rendering other audit services and that could lead to the bank’s insolvency” (internet portal about finance and economics “finbalance”, 2016). however, bdo llc managed to prove their noninvolvement and win an appeal against the nbu’s decision thereby regaining the right to conduct bank audits. the oratania llc audit firm was also struck off the register of audit firms that have the right to carry out bank audits followed by its complete striking off the register of audit firms. it was noted that the national bank of ukraine had disclosed a number of irregularities in the operation of that audit firm that were related to the company’s improper performance of its duties as an auditor. an important fact is that that audit company audited financial statements of the pjsc cb “privatbank” in the period from 2007 until 2009 (the national bank of ukraine, 2016). it can, therefore, be concluded that a corrupt element in the general “audit company-client” arrangement does indeed exist in ukraine, but the aspect of factual corroboration of that kind of corruption, gathering evidence base against it and public condemnation of that corruption, remain fairly problematic. in general, proving and public disclosure of corrupt schemes practiced by audit firms operating in ukraine are to a large extent isolated. 4. problematic aspects of the audit firms’ activities in ukraine in our opinion, the existence of a corruption precedent in the activities of audit firms in ukraine is due to a number of factors of economic and non-economic nature. one of the factors contributing to the increase in the likelihood of “corrupt” cooperation between auditors and their customers, i.e. consumers of audit services, is the tendency towards the reduction of the number of certified auditors. according to the statistical reporting data of the audit chamber of ukraine (acu), in the period from 2012 until 2016, there was a negative tendency towards the reduction of the number of persons who were certified auditors (audit chamber of ukraine, 2016). the general dynamics of the number of audit firms and certified auditors is shown in fig. 2. baltic journal of economic studies 348 vol. 4, no. 1, 2018 3139 2993 2787 2675 2646 1 672 1 488 1 326 1 107 1 008 0 500 1000 1500 2000 2500 3000 3500 2012 2013 2014 2015 2016 n um be r years the number of auditors the number of audit activity entities fig. 2. dynamics of the number of audit firms and certified auditors in ukraine from 2012 until 2016 source: compiled by the authors on the basis of a generalization of data of the audit chamber of ukraine (audit chamber of ukraine, 2016) thus, in the period from 2012 until 2016, the share of certified auditors decreased by 493 persons in absolute terms and by 15.71% in relative terms. it should be noted that in the period from 2013 until 2015, the reduction of the share of certified auditors in ukraine was caused by the significant influence of the political factor, viz. the annexation of the crimean peninsula and the beginning of hostilities in the east of the country that led to the emergence of some areas in the donetsk and luhansk regions that are temporarily beyond the government control. it was in the period between 2013 and 2014 that the number of certified auditors decreased by 206 persons. the conduct of hostilities in the east of the country, the illegal annexation of the crimean peninsula, the unfavourable economic situation, the intensification and the uncontrollable nature of inflationary processes and, as a result, an accelerated depreciation of the national currency, all contributed to the formation of the second factor for the increase of corruption in the economic sphere, i.e. the reduction of the number of audit firms. according to the data of the audit chamber of ukraine, the largest decrease in the number of audit activity entities took place in the donetsk (43.8%), luhansk (38.5%), and ternopil (33.3%) regions. a  significant decrease in the number of audit entities was observed in the rivne (26.3%), zakarpattia (21.4%), and ivanofrankivsk (20%) regions (audit chamber of ukraine, 2016). the decrease in the number of auditors in the western regions of ukraine was caused by a growing number of bankrupt companies, the aggravation of migration processes, etc. on the whole, the tendencies towards a reduction in the number of audit firms and certified auditors contribute to limiting the supply of audit services and ones associated therewith, as well as to strengthening the process of the market monopolization. the shrinking of the audit services market in ukraine contributes to the intensification of corrupt practices in the country’s economy. it is our opinion that due to the increased risk of loss of potential clients, with which the audit firms formed close professional relationships, the said firms apply not only measures of marketing and flexible pricing policy but, in some cases, they may also conduct an audit whereby their client company would obtain the “desired” results. apart from that, prerequisites emerge for the auditor to obtain an additional income for “loyalty”. according to the data of the audit chamber of ukraine, as for the year 2016, audit services were provided for the total amount of 1,973,102.3 thousand uah. of that sum, the share of the city of kyiv and the kyiv region is 1,634,543.8 thousand uah, which is 82.8% of the total amount of services rendered in 2016. so, the rest of the regions of ukraine provided audit services for 338,558.5 thousand uah, which is 17.2% of the total amount of services rendered in 2016. that being the case, the average cost of one order in ukraine ranges from 9,600 uah (mykolaiv region) to 90,800 uah (the city of kyiv and the kyiv region) (audit chamber of ukraine, 2016). taking that into account, it is quite clear that audit firms and individual auditors can enter into illicit corrupt schemes or be their direct initiators for the purpose of illegal enrichment. 5. conclusions of the study despite the complexity of the economic and political situation, in order to successfully combat various kinds of corruption schemes in the field of audit services, it is necessary to develop a full range of administrative and legal measures. having analysed the negative factors contributing to the development of corruption processes in the audit activity, and the findings of the research conducted, we consider it expedient to suggest the following: 1. the inclusion of a representative of the national anti-corruption bureau of ukraine (nabu) into the governing body of the audit chamber of ukraine. the inclusion of a nabu representative into the governing body of the audit chamber of ukraine will promote cooperation in the anti-corruption struggle, the promptitude in detecting corruption and examining cases regarding auditors who violate the principles of the code of professional ethics. at the same time, in order to avoid corruption precedents, we propose a systematic rotation of the representative of the nabu in the governing body of the audit chamber of ukraine, the rotation period presumed to be six months. 2. developing a state system of material incentives for individuals and corporate entities to make them point out the facts of corruption during an audit while preserving the informer’s anonymity. 3. establishing at the legislative level a procedure whereby the mandatory change of the audit company by the client company is effected once every three years. baltic journal of economic studies 349 vol. 4, no. 1, 2018 4. the imposition of an “interest on corruption”, i.e. all losses incurred by the state or natural persons and corporate entities due to the concealment or incorrect submission of information in the auditor’s report, should be paid by the audit firm in question. 5. introducing and making public on a mandatory basis of declarations of property status and personal income for auditors, heads of audit firms, and their immediate families. at the same time, we propose to envisage administrative and criminal responsibility for not submitting or distorting information in the above declarations. 6. creating an analogue of the prozorro system for audit firms. we suggest introducing the following mechanism for the functioning of a similar electronic system: audit firms should hand over to the audit chamber of ukraine the lists of services they can provide, the official number of auditors who are authorized to conduct audits, and the price lists of their services. at the acu, the information gathered would be processed, sorted, and a general list of all audit firms would be compiled. that being the case, it is important that neither the state nor the system administrator could influence the participants in the procedure and sift them out in any way. an audit service client would log on to the acu website and file an application, which should indicate the type of services that must be performed by a potential service provider, as well as the amount of payment for the services rendered. after that, the electronic system, based on the criteria entered and using the “random” principle, selects an audit firm for the client company. the main advantages of this solution are that the state is in a position to monitor the real situation on the market of audit services, and at the same time, the possibility of a “prior coordination” of the audit results is ruled out. 7. introduction of amendments and supplements to the law of ukraine “on auditing activity” and the international standards on auditing, in particular, to isa 240 “the auditor’s responsibilities relating to fraud in an audit of financial statements”, where article 7 says: “two types of intentional misstatements are relevant to the auditor – misstatements resulting from fraudulent financial reporting and misstatements resulting from misappropriation of assets” (the international federation of accountants, 2012). audit standards prescribe that the theft of assets and misstatements that affect the financial position of the company while ignoring the impact of corruption should be taken into account. the insufficient accuracy of standards in that part has been and will be the cause of many corporate scandals related to the auditor’s findings, on account of which the professional opinion of that auditor may be called into question. the above suggestions and areas of improvement of audit activity in ukraine should also be strengthened by the support on the part of the state: legislative stability of the legal and regulatory framework should be ensured as should be the promotion of the accountability of national audit firms as regards the market of audit services. references: audit chamber of ukraine (2016) generalized information on the state of audit activity in ukraine in 2016. retrieved from: http://apu.com.ua/1064-zvit-do-kmu-2016 (accessed 24 february 2018) institute of social and economic transformation (2017) eight tax-evasion schemes: the offshore companies and shadow importers are the most tax underpayments. retrieved september 7, 2017 from: http://iset-ua.org/ua/novini/ podatki/item/116-visim-skhem-ukhylennia-vid-podatkiv interfax-ukraine news agency (2017) the nbu has excluded pwc from the register of bank auditors for an untrustworthy audit of privatbank. retrieved july 20, 2017 from: http://ua.interfax.com.ua/news/general/437466. html internet portal about finance and economics «finbalance» (2016) the bdo auditors confirmed inaccurate information in the banks' reporting. retrieved august 11, 2016 from: http://finbalance.com.ua/news/nbu-auditoribdo-pidtverdzhuvali-nedostovirnu-informatsiyu-u-zvitnosti-bankiv ministry of economic development and trade of ukraine (2017) trends of the shadow economy in ukraine in january-september 2017. retrieved from: http://www.me.gov.ua/documents/list?lang=uk-ua&id=e384c5a76533-4ab6-b56f-50e5243eb15a&tag=tendentsiitinovoiekonomiki (accessed 12 february 2018) state audit service of ukraine (2017) preventing corruption. retrieved december 8, 2017 from: http://www.dkrs. gov.ua/kru/uk/publish/article/136627 the international federation of accountants (2012) international standard on auditing 240, the auditor's responsibilities relating to fraud in an audit of financial statements. retrieved from: http://www.apu.com.ua/1038mizhnarodni-standarti-kontrolyu-yakosti-auditu-oglyadu-inshogo-nadannya-vpevnenosti-ta-suputnikh-poslugvidannya-2015-roku (accessed 20 february 2018) the national bank of ukraine (2016) bdo ltd is excluded from the register of audit firms, which have the right to conduct audits of banks. retrieved august 11, 2016 from: https://bank.gov.ua/control/uk/publish/article?art_ id=35066885 transparency international (2018) corruption perceptions index 2013-2017. retrieved february 22, 2018 from: https://ti-ukraine.org/research/indeks-koruptsiyi-cpi-2017/ baltic journal of economic studies 35 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 taras shevchenko national university of kyiv, ukraine e-mail: vergun.va@gmail.com orcid: https://orcid.org/0000-0002-9784-5557 2 taras shevchenko national university of kyiv, ukraine (corresponding author) e-mail: gdarja03@gmail.com orcid: https://orcid.org/0000-0003-4734-4268 3 taras shevchenko national university of kyiv, ukraine e-mail: yaroslav.humenyuk@gmail.com orcid: https://orcid.org/0000-0003-0091-2758 doi: https://doi.org/10.30525/2256-0742/2023-9-1-35-45 social component in the modern national innovation system volodymyr verhun1, darya glukhova2, yaroslav humeniuk3 abstract. with the intensification of globalization processes and the high level of competition in international, regional and national markets, innovation has acquired the status of a major advantage for any country and has become the basis for ensuring its sustainable economic development. the use of new knowledge and technologies provides an opportunity to implement and intensify innovation and, as a result, to build an efficient and competitive innovation economy. based on the above, the question arises of building a fundamentally new national innovation system, adapted to the socio-technological challenges, which should determine the competitive position of the national economy in the global arena. in this context, social capital, as a factor of readiness for technological transformations of the state and strengthening of competitive positions in the international markets, forms the basis for the expansion of research and transformation of the nis. the purpose of the article is a theoretical substantiation of objective processes of transformation of nis, taking into account modern trends and identifying the role and place of the social component in it. given the fact that scientific and technological progress is an inevitable process, the relationship between the center and the periphery of the global economic system is characterized by unequal scientific and technological exchange, in which the peripheral countries are forced to pay intellectual rents contained in imported goods and services, as well as to act as a raw material and production appendage of the developed countries. the subject of the article is the transformation processes that take place in modern innovation systems under the influence of global challenges, as well as the social component, which is undoubtedly the driving force in the modern world for the promotion of domestic innovations, the development of high-tech business, and the increase of the level of technological readiness of society. the methodological basis of the study is the historical-logical method, the system-structural analysis of economic processes and phenomena, and the methods of qualitative comparison. results. social capital in nis acts as a kind of litmus test, reflecting its efficiency and competitiveness, since the functionality and social role of the innovation system is expressed in providing society with innovations, technological goods, products and services that effectively satisfy the entire spectrum of human needs. key words: innovation system, social capital, financing, innovative product, technology, globalization, research and development (r&d). jel classification: o31, o32, o33, o38, o57 1. introduction modern economic conditions dictate the need to solve the problems of activating innovation processes in the national economy and ensuring the creation of a highly efficient nis. the main factor of the country 's economic growth is the system of innovation processes taking place in the country. the formation and improvement of innovation systems is one of the key issues of economic development not only of industrialized countries, but also of developing countries, which creates an objective need to search for new forms and mechanisms of interaction between the state, science, business, production and education. in the classical structure of the nis there are three actors: the government as a guarantor, which provides baltic journal of economic studies 36 vol. 9 no. 1, 2023 and implements mechanisms for regulating the innovation processes taking place in the country; directly the scientific and technological sector, which is a generator of innovative ideas and novelties; and business as a system of commercialization and transformation of scientific results into finished products and goods. unfortunately, in the theoretical base of world research, as well as in practice, there is no social component of the nis, as a system of popularization, promotion and consumption of domestic r&d. therefore, the real question is how to embed a social element into the modern system of innovative values, i.e. society itself, which motivates and stimulates the above mentioned actors to development. the purpose of the article is a theoretical substantiation of the role and place of society in modern nis, which is implemented through the main tasks, namely: on the basis of a conceptual framework to explore the prerequisites for the formation and development of nis; to analyze the most effective national systems in the world; to determine the methods and ways of introducing the social component in nis; to highlight the main problems of innovative development at the global level. the article reveals both the theoretical approach to the structure and development of the nis, and determines the relationship with its participants, taking into account the social component. 2. theoretical views on the formation and development of the national innovation system modern social, economic and political attitudes are creating qualitatively new approaches to consumption, communication, lifestyle, production, advertising, etc., which is due to the intensive development of innovative technologies. in this context, the task of any progressive government is to introduce these technologies into society in order to create a society that is responsible and ready for innovative transformations. it is expedient to create a national innovation system (nis), which would rely not only on economic, political and legal institutions, but also to cover the social side, which acts as a kind of basis for the adoption and development of new technologies. the purpose of the article is to determine the role and place of the social component as a new player in the national innovation system and the theoretical argumentation of its importance. at the present stage, the leading countries of the world economy have accelerated the pace of socioeconomic development through the use of scientific and technological cooperation as part of modern globalization processes, which in turn ensure the trade and production integrity of the world economy through innovation and effective functioning of national innovation systems. since the beginning of the 1990s, the concept of the national innovation system has been in the center of attention of scientists dealing with economic, technological and innovative development, as well as state and international organizations responsible for the development of innovation and industrial policy. accordingly, the theoretical justification of innovation infrastructure and its elements in scientific circles is the "concept of national innovation systems" (cnis), which was proposed by a group of scientists as k. freeman, b. lundvall and r . nelson. (freeman, 2011; lundvall, 1992) k. freeman considered nis as "a system of institutions in public and private sectors, the activities and interactions of which are aimed at initiating, importing, modifying and diffusing new technologies". (freeman, 2011). based on the conclusions of the institutional theories of scientists r . coase and d. north, he continued to study the institutional context of innovation, emphasizing that nis is a kind of institutional structures in the public and private sectors, whose activities and interactions initiate, create, modify and promote the diffusion of new technologies. b. lundvall, based on the concept of "national production systems" of f. list and the work of von hippel on technological cooperation between firms, studied the relationship between producers and consumers of new knowledge and technologies within a state and compared the priority characteristics of innovative innovation. systems in the countries of northern europe. according to the ideas of b. lundvall, the interaction of firms in the process of technological development is much more often realized within the country and is determined by the peculiarities of its institutional structure, to which special attention was paid by the economist – scientist d. north. he assumed that institutions create a system of incentives (positive and negative) that direct people's activities in a certain direction. according to him, technology only sets the upper limit of achievable economic growth. in the theory of economic development, the founder of the concept of innovation is the austrian scientist j. schumpeter, who for the first time substantiated its economic and business essence. he, in the long run, identified the complexity of this phenomenon, namely, innovation is: a brand new product; improved product; a new way of manufacturing existing products; a new way of promoting existing products; use of a new raw material. it marked the beginning of a new round of economic views and mainstream, which led to the formation of a structured system not only at the business level, but also at the technological level. it can be assumed that this is a kind of synergy of natural sciences and humanities, which is present today in almost all scientific approaches. baltic journal of economic studies 37 vol. 9 no. 1, 2023 since the 1960s, research on innovation has been carried out in germany, in particular by professor g. mensch. his contribution to the theory of innovation was the refinement of its classification and the nomination of the "continuity hypothesis". it should be noted that he was one of the few researchers who were able to identify the first negative manifestations of the situation in the 1970s, when the signs of a new global stagnation were not yet obvious. g. mensch described the crisis of the 70's as a "technological stalemate", i.e., a natural pause in the progressive development of the economy. at the end of the twentieth century, nis has already emerged as a system that requires appropriate research methodology and regulatory mechanisms. for example, in the work of s. naubar "formation and development of the concept of national innovation systems", the search and formalization of the ideological and methodological basis of the concept. d. metcalfe – an english economist from the university of manchester, director of the center for innovation and competition – proposes to consider nis as a set of developed institutions that individually and in cooperation contribute to the development and transfer of technology, as well as provide conditions for public policy influencing innovation processes. (metcalfe, 1993). there are also scientists who consider the national innovation system from a purely socio-political point of view. they do not distinguish its technological determinants. sociologist reio miettenen belongs to such scientists. he sees and writes about nis as a term and concept used for a limited period of time, which is not only characterized by a particular technology and political situation, thus giving the conceptual meaning to the phenomenon of socio-political context. the concept of g. mensh is shared by the american economist r . foster, who, summarizing a large amount of factual material and using s-shaped logistic curves as the main analytical tool, found the existence of technological limits and technological gaps and proved the objectivity of cyclical development. he noted that innovations are subject to a certain logic and predictability, and on this basis, it is possible to assess the depth of those changes that will occur in the future. in order to do this, according to r . foster, companies must carry out a concentrated program of accumulation of scientific knowledge through research. the neoclassical theories of endogenous development form the basis for the further development of the concept of nis and its structure at the present stage. among the economists who have dealt with this issue, it is worth mentioning: r . solow, p. romer, k. erode, r . lucas, s. grossman. the main idea is the implementation of technological changes through research and development in order to maximize profits over time. in models of endogenous growth, the production function is based on three factors of production: labor, physical capital and human capital. that is, it can be assumed that "innovativeness" – is a system of factors that affect the parameters of a product, but provided that these factors are applicable for the first time specifically to it. it is clear that the very mode of production or the market may not be new, but in relation to a specific product, it acts as an "innovation", considered as an object in space and time. (schumpeter, 2008) it marked the beginning of a new round of economic views and mainstream, which led to the formation of a structured system not only at the business level, but also at the technological level. it can be assumed that this is a kind of synergy of natural sciences and humanities, which is present today in almost all scientific approaches. american scientist, economist, publicist, one of the most influential management theorists of the twentieth century p. drucker in his works "innovation and entrepreneurship" (1985) formed a theory of innovative economy and entrepreneurial society, in which scientist believed that the economy of the 90s is fundamentally different from the economy of the 60s and 70s, which was based on production, and as a result entrepreneurs focused on improving their production, including large companies that dominate the market. innovative economy includes the formation of an effective nis, taking into account balanced mechanisms of regulation by the government and cooperation between the scientific and business sectors. drucker's theory was supported by economists k. mcconnell and c. brew, who considered large companies as a factor of innovative development and argued that new technologies require the use of large capital and market, centralized and integrated market, rich and reliable sources of raw materials. in other words, only large firms can afford a technological breakthrough because they have the appropriate market power and a sufficient resource base, while small firms cannot. considering the concept of nis, it is also worth emphasizing some of its negative aspects. among the publications devoted to the study of the development and functioning of nis, there is a large number of works devoted to the study of infrastructural and institutional problems and shortcomings of real innovation systems (b. carlson, s. jacobson). noteworthy are the works whose authors try to determine the determinants of nis functions, the non-fulfillment of which means the failure of nis (m. heckerte). however, these functions are often rather abstract and indirect. important work is baltic journal of economic studies 38 vol. 9 no. 1, 2023 devoted to the study of the links between r&d and technology creation processes at the level of individual industries (w. loy) and countries (s. louis). they are considered through the prism of the barriers created by the introduction of the latest technologies, which is a rather long and expensive process that not every country can afford. it is worth noting that in the xxi century scientific schools are being formed that consider and research nis in the relevant specialties. such associations are formed, for example, on the basis of universities where nis theorists work. an example of such an association is the iked (innovation knowledge and economic development) group. the most famous project of this group is globelics – an international network of researchers, practitioners and policy makers who share and use the concept of innovation systems in their activities. it is an international network of scholars who take the concepts of "studying, innovating, and building innovation systems" (lics) as a core and use them to strengthen lics in developing countries, economic systems, and societies in transition. researchers seek to locate systems with unique features that contain common positive developments in order to develop tactics for innovation, innovation systems, international competitiveness, regional development, the labor market and human capital. important achievements in the study of innovative systems are the works of ukrainian scientists. for example, according to m. kundryk, k. friedman's definition of nis is limited only to institutional regulation and innovative institutions, while, in his opinion, the concept of nis has expanded from a single enterprise to the business environment and, finally, beyond purely economic categories, today covers the field of politics, management, education and science. mykytyuk z. defines the national innovation system as "a set of interconnected institutions designed to create, store and transfer knowledge, skills and artifacts that define new technologies." m. sharko considers the national innovation system as an economic mechanism based on the development and use of new knowledge, entrepreneurial approach, integration into foreign markets and accelerated development of competitiveness of the country and its regions. (sharko, 2005) nowadays the question of innovative orientation development arises not only on cooperation between scientific sector, state and business, but also on integration of a social component into the given form of communication. accordingly, social capital becomes a determinant and a new participant in the nis, expanding and transforming it. it can be seen in the form of links between market participants, human potential, and in the context of innovative development, as a society ready for the latest transformations. j. coleman believed that social capital is "...the value of aspects of social structure to actors as resources they can use to achieve their goals...". (coleman, 1988) today, this statement is expressed in the form of popularization of innovation, as well as tightening of ties between nis participants. the scientist p. bourdieu drew attention to the fact that the well-being of an individual depends to a greater extent on the intensity of his connections with other individuals, since useful economic information circulates along such chains, so social capital is a useful resource that forms the readiness and awareness of society to new information and technologies. n. kondratyev considered innovative activity as an interweaving of not only material, but also social aspects (elements), noting that human potential becomes the basis of innovative competitiveness of the country and, accordingly, of nis. the modern scientific school of international business and law (v. vergun, d. glukhova, y. humeniuk, r . yedeliev) defines nis as a complex of relations between the state, scientific sector and business in the context of formation and development of the innovation-technological nation, ready for new global transformations. 3. the social component as a modern element of the national innovation system today, innovations have become a larger category that form state, national, international and global institutions, such as innovation systems and infrastructures, and interpret all socio-economic and political-legal processes in the form of modern concepts and paradigms, among which are: inclusive paradigm of the innovative model of global economic development and the concept of sustainable development. modern problems related not only to the environment, but also to the asymmetry of economic development, information security, militarization, terrorism, etc., are somehow correlated with innovative development. therefore, there is an opinion that scientific and technological progress has a negative effect not only on the environment, but also on all humanity as a whole, enslaving it. but one way or another, innovative technologies have become a determinant of international competitiveness of any participant in business processes at the national and global levels. in this context, for each state the question of organizing an effective national innovation system, which would be focused on country specialization and specification, and also satisfy global challenges and requirements. there are many interpretations of the nis structure as an institutional and infrastructural complex that baltic journal of economic studies 39 vol. 9 no. 1, 2023 ensures the innovative development of the country. (patel, pavitt, 1994) first of all, for a graphic description of the nis it is necessary to identify its main participants, namely: the state (guarantor), the scientific sector (research institutes, universities, scientific and educational institutions) and business. most researchers are limited to this list, but today the defining component of this system is society, which determines a country 's willingness to adopt and develop certain technologies. the figure shows the components of the national innovation system and the relationship between them. first of all, it should be noted that the first chain (number 1) is the state – the science sector. the government directs and finances science through grants, competitions, as well as scholarships and subsidies, thereby stimulating the latter to create a critical mass of r&d. chain 2 shows the "return" of contributions and privileges of the state in relation to science. in this regard, the majority of scientists see the volume of government contracts, the development of the military-industrial complex and other public sectors at the expense of r&d. (haagedoorn, 1994) however, it should be said that this connection is not limited to this. the state should be interested in increasing the innovative potential, first of all, to increase international competitiveness, create an attractive investment climate, develop intellectual capital, and expand external relations. (kolomytseva, pavlovska, 2020) all this, strangely enough, is achieved at the expense of the scientific sector. this sector should be open and communicate with all components of the nis, such as the state. the relationship between science and business is bilateral, complex and multifaceted. consequently, this link is not effective in all countries. for example, in peripheral countries, chain 3 is rather weak, because there is a very low level of confidence in the quality of local innovations. unfortunately, ukraine is one of these countries. entrepreneurs prefer to buy foreign technologies, spending more money and reducing the innovative potential of the country. in the countries of the center, the opposite is true; the level of trust in national developments is so high that their quality is beyond doubt. these countries include usa, japan, belgium, switzerland, uk, china. in each case there is an element of specialization, but in the general picture of the world these countries are recognized as innovative. the high quality of the offered products (in this case, r&d) stimulates the demand for them, which is represented by chain 4, the density of which reflects the effectiveness of the relationships between the components. if technologies meet or exceed customer expectations, it is logical that the business sector will be interested in their development and will invest in them. as mentioned above, society is a new actor in the nis, as it used to be considered from the point of view of r&d commercialization. society is an element that generates demand for certain innovations, acts as a determinant of the state's readiness to produce technologies and, as a consequence, its international competitiveness. as shown in figure 1, "society ", in parallel with the state, provides the demand for innovative products. therefore, it is important to assess the innovative development of society and the extent to which the state provides it with access to new technologies. today, there are a large number of indicators that measure the innovative capacity of society, the economy and business. they are diverse and are figure1. the structure of relations between nis participants source: compiled by the author baltic journal of economic studies 40 vol. 9 no. 1, 2023 formed depending on the development of the country and the region; they can be generalizing and integral. the most popular is the global innovation index (wipo), which accumulates an overall measure of the innovation development of countries and ranks them accordingly. the digital economy and society index (desi) is a composite index published by the european commission since 2014, measuring the progress of eu countries in the digital economy and society. it establishes a set of relevant instruments that operate in the european digital policy framework. there are also national parameters that characterize the degree of society 's readiness for modern technologies. as a rule, they are focused on business and government. (müller, potters, 2019). in the context of the popularization and diffusion of information and communication technologies (icts), the following parameters are important: ict development index, e-government development index, global networking index, inclusive internet index, networked society readiness index, e-commerce index, global cybersecurity index, european bank for reconstruction and development (ebrd) knowledge economy index. developed countries annually assess the effectiveness of measures taken to improve nis and innovation infrastructure. these indicators are a kind of tool for determining its strengths and weaknesses, as well as priority directions of development, taking into account not only economic, political, legal and technological factors, but also socio-cultural, religious and psychological. society creates demand for innovative products by consuming and using new technologies. the 5th and 6th chains clearly show that in the conditions of globalization, the state should already be prepared for the relevant needs of society and ensure their turnover. using the example of the leading developed countries of the world, it is possible to determine the industrial and technological policy of the country. therefore, according to the expert data of the harvard business review in 2019–2020, the following countries held the leading positions. the czech republic is an industrial country. the main industries are fuel and energy, metallurgy, engineering, chemical, light and food industries. the czech republic spends about 500 million euros annually on research and development to improve these industries. in recent decades, sweden has made a breakthrough in modern industries – digital technology and telecommunications. for ten years, the share of information technology in the country 's economy has grown to 16%, and 5% of the working-age population is already employed in the it industry. france is a highly developed country, a nuclear and space power. it ranks second in the european union (after germany) in terms of total economic volume and is consistently among the top ten in the world. the french government has earmarked 15 billion euros for the state program le grand plan d'investissement 2018–2022 ("great investment plan 2018–2022", also called "plan of investment in professional development"). the french tech horizon 2022 program pays special attention to the issue of public support for the development of start-ups in the elite category of "deep technologies" – high-tech companies with a "special profile", which often experience serious problems in obtaining external financing due to the existence of a significant time gap between the development of innovative products or services and their subsequent launch on the market. for the targeted support of such companies in the french tech horizon 2022, it was envisaged to allocate approximately 70 million euros from the budget of the government's industrial investment fund (espas, 2019). in recent years, the republic of korea has accelerated the development of innovative technologies and is now one of the world's top consumer electronics manufacturing locations. the government focuses on the development of "green technologies" and spends 2% of gdp annually on them, and in 2009 a long-term national strategy for "green growth" (2009–2050) was adopted, with funding of $320 million. the people's republic of china, or the " world factory ", which has the largest gold and foreign exchange reserves, is a powerful innovative and technological potential in every sense: it increases the education of the population, the number and quality of highly qualified personnel, and spares no financial resources to create a technological base. putting science and technology and innovation above other tasks and giving specific substantive tasks – this message rang out for the first time in the history of the formation of five-year plans for the country 's socio-economic development (2021– 2025). over the past 5 years, the indicator of china's scientific and technological progress has increased from 55.3% to 59.5%, and a number of important results have appeared in this direction. in terms of innovation capability, the country ranks 14th among 131 economies in the world. according to the latest data, in 2019, china's innovation index was 228.3, an increase of 7.8% compared to 2018, while investment in technology research and development (r&d) amounted to 2.23% of total gdp (gross domestic product), exceeding the average eu level in 2018 (mark j. greeven, george s. yip, wei wei, 2019). according to deloitte, the most promising innovative baltic journal of economic studies 41 vol. 9 no. 1, 2023 areas of china's economic growth are: fintech, artificial intelligence, and new energy sources and telecommunication technologies. the united kingdom is one of the leading countries in the world with innovative industry, which is reflected not only in the country 's strategic plans, but also in the trends of increasing government spending on r&d: in 2014 it amounted to 1.66% of gdp, in 2015 – 1.67%, in 2016 – 1.68%, in 2017 – 1.7%, in 2018 – 1.72% of gdp. in the industrial strategy of the uk government was set the goal of becoming the most innovative country in the world, which provides for further gradual increase of r&d spending to 2.4% of gdp by 2027, and in the long term – up to 3% of gdp. in relative terms, these are not the highest figures, but in absolute terms – this amounts to about 10 billion pounds sterling. the united states leads the world in terms of technology sales, modernization trends, and innovative development. the innovation support system in the united states is highly diversified and decentralized (sgir , 2020). its members include federal and local government agencies, universities, the private sector, nonprofit organizations, and intermediary firms. the system combines a large amount of r&d (basic research is funded by government agencies) with a focus on the practical application of developments in the marketplace. the federal government supports innovation through infrastructure development and targeted programs (world investment report, 2020). local governments usually provide direct support to companies related to regional business and development of the state economy. according to the white house, in fiscal year 2020, total spending on innovation and r&d in the united states amounted to $523 billion, which is 26% of the funds allocated for similar purposes by all states in the world. ukraine is also not worth the global innovative trends and increasing its potential in this area. this can be seen in the following trends. thus, according to wipo in 2020, ukraine ranked 45th out of 131 countries in the rating "global innovation index 2020", scoring 37.4 points out of 100. in 2019, 782 enterprises carried out innovation activities in the industrial sector. at the same time, the share of the number of industrial enterprises that implemented innovations (products and/or technological processes) in the total number of industrial enterprises was 13.8%. at the same time, the share of expenditures on research and development will decrease from 26.3% in 2018 to 20.5% in 2019, on the acquisition of other external knowledge – from 0.4% to 0.3%. in addition, no less important indicator is the share of expenditures on scientific and technical work in gdp, which in 2020 will be only 0.47%. as can be seen from table 2, the studied indicators show a correlation between the state's level of innovative development through the popularization of technology in society, its transformation and modernization. returning to figure 1, chain 6 shows that every thing is interconnected and it is very difficult to determine who dictates the rules in this situation, but the government as a guarantor ensures the promise not only to popularize technologies, but also to create conditions for their comfortable and appropriate use. this means that not every innovative technology is table 1 ukraine's place in the modern innovative business system indicator place dynamics (+/-) education 23 +20 r&d 44 +10 creation of knowledge (patents and inventions) 23 -6 political and operational stability 123 +2 government's effectiveness 93 +2 the rule of law 109 -2 regulatory policy 88 +6 doing business 52 -4 startupblink 29 source: compiled by the author table 2 global indicators of innovativeness the world's leading countries country networked readiness index global innovation index global competitiveness index place score place score place score the czech republic 28 66.33 24 48.3 33 sweden 1 82.75 2 62.5 6 france 17 73.18 12 53.7 32 the republic of korea 14 74.60 10 56.1 23 people's republic of china (hong kong) 40 58.44 11 54.2 5 united kingdom 10 76.27 4 59.8 19 usa 8 78.91 3 60.6 10 ukraine 64 49.43 45 36.3 55 source: compiled by the author baltic journal of economic studies 42 vol. 9 no. 1, 2023 obliged to "take root" in this or that society. based on specialization, cultural characteristics, climate, level of urbanization, and age qualification, the guarantor balances the technological equilibrium in society. it is impossible not to mention the relationship between society and business (chains 7, 8), which determine the commercial core. starting from the fact that the essence of entrepreneurship lies in the innovative component, it is they who, through advertising, pr , social networks, etc., create in the consumer's subconscious the need for a certain technology (product). at the same time, the business sector must monitor and study the reaction of society to what it offers. in this context it is important to create one's own niche and think about the customer's needs. as practice shows, after a certain period of time (less than a year), 90% of consumers expect an improved product, not a new one, but an improved one or one with additional options. apple can serve as such an example, orienting its consumers to a new iphone every year. science and society are most closely related, and the main indicator is education. the level of society and the characteristics of innovative development determine the specifics of education and science in the state. the quality of national education is proportional to the level of confidence in it. by raising domestic standards and bringing them closer to international ones, the state maintains and strengthens its intellectual potential (lundvall, 1992). naturally, it is necessary to take into account not only the specialization of the national economy, but also the prospects for its development, as well as the needs of society, which cannot be ignored. the formation of a differentiated complex of scientific and educational approach increases the international competitiveness of all economic entities, meeting the needs of all nis participants. an important question is that of the indicators of social capital in this field. they are multifaceted and have different measures, as well as scientific affiliation, namely: the number of innovative products used, the number of applicants who enter national universities, the number of scientists involved in national innovative programs, the number of views and "likes" in social networks of national projects, the number of applicants who choose natural sciences, the number of individuals who finance domestic innovative projects, the identification and recognition of domestic innovative products, the level of popularization of national innovations and technologies in universities, schools, colleges (subjects that are considered on a practical case), the way of popularization of innovations (through friends, relatives, at work, at school, at university, etc.), number of social innovation projects, etc. these indicators are not included in any index that is considered in the study of innovation, because they are polyscientific. it is advisable to abstract from the "complaints" about the imperfect legislative system, insufficient funding for r&d, obsolete physical capital and brain drain from the country and look at nis from the point of view of social capital. it can be discussed not only within a country, but also in the context of glocalization, for example, the creation of the eu digital single market, the european innovation platform, the global fintech network, technoparks and technopolises. representative structures create trust in the national product and stimulate its consumption. chain 9, which determines society 's willingness and confidence in national education, is no less important and perhaps the most decisive. national achievements shape social interest and desire for education. this phenomenon can also be called capital substitution in the context of human capital formation, which in turn can increase the international competitiveness of the nis. it is seen that the above processes are complex, institutional and inseparable, which requires a response from all nis participants, namely: the state (balanced and adaptive legislative framework; preferences and benefits for small and medium-sized businesses; expanding the range of relations with foreign investors; simplifying registration innovative companies and obtaining permits for activities; creation of project databases with open access; formation of state projects with the right to invest; convergence of national and international standards, etc.); scientific sector (attracting foreign specialists and colleagues in joint areas of research; collaboration of natural and human sciences, as: formation of a services’ range for the development, promotion and support of innovative projects on the part of marketers and managers; motivation for publication activity; openness to cooperation with business and public organizations; elimination of bureaucratic webbing, etc.); business sector (increasing confidence in national innovations, expanding access to information, creating a base of preferences in r&d; financing scientific developments at the local level, creating regional technology parks, organizing and participating in scientific and educational events, etc.); society (first of all, it must be said that society ceases to perceive the educational and scientific spheres as a service. moral norms form the basis for the competence and professionalism of each individual, and thus for the strength of the nation. avoid blindly applying foreign experience at the national level, and even more so, waiting for an adequate reaction. if it is copied, abruptly switching to western models, then all efforts will fail. the readiness of society as social capital is formed gradually, because not everyone in it can perceive changes in the same way, or they can be implemented in a "distorted" way. this issue is of great and comprehensive relevance. so far, it has been perceived baltic journal of economic studies 43 vol. 9 no. 1, 2023 exclusively in terms of ethical norms, but if to talk about the social basis of innovation, it should already concern socio-economic, political and legal mechanisms for regulating public opinion). 4. conclusions there are many definitions of the concept of the national innovation system and its management interpretations. each author considers it on the basis of his scientific interests. nis cannot be considered as standardized: from the economic, political and legal point of view, as it serves as a broader concept than the national innovation policy or infrastructure, including all areas of social development. these theories consider nis as an auxiliary system of economic growth, socio-political transformations, diffusion and technology transfer. today, it is necessary not only to create a qualitatively new structure of relations between participants, but also to use the mechanism of eclecticism – to comprehensively adapt to the development and research of nis and not to ignore social issues. practice shows that economic indicators are not a decisive factor in the competitiveness of the company, industry and even the country, because the social component forms the demand that will determine the proposal in the future. therefore, the task of the new forces is to interest and prepare the society for innovative discoveries and to make it adhere to them. the article presents the structure of the nis, clearly tracing the links between its classical actors and the social component. in this context, it is important not only to broaden scientific opinion on the role of society in increasing the country 's innovative activity, but also to consider it as a determinant of progress in all areas. unfortunately, today there are few scientific and theoretical works that explicitly define this issue. at the same time, the article attempts to provide a justification for considering the social component as the fourth actor in the nis, since it can be used to popularize national r&d and its implementation in business and industry. having studied social capital as a determinant of the development and transformation of the national innovation system, the following conclusions can be drawn: nis implements a social, educational function, provides training, provides resources, manages and regulates innovation processes, while the social function (aimed at improving the quality of life) is one of the main determinants in providing society with innovations, technological goods, products and services that allow more efficiently meet the full range of human needs. the formation of an effective and competitive nis is a strategic task for all its participants, including society. balanced relationships can minimize the need for large amounts of state funding and distribute it correctly among all actors to the fullest extent. this issue is very relevant and open, especially in the context of global transformations and orientation towards sustainable development, which should reduce not only physical negative impact on the environment, but also socio-cultural, increasing the level of education, responsibility and readiness of society for modern challenges and changes. social capital is a critical component of all processes that take place at the national and international levels, especially in the field of innovation, because it reflects the potential of the state and its readiness for further innovative development. when designing innovation systems and infrastructures, it is particularly important to take into account the willingness and ability of society to perceive, consume and use innovative products and services. unfortunately, in many countries the social factor is not used as a determinant in the study system. modern trends in economic growth and characteristic features of innovative economies, determine the basic requirements for the development of nis in independence from the national framework. among them, the basis is that it should include: ensure sustainable economic growth and competitiveness of the country through the use of scientific and technical potential; possess selfsufficiency (support on own resources of the national economy) and resistance to the effects of the external environment; implement mechanisms for aligning socio-economic development of society; comply with world development trends, have the ability to interact and integrate into higher level innovative systems; to form on the basis of a balanced combination of state, commercial, scientific, market and social regulatory mechanisms. this can be achieved through wellcoordinated interaction and exchange of capital in the economic nature of the nis, thus ensuring the international competitiveness of the state. references: bloomberg (2020). these are the world’s most innovative countries. available at: https://www.bloomberg.com/ news/articles/2020-01-21/germany-nearly-catches-korea-as-innovat ion-champ-u-s-rebounds coleman, j.s. 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1, 2023 vis (2017). digital21: set the direction for the digitalization of business in norway. available at: https://www.visinnovasjon.no/2017/12/set-direction-digitalization-business-norway/ world economic forum (2019). gci report. available at: https://www.weforum.org/reports world investment report 2020. investment and new industrial policies / united nations, new york and geneva, 2020. available at: https://unctad.org/en/publicationslibrary/wir2020_en.pdf received on: 5th of february, 2023 accepted on: 19th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 183 vol. 3, no. 5, 2017 corresponding author: 1 department of applied economics, odessa institute of trade and economics of kyiv national university of trade and economics. e-mail: victor-koval@ukr.net 2 department of accounting, economics and human resources management of enterprise, prydniprovska state academy of civil engineering and architecture. e-mail: golovkoyuliya3@gmail.com 3 department of accounting, economics and human resources management of enterprise, prydniprovska state academy of civil engineering and architecture. e-mail: denalli.com.ua@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-183-187 the influence of the enterprise life cycle on the efficiency of investment viktor koval1 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine yuliia prymush2, viktoriia popova3 prydniprovska state academy of civil engineering and architecture, ukraine abstract. the article presents results of the study of relations between the enterprise life cycle and the efficiency of investment in the context of dynamic, rapid changes in the conditions of enterprises operation and development. it is determined that one of the main factors of success is the introduction of innovative technologies in the production process, which cannot be carried out without attracting investments. it is the investment activity of enterprises that determines the dynamics of their development, the level of competitiveness and the growth of productive resources, which affects the efficiency of their activities. it is proved that it is relevant to take into account the possible negative effects of the influence of factors divergence. the purpose of the study is to analyse possibilities of determining the impact of life cycle stages on the efficiency of investing in an enterprise. the methodological basis of the research is grounded on the general scientific methods of dialectics, observation, measurement, and formalization; methods of the system and statistical analysis. in particular, to determine the influence of internal factors on the indicators of the efficiency of investment activity of the enterprise at the stages of its life cycle, deterministic factor analysis is applied; methods of systematization and synthesis, analysis and synthesis are also used. it is determined that the construction industry plays a special role in the national economy since its development creates a synergistic effect for the development of other industries, increases the standard of living of the society through solving certain socioeconomic problems. the analytical data of construction enterprises activity in dnipropetrovsk and odesa regions of ukraine became the basis for the approbation of the proposed approach. the use of the life cycle model of the enterprise, which includes the stage of growth (slow and rapid growth, stability stage) and the stage of the fall (slow and rapid fall, crisis stage), is substantiated. the features of investment activity according to the given stages of the life cycle of the enterprise are considered. it is determined that the growth and fall stages have a different effect on the nature of the investment indicators, which depends on certain factors. further research is aimed at improving the mechanism of monitoring the environment in order to determine the force of factors influence on investment activity and implementation of preventive measures. the lack of a rapid reaction of the company to changes in the environment can lead to a crisis state of management, which determines the high degree of significance of adaptation for any life cycle of the enterprise. key words: enterprise life cycle, investment, stages of growth and fall. jel classification: d15, d25 1. introduction transformational changes in the global economy of the last decade have significantly changed the economic, legal, and social environment of the manufacturing sector of any country. there are dynamic, rapidly changing unique conditions of enterprises operation and development, in which one of the main factors of success is the introduction of innovative technologies in the production process. in order to meet the current world standards, any industry has faced an urgent need for innovation and technological change that cannot be made without investment. it is the investment activity baltic journal of economic studies 184 vol. 3, no. 5, 2017 of enterprises that determines the dynamics of their development, the level of competitiveness and the growth of productive resources, which then affects the efficiency of their activities. it should be noted that the economic growth of enterprises is in certain limit values of the time interval associated with the laws of cyclical functioning of the economy. the identification of the life cycle stage and the assessment of the achieved results at certain stages in order to determine the effectiveness of investment is objectively necessary for the enterprise, regardless of the scale of activity, duration of its life, size, ownership, to avoid violations of reliability and stability of its functioning. in the conditions of constant transformation of the external environment during investment, there is a problem of taking into account the possible negative consequences of the adverse effects of the said environment and the associated uncertainty and risk, which affect the reliability of the entire investment process. therefore, the approach to the company as a dynamic system and the study of the impact of its life cycle stages on the efficiency of investment is highly relevant. 2. review of theory and literature regularities and trends of the cyclical development of the enterprise, features of its state depending on the stage of the life cycle, the issue of determining the nature and evaluation of the enterprise life cycle were considered in the publications by a.  alti (2003), a.  downs (1967), b.  gerasimov, t.  konovalova, s.  spiridonov and n. satalkina (2008), k. cameron and r . quinn (2001), d. miller and p. friesen (1984), b. jovanovic and glenn m. macdonald, (1994), i. ivashkovskaya and d. yanhel (2007) and others. despite numerous scientific papers devoted to the study of the stages of a company life cycle, the theoretical foundations of this problem have not yet been fully disclosed. there are also a number of unresolved issues related to the quantification of the investments effectiveness and taking them into account in terms of economic substantiation of the investment reliability. in the current research of investment effectiveness, the stage of enterprise stability is the most frequently analysed, while due attention is not paid to the indicators of the previous stages and accounting for future stages of the cycle. in some cases, the economic substantiation of the reliability of investment is not carried out at all, while in others, the probabilistic nature of the environmental parameters is not considered. thus, the need to determine the impact on the effectiveness of investment processes in the various stages of the company’s life cycle predetermined the purpose of the study, which is to analyse the possibility of defining the impact of life cycle stages on the efficiency of investing in the enterprise. 3. data collection (data sources and methodology) the theoretical and methodological basis of the research was the scientific works by the leading ukrainian and foreign scientists on the enterprise economy, assessment of stages of the life cycle of the enterprise, as well as the reliability and investment activity of the enterprise. in the process of research, the general scientific methods of dialectics, observation, measurement, and formalization were used; methods of system, statistical and graphical analysis. in particular, to determine the influence of internal factors on the efficiency indicators of the enterprise investment activity at the stages of the life cycle, deterministic factor analysis was applied; methods of systematization and synthesis, analysis and synthesis were also used. the preliminary analysis shows that the construction industry plays a special role in the national economy, since its development creates a synergistic effect for the development of other industries, increases the standard of living of society through solving certain socioeconomic problems. this formed the information base for the approbation of the proposed approach, analytical data on the activity of the construction enterprises of dnipropetrovsk and odesa oblasts of ukraine. 4. the theoretical and methodological basis of research one of the main engines of growth and qualitative development of the enterprise is its investment activity. due to efficient capital expenditures, the desired growth rates are achieved, as well as the return on investment. it is obvious that improving the current technical equipment of the company will lead to an increase in the efficiency of the production process, and investment in new products development or improving the characteristics of existing goods will strengthen the market position of the enterprise, the emergence of strong competitive advantages and, consequently, will increase the value of the entire business. according to the results of the analysis and generalization of theoretical approaches to the definition of the enterprise life cycle, despite a significant number of scientific works devoted to the issues of the life cycle by both foreign and domestic scientists, it was revealed that today there is no a single approach to the interpretation of this category. both the content and the choice of alternatives to the life cycle of the enterprise, as well as the specific directions of its formation, depend on the content entering this concept and criteria accepted as a basis. category “life cycle” is one of the key economic concepts, but the essence of this definition is interpreted by different researchers quite broadly, depending on the subject which is being explored. the generally accepted definition states that “an enterprise life cycle” is a set of stages, which the baltic journal of economic studies 185 vol. 3, no. 5, 2017 enterprise passes during the course of its life from creation to liquidation. this is explained by the complexity and versatility of the life cycle as a phenomenon. with regard to the research on relations between investment and the stages of an enterprise life cycle, most of the existing research in this area is focused on assessing the reliability of the enterprise as an economic system, which is determined by the diagnosis of all levels of financial and economic activity of the organization. this approach is acceptable for the enterprises at the stage of sustainable development of the life cycle trajectory. in the case when the company develops a strategic development plan and plans appropriate investments, there is a problem determining the comprehensive reliability of obtaining expected indicators assessing the economic efficiency of the future outcome. very often, and this is noted in the literature on the analysis of the investments efficiency, there are problems with the choice of alternative investment options in comparison of their performance indicators, which are known to have different dimensions and therefore cannot be considered as an additive at different life cycle stages. it should be noted that none of the existing models in economic science allow conducting a complete study of the enterprise life cycle, since each enterprise has its own individual pace of development, and changing the stages of the life cycle depends on a number of factors (external environment of the enterprise, branch affiliation). for our study, we offer to use the following model of the enterprise life cycle identifying: a growth stage characterized by slow and rapid growth part, a stage of stability; a stagnant phase characterized by a slow and rapid fall, and also a stage of a crisis. this choice is based on the fact that in this model, in our opinion, the basic laws of the enterprise life cycle are the most clearly traceable (strobl & kronenberg, 2016). there are several disadvantages of practical application of the methodological approaches existing in the economic literature to the definition of stages of an enterprise life cycle: identification of the stages of the company lifecycle is carried out on the basis of one or two indicators, which determines the narrow target orientation; almost all methods at the final stage of calculation are based on methods of expert evaluation; none of the approaches consider an enterprise life cycle as a combination of a certain ratio and interaction of the enterprise; each of the methods and approaches has its own limitations because there are sectorial and regional features of enterprises and it is not always possible to give an accurate qualitative and quantitative description of a particular life cycle parameter. all this led to the need for a comprehensive approach to assessing the life cycle of a construction company, which allows: considering an enterprise life cycle as a set of all activities of the enterprise, subject to the influence of factors of the operational environment of the enterprise; taking into account the ability of the company to operate at the stages of the life cycle to produce certain results; forming an information base for the development of appropriate evaluation tools, for example, the matrix of determining the stages of the company life cycle by the indices of changes in profitability indicators (table 1) as noted in (cameron and quinn, 2001; ivashkovskaya and yanhel, 2007), the change in the stages of the company life cycle is determined not by the individual values of the selected indicators, but by the growth (index) of these indicators. according to the purpose of our research, the most interesting for us is the characteristic of investment activity according to the given stages of the enterprise life cycle. stage of growth. one of the rationales for investing in the enterprise is associated with the conditional transition from the stage of fall to a new cycle of the life cycle. first, it is a question of updating the active elements of fixed capital (ivashkovskaya and yanhel, 2007). their moral aging leads to potential costs that arise as a result of the need to introduce new developments and qualitatively other means of production. in this case, an enterprise must calculate when it will be necessary to prematurely change capital assets to their full physical deterioration. thus, a new cycle of a company begins precisely from the moment the investment project is implemented, for example, such as the replacement of the worn equipment or investment in research work. innovation is often seen as the starting point of the financial cycle of the whole industry (and with it and the existing enterprises in the industry). thus, boyan jovanovic and glenn m. mcdonald (1994), analysing the automotive tires industry in the usa from 1906 to 1971, using a formal mathematical model, came to the conclusion that the enterprises that had first introduced new developments in 1910–1920, significantly won in growth rates ( jovanovic and macdonald, 1994). table 1 matrix identifying the stages of the company life cycle by indexes of changes in profitability indicators stage of growth stages of fall index of change in profitability slow growth fast growth stability slow fall fast fall crisis operational activity ↑ ↑ ↑ ↓ ↓ ↓ investment activity ↓ ↑ ↑ ↑ ↓ ↓ financial activity ↓ ↓ ↑ ↑ ↑ ↓ source: developed by the authors baltic journal of economic studies 186 vol. 3, no. 5, 2017 the peculiarity of this stage is also that the company has to simultaneously support the growth of the production scale and invest in the qualitative transformation of business. so a. alti in his research notes that the sensitivity of investment to the cash flow is significantly higher for young and growing firms (alti, 2003). next, the growth stage is characterized by an increase in the investment stability of the organization, increase in the number of potential investors by reducing uncertainty and increasing monitoring of risks. increasing risk control leads to a lowering of the threshold of profitability and, therefore, requirements for the minimum efficiency of the projects under consideration. it expands the range of affordable investment projects and accelerates their implementation. stage of fall. firstly, the value of the enterprise at this stage is formed entirely current (already existing assets). secondly, enterprises in the downturn stage must have an excessive share of debt that is to be overlevered, which is equivalent to becoming bankrupt in the future. therefore, it can be assumed that the deterioration of the enterprise development prospects will undoubtedly have a negative impact on investment policy: indirectly by reducing sources of funding and directly by concentrating investments to restore or maintain market positions. however, one should not forget that under effective management, the company will not stay on the stage for a long time and will begin to take all necessary steps to revive the business, which in turn will require additional capital investments. it should be noted that the growth and fall stages have a different effect on the nature of certain financial indicators of investment. it depends, first of all, on the nature of the production process, the organization of management, the degree of uncertainty, prospects of development, and many other factors. 5. the approbation of the proposed approach as a result, analysing the current economic state of the ukrainian construction market, we selected ten companies from dnipropetrovsk and odesa regions that represent the small and medium business of the regions. the influence of external factors of the enterprises’ direct and indirect environments on their life cycle has been studied (a detailed list of factors is given in (prymush, 2013). to determine the degree of influence of the selected external factors on the types of activities of the enterprises under investigation, an elasticity coefficient was applied, which allowed obtaining the data sensitivity the efficiency indicators of the enterprises investment activity at the stages of the life cycle to the influence of the external environment (in the case of a change in the value of the external factor by 1%): êå ð ð ð x x x x t x t x t t t t = − − − − − − ( ) ( ) ( ) 1 1 1 1 , (1) where, ке – elasticity coefficient; p(х)t,p(х)t-1 – profitability indicator х enterprise activity at stages of the life cycle in the periods t and t-1, %; xt, xt-1 – external factor of the environment of the enterprise operation in periods t and t-1, %; p(х), x>0. as a result of the calculations of the influence of external factors on the performance indicators of the investment activity of the construction enterprises in the dnipropetrovsk and odesa regions at the stages of the life cycle, it was determined which ones of the list have the greatest influence (table 2). when calculating for more substantiated conclusions, the overall elasticity coefficients (for 2010–2016) for each external factor for selected enterprises were calculated as a geometric average. table 2 the value of elasticity coefficients for the investment activity of construction enterprises of the dnipropetrovsk region № the external factor of influence enterprise number 1 2 3 4 5 6 7 8 9 10 factors of the immediate environment inverse dependence 1 index of the number of buildings and engineering structures of unfinished construction (%, before the previous year) 0,69 0,73 0,39 1,35 0,64 0,99 0,93 0,69 1,50 0,76 2 index of prices of manufacturers of machinery and equipment (%, before the previous year) 2,28 2,40 2,0 1,57 1,37 2,06 2,45 2,09 1,89 1,78 3 the investment index in residential construction (%, before the previous year) 1,58 1,26 1,68 1,67 1,26 1,78 1,46 1,78 1,57 1,46 factors of the indirect environment direct dependence 4 index of growth of the average official rate of the national currency to foreign currencies 1,38 1,0 1,32 1,65 0,86 1,48 1,10 1,42 1,75 0,96 5 the cost of long-term loans for economic entities, % 0,50 0,64 0,32 0,52 0,32 0,60 0,54 0,32 0,42 0,22 source: calculated by the authors baltic journal of economic studies 187 vol. 3, no. 5, 2017 the results of analysing the influence of external factors on the investment activity of construction enterprises of dnipropetrovsk and odesa regions at different stages of their life cycle identify the factors of the immediate functioning environment as being the most affluent; in particular: a significant elastic bond is observed in both regions between the indicator of the efficiency of enterprises investment activity and the prices of machinery and equipment manufacturers. taking into account the fact that this is inverse dependence, the increase in prices will contribute to reducing the demand of construction enterprises for these funds, and as a result of the aging of non-current assets and a drop in profits from the enterprise investment activity; a certain connection is observed between the indicators of the efficiency of enterprises investment activity and indicators of investment in housing construction. this is determined with the fact that investment increase in fixed assets of construction enterprises leads to an increase in non-current assets, expansion of production volumes, sales of construction products and profit from investment activity of a construction company; significant feedback is observed between the indicator of the number of buildings and facilities under construction and the indicator of the investment activity effectiveness. this is primarily reflected in the fact that an increase in the number of uncompleted construction decreased sales of construction products and resulted in reduced investments, as the company reduces the volume of operations. 6. conclusions to sum up, it should be noted that the definition of the current phase of the life cycle is a complex process, as an enterprise may not be on the first helix of its development. it is likely that the company has already undergone one or more transformations in its development. this problem is levelled by conducting a dynamic analysis of the enterprise development from the initial stage – the stage of origin. in this case, you can get a comprehensive idea not only about the financial status of the subject of economic activity at each particular moment but also about the temporary evolution of the entire production process. it is worth noting that in order to model the empirical dependence, especially on a large studied group, it is practically impossible to detect fake stages of growth. on the other hand, changes occurring in the external environment affect the life cycle of an enterprise by causing a significant inconsistency of the internal environment with external requirements. therefore, further research will be aimed at improving the mechanism of monitoring the environment in order to determine the force of influence of the factors on investment activity and implementation of preventive measures. the lack of a rapid reaction of the company to the changes in the environment can lead to a crisis state of management, which determines the high degree of significance of adaptation for any enterprise life cycle. references: alti, aydogan (2003). how sensitive is investment to cash flow when financing is frictionless? the journal of finance, 58(2): 707-722. downs, a. (1967). the life circle of bureaus. in a. downs (ed.), inside bureaucracy. san francisco: little, brown, 296-309. gerasimov, b.i., konovalova, t.m., spiridonov, s.p., & satalkina, n.i. (2008). comprehensive economic analysis of the financial and economic activities of the organization. tambov: publishing house of tamb. state. tech. university, 160. jovanovic, boyan, & macdonald, glenn m. (1994). the journal of political economy, 102 (2): 322-347. cameron, kim s., & quinn, robert e. (2001). diagnosis and change in organizational culture. spb. y dr.: pyter, 320. miller, d. a ., & friesen, p. h. (1984). longitude study of the corporate life cycle. management science, 30: 1161-1183. prymush, yu. s. (2013). estimation of the influence of external factors on the life cycle of construction enterprises. ekonomichnyy prostir. 77, 201-213. strobl, andreas, & kronenberg, christopher (2016). entrepreneurial networks across the business life cycle: the case of alpine hospitality entrepreneurs. international journal of contemporary hospitality management,(28) 6: 1177-1203, https://doi.org/10.1108/ijchm-03-2014-0147 ivashkovskaya, i. v., & yanhel, d. o. (2007). the organization's life cycle and the aggregate growth rate. korporatyvnye fynansy, 4: 97-110. baltic journal of economic studies 238 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-238-243 monitoring of the activity of public procurement system in countries of european union and ukraine iryna ksonzhyk1, maryna dubinina2 mykolayiv national agrarian university, ukraine abstract. the research objective is to study and summarize the experience of the european union countries in the field of public procurement monitoring; to study the activities that form its mechanism; to analyse forms of monitoring. also, the current state, problems and prospects of creation and implementation of the mechanism for public procurement monitoring in ukraine are studied; administrative and corruption risks are revealed. methodology. theoretical and methodological backgrounds of the research are formed on the basis of the provisions, categories, and concepts of economic theory, national and world economy, strategic development of public procurement, modelling. laws and regulations that are regulators of the public procurement system and its monitoring, the works of domestic and foreign scientists on investigated issues were of greater importance. the system-structural analysis and synthesis, general scientific methods and methods of economic research are used to analyse and evaluate the phenomena and processes that accompany the functioning of the public procurement market and the mechanism for its monitoring. in particular, historical and dialectical methods (when studying the development of public procurement system in western countries, the definition of stages and trends in its formation, the development and adoption of treaties for the regulation of public procurement within the european union); method of expert assessments (for assessing the regulatory and legal support for public procurement monitoring); abstractlogical method (when establishing the factors for the formation of a monitoring mechanism in the field of public procurement in ukraine, in particular, the institutional and organizational-economic features of its implementation, when assessing the criteria and performance indicators for the functioning of the monitoring system and its impact on the public procurement market, for theoretical generalization and conclusions formation). results. the results of the research showed that the system of public procurement in the member countries of the european union and its monitoring processes are still in the process of reforming, despite being the most organized, open, and predictable in the world. at the same time in ukraine, the process of developing and implementing a mechanism for monitoring public procurement is only a few years old. at the same time, the development of the field of public procurement and the mechanism for its monitoring is accelerating, which is conditioned both by the position of civil society and by the presence of significant corruption risks. practical implications. the study of the experience of the public procurement monitoring system in the eu countries makes it possible to use the result (in the form of conclusions and generalizations) to adapt foreign monitoring instruments to the domestic realities of the public procurement market in order to achieve maximum effect in the form of budgetary savings. value/originality. harmonization of the organizational and economic mechanism for public procurement and its monitoring in the countries of the european union and ukraine will provide a mutual opportunity for both foreign and domestic economic entities to become full participants in the public procurement markets; will make procurement, conducted in ukraine, clear and accessible to foreign participants. key words: monitoring, public procurement, observations, directives, regulatory framework, procedure, electronic platforms. jel classification: h83, m48, f15, k33, z39 corresponding author: 1 department of accounting and taxation, mykolayiv national agrarian university. e-mail: iryna_ksonzhyk@meta.ua 2 department of accounting and taxation, mykolayiv national agrarian university. e-mail: dubinina@mnau.edu.ua baltic journal of economic studies 239 vol. 3, no. 5, 2017 1. introduction public procurement in countries of the european union is a powerful tool for achieving social goals. such goals include the social responsibility of business entities, development of innovation, improvement of labour relations, measures aimed at improving the health of the population, environmental protection, combating climate change, and other socio-economic and environmental issues. it should be borne in mind that public procurement contracts constitute the largest share of gdp and the state budget of any country in the european union. according to the evaluation report (2016) published by the european commission, the volume of public procurement in the european union in 2014 was 1800 billion euros. thus, in the eu, procurement by the member states corresponds to about 19% of their gdp, and the company whose business is directly dependent on these procurements provides more than 30 million jobs. such index itself justifies the need to monitor the operation of public procurement systems. the oxford english dictionary (oed) defines the verb “to monitor” as “to observe and check the progress or quality of (something) over a period of time; keep under systematic review” (oxford english dictionary, 2018). according to another definition, “monitoring is a discontinuous (regular or irregular) series of observations over time conducted to determine the degree of compliance with a stated standard or the degree of deviation from the expected norm” (hellawell, 1991). monitoring is only meaningful when a desirable condition depending on the tasks or goals is predefined. the role of monitoring is to assess whether such goals (tasks) have been achieved (performed) (public procurement. performance measurement, 2011). the monitoring of public procurement includes absolutely all systematic observations of the public procurement system, conducted on the basis of homogeneous approaches in order to evaluate the functioning and development of this system over time and to determine if the desired (plan) state established by political leadership has been achieved. the concept of monitoring, as defined above, should be distinguished from the methods and procedures used to identify and eliminate violations of public procurement rules (audits, inspections, compliance monitoring). whereas detecting and eliminating violations of public procurement rules is an important tool for achieving their goals, monitoring is a concept that is much broader and not limited to solely compliance control (public procurement. performance measurement, 2011). 2. analysis of public procurement monitoring system in countries of the european union in eu member states, the practice of public procurement is based on the cooperation of european companies with the state. active development of the system of public procurement in the western countries began in the second half of the xx century when there was a need for post-war reconstruction and construction of large infrastructure objects. treaties on the regulation of public procurement within the framework of the european union countries (1971, 1976) were developed and adopted. within the eu, the most important aspects of public procurement are unified, making the legislation of different member states quite similar in the field of public procurement. at the same time, however, in their attempts to harmonize the norms of monitoring activities, the eu stopped at the minimum, which is necessary to enable the european commission to supplement the information that can be obtained from messages published in the tenders electronic daily (ted) – the general eu database (articles 83-85 of the new directive 2014/24/eu) (directive 2014/24/eu of the european parliament, 2014). the new public procurement directives, adopted in 2014, require the member states to “monitor compliance with public procurement rules.” this requirement is defined by the basic rules of monitoring activities. therefore, it is necessary to ensure that the monitoring bodies in the member states have a competence whose scope would include defining the problems associated with the application of public procurement rules and bringing them to the attention of the relevant ultimate audit institutions. it is also important to ensure open access to the results of such monitoring. the eu member states are also required to submit statistical reports every three years indicating “(...) the most common causes of misuse of regulations or legal uncertainty, including possible structural or periodic problems related to the application of regulations, at the level of smes involved in public procurement, as well as on the prevention, detection of fraud, corruption, conflicts of interest or other serious violations during the procurement process and their proper reporting.” thus, in the eu, the main objective of monitoring is to ensure the proper application of provisions of directives in the field of public procurement (shatkovskyi, bruunnielsen, 2016). as a rule, monitoring of public procurement in eu countries includes such activities as: data collection; analysis; dissemination of information on various aspects of public procurement (such as transparency, openness, competitiveness, and efficiency). the information collected during the monitoring is useful for the purpose of developing rules, determining the effectiveness of financial costs, and developing conclusions on compliance with the fundamental principles of public procurement and the implementation of predefined tasks and plans. the monitoring results provide a basis for the preparation of regular reports on the functioning of the procurement system, and baltic journal of economic studies 240 vol. 3, no. 5, 2017 in particular – for developing recommendations and proposals for its further development. it is necessary to monitor this system in order to make well-founded decisions regarding the further development of the public procurement system. in order for monitoring to produce meaningful results, it is necessary to fulfil a number of conditions. firstly, the goals and objectives of rules of the public procurement system should be consistent in time, since otherwise, it will be difficult to compare the results obtained during the monitoring process. secondly, the availability of high-quality, reliable data plays the crucial role. thirdly, for the effective monitoring, it is necessary that the specialists who deal with them have skills in analysing and preparing reports. they should understand which information is useful, how to collect it, how to process the collected data, how to draw conclusions, and how to present the results obtained during the monitoring. fourthly, the effectiveness of monitoring depends on the support, guidance, and actions of the management (public procurement. performance measurement, 2011). there are three main forms of monitoring: regulatory compliance audit, performance parameters estimation, compliance monitoring (fig. 1). 1. regulatory compliance audit (procedural compliance). this type of monitoring means the audit of the activities of tender organizers in terms of the formal fulfilment of their legal requirements. such monitoring is carried out through checks (inspections) of the legality of acts taken by the organizers of tenders (for example, qualification selection of economic entities or determination of the winner of a tender) or their inactivity. it should result in an increase in the proportion of competitive procedures (public procurement. performance measurement, 2011). examples of departments, which carry out regulatory compliance audit, are bulgarian public procurement agency, polish public procurement office, public procurement office in slovakia, as well as romanian national authority for regulating and monitoring public procurement. the monitoring of public procurement, above all, is to verify compliance with established procedural standards or the effectiveness of public procurement, which are important functions of public administration. there are different approaches to the organization of this type of monitoring and different ways of determining and measuring the level of procurement efficiency, but the most obvious criterion in this regard is the level of efficiency of the use of taxpayers’ funds (shatkovskyi, bruun-nielsen, 2016). 2. performance parameters estimation/measurement. this type of monitoring focuses on assessing the performance of the procurement system in terms of efficiency and effectiveness. to carry out such an assessment, monitoring bodies are required to collect and process a wide range of data on procurement processes. these data as a whole can be called the indicators of procurement (public procurement. performance measurement, 2011). 3. compliance monitoring. compliance monitoring can also be conducted for specific purposes, for example, to verify compliance with international standards and international obligations of ukraine (regarding the approximation of its public procurement legislation to the relevant eu directives forms of monitoring of public procurement in the eu regulatory compliance audit performance parameters estimation compliance monitoring c he ck in g of le ga lit y of a ct s c he ck in g of n on fe as an ce e va lu at io n of pr oc ur em en t w or k in te rm s of e ff ic ie nc y e va lu at io n of pr oc ur em en t w or k in te rm s of ef fe ct iv en es s v er if ic at io n of co m pl ia nc e w ith in te rn at io na l st an da rd s v er if ic at io n of co m pl ia nc e w ith in te rn at io na l ob lig at io ns fig. 1. forms of public procurement monitoring in the member states of the european union source: compiled by the authors according to the research results baltic journal of economic studies 241 vol. 3, no. 5, 2017 or other international standards) (shatkovskyi, bruunnielsen, 2016). 3. peculiarities of public procurement monitoring in ukraine in ukraine, the monitoring of procurement is regulated by the law of ukraine “on public procurement”, namely, paragraph 11 of part one of article 1 (from the moment of the enactment of this legislative act) gives definition to this economic category, and describes it as “... an analysis of customer compliance with the law in the field of public procurement at all stages of the procurement procedure through systematic observation and analysis of information through the electronic procurement system” (on public procurement, 2015). section ii “state regulation and control in the field of procurement” of the same law also states that “... procurement monitoring is carried out by a central executive body that implements state policy in the field of public financial control and its local authorities.” in addition, section ii identifies those responsible for monitoring procurement in ukraine, as well as six entities for control and monitoring of public procurement (fig. 2). the aforementioned law states that the procedure for monitoring is determined by the central executive body, which ensures the formation and implementation of the state financial policy. the general vision of the procurement monitoring mechanism, which was reflected in the law of ukraine “on public procurement”, did not allow for the detection of abuses in this field and the mechanism of bringing to responsibility was ineffective. this was confirmed by the practical activity of prozorro electronic public procurement system. therefore, the new stage in the implementation of monitoring of public procurement in ukraine was the adoption of the law of ukraine no. 4738-d “on amendments to the law of ukraine “on public procurement” and some laws of ukraine on procurement monitoring” by the verkhovna rada on december 21, 2017, which extends the powers of the state audit service of ukraine (hereinafter referred to as the sasu) in the field of monitoring of public procurements, which will improve the efficiency of tender procedures and reduce the effectiveness of corruption schemes (on amendments to the law of ukraine “on public procurement” and some laws of ukraine on procurement monitoring, 2017). before the adoption of this law, auditors of the sasu did not have the tools to prevent violations at all stages of procurement. they could only react after a bid after the contracts had already been signed and a transfer of funds was made. the auditors’ recommendations regarding the termination of contracts were not binding and were often ignored by offenders. such impunity undermined the effectiveness of the public procurement system, frightened honest business and generated corruption schemes and fraud. the law no. 4738-d obliges customers to respond to the recommendations and comments of the sasu in a mandatory manner (on amendments to the law of ukraine “on public procurement” and some laws of ukraine on procurement monitoring, 2017). also, the law no. 4738-d stipulates that bodies authorized to exercise control in this sphere shall not have the right to intervene in the conduct of procurement procedures. the decision to start monitoring is taken by the head of the state control body or his deputy on the basis of the data of automatic indicators of risks, information fig. 2. authorities authorized to regulate, control and monitor public procurement in ukraine source: compiled by the authors regulation, control and monitoring entities in the field of public procurement a ut ho ri ze d b od y, m in is tr y of e co no m ic d ev el op m en t an d t ra de o f u kr ai ne a cc ou nt in g c ha m be r a nt im on op ol y c om m itt ee o f u kr ai ne st at e t re as ur y se rv ic e of u kr ai ne st at e a ud it se rv ic e of u kr ai ne pu bl ic c on tr ol baltic journal of economic studies 242 vol. 3, no. 5, 2017 received from the authorities, from the media or from public associations, as well as signs of violations of legislation detected by the state financial control body (the verkhovna rada introduced a new tool for public procurement monitoring, 2017). each tender will now be checked from the announcement to the signing of the contract to meet a number of criteria. at first, there will be 25 such criteria. monitoring is expected to last no more than 15 business days. it will be possible to continue it only on the decision of the head of the state control body or his deputy, but not more than for 10 working days. according to the results of the monitoring, a conclusion will be drawn up that is to be made public in the electronic procurement system within three working days (the verkhovna rada has introduced a new public procurement monitoring tool, 2017). this dialogue will be made publicly available in the prozorro system on the tender card. in addition, the law no. 4738-d supplements the first part of article 1 with a completely new clause, the content of which relates to automatic risk indicators, which are defined as criteria with predetermined parameters, the use of which makes it possible to automatically select procurement procedures that contain signs of violations of the law in the field of public procurement (on amendments to the law of ukraine “on public procurement” and some laws of ukraine on procurement monitoring, 2017). the risk indicator system that will be integrated with prozorro will automatically search and highlight suspicious procurement, and they will automatically get in the queue for validating by the sasu. in addition to signals of the risk indicator system, the reason to verify procurement will be the appeal of public activists, journalists or representatives of government and local self-government. sasu auditors will be able to check any procurement and on their own initiative (the verkhovna rada has passed the law on public procurement monitoring, 2017). the economic category “procurement monitoring” has also been revised. now it is defined as “an analysis of customer compliance with public procurement legislation at all stages of procurement in order to prevent breaches of public procurement law”. another additional tool that can significantly increase the level of procurement efficiency in ukraine is the dozorro monitoring portal (http://dozorro.org/), which was launched on november 1, 2016. the dozorro portal combines the efforts of the state, businesses, regulatory authorities and the public. the resource has collected the best world and ukrainian methods for detecting violations in the field of public procurement. all participants of the portal have access to real effective legal instruments for appealing dubious procurements. the tenderers can evaluate their partners in transactions and leave detailed reviews. on the basis of this information, a rating is automatically generated. and from the profile of each of them, it is clear to what extent the separate user of the system is an honest supplier or purchaser. such systematic information allows all parties to make rational decisions in activities related to work in the prozorro system. the portal was created within the framework of a two-year monitoring program implemented by transparency international ukraine with the support of omidyar network, open government partnership, and ebrd. the program provides for the creation and development of a monitoring infrastructure around the prozorro e-procurement system. in addition to dozorro, analytical tools are developed based on qlik sense (http://bi.prozorro.org/) and qlik view (http://bipro.prozorro.org/), the system of automatic risk indicators; a new approach to monitoring is developed and tested, using open data and continuously legal support is provided to all ecosystem users (dozorro public procurement monitoring project launched, 2016). implementation of the aforementioned legal acts and control instruments reveals the monitoring of procurement in ukraine on a completely new quality level. 4. findings public procurement is an integral part of the economic processes that are taking place now both in the member states of the european union and in ukraine. despite the fact that the formation of the public procurement market in the eu took place from the middle of the 20th century, and in ukraine, it is less than 30 years old, fundamental transformations and colossal changes in this sphere are a characteristic feature of the present for both western and eastern europe. but if the eu countries gradually developed a regulatory framework that allowed reform of the public procurement system, prepared a platform for the implementation of the electronic procurement system, ukraine was forced to go through this difficult path in a short space of time. in the past few years, the public procurement activities of the ministry of economic development and trade, regulatory authority, transparency international ukraine, civic organisations and representatives of the business environment, volunteers have been aimed at creating an effective mechanism capable of providing procurement system monitoring through the creation of a unique legal and regulatory platforms, as well as a powerful database of real data of purchasers, suppliers, and tenders. 5. conclusions the implementation of the public procurement system is one of the most successful ukrainian reforms, baltic journal of economic studies 243 vol. 3, no. 5, 2017 which became a precedent for the effective interaction of civil society, state, and business. this is explained both by the successful results of reform and by successful communication. despite the need for further improvement, we can identify a number of positive changes that led to the reform of public procurement. firstly, the reform has increased the general awareness of ukrainian citizens about public procurement. this achievement is important because citizens are the ultimate consumers of public services, as well as those who actually pay for purchased goods through taxes. secondly, the reform united all customers, participants, and the antimonopoly committee in a single electronic system covering all types of procedures and all stages are outlined by the public procurement law. the size and inclusivity of the system which covers all users distinguish the ukrainian e-system from the practice of applying an e-approach individually for each stage (european commission. e-procurement uptake final report, 2015) in eu countries. thirdly, within the framework of the reform the decentralization of trading platforms took place: as of january 1, 2018, there are 23 accredited trading platforms (for all purchases) instead of one state (prozorro sites, 2018). commercialization of this segment has added competition between the sites and should provide continuous improvement of services. fourthly, as a part of the e-system and, in order to attract more key players to participate, research and monitoring, open data standards have been used to ensure equality of access to information and allowed all interested parties to monitor the procurement process (impact of prozorro, 2017). fifthly, the verkhovna rada adopted the law of ukraine no. 4738-d “on amendments to the law of ukraine “on public procurement” and some laws of ukraine on procurement monitoring” on december 21, 2017. the uniqueness of this law lies in the fact that for the first time in the world, it introduced a system of risk indicators, which will be integrated into prozorro, which will automatically search and highlight suspicious procurements. thus, it can be noted that consolidating the efforts of all stakeholders: will allow ensuring effective competition in ukraine in the field of public procurement; will lead to the reform of adjacent fields of public procurement; will open for domestic purchasers an opportunity to join not only the european, but also the global market of public procurement. references: directive 2014/24/eu of the european parliament. retrieved from: http://eur-lex.europa.eu/legal-content/en/ txt/?uri=celex%3a32014l0024 (accessed 20 january 2018). startuvav proekt monitorynhu publichnykh zakupivel dozorro [dozorro public procurement monitoring project launched]. retrieved from: http://me.gov.ua/news/detail?lang=uk-ua&id=0ad264d5-761a-4c0a-b34096447256601c&title=startuvavproektmonitoringupublichnikhzakupiveldozorro (accessed 19 january 2018). european commission. e-procurement uptake final report. 2015. retrieved from: http://ec.europa.eu/ docsroom/documents/10050/a achments/1/translations/en/renditions/native (accessed 22 january 2018). hellawell, j. m. (1991). development of a rationale for monitoring. chapmanand hall, newyork, pp. 1-14. vplyv prozorro [impact of prozorro]. retrieved from: http://cep.kse.org.ua/assets/img/articles/prozorro_ report_ua.pdf (accessed 22 january 2018). pro publichni zakupivli : zakon ukrainy [on public procurement: the law of ukraine] no. 922-19 of december 25, 2015. pro vnesennia zmin do zakonu ukrainy “pro publichni zakupivli” ta deiakykh zakoniv ukrainy shchodo zdiisnennia monitorynhu zakupivel : zakon ukrainy [on amendments to the law of ukraine “on public procurement” and some laws of ukraine on procurement monitoring: the law of ukraine] no. 4738-d of december 21, 2017. oxford english dictionary: the official site. retrieved from: http://www.oed.com/(accessed 21 january 2018). performance measurement. public procurement. retrieved from: http://www.sigmaweb.org/ publications/48630147.pdf maidanchyky prozorro [prozorro sites]. retrieved from: https://prozorro.gov.ua/majdanchiki-prozorro (accessed 20 january 2018). shatkovskyi о., bruun-nielsen s. zvit pro monitorynh derzhavnykh zakupivel [public procurement monitoring report]. retrieved from: http://eupublicprocurement.org.ua/wp-content/uploads/2016/07/report-on_ pp-monitoring_ukr .pdf (accessed 15 january 2018). rada vvela novyi instrument monytorynha hoszakupok [the verkhovna rada introduced a new tool for public procurement monitoring]. retrieved from: http://gordonua.com/news/money/rada-vvela-novyy-instrumentmonitoringa-goszakupok-223229.html (accessed 17 january 2018). verkhovna rada ukhvalyla zakon pro monitorynh publichnykh zakupivel [the verkhovna rada has passed the law on public procurement monitoring in the first reading]. retrieved from: https://prozorro.gov.ua/news/verhovnarada-uhvalila-zakon-pro-monitoring-publichnih-zakupivel (accessed 18 january 2018). baltic journal of economic studies 47 vol. 4, no. 2, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-2-47-52 the impact of international labour migration on the development of states under globalization: economic and legal aspects nadiya bortnyk1 institute of law and psychology, lviv polytechnic national university, ukraine galyna didkivska2, vyacheslav tylchyk3 national university of the state fiscal service of ukraine, ukraine abstract. the purpose of this article is to conduct an economic and legal analysis of the current situation of international labour migration and its impact on the development of states in a globalized world. it is stressed that modern globalization has not slowed migration flows but, on the contrary, significantly increased them and created the so-called “era of migration”. the article reveals the meaning and significance of international labour migration, acquired at the beginning of the xxi century. the key definitions of the research and the theory of the emergence of migration are presented. the role of labour migration in redressing imbalances, which exist in the labour market, is analysed. the genesis of the migration policy of the world leading countries regarding the admission of labour migrants to their territories is considered. the mechanism of legal regulation of some donor countries and recipient countries is revealed. the causes of external labour migration and its consequences for ukraine are considered. the prospects for improvement in the migration policy of ukraine in the context of globalization and european integration processes are outlined. an attention is paid to the importance of international labour migration for the economic development of the state, which receives migrants and one from which they originate. primary theoretical and practical significance of international labour migration for the industrialized countries of the world, which due to acute demographic challenges cannot provide development and normal functioning of the economy without the involvement of labour migrants, is highlighted. the article aims to consider international labour migration as an integral part of the global economy and to identify peculiarities of international labour migration, as well as its place in international economic relations. at the same time, an attention is paid to the fact that labour migration abroad is the most powerful migration process in ukraine today, which increases the importance of studying the issues of state policy development in the area of regulation and strengthening the protection of the rights of ukrainian citizens who travel abroad as migrant workers. besides, it is focused on the issue of the creation of a global market of skilled labour, as well as the consequences of migration of skilled personnel and the challenge of overcoming the negative consequences of the migration of skilled workers. it is noted that the world (global) labour market is a set of global labour resources as the sum of all occupied (real and potential) population of the world, including international labour migrants. given this, temporally dynamic changes, taking place in the area of displacement of international labour migrants, particularly in ukraine, as well as in the migration mood of the ukrainian population, require their constant monitoring and scientific substantiation. the practical importance of the scientific research is to clarify the causes and consequences of international labour migration for the development of the receiving states and those that generate them. this is extremely important for the improvement of the ukrainian migration legislation, which will not be effective without a broad vision and a deep understanding of the migration situation in the country. today’s general understanding of the migration situation and migration flows in ukraine is not correct and, therefore, some proposals and decisions concerning their management are not adequate. at the level of strategic planning, it would be useful to coordinate the migration policy objectives with the actual demographic and economic situation, social and psychological state of its citizens. consequently, the economic and legal analysis corresponding author: 1 department of administrative and information law, institute of law and psychology, lviv polytechnic national university. e-mail: bnp1969n@gmail.com 2 department of criminal law and criminology, national university of the state fiscal service of ukraine. e-mail: galynadid@gmail.com 3 department of administrative law and process and customs security, national university of the state fiscal service of ukraine. e-mail: tilchikvv@ukr.net baltic journal of economic studies 48 vol. 4, no. 2, 2018 1. introduction the modern trends of social development are closely linked to the fundamental changes in the socio-political life of the world community. their characteristic feature is globalization, which has gained an all-encompassing planetary scale at the turn of the millennium. in essence, globalization turned out much wider than its purely economic component having touched all aspects of economic ties and international relations. the modern world reveals an ever-increasing tendency to a more close interaction of individual territories, economies, political, cultural-spiritual, and other fields of activity. the modern information and communication technologies are the basis of such interaction, its direct guides. the process of globalization is accompanied by an unprecedented increase in trade and capital flows, as well as by the involvement of national economies in a single reproduction process. the deepening of international economic interaction consists of the growth of the interconnection and interdependence of national economies. an effective development of national economic complexes and the entire world economy becomes possible only through the use of the benefits of the global division of labour, the formation of the international labour market, and the free flow of labour power from one country to another (glushchenko, ponomarev, 2009). thus, one of the forms of cooperation is international labour migration, which has a significant impact on the economy and recipient countries, and donor countries. at the same time, it is necessary to emphasize that the global labour market is a dynamic entity that reflects the processes taking place in the global economy at each particular stage of its development. the global market serves as a “litmus paper” which shows all weaknesses in the current stage of development of the world economy (ryazantsev, tkachenko, 2010). the transition of the ukrainian economy to market relations, reforms in the political area and the deepening of the integration processes have created extremely favourable conditions for the full participation of our state in the international labour market. ukraine’s entry into the world market forms new migration flows. labour migration is more clearly distinguished in the structure of external migration. the involvement of the national labour market in international cooperation, the penetration in the world labour market, the various socio-economic impacts for the participating countries have led to the need for an in-depth analysis of the driving motives of the migration of the labour force and the reasons that hinder this process, its impact on economic development, which is the purpose of this publication. at the same time, scientific comprehension of the problems of international labour migration is necessary for ukraine to resolve such practical tasks as the development of appropriate national-wide and regional-information and statistical databases for optimal managerial decisions making, first of all, on the maximum use of the potential of labour migrants for the development of the state’s economy, limitation of the possibilities for penetration of illegal immigrants into the country territory, elimination of the negative consequences of illegal migration, and most importantly – the development of new regulatory legal acts in the area of migration process assurance with account of the experience of world’s powerful countries. 2. concept, categories, essential characteristics of international migration in the context of our research, it is necessary to underline that the legal aspect of the phenomenon of migration as a whole is the right of a person to freedom of movement and free choice of place of residence. instead, the formation of national states became the most important event that affected the mobility and distribution of the population on the earth. the necessity of boundaries establishment was performed to maintain the political, territorial, and administrative integrity, a certain living standard, the ethnic uniqueness of the state and control was implemented in order to limit an excessive number of migrants. according to sovereign right and legitimate interests of states, each of them must have their own migration laws adhering to of migration moods and migration behaviour of international labour migrants is extremely important for scientific argumentation of the main directions of improvement of the migration policy of ukraine in the current conditions of globalization for saving labour potential of the state and develop its economy. methodology. methodological foundations of the research of international labour migration are determined by a set of methods of scientific knowledge, which allow considering this problem as a multifaceted, interdisciplinary phenomenon. the research strategy, underlying the integrated approach, primarily is based on the following methodological principles: formulation of fundamental theoretical concept; development of cross-cutting concepts and categories, which ensure the unity of the approach to the object of research. key words: migration, international labour migration, economic growth, labour market, skilled labour force, demographic potential, legal regulation, migration policy. jel classification: d78, e24, f22 baltic journal of economic studies 49 vol. 4, no. 2, 2018 the operative rules of international law and undertaking always to respect the rights and freedoms of a migrant. it should be noted that in the modern scientific literature on the problem under study, in our opinion, sufficiently comprehensive explanation of the term “external migration” is given, under which it is necessary to understand the latin expression “migrate, migro”, that is, the moving, resettlement. existing scientific sources explain this term as follows: – resettlement, moving of people, ethnic groups, their units or separate representatives, connected with the change of permanent residency or return to it (etnonatsionalnyi rozvytok v ukraini, 1997); – moving, resettlement within a country or from one country to another (ozhegov, 1972); – the socio-economic and demographic process, which is a set of displacements carried out by people between countries, regions, settlements (gvishiani, 1989); – people moving through the territorial boundaries of the state or other territories with the change of residence forever or for a long period of time (valentey, 1985); – resettlement, displacement within the country  – internal migration of people from one country to another  – external migration of people: emigration, immigration (dictionary of foreign words, 1988); – the movement of people, usually associated with a change of domicile (azriliyana, 1997); – the displacement of people, workers, mainly connected with the change of place of domicile and place of work (riesberg, lozovsky, starodubtsev, 1998); – migration of people is a process of their resettlement for the purpose of settlement and employment (rymarenko, 1998). the analysis of the above-mentioned points of view shows that the majority of researchers, with minor differences, understand external migration as the movement of people between countries, administrativeterritorial entities, settlements connected mainly with a temporary or permanent change of place of residence, work, and way of life. consequently, the main features that allow identifying external migration among other displacements of the population are: a) displacement of people, resettlement, that is, a process; b) crossing of state and administrative boundaries of territories in the process of migration movements; c) temporary or permanent change of place of residence or work. instead, in order to gain a better understanding of the impact of international labour migration on the development of states in the context of globalization, it is necessary to pay attention to the content of the basic concepts that characterize the modern migration process. potential migration is a psychological readiness of an individual or a group of persons to leave a certain settlement (country). it is characterized by an accepted but still unrealized decision to move. potential migration is one of the most important characteristics of the migration mobility of individuals. migration motivation (migration motives) is a mental state of an individual that prompts him to achieve own goal of economic, social or psychological nature through the change of permanent residence. this concept reveals the qualitative side of the individual’s needs to change the place of residence, working conditions, and the implementation of the certain project of life. migrant workers are a type of migrants who cross internal and interstate borders in search of work or with the aim to buy or sell a small batch of goods. typically, migrant workers are unqualified or lowskilled workers who have low social status in a society. however, migrant workers (due to certain reasons or circumstances) become professionals who have a shortage occupation, higher educational attainment and even academic degrees. migrant workers are divided into three large groups: a) those who left the country of residence forever; b) those who work in another country for a long time; c) so-called labour tourists who cross the interstate borders for a short time (for several days or months). generally, migrant workers move to the developed countries of western europe and north america. the increase of their number, especially in recent years, generates many political and legal, socio-economic, linguistic-cultural and other issues, and often leads to strengthening of anti-migration attitude among a large part of the local population of host countries, which is legally obliged to limit the influx of migrants and to intensify supervision and control over them. 3. tendencies and causes of international migration movement in the era of globalization thus, as scientists rightly emphasize, international migration became global at the turn of the millennia reflecting globalization tendencies in various areas of society’s activity (ivanov, 2002). the globalization processes in the labour market, business, education, science, information and communications, as well as social connections, make a particularly significant impact on the movement of the population. instead, it should be noted that the following phenomena are new in the globalization process of the late xx – early xxi century: – the interweaving of national borders in the course of transactions with goods, services or migration labour power; – the emergence of global environmental awareness of the danger of further prolongation of the arms race, production of technologies and weapons of mass destruction, depletion of the natural environment and exhaustion of natural resources; baltic journal of economic studies 50 vol. 4, no. 2, 2018 – the emergence of new arenas of intergovernmental regulation to ensure the further life of mankind in time and space; – transcirculation of technological crops of the reproductive process on the basis of strengthening internationalization of the latter one; – the growth of the number and power of the so-called new “transnational actors”, business entities, various institutions and partnership agreements; – the growth of economic concentration that resists globalized competition overcoming national boundaries, which is becoming more and more internationally regulated at an international scale. the above distinctive features of globalization as a process covering all field of human existence, simultaneously denote the sphere of international responsibility for the safety of mankind; compel in a different manner to understand the place and role of the entire arsenal of political, diplomatic, and economic measures of interaction between states and nations in the process of regulation of international relations, which is a part of the international economic relations (held, mcgrew, goldblatt, peratton, 1999–2000). the creation of the international labour market is manifested in the formation of global demand and labour supply, which is reflected, in particular, in the growth of the number of employers, who conduct search and hire of labour power outside national labour markets, an increase of workers group offering their labour to foreign employers (persian, 2009). the mechanisms that ensure the functioning of this market are developing including the system of national and supranational regulation of issues related to the use of foreign labour, the expansion of activity of foreign employment agencies, which facilitate the extension and regulation of economic labour migration (massey, 2003). the activities of such agencies fit into the institutional theory of migration, according to which in the course of migration development, there are structures that contribute to it (provide relocation, employment, accommodation, etc.). consequently, the main tendencies of modern international migration are: globalization of international migration; qualitative changes in global migration flows; defining role of economic, first of all, labour migration; significant increase in illegal migration; enlargement of the scale and expansion of the geography of forced migration; increasingly large role of international migration in the demographic development of developed countries; feminization of international migration; the double nature of migration policy at the national, international regional and world levels (iontsev, kamensky, 2004). at the same time, in any classification, the main definition is the definition of a migrant as a category. in general, both in science and in the work of practical organizations, including the international organization for migration (iom), the allocation of five main types of international migrants is considered: – settlers are people who come to the country for permanent residence; – contract staff are people who have been accepted on the basis of realization that they work for a limited period; – professionals are people with a high level of education, sufficient work experience, who can easily adjust to a new team and work in a given specialty and at the appropriate level or re-train for work in another country (a significant number of them are scholars, teachers, students and trainees, employees of transnational corporations moving from one branch to another); – illegal migrants are people who have arrived in the country illegally, have expired visas or engage in labour activity without official permission; – shelter seekers and refugees are people who have left their countries because of the threat of any significant danger (military, religious, environmental, political, etc.). at the same time, we can state that among mentioned types of territorial, interstate mobility, labour migration plays a special role. as it migrates, moves between countries the main resource and the factor of production – the ability to work and the labour activity itself. according to a new study by the international labour organization (ilo), migrant workers account for 150.3  million and approximately 232 million international migrants. the ilo global estimate on migrant workers report shows that migrant workers account for 72.7 per cent of which 206.6 million are working age migrants (15 years old and up). most of them  – 83.7 million are men, 66.6 million are women. in his commentary to the report, the ilo directorgeneral guy ryder said: “these analyses are significant contribution of the ilo to support the member states to implement agenda’s sustainable development goals on 2030, particularly targets within goal 8 on protecting all workers, including migrant workers, and goal 10 on the implementation of well-managed migration policies. now, those who make decisions will have a real data, a policy can be built on.” (http://www.ilo.org....). 4. main factors of migration of highly skilled labour power a special attention is paid to the migration of highly skilled labour power in the context of the matter under investigation. it should be noted that the growing importance of the international migration of professionals is determined by the following four long-term trends: increasing the life expectancy, reducing birth rates; chronic shortage of labour power in the public sector (especially in healthcare and education); technological changes taking place in the context of national competitiveness increase, baltic journal of economic studies 51 vol. 4, no. 2, 2018 which create a shortage of highly skilled workers; save of time and money to train the necessary professionals by importing them. the education system also experiences a significant shortage of skilled personnel. for example, in the uk, the number of non-native teachers has reached 110,000 and takes the third position in the list of specialties occupied by foreign experts (dobson, koser, et al., 2001). at the same time, it should be emphasized that the import of professionals, who are necessary for the economy, leads to the saving of time and money spent on their training (bartlett, 2006). however, education expenditures are not always taken into account, although these costs are quite significant, especially for such highly educated professionals as engineers. expenses include the total cost of children’ bringing-up, getting of primary, secondary and higher education; payment of scholarships to students studying abroad, continuing education after graduating from higher education institutions and improvement of the professional level; as well as public services that contribute to the creation of a stable environment for this activity. in addition, it should be taken into account that the average productivity of a young professional for the first 2 years is only 60% (trevelyan, 2002). technological changes are considered one of the most important sources of productivity and economic growth in the new global economy (pricewaterhousecoopers, managing mobility issues a european perspective, 2002). today, the pace of technological changes is so great that society does not have time to absorb it qualitatively. the curve of technological changes is growing at an extremely fast pace. in the context of the migration problem of highly skilled personnel, it cannot avoid the issue of international student mobility, which is very relevant today for ukraine. indeed, at a time when the student migration in its pure form cannot be regarded as a form of migration of skilled scientific and technical personnel, it can precede it. according to the well-known statement of b. khadria (khadria, 2004), students are “semifinished products of human capital.” in the last few years, foreign students, including ukrainian ones, have the opportunity to change their status and obtain a work permit based on their qualifications. 5. conclusions summarizing the foregoing, we can state that migration processes, as an integral and permanent component of the history of mankind, have a significant impact on the state and prospects of economic, cultural, and social development of society bringing fresh ideas and enhancing the country’s creative potential. instead, we have a unique opportunity to observe and analyse new, yet insufficiently studied processes that have a certain socio-political orientation and touch the interests of various ethnic groups, the communities of people in general, as well as their specific representatives. it should be emphasized that in today’s knowledgebased economy, considerable attention is being paid to the attraction of labour migrants, especially highly skilled. while it is possible confidently to predict the growing international labour migration, it is difficult to predict with a sufficient degree of probability the quantitative indicators of these flows and certain models of international labour migration. we believe that the dynamics of flows will be influenced by the situation in the international labour markets of developed countries and developing countries, which will be determined by the ratio of labour’s demand and supply; the specialization of global labour markets as new industries and services, emerging in the depths of the new economy, create the need for new knowledge and skills, requiring rapid and effective responses to the labour market that takes into account the development and expansion of modern sectors; the possibilities of its own education system to satisfy it. the new migration policy should be based on the realities of the global world. for the development of our state, it is necessary to take a full advantage of the current migration situation and opportunities of ukrainian labour migrants. references: glushchenko, g.i., ponomarev, v.a. (2009) migratsiya i razvitie [migration and development]. мoscow: zao «izdatelstvo ekonomika» [in russian] ryazantsev, s.v., tkachenko, m.f. (2010) mirovoy rynok truda i mezhdunarodnaya migratsiya [international labour market and international migration]. мoscow: «izdatelstvo ekonomika» [in russian] (1997) etnonatsionalnyi rozvytok v ukraini. terminy, vyznachennia, personalii [ethnonational development in ukraine. terms, definitions, personalities]. kyiv. [in ukrainian] ozhegov, s.i. (1972) slovar russkogo yazyka [dictionary of the russian language]. мoscow: mysl [in russian] gvishiani, d.m. (ed.) (1989) sovremennyy slovar po sotsiologii [modern dictionary of sociology], мoscow: nauka [in russian] valentey, d.i. (ed.) (1985) demograficheskiy entsiklopedicheskiy slovar [demographic encyclopedic dictionary], мoscow: sov. entsikl. [in russian] (1988) slovar inostrannykh slov [dictionary of foreign words]. мoscow. [in russian] baltic journal of economic studies 52 vol. 4, no. 2, 2018 azriliyana, a.n. (ed.) (1997) bolshoy ekonomicheskiy slovar [large economic dictionary], moscow: in-t mirovoy ekonomiki [in russian] rayzberg, b.a., lozovskiy, l.sh., starodubtsev, e.b. (1998) sovremennyy ekonomicheskiy slovar [modern dictionary of economics]. мoscow.: infra [in russian] rymarenko, yu. (ed.) (1998) mihratsiini protsesy u suchasnomu sviti: svitovyi, rehionalnyi ta natsionalnyi vymiry: poniatiinyi aparat, kontseptualni pidkhody, teoriia ta praktyka: entsyklopediia [migration processes in the modern world: global, regional and national dimensions: conceptual framework, conceptual approaches, theory and practice: encyclopedia], kyiv: dovira [in ukrainian] ivanov, n. p. (2002) globalizatsiya i problemy sotsialno-ekonomicheskogo razvitiya rossii [globalization and problems of russia’s socio-economic development]. мoscow: imemo ran. [in russian] held, d., mcgrew, a., goldblatt, d., peratton, j. (1999-2000) global transformation. oxford-cambridge: polity press, pp. 412-440. perskaya, v.v. (2009) globalizatsiya i gosudarstvo [globalization and state]. moscow: rags. [in russian] massey, d. (2003) patterns and processes of international migration in the 21st century, paper prepared for conference on african migration in comparative perspective. johannesburg. retrieved from http://pum.princeton.edu/pumcomference/papers/1-massey.pdf iontsev, v., kamenskiy, a. (2004). mezhdunarodnaya migratsiya naseleniya v rossii: uroki kaira [international population migration in russia: cairo’s lessons]. mezhdunarodnaya migratsiya: kair + 10, pp. 10-11. dobson, j., koser, k. (et al.) (2001) international migration and the united kingdom: recent patterns and trends. final report to the home office. l, december. р. 211. bartlett, d.l. (2006) building a competitive workforce immigration and the u.s. manufacturing sector. р. 1. trevelyan, j.p. (2002) effects of skilled migration: case study of professional engineers school of mechanical engineering. j.p. trevelyan s. tilli. crawley: the university of western australia. dec., р. 26. pricewaterhouse coopers. managing mobility matters a european perspective. 2002. khadria, b. (2004) migration of highly skilled indians: case studies of it and health professionals / b. khadria. paris: oecd. (sti/wp 2004/6). stadnyi, ye. kilkist ukrainskykh studentiv za kordonom [number of ukrainian students abroad]. retrieved from: http://www.cedos.org.ua/uk/osvita/56 malynovska, o. (ed.) (2016) mihratsiia v ukraini: fakty i tsyfry [migration in ukraine: data and statistics], predstavnytstvo mom v ukraini. [in ukrainian] baltic journal of economic studies 28 vol. 1, no. 2, 2015 determination of processes of use, preserving and reproduction in the system of renewable natural resources management mikhail gazuda1, uzhgorod national university, ukraine abstract. the purpose of the paper is to develop factor model of renewable natural resources management, specifying the assessment of the amount of resource, including the natural factor, consumption level and intensity of reproduction. methodology. the survey is based on highlighting factors influencing the reproductive capacity of natural environment. it allows, on the base of taking into consideration reproductive abilities of resources and intensity of consumption, to substantiate three models for their use, including: heavy exploitation of renewable natural resources as the most commonly used model at the current level of development of society; model of reproductive use of natural resources, stipulating for the interference from the side of authorities and management, and the model of simple reproduction of renewable natural resources, at which the resource itself and the amount of its reproduction for the next period remain constant. practical implications. the need is substantiated in implementation of the new model for determination of the processes of managing balanced use of natural resources, which will stipulate processes of reproduction in the sphere of natural management, form new approaches to environmental protection and promote the optimal ratio between the consumption and reproduction of natural resources. at this, the processes of natural reproduction are influenced by the amount of resource itself, intensity of its reproduction and level of consumption. the main objective of the managing bodies in the sphere of the use of renewable natural resources should be securing optimal ratio between consumption and reproduction of such natural resources. the efficiency of the implementation process and reproduction of natural resources presupposes providing their simple and extended reproduction, economic effectiveness and sustainability in allocation and use of such resources. this will have positive effect on ecological and economic security of the country as a whole and enhance implementation of basic provisions of the concept of balanced and sustainable nature management. value/originality. solving the problem of renewable natural resources preservation requires decreasing the level of consumption of natural resources to the level lower than their recovering capabilities are. determination of the processes for securing reproductive capabilities of natural resources, their sustainable use and preservation substantiate the importance of the use of managerial approaches aiming to form favorable environment for their preservation and accumulation, and such way of using natural goods, that will provide for increase in consumption levels due to both advance growth of goods and their reproductive capabilities. the more the deviation between reproduction and consumption is, the more effective accumulation and reproduction processes will be, as well as consumption process in future. key words: determination of the management processes, balanced use of natural resources, factor model, consumption level, intensity of reproduction. jel classification: q28, o13 corresponding author: 1 department of economy of enterprise, uzhgorod national university. e-mail: mishagazuda@gmail.com 1. introduction strong interrelation of events and processes taking place now within the provision of vital needs of society causes the timely character of studies in the sphere of using processes determination, preservation and reproduction of renewable natural resources. this also causes the need in developing a model for determination of management for balanced use of natural resources in various sectors of human’s economic activity. substantial contribution in the study of scientific approaches to managing the processes of sustainable use and reproduction of natural resources was made by v.  golyan, m. hvesyk (2007), b. danylyshyn, o.  kucher (2005), p. korenyuk (2002), i. lukinov (1977), k . rudyk (2012) and others. comprehensive studies of the process of reproduction in agricultural nature management are in the works by v. zaremba, v. pavlov, y. fesina (2008). baltic journal of economic studies 29 vol. 1, no. 2, 2015 2. determination of the process of natural resources sustainable use the general functional orientation of the mechanism of managing the use of renewable natural resources is the assurance of conditions of their sustainable use in different sectors of economic activity. the sustainable use of natural resources is related to three general directions (paton, 2012): preserving their productivity, gradual increase of economic efficiency of their use, solving social problems of certain territories. solving the existing problems in the sphere of the use of natural resources should be supported with making ecologically and socially oriented decisions. therefore the changes in the system of natural resources management should concern transformations of the tools for preventing negative effects of the anthropogenic influence on natural resources and making for safe environment for people and nature. the processes of determination of managing balanced use of natural resources, their reproduction and preserving are integral elements of management within the studied mechanism. it is important to note, that the model for determination of management of the balanced use of natural resources has to be based on complex analysis of the state of use of natural and resource potential, results of the assessment of efficiency of the use of renewable natural resources, taking into consideration the influence of natural factors. a new model for determination of processes of balanced use of natural resources management has to be implemented. it will define the selection of one of the models for development of renewable natural resources management: “consumption” model, at which natural resources are used in amount exceeding the scales of their reproduction; “reproduction model”, at which reproduction processes are much more effective than consumption of natural resources; “environment protection” model, as a result of optimal balance between consumption and reproduction of natural resources. low development level of the economic system catalyzes the exploitative type of natural resources consumption, which is shown as an extensive natural management. this has a negative effect on the state of reproduction of natural resources and leads to their exhausting. at the same time, continuous increase of economic performances supports structural and technological changes and development of environmentally friendly technologies in manufacturing, decreases the pressure, done at natural and resource sphere. thus, for example, development of agrarian economy and genesis of innovative solutions in the farm-machinery industry encouraged manufacturers of agricultural products to use move universal systems of machines in farming. as a result, not only productive costs were lessened, but also the pressure of mechanicals on the soil have decreased, the conditions for growing have become better. now their respective biologic parameters became subjects of complex systemic changes under the influence of anthropogenic factor. here the kuznets’s phenomena of ecological curve has to be mentioned. he learned that increase of incomes in society together with decrease of differentiation automatically lead to quality improvement of environmental parameters. thus, the social demands as to the ecological parameters of the life level increase together with the increase of economic well-being. thus, we can make a conclusion, economic component of sustainable development of natural resources is the most important; therefore, the ultimate attention has to be granted to the opportunities of economic growth. the last will lead to increase of social parameters of life level and improvement of the state of environment. we consider that the transition of the consumption model of natural resources from technocratic to nature saving one is evident, as it reflects the natural origins of the human being. as human is one of the kinds of biosphere, its priorities cannot be treated as higher than the priorities of the biosphere as a system itself (lukinov, 1977). moreover, excessive consumption of natural resources causes breach in biochemical cycles of environment and its capability to assimilate and recover (budzyak, 2011). the study of scientific sources (korenyuk, 2002; нvesyk, golyan, 2007; rudyk, 2012; danylyshyn, kucher, 2005) reveals a common perception among scholars, that tools and objectives of the model of consumption of natural resources are oriented mostly at effective nature management. it supposes such activity of economic entities, which is aimed not only at satisfaction one’s needs, but also at preserving (reproduction) of the components of environment. this aim is implemented through the economically correct use of natural conditions and constant keeping the regime of their reproduction. we agree with v. baranovs’kyj, that the problem of rational use of natural resources has a strongly cut global and regional dimension and plays an important role in intensification of production (baranovs`kyj, 2001). 3. sustainable use of natural resources sustainable use has a meaning of reasonable and careful attitude to the natural resources, which is gained on the base of economic harmonization and socio-ecological objectives and based on creating conditions for constant reproduction of natural resources and supporting preserving functions for them. hence, sustainable use of natural resources is primary concerning the preservation of natural resources. some scholars are expressing similar thoughts, considering sustainable natural management as a system of the use of natural resources, which is based on institutional norms in the sphere of natural management, stipulating their designated use, providing high efficiency of the use of natural resources, their preservation, defending the rights of owners and users of these resources under conditions of effective monitoring of formal and informal institutions (pavlov, zaremba, fesina, 2008). the function of sustainable use of renewable natural resources in the system of their management is aimed to baltic journal of economic studies 30 vol. 1, no. 2, 2015 provide development and support of the effective regime of both exploitation and reproduction of them, taking into account the objectives of sustainable development. it has to be mentioned, that for biological resources their sustainable consumption means the use of manufacturing wastes in the fullest extent possible. in the sphere of agricultural production, considering its importance in the life of society and provision of its economic development, the resources used in this process have to be constantly reproduced of regenerated for their solidity. lukinov gives a broad explanation of the scale of reproduction process. he mentioned that reproduction covers all consistent stages of production, distribution and consumption and appears as a complex of naturally connected forms of economic circulation. thus the scholar considered the process of reproduction of productive forces (including natural ones) and reconstruction of the system of production relations (lukinov, 1977). 4. factor model of reproductive use of natural resources it’s necessary to note that raising the question of reproduction of natural resources as a problem is obvious. the urgency of the issue is caused with the fact, that the scale of non-sustainable their use has a negative influence at both environment and economic sector. therefore, the reproduction process is a general characteristic of renewable natural resources, which are having the ability of self-reproduction. to solve the problem of preserving natural resources, the consumption of them has to be decreased with the level, which is lower than their reproductive capacity is. the following factors are affecting the reproductive capacity of natural environment (fig. 1). cyclic processes of consumption and reproduction are characterized with a tight cause-and effect relationship with the influence on both qualitative state of resource and on its reproduction. the amount of the natural resource itself, the intensity of its reproduction and the level of consumption have direct influence on the processes of natural reproduction. factors, which can regulate the intensity of reproduction, are closely connected to the amount of resource, have natural qualities, are included in physiological, climate, ecological and other components, which have, though not in all cases, potential capabilities of regulation. therefore, three models of the resources usage can be formed taking into consideration the self-reproductive qualities of resources and consumption needs. the first is oriented at heavy exploitation of natural resources. it is the most common at the modern stage of societal development. the second one can be the base for implementation of reproductive use of natural resources. its functioning has to be supported additionally with the mechanism of management in the sphere of the use of renewable natural resources. the last model will concern simple reproduction and consumption of renewable resources, at which the resource itself and the amount of its reproduction for the next period remain constant. reproductive use of natural resources factors of influence reproduction amount of resource intensity of reproduction n at ur al fa ct or c on su m pt io n le ve l in te ns it y of r ep ro du ct io n n at ur al p ec ul ia ri ti es a m ou nt o f r es ou rc es h um an fa ct or level in du st ri al u se d om es ti c co ns um pt io n n at ur al c on su m pt io n l os se s of r es ou rc es fig. 1. factor model of reproductive use of natural resources baltic journal of economic studies 31 vol. 1, no. 2, 2015 considering the consumption and reproduction models, it should be mentioned, that the general task of the bodies of renewable natural resources management is to provide optimal ratio between consumption and reproduction of such renewable natural resources. sustainable nature management has to be implemented at complete refusal to use elements of consumer-oriented approach of the use of renewable natural resources and at the platform of optimizing their use. optimization itself gives the opportunity to balance interests in the sphere of natural resource management. therefore, optimization gives the opportunity to define the threshold of the allowable level of economic activity at which the natural mechanism of reproduction of natural resources can be renewed. from the other side, optimization of consumption and reproduction models is a prerequisite for implementation of the model of preservation of natural resources. preservation of renewable natural resources has to be considered as a system of measures aimed to stand against the challenges of misbalancing socio-ecological and economic interests and secure natural resources from harmful activities, protect them from damaging, destruction or destruction. as the results of the study of the sense of sustainable use, preservation and reproduction of natural resources show, all these notions are defined as both independent and interrelated elements of the system of renewable natural resources management. in particular, some thoughts are expressed, according to which protection of natural resources determines capabilities of sustainable natural resource marketing. the result of implementation of the model for the use of renewable natural resources involves provision of economic efficiency and sustainability in allocation and use of these resources. the protection model is aimed at ecologization of environment, the main directions in which are: prevention of negative effects of anthropological influence on natural resources, creating safe environment for population and for the nature. the expected result of introducing the model of reproduction of renewable natural resource is provision of their simple and expanded reproduction. such processes will have positive influence on ecological, economic safety of the country as a whole and will implement the basic provisions of the concept of balanced nature resources management. determination of renewable natural resources management shows the linkages of such systemic processes as development of natural resources as a material base for development of different sectors and kinds of economic activity. at this, the managerial level has the following elements: industrial use, having the basic reserves for saving natural resources; social and ecological use of resources has to be directed at economical consumption; part of resources is used with the nature itself for creation of other kinds of them; while the process has to be oriented at reproduction, balancing and harmonization of natural ecosystem; the losses of natural resources have to be minimized. 5. conclusions therefore, reproductive natural management means management and use of renewable natural resources within the limits of their reproductive capabilities with the intent to preserve and accumulate them. it also means the way of using natural goods, at which increase in the rate of consumption is gained due to advance increasing of goods together with the increase of their reproductive capabilities. the more the deviation between reproduction and consumption is, the more effective accumulation and reproduction processes will be, as well as consumption process in future. references paton, b. y. 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(2012). formuvannya efektyvnogo upravlinnya racionalnym zemlekorystuvannyam v systemi gospodarskogo mexanizmu. naukovyj visnyk lnau. no 39, р. 175-180. danylyshyn, b. m. and o. o. kucher (2005). indykatory stalogo rozvytku i oxorony navkolyshnogo seredovyshha: osoblyvosti rozrobky ta vprovadzhennya. agrobioriznomanittya ukrayiny: teoriya, metodologiya, indykatory, pryklady: zb. nauk. pracz. – k: nichlava, vol. 1, р. 31-48. baranovskyj, v. (2001). do koncepciyi perexodu ukrayiny na model stalogo rozvytku. ekonomika ukrayiny. no. 7, р. 78-84. pavlov, v. i., zaremba, v. m., and y. g. fesina. (2008). instytuty ta instytuciyi agrarnogo pryrodokorystuvannya: regionalnyj vymir. – luczk: nadstyrya. baltic journal of economic studies 32 vol. 1, no. 2, 2015 михаил газуда детерминация процессов использования, охраны и воссоздания в системе управления возобновляемых природных ресурсов аннотация. целью работы является разработка факторной модели воспроизводимого использования природных ресурсов, что предусматривает оценивание величины ресурса, в частности природного фактора, уровня потребления и интенсивности воспроизводства. методология. исследование основано на выделении факторов влияния на воспроизводственную способность природной среды, что позволило на основе учета свойств самовоспроизводства ресурсов и потребностей потребления, обосновать три модели их использования, в частности жесткую эксплуатацию возобновляемых природных ресурсов, как самую распространенную на современном уровне общественного развития, воспроизводимого использования природных ресурсов, что обусловлено целесообразностью поддержки со стороны властных и управленческих структур, а также модель простого воспроизводства и потребления возобновляемых ресурсов, когда неизменными остаются как сам ресурс, так и величина воспроизведения на последующий период. практические последствия. обоснована необходимость внедрения нового типа модели детерминации процессов управления сбалансированным использованием природных ресурсов, которая предопределяет воспроизводственные процессы в сфере природопользования, формирует новые подходы к охране окружающей природной среды и будет способствовать обеспечению оптимального соотношения между потреблением и воспроизводством природных ресурсов. при этом на процессы естественного воспроизводства непосредственно влияют величина самого природного ресурса, интенсивность его воспроизведения и уровень потребления. в сфере использования возобновляемых природных ресурсов главной задачей органов управления должно быть обеспечение оптимального соотношения между потреблением и воспроизводством таких природных ресурсов. результативность процесса внедрения модели использования и воспроизводства природных ресурсов обуславливается обеспечением их простого и расширенного воспроизводства, экономической эффективностью и рациональностью в распределении и использовании этих ресурсов, что положительно повлияет на обеспечение как экологической, так и экономической безопасности страны в целом, и будет способствовать реализации основных постулатов концепции сбалансированного и рационального природопользования. значение/оригинальность. с целью решения проблемы сохранения возобновляемых природных ресурсов необходимо довести потребление ресурсов до уровня ниже, чем их воспроизводственные возможности. детерминация процессов обеспечения воспроизводственных возможностей природных ресурсов их рациональное использование и охрана обусловливают необходимость применения управленческих подходов в целях формирования благоприятной среды для их сохранения и накопления, и такой способ потребления природных благ, обеспечивать наращивание темпов потребления за счет опережающего роста, как самих благ, так и их воспроизводственных возможностей. чем существеннее будет разница между восстановлением и потреблением, тем эффективнее станут процессы накопления и воспроизводства, а в дальнейшем и потребления. baltic journal of economic studies 235 vol. 4, no. 1, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-1-235-241 financial risk management as a strategic direction for improving the level of economic security of the state inna korol1 pavlo tychyna uman state pedagogical university, ukraine anastasiya poltorak2 mykolayiv national agrarian university, ukraine abstract. the purpose of the paper is to generalize theoretical and methodological principles and develop practical recommendations aimed at improving financial risk management as a strategic direction for improving the level of economic security in ukraine. methodology. the methodology for this study was based on methods of scientific abstraction, methods of the system-functional approach, grouping, generalization and formalization, systematization, analysis and synthesis, statistical and economic methods, peer review. results. it is proved that the economic essence of financial risk management as a strategic direction for improving the level of economic security consists in the permanent and continuous application of procedures for communication and definition of management context (management goals, distribution sector, list of criteria to be taken into account in the management process), management policy, as well as selection, comprehensive analysis, quantification and processing of financial risks (allocation of alternative ways to reduce the impact), which are characterized by specific characteristics of financial sector risks. the present situation of the financial environment of the financial sphere is analysed by calculating indicators and generalizing them in the integral index which dynamics in 2011–2017 tends to deteriorate values. this means lowering the level of financial security. the method of quantitative assessment of financial risks through reasonable algorithm is improved. it consists of the following stages: analysis of indicators of the state of financial security structured according to its subsystems; assessment of the level of financial risks in the system of economic security; comprehensive risk assessment in financial security subsystems; definition of the integral index of financial risks in the system of economic security. directions of financial risk management in the system of economic security are generalized and their groupings are organized according to distinct subsystems of economic security in ukraine. the mechanism of financial risk optimization is substantiated. it provides a description of the process of achieving the optimal characteristics of identified financial risks in subsystems of economic security. its purpose is to minimize social and economic consequences of the destructive impact of the risk environment and improve the overall state of economic security of the country and society. practical implications. the practical significance of the obtained results is the proven and justified feasibility of using proposed recommendations in the field of financial risk management to improve the level of economic security in ukraine and a mechanism for optimizing financial risks, which describes the process of achieving the optimal characteristics of identified financial risks in the subsystems of economic security. value/originality. the information base of the article is the legislative and regulatory documents, consolidated data of the state fiscal service of ukraine, the state statistics service of ukraine, ministry of finances of ukraine, the national bank of ukraine, ministry of economic development and trade of ukraine, periodicals and reference publications, internet resources, and results of authors’ studies and calculations. key words: financial risks, financial risk management, economic security, financial security, finance, financial risk assessment. jel classification: d81, g30, g38, e30, e60 corresponding author: 1 department of marketing, management and business management, pavlo tychyna uman state pedagogical university. e-mail: innakorol88@gmail.com 2 department of finance, banking and insurance, mykolayiv national agrarian university e-mail: poltorak@mnau.edu.ua baltic journal of economic studies 236 vol. 4, no. 1, 2018 1. introduction under the influence of external and internal factors, the state of economic security, traditionally analysed as a complex of energy, macroeconomic, food, demographic, social, investment-innovation production, foreign economic and financial security, is rapidly changing. it should be noted that effective maintenance of a sufficient level of economic security is impossible without managing the risk environment of the financial sector, taking into account the fact that financial risks have a dominant influence on the level of economic security in comparison with others. thus, realizing the economic interests of the country, we believe that the problem of financial risk management in order to improve the level of economic security of the state is extremely relevant. the purpose of the paper is to generalize theoretical and methodological principles and develop practical recommendations aimed at improving financial risk management as a strategic direction for improving the level of economic security in ukraine. in accordance with the purpose of the article, the following interrelated tasks were determined and solved: to study the economic essence of financial risk management as a strategic direction for improving the level of economic security of the state; to analyse the current state of the financial environment; to improve methods of quantitative assessment of financial risks; to substantiate directions and identify financial risk management tools; to improve the mechanism and principles of financial risk optimization. various aspects of the issue of financial risk management were studied in many scientific works (atamanyuk, 2005), (dinu, 2014), (hammoudeha, mcaleer, 2013, 2015), (kosmidoua, kousenidisa, ladasb, negkakis, 2017), (poltorak, tymoshenko, 2015), (poltorak, volosyuk, 2016, 2017), (ukrainska, 2010), and others. the methodology for this study was based on methods of scientific abstraction, methods of the system-functional approach, grouping, generalization and formalization, systematization, analysis and synthesis, statistical and economic methods and peer review. 2. the economic essence of financial risk management one of the most important issues in the field of achievement and sustainable maintenance of the necessary level of economic security of the state is the growth of threats to the financial sector. among strategic risks to economic security, a special place is occupied by financial risks that have certain essential characteristics, namely: influence on financial management objects; risk in relations that are characterized by a financial nature; consequences of the negative influence of financial risks in the form of failure to achieve financial goals or planned indicators, including in the field of economic security; financial nature of stochastic events (ukrainska, 2010). financial risks also impede the implementation of effective reforms in the economy and create obstacles to the transformation of the financial system of ukraine. taking into account the heterogeneity of risk factors and risk variability of the financial sector, the process of making an effective solution under the special conditions of the influence of quantitatively estimated financial risks is their management. accordingly, in our opinion, the economic essence of financial risk management as a strategic direction for improving the level of economic security consists in the permanent and continuous application of procedures for communication and definition of management context (management goals, distribution sector, list of criteria to be taken into account in the management process), management policy, as well as selection, comprehensive analysis, quantification and processing of financial risks (allocation of alternative ways to reduce the impact). 3. the current state of risk environment of the financial sector it should be noted that methodological recommendations for calculating the level of economic security in ukraine have resulted in a list of indicators, which generalized meaning provides an opportunity to quantify the level of economic security and, accordingly, all its components, including financial security. the state of the ukrainian financial security can be systematically evaluated by calculating indicators of its state and generalizing them to the integral index. comparing its values in different periods, we will be able to describe key trends in financial security, as well as study the current state of risk environment of the financial sector. the results of the analysis of absolute and normalized indicators of the country’s debt security (dynamics of the ratio of debt obligations of the country to gdp, international reserves of the country to gross external debt and others) in 2011–2017 indicate a tendency for the deterioration of the debt security. so, in 2011–2013 the ratio of the state and state-guaranteed debt to the gdp of the country varied in the range of 36.3-40.1%, that is, in fact, was in the zone of unsatisfactory values. in 2014–2017, this indicator was characterized by the baltic journal of economic studies 237 vol. 4, no. 1, 2018 values, which were in the critical range. these dynamics are extremely threatening. the state of budget security as a component of financial and, accordingly, economic security characterizes the level of financial stability and solvency of public finances, the level of efficiency of the functional performance of state authorities. it should be noted that the analysis of values of most indicators of budgetary security (the ratio of budget deficit to gdp, the level of gdp redistribution through the consolidated budget, the share of deficit/ surplus of budget and extra-budgetary funds in the sector of national government in gdp structure) in 2011–2017 were in ranges of optimal and satisfactory values. however, the ratio of payments for servicing and repayment of public debt to the revenue part of the state budget is steadily in the zone of critical values, which significantly reduces the level of budgetary security. after examining the state of the currency security in ukraine, it is proved that the change in the rate of the national currency to the us dollar in 2014–2017 was mainly in the area of critical values. volumes of gross international reserves of ukraine, determined in months of import, tend to decrease. in addition, indicators of the share of foreign currency loans in the structure of all loans and the level of dollarization of the money supply are in the zone of dangerous values and tend to deteriorate the values. an analysis of the indicators of the state of financial security in ukraine can be used to substantiate the impact that determinants of financial market development have on the level of financial security. in particular, there are reasons to assume the influence of such a system of factors: insufficient level of overall market development, lack of financial resources and their ineffective placement in assets, insufficient level of activity of the state in the financial market. thus, integral coefficients of the state of the financial security subsystem in ukraine in 2011–2017 are shown in table 1. thus, having carried out a comparative analysis of the state of financial security in ukraine, it is proved that the integral index of financial security in ukraine summarizing indicators of monetary, budget, currency, banking, debt security, and security of the non-banking sector in 2011–2017 tended to deterioration of values. it means lowering the level of financial security. 4. methods of quantitative assessment of financial risks the result of the quantitative assessment of various types of financial risks should be their numerical values and a generalized indicator of the risk environment of the financial sector. in our opinion, a comprehensive assessment of financial risks should take into account financial risks affecting all components of economic security and its results contribute to the formation of clear conclusions about the dynamics of changes in the state of risk environment of the financial sector and adoption of an effective solution under the conditions of alternative options. the most common methods for assessing financial risks are delphi method, statistical method, analytical method, analogue method, and method of expediency analysis (tymoshenko, 2015). in our opinion, the significant advantages of the method of expert assessments in the field of financial risk assessment in the system of economic security in ukraine are the possibility of timely adjustment of the scale of the estimation coefficients depending on changes in the internal environment and external conditions. to quantify the risks in the financial sector, ranges of the characteristic values are applied by means of standardization to interpreting indicators obtained using the analogue method, the legislative-normative criterion and delphi method. an algorithm for quantifying financial risks in the system of economic security is given in fig. 1. due to the rating method, the improved algorithm for quantitative assessment of financial risks in the system of economic security of ukraine takes into account a set of financial risks that affect the state of economic security of the country, as well as substantiates conclusions on the state of risk environment of the financial sector based on the evaluation results. table 1 integral indicators of the state of the financial security subsystem in ukraine in 2011–2017 integral indicators of financial security subsystems values of integral indicators 2011 2012 2013 2014 2015 2016 2017 monetary 40,36 39,96 38,70 39,19 37,21 33,46 33,51 non-bank financial market 39,56 48,75 44,17 67,91 66,72 62,80 61,42 currency 48,00 59,00 59,00 41,00 43,00 40,00 44,00 budgetary 68,00 58,00 58,00 56,00 63,00 62,00 64,00 debt 45,00 39,00 36,00 25,00 29,00 33,00 29,00 banking 40,07 49,83 51,19 52,24 40,86 38,23 39,78 integral index 47,91 49,29 48,29 45,73 45,75 44,21 44,32 source is proposed by the authors baltic journal of economic studies 238 vol. 4, no. 1, 2018 5. directions and tools for managing financial risks taking into account the structure of economic security, according to which the algorithm of quantitative assessment of financial risks was improved, it is expedient to analyse separately directions and tools of financial risk management in each of the financial security subsystems. in order to minimize the negative impact of financial risks for budgetary security, it is appropriate to use the following measures: increasing the accuracy of forecasting indicative budget indicators, updating the statistical system of the budget, improving the system of budget planning within the boundaries of quarters, preventing underperformance of the plan for state budget filling, which may lead to an increase in government borrowing; ensuring compliance of available financial resources of a certain type of budget and defined tasks of budget policy at the necessary level, which is especially relevant during the period of fiscal decentralization reform; continuous monitoring of the targeted use of budget funds, improvement of the internal audit system taking into account standards of the european union; improving the quality of capital budgeting; financing of the state budget at the minimum possible cost of public debt service taking into account risks; optimization of state target and budget programs. fig. 1. an algorithm for quantitative assessment of financial risks in the system of economic security * in the algorithm i is financial risk; j is security subsystem; xmin, xmax are marginal values of indicators of financial security in ukraine in the appropriate range; ymin, ymax are marginal values of the financial risk in the appropriate range of indicators of financial security in ukraine, %; ai is weighing coefficients of relevant financial risks; aj is weighing coefficients of complex indicators of financial risks in the system of economic security. source is improved by the authors based on (tymoshenko, 2015) 1. analysis of financial security indicators (xi) structured according to its subsystems 2. estimation of financial risks in the system of economic security (yi) qualitative characteristics of the financial risk bad critical threatening allowable acceptable minimum ranges of quantitative assessment of the financial risk, % 100 % [75; 100) [50; 75) [25; 50) [0,1; 25) [0; 0,1) ranges of quantitative assessment of financial security indicators xi (stimulant) xi (disincentive) <xcrit [xcrit;xdang) [xdang;xunsatis) [xunsatis;xsatis) [xsatis;xopt1) [xopt1;xopt2] >xcrit (xdang;xcrit] (xunsatis;xdang] (xsatis;xunsatis] (xopt2;xsatis] if the indicator is a stimulant: min max min max max min ( ) (y y ) ( ) i i x x y y x x − ⋅ − = − − if the indicator is a disincentive: min max min min max min ( ) (y y ) ( ) i i x x y y x x − ⋅ − = + − 3. comprehensive risk assessment in financial security subsystems: 1 1 m i i i j m i i a y fr a = = × = å å 4. integral index calculation of financial risks in the system of economic security: 1 j n a j j fr fr = = õ baltic journal of economic studies 239 vol. 4, no. 1, 2018 as a result of the systematic application of directions of financial risk management in the system of budgetary security, it is expected that the state budget deficit will be reduced, namely: 2.4% of gdp in 2018 and 2.2% of gdp in 2019. main tools for managing financial risks in the system of budgetary security are rates of taxes and fees; transfers; interest rate; budgetary norms and regulations; tariffs; creation of reserves; government loans; cost standards. the modern debt area of ukraine is characterized by a significant level of budgetary, currency and refinancing risks, as well as a moderate level of liquidity risk and interest rate risk. it is also necessary to take into account the deterioration of payment balance indicators and risks of public debt management, including those related to the support of the banking system and guarantee fund for individuals’ deposits. in the process of managing financial risks in the system of debt security in order to improve debt management mechanisms, it is expedient to have: adherence to the medium-term strategy of public debt management in 2017–2019, including ensuring the effective functioning of the domestic market of government securities and expanding access to the international capital market; expansion of cooperation with international financial organizations; observance of limits of the average weighted term in the strategy of public debt management to debt obligation repayment of the state; minimization of risks by refinancing the debt; optimization of public debt structural indicators in the context of interest rates and currencies; avoiding peak budgetary burdens associated with payments for servicing public debt; increasing demand for government debt securities by investors as a result of increasing their liquidity level; ensuring transparency and publicity of public debt management activities. implementation of directions for the improvement of debt management mechanisms will promote compliance with an economically safe level of state and state-guaranteed debt and, accordingly, effective and transparent debt management. main tools for managing financial risks in the system of debt security include: term, interest rate, currency, type of state borrowing; restructuring; maximum limits of public debt and provision of state guarantees; loan unification; consolidation; conversion; delay in loan repayment. in our opinion, under the conditions of the ukrainian economic security, the issue of effective risk management in the banking system is of first priority. the risk analysis has shown that the integral index of economic security is reduced by 0.05% with an increase of 1% of the generalized indicator of financial risks of the banking sector. thus, directions of financial risk management of the banking sector are offered, namely: improvement of methods for problem loan repayment; increasing the efficiency of the bank reorganization and capitalization process; application of updated approaches to the quantitative assessment of bank risks; expanding the range of financial services of banks; raising the level of financial literacy of the population. as a result of application of reasonable directions of financial risk management in the banking sector, it is expected: reduction in the share capital of foreign capital in the bank authorized capital; decrease in the proportion of problem assets in the general portfolio of assets of the ukrainian banks in the medium-term to 7%, with its subsequent increase of 4%; adjusting the ratio of long-term loans and deposits. main tools for managing financial risks in the banking system include: interest rates; exchange rates; conditions for obtaining and repaying loans; security yield level; reorganization and capitalization of banks; introduction of a temporary administration; refinancing. thus, directions of financial risk management in the subsystems of the ukrainian economic security are generalized and the main tools of effective financial risk management are defined. 6. mechanism and principles of financial risk optimization the mechanism of financial risk optimization in the system of the ukrainian economic security should provide a detailed description of the process of obtaining optimal indicators of identified financial risks in order to increase the overall level of the ukrainian economic security, as well as be used in different conditions, such as in periods of active development of the economic system and in periods of crisis phenomena. the strategic goal of optimizing financial risks in the ukrainian economic security system is to minimize social and economic consequences of the destructive impact of the financial sector’s risk environment and improve the overall state of economic security of the country and society. the process of optimizing financial risks in the ukrainian economic security system should take into account principles presented in fig. 2. priority tasks of financial risk optimization in the system of economic security in ukraine include: maintaining quantitative values of identified financial risks in each of the subsystems of economic security within the range, which will ensure a stable level of the ukrainian economic security; timely and systematic review of the complex of financial risks, identification of new risks, adjustment of ranges of indicators of the financial security status, taking into account the changing environment; baltic journal of economic studies 240 vol. 4, no. 1, 2018 fig. 2. principles of financial risk management in the system of economic security* source is systematized by the authors fig. 3. the mechanism for optimizing financial risks in the system of economic security* source is improved by the authors principles of financial risk optimization in the system of economic security in ukraine the process of identification, analysis, risk assessment, and monitoring of their management is carried out continuously continuity economic efficiency costs of the process of financial risk optimizing should not exceed the assessment of destructive effects of these risks consistency risk management in the subsystems of the ukrainian economic security should take into account their interconnection preventiveness preventive identification of the threat growth to economic security and introduction of measures aimed at minimizing them absence of interest conflict risk optimization in the system of economic security cannot exert a destructive influence on other national security systems goals are minimizing social and economic consequences of the destructive influence of the financial environment and improving the overall state of economic security of the country and society assumptions are the invariable risk environment in other national security systems; a constant level of other types of risks; systematic adjustment of ranges of indicator values taking into account the changing environment objectives are to maintain quantitative risk values within the permissible limits; timely and systematic review of the complex of risks, identification of new risks; improve existing and develop new methods for managing financial risks principles are continuity; economic efficiency; consistency; preventiveness; absence of interest conflict identification and recording of characteristics of financial risks in the system of economic security of ukraine calculation of norms, levels of risk acceptability, ranges of indicator values of the state of economic security applying the algorithm for quantifying financial risks and calculating the integral risk index in the system of economic security quantitative assessment of financial risks is acceptable quantitative assessment of financial risks is unacceptable definition of generalized risk environment indicators in economic security subsystems and integral index of the state of economic security obtained values are acceptable obtained values are unacceptable the result is the achievement of the strategic goal of optimizing financial risks in the system of economic security, which is to minimize consequences of the destructive influence of the financial environment and increase the general state of economic security of the country and society applying directions and tools for managing financial risks in separate subsystems of the ukrainian economic security, including banking, debt, budget, currency, monetary, and non-banking financial sector introduction of updated approaches and methods of financial risk management in the system of economic security in ukraine and mechanisms of state regulation baltic journal of economic studies 241 vol. 4, no. 1, 2018 improvement of existing and development of new methods for managing financial risks in the system of economic security in ukraine, as well as mechanisms of state regulation. a mechanism for optimizing financial risks is shown in fig. 3. as a result of implementation of the financial risk optimization mechanism in the system of economic security, it is planned to develop and use updated approaches to assessing financial risks, ensuring transparency and efficiency of activities in the field of financial risk management, and achieving the strategic goal of optimizing financial risks in the system of economic security. this is to minimize consequences of the destructive impact of the financial environment and increase the overall state of economic security of the country and society. 7. conclusions in the process of generalization of theoretical and methodological principles and development of practical recommendations aimed at improving the financial risk management, the following conclusions were made: 1. it is proved that the economic essence of financial risk management as a strategic direction for improving the level of economic security consists in the permanent and continuous application of procedures for communication and definition of management context (management goals, distribution sector, list of criteria to be taken into account in the management process), management policy, as well as selection, comprehensive analysis, quantification and processing of financial risks (allocation of alternative ways to reduce the impact), which are characterized by specific characteristics of financial sector risks. 2. in the process of analysing the current state of risk environment of the financial sector, the state of financial security in ukraine is assessed by calculating indicators and their generalizing in the integral index. its dynamics in 2011–2017 tended to deteriorate values, which mean lowering the level of financial security. 3. the method of quantitative assessment of financial risks is improved through the reasonable algorithm consisting of the following steps: analysis of indicators of the state of financial security structured according to its subsystems; assessment of the level of financial risks in the system of economic security; comprehensive risk assessment in financial security subsystems; calculation of the financial risk integral index in the system of economic security. 4. directions of financial risk management in the system of economic security and their grouping according to distinct subsystems of economic security of ukraine are overviewed. 5. the mechanism of financial risk optimization is substantiated, which provides a description of the process of achieving optimal characteristics of identified financial risks in the subsystems of economic security. its purpose is to minimize social and economic consequences of the destructive impact of the risk environment and improve the overall state of economic security of the country and society. references: atamanyuk, i. p. (2005). algorithm of extrapolation of a nonlinear random process on the basis of its canonical decomposition. kibernetika i sistemnyj analiz, no. 2, 131-139. https://doi.org/10.1007/s10559-005-0059-y dinu, a. m. (2014). risk in financial transactions and financial risk management. procedia social and behavioral sciences, vol. 116, 2458-2461. https://doi.org/10.1016/j.sbspro.2014.01.591 hammoudeha, sh., & mcaleer, m. (2013). risk management and financial derivatives: an overview. the north american journal of economics and finance, vol. 25, 109-115. https://doi.org/10.1016/j.najef.2012.06.014 hammoudeha, sh., & mcaleer, m. (2015). advances in financial risk management and economic policy uncertainty: an overview. international review of economics & finance, vol. 40, 1-7. https://doi.org/10.1016/j.iref.2015.02.001 kosmidoua, k., kousenidisa, d., ladasb, a., & negkakis, ch. (2017). determinants of risk in the banking sector during the european financial crisis. journal of financial stability, vol. 33, 285-296. https://doi.org/10.1016/ j.jfs.2017.06.006 poltorak, a. s., & tymoshenko, yu. (2015). efektyvne upravlinnia finansovymy ryzykamy v systemi ekonomichnoi bezpeky ukrainy [effective management of financial risks in the system of economic security of ukraine]. ahrosvit – agrosvit, vol. 1, 34-39 (in ukraine). poltorak, a. s., & volosyuk, y. v. (2016). tax risks estimation in the system of enterprises economic security. economic annals-xxi, vol. 158 (3-4(2)), 35-38. http://dx.doi.org/10.21003/ea.v158-08 poltorak, a. s., & volosyuk, yu. v. (2017). kompleksnyi pidkhid do kilkisnoho otsiniuvannia podatkovykh ryzykiv derzhavy [an integrated approach to quantitative assessment of tax risks of the state]. aktualni problemy ekonomiky – actual problems of economics, vol. 2(188), 269-276. (in ukraine). tymoshenko, yu. o. (2015). analiz tendentsii zmin znachen indykatoriv stanu finansovoi bezpeky v systemi ekonomichnoi bezpeky ukrainy [analysis of tendencies of changes in values of indicators of the state of financial security in the system of economic security of ukraine]. innovatsiina ekonomika – innovative economy, vol. 5(54), 341-345 (in ukraine). ukrainska, o. o. (2010). financial risks of business entities: assessment and reduction of their negative impact. (ph.d. thesis), donetsk national university, ukraine (in ukraine). baltic journal of economic studies 125 vol. 3, no. 5, 2017 corresponding author: 1 department of railway transport management, state university of infrastructure and technology. e-mail: zdvulit@ukr.net 2 research department, state university of infrastructure and technology. e-mail: olevchenko76@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-125-134 advanced vocational training of environmental professionals for providing sustainable development of railways of ukraine on the way to european integration zoriana dvulit1, olha levchenko2 state university of infrastructure and technology, ukraine abstract. the subject of the research is to study the state of issue of advanced training of environmental professionals and specialists on six railways of ukrzaliznytsia pjsc: donetsk, lviv, odesa, pivdenna (southern), pivdenno-zakhidna (southwestern) and pridniprovska railways. the purpose of the article is to study the issue of providing the necessary qualification level of postgraduate education (advanced training) of environmental professionals and specialists at six ukrainian railways. the methodology of the research: in order to achieve the goal, the following methods are used in the article: 1) statistical methods and methods of comparative analysis; 2) questionnaires and expert surveys of environmental professionals and specialists; 3) taxonomic methods. the novelty of the research. the state of the issue of ensuring the necessary level of professional development of environmental professionals and specialists at six railways of ukrzaliznytsia pjsc is investigated. namely: 1. the state of the level of professional development of environmental professionals and specialists of 6 railways of ukrzaliznytsia pjsc for the period from 2012 to 2016 is researched and evaluated; its structural and dynamic analysis is carried out; 2. calculations of taxonomic indicators of the level of development of career development system for environmental professionals and specialists as distribution of expenses for advanced training for 6 railways for 2012–2016 are made; 3. carried out a questionnaire of environmental professionals and specialists, whose list of functional responsibilities, in accordance with the job description (both staffed and part-time workers), includes issues of the use of natural resources and environmental protection  – in order to clarify the availability of environmental education, the length of work in the railway, the length of work in positions associated with environmental activities, the level of satisfaction with the content of their work. conclusions. to ensure the sustainable development of ukrainian railways on the way to european integration, it is necessary to take into account the requirements and standards of the eu both in the reform of rail transport in general and in the management of its impact on the natural environment. the training of modern skilled personnel is an important part of the strategy of sustainable economic and ecological development of rail transport; therefore, a special attention should be paid to the training of environmental professionals and specialists working in positions related to the use of natural resources and environmental protection. the european direction of the railways of ukraine requires new approaches to the education and professional development of such specialists. summing up the results of the conducted researches, the authors of the article substantiated that both the structure of the number of environmental professionals and specialists who have increased the qualification, as well as the structure of costs for the advanced training of environmental professionals and specialists of six studied railways, which are parts of ukrzaliznytsia pjsc, for the period from 2012 to 2016 are very volatile. thus, they concluded that, during the period under review, such significant structural shifts do not comply with the principles and provisions of the sustainable development of railway transport enterprises. key words: advanced vocational training, environmental professionals, natural environment, railway transport enterprises, railways, advanced training costs. jel classification: j44, l84, l92, f64, i21 baltic journal of economic studies 126 vol. 3, no. 5, 2017 1. introduction the relevance of the research. the strategy for development of pjsc “ukrzaliznytsia” (hereinafter  – ukrzaliznytsia) for 2017–2021 determines ukrzaliznytsia’s mission as ensuring sustainable development of ukraine by providing high-quality and affordable transport and logistics services based on the principles of social and environmental responsibility, as well as an effective model of company management that will meet the challenges of the present, taking into account the future needs of the economy and the population (key aspects of the strategy for development of pjsc “ukrzaliznytsia” for the 2017– 2021 years, 2017). ukrzaliznytsia provides 82% of freight and almost 50% of passenger traffic carried by all modes of transport. in terms of freight traffic, it ranks fourth in the eurasian continent, second only to the railways of china, russia, and india (ukrzaliznytsia pjsc, 2018), and provides work to 285 500 people (data as of 30.06.2017) (statistical data on ukrainian railways, 2018). railways – enterprises of railway transport of general use, which ensure the formation and implementation of state policy in the field of transport (verkhovna rada of ukraine, 2012a). the concept of sustainable development was recognized by the un world conference on the environment as the dominant ideology of civilization in the xxi century. the balance of ecological and economic interests is a valuable and cultural component of the model of sustainable development in countries of the european union (hereinafter – the eu). therefore, since european integration is the main foreign policy priority of ukraine, and the eu sets high environmental standards, the sooner their implementation in ukraine will be the key to further european integration in the field of environmental protection. this requires bringing the parameters of the functioning of railways in line with european environmental norms and standards. in pursuance of the state target program for rail transport reform for 2010–2019, which set one of the tasks of accelerating the integration of domestic rail transport into european and world transport systems, a number of measures are identified, in particular: improvement of environmental safety system is envisaged in order to improve the level of safety of passenger and cargo transportation; moreover, it is also envisaged to improve the quality of training of industry specialists (cabinet of ministers of ukraine, 2009). the strategic goals of the state environmental policy of ukraine are recognized development of the strategy for environmental education for the purpose of sustainable development of ukrainian society and economy of ukraine by 2015; as well as the creation by 2015 of a system of environmental education and professional development of civil servants whose competence includes environmental protection (verkhovna rada of ukraine, 2010). however, such an environmental education strategy has not yet been developed, which has its negative consequences, as will be discussed below. the eu sets standards and requirements for advanced training. thus, the recommendation of the european parliament and the council (2008/c 111/01) has defined general principles for ensuring quality higher education and vocational education and training in the context of european qualifications (european parliament and council, 2008). directive 2001/16/ ec of the european parliament and the council on 19.03.2001 on the interoperability of the conventional rail system contains conditions, in particular regarding the skill level of the personnel who operate and maintain it (dvulit, 2015). directive 95/18/ec stipulates the requirements for the skill level of safety staff (european council, 1995). directive 2004/49/ec sets requirements for the responsibility of each railway undertaking and each infrastructure manager for the level of training (including exams and certificates) and the qualifications of their personnel performing securityrelated work (european parliament and council, 2004). as a result, the level of education, including professional development, of ukrzaliznytsia employees becomes even more important in terms of the european direction of the ukrainian railways on the basis of sustainable development. the railway transport of ukraine has a powerful and extensive system of professional development of workers, which includes training complexes directly at enterprises of the branch and own educational establishments  – personnel professional development centres (centres of professional education). in general, 11 branch vocational and technical educational institutions operate at the railways, which carry out training, retraining, and professional development of the workforce. in accordance with requirements of the current legislation, the training, retraining and advanced training of workers for the needs of the industry are carried out at the expense of employer companies (verkhovna rada of ukraine, 1996). nevertheless, one should note a negative tendency during 2012–2016 regarding the reduction in the number of workers trained in new professions that have undergone retraining or advanced training. this trend was observed in general both in the ukrainian economy, in the transport sector, and in rail transport in particular. in addition, it should be pointed out that from 2015, in the static annual data provided by the state statistics service of ukraine, there is no section “professional training and professional development of employees”, and hence official statistical information (state statistics service of ukraine, 2018). according to article 7 of the law of ukraine “on environmental protection”, ecological knowledge is a mandatory qualification requirement for all officials baltic journal of economic studies 127 vol. 3, no. 5, 2017 whose activities relate to the use of natural resources and which has an impact on the state of the environment (verkhovna rada of ukraine, 1991). however, for today, in most structural subdivisions of ukrzaliznytsia environmental specialists are not specialized specialists, but engineers of technical departments, metrology engineers, health and safety engineers, energy, mechanic engineers, masters and other specialists, who are only assigned duties of ecologists in addition to other duties. these workers are overwhelmed by their main place of work with completely different issues that are not related to the environmental protection. only about 9% of full-time employees are in positions of environmental professionals and specialists: in 2012  – 9.34%, in 2013  – 9.22%, in 2014  – 9.17%, in 2015  – 8.87%, in 2016  – 8.87%; and there is a tendency for an annual gradual decrease of this percentage. in addition, in some structural subdivisions, ecological responsibilities are generally separated by certain natural factors, namely air, waste, water, and assigned to different workers. the actual neglect of mentioned in article 7 of the law of ukraine “on environmental protection” at railway undertakings and, therefore, the lack of environmental professionals and specialists on the railways of ukraine, as well as the inadequate level of their education and qualifications lead to a large number of environmental fines and claims and, consequently, the considerable expenses of ukrzaliznytsia for the payment of these penalties and claims. thus, according to the annual reports of the railways of ukrzaliznytsia in 2016, 169 decisions to impose an administrative penalty for violating the requirements of environmental legislation on officials of production units are issued and, accordingly, these fines are paid  – in the amount of 40.324 thousand uah, and 10 claims in the amount of 3 902.834 thousand uah are presented, of which actually 2 claims were reimbursed in the amount of 191 884.96 uah (kravets, 2017). the main violations detected during inspections of ukrzaliznytsia’s production departments: waste management (55.5% of all fines), air protection (29%), land protection (3%), water resources protection (6.5%), in the field of protection, protection, use, and reproduction of forests (6%). there are also penal sanctions for organizational reasons that do not require material costs but only increased control over: the implementation of requirements of the legislation in the field of waste management, rules of technical operation of gas treatment plants. in addition, there has recently been a tendency to charge penalties for exceeding the permissible standards for discharging sewage into urban sewage networks. the main grounds for filing claims for damages for the harm caused to the environment are the lack or untimely receipt of permits and the unauthorized felling of trees (reference, 2016). all these negative phenomena testify to the ineffective management system for raising the skills of environmental professionals and specialists. therefore, it is considered necessary to increase the number of competent, skilled specialists in the field of environmental protection and use of natural resources on the railways. in addition, environmentalists need to constantly improve their knowledge, skills, abilities, competencies and, therefore, to systematically improve their qualifications and confirm their level with relevant certificates. and the management of railways of ukraine should, taking into account the european direction of the railways of ukraine, make managerial decisions regarding the proper financing and distribution of funds for the training of environmental professionals and specialists responsible for environmental resources management sphere. the subject of the research is to study the state of the issue of advanced vocational training of environmental professionals and specialists at six railway undertakings of ukraine (hereinafter  – the railways (cabinet of ministers of ukraine, 2014)): state enterprise “donetsk railways” (hereinafter  – donetsk railways), state territorial branch association “lviv railways” (hereinafter  – lviv railways), odesa railways, state enterprise “pivdenna railways” (“southern railway”, hereinafter  – pivdenna railways), state territorial branch association “pivdenno-zakhidna railways” (hereinafter  – pivdenno-zakhidna railways), state enterprise “prydniprovska railways” (hereinafter  – prydniprovska railways). the purpose of the article is to study the problem of providing the necessary skill level of postgraduate education (advanced training) of environmental professionals and specialists on six railways of ukrzaliznytsia. the following tasks are set for the achievement of the set goal: 1. to study and evaluate the state of the level of professional development of environmental specialists and specialists of 6 railways of ukrzaliznytsia for the period from 2012 to 2016 and to carry out its structural and dynamic analysis; 2. to conduct calculations of taxonomic indicators of the level of development of career development system for environmental professionals and specialists as distribution of expenses for advanced training for 6 railways for 2012–2016; 3. to carry out a questionnaire of environmental professionals and specialists, whose list of functional responsibilities, in accordance with the job description (both staffed and part-time workers), includes issues of the use of natural resources and environmental protection  – in order to clarify the availability of environmental education, the length of work on the railway, the length of work in positions associated with environmental activities, the level of satisfaction with the content of their work. research methodology: in order to achieve the target goal and solve the set tasks, the following methods are used in the article: 1) statistical methods and methods of comparative analysis  – for structurally-dynamic baltic journal of economic studies 128 vol. 3, no. 5, 2017 analysis of the number of environmental professionals and specialists working in positions related to the environmental protection; the number of those who passed the advanced training; costs of advanced training by railways of ukraine; 2) questionnaires and expert surveys of environmental professionals and specialists, whose list of functional responsibilities includes issues of the use of natural resources and environmental protection,  – to study and evaluate the availability of environmental education, the length of work on the railway, the length of work in positions associated with environmental activities, the level of satisfaction with the content of their work; 3) taxonomic methods  – to assess the development of a system for allocating costs for the training of environmental professionals and specialists for each of these six railways for each of the 5 years studied (2012, 2013, 2014, 2015, 2016). the scientific-theoretical and methodological basis of the research consisted of scientific works and publications of scholars, materials of scientific conferences in the field of development of enterprises of the transport industry in general and railways in particular, the study of issues of professional development of employees. the information base for the study consists of: statistical data of the ministry of infrastructure of ukraine and pjsc “ukrzaliznytsia”, the state statistics service of ukraine, statistical reporting and initial documentation of the railways of ukrzaliznytsia; internet resources, results of questionnaires and polls of environmental professionals (reference on the use of results and individual proposals of dvulit z. p., presented in the thesis for the degree of doctor of economics on the topic: “economic and environmental management of the sustainable development of rail transport enterprises” № 1/21-16 on 19.10.2016) etc. economic calculations are made using modern methods and computer technologies for the processing of statistical materials. the novelty of the research. the state of the issue of ensuring the necessary level of professional development of environmental professionals and specialists on six railways of ukrzaliznytsia is investigated. namely: 1. the state of the level of professional development of environmental professionals and specialists of 6 railways of ukrzaliznytsia for the period from 2012 to 2016 is researched and evaluated; its structural and dynamic analysis is carried out; 2. calculations of taxonomic indicators of the level of development of career development system for environmental professionals and specialists as distribution of expenses for advanced training for 6 railways for 2012–2016 are made; 3. carried out a questionnaire of environmental professionals and specialists, whose list of functional responsibilities, in accordance with the job description (both staffed and part-time workers), includes issues of the use of natural resources and environmental protection  – in order to clarify the availability of environmental education, the length of work on the railway, the length of work in positions associated with environmental activities, the level of satisfaction with the content of their work. 2. professional development of environmentalists and railway specialists education is the basis of the intellectual, spiritual, physical, and cultural development of the individual, its successful socialization, economic prosperity, the key to the development of society, united by common values and culture, and the state. the purpose of education is the comprehensive development of human being as a person and the highest value of society, its talents, intellectual, creative, and physical abilities, formation of values and competencies necessary for the successful self-realization, education of responsible citizens who are capable of conscious social choice and directing their activities in favour of other people and society, enriching on this basis the intellectual, economic, creative, and cultural potential of the ukrainian people, raising the educational level of citizens for the sustainable development of ukraine and its european choice. postgraduate education includes professional development  – acquiring new and/or improving previously acquired competencies by a person within the framework of professional activity or field of knowledge (verkhovna rada of ukraine, 2017). according to the law of ukraine “on professional development of employees” (verkhovna rada of ukraine, 2012b), the main areas of work of employers in the field of professional development of employees are, in particular: organization of professional training of employees; stimulating them for professional growth; provision of advanced training directly by the employer or educational institutions usually not less than once every five years. advanced training of the employer’s employees is continuous and carried out during their work in order to gradually expand and deepen their knowledge, skills, and abilities in accordance with the requirements of production. to this end, the employer periodically arranges for the employees professional training, retraining, and advanced training through a collective contract and agreements. in its turn, the law of ukraine “on environmental protection” (verkhovna rada of ukraine, 1991) states that raising the ecological culture of society and professional training of specialists are provided by the general obligatory complex education in the field of environmental protection, including in the system of vocational and higher education, advanced training and retraining. in order to meet the needs of the railway industry in the retraining and professional development of managers and specialists, there is a postgraduate training centre at the state university of infrastructure and technology, which provides education services, where managers and baltic journal of economic studies 129 vol. 3, no. 5, 2017 specialists of different structural divisions of railways of ukraine, whose duties include the use of natural resources and environmental protection, improve their qualification. during training, environmental professionals improve their qualification in the direction “efficiency of introducing environmentally sound technologies in railway transport”. 3. structural and dynamic analysis of advanced training by environmentalists and specialists of ukrzaliznytsia the number of specialists dealing with the use of natural resources and environmental protection, in total on 6 railways in 2012 amounted to 846 people, of which only 79 people work full-time (9.34%), while 767  people work on a part-time basis (90.66%); in 2013  – 835 people, among them work full-time  – 77  people (9.22%), work part-time  – 758 people (90.78%); in 2014 – 807 people, among them full-time – 74 people (9.17%), part-time  – 733 people (90.83%); in 2015 – 778 people, among them full-time – 69 people (8.87%), part-time  – 709 people (91.13%); in 2016  – 778 people, among them full-time – 69 people (8.87%), part-time  – 709 people (91.13%). as we can see, over five years the total number of specialists has decreased by 68 people or 8.04%, including there was a decrease in 2016 compared to 2012 in staff employees for 10 people or 12.66%, and part-time workers – 58 people (7.56%). based on annual reports from railway undertakings on environmental protection, in fig. 1, we presented this dynamics of the number of specialists dealing with the use of natural resources and environmental protection – in total for 6 railways for 2012–2016. 740 760 780 800 820 840 860 2012 2013 2014 2015 2016 a n um be r o f s pe ci al is ts o n 6 ra ilw ay s years fig. 1. dynamics of the number of specialists on the railways that deal with issues of environmental protection in general on 6 railways in 2012–2016 let us track the dynamics of the number of specialists involved in the use of natural resources and environmental protection, who have undergone advanced training in 2012–2016, for each of 6 railways, as shown in fig.  2. moreover, on 6 railways in general, in 2012, from 846  people  – 67 people have passed the advanced training, that is, 37%; in 2013, from 835  people  – 25 people (14%); in 2014, from 807 people – 30 people (17%); in 2015, from 778 people – 25 people (14%); in 2016 from 778 people – 33 people (18%). this testifies to the uneven tendency over these 5 years as to the number of specialists who have passed the advanced training in the environmental field. thus, compared to 2012, when 37% of specialists have undergone advanced training, there has been a significant decline in their number since 2013 and, in the following years, their number was approximately uniform: 14% in 2013, 17% in 2014, 14% in 2015, and 18% in 2016. altogether, for the period of fig. 2. dynamics of the number of specialists on 6 railways that deal with the use of natural resources and environmental protection, who have passed the advanced training in 2012–2016 baltic journal of economic studies 130 vol. 3, no. 5, 2017 5 years in total for 6 railways, 180 people have passed the advanced training, including: on the prydniprovska railways  – 51 people, pivdenno-zakhidna railways  – 48 people, pivdenna railways  – 35 people, donetsk railways – 24 people, lviv railways – 13 people, odesa railways – 9 people. fig. 3-8 reflect the ratio of the total number of specialists dealing with issues of the use of natural resources and environmental protection, and the number of environmental professionals who have improved their qualifications – for each of 6 railways for 2012–2016. the highest level of advanced training is on the prydniprovska railways, where, in total, for the last five years it was passed by 51 environmental professionals, and the lowest  – odesa railways, where only 9 people have passed it. among 6 studied railways, no environmental professional has upgraded his qualification on the donetsk railways in 2015 and 2016 and on the lviv railways in 2013 and 2015. it should be noted that there is a very uneven structure of the number of environmental professionals who have improved their qualifications, both in the section of railways and by year. 0 20 40 60 80 100 120 140 160 2012 2013 2014 2015 2016 n um be r, pe op le fig. 3. state enterprise “donetsk railways” fig. 4. state territorial branch association “lviv railways” fig. 5. odesa railways fig. 6. state enterprise “pivdenna railways” 0 20 40 60 80 100 120 140 160 2012 2013 2014 2015 2016 n um be r, pe op le 0 20 40 60 80 100 120 140 160 2012 2013 2014 2015 2016 n um be r, pe op le fig. 7. state territorial branch association “pivdennozakhidna railways” fig. 8. state enterprise “prydniprovska railways” note:   – the total number of specialists, dealing with the use of natural resources and natural environment protection,  – number of environmental professionals who have improved their qualifications. the highest percentage of environmental professionals who have improved their qualifications to the total number of specialists dealing with the use of natural resources and natural environment protection was on three railways in 2012: donetsk railways  – 13.42%, prydniprovska railways  – 11.81%, pivdennozakhidna railways  – 11.43%, however, there was a downturn in subsequent years. the other three railways had the highest figures for the number of ecologists who improved their qualifications to the total number of specialists involved in the use of natural resources and environmental protection, as follows: pivdenna railways – 7.86% in 2013, lviv railways – 4.83% in 2016, odesa railways – 3.39% in 2016. the lowest percentage of the number of environmental professionals who have improved their qualification to the total number of specialists dealing with the use of natural resources and environmental protection on the odesa railways for all 5 years (2012–2016) – below 1% in 2012–2014 (0.75% in 2012, 0.84% in 2013, and 0.85% in 2014), 1.7% in 2015, and 3.39% in 2016. in addition, on each of five other railways, it was the lowest in some years: donetsk railways  – 0.00% in 2015 and 2016, lviv railways  – 0.00% in 2013 and 2015, prydniprovska railways  – 2.76% in 2013, pivdenna railways  – 3.68% in 2016, pivdenno-zakhidna railways – 5.11% in 2013. thus, the ratio of the number of environmental professionals who have improved their qualification to the total number of specialists dealing with the use of natural resources and natural environment protection has changed during 5 years under study on 6 railways as follows: donetsk railways – from 0.00% to 13.42%, lviv railways  – from 0.00% to 4.83%, pivdenno-zakhidna railways  – from 5.11% to 11.43%, prydniprovska railways  – from 2.76% to 11.81%, odesa railways  – from 0.75% to 3.39%, pivdenna railways – from 3.68% to 7.86%. moreover, it should be noted that the total number of environmental professionals and specialists on each railway in the last 5 years has changed somewhat unevenly, however, in five railroads (except lviv) in 2016 compared with 2012 there was a decrease in the total number of these workers, and this reduction was observed gradually every year from 2012 to 2016 on most railways. the divergence in the total number of environmental professionals and specialists fluctuated by railways as follows: donetsk railways – 5.37%; lviv railways  – 4.73%; pivdenno-zakhidna railways  – 15.00%; prydniprovska railways  – 17.93%; odesa railways – 8.52%; pivdenna railways – 6.2%. 4. dynamics of expenses of railways for advanced training let us track the dynamics of costs for the training of environmental professionals in total for 6 railways during 2012–2016, which is shown in fig. 9. baltic journal of economic studies 131 vol. 3, no. 5, 2017 80400 33900 36000 34250 50622 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 2012 2013 2014 2015 2016 u a h years fig. 9. dynamics of costs for the advanced training of environmental professionals in total for 6 railways during 2012–2016, uah as we can see, there was a sharp decline in costs in 2013, compared to 2012, more than doubled (which correlates with 37% of environmentalists who have completed advanced training in 2012 – compared with 14% in 2013); this tendency for minor expenses was maintained during 2014–2015 (which also correlates with 17% of environmentalists who have undergone advanced training in 2014, and 14% in 2015), and in 2016 there was an increase in costs by almost half, which, however, was only about 60% of the amount of costs in 2012 (with the fact that in 2016 only 18% of environmentalists have completed advanced training  – almost as much as in previous years of 2013–2015). let us analyse the costs incurred by ukrzaliznytsia for advanced training of environmental professionals during 2012–2016 in the percentage for each of 6 railways. the structure of distribution of costs for training was uneven and unstable. as none of the environmental professionals improved qualification on the donetsk railways in 2015–2016 and on the lviv railways in 2013 and 2015, therefore, there were no corresponding costs for these railways in the specified years. a more or less stable structure of the distribution of costs for advanced training during this period was peculiar for the pivdenno-zakhidna railways, the cost of which in the structure of total cost of 6 railways ranged from 23.88% to 32%. in the remaining 5 railways, this structure was leap-shaped and uneven. the largest fluctuations in the structure of distribution of costs for advanced training were on the pivdenna railways: from 11.94% to 44%. the lowest costs for the professional development of environmental professionals in total for the 5 years studied were on the odesa railways, even lower than in lviv and donetsk, where there were no such expenses for two years at all. and the highest costs in total for 5 years were on the prydniprovska railways  – five times more than in odesa; on the pivdenno-zakhidna railways – almost five times as much, as well as on the pivdenna railways  – where it was almost four times more costs than on the odesa railways. for the study of the state of the level of professional development of environmental professionals on 6 railways, the definition of the structure of the distribution of costs for their postgraduate education in the context of 2012–2016, it is expedient to involve methods of multidimensional comparative analysis. this is determined by the multiplicity of objects and processes that are characterized by the versatility and ambiguity of ukrainian railways as complex dynamic systems. thus, let us calculate taxonomic indicators of the development level of the system of distribution of costs for the training of environmentalists on 6 railways of ukrzaliznytsia on the algorithm of taxonomic analysis (syrvetnyk-tsarii v.v. and duliaba n.i., 2016; iliash o.i., 2012; pliuta v., 1980): formation of the matrix of observations, standardization of values of elements of the matrix of observations, identification of the vector-standard, determination of the distance between individual observations and the vector-standard, calculation of the taxonomic coefficient of development. the taxonomic index can reach the value in the interval [0;1] and has the following interpretation: the closer the value of the generalization indicator to one, the more developed the individual object (process) in this period. with its help, it is possible to estimate the “average” level of values of characteristics characterizing a phenomenon or a process reached in a certain period or a time point. the calculations of the taxonomic indicator of the level of development of the system for allocating costs for the improvement of the qualification of environmental professionals in total for 6 railways in 2012–2016  calculated by us showed the following values ranging from 0.3608 to 0.4742: к2012=0.3608, к2013=0.3921, к2014=0.4485, к2015=0.4742, к2016=0.4356. thus, by gradation of values of the indicator, it is established that all 5 surveyed years were characterized by an indicator below the average, which is evidence of an ineffective allocation of funds for advanced training in total for 6 railways per study year. true, the level of development of the system for allocating costs for the training of environmental professionals in total for 6 railways has shown a tendency for annual gradual growth over 2012–2015: from 0.3608 in 2012 to 0.4742 in 2015, however, slightly decreased to 0.4356 in 2016. moreover, the value of the taxonomic indicator for 2012 by individual railways was in the range from 0.2 to 0.39, which corresponds to the low level of development of the system for allocating costs for the training of environmental professionals. and over the next four years, the value of this indicator on individual railways ranged from 0.4 to 0.59, which, while indicating its rise to the average level of development of the system of cost allocation, however, had little leaping tendency: during three years from 2013 to 2015, there was an increase in the value of taxonomy indicators, and in 2016 it decreased by 8.14%. baltic journal of economic studies vol. 3, no. 5, 2017 132 4. questioning of environmental professionals and specialists of ukrzaliznytsia given the uneven tendency on 6 railways in relation to decreasing in 2013–2016 compared to 2012 in the number of environmental professionals who have undergone an advanced training, let us investigate this problem in more detail. for the purpose of this study, we conducted a questionnaire survey of managers and specialists of various structural divisions of 6 ukrainian railways in advanced training courses at postgraduate training centre of the state university of infrastructure and technology in the period from september 12 to 23, 2016 (reference, 2016). the choice of the form of an expert survey is determined by the purpose of sociological research, available resources, processing possibilities of the received data. therefore, we used a polling form, such as a one-time individual survey (questionnaire). the questionnaire consisted of 6 questions, forms for filling in the personal data of the respondent and provided for self-esteem results. the questions were of open and closed formats. in the form of filling in the respondent’s personal data, it was foreseen to find out the education in the environmental specialty; work experience in positions related to environmental activities; the work experience in ukrzaliznytsia in general and in the positions, the list of functional responsibilities, in accordance with the job description (both staffed and part-time workers), includes issues of the use of natural resources and environmental protection; as well as satisfaction with the content of activities in positions held. the experts conducted a selfassessment on a point scale. such additional information made it possible to set the level of the expert group as a whole. principles of small samples and the sufficiency of information were chosen to form the volume of the sample population. the list of respondents who formed the sample population covered 31 environmental professionals and specialists (managers, chiefs, deputy chiefs, specialists, engineers on the ecology of services, departments, sectors, directorates, structural units, stations, railways, and other enterprises of railway transport). the questionnaire included the following questions: 1. age of the employee; 2. work experience in ukrzaliznytsia; 3. work experience in positions related to environmental activities; 4. work experience in ukrzaliznytsia in positions, which list of functional responsibilities, in accordance with the job description (both staffed and part-time workers), includes issues of the use of natural resources and environmental protection; 5. availability of higher education in an environmental specialty; 6. satisfaction with the content of work in a position. as a result of the processing and systematization of data obtained during the survey, we have set the following. the average age of the respondents was 39 years, the youngest employee was 24 years old, and the oldest  – 59 years old. the work experience of the respondents in ukrzaliznytsia varied from 2 to 40 years, and on average it was 16 years. the average work experience in positions related to environmental activities was 8 years, that is, half of the length of work on ukrzaliznytsia, 2 of respondents had such experience only up to 1 year, 20 people had 10 years of work experience, and 9 persons – more than 10 years, one of whom has been working for such a post for 27 years. the average length of work in ukrzaliznytsia in the posts, which list of functional responsibilities, in accordance with the job description (both staffed and part-time workers), includes issues of the use of natural resources and environmental protection, was 7 years. a particular attention is paid to the fact that only 5 employees or 16.13% of the total number of respondents have professional environmental education, that is, the rest 83.87% have no such education. 16 persons or 51.61% are satisfied with the content of work performed on a position, unsatisfied  – 7 people or 22.58%, partially satisfied – 8 people or 25.81%. consequently, we can draw the following conclusions from our survey of environmental professionals and specialists of ukrzaliznytsia: 1) a very low percentage of employees who have higher education in an environmental specialty; 2) for the most part, they are employees who have sufficient work experience in positions related to environmental activities, but a half of them are actually dissatisfied with the content of the work performed and, therefore, it has a significant impact on the quality of their functional responsibilities and productivity and thus not promotes their acquisition of new and/or improved competences previously acquired within the framework of their professional activities in the field of environmental protection. 5. research conclusions in order to ensure the sustainable development of ukraine’s railways on the way to european integration, eu requirements and standards must be taken into account both in the reform of rail transport in general and in the management of its impact on the natural environment. the training of modern skilled personnel is an important part of the strategy of sustainable economic and ecological development of rail transport; therefore, a special attention should be paid to the training of environmental professionals and specialists working in positions related to the use of natural resources and natural environment protection. the european direction of the railways of ukraine requires new approaches to the education and professional development of such specialists. summing up the results of our research, we are convinced that both the structure of the number of baltic journal of economic studies 133 vol. 3, no. 5, 2017 environmental professionals and specialists who have increased the qualification, as well as the structure of costs for the training of environmental professionals and specialists of six studied railways, which are a part of ukrzaliznytsia, in the period from 2012 to 2016 is very volatile. thus, we arrive at the conclusion that during the analysed period, such significant structural changes do not correspond to the principles and provisions of the sustainable development of rail transport enterprises. and therefore, this structure needs to be improved and optimized to ensure the stability and predictability of costs of advanced training of environmental professionals and specialists in order to reduce costs of violating environmental legislation, minimizing the amount of fines and claims, rational use of nature and environmental measures, as well as to meet the requirements of the european legislation in the field of environmental protection and quality of postgraduate education in terms of qualification improvement of environmental professionals and specialists of railway transport enterprises. the results of the carried out research made it possible to conclude that there is no complete information array regarding the current state of the issue of professional development of environmental professionals and specialists, including assessment of the availability of environmental education, work experience, and satisfaction with the content of functional responsibilities in positions occupied. thus, first of all, it is necessary to recognize the existence of this problem and, therefore, it is necessary to adopt appropriate managerial decisions in the direction of solving the identified problem, which in the future will make it possible to reduce, and subsequently, prevent the occurrence of environmental penal sanctions and claims against ukrzaliznytsia, and other unpredictable costs. references: ukrzaliznytsia pjsc. official website, [online] retrieved from: http://www.uz.gov.ua [date of referral: 21 january 2018]. verkhovna rada of ukraine (1991). law of ukraine “on environmental protection” № 1264-xii on 25.06.1991 [online] retrieved from: http://zakon1.rada.gov.ua/laws/show/1264-12 [date of referral: 21 january 2018]. verkhovna rada of ukraine (1996). law of ukraine “on rail transport” № 273/96-вр on 04.07.1996 [online] retrieved from: http://zakon1.rada.gov.ua/laws/show/273/96-вр [date of referral: 21 january 2018]. verkhovna rada of ukraine (2010). law of ukraine “on fundamental principles (strategy) of the state environmental policy of ukraine for the period until 2020” № 2818-vi on 21.12.2010 [online] retrieved from: http://zakon2.rada.gov.ua/laws/show/2818-17 [date of referral: 21 january 2018]. verkhovna rada of ukraine (2012a). law of ukraine “on specifics of establishing the public joint stock company of rail transport of public use” № 4442-vi on 23.02.2012 [online] retrieved from: http://zakon3.rada.gov.ua/laws/ show/4442-17 [date of referral: 21 january 2018]. verkhovna rada of ukraine (2012b). law of ukraine “on professional development of employees” № 4312-vi on 12.01.2012 [online] retrieved from: http://zakon3.rada.gov.ua/laws/show/4312-17 [date of referral: 21 january 2018]. verkhovna rada of ukraine (2017). law of ukraine “on education” № 2145-19 on 05.09.2017 [online] available at: http://zakon3.rada.gov.ua/laws/show/2145-19 [date of referral: 21 january 2018]. dvulit, z. p. (2015). integration of enterprises of the rail transport of ukraine into the european railway system: an environmental component. collection of scientific papers of the state economy and technology university of transport. series “economics and management”, 34, p. 89-102. state statistics service of ukraine. official website, [online] retrieved from: http://www.ukrstat.gov.ua/ [date of referral: 21 january 2018]. reference (2016). on the use of results and individual proposals of dvulit z. p., presented in the thesis for the degree of doctor of economics on the topic: “economic and environmental management of the sustainable development of rail transport enterprises” № 1/21-16 on 19.10.2016. european parliament and council (2004). directive “on safety on the community’s railways” 2004/49/ec on 29.04.2004 [online] retrieved from: http://zakon3.rada.gov.ua/laws/show/994_953 [date of referral: 21 january 2018]. european parliament and council (2008). recommendation “on the establishment of the european qualifications framework for lifelong learning” 2008/c 111/01 on 23.04.2008 [online] available at: http://zakon2.rada.gov.ua/ laws/show/994_988 [date of referral: 21 january 2018]. iliash o. i., 2012. transformations of ukraine’s social security system: regional dimension: [monograph]. lviv: pais. cabinet of ministers of ukraine (2009). resolution “state target program for rail transport reform for 2010–2019” № 1390 on 16.12. 2009 [online] retrieved from: http://zakon3.rada.gov.ua/laws/show/1390-2009-%d0%bf [date of referral: 21 january 2018]. cabinet of ministers of ukraine (2014). annex 1 “list of enterprises and institutions of rail transport of general use, on the basis of which public joint stock company “ukrainian railways” is formed” to the resolution “on formation of public joint stock company “ukrainian railways” № 200 on 25.06.2014 [online] retrieved from: https://www.kmu.gov.ua/ ua/npas/247420738 [date of referral: 21 january 2018]. baltic journal of economic studies 134 vol. 3, no. 5, 2017 kravets, t., honcharuk, v., karabut, v. (2017). results of the work of the rail transport on environmental protection for 2016. k.: ukrzaliznytsia. key aspects of the strategy for development of pjsc “ukrzaliznytsia” for the 2017–2021 years. official website of pjsc “ukrzaliznytsia”, [online] retrieved from: http://www.uz.gov.ua/files/file/strategy_presentation_fin1.pdf [date of referral: 21 january 2018]. pliuta, v. (1980). comparative analysis in economic research: methods of taxonomy and factor analysis. m.: statistika. european council, 1995. directive “on the licensing of railway undertakings” 95/18/ec on 19.06.1995 [online] retrieved from: http://zakon2.rada.gov.ua/laws/show/994_952 [date of referral: 21 january 2018]. syrvetnyk-tsarii, v. v., duliaba, n. i. (2016). taxonomic analysis as a tool for identifying opportunities for ensuring the development of the effectiveness of management of the economic potential of enterprises of trade in consumer co-operation. global and national problems of the economy, 9, p. 419-423. statistical data on ukrainian railways. official website of the ministry of infrastructure of ukraine, [online] retrieved from: https://mtu.gov.ua/content/statistichni-dani-pro-ukrainski-zaliznici.html [date of referral: 21 january 2018]. baltic journal of economic studies 58 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 v. m. koretsky institute of state and law of the national academy of sciences of ukraine, ukraine (corresponding author) e-mail: wlacademic@gmail.com orcid: https://orcid.org/0000-0002-7411-2086 2 institute of public administration and research in civil protection, ukraine e-mail: sergiy_kiev@ukr.net orcid: https://orcid.org/0000-0002-3787-0929 3 international humanitarian university, odesa, ukraine e-mail: ychebotdelmgu@gmail.com doi: https://doi.org/10.30525/2256-0742/2022-8-5-58-69 geostrategy of ukraine: a mathematical model of building sectoral institutional-organizational structures volodymyr lipkan1, serhii poteriaiko2, serhii mul3 abstract. structuring the geostrategic landscape entails using integrated modeling methods to expand strategic horizons to forecast the development vectors of political and economic systems. the reasons for the barbarous war of the moscow regime against the ukrainian state have a significant basis both for theoretical study and further practical implementation of the obtained data into political and security practices. examining the causeeffect complex of articulation of destructive paradigms has become the subject of many sciences. however, requiring their completed conceptualization within the political reality, individual phenomena are poorly studied from the standpoint of economic representation in the context of mathematical modeling of institutional implementing strategic national interests in the most crucial areas of life. thus, public infrastructure policy is one of the reference areas. the development of the geostrategy of the modern ukrainian state actualizes the task of elaborating precise mathematical models for assessing geostrategic processes, primarily the economic component. clarifying the economic foundation of the war against ukraine makes it possible to identify the facts of falsification in the modern political reality of those economic concepts which focus on the genocide of the ukrainian nation under the guise of the development concept, reform, modernization, integration, etc. the paper articulates the conditionality of referring to the mathematical dimension of geostrategy implementation as exemplified by state infrastructure policy, analyzes the models of rendering political and economic decisions, specifies essential characteristics of institutional structures, and determines the algorithm for selecting experts. the article extends the central author’s idea of a clear distinction between geopolitics and geostrategy. therefore, mathematical modeling assists in proving the nullity of argumentation and the lack of logical and other prerequisites for implementing ukraine’s economic policy in the interests of third countries. it is concluded that the scientific study of alternatives to building institutional structures carrying out geostrategy, combined with articulating the economic dimension of their efficiency in the most important areas of life, constitutes an essential layer of political and economic doctrines. they should lay the groundwork for the design of the geostrategy of the modern ukrainian state outside the context of stigmatization and attempts to rewrite history, semblance of the geostrategic landscape in a space-time format, and imposing destructive economic models on ukraine. key words: political and economic dimension of geostrategy, economic policy, geostrategy of modern ukrainian state, mathematical model, development alternatives, economic ideology, ukrainianness, passionarity of titular ethnic group. jel classification: p10, c10 1. introduction the development of the modern ukrainian state is increasingly facing expressive forms of its rejection as an independent and self-sufficient entity of international relations. studying only political or military roots is insufficient to model modern complex processes within the geostrategic landscape. there is a need to apply interdisciplinary metho baltic journal of economic studies 59 vol. 8 no. 5, 2022 dology, including mathematical modeling methods, which make it possible to reach superior abstractions through the use of reference models. since public policy is a systemic phenomenon, the application of extrapolation models should be preceded by the use of a reference model for building institutional-organizational structures in the separate most challenging and complex system. in this article, the system of state infrastructure policy is regarded as a reference given the scale. the issues covered in research are raised for the first time in such interpretation; thus, there is no practical need to cite and point out those who have not dealt with them. the purpose of the article is to present a mathematical model of building sectoral institu tional-organizational structuring as exemplified by the system of state infrastructure policy. during the analysis of literature sources (afonichkin, mihalenko, 2009; maliarets, minienkova, 2017; morozov, 2013; putiatyn, 2015; tsiutsiura, kryvoruchko, tsiuriupa, 2012; shtoyer, 1992; linkov, moberg, 2012; alireza afshari, majid mojahed and rosnah mohd yusuff, 2010), it was found that in order to substantiate decisions on an optimal institutional-organizational structure for imple menting the strategy of ukraine’s state infrastructure policy, it is advisable to refer to multi-criteria analysis, because assessment along with the developed criteria will allow ranking alternatives by the degree of benefits to select the optimal option of an adequate solution. an analysis of alternatives contributes to the identification and overcoming of limitations arising when making unstructured decisions, and the integration of objective indicators with subjective assessments, particularly under the active use of subjective judgments, can act as a basis for generating a set of all possible options for analytical work on making a decision relevant to specified conditions. it seems appropriate to develop a decision-making algorithm in view of the multi-criteria management decisions analysis (mсmda) to justify the chosen approach to selecting alternatives for institutionalorganizational structures for carrying out the strategy of state infrastructure policy. it should be kept in mind that the problem solution through applying the mсmda methodo logy requires compliance with the following steps: 1) selection of alternatives, which involves analysis and selection of the most significant alternatives from the range of possible or given options to solve a specific problem; 2) determination of the best alternative from the considered ones; 3) alternative ranking (from the best to the least optimal given assessments and benefits). 2. reference management decision model based on a multi-criteria analysis a decisive advantage in applying the mсmda approach is an option to arrange expert judgments by descending importance and compare specific criteria without considering units of their measurement that is achieved by standardizing the judgments. to formalize the choice problem, criteria must have quantitative characteristics because a criterion is a quantitatively expressed goal or a quantitative model of this goal. in general, criteria can be presented as some evaluation function which acquires value based on a set of evaluations. one of the approaches to solving multi-criteria management problems is related to the procedure for creating a generalized function: f (a1, ai, ai3; ..., ain), which is monotonically dependent on the criteria ai1, ai2, ai3, ..., ain. the relevant approach is realized through the method of criteria convolution. following the research objectives and set tasks, it is expedient to apply the method of additive convolution of criteria. this method is grounded on criteria standardi zation, that is, bringing them to comparability. in addition, the vector of the weighting factors of the criteria λ = (λ1, λ2, …, λj), which can facilitate assessing the importance of a particular alternative, is determined. at the same time, the requirement for (1) is met: j n j � � � 1 1� , � j �� 0. (1) a new objective function (2) is built for the additive criterion: f ai j n j ij� � � � �� 1 � � (2) the problem of optimizing the scalar criterion z = f (a) → max (min) is solved under the conditions that a ∈ d, where a = (a1, a2, …, an) – a plurality of points which comply with a system of constraints g(a1, a2, …, an) ≤ bi, i=1,2,…,m; a – an allowed area of solutions. the elements of the d set are admissible solutions or alternatives, and the numerical functions fj, j=1,2,…,n are objective functions or criteria defined for the a set. in general, the objective function has the following form (3): f a f a f a f a max min j n j j j j n j� � � � � � � � � � � � � � � � �� � � 1 0 1 � � (3) where: n – the number of combined partial criteria; λj – the weighting factor of a j-th partial criterion; fj(a) – the numerical value of a j-th criterion; f aj 0 � � – j-th standard divisor; fj(a) – the standardized value of the j-th partial criterion. baltic journal of economic studies 60 vol. 8 no. 5, 2022 as can be seen from an expression (3), the criterion for choice optimality is the objective function’s maximum (minimum) value. the generalized objective function can be used to convolute the partial criteria of optimality if: 1) partial (local) criteria are quantitatively measurable in order of importance, that is, each of them can be assigned some number λj, which quantitatively characterizes its importance to other criteria; 2) partial (local) criteria are homogeneous (they have the same dimension). in this case, for solving a multi-criteria optimi zation problem, it is worthwhile to apply the additive criterion of optimality. an additive criterion, or an optimality criterion, is found by adding the standardized values of the partial criteria. given the additive formula (2), the following conditions must be met: 1) the availability of m variant solutions (alternatives); 2) developed criteria (n) which stipulate the optimal solution choice; 3) weighting factors (λj, where: j=1,...,n.) to assess the degree of importance of each criterion; 4) evaluation of alternatives upon each criterion aij, i=1,..., m, j=1,...,n. taking into account the above conditions, a matrix is built. the relevant matrix conveys the alternatives (аm) in the rows and the criteria (аmn) in the columns. according to the described conditions (table 1), the value of the optimality criteria (objective function) is determined (4): f j n j j1 1 1� � �� �� � ; f j n j j2 1 2� � �� �� � ; ... fm j n j mj� � �� � 1 � � (4) due to the heterogeneity of criteria by optimization vectors (max/min) or if different measurement scales are used, these criteria should be subject to standardization which means such a sequence of procedures which reduces all criteria to a single, dimensionless scale of measurement. table 1 matrix of multicriteria alternative selection alternatives local criteria k1 k2 … kп а1 а11 а12 … а1п а2 а21 а22 … а2п … … … … … аm ат1 ат2 … атп weighting coefficient λ1 λ2 … λп source: author’s development based on [2; 10] the maximum and minimum of each local criterion is determined given: – criteria to be maximized (5) aj+ = max aij, i = 1,m (5) – criteria to be minimized (6): aj= min aij, i = 1,m (6) according to the principle of maximum efficiency, the standardized criteria are determined by relying on the following ratios: – for the criteria to be maximized, the standardized estimates are calculated by the formulas (7; 8): � � �ij ij j j e� � � � � , ,1 ; (7) � � � � �ij ij j j j j e� � � � � � �� �� � – – , ,1 ; (8) – for the criteria to be minimized, the standardized estimates are calculated by the formulas (9; 10): � � �ij ij j j e n� � � � � �� �1 1– , , ; (9) � � � � �ij j ij j j j e n� � � � � � � �� � � – – , , ;1 (10) an alternative providing the maximum value of the target function will be optimum (2). according to the minimum loss principle, the standardized criteria are determined from the ratios: – for criteria to be maximized, the standardized estimates are calculated by the formulas (11; 12): � � �ij ij j j e� � � � �� �1 1– , , ; (11) � � � � �ij j ij j j j e� � � � � � �� � � – – , , ;1 (12) – for criteria to be minimized, the standardized estimates are found by the formulas (13; 14): � � �ij ij j j e n� � � � � � , , ;1 (13) � � � � �ij ij j j j j e n� � � � � � � �� � � – – , , ;1 (14) an alternative providing the minimum value of the target function will be optimum (2). the proposed methodology underlies the scientific and practical approach to selecting alternatives to drafting one of the sectoral strategies – the strategy of state infrastructure policy (hereinafter – sip). to substantiate a theoretical and applied model of the sip strategy, it is necessary to pay attention to its organizational and functional frameworks. first of all, the sip system operation is dased on the coordinated interaction of horizontally and vertically integrated functional systems, which implement their functions through synthesizing reference models of the relevant system. baltic journal of economic studies 61 vol. 8 no. 5, 2022 given the scale of functions and the availability of a ramified public administration system, it seems relevant the study relies on the organizational and functional level, which involves coordination and synchronization of communications in two directions: horizontal (at the level of central executive bodies and other state bodies); vertical (at the level of territorial units of central executive bodies and other state bodies, regional and local authorities). the division of powers between the mentioned authorities should be realized under the principle of observance of a unified legal framework, which will ensure the best division of labor for the performance of state tasks and functions and the provision of appropriate services, thus promoting the interaction of system elements by uniting them into a single system. considering research objectives, there is a need to identify the most efficient from a perspective of the organizational framework of the executive body, which will be able to formulate and directly implement the strategy of state infrastructure policy most effectively. 3. analysis of alternatives to institutional and organizational structures implementing ukraine’s geostrategy to solve the relevant problem, it is expedient to analyze a range of organizational structures as appropriate alternatives, which have a single purpose but differ in the legally specified scope of the authority’s legal action given its rights, obligations, purpose, tasks, and functions. the first alternative to the formation and implementation of the sip strategy is the establishment of a separate public administration body, which is empowered to draft and implement the relevant state policy in the specific area. the second alternative provides for the establishment of a public administration body subordinated to a special-purpose law enforcement agency (a national counter-terrorism system can be used as a reference model). the third alternative is the establishment of the government office for the development and implementation of the sip strategy. the fourth alternative is proposed in view of the creation of the center for the protection of critical infrastructure under the office of the president of ukraine (opu) and the office for critical infrastructure protection in the cmu structure with subordinated se "ukrainian institute". the alternatives put forward for the analysis were named considering the existing in political science and security practice rights to justify the organiza tional structures for the implementation of the sip strategy in the public administration system. the key benefits of establishing a separate state body are as follows: 1) merger of various objects of the strategic infrastructure into a single management system, which allows for effective and efficient control over the performance of tasks, powers and functions within a single state body; 2) scale saving stimulated by operational management and response to state variability. shortcomings in the establishment of a separate state body should be considered within the categories of time and costs, that is, the duration of all organiza tional procedures for the establishment of a specific central executive body and the costs for implemen ting the project. in addition, the scope of financial support of the new-established state body requires more funding from the state budget compared to other organizational structures. the scale of such an organizationally ramified structure leads to tight control over the vertical. as a result, there is evident pressure on performers and an increase in the document flow. the following alternative justifies the creation of a body subordinated to a separate special-purpose law enforcement agency (national security entity/ security policy entity) (this article refers to the sbu model). the benefits of the organizational structure under consideration originate from the sbu legal status, which envisages the assessment of critical infrastructure security, the procedure for responding to some incidents of information security violations and their elimination. in addition, the advantages also include the availability of formed communications, which are realized through a smooth-running system of inter-agency interaction and coordination of the performance of ministries, which makes it possible to formulate and implement joint inter-agency communication programs. the main disadvantage of developing such a structure is a niche expertise of the sectoral executive body, which is regulated by the law of ukraine "on the security service of ukraine" (pro sluzhbu bezpeky ukrainy: zakon ukrainy), as well as its dependence on the political climate taking place in the geostrategic landscape. alternative no. 3 provides for the establishment of a government office for critical information protection. the advantages of such an organizational entity are as follows: mobility of response to events arising during the implementation of the sip strategy; structured and adaptive budget financing compared to the above-mentioned public authorities; the possibility of accumulating a powerful expert and analytical capacity; attraction of additional investments. the shortcomings of this unit’s organization comprise the minimization of its functions arising from its status, powers and subordination, as well as the baltic journal of economic studies 62 vol. 8 no. 5, 2022 need for constant involvement of highly-qualified specialized experts. the center of critical infrastructure protection under the office of the president of ukraine and the office for critical infrastructure protection in the cmu structure with subordinated se "ukrainian institute", described by the fourth alternative, has the following main advantages: a) established interaction and relations with public authorities at all levels, taking into account the general provisions of the law of ukraine "on the cabinet of ministers of ukraine" (pro kabinet ministriv ukrainy: zakon ukrainy); b) moderation of time and costs for the establishment and development of such a budgetary institution; c) flexibility in information flow management. the threat of functions’ duplication due to the extensive functional responsibilities and the need for specialists in various branches with the appropriate qualifications can be considered the main shortcomings. in order to obtain competent judgments on the alternatives put forward and test the methodology of a multi-criteria analysis using empirical objects and considering the tasks set, it is expedient to resort to expert assessment. expert assessment refers to the procedure for obtaining an estimate of a problem based on the opinion of specialists (experts) to make a further decision (choice) (danelyan, 2015). experience, intuition, and feelings of perspective combined with information allow the subjects of expert assessment (experts) to more accurately choose the most important objectives and directions of development and find the best options for solving complex problems in the absence of information sources about the solution of similar problems in the past. despite the predicted bias – the use of the above characteristics for the selection of experts – expert assessments can be often one of the most effective, fast and accurate decision-making tools (maryicheva, 2018). however, to increase the accuracy, objectivity of assessments and the quality of the decision making procedure, several experts should be involved and, hence, their opinions should be regarded when analyzing alternatives. expert assessments can provide generalized information about the object (phenomenon) under study to substantiate a certain decision that is set by expert evaluation purpose. the information obtained is not conclusive. it is subject to processing using the selected evaluation methodology. the application of a particular method when analyzing individual expert assessments depends on the complexity of the current problem and the specifics of the study area. by relying on the analyzed sources (azgaldov, kostin, 2012; danelyan, 2015; maryicheva, 2018; kalinina, hozhyi, musenko, 2012; morozov, 2013; podolianchuk, 2014), it was visualized the process of assessing expert competence, which was grounded on traditional evaluation criteria and available approaches and methods of examination: 1) evaluation requirements (credibility, efficiency, and reliability); 2) competence criteria (work experience, a number of successfully completed projects, and a qualification level); 3) evaluation methods (self-assessment, mutual assessment, assessment by a working group). the issue of assessing expert competence is quite complex. however, given the tasks set, such formal general competence criteria as position, academic degree and rank, seniority, the number of examinations or projects completed, the number of scientific research, developments in the relevant field, etc. can be used for evaluation. the selection of the above criteria originates from the hypothesis that to solve the problem, there is an available amount of information sources for making a decision. therefore, in terms of the problems, experts act as qualitative sources and fairly accurate measures of information. as for the ways of evaluation, they have both some advantages and disadvantages associated with the influence of subjective factors. in particular, if the assessment uses a method involving mutual evaluation, each candidate elected to the expert group assesses the competence of others. in the other case, an analytical group, which organizes and runs expertise, is formed. however, the analyzed methods entail awareness of each expert regarding the qualifications and professionalism of other selected specialists. the method’s significant drawback also be evident when there is a confrontation between experts, or a coalition of experts. this considerably affects assessment objectivity and, thus, the questionnaire results that can distort the examination of findings. such methods are not applicable towards the purposes set in the paper. in this context, it is advisable to use such a method as self-assessment, when the expert himself provides an assessment of the awareness of the expertise subject and his competence. that sort of method is the most acceptable amidst the relevant assessment since the competence criteria are based on the analysis of documentary data. if the selection of experts to perform tasks and objects is carried via maximum estimates under the coefficient of competence, it is possible to use a combined method for ranking experts, which envisages the application of a methodological toolkit of the analytic hierarchy process (saati, 1993; bratushka, novak, khailuk, 2010). a hierarchical structure consists of three levels: 1) the purpose is set – the choice of experts; 2) the criteria for choosing experts; 3) alternatives – the experts themselves. baltic journal of economic studies 63 vol. 8 no. 5, 2022 4. algorithm for selecting experts by assessing their competence according to the hierarchical method the structuring of tasks as a hierarchical structure needs the following: 1) to build a hierarchy meeting the analysis objectives (in our case, it is the choice of n experts from the set of n) using factors (criteria) through comparison of options to the lower level, which contains a set of alternatives; 2) to select factors for assessing competence, which should comprise: an expert’s area of expertise given education (legal, economic, political, or public administration); employment history in central executive bodies; scientific qualification (the availability of a scientific degree: candidate of sciences, doctor of sciences, or lack of a scientific degree); work experience associated with the subject of expertise, that is, work in public administration; experience in conducting expert evaluation, that is, the practice of conducting examinations on the establishment, creation and liquidation of organiza tional structures in public administration; experience in the economic appraisal of the costs for realizing a decision. the solution to the problem of selecting specialists for an expert assessment consists of three stages: 1) drawing up a list of prospective candidates for performing an expert examination of certain objects; 2) selection of an expert group with a smaller number, considering the qualitative components of the assessments, that is, the sample includes experts who have gained the maximum coefficients of competence; 3) the determination of average sampling error. to assess the professional competence of an expert, relevant test questions are drafted. for this purpose, it is used a test form, which includes questions on the professional qualification of an expert (table 3) and the assessment of alternatives to deciding on the choice of a particular organizational form meeting the profile of critical infrastructure protection. the survey involved ten specialists (experts), considering the research area, the subject of examination, and professional activity. by applying the documentary method, the respondents answered the test questions. the survey results are presented in table 3. at the first stage of assessing the experts’ compe tence, the issue of choosing the weight coefficients of the experts upon the specific factors is solved. table 2 test questions on the professional competence of experts upon specific factors (criteria) factors (criteria) weighting coefficient value under the specific scales expert specialization by education (f1) legal economic public administration 0.2 0.3 0.5 employment history in central executive bodies (f2) 1 – 5 years 5 –10 years more than 10 years 0.2 0.3 0.5 scientific qualification (f3) without a scientific degree phd dsc 0 0.4 0.6 experience with the subject under examination (f4) none 5 – 10 years more than 5 years 0 0.4 0.6 experience in conducting expert assessment (f5) none 1 – 3 times more than 3 times 0 0.4 0.6 source: the authors’ development table 3 results of the expert survey and calculation of weighting coefficients f1 f2 f3 f4 f5 sum xi wi expert no. 1 0,5 0,4 0,4 0,4 0,4 2,1 0,121387 expert no. 2 0,5 0,2 0 0,4 0,6 1,7 0,098266 expert no. 3 0,3 0,5 0,4 0 0 1,2 0,069364 expert no. 4 0,5 0,3 0,4 0,6 0,6 2,4 0,138728 expert no. 5 0,5 0,5 0,6 0,6 0,4 2,6 0,150289 expert no. 6 0,2 0,2 0,4 0,6 0,4 1,8 0,104046 expert no.7 0,3 0,4 0 0 0,4 1,1 0,063584 expert no. 8 0,2 0,5 0,6 0 0 1,3 0,075145 expert no. 9 0,3 0,2 0,4 0 0 0,9 0,052023 expert no.10 0,3 0,3 0,4 0,6 0,6 2,2 0,127168 sumфj 3,6 3,5 3,6 3,2 17,3 1 note: an expert’s specialization by training (f1); employment history in cea (f2); scientific qualification (f3); experience in terms of the subject of examination (f4); experience in conducting expert assessment (f5). calculated by the authors. baltic journal of economic studies 64 vol. 8 no. 5, 2022 the developed weights were based on the following statement (15): i m iw � � � 1 1, (15) where wi – the weighting coefficient of the i-th expert; m – the number of experts. calculation of the weight assessment of the i-th expert upon j – the factor (criterion) is performed according to the following algorithm: 1. the overall estimates of sumxi points scored by the i-th expert upon all specific factors are calculated (16): sumxi j n ij� � �� 1 � (16) where: n – the number of criteria; aij – the point obtained by the i-th expert upon the j – factor (criterion). 2. the sum of points (sum фj) is calculated, where – фj – the factor for each expert, which is calculated by the formula (17): sumфj = i m ijместодля уравнения � � 1 � � � . (17) 3. the weight coefficient of experts is calculated upon all factors (criteria) by the formula (18). (18) the findings on the calculation of weighting factors presented in table 4 allow analyzing the obtained weighting factors and performing the ranking of the set of options, which can be described by the equation v= {v1, v2, …, vn}. the options are ranked as follows: the larger the weighting factor, the higher the rank (table 4). as shown in table 4, the largest ratings are achieved by an expert no. 5; 4; 10; 1; the moderate group of ratings can be attributed to an expert no. 6; 2; other experts – 8; 3; 7; 9 – have significantly lower ratings. to understand which experts’ points can be used to select alternatives, it is necessary to identify priority vectors by normalizing points. therefore, a pairwise comparison matrix of factors (criteria) is used. identification of the vector of local priorities (li) is accomplished by calculating the geometric mean of the rows of a pairwise comparison matrix r (19): r r r r r r r r r r n n n nm � � � ���� � � � � � � � � � � � � � � � � � � � � � � � 11 12 1 21 22 23 1 2 (19) in view of the matrix, sum is calculated by matrix columns i n ijr � � 1 . the next step is the standardization of all the components of the priority vector (20): table 4 ranking of experts upon professional competence according to weighting indicators 0,1503 0,1387 0,1272 0,1214 0,1041 0,0983 0,0751 0,0694 0,0636 0,052 0 0,02 0,04 0,06 0,08 0,1 0,12 0,14 0,16 expert no. 5 expert no. 4 expert no. 10 expert no. 1 expert no. 6 expert no. 2 expert no. 8 expert no. 3 expert no. 7 expert no. 9 w ei gh ti ng c oe ff ic ie nt s source: the authors’ development baltic journal of economic studies 65 vol. 8 no. 5, 2022 l r r i j n ij n i n j n ij n � � � � � � � � 1 1 1 (20) n – the number of hierarchy level criteria. the obtained results are shown in table 5. according to table 5, f1 (an expert’s specialization by training) and f4 (experience in conducting expert research) prevail when assessing the professional competence of experts. thus, subsequent normalization identifies global priorities (table 6). based on the above data, it can be concluded that expert no. 5, expert no. 4, expert no. 6 and expert no. 10 have the highest global priority. hence, their opinions can be regarded as a basis for assessing specific alternatives. however, it is necessary to clarify the limits of the group of key experts. to this end, it is used a relevant mathematical toolkit, which determines the number of experts forming the above group (21): n t n n t � � � � � � � 2 2 2 2 2 � �� (21) where: t (table) = 3 under probability 0.997; σ2 = 0.003397, sample variance for data (table 5, 6), n – totality (n=10); δ – sampling error (not more than 7%) or δ = 0.07. following data substitution, a result is obtained, where n = 3.841898. thus, the required number of experts for examining alternatives is 4 persons upon the general sample n = 10. proceeding from the calculations by the formula (21), it is possible to choose experts who have rank no. 1;2;3;4 for assessing the identified alternatives. in particular, they should be represented by expert no. 5, expert no. 4, expert no. 10, and expert no. 6, because of their maximum rating among the general sample, which is confirmed by weighting factors: 0.153, 0.149, 0.138, and 0.138, respectively. by relying on the above, the generalized opinion of the expert group is average regarding their individual judgments, and therefore it can be considered adequate to the realities. to rendered the final decision, it makes sense to calculate the competence coefficient by the formula (22): , (22) table 5 matrix of paired comparisons of factors (criteria) factors f1 f2 f3 f4 f5 j ij � � 1 5 5 li f1 1 3 2 0,5 2 1,43097 0,25656 f2 0,3333 1 0,5 0,5 0,5 0,52961 0,09495 f3 0,5 2 1 0,3333 0,3333 0,64439 0,11553 f4 2 2 3 1 2 1,88818 0,33853 f5 0,5 2 3 0,5 1 1,08447 0,19443 total 4,3333 10 9,5 2,8333 5,8333 5,57762 1 note: an expert’s specialization by training (f1); employment history in cea (f2); scientific qualification (f3); experience in terms of the subject of examination (f4); experience in conducting expert assessment (f5). source: calculated by the authors table 6 the results of calculating the global priorities of the surveyed experts f1 f2 f3 f4 f5 g li 0,256 0,095 0,116 0,339 0,194 expert no. 1 0,122 0,114 0,111 0,129 0,120 0,122 expert no. 2 0,122 0,057 0 0,129 0,160 0,112 expert no. 3 0,074 0,143 0,111 0 0,160 0,076 expert no. 4 0,122 0,086 0,111 0,194 0,160 0,149 expert no. 5 0,122 0,143 0,167 0,194 0,120 0,153 expert no. 6 0,122 0,057 0,111 0,194 0,120 0,138 expert no.7 0,074 0,114 0 0 0 0,097 expert no. 8 0,046 0,143 0,167 0 0 0,045 expert no. 9 0,074 0,057 0,111 0 0 0,037 expert no.10 0,122 0,086 0,111 0,160 0,160 0,138 note: an expert’s specialization by training (f1); employment history in cea (f2); scientific qualification (f3); experience in terms of the subject of examination (f4); experience in conducting expert assessment (f5). li – priority vector (local priorities); g – global priorities. source: calculated by the authors. baltic journal of economic studies 66 vol. 8 no. 5, 2022 where n – the number of experts; m – the number of criteria for assessing experts; kij – the score obtained by the i-th expert upon the j-th criterion. based on the expert responses in the questionnaires and the points presented in table 7 upon the formula (22), the competence coefficient of the expert group is determined. having selected the experts participating in the questionnaire, the next step should focus on the criteria for assessing alternatives. the proposed organizational structures of sip are considered as alternatives, which should be created for the implementation of the relevant tasks. criteria for assessing alternatives comprise the following: a level of capacity to carry out inter-agency coordination (cr1); admissibility to distinguish between political and state communications (cr2); coverage of strategic and executive functions (cr3); time required for creating an organizational structure (cr4); costs of creating an organizational structure (cr5). the defined criteria were assessed by the experts via a questionnaire in the google form. points were given in different ranges considering the growth vectors, requirements, and assessment objectives. for example, for growth vectors, the maximum point given to cr1; cr2; cr3 – the maximum point was given for the maximum score in the range from 1 to 5, that is, the higher the point value, the greater advantage of the alternative. in other words, the function strives to the maximum (cr1, cr2, cr3 → max). cr4 and cr5 obtained a maximum score given the minimum value, that is, the lower the score value, the greater the alternative’s advantage, and therefore cr4, cr5 → min. responses to pairwise comparisons of alternatives were based on the saaty’s scale from 1 to 9 points (saati, 1993; bratushka, novak, khailuk, 2010). experts expressed their views based on their practical experience and according to the occupational level and knowledge in public administration, the specifics of strategic communications and the possibilities of adapting them to the system of public administration. subsequent to the expert assessments, the data of table 8 were calculated. to evaluate alternatives, the weighting factors of each criterion must be determined. as a result, it is expedient to resort to the analytic hierarchy process given the experts’ responses in the questionnaire, where they assessed the advantages of one criterion over another. following the latter statements, a pairwise comparisons matrix for the criteria of selected alternatives was created (table 9). the results obtained during the analysis (table 9) convey the criteria weight by significance levels (rating). however, it is essential to check the consistency of experts’ opinions by identifying the consistency index (in) and the consistency ratio (i0). the consistency index is calculated by the formula (23): i n n t max� � � � � – –1 (23) where: λmax – the maximum value of the matrix r (24): �max j n j i n ijl r� � � � � � � � � � �� 11 1 (24) based on the data (table 9), the maximum matrix value is r, namely λmax = 7.516. the random consistency index (ic) is calculated by the tabular method and is: ic = 1.24 according to the reference table, and the consistency ratio (i0) is calculated: or by relying on the fact that the consistency index determines a satisfactory state at i0 < 0.10, it can be argued that the consistency level of the r matrix is sufficiently acceptable, since the obtained results meet the requirement (0.0694 < 0.10). thus, according to the research finding, it can be concluded that the highest rating (table 9) belongs to the criterion "the level of capacity to carry out inter-agency coordination", which weights (cr1) 0.469. the next in the rating is the criteria which have minor differences in values, in particular, the criterion "time required to create an organizational structure" (cr5) – 0.187; the criterion "level of coverage of strategic and executive functions" (cr3) – 0.154; the criterion "time required to create an organizational structure" (cr4) – 0.125. the lowest rating belongs to the criterion "ability to table 7 calculation of the competence coefficient experts points defining the competence of experts total points of each expert ккі f1 f2 f3 f4 f5 expert no. 5 0,5 0,5 0,6 0,6 0,4 2,6 0,29 expert no. 4 0,5 0,3 0,4 0,6 0,6 2,4 0,27 expert no. 10 0,3 0,3 0,4 0,6 0,6 2,2 0,24 expert no. 6 0,2 0,2 0,4 0,6 0,4 1,8 0,2 total points 9 1,0 source: calculated by the authors baltic journal of economic studies 67 vol. 8 no. 5, 2022 table 8 calculation of criteria values given the competence coefficient experts ккі a1 a2 a3 a4 1 2 3 4 5 6 assessment of cr1 (level of capacity to carry out inter-agency coordination) expert no. 5 0,29 5 3 1 2 expert no. 4 0,27 5 4 2 3 expert no. 10 0,24 5 3 1 2 expert no. 6 0,2 5 5 1 2 cr1 weight given expert competence 1 5 3,67 1,27 2,27 1 2 3 4 5 6 assessment of cr2 (ability to distinguish between political and state communications) expert no. 5 0,29 4 3 2 1 expert no. 4 0,27 3 2 3 2 expert no. 10 0,24 4 4 3 2 expert no. 6 0,2 5 3 1 2 cr2 weight given expert competence 1 3,93 2,97 2,31 1,71 assessment cr3 (coverage of strategic and executive functions) expert no. 5 0,29 5 5 2 1 expert no. 4 0,27 5 4 3 2 expert no. 10 0,24 4 4 2 3 expert no. 6 0,2 5 4 2 2 cr3 weight given expert competence 1 4,76 4,29 2,27 1,95 assessment of cr4 (time required to create an organizational structure) expert no. 5 0,29 1 4 4 5 expert no. 4 0,27 2 4 3 5 expert no. 10 0,24 2 3 4 4 expert no. 6 0,2 2 2 4 5 cr4 weight given expert competence 1 1,71 3,36 3,73 4,76 assessment of cr5 (costs of creating an organization) expert no. 5 0,29 1 4 4 5 expert no. 4 0,27 2 4 3 5 expert no. 10 0,24 2 3 4 4 expert no. 6 0,2 2 2 4 5 cr5 weight given expert competence 1 1,71 3,36 3,73 4,76 source: calculated by the authors table 9 pairwise comparisons matrix for alternative criteria cr1 cr2 cr3 cr4 cr5 j ij � � 1 5 5 li cr1 1 9 5 0,25 0,143 3,178 0,469 cr2 0,111 1 0,333 0,143 0,5 0,437 0,065 cr3 0,2 3 1 5 3 1,045 0,154 cr4 7 2 0,333 0,5 1 0,844 0,125 cr5 4 7 0,2 1 2 1,267 0,187 total 12,311 22,000 6,867 6,893 6,643 6,771 1,000 source: calculated by the authors table 10 summary assessments of alternatives alternatives cr1 cr2 cr3 cr4 cr 5 а1 5,0 3,93 4,76 1,47 1,71 а2 3,67 2,97 4,29 3,36 3,36 а3 2,27 1,71 1,95 4,76 4,56 а4 1,27 2,31 2,27 3,49 3,73 weighting coefficients (λ) 0,469 0,065 0,154 0,187 0,125 source: calculated by the authors baltic journal of economic studies 68 vol. 8 no. 5, 2022 distinguish between political and state communications" cr2 – 0.065. following the results shown in tables 8 and 9, the authors shaped a summary table, which is the basis for applying multi-criteria analysis by convoluting local criteria to calculate the additive criterion through the application of normalized values of local criteria (table 9). 5. conclusions in table 10, the values of the weighting coefficients are the result of the calculation of local criteria (table 9). based on the data, we can calculate additive optimization criteria upon the provided alternatives using the formula (4). in accordance with the objective function of the task, the following mathematical expressions are obtained: f1(aij) = λ1 · a11 + λ2 · a12 + λ3 · a13 + λ4 · a14; f2(aij) = λ1 · a21 + λ2 · a22 + λ3 · a23 + λ4 · a24; f3(aij) = λ1 · a31 + λ2 · a32 + λ3 · a33 + λ4 · a34; f4(aij) = λ1 · a41 + λ2 · a42 + λ3 · a43 + λ4 · a44. to solve the task, it is necessary to normalize experts’ assessments by identifying a group of the maximum criteria (сr1, сr2, сr3 → max) and a group of the minimum criteria (cr4, cr5 → min). the next step ascertains the overall optimization problem given maximizing or minimizing the objective function. taking into account the conditions, the general problem should be solved as a maximi zation problem, because the maximization criteria prevail over the minimization criteria. consequently, a formula (7) is used to normalize the scores to the maximum. for criteria under minimization, normalized assessments are calculated using formulas (9). normalization results are shown in table 11. as can be seen from table 11, the obtained assessments have the following rating: a1 = 0.895; a2 = 0.620; a4 = 0.304; a3 = 0.303. this allows stating that when a function seeks the maximum, the most acceptable alternative should be an alternative with a maximum value of fn (aij), i.e., a1 that justifies the decision to establish a separate state executive body. thus: if we consider geostrategy as a holistic and adaptive macro-system [19], containing all the functionality of state policy, then following the above (the case of state infrastructure policy (lipkan, 2021)), the relevant measures are taken before distributing all functions: 1) the most important spheres of life are formed; 2) according to the specific areas, separate central executive bodies are established, which should implement well-defined functionality through the implementation of relevant sectoral strategies; 3) all sectoral strategies, as types of political and security practices in certain areas of life, are interconnected systemic links in the context of the geostrategy implementation as a whole; 4) strategies as acts of strategic law-making should be drafted exclusively by relying on an overall geostrategy that specifies the development principles for the political system as a whole. mathematical methods of economic modeling can render a reference approach to developing institu tional and organizational structures in various areas of public policy. table 11 normalized assessments alternatives cr1 cr2 cr3 cr4 cr5 fn (aij) а1 1 1 1 0,691 0,625 0,895 а2 0,734 0,756 0,901 0,294 0,263 0,620 а3 0,454 0,435 0,410 0,000 0,000 0,303 а4 0,254 0,588 0,477 0,267 0,182 0,304 weighting coefficients (λ) 0,469 0,065 0,154 0,187 0,125 х source: calculated by the authors references: afonichkin, a. i., & mihalenko, d. g. 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(2021). stratehiia derzhavnoi infrastrukturnoi polityky ukrainy z pozytsii normatyvizmu [the strategy of the state infrastructure policy of ukraine from the standpoint of normativism]. aktualni problemy filosofii ta sotsiolohii, vol. 32, pp. 149–157. received on: 11th of october, 2022 accepted on: 24th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 122 vol. 1, 2015 financial stability of banks in times of crisis svetlana lanets1, kaliningrad state technical university, russia abstract. this paper is aimed at drawing attention to the current situation and further development of the banking sector in russia. in particular, it seeks to discuss ways to improve the financial stability of banks. the article looks at the banking system, describes the important role of banks in the economy of the country and establishes correlation between stability of banks and socioeconomic development of the country. it is underlined that the stability of banks is one of the key factors in economic growth. the article analyzes how the banking system has settled after the financial crisis. the focus of the article is on the characteristics of the current financial crisis, compares it to the previous ones and describes the impact of the crisis to the banks. in particular, in the frame of this publication we present the analysis of the features of crisis impact on regional banks and the possibility of losing them in near future. this paper emphasizes the impact of the banking system on the country's economy and demonstrates the importance of financial stability of the banks. moreover the article underlines a set of financial – economic/bank – government approaches to the issue of improving financial stability in the contemporary financial crisis. the paper summarizes the government role in the time of modern financial crisis and describes the existing strategies of the state. at the same time article shows the dual role of the government activities in preventing to put the finance sector under such stress as on the one hand it helps banks to increase the capitalization of banks while on the other hand it introduces basel 3 principles, which reduce capital. the study is based on the methods of analysis, comparison, statistical data and theoretical generalization. the scientific and theoretical part of the survey is based on the official statistics and data from the central bank. we believe that the issue of bank’s stability, especially in this uncertain time, has not received sufficient attention, and the application of banks stability in man¬aging development remains limited. the study of underlying facts showed the necessity of further government interference in order to modernize the national banking system. the findings also suggest the need for implementation of new methods for developing regional banks in order to enhance their competitiveness. the facts point to the urge to develop a more efficient system to support the current banking management. keywords: financial stability, financial crisis, government support, regional banks, basel 3. jel classification: g21, g28 corresponding author 1 department of finance and credit, kaliningrad state technical university. e-mail: lanetssv@gmail.com 1. introduction this article is aimed at studying a particularly burning issue, that of a bank’s financial stability in the modern financial crisis. banking system plays an important role in the socioeconomic development of the country, primarily because of certain exclusivity inherent to its functions. banking sector is responsible for money and it is the main institutional guide in the monetary and credit policy, which supports and provides financial flows in the country. it is one of the main providers of the country’s economic stability. internal and external balances and payments rely on effective banking structure. banks mobilize savings accounts, performing socially important functions. thus, banks are one of the key actors who can contribute to the economic growth in russia and provide general conditions for development and implementation of the right structure of an effective and modern banking system. instability of the banking system could lead to the disruption of economy and could destabilize social and political situation in the country. thus, the role of the banking sector in economy of the country takes the utmost importance, and the question of its stable functioning in today's financial crisis becomes especially valid. the stability of banks affects the rate of the country’s socioeconomic development, whereas the banks’ instability can aggravate existing economic and social problems that various strategies and programs of the federal government are created to solve. 2. banking crisis in russia banking crises in russia take place every five years, give or take. the current stage of the development of russian banking sector is facing the fourth crisis in the last twenty years of a full-blown crisis (1995, 1998, 2008, 2014-2015). at the same time, the current crisis situation is much worse than in 2008. some of the problems can be baltic journal of economic studies 123 vol. 1, 2015 compared to the ones that emerged during the previous crises, while some of them are totally different and will have stronger repercussions. nowadays, the problems of the banking sector are based on toxic loans and on preference for liquidity at the expense of profitability. the situation is worse because of shocks associated with the fall of ruble, the stagnation in the real sector and with budgetary problems. sanctions for russia only added insult to injury (petrova, 2014). russia faced deterioration of external conditions: a complication of relations with western countries, narrowing of the possibilities of attracting external funding, a decline in the oil prices. with limited access to international capital markets, local businesses have increased the demand for foreign currency in the domestic market to pay off external debt (khlopunova, 2015). the following table compares the data in times of banking crises, according to statistics from the bulletin of the bank of russia for 1998, 2008, 2014 and 2015. it is important to note that the reason for the drop in the indicators for the banks is not only a crisis of the banking system, but also the requirement of the central bank in cooperation with the ministry of finance to increase the minimum capital of commercial banks up to 300 mln rubles in 2015, which has led to the consolidation of banks. high rate of license revocation begs to consider the overall stability of the banking system. for the first time in many years, the banks have shown a negative result. according to the credit reporting companies posted on the website of the central bank, in january september 2015 the banking system received 128.38 billion rubles of profit. at the same time the profit for the same period in previous year was 685.2 billion rubles. below is a ranking of banks based on the ratio of profit from the beginning of the year (according to kuap.ru). the main reason for increased losses is the increase of reserves for possible loan defaults. it is worth noting that the cost of raising funds by banks remains high, which leads to a decrease in the interest income of credit institutions. 3. the government's role in the crisis the sanctions and the cut off from western money happened to be a reason for the banks to be heavily dependent on funding from the central bank of russia and the dynamics of the interest rate. big banks have to finance loss-making enterprises on favorable terms, which will inevitably break the balance sheet and reduce the profitability of a bank. moreover, there is a growth of overdue debts of borrowers in all segments in crisis time. when the state enters in capital with the large quantities, banks lose independence in decision-making process and reduce the quality of their asset management. there are some problems for large banks, namely: an increase in the load on the external debt of the banks, substituted domestic sources of external funding, low desire to lend, increased competition for creditworthy borrowers. the problem of the growth of overdue loans also increases, which affects the bank's results: increased payments to the bank’s reserves for loan losses lead to a decrease in profitability of the banking sector. banks now mainly rely on government support, and the state is starting to deliver. the situation is ambiguous at best: on the one hand, the government supports the banking system by increasing the capitalization of banks, on the other hand, it introduces basel principles, which reduce capital. the central bank of russia with regard of the criteria of the international activities identified systemically important credit institutions in russia. the list of systemically important banks includes four state banks table 1 comparison of banking crises in 1998, 2008 and 2014-2015 index 01.09.98 01.09.08 01.09.14 01.09.15 registered credit institutions 2504 1250 1057 1035 registered banks 2476 1194 985 959 credit institutions that have had their banking operations licenses revoked (canceled) 950 123 188 261 table 2 the ratio of profits from the beginning of the year, thous. rub. № bank name 01.01.2015 01.10.2015 change absolute change, % 1 sberbank of russia 305,703,229 144,432,688 161,270,541 111.7% 2 alpha bank 48,823,474 27,679,459 21,144,015 76.4% 3 vtb24 31,534,739 -12,179,816 43,714,555 -358.9% 4 raiffeisenbank 24,788,043 10,004,522 14,783,521 147.8% 5 vtb 20,007,291 56,447,751 -36,440,460 -64.6% 6 gazprombank 18,283,177 -56,824,981 75,108,158 -132.2% 7 bank fc otkritie 14,584,843 8,046,504 6,538,339 81.3% 8 national clearing centre 11,312,981 14,866,102 -3,553,121 -23.9% 9 russia 10,087,888 1,969,303 8,118,585 412.3% 10 rosbank 9,658,208 -2,315,502 11,973,710 -517.1% baltic journal of economic studies 124 vol. 1, 2015 (sberbank, vtb, gazprombank and rosselkhozbank), three private banks (alfa-bank, "fc opening" and psb) and three foreign-owned banks (unicredit bank, rosbank, raiffeisenbank). these credit institutions (including the russian credit organizations participants of the respective banking groups) account for 63% of the entire russian assets (based on data from october 1, 2015). requirements for short-term liquidity indicator of compliance (basel iii) will be used as the prudential norms established for systemically important banks in accordance with article 57 of the federal law "about the central bank of the russian federation (bank of russia)", from october 1, 2015. the minimum allowable value of the index is set at 60% with an increase on 10 percentage points each year since 1 january 2016 up to the value of 100% at january 1, 2019. the cbr spokesperson has announced that the central bank plans to introduce a surcharge to the basic capital based on "basel iii», starting on january 2016. the requirements will be phased in from january 2016 to january of 2019, in accordance with the standard calendar for «basel iii». it is about three allowances: capital conservation buffer, countercyclical buffer and buffer to maintain capital adequacy of systemic importance. the size and the procedure of counter cyclical buffer will be determined by the central bank when the regulator will consider that credit growth leads to an unacceptable level of systemic risk. at the same time in 2016 it is expected to set off with a value of zero, which is justified as we are facing reduction in the lending sector. the buffer to maintain capital adequacy for the systemic importance of the above-mentioned systemically important financial institutions is planned at the amount of 0.15% of the risk-weighted assets with a phased increase annually by 1% by january 1, 2019. capital conservation buffer is planned for all banks on a consolidated basis. based on the basel iii, it is set to start on january 1, 2016 with the amount of 0.625% of risk-weighted assets with an of increase 0.625 percentage points annually up to 2.5% by 1 january 2019 (koroleva, 2015). capital conservation buffer is planned in order to cover losses in the period of financial instability, which is observed in russia at the moment. at the same time, large banks are more stable as they have access to cheap funding of the central bank. they were able to recapitalize through the ofz. at the same time, the level of confidence of the major banks higher in an ongoing process of review and restructuring of licenses in the market. 4. regional banks problems the main trend of the regional banking sector development in russia is the reduction of the number of regional banks and the concentration of assets in the largest banks. if we keep on this trend regional banks may simply disappear in the near future. at the same time, large banks often do not reach small towns, because they are only interested in the most profitable regions. therefore, lending to local people and businesses, although at a significantly high rate of interest, usually engaged with regional banks. it is also assumed that regional banks show a higher level of social responsibility, as local banks are focused on long-term cooperation with the community and regional business, and as a consequence, they are more interested in the balanced development of regions. thus, we can say that regional banks form the financial systems in the region. this underlines the need to save the system of regional banks. despite this, government only supports large systemically important credit institutions, leaving smaller banks to fend for themselves, which makes them offer high deposit rates and risk the displeasure of the central bank. according to the central bank (statement from 01.09.2015) there are 774 registered regional banks, a number significantly lower than that given on 01.12.2011 (982 banks). at the same time, in the kaliningrad region, there are 23 branches of operating credit institutions and only one of them is a regional bank. this is a call for the government to pay more attention and to apply tactics change in order to save not only the "big players", but also smaller banks. at the moment we are seeking to develop practical approaches to create the conditions, which will allow regional banks to fully implement their investment opportunities. 5. conclusions the results of this study show that the current financial crisis, which has had a serious impact on the banking sector and on the market relations in the country by hindering its socioeconomic progress, confirmed the failure of forecasting activities, and stressed the need for constant monitoring, analysis and modernization of the banking system to maintain its financial stability. it is necessary to understand the importance of the banks ability to respond to the changes of the economic, political, social and internal environment and the need of organizing the banks activity, which is based on these findings. the financial crisis underlined the need to develop a set of methods to overcome the crisis in the banking sector, to identify ways and means of increasing the financial stability of banks, to restore confidence in the banking system and further development of the russian banking system in the post-crisis time. with the success of these methods and management practices banks can compete and develop and that determines the future of the russian economy. it is obvious that the government should introduce new methods, which would be aimed at mitigating the negative effects of the banking crisis. at the same time, it is important to understand that the conditions for the restoration of the banks during the crisis suggest the invention of new methods of organization and conduct of activities by banks, which should be based on detailed analysis of the risks which the banks face. baltic journal of economic studies 125 vol. 1, 2015 references cbrf.ru koroleva a. (2015). banking crisis: would the large banks stand, and what about small ones? corporate finance, vol 5806 khlopunova m.v. (2015). roots, origins and spreading of bank crisis. novosibirsk state technical university (nstu), electronic scientific journal economics and management of innovative technologies petrova s. (2014) from the stop to the crisis: results of the year: the banking crisis began in russia. gazette, vol 3746 светлана ланец финансовая устойчивость банков в условиях кризиса аннотация. данная работа направлена на привлечение внимания для дальнейшего развития банковской сферы в россии, в частности на повышение финансовой стабильности банков в условиях современного спада экономики. в статье рассмотрена банковская система россии, описана важность роли банков в экономике страны, рассмотрена взаимосвязь между стабильностью банков и экономической ситуацией в стране и подчеркнуто, что стабильность банков является одним из ключевых факторов для роста экономики. в работе анализируется характерные особенности нынешнего финансового кризиса, сравнение его с предыдущими кризисами и описано его воздействие на банки. в частности, в рамках данной публикации предоставлен анализ особенностей влияния кризиса на региональные банки и предсказана возможность исчезновения данных банков. статья также подчеркивает влияние банковской системы на экономику страны демонстрирует важность финансовой стабильности банков. статья также освящает совокупность финансово-экономических отношений между банками и государством по вопросу повышению финансовой устойчивости в условиях нестабильности экономики. в работе подчеркнута важность роль государства в период финансового кризиса и описаны первые предпринятые действия. в тоже время, показана двойственность роли государства в решении проблем. с одной стороны, правительство помогает банкам, увеличивая капитализацию банков, а с другой стороны, вводит принципы базель 3, которые снижают капитал. исследование опирается на методы анализа, сравнения, статистической обработки данных и теоретического обобщения. научно-теоретической базой послужили материалы центрального банка. данная статья демонстрирует, что вопрос о стабильности банка, особенно во время финансового кризиса, не получил должного внимания, и применение существующих методов управления в банках остается ограниченным. на основе проведенного исследования выявлена и обоснована необходимость дополнительно вмешательства государства в целях модернизации национальной банковской системы в современных условиях. также в рамках статьи подчеркнута необходимость внедрения мероприятий по развитию региональных банков для усиления их конкурентоспособности. baltic journal of economic studies 32 vol. 3, no. 3, 2017 influence of customs payments on the economic security of the country, problems and ways of overcoming inna kiyanchuk1 ternopil national economic university, ukraine abstract. the article considers the role of customs payments as one of the main revenue sources of the state budget of ukraine. the volume of receipt of customs payments to the state budget is characterized. the structure of receipts from customs payments for 2016-2017 is considered. problems that violate the stable level of economic security of the country are identified. the complex of measures proposed to resolve deficiencies in the system of collection of customs payments to the state budget of ukraine is considered. the purpose of this article is to reveal the content and role of revenues from customs payments to the state budget and their impact on the country’s economic security. the subject of research: the impact of customs payments on the country’s economic security. the methodological basis of the study is a set of general, scientific, specific scientific and special methods and approaches, which helped to realize the conceptual unity of the research. in particular: an integrated approach that is used to analyse the collection of customs payments methods of induction and deduction, formalization to study the mechanism of charging customs payments, the method of analysis – in the study of the main elements of the collection of customs payments in ukraine. positive and normative research methods are used to develop proposed budget revenues from receipt of customs payments and to ensure stable economic security. results. thus, according to the results of the analysis, in 2017, there is a clear tendency to increase revenues to the state budget, including from customs payments. thus, in 2017, the total amount of customs payments amounted to 277.27 billion uah, which is 57.24 billion uah more than the previous year (220.03 billion uah). that is, customs payments increased by 26%. economic implications. however, there are some problems in collecting customs payments to the state budget, which in turn violate a stable level of economic security of the state. to the problems that violate a stable level of economic security can be attributed: improper development of individual industries and industries that need to work efficiently and get further development in ukraine, excessive customs duties can also lead to a shortage of goods in domestic markets and an increase in domestic prices. all this will negatively affect the economic security of the state. therefore, when establishing customs duties, it is necessary to take into account their impact on the economic security, to predict the possible socio-economic consequences of the application of certain rates of customs duties. conclusion. taking into account the importance of customs payments in the formation of the state budget and ensuring the economic security of ukraine, we believe that the practice of charging customs payments in ukraine requires the introduction of new ideas. in recent years, many interesting and effective methods of customs and tariff regulation have been applied in the world, which could be useful for ukraine. at the present stage, the most appropriate is the use of the experience of the countries of central and eastern europe, which recently joined the eu. key words: fiscal service of ukraine, state budget of ukraine, state economic security, customs payments, duties, value added tax, excise tax. jel classification: h 200, н210, н220, н250 corresponding author: 1 department of finance named after s.i. yurii, ternopil national economic university. e-mail: 09inna03@ukr.net 1. введение в статье рассмотрена роль таможенных платежей, как одного из основных доходных источников государственного бюджета украины. охарактеризованы объемы поступления таможенных платежей в бюджет государства. проанализирована структура поступлений от таможенных платежей за 2016-2017 гг. определены проблемы, которые нарушают стабильный уровень экономической безопасности страны. рассмотрен комплекс мероприятий предложенных по решению недостатков в системе взимания таможенных платежей в государственный бюджет украины. baltic journal of economic studies 33 vol. 3, no. 3, 2017 таможенная политика каждого государства играет важную роль в развитии финансово-экономических отношений. четко и правильно построенная налоговая и таможенная системы в сфере внешнеэкономической деятельности делает существенное влияние на функционирование экономики в целом, и на все макроэкономические показатели развития государственного образования. именно таможенные платежи выполняют одну из важнейших статей наполнения государственного бюджета (stal, 2015). на сегодняшний день процессы глобализации и интернационализации влияют на экономику каждой страны, обуславливая ее зависимость от экзогенных факторов и вызывая рост экономических показателей или возникновения кризисных явлений в определенных секторах экономики. не исключением является и украина. поэтому актуальность приобретает обеспечение экономической безопасности государства от внутренних и внешних угроз, которые могут быть вызваны различными явлениями. это снижение доходов бюджета, защите национального товаропроизводителя, торговые войны и тому подобное. вопросы исследования таможенных платежей и их роль в развитии государства неоднократно становились предметом исследования таких ученых и практиков, как и. бережнюк, и. бураковский, а. войцешук, л. воронина, в. геец, а. гребельник, в. дудчак, ф.  жорин, а.  киреев, а.  кредисов, в.  мартынюк, к. осадчая, п. пашко, в. покровская, в. пятницкий, к. сандровский, с. терещенко, д. тесленко и др. отдельно стоит выделить работы а.  в.  годованец, и.  а.  гуцул, а.  ф.  запорожец, т.  н.  стужук, в которых более подробно рассматриваются вопросы поступлений в государственный бюджет от таможенных платежей. но, несмотря на достаточно большое количество научных наработок по этой теме, остаются открытыми многие вопросы о роли таможенных платежей в формировании государственного бюджета, а также в обеспечении экономической безопасности страны. а именно вопросы, касающиеся решения проблем в системе взимания таможенных платежей в бюджет, которые в свою очередь нарушают стабильный уровень экономической безопасности государства. целью данной статьи является раскрытие содержания и роли поступлений от таможенных платежей в государственный бюджет и их влияние на экономическую безопасность страны. достижение поставленной цели предполагает решение следующих задач: ‒ охарактеризовать состав и динамику поступлений от таможенных платежей в украине; ‒ определить роль таможенных платежей в формировании государственного бюджета и обеспе чении экономической безопасности государства; ‒ выделить проблемы, которые нарушают стабильный уровень экономической безопасности государства; ‒ предложить направления повышения эффективности организации взимания таможенных платежей для обеспечения стабильности экономической безопасности страны. методологической основой исследования является совокупность общих, общенаучных, конкретно-научных и специальных методов и подходов, что помогло в реализации концептуального единства исследования. в частности: комплексный подход, который используется для анализа взимания таможенных платежом, методы индукции и дедукции, формализации к изучению механизма взимания таможенных платежей, метод анализа  – при исследовании основных элементов взимания таможенных платежей в украине. для разработки предложений по росту доходов бюджета от поступления таможенных платежей и обеспечении стабильной экономической безопасности использован положительный и нормативный методы исследования. 2. экономическая суть таможенных платежей таможенный платеж  – это разновидность обязательных платежей, взимаемых при перемещение или в связи с перемещением товаров через таможенную границу украины (voitschuk, 2007). налоговый кодекс украины определяет таможенные платежи как налоги, согласно налоговому кодексу украины или таможенного законодательства взимаются при перемещении или в связи с перемещением товаров через таможенную границу украины и контроль за взиманием которых положен на таможенные органы (the tax code of ukraine, 2015). налоговым кодексом украины установлено, что таможенные органы являются субъектами государственного контроля за пошлины, акцизного налога, налога на добавленную стоимость, согласно налоговым законодательством взимаются в случае ввоза товаров и предметов на таможенную территорию украины или территорию специальной таможенной зоны или их вывоз из них (the tax code of ukraine, 2015). из чего следует, что ввозная и вывозная пошлина, начисление которой предусмотрено на объекты экспортно-импортных операций, по действующему налоговому законодательству является одним из видов налогов, то есть обязательным, безусловным платежом в бюджет соответствующего уровня (the tax code of ukraine, 2015). вместе с ндс и акцизным налогом, пошлина относится к общегосударственным налогам (the tax code of ukraine, 2015) следовательно, уплачивается в государственный бюджет украины. baltic journal of economic studies 34 vol. 3, no. 3, 2017 3. анализ динамики поступлений от таможенных платежей поэтому перейдем к анализу значения таможенных платежей в формировании государственного бюджета украины за 2017 год и сравним эти данные с данными за 2016 год. таблица 1 структура доходов государственного бюджета украины в 2016 и 2017 гг. статья доходов 2017 (млрд. грн.) 2016 (млрд. грн.) налоговые поступления 606,02 502,56 налоги на доходы, налоги на прибыль, налоги на увеличение рыночной стоимости 126,59 104,69 рента за использование природных ресурсов 48,09 62,50 внутренние налоги на товары и услуги 406,44 314,55 – в т. ч. акциз с ввезенных в украину подакцизных товаров 41,75 29,18 – в т. ч. ндс с ввезенных в украину товаров 212,76 171,20 налоги на международную торговлю и внешние операции 22,75 19,64 – в т. ч. ввозная пошлина 22,36 19,28 – в т. ч. вывозная пошлина 0,40 0,37 местные налоги 0,72 0 экологический налог 1,42 1,17 неналоговые поступления 107,22 87,65 административные сборы и платежи 7,02 5,48 другие неналоговые поступления 10,87 10,64 официальные трансферты 1,78 5,50 целевые фонды 11,72 7,88 всего доходов 727,11 607,97 источник: построено по данным (revenues of the state budget of ukraine, 2017) как видим из таблицы 1, пошлина, акцизный налог с ввезенных на таможенную территорию украины подакцизных товаров, налог на добавленную стоимость с ввезенных на таможенную территорию украины товаров  – один из главных поставщиков денег для государственного бюджета в 2017 году. ведь падение курса гривны увеличивает цену импортного товара и, соответственно, и размер ндс и пошлины с него, кроме того, увеличены акцизы на импортируемый алкоголь и сигареты. крупнейшими статьями доходов бюджета в 2017 году, так же как и в предыдущие годы, буду т: налог на добавленную стоимость (ндс) с импортных и украинских товаров, работ и услуг, налог на доходы физлиц (ндфл), налог на прибыль, рента за пользование недрами и акцизы по нефтепродуктам, алкоголя и сигарет. так, с ввезенных на территорию украины товаров в 2017 году планируется получить 212,7 млрд. грн., что на 41,5 млрд. грн. больше, чем было заложено в бюджете на 2016 год. ндс по импорт у  – самая большая статья доходов в бюджете. для сравнения, из произведенных товаров, работ и услуг в украине планируется собрать 80,3  млрд.  грн. ндс  – на 19  млрд.  грн. больше по сравнению с бюджетом 2016 года. выраст у т доходы от произведенных в украине и импортированных подакцизных товаров. как известно, в 2017 году значительно выросли акцизы на сигареты и алкоголь. от продажи подакцизных товаров, произведенных в украине (алкоголь, сигареты, нефтепродукты) в 2017  году запланировано собрать 71,5  млрд.  грн., что на 19  млрд.  грн больше, чем в 2016 году. от импортируемых подакцизных товаров  – 41,7  млрд.  грн., что на 12,6  млрд.  грн. больше, чем в 2016 году. налога на доходы физических лиц планируется собрать 68,7  млрд.  грн., налога на прибыль предприятий  – 58  млрд.  грн. это соответственно на 2,5  млрд.  грн. и 9,3  млрд.  грн. больше запланированных поступлений в 2016 году. главным наполнителем бюджета в разделе неналоговых поступлений в 2017 году будет национальный банк, который обязали перечислить не менее 45  млрд.  грн. это на 7 млрд. грн. больше, чем нбу перечислил в 2016 году. в целом доходы государственного бюджета 2017 вырастут на 119  млрд.  грн.  – до 727  млрд.  грн. (см. таблицу 1). таким образом, по результатам проведенного анализа, в 2017 году прослеживается четкая тенденция увеличения поступлений в государственный бюджет, в том числе и от таможенных платежей. наибольший удельный вес в составе таможенных платежей в 2017 году занимает налог на добавленную стоимость с ввезенных на территорию украины товаров – 212,76 млрд. грн., или около 76,7% (рис. 1). в 2016 году поступления от этого налога в структуре таможенных платежей составляли 171,20  млрд.  грн., или около 77,8% (рис. 2). вторым по значению является акциз с ввезенных в украину подакцизных товаров. ввозная пошлина находится на третьей позиции, и замыкает список вывозная пошлина, поступления от которой находятся в пределах 0,1-0,2% от всех таможенных платежей. таким образом, по результатам проведенного анализа, в 2017 году прослеживается четкая тенденция увеличения поступлений в государственный бюджет, в том числе и от таможенных платежей. так, в 2017 году общая сумма таможенных платежей составила 277,27  млрд.  грн., что на 57,24  млрд.  грн. больше предыдущего года (220,03  млрд.  грн.). то есть таможенные платежи выросли на 26%. baltic journal of economic studies 35 vol. 3, no. 3, 2017 4. определение проблем экономической безопасности государства однако существуют некоторые проблемы во взимании таможенных платежей в государственный бюджет, которые в свою очередь нарушают стабильный уровень экономической безопасности государства. в общем, стабильный уровень экономической безопасности это показатель успешного развития государства, его экономики. эффективная система обеспечения экономической безопасности вопрос жизни любого государства, стремящегося занять достойное место в мировом геополитическом и экономическом пространстве. к проблемам, которые нарушают стабильный уровень экономической безопасности можно отнести: 1. несовершенное развитие отдельных производств и отраслей, которые должны эффективно работать и получать дальнейшее развитие в украине. в условиях, когда отечественная промышленность, которая производит товар, аналогичный импортному товару, недостаточно конкурентоспособна, возникает необходимость в ее защите на то время, когда она сможет достичь уровня конкурентоспособности. важно правильно обосновать и рассчитать уровень таможенной защиты. недостаточный уровень защиты приведет к постепенной нерентабельности и ликвидации собственного производства товара, увольнения работников, рост безработицы, а впоследствии  – и снижение поступлений в бюджет. а чрезмерный – будет создавать препятствия конкуренции на рынке, что впоследствии также отрицательно повлияет на отечественного производителя, который начнет производить продукцию недостаточного качества по завышенной стоимости. 2. чрезмерные таможенные ставки также могут приводить к созданию дефицита товаров на внутренних рынках и рост внутренних цен. все это отрицательным образом отразится на экономической безопасности государства. поэтому при установлении таможенных платежей, необходимо учитывать их влияние на экономическую безопасность, прогнозировать возможные социально-экономические последствия применения тех или иных ставок пошлин. значение таможенных платежей для обеспечения экономической безопасности в рассматриваемом аспекте является следующим: ‒ таможенные платежи создают стоимостный барьер, что повышает цену импортного товара при его движении на внутренний рынок страны или при вывозе сырья на мировой рынок; ‒ выборочно повышая или понижая ставки таможенных платежей, государство может стимулировать развитие определенных отраслей экономики; ‒ таможенные платежи (в разрезе ввозных пошлин) защищают определенные отрасли экономики от конкуренции иностранных товаров и создают национальным производителям условия, позволяющие им конкурировать с иностранными товаропроизводителями; ‒ таможенные платежи могут широко использоваться в качестве рычага давления на стран-экспортеров с целью заставить их пойти на определенные уступки; 15,1% 76,7% 8,1% 0,1% акциз с ввезенных в украину подакцизных товаров ндс с ввезенных в украину товаров ввозная пошлина вывозная пошлина рис. 1. структура поступлений от таможенных платежей в 2017 г. источник: построено автором по данным таблицы 1 рис. 2. структура поступлений от таможенных платежей в 2016 г. источник: построено автором по данным таблицы 1 13,3% 77,8% 8,7% 0,2% акциз с ввезенных в украину подакцизных товаров ндс с ввезенных в украину товаров ввозная пошлина вывозная пошлина baltic journal of economic studies 36 vol. 3, no. 3, 2017 ‒ таможенные платежи являются эффективным инструментом интеграции страны в мировую экономику, обеспечение ее конкурентоспособности на международных рынках. совершенствование системы взимания таможенных платежей является важным фактором влияния на положительную динамику относительно полноты поступлений таможенных налогов и сборов в государственный бюджет, что в свою очередь обеспечат стабильность экономической безопасности государства. наиболее эффективным способом увеличения доходов бюджета от взимания таможенных платежей является правильное определение величины базы налогообложения – таможенной стоимости товаров. именно таможенная стоимость влияет на объемы таможенных платежей, а также на уровень импортных цен на внутреннем рынке. стоит также отметить о нарушении субъектами внешнеэкономической деятельности налогового и таможенного законодательства, несовершенной структуре внешнеторговых потоков, отрицательном сальдо торгового баланса, отдельных недостатках нормативно-правового обеспечения налогового регулирования вэд, несовершенства системы предоставления льгот. также существуют проблемы в организации контроля за соблюдение таможенного законодательства субъектами вэд и гражданами (pashko & berezhnyuk, 2013). существует ряд проблем во взимании акцизного налога, что обусловлено неструктурированными ставками на подакцизные товары. с целью усовершенствования акцизного налогообложения внешнеторговых потоков считаем необходимым ввести научно обоснованный уровень и структуру ставок акцизного налога, что усилит выполнения им регулирующей функции путем постепенного увеличения доли акциза в цене импортной подакцизной продукции. требует совершенствования механизм автоматического возмещения ндс экспортерам, поскольку невозмещение или несвоевременное возмещение сумм такого налога приводит к росту цены экспортируемой продукции и снижение ее конкурентоспособности на мировом рынке (pashko & berezhnyuk, 2013). 5. выводы из данного исследования и перспективы итак, из проведенного исследования можно сделать вывод, что таможенные платежи являются весомым наполнителем государственного бюджета украины, и имеют один из решающих факторов в формировании стабильной экономической безопасности государства. хотя в системе взимания таможенных платежей существует ряд недостатков и проблем, требующих неотложного решения. в последние годы в мире применено много интересных и эффективных приемов таможенно-тарифного регулирование, которые могли бы бить полезными для использование в украине. на современном этапе наиболее подходящим является использование опыта стран центральной и восточной европы, которые недавно присоединились к ес. он заключается в соблюдение низких тарифных ставок на большинство товарных позиций, особенно с низкой степенью пропитки и особую защиту некоторых отраслей сельского хозяйства и машиностроения. как показывает опыт стран-членов европейского союза, с помощью только таможенных платежей нельзя обеспечить защиту национального товаропроизводителя, эффективно является его сочетание с антидемпинговыми расследованиями, нетарифными методами регулирования и субсидиями национальным товаропроизводителям. учитывая большое значение таможенных платежей в формировании государственного бюджета и обеспечении экономической безопасности украины, считаем, что механизм взимания таможенных платежей в украине требует внедрения новых приемов и идей. повышение эффективности организации взимания таможенных платежей и обеспечить стабильность экономической безопасности можно достичь за счет: ‒ активизации сотрудничества с производителями и импортерами товаров в части получения справочной информации о ценах и факторах, влияющих на их уровень; ‒ проведения анализа классификационных решений традиционного импорта; ‒ сохранение необходимого уровня тарифной защиты отдельных отраслей, имеющих низкую конкурентоспособность; ‒ улучшение организационно-правового обеспечения деятельности контролирующих органов; ‒ разработка и установление оптимального уровня таможенных платежей с целью повышения инвестиционной привлекательности отдельных отраслей украинской промышленности и сельского хозяйства; ‒ усиление контроля таможенных органов за правильностью классификации и определения страны происхождения товаров, в отношении которых установлены дифференцированные ставки ввозной пошлины и специальные и антидемпинговые меры. решением этих вопросов позволит повысить качество таможенного регулирования и усовершенствовать процесс взимания таможенных платежей в украине, что в свою очередь будет способствовать увеличению поступлений в государственный бюджет страны, и поддерживать стабильный уровень экономической безопасности, а как мы отметили выше – эффективная и качественная система обеспечения экономической безопасности – вопрос жизни любого государства, стремящегося занять достойное место в мировом геополитическом и экономическом пространстве. baltic journal of economic studies 37 vol. 3, no. 3, 2017 references: stal t. (2015). customs payments of ukraine and influence on their membership in the world trade organization. theoretical and practical aspects of economy and intellectual property,1(2):192-196. voitschuk a. (2007). regulation of customs: textbook for stud. higher teach shut off.  – khmelnitsky, intrada, p. 312. the tax code of ukraine: as of october 1, (2015) – k.: my book, p. 592. pashko p., & berezhnyuk i. (2013). customs policy and customs security of ukraine: monograph – khmelnitsky, 338 p. revenues of the state budget of ukraine for (2017). electronic resource, liga law: legal portal. – access mode: http://search.ligazakon.ua/l_doc2.nsf/link1/t161801.html инна киянчук влияние таможенных платежей на экономическую безопасность страны, проблемы и пути преодоления аннотация. в статье рассмотрена роль таможенных платежей, как одного из основных доходных источников государственного бюджета украины. охарактеризованы объемы поступления таможенных платежей в бюджет государства. проанализирована структура поступлений от таможенных платежей за 2016-2017 гг. определены проблемы, которые нарушают стабильный уровень экономической безопасности страны. рассмотрен комплекс мероприятий предложенных по решению недостатков в системе взимания таможенных платежей в государственный бюджет украины. цель этой статьи – выявить содержание и роль доходов от таможенных платежей в государственный бюджет и их влияние на экономическую безопасность страны. предмет исследования: влияние таможенных платежей на экономическую безопасность страны. методологической основой исследования является совокупность общих, общенаучных, конкретно-научных и специальных методов и подходов, что помогло в реализации концептуального единства исследования. в частности: комплексный подход, который используется для анализа взимания таможенных платежей, методы индукции и дедукции, формализации к изучению механизма взимания таможенных платежей, метод анализа  – при исследовании основных элементов взимания таможенных платежей в украине. для разработки предложений по росту доходов бюджета от поступления таможенных платежей и обеспечении стабильной экономической безопасности использован положительный и нормативный методы исследования. результаты. таким образом, согласно результатам анализа, в 2017 году наблюдается явная тенденция увеличения поступлений в государственный бюджет, в том числе от таможенных платежей. так, в 2017 году общий объем таможенных платежей составил 277,27  млрд.  грн., что составляет 57,24  млрд.  грн. больше, чем в предыдущем году (220,03  млрд.  грн.). то есть таможенные платежи увеличились на 26%. экономические последствия. однако есть некоторые проблемы в сборе таможенных платежей в государственный бюджет, что, в свою очередь, нарушает стабильный уровень экономической безопасности государства. к проблемам, которые нарушают стабильный уровень экономической безопасности, можно отнести: ненадлежащее развитие отдельных отраслей и отраслей, которые должны эффективно работать и получать дальнейшее развитие в украине, чрезмерные таможенные пошлины также могут привести к нехватке товаров на внутренних рынках и увеличение внутренних цен. все это отрицательно скажется на экономической безопасности государства. поэтому при установлении таможенных пошлин необходимо учитывать их влияние на экономическую безопасность, прогнозировать возможные социально-экономические последствия применения определенных ставок таможенных пошлин. вывод. принимая во внимание важность таможенных платежей при формировании государственного бюджета и обеспечении экономической безопасности украины, мы считаем, что практика взимания таможенных платежей в украине требует введения новых приемов и идей. в последние годы в мире применено много интересных и эффективных приемов таможенно-тарифного регулирование, которые могли бы быть полезными для использования в украине. на современном этапе наиболее подходящим является использование опыта стран центральной и восточной европы, которые недавно присоединились к ес. baltic journal of economic studies 103 vol. 3, no. 5, 2017 corresponding author: 1 department of finance, national university of life and environmental sciences of ukraine. e-mail: davidenk@ukr.net 2 department of finance, national university of life and environmental sciences of ukraine. e-mail: ga_skrypnyk@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-103-107 evaluation methods of investment at tractiveness of ukrainian agricultural enterprises nadiya davydenko1, halyna skryphyk2 national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the article is to reveal scientific approaches to determining investment attractiveness of enterprises. evaluation methods of investment attractiveness of enterprises, which are based on various expert assessments, on statistical information, and also combined methodologies based on expert and statistical calculations are investigated. decision-making criteria on the appropriateness of investment are determined. methodology. to determine investment attractiveness of agrarian enterprise on the basis of rating and analytical assessment, it is necessary to use an integrated approach and take into account certain set of indicators. during developing and organizing rating restrictions, we conducted an analysis of groups of indicators, which combined characterize investment attractiveness in a complex way, taking into account specifics of the industry. results. application of this approach allows quickly evaluating perspectives of funds investing and the reliability of the investment object. at the same time, the investment potential of company and investment risk are expressed by one general indicator, which allows applying rating comparisons. in order to approbate research results, seven agrarian enterprises with positive profitability and appropriate level of financial autonomy are selected. based on financial statements, we determined their investment attractiveness and rating. practical implications. proposed calculation methodology covers all major processes occurring in different functional sectors of the internal environment of agrarian enterprise, which ensures a systematic view of the subject of management, which enables to identify all the strengths and weaknesses, as well as to create a strategy for prospective development on this basis. presented methodology for the evaluation of investment attractiveness of enterprises can be successfully applied in agrarian enterprises as during the choice of priority directions of investment investments, as well as for operating current costs, technologies, etc. applying in practice the abovementioned recommendations will increase the objectivity of evaluation of investment attractiveness, will increase the flow of necessary funds to the company. key words: investment attractiveness, methods of analysis, rating and analytical valuation, agrarian enterprises. jel classification: q14, m21, r30 1. introduction in conditions of investment resources deficit and further high risk of investment activity in the agricultural production of ukraine, information on the level of investment attractiveness of potential consumer of investments is important for potential investors. the necessity to study investment attractiveness, create conditions for its growth, and develop a mechanism for attracting investment into enterprises of agricultural sector determines the relevance of our research. a detailed analysis of literary sources suggests that the overwhelming majority of key theoretical considerations for the evaluation of investment attractiveness have been developed quite thoroughly. however, traditionally, investment attractiveness of enterprise is considered as a function of its financial condition. insufficient attention is paid to factors such as investment and innovation potential, economic growth, and competitive positions in the market. calculations are mainly limited to retrospective analysis, which highlights the situation that occurred in the previous period. investment attractiveness plays an important role in activating investment processes. its role lies in the fact that potential investors need to be convinced in the expediency of investments with help of concrete indicators. today, the issue of developing a methodology and improving methods of evaluating investment attractiveness of agrarian enterprise becomes relevant. investment attractiveness of agrarian enterprise is multilevel integrated characteristic. baltic journal of economic studies 104 vol. 3, no. 5, 2017 at the present stage in economic literature, notion of essence and analysis of the main approaches to the valuation of investment attractiveness were considered in a number of works by well-known domestic and foreign researchers, in particular, i.  o.  blank, f.v.  bandurin, s.  a.  butkevych, i.  m.  vahovych, f.  p.  gayduksky, t.  v.  majorova, s.  s.  chernysh, t.  a.  cherniavska, o. m. yastremska. however, it should be noted that, despite numerous publications, there is still no single point of view on methodological approaches to analysis and evaluation of investment attractiveness, which indicates the need for further research in this direction. 2. problem statement nowadays one of the important issues is an improvement of methodological approaches to determining investment attractiveness of agrarian enterprises taking into account sectoral features and developing an active mechanism for attractiveness evaluation of investment object. the relevance of this issue is conditioned, first of all, to the fact that in modern conditions of management, the majority of agrarian enterprises need to attract additional investment resources for pursuing activities. and investor, in turn, should identify the potential object for investing resources and focus on investment attractiveness of enterprise. the purpose of the paper is to open up and develop methodological approaches to improve evaluation of investment attractiveness of agrarian enterprises on the basis of rating approach, taking into account sectoral peculiarities. 3. methods of analysis of investment attractiveness of enterprise estimation of investment attractiveness of enterprise is carried out directly in a number of methods developed by ministries (departments), national bank of ukraine and commercial banks. the basis of such methodological approaches has been laid since 1998 by agency for prevention of bankruptcy of enterprises and state tax administration of ukraine. at the legislative level, on the initiative of agency for prevention of bankruptcy of enterprises and organizations, methodology for integral assessment of the investment attractiveness of enterprises and organizations has been developed. this methodology is developed in accordance with the law of ukraine “on investment activity”, decree of president of ukraine “on establishment of agency for prevention of bankruptcy of enterprises and organizations” and regulation on register of insolvent enterprises and organizations with view to defining integral indicator of investment attractiveness of enterprises and organizations, accelerating implementation of investment projects, promotion of domestic and foreign entrepreneurs’ investments, provision of methodical assistance to specialists involved in creation measures for sanitation of production sector. according to methodology, investment attractiveness of enterprise is level of satisfaction of financial, industrial, organizational and other requirements or interests of an investor with respect to a particular enterprise, which can be determined or evaluated by values of relevant indicators, including integral assessment (methodology, 1998). at the stage of enterprise creation, investment attractiveness affects model of future work of enterprise, on basis of which it is possible to predict advantages and opportunities of strategic investment management in the long run, as well as to insure against risks both at decision-making level about profitability or unprofitability of investment, and risk inadequate reaction of subjects of investment planning and their expectations (ponomarenko and others, 2003). o.m. yastremskaya claims that investment attractiveness is determined by using methods of multi-factor analysis to identify explicit and implicit tendencies in their use in the first stage, and regression analysis based on the genetic algorithm in the second stage (yastremskaya, 2004). investment attractiveness of enterprise is set of characteristics of its financial, economic and managerial activity, prospects of development and possibility of investment resources attracting. evaluation of investment attractiveness of enterprise is integral characteristic of its internal environment (borsch, gerasimova, 2007). the essence of the methodology of integrated assessment of investment attractiveness is carried out in analysis conducting at following stages: 1) assessment of the financial condition of investment object; 2) determining the importance of group and individual indicators based on expert assessments; 3) determination of the fraction of the scale of variation set; 4) definition of ranked value for each indicator; 5) investment attractiveness integral indicator calculation (methodology, 1998). it should be noted that this methodology has its disadvantages; in particular, it does not take into account inter-industry specifics enterprises activity. also, a financial analysis of investment attractiveness of an enterprise according to this methodology is rather cumbersome since it involves the calculation of more than forty indicators in terms of business activities of the enterprise. obtained results require the processing and synthesis to determine more significant indicators, which involves experts (which entails additional costs). however, i. bakhovych notes that definition of integral indicator and assessment of investment baltic journal of economic studies 105 vol. 3, no. 5, 2017 attractiveness of enterprise should be carried out at the level of a separate region in order to identify the most investment-attractive enterprises of the region. this, in turn, will allow the attraction of foreign investors and stimulate domestic investment in the designation of enterprise (vakhovych, 2014). theory of financial analysis uses a large number of techniques to determine investment attractiveness of enterprises. all developed in domestic and world practice methods of evaluation of investment attractiveness in relation to the source of information can be divided into three broad groups: 1) methods based on various expert assessments; 2) methods based on the statistical information; 3) combined methods based on expert and statistical calculations (pylypenko, 2010). in the economic literature, i. o. blank considers investment attractiveness from the point of view of financial position of company as “integral characteristic of individual firms – objects of possible investment from the perspective of development, volumes and prospects of product sales, efficiency of asset utilization, their liquidity, solvency and financial sustainability” (blank, 2001). in turn, a. gaiducky proposes to use the method of comparisons, which should cover the following main components of investment process: comparison between investment objects, between subjects of investment (investors), and between investment conditions (factors of investment attractiveness) (gaiduckiy, 2004). objective, expedient, and competitive system of appraisal indicators of investment attractiveness, as noted by s. s. chernysh, should take into account the following conditions: 1) a limited number of indicative indicators directly affecting investment decision-making; 2) use in calculation of indicators of public accounting and statistical reporting data, minimizing the use of internal information; 3) the possibility of carrying out a rating assessment of company’s activities in relation to other economic entities, as well as in time (chernysh, 2013). consequently, existing methods of determining the level of investment attractiveness not always meet investor’s objective and sufficient for decision-making information. therefore, there arises issue towards the creation of a unified system of evaluation indicators, which would allow conducting an objective and comprehensive analysis of enterprises’ investment attractiveness in the framework of the chosen mathematical toolkit. in our opinion, in order to fully assess investment attractiveness of enterprise, quantitative and qualitative assessment of characteristics of enterprise should be taken into account: capital structure, liquidity and solvency of the enterprise, transparency of senior management’s activities, and level of liability to investors, the nature of conflicts of corporate interests, and enterprise’s business reputation. 4. research methodology for ukraine in the difficult period of crisis state of the economic system, solution to the question of increasing the investment potential means creating mutually beneficial conditions for the placement of financial resources of investment entities that form a comprehensive basis for recreating the economic and social spheres of region’s life. one of the methods for assessing investment attractiveness is a rating of the issuer. this methodology is based on analysis of financial reporting data. this method involves assessing company’s financial condition by calculating such indicators: liquidity, solvency, financial stability, business activity, insolvency and probability of bankruptcy (gotra, 2017). after calculation, these indicators of the enterprise are compared with each other and investor chooses the most optimal one from his point of view for investing. in turn, y. v. skrypnyk, in order to determine investment attractiveness of agrarian enterprise on the basis of scoring, uses an integrated approach, takes into account certain set of indicators. in developing and organizing rating constraints, the author analysed four groups of indicators, which combined characterize investment attractiveness in a complex way, taking into account the specifics of the industry (skrypnyk, 2016). according to this points’ method, we will analyse 7  agrarian enterprises (table 1) where is investment attractiveness of a number of points evaluated as follows: 4 – attractive zone, 3 – satisfactory, 2 – acceptable, 1 – risky, 0 – absolutely risky. analysing the indicators of table 1, we note that of seven companies, four are located in an attractive zone. two enterprises – pae “avangard” and allc “luchansk-2” are in the satisfactory zone and only one enterprise – llc “urozhaina ukraina” – in acceptable zone. thus, a proposed list of indicators makes it possible to take into account such important components of investment attractiveness of agrarian enterprise as resource productivity and business activity, quality of labour force, financial stability, opportunities for the economic growth and efficiency of economic activity. in addition, the lack of value measures makes this technique independent from the impact of inflation, which allows using it for the analysis of time trends. the next step is rating assessment of the financial condition of agrarian enterprises for investment attractiveness (table 2). according to the calculations, apc “labunsky” is identified as the most investment-attractive enterprise and the least attractive for investments – llc “luchanske-2”. the most significant indicators are considered such as profitability and efficiency of assets baltic journal of economic studies 106 vol. 3, no. 5, 2017 utilization, which determine how quickly invested funds will return to investor and what income he will receive. abovementioned calculations indicate that financial condition of the majority of agrarian enterprises is satisfactory, since the bigger part of business activities is financed by own working capital, and these enterprises have satisfactory profitability indicators. 5. findings in order to determine real investment attractiveness of agrarian enterprise, it is necessary to evaluate its complexity taking into account production and financial potential, as well as the potential of business activity and production efficiency. such approach can be fully implemented in both inflationary and stable economy. investment attractiveness plays an important role in activation of investment processes. in the conditions of limited resources and intense competition between enterprises for obtaining financial resources, arises the issue regarding creation in investors of the idea of enterprise as attractive investment object – formation of investment attractiveness. the role of determining investment attractiveness of enterprises lies in the fact that potential investors need to convince expediency of investments with specific indicators. 6. conclusions methodological approaches of different authors have some disadvantages, especially they do not take into account industry specifics of enterprise, are based table 1 investment attractiveness points evaluation of agrarian enterprises of ukraine, 2016 indicator attractive zone enterprise apc “labunsky” llc “agroleaderukraine” llc “maslivske” llc “urozhaina ukraina” llc “таkаgro” pae “avangard” allc “lychanske – 2” coefficient of fixed assets depreciation <20% 0,55 0,39 0,34 0,20 0,26 0,32 0,63 return on capital of main funds > 0,8 24,1 1,69 13,2 27,5 1,14 2,52 1,09 return on equity >0,4 0,7 0,94 1,91 0,90 1,36 1,53 2,07 turnover of current assets >2 0,6 0,81 1,53 0,56 0,80 1,21 0,79 absolute liquidity ratio >0,2 0,15 0,65 2,2 0,005 0,001 0,12 0,21 current liquidity ratio (coverage) >2 17,42 17,43 6,9 1,96 2,18 2,90 1,46 coefficient of financial independence (autonomy) >0,6 0,97 0,92 0,86 0,55 0,63 0,84 0,34 return on basic activity >25% 14,2 24,06 37,7 0,4 28,79 20,76 21,8 return on assets >15% 22,6 26,24 55,8 0,7 48,90 26,41 38,65 return on sales >20% 23,9 32,08 29,2 0,4 35,98 17,22 18,60 points 4 4 4 2 4 3 3 calculated by the authors on the basis of financial statements of enterprises table 2 rating estimation of investment attractiveness of agrarian enterprises of ukraine, 2016 indicator enterprise apc “labunsky” llc “agroleaderukraine” llc “maslivske” llc “urozhaina ukraina” llc “таk-аgro” pae “avangard” allc “lychanske-2” financial dependence 1,03 1,09 1,16 0,45 1,59 1,19 2,9 current liquidity 17,42 17,43 6,9 1,96 2,18 2,9 1,46 liquid ratio 3,67 18,39 6,4 1,08 1,54 1,27 0,6 absolute liquid ratio 0,149 0,65 2,2 0,005 0,001 0,12 0,21 return on assets 14,2 0,24 0,37 0,4 0,29 0,21 0,2 return on equity 12, 0 0,26 0,55 0,7 0,49 0,26 0,39 efficiency of assets utilization for production (revenue/assets) 0,6 0,75 1,3 1,2 0,67 1,21 0,6 place in the ranking 1 2 3 4 5 6 7 calculated by the authors on the basis of financial statements of enterprises baltic journal of economic studies 107 vol. 3, no. 5, 2017 on cumbersome multifactorial models, narrowing the range of analytical assessment. hence, there is a need to develop rating generalization indicator that would enable to quickly and objectively evaluate investment attractiveness of enterprise and to select from its certain number of most reliable potential investment objects. 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(2016). rejtingovo-analіtichna ocіnka іnvesticіjnoі privablivostі sіlskogospodarskogo pіdpriymstva [rating and analytical estimation of investment attractiveness of agricultural enterprise]. economics and society, no. 3, pp. 477-448. baltic journal of economic studies 139 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 engineering educational and scientific institute named after y. m. potebnya, zaporizhzhia national university, ukraine (corresponding author) e-mail: vitalina2006@ukr.net orcid: https://orcid.org/0000-0001-9588-7836 2 engineering educational and scientific institute named after y. m. potebnya, zaporizhzhia national university, ukraine e-mail: valentinavoronkova236@gmail.com orcid: https://orcid.org/0000-0002-0719-1546 researcherid: т-2057-2017 3 zaporizhzhia national university, ukraine e-mail: znuhist@gmail.com orcid: https://orcid.org/0000-0001-6889-7377 researcherid: v-3050-2017 doi: https://doi.org/10.30525/2256-0742/2022-8-5-139-145 the concept of developing a "blue economy" as a basis for sustainable development vitalina nikitenko1, valentina voronkova2, yyuriy kaganov3 abstract. the relevance of the problem under study is that the concept of the development of the "blue economy" represents the most modern development of ecopolises based on the ingenuity of ecosystems and the provision of numerous products and services on which human life and humanity depend. the aim of the article is to create conditions for the development of a "blue economy" as the basis of an ecologically sustainable ecopolis, in which a new culture of agro-ecology is revived as a new type of agricultural product. this study identifies the problems of today's agricultural production model, which generates a lot of waste and leads to genetic manipulation. the "blue economy" as a new direction of production cultivates the effective development of waste potential, demonstrating the evolutionary path of nature, which restores its balance and evolves from scarcity to abundance. the main approach of the study is the systemic method, which makes it possible to show the development of the "blue economy" as a system consisting of interconnected components that function as a whole, as well as methods for modelling the processes of a regenerative economy, of which the "blue economy" is a variety. people live in a complex system of the natural environment, in which they face the problems of environmental pollution, the overcoming of which leads to the need for new types of circular economy, of which the blue economy is a variant. the article analyses the conditions for the emergence of a "blue economy" based on the ingenuity of ecosystems to continue to provide humanity with the best products on which the quality of sustainable human life and the capacity of society to renew itself depend. today's agricultural production is a model that produces a lot of waste, which can be used to process weeds, to make animal feed and to develop "coffee chemistry" by growing mushrooms on coffee biomass. the "blue economy" as a new direction of agricultural production can be a response to the innovative development of the food industry – from food to the production of animal feed and ingredients for cosmetics – which represents the formation of new values of the "blue economy" as a sustainable provision of new products. the combination of sustainable agriculture, new agricultural production and human health requires innovation and the development of the blue economy as a new culture of agroecology – environmentally friendly products and food. key words: agricultural production, "blue economy", sustainable development, ecopolises, agro-ecology. jel classification: a13, b49, o39, p16, p49, z10 1. introduction the relevance of the problem under study lies in the fact that the concept of "blue economy " develop ment is one of the directions of transformation of agriculture, which is based on the modern develop ment of ecopolises, based on the ingenuity of ecosystems and the provision of numerous products and services on which human life and humanity depend. in 1982, ashok khosla created the organi zation development alternatives, with a guaranteed project in the amount of $100,000, which was funded by the un environment program (unep) and aimed baltic journal of economic studies 140 vol. 8 no. 5, 2022 at efficient implementation of the environmental mission (sharma, 2018). development alternatives began by analysing the changes needed in existing economic systems, society and governance to ensure the health of the environment and renew it for future generations. it is based on the idea that technology should generate waste, respond to people's basic needs and be the main tool for preserving the environment. for the development of "blue economy " were established other organizations such as "technology and action for rural advancement" (tara), "research and development innovation centers", which develop special technologies of environmental sustainability, conservation of healthy land, water and forest resources, overcome the poverty problems, environmental and technological security preservation (voronkova, & nikitenko, 2022). the aims of the organization "technology and action for rural advancement" (tara) were aimed at increasing the housing construction in rural areas, the search for renewable energy technologies, water management, waste management and recycling, which should lead to the agricultural sustainability. this concept is based on a new understanding of the economy as a subsystem of society and nature, a tool for achieving a socially just and environmentally stable future, because the planet does not have time to renew itself and the state increases the volume of production, wasting resources and causing many problems with risks, crises, instability, uncertainty and volatility of development (buhaychuk, nikitenko voronkova, andriukaitiene, & malysh, 2022). geldermann and kogel states that considerations of global agricultural production in the future must take into account the certainty that the world population will increase (geldermann and kogel, 2002). figure 1 shows the growth in the number of people to a projected 9.5 billion in 2050. un reports predict population growth only in developing and emerging countries. any consideration of global agricultural production in the future must take into account the certainty that the world's population will increase. what are the strategies for agricultural production to sustain food for a growing human population? a powerful vision of sustainable development has emerged from global discussions about the limits of agriculture. terms such as limitation, sustainability, sufficient supply, equitable distribution, and productivity of resources are no longer obstacles, but guidelines for a fairer and safer world. natures concept focuses on biological and ecological principles. on this basis, criteria for action must be defined in order to determine the long-term economic consequences of agricultural production. more than ever, the solution to sustainable agriculture lies in figure 1. world population changes source: (geldermann and kogel, 2002) figure 2. schematic representation of sustainable agriculture source: (blazheva, 2020) baltic journal of economic studies 141 vol. 8 no. 5, 2022 the scientific development of tools for sound resource management (geldermann and kogel, 2002). the concept of sustainability is based on the idea that the needs of humanity today must be met without compromising the ability of future generations to meet their own needs (figure 2). 2. literature analysis and problem statement a seminal work of new thinking was the club of rome's first report, "the limits to growth" (1972), which forced us to think about the physical limits to human economic growth. the focus will be on the book by donella meadows, jorgen randers, and dennis meadows, "the limits to growth". thirty years later, based on information from the second half of the twentieth century, information emerged about the depletion of global natural resources and the limited assimilative capacity of the planetary ecosystem. an updated study by representatives of the club of rome concludes that if economic growth rates remain unchanged, the depletion of natural resources and significant pollution will lead to the ultimate destruction of the world's systems (meadows donella, randers jorgen, meadows dennis, 2018). 3. purpose and tasks of the study the purpose of the article is to formulate the concept of the "blue economy " as the basis for the ecologically sustainable development of an ecopolis, which revives a new culture of agroecology as a new type of agricultural production. research objectives: 1) to study the problems of agricultural development and outline the transition to a new develop ment paradigm; 2) to formulate the main provisions of the new concept of the "blue economy "; 3) to investigate the innovative development of agricultural production as a basis for the develop ment of the "blue economy " concept; 4) to clarify the main directions of development of the "ecopolis" as a basis for the development of the "blue economy " concept (nikitenko, voronkova, andriukaitiene, oleksenko, 2021). 4. research materials and methods the leading approach to the study is a systematic approach, which allows to show the development of the "blue economy " as a system consisting of interconnected components of subsystems that function as a whole, as well as modeling the processes of the regenerative economy, of which the "blue economy " is a type. the methodology of system dynamics and modern computer capabilities developed by the authors of the club of rome helped to create an environmentally balanced and socially oriented model of the economy that will bring prosperity to all. to do this, it is necessary to revise the worldview, behavioral and political models, develop new trends, and model new development scenarios (voronkova, kaganov, & metelenko, 2022). 5. research result in 2009 günter pauli published the local economic development concept as a possible draft report to the roman club under the title "the blue economy: 10 years, 100 innovations, 100 million jobs" (the blue economy: 10 years, 100 innovations, 100 million jobs). he started from the assumption that nature has overcome all the challenges and ways for human survival throughout its existence, which can be built on the ingenuity of ecosystems that continue to provide humanity with numerous products and services, contributing to the renewal of environmentally friendly products. günter pauli formulated some fundamental principles of the "blue economy " concept, which helps transform many industrial sectors through recycling products from waste and functions better and more efficiently as a hope for human and human survival (voronkova, nikitenko teslenko, bilohur, 2020). 1. the problems of agricultural development are related to the fact that the old development paradigm is based on deindustrialization, inequality, and constant economic growth through aggressive expansion, which has gradually degenerated into an economy of absurd speculation. therefore, scientists have developed a qualitatively new concept of the "blue economy " as a new innovative philosophy of the production and consumption system that uses the properties of nature, optimizes natural processes, and demonstrates nature's ability to recover. the "blue economy " as a new concept opposes the outdated market fundamentalism with a new anthropo centrism, demonstrates the evolutionary path of nature, which restores its balance and evolves from scarcity to wealth (kyrychenko, 2019). 2. these changes in agriculture have been facilitated by: 1) depletion of the stratospheric ozone layer; 2) loss of biodiversity and extinction of many biological species; 3) chemical pollution and newer chemical releases (radioactive materials, genetically modified organisms, nanomaterials that have the potential for undesirable geophysical and/or biological effects); 4) climate change; 5) ocean acidification; 6) landscape changes; 7) saltwater use and the global hydrological cycle; 8) nitrogen and phosphorus inputs to the biosphere and oceans; 9) atmospheric aerosol concentrations. modern, innovative agricultural production is a model of economic development with the use of many wastes in further processing, baltic journal of economic studies 142 vol. 8 no. 5, 2022 for example, weeds for animal feed or the mushroom growing on coffee biomass (boschen-rose, ferreira, johnson, and gianni, 2020). 3. the main provisions of the new concept of the "blue economy". the blue economy is based on the ingenuity of ecosystems that continue to provide humanity with the best products on which the quality of sustainable human life and society 's ability to renew itself depend. there is no unemployment problem in ecosystems, so the implementation of the blue economy concept improves the life of biopolises and their quality, develops new business models that increase the efficiency of resource use, and generates new ways of producing different types of food using mainly local resources (blazheva, 2020). in this regard, there are examples of the intro duction of a "blue economy " of final consumption based on the consistent development of natural resources, such as the cultivation of mushrooms on coffee biomass plantations, which is called "coffee chemistry ". the fermentation process leads to the use of only a tiny part of it, and the rest is disposed of as waste, so the critical factor in development depends on the availability of raw materials. the "coffee logic" can be applied to the production of other products – tea and dozens of other crops – combining innovations that can change toxic chemicals, generate income and create new jobs (uhl, and hanslik, 2017). to develop a "blue economy," it is possible to use various types of waste products, such as weeds, and process them into a variety of biochemicals, and recycle the waste back into animal feed, which could then be the answer to many of society 's needs. the cultivation of seaweed, mussels, oysters and lobsters was a new and effective way to revive healthy seafood production. a wide variety of foods can be grown in this way, from animal feed to all kinds of ingredients for cosmetics and pharma ceuticals, and all the waste can be turned into fertilizer. all this lends itself to the creation of a philosophy of new "blue economy " values, in the context of lower investment costs, more efficient results, more jobs and innovative development of food products (li, bao, sun, wang, 2019). as zhang (2020) poited out, the concept of sustainable development has become the main development concept. with the gradual deepening of the concept of sustainable development, the blue economy has become the main voice calling for a more rigorous accounting of marine resources (zhang, 2020). boschen-rose (2020) asserts that improving the management and governance of marine resources requires linking science and socioeconomics, which is key to the development of the blue economy. the sustainable growth of the blue economy (blue growth) requires robust scientific information on the marine environment, detailed knowledge of the activities taking place in the ocean space, and a comprehensive understanding of the environmental impacts (rios, charnley, 2016). the development of the "blue economy " concept is based on: 1) the concept of "renewable energy sources", wind and solar energy technologies, on which agroecology is based; 2) the concept of circular metabolism, that is, the return of nitrogen, phosphate and potassium to new agricultural land, which contributes to the revival of agricultural production; 3) the concept of urban revitalization, based on the revival of culture, education, science, new investments in their development (cherep a., cherep o., krylov, voronkovа, 2019). according to uhl, a. and hanslik, o. (uhl, hanslik, 2017), innovation is a prerequisite for the continued existence of a prosperous society and its survival in a competitive economic environment. following this path, the blue economy approach promises a combination of sustainability, innovation and competitiveness. the basic idea is to rediscover traditional business models and processes under the premise of using sustainable resources. existing principles from physics and chemistry are combined to create new business models while making a significant contribution to environmental protection (kyrychenko, nikitenko, voronkova, harbar, fursin, 2021). innovative development of agricultural production as a basis for the development of the concept of "blue economy ". the concept of "blue economy " as a new direction of agricultural production can become a response to the innovative development of industry, as already mentioned, from food to the production of animal feed and ingredients for cosmetics, which represents the formation of new values of the "blue economy " as a sustainable provision of new products. the combination of food security, sustainable agriculture and health protection requires entrepreneurs to implement innovations in various areas – social, technological, managerial and organizational, creating such development tools that help redesign processes in relation to the standards and requirements of eco-civilization – producing high quality products, free from large quantities of chemicals (cherep, voronkova, kurdupa, 2021). innovation in agriculture, often called technological progress, gradually increases the productive potential of the economy, which is facilitated by the development of science, technology, social science and management science, – notes chandran nair (chandran nair, 2020). innovations in agriculture can become a locomotive of technological and social transformations and serve as a basis for building an ecopolis. the economy of innovation in ecopolises leads to constant regeneration of knowledge, thanks baltic journal of economic studies 143 vol. 8 no. 5, 2022 to which they have the opportunity to increase their capitalization. if primary economy works with limited and non-renewable sources of natural resources, which come to their exhaustion and depreciation of assets of traditional industries, in "economy of innovation" of ecopolises the main assets are transferred from knowledge production to processing of raw materials. according to blazheva (2020), in smart agriculture or future agriculture, the socalled third green revolution driver is the concept of connected smart machines and sensors integrated into farms to make data-driven and data-activated agricultural processes. smart farming enables the potential of an intelligent network of sensors, actuators, cameras, robots, drones, and other connected devices to deliver unprecedented levels of control and automated decision making, enabling the creation of a sustainable, innovative ecosystem. (melnik, 2019) circular production is known as closed-loop agriculture: a farming method in harmony with nature, not against it. residues from one chain are raw materials for another (cherep, voronkova, kurdupa, 2021). the focus of circular agriculture is on reducing the use of raw materials, not on mass production at the lowest possible price. at the european level, the circular economy is expected to increase global competitiveness, stimulate sustainable economic growth and create new jobs. the circular economy of resource-based industries embraces the goal of sustainable development and requires that economic activities be conducted according to natural ecosystem patterns. it is a new mode of economic development, and it is a repeated flow process of ''resources-products-recycled r esources'' (chandran nair, 2020). at the heart of the "new economy " concept is new knowledge, which is transformed into innovation and then into capital as a self-growing value (nikitenko, andriukaitiene, & punchenko, 2019). 4. the main directions of development of "ecopolis" as a basis for development of the concept of "blue economy". ecopolis is a regenerative city that stimulates the return of rural activities to the city, such as the development of horticulture or renewable energy, which reduces dependence on exhaust fuels, in accordance with the basic laws of ecology (nikitenko, 2020). synonymous with "ecopolis" is the biopolis as an ecologically clean city with zero waste, which is also recycled, where people live in harmony with nature and regenerate the nature and culture of the city. figure 3. circular agriculture model source: https://agri.bg/novini/predstavyat-modeli-na-kragovata-ikonomika-v-zemedelieto, 12.06.2020, cit. blazheva (2020) baltic journal of economic studies 144 vol. 8 no. 5, 2022 ecopolis creates regenerative urban systems of production, consumption, and transportation that develop a new concept of services. thus, in connection with the implementation of the concept of "five factors" there is a fivefold increase in resources in agriculture, which in turn ensures the stability of product quality and the achievement of sustainable development of agriculture (rybalchenko, bilohur, oleksenko, voronkova, verkhovod, 2021). today, food trade is based on the ability of the exporting country to ensure the quality of products and their safety by identifying unsafe factors (microbiological, toxic, mechanical, physical, etc.). in an ecopolis, everyone is responsible for protecting the environment, so there is no conflict between economic development and environmental protection. it is the course of innovative development that provides the opportunity to create products with global innovation potential in the future, thus ensuring economic prosperity (tetlock, gardner, 2018). 6. conclusions thus, the formation of the "blue economy " concept as the basis for the development of a sustainable ecopolis, in which a new agro-ecological culture is revived as a new type of agricultural production, represents a new economic model for the creation of an eco-civilization. günter pauli, the founder of this concept, was based on the conclusion that nature evolves from scarcity to abundance, relentlessly manipulating matter, energy and food, each component of which contributes to achieving efficient agricultural production and the country 's transition to sustainable development, prosperity and well-being (schwab, 2019). the integration of sustainable agroculture leads to the creation of new agro-production based on vertical farming, hydroponics (a plant growing technology using substrate and nutrient solution), aeroponics (a growing process in an airy environment without soil, in which nutrients are delivered to the plant roots as an aerosol); solidarity farming or community-supported farming, an alternative economic model designed for small area coverage and for efficient management and distribution of crops), which is the basis of the "blue economy ". the soil is "fed" with organic, not mineral fertilizer, compost. such soil provides all the opportunities for the growth of healthy, wholesome plants. the "blue economy " as a new environmentally friendly way of growing agricultural crops promotes innovation as a new culture of agricultural ecology, ensuring a basic standard of living and a comfortable level of life, moving away from excessive use of resources and externalization of costs, which requires competent agricultural management, investment in agriculture and a strong policy of state management structures. the scale, complexity, and urgency of the challenges facing the world require leaders to act swiftly to forge shared values aimed at creating inclusive, equitable, and prosperous societies. references: buhaychuk oksana, nikitenko vitalina, voronkova valentyna, andriukaitiene regina, & malysh myroslava (2022). іnteraction of the digital person and society in the context of the philosophy of politics. interacción persona digital y sociedad en el contexto de la filosofía política. cuestiones políticas, vol. 40, 72, 558–572. voronkova, v., & nikitenko, v. 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(2019). methodological approach to the redistribution of investment projects within a company according to formal criteria. financial and credit activity-problems of theory and practice, vol. 28.1, 256–263. received on: 13th of october, 2022 accepted on: 29th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 198 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 kyiv national economic university named after vadym hetman, ukraine (corresponding author) e-mail: olvalshev@gmail.com orcid: https://orcid.org/0000-0003-0386-7550 researcherid: hgc-5262-2022 2 kyiv national economic university named after vadym hetman, ukraine e-mail: ol.shevchuk@ukr.net orcid: https://orcid.org/0000-0002-3206-6966 researcherid: hgc-7172-2022 3 v. n. karazin kharkiv national university, ukraine e-mail: polovynko96@gmail.com orcid: https://orcid.org/0000-0003-0592-941x researcherid: hgb-5903-2022 doi: https://doi.org/10.30525/2256-0742/2022-8-5-198-208 regulation of dynamic processes in the indicators of disproportions of ukrainian regions: operational and logistic approach olga shevchenko1, oleg shevchuk2, bohdan polovynko3 abstract. indicators of socio-economic development of the regions of ukraine demonstrate a tendency to increase disproportions, which are significantly intensified in the conditions of military operations. in addition to the deterioration of performance indicators, this trend leads to the fragmentation of the country's economic space. regulation of regional development does not contribute to the reduction of disparities, in particular, due to shortcomings in the assessment, interpretation of indicators of disparities and modeling of their dynamics, which leads to the definition of unrealistic goals of regulation. taking into account the need to ensure the connection between short-term and long-term planning of regional development, the purpose of the article is to develop theoretical and empirical foundations aimed at regulating dynamic processes in the indicators of regional development disproportions. to achieve the goal, the following tasks were chosen: to analyze the models of convergent-divergent processes of regional development imbalances, to build models of long-term interaction of indicators of imbalances in the spheres of life, to determine the basis for assessing the crisis dynamics of regional indicators. methodology. to regulate the development of regions, a model of long-term interaction of indicators of disproportions in various spheres has been developed. the process component of the study of dynamic processes in the indicators of regional disproportions and forecasting of crisis situations in the spheres of regional activity, which covers the tasks, tools and main results of the study, has been formed. the paper investigates the long-run interaction of inequality indicators in different areas using econometric dynamic vector autoregressive and error correction models (var&ecm). this makes it possible to identify and predict non-stationary impulse processes in general, to identify trends relevant to individual phases of activity, to identify the relationship and interdependence of the trajectory of imbalances. the research tools are designed to solve a set of tasks on the regulation of imbalances. the originality of the article lies in the application of the modeling results in the form of interrelationships of disproportions for different time intervals in the formation of a set of programs and preventive measures to manage regional development disproportions. this also enhances the practical significance of the study. practical implication. the data obtained as a result of the study of the dynamic processes of disproportion indicators can be taken into account in solving a set of tasks to regulate the disproportions of regional development, developing a set of measures for the implementation of regional strategies, financial and budgetary regulation of regional development, determining budget expenditures for solving problems arising from disproportions. key words: regional economy, regional economy disparities, econometric modeling, operational-logistics approach, regional development regulation, financial and budgetary relations. jel classification: r12, r58, g28, c51, c36, с13 baltic journal of economic studies 199 vol. 8 no. 5, 2022 1. introduction at the present stage, the development of the regions of ukraine is characterized by unevenness, which is a long-term feature of regional economic indicators. at the same time, during the current year it has deepened due to military operations on the territory of ukraine. the analysis of the socio-economic indicators of the regions of ukraine shows a clear tendency to increase disproportions and fragmen tation of the economic space. strategic and tactical regulation of regional development insufficiently addresses a number of problems that are actually caused by shortcomings in approaches to assessing the socio-economic situation in the regions. such approaches do not take into account the dynamic processes of disproportion indicators in the long term, which further leads to incorrect definition of the goals of regulating structural changes in the regional economy, causing an increase in dispro portions. taking into account the need to ensure the connection between current and strategic goals of regional development, the purpose of the article is to determine the principles of regulation of dynamic processes in the indicators of regional disparities. to fulfill these tasks, the models of convergentdivergent processes of uneven regional development were analyzed, models of long-term interaction of disproportion indicators in different spheres were built, and the principles of assessing the crisis dynamics of regional development indicators were determined. the authors consider it necessary to assess the regulatory impact of government and local selfgovernment bodies on the indicators of regional disparities, as disparities are among the problems that cannot be solved by market self-regulation alone. another aspect of the approach to the regulation of disparities is the use of logistical principles of planning and regulation of material, information and financial resources and flows, taking into account that the unevenness of regional potential is the root cause of the disparity of regional development. thus, by combining operational and logistical approaches, the tools for regulating dynamic processes in terms of disproportions in the regions of ukraine were built. this will allow solving the problems that arise in business entities at the regional level. 2. literature review researches on the regulation of disparities in regional socio-economic development, including use of various models, are widely highlighted. growth of regional development disparities and need to regulate it are proven in the work of gonta (2018). socioeconomic problems of the regions are analyzed in the papers by kyzym et al. (2021) and kondratenko et al. (2022). assessment of region disparities and examples of its regulation in spain, great britain, and european countries in general, are presented in papers by martinez-galarraga (2015), mccann (2020), and de dominic (2014). some papers are devoted to regional and spatial aspects of ukraine economy, spatial dimension of macroeconomic phenomena – cherniuk et al. (2011), dorosh et al. (2015). evaluation of dynamics of regional development disparities is the subject of works by gur'yanova (2013) and bril (2020). paper by melnikova (2015) examines structural shifts in regional economy that lead to disparities. the dynamics of regional development is predicted and modeled in a number of works, among which it is worth noting manoilenko et al. (2020), which considers the modeling of hierarchical systems, including the regional level, and the works of klebanova et al. (2012), gur'yanova (2012), brumnik et al. (2014), klebanova (2014), devoted to the forecasting of economic processes at the regional level. considerable attention is paid to the latest tools regulating development of regions and communities, in particular, in the work by shebanin et al. (2021). the analysis of theoretical and methodological approaches to the assessment, analysis and research of dynamic processes of socioeconomic regional development is set out in a number of other thorough articles devoted to the dynamics of disproportionality and the development of tools for its regulation. thus, amosha et al. (2011), and gur'yanova (2013) allowed conclude that methods of quantitative research of the dynamic processes of disparity and prediction of crisis situations by spheres of life in the region need further investigation. all this actualized the development of a structured scientific and methodological system that regulates dynamic processes in the indicators of regional development imbalances. it is based on the activity-logistic approach, which allows to form a strategy of balanced development of regions and the country as a whole. 3. research methodology according to gur'yanova (2013) and gur'yanova et al. (2012), regional economy should be considered not as a mono-object, but as a complex multi regional system functioning through the basis of vertical and horizontal interactions, which affect indicators of disparities in different ways. thus, the regulation of regional development in ukraine requires the improvement of the methodology of a comprehensive mechanism for assessing, analyzing and forecasting socio-dynamic processes by indicators of disproportions. estimates of relation ships between disparity indicators obtained in the baltic journal of economic studies 200 vol. 8 no. 5, 2022 previous paper by shevchenko (2021) made it possible to designate three classes of regions: regions with balanced disparities in the development of a certain sphere, with controlled disparities, and with unrestrained (uncontrolled) disparities. seven spheres of regional development were studied: general economic, socio-demographic, structural, socio-economic, foreign economic, natural and environmental, industrial. in most areas of development, most regions belong to the second class (with controlled disproportions). classes of regions with higher territorial economic density demonstrate greater stress resistance to various types of external influences. for the purposes of this study, a dynamic series of indicators of disproportions in the socio-economic development of regions in 2007–2021 was analyzed using data from the state statistics service of ukraine. among the limitations is the lack of statistical data on direct investment in certain regions, which distorted the results. to solve the problems of regional socio-economic development due to the crisis and global instability, it is necessary to apply new approaches to the study of relationships in various spheres of socio-economic development of regions, including financial and budgetary. the importance of research in this area is an indicator of stability, living standards, social benefits, business profitability and public welfare. the model of long-term interaction of indicators of imbalances in different spheres of development is developed, which allows to regulate dynamic processes in the indicators of imbalances. models of long-term interaction of indicators of disparities in different areas (based on the use of econometric dynamic models of vector autoregression and error correction – var&ecm): – analysis of cause-and-effect relationships of dynamic rows of disparities indicators; – assessment of stability and level of interrelationship of the components in different spheres of region; – analysis of interdependence of indicators and forecasting the key indicators of unevenness. the choice of such a tool for the study of nonstationary processes of the dynamics of disproportion indicators is due to the following features: it is a convenient tool for studying shortand medium term trends in the dynamics of indicators; allows to reveal the dynamic relationship between the current and lagged values of the relevant indicator; the apparatus of one-time modeling of several hourly series of indicators by means of a system of dynamic equations is presented, which allows to take into account and study the feedbacks between indicators and their lag values, as well as to describe and analyze the relationships between economic variables (klebanova et al., 2012). the results of the study can be used to forecast further trends taking into account shocks and impulses. the proposed models can also be considered as a decision support tool for the formation of strategic priorities in the regulation of imbalances, taking into account short-term effects and fluctuations. 4. process component of the study of dynamic processes in regional disparities the assessment of the relationships between the indicators of disparities (shevchenko, 2021) shows that clusters of regions with higher territorial economic density show greater stress resistance to various kinds of "shocks". thus, disproportionality forms an additional factor that destroys the sustainable potential of regions in the interregional dimension. thus, an urgent socio-economic issue for the country is the strengthening of regional policy measures aimed at reducing interregional disparities in various spheres, as well as improving approaches to assessing the dynamics and interrelationships of disparity indicators. the level of disproportions of regional development in certain spheres of activity, as the main sign of structural disproportions, as well as disproportions in the financial and credit sphere, can be reduced by implementing a scientifically balanced state policy of structural transformations of the regional economy and forecasting crisis situations, based on the principles of an integrated, proportional approach to strategic planning of regional development (scenario models, 2013, otenko et al, 2019). a comparative analysis of the models of regional development regulation in different countries has led to the conclusion that, despite the different types of state structure, similar development priorities can be identified: ensuring a common standard of living and quality of life and reducing disparities between regions. the regulation of regional development in ukraine emphasizes the priority of territorial development, which is a balanced economic territorial development that ensures the integrity of the economic space of the country as a whole (amosha et al, 2011, gur'yanova, 2013). thus, the model of regional regulation in ukraine requires improvement of the methodology of comprehensive assessment, analysis and forecasting of regional socio-economic development, as well as the study of the processes of disproportionality of indicators and forecasting of crisis situations in different areas of the region. figure 1 presents the procedural component of the study of the dynamics of indicators of regional development disproportions and forecasting of crisis situations. this component contains a description of the tasks set, the research tools with an indication of the software packages used, as well as the presentation baltic journal of economic studies 201 vol. 8 no. 5, 2022 fi gu re 1 . a lg or it hm ( pr oc es s co m po ne nt ) fo r in ve st ig at io n of d yn am ic p ro ce ss es in in di ca to rs o f r eg io na l d ev el op m en t d is pa ri ti es so ur ce : a ut ho rs ’ a na ly sis th e m od el s a re c on si de re d as a to ol to su pp or t d ec is io nm ak in g in re gu la to ry m ec ha ni sm s a im ed a t r ed uc in g in te rre gi on al d iff er en tia tio n of d ev el op m en t i n th e st ud ie d ar ea s st u d y o f d y n a m ic p r o c e ss e s o f d is pr o po r t io n in d ic a t o r s a n d f o r e c a st in g o f c r is is s it u a t io n s b y a r e a s o f a c t iv it y in t h e r e g io n t a s k s m od ul e 1. c on st ru ct io n of m od el s f or co nv er ge nt -d iv er ge nt p ro ce ss es o f re gi on al d ev el op en t d is pa rit ie s m od ul e 2. c re at in g m od el s f or lo ng -t er m in te ra ct io n of d is pa ri tie s i nd ic at or s b y sp he re s of r eg io na l a ct iv ity m od ul e 3. c re at in g m od el s f or a ss es sm en t o f c ris is dy na m ic s o f r eg io na l d ev el op m en t i nd ic at or s assessment of convergence rate according to indicators of regional disparities verification of hypothesis about strengthening of regional development imbalances analysis of case-andeffect relationships of dynamics rows of disparities indicators analysis of interdependence of indicators and forecasting the key indicators of unevenness identificationofsystem of interconnection of disparities indicators analyticalassessment of points of possible balance and bifurcations research of number and nature of extremum functions of indicators systems r e s e a r c h t o o l k i t m et ho ds o f o bs er va tio n an d co m pa ris on , as se ss m en t, de ta ili ng a nd g en er al iz at io n ec on om et ric m od el s f or ec on om et ric d yn am ic m od el s o f v ec to r au to re gr es si on an d er ro r c or re ct io n (v a r & ec m ) m od el s o f n on lin ea r d yn am ic s o f t he re la tio ns hi p of in di ca to rs ba se d on th e th eo ry o f c at as tro ph es a nd b ifu rc at io ns p a c k a g e s o f p r o g r a m s a p p l i e d f o r r e s u l t s im p l e m e n t a t io n st at is tic a ev ie w s st at is tic a, m at hl ab r e s u l t s (c a n b e u se d ) to id en tif y vu ln er ab le a re as w ith im ba la nc es b y re gi on to p re di ct fu tu re tr en ds ta ki ng in to a cc ou nt sh oc ks a nd im pu lse s to d et er m in e th e so ci oec on om ic c at al ys ts o f r eg io na l d is pa rit ie s t he m od el s ar e co ns id er ed a s a de ci si on -m ak in g su pp or t to ol re ga rd in g th e fo rm at io n of s tr at eg ic p ri or iti es fo r t he re gu la tio n of d is pa ri tie s, ta ki ng in to a cc ou nt s ho rt -t er m ef fe ct s an d fl uc tu at io ns t he m od el s ar e co ns id er ed a s a de ci si on -m ak in g su pp or t t oo l re ga rd in g th e pr ed ic tio n an d pr ev en tio n of c ri si s si tu at io ns a nd th e si m ul at io n of im ba la nc e re gu la tio n sc en ar io s assessment of disasters nature of the identified systems by spheres of activity assessment of stability and level of interrelationship of the components in differend spheres of region analysis of absolute and conditional convergence of regional development es tim at in g sp at ia l β -c on ve rg en ce baltic journal of economic studies 202 vol. 8 no. 5, 2022 of the main results. the toolkit for studying the dynamic processes of disproportion indicators and forecasting crisis situations by spheres of regional activity is designed to solve a set of tasks for managing regional development disproportions through the following: – building models of convergent-divergent processes of regional development disproportions (module 1); – creation of models of long-term interaction of disproportion indicators by areas of regional activity (module 2); – creation of models for assessing the crisis dynamics of regional development indicators (module 3). convergent-divergent processes were analyzed for the following groups of indicators: socio demographic disparities (ratio in the migration movement of the population (arrived/left, per 10,000 people, sign x1)), production disparities (ratio of the amount of innovative products to the costs of innovation, x2), natural and ecological disparities (ratio between emissions of harmful substances and costs for environmental protection, x3), foreign economic disparities (coverage of imports by exports, x4), structural disparities (structure of gross value added (ratio of amount of extractive and processing industry, x5)), socioeconomic disparities (ratio between regional and national average incomes of the population (x6)), total economic disparities (ratio of savings to gross regional product – grp, x7). the analysis of convergent-divergent processes (module 1) has shown that divergent trends in the uneven development of ukraine's regions are currently increasing. at the same time, there is interregional convergence within groups of homogeneous clusters, the so-called "convergent clubs". in the current period, the process of convergence of the uneven regional socio-economic development has slowed down; its activation requires adoption of appropriate measures of public administration, related primarily to raising the educational and professional level of the workforce, accelerating the development of r&d sphere, stimulating innovative activity, and creating the necessary infrastructure production. given the decisive role of convergence of uneven regional development, it is necessary to use comprehensive approaches to accelerate this process. they should be implemented within the framework of innovation, scientific and technical, industrial, entrepreneurial and other types of state regulation policy. the results of the study can be used to identify vulnerable areas with regional disparities. 5. model of long-term interaction of disparities indicators according to different shperes of regional development in the modeling of long-term interaction of disparity indicators by different spheres based on econometric dynamic models of vector autoregression and error correction (var & ecm) (module 2) following processes were involved: – analysis of cause-and-effect relationships of dynamic rows of disparities indicators; – assessment of stability and level of interrelationship of the components in different spheres of region; – analysis of interdependence of indicators and forecasting the key indicators of unevenness. the structural form of var for k variables and the number of lags p has the form (1): ⎩ ⎪ ⎪ ⎪ ⎨ ⎪ ⎪ ⎪ ⎧ х𝑡𝑡𝑡𝑡1 = 𝛼𝛼𝛼𝛼10 − 𝛼𝛼𝛼𝛼1𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡2 − … − 𝛼𝛼𝛼𝛼𝑘𝑘𝑘𝑘𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡,𝑘𝑘𝑘𝑘 + 𝛽𝛽𝛽𝛽111 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,1 +𝛽𝛽𝛽𝛽121 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,2 + ⋯ + +𝛽𝛽𝛽𝛽1𝑘𝑘𝑘𝑘 1 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,𝑘𝑘𝑘𝑘 + 𝛽𝛽𝛽𝛽112 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,1 + 𝛽𝛽𝛽𝛽122 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,2 + ⋯𝛽𝛽𝛽𝛽1𝑘𝑘𝑘𝑘 2 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,𝑘𝑘𝑘𝑘 + … + 𝛽𝛽𝛽𝛽1𝑘𝑘𝑘𝑘 𝑝𝑝𝑝𝑝 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−𝑝𝑝𝑝𝑝,𝑘𝑘𝑘𝑘 + 𝑢𝑢𝑢𝑢𝑡𝑡𝑡𝑡1 х𝑡𝑡𝑡𝑡2 = 𝛼𝛼𝛼𝛼20 − 𝛼𝛼𝛼𝛼2𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡1 − … − 𝛼𝛼𝛼𝛼𝑘𝑘𝑘𝑘𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡,𝑘𝑘𝑘𝑘 + 𝛽𝛽𝛽𝛽211 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,1 +𝛽𝛽𝛽𝛽221 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,2 + ⋯ + +𝛽𝛽𝛽𝛽2𝑘𝑘𝑘𝑘 1 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,𝑘𝑘𝑘𝑘 + 𝛽𝛽𝛽𝛽212 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,1 + 𝛽𝛽𝛽𝛽222 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,2 + ⋯𝛽𝛽𝛽𝛽2𝑘𝑘𝑘𝑘 2 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,𝑘𝑘𝑘𝑘 + … + 𝛽𝛽𝛽𝛽2𝑘𝑘𝑘𝑘 𝑝𝑝𝑝𝑝 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−𝑝𝑝𝑝𝑝,𝑘𝑘𝑘𝑘 + 𝑢𝑢𝑢𝑢𝑡𝑡𝑡𝑡2 … х𝑡𝑡𝑡𝑡𝑘𝑘𝑘𝑘 = 𝛼𝛼𝛼𝛼𝑘𝑘𝑘𝑘0 − 𝛼𝛼𝛼𝛼𝑘𝑘𝑘𝑘𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡1 − ⋯𝛼𝛼𝛼𝛼𝑘𝑘𝑘𝑘−1𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡,𝑘𝑘𝑘𝑘−1 + 𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘1 1 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,1+𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘2 1 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,2 + ⋯ + +𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘𝑘𝑘𝑘𝑘 1 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−1,𝑘𝑘𝑘𝑘 + 𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘1 2 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,1 + 𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘2 2 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,2 + ⋯𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘𝑘𝑘𝑘𝑘 2 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−2,𝑘𝑘𝑘𝑘 + … + 𝛽𝛽𝛽𝛽𝑘𝑘𝑘𝑘𝑘𝑘𝑘𝑘 𝑝𝑝𝑝𝑝 𝑥𝑥𝑥𝑥𝑡𝑡𝑡𝑡−𝑝𝑝𝑝𝑝,𝑘𝑘𝑘𝑘 + 𝑢𝑢𝑢𝑢𝑡𝑡𝑡𝑡𝑘𝑘𝑘𝑘 (1) (1) the authors develop models of long-term interaction of disparity indicators in different areas on the example of disparity indicators in the eviews software package. to check the rows for cointegration, and, in particular, at the initial stage, when checking stationarity, extended dickey-fuller test (engle, 1987) is used. it tests each separate row of the dynamic indicator and determines the integration of the first order. the results of the test for the ratio of savings to grp – general economic imbalances – are shown in table 1. in this case, the dickey-fuller test shows that the time row of the total savings-to-grp ratio is nonstationary because its values less than the crutial values for the 10 %, 5 %, and 1 % significance levels. aggregated results of tests for time rows are presented in table 2. table 2 also shows the determination index and the durbin-watson criterion, which reflect the baltic journal of economic studies 203 vol. 8 no. 5, 2022 adequacy of the model and the absence of auto correlation. the dickey-fuller methodology involves finding the differences of a series in order to transform the series from non-stationary to stationary. since cointegration involves the analysis of stationary time series, it is necessary for further analysis that the analyzed variables are stationary based on differences of the same order. since all the original time series are non-stationary, it is necessary to find the first differences and determine the order of integration. table 3 shows the dickey-fuller first difference test for the time series. table 3 shows that all series of first differences are stationary as they exceed the critical values, which allows us to conduct further research and test the series for cointegration. cointegration is tested using the engle-granger test. cointegration requires the same order of integration of non-stationary time series. therefore, the original time series should be, firstly, non stationary, and secondly, have the same order of integration. in this case, all the studied disproportion coefficients are of the first order. only compliance with this requirement allows to talk about the possibility of cointegration. in addition, the test for the presence of cointegration between two table 1 dickey-fuller criterion based on the ratio of savings to grp (x7) adf test statistic -1.447254 1% critical value* -3.5889 5% critical value -2.9303 10% critical value -2.6030 *mackinnon critical values for rejection of hypothesis of a unit root augmented dickey-fuller test equation dependent variable: d(x7) method: least squares sample(adjusted): 2007: 2021 included observations: 43 after adjusting endpoints variable coefficient std. error t-statistic prob. x13(-1) -0.058256 0.040253 -1.447254 0.1556 d(x13(-1)) 0.446455 0.138695 3.218960 0.0026 c 41.50782 30.49906 1.360954 0.1811 r-squared 0.221231 mean dependent var 3.104143 adjusted r-squared 0.182293 s.d. dependent var 82.14515 s.e. of regression 74.28153 akaike info criterion 11.52082 sum squared resid 220709.8 schwarz criterion 11.64369 log likelihood -244.6975 f-statistic 5.681569 durbin-watson stat 2.039712 prob(f-statistic) 0.006732 source: authors’ estimates table 2 the value of the test according to the dickey-fuller criterion for disaprities indicators indicators of regional development disparities adf test statistic r2 determination coefficient durbin-watson stat x7 -1.447254 0.221231 2.039712 х1 -1.350981 0.077162 1.930197 x5 -1.312578 0.088450 1.932868 x6 -1.549853 0.075400 1.989725 x4 -1.515196 0.068891 1.909290 x3 -1.787479 0.145609 2.047677 x2 -1.812963 0.277812 2.072573 source: authors’ estimates table 3 values of the dickey-fuller criterion of disparities for first differences regional disaprities indicator adf test statistic d(1) x7 -3.505409 x1 -4.501949 x5 -4.364007 x6 -4.042056 x4 -5.078195 x3 -6.081148 x2 -3.099277 source: authors’ estimates baltic journal of economic studies 204 vol. 8 no. 5, 2022 variables was conducted if their linear combination is stationary. based on the errors of the model, the dickey fuller test was conducted and the rows that are cointegrated with the corresponding defined indicator (in our case – the ratio of savings to grp) were identified (table 4). table 4 results of the dickey-fuller test for cointegration by the ratio of savings to grp (x7) residuals adf test statistic durbin-watson stat x7_x1 -2.678424 1.967278 x7_х5 -2.455174 1.987139 x7_х6 -2.035982 2.007451 x7_x4 -2.880047 1.980032 x7_x3 -2.937704 1.986673 x7_x2 -2.699071 2.140176 source: authors’ estimates the obtained results allow us to conclude that the indicators x4, x1, x3, x2 cointegrate with the ratio of savings to grp (x7) at the significance level of 10%, indicators x5, x6 cointegrate at the significance level of 5%. at the same time, the lag is taken equal to one, since cointegration is most clearly manifested at this lag. therefore, the only hypothesis is accepted, which states that such series have the first level of integration and are cointegrated with each other. the original series of these indicators are non stationary and have the order of integration i (1). in this case, cointegration means that a linear combination of variables (or an error term that measures deviations from long-run equilibrium) is a stationary time series. based on the results of determining the cointe gration relationships of the differentiation indicator of the ratio of savings to grp (x7), an error correction model (ecm) was built to study both the short-term and long-term impact of the indicators on each other, as well as their aggregate impact. the model is built for lags of 1 and 2 periods, which is not the maximum value, but, as it was determined earlier, this lag period is the most effective. the results of the ecm model are shown in table 5. after evaluation, the ecm model should be tested for adequacy. in order for the ecm model to be dynamically stable, it is necessary to adjust speed coefficients to be within the given limits of 0 ≤ λ1 < 1,0 ≤ λ2 < 1. this condition ensures that λ1 and λ2 converge to a long-term balanced link. if the variables cointegrate, then at least, one of the coefficients λ1 and λ2 must be statistically significantly different from zero. as a result of the construction of the ecm-model, it is possible to obtain the cointegration equation, short-term effects and speed coefficients with which the system can return to equilibrium. according to the cointegration equation, it can be established that the system of indicators of regional disparities is generally stable, which is reflected by the coefficient of deviation from the long-run equilibrium. according to akaike's information criterion, it can be stated that the greatest degree of relationship is observed between the indicator of savings ratio to grp (x7) and the ratio of the innovative products amount to the costs of innovation (x2). the system of equations of the cointegration model is presented below (2): x7=1,46*x1-2,7*x4-1,3*x3+1,59*x2 d(x7) = 0.07*( x7(-1) + 1.46*x1(-1) 2.7*x4(-1) 1.3*x3(-1) + 1.59*x2(-1) + 5275.91) + 0.12*d(x7(-1)) + 0.05*d(x7(-2)) + 0.1*d(x1(-1)) + 0.06*d(x1(-2)) 0.05*d(x4(-1)) 0.128*d(x4(-2)) 0.24*d(x3(-1)) 0.22*d(x3(-2)) + 0.15*d(x2(-1)) + 0.15*d(x2(-2)) 0.44 d(x1) = 0.28*( x7(-1) + 1.46*x1(-1) 2.7*x4(-1) 1.3*x62(-1) + 1.59*x2(-1) + 5275.9 ) + 0.45*d(x7(-1)) + 0.082*d(x7(-2)) + 0.15*d(x1(-1)) 0.2*d(x1(-2)) 0.32*d(x4(-1)) 0.64*d(x4(-2)) 0.42*d(x3(-1)) 0.28*d(x3(-2)) + 0.48*d(x2(-1)) + 1.56*d(x2(-2)) 21.5 d(x4) = 0.11*( x7(-1) + 1.46*x1(-1) 2.7*x4(-1) 1.3*x3(-1) + 1.59*x2(-1) + 5275.9) + 0.62*d(x7(-1)) + 0.02*d(x7(-2)) + 0.05*d(x1(-1)) 0.28*d(x1(-2)) + 0.004*d(x4(-1)) 0.24*d(x4(-2)) 0.48*d(x3(-1)) 0.38*d(x3(-2)) + 0.17*d(x2(-1)) + 1.06*d(x2(-2)) 20.4 d(x3) = 0.04*( x7(-1) + 1.46*x1(-1) 2.7*x4(-1) 1.3*x3(-1) + 1.59*x2(-1) + 5275.9) + 0.759*d(x7(-1)) + 0.86*d(x7(-2)) + 0.28*d(x1(-1)) 0.48*d(x1(-2)) + 0.01*d(x4(1)) + 0.39*d(x4(-2)) 0.73*d(x3(-1)) 0.45*d(x3(-2)) 0.19*d(x2(-1)) + 0.52*d(x2(-2)) 5.59 d(x2) = 0.11*( x7(-1) + 1.46*x1(-1) 2.7*x4(-1) 1.3*x3(-1) + 1.59*x2(-1) + 5275.91) + 0.23*d(x7(-1)) 0.069*d(x7(-2)) 0.1*d(x1(-1)) 0.08*d(x1(-2)) + 0.08*d(x4(-1)) 0.06*d(x4(-2)) 0.24*d(x3(-1)) 0.22*d(x3(-2)) + 0.5*d(x2(-1)) + 0.4*d(x2(-2)) 2.55 (2) (2) baltic journal of economic studies 205 vol. 8 no. 5, 2022 the toolkit for analysis and decomposition of shocks caused by the disproportionality of regional development is based on the impulse response function and variance decomposition. the decomposition of forecast error variances allows to analyze the impact of different shocks on the forecast error variance for different lead times. t hus, the decomposition of variances makes it possible to estimate the shares of variance caused by shocks to different variables and, accordingly, to assess the degree of influence of the relationships between indicators. for the studied series, which are cointegrated with the indicator of the ratio of savings to grp (x7), the stability of the response is checked. on the basis of impulse analysis, the impulse response of the variable of the ratio of savings to grp in relation to all cointegrating factors is investigated. in figure 2 shows the impulse response function: the above graph demonstrates the general possibility of system stability, i.e., return to equilibrium, but only in the long run over 10 years. thus, based on the construction of the ecm-model and impulse analysis, it can be concluded that cointegration indicators, that is, inequality indices x1, x4, x3 and x2, have a long-term relationship with the ratio of savings to grp (x7) and a change in the level of one indicator will lead to an adjustment in the level of the other. the presence of such table 5 ecm model for indicators of regional disparities sample(adjusted): 2007: 2021 included observations: 42 after adjusting endpoints standard errors & t-statistics in parentheses cointegrating eq: cointeq1 x7(-1) 1.000000 x1(-1) 1.464173 x4(-1) -2.704880 x3(-1) -1.307671 x2(-1) 1.594756 c 5275.907 error correction: d(x13) d(x21) d(x53) d(x62) d(x71) cointeq1 -0.071438 -0.284515 -0.111130 0.044521 -0.108876 d(x7 (-1)) 0.119144 0.449451 0.620530 0.759315 0.228526 d(x7(-2)) 0.050899 0.082444 0.021677 0.855744 -0.069310 d(x1(-1)) 0.101953 0.153624 0.050952 0.282257 -0.099999 d(x1(-2)) 0.060863 -0.200051 -0.280422 -0.484990 -0.078249 d(x4(-1)) -0.050892 -0.317470 0.004141 0.014461 0.080529 d(x4(-2)) -0.128443 -0.643112 -0.237922 0.396888 -0.060413 d(x3(-1)) -0.235645 -0.422209 -0.477814 -0.734139 -0.237673 d(x3(-2)) -0.214995 -0.282948 -0.383320 -0.454404 -0.219752 d(x2(-1)) 0.154481 0.476719 0.174826 -0.194328 0.502068 d(x2(-2)) 0.154115 1.556723 1.060919 0.515523 0.423054 c -0.443958 -21.49478 -20.39716 -5.592783 -2.548685 r-squared 0.625087 0.415047 0.392995 0.443344 0.465612 adj. r-squared 0.487619 0.200565 0.170426 0.239237 0.269670 sum sq. resids 104762.7 3093232. 1929860. 646716.3 1473847. s.e. equation 59.09392 321.1039 253.6310 146.8237 221.6489 f-statistic 4.547150 1.935109 1.765723 2.172112 2.376272 log likelihood -223.8529 -294.9436 -285.0365 -262.0773 -279.3755 akaike aic 11.23109 14.61636 14.14459 13.05130 13.87502 schwarz sc 11.72757 15.11284 14.64107 13.54778 14.37150 determinant residual covariance 1.57e+20 log likelihood -1274.570 akaike information criteria 63.78906 schwarz criteria 66.47832 source: authors’ estimates baltic journal of economic studies 206 vol. 8 no. 5, 2022 a relationship indicates that their stochastic trends are interrelated. thus, there is a common long-term balanced trajectory of change of such variables, from which they may deviate in short-term periods. 6. economic interpretation of stability and interdependence of indicators it is expedient to consider the economic interpretation of the stability and interdependence between the ratio of savings to grp (x7) and the ratio of innovative products to innovation expenditures (x2), which have the highest degree of interconnection according to the variance decomposition graph and impulse response function (figure 3). thus, the decomposition of variances makes it possible to estimate the shares of these variances caused by difference shocks and, accordingly, to assess the degree of influence of the relationships between inequality indicators. dispersion analysis characterizes the relative importance of factors that affect the dynamics of change (dispersion) of a particular system process. the analysis of the above graphs allows to draw the following conclusions: – dynamics of changes in the ratio of savings to grp (x7) is practically explained by the dynamics in figure 2. impulse response function of the savings to gdp ratio (x7) relative to other indicators source: authors’ estimates figure 3. variance decomposition plot and impulse response function for the ratio of savings to grp (x7) and the ratio of innovative output to innovation expenditure (x2) source: authors’ estimates baltic journal of economic studies 207 vol. 8 no. 5, 2022 previous periods of time (up to 60%) and almost 50% is due to the influence of the ratio of innovative products to innovation expenditures (x2), the impact of which becomes less significant over time; – the dynamics of changes in the ratio of innovative products to innovation expenditures (x2) largely depends on the dynamics of the ratio of savings to grp (x7) (from 40% to 65% in a fairly short time and a stable level of influence of which remains for a long time) and is conditioned by fluctuations of the same indicator and its previous dynamics, which rapidly changes from 60% to 35% in a fairly short time and remains stable in the long term. the impulse function analysis for the studied indicators proves that shocks in the dynamics of inequality indicators cause more negative than positive consequences in the dynamics of other aspects of the region's activity. the study of the dynamics of a longer period shows that fluctuations decrease and approach zero, which confirms the longterm stability of the regional system. fluctuations go down and the system reaches a certain steady state, and in a rather long period – more than 10 years, which coincides with general trends. the proposed complex of models of longterm interaction of indicators of disparities in the spheres of activity of different regions based on the use of econometric dynamic models of vector autoregression and error correction is an effective tool for a comprehensive study of general shortterm and long-term trends in regional differences. this makes it possible to identify and predict non stationary impulsive processes in the sphere and in general, to determine their typical trends, interconnection and interdependence of the trajectories of inequality. this is essential for the formation of programs and preventive measures to manage the imbalances of regional development for different time intervals. 7. conclusions the study of the dynamic processes of indicators of regional development imbalances involves the construction of the following models: analysis of convergent-divergent processes of regional development imbalances; long-term interaction of indicators of imbalances in the spheres of regional life; assessment of the crisis dynamics of regional development indicators. the analysis of convergentdivergent processes showed that currently there is an increase in divergent trends in the uneven development of the regions of ukraine. the proposed set of models of long-term interaction of disparity indicators based on the use of econometric dynamic models of vector autoregression and error correction is an effective tool for a comprehensive study of general short-term and long-term trends in regional disparities. this allows to identify and predict nonstationary impulse processes in general and for individual spheres of regional activity, to determine the corresponding trends, interconnection and interdependence of the dynamics of disproportionality. the analysis of the interrelationships of disproportions showed that most regions belong to the class with restrained (controlled) disproportions in most of the studied areas, so the situation with disproportions is regulated within the framework of improving the instruments of the state regional policy. at the same time, given the external and internal challenges to regional development, further research should focus on forecasting crises and disasters in various areas of regional socio-economic development (module 3). taking into account theoretical and empirical studies on regional development disparities allows to develop an effective methodology for reducing interregional disparities, which will help to manage potential negative consequences for the regions of ukraine. the tools for the study of dynamic processes in the indicators of imbalances can be used to solve a set of problems of regulating the imbalances of regional development, the formation of measures to prevent excessive growth of imbalances at different time intervals. this is the basis for the formation of current and strategic financial and budgetary regulation of regional development, development of budget programs to overcome the negative consequences of imbalances, as well as for determining the amount of budget expenditures for such purposes. objectively, there is an urgent need to analyze the interrelationships of regional development imbalances using a new operational and logistics approach. its application to the analysis of regional development involves planning, organization, management, control and regulation of the activities of all participants in the process of resource allocation and redistribution. in the future, the implementation of the operational and logistics approach will involve analytical processing of information to assess the effectiveness of expenditures in certain areas to ensure a sufficient level of socioeconomic development of the region. in the future, the implementation of the operational and logistics approach will involve analytical processing of information to assess the effectiveness of expenditures in certain areas to ensure a sufficient level of socio-economic development of the region. baltic journal of economic studies 208 vol. 8 no. 5, 2022 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(2021). the toolbox for recognizing the groups of ukraine’s regions by indicators of disparities in their social and economic development. biznes inform, 7, 115–126. doi: https://doi.org/ 10.32983/2222-4459-2021-7-115-126 received on: 14th of october, 2022 accepted on: 25th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 443 vol. 3, no. 5, 2017 corresponding author: 1 institute of law and postgraduate training, ministry of justice of ukraine. 2 department of criminal process, national academy of internal affairs of ukraine. 3 department of criminal law and process, uzhhorod national university. doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-443-450 administrative and legal principles of functioning of the financial system in ukraine and europe: a comparative analysis kateryna chyzhmar1 institute of law and postgraduate training, ministry of justice of ukraine, ukraine vasyl farynnyk2 national academy of internal affairs of ukraine, ukraine yaroslav stupnyk3 uzhhorod national university, ukraine abstract. the purpose of the ar ticle is a comparative legal analysis of the administrative and legal principles of the functioning of the financial system in ukraine and european countries. the subject of the study is the peculiarities of the state regulation of financial systems in great britain, germany, poland, spain, sweden, and ukraine. methodology. the research is based on comparing the legal regulation of the financial system in ukraine and in the eu countries. an analysis of european experience in the administrative regulation of financial systems and financial activity has shown that most european states support the policy of regulating the financial system as a holistic, indivisible phenomenon, gradually moving away from its understanding as a set of separate segments. a significant influence on this issue was made by the european union, within which there was introduced a combination of the most important functions in the regulation of the eu financial system and entrusting them to a separate group of special bodies. results of the comparative legal study showed that, unlike most european countries, in ukraine, the administrative and legal framework for the provision of certain components of the financial sector, in particular, banking, investment, tax and budget, financial services market, etc., are not combined into a single model of state regulation of financial system, but they are scattered. in turn, the lack of a unified legal basis for state regulation of the national financial system in practice creates a situation where such regulation is carried out by a large number of state bodies of varying degrees, whose powers are repeated in some cases, which causes contradictions. practical implications. it is found that the key difference between the regulation of financial systems in the countries of europe lies in the very principle of perceiving the role of the state in this process and understanding the content of the financial system as a whole. financial consolidation and the formation of large financial conglomerates necessitates the replacement of the traditional regulatory paradigm, based on the consideration of the financial system as a set of segregated segments (insurance, banking, stock, etc.), taking into account the interconnectivity of various financial intermediaries. value/originality. a comparative legal study of the basic principles of the functioning of the financial system in ukraine and european countries provides a better understanding of the most promising directions of development of the domestic economic system in the context of strengthening the integration and globalization processes in the international financial and commodity markets. key words: administrative-legal principles, financial system, state regulation. jel classification: k23, p34, h7 baltic journal of economic studies 444 vol. 3, no. 5, 2017 1. relevance the vital activity of any state depends on the functioning of a large number of different elements, in particular: society, legal system, security and inviolability of its territories, etc. one of the most important components is the economy of the country. in ukraine, the financial sector is currently in transition state due to a number of factors: firstly, our country is relatively young compared to other european countries; and secondly, a sharp reorientation of the national economy from the planned form to the market; thirdly, the restructuring of the regulatory framework and the change in the state policy in the economic sphere under the “pressure” of european standards. at the same time, incompleteness and partial imperfection of the financial system of ukraine leave a place for its further reformation and development. in this context, the issue of state influence on the financial sphere, that is, its power regulation is important. relations that occur in this case are regulated by rules of many branches of law. hence it turns out that in the modern legal system of the state, there are corresponding administrative and legal principles of functioning of the financial system of ukraine. in this case, it should be noted that this aspect is not a novel in the territory of foreign countries. in particular, in each european country, there are the relevant power and legal principles of support and influence on the financial sector that are relevant for borrowing. it should be emphasized that in the scientific sphere, the issue of comparing the administrative and legal principles of the functioning of the financial system of ukraine and european countries was not properly addressed. at the same time, the lack of a theoretical and practical justification of this aspect confirms the high level of its relevance. a comparative analysis of the administrative and legal framework for the functioning of the financial system in european countries and ukraine will allow seeing the positive and negative factors of our country’s activity in this area, as well as understanding what experience should be taken. 2. the degree of development the financial system is a multidimensional phenomenon, therefore, its research was carried out by a large number of foreign and domestic scholars of various scientific fields, in particular: voronova  l.k., oparin  v.m., borynets s.ya., afanasiev  m.p., vasylyk  o.d., lunina i.o., sadovskyi  v.m., mykhailov  a.m., and others. the problems of the administrative-legal mechanism of regulation of the financial system were considered in their writings by such theorists-lawyers as: bandurka  o.m., averianov  v.b., zasunko s.s., kolpakov v.k., stolbovyi v.p., sushchenko v.d. and others. the foreign experience of state regulation of financial systems was highlighted in the writings of mcdonald w., rose t., trachtman j., and others. instead, a comparative analysis of the ukrainian and foreign administrative principles in the field of ensuring the functioning of the financial system was not properly carried out. 3. the purpose of the article is to conduct a comparative analysis of administrative and legal principles of the functioning of the financial system in ukraine and european countries. first of all, it is necessary to outline features and define the content of categories “administrative legal principles” and “financial system” as separate phenomena in order to reveal this problem. it should be noted that the concept of “administrative legal principles” in the scientific literature is quite common. in addition, it consists of two independent terms that have broad content. thus, according to the provisions of the vocabulary literature, “administration” is disclosed as a bureaucratic guide through orders and instructions (busel, 2005). in turn, the word “foundation” is used in the meanings: the basis of something; the main thing, on what something is based; initial, main position, principle; the basis of the outlook, the rule of conduct; way, method of doing something (bilodid, buriachok, 1972; zabroda, 2013). thus, administrative principles can be defined as the bases, priority directions of public administration. at the same time, the term “legal” denotes their unity with a particular branch of law – administrative. the latter is considered by scientists as a set of legal norms regulating the public relations of a managerial nature in order to fulfil tasks and functions of the state, which are drawn up in the sphere of executive power, internal organization of other state bodies, as well as in the process of carrying out by public organizations, their bodies of external legal-power authorities (alforov, vashchenko, dolhopolova, kupin, 2011; bytiak, bohutskyi, harashchuk, 2000). in this context, it is advisable to give a thought of melnyk r .s. and bevzenko v.m., according to which administrative law regulates such groups of social relations as: social relations that arise in connection with the provision of subjects of public authority, primarily public administration, with human and civil rights and freedoms; social relations that take place in the field of public administration of state and communal property objects; social relations that take place in the internal organization of public authorities; public relations in the sphere of the interaction of public authorities with civil society institutions (melnyk, bevzenko, 2014). baltic journal of economic studies 445 vol. 3, no. 5, 2017 thus, the administrative and legal principles can be defined as normatively-fixed bases of government activity of state bodies in relation to public administration in certain spheres of social relations. based on this interpretation, the administrative and legal principles are not separate principles of the work of certain state bodies, but a set of rules of law, which contain provisions of initial, key ideas of the management of a particular field of social relations. in our case, such a sphere is a financial system, the content of which also needs to be further elaborated. it should be emphasized that the main feature of the financial system is its systemic nature, that is, the presence of the structure of interconnected elements. the notion of a special form of unity of categories in the system dates back to the time of ancient greece (agoshkova, akhlibininskii, 1998; bilinskyi, 2011). its characteristic feature is that each element is a completely independent category, which can have its own purpose of existence, tasks, etc. however, in aggregate, such elements acquire common features, and their target orientation may change. in connection with this, there is a logical question of what the financial system represents and what elements are included in it? there are several scientific views on defining the content of this category. for example, oparin v.m. argues that the problem of defining the content of the financial system should be considered in two sections: on the content and the institutional structure. in the first case, under the filling of the financial system is meant a set of separated but interrelated links (finances of business entities, state (public finance), international finance, financial and insurance markets), which reflect the particular forms of financial relations. by institutional structure, the financial system appears as a set of financial institutions that ensure its effective functioning, organization and implementation of financial activities of its subjects (bubryka, solonar, utkina, 2016; oparin, 2006). kyrylenko o.p. considers the financial system as a set of separate areas of financial relations that are interconnected, they have centralized or decentralized funds, and there are an appropriate management apparatus and legal support (kyrylenko, 2002). according to popov i.v., the financial system is a set of historical economic relations between the formation, distribution, and use of funds of state, economic entities, and households, the distribution and redistribution of gdp, which are realized with the help of a financial instrument based on the country’s financial legislation (popov, 2012; hanzytska, 2016). well-grounded is the position of orliuk o.p., which marks the multidimensional character of financial system category, defines the content of the latter in three “dimensions”, namely: as a set of financial institutions that contribute to the creation and use of funds specifically for the performance of financial activity of the state; as a set of bodies of state power and bodies of local government, which carry out the management of financial activity of the state as a whole, as well as enterprises, institutions, organizations, which participate in it; as a set of public finances, finances of business entities, international finance, and financial market (orliuk, 2010; myrhorod-karpova, 2017). given the diversity of views of the scholars, we concluded that the financial system of the state – a set of social relations that arise in the area of distribution and use of the whole mass of cash resources, implemented in the activities of individual subjects and provided by the state, which determines features, forms, and the procedure for conducting financial activities. accepting the scientific position of nesterenko a.s., we note that these relations are consolidated into integral institutions, which, in turn, are a part of the structure of the financial system. hence it turns out that the latter includes: public finances, finances of business entities, international finance, and financial markets (nesterenko, 2013). at the same time, the latter includes: banking, tax and budget, investment spheres, financial services market, etc. so, after outlining the essence and peculiarities of all the necessary concepts, we are able to determine what constitutes the administrative and legal basis for the functioning of the financial system of the state. in our opinion, this is a set of legal norms that establish the key principles governing the activities of public authorities in the field of organization and provision of the financial system as a set of relations regarding the distribution and use of monetary resources. simply put, these principles regulate the peculiarities of the existing model of statelegal regulation of the financial system as a whole. the administrative and legal principles of the functioning of the financial system can be found in the provisions of many legislative and subordinate laws and regulations of ukraine. for example, in the law of ukraine “on financial services and state regulation of financial services markets”, article 20 states that state regulation of financial services provision activities is carried out by: 1) maintenance of state registers of financial institutions and registers of persons who are not financial institutions but have the right to provide separate financial services, and licensing of financial services; 2) legal regulation of activities of financial institutions; 3) supervision over the activities of participants in financial services markets (except for financial services customers); 4) application by the authorized state authorities of the measures of influence; 5) other measures on the state regulation of financial services markets (pro finansovi posluhy ta derzhavne rehuliuvannia rynkiv finansovykh posluh). similar provisions are also contained in the law of ukraine “on investment activity”. chapter iii of the baltic journal of economic studies 446 vol. 3, no. 5, 2017 law defines purposes, forms, and limits of state-legal regulation of investment activity. in particular, its goal is determined as the implementation of economic, scientific and technical, and social policies, based on the goals and indicators of economic and social development of ukraine, state and regional programs of economic development, state and local budgets, in particular, the amount of financing of investment activity provided in them. at the same time, privileged conditions are created for investors investing in the most important areas for satisfying social needs, first of all, in the social sphere, technical and technological improvement of production, creation of new workplaces for citizens who need social protection, introduction of discoveries and inventions in the agroindustrial complex, in the implementation of programs for the elimination of consequences of the chernobyl accident, in the production of building materials, in the field of education, culture, protection of cultural heritage, environmental protection and health (pro investytsiinu diialnist : zakon vid 18.09.1991 #1560xii). under these conditions, the main forms of state regulation of investment activity are the management of public investment, regulation of investment activities, control over the implementation of investment activities by its participants and investors (pro investytsiinu diialnist : zakon vid 18.09.1991 #1560-xii). in the field of banking, state regulation is limited. according to articles 4 and 5 of the law of ukraine “on banks and banking activities”, banks formed in accordance with the laws of our state independently determine the directions of their activity and specialization by types of services. public authorities and local governments are prohibited from influencing the management or employees of banks in any way during the performance of their official duties or interfering in the activities of the bank (pro banky i bankivsku diialnist : zakon vid 07.12.2000 #2121-iii). instead, in accordance with the legislation, the regulation of banking activities, as well as supervision of the banking system in order to promote financial stability, within the powers granted by law, is exercised by the national bank of ukraine – a special central government body (pro banky i bankivsku diialnist : zakon vid 07.12.2000 #2121-iii; pro natsionalnyi bank ukrainy : zakon vid 20.05.1999 #679-khiv). the legislator also clearly defined forms of administrative and legal influence on the banking system, which include: 1) registration of banks and licensing of their activities; 2) establishment of requirements and restrictions on the activities of banks; 3) application of sanctions of an administrative or financial nature; 4) supervising the activities of banks; 5) advising on the activities of banks (pro banky i bankivsku diialnist : zakon vid 07.12.2000 #2121-iii). it is worth noting that the administrative and legal principles of the functioning of the financial system in a part of the state regulation of fiscal-tax relations show the change in the vector of public administration in this field, which is determined by its reformation. confirmation of this fact can be found in the provisions of the strategy of sustainable development “ukraine-2020” approved by the decree of the president of ukraine on 12 january 2015. the seventh paragraph of the document states that the purpose of the tax reform is to build a tax system that is simple, economically fair, with minimal time spent on the calculation and payment of taxes, creates the necessary conditions for the sustainable development of the national economy, provides sufficient coverage of the state budget of ukraine and local budgets. the main areas of reform are the transition from supervisory and punitive functions of the fiscal authorities to the servicing, which helps in the calculation and execution of tax payments, rather than aims to fill the budget through financial sanctions and overpayments; reduction of the number of taxes, their size, and simplification of the procedure of calculation and payment; introduction of electronic services for taxpayers; reduction of the tax burden on wages in order to unshadow it; improvement of the legislation of ukraine aimed at increasing the fight against tax evasion schemes for both legal and natural persons, in particular, improving the administration of value added tax, creating a system of tax control depending on the degree of risk in the activity of taxpayers, ensuring openness of access to information on payment of taxes, improvement of the legislation on transfer pricing issues, implementation of control over expenditures of individuals (pro stratehiiu staloho rozvytku «ukraina-2020»: ukaz vid 12.01.2015 #5/2015). thus, the analysis of current legislation has shown that at present there are a large number of administrative and legal principles for the functioning of the financial system, which are enshrined in legal norms, which regulate key aspects of state influence on certain spheres of components of the financial system. at the same time, the conducted research revealed that ukraine did not develop a general model of state regulation of the financial system. there are only administrative and legal foundations for securing certain components of the financial sector, in particular, banking, investment, tax and budget spheres, financial services markets, etc. in these areas of state regulation, independent political courses are formed, which allows noting the general inconsistency of administrative and legal regulation of the financial system. it is precisely because of this that there is a large number of state authorities in ukraine that have different powers in the financial sphere. at present, the coordination of the financial system is carried out by the cabinet of ministers of ukraine, the verkhovna rada of ukraine, the accounting chamber, the president of ukraine, the ministry of finance of ukraine, the state baltic journal of economic studies 447 vol. 3, no. 5, 2017 treasury, the national bank, fiscal authorities, etc. such a control and regulation mechanism is extremely cumbersome and ineffective, which ultimately leads to negative economic consequences for our country. the european experience of administrative regulation of financial systems and financial activities is significantly different from the national one. it is worth pointing out that signs of the current stage of development of the world economy are the liberalization of foreign economic relations, the strengthening of integration and globalization processes in international financial and commodity markets, which takes place due to the openness of national economies and cooperation of countries in various spheres of economic activity. thus, the openness of the national economy contributes to the development and deepening of economic, productive, financial, social, cultural, and other interrelationships between countries (denysiuk, 2015). a striking example of this fact is the european union (hereinafter – the eu). the essence is that a large number of states are now a part of the eu. this international organization, in the person of special bodies, coordinates the functioning of financial systems of the member states in order to ensure economic stability in the territory of the union. at the same time, this approach does not preclude the existence of appropriate national mechanisms to maintain the functionality of financial systems directly in the territory of the eu member states. a key difference in the regulation of financial systems in europe is in the very principle of perceiving the role of the state in this process and awareness of the content of the financial system as a whole. financial consolidation and formation of large financial conglomerates necessitates the replacement of the traditional regulatory paradigm based on the consideration of the financial system as a set of segregated segments (insurance, banking, stock, etc.) by that one, which takes into account the interconnectivity of different financial intermediaries and establishes for them the same rules and supervision principles. for example, on this basis in the european union, a new european system of financial supervision has been built, the key institutions of which at the european level have become the european systemic risk board, and three sectoral bodies created on the proposal of the european commission: 1) european securities and markets authority; 2) european banking authority; 3) european insurance and occupational pension authority (giorgio di g., 2005; the level 3 committees welcome the new institutional arrangements on european financial supervision: press release; baldych, 2013). at the national level, in economically advanced countries, the regulation of the financial system is also based on the consolidation of a large amount of authority within one or more core bodies that implement a common economic policy that affects all spheres and components of the financial system. the most striking manifestation of this aspect is great britain. administrative regulation of the financial system in the territory of this state is carried out by a single, key institution – the treasury (harust, tolkachov, 2017). it should be noted that hm treasury of great britain is one of the oldest state agencies, but in terms of the number, it is one of the smallest. hm treasury is a political and creative department with several functions that combine it with the public and industry. its connection with financial markets is mainly through the bank of england. historically, its main function was to control the spending of public funds, but now one of the most important tasks is to manage the economy of great britain in such a way as to achieve the economic goals set by the ministries and agreed with the parliament (yurii, stoian, mats, 2002; bulhakova, kolodii, 2002; havrylishyn, kozyrieva, 2007). the treasury of great britain has a wide range of functions in support of the functioning of the financial system. in particular, this body regulates issues related to: 1) public expenditures, which include expenditures of state agencies for labour and pensions in the public sector, as well as an investment; 2) coordination of the financial services market; 3) strategic oversight of the uk tax system; 4) supervision of economic stability (united kingdome government : hm treasure). in addition, among the main functions of the treasury in accordance with uk law are development, drafting, and execution of the state budget; development and implementation of fiscal policy of the state; tax system management; management of the activity of structural subdivisions of the treasury; development of tax legislation, simplification and computerization of tax legislation; financial and economic forecasting; planning and control over public expenditures, maintaining budget balance, timely and efficient budget coordination, drafting a financial and budget report, and submitting it to parliament; the implementation of the policy of relations with the european community, the maintenance of the balance of profits and costs associated with eu membership, and so on (havrylishyn, kozyrieva, 2007). the german model of administrative regulation of the financial system is similar to the british one, it is also based on the unification of powers within the framework of several main bodies of financial coordination. on the territory of germany, the federal financial supervisory authority carries out oversight functions in the financial sector. this body has a wide range of authorities, and also has the right to issue government rules and regulations within the scope of its competence. in addition, the authority also carries out banking supervision, in conjunction with the german federal bank. the latter, in the process of ongoing control, evaluates documents, reports, annual financial statements and audit conclusions, and so on. it baltic journal of economic studies 448 vol. 3, no. 5, 2017 should be noted that the federal financial supervisory authority issues licenses for banking, insurance, and financial services, as well as oversees the activities of credit institutions, financial conglomerates, insurers, investment and pension funds, and activities in the securities market (khoruzhyi, 2016). similar administrative and legal principles of the functioning of the financial system exist in other european countries as well. in particular, in poland, state financial regulation is carried out by the financial sector supervision commission. the latter is a body of financial supervision with autonomous competence and a separate budget that oversees banks, insurance companies, insurance intermediaries, investment companies, asset management companies, investment and pension funds, payment service providers and e-money providers, credit bureaus and markets of securities (khoruzhyi, 2016). on the territory of sweden, the state regulation of the financial system is implemented in the activities of the financial supervisory authority. it is a public institution responsible for financial supervision of banks, supervision of electronic money and activities of payment institutions, activities in the securities market (including exchanges, clearing institutions), activities of investment and pension funds, consumer lending and savings activities, loan associations, as well as insurance and insurance intermediation activities. funded at the expense of annual regulatory fees and at the expense of license fees. the authority is subject to the ministry of finance of sweden (khoruzhyi, 2016). principles of administrative regulation of the financial system of spain, the most priority areas of which are fiscal, banking, and financial market spheres, are quite interesting. state regulation of the tax sector is characterized by a high level of efficiency, which is determined by numerous reforms in the 80s of the xx century. in order to simplify the procedure for paying taxes, improve taxpayer accounting, and strengthen the fight against tax crimes, the reorganization of the tax service was carried out through a series of organizational measures, in particular: introduction of identification numbers for all taxpayers – both for legal entities and for individuals; introduction of tax labels, which contain all the information on the taxpayer: the identification number, all types of taxes payable by the payer, payment deadlines (issued to legal entities at registration, and to individuals – by mail); introduction of mandatory submission of a tax return together with tax labels; introduction of tax vectors and notes, in which taxes and their payment periods are determined; establishment of close cooperation with banking institutions and structures; changing the organizational structure of tax administration and tax service in general (stukalo, lytvyn, derkach, 2014). in the area of supporting the stock market, there is a specially established national stock market commission that oversees the proper functioning of the system, checks spanish securities markets and activities of all participating organizations. in addition, the commission also monitors the transparency of spanish stock markets and the correct pricing, cares about the protection of investors. the activity of the said body is extended to companies that issue securities for public placement, to secondary stock markets, and to companies offering investment services (stukalo, lytvyn, derkach, 2014). although the banking system of spain is a large set of different government agencies and private banking institutions, in practice it is based on the principles of strict centralization. in particular, the bank of spain, the central bank of the country, is the main institution that regulates the banking system and implements monetary policy in the country. in its activities, the bank of spain is subordinated to the ministry of economy and finance, to which the government delegates powers in the field of monetary policy. the ministry of economy and finance develops provisions for the bank of spain, which it must follow when implementing the monetary and credit policy of the government, defines principles of the bank’s implementation of disciplinary and control functions, establishes the procedure for the bank to carry out operations with private banks, etc. (stukalo, lytvyn, derkach, 2014). 4. conclusions consequently, the comparative analysis showed that the administrative and legal principles of the functioning of the financial system of ukraine differ significantly from the european ones, which manifests itself in the peculiarities of the construction of the mechanism of state regulation of the financial sphere, in general, and its separate components, in particular. so in light of the foregoing, we have come to a number of conclusions. 1. the existing administrative and legal principles of functioning of the financial system of ukraine are characterized by general inconsistency. simply put, there is no connection between them, which impedes the creation of a general financial policy in our country and its further realization. in all cases, the administrative and legal principles enshrined in rules of legislative and subordinate acts relate to state regulation in certain spheres of the constituent elements of the financial system. 2. the lack of a unified legal framework for state regulation of the national financial system in practice generates a situation where such regulation is conducted by a large number of state authorities of varying degrees, whose powers, in some cases, are repeated, which causes contradictions. this negative aspect directly affects the efficiency of financial activity and the level of the national economy. baltic journal of economic studies 449 vol. 3, no. 5, 2017 3. analysis of foreign experience has shown that most european states support the policy of regulating the financial system as a holistic, indivisible phenomenon, gradually moving away from its understanding as a set of separate segments. a significant influence on this issue was made by the european union, which introduced a combination of the most important functions in the regulation of the eu financial system and transferring them to a separate group of special bodies. 4. it is determined that on the basis of consolidation of coordination and supervisory functions, today systems of state regulation of financial system of many european countries are built. the national regulation of financial relations is carried out by one or several clearly defined bodies in the following european countries: germany, poland, sweden, spain, etc. the many years of the uk experience should be noted separately. in this country, the main functions in the regulation of the financial system of the country are relied on a single body – the treasury. the similar format works today quite effectively, which is confirmed by the fact that the uk economy is one of the most developed in the world. thus, the administrative and legal principles of the functioning of the financial system in certain european countries reflect the greater effectiveness of the mechanism of state regulation of the financial system in 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(2010). finansovi systemy zarubizhnykh krainy : navchalnyi posibnyk [financial systems of foreign countries : study guide]. k.: kneu, 348 p. baltic journal of economic studies 122 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 ivano-frankivsk law institute of national university "odesa law academy ", ukraine (corresponding author) e-mail: savchukrom@ukr.net orcid: https://orcid.org/0000-0002-3336-6565 2 national university "odesa law academy ", ukraine e-mail: bilous200@ukr.net orcid: https://orcid.org/0000-0001-5343-3756 doi: https://doi.org/10.30525/2256-0742/2022-8-4-122-130 institutional support for the regulation of scientific activity in the context of digitalization roman savchuk1, tetiana bilous-osin2 abstract. the subject of the study is the principles of the use of information and telecommunication technologies in the regulation of public relations in the field of scientific activity in terms of institutional support. methodology. general scientific methods were used in the research process. the method of comparison was used in the selection and grouping of international standards related to the field of digital transformation. the analysis identified quantitative and qualitative parameters that characterize the specifics of the management activities of the cabinet of ministers of ukraine, the ministry of science and education of ukraine, the ministry of digital transformation of ukraine in modern conditions. induction and deduction were used to determine approaches to the main dominants of the main areas of activity of central executive bodies in the field of scientific activity. the results of the study showed that the introduction and use of digital technologies in the field of scientific activity is a natural and necessary phenomenon, which is an integral element of the functioning of public authorities, creates conditions for the effective exercise of their powers, and contributes to the public interest in general. conclusion. the characteristic of the state of provision of the sphere of scientific activity in terms of digitization in the existing institutional mechanism is established. the system of entities that are empowered in the field of scientific activity and / or authorized to use information and telecommunication means in the field of scientific activity is distinguished. the formation of science that stimulates the socio-economic development of the state was defined, achieved and tested through: the launch of the telegram-bot "info science bot", conducting free webinars in ukrainian by clarivate, opening of the era4ukraine portal to provide information and support services to ukrainian scientists, ukraine's membership in the cost association for the financing of innovation and research networks, implementation of the project "advisory fund to support the eu-ukraine association", etc. key words: the field of science, legal influence, public administration, digital technologies, institutional support, management entities, "e-science" project. jel classification: h83, o14 1. introduction regardless of the sphere of social relations subject to legal influence, the choice of measures and areas of regulation will depend on existing globalization trends and international standards. one of such areas is digitalization, which transforms the usual ways of influence of power entities, methods of their activities, forms of consolidation of decisions. this thesis will be confirmed by international standards in the field of digitalization in the public sector, namely: the provisions of the okinawa charter on the global information society (2000), the declaration on european policy on new information technologies (1999), the european code of electronic communications (2018), the european union directive "on measures for a high common level of security of network and information systems in the union" (2016), etc. the sphere of scientific activity and its regulation, including the institutional level of support, has undergone appropriate adjustments, which is partly due to the inclusion of the scientific environment of ukraine in the single european space. at the same time, any applied innovations are implemented against the background of revision of the initial theoretical postulates of public administration and regulation. at the same time, one of the central categories by which the managerial influence and the way of organizing social relations is interpreted is the category of "institutional support". baltic journal of economic studies 123 vol. 8 no. 4, 2022 given the challenges of today, it is important to identify the possibilities of using digital tools for the organization of scientific activities. thus, the key problems in the field of scientific activity, which can be solved with the help of digital tools, and which were identified by the ministry of education and science of ukraine (hereinafter – the ministry of education and science of ukraine), are as follows: lack of up-to-date and reliable information about scientific and pedagogical and scientific workers for making managerial decisions; bureaucratization of internal document flow processes of institutions and educational and scientific institutions; insufficient transparency in the distribution of research funding for ukrainian scientists; inaccessibility of scientific resources and digital infrastructures; absence of effective electronic reporting systems in educational and scientific institutions (project concept of digital transformation of education and science for the period until 2026, 2022). at the same time, the phenomenon of outflow of scientific potential abroad has become permanent. this is, among other things, due to the level of provision of the material and technical base of scientific institutions and higher education institu tions. thus, over the past five years, the number of researchers in ukraine has almost halved: from 101,440 people in 2014 to 51,121 people in 2019. in the total number of employed population in 2018, the share of scientists was 0.54 percent, including researchers – 0.35 percent (on approval of the concept of the state target program for the development of research infrastructures in ukraine for the period up to 2026 2021). therefore, the purpose of the study is to determine the state of institutional support for the regulation of scientific activity, taking into account the capabilities of digitalization tools by analyzing: a) the role of information and telecommunication technologies in the field of scientific activity; b) the status of the cabinet of ministers of ukraine, individual ministries and other authorized entities that regulate the sphere of scientific activity. 2. information and telecommunication technologies in the field of scientific activity and their institutional support regardless of the type of social relations in the field of scientific activity, public administration in this area should be carried out taking into account the concept of digitalization. the idea of using information and telecommunication technologies in the sphere of scientific activity streamlining became vividly expressed with the adoption of the resolution of the cabinet of ministers of ukraine "some issues of digital transformation" (2021). accordingly, the idea of digital transformation in the chosen field is reflected through: a) the creation of an information system designed for competitive funding of scientific research; b) the creation of an electronic system of access to existing scientific information resources, an electronic scientific information system; c) creation of a register of ukrainian research infrastructures; d) development of the ukrainian science citation index; e) creation of an electronic system for awarding academic degrees and academic titles; f ) modernization of the systems of submission of documents and state certification of scientific institutions and higher education institutions in terms of their scientific activities; g) ensuring the development of the repository of academic texts and connecting local repositories to it. analysis of the report of the ministry of education and culture for 2020 shows the urgency of increasing public investment in research and innovation and creating demand for innovation (pysarenko, kuranda, kvasha, 2021: 33). the idea of using information and telecommunication technologies in the field of streamlining scientific activities has received a vivid expression with the adoption of the resolution of the cabinet of ministers of ukraine "some issues of digital transformation" dated february 17, 2021 no. 365. accordingly, the idea of digital transformation in the field of science is reflected in: 1) automation of the admission campaign; organization of recruitment and training (internships) of foreigners and stateless persons; ordering educational documents and annexes to them of the european standard; introduction of electronic licensing; modernization of the unified state electronic database on education; creation and modernization of a unified electronic system for monitoring the employment of graduates; 2) creation of an information system designed for competitive funding of scientific research; creation of an electronic system of access to existing scientific information resources, an electronic system of scientific information; creation of a register of ukrainian research infrastructures; development of the ukrainian scientific citation index; creation of an electronic system for awarding academic degrees and academic titles; modernization of the systems of submission of documents and state certification of scientific institutions and higher education institutions in terms of their scientific activities; ensuring the development of the repository of academic texts and connecting local repositories to it. it should be noted that the use of information and telecommunication technologies in the regulation of social relations in the field of education indirectly affects the implementation of scientific activities. however, such aspects as: automation of the admission campaign, organization of recruitment baltic journal of economic studies 124 vol. 8 no. 4, 2022 and training (internships) of foreigners and stateless persons, ordering of educational documents and annexes to them of the european standard, modernization of the unified state electronic database on education, creation and modernization of a unified electronic system for monitoring the employment of graduates (in the future this direction will be called "e-university "), will not apply to the digitalization of public administration in the field of scientific activity. establishing the state of provision of the sphere of scientific activity in terms of digitization should be based on the existing institutional mechanism and administrative tools used by authorized entities. the entities authorized in the field of scientific activity and / or allowed to use information and telecommunication means in the field of scientific activity are proposed to include the following: 1) state executive authorities: cabinet of ministers of ukraine and its advisory bodies (national council of ukraine for the development of science and technology), ministry of education and science of ukraine, ministry of digital transformation of ukraine, other central executive authorities, local executive authorities; 2) subjects of delegated powers: scientific institutions, scientific (scientific, scientific-technical, technical) council of a scientific institution, expert group for evaluation of the effectiveness of scientific institutions, scientific self-governing organizations (national academy of sciences of ukraine, national branch academies of sciences), public scientific organizations, regional scientific centers; 3) local self-government bodies; 4) other entities that are not classified as public authorities (for example, the president of ukraine, the educational ombudsman). consider separately the applied role of some subjects in the introduction of the latest technologies in scientific activity, which is reflected in certain legal forms (doctrinally can be used as a synonym for the concepts of "form of public administration", "instrument of public administration"). it is an external expression of homogeneous in nature and legal nature groups of actions of public administration entities, which are implemented within the competence defined by law in order to achieve the desired legally significant result (averyanov, 2004: 169). 3. the cabinet of ministers of ukraine as a subject of regulation of the sphere of scientific activity the cabinet of ministers of ukraine is a subject of general competence, which ensures the implementation of state policy in the relevant spheres of public and state life, the implementation of the constitution and laws of ukraine, acts of the president of ukraine, observance of human and civil rights and freedoms (about the cabinet of ministers of ukraine, 2014). the sphere of scientific activity is no exception. in detail, the powers of the highest central executive body in the field of scientific activity are contained in article 41 of the law of ukraine "on scientific and scientific-technical activity " (2015). it seems possible to group the powers of the cabinet of ministers of ukraine in the following areas: 1) political (implementation of the state scientific and technical policy, development and strengthening of the scientific and technical potential of ukraine); 2) organizational (ensuring the development and implementation of state targeted scientific and scientific-technical programs, ensuring the interaction of central executive bodies with the national council of ukraine for the development of science and technology); 3) regulatory and legal (approval of state target scientific and scientific-technical programs, adoption of normative acts related to the use of digital technologies); 4) personnel (approval of the personnel of the national council of ukraine for the development of science and technology, which is approved by the chairman of the national research foundation of ukraine); 5) representative (negotiating and signing international treaties of ukraine, in accordance with the powers granted). in addition, the cabinet of ministers of ukraine exercises constant control over the implementation of the constitution of ukraine and other acts of legislation of ukraine by executive bodies, takes measures to eliminate shortcomings in the work of these bodies. with regard to the introduction of the latest technologies in scientific activities, within the powers available to the cabinet of ministers of ukraine, the main role is assigned to the adoption of regulatory legal acts on: a) the use of digital technologies of a general nature; b) the use of digital technologies directly in the field of scientific activity. in the first case, for example, we are talking about: approval of the concept for the development of e-governance in ukraine (2017), intensification of the activities of units for digital development, digital transformation and digitalization operating at central and local executive authorities, kyiv and sevastopol city state administrations (some issues of the activities of units for digital development, digital transformation and digitalization of central and local executive authorities and deputy heads of central executive authorities, regional, kyiv and sevastopol city state administrations on digital development, digital transformation and digitalization, 2020), application of the principles of the state policy of digital development by executive authorities in the process of preparing drafts of new regulatory legal acts and exercising official powers through the use of baltic journal of economic studies 125 vol. 8 no. 4, 2022 digital technologies (some issues of digital development, 2019), the allocation of digital competencies and their implementation in the educational process in order to improve the quality and development of all spheres of public life, etc. (concept of development of digital competences, 2021) regarding the introduction of digital technologies directly into the sphere of scientific activity, the cabinet of ministers of ukraine approved a number of progressive changes. for example, the relevant resolution of the cabinet of ministers of ukraine provides for the use of information and telecommunication means when holding a competition for vacant scientific positions in a state scientific institution: the announcement of the competition with information on the conditions of its holding is placed on specialized internet resources, published on the official website of the state scientific institution; documents for the competition can be submitted by e-mail; information on the results of the competition is subject to mandatory publication on the official website of the state scientific institution (on approval of the standard regulation on the procedure of competition for vacant scientific positions of the state scientific institution, 2018). a similar conclusion can be drawn in the aspect of analysis of the regulation of the mechanism of formation and use of funds provided for the national research fund in the state budget under the program "ensuring the activities of the national research fund, grant support for scientific research and scientific and technical (experimental) developments". accordingly, the budget funds are envisaged, among other things, for the purchase, creation, operation and technical support of the official website of the fund, software for the formation of an electronic database of experts who carry out the examination of projects submitted for the competition, an electronic information system for the submission and processing of such projects, an electronic database of research and development funded or financed by the fund (on approval of the procedure for formation and use of funds of the national research fund of ukraine, 2019). the influence of the cabinet of ministers of ukraine on the reform of public relations in the field of scientific activity in the direction of digitalization is expressed in the relevant draft legal acts. for example, the government of ukraine has developed a draft resolution "on approval of the regulation on the national electronic system of scientific information" (2021), which was submitted for public discussion on october 22, 2021. in general, the national electronic scientific and information system is a multifunctional tool for organizing scientific activities based on the use of information and telecommunication technologies, which will ensure the collection, formation, processing, storage, use of data and information on: registration procedures of scientific institutions supported by the state and scientific objects of national heritage; procedures for state accreditation of individuals and legal entities for the right to conduct scientific and scientific-technical expertise; electronic catalogues of scientific libraries; procedures for certification of researchers and state certification of higher education institutions in terms of their scientific (scientific and technical) activities; registration of scientific and scientific-practical events; registration of professional publications, etc. however, as of today, these provisions have not become binding. first of all, this is due to the fact that some of the above-mentioned registers are not available in paper form, and given the digitalization of certain aspects of scientific activity, there are no comprehensive requirements for their standardization. it is appropriate to pay attention to the draft decree of the cabinet of ministers of ukraine "on approval of the national action plan for the implementation of the principles of open science for the period up to 2030" (2022), which outlines the following areas of science development in ukraine: 1) ensuring open access to scientific results and scientific and technical information by implementing the following measures: placing in the public domain scientific results and scientific and technical information obtained during the implementation of fundamental and applied scientific research funded from the budget; regulating the mechanisms of registration and accounting of research, development and dissertations using an electronic system with remote access; implementation of the strategy for the implementation of open access; ensuring access of higher education institutions and scientific institutions to international electronic databases of scientific information at the expense of the budget; development of mechanisms to stimulate the registration of ukrainian scientific publications (journals) in international databases of open access journals; conducting a comprehensive analysis of the legal basis for placing monographs in open access; 2) ensuring open access to research infrastructure, which is ensured, among other things, by approving the concept of state policy for the development of e-infrastructures; 3) creation of conditions for effective work with scientific and technical information and objects of research infrastructure that are in the public domain, which should be achieved in the following ways: by improving legislation in accordance with the standards and norms of the european union in terms of applying the principles of good management of scientific data (fair principles) and the use of optimized scientific data (fair data); ensuring standardization and certification of data warehouses baltic journal of economic studies 126 vol. 8 no. 4, 2022 in international data storage systems; ensuring data exchange with eu countries, in particular through integration into european data spaces; creation of a single database on the results of scientific and scientific-technical activities; 4) popularization of science, dissemination of scientific knowledge and involvement of citizens in scientific and scientific-technical activities by conducting information and communication campaigns to promote scientific achievements among the population, informing about the possibilities of using scientific achievements in professional activities and everyday life, etc. the proposals contained in the draft order are progressive and cover all priority areas of scientific activity development in terms of the use of digital technologies. therefore, their regulatory approval as mandatory seems urgent. special attention should be paid to the entity that promotes the introduction of the latest technologies in scientific activities – the national council of ukraine for the development of science and technology, which is at the same time a permanent advisory body established under the cabinet of ministers of ukraine to ensure effective interaction of representatives of the scientific community, executive authorities and the real sector of the economy in the formation and implementation of a unified state policy in the field of scientific and scientific-technical activity (regulations on the national council of ukraine on science and technology development, 2017). at first glance, the optional nature of this body does not have a pronounced practical significance, but the involvement of experts in the scientific field and practitioners in solving the problems of the scientific sector creates a flexible mechanism for implementing urgent changes. among such priority innovations should be the dissemination of the practice of using digital technologies in scientific activities through 1) preparation and submission of proposals for the formation of the principles of state policy in the field of scientific and scientific-technical activity, determination of priority areas of science development and measures for their implementation; 2) preparation of proposals for the integration of national science into the world scientific space and the european research area, taking into account national interests; 3) providing conclusions on draft concepts of state target scientific and scientific-technical programs and projects of such programs; 4) providing recommendations on the formation of the state budget in terms of determining the total amount of funding for scientific activities; 5) preparation of an annual report on the state and prospects of development of the sphere of scientific activity, as well as on the state of implementation by ukraine of the priorities of the european research area and submission of proposals for their implementation plan for the next year; 6) initiation and ordering of forecast and analytical studies in the field of science and scientific expertise of decisions of central executive authorities related to the scientific sphere; 7) development of proposals for the creation of mechanisms for commercialization of research results, etc. analytical reporting on the activities of the national council of ukraine on the development of science and technology shows that this body pays attention to the importance of using digital technologies in the field of scientific activity. in particular, this concerns the recommendations on ukraine's accession to the european research area, namely the european open science cloud, participation in the eu program for research and innovation "horizon europe", creation of a legal framework for ukraine's participation in the european research infrastructure consortia (eric), recognition of priority areas for ukraine and joining the eu program "cost" (minutes no. 3 of the meeting of the national council of ukraine on science and technology development, 2019). 4. the role of individual ministries as subjects of regulation of the sphere of scientific activity the legal status of the ministry of education and science of ukraine (hereinafter – the ministry of education and science of ukraine) is a multidimensional characteristic of the position occupied by this central body of state executive power in the organization of regulation of public relations and in the system of state authorities as a whole. the functioning of the ministry of education and culture of ukraine in the field of science is aimed at the proper regulation of social relations related to scientific activity, which is achieved by performing such tasks as: formation and ensuring the implementation of state policy in the field of science, scientific and scientifictechnical activity, innovative activity in these areas, transfer (transfer) of technologies, as well as ensuring the formation and implementation of state policy in the field of state supervision (control) over the activities of entities engaged in activities related to the provision of services in the field of science, regardless of their subordination and forms of ownership (on approval of the regulation on the ministry of education and science of ukraine, 2014). the powers of the ministry of education and science of ukraine in the field of scientific activity, depending on their content, should be classified as follows (on scientific and scientific-technical activity, 2015): – organizational and administrative (e.g., ensuring the development of the national system of scientific and technical information, management of the baltic journal of economic studies 127 vol. 8 no. 4, 2022 system of scientific and scientific-technical expertise, management of the system of state certification of scientific institutions on the basis of the principles developed by the national council of ukraine for the development of science and technology); – coordination (e.g., elaboration of the principles of scientific and scientific-technical development of ukraine and submission of relevant proposals to the cabinet of ministers of ukraine and the president of ukraine, interaction with the national council of ukraine for the development of science and technology, coordination of implementation by other central executive authorities, the national academy of sciences of ukraine and national branch academies of sciences of the state policy in the field of scientific and scientific-technical activity, development together with the national council of ukraine for the development of science and technology of the state policy in the field of scientific and scientific-technical activity); – globalization-oriented (for example, ensuring the integration of national science into the world scientific space and the european research space with the preservation and protection of national priorities, coordination of international scientific and technical cooperation, development of draft interstate programs to ensure the implementation of international agreements in the field of scientific and scientific-technical activities); – auxiliary (for example, the formation of the subject of the state order for the most important scientific and technical (experimental) developments and scientific and technical products, financial support for the implementation of the state order for the most important scientific and technical (experimental) developments and scientific and technical products, financial support for scientific and scientific and technical activities of higher education institutions that belong to the sphere of its management); – control and supervision (for example, approval of the procedure for the formation of the list of scientific professional publications of ukraine, approval and cancellation of the decision of specialized academic councils on awarding a degree to an applicant. institutionalization as a priority goal – the use of digital technologies in the field of science – is of great importance in the activities of the ministry of education and culture of ukraine. currently, this goal is achieved through the recognition of the main goals in the field of regulation of scientific activity – the formation of science that stimulates the socioeconomic development of the state (action plan of the ministry of education and science of ukraine for 2021, 2021). under such conditions, the directorate of digital transformation, which is an independent structural unit of the ministry of education and culture of ukraine, will need to reformulate a number of established principles of work, which is a practical basis for further research on the selected issues. among the priority tasks of the digital transfor mation directorate, for example, is to ensure the formation of state policy based on a constant analysis of the state of affairs in the field of digital transformation and digital development of science by finding alternative solutions to existing problems; monitoring and evaluation of the results of the implementation of state policy in the field of digital transformation and digital development of science, etc. (bilous-osin, 2021: 26) institutionalization as a priority goal – the use of digital technologies in the field of science – is of great importance in the activities of the ministry of education and culture of ukraine. currently, this goal is achieved through the recognition of the main goals in the field of regulation of scientific activity – the formation of science that stimulates the socio economic development of the state (on approval of the decree of the president of ukraine "on the introduction of martial law in ukraine", 2022; on the legal regime of martial law, 2015). projects and initiatives of the ministry of education and culture of ukraine aimed at supporting science in these conditions are positive. however, most of these innovations are based on the use of, for example, digital technologies: – the telegram-bot "info science bot" was launched, which provides: prompt informing of scientists, innovators about modern opportunities for scientists, current news and diplomatic steps of the authorities and the scientific community to counter russian aggression, as well as sanctions against the russian federation imposed by our international partners; information on opportunities for scientists from foreign universities in scientific institutions regarding grant support, mobility and temporary employment (official website of the ministry of education and science); – free webinars in ukrainian were held by clarivate on scientometrics and bibliometrics, which will consider the peculiarities of publishing the results of scientific activities of scientists in publications indexed by the web of science database, the possibility of using web of science and platform tools (official website of the ministry of education and science); – the european commission has launched the era4ukraine portal to provide information and support services to ukrainian researchers who are forced to go abroad due to the war. the portal brings together initiatives at the level of the eu, individual countries and non-governmental institutions. the portal contains information on: recognition of diplomas, current vacancies, social assistance, housing offers for scientists and their families (official website of the ministry of education and science); baltic journal of economic studies 128 vol. 8 no. 4, 2022 – ukraine became a member of the cost association of innovation funding and research networks. among the strategic priorities of cost are the following: promoting and disseminating cuttingedge science and best practices, empowering and supporting young innovators and researchers, promoting interdisciplinary research for breakthrough science. in addition, membership in this organization provides an opportunity to join cost actions research networks, which offer an open space for international cooperation of scientists, as well as give impetus to the progress of innovation and research (official website of the ministry of education and science); – the project "advisory fund to support the eu ukraine association", which is implemented in ukraine by the federal company deutsche gesell schaft für internationale zusammenarbeit (giz) gmbh on behalf of the federal ministry for economic cooperation and development (bmz), has started its work. in general, it is an online platform for communication and effective interaction between representatives of business and the scientific community, which aims to achieve scientific results by business and realize the potential of scientists (project "advisory fund to support the eu-ukraine association"). thus, the ministry of education and culture of ukraine is a specially authorized entity that has the necessary powers to regulate the sphere of scientific activity, taking into account the spread of digital technologies. particular attention should be paid to the ministry of digital transformation of ukraine, whose competence is primarily aimed at digital development of regulation of public relations, dissemination of the latest technologies in various spheres of public relations, formation of the state policy of digitalization in general and digital development (with an emphasis on the formation of digital skills and digital rights of citizens). among the priority tasks of the ministry of digital transformation, a prominent place is given to the implementation of measures aimed at forming high-quality methods of electronic interaction of state electronic information resources and an integrated approach to electronic identification; preparation of the legal framework for digital transformation; formation of the state policy of cryptographic and technical protection of information, cybersecurity; ensuring the introduction of virtual assets, blockchain and tokenization, artificial intelligence, etc. (questions of the ministry of digital transformation, 2019) the adaptation of digital tools to the sphere of scientific activity is relatively slow. the project "digital transformation of funding and services in science (e-science)" announced by the ministry of digital transformation of ukraine aims to: create electronic systems that will reflect the funding of scientific research; providing access to scientific digital services; introduction of a register of research infrastructures; formation of an electronic system for awarding degrees and academic titles; creation of an electronic mechanism for certification of scientific institutions, as well as the formation of a repository of academic texts (projects of digital transformation). to implement the e-science project, the ministry of digital transformation of ukraine cooperates with the ministry of education and science of ukraine, which is a sustainable approach to the work of the relevant central executive authorities. 5. conclusions the study found that the state of provision of the sphere of scientific activity in the conditions of digitalization should be based on the existing institutional mechanism and administrative tools used by authorized entities. the system of entities that are empowered in the field of scientific activity and/or authorized to use information and telecommunication means in the field of scientific activity is distinguished. these include state executive authorities: cabinet of ministers of ukraine and its advisory bodies (national council of ukraine for the development of science and technology), ministry of education and science of ukraine, ministry of digital transformation of ukraine, other central executive authorities, local executive authorities; subjects of delegated powers: scientific institutions, scientific (scientific, scientifictechnical, technical) council of a scientific institution, expert group for evaluation of the effectiveness of scientific institutions, scientific self-governing organizations (national academy of sciences of ukraine, national branch academies of sciences), public scientific organizations, regional scientific centers; local self-government bodies; other entities that are not attributed to public authorities (for example, the president of ukraine, the educational ombudsman). the importance of adopting regulatory legal acts on: a) the use of digital technologies of a general nature; b) the use of digital technologies directly in the field of scientific activity, as tools for intro ducing the latest technologies into scientific activity within the powers of the cabinet of ministers of ukraine. attention was drawn to the need for urgent regulatory approval as mandatory proposals contained in the draft acts of the cabinet of ministers of ukraine. the praxeological significance of the use of digital technologies in the field of science in the activities of the ministry of education and science is determined. today, this goal is achieved through the recognition of the main goals in the field of regulation baltic journal of economic studies 129 vol. 8 no. 4, 2022 of scientific activity – the formation of science that stimulates the socio-economic development of the state, which has been tested in practice: launching of the telegram-bot "info science bot", conducting of free webinars in ukrainian by clarivate on scientometrics and bibliometrics, opening of the era4ukraine portal to provide information and support services to ukrainian scientists, ukraine's membership in the cost association for financing innovation and research networks, implementation of the project "advisory fund for the support of the eu-ukraine association", etc. references: okinawa charter of the global information society: international document dated 07/22/2000. available at: http://studies.in.ua/ru/informacionnoe-pravo-shpargalki/2201-oknavska-hartya-globalnogo-nformacynogosusplstva.html declaration on european policy in the field of new information technologies: international document dated may 6, 1999. available at: https://zakon.rada.gov.ua/laws/show/994_695#text on the introduction of the european code of electronic communications: directive of the european parliament and of the council (eu) 2018/1972 of december 11, 2018. available at: https://zakon.rada.gov.ua/laws/ show/984_013-18#n78 on measures for a high common level of security of network and information systems on the territory of the union: directive of the european parliament and the council of the eu 2016/1146 of 07/06/2016. available at: https://zakon.rada.gov.ua/laws/show/984_013-16#text concept project of digital transformation of education and science for the period until 2026. available at: https://mon.gov.ua/ua/news/koncepciya-cifrovoy i-transformaciy i-osv iti-i-nauki-mon-zaproshuye-dogromadskogo-obgovorennya on approval of the concept of the state target program for the development of research infrastructures in ukraine for the period up to 2026: order of the cabinet of ministers of ukraine of april 4, 2021 no. 322. available at: https://zakon.rada.gov.ua/laws/show/322-2021-%d1%80#text some issues of digital transformation: resolution of the cabinet of ministers of ukraine dated february 17, 2021 no. 365-r. date of update: 08/04/2021. available at: https://zakon.rada.gov.ua/laws/show/365-2021-%d1%80#text pisarenko, t. v., kuranda, t. k., kvasha, t. k. and others (2021). state of scientific and innovative activity in ukraine in 2020: scientific and analytical note. kyiv: ukrintei, 39 p. administrative law of ukraine. academic course: textbook: in 2 volumes: t. 1. general part / ed. number v. b. averyanov (head). kyiv: legal opinion publishing house, 2004. 287 p. about the cabinet of ministers of ukraine: law of ukraine dated february 27, 2014 no. 794-vii. date of update: 06.03.2021. available at: https://zakon.rada.gov.ua/laws/show/794-18#n62 on scientific and research activities: law of ukraine dated november 26, 2015 no. 848-viii. available at: https://zakon.rada.gov.ua/laws/show/848-19#text on approval of the concept of the development of e-government in ukraine: decree of the cabinet of ministers of ukraine dated september 20, 2017 no. 649. available at: https://zakon.rada.gov.ua/laws/show/649-2017%d1%80#text some issues of activities of units on digital development, digital transformations and digitalization of central and local executive bodies and deputy heads of central executive bodies, regional, kyiv and sevastopol city state administrations on digital development, digital transformations and digitalization: decree of the cabinet of ministers of ukraine from march 3, 2020. № 194. available at: https://zakon.rada.gov.ua/laws/show/1942020-%d0%bf#text some issues of digital development: decree of the cabinet of ministers of ukraine of january 30, 2019 no. 56. date of update: 03/05/2020. available at: https://zakon.rada.gov.ua/rada/show/56-2019-%d0%bf#n18 the concept of the development of digital competences: decree of the cabinet of ministers of ukraine dated march 3, 2021 no. 167-p. available at: https://zakon.rada.gov.ua/laws/show/167-2021-%d1%80#text on approval of the model regulation on the procedure for conducting a competition for filling vacant scientific positions of a state scientific institution: resolution of the cabinet of ministers of ukraine dated may 23, 2018. № 404. available at: https://zakon.rada.gov.ua/laws/show/404-2018-%d0%bf#n10 on approval of the procedure for the formation and use of funds of the national research fund of ukraine: resolution of the cabinet of ministers of ukraine dated 04.12.2019 no. 1007. available at: https://zakon.rada.gov.ua/laws/show/1007-2019-%d0%bf#n8 on approval of the regulation on the national electronic scientific and information system: draft resolution of the cabinet of ministers of ukraine. 2021. available at: https://mon.gov.ua/ua/news/mon-proponuye-dogromadskogo-obgovorennya-proyekt-postanovi-kabinetu-ministriv-ukrayini-pro-zatverdzhennya-polozhennyapro-nacionalnu-elektronnu-naukovo-informacijnu-sistemu on approval of the national plan of measures for the implementation of the principles of open science ntil 2030: draft order of the cabinet of ministers of ukraine. available at: https://mon.gov.ua/ua/news/mon-proponuyedo-gromadskogo-obgovorennya-proyekt-rozporyadzhennya-kabinetu-ministriv-ukrayini-pro-zatverdzhennyanacionalnogo-planu-zahodiv-shodo-vprovadzhennya-principiv-vidkritoyi-nauki-do-2030-roku baltic journal of economic studies 130 vol. 8 no. 4, 2022 regulations on the national council of ukraine for the development of science and technology: resolution of the cabinet of ministers of ukraine dated april 5, 2017. № 226. available at: https://zakon.rada.gov.ua/laws/ show/226-2017-%d0%bf#text minutes no. 3 of the meeting of the national council of ukraine on science and technology development dated november 5, 2019. available at: https://www.kmu.gov.ua/storage/app/sites/1/73-dgsp/protokolnogorishennya.pdf on approval of the regulation on the ministry of education and science of ukraine: resolution of the cabinet of ministers of ukraine dated october 16, 2014. № 630. available at: https://zakon.rada.gov.ua/laws/show/6302014-%d0%bf#text action plan of the ministry of education and science of ukraine for 2021: order of the ministry of education and science of ukraine dated january 6, 2021 no. 30. available at: https://mon.gov.ua/ua/ministerstvo/diyalnist/ plan-roboti belous-autumn, t. i. (2021) the ministry of education and science of ukraine as an authorized entity in the field of scientific activity. scientific works of ou "oyua", рр. 20–27. on approval of the decree of the president of ukraine "on introduction of martial law in ukraine": law of ukraine dated february 24, 2022 no. 2102-ix. available at: https://zakon.rada.gov.ua/laws/show/2102-20#text on the legal regime of martial law: law of ukraine dated may 12, 2015. № 389-viii. available at: https://zakon.rada.gov.ua/laws/show/389-19#text official website of the ministry of education and science. available at: https://mon.gov.ua/ua/news/monzapuskaye-telegram-bot-info-science-bot project "consulting fund for the support of the ukraine-eu association". available at: https://s2b.nauka.gov.ua/ about regulations on the ministry of digital transformation of ukraine: resolution of the cabinet of ministers of ukraine dated september 18, 2019 no. 856. date of update: 07.02.2022. issues of the ministry of digital transformation: resolution of the cabinet of ministers of ukraine dated september 18, 2019 no. 856. available at: https://zakon.rada.gov.ua/laws/show/856-2019-%d0%bf#text digital transformation projects. available at: https://plan2.diia.gov.ua/projects?fbclid=iwar0xui-4lrtzqub7 bfvxwbpw8k9idqx2r8vobneyv24f i28ouf0d_zb762m received on: 23th of september, 2022 accepted on: 29th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 34 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 institute of industrial economics of the national academy of sciences of ukraine, ukraine e-mail: amosha1937@gmail.com orcid: https://orcid.org/0000-0003-0189-3819 2 o.m. beketov national university of urban economy in kharkiv, ukraine (corresponding author) e-mail: hcsms.07@gmail.com orcid: https://orcid.org/0000-0002-0282-368x 3 о.m. beketov national university of urban economy in kharkiv, ukraine e-mail: troyan.vlada@gmail.com orcid: https://orcid.org/0000-0002-2142-2873 doi: https://doi.org/10.30525/2256-0742/2023-9-2-34-39 strategies for managing the company's potential to increase the enterprise's investment attractiveness oleksandr amosha1, volodymyr velychko2, vladyslava troian3 abstract. the subject of the study is a complex of theoretical and methodological provisions and practical recommendations on increasing the effectiveness of the formation and use of the potential of enterprise management strategies through the creation and implementation of organizational and economic principles to increase their investment attractiveness. currently, there is no objective method of managing the investment potential of an enterprise, which is capable of reliably reflecting possible problems of functioning and risks of investing funds in the enterprise. existing methods of managing the investment potential of a company consider either an insufficient number of factors necessary for evaluation, or an excessive number of factors to be evaluated, as a result of which it is quite difficult for the investor to isolate the necessary information and make the right decision. for such enterprises the increase of investment attractiveness is possible only by qualitative changes in the management and production system, in particular by reorientation of the production process to the needs of the market, which will improve the image of the enterprises on the market and create new or develop existing competitive advantages. methodology. the theoretical and methodological basis of the article consists of general scientific methods: comparison, dialectical development of economic systems, methodology of normative-legal and information-analytical support of the functioning of enterprises, formation and use of the strategy of potential management of the enterprise, creation and implementation of organizational and economic principles to increase their investment attractiveness. the research was based on the synthesis of social science theories, organizational systems theory and corporate finance theory. according to the system approach, the potential of the enterprise was considered as the potential of the financial system of the enterprise. the purpose of the article is the development of theoretical, methodological provisions and practical recommendations for the creation and implementation of the strategy of managing the financial potential of the enterprise in order to increase the investment attractiveness of the enterprise. conclusion. the research carried out in the article consists in modernization and optimization of the considered strategies of financial potential management of the enterprise in order to increase the investment attractiveness of the enterprise, identification of an evaluation method that would meet the needs of investors, taking into account the factors significant for the assessment of the investment attractiveness of the enterprise, capable to objectively characterize its advantages and disadvantages and investment risks for investors. key words: strategy, potential, investment attractiveness, method, management. jel classification: l21, m19, m21 1. introduction in order for the company to have a steady development, it needs an inflow and attraction of external capital. since each investor is more than interested in the profitability of his investment, he must carefully calculate the risks and profitability of this investment when choosing an investment object. investors try to minimize the risk of losses and get the maximum benefit from the investment of their own funds, therefore they evaluate the effectiveness of invest ments, i.e., they consider and evaluate such a concept as the investment attractiveness of a company. baltic journal of economic studies 35 vol. 9 no. 2, 2023 at present there is no objective method of managing the investment potential of an enterprise, capable of reliably reflecting possible problems of its functioning and risks of investing funds in it. existing methods of managing the investment potential of the enterprise consider either an insufficient number of factors necessary for evaluation, or an excessive number of factors to be evaluated, as a result of which it is quite difficult for the investor to isolate the necessary information and make the right decision. enterprises with below-average investment attractiveness are characterized by low opportunities to increase capital, which is mainly due to inefficient use of existing production potential and market opportunities. companies with low investment attractiveness can be considered unattractive, as invested capital does not increase, but only acts as a temporary source of support for the viability, without determining the economic growth of the enterprise. for such enterprises the increase of investment attractiveness is possible only by qualitative changes in the management and production system, in particular by reorientation of the production process to the needs of the market, which will improve the image of the enterprises on the market and create new or develop existing competitive advantages. 2. practical approaches to managing the company's financial potential in today 's economic conditions, investment attractiveness is one of the important factors determining the stable development of an enterprise. many works of foreign and domestic scientists are devoted to the study of the concept of investment attractiveness, among which it is possible to mention u. sharp, m. scott, d. morris, t. copeland, y. brigham, f. berger, i. i. roizman, e. i. krylova, v. a. moskvyna, v. v. bocharova, i. a. blank and others. each of the scientists interprets the meaning of the concept of investment attractiveness in a different way, since the meaning of the concept depends on the factors embedded in its basis, therefore, no unified approach to the interpretation of this term has been developed so far. most definitions of the concept of investment attractiveness boil down to the interpretation of this term as a system or combination of various features or factors of the external and internal environment that affect the state of the object being evaluated, without further specification of these features. such a general definition is due to the fact that there are many factors that can influence the investment attractiveness of the object. the difference is not only that the authors cannot agree on which factors should be considered significant and which are less important when assessing the investment attractiveness, but also that these factors differ significantly depending on the object of assessment, type of investor, investment goals. therefore, the assessment of the company 's investment attractiveness becomes more and more important and relevant every year. in the conditions of increased competition between companies, practical approaches to the management of financial potential become more and more important. at the same time, the given direction of management is fundamental in terms of such elements as quality management, development and promotion of new assortment groups, etc. at present, the concept of investment attractiveness is quite new, having appeared relatively recently in economic literature. the concept of investment attractiveness is used, first of all, for characterization and evaluation of investment objects, comparative analysis of processes and rating comparisons. the analysis of various points of view on its interpretation led to the conclusion that in the modern sense there is no unified approach to the essence of this economic category. investment attractiveness of the enterprise is an unconditional factor of effective functioning of enterprises of various organizational and legal forms. a high level of investment attractiveness forms and strengthens visible and hidden advantages over its competitors (aaker, 2013). increasing the efficiency of the enterprise functioning and its investment attractiveness can be carried out at the expense of: – creation of new factories in the places with the most available raw materials and near the consumers of finished products; – implementation of innovative projects; – expansion and differentiation of production scales; – modernization of production and its technical rearmament with resource-saving and less expensive equipment. the investment attractiveness of the enterprise is a general indicator of the investment object from the point of view of investment profitability, development prospects and the level of investment risks. in order to make decisions on the implementation of investments, it is necessary to compare the expected positive returns with the actual costs of capital investments. there is no doubt about the practical importance of issues related to determining the investment attractiveness of enterprises, since economic growth and its stabilization are impossible without investments in business entities. solving this problem ensures the viability of the enterprise as a whole. baltic journal of economic studies 36 vol. 9 no. 2, 2023 in the era of modernization of production and introduction of innovations, investment attractiveness as a possibility of prospects for development of the enterprise under the influence of the investment process is very relevant. the concept of investment attractiveness of an enterprise is a set of performance indicators reflecting the profitability of monetary contributions to the development of the company. the investment attractiveness of the company includes a set of financial and economic indicators that evaluate the external environment of the enterprise, the level of its positioning on the market and the possibilities of results. as mentioned above, there is no definition of the concept of "investment attractiveness" in economics, it contains a large knowledge base and methodology, but it is abstract. for example, a bank and private capital require completely different indicators. first of all, for banks the solvency and speed of return of funds to the enterprise are considered, and for the shareholder the return in the total income of assets from active and planned operation of the enterprise is more important (asaul, 2008). in general, it should be noted that despite the lack of consensus in scientific works on the interpretation of this concept, the opinions of domestic authors significantly complement each other. investment attractiveness means the expediency of investing funds in an enterprise of interest to theinvestor, which depends on a number of factors characterizing the activity of the business entity. investment attractiveness of the enterprise is a set of quantitative and qualitative indicators that reflect the efficiency of various aspects of the enterprise, on the basis of which economic relations between business entities are established for effective business development and maintenance of its competitiveness. the literature also considers the dependence of the level of development of the enterprise on the level of its investment attractiveness (asaul, 2008). one of the conditions for the development of investment activity of the enterprise is the existence of an investment policy. the investment policy of the enterprise is a complex, interrelated and inter dependent set of activities of the enterprise aimed at its future development, obtaining profit and other positive effects obtained as a result of investments (batkovets, 2022). investment policy, like investment potential, does not have a fixed terminological definition, some authors tend to the fact that investment policy is a component of the financial strategy of the organization, others believe that a set of interde pendent types of business activities more accurately conveys the meaning of this term. in general, the investment policy of the enterprise is an important lever of influence on business activity and a part of the general economic policy of the enterprise. it includes the choice and method of implementation of the most rational ways of investment in order to ensure high growth rates of its constant development, expansion and renewal of its production potential. the investment policy includes the establishment of long-term goals of the enterprise, determination of the most promising and profitable investments of the investors' funds, development of priority directions of the enterprise development, evaluation of investment projects, development and analysis of financial, technological, marketing forecasts, assessment of the consequences of the implementation of investment projects. the investment policy of the enterprise is, in fact, the selection and assessment of the consequences of the implementation of investment projects. investment policy acts as a tool for the development of the enterprise, its main task is to find the optimal way of using investment resources, the appropriate combination of various sources of financing to achieve a positive effect on the economically suitable directions of development of the enterprise. the investment policy of the enterprise is, in fact, the choice of the strategic path of development of the enterprise, extensive or intensive. the extensive path of development includes the direction of investments to increase the scale of production for the existing technological base. in this way, the company is impressive, has a high level of technological and technical equipment, is ahead in the field of other market participants. by increasing the scale of production, the company increases its profit. this policy is a temporary factor, because if the company wants to maintain a leading position in the market, it must invest money in the search for the most efficient methods of production. competitiveness on the market is a strong incentive to choose the strategy of intensive development of enterprises. this way of development includes the formation of such an investment policy of the enterprise, in which the major part of the profit or investment is spent on the purchase of the most efficient, productive and new equipment, the use of progressive methods of management, automation and robotization of production (batkovets, 2022). in order to make decisions on the implementation of investments, it is necessary to compare the expected positive returns in the future with the actual costs of capital investments. there is no doubt about the practical importance of issues related to determining the investment attractiveness of enterprises, since economic growth and itsstabilization are impossible without investments in business entities. solving this problem ensures the viability of the enterprise as a whole. baltic journal of economic studies 37 vol. 9 no. 2, 2023 3. determination of the mechanism of formation of the financial potential management strategy company financial analysis as the main mechanism of ensuring the financial stability of the enterprise and assessing its attractiveness for potential investors is a central link in the method of determining investment attractiveness (asaul, 2008). its main purpose is to study the problems arising in the assessment of the financial attractiveness of an enterprise for an investor. in this regard, aspects of the analysis of the financial condition of the company are considered, the level of profitability, creditworthiness, efficiency and financial stability are assessed. the main problem at the moment is the lack of a holistic view of the system of qualitative and quantitative factors aimed at determining the overall investment attractiveness of the enterprise. the main factors hindering the creation of a favorable investment climate include the following: – infrastructural limitations that prevent the creation of high-tech, energy-intensive production facilities characterized by high labor productivity; – lack of regional development institutions integrated into international investment processes; – insufficient use of the current advantages of the economic and geographical position; – the low level of liquidity of fixed assets of most organizations and, as a result, the impossibility to actively use investment mechanisms, such as long-term loans; – insufficient development of the leasing market infrastructure; – asignificant predominance of the consumed portion of income over the saved one, a high indicator of the average propensity to consume; – "weakness" of the budgetary base of the regional budget (aaker, 2013). the mechanism of formation of financial potential management strategy is divided into a number of stages (analysis and selection of priorities from the general strategy of development of the enterprise in formation of financial potential management strategy; development of target guidelines), which are based on the following procedures: analysis and forecasting of the financial and economic state of the external environment, analysis of the internal environment of the enterprise, identification of strengths and weaknesses; adaptation to environmental conditions; determination of the main directions of formation, accumulation, distribution of resources and search for new sources of credit financing; formation of elements of the strategy of management of financial potential (planning and control of financial flows and resources, organizational and legal registration, selection of financial instruments, analysis and assessment of financial risks, tax planning); development and implementation of the strategy of management of financial potential within the framework of strategic plans; analysis and control of the strategy of management of financial potential; use of the results of the analysis to determine the strategic directions of development of the company. it should be noted that the specified elements of the strategy of financial potential management ultimately determine the competitiveness of any enterprise that aims to achieve a positive economic effect. the achievement of this goal should be ensured in the long term by the management system as a whole (koll, 2022). basically, the strategy of financial potential management should be defined as a system of goals and prospective actions based on the creation and implementation of financial management approaches and tools. this system is a set of plans for obtaining, accumulating and distributing financial resources. in the most general form, the definition of the financial potential management strategy consists of three components: the use of bank financing instruments, the organization of a bond loan and the organization of an additional issue of shares. each of these instruments has known advantages and disadvantages in relation to each other. it should be noted that the potential ability to use a particular type of financing is largely determined by the stage of development of the business entity. thus, in the initial stages of the company 's formation, the company is characterized by a lack of positive cash flows and, accordingly, a lack of opportunities to service debt obligations. therefore, until the opportunity to fully utilize bank loans or organize bond loans, the main form of financing is equity. at the same time, debt financing is more attractive for established enterprises because it does not dilute equity. at the same time, in a number of cases (for example, business diversification, creation of vertically integrated structures) it may be necessary to create new organizations (legal entities) within the framework of the emerging holding, including on the principles of project financing. it is in the combination of these forms that the possibilities for building an effective strategy for managing financial potential are most fully revealed. from the above set of financial instruments each company can develop its strategy of financial potential management. however, it should be taken into account that all financial market instruments are dynamic and constantly developing, therefore one of the most important tasks for business entities is timely monitoring of financial market development trends and timely use of economically beneficial strategies (blank, 2004). baltic journal of economic studies 38 vol. 9 no. 2, 2023 both quantitative and qualitative approaches and methods should be used in developing an organization's development management strategy. the need to combine quantitative and qualitative methods creates the problem of their organic combination in the process of building a strategy. at the same time, neither quantitative (amount of profit, interest rates on loans, etc.) nor qualitative (level and criteria of financial condition, availability of collateral, its liquidity, etc.) characteristics can be omitted. in this regard, one of the main tasks of the enterprise is effective management of the process of formation, use and forecasting of the need for internal sources of financial resources. one of the internal sources of own funds formation is the net profit of the enterprise, which is a part of own funds and ensures the increase of equity and, consequently, the increase of the value of the enterprise. the most justifiable criterion of the absolute effectiveness of the management of the financial potential of corporate education should be considered the indicator of net cash income, calculated as the amount of profit remaining at the disposal of the enterprise (net profit) plus depreciation deductions based on the cash flow method. it should be noted that the content of each element of the strategy of management of financial potential depends, first of all, on the constantly changing macroeconomic situation, and, in fact, the elements of the strategy of management of financial potential are specific directions of the general strategy of development of the enterprise. it is generally accepted that the ultimate financial goal of a company is to increase its market value for the benefit of its shareholders. the cost and investment attractiveness is determined by the financial condition of the organization, which in turn is largely a consequence of the chosen market strategy, the efficiency of the use of material and labor resources, production capacities (operational activity), as well as their expansion (investment activity). the internal tasks of financial management consist in providing financial resources for the company 's operating and investment activities, as well as forecasting its future needs and financial position. thus, an effective internal financial policy directly determines the growth of the company 's value (drucker, 1995). the financial potential not only determines the ability of the enterprise to attract and rationally use internal and external financial resources, but also realizes the most important function – reproduction of the production capacity of the enterprise. therefore, increasing the company 's income expands the internal sources of investment, increases the reliability of investment and attractiveness of the company for external investors. as the company 's production capacity grows, its financial potential increases, which leads to an increase in the competitiveness of the company as a whole. that is, the financial potential is characterized by the financial independence of the enterprise, its financial stability and creditworthiness (liquidity). managing the financial potential of an enterprise requires deep systemic knowledge in the theory and practice of making effective management decisions. this statement is based on a systemic view of the management of the financial potential of an enterprise, that is, on its inherent signs of systemicity (braun, starkbaum, 2022). it is known that the study of complex systems includes their division into separate components. the elements of the managed system are: management of own financial resources, management of borrowed financial resources, management of involved financial resources. thus, the management of the financial potential of the enterprise is a purposeful managerial influence on financial resources with the purpose of improving the financial indicators of functioning, achieving the financial well-being of the enterprise and increasing the level of its financial potential, aimed at updating and development of production on an innovative basis for the production of competitive products. 4. conclusions and implications the main point of business management is the timely adoption of all necessary management decisions. the discrepancy between the decisions taken and the needs of the enterprise may lead to disastrous consequences, including its liquidation. the key point of the general concept of the effectiveness of the functioning and development of the enterprise is the development of an investment attractiveness strategy, which is necessary as a logical conclusion of any deliberate action. the strategy of investment attractiveness of the enterprise is based on a comprehensive approach to the assessment of the economic condition of the enterprise, its position in the market, the use and adoption of operational management decisions in the current and future work of the enterprise. in the conditions of the economic crisis, special attention should be paid to the management of investment potential to increase the investment attractiveness of the company as the most complex and responsible link in the whole management system. investment attractiveness is a universal indicator that depends on the method and criteria of its evaluation. due to the lack of a unified methodology, it is not possible to obtain an unambiguous result. however, there is no doubt that this indicator is important for potential investors. therefore, due to the lack of own resources, baltic journal of economic studies 39 vol. 9 no. 2, 2023 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(2021). formation of an organizational and economic mechanism for the development of innovative entrepreneurship in the region. the economic forum, vol. 1 (1), pp. 93–106. tymoshchuk, m., shyshkovskyi, s., & yavorska, n. (2019). financial indicators of socio-economic interaction of stakeholders. socio-economic relations in the digital society, vol. 34, pp. 107–114. zhakupov, y. k., berzhanova, a. m., mukhanova, g. k., baimbetova, a. b., & mamutova, k. k. (2022). the impact of entrepreneurship on the socio-economic development of regions. business strategy & development, vol. 6, pp. 13–19. doi: https://doi.org/10.1002/bsd2.219 received on: 01th of march, 2023 accepted on: 13th of april, 2023 published on: 23th of may, 2023 companies need to monitor the level of their investment attractiveness in order to attract additional investments. in order to make a decision on the implementation of investments, it is necessary to compare the expected positive income in the future with the cost of capital investments. there is no doubt about the importance of issues related to investment potential management for increasing the investment attractiveness of an enterprise, since economic growth and stabilization are impossible without investments in business entities. solving this problem ensures the viability of the enterprise as a whole. constant monitoring and adjustment of the investment attractiveness of the company allows to attract investments in the required amount, improve the efficiency of the management system, profitability of operations, as well as implement business planning and budgeting processes, control the achievement of the planned result. the development and implementation of these measures will allow investors to consider the company as an attractive investment object capable of effectively absorbing investment funds and generating the required level of income. imple mentation of the strategy and a set of measures to increase the investment attractiveness of the company will allow to accelerate the process of attracting additional resources, increase their volume and also reduce their cost. baltic journal of economic studies 113 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 v.m. koretsky institute of state and law of the national academy of sciences of ukraine, ukraine (corresponding author) e-mail: wlacademic@gmail.com orcid: https://orcid.org/0000-0002-7411-2086 2 educational and scientific maritime institute of humanities, odessa national maritime university, ukraine e-mail: 200mirel@gmail.com orcid: https://orcid.org/0000-0001-6224-632x 3 educational and scientific institute of information technologies and innovation entrepreneurship, odessa national maritime university, ukraine e-mail: andriy5555@i.ua orcid: https://orcid.org/0000-0002-7691-3012 doi: https://doi.org/10.30525/2256-0742/2023-9-1-113-123 geoeconomics as a tool of modern geostrategy volodymyr lipkan1, oksana kuznichenko2, andrii ivanov3 abstract. the scholarly article presents different analytical approaches to modern understanding and manifestation forms of geoeconomics as a tool of geostrategy. it contains a comprehensive list of conceptual tools, empirical roots, and case studies on the political-economic essence of geoeconomics. the paper’s particular contribution is its direct connection with the practice and rooting of international political economy and poorly studied determination of geoeconomics with geostrategy in the evolving structure of the global world order and new vectors of geoeconomic dynamics of ukraine. based on the evolutionary method, the author has developed a matrix of approaches to understanding geoeconomics, demonstrated its progress, conducted a critical analysis of each of them, and put forward an original version and model of interpreting the relevant dynamic phenomenon following the strategic national interests of ukraine. the myth of static assumptions about the existence of geoeconomics as a self-sufficient system that should have replaced geopolitics was debunked. using the case study method, the key factors facilitating the geoeconomic expansion of china, the usa, and russia are highlighted. emphasis is placed on the role of other states in the formation of geoeconomics, and the issue of strategic autonomy is elucidated. the author justifies the genuine interest in geoeconomics as a component of geostrategy, demonstrates its determination, and specifies the main modern tools of geoeconomics. the impact of the military discourse on geoeconomics is proven, and the vectors of geoeconomic de-sovereignization of some countries in the context of economic globalization, geosecurity expansion, and the growing role of services in the gdp structure. the importance of studying the role of artificial intelligence, android robots and humanoids in gdp formation was separately emphasized; options of their influence on the world’s geoeconomics and the development of humanity as a whole amidst neo-economics are modeled. key words: geoeconomics, geostrategy of modern ukrainian state, neoliberal globalization, geoeconomic security, neoclassical economics, economic ideology, economic transformations, strategic autonomy, geoeconomic development, post-neoliberal. jel classification: f11, p10 1. introduction the post-war development of the ukrainian state, along with the transformational post-russia processes and the dicentric processes of building strategic autonomies, will increasingly face the expressed forms of its further rejection as an independent and selfsufficient economic entity, an attempt to manipulate the loans granted during the war to generate supervised algorithms for managing and structuring gdp following the requirements of the world econo mic forum and other influential geoeconomic actors. there is a need to apply interdisciplinary methodology, in particular, national security studies and the theory of geostrategy, econometrics and mathematical statistics in their organic synthesis. the proposed approach makes it possible to reach a high-level abstraction through macroeconomic extrapolation models. baltic journal of economic studies 114 vol. 9 no. 1, 2023 since state policy is a systemic phenomenon, there is a necessity to study emergent transformation processes in macroeconomics. thus, the author puts forward a hypothesis about the evolution of geoeconomics and shapes a system of arguments about relevance to develop and study its highest form – neoclassical economics, in the context of implementing the geostrategy of the modern ukrainian state. the complex issues raised in the article are covered for the first time in this interpretation that excludes a practical need to cite and mention the research papers of those authors who have not dealt with the topic concerned and have not associated the formation of neoclassical economics with geostrategy. the purpose of the article is to present an evolutionary macroeconomic model of the transformation of geoeconomics as a component of the modern ukrainian state’s geostrategy. among publications that have become classical and fundamental, it is essential to highlight the works of o. bilorus, r . weid, a. halchinskyi, b. gosling, v. derhachev, c. jean, r . korzienivits, e. kochetov, e. lyutvak, d. martin, j.-l. mezger, t. moran, p. savon, and j. firebug. the contributions of modern foreign researchers of the geoeconomics phenomenon are also worth noticing, as follows: milan babić, adam d. dixon, imogen t. liu, paolo balmas, sabine dörry, clara weinhardt, karsten mau, jens hillebrand pohl, jaša veselinovič, scott lavery, sean mcdaniel, davide schmid, henrique choer moraes, mikael wigell (milan babi´c, adam d. dixon, imogen t. liu, 2022), and joachim klement ( joachim klement, 2021). the new global economic and political reality necessitates elaborating an updated toolkit and a paradigm for studying transformation processes, incl. in macroeconomics. over the years of independence, almost all the most significant from the standpoint of macroeconomics economic phenomena have occurred in ukraine, even such rare ones as hyperinflation and demonetization of gdp. as a result, the appeal to the economic content of geostrategy and strategic issues of geoeconomics is relevant in the context concerned. the logical element of any research is to define the key concept with the subsequent presentation of one’s vision following the research subject. therefore, the author further considers the concept of geoeconomics amidst designing the geostrategy of the modern ukrainian state. 2. the concept of geoeconomics the merriam-webster dictionary notes the term was first used in 1981: it was then understood as a combination of economic and geographical factors relating to international trade (merriam webster.com dictionary). however, most scientific sources indicate that the term "geoeconomics" has been in routine use since 1990 and is associated with the name of edward luttwak (1990). while extrapolating the dominant paradigmatic formula for defining the concept of geopolitics, he also applied it to geoeconomics, which he interpreted as the science of spatial, temporal, and political aspects of the economy and resources (luttwak, 1999). a somewhat transformed interpretation, but with the preservation of key terms, was provided by the azerbaijani economist vusal gasimli, who defines geoeconomics as the study of the interrelations between economics, geography, and political science in an "infinite cone" rising from the center of the earth to space (including the economic analysis of planetary resources) (gasimli, 2015). moreover, such a definition is actually duplicated in the merriamwebster dictionary: "1. a combination of economic and geographical factors relating to international trade; 2. a government policy guided by geo economics" (merriam-webster.com dictionary). even now, there is no a robust definition of the concept and consensus paradigm of geoeconomics; however, professional studies refer to the american strategist edward luttwak and the french economist and political scientist pascal lorot as those who first attempted to give scientific credence to the need to distinguish between geoeconomics and geopolitics. moreover, later studies also highlight the lack of a unified position on the interpretation of geoeconomics (marianne schneider-petsinger geoeconomics explained). in general, to understand the complex context, the author focuses not so much on the numerical definitions of many researchers as on the outcome of their analysis, which is presented in the form of an original matrix of approaches to the definition of geoeconomics based on the evolutionary method. 3. evolutionary matrix of approaches to the definition of geoeconomics. geoeconomics – an economic tool for achieving geopolitical goals the relevant definition conveys the first stage of the distinguishment between geoeconomics and geopolitics. thus, it reflects the relationship between geoeconomics and geopolitics and demonstrates the geopolitical angle subordinate to geoeconomics. such a definition aims, on the one hand, to demonstrate the availability of an individual phenomenon "geoeconomics", and on the other hand, to show its correlation and determination baltic journal of economic studies 115 vol. 9 no. 1, 2023 by geopolitics, which stipulates and admits the existence of geoeconomics as its own toolkit. taking into account the subordination of geoeconomics to geopolitics, it is proposed to apply a three-level approach to understanding and studying geoeconomics: 1) the level of policy, as in international political economy; 2) the integration layer, as in economic geography and industrial organization; 3) the level of transactions, as in financial economics. furthermore, analysis levels in geoeconomics (policy, integration, and transactions) also relate to national policy, which can vary from industry specific tax breaks to anti-money laundering laws or sanctions restricting some cross-border financial transactions (singer, j. david, october 1961). in their work " war by other means: geoeconomics and statecraft", robert d. blackwill & jennifer harris noted that geoeconomics is the use of economic instruments to promote and defend national interests, and to produce beneficial geopolitical results; and the effects of another nation’s economic actions on a country’s geopolitical goals (blackwill, harris, 2016). the upside of the mentioned approach is that geoeconomics has received a boost for its independent development and has begun to be considered separately from geopolitics, at least in conceptual terms. at the same time, geopolitics retained its dominant importance in the theoretical aspect and set the context for its implementation via geopolitical goals: in practice, it changed a particular vector of designation, not activities. therefore, within geoeconomics of the initial stage, geoeconomic goals, interests, priorities, strategies, and security did not become the objects of individual studies and therefore did not acquire adequate content and operationalization in the macroeconomics of countries and regions and the geoeconomic landscape. according to e. luttwak, there were some attempts to grasp the diminishing importance of military force, which is inferior to geo-economic power. over time, the approach was annihilated and disavowed when, first, on august 8, 2008, the world did not react to russia’s aggressive war against georgia – the annexation of its territory, and then the hybrid war launched by russia in 2014 against the ukrainian state by annexing the ukrainian crimea and parts of the ukrainian territory in the east, and later the barbarous war launched on february 24, 2022. president clinton’s initial assumption was that geoeconomics had replaced geopolitics (robert d. kaplan, 2022). and another us president, richard nixon, stated that "geoeconomics" had surpassed military strength and traditional geopolitics, and america had to hammer out its swords not on coulters but microchips (nixon, january 15, 1992). consequently, the above myths were debunked. 4. geoeconomics – a self-sufficient science with its research subject and implementation tools, including a geopolitical one according to such an approach, geoeconomics is opposed to geopolitics. subsequently, it became clear that the achievement of economic goals is impossible only via economic instruments as in the first approach. there was a sound understanding that the achievement of economic goals, geoeconomic dominance, and expansion is possible using the geopolitical potential of the state, international entities, and transnational corporations. therefore, a characteristic feature of the evolution of the understanding of geoeconomics at the stage concerned was the awareness of the need to apply geopolitical tools to achieve and implement geoeconomic interests. our standpoint resonates with adam dixon’s opinion who argues that the manifold ways in which globalized networks of corporate power and control can be weaponized, manipulated, and instrumen talized, challenges and at the same time complements geopolitics (milan babic, adam dixon). the variability of goals and means of geoeconomics is characteristic of this stage, but awareness of one fact becomes decisive: the achievement of geoeconomic results and the satisfaction of geoeconomic interests outside the context of geopolitical tools is impossible. 5. clear differentiation between geopolitics and geoeconomics at the conceptual level are often analyzed in the aggregate, and the latter is considered as a subtype of the former the article proves the feasibility of their differentiation at the conceptual level. comparing traditional geopolitics and geoeconomics, the author assumes that they have entirely different qualities and effects for their goals both at the national and international levels. it is important that they provide for the formation of alliances and the fact whether they are driven by the dynamics of balancing, dominance or poor balancing. european strategists made the mistake of wishful thinking when transmitting and spreading narratives about "changes in russia’s geostrategy towards europe" (mikael wigell, antto vihma). history quite often shows that the non-imperial strategy of russia remained the same, except for deceiving some european states, bribery, blackmail, industrial spying, maintaining usual intelligence subversive and intrusive activities to cause discomfort, nuisances, baltic journal of economic studies 116 vol. 9 no. 1, 2023 elements of controlled chaos in the european community, unity, and integrity. moreover, there were chaos infiltration and zero inclusion, as well as steady-going conditions for geoeconomic energy dependence on russian energy resources. in fact, russian geoeconomics pursued "the strategy of fight fire with fire", splitting the eu into different areas, not only economic ones. as geoeconomics was cut off from geopolitics and most scientists dreamily considered it dogmatics, the eu turned to lose strategic sustainability and balance. in addition, economic problems caused varied attitude and a lack of unified european politics regarding russia, which at the beginning of the barbarous war was identified as inconsistent and non-systemic, incapable of reaching agreed complex consensuses in geoeconomics. however, mikael wigell and antto vihma believe that the 2014–15 drives for a more coordinated european approach were produced by changes in the focuses of russia’s geostrategy. the resort of russia to geopolitics began to act as centripetal power resulting in the enhancement of eu unity. due to sensitivity to threat, centripetal trends are evident in economic sanctions, the growing leadership of germany in external eu policy, and discussions about an energy union. the analysis requires delving into the way a strategic choice – geopolitics vs geoeconomics – influences the consistency of rogue states and models of alliances (mikael wigell, antto vihma). however, we do not share the ideas of the mentioned authors as the leadership of germany did not affect the prevention of the war and merkel’s anti-ukrainian policy, attempts to put into effect nord stream, further exposure of coup d'état attempts made under scholz’s rule, and adverse conspiracy options for achieving the mentioned goal, allow claiming the following: during merkel’s term, germany lost the sense of strategic danger and sought to develop economic relations with russia pursuing financial benefits by relying on the illusions of geoeconomics. at the same time, russia had ulterior plans to sow discord within europe, deprive it of unity, and make it geopolitically dependent. it is also interesting to note that analytics of european countries differ in interpreting the geoeconomic expansion of russia and china. if the former was beyond dispute and its performance was identified as a change "in the geostrategy towards europe", the actions of china in the field of high technologies, access to investments in high-tech production, or the implementation of 5g networks were subject to security-centrism and hence relations between geoeconomics objectives and geostrategy were established and identified. thus, the author concludes: a lack of universal science-based criteria for identifying geoeconomics led to european commodity dependence on russia and contributed to delaying a solution on military aid to the ukrainian state on the first days of the war. 6. the term "geoeconomics" acts as a collective and generalizing concept and is used to describe a wide range of concepts in the most general sense, it is applied as a synonym for international economic relations with an emphasis on the global structure of such relations. in general, supporters of the relevant position take a dim view of the very term and the separation of geoeconomics, as well as geopolitics and other pseudoscientific theories of historical and geographical determinism based on critical geopolitics. such a position is shared by milan babic who stated that geoeconomics, as a relatively new concept, has not yet been fully integrated into the broader research canon of international relations. geoeconomics is theoretically close to an integrated approach to international relations stressing cross-border economic links and global networks as focal points for understanding international politics. a contribution to the topic concerned could analyze how geoeconomics can be integrated as a broader research program in international relations, how different theoretical implications complement/diverge from international relations theory, or how geoeconomics challenges elucidate the assumptions of available studies on international relations (milan babic, adam dixon). 7. geoeconomics – an organic and combined synthesis of international economics and geostrategy it is the standpoint that we present in this scientific article, given the author’s understanding of both geostrategy which is significantly and drastically different from geopolitics, and the methodology of strategic communications and the theory of strategic transformations (developed by v. lipkan) amidst the modern content of the geostrategic landscape. other theories convey geoeconomics in various manners and can be subject to political and economic research: – weaponized interdependence: farrell & newman, 2019); – "economic statecraft" (aggarwal & reddie, 2021); – "geoeconomic competition" (gertz & evers, 2020); – spatial flexibility (moisio, 2019); – "geopoliticization" of trade and investment (meunier & nicolaidis, 2019). however, the approaches of one of the founders of geoeconomics e. luttwak, who argued that it is an admixture of the methods of commerce to the logic of the conflict (luttwak, 1990), are already outdated baltic journal of economic studies 117 vol. 9 no. 1, 2023 and do not correspond to its modern content, elements and forms of manifestation. the statement by babych is somewhat irrelevant: "geoeconomic strategy aims rather at market control and profit extraction than at projection of state power abroad" (babi´c, 2021). by referring to the case of china, we further demonstrate how the toolkit of geoeconomics embodied in geostrategy determines and shapes soft conditions for establishing state power, which is not limited only to the economic sector. russia’s barbarous war against the ukrainian state evidenced the worthlessness of the postulates of neoclassical economics regarding the "logic of commerce", which supposedly separates market dynamics from political power. for russia, there is no logic between goals and consequences, even at the current stage (beginning of 2023): capital outflow, a drop in the gdp, a lack of foreign investment, economic sanctions, a ban on access to high technologies, etc. – this defies the "logic of commerce" but fully echoes neo-imperialist ideology, as follows: – politics has always been and remains above the economy; – ideas have always prevailed over expediency and pragmatism; – political illusions of the ruling class are always above national interests. as a result, within geoeconomics, it is necessary to discuss not only conflicts and antagonisms (that is, struggle and dominance, which are natural postulates of geopolitics) but primarily competition and cooperation. the vector of modern political and economic studies by foreign researchers resonates with our vision (kanai, schindler, 2019; kolodyazhnyy, auyezov, louise, 2021). 8. modern realities and manifestations of geoeconomics the importance of analyzing the evolution of the concept of "geoeconomics" is due to its inherent transformative nature and the capacity to change its manifestation forms depending on the geo-economic landscape, geostrategic priorities, and the level of achieving strategic goals. to illustrate the manifestations of geoeconomics, we cover its specific manifestations using a case study as exemplified by the most influential countries: china, the united states, and russia. the people’s republic of china. the most striking example of the use of geoeconomics as the driver and foundation for the establishment of world domination is the policy of modern china, in particular, the political leadership of the fifth generation led by xi jinping. during the reign of the fifth generation, china began to apply economic instruments to achieve its geostrategic ambitions, influence the world community, and softly impose its technological devices and networks. china increasingly makes other countries dependent on its goods and services, and thus, it significantly influences the control and formation of individual components of the gdp structure. china is moving towards world domination systematically, gradually, and inevitably thanks to achievements in artificial intelligence, computeraided learning and various cyber capabilities used to gain control not only over the economic potential of foreign countries. according to the head of the pentagon’s military software development unit, nicolas chaillan, us cybersecurity is "kindergarten" compared to china (the pentagon's chief military programmer). therefore, geoeconomics is infused with the implementation of a proactive cybersecurity policy, which is an essential modern tool for preserving infrastructure potential. in his monograph, v.a. lipkan aptly predicted that in 2022, social and interstate tension would significantly increase due to the closure of many industrial enterprises, primarily in the motor vehicle industry (lipkan, zubko, 2022). it is driven by the fact that beijing significantly reduced export quotas for natural minerals by 40% in 2010, referring to the need to ensure "environmental safety " despite repeated claims to the wto. tensions and trade wars between the us and china are mainly the aftermaths of the us high-tech industry’s heavy reliance on rare earths from china (kashchuk). the prc’s intensification towards the militari zation of its foreign policy and the constant timing of the accession of taiwan (without constraining itself by the obligation not to use force) are effects of the awareness of the complete dependence of other countries on china, primarily in terms of highend manufacturing and the production of ultramodern weapons. thus, a clear implementation of the geoeconomic paradigm in promoting the geostrategic goals of the prc is visualized. it is worth noting that geoeconomics is an essential tool of the modern prc’s geostrategy. implementing the prc’s geoeconomic strategy by the fifth generation of leadership allows us to conclude that after 2025, even the physical capacity of other countries to manufacture new weapons becomes remote and doubtful since rare-earth minerals are the strategic raw materials for their production. in addition, china seeks to employ geoeconomic tools to address its political problems: china has repeatedly cut car imports from japan or halted exports of chinese rare earths to japan to weaken tokyo’s resolve over territory and sovereignty in the east china sea. another example is the provision of assistance to africa – china rewards those countries that vote for it in the un. baltic journal of economic studies 118 vol. 9 no. 1, 2023 it is also necessary to mention the case of the withdrawal of ukraine’s signature from the document condemning the torture of uighurs in china. the insidiousness of china in exploiting the gaps and errors, principles, and structure of the options of neoliberal globalization is well-studied in the work (liu, dixon, 2021) which elucidates the evolution of china’s global economic rise. thus, our task is not so much to state the obvious as to form vectors of how ukraine can use the above to meet its strategic national interests. in this regard, ukraine is shaping sufficient prerequisites for the proper use of the relevant situation in its favor through attracting foreign direct investment (in combination with their screening following the principles of security-centrism (lipkan, 2003)) and the placement of high-tech industry facilities on its territory with the subsequent development of both an appropriate production and industrial base and the market of high-intelligent and technological services. geostrategic discourse and geostrategy as a political-security practice allow for insight into the objective of geoeconomics and its role in constructing the united, prosperous, strong, and economically powerful ukrainian state. given the consolidation of the state role in the chinese economy, the revival of state capitalism "with chinese specifics", the growth of stateowned enterprises, and the acquisition of private corporations by the state (for example, the acquisition of the ant group in the prc in 2023) (billionaire jack ma will lose control of ant group), we conclude that china is a canonical example of the use of geoeconomic potential at the cutting edge of promoting its own geostrategy. the deep integration of global trade links, the attempts to implement the "one road one belt" project, and control via cyber-espionage over financial world markets have made geoeconomics an essential and powerful tool for satisfying the geostrategic interests of the prc. the united states of america. let’s be frank: from the standpoint of geoeconomics and political logic, it is confusing why in response to the russian annexation of crimea, the united states and other countries did not send troops to protect ukrainian territory but only imposed sanctions against russia. what was the difference between the annexation of crimea and the occupation of territory in the east of the ukrainian state and the iraqi invasion of kuwait, or the yugoslav war, when the united states, despite the nato charter, organized an international coalition and carried out armed protection of its partners? the answer lies in the author’s presentation and interpretation of geoeconomics: at the moment of russia’s invasion of ukraine, the economic toolkit of influence on russia was more profitable for the united states. the same situation is evident in 2023, when the barbarous war continues: 1) on the one hand, the united states gains economic benefits from sanctions against russia; 2) on the other hand, it has managed to drive russia out of the european energy market and, together with qatar, become the principal supplier of energy to europe; 3) in addition, it has secured orders for its military-industrial complex for many years in advance to replenish the stocks of weapons, particularly of european countries that will supply them to ukraine; 4) the number of loans that ukraine has taken from the united states also makes it strategically and economically attractive to earn prolonged profits on credit interest and other preferences that the ukrainian state will experience only over the years. the united states has also spearheaded international efforts to influence iran’s nuclear policy through sanctions. at present, we can state that the advantage of the dollar and the dominance of the united states in the international financial system mean that american sanctions have a significant impact. "just as in the war the artillery conquers territory by fire, which the infantry can then occupy, the aim here is to conquer industries of the future by achieving technological superiority (luttwak, 1999). "infantry " in e. luttwak’s analogy corresponds to commercial production, which can also be supported by the state via: 1) various forms of subsidies; 2) loan offer at interest rates lower than market ones. thus, geoeconomics creates conditions under which foreigners usually pay lower interest than local borrowers, whose taxes pay concessions received by foreigners. however, to balance the financial system, the state can make concessions for local producers, i.e., preferential loans and special tax regimes. (for example, program from the government: 5-7-9 in ukraine). at the same time, amidst the geoeconomic process, there may be situations that have not been specified in advance and the determination and production cycles of economic processes cannot be changed, which is why originally attractive conditions can be changed over time. moreover, the exit from the geoeconomic process is much more difficult than the entrance. another geoeconomic tool of influence is the screening of foreign direct investment, with the help of which and under the "pretext" of which it is possible to regulate the entry of "desired" and prevent the entry of "undesired" investments. one of the manifestations of geoeconomics is geoeconomic competition. in turn, geoeconomic competition, which is also evident in the us-china trade war, has exacerbated many questions, primarily of theoretical nature: – the war consequences go beyond the borders of these two states and affect other states and regions; baltic journal of economic studies 119 vol. 9 no. 1, 2023 – at the same time, the consequences are within a new geospatial formation: the geoeconomic landscape; – who is a geoeconomic actor, and how is it different from the international entity; – whether states are the only possible actors capable of accumulating the strategic potential and strategic power of the state and the whole society to implement the geostrategy; – whether transnational corporations can compete in this regard on a par with the state / group of states by accumulating such capacities. foreign researchers also pay attention to the need for the theoretical and empirical study of the relevant issues (milan babic, adam dixon). another actor who actively uses geoeconomics as a toolkit of geostrategy is russia. russia. russia is using its energy potential to achieve strategic goals. in 2008, it cut off gas pipelines to some parts of europe in the middle of winter amid political disputes. the kremlin provides enormous financial support to the annexed crimea. because of the barbarous war, russia is experiencing international isolation, and thus, the geoeconomic vectors are altering significantly. russia has begun to compete with iran in the world oil and gas markets, including oil sales to china, while actively cooperating in procure kamikaze drones and unmanned aerial vehicles. an interesting geoeconomic effect of russia’s strategic negligence is that it currently ties first and second place with north korea in economic dependence on china. as shown above, since geoeconomic instruments are determined by geostrategy, economic dependence on china means actual political dependence and further desovereignization of russia. therefore, the mentioned facts may explain the strategic uncertainty of china about russia’s war against ukraine. 1. failure to condemn russia produced the following benefits and advantages to the prc: – it remained a reliable partner in the procurement of energy carriers with preferential and cut prices; – led to a significant infiltration of the yuan into interstate settlements, strengthening its potential as an international currency; – made russia dependent on the chinese economic system. 2. the lack of direct support for russia created conditions under which the trade war between the united states and china did not take it up a notch, and china (its enterprises, organizations, and businesses) was not subject to sanctions. therefore, we reach an important intermediate conclusion: modern geoeconomics is a tool for establishing monopoly geoeconomic dependence and imperative geoeconomic desovereignization. the dependence of russia’s economic progress on the economic needs of china and its capacities to overcome covid and problems in the stock market allows for confirming the natural integration of economic systems, quite possibly through the partial acquisition of some sectors of the economy. the practical conclusion from the above – regarding the implementation of geoeconomics within the geostrategy by the three countries – is the formation of the author’s list of predominant geoeconomic instruments. 9. predominant geoeconomic tools thus, the predominant geoeconomic tools at this stage of the development of socio-economic formation, given the synthesis of political and economic theory and analysis of geoeconomic practice, comprise the following: – strategic policy for integration into the global economy to their strategic national interests’ advantage; – trade policy; – global value chains; – supply chains; – investment policy, including state one; – economic and financial sanctions; – energy embargo (babić, dixon, liu, 2022); – financial and monetary policy; – objects of strategic, including financial infrastructure; – energy and raw materials; – different forms of assistance; – the performance of transnational elites, networks, forums, influence agents, their infiltration into the public administration of countries whose economic potential is of geoeconomic interest; – internationalization of own monetary unit; – introduction of blockchain technologies into the economy; – introduction of artificial intelligence and humanoid robots; – introduction of the national digital currency; – cybernetic means. according to robert d blackwill and jennifer harris, while some function in the same way as in the past (assistance), others are new (cyber) or operate in a different environment (energy) (blackwill, robert d.; harris, jennifer, 2016). 10. from geoeconomics to neoeconomics of the ukrainian state on the one hand, february 24, 2022, was the commencement of the practical realization of the ukrainian state’s geostrategy and, on the other hand, of the european civilizational breakdown, primarily regarding universal values and the economic price of political processes. baltic journal of economic studies 120 vol. 9 no. 1, 2023 the war is transforming the ukrainian nation, but the main thing is the transformation of the state apparatus and strategic architects, which contribute to epoch-making macroeconomic systemic changes in the geostrategic landscape. scientists are responsible for a future model of economic strategy and a model of neoclassical economics the ukrainian state will be able to implement amidst geostrategy. after all, it affects ukraine’s position: on the forefront and vanguard of world economic and geostrategic changes, or in the concert hall – as a contemplator and passive participant and performer of global agendas, reboots, decisions of the wef, who, etc. neoclassical economics is defined as a system of strategic infrastructure objects driven by the complex effect of economic factors and the corresponding state infrastructure policy upon which the value of tangible objects prevails not so much as the ability to provide vital services and perform relevant functions. neoclassical economics is defined as the economy of knowledge, the application of the latest information technologies, new business processes, and the introduction of a centralized national cryptocurrency, trade bots, and artificial intelligence. hence, the decisive factor is the enhancement of the role of providing services together with a decrease in the role of tangible assets. as a result, the structure of ukraine’s gdp changed noticeably from 2000 to 2020. if in 2000, services accounted for only 29%, in 2020, the level increased to 70%, almost as in japan (71%). it means that ukraine is ready to actively participate in the formation of a new neo-economic order since creativity and the introduction of new business processes will manage to ensure leadership and competitiveness. the outstanding feature of neoclassical economics is the development of not only intellectual capital but also artificial intelligence and the metaverse, which significantly expand the classical ideas about production factors, which are presented later. for example, in 2022 mark zuckerberg due to the untenable development of the metaverse project lost more than $71 billion, which is the largest loss of wealth among all billionaires whose financial status is tracked by bloomberg. zuckerberg’s powerful fall is explained exclusively by market factors and make us recall once again the transformation of his company into a metaverse (played in the meta universe: mark zuckerberg lost 70 billion dollars). therefore, the generation of abnormal profits and losses is not associated with the classical factors of production: 1) labor (purposeful activity of people); 2) land (natural resources); 3) capital (means of production). at the present stage, modern authors often consider entrepreneurship to be the fourth factor of production. production factors also comprise science, information, human capital, etc. in our opinion, a change in the concept of "labor" is main and key. the concept takes a new meaning within neoclassical economics because it should refer to the purposeful labor of people, humanoid robots, bots, artificial intelligence, and neural networks. the classical factor of production (human labor) is currently supplemented in augmented reality within the metaverse, as well as the functioning of trade bots capable of performing up to 200 operations per second and the performance of artificial intelligence. for example, in hong kong, tang yu, the ai-driven virtual robot humanoid, successfully works as ceo of netdragon websoft holdings ltd (developer of mobile and online games). tang yu optimizes the flow of processes and increases the quality of work tasks and the speed of their execution. it is also a real-time data hub and analytical tool to support rational decision-making in day-to-day operations, contributing to more effective risk management systems (ai-powered 'boss', staff getting along thanks to hk-listed enterprise). thus, robots will also be able to work and participate in capital gains and provide services. the introduction of artificial intelligence, trade bots, blockchain – these factors in the near future will amplify economic theories. at the same time, the development of neo-economy principles, provided that robots are self-sufficient, will be less dependent on a common logical and pragmatic geostrategy but will be guided by original algorithms and criteria of economic benefit and feasibility. 11. conclusions odiousness and metamorphoses of geoeconomic entities, which use diverse solutions under the guise of "strategies" as a smear, bring the world closer to sad destructive and anti-humanistic solutions devoid of the implementation of strategic national values and interests and the preservation of national identity. subsequent imitation of geopolitics in geoeconomics will lead to the throwback of its role and status, as shown above, in presenting the evolutionary matrix of approaches to understanding the concept of geoeconomics. that is, geoeconomics will again turn into a servant of geopolitics and will become the tool of the wef, other forums, and transnational corporations treating the world community and the noosphere as their system of governance outside the context of sovereign democracy, national identity, humanism, and other universal values; and most importantly, it will exist as a conflictual and confrontation system. baltic journal of economic studies 121 vol. 9 no. 1, 2023 under such conditions, geoeconomics can suffer the same consequences as geopolitics: it will transform from the art of managing the geoeconomic landscape into craftsmanship, a blasphemous wrench and servicing the geopolitical goals of international entities: 1) instead of integration and constructive globalization, revanchism of geohistorical subjects will take place which will dominate over the economic and infrastructural potential of countries through military force and inspirational and infiltrated into the system of public administration economic mechanism; 2) instead of introducing neoclassical economics and increasing the role of services in the gdp structure, it will take other forms: banditry and raiding, takeover, barbarism, genocide, enrichment of the elect, global coercive measures determined either by climate change, diseases, the food crisis, or water and energy restrictions, decarbonization, etc. the modern distorted form of the neoclassical economy is de-infrastructurization, when in pursuing the geopolitical goal of enslaving a particular social system, the country’s infrastructure potential is deliberately and purposefully destroyed, the provision of vital services and the performance of vital functions are impossible, thereby undermining the institutional capacity of the state to remain a holistic and organized political system of civil society charged with satisfying the most important needs of citizens (lipkan, zubko, 2022); 3) geohistorical manipulations of clandestine services and conspiracy units imbued with the spirit of mercantilism under the pretext of the ideas of "good and humanism", democracy and human rights will spread and scale (lipkan, v.a. reason for humanism). one of the essential strategies for realizing the relevant policy was the concept of strategic uncertainty, under which the proclaimed and attainable goals of geoeconomics are significantly different in their nature, effects and takeaways obtained after its application. according to the geostrategic discourse introduced and scientifically grounded by the author, the strategic goal of geoeconomics is to proactively establish control over promising sectors of the future, including objects of strategic high-tech and space infrastructure, through the achievement of technological superiority via geostrategic tools given the balance of the growth principles of securitycentrism, strategic economic policy, and economi zation of strategic policy. the proposed evolutionary matrix of approaches to understanding geoeconomics led to the formulation of a theoretical justification for the continuity of neoliberal globalization and the collapse of relative hegemonic stability in the aftermath of strategic instability upon which the effective use of geoeconomics tools will be an indicator of the ability to positively transit from the level of adaptation to strategic instability (whereby changes and geostrategic landscape can be irreversible) to the growing equilibrium and strategic transformations (when circumstances remain in the fairway of the management system of strategic architects). in our opinion, it is perspective to study the issues of strategic autonomy, the relevance of which is evident against the background of the increase in china’s economic power and the strengthening of fifth generation power within the state, industrial consolidation in state ownership, as well as the militarization of international relations combined with growing political turbulence in the united states and, as a result, the weakening of its global leadership, which contributed to decentralization and instability of the geoeconomic development of the world financial system. the concept of strategic autonomy should be interpreted as a guiding principle of regional development of blocs of states, which together strengthen their synergistic potential to influence globalization processes and the implementation of their strategic national interests. amidst geoeconomics, the concept of strategic autonomy can be an additional tool for the effective activities of regional international entities as full-fledged and self-sufficient geoeconomic actors. the logic of strategic choice includes not only the issues of military, security, cyber, and other nature but primarily of geoeconomic one. therefore, in understanding the essence of geoeconomics, it is crucial to find out its causes and conditions, other determinants, key actors, and consequences in the context of the implementation of the modern ukrainian state’s geostrategy upon permanent variability of the global economic order. geostrategic discourse makes it possible to deprive macroeconomics transformations of tactical nature. thus, there is maneuvering between threats and the resource potential for protection against them due to the implementation of reactive policies, including economic ones. such tactics lie in saving available advantages and privileges, preserving a certain status without sweeping qualitative structural macroeconomic changes. geostrategy inspires and fills the very geoeconomics with strategic content. baltic journal of economic studies 122 vol. 9 no. 1, 2023 references: aggarwal, v.k., & reddie, a.w. 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"the level-of-analysis problem in international relations". world politics. cambridge university press, 14 (1): 77–92. the pentagon's chief military programmer: the us lost the ai war to china. available at: https://root-nation.com/ ua/news-ua/it-news-ua/ua-usa-china-ai/ received on: 14th of january, 2023 accepted on: 26th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 6 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-6-12 the influence of internally displaced persons on the social and economic development of regions in ukraine inna arakelova1 donetsk state university of management, ukraine abstract. in terms of the issues aggravation concerning internally displaced persons and the disproportions in the social and economic development of regions as a result of the antiterrorist operation in ukraine, an analysis of social and economic transformations in regional development under the migration processes influence and the search for their overcoming mechanisms becomes relevant. the purpose of the article is to analyse the impact of internally displaced persons flows on the social and economic development of regions in order to improve the regional development mechanisms in ukraine. the research methodology includes a set of scientific research methods that provide a systematic approach to investigating the impact of internally displaced persons on the social and economic development of ukrainian regions, theoretical approaches to state regulation of internal migration flows in conditions of decentralization of power and reform of public administration in the country. in the course of investigations, the following methods are used: statistical analysis and synthesis while determining the indicators of the idps burden on the regional social and economic systems of ukraine; analysis while studying the main problems of internally displaced persons and their directions; logical synthesis and synthesis while drawing conclusions. the information base for the study consists of the legislative acts of the verkhovna rada of ukraine, the decree of the cabinet of ministers of ukraine, statistical and reporting information of the ministry of social policy of ukraine, development of the un agency for refugees, the un reliefweb specialized service for the coordination of humanitarian affairs, inter-agency standing committee, proman, ngo “labor and health social initiatives”, ukrainian helsinki human rights union, research results of domestic and foreign scientists. results. the article deals with the issues of effective reforming of regional development mechanisms related to solving the internally displaced persons’ issues and their impact on social and economic processes in the regions. the internally displaced persons’ influence analysis on the regional social and economic systems of ukraine was conducted. the analysis allowed determining the rating of five regions with a significant load of idps and identifying the social and economic system in the region and the acutest elements. practical implications. the peculiarities of internally displaced persons’ migratory flows by regions and their impact analysis on the social and economic development of regions and ukraine as a whole are to be investigated. value/originality. the ways of positive social and economic dynamics of regional development enhancement due to the programs and regional development strategies correction, taking into account the resource potential of the idps in some areas, are proposed. key words: internally displaced persons in ukraine, social and economic development of regions, regional development strategy, internal migration. jel classification: r23, o15, r28, r12, l50 corresponding author: 1 faculty of economics, donetsk state university of management. e-mail: iarakelova@gmail.com https://orcid.org/0000-0001-9582-793x 1. introduction the current changes in the social and economic development of individual regions and the country as a whole since 2014 were influenced by the massive internal migration of the population within the country. as a result of the armed conflict in ukraine, about 4% of ukraine’s population is in the status of “internally displaced persons” (idps) and has migrated to other regions of the country. on the basis thereof, there was an aggravation of problems in the social and economic spheres of the regions that added to the imbalances growth in regional development, especially in the eastern regions of ukraine (donetsk, luhansk, dnipropetrovsk, zaporizhzhia, kharkiv regions). a particular importance is paid to the following negative phenomena of regional development: the destruction of housing stock, social infrastructure and life support systems; the loss of real baltic journal of economic studies 7 vol. 3, no. 5, 2017 and other property by population, the complication with providing the population of the eastern regions with the necessary utilities, medical care, social and educational services; economic decline and rising unemployment due to the enterprises closure, the breakdown of economic ties; the breakdown of the financial, banking, transport infrastructure and communications and communications systems; low level of external and internal demand owing to inhibition of economic growth; decrease in the of purchasing power level of the population as a result of reduction of real incomes; lower quality of life; the population growth in the territorial communities of the eastern regions of ukraine in connection with internal displacement; a sharp environment deterioration, complication of the environmental situation in the eastern regions; ineffective information policy (yedynyj veb-portal orhaniv vykonavchoi vlady «uriadovyj portal», 2017). issues of idps adaptation in the conditions of new cities of residence, their integration into the region’s social life and determination of the region’s possibilities regarding the use of the idps potential for further development are still urgent ones. the process of regional development and implementation of the regional development strategies of individual regions became complicated due to the difficult financial and economic situation, and the priority task of the regional policy was the creation of an effective and operative system of idps social protection and their immediate problems solution. therefore, the issue of adherence to the idps principles in ukraine as a whole and in certain regions, the definition of the idps problems and ways of their solution, as well as the analysis of the idps flows’ impact on the regional development of ukraine in the process of reform, is relevant. the main difficulties of the state and regional policies were researched by the ukrainian scientists, national strategic planning institute scholars (vlasiuk, 2016; horbulin, vlasiuk, libanovа, liashenko, 2015; chechel, khlobystov, orlova, 2017; novikova, 2017), who identified the peculiarities and dynamics of the regions’ development, development factors of socioeconomic processes in the regions under the conditions of reform, investigated the risks and resource loss of the occupied territories potential, highlighted the idps social and economic problems. individual scholars (ryndzak, 2017; yevdokymov, shymanska, 2017; nahorniak, 2016; dustmann, vasiljeva, damm, 2016; betts, bloom, kaplan, omata, 2014) researched the international experience of internal migration of the population, identified the typical idps problems and certain mechanisms of the idps right execution and state support in various countries. further development is needed for identifying the risks from internally displaced people flows for regions’ socio-economic development, for adjusting the state strategic programs of regional development under the reform conditions, for further idps integration to the social life of the region, and for the formation of effective state mechanisms for solving the idps problems in ukraine. the presented unresolved difficulties while implementing the modern state regional policy determine the purpose of the study. 2. the social and economic development of the ukrainian regions according to the various indicators levels of socioeconomic development, ukraine lags far behind most european countries and during 2015–2016 the situation underwent significant changes. the entire social and economic sphere of ukraine is in the process of reforming in the conditions of european integration processes. priorities for government decentralization and public administration reform are defined in the main valid documents of a strategic nature, i.e. the strategy for sustainable development “ukraine 2020”, approved by the decree of the president of ukraine on january 12th, 2015, and the state strategy for regional development for the period up to 2020, approved by the cabinet of ministers of ukraine dated august 6th, 2014. the conceptual foundations of the reform have been established by the concept of reform of local self-government and territorial organization of power of ukraine (approved by the decree of the cabinet of ministers of ukraine dated april 1st, 2014). the regional development issues, in terms of the proper responses absence, will grow into threats to regional stability. currently, the critical risks for ukraine’s regional development are the inability to develop own potential at the expense of existing tools and sources of resources, the problem of full-fledged attraction of necessary resources, the destruction of economic ties within the country, the change of resource and migration flows that affect the effectiveness of the regional strategy and state social development implementation (vlasiuk, 2016; horbulin, vlasiuk, libanovа, liashenko, 2015). the presence of regional stark comparison asymmetries in the regions’ development in ukraine (different quality of economic and social development planning at the regional level, different levels of urbanization, different levels of income per capita, different levels of agricultural land use efficiency, different state of human development indicators) was negatively affected by massive internal population migration in ukraine since 2014. the social and economic development of the ukrainian regions in 2015  – early 2016 showed mixed dynamics. the beginning of 2016 was characterized by more positive tendencies in comparison with 2015. one could observe the gradual restoration of certain development indicators or slowdown of their rates, which testified to the regions stabilization tendencies. positive baltic journal of economic studies 8 vol. 3, no. 5, 2017 trends could be observed in the spheres of industrial production, construction works, capital investment, retail trade. at the same time, the situation in the regions was affected by a number of destabilizing factors (the crisis in the socio-economic sphere, declining incomes, slow steps towards entering eu markets, external aggression that had been going on for a third consecutive year), which had an impact on development indicators. that situation was conditioned by the fact that in early 2016, the socio-economic development of most regions in ukraine was characterized by a continued reduction of direct foreign investments, reduced agricultural output, risen unemployment, increased social tensions, and significant wage indebtedness. those indicators are interrelated: the general macroeconomic instability increases the unattractiveness of the investment climate and the outflow of foreign investment, which affects the level of production and the state of the labour market and payment of wages and forms negative trends in the regional economic development (vlasiuk, 2016; horbulin, vlasiuk, libanovа, liashenko, 2015). 3. basic problems of the massive internal migration of the population in ukraine the massive internal migration of the population within the country is connected with a number of burdens that arise both within the idps themselves and in society as a whole. at this stage, it is important to study the problems and needs (primary and secondary) of internally displaced persons, as well as the services provided to them, the level of satisfaction with these services, the definition of a trust credit to state and nonstate institutions, services, idps organizations, their effectiveness in providing services to these persons. solving the problem of increasing the effectiveness of the social protection of the population requires an active regional policy implementation by the state (nahorniak, 2016). based on analytical studies by the un refugee agency (united nations refugee agency, 2014), the un relief web specialized service (relief web, 2017), inter agency standing committee (the global shelter cluster, 2016), proman consortium, (ministerstvo sotsialnoi polityky ukrainy, 2017), a social survey conducted by the ngo “labor and health social initiatives” (mho «sotsialni initsiatyvy z okhorony pratsi ta zdorovia», 2015), the research of the ukrainianhelsinki human rights union (ukrainska helsinska spilka z prav liudyny, 2017), it is advisable to identify the problems regarding the work with ukrainian idps at the state level and the directions for their solution (table 1). a particular attention ought to be paid to the results of the internally displaced persons’ needs and services assessment in ukraine, which was conducted by the ngo “labor and health social initiatives”. in the study, table 1 issues of idps in ukraine issue direction for solving the issue (2015–2016) uncertainty about the legal status of the idps and the absence of a nationwide support program the law of ukraine “on guaranteeing of rights and freedoms of internally displaced persons” provided the idps registration procedure and the creation of a single information database for this population group (verkhovna rada of ukraine, 2017). it ensured idps with the right to work, including a simplified system of individuals’ registration and entities, obtaining the status of the unemployed, pensions, social insurance, social services, training, voting rights, conditions for temporary or prolonged stay, including the favourable credit facilities for construction and housing, protection against discrimination, the right to voluntarily return to places of residence. low level of meeting the idps needs the idps welfare level was generally lower than that of the local population, but the risk of idps poverty was not significantly different from that of the local population, and even for small households it was slightly lower. short-term delivery of medical, legal, administrative, psychosocial services 59.6 thousand of internally displaced families, which were raising 55.4 thousand children, received social services and assistance in 2016 (ministerstvo sotsialnoi polityky ukrainy, 2017). the resource centre, which carried out analytical work and advocacy in order to improve the legal framework, also provided direct humanitarian and counselling assistance to internally displaced persons in places of compact residence. the resource centre received support from the united nations development program in ukraine. simplified procedures and quotas for children with refugee status or additional protection for compiling ukrainian state exams (zno) were introduced. together with other international partners, the inclusion of tolerance lessons and educational materials in kindergartens and schools’ curriculum was promoted. discrimination, administrative and bureaucratic obstacles to the idps rights execution almost 18% of idps were discriminated on the territory of ukraine. only 6% voted in the local elections in 2015. in october parliamentary elections of 2014, all ids (about 500,000 as of october 2014) did not have the right to elect a member of the verkhovna rada of ukraine in the majority constituency for a new residence. in october 2015, at the local elections, 1,345,100 displaced persons did not gain their rights (mho «sotsialni initsiatyvy z okhorony pratsi ta zdorovia», 2015). in order to inform the idps of their rights and needs, various training, roundtables, meetings with representatives of the non-governmental sector supported by international donors were held. baltic journal of economic studies 9 vol. 3, no. 5, 2017 the idps identified the needs that were satisfied at a high or sufficient level: humanitarian  – 51.2%, medical  – 45.8%, residential  – 36.6%, psychological  – 32.8%, social  – 30.5%, cultural  – 28.3%, financial  – 27.2%, legal  – 20.7%, political  – 12.4% (mho «sotsialni initsiatyvy z okhorony pratsi ta zdorovia», 2015). all these needs should be realized with the support of state, regional, and local programs on idps. therefore, it is advisable to carry out an analysis of the idps in a regional context for a more detailed study of the needs and problems and the determination of the idps flows’ impact on the socio-economic development of regions. 4. analysis of the idps burden on regional socio-economic systems there are international organizations and think tanks in the world that successfully use different methods for analysing and monitoring social problems, public opinion, demographic trends, refugee and internally displaced persons (statista, pew, international organization for migration (iom)). the author carried out an analysis of the idps burden on regional socio-economic systems of ukraine according to individual indicators of iom (table 2): 1) the number of idps per 1000 population; 2) the number of idps for 1000 square km of territory; 3) the number of idps for 1 uah of gross regional product (grp) per capita. the analysis allowed determining the rating of the five regions with a significant idps burden (the largest number of internally displaced persons is registered in the donetsk, luhansk, kharkiv, zaporizhzhia regions and kyiv), and five regions with average idps load (kyiv, dnipropetrovsk, poltava, odesa, sumy regions). other regions of ukraine received an insignificant idps burden, which had a minimal impact on the socioeconomic indicators of these regions. accommodation issues the government established simplified conditions for the possibility of obtaining shelter for permanent use for war invalids, members of their families and displaced families or victims, which enabled them to be in a housing list. in march 2017, oschadbank introduced a program of idps crediting for the housing purchase within 90% of its value for up to 30 years at 20% per annum. at the same time, lending conditions do not match the idps possibilities (ministerstvo sotsialnoi polityky ukrainy, 2017). lack of employment prospects during 2016, 24.3 thousand unemployed from the idps category used the services of the state employment service (ministerstvo sotsialnoi polityky ukrainy, 2017). a comprehensive informational and explanatory work was provided to internally displaced persons regarding the conditions for registration, re-registration at the state employment service and the provision of social services in employment support. dependence on external financial assistance the work and coordination of international organizations took place on the basis of the strategic humanitarian response plan, which assessed the situation with regard to ids and the resources to be recruited. the analysis was based on a cluster approach. the obstacle to the provision of humanitarian assistance was regulatory acts, according to which charitable assistance from international organizations was taxed at a 15% tax on personal incomes. the need to abolish that rule was highlighted by most international donors who did not see the logic of taxing humanitarian aid for idps. appropriate changes were adopted by the ukrainian parliament on march 2nd, 2015. table 2 burden indicators influencing the regional social and economic systems in ukraine (based on (derzhavnyj komitet statystyky ukrainy, 2017) rating region the number of idps per 1000 population, persons region the number of idps for 1000 square km of territory, thousand people region the number of idps for 1 uah of grp per capita of individuals 1 donetsk 170.74 kyiv city 151.91 luhansk 27.01 2 luhansk 133.65 donetsk 27.33 donetsk 26.74 3 kharkiv 78.71 luhansk 11.00 kharkiv 4.60 4 zaporizhzhia 68.35 kharkiv 6.77 zaporizhzhia 2.32 5 kyiv city 43.41 zaporizhzhia 4.37 dnipropetrovsk 1.15 6 kyiv 28.19 dnipropetrovsk 2.40 odesa 0.85 7 dnipropetrovsk 23.68 kyiv 1.99 kyiv city 0.82 8 poltava 21.52 odesa 1.07 kyiv 0.82 9 odesa 14.96 poltava 1.07 kherson 0.47 10 sumy 13.85 cherkasy 0.69 poltava 0.46 baltic journal of economic studies 10 vol. 3, no. 5, 2017 the analysis made it possible to determine the impact on different socio-economic systems of the region, which was reflected in internal indicators of development, namely: • the first indicator (the number of idps per 1000 population) is a very significant burden for idps in donetsk, luhansk, and kharkiv regions, which means the difficulties with idps integration into local communities, the risk of discrimination, violence. from the economic point of view, the idps burden on the population of the region means changing the labour market situation, including in the long run, which also means the need for further analysis of idps sex-age groups and their propensity to find work; • according to the second indicator (the number of idps per 1000 sq. km of territory), the high loading of idps in kyiv, donetsk, luhansk regions, characterized by the load on the territorial systems (institutional components of the region), including the existing transport and telecommunication infrastructure, local natural resources of the region, as well as changes in the urbanization level; • according to the third indicator (the number of idps per 1 uah of gross regional product per capita) indicates the burden of idps on the economic prosperity of the region. the largest load on this indicator is in luhansk and donetsk regions. the study by the international labour organization, the un relief web specialized service for the coordination of humanitarian affairs, the analysis of the international technical assistance project “partnership for urban development” («partnerstvo dlia rozvytku mist» proekt promis, 2016), the research of yasno research & consulting group (yasno research & consulting group, 2017), the regional target programs of the regional state administrations of ukraine (luhanska oblasna derzhavna administratsiia, 2017; zaporizka oblasna derzhavna administratsiia, 2016) made it possible to conclude that the work issues solving with the idps at the regional level is for the short-term period, and the actions of regional and local authorities are aimed at meeting the immediate needs (material assistance, temporary housing, employment) and do not foresee the integration of internally displaces persons in the socio-economic life of the region. however, at the state level, adoption of new regulatory documents is taken place, new organizations are created to help and support internally displaced persons, create new jobs, retraining staff (both people seeking employment and those who provide new services), volunteer movement and charitable help are being developed. that is, in fact, the institutionalization of social rehabilitation of internally displaced persons in ukraine is carried out. internally displaced persons have a high potential, which puts forward the task of their attraction and use as a resource for the region and the country development. the economic, labour, and entrepreneurial activity of idps must be maintained, consolidated and used in the process of their integration. the positive effects of the idps integration at the regional level are manifested in the revitalization of entrepreneurial activity, the stimulation of community development through the assistance of international organizations, the growth of quality and quantity of labour potential, the strengthening of social activity at the expense of social activists among the idps, increase in revenues to the local budget at the expense of taxes and fees from idps, development of the consumer market (novikova, 2017). 5. conclusions in the context of social and economic processes reforming in ukraine, the promising direction of state policy is to strengthen the competitiveness of the regional economy, as well as the intensive development of interregional cooperation within the country. the negative consequences of the antiterrorist operation were reflected not only in the regional development indicators, where most of the idps moved but also all indicators of socially-economic development of ukraine. the regions that have undergone major social and economic changes and that faced with the resolution of the most acute problems of idps (donetsk, luhansk, kharkiv, zaporizhzhia regions, kyiv city) have not established the effective mechanisms of regional governance for solving the issues of internally displaced persons in various spheres of their social life. on the principle that the main objective of the regional policy is to minimize regional disproportions and prevent the emergence of depressed territories, its priority is to restore the positive socio-economic dynamics of regional development by adjusting programs and strategies for regional development taking into account the idps resource potential in the following areas: • activation of idps economic involvement in regional development (systematization of data collection on needs, idps qualifications with further employment monitoring; quality retraining programs provision for idps; extension of the benefits list for employers hiring idps); • intensification of cooperation with international donors (targeted assistance to cover urgent needs, financial assistance for the deployment of infrastructure projects); • strengthening the human capital of the region on the basis of social dialogue and constructive interaction of authorities, public organizations, and idps, strengthening the social ties and communications, overcoming the social and cultural contradictions; • provision of social assistance to idps on the basis of differentiation, for the provision of assistance depending on the health state, welfare level and social status of idps; baltic journal of economic studies 11 vol. 3, no. 5, 2017 • the integration of the idps into the decentralization reform implementation aimed at strengthening the institutional capacity of the regions, the formation and introduction of new mechanisms for stimulating regional and local development, budget decentralization, and the formation of capable territorial communities; • assistance in solving idps housing problems in the long run on the basis of concessional mortgage lending for internally displaced persons. references: yedynyj veb-portal orhaniv 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http://www.zoda.gov.ua/news/35334/zvit-pro-stan-vikonannyaplanu-roboti-na-2016-2017-roki-z-vikonannya-zavdan-derzhavnoji-strategiji-regionalnogo-rozvitku-na-perioddo-2020-roku-v-zaporizkiy-oblasti-za-pidsumkami-2016-roku.html (accessed 27 november 2017). baltic journal of economic studies 110 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: alinadenysova99@gmail.com orcid: https://orcid.org/0000-0001-5551-9297 2 odessa state university of internal affairs, ukraine e-mail: pavlutinyuriy@gmail.com orcid: https://orcid.org/0000-0003-3267-1389 3 odessa state university of internal affairs, ukraine e-mail: defender_odzal@ukr.net orcid: https://orcid.org/0000-0002-0443-7168 doi: https://doi.org/10.30525/2256-0742/2023-9-2-110-117 overcoming corruption risks in the activities of law enforcement agencies in the context of economic integration alina denysova1, yurii pavliutin2, oleksandr dubenko3 abstract. the subject of the study is the conceptual, theoretical, empirical and methodological foundations of overcoming corruption risks in the activities of law enforcement agencies in the conditions of economic integration. methodology. general and specific methods of knowledge were used in the research process. the dialectical method was used to study the nature of corruption at the legal and economic levels of its manifestation. the analysis created the conditions for a multifaceted study of all the characteristic features of corruption, corruption risk and corruption risk management in the context of economic integration. the synthesis created the conditions for generalising the characteristics of the above categories in the legal and economic fields. the formal legal method allowed to correctly interpret the content of normative legal acts that determine the general, special and local legal regime of corruption risk management in the activities of law enforcement agencies in the conditions of economic integration. the purpose of the article is to identify the economic and legal foundations of corruption as a socio-economic and legal phenomenon, as well as corruption risks and their management in the activities of law enforcement agencies, at a theoretical and empirical level. the results of the study showed that measures to overcome corruption risks in the activities of law enforcement agencies are components of the process of their management, which have the appropriate differentiation, organisational, legal and socio-economic basis. conclusion. corruption as a social, economic and legal phenomenon has a number of causes, including political, economic, legal, organisational and sociopsychological. corruption causes corresponding negative phenomena in the development of the economy both at the national and global, international level. taking into account the position of international and ukrainian legislation, the study of the nature of the risk of corruption was conducted, as a result of which the categories of assessment and management of the risk of corruption were distinguished in favour of the latter. the positive results of improving the legal regulation of corruption risk management were noted. based on the results of the study of the content of corruption risks and the process of their management, proposals for amendments to the law of ukraine "on prevention of corruption" were made. it was concluded that the phenomenon of overcoming corruption risks in law enforcement bodies represents a system of appropriate measures, which can be divided into the following groups: 1) general; 2) special; 3) local. general measures are defined within the framework of the general provisions of the current international and domestic legislation, which applies to all subjects in the field of anti-corruption legal regulation, in particular to officials of state authorities. special ones reflect the specifics of such measures within the limits of the respective law enforcement agency, which is reflected in the content of the anti-corruption programme for the respective period. local ones appear within the framework of the relevant law enforcement body (police), which is mediated by the anti-corruption programme of this particular body. key words: corruption, corruption risks, overcoming corruption risks, law enforcement agencies, anti-corruption program, anti-corruption legislation. jel classification: d73, f52, h56, k42 baltic journal of economic studies 111 vol. 9 no. 2, 2023 1. introduction corruption as a socio-economic phenomenon has roots that go back centuries, which is why it is divided into two important components of its manifestation – legal and economic. what is the order and priority of one or the other? which factor is more important in overcoming such a negative phenomenon? which set of circum stances creates the risk of such negative behaviour for society? all of the above questions, and not only them, serve as a prerequisite for conducting theoretical and empirical research, which would be able to answer the general question of identifying the economic and legal conditions for the emergence of corruption risks, measures to detect, prevent and stop the relevant crimes that develop from them. available statistical data show that the gdp of a country, as a decisive criterion for the well-being of the respective population, is determined in inverse proportion to the level of corruption in such a country (mazyarchuk and fedko, 2016). that is, the higher the level of corruption, the lower the level of gdp of such a country. statistical studies of international organisations indicate losses in global gdp at the level of about 2% per year (corruption: cost and mitigating strategies, 2016). at the same time, the activities of law enforcement agencies are directly considered in international and national legislation as a subject of prevention and combating of corruption offences, and therefore there is an urgent need to identify and eliminate the conditions for their commission, which is reflected in overcoming corruption risks in the activities of law enforcement agencies. the issue of overcoming corruption risks in the activities of law enforcement bodies in the conditions of economic integration has been addressed by a number of scientists from the point of view of the economic or legal component of its content. in particular, from the point of view of the impact of this phenomenon on the economy in the international and national context, the above issues were studied in relation to the threat of corruption to the economic development of the state (parfentiy, 2022), economic consequences of corruption in ukraine (vysotska et al., 2019), manifestation of the impact of corruption on the economy of ukraine (blank, batrakova, 2016), determination of factors of influence of corruption on economic security and ways of solving relevant problems in public life (hbur, 2017), influence of corruption on investments in certain segments of the national economy (beekman et al, 2014) and others. legal scholars conducted research on the risks of corruption, directions and means of overcoming them in general and in the field of law enforcement, in particular, through the study of such issues as: international legal standards in the fight against corruption (zadorozhnyi, 2016), the formation of the content and forms of countering manifestations of corruption in international regulatory acts (prykhodko, 2018), the impact of corruption offences on the economy of the modern country (korniienko et al., 2020), the place of corruption offences in the structure of crime in modern ukraine and the world (arkusha et al, 2019), corruption risks in the provision of administrative services and control and supervisory activities in ukraine (koliushko et al, 2009), countering corruption in the activities of the units of the national police of ukraine (shatrava, 2017), etc. the above contributes to the study of the issue of overcoming corruption risks in the activities of law enforcement agencies in the conditions of economic integration, which will be the subject of this work. 2. corruption's impact on economic processes in the context of global integration corruption as a social, economic and legal phenomenon has a number of reasons for its occurrence, including political, economic, legal, organisational, socio-psychological and some others (hbur, 2017). at the same time, it is necessary to agree that in the context of the subject of this study, the economic reasons, which indirectly consist in the lack of transparent rules for the functioning of certain economic processes, are quite significant. however, corruption itself generates corresponding negative phenomena in the development of the economy both at the national and global, international level, as evidenced by the above statistical data, which can be detailed in the following context. in particular, in statistical studies on the subject of the influence of the level of corruption on the economy of a given country, it is appropriate to use the determining parameters of economic growth, including gdp per capita as a measure of the output per capita of the corresponding country in relation to its purchasing power; the level of literacy of the adult population as a ratio of the number of literate persons to the total population of such a country; life expectancy at birth, which characterises the level of general well-being, primarily economic, which provides a set of necessary benefits for the existence of a person as a physiological and social person with appropriate needs (mazyarchuk and fedko, 2016). the law of ukraine "on prevention of corruption" (law of ukraine "on prevention of corruption" of october 2014, no. 1700-vii) defines the concept of corruption as the use of official powers or opportunities connected with them by a person with baltic journal of economic studies 112 vol. 9 no. 2, 2023 a special legal status for the purpose of obtaining an unlawful advantage or accepting such an advantage or accepting a promise/offer of such an advantage for oneself or other persons or, similarly, the promise/offer or provision of an undue advantage to that person or, at his request, to any other natural or legal person, with a view to inducing that person to make undue use of his official position or of the opportunities associated with it. corruption as a phenomenon is directly related to the economic basis of existence of a person and society, its influence on the given parameters of economic development is undeniable, which is confirmed by the differentiation of corruption into types (domestic, political, business), the form of the benefit (receiving property or a corresponding service of property or non-property of a nature having a corresponding material value). correlating corruption as a negative social phenomenon with the given parameters that determine the level of economic growth of a community, the following is observed. as the level of corruption grows, gdp decreases due to the shadowy and unfair distribution of national wealth, when individuals misappropriate the national product at the expense of the rest of the population. an increase in the level of corruption has a negative effect on life expectancy, highlighting the inversely proportional relationship between these indicators, which is explained by the withdrawal of relevant public resources by corrupt manifestations for the benefit of a certain circle of individuals, resulting in a decrease in socio-economic opportunities to provide the main part of the population with the necessary benefits for a dignified existence, taking into account natural and social needs, during a given period of existence. finally, the level of literacy among the adult population is inversely proportional to the level of corruption in society. such dependence is explained by the fact that an educated society is endowed with cultural values that reproduce the appropriate level of thinking, decision-making, determining a person's place in society, clarifying legal, democratic, social values in the modern community, as a result, establishing the nature of justice and the appropriate order of distribution of humanity 's achievements. at the same time, corruption creates conditions for lowering the level of education and a person's lack of interest in implementing the established values (corruption: cost and mitigating strategies, 2016). in addition, given the research presented and available, it will be appropriate to highlight such manifestations of the influence of corruption on economic processes in the state and society. first, corruption in general affects the level of economic security of the state and the world community, creating obstacles in the development of individual national economic processes and global international relations. in particular, attention is drawn to the growth in such conditions of the level of spread of the phenomenon of legalisation (laundering) of the proceeds of crime (parfentiy, 2022). second, the formation of a negative image background to the state's activities on the world stage, which results in a significant reduction of investment projects on its territory and a significant deterioration of the investment climate. third, the formation of the shadow economy at the national and international level. in the given context, the position is correct, according to which such manifestations of the mentioned shameful phenomenon are singled out as: informal economy, hidden economy, criminal economy (blank, batrakova, 2016). fourth, the loss of targeting of social payments, which are directed from the state budget instead of the relevant category of the population to finance corrupt expenditures of public authorities (vysotska et al., 2019). fifth, the impact on fiscal policy in the country, which contributes to the growth of the budget deficit. sixth, it affects the efficient and equitable distribution of resources in society. seventh, limiting the content and scope of state support for relevant socio-economic processes in all areas of social life (education, medicine, law enforcement, etc.). the above emphasises the decisive influence of corruption on all spheres of social and economic existence of society and the state. at the same time, in the conditions of global integration, such influence has global and local significance both within the world community and within a separately defined country. in the global context, the increase in the level of corruption is manifested, in particular, by a decrease in the level of gdp per capita, a decrease in the expected length of human life, a decrease in the level of literacy of the adult population, which has found an appropriate justification. in a more local sense, it is indicated by the influence of corruption on economic security, the level of investment in the state economy, the implementation of fiscal and budgetary policy, ensuring the social function of the state and the development of human resources. 3. overcoming corruption risks in the activities of law enforcement agencies in the context of economic integration the nature of the risk of corruption is defined directly in national legislation and indirectly in international legislation. thus, according to the un convention against corruption (un convention baltic journal of economic studies 113 vol. 9 no. 2, 2023 against corruption, 2003), the essence of corruption risk can be traced in several norms, the content of which indicates the transformation of this category in the area of 1) the formation of an anti-corruption culture among public figures; 2) the management of the risks of corruption offences in the relevant sphere of social life; 3) the publicity of the activities of the state aimed at the prevention of corruption manifestations in the state administration. the law of ukraine "on prevention of corruption" (the law of ukraine "on prevention of corruption" of 14 october 2014, no. 1700-vii) uses the term corruption risk without defining it in relation to the normalisation of: 1) the powers of the central executive body with a special status, which ensures the formation and implementation of the state anticorruption policy; 2) the rights of the specified body; 3) the tasks of the authorised departments (authorised persons) on issues of prevention and detection of corruption; 4) the powers of the anti-corruption unit of the national agency; 5) the content of anti-corruption programmes; 6) information specified in the declaration of persons authorised to perform functions of the state or local self-government; 7) full verification of such declarations; 8) additional financial control measures; 9) special control of persons specified in this law; 10) general principles of prevention of corruption in the activities of a legal entity; 11) content of the anti-corruption programme of the legal entity. a more detailed approach to the essence of corruption risk is contained in the methodology for assessing corruption risks in the activities of government bodies adopted for the development of the specified law, which was approved by the decision of the national agency for the prevention of corruption dated 02.12.2016 no. 126 (on approval of the methodology for assessment of corruption risks in the activities of public authorities: decision of the national agency for the prevention of corruption of ukraine dated 02 december 2016, no. 126), which has already acquired a new embodiment in accordance with the decision of the national agency for the prevention of corruption dated december 28, 2021 no. 830/21 (on improving the process of corruption risk management: decision of the national agency for the prevention of corruption of ukraine of 12 december 2021, no. 830/21). indeed, the latest regulatory act approved the methodology of corruption risk management and the procedure for submitting anti-corruption programmes, amendments to them for approval to the national agency for the prevention of corruption and the implementation of their approval. such a step is absolutely necessary in connection with the implementation of the content of the law of ukraine "on prevention of corruption" (the law of ukraine "on prevention of corruption" of 14 october 2014, no. 1700-vii), which works with the concept of risk assessment in the activities of a body, institution, organisation, determining the causes that give rise to them and the conditions that contribute to them, as well as taking measures to eliminate the identified corruption risks, persons responsible for their implementation, terms and necessary resources. at the same time, the law itself contains a blanket provision that refers to the methodology for assessing corruption risks in the activities of authorities, and the current decision of the national agency for the prevention of corruption dated 12.28.2021 no. 830/21 (on improving the process of corruption risk management: decision of the national agency for the prevention of corruption of ukraine of 12 december 2021, no. 830/21) approves the methodology of corruption risk management, which is more appropriate in connection with the following. first, the methodology for assessing the risk of corruption in the activities of state bodies is limited to the specified bodies, while the methodology for managing the risk of corruption covers state bodies, local government bodies and other bodies whose activities are subject to legal regulation under the specified law. second, the methodology of corruption risk assessment had a narrow application, without determining the practical use of the obtained results directly in the management of corruption risks in the legal position of one or another subject, whose activity is the sphere of legal regulation of anti-corruption legislation. the methodology of corruption risk management has sufficiently detailed the conceptual apparatus in the field of corruption management and defined the basic principles of such activity. in particular, the concept of corruption risk has been correctly defined as the probability of committing a corruption or corruption-related offence that will have a negative impact on the activities of the organisation, the scope of corruption risk assessment as a set of functions of the organisation that are potentially vulnerable to corruption and processes in its activities, and the management of corruption risks as a targeted, coordinated activity of the organisation to identify, eliminate and minimise corruption risks in its activities. thirdly, the organisation of qualitative and quantitative indicators in the assessment of corruption risks in order to make an appropriate decision on their management was a significant achievement of the corruption risk management methodology. thus, the following quantitative indicators are defined 1) the level of probability of corruption risk realization (from 1 to 4 points); 2) the level of consequences of corruption risk baltic journal of economic studies 114 vol. 9 no. 2, 2023 realization is determined by the highest score of potential losses of the organisation from corruption risk realization in one of the categories (from 1 to 4 points); 3) the level of corruption risk: critical – from 12 to 16 points; high – from 6 to 9 points; average – from 3 to 4 points; low – from 1 to 2 points. fourthly, the corruption risk management methodology provides the entity that manages corruption risks in the organisation with the appropriate toolkit, among which the methods and procedures for identifying corruption risks occupy an important place, including 1) analysis of legal and regulatory documents that govern the organisation's activities; 2) individual communication (interview) and focus group with external and internal stakeholders; 3) methods that are standardised at the legislative level (brainstorming, delphi method, scenario analysis through appropriate modelling of certain scenarios, etc.). fifth, the corruption risk management methodology clearly outlines the formation of a set of measures to influence corruption risks. sixth, the organisational, legal and methodological foundations for the development of the anti corruption programme are outlined. seventh, detailed procedural points regarding the adoption of the implementation of the anticorruption programme in the organisation, which led to the approval of the aforementioned procedure for submitting anti-corruption programmes, amendments to them for approval by the national agency for the prevention of corruption and their approval. finally, a corruption risk management model has been introduced into the organisation's activities, which includes the following stages: 1) preparation of corruption risk assessment; 2) study of the organisation's environment and the scope of corruption risk assessment; 3) direct assessment of corruption risks (identification of corruption risks, analysis of corruption risks, determination of the level of corruption risks); 4) determination of measures to influence corruption risks; 5) preparation and adoption of the anti-corruption programme; 6) implementation of the anti-corruption programme; 7) monitoring of the implementation of the anti-corruption programme; 8) evaluation of the implementation of the anticorruption programme. taking into account the above, it is necessary to make amendments to the law of ukraine "on prevention of corruption" (the law of ukraine "on prevention of corruption" of 14 october 2014, no. 1700-vii), namely to amend clause 11 of the first part of article 12 in the following edition: "11) approve the methodology of corruption risk management, analyse the anti-corruption programmes of the relevant organisations and make binding proposals for such programmes." when analysing the special legislation on countering and preventing corruption in law enforcement agencies, then on the example of the law of ukraine "on the national police" (the law of ukraine "on the national police" of 02 july 2015, no. 580-viii) it should be noted that special normative regulations have a blanket character, which refers to the anti-corruption legislation, which also applies to law enforcement officers as officials with a special status of public service. this explains, among other things, the inclusion of such persons in the content of the law of ukraine "on prevention of corruption" (the law of ukraine "on prevention of corruption" of 14 october 2014, no. 1700-vii). thus, police officers, along with officials and officers of the prosecutor's office, the security service of ukraine, the state bureau of investigation, the national anti-corruption bureau of ukraine, the bureau of economic security of ukraine, the diplomatic service, the state forest protection, the state protection of the nature reserve fund, the central executive body that implements the state tax policy, the central executive body that implements the state customs policy, are classified as persons authorised to perform the functions of the state or local self-government. in this regard, everything said about overcoming corruption risks in the activities of entities covered by the analysed anti-corruption legislation will be applicable to the settlement of similar issues in the activities of law enforcement agencies. interesting in the study of the nature of corruption risks is the examination of the conditions for providing relevant law enforcement services in relation to the nature of corruption risks of the following groups: 1) in general for the entire system of public administration; 2) in the field of providing administrative services; 3) within the scope of the control and supervisory function of public administration (koliushko et al., 2009). it should be noted that the corruption risks of the first group have been significantly mitigated by the reform of law enforcement agencies, in particular, the adoption of new principles for the functioning of these agencies based on the law of ukraine "on the national police" (the law of ukraine "on the national police" of 02 july 2015 no. 580-viii). the reduction of corruption risks of the second group at the level of law enforcement bodies takes place in the form of: introduction of signs of openness in relations between law enforcement officers and citizens; provision of a wide range of information on obtaining law enforcement services; involvement of public control in all spheres of activity of the law enforcement body; simplification baltic journal of economic studies 115 vol. 9 no. 2, 2023 of procedures for providing relevant administrative services, including law enforcement; expansion of citizens' access to relevant services and their diversification; shortening of terms for providing such services; refusal of monopoly in the provision of certain administrative services. accordingly, as part of the implementation of the control and supervisory function, the following measures may be proposed: limiting the powers to interfere with a particular type of public activity; clearly defining the rules on the possibility of restricting the rights and freedoms of citizens, including using international law-making experience and relevant court practice; narrowing the practice of imposing and collecting fines at the place of commission of an offence or securing means of recording and control; reorientation of law enforcement activities from punishment of offenders to prevention or elimination of offences; elimination of prerequisites for a wide scope for discretionary decisions; positive rulemaking, which consists in eliminating homogeneous corpus delicti that entail different legal consequences according to the degree of responsibility of the offender. according to s. shatrava, in the set of measures to overcome corruption risks in the activities of the national police, one should distinguish between general and special measures (shatrava, 2017). among the special measures specific to this particular law enforcement body, he mentions such areas as: recruitment, training of personnel and completion of service in the national police; provision of a complex of administrative services, primarily of a law enforcement content; the scope of judicial and supervisory functions of the national police. considering the importance of the anti-corruption programme as a comprehensive anti-corruption document of a strategic nature, which defines the process of corruption risk management taking into account the identified corruption risks in the organisation and the state anti-corruption policy, the following should be stated. taking the example of the national police, the existing practice of adopting and implementing anti-corruption programmes of the national police of ukraine and subordinate bodies and units has been available since 2017. a structural element of such programmes, in addition to the identification of corruption risks, is also a set of measures to overcome them. thus, within the framework of the anti-corruption programme of the national police of ukraine for 2017 (on approval of the anti-corruption programme of the national police of ukraine for 2017: order of the national police of ukraine of 24 february 2017, no. 176), the following measures to overcome the risks of corruption: 1) strengthening and improving control in the following areas: implementation of operational information by employees of criminal police departments; implementation of procedural actions by investigators at all stages of criminal proceedings; police decisionmaking in the registration of administrative offences committed in public places; 2) strengthening control in the following areas: issuance of permits, compliance with special rules and procedures for the storage and use of weapons, other objects, materials and substances subject to the permit system; compliance with the requirements of laws and other regulatory legal acts on guardianship, care of orphans and children deprived of parental care; use of state property at the disposal of the bodies and units of the national police; use of state funds by territorial police bodies; use of official information; 3) inspection of temporary detention facilities and convoy units for compliance with human rights and freedoms and elimination of corruption factors that may contribute to the commission of offences by the police. in accordance with the anti-corruption programme of the national police of ukraine for 2019–2021, a table of corruption risks and measures to overcome them was developed, which allowed to group them and determine appropriate measures (table of corruption risks and measures to address them: order of the national police of ukraine of 07 may 2020, no. 341). the measures aimed at overcoming high-level corruption risks include the following: 1) conducting control measures to ensure that budget managers comply with the timeliness and targeted use of budget funds; 2) checking the availability of documents and other data carriers containing proprietary information; 3) hearing investigators in criminal proceedings to monitor their activities, developing draft regulations to simplify the investigation of certain categories of criminal offences; 4) conducting trainings on knowledge of anti-corruption legislation in the relevant area of activity of a particular unit of the national police; 5) overseeing decisions made by the management and officials of the national police; 6) digitalising administrative activities of the police; 7) conducting awareness-raising sessions on filing declarations. the measures aimed at overcoming medium level corruption risks include the following: 1) reviewing the distribution of responsibilities of the national police management; 2) introducing electronic recording of applications and reports; 3) introducing procedures for internal and external audit of the activities of the national police units; 4) ensuring the creation of a healthy moral and psychological climate in teams where intolerance towards violators of anti-corruption legislation is formed; 5) introduction of external control measures in the units of the national police; 6) examination baltic journal of economic studies 116 vol. 9 no. 2, 2023 of the status of solving family and domestic issues of police officers; 7) ensuring the formation of personnel policy in the field of selection of members of relevant commissions, documentary support of such work in the units of the national police. measures to overcome low-level corruption risks include: 1) involvement of the public in monitoring police activities; 2) creation of a separate unit to make decisions on mortgage lending to police officers and selection of its personnel; 3) development of the procedure and conditions for providing police officers with compensation for renting housing; 4) development and dissemination of statistical and analytical materials on ensuring equal rights of women and men in law enforcement agencies; 5) establishment of units for prevention and detection of corruption in the territorial bodies of the national police; 6) identification of persons responsible for verification of declarations; 7) development of provisions that prevent discretion in decision-making by the management on the procedure and amount of financial assistance to police officers. from the above it should be noted that the phenomenon of overcoming corruption risks in law enforcement bodies is a system of appropriate measures, which can be divided into the following groups: 1) general; 2) special; 3) local. the general ones are defined within the framework of the general provisions of the current international and domestic legislation, which applies to all subjects in the field of anti-corruption legal regulation, in particular to officials of state authorities. special ones reflect the specifics of such measures within the limits of the respective law enforcement agency, which is reflected in the content of the anti-corruption programme for the respective period. local ones appear within the framework of the relevant law enforcement body (police), which is mediated by the anti-corruption programme of this particular body. 4. conclusions the results of this study can be summarised as follows. corruption as a social, economic and legal phenomenon has a number of causes, including political, economic, legal, organisational and sociopsychological. corruption causes corresponding negative phenomena in the development of the economy both at the national and global, international level. as the level of corruption grows, gdp decreases due to the shadowy and unfair distribution of national wealth, when individuals misappropriate the national product at the expense of the rest of the population. an increase in the level of corruption has a negative effect on life expectancy, highlighting the inversely proportional relationship between these indicators, which is explained by the withdrawal of relevant public resources by corrupt manifestations for the benefit of a certain circle of individuals, as a result of which the socio-economic opportunities to provide the main part of the population with the necessary benefits for a dignified existence, taking into account natural and social needs during a certain period of existence, decrease. finally, the level of literacy among the adult population is inversely proportional to the level of corruption in society. the consequences of the influence of corruption on the economy are as fol-lows: decrease in the level of economic security of the state and the world community; formation of a negative image background in the activities of the state on the world stage; formation of the shadow economy at the national and international level in its various forms; loss of targeting of social payments from the state budget; influence on the fiscal policy in the state, which contributes to the growth of the budget deficit, as well as to the effective and fair distribution of resources in society; narrowing of the content and scope of state support of relevant socio-economic processes in all spheres of social life. a study of the nature of the corruption risk was conducted, taking into account the position of international and ukrainian legislation, as a result of which the categories of assessment and management of corruption risks were distinguished in favour of the latter. among the positive achievements resulting from the improvement of the legal regulation of corruption risk management, the following were noted: 1) extension of this process to all subjects of anti-corruption activities; 2) specification of the definition of corruption risks and their management; 3) streamlining of qualitative and quantitative indicators in the assessment of corruption risks in order to make appropriate decisions on their management; 4) providing the entity managing corruption risks in the organisation with appropriate tools, including methods and ways to identify corruption risks; 5) forming a set of measures to influence corruption risks; 6) organisational, legal and methodological principles of developing an anti-corruption programme; 7) procedural aspects of making a decision on implementing an anti-corruption programme in the organisation; 8) implementation of the corruption risk management model in the organisation's activities, including the relevant stages. based on the results of the study of the content of corruption risks and the process of managing them, proposed amendments to the law of ukraine "on prevention of corruption" (the law of ukraine "on prevention of corruption" of 14 october 2014, no. 1700-vii). baltic journal of economic studies 117 vol. 9 no. 2, 2023 references: mazyarchuk, v., & fedko, i. (2016). the impact оf corruption оn economic growth. available at: https://ti-ukraine.org/wp-content/uploads/2016/12/feao_corruption_economy_a5_short_final.pdf (in ukrainian) corruption: cost and mitigating strategies (2016). available at: http://www.imf.org/external/pubs/ft/ sdn/2016/sdn1605.pdf parfentiy, l. (2022). corruption as a threat to ukraine's economic security. topical issues of ensuring the financial security of the state in the context of globalisation, pp. 192–196. (in ukrainian) vysotska, i., nahirna, o., & sylkin, o. (2019). economic consequences of corruption in ukraine. black sea economic studies, vol. 42, pp. 182–187. (in ukrainian) blank, m., & batrakova, t. (2016). the influence of corruption on the economy of ukraine. scientific bulletin of the uzhhorod national university. series: international economic relations and the world economy, vol. 7(1), pp. 25–28. (in ukrainian) hbur, z. (2017). factors of corruption impact on economic security and ways of addressing them. investments: practice and experience, vol. 21, pp. 77–81. (in ukrainian) beekman, g., bulte, e., & nillesen, e. (2014). corruption, investments and contributions to public goods: experimental evidence from rural liberia. journal of public economics, vol. 115, pp. 37–47. zadorozhnyi, o. (2016). international legal standards for combating corruption. implementation of the state anti-corruption policy in the international dimension, pp. 49–55. (in ukrainian) prykhodko, a. (2018). an international retrospective on the development of anti-corruption standards. subcarpathian law herald, vol. 2 (23), pp. 167–172. (in ukrainian) korniienko, m., petrunenko, і., yena, і., pankratova, k., & vozniakovska, k. (2020). negative effects of corruption offenses for the country 's economy. international journal of management, pp. 1072–1083. arkusha, l., korniienko, m., & berendieieva, a. (2019). criminal activity in ukraine in the light of current conditions. аmazonia investiga, vol. 8(24), pp. 386–391. koliushko, i. et al. (2009). corruption risks in the provision of administrative and regulatory services in ukraine. "democratic initiatives" foundation, 196 p. (in ukrainian) shatrava, s. (2017). preventing corruption in the activities of the national police as a necessary component of the state's anti-corruption policy. forum prava, vol. 5, pp. 427–434. (in ukrainian) the law of ukraine "on prevention of corruption" of 14 october 2014, no. 1700-vii. available at: https://zakon.rada.gov.ua/laws/show/1700-18?lang=en#text un convention against сorruption (2003). united nations convention against сorruption. on approval of the methodology for assessment of corruption risks in the activities of public authorities: decision of the national agency for the prevention of corruption of ukraine dated 02 december 2016, no. 126. available at: https://zakon.rada.gov.ua/laws/show/z1718-16?lang=en#text on improving the process of corruption risk management: decision of the national agency for the prevention of corruption of ukraine of 12 december 2021, no. 830/21. available at: https://zakon.rada.gov.ua/laws/show/ z0219-22?lang=en#text the law of ukraine "on the national police" of 02 july 2015, no. 580-viii. available at: https://zakon.rada.gov.ua/ laws/show/580-19?lang=en#text on approval of the anti-corruption programme of the national police of ukraine for 2017: order of the national police of ukraine on february 24, 2017, no. 176. available at: https://media-www.npu.gov.ua/npu-pre-prod/ sites/24/uploaded-files/nakaz%20npu176.pdf (in ukrainian) table of corruption risks and measures to address them: order of the national police of ukraine on may 07, 2020, no. 341. available at: https://media-www.npu.gov.ua/npu-pre-prod/sites/24/uploaded-files/nakaz_341_ dodatok_2_zmin.pdf (in ukrainian) received on: 11th of march, 2023 accepted on: 29th of april, 2023 published on: 23th of may, 2023 it was concluded that the phenomenon of overcoming corruption risks in law enforcement bodies represents a system of appropriate measures, which can be divided into the following groups: 1) general; 2) special; 3) local. general measures are defined within the framework of the general provisions of the current international and domestic legislation, which applies to all subjects in the field of anti-corruption legal regulation, in particular to officials of state authorities. special ones reflect the specifics of such measures within the limits of the respective law enforcement agency, which is reflected in the content of the anti-corruption programme for the respective period. local ones appear within the framework of the relevant law enforcement body (police), which is mediated by the anti-corruption programme of this particular body. baltic journal of economic studies 304 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-304-310 food industry development in the context of the food security of regions of ukraine mykola mykolaichuk1 ukrainian catholic university, ukraine odesa regional institute for public administration of national academy for public administration under the president of ukraine, ukraine nataliya mykolaichuk2 kherson national technical university, ukraine abstract. the purpose of the study is to substantiate the food security needs in the regions of ukraine, as well as the definition of tasks in filling the market with own production products. the obtained results will determine the directions of structural changes in agricultural complexes of the regions and the necessary measures by the public regulatory bodies. methodology. the research is based on a comparison of results of normative and search forecasts. in developing normative forecasts, the projected population and needs in different types of products according to the norms of rational consumption are taken into account. search forecasts provide for the definition of a future state of satisfaction with the preservation of existing development trends. the gap between the necessary and projected results determines the task of accelerating growth. in terms of national security, food production should be provided with its own raw material base. therefore, an analysis of the conditions for the development of livestock and crop production is necessary, which enables to substantiate the directions of systemic changes in agricultural complexes of the regions. in order to ensure positive changes in the structure of agricultural production, strengthening the effectiveness of public regulation on the basis of financial and economic leverage is needed. results. regions of ukraine by territory and population exceed certain countries of the european union. significant differences in socio-economic conditions of the regions contribute to the growth of tension in society and migration. the events of recent years indicate the possibility of external interference in the functioning of the regions of ukraine and the danger of the collapse of cooperative ties. therefore, it is important to ensure the satisfaction of the immediate needs of the population of each region at the expense of its own production. among the necessities, food occupies a special place. complete nutrition is one of the prerequisites for increasing the life expectancy of the population. the development of the production of these goods positively affects the economy, because it provides employment, rapid cash flow, and budget filling. however, food consumption is limited by physiological needs. therefore, the potential capacity of the food market depends on the demographic structure, population size, and rational consumption standards. according to the results of the study, excessive consumption of bread and potatoes by ukrainian people and too little consumed meat and dairy products, fruits are detected. during the years of ukraine’s independence, the share of livestock farming in agricultural complexes of regions has significantly decreased. in plant growing, there are also structural changes in the direction of reducing the forage base and increasing crop areas under technical crops that deplete the land. these changes threaten the irreversible loss of soil fertility. therefore, governmental stimulation is required not only for the revival of livestock but also for the rational use of sown areas. practical implications. the results of a comparative assessment of the potential capacity of regional food markets with the current state of satisfaction of the population’s needs will reveal the necessary directions for the development of the food industry and agriculture of the regions. value/originality. a systematic approach to the formation of plans for the development of the food industry that meets the requirements of food security and the corresponding changes in the ratio of livestock and crop corresponding author: 1 department of public administration, ukrainian catholic university. department of economic and finance policy, odesa regional institute for public administration of national academy for public administration under the president of ukraine. e-mail: myk3chuk@gmail.com 2 centre for retraining and skills upgrading, kherson national technical university. e-mail: nsmyk45@gmail.com baltic journal of economic studies 305 vol. 3, no. 5, 2017 1. introduction issues of food security have a global significance. however, there are different approaches to the interpretation of food security objectives and ways to achieve it. the report “state of food security and nutrition in the world 2017” defines food security as “…situation that exists when all people, at all times, have physical, social, and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life.” on the basis of this definition, four dimensions of food security are distinguished: food availability, economic and physical availability of food, utilization of used food and time stability. thus, the causes of food insecurity or failure may be: the absence or insufficiency of food, insufficient purchasing power, inappropriate distribution, or inadequate use of food (fao, ifad, unicef, wfp and who, 2017). according to the report, europe, as well as north america, has a lower rate of 2.5% of the population suffering from malnutrition. this is the best indicator in the world, but a part of the second report focuses on the interconnection of armed conflicts with food security. among the causes of armed conflict, we will distinguish external (russia’s aggression against georgia in 2008 and ukraine from 2014 to the present time) and internal (the struggle for the independence of the republics of the caucasian region in russia). however, in our opinion, significant differences in the socio-economic development of the regions of the country can also be the cause of internal conflicts. the global food security index was developed by the analytical department of economic intelligence with the support of dupont company. since 2012, this indicator has taken into account three main components: affordability (40.0%), availability (44.0%), quality and safety (16.0%). since 2017, the fourth category has been added to reflect the impact of climate and natural resources. the overall score is now calculated from the simple average weighted score of the main three categories, and the category “natural resources and sustainability” is a correction factor. consequently, the fourth component demonstrates changes in the overall assessment, taking into account the risks associated with climate and natural resources. global food security index is calculated for 113 countries. of these, 26 countries belong to europe. the european union is represented by 20 countries with a population of over 5 million people. in the overall ranking, ukraine with the index 54.1 from 100 takes the 63rd position. the nearest neighbours in the ranking from the countries of europe and the eu, respectively, is serbia with the indicator 60.6 (50th position) and bulgaria with the indicator 62.9 (47th position). a  similar situation remains with all the components, except for quality and safety, where ukraine is one position ahead of serbia and three of bulgaria (the economist intelligence unit limited, 2017). this is not surprising since in recent years attacks on the territorial integrity of ukraine and related military actions have been struck by a devastating blow to its economy. in the difficult conditions of the struggle for the independence and integrity of the state, ukraine needs not only to stop the destruction of the economy but also to create conditions for the economic growth. achievements in the development of the national economy are significantly dependent on the results of the development of its components that can be allocated on a territorial or sectoral basis. on a territorial basis, ukraine is divided into regions that are identified with administrative regions – “oblasts”. in today’s conditions, the level of socio-economic development of regions is significantly different. thus, in 2015, the gross regional product (grp) per capita in the chernivtsi oblast is almost in 2.3 times lower than the average in ukraine and in 3.2 times less than in the poltava and dnipropetrovsk oblasts. below average and indicators of the grp of the southern regions: odesa oblast – at 10.0%, mykolaiv oblast – at 11.0%, kherson oblast – at 35.0%. from the leading regions, they fall at 36.7%, at 37.0%, and at 54.1%, respectively. significant differences also occur in the average wage. the highest wages for 2015–2016 were in donetsk oblast (at 18.7% and at 15.6% higher than the average in ukraine), while in chernivtsi oblast it was in 1.4 times less than the average in ukraine and almost at in 1.6 times lower than the donetsk region. in the mykolaiv oblast, the level of remuneration is at 5.7% lower than the average for ukraine, odesa oblast  – at 7.2%, kherson oblast  – at 22.0%. the gap between the level of remuneration in kherson and donetsk oblasts exceeds 30.0% (verner, 2017 (part ii), p. 18 and verner, 2017 (part i), p. 102). from the point of view of economic security of the country, it is necessary to reduce the differences between the level of socio-economic development of the regions, to provide them with a certain self-sufficiency in meeting the primary needs of the population, providing social services, creating conditions for comfortable living production, the structure of crop areas is proposed. this approach has not only a scientific novelty but also contributes to increasing the positive impact of the food industry on the sustainable development of both individual regions and the country as a whole. key words: food security, regions, food industry, forecasting, factors of influence. jel classification: e27, f52, q18, r11, r58 baltic journal of economic studies 306 vol. 3, no. 5, 2017 and personal development, directing the community’s efforts to improve the competitiveness of the region, and countries. among the components of general economic security, which have a strong influence, but significantly behind the desired level, is food security (kharazishvili, dron, 2014). during the years of the first decade of independence, ukraine has significantly reduced the volume as industrial and agricultural production, which results in the new millennium meat products consumption reached only 42.5% of the norm, milk  – 56.7%, vegetables  – 58.4%, fruits and berries  – 27.4%. the volumes of agricultural products, which are raw material suppliers for food industry enterprises, accounted for only 53.4% of the volume of 1990. at the same time, there was a significant divergence in the situation in the regions. thus, in the zakarpattia oblast, agricultural production reached 81.8% of the 1990 level, in kherson oblast it was 44.2%, while mykolaiv’s index was only 41.0% (pepa, 2001, p. 175 and osaulenko, 2008, p. 147, 148). for the period up to 2015, the volume of agricultural production has increased substantially, but it was still only 84.6% of the 1990 level in the country (calculated from osaulenko, 2008, p. 147 and verner, 2017 (part ii), p. 202). in order to meet the needs of the population and form the export potential, it is necessary to determine sufficient quantities of food for domestic consumption according to rational standards. therefore, the purpose of the article is to substantiate the level of food production in the regions of ukraine, which is necessary in terms of food security, and also to identify problems in filling the market with products of its own production. implementation of the objectives requires a systematic approach to determining the desired structural changes in the agricultural sector in the region and the necessary measures of state regulation based on a comparison of estimated potential market size of food from the expected results of the food industry based on existing trends, identify factors influencing the amount and direction of action. 2. forecasting capacity of regional food markets in determining the potential capacity of markets, it is necessary to take into account not only the existing and future needs of the population but also the assessment of the positive and negative effects of certain changes in various spheres of activity of the country and the region. potential capacity characterizes the highest level of consumption under favourable conditions and is determined on the basis of forecasting. it is a prediction that provides a proactive reflection of reality. future needs should be determined on the basis of normative forecasts, which reflect the idealized results. adding them to search forecasts, which are built from the past to the future, and foresee a future state while preserving the existing development trends, helps to choose the variant of development that contributes to the achievement of the goal. forecasting the capacity of markets for products for different purposes has its own peculiarities. so, the capacity of a food market depends on the population size and physiological needs in different products. to substantiate the need for food products, first of all, it is necessary to determine the expected population in the region. existing trends in population growth in the southern regions are described by polynomial trends and are presented in table 1. table 2 estimated need for food for the southern regions of ukraine № commodity group rational consumption ratios (kg/year per capita) need of the regions, thousand tons (pieces) for 2020 mykolaiv oblast odesa oblast kherson oblast 1 meat and meat products 83 96,3 203,1 88,6 2 milk and dairy products 380 440,9 929.8 405,8 3 eggs (pieces) 290 336,4 709,6 309,6 4 fish and fish products 20 23,2 48,9 21,4 5 sugar 38 44,1 93,0 40,6 6 oil and other vegetable fats 13 15,1 31,8 13,9 7 potato 124 143,9 303,4 132,4 8 vegetables and melons 161 186,8 394,0 171,9 9 fruits, berries, grapes, nuts 90 104,4 220,2 96,1 10 bread and bread products 101 117,2 247,1 107,8 table 1 trends and forecast of the population * region (oblast) trend r2 estimated number in 2020, thousand odesa y = 2482,5 + + 0,7518 t2 – 16,813 t 0,9135 2446,96 mykolaiv y= 1291,4 + + 0,3761 t2 – 14,083 t 0,9983 1160,18 kherson y = 1204,0 + + 0,4265 t2 – 15,338 t 0,9992 1067,80 * y – population, thousand people; t – serial number of the year (base year is 2001); r – coefficient of determination baltic journal of economic studies 307 vol. 3, no. 5, 2017 the value of the determination coefficient indicates that more than 90% of the population changes correspond to the indicated patterns. therefore, it is possible to determine the expected population based on this model in 2020. the expected number determines the need for food (table 2). at the beginning of the new millennium, the open joint-stock company “ukrainian research institute of nutrition” developed the norms (recommended) and the minimum consumer basket under the conditions of the socio-economic crisis. it should be noted that they are almost 20% lower than actual consumption in developed countries (yegorov, mardar, 2011). 3. trends in satisfying food needs. the potential capacity of the domestic market reflects the desired results, the ability to achieve which depends on many factors and requires active action, financial resources, and time. to determine the directions of action, resource requirements, it is necessary to compare the desired results with expectations based on the passive forecast. traditionally, too much bread, potatoes, and sugar are consumed in ukraine. in 1990, the production was sufficient to meet the minimum requirements for the consumption of meat, milk, eggs, fish, but vegetables and fruits consumed less than normal. the consumption of bread and bakery products exceeded the recommended norms at 39.6%, sugar  – at 31.6%, potatoes – at 5.6% (calculated from osaulenko, 2008, p. 434). in subsequent years, consumption of products of all species (except for potatoes) decreased significantly; positive changes began to be observed only in 2005. excessively high consumption of ukrainian oil, potatoes, and bakery products is due to the relatively low solvency of the population. the effects of unbalanced nutrition are increasing mortality and reducing the life expectancy of the population. according to who data, in countries where the population consumes a lot of vegetables and fruits, the mortality rate from circulatory system diseases decreases (yegorov, mardar, 2011). high-quality balanced nutrition significantly reduces the risk of diabetes and mortality from oncological diseases. with the preservation of existing trends, the needs for rational consumption standards will satisfy the production of bread and bakery products, oils, sugar, vegetables and melons, potatoes, eggs and a possible approximation to rational standards for consumption of fish products. the highest level of production and consumption of food products was observed in 2013 but the situation deteriorated in further. in 2013, the average for ukraine consumed 14.6 kg of fish products per capita, the needs of residents of kyiv region were satisfied by the rational norm. the consumption of this product in the odesa oblast amounted to 88.5% of the rationale norm, mykolaiv oblast  – 85.5%, kherson oblast – 78.5% (calculated from state statistics service of ukraine, 2016). the situation with the provision of benefit products for the public such as fruits, berries, nuts, grapes is much worse. in general in ukraine in 2013, the population consumed only 62.5% of the rational norms: odesa oblast  – 65.0%, mykolaiv oblast  – 61.0%, kherson oblast – 60.6% (calculated from state statistics service of ukraine, 2016). in the development of passive forecasts, equations of trends, which allow determining the predicted level of indicators while preserving existing trends, are used the most often. sustained positive trends are observed in changing the consumption of fruits, berries and grapes: y = 23,438 + 2,2286 t, (1) where t – the serial number of the time period the value of r2 =0,9638 indicates the high reliability of this trend. the predicted value of the level of consumption of fruit and berries in ukraine by one person in 2020 will be 70 kg, which is 22.0% less than the rationale norm. the greatest problems arise in providing the population of ukraine with meat and dairy products. so, before russia’s aggression in 2013, consumption of meat and meat products in ukraine as a whole was 67.5% of the norm, in the southern regions it was even lower: in the kherson oblast – 62.1% of the norm, mykolaiv oblast – 61.9%, odesa oblast  – 58.0%. in 2015, the figure in ukraine decreased to 55.2%, mykolaiv oblast  – 53.2%, odesa  – 57.8%, kherson  – 61.3% (calculated from state statistics service of ukraine, 2016). in 2013, the consumption of dairy products in ukraine accounted for 58.1% of the rationale norm, in kherson region it was 51.7%, odesa – 50.5%, and in the mykolaiv oblast consumption was more than the average in ukraine  – 59.8% of the norm. in 2015, the average dropped to 55.2%. even lower were indicators in the southern regions: 54.4%  – in the mykolaiv oblast; 51.5%  – in kherson oblast; 51.2% – in the odesa oblast (calculated from state statistics service of ukraine, 2016). the equation of the trend of consumption of meat and meat products by one person per year is as follows: y = 28,952 + 1,9393 t, (2) where t – the serial number of the time period. the value of r2 =0,9489 indicates the high reliability of this trend. the predicted value of the level of consumption of meat and meat products in ukraine by one person in 2020 will be 67 kg, which is 20.0% less than the rationale norm. in the consumption of milk and dairy products in the period from 2000 to 2014, there were temporary surges and a drop in indicators that were not regular. at the end baltic journal of economic studies 308 vol. 3, no. 5, 2017 of the period, the level reached 223 kg, which was close to the 225 kg stable enough in 2002–2007. but this is only 57.0% of the rational norm. 4. factors affecting the production of food it should be noted that the problems of ensuring the population of meat and dairy products have a chain character. an increase in food production is possible only with the corresponding increase in livestock and sown areas planted for the cultivation of forage crops and the increase in their yields. however, there are opposite trends. in the period from 1990 to 2015, the share of livestock production in agricultural products decreased from 54.4% to 29.7%, the number of cattle – from 24623 thousand heads to 3750 thousand heads (that is in 6.6 times and constitutes only 33.5% of its number in 1950), the livestock of pigs decreased in 2.7 times and reached only 91.0% of the presence of these animals in 1950 (calculated from zhuk, 2016). thus, the restoration of livestock will contribute to improving not only the satisfaction of the needs of the population in meat products, dairy products, but also the restoration of the cultivation of fodder crops, which will positively affect the state of land resources. also, the amount of organic fertilizers will increase. the area occupied by forage crops in 1990 comprised 37.0% of the total cultivated area, the technical culture had to only 11.6%. in 2015, the share of forage crops decreased to 7.4%, and the employment of technical crops increased to 31.0%. the southern regions have a similar structure of crop area. in the mykolaiv oblast, 32.9% of crop area is under technical crops, 3.5%  – are under forage. in the odesa oblast, respectively: 26.6% and 4.0%. in kherson oblast: 31.3% and 5.5% (calculated from zhuk, 2016). the reason for these changes is the commercial attractiveness of technical crops and, as a consequence, a catastrophic decline in the fertility of the land. at the request of crop rotation, sunflower may be returned to one and the same field only after 8-10 years, so the safe part of the sunflower in the crops can’t exceed 10.0% (popova, 2009). in kherson oblast, the share of sown area sown with sunflower in the year of 1997 was 7.3%, and in 2016 it was 28.0% (voznyuk, 2017). it adversely affects the health of the population and insufficient supply of fruits and berries. in 2014, the population consumed only 58.0% of the rationale norm for this useful product, and self-sufficiency was only 82.0%. this indicates the need to increase own production volumes and reduce imports. in order to increase own production of this product, new plantations, fruit-bearing age, which occur only in a few years, are needed. but in ukraine, the planting of fruit trees and vineyards is decreasing dramatically. in 1995, the area of fruit and berry plantations was 794 thousand hectares, in 2010 it decreased to 255 thousand hectares, and in 2015 there were only 235 thousand hectares. a similar situation with the area of vineyards, which reached 155 thousand hectares in 1995, and in 2015 there were only 45 thousand hectares (zhuk, 2016). it should be noted that according to the balance of food resources, the needs for meat and dairy products are covered by their own production, the level of selfsufficiency of meat products is 106.2%, milk products – 105.0% (state statistics service of ukraine, 2016). this indicates the need to increase the purchasing power of the population. without solving this problem, there will be no sense in increasing production volumes. taking into account the increase in the cost of communal services and the need to reduce the share of food expenditure, the incomes of the population should increase in 2.5–3 times. 5. public regulation of the food industry development of the regions in order to ensure positive changes in the development of the food industry of the regions, state regulation of agricultural development by economic methods is necessary. first of all, it is necessary to encourage an increase in livestock production. after all, it not only allows improving the structure of consumption of food but also helps to restore soil fertility. to do this, it is necessary to have an average of 1 ha of arable land a certain number of animals: 2–3 cows, or 25 pigs, or 2500 chickens (vlasenko, 2014). there must be financial benefits in growing fodder crops, maintaining soil fertility. it is necessary to ensure balanced production of various crops taking into account their impact on soil fertility and recommendations of experts on rational crop rotation. observance of scientific recommendations for crop rotation is possible only with the provision of land plots for rent for a period of at least 20 years. in this case, it is necessary to reflect in the agreement the state of the land resources and the obligation to maintain it (or improvement) until the end of the lease term. in the regions, it is advisable to create trust funds for ecologically safe land use. this corresponds to the global experience of creating various non-governmental organizations, as well as legislative regulation at the local level of the relationship between business entities. thus, the law of japan provided funding for environmental expenditures by private businesses and canadian provinces right granted by law to regulate relations in the field of environmental protection (dorohuntsov, horbach, khvesyk, pastushenko, 2007). in the conditions of decentralization of public power, it is desirable in ukraine to give local authorities the right to regulate relations on environmental protection. in particular, experts suggest the use of the following economic measures: the release of landowners and land users from land payment, which are being implemented measures to improve their condition; baltic journal of economic studies 309 vol. 3, no. 5, 2017 providing tax and credit privileges to those who, at their own expense, embody measures to protect and enhance soil fertility; introduction of land insurance against the reduction of their qualitative state in case of force majeure; the introduction of sanctions for inefficient land use (vlasenko, 2014). from the point of view of the authors, the sanction payments must compensate for the costs of fertilizing the soil, which is reflected in the resumption of humus quantities. in order to maintain the soil fertility, it is necessary to maintain a balance of humus, that is, its income in the amount not less than that lost due to erosion processes and its removal by agricultural crops. depending on the structure of the crop area, an annual reduction of humus reaches 0.6-1.4 tons per 1 hectare. to restore it, it is necessary to add organic fertilizers in the amount of 12-28 tons per hectare. in fact, over the past 15 years, 2-3 tons of organic fertilizers have been introduced (gorlachuk, struchenko, 2007). comparison in the process of monitoring the actual state of land with the indicators reflected in the agreements allows you to determine the compensation costs for the restoration of soil fertility. 6. conclusions the development of the food industry is of particular importance in terms of both food and economic security of the country and its regions. balanced nutrition creates the preconditions for a healthy lifestyle by preventing cardiovascular, cancer, reducing mortality and increasing the life expectancy of the population. therefore, it is necessary to predict the population and the necessary quantities of food production according to rational standards, the corresponding demand for livestock and crop products. the analysis of existing tendencies in the development of the food industry and factors influencing it makes it possible to determine the necessary growth rates of different types of products for the formation of an optimal assortment of food products, to substantiate changes in the structure of agricultural complexes of regions. to achieve positive changes, it is necessary to improve the financial and economic methods of state regulation of agricultural development, in particular, to stimulate the development of livestock and rational nature management. it is also important to increase the solvency of the population. prospects for further research are seen in adapting the methodology for determining the index of food security as the macro-regions of ukraine (south, west, north, centre, etc.), as well as eu macro-regions, for example, the baltic countries. references: dorohuntsov, s. i., horbach, l. m., khvesyk, m. a., pastushenko, p. p. (2007). ekoseredovyshche ta yevrointehratsiini protsesy: monohrafiia [eco-environment and european integration processes: monograph]. (vol. 6). кyiv: kondor. (in ukrainian) fao, ifad, unicef, wfp and who (2017). the state of food security and nutrition in the world 2017. building resilience for peace and food security. web page. retrieved from: http://www.fao.org/fileadmin/user_ upload/ newsroom/docs/20170328_full%20report_global%20report%20on%20food%20crises_v1.pdf (accessed 21 december 2017) gorlachuk, v., struchenko, a. (2007). problemy zberezhennia rodiuchosti hruntiv fermerskykh hospodarstv [problems of preservation of fertility of soils of farms]. economy of ukraine, (3), 74–79. kharazishvili, yu. m., dron, e. v. (2014). prohnozuvannia indykatoriv, porohovykh znachen ta rivnia ekonomichnoi bezpeky ukrainy u serednostrokovii perspektyvi. analitychna dopovid [forecasting of indicators, threshold values and level of economic security of ukraine in the medium-term perspective. analytical report]. кyiv: national institute for strategic studies. (in ukrainian) osaulenko, a. g. (ed.). (2008). statystychnyi shchorichnyk ukrainy za 2007 rik [statistical yearbook of ukraine for 2007]. кyiv: konsultant. retrieved from: http://www.ukrstat.gov.ua/druk/publicat/kat_u/ publ1_u.htm pepa, t. v. (2001). kharchova promyslovist yak osnova formuvannia eksportnoho prodovolchoho potentsialu [food industry as the basis for the formation of export food potential]. strategy of economic development of ukraine, 6, 173-179. popova, o. l. (2009). stalyi rozvytok ahrosfery ukrainy: polityka i mekhanizmy [sustainable development of the agrosphere of ukraine: policies and mechanisms]. кyiv: institute of economics and forecasting of the national academy of sciences of ukraine. (in ukrainian) state statistics service of ukraine (2016). balansy ta spozhyvannia osnovnykh produktiv kharchuvannia naselenniam ukrainy [balance and consumption of basic food products by the population of ukraine], кyiv: state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/druk/publicat/kat_u/publ2_u.htm (accessed 22 december 2017) the economist intelligence unit limited (2017) global food security index web page. retrieved from: http:// foodsecurityindex.eiu.com/ (accessed 20 december 2017) verner, i. e. (ed.). (2017). statystychnyi zbirnyk “rehiony ukrainy” 2017, chastyna ii [statistical bulletin “regions of ukraine” 2017, part ii]. кyiv: state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/ druk/ publicat/kat_u/publ2_u.htm (accessed 20 december 2017) baltic journal of economic studies 310 vol. 3, no. 5, 2017 verner, i. e. (ed.). (2017). statystychnyi zbirnyk “rehiony ukrainy” 2017, chastyna i [statistical bulletin “regions of ukraine” 2017, part i]. кyiv: state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/druk/ publicat/kat_u/publ2_u.htm (accessed 20 december 2017) vlasenko, i. v. (2014). pryntsypy funktsionuvannia ekolohobezpechnoho zemlekorystuvannia v silskomu hospodarstvi [principles of the ecological-safety land use functioning in agriculture]. balanced nature management, (1), 136-141. voznyuk, v. a. (ed.). (2017). statystychnyi shchorichnyk khersonskoi oblasti za 2016 rik [statistical yearbook of kherson oblast for 2016]. kherson: chief department of statistics in the kherson region. (in ukrainian) yegorov, b., mardar, m. (2011). stan kharchuvannia naselennia ukrainy [state of ukrainian population nutrition]. commodities and markets, 11(1), 140-147. zhuk, i. m. (ed.). (2016). statystychnyi shchorichnyk ukrainy za 2015 rik [statistical yearbook of ukraine for 2015]. кyiv: state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/druk/publicat/kat_u/ publ1_u.htm (accessed 20 december 2017) baltic journal of economic studies 189 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: shvetc@ukr.net orcid: https://orcid.org/0000-0002-1999-9956 2 odessa state university of internal affairs, ukraine e-mail: lvovaliza@outlook.com orcid: https://orcid.org/0000-0002-3381-3185 3 national academy of internal affairs, ukraine e-mail: evgeniykobko@gmail.com orcid: https://orcid.org/0000-0002-3121-0823 doi: https://doi.org/10.30525/2256-0742/2023-9-1-189-199 legal issues and economic justification of eu work permit quotas dmytro shvets1, ielyzaveta lvova2, yevhen kobko3 abstract. the interest in the european union work permit quotas arises largely as a result of globalization and digitalization, while the european union member states produce more labor services than materials, followed by deviations in labor policies. the main aim of the article is to analyze the work permit policies implemented by the eu and its member states to manage the legal employment of migrant workers, focusing on the existing programs during the last two years. the subject of the study is the outcome of work permit legislation and quotas for third country economic relations with the european union. the methodology of the research includes the method of descriptive and explanatory study of legal issues of eu work permit quotas, followed by statistical analysis with legal review of the data on the subject. the study is based on the analysis of documents (founding acts, directives, regulations, decrees, etc.) of the eu countries and is focused on the research of the scope of their domestic decisions. as a result, the paper raises and analyzes many important issues of the european union's work permit quota regulations in times of socio-economic imbalance. the first section of the paper provides an analysis of the legal background of labor migration policy at the eu level. the second section deals with the political and legal work permit measures (quotas) defined by the member states to secure their national economy. the second section is dedicated to the statistical survey of the eu work permit policy in the context of the employment of migrant workers of ukrainian origin. the hypothesis of the paper is that labor migration is a social phenomenon with a long historical background, while the work permit quota is an annual governmental mechanism established in relevant normative acts of the states. practical implications are as follows: the conclusions and methodological approaches to legal work permit model, obtained as a result of the study, is considered a tool for national security management of multiplicative risk factors, and is applicable to condense misleading in labor policies of eu member states and in third countries. the value/originality of the paper is revealed by the use of behavioral and economic analysis (in the context of humanitarian crisis in ukraine). the paper modifies the current situation on execution of regulatory acts within the framework of eu work permit quotas as currently improving measures. key words: european union, freedom of movement, labour migration policy, measures, national security, temporarily protection, work permit quotas. jel classification: e24, i38, j08, k30, k31, k38 1. introduction there are no unified rules for eu labor law, although there are numerous governmental acts aimed at common management of labor migration policy. according to the latest frontex risk analysis report, the main risks for european integrated border management in 2022/2023 are: 1. irregular migration on established migration routes to the eu. 2. transnational crime and terrorism. 3. the instrumentalization of migration as a political bargaining chip. 4. the widening gap between return decisions and actual returns. baltic journal of economic studies 190 vol. 9 no. 1, 2023 all of these risks are expected to be exacerbated by the multiple, long-term consequences of the war in ukraine (frontex, 2022). millions of refugees from ukraine found their shelter in the european union and registered for temporary protection with main destinations in poland, germany, hungary and romania (operational data portal, 2023). in the member states of the european union, work permits for employment of foreigners are usually issued within the framework of the specified work permit quota – the number of work permits that can be issued to foreigners in certain occupations in one year in accordance with the migration policy of the country and the situation on the labor market. the work permits specified in the annual quota by activities and professions shall be issued first for the purpose of extending the already issued work permits and then for new employment. when issuing work permits, priority is given to foreigners who already have a temporary residence permit in the country on the basis of family reunification. in addition, it is well known that all eu citizens and their family members1 have the right to move and reside freely within the eu. the treaty of rome establishing the european economic community (hereafter eec, 1958) is recognized as one of the elementary international agreements to liberalize trade in goods, services and capital, free movement of workers and freedom of establishment, followed by the single market without barriers and border controls (1993). (single market act, 2011) today, the free movement of workers in the european union is regulated by the norms of the treaty on the functioning of the european union (hereinafter tfeu), based on the treaty of maastricht (treaty on the european union, hereinafter teu, 1993) with the set of eu rules on free movement of persons with some restrictions for new eu member countries. these provisions must be read in the context of the general principle of non-discrimination based on article 21(2) of the charter of fundamental rights of the european union: 1. any discrimination based on any ground such as sex, race, color, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited. 2. within the scope of application of the treaties and without prejudice to their specific provisions, any discrimination on grounds of nationality shall be prohibited. the corresponding provision is mentioned in article 18 tfeu: " within the scope of application of the treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited." article 45 tfeu (ex-article 39 tec) also mentions this: 1. freedom of movement for workers within the union shall be ensured. 2. such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the member states as regards employment, remuneration and other conditions of work and employment. 3. it shall include the right, subject to limitations justified on grounds of public policy, public security or public health, to: (a) to accept offers of employment actually made; (b) to move freely within the territory of the member states for that purpose; (c) to remain in a member state for the purpose of employment in accordance with the provisions laid down by law, regulation or administrative action governing the employment of nationals of that state; (d) to remain in the territory of a member state after having been employed in that state, subject to conditions to be laid down in regulations to be drawn up by the commission. 4. the provisions of this article shall not apply to employment in the public service. researchers amy weatherburn, lisa berntsen claim that "eu legislation provides for the equal treatment of posted workers, ... while the eu labour law framework is not harmonized, the eu has the competence under article 153(1) tfeu to adopt minimum requirements in certain areas, including inter alia the improvement of the working environment to protect workers' health and safety and working conditions." (weatherburn, berntsen, 2021) 2. legal background of free movement and work permits in eu labor migration policy the common policy of free movement of workers in the eu is based on the economic freedom of free movement of labor and the freedom of establishment, which is based on the economic freedom of services (the right to self-employment) under article 49 tfeu (ex-article 43 tec), which provides that: " within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a member state in the territory of another member state shall be prohibited. such prohibition shall also apply to restrictions on the setting up of agencies, branches or subsidiaries 1 who is classed as a "family member" is defined at article 2. baltic journal of economic studies 191 vol. 9 no. 1, 2023 by nationals of any member state established in the territory of any member state. freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of article 54, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the chapter relating to capital." this rule applies to individuals and legal entities. remarkably, the title v: area of freedom, security and justice, chapter 2: policies on border control, shelter and immigration, article 78 tfeu (ex-articles 63(1) and (2) and 64(2) tec) provides that: "1. the union shall develop a common policy on shelter, subsidiary protection and temporary protection with a view to offering an appropriate status to any third country national in need of international protection and ensuring compliance with the principle of non-refoulement. this policy shall be consistent with the geneva convention of 28 july 1951 and the protocol of 31 january 1967 r elating to the status of refugees and other relevant treaties. 2. for the purposes of paragraph 1, the european parliament and the council, acting in accordance with the ordinary legislative procedure, shall adopt measures for a common european shelter system comprising: (a) a uniform status of refugee for nationals of third countries, valid throughout the union; (b) a uniform status of subsidiary protection for nationals of third countries who are in need of international protection and cannot obtain european shelter; and (c) a common system of temporary protection for displaced persons in the event of a mass influx; (d) common procedures for granting and withdrawing uniform shelter or subsidiary protection status; (e) criteria and mechanisms for determining which member state is responsible for examining an application for shelter or subsidiary protection; (f ) standards on the conditions for the reception of applicants for shelter or subsidiary protection; (g) partnership and cooperation with third countries for the purpose of managing inflows of applicants for shelter or subsidiary or temporary protection. 3. in the event of one or more member states being confronted with an emergency situation characterized by a sudden inflow of nationals of third countries, the council, on a proposal from the commission, may adopt provisional measures for the benefit of the member state(s) concerned. the council shall act after consulting the european parliament." secondary eu legislation sets out more detailed rules to regulate free movement, through directive 2004/38/ec of the european parliament and of the council of 29 april 2004 on the right of citizens of the union and their family members to move and reside freely within the territory of the member states, amending regulation (eec) no 1612/68 and repealing directives 64/221/eec, 68/360/eec, 72/194/eec, 73/148/eec, 75/34/eec, 75/35/eec, 90/364/eec, 90/365/eec and 93/96/eec (oj l 158, 30.4.2004, p. 77). the specific rights relating to the free movement of workers and their family members are set out in regulation (eu) no 492/2011 of the european parliament and of the council of 5 april 2011 on freedom of movement for workers within the union. this means that all eu citizens and their family members have the right to move and reside freely within the territory of the member states, including the right not to be discriminated against on grounds of nationality regarding: – access to employment; – working conditions; – social and fiscal advantages; – access to training; membership of trade unions; – access to housing; – access to education, apprenticeships and training for their children, etc. to this end, the free movement of persons also applies to countries that are part of the european free trade area, as a result of the agreement establishing the european economic area ("eea") and the agreement on the free movement of persons ("afmp") with the swiss federation (opinion of advocate general hogan, 2021). in order to implement the norms of article 78(3) tfeu, the european commission proposed in 2015 a council decision on emergency measures to help italy, greece, hungary (to relocate shelter seekers from syria and eritrea) (proposal, 2015) and latvia, lithuania and poland (to solve the migration situation at the borders of belarus). it is extremely important to mention council implementing decision (eu) 2022/382 to solve the migration flow of refugees from ukraine because of russia inhuman crimes of aggression and illegal invasion of the territory of ukraine. on march 4, 2022 the eu member states unanimously agreed to activate the temporary protection directive 2001/55/l (council implementing decision (eu) 2022/382). article 2(1) of council decision 2022/382 identifies three categories of persons to whom temporary protection applies: (і) ukrainian nationals residing in ukraine on or before february 24, 2022; (іі) stateless persons and nationals of third countries other than ukraine who enjoyed international baltic journal of economic studies 192 vol. 9 no. 1, 2023 protection or equivalent national protection in ukraine before february 24, 2022; and (ііі) family members of the aforementioned groups. while the temporary protection directive allows member states to have national complementary schemes, the majority of responding member states reported that they apply temporary protection exclusively under the temporary protection directive. according to article 9 of the temporary protection directive, member states are required to provide beneficiaries of temporary protection with a document in a language which they can understand, clearly indicating the provisions of temporary protection which apply to them. it should be emphasized that in accordance with paragraphs 10 and 18 of directive 2004/38/ec: "(10) persons exercising their right of residence should not, however, become an unreasonable burden on the social assistance system of the host member state during a first period of residence. the right of residence for union citizens and their family members for periods exceeding three months should therefore be subject to conditions. ... (18) in order to be a genuine instrument of integration into the society of the host member state in which the union citizen resides, the right of permanent residence, once acquired, should not be subject to any conditions." the right of residence is governed by chapter iii of directive 2004/38, entitled "right of residence". in this chapter, article 7 deals with the right of residence for more than three months. it provides: "1. every union citizen shall have the right of residence in the territory of another member state for a period of more than three months if the person concerned is: (a) are workers or self-employed persons in the host member state; or (b) have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host member state during their period of residence and have comprehensive sickness insurance cover in the host member state; or ... (d) are family members accompanying or joining a union citizen who satisfies the conditions laid down in points (a), (b) or (c)." in addition, the following legal acts, among others, are of extreme importance: – regulation (ec) no 883/2004 of the european parliament and of the council of april 29, 2004 on the coordination of social security systems (oj l 166, 30.4.2004, p. 1). – directive 91/533/eec of 14 october 1991 on an employer's obligation to inform employees of the conditions applicable to the contract or employment relationship (oj l 288, 18.10.1991, p. 32). – directive 2014/54/eu of the european parliament and of the council of 16 april 2014 on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers was adopted to facilitate the free movement of eu workers and their family members and to make these rights more effective. article 4 of the directive states: "1. each member state shall designate one or more structures or bodies ("bodies") for the promotion, analysis, monitoring and support of equal treatment of union workers and their family2 members without discrimination on grounds of nationality and without unjustified restrictions or obstacles to their right of free movement and shall make the necessary arrangements for the proper functioning of such bodies. these bodies may be part of existing bodies at national level which have similar objectives ... 4. member states shall ensure that existing or newly created bodies are aware of, can make use of and cooperate with existing information and assistance services at union level, such as your europe, solvit, eures, the enterprise europe network and the points of single contact." – directive (eu) 2018/957 of the european parliament and of the council of 28 june 2018 amending directive 96/71/ec concerning the posting of workers in the framework of the provision of service. case law is essential part of legislation that guarantees the freedom of movement in the eu, e.g.: – judgment of 26 february 1991, the queen v immigration appeal tribunal, ex parte gustaff desiderius antonissen; – judgment of 31 march 1993, kraus; – judgment of 20 june 1996, semeraro casa uno and others; – judgment of 27 january 2000, graf; – judgment of 11 july 2002, d'hoop; – judgment 23 march 2004, collins; – judgment) of 4 june 2009, vatsouras (c-22/08) and josif koupatantze (c-23/08) v arbeitsgemeinschaft (arge) nürnberg 900; – judgment of the court of 23 february 2010,teixeira; – judgment of 29 march 2011, commission v italy; – judgment of 12 july 2012, sc volksbank românia, etc. in paragraph 70 of the teixeira case, the court ruled that "the right of residence in the host member state of the parent who is the primary carer of a child exercising the right to education under 2 members of their family’ should be understood as having the same meaning as the term defined in point (2) of article 2 of directive 2004/38/ec of the european parliament and of the council baltic journal of economic studies 193 vol. 9 no. 1, 2023 article 12 of regulation (eec) no 1612/68 of the council of 15 october 1968 on freedom of movement for workers within the community (15) is not subject to the condition that that parent has sufficient resources not to become a burden on the social assistance system of that member state during the period of residence and has comprehensive sickness insurance cover there." 3. domestic government initiatives and decisions on work permit quotas in eu member states it is well known that eu member states apply quotas or limits as measures to manage labor migration from third countries (c-190/98, eu:c:2000:49, paragraph 25). in most member states, mobile third-country workers do not receive any significant preferential treatment compared to newly arrived third-country nationals and must therefore obtain a work permit under the same conditions as third-country nationals coming directly from outside the eu3, subject to a labor market test procedure or labor market quotas. in practice, however, the administrative procedures and the resulting granting of work permits to third-country nationals show both similarities and differences between the member states. in some member states, concessions are granted in particular to those third-country nationals whose mobility is provided for under eu directives for long-term residents and specific categories of workers. in particular, exemptions apply to particular highly skilled / qualified workers4 or personnel in foreign companies (cyprus).5 in 2006, philip l. martin wrote that "the general agreement on trade in services (gats) offers a potential mechanism for encouraging such migration, particularly by facilitating the cross-border movement of professional service providers. if the gats were to liberalize the movement of service providers, there could be "hundreds of millions" of additional migrants." (gats, 2006) legally speaking, gats mode 4 is defined as the supply of a service by a service supplier of one wto member through the presence of natural persons of another wto member. nowadays, the movement of natural persons covers services supplied by a service supplier of one member through the presence of natural persons of one member in the territory of any other member. mode 4 may affect such sectors of the economy as: information technology, professional services, other services where the movement of service providing personnel is crucial (i.e., after-sales services) (wto, 2021). types of measures affecting mode 4 trade: – visa and work permit processing delays; – licensure/certification requirements; – restrictions on employment of spouses; – restricted entry for certain types of occupations; – economic needs and labor market tests; – quotas; – technology transfer requirements; – residency and citizenship requirements; – training/education/qualification requirements; – promotion of economic relations. in general, visa and work permit requirements and procedures are among the most important measures affecting mode 4 trade. eligibility criteria tend to be strict, with a bias towards categories of highly skilled and educated individuals at higher functional levels. their movement tends to be linked to a commercial establishment in the host country and to a prior period of employment in the home company. permits are issued for periods of stay that are not always tailored to the needs of mode 4 service providers and are often not renewable. there are also often quantitative restrictions on visas and work permits, expressed as numerical quotas and/or economic needs tests (ents). the latter may take the form of labor market tests, management needs tests, staffing requirements, or other types of tests and conditions. ents implemented in the absence of clearly defined criteria and procedures are comparable in effect to the absence of any binding policy. procedures related to visas and work permits can be an additional barrier to mode 4 trade. application procedures are often cumbersome, costly and administratively complex; processing times are likely to be long; rejection rates can be high; and the cost of reapplying is significant. two separate procedures, one for an entry visa and one for a work permit, are often required. permits are generally not transferable from one employer to another, and extension and renewal procedures are not necessarily streamlined. procedures, particularly those related to work permits, rarely distinguish between temporary and permanent movement of workers and are therefore particularly ill-suited to the temporary and often timesensitive types of movement that mode 4 involves. opacity and arbitrariness are also cited as problems associated with entry and work permit procedures (wto, 2021). for example, on march 30, 2020, the eu commission published two additional communi3 austria, belgium, estonia, greece, finland, france, hungary, ireland, italy, lithuania, luxembourg, netherlands, malta, sweden 4 belgium, france, cyprus, finland, poland 5 in finland, france and poland, for example, highly qualified third country national workers holding an eu blue card are exempt from a labour market test. baltic journal of economic studies 194 vol. 9 no. 1, 2023 cations: the "guidelines concerning the exercise of the free movement of workers during the covid-19 outbreak" and the "guidance on the implementation of the temporary restriction on non-essential travel to the eu, on the facilitation of transit arrangements for the repatriation of eu citizens, and on the effects on visa policy ", adding seasonal workers in the agricultural sector to the list of third-country nationals who can enter the eu despite the closure of its external border. as noted in point 2 of the guidance: "the temporary restriction of non-essential travel should not apply to [...] seasonal agricultural workers." in the same guide, the eu commission also provided practical measures for member state authorities to promote a coordinated management of external border controls on travelers authorized to cross the border, through a strict application of the schengen borders code. these measures ranged from systematic checks through consultation of the schengen information system (sis) to health checks of travelers in relation to covid-19 with thermal scanning and/or symptom screening. member states and schengen associated countries were able to limit the number of border crossing points that remained open to "essential workers". and, based on national decisions, each country applied the most appropriate control measures to detect and limit the spread of covid-19, such as quarantining anyone entering their country (including their own citizens) for 14 days (geraci, 2021). weatherburn a., berntsen l. claim that "in belgium, the labor law framework is known to offer significant protection to workers. however, the extent to which this protection is extended to migrant workers is criticized by civil society, as labor migration policies do not take into account the specific vulnerability of migrant workers. this is particularly true for third-country nationals, but also applies to eu migrant workers. however, there are sectoral differences. for example, in the meat sector, although there is still the possibility of informal work, significant efforts have been made to ensure equal treatment of all workers, including posted workers. joint committee no. 118 determines the working conditions and wages of workers in the food industry. according to article 5(1) of the act of march 5, 2002, an employer who employs a posted worker in belgium is obliged to comply with the employment, wage and working conditions laid down by the legal and regulatory provisions of the cbas and the joint committees." (weatherburn, berntsen, 2021) continuing the analysis, suppose that in january 2023, the italian government issues a decree (decretto flussi) that defines the number of quota-eligible non-european economic area workers that can be admitted to italian companies for local employment. in italy, caps ("quotas") are determined annually through consultations with local authorities and the employment services, but are the joint responsibility of the ministry of labour and the ministry of the interior.6 in 2023, the increased quota of work permits is up to 82,705 for non-eu nationals, including: the free movement of workers within the union will be ensured. such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the member states as regards employment, remuneration and other conditions of work and employment. it shall include the right, subject to limitations justified on grounds of public policy, public security or public health, to: (a) to accept offers of employment actually made; (b) to move freely for that purpose within the territory of the member states; (c) to remain in a member state for the purpose of employment in accordance with the provisions laid down by law, regulation or administrative action governing the employment of nationals of that state; (d) to remain in the territory of a member state after having been employed in that state, subject to conditions to be laid down in regulations to be adopted by the commission (chaloff, 2014). the quotas of flow decree involve the following countries: albania, algeria, bangladesh, bosniaherzegovina, korea (republic of korea), ivory coast, egypt, el salvador, ethiopia, philippines, gambia, ghana, japan, guatemala, india, kosovo, mali, morocco, mauritius, moldova, montenegro, niger, nigeria, pakistan, republic of north macedonia, senegal, serbia, sri lanka, sudan, tunisia, ukraine, albania, algeria, bangladesh, bosnia-herzegovina, korea, ivory coast, egypt, el salvador, ethiopia, philippines, gambia, ghana, japan, guatemala, india, kosovo, mali, morocco, mauritius, moldova, montenegro, niger, nigeria, pakistan, republic of north macedonia, senegal, serbia, sri lanka, sudan, tunisia, ukraine. applicants for italian work visas and visa conversions must submit a number of documents by december 31, 2023. 1. application for the certificate of no impediment (so-called nulla osta). 2. application for the italian visa. 3. entry into italy and application for the italian residence permit. 6 provisions shall not apply to employment in the public service; 500 authorizations for self-employed, 44,000 authorizations for seasonal workers in the agricultural and tourism-hotel sectors, 31,205 authorizations for local hires of certain nationalities in specific industries. 7,000 authorizations for changes of status. baltic journal of economic studies 195 vol. 9 no. 1, 2023 for example, at the beginning of 2023, the danish government had published the salary threshold for the pay limit scheme with a minimum salary amount of dkk 465,000 per year (dkk 38,750 per month). the danish positive list scheme includes new job titles with the new job titles for the next six months. in luxembourg, access to employment for beneficiaries of international protection is regulated by a temporary work permit (aot). the labor market is characterized by a high number of crossborder workers from france, belgium and germany, who represent 46.7% of the country 's workforce. while third country nationals represent only 4.8% of the total workforce. these figures do not allow for a targeted labor market integration policy for third-country nationals or, more specifically, for applicants for international protection. the legal framework in luxembourg does not allow applicants for international protection direct access to the labor market. this is only possible after six months from the submission of the application, if the application has not been decided and this lack of decision cannot be attributed to the applicant. this six-month period, during which the applicant cannot access the labor market, is considered by civil society as one of the main challenges for the integration of applicants for international protection into the labor market. however, this is not the only restriction that regulates access to the labor market for applicants for international protection. after the six months, the applicant for international protection has to apply for a temporary work permit (aot), find an employer willing to employ him/her with the aot, and also pass the labor market test. this lengthy and rather complicated procedure can be seen as one of the reasons why the number of first-time aots issued in luxembourg is very low (around 10 permits per year) (emn report on integration, 2022). the irish government has relaxed the rules for general applications under the atypical working scheme (hereafter aws) with effect from january 1, 2023. a 90-day permit under the aws will be allowed to be spread over a six-month period, allowing the employee to travel intermittently during that period. the cooling-off period for starting a new aws permit after this six-month period will also be reduced from 12 months to one month. this will be beneficial to foreign nationals who are able to work in ireland on a regular basis and are not required to work for a continuous period of 90 days. the salary threshold for the aws will be revised from the current national minimum wage to align with the published salary requirement for a general employment permit (currently €30,000). the irish equality and human rights commission (hereinafter ihrec) has been designated as the "designated body " for ireland under article 4 of the ihrec act 2014. in certain circumstances, ihrec may provide legal and/or other assistance to eea workers and their families to help them assert their rights under the directive and the ihrec act 2014. it also has functions to promote, analyse, monitor and support the equal treatment of workers and their family members without discrimination on grounds of nationality. with effect from 1 january 2023, the employment services act no. 5/2004 has been amended and several changes have been implemented affecting the immigration processes of eu and non-eu nationals. the romanian government has published its decree with annual quota for non-eu/eea/swiss workers from outside the european union, european economic area and switzerland. as of january 1, 2023, the romanian government has set the work permit quota at 100,000 work permits for non-eu/eea/swiss nationals to be employed in romania. the slovak government has obliged slovak companies that employ eu citizens on secondment to slovakia to submit information cards to the labor office at the beginning and end of the secondment. it is not necessary for the labor office to conduct a labor market review during the renewal process for non-eu nationals who are applying for a single permit renewal or a blue card renewal and who are not changing their job position. non-eu nationals who have a pending single permit renewal application will be allowed to work until a decision is made, even if the current permit expires; it is just important to submit the renewal application 90 days before the expiration date, in exceptional cases 30 days before the expiration date. employers must submit the information card to the labor office. on december 22, 2022 the spanish government introduced a law on teleworking visa, the so-called el visado para el teletrabajo de carácter internacional. the telework visa is intended for non-eu nationals who wish to live and work in spain on a self employed basis or as employees of foreign companies who perform their duties remotely for up to one year. it is possible to apply for a three-year residence permit and then renew it every two years. the sponsoring foreign company with which the applicant has an employment relationship must provide proof of prior real and continuous activity for at least one year. the fact that supporting documents must include, among other things, police certificates, proof of social security coverage and proof of health insurance means that sufficient lead time is required to collect these documents (abboud, vennewald, 2023). to compare the eu policy with other countries' policies, it is worth mentioning that switzerland has the right to renew seasonal work permits, which baltic journal of economic studies 196 vol. 9 no. 1, 2023 allows the worker to apply for a permanent residence permit after four consecutive seasons (oecd (2002a)). the swiss authorities have published the work permit quotas for foreign workers for 2023, with the same quota allocations as for 2022. as before, quotas do not apply to applications for l permits for stays of less than four months, status changes, and renewals. in contrast to 2022, quotas for croatian nationals will be reintroduced in 2023 (federal council, 2023; switzerland, 2023). on january 30, 2023, the government of canada announced that canada will temporarily extend work permits to family members of principal applicants under the temporary foreign worker program (tfwp) and the international mobility program (imp) to help canada address chronic labour shortages. eligibility for work permits will be extended to the following classes of applicants: – the spouse, common-law partner, or dependent child of a work permit holder who is working in an occupation in any of the training, education, experience, and responsibilities (teer) categories (0 to 5), or; – the spouse, common-law partner, or dependent child of a work permit holder who is the principal petitioner and has an open work permit (example: post-graduate work permit holders at all skill levels); – the person is a spouse, common-law partner, or dependent child of a permanent resident petitioner in the economic class who has a work permit. spouses, common-law partners, and dependents of workers in a teer 4 or 5 job under the low-wage agricultural stream of the seasonal agricultural worker program and the agricultural stream of the temporary foreign worker program are not eligible to apply at this time. 4. eu work permit quotas policy for ukrainian beneficiaries of temporary protection according to the european migration network report 2022, "the situation with regard to ukrainian nationals already present on the territory of a member state before 24 february 2022 varies widely across member states. most member states have adopted specific measures, with three member states reporting that their existing legal framework already covers such cases. several member states reported that ukrainian nationals legally residing on their territory could remain after the expiry of their visa or other legal basis for stay. estonia, for example, stated that there was no need to specifically apply for an extension of the documents granting legal stay. others specified that individuals could apply for an extension of their current permit, apply for temporary protection, or apply for shelter. in contrast, the measures taken by bulgaria, malta and slovenia do not allow ukrainians who were already in their territory before the russia attack to benefit from temporary protection, but only from international protection. to make it easier for those who were already in sweden at the time of the invasion, the swedish government adopted an amendment to the relevant ordinance in early april. the amendment, which entered into force on 26 april 2022, has the effect that those who traveled to and stayed in sweden between 30 october 2021 and 23 february 2022 are also included in the group of persons entitled to a residence permit with temporary protection, provided that they meet the requirements, e.g., being a ukrainian national and residing in ukraine. with regard to ukrainian nationals in an irregular situation, some member states reported that they provide that such persons are granted a legal basis for temporary stay and that any return decision is thereby postponed or annulled." (emn report, 2022) in terms of policy, belgium reported that there were no specific provisions for ukrainian nationals in an irregular situation, but that they could apply for temporary protection. finland and latvia put persons in an irregular situation on the same footing as those with valid permits by allowing them to apply for an extension of an expired permit, to apply for temporary protection or to apply for shelter. on the other hand, italy 's measures provide that persons in an irregular situation can apply for international protection and are therefore not subject to possible repatriation. it is noteworthy that on april 5, 2022, the luxembourg refugee council (collectif réfugiés luxembourg – lfr) issued a statement on certain issues related to persons fleeing ukraine after the unprovoked war launched by russia against ukraine. one of the main points was related to the access to the labor market for the beneficiaries of temporary protection, which indicates: " we are satisfied that access to the labour market will be facilitated for beneficiaries of temporary protection, who will be exempted from the need to apply for a temporary work permit (aot). they will have free access to the luxembourg labor market." however, the statement also criticized the difficulty of access to the labor market for applicants for international protection. in this regard, the declaration states " we expect a rapid positive development regarding access to employment for applicants for international protection, who currently have to wait six months before they can apply for a work permit. the obligation to apply for this authorization (no direct access even after six months) and the labour market test are important obstacles. the authorities informed us that the legislative process is ongoing and that positive developments are expected (abolition baltic journal of economic studies 197 vol. 9 no. 1, 2023 of the labor market test). however, the temporary work permit procedure would remain in place and therefore, contrary to our demands, the impossibility of access to the labor market for applicants for international protection before six months of the procedure would also remain." however, the luxembourg government has taken certain measures to integrate them into the labor market. exceptionally, refugees from ukraine have immediate access to the labor market. they can be hired directly under legal employment contracts (permanent / temporary / fixed-term), subject to the legal provisions of the labor code. employers wishing to hire beneficiaries of temporary protection from ukraine must register their vacancies with the adem in accordance with the usual procedure. when filling in the vacancy declaration, employers should make sure that they choose the public publication of their vacancy in order to ensure that jobseekers from ukraine can access it directly on the public website of the adem's jobboard (emn report, 2022). agree with daniel thym on the advantages of the temporary protection directive. firstly, "the temporary protection directive avoids the overstretching of scarce administrative resources. beneficiaries receive protection status without having to go through long and complex shelter procedures. this would have taken weeks, if not months. national authorities can instead concentrate on the reception of beneficiaries. secondly, the temporary protection directive has always been perceived as an instrument of intergovernmental solidarity, in response to protracted political disputes in the 1990s. germany and austria were among the countries that received the largest number of people fleeing the civil wars in the former yugoslavia and lobbied, without much success, for mandatory solidarity. the content of implementing decision (eu) 2022/382 is quite different from what many might intuitively think. inter-state distribution keys or quotas give way to a simple allocation mechanism: "free choice" is the surprising outcome of the council decision. politically, the negotiations were not derailed by protracted disputes over quotas, although these had dominated the original debate on the directive. the implementing decision does not specify which country will receive how many people." (thym, 2022) it is noteworthy that the association agreement between ukraine and the eu provides for overcoming discrimination in all its forms and manifestations. the second phase of the eu action plan on liberalization for ukraine requires effective implementation of legislation and anti-discrimination policies, implementation of relevant un and council of europe documents. the creation of an effective system to prevent and combat discrimination is also provided for in the national human rights strategy, and item 3, article 105 of the action plan for its implementation directly requires the provision of punishment for crimes committed for reasons of into lerance based on such grounds as race, color, religious beliefs, sexual orientation, transsexualism, disability, language. (matvieieva, smokov, kornienko, 2022) there are also some hidden dangers and disadvantages, as recalled in the recent statement that "the smuggling of people across the green and blue borders and the considerable gap between return decisions and the actual return of third country nationals will continue to be two of the most enduring challenges for european border management. the risk remains that irregular migrants will be victimized by exploitative working and living conditions, in some cases as a means of repaying their debts to smugglers." (frontex, 2022) 5. conclusions the observed study shows that the number of people arriving in the eu member states will double in the coming decades. labor migration is a "tireless" phenomenon in the european union. the effect of this process is difficult to interpret from a legal point of view, although it is obvious that no legal overview can fully reveal the issue of labor migration in the european union. the analysis of the legal backgrounds identified at the eu level of labor migration policy revealed that work permit measures (quotas) defined by the eu member states to secure their national econo mies help to reduce unilateral and risky labor migration. the solidarity of the eu member states is based on the establishment of relevant normative acts to harmonize international security, rescue and reception (shelter) systems. the global economic situation in the framework of labor migration from ukraine is still controversial, however, it is implemented to promote ukrainian trade and migration policy in a comprehensive scale. nevertheless, there are several facts of smuggling, human trafficking, visa-free regime violations committed by migrant workers originating from ukraine, while the exploitation of temporary protection affects eu-ukraine relations. ukraine has its own national legislation to prevent and combat illegal human trafficking and sets special "expatriate quotas" to prevent illegal migration from "unfriendly countries". the eu law obliges legal authorities to issue registrations in several legal matters (entry and customs violations). observation of the competence of legal institutions, which are in charge of work permit quotas, helps to understand the current aspects of the right to shelter and temporary protection, baltic journal of economic studies 198 vol. 9 no. 1, 2023 forced by the war in ukraine. national work permit quotas are seen as a tool that cannot exist separately from legal obligations of eu member states, otherwise they are ineffective. in order to prevent illegal entry of migrant workers into the eu member state, the relevant ministry of interior is responsible for the passport and visa control mechanism. ministries of interior and customs have an essential role to play in the prevention of transnational displacement, which has an imperative impact on global labor migration policies. finally, the european labor migration mechanism is not a common one and depends on the visa policies of each country. however, the european work permit quota remains a problematic measure that is not exempt from prohibitions and violations of the principles of free movement and non-discrimination. references: abboud, r ., & vennewald, g. (2023). global immigration alert. available at: https://www.lexology.com/ library/detail.aspx?g=9e875724-f7fa-412f-902b-f23b0f26f3b2 analytical report following the communication from the commission to the european parliament, the european council and the council commission opinion on ukraine’s application for membership of the european union (2023). available at: https://neighbourhood-enlargement.ec.europa.eu/system/files/2023-02/ swd_2023_30_ukraine.pdf bundesrat legt drittstaatenkontingente für 2023 fest (2023). available at: https://www.admin.ch/gov/de/ start/dokumentation/medienmitteilungen.msg-id-91840.html c-19/92, eu:c:1993:125, paragraph 32. c-418/93 to c-421/93, c-460/93 to c-462/93, c-464/93, c-9/94 to c-11/94, c-14/94, c-15/94, c-23/94, c-24/94 and c-332/94, eu:c:1996:242, paragraph 32. c-190/98, eu:c:2000:49, paragraph 25. c-480/08, eu:c:2010:83. c-565/08, eu:c:2011:188, paragraph 53. c-602/10, eu:c:2012:443, paragraphs 79 to 81. chaloff, j. (2014). evidence-based regulation of labour migration in oecd countries: setting quotas, selection criteria, and shortage lists. migration letters, 11(1), 11–22. consolidated version of the treaty on the functioning of the european union – p art three: union policies and internal actions – title iv: free movement of persons, services and capital – chapter 2: right of establishment – artcle 49 (ex article 43 tec). available at: http://data.europa.eu/eli/treaty/tfeu_2008/art_49/oj council implementing decision (eu) 2022/382. directive 2014/54/eu of the european parliament and of the council of 16 april 2014 on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, available at: http://data.europa.eu/eli/dir/2014/54/oj directive (eu) 2018/957 of the european parliament and of the council of 28 june 2018 amending directive 96/71/ec concerning the posting of workers in the framework of the provision of services. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32018l0957 emergency measures on migration (2015). available at: https://www.europeanmigrationlaw.eu/documents/ article78(3)tfeu-emergencymeasuresmigration.pdf emn bulletin on the application of quotas in eu member states as a measure for managing labour migration from third countries. available at: https://emn.ie/files/p_201403281253032014_emn_inform_application_of_ quotas_en_version_final.pdf emn report on integration of applicants for international protection in the "luxembourgish labour market" (2022). available at https://home-affairs.ec.europa.eu/system/files/2023-01/labour_market_integration_of_ aips_final.pdf emn report on application of the temporary protection directive (scope and registration) (2022). available at: https://emn.ie/wp-content/uploads/2022/07/emn_tpd_inform.pdf frontex risk analysis for 2022/2023, p. 41. doi: https://doi.org/10.2819/469148 gats, migration, and labor standards philip l. martin international labour organization (international institute for labour studies), (2006). geneva 22 (switzerland), 48 p., at p. 5. available at: http://cdi.mecon.gov.ar/ bases/doc/oit/iils/dp16506.pdf geraci, a. (2021). the "pandemic compromise": the breaking down of barriers for migrant farm workers. labour migration in the time of covid_19: inequalities and perspectives for change, staiano f., ciliberto g.(eds.), conciglio nationale delle ricerche, p. 149. judgment of the court of 26 february 1991. the queen v immigration appeal tribunal, ex parte gustaff desiderius antonissen. reference for a preliminary ruling: high court of justice, queen's bench division – united kingdom. case c-292/89. available at: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex:61989cj0292 baltic journal of economic studies 199 vol. 9 no. 1, 2023 judgment of the court of 11 july 2002. marie-nathalie d'hoop v office national de l'emploi. available at: https://curia.europa.eu/juris/liste.jsf ?language=en&num=c-224/98 judgment of the court (full court) of 23 march 2004. brian francis collins v secretary of state for work and pensions. reference for a preliminary ruling: social security commissioner – united kingdom. freedom of movement for persons – article 48 of the ec treaty (now, after amendment, article 39 ec) – case c-138/02. available at: https://curia.europa.eu/juris/liste.jsf ?num=c-138/02 judgment of the court (third chamber) of 4 june 2009. athanasios vatsouras (c-22/08) and josif koupatantze (c-23/08) v arbeitsgemeinschaft (arge) nürnberg 900. references for a preliminary ruling: sozialgericht nürnberg – germany. available at: https://curia.europa.eu/juris/liste.jsf ?num=c-22/08&language=en matvieieva, l., smokov, s., & korniienko, m. (2022). hate crimes: international, regional, economic, and national aspects, baltic journal of economic studies, 8(3), 125–134. doi: https://doi.org/10.30525/22560742/2022-8-3-125-133 oj l 158, 30.4.2004, p. 77. oj l 166, 30.4.2004, p. 1. oj l 288, 18.10.1991, p. 32. operational data portal. ukraine refugee situation (2023). available at: https://data.unhcr.org/en/situations/ ukraine opinion of advocate general hogan delivered on 30 september 2021(1) case c-247/20 vi v commissioners for her majesty’s revenue & customs (request for a preliminary ruling from the social security appeal tribunal (northern ireland), (united kingdom)). available at: https://curia.europa.eu/juris/document/document. jsf ?docid=246802&doclang=en proposal for a council decision establishing provisional measures in the area of international protection for the benefit of italy, greece and hungary, com/2015/0451 final – 2015/0209 (nle). single market act – frequently asked questions (2011). available at: https://ec.europa.eu/commission/ presscorner/detail/fr/memo_11_239 steps for obtaining work permits in bosnia and herzegovina (2012). available at: http://ukrexport.gov.ua/i/ imgsupload/file/steps_for_obtaining_work_permits_in_bh.pdf switzerland: work permit quotas for 2023 unchanged (2023). available at: https://www.fragomen.com/ insights/switzerland-work-permit-quotas-for-2023-unchanged.html the irish human rights and equality commission's. available at: https://www.ihrec.ie/our-work/overview of-eu-rights-on-free-movement-of-workers-and-families/ thym, d. (2022). temporary protection for ukrainians: the unexpected renaissance of ‘free choice’: shelter crisis, eu law, european union, refugees, temporary protection, 2022. available at: https://eumigrationlawblog.eu/ temporary-protection-for-ukrainians-the-unexpected-renaissance-of-free-choice/07mondaymar 2022 weatherburn, a., & berntsen, l. (2021). similar work, yet different risks? examining legal and institutional responses regarding essential migrant workers in belgium and the netherlands in covid-19. labour migration in the time of covid-19: inequalities and perspectives for change, staiano f., ciliberto g. (eds.), conciglio nationale delle ricerche, pp. 251–263. world trade organization: presence of natural persons (mode 4) (2021). available at: https://docs.wto.org/ dol2fe/pages/fe_search/fe_s_s009-dp.aspx?language=e&catalogueidlist=108652 received on: 12th of january, 2023 accepted on: 23th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 175 vol. 4, no. 1, 2018 corresponding author: 1 department of fea management and eurointegration, sumy national agrarian university. e-mail: likalachevska@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-175-180 models for innovation development of rural territories based on infrastructure development larysa kalachevska1 sumy national agrarian university, ukraine abstract. the research subject is an aggregate of theoretic and methodical grounds for choice and organization of rural development innovation models based on infrastructure development, taking into consideration the world experience. methodological and theoretical ground for the research is a systematic approach for studying socialeconomic and ecologic phenomena and processes under the market conditions. in order to solve some tasks, there are used several methods: abstract-logical method to determine the conception and methods of analysis and synthesis. the aim of the research is to study the models for innovation development of rural territories based on infrastructure development. conclusions. segregate scientific approaches to form the model of rural economy are ruralism and neoruralism. ruralism is a way of thinking and idea representing ruralisation in the human community, the development of which is focused on securing food supply and needs of those who live and work in rural areas. neoruralism is a multifunctional social-economic system, which is focused on broadening of powers for united territorial communities. the rural economy here is an open system, focused on securing rural inhabitants welfare. the idea that agricultural changes in terms of modern tendencies and effective models of rural development, especially in the sphere of agricultural modernization, as a ground for its sustaining power, improvement of competitive ability for agricultural production and to meet the wto ukrainian member requirements is proved. strategic benchmarks for ukrainian rural areas in accordance with the requirements of europe 2020 strategy are smart development – balanced development of the economy and social sphere; constant development – abide by scientifically proved norms; inclusive development – taking into consideration social standards for development. special institutions determining law institutional mechanism of innovation development are very important for the revival of rural areas and infrastructure development. key words: development model, rural areas, estimation, infrastructure, social sphere. jel classification: f140, q180 1. introduction rural areas are the important element of life in any country, developing under the conditions of market economy, they have a great economic, natural, demographic, and socio-cultural potential. utilization of such potential in many ways determines the development of certain regions. that is why any country must consider the development of rural areas as an important step, not only for the improvement of agricultural productivity but also for increasing of gdp in the whole. we must also determine the development of rural areas choosing a particular model able to solve the existing tasks. the existing model for agrarian sector development, where large agrarian holdings have the dominant role, has negative ecologic and social effect. ineffective utilization of key asset  – land is in the first place. large agrarian holdings renting more than a half of all agricultural lands grow only highly productive cultures, without following crop rotation measures, they use great numbers of chemicals without application of organic fertilizers. such technologies lead to soil fertility fall. soils are vulnerable to water and wind erosion. utilization of “monoculture” leads to accumulation of heavy metals, pesticides, and pathogenic agents in soil. wrong crop rotation leads to large numbers of weeds and pests. practically all production of large agrarian holdings is exported as a raw material. so, producers do not get added value from procession and marketing. it damages agricultural complex, leads to increase in unemployment rates in rural areas and restrain the development of social and productive infrastructure. besides, holdings, having modern wide agricultural machinery, a number of storage facilities and resources for chemical fertilization, leave small farms and agricultural enterprises as non-competitive. it leads to a baltic journal of economic studies 176 vol. 4, no. 1, 2018 reduction in a number of such enterprises and decrease in production of food crops, grown on small farms. holdings do not invest much in the development of rural infrastructure especially social and productive. taking into consideration the depression of rural areas, we consider the tendency to decrease in purchasing power for food products. it restrains the eco production, which is highly important in the formation of a healthy nation. among the challenges of the agrarian sector is the lack of commercial, law, and market information needed by stakeholders, it restricts their investment activity. unpredicted changes in taxation system also have a negative effect on the agrarian sector. all these points need to be urgently changed together with the implementation of new legislation considering the agrarian sector. everything mentioned above needs new models for innovation development of rural areas based on infrastructure development 2. research and literature analysis theoretical grounds for innovations in agrarian infrastructure development and theoretical and methodological paradigm of rural areas development and rural economy in particular have been studied by famous ukrainian and foreign scientist. t.  m.  lozynska has studied the institutional inefficiency of transformations in the agrarian sector (lozynska, 2012). tendencies, subjects, and prospects of reforming rural areas are the research subject of a. yermolaiev, i. klimenko, v. yemets, s. taran (yermolaiev, 2015). current state and prospects of international integration of agrarian sector have been studied by y.o. lupenko (lupenko, 2015) and p. т. sabluk (sabluk, 2006). м. о. baranovskyi has studied the rural areas in the context of the level of their development, transformational changes, and conceptual approaches (baranovskyi, 2011). м.  в.  polenkova studied the economic complex of rural areas and its integral aspect, in particular (polenkova, 2013). а. v. lisovyi studied methodological approaches to the assessment of rural areas in ukraine and their need for innovation development and creation of infrastructure (lisovyi, 2013). however, a great number of other points in innovation development for rural areas still demand a research work. 3. research materials problems of rural areas are evident and if the situation gets worth, it will cause the danger to territorial balance. the characteristic feature of the process is dissolution of many locations from the map of ukraine. as it is known, the reason for it is a crisis in the basic brunch of economy – agriculture. m. baranovskyi studying the conceptual approaches for reformation of agricultural sector, mentioned that ukraine for many years had one way of rural development, despite its agrarian potential, it had agrarian tendency without development of any other productions (baranovskyi, 2012). the mentioned above facts show the need for theoretical and methodological research in the sphere of systematic development for rural areas with innovation models adapted to modern challenges. scientific researches of ukrainian and foreign scientists, based on classic approaches to agricultural economics concerning the specifics of native agrarian sector development became the ground for models of agricultural development. scientific researches of agrarian economists are important for further research work and creation of strategic vectors for further development of rural areas. the mentioned researches give the opportunity to separate two development models for rural areas based on innovations: ruralism and neoruralism (fig. 1). ruralism ruralism – a way of thinking and idea, representing ruralisation in the human community, the development of which is focused on securing food supply and needs of those who live and work in rural areas is one of the most important factors of effective agrarian policy. neoruralism a multifunctional socialeconomic system, which is focused on broadening powers for united territorial communities. the rural economy here is an open system, focused on securing rural inhabitants welfare. models of rural development fig. 1. scientific approaches to form the model of the rural economy according to the principles of ruralism and neoruralism source: the author’s research baltic journal of economic studies 177 vol. 4, no. 1, 2018 theoretical and methodological approaches of ruralism and neoruralism have several levels: global and national. studies of the global level analyse the points of natural, spiritual, and economic development of rural areas under the conditions of modern challenges connected with the changes of the world markets, growing food supply problems and urbanization. national level studies specific characteristics of a particular country, its resources, peculiarities of production, and models of development. neoruralism, extended under the conditions of decentralization and broadening of powers for united territorial communities, having enough financial resources and the ability to use active assets, is concentrated in rural areas, new communities can solve a great number of economic, ecologic, and social problems. despite the number of the researches, the formation of the new socially oriented economy is an urgent problem and needs further research work. p. m. matvieiev, studying ecologic and economic grounds for the formation of effective agricultural production, states that the key branch of the real economy sector is agriculture, effective and rational development of which is a guarantee for food and ecological safety of any country (matvieiev, 2014). a. v. lisovyi, studying the methodical approaches to assessment of rural areas and the need of innovation and infrastructure development, proved that agriculture gradually becomes the indicator of economic development, showing a good economic efficiency of agricultural production, steady increase of innovation ability and investment prospects (lisovyi, 2007). current state and challenges of agrarian land transformations in ukraine have been studied by a. yurchenko. taking into consideration the fact that agriculture is an important factor of welfare, the author says that there is a need for a certain model providing steady development of the sector. ukraine due to existing soil resources and favourable climatic conditions is highly competitive on the world market (yurchenko, 2015). an important part of steady development for rural areas is effective functioning of agriculture, being presented in multifunctional production (fig. 2). о. м. borodina, describing the rural development policy based on united communities in ukraine proves that multifunctional conception is a methodological ground for strategies for the agrarian sector in many countries of the world and in european union in particular (borodina, 2015). under the conditions of globalization and growing competition among the world producers of agricultural a gr ic ul tu re is v ie w ed a s a br un ch o f t he a gr ar ia n co m pl ex . t he m ai n ra te s of se ct or c on di tio ns a re g ro ss a gr ic ul tu ra l p ro du ct v al ue b as ed ra te ; a gr ic ul tu ra l pr od uc tio n ac co rd in g to o w ne rs hi p; p la nt p ro du ct io n an d an im al h us ba nd ry in na tu ra l f or m ; t he n um be r o f a gr ic ul tu ra l w or ke rs ; m at er ia l a nd e qu ip m en t increase in agricultural productivity, intensification of production processes, and implementation of innovations; rational utilization of resource potential (soils, labour, finance); alternative (non-agricultural) employment in rural areas, diversification of production; st ea dy d ev el op m en t o f r ur al a re as ecological safety development, improvement of natural environment, preservation of natural landscapes; added value production by smalland middle-sized producers. it will make them competitive with large agricultural holding. development of rural areas and an increase of gross export potential are impossible without smalland middle-sized producers; production of intangible values and services in rural areas, creation of complete cycle production fig. 2. parts of a steady agricultural development as a system-forming part of the agrarian sector source: the author’s research baltic journal of economic studies 178 vol. 4, no. 1, 2018 production, it is important to develop models of future development for the agrarian sector and rural areas, with a system of assessment for it (fig. 3). grouping of indicators allows forming four groups, depending on their functional purpose: economic  – characterize economic effectiveness, institutional  – characterize the level of legislation, social  – characterize social effectiveness, ecological – characterize the level of the ecological environment. in order to secure the development of rural areas, according to neorural model, it is necessary to develop and confirm the long-term oriented plan of rural development. one of the most important parts of this process is scientific and research work. it contains initiation for development, making the idea popular, the creation of a work group to provide scientific researches. scientific research work, in its turn, is held in two directions. the first, the assessment of territorial competitive ability, the second is an assessment of competitive advantages and critical challenges of territorial development. the final point of the research work is in discussion and confirmation of the research results. the planning system has three-way activity, devoted to the development of systematic, special multisectoral programs and projects based on competitive advantages. here we can mention human resources, spatial planning, and electronic government. the development of programs involves a power supply, environment protection, modernization of living conditions. in ukraine realization of such incentives is a problem because of the lack of financial support. agrarian sector of eu depends on donations and gets lots of financial resources for the development. decentralization is one of the reforming measures providing accumulation of the financial resources needed. the process of government decentralization and reformation of local authorities is a priority of modern ukrainian policy. it must have a positive effect on the development of rural areas (fig. 4). under the conditions of decentralization and reformation of the management system and growing of agrarian sector, it is impossible to do so without the development of infrastructure. it is important now to form a united fig. 3. set of indicators for the assessment of models for rural development source: the author’s research  gross agricultural production;  ratio of capital investments in agriculture;  profitability of agricultural enterprises;  rural employees productive abilities;  government financing of the rural economy. economic – characterize economic effectiveness institutional – characterize the level of legislation ecological – characterize the level of ecologic environment  income-expenses relation;  level of rural unemployment;  budget healthcare expenses;  hospital accessibility for rural inhabitants;  part of budget expenses for education;  internet and media accessibility. social – characterize social effectiveness  local authorities functioning;  accessibility of local authorities;  scientific research expenses (budget %);  status of development programs;  the existence of steady development strategy.  expenses to decrease air pollution;  expenses for ecosystem restoration;  expenses for measures of biodiversity conservation;  the amount of waste from stationary and mobile sources of pollution per 1 person;  the rate of biotechnologies utilization. baltic journal of economic studies 179 vol. 4, no. 1, 2018 organizational, economic, finance, investment and logistic system of development. all of them are closely connected and form the united system of infrastructure development. having a base in the neorural idea, decentralization gave the local authorities an opportunity to improve the conditions for local business. the principle is easy to understand  – the better conditions local enterprises have, the better financing a local budget has. 4. conclusions the model of decentralization chosen, having a base in the neorural idea, is an important step of rural areas development. first steps in uniting the communities have positive results; today we need a special strategy and system of problem-solving for further development. first of all, we must consider the functions of rural territories. it contains: productive-economic, sanative-recreational, environment protection and social functions. the productive-economic function is of a global character, as it is a decision for food safety program of our country, and provides the rural community with the inputs and clear legislation in the market for agricultural production. together with economic problems, we need to solve ecologic problems; these ecologic problems contain sanative-recreational and environmental protection. ecotourism must be an integral part of rural development. environment protection and rational utilization of natural resources must be a dominant function in rural areas. social content is one more important point of rural functioning. here is the development of infrastructure, whole year employment of rural inhabitants, the creation of conditions for labour and rest needed for educational, cultural, and health development. in order to solve these problems, we need to proceed in the revival of rural territories and create conditions for steady development. but first of all, we must consider the social purposes for rural areas. all above mentioned requires control of recourses utilization, especially for the agricultural lands, increase soil productivity and protection of the environment. the main aims of rural development, under the conditions of decentralization model, are real managing power of united communities, making the social services available and others. according to the research data, monitoring of the process of decentralization, we have some positive results. as of 17 october 2017, 665 united territorial communities have been created. 252 communities have the desire to run in the elections, it is a positive impulse, showing a good performance in the development of rural areas, having a positive effect on the social and productive sphere. fig. 4. aims for the development of rural areas under the conditions of decentralization and widening of united territorial communities powers source: the author’s research strategic aims – secure high living standards in any region of the country. in order to secure it, we must realize the existing problems. aims widening of community’s possibilities to manage the investments of any kind real powers of the community to manage the capital territorial availability of social services creation of united territorial communities and centres of administrative services a delegation of powers in infrastructure management and all parts of endogenous territorial potential to united communities redistribution of budget financing to communities; direct access to international and national investments instruments stakeholders: ministry for regional development, housing and building of ukraine, state statistic service of ukraine, state service of geodesy, mapping and land registry of ukraine, ministry of justice, state owned enterprise “national informational systems”, state fiscal service of ukraine, state judicial administration of ukraine. baltic journal of economic studies 180 vol. 4, no. 1, 2018 references: baranovskyi m. (2012) kontseptualni pidkhody do reformuvannia silskoho sektora ukrainy [conceptual approaches to the reforming of rural sector of ukraine]  – nizhyn mykola gogol state university publishers: pp. 29-30. [in ukrainian] borodina o. (2015) polityka silskoho rozvytku na bazi hromad v ukraini : naukova dopovid. [community-based rural development policy in ukraine: scientific report] national academy of sciences of ukraine. kyiv: pp. 47. [in ukrainian] yermolaiev a. (2015) ahrarnyi sektor ukrainy: tendentsii, subiekty, perspektyvy reformuvannia [agrarian sector of ukraine: trends, subjects, prospects for reforming]. kyiv: isd: 28 p. [in ukrainian] lisovyi a. (2007) metodychni pidkhody do otsiniuvannia silskykh terytorii ukrainy [methodological approaches to the assessment of rural territories in ukraine]. ekonomika apk  – economics of aic (8): pp. 123-130. [in ukrainian] lozynska t. (2012) instytutsiina neefektyvnist transformatsii v ahrarnomu sektori ekonomiky [institutional inefficiency of transformations in the agrarian sector of economics]. scientific works of poltava state agrarian academy (5): pp. 163-169. [in ukrainian] lupenko yu. (2015) suchasnyi stan ta perspektyvy mizhnarodnoi intehratsii ahrarnoho sektoru ukrainy: zavdannia ahroekonomichnoi nauky [current state and prospects of international integration of agrarian sector of ukraine: problems of agroeconomic science]. ekonomika apk – economics of aic (6): pp. 6-11. [in ukrainian] matvieiev p. (2014) ekoloho-ekonomichni zasady formuvannia silskohospodarskykh zemlevolodin i zemlekorystuvan [ecological and economic principles of agricultural land holdings formation]: dissertation of candidate of economic sciences, kharkiv: 358 p. [in ukrainian] polenkova m. (2013) hospodarskyi kompleks silskykh terytorii: intehralnyi aspect [economic complex of rural territories: an integral aspect]. molodyi vchenyi – young scientist 2(02): pp. 32-39. [in ukrainian] sabluk p. (2006) rozvytok silskykh terytorii – zaporuka vidrodzhennia ahrarnoi ukrainy [development of rural territories – a guarantee of agrarian ukraine revival]. visnyk ahrarnoi nauky – bulletin of agrarian sciences (5): pp. 21-23. [in ukrainian] yurchenko a. (2015) suchasnyi stan ta problemy zemelnykh transformatsii v ahrarnii sferi ukrainy [current state and problems of land transformations in the agrarian sector of ukraine]. zemlevporiadnyi visnyk – bulletin of land management (12): pp. 28-31. [in ukrainian] baltic journal of economic studies 186 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 volodymyr dahl east ukrainian national university, kyiv, ukraine (corresponding author) e-mail: sieriebriak1@gmail.com orcid: https://orcid.org/0000-0001-7207-594x doi: https://doi.org/10.30525/2256-0742/2023-9-2-186-192 peculiarities of state policy formation in the field of special regimes of economic activity stanislav sieriebriak1 abstract. the main purpose is to consider the national experience of changing the specifics of economic activity, the main approaches to the legal regulation of relations in the sphere of economic activity are highlighted in historical retrospect. the article is devoted to the analysis of the procedure of formation and development of the mechanism of state regulation of economic activity in special conditions (preferential principles of economic activity, restrictions on economic activity and mixed legal regimes). research methodology. special attention is paid to the possibility of applying the method of legal modeling and introducing a special regime of management in the conditions of martial law. it is emphasized that most countries of the world, including ukraine, are not ready for "war" and "post-war" economy. there is no adequate economic and legal basis for creating appropriate conditions for economic activity. important aspects of legal regulation of special economic regimes have been studied. the basic legal documents regulating the principles of state policy in the sphere of economy were analyzed. different stages of economic development of the country are highlighted. the legal basis of economic activity in the conditions of the martial law regime was studied. the main means of stabilization of the economic system of ukraine are also indicated. conclusions. the current stage of development of the ukrainian economy is characterized by a period of profound transformation of approaches to economic activity. the problem of introducing a system of legal regulation of economic relations is quite acute in the conditions of the urgent need to "restart" the national economic system of ukraine. it is obvious that there is a need to create effective mechanisms for regulating the creation and functioning of special regimes of economic activity in the context of anti-crisis regulation. practical implications. since today there is an urgent need to update the legislation, joint legal and economic research will contribute to the modernization of legislation in this area. value/originality. the conducted research allows to determine the basic directions of modernization of the system of legal regulation of economic activity. key words: special regime, regional policy of the state, territorial development strategies, territories of recovery, regional growth poles, territories with special conditions for development, territories of sustainable development. jel classification: k22, z18, r13 1. introduction it is well known that the basis for the prosperity of any state is the state of its economic system. the stronger this sphere is, the stronger the country itself is, more adapted to various challenges. a vivid example of this is the activity of the "big seven" countries, whose members are the highly developed countries of the world – the usa, japan, germany, great britain, france, italy and canada. in the conditions of the period of almost three years of quarantine restrictions in ukraine, a full-scale war, reorientation and restart of the entire economic system is necessary. the main challenge today is to find means to restore the state, to find investors (both domestic and foreign) and to support entrepreneurship in the country. all this is possible with the creation of effective special forms of economic activity. the current state of legal regulation of the functioning of legal regimes of economic activity in ukraine is extremely unsatisfactory. at least due to the fact that the mechanism of legal regulation is imperfect and, accordingly, the goal of regulatory influence is not achieved. therefore, the main goal of this scientific work is to determine the main directions of modernization of state policy in the field of special economic regimes at the current stage of functioning of the ukrainian state. baltic journal of economic studies 187 vol. 9 no. 2, 2023 2. history of special economic regimes the question of determination of certain special conditions for realization of economic activity has been of interest to scientists of various branches of science for a long time. in various studies, special attention is paid to the formation of an effective policy to support the development of entrepreneurial activity. at the same time, the issue of stabilization of the state economic system in conditions of various negative factors is always important. for example, a global pandemic, armed conflicts or full-scale war. as some scientists rightly point out, the military conditions of economic activity make it necessary to apply special methods, tools and approaches to the development of the economy of the country destroyed by war. the set of these special methods, tools and approaches is based on the definition of the most effective forms, fiscal methods and tools of support to producers and the population through the provision of subsidies, state aid, financial support, budget support, protection of commodity producers, and so forth (zablodska, rohozian, sieriebriak, plietnov, vakhlakova, 2022). at the same time, it should be emphasized that the problem of reformatting the economic system, adjusting the economy and the conceptual bases of its construction to real conditions is not a new situation for ukraine. indeed, there is already experience of transition to a different model of economic organization of ukrainian society. the state went through the following stages of such restructuring (modernization of the system of state support of business entities in ukraine, 2013). first of all, this is the period when the principles of the administrative-command system of building the economy prevailed in the legislation of ukraine. it was the first decade of the formation of the independent ukrainian state, i.e., 1991–2000. at that time the emphasis in the regulation of economic relations was put on direct budgetary support of business entities. the second stage is the stage of development of the system of state support for economic entities in 2001–2005. this period was characterized by the introduction of a program-targeted method of the budget process, and a certain modernization of forms of state support took place. thus, in particular, in 2004, the law of ukraine "on state targeted programs" was adopted. this happened after the adoption of the civil and economic codes in 2003. this normative legal act determined the main mechanisms for the development, approval procedure and the procedure for the implementation of state target programs, as well as their types (the law of ukraine "on state targeted programs", 2004). in 2003, a very important regulatory and legal document was adopted – the law of ukraine "on the fundamentals of state regulatory policy in the field of economic activity ". this document introduced a mechanism for publishing draft regulatory legal acts for the purpose of receiving comments and suggestions, which is a component of ensuring the implementation of state regulatory policy. in 2005–2010 there was a stage in the regulation of economic relations when the focus was on integration into the international economic system. at that time the main reduction of state support programs for economic entities was carried out. in fact, it is a matter of "devaluation" of special regimes of economic activity. as analysts rightly point out, it is precisely the incompleteness of modernization that has a negative impact both on the potential for structural restructuring of the economy, and on the formation of appropriate political and managerial experience of all interested parties in the matter of state support: authorities, industrial associations, lobbyists, enterprises (modernization of the system of state support sub of economic entities in ukraine, 2013: 6). the adoption of the tax code of ukraine in 2011 marked the beginning of a new stage of changes in the legal regulation of economic relations in ukraine. and this stage lasted until 2020. during this period there were positive developments in the field of legal regulation of economic activity, as the grounds for granting state support to economic entities were systematized (though not completely). the law of ukraine "on stimulation of investment activity in priority sectors of the economy with the aim of creating new jobs" and the state program for enhancing economic development for 2013–2014 played an important role. in 2014, part of the territory of the ukrainian state was annexed by the russian federation. therefore, the planning of measures to support business entities had to be carried out without taking into account the autonomous republic of crimea and the temporarily occupied parts of luhansk and donetsk oblasts. it was during this period that the first "glimpses" of legal regulation of the economy began, taking into account a number of anti-crisis phenomena. in 2020, completely radical changes have taken place in the regulation of the procedure for carrying out economic activities. this was due to quarantine restrictions throughout the country, which were introduced by the law of ukraine "on prevention of the spread of acute respiratory disease covid-19 caused by the coronavirus sars-cov-2" of march 11, 2020, and a resolution of the cabinet of ministers of ukraine. "on the establishment of quarantine and the introduction of restrictive anti-epidemic measures baltic journal of economic studies 188 vol. 9 no. 2, 2023 to prevent the spread of acute respiratory disease covid-19 caused by the sars-cov-2 coronavirus in ukraine" of 09.12.2020 no. 1236. this is the fifth stage of regulation of economic activity. today, it has changed somewhat: in addition to the challenges faced by the legislator in connection with the need to introduce quarantine restrictions, there are also challenges related to the full-scale invasion of ukraine, the destruction of infrastructure, energy supply, logistics routes, etc. a number of legal acts have been adopted that make it impossible for special economic regimes to operate. in particular, this is the decree of the president of ukraine "on the introduction of martial law in ukraine" no. 64/2022 dated february 24, 2022. it was enacted by the law of ukraine "on approval of the decree of the president of ukraine 'on the introduction of martial law in ukraine'" of february 24, 2022, no. 2102-ix. 3. effectiveness of state policy in the field of economic activity for the past 3 years, the ukrainian state has been facing challenges that are difficult to "reconcile" with the introduction of special forms of economic activity. therefore, it is necessary to reformat ukrainian legislation in such a way as to create an effective system of legal regulation of economic activity in special conditions. although such types of legal regimes were introduced by the economic code of ukraine (when it was adopted in 2003), real mechanisms were never developed. at the current stage of ukraine's development, the structural and sectoral restructuring of the entire economy of ukraine is becoming increasingly important. this is due to the challenges caused by the seizure of a number of territories by the aggressor state in 2014 and the continuation of a full-scale war. in addition, the introduction of restrictive measures in all spheres of the economic system of ukraine caused a number of problems for the effective functioning of the economic system of ukraine due to the quarantine on the entire territory of ukraine to prevent the spread of the acute respiratory disease covid-19, caused by the coronavirus sars-cov-2, on the territory of ukraine. later, questions arose about overcoming the consequences of the pandemic and stabilizing the economy, which was emphasized by a number of analysts and scientists (the ukrainian economy fell by 6.5% in six months. in the second quarter of 2022). naturally, the war period of 2022–2023 revealed a number of gaps in the regulation of the state economy. in particular, the basis of legal regulation of the procedure of restoration of territories, reconstruction of entire housing estates, cities and towns, as well as compensation for damage caused not only to individuals, but also to legal entities, is unclear. according to a report prepared by the world bank, the european commission, and the ukrainian government, the cost of rebuilding ukraine and its economy as of june 1, 2022, is already about $349 billion (sullivan, rzheutska, 2022). it should be noted that every economic system sooner or later comes under the influence of various negative phenomena. this is a normal process of development of any system. the crisis is an integral part of the continuous process of social development and the engine of evolutionary and revolutionary changes in the social, scientific and technical, economic and spiritual life of mankind. depending on the variety, type, nature of origin, scale and characteristics of the course, the crisis has a certain degree of controllability. this requires the introduction of an effective anti-crisis regulatory mechanism (oleshko, 2012). now the question is to find ways to work effectively under all conditions. unfortunately, today it is difficult to predict realistically when exactly this terrible war will end. it is even more difficult to predict when exactly the ukrainian economic system will be able to overcome its consequences. however, it is clearly necessary to focus on the fact that an important component of sovereignty (including) – the economic system – can work as a clear mechanism in any conditions. for this purpose, it is necessary to formulate the main goals, the main factors influencing the state of the system and the way out of such a situation with the help of legal means. this is possible by choosing the most optimal directions of state policy in this area. speaking about the mechanism of anti-crisis regulation of the national economy, it is possible to distinguish 2 groups of principles of economic regulation that form its basis. there are general and special principles. general principles of economic regulation are relevant at any stage of development of a given state. in particular, it is the principle of efficiency, fairness, stability, etc. special principles are the basis of anti-crisis regulation in situations such as those observed in the current economic system. they should include: 1) the principle of orientation of regulation to the achievement of strategic goals of economic development, which provides for the priority of ensuring long-term sustainable economic development over the situational advantages of shortterm influence; 2) the principle of subordination to the strategic goals of social development – follows from the definition of anti-crisis regulation as a component of strategic state regulation of the national economy; baltic journal of economic studies 189 vol. 9 no. 2, 2023 3) the principle of transparency and openness in the adoption and implementation of anti-crisis measures, which provides for the clarity of public, general "rules of the game" for all economic entities; 4) the principle of timeliness of the adoption of anti-crisis measures – involves forecasting, diagnosis and prompt response to crisis symptoms in order to prevent the cumulative accumulation of crisis potential; 5) the principle of consistency and coordination with intergovernmental anti-crisis programs – involves taking into account the influence of anti-crisis policies of countries – foreign economic partners and supranational structures when developing a national anti-crisis strategy (oleshko, 2012). it is worth noting that it is during the crisis that the state policy in the sphere of regulating the activities of business entities, granting certain preferences, introducing restrictions, etc. should be the most transparent and balanced. this will minimize the consequences of the crisis, as well as shorten the period of "being" in it. the organization and management of interaction between public authorities and business entities have a great influence on the formation of state policy. at the same time, the essence (which is the basis of this process) of cooperation between state authorities and business representatives is an urgent issue, since the interaction of the public and private sectors in the conditions of a market economy can become one of the most effective mechanisms capable of ensuring the comprehensive economic development of the country as a whole and achieving the goals of business entities. it is generally believed that partnership relations between public authorities and business entities are one of the ways of economic development of the country. the modern mechanism of interaction of the public and private sectors is based on a formal approach, which does not create a motivational basis for cooperation. in order to increase the efficiency of partnership relations, achieve a balance of interests of participants of partnership relations and as a result of increasing the rate of growth of the socio economic potential of the country, increase the activity of authorities in ensuring the availability of infrastructure services and the development of private sector activities, stimulating business and investment activity, it is important to form a management mechanism the development of partnership relations in the conditions of organizational and institutional environment. the process of formation of state policy in any sphere plays an important role in the life of society, as it is the answer to its practical problems, i.e., it consists in the analysis of existing problems, the causes of their occurrence and the search for ways to solve them under the influence of social, economic, political environment. analyzing the process of development of state policy, the authors distinguish several stages: policy initiation (consists in definition and analysis of social problems, formulation of goals and priorities of state policy); policy formation (development of state policy and coordination of interests, goals and means of their achievement); policy adoption (legitimization and financing of state policy, i.e., consolidation of the developed policy in a set of decisions and programs); policy implementation (policy implementation and monitoring); policy evaluation (checking its effectiveness and quality) (kasmin, mordovets, 2017). 4. update of the state policy in the field of special economic regimes today, the priority of ukraine is to preserve its sovereignty. this is possible if the territories are returned. the military is showing great capabilities. however, the economic component is and will be important. because war is a rather expensive phenomenon for all participants. one of the fundamental national interests of ukraine is the sustainable development of the national economy. such development is possible in the presence of an effective mechanism of legal regulation aimed at creating favorable conditions for economic activity and meeting the economic needs of society, which requires the existence of a system-forming, complex, modern codified act. for this purpose, it is necessary to develop a system of legal regulation, firstly, to get out of a deep rut, and secondly, to determine the priorities of economic development today. the current state of legal regulation, organization and direct implementation of economic activity is characterized by a number of problems, including: – insufficient consideration of development trends and achievements of world economic science in the legal support of the ukrainian economy; – low efficiency of modern methods and means of economic and legal influence on the economy in the face of constant external threats caused by biological (covid-19 pandemic), military (occupation of part of ukraine's territory) and other factors; – insufficient integration of the sustainable development goals into the mechanism of economic and legal regulation of economic relations; – unregulated and inconsistent approaches to defining organizational and legal forms of business, types of business (economic) entities, contradictions and gaps in defining their legal status, lack of incentives for corporate social responsibility of such entities; – inequalities in determining the degree and limits of participation of state authorities and local selfbaltic journal of economic studies 190 vol. 9 no. 2, 2023 government in economic (business) relations, inefficiency of management of enterprises of the state and municipal sectors of the economy, insufficient economic and legal incentives for implementation of large-scale infrastructure projects on the basis of public-private partnerships, imperfection of approaches to provision of state aid to economic entities, application of separate means of state regulation and implementation of state control and supervision in the sphere of economic (business) activity; – inadequacy of the procedure for consideration by the antimonopoly committee of ukraine of cases of violation of the legislation on protection of economic competition, incomplete conformity of the system of control over the admissibility of state aid to competition with the legal acts of the european union; – insufficient level of legal support for the use of property in the organization and implementation of economic (business) activities; – lack of clear, systematic legal regulations on methods and legal forms of commercialization of intellectual property rights in the field of business; – insufficient legal regulation of the conclusion, execution and termination of contracts in the field of economic activity; – the lag of legal regulation from existing practices and trends in the digitalization of business (economic) activities, the use of the latest electronic and other technologies in these activities, the spread of e-commerce, cryptocurrency circulation, the introduction of smart contracts, and so forth; – low level of protection of the rights and legitimate interests of participants in business (economic) relations; – imperfection of the provisions on liability for certain types of offenses by business entities, the list of grounds for such liability and sanctions for offenses in the field of business partially does not meet the needs of today; – excessive overregulation and, at the same time, gaps and contradictions in the regulation of activities in certain industries and sectors of the economy; – unfavorable legal conditions for carrying out innovative, investment, foreign economic activities, integration of ukraine into the global economic space; – controversial definition of special economic regimes (economic activity in the armed forces of ukraine, economic activity in a state of emergency, the joint forces operation, etc.). the mentioned problems in the legal sphere, together with other factors, have a negative impact on the state of the ukrainian economy, which is manifested, in particular, in a high level of its "shadowing", limitation of entrepreneurial initiative, reduction of industrial production, low attractiveness of ukraine for foreign investors (concept of modernization of economic legislation of ukraine, 2021). it is worth noting that the legislator is taking separate steps to modernize legislation in the field of regulation of economic activity, both in general and in relation to specific problems of implementation mechanisms. thus, a number of normative legal acts have been adopted, filling the legislative gaps in this difficult period for the state. thus, in accordance with the state strategy of regional development for 2021-2027, approved by resolution 695 of the cabinet of ministers of ukraine of august 5, 2020 (state strategy of regional development for 2021–2027, 2020), the priority tasks of regional policy for the new stage of development of ukraine. separately, it should be emphasized that such tasks as accelerating economic growth of regions and increasing their competitiveness can be performed only under certain conditions. such conditions are recognized as: 1) effective use of internal potential of the region; 2) creation of new jobs; 3) improvement of employment of the population and 4) creation of conditions for return of migrant workers to their homeland. all these conditions can be created in the event that a local business will work effectively or a foreign investor will "come" to a certain region. at the same time, all these conditions are rather the results of the implementation of an effective state policy in the sphere of regulation of the activities of business entities. another legislative act is also worth analyzing. this is the law of ukraine "on amendments to certain legislative acts of ukraine on the principles of state regional policy and the policy of restoration of regions and territories" of 07.09.2022 no. 2389 (on amendments to certain legislative acts of ukraine on the principles of state regional policy and the policy of restoration of regions and territories, 2022). this document introduced fundamental changes in a number of normative legal acts. in particular, article 415, which regulates the activities of priority development areas, was removed from the economic code of ukraine. on the positive side, the legislator did take a conceptual approach to regulating economic activity regimes: relevant amendments were made to the law of ukraine "on the principles of state regional policy " and supplemented by new regulations (on the principles of state regional policy, 2015). thus, article 11-2 "functional types of territories" was added, which actually defines the types of functional types of territories: 1) reconstruction territories – micro-regions, territorial communities, on the territory of which hostilities have taken place and/or which have been baltic journal of economic studies 191 vol. 9 no. 2, 2023 temporarily occupied, and/or on the territory of which, as a result of hostilities, critical infrastructure, social infrastructure and housing have been destroyed, and which are characterized by a sharp deterioration in the level of socio-economic development and a significant migration of the population to other regions and/or other states; 2) regional growth poles – micro-regions, territorial communities characterized by significantly better geographical, demographic, socio-economic development indicators compared to other similar territories in the region, and whose growth has a positive impact on adjacent territories, the region and/or the state as a whole; 3) territories with special conditions for development – macro-regions, micro-regions, territorial communities, the level of socio-economic development of which is low or where there are natural, demographic, international, security or other objective restrictions on the use of the territory 's potential for development; 4) territories of sustainable development – selfsufficient micro-regions, territorial communities with the available socio-economic potential of the territories and capable of balanced development in the economic, social and ecological spheres. it is emphasized that these territories are introduced "to plan the restoration and stimulate the development of regions and territories, as well as to introduce special mechanisms and instruments by executive authorities and local governments". 5. findings in essence, it is about new types of special economic regimes. and also, about new approaches to providing state support to business entities. it should be noted that such approaches are a rather positive development in the system of legislative regulation of special economic regimes. after all, the means of state support are differentiated depending on the urgent need and the territory to which the legal regime will apply. although such basic concepts as "micro-region" and "macro-region" are reflected in this law, and there are definitions of them, some terms need to be clarified and explained. 6. conclusions in general, such trends in legal regulation should be recognized as positive. of course, an important task at the moment is the development of a detailed mechanism for implementing the provisions of this regulatory act. thus, different economic situations require an appropriate reaction of the legislator. depending on the goal of legal regulation of economic activity, it is necessary to pay attention to a set of legal means that will help achieve appropriate results. if the goal of legal regulation is the restoration of depressed regions, then the legal means should be clearly aimed at stimulating, first of all, the development of entrepreneurial activity in this territory, the inflow of investments, etc. for example, if the goal of legal regulation is to prevent the development of entrepreneurial activity in certain strategic sectors of the economy, then strict requirements for the implementation of such types of entrepreneurial activity should be introduced. finally, it should be noted that today the processes of deep transformation of approaches to the introduction of the system of legal regulation of economic relations are taking place in the conditions of the urgent need to "restart" the national economic system of ukraine. it is obvious that there is a need to create effective mechanisms for regulating the creation and functioning of special regimes of economic activity in the context of anti-crisis regulation. references: sullivan, a., & rzheutska, l. "how the war affected the economy of ukraine". available at: https://www.dw.com/ uk/ak-vijna-vplinula-na-ekonomiku-ukraini/a-63093916 kasmin, d. s., & mordovets, a. v. (2017). analysis of the stages of development of state policy in the sphere of socio-economic partnership of authorities and business entities. economic development and legacy of semen kuznets: materials of the international science conference, june 1-2, 2017. kharkiv, pp. 80–83. modernization of the system of state support for business entities in ukraine (2013). kyiv: niss, 28 p. available at: https://niss.gov.ua/sites/default/files/2013-06/1806_dop.pdf oleshko, a. a. (2012) conceptual principles of anti-crisis regulation of the national economy. economy and the state, vol. 9, pp. 4–7. available at: http://www.economy.in.ua/pdf/9_2012/3.pdf on amendments to certain legislative acts of ukraine on the principles of state regional policy and the policy of restoration of regions and territories: law of ukraine of 09.07.2022 no. 2389. available at: https://zakon.rada.gov.ua/laws/show/2389-20#top the law of ukraine "on the principles of state regional policy " of february 5, 2015, no. 156-viii. available at: https://zakon.rada.gov.ua/laws/show/156-19#n53 the law of ukraine "on state targeted programs" no. 1621 of march 18, 2004. available at: https://zakon.rada.gov.ua/laws/show/1621-15#tex baltic journal of economic studies 192 vol. 9 no. 2, 2023 the concept of modernization of commercial legislation of ukraine. available at: https://lexinform.com.ua/ zakonodavstvo/kontseptsiya-modernizatsiyi-gospodarskogo-zakonodavstva-ukrayiny/ the ukrainian economy fell by 6.5% in six months. in the second quarter – by 11%. available at: https://www.epravda.com.ua/news/2020/08/6/663774/ state regional development strategy for 2021-2027 resolution of the cabinet of ministers of ukraine dated august 5, 2020 no. 695. available at: https://zakon.rada.gov.ua/laws/show/695-2020-%d0%bf#text zablodska, i., rohozian, y., sieriebriak, s., plietnov, m., & vakhlakova, v. (2022). special mode of economic development of european countries in the post-war period: legal experience. amazonia investiga, vol. 11(57), pp. 162–171. received on: 02th of march, 2023 accepted on: 20th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 293 vol. 4, no. 1, 2018 corresponding author: 1 department of administrative, financial and information law, kyiv national university of trade and economics. e-mail address: pustovitjuly@gmail.com 2 department of administrative, financial and information law, kyiv national university of trade and economics. e-mail address: timashovv@bigmir.net 3 department of marketing, national university of food technologies. e-mail address: аlinaberger2016@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-293-303 principles of state financial control of ukraine in the conditions of european integration yuliya pustovit1, viktor timashov2, kyiv national university of trade and economics, ukraine alina berher3, national university of food technologies, ukraine abstract. the purpose of the study is an improvement of principles of state financial control of ukraine taking into account european advanced experience. the subject of the research is a comparative analysis of financial control principles and principles of state financial control of ukraine with the international principles of financial control, envisaged at the international level, and the establishment of the expediency of their implementation in the national legislation in connection with the terms of european integration. the methodological background of the research is the combination of theoretical and scientific methods: analysis, synthesis and comparison, theoretical and logical generalization. the theoretical approaches are analysed according to the determination of conceptcategory of terms: “principle of financial control,” “principle of state financial control.” existed principles of financial control, principles of state financial control of ukraine, leading principles of financial control, what determined in lima declarations of guidance on auditing precepts, general principles of supreme bodies of financial control activity that are envisaged in declaration about general principles of supreme bodies of financial control activity of states-participants of cis are investigated. carrying out the analysis of financial control principles, principles of state financial control of ukraine, and international principles of financial control, we reached a conclusion that basic principles (principles of legality, independence, objectivity, impartiality, publicity, neutrality) are already normatively envisaged. there is the part of international principles (principle of competence, publicity, efficiency, well-proven, observance of professional ethics, violation prevention, obligatory of responsibility offensive for the accomplished violations of financial discipline) that doesn’t have the normative consolidation in laws and regulations of ukraine. international principles of financial control are partly marked in the scientific literature of ukraine, but it not enough in order that they become leading ideas, the fundamental basis of the financial control system development of european standard in ukraine. conclusions. it is suggested to improve the statutory provision of state financial control: to manage further development of conceptual bases of the system of state financial control principles, their classification; in branch legislation, to specify principles of state financial control in accordance with their kinds; to complement the law of ukraine “on basic principles of state financial control realization in ukraine.” the list of realization principles of state financial control in ukraine that will become one of the meaningful steps on the way of european integration of ukraine to the european union is envisaged. key words: control, financial control, state financial control, principles of financial control, principles of state financial control. jel classification: g28, g29 1. introduction the current economic relations development in ukraine, the improvement of management processes requires scientific analysis of transformations, understanding and recognizing of the organizational and economic mechanisms used by the state during its core functions. significant violations of budget legislation and inefficient use of budget resources by the state authorities and bodies of local self-government, shadow economy, baltic journal of economic studies 294 vol. 4, no. 1, 2018 macroeconomic instability, poor business climate, low productivity and international competitiveness, lack of investments are priority problems that hinder the country’s economic growth. to overcome these problems, the government of ukraine should follow a single concept in its work. the initial step in the system work of the government was the development and approval of the government’s priority action plan for 2016, aimed at ensuring an increase in the standard of citizens life and, as a result, the sustainable economic development of society (order of the cabinet of ministers of ukraine, 2016 ). subsequently, government’s priority action plan for 2017 was approved. the reform of the public finance management system has been initiated, which will help to prevent a crisis in the future. ukraine’s cabinet of ministers approved a public administration reform strategy for 2016‒2020 and the plan of its implementation. the strategy envisages short-term and long-term tasks. the concept determines the field for reforming public administration and the key principles of the reform. the concept has been approved by the european union (eu). the eu is ready to provide assistance to ukraine in its implementation. the document touches only the issues of operation of central executive power branch and local public administrations in part of civil service. it does not touch local self-government agencies. the strategy foresees the necessity of its regular revision, taking into account the results of its implementation. improving the well-being of citizens has become the main goal of the government. the minimum wage has been increased by 16.1 percent since january 2016. from january 1, 2017, the minimum wage has been increased twice. in the medium-term perspective to implement priority to reform and the creation of an efficient and high-quality system of public financial control activities planned, including the: ‒ carrying out tasks, defined in the strategy for system reforming of public finance management for 2017‒2020 years, approved by the regulation of the cabinet of ministers of ukraine on february 8, 2017 no. 142 on the public financial control and achieving results on tasks implementation; ‒ approving and implementation by the sas of the concept of the state policy realization in the sphere of system reforming of public financial control till 2021, which is on the development stage now; ‒ development of the legal framework and methodological support of the public financial audit by harmonization with international standards (the institute of internal auditors (iia), the international federation of accountants (ifac), intosai) and methodology, and eu best practice of audit in the sphere of public finances; ‒ modernization and improvement of the efficiency and effectiveness of activities of public financial control authorities, implementation of audit results and receiving of economic effect; ‒ introducing a mechanism of accountability of public authorities for the legality and effectiveness of their activities and decision making; ‒ clear division of functions and powers between the state financial control authorities; ‒ definition and normalization of a list and a mechanism of administrative services providing by the sas for public and local authorities and economic agencies; ‒ improvement of information support of state financial control system by creating a common information and analytical base of the state financial control; ‒ strengthening of human resource capacity of state financial control authorities and an effective model of qualified personnel development and training in the sphere of the state financial control. achieving goals of the medium-term plan priorities for the government until 2020 are the development of the system governance, which is able to launch systematic reforms in ukraine with all democratic principles, the rule of law, protection of property rights and gender equality, inclusiveness and collaboration, is one of the base assumptions of success of ukraine. the structure and the system of public administration work have to provide timely public services with the economical use of public resources and with the transparent and accountable way by citizens, saving of public services and welfare for people of ecological clean and the varied world around. the quality of public services indicates the level of respect of the state to the rights and dignity of every person. the government will ensure effective and transparent use of public finances and implements the budget planning for the medium term in the context of major spending agencies at the level of the state budget to improve the efficiency and quality of public services. the ukrainian government continues to be committed to european values and takes the necessary steps to further ensure the integration of ukraine into the european political, economic, and legal space. medium-term planning of consistent and complex reforms, in particular, defined by the action program of the cabinet of ministers of ukraine, the strategy for sustainable development “ukraine–2020”, the public administration reform strategy for 2016‒2020, the association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other hand, the memorandum of cooperation between ukraine and the international monetary fund (imf), the coalition agreement and the legislative reform plan, is the basis of sustainable economic growth, the achievement of european standards of citizens’ life. providing for the effective state financial control of public and local authorities’ activity during the management baltic journal of economic studies 295 vol. 4, no. 1, 2018 and usage of budget resources, the state financial control targeting increasing the level of efficient, legal, targeted, rational, resulted usage and saving financial resources of the state, fixed and other assets, achieving the growth of budget funds economy by its executors and recipients, eliminating violations, drawbacks and preventing them in the process of its activity, increasing of managers responsibilities of the public sector for effective activity. the state can function and develop properly only with a well-organized system of control over the production, distribution, and redistribution of the social product and other spheres of public life in the state. in order to organize in the state a system of state financial control of the european model, it is necessary to make all transformations, starting with the principles, the basic fundamental provisions that will be the main benchmark for such changes. therefore, the subject of our study will be a comparative analysis of the principles of financial control and principles of the state financial control of ukraine with the international principles of financial control, enshrined at the international level, their implementation in national legislation in connection with european integration. 2. analysis of recent research studies and publications today scientists are interested in the problem of principles of state financial control. there is a significant number of scientific works, in which the concept, content of the principles of financial control as a type of activity is examined. also in the ukrainian scientific literature, the international experience of forming models of state financial control and the possibility of implementing these models in ukraine are actively studied. among such scientists are n. barabash, v.  baranovska, a.  butko, l. gutsalenko, m. nykonovych, l. savchenko, o. orlyuk, m. tulupova, о. vasylyk, yu. voloshyn, l. voronova, and others. but despite this, in the legal literature, there is no comprehensive study devoted to this issue. the discovery and coverage of the principles of branches, sub-sectors, and institutes of law are hampered by the weak general theoretical development of the problem, but it must be said that the general theory of law is not able to independently study the basic principles of law without relying on the generalization of branch legal sciences. 3. presentation of the main material of the study 3.1. theoretical and applied content of the financial control at the present stage of development of a market economy, the control function of finance has become particularly relevant, due to a certain specificity of this activity and allows actively influencing economic processes in the state. an important part of the management system that guarantees quality and ensures an effective implementation of governmental activity is control. the essence of the control is the implementation of purposeful influence on the objects of management, which provides for systematic supervision, monitoring their activities to detect deviations from the established norms, rules, requirements or tasks in the process of their implementation (gutsalenko et al., 2017: 5‒6). control as a type of relationship is the attitude of the subject to their own activities or the activities of other subjects in terms of a compliance with certain rules. control may be state and public and be used in various structures, including nongovernmental ones. having considered the definition of control and its essence, let us turn to the definition of financial control since financial control is an integral part of the financial activity of the states. the state financial control has a special place in the system of the state control. financial control is a special sphere of state control related to the activities of financial institutions to detect violations of law, financial discipline and expediency in the formation, distribution, and use of state and municipal monetary funds (voronova et al., 2009: 94). financial control is an element of the financial management system, a special sphere of cost control over the financial activities of all economic subjects (state, regions, enterprises, and organizations), compliance with financial and economic legislation, expediency costs, economic efficiency of financial and business operations (vasylyk, 2000: 401). financial control is a complex and purposeful financial and legal activity of the financial control bodies or their subdivisions or representatives, as well as persons authorized to exercise control based on the provisions of the acts of the current legislation. it consists in establishing the actual state of affairs at the controlled object for its financial and economic activity and is aimed at ensuring legality, financial discipline, and rationality in the course of the formation, distribution, ownership, use, and alienation of assets for the purpose of effective social and economic development of all subjects of financial legal relations (gutsalenko et al., 2017: 6). consequently, after considering these three definitions of financial control, we can conclude that during such a control the state interests are satisfied, which consist of the successful implementation of the state financial policy, the effective use of the financial resources of the state. financial control over its economic essence is a management function that includes a set of observations, inspections on the management object activity in order to assess the reasonableness and efficiency of decision-making and results of their implementation. in general, financial control is a universal phenomenon. baltic journal of economic studies 296 vol. 4, no. 1, 2018 its universality is its use in various spheres of social life, namely: scientific, political, social, economic, etc. the essence of financial control is disclosed through the relationship between the use and operation of finance. financial control is applied there and when the finances are operating. finance is a collection of forms and methods for the formation, distribution, and use of centralized and decentralized funds in order to fulfil functions and tasks of the state, enterprises, and people to ensure conditions for expanded reproduction, meeting the social and other needs of society (vasylyk, 2000: 402). the effectiveness of the work of executive authorities and local self-government in the state depends on the control over the implementation of laws, decisions, orders, and the proper organization of their implementation. systemic and comprehensive control contributes to ensuring the scientific validity of decisions, regulations, and other statutory documents, their timely implementation. it is a prerequisite for the detection and elimination of defects in the objects of management activities and the reasons that give rise to them. control disciplines employees of the management apparatus, makes it possible to objectively assess the level of their competence and compliance, promotes the spread of the positive practice of the work (gutsalenko et al., 2017: 5). legal science and current legislation contain a number of fundamental principles for the implementation of financial control. the observance of these principles allows the financial control bodies to fully exercise their powers. we will start analysing the principles of financial control starting from generic principles that have become the foundation (basis) for implementing these principles in general. state financial control is a kind of financial control carried out by the relevant state financial control bodies. it consists in establishing the actual state of affairs in observance of requirements of the current legislation at the controlled object, aimed at ensuring the legality, financial discipline, and rationality during the formation, distribution, possession, use, and alienation of assets owned by the state, as well as the use of funds that remaining in the subject of financial legal relations in connection with granted privileges for payments to the budgets, state extra-budgetary funds and loans received under the guarantees of the cabinet of ministers of ukraine (gutsalenko et al., 2017: 6). the development of modern state financial control is based on a hierarchically structured system of principles. principles of state financial control are the basic, fundamental ideas of regulation of financial and legal relations in the implementation of state financial control sphere and ensure the unity of the normative content of this section of financial law, on the one hand, they are the factors determining the directions of its internal development, and on the other hand, they are the tools to overcome various contradictions and collisions. 3.2. principles of financial control in ukraine there are three main forms of financial control: preventive control, operational control, retrospective control. operational control is performed during the financial and economic operations, retrospective control − respectively after the reporting period. but the most important one is preventive control, which is performed until financial transactions. the assessment of the validity of programs and financial forecasts, financial plans based on the analysis of macroeconomic indicators of the state economy are carried out. it is performed to prevent the violation of laws, rational use of financial resources. according to the law of ukraine “on basic principles of implementation of state financial control in ukraine,” the main tasks of body of the state financial control are: implementation of the state financial control of use and safety of the state financial resources, non-current and other assets, correctness of determination of need for budgetary funds and capture of obligations, effective use of means and property, condition and reliability of financial accounting and the financial reporting in the ministries and other executive bodies, the state funds, funds of obligatory national social insurance, budgetary institutions and subjects of managing of public sector of economy, and also at the companies, in organizations and the organizations, which receive (received in the period which is checked) means from budgets of all levels, the state funds and funds of obligatory national social insurance or use (used in the period which is checked) the state-owned or municipal property (further ‒ under control organizations), behind observance of the budget legislation, compliance with law about public procurements, activities of business entities irrespective of pattern of ownership, which are not carried by the legislation under control organizations, by a court decision, accepted in criminal proceedings. state financial control is provided with a body of the state financial control through carrying out the state financial audit, check of public procurements, and inspection. the procedure for carrying out by the body of the state financial control of the state financial audit, inspection, and checks of public procurements is established by the cabinet of ministers of ukraine (law of ukraine ). according to article 3 of this law of ukraine, the state financial audit is a kind of the state financial control and consists in check and the analysis by body of the state financial control of actual state of cases of rather legal and effective use of the public or municipal funds and property, other assets of the state, correctness of conducting financial accounting and reliability of the financial reporting, functioning of internal control system. results of the state financial audit and their assessment are stated in the report. in the opinion of v. baranovska, the main directions of state financial control are the social relations that baltic journal of economic studies 297 vol. 4, no. 1, 2018 arise, change, and cease in the public financial activity sphere, namely: ‒ verification of performance of functions of accumulation, distribution, and use of financial resources by state authorities and local self-government in accordance with their competence; ‒ verification of fulfilment of financial obligations to the state and local self-government bodies, organizations, and citizens; ‒ checking the correct use of state and municipal enterprises, institutions, organizations of monetary resources, which are in economic management or operational management (budget and own funds, bank loans, extra-budgetary and other funds); ‒ verification of compliance with rules of financial transactions, calculations and storage of funds by enterprises, organizations, institutions; ‒ identification of internal reserves of production  ‒ opportunities for improving the profitability of the economy, the growth of labour productivity, more efficient use of material and money resources; ‒ elimination and prevention of violations of financial discipline. in case of their detection in the established procedure, the measures of action against organizations, officials, and citizens are used; the compensation for material damage to the state, organizations, citizens is provided (baranovska, 2012: 65). in the process of state financial control, the bodies that carry it out must be guided by the basic principles. in particular, the principles reflect the legality of social development, the needs of this society. this is their social conditionality, dependence on real-life conditions. the study of the system of state financial control principles, as well as their use in law enforcement practice, is a prerequisite for building an effective system of financial control. the study of the principles of state financial control we begin with the fundamental category of “principles of law.” this category is one of the main in the theory of law. principles of law are also important for the study of branch legal sciences, including financial and legal. first of all, in the context of this problem, we should pay attention to the general concept of the principle of law in order to formulate the concept of principles of state financial control. the term “principle” is defined as the basic principles, original ideas characterized by universality, general significance, higher imperative, and reflect the essential provisions of theory, doctrine, science, systems of domestic and international law, political, state or public organization. these principles have a property of abstract reflection of the social activity laws, which determines their special role in the structure of many phenomena (voloshyn, 2003: 110‒111). m. tulupova determines the principle of law as an abstract expression of the meaning of some legal norms existing in the form of an idea and expressed in the form of a rule of law, which allows the separation of legal norms from those that conflict with the law. so, we can determine the principles of the state financial control implementation (tulupova, 2007: 49). the principle of state financial control is the fundamental and guiding ideas expressed in the form of legal provisions that determine the content of the regulation of state financial control, in many cases, serve as the highest criterion for the legality of the behaviour of participants in legal relations in the field of public financial control, legal rules of state financial control. the principles that are the basis of state financial control can be defined as theoretically substantiated and normatively fixed principles of the very beginning of the essence of state financial control. these principles are its main content, determine the general direction of legal regulation of the state and municipal entities in the state financial control sphere and direct activities to achieve its goals and objectives. the principles of state financial control are not isolated from each other; they are integrated into the system. as can be seen from the above (the formal certainty), we can identify: the principles enshrined directly in the rules of law (e.g. the principle of independence of control); the principles arising from the content of legal norms, but directly to them is not fixed (e.g. the principle of the unity of the purpose and objectives of the financial control) (butynets, 2000: 97). on the nature of legal relations falling within the scope of the principle, the financial control principles can be divided into legal (“regulatory”, e.g. the implementation procedure of the financial control, namely: legality, transparency, independence, etc.), “economic” (an economic component in their content, e.g. the principle of budget efficiency, the principle of the financial importance of the object of control taking into account economic indicators in the control), and “organizational and methodical” (determine the organization and activities of the financial control subjects). in addition, depending on the ways of external expression of the principles in those or other formal legal sources the principles can be enshrined in international legal acts and treaties, the constitutions, legislation, regulations (butko & marchenko, 2013: 129‒130). state financial control as an integral part of the financial activity has the same principles of its implementation: legality, transparency, planning, as well as relevant specific principles: independence of control, objectivity, and competence, etc. (butko & marchenko, 2013: 130‒134). according to the sphere of action, the legal principles are divided into the principles that are inherent: in law in general (general law); in a group of related sectors (intersectoral); separate branches or institutes of law (semenov, 1982: 28). so, the principles of state financial control of ukraine are classified according to the following criteria: baltic journal of economic studies 298 vol. 4, no. 1, 2018 ‒ the legislative consolidation ‒ the legal and doctrinal principles; ‒ the nature of legal relations ‒ legal, economic and organizational and methodical principles; ‒ depending on the ways of external expression, the principles may be enshrined in international legal acts and treaties, the constitution, legislation, by-laws; ‒ in the sphere of action ‒ general law, intersectoral, sectoral principles. it is worth noting that in legal opinion, there are different approaches to the classification of the principles of law, their conjunction with those or other social phenomena but, as a rule, in one issue there is unity of opinions ‒ legal principles are interpreted as “thoughtstarter”, “outgoing”, “governing” ideas underlying the law. as a part of this study, we must consider the question: “what is the system of principles inherent in state financial control and their role in regulating relations in this area?” scientists make some attempts to formulate the system of financial control principles, but at present, there is no consistent approach to the definition of the system of financial control principles. from the point of view of o. orlyuk, the fundamental principles of financial control are: ‒ legality, objectivity, pooling of state, regional and private interests; ‒ distribution of control powers, in particular, sharing of powers of initiation and implementation of financial control between subjects; ‒ fullness of detail of the object by the control, which is achieved through continuous tracking or selective verification of certain segments of controlled objects; ‒ the authenticity of information that ensures its compliance with the actual financial resources, processes and results of the activity, which reflects this information; ‒ balance of control actions provides for the coherence of their internal and external orientation and ensures a balance of financial control; ‒ preventive control actions, aid in the timely implementation of controls to prevent significant deviations of the financial process from the norms; ‒ self-sufficiency of the control system, i.e. such elements of the control system, which ensures the efficiency of its operation and development; ‒ efficiency, i.e. adaptability of the control system to the financial activity of economic entities, which depends on the completeness of the implementation by the controlling entities of such basic requirements: ‒ control should be constant, regular, and systematic; ‒ to be timely in terms of implementation, qualitative and complete in relation to its objects; ‒ to be operating, effective, public and different; ‒ the principle of responsibility, i.e. the responsibility of control subjects for the effectiveness of the functioning of the financial control system and economic entities for the effects of control actions (orlyuk, 2010:149‒150). in the opinion of o. vasуlуk, the principles of financial control include: ‒ independence of financial control as an integral attribute of democracy and a mandatory element of financial resources management; ‒ legislative consolidation of the independence of financial control bodies; ‒ determination of the necessity of the preliminary control and control over actual results; ‒ internal and external control as an obligatory condition of financial control; ‒ transparency of controlling bodies with the obligatory requirement of observance of commercial and other secrets protected by law (vasylyk, 2000: 343). l. savchenko offers such a list of principles of financial control: the principle of legality, planning principle, objectivity concept, independence principle, transparency principle, the principle of competency, operational principle. the principles of publicity and transparency principle are distinguished by the author. the transparency is the compulsory passing of the financial documents, conclusions about the activities of the relevant control bodies through the representative bodies, the principle of publicity is defined as the promulgation of results of the activities of financial control bodies to the public (savchenko, 2002: 13). having considered the principles of financial control, let us examine the principles of state financial control. state financial control is a type of financial control, so they have common principles. l. gutsalenko and his co-authors examine such principles of state financial control: principles of management and principles of implementation. principles of management of state financial control are: ‒ delimitation of the place, role, tasks, and functions of the bodies of state financial control in accordance with the competence of the legislative and executive power according to the constitution and legislation of ukraine; ‒ functional, organizational, personal, and financial independence of state financial control bodies and their officials from controlled objects; ‒ coordination of activities of state financial control bodies by way of eliminating duplication in their work and ensuring a single system of state financial control at all levels of government. the main principles of the implementation of state financial control are: law, liability, strategic orientation, impartiality, comprehensiveness, systematicity, planning, regularity (timeliness), concreteness, profitability, transparency (under observance of official, commercial and other secrets protected by law), efficiency (gutsalenko et al., 2017: 9]. in view of the foregoing, we can draw a conclusion baltic journal of economic studies 299 vol. 4, no. 1, 2018 that each element of state financial control has its own drawbacks and is far from being perfect. state financial control system exists as a combination of separated units and does not operate as a united system. state financial control system does not meet european requirements for a number of reasons, such as the prevalence of follow-up control over the previous and current. state financial control system is not based on thorough theoretical foundation. most of the key concepts are even enshrined in law that hinders the development of such control and creates difficulties for furthers reforms. the current direction of ukraine’s development is aimed at strengthening the state’s role in state financial management and reducing the overuse in the public sector. the system of state financial control, obviously, has a very strong structure, but the leading role is held by the state financial inspection of ukraine, which controls the legitimacy, effectiveness, and proper use of public resources, and accuracy of accounting records and the reliability of financial reporting spending units. 3.3. comparative analysis of the principles of financial control of ukraine and the guidelines of financial control of the european union having considered the principles of financial control and the principles of state financial control, we consider examining the financial control guidelines of the lima declaration of guidelines on auditing precepts. lima declaration was the first intosai document to comprehensively set out the importance of sais’ independence. it reminded intosai members that sais can only be objective and effective if they are independent from the audited entity and are protected from outside influence. the international organization of supreme audit institutions (intosai) is a professional organization providing an institutionalized forum for the sais from around the world to promote development and knowledge transfer, to discuss specific issues of mutual interest, to increase the added-value of the audits, to disseminate the latest developments in auditing and other applicable professional standards and best practices. intosai recognizes that its strength lies in cooperation, experiences, special capacities and knowledge deriving from the cultural, social, economic, and governmental diversity of its global membership. at present, intosai has 194 full members, 5 associate members and 1 affiliate member (the lima declaration, 1977 ]. meeting in the united arab emirates in december 2016 at its congress (xxii incosai), the international organisation of supreme audit institutions (intosai) agreed the abu dhabi declaration. the xxii incosai builds on intosai’s past achievements and initiatives, which aim at enabling sais to help their respective governments to improve performance, enhance transparency, ensure accountability and fight corruption. the declaration sets out the key outcomes of the congress and how they will guide intosai in the years to come. the abu dhabi declaration was developed within the following context: firstly, intosai’s comprehensive strategic planning process, which resulted in a new strategic plan for 2017‒2022, aiming to increase the contribution sais make to improving accountability and transparency in public management around the globe; secondly, intosai’s revision of the statutes to align them more closely with the current structure, strategy, and objectives in order to help it better meet the needs of its members and stakeholders; thirdly, the endorsement by the un of the 17 sustainable development goals (sdgs) at the heart of the 2030 agenda for sustainable development, which are in forces the need and demand for effective public audit and scrutiny and the action already taken by intosai entities relating to auditing the implementation of the sdgs; fourthly, the establishment by the knowledge sharing committee of a community portal to facilitate the sharing of knowledge; and finally, the adoption by intosai of the new framework for professional pronouncements as a part of the ongoing efforts to improve intosai’s standards and standard-setting process, as well as all the issais and other intosai professional pronouncements endorsed to date. founding principles of public sector auditing refer to the following: ‒ purpose and types of audits; ‒ independence of sais and its members; ‒ relationship to parliament, government, and administration; ‒ powers of sais; ‒ audit methods, audit staff, international exchange of experiences; ‒ reporting; ‒ audit powers of sais (the abu dhabi declaration, 2016 ). the declaration contains a comprehensive list of all goals and issues relating to government auditing, while simultaneously remaining remarkably significant and concise, making it easy to use with its clear language ensuring that focus does not wander away from the main elements. the chief aim is to call for independent government auditing. a supreme audit institution, which cannot live up to this demand, does not come up to standard. rule of law and democracy are essential premises for really independent government auditing and are the pillars, on which the declaration of lima is founded. the precepts contained in the declaration are timeless and essential values, which have maintained their topicality since the years they were first adopted. baltic journal of economic studies 300 vol. 4, no. 1, 2018 to sum up, the declaration points out basics for audits and audit institutions, which are necessary for achieving independent and objective results. the success of the lima declaration is above all due to the fact that it contains a comprehensive list of all goals and issues relating to government auditing, while simultaneously remaining remarkably significant and concise, making it easy to use, with its clear language ensuring that focus does not wander away from the main elements. the chief aim of the lima declaration is to call for independent government auditing. the supreme audit institution, which cannot live up to this demand, does not come up to standard. it is not surprising, therefore, that the issue of the independence of supreme audit institutions continues to be a theme repeatedly discussed within the intosai community. however, the demands of the lima declaration are not satisfied by sai just achieving independence; this independence is also required to be anchored in the legislation. for this, however, well-functioning institutions of legal security must exist, and these are only to be found in a democracy based on the rule of law. rule of law and democracy are, therefore, essential premises for really independent government auditing and are the pillars, on which the declaration of lima is founded. the traditional task of supreme audit institutions is to audit the legality and regularity of financial management and of accounting. in addition to this type of audit, which retains its significance, there is another equally important type of audit – performance audit, which is oriented towards examining the performance, economy, efficiency and effectiveness of public administration. performance audit covers not only specific financial operations but the full range of government activity including both organisational and administrative systems. the supreme audit institution’s audit objectives ‒ legality, regularity, economy, efficiency and effectiveness of financial management ‒ basically are of equal importance. however, it is for each supreme audit institution to determine its priorities on a case-by-case basis (the lima declaration, 1977 ). considering the principles of state financial control some authors hanker that: “appeal to experience the world community has developed the main principles of state financial control, the realization of which every modern civilized hanker. these principles are in the lima declaration (supreme audit institutions): objectivity principle, independence principle, the principle of competency and principle of publicity” (barabash & nykonovych, 2015: 46). the next document, which establishes the general principles of activities of the supreme bodies of financial control, is the declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states (declaration, 2001 ). according to the declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states, the activities of the supreme bodies of financial control are based on the following principles: principle of legality, independence principle, objectivity principle, principle of competency, operational principle, evidence-based approach, transparency principle, professional ethics principle. it is worth noting that five principles of the lima declaration and five controlling principles of the declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states are the same principles, they are: principle of legality, independence principle, objectivity principle, principle of competency, transparency principle. all other principles are different. the guidelines for financial control of the lima declaration (principle of publicity, principle of efficiency, principle of preventing violations, principle of compulsory liability for committing a violation of financial discipline) are not enshrined in the declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states. but in the declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states, there are several distinctive principles: operational principle, evidencebased approach, professional ethics principle. above analysis of these principles, we can examine and compare the lima declaration principles and the principles of declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states with the principles of financial control in ukraine in general and also the principles of state financial control: principle of legality, independence principle, objectivity principle, principle of efficiency, evidencebased approach, principle of competency, principle of publicity, professional ethics principle, operational principle, transparency principle, principle of preventing violations, principle of compulsory liability for committing a violation of financial discipline. so we have examined the lima declaration principles and the principles of declaration on the general principles of activities of the supreme audit institutions of the member states of the commonwealth of independent states. let us start our comparative analysis of the principles that o. orlyuk determined as the fundamental principles of financial control. among these principles, only four international principles are in the author’s list: the principle of legality, objectivity principle, the principle of efficiency, the principle of responsibility. baltic journal of economic studies 301 vol. 4, no. 1, 2018 among the principles of financial control, which were defined by v. vasylyk, there are two international principles of financial control ‒ independence principle and transparency principle. l. savchenko among the principles of financial control determines the following international principles: the principle of legality, objectivity principle, independence principle, the principle of efficiency, the principle of publicity, and transparency principle. l. gutsalenko and his co-authors determine such three principles of state financial control: principle of legality, sure thing principle, and transparency principle. in view of the foregoing, we can conclude that the lima declaration principle of preventing violations and principle of efficiency, evidence-based approach, professional ethics principle, which are enshrined in the declaration on the general principles of the activities of the supreme audit institutions of the member states of the commonwealth of independent states, are not among the principles of financial control determined by these scientists. the competence of financial control bodies, e.g. the accounting chamber, the state audit service of ukraine, the state fiscal service of ukraine and others, is detection of violations of financial discipline, measures for the prevention of violations in the financial sphere, so the principles of their activities have to be coordinated with the lima declaration principles and the principles, which are enshrined in the declaration on the general principles of the activities of the supreme audit institutions of the member states of the commonwealth of independent states. it is worth examining in more detail the competence of financial control bodies. article 3 of the law of ukraine “on accounting chamber” no. 576-viii dated 02 july 2015 regulates the principles of the accounting chamber activities and the guarantees of its independence: the principles of legality, independence, objectivity, fairness, publicity, and political impartiality. the independence of the accounting chamber is provided by: 1) established by the constitution of ukraine and this law order of appointment and dismissal of members of the accounting chamber; 2) determined by this law and other laws of ukraine guarantees of the accounting chamber activities; 3) special order organizational support of the accounting chamber activities established by law. the accounting chamber in the exercise of its authority is independent of any improper influence, pressure or interference. unlawful interference with the exercise by the accounting chamber of powers granted by law is prohibited and shall entail liability established by the law. the accounting chamber uses in its work the basic principles of the international organization of supreme audit institutions (intosai), the european organization of supreme audit institutions (eurosai), and international standards of supreme audit institutions (issai) to the extent that is not contrary to the constitution and the laws of ukraine (law of ukraine, 2015 ). having made a comparative analysis of the international financial control principles with the principles of financial control of ukraine, which are directly enshrined in the national legislation, we have established that the law of ukraine “on accounting chamber”, with the amendments and additions, establishes four main international principles (the principles of legality, independence, objectivity). as for the principles of fairness, publicity, they are not fixed at the international level, they are purely ukrainian property. an analysis of the regulations “on state audit service of ukraine” (the resolution of the cabinet of ministers of ukraine, 2016 ), “on state fiscal service of ukraine” (the resolution of the cabinet of ministers of ukraine, 2016 ), and the law of ukraine “on basic principles of implementation of state financial control in ukraine” (with the amendments and additions) (the law of ukraine, 1993 ) made it possible to conclude that none of these laws and regulations directly consolidate principles of financial control. 4. conclusion the analysis shows the need to improve a state financial control. a lot of problems should be solved but, according to the results of state financial control practice during the last years, it has lost its effectiveness. for improving the current state financial control system, the specialists have taken a series of statutory documents. the most important judicial issue is to provide the accounting chamber of ukraine to represent the state in legal proceedings and to fulfil the preventive functions. in the developed countries, financial control is a part of the state regulation in order to detect deviations from the regulations and violations of the principles of legality and efficiency. so, the subjects of state financial control include a lot of regulatory authorities. it should be noted that there is a significant intersection of their functions. the indicated problem has been realized by a majority of lawmakers, but yet not completely eliminated. at present, all subjects of state financial control have almost identical powers, which are purely external. the objects of state financial control are public and municipal services. nowadays state financial control methods used in the practice of regulatory authorities are totally agreed with the key purpose of control measures – identifying violations and punishment of persons committed them. the main drawback of current state financial control methods is their inability to find reserves of their activity and make provisions for preventing offenses. therefore, it is necessary to review the existing methods and improve them according to current requirements. baltic journal of economic studies 302 vol. 4, no. 1, 2018 the state financial control forms reflect the expression of a particular subject of state financial control. nowadays the main form is a revision. the basis for stare internal financial control, performed by sfi, along with different types of control is an inspection. such a type of control over the activities of public and municipal sectors is aimed primarily at detecting violations and punishing responsible persons but not assessing the results, achieved in public finance management. the current need to perform the inspection is due to an extremely low level of financial discipline in the public sector, the lack of internal control system, and decentralized internal audit in the public sector. the classification of state financial control is sufficiently completed but also has many disadvantages. this is especially true for follow-up control over the previous and the current one, which is rather ineffective according to the opinion of the international community. in ukraine, the accounting chamber performs the state financial control function in a part of the monitoring of using the state budget of ukraine and government financial inspection of ukraine within its powers defined by law. an important sign of readiness to join the eu is to establish procedures for the compensation for loss of finance. but today, ukrainian legislation does not provide an effective mechanism for the compensation of lost budget funds and the responsibility of officials for violations of financial discipline. experience in other countries shows that to deal with cases of abuse by tax officials of their rights, there is a widespread practice of recovery of costs and expenses from the tax authority. the results of state financial control and audit must be based on the application of common procedures and methods, and also on sufficient evidence, which enable a state inspector or a public accountant to express logical and competent opinions. in view of the above, it is necessary: ‒ to further develop conceptual foundations of the system of principles of state financial control, their classification; ‒ in sectoral legislation, specify the principles of state financial control according to their types; ‒ to amend the law of ukraine “on basic principles of implementation of state financial control in ukraine” by the article, which provide a list of principles for the implementation of state financial control in ukraine (legality, independence, objectivity, efficiency, accountability, competence, professional ethics, transparency, publicity, prevention of violation, obligatory liability for violations of financial discipline), which will become an important step towards the european integration of ukraine into the european union. references: barabash, n. & nykonovych m. (2015) udoskonalennia systemy derzhavnoho finansovoho kontroliu [improvement of the system of state financial control]. financial control (no. 3 (26)), p. 44‒47. baranovska, v. (2012) derzhavnyi finansovyi kontrol v ukraini: problemy ta shliakhy yikh vyrishennia [state financial control in ukraine: problems and ways of their solution]. analysis, control and analysis in the management of entrepreneurial activity (cherkasy), p. 62‒64. butko, a. & marchenko, b. (2013) vnutrishnii finansovyi kontroliu u systemi finansovoho kontroliu derzhavy [domestic financial control in the system of financial control of the state]. finance of ukraine. p. 127‒136. butynets, f. & bardash, s. (2000) kontrol ta reviziia [control and revision] (zhytomyr: zhiti), 512 p. declaration on general principles of activity of the highest financial control bodies of the member states of the commonwealth of independent states (2001). the verkhovna rada of ukraine (dated june 8), available at: http://zakon0.rada.gov.ua/laws/show/997_a40 gutsalenko, l. derii, v., & kotsupatry, m. (2017) derzhavnyi finansovyi kontrol [state financial control] (kyiv: tsentr uchbovoi literatury), 424 p. law of ukraine (1993) pro osnovni zasady zdiisnennia derzhavnoho finansovoho kontroliu v ukraini [on the basic principles of implementation of state financial control in ukraine] (dated january 26, no. 2939-xii). the verkhovna rada of ukraine, available at: http://zakon2.rada.gov.ua/laws/show/2939-12 law of ukraine (2015) pro rakhunkovu palatu [on accounting chamber] (dated july 2 no. 576-viii). the verkhovna rada of ukraine, available at: http://zakon2.rada.gov.ua/laws/show/576-19 order of the cabinet of ministers of ukraine (2016) pro zatverdzhennia planu priorytetnykh dii uriadu na 2016 rik [on approval of the plan of government priority actions for 2016] (dated may 27, no. 418-р). orlyuk, o. (2010) finansove pravo. akademichnyi kurs [financial law. academic course] (kyiv: yurinkom inter), 808 p. savchenko, l. (2002) pravovi problemy finansovoho kontroliu v ukraini [legal problems of financial control in ukraine] (kharkiv), 42 p. semenov, v. (1982) konstitutsionnyie printsipyi grazhdanskogo sudoproizvodstva [constitutional principles of civil proceedings] (moscow). the abu dhabi declaration xxii incosai (2016). united arab emirates. international organization of supreme audit institutions, available at: http://www.intosai.org/events/congresses-incosai/congress-themes-finaldocuments.html#c4202 baltic journal of economic studies 303 vol. 4, no. 1, 2018 the law of ukraine (1993) about the basic principles of implementation of the state financial control in ukraine (with the amendments and additions) (dated january 26, no. 2939-xii), available at: http://cis-legislation.com/ document.fwx?rgn=14460 (the last edition from december 23, 2015). the lima declaration of guidelines on auditing precepts (1977). intosai. international organization of supreme audit institutions, available at: http://www.intosai.org/issai-executive-summaries/view/article/issai-1the-lima-declaration.html the resolution of the cabinet of ministers of ukraine (2014) polozhennia pro derzhavnu fiskalnu sluzhbu ukrainy [the provision on the state fiscal service of ukraine] (dated may 21, no. 236). verkhovna rada of ukraine, available at: http://zakon3.rada.gov.ua/laws/show/236-2014-%d0%bf the resolution of the cabinet of ministers of ukraine (2016) polozhennia pro derzhavnu audytorsku sluzhbu ukrainy [the provision on the state audit office of ukraine] (dated february 3, no. 43). verkhovna rada of ukraine, available at: http://zakon2.rada.gov.ua/laws/show/43-2016-%d0%bf tulupova, m. (2007) publichnyie finansyi rossiyskoy federatsii: novyie podhodyi k pravovomu regulirovaniyu [public finances of the russian federation: new approaches to legal regulation]. center for public legal research (ed. kozyrina, a.) (moscow: tsppi), 177 p. vasylyk, o. (2000) teoriia finansiv [theory of finance] (kyiv: nios), 416 p. verkhovna rada of ukraine (2017) serednostrokovyi plan priorytetnykh dii uriadu do 2020 roku [medium-term plan of priority actions of the government by 2020], available at: http://zakon2.rada.gov.ua/laws/show/2752017-%d1%80 voloshyn, yu. (2003) pryntsyp [principle]. legal encyclopedia, volume 5 (kyiv: ukrainska entsyklopediia), 736 p. voronova, l., kucheriavenko, m., prishva, n. at al. (2009) finansove pravo ukrainy [financial law of ukraine] (kyiv: pravova yednist), 395 p. baltic journal of economic studies 216 vol. 3, no. 4, 2017 corresponding author: 1 department of corporate finance and controlling, kyiv national economic university named after vadym hetman. email: spokrason@gmail.com a healthy dose of pessimism? influence of the ukrainian economy on its banking sector credit ratings svitlana pokrason1 kyiv national economic university named after vadym hetman, ukraine abstract. the purpose of the research is to identify the influence of ukraine’s economic development on the international agencies' credit rating of its banking system. the instability and ambiguous geopolitical position of ukraine are complicating any predictions for its economic developments. in the meanwhile, massive restructuring of all sectors of the economy became the necessary minimum for the reformation of the country and the achievement of the international standards. it is interesting to see how exactly these international standards, as represented by the evaluation of the rating agencies, appraise ukraine, and particularly its banking sector. the methodology involves the analysis of the three major ukrainian banks – privatbank, oschadbank, and ukreximbank using fitch’s credit quality assessment systematic as an example. the comparative analysis was performed using tier 1 capital ratio and loan-to-deposit ratio of these banks, year-to-year quarterly gdp growth, consumer price index (cpi) year-to-year change, uah/usd exchange rate, 2-year and 5-year government bond yield, as well as 2-year and 5-year credit default swap (cds). results show that the most influential credit rating drivers for ukrainian banks are: exchange rate; funding and liquidity; capital position and asset quality; sovereign risk. the research showed that the 2-year and 5-year government bond yield in usd and 2-year and 5-year cds were influenced by similar trends. the yield on short-dated ukrainian governmental bonds has shown a parallel increase with the corresponding cds that indicated the market’s evaluation of the stressed condition of the country’s government and economy. additionally, conventional yield structures displayed inversed nature with 2-year governmental bond yield in usd trading at significantly higher yields than 5-year government bond yield in usd during times of economic distress. although longer maturity instruments should usually trade at a higher rate, such a development could have reflected the public markets’ scepticism to the ukrainian government’s short-term solvency. the closer look at the tier 1 capital ratio, which is considered to be a key indicator of the financial health of the banks, revealed analogy between it and three major ukrainian banks rating development, indicating the tier 1 capital ratio as a strong influencing factor. loan-to-deposit ratio as an indicator of bank liquidity moved in parallel with decreasing credit ratings. the strong decrease in the uah/usd exchange rate mirrored a strong increase in inflation and overall worsening state of the ukrainian economy also being reflected in the major banks’ ratings. practical implications. the correlation of these factors is relevant for bank managers and investors who can use financial market indicators to forecast and plan their own ability to conduct business. likewise, academic researchers can further build on this study to add to the literature on country-specific reviews of sovereign debt crises and their impact on national banking systems. value/originality. this research demonstrates that a worsening of financial indicators of the health of ukraine’s financial system as measured by government bond yields and the trading of credit default swaps, as well as the country’s economic downturn, go along with a decline of local banks’ credit ratings. key words: banking sector, default, credit rating, rating agency, restructuring, economic downturn, sovereign risk, funding and liquidity, capital position, asset quality. jel classification: f62, g01, g21, g24, g28, g33 1. introduction the continuously stressed condition of the ukrainian economy has had a strongly negative impact on the country’s banking sector. currently, the ability of ukraine’s government to meet the ambitious fiscal and economic targets, agreed with the imf to secure access to further liquidity, is closely being monitored by market participants. while the agreement between the government and creditors holding usd 18 bn of government and government-guaranteed eurobonds is cautiously seen as a positive sign, with market prices of ukrainian government bonds appreciating questions baltic journal of economic studies 217 vol. 3, no. 4, 2017 about further needed restructuring measures are being raised. all the while, political conflict within the country is ongoing. for a business model as integrally based on leverage as banking, these developments are understandably threatening: volatility in the main interest rate, political uncertainty, rapidly fluctuating deposit levels, as well as the dramatic decline in the hryvnia exchange rate against the main foreign currencies are presenting tough challenges. combined with a rapid increase in nonperforming loans due to declining credit quality in both the commercial and retail markets, these developments have been putting a critical strain on the country’s banks and further threaten to erode their capital positions. the purpose of this research is to identify the influence of the country’s economic development on the international agencies’ credit rating of its banking system. the study methodology involves the analysis of the three major ukrainian banks  – privatbank, oschadbank, and ukreximbank using fitch’s credit quality assessment systematic as an example. for the comparison, the tier 1 capital ratio of the ukrainian banks, 2-year and 5-year cds, 2-year and 5-year government bond yield, loan to deposit ratio of the ukrainian banks, year-to-year quarterly gdp growth, cpi year-to-year change and uah/usd exchange rate were taken. first, the development of ukrainian macroeconomic indicators is analysed. second, the historical fitch ratings issuer default rating development for privatbank, oschadbank, and ukreximbank is presented. third, the development of the ukraine’s 2-year and 5-year governmental bond yield in usd and 2-year and 5-year cds is closely looked into, which could provide the indication of the potential default risks. further, the ukrainian bank ratings are being compared versus quarterly real gdp development, tier 1 capital ratio development of ukrainian banks, loan to deposit ratio development of ukrainian banks, and uah/usd exchange rate development. 2. ukrainian macroeconomic indicators and banks’ credit ratings development from figure 1, it can be seen that due to the economic crisis and political uncertainty the country was hit by the sharp increase in inflation starting at the beginning of may 2014 with the cpi reaching growth rates above 60% in april 2015. the ukrainian central bank reacted to this through a strong increase in the discount rate up to 30%. a painful decline in the exchange rate of up to 30 uah per usd in february 2015 reflected the strong inflation and since then has been strongly counteracted by the national bank of ukraine, as of october 2017 stabilizing around 26 uah per usd, and discount rate going down to 12.5%. gdp growth reached the quarterly rate of minus 17% in march 2015 and improving to 2.3% in the second quarter of 2017. 0 5 10 15 20 25 30 35 40 -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% u a h /u sd discount rate (lhs) cpi y-o-y change (lhs) gdp growth (lhs) uah/usd exchange rate (rhs) fig. 1. ukrainian macroeconomic indicators development, 2012–2017 source: the author’s own research based on data of the national bank of ukraine (2017) these developments have been reflected in the banks’ broadly declining credit ratings. while a direct cause and effect relationship between credit ratings and banks’ refinancing risks, as well as capital costs is difficult to establish, major bond issuances, especially those marketed to international investors, usually require a rating by a market-leading agency and international asset managers often are operating under certain investment restrictions with respect to certain rating levels. therefore, credit rating levels continue to have strong implications for the ability of banks to access refinancing markets, as well as their overall cost of capital, reflecting the market’s increased perception of risk for the ukrainian economy as a whole and the banking sector in particular. looking at the long-term issuer default ratings of the country’s three largest lenders, privatbank, oschadbank, and ukreximbank, as determined by fitch, there has been a steady decline until the second quarter of 2015. banks’ rating downgrades started in september 2013, preceding the decline of macroeconomic indicators (see figure 1). rating improvements for oschadbank and ukreximbank started in q3 2015, following the privatbank oschadbank ukreximbank d rd c cc ccc bb b+ bbbb fig. 2. fitch ratings development for privatbank, oschadbank, and ukreximbank, 2008–2017 source: the author’s own research based on banks’ public information and fitch ratings (2017, july 25) baltic journal of economic studies 218 vol. 3, no. 4, 2017 stabilization of the economic situation while the recent downgrade of privatbank to rd in the last quarter of 2016 can be attributed to the bank’s individual financial difficulties (see figure 2). 3. methodical approaches this research applies a qualitative comparative analysis to a range of indicators of the health of the ukrainian economy and its banking sector. quantitative data for this review has been collected from a number of sources, predominantly bloomberg, fitch ratings, and national bank of ukraine. three major ukrainian banks  – privatbank, oschadbank, and ukreximbank were taken for the analysis. to understand the credit quality assessment, taking fitch's systematic as an example, the long-term issuer default ratings are informed by a combination of two elements, namely (i) the individual bank’s viability rating and (ii) the support rating from an institutional and/or sovereign level (fitch ratings, 2014, april). credit ratings are therefore inherently linked to the respective sovereign rating. fitch on april 28, 2017, affirmed november 11, 2016, long-term foreignand local-currency issuer default ratings for ukraine at “b-” with having a stable prognosis. fitch upgraded the ukrainian state from ccc level, which was indicating that default was an actual possibility, noting that chance for meeting financial commitments depended on improving the economic situation. during the same time, fitch upgraded oschadbank and ukreximbank from ccc rates to b-, while privatbank was downgraded to rd, which according to fitch can indicate default on financial obligations that has not yet led to filing for bankruptcy or any other winding-up process, thus remaining in operations. the privatbank downgrade can also reflect the nationalization by the government of ukraine in december 2016, as a result of the national bank of ukraine investigation of privatbank’s capital deficit. 4. findings the analysis showed that concerning ukrainian banks, the international ratings by fitch, s&p and moody’s are based on several key drivers, which inform the agencies’ current risk assessments, as well as conditions for future rating actions. in the research, the following credit rating drivers for ukrainian banks were identified. sovereign risk. according to imf (2015, august 4) data, 51 banks representing ca 22% of the ukrainian banking system’s total assets have fallen into insolvency since the beginning of 2014, 42 of which were in liquidation. furthermore, several banks were engaged in restructuring their foreign currency liabilities to free up capital. the research showed, as can be seen in figure 3, the yield on short-dated ukrainian government bonds has increased dramatically followed by the corresponding cds, indicating the market’s assessment of the stressed state of the country’s government. the 2-year and 5-year government bond yields in usd have similar development trends as 2-year and 5-year cds, which spiked in the spring of 2015, indicating the market's assessment of the country 's critical economic and governmental state. during this time conventional yield structures inversed with 2-year government bond yield in usd trading at significantly higher yields than 5-year government bond yield in usd. while longer maturity instruments should usually trade at a higher rate, this development clearly reflected the public market scepticism of the ukrainian government’s shortterm solvency outlook. yields reached a peak of around of 80% at the end of march 2015; one week after the ukrainian parliament approved the list of regions on the special status of donbas on the 17 of march, as was discussed at the minsk ii. as of today, government bond yields returned to normal patterns with the 5-year government bond yield in usd exceeding that of the 2-year yield by ca 130 bps. 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% gvt bond yield 2y usd gvt bond yield 5y usd cds 5y usd cds 2y usd fig. 3. ukraine’s 2y and 5y government bond yield in usd and 2y and 5y cds development, 2011–2017 source: the author’s own research based on the bloomberg data (2017) after the minsk-ii agreement, the security situation in the east of the country has somewhat stabilized, however, the remaining uncertainty and potential for renewed military conflict is still a key factor in the rating agencies’ sovereign risk assessment given the strongly negative impact a renewal of the conflict would have for the economy as a whole. the development and presumed connection between the changes in the ukrainian banks’ ratings and the economic state of the country can be observed in figure 4, where the waves of the real gdp decline are parallel to the ratings’ downgrade of the selected banks, especially in 2008– 2010 and 2014–2016. ukraine’s fiscal situation is also heavily strained with the government continuing to post a budget deficit (nbu, 2017). between 2012 and 2014, ukraine’s government debt more than doubled to 1.1 trillion uah (71% of gdp) with the ukrainian national bank expecting baltic journal of economic studies 219 vol. 3, no. 4, 2017 debt levels to rise. moody’s (2015, july 10) stated that the government in order to deal with the deficit and be able to refinance the debt falling due became dependent on increasingly costly new local market borrowings, on borrowings from imf, mdbs, as well as bilateral creditors. but even despite new attracted loans, the government is still running out of funding, which led to the additional currency volume issue. the increase in money supply has put pressure on the hryvnia exchange rate and led to a sharp increase in interest rates by the ukrainian national bank. the main refinancing rate stood at 29% at the end of august 2015, while inflation reached levels of around 55% in july 2015, 39% for the period of january–july 2015 (nbu, 2015, june). to avoid an imminent default, the ukrainian government has been engaged in negotiations with the imf and private bondholders regarding the restructuring of certain government issued or guaranteed foreign currency obligations. at the beginning of september, bondholders representing a nominal amount of 18 bn usd, or around a half of ukraine’s sovereign foreign debt at the time, reached an agreement with the ukrainian state approving a 20% haircut on their debt and a maturity extension until 2018. in return, the state agreed to an interest rate uplift and warrants linked to country’s gdp development for bondholders. the participation of bondholders through debt relief has been a key demand by the imf towards the ukrainian government to allow the further release of imf loans to the country under the 17.5 bn usd program. given the country’s limited access to other funding sources, the imf loans are seen as vital by the rating agencies. another 1.7 bn usd loan release was agreed by imf on the 31 of july 2015 (imf, 2015, july 31). the targets agreed with the imf include providing 15 billion usd in public-sector financing, a public and publicly guaranteed debt-to-gdp ratio of below 71% of gdp by 2020; and holding budget financing needs at an average of 10% of gdp and below an annual maximum of 12% from 2019 to 2025 (imf, 2015, august 4). any unexpected misses of economic targets set by the government and agreed with the imf would put the release of further funding into question, make additional restructurings necessary, and cause downward pressure on the country’s credit default assessment. as an example, moody’s (2015, july 10) also stated that ukrainian economic and external position was weaker than had been expected and that the unstable political situation and difficulties in executing the program’s conditions could lead to changes in the program and the halt of imf disbursements. currently, the ukrainian government is being rated at “b-” with a stable outlook. it is believed that further expected projections regarding the correlation of the general government debt to gdp will depend on the ukraine’s currency exchange rate, as well as the term of its trade, and also on the situation’s development in the eastern ukraine. any further downgrades of the sovereign rating of ukraine would translate directly into consequences for ukrainian banks. also, the ability and willingness of the state or major shareholders to provide support to the banks through funding are seen as a critical factor in the assessment of individual ratings. capital position and asset quality. if one compares the development of the ratings by the three major ukrainian banks to the development of the tier 1 capital ratio, a key indicator of the financial health of the banks, the action of the rating agencies developed analogously indicating its role as a strong influencing factor. this relationship has particularly been visible in recent past starting from mid2013. when tier 1 capital ratio of the ukrainian banks reached their low point at 5.5%, the ratings of the major banks covered by fitch also reached their lowest points in the last years: rd for ukreximbank due to ongoing restructuring of their foreign currency denominated debt, c for privatbank and oschadbank, who were also in restructuring negotiations (see figure 5). 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% rating privatbank (lhs) rating oschadbank (lhs) rating ukreximbank (lhs) tier 1 capital ratio ukrainian banks (rhs) bb bbb+ b bccc cc c rd d fig. 5. fitch ukrainian banks ratings vs. tier 1 capital ratio development of ukrainian banks, 2008–2017 source: the author’s own research based on banks’ public information, fitch ratings (2017, july 25) and national bank of ukraine data (2017) fig. 4. fitch ukrainian banks ratings vs. quarterly real gdp development, 2008–2017 source: the author’s own research based on banks’ public information, fitch ratings (2017, july 25), and bloomberg data (2017) -25% -20% -15% -10% -5% 0% 5% 10% rating privatbank (lhs) rating oschadbank (lhs) rating ukreximbank (lhs) y-o-y quarterly gdp growth (rhs) bb bbb+ b bccc cc c rd d baltic journal of economic studies 220 vol. 3, no. 4, 2017 unsurprisingly, the negative development of the ukrainian economy has had a strong impact on banks’ loan portfolio qualities and capital positions. according to data by the ukrainian national bank (2017), the nonperforming loan ratio for the banking sector reached over 24% in june 2015, while the industry average tier 1 capital ratio fell to around 5%. furthermore, the regulatory capital adequacy ratio for the entire ukrainian banking system (including insolvent banks) almost halved from 15% in january to 8% in august 2015, even less than the lows of around 13% during the global financial crisis in 2008 and below the regulatory 10% minimum. a first asset quality review of the 35 largest ukrainian banks conducted by the national bank in 2014 identified additional capital needs of 66 bn uah, or around 4% of the country’s 2014 gdp, for the country’s banking system (nbu, 2014, october 10). until june 2015, 5 banks did not meet the increased capital requirements set as a result of the stress test and were declared insolvent (imf, 2015, august 4). as agreed in the mou with the imf in february 2015, a second asset quality review and subsequent stress test based on march 2015 numbers were conducted. based on the individual banks’ stress test performance and their ability to recapitalize, rating agencies factored in these developments into their latest assessments. the impact of declining credit quality on operational performance was also frequently discussed. in april 2015, s&p (2015, april 21) noted regarding privatbank that the agency was forecasting that the bank’s profitability in 2015–2016 would decline significantly, which would be lower than that of its international peers, as a result of creating bigger volumes of additional provisions. determinants of asset quality as viewed by rating agencies include the individual asset mix of a bank. the ukrainian government has committed in its mou with the imf to increase the transparency of related party lending and to effectively enforce the limitations in place. the national bank of ukraine for the first time published data on this in july 2015 and, as of august 2015, the maximum credit exposure to related parties for the total ukrainian banking system was reported at 20% (nbu, 2017). according to the imf (2015, august 4), the country’s largest banks had their portfolios reviewed and measures are planned to dissolve any lending positions, which do not comply with the newly set limit of 25% for related party lending and to monitor their developments going forward. several banks have been negotiating with their creditors to restructure their foreign currency debt exposures. notably, bondholders in oschadbank and ukreximbank agreed to a maturity extension of their 1.5 bn usd and 1.2 bn usd exposures, respectively, in return for a margin uplift on the debt. however, the strong dependency on emergency liquidity and exposures to the volatile economic environment will continue to keep most banks from surpassing the ukrainian government’s ratings. funding and liquidity. another effect of the ongoing economic downturn in the country has been strong volatility in banks’ short-term funding. nominal demand deposits of households in local currency went down by 20% between the beginning of 2014 until the middle of 2015 and foreign currency deposits fell even more dramatically by over 50% (usb research, 2015, august 17). while the situation has to some extent stabilized in mid-2015, the agencies continue to see low investor confidence as a key weakness. as an indicator of bank liquidity, the stark increase in the loan-to-deposit ratio of the ukrainian post-2008 financial crisis, indicating higher leverage and deposit outflows, moved in parallel with decreasing credit ratings with a current loan-to-deposit ratio around 1.18 times (see figure 6). 1,0 1,2 1,4 1,6 1,8 2,0 2,2 2,4 rating privatbank (lhs) rating oschadbank (lhs) rating ukreximbank (lhs) loan to deposit ratio ukrainian banks (rhs) bb bbb+ b bccc cc c rd d fig. 6. fitch ukrainian banks ratings vs. loan to deposit ratio development of the ukrainian banks, 2008–2017 source: the author’s own research based on banks’ public information, fitch ratings (2017, july 25) and national bank of ukraine data (2017) moody ’s (2015, july 10) stated that ukrainian banks continue to face significant liquidity risks and that the confidence of depositors still has to stabilize. in the first quarter of 2015, following strong withdrawals in 2014, ukraine’s banking system was hit by 5% of local-currency deposits and 13% of foreign-currency deposits decrease. ukrainian banks faced challenges paying back their international borrowings that were due in 2015– 2016, which required further distressed exchanges in order to extend maturities. deposit outflows and the strong devaluation of the hryvnia have led to an erosion of bank liquidity. in 2015 alone, the ukrainian national bank provided over 5 bn uah in emergency liquidity assistance to the banking system, notably including privatbank and ukreximbank, and a maturity extension on past loans was granted to recipients (nbu, 2017). baltic journal of economic studies 221 vol. 3, no. 4, 2017 in its note on privatbank from july 2015, s&p opined that it viewed the privatbank’s liquidity as weak compared to moderate. agency’s evaluation was based on the bank’s strong dependence on the national bank of ukraine for the liquidity assistance to tackle the problem of the continuing withdrawal of deposits. s&p also stated that it believed that the planned eurobond restructuring could weaken the confidence of investors (interfax-ukraine, 2015, july 10). from the rating agencies’ perspective, the sustained provision of liquidity by the ukrainian national bank to the banking system, as well as short-term capital controls, has been of key importance for stabilizing the banking sector as a whole. free access to capital markets and the successful raising of capital are also seen as prominently positive factors for the individual banks’ liquidity positions. however, the current environment remains very difficult. as of october 2017 cost of loans is around 14.8% in domestic currency and 8% in foreign currency, while costs of term deposits are 9.4% and 2.6% in national and foreign exchanges correspondingly. an average weighted interest rate on interbank credit market is at 11.7% level (nbu, 2017). the impact of the complex interplay of deposit flows, inflation and interest rate development, as well as government solvency, will be a key determinant for rating agencies in their credit strength assessments for individual banks. exchange rate. another deciding factor is local currency stability. the hryvnia exchange rate against the main currencies dramatically reduced in 2015 with the rate against the usd decreasing by 40% from january to september 2015. given that around 50% of total loans to customers and other financial institutions in the country’s banking system are denominated in foreign currencies, according to data from ukrainian national bank per july 2015, hugely negative implications become apparent (nbu, 2017). these developments put considerable strain on banks’ foreign currency reserves. as shown in figure 7 the dramatic decrease of the uah/usd exchange rate starting at the end of 2013, mirroring a strong increase in inflation and overall worsening state of the ukrainian economy and the banking sector, in particular, has been reflected in the banks’ ratings. currently, ukrainian two major banks’ ratings are band privatbank hovering around the default level, while the exchange rate is trading near its recent historical low of 26 uah/usd. s&p (2015, august 28) noted that in february 2015 hryvnia has been officially floated, and its exchange rate was supported by a drastic increase in the refinancing rate and rigorous control over the currency. this control included the prohibition of the foreign currency exchange sales by individuals larger than 3,000.00  hryvnias, as well as 15,000.00 hryvnias on deposit payments in foreign currencies. another control measure was restrictions on banks’ foreign exchange purchases for own accounts, the obligatory sale of 75% of exporter’s foreign receivables in exchange for hryvnias, and more severe control of importers. refinancing of foreign currency debt has, therefore, become extremely challenging for ukrainian banks. to address this, as mentioned above, the country ’s largest private banks, banks controlled by the government, as well as the government itself, have been engaging in negotiations with lenders to restructure their foreign currency eurobonds, mainly seeking to reduce debt and interest burdens through haircuts or the extension of maturities. the success of these efforts is closely monitored by the rating agencies and has both shortand long-term implications for the institutions’ ratings. 5. conclusions the ukrainian banking sector is currently facing a highly challenging environment reflected in a volatile economy, reduced capital cushions, increased reliance on state funding to counter dwindling liquidity, as well as a decrease of credit quality across the market. credit rating drivers for ukrainian banks that were identified by this research to pose a key influence are: 1) sovereign risk; 2) capital position and asset quality; 3) funding and liquidity; 4) exchange rate. all these aspects are under consideration by the rating agencies and previously led to steady downgrades of ukrainian banks that indicated heightened default expectations. analogously, the agencies mostly saw a government default as very likely. the ukrainian government’s solvency and its ability to restructure its debt, receive support and debt relief from its creditors, and ability to control the political situation in the country will be the key factors to stabilize the system. fig. 7. fitch ukrainian banks ratings vs. uah/usd exchange rate development, 2008–2017 source: the author’s own research based on banks’ public information, fitch ratings (2017, july 25) and national bank of ukraine data (2017) 0 5 10 15 20 25 30 35 40 rating privatbank (lhs) rating oschadbank (lhs) rating ukreximbank (lhs) uah/usd exchange rate (rhs) bb bbb+ b bccc cc c rd d baltic journal of economic studies 222 vol. 3, no. 4, 2017 currently, ukraine is on a road to a successful restructuring ahead, which also showed in improving credit ratings for banks. until this journey is completed, the faith of the ukrainian banking system is intrinsically linked to the country’s economic and political progress, as well as creditors’ confidence. references: bloomberg. (2017). data: 1). 2-year and 5-year usd ukrainian governmental bond yield, 2-year and 5-year usd cds from november 2011 to october 2017; 2). ukraine's gdp development from march 2008 to october 2017. retrieved october 24, 2017 from bloomberg terminal. fitch ratings. (2017, july 25). fitch affirms ukreximbank and oschadbank at 'b-'/stable; upgrades vrs. doddfrank rating information disclosure form. retrieved october 24, 2017 from: https://www.fitchratings.com/ site/dodd-frank-disclosure/1026966 fitch ratings. (2014, april). introducing ratings navigator for banks. fitch ratings navigators. retrieved october 24, 2017 from: http://image.fitchemail.fitchratings.com/lib/fe9812717765027d72/m/1/ navigatorpromotionalmaterial20.pdf imf. (2015, august 4). first review under the extended arrangement—press release; staff report; and statement by the executive director for ukraine. imf country report no. 15/218. retrieved october 24, 2017 from: https://www.imf.org/external/pubs/ft/scr/2015/cr15218.pdf imf. (2015, july 31). imf executive board completes first review of ukraine's eff and approves us$1.7 billion disbursement. imf press release no. 15/364. retrieved september 18, 2015 from: http://www.imf.org/external/ np/sec/pr/2015/pr15364.htm interfax-ukraine. (2015, july 10). s&p downgrades privatbank to 'cc' on invitation to creditors to extend maturity of eurobonds. retrieved october 24, 2017 from: http://en.interfax.com.ua/news/economic/277140.html interfax-ukraine. (2015, april 21). s&p lowers privatbank's long-term rating to 'ccc-' on increased economic and sovereign risks. retrieved october 24, 2017 from: http://en.interfax.com.ua/news/economic/261517.html moody 's. (2014, december 19). ratings report: ukraine, government of. new york, moody 's. retrieved october 24, 2017 from: https://www.moodys.com/credit-ratings/ukraine-government-of-credit-rating-600037040 moody 's. (2015, july 10). moody 's: outlook stays negative for ukraine's banking system. moody 's investors services. retrieved september 18, 2015 from: https://www.moodys.com/research/moodys-outlook-staysnegative-for-ukraines-banking-system--pr_329781 national bank of ukraine (2017). statistics: 1). macroeconomic indicators; 2). monetary and financial statistics; 3). financial soundness indicators; 4). banking system indicators; 5). data from the financial statements of the ukrainian banks; 6). implementation of prudential ratios by the entire ukrainian banking system in 2015; 7). key performance indicators of banks; information materials: 1). information on loans with a maturity of over 30 days granted to the ukrainian banks by the national bank of ukraine in 2015. retrieved october 24, 2017 from: https://bank.gov.ua/control/en/publish/article?art_id=67604&cat_id=37801 national bank of ukraine. (2015, june). inflation report. retrieved october 24, 2017 from: http://www.bank.gov.ua/ doccatalog/document?id=19007320 national bank of ukraine. (2014, october 10). oleksandr pysaruk: in one or two years from now, we must have a revamped banking system. retrieved october 24, 2017 from: http://www.bank.gov.ua/control/en/publish/ article?art_id=11345111&cat_id=92516 s&p ratings services. (2015, august 28). research update: ukraine long-term foreign currency rating affirmed at 'cc'; outlook remains negative. new york, ny: standard & poor's ratings services. retrieved october 24, 2017 from: http://www.standardandpoors.com/en_us/web/guest/article/-/view/sourceid/20013397 usb research. (2015, august 17). ukrainian capital markets weekly. kiev: bnp paribas group, pp.3-6. светлана покрасьон здоровая доза пессимизма? влияние украинской экономики на кредитные рейтинги банковского сектора аннотация. целью исследования является определение влияния экономического развития страны на кредитный рейтинг её банковской системы. нестабильность и неоднозначное геополитическое положение украины усложняют любые прогнозы касательно её экономического развития. в то же время, масштабная реструктуризация всех секторов экономики стала необходимым минимумом для реформирования страны и достижения международных стандартов. интересно посмотреть, как именно эти международные стандарты, представленные оценкой рейтинговых агентств, оценивают украину и, в частности, ее банковский сектор. методология включает в себя анализ трех основных украинских банков  – приватбанка, ощадбанка и укрэксимбанка с использованием системы оценки качества кредитов fitch. сравнительный анализ проводился с использованием коэффициента капитала 1 уровня украинских банков, квартального роста ввп, индекса изменения потребительских цен (ипц), обменного курса uah/usd, показателя соотношения baltic journal of economic studies 223 vol. 3, no. 4, 2017 кредитов и депозитов украинских банков, 2-летних и 5-летних доходных государственных облигаций, 2-летних и 5-летних кредитных дефолтных свопов. результаты показывают, что основными драйверами кредитного рейтинга для украинских банков, которые оказывают основное влияние, являются: обменный курс; финансирование и ликвидность; капитализация и качество активов; суверенный риск. исследование показало, что доходность 2-летних и 5-летних государственных облигаций в долларах сша, 2-летних и 5-летних кредитных дефолтных свопов имела схожую тенденцию развития. доходность краткосрочных украинских государственных облигаций увеличилась параллельно с соответствующими кредитными дефолтными свопами, что свидетельствует о рыночной оценке напряженного состояния правительства и экономики страны. кроме того, традиционные структуры доходности отображали обратную природу с доходностью 2-летних правительственных облигаций в долларах сша с значительно более высокой доходностью, чем доходность 5-летних государственных облигаций в долларах сша. хотя более долгие инструменты погашения обычно должны торговаться по более высоким ставкам, такое развитие могло бы отразить скептицизм на публичных рынках в отношении краткосрочной платежеспособности украинского правительства. более пристальный взгляд на коэффициент капитала 1-го уровня, который считается ключевым показателем финансового состояния банков, выявил аналогию развития между ним и рейтингами трёх крупных украинских банков, указав на то, что коэффициент капитала 1-го уровня есть сильным влияющим фактором. соотношение кредитов и депозитов в качестве индикатора ликвидности банка перемещалось параллельно с понижением кредитных рейтингов. сильное снижение обменного курса гривны / доллара отразилось на сильном увеличении инфляции. общее ухудшение состояния украинской экономики также отразилось на рейтингах крупных банков. практическое значение. соотношение этих факторов актуально для менеджеров банков и инвесторов, которые могут использовать индикаторы финансового рынка для прогнозирования и планирования своих возможностей для ведения бизнеса. аналогичным образом, академические исследователи могут продолжить работу над этим исследованием, чтобы прибавить к литературе обзоры суверенных долговых кризисов по конкретным странам и их влияние на национальные банковские системы. значение/оригинальность. это исследование показывает, что ухудшение финансовых показателей финансовой системы украины, измеряемое доходностью государственных облигаций, а также кредитными дефолтными свопами, и экономический спад в стране, сопровождаются снижением кредитных рейтингов местных банков. baltic journal of economic studies 367 vol. 3, no. 5, 2017 corresponding author: 1 department of labor and commercial law, kharkiv national university of internal affairs. 2 department of labor law and social security law, taras shevchenko national university of kyiv. 3 department of management and human resources, national academy of internal affairs of ukraine. doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-367-375 the problem of legal regulation of the operation of the over-the-counter (otc) currency market (forex) in ukraine and the eu eugene podorozhnyi1 kharkiv national university of internal affairs, ukraine dmytro sirokha2 taras shevchenko national university of kyiv, ukraine pavlo komirchyi3 national academy of internal affairs of ukraine, ukraine abstract. the aim of the article is to evaluate the state of legal institutionalization of the otc foreign exchange market in ukraine, as well as its comparison with the foreign experience of legal regulation of otc currency relations in ukraine and eu countries. the subject of the study is the legal and administrative framework for the functioning of the otc currency market (forex) in ukraine and in the eu countries. the methodology of the study consists of: historical and legal method, which allowed determining the preconditions for the emergence of otc markets in ukraine and the world and the principles of their functioning; system and structural method, which was used to analyse the world monetary system as an institutional and functional form of organization of international monetary and financial relations; a formal legal method that allowed us to comprehensively investigate a condition of regulation of the functioning of forex in ukraine, to identify its shortcomings, gaps, contradictions, and miscalculations, as well as to develop recommendations aimed at their elimination; a comparative and legal method that provided a deeper study of the specifics of the legal regulation of the functioning of forex in the eu and to define ways of implementing a positive foreign experience in the national legal system. the results of the conducted legal study have shown that in ukraine, the forex market operates in legal vacuum conditions that negatively affect either the protection of the rights of forex clients or the amount of tax revenues to the state budget. the most acceptable way to eliminate this shortcoming is to implement the main principles and requirements of the mifid in the national legislation. practical impact. the research of experience of eu countries regarding the legal regulation of forex companies activity and also regarding the creation of legal bases for implementation by the specified companies of self-regulation  – it is a necessary condition of further improvement of the legal regulation of the otc currency relations in ukraine. correlation/authenticity. the mentioned directions of improvement of domestic legislation in the field of the functioning of the otc currency market (forex) are the most promising at the modern stage of development of the domestic economy. it is so because they are aimed at ensuring stability, reliability, and efficiency of the financial system, strengthening the guarantees of the rights of private investors, and increasing tax revenues from the activities of forex companies. key words: currency market, currency system, forex, forex trading company. jel classification: a11, b17 1. the statement of the problem the weakness of its financial system is one of the most important issues for modern ukraine. it does not ensure the normal functioning and stable development of the domestic economy. this situation negatively affects the competitiveness of our country, which is an extremely important moment of ukraine’s participation in a number of globalization and integration processes. particularly, it constrains rates of its join to a highly developed european community as a full member. a number of ukrainian researchers have repeatedly emphasized the importance of the issue of ensuring baltic journal of economic studies 368 vol. 3, no. 5, 2017 the stability, reliability, and efficiency of the financial system as a guarantee of the proper development of the national economy. at the same time, most of them pay attention to the fact that the current financial system of ukraine has many significant problems and disadvantages, which determines the need to improve approaches to the organization and implementation of public administration. for example, such scientists as n.  ye.  seliuchenko and z. shmihelska quite rightly point out that the formation of a system of financial bodies and institutions in ukraine today is extremely relevant, because the efficiency of the functioning of state bodies and the stability of the development of the country’s economy, in general, depends on the correct solution of this issue. therefore, it is important to improve the financial system of ukraine, which is still on the stage of formation and it really needs control from the authorities of the country. besides, the correct financial model will not only stimulate the manufacturer but will also ensure the effectiveness of financial relations in society (seliuchenko, shmihelska, 2012). v.f. rol, v.v.  serhiienko, and s. popova write in their researches that problems of regulation of financial relations are among the most urgent for the modern stage of development of ukraine. finances are the material basis of the existence of the state, a source of monetary support for its functions. therefore, it seeks to regulate in details the social relations that arise during formation, distribution and use of various funds of funds (rol, serhiienko, popova, 2011). lawyers point out that in countries with a developed market economy, finance is the main economic tool for influencing the processes of expanded reproduction, distribution, and redistribution of the aggregate social product (rol, serhiienko, popova, 2011). p. ya. kravchuk and yu. s. tkachuk point out that innovative development of society is possible only in case of presence of a powerful financial system. in ukraine, the financial system does not yet solve complex economic and social problems. that is why the creation of the efficient financial system requires new scientific research, a deep analysis of causes and consequences of the creation and use of financial resources funds (kravchuk, 2013). v.  chernenko emphasizes that problems of stabilization and improvement of the financial system of ukraine are the most urgent issues for the state. the aim of stabilization is to create real starting conditions for the structural adjustment of the economy, the restoration of the investment process, and the mobilization of the relevant financial resources through the formation of the financial market and other financial institutions (chernenko). 2. the condition of research one of the significant gaps in the government’s management of the domestic financial system is the lack of qualitative regulation of the functioning of the forex market in ukraine. such scientists as: a. paskalova, v. holubchik, y. sibirianska, ye. virlych, l. maliarchuk, p. pirnykoza, s. dziuba paid attention in their researches to the relevance of this issue and to the need for its constructive solution. in the context of ukraine’s course to european integration, the issue of regulating the forex market in our country becomes especially important, because in the territory of the eu functioning of this market takes place in a clearly defined legal field. that is why in this article we would like to consider the state of legal institutionalization of forex in ukraine, as well as we will compare it with foreign (especially in the eu) experience of legal regulation of this currency market. 3. statement of the basic material the foreign exchange market of ukraine, as well as currency markets of the majority of countries of the world, substantially reflects the state of the economy of the country. foreign exchange market acts as the objective organizer of the currency relations, which segments and orders aspiration of different economic agents. the latest events in the world show importance of the influence of the foreign exchange market on the economy. the development of the crisis has shown how closely are connected the monetary and financial spheres and under a certain coincidence, what extent of their impact on the main fields of economic activity and financial security in general (korol, 2015) can be. on the pages of special literature, depending on the context, the currency market is determined differently. thus, the economic category (the currency market) is a system of stable economic and organizational relations related to the operations of purchase and sale of foreign and payment documents in foreign currencies. as an institutional mechanism, it is a set of institutions and organizations  – tnb, currency exchanges, brokerage firms, which ensure the functioning of foreign exchange market mechanisms (bozhydarnik, 2013). from the financial and legal point of view, the currency market is a set of social relations between authorized entities that are regulated by the law of a state, that arises in the financial sphere of the state and it is related to the implementation of activities aimed at the possession, use, and disposal of financial instruments in foreign currency or currency valuables (starynskyy, 2012). foreign exchange markets in the modern sense were formed in the xix century. this was facilitated by the following prerequisites: development of international economic relations; creation of a world monetary system that imposes certain obligations on member countries with respect to their national currency systems; broad use of international payments; strengthening concentration and centralization of bank capital, development of correspondent relations between banks of different countries, spreading the baltic journal of economic studies 369 vol. 3, no. 5, 2017 practice of maintaining current correspondent accounts in foreign currency; improvement of communication facilities – telegraph, telephone, telex, which facilitated contacts between foreign exchange markets and reduced the degree of currency and credit risks; development of information technology, rapid transmission of communications about exchange rates, banks, the status of their correspondent accounts, tendencies in the economy and policy (bozhydarnik, 2013). the world monetary system is an institutional and functional form of the organization of international monetary and financial relations that has developed as a result of the evolution of the world economy and it is legally enshrined by the intergovernmental agreements. the main task of this system is to regulate international settlements and foreign exchange markets, mediate payments for exports and imports of goods, capital, services, and other types of international economic activity, create favourable conditions for the development of production and the international division of labour. this dynamic, evolutionary system has gone a series of stages in its development, each of which reflects the level of maturity of monetary and financial relations and their institutions (rohach, filipenko, shemet, 2003). the first in the history of the world monetary system was a system, which was based on the uniform rules of circulation of golden money goods and it is known under the name of the system of “gold standard”. the beginning of the gold standard was made by the bank of england in 1821. legally, this currency system was issued at the conference in paris in 1867. the system of the gold standard was characterized by the fact that the role of a universal equivalent was fixed to gold, and gold coins or bank notes, the exchange of gold were in circulation. the system of the gold standard has become widespread in the world in the last quarter of the 19th century: in germany in 1871–1873, in france from 1878, and in japan in 1897 (patyka, 2012). the golden standard system was based on several simple principles: countries fix the golden content of national currency units; currency parities are determined by the ratio of the golden weight of currencies; countries provide the convertibility of national currencies to gold; therefore, they bind volumes of the monetary offer with volumes of the gold reserves; gold is freely exported and imported. the gold standard provided the stability of exchange rates. deviations from the golden parity were not big and were limited by “golden points” – economic boundaries, which were determined by the amount of expenses for the export of gold abroad for exchange for any currency (transportation, insurance, packing, unloading costs, etc.). the gold standard also provided a long-term balance of payments balances (hrontkovska, riaba, ventsuryk, krasnovska, 2014). the second world war actually destroyed the system of gold-digging standard, which prompted the development of a monetary and financial system that was adequate to new conditions of the functioning of the world economy and international economic relations. after long preparatory work, such a system has been created and institutionally issued in 1944 (rohach, filipenko, shemet, 2003). this year, by the initiative of the us in the american city of bretton woods, an international monetary and financial conference was convened by the 44 states that signed the charter of the soa, including the ussr . the subjects of discussion were two projects of the new international monetary order  – english, created by j.m. keynes, and the american one  – proposed by h. white. the keynesian project differed by the scale of the proposed reforms and the european vector of change. in this project, it was written about creation of an institutional basis of the international cooperation – systems of the international organizations (the world bank of the central banks, international clearing union, international investment bank, organizations for environmental regulation, international bank for reconstruction and development, etc.), which are able to regulate and concentrate resources that will help to avoid the dangers of economic downturns and, above all, will reduce the burden of external constraints on the devastated european economy by giving it the financial resources needed to rebuild and develop (hrontkovska, riaba, ventsuryk, krasnovska, 2014). as h.  e.  hrontkovska, o. i. riaba, a. m. ventsuryk point out, plan of h. white was simpler, more pragmatic, and pro-american. institutional terms were proposed only for creating a stabilization fund – it is a simple common cash from the deposits of participating countries and it was excluded the possibility of creating a world power that could create competition for american economic and political leadership. at the same time, as the researchers emphasize, two projects also had common ideas: the recognition of the need for freedom of world trade and financial exchange, international monetary stability and the achievement of balance of payments, replacing the gold standard with gold, the creation of an international organization to oversee the functioning of the world monetary system, mutual cooperation and settlement of balance of payments. the agreements signed in bretton woods were really close to h. white’s project (hrontkovska, riaba, ventsuryk, krasnovska, 2014). yu. h. kozak, k. i. rzhepishevskyi, v. v. kovalevskyi and others note that the bretton woods agreement has become an important stage in the development of the international monetary system. as for the first time the currency system began to be based on the baltic journal of economic studies 370 vol. 3, no. 5, 2017 interstate agreement, which establishes common rules for all and establishes such international organization – as the international monetary fund (imf)  – which “obligation” is to ensure normal functioning of system and compliance principles established by the general agreement (kozak, rzhepishevskyi, kovalevskyi, 2004). the imf statute has defined the basic principles of the new currency system. the bretton woods currency system functioned until the middle of the 70th years of the 20th century and has played a significant role in deepening of the international division of labour, production internationalization, and in the intensive development of foreign economic relations (rohach, filipenko, shemet, 2003). however, with the growth of the global economy, with the increased competition, the growth of inflation, a sharp increase in financial transactions not related to specific foreign trade agreements, as well as in connection with the crisis of the key currency system  – the us dollar, the bretton woods monetary system satisfied more less all the needs of international trade and capital movements (kozak, rzhepishevskyi, kovalevskyi, 2004). in connection with this, we have a question about the introduction of a new international monetary system that would correspond to the realities of world modern economic life. that is why in 1971 when the decision of the president of the usa cancelled the convertibility of the dollar into gold, the bretton woods monetary system has stopped to exist  – instead of it a floating exchange rate was introduced, i.e. a market valuation system. since 1974, all leading currencies (such as the dollar, pound sterling, german mark, yen, french franc) were already free to swim in relation to each other. in the same year, “special drawing right” – “sdr basket” became the new standard of the value of currencies. in 1976, the imf decided to refuse to fix the official price of gold, by stopping operations with him within the framework of the imf, giving the national currency bodies the right to dispose of their own gold at their discretion. finally, in 1978, the imf’s statute secured a refusal from the fixed parities and a new currency system (hrontkovska, riaba, ventsuryk, krasnovska, 2014), which was named jamaica, was officially put into effect, because the amendments to the imf statute were made by the international agreement, which was signed in january 1976 in kingston ( jamaica). and during this period, the forex market appeared on the world financial and monetary stage  – it is the interbank market, which operates around the clock and has no links to any stock exchange. the term “forex” in english means “foreign exchange”. terms of trade in this currency market are the same for its participants, the key principle of its operation is free trade, the ability to buy and sell currency at the most favourable price, which depends on demand and supply on it. for a long time, the market forex was available only to banks and to the international corporations. for example, 80% of the total profits of the largest swiss bank union bank of switzerland (ubs) in 1994 have made operations in the foreign exchange market, and only 20% of total profit income from the credits and trade in securities (chto takoe foreks). however, in the second half of the 90s of the twentieth century, currency brokers began to function, which allowed “small” participants, particularly, ordinary citizens, to enter this market in order to earn a difference in exchange rates. the active development of information and communication technologies and the aggressive advertising company, which was aimed at attracting investors – all these factors have contributed to the active development of the forex market and increased volumes of currency transactions on it. over the past three decades, the forex currency market has developed into the largest financial market in the world, whose turnover was about $4 trillion a day, according to a 2010 study published by the bank for international settlements. the main currencies in this market are the us dollar (usd), euro (eur), japanese yen ( jpy), swiss franc (chf) and british pound sterling (gbp) [chto takoe foreks]. in 2016, the daily volume of transactions in the forex market amounted to 5.1 trillion dollars in the structure of operations in the forex market, foreign exchange swaps (on average 47%), operational spots (on average 33%) and forward transactions (13-14%) occupy the largest share, and among the major forex currency currencies are the us dollar, the euro, the japanese yen, the british pound sterling. the highest levels of monetary turnover have currency pairs of euro/dollar, us dollar/japanese yen (23% and 18% of all transactions in 2016, respectively) (paskalova, sibirianska, maliarchuk, pirnykoza, 2017). from the mentioned information it is clear that the volumes of this market are spectacular, and according to forecasts of various financial and analytical organizations (by 2020 the size of daily operations on forex can grow from 10 to 20 trillion dollars a day). participants of the foreign exchange market are banks, international corporations and export-import companies, investment funds, as well as private investors. millions of people around the world conduct trading on the forex market and earn a profit by fluctuating foreign exchange rates. forex operations today are one of the main sources of income for banks and financial institutions around the world. the current forex market is the only telecommunication network of interconnected banks and other financial institution that does not have a territorially defined place of trade and temporary restrictions, auctions can start on monday morning in new zealand and can close on friday evening in the united states. a participant of the foreign exchange market can become anyone, regardless of the location, because, for transactions in the forex market, it is necessary only to have access to the internet and the necessary knowledge (chto takoe foreks). baltic journal of economic studies 371 vol. 3, no. 5, 2017 in our country, the studied currency market, that is, forex appeared in the late 90s of the twentieth century with the beginning of the development of free market relations. and firstly, as in other countries, it was a technology that operated exclusively within some banks. moreover, the use of such technology was possible only in those banks that were able to operate with sufficiently large funds outside of the nbu’s foreign exchange supervision. thus, citizens of ukraine had to get acquainted with forex exclusively through the representative offices of foreign dealerships (holubchik, 2012). however, in the end, ordinary citizens received access to this market. extremely high level of liquidity of the forex market; opportunity, due to the existence of a leverage to carry out operations in the presence of a participant in the market of a monetary amount much less than what is needed; an extremely high level of potential profitability; freedom to carry out transactions; round-the-clock and global availability has helped to gain a high popularity of this market among private investors. according to the research of the association “ukrainian centre for the development of otc financial instruments and technologies” in 2012, the volume of annual revenues to the accounts of ukrainian participants in the forex market made to 40 million dollars. the total number of ukrainians, who are actively engaged in transactions on forex, has exceeded over 70 thousand people. in this case, they use services of more than 30 operators (obsyahy rynku forex v ukrayini syahayut 40 mln dolariv; vyhody ta ryzyky instytualizatsiyi rynku foreks v ukrayini). in 2015–2016, the number of clients of forex brokers in ukraine was about 100 thousand people, and the amount of funds invested by the latter amounted to about 200 million dollars. although these data are approximate, at the same time they clearly indicate that, even despite the economic crisis in ukraine, the real interest of the population in the forex is growing. that is quite clear, considering it mentioned features (liquidity, availability, high potential profitability, ubiquity, relative ease (from a technical point of view), work on it, etc.). taking into account the scale of this market, it is obvious that it cannot be left out of the state’s attention. however, this sector has not yet received a proper legal regulation in ukraine. it negatively affects either the rights of forex brokers or profits of the state itself. according to the research, over the lack of regulation of such companies by the state, in the shadow of the ukrainian forex market annually rotate about 200  million usd (paskalova, sibirianska, maliarchuk, pirnykoza, 2017). of course, we cannot say that there is no legal framework for the functioning of the forex market in ukraine, its certain aspects are regulated by provisions of the civil and tax codes of ukraine, laws “on banks and banking” on 7.12. 2000 no. 2121iii, “on national bank of ukraine” dated 20.05.1999 №  679-xiv, “on procedure for settlement in foreign currency” on 23.09.1994 № 185/94-vr , resolution of the board of the national bank of ukraine “on approval of instruction on procedure for opening, use, and closure of accounts in the national and foreign currency” of november 12, 2003 no. 492, “on amendments to certain regulatory acts of the national bank of ukraine” on 3.08.2012 № 327 and others. however, the provisions of these and other regulatory documents regulate the investigated industry only partly. the lack of a legal field has led to the emergence and active growth of unfair forex brokers (the so-called “kitchens”) in the first decade of the 21st century, which, by carrying out aggressive advertising companies, attracted a huge amount of funds from private investors, and in a few years was recognized as a bankrupt. trying to protect somehow citizens against similar fraudulent, to provide reliability, legality, and controllability of operations in the forex market, the nbu has adopted the resolution “on introduction of amendments to some normative legal acts of the national bank of ukraine” on 3:08.2012 no. 327. according to this legal regulation and the regulation of procedure and conditions for trade in foreign currency on august 10, 2005, no. 281, ukrainian investors may invest in the forex market only through authorized banks. particularly, this resolution stipulates that authorized banks have the right to conduct their own arbitration operations and arbitration operations on behalf of clients with foreign counterparties. authorized banks have the right to conduct arbitration operations with foreign banks and/or foreign nonbank financial institutions, if such an institution has the right to trade in foreign currency in correspondence with the law of the country, where it is registered, and it is covered by the supervisory activities of the corresponding bodies of supervision of the financial institutions of foreign countries. authorized banks have the right to carry out arbitration operations on the basis of the contracts signed with such clients as: physical resident persons; legal entities, which are not authorized banks, and individuals  – subjects of entrepreneurial activity; other authorized banks. authorized banks have the right to carry out arbitration operations only after the registration in the national bank of rules for conducting these operations in the order, which is determined by the national bank (pro vnesennya zmin do deyakykh normatyvno-pravovykh aktiv natsionalnoho banku ukrayiny; pro zatverdzhennya normatyvno-pravovykh aktiv natsionalnoho banku ukrayiny). in this case, under arbitration operations on terms of margin trading (hereinafter  – arbitration operations) we understand non-cash transactions, which provide the fulfilment of two counter-obligations to buy and sell one foreign currency for another foreign currency and which are carried out without a real supply of currency in the international foreign exchange market in order baltic journal of economic studies 372 vol. 3, no. 5, 2017 to receive profit from changes in the exchange rate or hedging currency risks. terms of conducting arbitration operations between the bank and the client are specified in the agreement on the implementation of arbitration operations, including: 1) notification of the risks of conducting arbitration operations by the client’s bank; 2) order of placement of the guarantee fee by the client (amount of the deposit, type of currency, term); 3) procedure for settlements between the bank and the client based on the results of arbitration operations (compensation of losses at the expense of the guarantee fee, the procedure for crediting profits); 4) frequency and procedure for providing information to the client about the transactions, which were performed by the client, the movement of his funds, and the balance of funds on his accounts (pro vnesennya zmin do deyakykh normatyvno-pravovykh aktiv natsionalnoho banku ukrayiny; pro zatverdzhennya normatyvno-pravovykh aktiv natsionalnoho banku ukrayiny). the mentioned nbu’s steps seem rather controversial. it is so, because, first of all, such an approach corresponds neither to any european practice in this area nor to ukrainian legislation, especially the law “on financial services and state regulation of financial services markets” 12.07.2001 no. 2664-iii. in most european countries, the supervision of the operation of forex companies is carried out not by national banks, special financial commissions, management, committees, etc. (for example, in germany  – by the federal financial control agency, in austria  – by the financial markets commission, in estonia  – by the financial control office). if we talk about ukrainian legislation, then in the article 21 of the aforementioned law “on financial services and state regulation of financial services markets” it is clearly enshrined that the state regulation of financial services markets is carried out: in the market of banking services and money transfer activities – by the national bank of ukraine; in securities and derivatives (derivatives) markets  – by the national securities and stock market commission. if we talk about other financial services markets  – the national commission that carries out state regulation in the field of financial services markets. the antimonopoly committee of ukraine and other state bodies make control over the activities of participants in financial services markets and receive information from them within the limits of the powers specified by law (pro finansovi posluhy ta derzhavne rehulyuvannya rynkiv finansovykh posluh). secondly, not all forex companies operating in ukraine belonged to the so-called “forex kitchens” and honestly fulfilled their obligations to their customers. the nbu having carried out the same transfer of the provision of forex services in the area of banking activity, and thus, made it impossible to operate within the framework of the legal field of forex companies, which do not have the status of banking institutions. then the question arises about the correspondence of such a position of the nbu to the article 42 of the constitution of ukraine. the indicated activity (providing forex services) is business and at the same time, it is not directly prohibited by any law. however, in accordance with the mentioned nbu resolution, the subject (legal entity, individual entrepreneur) cannot be engaged in this type of business, if it does not have the status of a banking institution. thirdly, the steps taken by the nbu did not substantially strengthen the guarantees of the rights of private investors, and moreover, they did not contribute to the increase in tax revenue to the budget from the activities of forex companies. after all, the majority of forex companies in ukraine that do not have the status of a banking institution are not residents of ukraine and they are registered in offshore areas. it is obvious that such a situation does not contribute to hindering the outflow of capital from the country with the help of these companies, it does not provide a proper control over the legality of cash flows and, of course, it does not make investors of such forex brokers more secure, it is so because disputes between investors and forexbrokers are usually resolved far beyond the jurisdiction of ukraine. that is, the ordinary ukrainian citizens who have invested their funds in the forex market through such foreign forex companies, in fact, do not have any legal means of real influence on these companies, in case if they have any claims to the brokers regarding the lawfulness, transparency, and conscientiousness of the fulfilment of their brokerage obligations to the client. the mentioned circumstances indicate that in the question about the settlement of forex, the nbu chooses the most simple and, obviously, not the most expedient and useful way. to our mind, in this question, we should take advantage of the eu experience and choose the way of not restricting access to making a business of providing forex services. it is necessary to establish clear and understandable requirements for the licensing of forex companies, to consolidate reliable guarantees of their clients’ rights, and to introduce a quality control over the activities of such companies. thus, the main regulatory document regulating the activities of forex companies in the territory of the eu is directive 2004/39/ec on markets in financial instruments (mifid). according to this legal act, companies that provide access to private investors to the forex market are investment companies. at the same time, according to this directive, investment services and (or) investment activities include such as: 1) acceptance and transfer of orders for one or more financial instruments; 2) execution of orders on behalf of clients; 3) making transactions on at own expense; 4)  management of assets; 5) consultation on investment; 6) underwriting of financial instruments and/or placing them on a firm commitment basis; baltic journal of economic studies 373 vol. 3, no. 5, 2017 7) placement of financial instruments without firm commitments; 8)  management of multilateral trading facilities paskalova, sibirianska, maliarchuk, pirnykoza, 2017). the key question, on the settlement of which the specified directive is directed, is to grant permission to engage in investment activities. so, firstly, when granting a license, the competent authorities must be sure of the positive nature of business reputation and sufficient experience in financial, in particular, investment and persons who will manage an investment company; and secondly, the company must have sufficient financial resources for the investment activity. the level of capital adequacy is determined by eu directive 2006/49/ ec dated 06.14.2006 “on capital adequacy of investment firms and credit institutions”. according to this directive, particularly, article 9, companies that perform orders from investors on financial obligations, which include forex companies as well, must have an initial capital of at least 730000 eur (directive 2006/49/ec of the european parliament and of the council of 14 june 2006 on the capital adequacy of investment firms and credit institutions). thirdly, according to mifid requirements, the investment firm must have stable, administrative and accounting procedures, internal control mechanisms, effective risk assessment procedures, and effective mechanisms for monitoring and information security systems. fourthly, the activity of an investment firm should be transparent, first of all, which is shown, in its duty to provide the investor (client) with all necessary information about the grounds and conditions of the firm’s operation at the stage of concluding the agreement with the client, as well as other information necessary for the client in the process of executing financial transactions on his behalf and/or on the results of their implementation. in particular, mifid obliges forex brokers to provide their customers with daily reports of their actions on their behalf. an important point is that the investment company itself must prove the adequacy and timeliness of providing information to the client, in case of a dispute between a client and an investment company and putting in relation to this the issue of customer awareness. the mifid sets common, most important requirements for the activities of investment companies, including forex companies. at the same time, each eu member country has the right to detail and develop the provisions of directive 2004/39/ec (commission directive implementing directive 2004/39/ec) at the national level. for example, each country independently determines, which authorities check the compliance of the company, which intends to obtain a license about investment activities, mifid requirements, and, in fact, which authorities issue a license, as well as control the compliance of such companies with the norms of the current legislation, both eu and national. for example, in the federal republic of germany, it is the federal financial supervision authority (bafin), which is the main financial services market supervisor. in its activities, this body is controlled and accountable to the federal government. besides, the management, during the exercise of its supervisory and control powers, closely cooperates with the federal bank of germany. such status as the federal financial supervision authority is determined by the federal law on financial supervision authority. during its work, the management quite strictly control activities of forex companies by actively using its right to conduct sudden inspections. according to the results of inspections, in case of detection of violations, the management has the right to impose fines on the company, the amounts of which may exceed 100 thousand euros. for example, in england, supervision over the activities of forex companies is carried out by the financial conduct authority (fca). its powers include the licensing of forex brokers, oversight of the security of the financial system of the state and the compliance of financial rights of their clients by the listed companies. we also consider it necessary to pay attention to such moment as self-regulation of activities of forex companies in ukraine. a number of european countries, along with controlling regulatory authorities, monitor the legality, transparency, and conscientiousness of forex companies by self-regulatory organizations, which are created by the same companies. in ukraine, in 2013, the association “ukrainian centre for otc financial instruments and technologies development” was established, which operates on the basis of the charter of 01.07.2014. the subject of the association’s activity is the development, implementation, and monitoring of the application of unified standards and rules of activity of legal entities and individual entrepreneurs, whose activities include the provision of services by using information and communication technologies related to the operation of otc financial instruments either in the international currency market (forex) or in other markets. the mentioned activity includes the activities of: legal entities that provide operations to individuals and legal entities in the forex market (hereinafter referred to as “forex companies”); legal entities, which attract clients for forex companies in order to obtain rewards from such clients, but which have no right to keep accounts of such clients, or accept money for them or other security and perform on their behalf transactions in the forex market, but not limited by it (hereinafter  – “representatives of forex companies”); legal entities engaged in software development and maintenance; legal entities that develop and maintain the software, which is necessary for carrying out the activities specified in paragraph 4.1 of the statute; legal entities that collect and provide financial news and other information, which is necessary for the activities specified in the paragraph 4.1 baltic journal of economic studies 374 vol. 3, no. 5, 2017 of the statute (statut asotsiatsiyi «ukrayinskyy tsentr rozvytku pozabirzhovykh finansovykh instrumentiv i tekhnolohiy»). in its activities, this association pursues a number of goals as: unification of the rules of behaviour (business practices) of individuals, who carry out entrepreneurial activity in the field, which is defined in paragraph 4.1 of the statute; unification of rules of conclusion, execution, and responsibility for nonfulfilment and/or improper performance of agreements in the field specified in the paragraph 4.1 of the statute; assistance in preventing property damage to legal entities, state or municipal property, as well as damage to the business reputation of legal entities obtained as a result of the guilty (inaction) of the members of the association during the performance of activities in the field specified in paragraph 4.1 of the statute; assistance in the reimbursement of damage, in case of intended infliction by members of the association, due to shortcomings in the work and the provision of services, executed and provided by members of the association; improvement of the quality of works and services, as well as the possible increase in the volume of services and work in the field specified in paragraph 4.1 of the statute, as well as other types of activities carried out by members of the association; carrying out an analysis of the activities of its members; etc. (statut asotsiatsiyi «ukrayinskyy tsentr rozvytku pozabirzhovykh finansovykh instrumentiv i tekhnolohiy»). creation of such association is, of course, a positive step towards regulating the functioning of the forex market in ukraine. but there is the problem that there are no powers that would allow it to actually exercise control in the specified area. all of its decisions are advisory. there is no guarantee that these recommendations will be taken into account by the market participants and/or by the corresponding government bodies. besides, ukrainian legislation does not oblige forex companies, which operate in the territory of our country, to join this association. 4. conclusions summarizing all the mentioned above, we can confidently state that in ukraine, the forex market operates in legal vacuum conditions, which negatively affects both the protection of rights of forex clients and the amount of tax revenues to the state budget. taking into account the existing volumes and the growth rates of this market, we consider that the legislator should make appropriate amendments and additions to the current legislation, as soon as possible in order to regulate abovementioned branch of financial activity. in this case, the principles and requirements set out in the mifid must be taken into account obligatorily. besides, studying and borrowing of the experience of eu countries in regulating the activity of public authorities, which control the activities of forex companies, as well as the creation of a legal framework for the implementation of self-regulation of these companies, seem necessary and useful. it is necessary to abolish provisions allowing arbitration operations only to banking institutions. instead, a special law should be adopted (or amendments to the current law “on financial services and state regulation of financial services markets” should be made). this law should define clear and strict conditions and procedures about licensing forex companies, as well as requirements for their activities, in particular: customer service, payment of taxes, interaction with state authorities, and participation in forex trading company’s self-regulation. references: seliuchenko, n. ye., shmihelska, z. k. (2012). upravlinnya finansovoyu systemoyu ukrayiny [management of the financial system of ukraine]. visn. nats. un-tu "lviv. politekhnika", № 725, p. 366-371. rol, v. f., serhiienko, v. v., popova, s. m. (2011). finansove pravo. navch. posib. [ finance law. teaching manual]. k.: tsentr uchbovoyi literatury, p. 392. (in ukrainian) kravchuk, p. (2013). problemy ta perspektyvy rozvytku finansovoyi systemy ukrayiny [problems and prospects of development of the financial system of ukraine]. ekonomichni nauky. cer. : oblik i finansy, p. 129-133. retrieved from: http://nbuv.gov.ua/ujrn/ecnof_2013_10%282%29__18. (in ukrainian) chernenko, l. v. problemy finansovoyi systemy ukrayiny v suchasnykh umovakh [problems of the financial system of ukraine in the current terms]. retrieved from: http://www.khntusg.com.ua/files/sbornik/vestnik_105/51. pdf (in ukrainian) korol, m. m. (2015). valyutnyy rynok ukrayiny: stan, problemy y perspektyvy [the foreign exchange market of ukraine: state, problems and prospects]. stalyy rozvytok ekonomiky, № 3, p. 65-70. retrieved from: http://nbuv.gov.ua/ujrn/sre_2015_3_10 (in ukrainian) bozhydarnik, n. v. (2013). valyutni operatsiyi pidruchnyk [foreign exchange operations. textbook]. k: "tsentr uchbovoyi literatury ", 698 p. (in ukrainian) starynskyy, m. v. (2012). valyutnyy rynok yak finansovo-pravova katehoriya [foreign exchange market as a financial and legal category]. pidpryyemnytstvo, hospodarstvo i pravo, № 8, p. 67-70. (in ukrainian) rohach, o. i., filipenko, a. s., shemet, t. s. (2003). mizhnarodni finansy: pidruchnyk [international finance: a textbook]. k: lybid, 784 p. retrieved from: http://pidruchniki.com/finansi/etapi_rozvitku_svitovoyi_ valyutnoyi_sistemi. (in ukrainian) baltic journal of economic studies 375 vol. 3, no. 5, 2017 patyka, n. i. (2012). mizhnarodni valyutno-kredytni vidnosyny : navch. posib. [ international monetary and credit relations: teach. manual]. k.: znannya, 566 p. retrieved from: http://pidruchniki.com/1214031047636/ finansi/evolyutsiya_mizhnarodnoyi_valyutnoyi_sistemi. (in ukrainian) hrontkovska, h. e., riaba, o. i., ventsuryk, a. m., krasnovska, o. i. (2014). mizhnarodna ekonomika [tekst] : navch. posib.[ international economics [text]: teaching manual]. kyiv: «tsentr uchbovoyi literatury», 384 p. retrieved from: http://pidruchniki.com/1124052562553/ekonomika/mizhnarodna_valyutna_sistema. (in ukrainian) kozak, yu. h., rzhepishevskyi, k. i., kovalevskyi, v. v. (2004). mizhnarodna ekonomika: v pytannyakh ta vidpovidyakh: navchalnyy posibnyk [international economics: questions and answers: teaching manual]. kyiv:«tsentr uchbovoyi literatury», 676 p. retrieved from: http://pidruchniki.com/1202022451152/ ekonomi k a/v_chomu_polyagay ut_si stema_zolotogo_standar tu_bretton-v ud sk a_valy utna_si stema . (in ukrainian) chto takoe foreks [what is forex?]. foreks ukrayna –forex ukraine. retrieved from: http://www.forexua.com/ ru/study/aboutforex. paskalova a., sibirianska yu., maliarchuk l., pirnykoza p. (2017). mizhnarodnyy dosvid rehulyuvannya rynku foreks [international experience in regulating the forex market]. ofis z finansovoho ta ekonomichnoho analizu u verkhovniy radi ukrayiny, p. 33. (in ukrainian). otchet po foreks za peryod 2013-2016 ot banka mezhdunarodnykh raschetov [report on forex for the period 2013-2016 from the bank for international settlements]. retrieved from: https://justforex.com/blog/ru/ statistika-foreks/. holubchik, v. v. (2012). problemni pytannya diyalnosti rynku foreks v ukrayini [problematic issues of forex market activity in ukraine]. visnyk natsionalnoho tekhnichnoho universytetu ukrayiny "kyyivskyy politekhnichnyy instytut". politolohiya. sotsiolohiya. pravo, 3, p. 170-174.  – retrieved from: http://nbuv.gov.ua/ujrn/vkpi_ soc_2012_3_33. (in ukrainian) obsyahy rynku forex v ukrayini syahayut 40 mln dolariv [the volumes of the forex market in ukraine reach 40 million dollars]. retrieved from: http://vkurse.ua/ua/business/obemy-rynka-forex-v-ukraine.html. (in ukrainian) vyhody ta ryzyky instytualizatsiyi rynku foreks v ukrayini [benefits and risks of institutionalization of the forex market in ukraine]. ia «interfax-ukrayina». retrieved from: http://ua.interfax.com.ua/news/pressrelease/171723.html. pro vnesennya zmin do deyakykh normatyvno-pravovykh aktiv natsionalnoho banku ukrayiny : postanova pravlinnya nbu vid 3.08. 2012 r. # 327 [on amendments to certain legal acts of the national bank of ukraine: resolution of the board of the nbu dated 3.08. 2012 number 327]. retrieved from: http://zakon0.rada.gov.ua/ laws/show/z1434-12 pro zatverdzhennya normatyvno-pravovykh aktiv natsionalnoho banku ukrayiny : postanova pravlinnya nbu vid 10.08.2005 # 281 [on approval of legal acts of the national bank of ukraine: resolution of the board of the nbu dated august 10, 2005 no. 281]. retrieved from: http://zakon0.rada.gov.ua/laws/show/z0950-05. pro finansovi posluhy ta derzhavne rehulyuvannya rynkiv finansovykh posluh : zakon ukrayiny vid 12.07. 2001 r. # 2664-iii [on financial services and state regulation of financial services markets: law of ukraine dated 12.07. 2001 no. 2664-iii]. vidomosti verkhovnoyi rady ukrayiny (vvr), 2002, # 1, st. 1. commission directive implementing directive 2004/39/ec of the european parliament and of the council as regards organisational requirements and operating conditions for investment firms, and defined terms for the purposes of that directive. retrieved from: http://ec.europa.eu/internal_market/securities/docs/isd/dir-200439-implement/dir-6-2-06 final_en.pdf directive 2006/49/ec of the european parliament and of the council of 14 june 2006 on the capital adequacy of investment firms and credit institutions (recast). retrieved from: http://eur-lex.europa.eu/legal-content/en/ all/?uri=celex:32006l0049 (in ukrainian) statut asotsiatsiyi «ukrayinskyy tsentr rozvytku pozabirzhovykh finansovykh instrumentiv i tekhnolohiy» vid 01.07.2014 r. [statute of the association "ukrainian center for the development of otc financial instruments and technologies" dated 01.07.2014]. retrieved from: http://ucrfin.com.ua/wp-content/uploads/2014/01/ ucrfin_new_statute.pdf (in ukrainian) baltic journal of economic studies 45 vol. 1, no. 2, 2015 how egovernment can change the business: ukrainian aspect volodymyr dovhanyk1, ivan franko national university of lviv, ukraine abstract. the purpose of the paper is to evaluate the impact of egovernment on business and to define the main implementation characteristics of the following systems in ukraine. methodology. statistical data provided by the e-government survey and doing business index were used for computing the linear regression model. ordinary least square method was used for defining the model’s parameters. the paper review existing approaches to managing egovernment in eu and estonia as an example. analysis of available egovernment services was done to determine their general characteristics and system’s stakeholders. results of the research demonstrate the strong correlation between the e-government index and doing business rating. computed model proves the directly proportional relation between the two indexes and model’s accuracy allows to prove statistical significance of the model. the main approaches to term “egovernment” were reviewed, as well as the most used classifications of e-gov services. main egovernment stakeholders were defined and their possible impacts on the project were evaluated. positive impacts of egovernment services were summarized and the most significant challenges for ukrainian business and citizens are listed. practical implication. since implementing the software for providing administrative services has positive effect on simplicity of running business research results can be used for defining reform strategies in regulation changes. defined list of stakeholders should be considered during designing and implementation of egovernment solution for better understanding the real business needs. the research defines main bureaucratic barriers that slow down the development of e-government in ukraine. vale/originality. defined model enable better understanding the relation between the government regulations and providing administrative services on-line. for the first time the research emphasizes on groups of stakeholders in ukraine of egovernment projects, including specialized non-governmental public organizations. the research results can be improved by the inclusion of additional macroeconomic and social indicators in regression model. also, interaction of stakeholders at all stages of project design and construction of e-government services requires additional studies. interdependence between stakeholders can be simulated, for example, by using game theory. summarized challenges and bureaucratic limits for egovernment (and for ict at whole) can be used as short-term goals for revising and improving egovernment policy in ukraine. key words: egovernment, e-gov, business regulations, doing business index, e-government development index. jel classification: h11, k23, f63 corresponding author: 1 department of information systems in management, ivan franko national university of lviv. email: vdovganyk@ukr.net 1. introduction ukrainian revolution in 2014, president’s and parliament’s elections changed the vector of ukrainian foreign policy as well as social-economic goals that should be reached in the mi-term period. based on the strategy of sustainable development “ukraine-2020” provided by the president of ukraine in early 2015 one of the key performance indicators for ukrainian economy is reaching top thirty positions in international ranking doing business (strategy of sustainable development “ukraine-2020”, 2010). several reforms are considered to achieve this goal however implementation of egovernment systems can be important component of each declared policies. 2. egovernment modern academic researches and government agencies provide several definitions of term “electronic government” (“egovernment” or simple “e-gov”). the world bank and the united nations describe egovernment (e-gov) as the utilization of the internet and the world wide web for delivering government information and services to citizens and other stakeholders in a country (un public administration program, 2010; infodev, 2004). egovernment makes government’s services more effective and accessible to citizens (moon, 2002; west, 2004). ukrainian researches defines egovernment as implementation of the government functions in the way that satisfy all internal and external relations using baltic journal of economic studies 46 vol. 1, no. 2, 2015 information and communication technology (ict) (dubov, 2006); technology that simplifies and facilitates communication among citizens, business and governance on all levels and in all areas. in addition, concept of egovernment development in ukraine defines e-gov (cabinet of ministers of ukraine, 2010) as a form of governance organization that promotes efficiency, openness and transparency of state and local government using ict to create a new type of state, focused on the needs of citizens. previous academic researches demonstrate that countries with advanced economic development have better development egovernment infrastructure than countries with transformation economy (west, 2007; azad et al., 2010). government institutions and academic researches investigate relations between implementation of egovernment solutions and economy of the state. dependencies between the macroeconomic indexes and egovernment maturity were tested and appropriate model was provided (ifinedo, p. & singh, m, 2011). e-gov development index report (united nations department of economic and social affairs, 2014) analyse impact of gross national income on egovernment state. based on un research conclusion that gni does not have direct influence on egovernment development was made. despite numerous usage of ict for providing services by government three main types of egovernment systems can be defined (jeong , 2007): –  government-to-government, g2g – systems that provides data interchanges between different government institutions themselves; –  government-to-business, g2b – systems that provides services for business; –  government-to-citizen, g2c – systems that provides services directly to citizens. in recent publication other types of egovernment systems can be met, like government-to-employees, governmentto-consumer, government-to-organization, citizen-tocitizen, but all of them can be explained using previously mentioned types. 3. eu approach to egovernment each country can have its own egovernment infrastructure that usually include web-portal for single access to provided services, institution that define egovernment strategy for the country and support existing systems, list of services available for residents and non-residents, and attributes required for authorization and authentication the citizen or organization. as a result of lisbon summit in 2000 list of 20 electronic services that should be supported by future eu countries were defined (dubov, 2006). among them there were 10 services that satisfy economical rights of citizens and business, such as: – income taxes: declaration, notification of assessment; – job search services by labor offices; –  social security contributions including unemployment benefits and medical costs (reimbursement or direct settlement); – car registration (new, used and imported cars); – social contribution for employees; – corporation tax: declaration, notification; – vat: declaration, notification; – registration of a new company; – customs declarations; – public procurement. implementation of required services can incredibly depend on the country. for example estonia e-gov portal provides 24 services including both mandatory and complementary services that simplify business transactions in the country (e-estonia, 2015): –  several options for electronic identifier (mobileid and electronic id cards); –  government integration bus for data interchange between the systems (xroad); – electronic digital signature; – electronic document workflow (digidoc). 4. egovernment impact on economy for evaluation general impact of egovernment on complexity of communication between government authority and business entities we compare e-government index (egi) evaluated annually by the un department of economic and social affairs and doing business rating provided by world bank for 2014. e-government index presents the state of e-government development of the united nations member states. the index provides a holistic view of e-government development resting on three important dimensions: the availability of online services, telecommunication infrastructure and human capacity (united nations department of economic and social affairs, 2014). since 2002 the doing business project provides objective measures of business regulations and their enforcement across 189 economies and selected cities at the subnational and regional level (world bank, 2013). major index is decomposed into eleven sub indexes that measures the regulations in different aspects of the business, like starting a business, trading across borders, paying taxis etc. the official data provided by the un and world bank were used for the analysis of dependencies between the level of egovernment development and simplicity of business regulations in the countries. correlation between e-government index and doing business sub indexes were calculated to determinate possible relations. for data evaluation both pearson correlation and rank spearman correlation were used. the main differences of this approaches is that spearman’s ρ estimates ordered rank on the pairs in the data set. computation results are provided in table 1. computed correlation allows us to observe strong relations between e-government index and doing business index. additionally we can define correlation between edi and a few sub indexes (starting a business and trading across borders) based on spearman coefficients. baltic journal of economic studies 47 vol. 1, no. 2, 2015 table 1 correlation between edi and doing business sub index pearson correlation spearman correlation doing business index 0,805 0,807 sub indexes starting a business 0,587 0,616 dealing with construction permits 0,270 0,258 getting electricity 0,502 0,478 registering property 0,505 0,548 getting credit 0,498 0,508 protecting minority investors 0,509 0,473 paying taxes 0,501 0,523 trading across borders 0,580 0,694 enforcing contracts 0,578 0,566 resolving insolvency 0,712 0,683 ordinary leas square (ols) method was used for creating a linear regression model. the model measures relations between the e-government index (x) and doing business index (y), using the data of 2014. based on 184 with using the r package version 3.1.2 we defined the following model: y=40.067+45.633x (1) both f-test and t-test for the model’s parameters prove statistical significant of the model. we can observe several points that pretty far from the defined linear model (fig. 1) and have negative impact on model’s accuracy (r2=0.648). however this model proves the tightly relations between the level of egovernment development and complexity of business regulation in the country. fig. 1. dependency between the e-government index and doing business index 5. characteristics of egovernment in ukraine during first two decades of ukrainian independence number of available egovernment services was definitely limited. researches emphasize that main reason for that was limited understanding of its need by government officers (shevchuk, 2003). the necessity and importance of egovernment were clear only for middle management. together with restricted internet access they decelerate egovernment development in the state. however with increasing internet infrastructure and changing political authority till the autumn 2015 there are 147 available free egovernment services provided by state authorities. in addition separate local governments, like kyiv and lviv, implements their own egovernment portals usually with functionality that duplicates functionality of state ones. developed and implemented egovernment systems can be in the following five groups: –  state electronic registries that store and represent information about companies, property rights etc. in some cases such systems provide corresponding certificates. – egovernance systems that provides electronic document flow for government institutions and can contain interfaces for citizens or business; –  g2c systems that provides possibility to book time for visit to corresponding office or request the paper certificate; –  trading systems that enable government to maintain government procurement or sell arrested property on-line; –  electronically reporting services that enables maintain required reports on-line; – open data systems that represent aggregated or raw data about different aspects of government activities; –  web-sites of government institutions that provides main information about regulations in corresponding areas, proposed changes into existing regulations, upcoming events. regardless of egovernment system’s type or category it can provide the following benefits for business and whole economy: –  decreasing time and expenses required for registration new business or maintaining changes for existing one, receiving government permissions or licenses; –  depersonalizing government services by decreasing number of direct contacts with government officers and as result minimize opportunity for corruption; –  organizing interaction between business and government in predictable and transparent way; – providing reliable and up-to-date statistical information for market, environment, and legislative research by business. despite on listed above advantages we should note possible challenges to companies and citizens related to the implementation of egovernment systems, such as: – increasing requirements for employees especially related to usage of computers; –  necessity of investment in hardware and software, some limitations to software that are supported by the egovernment solutions; –  increasing risk of cyber crimes and looses of sensitive personal information. important issues of any project is defining stakeholders and understanding their needs. project management institute defines stakeholder as individual, group or organization who may affect, be affected by, or perceive itself to be affected by a decision, activity or outcome of baltic journal of economic studies 48 vol. 1, no. 2, 2015 the project (project management institute, 2013). during all stages of developing, implementation, and using an egovernment solution we can define the stakeholders according to the table 2. unfortunately except ordinary stakeholders and their interests we need to consider impacts of “oldfashion” corrupted officers and their willingness to keep possibilities of corruption actions or get illegal income from implementation of egovernment project. despite obvious benefits of the migration from the traditional providing of government services to egovernment approach there are several key problems for such transformation: –  obsolete technical standards defining software development lifecycle. main standards (gosts) are inherited from ussr and are dated 1970s-1980s. –  discrepancy on ukrainian and international standards itc security, which increases efforts for appropriate table 2 main stakeholders of an egovernment project stakeholder main interests examples potential impact on the e-gov projects government institutions – main owner of the system decreasing number of requests from citizens and another institutions; optimization of particular business process in government organisations; implementation of declared policy in informational environment. ministry of justice of ukraine, state fiscal service of ukraine, local authorities. high represents customer and project sponsor in e-gov projects; response for defining requirements to the system and its acceptance software developers receiving profit from implementation of e-gov systems; satisfy the needs of system’s owner; software companies that develop and/or supports e-gov systems. high response for choosing the technology and architecture of the systems hardware providers receiving profit from supplying hardware for e-gov systems; satisfy required levels of system’s availability and security companies that produce or sell hardware, rarely cloud providers medium effects the infrastructure solutions available on the market in appropriate price ranges end users – employees of government institutions decreasing scope of everyday routine job; minimizing number of changes related to existing business processes; in some cases keeping mechanisms of corruption. officers of centers of administrative services, civil registries medium provides the feedback for implemented software, maintain the data required for providing e-gov services, partially defines the requirements to the system end users – citizens of ukraine accelerating receiving the administrative services; decreasing probability of requesting bribes for providing administrative services; decreasing costs for receiving administrative services citizens of ukraine who receives administrative services trough e-gov systems low represents the most numerous group of users. usually no involved in the process of creation e-gov system controlling institutions control target usage of budget; identifying and combating acts of corruption during the creation of egovernment; control for systems consistency with government technical standards. state fiscal service of ukraine, department of treasury of ukraine, state service of special communication and information protection high response for defying security requirements to the software and validating provided solution. controls the budget spending and procurement procedures ngo working in corruption avoidance area monitoring target usage of budget during creation of egovernment systems; monitoring information available from open sources for identifying and avoiding the corruption. ngos working in corruption avoidance area (“watchdogs”) i.e. anti-corruption action centre low monitors the government expenses and escalates identified problems to prosecutors. usually no involved in the process of creation e-gov system specialized organisations accessing statistical data about government activities for further usage in scientific (marketing) researches. accessing statistical data about government activities for monitoring separate government services patient organisation, scientific societies, rnd groups low provides feedback about system usage. usually no involved in the process of creation e-gov system owners of other e-gov systems possibility to integrate the system with existing e-gov solutions for reducing manual operations and data redundancy. state registry of vehicles, state registry of entities medium response for defying integration requirements. baltic journal of economic studies 49 vol. 1, no. 2, 2015 software and hardware, makes impossible to use cloud solutions for egovernment. –  absence of one point of entrance for all government services. nowadays to get the service person needs to visit directly the web-portal of corresponding agency, usually by finding it via search engines. – absence of unique electronic identifier of citizen. existing digital signatures are not widely used by the people. –  undefined holistic state vision for developing egovernment on each authority level, as a result different cities can use different approaches for defining inhabitants or duplicate some functions of centralized egovernment systems. 6. conclusions developed egovernment systems have direct impact on business environment in the state and complexity of regulations. based on computed linear regression we can evaluate the direct impact of egovernment on simplicity of procedures required for running the business in the state. starting 2014 the egovernment boom is observed in ukraine, majority of the central government institutions are opening the entire registries and statistical data. however absence of holistic strategy of egovernment development in ukraine together with obsolete and divergent technical standards creates bureaucratic limits for rapid egovernment growth. in addition there are a few issues to be investigated in the further researches. provided model can be improved by including additional macroeconomic and social parameters, dependencies between the egovernment and doing business sub indexes can be evaluated. more detail investigation should be done on listed stakeholders and their behaviour during implementing the egovernment projects, possibly using game theory methods. references azad, b., faraj, s. & goh j. f. (2010). what shapes global diffusion of egovernment: comparing the influence of national governance institutions, journal of global information management, 18, 2, р. 85-104. decree of the president of ukraine №5/2015 from january 12, 2015 “about the strategy for sustainable development” ukraine-2020” – http://zakon5.rada.gov.ua/laws/show/5/2015 digital agenda for europe http://ec.europa.eu/digital-agenda/ dubov d. v. & dubova, s. v. (2006). basics of egovernment: tutorial. centre of educational literature e-estonia. digital society. – https://e-estonia.com/components/ egovernment indicators for benchmarking eeurope – http://ec.europa.eu/newsroom/dae/document.cfm?doc_ id=1189 ifinedo, p. & singh, m. (2011). determinants of egovernment maturity in the transition economies of central and eastern europe, electronic journal of e-government, 9, 2, р. 166–182. infodev (information for development programme) (2004). egovernment handbook for developing countries. retrieved may 6, 2006 from http://www.infodev.org jeong chun hai ibrahim, fundamental of development administration. selangor: scholar press, 2007 isbn 978-967-5-04508-0. kolisnichenko i. m. (2014). development of egovernment in ukraine: institutional aspect. bizness-inform, 3 p. 52-57. [electronic resource]. – retrieved from: http://nbuv.gov.ua/j-pdf/binf_2014_3_9.pdf moon, j. m. (2002). the evolution of egovernment among municipalities: rhetoric or reality? public administration review, 62, 4, р. 424-433. moon, m. j., welch, e. w. & wong, w. (2005). what drives global e-governance? an exploratory study at a macro level. in proceedings of the 38th. hawaii international conference on system sciences, usa. project management institute (2013). a guide to the project management body of knowledge (pmbok® guide)—fifth edition. isbn: 9781935589679, 583 p. shevchuk oleksandr (2003). “electronic ukraine – on the way of formalization” weekly mirrow. – 04.05. – http://www.zn.kiev.ua/ the cabinet of ministers of ukraine № 2250-r of december,13 2010 “about approval of the concept of e-government in ukraine”. un public administration program (2010). united nations egovernment global reports. retrieved august 12, 2010 from http://www2.unpan.org/egovkb/global_reports/10report.htm united nations department of economic and social affairs (2014). united nations e-government survey 2014 (pdf). un. retrieved 2014-09-16. west, d. m. (2004). egovernment and the transformation of service delivery and citizen attitudes. public administration review, 64, 1, р. 15-27. world bank (2014): “doing business 2014, understanding regulations for small and medium-size enterprises”, world bank group, 2013, u.s.a. world bank group, doing business, historical data sets and trends data – http://www.doingbusiness.org/ custom-query baltic journal of economic studies 50 vol. 1, no. 2, 2015 владимир довганик как электронное правительство может влиять на бизнес: украинский аспект аннотация. целью данной статьи является оценка влияние электронного правительства влияния на бизнес и определить основные характеристики реализации данных систем в украине. методология. для исследования использовались статистические данные, предоставленные международного индекса развития электронного правительства (e-government survey) и рейтинг ведения бизнеса (doing business). на основании полученных данных была построена линейная модель. метод наименьших квадратов был использован для определения параметров модели линейной регрессии. анализ имеющихся услуг электронного правительства было сделано, чтобы определить их общие характеристики и заинтересованных сторон системы. результаты исследования демонстрируют сильную корреляцию связь между индексом развития электронного правительства (e-government survey) и рейтингом ведения бизнеса (doing business). построенная модель доказывает, прямо пропорциональную связь между двумя индексами, а полученная точность модели разрешает утверждать о ее статистической значимости. рассмотрено основные подходы к определению термину «электронное правительство», а также классификацию систем электронного правительства. проанализировано и выявлено основные позитивные влияния от внедрения данных систем, а также вызовы с которыми могут столкнутся бизнес и граждане при роботе с системами электронного правительства. были определены основные заинтересованные стороны проектов электронного правительства и оценены их возможные влияния на проект. определено бюрократические барьеры, которые замедляют развитие электронного правительства в украине. практическое значение. поскольку внедрение программного средств для обеспечения административных услуг государства оказывает положительное влияние на простоту ведения бизнеса в стране результаты работы могут быть использованы для определения стратегии реформ для изменения государственного регулирования в различных сферах экономики. определенный список заинтересованных сторон должен учитывается во время и реализации электронного правительства решения для лучшего понимания реальных потребностей бизнеса. ценность/оригинальность. определенная модель позволяет лучше понять связь между государственными правилами и предоставлении административных услуг он-лайн. впервые в украине сделан акцент на всех заинтересованных сторонах государственных проектов в сфере информационных технологий, в том числе и профильных негосударственных общественных организациях. результаты исследований могут быть улучшенные за счет включения в регрессионную модель дополнительных макроэкономических и социальных показателей. также дополнительных исследований требует анализ взаимодействия заинтересованных лиц проекта на всех этапах проектирования и создания сервисов электронного правительства. взаимозависимости между заинтересованными лицами могут быть смоделированные, например, с помощью теории игр. baltic journal of economic studies 141 vol. 1, 2015 the institutional barriers’ impact on the economic growth in the international economic integration iryna prykhodko1, ivan franko national university of lviv, ukraine abstract. the purpose of the paper. in our study we try to assess the causality link between a number of the international economic integration politico-economic factors, institutions and basic production factors with the growth of the economy. we form a sample of 18 post-socialist countries, including central and eastern europe (cee) countries-members the european union, and the rest of cee non-members countries and cis countries, who have not acquired the membership in the eu, including ukraine. the time period of our study is 23 years, starting from 1991 – the year of independence of ukraine till 2013 – the last year for which statistics are published for our group of a corresponding list of indicators that make up our interest. in the estimating equation we use econometric analysis panel data by least squares method with fixed effects transformation to eliminate countries’ heterogeneity. in the study we use such determinant of the institutions quality as the index of economic freedom (heritage foundation), and we investigate various components of the index of economic freedom (freedom of ownership, freedom of trade, freedom from corruption, freedom of investment). we assume that institutions towards freedom of foreign trade and reducing corruption will have a greater effect on the economy of the investigated countries. it is advisable to attach to the international economic integration politico-economic factors the indicator of foreign trade taxation as a measure of tariff barriers, international aid programs of the foreign donors and the european institutions to assess their role for the economic growth of the countries surveyed, and we take into account the capital and the labor as the basic factors of production. methodology. the methods of synthesis, logic, abstraction and analysis are used in the study. on a sample of 18 post-socialist countries (cee and cis) for the period of 23 years (1991-2013) we had conducted the econometric panel analysis by the method of least squares with fixed effects transformation method, in order to avoid the heterogeneity across countries. the statistics of world bank, imf, oecd is used in the study. results of the survey showed that the specifications test results confirm the positive role of the international aid programs to support the growth of gdp, in addition, we can assume the existence of positive effects simultaneously improving institutions and the positive effect of the external trade determinants. practical implications. this study makes it possible to confirm that in terms of economic policies, countries that are in the integrating process should focus their efforts on improving the institutions in the trade area. value/originality. the results of both models provide a better understanding of the impact of political, economic and institutional factors on the economic integration process of central eastern europe countries and commonwealth of independent states. further research in this area will help to reveal the problem in more details. key words: economic growth, international economic integration, institutional barriers, politico-economic barriers, index of economic freedom, factors. jel classification: f020, f150 1. introduction the term "integration" (from latin. integration)  – replenishment, the association of some individual parts, states in interstate region, economic complex. in the "new economic encyclopedia" integration is defined as "interconnectivity, system connection into entirety, generation of some relations, convergence, union organizations, industries, regions or countries". international economic integration – the process of the state economic cooperation, leading to the convergence of economic mechanisms, in the intergovernmental agreements form and concerted intergovernmental regulatory authorities (kireev, 1997). p. lutsyshyn and s. fedonyuk determine international economic integration as the various forms of shortand long-term economic cooperation  – from trade to the corresponding author 1 department of international economic relations, ivan franko national university of lviv. e-mail: iryna.prykhodko2010@mail.ru baltic journal of economic studies 142 vol. 1, 2015 sovereignty transfer to the common institutions – between politically independent states on the international agreements basis (lutsyshyn, fedonyuk, 2004). m. arah determines integration as the process of creating the optimal structure of the international economy and free coordination and unification between different elements (arah, 1998). another definition of international economic integration indicates it as an " interpenetration process of the different countries’ economies of and the economic system formation of the highest order, characterized by the individual subsystems consistency "(mokiy, 1999). one can say, that the integration process development requires a number of objective and subjective conditions: socio-economic homogeneity, economic and geographic proximity of the countries, the availability of high and close levels of economic development of the states that are in the integration process. thus, the preconditions of international economic integration can be considered as the proximity of economic development of the states, their geographic proximity, the commonality of economic and other problems etc. the international regional economic integration efficiency is achieved by: 1) eliminating of the discrimination and barriers between the member countries of integration associations in the movement of goods and services, capital, labor and entrepreneurship; 2) the standardization and the unification of the industrial and commercial areas; 3) the dynamic effect due to the expansion of the market and economies of scale; 4) providing a sufficient level of the competition. 2. barriers in international economic integration process r . baldwin in his study described four methods of the non-tariff barriers measuring. r . baldwin considered the implementation of political factors of the trade protection by the state, while a. hilman (1982), s. madgee, v. brock and l. young investigated how political factors can affect on trade (baldwin, 1989, hilman, madgee, young, 1989). in the research "declining industry and the political motives of protectionism" (1982) a. hilman highlighted the trade protection benefits with regard to political influence on state regulation of the economy. next work of a. hilman was devoted to the political decision in the selection of the protectionist policy tools (hilman, 1985). edward e. leamer is one of the leading researchers of the trade barriers effects. in some studies that e. leamer began in 1986 and submitted the study in more details in 1990, the theoretical foundations of empirical models are described and the application of econometric models to calculate the effects of trade barriers are covered (leamer, 1986). in 1990 e. leamer determined the trade barriers effects based on the import barriers differences. although the studies of e. leamer were detailed but not without drawbacks, one of these was the inability to determine the volume and structure of mutual trade. that is, this model can be used to determine the net trade flows but empirically the trade barriers’ impact on gross imports requires some additional investigation. consequently, an empirical model of e. leamer is confirmed only by free theoretical assumptions. j. lee and f. swagel continued the investigation of trade barriers within the theory of monopolistic competition. they explored the impact of trade barriers in more countries than did harrihan. however, they focused more on the political and economic determinants of non-tariff barriers than on the impact of protective measures (tariff and non-tariff ) on the trade flows ( lee, swagel, 1995). jong-wha lee and phillip swagel in his book "trade barriers and trade flows between countries and sectors" noted that the effectiveness of free trade model and definition of trade barriers usually depend on political and economic reasons (lee, swagel, 1994). the investigation of j. lee and f. swagel was based on a study of p. krugman and e. helpman, on the model of monopolistic competition, where the goods are not perfectly interchangeable and may differ by country of origin (krugman, helpman, 1985). the next assumption is similar tastes and preferences of consumers and the same consumption of each product in different countries. the model of monopolistic competition allows to predict the volume of trade in a situation where there are no trade barriers. the helpman-krugman model includes different measures of trade policy and points to the protectionism effects and welfare, production and trade flows of the country. however, using this model one can not determine whether the presence of trade barriers such as tariffs, nontariff barriers will cause decrease in trading volumes. in general, the international trade barriers are devided conditionally into two groups, the independent and the singled out by the way of the impact on trade flows. the first group  – are different types of natural barriers, above all, the geographical distance between countries, the transportation infrastructure etc. however due to the enhancing globalization and technological progress and tehnological impact of these barriers on the value of trade flows will decrease. the second group consists of various tools of foreign policy created by governments and directly affect the import level and export of goods. this group includes of measures of tariff and non-tariff regulation of foreign trade. 3. survey methodology in our study we try to assess the causality link between a number of the international economic integration politicoeconomic factors, institutions and basic production factors with the growth of the economy. we form a sample of 18 post-socialist countries, including central and eastern europe (cee) countries-members the european union, and the rest of cee non-members countries and cis baltic journal of economic studies 143 vol. 1, 2015 countries, who have not acquired membership in the eu, including ukraine. the time period of our study is 23 years, starting from 1991 – the year of independence of ukraine to 2013  – the last year for which statistics are published for our group of a corresponding list of indicators that make up our interest. in the estimating equation we use econometric analysis panel data by least squares method with fixed effects transformation to eliminate countries’ heterogeneity. in the study we use such determinant of the institutions quality as the index of economic freedom (heritage foundation), and we investigate various components of the index of economic freedom (freedom of ownership, freedom of trade, freedom from corruption, freedom of investment). we assume that institutions towards freedom of foreign trade and reducing corruption will have a greater effect on the economy of the investigated countries. it is advisable to attach to the international economic integration politico-economic factors the indicator of foreign trade taxation as a measure of tariff barriers, international aid programs of foreign donors and the european institutions to assess their role for the economic growth of the countries surveyed, and we take into account the capital and the labor as the basic factors of production. 4. findings we use two log-linear specification of the model: basic and advanced. the basic log-linear data we present in equation (1), which relates economic growth, which we measure as gdp in constant us dollars in 2005 (ln gdp it ) in logarithms, of each of the 18 postsotsialistic states from our group for the appropriate year t, such factors such as: 1. capital (ln k it ) in logarithms, which we define as the accumulated total (private and public) capital stock. to the capital stock of each of the current year we include the capital stock from previous years and generated gross fixed capital last year (in constant us $ 2005), taking into account amortization rate 5%. 2. workforce (ln l it ) in logarithms, which we define as the entire labor force that includes people aged 15 and older and are the economically active population. 3. institutions (ln i it ) in logarithms, which we measure as the index of economic freedom  – product development heritage foundation and wall street journal, and alternatively since disaggregated components we use this index as: freedom of ownership (lni_pr it ), freedom of trade (lni_tf it ), freedom from corruption (lni_cor it ), freedom of investment (lni_if it ) itiitititit ucialakagdp ++++= lnlnlnln 321 itiitititititit itititititit itititititit ucaidiafdiiaia impiaaidattaxaiprafdia aimpaialakagdp ++++ +++++ +++++= lnlnlnlnexplnln lnlnlnlnlnln explnlnlnlnlnln 131211 109876 54321 , (1) where i and t indicate countries and time periods, respectively, c i   – is unobserved fixed (by country) effect and u it  – idiosyncratic errors. extended model covers a wider range of political and economic factors of the international economic integration, affecting economic growth, which we measure as gdp (ln gdp it ) in logarithms for 18 post-socialistic countries i with the corresponding year t. indicators in addition to the base model (capital, labor and institutions) we include in the analysis the following indicators for the post-socialist countries: imports of goods and services (ln imp it ), which is calculated as imports of goods and services in value of all goods and services received from the rest of the world. exports of goods and services (ln exp it ), which is calculated as exports of goods and services in value of all goods and services provided by other countries. these include the cost of goods, freight, insurance, transport, travel, royalties, license other services such as communication, construction, financial, information, business, personal and government services. international exchange of intellectual property rights (ln ipr it ), as the amount of payments from usage of foreign intellectual property rights abroad and the receipt of payments from abroad, the use of national intellectual property rights by foreigners. foreign direct investments in relation to gdp (ln fdi it ), a percentage that is a net inflow of investments with the right to influence the management of assets purchased (10 percent or more shares) in the company, which works in a country other than the investor’s country. this is the sum of equity capital, reinvestment of income, the other long-term assets and short-term capital as shown in the balance of payments reporting period divided by country and gdp. taxation of international trade (ln ttax it ), includes import and export duties and taxes, profits of export or import monopolies, exchange of charges in relation to the total taxes in the country in percentage.we include this figure in our equation as a measure of the tariff barriers in the foreign trade, which is one of the aspects of international economic integration of the countries surveyed. international assistance from external donors and european institutions in the us currency (ln aid it ).we incorporate this indicator into our equation as a measure of the level of involvement of the country to international aid programs, which is one of the political and economic aspects of international integration of the countries surveyed. we also believe that in many cases the factors studied international economic integration alone may not be sufficient to create a significant effect on economic growth, and there may be some significant interaction effects. we use the interaction rate between the respective trade indicators and institutional variables (ln i it * ln imp it , ln i it * ln exp it ). in addition, we assume that the higher quality institutions can help to attract the foreign direct investment and the international assistance programs, including from the eu. to test this, we are introducing in the estimated equation parameters of interaction between institutions and foreign direct investment and international assistance programs (ln i it * ln fdi it , ln i it * ln aid it ). if the coefficients interaction parameters valued in equation (2) is positive baltic journal of economic studies 144 vol. 1, 2015 (a 1 > 0..., a 13 > 0), then there are synergistic effects of the integrated policies improving institutions and improving trade, investment, credit and grant relations of the countries surveyed. extended specification: itiitititit ucialakagdp ++++= lnlnlnln 321 itiitititititit itititititit itititititit ucaidiafdiiaia impiaaidattaxaiprafdia aimpaialakagdp ++++ +++++ +++++= lnlnlnlnexplnln lnlnlnlnlnln explnlnlnlnlnln 131211 109876 54321 , (2) where i and t indicate countries and time periods, respectively, c i   – is unobserved fixed (by country) effect and u it  – idiosyncratic errors. our specification model 1 (table 1) shows a statistically significant, positive and economically significant role in the improving aggregate index of economic freedom on gdp growth. the model specifications 2 and 3 (table 1) shows that since disaggregated sub-indices freedom from corruption and freedom of trade are statistically significant and positive effects on the growth. this supports the idea of the need to accelerate efforts towards post-socialistic countries fighting corruption and further trade liberalization. as revealed in the specifications models 2 and 3 (table 1) link between the gdp growth and the improving freedoms of property rights and freedom of investment is the inversely. the interpretation of these results may be that their own freedom of ownership and investment is not an incentive for the intensification of economic activity. obviosly, these freedoms must to be improved, along with other aspects of improving institutions, or they can have a positive impact on growth through other factors. as confirmed by testing three model specifications (table 1) international aid programs prove their positive role to stimulate gdp growth. in our opinion, the intensification of inflow of donor programs is a sign of improvement of quality of institutions in aid recipient country. as seen from sheets 1 and 2 (table 2) the most economically important and statistically significant effect is to improve cooperation between institutions and foreign trade activity indicators. we can assume the existence of some synergetic effects simultaneously improving institutions and trade liberalization, which together can produce a greater effect on economic growth than would be developed each process separately. in terms of economic policy, we can justify the feasibility of introducing a comprehensive policy reforms to liberalize foreign trade and improving institution 5. conclusion the institutions, along with the basic factors of growth capital and labor are the key determinants of economic growth in post-socialistic countries. not all of institutional improvements components have the same impact on economic growth of the post-socialistic table 1 the role of institutions in economic growth in the international economic integration (the method of least squares with fixed effects) ln gdp ln gdp ln gdp ln k 0.416*** 0.505*** 0.532*** (13.54) (20.59) (15.43) ln l 0.397*** 0.697*** 0.823*** (2.70) (5.29) (5.18) ln i 0.954*** (8.00) lni_pr -0.322*** -0.292*** (6.23) (4.79) lni_cor 0.138*** 0.176*** (4.36) (5.47) lni_tf 0.266*** 0.312*** (4.70) (5.24) lni_if -0.249*** -0.222*** (6.68) (5.50) ln aid 0.081*** (5.74) constant 3.892* 1.485 -3.283 (1.79) (0.74) (1.43) observation 309 309 216 country quantity 18 18 17 r-square 0.70 0.79 0.82 note: absolute value z statistic in brackets, * significance level 10%; ** significance level 5%; *** significance level 1%. source: calculated by author, using statistical program e-views table 2 the effects of the institutions interactions with other political and economic factors of economic growth in the international economic integration process (the method of least squares with fixed effects) ln gdp ln gdp ln gdp ln gdp ln gdp ln k 0.212*** 0.189*** 0.567*** 0.159*** 0.512*** (6.83) (5.53) (21.69) (3.28) (12.45) ln l 0.557*** 0.468*** 0.381** 1.007*** 0.445** (4.56) (3.73) (2.44) (5.80) (2.49) ln i * ln imp 0.046*** (15.04) ln i * ln exp 0.048*** (13.92) ln i * ln fdi 0.019*** (5.67) ln i * ln ipr 0.018*** (6.53) ln i * ln aid 0.029*** (8.33) constant 6.105*** 7.804*** 4.071* 3.755 2.390 (3.39) (4.17) (1.75) (1.34) (0.98) observation 309 309 299 155 216 country quantity 18 18 18 18 17 r-square 0.80 0.78 0.67 0.69 0.72 note: absolute value z statistic in brackets, * significance level 10%; ** significance level 5%; *** significance level 1% source: calculated by author, using statistical program e-views baltic journal of economic studies 145 vol. 1, 2015 central eastern europe countries (cee) and countries of the commonwealth of independent states (cis). consequently, we found out that freedom of trade and freedom from corruption are among the key institutions that significantly affect on the economic growth, especially for subgroups cee and cis countries that are not eu members. obviously, this subgroup of countries has a relatively weaker institutions. therefore, it is advisable to focus on the economic policies to improve the quality of the component institutions, which can be a significant incentive for their economic growth. the study confirms that weak institutions are the main barriers to growth in terms of integration into the international economy. excepting such factors as institutions, trade and other political and economic factors of international economic integration that affect on the economic growth of post-socialistic countries, one can single out: foreign direct investment, international exchange of intellectual property rights, international donor assistance programs and the european institutions, and foreign income tax trade. these factors are mainly positive, but less frequently, have the economic effect on economic growth and in some specifications of the model coefficients of these indicators lose statistical significance. references arah, m. (1998) european union: politic union case. – m., economics, p. 18. baldwin, r .e. (1989) measuring nontariff trade policies. national bureau of economic research., may, work. papers, № 2978. helpman, e., krugman, p. (1985). market structure and foreign trade: increasing returns, imperfect competition and the international economy. – cambridge: mit press. hillman, a. (1982) declining industries and political-support protectionist motives. american economic review, vol. 72, № 5,december, pp. 1180-1187. kireev, a. (1997) international economy – m., international relations, p. 362. leamer, e. (1986) cross section estimation of the effects of trade barriers.department of economics, ucla, september, № 417. lee, j., swagel, p. (1995)trade barriers and trade trade flows across countries and industries.board of governors of the federal reserve system, july, № 476. lutsyshyn, p., fedonyuk, s. (2004) european integration process: the formation of the single market.  – lutsk, volyn oblast printing house, 200 p. magee, s., brock, w., young, l. (1989) black hole tariffs and endogenous policy theory, cambridge universiry press. morozov, s. (2000) dictionary of foreign words. – k., naukova dumka, 680 p. rumyantseva, e. (2005) new economic encyclopedia – m., infa, v. 6, p. 164. ирина приходько влияние институциональных барьеров на экономический рост в условиях международной экономической интеграции аннотация. целью работы является выявить влияние политико-экономических и институциональных барьеров на процесс международной экономической интеграции. важно также глубже проанализировать роль институтов как основного фактора получения экономических выгод страны от международной экономической интеграции. в нашем исследовании мы пытаемся оценить причинность связи между рядом политико-экономических факторов международной экономической интеграции, институтов и базовых факторов производства с ростом экономики. мы используем также такие измерители качества институтов как индекс экономической свободы, причем исследуем различные компоненты этого индекса, такие как свобода прав собственности, свобода торговли, свобода от коррупции, свобода инвестиций. мы предполагаем, что институты в направлении свободы внешней торговли и снижение коррупции будут иметь больший эффект на экономику исследуемых стран. мы формируем выборку с 18-ти постсоциалистических, из них десять стран центрально-восточной европы (цве), которые уже вступили в ес, и восемь стран цве и снг, которые не приобрели членства в ес, в том числе украины. временной период нашего исследования составляет 23 года, начинаются с 1991 года – года обретения независимости украины, к 2013 году – последний год, за который опубликован статистические данные для нашей группы стран по соответствующим перечнем показателей, составляющих наш интерес. для преодоления различных проблем в оцениваемом уравнении мы используем эконометрический анализ панельных данных методом наименьших квадратов с трансформацией методом фиксированных эффектов, чтобы ликвидировать гетерогенность по странам. методика. на основе выборки из 18 постсоциалистических стран (страны цве и снг), за период 23 лет (1991-2013) мы провели эконометрический анализ панельных данных методом наименьших квадратов с трансформации методом фиксированbaltic journal of economic studies 146 vol. 1, 2015 ных эффектов, чтобы ликвидировать гетерогенность по странам. в исследовании использовались статистические данные всемирного банка, организации экономического сообщества, и международного валютного фонда. результаты тестирования спецификаций моделей подтверждают положительную роль международных программ помощи для стимулирования роста внутреннего валового продукта, кроме того мы можем предположить о существовании положительных эффектов одновременном улучшении институтов и положительного эффекта показателей внешней торговли. практическое значение. проведенное исследование позволяет утверждать, что с точки зрения экономической политики странам интегрируются целесообразно сконцентрировать усилия для совершенствования институтов в торговой сфере. значение/оригинальность. полученные данные обеих моделей обеспечивают лучшее понимание влияния политико-экономических и институциональных факторов на процесс международной экономической интеграции на страны цве и снг. дальнейшие исследования в этой сфере помогут раскрыть эту проблему более подробно. baltic journal of economic studies 271 vol. 3, no. 4, 2017 corresponding author: 1 department of accounting and audit, ivan franko national university of lviv. e-mail: nkhocha@ukr.net the organization of management accounting at small enterprises in ukraine nadiya khocha1 ivan franko national university of lviv, ukraine abstract. the purpose of the research is to study the organization of managerial accounting in ukrainian small enterprises. methodology. the survey of management accounting is conducted by an interview with the manager/ chief accountant/financial director of small enterprises, or by sending the questionnaires to these persons via the e-mail. the sample of study includes fifty-five small enterprises of the lviv region in different types of activities and forms of ownership. results. analysis of theoretical base of ukrainian scholars and the experience of management accounting in foreign small enterprises allowed distinguishing three main stages of the study. summarizing the results of the survey, received on the base of the questionnaire of the first stage “information for management decision-making”, we can conclude that the main source of information for the manager in making managerial decisions are the operational reports or their combination with financial assessment; the preparation of such information is made by chief accountant (outsourcer), who submits it to the chief manager daily, once per week or month. the indicators of financial reporting, analytical information, obtained on the base of management accounting methods, as well as non-financial indicators that characterize the economic activities of a small enterprise, are the basis for managers in managerial decision-making. the results of the second stage “practice of conducting the management accounting” show that, in order to improve the financial position of small enterprises, their managers use information derived from the application of methods of operational and strategic management accounting. however, the level of their implementation is rather low since most small entities use only one of the methods of operational and strategic management accounting. it is defined that the number of management accounting methods used by small enterprises is higher if the founders are foreign citizens and/or whose average number of employees exceeds 30 persons. significant money and time expenditures for the organization and conducting of the management accounting are the main reason for the refusal to use it at small enterprises, due to the results of the third phase of the research “reasons for the refusal from the management accounting and organization of management accounting”. otherwise, most of the small enterprises have an understanding of the benefits from using management accounting, as well as do not deny the expediency of its organization and determine the methods of managerial accounting, which will help to improve their financial situation. practical implications. the results of the study confirmed that a sufficient part of the management informational support at small enterprises of lviv region is the information obtained by the use of methods and tools of managerial accounting. however, we can observe a low level of their application. therefore, appears a need to ensure the awareness of managers on the benefits of using different management accounting methods, which can be achieved by attending specialized courses, trainings or seminars conducted on the base of higher education institutions. value/originality. the results of the study are the framework for the creation a theoretical base of managerial accounting for ukrainian small business entities and mechanisms of its implementation in practice. key words: small enterprise, management accounting, tools, methods, organization. jel classification: l25, m40, m41 1. introduction the modern economic conditions stimulate small business entities to find the effective ways of the company’s profit increase that is possible in the situation of properly provided information support of management system. the necessary, objective, and up-to-date information can be provided by an accounting system that generates information flows related to the small business activities. first of all, it relates to information support created by the use of management accounting methods and tools. on the other hand, general principles of management accounting, approaches and types of its baltic journal of economic studies 272 vol. 3, no. 4, 2017 organization have not been yet sufficiently developed at the theoretical level. moreover, scientists have not yet reached the consensus regarding the possibility of its adaption at small enterprises. a significant reason for the insufficient use of management accounting tools at small enterprises is the opinion of some professionals about the need to use it only at large enterprises. that is to say, l. chernelevskyy (2003) argues that the use of such management accounting method as budgeting is not relevant for small enterprises since they have mainly produced a small range of products and there is one or maximum two centres of responsibility, which are identical to cost centres. t. slozko (2006) and s. levytska (2007) are convinced that management accounting should be implemented in medium and large enterprises. they argued this position by the fact that small business entities have a narrow range of activity, a small number of accounting officers and, in some cases, the accounting has been doing by the manager or a specialized accounting organization, which leads to conducting the only statutory financial accounting. however, regardless the size of the company, its manager needs to receive the information in time about: a kind of the most profitable activity; products which are most profitable and in high demand (about the costs of production, the revenue of realization in the future); a formation of a breakeven assortment of production; buyers and suppliers who occupied the largest segment in the realization and supply of the enterprise. these and other issues stimulate managers to implement a subsystem of management accounting for small enterprises, as well as scientists to create a theoretical framework and to look for the best options of using the management accounting tools for this category of enterprises. 2. theoretical researches of the management accounting organization at small enterprises in ukraine the problems of management accounting organization at a small enterprise are described in the works of some ukrainian scientists: e.m. lymonova, s.m. denga, s.i.  drobyazko, t.a. gogol, n.i. niporko, l.m. ocheret’ko, n.v. krasovska. e.m. lymonova (2005) considers that one of the conditions for conducting the high-quality controlling at a small enterprise is the organization of managerial accounting. the scientist offers to create an integrated model of management accounting on the base of financial and managerial accounting. as a background for this model is proposed to use an accounting system of partial costing (direct costing system), which considers the calculation of the cost of products or services based on the division on fixed and variable costs. such costs’ division will be used to determine the margin revenue, as a result of comparing the sales revenue from a certain period with variable costs. the priority activities or products for the manager should be those, which marginal income is enough to cover the constant costs and to receive profit. s.i. drobyazko (2013) proposes to use at the small enterprises an integrated monistic system of linked financial and managerial accounting, in which analytical accounting and correspondence of accounts are organized in such a way that information for management accounting is derived from financial accounting data. moreover, a scientist defines the principles of preparation and the composition of managerial reporting of small business enterprises. s.m. denga (2007) mentioned the necessity of the financial and managerial accounting integration at small enterprises. with this aim, it is necessary to add the financial chart of accounts by accounting nomenclature and analytical accounts for the goals of the management accounting. in particular, the scientist offers such a system of accounting nomenclature and analytical accounts to the accounts of income, expenses, and financial results of the general chart of accounts for trading enterprises, which can be realized in the information system of financial accounting, in particular, “1c: enterprise”. t.a. gogol (2014) explores the process of managerial accounting implementation at small enterprises. in particular, the scientist outlines the basic principles (simplicity, accessibility, and clarity), construction requirements and factors that influence the organization of the subsystem of management accounting at small enterprises, as well as develop a methodology for the formation and compilation of management reporting. n.i. niporko (2015) developed an algorithm of managerial accounting implementation at a small enterprise, which includes four stages: analytical, methodological, organizational, as well as the stage of documentation and automatization. l.m. ocheretko and n.v. krasovska (2017) proposed a process of management accounting implementation in small businesses that use a simplified form of accounting. thus, the main directions of ukrainian scientists’ researches have the theoretical character and are related to the justification of the feasibility of implementation of a system of managerial accounting for small enterprises, studying the problems in this process, defining the factors and stages of the system formation. in view of this, it is important to study the practice of management accounting at smalland medium-sized enterprises (hereinafter: smes) abroad and in ukraine. 3. the practice of management accounting at small enterprises abroad we will try to perform some researches conducted in canada, european union member states (great baltic journal of economic studies 273 vol. 3, no. 4, 2017 britain, finland, italy, croatia, slovakia, and bulgaria), countries of southeast asia (malaysia, philippines) and kenya. the significance of investigations lies in their applied nature. the object of these studies is the process of management accounting at smalland mediumsized enterprises of different types of activities. the sample was carried out from 1 enterprise in finland to 397  enterprises in slovakia. the interviews were conducted at the smes of one city (philippines), as well as in selected regions (canada, bulgaria, croatia) and the entire country (great britain, italy, slovakia, malaysia, kenya) by conducting the interviews with owners/managers of enterprises, or by sending questionnaires to postal or e-mail addresses. the study of management accounting practices was conducted with the consideration of various aspects of smes activity in different countries (see: table 1). the most common fields of research include: assessment of the overall quality of managerial accounting in smes; organization of management accounting in the enterprise; analysis of the methods of management accounting that are used; the relationship between the accepted methods of managerial accounting and the volume, type of activity, personal qualities of the manager/owner; the study of the main directions’ analysis of management accounting information usage, and the reasons for the refusal of smes from the application of management accounting methods. the results of the research have shown the existence of increasing tendency of the managerial accounting role for smes in world practice. managers/owners wish to receive reliable information about the current situation at the enterprise for the prompt resolution of problems that arise in the decision-making process. with this aim, the management accounting is used in the smes and differs in the form of organization, as well as the variety of methods that are used by each country. for example, a study of british scholars has shown that the managerial accounting is made directly by owners – managers in smes. they explained their choice by the possibility of direct access to “vulnerable” information presented in the sophisticated form, which table 1 researches’ directions of the of management accounting operation at smalland medium-sized enterprises, represented in foreign scientific sources researches’ directions of the management accounting (ma) operation at smalland medium-sized enterprises h . m . a rm ita ge , a . w eb b (2 01 3) ( c an ad a) m . l uc as , m . p ro w le , g . l ow th (2 01 3) ( g re at b ri ta in ) d . w ie de m an n (2 01 4) (f in la nd ) l . b ro cc ar do ( 20 14 ) (i ta ly ) t.  š es ta nj -p er ić , s . k . k uk ec (2 01 2) ( c ro at ia ) s.  m ay r ( 20 11 ) (s lo va ki a) e . p ap az ov , l . m ih ay lo va (2 01 4) (b ul ga ri a) h .d . r ufi no ( 20 15 ) (p hi lip pi ne s) k . a hm ad ( 20 14 ) (m al ay si a) j.  k ar an ja , e . m w an gi , p.  n ya an ga ( 20 12 ) (k en ya ) to ta l 1. overall quality assessment of the ma in smes + + + + + + + + + + 10 2. organization of the ma + + + + + 5 3. analysis of the ma methods that are used + + + + + + + + + 9 4. the relationship between accepted methods of ma and: – the size of smes; + + + + + 5 – type of the activity (productive/nonproductive); + + + + + 5 – organizational and legal form; + 1 – personality features of the manager; + + + + 4 – involvement of external consultants; + + + 3 – ways of financing; + + 2 – investments; + 1 – the orientation towards foreign markets. + + + 3 5. investigation of the main sources of information acquisition for making managerial decisions + 1 6. the main directions’ analysis of ma information usage + + + + + 5 7. reasons for the refusal of smes from the application of management accounting methods + + + + + 5 source: compiled by the author according to the research results baltic journal of economic studies 274 vol. 3, no. 4, 2017 allows them better understand what is taking place and, therefore, provides the wider control over the enterprise activities. therefore, they are not inclined to engage accountants specializing in managerial accounting for this work. a similar situation has arisen in the hotel “rantalina” (finland), where managerial accounting was not provided by a qualified accountant-analyst of accounting but only by a manager (wiedemann, 2014). research of slovak scholars indicates that in less than 5% of smes exists a separate management accounting unit (mayr, 2011), while 22% of croatian smes receive the advisory services related to management information from specialized accounting firms (external consultants), that promote a wider use of management accounting techniques at these enterprises (šestanjperić & kukec, 2012). a significant influence on the use of management accounting information has a kind of activity. according to the canadian scholars’ research the percentage of usage the management accounting tools in manufacturing firms is higher than in non-productive (armitage & webb, 2013). the sample of the scientists’ survey (l. broccardo (2014) (italy), h. rufino (2015) (philippines), k. ahmed (2014) (malaysia)) consisted only of manufacturing smes that confirms the higher activity of managerial accounting introduction in the practice of this enterprises group. british scholars also emphasize the relationship of activity’s kind with certain management accounting methods (budgeting, cvp analysis) since it influences the ability to revenue and expenditures forecast with a sufficient level of accuracy (lucas, prowle & lowth, 2013). in the practice of foreign scientists, the object of research is the process of conducting the management accounting at smalland medium-sized enterprises, but in some countries (like italy) microenterprises are also distinguished (broccardo, 2014). therefore, one of the research directions is the study of the relationship between volume and level of management accounting methods’ application. the results of most studies have shown that management accounting practices are more acceptable in medium-sized enterprises. in the case when the number of using methods at smalland medium-sized enterprises coincides, then at medium-sized enterprises they are applied at a higher level. for example, a study of l. broccardo (2014) (italy) shows that accounting tools are used by 74% of microenterprises, 90% of small and 92% of medium-sized enterprises; then most of these microenterprises (30%) have used 4-6 methods of management accounting, while 40% of small and 46% of medium-sized enterprises have used nearly 7-9 tools. the quantitative and qualitative level of conducting the management accounting techniques has been significantly increased in conditions of the availability of economic education or specialized training, seminars hold by smes owner or manager, his participation in the process of preparation of management information; the need for attracting bank loans or the founders’ requirements for the compilation and submission the management reporting for their consideration; the volume of investment in various enterprise fields, and the orientation of smes to trade in foreign markets. all these aspects could be confirmed by the studies’ results of: k. ahmad (malaysia), l. broccardo (italy), d. wiedemann (finland), s. kukec (croatia), g. lowth (great britain), m. lucas (great britain), l. mikhaylova (bulgaria), e. papazov (bulgaria), m. prowle (great britain), t. šestanj-perić (croatia). it should be emphasized that the study of methods and tools of managerial accounting on selected smes is the important direction of the research. since researchers have used the different volumes of a sample of smes, then, for a comparison, we divide the smes into five groups, depending on the positive answer concerning the use of a particular method or management accounting tool, with the assignment to each group the rank on a five-point scale. the summarized data on the use of methods and tools of management accounting at foreign enterprises are presented in table 2. the results of the research have shown that most of smes use: typical costing systems (process costing, joborder costing), standard costing system, operating budgets, cost-volume-profit (cvp) analysis, and financial statement analysis. meanwhile, less share of smes uses the variable costing system, responsibility accounting, capital budgets’ conducting. taking into consideration the strategic accounting methods, the most common are swot-analysis, target costing, benchmarking, activity-based costing and performance measurement system. by comparing the level of usage of the operational and strategic management accounting methods, parity is maintained among them. an analysis of the asian scholars’ researches (rufino, 2015 & ahmad, 2014) has shown that the introduction of management accounting practices is beneficial in terms of using the obtained information for pricing, planning, controlling, productivity evaluating, optimizing the resources’ usage, managing, and reducing of the costs, contributes to making decisions on production, sales and marketing. british scholars have come to the conclusion that management accounting is typically used not for decision support but for managerial controlling (lucas, prowle & lowth, 2013). croatian scholars point out that the use of managerial accounting information helps to overcome internal weaknesses of smes and, accordingly, better adapt to dynamic environment conditions (šestanj-perić & kukec, 2012). the main reasons for the refusal of smes from the application of management accounting methods are: significant money and time expenditures for conducting the practice of management accounting; lack of qualified personnel, trainings and seminars; the type of activity and the number of business operations that would allow using all known methods of managerial accounting. baltic journal of economic studies 275 vol. 3, no. 4, 2017 consequently, according to the analysed studies, we may confirm the feasibility of introducing of management accounting subsystem into the accounting system of a small enterprise. the conducting of management accounting in foreign smes proves the possibility of using some of these instruments at domestic small enterprises. for this purpose, it is necessary to develop an organization procedures and the methodology of conducting the managerial accounting in practice, which have already been partially done by ukrainian scientists. 4. the investigation of the management accounting organization at small enterprises in the lviv region (methodology of the survey) the main goal of the study was to test the existing position of the accounting system of the small enterprises in ukraine. among the main directions of its achievement was the study of the management accounting tools using. the survey was conducted in the form of an interview with the manager/chief accountant/financial director of a small business or by table 2 the main methods and tools of managerial accounting used at smalland medium-sized foreign enterprises № methods and tools of managerial accounting h . m . a rm ita ge , a . w eb b (c an ad a) m . l uc as , m . p ro w le , g . l ow th ( g re at b ri ta in ) d . w ie de m an n (f in la nd ) l . b ro cc ar do ( it al y) t.  š es ta nj -p er ić , s.  k . k uk ec ( c ro at ia ) s.  m ay r ( sl ov ak ia ) e . p ap az ov , l . m ih ay lo va ( b ul ga ri a) h .d . r ufi no (p hi lip pi ne s) k . a hm ad ( m al ay si a) 1. typical costing systems (process costing, job-order costing) 4 5 5 5 4 x x 2 5 2. standard costing system 3 5 x x 4 x 5 1 x 3. variable costing system 4 x x 1 x 2 2 x 4. quality cost system 2 x x x x x x x 5. target costing system 2 x x 1 3 3 2 6. activity based costing 1 x x 1 3 1 7. kaizen costing system x x x x 2 x x 8. swot-analysis x x 5 x 2 3 3 x x 9. “just-in-time” system x x x x x x 3 x 1 10. benchmarking x x 4 3 4 3 x 11. operating budgets 5 3 4 x 3 4 4 x 12. capital budgets 3 x 4 x 1 x 4 x 13. flexible budgets 1 x x x x x 1 x 14. zero base budgeting x x x x x 3 x 15. responsibility accounting 4 3 x x x x 2 x x 16. balanced scorecard system x 1 1 1 x x 17. product lifecycle analysis x x 2 x x 3 x 18. costbenefit analysis x x x x 1 x x x 19. variance analysis 5 4 x x 4 4 x 20. cost-volume-profit (cvp) analysis 2 5 3 x x 4 3 x 21. working capital measures x 5 x x x x x x x 22. cash flow analysis 1 4 x x 5 x x 23. overhead analysis 4 4 x x x x 24. performance measurement system 5 x 5 x x 3 x 4 x 25. formation of the non-financial information x x 5 x 5 x x x x 26. financial statement analysis 5 x x 5 5 x 5 x x 27. statistical analysis x x x x x x 3 x x 28. multiple regression x x x x x x x x 29. net present value (npv) analysis x x 2 1 3 x abbreviation concerning the use of a certain method of managerial accounting with the assignment to each group the rank on a five-point scale: “1” – the method of managerial accounting is used by 1-19% of the smes from the sample; “2” – 20-39% of smes; “3” – 40-59% of smes; “4” – 60-79% of smes; “5” – 80-100% of smes; “-“ – the method of management accounting is not used by smes; “x” – the usage of the management accounting method was not the subject of the research. source: compiled by the author according to the research results baltic journal of economic studies 276 vol. 3, no. 4, 2017 sending to these persons the questionnaire by e-mail for filling it. the sample included fifty-five small enterprises of different types of activities and forms of ownership. the data collection was carried out on the basis of the questionnaire developed by us, which consists of the following five sections: i. general data on a small business. ii. the organizational structure of small business and form of management. iii. organization of accounting. iv. organization of financial accounting. v. organization of management accounting. the survey, which was conducted on the basis of the questions from five section of the questionnaire “organization of the management accounting system”, can be divided into three stages (see: table 3). 5. the results of the study analysis of the main manager’s information sources with the aim of making managerial decisions was conducted on the basis of the respondent’s choice of one (or several) in three variants of reporting used by the small enterprise. among them: operational reports, which involves the information about the operating activities of the enterprise (supply, manufacture, sale) and can be presented in tabular form, as well as in the form of reports or notes; financial statements, drawn up by small enterprises in accordance with the current legislation; responsibility accounting reports, which include the activity indicators that are affected by the employees of the particular centre. according to the results of the study, it is defined that making the managerial decision on the base of operational reports are conducted at 29 small domestic enterprises, as well as on the base of financial statements – 10 enterprises, then by using the responsibility accounting reports – only at one small enterprise. operational reports in combination with the financial statement are the source of information for management in 13 enterprises, while the indicators of these three types of reporting are used only at one small enterprise. therefore, the main information source in the management of the small business is operational reporting. considering the periodicity of collecting the information about the activity at a small enterprise for the manager/owner, it is found that this information is daily submitted in 19 enterprises, once a week – in 16 enterprises, 2-3 times per month – in 4 enterprises, 1  time per month – in 18 small enterprises. so, the largest percentage (34.5%) of enterprises has daily prepared the information for a manager. however, it should be noted that for the vast majority of enterprises with different intervals of information providing, the time range is within one month. a chief accountant (outsourcer) or manager carried out the preparation of business activities’ information in most of the small enterprises. the share of such enterprises is 56.4% (12.7%) and 27.3% accordingly. the post of accounting analyst is provided in 3 small enterprises, and then the preparation of information for the manager by the financial director is provided also in 3 of smes. respondents of some (4 entities) small enterprises said that collection and processing of information are provided by the chief accountant and manager or chief accountant and chief financial director. in order to secure a competitive position in the market managers of small businesses have to use a variety of information characterized the business activity. this information can be obtained by analysing the indicators of financial reporting, non-financial table 3 stages of investigation of the management accounting organization at a small enterprise stages of investigation of the management accounting organization at a small enterprise characterization of the received information number of stage name of stage first stage information for management decision-making – the main sources and types of information used by the head of a small enterprise; – periodicity of the information submission; – employees involved in its preparation. second stage practice of conducting the management accounting – information about methods of cost accounting and calculating the cost of production; – tools of operational and strategic management accounting; – factors that have contributed to the use of management accounting at small enterprises. third stage reasons for the refusal from the management accounting and organization of management accounting – the main reasons for the refusal from management accounting at small enterprises or the insufficient use of its tools; – definition of the persons who should be engaged in its introduction; – methods and techniques of managerial accounting that should be used in the case of organization the management accounting subsystem at small enterprises. source: compiled by the author according to the research results baltic journal of economic studies 277 vol. 3, no. 4, 2017 indicators or analytical information received on the basis of methods and techniques of management accounting. results of the study represent that the majority of small enterprises (30 entities) uses different combinations of two indicators’ types for making management decisions, the main part of which are non-financial indicators and analytical information obtained on the base of management accounting methods (13 entities). non-financial indicators and the indicators of the financial statement are used at 10 small enterprises, while the indicators of financial statement combined with analytical information – only at 7 small enterprises. furthermore, 7 small enterprises use for the management a combination of three mentioned indicators above. among enterprises that use only one indicator – the most popular is decision-making based on non-financial indicators (43.6%). the second stage of the study “practice of conducting the management accounting” showed that cost of production calculation at most small enterprises is carried out by full cost method (52.7%), according to ukrainian accounting standards no. 16 and by job-order costing (45.5%). only two enterprises from sample provide responsibility accounting, and seven entities use budgeting. the most popular types of analysis are marginal analysis and cost-benefit analysis. therefore, two small enterprises use all four types of analysis, while one enterprise has used three types (marginal analysis, analysis of alternative solutions and analysis of resource use in the presence of constraints). five enterprises use different combinations of these two types and twentytwo entities use only one kind of analysis. regarding the use of methods and techniques of strategic management accounting, the most common is the analysis of competitors (51.1%) and target calculation (21.3%). most of the small enterprises use only one method (18), a combination of two methods – 10 units, three methods – 3 units. the main factors influencing the use of management accounting techniques are the manager willingness and the objective need to improve the financial position of the enterprise. according to the third stage of the study “reasons for the refusal from the management accounting and organization of management accounting” it is defined that the main factor of the non-use or use the lowlevel management accounting methods is significant money and time expenditures for its organization and management. otherwise, the manager and accountants of four small enterprises have a sceptical opinion to the management accounting introduction for this category of business entities. the majority of respondents replied that in the case of management accounting organization at the small enterprise, it should be carried by a chief accountant (outsourcer) or an accountant-analyst. in most small enterprises, where management accounting is not used or used at a low level, it is expedient to introduce such methods as: cost-benefit analysis, costvolume-profit (cvp) analysis, analysis of alternative solutions, budgeting and swot-analysis. consequently, according to the results of the study obtained on the basis of first stage questions “information for making managerial decisions”, we can conclude that the main source of information for the manager in the process of managerial decisionmaking is the operational reports or their combination with the financial assessment. the preparation of such information is made by chief accountant (outsourcer), who submits it to the manager daily, once per week or once per month. the indicators of financial reporting, analytical information, obtained on the base of management accounting methods, as well as nonfinancial indicators that characterize the economic activities of a small enterprise, are the basis for managers in managerial decision-making. the results of the second stage “practice of conducting the management accounting” show that in order to improve the financial position of small enterprises, their managers use information derived from the application of methods of operational and strategic management accounting. however, the level of their implementation is rather low since most small entities use only one of the methods of operational and strategic management accounting. it should be also emphasized that the number of management accounting methods used by small enterprises is higher if the founders are foreign citizens and/or whose average number of employees exceeds 30 persons. significant money and time expenditures for the organization and conducting of the management accounting are the main reason for the refusal to use it at small enterprises, due to the results of the third phase of the research “reasons for the refusal from the management accounting and organization of management accounting”. otherwise, most of the small enterprises have an understanding of the benefits from using management accounting, do not deny the expediency of its organization and determine the methods of managerial accounting, which will help to improve their financial situation. after all, the main reasons for the deterioration of the financial situation of small enterprises are: a) cash deficit (low liquidity); b) insufficient return on equity (low roe); c) lack of an appropriate level of financial situation (low profitability); d) inefficient management of financial resources. we have to note that problems of small enterprises related to solvency, profitability, and financial independence have a unified framework characterized by the lack of an appropriate methodological basis for forecasting the indicators of break-even and profitable activity, the lack of the efficient calculation system and use of other managerial accounting tools. as a result, there appears a need to improve the financial situation of small enterprises in the lviv region by baltic journal of economic studies 278 vol. 3, no. 4, 2017 optimizing the costs and revenues through structuring the sources of revenues’ formation and directions of its using with a distinguishing the percentage of revenue on reinvestment; by efficient resources use in order to rationalizing the inventories management; by carrying out the analysis and redistribution of assets for the detection of negative phenomena of influence; by financial risks reduction and by financial stability increasing. 6. conclusions the results of the study confirmed that a sufficient part of the management informational support at small enterprises of lviv region is the information obtained by the use of methods and techniques of managerial accounting. however, we can observe a low level of their application. therefore, there appears a need to ensure the awareness of managers on the benefits of using different management accounting methods that can be achieved by attending specialized courses, trainings or seminars conducted on the basis of higher education institutions. this, in turn, enhances the role of scientists in creating a theoretical framework of managerial accounting for small business entities and mechanisms of implementing it in practice. consequently, in order to improve the financial situation of small enterprises, it is expedient to use anti-crisis measures, which secure from the crisis and financial problems, as well as reduce the risk level. the main anti-crisis measures are: reduction or optimization of costs, effective use of marketing and staff personnel policies, timely staged planning, well-organized budgeting, etc. the success of anti-crisis measures application will be achieved in case of their use at each stage of the company’s life cycle. in particular, at the stage of enterprise establishing should be clearly defined a strategy of product promotion on the market, as well as pricing and communication strategy. at the stage of the company lifting, it is recommended to think about preventing a crisis situation by using an effective and professional management system and if it is necessary the attraction of skilled professionals. at the stage of maturity – the purpose of the anti-crisis measures’ application is to stabilize the situation and prevent the reduction of the market segment. the stage of reorganization or bankruptcy is characterized by the use of measures aimed at optimizing budgeting (if necessary – renting an unusual space, selling individual buildings, etc., or favourable selling of the company). successful implementation of the above-mentioned stages is possible under the condition of proper organization of strategic management accounting at small enterprises but the survey of respondents shows that the development of strategic accounting at domestic small enterprises is only on the initial stage. references: ahmad, k. 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(2014). characteristics of management a goo.gl/vadrnuccounting in small and medium-sized enterprises. case: rantalinna oy. retrieved from: goo.gl/1kemtz надежда хоча организация управленческого учета на малых предприятиях в украине аннотация. целью работы является исследование состояния организации управленческого учета на малых предприятиях в украине. методология. опросы о состоянии управленческого учета проводились путем проведения интервью с руководителем/главным бухгалтером/финансовым директором малого предприятия или передачей указанным должностным лицам анкет на их электронную почту для самостоятельного заполнения. выборка составила пятьдесят пять малых предприятий львовской области различных видов деятельности и форм собственности. результаты. изучение теоретических наработок украинских ученых и опыта применения управленческого учета на малых предприятиях за рубежом позволило выделить три основных этапа исследования. по итогам опроса первого этапа "информация для принятия управленческих решений" делаем выводы, что основным источником информации для руководителя, при принятии управленческих решений, являются оперативные отчеты (или их сочетание с финансовой отчетностью), подготовкой такой информации занимается главный бухгалтер (аутсорсер) и представляет ее руководителю ежедневно, один раз в неделю или месяц. показатели финансовой отчетности, аналитическая информация, полученная на основе использования методов управленческого учета и нефинансовые показатели, характеризующие хозяйственную деятельность малого предприятия, являются основой для руководителей при принятии управленческих решений. результаты исследования второго этапа "практика ведения управленческого учета" показывают, что с целью улучшения финансового состояния малых предприятий, их руководители используют информацию, полученную на основе применения методов оперативного и стратегического управленческого учета. однако уровень их внедрения является достаточно низким, поскольку на большинстве малых предприятий используют только один из методов оперативного и стратегического управленческого учета. также отметим, что количество применяемых методов управленческого учета является выше на малых предприятиях, учредителями которых являются иностранные граждане и/или среднее количество работников которых превышает 30 человек. значительные затраты денег и времени на организацию и ведение управленческого учета являются основной причиной отказа от его использования на малых предприятиях, о чем свидетельствуют результаты опроса третьего этапа исследования «причины отказа и организация управленческого учета". однако на большинстве малых предприятий, понимая преимущества использования управленческого учета, не отрицают целесообразности его организации и определяют методы управленческого учета, применение которых будет способствовать улучшению их финансового состояния. практическая реализация. по результатам исследования сделан вывод, что на малых предприятиях составляющей информационного обеспечения управления является информация, полученная на основе использования методов и инструментов управленческого учета. однако наблюдаем низкий уровень их применения. поэтому возникает потребность в проведении на базе высших учебных заведений специализированных курсов, тренингов или семинаров с целью информирования руководителей малых предприятий о преимуществах применения различных методов управленческого учета. значение/оригинальность. полученные результаты являются основой создания теоретической базы управленческого учета для украинских субъектов малого предпринимательства и механизмов внедрения ее на практике. baltic journal of economic studies 157 vol. 3, no. 4, 2017 corresponding author: 1 department of theoretical and applied economics, chernihiv national university of technology. e-mail: natasha290186@ukr.net systematization of scientific approaches to the interpretation of information economy nataliya kholiavko1 chernihiv national university of technology, ukraine abstract. the purpose of the article is to analyse and systematize scientific approaches to the interpretation of the essence of the information economy. the research object: scientific approaches to the interpretation of the essence of the concept of “information economy”. the theoretical and methodological base of the research consists of works by d. bell, z. brzezinski, j. baudrillard, m. castells, yoneji masuda, f. machlup, m. porat, a. toffler, which are devoted to issues of development of information society. analysis of recent research and publications allows noting an increasing scientific interest in issues of formation of the economy of information type. the essence and features of information economy are considered in scientific papers of scholars such as hrynkevych s., iliash a., krystynevych s., malyk i., nikolaiev ye., bazhal yu., tolstiakov r., shkarlet s., fedulova l., chukhno a., and others. research methods: analysis, content analysis, synthesis, system method. increasing scientific interest in the formation of the information economy leads to an increase in the number of publications on this topic; pluralism of scientific approaches to the consideration of the essence of the information economy actualizes the need for their systematization. the theory of information economy logically follows and is a component of the theory of the development of information society. along with it, there is an approach in the scientific literature, according to which scholars identify the concept of information society and information economy. in our opinion, this approach is not well-balanced, since the term “information society” is inherently wider than “information economy”. the latter can be considered as an inherent component of the information society, which development is determined by a number of specific factors. in other words, these terms are closely interrelated and they should be investigated in the context of links between them, however, we should not consider them as synonymous terms. there is no the only consistent interpretation of the term “information economy” in the scientific literature, which is explained by differences in views and research methods of different scholars. moreover, this is complemented by the high dynamism of the economic component of the information society, which is why new aspects of its study are constantly emerging. conclusions. the article analyses views of domestic and foreign scholars on the essence of the information economy. systematization of scientific approaches made it possible to note that their pluralism is determined by differences in the views of scientists, the methodology used, scientific schools, etc. the analysed definitions are characterized by different degrees of concreteness, abstractness, scale, complexity, completeness, and systematicity in disclosing the essence of information economy with possible identification of the component composition and determinants of its development. based on the systematization of scientific approaches to the interpretation of this concept, it is proposed to consider the information economy as a type of economic system, which is characterized by the defining role of information and information technologies in the processes of production, exchange, distribution, and consumption, as well as in the development of basic industries and the national economy as a whole. the author emphasizes that ensuring the competitiveness of economic entities at the micro (local, sectoral), macro (national), and mega (international) levels requires the implementation of flexible and highly adaptive mechanisms for generation, accumulation, processing, analysis, information transfer, effective distribution and use of information resources, rapid update and implementation of innovative information and communication technologies. in terms of formation of the information economy, industries, sectors, and spheres, which are capable of producing knowledge and information, in the first place – higher education, science, play a particular role. prospects for further research are the study, structuring, and systematization of scientific approaches to the correlation of the categories “information economy” and “knowledge economy” with the specification of their key features and specific characteristics. this will make it possible to substantially deepen the theoretical and methodological foundations of research into the formation and development of an economy of an informational type. key words: information economy, knowledge economy, information, information resources, information and communication technologies. jel classification: а10, b00, e00, n00, o10, o3, y30, y40 baltic journal of economic studies 158 vol. 3, no. 4, 2017 1. introduction socio-economic development of the leading countries of the world takes place in a number of challenges, the key among which one can determine: the high dynamics of the exogenous and endogenous environment; the variability of factors and the specifics of their impact on the national economy; rapid informatisation, automation, robotisation of production processes; an increase in the knowledge content of the complexity of production; penetration of information and communication technologies in various spheres of society life, including in economic relations. these challenges lead to the transformation of the national economic system, its transition to the informational type. economists-practitioners and scholars note the intensification of processes of formation of the information economy. the development of effective mechanisms and strategic approaches to effective state regulation of the national economy in terms of its transition to functioning on the basis of informational means the expediency of conducting previous thorough scientific research, the formation of the theoretical and methodological basis for the implementation of relevant processes. world trends of economic development confirm the thesis of the significant transformative influence of information and modern technologies on the course of economic processes. increasing access to information resources and increasing the speed of obtaining information leads to a change in the economic behaviour of actors in making decisions: customers (consumer choice), commodity producers (when defining answers to fundamental economic problems), suppliers (when choosing a logistics strategy), etc. information technology intensifies production processes, shortens the life cycle of goods. changes in the structure of factors of production, productive forces, factors of competitiveness of economic entities under the influence of information, the formation of the market for information services – all this justifies the need for scientific research, the study of the theoretical foundations of the functioning of the economy of information type. the theory of information economics flows logically and is a component of the theory of information society development (hrynkevych, 2015; krystynevych, 2008). along with this, there is an approach, in the scientific literature, by which scientists identify the concept of the information society and the information economy. in our opinion, such an approach is not sufficiently balanced, since the term “information society” in its essence is wider than the “information economy”. the latter can be considered as an inherent component of the information society, which development is determined by a number of specific factors. in other words, these terms are closely interrelated and they should be investigated in the context of links between them, however, we should not consider them as synonymous terms. there is no the only consistent interpretation of the term “information economy” in the scientific literature, which is explained by differences in views and research methods of different scholars. moreover, this is complemented by the high dynamism of the economic component of the information society, which is why new aspects of its study are constantly emerging. 2. views of foreign scholars on the essence of the information economy in scientific terms, the concept of information economy was introduced by mark porat, an american economist at the stanford center for interdisciplinary research. in his work of the same name, the scientist, having analysed the information-intensive activities and their contribution to the formation of the gnp of the united states of america, comes to the conclusion about the formation of an information economy. m.  porat, characterizing the informational economy, proposed to divide it into the primary and secondary information sectors. in general, the scholar associates the development of the information society with the expansion of the information sector of the economy (mark u. porat, 1977). f. machlup follows similar views on the essential aspects of the information economy. in particular, this concept is interpreted as a type of economy, in which activities for the production, processing, storage, and transfer of knowledge and information form the overwhelming share of gdp of the country (machlup, 1962). by sharing this view on the category under study, along with this, we consider it expedient to note its broad, generalized character, which determines the appropriateness of its concretization. according to m. castells, the information economy can be defined as the economy, the competitiveness of which subjects depends on their “ability to generate, process, and effectively use knowledge-based information” (castells, 1996-1998). the scholar emphasizes the fact that information technologies make a special impact on economic processes. the current trends in scientific and technological and innovative development are demonstrating the increasing influence of dynamically updated information and communication technologies on the economy, which in practice confirms the abovementioned thesis formulated by m. castells. nizhegorodtsev r .m. proposes the interpretation of the information economy, a broad enough in its internal content. in the monograph “information economics”, the scientist points out the following definition: “this is an economic sector that studies economic changes that operate in the field of production and reproduction of scientific and technological information, scientific baltic journal of economic studies 159 vol. 3, no. 4, 2017 knowledge” (nizhegorodtsev, 2002). according to the scholar, the subject of the information economy covers economic processes and economic laws, according to which the processes of production, exchange, distribution, and consumption of scientific and technical information are carried out (nizhegorodtsev, 2002). analysis of the above demonstrates, firstly, the expediency of expanding the subject – with the inclusion of all types of information (that is, without limitation, only the scientific and technical information). secondly, the scholar’s position regarding the economic laws included in the research subject requires a specification (nikolaiev, 2010). in the thesis, tolstyakov r .r . interprets the informational economy as “a part of the post-industrial economy, which is determined by the progress of science and technology, which makes high technology the basis of technical and economic development” (tolstyakov, 2003). the critical analysis of the above definition allows marking its concentration on aspects of factor support for the formation of the information economy. the latter is explained by the subject of research in the thesis of tolstyakov r .r . b.v. korneychuk outlines two aspects of the consideration of the information economy: 1) as a modern stage of development of civilization, the defining feature of which is the prevalence of creative work; 2) as “the economic theory of information society” (korneychuk b., 2006). we consider this approach justified, taking into account the complexity and high dynamics of the information economy as a research object. according to rakitov a.i., that economy can be called as information, in which “the cost of information search goes to zero” (rakitov, 1998). we unequivocally agree on the crucial importance of information and ensuring wide access to information resources of all interested economic entities. however, given this, the formulated by a.i. rakitov definition seems to us somewhat limited since it does not fully reflect processes of generation, production, analytical processing, and transfer of information, knowledge, information technology. s. diatlov considers the information economy from the point of view of the systematic approach. to the subject of study of the specified type of economy, scientists are assigned: economic relations concerning the production, exchange, accumulation, and consumption of information; laws of self-organization of economic systems; aspects of rational search and use of information resources; systematic organization of economic processes and phenomena in the perspective of informatisation (diatlov, 1998). fully sharing the idea of the need for a systematic approach to the interpretation of the essence of the information economy, yet we have to note the excessive breadth of the subject of the research object, which greatly complicates and aggravates the process of its study. and accordingly, in our opinion, it needs to be optimally narrowed in order to provide more specificity and purposefulness of the research. analysing the experience of foreign scientists in the problem of interpreting the essence of the information economy, we consider the position of gubaidullina d.m. as appropriate, who examine this concept as “the stage of development of human society, the totality of all relations arising between economic entities on the basis of production, distribution, change, and consumption information” (gubaidullina, 2011). this definition combines two the most widely used scientific approaches. moreover, gubaidullina d.m. defines the informational economy as a factor in promoting the development of a new information technology (gubaidullina, 2011). 3. views of ukrainian scholars on the essence of the information economy ukrainian scholars have fundamental developments in the study of issues of the formation of the information economy. in particular, yu.m. bazhal in this regard emphasizes “the use of knowledgeable information for the production of a new product, competitive in the world market, not necessarily informational, but such that, having mass sales, provides economic wealth and development of producer countries” (bazhal, 2006). in the monograph “ukraine in the measurement of the knowledge economy” edited by academician v.m. heiets, it is proposed to consider the economy as “knowledge economy that involves the use of knowledge for economic development” (bazhal, 2006; chala, 2012). in this monograph, scholars are able to withdraw from the consideration of the information economy solely through the prism of aspects of the analysis of information resources and technologies, expanding the research problem to issues of knowledge generation and cost-effective implementation of information technologies. the authors of the monograph “priorities of national economic development in the context of globalization challenges” call the information economy “a special type of economy, in which information is a decisive productive resource, based on information production and information technologies” (heiets, mazaraki, 2008). one recognizes the equation of the information economy to the knowledge economy on the internal content of both concepts as quite acceptable. a thorough approach to the interpretation of the essence of the information economy is proposed by s.  shkarlet and m. dubyna, considering this term as “the type of economic system, within which information plays a key role in the development of the main spheres and industries of national production, is an integral part of the implementation of processes of production, distribution, exchange and consumption, baltic journal of economic studies 160 vol. 3, no. 4, 2017 further development of such a system is directly related to the creation and implementation of new information technologies in the activities of various economic entities” (shkarlet, dubyna, 2017). in a joint paper, scholars focus on transforming the essence and structure of economic processes under the influence of innovative information technologies, as well as changing the working process (collection, storage, processing, transfer, use) with economic information itself (shkarlet, dubyna, 2017). domestic scholar a.o. maslov devotes a series of his scientific works to the study of scientific and methodological principles of functioning of the information economy in ukraine and the world. on the basis of conducted researches and thorough study of scientific achievements of foreign scientists, maslov a.o. proposes to consider the information economy as “an economy that was formed in combination and covers elements of the traditional, network, and knowledge economy, and created its own special content elements based on information and knowledge” (maslov, 2012). from this definition, it is clear that the scholar manages to combine various scientific approaches, as well as to define clearly the relationship between the concepts of information and knowledge economy (among them, including the elements of the latter in the structure of information economy along with the components that characterize the traditional and network economy). in addition, maslov a.o. in his publications specifies features and specific structural elements inherent in the information economy itself at the stage of its formation. according to v.l. pleskach and t.h. zatonatska, the informational economy covers “electronic economic activity, where business activities in the field of information services, their production and exchange, where information and knowledge are the main resources, prevail” (pleskach, zatonatska, 2007). we believe that in the context of modern realities regarding the growth of the value and influence of information and communication technologies on economic processes, the above definition should be supplemented with aspects that reflect the specifics of such an influence with the identification of directions of transformation of economic relations in the conditions of informatisation of the national economy and society. melnychuk o. adheres to the position that is close to this approach, interpreting the informational economy as “an innovative type of economic activity, where the main resources are the information and knowledge that ensure the functioning of e-business and the provision of electronic services by the state in terms of minimization of information search costs” (melnychuk, 2014). we can note some limitation of this definition by isolating and summarizing the essence of the analysed concept to one structural element – e-commerce, which we consider to be unjustified even in view of the high dynamism and perspective of this element. chala o.v. states that the information economy “includes the creation and use of information resources in a structured information space, and also provides table 1 interpretation of the essence of the information economy in dictionaries definition source reference to the source information economy – “an economy in which knowledge, information, and services are more valuable than manufacturing; the technological revolution associated with the computer and the information economy has accelerated the shift of industrialized countries from manufacturing-based economies toward service-based economies” cambridge business english dictionary, cambridge university press http://dictionary.cambridge.org/ dictionary/english/informationeconomy information economy – “an economy based on the effective acquisition, dissemination, and use of information, rather than on the means of production” oxford dictionary https://en.oxforddictionaries.com/ definition/information_economy information economy – “an economy in which data and intellectual work are a more important source of wealth than manufacturing” macmillan dictionary http://www.macmillandictionary. com/dictionary/british/informationeconomy information economy – “a type of modern economy, in which the dissemination of information technology in the field of material and non-material production, the transformation of information to one of the most important factors of socio-economic progress of society and person are taking place” economic glossary (економічний словник-довідник) http://subject.com.ua/economic/ dict/363.html information economy – “an economy, in which most of the gross domestic product is provided with activities in the production, processing, storage, and distribution of information and knowledge, with more than half of the employees involved in this activity” financial dictionary (финансовый словарь) https://dic.academic.ru/dic.nsf/ fin_enc/23440 baltic journal of economic studies 161 vol. 3, no. 4, 2017 opportunities for the production of intellectual capital and innovation and thus affects economic processes and socio-economic relations” (chala, 2012). on the one hand, this definition is sufficiently complex and broad in its content; however, on the other hand, it deprives it of specifics and does not reflect the specificity of the term. ye.b. nikolaiev rightly notes possibility to consider the essence of the information economy in the broad and narrow sense, respectively, as: – “economic system where the industries, in which the intellectual product is created, occupy a central place and have a decisive influence on the operation of all other industries” (nikolaiev ye., 2010); – “a separate sector of the national economy, where an intellectual product (science, education, etc.) is created” (nikolaiev, 2010). to ensure the completeness and comprehensiveness of the analysis of approaches to the interpretation of the essence of the information economy, table. 1 presents a definition of some dictionaries. the definitions given in the table fully correspond to the basic scientific views. in domestic and foreign dictionaries, the emphasis is made on the exceptional role of information and the powerful transformational impact of information technology on economic relations and the state of the national economy as a whole. 4. scientific approaches to the definition of the subject of the information economy thus, the elaboration of scientific sources allows us to conclude that there is no single agreed approach to the interpretation of the essence of the information economy. by systematizing the definitions formulated by foreign and ukrainian scholars, we can note that pluralism is determined by differences in the views of scholars, applied methodology, scientific schools, etc. the analysed definitions are characterized by different levels of concretization, abstraction, scale, complexity, completeness, and systematicity in disclosing the essence of the information economy, including the possibility of identifying the component composition and determinants of its development. there diversified scientific views on this term are generalized and the subject of the study is presented schematically in fig. 1. information economy e ss en ce type/kind of economic system sector/branch of the national economy electronic economic activity/innovative type of economic activity economic theory of information society part of the postindustrial/knowledge economy stage of development of human civilization / initial stage of the new economy of postindustrial society subject economic laws and economic relations in the process of production, exchange, distribution, consumption of information (nizhegorodtsev, 2002) use of knowledgeable information for the production of competitive products (bazhal yu., 2006) problems of acquiring and application of knowledge (heiets v., 2008) the process of reproduction of information and information resources in the economy; the influence of information on reproduction of other elements of the economic system; relevant socioeconomic relations (nikolaiev ye., 2010) information aspects of the organization of economic processes; information interaction; economic relations regarding the production, accumulation, analysis, exchange, and consumption of information; rational use of information resources, etc. (diatlov s., 1998) fig. 1. the main scientific approaches to determining the essence and subject of the information economy baltic journal of economic studies 162 vol. 3, no. 4, 2017 5. conclusions based on the analysis and systematisation of scientific views, we can state that ensuring the competitiveness of economic entities on the micro (local, branch), meso (regional), macro (national), and mega level (international) requires the implementation of flexible and highly adaptive generation mechanisms, accumulation, processing, analysis, transfer of information, effective allocation and use of information resources, prompt updating and introduction of innovative information and communication technologies. in terms of the formation of the information economy, a special significance is held by branches, sectors, and spheres capable of producing knowledge and information, first of all – higher education, science. thus, the article analyses the views of domestic and foreign scholars on the essence of the information economy. by systematising the definitions formulated by foreign and ukrainian scholars, we can note that pluralism is determined by differences in the views of scholars, applied methodology, scientific schools, etc. the analysed definitions are characterized by different levels of concretization, abstraction, scale, complexity, completeness, and systematicity in disclosing the essence of the information economy, including the possibility of identifying the component composition and determinants of its development. on the basis of systematisation of scientific approaches to the interpretation of this concept, it is proposed to consider the information economy as a type of economic system, which is characterized by the decisive role of information and information technologies in the processes of production, exchange, distribution and consumption, as well as development of major industries and the national economy as a whole. prospects for further research are the study, structuring, and systematisation of scientific approaches to the ratio of the categories “information economy” and “knowledge economy” with the specification of key aspects and peculiar features. this will substantially deepen the theoretical and methodological principles of the study of the formation and development processes of the economy of informational type. references: hrynkevych, s., & iliash, o. (2015) theoretical and applied aspects of the formation of the information economy in ukraine. strategic priorities. 2015. № 1 (34). – p. 56–62. gubaidullina, d. (2011). dynamics of the development of the information economy in russia. 21 p. diatlov, s. (1998) the subject and method of the theory of information economy. economic theory on the 21st century. – p. 497-519. economical dictionary. [electronic source]. access mode: http://subject.com.ua/economic/dict/363.html korneychuk, b. (2006). information economy. st. petersburg, 400 p. krystynevych, s. (2008) the concept of information economy: essence and development criteria at the present stage. № 3. p. 72–77. maslov, a. (2012). the theory of information economics as an alternative paradigm of modern orthodoxy. – p. 115-119. [electronic source]. access mode: http:econom.kiev.ua/paradigm_et/conf_ materials.pdf melnychuk, o. (2014) the development of e-commerce in the structure of the information economy of ukraine. bulletin of the taras shevchenko kyiv national university. № 8 (161). p. 93-97. nizhegorodtsev, r . (2002) information economy. book 1. information universe. – moscow-kostroma, 163 p. nikolaiev, ye. (2010). the subject of the theory of information economics. problems of the formation of a new economy of the xxi century. dnipropetrovsk. p. 59-61. pleskach, v., & zatonatska, t. (2007). e-commerce. – kiyv. 535 p. priorities of national economic development in the context of globalization challenges (2008). monograph. (ed. heiets v., mazaraki a.). kiyv. 389 p. rakitov, a. (1998). information, science, technology in global historical changes. – moscow. – 104 p. tolstyakov, r . (2003). the main factors of information economy formation. tambov. 20 p. ukraine in the measure of knowledge economy (2006) (ed. heiets v.) kiyv. 592 p. financial dictionary [electronic source]. access mode: https://dic.academic.ru/dic.nsf/fin_enc/23440 chala, o. (2012) essential aspects of the information economy. bulletin of the economy of transport and industry. № 40. p. 76-79. shkarlet s., & dubyna m. identification of the essence of the information economy. problems and prospects of economy and management. № 1 (9). p. 99-104. cambridge business english. dictionary cambridge university press. [electronic source]. access mode: http:// dictionary.cambridge.org/dictionary/english/information-economy baltic journal of economic studies 163 vol. 3, no. 4, 2017 castells, m. (1996-1998). the information age: economy, society and culture. oxford: blackwell publishing. 3 volumes. machlup, f. (1962). the production and distribution of knowledge in the united states. nj.: princeton. 283 p. macmillan dictionary. [electronic source]. access mode: http://www.macmillandictionary.com/dictionary/ british/information-economy oxford dictionary. [electronic source]. access mode: https://en.oxforddictionaries.com/definition/information_ economy porat, mark u. 1977) the information economy. nine volumes. office of telecommunication, us department of commerce. washington, 1977. наталия холявко систематизация научных подходов к трактовке сущности информационной экономики аннотация. целью статьи является анализ и систематизация научных подходов к трактовке сущности информационной экономики. предмет исследования: научные подходы к идентификации сути понятия «информационная экономика». теоретико-методологическую базу исследования составляют труды д. белла, з. бжезинского, ж. бодияра, м. кастельса, э. масуда, ф. махлупа, м. пората, э. тоффлера, посвященные вопросам развития информационного общества. анализ последних исследований и публикаций позволяет отметить все возрастающий научный интерес к проблемам становления экономики информационного типа. сущность и особенности информационной экономики рассматриваются в научных работах ученых гринкевич с., иляш а., кристиневича с., малик и., николаева е., бажала  ю., толстякова г., шкарлета с., федуловой л., чухно а. т.д. методы исследования: анализ, контентанализ, синтез, системный метод. возрастающий научный интерес к проблематике формирования информационной экономики приводит к увеличению количества публикаций по данной тематике; плюрализм научных подходов к рассмотрению сущности информационной экономики актуализирует необходимость их систематизации. теория информационной экономики логично вытекает и является составной теории развития информационного общества. наряду с этим, в научной литературе встречается подход, согласно которому ученые отождествляют понятие информационного общества и информационной экономики. по нашему мнению, такой подход недостаточно взвешен, поскольку термин «информационное общество» по своей сути является более широким нежели «информационная экономика». последний можем рассматривать в качестве неотделимого компонента информационного общества, развитие которого детерминируется рядом специфических факторов. иными словами, указанные термины тесно взаимосвязаны и их следует исследовать в контексте имеющихся между ними связей, однако не стоит рассматривать как синонимичные понятия. в научной литературе отсутствует единственно согласованное толкование термина «информационная экономика», что объясняется различиями во взглядах и способах исследования различных ученых. кроме того, это дополняется высокой динамичностью экономической составляющей информационного общества, из-за чего постоянно возникают новые аспекты ее изучения. выводы. в статье проанализированы взгляды отечественных и зарубежных ученых на сущность информационной экономики. систематизация научных подходов позволила отметить, что их плюрализм определяется различиями во взглядах ученых, используемой методологии, научных школах и пр. проанализированные дефиниции характеризируются различными степенями конкретности, абстрактности, масштабности, комплексности, полноты и системности в раскрытии сущности информации экономики с возможной идентификацией компонентного состава и детерминантов ее развития. на основе систематизации научных подходов к трактовке данного понятия предложено рассматривать информационную экономику как тип экономической системы, для которой характерна определяющая роль информации и информационных технологий в процессах производства, обмена, распределения и потребления, а также в развитии основных отраслей и национальной экономики в целом. автор делает акцент на том, что обеспечение конкурентоспособности экономических субъектов на микро(локальном, отраслевом), макро(национальном) и мега(международном) уровнях требует имплементации гибких и высокоадаптивных механизмов генерации, аккумулирования, обработки, baltic journal of economic studies 164 vol. 3, no. 4, 2017 анализа, трансфера информации, эффективного распределения и использования информационных ресурсов, оперативного обновления и внедрения инновационных информационно-коммуникационных технологий. в условиях формирования информационной экономики особое значение играют отрасли, сектора и сферы, способные к продуцированию знаний и информации, в первую очередь – высшее образование, наука. перспективы дальнейших исследований заключаются в изучении, структуризации и систематизации научных подходов к соотношению категорий «информационная экономика» и «экономика знаний» с конкретизацией их ключевых особенностей и специфических характеристик. это позволит существенно углубить теоретико-методологические основы исследования процессов формирования и развития экономики информационного типа. baltic journal of economic studies 118 vol. 4, no. 1, 2018 corresponding author: 1 department of management and economy of enterprises, national university of pharmacy. e-mail: y.derenskaya@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-118-125 project scope management process yana derenskaya1 national university of pharmacy, ukraine abstract. the purpose of the article is to define the essence of project scope management process, its components, as well as to develop an algorithm of project scope management in terms of pharmaceutical production. methodology. to carry out the study, available information sources on standards of project management in whole and elements of project scope management in particular are analysed. methods of system and structural analysis, logical generalization are used to study the totality of subprocesses of project scope management, input and output documents, and to provide each of them. methods of network planning are used to construct a precedence diagram of project scope management process. results of the research showed that components of the project scope management are managing the scope of the project product and managing the content of project work. it is the second component is investigated in the presented work as a subject of research. accordingly, it is defined that project scope management process is to substantiate and bring to the realization the necessary amount of work that ensures the successful implementation of the project (achievement of its goal and objectives of individual project participants). it is also determined that the process of managing the project scope takes into account the planning, definition of the project scope, creation of the structure of project work, confirmation of the scope and management of the project scope. participants of these subprocesses are: customer, investor, and other project participants  – external organizations (contractors of the project); project review committee; project manager and project team. it is revealed that the key element of planning the project scope is the formation of the structure of design work, the justification of the number of works, and the sequence of their implementation. it is recommended to use the following sequence of stages for creating the structure of project work: analysis of results of planning the project scope; study of templates of project works’ structures, recommendations for the formation of levels of structure; decomposition of the totality of project work; creating a dictionary of the project work structure; updating the description of the project scope and the project scope management plan. practical importance. in order to improve the management of the scope of projects in the pharmacy, the components of subprocesses, participants, input and output documents are investigated and the algorithm for managing the project scope is built. it is determined that the starting elements of project scope management are the justification of the initial data, i.e. the project purpose, impacts of the environment and the internal potential of the enterprise in relation to the project implementation (assets of the organizational process). it is recommended to create a structure of project work starting from the analytical research existing at the enterprise or recommended by standards and guidelines on project management approaches to building a hierarchical structure of works, templates of project work structures. it is noted that the created structure of project work should be audited by participants of the project office. according to the results of planning the sequence and duration of operations for managing the scope of works, a precedence diagram of the investigated process is constructed. value/originality. the developed recommendations regarding the consistency and structure of subprocesses and operations of the project scope management will allow the enterprise to significantly save time for planning the scope of subsequent projects, using the database created in previous periods, statistics on the implementation of the described operations. key words: project, project management, scope, project scope, project charter, work breakdown structure, project scope management. jel classification: m11, l20, o21, o22 baltic journal of economic studies 119 vol. 4, no. 1, 2018 1. introduction the need to keep pace with development in order to confront competitors leads to the need for a modern pharmaceutical company to introduce new approaches to management. intensification of activity in the development of new drugs, reconstruction, modernization of production, the search for new markets leads to the urgency of the application of methods and tools of project management. accordingly, the start of the implementation of any project is related to the definition of its essence, planning the project scope. project scope management is related to performing processes that identify, plan, control the execution of the required amount of project work. in fact, scope management is a justification of the required amount of project work to ensure successful completion of the planned project. on the one hand, an insufficient amount of work can lead to the complexity of managing them, loss of management efficiency. on the other hand, too much detail requires large amounts of money and time to plan each work and monitor its execution. therefore, project scope management determines the number and amount of project work necessary and sufficient for the successful implementation of project works. the purpose of the article is to define the essence of the project scope management process, its components, as well as to develop an algorithm of project scope management in terms of pharmaceutical production. to carry out the study, available information sources on standards of project management in whole and elements of project scope management in particular are analysed. methods of the system and structural analysis, logical generalization are used to study the totality of subprocesses of project scope management, input and output documents, and to provide each of them. methods of network planning are used to construct a schedule for project scope management. 2. the essence of project scope management in project management, the term “scope” takes into account three components: product content, the content of works, project content (fig. 1). according to the guide to the project management body of knowledge (pmbok® guide, 2008), the term “scope” refers to the content of the product or the content of the project as a whole. in the paper (mazur, shapiro, ol’derogge, polkovnikov, 2009), the project scope is considered as the content of works, for the effective management of which it is necessary to determine: the work to be performed; sequence of works; work duration; need for resources, and cost of work. s.h. moroz and a.s.  nemchenko consider the content of works as “actions, descriptions of works to be performed, and resources to be secured” (moroz, nemchenko, 2017). iso 21500 (iso 21500:2012, 2012) defines scope as the processes necessary for identifying and defining works and results, as well as only the required work and results. in terms of iso 21500 (iso 21500:2012, 2012), the project scope management takes into account the definition of content, the design of the project work, the definition of the composition of works, content project content management – processes of determining, justifying, and controlling the implementation of the required amount of project work that ensure the successful implementation of the project and the creation of a project product in accordance with the planned parameters (customer requirements) the scope of the project product – features and functions that characterize the product, service, project result the content of project works – a description of works to be performed and resources that ensure the execution of these works project scope – works to be performed to get a product, service or result with planned features and functions fig. 1. components of project scope management baltic journal of economic studies 120 vol. 4, no. 1, 2018 control. the purpose of the definition of the project scope is to identify the essence of the project scope, its purpose, results, requirements, and limits by analysing the final state of the project. determining the content of the project shows the contribution of the project to the implementation of strategic objectives of the enterprise. a detailed description of the project scope is the basis of all project decisions, a base that links the importance of the project and the benefits that should be gained as a result of a successful project implementation. the main inputs for the process of defining the project scope for iso 21500 (iso 21500:2012, 2012) are the project charter and approved changes, and outputs are a description of the scope and requirements. the purpose of creating a project works’ structure is to create a presentation tool for a set of works in the form of a hierarchy of works that must be performed to achieve the purpose of the project. the structure of project works is the basis for splitting the project into more detailed levels and works that are easier to manage (to plan, control, etc.). the structure of design work can be formed on various grounds –phases, main results, functional areas, geographical location. each subsequent level of structure takes into account a more detailed description of project works (detail may also include results, organizational aspects, risks, accounting of costs, resources, etc.). according to iso 21500 (iso 21500:2012, 2012), the main inputs of the process of creating a project work structure are project plans, requirements, approved changes, and outputs  – a hierarchical structure of work, a dictionary of the project work structure. definition of works is the process of identifying, defining, and documenting all operations that must be planned and implemented to achieve the purpose of the project. in addition, the definition of works may also include processes for identifying, defining, and documenting works that must be implemented at the lowest level of the project work structure. it is from this level that the definition of the work begins, that is, more detailed components form the basis for planning, implementation, control, and further closure of the project. inputs of the process of determining the work include the hierarchical structure of works, its vocabulary, project plans, approved changes, and outputs – a list of works. scope control consists in determining its current status, comparing the current status of the scope with the approved base plan, detecting deviations, forecasting scope as of the project completion date, and implementing relevant changes requests in order to prevent the negative effects of changing the project scope. at the same time, the purpose of scope management is to enhance the positive and mitigate the negative consequences for the project, which arise due to changes in the scope. the process of scope control also involves identifying and managing factors that can change the scope of a project. from this perspective, scope control is considered in conjunction with the control of change. scope control is also used to manage actual changes, as uncontrolled changes cause the scope to be offset. the main inputs of the content control process are data on the implementation of the project, a description of the project scope, project work structure, and a list of works, and outputs – requests for changes. according to s. h. moroz and a. s. nemchenko, “management of the scope of the organization’s work is a system of strategic integrated approaches to the effective functioning of the organization and its management system, which are aimed at achieving the mission and goals of the organization, provide an opportunity for effective operation of the organization and the effective work of its employees” (moroz, nemchenko, 2017). in our view, processes of managing the scope of works are highlighted in more detail by the guide to the project management body of knowledge (pmbok® guide, 2008), which links processes of scope planning, scope definition, project design, scope validation, scope management. 3. project scope management processes the analytical study of existing approaches to the formation of a set of subprocesses of project scope management, as well as taking into account the adaptation of standards for project management, allowed developing a model of the process of project scope management in the conditions of pharmaceutical production (derenskaya, 2012), which takes into account the implementation of five subprocesses. participants of these subprocesses are: customer, investor, and other project participants  – external organizations (contractors of the project); project review committee; project manager and project team. the encoding of each subprocess includes the code of the scope management (уз) process and the serial number of the subprocess itself. the process of project scope management is to substantiate and bring to the realization the necessary amount of work that ensures the successful implementation of the project (achieving its goal and objectives of individual project participants). the first subprocess  – “project scope planning”  – is the work on the selection of approaches, methodologies, procedures, data sources, and other factors (which affect the formation of the complexity of the project) in order to create a plan for managing the project scope. using the results of the first subprocess, the project team defines a list of specific requirements for project works in terms of requirements of project participants, norms, restrictions. results of the subprocess include: clearly defined goals of the project, defined project scope, its boundaries, requirements and results, performance criteria, constraints, preliminary schedule, and project estimates. baltic journal of economic studies 121 vol. 4, no. 1, 2018 the next subprocess (“creating a project work structure”) forms a decomposition of project work, taking into account a certain approach to grouping them. structuring works can determine their interdependence, which is a prerequisite for the construction of the schedule and calendar plans for the project. in addition to the structure of the project work, the result of the subprocess is the wbs dictionary created, which allows unambiguous interpretation of the project terms by all project participants. according to the results of the analytical study of project management standards, it is recommended to use the following sequence of stages of creating the structure of project work: 1. analysis of results of project scope planning (assets of the organizational process, environmental factors, elements of the project scope management plan, charter, and description of the project scope). 2. investigation of templates of project structures, recommendations for the formation of levels of structure. 3. decomposition of the totality of project works. 3.1. identification of inputs and outputs (input data and results) for each stage of the project, formation of the first level of the project work structure. 3.2. structuring of the stages, grouping of blocks of works. 3.3. detailing the blocks of work by the results of breaking the upper levels into elements. 3.4. checking the necessity of the work done on the work packages and the adequacy of the degree of decomposition of works. 3.5. identification of elements of the structure of project work (development and assignment of code to each element of the structure). 4. creation of a dictionary of project work structure, which allows unambiguous interpretation of project terms by all project participants. 5. updating the description of the project scope and the project scope management plan. formation of templates of project work structures allows the project team to save time on project planning as a result of applying corrective actions or updating similar structures that were worked out in the process of implementation of previous projects of the enterprise. confirmation of the project scope is a formal acceptance by the project participants of the wbs created. the subprocess takes into account the verification of the project scope by verifying the readiness of the participants to complete the project work and document the appropriate parameters. if necessary, the corresponding change in the project scope (specific work) is revealed, documented, and substantiated, which requires a certain replanning of the project scope and all its parameters. project scope management is to ensure that the change of the identified changes at all stages and procedures for project change management is carried out. this subprocess also manages the current changes in the project work parameters, integrating the project scope management process with the management of terms, cost, quality of the project, and other processes. the results of this subprocess are the updated description of the project scope, project work structure, project scope management plan. in terms of pharmaceutical production, it is recommended to use the algorithm shown in fig.  2 to control the scope of executable projects. the starting elements for managing the project scope are the justification of the initial data, that is, the purpose of the project, impacts of the environment and the internal capacity of the enterprise in relation to the project implementation (availability of knowledge base, experience of the project activity  – assets of the organizational process). the established charter, a preliminary description of the scope, and the project management plan are subject to obligatory examination by a project review committee, a project office. clarifying the needs and expectations of project participants helps to formulate their requirements for results and form a description of the project scope. the next stage of the project scope management algorithm  – the creation of a project work structure  – begins with an analytical study of existing at the enterprise or recommended by standards and guidelines for project management approaches to building a hierarchical structure of work, templates of project work structures. the analysis conducted determines the list of works to be done in order to achieve the results previously determined by the project. decomposition (distribution by levels and corresponding grouping) of project works allows forming a structure of project works, the description of which is carried out with the help of a dictionary of the structure of project work. simultaneously with the creation of the structure of project work, changes are made to the planned project documents. the created structure of project work is subject to audit by project office participants, who, in case of discrepancies or insufficient disclosure of levels or number of works, may formulate relevant requests for changes in the scope of works. in case of necessity of making changes, they are substantiated by calculations of economic indicators (time, costs, change of project efficiency, etc.). approved by the project review committee and the project office, changes are implemented by adjusting the project plans. the updated scope of the project, description of the project scope, project work structure, the vocabulary of the project work, scope management plan, project management plan are subject to approval by the project review committee. characteristics of operations proposed for managing the project scope is shown in table 1. each operation is baltic journal of economic studies 122 vol. 4, no. 1, 2018 fig. 2. project scope management algorithm formation of a preliminary project scope management plan formation of a preliminary description of the project scope formation of a preliminary project management plan substantiation of the project goal analysis of factors of the environment of the enterprise analysis of assets of the organizational process of the enterprise project charter creation expert group creation expert assessment of knowledge on the project scope planning analysis of existing project documentation templates analysis of needs of project participants, formulation of requirements to project results analysis of the essence of expected results of the project analysis of alternative methods of project work execution formation of the project scope description analysis of templates of project work structures analysis of existing approaches to the project work structure creation formation of the list of project works decomposition of elements of the project work structure construction of the project work structure formation of the vocabulary of the project work structure update of project scope description audit of project work structure update of the project scope management plan formation of requests for changes adoption of changes substantiation of the need for making changes to the structure of project work controlling the change in project effectiveness adjustment of project scope, project work structure, project scope management plan, project management plan approval of updated project scope, updated project work structure, updated management plans of the scope of works and project baltic journal of economic studies 123 vol. 4, no. 1, 2018 coded as follows: уз – the name of the process – project scope management; the second digit  – subprocess number (1  – scope planning, 2  – definition of the project scope, 3  – creation of the structure of project work, 4  – confirmation of the project scope, 5  – scope management); the third digit of the code is the serial number of the operation of the corresponding subprocess of the project scope management. the duration of operations is determined by the example of managing the scope of a project of one of the ukrainian pharmaceutical companies. based on the results of planning the sequence and duration of operations for managing the scope of works in the absence of an accumulated knowledge base in the enterprise, a precedence diagram of the investigated process is built, which is shown in fig. 3. thus, the critical path is formed by: уз.1.1→ уз.1.4→ уз.1.6→ уз.1.7→ уз.1.8→ уз.1.10→ уз.2.1→ →уз.2.2→ уз.2.5→ уз.3.3→ уз.3.4→ уз.3.5→ уз.4.1→ уз.4.2→ уз.5.1→ →уз.5.3→ уз.5.6→ уз.5.7→ уз.5.8 according to the enterprise’s forecasts, the duration of the scope management process in the absence of an accumulated knowledge base will be 70 days (that is, about 3.5 months). 4. conclusions according to the results of the research, the following conclusions can be drawn: 1. one of the processes of project management is the project scope management process, which takes into account the planning, definition of the project scope, creation of the structure of project works, confirmation of the scope, and project scope management. 2. in order to improve the management of the scope of projects in the pharmacy, the components of subprocesses, participants, input and output documents are studied, and the project scope management algorithm table 1 characteristics of operations of the project scope management process code name of operation previous operation duration, days уз.1.1 substantiation of the project goal 1 уз.1.2 analysis of factors of the environment of the enterprise уз.1.1 5 уз.1.3 analysis of assets of the organizational process of the enterprise уз.1.1 4 уз.1.4 project charter creation уз.1.1 6 уз.1.5 formation of a preliminary description of the project scope уз.1.2; уз.1.3; уз.1.4 4 уз.1.6 formation of a preliminary project management plan уз.1.2; уз.1.3; уз.1.4 5 уз.1.7 expert group creation уз.1.5; уз.1.6 3 уз.1.8 expert assessment of knowledge on the project scope planning уз.1.7 5 уз.1.9 analysis of existing project documentation templates уз.1.7 2 уз.1.10 formation of a preliminary project scope management plan уз.1.8; уз.1.9 3 уз.2.1 analysis of needs, requirements, and expectations of project participants уз.1.10 3 уз.2.2 formulation of requirements of project participants to its results уз.2.1 1 уз.2.3 analysis of the essence of expected results of the project уз.1.10 2 уз.2.4 analysis of alternative methods of project work execution уз.1.10 2 уз.2.5 formation of the project scope description уз.2.2; уз.2.3; уз.2.4 4 уз.3.1 analysis of templates of project work structures уз.2.5 2 уз.3.2 analysis of existing approaches to the project work structure creation уз.2.5 1 уз.3.3 formation of the list of project works уз.2.5 5 уз.3.4 decomposition of elements of the project work structure уз.3.1; уз.3.2; уз.3.3 4 уз.3.5 construction of the project work structure уз.3.4 3 уз.3.6 formation of the vocabulary of the project work structure уз.3.4 2 уз.3.7 update of project scope description уз.3.4 2 уз.3.8 update of the project scope management plan уз.3.4 2 уз.4.1 audit of project work structure уз.3.5; уз.3.6; уз.3.7; уз.3.8 4 уз.4.2 formation of requests for changes in the scope of project work уз.4.1 2 уз.5.1 substantiation of the need for making changes to the structure of project work уз.4.2 5 уз.5.2 controlling the change in project effectiveness уз.4.2 3 уз.5.3 adoption of changes to the project work structure уз.5.1; уз.5.2 3 уз.5.4 project scope description adjustment уз.5.3 2 уз.5.5 project work structure review уз.5.3 3 уз.5.6 project scope management plan adjustment уз.5.3 5 уз.5.7 project management plan adjustment уз.5.4; уз.5.5; уз.5.6 7 уз.5.8 approval of updated documents (project scope description, project work structure, project scope management plan, project management plan) уз.5.7 1 baltic journal of economic studies 124 vol. 4, no. 1, 2018 is constructed. it is revealed that the key element of the project scope planning is the formation of the structure of project work, the justification of the number of works, and the sequence of their implementation. 3. as a result of the planning of the sequence and duration of operations for managing the scope of works, a precedence diagram of the investigated process is constructed. the developed recommendations regarding the consistency and structure of subprocesses and operations of project scope management will allow the enterprise to significantly save the time of planning the scope of subsequent projects, using the database created in previous periods, statistics on the implementation of the described operations. 1 1 1 0 1 1 уз.1.1 5 6 3 1 7 2 уз.1.2 4 5 4 2 7 2 уз.1.3 6 7 2 0 7 2 уз.1.4 4 11 9 1 12 8 уз.1.5 5 12 8 0 12 8 уз.1.6 3 15 13 0 15 13 уз.1.7 5 20 16 0 20 16 уз.1.8 2 17 19 3 20 16 уз.1.9 уз.1.10 уз.1.9 уз.1.8 3 26 24 0 26 24 уз.2.1 2 25 26 2 27 24 уз.2.3 2 25 26 2 27 24 уз.2.4 1 27 27 0 27 27 уз.2.2 4 31 28 0 31 28 уз.2.5 3 23 21 0 23 21 уз.1.10 2 33 35 3 36 32 уз.3.1 1 32 36 4 36 32 уз.3.2 5 36 32 0 36 32 уз.3.3 уз.3.4 уз.3.3 уз.3.2 4 40 37 0 40 37 уз.3.4 уз.3.1 3 43 41 0 43 41 уз.3.5 2 42 42 1 43 41 уз.3.6 2 42 42 1 43 41 уз.3.7 2 42 42 1 43 41 уз.3.8 4 47 44 0 47 44 уз.4.1 2 49 48 0 49 48 уз.4.2 5 54 50 0 54 50 уз.5.1 3 52 52 2 54 50 уз.5.2 уз.5.3 уз.5.2 уз.5.1 2 59 61 3 62 58 уз.5.4 3 60 60 2 62 58 уз.5.5 5 62 58 0 62 58 уз.5.6 3 57 55 0 57 55 уз.5.3 7 69 63 0 69 63 уз.5.7 1 70 70 0 70 70 уз.5.8 fig. 3. precedence diagram of the project scope management process baltic journal of economic studies 125 vol. 4, no. 1, 2018 references: project management institute (2008). a guide to the project management body of knowledge (pmbok® guide). newtown square, pennsylvania, usa: project management institute. derenskaya y. n. (2012). skladovi protsesu upravlinnya zmistom proektu [components of the project scope management process]. proceedings of the reformuvannya ta rozvytok nauky: suchasni vyklyky (ukraine, kyiv, february 20, 2012), kyiv: tsentr naukovyh publikatsiy, pp. 39-41. iso 21500:2012. (2012). guidance on project management. retrieved from: www.mosaicprojects.com.au/pdf/ iso_21500_ communique_ no1.pdf (accessed 5 june 2014). mazur i. i., shapiro, v. d., ol`derogge n. h., polkovnikov a. v. (2009). upravlenie proektami [project management]. moscow: omega-l. (in russian) moroz s. h., nemchenko a. s. (2017). upravlinnya zmistom robit [project scope management]. kharkiv: nphau. (in ukrainian) petrenko n. o., kustrich l. o., homenyuk m. o. (2015). upravlinnya proektamy [project management]. kyiv: tsentr uchbovoyi literatury. (in ukrainian) polkovnikov a. v., dubovik m. f. (2011). upravlenie proektami [project management]. moscow: eksmo. (in russian) posylkina o. v., derenskaya y. n., kostyuk g. v. (2010). upravlinnya proektamy u farmatsevtychnomu vyrobnytsvi [project management in pharmaceutical industry]. kharkiv: nphau. (in ukrainian) baltic journal of economic studies 101 vol. 3, no. 4, 2017 corresponding author: 1 department of personnel management and labour economics, zaporizhzhia national technical university. e-mail: a.v.karpenko@meta.ua 2 hr manager, udtech. e-mail: basenko.k@udtech.co highly effective corporate culture as an instrument of talents’ at tracting and retaining andrii karpenko1 zaporizhzhia national technical university, ukraine katerina basenko2 hr manager, udtech, ukraine abstract. the purpose of this article is to highlight such concepts as high corporate, description of the motivational complex for building a highly effective culture, consideration of international practice in building a highly effective corporate culture, and report on the changes in corporate culture in the ukrainian it company. methodology. the general scientific methods of cognition of economic phenomena and processes in their continuous development and interrelation are used in the work: logical analysis, methods of scientific abstraction, induction, deduction, optimization, grouping. results. the main research in the field of motivating employees and building a corporate culture is systematized, the analysis of these exercises and methods is carried out, and the data received by scientists are practically confirmed. practical implications. practical application of obtained results is possible both on the scale of ukraine and around the world. building a highly effective corporate culture on the basis of a motivational complex (game, goal, self-realization, psychological and economic pressures and inertia) is extremely effective and fairly simple to apply. value/originality. the results for the main five elements of the motive complex allow companies to test employees, involve them in the formation and development of a highly effective corporate culture. key words: enterprise, personnel, corporate culture, motivational levers, development. jel classification: j81, j53 1. introduction the greatest value of modern enterprises is acknowledged by the personnel because it depends on it on the success of the entire production process. creation and development of a favourable internal environment promote the implementation of the potential of its employees, which directly affects the efficiency of the enterprise. a special place belongs to the formation of the philosophy of the enterprise, the formulation of mission and values, the development of corporate culture. corporate culture has long been recognized in developed countries as a key to the better knowledge of staff, its value orientations, motivational levers to achieve high productivity and manufacturing, competitive product or service. in domestic practice, corporate culture only begins to be seen as a motivating factor and, therefore, absent mechanism of influence on personnel through the development of culture. accordingly, it becomes important to acquaint and further use at the domestic enterprises the significant experience of the development of a corporate culture that is covered in articles and analytical reports of foreign companies. corporate culture is the main element that contributes to meeting the economic and social needs of the company and employee, and also provides the enterprise with the opportunity to adapt quickly to changing conditions. transformation of corporate culture is directly related to the survival of the organization. if the changes are much slower than the overall development of the enterprise, then, most likely, the organization will soon terminate its activities. in the process of the organization development that leads to changes and liquidation of the business, the corporate culture fulfils the role of “integrator”. because of its complexity, on the one hand, it sets the ethics and aesthetics of an organization, the limitations and opportunities that unite its employees; on the other hand – the possibility of implementing the systemforming functions of the organization, its technological preferences and rules and, finally, the perception and attitude to the requirements of the external and internal environment. baltic journal of economic studies 102 vol. 3, no. 4, 2017 in order to ensure the successful implementation of any changes in the company and maximize the value of human capital, it is necessary to purposefully manage the corporate culture. the ability to manage a corporate culture must become a mandatory competence of managers since its proper formation is an essential factor in the organization's success. the presence of this competence becomes necessary, although not sufficient, for quality management. hence the main problem is the need to determine the right, most appropriate corporate culture for the company and, most importantly, to change it in accordance with the identified priorities. many companies, even legendary ones, have difficulties in developing, implementing and strengthening the corporate culture. their leaders, not having a systematic and psychologically sound understanding of the essence of such a culture, rely mainly on intuition and repeat the experience of others. they try to copy apple, southwest airlines, zappos or the ritz-carlton hotel net-work and make sure that the duplicates are inconsistent and they do not fit. reproduced cultures do not prompt properly and, therefore, do not take root: they lack absolute motivation. the main tasks in the management of corporate culture are the allocation and effective regulation of its key characteristics, ensuring the unity between the basic and secondary characteristics, and preventing inter-elemental conflicts. however, corporate culture management is impossible without a deep understanding of what is embedded in the meaning of this concept. let us briefly consider the essence of corporate culture. 2. the theoretical base of corporate culture despite the fact that the beginning of the popularization of the corporate culture occurred in the 1980s, it is possible to trace the earlier prerequisites for its emergence, which have their roots by the 40s of the last century. the theorists of the behavioural school of management even then considered the informal, intangible, interpersonal, and moral aspects of the relationship as more important than formalism, material factors and instrumental control, advocated by the proponents of rationalism. as a consequence, corporate culture was increasingly perceived as a quantitatively measurable entity and became purely qualitative. after gaining the right to exist and as the corporate culture doctrine evolves, the accents are again shifted back to more measurable indicators, such as employee attitudes and conditions in the organization (level of involvement, degree of delegation, subordination, etc.). this approach was the first study of the organizational climate and confidently held from 1960 to the 1970s (denison, 1990). after that, a new interest in corporate culture broke out in the late 70s, which was marked by the emergence of a number of works, which argued that in order to understand the critical but intangible side of corporate life, a thorough study of the human factor is necessary. also, an increased attention received the study of the formation and maintenance of corporate culture, as well as its impact on the effectiveness of the organization. the main feature of the modern approach is that it views corporate culture to a lesser extent as an organically emerging entity and more as an asset that can be managed, and thereby create a competitive advantage. the concept of “corporate culture” still does not have a single generally accepted definition. thus, one of the leading specialists in the field of management e.h. schein (schein, 1992) singled out a number of phenomena that are almost always associated with corporate culture: behavioural aspects in the communication of people: language, customs, and traditions, rituals; collective norms: unspoken standards and values adopted in the organization; official rules: publicly stated principles, which the organization tries to follow; formal philosophy: a variety of ideological and political principles governing the activities of the organization; unspoken rules of the organization; climate: the feeling transmitted to the organization through the external environment and the forms of interaction between employees; established skills: demonstration of certain skills in the performance of the task; the way of thinking: the way of thinking shared by employees of the company, which determines the perception, thoughts, and language of the organization; a common understanding: arises when communicating members of an organization with each other; metaphors and integrated symbols: ideas, feelings, and images, through which the organization itself characterizes. corporate culture implies a certain level of stability, i.e. something that is shared by all employees, is deeply developed and fairly stable. it is the stability of e.h. schein that considers the essence of the corporate culture, which he defined as a set of basic provisions developed as the organization addresses the problems of external adaptation and internal integration, shared by all the participants in the organization, and sufficiently developed to give them as examples of behaviour, ways of thinking and feelings for the solution of the mentioned problems to the new participants of the organization (schein, 1992). deshpande, r., farley, j.u., webster, f.e. defined corporate culture as a set of shared values and beliefs that help employees understand the work of the enterprise and thereby ensure their standards of conduct in the organization (deshpandé, farley & webster, 1993). another researcher (wagner, 1975) viewed the corporate baltic journal of economic studies 103 vol. 3, no. 4, 2017 culture as values, assumptions, and interpretations of company members, as well as a combination of organizational and psychological factors. people in the organization, like in real life, come up with schemes that help them understand what is happening at the moment; how it happened and how it should be. such schemes also form the essence of culture (mcdermott, o’dell, 2001). it is precisely such views and values shared by employees in the scientific literature that are called corporate culture. we consider it possible to define corporate culture in the following way: an adaptive system of relatively stable administrative, economic, social, and cognitivepsychological elements, developed rationally or unconsciously, both formalized and not formalized, shared by all members of the enterprise in order to increase the efficiency of its activities. the adaptability of the system means the ability of corporate culture to transform in the case of significant changes in the external environment for the organization. based on all the above definitions, we can draw the following conclusions: corporate culture should contribute to improving the efficiency of the enterprise; corporate culture is formed either unconsciously, or the process of its formation is initiated by management; corporate culture can and should change over time; the corporate culture must meet the strategic needs of the enterprise. for decades, researchers have argued that the organization’s culture defines its efficiency. tom peters and robert waterman jr. wrote about ideal corporate cultures in their classic book in search of excellence (peters, waterman, 1982, 2010). if you bought the shares of those successful companies, about which the authors told in the first publication of the book (1982), and they were kept for 20 years, your investment portfolio would bring 1300% (compared to the growth of the dow jones index in 800%, and the rating company s & p 500 – in 600%) (trice, beyer, 1993). this study, like a number of others, proves that corporate culture helps to increase the profitability of the company at times. in another study, venerable scholars from harvard business school john cotter and james heskett compared the changes over 11 years in the stock price of shares of companies with highly effective and mediumefficient crops. the value of shares of the first companies increased by 901% compared with 74% in the second. similarly, the income of the first group increased by 682% and net profit by 756% (compared to 166% and 1% respectively, in the second group). whatever grandiose plans the management had, how hard the top managers would not try, the company could not become successful and make a profit for a long time if it did not start to en-gage in a meaningful formation of a corporate culture in a timely manner, which would charge employees for the result. in this article, we would like to highlight the basic requirements that the company’s leaders must follow in order to create the most effective corporate culture. so, here are these rules: to build a highly effective corporate culture, the work of employees must be built on the main six motives: play, purpose, the realization of potential, emotional pressure, economic pressure, and inertia. in this case, the effect of the first three motives (game, goal, and realization of the potential) should be as strong as possible, but the influence of the last three motives (emotional tension, economic pressure, and inertia) should be minimized (fig. 1). the researches of the scientist luc pelletier and his colleagues, as well as the works of hundreds of other the work itself your identity, values and beliefs external forces the six motives of the motive spectrum direct motives play purpose potential indirect motives emotional pressure economic pressure inertia fig. 1. the motive spectrum in its entirety (the circles symbolically represent a person’s mo-tive) baltic journal of economic studies 104 vol. 3, no. 4, 2017 specialists, give grounds for two important conclusions regarding the spectrum of motives. 1. direct motives, as a rule, increase the effectiveness of human activity, while the motives indirectly reduce it. 2. the more directly the motive is associated with a particular activity, the higher its effectiveness. the game is the motive closest to work; therefore, it has the strongest influence on it. the motive of the goal lags a step, becoming the second in terms of impact. the desire for self-realization is two steps away from the first motive: it is the third in efficiency. the study by queens school of business (one of the uk and ireland’s leading business schools) and the gallup organization (american institute of public opinion) show that under-loaded workers have 37% more absenteeism, 49% more accidents and 60% more mistakes and shortcomings. at enterprises with low rates of employee engagement, employees were 18% less productive, the company’s operations were 16% less cost-effective, and employment growth was 37% lower. it is important to note that when working with highly motivated (enthusiastic labour) personnel, 100% more applications for the employment. studies show that stress in the workplace leads to an increase of almost 50% of dismissals on their own (seppala, cameron, 2015), but if it is excessive. that is, destructive stress (very high level) causes overload, destroys the physical and mental health of the staff and is demotivating, accordingly increases the turnover of staff, increases the costs associated with hiring, training, reduces productivity, leads to loss of knowledge. in cases of the presence of constructive stress, on the contrary, a positive effect is manifested, as it contributes to the increase of work capacity, stimulation of creativity and diligence (selye, 1976). 3. highly effective corporate culture in practical use studies of such a huge number of scientists, which contain interesting and effective knowledge, was decided to apply in practice in a small ukrainian it company udtech. prior to our participation in the company’s life, there were no conscious steps to build and manage the corporate culture, the company for a long time was experiencing stable times, and there was no need for the growth and expansion of staff. but, by the end of 2016, business began to grow rapidly and it was decided to start managing the corporate culture of the company in order to improve the efficiency of existing employees and attract the most efficient employees from outside. we will describe the main activities that have been undertaken to create a highly effective corporate culture in a modern small it company. the first motive that was used in the company is the motive of the game. it was decided to use the game both in adapting new personnel and in building a workflow for other employees. it is proposed to begin a consideration of this motive from the adaptation stage. when a new employee arrives on his first working day, he receives a “guide sheet”, which clearly describes the steps that must be taken within 3 months to successfully pass the trial period. such a list should be formed individually for each company but there are some points that will be repeated at all, for example: acquaintance with the team and a tour of the office, studying the rules of work in the company and the job description (by the way, it is very important that the instruction was real and complete corresponded to the tasks that the novice will encounter in the work). individuals in this list will be literature, which will need to be read to understand the corporate culture, the passage of any rituals in the company, specific rules in the company (for example, how the company celebrates a birthday and other holidays). this list should be as interactive as possible (there should be video, possibly logical tasks, links to sources on the internet, etc.) and interesting, as well as constantly updated and supplemented with up-to-date information. as an example, we can give a video that is in the “leaf-guide” of udtech: it is a specially recorded video message from the director of the company with the story of the company: the most complex projects that we managed to accomplish, the most ambitious and interesting clients, the most interesting situations, with which the company faced. in the work with other employees, the motive of the game is used in this way: every 2 months, a survey of managers on the quality of work of employees, during which the leader with the highest ball is calculated. the winner is rewarded with a nice prize (for example, going to a spa salon for girls, or participating in auto-quests, walking on a yacht with friends, etc.). in the course of the work, we decided to refuse bonuses to employees (because in the ukrainian economy, salaries for it professionals are much more than average and financial motivation stops working). instead of a cash reward, the company celebrates the best employees with individual gifts, which motivates much better than the increase in the very high wages. further, we would like to highlight the following 2 motives: the motive of the goal and the realization of its potential. we decided to combine these two motives in this way: for each employee, a professional growth system is prescribed with clear time constraints and skills that the employee must buy during this time. thus, the employee has an incentive for professional development and a clear understanding of exactly what actions need to be taken to advance the career and financial ladder. at the same time, both vertical and horizontal system of employee growth is pre-scribed, because, for example, not all programmers dream of becoming managers, baltic journal of economic studies 105 vol. 3, no. 4, 2017 some simply like to develop in their professional sphere and not try to become a manager. how were motifs with negative colouring (emotional tension, economic pressure, and inertia) minimized? let us start with emotional stress. most often, people experience stress at work because of improper management of employees by the heads of departments or top management. also, it is extremely devastating from the psychological point of view of the employee’s thoughts that he is not appreciated in the workplace and does not notice his achievements. the first problem was corrected by deep work with the heads of departments, as well as with all managers of the company. thus, all employees who are involved in personnel management are able to correctly give feedback on employees, solve conflict situations, and also motivate their teams. the second problem (the feeling that you are not appreciated and do not notice your achievements) was solved by regular encouragements of the best specialists, as well as individual cards of professional development of employees. the next is the motive of economic pressure. since salaries in the company are higher than market wages and there are no penalties or other economic factors that could adversely affect motivation, this motive did not require any practical intervention. the last motive is inertia. to combat this negative motive, the following measures were taken: stimulation of professional growth of specialists, regular speeches of specialists to employees, and outside the company’s walls (at conferences and round tables). under the stimulation of professional growth, we mean the drawing up of a card for the professional development of the employee and ensuring that the employee follows this card. if in a certain professional period the employee decides to stop development, this leads to explanatory conversations, because in the it world, one should never stop selflearning and development in a professional way. if a person does not change his position, he loses his professionalism and the company has to say goodbye to such a specialist. thus, there is a stimulation of specialists, so that inertia does not absorb from and drop out specialists who have fallen into inertia. since the beginning of the conscious formation of the corporate culture, the number of employees in the company has almost doubled, with the majority of hired professionals being high-class programmers who have moved to our company thanks to the company’s good brand as an employer and attractive working conditions and growth opportunities in the company. at the same time, if we talk about retention of talents, only 1 specialist left the company (the employee moved to another city for family reasons). at the moment, the company has set the goal of continuing active growth, consolidating a highly effective corporate culture and attracting even more talent. 4. conclusion corporate culture does not end with the creation of a sense of belonging to the employees of the company, the desire to participate and to have weight in the adoption of important for the enterprise solutions. after creating the atmosphere of unity and the achievement of collectivism, corporate culture begins to develop an innovative component in itself. that is innovative culture is the higher (next) stage of corporate development culture, which provides activation of innovation, creative activity of employees, an increase of content and satisfaction with work, creates comfortable and cosy conditions at the enterprise. so to more fully reveal the potential of employees and more effectively use their ability needs to consider a large group of factors when planning development of corporate culture, the formation of its innovative level. corporate culture is one of the most effective factors. therefore, it is necessary to manage the corporate culture, and accordingly, include motivational and organizational mechanisms that will allow you to represent the company in a positive way before workers and motivate them for development. creating an effective system of values will facilitate the efficient use of available re-sources, and directly to staff – to perform their tasks faster and more efficiently. that is, the use of the practices of world companies by domestic enterprises is an essential basis for the formation and development of not only corporate culture but also a new quality of market activity. forming an effective corporate culture is a long and painstaking process; the culture is unique in every company and is built on the individual specialties of each individual employee, so you cannot just repeat the successful culture of another company. in any case, it is necessary to adjust and adjust to a particular team. given the successfully formed corporate culture, business begins to save money to attract and retain talents, to maintain the brand, and organize motivational activities in the company, be-cause a highly effective corporate culture motivates the staff, attracts the best specialists and abductively influences the brand of the company as an employer. baltic journal of economic studies 106 vol. 3, no. 4, 2017 references: denison, d.r . (1990). corporate culture and organizational effectiveness. new york: john wiley & sons, 267 p. schein, e.h. (1992). organizational culture and leadership. jossey-bass publishers, san francisco, ca, 418 p. deshpandé, r ., farley, j.u. and webster, f.e. (1993). corporate culture, customer orientation, and innovativeness in japanese firms: a quadrad analysis, journal of marketing, 57, pp. 22-27. wagner, r . (1975). the invention of culture, prentice-hall, englewood cliffs, 208 p. mcdermott, r ., o'dell, c. (2001) overcoming cultural barriers to sharing knowledge. journal of knowledge management, 5 (1), pp.76-85. piters, t. and waterman-ml., r . (2010). v poiskakh sovershenstva: uroki samyih uspeshnyih kompaniy ameriki [in search of excellence: lessons from america’s best run companies], moskva: alpina pablisher, 528 p. peters t.j. and waterman r .h. (1982). in search of excellence: lessons from american’s bestrun companies, new york: harpercollins, 360 p. trice, h. and beyer, j. (1993). the cutures of work organizations. englewood cliffs, new jersey: prentice hall, 510 p. seppala e. and cameron k. (2015). proof that positive work cultures are more productive. harvard business review, 12. – https://hbr.org/2015/12/proof-that-positive-work-cultures-are-more-productive selye, s.h. (1976). the stress of life, new york: mcgraw-hill, 320 p. андрей карпенко, екатерина басенко высокоэффективная корпоративная культура как инструмент привлечения и удержания талантов аннотация. цель этой статьи – выделить такие понятия, как высокая корпоративная куль-тура, описание мотивационного комплекса для построения высокоэффективной культуры, рассмотрение международной практики построения высокоэффективной корпоративной культуры и отчет об изменениях корпоративной культуры в украинской ит-компании. методика. в работе используются общие научные методы познания экономических явлений и процессов в их непрерывном развитии и взаимосвязи: логический анализ, методы научной абстракции, индукции, дедукции, оптимизации, группировки. результаты. проведена систематизация основных исследований в области мотивации сотрудников и построения корпоративной культуры, проведен анализ этих инструментов и методов, а полученные учеными данные практически подтверждены. практическое значение. практическое применение полученных результатов возможно как в масштабах украины, так и во всем мире. создание высокоэффективной корпоративной культуры на основе мотивационного комплекса (игра, цель, самореализация, психологическое и экономическое давление и инерция) чрезвычайно эффективно и довольно просто в применении. значение/оригинальность. полученные результаты по основным пяти элементам мотивационного комплекса позволяют тестировать сотрудников, вовлекать их в формирование и развитие высокоэффективной корпоративной культуры. baltic journal of economic studies 1 vol. 4, no. 1, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-1-1-7 the innovative activity of enterprises as a prerequisite for sustainable economic development olena аrefieva1, samira piletska2 national aviation university, ukraine serchii аrefiev3 kyiv national university of technology and design, ukraine abstract. in terms of exacerbation of crisis processes in the economy, hindering trends in upgrading technologies are observed, which leads to a certain lag from modern needs for the reproduction of productive forces. in order to solve this problem, it is necessary to consider the innovative activity as a factor and a consequence of hierarchical changes in related levels and fields that allows a researcher to deepen into the selected area and develop it in more detail from the chosen position. the presence of innovative activity leads to technological shifts that are carried out by using technologies of another technological mode. in such conditions, the innovative activity of enterprises, which serves a basis for sustainable development of the economy, is an important component and prerequisite for sustainable economic development. the purpose of the article is to analyse the nature of the innovative activity of enterprises, study issues of providing sustainable economic development by developing a mechanism of innovative activity of an enterprise, taking into account its innovative space. to achieve this purpose, there are the following tasks: to analyse trends in innovative processes and innovative activity of enterprises by corresponding directions; substantiate factors of innovative activity by levels of the economy and determine their effect by components; propose a mechanism of innovative activity by levels of the economy in order to stimulate enterprises to introduce innovations for ensuring increased capacity of activities. methodology. the methodological basis of the article is methods of scientific cognition, which allow revealing the nature of the innovative activity of enterprises, the main laws of innovative development of the economy, priority ways to ensure their financial firmness. in particular, the following methods are used: analysis and synthesis – when studying the innovative activity of enterprises in 2001–2016; systematization – for revealing factors hindering the innovative activity of enterprises; scientific abstraction  – in order to form a theoretical generalization and conclusions. results. there are substantiated factors of influence on the innovative activity of all economic levels per unit of influence that is proposed to be considered a business process, which stipulate for the operation of the effective mechanism of business process management that contributes to the intensification of the enterprises’ innovative activity. the proposed mechanism of innovative activity by levels of the economy allows forming it aimed at creating an active innovation space, which establishes feedback with the innovative climate, which creates information capabilities for its adaptation to changing conditions of the environment in the aspect of development and introduction of modern innovative equipment. further research directions are aimed at deepening the interconnection of innovative climate in ukraine and innovative space and its characteristics, which is an integral component of intensification of innovative activity. practical implications. practical implications are related to the possibility of using the proposed mechanism of the increase in innovative activity of enterprises, providing the efficiency of managerial influences when introducing modern technology, and improving the production quality. value/ originality. originality lies in the substantiation of relevant factors that influence and determine directions of innovative activity of enterprises, which allow combining the study of active business processes and financial planning and creating information support for compliance. key words: sustainable development, mechanism, innovative activity, factors, compliance, levels of economy, business process. jel classification: o31, f63 corresponding author: 1 department of air transport economics, national aviation university. e-mail: lena-2009-19@ukr.net 2 department of finance, accounting and auditing, national aviation university. e-mail: 0508486185@ukr.net 3 department of entrepreneurship and business, kyiv national university of technology and design. e-mail: arefievso@ukr.net baltic journal of economic studies 2 vol. 4, no. 1, 2018 1. introduction in terms of exacerbation of crisis processes in the economy, hindering trends in upgrading technologies are observed, which leads to a certain lag from modern needs for the reproduction of productive forces. there is the development of innovative processes aimed at activisation of knowledge use for the increase in social production based on innovative potential and the maximum satisfaction of consumer needs in innovative products. in order to solve this problem, it is necessary to consider innovative activity as a factor and a consequence of hierarchical changes in related levels (mega-, macro-, mesa-, and micro-levels) and fields (as a source of orders for qualitatively new raw and other materials, semi-finished products, services) that allows a researcher to deepen into the selected area and develop it in more detail from the chosen position. the presence of innovative activity leads to technological shifts that are carried out by using technologies of another technological mode. in such conditions, the innovative activity of enterprises, which serves a basic prerequisite for the formation and a basis for sustainable development of the economy, is an important component of sustainable economic development. 2. literature review modern fundamentals of innovative development were studied in works of such domestic scholars as: bielikova (2014), vakhovych (2012), melnyk & shkarupa (2011), yurkevych (2010) and others. growing interest of scholars to the issue of management of innovative processes at enterprises is determined by the improving role of innovations in their activities, namely, in scientific works of the following authors: boichuk, (2016); varfolomiieva, (2009); voloshchuk, (2015); demydenko, (2015); doroshuk, (2010); illiashenko, (2008); shypulina, illiashenko, pererva & kosenko (2012); polinkevych, (2011); sotnyk, & shevtsov, (2013); uvarova, hnylobokov & boiakova, (2010); yurkevych, (2010); yastremska & dourtmes, (2016). along with that, a large number of works in the field of innovative activity of enterprises require its further disclosing as a prerequisite for sustainable development of the economy and remain unsolved from the viewpoint of system multilevel approach and based on the engagement of knowledge economy. this is what will contribute to the formation of changes in the functional imperative of management at all levels during the transition to innovative development model. 3. goals and tasks of the article the purpose of the article is to analyse the nature of the innovative activity of enterprises, study issues of providing sustainable development of the economy by developing a mechanism of innovative activity of an enterprise, taking into account its innovative space. to achieve this purpose, there are the following tasks: to analyse trends in innovative processes and innovative activity of enterprises by corresponding directions; substantiate factors of innovative activity by levels of the economy and determine their effect by components; propose a mechanism of innovative activity by levels of the economy in order to stimulate enterprises to introduce innovations for ensuring increased capacity of activities. 4. the main material of the research in the era of knowledge economy, innovations become a driving force of development; they, on the one hand, are a result of innovative activity and, on the other hand, are a component of formation of the enterprise’s strategy, changing market condition and a basic component of development, which is evidenced by characteristics of corresponding technological modes. by using a process approach as an essential characteristic and technology for conducting the innovative activity, enterprises will be able to achieve the necessary innovative activity. it is innovatively active economic entities that should be the basis for qualitative changes in industries that are able to introduce innovative technology and products for the productive and personal consumption and to develop innovative potential. it should be noted that innovative activity is not widespread yet in ukraine as the share of enterprises engaged in innovations in 2016 was 18.9%, i.e. almost 2-2.5 times less compared to developed countries. however, total research-and-development spending and costs of modern equipment purchasing more precisely characterise innovative processes in the national economy; so, in 2014, this sum amounted to 7695.9 million hryvnias (at dollar’s market value of 12-13 hryvnias), and in 2016 – 23229.5 million hryvnias (at dollar’s market value of 26-27 hryvnias) (table 1), which testifies about negative tendencies in the innovation sphere and hindering development on qualitatively new basis of technical and technological support. the innovative activity of an enterprise (economic entity) requires additional consideration and interpretation from the position of system multilevel approach, which will allow intellectualizing its potential in whole, and competencies, in particular, since it is based on knowledge and awareness of this activity’s participant. as a result, an innovative capacity of the enterprise is created, which ensures implementation of changes in production technologies and labour organization, managerial innovations that make an influence on the selection of organizational structure model and its adaptation, its functionality and corporate culture, capacity of workers to think outside of the box and produce ideas. baltic journal of economic studies 3 vol. 4, no. 1, 2018 so far as an innovative activity not only changes qualitative characteristics of the economy, industry, enterprise but also creates new qualities of consumption that are based on needs of the people who conduct this activity. this is what enables creating a multiplicative effect both in production and non-production sphere by requiring using the latest technology, creating preconditions for the innovativeness of management at all levels, and basing on the prediction of transformation changes. the increase of disproportions in the economy is explained, first of all, by different vector directions of regulatory influences on the innovative activity of enterprises, which is a prerequisite for sustainable economic development (fig. 1). this is especially reflected in the system-forming industries, which are construction, engineering, transport, agro-industrial complex, and some others. therefore, it should be noted that the blocking of any element (at levels) of the economy as a socio-economic system leads to the destruction of links between the elements over the discrepancy of the pace of innovation and investment activity of more than 30%, violates the adaptability of resources use and the organization of functional systems. moreover, a set of factors that hinder the innovative activity of enterprises can be distinguished: ‒ the high cost of research and development work, as well as their duration, limit the number of business entities capable of carrying them out and releasing for this purpose funds from circulation sufficient to ensure the continuity of such works and minimizing financial threats to business; ‒ limited state support and budget funding for the development and implementation of innovative products. thus, on average for 2005–2013, the share of budget financing of innovations in total expenditures in ukraine was within the range of 1.0-1.6% (ilnytskahykavchuk, 2015), and in 2016 – 0.8%; ‒ the imperfection of the implementation of the stimulating function of taxation of innovative products over the lack of appropriate privileges and underdevelopment of mechanisms for accelerated depreciation when updating fixed assets for this; ‒ the lack of diversification of banking lending because of high-interest rates of venture projects, due to their duration and high risks of non-repayment of funds due to non-predictability of results; ‒ high depreciation of the active part of the capital of enterprises, which does not allow to find the technical and technological basis for their testing and introduction into the production process on qualitatively new grounds, as well as the need to train the personnel of table 1 innovative activity, million uah year share of enterprises engaged in innovations, % total costs including by directions research and development1 including acquisition of other external knowledge2 preparation of production for introducing innovations3 acquisition of machinery, equipment, and software4 other costsinternal r&d external r&d 2001 16,5 1979,4 171,4 х х 125,0 183,8 1249,4 249,8 2002 18,0 3018,3 270,1 х х 149,7 325,2 1865,6 407,7 2003 15,1 3059,8 312,9 х х 95,9 527,3 1873,7 250,0 2004 13,7 4534,6 445,3 х х 143,5 808,5 2717,5 419,8 2005 11,9 5751,6 612,3 х х 243,4 991,7 3149,6 754,6 2006 11,2 6160,0 992,9 х х 159,5 954,7 3489,2 563,7 2007 14,2 10821,0 986,4 793,5 192,9 328,4 х 7441,3 2064,9 2008 13,0 11994,2 1243,6 958,8 284,8 421,8 х 7664,8 2664,0 2009 12,8 7949,9 846,7 633,3 213,4 115,9 х 4974,7 2012,6 2010 13,8 8045,5 996,4 818,5 177,9 141,6 х 5051,7 1855,8 2011 16,2 14333,9 1079,9 833,3 246,6 324,7 х 10489,1 2440,2 2012 17,4 11480,6 1196,3 965,2 231,1 47,0 х 8051,8 2185,5 2013 16,8 9562,6 1638,5 1312,1 326,4 87,0 x 5546,3 2290,9 20145 16,1 7695,9 1754,6 1221,5 533,1 47,2 x 5115,3 778,8 20155 17,36 13813,7 2039,5 1834,1 205,4 84,9 x 11141,3 548,0 20165,7 18,9 23229,5 2457,8 2063,8 394,0 64,2 x 19829,0 878,4 1 sum of internal and external r&d since 2007; 2 acquisition of new technology until 2007; 3 since 2007 the indicator is included with other costs; 4 till 2007 acquisition of machinery and equipment, related to the introduction of innovations; 5 data is provided without including temporarily occupied territory of the autonomous republic of crimea, sevastopol, and a part of anti-terrorist operation zone; 6 in relation to changes in organization and conduct of state statistical survey on innovative activity of an industrial enterprise, a direct comparison of data for 2015 with analogous data of previous years is incorrect; 7 data is provided according to results of the state statistical survey on form № інн “investigation of innovative activity of enterprises for 2014–2016” (by international methodology). source: (official site of the state statistics service of ukraine) baltic journal of economic studies 4 vol. 4, no. 1, 2018 the appropriate qualification and capable of perceiving innovations; ‒ impossibility to reliably determine the demand for innovative products, which is characterized by flexibility, high costs of researching the market, informing and stimulating demand, taking into account psychological peculiarities, based on changing consumer requirements. the pace of innovation is slowed down by the lack of experience in managing innovation at all levels, based on internal motivation for action through entrepreneurial activity, which is based on a creative initiative. therefore, in order to stimulate innovation activity of an enterprise, it is necessary to select the unit of influence, which should be considered business process and structured. so, n.ya. boichuk believes that the main stage in the enterprise organization is the classification of business processes. they are divided into four categories. the first category is the main business processes, which are focused on production. they provide acquisition of income. the second category is providing business processes. they provide all processes that take place in the enterprise with resources and services. the third category is managerial business processes. they cover business management functions. the fourth category is business development processes. they are business processes of innovation (boichuk, 2016). such an approach to the division of business processes in the enterprise activity is based on the principles of functional and cost analysis as a way to save costs in production and consumption of the product, within which the gradation of the processes itself as a function is made, and the cost of its implementation is determined, which may become the basis to form a mechanism for managing business processes for the development of innovation activity, which meets the requirements of the current stage of development of the economy as a whole, and industry, in particular. it should be noted that (chekulyna, 2011) proposed the following main stages of the business process management mechanism: fig. 1. factors of innovative activity by levels of the economy (own development) political socio-economic natural and geographical taxation policy innovative policy regulatory and legal organizational personnel levels of the economy the innovative activity of the enterprise organization of innovative process favourableness to innovation innovative capacity demand/supply of innovation adaptation, restructurisation megalevel macrolevel mesolevel microlevel factors of innovative activity baltic journal of economic studies 5 vol. 4, no. 1, 2018 ‒ determining the significance of the influence of management levers on business processes; ‒ identification of priority indicators for improving the effectiveness of the business process; ‒ definition of measures to improve business processes at the enterprise by the chosen indicator; ‒ analysis of the influence of innovation activity on the general activity of the enterprise; ‒ assessment of the efficiency of the operation of the enterprise management mechanism (chekulyna, 2011), which should be carried out in accordance with its potential regarding the improvement of methods and technology, as well as the modern innovation and investment trends of the economy and industry’s development; ‒ development of compliance of the qualitative and quantitative activity of the enterprise from the standpoint of efficient use of resources and reserves; control elements embedded in business processes to maintain their compliance with external and internal standards; ‒ management of the tax system at certain levels of the economy in order to optimize cash flows, which stimulates innovation activity and optimizes the tax burden of the enterprise and creates preconditions for applying the methods and elements of compliance; fig. 2. the mechanism of innovation activity by levels of the economy (own development) country region branch innovative climate logistic infrastructure financial infrastructure resources opportunities substantiation of innovative capacity of the enterprise suppliers consumers compliance formation of innovative space formation of plan programs of innovative resources of the enterprise implementation of innovative development plan determination of innovatively active business processes financial planning baltic journal of economic studies 6 vol. 4, no. 1, 2018 ‒ formation of stimulating influences of innovative activity of employees, which provides technological development and use of the updated potential of the enterprise due to the formation of innovation space. it should be noted that the profitability of the enterprise, provided by the continuous implementation of organizational and technological innovations, depends on the synchronization of stages of the lifecycle of various products, when the excess of funds from profitable products or services provides the costs for the development of innovation, the maturity of which compensates for the reduction of profitability of already developed and “worked” products or services. this will smooth out “big waves” of financial results, caused by cyclical fluctuations of cash flows from the sale of a product or service at different stages of its lifecycle (ilnytska-hykavchuk, 2015). since innovative development should be aimed at ensuring the competitiveness of the enterprise-producer both in the domestic and foreign markets through the creation of greater consumer value for the consumer, which is the main precondition for its competitive advantage. in our opinion, the establishment and strengthening of this cost-and-value production direction form the essence of transformations of innovative enterprises that are capable of creating their higher added value. to activate and intensify components of the innovation process, an appropriate mechanism (fig. 2), which is based on a combination of the innovative climate at all levels of the national economy as a prerequisite for the use of logistics and financial infrastructure, is proposed. a separate stage includes the justification of the innovative potential of the enterprise, which allows forming planned programs of its innovative reserves and is based on the study of the market of consumers, suppliers, and the identification of innovative business processes, which in the vast majority are conditioned by the quality of financial planning. the distribution of financial costs for the production and sale of product or service innovations should be consistent with the target priorities for the stage of the life cycle of a particular innovation and ensured by the methods of compliance. in relation to this, it can be argued about the alternation not only of the stages of the product lifecycle but also the stages of functioning of the organizational mechanism for the implementation of innovations: strict regulation of activities aimed at compliance with product (service) standards at initial cost stages and encouraging cooperation between management and subordinates to provide internal initiatives to improve production activities at the stages of increasing the profitability of existing services. 5. conclusions and recommendations for the further research there are substantiated factors of influence on the innovative activity of all economic levels per unit of influence that is proposed to be considered a business process, which stipulate for the operation of the effective mechanism of business process management that contributes to the intensification of the enterprises’ innovative activity. the proposed mechanism of innovative activity by levels of the economy allows forming it aimed at creating an active innovation space, which establishes feedback with the innovative climate, which creates information capabilities for its adaptation to changing conditions of the environment in the aspect of development and introduction of modern innovative equipment. further research directions are aimed at deepening the interconnection of innovative climate in ukraine and innovative space and its characteristics, which is an integral component of intensification of innovative activity. references: bielikova, n.v., omarov, sh.a., & kriachko, ie.m. 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(2016) innovatsiina diialnist promyslovykh pidpryiemstv: rezultaty otsiniuvannia [innovative activity of industrial enterprises: results of evaluation]. biznes inform, no. 4, pp. 161-168. baltic journal of economic studies 46 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 international humanitarian university, ukraine (corresponding author) e-mail: kandidatnauk2013@gmail.com orcid: https://orcid.org/0000-0002-2138-4862 doi: https://doi.org/10.30525/2256-0742/2023-9-1-46-52 universalising the legal regulation of naval forces ievgen borysov1 abstract. it is impossible to study the development of the legal regulation of naval forces without analysing the supranational legal component. although the law of the sea, as defined above, has traditionally had an international private and public legal dimension, the relevant sources have for a long time been primarily customary and concerned primarily the commercial exploitation of the sea and merchant shipping. all references to the maritime power of states and their rights at sea in this dimension did not concern aspects of the specificities of military activity at sea. in fact, both normative references and doctrinal reflections on international, supranational standards of naval activity only began to emerge in the nineteenth century. the purpose of the article is to define the legal acts for the administrative regulation of the naval forces and to formulate approaches to universalising their definition based on the ontology of holistic approaches to legal regulation and doctrine making. methodology. this study applies the methodology of interdisciplinary comparison, methods of content analysis and integration of heterogeneous features into the system, which allowed to obtain a new scientific approach, namely to characterise the legal regulation of naval forces in the context of its universalisation and to consider the formation of maritime policy in the future, including the national one. the main impetus for the development of holistic approaches to this type of activity should be seen in the adoption of bilateral and collective intergovernmental agreements on maritime issues, in particular. in particular, it is possible to refer to the documents that initiated the standardisation of the treatment of neutral and enemy ships at sea, which can be traced back to 1780. in addition, military and legal practice, especially in the context of the black sea straits regime, has repeatedly raised the issue of determining the criteria for the affiliation of a particular ship to the navy. in the course of the nineteenth century, a significant number of bilateral treaties regulating aspects of naval cooperation were developed, taking into account the practice of national unilateral acts and decisions of courts martial and tribunals, and then became the subject of research by relevant scholars who were closely involved in naval practice and, at the same time, in the formation of norms. results. the author concludes that at the supranational level, the issues of regulating the activities of naval forces have been traced in the treaty dimension since the late eighteenth century, primarily in the concepts of sovereignty, prohibition of privateering and prosecution of piracy, and restrictions on the activities of naval forces in certain areas. the unregulated nature of a number of aspects of supranational naval activities, notably the right of entry to foreign ports, the procedure for stopping and inspecting foreign merchant ships at sea, and the limits of the powers of foreign coastal authorities over a warship, has led to an active search for appropriate acceptable international customs and attempts to substantiate them with legal doctrine based on national statutes and the established practice of maritime states. the development of the relevant legislation is still in progress and is far from being completed, given the challenges of ukrainian naval doctrine and the level of implementation and incorporation of international and foreign experience. in this regard, the naval policy in its internal and external dimensions is of particular importance, which is regulated both by national acts of an administrative and legal nature and by international legal sources of various origins. key words: blockade, warship, naval policy, naval customs, naval forces, privateering, neutral vessel, vessel flag, embargo, black sea straits. jel classification: f42, f63, k10, k33, k49 baltic journal of economic studies 47 vol. 9 no. 1, 2023 1. introduction it is impossible to study the development of the legal regulation of naval forces without analysing the supranational legal component. although maritime law, as defined above, has traditionally had an international private and public legal dimension, the relevant sources have for a long time been primarily customary and concerned primarily the commercial exploitation of the sea and merchant shipping. all references to the maritime power of states and their rights at sea in this dimension did not concern aspects of the specificities of military activity at sea. in fact, both normative references and doctrinal reflections on international, supranational standards of naval activity only began to emerge in the nineteenth century. 2. ontology of formation of holistic approaches to the legal regulation of the navy the main impetus for the development of holistic approaches to this type of activity should be seen in the adoption of bilateral and collective intergovernmental agreements on maritime issues, in particular. in particular, the declaration of armed sovereignty of 1780, signed by austria, denmark, the netherlands, portugal, prussia, the russian empire, sweden and others, should be mentioned. this document laid down the principles of the inviolability of neutral trade and called for the definition of a port blockaded during hostilities, "into which a manifest danger insists on being entered by ships stationed in its vicinity by order of the attacking power". the declaration provided for the application of its rules in national legal proceedings and at the same time required the belligerent powers to "give similar instructions to their admirals and commanding officers, in accordance with the principles above stated, derived from the primitive code of nations, and so often recognised in conventions". although this 1780 declaration remained a historical act, similar principles were adopted at the paris conference in april 1856. the declaration on the principles of the international maritime law stated that "privateering is hereby forever abolished; the neutral flag covers enemy cargoes, except military contraband; neutral cargoes, except military contraband, are not subject to capture under the enemy 's flag; a blockade, to be binding, must be effective, that is, supported by sufficient force to effectively prevent access to the enemy 's coast". (declaration respecting maritime law) it is noteworthy that the declaration of 1856, which was signed by more than 50 states and has lost none of its force since then, justifies the adoption of these provisions by stating that "the maritime law in time of war has long been the subject of sad disputes" and that "the uncertainty of rights and duties in this matter is the cause of disagreements between neutral and belligerent states, which may give rise to serious difficulties and even to clashes". (declaration respecting maritime law) at the same time, a significant number of bilateral treaties regulating aspects of naval cooperation were adopted in the nineteenth century; these, together with numerous unilateral national acts and decisions of courts and tribunals, became the subject of research by relevant experts, such as the german scholar and practitioner ferdinand perels, who, as a military officer and then legal adviser to the imperial admiralty, published the monograph "modern international maritime law". (perels, 2015) f. perels referred to the issues of supranational regulation in the naval sphere primarily as aspects of the rights of warships, naval ceremonies, provisions on the extradition of deserters, embargoes and angary. (perels, 2015) theodore ortolan had a similar approach to the subject of regulation, and in his monograph "reges internationals et diplomatie de la mer" he defined the aspects of interrogation and inspection of merchant ships by the military, issues of international jurisdiction over ships, including the aspects of fugitives and deserters, the legality of seizure of a ship, its differences from privateering and corsairing, aspects of maritime ceremonial, blockade, the right of shelter, angary, insult to the flag, violation of neutrality, mutiny on board ship and the status of parliamentarians. by embargo, t. ortolan actually understood sequestration, i.e., the seizure of foreign merchant ships in the port that did not comply with the reasonable orders of the military authorities, and by angary he understood the forced but paid use of foreign merchant ships detained in the port for sea transport. (ortolan, 1864; perels, 2015) at the same time, ortolan and perels' work explored a fundamental issue that will continue to accompany the development of supranational maritime standards, namely the difference between a naval vessel and a civilian vessel. t. ortolan believed that the proof of the nationality and character of a warship was "the flag at the stern and the pennant at the top of the mast, the testimony of its commander, if necessary given in good faith, and the orders received by the commander from the sovereign". as f. perels added, "the flag and the pennant are visible signs; but in some cases they are trusted only when they are supported by a cannon shot", and as for the documents of a warship, "no foreign power has the right to demand their submission". (perels, 2015) baltic journal of economic studies 48 vol. 9 no. 1, 2023 f. perels gives the example of the dispute between denmark and spain in 1782 over the seizure of a danish corvette suspected of displaying a military flag. the danish government argued that the only sign of a warship was its military flag, and spain was reluctant to accept this principle, turning to the mediation of poland and the netherlands, which promised to respect their decision. according to these countries, the main characteristic of a warship should be the presence of a commander belonging to the navy, which is "an undoubted custom for all nations". (perels, 2015) in general, the question of the military or civilian nature of a ship was of great practical importance, since a number of international treaties of the time established different regimes for them, particularly with regard to the use of certain international straits. this was exemplified by the treaty of london of 13 july 1841, which closed the bosphorus and dardanelles to the warships of all non-black sea countries. (perels, 2015) later, the relevant issues were regulated by the treaty of paris of 30 march 1856, adopted at the paris conference. this document prohibited access to the black sea for warships of all states, with certain exceptions for the black sea states in the form of the maintenance of "a limited number of small warships for certain coastal needs, namely 6 steamers, each not exceeding 50 metres in length and with a displacement not exceeding 800 tonnes, and 4 light steamers or sailing vessels with a maximum displacement of 200 tonnes each", as well as the right for these states to maintain "two light military vessels each to ensure the maintenance of order and to supervise the strict application of the rules of navigation on the danube". 3. formation of the doctrine of international and national law one of the clauses of the treaty of paris was the prohibition of the establishment and maintenance of naval arsenals on the black sea coast. (perels, 2015) in addition to the definition of a warship, the doctrine of international maritime law of the nineteenth century sought, in the absence of relevant treaty provisions, to establish and explain aspects of the customary regulation of the right of warships to compel merchant ships of all countries to fly their flag in times of peace (the so-called "enquête de pavillon"), as well as the right to search for and detect ships engaged in piracy. (perels, 2015) at the same time, in the absence of a clearly defined procedure in the treaties, scholars attributed the approval of final decisions to the discretion of the warship commander (captain). for example, t. ortolan pointed out that "it is very likely that the ship with which we want to start negotiations will stubbornly refuse to fly its national flag. the commander must always remember that the responsibility for what has happened lies entirely with him". this researcher added that "if the behaviour of the captain of a warship is not of the greatest prudence, he may create considerable difficulties for his government. however, the question under consideration is so important that the commander of a warship, if he feels that he has some ground under him, should not fear responsibility ". (ortolan, 1864; perels, 2015) in addition, the legal doctrine of the time sought to generalise the customs regarding the practical possibilities of a warship entering a port and the rights of the coastal state to limit these possibilities and impose additional conditions. these concerned the length of stay, the number of ships in a port, the obligation to give prior notice of a ship's call, the obligation to provide the coastal authorities with information on the ship, namely its flag, name, armament, number of crew, position of the master, the purpose of the call and the approximate length of stay. they also studied and summarised national regulatory practices regarding the procedure for providing repair services, bunkering, exemption from customs and other similar forms of control and payments. (perels, 2015) particular attention was paid to the situation of a warship in a foreign port, including aspects of firing, boat drills and the disembarkation of crew members ashore, particularly with regard to their weapons. in this respect, f. perels cited a special provision of the bilateral agreement between prussia and portugal of 1864, according to which sailors and marines of one party could go ashore in the port of the other party without weapons, exceptions being made only for the need of protection or for solemn occasions. (perels, 2015) at the same time, f. perels quotes the relevant norms on the dues for the passage of warships through the international suez canal, which amounted to 10 francs per registered ton of the ship, regardless of other parameters, while prohibiting the collection of other, additional dues. the same norms, the author adds, applied to the conditions of passage through the canal for merchant ships chartered to transport troops, but these ships were not identified with military ones. (perels, 2015) the researcher also analyses a number of bilateral agreements between germany at the end of the nineteenth century on the procedure for the stay of german warships in the ports of the respective states and territories. in particular, he draws attention to the treaty of friendship and navigation between japan and the north german union of 20 february baltic journal of economic studies 49 vol. 9 no. 1, 2023 1869, which included a list of japanese ports open to german ships, the conditions for procuring provisions for warships, customs inspection privileges, and rules for loading and unloading. f. perels also points to the treaty of friendship between germany and the king of tonga, dated 1 november 1876, which states that "the warships of both high contracting parties shall have the reciprocal right to enter all waters and harbours belonging to the other party, as well as to anchor there, to stay for a longer or shorter time, to take on all necessary supplies, to repair, subject to full compliance with local laws and regulations". in order to implement these arrangements, the agreement provided that the tongan authorities would make land available to germany for the establishment of a coal depot, but "without prejudice to the supreme rights of the king of tonga in these properties". (perels, 2015) the researcher cites the german treaty of friendship with the kingdom of samoa of 24 january 1879, under article 5 of which german warships were granted "the right to enter freely into the port of saluafata, to anchor there, to remain for a longer or shorter time, to take on necessary supplies and to repair; furthermore, the german government is granted the right to make all arrangements or give all orders for the benefit of german warships and their crews". to implement these agreements, the german government was given "the right to fly its flag on the shore over such buildings as it may desire, provided, however, that by this act the supreme rights of the kingdom of samoa shall not in any way be infringed", but the latter government was not to "grant to other nations, either in the port itself or on its shores, rights equal to those of the germans". in contrast to these obviously unequal agreements, which determined the specifics of the regulation of germany 's naval forces abroad, the 1879 agreement between germany and the kingdom of hawaii, cited by f. perels, only provided for "free entry of military vessels into all ports, rivers or other places open to free foreign trade, with the right to count on the assistance of the local authorities in case of repairs, the need to procure supplies and provisions". (perels, 2015) however, while on land the status and treatment of foreign warships naturally lay in the obvious interplay of the two legal systems, since even unequal treaties and even more so customary law did not grant such subjects complete immunity from the coastal authorities, the most heated doctrinal debates, in the absence of treaty regulation, concerned the jurisdiction of the coastal state over a foreign warship in its port or waters. at the same time, the positions of the doctrine were different, in particular, the italian researcher of the early nineteenth century giovanni lampredi pointed out that only a representative of these waters can have authority in national waters, and therefore any legal power belongs to him alone. (lampredi, 2022) the portuguese international lawyer of the same period, sylvester pinheiro ferreira, noting that issues of discipline and service relations undoubtedly remain under the jurisdiction of a warship due to "its meaning and nature", believed that in other matters both the ship and its crew should be considered to be under the jurisdiction of the port. (pinheiro ferreira, 1863) f. perels, commenting on these theses, gives a system of examples of categorical disagreement with this approach on the part of some states at the time, including great britain. he cites an example of english warships not handing over to the coastal authorities slaves who had managed to escape to english warships during their stay in states where, unlike great britain, the principle of slavery was recognised as legal. (perels, 2015) in this respect, the nineteenth-century english internationalist robert fillimore was quite categorical, stating that "long practice and custom make it possible to define every warship as a part of the country to which it belongs, and therefore to place such a ship outside foreign jurisdiction". (phillimore, 1854) at the same time, the researcher notes that it is no longer known "whether this privilege is based on the strict principles of natural international law or whether it arose from the need for courtesy, which gradually became law". but in any case, r . fillimore inferred from this situation the international custom according to which, with regard to a foreign warship, "any state which has not formally notified the non-recognition or denial of this custom of the civilised world, is deemed by its silence to be bound to grant this privilege to foreign warships in its ports". the same privileges are enjoyed by all the boats and guns of a warship, the author adds. (phillimore, 1854) the italian international lawyer of the nineteenth century, raphael schiattarella, in his work "the law of neutrality in war at sea", stated that the respective unlimited jurisdiction of warships is their exclusive property, based on "the respect that different independent states should show to each other", and therefore the author identified the subordination of a warship of one country to the laws of another as the subordination of one state to another. however, the author also pointed out the loss of the inviolability of a warship if its crew commits a crime on the coast or in the harbour of a foreign state against the interests of this state or its inhabitants. (schiattarella, 1880) baltic journal of economic studies 50 vol. 9 no. 1, 2023 4. formation of ukrainian naval doctrine the analysis of the development of naval doctrine in terms of the relevant complex and at the same time integrated phenomenon, which undoubtedly includes both internal and external functions of the state, is undoubtedly impossible without a comprehensive consideration of the relevant historical experience, as well as a general understanding of maritime policy in the context of the development of the international legal order, as emphasised by contemporary authors (hong, 1995, p. 97). of course, certain aspects of naval activities are reflected in the basic united nations convention on the law of the sea of 1982 (unclos'82), developed in numerous supranational legal practices and implemented in modern naval standards, in particular with regard to the categories of warships, their immunities, rights of innocent passage, the powers of a warship to control events and vessels in waters under different legal regimes, etc. it is clear that not only the development of relevant international standards, but also their national implementation face the same or similar organisational and legal challenges as the states of the eighteenth and nineteenth centuries. the relevant challenges for maritime administration are recognised by modern researchers (vanchiswar, 1996, p. 6–7) and are undoubtedly part of the factors influencing the development of naval policy and practice and the conditions for its current implementation, particularly in the context of russia's large-scale maritime aggression against ukraine in the twenty-first century. in this dimension, a number of approved national program documents can be mentioned, such as the national program for research and use of resources of the azov and black sea basins and other areas of the world ocean for the period up to 2000, approved by the decree of the president of ukraine of december 16, 1993, no. 595/92 (national program, 1993) and the subsequent maritime doctrine of ukraine until 2035 (maritime doctrine, 2009) in its gradual development (maritime doctrine 2009, maritime doctrine 2015, maritime doctrine 2018), in particular in the context of ukraine's european and euro-atlantic integration. in particular, the decision of the national security and defence council of ukraine (nsdc) of 12 october 2018 "on urgent measures to protect national interests in the south and east of ukraine, in the black and azov seas and the kerch strait", approved by presidential decree no. 320/2018 of 12 december 2018, cannot be ignored (on the decision of the national security and defence council of ukraine of 12 october 2018 "on urgent measures to protect national interests in the south and east of ukraine, in the black sea, the azov sea and the kerch strait": decree of the president of ukraine of 12 december 2018 no. 320/2018). this decision stipulated, inter alia, that ukraine, in accordance with its obligations as a coastal state under the 1982 un convention on the law of the sea, should inform in the prescribed manner of the danger to navigation in the territorial sea and internal waters of ukraine in the black and azov seas and the kerch strait caused by the temporary occupation of part of ukraine's territory and russia's aggressive actions. referring to ukraine's maritime doctrine, the nsdc decision stipulated that the consequences of russia's creation of conditions complicating ukraine's economic activity in the black sea, the sea of azov and the kerch strait should be analysed. these provisions were further developed in the military security strategy of ukraine, approved by the nsdc decision and presidential decree no. 121/2021 of 25 march 2021 (on the decision of the national security and defence council of ukraine of 25 march 2021 "on the military security strategy of ukraine": decree of the president of ukraine of 25 march 2021 no. 121/2021). as stated in the strategy, interaction in the process of ukraine's comprehensive defence requires coordination of measures taken in the state in preparation for armed defence and protection in the event of armed aggression or armed conflict against ukraine, during the post-conflict reconstruction period, with measures taken to assist ukraine by the institutions of the european union, nato and its member states, other states and international organisations. the document states that the legal basis for the comprehensive defence of ukraine, naturally taking into account the needs for protection against maritime aggression, is the constitution of ukraine and other acts of ukrainian legislation, international treaties ratified by the verkhovna rada of ukraine, which corresponds to the sovereign inalienable right of any state to self-defence against aggression enshrined in the un charter. thus, the analysis, consideration and implementation of international standards is an important component of ukraine's defence against maritime aggression and, accordingly, it is an integral part of ukraine's national naval doctrine and should be reflected in the legal and organisational support of the ukrainian navy. these requirements are also reflected in the strategy of the naval forces of the armed forces of ukraine (afu navy) 2035. according to this document, published in 2021, the purpose of the ukrainian navy is to deter aggression, protect the sovereignty and territorial integrity of ukraine, ensure maritime security, economic growth and international stability at sea and from the sea in cooperation with national baltic journal of economic studies 51 vol. 9 no. 1, 2023 defence and security forces, strategic partners (strategy of the naval forces of the armed forces of ukraine 2035. the navy of the armed forces of ukraine). according to the strategy, the main objectives of the ukrainian navy in the course of operations (combat actions) at sea for the defence of the state should be to prevent enemy actions (sea denial) and, subsequently, to control a certain area of the sea (sea control). this can be achieved through air defence, anti-surface warfare, anti-submarine warfare, mine countermeasures, electronic warfare, missile and artillery strikes, amphibious assault, and special operations at sea and on rivers. ensuring a range of maritime security measures, the strategy adds, includes mastering the maritime environment, maintaining the safety of navigation, combating terrorism and the proliferation of weapons of mass destruction at sea, protecting critical maritime infrastructure, participating in international naval operations and exercises led by nato, the european union and the united nations, and other military cooperation activities with partner states and organisations. as eduard pleshko notes in this regard, in the context of a large-scale interstate armed conflict at sea, russia's maritime aggression, which disregards international law and threatens international security, is a serious problem and extremely relevant for ukraine. the temporary occupation of crimea demonstrates to us the conduct of various hybrid operations to cover up the crime of aggression. at the same time, the author emphasises that the 1994 san remo regulations on the law of naval warfare are an example of modern international law taking into account the significant specificities of military operations in the maritime sphere, as opposed to the actions of ground forces. however, he also raises the question of whether international law should define the relevant specifics of maritime aggression (pleshko, 2023). it is necessary to acknowledge the importance of the parliamentary declaration "on the aggression of the russian federation in the black and azov seas and the kerch strait" mentioned by the contemporary authors, approved by the verkhovna rada of ukraine on 20 september 2022, no. 2595-ix (on the statement of the verkhovna rada of ukraine "on the aggression of the russian federation in the black and azov seas and the kerch strait": resolution of the verkhovna rada of ukraine of 20 september 2022, no. 2595-ix). with this declaration, the ukrainian parliament recalled that the blockade of a state's ports or coasts by the armed forces of another state is an act of aggression, and that aggressive war is a crime against international peace. it states the indisputable duty of modern civilised states to maintain international peace and security and, to this end, to take effective collective measures to prevent and eliminate threats to peace and to suppress acts of aggression or other breaches of peace, with which one cannot but agree. the thesis of the declaration on the need not only to condemn the aggression of the russian federation in the black and azov seas and the kerch strait, but also to support ukraine, as a victim of aggression, in the exercise of its inalienable right to self-defence, as well as the need to take effective collective measures to eliminate the threat to peace and suppress acts of aggression by the russian federation in the black and azov seas and the kerch strait, including operations to ensure freedom of navigation, deserves unquestionable support. thus, ukraine's naval doctrine is currently in a state of constant development in view of the large-scale and systemic challenges posed by russia's maritime aggression. it is the development of this doctrine, taking into account international standards and examples of its successful implementation and realisation by the leading maritime powers of today, that should form the basis for effective legal and organisational support of the activities of the ukrainian navy. 5. conclusions thus, at the supranational level, the issues of regulating the activities of naval forces can be traced in the treaty dimension since the late eighteenth century, primarily in the concepts of sovereignty, prohibition of privateering and prosecution of piracy, as well as restrictions on the activities of naval forces in certain areas. the unregulated nature of a number of aspects of supranational naval activities, notably the right of entry to foreign ports, the procedure for stopping and inspecting foreign merchant ships at sea, and the limits of the powers of foreign coastal authorities over a warship, has led to an active search for appropriate acceptable international customs and attempts to substantiate them with legal doctrine based on national statutes and the established practice of maritime states. the implementation of the successful experience of supranational regulation of naval forces in ukraine is based on the constant development of relevant strategic and programmatic documents on maritime activities in general, as well as on repelling and countering russia's naval aggression and building the capabilities of the ukrainian navy in today 's extremely difficult conditions. at the same time, certain practical challenges faced by the ukrainian navy, namely the baltic journal of economic studies 52 vol. 9 no. 1, 2023 determination of the criteria for the neutrality of ships, the identification of ships belonging to military forces, the use of the right of passage and the right to stay, especially in waters with a special legal status, are traditional for the legal support of naval forces and therefore undoubtedly require a thorough analysis of the development of relevant supranational standards, especially in the practice of their implementation by the world's leading maritime countries, especially in the euro-atlantic dimension. references: perels ferdinand (2015). modern maritime law: an essay in 2 parts. part one "state of the world" [translated and supplemented by g.k. lilienfeld; co-compiled by e.v. dodin et al]. odessa: feniks, 550 p. declaration respecting maritime law. paris, 16 april 1856. icrc. available at: https://ihl-databases.icrc.org/ en/ihl-treaties/paris-decl-1856 lampredi, g.m. 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(2020). the ukrainian public administration of territorial seas:a european example. european energy and environmental law review, 29(2), 26–38. resolution on the approval of the maritime doctrine of ukraine for the period up to 2035 (2009). сabinet of ministers of ukraine. available at: https://zakon.rada.gov.ua/laws/show/1307-2009-%d0%bf on the decision of the national security and defence council of ukraine of 06.05.2015 "on the national security strategy of ukraine": decree of the president of ukraine of 26/05/2015 no. 287/2015. available at: https://zakon.rada.gov.ua/laws/show/287/2015#n2 on urgent measures to protect national interests in the south and east of ukraine, in the black and azov seas and the kerch strait decision of the national security and defence council of ukraine of 12.10.2018. available at: https://zakon.rada.gov.ua/laws/show/n0011525-18#text on the decision of the national security and defence council of ukraine of 12 october 2018 "on urgent measures to protect national interests in the south and east of ukraine, in the black sea, the azov sea and the kerch strait": decree of the president of ukraine of 12 december 2018 no. 320/2018. available at: https://www.president.gov.ua/documents/3202018-25174 on the decision of the national security and defence council of ukraine of 25 march 2021 "on the military security strategy of ukraine": decree of the president of ukraine of 25 march 2021 no. 121/2021. available at: https://www.president.gov.ua/documents/1212021-37661 strategy of the naval forces of the armed forces of ukraine 2035. the navy of the armed forces of ukraine (2021). available at: https://navy.mil.gov.ua/strategiya-vijskovo-morskyh-syl-zbrojnyh-syl-ukrayiny-2035/ pleshko, e. (2023). maritime aggression, occupation of crimea and issues of third countries’ neutrality / eduard pleshko, borys babin. arc, march 6, 2023. available at: https://arcrimea.org/en/analytics/ 2023/03/06/maritime-aggression-occupation-of-crimea-and-issues-of-third-countries-neutrality/ on the statement of the verkhovna rada of ukraine "on the aggression of the russian federation in the black and azov seas and the kerch strait": resolution of the verkhovna rada of ukraine of 20 september 2022, no. 2595-ix. available at: https://zakon.rada.gov.ua/laws/show/2595-20#text received on: 7th of february, 2023 accepted on: 20th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 188 vol. 3, no. 5, 2017 corresponding author: 1 department of finance and banking, poltava national technical yuri kondratyuk university. e-mail: avkozachenko2016@gmail.com 2 department of finance and banking, poltava national technical yuri kondratyuk university. e-mail: vbukolova2015@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-188-195 socioeconomic security of a region as an object in economic security studies at the mesolevel anna kozachenko1, victoriya bukolova2 poltava national technical yuri kondratyuk university, ukraine abstract. the purpose of this paper is to determine the key object in economic security studies at the mesolevel of regional socioeconomic security, as well as explain its genesis, contents, causes for emergence, and topicality. methodology. research on the socioeconomic security of a region is carried out within the ontological frameworks of post-non-classical science, one of the key features of which is strongly collective nature of scientific and ontological activities, consensual nature of scientific knowledge and also methodological pluralism. the latter predetermines active use of immanent and contextual approaches. their parallel use has enabled determining the internal essence of the notion “socioeconomic security of a region” from the standpoint of one of the key approaches to economic security studies  – activity-based one. the results of the carried out research have revealed that the category “socioeconomic security of a region” cannot be considered as a merger of two definitions – “social security of a region” and “economic security of a region”. the connection between these two definitions is of much more complex nature: socioeconomic security of a region emerges on the edge between economic security of a region as a quasi-corporation and social security of a region as an institute of interests’ protection and demands’ satisfaction for region’s population. it is offered to consider socioeconomic security of a region as a combination of economic and social conditions, which is providing certain social guarantees for state responsibilities and for a certain level of comfort inside a region on the basis of regional authorities’ support, within their level and volume of competences, for economic activities of regional business agents, making sure at the same time that production activity of these agents does not cause damages to the regional environment. economic security forms the basis for the category “socioeconomic security of a region”, while social security is its additional upper structure. practical implications. contents of the category “socioeconomic security of a region” serves as the starting point for the development of principles and means for its provision and evaluation, system building and objectification of regional economic security, all processes and mechanisms within security-providing activities of regional management, their actions taken on prevention of insecure development of events and situations, which are destroying the whole socioeconomic system of a region, thus hindering its adequate functioning. the results of studying the genesis and the contents of the notion “socioeconomic security of a region” serve as the explanatory basis for economic security studies at the mesolevel, the key features of which are consensual nature of scientific knowledge, collective ways of the research activities, as well as their contextuality. value/originality. prior to this study, economic security studies have never considered the socioeconomic security of a region as the crossroads of economic security of a region as a quasi-corporation and social security of a region as an institute protecting interests and satisfying demands of the population within a region. the offered here approach to socioeconomic security of a region sets brand new vectors in economic security research on its mesolevel. key words: region, economic security studies, mesolevel, socioeconomic security of region, contents, definition, approach. jel classification: о18, r10 1. introduction a region is a multidisciplinary notion and a research object for a range of sciences, including: physical and political geography, history, biology, sociology, political science, and economics. each of these sciences studies region in its particular aspect. a region is also a research object for one of the newest knowledge systems  – economic security studies. economic security studies are built on the principles of hierarchy, the latter is built around the core  – the baltic journal of economic studies 189 vol. 3, no. 5, 2017 essence of economic security of a state (region, sector, enterprise etc.). the core also includes principles and means used for this economic security maintenance and assessment, other elements of the core include: system building, functioning and objectification of the economic security system at its various levels, processes and mechanisms of security provision, prevention measures at all socioeconomic levels (state, region, enterprise). economic security as a subject matter became especially relevant and topical in the first half of the previous century, when economic threats started getting truly systemic and global nature, and many negative features of the market economy  – uncontrollable and unregulated market relations, inequality, inconsistency of governmental policies and actions in relation to economic agents, violations of market freedoms  – became especially acute. contemporary institutionalism has contributed greatly to the expansion of views on the economic security of the state and market agents. causes of market agents’ behaviour became much clearer, as well as state actions concerning regulation of business activities (including paternalism, inter alia). also, clearer became potential threats stemming from the behaviour of both these sides. in ukraine research on economic security issues started in the 1990s, in parallel to radical changes in the economic and administrative systems, both transitioning to functioning on the basis of the market economy. the first research objects in such studies were the state itself and also separate enterprises, later – also regions. today economic security at all possible economic levels is thoroughly studied not only in ukraine, but in all post-soviet countries and also postsocialistic countries of eastern and central europe, including poland, bulgaria, slovak republic, czech republic (see, e.g., korzeniowski, 2007, 2008; šimák, 2001; mikolaj, j., hofreiter, mach, mihók & selinger 2004; piocha, 2004; tomaszewski, 2003). economic security studies nowadays are developing actively as never before. as a result, new objects are now in the focus of studies, for example, today especially relevant is the economic security of separate regions and also specific commodity markets (see, e.g., tavares, 2009; crocker & hampson, 2011; chappell, mawdsley & petrov; miller, 2016 and others). in our observations, the most understudied object in economic security studies is socioeconomic security. it would be most feasible to study it at the mesolevel of economic security, though, of course, it can be also studied at both macro and microlevels. identification of new research object for economic security studies  – as the socioeconomic security of a region  – is the result of research on peculiarities of a region as a socioeconomic system and its regional management. one of the key features here is the presence of two objects for regional management: not only economic activities of various subjects within a region but also the satisfaction of social needs of the local population. therefore, socio-economic security of a region is a relatively new object for economic security studies at their mesolevel. thus, it requires thorough description and study, explanation of its contents, origins of this object emergence as such and its topicality for the contemporary stage of market economy development. 2. research methodology in any scientific system of knowledge, studies on a particular research object start with determination and description of its key features, using terminology and definitions of the categorial toolkit of this scientific system and results of the research over the behaviour of this object. sorting these features and their detalization provide us with a certain imagination of this research object, explaining its nature of origin, contents, and peculiarities. description of a research object with the use of categorial toolkit of a particular scientific system forms the explanatory basis, which later will serve as the ground layer for its theoretical and methodological basis. in this regard, economic security studies at the mesolevel are no exception. methodological fundamentals of economic security studies are also formed by its categorial toolkit, all related notions, categories, and definitions, thus promoting unity in the understanding of key grounds. at the contemporary stage of economic security studies’ development, there already is available a certain system of norms and standards concerning the scientific research of economic security at the level of various objects – the state, region, and enterprises. study on the socioeconomic security of a region here has been performed under the frameworks of post-non-classical ontology, the key features of which are: collective nature of research activities, consensual scientific knowledge obtained and also methodological pluralism. the latter, in its turn, preconditions the active use of both immanent and contextual approaches within this research. parallel use of these two approaches has allowed determining the internal essence of the notion “socioeconomic security of a region” from the standpoint of one of the most widely spread approaches in economic security studies – activity-based approach. 3. results 3.1. preconditions for the determination of the key research object in economic security studies at the mesolevel in economic security studies, all notions by default stem from the generic term “security”. due to its connection with all security objects and all types of security there emerge various, more complex subnotions baltic journal of economic studies 190 vol. 3, no. 5, 2017 of security (see, for example, figure 1.1 in (illiashenko, 2016, p. 14): economic security of a region, food security of the whole country, information security of an enterprise, and so on. determining socioeconomic security of a region as the key research object in economic security studies at their mesolevel is mostly predetermined by features of the region as a complex socio-economic phenomenon. thus, refusal to consider economic and social securities separately in the case of the region should be supported by the following provisions. the economy is the basis of any region in any country. it is the economy that guarantees and supports region’s development; therefore, it indirectly guarantees and supports the economic development of the whole country. according to the popular today approach, the region as an economic system can be viewed as a quasicorporation, that is, a formation which is concentrating the productive forces in itself in order to set the relations between economic agents and trigger economic activities of various types. the understanding region as an economic system of quasi-corporate type is more than simply well-grounded. this quasi-corporation performs its economic activity within the institutional environment common for the whole country, and this environment is established by the state and can be changed by the same state. any region has the very limited capacity to change this institutional environment or even one of its element (even improvement or more detailed specification of institutional rules is hardly ever possible by the initiative of a region). same applies to the formation of own institutional environment, within one region only. region simply does not have enough legal authority for such radical changes in a system. regional authorities are obliged to follow the orders of formal institutions as it is approved in the state overall, and they have to follow institutional provisions imposed by the state in any decision a region is making. property of various economic subjects located on the territory of a certain region is usually predominantly private or collective, that is, non-state. therefore, regional authorities may have a very limited influence on the decisions made by local enterprises’ owners concerning the use of their property and namely, production means. in case of ukraine and all other post-soviet countries, this means that territorial production complexes which used to exist during the soviet era (and belonging to the state) are simply absent in contemporary regions. therefore, regional management has to use new, non-traditional (at least for them) methods since all previously known and so familiar methods are not working under the conditions of market economy. another limiting factor in terms of region’s authorities and capacities when it comes to the economy is the legal order of local budgets’ formation. in ukraine, future volumes of local budgets are always hard to forecast in advance, even for a relatively short term. another problem of local budgets is their insufficient volume and instability of inflows. the logical consequence of these problems is that it is hard for regions to guarantee social programs’ availability and performance. according to l. tulush (tulush 2015), this state of affairs means there will be significant risks on the side of local budgets’ incomes. therefore, there will be also risks related to financing region’s own performance and its socioeconomic development. capacities of regional authorities in part of their influence on region’s economy should not be limited to filling up the local budget and its further use. according to the sectoral competence (this is a legally binding sphere of particular state authorities’ or selfgoverning authorities’ responsibilities) as described in the law of ukraine “on local state administrations”, competences of local state administrations (lsa) in part of region’s socioeconomic development include the following: managing economic objects in state property transferred for management under lsa, organization of economic objects’ accreditations, certification of products and productions according to their profile, promotion of external economic relations of the local enterprises and organizations, regardless their property form etc. outlined above competences of lsas confirm they indirectly participate in economic security provision at the regional level since they have their own levers of influence on local production forces – thus, on region’s economic security too. therefore, it would make little sense to consider economic security of a region as “the state of regional economy, under which a certain its territory, seen as a whole in the interrelation of its elements, is economically independent, thus forming the opportunities for sustainable development” (the quote is translated from (antoshkin, 2014)). region simply cannot be truly economically independent for a range of already presented reasons. its economy though can be to some extent self-sufficient when its territory is concentrating in itself a range of economic subjects with various types of economic activities, including those engaged in external economic relations. it would be more expedient to consider the economic security of a region in the context of regional economy’s self-sufficiency, the latter, according to (sverdan, 2013) being manifested through stability and sustainability. these features of regional economy are manifested through the following: real protection of property, regardless its type and legal form; trustworthy guarantees and favourable conditions for entrepreneurship; hindering, using tools and competencies available for the regional administration, the influence of factors which could destabilize the economic situation overall (for example, prevention of economic crimes in a region); baltic journal of economic studies 191 vol. 3, no. 5, 2017 support, within the competences of regional administration, for region’s development (for example, creating and maintaining favourable investment climate) (sverdan, 2013). these and other provisions allow us stating that economic security of a region has a very different status today – it becomes one of the key preconditions for the regional economy’s development. this precondition is formed on the basis of system interaction between a region on one side and economic subjects from its internal and external environment on the other. this interaction is supposed to take into account interests of a region itself, of the state, of all related economic agents so that to balance the key structural elements within production relations. only once this system of interaction is balanced enough, we can assume the economic security of a region. if we consider the provision of economic security within the protective approach  – this means timely detection, observation, and taking actions so that to prevent the development of various threats, excluding them at best scenario or at least smoothing the consequences from these threats’ realization. economic development of a region, which becomes possible under region’s economic security provision, is not the self-target, actually. it is supposed to be aimed at increasing the welfare level for the local population, at the creation of most comfortable conditions for living, and all the related to this factors in combination form the social security of a region. however, we need to keep in mind here that economic security of a region is not always followed by the social security of a region. 3.2. social security of a region if we consider the region as a separate self-sufficient and single entity within a state than its key feature would be the satisfaction of social demands from the population (food supply, providing places for living, education, healthcare, transport, the satisfaction of cultural demands, environment’s protection etc.). and this, to a greater extent, would be the logical consequence and the result from economic activities of all economic subjects operating within the same region. thus, economic subjects’ activity in a region is the vitally necessary prerequisite for the satisfaction of social demands in the same region; however, this economic activity as such does not automatically lead to these demands’ satisfaction. this is because region itself is not only the system of productive forces; it is also a socioethnical, socio-economic, and socio-political system. and if within a region as socio-economic system relations between various groups of people are established for and during their economic activities, concerning first of all distribution and consumption of resources  – then the relations within a region as a socio-ethnical and sociopolitical system have a very different nature. for this reason, the social aspect of economic security provision within a region should never be ignored. social security (of a state or of a region) is an extremely wide and multi-aspect notion, which has been considered in literature, both ukrainian and foreign, in very different contexts (see, for example, altman & kingson, 2015; landis, 2016; gokhale, 2010; sindell, 2012; matthews, 2017). analysis of many definitions for “social security” presented in ukrainian scientific narrative (see (zinchenko)) shows that the already available definitions and interpretations emphasize mostly on the protection of interests (individual, those of certain social groups, society as a whole etc.). however, there are also more popular and also wider definitions of the notion “social security of a region”, for example, the one provided in (antoshkin, 2014): the state of legal protection for rights and freedoms for a person according to the constitution of ukraine (chapter 2), also covering vitally important social interests of a person and financial provision for the officially predetermined social standards and guarantees, which are supposed to help maintain sustainable development of the whole society (including prevention of the social pressure escalation etc.). however, this definition provided by (antoshkin, 2014) covers specifically “social security” only, while it fully ignores such important aspects as environment, social infrastructure, the comfort of residing in a region, business opportunities etc. the core element of any region is its population, the people. the region is not merely an economic subject, while the aim of any regional economy is not simply the production of a certain volume of material assets. for the people, residing in a region, the social component of region’s security is no less important than the economic one. this is why if a certain economic subject, operating inside a region, may really have a solely financial nature of all aims and interests  – this is not applicable for a region as a whole, since in it, the social component is no less important, and it would be not feasible to limit the notion (and all the related actions) to the economic contents of security only. economic security of a region is an important precondition for its social security because the level of region’s economic security predetermines (not fully but to a larger extent) the level of its social security, and this finds its manifestation in personal development of the people residing in this region and in the development of social institutes too. this logic explains why it is not appropriate to interpret economic security alone, and why it is more feasible to study socioeconomic security (of separate individuals, the population within a region and society in a country as a whole) (yazlyuk, 2014). therefore, for the economic security studies at the mesolevel provision of economic and social security of a region has equal importance. moreover, there is a strong casual relation of a closed type between these two types of region’s security: economic security of baltic journal of economic studies 192 vol. 3, no. 5, 2017 a region forms the basis for its social security, and the latter, in its turn, promotes and contributes to the stronger economic security of the same region. separate research on economic and social security of the same region will never provide truly valid results and conclusions, mostly because economic development of a region (which is always possible only under the conditions of region’s economic security) is not the aim in itself, it is always targeted at increasing the welfare level for local population in a region and the level of comfortable living, and these two positions form, in their turn, the social security of a region. this is why separate studies on economic and social security would limit any research significantly, providing inconclusive results and revealing only part of the problems related to region’s security. 3.3. socioeconomic security of a region as it was already stated above, the category “socioeconomic security of a region” is formed by means of combining two subcategories – “economic security of a region” and “social security of a region”. however, we have to admit that this category is also under discussions as of today, mostly due to the fact that it has no valid legal status: the notion “socioeconomic security” (of the state or of its regions) is not represented in the current legislation of ukraine, unlike several other types of security, actually. at the same time, we also need to mention that legal recognition of certain terminology and notions, as a rule, follows once all related to this notion processes get the stable character. moreover, for legal recognition, a vital factor is when certain objects, phenomena and/or processes simply cannot be described without the use of this particular newer notion. it would be not correct to assume that the category “socioeconomic security of a region” is formed by means of simply merging the definitions of “social security of a region” and “economic security of a region”. relations between these two definitions are of much more complex nature. socioeconomic security of a region emerges on the edge between economic security of a region as a quasi-corporation (speaking generally, as an economic agent or as a system of resources’ and production forces’ allocation) and social security of a region (again, speaking generally – as a socioeconomic system or an institute protecting the interests of local population and satisfying their demands). economic security forms the basis for the category “socioeconomic security of a region”, while social security is its upper structure. accordingly, low economic security of a region predetermines low level of social security too, and on the opposite. as it is persuasively demonstrated in (zinchenko), the category “socioeconomic security of a region” shows mutual conditionality, interdependence and complementarity of the relations being formed in the course of the related subjects’ interaction with the aim to provide economic and social security for a region. two components of socioeconomic security of a region (economic and social ones) do not contradict each other, on the opposite  – they support each other and contribute to each other, thus shaping the overall state of socioeconomic security (or insecurity in some cases) of a region. security of a region, in its turn, is a complex socio-economic phenomenon which is combining economic and social security. connections between the economic and social security of the same region can be both direct and inverse, it can be obvious and in some cases also much more complex, as it seems at first glance. thus, the higher economic activity of various subjects within the same region leads to higher welfare rate for a local population, higher demand for labour force and, most probably, also to higher wages and thus lower emigration rate. on the other hand, more economic activities within a region do not necessarily mean better social infrastructure and lower social disproportions. moreover, a higher rate of economic activities in a region may lead to significant worsening of the environmental situation in this region or even higher crimes rates in it. in its turn, the absence of threats to the social security of a region and stable social conditions overall are in themselves additional stimuli for investments’ attraction into a region as well as for reinvestment of income, production expansion, more favourable business climate and stability of business operations as such. on the opposite, a reverse relation between the social and economic security of a region usually causes the emergence of threats to the regional economy, poorer economic results for all related business agents and thus – lower inflows into the regional budget, therefore, its lower spending, higher unemployment rate, lower wages. that is lower welfare level in this region overall. in its turn, lower level of social security in a region decreases its investment attractiveness and also causes capital and human resources’ outflow to other regions or abroad, lower rates of entrepreneurial activity inside the region etc. these processes together become a direct threat to the regional economy and in the process of their development they may turn into economic insecurities. contents and essence of the notion “socioeconomic security of a region” have been established according to the results of the descriptive analysis, which also has enabled formulating the following conclusions. definitions for the notion “socioeconomic security of a region” are not that numerous and differ from each other quite significantly. there is no unity of opinions on the contents of this phenomenon, however, in all definitions, the core idea remains the same. it combines all available approaches to determination of the notion “socioeconomic security of a region”. this core distinctive feature is instability of the internal essence and lack of any emphases on its contents. consequently, an attention of all related research is concentrated on separate aspects of this notion. and this, in turn, leads baltic journal of economic studies 193 vol. 3, no. 5, 2017 to all these research studies being rather one-sided essentially. quite frequently the notion “socioeconomic security of a region” is identified as being exactly the same with the notion “economic security of a region”. and the latter, according to (antoshkin, 2014), is often identified from various angles – as a certain “capacity”, as “combination of properties” or as “the degree of development” as applied to the regional economy. it is quite probable that this full identification of quite different notions, according to the same (antoshkin, 2014), is predetermined by the fact that it is the economy that shapes the welfare of a region, and first of all the economy also shapes the economic independence of a region (though it is quite relative, noteworthy). and this relative economic independence of a region, in its turn, is the key precondition for this region’s sustainable development. the descriptive analysis allows us to state that socioeconomic security of a region can be considered as such its state, which can be described by certain parameters, like preconditions for regional development etc. within the borders of the contextual approach, the definition of the notion “socioeconomic security of a region” is quite obvious. generally speaking, each of the definitions for the notion “socioeconomic security of a region” is valid to some extent, since any of them sets and defines certain guidelines in the development, vectors and the character of actions on achieving the state of security, all being appropriate and feasible within the borders of the selected approach. besides revealing the essence of socioeconomic security of a region, its definition is supposed to determine the approach, within the borders of which it would be considered. the choice of a certain approach allows specifying and deepening the contents of the notion “socioeconomic security of a region”, while the latter, in its turn, determines the nature of actions on the provision of this security. in contemporary studies on economic security, there are several approaches to the investigation of economic security issues on the levels of state, region, enterprises: protective approach, harmonization approach, resource approach, activity-based approach (for more details see in (kozachenko & pogorelov, 2015)). among these and other approaches, one of the most widely spread is the protective approach. it appeared among the first due to close associations between security on one side and such notions as “threat”, “protection” and “protected” on the other. today this approach is actively used in most of the studies on economic security. also useful could be a resource approach to studying the socioeconomic security of a region. however, this approach means that the attention would be mostly concentrated on the resource potential of a region. the very notion “region’s potential” is also relatively new because the related investigations in regional research are focused primarily on separate types of potentials (economic, financial, resource, innovation, budget, market etc.). it would not be fully appropriate to determine the contents of the notion “region’s potential” using the additive approach (when region’s potential is the sum of its types of potentials). the basis for any region’s potential is formed by resources, however, considering their use only from the standpoint of their transformation into some sort of end result would mean considering region’s potential in one context only (moreover, in many cases region itself is not able to make full use of all its resources and their types). results from the analysis of the available definitions of the notion “socioeconomic security of a region” have formed the basis for further outlining of approaches to the contents of the notion “socioeconomic security of a region” (in a similar manner to (pabat, 2012), but  – as applied to economic security studies at the mesolevel: adaptive approach: combining the key essences from the definitions of the notion “economic security of a region” and “social security of a region”; activity-based approach: the state of regional economy, which can be described either using qualitative features (resistance to external and internal threats, resulting performance of regional management, balancing of regional interests with the state ones) or using the system of quantitative (sometimes quasiquantitative) parameters; environmental approach: combination of conditions, factors, and resources which together are shaping the potential of a region, its use becomes the basis for the maintenance of socioeconomic security in a region; protectionist approach: securing the interests of a region is maintained through regulatory actions of the state and making use of regional potential; qualitative approach: the capacity of a region to protect the interests of economic agents inside it and maintain social standards and social guarantees to the local population at a certain level. after analysing the available definitions of the notion “socioeconomic security of a region” we can formulate its comprehensive contents in the following way: socioeconomic security of a region is a combination of economic and social conditions, which are supposed to provide for welfare guarantees and other responsibilities of the state concerning the level of comfortable living in a region maintained through regional authorities’ policies and actions aimed at supporting the activity of economic subjects within a region and their production activities in particular (under the conditions that the latters do not harm local environment). research results on the genesis and contents of the notion “socioeconomic security of a region” set the fundamental principles for the explanatory basis of economic security studies at the mesolevel, the distinctive features of which are consensual nature of scientific knowledge and contextuality of the research performed. baltic journal of economic studies 194 vol. 3, no. 5, 2017 4. conclusions development of economic security studies as the scientific system of knowledge starts with the description of distinctive features of the research object, the arrangement of which provides the opportunities to explain its nature, contents, and key peculiarities. it is expedient to state that the research object of economic security studies at their mesolevel is not the economic security of a region or its social security, but rather socioeconomic security of a region. well-grounded arguments are provided to prove this assumption valid. within the category “socioeconomic security of a region”, a definition “social security of a region” is not simply added to the definition “economic security of a region”. the connection between these two definitions is much more complex: socioeconomic security of a region emerges on the edge between economic security of a region as a quasi-corporation and social security of a region as an institute protecting interests and satisfying the demands of the population in a region. in relation to socioeconomic security of a region, economic security is the basic category, while social security is its upper structure. the essence of the notion “socioeconomic security of a region” is revealed in the process of descriptive analysis: socioeconomic security of a region is a combination of economic and social preconditions, which together provide for certain social and other state-level guarantees along with its responsibilities for the provision of comfortable living in a region through comprehensive support by regional authorities for all economic agents within their competences of activities, aimed in particular at their production of economic commodities, which is not supposed to harm regional environment. the contents of the notion “socioeconomic security of a region” may serve as the starting point in the related research on the assessment of socioeconomic security of a region and further use of this assessment results in the security provision activities at the regional level, in particular, during the selection of tools for socioeconomic security provision at the mesolevel. references: altman, n. & kingson, e. 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(2013). rehionalna ekonomika ta ekonomichna bezpeka rehionu [regional economy and economical security of a region]. naukovyy visnyk khersonskoho derzhavnoho universytetu. 1: 46-52 [in ukrainian]. tavares, r . (2009) regional security: the capacity of international organizations (global institutions). abingdon: routledge, 232 p. baltic journal of economic studies 195 vol. 3, no. 5, 2017 the eu, strategy and security policy: regional and strategic challenges (2016) / ed. by l. chappell, j. mawdsley & p. petrov. abingdon: routledge, 238 p. tomaszewski, j. (2003). regionalne bezpieczeństwo ekonomiczne. /w:/ państwo, gospodarka, społeczeństwo w integrującej się europie. t. 3. kte, kraków, p. 383-398. tulush, l. d. (2015). dokhidna baza silskykh byudzhetiv v umovakh fiskalnoyi detsentralizatsiyi v ukrayini [income base of country budgets in conditions of fiscal decentralization of ukraine]. ekonomika apk. 3: 39–50. [in ukrainian] yazlyuk, b. o. (2014). teoretychni osnovy sutnosti ta zmistu sotsialno-ekonomichnoyi bezpeky [theoretical basics of essence and content of social-economical security]. ekonomichnyy analiz. 16 (1): 149-154. [in ukrainian] zinchenko, o. i., khimchenko a. m. shchodo sutnosti ponyattya «sotsialno-ekonomichna bezpeka». [concerning the notion of “social-economical security] retrieved from: file:///c:/users/%d0%90%d0%bd%d0%bd%d0%b0/ downloads/9121845-1-sm.pdf [in ukrainian]. baltic journal of economic studies 61 vol. 3, no. 5, 2017 corresponding author: 1 department of management, national metallurgical academy of ukraine. e-mail: vishnevskaya@i.ua 2 department of management, national metallurgical academy of ukraine. e-mail: 13managua@gmail.com 3 department of management, national metallurgical academy of ukraine. e-mail: kaut_olga@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-61-69 development of methodology for the calculation of the project innovation indicator and its criteria components mariya vishnevskaya1, dmytro kozenkov2, olha kaut3 national metallurgical academy of ukraine, ukraine abstract. two main components of the problem studied in the article are revealed. at the practical level, the provision of the convenient tools allowing a comprehensive evaluation the proposed innovative project in terms of its possibilities for inclusion in the portfolio or development program, and on the level of science – the need for improvement and complementing the existing methodology of assessment of innovative projects attractiveness in the context of their properties and a specific set of components. the research is scientifically applied since the problem solution involves the science-based development of a set of techniques, allowing the practical use of knowledge gained from large information arrays at the initialization stage. the purpose of the study is the formation of an integrated indicator of the project innovation, with a substantive justification of the calculation method, as a tool for the evaluation and selection of projects to be included in the portfolio of projects and programs. the theoretical and methodological basis of the research is the conceptual provisions and scientific developments of experts on project management issues, published in monographs, periodicals, materials of scientific and practical conferences on the topic of research. the tasks were solved using the general scientific and special methods, mathematical modelling methods based on the system approach. results. a balanced system of parametric single indicators of innovation is presented  – the risks, personnel, quality, innovation, resources, and performers, which allows getting a comprehensive idea of any project already in the initial stages. the choice of a risk tolerance as a key criterion of the “risks” element and the reference characteristics is substantiated, in relation to which it can be argued that the potential project holds promise. a tool for calculating the risk tolerance based on the use of matrices and vector analysis is proposed. based on the fuzzy sets theory, a calculation of the “personnel” component is suggested on the basis of the analysis of the conformity factor of execution of potential project operations to the required competencies of the project manager. the suggested technology assessment as a part of a comprehensive indicator of the project innovation, unlike other technologies, considers the compliance of the project product characteristics with the consumers’ requirements and the options of a specific project. on the basis of ideal and matrix modelling, a mathematical model is obtained for determining the prospects of realizing consumer’s expectations regarding the project product. practical implications. as a result of applying the suggested indicator of innovation, it is possible to obtain the information on the degree of the project innovativeness and risk tolerance, if the available resources are sufficient, whether the set of competencies of a project manager is in compliance with the project works, and whether the project product meets the requirements of the consumers. it is found that the innovation of projects can be considered as necessary and sufficient information for making optimal decisions. simplicity, ease of use, efficiency, measurability, adaptability of innovation indicator extend its effectiveness in the field of the project management and provide the organization with a new tool for making appropriate management decisions. application of the integrated project innovation indicator complements the classical methods of analysis of options, increases the effectiveness of the application of project management tools, especially at the stage of project selection to portfolio or program. the results of the research can be used for further development of scientific and methodological foundations to form a balanced system of indicators of innovative projects. the results implementation is a methodological and organizational basis for creating effective systems and technologies for managing the project programs and portfolios. key words: project innovation indicator, personnel assessment, quality assessment, risk assessment, project selection criteria jel classification: h43, о22, m59, m110, d81, c65 baltic journal of economic studies 62 vol. 3, no. 5, 2017 1. introduction in management and project management, a special attention is given to the problem of effective mechanisms of selecting the projects to portfolios or development programs. after all, despite the heterogeneous nature of projects, the choice of a variety of possible options is not accidental. at the same time, the requirements for portfolios (programs) are reflected in managerial decisions as to which of the projects should be involved in a portfolio or a program. thus, the selection and optimal use of innovative projects are one of the key aspects of creating an effective management system. this requires the appropriate methodological and organisational support. the problem solved by the authors in the study is relevant and significant for the project management. in fact, the challenging issues of determining the content of programs and the composition of portfolios require the creation of appropriate quality mechanisms for effective selection of projects. under conditions of the inconstancy of the business environment, the availability of numerous risks, limited time, financial, and material resources, tools for selecting the projects on the basis of an integrated indicator, suggested in the study, becomes especially important. 2. the analysis of recent scientific researches and articulation of the problem nowadays, there is a large number of approaches to projects selection, both on the basis of qualitative and quantitative indicators (ohara, 2010), as well as by various integral and multi-criteria indicators, like in the study by boock and chau (2013, pp. 76-86). where a transparent, easy-to-use for all project stakeholders, selection model based on a system of evaluation and cost criteria is represented. at the same time, the researches by chang and ishii (2013, pp. 935-948), as well as the study by kuo, chang and chen (2013, p. 335-349) suggest to use the hybrid mcdm model  – a multicriteria decision making model based on the combination of dematel technology with anp and vicor methods. katayev in his study (2014, pp. 55-63) considers the integration of critical chain, critical path, and simulation methods with the use of a matrix model of project management, however with regard to labour resources only. within the research (morozov and osetrin, 2009), the approaches to the formation of a projects portfolio are based on integrated indicators in the field of safety. an interesting “prism” model of the filtering process for new projects, taking into account the influence of the criteria for selecting the necessary projects for a particular portfolio is given by zachko, rak y. and rak t. (2008, pp. 54-61). the authors  – rach, koliada, and antonian (2009, pp. 90-101) – suggested a method of evaluation for selecting the projects for a portfolio based on the analytical and hierarchical model. the subject of the study was later researched by koliada (2010), who represented an effective tool for selecting the projects for a portfolio based on the concept of strategic unity. at the same time, sensitivity of integral index to changes in the incoming indices values. the authors semko and oleinikova (2010) suggest the analysis of indicators to form a projects portfolio, taking into account the synergism effect. in the conditions of information overload and huge supply in the project market, it becomes increasingly difficult to form projects portfolios and programs from a variety of possible options. in connection with the adoption and implementation of an innovative strategy for the development of social and economic relations, this trend will be retained. as the number of projects grows, the development of an effective project selection tool will definitely remain relevant in the coming years. in view of the above, it is suggested to use the tool for solving the identified problems based on the use of integrated comprehensive indicators of the project innovation. in contrast to the available indicators, it allows making a comprehensive assessment of risk tolerance, the effect of innovations, the degree of compliance of managing personnel’s competencies with the work, and the project product quality with the consumers’ expectations at the initial stages. therefore, it will make it possible to reduce the number of redundant projects and simplify the procedure for rejecting the projects that do not meet the requirements. 3. goal and objectives of the study the purpose of the study is the formation of an integrated indicator of the project innovation, with a substantive justification of the calculation method, as a tool for the assessment and selection of the projects to be included in the projects portfolio and programs. to achieve this goal, the following tasks shall be addressed: – to design and define the methodology for calculating the integrated indicator of the project’s innovation and the balanced system of its criteria components; – to present a methodology for calculating the criteria component – “risks”; – to describe the method of calculation of the criteria component – “managing personnel”; – to determine the methodology for calculating the criteria component – “quality”. 4. materials and methods of research of the project assessment system the problem under study includes two main components. at the practical level, the provision of the convenient tools allowing a comprehensive evaluation the proposed innovative project in terms of its possibilities for inclusion in the portfolio or development program. at the level of science, there is baltic journal of economic studies 63 vol. 3, no. 5, 2017 a need for improving and complementing the existing methodology of assessment of innovative projects attractiveness in the context of their properties and a specific set of components. the research is scientifically applied since the problem solution involves the development of a set of techniques, allowing the practical use of knowledge gained from large information arrays at the initialization stage. one of the problem’s solutions has been suggested in the study (malyi, antonenko, mazurkevych, 2008), where the innovation of the project is regarded as the amount of information necessary and sufficient to obtain the optimal solution in the course of the project implementation. according to the source (kutsekon, 2009), the resulting effect of any innovative activity is the production of a competitive product, strengthening of the position of an enterprise in the market and of the financial state of a company. with such an approach, choosing the best variant of the innovative project to be included in a portfolio involves getting great results at minimum cost. by its essence, economic indicators are resultant, other groups’ indicators are indicative, they help to identify the causes of problems and prevent the consequences. there are a number of general rules for using alternative projects selection criteria; however, each enterprise has its own system of priorities. for example, the project’s compliance with the chosen strategy, completion time, social significance, market potential of the product, impact on the company’s image, level of risk, etc. as the choice of any set of projects in the future provides a balance or imbalance of the entire portfolio or program, the creation of an effective system of projects assessment is of great importance and involves the use of a number of indicators. therefore, it seems advisable to use the project innovation indicator, which is formed on the basis of a comprehensive system of indicators (criteria). 5. calculation of the integrated project innovation indicator and its criterion components integrated (group) factorial indicator of the project innovation (w) is defined as the sum of the products of parametric single (in some cases – expert) assessments (di) and weight coefficients of the indicators being analysed (gi) using the formula: w d gi i i n = = ∑ * , 1 (1) where di is the value of i indicator of the assessment; gi is the weight coefficient of i indicator; p is the number of assessment indicators. based on the results of previous studies, the components of the index of innovativeness of the project include the following criteria: risks, managing personnel, quality, innovation, resources and performers (subcontractors). in the limited volume of this work, consider in detail the methodology for calculating the first three of the six specified components. world experience and business practices show the business entities management’s awareness of the importance of taking into account the risks as the elements of management strategies for a capital increase in the total value of the enterprise (arseniev, davydova, 2017). this, according to martin and william (2000), is an assessment of the performance and criterion of prospects for the economic growth and owners’ welfare. so, let us consider the first criteria component of creating the indicator of project innovation – “risks”. quantitative assessment of potential risks is an integral part of the project selection stage. it provides a determination of the probability of risks occurrence and the possible impact of their consequences on the project. in this case, the measures chosen on the basis of risk assessment can be aimed at the risk mitigation directly, the elimination of risk factors or at the control of the economic consequences (fig. 1). in practice, risk assessments are often based on a simplified model  – several or one main indicator, representing the most important characteristics inherent in this project. as a key criterion, we suggest a choice of project tolerance for possible risks. in particular, the risk tolerance (ability to withstand the business destabilization processes due to certain characteristics) will be assessed using matrices and vector analysis. suppose we have m projects described by n categories of risk. then each of considered projects m can be interpreted as a point of a n-dimensional risk space with coordinates equal to the value of n risk categories for the selected project. below are the acceptable risk assessments (value xij where i is the index of the project, and j is the index of the project risk category). projects risk assessments risk 1 risk 2 risk 3 ….. risk j …. risk n project 1 x11 x12 x13 … x1j … x1n project 2 x21 x22 x23 … x2j … x2n project 3 x31 x32 x33 … x3j … x3n …… … …. …. … … … … project i xi1 xi2 xi3 … xij … xin …… … … … … … … … project m xm1 xm2 xm3 … xmj … xmn assessments of the risk category may be heterogeneous due to the fact that the risk factors are manifested differently in projects of different types. therefore, in order to eliminate the perversion in the further analysis that may be caused by this, it is necessary to carry out a preliminary procedure for standardizing risk assessments. this procedure involves the replacement of assessments of xij, with zij assessments, calculated using the formula: baltic journal of economic studies 64 vol. 3, no. 5, 2017 z x x ij ij j j = − σ , (2) where x m xj ij i n = = ∑ 1 1 , (3) and σ j ij j i n m x x= −       = ∑ 1 2 1 1 2 ( ) , (4) where j = 1,2,3 ..., n; i = 1,2,3 ..., m; xij are the values of the risk category j for the project i; x j is the arithmetic mean of the risk category j; σ j is the standard deviation of the risk category j; zij is the standardized value of the risk category j for the project i. in order to make an appropriate management decision regarding the selection of a project, it is necessary to select its reference characteristic, regarding which it can be argued that this project holds promise. also, the project with a minimal risk can be chosen as a reference. then z0j is a standardized value of the risk category j for the project 0 will be defined as the minimum among all values for this category of risk: z zj i ij0 = min . (5) the distance between individual projects and the reference project in the area of standardized risk assessments will be determined as follows: c z z i mi ij j j n 0 0 2 1 1 2 1 2 3= −       = = ∑( ) ( , , ,... ) . (6) upon the calculation of the distances between all the projects and the reference project in space, a vector of distances is obtained, which can be represented as follows: c c c c c i m =                     10 20 0 0 . (7) the resulting distances are the initial values for calculating the risk tolerance index di for each i-th project: d c c i i= −1 0 0 , (8) c c s0 0 02= + , (9) fig. 1. bidder projects risk monitoring system acceptance mitigation transfer quantitative and qualitative analysis of possible risk events under the project project risk tolerance analysis choice of management methods preventive measures m o n i t o r i n g o f r i s k s a n p o s s i b l e e c o n o m i c c o n s e q u e n c e s o f b i d d e r s p r o j e c t s t e c h n i c a l a n d e c o n o m i c i n d i c a t o r s o f t h e c o m p a n y pr oj ec t m an ag er pr of es si on al ex pe rt s pe rf or m er s r is km an ag er s e x t e r n a l i n f o r m a t i o n justification of methods of managing economic consequences assessment of forecast risk coefficients forecasting of economic consequences of project risks in micro-logistic system baltic journal of economic studies 65 vol. 3, no. 5, 2017 c m ci i m 0 0 1 1 = = ∑ , (10) s m c ci i m 0 0 0 2 1 1 21 = −       = ∑( ) , (11) where i = 1,2,3 ..., m; di is the risk tolerance index; c0 is the vector of distances of i project; c0 is the arithmetic mean of the vector of distances of i project; ci0 is the distance between individual projects and the reference project; s0 is the standard deviation of the vector of distances of i project; m is the number of projects to be assessed. the closer the value of the risk tolerance indicator of the project to 1, the more promising the project. the limit value at the stage of making a decision on the selection of projects by the risk indicator is the arithmetic mean of the risk tolerance level: d m di i m = = ∑ 1 1 . (12) thus, with an assessment by different risk categories for each potential project, using taxonomic analysis of the set of estimates, it is possible to divide the projects into 2 subsets – the promising ones and those showing no promise. consider the following criteria component of creating the project innovation indicator  – “personnel”. in particular, using the theory of fuzzy sets, an analysis of the coefficient of compliance of the potential project operations performance with the required competence of the project manager is suggested. suppose that x = {x1, x2, x3} is a set of project operations, y = {y1, y2, y3} is a set of functions performed due to a certain competence, z = {z1, z2, ..., zm} is the set of competencies of the project manager required for the project implementation. фr:: x×y [0,1] is the membership function of the fuzzy binary relation r. for all x∈x and all y∈y function fr (x, y) is the degree of significance of a certain function execution (functional significance) for the performance of the relevant work when selecting the key competencies of the project. relation r in matrix form: y1 y2 … yp x1 φr x y1 1,( ) φr x y1 2,( ) … φr px y1,( ) r x= 2 φr x y2 1,( ) φr x y2 2,( ) … φr px y2,( ) … … … … … … … … … … … … … … … xn φr nx y, 1( ) φr nx y, 2( ) … φr n px y,( ) suppose that π: y×z→ [0,1] is a membership function of the fuzzy binary relation s. for all y∈y and all z∈z πs (y, z) is the degree of membership or the degree of compatibility of the key competency with functional significance. then in the matrix form, this relation is as follows: z1 z2 … zm y1 πs y z1 1,( ) πs y z1 2,( ) … πs y zm1,( ) s y= 2 πs y z2 1,( ) πs y z2 2,( ) … πs y zm2,( ) … … … … … … … … … … … … … … … yp πs y zp, 1( ) πs y zp, 2( ) … πs y zp m,( ) the relation t: x × z [0,1] is obtained, the elements of which are defined by the following membership function: µ π ai i r i y r y x z x y s y z x y , , , , ( ) = ( ) ⋅ ( ) ( ) ∑ ∑ φ φ for all x x y y z z∈ ∈ ∈, , . (13) the relation t in the matrix form: z1 z2 … zm x1 µa x z1 1 1,( ) µa x z2 1 2,( ) … µam mx z1,( ) t x= 2 µa x z1 2 1,( ) µa x z2 2 2,( ) … µam mx z2,( ) … … … … … … … … … … … … … … … xn µa nx z1 1,( ) µa nx z2 2,( ) … µam n mx z,( ) the sum φr y x y,( )∑ is equal to the degree of a fuzzy subset of functional significance y, indicating the level x, which is used in the study to assess key competencies z, µai ix z,( ) . the function zi can be interpreted as a weighted degree of necessity of availability of a competence to perform the work x. for all x1 and x2 of all z ∈ z and all λ∈[0.1], this function meets the condition: µ λ λ µ µai i i ai i ai ix z x z x z x z1 2 1 21, , min , , ,( ) + − ( )( )  ≥ ( ) ( )  µ λ λ µ µai i i ai i ai ix z x z x z x z1 2 1 21, , min , , ,( ) + − ( )( )  ≥ ( ) ( )  , (14) where λ is the size of the class interval, which will be calculated as follows: λ = −z z k max min , (15) where k is the number of classes, into which the variation of a sign should be split. for example, the number of competencies is 5-20 – the number of classes is 5, or the number of competencies is 20-35 – the number of classes is 7. baltic journal of economic studies 66 vol. 3, no. 5, 2017 at the same time, it should be noted that all μai (x, zi) are convex. and hence their overlap is convex functions as well. let us determine the condition, by which the threshold for the distribution of project operations will be limited, taking into account the key competencies of the project manager l x z x z i j x ai i ai j< ( ) ( ) min max min , , ,, µ µ . (16) then m x x x z x zi ai i j x ai i ai j= ( ) ≥ ( ) ( ) { }µ µ µmin max min , , ,, for all x mi∈ . (17) in this way, we obtain a level set that describes operations, focused on a certain key competence. subsequently, if the project is classified as a low or inappropriate level of competence of a project manager, a decision is made to review the composition of the team – in particular, the selection of a project manager, experienced in the field of the project issues. in case the replacement is not possible, the decision to reject the project may be made. however, provided that analytical data on other components of the project innovation indicator are taken into account. let us turn to the next component of the suggested indicator  – “quality”. in a market economy, the level of production performance can be considered as a measure of satisfaction of consumers’ needs at the minimum cost. at the same time, the key characteristic that shapes the needs of consumers in a competitive environment is the quality of projects product or products. the assessment of the quality of carrying out the processes of the project activity and production is possible using various methods  – differential, generalization, comprehensive, instrumental, statistical, etc. each of them has certain advantages and disadvantages. the calculation of the “quality” indicator according to the ideal matrix modelling (mazurkevich, 2009) is suggested on the basis of assessing the quality level of the project product in relation to the consumer’s requirements for the product. this interconnection is illustrated in fig. 2 suppose, x x x xn= { }1 2, , is the set of project operations (the technological capabilities of the organisation used to obtain the product); y y y yp= { }1 2, ,...   – a set of project product characteristics; z z z zm= { }1 2, ,...  – a set of consumer requirements for the product. φr x y: ,× → [ ]0 1   – a membership function of a fuzzy binary relation r (in matrix form  – φr x y( , ) ). for all x∈x and all y∈y function fr (x, y) is the degree of significance of carrying out a specific operation to implement the relevant characteristic of the project product. π:y×z→ [0,1] is the membership function of the fuzzy binary relation s. for all y ∈ y and all z ∈ z πs (y, z) is the degree of membership or the degree of compatibility of product characteristics with the consumer requirements for this product. then in the matrix form this relation is as follows: πs y z,( ) . the relation t: x × z → [0,1] is obtained, the elements of which are defined by the following membership function z z1 2, z z1 3, … z zm m−1, x1 µa x z1 1 1,( ) ^ µa x z2 1 2,( ) µa x z1 1 1,( ) ^ µa x z2 1 3,( ) … µam mx z1 1, −( ) ^ µam mx z1,( ) w x= 2 µa x z1 2 1,( ) ^ µa x z2 2 2,( ) µa x z1 2 1,( ) ^ µa x z2 2 3,( ) … µam mx z2 1, −( ) ^ µam mx z2,( ) … … … … … … … … … … … … … … … xn µa nx z1 1,( ) ^ µa nx z2 2,( ) µa nx z1 1,( ) ^ µa nx z2 3,( ) … µam n mx z, −( )1 ^ µam n mx z,( ) fig. 2. interconnection of quality with consumer requirements for the project product q u a l it y organizational aspect – technological opportunities c o n su m e r s r e q u ir e m e n t s target aspect – the degree of reaching the goal functional aspect – product properties baltic journal of economic studies 67 vol. 3, no. 5, 2017 µ π ai i r i y r y x z x y s y z x y , , , , ( ) = ( ) ⋅ ( ) ( ) ∑ ∑ φ φ for all x x y y z z∈ ∈ ∈, , . (18) then in the matrix form, this relation is as follows: µa x z,( ) . thus, µ µ a a åòàëîí x z x z , , % ( ) ( ) ×∑ ∑ 100 , (19) determines the organization’s ability to implement the expectations of consumers about this product, that is, determines the quality of the product for a particular consumer. µa åòàëîíi x z,( )∑ it is calculated using the formula: µ π ai i åòàëîí r åòàëîí s i åòàëîí y r åòàë x z x y y z x y , , , , ( ) = ( ) ⋅ ( ) ( ) ∑ ∑φ φ îîí y ∑ ∑             for all x x y y z z∈ ∈ ∈, , , (20) µ π ai i r åòàëîí s i y r åòàëîí y x z x y y z x y , , , , ( ) ( ) ⋅ ( ) ( )          ∑ ∑ ∑ φ φ                ×∑ 100% for all x x y y z z∈ ∈ ∈, , (21) the second relation is matching the needs: µ π ai i r s i åòàëîí y r y x z x y y z x y , , , , ( ) ( ) ⋅ ( ) ( )               ∑ ∑ ∑ ∑ φ φ           ×100% for all x x y y z z∈ ∈ ∈, , (22) the suggested technology of quality assessment as a part of a comprehensive indicator of the project innovation, unlike other technologies, considers the compliance of the project product characteristics with the consumers’ requirements and the options of a particular project. such information is extremely important for the manager at the stage of making a decision on the inclusion of a potential project in a projects portfolio or a program. in the next steps, the project manager calculates the data of three other components of the integrated project rejection of the project implementation no yes projects portfolio (programs) optimisation creation of an optimised projects portfolio (program) and allocation of resources in the projects bidders projects to be selected determination of basic parameters of each bidder project projects analysis for the selection to projects portfolio (program) based on the calculation w rejection of the project implementation no calculation of the project efficiency project inclusion into the projects portfolio or a program yes assessment of: risks management personnel quality innovations resources performers fig. 3. the place of the integrated indicator of the project innovation in the algorithm of the projects portfolio or program creation baltic journal of economic studies 68 vol. 3, no. 5, 2017 innovation indicator  – “resources”, “innovations” and “performers”. as a result, the matrix consisting of numbers from 0 to 1 is obtained. since the value of the ideal matrix should be 0, then this is a priority option, while the matrix with the value of 1 is the inadmissible option. further using the given formula (1), the project innovation indicator is directly defined. fig. 3 shows the place of the developed indicator of projects innovation in the general algorithm of the project portfolio (program) creation. the developed methods for project selection based on the innovation indicator considers the project portfolio and the program as a system of ordered elements and allows for simplification of the screening procedure and the reduction of the number of “redundant” projects, and thus provides the organization with an entirely new tool for making appropriate management decisions on the issue of assessment and choices. it can be argued that the use of a project innovation indicator will complement the classical project selection tools to project portfolios or development programs. however, at the same time, all the criteria must be defined and approved by senior management, the limitations should be established by the appropriate departments, all analytical project data shall be recorded in the relevant documents, potential conflicts between projects must be timely discovered and eliminated. the created projects portfolio/program in the future should be checked for sensibility and go through the process of optimization. for example, using the recurrence relation of richard bellman. however, it should be noted that some of its components can be calculated on the initial stages using the expert method only, which slightly reduces the accuracy of results. this method of individual expert estimations is based on the expression of expert opinions independently of each other and on the use of these opinions as the final result of the expert evaluation. however, this disadvantage may be neutralized or minimized. in order to do this, in the course of processing the results of the expert survey, the expert opinions consistency analysis is required using a concordance coefficient. the confidence estimation of the expert survey results must also be carried out using a delphi method. 7. conclusions to date, there are numerous approaches to the selection of projects both on the basis of qualitative and quantitative indicators. methods for project financing analysis, scenario methods, optimization, cost-benefit method, and other methods can be used for the assessment and option selection. summarizing the results, it is worth noting that the use of the project innovation indicator for this purpose is feasible as it has certain advantages. among them are: simplicity, ease of use, performance, measurability, and adaptability. all of its components are available to the manager or the project manager at an early stage, and they allow getting a comprehensive overview of the project. the above complements the classical methods of alternative analysis, increases the efficiency of the application of the project management tools, especially at the stage of project selection to a portfolio or a program. according to the tasks, the following conclusions are obtained: 1. an integrated factorial projects innovation indicator is created, which is defined as the sum of the results of parametric single estimates and weight coefficients of the factors under analysis. based on the review conducted by the existing indicators of project selection and the results of previous studies, suggested the following composition of criteria for defining the projects innovation indicator: risks, personnel, quality, innovation, resources and performers. according to the authors, these components are optimal in terms of the completeness of the scope of potential projects analysis for the involvement in a particular program or projects portfolio. after all, as a result of the application of the suggested innovation indicator, it is possible to obtain information on the degree of innovation and risk tolerance of the project. and whether there are sufficient resources available, if the project manager’s set of competencies meets requirements of the project operations, and whether the project product is in compliance with requirements of customers. it is found that the innovation of projects can be considered as necessary and sufficient information for making optimal decisions. and since this value is non-dimensional, there is the possibility of comparing different projects to each other and making appropriate managerial decisions, based on a particular, measurable characteristic. 2. risk tolerance is selected as the key criterion for the “risks” component and the reference characteristic, in relation to which it can be argued that this project holds promise. after all, the ability to withstand the current destabilization processes of a business environment due to particular characteristics is one of the most important qualities. a tool for calculating the risk tolerance based on the use of matrices and vector analysis is suggested. it is found that since the risk category estimates may be heterogeneous, in order to eliminate the perversion, it is necessary to carry out a procedure for their standardization. the limit value at the stage of making a decision on the selection of projects by the risk indicator is the arithmetic mean of the risk tolerance level. thus, the closer the value of the indicator of the project risk tolerance to 1, the more promising the project will be considered. 3. the calculation of the “personnel” component is presented based on the analysis of the coefficient of compliance of potential project operations with the required competencies of the project manager, employing baltic journal of economic studies 69 vol. 3, no. 5, 2017 the theory of fuzzy sets. an algorithm for determining the conditions, limiting the threshold of the project works distribution, considering the key competencies of the project manager, is provided. an equation for describing the work focused on a certain key competence is obtained. the criterion for making a positive decision on the selection of projects by the “personnel” indicator will be the maximum correspondence of a set of competencies of the project manager to a set of certain project operations, or vice versa. 4. the calculation of “quality” component on the basis of ideal-matrix simulation is proposed. a mathematical model for determining the prospects of implementing consumers’ expectations regarding the project product is obtained. therefore, the suggested technology of quality assessment as a part of a comprehensive project innovation indicator, unlike other technologies, considers the compliance of the project product characteristics with the consumers’ requirements and the options of a particular project. the best project will be the one with the maximum degree of significance of a particular work to implement the appropriate characteristics of the project product and the maximum degree of compatibility of product characteristics with the consumer requirements for this product. the results of the research can be used for further development of scientific and methodological foundations to form a balanced system of indicators of innovative projects. the implementation of the results obtained represents a methodological and organizational basis for creating effective systems and technologies for managing the programs and project portfolios both at the level of individual enterprises and at the regional level. the next step in this study may be the application of the suggested innovation indicator, as one of the components of the mathematical model for calculation of projects clusters, because the need to activate the innovation factor under conditions of significant regional inequality stimulates interest in the theory of innovative regional clusters. thus, with the availability of a certain cluster of projects that may be included in the program, it is necessary to conduct the qualitative and quantitative selection of projects. at the same time, qualitative selection can be started by constructing a matrix of combined criteria and project distribution within this matrix. such a matrix can be created for a combination of such criteria as: “the project innovation indicator – profit” or “the project innovation indicator – profitability”. references: arsenyev, ya. n., & davydova, t. ya. (2017). problem business risk management. topical questions of contemporary science, aspekt publishing, 41. boock, m. h., & chau, m. (2013). the use of value engineering in the evaluation and selection of digitization projects. evidence based library and information practice, 2(3), 76-86. chang, y. f., & ishii, h. (2013). probing the implementation of project management office by using dematel with a hybrid mcdm model. journal of japan society for fuzzy theory and intelligent informatics, 25(6), 935-948. kataev, d. s. (2014). matrichnoe upravleniе trudovyimi resursami promyishlennyih predpriyatiy. upravlinnya proektami ta rozvitok virobnitstva, 1(49), 55-63. kolyada, o. p. (2010). instrumentalnyi zasib vidboru proektiv u portfel vyshchoho navchalnoho zakladu v ramkakh kontseptsii stratehichnoi yednosti. vostochno-evropeiskyi zhurnal peredovykh tekhnolohyi,1/2 (43), 31. kuo, sh.-y., chang, k.-w., & chen sh.-ch. (2013). decision-making on transport policy: a comparison between scholars and stakeholders. journal of the eastern asia society for transportation studies, 10, 335-349. kutsekon, l. o. (2009). innovatsiyi yak obektivna neobhidnist zabezpechennya konkurentospromozhnosti ekonomiki. strategiya innovatsiynogo rozvitku ekonomiki ta aktualni problemi menedzhment-biznes osviti, 191-194. maliy, v. v., antonenko, s. v., & mazurkevich, a. i. (2008). riven innovatsiynosti proektu. upravlinnya proektami ta rozvitok virobnitstva, 1(25), 9-12. martin, j., & william, p. (2000). value based management. the corporate response to the shareholder revolution. harvard biasness school press, 249. mazurkevich, a. i. (2009). model otsenki kachestva. upravlinnya proektami stan ta perspektivi, 127-128. morozov, v. v., & osetrin, k. m. (2009). rozrobka modeli formuvannya portfelya budivelnih proektiv. upravlinnya proektami stan ta perspektivi, 59-60. ohara, sh. (2010). the logical context and evolution of p2m program life cycle management: in pursuit of sustainable and seamless innovation in global competition. journal of international association of project & program management, 5, 23-40. rach, v. a., kolyada, o. p., & antonyan, e. a. (2009). metod invariantnyih pokazateley opisaniya strategiy razvitiya kak instrument formirovaniya portfelya proektov. upravlinnya proektami ta rozvitok virobnitstva, 2(30), 90-101. semko, i. b., & olenikova, t. yu. (2010). sinergetichniy efekt portfelya proektiv. vostochno-evropeiskyi zhurnal peredovykh tekhnolohyi,1/2 (43), 60-62. zachko, o. b., rak, yu. p., & rak, t. ye. (2008). pidkhody do formuvannia portfelia proektiv udoskonalennia systemy bezpeky zhyttiediialnosti. upravlinnya proektami ta rozvitok virobnitstva, 3(27), 54-61. baltic journal of economic studies 242 vol. 4, no. 1, 2018 corresponding author: 1 department of administrative activities and economic security, odessa state university of internal affairs. e-mail: kav1312@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-242-247 classification of forms of shadow economic activity from the viewpoint of ensuring economic security andrii kubaienko1 odessa state university of internal affairs, ukraine abstract. the article explores the problem of economic security and its important institutional threat – the shadow economy. the evolution of approaches to the problem of the shadow economy, external and internal conditions of functioning of the shadow economy are considered. the shadow schemes, which are used by some business entities to evade taxes, are revealed. the research objective – to explore the evolution of approaches to the problem of the shadow economy as an institutional threat to economic security, to reveal shadow schemes, by which business entities for the purpose of tax evasion, propose a classification of the shadow economy that can be used by fiscal and supervisory bodies in developing practical measures to reduce the impact shadow economy on the economic security of the state. the methodological and theoretical basis for the article is general scientific and special methods of the theory of knowledge: system analysis and synthesis (in the study of the essence and conceptual provisions of the theory of economic security), synergistic representations (in the study of the shadow economy), logical generalization and the complex goal approach shadow economic activity), the program-target approach (in the formation of measures to counteract the shadow economy). suggestions for the classification of shadow economic activities that various economists propose vary considerably depending on the period of research, goals and tasks that the authors consider to approach. the article examines the existing approaches to the analysis of the shadow economy, systematizes the external and internal conditions of its existence, proposes a classification of ways to transfer resources to the shadow turnover at the level of the business entity. schemes of tax evasion are considered as a way of transferring resources to the shadow economy. unified schemes of tax evasion are considered as an integral element of the shadow economy, as well as shadow economic activity in areas not related to taxation. based on the analysis of existing schemes for the transfer of economic activity into the shadow turnover, it is proposed to classify the methods of economic evasion from social norms, rules, and obligations. practical implications. the application of the proposed classification will greatly simplify the information interaction between those structures that oppose the shadow economy; this will allow more purposeful implementation of counteraction to shadow economic transactions, which are institutional threats to economic security. key words: shadow economy, economic security, institutional threat, shadow turnover, doctrine of “business purpose”. jel classification: в40, в52, е62, н26 1. introduction the problem of ensuring the economic security and overcoming the shadow economy arose simultaneously with the emergence of new national interests in general and in economic ones in particular. it is these processes that are taking place in ukraine today. with varying degrees of urgency, this problem is relevant for many other countries, regardless of their level of economic development. but they become especially relevant in economic systems that function in the conditions of a deep transformational crisis. under such conditions, the study of the issues of overcoming the threats to economic security is of great importance and testifies to the urgency of solving the existing problems faced by economists-practitioners, leaders, scientists, and the government. the shadow economy is an institutional threat to the economic security of ukraine, the depth of research of this problem requires a detailed classification of this ambiguous phenomenon. relevant scientific researches and issues analysis. questions of economic security and the classification of forms of shadow economic activity are considered in a number of works of foreign and domestic scientists, such as z. gerasimchuk, о. golovchenko, a. danilian, v. zakharchenko, v. kizim, t. klebanova, e. kovalev, baltic journal of economic studies 243 vol. 4, no. 1, 2018 t. kovalchuk, g. pasternak-tarnaushenko, r . sitnik, m. chumak, v. shlemko, g. becker, k. boulding, g. grossman, j. buchanan, а. katsenelinboigen, m. olson, a. portes, h. de soto, j. ubarra, e. feige, k. hart, and others. defining uninvestigated aspects of the general condition. suggestions for the classification of shadow economic activities that various economists propose vary considerably depending on the period of research, goals and tasks that the authors consider to approach. the research objective is: a) to explore the evolution of approaches to the problem of the shadow economy as it is an institutional threat to economic security; b) to reveal shadow schemes, which two business entities can resort to for the purpose of tax evasion; c) to propose a classification of the shadow economy that can be used by fiscal and supervisory bodies in developing practical measures to reduce the impact of the shadow economy on the economic security of the state. the methodological and theoretical basis for the article is general scientific and special methods of the theory of knowledge: system analysis and synthesis (in the study of the essence and conceptual provisions of the theory of economic security), synergistic representations (in the study of the shadow economy), logical generalization and the complex goal approach shadow economic activity), the program-target approach (in the formation of measures to counteract the shadow economy). 2. types of the shadow economy often researchers (gerasimchuk, vavidyuk, 2006), (golovanov, perekislov, fadeyev, 2003), (golovin,1992), (zlupko, 1996), (grossman, 1977) analyse two types of existence of the shadow economy: the shadow economy of the first type is an independent sector of the economy with an individual production function that differs from the legal economy, while the second type deals with a hidden aspect. this type of shadow economy is mainly typical for the command and administrative system and for the economy of poor countries, in a number of cases it can be observed in a developed market economy, for example, when describing the shadow market of foreign currency, as well as a number of other goods and services, the turnover of which is strictly regulated by the state. according to g. grossman (1977), the determining influence on the development of shadow markets is an exaggerated demand for goods and services. in his study, k. boulding (1947) goes further, he believes that the size of the offer directly depends on the value of additional costs, namely penalties, and the offer price is the less, the higher the penalties for consumers. the second type of shadow economy is observed in the market environment and represents a hidden version of the legal economy with an identical production function. the difference lies in the external social environment, which under the influence of a number of factors forms a number of conditions for the functioning of shadow activities (tab. 1). for the purpose of investigating the manifestations of the shadow economy, such as that which is subject to taxation, we classify the ways of transferring resources to the shadow turnover. the classification is based on the model of the functioning of a business entity in the business environment (fig. 1). depending on the stage of the economic activity process, it is possible to identify ways of transferring resources into the shadow turnover that arise in the production process, as well as in the implementation of input and output commodity and financial flows. for the purposes of investigating the behaviour of the shadow economy, as an economy, which is a threat to economic security and has acquired the character of a non-legal social institution (tarasova, 2014), and is not also subject to taxation, we have classified the methods of transferring resources to the shadow economy. the classification is based on a business model of a business entity in its business environment (figure 1). in cases where the shadow activity of a subject is identified by any person, the reporting details of the table 1 external and internal functioning conditions of shadow and legal economy operating conditions shadow economy legal economy information availability maximally closed frankness of information (with the exception of information that carries commercial secrets) temporary orientation oriented to short-term development oriented to long-term development the nature of communication between participants mainly locally oriented connections global connections (designed for many users) social security of participants none guaranteed by the country legal support determined by participants determined by the country currency dirty money, barter cashless funds and hard currency risk assessment increased risks associated with the possibility of being revealed by the controllers standard risks caused by such a type activity and socio-economic condition of the environment source has been elaborated by the author baltic journal of economic studies 244 vol. 4, no. 1, 2018 economic entity identify the forfeit amounts or the reimbursement of losses that arise due to non-fulfilment of obligations. transferring resources into the shadow economy with tax evasion is carried out through tax evasion schemes. in order to determine uniquely what actions of economic entities fall under this concept, it is necessary to consider the doctrine of “business purpose”. the doctrine of the “business purpose” is that the operation consisting in reducing taxes and not any other economically justified or management purpose can be declared invalid. the determination of the existence of reasonable economic or any other reasons in the actions of the taxpayer is carried out taking into account the assessment of circumstances that indicate his intention to obtain an economic effect as a result of real business or any other economic activity. any operation should have any commercial purpose, that is, the direction for profit, which is the meaning of the entrepreneurial activity. taking into account that it is not obligatory, an operation should have a direct aim of obtaining profit. basically, this is usually the case, but the commercial goal which is profit can sometimes be achieved in the chain of operations, some of which can even be planned as unprofitable. for instance, a taxpayer may sell goods fig. 1. classification of ways to transfer resources into the shadow turnover at the level of the business entity source has been elaborated by the author ways of resources transfer into the shadow turnover according to the type of information source about the shadow activity by the type of counterparties by the stage of economic activity shadow activity that appears in the process of conducting business transactions with suppliers (contractors) shadow activity that appears in the process of carrying out business transactions with customers (clients) shadow activity that appears in the process of conducting business transactions with personnel shadow activity that appears in the course of economic transactions with state service shadow activity that appears in the process of carrying out economic transactions with the founders (owners) of enterprise shadow activity that appears in the process of interaction with other persons (e.g., with competitors) shadow activity that appears in the process of interaction with the environment information on the shadow activity, which is found from the reporting documents, regardless of its identification by any person information on the shadow activity, which finds its reflection in the reporting documents only after its identification by certain person shadow activity that appears in the production process shadow activity that appears in the process of the implementation of incoming commodity or financial flows shadow activity that appears in the process of carrying out outgoing commodity or financial flows baltic journal of economic studies 245 vol. 4, no. 1, 2018 below the market value in order to capture a particular market segment and promote a new product. in this case, although the operation will be unprofitable, it will be aimed at making a profit in the future. in practical terms, the doctrine of “business purpose” is revealed in such cases where the actions of the taxpayer deliberately have no other purpose than to reduce the tax burden. for example, carrying out unprofitable operations as an interdependent business entity in order to reduce the base of taxation. proceeding from the doctrine of “business purpose”, one should proceed to the definition of actions that termed as tax evasion. 3. ways of tax evasion tax evasion refers to financial and economic operations that do not have a business purpose but are aimed at obtaining unwarranted tax benefits. the evasion of taxation involves the construction of specific models of financial and economic activity, accounting and tax accounting, and documenting economic turnover. an unreasonable tax benefit can be obtained through a tax deduction, tax evasion, and unlawful tax reimbursement from the budget. therefore, it is possible to formulate a definition of a scheme for evading the budget. the scheme of tax evasion is a set of financial and economic activities and their display in the documentary of the payer of taxes intended to receive unreasonable tax benefits in the absence of a “business purpose”. this is a typical set of actions to avoid taxation with minor changes, which is often used by taxpayers. an analysis of the guidance materials of the state fiscal service and publications on minimizing the tax burden demonstrates a significant variety of schemes for tax evasion (golovchenko, 2015). for example, in the information base of the fiscal services of odessa, data on 190 patterns of tax evasion have been collected. such a variety of actions of unscrupulous taxpayers complicates the identification and prosecution of tax evaders. at the same time, among the applied schemes, it is possible to allocate a sufficient number of template actions for evading taxation. many schemes use the same principles for concealing the taxable base and the schemes themselves are distinguished by minor nuances that are often due to the organizational and legal form, sectoral and regional specifics of the activity of taxpayers. in spheres that are not connected with taxation, shadow economic activity is carried out by means of evasion from public norms, rules, obligations. there are many examples of such actions, for example, doing business without licenses, copyright infringement. these operations combine the existence of evasion of certain financial obligations or from the performance of compulsory actions, the implementation of costs. evasion provides a kind of “economy” and, as a result, an unreasonable gain. evasion is impossible without deliberate distortion or concealment of facts that are significant for the emergence of obligations. such actions are distinguished by a variety of forms that are constantly changing and improved by persons who carry out shadow economic activities, with the aim of complicating the identification of the true meaning of operations. disclosure of actual information about the nature of the shadow economic operation should lead to imposing sanctions on the business entity that carries out these operations. 4. classification of forms of shadow economic activity economic evasion from social norms, rules, and obligations is a set of financial and economic operations and their display in the document circulation of an economic entity aimed at obtaining unreasonable benefits. at the same time, deliberately distorted or hidden facts that are important for the emergence of obligations to the state or other economic entities. the variety of actions for economic evasion complicates the identification and bringing to justice of organizers of shadow economic operations. in the meantime, among the methods that are applied, a lot of template actions can be distinguished. based on the analysis of guidance documents and publications on identified economic and tax violations, such criteria were formulated for grouping ways of avoiding public norms, rules, and obligations (fig. 2). the classification is focused on identifying schemes, which are used by business entities. the criteria for grouping the composition of participants take into account the fact that, usually, evasion schemes are implemented through specific counterparties. participation in the operations of interdependent flyby-night companies (enterprises that were created for fictitious operations), offshore structures are one of the indicators of the possible application of the scheme of evasion by the business entity. the classification criteria from the “form of operations” group, which are used to conceal or distort information, must be constantly updated. in order to complicate the detection of deviations, unscrupulous entrepreneurs constantly modify and find new ways of hiding or distorting information, often using the instability of ukrainian legislation. the actualization of classification characteristics should be carried out on the basis of systematization of the results of monitoring work. the classification has as its goal the development of unified methodological bases for identifying shadow economic activity in various spheres. the proposed classification will also ensure the creation of a data basis structure for preventing evasion of public norms, rules, and elements, which will effectively counteract the shadow manifestations in economic activities and, as a consequence, strengthening of the country’s economic security. baltic journal of economic studies 246 vol. 4, no. 1, 2018 with their help, information support can be provided for making decisions on conducting control measures. 5. conclusions as a result of the research, two types of shadow economy are identified. the first type is the shadow economy as an independent sector of the economy, with an individual production function different from the official economy. this type of shadow economy is typical, mainly for the commandadministrative system and for the economy of poor countries, in a number of cases it can be observed in a developed market economy. the second type of shadow economy can be observed in the market environment and it is a hidden version of the official economy with an identical production function. the main difference is in the external social fig. 2. classification of ways of economic evasion from public norms, rules, obligations source has been elaborated by the author c la ss if ic at io n of w ay s of e co no m ic e va si on fr om p ub lic n or m s, r ul es , o bl ig at io ns by the composition of participants of the method of evasion participation in schemes of interdependent persons participation in fly-bynight firms presence of foreign economic activities in the scheme of participants participation in the schemes of offshore structures in the presence of industry specifics for distorted accounting object profit expenses assets liabilities privileges by the method of inflicting damage on budgets of all levels, business entities evasion of charging obligations to the state, counterparties evasion of payment of obligations illegal receipt of money resources or other resources from the state, managing subjects by the degree of complexity of implementation simple (implemented independently on the basis of “exchange of experience”, (for example, unprofitable revenue) complex (requires the involvement of specialists for the implementation of: lawyers, auditors and others.) by the form of implementation abuse of disadvantages in the exchange of information between the controllers concealment of proceeds from the sales of goods, works, services creating fictitious costs application of transfer pricing unjustified use of benefits creating information about product properties re-qualification of relations between business entities the use of financial and economic instruments of entrepreneurial activity solely for the purpose of evasion illegal “discounting” of mandatory payments formation of unlawful deferrals of mandatory payments direct concealment of accounting objects in order to prevent the occurrence of liabilities baltic journal of economic studies 247 vol. 4, no. 1, 2018 environment, which under the influence of a group of factors forms a number of conditions for the functioning of shadow activities. the external and internal conditions of functioning of the shadow and official economy are investigated and their classification is proposed. systematization of the ways of transferring resources to the shadow turnover is carried out, which is based on the model of the functioning of the business entity in the business environment. depending on the stage of the process of economic activity, ways of transferring resources to the shadow turnover that arise in the production process, as well as in the implementation of input and output commodity and financial flows, are identified. the sources of information that characterizes the shadow activity are also investigated. the transfer of resources to the shadow economy in case of tax evasion is carried out using tax evasion schemes. the doctrine of “ business purpose” is proposed, which consists in the fact that an operation aimed solely at reducing taxes, and not any other economically justified or economic goal, can be recognized as invalid. among the shadow schemes that are used to evade taxation, similar principles are singled out for concealing the taxable base. based on the analysis of instructive documents and publications on identified economic and tax violations, criteria are formulated for grouping ways of avoiding public norms, rules, and obligations: the composition of participants in the methods of evasion; the presence of specificity in the types of economic activity; distortion of the accounting object; ways of causing damage; degree of complexity of implementation; forms of operations used to distort information. the developed classification will allow structuring databases on ways of evasion from taxation and transfer of economic resources to shadow turnover. practical application of the proposed classification will greatly simplify the information interaction between structures that oppose the shadow economy, which will allow more purposeful implementation of counteraction to shadow economic transactions as an institutional threat to economic security. references: gerasimchuk z.v., vavidyuk n.s. (2006) ekonomichna bezpeka rehionu: diahnostyka ta mekhanizm zabezpechennya [the economic security of the region: diagnostics and mechanism of its ensuring]. lutsk: nastirya. (in ukrainian) golovanov n.m., perekislov v.e., fadeyev v.a. (2003) tenevaya ékonomika i legalyzatsyya prestupnykh dokhodov [the shadow economy and legalization of criminal incomes]. st. petersburg : peter. (in russian) golovin s.d. (1992) o klassyfykatsyy yavleniy tenevoy ékonomiki [on the classification of phenomena of the shadow economy]. vestnik mgu. series: the economy, no. 1, pp. 40-46. (in russian) efremov k.i. georgadze e.i. (2002) voprosy otsenki ékonomycheskoy bezopasnosti regiona [issues of assessing the economic security of the region]. problems of statistics, no. 2, pp. 57-59. zlupko s.m. (1996) ukrayinska rehionalistyka: tendentsiyi, zdobutky, problemy [ukrainian regionalism: trends, achievements, problems]. regional economics, no. 1, pp. 124-131. grossman g. (1977) the "second economy " of the ussr . problems of communism. – wash., vol. 26, no. 5, pp. 25-40. boulding k. (1947) a note of the theory of the black market. canadian journal of economics and political science,vol. 13, no. 1, pp. 115-118. tarasova i.i. (2014) doslidzhennya teoriyi instytutsionalizmu v upravlinni ekonomichnymy ta suspilnymy instytutamy [investigation of the theory of institutionalism in the management of economic and social institutions]. scientific journal "economic journal – xxi", no 11, pp. 11-14. (in ukrainian) golovchenko o.m. (2015) systema otsinky ekonomichnoyi bezpeky rehioniv v suchasnykh sotsialno-ekonomichnykh umovakh [the system of assessing the economic security of the regions in modern socio-economic conditions]. prosseding of the kontseptualni zasady ekonomichnoho i pravovoho zabezpechennya bezpeky derzhavy v umovakh yevrointehratsiyi (ukrain, odessa-cherkasy, april 28-29, 2015), odesa: oduvs, 2015, pp. 24-28. (in ukrainian) baltic journal of economic studies 38 vol. 3, no. 3, 2017 corresponding author: 1 department of finance and banking, pryazovskyi state technical university. e-mail: mavinamaryna@gmail.com the concept of reflexive management of consumer demand maryna mavrina1 pryazovskyi state technical university, ukraine abstract. development of theoretical approaches of demand management is conducted from the moment of awareness of the importance of this concept. many models of individual consumers were developed. however, to predict the reaction of consumers to the commercial policy of the enterprise, exact methods do not exist yet because the available ones are mostly empirical in nature. models of behaviour often do not provide the expected result because they use an erroneous approach to the analysis of the mechanism of demand formation. the subject of the research is the theoretical and methodological basis, methods of assessment, and reflexive management of consumer demand of commercial enterprises. the purpose of the paper is developing a concept of reflexive management of consumer demand. to achieve the research goal, the following tasks are set and solved: to substantiate the theoretical and methodological foundations of reflexive consumer management, to analyse existing approaches to the modelling of consumer behaviour; to improve the model of consumer behaviour; to develop a concept of reflexive management of consumer behaviour. methodology. in the paper, we use such methods and approaches to research as: reflexive approach (phenomenological method), behavioural economic theory, marketing approach, abstract-logical analysis, analysis of theoretical approaches to the modelling of consumer behaviour. results. modern approaches to modelling of consumer behaviour are mostly empirical in nature and have shortcomings of general models. in them, there is no description of specific situations of the purchase of goods. they cannot be quantified. therefore, they cannot be practical models. but they have a weighty advantage in a comprehensive look at motivated purchases, what makes it possible to evaluate the relevance of individual variables and to understand the fundamental processes of consumer behaviour. it makes possible to identify the variables necessary for the research, gives rise to the construction of a hypothesis. practical implications and originality of the results obtained are the development of the concept of reflexive management of consumer demand, which will allow taking into account personal preferences of potential customers in the activity of a commercial enterprise. the concept envisages the use in the practice of targeted impacts on consumer information channels and promotes competitive advantage. the model of the process of consumer acceptance of the purchase decision is improved, taking into account the personal preferences of the target consumer. the model of the process of consumer acceptance of the purchase decision is improved. all this allows us to determine the key steps in the decision-making process by the consumer with the aim of developing a complex of reflexive influences. key words: consumer demand, consumer behaviour, model of consumer behaviour, demand management, marketing, reflexive management. jel classification: b1, d11, d12, m31 1. введение спрос представляет собой для коммерческого предприятия главный объект конкурентной борьбы и как результат эффективной работы, выражающийся в конкурентоспособности. сама же конкурентоспособность понятие относительной, т.к. показывает способность предприятия создавать востребованный продукт по сравнению с аналогами в определённых территориальных границах, будь то регион, страна или целый континент. так же на неё оказывает влияние потенциал рынка, стоимость входа в него, уровень однородности и т.д. развитие теоретических под ходов управления спросом ведутся с момента осознания представителями экономической науки важности данного понятия. с усложнением теоретических под ходов к анализу экономического поведения с точки зрения психологической природы человека было разработано множество моделей индивидуальных потребителей. однако для прогнозирования baltic journal of economic studies 39 vol. 3, no. 3, 2017 реакции потребителей на коммерческую политику предприятия в условиях не ценовой конкуренции точных методов пока не существует, потому что имеющиеся носят преимущественно эмпирический характер. так же необходимо признать, что используемые модели поведения часто не обеспечивают ожидаемый результат по причине ошибочного под хода к анализу механизма формирования спроса как такового. целью исследования является разработка концепции рефлексивного управления потребительским спросом. для достижения цели исследования поставлены и решены такие задачи: обосновать теоретико-методологические основы рефлексивного управления потребительским спросом; выявить и проанализировать существующие подходы к моделированию потребительского поведения; усовершенствовать модель потребительского поведения; разработать концептуальные положения рефлексивного управления поведением потребителей. в работе использованы такие методы и подходы к исследованию: рефлексивный подход (феноменологический метод), поведенческая экономическая теория, маркетинговый подход, абстрактно-логический анализ использован при исследовании теоретико-методологических основ управления взаимодействиями, анализе теоретических подходов к моделированию потребительского поведения, разработке концепции рефлексивного управления поведением потребителя, при теоретическом обобщении и формулировании выводов. 2. сущность рефлексивного управления спросом управление взаимодействиями в коммерческом предприятии заключается в создании стратегии нацеленной на удовлетворение потребностей существующих и потенциальных клиентов. поэтому спрос является основополагающим фактором работы предприятия и одной из главных переменных рынка наряду с предложением и ценой (kotler, 1984). т.к. под спросом скрываются желания, готовность и возможность экономических субъектов приобретать необходимые для них товары (услуги), то на первый план исследований выходят механизмы принятия потребительских решений или модели поведения, для выделения перспективных направлений воздействий с целью получения конкурентного преимущества и дальнейшего финансового роста предприятия как экономического агента. ориентация на нужды и потребности целевых клиентов, подкрепленная адекватной системой управления хозяйственной деятельностью, нацеленной на создание потребительской удовлетворённости в качестве основы для достижения поставленных целей предприятия, является гарантией успеха. таким образом, понятие «взаимодействие» является важной составляющей деятельности предприятия, без учёта которой невозможна эффективная работа в условиях рынка. вопросам теории рефлексии уделяют внимание большое число исследователей, среди которых в.а.  лефевр, в.е.  лепский, г.п.  щедровицкий, е.н. емельянов, а.в. карпов, а.с. шаров, и.н. семёнов, с.ю.  степанова, г.м.  андреева, а.а.  бодалёв, и.с. ладенко, а.в. россохин и др. впервые рефлексивное управление (ру), как научное понятие ввёл советский и американский психолог и математик, создатель концепции рефлексивных игр в.а. лефевр. он представил математический подход к социальной психологии в «теории рефлексии». описал человеческое поведение в виде уравнений, параметрами которых выступают воздействие мира на субъект, субъективный образ этого воздействия и интенция самого субъекта (lefevre, 2003). рефлексивное управление в.а. лефевр определяет как процесс передачи оснований для принятия предопределенного решения (lefevre, 2009). он истолковывает ру как особый способ получения информации, о взаимодействующих субъектах, исследуя рефлексивную систему, в которой важная роль отводится занимаемым персонажами рангам рефлексии, плацдарму, операторам осознания. например, рефлексия первого ранга – это собственные представления субъекта о внешнем мире. второго ранга  – представления о себе и другом персонаже. третий ранг – на уровне второго ранга имея представления о взглядах других персонажей. по своей сути они соответствуют процессам осознания окружающей реальности субъектами исследуемой рефлексирующей системы. теоретическое количество рангов не ограничено. ранги рефлексии изображены на рис. 1–3. y y рис. 1. первый ранг рефлексии x y y x рис. 2. второй ранг рефлексии x y x y x рис. 3. третий ранг рефлексии baltic journal of economic studies 40 vol. 3, no. 3, 2017 из-за сложности графического и естественного изображения рефлексивных процессов в.а. лефевр разработал специфический аналитический аппарат со специальным «алгебраическим языком» в виде рефлексирующей системы. место осуществления ру является некий условный «плацдарм» т, на котором действуют персонажи, например x,y. учитывается момент времени «осознания» ситуации ti. в процессе осознания происходит понимание или «физической реальности», или картины происходящего вокруг. как следствие, возникают элементы вида тх и тхх соответственно. для наглядности, изобразим процесс взаимодействий персонажей показанных на рисунках 1-3. в момент t0 у субъекта y нет внутренних картин (рис.1). рефлексивная система имеет вид плацдарма t. рефлексивная система на рис. 2 в момент времени t1 принимает вид суммы (1) и состоит из плацдарма т и картины плацдарма перед y: tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= . (1) рис. 2 соответствует многочлен (2): tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= . (2) для фиксации процесса осознания используется специальный формализм  – оператор осознания (ω). он является формальным способом изображения перехода рефлексивной системы от одного состояния в другое, т.е. представляет собой схематичное представление естественного понимания рефлексии как таковой. а само состояние рефлексирующей системы приобретает вид специфического многочлена ω = тω . выразим на алгебраическом языке процессы перехода картин на рис. 2 в рис. 3 и т.д. для этого плацдарм умножим на оператор осознания 1 + y и получим результат в виде многочлена (3): tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= . (3) для дальнейших превращений полученный многочлен ω1 снова умножаем на оператор осознания, который принимает вид в данном случае, ω = 1 + x и получаем выражение (4) эквивалентное (2): tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= . (4) следовательно, представленной графически процедуре осознания на рис. 1-3 соответствует алгебраическая операция умножения многочленов (1+y) (1+x). данное осознание является последовательным, но оно может быть и одновременны, тогда оператор осознания становится (5): tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= , (5) многочлен рефлексирующей системы примет вид выражения (6): tytω1 += ( ) tyxtxtytxtyttytω2 +++=+++= ( ) tyty1tω1 +=+= ( )( ) ( ) tyxtxtytxtyttytx1y1tω2 +++=+++=++= xy ++= 1ω ( )nn xy1tω ++= , (6) где n – число осознаний. подобным изображением сложных типов социальных взаимодействий, которые практически невыразимы естественным языком, в.а. лефевр значительно расширил возможности их исследования для дальнейшего ру (lefevre, 2009). р.н. лепа в (lepa, 2012) отмечает, что рефлексивное управление процессом принятия решения управляемым субъектом происходит посредством оказания воздействия на его психику. в этот процесс так же входит расчёт эффективности осуществленного воздействия. при этом для стороны, ведущей рефлексивное управление, важно не только отслеживать поведение конкурента и реагировать на его действия, но и упреждать его намерения, периодически вводя в заблуждение относительно собственных намерений. 2. подходы моделирования потребительского поведения значение изучения взаимодействий между коммерческим предприятием и потребителем, которые действуют в постоянно изменяющихся условиях рынка, трудно переоценить, т.к. от этого зависит спрос и сбыт создаваемого продукта и как следствие результат деятельности самого предприятия. знания модели поведения потребителя или различных групп потребителей дают непревзойдённое конкурентное преимущество виде перспективных направлений воздействий на клиентов для формирования надёжных взаимовыгодных отношений. представители экономической науки, начиная со времён зарождения классической школы и до сегодняшнего дня, продолжают исследовать разные аспекты теории поведения потребителя: факторы разного характера, влияющие на поведение, непосредственный процесс принятия решения о покупке, рациональность и иррациональность выбора, учёт неопределённости, недостаток информации. первые идеи экономического поведения людей в качестве потребителей появились в эпоху нерегулируемых рыночных отношений. а именно, в классической политической экономии и связаны с именем адама смита (1723-1790)  – английского ученого-экономиста конца xviii в. в своём величайшем труде «исследование о природе и причинах богатства народов» 1776 г. опубликования, потребитель впервые выступает объектом исследования. модель «homo economicus» описывает частный случай потребительского поведения, основанного на склонности к обмену и стремлениях к лучшей жизни, с присущим людям эгоизмом (yadgarov, 2009). таким образом, первые попытки представления и объяснения поведения человека в рамках экономической науки связаны с именем а. смита. маржинализм стал исторически первой экономической школой, заинтересовавшейся проблемой потребительского выбора. сделав принцип субъbaltic journal of economic studies 41 vol. 3, no. 3, 2017 ективности ценности благ основой анализа поведения, тем самым заложил фундамент математического моделирования экономического поведения. последователи этого направления использовали данные наблюдений, идеи философии и этики. именно маржинализму мы обязаны появлением понятия полезности и введением в обиход предельной полезности в качестве инструмента анализа поведения потребителя. однако, маржинализм (например, австрийская школа  – как его ярчайший представитель) абсолютизировал принцип субъективности, и поэтому его представители не смогли объективного характера экономических взаимосвязей и взаимозависимостей. объективность таких экономических величин как спрос и цена, которая присутствовала в учении классической экономической школы, была потеряна маржиналистами и вновь появилась в неоклассическом подходе к экономике (в частности, у а. маршалла). неоклассика смогла произвести синтез двух противоречащих друг другу подходов. синтез этот основан на том факте, что в экономике действует очень много субъектов, и, хотя поведение каждого основано на субъективных принципах, но общее поведение можно считать вполне объективным, из-за действия закона больших чисел. дальнейшее развитие теории поведения потребителя долгое время происходило в рамках неоклассической теории, которая, с одной стороны, смогла более глубоко понять смысл полезности и разработать теорию потребительского выбора, а с другой  – применила теорию полезности к проблемам потребительского выбора в разных ситуациях, создав теорию межвременных предпочтений и теорию рисковых предпочтений потребителя. однако экономическая практика показала наличие у неоклассического подхода некоторых недостатков, в частности, наличие возможности манипулирования спросом потребителей и субъективность формирования спроса и цены в некоторых ситуациях. поэтому возник маркетинг, имеющий свою теорию поведения потребителя, а также методики управления этим поведением. одновременно подрывать базис неоклассической экономической теории стала психология, выяснившая, что человек ведет себя полностью разумно лишь в некоторых ситуациях. точнее тогда, когда не может применить иные механизмы принятия решений, связанные с подражанием и использованием типовых механизмов поведения. более того, исследования психологов показали, что даже если поведение формируется рационально, оно не обязательно должно быть оптимальным, так как человеку трудно точно оценить все варианты выбора, поэтому в последствие, если возникнет сходная ситуация, сделанный выбор корректируется. т.е. человек не сразу делает оптимальный выбор, а действует методом проб и ошибок (yadgarov, 2009). первым учёным, обратившимся к психологии для объяснения причин осуществления индивидуального потребительского решения, был дж. кейнс. он обосновал необходимость использования психологических факторов для прогноза поведения индивида как экономического агента. в дальнейшем экономическая психология приобретает статус самостоятельной области знания благодаря работам ж.г. тарда. до второй половины хх в. модель поведения строилась на принципе рационального поведения, что критикует и предлагает новый подход ограниченной рациональности г. саймон. данная концепция приобретает широкое признание и применение к различным видам экономического поведения. в конце 1960-х гг. появляются первые учебники по потребительскому поведению, наиболее важным из них становится работа дж. энджела, д. коллата и р. блэкуэлла. заслуживает внимания модель говарда-шета, описывающая приобретение часто покупаемого продукта, как непрерывный процесс, характеризующийся подъёмами и спадами в поиске информации, аналогичным циклическим колебаниям в экономике. однако приходится признать, что имеющиеся в настоящее время подходы к моделированию потребительского поведения носят преимущественно эмпирический характер и обладают недостатками общих моделей. в них нет описания конкретных покупательских ситуаций настолько подробно, чтобы быть практическими моделями, и их нельзя выразить количественно. несмотря на это анализируемые подходы имеют весомое преимущество во всестороннем взгляде на мотивированные покупки, что позволяет оценить релевантность отдельных переменных и тем самым лучше понять фундаментальные процессы поведения потребителей. позволяет идентифицировать необходимые для исследования переменные, даёт старт для построения гипотезы и точку отсчёта для интерпретации результатов экспериментов. 3. концепция рефлексивного управления потребительским спросом внешняя среда для потребителя представляет собой совокупность экономических субъектов, которые оказывают на него влияние посредством информационных потоков. её совокупная информация представлена в виде социальных и культурных устоев общества, законодательных норм и ограничений, уровня развития и использования нтп, экономической активности хозяйствующих субъектов. весь этот поток информации формирует внутреннюю среду потребителя, а именно: мотивы и личные предпочтения, которые направлены на удовлетворение возникающих потребностей для дальнейшего обеспечения благополучия и предсказуемости будуbaltic journal of economic studies 42 vol. 3, no. 3, 2017 щего. таким образом, внешняя среда воздействует на модель поведения и осуществления выбора потребителем. данный процесс представлен на рис. 4. на рис. 4 мы видим, что под влиянием информационных потов субъектов внешней среды потребитель осуществляет выбор в пользу того или иного конкурирующего предприятия, используя при этом составляющие своей внутренней среды. непосредственный процесс принятия решения основывается на потребностях покупателей и факторах, определяющих модель их поведения. в литературе (levy, 2013) выделяют 3 типа таких процессов, это развёрнутый, ограниченный и по привычке. первый присущ к покупкам с высокой вероятностью финансового, социального и физического рисков. потребитель в этом случае глубоко вовлечён в процесс покупки, потому что ему необходимо удовлетворить важную потребность или восполнить недостающие знания о приобретаемом продукте. в этом случае продавец может оказать влияние на выбор потребителя при предоставлении ему необходимой информации в выгодном для себя свете. ограниченный тип процесса принятия решения потребителем реализуется при условии умеренного риска во время приобретения того или иного вида товара/услуги по причине наличия необходимой информации у покупателя. примером является приобретение торговых марок, которые уже приобретались ранее и создали о себе положительный опыт так же и импульсные покупки. здесь способ влияния на сознание потребитель можно реализовать с помощью грамотно разработанной презентации товаров/ услуг в предназначенных для этого зонах торгового пространства. привычный тип принятия решения тесно граничит с понятием покупательской лояльности к торговой марке, бренду или торговой точки. из-за хронической нехватки времени у современного потребителя формируется привязанность к определённым по его личным критериям выбора торговым маркам или «избранным» магазинам. у продавца есть возможность привлечь большое количество лояльных потребителей посредством удобства местоположения, предложения широкого ассортимента, вознаграждения постоянных клиентов с помощью гибкой системы скидок и акций, предоставления высокого уровня сервиса, тем самым оказывая скрытое воздействие на поведение целевой аудитории. в данной работе будет рассмотрен только третий тип принятия решения потребителем. в источнике (levy, 2013) для рынка продовольственных товаров такой тип принятия решения потребителем представлен в следующей последовательности действий: осознание потребности, поиск информации, оценка, выбор, выводы. усовершенствуем и представим выделенную последовательность действий потребителя в виде модели принятия решения (рис. 2). в представленной на рис. 5 модели выделены главные этапы принятия потребителем решения с целью предложения комплекса рефлексивного воздействия на поведение потребителя. предприятияконкуренты цели мотивы использования нтп потребитель взгляды предпочтения желания нужды уровень культуры образованность государство средства массовой информации модель принятия решения управляющие воздействия выбор предприятия экономическая активность, нтп с оц . ку ль ту р. ус то и законодательные нормы рис. 4. взаимодействие потребителя с внешней средой baltic journal of economic studies 43 vol. 3, no. 3, 2017 для разработки концепции рефлексивного управления потребительским спросом подробно рассмотрим каждый этап для выявления возможности предприятия воздействовать на процесс принятия потребителем решения о покупке товара/услуги. отметим один важный факт: потребитель не обязательно проходит выделенные этапы по порядку. возможно, он вначале примет решение о покупке и только потом будет искать подходящее место для осуществления покупки. осознание потребности представляет собой начальную стадию процесса покупки. различают два типа потребностей: функциональные и психологические. первые ещё называют рациональными, потому что они напрямую связаны с физическими характеристиками продукта. к психологическим или эмоциональным потребностям относят стимулирование, вознаграждение, изучение новых тенденций, статус и власть. возможность предприятия оказывать влияние на процесс возникновения и осознания потребности у покупателя ограничена маркетинговыми инструментами. дополнительным инструментом может выступить рефлексивное воздействие на психологическую природу потребителя, несущее в себе информацию о наличии продукта и преимуществе приобретения его в конкретном месте в сравнении с предприятиями-конкурентами. поиск информации осуществляется в направлении необходимого продавца или товара/услуги. источники информации бывают двух типов: внутренние и внешние. к внутренним относится прошлый опыт, внешним  – рекламные средства, отзывы других потребителей. при условии недостачи внутренний информации покупатель обращается за необходимыми данными к внешним источникам. результатом выступает сформированный набор критериев личных предпочтений с разной степенью веса. возможность рефлексивного воздействия можно реализовать через создание благоприятного для продавца информационного пространства, которое будет влиять на оба типа источников. оценка выбранных вариантов для потребителя альтернативных товаров/услуг и торговых предприятий осуществляется по принципу наибольшей привлекательности на основе его собственных предпочтений. в этом случае рефлексивное воздействие со стороны продавца может быть эффективным, если в сознании у потребителя уже есть положительный опыт приобретения необходимых для удовлетворения собственных потребностей покупок у данного экономического субъекта. потребитель не всегда имеет возможность приобрести выбранный им продукт по ряду причин: его может не быть в наличии, торговая точка может оказаться закрытой, не принимать к оплате платёжные карты и т.п. поэтому только от предприятий зависит, сможет ли клиент превратить положительную оценку необходимого для него товара в реальную покупку. здесь важную роль играют заинтересованность индивида в приобретении, выработанный подход продавца к различным группам клиентов, гибкая система скидок и т.п. рис. 5. модель принятия потребительского решения потребитель внутренняя среда: взгляды предпочтения желания нужды уровень культуры образованность осознание потребности функциональные психологические поиск информации оценка выбор и покупка выводы внешние источники: сми внутренние источники: приобретённый опыт + + внешняя среда: соц.кул. устои общества нтп уровень конкуренции законодательные нормы и ограничения baltic journal of economic studies 44 vol. 3, no. 3, 2017 выводы после приобретения товара/услуги повлияют на дальнейшее отношение потребителя к продавцу. таким образом, покупатель оценивает продукт как удовлетворяющий или нет. при ощущении полного удовлетворения от покупки, клиент приобретает положительный опыт, который в дальнейшем становиться частью внутреннего источника информации и будет оказывать влияние на второй и третий этапы процесса принятия решения. при негативном опыте из-за отсутствия удовлетворения потребности происходит отказ клиента от товаров/услуг продавца и последующим поиском других альтернатив. на основе рассмотренных этапов выбора потребителя и использования теории рефлексии в.а. лефевра составим концепцию рефлексивного управления потребительским спросом (рис. 6). в данной концепции рефлексивного управления потребительским спросом схематично разделены участники экономических взаимоотношений на три группы: исследуемое коммерческое предприятие, потребитель и конкуренты. использование данного разделения необходимо для того что бы показать возможные отличия в истинном состоянии субъекта взаимоотношений и его представлений о себе в сложившейся ситуации. модель рефлексивного управления будет состоять из трёх последовательных этапов: анализ данных, формирование и реализация комплекса рефлексивного управления, и оценка эффективности применения (рис. 6). на первом этапе происходит сбор и обработка данных о внешней и внутренней средах, в которых функционирует исследуемое предприятие. осуществляется анализ рыночных возможностей, отбор целевых рынков, сегментирование потребителей, группировка конкурентов по значимым признакам для потребителя. особое внимание необходимо уделить расчёту параметра потребительской привлекательности как для предприятия самого, так и его основных конкурентов, потому что на основе данных качественных оценок можно сделать заключение о вероятности посещения того или иного торгового объекта целевыми покупателями. на втором этапе происходит формирование комплекса рефлексивного управления и его реализация, используя инструментарий рефлексивных игр в.а.  лефевра для выявления эффективных направлений действий коммерческого предприятия. моделирование плацдарма взаимоотношений и влияний экономических агентов даст возможность рассчитать вероятность совершения покупки целевыми потребителями. а на основе этого показателя и наличия данных о количестве населения в исследупотребитель образ предприятия образ конкурентов внутренняя среда модель принятия решения конкуренты образ предприятия образ потребителя собственный образ данные о внешней среде исследуемое предприятие анализ внешней и внутренней сред предприятия: сбор данных, выявление собственных конкурентных преимуществ, формирование и реализация комплекса рефлексивного управления потребительским спросом спросом оценка эффективности комплекса рефлексивного управления потребительским спросом образ конкурентов собственный образ образ потребителя рис. 6. концепция рефлексивного управления потребительским спросом baltic journal of economic studies 45 vol. 3, no. 3, 2017 емых торговых зонах и их среднем уровне трат на исследуемую группу товаров, появляется возможность моделирования функции спроса и вычисления возможной прибыли, что в свою очередь позволяет перейти к третьему этапу моделирования. таким образом, оценка эффективности рассчитывается на основании функциональной зависимости спроса от вероятности посещения потребителями исследуемого коммерческого предприятия. 4. выводы развитие рефлексивного управления применительно к экономике предстаёт в виде целенаправленной организации рефлексивных воздействий на управляемый субъект с целью склонения его к принятию решений, прогнозируемых управляющей системой. что в свою очередь снижает неопределённость и создаёт преимущества для управляющей стороны. научная новизна полученных результатов состоит в развитии концепции рефлексивного управления потребительским спросом, которая позволяет учитывать личные предпочтения потенциальных клиентов в деятельности коммерческого предприятия. концепция предусматривает использование на практике целенаправленных воздействий на информационные каналы потребителей и способствует обеспечению конкурентных преимуществ торговой точки неценовыми методами в условиях нестабильной рыночной среды. усовершенствовано модель процесса принятия потребителем решения о покупке, учитывающая, в отличие от существующих моделей, цикличность процесса выбора, различные сценарии поведения и личные предпочтения целевого потребителя. все это позволяет определить ключевые этапы процесса принятия решения потребителем с целью разработки комплекса рефлексивных воздействий. references: lefevre, v.a. (2009). lectures on the theory of reflexive games. moscow: cogito-centre, 89-103. lefevre, v.a. (2003). reflexion. moscow: cogito-centre, p. 17-20. lepa, r .n. (2012). models of reflexive management in the economy. donetsk: institute of industrial economics, p. 54-77. levy, m., weitz, b.a., grewal, d. (2013). retailing management. mcgraw-hill companies, inc., p. 83-107. kotler, p. (1984). marketing essentials. englewood: prentice-hall, inc., p. 45-47. yadgarov, y.s. (2009). history of economic thought. moscow: publishing house "infra-m", p. 104-117, 272-329. марина маврина концепция рефлексивного управления потребительским спросом аннотация. развитие теоретических подходов управления спросом ведутся с момента осознания представителями экономической науки важности данного понятия. с усложнением теоретических подходов к анализу экономического поведения с точки зрения психологической природы человека было разработано множество моделей индивидуальных потребителей. однако для прогнозирования реакции потребителей на коммерческую политику предприятия в условиях не ценовой конкуренции точных методов пока не существует, потому что имеющиеся носят преимущественно эмпирический характер. так же необходимо признать, что используемые модели поведения часто не обеспечивают ожидаемый результат по причине ошибочного подхода к анализу механизма формирования спроса как такового. предметом исследования выступают теоретико-методические основы, методы оценки и рефлексивного управления потребительским спросом коммерческих предприятий. целью исследования является разработка концепции рефлексивного управления потребительским спросом. для достижения цели исследования поставлены и решены такие задачи: обосновать теоретико-методологические основы рефлексивного управления потребительским спросом, выявить и проанализировать существующие подходы к моделированию потребительского поведения; усовершенствовать модель потребительского поведения; разработать концептуальные положения рефлексивного управления поведением потребителей. методика. в работе использованы такие методы и подходы к исследованию: рефлексивный подход (феноменологический метод), поведенческая экономическая теория, маркетинговый подход, абстрактно-логический анализ использованы при исследовании теоретико-методологических основ управления взаимодействиями, анализе теоретических подходов к моделированию потребительского поведения, разработка концепции рефлексивного управления поведением потребителя, при теоретическом обобщении и формулировании выводов. результаты. имеющиеся в настоящее время подходы к моделированию потребительского поведения носят преимущественно эмпирический характер и обладают недостатками общих моделей. в них нет описания baltic journal of economic studies 46 vol. 3, no. 3, 2017 конкретных покупательских ситуаций настолько подробно, чтобы быть практическими моделями, и их нельзя выразить количественно. несмотря на это проанализированные в данной работе подходы имеют весомое преимущество во всестороннем взгляде на мотивированные покупки, что позволяет оценить релевантность отдельных переменных и тем самым лучше понять фундаментальные процессы поведения потребителей. делает возможным идентифицировать необходимые для исследования переменные, даёт старт для построения гипотезы и точки отсчёта для интерпретации результатов экспериментов. практическое значение и оригинальность полученных результатов состоит в развитии концепции рефлексивного управления потребительским спросом, которая позволяет учитывать личные предпочтения потенциальных клиентов в деятельности коммерческого предприятия. концепция предусматривает использование на практике целенаправленных воздействий на информационные каналы потребителей и способствует обеспечению конкурентных преимуществ торговой точки неценовыми методами в условиях нестабильной рыночной среды. усовершенствовано модель процесса принятия потребителем решения о покупке, учитывающая личные предпочтения целевого потребителя. все это позволяет определить ключевые этапы процесса принятия решения потребителем с целью разработки комплекса рефлексивных воздействий. baltic journal of economic studies 350 vol. 4, no. 1, 2018 corresponding author: 1 lviv university of business and law. e-mail: business_law@ukr.net 2 department of administrative law and process and customs security, university of state fiscal service of ukraine. e-mail: tilchikvv@ukr.net 3 department of administrative and information law, institute of law and psychology, lviv polytechnic national university. e-mail: khomyshyni@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-350-357 national economic security: an economic and legal framework for ensuring in the conditions of the european integration larіsa jankovska1 lviv university of business and law, ukraine vyacheslav tylchyk2 university of state fiscal service of ukraine, ukraine iryna khomyshyn3 institute of law and psychology, lviv polytechnic national university, ukraine abstract. the purpose of this article is to characterize legal and economic basis for ensuring national economic security in the conditions of ukraine’s entry into a common european economic and political space. this article analyses approaches to the understanding of economic security in the meaning of legal regulation and explores its interrelation with national security. the context of legal regulation, which is directly related to sovereignty and protection of the national interests, the possible threats affecting the state of national economic performance are distinguished. it is noted that the problems of domestic economic development of ukraine, dynamic changes that take place within the global economic space, and increase of the extent of national economy’s openness stipulate the need to study the scope of “economic security” category taking into account peculiarities of modern economic system development that will allow timely identifying the threats to national economic interests and preventing damage to the entire social and economic system. at the same time, a special attention is paid to the fact that despite different ways of the state management of the economy, many of them are implemented specifically in the legal form. the point was stressed that legal regulation of the economic system of ukraine should be carried out in two priority areas: first was a normative codification of the adopted mechanisms that developed as a result of the natural economic influence patterned and second was the direction of economic development to achieve interests of the state and the society within the framework of the european integration. establishment of the effective legal and regulatory framework of the economy in ukraine is quite a reachable goal. legal regulation of the economic area must be flexible and it must timely and optimally respond to internal and external changes that will allow enhancing substantially national economic security. practical importance of the scientific research results lies in detailing the “economic security” concept in the context of legal regulation, which is important for the successful social and economic development of the state, and it contributes to the identification of factors hindering economic development, it facilitates development and further improvement of the legal framework governing economic area and having impact on development of an effective economic crisis exit strategy. national economic security is not just one of the most important elements of the entire national security system as a scope of the national interests’ protection but it is also a basic, critically important condition for observance and implementation of national interests. in view of the stated above, scientific researches in this area are relevant and timely within the period of search for the priorities of national economic policy. methodology. a methodological framework of the economic security research is defined by a complex of scientific cognition methods that allow us to look at this problem as a multi-aspect, interdisciplinary phenomenon. on the basis of the system-based, structural, systemic-functional, and other scientific approaches, the idea of the economic security has formed a complex systemic category covering the theoretical and practical level of economic activity. key words: economic security, national security, legal regulation of economic area, threats to economic security. jel classification: r14, d18, p2 baltic journal of economic studies 351 vol. 4, no. 1, 2018 1. introduction these days it can be said with a great probability that the greater part of the world has made three extremely important choices over the past decades: 1) democracy has been recognized as the desirable form of a political system; 2) the dominant form of the economic system is a modified free market; 3) most people realize themselves as an organic part of the global civilization that helps us better understand our moral obligation to the future. even those countries that still formally oppose democracy and market relations are gradually moving towards this direction (tolstoukhov, hylko, 2001). at the same time, all of us have become by today not just witnesses but also active participants in the implementation of drastic transformational processes aimed at building up a legal, social, and democratic state in ukraine with a strong and stable economic basis. implementation of the ukraine-eu association agreement stipulates for the transition to the socially oriented economy, it reasonably requires targeting actions by the state, which in addition to the general governance functions performs a range of the specific functions, including ensuring economic security. it comes as no surprise that “ukraine-2020” sustainable development strategy (2015) determines the key vectors to follow that will facilitate the solution of the tasks indicated above. thus, the development vector provides for ensuring sustainable development of the state, implementation of structural reforms and, consequently, raising the standards of living. ukraine should become the state with a strong economy and with advanced innovations. the security vector is aimed at ensuring security guarantees for the state, businesses, and citizens, protection of investments and private property (decree no. 5/2015). this vein, without the economic basement, which is understood as production relations’ system of the society, the state cannot normally exist, function, and develop, and this, in its turn, requires the establishment of conditions for ensuring its economic security. in view of the noted above, the purpose of this publication is to clarify the subject matter and the essence of “economic security” concept as economic and legal category to facilitate search for the ways for building up such a national economic security strategy that would be aimed at the prevention of devastating development of the threats to national security, but on the other hand, it would ensure protection of the rights and fundamental freedoms of an individual and a citizen. 2. national economic security: approaches to the concept definition first of all, it should be noted that economy is a comprehensive system of social relations formed in the area of production, distribution, consumption of material wealth; it determines the scope of different kinds of ideological relations, forms of public conscience, political and legal institutions. the economy in many respects defines not just the policies and the system of government but also right, main lines of the government activities and its functions. it directly affects domestic and foreign policy, changing the nature of political and legal decisions. under such circumstances, ensuring national economic security becomes the main and the determinant task. it should be noted that until the present, the scientific literature has not developed a single approach to the understanding of “economic security” concept. at the same time, within the existing circumstances, this category acquires a new meaning, it becomes more multi-aspect, which is primarily connected with the global socioeconomic and political processes such as globalization and regionalization, that is, opposed by their nature, as well as building up the information society. analysing the academic views on the essence and the meaning of “economic security” category, it should be noted that they are distinguished by their diversity. thus, bielov (2016) understands economic security as “the state of the national economy, which allows maintaining resistance to internal and external threats and is able to meet the needs of an individual, a society, and a state.” binko and shlemko (1997) share the same opinion defining economic security as “the state of the national economy that allows maintaining resistance to internal and external threats and is able to meet the needs of an individual, a family, a society, a state.” g.a. pasternak-taranushchenko (2002) also considers economic security as the state, which points up the fact that “economic security is the state of a country that provides the ability to establish and to develop the conditions for the productive life of its population, the perspectives for economic growth in the future, and growth of its residents’ well-being.” at the same time, l.i. abalkin (1994) contends that economic security is the combination of conditions and factors that ensure national economic independence, its stability and sustainability, its ability to upgrade and to improve itself on regular basis. mishyna (2007) considers economic security as the basis of the vital activity of the society, its socio-political and national-ethnic stability. muntian (1999) expresses a separate opinion related to the understanding of economic security meaning and believes that it is “a nation-wide set of the measures aimed at the continuous and sustainable development of the national economy that includes a tool to counteract internal and external threats. american scientists expressed a special attitude to “economic security” category and believe it must meet at least two important conditions: first is preservation of economic independence of the state, its ability to take the decisions in its own interests related to development baltic journal of economic studies 352 vol. 4, no. 1, 2018 of the economy generally; second is preservation of already reached living standard of the population and potential for its further improvement (murdoch, knorr, trager, 2001). as it is noted by chechel (2010), “under the conditions of crisis processes that can be observed currently, the tools for economic security stabilization and ensuring are multi-valued and extraordinary. thus, the most summarized and logic characteristic of economic security must include three most important elements as follows: economic independence, which in current conditions means the ability of the state to exercise control over national resources, achievement of such level of production efficiency and quality of products that could ensure its competitiveness and enable equal participation in world trade; stability and sustainability of national economy involves protection of property in all its forms, establishment of reliable conditions and guarantees for business activity, prohibition of the factors that are capable to destabilize the situation (tough policies related to counteracting illegal takeovers, curtailment of corruption within the government, the judicial system and appropriate foreign economic policy); the economic progress, which provides for the establishment of a business-enabling environment for investments and innovations, continuous modernization of production, state support of strategic industries, search for new lines of activity that are necessary for national economy’s sustainability and selfpreservation.” thus, in the scientist’s opinion, the scope of “economic security” concept can be disclosed through the set of conditions and factors that ensure national economic independence, its stability and sustainability, and ability to steady progress (chechell, 2010). at the same time, the economic literature highlights that the essence of economic security is disclosed within the system of criteria, indicators, and threshold values. however, it is noted that, first of all, it is necessary to classify the threats to economic security that refer to the factors that make it impossible or complicate substantially the process of national interests implementation, representing the threat to livelihoods of the nation, its socioeconomic and political systems. therefore, taking due account of the economic development peculiarities, identification of the current challenges and threats and their elimination must be the priority elements for the national economic policy. we tend to believe that national economic security is a process of ensuring sustainable and safe economic system development where the economy is capable of completing the following tasks: to ensure national economic independence, national economic sovereignty, its energy independence; to satisfy effectively material needs of an individual, a society, and a country; to support the required level of social and political stability of the society; establishment of conditions for the harmonious development of the system of economic relations; to protect effectively domestic and foreign markets; to protect all forms of ownership; to ensure national economic sustainability in the conditions of unforeseeable breach of international economic relations; to ensure sustainability of the economy about natural and man-made emergencies, as well as armed conflicts of a different level; elimination of criminal structures’ impact on the economy, etc. analysing economic security as a scientific category, kuziomko (2010) draws his attention to the fact that currently two main general-methodological approaches have been formed within the academic community, from which the said category is considered, they are static and activity approaches. at the same time, the scientist proves that “both approaches (static and activity) can be considered not an alternative, but complementary ones that from different perspectives consider the essence of the “security” category. nevertheless, economic security should be considered as one of the types of security that is specific to the economic systems. it can be considered at micro and macro levels. in the first instance, it is referred to national economic security (as one of the types of national security); in the second instance, it is referred to security of industries and regions; in the third instance, it is referred to security of certain economic entities and individuals that enter into economic relations.” thus, we can state that the analysis of some definitions of “economic security” concept permits us to finalize that this category is characterized by a complicated internal structure. the general disadvantage of all these approaches is the lack of a comprehensive approach to the entire set of the interrelated elements of economic security. in fact, economic security is not just the state of national interests’ protection but also the readiness and the ability of government institutions to set up tools for the implementation and protection of the national interests and protection, development of the domestic economy, support for the socio-political stability of the society. 3. the relationship between national and economic security national economic security is one of the most important components of national security. it plays a crucial role in ensuring economic development, in support of the sustainable economic development, implementation of the effective social policies, baltic journal of economic studies 353 vol. 4, no. 1, 2018 protection of the society from environmental disasters, maintaining the proper level of competitiveness in the conditions of international economic interdependence. in other words, economic security is meant to protect national interests of the state. over the last years, the traditional approach to the development of national security focused on national interests, political sovereignty, and territorial integrity undergoes significant transformations, which are primarily connected with radical changes within the system of threats and methods of destructive influence. the “economic security” concept is developed on the background of the threats to national security connected with the economy. transformation of the ukrainian economy is lengthened in time and in recent years the economic crisis has been in progress. under such conditions, the contradictions become pointed that exist in economic relations, and new threats emerge to national security. economic security as a foundation of national security becomes of paramount importance. peandiura (2005) points out that national economic security is not just one of the most important components of the entire national security system as complex for national interests’ protection but it is also a crucial condition for the observance and implementation of national interests. these days, national security has become an extremely relevant issue since the fate of ukraine, social and economic welfare of the citizens, formation of their national identity and respect for their state will depend on its resolution, thus it is necessary to take into account the mistakes made in the course of the economic reforms implementation that led to destructive processes in the economy and in the minds of people. our emphasis specifically on “national security” concept in this particular part of the research is based on the fundamental provision stating that economic security, which is the subject of the research, is relevant to national security as per a “part/whole” scheme. along with this, the economic aspect of national security is its integral part. thus, economic security can neither exist beyond overall national security nor national security will be comprehensive if it is deprived of its economic vectors. in general, “national security” concept has many of determinations and aspects that are different particularly in the corresponding standpoints, from which this issue is addressed. national security is a complex inseparable system developed on its own and, therefore, it consists of a number of the subsystems (elements) with the corresponding clear interrelations both within the system and with its surrounding elements that in their entirety generate a new quality. among other specific features of the system indicated above, we should place an emphasis on the appropriate structure, the systemic unity and integrity, the general objective, the relative independence of each other element of the system with the mandatory performance of the functions required for the existence of the entire system. thus, honcharenko, lysytsyn (2001) point out that previously this category was of abstracted nature to some extent, but currently, it was being used in the state administration practiced. in addition, quantification methodologies to assess the national security state have been developed and used. according to the methodologies above, the national security state is characterized by a numeric value that belongs to a segment from zero (the lowest level of the state of the national security, that is, its worst state) to one (the highest level of the state of the national security, that is, its best state). therefore, they propose to define national security as the degree (measure, level) of protection of vital interests, rights, and freedoms of individuals, societies, and countries from internal and external threats or the degree (measure, level) or absence of the threats to human rights and freedoms, basic interests and values of the society and the country. in their turn, danilian, dzioban, panov (2002) represent national security concept as the state for the protection of vital interests of an individual, a society, and a country, the mankind in whole from internal and external threats. the definition above became a classic one in fact and it was used by the legislature in the law of ukraine “on the fundamentals of national security of ukraine” (2003) where it was stated that national security was “protection of vital interests of an individual, a citizen, a society, and a country where sustainable development of the society, timely detection, prevention and elimination of the real and potential threats to the national interests in the area of law enforcement activity, fight against corruption, border guard activity and defence, migration policy, healthcare, childcare, education and science, scientific and technical and innovation policy, cultural development of the population, ensuring the right to free speech and information security, social policy and pension provision, housing and utilities, financial services market, protection of property rights, stock markets and securities turnover, fiscal and customs policies, trade and business, banking market, investment policy, audit activities, monetary and foreign exchange policy, information security, licensing, industry and agriculture, transport and communication, information technology, energy and energy saving, natural monopolies functioning, utilization of mineral resources and water resources, ecological and environmental protection and other areas of public administration when negative trends emerge as to evolution of potential or real threats to national interests are ensured.” as with “economic security” category, “national security” category has a variety of the specific approaches to its definition. thus, the “state of protection (safeguarding)” specification when determining the “national security” baltic journal of economic studies 354 vol. 4, no. 1, 2018 concept is the most widespread. nevertheless, more and more researchers point out that the definition above was formed in the days when “security” had a specific expression, mainly in the speeches and it was measured by their state. the state of things (material values) and their properties were clearly defined, they did not change for the most part, but the change predetermined a new steady state (hurkovsky, 2004). the specification indicated above has been equally criticized because it reflects the security knowledge paradigm that existed in soviet times when the priority was given to protection against prevention. nowadays, elucidation of just one side of protection when determining security is considered incomplete. in light of the fact that in the course of this approach such important functions of security as preventive actions are de-emphasized and dropped of the equation: narrowing, relaxing, eliminating and prevention of dangers and threats. yarochkin (2000), in particular, draws his attention to this circumstance. some researchers speak both about the immanent nature of the threats and their creative and constructive role in the development of the object. in particular, such a viewpoint is represented in the work of lipkan (2003) “security knowledge”. thus, national security is considered as an integrative set of different areas of life of the society and one of them is the economic area. even within the framework of the approach, we outlined above, we can single out two rather independent existence areas of national security concept and its economic component. first, it is a theoretical sphere of national security, which considers the problem above through the lens of understanding of the content and the essence, the definition of its place within the system of government activities. second, it is a practical sphere of national security, to which we refer a legal framework of the activity of the state aimed at the protection of national security and establishment of the appropriate effective tools for this protection. 4. legal regulation of the economy is the basis to ensure economic security favourable development of the economy and, consequently, ensuring of economic security are rather problematic without the improvement of legal regulation of the economy, entrepreneurial activity. using the experience of the implementation of the reforms in the nineties of the 20th century within the states that became the eu members, we can conclude that the economic reform cannot be effective without the government intervention of the certain extent in the economic processes. in this regard, we can see a significant collection of the legislative acts in this area, the range of the economic measures taken by the state, for example, privatization of state and community property, land reform, etc. with the help of legal regulation, taxes, public procurements, administrative controls of various types, the state should have a diversified effect on the economic processes. the system of legal and regulatory environment for the area of economic activity includes a significant list of laws, decrees of the president of ukraine, resolutions of the cabinet of ministers of ukraine, and other regulations, provisions of which can be sorted out as follows: principles defining the basis of social relations protected by law enforcement system and the basis of this system’s organization and functioning, regulatory provisions that codify the procedure for social relations that are subject to protection; provisions that are implemented as a result of the law enforcement activity through enforcement of law; provisions determining the structure (organization) of the lawenforcement system and its offices and regulating the operating procedures. every regulatory legal act may contain separate articles relating to other groups of provisions (for example, some constitutional principles are repeated largely in all codes) and there are also such acts that have holistic character code of ukraine on administrative offenses (1984). section vii of the criminal code of ukraine (2001) stipulates criminal responsibility for unlawful acts in the area of economic activity. the code contains the sections establishing the responsibility for crimes against property (section vi), crimes in the area of official activities and professional activities related to the provision of public services (section xvii). the code of ukraine on administrative offenses (1984) contains chapters that stipulate responsibility for administrative offenses in the area of finance and business (chapter 12), protection of property (chapter 6). the civil code of ukraine (2003), along with the other laws adopted according to it, is the main source of civil law in ukraine. the first book of the civil code contains fundamental rules of civil law, basic definitions of civil law, regulations for agreements, representation, limitation of actions, the right of property, etc. however, the economic offenses occurring under the cover of civil law provisions demonstrated the lack of completeness in the law of a number of classic civil law institutions. these institutions may include invalidity of agreements, incorporation, reorganization, and liquidation of legal entities, assignment of claim and transfer of debt, pledge, etc., that necessitate a range of the systemic amendments to be made in the civil code. a special attention should be paid to the structure of the tax law. the tax code of ukraine (2010) contains provisions relating to the tax offenses and the responsibility for their commission (chapter 11). baltic journal of economic studies 355 vol. 4, no. 1, 2018 recently in practical terms none of the regulatory legal acts that characterize the socio-economic and political situation in ukraine have been handled without the reference to the need of fight against corruption. until recently, fight against corruption has been ineffective. however, although that recently the state has been taking measures to increase the effectiveness of the fight against corruption, this phenomenon impedes the normal functioning of different government mechanisms, and it hampers economic growth of the state. this is the factor that breeds up concern and distrust of the public in public institutions. in this regard, particularly relevant is the law of ukraine “on prevention of corruption” (2014), which codifies the keystones of counteracting corruption, legal and organizational principles for the prevention of corruption and fight against corruption, minimization, and elimination of the consequences of corruption-related offenses. by the resolution of the cabinet of ministers of ukraine, the communications strategy in the area of prevention and counteraction of corruption (2017) was approved, which provided for the establishment, functioning, and development of the specialized information and methodological resource on the issues of anti-corruption requirements implementation. a  special attention is given to work on prevention of corruption in organizations established to perform the tasks of the government authorities, educational and awareness-raising activities for the citizens are provided for around the requirements of the anti-corruption legislation. protective, regulatory, and direct effect measures that are applied by the state should be aimed at the support of the qualitative state of economic relations through the suspension and limitation of negative phenomena development within the economy. the above measures should come with the appropriate mechanisms for their application. economic security should not be ensured by one authority, but it should be supported by the whole of government authorities system, all branches, and structures of the economy. regulatory influence of the state should be aimed at the gradual reduction of the state’s impact on the economy (as the opportunities and the conditions are established for setting up a relatively independent protection system by the economic entities). detailing, which means more detailed regulation of economic processes, is a general trend of the legislation developed in the area of economic activity. at the same time, the quality of legislation specifically is one of the essential conditions for the dynamic and progressive development of the economy. one of the important features of the state activity is the circumstance that the requirement to increase the efficiency of legal support of the economy is embodied within “ukraine-2020” sustainable development strategy (2015), in a range of the regulatory documents that result from it. it is emphasized in the strategy that successful reforming of the economy and social area involves the establishment of effective interaction tools between the society, the business, and the state that are aimed at the coordination of all parties’ efforts, ensuring consideration of interests of various social groups of the society and the business in the course of development and implementation of socio-economic policy. we can’t fail to agree that reflection of real threats to economic security requires highly qualified and effective political and economic actions, the need to change social-psychological attitudes that are present in the society. this grounded viewpoint is supported primarily by the european experience, examples of the baltic states that managed to overcome aggressive influence of russia, as well as to find the effective manner in search for the way of economic development, to raise the economic indicators to the optimal level due to the european integration and accession to nato membership. however, the problems related to the internal threats to national economic security deserve special attention. in the national security strategy of ukraine, approved by decree of the president of ukraine (2015), a high priority is given to all types of national security, including the economic one. the strategy outlines such types of unlawful activities where information, communication, and other high technologies are used. a special position in the strategy holds the provision, which stipulates that the main subject of economic reform is the establishment of conditions to overcome poverty and excessive gap between the rich and the poor in the society, approximation of social standards to the level of central and eastern european states being the eu member states, achievement of the economic criteria required for ukraine to become a member of the eu. the national security strategy of ukraine (2015) defines the priority lines for ensuring national security in the economy for long-term perspective (this includes upgrading of energy security level). internal and external threats are the result of insufficient and imperfect legal support for the national economy. contextually the national security strategy of ukraine (2015) contains a number of the factors that affect development of the certain threats to economic security: irregularity of financial institutions formed in the country, state of the stock market, inconsistency between the domestic tax policy and the eu, efficiency level of the state financial control arrangement, regulation of financial system; unevenness of small businesses regional development, which contributes to further economic lag of the regions; deficient legal regulation of foreign investors’ participation in the securities market, etc. legal regulation of foreign investors participating in the securities market of ukraine is carried out on the basis of the following laws: “on foreign investment baltic journal of economic studies 356 vol. 4, no. 1, 2018 environment” (1996); “on securities and stock market” (2006); “on state regulation of securities market” (1996), and other regulatory acts. they determine the procedure of foreign investments entrance into the securities market. participation of investors in the projects of national and governmentwide levels makes an effective impact, especially on innovative economy branches development. in view of this, legal regulation of these social relations takes on greater importance. one of the most important lines of the state’s activities in the area of economic life is remedial action in the wake of escalation of armed aggression of the russian federation against ukraine that has had a significant impact on the government processes. armed aggression has determined largely further lines of the country’s development. with a view to overcoming adverse consequences of armed aggression, to eliminate the greatest threats in the area of economic security, to stabilize socio-economic development, it is necessary to implement a set of specially adjusted measures by the government authorities in ensuring proper and favourable conditions for the economic growth of the state. an important condition for the effective solution of the assigned tasks is well-coordinated and well-organized work of the government authorities, which is based on the certain program of powers, strict compliance with the principles of european financial and fiscal legislation. 5. conclusions ukraine along with the implementation of the recovery from acute economic crisis policy should define a new, scientifically grounded economic security strategy. it is about mainstreaming the government support for the economic dynamic development of all business entities, ensuring the guaranteed protection of national interests, implementation of socially-oriented policy. negligence of economic security can lead to disastrous consequences: economic decline, businesses bankruptcy, and undermining of the life support system of the nation with further loss of sovereignty. at the same time, despite different ways of government regulation of the economy, a large portion of them are implemented specifically in the legal form. the point should be stressed that legal regulation of the economic system of ukraine must be carried out in two priority areas: first is a normative codification of the adopted mechanisms that develop as a result of the economic influence patterns and second is the direction of economic development to achieve the interests of the state and the society within the framework of the european integration. establishment of the effective legal and regulatory framework of the economy in ukraine is quite a reachable goal. legal regulation of the economic area must be flexible and it must timely and optimally respond to internal and external changes that will allow enhancing substantially national economic security. references: abalkin l. i.  (1994) ekonomicheskaya bezopasnost rossii: ugrozy i ikh otrazhenie [russia’s economic security: threats and their reflection]. moscow. economic matters. no. 12, pp. 4-13. 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(2010) ekonomichna bezpeka v konteksti derzhavnoi ekonomichnoi polityky ukrainy [economic security in the context of the state economic policy of ukraine]:  aktualnі problemi derzhavnogo upravlіnnya [challenging issues of public administration].  vol. 1. pp. 341-351. retrieved from: http://nbuv.gov.ua/ujrn/ apdy_2010_1_47(accessed 15 march 2018). danilian  o.  g., dzioban  o.  p., panov  m.  i. (2002) natsionalna bezpeka ukrayiny: sutnist, struktura ta napryamy implementatsiyi [national security of ukraine: the essence, the structure, and the directions of implementation]. kharkiv: folio, p. 296, p. 9. honcharenko  o.  m., lysytsyn  e.  m. (2001) metodologіchnі zasadi dlya rozrobki pereglyanutoї versії kontseptsії natsіonalnoї bezpeki ukraїni [methodological framework for development of revised version of national security concept of ukraine’s]. kyiv: the national institute for strategic studies. journal of series “national security”. vol. 4. hurkovsky  v.  i. (2004) orhanizatsiyno-pravovi problemy vzayemodiyi derzhavnykh orhaniv u sferi natsionalnoyi informatsiynoyi bezpeky [organizational and legal issues of public authorities interaction in the area of national information security] (phd thesis), kyiv: national academy of public administration under the president of ukraine. p. 225, p. 32. kuziomko  v.  m. (2010) ekonomіchna bezpeka yak naukova kategorіya [economic security as a scientific category]. economics. vol 9, pp. 29-34. lipkan v. a. (2003) znannya pro bezpeku: pіdruchnik [security knowledge: textbook]. european university press, p. 208, (p. 35). (in ukrainian) baltic journal of economic studies 357 vol. 4, no. 1, 2018 mishyna i. g. (2007) ekonomichna bezpeka v umovah rynkovyh transformacij [economic security in the conditions of market transformations] (phd thesis), donetsk: donetsk national university of the ministry of education and science of ukraine. p. 235, p. 3. muntian  v.  i. 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(2015). decree. “national security strategy of ukraine”, ofitsiyne internet-predstavnytstvo [official online representation].   no.  287/2015 retrieved, march, 2018, from: http://www.president.gov.ua/ documents/422016-19772 president of ukraine national. (2015). decree. “ukraine-2020 sustainable development strategy”. ofitsiyne internet-predstavnytstvo [official online representation].  no. 287/2015. retrieved, march, 2018, from: №5/2015) available at: http://zakon5.rada.gov.ua/laws/show/5/2015 (accessed 15 march 2018). shlemko v. t., binko i. f. (1997).ekonomichna bezpeka ukrainy: sutnist ta naprjamky zabezpechennja. [economic security of ukraine: the essence and the directions of ensuring]. kyiv: the national institute for strategic studies. p. 144, p. 8 (in ukrainian). verkhovna rada of ukraine. (1996). law of ukraine. “on foreign investment environment”. no.  93/96-vr . retrieved, march, 2018, from: http://zakon5.rada.gov.ua/laws/show/93/96-вр verkhovna rada of ukraine. 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(1984). law of ukraine. “code of ukraine on administrative offenses”. retrieved, march, 2018, from: http://zakon3.rada.gov.ua/laws/show/80731-10 verkhovna rada of ukraine. (2001). law of ukraine. “criminal code of ukraine”. retrieved, march, 2018, from: http://zakon3.rada.gov.ua/laws/show/2341-14 verkhovna rada of ukraine. (2010). law of ukraine. “the tax code of ukraine”. retrieved, march, 2018, from: http://zakon3.rada.gov.ua/laws/show/2755-17 yarochkin  v.  i. (2000) sekyuritologiya : nauka o bezopasnosti zhiznedeyatelnosti [securitology is the science the deals with life safety]. moscow: axis-89. p. 400, p. 213. baltic journal of economic studies 113 vol. 1, 2015 a challenge of trust: can distrust kill the euro? nataliia kostiuchenko1, odessa i.i. mechnikov national university, ukraine abstract. the purpose of the paper is to determine the dynamics of trust in the ecb in the most recent period, to compare the findings with a previous study of farvaque et al. (2010) and to explore the question of importance of citizen’s trust in public institution for the economic performance of the country. this paper is dedicated to the study of the determinants of trust in the european central bank. the study attempts to give an answer to a question posed in introduction: can distrust kill the euro? after the world economic crisis the trust in the ecb began to deteriorate. citizen’s trust in public institutions plays an important role for the economic performance of the country. methology. we rely on the micro data from the european commission’s eurobarometer survey. this paper contributes empirically to the existing literature dedicated to the issue of trust in public institutions. the responses in 15 eu-member countries were taken into account. the present work uses the model of farvaque et al. (2010) extending the time frame considered previously, giving a broader picture on this issue using the most recent data. results. in accordance with our findings, the population that support the ecb is approximately equal to the population that does not trust in the community bank, with a mean value of 0,51. even if there are still more supporters of the ecb, this data should provide an alarm for the european institutional framework, in consideration that in 1999 (in accordance with farvaque et al. (2010)) the mean value was 0,67. practical implications. according to our findings, still people with higher level of education, people with a higher social status, people with center or right-wing political orientation, people with optimistic expectations on the economic situation have more trust in the ecb. however, we have found that women have become more supportive about the ecb than men in contrast with the findings of farvaque et al. (2010). value/originality. a matter of trust in public institutions represents a great interest for economic research. in the background of the global financial crisis, the trust in central banks has become extremely popular nowadays. particularly, trust in the european central bank in the aftermath of the world economic crisis, concentrating on the period of 2012-2014, is examined. key words: trust, eurobarometer survey, european central bank, public opinion. jel classification: e58, z13, c23 1. introduction the global financial crisis has become a challenge to the whole world. the european union is not an exception. in the background of the global financial crisis, the reputation of the european central bank (ecb) has become more doubtful. it was criticized not only by citizens, but also by many politicians. politicians often try to put pressure on the ecb. a question whether distrust may kill the euro arises. it is crucially important that ecb gets more support and trust from the population. it is important to have a transparent communication strategy in order to provide a support for a central bank’s policy by the citizens. europe has gone through a unique historical process of both economic and political integration in the aftermath of world war ii. in the spring of 2010 the worst situation in the sovereign debt crisis was recorded. on january 1, 2011 estonia introduced the euro on its territory. the central bank of estonia paid in a part of its capital to the ecb capital in a set amount. on january 13, 2011 it was decided to keep the discount rate on the same level (1,00%). in 2011 the ecb raised the discount rate on april, 13. it comprised 1,25%. from february until april 2012, a sovereign debt restructuring took place in greece. it was the largest sovereign bond exchange in history (zettelmeyer et al., 2013). on july, 11 the ecb decreased the discount rate to 0,75%. on july 1, 2013 the republic of croatia was accepted to the eu. so, now there are 28 member states in the eu. in november, 2013 the discount rate was on the level of 0,25%. the monetary policy at this period was aimed at support of economic activity and creation of working places (bespalova, 2012). on january 1, 2014, latvia became the member of the eurozone and adopted the euro. the ecb under the supervision of mario draghi continues the cheap money policy. on september 4, 2014 the ecb decreased its discount rate by 0,1% to the level of 0,05%, which has never been so low before. such radical decision of the ecb made the euro weaker to u.s. corresponding author 1 department of world economy and international economic relations, odessa i.i. mechnikov national university. e-mail: nataliakostiuchenko@gmail.com baltic journal of economic studies 114 vol. 1, 2015 dollar. such situation is profitable for the exporters from the countries of the eurozone, as their production will automatically become cheaper and more competitive for the final consumer. one of the main aims of the “cheap money” policy of the ecb is support of southern eu economies: spain, italy, portugal, greece and cyprus. a matter of trust in public institutions represents a great interest for economic research. in the background of the global financial crisis, the trust in central banks has become extremely popular nowadays. a high level of trust in public institutions is crucial for an economic performance of a country, because citizens can devote more time to productive activities if they do not need to think about what actions to undertake in order to secure their safety from ineffective functioning of institutions (ehrmann et al., 2012). that is why the trust of citizens in policy-making institutions is extremely important for a successful functioning of such institution as ecb. a classical reference to the literature that has focused on interpersonal trust as the main determinant of economic growth is north (1990). however, putman (1993) investigated what impact social cohesion and trust had on the quality of public policies. furthermore, knack and keefer (1997) have found that interpersonal trust and confidence in government have a positive relation (erhmann et al., 2012). in contrast, lack of trust makes the central banks affected by political pressure (ehrmann and fratzscher, 2011). walstad and rebeck (2002) claim that public viewpoints depend on economic knowledge, which in turn is affected by such factors as education, income, age, gender, race and political party affiliation. maya and rodrik (2005) studies attitude to protectionism and find that sociodemographic background, values, identities, attachments explain difference in attitude to trade (hayat et al. 2012). hainmueller and hiscox (2006) find that individuals with college-level education have positive attitude to trade openness rather than those without. a number of studies has been made on whether or not there has been a decline of public confidence in modern institutions among various societies (newton, norris, 1999). today three schools of thought explaining the erosion of citizen confidence in public institution can be outlined. the first one focuses on the social-psychological features of individuals. the second one looks at the cultural environment of individuals, groups or communities. and the third one concentrates on governmental performance. there are many writers who see trust as a fundamental feature for building stable democracy (almond and verba, 1963). those governmental institutions that perform well generate more confidence of citizens and vice versa. governmental performance has an influence on individuals no matter of their personality or social type. inflation, economic growth, government corruption or foreign policy affects citizens to a greater extent than the government performance. for this reason political trust is more or less randomly distributed among people with different individual characteristics (education, income, religion, age, or gender) (newton, 1999). nowadays it is interesting to investigate the effect of the financial crisis on public opinion. hayo (2005) investigates the trust in public institutions during the asian financial crisis of 1998-99. he was using the data from south korea. another example is the study of coffey and hellwig (2011). they study the public opinion of british citizens during the financial crisis. they have found that such factors as education and political orientation play an important role when defining who is responsible for the financial crisis. in accordance with the results of stevenson and wolfers (2011), there is a fall in trust in public institutions during the period of great recession. nevertheless, the question of how to measure the level of population’s trust remains open. definitely, it is not an easy task to carry out. there have been attempts of a number of scientists. for instance, maier and bezoen (2004). they mainly argue that such organizations as the international monetary fund (imf) and politicians impose pressure on the ecb. another example is the study of ehrmann and fratzscher (2007). they examined the pattern of communication strategies of several central banks, but their evidence is limited to the reactions of financial markets. in terms of this, the eurobarometer survey data represents an important source for economic research. eurobarometer survey represents a large cross-national individual-level survey carried out on behalf of the european commission since 1973. each survey conveys around 1,000 face-to-face interviews per member state, up to total 27,000 individuals in eu. an important fact to be considered is that the survey is not a panel. every time there is a different subject. the question may be repeated in the next year or not. hayo (1999) investigates public attitudes to european monetary union (emu), using data from the eurobarometer 39. he concludes that high awareness of emu influences public opinion on monetary integration in a positive way. hayo (1999) and gȁrtner (1997) were using such datasets in order to examine macroeconomic and monetary issues. gabel (1998) using the surveys conducted in the period of 1978-1992 concludes that gender, age and occupation are the relevant variables to consider when explaining support for the european integration process. kaltenthaler and anderson (2001) use the data from eurobaromenter waves 41-47 and analyze the support for a european monetary policy during 1994-1997. they conclude that individuals with dominating national identities show less support for a single currency. kaltenthaler et al. (2010) investigate the distrust of public attitude to ecb. they have found that when the bank autonomy is too high, the level of distrust rises. furthermore, women appeared to show less trust to ecb. but those who are older and more educated showed more trust. a study carried out by ehrmann et al. (2012) represents a great interest. they tried to explain the trust in ecb both in normal times and in crisis times. they come baltic journal of economic studies 115 vol. 1, 2015 up with a conclusion that a higher degree of knowledge about the ecb generates more trust in normal times and even more of it during the financial crisis. this paper contributes empirically to the existing literature dedicated to the issue of trust in public institutions. the aim of the present study was to determine the dynamics of trust in the ecb in the most recent period and to compare the findings with a previous study of farvaque et al. (2010). the responses in 15 eu-member countries were taken into account. the main paper we rely on in our study is the one of farvaque et al. (2012): “who supports the ecb? evidence from eurobarometer survey data”. in this paper the socio-demographic determinants of particularized trust, particularly in an influential institution  – the ecb are studied. they rely on microlevel data and cover the period from 1999 until 2011. they focus on the old eu 15 and new eu 12 countries. the following variables enter the logistic regression: age, education, income, employment, political ideology. they also use macroeconomic variables, such as inflation, real gdp growth, the unemployment rate and inflation. according to their findings, such groups of people support the ecb: people with higher level of education, people with higher level of income, people with center or right-wing political orientation, people with optimistic expectations on the economic situation. in addition, men are more supportive about the ecb than women are, as they are more business involved. the unemployed people show the least level of support in the ecb as well as those with the least level of income and education. in this study, we also consider the socio-demographic determinants of trust in the ecb. we consider the period that has not been examined by farvaque et al. (2012), namely 2012–2014. we rely on the data from the eurobarometer surveys 77.3 (may 2012) through 82.3 (nov. 2014). this period is particularly interesting, because there have been certain changes in the ecb policy and in the composition of member-states in the eu and the eurozone in the period between the analysis of farvaque et al. (2012) and ours. we also omit the income factor, that they were using. instead we include the social class factor in the model. in accordance with our findings, firstly, the population that supports the ecb is approximately equal to the population that does not trust in the community bank, with a mean value of 0,51. even if there are still more supporters of the ecb, this data should provide an alarm for the european institutional framework, in consideration with that in 1999 (in accordance with farvaque et al. (2010)) the mean value was 0,67. this meaningful drop is strongly affected by the piigs economics crisis in 2012 and the magnitude of this scepticism forced mario draghi. secondly, our results provide that women are more supportive of the ecb in the period considered. it can be explained by the rise of women’s involvement in business activity in the recent years and the rise of scepticism about the ecb among men. this paper is organized in the following way. an introduction provides information on the background of the problem and highlights the existing problems in the field. section 2 dwells on the literature and previous studies known in the area. section 3 reports on the data from the eurobarometer survey, providing us with more details. it is dedicated to a statistical summary and graphs’ description. section 4 talks about econometric estimation of determinants of trust in the ecb. it describes the model employed and the acquired results. section 5 provides the conclusions on the investigated issue giving a brief summary of our findings. 2. data and statistical summary we consider the period that has not been examined by farvaque et al. (2012), namely 2012  – 2014. we rely on the data from the eurobarometer surveys 77.3 (may 2012) through 82.3 (nov. 2014). those waves of the survey that include the question on trust in the ecb are selected. table 1 provides more details. table 1 eurobarometer data coverage by survey wave no in our sample original no original 4-digit code period year question number 1 77.3 5612 may 2012 qa17_4 2 78.1 5685 nov 2012 qa15_4 3 79.3 5689 may 2013 qa18_4 4 80.1 5876 nov 2013 qa15_3 5 81.2 5913 march 2014 qa10_3 6 81.4 5928 may jun 2014 qa15_3 7 82.3 5932 nov 2014 qa17_3 the waves employed cover 15 countries namely, old 15 eu member countries (belgium, denmark, germany, greece, spain, france, ireland, italy, luxembourg, netherlands, portugal, united kingdom, austria, sweden, and finland). table 2 provides more details. table 2 eurobarometer data coverage by country eu15: 2012-2014 code name fr france be belgium nl netherlands de germany (east+west) it italy lu luxembourg dk denmark ie ireland gb great britain gr greece es spain pt portugal fi finland se sweden at austria baltic journal of economic studies 116 vol. 1, 2015 a question of a direct interest is the question of trust in ecb (question no. 17_4 in eurobarometer 77.3  – may 2012), particularly: “q.17 and, for each of them, please tell me if you tend to trust it or tend not to trust it? q.17_4 the european central bank” there are the following responses: 1 for “tend to trust”, 2 for “tend not to trust”, and 3 for “don’t know”. we exclude the response that does not express any opinion 3. there is actually a significant issue in the eurobarometer survey design, because the question on trust in ecb is connected with questions on trust in other institutions, such as the european parliament, the european commission, the council of ministers of the european union etc. due to unawareness of some respondents about separate roles of every institution, they might give a collective answer to this question. due to this fact the number of observations falls. that is why it can be said that the survey design is a serious matter (ehrmann et al., 2012) it is important to consider the variable of the individual level of knowledge about ecb. in the eurobarometer survey, the following question is asked: “have you heard about the ecb?” and the possible answers are “yes” and “no”. about 85% of respondents choose “yes”. therefore, it is important that those people who have heard about ecb are asked a question about trust to it. (ehrmann et al., 2012). the sample period for analysis is 2012  – 2014 – particular years that have not been considered in the paper of farvaque et al. (2010). from table 3 we can see that trust in the ecb has considerably declined in the year 2014, especially for such countries, as italy, ireland, greece, spain and portugal. throughout the history, the monetary thought has encompassed various modifications. different viewpoints have been expressed depending on the period of development of economic thought and on the general political situation in the world, either war or an economic crisis. monetary economics has both a microeconomics and a macroeconomics part. among variables influenced by the shifts in the supply and demand for money are the following variables: national output, employment, the rate of unemployment, exports and imports, exchange rates and the balance of payments. in 2013 the unemployment level in greece comprised 28%, in spain it increased significantly in 2013 and was at the level of 27%. in ireland it was 12%, in italy  – 13%, in portugal 15% and in cyprus 18%. in spain there is a slight reduction in unemployment, but it can be explained by the rise in emigration of the unemployed. the level of youth unemployment is striking. in greece the youth under age of 25 was 59% in the end of 2013. in spain the number is even more striking  – 54%. in italy this number is less  – 42%. in portugal it comprises 36%. however, in germany only 7,4% of unemployment among youth is recorded. this is due to its vocational training scheme. high rates of unemployment result in mass protests and social unrest. in spain in 2011 there was a number of demonstrations in around fifty cities. in 2012, about one million people participated in demonstrations in portugal. in greece demonstrations have become a common issue. over 100,000 people went on demonstrations in italy. due to losses of euro and the deterioration in the economic situations in countries, concern of people grows. we can see from the table that the numbers are striking also in germany and france for the year 2014. for example, in germany the number of respondents, who showed distrust in the ecb in the year 2012 comprised 824 respondents. in the year 2013 it has increased up to 1610 respondents. finally in 2014 even more people were disbelieved, particularly 2549 respondents. this can be explained by the following. on september 4, 2014 the ecb decreased its discount rate by 0,1% to the level of 0,05%, which has never been so low before. such radical decision of the ecb made the euro weaker to u.s. dollar. such situation is profitable for the exporters from the countries of the eurozone, as their table 3 trust in the european central bank (ecb) in 15 eu countries, 2012-2014 country code 2012 2013 2014 for against for against for against france fr 1,211 607 600 1,058 855 1,632 belgium be 1,461 565 1,013 923 1,326 1,384 netherlands nl 1,593 333 1,064 801 1,675 992 germany (east+west) de 2,080 824 1,151 1,610 1,658 2,549 italy it 1,059 785 593 1,093 740 1,677 luxembourg lu 728 198 579 284 763 502 denmark dk 1,597 281 1,277 466 1,787 737 ireland ie 1,219 592 672 1,069 853 1,647 great britain gb 902 902 411 1,109 614 1,498 greece gr 1,096 872 340 1,599 528 2,387 spain es 1,114 766 347 1,479 512 2,235 portugal pt 1,272 609 580 1,263 932 1,872 finland fi 1,522 393 1,132 685 1,889 808 sweden se 1,593 358 1,132 706 1,629 1,000 austria at 1,387 501 936 894 1,371 1,385 total 19,841 8,586 11,827 15,039 17,132 22,305 baltic journal of economic studies 117 vol. 1, 2015 production will automatically become cheaper and more competitive for the final consumer. one of the main aims of the “cheap money” policy of the ecb is support of southern eu economies: spain, italy, portugal, greece and cyprus. in this case, the northern countries, particularly their citizens are losing. in germany, for example, the old-age welfare is based on withholdings during a working age and also on how much the pension funds will be able to earn, that invest these withholdings in stocks, real estate and other actives. however, if the discount rate of the ecb is low, then the percent generated by the actives remains low, and as a result the possibility to get a reasonable percent raise to pension is equal to zero. in other words, german pensioners finance the debts of greece and cyprus. apart from this, pensioners from finland, luxembourg and the netherlands are in the same situation. moreover, the burden is hanging not only on the pensioners, but also on all the citizens who have bank deposits. even without knowing it they transfer a part of percent to the virtual fund bailing out the southern europe. the country that was mostly disbelieved about the ecb already in the year 2012 was great britain – 902  respondents gave an answer “tend not to trust”. however, that number has risen not so much in the following years: 1109 and 1498 in the years 2013 and 2014 respectively. an interesting observation about great britain is that in the year 2012 half of respondents gave a positive answer and another half a negative one. nevertheless, more people showed a tendency not to trust in the ecb in the following years. on the other hand, in greece more people still tended to trust in the ecb in 2012, however this trend has changed in the years 2013 and 2014. the same picture is observed in such countries as ireland, spain, portugal, italy and france. in the year 2012 those countries showed more trust in the ecb in comparison with the following years. the counties that showed more trust in ecb during all the 3 years are the netherlands, denmark, finland, sweden and austria. average support for the ecb by country is illustrated in figure 1, taken as a long-run average across the eurobarometer survey waves. average level of trust is higher in denmark, sweden and netherlands. almost 80% of respondents tend to trust in the ecb. by contrast, in great britain only 50% tend to trust in the ecb. in greece and spain the minimum level of trust in the ecb is the least – nearly 20%. source: author’s calculations based on eurobarometer survey data fig. 1. average support for the ecb by country, % – eu15, 2012-2014 the annual evolution of the level of trust in the ecb by country is demonstrated in figure 2. the lowest level of trust is observed in almost all the countries in 2013. this can be attributed to the ecb policy in that period. in november, 2013 the discount rate was on the level of 0,25%. then the level of trust gradually increases by the year 2014. the “cheap money policy” proves to bring positive results. figure 3 reveals the change in the distribution of trust in the ecb in the old eu15 countries in the period 2012-2014 in terms of boxplot diagram. from 2012 the trust in the ecb has significantly deteriorated (the mean goes from 70% to 40%). source: author’s calculations based on eurobarometer survey data fig. 2. trust in the ecb by country, % – eu15, 2012-2014 source: author’s calculations based on eurobarometer survey data fig. 3. distribution of trust in the ecb, % – eu15, 2012-2014 – boxplots table 4 provides summary statistics in the eurobarometer survey across its main socio-demographic categories and groupings. the respective means give an impression about who supports the ecb to a less or a bigger extent. firstly, the population that support the ecb is approximately equal to the population that does not trust in the community bank, with a mean value of 0,51. even if there are still more supporters of the ecb, this data should provide an alarm for the european institutional framework, in consideration that in 1999 (in accordance with farvaque et al. (2010)) the mean value was 0,67. this meaningful drop is strongly affected by the piigs economics crisis in 2012 and the magnitude of this scepticism forced mario draghi to claim the famous sentences "is ready to do whatever it takes to preserve the euro. and believe me, it will be enough” in order to mitigate the speculative financial attack.referring to the population characteristics, the gender sex is not so much relevant, with the male population that weakly tends to have negative impressions, with a value of 0.48, baltic journal of economic studies 118 vol. 1, 2015 meanwhile the female population tends to trust in the european central bank. on the other hand, it is worth noting that the scepticism among men are bigger than among women. the age of the population is also not relevant in terms of a trust deviation. in particular, it can be noticed that all the mean values tend to the central value of 0.5, with a small negative deviation for the 25-39 years part of the population and a small positive deviation for the oldest part of the population. these modest differences are surely correlated to the unemployment crisis that the pigs country are experiencing in this economic period. differently to the previous data, the education is strongly spread out in function of the age when the person interviewed had ended to study. in fact, the part of the population that are ended up to 15  years of education is significantly sceptical about the ecb, with a mean value of 0,38. the under-educated are usually the part of population that own less income because of the low salary gained doing a job that requires low skills (miller, 1960; schulz, 1961; david 1963). furthermore, in the last economic crisis the poorer part of the population was more affected by the economic recession, with a lower salary and more unemployment, causing an important disbelief in the european central bank policy. the poverty condition can be also a caused by the wish of change from the actual framework. it is worth noting that also the second educational population interval, 16-19 years, tends to have a discordant belief about the ecb, with a mean value of 0,49. on the contrary, the over-educated part of the population, with more than 19  years of education, puts a meaningful trust in the european bank. this could be explained at first with the same argument of the undereducated. there is in fact a strong positive evidence between levels of education and earning, so this part of population tends also to have a lower impact on the wellness and, apart from that, this part of population has consequently an important desire of stability. we should also highlight the balance between the lower educated and the upper educated, since the average value between those two is approximately equal to 0.50, namely the equality between trust and distrust. this has a double relevance: at first, as the medium class is also approximately equal to 0.5, the education in average does not move the preference of the entire population on the ecb policy; secondly, this gap shows also that the deviation from the central 0,5 value has the same magnitude, 0.11. for this data, the difference between the 1999 values should be compared: at this period all the population was more optimistic about the ecb. the political preferences show a tendency not to trust in the ecb, as the major part of the left and centre political electors do not support the european bank institution, with a value of 0,45 for centre and mostly with a value of 0,42 for the left. on the contrary, the right has a weak tendency to trust in the ecb. these values shows at first that the preference "goes" from the left, akin to the keynesian economy and for that reason this part of population wishes a government intervention in order to support the economy, to the right, that on the opposite are akin to the conservative policies, almost always adopted by the ecb. the economic expectation about the future are strongly correlated with the trust or not trust in the european central bank, as the worse expectation mean value is strongly lower than 0,5, with a value of 0,33. it is straightforward that who does not put his trust in the ecb has also a pessimistic point of view, and the magnitude of the pessimism is bigger than the optimism of the population that trust in the ecb, with a value of 0,61. this data, collected in 2014, is not so much affected by the ltro announcement in july 2014 and mostly is not influenced by the first qe implemented by the european central bank, decided on the 22nd of january 2015 in order to stabilize the inflation to the 2% value. it is also important to highlight the dramatic drop of the value in comparison with the 1999 values, with a loss of 0,17 in mean for the optimistic expectations and a loss of 0,24 for the pessimistic one. the class divisions has roughly table 4 trust in the ecb by socio-demographic category – summary statistics. source: author’s calculations based on eurobarometer survey data mean standard deviation observations full sample 0.51 0.5 106789 gender male 0.4878211 0.4998569 55742 female 0.5432099 0.4981347 51047 age 15-24 years 0.5168488 0.4997445 10424 25-39 years 0.4957416 0.4999942 22771 40-54 years 0.5126274 0.4998506 27317 55 years and older 0.5259766 0.4993309 46277 education up to 15 years 0.3854239 0.4867084 21541 16-19 years 0.4736091 0.4993105 37955 20 years and older 0.6199971 0.4853943 37320 still studying 0.5443505 0.4980588 9973 political placement (data available only 2014) left 0.419105 0.4934338 13250 center 0.4474816 0.4972514 16817 right 0.5389294 0.4985125 9246 economic expectations same 0.57 0.49 60501 better 0.61 0.49 18213 worse 0.33 0.47 28075 class the working class of society 0.4256431 0.4944501 35599 the middle class of society 0.5402838 0.4983807 53165 the upper class of society 0.5750319 0.494349 32887 occupation unemployed 0.3840563 0.4863989 9935 retired 0.5258903 0.499338 32359 baltic journal of economic studies 119 vol. 1, 2015 the same value of the education interval values: in fact, the working class of the society has a meaningful disbelief for the ecb, but this is approximately compensated by the trust of the upper class. finally, it is worth emphasizing how much the unemployed do not trust in the ecb. this data can be seen as a result of the economic condition, also keeping in mind that the unemployment issue was not considered as a target for the ecb until the economic crisis of 2012. it is also straightforward that this data is a consequence of richness loss caused by the crisis that caused an increment of the unemployment rate. 4. econometric estimation of determinants of trust in the ecb the model of farvaque et al. (2010) is employed: trust ijt =f(inf it ,dem’ ijt ,pol’ ijt ),ecoexp ijt ,d jt ,c j , t t ,c)+є ijt trust ijt is the opinion of a respondent i in country j at the time/wave t of the eurobarometer survey. inf_it is the measure of inflation at t in the j-th country. dem’ ijt is a vector of “demographic variables” such as age, gender, education, employment status. the income variable was omitted in our calculations. instead, we introduced the variable of the social class in society. pol’ ijt is a vector of “political variables”, such as the polital ideology of the i-th respondent in the j-th country at t, and the trust in the european commission. ecoexp ijt are the expectations regarding the future economic situation by the respondent. c j represent the country-fixed effects, t t  – time/wave fixed effects, є ijt is the error term of the regression, c is the constant term. in the paper of farvaque et al. (2010) the following variables are recognized to determine the trust in ecb, namely: education, age, gender, income, employment, political ideology, trust in european commission, expectations about economic situation. apart from this, we include a number of macroeconomic variables at the country level, such as gdp per capita (expressed in constant national currency per person), unemployment rate and inflation (cpi). data comes from the international monetary fund. table 5 reports about the results. the model shows at first the insignificance of the inflation on the trust in the ecb, as the regressand is not significantly different from zero. the other characteristics took into account on the questionnaire that are not meaningful are the age (since the interviewed are not older than 54 years) and the political preference for the center. the strongest variable that influences the trust is the occupation, with a strong significant negative impact for the trust as the individual is unemployed, with a value of -1,29. negative impact on the trust has also a situation of being retired, with a value of the regressor of -0,97. a meaningful impact also have the years of education, in particular the more years the individual studies the more the trust to the ecb he has. the social class affinity is also significant for the trust, in particular if the individual belongs to the upper class. the effect of the economic expectation are approximately equal, with a small tendency to the negative impact caused by pessimistic expectation (0,62 ) against a positive effect of optimistic expectation. finally, small but significant positive effect have being affined to the right policy point of view and the gender. 5. conclusions comparing the results of farvaque et al. (2010) it can be said, that considerable difference hasn’t been noted. according to our findings, still people with higher level of education, people with a higher social status, people with center or right-wing political orientation, people with optimistic expectations on the economic situation have more trust in the ecb. however, we have found that women have become more supportive about the ecb than men in contrast with the findings of farvaque et al. (2010). it can be explained by the higher level of women’s involvement in business activity in recent years and because women become more educated and politically involved and that is why they are more confident about the ecb. factors that influence the trust in the ecb the most are: occupation, years of education, the social class. as to our findings, a socio-demographic portrait of a person who has a high level of trust in the ecb looks as follows: it is a well-educated, employed woman in her fifties that belongs to the upper class of society, has center or right political affiliation and has positive expectations about the economic situation in the country. definitely, a trust in public institution as the ecb has been deteriorated due to the piigs economics crisis in 2012. the north has table 5 evolution of trust in the ecb after the financial crisis – eu15, 2012-2014 regressors 2012-2014 inflation (t) -0.005 . gender (bl: male) female 0.235 *** age (bl: 15-24 years) 25-39 years -0.042 40-54 years 0.021 55 years and older 0.392 ** education (bl: up to 15 years) 16-19 years 0.326 *** 20 years and older 0.706 *** still studying 0.458 *** political placement (bl: left) center 0.162 *** right 0.346 *** occupation unemployed -1.249 *** retired -0.979 ** class (bl: the lower class of society) the middle class of society 0.400 *** the upper class of society 0.830 *** economic expectations (bl: same) worse -0.622 *** better 0.583 *** significativity codes: *** 0.001; ** 0.01; * 0.05; . 0.1; ’ ’ 1 baltic journal of economic studies 120 vol. 1, 2015 to finance the debts of the south. trust in the ecb has considerably declined in the year 2014; the numbers in germany and france for the year 2014 are striking. most visible decline of trust was recorded in italy, ireland, greece, spain and portugal. so does it mean that distrust can kill the euro? we should take into consideration the fact that new countries still keep joining the eurozone as well as the eu. however, it can be also claimed that the world economic crises has revealed the disadvantages of the european system. during crisis, the main objective of a central bank is to bail out institutions and markets. the euro system needs to monitor the banking and financial system in its jurisdiction. it also should develop and keep up with the regulatory and supervisory policies and practices. the situation when it will be possible to tell that distrust might kill the euro is only possible in the case if the most crisis-affected countries decide to abandon the euro and leave the euro system. references banducci, s.a., karp, j.a., loedel, p.h. 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(2013). the greek debt restructuring: an autopsy – economic policy, vol. 28, issue 75, p. 513-563. наталья костюченко испытание доверием: недоверие может убить евро? аннотация. целью работы является определение динамики доверия к европейскому центральному банку в современном периоде и сравнить результаты с предыдущим исследованием farvaque et al. (2010), а также исследовать вопрос важности доверия населения к государственным организациям для экономической ситуации в стране. данная работа посвящена изучению факторов, определяющих доверие к ецб. методика. мы используем данные из опроса под названием «евробарометр» европейской комиссии. мы рассматриваем данные в 15-ти странах-членах ес. проведенное исследование даёт ответ на вопрос: может ли недоверие убить евро? данное исследование использует модель farvaque et al. (2010), расширяя временные рамки более ранним периодом. результаты. после мирового финансового кризиса доверие к ецб значительно уменьшилось. в соответствии с нашими результатами, население, которое поддерживает ецб приблизительно равно населению, которое не поддерживает общественный банк. практическое значение. в соответствии с нашими результатами, население с более высоким уровнем образования, с более высоким социальным статусом, с центральной или правой политической ориентацией, с положительными ожиданиями о будущем больше доверяют ецб. однако, мы отметили, что женщины стали больше доверять ецб по сравнению с результатами farvaque et al. (2010). значение/оригинальность. вопрос доверия к государственным организациям представляет большой интерес для экономического исследования. вследствие мирового финансового кризиса, доверие к европейскому центральному банку стало очень актуальным вопросом. в частности, доверие к европейскому центральному банку после мирового финансового кризиса, в период с 2012 по 2014 гг., который исследован в данной статье. baltic journal of economic studies 451 vol. 3, no. 5, 2017 corresponding author: 1 department of applied mathematics and computer science, national metallurgical academy of ukraine. e-mail: sgg1@ukr.net 2 department of economic cybernetics and mathematical methods in economics, alfred nobel university. e-mail: sgg1@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-451-456 research of the enterprise profitability strategy gennady shvachych1 national metallurgical academy of ukraine, ukraine elena kholod2 alfred nobel university, ukraine abstract. the article focuses on such indicators as profit and profitability, reflecting the economic efficiency of an enterprise, its financial condition, and the problems of its economic development. the subject of the research is to analyse the profitability of an enterprise and validate the strategy of the enterprise’s efficiency increasing. the methodology of the research is based on an analysis of the enterprise efficiency characteristics in general, the profitability of different areas of production. for this purpose, in the economic analysis, in particular, there were used profitability indicators. in this case, profitability is the most generalized, qualitative indicator of the economic efficiency of an entity’s activity, which allows comparing the amount of profit with the value of the means, by which it was obtained. the purpose of the research is to analyse the production activity of ojsc “nmtz” and to develop proposals for improving its production efficiency; study ways of production development; research factors that delay the growth process of pipe products production; identify the profitability growth factors of the enterprise that allow increasing competitiveness indicators in the pipe market. practical application. the enterprise’s priority directions of activity aimed at improving the technique and technology on the basis of modern scientific developments in order to reduce energy and material consumption, as well as to improve the quality of pipe products are shown. the key ways of increasing profit and profitability are indicated. factors of the income increase, which allow the enterprise to carry out its activities more successfully, are revealed. key words: profit, profitability, enterprise, economic efficiency, market, competitiveness. jel classification: l11, l16, o14, p11 1. introduction in an economic analysis, the results of an enterprise can be estimated by such indicators as output, sales, profit, etc. however, when it comes to assessing the effectiveness of an enterprise, it becomes obvious that the listed characteristics are not enough because those are the absolute indicators. in this regard, in order to characterize the efficiency of the enterprise in general, the profitability of different areas of production in the economic analysis, there are used, in particular, the indicators of profitability. profitability in the broad sense of the word means efficiency and returns (balabanov, 2007). profitability is the most generalized, qualitative indicator of the economic efficiency of an entity’s activity; it allows you to compare the amount of profit with the value of the means, by which it was obtained. therefore, profitability can be interpreted as a measure of returns, reinunerativeness, and business efficiency. relative indicators that allow one to evaluate the efficiency of an enterprise in general, as well as directions of its activities (production, commercial, investment, etc.), the profitability of production of certain types of products and definite services rendering measure profitability. it should be noted that the indicators of profitability are important elements that reveal the factor environment of profit generation, so they are mandatory in conducting a comparative analysis and assessment of the financial condition of the enterprise. in addition, profitability is important for decision-making in investment, planning, budgeting, coordination, evaluation, and control of the enterprise activity. the purpose of the article is: − analysis of production activity of nmtz ojsc and proposals development for improving its production efficiency; baltic journal of economic studies 452 vol. 3, no. 5, 2017 − research of ways of production development; − research of factors that delay the production growth process of pipe products; − identification of profitability growth factors of an enterprise that allow increasing the competitiveness indicators in the pipe market; − definition of directions of optimal production process development. 2. analysis of recent research and publications one of the main results of an enterprise is profit, which is an absolute indicator of its efficiency. a significant contribution to solving the problem of improving the efficiency of enterprises belongs to such economists as v.h.  andriichuk, m.ya.  demianenko, v.n.  kosinsky, p.m.  makarenko, l.l.  melnyk, n.m.  bohatska, p.t.  sabluk et al.  (andriichuk, 2014; melnyk, 2013; sabluk, 2008; parshyna, 2013). thoroughly this problem in the classical form is reflected in the researches of e.i. krylov, v.m. vlasova, i.v. zhuravkova, t.u. turmanidze, i.a. blank et al. (krylov & vlasova, & zhuravkova, 2006; tumanydze, 2013, blank, 2007). note that some western economists define profits as a category of well-being. so, j. hicks stated that the goal of determining profit in practice is to give people a sense of the amount they can spend on consumption without becoming poorer. the essence of this provision is that profit should be considered as the maximum amount that a person can spend, provided that his/her welfare will not have been decreased by the end of a certain control period. at the current stage of economic development, most economists also interpret the profit from the economic activity of an enterprise as the excess of income over costs. in particular, s.f. pokropivnyi (pokropivnyi, 2001) and n.m. bondar (bondar, 2014) consider the profit as a part of the proceeds remaining after the reimbursement of all costs for the production and commercial activities of an enterprise. o.o. hetman and v.m. shapoval prove that “profit is the difference between the sale price and the cost price of products (goods, works, services), between the amount of proceeds received and the amount of production and sales costs” (hetman & shapoval, 2010). the researches of local and foreign scientists attest that the absolute profit size does not allow obtaining a clear idea of the level, or changing in the efficiency of production. thus, the total amount of profit may increase, when the production efficiency will remain unchanged or even decrease. this situation can take place with the profit growth due to quantitative factors of production. for example, with the equipment and staff expand. at the same time, we note that the profitability of production (or reinunerativeness) is derivative from the profit (prokopenko & hanin, 2008). in this case, the meaning of profitability in the economic literature is presented in several interpretations. this fact indicates that the profitability of the production relates to the economic category, which is different in its complexity. for instance, in general, it can be noted that the profitability of production is a relative indicator of the economic efficiency of an enterprise. in addition, such an indicator comprehensively represents the use of monetary, labour and production resources. on the other hand, the profitability of production can be interpreted as the ratio of income and the capital invested in creating such income. consequently, the profitability of a production based on a comparison of the return on investment with the capital invested allows determining the level of profitability of an enterprise and comparing it with the alternative use of capital, received by the enterprise on equal risk terms. it should be noted that, despite the significant source of research on the theory of an enterprise increasing efficiency, the problem of profit and profitability increasing has not been studied sufficiently. this is especially true in the iron and steel industry, where there is a drop in production. 3. research on the production efficiency increasing problem profit, as a source of industrial and social development, is one of the major factors in self-financing of an enterprise. moreover, the possibilities of an enterprise are mainly determined by the extent, to which its income exceeds costs. therefore, it is not only profit that plays an important role in the enterprise’s activity but also the losses. those can usually show miscalculations and even errors in the production organization, as well as in sales. the noted points allow asserting that the profit is the result of the activity of an enterprise that indicates its absolute efficiency. figure 1 shows the main factors of increasing the profit of an enterprise. indicators of production profitability are the most important factors for the current planning of an enterprise. they are also taken into account in determining the financial capacity of an enterprise. it is clear that the profitability indicators of an enterprise can be considered as generalizing criteria of economic production efficiency. in general, such indicators reflect the efficiency of usage of money and labour resources. in this case, the enterprise is considered to be profitable if it is remunerative. the study of production profitability indicators can reveal the profit increase factors, as well as indicate the ways of further development of an enterprise. also, the profitability indicators may show the assessment of the enterprise management effectiveness, as it is obvious that the high-profit level and a significant return of the enterprise directly depend on the effectiveness of management decisions. from baltic journal of economic studies 453 vol. 3, no. 5, 2017 these positions, the production profitability can be interpreted as one of the most important factors in the quality of the enterprise management. an enterprise must constantly identify ways to increase profitability for ensuring highest indicators of its activity. the main factors in increasing the production profitability can be defined by the following: the higher the income and the less the value of fixed assets and working capital for its achievement, the higher the production profitability. at the same time, the economic efficiency of an enterprise operation increases significantly. as a rule, when performing an analysis of ways to increase the production profitability, the influence of external and internal factors is distinguished. external factors in increasing the production profitability can be referred to the sales market expansion of the products at the expense of lower prices for goods produced. internal factors are considered to be more significant than external ones. these include the following: reducing production cost, increasing production volumes, increasing the return on fixed assets, and so on (fig. 2). key ways to increase profitability increasing the absolute amount of profits production costs reduction fig. 2. the key ways to increase profitability a wide range of indicators may characterize the production profitability. those show the ways to increase the efficiency of production. on the other hand, profitability indicators are to determine the effectiveness of the funds invested in production. the more so, the assessments analysis of the financial and economic enterprise activity is based on these indicators. the most important ones may include the following. in particular, these are: assets profitability, investment capital profitability, products profitability, roi of personnel, sales profitability, the coefficient of basic profitability of assets, profitability of net assets, etc. the direct analysis of assessments of the nmtz ojsc efficiency was conducted on the basis of determining the following indicators of profitability. production profitability: pp = pr / pc × 100%, (1) where pp – production profitability; pc – production costs; pr – profit obtained from the production volume. the share of profits accounted for by 1 uah spent on production assets characterize such an indicator. products profitability: pr = pr / c × 100%, (2) where pr – production profitability; pr – profit; c – cost. it shows the profit amount for 1 uah of self-cost. sales profitability: sp = pr / s × 100%, (3) where sp – sales profitability; pr – profit; s – sales or revenue. the sales profitability is responsible for the profits amount, which accounted for 1 uah of revenue. sometimes such an assessment is called general profitability. 4. analysis of profit, financial condition and production profitability ojsc “nmtz” is focused on the production of electric welded pipes of various purposes. the priority direction of the plant’s activity is the production of pipes of such a diameter as large, medium, and small. modern technologies and equipment in production, as well as quality control and product testing systems, ensure the production of pipes of the following grades of steel: carbon, low-alloy, and stainless steel. the pipes are produced according to the local and international standards. the analysis of the financial condition of the enterprise was based on the report that describes the corresponding balance of the enterprise. table 1 shows the main indicators of such a balance. table 1 analysis shows the following. the enterprise received a profit of 1 419 197 thousand uah from the main factors of profit growth cost of production reduction rational use of industrial resources ensuring the products competitiveness improving product quality application of technical and organizational innovations fig. 1. the main factors of increasing the profit of an enterprise baltic journal of economic studies 454 vol. 3, no. 5, 2017 its activity for the reporting period. this profit amount shows that in comparison with the last year’s corresponding indicator, it decreased by 18.7%. it is 423 303 thousand uah in absolute values. closer analyses of the enterprise main indicators show the following. the self-cost of production, realized by the enterprise, increased by 8.4%. thus, at the enterprise, there was a growth in the production self-cost over the income. this situation has led to a 9.8% decrease in gross profit in general. a detailed analysis of the situation at the enterprise showed the following. the slowdown in the enterprise performance occurred due to the deteriorating situation in the production and sale of the produced goods, that is, the main activity of the enterprise was in the crisis phase. this explains the costs increase over other activities of the enterprise. the next step was to analyse the enterprise profitability. table 2 represents the main profitability indicators. those show a decrease in the efficiency assessment of the enterprise for all major parameters compared with the last year. table 2 basic indicators of the enterprise profitability profitability for the reporting period for the same period of the previous year production 0,166 0,143 products 0,215 0,178 sales 0,166 0,143 in addition, there were determined other profitability indicators of the enterprise. profitability decreased by 16%. such an assessment showed that 1 uah of assets accounted for 0.12  uah of net profit. in the past reporting period, it was 0.28 uah. the profitability of the net worth decreased by almost 2.1 times. in the previous reporting period, 1 uah of the net worth accounted for 0.51 uah, while at the reporting period it was 0.24 uah. 5. the strategy of increasing the production profitability analysis of the strategy of increasing the production efficiency is based on the peculiarities of the sales figures of pipes by the enterprise. table 3 shows such data. table 3 pipes sales figures profitability for the reporting period for the same period of the previous year sales of pipes in local market 452 432 500 217 sales of pipes for export 1 045 765 1 342 283 total proceeds from sales of pipes 1 498 197 1 842 500 table 3 data analysis shows that the enterprise pays a considerable attention to the sales of pipes for export. the main consumers of the enterprise’s products are such countries as the us and china, as well as the eu countries. it should be noted that the enterprise produces pipes for oil and gas sector. and this, in turn, means that the prospects for the expansion of the production of the enterprise directly depend on the oil and gas field development. against this background, there could be specified several subjective factors that affect the phaseout. the main ones include the following: − expansion of pipes production by countries that are consumers of pipes’ products (usa, china, eu); − significant aggravation of competitive opportunities in the world markets for pipe products; − a significant increase in prices for raw materials; − some activation of the policy of import substitution of ukrainian pipe products. it is also possible to point out objective factors that hamper the expansion of the pipe product market. thus, the price of energy resources has a significant impact on the final cost of pipe products. abroad pipe plants have the opportunity to buy them at a significantly lower price than local producers do. clearly, this situation leads to a reduction in the cost of pipe production for abroad enterprises and thus has significant advantages in the competition. there should also be noted another aspect that has a significant impact on the competitiveness of products. this is the quality. for pipe products, this is primarily due to the increase in the accuracy of the pipes’ diameter. this circumstance indicates that today pipe producers are trying to follow american standards. this allows a significant increase in the sales figures of pipes in the us market. on the other hand, this approach opens the prospects of development and other markets, e.g., central asian. the results of the above analysis show that competition in the market of pipe products is quite high. for these reasons, every pipe producer is looking table 1 the main indicators of financial activity of the enterprise item line code for the reporting period for the same period of the previous year net income from sales of goods (goods, works, services) 2000 1 498 197 1 842 500 self-cost of the products sold (goods, works, services) 2050 (1 271 830) (1 516 403) gross: profit 2090 226 367 326 097 baltic journal of economic studies 455 vol. 3, no. 5, 2017 for ways to increase the competitiveness of its products. one of the most promising directions for increasing the competitiveness of products for nmtz ojsc could be the implementation of the energy-saving program. to do this, there was analysed both externals and internals of the enterprise. at the same time, there were spotted the opportunities and the greatest future threats. in this regard, to improve the profitability of the enterprise there were proposed some measures: the investment project involves the improvement of the technology of producing pipes of a certain diameter, which increases the yield of a suitable products and reduce the number of defects, as well as reduce the self-cost and improve the profitability of production. the essence of the design choices is to replace the outdated electrical equipment of one rolling mill with more up-to-date and reliable, namely, the replacement of the relay-contact control system on four motors on serial complete thyristor converters. modernization of electrical equipment can be carried out at the expense of the depreciation fund. direct capital investments were calculated to implement such a proposal. capital investment in production includes: the costs associated with the purchase of the appropriate equipment, the cost of installation and commissioning, the cost of supporting materials. in general, this project requires 190.35 thousand uah. another strategic direction of the enterprise’s energy saving program is the refusal of the open-hearth process and the introduction of the technology of smelting steel processing. such a transition allows using the local steel. the introduction of such an approach is aimed at reducing the cost of production as the enterprise may partially refuse the purchase of imported production components. consequently, there is an opportunity to bring the quality of pipe products to the level that meets the regulatory requirements of the european union, as well as to increase the volume of pipes delivered to the abroad consumers. in addition, there should be noted that it is advisable for the enterprise to consider a competitive strategy of cost leadership since it may be very relevant to it. such a strategy aims at reducing costs throughout the chain of the technological process of pipes production. the main purpose of such a strategy is to create a significant advantage over competitors at appropriate costs. for the most part, such a strategy is used by large enterprises with a limited range of products, namely, such as nmtz ojsc. the main idea of this strategy is to find opportunities to reduce costs. the use of this strategy could cut production costs by reducing the percentage of defects and by optimizing the production process. with the cost lowering, there supposed the increase in the net profit amount, with the same sales figures, which leads to an increase in profitability indicators. therefore, in order to maintain favourable positions in the pipe production market, it is necessary to work systematically in all directions of the enterprise’s activity, particularly: improving the quality of products, improving production technologies, and developing new types of products according to the growing market requirements. 6. conclusions based on the foregoing, subjective and objective factors hindering the increase of pipe production efficiency are established. the priority directions of the enterprise development are determined. a program of energy saving is proposed to increase the competitiveness of products. in addition, the enterprise was proposed to introduce a competitive strategy of cost leadership. the use of this strategy will cut production costs by reducing the percentage of defects and by optimizing the production process. with the cost lowering, the net profit amount is supposed to increase, keeping the same sales figures, which leads to an increase in profitability indicators. references: andriichuk,  v. h. 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(2013). kontseptualni osnovy zabezpechennya konkurentospromozhnosti promyslovykh pidpryyemstv [conceptual basis for providing competitiveness of industrial enterprises]. teoretychni ta prykladni aspekty pidvyshchennya konkurentospromozhnosti pidpryyemstv [theoretical and applied aspects of increasing the competitiveness of enterprises]. dnipropetrovsk, herda, vol. 1, pp. 7–14 (in ukrainian). pokropivnyi,  s. f. (2001). ekonomika pidpryyemstva [economy of the enterprise]. kyiv, kneu, 352 p. (in ukrainian). prokopenko  i. f., hanin  v. i. (2008). metodyka i metodolohiya ekonomichnoho analizu [methodology and methodology of economic analysis]. kyiv, tsentr uchbovoyi literatury, 430 p. (in ukrainian). tumanydze  t. u. (2013). upravlenye proyzvodstvennymy zatratamy predpryyatyya [management of production costs of the enterprise]. stratehyya razvytyya ékonomyky [strategy of economic development], no.  3(202), pp. 24–28 (in ukrainian). sabluk p. t. (2008). problemy zabezpechennya dokhidnosti ahropromyslovoho vyrobnytstva v ukrayini v postindustrialnyy period [problems of ensuring the profitability of agro-industrial production in ukraine in the post-industrial period]. ekonomika apk [economy of agro-industrial complex], no. 4, pp. 19–37 (in ukrainian). baltic journal of economic studies 70 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 administrative court of cassation within the supreme court of ukraine, ukraine e-mail: bevzenkovm@ukr.net orcid: https://orcid.org/0000-0001-9699-7930 2 kyiv national economic university named after vadym hetman, ukraine (corresponding author) e-mail: yutsvirkun@gmail.com orcid: https://orcid.org/0000-0002-5351-9653 doi: https://doi.org/10.30525/2256-0742/2022-8-5-70-76 the law of public construction in the countries of the european union: experience of germany and economic and legal dimension of its creation in ukraine volodymyr bevzenko1, yurii tsvirkun2 abstract. the subject of the study. a new public administration system in ukraine should be created through administrative reform. the existing system of public administration in ukraine remains generally inefficient, with an eclectic mix of institutions inherited from the soviet era and new institutions formed during ukraine's independence. it is argued that the rapid development of modern social relations naturally causes and is conditioned by the continuous transformation and progress of various sectors of public and state life. scientific and technological progress, informatization and updating of production methods cause an objective need to revise and adopt fundamentally new legislation, study and implement advanced forms of organization of social relations. it is clear that the construction industry is a component of the national economy, which requires meaningful legal regulation, does not stay away from modern social and state development. the complexity and significance of the construction industry, its multifaceted nature require, in particular, the study and implementation of perfect regulatory mechanisms developed by developed countries with highly developed economies, strong and perfect standards of functioning of the state apparatus, legislation. methodology. the national construction legislation was reviewed in comparison with the experience of the federal republic of germany. it is concluded that the review of the institutional architecture of the construction industry of the federal republic of germany, the basic principles of the formation of german public construction law as a factor of the modern economy, its progressive forms and methods has been carried out. the content of this branch of public law, its impact on economic processes in the state, the formation and change of the main economic indicators are assessed. the conclusion is made about the objective connection between the state and development of national legislation, in particular construction legislation, and the degree of economic development of the state. the purpose of the study. by choosing the strategic path of institutional and fundamental reforms, ukraine also implements the best legal and state experience of modern progressive states with developed democracy, state-building and law-making, developed economy. in the field of law and law-making, improvement of legal education and science the experience of the federal republic of germany has proved its perfection, efficiency and progressiveness for ukraine. german public construction law is not the only area that has become a model for domestic public law and legislation, in particular, it is worth mentioning the german experience of administrative procedure law and legislation, which was used in the adoption of the code of administrative procedure of ukraine, and administrative procedure law and legislation, which was the basis for the preparation of the law of ukraine "on administrative procedure". thus, the time-tested and experienced german administrative and legal theory has become one of the prerequisites for the creation and development of national branches of public law, including the law of public construction. the economic and legal dimension of public construction law in ukraine is that the construction industry is a productive sector of the economy, the efficiency and successful functioning of which depends on a simultaneous set of factors, including, in particular, the availability and completeness of national construction and administrative and procedural legislation, the development of the theory of public construction law, transparency and validity of the activities of administrative bodies in the field of construction. conclusion of study. it is concluded that the new branch of baltic journal of economic studies 71 vol. 8 no. 5, 2022 national special administrative law – publicc construction law of ukraine is manifested in three dimensions: the substantive dimension of national public construction law and the prerequisites for its formation and further development; european (foreign) experience of legal regulation of public construction; economic and legal dimension of its creation in ukraine. key words: public construction law, state administration, general administrative law, special administrative law, economy, construction, administrative body, administrative act, construction code, administrative procedure, administrative discretion, land management. jel classification: k10, k15, q15 1. introduction ukraine and ukrainian society at the next stage of the evolutionary development of national state and social institutions faced an objective challenge of reassessment, revision and introduction of fundamentally new principles of organization and functioning of public authorities in the state. as a result, in 1998, in order to ensure the reform of the public administration system in ukraine, to create conditions for building a democratic, social, legal state in accordance with the constitution of ukraine, to establish and ensure human and civil rights, the concept of administrative reform in ukraine was adopted (on measures to implement the concept of administrative reform in ukraine, 1999). in particular, it is recognized that an important factor in overcoming the transformation crisis of ukrainian society is the creation of a modern, effective system of public administration. the need to form a new system of public administration as a tool to overcome the crisis in ukraine has been underestimated until recently (on measures to implement the concept of administrative reform in ukraine, 1999). a new public administration system in ukraine should be created through administrative reform. the existing system of public administration in ukraine remains generally inefficient, with an eclectic mix of institutions inherited from the soviet era and new institutions formed during ukraine's independence. this system is internally contradictory, incomplete, cumbersome and disconnected from the people, as a result of which the existing state administration has become a brake on socio-economic and political reforms (1). thus, the content of administrative reform is, on the one hand, a comprehensive restructuring of the existing system of public administration in all spheres of public life in ukraine. on the other hand, in the development of some public administration institutions that ukraine has not yet established as a sovereign state (on measures to implement the concept of administrative reform in ukraine, 1999). the purpose of the administrative reform is to gradually create a system of public administration that will ensure the formation of ukraine as a highly developed, legal, civilized european state with a high standard of living, social stability, culture and democracy, will allow it to become an influential factor in the world and europe. it also aims to form a system of public administration that will be closer to the needs and demands of people, and the main priority of its activities will be to serve the people and national interests. this system of public administration will be controlled by the people, transparent, based on scientific principles and effective. expenses for the maintenance of administrative staff will be adequate to the financial and economic state of the state (1). in order to achieve the goal of administrative reform, it is necessary to solve a number of tasks (on measures to implement the concept of administrative reform in ukraine, 1999): – formation of an effective organization of executive power both at the central and local levels of government; – formation of a modern system of local self-government; – introduction of a new ideology of the functioning of the executive branch and local self-government as an activity to ensure the realization of the rights and freedoms of citizens, the provision of state and public services; – organization on the new basis of public service and service in local self-government bodies; – creation of a modern system of training and retraining of management personnel; – introduction of a rational administrative and territorial system. it also provides for the implementation of administrative reform over a relatively long period, which includes three stages (on measures to implement the concept of administrative reform in ukraine, 1999). at the preparatory stage of the reform, the concept of administrative reform and the program of administrative reform implementation should be developed and officially approved. at this stage, priority issues related to the current improvement of elements of the existing public administration system are being addressed. the second stage introduces the organizational and legal framework for reforming key elements of the public administration system. baltic journal of economic studies 72 vol. 8 no. 5, 2022 at the third stage, transformation processes deepen, new institutions, organizational structures and instruments of public administration are formed. therefore, one of the directions of implemen tation of administrative reform measures in ukraine was the development and implementation of perfect legal regulation of public relations with the participation of public authorities. the legal basis for the organization and functioning of the participants of relations, in addition to the institutional component, has become a mandatory measure not only of administrative reform, but also a guarantee of successful development of the ukrainian state, its institutions, the formation of a market economy, the establishment and protection of human rights and freedoms (article 3 of the constitution of ukraine) (constitution of ukraine, 1996). 2. content, features and comparative studies of the state construction industry the rapid development of modern social relations naturally causes and is conditioned by the continuous transformation and progress of various sectors of public and state life. scientific and technological progress, informatization and renewal of production methods cause an objective need to revise and adopt fundamentally new legislation, study and implement advanced forms of organization of social relations. it is clear that the construction industry is a component of the national economy, which requires meaningful legal regulation, does not stay away from modern social and state development. the complexity and significance of the construction industry, its multifaceted nature require, in particular, the study and implementation of perfect regulatory mechanisms developed by developed countries with highly developed economies, strong and perfect standards of functioning of the state apparatus, legislation. critically assessing such a new branch of national special administrative law as public construction law of ukraine, it is necessary to pay attention to its dimensions (aspects) and features: – substantive legal dimension of the national law of public construction and prerequisites for its formation and further development; – european (foreign) experience of legal regulation of the public construction industry; – economic and legal dimension of its creation in ukraine. consider these aspects and features of public construction law in turn. it should be emphasized that these dimensions (or otherwise – the disclosure of objectively existing features and patterns of public construction law) are not independent, but are in fact interrelated and determinative. that is, a thorough justification of the content of the law on state construction leads to the adoption of highquality legislation in the field of state construction, developed on the basis of progressive european experience in the legal regulation of state construction. instead, a self-sufficient construction industry, enshrined in the current norms of national public construction legislation, is one of the decisive factors in the stability and progressive development of the national economy, the progress of both individual and overall industries, financial and credit and banking systems. firstly, as it is known, the whole set of adminis trative law norms can be divided into general administrative law norms and special administrative law norms. these groups of administrative law norms form, respectively, general administrative law and special administrative law (melnyk, 2014; melnyk, 2010). given the existence of social relations, legal norms that regulate them, and participants in such relations, it is possible to talk about the constant formation and development of numerous branches of special administrative law, which includes the state construction law of ukraine. public construction law of ukraine is an independent branch of special administrative law, which, although almost not substantiated in ukraine, has all the necessary prerequisites for this (bevzenko, 2022): – in the state, construction legal relations that have a public-legal (administrative-legal) nature constantly arise, develop, and terminate; – participants in administrative-legal construction relations are special subjects – the customer, consulting engineer, executive authorities, the verkhovna rada of the autonomous republic of crimea, the council of ministers of the autonomous republic of crimea, local self-government bodies; – ukraine has adopted national legislation that directly regulates construction relations, in particular, the laws of ukraine "on fundamentals of urban planning", "on liability for offenses in the field of urban planning", "on general scheme of planning the territory of ukraine", "on architectural activities", "on construction regulations", "on regulation of urban planning activities", state construction regulations, etc. the public construction law of ukraine is essentially (bevzenko, 2022): − an independent branch of special administrative law; − a branch of the legislation of ukraine; − a branch of legal science; − an educational subject. unlike other public and private branches of national law (criminal, commercial, civil), which also have construction relations as their subject, baltic journal of economic studies 73 vol. 8 no. 5, 2022 the legislation of ukraine on public construction is characterized by the following (bevzenko, 2022): – construction relations are regulated by the norms of administrative law contained in legislative acts and by-laws. sources of the public construction law of ukraine (laws, by-laws) form a hierarchical internally-organized system; – subject of regulation of the public construction law of ukraine is relations that arise, change and terminate between natural persons, legal entities and administrative bodies in connection with construction; − administrative bodies in construction legal relations adopt administrative acts within the limits of their powers, administrative discretion and administrative procedure; – the public construction law of ukraine contains all concepts and categories of general administrative law without exception – in particular, sources, principles and subjects of administrative law, tools of administrative bodies, extrajudicial control over the activities (decisions) of administrative bodies (grytsenko, 2015; maurer, 2020). thus, public construction law of ukraine arises in connection with the issuance of administrative acts by administrative bodies (application by these bodies of other instruments of their activities) in order to ensure the rights, freedoms and interests of individuals and legal entities in the field of construc tion. the existence and boundaries of this branch of special administrative law are determined by administrative and legal relations in the field of construction (bevzenko, 2022). secondly, by choosing the strategic path of institutional and fundamental reforms, ukraine is also implementing the best legal and state experience of modern progressive states with developed democracy, state-building and law-making, and developed economy. in the field of law and lawmaking, improvement of legal education and science the experience of the federal republic of germany has proved its perfection, efficiency and progressiveness for ukraine. german public construction law is not the only area that has become a model for domestic public law and legislation, in particular, it is worth mentioning the german experience of administrative procedure law and legislation, which was used in the adoption of the code of administrative procedure of ukraine, and administrative procedure law and legislation, which was the basis for the preparation of the law of ukraine "on administrative procedure". thus, the time-tested and experienced german administrative and legal theory has become one of the prerequisites for the creation and development of national branches of public law, including the public construction law. in modern german public construction law (öffentliches baurecht), it is considered that the concept of "construction law" includes both public and private construction law. public construction law is of primary interest for legal research; in the general sense of the term, it contains rules, technical conditions and restrictions related to the structural use of land plots. the law of private construction, on the contrary, covers the construction use of land in relations between private law entities; it determines whether and to what extent a land plot can be used for construction, subject to the requirements of civil law (brenner, 2020). public construction law contains a set of legal norms that relate to the structural use of land, i.e., the permissibility, procedure and facilitation of the construction of structures, their intended use and restrictions. public construction law is a general term for the legal issues of general urban planning law, including urban planning, special urban planning law and construction regulation law (brenner, 2020). therefore, the "publicity " of construction law can be judged by its aggregate presence in construction legal relations: – norms of public and general administrative law (administrative-legal norms); – administrative body (administrative bodies); – acceptance/application by the administrative body of the instrument/instruments of the activity of administrative bodies; – administrative procedure of acceptance/application by the administrative body of the instrument/ instruments of activity of administrative bodies; – exercise of competence by the administrative body within the limits of its administrative discretion. administrative discretion will also be checked and will testify the "publicity " of construction law, whether the administrative body has acted with errors (flaws) in the administrative discretion – has not applied it, has acted outside its limits or has acted not in accordance with the prescriptions of legal norms, that is, an illegal (unlawful) exercise of discretion has taken place (maurer, 2011; zeller, 2021). the main legal regulator of public construction relations in germany is the german construction code (baugesetzbuch (baugb), paragraph § 1 tasks, concepts and principles of land management, which stipulates that (baugesetzbuch, 2022): (1) the task of land management is to prepare and manage structural and other land use in the municipality in accordance with this code. (2) land management projects are a land manage ment project (preparatory land management project) and a territory plan (mandatory land management project). (3) municipalities are obliged to draw up land use plans as soon as possible and to the extent necessary for the development and order in the city; the list may be taken into account, in particular, when baltic journal of economic studies 74 vol. 8 no. 5, 2022 allocating territories for residential development. the right to develop land management projects and urban planning acts is not provided for; a claim cannot be based on a contract either. (4) land use plans must be adapted to the objectives of spatial planning. (5) land use plans are developed to ensure sustainable urban development that reconciles social, economic and environmental requirements, as well as responsibility to future generations and socially equitable land use that serves the common good, taking into account the housing needs of the population. they should contribute to the creation of a humane environment, protect and develop the natural foundations of life, promote climate protection and adaptation to climate, especially in the field of urban planning, as well as preserve and improve urban design and the image of the city and landscape in terms of the development of building culture. for this purpose, the development of the city should be carried out primarily through internal development measures. thus, in the federal republic of germany, the public construction industry is mainly regulated by the construction code (baugesetzbuch (baugb), which describes the procedures for the start, duration and completion of construction under the control of administrative bodies authorized to adopt administrative acts and use other tools of activity – planning acts, administrative contracts, acts-actions. on the other hand, the ukrainian construction legislation, unlike the german one, is not so codified and is represented by numerous and diverse regulations. thus, the sources of construction legislation of ukraine are: 1) codes, 2) laws, 3) resolutions of the cabinet of ministers of ukraine, 4) orders of central executive bodies, 5) state construction regulations, 6) branch construction regulations, 7) national standards that relate to the requirements for the production of urban planning, design, scientific design and work documentation, design methods, construction work processes, test methods, structural and engineering systems. there is such a hierarchy of sources of the public construction law of ukraine: 1) codes: – water code of ukraine dated june 6, 1995 no. 213/95-bp; – land code of ukraine dated october 25, 2001 no. 2768-iii; – air code of ukraine dated may 19, 2011 no. 3393-vi; 2) laws: – "on administrative procedure" dated february 17, 2022 no. 2073-ix; – "on mediation" dated november 16, 2021 no. 1875-ix; – "on law-making activity " dated february 15, 2022; – "on construction regulations" dated november 5, 2009 no. 1704-vi; – "on regulation of urban planning activities" dated february 17, 2011 no. 3038-vi; – "on fundamentals of urban planning" dated november 16, 1992 no. 2780-xii; – "on legal regime of the territory exposed to radioactive contamination as a result of chornobyl disaster" dated february 27, 1991 no. 791a-xii; – "on the state land cadastre" dated july 7, 2011 no. 3613-vi; – "on the general planning scheme of the territory of ukraine" dated february 7, 2002 no. 3059-iii; – "on the improvement of settlements" dated september 6, 2005 no. 2807-iv; – "on liability for offenses in the field of urban planning" dated october 14, 1994 no. 208/94-vr; – "on alienation of land plots and other objects of immovable property located on them in private ownership for the social needs and on the grounds of social necessity " dated november 17, 2009 no. 1559-vi; – "on administrative services" dated september 6, 2012 no. 5203-vi; – "on land management" dated may 22, 2003 no. 858-iv; – "on architectural activity " dated may 20, 1999 no. 687-xiv; – "on motorways" dated september 8, 2005 no. 2862-iv; – "on the protection of cultural heritage" dated june 8, 2000 no. 1805-iii; – "on comprehensive reconstruction of quarters (districts) of outdated housing stock" dated december 22, 2006 no. 525-v; – "on access to construction, transport, and electric power facilities for the purpose of developing telecommunication networks" dated february 7, 2017 no. 1834-viii; – "on licensing of types of economic activity " dated march 2, 2015 no. 222-viii; – "on the permit system in the field of economic activity " dated september 6, 2005 no. 2806-iv; – "on the basic principles of state supervision (control) in the field of economic activity " dated april 5, 2007 no. 877-v; – "on the procedure for allocating in kind (on-site) land plots to owners of land shares" dated june 5, 2003 no. 899-iv; – "on heat supply "dated june 2, 2005 no. 2633-iv; – "on public procurement" dated december 25, 2015 no. 922-viii; – "on environmental impact assessment" dated may 23, 2017 no. 2059-viii; – "on strategic environmental assessment" dated march 20, 2018 no. 2354-viii. baltic journal of economic studies 75 vol. 8 no. 5, 2022 it should be emphasized that this hierarchical list of sources of construction law of ukraine is not exhaustive, as there are a significant number of other regulations of a subordinate nature, namely: resolutions of the cabinet of ministers of ukraine, regulations (orders, provisions) of central executive authorities, state and sectoral construction standards. the authors are convinced that given such a large number of regulations, the european (german) experience in the construction industry, it is time to discuss, develop and adopt a codified regulatory act (the construction code of ukraine), which should regulate administrative procedures (declarative and interventional procedures) for the start, duration and completion of construction. it briefly explains why it is necessary to adopt the construction code of ukraine: 1. to organize, unify (codify) and update the construction norms contained in numerous, diverse, contradictory normative legal acts – these are about 3 codes, 25 laws, 24 resolutions of the cabinet of ministers of ukraine, 13 orders of central executive authorities. 2. to clarify the legal regulation of construction, to exclude competition of construction norms of law, which are contained in numerous normative acts of different legal force. 3. for a comprehensive and meaningful settlement of the issues of construction and restoration of construction objects, infrastructure after the victory of ukraine and the end of the war. 4. to create clear and transparent legislative preconditions for investing in the economy of ukraine, to provide guarantees of successful business for national and foreign investors. 5. to regulate procedures in the construction industry, to create conditions for quick and convenient access of individuals and legal entities to services provided by administrative bodies (authorities). that is, the adoption of the construction code of ukraine will ensure the establishment and protection of human rights and freedoms, which is the main duty of the state (article 3 of the constitution of ukraine). 6. to create unambiguous legal and transparent conditions for the functioning of administrative bodies (authorities) in the construction industry, to prevent corruption in this area. 7. to prevent the growth of violations of subjective rights, freedoms and interests in the field of construction, to reduce the growing number of administrative disputes involving public authorities. 8. to fully digitalize the provision of services in the construction industry, the introduction of e-government in this area. 9. the adoption of the construction code of ukraine is conditioned by the law of ukraine "on administrative procedure" in the norms of which it is stipulated, in particular (on administrative procedure of ukraine, 2022): 1) within 12 months from the date of publication of this law to submit to the verkhovna rada of ukraine proposals for bringing legislative acts of ukraine in line with this law; 2) within 18 months from the date of publication of this law, take measures to adopt and/or update regulatory legal acts of executive authorities arising from this law, ensuring their entry into force simultaneously with the entry into force of this law… and, finally, thirdly, the economic and legal dimension of public construction law in ukraine is that the construction industry is a productive sector of the economy, the efficiency and success of which depends on a simultaneous set of factors, including, in particular, the availability and perfection of national construction and administrative and procedural legislation, the development of the theory of public construction law, transparency and validity of the activities of administrative bodies in the field of construction. the construction industry ensures the creation of a significant number of jobs, the involvement of low, medium and highly qualified specialists, the formation of a significant share in the national gross domestic product, the saturation of the fiscal and financial and banking systems with circulating, liquid funds. instead, a stable, predictable and effective economic policy in ukraine, the production sphere is a factor of success of both the construction industry as a whole and its individual sectors in particular. 3. conclusions therefore, the purpose of the review is to consider the institutional architecture of the construction industry of the federal republic of germany, the basic principles of the formation of german public construction law as a factor in the development of the modern economy, its progressive forms and methods. the content of this branch of public law, its impact on economic processes in the state, the formation and change of the main economic indicators are assessed. the conclusion is made about the objective connection between the state and development of national legislation, in particular construction legislation, and the degree of economic development of the state. in ukraine, a branch of special administrative law – public construction law – has been formed for a long time and continues to develop. in this area there are "own" subjects, administrative procedures, tools of administrative bodies, legal regulation. at the same time, the provisions of modern domestic general administrative law are fundamental and baltic journal of economic studies 76 vol. 8 no. 5, 2022 determinative for the construction law of ukraine. the construction law of ukraine is characterized by the following: – construction relations are regulated by the norms of administrative law contained in legislative acts and by-laws. sources of the public construction law of ukraine (laws, by-laws) form a hierarchical internallyorganized system; – subject of regulation of the public construction law of ukraine is relations that arise, change and terminate between natural persons, legal entities and administrative bodies in connection with construction; − administrative bodies in construction legal relations adopt administrative acts within the limits of their powers, administrative discretion and administrative procedure; – the public construction law of ukraine contains all concepts and categories of general administrative law without exception – in particular, sources, principles and subjects of administrative law, tools of administrative bodies, extrajudicial control over the activities (decisions) of administrative bodies. the public construction law of ukraine arises in connection with the issuance of administrative acts by administrative bodies (the use by these bodies of other instruments of their activities) in order to ensure the rights, freedoms and interests of individuals and legal entities in the field of construction. the existence and limits of this branch of special administrative law are determined by administrative and legal relations of construction. for proper law enforcement and the formation of quality administrative practice in the field of construction, it is advisable to understand the systemic relationship between public construction law and general administrative law. since these phenomena (public construction law of ukraine and general administrative law) do not exist and cannot exist separately, they mutually influence each other, change and develop. thus, general administrative law is the fundamental basis of public construction law; within the framework of public construction law, the general provisions of general administrative law are used, developed, supplemented by special rules and regulations. references: on measures to implement the concept of administrative reform in ukraine: decree of the president of ukraine. official bulletin of ukraine. 1999. no. 21. page 32. article 943. constitution of ukraine dated june 28, 1996. information of the verkhovna rada of ukraine. 1996. no. 30. article 141. melnyk, r . s., & bevzenko, v. m. (2014). general administrative law: textbook. acc. to general edition of r .s. melnyk. kyiv: vaite. melnyk, r . s. (2010). administrative law system of ukraine: monograph. kharkiv: publishing house of kharkiv national university of internal affairs, 398 p. bevzenko, v. (2022). public construction law of ukraine: textbook. kyiv: ph "dakor". hrytsenko, i. s., melnyk, r . s., pukhtetska, a. a. et al. (2015). general administrative law: textbook / acc. to general edition of i. s. hrytsenko. kyiv: yurinkom inter, 568 p. maurer / waldhoff allgemeines verwaltungsrecht. 20., überarbeitete und källteite auflage. 2020. xli, c. h. beck. munich. 872 s. michael brenner öffentliches baurecht. mit dem recht der raumordnung. 5., völlig neu bearbeitetee auflage. c. f. müller. 2020. maurer, h. (2011). algemeines verwaltungsrecht. verlag c.h. beck, munich. edith zeller, roman kuibida, roman melnyk report: "discretion of administrative bodies and judicial control over its implementation". baugesetzbuch. available at: https://www.gesetze-im-internet.de/bbaug/__1.html on administrative procedure: law of ukraine dated february 17, 2022 no. 2073-ix. official bulletin of ukraine. 2022. no. 49. page 13. article 2675. received on: 7th of october, 2022 accepted on: 13th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 131 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 odessa national medical university, ukraine e-mail: viktoriyaborshch@gmail.com orcid: https://orcid.org/0000-0001-6400-7840 3 odessa national medical university, ukraine e-mail: rogachevskiy75@gmail.com orcid: https://orcid.org/0000-0002-8063-258x doi: https://doi.org/10.30525/2256-0742/2022-8-4-131-138 theoretical foundations of competitiveness management of health care institutions yuriy safonov1, viktoriia borshch2, oleksandr rogachevskyi3 abstract. increasing the competitiveness of health care institutions is an urgent issue for health care in the new funding environment. the purpose of this work is to analyze the existing tools for competitiveness management in the healthcare sector. the problems of competitiveness management development are investigated. state regulation, political dynamics, changing socio-demographic characteristics and constant technological development cause significant changes in the healthcare sector, but despite this, state restrictions, conservatism of ukrainian healthcare and lack of management specialists are the main problems of ukrainian healthcare. this necessitates the use of the principles of competitiveness management of modern health care institutions. the main methodological approach used in the work is a review of literature sources. the analysis of scientific literature revealed the absence of unified methodological approaches to measuring competitiveness, and many of the proposed methods do not take into account the specifics of the health care system, as well as the areas of activity of the medical organization. the existing models of competitiveness management tools differ from each other, and their use is conditioned by many factors. the role and impact of competition in the healthcare sector is considered separately. the theoretical basis of the study is a systematic approach to understanding the relationship between different levels of health care. important conceptual issues of measuring competition in healthcare, including s.w.o.t. analysis, competitive advantages, human resources assessment, benchmarking, etc. are considered. the results of this study form the methodological and practical basis for improving the competitiveness management system of health care institutions in ukraine, which operate in difficult socio-economic conditions. key words: competitiveness, competitiveness management, healthcare institution, medical services market, health care. jel classification: i11, i15 1. introduction in the context of the ongoing transformation of the healthcare system of ukraine, the task of finding a model of an effective national healthcare system, adequate to the modern realities of society and competitive in the global space, remains extremely relevant. before proceeding to the analysis of the competitiveness management system of health care institutions, it is necessary to conditionally characterize the current state of the national health care system. unfortunately, the existing health care system in ukraine does not allow to implement the desired principles of marketing relations in the emerging market of medical services. it is well known that a market economy cannot be imagined without such concepts as "competition" and "competitiveness". in countries with developed market economies, public and private health care institutions have existed for many years in conditions of sectoral competition, but in ukraine the competitive environment is still not developed. the main factors of low and sometimes even absent competitiveness among ukrainian healthcare institutions are as follows: – a revolutionary transition from the administrative and planning system of the semashko healthcare model to the uncontrolled process of forming marketing relations in the context of the evolutionary formation of the healthcare market; baltic journal of economic studies 132 vol. 8 no. 4, 2022 – conservative form of ownership of health care institutions, as well as uncertainty of the formation and development of small and medium-sized businesses in the existing health care system. this does not correspond to classical economic laws and conditions of competition and competitiveness; – the predominance of the public sector in health care in ukraine, which is absolutely regulated and financed by the state. this creates a state monopoly in the healthcare sector; – lack of modern managers in the public health system who are able to competently solve organizational, financial and other management problems and tasks of the health care institution; – absence in the educational programs of ukrainian medical universities of such discipline as "management of competitiveness in health care", and unfortunately, as a rule, even the absence of the discipline "management in health care"; – unjustified caution in the implementation of evidence-based planning methods, such as system analysis, forecasting, optimization of medical activities, etc. in the context of the formation of the health care market; – lack of political will in making sound management decisions to bring to the logical implementation of modern mechanisms, methods and forms of continuous improvement of the quality of medical care. other factors contributing to the inefficiency of the competitive environment in ukrainian healthcare are the following: – gaps in legislation (permitting and incentive mechanisms, such as licensing and accreditation); – poor access to medical information, for example, on the quality of services provided; – high differentiation of services, which leads to significant variation in prices and the need of the population for different health services, as well as interference in pricing; – heterogeneity of patients (level and structure of morbidity and disability, socio-economic characteristics, etc. when studying the problem of formation and management of the competitive environment of production and consumption of medical services, it is necessary to understand the negative role of incentives in the health care system, which contribute to the creation of conditions for the absence or unproductive competition. some factors that cause this problem and in principle do not allow to form a competitive environment in health care are listed below. 1. multilevel system of consumers (intermediaries) of medical services, such as: a) the state (program of state guarantees of free medical care); b) patients (exclusion of the consumer of medical services from the system of active influence on the quality of medical care); c) management of health care institutions (bureaucratic directive-command regulation of relations between patients and health care workers); d) physicians (making decisions about treating their patients and providing that treatment takes place in a competitive and economic vacuum); e) health insurance organizations (in the ukrainian healthcare model there is just voluntary medical insurance). 2. conflicting interests of the subjects of production and consumption of medical services. 3. patients are responsible for paying for medical services, and doctors are not responsible for the quality of medical services provided. 4. lack of objective indicators of the quality of medical care for patients and doctors. 5. impossibility of establishing an unambiguous link between the price and quality of the provided medical service. 6. a specific feature of the patient as a consumer of medical services, which distinguishes him from consumers of other (non-medical) goods and services, is a kind of absolute priority of preserving life and health, without regard to possible costs. 7. lack of opportunity and extremely insufficient awareness of patients about the prices of medical services from different doctors. certain sensitivity in obtaining such information directly from the attending physician; 8. lack of financial resources for the majority of the population to pay for quality medical care according to their wishes and choices; 9. subjectivity of the decision-making process among the population regarding the choice of institution, specialist, treatment and preventive measures, based only on their own impressions and opinions of friends, image, reputation and ability to persuade doctors. (fuch, 1988; greenberg, 1991; soltman, busse, mossialos, 2002) in general, health care is of great importance for society and has a number of features that distinguish it from other spheres of socio-economic activity, which greatly complicates the transition of this sphere to market conditions and creates preconditions for a number of reservations in the application of market principles. unresolved aspects of the problem. all of the above leads the researchers to the conclusion that in the current state of domestic health care (more precisely, in the emerging sphere of production and consumption of medical services), there is no fundamental management system. and, consequently, there are no relevant relations of subjects, such as competition. this makes it virtually impossible to baltic journal of economic studies 133 vol. 8 no. 4, 2022 implement such a mechanism to improve the quality of medical services. the purpose of the article. thus, the challenge is to offer theoretical tools for creating a system of competitiveness management of health care institutions that will ensure their sustainable growth and market stability. 2. theoretical foundations of competition in the healthcare sector analyzing various literature sources, starting with adam smith, it can be argued that there are many definitions of the concept of competition. much less research is devoted to competition in the healthcare sector. thus, it is necessary to adapt the existing definition of competition to this practical area. while analyzing different definitions, the authors came to the following understanding of thе term competition in the healthcare sector: is a state and process of relations between the subjects of production and consumption of medical services within the framework of a specific civilized form of competition between medical workers (doctors) to achieve the highest degree of satisfaction of the patient's target needs. today, competition in the field of health care exists both between state, municipal and private health care institutions, and between state and municipal institutions (district and regional polyclinics, hospitals, etc.), as well as between doctors themselves as specialists providing medical services. its accessibility is ensured by law, based on the patient's right to choose a doctor and medical institution, as well as in fact, as evidenced by modern medical practice. thus, competition is an objective and necessary function of the activity and development of the health care market (porter, 2005). the key role of competition in health care is the potential to provide a mechanism for reducing health care costs (rivers, glover, 2008). according to the authors, many aspects and factors of functioning and development of health care institutions and medical practice can be synthesized in competitiveness. at the same time, the competitive environment itself is ambiguous and contradictory. researchers identify some contradictions that arise in the functioning of competition in the healthcare sector. in particular, they include the following: 1. contradiction between the incentive system in health care and the fundamental laws of competition. this is reflected in the fact that high prices for medical services are maintained even in conditions of excess supply. 2. tension between expensive medical technologies and universal access to medical services. the high price of medical technologies has a direct impact on price growth, which in turn reduces the access of consumers (patients) to medical services (even without improving the quality of medical care). 3. the conflict is manifested in the fact that the current system of incentives for medical work encourages the introduction of innovations, increase in costs or quality without a corresponding reduction in the cost of quality medical services. at the same time, the key role of competition in health care is he potential to provide a mechanism for reducing health care costs. thus, the above contradictions indicate a low possibility of introducing free market rules in health care while maintaining its social orientation, namely universal access to quality medical services for the entire population. but, nevertheless, the main idea of competition – "ensuring the provision of the best goods and services to meet the needs of consumers" – is being implemented. competition in the healthcare sector is divided into certain levels. thus, it is logical to distinguish the following levels of the competitive environment in the production of medical services (figure 1): 1) competitiveness of national healthcare at the international level, which is influenced by medical innovations, high technologies, etc. 2) competition between consumers of quality medical services. competitiveness of the national healthcare competition between consumers for the high-quality medical services competition between private healthcare institutions competition between public healthcare institutions competition between pharmaceutical companies figure 1. levels of competition in ukrainian healthcare baltic journal of economic studies 134 vol. 8 no. 4, 2022 3) competition between pharmaceutical companies. 4) competition between private healthcare institutions. 5) competition between public healthcare institutions. but it should be noted that in the state sphere of medical care there is no competitive environment of production and consumption of medical services, as well as real conditions that would allow to form such an environment. this is where the social orientation of health care is manifested. thus, in ukraine competitiveness management can be applied to private healthcare institutions and pharmaceutical companies. the latter are not the subject of this study. 3. competitiveness and competitiveness management of healthcare institutions competitiveness, as well as competition, are universal concepts for any market of goods and services (rivers, glover, 2008). competitiveness refers to the ability of a healthcare institution to compete in the healthcare market in terms of such parameters as: – professional level of medical staff; – quality of medical services; – cost of medical services; – features of service provision; – ability to meet the requirements of consumers (patients) to the maximum extent possible; – ability to introduce medical and technological innovations in the process of service provision. thus, the authors are confident that the quality of medical services, based on the high professional level of medical staff and the ability of the health care institution to introduce medical and technological innovations in the process of their provision, is the main competitive advantage of any health care institution. at the same time, the healthcare sector imposes specific restrictions on the formation of a competitive environment in the medical services market. according to the authors, the competitive environment in the health care sector is a complex economic category characterized by the interaction of the state, public and private health care institutions, external and internal factors of influence on the conditions of economic activity in the health care sector, which determine the appropriate level of economic competition and the importance of individual business entities on the overall market situation. it may be noted that unlike goods, the competiti veness of which is easy to assess directly, the competitiveness of medical services is usually assessed indirectly. some features of the assessment of competitiveness of medical services are as follows: – the object of evaluation is the activity of the organization (namely, a health care facility, medical practice, etc.) that provides medical services; – evaluation of the service is related to the assessment of the quality of the process and technology of service provision; – evaluation of healthcare professionals is carried out directly by the consumer; – it is necessary to assess the time characteristics of the provision of medical services; – evaluation of the service provided is carried out for compliance with the quality standards of service (conditions and culture of service); – assessment and integration of subjective opinions of patients who received a single medical service should be ensured. (mark, coffey, 2001; miller, 1996) from the point of view of systematic and integrated approach, the competitive advantages of medical services are provided by legal, professional, technological, market, scientific, economic, organizational, psychological and other aspects, as well as their systematic interconnection. the field of moderate competition in the health care market can be formed if a number of mandatory conditions are met, some of which are listed in table 1. competitiveness management of a health care institution is considered as one of the aspects of management aimed at the formation, development and implementation of competitive advantages and ensuring the viability of a health care institution as a subject of economic competition. it requires a set of measures aimed at systematic improvement of 4p marketing. managing the competitiveness of a healthcare institution requires the following actions: 1. diagnosis of the external competitive environment. 2. assessment of the level of competitiveness of the health care institution in the market. 3. development of a clear competitiveness management strategy based on the results of diagnostics and assessment. 4. implementation of the formed strategy. 5. continuous monitoring of the strategy implementation. 6. improving the competitive advantages of the health care institution. thus, the creation and improvement of competitive advantages of health care institutions (which is the task of competitiveness management), the formation and development of competitiveness of medical services and medical labor is an effective tool for qualitative changes in industrial relations in health care itself and, most importantly, an absolutely necessary condition for the formation of modern marketing relations between the consumer (patient) and the doctor. baltic journal of economic studies 135 vol. 8 no. 4, 2022 4. tools for measuring competition and competitiveness of a healthcare institution an important link in the management of competitiveness of any organization is the correct assessment of its level. when measuring competitiveness, a number of tasks are solved, namely: (a) establishing the state and peculiarities of increasing/loss of competitiveness; (b) identifying "problem" areas that negatively affect competitiveness; (c) identifying reserves for increasing competitiveness. two methodological approaches to the competitiveness are described to the literature: 1) operational efficiency; 2) strategic positioning. the operational efficiency strategy is aimed at achieving results that significantly exceed the results of competitors engaged in similar activities. strategic positioning is aimed at carrying out activities that are fundamentally different from those of competitors or include alternative approaches to similar activities. the ambiguity of existing methodological approaches to the definition of competitiveness in modern management theory determines the multiplicity of methods used to assess it. all methods used to measure and assess competitiveness can be grouped into nine sectors. the first four of them are grouped in chronological order of appearance of approaches in the first half table 1 conditions for the formation of a competitive environment in the medical services market types and levels of competitiveness management conditions and possible measures patient-level – the right to free choice of a doctor; – ensuring free access of patients to health care facilities and medical practice; – equal guaranteed access to the choice of health care providers; – protection of patients' rights; – highly developed health insurance system; – a system of quality control of medical care. physician-level – licensing of doctors; – standardization of medical practice; – the right of health care institutions and private practitioners to earn and make a profit; – system of fixed contractual fees with prepayment; – partnership rights of medical staff; – open recruitment of medical staff; – adoption of professional ethical standards. healthcare institution-level – accreditation of health care institutions; – improving the quality of strategic management decisions; – freedom of adaptation of functions and organizational structure of health care institutions to dynamic markets of medical services; – independence of healthcare institutions to self-finance and operate independently; – a system of continuous staff training. scientific and other institutions-level – scientific substantiation of competitive models in the production and consumption of medical services; – economic methods of management of health care institutions; – flexibility of commercial investment in the healthcare sector; – information openness of the health care market. administrative level – demonopolization of medical care; elimination of administrative division and vertical integration of health care institutions and services; – privatization of health care institutions; – integration of primary health care services; implementation of optimal and functional solutions for the restructuring of primary health care institutions and services; – opening of previously closed (departmental) healthcare institutions for all citizens. state regulation-level – creation of legislative conditions for guarantees and incentives for the development of entrepreneurship, competition and restructuring of the health care sector; – reorientation of new medical programs and projects from vertically coordinated institutions to the level of primary health care centers; – regulation of the competitive environment in the markets of medical services; – system of targeted social guarantees in obtaining medical care by certain categories of the population; – regulation of the quality and efficiency of services provided; – professional training of personnel; – evaluation of the economic efficiency of medical technologies. source: created by the authors baltic journal of economic studies 136 vol. 8 no. 4, 2022 of the xx century. later, the theory and practice of strategic management led to the almost identical emergence of a number of methodological approaches to assessing competitiveness in the works of domestic and foreign scientists. therefore, the set of methods can be represented as follows: 1. methods based on comparative advantage analysis. 2. methods based on the theory of equilibrium of the firm and industry. 3. methods based on the theory of effective competition. 4. methods based on the theory of product quality. 5. matrix methods for assessing competitiveness. 6. complex methods (including integrated). 7. method based on the multiplier theory. 8. method of determining the position in the competition in terms of strategic potential of the enterprise. 9. methods based on comparison with the standard (modification of complex methods using integral estimates). below are the most popular methods that can be used in healthcare. s.w.o.t. analysis is a classic and widely accepted method of evaluating strategic planning and has found wide application in healthcare. this analysis is aimed at identifying the strengths and weaknesses, threats and opportunities of the organization. it consists of 4 stages: analysis of the internal (the main production process, personnel) and external (threats, opportunities) environments of the enterprise; entering the results into the swot matrix; assessment of opportunities and threats identified in the research process (on a 10-point scale); formulation of actions to maintain a competitive advantage. (baker, 2001; harris, mcdaniel, 1993; tompson, striklend, 2000) the obvious advantages of this method are easy adaptation to any area of the enterprise, the ability to freely choose the elements for analysis in accordance with the goals and use them for both operational control of the organization and strategic planning. however, due to the subjectivity of the method, the reliability of the results depends entirely on the qualifications of the analyst, and the analysis is only a general goal without specifying measures to achieve it. thus, the competitiveness of a healthcare institution can be assessed in two ways: 1) in comparison with by-products (competitors); 2) within its internal environment. in this approach, it is possible to use the "system of seven functions" by which the level of competiti veness is assessed: target, licensing, accreditation, deontological, economic, technological and performance functions (fliaisher, bensussan, 2005). the advantages of this approach include: (a) the use of objective indicators based on the assessment of specific parameters and conditions; (b) the possibility of assessing competitiveness with other organizations with a similar profile; (c) the possibility of assessing competitiveness within one health care facility. the disadvantages include the inability to compare public and private healthcare institutions. thompson and strickland proposed to use indicators from a list of key factors of the organization’s success of a certain industry, as well as the main advantages and disadvantages of competitors. the sum of these indicators forms a comprehensive indicator of the organization's competitiveness (tompson, striklend, 2000). here the advantage of this approach is the ability to measure competitiveness directly relative to competitors in the industry. but the methodology does not take into account the specifics of budgetary and paid organizations, and there is no possibility to assess competitiveness within the organization itself. another approach used to measure the enterprises’ competitiveness is the estimation of human resources. it is well known that human resources make a significant contribution to the efficiency of the health care system. human resources are considered the main determinant of the quality and accessibility of health care and, in general, the competitiveness of health care institutions. in the strategy of improving the competitiveness of health care, the development of human resources in the direction of forming the intellectual capital of the organization and customeroriented approach is of great importance. the hierarchy analysis method, which is used in the process of competitiveness assessment, is based on the expert assessment of certain competitiveness criteria by the organization, which form pairwise comparison matrices. competitiveness is determined both separately for each criterion and for the overall level based on all parameters. this method is both qualitative and quantitative, i.e. suitable for assessing several organizations, and allows for a hierarchical systematization of indicators. however, it should be noted that the method is rather subjective, as it is based on expert assessment and can be applied to a small number of entities and indicators (up to 9). there is an approach, where five directions of evaluation of competitors of health care (sources and types of funding, level of healthcare institution, specialization, location and price segment) are developed. the four main criteria of competitiveness are: reputation of the health care institution, attention, speed of service, degree of differentiation of services. the proposed approach takes into account the peculiarities of the market of paid services, where the degree of patient satisfaction with the provided medical services is important. baltic journal of economic studies 137 vol. 8 no. 4, 2022 it should be noted, however, that this approach does not take into account the competitiveness of health care, and the main criterion for the success of the organization is the level of satisfaction of the consumer of the service. a. smith, d. riccardo, proposed an assessment of competitiveness from the standpoint of competitive advantage. competitive advantages of health services are provided by market, legal, economic, organizational and other aspects (porter, 1998). the methodology includes an inventory of factors affecting the competitiveness of the organization, the definition of indicators by which the impact of each factor is measured, and the comparison of competitors by the collected indicators. the disadvantage of such a model is the high risk of statistical error when the number of indicators increases. benchmarking is "the process of measuring products, services and processes against those of organisations that are leaders in one or more aspects of their activities". it can provide data on how a healthcare facility compares to similar organizations, even if they are in a different business or have a different customer (patient) group. it can also help identify areas, systems or processes that need improvement. thus, it can be argued that there are a large number of tools for assessing the competitiveness of a healthcare institution. each manager can choose for himself the tool that is suitable for the given situation. 5. conclusions the existence of competition in the provision and consumption of medical services, as well as increasing the competitiveness of health care institutions and medical practices are particularly important for the further development of the national health care system in the context of globalization. creating conditions for competition in the healthcare system, launching mechanisms of civilized rivalry between doctors, and finally, managing the competitiveness of healthcare institutions and medical practices are the tasks without understanding and solving which qualitative changes in the current state of domestic healthcare are impossible. thus, the analysis of existing tools for assessing the competitiveness of health care institutions has shown a significant interest of researchers. this is due to the ongoing reform of the entire health care system and the active introduction of market mechanisms in the provision of health care services. however, it should be noted that currently there is no unified methodological approach to measuring competition and competitiveness that would take into account the specifics of the health care system and the scope of activities of the health care organization (types of medical care and services provided, consumer profiles, etc.). measuring competition and competitiveness is an important component of strategic management of health care institutions to understand the impact of market changes and policy initiatives in health care. ongoing changes in the health care system promise to make it more important to understand the forces influencing competition, as well as the implications of competition for the provision and costs of health care services. further progress in the development of competitiveness management in health care is associated with the development of specific common tools for managing the competitive advantages of the organization and assessing its competitiveness. future scientific research of the authors should be aimed at studying the competitiveness strategies of health care institutions, as well as finding ways to improve their business activity. references: baker, l. c. (2001). measuring competition in health care markets. services research, vol. 36 (no. 1, part ii), pp. 223–251. fuch, v. (1988). the competition: revolution in health care. health affairs, summer, vol. 23, pp. 5–24. greenberg, w. (1991). competition, regulation and rationing in health care. ann arbor, michigan, il: health administration press. harris, i. c., & mcdaniel, r . r . (1993). untangling healthcare competition, health care managers must recognize the three-dimensional nature of competition. health progress, november, vol. 30, pp. 20–23. mark, t. l., & coffey, r . m. (2001). studying the effects of health plan competition: are available data resources up to the task? health services research, vol. 36 (no. 1, part іі), pp. 253–275. miller, r . h. (1996). competition in the health system: good news and bad news. health affairs, summer, vol. 15 (no. 2), рр. 312–320. porter, m. e. (1998). competitive advantage: creating and sustaining superior performance. new york: the free press. porter, m. e., & teisberg, e. o. (2004). redefining competition in health care. harvard business review, vol. 82 (no. 6), рр. 65–72. baltic journal of economic studies 138 vol. 8 no. 4, 2022 rivers, p. a., & glover, s. h. (2008). health care competition, strategic mission, and patient satisfaction: research model and propositions. j health organ manag, vol. 22 (6), pp. 627–641. doi: https://doi.org/ 10.1108/14777260810916597 teisberg, e. o., porter, m. e., & brown, g. b. (1994). making competition in health care work, incentives throughout the health care system are so skewed tat the normal rules of competition do not apply. harvard business review, рp. 131–141. porter, m. e. (2005). konkurentsiia [competition]. moskva. (in russian) soltman, r . b., busse, r ., & mossialos, e. (eds.) (2002). regulirovanie predprinimatelskoi deyatelnosti v sistemah zdravoohraneniya evropejskih stran [regulation of entrepreneurial activity in the health care systems of european countries]. moskva. (in russian) tompson, a. a., & striklend, a. dzh. (2000). strategicheskii menedzhment: kontseptsii i situatsii [strategic management: concepts and situations]. moskva. (in russian) fliaisher, k., & bensussan, b. (2005). strategicheskii i konkurentnyi analiz. metody i sredstva konkurentnogo analiza v biznese [strategic and competitive analysis. methods and tools of competitive analysis in business]. moskva. (in russian) received on: 12th of october, 2022 accepted on: 19th of november, 2022 published on: 30th of november, 2022 baltic journal of economic studies 40 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 zaporizhzhia state medical university, ukraine (corresponding author) e-mail: amakpu@ukr.net orcid: https://orcid.org/0000-0001-6342-4829 2 classic private university, ukraine e-mail: kpuinform@gmail.com orcid: https://orcid.org/0000-0002-5235-3225 doi: https://doi.org/10.30525/2256-0742/2023-9-2-40-47 economic justification of corruption risks in the field of healthcare mykhailo anishchenko1, viktor oharenko2 abstract. the purpose of the article is to identify the most common corruption offenses in the healthcare sector and their impact on the country's economy, and also to outline the main directions of the state anti-corruption policy in this area. methodology. the research is based on the study of international treaties ratified by ukraine, as well as domestic legal acts regulating the activities of the medical sector in the area of combating and preventing corruption. results. the article analyzes the main directions of anti-corruption policy in the national healthcare system and determines their impact on the economy of the country. it is noted that corruption in this area is inherent in all socio-economic systems of the world, however, it is most widespread in the process of transformation of the economic and social environment. corruption can manifest itself in various mechanisms. the author analyzes the monitoring of corruption risks in the field of security by transparency international, which annually determines the corruption perceptions index (cpi), and the european commission. it is theoretically proven that a decrease in the score of the corruption perceptions index leads to an outflow of capital from the country (one point corresponds to 0.5% of the country's gross domestic product). using the examples of the united states of america, the federal republic of germany, and denmark, the paper examines the most common forms of corruption in the healthcare sector, as well as the positive experiences that should be implemented in order to improve the level of economic development of the country. the main corruption risks in the healthcare sector were analyzed. the role of the napc and the nabu in combating and preventing corruption in the healthcare sector is revealed. practical implications. the article outlines the main steps that need to be taken to introduce changes in the direction of anti-corruption activities in private healthcare institutions. the role of the electronic system of public procurement of goods, works and services "prozorro" in combating and preventing corruption in the healthcare sector is determined. the analytical data of the independent anti-corruption commission are studied. value/originality. it is theoretically substantiated that the key task of the state anti-corruption policy in the healthcare sector is to develop and implement mechanisms for detection, prevention and elimination of conditions that facilitate the emergence and spread of corruption, the impact of which on the country's economy is quite dangerous, as it significantly impairs the effectiveness of the state's economic policy. the article highlights the consequences of corruption in the healthcare sector for the country's economy: expansion of the shadow economy; violation of competitive mechanisms; inefficient use of budget funds in the distribution of public contracts and benefits; price increases due to "corruption costs"; and deterioration of the investment climate. the article outlines the main areas of anti-corruption policy in the healthcare sector, including: an effective system of control and transparency; analysis of the causes of corruption; a high level of legal awareness and culture of citizens; involvement of specialists and scientists in the areas of activity in the preparation of relevant regulatory documents; improvement of the electronic healthcare system and, consequently, further automation of workplaces; change of the financing system; improvement of the anti-corruption policy in the healthcare sector as a component of the overall anti-corruption policy; implementation of positive international experiences. key words: economy, healthcare, corruption risks, anti-corruption, economic instruments. jel classification: g18, h75 baltic journal of economic studies 41 vol. 9 no. 2, 2023 1. introduction healthcare is a priority area for the development of the ukrainian state, because human resources are the basis of the intellectual and labor potential of the country, which, in turn, improves the level of its economy. "the economy is the environment where officials enter into corrupt relationships, where corruption is nourished, and where profits are greatest. the reverse effect of corruption on the economy is particularly dangerous because it reduces the effectiveness of the state's economic policy,... encourages officials to solve their problems outside the legal sphere." (blank, batrakova, 2016) at present, due to the lack of adequate funding of the healthcare sector in ukraine, as well as the imperfect marketing policy of insurance companies, such insurance as healthcare is developing at a rather slow pace (bilyk, novikova, 2016). underfunding of the healthcare sector in times of economic and political instability fosters corruption. and this is despite the fact that the healthcare sector is "a rather complex system with different actors who may have diametrically opposed interests, different processes (existing in both vertical and horizontal relations), different objects (tangible and intangible, etc.)." (demchenko, 2019) thus, corruption in the national healthcare system is possible in its various mechanisms. for example, in february 2017, the economic crime department of the national police in kyiv uncovered a criminal scheme to embezzle budget funds allocated for the purchase of hemodialysis kits for kyiv patients in the amount of 92 million uah (ukraine remains most corrupt country in europe, 2017). the zaporizhzhia regional clinical hospital purchased ambulances with a subsidy from the state budget, which could not be used for their intended purpose. as a result, the state suffered losses totaling more than 13 million uah (90% of abuses uncovered by nabu in the social sphere relate to healthcare, 2018). in 2019–2020, an employee of the state expert center for insulin and diabetes medicines received more than 4 million uah from the manufacturer (policy brief on corruption in public procurement of medicines in 2019–2020, 2020). according to the principles of the anti-corruption strategy for 2021–2025, the healthcare sector is identified as one of the most important sectors in the fight against corruption (the law of ukraine "on the principles of state anti-corruption policy for 2021–2025"). "the greatest harm of corrupt relations is that they break all existing legal procedures for resolving any situation and establish new patterns of behavior, creating a false, "schematic", virtual reality that exists outside the legal field." (rohatiuk, 2019) this criminal reality develops in parallel with the existing legal system and, most disastrously for the country 's economy, it begins to compete with it, attracting more and more interested citizens to its level (lehka, 2020). "the social danger of corruption lies in the fact that it leads to the slowing down of socio-economic reforms, increases social tensions in society, significantly reduces the level of social protection, and creates an illegal lifestyle." (smetanina, 2017) therefore, in the current economic and social crisis, the issue of anti-corruption policy in the healthcare sector should not be considered as a separate, sectoral, specialized phenomenon, but as part of the general anti-corruption policy. certain aspects of combating corruption in the healthcare sector (public procurement, anti corruption strategies and plans, liability) have been studied by t. batrakova, o. bilyk, m. blank, i. demchenko, t. krupytska, o. lehka, r . nasirov, v. pashkov, v. predborskyi, i. rohatiuk, n. smetanina and other scholars. at the same time, given the ongoing economic reforms and continuous improvement of domestic legislation in this area, the issue of economic justification of corruption risks in the healthcare sector requires additional study, which has actualized the need to study this topic. 2. place and role of the healthcare sector in the national economy the healthcare sector is one of the most important social spheres of society. however, health care activities are defined as a type of economic activity – 17. section q. healthcare and social assistance of the classifier of economic activities (cea) dk 009:2010, which came into force on january 1, 2012 according to the order of the state committee for technical regulation and consumer policy no. 457 dated october 11, 2010 (classification of economic activities dk 009:2010, 2010). the healthcare sector is linked to economic sectors and types of economic activity in the following areas: agriculture (cea section a) – th e use of plant and animal natural resources, crop products, breeding of farm animals as raw materials for the production of medicines, medical equipment, and so on; manufacturing (cea section b-e) – preparation and processing of raw materials, manufacturing of products, supply of energy resources to support the activities of institutions, establishments, bodies, organizations, etc. in the healthcare sector; construction (cea section f) – construction, repair, expansion, reconstruction of medical facilities, etc.; wholesale and retail trade, repair of motor vehicles (cea section g) – supply of medical equipment, pharmaceuticals, etc., repair of motor vehicles on the balance sheet baltic journal of economic studies 42 vol. 9 no. 2, 2023 of medical institutions, and so forth; transport (cea section h) – ambulance organization, etc.; financial and insurance activities (cea section k) – healthcare financing, insurance medicine, and the like; professional, scientific and technical activities (cea section m); education (cea section p) – conducting research in the healthcare sector, training of specialists, etc. for example, in terms of financial and insurance activities, depending on the predominant sources of funding in modern conditions, all healthcare models can be divided into three types: budgetary (state), insurance (social insurance), and private (non-state or market) (slavitych, hupalo, 2014). the comparative characteristics are presented in the form of a table (table 1). at present, none of the economically developed countries has these models in their pure form. in ukraine, in accordance with the order of the cabinet of ministers of ukraine "on approval of the concept of healthcare financing reform" of 30.11.2016 no. 1013-p, a model of state solidarity health insurance is proposed, which takes into account the best modern practices and experience of transforming healthcare systems in the world, in particular in central and eastern europe. the main source of funding for the revamped healthcare system remains the state budget of ukraine, which is derived from national taxes. payments for the treatment of an individual are not tied to the amount of their individual contributions (on approval of the concept of healthcare financing reform: order of the cabinet of ministers of ukraine of 30.11.2016 no. 1013-p). in the second half of the twentieth century a new branch of economics, health economics, was formed in the world, and with the independence of ukraine, on the basis of market economy principles. at the same time, the relationship between healthcare and the economy of the entire country 's economy is considered in two main aspects: 1) the impact of health and healthcare on the level of well-being of the population and economic development; 2) the impact of economic development of society on the state of human health and healthcare. healthcare has an impact on the development of the country 's economy through increased labor productivity by reducing morbidity, mortality (primarily in the working age), temporary and permanent disability, and improving overall health. on the other hand, the well-being of society affects the health of people. society 's spending on healthcare development is not only socially important, but also economically important. the richer the state, the more money it table 1 healthcare financing models financing model budget (state or semashko-beveridge system) social health insurance model (bismarck system) private (non-state or market) main characteristics the state plays a significant role. the state is the main purchaser and provider of healthcare, ensuring that most of the public need for healthcare services is met. the system of budgetary financing of healthcare is based on the principle of free of charge. the state strictly controls most aspects of the market for medical goods and services, and sets the rules for admission and access to the market. it is based on the principles of a mixed economy, combining the healthcare market with a developed system of state regulation and social guarantees. it provides for universal health insurance and is financed by money paid by insurers to special funds. medical services are provided mainly on a fee basis, at the expense of private insurance and citizens' own funds. there is no unified system of state health insurance. advantages/ disadvantages free and public accessibility, planned development, preventive orientation the most technologically advanced and operational, allowing for a number of funding sources the least accessible to the population, with little focus on prevention, but at the same time the most dynamic and technologically advanced due to the pronounced competition between healthcare providers countries, where the model prevails united kingdom ireland denmark portugal italy greece spain germany france japan canada netherlands austria belgium switzerland usa israel source: compiled by the authors baltic journal of economic studies 43 vol. 9 no. 2, 2023 can allocate to healthcare, occupational safety and health, and improvement of the environment and living conditions, which will lead to better health, lower morbidity, lower mortality and disability rates, and an increase in the period of active working life. one of the key elements of social and economic development of a society is healthcare. the effectiveness of healthcare as a service industry lies in the fact that by protecting and restoring human health, which is the main component of the society 's productive forces, it contributes to the growth of the country 's national income and the welfare of the people. this is the most important contribution of healthcare to the economy. one of the consequences of healthcare activities is a change in the economic situation of healthcare workers. the economic performance of healthcare institutions in general depends on the quantity and quality of their labor. a modern doctor should consider his work not only from a professional point of view, but also from an economic one, understanding the issues of public, insurance and private financing of medicine, pricing, etc. knowledge of economic laws is necessary in the work of practicing physicians, since in a market economy they are sellers of medical services, choosing rational schemes for examination and treatment of patients. a doctor should be able to assess the economic efficiency of his activities in medical and other healthcare institutions, facilities and organizations. 3. manifestations of corruption in the healthcare system according to transparency international, which annually determines the corruption perceptions index (cpi), ukraine received 32 points out of 100 in 2021 (122nd place out of 180 countries in the cpi) (corruption perceptions index, 2021). "taking into account even this index, we can understand corruption as a phenomenon that has become not only criminal, but also, unfortunately, social." (corruption in the medical sector…, 2018) and this is despite the fact that a decrease in the corruption perceptions index score leads to capital outflows from the country (one point equals 0.5% of the country 's gross domestic product). in 2021, the sociological group "rating" conducted a survey among the population of ukraine (aged 18 and older), according to which 21% of respondents identified bribery and corruption as the main problematic issues in the healthcare sector (sociological group "rating", 2021). over 70% of respondents confirmed that they had been involved in corrupt practices at least once (table 2). as can be seen, the initiators of the vast majority of corruption situations are healthcare workers who provide medical services. at the same time, as i. s. demchenko, corruption exists not only in the public sector... the private sector is also an active participant in corrupt relations (corruption in the medical sector …, 2018). however, according to the study of anishchenko m. a., the created special anti-corruption body – the national agency for the prevention of corruption (napc) ensures the organization of work "in state healthcare institutions, recommends the establishment of these institutions in municipal healthcare institutions and does not regulate the issue of anti-corruption activities in private healthcare institutions at all" (anishchenko, 2019). o. i. bilyk and o. v. novikova in modern conditions, corruption in the field of medicine is divided into the following main levels: 1) from a patient to a doctor or other healthcare worker; 2) within a hospital – from employees of medical institutions to hospital management; 3) at the state level in relation to public procurement of medicines; 4) within the corruption of the system as a whole. the main reasons for the flourishing of corruption schemes are economic: low funding of medical institutions, mismatch between the remuneration of doctors and the difficulty of their work, high costs of medical education, and the need to spend money on improving the quality of knowledge in the field of medicine (bilyk, novikova, 2016). table 2 results of the research on initiators of corruption situations the most common corruption situations on one's own initiative on request 1. medical services for patient treatment, surgeries 21,7% 69% 2. improving the conditions of inpatient stay in a medical facility 19,6% 70,4% 3. passing a medical examination 22,5% 57,6% 4. issuing certificates, sick leave certificates 18,4% 55,2% 5. issues related to childbirth 22,2% 57% 6. getting the " necessary " prescription 16,9% 56,1% 7. obtaining covid-certificate of vaccination without vaccination; certificates of negative results of the prl test 14,9% 43% source: based on the survey conducted by the sociological group rating "assessment of the healthcare sector in ukraine" (march 24-28, 2021) baltic journal of economic studies 44 vol. 9 no. 2, 2023 this research is based on the assumption that corruption in the healthcare sector is not a separate, independent process, but an element of the overall corruption system. therefore, the growth of corruption both within the state and in a particular sector leads to the following economic consequences: inefficient distribution and use of public funds and resources, growth of the shadow economy (over 50%), blocking of foreign investment, etc. moreover, with the total shadowing of economic processes, corruption can become a structuring element of public administration. according to experts, one of the main reasons for the emergence and existence of the shadow economy in ukraine is low wages and high payroll taxes. for $1 in hourly wages, an average ukrainian worker produces about 3 times more gdp than a similar american worker. this indicates unfair exploitation of hired labor. for a meager salary, our employees are forced to buy goods and services at world prices (predborskyi, 2009). it is clear that corruption cannot be completely eliminated, but it can and should be fought by implementing a system of administrative, organizational and legal measures. thus, in each area of the shadow economy, it is necessary to look for different ways of unshadowing, because the specificity of the industries does not allow everything to be brought under the same standards. in the healthcare sector, such measures may include: creation of information websites where every citizen can get acquainted with the current legislation, existing programs, a list of free and paid services, etc.; organization of a telephone multichannel hotline for various issues, reports of corruption, etc. in the functioning of the healthcare system, it is possible to distinguish its components and directly related activities where the likelihood of potential corruption risks is quite high. in particular, these include: the regulatory framework for the organization and implementation of activities in the healthcare sector; activities of public authorities, officials, medical and other personnel of healthcare institutions; public procurement. as can be seen, it is the last item that is closely related to the economic system of the state. public procurement is an important tool for solving particularly important social and economic tasks. the legal regulation of public procurement in ukraine is carried out by the law of ukraine "on public procurement" of 15.12.2015, which defines the legal and economic principles of procurement of goods, works and services to meet the needs of the state, hromadas and amalgamated hromadas... in order to ensure efficient and transparent procurement, create a competitive environment in the field of public procurement, prevent corruption in this area, and develop fair competition (law of ukraine "on public procurement", 2015). healthcare is one of the largest procurement segments in ukraine: in 2023, the state budget is expected to allocate more than 8.2 billion uah for the procurement of medical equipment, medicines, etc. (public procurement, 2023). when determining the optimal model of state regulation of prices for the main subject of procurement in the healthcare sector, it is necessary, first of all, to ensure the balance of public and private interests in economic relations, as well as to eliminate grounds for corruption abuse by public authorities. in other words, the search for compromises and differentiations between regulation and deregulation, which are the driving forces behind the development of an efficient, multi structured economy, deserves attention. since the level of prices for medicines, medical devices, medical equipment, medical and social services determines the amount of public funds spent and the volume of goods and services purchased in kind in economic procurement relations, regulatory measures will eliminate the practice of uncontrolled, often unjustified price increases by procurement participants, reduce the likelihood of procurement at inflated prices, and promote the availability of healthcare for citizens. despite all the imperfections and shortcomings in the electronic tender system, experts agree that e-tendering can significantly reduce corruption in the tender sector (krupytska, 2008). 4. international experience of fighting corruption in the healthcare sector: aspects to be adopted corruption in the healthcare sector, which directly affects the decline in economic development, is not a unique ukrainian phenomenon. the healthcare sector in the vast majority of countries is considered one of the most corrupt institutions of the state apparatus (10 to 25% of public procurement costs are lost due to corruption) (pashkov, 2019). in particular, according to medicare, 243 people were prosecuted for corruption in the united states during the year. the most common corruption crimes include overbilling for medical services, performing procedures without clinical indications, kickbacks, and abuse of relationships with the industry (nesterenko, 2020). according to the european commission, which monitored corruption risks in the healthcare sector, the main cases that increase the level of corruption risks in the healthcare sector include: bribery in the provision of medical baltic journal of economic studies 45 vol. 9 no. 2, 2023 services; corruption (in public procurement, marketing relations, reimbursement of medicines); and abuse of office (international experience in combating corruption in the security sector: implications for ukraine, 2015). an analysis of international experience in preventing and combating corruption shows that there is no single approach. only a combination of strategy and best international practices can be effective. the us system of combating corruption in the healthcare sector based on the principle of health insurance (which ensures transparency of payments and all payment transactions made by doctors and transferred to healthcare institutions) is noteworthy. this system also helps to prevent corruption risks when prescribing "unnecessary procedures" (the doctor provides recommendations that are authorized by the insurance company; the insurance company analyzes their feasibility and only then approves them) (nesterenko, 2020). thus, questionable recommendations of doctors are excluded from the list. the experience of the federal republic of germany (frg) is also interesting for imple mentation (the functions of preventing and detecting corruption are assigned to general public administration bodies), which, unlike ukraine, does not fight corruption but prevents it. among the main tasks of germany in this area is the destruction of the financial base of criminal groups (confiscation of property and creation of an appropriate regulatory framework). banking institutions are obliged to provide law enforcement with information on transactions with money in excess of 20 thousand dm. germany has also created a register of corrupt companies (a company that is included in such a register will not only be immediately deprived of the right to fulfill any government orders, but will also be subject to additional attention from law enforcement agencies). the approach to preventing corruption is also applied in denmark, which, according to the global competitiveness index, has been ranked first among the countries with the lowest level of corruption for several years. in particular, in denmark, the policy of preventing corruption is a key component of the de-shadowing of economic relations at many levels (the activities of all authorities are aimed at preventing corruption in various sectors of the economy. for example, the danish international development agency (danida) obliges legal entities that are members of this association to include "anti-corruption clauses" in foreign trade contracts, and an additional condition is the signing of a declaration of noncorruption. in addition, the parties sign a non-bribery pledge in declarations for each transaction in all institutions. special anti-corruption employment contracts are concluded, according to which the employee undertakes not to accept or offer bribes. in case of violation of these conditions, the employer may dismiss the employee by making a note in the personal file or in the characteristic, which will inform the company about the person who was found to have engaged in corrupt practices (who is better at fighting corruption? the leading countries, 2021). 5. economic instruments to combat corruption in the healthcare sector the study of corruption risks in the healthcare sector from an economic perspective primarily concerns the following components: public procurement, export/import of medical products; table 3 economic instruments to combat corruption in the healthcare sector part of the healthcare system economic instruments to combat corruption public procurement 1) the procurement procedure should comply with the main provisions of the wto agreement on government procurement (the wto agreement on government procurement, 1994); 2) use of electronic trading; 3) preliminary analysis of counterparties with respect to their business reputation, relations with competitors or customer officials, conflicts of interest, etc; 4) procurement of healthcare and social services by the state on the basis of a competitive contract; 5) ensuring stability and reasonableness of purchase prices. export/import of goods 1) it is necessary to remove all logistics chains (so-called carriers), combining general (passage of goods across the customs border) and special (quality control) actions when crossing the customs border for medicines, medical equipment, etc; 2) introduction of it technologies, for example, the introduction of a computer program for the distribution of customs office staff (nasirov r ., 2016). insurance introduction of solidarity insurance; certain segments of the population should receive medical services and maintenance free of charge at the expense of the state. social security 1) increasing the level of salaries of healthcare workers; 2) improving the level of material and technical support of health care institutions. source: compiled by the authors baltic journal of economic studies 46 vol. 9 no. 2, 2023 health insurance; social security of employees, etc. based on the research of domestic and foreign experts, as well as on personal experience, it is possible to outline economic instruments for combating corruption in each of these components (table 3). 6. conclusions to sum up, further effective development of the national economy is impossible without overcoming corruption, which today has a rather pronounced and well-established structure. corruption undermines the state's economic policy and creates the basis for the growth of the shadow economy. corruption is a threat to the economic security of the state, which makes it impossible to achieve the set goals. the main consequences of corruption in the healthcare sector on the country 's economy include the following: expansion of the shadow economy, violation of competitive mechanisms, inefficient use of budget funds in the distribution of public contracts and services, price increases due to "corruption costs", and deterioration of the investment climate. therefore, the key task of the state anti-corruption policy in the healthcare sector is to develop and implement mechanisms for detecting, preventing and eliminating conditions that facilitate the emergence and spread of corruption. in recent years, ukraine has taken significant steps to improve the existing and adopt a new regulatory framework governing issues related to corruption, including in the healthcare sector (a special law of ukraine "on prevention of corruption", a number of articles of the code of administrative offenses and the criminal code of ukraine that establish legal liability for corruptionrelated offenses and crimes). effective work to overcome corruption in the healthcare sector requires a multi-faceted state anti-corruption policy using economic, legal, administrative and social means. references: 90% of the abuses exposed by nabu in the social sphere relate to healthcare. available at: https://nabu.gov.ua/ novyny/90-zlovzhyvan-vykrytyh-nabu-u-socialniy-sferi-stosuyutsya-ohorony-zdorovya ukraine remains most corrupt country in europe – transparency international, interfax-ukraine (3 december 2014). available at: https://uk.wikipedia.org/wiki/ policy brief on corruption in public procurement of medicines in 2019–2020. available at: http://ni kor upciji.org/2013/06/20/analit ychna-zapyska-z -pr y vodu-faktiv-kor uptsiji-pr y-zdijsnenniderzhavnyh-zakupivel-likarskyh-zasobiv-v-2019–2020-rr anishchenko, m. a. (2019). organization of anti-corruption activities in healthcare institutions: problems of institutionalization. state and regions. series: "public administration", vol. 3(67), p. 17. bilyk, o. i., & novikova, o. v. (2016). justification of ways to overcome corruption in the healthcare sector. public administration: improvement and development, vol. 10. available at: http://www.dy.nayka.com.ua/?op=1&z=1008 blank, m. e., & batrakova, t. i. (2016). the impact of corruption on the economy. scientific bulletin of uzhhorod national university. series: "international economic relations and the world economy", vol. 7, pp. 25–28. demchenko, i. s. (2019). corruption and public health: points of contact and legal regulation. reforming the healthcare system: corruption risks and ways to eliminate them: roundtable materials (kharkiv, december 5, 2019). kharkiv: pravo, p. 21. public procurement. ministry of health of ukraine. official website. available at: https://moz.gov.ua/ corruption perceptions index-2021. available at: https://cpi.ti-ukraine.org. classification of economic activities dk 009:2010: order of the state committee for technical regulation and consumer policy of 11.10.2010 no. 457. available at: https://zakon.rada.gov.ua/rada/show/vb457609-10#text corruption in the medical sector: eradicate, prevent, and defea (2018), no. 3 (1124). available at: https://www.apteka.ua/article/442446 krupytska, t. (2008). the price of the issue is our money. reduktsion, vol. 7 (29), pp. 22–23, 26–27. lehka, o. v. (2020). the main determinants of corruption offenses in ukraine. law and society, vol. 3, pp. 44–49. international experience in combating corruption in the security sector: implications for ukraine. analytical note. publication 01.07.2015. national institute for strategic studies. available at: https://niss.gov.ua/ doslidzhennya/nacionalna-bezpeka/mizhnarodniy-dosvid-borotbi-z-korupcieyu-v-sektori-bezpeki nasirov, r . innovative it technologies will help to overcome corruption at customs. published on 13.05.2016. available at: https://www.kmu.gov.ua/news/249026083 nesterenko, s. corruption in medicine: how it is fought in the united states. available at: http://sergiynesterenko.com/ ?p=321 pashkov, v. legal economic order in ensuring anti-corruption activities in the healthcare sector. available at: https://www.apteka.ua/article/39950 predborskyi, v. a. (2009). shadow economy as a form of uncertainty economy. formation of market relations in ukraine, vol. 4 (95), pp. 44–49. baltic journal of economic studies 47 vol. 9 no. 2, 2023 the law of ukraine "on the principles of state anti-corruption policy for 2021–2025" of 20.06.2022, no. 2322-ix. official bulletin of ukraine. of 22.07.2022, no. 56, p. 66, article 3272, act code 112455/2022. the law of ukraine "on public procurement" of december 15, 2015, no. 922-viii. bulletin of the verkhovna rada of ukraine. 2016. no. 9. art. 89. version of 01.01.2023. on approval of the concept of healthcare financing reform: order of the cabinet of ministers of ukraine of 30.11.2016 no. 1013-p. available at: https://zakon.rada.gov.ua/laws/show/1013-2016-%d1%80#text rohatiuk, i. v. corruption: will the state be able to move forward with its eradication? available at: https://www.naiau.kiev.ua/pravova-prosvita/osnovi-antikorupcijnogo-zakonodavstva-ukrayini/naukovi-stattita-tezi-z-antikorupcijnoyi-tematiki/materiali-iv-mizhnarodnoyi-naukovo-praktichnoyi-konferenciyi.pdf slavitych, m. v., & hupalo, o. v. (2014). comparative analysis of healthcare models. bulletin of the odesa i.i. mechnikov national university, t. 19, iss. 2/5, рp. 70–73. smetanina, n. n. (2017). the cost of corruption crimes. criminal law and criminological principles of combating corruption: collection of abstracts of the v international scientific and practical conference (kharkiv, march 31, 2017). kharkiv: kharkiv national university of internal affairs, рр. 175–176. sociological group "rating". assessment of the healthcare sector in ukraine (march 24-28, 2021). available at: https://ratinggroup.ua/research/ukraine/ocenka_medicinskoy_sfery_v_ukraine_24-28_marta_2021.html the wto agreement on government procurement of april 15, 1994. wto: agreement, international document. available at: http://zakon2.rada.gov.ua/laws/show/981_050 who is better at fighting corruption? the leading countries. available at: www.slovoidilo.ua.polityka received on: 12th of march, 2023 accepted on: 28th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 49 vol. 4, no. 1, 2018 corresponding author: 1 department of criminalistics, national university “odessa law academy”. е-mail: vaschuk@onua.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-1-49-61 formation of modern incentive system for managers in the context of european integration processes olesia vashchuk1 national university “odessa law academy”, ukraine abstract. the article is devoted to the research of issues of the formation of the modern system of evaluation of effectiveness and motivation of managers and workers of an enterprise in the context of european integration processes in ukraine. the object is theoretical and practical foundations of creating an efficient motivational profile of an organization with the help of formation of the modern system of employee efficiency analysis and formation of an individual system of employee motivation at the enterprise based on research of incentive systems of developed countries and eu countries. the main research objectives are established: determination of key priorities for the formation of the system of valuation and motivation; formation of an algorithm and economic and mathematical model of the system of evaluation and motivation of personnel efficiency, zoning of boundary priorities and formation of a matrix of opportunities, formation of an effective system for improving the system of personnel motivation and evaluation, and a model of the system of improvement of personnel motivation means. methodology. the conducted comparative analysis of various motivation systems existing in the eu countries and the most developed countries allowed developing a hypothesis about the necessity to form a more effective system of personnel evaluation and motivation that would correspond to general european values and criteria. a model of motivation is proposed that is developed on the basis of the management functional assessment model (mfam), which is elaborated by researchers of sheffield hallam university (great britain) and the company “iva consulting group”. mfam is based on six main management functions: forecasting/planning, organization, motivation, control, coordination, and communication. its main advantages are the evaluation by three parameters: personnel loyalty; personnel performance; company’s attractiveness in the labour market, information about which is available in free and convenient access. evaluation of the enterprise management system based on the functional model (mfam) is carried out by questionnaire method. questions of the express evaluation questionnaire are divided into five groups according to model criteria. by an obtained mathematical model, analytical indicators, and grading scale, we define zones of effectiveness where enterprise management is taking place and build a matrix of opportunities for development of enterprise efficiency. result. the research conducted confirms the methodology’s efficiency, its uniqueness, and instrumental suitability. based on experimental calculations, the algorithm of formation of performance evaluation system is determined, gradients and limits of the enterprise development are identified, the matrix of opportunities is formed, directions to improve the system of personnel motivation and evaluation are formed, and the model of the system for improving personnel motivation means is developed. results of the enterprise personnel performance evaluation according to the developed system of indicators gave a possibility for managers of the company: to make a separate generalized profile of the appropriate group of the most successful co-workers; to form profiles of ideal co-workers, which are built given the idea of the leadership about the optimal combination of motivating factors, and to form effective directions for improving the motivation system. key words: european integration motivation criteria, motivation system, mfam, performance evaluation, matrix of opportunities, motivation system improvement, motivation model. jel classification: h87, h89 1. introduction prospects of ukraine’s integration into european space provide for the activation of the use of a set of tools, mechanisms, factors aimed at the formation of a socially oriented value system and the promotion of personnel, the creation of a modern system of personnel motivation. at the same time, while focusing on pan-european values, it should be noted that the level and quality baltic journal of economic studies 50 vol. 4, no. 1, 2018 of human resources are an important foundation for development. in particular, the main tasks of the eu regional policy are: creating conditions for the development of viable entrepreneurship; support for economic restructuring; mastering of new production and management technologies; guaranteeing the provision of essential services to the population (training, educational, communal, medical aid); support for a new network and infrastructure; stimulating the development of tourism; restoration of the potential of territories of the country and separate regions. the most striking differences in the level of economic well-being between ukraine and the eu countries are observed in the process of comparing the well-being of citizens because the inherent confidence of citizens of the eu countries in the effective functioning of formal institutions and their awareness of a significant number of risks associated with the use of informal institutions are a factor of the openness of economic life and development. in ukraine, such institutions include: financial intermediaries and speculators who provide loans at excessive rates; personnel agencies, which reduce labour costs and employ for illegal work abroad; employers who pay low salaries or generally avoid payments. all of the above factors cause limited access to the necessary economic resources, low wages, reduced employment, poor quality of medical and cultural services, and are accompanied by a decrease in the quality of manpower, gaining profit in a dishonest way, the absence of moral order, corruption, bribery. such a situation contributes to the emergence of barriers to the adaptation to eu standards, which can be overcome by stimulating competition, developing the social and market infrastructure of the country, and improving the quality of its human resources. thus, ukraine’s integration into european space envisages activating the use of a set of tools, mechanisms, factors that are aimed at forming a socially oriented system of motivation and development of management that is an actual direction of research both for ukraine and for other countries. the purpose is to create a system for assessing the performance and a system of the motivation of managers and employees of the enterprise, which would meet modern standards and requirements in the context of ukraine’s european integration. the main research objectives are: the definition of key priorities for the formation of a system of assessment and motivation; the formation of the algorithm and the economic and mathematical model of the system for assessing and motivating the efficiency of personnel, zoning of the boundary priorities and forming a matrix of opportunities, the formation of an effective system for improving the system of personnel motivation and evaluation and the model of the system for improving personnel motivation means. 2. presentation of the main material in the presence of limited financial resources, enterprises of various sectors of the economy of ukraine are looking for ways to enhance the competitiveness of their enterprises by increasing the personnel motivation to work and creating an adequate system of personnel management that can influence the behaviour of personnel, directing it to a more productive work, achieving competitive results of work and goals of the enterprise in the conditions of dynamic changes of the environment (iliash, kaperyz, 2011). each company has its own individual profile of motivational factors that need to be managed (larka, zorina, 2016). there are a number of requirements that should be guided by the creation of a system of stimulation (day, wensley, 1988; hutorova, 2009; kozak, 2011): 1) objectivity: the size of the employee’s remuneration should be determined on the basis of an objective assessment of the results of his work; 2) predictability: an employee must know what remuneration he will receive depending on the results of his work; 3) adequacy: the remuneration should be adequate to the labour contribution of each employee as a result of activities of the whole team, his experience and level of qualification; 4) timeliness: the reward should follow the achievement of the result as soon as possible (if not in the form of table 1 comparison of motivation systems in different countries country key signs of labour motivation characteristic features of the formation of motivation system usa stimulation of entrepreneurial activity. quality of execution. high qualification. participation in the company’s profits and development. a combination of hourly and subcontract payment systems. premiums for trouble-free work, long-term operation of equipment. compliance with technological discipline. dual-track system. great britain income. participation in profits in the form of a distribution of shares positively affects both the company and its employees, improves their attitude to work, creates a favourable atmosphere in the company, and stimulates more efficient work. there are two profit-dependent types of modification of labour remuneration: cash and equity, which involves partial payment in shares. work share participation. the employee receives income in three directions: basic salary, the share of income participation on the basis of labour, the share of profit based on the capital invested. baltic journal of economic studies 51 vol. 4, no. 1, 2018 direct remuneration, then at least in the form of a record for the next reward); 5) significance: the remuneration must be significant for the employee; 6) fairness: rules for determining the remuneration should be clear to each employee of the organization and be fair, including from the employee’s point of view. comparative analysis of personnel motivation mechanisms at ukrainian enterprises and enterprises of the developed market economy showed that domestic enterprises in the choice of motivation methods are oriented mainly on the work performance while ignoring the quality of work, professional skills and qualifications of the worker. participation in capital and profit as one of the most effective motivational methods is almost not used in other countries. 3. methodology when developing a system of motivation, one must strictly adhere to the following basic principles: to pay for the result or for success; use only the transparent rules governing the difference in incomes between different groups and categories of employees; manage expectations of employees, if the motivation system created does not justify expectations of employees, it will not work; compete in the labour market. we propose to form a modern model of motivational evaluation based on the evaluation management model mfam, which is elaborated by researchers of sheffield hallam university (great britain) and the company “iva consulting group” (watson, maslow, chileshe, 2004). mfam is based on six main management functions: forecasting/planning, organization, motivation, control, coordination, and communication. first five functions of management correspond to five evaluation criteria of the model and form a management structure that, in turn, determines the nature of relationships of the organization, that is, its communication. the efficiency of the proposed motivation system should be evaluated according to three parameters: 1. personnel loyalty. 2. personnel performance. 3. company’s attractiveness in the labour market. personnel loyalty is estimated within a month after the introduction of new motivational schemes based on the coefficient of fluidity. for example, after the announcement of a new system of motivation in a large retail network, where staff turnover was more than 50%, this figure dropped to zero for several weeks. to estimate performance, more time is required, depending on the motivation system’s goals. if employees need to focus on the growth of company value, it will take several years to see the results, and if on the increase in sales – a quarter or six months. attractiveness in the labour market is assessed on the basis of indicators such as the number of candidates for a vacancy or the percentage of those france level of qualification. quality of work. a number of rational suggestions. level of mobilization. three approaches to individualization of wages: in each workplace, the minimum wage and salary “brackets” are determined. the assessment of the work of each employee is carried out in relation to the work performed, the salary is divided into two parts: set and variable, reflecting the efficiency of labour. additionally paid awards for highquality work; enterprises are engaged in profits, sales to employees of the enterprise shares, payment of premiums. score evaluation of professional skills, quality and productivity, compliance with safety, business ethics, participation in public life, initiative. germany quality of work. a person with his/her interests as a free personality, aware of his/ her responsibility to society. a harmonious combination of labour stimulation and social guarantees is one of the best models ever known in the history of economic theories. sweden joint liability and wages based on the following principles: equal pay for equal work, reduction of the gap between the size of the minimum and maximum wages. the very system of determining the uniform level of wage increases contributes to its alignment: earnings rise for low-paid and restrained for highly-paid employees. the differentiated system of taxes and benefits. collective social policy. japan labour effectiveness. professional skills. definition of age and length of service. flexible incentive system. salary is established according to the tariff scheme, which determines the conditionally constant part of the salary of the employee as the amount of payments in three sections: for age, for the length of work, for qualification and skills, characterized by category and grade. synthesized systems, where wages are determined by four indicators – age, length of employment, professional level, and labour productivity. lifetime employment of a worker. ukraine labour productivity and efficiency. the economic connection of goals of the personnel and the enterprise (to achieve the goals, the award is set). the predominant use of non-material and socio-psychological methods of motivation. (compiled by the author based on: kushneryk, 2012) end of table 1 baltic journal of economic studies 52 vol. 4, no. 1, 2018 employees who agreed with the number of those whom the company made the offer. it should be noted that redesigning and adjusting the system of motivation is a process, if not continuous, that is, at least cyclic. companies are constantly evolving, their market environment is changing, and new tasks are put before business in general and before separate units. over time, existing incentive mechanisms inevitably reduce relevance and effectiveness. therefore, it is very important to periodically monitor the performance of the incentive system and its compliance with the business goals and objectives. then the process of the redesign will be planned rather than an emergency (watson, chileshe, maslow, 2004). assessment of the management system of the organization based on the functional model (mfam) is carried out by the method of questioning. the questions of the express assessment questionnaire are divided into five groups according to the criteria of the model (see table 2). each question has five answers. recall the scale of assessment (table 3). the highest score for each of 25 rating categories (questions) is 4 points. accordingly, the maximum result for each of these five criteria is 20 points. table 3 the scale of management activity evaluation scale of evaluation category status 0 activities are not conducted 1 activities are changing from time to time 2 activities are partly, depending on the situation 3 activities are conducted on a regular and systematic basis 4 activities are conducted as efficiently as possible (reference level) compiled by the author it should be noted that this evaluation is carried out not only by managers, specialists of different levels but table 2 method of two-way express evaluation by the criteria of mfam criterion/category maximum estimation 1. planning (20) 1.1. setting goals and strategic objectives 4 1.2. collecting and analysing customer and market information 4 1.3. detailing the business process 4 1.4. collecting and analysing information about competitors and benchmark companies 4 1.5. resource planning 4 2. organization (20) 2.1. formation of organizational structure 4 2.2. distribution of powers and establishment of areas of responsibility 4 2.3. conditions for self-education 4 2.4. implementation of the main process 4 2.5. the effectiveness of the process of creating new values for customers 4 3. motivation (20) 3.1. leadership and corporate culture 4 3.2. conditions for training and professional development of personnel 4 3.3. the level of employees’ needs 4 3.4. involvement of employees in the process of improvement 4 3.5. satisfaction of employees with the results of their activities 4 4. control (20) 4.1. quality control system at every stage of the business process 4 4.2. criteria for evaluating the results 4 4.3. measuring the degree of consumer satisfaction 4 4.4. rational use of resources 4 4.5. correspondence of the obtained results to the established goals 4 5. coordination (20) 5.1. connection and coordination of the first four functions 4 5.2. establishing internal interrelations of the organization 4 5.3. conflict resolution system 4 5.4. current deviation analysis: view and adjust plans 4 5.5. information management 4 6. communication (general management assessment = σ criteria 1-5) (100) compiled by the author based on: watson p., chileshe n., maslow d. a., 2004 baltic journal of economic studies 53 vol. 4, no. 1, 2018 also by ordinary employees, that is, those who make managerial decisions. for obtaining objective data, the necessary condition is the survey participation of not less than 80% of managers and not less than 50% of employees. the average score for each of 25 rating categories (questions) is calculated according to the formula (maximum 4 points): i i i cp n pyx n ðàá n . . .= + 2 (1) where: iср.n – average score by the category; iрук.n – average evaluation of leaders; iраб.n – average evaluation of employees; n – evaluation category (question). an estimate of each criterion is the sum of average scores of the categories corresponding to this criterion (maximum 20 points): i iêðèò cp n n . .= ∑ =1 5 (2) where iкрит. – general estimation by criterion; iср.n – average score by the category; n – evaluation category. total management estimation (tme) of the organization is determined by the sum of estimations for all five evaluation criteria of mfam (maximum 100 points): tme iêðèò n = ∑ = . 1 5 (3) where: tme – total management estimation; iкрит. – the estimate for each criterion; n – estimation criterion. adequacy of the management of the enterprise is determined as follows: the advantage of the bilateral assessment system is that it can be determined how the leaders’ presentation of the situation in the company is consistent with the opinion of employees. evaluation of leaders (iрук) for each of 25 rated categories is compared with the corresponding evaluation of workers (iраб). the coefficient of management adequacy (кам) is calculated using the following formula: k i i am ðóê ðàá= − 4 (4) where: кам – coefficient of management adequacy; iрук – average evaluation of managers; iраб – average evaluation of employees; 4 – the maximum possible score by the category. an analysis of the coefficient of management adequacy by individual evaluation categories can be conducted using the graph (see figure 1). adequate estimation zone of management capabilities: from -0,1 to 0,1 (upper and lower points are included in this zone). indicators of this zone characterize the adequate perception of employees of management decisions, the leader and the team are guided by the same principles in the work, which contributes to the harmonious development of the organization. managers, using such a situation, have an opportunity to continuously improve the business process. underestimation zone of management capabilities: from -1 to -0,1 (the lower point is included in this zone). the underestimation zone indicators reflect the lack of leadership skills of enterprise managers. there are potential opportunities to improve the management system. employees evaluate the activities of the company higher than leaders. it is needed to use this situation to adjust the position of managerial personnel and to enhance the processes of improvement. overestimation zone of management capabilities: from 0,1 to 1 (the top point is included in this zone). indicators of the overestimation zone reflect differences in the opinions of leaders and employees regarding the situation in the enterprise. in this case, most managerial overestimat ion zone adequate estimation zone underestim ation zone fig. 1. zonal distribution of estimation criteria baltic journal of economic studies 54 vol. 4, no. 1, 2018 decisions may face the internal resistance of the team, and various kinds of transformations initiated by management will be completely ineffective (korytko, 2012). the primary tasks of management here are: the identification of causes of inconsistencies, analysis of categories, where the maximum differences in the evaluation are traced; establishing a more close contact with personnel; determining the degree of employee satisfaction; strengthening corporate culture. personnel cohesion. an important element of the analysis in the system of self-assessment on the basis of mfam is the definition of the personnel cohesion coefficient (кск). this ratio reflects the polarity of opinions within the organization. for each question (category), the variance of employee estimates is calculated according to the following formula 5: k m i i mck ðàá n ðàá n= −∑ ∑( ) ( ). .2 2 2 (5) where кск – personnel cohesion coefficient; m – the number of interviewed employees; iраб. – evaluation of employee; n – the number of the question (category). an analysis of responses of employees makes it possible to identify the zone of unity and polarity of opinions in the staff. the zone of unity is within the value of the coefficient of agreement from 0 to 1 inclusive. in the zone of polarity, the value of the coefficient, respectively, is between 1 and 4. the categories, by which workers gave an equivalent assessment, have a greater potential for making effective changes, as the situation in this area is equally perceived by the entire personnel. indicators in the polarity zone require a top-priority analysis of reasons for the discrepancies. otherwise, any improvement plans will be inadequately perceived by the personnel, and the effectiveness of the changes will be at best low, or the effect will be negative at all (kindermann, 2002; dykan, 2008). further analysis of the survey results involves identifying correlations between the coefficients of management adequacy and the personnel cohesion coefficient. the main task of the final stage of selfevaluation is to more accurately determine the effectiveness of changes in one area or another. the analysis tool here is the matrix of opportunities for improvement (see fig. 2). depending on which of the zones a point with coordinates (кск; кам) falls, the degree of improvement opportunities on the investigated indicator is determined. we distinguish four zones of analysis: 1. effective zone: the effectiveness of the program for improving management efficiency is high. 2. working zone: the stable probability of improvement. working zone effective zone problem zone moderate zone fig. 2. the matrix of opportunities for developing efficiency baltic journal of economic studies 55 vol. 4, no. 1, 2018 3. moderate zone: implementation of a program of improvement requires a detailed preparation and preliminary analysis of coefficients. 4. problem zone: the development and implementation of a program of improvement should begin after a thorough examination of the unsatisfactory indicators of кск, кам. 4. result the experience of the experimental application of the model shows that the functional evaluation model helps to systematize the management approach, thus enhancing competitiveness and improving business results of organizations. in table 4, we specified the competitive advantages that the enterprise received by using the mfam. in general, the algorithm of organizational self-esteem based on a functional model of management assessment can be represented as follows: step 1: calculating the overall management assessment. step 2: analysis of the results obtained for 25 categories of the model. identification of strong and weak areas in the management system. step 3: calculation of the coefficient of management adequacy, kam. step 4: calculation of the personnel cohesion coefficient, кск. step 5: building a matrix of opportunities for improvement. analysis and definition of possible directions for improvement. step 6: re-evaluation and analysis of changes (repeat steps 1-5). in this regard, it makes sense to propose a flexible system of indicators for assessing the employee’s business qualities (bq) and evaluating the summarized results (sr) of his/her work, the essence and content of the indicators and their score are disclosed in table 5. table 5 essential distribution of indicators of labour evaluation by criteria the essence of the indicator and its evaluation 1-low 2-middle 3-high 4-highest extremely unsatisfactory results rather unsatisfactory than satisfactory quite satisfactory, but not always excellent results always excellent results signs (criteria) of the employee’s business qualities (bq) 1. diligence within the scope of labour duties. readiness to perform production tasks entrusted by the manager. undiligent, inclined to avoid receiving new tasks under any circumstances. low level of diligence. sometimes tries to avoid getting new tasks. a good level of diligence, but not every day without exception. excellent level of diligence. always perform duties and assignments. 0,20 0,30 0,50 0,80 2. ability to cope with duties and instructions. ability to identify and solve emerging problems. often cannot cope with duties and instructions. cannot detect problems and hardly solves them. as a rule, copes with his/ her responsibilities, but not always performs them properly. poorly solves problems. copes well with responsibilities, skilfully solves problems but requires control from the head. able to handle duties perfectly. always skilfully detects and quickly solves problems. 0,20 0,50 0,50 0,80 3. working capacity and/ or ability during each working day to focus only on the performance of work. inattentive. able to maintain efficiency for a short time, constantly diverting to issues not related to work. tired of increasing labour intensity, keeps the average working capacity during the working day. often distracted. able to maintain a fairly high level of productivity during the working hours, but not always active. active throughout the working day. always ready to work hard and intensely. all attention is concentrated only on work. 0,20 0,30 0,50 0,80 table 4 competitive advantages when applying a functional model of self-esteem key growth points competitive advantages obtained improvement of processes a clear understanding of how to create value for the consumer achievement of the organization’s goals implementation of strategic goals and objectives, based on available opportunities and disclosure of the organization’s strengths, taking into account the views of employees comparison of key performance results with benchmarking ability to measure the dynamics of improvement and the level of achievement of the set goals, having determined the limits development of an operational planning system based on the organization’s policy and strategy clarity and unity of goals within the whole organization contribute to the effectiveness of the process of continuous improvement combining all initiatives to improve into a single system interconnection of all areas of activity within the framework of a systematic approach to making managerial decisions development of team activity teambuilding on the basis of common values, trust, corporate culture, ethics baltic journal of economic studies 56 vol. 4, no. 1, 2018 on the basis of the assessment of the employee’s business qualities (bq) and the summarized results (sr) of his work, an integrated assessment of the enterprise personnel is calculated, using the formula: integrated assessment= =(business qualities)+(summarized results) (6) comprehensive evaluation of labour, as well as indicators of business qualities and criteria of summarized results of work of an employee, are compared with the average values of the relevant indicator on the whole for the enterprise in this way: if the individual value of the indicator falls within the range of ±30% of the average – the employee’s activity is recognized as average, at the value more than 30% – successful, otherwise – unsatisfactory. the flexibility of the proposed system of indicators is ensured by the possibility of carrying out a comprehensive assessment of the work of the personnel of the industrial enterprise by the general characteristics (attributes) inherent in any type of labour activity. the results of a comprehensive evaluation of work are formalized in the form of motivational profiles – individual for each employee or consolidated for a unit or the whole enterprise. the results of evaluating the company’s personnel in accordance with the developed system of indicators provided an opportunity for managers (day, wensley, 1988; korytko, 2012): – to make a separate generalized profile, corresponding to a group of the most successful employees; – to form profiles of ideal employees, which are formed 4. competence. knowledge of using techniques and methods of work and the ability to accurately follow them, the presence of the necessary skills. incompetent. does not possess the basic techniques and methods of work and does not seek to master them. knows the basic techniques of work not well, while having weak skills and slowly developing them. knows the methods of work well, but there is a need for further competence development. competent. excellent knowledge of all methods of work; strictly follows them every day. 0,20 0,30 0,50 0,80 5. interests and activities in matters of improving the quality, productivity of work, and development of effective working methods. often opposes the introduction of new technologies, methods of work aimed at improving quality and productivity. does not resist, but does not show interest in issues of improving the quality and productivity of work. always supports all innovations, helps to learn new methods of work. not only actively helps to master new methods of work, but often presents various innovative proposals. 0,10 0,15 0,25 0,40 6. ability to maintain working relationships with other employees of the enterprise. the absence of conflict. hard to get along with. often creates conflict situations and tension in the team. not always and not with everyone can maintain normal working relations. able to maintain working relationships with colleagues in work, but one cannot say that he/ she actively cooperates with them. able not only always and with all to maintain normal working relationships, but also actively cooperates with others, provides them with assistance. 0,10 0,15 0,25 0,40 signs (criteria) of summarized results of work of an employee (sr) 7. execution of the planned volume of work according to assigned production tasks. no scheduled work was performed on assignments in time. there have been cases of incompleteness in the full scope of the planned work on assignments. executed the entire volume of the planned work, but there were cases of violation of terms. all planned work on assignments was carried out in full volume and in due time. 0,30 0,45 0,75 1,20 8. quality of work, tasks performed. the work was carried out poorly. there were cases of shortage and return of tasks for work. although very rare cases of lack of work, there were errors and shortcomings. the work was carried out quite qualitatively, but there were small errors. works were executed impeccably, neatly, without defects, in strict conformity with standards. 0,40 0,60 1,00 1,60 9. discipline. compliance with labour, industrial, and technological discipline. undisciplined, indifferent, unpunctuality, there was a gross violation of discipline. there were significant violations of discipline. disciplined, punctual in general, but there were minor violations of discipline. there was no case of discipline violation during the attestation period. punctual in all details. 0,30 0,45 0,75 1,20 end of table 5 baltic journal of economic studies 57 vol. 4, no. 1, 2018 on the basis of the idea of the leadership about the optimal combination of motivating factors (nikitin, rukas-pasichnyuk, 2016). with the help of profiles of successful and perfect employees, one can get a set of motivators and tools of motivation, which most completely meet the requirements of the enterprise. at the same time, evaluation of the results of the personnel activities allows management to identif y the most prominent workers and really raise the level of their achievements, developing significant for the company qualities and skills of the employee (iziumtseva, myronchuk, 2012). the methodology for assessing the enterprise personnel efficiency is an integral part of the organizational and economic model of assessment and motivation of the work of personnel. this is due to the fact that the results of the assessment of labour efficiency conducted in accordance with the developed methodology will allow improving the system of personnel motivation at the enterprise and increasing the efficiency of the enterprise personnel management by: positive action on the motivation of employees – the feedback has a beneficial effect on the motivation of employees, allows them to correct their behaviour in the workplace and achieve increased productivity. in developing programs and measures to improve the system of assessment and motivation of personnel of an industrial enterprise, it is also necessary to take into account global trends and forecasts in personnel management (potemkin, 2011): – the transition of motivation to the strategic level; – increasing participation of personnel in corporate governance; – increase in the cost of health services and, consequently, increase in the importance of voluntary health insurance as one of the motivators; – introduction of new information technologies in personnel management; – aging of the labour force; – increase in the number of claims to employers. proceeding from world trends and taking into account domestic specifics, to ensure the effectiveness of the system of evaluation and motivation of labour of the enterprise personnel, the following provisions must be observed: – creation of conditions for the continuous selfimprovement of participants in labour relations at the enterprise; – use of specialized motivational programs in expanding the authority of the team in the adoption of managerial decisions; – formation of new market values of labour, shared by all participants in production processes; – flexible and adaptive use of human resources, the formation of a humanized organizational culture of the enterprise. on the basis of these principles, it is possible to give grounded priority directions for improving the system of motivation and evaluation of labour of the personnel of the industrial enterprise, which are presented in table 6 (semenov, sharko, 2009; semikina, 2011). improvement of personnel motivation system at the industrial enterprise means reconstruction of the structure of motivating factors – the process is long and hard to foresee. methods may vary from the creation of a system of internal corporate measures to change the corporate culture or the structure of business processes (extension of powers of certain groups of employees, change of control system). the main principle of changes: a new system of motivation should meet the enterprise goals (semikina, 2011). having analysed table 6, it can be seen that, for example, the remuneration system for superannuated work has much greater versatility than the scheme of share participation in business (temchenko, lisnichenko, 2010). basic motivation means allow satisfying mostly firstlevel needs. additional means provide a possibility to realize the spiritual and intellectual potential of the worker. based on developed concepts and models of improvement of motivation means, it is possible to create a complex program. the mission of this program is to create an effective system of personnel motivation that ensures an increase in the business activity of employees on the basis of the disclosure of their personal potential. the main objectives of the program are to increase the personnel’s interest in high-performance work and develop a system of compensation payments and benefits for personnel. today, when due to a difficult economic situation, a special attention should be paid to non-material stimulation, creating a flexible system of employee benefits, humanizing work, in particular: – to recognize the value of an employee for the organization, to provide him with creative freedom, to apply programs of enrichment of work and rotation of staff; – to use flexible schedule, part-time working week, opportunity to work both in the workplace and at home; – to set discounts on the products produced by the company (to issue cards for the use of gasoline); – to provide facilities for recreation and leisure, provide free vouchers, issue loans for the purchase of housing, garden area, motor vehicles, and so on. it is advisable to form the motivational system at the enterprise in such a way that each employee is interested in delegating him a greater share of authority and directing each work to a positive result. it is necessary to develop performance indicators for employees based on the strategic objectives of the enterprise, and not simply to make the implementation of certain indicators dependent on wage payment. in this way, each employee will work to achieve the goals set by the enterprise baltic journal of economic studies 58 vol. 4, no. 1, 2018 table 6 the formed directions for improving the system of motivation and evaluation of personnel work directions for improving the essence and possible results of the implementation the motivation of the personnel by its external hobbies. the passion for external interests – sports, hobbies, or other things that are not directly related to work, is typical for dynamic employees who have a significant growth potential. aspirations of employees to achieve high results in the area they are interested can be used to stimulate their growth and motivation in the workplace. the positive attitude and encouragement from the management of interests of personnel are positively reflected in his/ her work. in addition, the management, possessing information about employee’s external hobbies, receives additional and effective tools of his/her labour motivation. independent personnel assessment of the degree of success of the work performed. employees, who constantly monitor their activities, are able to notice and document the growth of their own professionalism. they create for themselves a table of ratings and celebrate their victories and defeats better than the leader. the incentive and encouragement of the personnel as a result of self-assessment by the management provides additional motivational. individual approach to the motivation of each employee. different employees have different goals and desires and, therefore, they need to provide different opportunities for work and professional growth. to increase motivation, one needs to find an individual approach to each subordinate. one of the ways is to delegate the authority, goals, and objectives to each employee when developing a general plan or project. another way is to provide subordinates the opportunity to independently develop their own strategic tasks and plans. operative data exchange within the enterprise on the work of personnel. allows timely receiving and monitoring the performance of employees and fulfilling their official duties, production tasks, and orders of leaders. the more information and operational exchange, the higher the motivation. availability for the staff of remuneration system accepted. arbitrary incentives and rewards negatively affect motivation. if the program of motivation is not enough for employees, it is necessary to explain in detail its essence, goals and tasks, the possibility of influencing their current activities. creation of a bank of ideas. most of the ordinary employees have their opinion and a number of ideas about improving the technology and production and economic activities of the enterprise as a whole. thanks to practical knowledge and proximity to production processes, some employee ideas are valuable to management. motivation by knowledge. in order to achieve professionalism in any work, an employee should strive to become the best in his specialty. a person enthusiastic about learning will necessarily grow up in office and develop additional useful skills. awarding individuals for the total contribution of the group. in teamwork, individual merits of employees often remain unaccounted for, as companies tend to recognize the success of the group as a whole. however, direct heads and colleagues need to note the contribution of individual employees to the general business, only so a person can be encouraged and motivated to further activities. support for the positive exchange of information between employees. personal positive evaluations of the work of employees are an effective motivating factor. a corporate culture that supports the desire to give positive evaluations of consequences of the task increases the level of motivation and productivity. it is necessary to search and accept people with internal motivation. when hiring staff, managers tend to be interested in their level of competence. however, the very relation to work determines the motivation, which, in turn, has a major impact on the employee’s aspirations for learning and quality work. rewarding employees is expedient to carry out in smaller volumes, but more often. most companies have a widespread practice of awarding valuable rewards to employees and paying large bonuses for the project, quarter or year. the ceremony for awarding the best passes rarely and attracts a close attention of all employees of the company, but of course they have less effect on motivation than not so big but more frequent incentives that give employees more chance of success. motivation by control heads are convinced that control is their prerogative. but control can also be a motivator. the main idea of this method is to provide employees with the opportunity to make decisions on all issues that do not require centralized control. specification and clarification of tasks. an employee should be clear what he is doing, why he does it, and how well he performs his job. studies have shown that the clarity of tasks more influences the motivation of employees than their experience or the size of the bonus. it is possible to achieve great results if help colleagues to see their personal contributions to the general business and regularly, promptly, and accurately evaluate their work. compiled by the author based on: (semikina, 2011; temchenko, lisnichenko, 2010 baltic journal of economic studies 59 vol. 4, no. 1, 2018 and personally will be interested in their achievement through the system of motivation. a particular attention should be paid to the development of a motivational system for production personnel, which would reduce staff turnover and unite production personnel at the plant, creating stable groups (gangs) that would be interested in achieving the objectives set by the plant and aware of their contribution to their achievement. to develop a system of advanced training for mid-level managers: to conduct a series of training for employees, to oblige the hr department to find specialized seminars, trainings for enterprise management, and conduct such training on an ongoing basis. to automate the personnel department in order to facilitate and improve the work of the latter. to improve the motivation system, one can use a motivation system that aims to improve motivation means (see figure 3). the basic means of motivation can satisfy mainly the needs of the first level. additional means provide an opportunity to realize the spiritual and intellectual potential of the worker. based on the developed concepts and models of improving the means of motivation, it is possible to create a comprehensive program. the mission of this program is to create an effective system of personnel motivation, which ensures the increase of the business activity of employees on the basis of the disclosure of their personal potential. the main objectives of the program are to increase the interest of the staff in high-performance work and to develop the system of compensatory payments and benefits for personnel. thus, within the framework of the program, there are 5 main directions of activities: creation of a new motivational environment, which helps to identify the reserves of employees as the main resource of the organization’s internal development; development of basic organizational, regulatory, and methodological documents on the program formation; providing methodical assistance to the heads of departments in the formation of a new motivational mechanism; organization of broad propagation of the program’s goals and objectives; questionnaires and surveys of personnel to clarify the program’s goals and objectives. 5. conclusions according to european choice, ukraine launches a new process of changes that should be based on the european human-centred system of pan-european values based on the observance of the integrity of human dignity, freedom of choice and fair working conditions, the creation of equal starting conditions and opportunities for promoting development and implementation of innovative, intellectual, cultural, creative abilities of the person in the process of labour activity, access to social guarantees, satisfaction of socio-economic and psychological needs of employees, social solidarity, social mobility towards obtaining professional knowledge, mastering of innovative technologies, tolerance, etc., which is a prerequisite for the formation of an effective system of personnel motivation at domestic enterprises and is aimed at meeting the person’s personal needs according to moral, spiritual, cultural, educational preferences, achievement of the highest quality of working life. motivation means basic means compensation system labour assessment system development of moral stimulation of workers improvement of corporate style development of corporate strategy additional means pay and allowances premiums benefits fig. 3. model of the system of improvement of personnel motivation means compiled by the author based on: zhyvko, 2010; iliash, kaperyz, 2011 baltic journal of economic studies 60 vol. 4, no. 1, 2018 it is advisable to create a motivational system at an enterprise in such a way that each employee is interested in delegating more weight to his authority and directing each one to a positive result. the effectiveness of the system of motivation should be evaluated in three parameters: personnel loyalty; productivity of personnel activities; company ’s attractiveness in the labour market. we determine prospects of further research by the following directions. it is necessary to develop performance indicators for employees based on the set 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(2010). mekhanizm motyvuvannia ta modeli motyvatsii personalu na vuhledobuvnykh pidpryiemstvakh [mechanism of motivation and models of personnel motivation at coal-mining enterprises]. management and marketing. science and economics, no. 1, pp. 86–91. baltic journal of economic studies 209 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 kyiv national economic university named after vadym hetman, ukraine (corresponding author) e-mail: tnshkoda@ukr.net orcid: https://orcid.org/0000-0003-1016-4853 2 kyiv national economic university named after vadym hetman, ukraine e-mail: savych@kneu.edu.ua orcid: https://orcid.org/0000-0001-5934-9002 doi: https://doi.org/10.30525/2256-0742/2022-8-5-209-216 transformation of marketing in wartime and post war tetiana shkoda1, oleksandr savych2 abstract. the study is relevant to the current global trends of business environment turbulence and marketing transformation under the influence of the war in ukraine. the purpose of the article is to identify the reasons for the transformation of marketing under the influence of the war in ukraine related to various aspects of the problems of marketing activities of business companies that lead to this, and to develop recommendations for improving marketing policy and improving the prospects for business profitability. the novelty of the study lies in the creation of a theoretical model of marketing transformation in the context of turbulence in the business environment. the object of the scientific research is determined as marketing activities of ukrainian business representatives during the war. the research methodology includes such methods: comparative analysis, critical analysis, descriptive analysis, statistical analysis. the study is based on the results of a sociological survey of business representatives in ukraine. the study's limitations are that the data collection period covers september-october 2022 during the war in ukraine. the obtained results confirmed the authors’ hypothesis h1 that ukrainian businesses use the limited marketing toolkit in times of war that worsens perspectives of marketing transformation in the direction of income growth; h2 – relocation has not really become the driver of marketing transformation in the war-time period as majority of businesses has not realized it in general; h3 – one more problematic zone of marketing activity in the war-time period is the ability of work with clients, which is not well used by the majority of surveyed ukrainian businesses; and н4 – the main problem for business not only the war itself, but the absence of effective marketing strategy in general. the practical value of the research for the young scientists’ community is in the use of the model of marketing transformation and the practical research results in changing the marketing identity of business entities, which gives the opportunity to improve marketing strategy and the company’s profitability. the possible directions of the research development are studying of the correlations of marketing with other elements of business activity and their impact on post-war business recovery. key words: marketing, transformation, war and post-war times, business environment, turbulence. jel classification: m31 1. introduction the growing turbulence of the macro environment is occurring at the intersection of two powerful factors, such as covid-19 and russia's war against ukraine. the first of them significantly transformed marketing in the pre-war years of 2020–2021, but is now gradually losing its power of influence. its main consequences are the accelerated transition of consumption from offline to online and the reassessment of end users' priorities (hoekstra, leeflang, 2020). however, the second factor of the war is already in full swing and is forcing companies around the world to adjust their marketing activities. at the same time, the transformation of marketing is more intense. any turbulence in an enterprise's macro environment has such characteristic features as unpredi ctability, uncertainty, volatility, complexity, and the presence of constant change. in particular, this is confirmed in their studies by murphy & seriki (2021), wang, chen, fang (2021), whittington and co-authors (2017), grant (2003), etc. at this time, entrepreneurs are remembering the need to apply a meaningful, aggressive, and effective marketing policy. classically, the need for marketing arose due to overproduction and, consequently, the baltic journal of economic studies 210 vol. 8 no. 5, 2022 supply of similar products in competitive markets. however, it is important to understand that any shocks that arise in the macro environment lead to the main business problem, which is the limitation of solvent market demand in terms of quantity and value. as a result, companies face problems with sales, margins and profits, on the one hand, and aggressive actions of competitors with a limited market size, on the other. in this case, the consumer has many alternatives at the best price, and thus has absolute power over the seller. research question: the war in ukraine has caused a large-scale humanitarian crisis: more than 12 million people have been forced to flee their homes, and more than 13 million are in need of urgent humanitarian assistance (guenette, kenworthy, wheeler, 2022). growing economic uncertainty has a negative impact on business, reducing the willingness to invest and implement new technologies. in the process of communicating with entrepreneurs, during mba and postgraduate programs, there are different opinions about the transformation and effectiveness of marketing in wartime, and therefore, to confirm the authors' hypotheses, it became necessary to conduct a comprehensive study of the behavior of enterprises in wartime. in this study, the authors try to address the following research questions: "how did the war affect the transformation of marketing in ukraine? what are the ways of marketing development in wartime and post-war ukraine?" 2. theoretical basis today, the consequences of russia's military aggression against ukraine are being felt all over the world, acting as a powerful factor in the turbulence of the external environment. in particular, there is a significant increase in uncertainty. thus, researchers note (korneyev et al., 2022) such problematic issues faced by business in wartime as: change of market segments, change of target audience, search for opportunities to enter foreign markets, cost growth, staff reduction, etc. the solution of all these problems requires a serious transformation of marketing. other scientists in their studies (prohorovs, 2022) emphasize that the consequences of the war in ukraine for european business are two serious problems that lead to a decrease in profits: a decrease in sales and margins, which in turn leads to a drop in profitability, and on the other hand – an increase in costs. such direction of marketing as brand management in conditions of turbulence is considered by l. rego and co-authors (rego et al, 2020) as an adaptive process, which has such characteristics as surrounding turbulence (or resistance), a new equilibrium (or recovery) and reinvention through changes in new areas. they can be applied by businesses in the marketing transformation process in war and post-war times as they need to find effective instru ments to deal successfully with environmental turbulence, which requires marketing transformation. the concept of marketing transformation is important for this study. separately, the term "marketing" and its evolutionary stages have already been studied by the authors in previous studies (savych, shkoda, 2020). therefore, here is the focus on the essence of the term "transformation" and its connection with marketing. in economic sciences, transformation is considered mainly as a qualitative change in the economic system (pochenchuk, 2014), a change of something, a transformation of the system of different scale, depth, direction caused by internal or external factors (toffler, 2000; hrazhevska, 2011). therefore, when interpreting the transformation of marketing, it is assumed that before the start of the transformation process caused by the war, business companies already had a certain established marketing identity and acted in this plane. that is why the marketing transformation itself begins in full from the moment when a business realizes the need to change something due to the inconsistency of its business goals with the requirements of a turbulent environment. at the same time, owners and management of business companies take an active role in the process of marketing transformation. the problem that drives this research was identified as the serious challenges to doing business due to the war in ukraine, which leads to a significant transformation of marketing and adjustments in marketing strategy and policy. in this regard, it is important to diagnose the problems in the practice of marketing activities of ukrainian business representatives in connection with russia's military aggression by identifying the causes of marketing transformation and developing recommendations for improving marketing policy and increasing the future profitability of doing business. the subject of the study is the level of marketing activity of ukrainian business representatives in the conditions of war and its dependence on such factors as: adaptation of strategic and tactical goals of the enterprise, new needs and potential markets, reorientation to basic needs, universal human values, the possibility of exporting or internationalizing the enterprise's activities in foreign markets, etc. the theoretical model of the subject of research is based on the theoretical and methodological provisions of the concept of consolidation of marketing efforts (savych, shkoda, 2020) and the model of marketing transformation proposed in this paper. baltic journal of economic studies 211 vol. 8 no. 5, 2022 in accordance with the formulated problem of the presence of serious challenges for doing business because of the war in ukraine significantly affects the transformation of marketing , the following hypotheses are put forward: – н1 – representatives of business in ukraine in wartime use limited marketing tools, which worsens the prospects of its transformation in the direction of profitability growth; – н2 – business relocation is not a serious factor in the revival of marketing activity during the war; – н3 – the ability to work with the loyalty of existing customers and attract new customers is a problem area of business marketing activities in wartime; – н4 – the cause of business problems in wartime is seen as the war itself, and the problem is the lack of an effective marketing strategy. 3. methods the next stage of the research was the formation of a sample. based on the defined research object, the authors formed the general population. thus, the general population includes representatives of business in ukraine who belong to the category of students of accredited mba programs or students of postgraduate business education programs. the age of such potential respondents is proposed to be determined by a separate question, dividing them into the following categories: under the age of 30, 30-40, 40-50, 50-60, and over 60. such students are employees and owners of business companies in ukraine and improve their theoretical knowledge in the field of business by studying at mba and postgraduate programs. at this stage of their professional development, they need doing business before the war doing business during the war and post-war recovery increased turbulence due to the war war comparison of marketing effectiveness of a business company marketing identity of the company before the war marketing identity of the company during the war and post-war recovery conflict, inconsistency renewal of identification with the old format of marketing activities marketing transformation identification with the new format of marketing activities identification of marketing figure 1. model of marketing transformation source: created by the authors on the basis of (hubeladze, 2013) baltic journal of economic studies 212 vol. 8 no. 5, 2022 to formalize their practical business experience in a more sophisticated form, which will facilitate the further successful commercialization of their knowledge, skills and abilities. to determine the size of the general population (n), consider the data on the number of business representatives who should be involved in such a survey, based on the number of business entities in ukraine as of january 01, 2022, which, according to the state statistics service of ukraine, amounted to 1956320 enterprises (sssu, 2022). given the specifics of the justification for the size of the population and the relative homogeneity of the population units, the authors chose a stratified, random sample type. strata are categories of enterprises in accordance with article 2 of the law of ukraine "on accounting and financial reporting in ukraine" (parliament of ukraine, 1999). as can be seen from figure 2, the respondents surveyed were relatively evenly distributed across the relevant categories. calculating the size of a random sample requires determining the desired accuracy of the estimate, the risk of the response, and the degree of its variability. the accuracy of the estimate is traditionally taken at 5%, and the risk value is 0.95 (dvoretska, 2022). the reliability of the sample survey according to k. mikhajleva can be as follows (mihajleva, 2016): 1. increased reliability (sampling error is up to 3%). 2. normal reliability – from 3 to 10%. 3. approximate reliability (sampling error 10-20%). 4. estimated reliability – from 20 to 40%. 5. approximate reliability – more than 40%. within the framework of this scientific research, the authors substantiate the expediency of ensuring the normal reliability of a sample study, in which an error of 3-10% is allowed. the sample calculator of the laboratory of sociological research of vntu (lsr vntu, 2022) was used to calculate the sample size. the calculation of the required sample size for a population size of n = 1956320 enterprises and 5% accuracy is presented in table 1. table 1 calculation of the required sample size for n = 1956320 enterprises and 5% accuracy determining the sample size confidence probability 95% confidence interval ±5% general population 1956320 required sample size 384 source: calculated by the authors using the sample calculator (lsr vntu, 2022) further, it is considered sufficient and expedient to ensure 5% accuracy of the study based on the recommendations of k. mikhajleva (mikhajleva, 2016) to ensure the reliability of the sample study and taking into account the limited resources. the survey was conducted in september november 2022 among mba students and graduate students of business programs who are employees or business owners in ukraine. the number of respondents surveyed was 392 business representatives, which meets the requirements for the number of respondents with a margin of error of 5%. 19,40% 22,55% 33,85% 24,20% what category of enterprises does your company belong to? microbusiness (revenue from sales of products – up to 700 thousand euros; employees – up to 10 people) small business (revenue from sales of products – up to 8 million euros; employees – up to 50 people) medium-sized business (revenue from sales – up to 40 million euros; employees – up to 250 people) figure 2. categories of enterprises the representatives of which were survey respondents source: calculated by the authors baltic journal of economic studies 213 vol. 8 no. 5, 2022 the questionnaires were filled out online due to the need to ensure the safety of respondents in connec tion with the war. 4. results the study revealed a number of marketing problems that slow down or stop the development and economic activity of enterprises. in particular, most enterprises start thinking about marketing when things are already bad, which is manifested in a sharp decline in sales. 72% of respondents believe that marketing is about communication and product promotion, while 65% of respondents believe that marketing strategy development is the task of the marketing department, and 45% of business owners and managers consider marketing to be a declarative and impractical activity. the size of the own market is unknown to 92% of respondents, and only 26% believe that their target market has decreased. as shown in figure 3, 83% have felt the impact of the war on their consumption markets. marketing strategy is absent from 74% of entrepreneurs, and 80% of them have not approved it in writing. the question arises whether all employees of the company are aware of it. figure 4 shows the results of respondents' answers to the question "is the adaptation of strategic and operational goals of the enterprise appropriate?" as can be seen from figure 4, 47% of enterprises have not adapted their goals to wartime conditions, and 18% do not have them at all. this, according to the authors, negatively affects the resilience of enterprises in wartime and their ability to quickly adapt to the new realities of doing business. in addition, 75% of respondents do not use business environment analytics based on clear data, while 45% of enterprises do not have a clear understanding of the focus customer, and 52% do not have segmentation. also, companies make little use of such relationship marketing tools as loyalty programs – 81% of companies do not have a systematic loyalty program. this is also confirmed by the answer to the question about the availability of a complaints department, which is absent at 85% of enterprises, and 64% of managers believe that their employees should work with problem customers and do not want to be involved in the negative. the results confirm the author's hypothesis h3 that the ability to work with the loyalty of existing customers and attract new customers is a problem area of business marketing activities in wartime. the war has put new demands on the way businesses trade, but as figure 5 shows, only 34% of businesses intend to switch to purely online trading. 52% of companies do not consider internationalization of operations. this result is almost completely in line with the business needs and conditions survey in ukraine (diіa.business, 2022), which states that 59.8% of business representatives surveyed said that their business is focused on the domestic market. marketing tools for working with price are limited. only 29% of executives are willing to consider raising prices. one of the main indicators that indicates the effective implementation of marketing activities is the percentage of repeat purchases. according to the survey results, 51% of companies do not make repeat purchases (figure 6), and the frequency of purchases has decreased in 66% of companies. 83,82% 6,49% 9,69% is the impact of war risks on consumption markets strong? yes no hard to answer 53% 29% 18% is the adaptation of strategic and operational goals of the enterprise appropriate? yes no hard to answer figure 3. answers of respondents to the question "is the impact of war risks on consumption markets strong?" source: calculated by the authors figure 4. answers of respondents to the question "is the adaptation of strategic and operational goals of the enterprise appropriate?" source: calculated by the authors baltic journal of economic studies 214 vol. 8 no. 5, 2022 part of the decline in repeat purchases may be due to customer relocation, which affected 52% of companies, but 49% of companies do not target their offer by customer location. at the same time, 62.9% of the surveyed companies did not relocate their business. this result also correlates with the data of the study of the state and needs of business in ukraine (diіa.business, 2022), which states that 79.3% of the surveyed business representatives stated that business relocation was not carried out. in general, the results confirm the author's hypothesis h2 that business relocation does not act as a serious driver of revitalization of business marketing activity during the war. 77% of business representatives believe that their customers' consumption in wartime has shifted to the segment of essential goods, energy and security. accordingly, businesses should take this into account when transforming their marketing activities under the influence of the war. 27% see essential goods and services as a promising business area, 19% – work with government orders, 13% – infrastructure reconstruction. the majority of businesses believe that rational behavior prevails over emotional behavior by a ratio of 60% to 21%. the value proposition of the company is either absent or has become weaker in wartime at 62% of enterprises. 50% of companies have felt the aggressive influence of competitors since the beginning of the war (figure 7), but only 14% of respondents are looking for new needs, 24% are attracting new customers, and 29% are adapting to new customer behavior. 61% of companies have not studied new needs and potential markets. at the same time, 72% of companies are assessing reputational risks and have adapted their activities to avoid them. all this confirms the author's hypothesis h1 about the limited use of marketing tools in wartime. 5. conclusions according to the authors, marketing tools, techniques, and methodologies have not changed, but in order to have an effect, they must be used constantly, aggressively, and long before problems arise. now, taking into account all the changes, it has been determined that the main problem is the reduction in effective demand, and therefore there is little room for "competing sharks" to hunt for 33,90% 37,10% 29,00% is it more efficient to move to pure online trade? yes no hard to answer 37,10% 51,60% 11,30% is the level of repeat purchases high? yes no hard to answer figure 5. answers of respondents to the question "is it more efficient to move to pure online trade?" source: calculated by the authors figure 6. answers of respondents to the question "is the level of repeat purchases high?" source: calculated by the authors 50% 35% 15% is the influence of competitors on the company's activities strong in the current war conditions? yes no hard to answer figure 7. answers of respondents to the question "is the influence of competitors on the company's activities strong in the current war conditions?" source: calculated by the authors baltic journal of economic studies 215 vol. 8 no. 5, 2022 customers aggressively, using the simplest element of marketing – price. a marketing strategy is a set of actions in which price is only one of many small elements. but all the other elements of marketing strategy are hardly used by most companies: planning, analytics, identifying strengths, building a value proposition and unique competitive advantage, consumer knowledge, and stp. a marketing strategy is not a goal, mission, or positioning; it consists of several dozen elements. are all businesses like this? any action in marketing should be aimed at the consumer, so it is necessary to know the consumer perfectly. this is one of the main mistakes of companies that build their marketing strategies without knowing and identifying the target consumer and his or her motives for making a purchase from us rather than a competitor. in 52% of companies, consumers have moved away from traditional locations. why not intensify activities in the western regions of ukraine and the nearest european countries, including poland? in an era of macro risks and demand constraints, when market volumes are declining, maximizing conversion at every stage of the sales funnel is at the forefront. the market is still limited, and conversion can be increased endlessly. therefore, people in marketing and sales are the main asset and source of success. and this resource should not be skimped on even in difficult times. the absence of a systematic loyalty program is a negative characteristic for most businesses, and the word "systematic" is the most important here, meaning prescribed, with clear rules and conditions. after all, the main customers are current customers who already know about the company, buy and forgive its mistakes. and when the focus shifts away from them, they go to competitors, because they are constantly "hunting" for a client. naturally, in wartime, it is necessary to think about reducing the risks of dependence on a particular territory, and this can be done through online trading and access to international markets. yes, in difficult times, consumers become poorer, but they are willing to pay for the value they receive, and if the value for the customer is high, one can always raise prices and sell more expensive, but if there is no value, the lowest price will be unreaso nably high for the buyer. the brand still matters and needs to be built constantly, despite the rationality of consumer behavior, which cannot be dismissed either. but in difficult times, an established brand will help a company. managers and staff consider the war to be the main reason for failures and unsuccessful marketing actions, but looking at the results of the survey, it is clear that the war is only an excuse for failures that occurred due to the lack of a marketing strategy in companies or its ineffectiveness. in general, the results confirm the authors' hypothesis h4 that the cause of business problems in wartime is not only the war itself, but the essence of the problem lies in the lack of an effective marketing strategy. marketing has to work twenty-four hours a day, and it has no days off. moreover, even in wartime and post-war times, the main goal of marketing does not change, because it is a growth hormone. in addition, it is worth noting that marketing begins with the first person in the company – its owner. after all, it is the owner who must realize his or her most important function in the form of determining and shaping the marketing strategic vector of the company 's development. author contributions: tetiana shkoda prepared theoretical background, methods and conclusion, oleksandr savych performed introduction, results, processed the survey data. acknowledgements: the research is performed within the framework of the young scientists’ project "realization of the young scientists’ potential in integration of science, education, and business" (ukrainian state registration number 0120u102126). references: dia.business (2022). survey of state and needs of business in ukraine. september 2022. center of innovations’ development, office on entrepreneurship and export development, national project dia.business and strategic agency advanter group. available at: https://business.diia.gov.ua/uploads/4/24573-stan_ta_ potrebi_biznesu_v_umovah_vijni_rezul_tati_opituvanna_u_veresni.pdf dvoretska, g. v. 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(2013). model of transformation of youth social identity in conditions of migration from rural areas to city. available at: https://lib.iitta.gov.ua/710164/1/%d0%9c%d0%be%d0%b4%d0%b5%d0% b b % d 1 % 8 c % 2 0 % d 1 % 8 2 % d 1 % 8 0 % d 0 % b 0 % d 0 % b d % d 1 % 8 1 % d 1 % 8 4 % d 0 % b e % d 1 % 8 0 % d 0 % bc%d0%b0%d1%96%d1%97.pdf korneyev, m., berezhniuk, i., dzhyndzhoian, v., kubakh, t., & horb, k. (2022). business marketing activities in ukraine during wartime. innovative marketing, 18(3), 48–58. doi: https://doi.org/10.21511/im.18(3).2022.05 laboratory of sociological researches vntu (lsr vntu) (2022). sample calculator. available at: https://socio-lab.vntu.edu.ua/download/calculator.html mikhajleva, ye. g. (2016). methodology and methods of sociological researches. study book for students of higher educational establishments. kharkiv: publishing house nua, 286 p. murphy, r ., & seriki, o. (2021). the impact of environmental turbulence on the strategic decision-making process in irish quantity surveying (qs) professional service firms (psfs), construction management and economics, 39:9, 739–758. doi: https://doi.org/10.1080/01446193.2021.1952632 parliament of ukraine (1999). law of ukraine "on accounting and financial reporting in ukraine" № 996-xiv as of 16.07.1999. available at: https://zakon.rada.gov.ua/laws/show/996-14#text pochenchuk, h. m. (2014). laws of transformation processes of the national economy. ekonomichnyi analiz: collection of scientific publications, vol. 16, no. 1, pp. 123–129. prohorovs, a. (2022). russia’s war in ukraine: consequences for european countries’ businesses and economies. journal of risk and financial management, 15, 295. doi: https://doi.org/10.3390/jrfm15070295 rego, l., brady, m., leone, r ., roberts, j., srivastava, ch., & srivastava, r . (2022). brand response to environment turbulence: a framework and propositions for resistance, recovery and reinvention. international journal of research in marketing , 39, 583–602. savych, o., & shkoda, t. (2020). the concept of marketing efforts consolidation at the global car market. selected papers of the 11th international scientific conference "business and management 2020" held on may 07-08, 2020, vilnius, lithuania. pp. 63–72. doi: https://doi.org/10.3846/bm.2020.542 state statistical service of ukraine (sssu) (2022). performance indicators of business entities (2010–2021). available at: https://ukrstat.gov.ua/operativ/menu/menu_u/sze_20.htm toffler, a. (1980). the third wave, new york, william morrow and company, inc. 552 p. wang, m.-c., chen, p.-c., & fang, s.-c. (2021). how environmental turbulence influences firms’ entrepreneurial orientation: the moderating role of network relationships and organizational inertia. journal of business & industrial marketing, 36(1), 48–59. doi: https://doi.org/10.1108/jbim-05-2019-0170 whittington, r . et al. (2017). strategic planners in more turbulent times: the changing job characteristics of strategy professionals. long rande planning, 50, 108–119. received on: 13th of october, 2022 accepted on: 29th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 13 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-13-18 international aspects of state regulation of socio-economic responsibility of entrepreneurship: experience for ukraine ludmila batchenko1 kyiv national university of culture and arts, ukraine maryna dielini2 national pedagogical dragomanov university, ukraine abstract. the subject of the study is the socio-economic aspects of the social responsibility of business (csr) in 4 countries. the purpose of the article is to study the experience in regulating the socio-economic responsibility of entrepreneurship in the united states, sweden, india, and china to determine the direction of formation of the state mechanism of socio-economic responsibility of entrepreneurship (sere) in ukraine. the methodology of the article became theoretical researches of foreign scientists, their synthesis, systematization, and analysis for the development of the application of experience in ukrainian realities. the analysis showed how different states of csr policy differ in each of these countries and made it possible to draw conclusions about the application in ukraine. so, the experience of sweden is useful in reviewing the social reporting obligation, as well as the experience of china. in the case of the usa, the role of the state in regulating csrs in enterprises should be noted but, at the same time, the significant social consciousness of american entrepreneurs as recognized philanthropists, who are actively introducing ethical codes and key stewards from the implementation of csr, are seen by society and aimed at improving the well-being of society. in china, the government plays an important role in the implementation of csr for state-owned enterprises. in addition, laws are adopted to improve the rights of employees, to equalize gender differences, to increase the level of production, quality of products, which leads to an improvement in the quality of life of the country’s population. all this becomes relevant for ukraine and can be used in our country as well. indian experience draws attention through the adoption of a unique decision on the indifference of charity activities by indian companies with a certain level of profit and the adoption of them by the rules of corporate social responsibility. in entrepreneurship, these measures have not received support and a large number of enterprises artificially lower their profits. also, the problem of effective reform of indian social responsibility is the high level of corruption in the state, as well as the ineffectiveness of the current legislation. taking into account all these disadvantages when developing its own policy of developing social and corporate responsibility of business, ukraine is able to build a strong and effective mechanism of a socially responsible society. for the ukrainian realities, the following areas are emphasized: the approval of the obligation of social reporting for large enterprises of all forms of ownership and state enterprises in general, the improvement of ukrainian legislation in the field of social responsibility of business, the study of the possibility of introducing the obligation of charity for large enterprises from different sides (that is, how this will affect society, how it will affect the work of enterprises, how can it be regulated by law, what kind of reaction this will cause in society); conducting of informational and consulting measures by the government of ukraine for the dissemination of knowledge, skills, competences for the implementation and implementation of socio-economic responsibility at ukrainian enterprises. key words: social responsibility of business, socio-economic responsibility of entrepreneurship, charity, philanthropy, social reporting. jel classification: m21, m41, l30, f20 corresponding author: 1 department of hotel and restaurant business, kyiv national university of culture and arts. e-mail: ludavic@meta.ua 2 department of management, information and analytical activity and european integration, national pedagogical dragomanov university. e-mail: marina.dielini@gmail.com baltic journal of economic studies 14 vol. 3, no. 5, 2017 1. introduction in the modern world, social responsibility of business is an important element of the functioning of any enterprise, providing opportunities for effective business development. the socio-economic aspect of social responsibility manifests itself in the application of economic levers for its realization. in other works of authors, the basic forms and tools of socio-economic responsibility of entrepreneurship were given. in this research, we study the experience of two developed countries (the usa and sweden) and two asian countries (china and india) that are actively developing their economies. the experience of these countries will be useful to ukraine to build a solid system of socioeconomic responsibility of business. the purpose of the article is to study the experience of regulating the socioeconomic responsibility of the state of the usa, sweden, china, and india in developing the areas of stifling in ukraine and building a functioning mechanism of socio-economic responsibility of entrepreneurship. the methodology of the article was the systematization, synthesis, and analysis of theoretical studies on the subject of the research. the work gradually reveals the essence of state policy in the developed countries: the usa and sweden, and then we turn to the experience of china and india, after which the possibility of using one or another measures in ukrainian realities is analysed. 2. sweden’s and the usa’s experience in the regulation of sere first, we will research the experience of sweden and the united states, countries with a developed economy, in which csr has been developing for a long time and occupy a significant place in the activities of enterprises. sweden is traditionally considered a country with a social economy and therefore the system of social responsibility in it is set at a high level. in this study, we will also consider the main elements that can be attributed to socio-economic responsibility. turning to figures, we can present the following achievements of sweden, which are recognized by the world community: 1. 2007 – sweden topped the responsible competitiveness index. this index was based on a range of parameters covering climate, working environment, corruption and social issues among companies in 108 countries. in particular, the report highlighted gender equality in sweden. 2. 2010 – climate competitiveness index 2010 acknowledges the nordic countries to be in the forefront of combating climate change and promoting the development of “cleantech,” an umbrella term for innovations that reduce emissions or energy consumption. 3. 2010 – world economic forum’s global gender gap report 2010 states that sweden and the other nordic countries “emerge as top performers and true leaders on gender equality ... and thus serve as models and useful benchmarks for international comparisons.” (sweden leads by example in corporate responsibility). csr in sweden is a part of the industrial policy, which objective is to strengthen competitiveness and create more jobs and growing companies. the issues of the swedish parliament linked to csr include human rights, decent working conditions, environmental considerations and anti-corruption efforts, as well as gender equality, diversity, business ethics, and taxation. all of them are interconnected with sere as they have an economic base and as well some of them is a direct economic tool that influences business and society (the swedish government policy for corporate social responsibility). in table 1, the main developments of sweden’s csr are presented. so, do we see that some measures are being taken by the government in sweden that increasing the level of sere, and namely: the obligatory social reporting of state-owned enterprises, the adoption of laws that regulate the economic instruments of sere, the implementation of measures for the spread of social responsibility among the private sector. now we will turn to the experience of the united states, a country with almost the largest history of using such a tool of sere as a philanthropy and charity. the us refers to the american model of csr , which differs little role of the state in the regulation of social responsibility. most of the tasks are assigned to the enterprises. but despite this, the us is a country with a developed csr system and strong social protection for workers and consumers. it is the tradition to contribute a part of the profits for charity in order to improve the attitude of the local community towards a particular production and has formed an american model of social responsibility. american businessmen are involved in financing a wide variety of non-profit projects, and through this, they solve various social problems (vocational education, pension and social insurance, environmental protection). the state does not directly interfere in these processes, but only stimulates them through a system of privileges and subsidies. in particular, the united states introduced tax incentives aimed at helping employers compensate for the cost of hiring disabled people, pensioners, young people, and veterans (kolosok, 2015). u.s. businesses face social responsibility. according to the a. carroll model csr has 4 dimensions: economic, legal, ethical, and discretionary responsibilities. discretionary responsibility is defined as the presumption that a company will voluntarily serve society. such service reaches beyond economic, legal, and even ethical responsibilities. most businesses support the fight against hunger (forte, 2013). baltic journal of economic studies 15 vol. 3, no. 5, 2017 in relation to another sere instrument – social reporting, it should be noted that in the us it is not regulated by the state, a required framework for reporting does not currently exist, but has a lot of names: “environmental reports”, “social reports”, “climate change reports”, “carbon reports”, “triple bottom line reports” and “sustainability reports” among others. despite the lack of regulations in the united states requiring companies to disclose, increasingly more and more companies are issuing csr reports for a variety of reasons. research suggest that there are three main theories for this increasing trend: (a) to manage the perceptions of key stakeholders, which is explained in signalling theory; (b) to convey the organization’s values to the public, which is called impression management theory; and the most widely cited reason (c) to establish that the organization’s activities are in line with social norms, which is legitimacy theory. in addition to the organization’s motivations for disclosure, there is a growing demand for this nonfinancial information (cecil, 2008). besides, in the usa, it is typical for businesses to list ethics codes and concentrate on the following stakeholder groups – community. the usa entrepreneurs tended to zero in on issues that were not directly connected to their activities. they paid attention to arts, education, culture, and the quality of life. the u.s. firms focused on issues connected to the well-being of the community (forte, 2013). consequently, we see that in the united states, there are some other forms of implementation of sere – philanthropy, the most widespread in this country, tax incentives for the development of sere and the orientation and development of the community. there are no requirements for providing social reporting though. the us experience can be useful for ukraine in several directions, which will be further dispersed. 3. regulation of sere in china and india first, let us look at the example of china as emerging economies. so, csr has now become a party to the day in china, but it still remains a problematic issue that is related to the cultural and social factors of china. it should be noted that if before the csr was inherent by foreign-owned companies operating in the chinese market, now local companies are introducing csr as well (buhmann, 2005). the fact of increasing priority of chinese csr during last years is based on the growing interest in the sustainable development of chinese society. it is also very important sign due to china’s leading position in the worldwide production chain. in china, csr is interconnected with “harmonious society” – the concept that is built on the base of confucius study and aimed to develop stable and harmonic chinese society (csr asia, 2016). the most significant law provision with respect to csr is the 2005 amendment to the company law. the company law, which is the law detailing a general operating framework for companies, refers to general principles of social responsibility for companies. the “harmonious society” should be achieved thanks to the scientific development concept, which is the current chinese ideological guidance, and calls for sustainable development and social welfare such as the gap between rural and urban development, unequal income distribution, insufficiency of household wealth, ecological degradation, and lack of efficient use of resources. csr is also seen as an important component table 1 the main developments of sweden’s csr # sphere of developments characteristic sere direction 1 legislative sweden was the first country (2007) to demand sustainability reports from stateowned enterprises. the reports have to comply with guidelines from the global reporting initiative (gri). it’s a tool of sere that reflects main aspects of enterprise’s csr . 2 administrative since many years the government has made several attempts to encourage and inspire swedish companies to engage in strategic csr. the ministry for foreign affairs has a platform for dialogue with business, social partners, labour unions and ngos working with social responsibility and has during the past years organized and participated in several seminars about csr including anti-corruption. the swedish international development cooperation agency (sida), a government agency, is increasingly working together with the private sector to stimulate development, innovation, entrepreneurship, and csr in developing countries. sida aims to contribute to the promotion of sustainable and inclusive business practices through its experience of operating in less explored trade environments. the development of socially responsible entrepreneurship through private sector conducting seminars, business cases and so on that can increase the level of socioeconomic responsibility of entrepreneurship. 3 adjudication there are specific laws in sweden, civil and criminal, on health and safety, equal opportunities, the right of the collective agreement, corruption and discrimination as well as other human rights-related challenges. these laws regulate as well economic base of csr and namely: taxation, corruption, legal business etc. table is built on the base of overview of csr developments at the national level baltic journal of economic studies 16 vol. 3, no. 5, 2017 of companies’ competitiveness, as put forward in the csr guidelines for state-owned enterprises. interestingly, csr is also considered as a driver for corporate innovation (csr frameworks in china and the european union). now we can observe the increase in a number of social reports and the development of charitable and volunteer activities (mullich, 2009). at the third plenary session of the 18th central party committee on comprehensive reform in november 2013, social responsibility was announced as one of eight focus areas for further reform for chinese soes. in addition, since 2008, state-owned companies have been obliged to publish annual csr reports. these can be used to start the discussion with state-owned companies about csr . the state actively promotes the development of csr, adopting relevant laws or making changes to existing ones (csr frameworks in china and the european union). list the main laws of the people’s republic of china in the sphere of csr: company law (amended 2005), labour law of the people’s republic of china (1998), labour contract law (2008), law on the protection of rights and interests of women (2002), production safety law (2002), article 26 of the constitution (1982, amended 1988, 1993), environmental protection law (1989), law on the environmental impact assessment (2003), law on the promotion of clean production (2003), law on prevention and control of water pollution (1984, amended 2008). these laws regulate csr and sere in particular, including the socio-economic dimension in the field of ensuring employment, rights of workers, production of quality products, etc. a particular attention for ukrainian enterprises deserves the experience of operating and regulating the activities of state-owned enterprises: the obligation of their social reporting and a higher level of social responsibility inside the country are observed precisely at state enterprises. moving on to the experience of india, which in the sphere of csr decided to go further than other countries: in 2013, it entered into force article 135 of the law “on companies”, which obliges large companies to disclose information about csr . in addition, india has become the first country in the world to make obligatory charity. thus, the law “on companies” sets mandatory deductions for csr at a rate of 2% of the average net profit for the three financial years for companies with either own funds of over 5 billion inr (more than 77 million usd), or a turnover in excess of 10 billion inr (more than 155 million usd), or a net profit of 50 million inr (more than 775 million usd) during the fiscal year (legislative regulation is intensifying worldwide). from this, we see that it is a socio-economic responsibility that manifests itself when an enterprise uses economic instruments in addition to social actions. traditionally, csr in india was implemented as charity, and it was not discussed by companies, so there were almost no documents on its implementation. as some observers note, csr practices in india are still within the charitable space but moved from the institutional framework (educational, research and cultural) to community development through various projects (handbook on corporate social responsibility in india). in 2014, the next development of csr was taken place  – the indian government also adopted the “corporate social responsibility rules”, which, along with article 135 of the company law, are two of the most important documents that provide the legal basis for csr . these rules establish a certain list of activities that can be attributed to the enterprise’s csr . these are: the elimination of extreme hunger and poverty; promotion of education; promotion of gender equality and women’s empowerment; reducing infant mortality and improving maternal health; the fight against the human immunodeficiency virus, acquired immunodeficiency syndrome, malaria and other diseases; ensuring ecological sustainable development; improvement of professional skills; assistance in the development of social projects; contribution to the national assistance fund or the prime minister created by the central government or state governments for socio-economic development and assistance and funds for the well-being of caste, tribes, other classes, minorities and women, etc. an important part of this law is clause 4 of article 135, which stipulates that the council of each company specified by law must approve the corporate social responsibility policy for the company and disclose the contents of such policy in its report, as well as place it on the company’s website (india: corporate social responsibility). the csr annual report includes information on csr policies, with mandatory reference to web pages of csr projects and programs; structure of the csr committee; average net profit for the last three fiscal years; planned costs for csr; detailed information about the money spent on csr during the fiscal year; the amount is not spent, if any, its causes (if the company cannot spend the minimum necessary expenses, the company should indicate the reasons in the report of the non-compliance, so that no penalties were fixed.); the direction in which the amount spent during the fiscal year (ronald, 2014; india: corporate social responsibility). conducting reforms in india has faced many problems, which are explained by the country’s heritage: companies began to reduce their profits so as not to make charitable deductions, and the high level of corruption does not allow for the full development of csr . in this, we see the similarity with the ukrainian present, but taking into account these facts will make baltic journal of economic studies 17 vol. 3, no. 5, 2017 possible to make a more effective mechanism of sere in our country. 4. directions of development of sere in ukraine considering the experience of 4 countries that occupy a significant place in the modern business world, some suggestions can be made for ukraine, which will help to create a solid system of socio-economic responsibility in the country. the main elements of the swedish model that can be proposed for our country are as follows: 1. obligatory social reporting for all large enterprises operating in ukraine. this applies both to foreign companies and to ukrainians by origin. 2. government support for explanatory work with entrepreneurs on the importance of implementing and expanding socio-economic responsibility at the enterprise. 3. study of swedish legislation in the field of csr will be a solid basis for its regulation in ukraine, and namely, the principles, standards, and level of state interference in the regulatory process. the united states is an economic leader in the world and, of course, can be an example for our country in the field of regulation of sere. we can highlight the following elements of this model: 1. the orientation of entrepreneurs to philanthropy. to inform about the benefits of the implementation of sere, the main advantages for the community. 2. provision of preferential taxation for entrepreneurs who carry out csr activities and have real results for the community and the state. 3. determination of the main group of stakeholders as a society, that is, entrepreneurs need to reorient not to the fact that the implementation of sere brings an increase in profits, but what it gives to society in general. the main objective of sere is to increase the welfare of the population. the american model is an effective mechanism, but there is a little role of the state in implementing the csr; most of it is assigned to enterprises, which in ukraine cannot be applied now, as then domestic entrepreneurs focus only on making a profit. and at this stage of development of our state, strict regulation is required from the government. in these circumstances, the experience of china and india becomes an occasion. an example of china for our country is also useful given the similarity of the historical heritage of the economic system. like in our country, csr is generally based on already existing labour legislation, but development is getting the same, as china is now in the economic space. useful for ukraine can be distinguished as follows: 1. fixing the obligation of social reporting of stateowned enterprises and giving them a general presiding role in the implementation of csr . that is, they are becoming an example for others. 2. adoption of new and improved existing legislation that regulates employees’ rights, gender equality, production standards and product quality, environmental protection. indian experience is interesting enough because of the innovative idea to move away from the arbitrariness of csr and to introduce charity commitment to enterprises that have reached a certain level of profit. for ukraine, one can distinguish the following, which can be implemented by the government: 1. to establish the conscientiousness of charitable activities for enterprises with a certain level of profit. 2. the obligation to approve the corporate social responsibility policy for these enterprises. 3. taking into account the negative experience of reforms in india and the implementation of a monitoring system for compliance with the curtain. thus, the proposed measures can create a solid mechanism of socio-economic responsibility in ukraine. 5. conclusions the taken theoretical assessment showed the basic measures of state for the development of csr . it becomes clear that the countries that actively develop their economy and gain momentum in the global arena are increasingly focused on the implementation of the latest methods for business and society development. but the analysis showed a difference in the policies of each of the states. sweden, for example, is distinguished by the fact that the state is focused on the adoption and approval of the laws regulating the sphere of csr , as well as the government conducts a series of measures to disseminate the knowledge of the importance of this practice. while in the united states, the level of state intervention is moderate and there is a tendency to delegate tasks to the level of enterprises, although there are tax breaks. the level of social consciousness of us entrepreneurs is high, as they are recognized philanthropists and focused on improving the welfare of society, the introduction of ethical codes in their activities. characteristic of china is the “harmonized society”, which regulates the csr by the state. taking into account the international activity of the country, it increasingly focuses on world standards and improves the quality of products and life of the population. in addition, china increases the role of state-owned enterprises in the implementation of csr . but the most prominent for researchers in this field is the experience of india, which was the first in the world to withdraw from voluntariness and legally enforce the obligation of charity for large enterprises with a certain level of profit. although it has gained resistance inside baltic journal of economic studies 18 vol. 3, no. 5, 2017 the country, it remains the only supporter and deserves careful study. for ukraine, the experience of all these countries is beneficial and each of them has certain results that can be applied in our realities, and namely: consolidation of the obligation of the social report, improvement of the national legislation, introduction of an effective system of taxation, government’s activities on informing entrepreneurs regarding the importance of implementing the sere. all this will help create an effective mechanism for the effective socio-economic responsibility of entrepreneurship in ukraine. references: sweden leads by example in corporate responsibility. facts about sweden. (2011). swedish institute. retrieved from: www.sweden.se. the swedish government policy for corporate social responsibility. fact sheet. (2016). ministry of enterprise and innovation. retrieved from: www.government.se. overview of csr developments at a national level. (2013). csr committee. issue 1. retrieved from: http:// www.ccbe.eu/fileadmin/speciality_distribution/public/documents/csr/csr_position_papers/en_ csr_20130131_overview-of-csr-developments-at-a-national-level.pdf. kolosok, a. (2015). teoretychnyi aspekt sotsialnoi vidpovidalnosti biznesu [the theoretical aspect of the social vision of business]. ekonomichnyi chasopys skhidnoievropeiskoho natsionalnoho universytetu imeni lesi ukrainky. [economic journal of the east european national lesia ukrainka university]. # 4, pp. 64-67.  forte, a. (2013). corporate social responsibility in the united states and europe: how important is it? the future of corporate social responsibility. international business & economics research journal, volume 12, number 7. retrieved from: https://www.researchgate.net/publication/297754923_corporate_social_responsibility_in_ the_united_states_and_europe_how_important_is_it_the_future_of_corporate_social_responsibility. cecil, lianna (2008). corporate social responsibility reporting in the united states, mcnair scholars research journal: vol. 1: iss. 1, article 6. retrieved from: http://commons.emich.edu/mcnair/vol1/iss1/6. buhmann, k. (2005). corporate social responsibility in china: current issues and their relevance for implementation of law. the copenhagen journal of asian studies, 22, pp. 62–91. retrieved from: http://ej.lib. cbs.dk/ index.php/cjas/article/view/521/551. csr asia (2016). a study on corporate social responsibility development and trends in china. embassy of sweden, beijing. retrieved from: http://www.csr-asia.com/report/csr-development-and-trends-in-china-final hires.pdf csr frame works in china and the european union insights for csr workshops, china-europa forum’s ( june 2010). retrieved from: http://www.chinaeuropa-forum.net/bdfdoc-1704_en.html. mullich, joe (2009). corporate social responsibility emerges in china. the wall street journal. retrieved from: http://online.wsj.com/ad/article/chinaenergy-responsibility. v myre usylyvaetsia zakonodatelnoe rehulyrovanye sotsyalnoi otvetstvennosty byznesa [legislative regulation is intensifying worldwide]. retrieved from: http://tass.ru/plus-one/4403997. handbook on corporate social responsibility in india. pricewaterhousecoopers private limited, 2013. india: corporate social responsibility – indian companies act 2013. retrieved from: http://www.mondaq.com/ india/x/366528/corporate+governance/corporate+social+responsibility+indian+companies+act+2013. ronald, y. (2014). legal framework for csr in india. retrieved from: https://www.researchgate.net/ publication/268226026_legal_framework_for_csr_in_india. baltic journal of economic studies 24 vol. 3, no. 4, 2017 corresponding author: 1 department of accounting, simon kuznets kharkiv national university of economics. e-mail: volkovska_yana@ukr.net inspection of management accounting status at the enterprise iana volkovska1 simon kuznets kharkiv national university of economics, ukraine abstract. now the heads of enterprises have understood that management accounting is important for the decision-making process. it has a particular importance when enterprises because of the specifics of their activities and optimization of taxation, consist of several business entities, for example, hotel-restaurant complexes. however, it may be a situation when there is management accounting at the enterprise but managers do not receive the necessary information. then there is a need to check the status of management accounting. audit of management accounting is expensive, so there is a need for cheaper ways to determine the status of management accounting. this confirms the relevance of this study. the purpose of the work is the formation of a procedure for checking the status of management accounting at the enterprise. to achieve the goal, the method of expert evaluation was used. first of all, the author selected objects for checking the status of management accounting for the understanding what to focus on. next, the author analysed the main approaches to checking the status of management accounting and how they can be used at the enterprises of the hotel-restaurant complex. the author, on the basis of the analysis, formed possible questions about the assessment of the status of management accounting, which were evaluated by experts on the basis of the scale proposed by the author. expert evaluations were processed and ranked by the author. the result was a questionnaire for assessment of the status of management accounting at the enterprise, with the allocation of various aspects of accounting for the consideration of different issues. the author also developed recommendations for the answers to the questionnaire and the scale for the questionnaire, which allows drawing a conclusion about the completeness of the management accounting system. it makes a conclusion that this procedure of checking the status of management accounting at the enterprise helps to understand what issues are covered by the existing management accounting system and to what extent. however, this approach does not give an answer as to whether management accounting is correctly conducted because the essence of the procedure is in checking of the system’s provisioning, organization, confidentiality, and not checking of the quality of management accounting, which is the direction of further research. key words: management accounting, enterprise, hotel-restaurant complex, status, inspection. jel classification: d89, m41, m49 1. введение на сегодняшний день становится важным формирование учётно-аналитического обеспечения, качество которого увеличивается при наличии управленческого учёта на предприятии. однако возможны ситуации, когда управленческий учёт так и не даёт ответы на отдельные вопросы или построен таким образом, что наблюдается повторение. это приводит к тому, что необходимо проверить качество организации управленческого учёта на предприятии, при этом желательно находить наиболее простые способы для проверки. кроме того, следует отметить, что при организации управленческого учёта важно учитывать специфику деятельности предприятия, что закладывается при разработке управленческой отчётности. свои особенности имеют и предприятия гостинично-ресторанного комплекса, которые с целью оптимизации налогообложения и ведения учета обычно включают в себя несколько субъектов хозяйствования. как следствие, возникают отношения между центрами ответственности, подразделениями, то есть отдельным участком для контроля становится трансфертное ценообразование. кроме того, гостинично-ресторанные комплексы являются частью индустрии гостеприимства, поэтому отдельной статьёй расходов становятся затраты на качество, следовательно, и сигнальные показатели контроля качества тоже надо рассчитывать и анализировать. также значительное количество обычно составляют административные расходы и расходы на сбыт, часть которых есть трансакционными издержками, поэтому для предупреждения нецелевого использования baltic journal of economic studies 25 vol. 3, no. 4, 2017 средств под прикрытием представительских услуг руководству целесообразно также выделять отдельно такие расходы и анализировать их динамику, состав и величину. 2. объекты проверки состояния управленческого учёта при осуществлении проверки, насколько полно и объективно построена система управленческого учёта, важно определить его составляющие, а именно ключевые вопросы, которые обязательно надо проверить на наличие. следует отметить, что объектов может быть много и мало, всё зависит от первоначальных запросов руководства и детализации управленческого учёта. на мнение автора, объекты проверки состояния управленческого учёта следует разделить на 2 блока: финансовый и управленческий учёт. это можно объяснить тем, что управленческий учёт всё равно основывается на данных финансового учёта, ведь нецелесообразно использовать другой план счетов, если уже есть установленный, для целей управленческого учёта достаточно добавить отдельные аналитические счета. так, к вопросам финансового учёта можно отнести: рабочий план счетов бухгалтерского учёта, формы первичных документов, организация документооборота, перечень должностных лиц, которые имеют право подписи на первичных документах, наличие установленных предприятием перечня и состава статей калькулирования, наличие перечня установленных предприятием и состава переменных и постоянных общепроизводственных расходов, метод учёта расходов, выделение баз распределения расходов, наличие стандартов введения информации. также можно выделить такие объекты управленческого учёта: нормативная база организации и ведения управленческого учёта, организация системы внутрипроизводственного учёта, контроля и отчётности, состав и формы управленческой отчётности, своевременность предоставления управленческой отчётности руководителям, которые ответственные за принятие решений, организация бюджетирования, формирование информации о расходах по обычным видам деятельности, наличие центров ответственности, формирование информации про трансакционные издержки, наличие информации неучетного характера, ценообразование, анализ прибыльности покупателей, анализ расходов на качество, показатели качества, методы ценообразования, наличие программного обеспечения для ведения управленческого учёта, наличие сотрудника, отдела за ведение управленческого учёта, регламент сбора, обработки и хранения информации, наличие сбалансированной системы показателей, сигнальных показателей для контроля и систем оценивания и контроля отклонений от плана. таким образом, сформирован перечень объектов проверки состояния системы управленческого учета и выделены специфические объекты для гостинично-ресторанного комплекса, а именно формирование информации о трансакционных издержках, анализ прибыльности покупателей, анализ затрат на качество, показатели качества, метод трансфертного ценообразования. далее целесообразно проанализировать литературу на суть проверок управленческого учёта, этапы и основные вопросы. 3. подходы к проверке состояния управленческого учёта для обоснования объектов управленческого учета автором были проанализированы рекомендации различных ученых и экономистов-практиков по проверке состояния управленческого учета, что представлено в табл. 1. следует заметить, что не все объекты, рассмотренные ранее, можно встретить в анализе подходов, т.к. учёными не учитывается специфика предприятий гостинично-ресторанного комплекса, на которой делается акцент в данной работе. как можно увидеть, важнейшими объектами являются нормативная база ведения управленческого учета, формы управленческого учета и наличие системы показателей для анализа, и это логично. так, отражение любой хозяйственной операции должно быть обоснованным, а для этого все возможные действия и исполнители должны закрепляться в том или ином документе. если не будут разработаны формы отчетности, то где фиксировать необходимые дополнительные данные, рассчитывать показатели, освещать их анализ и прописывать выводы и предложения по дальнейшему развитию предприятия. при этом, как отмечает тютюнник в., важно не просто проверять наличие форм отчетности, а устанавливать уровень их сопоставимости, достоверность, при этом отчеты должны быть читабельными не только для тех, кто их составлял, но и непосредственно для пользователей (2013). кроме того, cima и aicpa для внутреннего контроля отдельно выделяют процедуры управления рисками для создания и сохранения стоимости бизнеса (2015), это является действительно важным, однако редко, когда проводится на предприятии. обычно большинство руководителей делают собственные предположения относительно рискованности той или иной операции на основании собственной интуиции и лишь некоторых отдельных фактов. это приводит или к возникновению лишних затрат, или к потере возможных доходов, то есть к уменьшению экономической прибыли. также волошин д. а., локтев а. в. делают акцент на стратегическом управленческом учете (2010), поэтому одним из объектов оценки эффективности системы управленческого baltic journal of economic studies 26 vol. 3, no. 4, 2017 учета является наличие стратегического плана развития системы управленческого учета, однако, по мнению автора, это не совсем целесообразно, ведь система управленческого учета полностью зависит от потребностей пользователей информации, поэтому если будут вноситься изменения в стратегический план развития непосредственно предприятия, то автоматически будет возникать потребность в дополнительных данных, которые будут определяться, и для их получения уже будет формироваться новый участок учета, однако отдельно выделять этот документ станет лишь дополнительными затратами. и важным является контроль таких вопросов, как осуществление мероприятий по проведению бенчмаркинга и соотношение выгод и затрат на функционирование системы управленческого учета, ведь, с одной стороны, нужно постоянно мониторить бизнес-среду, в которой функционирует предприятие, с другой стороны, возможна ситуация, когда существующая система управленческого учета является слишком дорогой и не добавляет выгод по сравнению с затраченными на нее средствами. необходимо добавить, что левицкая с. а. и левицкая и. а. также предлагают тесты внутреннего контроля формирования (калькуляции) затрат, где выделяют такие блоки, как условия (все ли услуги подкреплены соответствующими заключенными договорами, подписаны ли первичные документы, проверяется ли правильность отнесения сырья и материалов на расходы, понесенные при выполнении ремонтов и т.п.), реальность и полнота (сопоставляются ли данные в приходных ордерах на сырье и материалы по их фактической стоимости согласно условиям договоров, своевременно ли поступают акты оказанных услуг от подрядных организаций и т.п.), возможности (все ли условия договоров на выполнение ремонтных работ подрядными организациями согласовано компетентными должностными лицами и т.д.), компетентность (проведен ли инструктаж работников, осуществляющих различные учетные операции в автоматизированной системе учета) и учет (сопоставляются ли данные первичных документов с данными главной книги, показателями форм отчетности) (2014). такие тесты можно разработать для различных подразделений (центров ответственности) гостинично-ресторанного комплекса с сохранением и расширением этих разделов. таблица 1 анализ подходов к проверке состояния управленческого учёта объекты о лі йн ик а . а . (2 01 5) тю тю нн ик в . (2 01 3) м ещ ер як ов д . а . ( 20 14 ) в ол ош ин д . а , л ок тє в а . в . (2 00 7; 2 01 0) л ев иц ьк а с . а ., л ев иц ьк а и . а . (2 01 4) a ic pa , c im a (2 01 5) к ар по в а . (2 01 7) нормативная база системы управленческого учёта на предприятии + + + + + + + рабочий план счетов бухгалтерского учёта + + наличие распределения функций между подразделениями и сотрудниками, взаимодействия между ними, соответствия организационной структуре + + организация бюджетирования на предприятии + + + + наличие системы оценивания и контроля отклонений от плана + + система управления и организационная структура + + + направления деятельности и центры ответственности + + организация документооборота + + + + + + принципы обработки учётной информации + + + формы управленческой отчётности + + + + + + оперативность получения данных соответствующими специалистами + наличие стратегического плана развития системы управленческого учёта + наличие системы показателей для анализа + + выявление перспектив деятельности + наличие процедур управления рисками + baltic journal of economic studies 27 vol. 3, no. 4, 2017 4. проведение анкетирования итак, в дальнейшем для проверки состояния управленческого учета необходимо разработать анкету по оценке системы управленческого учета, которую будут заполнять уже непосредственно заказчики проверки, но для подтверждения того, что анкета должна включать именно такие вопросы, целесообразно привлечь экспертов, таким образом, необходимо определить минимальное количество экспертов и их состав для проведения опроса, какие участки следует проверять для установления состояния системы управленческого учета, а какие нет. как отмечает рупоносов в. л., для определения количества экспертов можно предложить зависимость между наличием объектов или элементов, оцениваемых по следующей формуле (2015): m= √n, (1) где m – необходимое количество экспертов, чел.; n – количество объектов, которые оцениваются, шт. как указано ранее, всего для проверки есть 30 объектов управленческого учета, следовательно, для заполнения анкеты необходимо 6 экспертов. при выборе экспертов была учтена специфика управленческого учета и деятельности предприятий гостинично-ресторанного комплекса. эти эксперты на каждый вопрос ставили оценку от 0 до 5 баллов. ниже представлена шкала оценивания целесообразности включения вопросов в анкету проверки состояния управленческого учёта на предприятии: 0 вопрос не касается управленческого учёта; 1 этот элемент (участок) управленческого учёта не важен для предприятий, или такая информация уже формируется в финансовом учёте в соответствии с национальными стандартами; содержание вопроса дублируется с другими вопросами; 2 данный вопрос целесообразно задавать в индивидуальных ситуациях, однако в универсальную систему управленческого учёта на предприятии этот объект можно не включать; данный вопрос можно рассматривать, однако он скорее является принципом ведения управленческого учёта, который целесообразно выполнять, а не обязательным элементом, без которого система не будет работать эффективно; 3 вопрос является важным, однако для экономии средств его можно исключить; предприятие ведёт такой учёт только по желанию, отсутствие этого элемента не повлияет на качество системы управленческого учёта; 4 вопрос целесообразно включить в анкету, однако есть сомнения относительно объективности ответа на него; 5 отмеченные элементы обязательно должны присутствовать в системе управленческого учёта. респондентам было предложено дать оценку каждому вопросу о состоянии управленческого учета, тем самым проранжировать их путем присвоения баллов (бальный метод). автором выделены разделы в анкете опроса экспертов, это сделано для понимания, для чего задано вопросы. обработка результатов осуществлялась на основе использования метода непосредственного оценивания (бального метода), т.е. упорядочения исследуемых объектов в зависимости от важности путем приписывания баллов каждому из них. при этом наиболее важный объект насчитывает наибольшее количество баллов по принятой шкале, которая отмечена выше. соответственно, по каждому вопросу были посчитаны общая сумма баллов, весомость вопроса и установлен ранг, по которому далее и отбирались вопросы в анкету. однако для понимания, насколько совпадали мнения экспертов при ранжировании вопросов, необходимо рассчитать коэффициент согласованности (коэффициент конкордации кендалла): , (2) где w – коэффициент конкордации; n – количество оцениваемых объектов; m – количество экспертов, которые принимали участие в опросе; d – дисперсия отклонения от среднего (рупоносов, 2015). таким образом, при проведении расчёта степени согласованности экспертов было определено, что коэффициент конкордации равен 0,88, что свидетельствует о высокой степени согласованности. далее была оценена значимость согласования пирсона и установлено, что 0,88 – величина не случайная, значит, полученные результаты имеют смысл и могут использоваться в исследованиях. 5. формирование анкеты оценивания состояния управленческого учёта по мнению автора, слишком много вопросов в анкете, которую будут заполнять заказчики, приведёт к тому, что её будут заполнять частично необъективно или невнимательно, потому что из проранжированных вопросов предлагается включать в анкеты первые 55 по важности. это объясняется тем, что самих объектов управленческого учёта в данной работе выделено 30 штук, поэтому если включить в анкету мало вопросов, то не удастся оценить в полной мере систему управленческого учёта, однако включение всех вопросов приведёт к неточности ответов, как было отмечено ранее. таким образом, на основании экспертного опроса сформировано следующую анкету для тестирования системы управленческого учёта на предприятии, что представлено в табл. 2. для ответа на представленные вопросы также будет предоставлена шкала оценивания от 1 до 5. следует отметить, что проходя тестирование, респонденты должны отвечать, исходя из того, есть это или нет, а baltic journal of economic studies 28 vol. 3, no. 4, 2017 таблица 2 тестирование системы управленческого учёта на предприятии № вопросы обоснование оценка 1 2 3 4 1. методическое обеспечение 1.1 присутствуют ли нормативные документы, которые регулируют организацию и ведение управленческого учёта? 1-5 1.2 есть ли положение про организационную структуру на предприятии? 1-5 1.3 утверждён ли рабочий план счетов для целей управленческого учёта? п. 5 ст. 8 закона №996-хіv 1-5 1.4 установлены ли состав и перечень статей калькулирования? приказ министерства финансов украины от 27.06.2013 № 635, п(с)бу 16 1-5 1.5 утверждён ли перечень и состав переменных и постоянных общепроизводственных расходов? приказ министерства финансов украины от 27.06.2013 № 635 1-5 1.6 утверждён ли метод учёта расходов и подходы к определению себестоимости? п(с)бу 16 1-5 1.7 организована ли система бюджетирования на предприятии? 1-5 1.9 есть ли методики оценки эффективности деятельности центров ответственности и их качества? 1-5 1.10 установлен ли регламент сбора, обработки и сохранения необходимой информации? п. 5 ст. 8 закона №996-хіv 1-5 1.11 установлены ли масштабы количественные, часовые, качественные рамки системы управленческого учёта? п. 5 ст. 8 закона №996-хіv 1-5 2. условия 2.1 все ли подразделения ведут бухгалтерский учёт? п. 5 ст. 8 закона №996-хіv 1-5 2.2 выделены ли центры ответственности? 1-5 2.4 проверяется ли правильность отнесения сырья и материалов, услуг к расходам? п(с)бу 16 1-5 2.5 все ли услуги подкреплены соответствующими подписанными договорами? 1-5 3. реальность и полнота 3.1 все ли операции зафиксированы в документах? ст. 9 закона №996-хіv 1-5 3.2 есть ли подтверждение целесообразности возникновения всех трансакционных затрат? 1-5 3.3 сопоставляются ли данные в приходных ордерах на сырьё и материалы, в актах приёмки-передачи работ, услуг с их фактической стоимостью по условиям договора? 1-5 3.4 своевременно ли доходят документы от сторонних организаций? ст. 9 закона №996-хіv 1-5 4. полномочия 4.1 утверждён ли перечень должностей лиц, которые имеют право подписи на первичных документах? 1-5 4.2 утверждены ли ответственные по каждому центру ответственности? 1-5 не из предположения, что в этой информации субъект хозяйствования не нуждается. итак, рекомендации по оцениванию ответов на анкету проверки состояния управленческого учёта на предприятии следующие: 1 на данный вопрос можно ответить «нет», т.е. указанное в вопросе отсутствует в существующей системе управленческого учёта; 2 присутствуют только отдельные документы или только в некоторых случаях такая система используется; 3 база для использования данного элемента есть, но не используется; 4 данный элемент присутствует или используется, но есть аспекты, которые необходимо усовершенствовать; 5 на данный вопрос можно ответить «да», т.е. такое полностью разработано, присутствует и используется в системе управленческого учёта. необходимо отметить, что на отдельные вопросы можно ответить только либо «да», либо «нет», это только облегчает оценки и увеличивает его объbaltic journal of economic studies 29 vol. 3, no. 4, 2017 1 2 3 4 4.3 все ли условия договоров на выполнение работ сторонними организациями согласованы компетентными должностными лицами? 1-5 4.5 созданы ли условия для разграничения ответственности относительно достижения цели между подразделениями? 1-5 5. компетентность 5.1 утверждён ли состав учётных сотрудников и их полномочия? 1-5 5.2 проходят ли обучение учётные сотрудники? 1-5 6. учёт 6.1 утверждены ли формы первичных документов? ст. 9 закона №996-хіv, приказ министерства финансов украины от 24.05.1995 №88 1-5 6.2 разработан ли график документооборота? 1-5 6.3 разработаны ли формы управленческой отчётности? п. 5 ст. 8 закона №996-хіv 1-5 6.4 утверждён ли состав управленческой отчётности? 1-5 6.5 утверждены ли формы бюджетов, которые составляются на разных уровнях управления? 1-5 6.6 утверждена ли периодичность составления бюджетов? 1-5 6.8 формируется ли информация неучетного характера? 1-5 6.9 выделены ли места возникновения затрат? 1-5 6.10 утверждена ли база распределения расходов? п(с)бу 16 1-5 6.11 осуществляется ли трансфертное ценообразование? 1-5 6.12 сопоставляются ли данные первичных документов и управленческой отчётности? 1-5 6.13 утверждены ли стандарты ведения отчётности? 1-5 6.16 формируется ли информация относительно возникновения трансакционных затрат? 1-5 7. анализ 7.1 проводится ли бенчмаркинг? 1-5 7.2 утверждены ли методы ценообразования? 1-5 7.3 проводится ли анализ прибыльности покупателей? 1-5 7.4 формируются и анализируются ли расходы на качество? 1-5 7.5 используется ли сбалансированная система показателей? 1-5 7.6 выделяются ли сигнальные показатели деятельности по центрам ответственности? 1-5 7.8 анализируются ли отклонения от запланированных показателей? 1-5 7.9 анализируется ли эффективность деятельности предприятия? 1-5 7.10 формулируются ли тенденции развития предприятия? 1-5 7.11 выделяются ли резервы повышения эффективности деятельности? 1-5 7.12 анализируются ли риски предприятия при осуществлении той или иной деятельности? 1-5 8. конфиденциальность 8.1 проинструктурированы ли сотрудники относительно конфиденциальности информации? 1-5 8.2 поддерживается ли конфиденциальность информации? 1-5 9. эффективность 9.1 своевременно ли предоставляется управленческая отчётность руководителям, которые ответственные за принятие решений? 1-5 9.2 сопоставляются ли расходы на организацию управленческого учёта с выгодами от её наличия? 1-5 9.5 удовлетворяет ли система управленческого учёта нужды пользователей? 1-5 9.6 есть ли потребность или целесообразность во внесение изменений в существующую систему управленческого учёта? 1-5 9.7 есть ли параметры качества системы управленческого учёта? 1-5 окончание таблицы 2 baltic journal of economic studies 30 vol. 3, no. 4, 2017 ективность. руководство самостоятельно решает, кому отвечать на представленную анкету, однако целесообразно, чтобы это делал руководитель отдела по ведению управленческого учёта, то есть человек, который понимает, каким образом организован учет на предприятии. после этого оцениваются результаты тестирования путем расчета среднего значения. по мнению автора, рассчитывать итоговый интегральный показатель нецелесообразно, так как возможна ситуация, когда нескольких участков может вообще не быть, а на показателе это почти не отразится за счет максимально организованного учета на других участках. при расчете же среднего значения будет сразу понятно, что чего-то не хватает. автором разработана такая шкала оценивания результатов тестирования проверки состояния управленческого учёта на предприятии: 4,5-5,0 – система управленческого учёта на достаточном уровне и требует лишь некоторых усовершенствований или изменений, которые связаны с запросами руководства; 4,0-4,99 – система управленческого учёта может использоваться в таком состоянии, однако нуждается в усовершенствованиях и дополнениях для улучшения информационного обеспечения, если недостающая информация нужна для пользователей, в ином случае систему продолжают использовать без изменений; 3,0-3,99 – система управленческого учёта не охватывает все вопросы, поэтому всё зависит от запросов руководства, если их недостающая информация не интересует, то можно оставить всё, как есть, в ином случае вносить коррективы в существующую систему; 2,0-2,99 – организованы только отдельные участки управленческого учёта, что является недостаточным для формирования информационной базы для принятия управленческих решений, много вопросов не охвачено совсем; 1,0-1,99 – присутствуют только отдельные аспекты управленческого учёта, однако сама система выгод не предоставляет; система управленческого учёта отсутствует на предприятии. 6. выводы таким образом, проведение такого анкетирования дает понять, на каком уровне организована система управленческого учета, и что надо отдельные участки совершенствовать и добавлять. ее целесообразно использовать на предприятиях, которые уже работают некоторое время, т.к. должна быть база для проверки. также следует отметить, что такую анкету со шкалами оценивания можно использовать не только на предприятиях гостинично-ресторанного комплекса, а и на других, т.к. расходы на качество, трансакционные расходы и т.п. касаются многих предприятий. однако такой способ проверки не даёт ответов, правильно ли ведётся учёт, т.к. суть процедуры в проверке, всё ли есть в наличии и насколько скоординировано, чтобы удовлетворять информационные потребности и не допускать утечки информации, при этом не анализируется качество ведения управленческого учёта, что является направлением дальнейших исследований. references: olijny`k, o. o. (2015). management audit: theoretic aspects and features of development in ukraine. bulletin of the national university of water management and nature management, 1: 104-110. tyutyunny`k, v. (2013). management accounting as an important element of activity. independent auditor, 3: 46-48. mescheryakov, d. a. (2014). management audit: mechanisms of organization and optimization. theory and practice of social development, 16: 94-97. voloshin, d. a. & loktev, a. v. (2010). improvement of management accounting system. doi http://www.cfin.ru/ management/controlling/mas_improvement.shtml voloshin, d. a. (2007). internal audit of management accounting at the enterprise. management accounting and analysis, 19: 52-57. levy`cz`ka, s. o. & levy`cz`ka, i. o. (2014). management audit as a tool of optimization of the costs of energy supply companies. scientific-practical edition «independent auditor», 9: 29-38. global management accounting principles by aicpa and cima (2015) doi: http://www.cimaglobal.com/ documents/employer%20docs/web%20pages%202016/global-management-accounting-principles.pdf karpov, a. (2017) analysis (audit) of management accounting system and statement doi: http://bud-tech.ru/ ma_analyze.html ruponosov, v. l. (2015). methods for determining the number of experts. bulletin of irgtu, 3: 286-292. baltic journal of economic studies 31 vol. 3, no. 4, 2017 яна волковская проверка состояния управленческого учёта на предприятии аннотация. сейчас руководители предприятий поняли, что управленческий учёт имеет важное значение для принятия управленческий решений. особое значение он имеет того, когда предприятия из-за специфики деятельности и оптимизации налогообложения состоят из нескольких субъектов хозяйствования, например, гостинично-ресторанные комплексы. однако может быть ситуация, когда управленческий учёт на предприятии есть, но нужной информации руководство не получает или же в недостаточном количестве. тогда возникает необходимость проверки состояния управленческого учёта. аудит управленческого учёта требует больших затрат и времени, поэтому возникает необходимость в более дешёвых способах определения состояния управленческого учёта. это подтверждает актуальность данного исследования. целью работы является формирование процедуры проверки состояния управленческого учёта на предприятии. для достижения цели был использован метод экспертных оценок. в первую очередь, автором были выделены объекты проверки состояния управленческого учёта для понимания, на чём именно акцентировать внимание, при этом объекты были разделены по отношению к финансовому и управленческому учёту, т.к. управленческий учёт включает в себя также и данные финансового учёта, которые в том числе важны для управления. далее автор проанализировал основные подходы к проверке состояния управленческого учёта и как их можно использовать на предприятиях гостинично-ресторанного комплекса путём выделения основных пунктов и их сравнения. таким образом, автор на основе проведенного анализа сформировал возможные вопросы по оценке состояния управленческого учёта, которые оценивались экспертами на основании шкалы, предложенной автором. оценки экспертов были обработаны автором и проранжированы. данная процедура осуществлялась бальным методом. результатом стала анкета оценки состояния управленческого учёта на предприятии с выделением различных аспектов учёта для учёта разных вопросов. также автором разработаны рекомендации по ответам на анкету и шкала оценивания анкеты, которая позволяет сделать вывод относительно полноты системы управленческого учёта. следует отметить, что хоть анкета и разрабатывалась на примере предприятий гостинично-ресторанного комплекса, но носит универсальный характер и может использоваться и в других отраслях, а также при желании дополняться вопросами, т.к. в дальнейшем для оценивания берётся среднее значение. это увеличивает практическую ценность предложенного анкетирования. сделан вывод, что данная процедура проверки состояния управленческого учёта на предприятии помогает понять, какие вопросы охватывает существующая система управленческого учёта и в какой степени. однако данный подход не даёт ответов, правильно ли ведётся учёт, т.к. суть процедуры в проверки наполняемости системы, её организованности, конфиденциальности, а не проверки качества ведения управленческого учёта, что является направлением дальнейших исследований. baltic journal of economic studies 1 vol. 3, no. 4, 2017 factors of labour productivity grow th in agriculture of the agrarian region anatoly babenko1 university of customs and finance, ukraine olena vasilyeva2 zaporozhye national technical university, ukraine abstract. the aim of the article is to study the conceptual provisions of the essence of labour productivity in agriculture in order to determine the factors and conditions for its growth at the present stage of economic development. methods. the theoretical and methodological bases of research are the works of classical and modern economic science concerning labour productivity and human capital. with the aim of concretizing the conceptual and categorical apparatus, the dialectical and abstract-logical methods were used; a monographic method was used during covering the views of scientists on the investigated problem; for the analysis of labour productivity trends, the method of comparative analysis and the graphical method were used. results. the conditions of agricultural production management in an agrarian region are characterized. factors of labour productivity growth in agriculture are determined. it is established that the main reserves of increasing labour productivity consist of reducing labour costs for the production of agricultural products. in turn, the reduction of labour costs is caused by the use of new equipment and new technologies, progressive forms of labour organization, improvement of the system of material incentives for labour. practical significance. the realization of proposals and recommendations concerning the formation and development of human capital for agricultural production, optimization of production resources, strengthening of labour motivation will provide an opportunity to increase the labour activity of personnel, the volume of agricultural production. relevance/originality. further development of research results allows us to collect an empirical, multifactorial model of labour productivity growth in agricultural production. key words: labour, labour productivity, factors, workforce, compensation, agriculture. jel classification: d24, e24, j43, r23 corresponding author: 1 department of labour economics and socio-labour relations, university of customs and finance. e-mail: babenko.akademik@ukr.net 2 department of personnel management and labour economics, zaporozhye national technical university. e-mail: olena.vasilyeva@gmail.com 1. introduction development of agriculture is especially relevant today as the increase in output of agricultural products ensures socio-economic progress of society, poverty reduction, solution for the food security problem both at the regional and global levels. favourable climatic conditions for the agriculture, fertile soils, geographic position of ukraine, considerable agroindustrial potential open wide prospects for the sustainable economic development of the country, which can be achieved at the expense of increasing efficiency of agricultural production based on the increase of labour efficiency. one of the important issues of the economy of agriculture is production ramp-up at the expense of effective use of labour. labour productivity in agriculture is a multicomponent system that is influenced by a number of factors and is an integral indicator of the degree of development of technology, labour organization, and a high level of labour productivity provides an improvement in the quality of life of the rural population and an increase in wages. it is a human factor, which is associated with categories “labour” and “human capital” that serves as deciding factor in the economic growth. despite the considerable amount of scientific research on increasing the efficiency of labour use in agriculture, the identification of reserves of labour productivity growth in the conditions of the interaction of technological and economic-organizational peculiarities of agricultural production with natural-biological laws of nature remains relevant. issues of labour productivity are considered in works of d. boginya, v. vitvitskii, v. gorkavyi, v. diesperov, e. libanova, p. makarenko, t. oleinik, m. proka, d. sink, s. strumilin, and many others, however, in terms of the ever-changing political and economic environment of the agrarian sector, many problems remain unresolved. baltic journal of economic studies 2 vol. 3, no. 4, 2017 2. the theoretical basis of labour productivity management in agriculture the main source of social wealth in the production of material goods is labour. the category of “labour” has been studied by many economists both in the classical economic school and in modernity. k. marx wrote: “labour is, first of all, a process between man and nature, a process by which man by his own activity mediates, regulates, and controls the metabolism between himself and nature” (marks, 1960). a fairly detailed definition of the category “labour”, in our opinion, is quoted in the economic dictionary by professor s.v. mochernyiy: labour is considered as “the process of conscious expedient activity of people, in which they modify the external nature, mediate, regulate, and control the metabolism between themselves and simultaneously change their own nature” (mochernyiy, 1995). in the monograph edited by d.p. boginya, the labour process is seen as a means of creating material and spiritual goods, and increasing the welfare of the population is determined by the effectiveness of the aggregate labour of representatives of material production and nonproductive sphere (boginya, 1990). in the process of labour, man creates various products: both for personal consumption, and as raw materials for the production of other products, means of labour. thus, the more fruitful, more efficiently labour is used, the higher the productivity, the more the aggregate social product is created (aydamirov, 2016). labour in the field of agriculture has a specific feature: the objects of labour are living organisms (plants and animals) under the influence of natural and climatic conditions; the operation of labour on them is limited by certain biological laws. the work of the same qualification and capital-labour ratio can lead to different results depending on the natural conditions. thus, the results of labour in agriculture are determined both by natural (soil-climatic and biological) and economic processes. working time is a measure of the costs of labour, the amount of the product created is the result of the labour process. economic category “labour productivity” determines the degree of fruitfulness, the ability of a particular labour force to produce use values, and perform useful work. labour productivity in the economy, which can be compared with the efficiency in technology (reflects the perfection of machines, the degree of energy use), characterizes the ability of labour to produce the necessary products, this is a kind of coefficient of efficiency of labour. the essence of labour productivity lies in the ability of a particular labour to produce a certain quantity of output per unit of time. labour productivity is the ratio of the labour results to its costs per employee per unit of working time, as calculated by the system of indicators. mathematically, this can be described as the ratio of the volume of output or work in kind to the cost of working time per unit of output or unit of work. in accordance with this ratio, an increase in labour productivity is possible either on condition of an increase in the volume of output or work or under the condition of a reduction in the expenditure of working time. the effect is multiplied if both conditions simultaneously act, and the calculation of labour productivity takes into account both the amount of output produced and labour costs. labour productivity is organically linked to important economic categories: the volume of production, cost, price, profitability, payment and motivation of work, technical equipment of labour, working day duration, labour organization, the efficiency of the use of productive assets. in agriculture, a significant role is played by the natural factor: more favourable soil and climatic conditions not only ensure the cultivation of various crops and breeding of certain types of livestock but also determine the so-called “natural labour productivity” (aydamirov, 2016). the growth of the capital-labour ratio of labour has a significant impact on increasing labour productivity: an increase in basic production assets raises the level of mechanization and automation of production, leads to a reduction in manual labour and an increase in the qualification level of workers. important criteria for technical progress in agricultural production are an effective use of land and livestock, since living labour and the means of production are applied to land and livestock, and their rational use raises the importance of all factors of production. it is technological progress that increases the productivity of living labour, leads to a saving of working time and growth in agricultural production, an increase in net and gross income. 3. modern trends and objective conditions for the development of agriculture in the agro-oriented region one of the most important branches of the economy of the zaporizhzhia region is agriculture, which forms the bulk of food resources and nearly three-quarters of retail commodity turnover. the level of development of the region’s agriculture determines the provision of the population of the region with food and industry – with raw materials. zaporizhzhia region occupies a favourable economic and geographical position: it is located in the south of the east european plain. the territory of the region is 4.5% of the territory of ukraine, favourable for the development of the agricultural sector in the region is the presence of chernozem soils (75% of the total area of the region). sown areas of agricultural crops in the zaporizhzhia region make up 6% of the sown areas of ukraine. in 2016, in the zaporizhzhia region, wheat was produced 6.6% of all volumes of ukraine. labour productivity in the agricultural sector in the region in 2016 was only 78% of baltic journal of economic studies 3 vol. 3, no. 4, 2017 the average for ukraine. the existing resource potential of the region’s agriculture, based on high-productive agricultural lands, favourable climatic conditions, opens prospects for increasing the volume of agricultural production, increasing production efficiency on the basis of productivity growth. the dynamics of the land and resource potential of the zaporizhzhia region is presented in table 1. analysis of the dynamics of the region’s land and resource potential indicates its strengthening over the past five years: the sown area has increased, positive dynamics of gross agricultural output can be observed, and labour productivity has increased. reform of property relations and transformation of economic relations in the agrarian sphere of ukraine led to the emergence of new forms of management based on private ownership of the means of production. on the territory of the region in 2016, there are 2790 enterprises engaged in agricultural production, which are mainly represented by farms – 73.3% (table 2). over the past five years, the structure of business entities in the agricultural sector has practically not changed, and their number has slightly decreased – by 5.6%. in other words, in the agrarian sector, the processes of reforming production relations are continuing, as well as the search for the most competitive and effective organizational and legal forms of management. the transition of agricultural land to private ownership led to small-scale production and inefficient use of land. among agricultural enterprises, there is a significant stratification in terms of land use. the majority of operating agricultural enterprises mainly occupied an insignificant area: 48.6% of enterprises – up to 50  hectares, 19.0% – from 101 to 500 hectares, only 0.2% of enterprises had a land area of more than 10,000 hectares (vasilyeva, 2016). the level of agricultural production, the yield of agricultural crops, and the productivity of arable land are determined by the optimal scientifically grounded structure of cultivated areas. agriculture in the agrarianoriented region of the steppe zone of ukraine specializes in growing grain and oilseeds. in the structure of sown areas, in the last years, it is occupied mainly by cereals, the specific weight of which varies within the limits of 58%; sunflower occupies 33% on average. for the “black fallow”, which ensures the accumulation of moisture in the soil before the sowing of winter wheat in the steppe zone, it is advisable to allot 15–20% of the land, but this rate has not been maintained recently, and is about 6%, while in 2000 the area of naked fallows of the region occupied 19.5%. the main reserve for increasing the yield and production volumes is the rational use of mineral and table 1 the dynamics of the land and resource potential of the zaporizhzhia region indicators 2012 2013 2014 2015 2016 deviation of 2016 to 2012 (+,-) area of agricultural land, thousand hectares 2133,0 2242,1 2241,8 2129,5 2127,1 -5,9 including arable land 1886,0 1904,0 1882,2 1881,9 1880,9 -5,1 sown area, thousand hectares 1589,8 1625,7 1625,2 1623,9 1630,2 40,4 gross agricultural output, million uah 7083,2 9523,3 9203,9 10055,7 9928,0 2844,8 index of plough-disturbance 0,88 0,85 0,85 0,88 0,88 0 gross output per 100 hectares of land, thousand uah 332,1 424,7 410,6 472,2 466,7 134,6 productivity per employee, thousand uah 102,8 147,4 145,1 172,0 215,7 112,9 table 2 operating entities in agriculture in the zaporizhzhia region business entities 2012 2013 2014 2015 2016 number % of the total number % of the total number % of the total number % of the total number % of the total total 2957 100,0 2930 100,0 2912 100,0 2745 100,0 2790 100,0 companies 463 15,7 477 16,3 493 16,9 418 15,2 458 16,4 private companies 246 8,3 243 8,3 240 8,2 208 7,6 210 7,5 production cooperatives 38 1,3 37 1,2 35 1,2 35 1,3 34 1,2 farms 2088 70,6 2091 71,4 2067 71,0 2041 74,4 2046 73,3 state-owned enterprises 24 0,8 21 0,7 23 0,8 17 0,6 17 0,6 enterprises of other forms of management 98 3,3 61 2,1 54 1,9 26 0,9 25 0,9 baltic journal of economic studies 4 vol. 3, no. 4, 2017 organic fertilizers, which contributes to the creation of a fertile soil layer, provides a balance of humus in the soil, and improves the quality of products. over the financial difficulties for many agricultural producers, mineral fertilizers became difficult to access, and the reduction in the output of livestock products limited the use of organic fertilizers (table 3). table 3 dynamics of the use of fertilizers for crops in the zaporizhzhia region years mineral fertilizers (nutrients) organic fertilizers, t/hakg/ha % by 2012 2012 49 100,0 0,7 2013 46 93,9 0,6 2014 48 98,0 0,4 2015 44 89,8 0,4 2016 63 128,6 0,3 organic fertilizers are introduced in scanty doses, while at least 10 tons of organic fertilizers per 1 hectare of the sown area are needed annually to suspend dehumidification processes. analysis of the positive dynamics of agricultural production per capita indicates that the region’s natural and resource potential allows satisfying the population’s needs for basic food products through local production, but the low level of income of the region’s population has led to a decrease in consumption of the most important food products (table 4). one of the factors of the efficiency of agricultural production is the technical potential. specificity of agricultural production in the zaporizhzhia region, specializing in grain production, involves the use of tractors and combine harvesters, the number of which per 1000 hectares of arable land is decreasing, which leads to an increase in the load per unit of machinery and may adversely affect the harvesting time (table 5). the main reasons for the crisis in the material and technical base are a decrease in solvent demand for agricultural machinery, insufficient investment in agriculture, unfavourable credit conditions, and a minimum level of state support for the agro-industrial complex. in our opinion, an increase in the load per unit of technology presupposes an organization of agricultural production, in which it is used as efficiently as possible. one of the ways to overcome these problems is to use financial leasing or partial compensation of interest rates on loans for the purchase of equipment. 4. factors of labour productivity growth an important task of studying the problems of labour productivity is to determine and analyse the causes of its changes, determine the factors and reserves for its growth. the term “factor” reflects the most general definition that affects labour productivity. the authors of the monograph “povyshenie proizvoditelnosti selskohoziaistvennogo truda” (“increase in agricultural table 4 consumption of the most important food products (per capita per year, kg) foodstuffs 2012 2013 2014 2015 2016 deviation of 2016 to 2012, (+,-) meat and meat products 54,4 54,6 54,9 51,6 51,0 -3,4 milk and dairy products 185,1 190,1 194,6 186,4 181,9 -3,2 eggs (pieces) 311 309 309 291 265 -46 bread products 102,9 104,2 103,0 101,8 96,2 -6,7 potato 112,3 101,1 110,1 104,1 107,2 -5,1 vegetables and cucurbits crops 172,4 174,5 174,8 173,7 167,7 -4,7 fruits, berries and grapes 50,6 52,0 47,9 46,5 46,1 -4,5 fish and fish products 14,1 14,4 11,5 9,3 10,3 -3,8 sugar 67,8 63,1 63,8 65,3 61,8 -6 sunflower oil 12,3 12,5 12,5 11,7 11,6 -0,7 table 5 availability of basic types of agricultural machinery type of material and technical resource 2012 2013 2014 2015 2016 deviation of 2016 to 2012, (+,-) tractors, units 8276 8191 8089 7901 8160 -116 per 1000 ha of arable land 6,6 6,6 6,5 4,2 4,3 -2,3 load per tractor, ha 151,6 152,6 153,8 238,1 232,6 81 combine harvesters, units 1998 1928 1912 1930 2034 36 per 1000 ha of crop area of cereals (without corn) 2,85 2,3 2,3 2,1 2,3 -0,55 load per 1 harvester, ha 350,4 434,8 437,7 476,2 434,8 84,4 baltic journal of economic studies 5 vol. 3, no. 4, 2017 labour productivity”) provide a fairly comprehensive definition of labour productivity factors. they include “material and technical, organizational and socioeconomic characteristics of social production, which actively influence the labour process and determine its effectiveness” (mashenkov, 1983). complexity and intensity of factors on the dynamics of labour productivity are caused by social incentives, numerous forms of social and labour relations: the system of labour remuneration, economic incentives, moral encouragement, and administrative influence. thus, in relation to the factors, the stimuli act as control levers (gilitskiy, 1982). k. marx in his work “value, price and profit” describes in detail the factors of growth in labour productivity and the conditions for their action: “apart from the different natural energies and acquired working abilities of different peoples, the productive powers of labour must principally depend: 1) upon the natural conditions of labour, such as fertility of soil, availability of necessary resources; 2) upon the progressive improvement of the social powers of labour, such as are derived from production on a grand scale, concentration of capital and combination of labour, subdivision of labour, machinery, improved methods, appliance of chemical and other natural agencies, shortening of time and space by means of communication and transport, and every other contrivance by which science presses natural agencies into the service of labour, and by which the social or co-operative character of labour is developed” (mashenkov, 1983). k.i. gurtskaya (gurtskaya, 1986) distinguishes three groups of factors: 1) increasing the level of production industrialization based on the achievements of scientific and technological advance; 2) improvement of technology, social organization of agricultural production and remuneration of labour; 3) increasing the culture of farming, economic fertility of soils, improving plant varieties and animal breeds, increasing their productivity, and intensive use of all natural conditions of agricultural production. in our opinion, the grouping of factors for increasing labour productivity in agriculture requires the definition of clear criteria for attributes of belonging to a particular group of factors. thus, the classification of a.p. vorontsov combines the factors into three groups, characterizing: the technical level of production, the efficiency of land use, and the efficiency of the use of labour resources (vorontsov, 1973). ya. maryahin unites the factors in the following three groups: the first group describes the technical re-equipment and the achievements of scientific and technical progress, the second – reflects the state of the organization of production and labour, the third one – personal reasons (maryahin, 1983). to identify factors that directly affect the level of labour productivity, it is first of all necessary to find the phenomena determining the quality and degree of using individual elements of the production process (means of production and labour), as well as phenomena characterizing the effectiveness of their interaction (gilitskiy, 1982). one of the important factors for the expanded reproduction in agriculture is an increase in the motivation of agricultural labour. the wages of agricultural workers during the last several decades remain the lowest in the sphere of material production. effective reproduction of the labour resources of the agrarian sector requires effective measures of the state to support agricultural producers, pricing regulation, resuscitation and development of the social infrastructure of the village. 5. conclusion strategic management of labour productivity increase in market conditions requires the development and implementation of targeted programs for managing labour productivity, which provides for increasing the level of labour use, stimulating labour, and reducing production losses. we believe that when studying the factors of labour productivity growth in the region, it is necessary to use an integrated system approach that takes into account the degree of connection between them. this will allow most fully reflect the nature of the impact of all circumstances that cause changes in labour productivity, minimizing negative factors, and finding the most optimal ways to increase it. references: marks k. (1960). kapital. t. 23, 907 p. aydamirov kh. (2016). methods of assessment and growth factors of productivity. vestnik chgu. ekonomicheskie nauki. boginya d. (1990). aktivizatsiya chelovecheskogo faktora i effektivnost truda – kiev, naukova dumka, 284 p. vorontsov a. (1973). samoe vazhnoe, samoe glavnoe (o proizvoditelnosti truda v selskom hozyaystve) – moskva, kolos, 95 p. gilitskiy f. (1982). proizvoditelnost truda i faktoryi ee rosta – minsk, nauka i tehnika, 128 р. gluhov a. (1963). o proizvoditelnosti truda v selskom hozyaystve – moskva, gosudarstvennoe izdatelstvo «vyisshaya shkola», 106 p. baltic journal of economic studies 6 vol. 3, no. 4, 2017 gurtskaya k. (1986). prevraschenie selskohozyaystvennogo truda v raznovidnost industrialnogo moskva, agropromizdat, 124 p. mashenkov v. (1974). proizvoditelnost truda v selskom hozyaystve – moskva, kolos, 224 p. maryahin g. (1983). proizvoditelnost truda v selskom hozyaystve: faktornyiy analyiz i prognozirovanie – moskva, ekonomika, 168 p. mochernyiy (1995). ekonomichniy slovnik-dovidnik – kyiv, femina, 368 p. vasilyeva o. (2016). suchasni tendentsiyi ta ob’ektivni umovi rozvitku agrarnogo sektoru. visnik agrarnoyi nauki prichornomor'ya, issue 1, p. 29-41. анатолий бабенко, елена васильева факторы роста производительности труда в сельском хозяйстве агроориентированного региона аннотация. целью работы является исследование концептуальных положений сути производительности труда в сельском хозяйстве для определения факторов и условий её роста на современном этапе развития экономики. методика. теоретическую и методологическую базы исследования составляют труды классической и современной экономической науки, касающиеся производительности труда и человеческого капитала. с целью конкретизации понятийно-категориального аппарата использованы диалектический и абстрактно-логический методы, при освещении взглядов ученых на исследуемую проблему применялся монографический метод, для анализа тенденций производительности труда – метод сравнительного анализа и графический метод. результаты. охарактеризованы условия ведения сельскохозяйственного производства в агроориентированном регионе. определены факторы роста производительности труда в сельском хозяйстве. установлено, что основные резервы повышения производительности труда состоят в сокращении затрат труда на производство сельскохозяйственной продукции. в свою очередь, сокращение затрат труда обусловлено применением новой техники и новейших технологий, прогрессивных форм организации труда, усовершенствованием системы материального стимулирования труда. практическое значение. реализация предложений и рекомендаций, касающихся формирования и развития человеческого капитала для аграрного производства, оптимизации производственных ресурсов, усиления трудовой мотивации даст возможность повысить трудовую активность персонала, объемы производства сельскохозяйственной продукции. значение/оригинальность. дальнейшее развитие результатов исследования позволит построить эмпирическую многофакторную модель роста производительности труда в сельскохозяйственном производстве. baltic journal of economic studies 137 vol. 1, 2015 state regulation of franchising in the eu member countries solomiya ohinok1, ivan franko national university of lviv, ukraine abstract. in despite of extensive research of franchising in the scientific community, there are a lot of unresolved issues relating to franchising, in particular its regulation at the national level and at the level of the european union that is why the purpose of the paper is to summarise and present the difference between state regulation of franchising in the eu member states and to research the basic principles of state regulation of franchising in the eu also to analyze legislation of the franchise relationship. methodology. the survey is based on a comparison of data from all eu member countries and analisis of the legal framework of each country in particular and in general eu legislation. the article is devoted to a detailed analysis of main features of the franchise business in europe. the mechanism of implementation of franchise relations between eu member states are studied. government regulation of franchising in the eu member states are investigated. the rate of growth of franchising in europe are analized. results. by comparing different state laws and regulations of franchising we have identified the most effective and productive. we divided counties into two groups due to their regulation of franchising: countries which do not have a special government regulation of franchising; the countries which have state regulation of franchising; countries which have government regulation of franchising and it is governed by eu law, countries in which regulation is carried out in accordance with eu law. thus, results of the survey showed that government regulation of franchising, as well as its regulation at the level of eu institutions have a positive impact on the development of franchising relationships. practical implications of the results of the paper will help to develop well known network of franchise bussiness without legislative interference. value/originality. it is first time we have grouped countries due to the main aspects of state regulation of franchising. key words: franchising, european business, international economic relations, european market, state regulation. jel classification: m20, f5, k29 1. введение франчайзинг признан в мире, как наиболее прогрессивная форма ведения бизнеса (yalovoy, g., 2013). привлекательность франчайзинга определяется, прежде всего, его прозрачностью и комплексным характером. такая стратегия ведения бизнеса предоставляет большие перспективы, поскольку позволяет привлекать иностранные инвестиции из различных стран для развития одной отрасли, а также внедрять высокие стандарты. государственное регулирование франчайзинга в странах ес достаточно разнообразное и мало исследованно, поэтому требует дальнейшего анализа и рассмотрения, что даст новые перспективы для его развития. учитывая большую популярность франчайзинга в европе и мире, он является достаточно исследуемой темой. среди ученых, занимавшихся анализом франчайзинга, отметим таких с.  сосна, е.  васильева, а.  городова, р.  гамельтон, и.  дахно, д.  хайфилд, м.  мендельсон, д.  стэнфорд, б.  смит, н.  широбокова, в.  шкромада, д.  балде, е.  кошелев, в.  денисюк, е. легенда, г. цират, л. цимбал, г. андрощук, в. суховатый, в. ляшенко. несмотря на широкие исследования франчайзинга в научных кругах, существует достаточно много нерешенных вопросов, касающихся сферы франчайзинга, в частности его регулирования на государственном уровне в странах-членах ес. 2. роль франчайзинга в европе высокая популярность и значительная распространенность франчайзинга определяется тем, что он предоставляет реальные возможности для развития сети сбыта товаров как на национальных рынках, так и на зарубежных, привлекая относительно небольшие средства, а главное за небольшой промежуток времени. роль франчайзинга в европе растет с каждым годом, ведь на базе единого европейского рынка страны-члены ес получили значительные преимущества, связанные с активизацией международного производства и стимулирования деятельности крупных и малых компаний. corresponding author 1 department of international economic relations, ivan franko national university of lviv, ukraine e-mail: ohinok.solomiya@gmail.com baltic journal of economic studies 138 vol. 1, 2015 20,00 40,00 60,00 80,00 100,00 120,00 140,00 160,00 источник: составлено автором на основе данных (the european franchise federation, 2015) рис. 1. темпы роста франчайзинга в странах-членах ес распространению франчайзинга как инструмента увеличения количества сетей сбыта товаров способствует обретения страной членства в ес, ведь именно так перед национальными фирмами открываются широкие возможности вхождения на крупные и небольшие иностранные рынки. сегодня европейский франчайзинг развивается постепенно и непрерывно, по данным международной федерации франчайзинга европейские франчайзеры занимали 31% мирового рынка в 2013 году (the european franchise federation, 2015). наиболее привлекательными для развития франчайзинга являются страны центральной и юго-восточной европы, среди них польша, чехия и венгрия. интересно, что среди стран центральной и восточной европы лидером по количеству франчайзинговых брендов есть именно польша. после вступления польши в европейский союз ее возможности по развитию собственных предприятий с помощью франчайзинга стали значительно больше. вместе со вступлением в ес перед польскими франчайзинговым сетями открылись широкие возможности выхода на зарубежные рынки и сбыта собственной продукции на территории общего рынка (“report on franchising in poland,” 2015). распространению франчайзинга в польше, болгарии, румынии, венгрии и чешской республике способствует либерализация их экономик, в связи с вступлением в ес и интеграция в организованную коммерческую систему европейского рынка. эти страны являются очень популярными для иностранных инвесторов в связи с высоко-квалифицированной рабочей силой, существенным ростом рыночного спроса и приемлемыми ценами на рекламу и недвижимость. на рынках стран центральной и юго-восточной европы существует большая конкуренция между американскими и западно-европейскими сетями, так как первые обладают широко-известными марками и хорошей репутацией, а вторые хорошо знакомы с рынком и потребительским спросом. 3. государственное регулирование франчайзинга однако рынок франчайзинга в некоторых странах является весьма ограниченным, прежде всего это касается нехватки внутреннего капитала и отсутствия адекватной законодательной базы. существует ряд стран, которые имеют совершенное государственное регулирование франчайзинговой деятельности, но большинство стран европы его не имеют или оно уже долгое время находится на стадии разработки. предлагаем рассмотреть это более подробно. разделим страны на следующие группы: • страны, которые не имеют отдельного государственного регулирования франчайзинга; • страны, в которых франчайзинг регулируется на государственном уровне; • страны, которые имеют государственное регулирование франчайзинга, а также он регулируется правом ес. • страны, в которых государственное регулирование осуществляется в соответствии с правом ес. к первой группе стран относятся: португалия, швейцария, чехия и греция. однако, осуществлять франчайзинговые отношения их участники должны действовать в соответствии с нормами гражданского кодекса, законов об интеллектуальной собственности и налогообложения. чешская республика греция португалия швейцария кол-во франчайзеров 90 430 489 180 0 100 200 300 400 500 600 і група стран источник-составлено автором на основе данных (top 500 franchises in europe, 2015) рис. 2. страны, не имеющие отдельного государственного регулирования франчайзинга ко второй группе относятся великобритания, бельгия, италия и норвегия. в великобритании франчайзинговые отношения регулируются договорным правом. в бельгии франчайзинг регулируется в соответствии с государственным актом, 2005 года (the 2005 disclosure act). в италии с 2004 года существует отдельный закон, которым регулируются франчайзинговые отношения, а также указам министерства экономического развития италии, с 2005 года. в норвегии регулирования франчайзинга осуществляется антимонопольной правовой базой. однако, рассматривая государственное регулирование во второй группе стран, следует отметить, что отдельным законодательным baltic journal of economic studies 139 vol. 1, 2015 актом государственное регулирование франчайзинга осуществляется только в италии, а в бельгии и норвегии оно осуществляется в части определенного нормативного акта или закона. великобритания италія норвегия бельгия кол-во франчайзеров 718 778 350 100 718 778 350 100 0 100 200 300 400 500 600 700 800 900 іі група стран источник-составлено автором на основе данных (top 500 franchises in europe, 2015) рис. 3. страны, в которых франчайзинг регулируется на государственном уровне к третьей группе стран относятся австрия, франция, германия и италия. государственное регулирование франчайзинга в австрии осуществляется в части национальной антимонопольной базы, а также в соответствии с правом ес  – регламентом комиссии (ec) № 2790/1999 «о применении статьи 81(3) договора к категориям вертикальных соглашений и согласованных действий»и ес 330/2010 в германии регулируется конкурентным правом и ес reg. 330/2010 (commission regulation (ec) n 2790/1999 of 22 december 1999 on the application of article 81(3) of the treaty to categories of vertical agreements and concerted practices,1999), (burnett, 2004). во франции франчайзинговые отношения также регулируются ес reg. 330/2010, однако на национальном уровне существует отдельный законодательный акт (loi doubin), которым государство регулирует данный вид экономической деятельности. в швеции государственном регулировании франчайзинга осуществляется на обоих уровнях, на национальном уровне с 2006 года (sfs 2006: 484) и на уровне ес с 2010 (eu reg. 330/2010). к четвертой группе стран отнесем финляндию, данию, нидерланды и польшу. все эти четыре страны имплементировали eс reg. 330/2010 и осуществляют государственное регулирование франчайзинга в соответствии с нормами и положениями этого документа. на национальном уровне ни у финляндии, ни дании, ни нидерландов, ни польшы нет специального законодательного акта для урегулирования франчайзинговых отношений. фінляндія данія нідерланди польща к-сть франчайзерів 177 128 453 814 0 100 200 300 400 500 600 700 800 900 iv група стран источник-составлено автором на основе данных (top 500 franchises in europe, 2015) рис. 5. страны, в которых государственное регулирование осуществляется в соответствии с правом ес по нашему мнению, следует обратить внимание, на то, что франчайзинг является экономической деятельностью, поэтому его государственное регулирование осуществляется в соответствии с нормами, которые закреплены в таких законотворческих актах как гражданский кодекс, закон о праве на интеллектуальную собственность, налоговый кодекс и ряд других законов, регулирующих экономическую деятельность в каждой стране. 4. выводы анализируя выше приведенный материал, можем сделать вывод, что страны, которые относятся к ii, iii и iv группы стран имеют значительно более высокие темпы роста количества франчайзеров чем те, что относятся к первой. итак, государственное регулирование франчайзинга, а также его регулирования на уровне институтов европейского союза положительно влияют на развитие франчайзинговых отношений. также стоит обратить внимание на iii группу стран, в которых есть как государственное регулирование франчайзинга и так же он регулируется правом европейского союза, поскольку они являются ярким примером того, что чем больше урегулирован франчайзинг как экономической деятельности, тем позитивнее это влияет на его рост и развитие. австрия франция гремания швеция кол-во франчайзеров 370 1037 900 790 0 200 400 600 800 1000 1200 iii група стран источник-составлено автором на основе данных (top 500 franchises in europe, 2015) рис. 4. страны, имеющие государственное регулирование франчайзинга, а также он регулируется правом ес baltic journal of economic studies 140 vol. 1, 2015 references report on franchising in poland 2015  – thousand ideas for business in 2015. (2015). retrieved from http://franchise.org.pl/report-on-franchising-in-poland yalovoy, g. (2013) prospects for the development of commercial concession (franchise) in ukraine kiev, taras shevchenko national university of kyiv, 203 p. burnett, r . (2004) law of international business transactions. 3rd ed. – sydney, 329 p. commission regulation (ec) n 2790/1999 of 22 december 1999 on the application of article 81(3) of the treaty to categories of vertical agreements and concerted practices,1999. vol. 42, l 336. – p. 21–25. the european franchise federation. (2015). retrieved from http://www.eff-franchise.com top 500 franchises in europe. (2015). – retrieved from http://www.franchisedirect.co.uk/top500/ соломия огинок государственное регулирование франчайзинга в странах ес аннотация. в несмотря на обширные исследования франчайзинга в научном сообществе, есть много нерешенных вопросов, касающихся франчайзинга, в частности, его регулирование на национальном уровне и на уровне европейского союза, поэтому целью данной работы является обобщение и представление разницы между государственным регулированием франчайзинга в странах-членах ес и исследование основных принципов государственного регулирования франчайзинга в ес также анализ законодательства франчайзингових отношений. статья посвящена детальному анализу основных особенностей франчайзинга в европе. методика. исследование основано на сравнении данных из всех стран-членов ес и анализ правовой системы каждой страны в частности и в целом законодательства ес. изучен механизм реализации франчайзинговых отношений между государствами-членами ес, так же исследовано государственное регулирование франчайзинга в странах-членах ес. проанализированы темпы роста франчайзинга в европе. сравнивая различные государственные законы и правила франчайзинга мы определили наиболее эффективные и продуктивные. результаты. мы разделили страны ес на группы в согласно регулирования франчайзинга: страны, которые не имеют специального государственного регулирования франчайзинга; страны, которые имеют государственное регулирование франчайзинга; страны, которые имеют государственное регулирование франчайзинга и он регулируется законом ес, страны, в которых регулирование осуществляется в соответствии с законодательством ес. таким образом, результаты исследования показали, что государственное регулирование франчайзинга, а также его регулирование на уровне институтов ес оказывает положительное влияние на развитие отношений франчайзинга. практические последствия результатов работы поможет развить хорошо известную сеть франчайзинга без законодательных препятствий. значение/оригинальность. впервые мы сгруппировали страны в соответствие с основными аспектами государственного регулирования франчайзинга. baltic journal of economic studies 181 vol. 4, no. 1, 2018 corresponding author: 1 department of marketing, management and public administration, donetsk national university of economics and trade named after mykhailo tugan-baranovsky (kryvyi rih). e-mail: ikarabaza7@gmail.com 2 department of accounting and audit, donetsk national university of economics and trade named after mykhailo tugan-baranovsky (kryvyi rih). e-mail: tk1897245@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-181-187 overcoming corruption as the basis of effective public governance and sustainable economic development of the country iryna karabaza1, tetiana kozhukhova2 donetsk national university of economics and trade named after mykhailo tugan-baranovsky (kryvyi rih), ukraine abstract. the purpose of the paper is to substantiate the means of overcoming corruption in order to ensure effective state governance and sustainable economic development of the country. methodology. the research is based on a systematic approach to studying aspects of overcoming corruption as a basis for effective public administration and sustainable economic development of the country. the following methods are used: the method of induction (while determining the impact of corruption on society); the method of analysis (while determining the means for effective fight against corruption); synthesis (while generalizing the main causes of corruption in ukraine), the method of hypotheses (while determining ways to support effective public administration in ukraine). results. the destructive effects of corruption are considered at two levels: at the state level (national level) and at the level of citizen (personal level). the state is formed by people, and their tolerance to corruption depends on their value systems and a vital position formed by society and family. the one can fight against corruption effectively, first of all, by forming the competence of “responsibility” in the citizens of the country, that is, their conscious attitude to the requirements of society, the ability to be responsible for their own lives and actions. anti-corruption tools are investigated at the state level and at the level of personality formation. effective governance under the influence of corruption pressure not only prevents the country from developing in a normal way, inhibiting foreign investment and reducing national wealth, but also activating the migration outflow of a responsible part of the population, the best part of the national gene pool, thereby destroying the nation. the fight against corruption at the state level should begin with the fight against corruption at the level of education of the individual, first of all, by forming the competence of the “responsibility” in the citizens of the country, that is, their conscious attitude to the requirements of society, the ability to be responsible for their own lives and actions. practical implications. using global experience in the fight against corruption, the following strategic measures are proposed: government data and information on tax revenues, as well as on funds from international organizations should be freely used by citizens (ukrainian ministries’ websites contains no transparent and detailed data); create an active forum for government officials, civil society, private sector leaders, and other members of “anticorruption initiatives”, which will provide an opportunity to fight against corruption and protect interests of the population in many areas, including the most risky, such as medical procurement; publish all data on public expenditure on the open government portal – the data warehouse of world-wide budgets created by the world bank group; to create information and technological infrastructure that will allow the widespread use of electronic services (from the payment of taxes through the internet to filling out the prescriptions of doctors); provide the opportunity to send instant text messages from citizens’ mobile phones to a specified address in order to provide feedback, submitting suggestions, or reporting a problem related to public services. value/originality. the means of overcoming corruption are substantiated in order to ensure effective public administration and sustainable economic development of the country. key words: responsibility, corruption, sustainable economic development, society, governance. jel classification: н70, е60, і28 baltic journal of economic studies 182 vol. 4, no. 1, 2018 1. introduction effective public administration is relevant to all countries of the world, but it is of paramount importance to developing countries looking for their place in the world community. in the absence of decent public administration, governments cannot effectively provide public services; health and education services are often poor; bribery flourishes, as well as illegal appropriation of goods and services intended for public consumption, the giving of benefits to family members in hiring, lobbying at the approval of laws and regulations for the purpose of obtaining personal gain. all this leads to the fact that the country that receives funds for development from international organizations does not show any progress because it is necessary to overcome corruption in the government before reforming in any field. in particular, in ukraine, where the fight against corruption was declared the main priority, the corruption perceptions index (sri) for 2016 was 29 out of 100, which is only 2 points more than in 2015. such a slight increase in the corruption perceptions index cannot be considered a victory for democracy in the country since, in recent years, the index did not reach even 30 points – the lower limit of the relative effectiveness of the fight against corruption (corruption perceptions index, 2016). therefore, it is important to determine the causal relationships of corruption and sustainable development of the state, to form a negative attitude towards corruption in society, as well as to form the competence of “responsibility” in the citizens and future civil servants at the mental level as a pledge of countering corruption. 2. analysis of recent research and publications many aspects of the fight against corruption have been considered by many scholars. thus, a.v. solonar, i.i. zymohliad (solonar, 2016) have investigated international experience in identifying and overcoming both the phenomenon of corruption and its causes for further use in order to develop proposals for improving ukraine’s legislation in the field of prevention and counteraction of corruption in public authorities. v.o. veklych defines in his writings the subjective and objective factors influencing the anti-corruption activity, fairly pointing out that the actual state of social relations, which precondition is not only material factors but also ideological ones, acts as an object of anti-corruption struggle. the author also notes that “further improvement in the context of the organization of anti-corruption struggle should be carried out with a clear understanding of the complex nature of the corruption environment, which requires further scientific developments and developments in this area. only under such conditions, the fight against corruption can be truly effective and practically oriented” (veklych, 2017). yu. repilo, s. tarasov (repilo, 2016) consider corruption in the security and defence sector, where there are favourable conditions for its emergence, growth, and spread, the threat to the effectiveness of the preparation and use of military formations in armed conflicts, analyse corruption threats in a conflict environment, develop a classification of corruption threats by the appropriate types and categories, and offer a system of indicators of corruption threats. t. semkiv (semkiv, 2017) studies the implementation of the institute of integrity inspections in ukrainian legislation. one can agree with the author that the approach to the implementation of the anti-corruption strategy for 2014–2017 as a part of the implementation of the institute of integrity inspections should be revised at the legislative level in order to ensure its functioning, and, taking into account the declaration of integrity inspections as an effective instrument for the fight against corruption, the implementation of this institution should have a systematic nature, extending to the employees of all law enforcement agencies, civil servants, other persons authorized to perform functions of the state or local self-government. you should also agree with v.e. bodnar (bodnar, 2017), who points out that it is expedient to implement in the domestic legislation a positive foreign experience in carrying out anti-corruption measures to improve the theoretical, legal, and organizational principles for combating crime in the area of official activity, but this experience is considered by the author only regarding employees of the units of the national police оf ukraine. unsettled issues that are a part of a common problem. thus, the problem of the awareness of the impossibility of coexistence of corruption and effective state administration and, accordingly, sustainable economic development of the state remains uncovered in the writings of scientists and requires in-depth study to develop measures to overcome corruption at the state level and citizen level. 3. findings according to a world bank study, corruption is a major challenge for achieving the two main goals of sustainable development: to eradicate poverty by 2030 and improve overall prosperity for the poorest 40% of people in developing countries. every year, the estimated amount of businesses and individuals spending on bribes is 1.5 trillion dollars (about 2% of world gdp). world bank empirical studies have shown, for example, that in paraguay poor people spend 12.6% of their income on bribes, high-income households spend 6.4% on the same purpose, in sierra leone these figures are 13% and 3%, 8% respectively. each stolen dollar, euro, peso, yuan or hryvnia deprives poor people of equal opportunities in life (worldbank, 2017). baltic journal of economic studies 183 vol. 4, no. 1, 2018 sustainable economic development of the state is characterized by economic growth, which provides a vital activity for citizens, is determined by the ability of ecosystems to recover and does not lead to their destruction. ensuring sustainable economic development of the state is possible on condition of changing of the social relations and creation of a society that will not ruin the environment of its existence. one of the main conditions for creating such a social relationship is to overcome corruption. in poor countries and countries with economies in transition, such as ukraine, it is impossible to make a leap towards sustainable development without proper anti-corruption governance. it is especially important if the country receives international assistance in different spheres of life since corruption reduces the effectiveness of such assistance and ultimately leads to international organizations distrust of the recipient state. in determining the causal link between corruption and the sustainable economic development of the state, it should be noted that the damage of development caused by corruption is, in fact, multiple of bribes, with a significant reduction in the country’s economic growth. the world bank’s research shows that when countries are engaged in combating corruption, government revenues increase 4-fold in the long run, in the conditions of reduction in corruption, the business can grow by 3% faster, and child mortality rates may drop by 75%. sustainable economic development of the state is impossible in the conditions of shadow economy growth, which allows corruption to occur, with a reduction in government revenue as a result of tax evasion; accordingly, a reduction in the amount of funds that can be used for innovative programs, such as the restoration of ecosystems, is obvious. corruption can also significantly affect the fundamental problems of the functioning of institutions. this form of corruption’s impact on the sustainable economic development of the state is often the most expensive in terms of overall economic outcomes. in the context of corruption in the state, winners of government contracts are unfairly determined, friends or relatives of civil servants are awarded, while contracts that win and receive financing may threaten with the depletion of natural resources, deterioration of the environment. all this reduces the favourable investment climate in the country, the riskiness of investments is increasing, investors distrust the country; under conditions of systemic corruption in the country, a part of the money of investors should be directed towards bribes. at the same time, the cessation of investments in the country directly affects the slowing down of its innovative development. corruption also reduces the quality of public service provision, for example, when police officers demand a bribe to fulfil their immediate responsibilities. fighting each of these corruption forms is the basis for making progress and sustainable changes. the destructive effects of corruption are to be considered at two levels: at the state level (national level) and at the level of citizen (personal level) (fig. 1, 2). therefore, it should be mentioned that corruption not only prevents the country from developing in a normal fig. 1. impact of corruption on society at the state level (national level) compiled by the authors interferes with a business that cannot successfully develop in a corrupt system, which leads to a reduction in the total wealth of the country entails a reduction in the amount of transfers and money that the government has to spend on purchasing items and equipment for schools, colleges, hospitals, and other budget institutions leads to the fact that the money the state allocates for the provision of social services (schools, hospitals, roads, sewage, police) is not used properly, which worsens the quality of services creates conditions for people who have money and connections to change laws and regulations of state bodies in their own interests, undermining confidence in the government hinders the flow of foreign investment into the country and the development of industrial facilities and a joint venture in the country t he in fl ue nc e of c or ru pt io n on th e de ve lo pm en t o f t he s ta te (n at io na l l ev el ) baltic journal of economic studies 184 vol. 4, no. 1, 2018 way, inhibiting foreign investment, and reducing national wealth, but also activating the migration outflow of a responsible part of the population, the best part of the national gene pool, thereby destroying the nation. according to the state program on the implementation of the principles of state anti-corruption policy in ukraine (anti-corruption strategy) for 2015–2017 (decree no. 265 dated april 29, 2015), anticorruption examination of election legislation has been conducted and revised on the basis of conclusions on corruptionrelatedness and european standards, the legislation on the implementation of the recommendations of the group of states against corruption (greco) has been adopted in terms of establishing limits and ensuring transparency and accountability in the financing of political parties and election campaigns; legislation on the legal framework for lobbying has been adopted, legislation on strengthening public control over decision-making by elected officials, in particular, through the introduction of a mechanism for the preliminary public discussion of socially important decisions using positive domestic experience and on the basis of the best world practice has been adopted, the level of transparency of the activities of the verkhovna rada of ukraine and local councils has been increased, in particular, by publishing information on the activities of the committees of the verkhovna rada of ukraine and the local councils (in particular, protocols of meetings), the publication on the internet of information on people’s deputies of ukraine and deputies of local councils (on their financing, business trips, assistants, their declarations of income, property, expenses and financial obligations, etc.), providing unimpeded access to information on estimates of representative bodies and reports on their use (on approval of state program on the implementation of the principles of state anti-corruption policy in ukraine (anti-corruption strategy) for 2015–2017). but taking into account that in 2016 ukraine ranked 131st among 176 countries in the corruption perceptions index (cpi), it should be noted that the measures taken to combat corruption in ukraine since the revolution of dignity have not given results and, accordingly, the effectiveness of international assistance in reforming of all areas of public life has been being very low. often the most visible manifestation of corruption is the enrichment of public officials. the main reasons for the ineffective fight against corruption in ukraine are: lack of transparency (for example, government officials do not inform others about their actions, how and why they act, and do not explain their actions), corrupt civil servants can remit incomes from their crimes abroad and have accounts in foreign jurisdictions to avoid disclosure and make it easier to use their unlawful profits (worldbank, 2017); low probability of exposure and impunity of illegal actions of officials; absence and disinterest of the higher authorities in reforming the judicial system; poverty, lack of goods, the need to receive something valuable yourself and disrespect to laws are instilled at the mental level; inefficiency of the system, which causes people to find a way to achieve their goals without taking into account the existing order and laws; lack of established competence of “responsibility” in the citizens and civil servants as a result of a long period of the destruction of individualism and the forced transition to collectivism in soviet times. the fight against corruption, on the one hand, is closely linked to the improvement of the country’s system of governance or the improvement of the formation of the government and the management of its activities and, on the other hand, it depends on the education of the individual by all social institutions within the state. means of combating corruption on two levels are presented in fig. 3, 4. fig. 2. impact of corruption on society at the citizen level (personal level) compiled by the authors disregard for the rule of law public distrust to the leaders support for extremism and incitement to internal conflicts, hatred against other citizens of the country, undermining the foundations of international peace and security the desire to migrate to other countries where the state respect for human rights really works, as well as transparent mechanisms for financing all spheres of human life the lack of such citizens’ quality and civil servants’ competence as “responsibility” for their actions and social responsibility t he in fl ue nc e of c or ru pt io n on th e de ve lo pm en t o f t he s ta te (p er so na l l ev el ) baltic journal of economic studies 185 vol. 4, no. 1, 2018 m ea ns o f c om ba ti ng c or ru pt io n at th e st at e le ve l to create an efficient anti-corruption justice system with the involvement of foreign specialists as active participants in the selection process for judges for these courts actively engage business, both ukrainian and international, in establishing new transparent rules of relations in the frames of the triangle “society – power – business”. to change your own attitude towards ukraine by means of deregulation, the predictability of tax legislation, the formation of a real rule of law to ensure stable conditions for doing business to conduct an audit and reduce the level of secrecy in the security and defence sector in the following areas: state budget articles, annual state procurement plans, procurement information and contracts to establish systemic communication on anti-corruption reform between the community and international partners on the basis of real facts and achievements, but not promises. clearly observe the international obligations assumed giving preference to repressive measures of criminal responsibility for corruption activities implementing a policy of zero tolerance for corruption in their own projects. when convicted of fraud and corruption, companies that have committed wrongful acts cannot participate in any new activity financed by state or investor. focus on education. education provides the acquisition of skills that can develop young people, create productivity and excellence. financing youth empowerment programs will form a new generation of people who are aimed at achieving not only their own goals but also the goals of state development, which is possible only with the complete elimination of corruption at all levels of government developing the architecture and platform for discussing corruption facts and combating corruption at the global and local levels raising respect for rules that are regulated by such subjects as family, enterprise, government, council, country providing young people with an opportunity to report on each action and decision made in any area of life propaganda of the state program of counteraction to the established soviet mentality: “if you informed others about unlawful actions, which you witnessed – you are not an ‘informer’ but a responsible person who builds the european future of the country” organization of free training for children on a responsible attitude to the environment, nature, animals, plants, energy, natural materials. after all, a responsible attitude towards the laws of the state, toward its development, which should not be hindered by corruption, begins through the love of the native land organization of forums for discussing anti-corruption measures. m ea ns o f c om ba ti ng c or ru pt io n at th e le ve l o f p er so na lit y fo rm at io n fig. 3. anti-corruption tools at the state level compiled by the authors based on worldbank, 2017 fig. 4. means of combating corruption at the personality formation level compiled by the authors baltic journal of economic studies 186 vol. 4, no. 1, 2018 fighting corruption at the state level is a derivative of combating corruption at the level of education of the individual. after all, the state is formed by people, and their tolerance to corruption depends on their value systems and a vital position formed by society and family. the one can fight against corruption effectively, first of all, by forming the competence of “responsibility” in the citizens of the country, that is, their conscious attitude to the requirements of society, the ability to be responsible for their own lives and actions. at the same time, taking advantage of global experience in combating corruption, the following strategic measures should be proposed: government data and information on tax revenues, as well as on funds from international organizations should be freely used by citizens (ukrainian ministries’ websites contains no transparent and detailed data); create an active forum for government officials, civil society, private sector leaders, and other members of “anticorruption initiatives”, which will provide an opportunity to fight against corruption and protect the interests of the population in many areas, including the riskiest, such as medical procurement; publish all data on public expenditure on the open government portal – the data warehouse of world-wide budgets created by the world bank group; to create information and technological infrastructure that will allow the widespread use of electronic services (from the payment of taxes through the internet to filling out the prescriptions of doctors); provide an opportunity to send instant text messages from citizens’ mobile phones to a specified address in order to provide feedback, submitting suggestions, or reporting a problem related to public services. these anti-corruption measures will increase the efficiency of using international resources to support effective public administration in ukraine will provide citizens with the opportunity to use the health and education services more effectively, while a dynamic private sector will be able to create jobs under conditions of reducing corruption, thus providing sustainable economic development of the state. 4. conclusions as a result of the study, the means of overcoming corruption have been substantiated in order to ensure effective public administration and sustainable economic development of the country. effective governance under the influence of corruption pressure not only prevents the country from developing in a normal way, inhibiting foreign investment and reducing national wealth, but also activating the migration outflow of a responsible part of the population, the best part of the national gene pool, thereby destroying the nation. the fight against corruption at the state level should begin with the fight against corruption at the level of education of the individual, first of all, by forming the competence of “responsibility” in the citizens of the country, that is, their conscious attitude to the requirements of society, the ability to be responsible for their own lives and actions. at the same time, it is proposed to focus on education to form a new generation of people who seek to achieve not only their own goals but also the state development goals; to raise respect for the rules that are regulated by such subjects as family, enterprise, government, council, country; to ensure the ability of young people to report on every action and decision taken in any area of life; propaganda of the state program of counteracting to the established soviet mentality of irresponsibility formed by collectivism. it is also proposed to organize free training for children on responsibility for the environment, nature, animals, plants, energy, natural materials and the organization of forums for discussing anti-corruption measures. using global experience in the fight against corruption, the following strategic measures are proposed: government data and information on tax revenues, as well as on funds from international organizations should be freely used by citizens (ukrainian ministries’ websites contains no transparent and detailed data); create an active forum for government officials, civil society, private sector leaders and other members of “anticorruption initiatives”, which will provide an opportunity to fight against corruption and protect the interests of the population in many areas, including the most risky, such as medical procurement; publish all data on public expenditure on the open government portal – the data warehouse of world-wide budgets created by the world bank group; to create information and technological infrastructure that will allow the widespread use of electronic services (from the payment of taxes through the internet to filling out the prescriptions of doctors); provide an opportunity to send instant text messages from citizens’ mobile phones to a specified address in order to provide feedback, submitting suggestions, or reporting a problem related to public services. in further research, it is planned to analyse the interconnection of the dynamics of economic indicators of the development of ukrainian regions and the implementation of measures of anticorruption strategy at the local level, as well as to propose a strategy for combating corruption considering the approach of forming a citizen’s personality based on the competence of “responsibility”. baltic journal of economic studies 187 vol. 4, no. 1, 2018 references: corruption perceptions index 2016. available at: https://ti-ukraine.org/research/indeks-koruptsiyi-cpi-2016/ solonar a.v. areas of legislation improvement in the field of corruption prevention and counteraction in public authorities. forum prava [law forum], 2016, no. 3, pp. 240-244. (in ukrainian) veklych v.o. on the issue of the organization of anti-corruption struggle in the context of the corruption environment. naukovi pratsi maup [scientific works of interregional academy of personnel management], 2017, no. 52(1), pp. 39–46. (in ukrainian) repilo yu. system of indicators of the influence of corruption threats on the effectiveness of the preparation and use of military forces in armed conflict. zbirnyk naukovykh prats natsionalnoi akademii derzhavnoi prykordonnoi sluzhby ukrainy (collection of scientific works of the national academy of the state border guard service of ukraine named after bohdan khmelnitskii), 2016, no. 3(69), pp. 102-111. semkiv t. implementation of the institute for integrity inspections in ukrainian legislation. visnyk natsionalnoi akademii prokuratury ukrainy (bulletin of the national prosecution academy of ukraine), 2017, no. 2(48), pp. 11-16. bodnar v.ye. international legal principles and foreign experience in counteracting crime in the field of official activity, committed by policemen. naukovyi visnyk natsionalnoi akademii vnutrishnikh sprav (scientific herald of the national academy of internal affairs), 2017, no. 1 (102), pp. 300-311. is technology good or bad in the fight against corruption? available at: http://blogs.worldbank.org/governance/ technology-good-or-bad-fight-against-corruption pro zatverdzhennia derzhavnoi programy shchodo realizatsii zasad derzhavnoi antykoruptsiinoi polityky v ukraini (antykoruptsiinoi strtegii) na 2015-2017 roky (on approval of the state program on implementing the principles of state anti-corruption policy in ukraine (anti corruption strategy) for 2015-2017). available at: http://zakon0. rada.gov.ua/laws/show/265-2015-%d0%bf here are 10 ways to fight corruption. available at: http://worldbank.org/governance/here-are-10-ways-fightcorruption corruption fight aided by technology. available at: http://worldbank.org/publicsphere/weekly-wire-globalforum-280 hurinova k.l. koruptsiia v ukrainskomu suspilstvi ta holovni pytannia borotby z neiu (corruption in ukrainian society and the main issues of combating it). available at: http://dimitrov-rada.gov.ua/information/ corruption/ korupciya v ukrayinskomu suspilstvi ta golovni pitannya borotbi_z_neyu.html shchurko o.m. dynamics of ukraine's image in international rankings (2014-2016). gileia: naukovyi visnyk [gilea: scientific bulletin], 2016, no. 109, pp. 382-386. (in ukrainian) baltic journal of economic studies 304 vol. 4, no. 1, 2018 corresponding author: 1 department of macroeconomics and public administration, kyiv national economic university named after vadym hetman. e-mail: sum1971@ukr.net 2 department of economics and management, odesa i.i. mechnikov national university. e-mail: evgenmaslennikov@ukr.net 3 department of economics and management, odesa i.i. mechnikov national university. e-mail: nlenskaya96@mail.ru doi: https://doi.org/10.30525/2256-0742/2018-4-1-304-310 evolution and modern tendencies in the theory of leadership yurii safonov1 kyiv national economic university named after vadym hetman, ukraine yevgen maslennikov2, nataliia lenska3 odesa i.i. mechnikov national university, ukraine abstract. leadership as a social phenomenon accompanies mankind throughout its existence. in different historical epochs, attempts were made to study leadership qualities on the basis of a description of the personalities of great people. as a result, the idea of leadership quickly evolved as the accumulation of theoretical and empirical material, revealing new facets of this complex phenomenon. in foreign social sciences, the theory of leadership has developed in several directions and by now a number of complementary theories and concepts have been developed, which predetermines the need to describe their continuity and development. for this reason, the purpose of the paper is to analyse the basic theories and concepts of leadership, as a sociopsychological phenomenon, the most significant in the context of studying the formation of the leader as an organizational leader. methodology. the methodological and informational basis of the investigation is scientific articles, materials of periodicals, resources of the internet. to achieve the goal set, the following general scientific and special methods were used: morphological analysis, system and structural-logical analysis, formalization, analogy, comparison and integration, tabular method. results. as a result of the research, a brief historical overview of approaches to the study of leadership was given; the logical continuity of the basic concepts and methods of research was considered; the main current trends in leadership research in recent years were revealed. practical implications. in order to realize the leadership potential, it is necessary to know what determines leadership, on what it depends. thus, the problem of studying the phenomenon of leadership in a modern organization is relevant; the considered theories of leadership can be applied by managers depending on the level of economic development of the organization. value/originality. the authors identified current trends in the theory of leadership and possibilities of their further development. key words: management, leadership, theories of leadership, leadership style, transformational leadership, transactional leadership, behavioural approach, situational approach, charisma, emotional intelligence. jel classification: b20, m12 1. introduction leadership is a special type of attitude towards a person, based on the recognition of his abilities to manage and those human qualities that are so necessary for the modern leader. leadership is built on the voluntary recognition of a person’s ability to understand the interests of other people and to manage them in accordance with these interests. in the past, leadership was seen as a set of innate traits or as features of a style of behaviour. most definitions of leadership include three components: influence, group, and purpose. firstly, leaders are people who influence the behaviour of others. secondly, leadership is usually investigated in the context of groups, especially working groups. third, the leadership study focuses on the group goal, which must be achieved. thus, the following definition of leadership can be given: it is a process, in which a person influences other members of a group to achieve the goals of a group or organization. the true leader, capable of leading people with him, is one who acquires universal recognition among people. baltic journal of economic studies 305 vol. 4, no. 1, 2018 the history of leadership research dates back to ancient times. scientists of antiquity and ancient china tried to systematize and describe the qualities inherent in the leader, unfortunately, not mastering modern scientific methodology. however, over the past centuries, the situation has changed dramatically; the scientific approach has taken the lead. more and more theories appeared, corresponding to the paradigm prevailing at one time or another. at first, it was a personal approach, from where the theory of leadership features emerged, then behaviourism took over the dominant position and then a behavioural approach emerged in leadership psychology. further, authentic theories of leadership were created on the one hand, and attempts were made to integrate opposing approaches on the other. each of these approaches has scientific leadership concepts that explain this phenomenon. let us consider the most popular of them. 2. evolution of the theory of features the great man theory. this group of concepts is a prescientific, philosophical doctrine of leadership. various philosophers (lao-tzu, confucius, homer, aristotle, plato, niccolo machiavelli) tried to design an image of an ideal governor on the basis of notional conclusions (oganyan, 2006). they did not use the scientific method and, obviously, they did not apply the approved psychodiagnostic techniques. in this regard, the understanding of the same feature could differ from one author to another, and lists of leadership features often contradicted each other. it is important that leadership was considered only at the level of large groups. the basic postulate of “the great man” theory was that it is impossible to become a leader, they can only be born. time passed, scientific methods of researching the personality appeared. however, this postulate remained in force. the founder of the scientific approach was f. galton, who believed that the leading role in human behaviour, including the leader, is played by hereditary factors. the development of this idea could be seen in the works of sociologists, social psychologists and philosophers (f.a. woods, j.g. tarde, f. nietzsche). a. wiggam argued that the reproduction of leaders depends on the level of fertility among the ruling classes (wiggam, 1931). finally, s. klubeck and b. bass discovered that people who are not inclined to leadership by nature can hardly be made leaders, except to try to influence them with psychotherapy (klubeck, 1954). the trait theory of leadership. soon serious concepts of personal traits and, respectively, the questionnaires, which allowed defining them, began to appear. here, first of all, it is necessary to mark out r . cattell who in 1954 have compared leaders to other members of the group; the first were ahead of the last on eight merits of the personality: moral maturity (c); domination (е); integrity of character (g); social courage (n); insight (n); independence of harmful inclinations (o); will power (q3); lack of excessive experiences (q4) (daft, 2006). thus, the era of allocation of leadership skills where each researcher studied the leader’s figure from a position of own concept of personal traits and own questionnaire has come. among the most modern, the concept of personal qualities “the big five” by warren norman is considered to be the most recognized. the great man theory has not reached a dead end. it got a new birth in the theory of charismatic leadership. representatives of the theory of charisma insisted on one, but integral quality, which makes a person a leader – charisma. charisma according to max weber is the quality bestowed by god. he put charismatic power in opposition to traditional and rational power. an important difference between the theory of charisma and the trait theory is the difference in the origin of leadership power. in weber’s concept, charismatic power is a magical quality bestowed from above. however, already in this concept, one can see hints of scientific understanding. so, m. weber insisted that in order for the followers to recognize the leader’s qualities in a leader, he must clearly argue his demands, prove his own skills, and demonstrate that subordination to him leads to certain results (friedland, 1964). transformational leadership. transformational leadership is a modern embodiment of the theory of charisma. the term “transformational leadership” has been introduced by j.v. downton (1973) for the first time. however, this concept has already received the development at james macgregor burns. he understands transformational leadership as a process, in which the leader and the follower, interacting definitely, lift each other to the higher level of motivation and personal/moral development. leaders appeal to the highest ideals and values and also accept and realize these values in practice (bensman, givant, 1975). bernard bass, burns’s follower, investigated leadership in the context of how a transformational leader influences followers. transformational leadership includes four main components: charisma and idealized influence; inspiring motivation; intellectual stimulation; individual approach (avolio, bass, 1988). various emotions and feelings are inherent in the behaviour of the leader. in particular, for the inspiring motivation process, enthusiasm, optimism, and excitement are inherent; for idealized influence – determination, confidence and pride; for intellectual stimulation – hostility, challenge, and anger; for an individual approach – sympathy, care, and love (connelly, 2002). the theory of emotional intelligence and primary leadership. the important role of emotions in the process of transformational leadership made scientists pay attention to the concept of emotional intelligence (fig. 1). a clear awareness of his mental processes baltic journal of economic studies 306 vol. 4, no. 1, 2018 and, in particular, the emotional state, is required from the leader. the theory of emotional intelligence by j.d. mayer and p. salovey, in the aftermath developed by d. goleman and r . boyatzis, most clearly describes the figure of the leader in this vein. emotional leadership transformational leadership process trait theory of leadership behavioural approach situational approach fig. 1. the theory of emotional leadership as a synthesis of different approaches (goleman, 2012) the emotional brain (the limbic system) is responsible, both for the demonstration of our emotions and for our memory. when memorizing, the hippocampus connects this or that sensory information with the emotional state, and when similar sensory information is subsequently presented, the emotional reaction is already recorded. on these processes, for example, human intuition and the phenomenon of bad apprehension are based. however, emotional intelligence is more than an emotional brain. so, d. goleman singles out the following components of emotional intelligence: knowledge of oneself and one’s emotions; the ability to control oneself and one’s feelings; the ability to understand the feelings and desires of others; the ability to control the feelings and desires of others. these qualities indicate the need to use the complete work of the brain and its logical part, even more so. leaders either spontaneously experience the emotions that they show to their followers, or they easily create and demonstrate the appropriate emotions. in other words, leaders control their feelings. followers react positively to positive emotions; there is an increase in sympathy for the leader (brotheridge, 2006). the influence of the emotions of transformational leaders on the emotions and affective reactions of followers can be explained by emotional contamination (newcombe, ashkanasy, 2002). 3. evolution of the behavioural trend in leadership researches leadership style theories. behavioural theories of leadership appeared simultaneously with the occupation by behaviourism of a leading position in scientific psychology. the basic “stimulus-response” behaviourism formula also found an application in the theory of leadership. it was assumed that we can get the desired behaviour if we correctly select the stimulus that this behaviour can cause. the idea arose that there is a certain behavioural style that will make it possible to achieve the greatest results. the most popular researches in this vein were made by kurt lewin and ralph white. they investigated the influence of three styles of leadership (liberal, authoritative, democratic) on the performance of the group (table  1). it turned out that table 1 classification of leadership styles by k. lewin (supplemented by the authors) interaction parameters leadership styles authoritative democratic liberal methods of decision-making resolves all issues individually consults with the subordinates before making a decision waits for the directions from above or decisions of the meeting ways of bringing solutions to the performer orders, controls, commands offers, argues, affects asks, persuades allocation of responsibility takes or passes to subordinates allocates responsibility, delegates authorities tries to shift off any responsibility attitude to the initiative completely suppresses encourages, uses in the interests of the matter gives to subordinates attitude to the recruitment does not accept or gets rid of skilled workers selects business, competent workers is not in charge of selection style of communication keeps distance, is not communicative is friendly, enjoys communication comes into contact with subordinates only on their initiative nature of relations with the subordinates hard, dictated by the mood smooth manner of communication, constant selfcontrol gentle, flexible attitude to the discipline an adherent of formal discipline, strict schedule a supporter of a reasonable discipline, has differentiated attitude to people does not require respect for formal discipline, patient to contraventions choice of the method of influence on subordinates regards punishment as the main method of stimulation, rarely encourages the elected uses various methods of encouragement and punishment uses reward more often baltic journal of economic studies 307 vol. 4, no. 1, 2018 the authoritative style led to the greatest productivity but the relations in the group and the creativity of its participants suffered. with the democratic style, the opposite situation was observed. liberal style showed the worst results in all parameters. the classification of k. lewin became the basis for the creation of many new models of leadership. however, they all came down to finding intermediate options (for example, authoritativeliberal, authoritative-democratic leadership styles). later, based on this concept, robert blake and jane mouton proposed their “managerial grid” (fig. 2) (blake, mouton, 1992). in their model, they claim that there is the most effective style that combines both the orientation to the result and the orientation to the relationship. this style was called team leadership. it is worth saying that the ideal style of leadership was not found. different styles of leadership turned out to be effective in different situations, as k. lewin himself said. motivational theories. motivational theory by r . howe, b. base understands leadership as an attempt to change the behaviour of members of the group through a change in their motivation. abraham maslow claimed that leadership arises in the process of transforming the desires of people into motives that depend on the environment. this idea was concretized by j. lipmanblumen in the concept of connective leadership, according to which the modern leader should be able to establish connections between his motives and goals, as well as the goals and motivations of other people. hence the emergence of many humanistic theories that considered the conflict between the motivations of the individual and the goals of the social structure, into which he enters. it is necessary to build an organization in such a way that it does not suppress the individual and, at the same time, is effective. transactional leadership. transactional leadership was born from behavioural theories of exchange. they, in turn, are based on the theory of operant conditioning by b.f. skinner and assume that any interaction of people is an exchange where everyone bears the benefits and costs. the first transactional theorist to talk about leadership was peter blau. he pointed out that leadership shows in a situation of nonequilibrium exchange. in the case when the individual has nothing to repay, he provides himself with a generalized loan. if this option is implemented purposefully, we are talking about the phenomenon of leadership. however, the theory of transactional leadership was developed in detail by e. hollander. he understands leadership as an exchange between a leader and followers. the leader provides followers with benefits in the form of: organizing actions; clarification of the situation; coordination of efforts; attention. followers also reward the leader with: recognition; respect; the adoption of influence (hollander, 2009). fig. 2. blake–mouton managerial grid baltic journal of economic studies 308 vol. 4, no. 1, 2018 4. evolution of the situational approach in leadership situational theories. these theories deny the personality in the course of leadership and direct all attention to a situation. so, herbert spencer specifies that it is not the person who changes time, but time creates great people (spencer, 1841). also, the theory of situational leadership by r . stogdill notes that the same person can become a leader in one situation and cannot in another. the theory of “leadership substitutes” by s. kerr and j. jermier assumes that presence of the leader isn’t a necessary condition of productivity of group as the absence of the leader can be compensated by parameters of the situation (pochebut, chiker, 2000). personal and situational theories. here at the same time both psychological traits of the leader and a condition, in which there is a leadership process, are considered. so, according to k. keyes, leadership is a result of three factors: personal traits; features of the group and its members; group problem. a.s. kaze also says that leadership is generated by three factors: personal qualities of the leader, group, and situation. and, for example, the main idea of the concept of “the distributed leadership” consists that in a group it is not obligatory to have one leader. at each stage of implementation of the project by the interim leader, there is a carrier of the competence, which is the most demanded at present. situational-behavioural theories. this direction is a combination of a situational and behavioural approach. here, the leadership behavioural styles that are effective in a given situation are determined. the first supporters of this direction in 1958 were tannenbaum and schmidt, who pointed out that the leadership style (authoritative or democratic) can be effective depending on three variables: the characteristics of the leader, the characteristics of the group, and situational factors (fig. 3) (tannenbaum, 1961). however, the most popular theory was fred fiedler’s theory, who distinguished three situational variables: relations, task structure and powers (fig. 4). efficiency is achieved fig. 3. the tannenbaum–schmidt leadership continuum fig. 4. fiedler’s contingency model baltic journal of economic studies 309 vol. 4, no. 1, 2018 if, in the least and most favourable situations leaders implement a work-oriented style, and in the neutral situations  – a relationship-oriented style (fiedler, 1967). gradually, the number of variables increased and w. reddin proposed a three-dimensional model, in which there were 12 cells and whose third dimension was efficiency, that is, the manager’s ability to achieve the goal set (fig. 5) (reddin, 1970). 5. modern trends in the development of the theory of leadership the elements of each of the described above leadership theories are still used today. however, the transition to a new paradigm led to the emergence of fresh ideas. understanding of the world as a “dynamic, ever-changing, risky and complex” creates new concepts of leadership. from this perspective, creating conditions for change is a key aspect of leadership (maxwell, 2006). it should be noted that, in previous theories, little attention has been paid to this issue. at the beginning of the xxi century, special meaning is given to the ways of introducing changes that allow adapting to environmental conditions. to adapt to a chaotic world, leaders create learning organizations, in which each employee is involved in the process of identifying and solving problems so that the organization can grow and develop. instead of leading and controlling, leaders create the image of the future and form a corporate culture that is conducive to the implementation of a forward-looking concept. at the same time, the hierarchical structure is destroyed and the organization becomes a community of people with the same goals and interests. 6. conclusions tracing the logic of the development of the leadership theories, it can be noted that they all started from one-factor approaches, that initially one factor was considered as the determinant of the leadership: personal qualities, behavioural style, situational characteristics. understanding the shortcomings of a one-way approach, leadership models began to be combined, two-factor concepts emerged: personal-situational, behaviouralsituational, personality-behavioural theories. however, this was not enough. the final stage in the study of leadership was the systematic approach, which included many factors. for example, the theory of emotional intelligence takes into account the personality traits of the individual, and his behaviour, and the situation in which it is realized. thus, it is possible to make a conclusion that a leader who wants to work as efficiently as possible, cannot afford to apply just one style of leadership throughout his career. the leader must rather learn to use all styles, methods, and types of influence that are most appropriate for a particular situation. fig. 5. the three-dimensional model by w. reddin baltic journal of economic studies 310 vol. 4, no. 1, 2018 references: blake, r ., mouton, j. (1992). nauchnyie metodyi rukovodstva. – kyiv, nauk. dumka, 234 p. daft, r .l. (2006). uroki liderstva: per. s angl. – moskva, eksmo, 408 p. goleman, d. (2012). emotsionalnoe liderstvo: iskusstvo upravleniya lyudmi na osnove emotsionalnogo intellekta: per. s angl. – moskva, alpina pablisher, 301 p. maxwell, j.s. (2006). liderstvo: 25 klyuchevyih printsipov postroeniya vzaimootnosheniy s lyudmi: per s angl. – minsk, popurri, 366 p. oganyan, n.n. (2006). tri epohi gosudarstva i vlasti. platon, makiavelli, stalin. – moskva, grifon, 190 p. pochebut, l.g., chiker, v.a. (2000). organizatsionnaya sotsialnaya psihologiya. – saint petersburg, rech, 298 p. avolio, b.j., bass, b.m. (1988). transformational leadership, charisma and beyond. – lexington, lexington books, 470 p. bensman, j., givant, m. (1975). charisma and modernity: the use and abuse of a concept.  – social research, № 4(42), p. 32-33. brotheridge, c.m. (2006). a review of emotional labour and its nomological network: practical and research implications. – ergonomia ije&hf, № 28, p. 295-309. connelly, s. (2002). a closer look at the role of emotions in charismatic and transformational leadership. – st. louis, mo, elsevier, 259 p. fiedler, f.e. (1967). a theory of leadership effectiveness. – new york, mcgraw-hill, 303 p. friedland, w. (1964). for a sociological concept of charisma. – social forces, № 43(112), p. 107-109. hollander, e.p. (2009). inclusive leadership: the essential leader-follower relationship. – new york, routledge, 263 p. klubeck, c., bass, b. (1954). differential effects of training on persons of different leadership status. – human relations, № 7, p. 59-72. newcombe, m.j., ashkanasy, n.m. (2002). the role of affect and affective congruence in perceptions of leaders: an experimental study. – leadership quarterly, № 13, p. 601-614. reddin, w. (1970). managerial effectiveness. – new york, mcgraw-hill, 345 p. spencer, h. (1841). the study of sociology. – new york, d. a. appleton, 152 p. tannenbaum, r . (1961). leadership and organization. a behavioural science approach. – new york, mcgrawhill, 474 p. wiggam, a.e. (1931). the biology of leadership. – new york, pitman, 371 p. baltic journal of economic studies 126 vol. 4, no. 1, 2018 corresponding author: 1 department of finance and innovation management, vinnytsia national technical university. e-mail: djedjulavv@gmail.com 2 department of finance and innovation management, vinnytsia national technical university. e-mail: epifanovairene@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-126-130 use of apparatus of hybrid neural net works for evaluation of an intellectual component of the energy-saving policy of the enterprise vyacheslav dzhedzhula1, iryna yepifanova2 vinnytsia national technical university, ukraine abstract. intellectual capital has a significant impact on the energy-saving policy, which is an indicator of levels of competitiveness and efficiency of the enterprise. making decisions on improving the efficiency of energy-saving policies of the enterprise through intellectual capital can be carried out by assessing qualitative, quantitative, and binary parameters of the state of the investigated object. researchers on energy saving issues are scientists such as a.m. asaul, o.i. amosha, v.m. heiets, yu.v. dziadykevych, v.v. stadnyk, v. parkhovnyk, r. toud. issues related to the definition of the essence of innovation were investigated by o.f. androsova, t.p. bubenko, m.p. voinarenko, v.m. heiets, g. mensch, m. kaletski, s.v. phillippova, j. schumpeter, a.v. cherep. issues of intellectual capital management were considered in the works of l. antoniuk, s.v. zakharinko, a. kendiukhov, g.r. natroshvili, v. tsipuryndа, l. fedulova. the issue of evaluating the intellectual component of the energy-saving policy, in particular, with the help of the apparatus of hybrid neural networks, remains poorly developed. the purpose of the paper is the determination of factors of intellectual capital that influence the energy-saving policy, the formation of a mathematical model based on the theory of hybrid neural networks to determine the indicator of the intellectual component of the energysaving policy of the enterprise. methodology. using the theory of hybrid neural networks, a mathematical model has been formed and the simulation has been carried out to determine the indicator of the intellectual component of the energy-saving policy of the enterprise. results. the factors influencing the value of this indicator have been determined as linguistic variables. a mathematical model has been formed and the simulation has been carried out to determine the indicator of the intellectual component of the energy-saving policy of the enterprise. practical implications. if it is necessary, the use of different components of intellectual capital, the proposed mathematical model will allow ranking their degree of attractiveness for energy conservation policies. the expert information can be provided both by an expert and a group of experts and serves as input information for modelling in the proposed mathematical model. further information and practical experience of implementation of energy saving measures can be used for training mathematical model. value/originality. the use of the proposed mathematical model allows you to determine the indicator of the intellectual component of the energy-saving policy of the enterprise, which in turn allows you to choose those components of intellectual capital for this enterprise that will make the greatest impact on the energy-saving policy. key words: intellectual capital, energy saving, human capital, organizational capital, market capital, hybrid neural networks. jel classification: c45, g32, g31 1. introduction all transactors are trying to be competitive not only at the regional level but also at the global level. a high level of competitiveness also implies competitive products of the right quality, which would meet the world standards of quality and have the appropriate price. taking into account the constant increase in the cost of energy, most enterprises are faced with finding ways to reduce their production cost. among the promising areas, active implementation of energy saving policy can be highlighted. for this purpose, the management of the baltic journal of economic studies 127 vol. 4, no. 1, 2018 enterprise should pay attention to its own intellectual capital. the effective use of intellectual capital can contribute not only to lowering the cost, but also to substantially increase the enterprise’s revenues. making decisions on improving the efficiency of the energy-saving policy of the enterprise through intellectual capital can be carried out by assessing qualitative, quantitative, and binary parameters of the state of the investigated object. that is why further research is needed on the justification of the factors influencing the energy-saving policy of the intellectual capital of the enterprise from the standpoint of the theory of fuzzy logic and hybrid neural networks. researchers on energy saving and the formation of energy saving policy are such scientists as a.m. asaul, o.i. amosha, v.m. heiets, y.v. dziadykevych, v.v.  stadnyk, v. parkhovnyk, r . toud. energy saving in modern conditions involves the active use of innovations. issues related to the definition of the essence of innovation were investigated by o.f.  androsova, t.p.  bubenko, m.p.  voinarenko, v.m.  heiets, g.  mensch (1979), m.  kaletski (1963), s.v. phillippova, j. schumpeter (1934), a.v. cherep. issues of intellectual capital management, its influence on innovation activity were considered in the works of l. antoniuk, s.v. zakharinko, a. kendiukhov, g.r .  natroshvili, v.  tsipuryndа, l.  fedulova. the theory of fuzzy logic and linguistic variable allows using analytical, experimental, and expert input information for the study of causal-consequent relationships of the behaviour of the economic system. at the same time, the issue of evaluating the intellectual component of the energy-saving policy, in particular, through the apparatus of hybrid neural networks, remains inadequately developed. the purpose of the study is the determination of factors of intellectual capital that affect the energy saving policy, the formation of a model for determining the indicator of the intellectual component of the energysaving policy of the enterprise. 2. components of intellectual capital the ability of the industrial enterprise to implement innovative directions of energy saving is determined not only by the financial position of the enterprise but also by the level of intellectual capital of employees. non-motivated and not experienced specialists are not sufficiently capable of generating new ideas and creating the energy-saving directions of the enterprise based on their own research. for the formation of a strategy for increasing energy efficiency, enterprise management can attract both detached and its own experts. but the work of attracted energy auditors and energy managers still needs the intellectual support of the specialists of the enterprise. a thorough study of the peculiarities of technological and auxiliary processes is possible only with multi-day direct contact with the technological and energy systems of the enterprise. each enterprise owns financial and intellectual capital, which consists of knowledge, skills, competencies, motivation, and experience of employees. different authors determine the essence of intellectual capital in different ways. in our opinion, intellectual capital is a set of knowledge, skills, and ideas of employees that can bring certain economic benefits and/or enhance the image of the enterprise. in general, most authors believe that intellectual capital consists of three components (denisenko m. p., 2013; di stefano, paul j. kalbaugh, g. edward, 1999; tsipurynda v., 2013; bontis nick, 1996; bassi laurie j., 1997; seid mohammad, reza, mirahmadia ali, attafara saideh ketabia, 2018): 1. human capital is a set of knowledge, skills, creative abilities, as well as the ability of owners and knowledgeintensive workers to meet the requirements and targets of the enterprise. 2. organizational or structural capital is computer software, databases, organizational structure, patents, trademarks, organizational mechanisms that ensure the productivity of employees, and the operation of the enterprise. 3. market or consumer capital is future consumers of products of the enterprise, the ability of the product to meet the needs of consumers. thus, intellectual capital is by its nature an intangible asset, an integral part of the goodwill, which, due to skilful management, can bring significant growth in income, profits, and ultimately the competitiveness and market value of the enterprise. an essential advantage of intellectual capital is that it has an exclusive form and has a fairly high added value compared to other resources available at the disposal of the company. it is difficult to assess the level of intellectual capital since the indicators that characterize it are predominantly evaluated linguistically, qualitatively, and not quantitatively, and even more difficult is the combination of all indicators of intellectual capital into one system and its quantification. 3. fuzzy model for determination of indicator of intellectual component of the energy-saving policy of the industrial enterprise the use of the hybrid neural network allows for a fairly accurate assessment of the level of intellectual capital in the industrial enterprise. an artificial neural network is a collection of mathematical models of neurons that are interconnected by synapses (voinarenko m. p., dzhedzhula v. v., yepifanova, i. yu., 2016; pankevich o. d., shtovba s. d., 2005; leonenkov a. v., 2005). the input of the neuron receives the result of the interaction of the activation function with the sum of the signals of the synapses. the synapse’s weight characterizes baltic journal of economic studies 128 vol. 4, no. 1, 2018 the binding power and may change in the process of network formation and learning. hybrid neural networks allow logical conclusions to be obtained by means of fuzzy logic, and the adjustment of membership functions is carried out by means of neural networks. hybrid networks allow us not only to combine the quantitative and qualitative characteristics of the object being investigated but also to study, that is, the forecast of its characteristics, which is obtained through the network, changes with the change of parameters of the object. such features of the hybrid neural networks provide the proposed method of modelling with the advantages over the classical theory of fuzzy logic, where the information bases of knowledge formed by experts are final. the stages of information transformation in the hybrid neural network are as follows: phasing – calculation of the logical conclusion – the formation of fuzzy logic equations – dephasing. the most common method of dephasing, that is, the transformation of fuzzy information into a clear, is the method of the centroid, the most common method of teaching the hybrid neural networks is the method of reciprocal error propagation. at the first stage of modelling, a training sample is provided for the input of the neural network and optimal parameters of the network nodes are found in the process. when new knowledge of the research object is entered into the network, a test sample is submitted that allows you to adjust the weighting factors. the linguistic variable ik, which characterizes the value of the intellectual component of the energy-saving policy of an enterprise, can be represented as: ( ), ,ik f b c d= (1) where b is an indicator characterizing human capital; c is an indicator characterizing organizational capital; d is an indicator characterizing market capital. the linguistic variable characterizing human capital can be represented as: ( )1 2 3 4 5, , , ,b f b b b b b= (2) where b1 is lv “potential of workers”; b2 is lv “level of knowledge of workers”; b3 is lv “motivation of workers”; b4 is lv “experience of workers”; b5 –is lv “ability to work in a team”. the linguistic variable characterizing the organizational capital can be represented as: ( )1 2 3 4 5, c , c , c , cc f c= (3) where c1 is lv “corporate culture”; c2 is lv “patents”; c3 is lv “organizational structure”; c4 is lv “level of information development”; c5 is lv “technological level of the enterprise”. the linguistic variable characterizing the market capital can be represented as: ( )1 2 3 4 5, d , d , d , dd f d= (4) where d1 is lv “loyalty of consumers”; d2 is lv “branding”; d3 is lv “suppliers”; d4 is lv “social activity of the enterprise”; d5 is lv “relations with financial institutions”. the factors of influence as linguistic variables are shown in table 1. the mathematical package matlab has been used for simulation. by compiling the training sample according to the expert estimates, we set the values of the initial indicators within [1 ... 5]. to reduce the computational time and the practical use of the proposed approach on low-power computers, we determine the value of each linguistic variable separately. to select the optimal form of membership functions, we carry out several stages of simulation and define training errors. graphical results of the calculation of training error in various forms of membership functions are shown table 1 the factors of influence as linguistic variables parameter symbol and name of the variable universal set linguistic terms for evaluation h um an c ap ita l (b ) b1 – lv “potential of workers” u(b1) = {1‒4} (points) absent, low, medium, high b2 – lv “level of knowledge of workers” u(b2) = {1‒4}(points) absent, low, medium, high b3 – lv “motivation of workers” u(b3) = {1‒4} (points) absent, material, moral, mixed b4 – lv “experience of workers” u(b4) = {1‒4} (points) absent, low, medium, high b5 – lv “ability to work in a team” u(b5) = {1-3} (points) high, medium, low o rg an iz at io na l ca pi ta l ( c ) c1 – lv “corporate culture”; u(c1) = {1-4} (points) high, medium, low, absent c2 – lv “patents” u(c2) = {1‒3} (points) absent, used purchased, own c3 – lv “organizational structure” u(c3) = {1‒3} (points) effective, not sufficiently effective, ineffective c4 – lv “level of information development” u(c4) = {1-3} (points) high, medium, low c5 – lv “technological level of the enterprise” u(c5) = {1‒5} (points) high, above medium, medium, below medium, low m ar ke t c ap ita l (d ) d1 – lv “loyalty of consumers”; u(d1) = {1‒3} (points) high, medium, low d2 – lv “branding” u(d2) = {1‒4} (points) high, medium, low, absent d3 – lv “suppliers”; u(d3) = {1‒3} (points) reliable, not reliable, missing constant d4 – lv “social activity of the enterprise” u(d4) = {1‒4} (points) high, medium, low, absent d5 – lv “relations with financial institutions” u(d5) = {1‒3} (points) reliable, not reliable, absent baltic journal of economic studies 129 vol. 4, no. 1, 2018 in fig. 1. the upper figure characterizes the error in the functions of the membership of the triangular shape, the lower – gaussian. as you can see, the gaussian form of membership functions allows obtaining much greater modelling accuracy for this case. the overall structure of the hybrid neural network is shown in fig. 2. the combination of all neural networks in one model to determine the value of the index of the intellectual component of the energy-saving policy of the enterprise has been carried out in the mathematical package simulink for matlab. 4. conclusions the use of the proposed mathematical model will allow us to determine the indicator of the intellectual component of the energy-saving policy of the industrial fig. 1. graphical results of calculating training error in various forms of membership functions fig. 2. general view of the structure of the hybrid neural network to determine values of the indicator “b” baltic journal of economic studies 130 vol. 4, no. 1, 2018 enterprise, which in turn provides an opportunity to select those components of intellectual capital that have the greatest influence on the energy-saving policy of the enterprise. if it is necessary, the use of different components of intellectual capital, the proposed mathematical model will allow ranking their degree of attractiveness for energy conservation policies. the expert information can be provided by both an expert and a group of experts and serves as input information for modelling in the proposed mathematical model. further information and practical experience of implementation of energy saving measures can be used for training mathematical model. references: denisenko, m. p. (2013) innovative development of society based on intellectual capital. naukovi zapysky natsionalnoho universytetu «ostrozka akademiya». ekonomika (scientific notes of the national university of ostroh academy. economy), 23, 15-19 (in ukr.). di stefano, paul j., kalbaugh, g. edward (1999) intellectual capital. rough notes, 142 (7), 94-95. tsipurynda, v. (2013). factors of formation of intellectual capital. visnyk knteu (bulletin of knteu), 2, 18-28 (in ukr.). bontis, nick (1996) there’s a price on your head: managing intellectual capital strategically. business quarterly, 60 (4), 40-47. bassi, laurie j. (1997) harnessing the power of intellectual capital. training & development, 51 (12), 25-30. seid, mohammad, reza, mirahmadia, ali, attafara saideh, ketabia (2018) developing a fuzzy anp model for performance appraisal based on firm strategy. decision science letters, 7, 243-256. voinarenko, m. p., dzhedzhula, v. v. & yepifanova, i. yu. (2016) modelling the process of making decisions on sources of financing of innovation activity. ekonomicniy chasopis xxi (economic annals-xxi), 160 (7-8), 126-129 (in ukr.). pankevich, o. d. & shtovba, s. d. (2005) diagnosis of cracks in building structures with the help of fuzzy knowledge bases. vinnitsa: universum-vinnytsya (in ukr.). leonenkov, a. v. (2005) fuzzy simulation in the matlab environment and fuzzytech. st. petersburg. bhvpetersburg (in russ.). baltic journal of economic studies 311 vol. 3, no. 5, 2017 corresponding author: 1 kharkiv national university of internal affairs. 2 institute of criminal execution service. 3 educational and scientific institute № 2 of the national academy of internal affairs of ukraine doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-311-318 comparative analysis of administrative and legal principles of tax administration in the conditions of decentralization in europe and ukraine leonid mogilevskyi1 secretariat of the academic council, kharkiv national university of internal affairs, ukraine eugene barash2 institute of criminal execution service, ukraine andrew sakovskyi3 educational and scientific institute № 2 of the national academy of internal affairs of ukraine, ukraine abstract. the aim of the article is a comparative analysis of the administrative and legal regulation of tax administration in european countries and in ukraine and the definition of ways to improve domestic legislation in this field on this basis. the subject of the study is the administrative and legal principles of tax administration in the conditions of decentralization of state power. methodology. the study is based on a comparison of the foreign experience of legal regulation and collection of local taxes by using the example of european states with the current state of the process of introducing tax decentralization in ukraine. due to the use of this amount of general scientific and specialscientific methods and methods of scientific knowledge, the content of the administrative and legal foundations of tax administration, as well as legal phenomena such as tax decentralization, were characterized and defined. the conclusions that we made helped us to determine the specifics of their administrative-legal regulation in some countries of europe and in ukraine. the results of the conducted comparative legal study made it possible to prove the direct impact of tax decentralization on the mechanism of tax administration and the systematic organization of tax authorities. these processes have a predominantly positive impact on macroeconomic processes, they broaden the rights and opportunities of local authorities regarding the use of funds by local governments, forecasting and approving regional budgets, and managing taxes and fees. practical impact. the administration of taxes in the conditions of decentralization in europe can be characterized by a high level of efficiency and functionality of the work of the territorial tax-control bodies. this experience is really necessary for ukraine, where the activities of local self-government in some areas are limited by the central apparatus. value/originality. a comparative legal study of world experience in the legal regulation of tax administration under conditions of financial decentralization, which consists of a whole complex of individual normative structures and procedures, gives us a better understanding of the prospects for the development of national administrative legislation in this area. key words: administration of taxes, decentralization, administrative and legal principles. jel classification: m11, e42 1. topicality the effective and high-quality taxation system, which supports the economic situation of the country and the filling of the budget, is an important factor in the functioning of any modern state with a market economy. the process of collecting taxes is a rather complex phenomenon, which has its own normativelegal consolidation, as well as the corresponding implementation principles. the administrative and legal provisions occupy the prominent place among them. on the bases of these principles, the system of regulation and direct collection of mandatory, legally determined payments is based. at the same time, administration of taxes serves today as the purpose of many reform processes, along with other fields of legal activity of society in ukraine. the financial baltic journal of economic studies 312 vol. 3, no. 5, 2017 decentralization is one of them. this aspect is primarily connected with the integration of our state into the european community, which requires a number of changes in the legal, economic, political, and other fields. that is why the problem of tax administration in the conditions of financial decentralization, which consists of a complex of separate normative structures and procedures, is a priority area of scientific and practical research. however, considering that the mentioned issue is the novelty of the modern economic and legal sphere of ukraine, we consider it necessary to conduct a comparative analysis of the latter, taking into account the foreign experience of european countries, in order to determine the perspectives for the development of tax administration and the place in this process of administrative and legal principles. 2. the level of the development the analysis of scientific literature has shown that many scholars have raised issues, which are connected with the functioning of the tax system, in their researches. particularly, the analysis of the peculiarities of national taxation was carried out by such scientists as: daudova v.h., barannyk l.b., heiets v.m., andrushchenko v.l., kyrylenko o.p., kravchenko v.i., lunina i.o., sokolovska n.v., and others. proskura k.p., zakharchenko v.yu., ivanova yu.b., krysovatyi a.i., and others studied practical and theoretical aspects of tax administration. in its turn, various taxation issues in other countries were highlighted in the works of such foreign scholars as: devero m., wilson d., tabellini g., diamond d., white m., perrotti r . et al. despite the existence of a large number of doctrinal views on different aspects of tax administration, a comparative analysis of the administrative and legal principles of this phenomenon in the conditions of decentralization in ukraine and in the territory of foreign states was not carried out. the aim of the article is a comparative analysis of the administrative and legal principles of tax administration in the conditions of decentralization in europe and ukraine. 3. statement of the basic material the scientific development of this problem we should begin with the definition of the content of such terms as “administrative and legal principles of tax administration” and “decentralization”. it should be noted that such term as “administrative and legal principles of tax administration” comes from the classical category of legal principles, that is, from the key principles of legal reality. in this case, the principles and bases should be considered as synonyms, since the meaning of both words is identical. regarding the definition of the latter, there are several views in the scientific environment. for example, according to prokopenko v.i., legal principles are the main subjective rights and responsibilities (prokopenko, 1969; strachuk, 2012). a broader and more comprehensible understanding of legal principles is proposed in the works of o.f. skakun, p.m. rabinovich, k.e. livantseva, yu.a. vedernikova, and others. according to their concept, the principles of law are the guiding ideas, which are objectively inherent bases of the law, and the indisputable requirements (positive obligations). they are put to the participants of social relations in order to harmonize the combination of individual, group, and public interests and they determine the content and direction of legal regulation, they reflect the most important patterns of socio-economic formation (strachuk, 2012; skakun, 2009; rabinovych, 1995; vedyernikov, hrekul 2005). if we will use this theoretical concept regarding the definition of administrative and legal principles, separately from the sphere of tax administration, then its content is most closely matched with the scientific view of panova n.s. the scientists point out that the administrative and legal principles are a set of administrative and legal norms, which define the main values, tasks, forms, and methods of development of normative and regulatory activities of executive bodies (zabroda, 2013; panova, 2008). the second part of the concept of “administrative and legal principles of tax administration” also has its own content load. it is logical to assume that administration is a cumulative process, which is aimed at achieving a certain goal. in our case, it is the collection of legally established, mandatory taxes and fees. confirmation of this definition can be found in the scientific concepts of many scholars. for example, khavkina o.g. considers administration of taxes as a management activity of state authorities, which is associated with the organization of the tax process and which is built on state legislative and regulatory acts (kravtsova, 2017; khavkina, 2005). melnyk v.m. provides a more detailed definition in his works. in his view, tax administration is an activity of executive authorities, it has managerial nature, and it is based on state legislative and regulatory acts, and it uses socially determined and accepted rules. besides, administration, as a direction of activity, consists of accounting, mass-explanatory and advisory work, forecast analytical work and control and analytical work (kravtsova, 2017; melnyk, 2006). the view of barabanova v.v. is rather interesting also. she understands under the administration of taxes not only the administrative activity of the public-law nature of the tax authorities regarding the formation of state revenues but also business entities in order to implement the provisions of the tax code (khomutenko, lutsenko, khomutenko, 2015; barabanova). however, despite a large number of doctrinal definitions, the legislative, legal justification of tax administration takes the main place. according to the current tax code, the latter is a set of decisions and procedures of the controlling baltic journal of economic studies 313 vol. 3, no. 5, 2017 bodies and the actions of their officials that determine the institutional structure of tax and customs relations, organize the identification, registration of taxpayers and payers of the single payment and objects of taxation, provide service to taxpayers, organization and control over the payment of taxes, fees, payments in accordance with the procedure established by law (podatkovyy kodeks ukrayiny, 2011). thus, summarizing all the mentioned, the administrative and legal principles of tax administration can be defined as the initial provisions of normative and managerial activities of the authorized bodies in the area of implementation of relevant decisions and procedures, which are aimed at the organization and regulation of relations related to the collection of official payments, fees, and taxes. their expression can be traced in the provisions of the legislative and bylaws acts, which establish the scope of application, powers and functions of the relevant state bodies involved in the organization of the taxation process in ukraine. it is also expedient to consider separately the meaning of the term “decentralization”, considering the complexity of the phenomenon that is described. according to the explanatory dictionary, decentralization is a management system, in which a part of the functions of central government passes into local self-government bodies. in other words, the extension of rights of local governing bodies is carried out (busel, 2005). according to borislavska a.n., decentralization is a quite complex concept, which can be revealed through its influence on: administrative-territorial structure of the state, the system of bodies of public administration, distribution between them of functions, powers, and financial resources. in fact, it is such a way of defining and demarcating tasks and functions, in which most of them pass from the level of central bodies to a lower level and become their own tasks and powers of the bodies of the lowest level (boryslavska, zaverukha, zakharchenko, 2012). however, in our case, we are talking about decentralization of the taxation system. it forms a large array of individual institutes that are organically combined with classical phenomena. it is necessary to present the scientific view of ostrovetskyi v.i. on this issue. the scientist points out that decentralization means the transfer of responsibility for increasing the expenditure and revenue parts of the budget to the local level. a decentralized system should ensure the level, quality, and content of public services and it should be coordinated with the preferences of voters, providing incentives for the efficiency of such services (ostrovetsky, (2016). therefore, taking into account the presented scientific views, it can be concluded that tax decentralization is a redistribution of the rights and functions of the central government, according to which the territorial authorities are given more powers in the field of taxation and regulation of financial and budgetary relations. so, by characterizing and defining the content of the administrative and legal principles of tax administration and the phenomenon of tax decentralization, we can analyse the current state of these categories on the territory of ukraine and european states. it should be noted that tax decentralization is a novelty in our country today because it is connected with the provision of local authorities with extended rights in the field of local budgets formation. the corresponding changes in the legislation began only in 2014 in order to build such internal financial relations. by this time, local budgets entirely depended on the general state treasury. the following legal documents became the regulatory basis for tax decentralization: the law of ukraine “on amendments to the tax code of ukraine and certain legislative acts of ukraine on tax reform” on 28.12.2014 (pro vnesennya zmin do podatkovoho kodeksu ukrayiny, 2015); the law of ukraine “on amendments to the budget code of ukraine on the reform of the intergovernmental fiscal relations” on 28.12.2014 (pro vnesennya zmin do byudzhetnoho kodeksu ukrayiny, 2015); the law of ukraine “on amendments to the budget code of ukraine regarding the peculiarities of the implementation of budgets of the united territorial communities” dated november 26, 2015 (pro vnesennya zmin do byudzhetnoho kodeksu ukrayiny, 2016); the law of ukraine “on amendments to the tax code of ukraine and certain legislative acts of ukraine regarding the balance of budget revenues in 2016” of 24.12.2015, etc. (pro vnesennya zmin do podatkovoho kodeksu ukrayiny, 2016). these normative legal acts clearly divided the national and local taxes and fees. so, in the structure of the local obligatory, legislatively established payments according to changes are included: property tax; single tax. parking fee for vehicles; tourist tax (podatkovyy kodeks ukrayiny, 2011). as we can see, the legislator has substantially limited the number of taxes and fees that form local budgets of territorial units. it should be noted that before carrying out the corresponding reforms and adoption of the new tax code of ukraine, sixteen separate taxes and fees have been carried into the number of local taxes (on local taxes and duties: decree of may 20, 1993). at first glance, such changes seem very negative because the local budgets were actually “cut” sources. however, tax decentralization has changed not only the list of taxes and fees, which go exclusively to local budgets but also redistributed nationwide mandatory payments. thus, the filling of the state treasury and budgets of urban significance is carried out in a percentage ratio. for example, according to the budget code of ukraine, 60 percent of the personal income tax is attributed to territorial revenues; 10 percent of corporate income tax, etc. (byudzhetnyy kodeks ukrayiny). baltic journal of economic studies 314 vol. 3, no. 5, 2017 in general, according to daudova h.v. introduction of budget decentralization has fundamentally changed the quality of financial support of local budgets. changes to the budget and tax legislation have defined new approaches to the formation of the revenue side of local budgets, which has resulted in the increase of the own resources of the territorial communities. the growth of financial resources is connected with the: with the introduction of new taxes and fees charged to local budgets; with the redistribution of revenues from state and local budgets (the state fee for the issuance of passports and fees for the provision of other administrative services); with the optimization of the system of intergovernmental transfers (daudova, 2015). besides, according to the analysis of the centre for the preparation of reforms, tax decentralization can also be characterized by a number of other features. of course, the most positive of them is the acquisition of the financial independence by the local budgets. therefore, cities, big and small villages can plan their development under any conditions, having already got their own funds for this. under such conditions, a part of the funds coming to local budgets in the form of subventions and subsidies is not so urgent because there is already a “financial pillow”. another positive factor is the fact that local authorities, in a context of tax decentralization, can, through a simplified procedure, provide local guarantees and borrowings from international financial institutions (herus). it should be noted that the introduction of tax decentralization undoubtedly affects the mechanism of tax administration. in accordance with the provisions of the tax code of ukraine, this mechanism is implemented by the corresponding executive body. so, such body for today is the state fiscal service of ukraine. its activities are directed and coordinated by the cabinet of ministers of ukraine through the minister of finance, which implements state tax policy, state policy in the field of state customs, state policy on administering a single contribution to compulsory state social insurance, state policy in the field of fighting offenses during application tax, customs legislation, as well as legislation on payment of single payment (pro derzhavnu fiskalnu sluzhbu). the influence of tax decentralization on the administration mechanism, of course, in no way left a reflection on the system organization of the tax authorities, which represent a hierarchical structure. however, with the expansion of financial and budgetary autonomy of local self-government, there appeared an urgent issue of assessing the effectiveness of administering compulsory payments and fees. the concept “efficiency” in this case should be defined as the ratio of the received result and the expenditures that were used to achieve it (litvinova, 2014). in our opinion, in the context of the administration of local taxes, effectiveness demonstrates the significance and efficiency of tax decentralization, as well as the feasibility of implementing certain normative or practical actions whose purpose is to fill the local treasury. viktorchuk m.v. also expresses the following opinion in his dissertation research. the latter outlines the criteria for determining the effectiveness of administering local taxes and fees, which include: indicator of the appeal of the effectiveness of administering local taxes and fee; the level of achievement of goals and fulfilment of tasks of tax decentralization; the level of collection of local taxes and fees; the level of adaptation of the system of taxation of local taxes and charges for changes in the environment (particularly, to changes in legislation); the ratio of the number of monetary claims in disputes between tax authorities and taxpayers, which are considered by the courts in favour of tax authorities; decrease in debt on taxes; increase in a share of payers who appraise work of tax bodies positively according to sociological researches; increase in a share of the payers, who have a possibility of access with the help of communication channels and the internet to the personified information about the condition of calculations with the budget, etc. (viktorchuk, 2016). besides, in our opinion, an effective factor in ensuring the effective implementation of the tax administration mechanism under the conditions of tax decentralization at the local level is the competent system of informing the population of the corresponding territory. today’s lack of knowledge about the content of legal phenomena that exist in our state and peculiarities of their functioning is a major problem for ukrainian society. this negative factor also has its manifestation in the field of taxation. lack of proper awareness leads to the wrong perception of legal reality by citizens and, as a consequence, it leads to the commission of offenses. increase in level of informing local population by tax authorities will become a functional preventive factor, which will increase the efficiency of administration of taxes and fees on places in the conditions of decentralization. so, having analysed features of the taxation at the local level, we have defined that the presented mechanism has ways of improvement in the conditions of tax decentralization because tax decentralization is at a development stage today. considering this fact, it is necessary to analyse the foreign provision of administrative and legal bases of administration of taxes in the conditions of decentralization on the example of the european countries. this approach will allow us to learn the most relevant and positive points of view of the effectiveness of taxation, and, besides, it will help to abandon the negative, inhibiting mechanism of the administration of factors. baltic journal of economic studies 315 vol. 3, no. 5, 2017 in europe, decentralization, as an economic and legal phenomenon, is not a novelty, unlike in ukraine. particularly, the first signs of decentralization processes have already been observed in the 11th–12th centuries in england. thus, richard i (1157–1199), when he needed money for the financing of the crusades, began to use actively the fast and efficient ways of replenishing the state treasury – the sale to the city of the charter, which guaranteed them certain privileges. particularly, the cities, with the consent of the crown, were granted the right to self-government, legal proceedings, consolidation of fortifications, and the creation of armed units for the maintenance of law and order. but the most important thing is that their tax status has changed. after the charter was donated, certain administrativeterritorial entities in the property and legal aspects acquired such force and significance that the king could not withhold anymore from them any taxes, except for the collection from the city (hrechakivskyy, kabash, 2009; smyt, 1992). later, the theory of decentralization of power in all spheres of social life and the acquisition of a wide range of rights for local self-government developed under the influence of the reform processes in europe. some concepts of decentralization have been reflected in modern international legal documents, such as the european charter of local self-government (hrechakivskyy, kabash, 2009). at t0he modern historical stage, the peculiarities of the influence of decentralization on the taxation mechanism can be analysed using the example of many european states. it should be noted that the approach to the organization of local government in europe differs from the ukrainian one, which significantly affects the tax system and the mechanism of its administration. for example, in poland, for many years, a concept has been built in which the development of regions can be possible only on condition of stable financial income. it is this factor that allows planning of the development of social infrastructure and introducing economic incentives for business development in the long term. in poland, such a stable income is local taxes. direct local taxes are: inheritance tax and gift, agricultural tax, forest taxes, real estate, transport tax and dog owners’ tax. besides, there are so-called fees as: market (in fact, payment for a place on the market), local, and administrative fees. also, at the territorial level, there is a tax that is paid in the form of a “tax card”, which in fact corresponds to our single tax. in a certain percentage ratio, the share of the personal income tax (pit) and the profit of enterprises are counted to the local budget of territorial units (rosolyak, martsiyas, 2016). we should note that the administration of taxes in poland can be characterized by high level of control over financial expenditures from the budgets of local self-government bodies. particularly, the network of regional accounts chambers is very close to local budgets, and it is easy to see abuse. this body is a rough, non-emotional financial audit and control. in turn, the ministry of finance of poland does not have access to many registries; it does not participate in the collection and payment of local taxes the register of real estate for payment of taxes is led by the head of the gmina (an administrative-territorial unit in poland), who is interested in ensuring that the register is as clear as possible, because the revenues to the budget, which is administered by the gmina, depend on it. it is at the level of the gmina, where the control is provided over the charge and payment of tax. and the verification of these processes is carried out by regional audit chambers (rosolyak, martsiyas, 2016). the example of tax administration in the context of decentralization in romania is quite informative and interesting. tax decentralization in the territory of this country has greatly expanded the rights and opportunities of local authorities regarding the use of funds by local self-government bodies, forecasting and approval of regional budgets, management of taxes and fees. the main state bodies that support the decentralization reform are the ministry of the interior and administrative reform, which are involved in the special programs of financing the european union. the legislation of romania specifies sources of financing local budgets, for example: state transfers, the share of national taxes, grants and subsidies; the property of state authorities, local taxes, fees, and borrowings. the regulatory base also regulates an order of formation, acceptance, and execution of local budgets and an order of financing of utilities and the organizations of the municipal sector. some of the latest amendments to the local finance act provide additional rights to introduce local taxes and fees to the local governments. besides, according to the provisions of romanian law, the main principles of tax decentralization and tax administration are: a uniform income level; proportionality; completeness; the local character of the financial system, etc. (detsentralizatsiya vlady, 2015). in spain, there is a special form of tax decentralization. in the territory of this country, this process is connected with democratization. therefore, the spanish constitution of 1978 fixes the concept of asymmetry. its essence lies in the fact that decentralization is divided into several modes – special, exclusive, and general. it should be noted that the exclusive regime applies only to the basque country and navarre, while the general regime extends to the other 15 autonomous territories. the main difference between these regimes is that the special regime regions have powers to collect taxes at the regional level, while in the general-mode regions such a possibility is significantly restricted. under the special regime, most of the taxes are transferred to the autonomous government, together with the baltic journal of economic studies 316 vol. 3, no. 5, 2017 responsibility for tax administration; and that means, consequently, that this government can establish an appropriate level and base of taxation. all main types of taxes – from income, corporate taxes, to wealth, inheritance and the transfer of wealth – are completely under the administration of regional authorities. in regions with a special regime, citizens do not pay any part of these taxes to the central government. the reform in 1997 increased the powers of the tax authorities of the named regions, and the value-added tax was also transferred to the regional authorities, however, without any powers to establish its rates or to define the base of taxation. but, with the aim of compensation for services that were provided by the central government to the region, the regional government pays to the central power a certain sum, which look like a transfer or grant (boryslavska, zaverukha, zakharchenko, 2012). 4. conclusions by conducting a scientific analysis of the all mentioned information, we have come to a number of corresponding conclusions. 1. tax decentralization in ukraine is a positive phenomenon in general. it allows significantly expanding the capacity of local self-government bodies in the area of the formation of a territorial basis, which, in turn, allows regions to develop independently and to use their own money for their own needs, regardless of the power centre. instead, tax decentralization is also characterized by some negative features. particularly, its introduction is a positive factor for the developed, economically and politically stable regions. on the territory of other administrative-territorial units, where such stability does not exist, the crisis events may deepen and gradually increase its effect. 2. decentralization does not have a qualitative effect on the mechanism of tax administration, which is carried out by special tax bodies, the system of which is hierarchical and centralized. this aspect needs to be changed, according to the model of the republic of poland, where special control agencies are close to local budgets of territorial units 3. positive and interesting in the long term for ukraine is spain’s experience in tax administration in the context of decentralization. on the territory of this european state, the regulation of fees and charges is fully ensured by the local authorities. this is primarily due to the tax policy of spain. most taxes and fees remain at the territorial level. in compensation for a high level of autonomy, the local government pays to the central government some amount, which is determined by the law. 4. in general, the administration of taxes in the conditions of decentralization in the territory of europe can be characterized by the high level of efficiency and functionality of operation of territorial tax supervisory authorities. besides, the european local government has a wide range of the rights 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(in ukrainian) baltic journal of economic studies 135 vol. 3, no. 5, 2017 corresponding author: 1 department of tourism, kremenchuk mykhailo ostrohradskyi national university. e-mail: drughinina.vd@gmail.com orcid.org/0000-0001-8776-1408 2 department of taxation and social economics, volodymyr dahl east ukrainian national university. e-mail: a.likhonosova@gmail.com orcid.org/0000-0001-6552-8920 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-135-145 strategic imperatives ensuring population welfare under transformation exclusion conditions viktoriia druzhynina1 kremenchuk mykhailo ostrohradskyi national university, ukraine ganna likhonosova2 volodymyr dahl east ukrainian national university, ukraine abstract. the purpose of the research is to substantiate strategic imperatives that should be taken into account in developing algorithms for improving the welfare of the population in the conditions of socio-economic transformation and the emergence of exclusion impulses. the subject of the research is the theoretical and applied aspects of the development of strategic imperatives for the transformation of socio-economic relations in different regions of ukraine. the methodology of the research is based on methods of correlation-regression analysis – to assess the standard of living of the population, taking into account regional specifics; logical-heuristic, economic-mathematical analysis – to identify the relationship between the needs of the population of different regions and their priority; spatial vector modelling – to predict the level of average wages of the population; as well as for diagnosing the welfare of the population, taking into account the influence of factors of socio-economic transformation and emerging rejection; inverse method – the adequacy of the obtained models and forecasts with the help of verification of predictive values is checked. results. the research confirmed that the effectiveness of achieving the welfare of the population depends on the degree of restrictions within the framework of socio-economic transformations, the emergence of impulses of social and economic exclusion. the authors developed an algorithm for estimating and modelling the living standards of the urban population. the implementation of the algorithm occurs by: determining the result indicator of the living standards of the population of the city to select the priority factors of influence on the result indicator; detection of the dependence between the result indicator and the factors of influence; the choice of the optimal predictive function for the forecast of the development of the main components (factors) of the result indicator; forecast of the level of the result indicator. at the stages of implementation of the algorithm, a multivariate econometric model for forecasting the living standards of the urban population is constructed. the model proposed by the author is adequate, its statistical quality, significance, and reliability are sufficient for use in forecasting socio-economic processes of city development. the practical significance of the study is to provide methodological and applied tools for finding compromise solutions to neutralize the negative effects of socioeconomic rejection and to promote the welfare of the population in different regions of ukraine, which unites the entire ukrainian nation to address the priority tasks that provide the maximum socio-economic effect. value/originality. the conducted research allowed confirming the obtained results: the implementation of a phased algorithm for forecasting the standard of living of the population depends on a set of strategic and alternative transformational decisions; prolongation of studies of processes of socioeconomic transformation and emerging rejection is ensured by the influence of factors of increasing or decreasing welfare of the population; the level of wages, as an indicator of the quality of life of the population, contributes to the formation of a strategy for improving the welfare of the population. such a complex of actions aimed at solving the problems of finding alternative solutions, adopting, implementing and monitoring the concerted actions of the population and governmental organizations will strategically ensure the achievement of high quality and standard of living of people, giving them the opportunity to realize their own development goals. key words: strategic imperatives, welfare, population, socio-economic transformation, exclusion impulses. jel classification: a13, c02, r11 baltic journal of economic studies 136 vol. 3, no. 5, 2017 1. introduction the main purpose of the activity of state and local authorities is to increase the welfare of the population both at the state, regional, and local levels. in order to accelerate the integration processes in the european economic and social space, it is necessary to ensure sustainable social and economic development of the population throughout the territory of ukraine. qualitative diagnostics of the welfare of the population, taking into account a large number of socio-economic factors affecting it, is an important tool in the development and implementation of state social policy. the peculiarity of socio-economic development of the population of ukraine to date is the presence of highly polarized types of levels and quality of life, which requires the use of various evaluation techniques and forecasting (belyaeva, 2009). 2. results of previous researches scientific developments of many foreign and domestic authors are devoted to issues of estimating the welfare of the population using the system of indicators. among the scholars who suggested ways to measure welfare and poverty, examined the relationship between the dynamics of indicators that characterize them and the economic growth at the national and regional levels, one should distinguish the work of scientists from the institute of demography and social studies e. libanova (libanova, 2007), o.  makarova (makarova & hladun, 2012), v.  pryimak (pryimak, 2011), a.  ihnatiuk (ihnatiuk, 2010), v.  druzhynina (druzhynina & zalunina, 2017), and others. theoretical and methodological aspects of living standards of the population are investigated in the works of a.g. smith (smith, 1997), a.c. pigou (pigou, 1932), a. sen (sen, 1987), v. mandybura (mandybura, 1998), v. zherebin and a. romanov (zherebin & romanov, 2015), i. kholodok (kholodok. & lysenko, 2011). the problems of assessing the standard of living of the population were revealed in writings by the following researchers: t. popova (popova, 2011), o. omelchenko (omelchenko, 2010), v. druzhynina (druzhynina & chornous, 2011), h. likhonosova (likhonosova, 2012). a significant contribution to the research of practical aspects of the application of statistical methods and models of diagnosis of living standards and social modelling was made by k. de green (green, 1987), h. verbytska (verbytska, 2010). however, despite a number of scientific works, the question of a qualitative assessment of the welfare of the population at the local level, due to a large number of factors influencing it, remains rather controversial. that is why the question of estimating and forecasting the welfare of the urban population is raised by the prism of its basic indicator of living standards. after all, raising the living standards of the population at the local level will contribute to the improvement of the socio-economic situation of the population at all administrative-territorial levels. 3. empirical studies of the impact of socio-economic transformations on the welfare of the population the priority direction of development for ukraine and its territorial-administrative units, in particular, is raising the level of welfare of the population. the system of modern state administration in the country is rather imperfect and ineffective, which leads to a decrease in the welfare of ukrainians in general and its material component – the standard of living – in particular. in this regard, a large number of scientists and researchers investigate current problems of the present, namely, the standard of living of the population. the standard of living of the population is a socioeconomic category that helps describe the material welfare not only of the individual but also defines the general result of economic development in the country over a certain period of time. this is quite a dynamic category, which depends on the specific conditions of development of the country and society, therefore, according to the objectives of the research, its content is also determined, which greatly influenced on the differences in methods of evaluation. hence, it can be concluded that the standard of living is quite complex and multifaceted concept, which combines in itself a number of socio-economic relations, which are connected with the state and the conditions of life of people in society (verbytska, 2010). it should be noted that the effectiveness of social policies of local authorities determined the living standards of its people because their main aim is to ensure economic growth and social stability on the local level, improving the material welfare and protection of its vulnerable strata, the material and spiritual needs of people, etc. the spatial research base is city kremenchuk, assessment of living standards, which should begin by multivariate modelling in system integrated assessment through the algorithm, which consists of certain phases (fig. 1). on the first phase of the study, it is advisable to choose the resulting index for assessing the level of life of the city population. the average wage in the city kremenchuk was such the resulting index (y). on the second stage of the study, it is necessary to choose the key indicators of socio-economic development (factor values) for assessing the impact of the factors; it is listed in table 1 (the main statistical office in poltava region). to assess the standard of living, on the third stage, there was chosen a method of correlation and regression analysis through a number of advantages of it: firstly it is available for pc users; secondly it helps to identify and baltic journal of economic studies 137 vol. 3, no. 5, 2017 quantify measure the level of influence of individual factors on the object of research; thirdly, on the basis of actual data of model, it is possible to realize forwardlooking assessment of the investigated object (pidhornyi & vitkovska, 2012). to detect the relationship between the resulting index and the factors that influence it using linear equations multivariable regression type: y = α0+α1 x1+α2 x2+∙∙∙+αn xn, (1) where y – the resulting figure; x1, x2, ..., xn – factors of influence; α0, α1, ..., αn – parameters of the model, which need to be estimated (regression coefficients). to identify the link between the resulting index (average salary) and the factors that influence it, it is necessary to build matrix coefficients of correlation of factors that influence the resulting index (table 2). in the process of analysing the data of table 2, under the conditions of eliminating multicollinearity, as factors of impacts on the resulting figure are elected as follows: the number of small enterprises (x2); cost of minimum living standards (x3); productivity (x5); nominal wages (x7); minimum wage (x9). generated results of regression analysis between average wages and selected indicators that affect it are given in tables 3–5. fig. 1. stages of forecasting of urban population life level source: compiled by the authors detection of the relationship between resulting the indicator and impact factors the choice of priority impact factors on the resulting figure stage 2. evaluation of the factors impact stage 1. identification of the resulting indicator for the evaluation of living standards of the city population stage 4. forecast of the resultant index level stage 3. choosing the optimal predictive function for the prediction dynamic of the main components (factors) resulting index table 1 summary indicators for the assessment of living standards of the population in kremenchuk name of indicator value index by years 2008 2009 2010 2011 2012 2013 2014 2015 average salary, uah (y) 2079 1960 2445 3036 3321 3522 3398 4043 gross value added, million uah (x1) 15603,6 10142,4 10345,2 14190,3 1527,5 13350,8 4957,4 4902,3 the number of small businesses per 10 thousand people, units (x2) 73 73 74 75 78 138 152 149 the size of the subsistence minimum per person per month, uah (x3) 601 664 849 923 1050,6 1147 1218 1330 the number of industrial personnel, persons (x4) 2270 2188 2057 2082 2219 2128 1582 1386 productivity, thousand uah (x5) 249,47 181,36 191,28 198,3 217,63 160,32 119,19 101 the migration balance, people (x6) 536 75 392 389 249 669 223 -441 nominal wages, uah (x7) 2080 1960 2609 3036 3386 3350 3398 4044 the inflation index, % (x8) 122,3 112,3 109,1 104,6 99,8 100,5 124,9 143,3 minimum wage in ukraine, uah (x9) 605 744 922 1004 1134 1147 1301 1378 arrears of wages, uah (x10) 7707,2 6870,4 2452,7 997,7 1253 1240,9 2161,8 3681,5 source: compiled by the authors using data from http://pl.ukrstat.gov.ua baltic journal of economic studies 138 vol. 3, no. 5, 2017 table 3 regression statistics multiple regression coefficient r 0,996360245 the coefficient of determination r² 0,992733738 normalized coefficient of determination r² 0,974568082 standard error 118,3632328 source: the authors’ calculations based on statistics (the main statistical office in poltava region) multiple regression coefficient r = 0,996 indicates a very tight relationship between the resulting indicator and factor values. the concern of the value of the coefficient of determination r² in obtained correlationregression model r² = 0,993, so, the dependence of the average wage to 99.3% due to selected factor values. this dependence is quite legitimate with considering high coefficients of multiple regression and determination. an indicator of significance f indicates that the evaluation results are sufficiently reliable. it makes sense to look at variance and f-statistics, so their higher value indicates a variation of the dependent and independent variable, so the regression equation is significant. thus, the regression equation, which is based on table 5, would look like this: y = -125,85 + 1,133 x2 + 1,553 x3 + 0,429 x5 + + 0,911 х7 – 1,282 х9. (2) through analyzing the regression equation may be made the following conclusions: as the number of small businesses per 10 thousand of present population grow on one unit, the average wage in kremenchuk increase by 1,13 uah; by increasing the subsistence minimum on 1 uah, the average salary will increase by 1,55 uah; while increasing productivity for 1 uah the average salary increase almost by 0,43 uah; by increase in nominal wages on 1 uah, the average salary will increase by 0,91 uah; by increasing the minimum wage on 1 uah, the average wages reduced on 1,28 uah. thus, the data of made correlation-regression analysis indicate that the selected factors have a significant impact on the average wage in the city kremenchug and it requires more careful analysis. at the local level for improving the living standards, it is necessary to ensure the stable development of the small and middle business. increasing the number of small businesses will provide more job places and will contribute to increased productivity in enterprises of the city. however, despite the increase in productivity, raising the minimum wage would reduce the average wage. this is because in times of crisis, companies do not fully use their potential as productive and skilled, what is displayed on the average wage. the minimum wage, in turn, should be reviewed depending on changes in the subsistence minimum table 2 matrix interconnection of paired correlation coefficients of factors that impact on resulting index х1 х2 х3 х4 х5 х6 х7 х8 х9 х10 y х1 1 х2 -0,346 1 х3 -0,595 0,851 1 х4 0,492 -0,798 -0,766 1 х5 0,446 -0,873 -0,803 0,901 1 х6 0,609 -0,334 -0,416 0,721 0,616 1 х7 -0,581 0,741 0,972 -0,703 -0,682 -0,421 1 х8 -0,229 0,510 0,303 -0,787 -0,564 -0,726 0,275 1 х9 -0,657 0,806 0,991 -0,774 -0,808 -0,459 0,961 0,284 1 х10 0,317 -0,306 -0,666 0,194 0,290 -0,144 -0,691 0,411 -0,692 1 y -0,522 0,780 0,972 -0,681 -0,689 -0,378 0,993 0,258 0,952 -0,674 1 source: the authors’ calculations based on statistics (the main statistical office in poltava region) table 4 indicators, which describe the reliability of regression model df ss ms f significance f regression 5 3828118,29 765623,6581 54,64893569 0,018066778 remainder 2 28019,70975 14009,85487 total 7 3856138 source: the authors’ calculations based on statistics (the main statistical office in poltava region) table 5 estimates coefficients of the five-factors regression model indicators coefficients standard error tcriteria of student p-value y -125,855 904,328 -0,139 0,902 х2 1,133 6,230 0,182 0,872 х3 1,553 3,921 0,396 0,730 х5 0,429 2,686 0,160 0,888 х7 0,911 0,497 1,834 0,208 х9 -1,282 2,467 -0,520 0,655 source: the authors’ calculations based on statistics (the main statistical office in poltava region) baltic journal of economic studies 139 vol. 3, no. 5, 2017 value of which is the social standard of the state. this index serves both such a factor influence on living standards of the population and an indicator of living in the country. therefore, increasing the living wage at the national level will contribute to social security and growth of standards of social and medical services for the population. in order to provide the effectiveness of developed regional and local socio-economic strategies of development, it is necessary to predict the level of life of the urban population. on the third stage, the forecast of the average wage was done by using the least squares method, which is used for predicting socio-economic processes (druzhynina, 2014). to confirm the accuracy of the constructed econometric model and obtain predictive values, there was carried out a verification of predicted values by invert method and by graphs of dynamics of actual and estimated levels of the average wage (fig. 2). through the results of the verification made, calculation error does not exceed 5%, confirming the adequacy of the model and derived predictions. in order to obtain accurate and reliable data forecast, a period from 2016 to 2019 was chosen, as making a forecast for a longer period is not appropriate taking into account the instability of the economic, social, and political situation in ukraine. by using the method of least squares obtained the following results of forecast factor indicators: the number of small businesses from 2016 to 2019 increased by 24.8%; the subsistence minimum per person per month 21.9%; productivity will decrease in 2019 to 50.3% compared to the year 2016; nominal and minimum wage from 2016–2019 will increase by 19,8% and 21,3 % respectively. on the fourth stage, there are made forecasts on the average wage in kremenchuk, which are based on forecast data and regression equation (fig. 3). despite the crisis phenomenon in the economy of the country, this forecast suggests a gradual increase of the average wage in kremenchuk, for forecast period it is nearly 20.3%, due to an increase in the number of small businesses; increase in subsistence level; growth of productivity and nominal and minimum wages. thus, the standard of living in kremenchuk tends to improve. so, as a result of the research, the following conclusions can be reached: firstly, developed and implemented step-by-step algorithm for the prediction of urban population level of life; secondly, by using correlation 2079 1960 2445 3036 3321 3522 3398 4043 2117 1898 2553 2956 3318 3462 3417 4069 1800 2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 2008 2009 2010 2011 2012 2013 2014 2015 a ve ra ge s al ar y, u a h year yф the actual average salary yр the estimated average salary fig. 2. trend changes of actual and estimated levels of the average wage in kremenchuk source: built by the authors’ calculations fig. 3. forecasting the level of the average wage in kremenchuk source: built by the authors’ calculations 4278,38 4568,30 4858,21 5148,13 0 1000 2000 3000 4000 5000 6000 2016 2017 2018 2019a ve ra ge s al ar y, u a h year baltic journal of economic studies 140 vol. 3, no. 5, 2017 and regression analysis, there are found factors that influence the city development, which will allow for the extending studies of socio-economic processes; thirdly, foundation of the average wage as an indicator for measuring living standards will promote a forming strategy for the socio-economic development city which is aimed at solving issues and finding alternative solutions, adopting, implementing, and monitoring that will be scientific base for the further studies. 4. strategic imperatives to increase the welfare of the population at the city level in recent years, kremenchuk has demonstrated a reduction in the economic growth due to the situational adaptation of the pre-crisis model of development. the positive changes in the local labour market of kremenchuk are developed for 2003–2015. it took place in the environment of controversial tendencies of development of labour markets areas (hlobynskyi, dykanskyi, kotelevskyi) and with consideration of negative trends in the development of local labour markets (pc “kryukov railway car building works”, jsc “kremenchuk steel works”, jsc “poltava fan factory”), which forms the imperatives of structural changes and development of the total of the local labour market. taking into account the results of comparing the characteristics of the main components of the balance of labour markets of foreign countries and ukraine, it is proved that, given the complexity of problems in the labour market in kremenchuk, we should not focus on ensuring the equilibrium state of the local labour market but on bringing the unbalanced local labour market today to the condition, in which the interests and needs of participants will be taken into account as much as it is possible. it is found that the increase in the imbalance of supply and demand in the local labour market of kremenchuk is due through, firstly, skill-imbalance of demand and supply of labour, and secondly, increased dual structural imbalance of supply and demand of job places by level of education and in professional qualification segmentation, which makes the need to solve the problem of imbalance on the basis of coordination of industrial, educational, demographic, and migration policy, strategic and tactical approaches to labour market regulation, inter-sectorial cooperation, the integration of efforts of government, business, and educational system. based on the assessment of the city’s resource potential, trends of socio-economic development in the city of kremenchuk, changes in the legal framework and certain vectors of the movement, existing problems and possible risks, it is necessary to determine the priorities, objectives, tasks, and measures of the economic and social policy of the city community, which are aimed at increasing the welfare of the population on the basis of taking into account all endogenous and exogenous factors, providing a high-quality and safe environment for the life of the population of kremenchuk. in order to increase the welfare of the population, to increase the socio-economic efficiency of the city of kremenchug, it is necessary to strengthen the coherence of state programs and work of local authorities in improving the economic conditions of the population and its social protection. the main conditions for improving the welfare of the urban population are appropriate approaches. in forming the strategic imperatives for increasing the welfare of the population of kremenchuk, the following approaches are used, such as the validity of the methodology for solving the problem: systemic, process, integration, dynamic, optimization, complex, strategic. the number of approaches used depends on the complexity of the system, therefore, the basic approach to solving the problem is a systematic approach, the use of which is due to the complexity of the problem and the need for its study in the unity of legal, economic, social, organizational, managerial, and other aspects; the globalization of competition, production, etc.; strengthening the role of the human factor. since welfare is seen as a natural system (climate and resource); economic (production, distribution, exchange, consumer, profit, business, property, and financial); institutional (components of security, intellectual, environmental, medical, demographic, psychological, social, educational, cultural, permissive, infrastructure, informational and communicative) components (druzhynina, 2014), consisting of an internal structure, in which input elements are transformed at weekends in accordance with the stated purpose, and the external environment, the above proves the need for a systematic approach. the economic essence of welfare is determined through its functions, which are in close connection with each other, which necessitates the application of a functional approach. the achievement of the stated goal of increasing the welfare of the urban population is established as a chain of interconnecting actions, which substantiates the choice of the process approach. when applying a dynamic approach welfare is considered in causal relationships, an analysis of the dynamics of its components in previous years and developed a mediumterm forecast. the integration approach is aimed at studying the relationship between vertical management levels, forming a multi-level system of indicators of population welfare and horizontal, exploring the welfare trends of the population at the same level, for example, at the city level. it is determined that interaction in all directions is carried out, first of all, on the basis of information technologies. the optimization approach is realized by identifying links between the resulting welfare indicators of the population, for example, the standard of living or quality of life, and the economicbaltic journal of economic studies 141 vol. 3, no. 5, 2017 ecological and social indicators through the methods of analysis, forecasting, and optimization, on the basis of which the imperatives and their directions form the concept of strategic welfare improvement and also the local population, which determines the use of principles of systemic and program-targeted approach. the program-targeted approach involves the selection of priority goals of economic and social development, the development of interrelated measures for their achievement at the specified time with the maximum efficiency with the necessary resources. strategic imperatives should be aimed at mobilizing and concentrating all possible resources for the implementation of tasks of reforming the city economy, developing the economic potential of cities, and achieving european standards of living (figure 4). the main vectors for improving the welfare of the population at the local level are the following: ‒ to increase the standard of living of the city’s population, strategic costs can be considered as an increase in the labour cost; reducing the proportion of low-income and low-wage workers; poverty reduction; settlement of interqualification relations in wages; elimination of arrears of wages and preventing them in the future; increasing the share of wages in the structure of production costs; observance of state guarantees in wages by all economic entities; ‒ to improve the quality of life of the population at the local level, it is necessary to ensure the stimulation of competitiveness, innovation processes and productions, the formation of a favourable climate for attracting investments; development of small and medium business; development of transport and road transport infrastructure. the main tasks for the development of transport infrastructure are increasing transport network capacity; introduction of high-speed passenger trains, primarily daily; development of a network of highways, first of all, high-speed and roundabouts of settlements. transport should ensure the availability and quality of transport services for all segments of the population in accordance with social standards. taking into account the steady trend towards urbanization and particularly intensive urban development, general purpose transport should become an alternative to individual motor transport. priorities in the development of public passenger transport are: long-term planning of urban, urban and suburban transport network development through the development of long-term general schemes for urban development, long-term development and transport links; the application of architectural and planning solutions to increase the throughput of the street network; forecasting the demand for passenger urban transportation and its satisfaction with various modes of transport; the optimization of the network of public routes and the structure of the park on the basis of periodic monitoring of passenger traffic; improvement of the city transport management system, including the creation of centres for the regulation of urban traffic; introduction of intelligent traffic control systems in urban areas, modernization of the system of automatic traffic control (traffic lights); ‒ development of traffic safety improvement programs in cities; implementation of projects to reduce the negative impact of urban passenger transport on the environment; providing population with high-quality public passenger transport services in cities, suburban, and rural areas by: developing and implementing state social standards and standards for passenger transport; development of highways; improving the service of people with disabilities; the introduction of a system of mandatory sale of tickets for travel and control over the implementation of such sales; the transfer of functions for the sale of tickets and the collection of revenues during the carriage of passengers in city traffic to customers; development and introduction of a system of cashless payments with the help of smart-cards for passenger transportation on public bus routes; ‒ reforming housing and communal services by creating social amenities for the city’s territorial community in providing high-quality housing and communal services, repairing the modernization of the housing stock reconstruction, ensuring the reliability of life support systems, comfort and safety of living conditions of the population; ‒ improving the accessibility, quality, and competitiveness of education through expanding the network of educational institutions for children, taking into account demographic indicators; creation of conditions in educational establishments that meet the modern requirements of educational development and ensure qualitative conducting of educational process; formation of students’ skills in the use of information and communication technologies for solving practical problems, research work, self-education, effective communication and cooperation, organization of effective access to them via the internet; ‒ implementation of the principle of continuity between pre-primary preparation of primary school pupils and profile education at a senior school; the introduction of inclusive education to support children with special educational needs and the formation of a positive attitude towards people with disabilities in the school environment; ensuring conditions for the development, adaptation in society and preparation for the work of children who need correction of physical and mental development; improvement of areas of work with gifted and talented children and young people, development of effective systems for the identification, training, education, and professional orientation of gifted and talented children and young people; raising the level of scientific and methodological support for pedagogical workers, disseminating advanced pedagogical experience in the city; updating modern computer equipment, technological equipment of baltic journal of economic studies 142 vol. 3, no. 5, 2017 fi g. 4 . th e de ve lo pe d or ga ni za ti on al s tr uc tu re o f b od ie s of lo ca l s el fgo ve rn m en t i n k re m en ch uk so ur ce : c om pi le d by th e a ut ho rs d ep ar tm en t o f c on tr ol an dc on si de ra tio n of a pp ea ls d is tr ic t d ep ar tm en ts o f s oc ia l pa ym en ts a nd c om pe ns at io ns 2 d ep ar tm en t o f ho us in g an d co m m un al s er vi ce s d ep ar tm en t o f op er at iv e co nt ro l i n ci ty co nd iti on s d ep ar tm en t o f ac co un tin g an d au di t d ep ar tm en t o f ac co un tin g an d au di tin g d ep ar tm en t o n pe rs on ne l w or k c on tr ol a nd re vi si on de pa rt m en t d ep ar tm en t o f la bo ur m un ic ip al te rr ito ri al c en tr e of so ci al s er vi ce d ep ar tm en t o n w or k w ith fa m ili es , c hi ld re n an d yo ut h d ep ar tm en t o f cu ltu re a nd to ur is m d ep ar tm en t o f ph ys ic al c ul tu re an d sp or t h ea lth c ar e de pa rt m en t d ep ar tm en t o f ed uc at io n d ep ar tm en t o f la bo ur a nd s oc ia l pr ot ec tio n of th e po pu la tio n fi na nc ia l de pa rt m en t e co no m ic de pa rt m en t d ep ar tm en t o f en tr ep re ne ur sh ip , tr ad e, s er vi ce , a nd re gu la r p ol ic y l an d re so ur ce s de pa rt m en t d ep ar tm en t o f ac co un tin g an d di st ri bu tio n of ho us in g ar ea d ep ar tm en t o n be au tif ic at io n an d ec ol og y l eg al d ep ar tm en t d ep ar tm en t o f in fo rm at io n an d co m pu te r te rc hn ol og ie s o rg an iz at io n an d co nt ro lli ng de pa rt m en t d ep ar tm en t o n do cu m en ts w or k d ep ar tm en t o n w or k w ith p ub lic ity pe rs on ne l de pa rt m en t m ay or c ity c ou nc il se cr et ar y of c ity c ou nc il pe rs on ne l o f c ity e xe cu tiv e b oa rd a dm in is tr at io n of a vt oz av od sk yi di st ri ct a dm in is tr at io n of k ri uk iv d is tr ic t t he fi rs t d ep ut y of m ay or d ep ut y of m ay or – he ad o f f in an ci al de pa rt m en t d ep ut y of m ay or d ep ut y of m ay or d ep ut y of m ay or c hi ef a cc ou nt an t o f ex ec ut iv e co m m itt ee d ep ar tm en t o f s oc ia l pr ot ec tio n of p op ul at io n d ep ar tm en t o f s oc ia l p ro te ct io n of po pu la tio n d ep ar tm en t o f co op er at io n w it h th e su bj ec ts o f e du ca ti on al se rv ic es m ar ke t a nd bu si ne ss s oc ie ty d ep ar tm en t o f l ab ou r p ro te ct io n d ep ar tm en t o f e m pl oy m en t o f po pu la tio n d ep ar tm en t o f l ab ou r r el at io ns se ct or o f c ol le ct iv e ag re em en t re gi st ra tio n baltic journal of economic studies 143 vol. 3, no. 5, 2017 canteens and strengthening material and technical base of educational institutions; provision of full financing of rational and dietary nutrition of schoolchildren; providing for the development of a network of camps for rest with day-care for children on the basis of educational institutions of the city; conducting preventive, health and ecological and valeological educational activities; increasing the autonomy of educational institutions at the disposal of financial resources; stimulating parents’ interest in changes in the modern educational space, creating an atmosphere of common interest among teachers and parents; ‒ reforming the health care system, improving the quality and availability of health care, modernizing primary care, strengthening the material and technical base (equipping/re-equipping) consultative and diagnostic centres through the provision of development of centres for primary medical (health and sanitary) assistance by improving material and technical bases for meeting the needs of the population in primary health care; reorganization of the bad fund of health care institutions providing secondary (specialized) medical care according to the need for its provision to the population; carrying out preparatory work for the organization of hospital districts, which should provide conditions for the provision of secondary (specialized) medical care to the population; redistribution of resources of the city budget between health care institutions providing primary and secondary (specialized) medical care; financing of health care institutions by types of medical care on the basis of contracts on medical care of the population, which are concluded by the main administrators of budget funds of the corresponding level; application of elements of the program-target method of compilation and execution of local budgets in the part of health care expenditures for the corresponding types of medical aid; ‒ increasing the level of social security of the city’s residents, accessibility and quality of social services in the spheres of social protection, culture, physical culture and sports, creating conditions for solving urgent problems of migrants, as well as preserving existing ones and creating new workplaces with proper conditions and decent wages, the growth of the real wage, its transformation into a reliable source of income and timeliness of its payment, which will provide a decent standard of living for the workers and their families; ‒ ensuring the safety of life and improving the ecological situation in the city through the rational use of the natural resource potential of the city, introduction of eco-safety standards, improvement of the quality of the air basin, preservation of biological and landscape diversity, improvement of the state of green economy (green zone development, parks reconstruction) and improvement of cities, implementation of constant ecological and sanitary control over the activity of industrial enterprises. to implement the priority tasks, it is necessary to ensure the unity of the subject interaction in the process of strategic maintenance of the growth of the welfare level of the urban population. taking into account the unity of the subject-object nature of this interaction, the necessity for improving the organizational infrastructure of the local self-government bodies of kremenchuk (official website of kremenchuk town council; official website of kriukiv district council) has been substantiated in the part concerning creation of the office of cooperation with subjects of the market of educational services and business structures, principles (social partnership principle, network principle of organization of the city system of continuous education, the principle of collective access to resources, the principle of selfdevelopment, the principle of transparency of financial activities); functions (coordination, uniting, controlling, informational, analytical, forecasting, regulatory, intersectoral, innovation, quality management) (fig. 4). thus, on the basis of the study, the following conclusions can be drawn: firstly, the imperatives of increasing the welfare of an industrial city that are strategic in nature are identified and should be embedded in the system of strategic development of the socio-economic sphere of the state and the region, which will be the scientific basis for the future research; secondly, in order to increase the welfare of the urban population, orientation towards long-term and mutually beneficial relations with the actors involved in the process should be ensured, which recognize the common tasks and are ready to work together to implement strategic imperatives. in order to ensure the unity of the subjects, improvement of the organizational structure of the local self-government bodies of kremenchuk in the part of the creation of the office of cooperation with the subjects of the market of educational services and business units, the principles and functions are defined. 5. conclusions as a result of the research, it is proved that since the problem of the low welfare of the local population is complex, ensuring the increase of the level and quality of life should be based on a scenario analysis using the synthesis of theoretical and empirical methods. the factors influencing the material welfare of the population are identified, a system of criteria (economic, social, environmental, institutional) is proposed, the use of which allows consistently determining the dominant external influences on the living standards of the population and identifying the most powerful of them; an algorithm for forecasting the living standards of the local population is developed. as a result of computer processing of the relationship of factors and on the basis of the analysis of the corresponding dependencies, the direct dependence function is selected, which was used to determine baltic journal of economic studies 144 vol. 3, no. 5, 2017 that the number of small businesses per 10,000 of the present population grows by one unit, the average wage in the city kremenchuk increase is 1.13 uah; by increasing the subsistence minimum of 1 uah, the average salary will increase by 1.55 uah; while increasing productivity for 1 uah, the average salary increase is almost 0.43 uah; by increase in nominal wages is uah 1, the average salary will increase by uah 0.91; by increasing the minimum wage of 1 uah, the average wage reduced by 1.28 uah. on the basis of this, with the use of the programs statistica 6.0 and microsoft excel received predictive values of the material welfare of the local population. the adequacy of the models and forecasts received is verified by means of verification of the predicted values by the inverse method (with a comparison of statistical and verification values). in the conditions of growing requirements for the continuous modernization of the economy, there is a need for the formation of new paradigmatic principles for increasing the welfare of the urban population, owing to the fragmentation of existing approaches to the latter phenomenon. it is substantiated that the imperatives of raising the level of welfare of the urban population should have a strategic character and be embedded in the system of strategic development of the social sphere of the state and the region through the implementation of the following directions: elimination of social imbalances; raising standards of living; creation of a comfortable environment for the population; creation of more favourable conditions for business development and improvement of the city’s business climate; development and modernization of hightech production; creation of favourable conditions for entering the city of domestic and foreign investments; development of municipal infrastructure; providing the city’s population with affordable, high-quality, and comfortable accommodation; ensuring the filling of budgets of all levels, etc. based on the foregoing, the concept of strategic provision of urban welfare growth will be formed in subsequent scientific studies. references: belyaeva, l. a. 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(accessed 29 december 2017) baltic journal of economic studies 126 vol. 1, 2015 employment of population as a basic index of economic development of country oleksandra lysiuk1, vinnitsa national agrarian university, ukraine abstract. the actual problem of modern economical theory and practice is a problem of guaranteeing of full employment. the aggravation of this problem during the economic crisis period stimulate the necessity of searching affective mechanism to overcome unemployment and development common form of labor. in the article the level of employment in 2005-2014 years, means of its increasing are investigated using recommendations of mop, which were created especially for ukraine. statistical information from ukrainian government statistical agency was used some practical recommendations to stable situation of employment in the country were given. methodology. using the systematic approach the current state of employment rate in ukraine was investigated and steps for development of labor market were found. using the economic and statistical methods, the actual state of employment rate was studied. information for the last 10 years about employment rate in ukraine was studied. information from web-site of ukrainian government statistical agency was used. results. the results of the survey showed the rate of employment was rising from 2005 till 2008 years. after that this rate has been reducing till today. the reason of this employment crisis was determined and after that some practical recommendation about rising employment rate and stability situation at ukrainian labor market were given. we recommend to develop some entrepreneurial activities in ukraine, to develop self-employment, but there are many problems to start these activities. people, who want to start entrepreneurial activities have many problems with high level of taxes, with high level of payments to other social systems. and they can’t get credit, because of high percentage and short time. many young people can’t start work without work experience. we recommend to introduce government programs, where young people can start work with the smaller salary and get experience for developing their skills. practical implications. we have researched the ukrainian labor market and analyzed the statistical information about employment rate in the country. we have analyzed the reasons of unemployment and have recommended some actions about rising employment rate. value/оriginality. the researching was provided for better understanding the situation at the ukrainian labor market. after that the reasons of employment crisis were determined and the some actions for the development ukrainian labor market were recommended. key words: employment, labor market, qualification, employment rate, increase, sphere of employment. jel classification: j10, j11, j24 1. introduction the worldwide problems of disability, poverty, and unemployment stem out of the interaction of multiple factors including social stigma, stereotypes, lack of access to physical infrastructure, information, and enabling environments. given this, a singular approach toward tackling these interrelated issues falls short. this article attempts to highlight the correlation of poverty, disability, and employment through the linkages with education, accessibility, legislative and policy changes, and awareness. it draws on the experiences of the national centre for promotion of employment for disabled people (ncpedp) to propose a course of action which is built on a strong cross-disability rightsbased movements driving a multi-pronged, multisectorial approach toward addressing inequalities to break the cycle of poverty and disability. the ratio is used to evaluate the ability of the economy to create jobs and therefore is used in conjunction with the unemployment rate for a general evaluation of the labor market stance. having a high ratio means that an important proportion of the population in working age is employed, which in general will have positive effects on the gdp per capita. nevertheless, the ratio does not give an indication of working conditions, number of hours worked per person, earnings or the size of the black market. therefore, the analysis of the labor market must be done in conjunction with other statistics (kolot, 2010). corresponding author 1 department of agrarian management, vinnitsa national agrarian university. e-mail: lysiukaleksandra@gmail.com baltic journal of economic studies 127 vol. 1, 2015 2. forming components of the labor market the employment of population is provided by government through active social economy policy to satisfy their needs of choosing activities and stimulation new working places and entrepreneurial development. the most important indicator of economy growth is employment. many economists determine this word differently, but everybody say, that these are people, who bring them income in money or other forms. active government policy of employment provides the developing programs of employment promotion. these programs take some groups of people: young people, women, disable’s and other specific groups. in developing countries most programs of employment concern some categories of people, who need help and support. the goal of government and regional employment programs (short time and longtime) is promotion of employment rate and needs of citizen in the work. but there are some problems on the ukrainian labor market: most of employee are considered in agricultural (near 5 million), where payment is not high; innovative development is not used by all capacity and not qualified work is more popular; every 5th person works not according to his/her education; many people work abroad, because they can’t find a good job with good payment in ukraine (zhukovski, 2013). 3. regulation of labor market in ukraine for the better situation in employee market, the labor market must be regulated and formulated more dynamically. law declared principles of state policy of ukraine concerning the regulation of employment: ensuring equal opportunities for all citizens in exercising their right to free choice of activities according to abilities and training based on personal interests and social needs; coordination of employment in other areas of economic and social policies based on national and regional employment programs; cooperation of trade unions, associations, enterprises, institutions, organizations or their authorized bodies in cooperation with the state administration in the development, implementation and monitoring of measures to ensure employment. the mechanism of regulation of employment includes the following components: development of national and regional employment programs; organization and support, functioning state employment; the participation of enterprises, institutions and organizations in the implementation of the state policy of employment; functioning of the state employment fund; vocational training, advanced training and retraining of unemployed citizens; providing compensation to citizens who lost their jobs or are retraining; control of public authorities for compliance with the legislation of ukraine on employment. in solving many problems of employment and unemployment important functions assigned to the state employment service. its activity is led by the ministry of labour and social policy of ukraine and local administrations. it is funded by the state fund for employment and exempt from taxes, customs and other charges made to the budget. according to the law, the state employment service analyzes and forecasts the supply and demand for labor, inform the public and public authorities on the labor market; consults citizens, business owners and institutions about the possibility of providing and labor requirements for trades and other issues that are useful to promote employment; provides accounting vacancies and individuals who apply for employment; assists citizens in the selection of relevant work, and the owners – in the selection of appropriate personnel; organizes the necessary training and retraining of public employment service system and other institutions; registers the unemployed and assist them, including cash; participates in preparing prospective and current employment programs and measures for social protection of different groups of unemployment (lycholat, 2007). 4. analyze of economy-active population rate labor market like any other market depends on the prevailing situation in the environment. an important factor in it was the economic crisis in the country. however, it is not only the cause of the current state of the labor market, but also not resolved domestic problems that occur in the economy of our country: 1. unreliability and concealment of information about the true state of the labor market and its prospective opportunities. 2. the absence of industrial employment dynamics. 3. low productivity, which leads to inconsistencies wages. in ukraine, the ukrainian labor productivity is 40% lower than in central and eastern europe. the current problems of wages are constantly in sight of the government. trying to solve these problems, especially for poor sections of the population, the government increases the minimum wage and salaries of low-paid categories of staff. automatically increase in wages occurs in other workers, leading to a number of negative consequences in the public sector  – reduced premiums, copayments removed, workers are sent on unpaid vacations, transferred to a shorter working week, spend reduction; the private sector  – diminishing returns fewer deductions to the budget, delaying the payment of salaries. also among the several reasons for the decline in real wages in the ukrainian society is that every 13 working in ukraine has reached retirement age, their productivity is low. 4. another problem of ukraine is the uneven distribution of human resources in the territory of the state  – the main concentration characteristic of eastern regions (more than a third of the working population); the largest migration baltic journal of economic studies 128 vol. 1, 2015 gain characteristic is in kyiv; the largest outflow comes from chernivtsi, ivano-frankivsk, cherkasy and kyiv regions; surplus labor characteristic of dnipropetrovsk, donetsk and kharkiv regions; long-term unemployment enveloped the zhytomyr, ivano-frankivsk, rivne, ternopil region. 5. ukrainian scientists identify the most important problem of the market – the deformation in the sectoral structure and professional qualification warehouse. the reason for the low level of skills can be called financial motivation, limited employment opportunities, lack of guarantees stability of industrial activity in the specialty, structure mismatch promising professional education needs of the labor market and professional qualification level structure. accordingly, there is a staff shortage for those industries that barred the use of technical and technological innovations. however, for the appearance, formation and functioning of the labor market requires certain conditions. first of all, should be provided with legal conditions for the functioning of the market, including the possibility of free movement for its citizens free choice of employment, ie a legal worker freedom, the ability to dispose of its ability to work. but this is not enough because, in economic terms, the owner of labor had to sell it when it does not have all the necessary for the conduct of its economy as a source of livelihood for reception or when income from other sources is insufficient. for a more detailed snapshot of the economically active population was investigated state statistics committee of ukraine for the last 10 years, which will give us an idea of the general state of the labor market in ukraine. table 1 economically active population ukraine 15-70 y.o people of working age the average, thsd. the % of the population in the corresponding age group the average, thsd. the % of the population in the corresponding age group 2005 20280,8 62,0 20582,5 71,1 2006 22245,4 62,2 20481,7 70,9 2007 22322,3 62,2 20545,9 71,2 2008 22397,4 62,6 20606,2 71,7 2009 22150,3 63,3 20675,7 72,3 2010 22051,6 63,3 20321,6 71,6 2011 22056,9 63,7 20220,7 72,0 2012 22011,5 64,3 20247,9 72,7 2013 21980,6 64,6 20393,5 73,0 2014 21767,3 65,00 20478,2 73,1 the table 1 can be concluded by 2008, including the number of economically active population increased by 116.6 thousand people in comparison with 2005. the economic downturn since 2009, albeit gradual, created conditions for increasing income, primarily wages and reduce its share in total revenues. however, due to low standards of overall pay income remains low. the low level of labor income and their unjustified differentiation inevitably leads to a crisis of motivation of work. the result is low labor activity, incomplete use of labor capacity, reducing the role of labor. everything is added and the high tax burden that discourages neither employers nor, in fact, the most labor. quite remain sharp inter-relationship and levels of remuneration. belonging to a particular field of activity creates value in pay. in fact, the payment should depend on the quality and results of work, as the world practice. according to the specific regional economy systems, stored and high regional differences in the level of wages. already amplitude is 100% of the national average level in some areas. according to the state statistics committee of ukraine, the average monthly nominal wage full-time employee during the first quarter of 2008 amounted to 1619 uah. and increased in comparison with the same period last year to 39.4%. the growth of real wages (over 14%) was observed in all regions except the dnipropetrovsk region and the largest  – in volyn, zakarpattia, kirovohrad, kyiv am chernihiv regions. however, the current state of the labor market is characterized by a number of problems which is a barrier to normal social and economic development of the country as a whole and its individual regions. there is a problem economic activity, quantitative and qualitative imbalance between supply and demand in labor, low qualification level of jobseekers and the working population and employment problems of young people and the disabled, especially in the self-governing cities, mining regions, rural areas, illegal foreign labor migration mal internal labor migration and informal labor sector. the reasons employers unmet demand for labor by graduates of vocational schools are: the poor quality of training (graduate denied the workplace on the basis of low-skilled, non professional knowledge and skills needs of the workplace, which is a consequence of imperfect because of the content of professional training qualification characteristics trades outdated and no independent qualification attestation graduates); preparation of educational institutions of skilled workers, professional composition which ignores the situation on regional labor markets (due to lack of state vocational orientation population and imperfect low effective system of state order for training personnel for functioning administrative basis) the basis of reasons employers unmet demand for quality manpower by adults  – lack of adult education for working life. the burden of financing vocational training in producing placed only on the employer. the result is the inability to raise the economic level of qualification of workers or employers are not interested in improving the quality of staff. at the same time, and there are problems in this segment of the labor market. the effectiveness of private farms is low, difficult labor, social security – insufficient. another problem of the labor market in ukraine is toning employment. the problems of illegal employment relations in the areas related to: baltic journal of economic studies 129 vol. 1, 2015 a significant level of financial burden on the payroll; failure to comply with labor laws regarding proper registration of employment by the employer; not regulated internal migration, the main factors which the imbalance of demand and supply of labor in the regions (currently the largest number of vacancies offered by employers kyiv, dnipropetrovsk, donetsk, kharkiv, zaporizhia region). the problem is illegal work of citizens of ukraine abroad, inadequate social protection, risk insurance and pension savings, the lack of reliable mechanisms to transfer the received funds for work abroad, returning migrants. leveling the negative effects of labor migration from ukraine, first of all connected with the creation of attractive domestic labor market, the conclusion of agreements on employment and social security of citizens of ukraine who are abroad. a characteristic feature of ukraine’s labor market is the low level of employment of people with disabilities. according to the information centre of the ministry of labor in 2014, the number of disabled workers was 515 thousand. people or 39% of the total number of disabled people of working age, while in other countries the employment rate of this category of citizens is considerably higher (for example, in italy – 55% in sweden – 60.1%, in china – almost 80%) the main reasons that hinder the employment of disabled people in ukraine are: a relatively low level of education of disabled persons and their training; lack of support for those first entering the labor market (graduates); lack of jobs, which may be involved labor disabled (tymosh, 2013). 5. conclusions in order to overcome regional imbalances in the labor market and economic development, it is advisable to introduce the following system events: introduction of employment by creating new jobs through the establishment of a favorable investment regime for businesses which create new jobs, providing state support to agricultural producers, businesses in depressed regions; improving the mechanism of formation, placement and execution of the state order for training, research and pedagogical skilled workers based on the state of regional labor markets; introduction of system of interaction of employers and vocational institutions by enhancing the participation of employers in creating a modern educational-production base development and implementation of programs to improve the demographic situation in the region by providing financial support to the most vulnerable sections of the population; decent social guarantees to large families (installation benefits in health, education service) implementation arrangements for the employment of graduates, the law of ukraine "on ensuring young people who received higher education or vocational education first job of providing subsidies to employers." in our view, indeed most essential lever for employment policy is to regulate the demand for labor, which, as is known, can be individual and aggregate. indyvidualnyy demand (demand separate employer) depends on the following factors: demand for products firm, as an employer, you need a workforce primarily as a resource for production of new goods and services. the demand for labor, in other words, is a derivative product demand firm; of production (capital efficiency and size, features technologies, methods of organization of production perfection labor i); since, as noted, the demand for labor is a derivative of demand for product firm (which in a competitive market depends on prices), we can conclude that he is also a derivative volume production and the general fund wages, which is in disposal of the employer. the higher the total salary fund size, the more workers can be hired by the employer to hire. i on the contrary, the higher the average salary of one worker, the less number of them will be recruited. the labor market in ukraine in modern conditions determined by the general state of the economy, namely the recession, structural setbacks, changes in the forms of property, the situation in the invest field. consequently, the demand for labor is also a state of crisis, so the economy of ukraine in modern terms is characteristic of the simultaneous stimulation of demand for labor i reduce its proposal. on the one hand, in ukraine in terms of the emergence of a large quantity of temporarily unemployed workers, who are mostly exempted from productive sectors due to restructuring of the economy, liquidation of unprofitable enterprises, expansion of private property, there is a need demand for labor. the latter involves the stimulation of job places i development of productive forces, straight lines investments in the creation and reconstruction work places, creating temporary work places, setting privileges taxation and loans for various i regions where it is desirable to enlarge the demand for labor, i t. n. in addition that, in our opinion, stimulate the demand for labor may contribute to the following actions: liquidation of legal restrictions of employment growth (to allow the participants to clarify employment contract schedule of working hours, providing opportunities individual guest regulation of working time, liquidation of restrictions on the number of employed workers); indemnity costs to the enterprise caused by search training i hiring workers; assistance in enterprise of supplying of material resources, guaranteeing sales of products i t. n. an enterprise of the increase provided work places; the enterprise benefits straight lines for each hired worker; creating conditions for economic interest of enterprises in ensuring employment disabled, youth and other groups, less competitive market labor (installation privileges on payments in the budget of the workforce of these groups grants to create specialized work places and organization of vocational training i t. n. ) baltic journal of economic studies 130 vol. 1, 2015 creating conditions for widespread use of elements of flexible labor market, including strengthening strengths labor costs, labor mobile professional and territorial the use of flexible forms of employment. the same basic direction of increasing the demand for labor was and still improving socio-economic structure of the economy (establishment of various forms of ownership), which is based on privatization, whose function is to create potentially investors. along with the improvement of organizational and economic structure of the economy, improving the socio-economic structure will help create market-competitive environment in ukraine. implementation of these measures will improve the quality of the national workforce to overcome regional disparities in the labor market in ukraine and significantly increase the demand for labor references annual statistical of ukraine till 2014 . – kyiv, consultant, 370 p. kolot, a.m. (2010). evolution of state employment policy in the countries with developed market 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(2013). human resources as a part of enterprise competitiveness. actual economy problems, – vol. 2, issue 68, p. 54-59. александра лысюк занятость населения как основной показатель экономического развития страны аннотация. актуальными проблемами современной экономической теории и практики есть проблема трудоустройства граждан. обострение данной проблемы в условиях экономического кризиса вызывает необходимость поиска эффективного механизма преодоления безработицы и таким образом дальнейшего развития общественной формы труда. в статье исследовано уровень занятости населения 2005-2014 гг., способы его повышения с помощью рекомендации моп, которые специально созданы для украины. была исследована статистическая информация госкомстата украины, на основе чего были разработаны некоторые практические рекомендации по становлению и развитию уровня занятости страны. методология. исследовано состояние рынка труда с помощью системного подхода, а также предложено ряд мероприятий по его развитию. исследовано состояние занятости населения по отраслевой классификации, при этом было использовано экономико-статистические методы. мы исследовали информацию об уровне трудоустройства за последние 10 лет в украине за данными госкомстата украины. информация была взята с официального веб-сайта госкомстата украины. результаты исследования показали, что уровень занятости граждан имел позитивную тенденцию с 2005 по 2008 г. на протяжении следующих годов, этот уровень незначительно, но все же падает. были исследованы причины спада занятости, на основе чего были разработаны практические рекомендации по улучшению уровня занятости и стабилизации ситуации на рынке труда украины. мы предлагаем развивать некоторые виды предпринимательской деятельности в украине, в том числе само занятость, но большинство проблем встречается на пути развития данных видов деятельности. граждане, которые начинают предпринимательскую деятельность – встречаются с такими проблемами, как высокий уровень налогообложения и других специальных отчислений. также при кредитовании бизнеса, присутствуют высокие проценты по использованию кредитных средств. также много молодых специалистов не могут начать свою трудовую деятельность при отсутствии определенного трудового опыта. мы разработали некоторые предложения по трудоустройству и обучению молодых специалистов, при условии минимальной заработной платы и развитию их способностей. практическое значение. исследовав уровень занятости в украине, мы проанализировали причины безработицы и разработали некоторые рекомендации по повышению уровня занятости. значение/оригинальность. исследование было проведено для более четкого понятия состояния рынка труда украины. на основе этого были выделены некоторые причины кризиса рынка труда и разработаны рекомендации по улучшению уровня занятости в украине. большое значение имеет возможность развития предпринимательской деятельности, при которой индивидуумы самостоятельно выбираю род своей деятельности и программы разработки собственного трудоустройства. были предложены государственные и региональные программы по развитию уровня занятости, а также предложены идеи по обеспечению рабочими местами молодых специалистов по окончанию учебного заведения, которые не имеют опыта работы. baltic journal of economic studies 224 vol. 3, no. 4, 2017 corresponding author: 1 department of accounting and taxation, mykolaiv national agrarian university. e-mail: potrivaeva@mnau.edu.ua 2 department of accounting and taxation, mykolaiv national agrarian university. e-mail: ingapelipkanich@gmail.com estimation of the modern state of provision of agricultural enterprises in mykolaiv region by material and technical resources natalya potryvaieva1, inha aheienko2 mykolaiv national agrarian university, ukraine abstract. the research considers the issue of the provision of agrarian enterprises in ukraine by material and technical resources and effective use of them. the scientific novelty of the results obtained is in the research of theoretical positions, substantiation of applied approaches concerning the organization of material and technical provision of enterprises of the agrarian sector, in particular, mykolaiv region, taking into account the proposals of the second market of agricultural machinery, units, and aggregates. methodology. the purpose of the article is the research and estimation of the current state of the provision of agrarian enterprises by material and technical resources. the object of scientific research is the process of provision of material and technical resources for enterprises of the agrarian sector in mykolaiv region. the level of material and technical resources at agricultural enterprises in mykolaiv region is analysed. relative improvement of the situation with technical equipment and energy supply of agriculture in the mykolaiv region since 2014 is defined; however, the dynamics are not active sufficiently and do not exceed five percent. the ratio between the amount of machinery purchased and disposed of by depreciation is disproportionate, the equipment provided by the unit of area, and the load on the machines available in the farms do not meet the requirements. the dynamics of capital and direct foreign investments in agriculture of mykolaiv region, which during the research period increased, is investigated. it is proved that despite the rather successful development of capital investments by large-scale agricultural producers in the region, financial investments in modernization, repair, and acquisition of the new technology by small business entities are not sufficiently active. the authors substantiate that the tasks of technical re-equipment for commodity producers of the mykolaiv region remain one of the most important, the search for prospective ways of its renewal is urgent. in particular, the authors proposed to intensify the formation of the secondary market of restored agricultural machinery based on the experience of foreign countries. progressive improvement of material and technical resources is seen in the development of a network of local leasing funds and funds of preferential lending to agricultural commodity producers; expansion of cooperative forms of acquisition and exploitation of high-tech; the growth of dealer centres that provide rural commodity producers with equipment on leasing terms. in the conclusions, it is proved that the reduction of the number of the main types of equipment at agricultural enterprises in mykolaiv region led to the fact that most of the technics are used longer the normative lifetime, on-load for each type of equipment is constantly increasing due to its scarcity. improvement of the efficiency and growth of agricultural production and the level of its intensification needs updating of the material and technical base of agricultural enterprises, which requires significant investments. taking into account the implementation of the region targeted programs, the role of public authorities is to develop measures aimed at a comprehensive solution to problems related not only to the implementation of technical, investment, and innovation policies but also to the coordinated co-operation between the industrial, commercial, and financial strategy. key words: agricultural enterprises, material and technical resources, fixed assets of production, energy supply, capital and direct investments. jel classification: q19, o13, l23, q43, p45 baltic journal of economic studies 225 vol. 3, no. 4, 2017 1. introduction the most important factor of production, especially in the conditions of scientific and technical progress, when the number of labour resources employed in production is decreasing, there are material and technical resources, among which the leading role is played by the fixed assets of production at the enterprises of the agrarian industry. according to statistics, the average annual value of fixed assets in the last 15 years has decreased more than twice, and in the last 5 years – by one third (main department of statistics in mykolaiv region: the official site). moreover, the coefficient of their elimination is constantly ahead of the update factor. that is, the majority of domestic agricultural enterprises are characterized by rather a slow pace of renovation of material and technical resources of production at a relatively high level of discharges, depending on the degree of their technical feasibility. the situation that has developed over recent years with the reproduction of material and technical resources of agrarian enterprises is largely determined by the accelerated growth of prices for industrial products in comparison with agricultural products, which resulted in the formation and preservation of price disparity. such a state cannot contribute to the effective development of agricultural production and needs coordinated structural changes in the national economy in general. therefore, the search for ways of providing enterprises and efficient use of their material and technical resources is a very topical issue of the present day and it makes it necessary to assess the current state of provision of agricultural enterprises with material and technical resources. so, the search for ways of the provision of enterprises and effective use of their material and technical resources is a very topical issue and causes the necessity to assess the current state of provision of agricultural enterprises with material and technical resources. the scientific novelty of the results obtained is in the research of theoretical positions, substantiation of applied approaches concerning the organization of material and technical provision of enterprises of the agrarian sector, in particular, mykolaiv region, taking into account the proposals of the second market of agricultural machinery, units, and aggregates. 2. the aim, task, and object of the study the study is aimed at a complete and reliable assessment of the current state of provision of agricultural enterprises in mykolaiv region by material and technical resources. to achieve the research goal, the following tasks are set: – to summarize the results of theoretical studies on the essence and content of material and technical provision in agriculture; – to study methodical approaches to the estimation of material and technical means of agricultural enterprises; – to assess the level of provision and use of material and technical means of agricultural producers in mykolaiv region; – to substantiate the proposals on the improvement of prov ision by material and technical means of agrarian enterprises in the region. the object of the study is the process of provision of agricultural enterprises in mykolaiv region by material and technical means. the subject of the study is a set of theoretical, methodological, and practical aspects of the formation of the material and technical provision at agricultural enterprises. 3. methods of the study the theoretical and methodological basis of the study provided is the works of domestic and foreign scientists on the issues of material and technical provision. the research uses the following methods: bibliographic (in the study of recent scientific publications and practical achievements in the subject; in developing specific research objectives) and system analysis, graphical (in the construction of graphs, diagrams), and statistical (in determining the factors of influence on the resulting indicator). 4. the state of studying the problem the issues concerning the state of supply of agricultural enterprises with material and technical resources were investigated by y. hvozdiev, i. herasymenko, t.  didorenko, h. maiduda, m. mohylova, o. nuzhna, i. svynous, o. cherkasov, y. shahovalova and other scientists. such scientists as y. hvozdiev and i. herasymenko (hvozdiev, 2016), m. mohylova (mohylova, 2016), o. nuzhna (nuzhna, 2015) highlight features and components of the system analysis of material and technical resources of commodity producers in the industry and methodical approaches to assessing the use and status of fixed assets of agricultural enterprises. in turn, h. maiduda (maiduda, 2015), о. cherkasov (cherkasov, 2015, 2016) and y. shahovalova (shahovalova, 2015) aimed their studies at exploring the state and structure of financial resources for the reproduction of material and technical resources in the industry. t. didorenko (didorenko, 2016) was engaged in the classification of material and technical resources at agricultural enterprises according to their function and role in the process of production. i. svynous, n. khomiak, o. rudych (svynous, 2016) analyse the role and place of the state in the process of reproduction of fixed assets of agricultural enterprises in their studies. the scientists believe the state support measures should stimulate expanded reproduction and increase of the production of agricultural products mainly at their own expense. in addition, only in the combination baltic journal of economic studies 226 vol. 3, no. 4, 2017 of theoretical and methodological provisions and methodical tools from the point of view of the system approach may connect reproductive flows and provide technical base updates and their economic growth. 5. presentation of the major research material the basis for the stabilization and expansion of agricultural production is the material and technical resources, the most important part of which are agricultural machinery and equipment. we analysed the level of material and technical resources at agricultural enterprises in mykolaiv region. the main indicators of material and technical resources based on statistical information are presented in table 1. as a result of the study of the average annual value of non-current and current assets of the agrarian enterprises in mykolaiv region, it is found that the lowest result was in 2013, namely, by almost 5% less than in 2012 and by 43.4% less than the indicator of the reported year. similarly, in 2013, the energy capacities and the main agricultural machinery were fixed less than in 2012 and in 2014–2015, fewer indicators were observed only in 2011. the presence of livestock and poultry in agricultural enterprises of mykolaiv region had been increasing by 2013 but from 2014 the value of the indicator is steadily decreasing and the smallest result was fixed in 2015 (main department of statistics in mykolaiv region: the official site). thus, the situation with technical equipment and energy supply of agriculture in mykolaiv region has improved since 2014, but the dynamics are not sufficiently active and do not exceed 5%. the most active part of the material and technical base of agricultural enterprises is energy resources, which include the power of mechanical engines (tractors, combines, cars, etc.), electric motors, electrical installations and working cattle. among the energy resources of agrarian enterprises, mechanical motors prevail, and the share of working cattle is less than 0.5%. as a part of energy resources, the main place is occupied by tractor and automobile engines, which account for approximately 2/3 of all capacities. analysing the resource potential of agriculture in mykolaiv region, we made the main focus on agricultural enterprises; their provision with agricultural machinery is given in table 2. the average power of a single tractor engine in 2015 was 93.4 kw, which is not enough to use resourcesaving and high-performance technologies, where tractors with an average engine power of 100 kw are required. nowadays, enterprises of mykolaiv region need to have 13 tractors per 1000 hectares of arable land, and 10.5  units of grain harvesters, 12.6 units of beet-harvesting machines, 17 units of potato harvesters (since 2013 the region has not had any of such combines at all) per 1000 hectares of crops are necessary; at the same time in 2015, 18.9 thousand hectares of potatoes were grown (shabala). the acquisition of the main table 1 the state of material and technical resources of agricultural enterprises of mykolaiv region indicators year deviation in 2015 in % until 20112011 2012 2013 2014 2015 average annual value of non-current and current assets, million uah 2543,6 2377,2 2264,0 2565,6 3247,0 127,7 availability of power capacities, ths. kw 1306,2 1421,6 1406,7 1462,1 1468,1 112,4 energy capacities per 100 hectares of sown area, kw 125 146 139 146 148 118,4 availability of basic agricultural machinery, pcs. 9212,2 9572,6 9371,7 9479,1 9551,1 103,7 livestock and poultry, thousand conventional heads 177 174 185 155 150 84,7 source: compiled by the author based on the data of the main department of statistics in mykolaiv region (main department of statistics in mykolaiv region: the official site) table 2 availability of main types of equipment at agricultural enterprises of the mykolaiv region types of agricultural equipment year deviation in 2015 in% until 20112011 2012 2013 2014 2015 tractors – total, pcs. 6339 6537 6481 6538 6573 103,7 tractors per 1000 hectares of arable land, pcs. 6 7 7 7 7 116,7 power of tractor engines, ths. kw 534,0 572,9 561,6 589,0 614,1 115,0 grain harvesters, pcs. 1338 1410 1295 1258 1292 96,6 corn harvesters, pc. 87 81 70 88 78 89,7 potato harvesters, pcs. 3 3 – – – beet-harvesting machines, pc. 62 56 47 43 43 69,4 milking establishments and devices, pcs. 167 148 142 178 175 104,8 source: compiled by the author based on the data of the main department of statistics in mykolaiv region (main department of statistics in mykolaiv region: the official site) baltic journal of economic studies 227 vol. 3, no. 4, 2017 types of equipment in the agrarian sector of mykolaiv region is shown in table. 3. analysis of the acquisition of the main types of equipment to the agricultural enterprises of mykolaiv region in 2015 (table 3) proved that only a number of tractors, drills, spreaders of fertilizers and grain harvesters had increased. for other types of technical means, both in crop production and in animal husbandry, there was a reduction. consequently, the situation regarding the availability of tractors, combines, and other types of equipment on agro-enterprises of mykolaiv region is quite critical, which is due to a violation of the ratio between the number of purchased and disposed equipment. in turn, the reduction of the number of basic types of equipment has led to a deterioration of indicators of equipment availability per area unit and increase in a load of existing machines at the enterprises. the area of grain crops grown by agricultural enterprises of the region in 2015 was about 950 thousand hectares. at the beginning of the reporting period, 1292 grain harvesters were involved in the industry. the load on a single combine harvester was 735 hectares instead of standard 130 hectares. because of this, the work took a longer period of time, which led to a significant loss of crops and lower quality of products. in addition, most of the technology will require qualitative upgrades and modernization (mykolaiv regional state administration: the official site). we consider it appropriate to analyse the dynamics of capital and direct investments in agriculture in the region in 2010–2015 (fig. 1). as it can be seen, the level of financial investments in the region’s agriculture since 2012 has gained a positive upward trend. thus, capital investments in 2015 increased by 2.5 times compared to 2012 (the lowest figure since 2011), and by 72.7% compared to 2014. at the same time, the direct foreign investments in reporting period increased by 7,6 times compared to 2012 and by 8% as to the previous year (main department of statistics in mykolaiv region: the official site). it was in the years of 2013–2015 that more than 15  major investment projects were implemented, including the largest in the field of plant growing: the construction of the transshipment terminal for 70  thousand tons in the city of nova odesa by the limited liability company, the joint venture nibulon; the reconstruction of the granary with the total capacity of 30 thousand tons of the limited liability company “mykolaivske zernoskhovyshche”. “blagodatnensky ptahoprom” joint stock company in arbuzynskyi district has started construction of a grain table 3 acquisition (disposal) of the main types of equipment to the agricultural enterprises of mykolaiv region in 2015 types of equipment availability types of equipment availability on 01/01/2015, pcs. % to availability at the beginning of the year on 01/01/2015, pcs. % to availability at the beginning of the year tractors 6573 101,3 harvesting combines 174 94,6 drills 4374 103,7 potato harvesters and potatodiggers 18 90,0 potato planters 29 96,7 combines and beetharvesting machines (without beet-cutting machines) 43 93,5 spreaders of manure and fertilizers 857 106,2 machines and combines for harvesting vegetables and melons 36 87,8 sprinklers 191 96,0 milking installations and apparatus 175 96,2 grain harvesters 1292 100,8 incubators 57 86,4 con harvesters 78 94,0 conveyors for manure removal 384 99,0 source: compiled by the author based on the data of the main department of statistics in mykolaiv region (main department of statistics in mykolaiv region: the official site) fig. 1. dynamics of capital and direct investments in agriculture of mykolaiv region source: compiled by the author based on the data of the main department of statistics in mykolaiv region (main department of statistics in mykolaiv region: the official site) baltic journal of economic studies 228 vol. 3, no. 4, 2017 storage facility with a capacity of 100 thousand tons, 50 thousand tons of which have already been put into operation for the first time and a reconstruction of a feed mill with a capacity of 30 thousand tons of feed per year has been carried out. the joint-stock company with limited liability “promin” in arbuzynskyi district built a grain storage facility with a capacity of 22 thousand tons and also built 4 greenhouses for the cultivation of early vegetables and seedlings of vegetable crops on the area of 4.5 hectares; 3 vegetable stores with capacity of 14 thousand tons of simultaneous storage were put into operation (mykolaiv regional state administration: the official site). in the field of livestock breeding, 16 objects were put into operation, 9 units were constructed, and 7  units were reconstructed, their total capacity is 1140 for cattle and 6,100 for pigs. the largest of these investment projects is a dairy complex for 2,000 cows in the joint-stock company with limited liability “promin” in arbuzynskyi district, where 1300 milk cows are housed with the use of the latest technology and they give 35 tons of high-quality milk every day, and the productivity of the cows was the largest in ukraine and made about 10 tons of milk per cow. similar works in dairy cattle breeding are carried out at a number of other farms, such as the limited liability company “kolos-2011” in ochakivsky district and a private joint-stock company “ukraine” in domanivsky district. in the field of swine breeding, the modern pig farms were put into operation at the private enterprise “tekhmet-yuh” in vitovskyi district and at the farm “agro-1” in novobuzkyi district (mykolaiv regional state administration: the official site). despite the rather successful development of capital investments by large commodity producers in the mykolaiv region, financial injecting into modernization, repair, and acquisition of new technology by small business entities is not quite active. thus, the task of technical re-equipment for commodity producers in the area remains one of the most important. in such circumstances, the budget funds allocated for the renovation of the material and technical base of agriculture are gradually decreasing; therefore, it is necessary to search for other ways of its renewal. in particular, it is necessary to intensify the formation of the secondary market of restored agricultural machinery. thus, the system of second-hand equipment sales has been rapidly developing in the economically developed countries. this tendency can be traced in the usa, canada, australia, and the six most agrarian countries in western europe. the outdated low-performance equipment is gradually withdrawn from economic circulation and enters the secondary market in these countries. thus, for example, in the usa the share of used tractors with engine power from 40 to 100 hp sales exceeds 87%, and for tractors with engine power more than 200 hp it accounts a little more than 2% (petrov). in european countries, the discharged tractors are being sold off on the secondary market; they are three times more than new ones. the service life of tractors is 4-5 years, for grain harvesters it makes 3-4 years. the sale of equipment takes place through a dealer system after a quality repair and maintenance, while its cost is 30% less than the original. the incentive for all participants in the secondary market is profit since capital repairs cost 2-3 times cheaper than buying a new one. it should be noted that domestic enterprises have accumulated at least a positive experience in the recovery of machines, assemblies, and units (pylypenko). we consider mykolaiv region needs to pay attention to: the development of a network of local leasing funds and funds for preferential lending to agricultural producers; the expansion of cooperative forms of acquisition and exploitation of expensive machinery; the growth of dealer centres that provide rural commodity producers with equipment on lease terms. 6. conclusions and perspectives of further research the results of the study prove that the reduction in a number of the main types of equipment at agricultural enterprises in mykolaiv region has led to the deterioration of the indicators of equipment availability per area unit and to increase in the load on machinery available on farms. currently, the tractor and combine park renewal ratio does not exceed 5%, while its rate should be 10-12%. in such conditions, a large part of the technology is used longer than the normative term of operation, the load on each type of equipment is constantly increasing due to its lack. in order to increase the efficiency and increase the volume of agricultural production, and the level of its intensification, it is necessary to further upgrade the material and technical base of agricultural enterprises, which requires tremendous investments. taking into account the implementation of the region targeted programs, the technical equipment of medium and small agricultural producers in modern economic conditions does not meet normative recommendations. the role of public authorities is to develop measures aimed at a comprehensive solution to problems related not only to the implementation of technical, investment, and innovation policies, but also to the coordinated co-operation between the industrial, commercial, and financial strategy. baltic journal of economic studies 229 vol. 3, no. 4, 2017 references: hvozdiev, yu. v. 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(2015). strategy of financial support of reproduction of fixed assets in agriculture. scientific journal of npu named by m. p. drahomanov, series 18: economics and law, issue 30, p. 50-56. наталя потрываева, инга агеенко оценка современного состояния обеспеченности сельскохозяйственных предприятий николаевской области материально-техническими ресурсами аннотация. в исследовании рассмотрен вопрос обеспечения предприятий аграрного сектора экономики украины материально-техническими средствами и их эффективного использования. научная новизна полученных результатов заключается в исследовании теоретических положений и обосновании прикладных подходов к организации материально-технического обеспечения предприятий аграрной сферы, в частности николаевской области с учетом предложений вторичного рынка сельскохозяйственной техники, узлов и агрегатов. методология. целью статьи было исследование и оценка современного состояния обеспеченности сельскохозяйственных предприятий материально-техническими ресурсами. объектом научной разведки был выбран процесс обеспечения материально-техническими средствами аграрного сектора экономики николаевской области. проанализирован уровень материально-технических ресурсов на сельскохозяйственных предприятиях николаевской области. установлено относительное улучшение ситуации с технической оснащенностью и энергообеспеченностью сельского хозяйства николаевского региона с 2014 г., однако динамика не является достаточно активной и не превышает пяти процентов. соотношение между количеством приобретенной и выбывшей по сносу техники непропорциональное, обеспеченность техникой на единицу площади и нагрузка на имеющиеся в хозяйствах машины не отвечают требованиям. исследована динамика капитальных и прямых иностранных инвестиций в сельское хозяйство николаевской области, которые за период исследования увеличились. доказано, что вопреки достаточно успешному освоению капитальных инвестиций крупнотоварными агропроизводителями baltic journal of economic studies 230 vol. 3, no. 4, 2017 региона, финансовые вливания в модернизацию, ремонт и приобретение новой техники субъектами малого предпринимательства происходит недостаточно активно. авторами обосновано то, что задание технического перевооружения для товаропроизводителей николаевской области остается одним из наиважнейших, актуальным является поиск перспективных способов его обновления. в частности, авторами предложено активизировать формирование вторичного рынка восстановленной сельскохозяйственной техники по опыту зарубежных стран. прогрессивным путем улучшения материально-технического обеспечения усматривается развитие сети местных лизинговых фондов и фондов льготного кредитования сельскохозяйственных товаропроизводителей; расширение кооперативных форм приобретения и эксплуатации дорогостоящей техники, рост дилерских центров, которые обеспечивают сельских товаропроизводителей техникой на условиях лизинга. в выводах было доказано, что сокращение количества основных видов техники в сельскохозяйственных предприятиях николаевской области привело к тому, что большая часть техники используется за пределами нормативного срока эксплуатации, постоянно растет нагрузка на каждый вид техники вследствие ее нехватки. повышение эффективности и рост объемов производства сельскохозяйственной продукции, уровня его интенсификации требует обновления материально-технической базы сельскохозяйственных предприятий, которое требует значительных вложений средств. ввиду реализации областных целевых программ роль органов государственной власти заключается в разработке мероприятий, направленных на комплексное решение задач, связанных не только с реализацией технической, инвестиционной и инновационной политики, но и скоординированных между собой промышленной, торговой и финансовой стратегий. baltic journal of economic studies 193 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national academy of statistics, accounting and audit, ukraine; all-ukrainian union "the national assembly of people with disabilities of ukraine", ukraine (corresponding author) e-mail: kutsa_alla_85@ukr.net orcid: https://orcid.org/0000-0002-6633-9192 2 institute of postgraduate education, o. bogomolets national medical university, ukraine e-mail: r.titikalo@gmail.com orcid: https://orcid.org/0000-0002-6406-8800 3 institute of law of kyiv national economic university named after vadym hetman, ukraine e-mail: iemelianov.volodymyr@kneu.edu.ua orcid: https://orcid.org/0000-0002-0660-5241 doi: https://doi.org/10.30525/2256-0742/2023-9-2-193-200 the socio-economic role of local governments in the field of guardianship and conservatorship of adults in ukraine alla sotska1, roman tytykalo2, volodymyr iemelianov3 abstract. based on the content of article 55 of the civil code of ukraine, the task of guardianship and conservatorship of adult incapacitated persons and persons with limited legal capacity – is to ensure the personal non-property and property rights and interests of such persons, and as practice shows, there are currently a significant number of problems. the relevant problems are, inter alia, of a social and economic nature and affect a large number of subjects, with a special role being assigned to local self-government bodies, whose executive bodies, according to the definition of ukrainian legislation, are guardianship and conservatorship bodies. this problem has a significant negative impact on the quality of life of adults in need of care and assistance, as well as on the exercise of relevant powers by local authorities. the above testifies to the usefulness of the study of the socio-economic role of local self-government bodies in the field of guardianship and conservatorship of adult incapacitated persons and persons with limited legal capacity. in this regard, an attempt was made to characterize the legislative basis and practical organization of the activities of local self-government bodies during their performance and powers of guardianship and conservatorship of adults, to determine and analyze the relevant duties, which, according to the results of the study, are proposed to be classified into three main groups (ensuring, protecting and defending the rights and legitimate interests of adults in need of guardianship and conservatorship; controlling and supervising the activities of guardianship and conservatorship entities (guardians, conservators and special institutions); controlling and supervising the preservation and management of property of persons under guardianship and conservatorship). key words: local self-government body, guardianship and conservatorship body, guardian, conservator, incapacitated person, person whose legal capacity is limited, property rights, non-property rights. jel classification: h11, h30, h61, i38, r50, d72 1. introduction ukraine is home to a significant number of people with mental and intellectual disabilities (for example, the world health organization speaks of 8 million ukrainians with intellectual disabilities by the end of 2020 (boyko, 2009)), some of whom have the legal status of incapacity or limited capacity (about 50 thousand people). one of the national means (widely used in many countries of the world) to provide these categories of people with favorable living conditions is the institution of guardianship and conservatorship. its functioning is directly related to the activities of local self-government bodies, which are becoming more and more important in the conditions of decentralization in ukraine in general and in connection with the socio-economic impact on the field of guardianship and conservatorship of adults in particular. the advisability of the continued existence of the institution of guardianship and conservatorship of incapacitated persons and persons with limited legal capacity in ukraine, as well as the institutes of baltic journal of economic studies 194 vol. 9 no. 2, 2023 incapacity and limited legal capacity, has long been under great question and in the perspective of many discussions. however, currently the executive bodies of local self-government continue to exercise powers as guardianship and conservatorship bodies, and therefore the study of their place and role in this area (in particular, the socio-economic role) is relevant. 2. research methodology 2.1. the level of scientific, theoretical and legislative support and problems, as well as the study of the socio-economic role of local governments in the field of guardianship and conservatorship of adults today, the state policy of ukraine in the field of guardianship and conservatorship of adults and the practice of its implementation are characterized by a large number of problematic issues related to the administration in the mentioned field, the implementation of norms and provisions of the national legislation on relevant issues, in particular, concerning subjects of guardianship and conservatorship for incapacitated persons and persons with limited legal capacity, ensuring personal non-property and property rights and interests of persons in need of guardianship and conservatorship, and other related issues. one of the key subjects in the outlined context are local self-government bodies, whose executive bodies perform the role of guardianship and conservatorship bodies, especially for adults. taking into account the gaps, inconsistencies and contradictions in the national legislation on socioeconomic issues of the formation and implementation of state policy of the appropriate direction and the urgent need to prevent and eliminate the negative consequences caused by the above-mentioned problems and restore the violated rights and freedoms of subjects and legal relations in the researched area, the issue of the socio-economic role of local selfgovernment bodies in this area needs attention. it is particularly noteworthy that ukrainian scientists have paid and continue to pay attention to certain aspects of guardianship and conservatorship, but mostly children under the age of 18. however, relevant issues through the prism of the rights of adults are almost not reflected in various types of scientific works and publications, with the exception of research on civil and civil procedural law. thus, this issue is both relevant and understudied. such situation requires more and more attention, as the policy of decentralization in ukraine continues, local selfgovernment bodies come to the fore in the context of implementation of a large number of directions of state policy, both their own framework and delegated powers. 2.2. methodological features of the socio-economic role of local self-government bodies in the field of guardianship and conservatorship of adults the article attempts to reveal the nature and peculiarities of the socio-economic role of local selfgovernment bodies in the field of guardianship and conservatorship of adults: the method of observation (used to follow the processes of implementation of powers by local self-government bodies in the researched area), scientific method (applied within the framework of research and use of the conceptual apparatus on the topic of the article), scientific abstraction (mainly used during the disclosure of the content of the powers of local self-government bodies in the field of guardianship and conserva torship of adults), analytical method (played a key role in the formulation of conclusions and proposals on possible ways of improving the activities of local self-government bodies in the area of guardianship and conservatorship of adults), statistical method (according to the results of its application, it was possible to analyze statistical data on the number of adult incapacitated persons and persons whose legal capacity is limited, etc.). the given list of used methods is not limited, but the above ones became decisive during the preparation of this article. 3. the role of local authorities in ensuring the implementation of state policy in the field of guardianship and conservatorship of adults: social and economic aspects 3.1. legal regulation of guardianship and conservatorship of adult incapacitated persons and persons with limited legal capacity today in ukraine the issues of guardianship and conservatorship of adults are regulated by the civil code of ukraine (hereinafter – cc) (civil code of ukraine), the civil procedure code of ukraine (hereinafter – cpcu) (civil procedure code of ukraine), the rules of guardianship and conservatorship, approved by the order of the state committee of ukraine on family and youth matters, the ministry of education of ukraine, the ministry of health of ukraine, the ministry of labor and social policy of ukraine dated may 26, 1999, no. 34/166/131/88 (registered in the ministry of justice of ukraine on june 17, 1999 no. 387/3680) (hereinafter – the rules) (on approval of the rules of guardianship and trusteeship) (valid only in the part of the provisions that do not contradict the ccu), as well as other normative legal acts on relevant issues. the norms and provisions of these legislative acts concern at least 50,000 incapacitated persons and baltic journal of economic studies 195 vol. 9 no. 2, 2023 persons with limited legal capacity, as well as thousands of persons related to them (relatives, guardians, custodians, employees of local self-government bodies and special institutions, etc.). at the same time, it should be taken into account that these statistics are more than five years old (more recent statistical data are not available, as they are not collected and analyzed) and do not take into account those who acquired the appropriate status during the specified period, primarily during the war, when the number of people with mental disorders and those whose status is established is growing daily and significantly. 3.2. organization of activities of local self-government bodies in the exercise of powers (social, economic and other) in the field of guardianship and conservatorship going directly to the subject of this study, lets note that article 56 of the ccu (civil code of ukraine) district, district state administrations in the cities of kyiv and sevastopol, executive bodies of city, district in cities, village, village councils are defined as bodies of guardianship and conservatorship. namely, the executive bodies of local self government at the level of cities, districts in cities, villages and settlements are authorized to exercise the powers of guardianship and conservatorship bodies. at the same time, it should be emphasized that the above-mentioned article does not specify the category of persons exercising such powers. the foregoing, as well as practical experience, leads to the conclusion that such persons include incapacitated adults and persons whose legal capacity is limited. as for the concept of "guardianship and conservatorship body ", it is suggested that it be understood as bodies defined by law, authorized to perform the functions of resolving issues of guardianship and conserva torship of minors, as well as adults who, due to their state of health, cannot independently exercise their rights and perform their duties. article 34 of the law of ukraine "on local selfgovernment in ukraine" (the law of ukraine "on local self-government in ukraine") refers to the delegated powers of executive bodies of village, town and city councils to resolve issues of guardianship and conservatorship in accordance with the procedure established by law. according to the definition of article 1 of the law of ukraine, delegated are the powers of executive authorities granted to local self-government bodies by law, as well as the powers of local self-government bodies transferred to the respective local state administrations by the decision of district and regional councils (the law of ukraine "on local selfgovernment in ukraine"). in the field of guardianship and adult conservatorship, the relevant authority is the executive authority granted to local selfgovernment bodies. such delegation provides for accountability and control by the relevant bodies of executive power over the decisions of the executive bodies of local self-government authorities on issues of guardianship and conservatorship, in particular over adults. in turn, the state administrations of kyiv and sevastopol and the executive bodies of the higher councils shall manage the guardianship and conservatorship institutions and control their activities. their respective functions are determined by subsection 1.9 of paragraph 1 of the rules (on approval of the rules of guardianship and trusteeship). it is also important to note that one of the economic components of the role of local self-government bodies in the person of their executive bodies in connection with the issue of guardianship and conservatorship of adult incapacitated persons and persons with limited legal capacity is the exercise of relevant powers by employees of these bodies at the expense of salary funds without additional payments for the sole purpose of managing issues of guardianship and conservatorship of adults. according to paragraph 1.4 of item 1 of the rules (on approval of the rules of guardianship and trusteeship), the direct management of matters related to guardianship and conservatorship is entrusted, within the limits of their competence, to the relevant departments and administrations of the local state administration of districts, districts of the cities of kyiv and sevastopol, executive bodies of city or district councils in cities. in settlements and villages, matters of guardianship and conserva-torship shall be dealt with directly by the executive authorities of the settlement and village councils. with regard to the structural unit, which is responsible for the issue of guardianship and conservatorship for adults, the head of a specific body of guardianship and conservatorship must be determined. in practice, issues of guardianship and conservatorship are mainly dealt with by the structural subdivisions of social protection of the population and health care, or the corresponding tasks are even assigned to librarians (although in the case of librarians this situation is more the exception than the rule). in order to support the work, paragraph 1.6 of section 1 of the rules provides for the establishment of guardianship councils with advisory functions at guardianship and conserva torship institutions. they include deputies, representatives of local executive and local selfgovernment bodies and the public (on approval of the rules of guardianship and trusteeship). baltic journal of economic studies 196 vol. 9 no. 2, 2023 3.3. identification and analysis of responsibilities of local self-government bodies in the field of guardianship and conservatorship for adults what are the specific powers of executive organs of local self-government as guardianship and conservatorship bodies in the field of guardianship and conservatorship of adults? analysis of the normative legal acts mentioned at the beginning of this article (civil code of ukraine; civil procedure code of ukraine; on approval of the rules of guardianship and trusteeship), as well as some others (the law of ukraine "on prevention and counteraction to domestic violence"; 1on approval of the model regulation on a psychoneurological boarding school), makes it possible to distinguish the following powers of the specified bodies: 1) receiving information about natural persons in need of guardianship or conservatorship. natural and legal persons who are obliged to immediately inform the competent guardianship and conservatorship bodies in case of detection of an adult in need of guardianship or conservatorship include, among others, close relatives and other persons, medical and preventive institutions of psychiatric profile, judicial bodies, internal affairs bodies, civil registry bodies, notary offices, other institutions and organizations that have become aware of an adult in need of guardianship and conservatorship. 2) appeal to the court with a statement on: – limitation of a person's civil capacity; – recognition of a person as incapacitated; – dismissal of a guardian or conservator in case such person fails to perform duties, violates the rights of the ward, as well as in case of placement of the ward in a health care or social protection institution; – annulment of the court decision on the restriction of the legal capacity of an individual and restoration of the legal capacity of an individual whose legal capacity was restricted; – reversal of a court decision recognizing an individual as incapacitated and restoration of civil capacity of an individual who has been recognized as incapacitated in case of recovery or significant improvement of his or her mental state. 3) submission to the court of an application for extension of the term of the decision on recognition of an individual as incapacitated. 4) submission to the court an application on: – the possibility of appointing a person as a guardian or custodian of an adult person who is incompetent or whose civil capacity is limited. first of all, in connection with this authority, it should be noted that at the present legislative level there is no clear list of documents on the basis of which the guardianship and conservatorship body prepares a petition to the court for the appointment of a person as a guardian or conservator of an adult incapacitated person or a person whose legal capacity is limited. therefore, the list of such documents may be determined either by specific guardianship and conservatorship bodies or by their superior bodies, taking into account the legal requirements for the person of the guardian and conservator. it should be noted that until march 22, 2005, when article 60 of the ccu was amended by the law of ukraine no. 2450-vi "on amendments to the civil code of ukraine" dated march 3, 2005 (the law of ukraine "on amendments to the civil code of ukraine"), the appointment of guardians and conservators over incapacitated persons and persons with limited legal capacity was carried out by guardianship and conservatorship bodies. in addition, article 138 of the marriage and family code of ukraine (expired on january 1, 2004) (marriage and family code of ukraine) provided for the possibility of appointing a guardian at the request of an adult of legal capacity who, due to his/her health condition, is unable to independently defend his/her rights and fulfill his/her obligations (today the institute of the guardian is in operation, the functioning mechanism of which is regulated by article 78 of the ccu). therefore, guardianship and conservatorship bodies had the right to make such decisions only until january 1, 2004. therefore, it is important to note that currently the grounds and procedure for dismissal of guardians are provided for in article 75 of the ccu. as can be seen from the content of the first part of the above-mentioned article, the guardianship body, if it has appointed a guardian, may by its decision release a person from the powers of the guardian on the basis of his or her application. in addition, in violation of the norms of national legislation in the field of guardianship and conservatorship of adult incapacitated persons and persons with limited legal capacity, guardianship and conservatorship bodies made decisions on the appointment of guardians and conservators for adults, in particular: 1) as of january 1, 2004 – on issues of appointment of guardians and conservators for adults with legal capacity, in violation of articles 60 and 63 of the ccu; 2) as of april 6, 2006 – on issues of appointment of guardians and conservators for adults with legal capacity, incapacitated persons and persons whose legal capacity is limited, in violation of article 60 of the ccu and article 241 of the cpcu. in practice, guardians and conservators use appropriate decisions when exercising authority over their wards, in particular, when registering pension baltic journal of economic studies 197 vol. 9 no. 2, 2023 payments, state benefits, resolving property issues, etc. to confirm the scale of the problem, in the period from march 22, 2005 to april 6, 2006, guardianship and conservatorship bodies issued more than 600 decisions on the appointment of guardians and conservators for adults. at the end of the topic on the appointment of guardians and custodians, it should be noted that according to the article 59 of the law of ukraine "on local self-government in ukraine" (on approval of the rules of guardianship and trusteeship), acts of bodies and officials of local self-government are recognized in court as illegal due to their inconsistency with the constitution or laws of ukraine: – replacement of a guardian or conservator if the guardian or conservator is not entitled to conduct a case in court on the grounds established by law. in connection with the aforementioned right to file a petition with the court, it should be noted that in accordance with the content of the first part of article 60 of the ccu (civil code of ukraine) and the first part of article 300 of the cpcu (civil procedure code of ukraine), the guardian of an adult incapacitated person and the guardian of a person with limited legal capacity are appointed by the court upon the request of the guardianship and conservatorship body. at the same time, article 122 of the cpcu (civil procedure code of ukraine) stipulates that a judge shall institute proceedings in a civil case only on the basis of a petition filed and executed in the manner provided by this code. pursuant to the first part of article 13 of the cpcu (civil procedure code of ukraine), the court shall consider a civil case within the limits of the requirements specified by the person in his/her application. at the same time, the legislation does not establish the obligation of guardianship and conservatorship bodies to apply to the court for the appointment of a guardian for an incapacitated person, and the guardian is limited to a competent person, as well as restrictions on the right of a person to apply to the court for the appointment of his/her guardian. 5) issuance of a permit: – to the guardian for the execution of transactions concerning: a) relinquishment of property rights of the guardian; b) provision of written commitments on behalf of the guardian; c) conclusion of contracts requiring notarization and/or state registration, including contracts on division or exchange of a residential building, apartment; d) conclusion of contracts on other valuable property; – to the guardian for consent to the person's transactions regarding: a) waiver of the person's property rights; b) written commitments on their own behalf; c) conclusion of agreements subject to notarization and/or state registration, including agreements on the division or exchange of a residential house or apartment; d) conclusion of agreements regarding other valuable property. it is important to note that a transaction made without the permission of the guardianship and conservatorship authority is invalid. at the request of the interested person, such a transaction may be recognized by the court as valid if it is established that it is in the interests of the individual over whom guardianship or conservatorship has been established (civil code of ukraine). 6) dismissal: – at the request of the guardianship and conserva torship body, if the relevant guardianship and conservatorship body has appointed a guardian or conservator; – at the request of the person over whom guardianship has been established, the guardian from his/her authority, if the corresponding guardianship and conservatorship body has appointed a guardian. 7) guardianship or conservatorship over an adult until a guardian or conservator is appointed or until such person is placed in a special institution. 8) requiring reports from guardians and conservators. in connection with the above-mentioned powers of local self-government bodies in relation to the reporting of guardians and conservators, it is necessary to express solidarity with the position of m. boyko, who points out that the guardianship bodies are not obliged to check the annual reports in kind. therefore, only in a few cases these bodies are able to notice the carelessness or intention of the guardians in time and, by removing them from the guardianship duties, prevent the death or damage to property. meanwhile, identifying the wrongful actions of guardians who have already caused harm to the ward almost never helps to compensate them. the fact is that the guardian usually does not have sufficient funds to compensate for the damages caused. in order to protect the property interests of the ward, the board of guardians examines the report from the point of view of the correctness of calculations and factual accuracy, and may correct and supplement the report. at the same time, the legislation provides that claims disputed in the relationship between the guardian and the ward may be submitted to the court for consideration even before the end of the guardianship relationship (boyko, 2009). 9) reviewing complaints regarding the actions of guardians and conservators. 10) supervising the activities of guardians and conservators. 11) monitoring the activities of guardians and conservators. with regard to the control over the activities of guardians and conservators, it is necessary to take baltic journal of economic studies 198 vol. 9 no. 2, 2023 into account certain financial aspects of the relevant legal relationship and their importance in the context of the protection of the property rights of adults under guardianship and conservatorship. the purpose of such control is to verify that the activities of guardians and conservators comply with national legislation and to ensure that there are no risks for their wards. according to subsection 4.14 of paragraph 4 of the rules (on approval of the rules of guardianship and trusteeship), the control over the activities of guardians and conservators is carried out by guardianship and conservatorship bodies with the participation of the public through scheduled visits to persons under guardianship. the frequency of visits shall be determined by a separate schedule, but not less than once a year, except for the first visit, which shall be made three months after the establishment of the guardianship and conservatorship. the schedule shall be established by a specific guardianship body. if necessary, the results of the inspections are brought to the meeting of the board of guardians in order to take appropriate measures. the form of control over the activity of guardians and conservators is also the collection, analysis and verification of reports of guardians and conservators. the issue of reporting on guardianship and conservatorship is regulated by subsection 4.11 of paragraph 4 of the rules (on approval of the rules of guardianship and trusteeship). in addition, based on the content of the powers of guardianship and conservatorship bodies, these bodies must also control, in the manner determined by them, the exercise of guardianship and conservatorship over adults by special institutions; 12) making a decision on placement in a psychoneurological boarding school for persons with disabilities. 13) exercising powers in the field of preventing and combating domestic violence in relation to incapacitated persons and persons with limited legal capacity, including: – solving the problem of social services for an injured person who is a disabled person, if no legal representative has been appointed for such a person, or if the legal representative is a criminal or evades the protection of the rights and interests of such a person; – giving consent to enter personal data of a disabled person who has reported the act of violence or who is a victim in the unified state register of cases of domestic and gender-based violence, if the legal representative of such a person is a perpetrator or evades the protection of the rights and interests of a disabled person; – placement of an injured person who is an incapa citated person in a social protection institution if, in connection with the perpetration of domestic violence, the residence of such a person in a family or with a guardian poses a threat to his/her life and health; – taking measures to provide compulsory psychiatric care for an incompetent person who is a perpetrator of domestic violence, if such a person's residence in a family or with a guardian poses a threat to the life and health of the family members or guardian; – to bring before the court, in accordance with the procedure established by law, the issue of release from the powers of a guardian or conservator in the case of domestic violence committed by them against a person who is incapacitated or has limited legal capacity; – protection of rights and representation of interests of the injured person who is a disabled person in state authorities, local self-government bodies or in court (if necessary); – violation before bodies of executive power and bodies of local self-government of the issue of holding officials accountable in the manner established by law in case of non-performance or improper performance of duties by them, when identifying and working with injured persons, disabled persons or persons with limited civil capacity; – implementation of other measures provided for by law in the field of prevention of and fight against domestic violence in relation to disabled persons and persons with limited civil capacity or with their participation. 14) appointment of a manager of the property of an individual entrepreneur recognized as incapacitated or whose civil capacity is limited, which was used in entrepreneurial activity, and conclusion of an agreement with the manager on the management of this property. 15) control over the activities of a property manager of an individual entrepreneur who has been recognized as incapacitated or whose civil capacity is limited, in accordance with the rules for controlling the activities of a guardian and conservator. 16) establishment of guardianship over the property of a person over whom guardianship or conservatorship has been established, which property is not located at the place of residence of such person. legislation does not specify the conditions for establishing guardianship over property. as a rule, the norms of article 74 of the ccu are applied in the case of guardianship or conservatorship of an incapacitated person or a person whose legal capacity is limited by a guardianship and conservatorship body or a special institution, if no guardian has been appointed for the person. the establishment of guardianship over property is formalized by a decision (order) of the guardianship and conservatorship body. baltic journal of economic studies 199 vol. 9 no. 2, 2023 17) execution of appropriate documents concerning the person of the ward and the property over which the guardianship is established. 18) to appeal to the court against the actions of the executor of the will if they do not comply with the law and violate the interests of the incapacitated heirs. 19) keeping records of persons in need of guardianship and conservatorship. in connection with this body, it should be noted that the procedure for keeping such records is not currently regulated by law. in this regard, the keeping of records of persons in need of guardianship and conservatorship may be determined either by specific guardianship and conservatorship bodies or by the regional and kyiv city state administration and executive bodies of the supreme council. at the same time, in accordance with the content of sub-paragraph 3.5 of paragraph 3 of the rules, a special file issued for the ward at the time of the establishment of guardianship is kept in the guardianship and conservatorship bodies at the ward's place of residence (on approval of the rules of guardianship and trusteeship). therefore, if the ward changes his place of residence, his personal file must be transferred to the guardianship and conservatorship body at the new place of residence and, accordingly, such a person must be taken into account by this body in relation to persons in need of guardianship and conservatorship. upon the death of an adult incapacitated person or a person with limited legal capacity, such person shall be removed from the register of persons in need of guardianship and conservatorship. 20) direct guardianship and conservatorship proceedings. 21) maintaining a register of personal files of wards, an alphabetical book and a file cabinet. 22) taking measures to protect the personal and property rights of persons under guardianship and conservatorship. 23) participating in court proceedings related to the protection of the rights of persons under guardianship and conservatorship. 24) protection and preservation of housing and property of wards. 25) restrictions, if necessary to protect the interests of the ward, on the right of the guardian or conservator to dispose of the deposit made by anyone in the name of the ward. 26) require the guardian or conservator to compensate for property damage caused to the person whose guardianship or conservatorship has been terminated as a result of the guardian's or conservator's dishonest or negligent performance of duties. 27) carrying out other activities to ensure the rights and interests of adults in need of guardianship and conservatorship. the generalization and analysis of the abovementioned powers of local self-government bodies in relation to the performance by their executive bodies of the role of guardianship and conserva torship bodies provides grounds for the conclusion of the three key tasks of these bodies, performed by them in the direction of ensuring, protecting and safeguarding the personal non-property and property rights and interests of adult incapacitated persons and persons with limited legal capacity. in particular, it is about: – ensuring, protecting and defending the rights and legitimate interests of adults who need guardianship or conservatorship but do not have the legal status of an incapacitated person or a person whose legal capacity is limited, as well as adults who have been granted such status in a court of law; – control and supervision of the activities of subjects of guardianship and conservatorship (guardians and conservators, special institutions) other than guardianship and conservatorship bodies for the purpose of their proper performance of guardianship and conservatorship duties over adults; – control and supervision of the maintenance and management of the property of persons under guardianship and conservatorship. the above information provides grounds for concluding that local self-government bodies play a key socio-economic role in the field of guardianship and conservatorship of adult incapacitated and partially incapacitated persons, especially considering that the relevant powers must by their nature be exercised by the state, but with the aim of increasing their efficiency and effectiveness are delegated to local self-government bodies that are "closer" to the community and individuals. as a matter of fact, if one or another local selfgovernment body does not perform or performs improperly its functions in the field of guardianship and conservatorship of adults, it can have extremely negative consequences for such persons, related, for example, to those real risks of loss, damage or bringing into unsuitability of the property of an adult who is under guardianship or conservatorship, if the guardianship and conservatorship body does not take measures to protect the rights and legitimate interests of such person. in order to prevent such negative consequences, the institution of responsibility of local self government bodies, depending on the nature of violations committed by them, operates as a guardianship and conservatorship body. 4. conclusions summarizing, it should be noted that the existing legislative regulation of the organization and activity baltic journal of economic studies 200 vol. 9 no. 2, 2023 of local self-government bodies as guardianship bodies does not fully resolve the issue of determining the legal status of such bodies in general and their socio-economic role in the researched area in particular. bodies of guardianship and conservatorship are not personalized and are not defined in the structure of local state authorities and local self-government bodies, which is a significant obstacle on the way to achieving the goal of guardianship and conservatorship of adult incapacitated persons and persons with limited legal capacity, ensuring personal non-property and property rights and interests of adults who, due to their health condition, are unable to independently exercise their rights and fulfill their duties. references: 8 million people with mental disorders ive in ukraine – world health organization. available at: https://www.ukrinform.ua/rubric-society/3115748-v-ukraini-8-miljoniv-gromadan-zivut-z-psihicnimirozladami-vooz.html civil code of ukraine. available at: https://zakon.rada.gov.ua/laws/show/435-15#text civil procedure code of ukraine. url: https://zakon.rada.gov.ua/laws/show/1618-15#text boyko, m. (2009). legal basis for the protection of civil property rights limited to capable and incapacitated persons. law forum, vol. 3, pp. 67–73. available at: http://nbuv.gov.ua/ujrn/fp_index.htm_2009_3_12 marriage and family code of ukraine (expired). available at: https://zakon.rada.gov.ua/laws/show/2006-07#text the law of ukraine "on amendments to the civil code of ukraine" dated march 3, 2005. № 2450-vi. available at: https://zakon.rada.gov.ua/laws/show/2450-15#text the law of ukraine "on local self-government in ukraine" dated may 21, 1997. № 280/97-vr . available at: https://zakon.rada.gov.ua/laws/show/280/97-%d0%b2%d1%80#text the law of ukraine "on prevention and counteraction to domestic violence" dated december 7, 2017. № 2229-viii. available at: https://zakon.rada.gov.ua/laws/show/2229-19#text on approval of the rules of guardianship and trusteeship: order of the state committee of ukraine for family and youth, ministry of education of ukraine, ministry of health of ukraine, ministry of labor and social policy of ukraine dated may 26, 1999. № 34/166/131/88. available at: https://zakon.rada.gov.ua/ laws/show/z0387-99#text on approval of the model regulation on a psychoneurological boarding school: resolution of the cabinet of ministers of ukraine of december 14, 2016. on approval of the model regulation on a psychoneurological boarding school: resolution of the cabinet of ministers of ukraine of december 14, 2016. № 957. available at: https://zakon.rada.gov.ua/laws/show/957-2016-%d0%bf#text received on: 09th of march, 2023 accepted on: 28th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 146 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national university "odessa law academy ", ukraine (corresponding author) e-mail: calmakina@gmail.com orcid: https://orcid.org/0000-0002-2032-1851 doi: https://doi.org/10.30525/2256-0742/2022-8-5-146-157 international aspects of intellectual property rights protection olena pasechnyk1 abstract. the article is devoted to the study of the main aspects of international protection of intellectual rights. the authors consider a number of international conventions and treaties, as well as the main provisions of cooperation between wipo and the wto under the agreement on trade-related aspects of intellectual property rights. international treaties form a network that serves all member states, depriving them of the opportunity to act arbitrarily, at their discretion. they establish common norms and standards of ip protection, deviation from which is punishable by sanctions. by signing such treaties, states agree to partially abandon their own ip laws and follow the path of convergence with the laws of other countries. such agreements exist for almost all categories of ip. the international system of public administration procedures in the field of intellectual property today is based on two conventions concluded in the late xix century: paris convention for the protection of industrial property of 20 march 1883 (paris convention) and the berne convention for the protection of literary and artistic works of 9 september 1886 (berne convention). these two conventions played a fundamental role in the subsequent development of legal institutions. in the modern world, a certain system of international legal regulation of related rights has already developed, which directly affects the european related law, since, in particular, the norms of international law form the basis of the legal system of the european union, and form international, including european, standards of intellectual property rights, including copyright and related rights. the main institutions dealing with ip protection on a global scale are the world intellectual property organization (wipo), the world trade organization (wto) and the united nations educational, scientific and cultural organization (unesco). all member states of the european union, as well as the european community are members of the wto organization, which has gained great importance in the field of intellectual property in connection with the adoption of the trips agreement. the trips agreement addresses five important issues: the principles of the trade system and international agreements on intellectual property, the minimum level of protection of intellectual property rights, measures to enforce these rules, the procedure for resolving disputes in the field of intellectual property, as well as transitional measures during the implementation of the systems. ukraine is a party to more than 50 multilateral and bilateral international treaties on intellectual property. therefore, it is advisable to determine the role of international standards in the system of intellectual property rights protection as integral components of the national legal system in ukraine. this has become especially important since 24.02.2022 due to the outbreak of a full-scale war on the territory of ukraine. the occupation of the territory of ukraine by russian invaders and the theft of industrial infrastructure, cultural heritage, art objects, which are also objects of intellectual property. absolutization of copyright and related rights protection does not automatically mean bringing such protection to international standards. it is necessary to amend the legislation of ukraine in order to harmonize the interests of copyright and related rights holders and the interests of society for access to cultural heritage, in the context of introducing only the minimum requirements of international legal acts for the protection of copyright. key words: intellectual law, intellectual property protection, paris convention, berne convention, madrid agreement, geneva treaty, wipo, wto, trips, intellectual ukraine, implementation of international agreements, protection of intellectual rights in war. jel classification: f29, f42, k19, к49 baltic journal of economic studies 147 vol. 8 no. 5, 2022 1. introduction with the rapid development of science and technology, human intellectual activity is becoming increasingly important in various spheres of material and spiritual production. all the latest scientific achievements and works of art are the results of creative work and are the objects of intellectual property (ip). in accordance with international standards, the term "protection of intellectual property rights" means the activities of authorized state authorities to recognize rights, restore rights and remove obstacles that impede the realization of the rights and interests of subjects of intellectual property rights. in this regard, depending on the context, this term means legal protection of intellectual property rights, restoration of rights (protection of rights) of the right holder, enforcement of rights (izbash, 2018). ukraine is a party to more than 50 multilateral and bilateral international treaties on intellectual property. therefore, it is advisable to determine the role of international standards in the system of intellectual property rights protection as integral components of the national legal system in ukraine. this has become especially important since 24.02.2022 due to the outbreak of a full-scale war on the territory of ukraine. the occupation of the territory of ukraine by russian invaders and the theft of industrial infrastructure, cultural heritage, art objects, which are also objects of intellectual property (galupova, 2022). for a long time, legal regulation of relations arising from the use of intellectual property was considered to be entirely the task of the national legislation of the states, which thereby encouraged creativity and promoted free and effective trade in the results of intellectual work for the purpose of economic and social development. countries tried in different ways to regulate the balance between the rights of creators to their works and the right of the public to free access to these works. as a result, there were numerous inconsistencies between national laws on the protection of ip rights. the rights recognized within one country, in the absence of special international agreements, did not exist for the rest of the countries. it turned out that without clear regulation of the norms of use of intellectual goods international cooperation in almost all areas of human knowledge is impossible: in the field of scientific research, medicine, nanotechnology, military, culture, etc. the need for international ip protection, which is ensured through the establishment of appropriate contacts at the international level, has become obvious. in the light of accelerating globalization processes, intensification of cross-border relations and unprecedented growth of intellectual property value, international cooperation on ip issues has become even more relevant. as the world experience shows, effective socioeconomic development of any modern state largely depends on the state of development and efficiency of intellectual and creative activity of its population. the purpose of the article is a systematic study of international legal acts on the regulation of related rights in comparison with ukrainian legislation. based on the purpose of the study, its main objectives can be formulated: to identify the main forms of international cooperation in the field of ip protection, to analyze the treaty base of cooperation in the outlined area, to identify trends and prospects for the development of the system of international protection of ip rights, as well as to consider the path of changes in ukrainian regulatory and creative policy over the years of its existence, and especially over the last year of fighting for victory and its right to independence! 2. stages of development of rule-making for the protection of intellectual property rights in the world in the modern world, a certain system of inter national legal regulation of related rights has developed, which directly affects the european related law (anhel, 2018), since, in particular, the norms of international law form the basis of the legal system of the european union (yurynets, 2012), and form international, including european, standards of intellectual property rights, including copyright and related rights. thus, the study of the legal framework of these international standards, including in the context of ukraine's european integration aspirations, is relevant. ip issues are widely represented in modern legal research. thus, considering the scientific works of specialists, it is possible to note certain evolutionary steps in determining the gradual need to create a global mechanism for the protection of ipr . for example, (peng, 2018; fang, 2017), noted that since the twentieth century there has been a stricter need for state regulation of ipr and the development of more reliable enforcement mechanisms as a separate direction of foreign economic policy in the world. raustiala k. considered in detail the stages of creating an international regulatory framework. ukrainian researchers considered the legal frame work in the context of harmonization of eu legi slation and ukraine's entry into the world market of intellectual resources (gornysevich, 2011; izbash, 2018). and modern problems of intellectual property rights protection in ukraine (nazarenko, maistro, pererva, 2020). the most pressing issues of ip baltic journal of economic studies 148 vol. 8 no. 5, 2022 protection under martial law and reform of the legal system (ohneviuk, 2022; halupova, 2022). the international copyright protection system is a complex mechanism, which is based primarily on the berne convention for the protection of literary and artistic works in its numerous versions and the universal copyright convention of 1952, which was amended in 1971 (berne convention, 2003). the international system of public administration procedures in the field of intellectual property today is based on two conventions concluded in the late xix century: paris convention for the protection of industrial property of 20 march 1883 (paris convention) and the berne convention for the protection of literary and artistic works of 9 september 1886 (berne convention). these two conventions played a fundamental role in the subsequent development of legal institutions. since then, the list of countries that have acceded to these conventions has been constantly growing, and the legal norms proclaimed in them have become the basis for the development of national legislation (hridochkin, 2019). further improvement of public administration procedures in the field of intellectual property took place after the adoption of the conventions through their further revisions. however, the acts adopted at a later date did not change the content of the previous versions of these conventions. in general, there is a certain coexistence of different versions of the acts, so that within both unions of states (paris and berne) one and the same state can be governed by the earlier version ratified by it (ennan, 2012). at the same time, each subsequent act is more advanced than the previous ones, in particular, regarding the general level of legal protection. the latest versions of the acts in force under both conventions, to which most european states have acceded, are the stockholm act of july 14, 1967 to the paris convention and the paris act of 1971 to the berne convention (hridochkin, 2019). numerous international conventions on public administration procedures in the field of intellectual property were also concluded within the framework of the paris and berne unions. the world intellectual property organization acts as a coordinator. the signed conventions can be divided into separate large groups, let us consider each of the groups in general. і. conventions that define the basic internationally accepted norms for the protection of intellectual property in each country. іі. conventions that create mechanisms for acquiring rights in several or all participating countries by a single registration or by filing a single application. such mechanisms simplify the procedure and reduce the costs for the applicant, who no longer has to file an application separately in each country where he/she wishes to obtain protection of intellectual property rights; conven tions on classifications, which are aimed at creating indexing systems to facilitate information searches on inventions, marks and industrial designs. quite often these conventions take the form of unions. as in the case of the paris and berne unions, they bring together groups of countries that may already be bound by different and successive versions of the same convention. in other cases, and this is typical for recent times, they may take the form of classical agreements. the list of normative acts, which together with the paris and berne conventions define at the international level the fundamental procedures of public administration in the field of intellectual property, includes: madrid agreement of 1891 on sanctions for false or misleading information concerning the place of origin of goods, rome convention 1961 for the protection of performers, producers of phonograms and broadcasting organizations, geneva convention of 1971 for the protection of producers of phonograms against unauthorized duplication of their phonograms (phonograms convention), brussels convention of 1974 on the distribution of program-carrying signals transmitted by satellite (satellite convention), nairobi treaty of 1981 on the protection of the olympic symbol, geneva treaty of 1989 on the international registration of audiovisual works (film register treaty), geneva treaty 1994 on the trademark law (tlt), geneva treaty 1996 on copyright, geneva treaty 1996 on performances and phonograms and geneva treaty 2000 on the patent law (plt). ііі. the list of conventions that create an international system of public administration for filing applications or registration of intellectual property rights includes: madrid union of 1891, established by the madrid agreement concerning the international registration of trademarks of 1891 and the madrid protocol concerning the international registration of trademarks of 1989, lisbon union for the protection of appellations of origin and their international registration, the hague union for the international registration of industrial designs, the international union for the protection of plant varieties (upov), the washington union (or pct union), the budapest union of 1977 on the international recognition of the deposit of microorganisms for the purposes of patent procedure (hridochkin, 2019). іv. the list of conventions that establish the international classification system includes: nice union of 1957 concerning the international baltic journal of economic studies 149 vol. 8 no. 5, 2022 classification of goods and services for the purposes of the registration of trademarks, locarno union of 1968 establishing the international classification of industrial designs, strasbourg union and vienna union of 1973 concerning the international classification of figurative elements of a trademark. these international joint offices, established after the adoption of the paris and berne conventions, played a significant historical role until after the second world war, when they were replaced by wipo. it was the embryo of an international organization, which operated in the swiss federal administration and provided management of the paris and berne conventions, as well as individual treaties concluded under these two conventions. wipo is a specialized agency of the united nations and, first of all, an international forum where agreements concluded in the field of intellectual property are usually discussed at the world level. the wipo secretariat manages the instruments in which enterprises are directly interested, such as the madrid union (or pct union), to mention only the most important ones (fil, 2016). the organization has also established an arbitration and mediation center to resolve intellectual property disputes. wipo is a very independent organization in financial terms: contributions from member states make up only 5-6 percent of its annual income. wipo finances its activities through fees for services provided to the private sector (izbash, 2018). another organization that performs important functions of public administration in the field of intellectual property in the eu is the wto, which was established in 1995, replacing the general agreement on tariffs and trade (gatt). all eu member states and the european community are members of the organization. the wto has gained great importance in the field of intellectual property in connection with the adoption of the trips agreement. the reason that prompted states to choose a forum other than wipo to negotiate these agreements was the growing dissatisfaction with the existing contrast between the precision, elegance, even sophistication of the treaty documents negotiated at wipo (fil s., 2016), and the lack of means to ensure the practical implementation and uniform interpretation of these treaties in different countries (yurynets, 2012). an annex to the marrakesh treaty is the trips agreement. it can be considered a set of rules that regulate the sphere of trade and investment in ideas and creativity. these rules provide for procedures and methods of intellectual property protection in the trade sphere (khridochkin, 2018). the wto dispute settlement procedure is also used in the trips agreement. it is a cornerstone of the world trade system, which guarantees the implementation of contractual provisions. and even if this system resembles court procedures, it is primarily aimed at settling disputes by mutual agreement (izbash, 2018). the first stage of the procedure is consultations between the parties to the dispute. the term of the consultation stage is 60 days. if the consultations do not lead to the settlement of the dispute, a special group of experts is appointed. this group is appointed by the dispute settlement body (the wto council, which is represented by all contracting parties). the panel works for six months and transmits its findings or recommendations to the dispute settlement body. it should also be noted that both wipo and wto do not exhaust the list of international organizations that, if necessary or in accordance with their status, deal with intellectual property issues. suffice it to recall that numerous negotiations on the conclusion of treaties in the legal field were held within the framework of the council of europe, as a result of which the council of europe also took the initiative in the field of intellectual property, as, for example, in the case of the convention of 27 november 1963 on the unification of certain elements of the patent law for inventions, which paved the way for european legislation in this field, unesco, for its part, develops significant activities in the field of copyright in connection with its special competences in the field of culture (hridochkin, 2019). 3. identification of the main international normative documents regulating ip rights and the trips agreement in the modern world as already mentioned, organizations in the field of ip rights protection operate at two levels: global and regional. the main institutions dealing with ip protection on a global scale are the world intellectual property organization (wipo), the world trade organization (wto) and the united nations educational, scientific and cultural organization (unesco) (komzyuk, 2012). hornysevych a.m. (2011), notes that currently in the world there is a whole complex of international legal agreements of universal character relating to intellectual property. currently, this complex includes a number of international agreements administered by unesco, the world intellectual property organization (hereinafter – wipo), the world trade organization (hereinafter – wto). accordingly, it is considered that related rights at the international level are regulated by the following documents ratified by ukraine (yurynets, 2012): baltic journal of economic studies 150 vol. 8 no. 5, 2022 1. international convention for the protection of performers, producers of phonograms and broadcasting organizations (rome convention) of 26.10.1961. 2. geneva convention for the protection of producers of phonograms against unauthorized duplication of their phonograms of 29.10.1971. 3. wipo performances and phonograms treaty (hereinafter – wppt) of 20.12.1996. 4. brussels convention on the distribution of signals carrying programmes transmitted by satellite of 21.05.1974 (participation of the ussr since 20.01.1989). there are a number of international treaties regulating relations in the field of intellectual property at the international level. however, the agreement on trade-related aspects of intellectual property rights (hereinafter – trips agreement), administered by the world trade organization (hereinafter – wto), plays a special role among the international standards for the legal protection of intellectual property. the trips agreement sets out the rules agreed by wto member countries as minimum requirements for the legal protection of intellectual property. all wto members, as well as those countries that would like to become members in the future, must comply with these rules (nazarenko, 2020). the provisions set out in the trips agreement largely coincide with the provisions of long-standing international treaties on the legal protection of intellectual property. for example, the provisions required by the berne convention for the protection of literary and artistic works (hereinafter – the berne convention) are included in the trips agreement and apply to the legal protection of copyrighted works. similarly, the trips agreement includes provisions on the legal protection of inventions and trademarks contained in the paris convention for the protection of industrial property (hereinafter – the paris convention). the trips agreement addresses five important issues: the principles of the trade system and international agreements on intellectual property, the minimum level of protection of intellectual property rights, measures to enforce these rules, the procedure for resolving disputes in the field of intellectual property, as well as transitional measures during the implementation of the systems. the doha program nevertheless envisages further negotiations to ensure that the protection of patents on pharmaceutical products does not impede access to medicines in poor countries and that at the same time the role of patents as an incentive for research and development in the pharmaceutical sector is preserved. at the ministerial conference in doha in november 2001, wto ministers adopted a special declaration stating that the trips agreement does not prevent countries from taking measures in the field of public health and using the flexibilities allowed by the trips agreement (in particular, compulsory licenses) (izbash, 2018). unresolved issues include: the possibility for countries that do not have domestic production capacity for the manufacture of pharmaceutical products to import patented medicines, the layout (topography) of integrated circuits, in relation to which reference is made to the 1989 washington treaty (not yet in force) on intellectual property in relation to integrated circuits, the protection of confidential information and control of unfair competition in the field of contractual licenses. the provisions of the third part of the trips agreement oblige the states to act in such a way that their legislation ensures the enforcement of the provisions in the field of intellectual property. to prevent infringements, legal sanctions in case of violations should be sufficiently onerous. procedures should be fair and should not be complicated or expensive. they should set reasonable time limits and not lead to unreasonable delays. parties should be able to apply to the court to review an administrative decision or appeal against a lower court decision. the trips agreement describes in detail the legal procedure, including rules for obtaining testimony and evidence, provisional and protective measures, injunctions and injunctions, damages and other sanctions (khridochkin, 2018). the trips agreement obliges to comply with the requirements in the field of related law even those countries that are not parties to the rome, berne or geneva conventions or the wppt. thus, in the judgment of 26.04.2012 in case c-510/10 the court of justice of the european union noted (lex digital blog, 2012): "the european union, although not a party to the berne convention, is nevertheless obliged to comply with its articles 1 to 21, in accordance with article 1(4) of the trips agreement, to which the european union is a party." as for the role of the berne convention in the protection of related rights, as noted in the publication (vallie, 2010), the rome convention did not recognize the personal non-property rights of performers. however, according to (vallie, 2010), this gap before the adoption of the wppt treaty was filled by art. 6 of the berne convention, according to which, regardless of the property rights of the author and even after the assignment of these rights, he has the right to claim recognition of his authorship of the work and to oppose any distortion, distortion or other alteration of this work, as well as any other encroachment on the work that may harm the honor or reputation of the author (izbash, 2018). baltic journal of economic studies 151 vol. 8 no. 5, 2022 according to (vallie, 2010), the berne and geneva conventions and the wppt are administered by the world intellectual property organization (wipo), the brussels convention by unesco, and the rome convention jointly by unesco, wipo and the international labour organization (ilo) (article 29 of the convention). the first organized international response to the need to provide legal protection to the three categories of beneficiaries of related rights (performers, phonogram producers and broadcasting organizations) was the conclusion of the rome convention. unlike most international conventions, which tend to synthesize the existing national legislation of many countries, the rome convention was an attempt to establish international legal norms in a new area for which few national laws existed at the time. therefore, in fact, the rome convention largely shaped the national legislation of the countries (yurynets, 2012). the trips agreement (part 1-3 of art. 14) repeats the related rights specified in the rome convention, and also (part 6 of art. 14) allows the member states to impose restrictions on the exercise of related rights provided for in the rome convention. it is also very important to examine cases where international instruments allow to restrict related rights. such restrictions are important in the context of harmonizing relations between the interests of the right holder and the interests of ensuring access to cultural property for the general public. in this sense, the rome convention allows (article 15) to restrict the related rights of the subject of such rights in some special cases (use for personal purposes; use of short excerpts for the purpose of reporting current events); shortterm sound recording made by a broadcasting organization on its own equipment and for its own broadcasts; use exclusively for educational or research purposes), as well as, irrespective of these cases, the same restrictions as provided for by its national legislation and regulations on the protection of copyright in works of literature and art. it should be noted once again that the right to impose restrictions on related rights is linked by the trips agreement exclusively to compliance with the requirements of the rome convention and does not provide for any other prohibitions on the imposition of such restrictions. under the trips agreement, in general, the application of the provisions of the rome convention is not mandatory for the countriesparticipants of the wppt (unless, of course, the respective country is a party to the rome convention) (yurynets, 2012). thus, international cooperation in the field of intellectual property is mainly regulated by the trips agreement and agreements under the auspices of the wipo. the trips agreement summarized and consolidated the existing documents, taking as a basis the principles of intellectual property regulation contained in these documents and focusing on the economic component of this object. in this situation, the development of science, moral aspect and advisory functions remain in the field of wipo regulation. wipo, established and operating as a specialized agency of the un, was called upon to regulate intellectual property issues in the context of two opposing political systems (michel m. walter. 2003). in such a balancing situation, it is difficult to ensure the imperative nature of the acts issued and related to issues far from international security problems. in the context of international economic integration, certain guarantees in the protection of intellectual property are needed. unlike the documents forming the wipo, the trips agreement prescribes the parties to ensure enforcement in accordance with the standards provided by the agreement (izbash, 2018). however, as practice shows, some measures of ip protection and enforcement in modern conditions may lead to violation of the right of everyone to free access to information. this concerns, first of all, the existence of ip in the internet, which has rapidly developed and occupied a large place in the everyday life of every individual. based on the analysis of the current trends in solving the problem of establishing a balance between the interests of right holders and internet users at the international level, there is a clear vector towards strengthening the intellectual property regime, which may have a negative impact on freedom of information on the internet. in this regard, it seems appropriate to adopt political documents at the international level that could restore the shaken balance. it should be noted that in the conditions of the modern technological revolution fundamentally new possibilities of reproduction of objects protected by intellectual property rights have appeared. this leads to a significant differentiation of the structure of the intellectual property protection system and complication of the mechanisms of such protection. of particular importance is the protection of new technological objects, which include computer programs, biotechnology, integrated circuits, reprography (including audio and video recordings), signal distribution through new communication techno logy (satellites, cable), digital distribution systems. partially these problems are already regulated by wipo treaties and trips agreement (izbash, 2018). at the same time, an extremely complex set of problems has arisen related to information flows, baltic journal of economic studies 152 vol. 8 no. 5, 2022 commercial and other activities on the internet and the need to adapt ip protection structures to activities using the latest information technologies. this complex goes far beyond the so-called internet treaties adopted in 1996. therefore, in september 1999, wipo adopted the so-called "digital agenda" – a 10-point action plan that takes into account the problems of ip protection in the context of the development of the internet (raustiala, 2019). in 2020, the number of international patent applications filed under the wipo patent cooperation treaty (pct) increased by 4% to 275900 applications, reaching an all-time high, despite a projected 3.5% decline in global gdp. china (68720 applications, + 16.1% year-on-year growth) remained the largest user of the wipo pct system in the world, ahead of the united states (59,230 applications, + 3%), japan (50,520 applications, – 4.1%), the republic of korea (20,060 applications, + 5.2%) and germany (18,643 applications, – 3.7%). the number of international trademark applications decreased by 0.6% in 2020 and amounted to 63800 (world intellectual property, 2020). the lack of appropriate protection of property rights and the existence of infringements of intellectual property rights, causes large losses to the industry, damages the country 's budget, negatively affects investments. all this contributes to the loss of the country 's reputation in the global intel lectual property market. the largest number of copyright infringements is observed in the market of computer and audio products. this leads to a low level of competitiveness and innovative development of the country. in the future, measures should be taken to introduce progressive legal norms and standards in the field of legal regulation related to intellectual property. the largest number of copyright infringements is observed in the market of computer and audio products. this leads to a low level of competitiveness and innovative development of the country. in the future, measures should be taken to introduce progressive legal norms and standards in the field of legal regulation related to intellectual property. given the nature of the harm that can be caused when intellectual property rights infringements are left unaddressed, the trips agreement requires prompt remedies, including provisional or interim measures, without prior notice to the alleged infringer. procedures should include guarantees that decisions will be made on the basis of evidence presented by the parties by an impartial judge who rationally applies the law. 4. implementation of international legislation regulating intellectual property rights in ukraine the legal system in ukraine is based on the rule of law. according to this, the constitution of ukraine has the highest legal force. laws and other normative legal acts are adopted on the basis of the constitution of ukraine and must comply table 1 international treaties of ukraine on intellectual property issues administered by wipo title of the agreement date of entry into force for ukraine convention establishing wipo paris convention for the protection of industrial property patent cooperation treaty madrid agreement concerning the international registration of marks berne convention for the protection of literary and artistic works treaty on the law of trademarks budapest treaty on the international recognition of the deposit of microorganisms for the purposes of patent procedure nairobi treaty for the protection of the olympic symbol convention for the protection of producers of phonograms against unauthorized duplication of their phonograms protocol under the madrid agreement concerning the international registration of marks nice agreement concerning the international classification of goods and services for the purposes of the registration of marks wipo copyright treaty wipo performances and phonograms treaty international convention for the protection of performers, producers of phonograms and broadcasting organizations geneva act of the hague agreement concerning the international registration of industrial designs patent law treaty locarno agreement establishing an international classification for the purposes of industrial designs vienna agreement establishing an international classification of the figurative elements of marks strasbourg agreement concerning the international patent classification singapore treaty on the law of trademarks 26.04.1970 25.12.1991 25.12.1991 25.12.1991 25.10.1995 01.08.1996 02.07.1997 20.12.1998 18.02.2000 29.12.2000 29.12.2000 06.03.2002 20.05.2002 12.06.2002 23.12.2003 28.04.2005 07.07.2009 29.07.2009 07.04.2010 24.05.2010 baltic journal of economic studies 153 vol. 8 no. 5, 2022 with it (article 8 of the constitution) (horny sevych, 2011). the basis of legal relations in the field of intel lectual property is the norms of article 54 of the constitution of ukraine. according to them, citizens are guaranteed freedom of literary, artistic, scientific and technical creativity, protection of intellectual property, copyrights, moral and material interests arising in connection with various types of intellectual activity. every citizen has the right to the results of his intellectual, creative activity; no one may use or distribute them without his consent, with the exceptions established by law. ukraine is a party to 20 out of 22 existing inter national treaties on intellectual property, administered by the world intellectual property orga nization (wipo). the list of these agreements is presented in table 1. the trips agreement entered into force on the territory of ukraine on the date of its accession to the wto, namely on may 16, 2008. particular attention in the trips agreement for ukraine is paid to the procedural standards designed to ensure prompt and effective prevention of infringements of intellectual property rights, including imports of goods that are the subject of such infringements, as well as preservation of relevant evidence of the alleged infringement. peculiar international standards of intellectual property rights protection can be considered the requirements of international non-governmental organizations on the protection of their intellectual property rights during the mass events organized by them, especially sports events, such as the european football championship 2010–2012 organized by the union of european football associations (hereinafter – uefa). it is also new for the system of international standards for the protection of intellectual property that usually the exclusive right to prohibit the unauthorized use of uefa intellectual property is granted to the government of the country hosting the championship. another innovation is uefa's requirements to prevent parasitic marketing, i.e., the use of uefa's reputation and the championship by others for their own commercial purposes without uefa's permission when carrying out activities in the field of marketing, advertising, public relations (hornysevych, 2011). in the field of reforming the legislation on intellectual property, ukraine receives comprehensive assistance from the eu. thus, from 2014 to 2016, the twinning project "strengthening the legal protection and enforcement of intellectual property rights in ukraine" was implemented by the spanish and danish patent and trademark offices. the project is aimed at improving the skills of specialists in the field of intellectual property (examiners of ukrpatent, judges, customs inspectors, etc.) and harmonization of ukrainian legislation with the european one (nazarenko, 2020). it should also be noted that in april 2018, dr. r . schmidt, an international expert of the eu project "support to the development of the 192 geographical indications system in ukraine", visited ukrpatent. the main focus of the discussion was the peculiarities of the process of registration of geographical indications in ukraine. the expert group and specialists of the examination body discussed the differences between the systems of registration of geographical indications in the eu and ukraine (anhel, 2018). it also requires improvement of the intellectual property sphere of ukraine and outlining further directions of the national registration system development. in 2017, there were changes in the institutional capacity of the authorities in the field of intellectual property protection – the government of ukraine launched the reform of the system of state admini-stration bodies in the field of intellectual property, namely, the activities of the state intellectual property service, which was not sufficiently transparent, were terminated (nazarenko, 2020). in september 2017, work began on the creation of a single specialized judicial body – the supreme court on intellectual property, designed to improve the efficiency of the system of rights protection. similar specialized courts exist in germany (federal patent court), japan (supreme intellectual property court) and a number of other countries. however, the full-fledged work of the said court in ukraine has not yet begun (nazarenko, 2020). 5. the problems of intellectual property rights protection are related to the full-scale war in ukraine the open russian attack on ukraine began on 24.02.2022 as a full-scale war, and continues throughout 2022. the full-scale war undoubtedly affects the judicial process of the state. there were few new laws adopted in 2022. as of the beginning of february 2022, the parliament had enough legislative ideas on intellectual property rights. for obvious reasons, the verkhovna rada came up with them in the summer of 2022, and some of them were rejected (for example, draft law no. 5552 "on copyright and related rights" or no. 6464-1 "on amendments to certain legislative acts of ukraine on strengthening the protection of intellectual property rights"). the main government draft law no. 6464 was developed to implement the terms of the association agreement between ukraine and the eu. it is now clear that further changes will be implemented on ukraine's path to eu membership (decree of the president of ukraine № 64/2022 from 24/02/2022). baltic journal of economic studies 154 vol. 8 no. 5, 2022 the draft law no. 6464 proposes amendments to the civil code of ukraine, the civil procedure code of ukraine, the commercial procedure code of ukraine, the laws of ukraine "on protection of rights to industrial designs", "on protection of rights to trademarks for goods and services", "on protection of rights to inventions and utility models", "on protection of rights to semiconductor product layouts". among the proposed implementations: – a decision to request information on the origin and distribution network of goods or services that infringe intellectual property rights; – a one-time monetary penalty instead of using other remedies if the violation is unintentional and the application of remedies is disproportionate to the damage caused; – an indication that the amount of compensation cannot be less than the amount of remuneration that would have been paid for granting permission to use the rights. back in the spring of 2022, the verkhovna rada adopted the law "on the protection of the interests of persons in the field of intellectual property during the martial law imposed in connection with the armed aggression of the russian federation against ukraine". the most anticipated changes came in the fall, on november 8, 2022, the government order no. 943-р "some issues of the national intellectual property authority " of october 28, 2022 came into force. according to this document, the ukrainian national office of intellectual property and innovations becomes the entity performing the functions of the nipa, and the state enterprise "ukrainian intellectual property institute" ceases to perform these functions" (ukrpatent). currently, as of december 2022, the process of transformation and transfer of nipa functions from ukrpatent to national intellectual property authority of ukraine (nipau) is underway. ukrpatent itself reported that from november 28, the electronic systems of filing applications for intellectual property objects, which were temporarily out of operation due to routine maintenance, should resume their work. it is quite possible that on the day when you will hold this publication in your hands, both nipau and ukrpatent will work as planned. at least the prospects for the start of work of the nipau are more optimistic than those of the supreme ip court. therefore, large and flexible changes in ukrainian legislation are expected in the near future. the process of implementation and harmonization of legislation with the eu norms will develop especially rapidly after the victory. the imposition of martial law by the decree of the president of ukraine no. 64/2022 of february 24, 2022 provides for the restriction of constitutional rights and freedoms of a person and citizen and the rights and legitimate interests of legal entities for the period of the special legal regime in order to take the necessary measures necessary to avert the threat, repel armed aggression and ensure national security, eliminate the threat to the state independence of ukraine, its territorial integrity. article 55 of the constitution of ukraine is not included in the list of constitutional norms guaranteeing rights that are restricted during martial law. therefore, the right of everyone to protect their rights and freedoms from violations and unlawful encroachments by any means not prohi bited by law is not restricted during martial law. according to article 10 of the law of ukraine "on the legal regime of martial law", the powers of the courts cannot be suspended, in addition, the reduction or acceleration of any form of legal proceedings is prohibited. nevertheless, the judicial system has undergone changes under the influence of military operations – the territorial jurisdiction of court cases has been changed and the remote form of consideration of some cases has been introduced. undoubtedly, such changes are necessary in the period of armed aggression and hostilities, because the changes are aimed at ensuring the rights of participants in court proceedings to participate in court hearings and exercise their right to a fair trial. taking into account the peculiarities of the current legal regime and the specifics of conflicts in the field of intellectual property, it can be stated that the change of territorial jurisdiction and remote consideration of cases cannot fully ensure effective protection of intellectual property rights. military actions in certain territories of the country may complicate the realization of the right to protect the results of intellectual and creative activity, so today, more than ever, the issue of using alternative dispute resolution methods and conflicts arising in the field of intellectual property rights is relevant. at present, such methods can justify the purpose of their emergence, namely, to help the judicial system to effectively protect rights. so, consider the features of judicial protection of intellectual property rights during martial law and the peculiarities of using alternative dispute resolution methods. in general, the imposition of martial law does not formally affect the judicial process. article 26 of the law of ukraine "on the legal regime of martial law" prohibits the reduction or acceleration of any form of justice under martial law. at the same time, as practice shows, armed aggression in certain territories of the country does not allow the participants of the process to get to court. thus, baltic journal of economic studies 155 vol. 8 no. 5, 2022 on 24.02.2022, the council of judges of ukraine adopted a decision "on taking urgent measures to ensure the sustainable functioning of the judiciary in ukraine in the context of termination of the hcj powers and martial law in connection with the armed aggression by the russian federation". according to the decision of the council, the courts will continue their work even under martial law. also, the decision states that "in case there is a threat to the health, life and safety of visitors and court staff, the court may suspend the proceedings until the circumstances that caused the danger are eliminated." (galupova, 2022) in addition, judicial protection of intellectual property rights during martial law may not be effective due to the shortcomings of the judicial method of protection, among which: the duration of the court proceedings (consideration of cases in the field of intellectual property often requires the involvement of an expert who would have the necessary knowledge of the specifics of the object of intellectual property rights, and expert research takes time); financial cost of the trial; inability to be physically present at the court hearing or inability to attach the necessary evidence due to military operations in certain territories; the court decision will not satisfy both parties, and therefore, when the dispute is resolved by the court, the conflict may continue or develop into another conflict and affect a wider range of people. alternative dispute resolution in the field of intellectual property (adr) is a system of ways to protect intellectual property rights based on contractual principles and aimed at resolving a dispute or settling a conflict over the rights to the results of intellectual and creative activity. in the legal literature, the methods of alternative dispute resolution include mediation, dispute settlement with the participation of a judge, negotiations, arbitration, facilitation and conclusion of a settlement agreement (galupova, 2022). the list of ways of adr is not exhaustive, because the development of public consciousness, on the one hand, and the development of information technology, on the other hand, make it possible to develop and expand the adr system. these methods are universal and flexible, which makes it possible to talk about their effective and unimpeded use in martial law. 6. conclusions in modern conditions it is impossible to imagine progressive development of any sphere of human activity (culture, industry, agriculture, health care, etc.) without proper scientific and technical support and gradual spiritual development of society. these processes are closely interrelated and, at the same time, interdependent. thus, at the present stage the main trends in the development of international regulation of intellectual property rights are clearly defined. firstly, these rights are recognized almost universally, although to varying degrees. secondly, due to negotiations at the highest level and actions of international organizations, there is harmoni zation and even unification of national legislation. thirdly, the universalization of ip protection, application of a unified approach to its provision to its citizens and foreigners, equalization of the scope of rights and opportunities for their protection in court for all interested parties is emphasized. as a result, ip protection is gradually losing its traditional territorial character. the system of international ip rights protection seems relatively stable, but in reality this structure is subject to constant upheavals. new problems and challenges force the participants of international cooperation on ip issues to continuously review the treaty basis of their relations. this allows them to adapt national legislation to changing realities and at the same time continue their harmonization. the tendency to modernize international norms and standards, to bring these norms in line with the requirements of time complements the picture formed in the field of international regulation of ip rights. in the eu system of law, compared to such leading branches of eu law as customs, institutional, competition law, the formation of intellectual property law as a special branch of law is still in progress. therefore, the study of the peculiarities of public administration in the field of intellectual property in the eu countries allows to identify and outline the nearest prospects for further development of domestic public administration procedures in this area. it should also be recognized that in ukraine the protection of related rights is absolutized at the legislative level, although in practice the state is unable to provide generally accepted protection. attention is drawn to the danger of absolutization of the need for intellectual property protection in ukraine and inadequate understanding of the role of intellectual property rights for economic, social and cultural development of the country. the fact that under the guise of the fight for copyright protection there are attempts to achieve other goals, in particular, to restrict the freedom of the internet and the media. absolutization of copyright and related rights protection does not automatically mean bringing such protection to international standards. recently, in europe and the united states there has been an understanding of the need to find a consensus baltic journal of economic studies 156 vol. 8 no. 5, 2022 between the interests of copyright and related rights holders and the interests of society for access to cultural heritage. it is necessary to amend the legislation of ukraine in order to harmonize the interests of copyright and related rights holders and the interests of society for access to cultural heritage, in the context of introducing only the minimum requirements of international legal acts for the protection of copyright and related rights and simplifying access to copyright and related rights. unfortunately, in today 's ukraine, the protection of intellectual property remains rather conditional. especially in the context of a full-scale military criminal attack on ukraine by the russian invasion in 2022. in the near future, and especially after the victory of ukraine, these trends will not only continue, but even intensify. international cooperation in the field of intellectual property protection will contribute to their development. however, it is itself affected by a number of positive and negative factors, the correlation of which determines the fruitfulness of joint efforts made at the interna tional level. at this acute stage, the state should take measures aimed at ensuring access to both judicial protection and protection of intellectual property rights by adr methods and public awareness of the variety of ways to protect the rights to the results of intellectual and creative activity. references: anhel, ye. 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(2020). modern problems of protection of intellectual property rights in ukraine. available at: https://core.ac.uk/download/pdf/162868431.pdf on the introduction of martial law in ukraine: decree of the president of ukraine № 64/2022 from 24/02/2022. available at: https://zakon.rada.gov.ua/laws/show/64/2022#text peculiarities of judicial proceedings under martial law. available at: https://jurliga.ligazakon.net/news/ 211140_osoblivost-zdysnennyasudochinstva-v-umovakh-vonnogo-stanu peng, m., ahlstrom, d., & carraher, s. 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(2019). intellectual property in the information age: american &chinese perspectives. ucla school of law, public law research paper. no. 19-30. available at: https://ssrn.com/abstract=3451389 valle, v. (2010). the decline of james i and queen annie: the protection of intellectual power in the hour of space. available at: www.viravallee.com/books/book2.aspx world intellectual property organization. available at: www.wipo.int/about-wipo/ru/history.html yurynets, yu. l. (2012). the international system of regulation of related rights in the context of the european integration of ukraine. information and law, vol. 3(6). available at: http://ippi.org.ua/sites/default/ files/12uuleiu.pdf received on: 4th of october, 2022 accepted on: 15th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 53 vol. 4, no. 2, 2018 corresponding author: 1 department finance, cherkasy state technological university. e-mail: irynahoncharenko@gmail.com 2 department finance, cherkasy state technological university. e-mail: i.servatynska@chdtu.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-2-53-57 financial unity of the world as an organic part of globalization iryna honcharenko1, inna servatynska2 cherkasy state technological university, ukraine abstract. the purpose of the paper is to determine the current features and phases of the formation of the financial unity of the world as an organic component of globalization and to identify the features of financial globalization in this context. methodology. the list of the research methods of the subject under consideration includes the monographic method, analysis, techniques of the abstract-logical method, etc. results. the urgency of the article is that the development and spread of globalization processes is a necessity to study the processes of forming a financial unity on a global scale, as a phenomenon that can have both positive and negative consequences. it is proved that the financial unity of the world is an integral part of globalization. the stages of formation of the financial unity of the world are determined. the positive and negative consequences are specified. despite the assumption about possible negative manifestations of the financial unity of the world, acceleration of its offensive in the final, perfect form will allow providing significant advantages for global economic development. practical implications. the main idea of the article was to justify the expediency of providing and using the financial unity as the instrument for development taking into account the prospects of globalization for national, regional economics, enterprises, and communities. value/originality. the conducted research allowed highlighting the positive and negative effects of financial unity and financial globalization, as its manifestation, in the global economic system as important characteristics of the evolution and the current state of world financial architecture. key words: globalization, financial globalization, financial market, single currency, financial calculations. jel classification: g22, f36, g11 1. introduction the essential features of the development of modern financial systems of different countries are their tendency to unite in the framework of international financial flows, development of common approaches to the allocation of financial resources, the emergence of supranational forms of financial intermediation etc. all these factors are an integral element of globalization, which has different manifestations in the economic sphere, and now it is found in the convergence of the economies of many states. financial globalization is triggered by the growth of financial flows that can have negative consequences, which were manifested in the global financial crises destroying the financial architecture of the world. thus, it helped it recover in new, more viable forms. the development of globalization processes needs further studying of processes of the fiscal unity formation on a global scale, as a phenomenon that can have both positive and negative consequences. target setting. in general, the effects of financial globalization have not been fully defined yet. virtually there is no formal empirical information confirming the often-quoted assertion that the financial globalization was a cause of the financial crises that occurred in the world in the last three decades. however, reliable evidence on the macroeconomic benefits of financial liberalization has not been obtained. therefore, it is necessary to designate the positive and negative effects of the financial unity and financial globalization, as its manifestation in the global economic system in the form of the important characteristics of the evolution and current state of the global financial architecture. 2. results of previous researches the issue of globalization and, in particular, the financial aspect contained in the basis of the fiscal unity of the world, is revealed in the works of many local researchers, such as d. y. mamotenko (mamotenko, 2009) who explores the globalization of international financial markets, v. v. kuleshov (kulishov, 2013) who specifies the nature and implications of financial globalization, v. s. lukyanov (lukyanov, 2013) who baltic journal of economic studies 54 vol. 4, no. 2, 2018 defines the basic imperatives and the crisis management mechanisms of the globalization of national financial systems, n. m. ukhnal (ukhnal, 2015) who studies the specific features of development of international financial centres in conditions of globalization of the financial system, v.v. zhuravel (zhuravel, 2010) who underlines the features of globalization of the world financial system et al. in foreign publications, issues of the studied subjects in certain aspects are investigated in sources (sheffield, korotayev & grinin, 2013; schmukler, 2004; rousseau & sylla, 2001; prasad, shang-jin & kose, 2003). due to the analysis of the mentioned above works including the author’s works (honcharenko & berezina, 2016; berezina, tkachenko, 2017), it is possible to make a conclusion. contemporary manifestations of the world financial unity, such as the emergence of digital currencies, some of which tend to get the status of the future single currency with both advantages and life-threatening impacts on economic security on a global scale are still remain unexplored. the objective of the study is to identify current characteristics and the gradual formation of the world fiscal unity as an integral component of globalization, and the establishment of specific features of financial globalization in this context. 3. stages of development of the world financial unity globalization accompanies the development of all spheres of modern life and is traced in the evolution in different directions. the convergence of cultures, political trends and attitudes, completion of construction of a sole information space on the basis of the newest technologies of storage and data access, intensification of educational and scientific exchange, the high mobility of the inhabitants of the planet, and the formation of a single world economic system proves conclusively that the world is transforming into the area, where goods, services, information, capital, and other resources are transferred and new ideas circulate freely together with their carriers and proponents, providing the necessary conditions for the development of supranational structures and international institutions, as well as establishing their close collaboration. globalization involves the formation of a unified international legal, cultural, informational, economic, and hence financial space. undoubtedly, the process of financial unity will play a vital role in the global economy of our time, providing a sufficiently powerful impetus to the creation of an entirely new system of financial relations. let us consider the stages, according to which the financial unity of the world occurs, table 1. the financial unity of the world is manifested in the formation of a single financial system, characterized by common dominant sources of financial resources, high level of interconnection of financial flows, redistribution of funds between states, unions of states, regions, industries to provide the necessary financial support and as a consequence, economic development. the principle of unity of the financial system is implemented in the mechanism of integration of financial plans and balance sheets developed at all levels of governance of the global economy. qualitative development of the financial sector has become a prerequisite for the integration of financial systems of individual countries into the global financial space and its status and level of architecture is one of the main factors that determine the magnitude of the financial growth and benefits that are expressed in maintaining stability, which can provide financial globalization. the higher the level of financial sector development of the state, the more benefits the country will receive from the proceeds of capital in the form of table 1 stages of development of the world financial unity stages specific features of the stage stage 1 establishing currency exchange rates, the formation of currency baskets, making a monetary exchange, establishment of financial relations between states stage 2 the rate to the convergence of financial markets; financial institutions from different countries such as product lines, which allowed financial intermediaries of some state series; penetration of foreign capital in the regional financial markets stage 3 the creation of international financial companies, expanding their branch networks around the world, creating a system of supranational regulators of financial relations, origins of the global financial market stage 4 enhancing the authority of international financial organizations, granting them the right to solve the financial problems of the global scale and influence on the national financial system stage 5 the development of payments using on the basis of electronic systems, facilitation of the access to financial products and services, increase in demand through international programs for the improvement of financial literacy of the population stage 6 (current status) the gradual levelling of the status of national currencies, distinguishing several currencies accepted for calculation in most countries and can claim the status of global currency; the emergence of virtual, digital currency, completion of formation of the global financial market, and building of its architecture stage 7 (in the future) the use of a single digital world currency, the same conditions for the licensing and activities of financial institutions, the same rules and rates for the use of financial products and services, the ability to use them anywhere in the world in selected financial companies resource: compiled by the authors baltic journal of economic studies 55 vol. 4, no. 2, 2018 financial growth. at the same time, the dependence on foreign financial flows could cost the state its financial stability, make vulnerable to large-scale financial crises. at the same time, in developing countries without their own high-performance of the financial sector, the sudden change of direction of financial flows can initiate or exacerbate the cycles of financial ups and downs. in addition, the mismatch of the financial policy between the requirements of the time, the low level of financial regulation, excessive liberalization of the domestic financial sector are the main causes of many crises that may be associated with financial integration, but in fact could be offset under the condition of the national financial services markets of a sufficient amount of foreign capital. 4. mainstreams of financial unity and international financial market development financial world unity is expressed primarily in the formation of a single financial market. in recent decades, the global (international) financial market has been widely developed and is currently playing a leading role in the global economic system. the trends in the development of a single financial market are the following: globalization, internationalization, institutionalization, disintermediation, the increased level of international competition, integration, convergence, informatisation, computerization, and concentration of world markets. the globalization of the international financial market is reflected in the increase of its share in the operations of providing active and passive forms of financial services by residents of different countries. the internationalization of the international financial market means that the high level of diversification of activity of economic entities in different regions of the world makes it impossible to determine their nationality. integration of the international financial market is one of the most notable trends of the global financial system. integration processes contribute to the increasing mobility of financial capital and reducing transaction costs in the use of financial products and services. convergence of the international financial market and its individual segments is a process similar in its substantive essence with the integration, which consists in the gradual disappearance of borders between the national sectors of the international financial market. the process of institutionalization of the international financial market is reflected in the strengthening of the role of financial institutions in the global financial architecture. disintermediation ‒ “the leaching of mediation” has become another noticeable trend in the development of the international financial market and had a significant meaning for the integration processes in the financial sector. it means the elimination of financial intermediaries (brokers, banks) from transactions between borrowers and lenders or buyers and sellers of financial products and services in the market, allowing both sides of a financial transaction to reduce their costs by refusing to pay commissions and other fees. increased competition over the last twenty years among global companies and financial institutions has led, on the one hand, to the improvement of the functioning of the international financial market, and on the other, to the growth of requirements for financial institutions with respect to their economic efficiency and financial security. thus, the only financially stable and profitable companies with a wide network of branches and offices that have a recognizable brand, a good reputation and associate consumer financial services with reliability and stability, which provide them with a high level of customer confidence remain on the global financial market. the increased competition had an impact on the concentration of international financial market and its participants. now the concentration occurs through the mechanisms of mergers and acquisitions, and these transactions are of a supranational, global character. computerization and informatisation are currently the main trends in the international financial market because its activities at the present stage are done using a computer and information technology. their proliferation has resulted in increased use of financial products and services; it has enabled financial institutions to serve their clients in a single financial space. the participants in the international financial market make management, investment, and financial solutions based on sophisticated techniques of computer simulation. the global financial market international financial centres, which were the largest cities on the planet, in countries where the concentration of financial flows was the most obvious coordinate their activities. the emergence of international financial centres is the requirement of time and opportunity for states to integrate into the modern global economic environment. finally, the financial world unity will not be achieved without the introduction of a single currency for service payments. in 1988, economists predicted the emergence of a single world currency. let us quote a fragment of the publication from the “economist” magazine: “thirty years from now, americans, japanese, europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. prices will be quoted not in dollars, yen or d-marks but in, let’s say, the phoenix. the phoenix will be favoured by companies and shoppers because it will be more convenient than today 's national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century” (mamotenko, 2009). given that the prophecy was made in 1988 for the thirty-year perspective, it should be realized in 2018, what makes this study even more relevant. baltic journal of economic studies 56 vol. 4, no. 2, 2018 at this point, usd can be called world currency with some conventions. although, it isn’t used in a number of countries. the international financial relations are based on the american dollar. this situation does not suit the government of a significant number of countries that understand that we should not allow one state to be emission centre of the whole world. the desire to introduce a single world currency is quite understandable. the supporters of the innovations propose to create a new instead of using an existing one at the moment. however, in any case, the country that will receive emission right will be in a better position than other participants in the global financial system. therefore, it is advisable to assume that a new stage of fiscal centralization and globalization will be a single world of digital origin. it can be assumed that it will be similar to the bitcoin blockchain, which for many has become a factor in the reliability of cryptocurrencies, proved to be beneficial for market regulators and authorities. opponents of cryptocurrencies claim that their significant drawback is the possibility to use outside the official financial accounts, i.e. for the needs of the shadow economy. however, if the authorities need to track transactions using bitcoin, due to the development of modern technologies and information systems, they will be able to do it, no matter how good the attackers will try to hide their actions. the prospect of anonymity while using cryptanalytic has not been completely proven. thus, there is every reason to believe that central banks and international financial conglomerates will actively use bitcoin as a world currency. it will probably appear to be the mythical currency “phoenix”, which was foreseen in 1988. an incredible amount of capital invested by large financiers in the blockchain, support from central banks is a signal that the technology of the blockchain will form the basis for the currency system of a “new world order” and accelerate the onset of the financial unity of the world in its perfect form. 5. advantages and threats from the financial unity of the world and financial globalization what will the introduction of the single global currency on the globalization scale help achieve? its use will allow avoiding sharp rate fluctuations of national currencies. and will contribute, therefore, to an active development of international economic relations (i.e. economic globalization). this study determines the advantages and threats from the financial unity of the world and financial globalization (see table 2), the occurrence of which, however, is inevitable, given the active development of globalization processes in the world. in spite of the suggestions regarding the possible negative effects of the financial unity of the world, accelerating its onset in a final, perfect form would provide significant benefits for the global economic development. 6. conclusions a study of trends and characteristics of the financial unity of the world as an integral component of globalization has led to the following conclusions. 1. the world financial unity has been proven to be an integral part of globalization. the convergence table 2 positive and negative effects of the onset of the world financial unity and financial globalization positive consequences negative effects the free exchange of financial assets, financial products and services in any country in the world the possibility to raise prices for financial products and services by means of the financial oligopoly of international companies cost reduction and financial services due to the tax-free currency exchange leaving the financial market for small business financial forms the increase in the rate of financial services through the use of single settlement and payment systems total control of international financial organizations of the functioning of national financial systems levelling of the cost of issuing paper money provided the use of a single digital currency (cryptanalytic) the use of cryptocurrencies with criminal intent through the use of information and computer technology the introduction of the unified rules of conducting the financial business, single standards and requirements for the quality of financial products and services the increasing number of financial frauds and economic crimes with the use of computer technology the ability to control all cash flows to minimize the shadow economy, funding of terrorism and money laundering the possibility of destruction of the entire global financial system and its architecture by a large-scale hacker attack improving financial literacy of the world’s population the destruction of the national financial diversity of banknotes, coins and other means of calculation the increase in demand for financial products and services, the ability to use them to increase the level of welfare of the population of the world the redistribution of financial resources in favour of international financial centres, favouritism in the allocation of investment capital facilitating the access to investment resources on the capital market the inability to withstand the global financial crises by the means of national financial systems resource: compiled by the authors baltic journal of economic studies 57 vol. 4, no. 2, 2018 of various political, cultural, economic trends, the formation of unions of states, common information space, supranational markets of goods and services necessitated the exchange of financial flows, unification of models of financial intermediation, build the international financial architecture, the emergence of universal means of payment of digital currency. financial globalization has expanded the boundaries of the capital markets, has ensured their smooth movement to meet the financial requirements and implementation of financial interests both at the macroand micro-level. further economic development on a global scale would be impossible without the introduction of unified norms and rules of functioning of the financial system. 2. financial unity of the world in its modern form took place in several stages. the establishment of foreign currency exchange rates took place on the first one; the course towards financial markets started on the second one; the third included the creation of international financial companies, the noticeable increase in the authority of international financial organizations happened in the fourth stage; the growth of cashless payments took place on the fifth stage; the present time gradual levelling of the status of the national currency, the completion of the formation of the global financial market and building its architecture was on the sixth stage; the last, seventh stage is expected to implement and use a single digital world currency. 3. financial globalization can have both positive and negative effects on the global economic order. however, the onset of the financial unity of the world is inevitable because this phenomenon is an integral consequence of the quality of the upcoming transformation of the world economic plane. therefore, the level of international financial institutions should develop a list of strategic directives and imperatives to avoid and minimize the threats that may result in the further process of unification of the financial system to ensure a high level of global financial and economic security in the future. references: berezina, o.y. & tkachenko, yu.v. 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(2004) benefits and risks of financial globalization: challenges for developing countries. available at: http://siteresources.worldbank.org/dec/resources/benefitsandrisksof financialglobalizationschmukler. pdf (accessed 10 april 2018). ukhnal, n.m. (2015) osoblyvosti rozvytku mizhnarodnykh finansovykh tsentriv v umovakh hlobalizatsiyi finansovoyi systemy [features of the development of international financial centers in the conditions of the globalization of the financial system] scientific papers ndfi, vol. 2, pp. 17-32. zhuravel, v.v. (2010) osoblyvosti hlobalizatsiyi svitovoyi finansovoyi systemy [features of globalization of the world financial system] bulletin of kharkiv national university named after v.n. karazin. series: economics, vol. 911, pp. 133-137. baltic journal of economic studies 124 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 odessa state university of internal affairs, ukraine (corresponding author) e-mail: makoviy09@i.ua orcid: https://orcid.org/0000-0002-6847-2309 2 sumy state pedagogical university named after a.s. makarenko, ukraine e-mail: kucshuk@ukr.net orcid: https://orcid.org/0000-0002-5918-2035 3 university of customs and finance, ukraine e-mail: filyanina.la@gmail.com orcid: https://orcid.org/0000-0002-8805-5510 doi: https://doi.org/10.30525/2256-0742/2023-9-1-124-134 modernisation of the legal regulation of temporary restrictions on the exercise of private rights in ukraine on the way to economic integration viktor makovii1, andrii kuchuk2, liudmyla filianina3 abstract. the subject of the study is the theoretical and applied aspects of legal regulation of certain economic relations, in particular, the temporal restrictions on the implementation of private rights in ukraine. methodology. general scientific and special legal methods were used in the research process. quantitative and qualitative parameters of organisational, legal and economic measures aimed at modernising the legal regulation of time limits on the exercise of private rights in ukraine were determined with the help of the analysis. the synthesis ensured the clarification of the common features of economic and legal phenomena, which is a precondition for the modernisation of the legal regulation of time limits for the exercise of private rights in ukraine. the comparative legal method allowed to identify common and specific features of the normative regulation of time limits on the exercise of private rights in different states (taking into account legal and economic features). the formal-legal method made it possible to draw conclusions on the effectiveness of the normative fixing of time limits on the exercise of private rights in the civil legislation of ukraine and to make relevant proposals for changes in the civil legislation. the purpose of the study is to determine the state of legal regulation of time limitations on the exercise of private rights in ukraine and to determine the prospects of its modernisationfor the sake of economic integration (through the study of legal and economic aspects of the specified phenomenon). the results of the study showed that the state of legal regulation of time limits on the implementation of private rights in ukraine on the way to economic integration creates the conditions for its modernisation within the framework of general and special legal regulations. conclusion. the basis of the civilised development of the modern world community is the establishment of civilised rules for the circulation of relevant property goods. from this point of view, among the social relations that are the subject of civil law regulation, the most important are property rights and non-property rights related to them (which have no economic significance, but by their very nature play an important role in ensuring civil circulation). the civil code of any state is a basic legislative act regulating a significant part of social relations. the modernisation of temporal categories in various institutions of civil law can be characterised from the standpoint of the concept of updating the civil code of ukraine, as well as from the study of the state and the need for improvement of other legal structures, in particular, from the standpoint of international jurisprudence. the temporal characteristics of the law are characterised through the prism of the limitation of the subjective right to intellectual property, which is generally consistent with the normative prescriptions contained in intellectual property law as a subdivision of civil law. the problematic aspects of the unification of intellectual property relations in the general provisions of the civil code of ukraine and special legislation are identified, and proposals for the legal regulation of such relations are made in the light of international legislation, judicial practice and legal doctrine. key words: temporal values, time, economic content, statutory limitations, prescription, time. jel classification: e22, k12, k15 baltic journal of economic studies 125 vol. 9 no. 1, 2023 1. introduction in the conditions of globalisation of all social phenomena of the modern world, the issue of interpenetration of cultures, rules of behaviour, ethnic customs and values becomes almost the most decisive factor in the development of the world economy. at the same time, the normative and legal support of such processes, which directly or indirectly promote the exchange of various goods ensuring the satisfaction of the needs of individuals, groups of people and peoples, is in the forefront. even a cursory analysis of the statistical data on the world turnover of all property and non-property goods creates the preconditions for finding and analysing their origin, ensuring the conditions for their fastest possible transfer from one subject to another in order to mutually satisfy the needs of the participants of such relations. undoubtedly, in any modern state, the primary place in the regulation of the above-mentioned processes is occupied by private law, which is intended to create the basis for the civilised development of social relations, based on the statement of immanuel kant, the famous german philosopher and jurist, regarding the freedom of individual behaviour as the sphere of manifestation of the self-regulating nature of private law: "the arbitrariness of one person ends where the arbitrariness of another begins". an important place among the institutions of private law is thus given to legal structures that ensure compliance with a certain compromise between the interests of the various participants in social relations. among these formations, time values occupy an important place. ukraine's accession to a number of international treaties and international organisations, which provide for civilised forms of mutual exchange of goods of various kinds and value, has contributed to the renewal or modernisation of both the national legal system and private law of ukraine. among such measures of a legal nature, it is necessary to note the adoption of the civil code of ukraine (the civil code of ukraine as amended on 1 january 2023, № 435-iv), the law of ukraine "on copyright and related rights" (on copyright and related rights: law of ukraine as amended on 1 december 2023, № 2811-ix), law of ukraine "on joint stock companies" (on joint stock companies: law of ukraine as amended on 1 january 2023, № 2465-ix), law of ukraine "on limited and additional liability companies" (on limited and additional liability companies: law of ukraine as amended on 1 january 2023, № 2275-viii) and others. the most relevant and urgently necessary in modern conditions is the development by the authors' association of scientists in the field of civil law, made in accordance with the resolution of the cabinet of ministers of ukraine dated 17 july 2019 № 650 (on the formation of a working group on the recodification (updating) of the civil code of ukraine: resolution of the cabinet of ministers of ukraine dated july 17, 2019 № 650), the cornerstone document of an organisational and legal nature – the concept of the renewal of the civil code of ukraine. the document contains the conceptual provisions on civil and legal norms according to the requirements of modernity and challenges of european integration of global changes taking place in ukraine. these problems have been considered by many scientists in the field of civil law. among them there are articles on: the nature of modernisation of civil law institutions (stefanchuk, 2021), the content of improvement of civil law norms in the structure of all social transformations of ukrainian society (spasibofateeva, 2019), the general nature of time and limitation periods in civil law and modernisation of relevant provisions of civil law (luts, 2013). shyshka (shyshka et al., 2022) deals with issues of implementation of european experience in the sphere of modernization of civil legislation of ukraine. when analysing the content of the modernisation of the private legislation of ukraine regulating public relations with the participation of a foreign element, attention is paid to the issue of the implementation of the main principles of european conflict regulation and the formation of new conflict approaches in the implementation of the corresponding legal mechanism (erpyleva, get'man-pavlova, 2016). the above-mentioned facts and studies update the knowledge about the novelty of the temporal restrictions on the exercise of private rights in the normative regulations of civil law for the benefit of the economic well-being of the ukrainian people. 2. economic and legal principles of private law modernisation in ukraine civil law institutions directly provide a static and dynamic component of economic turnover, which is mediated by the determination of the legal regime of a number of property and non-property goods, in relation to which civil legal relations are created, modified and terminated. the study of international legal instruments leads to the following conclusions the universal declaration of human rights (1948), in addition to the inalienable human rights that have no economic content, also includes rights that have a direct economic basis in this or that part. among the latter baltic journal of economic studies 126 vol. 9 no. 1, 2023 are the following rights: inviolability of the home (article 12), ownership of certain property individually or jointly with another person (article 17), inviolability of such property (article 17). the convention for the protection of human rights and fundamental freedoms (council of europe, 1950) also contains relevant provisions that provide an appropriate basis for the implementation of individual rights with economic significance. at the level of national legislation, similar provisions can be found, for example, in the constitution of ukraine (1996): art. 13 (property), art. 30 (right to inviolability of the home), art. 41 (right to ownership and to the results of intellectual and creative activity), art. 42 (right to carry on business), art. 43 (right to work), art. 47 (right to housing), art. 48 (right to an adequate standard of living), etc. however, the civil code of ukraine is the most universal and provides the legal basis for the existence of a number of rights with an economic content at the level of national legislation. thus, according to the content of art. 1 of the civil code of ukraine, the subject of legal regulation of this regulatory act are personal non-property and property relations based on legal equality, free expression of will and property independence of their participants. since the precondition for the civilised development of the modern world community is the establishment of civilised rules for the circulation of relevant property goods, the most important of the given relations that are the subject of civil law regulation are property relations and related nonproperty relations, which do not have an economic meaning, but due to their specific nature play an important role in ensuring civil circulation. thus, when studying the content of intellectual property rights, personal non-property rights are inseparable from the object itself, the value of which sometimes exceeds the value of this or that piece of real estate a thousand times. accordingly, public relations, the content of which is the right to banking secrecy connected with the conclusion of a corresponding banking contract on certain currency values, are clearly distinguished from other non-property relations in connection with the significance for the property sphere of the authorised subject in case of their violation. services, as a component of non-property goods, occupy the lion's share of the market in modern conditions. similarly, the non-property nature of corporate relations in no way diminishes the importance of their normalisation, given the importance of the influence of the exercise of the relevant corporate rights on the movement of capital in the modern economy. finally, the development of technological solutions, such as cryptocurrency solutions, nft objects, artificial intelligence, adequately ensures the capitalisation of goods over which non-property relations arise. property relations, the main purpose of which is to ensure a civilised legal regime of the relevant property goods by means of their static attachment to a certain subject and the possibility of changing the ownership of such goods, mediating the dynamics of civil turnover. the analysis of civil law norms shows that they cover a range of property relations, including: structures of property law, legal institutions of obligation, legal instruments of inheritance law, etc. the study of the statistics of economic indicators in the conditions of the globalisation of the world market on the example of venture investments shows the following. it should be noted that this type of investment is the most significant, as it involves investment in relevant, innovative, "young" projects, which offer the possibility of obtaining maximum profit when invested in pioneering programmes supported by business, the state and other social institutions due to their relevance and need within society. in this respect, the venture capital movement is more globalised due to the extreme dynamism of the means for its implementation, the possibility of using various innovations in the field and the flow of so-called cryptocurrency capital from it. the available analytical materials speak of the prospect of growth of this market segment from $173.5 billion in 2021 to $1,068.5 billion in 2031, where the annual growth of such capital should be more than 20% (pradeep et al., 2022). at the same time, the qualitative characteristics of the distribution of this capital are also changing: if yesterday the spheres of its manifestation were construction, trade, hotels and tourism, processing of agricultural products, insurance and informatisation, in the future it is planned that computer and consumer electronics, communication, natural sciences and energy spheres, etc. will prevail. today, people are already witnessing the prioritisation of areas such as the development of artificial intelligence, cloud and blockchain technologies. the decisive factor was ukraine's accession to the marrakesh agreement on the establishment of the world trade organization (1994), which is aimed, inter alia, at creating the most favourable conditions for trade and economic activities aimed at raising the standard of living, ensuring full employment and significant and constant growth in real income and effective demand, and the expansion of production and trade in goods and services, taking into account the optimal use of the world's resources in accordance with the objectives of sustainable baltic journal of economic studies 127 vol. 9 no. 1, 2023 development, seeking to protect and preserve the environment and improving the means to achieve this, in a manner consistent with their respective needs and interests at different levels of economic development. this event intensified the processes both within ukraine and in the international legal space with its direct or indirect participation by means of relevant residents regarding the provision of civilised rules for the introduction, use and withdrawal of relevant goods into the economic turnover with elements of foreign origin by interest, subject, object and place of committing legally significant actions, etc. the next significant step in the context of creating effective conditions for the development of the ukrainian economy in conjunction with the economies of neighbouring states, primarily the european union, was the state's course towards european integration, which was embodied in the association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other (association agreement, 2014). the above has contributed to the fact that the processes of integration into the world community have extended the scope of all social relations, especially in the sphere of the circulation of certain property goods with a corresponding economic value. therefore, the legal regulation of such social relations requires appropriate transformation, renewal and modernisation, taking into account the existing challenges. civil legislation contains the main instruments capable of accompanying the specified processes; moreover, they contain an interpolation construction in the sense of understanding the subject of legal regulation as an undefined circle of social relations, which, even without an indication in the relevant norms, are the subject of civil law itself. that is why, first of all, the modernisation of civil law norms through the implementation of the main achievements of the world community should ensure the economic integration of the ukrainian community into the world space. thus, the integration of the ukrainian society into the world, first of all into the european community, is directly connected with the economic processes taking place in ukraine, the leading vector of which is the worldwide globalisation through the mutual exchange in various forms of relevant resources of a property and non-property nature, having a certain priority, first of all, economic value. without proper legal transformations at the level of national legislation, such processes are doomed to failure; therefore, the relevant legal constructions are overdue and should be adequately implemented within the private, civil law framework. 3. modernisation of the legal regulation of temporal restrictions on the exercise of private rights in modern conditions as it was already mentioned, the civil code is the basic normative legal act ensuring the regulation of social relations in modern society in any state. therefore, it is necessary to agree on the ability of such a document to solve any whims of a modern person, mediating the need for appropriate transformations of individual legal mechanisms to the existing challenges of everyday life (spasibo-fatyeyeva, 2019). among civil and legal institutions, time occupies a decisive place, since it serves to ensure and protect the rights of any participant in civil legal relations, and in particular of a person, regardless of his or her legal personality manifestation, by including temporal values as an element in the composition of the mechanism of legal regulation aimed at protecting the rights of society and other authorised persons, capable of influencing the narrowing of the content of subjective civil law and the complication of its implementation with the help of specific legislative prohibitions, obligations or permissions. it is time as a temporal quantity, establishing certain restrictions on the exercise of civil rights and the performance of civil duties, which ensures the promptness of the behaviour of the subjects of civil law, determines the most optimal and effective way of implementing the dynamics of civil turnover, and thus mediates the most rational possibilities for the flow of economic processes in modern society. this formulation creates preconditions for the most optimal structuring of the mechanism of legal regulation of the given social relations, in the structure of which temporal restrictions have their proper place. the temporal categories of modernisation in certain civil law institutions can be characterised from the standpoint of the mentioned concept of updating the civil code of ukraine and the actual study of the state and the need for improvement of other legal structures in this sense, including from the standpoint of international jurisprudence (makovii et al., 2022). a cursory analysis of the concept of updating the civil code of ukraine provides an opportunity to identify significant changes in the legal regulation of time values in civil legislation. the latter can be divided into general, applicable to all institutions of civil law, and specific, related to one or another legal category and phenomenon. first of all, in section v "time and statutory limitation periods" of book i of the civil code of ukraine, the following should be noted. the definition of the statutory limitation period in the current version does not reflect its nature. thus, under the statute of limitations, civil legislation baltic journal of economic studies 128 vol. 9 no. 1, 2023 establishes a period of time within which a person may apply to court with a claim for protection of his or her violated, unrecognised or contested civil right or interest (article 256 of the civil code of ukraine). such a definition cannot be called successful, since, taking into account the provisions of part 2 of art. 267 of the civil code of ukraine, a person may bring an action in court even after the expiry of the statutory limitation period. it should be noted that the definition, albeit indirect, in art. 177 of the civil code of the republic of kazakhstan, art. 372.2 of the civil code of the republic of azerbaijan and part 1 § 194 of the german civil code is more acceptable. this point of view is supported by a number of other scholars who, based on the analysis of the court practice, draw attention to the fact that the statutory limitation period should be connected with the right to satisfy a claim, but not with the right to file it (luts, 2013). the second relevant issue concerning the statutory limitation period that should be considered in connection with the definition of the statutory limitation period under the civil code of ukraine is the issue of the beginning of the expiration of this type of statutory limitation period. as a general rule, any civil term begins to run from the day following the corresponding calendar date or the occurrence of the event with which its commencement is connected (article 253 of the civil code of ukraine). for the statutory limitation period, such a starting point is defined in art. 261 of the civil code of ukraine. in other words, the limitation period does not begin to run until the day after the day on which the person knew or could have known of the violation of his right or of the person who violated it. according to the authors, the definition of the starting point of the limitation period in the new domestic legislation is not sufficiently successful. the provision of art. 261 of the civil code of ukraine contains three circumstances which are conditions for the commencement of the statutory limitation period, the connection between which is based on disjunction. unlike part 1 of art. 180 of the civil code of the republic of kazakhstan, art. 377.1 of the civil code of the republic of azerbaijan, the specified norm of the present civil code of ukraine is supplemented by another subjective element, which requires the knowledge of the person who violated his rights. in civil law, this provision has already been interpreted as follows: if a person learns of the violation of his or her right, the statutory limitation period begins to run from the day he or she learns of the entity that violated his or her right (yarema, karaban, kryshchenko, rotan et al., 2004). however, such an interpretation does not correspond to the actual wording of this provision, because in it the preposition "or" establishes a connection between the circumstances that constitute the beginning of the statutory limitation period, while the above interpretation is possible only in the presence of a conjunction, i.e., in the presence of the preposition "and". the latter proposals have also found indirect support in legal literature (borisova, spasibo fatyeyeva, yarotskyi et al., 2004). it should be noted that such a position does not have a positive prospect of application in connection with the following. according to art. 9 of the convention on the limitation period in the international sale of goods, the commencement of the limitation period is defined as the date on which the claim arises (convention on the limitation period in the international sale of goods, 1974). the right of a person to sue arises from the moment when he learns or should have learnt of the infringement of his right, the latter reflecting the subjective moment of the creation of the right. in view of the foregoing and of the fact that the purpose of the limitation period is to stabilise and regulate civil and legal relations, there is no need to establish an additional circumstance as the basis for the expiry of the limitation period, regardless of the nature of its connection with other circumstances. in fact, the possibility provided by art. 261 of the civil code of ukraine gives reason to speak about the uselessness of this element, since the knowledge of the subject who violated the civil right of the authorised person cannot be without the knowledge of the fact of violation. at the same time, if the preposition «and» is used in the aggregate of these circumstances, there will be a variant in which the limitation period will not expire due to the impossibility of identifying the direct violator of a subjective right, which is in contradiction with the above provisions on the limitation period. in view of the above, in order to ensure the stability of civil legal relations, to eliminate their uncertainty, to encourage the entitled person to take active action and to clarify the legal field of application of the provisions, it is necessary to return to the definition of the beginning of the statutory limitation period as the day on which the person knew or could have known of the violation of his/her rights. incidentally, a similar legislative position on the commencement of the statutory limitation period is also contained in art. 390 of the merchant shipping code of ukraine (no. 176/95-vr as amended on 1 january 1995) for claims for compensation for damage caused by pollution from ships and nuclear damage. indirectly, this is also the case in article 198 of the civil code, where the above-mentioned legal consequence arises from the moment when the authorised person's claim arises. baltic journal of economic studies 129 vol. 9 no. 1, 2023 accordingly, the provisions of ukrainian civil legislation on other issues of application of the statutory limitation period should be amended. thus, based on the results of the analysis of the provisions of the civil legislation of the member states of the european community regarding the suspension and interruption of the statutory limitation period, it is appropriate to consider the expansion of the grounds for the above structures by implementing the provisions of articles 202-207, 208-216 of the civil code of ukraine and the civil legislation of other states with appropriate grounds. thus, it is positive to expand the range of grounds for interrupting the statutory limitation period due to the occurrence of circumstances similar to the recognition of a debt by a person or the filing of a lawsuit by a person, using as an example the use of mediation by the parties as an alternative form of dispute resolution, as is the case in part 1 of article 183 of the civil code of the republic of kazakhstan. in view of the above, the title of this section could be "time and limitation. prescription", which to some extent would correspond to the meaning of prescription among other categories of time. at the same time, chapter 19 should be called "prescription", anticipating the general definition of prescription as a period of time, the expiration of which is connected with the loss of the right to satisfy a claim to the court for the protection of a civil right or interest (legal prescription), or as a period of time, the expiration of which is connected with the emergence of a property right in the manner and under the conditions specified in book iii of the central committee of ukraine (prescription). separately, it is necessary to establish the relationship between the statutory limitation period and the prescription period in terms of their definition, duration, beginning and end of the period, determination of the order of interruption and termination. it is proposed to introduce a presumption: unless the contrary is proved, it is assumed that the owner knew or should have known about the violation of his or her right from the moment of bona fide acquisition of the property by the previous owner. the duration of the limitation period should be the same as the maximum duration of the statutory limitation period. the question of the course, termination and interruption of the statutory limitation period and the prescription period by determining the priority of the latter has thus been agreed. when characterising periods, it is important to determine the beginning and the end of their course. in the case of prescribed periods, in accordance with part 1 of art. 254 of the civil code of ukraine, the final moment of their course is the corresponding month, the day of the last year of the period. that is, in the case of movable property it is the corresponding day of the corresponding month of the 5th year of the period. art. 253 of the civil code of ukraine stipulates that a time limit shall begin to run from the day following the calendar date or the day of the occurrence of the event connected with its commencement. in the case of a statute of limitations, the starting point of time is, of course, the day following the day of taking possession of another person's property without a proper and bona fide reason. if the property is possessed on a legal basis (contract), the limitation period begins to run on the day following the day on which the legal limitation period for claiming this property has expired. taking into account the definition of the concept of "acquisition" for the limitation period as a valid action, it would probably be more expedient to quote art. 253 of the civil code of ukraine as follows: 1. "the limitation period shall commence on the day following the calendar date, the occurrence of the event or the performance of the act with which its commencement is connected". within the framework of the legal regulation of the prescription period, the possibility of amending art. 119 of the land code of ukraine (the land code of ukraine as amended on 19 november 2022, no. 2768-iii) with legal entities as well as natural persons as subjects of acquisition of rights to real estate by prescription. accordingly, in order to regulate the issue of acquiring the title to a land plot in connection with acquiring the title to a building located thereon, it is necessary to supplement the provisions of art. 119 of the land code of ukraine. secondly, the detailed provisions of the concept in the context of almost all civil law structures, starting from the personal non-property rights of individuals and legal entities and ending with the normative prescriptions of inheritance law, testify to the same, the need to rethink the place of time values in the mechanism of legal regulation of the relevant social relations in favour of civil turnover and to create an optimal model of legal protection of the rights and legitimate interests of the participants in such socially determined relations. taking into account the commercialisation of intellectual property, which is a crucial factor today (medvedenko, vitvitskyi, arapaki, 2022), the issue of defining the temporal limits of the implementation of the content of intellectual property rights and their corresponding modernisation is quite demanding. time values in the context of intellectual property law can be considered in terms of the following stages of the subjective existence of intellectual property rights: 1) creation; 2) implementation; 3) termination. no less rational is the perception of the nature of legal time as a limitation of the baltic journal of economic studies 130 vol. 9 no. 1, 2023 corresponding subjective civil right, which is an element of the legal regulation mechanism established by legislation, a contract, a court decision, a custom of business turnover in the interests of other persons. the consideration of legal time through the prism of the limitation of the subjective right to intellectual property is generally consistent with the normative prescriptions included in the structure of intellectual property law as a sub-branch of civil law. in fact, using the provisions of the law of ukraine "on copyright and related rights" as an example, the following can be stated. norms of art. 22-28 of the law contain a detailed description of the grounds and content of the limitation of copyright consisting in the possibility of using works without the author's consent, while art. 32 of the law discloses the essence of the transfer of works into the public domain after the expiration of the copyright term, i.e., the free use of works under the conditions of respect for the author's personal non-property rights. that is, time manifests itself as an element of the legal mechanism that ensures parity between the private interest of the author and the public interest of society, which seeks to obtain the relevant intellectual property. in ukrainian civil law, time values are represented by two mutually exclusive concepts: time and prescription. a key feature of domestic legislation is the consideration of time categories in the legal content of intellectual property rights, in contrast to the legislation of individual states, where exclusive rights are primary and others are optional. in the regulatory provisions of intellectual property law, the concept is reflected in the following ways. the most common is the approach according to which time as a type of temporal value is directly represented by the moment of the creation of the intellectual property right in the authorised person depending on the specific result of creative, intellectual activity. in particular, as a result of the comparison of the provisions of part 2 of art. 251 of the civil code of ukraine, where by time is meant the moment the occurrence of which is connected with an act or event having legal consequences, and part 1 of art. 437 of the civil code of ukraine, according to which the moment of copyright origin is the moment of creation of the work, this conclusion is reached. hereby it is obvious that the given legal fact is the corresponding action of the subject, i.e., the creation of the corresponding work, and according to part 3 of art. 9 of the law of ukraine "on copyright and related rights" any other legal act, such as registration of a work or its special design, is not required. in civil law, the creation of a work is understood to mean the representation of such an intellectual property object in an objective form that is perceived by other participants in civil legal relations. at the same time, the law of georgia "on copyright and related rights" in article 9, under the expression in an objective form of a work, understands the possibility of its perception and reproduction, that is, repeated reproduction. in research, it is acceptable to think about the peculiarities of the objective form of expression of certain works, as an exclusively material form in the field of fine arts, as well as a special set of facts that is a precondition for the emergence of co-authorship and the right to follow as a component of the content of copyright (churpita, 2004). in other words, time as the moment of origin of copyright can be presented as a general time value, provided that the result of creative activity is appropriately objectified, or as a special time value – if other legal facts are required. in particular, the special term for the emergence of copyright is the moment of lawful publication of the work under a pseudonym or anonymously (part 3 of article 31 of the law of ukraine "on copyright and related rights", article 32 of the law of georgia "on copyright and related rights"). international legislation takes a consistent position on this type of legal time, where, according to art. 7 of the berne convention of 1886 (berne convention for the protection of literary and artistic works, 1886), the general term for the creation of copyright is the moment of creation of the work and the specific term is the moment of lawful communication of the work in a form accessible to the public. at the same time, certain works, such as cinematographic works, photographic works and works of joint authorship, are given special characteristics. the study of the moment of granting of legal protection by domestic legislation to certain works that are characterised by a number of special features as the object of copyright, using the example of a computer program (petrenko, 2010), a scientific paper (denisova, 1999), a work of fine art created by the nft token, deserves attention. for the above-mentioned objects of legal protection, among the set of legal facts causing the emergence of copyright, apart from creation by presentation in an objectified form, suitability for use in a computer or other electronic device for the purpose of processing the relevant array of information to achieve a specified result is singled out – in relation to the first, the endowment of such a work with appropriate content that would correspond to the characteristics of scientific – in relation to the second, or digitisation in the appropriate form of the final object. for related rights, the moment of creation of the subjective intellectual property right in accordance with art. 451 of the civil code of ukraine is the first performance or transmission (programme) to a broadcasting organisation, production of a baltic journal of economic studies 131 vol. 9 no. 1, 2023 phonogram or videogram. at the same time, part 2 of art. 37 of the law of ukraine "on copyright and related rights" links the moment of the creation of a related right with the fact of the performance of a work, the production of a phonogram or videogram, as well as the publication of the broadcast by the broadcasting organisation. thus, there is a double understanding of the essence of the relevant right emergence as a temporal value, which in no way contributes to the clarity and unambiguity of the further legal application of the specified norms in accordance with the requirements of the decisions of the constitutional court of ukraine on september 22, 2005, no. 5-рп/2005), dated june 29, 2010 no. 17-рп/2010 ( judgment of the constitutional court of ukraine on june 29, 2010, no. 17-рп/2010), dated december 22 of 2010 no. 23-рп/2010 ( judgment of the constitutional court of ukraine on december 22, 2010, no. 23-рп/2010), dated october 11, 2011 no. 10-рп/2011 ( judgment of the constitutional court of ukraine on october 11, 2011, no. 10-рп/2011). according to the civil code of georgia, the legal regulation of related rights is clearly delineated, with priority given to a special law (article 1017). thus, according to art. 57 of the law of georgia "on copyright and related rights", the moment of occurrence of related rights in respect of performance is directly related to the first performance, in respect of phonograms and videograms – to the first recording, and in respect of a broadcasting program – to the first airing or cable transmission. according to the legislation of some states, the point in time associated with the relevant behaviour of the subject, which is reflected for the first time in one form or another, is considered as the general term for the emergence of a related right. thus, in relation to the performance, it is an alternative action of the performer, which is manifested in the performance, its recording, the broadcast or cable transmission; in relation to the phonogram, it is in the recording; in relation to the broadcast or cable transmission, it is in the notification of the corresponding broadcast or cable transmission. the essence of the understanding of the moment of creation of a related right under domestic law can be clarified by taking into account the philological understanding of the above concepts. for example, according to the dictionary, "production" means creating or compiling (a business document, a work), "performance" means reproducing any work for listeners or viewers, "manufacture" means making, producing objects, materials, etc., "realisation" means introducing, carrying out, making actual, real or performing something. "perform" – to introduce, carry out, make actual or real, or perform or produce something, "publicize" – to perform in the presence of people (bussel et al, 2005). thus, on the basis of the wording used, it must be concluded that the concepts used in the code and in the law are identical, with a few comments. in particular, the determination of the concepts of "performance" and "publication" based on the content of the moment when the intellectual property right in the broadcast (programme) comes into existence for the broadcasting organisation is controversial. since, according to the above-mentioned legislation of other countries, a message on air is recognised as a determining act for this object, i.e., publication, preference should be given to the latter. this opinion is reasonable in view of the comparison of the essence of the concepts of "performance" and "disclosure", since performance in this context may not imply disclosure, for example, recording of such an object without involving the relevant public. in addition, the provisions of the civil code of ukraine should be harmonised with the norms of the rome convention of 26 october 1961 (rome convention, 1961), where the creation of related rights is linked to performance, fixation and broadcasting as forms of legitimate conduct of performers, producers of phonograms and broadcasting organizations (article 14). the right to industrial property as a type of intellectual property right in the field of scientific and technical activity arises from the moment of obtaining a patent for an invention, utility model or industrial design in accordance with art. 462 of the civil code of ukraine. however, part 4 of art. 6 of the law of ukraine "on protection of rights to inventions and utility models" (on protection of rights to inventions and utility models) and parts 3-5 of art. 465 of the civil code of ukraine extend the term of legal protection and the date of creation of the respective industrial property right within the framework of the constituent exclusive right to an earlier date, namely to the date of filing the application for the invention in the prescribed manner. pursuant to part 1 of art. 465 of the civil code of ukraine, the emergence of property rights to the object of industrial property rights is associated with the date following the date of its state registration. the latter provision is very narrowly interpreted as providing legal protection to the so-called secret objects of intellectual activity in the scientific and technical sphere, which is not acceptable (kharitonov, kalitenko, et al., 2004). at the same time, there is an opinion that divides the moment of the emergence of the right to industrial property in terms of the personal non-property or property component of its content, where the circumstances of the first group are defined as primary (basai, 2012). thus, it is proposed that the emergence of the personal non-property rights of the inventor, author of a utility model and industrial design is baltic journal of economic studies 132 vol. 9 no. 1, 2023 associated with the creation of a corresponding object of industrial property, and the exclusive property rights are directly associated with the registration and obtaining of a patent. such a thesis is incorrect because it does not correspond to the nature of the origin of the intellectual property right (art. 422-425 of the civil code of ukraine), the content of the industrial property right depending on the object (art. 459, 460, 461 of the civil code of ukraine) and the nature of the right of the previous user (art. 470 of the civil code of ukraine). the abovementioned norms lead to contradictory considerations in civil studies about the moment of creation of the industrial property right, even within the limits of one study (petrenko, 2010). in this respect, it is correct to consider that the creation of the industrial property right is directly related to the recognition of the corresponding object as patentable, which is certified by the legalisation document; however, in order to extend such legal protection to the entire period of existence of the corresponding result of intellectual activity, the reverse effect of legal protection takes place in time, as a result of the recognition of the validity of the industrial property right from the moment of filing the application. according to ya. voronin, the proposed interpretation of the content of civil legislation does not correspond to the essence of the subjective right to industrial property, which can be exercised by the subject only from the moment of obtaining a patent, which requires appropriate legislative amendments (voronin, 2009). the above can be refuted by analogy with the content of part 5 of art. 1268 of the civil code of ukraine, which extends the powers of the heir to the period prior to acceptance of the inheritance. similarly, the right to intellectual property in the field of breeding achievements (article 488 of the civil code of ukraine) in relation to semiconductor products (article 475 of the civil code of ukraine) arises from the day following the day of their state registration. in relation to an innovative design, the intellectual property right arises from the date of its recognition by the relevant organisation in accordance with art. 481 of the civil code of ukraine. here, of course, a similar term is the date of the decision of the body or representative through which the legal entity exercises its legal personality. the term of an intellectual property right for a trade name is the date of the first use of this name, for a trademark and a geographical name – the date of the application and state registration of the corresponding property rights, and for a trade secret – the date of the acquisition of relevant information with the characteristics of such an object. scientific discovery as an object of non-traditional intellectual activity within the scope of chapter 38 of the civil code of ukraine has not received proper legal regulation, however, from the content of art. 457 of the civil code of ukraine, it is necessary to draw the following conclusion. firstly, according to the civil code of ukraine, the emergence of an intellectual property right for such an object is connected with its compliance with certain conditions: the establishment of such regularities, properties and phenomena of the material world that bring about fundamental changes in the level of scientific knowledge, their novelty (previously unknown) and objective existence. secondly, it is possible to extend to such an object, by analogy, the mechanism of legitimisation of authorised persons with regard to plant varieties as results of intellectual activity. to a certain extent, such a position corresponds to the legal nature of a scientific discovery and the meaning of the concept of "priority of a scientific discovery " as the date of the first formulation of a provision declared as a scientific discovery or the date of the publication of the specified provision. however, the alternative definition of the term "priority of a scientific discovery " is somewhat controversial, since the wording of the relevant provision, which is included in the content of a scientific discovery, makes sense and, accordingly, should be given legal protection from the moment of its public presentation. for this reason, the provisions of civil law concerning the temporal limitation of the exercise of civil rights and the performance of civil obligations should be modernised (updated), taking into account the importance of time in the mechanism of legal regulation of relevant social relations. this issue is particularly relevant in connection with the existing trends of economic globalisation, which provide for a civilised legal order, and the fact that the goods significant for civil circulation are usually the objects of property and related non-property social relations. undoubtedly, the ukrainian civil legislation in the field of temporal categories should be renewed, taking into account the work of the team of authors of the concept of updating the civil code of ukraine, scientific studies of the state and the need for improvement of other legal structures in this sense, including from the point of view of international jurisprudence and expressed proposals. 4. conclusions summarising the considerations presented in the article on the modernisation of the legal regulation of time limits on the exercise of private rights in ukraine on the way to economic integration, the following should be noted. in fact, civil law directly provides a static and dynamic component of economic turnover by defining the legal regime of a number of property and non-property goods in relation to which civil legal baltic journal of economic studies 133 vol. 9 no. 1, 2023 relations are created, modified and terminated. a precondition for the civilised development of the modern world community is the establishment of civilised rules for the circulation of relevant property goods. from this point of view, among the social relations which are the subject of civil law regulation, the most important are property rights and the non-property rights connected with them, which, although they have no economic significance, play an important role in ensuring civil circulation due to their specific nature. current trends in the world of capital indicate a wide range of capitalisation, not only of property, but also of non-property relations, where the sphere of information space and communication takes first place. by joining the marrakesh agreement on the establishment of the world trade organization and assuming obligations under the association agreement with the european union, ukraine has initiated a series of legal and economic transforma-tions, the former being crucial for clearing the field for the latter. the civil code in any state is a fundamental legislative act providing regulation of a significant number of social relations in modern society. the modernization of temporal categories in various institutions of civil law can be characterized from the standpoint of the concept of updating the civil code of ukraine, as well as the study of the state and exigency improvement of other legal structures, in particular, from the standpoint of international jurisprudence. it is the time as a temporal value, setting certain restrictions on the realization of civil rights and the performance of civil duties, that ensures the promptness of the behavior of subjects of civil law, determines the most optimal and effective way of implementing the dynamics of civil turnover, and thus mediates the most rational possibilities for the flow of economic processes in modern society. the legal analysis of individual economic relations allows to identify directions for improvement of normative consolidation of temporal categories in general provisions of civil legislation, in particular in section v "time and statutory limitation periods" of book i of the civil code of ukraine, as well as to formulate specific proposals for definition of the concept of "limitation period", determination of features of its course, as well as legal regime of limitation period (within civil and land legislation), correlation of specified types of limitation period. the temporal characteristics of the law are characterized through the prism of the limitation of the subjective right to intellectual property, which is generally consistent with the normative prescriptions included in the law of intellectual property as a subdivision of civil law. the problematic aspects of the normalization of intellectual property relations in the general provisions of the civil code of ukraine and special legislation are highlighted, as well as proposals for the legal regulation of such relations in the light of international legislation, judicial practice and legal doctrine are made. this study has the prospect of further elaboration in the context of studying the reasons for the modernization of other civil law institutions in connection with the temporal limits of the exercise of civil rights and the fulfillment of civil duties. references: the civil code of ukraine as amended on january 1, 2023, № 435-iv. available at: https://zakon.rada.gov.ua/ laws/show/435-15?lang=en#text about copyright and related rights: law of ukraine as amended on december 1, 2022, №  2811-ix. available at: https://zakon.rada.gov.ua/laws/show/2811-20?lang=en#text about joint stock companies: law of ukraine as amended on january 1, 2023, № 2465-ix. available at: https://zakon.rada.gov.ua/laws/show/en/2465-20?lang=en#text about limited and additional liability companies: law of ukraine as amended on january 1, 2023, № 2275-viii. available at: https://zakon.rada.gov.ua/laws/show/2275-19?lang=en#text about the formation of a working group on the 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(in ukrainian) received on: 13th of january, 2023 accepted on: 24th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 244 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-244-251 international monetary fund and east asia: developments, challenges, and lessons learned maksym kulbida1 institute of international relations, national aviation university, ukraine abstract. the article demonstrates that during the extended period of cooperation, the imf’s activities have had both positive and negative impact on the development of economies of the east asia region. on the one hand, the imf initiated and supported in-depth reforms that formed a solid basis for sustainable development and growth of countries of the region. on the other hand, the imf failed to achieve positive outcomes in some specific important areas mostly because of its unbalanced policies and due to disregard to specific needs of particular countries of the region. furthermore, the imf failed to properly discharge one of its main mandates to effectively predict, address, and overcome international financial crisis tendencies and processes that emerged from the fragility and the lack of sustainability of the global liquidity system at the regional level, and in particular during the asian crisis of 1997-98. the imf’s failures led to a significant decrease of cooperation with the east asia region and gave rise to the imf stigma and subsequent regionalism processes. although quite uncertain, any further cooperation may only be carried out on a new basis with due consideration of the specificity of the region and the particular countries. methodology. the author provides first, based on the imf’s official statistics and data, an analysis of the cooperation between the imf and the east asia region in order to identify main achievements and failures and then explores possible forms of further cooperation with due regard to all stakeholders’ interests and needs. the author aims to demonstrate, based on the imf’s experience in east asia, that cooperation between the imf and particular countries or regions is a complex and challenging process, which most often involves the need to give due consideration to various important factors, including country-based specificities and risks of reluctance to the imf’s activities. results. it is shown that despite the imf’s several failures in east asia the cooperation was, from long-term perspective, beneficial for the countries of the region, and that it is in the best interests of all stakeholders to find ways for further cooperation although on a new basis in order to ensure sustainable growth and to be able to effectively face eventual financial crises. key words: imf, east asia, asean+3, regionalism, cmim, amro. jel classification: f33, f36, f55 corresponding author: 1 department of international economic relations and business, institute of international relations, national aviation university. e-mail: kulbidamax@yahoo.com 1. introduction since the last decade, east asia region has become a global economic development driver not only because three countries of the region china, japan, and korea are amongst 12 largest economies in the world, but also and more importantly because of an increased number of countries with the fastest rates of economic growth. dynamic economic development of the region as a whole significantly increases the share of world gdp. according to the imf, the average annual growth rate of real gdp in east asia region, including china and asean-5, amounted to 5.2% in 2017 (imf, 2017). the world bank predicts economic growth of the economies of east asia region of 5.7% in 2018 (world bank, 2016), which is most likely to be achieved given expected high growth rates of china’s economy (6.8% in 2017). according to the asian development bank (adb), investment demand for infrastructure projects in asian countries amounts to 26.2 trillion us dollar with the need of 1.7 trillion us dollars annually for the period of 2016–2030 (adb, 2017). nevertheless, given this extremely high demand, any unconsolidated efforts of international financial institutions (ifis) either global such as the imf and the world bank or regional such as adb will not be sufficient to meet with their own resources the investment needs in the region (svedentsov, 2017). this gives rise to the need for combined efforts by all stakeholders, including both the ifis and respective countries. in this regard, most east asian countries have since years demonstrated baltic journal of economic studies 245 vol. 3, no. 5, 2017 reluctance to any of the imfs activities in the region mostly to the imf’s stigma effect after the asia crisis that relates to both a mark of disgrace and a set of negative belief about a country’s economic situation (andone and scheubel, 2017). recent developments of international economy have given rise to the establishment of the so-called “new global economic order” which is grounded on two main factors, namely technological changes and tendencies towards general economic liberalization. moreover, the global economy has also recently known a change in the balance of power, with the growing role of developing countries, in particular, east asia emerging markets. the rapid growth of the east asia region’s economy together with the increased expansion of asian transnational corporations onto the world markets, which demonstrate a high level of their competitiveness make the region one of the world most promising economic powers. that being said, at present, east asia is one of the engines of world economic development and international economic relations (arapova, 2015). how and to which extent could the imf enhance or at least maintain its presence in east asia and more specifically overcome stigma it has since for a while suffered from in this region? 2. the imf’s experience in east asia countries: between achievements and failures asia’s economic development and subsequent growth date back to the end of the second world war. japan was the first country wherein economic growth began. in the 1960s, other countries such as hong kong, korea, singapore, and taiwan, which are also known as “asian tigers”, clearly showed signs of economic recovery and significant growth with an orientation to foreign markets (berendser, 2013). the course was shortly followed by other countries of the region – indonesia, malaysia, and thailand. more recently, china and india jumped up in their economic development mainly because of the revision of their traditional methods of gradual liberalization. trade was amongst major factors determining such growth; insofar trade has itself contributed to the processes of industrialization, based on the dynamics of comparative advantages that have shifted from the agrarian sector to the labour-intensive manufacturing industry, and more recently in more capital-intensive industries with highly skilled labour. this model of industrialization further contributed to accelerating economic growth with social improvements – creating new jobs and raising wages. thus, in 1990 asia’s share in the world economy was 23.2%, while in 2017 it exceeded 62%. to date, two countries in east asia region make up slightly less than 50% of world economic growth. indeed, china’s share amounts to 34% and india’s share amounts to 13% of the global economic growth share. the imf began its activities in east asia in the 1950s with the allocation of first arrangements to japan. subsequently, the fund was involved in at least two more directions in the region. firstly, the fund provided technical assistance to the countries of the region in several areas, in particular, regarding the conduct of monetary policy. a number of countries such as cambodia, laos, and vietnam continue to receive significant technical assistance from the fund, in particular, in the areas of taxation, customs, and tax administration, the balance of payments management, central bank operations, banking supervision, monetary policy, and other areas. secondly, the imf provided financial assistance through its arrangements to the countries of the region, mostly in the 1990s. east asia’s countries continued to benefit from the fund’s financial support even after the contradictory measures taken by the fund with regard to the region at the course of the crisis in the late 1990s. table 1 below provides an overview of the imf’s financial assistance to east asian countries since the 1980s. table 1 imf arrangements in east asia, 1980–2017 country type of arrangement period amount drawn (in millions of sdr) cambodia esaf/prgf esaf 1999-2003 1994-97 58.50 42.00 china sba sba 1986-1987 1981 597.73 450.00 indonesia eff eff sba 2000-03 1998-2000 1997-98 3,638.00 3,797.70 3,669.12 korea sba sba sba sba 1997-2000 1985-87 1983-85 1981-82 14,412.50 160.00 575.78 121.69 laos prgf prgf saf sba 2001-05 1993-97 1989-92 1980-81 18.12 35.19 20.51 14.00 philippines sba eff sba sba sba sba sba 1998-2000 1994-98 1991-93 1986-88 1984-86 1983-84 1980-81 783.23 791.20 334.20 198.00 403.00 100.00 410.00 thailand sba sba sba sba 1997-2000 1985-86 1982-83 1981-82 2,500.00 260.00 271.50 345.00 vietnam prgf esaf sba 2001-04 1994-97 1993-94 124.20 241.60 108.80 source: imf data, wherein esaf/prgf – enhanced structural adjustment facility/poverty reduction and growth facility; eff – extended fund facility; saf – structural adjustment facility; sba – standby arrangement. baltic journal of economic studies 246 vol. 3, no. 5, 2017 thus, table 1 demonstrates that the countries of the region significantly intensified their cooperation with the imf during the period of the crisis of the 1990s that was mostly due to the process of globalization. in particular, it appears that countries such as indonesia, korea, and thailand had benefited from the largest borrowing rates within with the most popular credit lines, namely sba, which is typically aimed at addressing short-term balance of payments issues, and eff, which is commonly used in order to tackle medium and longterm problems with the aim to stimulate the region’s economies towards the implementation of necessary in-depth reforms. however, the imf’s activities in the countries of the region during the crisis period were somehow ambiguous and were and are still heavily criticized. thus, some economists argued that the fund intervened in areas beyond its competence (calomiris, 1998), while others stressed that the fund promoted an unfriendly market policy in the region (radelet and sachs, 1998). most of them criticized the excessive duration of the crisis, as well as the price that was paid for its handling. allegations were also made as to political nature of the fund’s decisions (feldstein, 1998). the asian financial crisis of 1997–98 is often flagged when analysing the policies and activities of ifis in different parts of the world. although it emerged as the continuation of the crisis processes in latin america, it raised a number of new issues related to globalization and imf policies. thus, since that time, the imf has been typically criticized for applying policy resulting in an increase in poverty and the gap between rich and poor people in east asia region (king, 2001). according to shinji takagi, the confirmed gaps in the imf’s policy in the region during the crisis were as follows: (i) the inability of the imf to predict the vulnerability of national economies, in particular, in indonesia and korea; (ii) the imf’s lending arrangements were unsuccessful, in particular, regarding fiscal policy; (iii) the imf required structural changes in areas that were not relevant to the resolution of the crisis, in particular, in indonesia and korea (takagi, 2016). nevertheless, an analysis of the dynamics of gdp in the east asia countries which have genuinely benefited from the imf’s assistance from the pre-crisis period to date, fairly demonstrates that the gdp of these countries has shortly increased and subsequently being relatively steady. in the early 2000s, economies of the region began showing a significant revival as regards main indicators of economic performance. flexibility and rapid recovery of east asian economies during the last world financial crisis were to confirm the meaningfulness of reforms triggered 15 years ago under the imf’s guidance and support (figure 1). despite its long-term achievements in east asia region, it can, however, be fairly argued that the imf failed to properly meet its function as a global regulator of international economic relations. indeed, the imf failed to effectively predict, address, and overcome international financial crisis tendencies and processes that emerged from the fragility and the lack of sustainability of the global liquidity system at the regional level. at the same time, the imf seems to have learned from the asian financial crisis. in particular, the fund realized that in order to be able to effectively tackle structural economic issues, the more balanced and well-considered and selected measures should be implemented so as to give due consideration to specific needs of particular countries of the region. furthermore, the fund began to more carefully evaluate social -15 -10 -5 0 5 10 15 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 indonesia korea, republic of philippines thailand vietnam fig. 1. the dynamics of the gdp in east asia countries which have genuinely benefitted from the imf loans during the asian crisis, 1995–2017 source: imf database baltic journal of economic studies 247 vol. 3, no. 5, 2017 consequences and impact of envisaged programs on a country by country basis, with the aim to thoroughly improve the quality of its assistance in the future. the asian crisis of 1997–98 was a result of the combination of both imf’s failures and mistakes of respective countries wherein it mostly operated, in particular, indonesia, korea, and thailand. the fund itself acknowledged the mistakes in its policy, which exacerbated the crisis in these countries (imf, 2003). the main failures were as follows: the imf’s limited financial assistance, in particular, in thailand (only $17.2 billion); the tight fiscal policy under conditions of aggregate demand worsening; the use of tight monetary policy in a fragile banking system, instead of introducing a moratorium and reducing the duration of this policy; floating exchange rate, which led to a sharp decline in the exchange rate, coupled with inefficient management of the banking sector, including the premature closure of 16 banks in indonesia without a guarantee of return of deposits; excessive structural conditions beyond the limits of macroeconomic problems, in particular, in indonesia; lack of premature attention to corporate debts and insolvency issues (kawai, 2015). it is fair to say the imf could have offered better strategies to prevent the crisis and to overcome its impact in the countries of the region. the most important lesson learned from this financial crisis is obviously that it is always better to prevent a crisis than to deal with it, which involves the importance of enhanced macroeconomic and financial supervision. however, since crisis may arise again, the thorough crisis management system must be established and strengthened. this system should ensure on the one hand prompt and effective reaction by respective governments, and on the other hand timely provision of large-scale international assistance (through the imf or regional development banks), which in turn will prevent the economic downturn from sharply reducing national reserves. after the asian crisis, it was recognized that a welldeveloped regional structure could contribute to the financial stability of the countries of the region in three ways: it is risky to rely only on the imf on anti-crisis policies; regional cooperation mechanisms would allow more effective prevention and management of financial risks; the regional basis for financial cooperation was logical, given the strong regional economic and financial interdependence of countries in the region. thus, the implementation of the imf recommendations in the east asia region had paradoxically both positive and negative impact on the countries. on the one hand, the imf’s financial measures aimed at overcoming the crisis included a waiver of a fixed exchange rate and anchoring to the us dollar; an increased refinancing rate to strengthen national currencies; holding fierce fiscal policy to reduce the state budget deficit; greater openness of markets for foreign capital for the development of competition and the internationalization of national economies, and others. on the other hand, the implementation of the imf’s recommendations adversely affected the socio-economic sphere, namely, the decline of national production, massive bankruptcies of medium and small businesses, the collapse of the health care system, rising unemployment, reducing imports, falling living standards, increasing social and political tension. more specifically, the cooperation with the imf has had a positive impact on the currency regimes put in place in the asean+3 countries. indeed, cooperation with the imf, which provides funding only through existing lending mechanisms, has beneficially affected the exchange regimes of the countries involved thereby making them more flexible and not tied to national regulations. the countries most actively cooperating with the imf continue to use the floating exchange rate (table 2). table 2 classification of exchange rate regimes in east asia, 2017 country exchange rate regimes affiliation to fixed exchange rate/anchor floating exchange rate hard peg brunei currency board arrangement sgd soft peg cambodia stabilised arrangement usdvietnam laos china crawl-like arrangement anchor money supply malaysia other managed arrangement anchor of monetary policymyanmar singapore floating regime korea floating anchor of inflation philippines indonesia thailand japan independently floating anchor of inflation (in a range of 0-2%) source: imf (2016). annual report on exchange arrangements and exchange restrictions 2016. – p. 5-6 according to classification imf monetary and capital markets department revised system for the classification of exchange rate arrangements // imf working paper. p. 4. floating currency regime is more liberal insofar it implies that the central bank does not assume any obligations to regulate or influence the formation of the baltic journal of economic studies 248 vol. 3, no. 5, 2017 exchange rate, such a course determined by the effect of market mechanisms and laws in the foreign exchange market (menon, 2014). to date, only one country (brunei) within asean+3 uses the fixed exchange rate regime. eight countries of the region have implemented so-called transitional exchange rates. de facto china has a floating exchange rate regime, and five countries, which were the largest borrowers from the imf in the region, have de jure a floating exchange regime. despite the fact that imf financial assistance helped the east asia countries to overcome their problems with currency liquidity, to equalize the course of their national currencies, and to return them to the rails of economic growth, it is however questionable that further cooperation with the fund will be attractive for the countries of the region “not only because it offered bitter drugs, but also due to the fact that he misdiagnosed the problem, which, in fact, later recognized himself.” at present, the imf’s activities in the region are focused on the following main aspects: economic monitoring and advice on macroeconomic policy. the imf’s proposals are included in the annual regional economic outlook (asia and pacific) report showing vulnerabilities in the economies of the countries of the region; assistance in order to enhance the interaction between developed countries and developing countries in the region. cooperating with regional associations such as asiapacific economic community and asean+3; exchange of macroeconomic information and expertise; participating in the financial sector assessment program established in 1999 with the goal of a comprehensive analysis of the country’s financial sector; technical assistance, in particular, in regard to financial policy in some countries of the region; strengthening social protection. by supporting the countries affected by the global crisis, the fund has expanded its lending capacity and continues to seek ways to further improve the quality of its loans. working with partners in europe, the fund is exploring opportunities for closer cooperation with regional funding mechanisms, including the chiang mai initiative in asia; exchange of knowledge, in particular, provide training and staff exchange opportunities and enhance cooperation with amro. 3. expansion of regionalism and the imf’s challenges the dissatisfaction of the east asian countries with the imf’s activities during the asian financial crisis of 1997–98, in particular, the introduction of harsh conditions for loans and ineffective actions, not only gave rise to the imf stigma but also pushed them to a closer region-based integration. thus, in 2000, the chiang mai initiative was set up with the aim of solving short-term liquidity problems within the asean+3 countries, in order to replace global financial mechanisms and/or enhance existing regional mechanisms. this mechanism was based on bilateral currency swap agreements between the central banks of the asean+3 countries. but the global financial crisis of 2008 gave rise to the need to extend the initial initiative. thus, in 2010, an agreement was reached between the asean+3 countries on the establishment of the chiang mai initiative multilateralization, which was based on multilateral currency swap agreements. as a result, each asean-5 can for now attract up to 22.76 billion dollars usa (menon, 2014). in 2011, the asean+3 macroeconomic research centre (asean+3 macroeconomic and research office – amro) was established initially as a private limited company and become an international organization in 2016 with its main mandate being to conduct macroeconomic and financial surveillance of global and regional economies and to contribute to early detection of risks, policy recommendations for remedies actions, and effective decision-making of the cmim (kawai, 2017). supervision is the main task of amro, wherein a distinction is made between supervision in peacetime and the one during the crisis. in peacetime, amro prepares quarterly reports assessing overall macroeconomic performance, both in the region as a whole and separately for each country. however, in a crisis period, this organization provides a report analysing the macroeconomic and financial situation in a country for the purpose of assessing the need for assistance and of monitoring the use of borrowed funds in the framework of cmim, and also of controlling the compliance of the borrowing country with the provisions of the cmim statute. given the expansion of regional organisations but mostly because of the imf ambiguous achievements in the region, the fund is currently faced with serious challenges as to how to maintain its presence in east asia. indeed, on the one hand, the imf’s major failures during the asian financial crisis of 1997–98, in particular, inefficient and inadequate lending programs recognized by the fund itself, have formed a generally hostile attitude to the fund’s activities. on the other hand, the region has known significant success towards processes of regionalization, as well as sustainable economic growth. paradoxically enough, the east asia countries, which achieved such growth not without the contribution of the imf, have now opted for the use and the expansion of their own imf-independent resources, which is currently being presented in the form of cmim. an increased competition between china and japan as leaders in the region has given additional impetus to this process. baltic journal of economic studies 249 vol. 3, no. 5, 2017 however, in spite of the east asian countries efforts to create an alternative mechanism to the imf, the current cmim is not likely to fully replace the fund’s resources and capacities. to date, cmim reserves amount to 240 billion dollars of the usa only which is obviously insufficient and should a new financial crisis arise in the region, especially if the crisis spreads to several countries. for comparison, during the asian financial crisis of 1997–98, thailand received more than 17 billion dollars of the usa emergency aid. under the current cmim thailand (like any other asean member) will be able to receive no more than 7 billion dollars of the usa. in the same vein, indonesia during the asian crisis received 40 billion dollars of the usa, which is six times more than the amount that can be used within the framework of cmim. similarly, korea attracted about 57 billion dollars of the usa from the imf during the crisis, which is almost double its quotas in cmim, namely 38 billion dollars of the usa. in addition, there are a number of other limitations suffered from within cmim’s, namely: (a) although the need for monitoring economic situation and macroeconomic indicators is crucial for identifying early crisis symptoms and for an adequate assessment of the economic situation in the countries in accordance with regional economic conditions, amro, which carries out economic supervision in the framework of cmim, has only recently begun to be the bona fide international organization that remains in the process of becoming (takagi, 2016). (b) the management of cmim reserves is carried out by specific countries, and not in the form of contributions as it is the case within the imf, which limits its autonomy and effectiveness in the event of a crisis. moreover, in the case of force majeure, each member of cmim has the right to not contribute to reserves, which limits the effectiveness of smis in the event of a crisis; (c) although cmim is funded exclusively by asean+3 countries, 70% of its reserves relate to the imf conditions that require significant structural reforms in the borrowing country, in particular, regarding the application of fiscal constraints and changes in monetary policy. as a result, should a country need to raise funds of more than 30% of the resources available to it under the smi, it is obliged to apply simultaneously to imf programs; (d) the cmim does not have its permanent secretariat, which causes uncertainty as to the procedure for activating assistance programs. moreover, decisionmaking on the provision of assistance may take a long period of time, especially if the required amount will be more than 30% of the possible amount for the borrowing country until the imf position is agreed upon; (e) the cmim does not consider the main donors as potential debtors of the resources of this initiative, namely korea, japan, and china, in particular as backed up by bilateral swap agreements between these countries, and the data have agreed to promote the investment of foreign reserve bodies in the form of government bonds. thus, during the world financial crisis of 2008, no east asian country used the mechanisms under the cmim. for example, korea and singapore, having problems with liquidity in financial markets at the end of 2008, attracted $30 billion through swap agreements with the federal reserve usa, instead of using opportunities within cmim (menon, 2014). moreover, insofar the largest donors are not considered as potential debtors, it remains unclear whether the new aceah be able to access cmim assistance at the event if the acea-5 countries’ quota is insufficient as it was the case during the asian financial crisis? in our view, the imf should consider taking advantage of the numerous deficiencies of the current and newly established regional financial mechanisms in order to enhance its presence in east asia region. fig. 2. chronology of development of the cmim from its early stage till now baltic journal of economic studies 250 vol. 3, no. 5, 2017 thus, the imf should at the least actively engage with such regional mechanisms. in this regard, it is in the best interests of amro itself to deeply cooperate with the imf in order to gain necessary experience, which is a top priority for member countries. the imf should also be more active in the region in providing technical and analytical assistance through training and joint working groups in relation to amro, so as to contribute to the development of this organization. moreover, since the imf has acquired broad expertise in providing technical assistance, and has significant credibility as an observer of the currency system, especially for low-income countries in the region, it should consider sharing this expertise at least until amro achieves similar competencies and credentials. it is true that the credibility of the imf’s independent oversight of the macroeconomic and financial health of the countries of the region cannot be easily renewed, especially in eyes of the large countries dominated by cmim and amro. nevertheless, the imf should continue to improve and strengthen its oversight in the region in helping amro (for example, focusing on interregional and global ties) to maintain its unique position as an authoritative expert. the imf should also consider developing lending programs specifically developed for asia in cooperation with amro, provided that the latter will reach the appropriate institutional capacity. in our view, all said steps may help the imf to restore its reputation in the region. indeed, helping cmim to become the driving force in the region’s financial assistance (as in the case of european mechanisms) can help eliminate unpleasant memories of unsuccessful lending in the region, which was the main reason why asian countries now reject the imf’s assistance. in this regard, when japan proposed to create “asian monetary fund” (which remains the ambitions of japan for the future of cmim) in 1997, the imf failed to support this initiative on the basis of duplication of functions and moral hazard. in our view, this position is not very constructive insofar it does not contribute to the restoration of the imf’s image in the region. instead, the imf should take an active stand on the proper development of further regional initiatives with the aim to subsequently gain long-term recognition and institutional influence. to conclude, in spite of the expansion of regionalism, the imf still remains a unique organization in terms of universality and diversity of its membership, financial resources and experience in implementing aid packages. the imf remains to date the only international financial institution capable to face crisis process both in international and regional level. the current regional mechanisms in east asia such as cmim cannot be deemed fully competitive to the imf and can only be seen as complementary to the imf in the region. 4. conclusion the future of relations between the east asia region and the imf remains today quite uncertain. although the imf has for twenty years spelled out plans as to how to make the global financial safety net more effective through the collaboration with regional financial arrangements, its achievements in the midst of the asian financial crisis remarkably differed from expectations. however, in our opinion, cooperation between the imf and the east asia region is not an ended story. such cooperation can develop in two scenarios. first, although it is expected that asian countries will further try to increase confidence in their macroeconomic management and financial policies through “selfsufficiency” in order to accumulate significant gold and exchange reserves, the imf should still maintain its presence in the region in contributing to regional cooperation mechanisms given its experience and expertise. second, the imf should consider revising its policies so as to allow at least the leaders of the east asia region being more significantly involved in managing the fund. this does not necessarily mean the need for asian countries to benefit from the imf’s financial resources, but will compensate the lack of presence in the fund and will furthermore strengthen their positions in decision-making processes within this institution. this will also be beneficial for the imf insofar it will help the fund to restore its reputation in the region. in this regard, the 2010 reform has partly changed the situation at the imf with respect to the percentage of votes in asian countries, especially china. thus, the shares of these countries at the imf within the reform have doubled, to 6.09 percent, while the share of asean+3 countries has increased to 18.21 percent, exceeding the us by 16.52 percent. therefore, asean+3 countries should consider acting as a bloc, which will allow them to significantly increase their influence on imf management and decision-making. references: international monetary fund. (2017). sustainable growth: short-term recovery, long-term challenges. washington, dc.: imf, 304. world bank. (2016). “reducing vulnerabilities.” east asia and pacific economic update. washington, dc.: world bank, 186. doi: 10.1596/978-14648-0991-0. asian development outlook update. (2017). sustaining development thought public-private partnership. manila: adb, 243. baltic journal of economic studies 251 vol. 3, no. 5, 2017 svedentsov, v.l. (2017). new international development banks and the interests of russia. the world of new economy, 1, 55-59. arapova, е. y. (2015). economic integration in east asia. retrospective analysis and future opportunities. moscow: prospect. berendser, b. (2013). asian tigers, african lions: comparing the development performance of southeast asia and africa. leiden, boston, brill. takagi, s. (2016). the imf and east asia: the legacy of the crisis and actions for the future. in s. armsrong and v. t. thanh (eds.) international institutions and asian development (74-96). london: routledge. kawai, m. (2015). from the chiang mai initiative to an asian monetary fund. adbi working paper 527. tokyo: asian development bank institute. menon, j. & hill, h. (2014) does east asia have a working financial safety net? asian economic journal, 28 (1), 1–17. kawai, m. (2017). asia’s financial stability as a regional and global public good. in a. estevadeordal & l. w goodman (eds.), 21st century cooperation (312-335). london: routledge. andone, i. & scheubel, b. (2017). imf stigma: the role of own and neighbours’ experience. cesifo working paper series no. 6399, 63. baltic journal of economic studies 457 vol. 3, no. 5, 2017 corresponding author: 1 department of administrative-legal disciplines, lviv state university of internal affairs. 2 department of criminal law and procedure, kyiv national economic university named after vadym hetman. 3 department of civil law and procedure, national academy of internal affairs of ukraine. doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-457-461 globalization and its negative impact on the global economy iryna shopina1 lviv state university of internal affairs, ukraine olena oliinyk2 kyiv national economic university named after vadym hetman, ukraine valerii finaheiev3 national academy of internal affairs of ukraine, ukraine abstract. the purpose of the article – to reveal causes and to generalize consequences of the negative impact of globalization processes on the world economy. methodology. the theoretical and methodological basis of scientific research is the work of well-known scientists in the world who studied issues of globalization development and its influence on separate spheres of economic life, official statistics of the international monetary fund and the world bank on the dynamics of economic development, own research results. in order to achieve the validity and reliability of the research results, the following methods were used: inductive and deductive – for theoretical conclusions; generalization – in studying the content of works of scientists on the impact of globalization processes on the world economy; analytical – during the study of economic consequences of globalization; cause-andeffect – to obtain final conclusions. results. in this article, causes of the negative influence of globalization processes on the world economy are disclosed. the analysis of economic development of countries in the context of the world economy and, in particular, developed economies, countries of the euro area and developing economies is conducted. consequences of the negative impact of globalization processes on the world economy are generalized. practical meaning. the results of this study may be useful to rating agencies, the structure of the world bank, the ministry of ukraine for european and euro-atlantic integration. value/originality – the reasons and economic consequences of globalization for the world community are specified. further research should be aimed at preventing the occurrence of crisis phenomena and processes. key words: global perspective, growth slowdown, effect of impact, economic consequences of globalization, world economy. jel classification: f01, f43, f6 1. introduction global changes that accompany the world and the economic relations between its actors, ranging from international communities to small companies and consumers, are both positive and negative. in the context of the aggravation of socio-economic, political-legal, environmental, financial, and other relations between countries of the world within the framework of integration unions and at the international level, it is vital to study negative consequences of the economic nature of globalization. economic consequences of globalization have a direct impact on the global community as a whole, changes in macroeconomic and microeconomic impacts, economic development of countries and their associations, the environment, finance, migration processes, political environment, etc. underestimation of the negative impact of globalization on the world community can lead to large-scale crises in the global economy and the destruction of world economic interaction under the pressure of negative consequences that accompany the internationalization of economic life. therefore, the analysis of causes and consequences of the negative impact of globalization processes on the world economy has an indisputable relevance and is a timely scientific task that needs immediate resolution. baltic journal of economic studies 458 vol. 3, no. 5, 2017 2. literature review the issue of studying the impact of globalization on the world economy has been studied by scientists since the creation of the gatt, but they have gained in-depth analysis since the beginning of the xxi century when the global problems of mankind were considerably aggravated. however, most often works of researchers determine positive effects of globalization. in particular, the increasing levels of globalization and economic interdependence between countries in recent decades, the promotion of economic growth of factors such as political freedom, low levels of corruption, and the availability of quality institutions are pointed (horn, 2011). the effect of increased trade and investment flows between countries, especially asia, is emphasized (abdin, 2017; das, 2016). the positive impact of globalization on the standard of living, development of innovations, formation of a competitive environment, advantages of cooperation between governments of countries, global awareness of problems are analysed (levy, 2012). at the same time, there is a sharp debate about the reasons for the slowdown of economic growth in the global economy (aghion, 2002; ayres & warr, 2009). causes of the loss of skilled labour in developing countries are revealed, as well as the contradictory nature of offshore outsourcing (khan & islam, 2006). negative consequences of even a short-term increase in the migration of highly skilled personnel to the human capital of a country and the ability of the economy to introduce new technologies are specified (marchiori, shen & docquier, 2013). the influence of technological advances on the change of experience and activity of the population and its aging are studied since the volume of labour, labour productivity, and supply of capital depend on it (ramakrishnan, 2011). 3. the main characteristics of the globalization of world economic processes the globalization of the world economy is one of the most important signs of a modern economy. this concept should be considered in the context of strengthening the interconnection and interdependence of its spheres, participants and regions, factors of acceleration of internationalization of economic life, development of links between economic systems of different countries of the world, which have both positive and negative impacts on the world economy. globalization processes become widespread as a result of deepening the international division of labour and cooperation of production, which has provided additional competitive advantages to the highly developed economies of the world and led to an increase in the gap between their level of development and the level of development of the developing economies. the growth of the interdependence of the economies of the world gave them comparative competitive advantages, became the main reason for the change in the world commodity structure, created preconditions for the economies of china and singapore for the active entry into the system of world leaders. openness of national markets and circulation of goods, capital, labour without significant restrictions has become one of the main signs of globalization of the world economy but, at the present stage, it has led to the lack of the possibility of securing both the economic security of individual countries and regions (usa, eu, israel, syria, turkey, egypt, etc.), and peace and security on the planet as a whole. for example, the north american free trade union initially gave the usa and canada the greatest impact, but over the next 20 years, mexico’s economy grew considerably, and its workforce was endangering usa economic security through excessive migration processes. the formation of a global information space, which greatly accelerates the exchange of data, qualitatively changing business processes, is now largely dependent on the presence of supercomputers in the country. by november 2017, the usa dominated here, but now they fully and completely “passed” their powers to china (top500 supercomputing sites, 2018). it should be noted that the development of globalization since 2014 is largely hampered by the information war and aggression in russia, aimed at erosion of relative stability in the world, including the conduct of hostilities (on the territory of ukraine and syria), the annexation of territories (autonomous republic of crimea), terrorist activities in many countries of the world (spain, france, germany, turkey). 4. the main development trends of the world economy in the period of 2000–2017 the peculiarity of the development of the world economy of this period is that by 2014 globalization processes have greatly provided intensification of international trade, a large impact on the world economy of the world bank and the imf, the dominance of transnational corporations and alliances, deepening regionalization of the world economy, characterized by intensive migration and investment processes (skilled labour went there, where significant investments were directed). the period of 2015–2017 is described by unprecedented trends in the reduction of trade in goods and services, china’s dominance in tnc market, the growth of economic risks for the eu and the usa, the lack of bank resources in the advanced countries of the world, which, in order to encourage their attraction, are lending rates less than zero, the growth of volumes of arms trade, the strengthening of migration processes as a result of increasing the danger in different regions of the world, the political confrontation between the usa, russia, and the eu, the interference in foreign policy of baltic journal of economic studies 459 vol. 3, no. 5, 2017 countries that acquires a total scale, the emergence of the threat of global environmental challenges. economic growth, which is often mentioned as the result of the development of globalization and internationalization of economic life, practically does not exist. indeed, since the mid-sixties of the xx century, the pace of economic growth has steadily declined, even despite their cyclical nature (world bank group and oecd, 2018). that is, the existing myth of globalization as a way to economic growth bursts like a soap bubble. let us analyse what happened in the global economy during the last decade (table 1). the decline in 2007–2009 is typical for all regions of the world, the economy of the eu countries suffered the greatest fall. reasons for such a situation were the crisis in the real estate market preceding the financial crisis, the instability of the euro and the dollar, the aggressive behaviour of the usa tycoons in the market of east asian countries. in 2010–2011, there is a recovery, however, in the future – in 2012–2013 – the stagnation of economic processes, and in 2015–2016 – the drop in world market growth in all regions. it should be noted that the least affected and characterized by the highest growth rates is not the economy of those countries that are a part of the integration unions but that one of developing countries. the explanation is simple: in these regions in the investigated period, the largest investments were made from the developed economies and the eu countries, which served as insurance of various types of risks, including financial, real estate market, currency destabilization, etc. 5. determination of causes of the negative impact of globalization processes on the world economy among the reasons for the negative impact of globalization processes on the world economy, it is expedient to highlight the following: 1. loss of control over economic development by governments because of the dependence on changes in the world market situation, activities of the world bank and the imf, business structures’ use of offshore zones. 2. the growth of the influence of monopolistic entities (tnc and tnb) on world economic processes. 3. the struggle for world domination among integration associations of different regions of the world over available resources (nafta, eu, asean, etc.). 4. lack of responsibility zones for the economic consequences of the negative impact of globalization on the global economy and the environment in particular. 5. lack of effective mechanisms for dealing with crisis phenomena and processes within the global environment (food, financial, political, social, and other crises). 6. the dominant influence of international credit and financial institutions on the development of the majority of countries of the world. 7. lobbying own interests by countries of the world that significantly prevail over regional or even international and global. 8. lack of targeted use of funds aimed at preserving the environment, preventing clogging of the world’s oceans, air, and land resources. 9. inability to anticipate the whole set of problems that will have negative economic consequences for the world community. 10. lack of stability of growth and drop in world economic growth rates in all regions of the world. the list of reasons of the negative impact of globalization processes on the world economy can be complemented by identified unctad factors that have the most negative impact on the change in foreign investment (world investment report, 2017, p. 7): geopolitical uncertainty, terrorism, social instability, changes in trade deals, change in exchange rate, interest rate growth, debt repayment by developing economies. the identified causes lead to economic consequences that have a varied manifestation but often lead to an aggravation of the socio-economic situation in the world that is developing into crisis phenomena and processes, as was the case in 1987–1988, 1997–1998, 2008–2009, and as it will be in 2018–2019. 6. economic consequences of the negative impact of globalization on the world economy the modern economy is characterized by considerable destabilization compared to a decade later. this is largely determined by the negative economic consequences of globalization: on the world community as a whole: – gradual loss of cultural and national identity by developing countries. the formation of a “new economy” under globalization leads to the domination of the information and communication sector, advertising market and mass media of the most developed countries table 1 growth rates of the world market by regions, % (international monetary fund, 2017) regions and the world as a whole 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 developed economies 2,7 0,1 -3,4 3,1 1,7 1,2 1,3 2,0 2,1 1,7 eu countries 3,0 0,4 -4,5 2,1 1,5 -0,9 -0,3 1,2 2,0 1,7 developing countries 8,6 5,8 2,9 7,4 6,3 5,4 5,1 4,7 4,2 4,1 world 5,6 3,0 -0,1 5,4 4,2 3,5 3,4 3,5 3,4 3,1 baltic journal of economic studies 460 vol. 3, no. 5, 2017 of the world, and the corresponding dissemination of language, cultural, ethnic, historical, and other achievements. as a result, countries lose additional revenue from tourism, domestic producers are squeezed out of the market; – the openness of borders and economies of a large part of the world forms preconditions for the spread of terrorism, the criminal threat of transnational crime, and poses a direct threat to the economic security of such countries. no country in the world is able to counter the terrorist threat independently, which is substantially complemented by violence and information warfare; – escalating complex crisis phenomena and processes within the global environment; on changing tendencies of macro and microeconomic influence: – countries that are a part of integration associations, the world trade organization and the gatt are obliged to adhere to the basic principles of their functioning, including the greatest promotion, reciprocity in the provision of trade and political concessions, settlement of disputes through multilateral negotiations, etc. however, for a particular country, this may be an obstacle to the protection of the national economy. multilateral negotiations between countries, aimed at resolving disputes, can last for years, which leads to destabilization both in the middle of countries and in the global economy as a whole; – governments of the world are forced to subordinate the formation of a legislative and regulatory framework to international law, to implement socio-economic policy in accordance with the imf requirements in order to obtain currency tranches, which increases legal and social instability in society; on the economic development of countries and their associations: – activities of tncs that use mechanisms of distorting transaction prices, using differences in tax regimes in different countries, contribute to the outflow of natural resources from less developed countries at low prices. similar mechanisms contribute to the outflow of skilled personnel and financial and investment resources. as a result, there are economic crises, population cuts, lack of funds to support economic development, and dependence on imf loan resources; – the inability of government institutions to positively influence changes in macroeconomic indicators over the dependence of economies on changes in the conjuncture of international markets, activities of the world bank and the imf; – destabilization of the development of economic processes in developed economies over the outflow of funds for the needs of developing countries. in developing countries, on the contrary, because of the loss of the financial and credit system’s ability to selfdevelopment and self-development through the use of foreign borrowing (with the exception of china); on the environment: – lack of responsibility zones for the economic consequences of the negative impact of globalization on the environment leads to prolonged natural and technogenic catastrophes (greenhouse effect and melting of glaciers, a landfill in the pacific, a nuclear power plant accident in japan, etc.); – intensification of industrialization and urbanization as a result of the globalization of world economic processes led to a decrease in the ability of environmental systems to self-healing and purification; on finance: – reduction of receipts in the form of taxes and fees that do not come to the budgets of countries as a result of activities of tncs, which actively use free economic zones with privileged tax treatment regimes, favourable for business development; – deterioration in the financial sector manageability in countries due to the significant dependence of central banks on the policy of the world bank and the imf; – uncontrolled outflow of capital under the influence of a significantly higher level of liquidity and security of world financial markets, which adversely affects the stability of the financial system of countries; on migration processes: – the uncontrolled outflow of skilled labour from countries where there is no necessary level of stimulation of their work for normal livelihoods and reproduction as a result of directing global investment flows into the zone of high profitability of business; – poorly controlled low labour force inflow into developed economies and industrially developed countries of the world, which leads to an aggravation of the socio-economic situation in the country where the labour force migrates; – the growth of “frozen flow ” of refugees as a result of hostilities in the countries, the crisis of society, a decline of living standards, impoverishment of the population; on the political environment: – trying of countries of the world to reach their own interests along with regional or international leads to a deep confrontation of goals and interests of the parties to globalization, the intensification of relations between countries, the conduct of hostilities in the struggle for world domination over available resources; – globalization processes contribute to the division of the world into regional groupings by political interests. thus, the globalization of the world economy does not allow conducting the regulation and reproduction of national markets so effectively that it contributes to the economic growth of countries of the world, regardless of their regional origin, requiring a radical reorganization of the existing system for coordinating economic policies of countries. baltic journal of economic studies 461 vol. 3, no. 5, 2017 7. conclusions the scientific research is devoted to solving the relevant issue – the disclosure of causes and the generalization of consequences of the negative impact of globalization processes on the world economy. a critical analysis of works of contemporary scholars has shown that the globalization of the world economic system is one of the most important features of the present-day economy and has a polyvector influence on its development. analysis of trends of the world economy in the period of 2000–2017 indicates an aggravation of economic problems and a decline in economic growth rates in all regions of the world at the end of the study period (in developed economies – by 0.4%, in the eu countries – by 0.3%; in developing countries – by 0.1%). this situation is the result of growing instability in the global economy and society as a whole. the identified causes of the negative impact of globalization processes on the world economy are often characterized by economic consequences that have a direct impact on the world community as a whole, changes in macroeconomic and microeconomic impacts, economic development of countries and their associations, the environment, finance, migration processes, political environment. the economic consequences of the negative impact of globalization on the global economy are an increase in crisis phenomena and processes within the global environment, growing threat of terrorism, socio-economic instability, and geopolitical uncertainty. in order to minimize the negative impact of globalization on the world economy, a comprehensive reorganization of the existing system of economic policy coordination of countries around the world, based on the development and implementation of a collective program of actions of socio-economic and militarypolitical security of mankind, is necessary. further research should be directed towards improving mechanisms for addressing crisis phenomena and processes within the global environment, based on the development and implementation of a collective program of action of the world community. references: abdin, md. j. (2017). challenges of global economic integration. retrieved from: https://ssrn.com/ abstract=2909413, referred on 01/02/2017. aghion, ph. (2002). schumpeterian growth theory and the dynamics of income inequality, econometrica, 70(3), рр. 855–882. ayres, r . and warr, b. (2009). the economic growth engine: how energy and work drive material prosperity (the international institute for applied systems analysis). edward elgar publishing; reprint edition. – 412 р. das, m. (2016). globalization and its positive impact on indian economy. retrieved from: https://ssrn.com/ abstract=2738054, referred on 15/02/2016. horn, d. m. (2011). political freedom, corruption, public institutions, and economic growth: a global analysis since the fall of the soviet union. retrieved from: https://ssrn.com/abstract=1923272, referred on 21/06/2011. khan, h. and islam, m. sh. (2006). outsourcing, migration, and brain drain in the global economy: issues and evidence. retrieved from: https://ssrn.com/abstract=1606106, referred on 01/09/2006. levy, br. (2012). the role of globalization in economic development. retrieved from: https://ssrn.com/ abstract=2233648, referred on 14/09/2012. marchiori, l., shen, i-ling and docquier, fr. (2013). brain drain in globalization: a general equilibrium analysis from the sending countries' perspective. economic inquiry, vol. 51, issue 2, pp. 1582-1602. ramakrishnan, dr. (2011). information, technology and its impact on aging society, 4th apru research symposium gerontology, shanghai, china, october 28-29. retrieved from: https://ssrn.com/abstract=1958556, referred on 28-29/10/2011. report for selected country groups and subjects (2017). world economic outlook. international monetary fund. 2017, application date 08/02/2018. top500 supercomputing sites. retrieved from: http://top500.org/, application date 13/02/2018. world investment report 2017 – investment and the digital economy. – unctad, united nations. geneva, 2017, 252 р. world gdp growth rate and gdp growth rate of total oecd countries. world bank group and oecd. retrieved from: https://en.wikipedia.org/wiki/economic_growth#/media/file:weltbipworldgroupoecdengl.png, application date 08/02/2018. baltic journal of economic studies 53 vol. 3, no. 3, 2017 corresponding author: 1 department of finance named after s.i. yurii, ternopil national economic university. e-mail: a.sydorchuk@tneu.edu.ua the analysis of financial reserves for the state social insurance anatoliy sydorchuk1 ternopil national economic university, ukraine abstract. the purpose of the paper is research of practice of making financial reserves of the state social insurance in ukraine and determining their optimal size. the method of study allows finding how the financial reserves ensuring sustainability of the state social insurance over three years (2014, 2015, 2016). methodology. the results of the study were obtained after analysing the indicators of the budget of state social insurance funds (2014, 2015, 2016). in the course of research, an analysis and synthesis as methods of theoretical knowledge of phenomena are used. comparisons and measurements are used as empirical methods for the conducted research. results of the research showed the lack of uniform methodological principles for the formation of financial reserves of state social insurance, which is confirmed by their various volumes, and the absence of the mandatory creation condition of them. extrapolating the provisions of article 14-3 of the budget code of ukraine, we propose that the amount of cash in circulation should not exceed 2% of the budget expenditures of the state social funds, that is, to provide a seven-day need for financing the insurance payments. at the same time, the condition of keeping the amount of cash on hand at the end of the period (year) should become mandatory. practical implications. for conducting research and substantiation of relevant conclusions, the indicators of budgets of the state social insurance funds of ukraine for three years are analysed (2014, 2015, 2016). value/originality. a step that will balance the financial resources of state social insurance is the need to introduce uniform requirements for the formation of financial reserves of state social insurance funds. the proposed measures will enable to make more manageable the system of the state social insurance funds in ukraine. key words: financial reserves, state social insurance, optimal size of financial reserves, sustainability of state social insurance. jel classification: h55, i13 1. introduction one of the elements of the financial resources of the state social insurance is financial reserves, which represent money that is deliberately withdrawn from the turnover in state social insurance funds and is intended for the use in unpredictable processes of social reproduction (zlepko, kramarchuk, 2007). also, the financial reserves are the ways and forms of creation and use of funds of financial resources to finance measures to localize the effects of unforeseen circumstances and support the welfare of citizens (vasylyk, 2000). therefore, the functional purpose of social insurance reserves, in our opinion, is to ensure the stability of the provision of public services for those persons who are directly involved in this area. financial reserves of social insurance are determined by us as a part of the state social insurance financial resources, whose main purpose is to ensure the sustainability of the system of state social insurance. finding the answers to questions “have the financial reserves of the state social insurance done their aim in ukraine?” determines the relevance of the article of the study. 2. the composition of the financial reserves of the state social insurance the practice of functioning of the state social funds shows the creation of the financial reserves in two forms: the current cash reserve and the balance of cash at the beginning of the budget period. on this basis, the financial reserves of the state social insurance are considered by us as currently (the current cash reserve, crv) and perspectively (the balance of cash at the beginning of the budget period, prv) (fig. 1). the crv is the current cash at the beginning of the period to cover temporary cash disruptions to finance insurance payments, social services of the current month. extrapolating the provisions of article 14-3 of the budget code of ukraine (the budget code of ukraine, 2010), we consider crv is a part of the budget of the state social insurance fund, which is formed at baltic journal of economic studies 54 vol. 3, no. 3, 2017 the beginning of the period to cover temporary cash disruptions for the financing of insurance payments, social services of the current month. the perspective financial reserves (prv) of the state social insurance funds include a reserve of funds to ensure the implementation of goals of a separate type of the state social insurance for a long period. in particular, they should include the difference between the remainder of the budget of a separate state social fund and the current cash at the end of the period. it is a free remaining balance that is not subject to withdrawal and is used to carry out expenditures in accordance with perspective decisions of the respective board of the state social fund. unlike other types of social insurance, formatting crv and prv of the state social insurance fund for temporary incapacity and the compulsory state social insurance fund of ukraine for unemployment in 2002–2007 was envisaged by law. the dynamics of indicators of the financial reserves of the social insurance for the unemployment is presented in table 1. listed in table 1 data about the financial reserves of social insurance for unemployment in ukraine indicate: a) absence of the financial reserves in 2014; b) the creation of the financial reserves in 2015 and 2016 at 1% of the compulsory state social insurance fund of ukraine for unemployment total expenditures to cover the 4-day expenditure need; c) absence of perspective reserves in 2014-2016. the lack of the financial reserves in 2014 is due to the beginning of hostilities in ukraine. the indicator crv for the social insurance for unemployment, expressed in days, showed a deviation of its volume from the norm. this is especially noticeable during 2015–2016, when it provided funding for this type of the state social insurance for 4 days, instead of 7 days. by doing so, it reached its critical minimum level. the absence of prv in 2014–2016 demonstrates the absence of long-term state policy in the development of this type of the social insurance. the dynamics of indicators of the financial reserves of the social insurance for temporary incapacity is presented in table 2. listed in table 2 data about the financial reserves of social insurance for unemployment in ukraine indicate: a) the indicator crv in 2015 has decreased by almost twice as compared to 2014; b) in 2015, the balance of cash of the state social insurance fund for temporary incapacity was formed at the end of the reporting year in the amount of 1759.8 million uah, which is 25.39% of the fund’s total expenditures. however, according to data, the fund’s expenditures were financed only by 77.8%, or the share of underfunding was 22.2%. thus, the real balance of the cash at the end of the reporting year was 3.19%. it is 3.19% that is the real value of the crv in 2015; с) absence of perspective reserves in 2014–2015. the decrease of the financial reserves in 2015 is due to the beginning of hostilities in ukraine. the indicator crv for the social insurance for temporary incapacity, expressed in days, showed its volume in the norm. this is especially noticeable in 2014, when it provided funding for this type of the state social insurance for 22 days, instead of 7 days. by doing so, it reached its critical maximum level. fig. 1. composition of the financial reserves of the state social insurance financial reserves of the state social insurance crv: the current cash at the beginning of the period to cover temporary cash disruptions to finance insurance payments, social services of the current month prv: the reserve of the social insurance funds for the implementation of goals of a separate type of social insurance for a long period table 1 the indicators of financial reserves of the social insurance for unemployment indicators 2014 2015 2016 prv, thousand uah crv, thousand uah 82,8 91 the total financial reserves, thousand uah 82,8 91 the total expenditures of the compulsory state social insurance fund of ukraine for unemployment, thousand uah 6883,7 8269,7 8573,5 specific weight of prv in the total expenditures of the compulsory state social insurance fund of ukraine for unemployment, % specific weight of crv in the total expenditures of the compulsory state social insurance fund of ukraine for unemployment, % 1 1,06 specific weight of the total financial reserves in the total expenditures of the compulsory state social insurance fund of ukraine for unemployment, % 1 1,06 prv, day crv, day 4 4 baltic journal of economic studies 55 vol. 3, no. 3, 2017 also, the absence of prv in 2014–2015 demonstrates the absence of long-term state policy in the development of this type of the social insurance. the dynamics of indicators of the financial reserves of the state social insurance against accidents at work and occupational diseases is presented in table 3. table 3 the indicators of financial reserves of the social insurance against accidents at work and occupational diseases indicators 2014 2015 prv, thousand uah crv, thousand uah 60,2 590,4 the total financial reserves, thousand uah 60,2 590,4 the total expenditures of the state social insurance fund against accidents at work and occupational diseases, thousand uah 7758,6 7091,8 specific weight of prv in the total expenditures of the state social insurance fund against accidents at work and occupational diseases, % specific weight of crv in the total expenditures of the state social insurance fund against accidents at work and occupational diseases, % 0,78 8,33 (0,13) specific weight of the total financial reserves in the total expenditures of the state the social insurance fund against accidents at work and occupational diseases, % 0,78 8,33 (0,13) prv, day crv, day 3 1 listed in table 3 data about the financial reserves of social insurance against accidents at work and occupational diseases indicate: a) the indicator crv in 2015 has decreased by in six times as compared to 2014; b) in 2015, the balance of the cash of the state social insurance fund against accidents at work and occupational diseases was formed at the end of the reporting year in the amount of 0.5904 million uah, which is 8.33% of the fund’s total expenditures. however, according to data, the fund’s expenditures were financed only by 91.8%, or the share of underfunding was 8.2%. thus, the real balance of the cash at the end of the reporting year was 0.13%. it is 0.13% that is the real value of the crv in 2015; с) absence of perspective reserves in 2014–2015. as other types of the state social insurance, the decrease of the financial reserves in 2015 is due to the beginning of hostilities in ukraine. the indicator crv for the social insurance against accidents at work and occupational diseases, expressed in days, showed a deviation of its volume from the norm. this is especially noticeable in 2015, when it provided funding for this type of the state social insurance for 1 day, instead of 7 days. by doing so, it reached its critical minimum level. also, the absence of prv in 2014–2015 demonstrates the absence of long-term state policy in the development of this type of the social insurance. the state social insurance fund for temporary incapacity and the state social insurance fund against accidents at work and occupational diseases are united in one  – the state social insurance fund of ukraine. for the first time, the social insurance fund of ukraine approved its budget in 2016. the dynamics of indicators of the financial reserves of the state social insurance (that including the social insurance for temporary incapacity and the social insurance against accidents at work and occupational diseases) is presented in table 4. table 4 the indicators of financial reserves of the state social insurance indicators 2016 prv, thousand uah crv, thousand uah 218,9 the total financial reserves, thousand uah 218,9 the total expenditures of the state social insurance fund, thousand uah 16886,8 specific weight of prv in the total expenditures of the state social insurance fund, % specific weight of crv in the total expenditures of the state social insurance fund, % 1,3 specific weight of the total financial reserves in the total expenditures of the state social insurance fund against accidents at work and occupational diseases, % 1,3 prv, day 5 crv, day 5 listed in table 4 data about the financial reserves of social insurance indicate: table 2 the indicators of financial reserves of the social insurance for temporary incapacity indicators 2014 2015 prv, thousand uah crv, thousand uah 607,9 1759,8 the total financial reserves, thousand uah 607,9 1759,8 the total expenditures of the state social insurance fund for temporary incapacity, thousand uah 10180,8 6930,4 specific weight of prv in the total expenditures of the state social insurance fund for temporary incapacity, % specific weight of crv in the total expenditures of the state social insurance fund for temporary incapacity, % 5,97 25,39 (3,19) specific weight of the total financial reserves in the total expenditures of the state social insurance fund for temporary incapacity, % 25,39 (3,19) prv, day crv, day 22 11 baltic journal of economic studies 56 vol. 3, no. 3, 2017 a) the creation of financial reserves in 2016 at 1.3% of the state social insurance fund’s total expenditures to cover the 5-day expenditure need; b) absence of perspective reserves in 2016. the indicator crv for the social insurance of ukraine, expressed in days, showed a small deviation of its volume from the norm. it provided funding for this type of the state social insurance for 5 days, instead of 7 days in 2016. actually, in terms of the formation of the financial reserves, the social insurance funds united into one fund are more acceptable. the dynamics of indicators of the financial reserves of the state pension social insurance is presented in table 5. table 5 the indicators of financial reserves of the state social pension insurance indicators 2014 2015 2016 prv, thousand uah crv, thousand uah 2098,1 1720,7 840,6 the total financial reserves, thousand uah 2098,1 1720,7 840,6 the total expenditures of the pension fund of ukraine, thousand uah 248945,1 267346,5 254066 specific weight of prv in the pension fund of ukraine, % specific weight of crv in the total expenditures of the pension fund of ukraine, % 0,84 *(0) 0,64 *(0) 0,33 *(0) specific weight of the total financial reserves in the pension fund of ukraine, % 0,84 *(0) 0,64 *(0) 0,33 *(0) prv, day crv, day 3 2 1 listed in table 5 data about the financial reserves of the state pension insurance indicate: a) the indicator crv in 2016 has decreased by in three times as compared to 2014; b) in 2014–2016, the balances of the cash of the pension fund of ukraine was formed at the end of the reporting year in the amount of 2.981 million uah, 1.7207 million uah, and 0.8406 million uah, which is nearly 0.5% of the fund’s total expenditures. the excess of the expenditures over on the income of the pension fund of ukraine was observed. in fact, this indicates that there are no reserves for this kind of the state social insurance. thus, the real balance of the cash at the end of the reporting year was 0%. it is 0% that is the real value of the crv in 2014–2016; с) absence of perspective reserves in 2014–2016. as other types of the state social insurance, the decrease of the financial reserves in 2015–2016 is due to the beginning of hostilities in ukraine. the indicator crv for the state pension insurance, expressed in days, showed a deviation of its volume from the norm. this is especially noticeable in 2016, when it provided funding for this type of the state social insurance for 1 day, instead of 7 days. by doing so, it reached its critical minimum level. also, the absence of prv in 2014–2015 demonstrates the absence of long-term state policy in the development of the state pension insurance in ukraine. in tab. 6, we have represented the volume of the financial reserves for each of their types in the context of certain types of the state social insurance (in days). table 6 the indicators of financial reserves of certain types of state social insurance indicators, days 2014 2015 2016 prv for the compulsory state social insurance fund of ukraine for unemployment crv for the compulsory state social insurance fund of ukraine for unemployment 4 4 prv for the state social insurance fund for temporary incapacity no data crv for the state social insurance fund for temporary incapacity 22 11 no data prv for the state social insurance fund against accidents at work and occupational diseases no data crv for the state social insurance fund against accidents at work and occupational diseases 3 1 no data prv for the state social insurance fund no data no data crv for the state social insurance fund no data no data 5 prv for the pension fund of ukraine crv for the pension fund of ukraine 3 2 1 listed in table 6 data about the financial reserves of all types of the state social insurance in 2014–2016 indicate: a) absence of perspective reserves of all types of the state social insurance in ukraine; b) the largest volumes of crv were observed for the state social insurance for temporary incapacity; c) the indicator crv in 2016 has decreased by in some times as compared to 2014 for all types of the state social insurance in ukraine; also, the data in table 6 testify to the lack of uniform methodological requirements for the formation of financial reserves in ukraine. reductions in the financial reserves of the state social insurance funds over the past 3 years indicate deterioration in the sustainability of the entire system of the state social insurance in ukraine. 3. conclusions data in tables indicate a lack of common methodological principles for the formation of the financial reserves of the state social insurance, which baltic journal of economic studies 57 vol. 3, no. 3, 2017 is confirmed by their various volumes, the absence of compulsory creation of them. the results over three years demonstrate that the step that will balance the financial resources of the state social insurance is the need to introduce unified requirements for the formation of the financial reserves of the state social funds. analysing the foregoing, one can conclude extrapolating the provisions of article 14-3 of the budget code of ukraine, we propose that the amount of the crv should not exceed 2% of the budget expenditures of the state social funds, that is, to provide a seven-day need for financing insurance payments. at the same time, keeping the amount of cash at the end of the period (year) should become mandatory. the proposed measures will enable the system of the funds of compulsory state social insurance in ukraine to acquire a more manageable and clear construction, the study of which we see as prospects for the further research in this sphere. references: zlepko, n.p., kramarchuk s. p. (2007). finansy. – ternopil, tneu, 114 p. vasylyk, o. d. (2000). teoriya finansiv – kyiv, nios, 416 p. verkhovna rada of ukraine. budget code of ukraine. retrieved from: http://zakon3.rada.gov.ua/laws/ show/2456-17/page2 cabinet of ministers of ukraine. postanova cabinet of ministers of ukraine “pro zatverdzhennya byudzhetu fondu zagalnoobovyazkovogo derzhavnogo socialnogo straxuvannya na vypadok bezrobittya na 2016 rik”. retrieved from: http://zakon2.rada.gov.ua/laws/show/414-2016-%d0%bf cabinet of ministers of ukraine. postanova cabinet of ministers of ukraine “pro zatverdzhennya byudzhetu fondu zagalnoobovyazkovogo derzhavnogo socialnogo straxuvannya na vypadok bezrobittya na 2016 rik”. retrieved from: http://zakon3.rada.gov.ua/laws/show/226-2015-%d0%bf the compulsory state social insurance fund of ukraine for unemployment. board resolution. retrieved from: http://www.dcz.gov.ua/doccatalog/document?id=383939 the state social insurance fund of ukraine for temporary incapacity. the information about the execution of the budget 2015. retrieved from: http://www.fse.gov.ua/fse/control/main/uk/publish/article/936560 the state social insurance fund of ukraine for temporary incapacity. board resolution. retrieved from: http://www.fse.gov.ua/fse/control/odd/uk/publish/article/924982 cabinet of ministers of ukraine. postanova cabinet of ministers of ukraine “pro zatverdzhennya byudzhetu fondu socialnogo straxuvannya ukrayiny na 2016 rik”. retrieved from: http://zakon3.rada.gov.ua/laws/show/532-2016%d0%bf the state social insurance fund of ukraine against accidents at work and occupational diseases. board resolution. retrieved from: http://consultant.parus.ua/?doc=08x207d4b2 the state social insurance fund of ukraine against accidents at work and occupational diseases. insurance activity report. retrieved from: http://www.social.org.ua/view/5588 cabinet of ministers of ukraine. postanova cabinet of ministers of ukraine “pro zatverdzhennya byudzhetu pensijnogo fondu ukrayiny na 2014 rik”. retrieved from: http://zakon3.rada.gov.ua/laws/show/202-2014%d0%bf cabinet of ministers of ukraine. postanova cabinet of ministers of ukraine “pro zatverdzhennya byudzhetu pensijnogo fondu ukrayiny na 2015 rik”. retrieved from: http://zakon3.rada.gov.ua/laws/show/67-2015%d0%bf cabinet of ministers of ukraine. postanova cabinet of ministers of ukraine “pro zatverdzhennya byudzhetu pensijnogo fondu ukrayiny na 2016 rik”. retrieved from: http://zakon3.rada.gov.ua/laws/show/190-2016%d0%bf анатолий сидорчук анализ финансовых резервов государственного социального страхования аннотация. целью работы является исследование практики создания финансовых резервов государственного социального страхования в украине и определения их оптимального размера. в статье рассматривается сущность финансовых резервов государственного социального страхования, проводится их классификация и анализируется практика формирования в украине. финансовые резервы социального страхования определяются нами как часть общегосударственных финансовых резервов, основным своим назначением должны обеспечить устойчивость системы государственного социального страхования. поиск ответа на вопрос выполняют данные резервы свое предназначение в украине определяет актуальность темы исследования. практика функционирования государственных целевых фондов свидетельствует о создании финансовых резервов в двух формах: оборотной кассовой наличности и остатка средств на начало бюджетного периода. исходя из действующей практики, финансовые резервы baltic journal of economic studies 58 vol. 3, no. 3, 2017 государственного социального страхования в украине рассматриваются нами как текущие (текущий резерв наличности) и перспективные (остаток денежных средств в начале бюджетного периода). метод исследования позволяет определить, обеспечивают ли финансовые резервы устойчивость государственного социального страхования в течение трех лет (2014, 2015, 2016). методика. результаты исследования были получены после анализа показателей бюджета фондов государственного социального страхования в украине (2014, 2015, 2016). в ходе исследований был использован анализ, синтез как методы теоретического исследования явлений. сравнение и измерение используются в качестве эмпирических методов для проводимых исследований. результат. результаты исследования показали отсутствие единых методологических принципов формирования финансовых резервов государственного социального страхования в украине, что подтверждается их разным объемом и отсутствием обязательного условия их создания. кроме того, анализ показал отсутствие формирование перспективных финансовых резервов по всем видам государственного социального страхования в украине. экстраполируя положения статьи 14-3 бюджетного кодекса украины, мы предлагаем, чтобы остатки средств на конец отчетного периода составляли 2% от бюджетных расходов государственных социальных фондов, то есть обеспечивали семидневную потребность в финансировании страховых выплат. в то же время обязательным условием является сохранение суммы наличных денег в конце периода (года). практическое значение. для проведения исследований и обоснования соответствующих выводов были проанализированы показатели бюджетов фондов государственного социального страхования украины за три года (2014, 2015, 2016). значение/оригинальность. шагом, который уравновесит финансовые ресурсы государственного социального страхования, является необходимость введения единых требований к формированию финансовых резервов фондов государственного социального страхования. предлагаемые меры позволят системе фондов обязательного государственного социального страхования в украине приобрести более управляемое и четкое строительство, изучение которых мы рассматриваем как перспективу дальнейших исследований в этой сфере. baltic journal of economic studies 248 vol. 4, no. 1, 2018 corresponding author: 1 business economics and administration department, sumy state pedagogical university named after a.s. makarenko. centre for european reforms studies, grand duchy of luxemburg. e-mail: olya.dina@gmail.com 2 business economics and administration department, sumy state pedagogical university named after a. s. makarenko. e-mail: omvitaliy@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-248-254 research framework for system security of technological & innovation systems olha kudrina1 sumy state pedagogical university named after a.s. makarenko, ukraine; centre for european reforms studies, grand duchy of luxemburg vitaliy omelyanenko2 sumy state pedagogical university named after a.s. makarenko, ukraine abstract. the purpose of this study is to consider the main aspects of system security theoretical concept and practical aspect within the technological & innovation systems research methodology development according to their considering as structurally complicated systems. methodology. in this study, we propose to use the concept of technological & innovation systems, in which it is analysed the development of the technological field in terms of structures and processes that support or impede its development. so this approach can be considered as an expanding to techno-socio-economic analysis, considered for the innovation system in our previous studies. results. the problem of study comes from the national security and defence objectives, which can be achieved within the national innovation systems, considering new meaning and problems in the age of globalization and high technologies development. we can underline that the important factor of technological & innovation systems system security consists in system identification within the management theory as the determination of the structure of the system and its parameters by analysing input data and system outputs. at the same time, we can note the system specifics, e.g. the identification of industrial systems security deals with the establishment of the identity of production facilities an ecological security etc. the most important relationships of innovation & technological systems designing that allow establishing appropriate adaptive management decisions were proposed. for the development of combined models of innovation & technological systems security, the main aspects of this type of systems were considered. practical implications. based on this, the author proposed to use system indicators for security providing process. using these indicators, we can identify system synchronous development speed and autonomous of speeds of security providing process. the technological & innovation systems security management is proposed to be analysed in two interrelated subsystems: self-organizing subsystems and technological subsystem. the main activities for the system security of highly complicated system providing were proposed. value/originality. based on the foregoing, the authors proposed to use security relationships adaptive management as a set of methods that can generate management systems, able to change the security-related parameters of regulator or controller structure according to the change of control object parameters or external disturbances acting on the control object. key words: system security, technological & innovation system, national security, national innovation system, technology, analysis. jel classification: c51, o14, o32 1. introduction today the problem of security is the main from the list of nation’s strategic importance development priorities. it includes the complexity of transformation processes at the beginning of xxi century and is the condition and the objective of development policy because it requires the concentration of all forces and resources on problems solving. their distraction from threats neutralizing makes difficult or sometimes makes it impossible for the successful realization of development strategy. security management system in different innovation systems can be considered as a set of methods and baltic journal of economic studies 249 vol. 4, no. 1, 2018 instruments of ensuring the maintenance of safe state of the object (system), prevention, detection, and elimination of threats, health, environment, property, and information, having common means of collecting and information processing, and management. in this general definition, the security is considered in terms of its functionality and is a common case of an integrated security system. the necessity for further innovation system analysis of methodology development through the improvement of existing and developing the new tools for security assessment and providing is caused by the fact that with the growth of complexity of humanmade systems and numerous links in them, and the more elements are in them, the greater the potential danger and risks and accordingly processes of analysing and forecasting system condition become more difficult. a brief literature review has shown that the problem of our study comes from the national security and defence objectives, which can be achieved within the national innovation systems, considering new meaning and problems in the age of globalization and high technologies development. in this framework, the main purpose of “technological & innovation system” conceptualization and analysing according to (hekkert, 2009) is to “analyse and evaluate the development of a particular technological field in terms of the structures and processes that support or hamper it.” within this analysis, such basic steps are highlighted: – analysis of innovation system structure (actors and rules, which make up the system); – analysis of how the system is functioning (functions and interaction between the functions analysis); – analysis of system problems, which block of system well-functioning. we believe that this approach can be useful for system security analysis because it provides possibilities for extended analysis. necessary for innovation systems efficient models development is caused by a clear understanding that innovation component becomes the main part of the global economic competition (new challenges, 2008). experts (oecd, 1997) have noted that there are different approaches to national innovation systems analysing. for example, innovation firm-level surveys consider enterprise’s sources of knowledge most relevant to innovation and rank of different linkages of industrial sector and country. cluster analysis focuses on interactions between particular types of firms and sectors, which can be grouped according to some technological and networking characteristics (oecd, 1997). but all these approaches consider innovation system as a separate object without answering the list of questions concerning system dynamics, different types of influences and impulses, subsystems dynamics etc. among studies, devoted to problems of national security and defence objectives, we can name research (mowery, 2009) focusing, in particular, on the usa during and after the cold war, including a brief description of post-9/11 trends in related to defence and national security investments using r&d strategy. also, systems security issues can be defined from the confidentiality & trade secrets as a part of the innovation process. in general, we need to identify vulnerability as a weakness in the target, which potentially can be exploited by security threats. for example, in the term “security economy” oecd experts describe a cluster of activities concerned with preventing (reducing) risk of deliberate harm to life or property (oecd, 2004). in npr 8715.3 c system safety is defined as “application of engineering and management principles, criteria, and techniques to optimize security … within the constraints of operational effectiveness, time and cost throughout all phases of system life cycle” (nasa, 2011). this definition gives a base for security management of various systems. the complexity of modern technological & innovation systems necessitates carrying out their depth analysis using system approach, methods and algorithms for structural and parametric synthesis based on technology package approach (artyukhov et al., 2016) as a set of technologies and additional elements that provide efficiency of innovation & technological system. this approach is consistent with benner l. (1997), who has suggested that any system definition describes dynamic interactions among people, procedures, and things and their influences on outcomes. the technology package approach can be applied based on different management approaches. e.g. in 2007 international organization for standardization has released iso 28000 “specification for security management systems for the supply chain”. although in the title supply chain is included, given standard specifies the requirements for security management system, including those aspects critical to security assurance for any organization or enterprise wishing to manage the security of organization or its activities. the purpose of this study is to consider the main aspects of system security theoretical concept and practical aspect within the technological & innovation systems research methodology development according to their considering as structurally complicated systems. 2. the methodology of technological & innovation systems study review the complexity of modern technological & innovation systems leads to the necessity of carrying out their depth analysis using system approach, methods and algorithms for structural and parametric synthesis, based on technology package concept as a set of technologies (industrial, social, organizational) that provide expected efficiency in the relationship of innovation & technological system. baltic journal of economic studies 250 vol. 4, no. 1, 2018 in this study, we propose to use the concept of technological & innovation systems (hekkert, 2009), in which it is analysed the development of the technological field in terms of structures and processes that support or impede its development. so this approach can be considered as an expanding to techno-socio-economic analysis, considered for the innovation system in our previous studies (marekha, omelyanenko, 2016; omelyanenko, 2014; prokopenko, omelyanenko, 2013; omelyanenko, 2015a; omelyanenko, 2015 b). that’s why through the review of previous studies and according to rational approach, given in (chechkin, 2009), we consider as a base for our study the concept of “system security of complex (complicated) system” that means an unconditional preservation of its main functions, main components of complex system and their relationships in solving any particular problem for the system life cycle ensuring the proper functioning of the complex system (i), as well as its system integrity within its metasystem (ii). in respect that the main characteristic of technological innovation system approach is its focus on system dynamics (suurs, 2009), we propose to analyse it in terms of its system components and (or) in terms of its general dynamics. that’s why we can apply virtuous circle (also referred as a vicious cycle) that refer to complex chains of events, which reinforce themselves through the feedback loop (webel, 2012). in our research, we also use approach for the identification of system security of technological & innovation systems based on system protection by reducing the risk of loss of its integrity and availability of information for decision-making to an acceptable level. 3. technological & innovation systems security modern technological & innovation systems can be referred as structurally highly complicated systems, which in the mathematical description cannot be reduced to simple serial, parallel or tree structures but can be described by complex network scenarios with cycles and repeatability arguments in formalization. the complex phenomenon of these type of systems’, which include, for example, information and computing systems, nuclear power stations, space stations, space vehicles, etc., in scientific terms are not known until the end and their security is not solved satisfactorily in an applied sense. for the system security detailed analysis, we need such three basic points’ acknowledgment: 1) in the macroeconomic and international levels the security of structurally complicated innovation & technology systems, we propose to consider as a classical situation, when the “impact of factors (external and internal) does not lead to system deterioration or impossibility of its operation or development” (zaplatinskiy, 2006); 2) system’s security analysis is aimed at the identification and assessment of factors that determine the undesirable internal incidents probability, the study of incident and development of preventive measures to reduce their probability (internal security of system); 3) system’s security analysis is also connected with the identification and evaluation of external factors that determine the probability of undesirable incidents (conflicts, events etc.) inside of it, the study of an incident’s nature and, recently, the development of preventive measures to reduce an incident’s probability (external security of system). so, according to the mentioned points and definitions, the system security of the highly complicated system can be provided through such main activities: – monitoring and elimination of conflicts between its components (subsystems) and their linkages that appear throughout the system life cycle stages; – monitoring and elimination of conflicts between the complex system and other external systems (its metasystem). based on methodology, given in (hekkert, 2011), and our previous studies, we can underline that the important factor of technological & innovation systems system security consists in system identification within the management theory as the determination of the structure of the system and its parameters by analysing input data and system outputs. at the same time, we can note the system specifics, e.g. the identification of industrial systems security deals with the establishment of the identity of production facilities’ ecological security etc. similar in formulation and meaning is the task of calculating the reliability of the systems, i.e. analysis of system’s ability to maintain the properties, necessary to comply with the specified purpose, during normal operation. but in the case of innovation & technological systems, we are facing with different external impulses (competitors, macroeconomic dynamics) that do not correspond to its normal (initial) conditions. analytical description of all above-mentioned issues can be conducted in two directions: 1. identification and description of different types of improper actions and incorrect management decisions according to different interrelations; 2. identification of consequences of malfunction, which causes other problems (or not cause), which ultimately leads to undesirable incidents and evaluate their probability. to solve these tasks from the standpoint of classical cybernetics, the technological & innovation management we propose to consider as functionoriented activity (i) for maintenance system basic properties (set of properties or functions (subsystems), loss of which entails the destruction of system or losing of its capacity or safety) in the environmental conditions change and (ii) for certain actions implementation, baltic journal of economic studies 251 vol. 4, no. 1, 2018 ensuring the stability of its functioning and development to achieve some target. in the context of function-oriented system analysis of objectives and appropriate optimization of technological & innovation systems, we propose to consider mechanism of complex transformation of a wide range of initial resources into the final results using the tools complex based on humanity-established skills and knowledge, as well as adequate information and management system of necessary resources and sub-system of dissemination various economic, social, environmental, and other results, which are related to this system (fig. 1). function-oriented security approach significantly expands the tasks of traditional factor analysis since provides that the object of security analysis should be systematic (integrated) and accordingly involve a number of sub-supply systems (scientific, technical, information, logistics, personnel, organizational, etc., that separately can be considered as a subsystems) must be function agreed through the set of different types of flows (material, energy, information flows, states changing etc.). from this perspective, the innovation & technological system’s structure can be considered as a set of restrictions on flows system in space and time. so we can apply system security approach to the consideration of the role of international relations in technological & innovation systems development within political and economic associations’ framework. this means that the necessity to manage of different resources (including valuable and limited resources) flows led to international integration processes development from simple economic and trade associations to interstate political, economic alliances and networks, as well as to different kinds of economic and technological wars. system security also corresponds to “technological economy” concept that characterizes “social technological” systems, their transforming socionatural character with the predominance of economic and scientific-technical development and rationalizing landmarks. so the technological & innovation systems security management according to the selected object is proposed to be analysed in two interrelated subsystems: – first deals with the characteristic of self-organizing subsystems; – second deals with the technical (technological) subsystem. for each of these subsystems security, two basic approaches can be used: activity analysing approach and process analysing approach. selection of specific approach depends upon the nature and complexity of object of management and focuses on the appropriate range of methods of analysis and decision-making (qualitative or quantitative). within the management of technological & innovation systems, which, as it was already mentioned above, are the most complicated types of systems, the first approach currently is dominant, and methodological spectrum share of qualitative methods of analysis and decision-making significantly exceeds the share of traditional quantity methods. policy (research, innovation, transition) hard (legislation, standards, ipr) & soft (culture, ethics, norms, behaviour) system security of innovation & technological systems development resources external security external security on foreign markets and partnership internal cooperation security internal security security in structural policy of system security of resource support technological security functional security aspects (information, energy, and other resources support etc.) system management decisions fig. 1. system security of technological & innovation the author’s approach baltic journal of economic studies 252 vol. 4, no. 1, 2018 4. technological & innovation systems development management the mentioned methods in the application for the technological & innovation systems should be considered as a part of system controlled evolution, which we offer to understand as a process of formation and implementation of such target impacts on technological & innovation system, as a result of which the system will turn to the target condition. as a part of the evolutionary management of technological & innovation systems, we offer to consider such analysis: 1) analysis of a variety of purposes based on potential and resource capabilities of the system; 2) analysis of internal environment of system formation processes; 3) data envelopment analysis, based on external factors (impulses and requests). therefore, for innovation & technological systems security analysis, we propose to use adapted evolutionary models in compliance with the dialectics principles and systematic approach. these models are based on the combination of constant (hereditary) part and variable component, which reflects the changes in the system and its environment. we also should underline the presence in evolutionary models of the efficiency concept as the dominance of one group of objects over another. this predominance can be achieved through the use of innovations and their interaction with other elements (technologies) in the system or the consequences of a technological innovations impact on the other areas. so with this understanding, we can identify causal relationships in a security context. so we came to the conclusion that the effectiveness of technological & innovation systems security instruments depends on balance (level of synchronization) of system’s development and relevant processes, caused by the introduction of specific elements (activities) into the system within the controlled evolution. assessment of system security, based on synchronization processes, we propose to realize according to a comparison of indicators, which characterize the systems development and development of investigated processes. based on these indicators, we can identify system synchronous development speed and autonomous of speeds of security providing process. the most important relationships when designing innovation & technological systems, which allow decisions making, can be: – the hierarchical relationship between the main system’s function (a function of quality, a cost function) and sub-functions; – managing relationship, reflecting the dependence of one system’s function (subsystem) from another as a way out of control directed to another; – functional (technological) relationship, which provides the fact that one output function (subsystem) is input to the next function (i.e., this relationship shows the actual technology). in the case of security models of technological & innovation system development, we propose to distinguish the direct connection for the input, when the output is transferred from the higher to the lower subsystem, and feedback on input, when output is transferred from lower to the higher subsystem. these aspects are relevant especially for technology cycles independency from the foreign or external suppliers; – consumer (resource) relationship, when the output of one system’s function (subsystem) is a mechanism (input) for the other (others); – logical relationship between homogeneous functions (subsystems) that performs the same activity but by the different (alternative) ways or uses different data (resources); – resource relationship that occurs between the functions (subsystems) that are used for their activities the same resources; specialized approach for system management innovation approach for system management) the number of protection measures proposed approach for system management fig. 2. comparative analysis of system security providing approaches the author’s calculations baltic journal of economic studies 253 vol. 4, no. 1, 2018 – information relationship that takes place between the system’s functions (subsystems) that are used as input of the same information; – time relationship occurs between the system’s functions (subsystems) that are performed simultaneously after another function results obtaining. fig. 2 illustrates comparative analysis of application of three main approaches for system security providing (specialized approach, which orients only on the system main function, innovation approach, which orients on the innovation development of the system main function and proposed system security approach), which for the management of it project for the e-governance. based on the foregoing, we propose to use security relationships adaptive management, which can be defined as a set of methods that can generate management systems, which are able to change the security-related parameters of regulator or controller structure according to the change of control object parameters or external disturbances acting on the control object. model of adaptive management based on precedents contents of possible outcomes (precedents) database that can occur before the start of adaptive management actions based on real or simulated precedents, after processing of control action results. the precedent structure for technological & innovation systems adaptive management can be written as: 1. status of the system before the action. description of the system (a set of agents, processes and their features, belonging to some class of states (situations)); 2. control action. influence description (where possible formalization, in particular, the classification of control actions); 3. state after impact. description of the object system (a set of agents, processes and their features, belonging to some class of states); 4. outcome (positive outcome / negative outcome / controversial outcome). in the context of initial technological & innovation system subsystems adaptive management at different levels (company, cluster, sector), we propose to use the similar to idef0 methodology for functional modelling and graphical notation, which is intended for the business processes formalization, based on the hierarchical ranking of objects. 5. conclusions in our study, we have shown that the modern technological & innovation systems are structurally complicated systems, which are not reduced to simple serial, parallel or tree structures but can be described with complex network scenarios with cycles and repeatability arguments in their formalization. based on this, we have considered system security concept as an analytical approach that can be an efficient base for innovation and economic policy efficiency assessment. as a framework for system security, we use functionoriented security approach, which significantly expands the traditional factor analysis. we came to the conclusion that the effectiveness of technological & innovation systems security instruments depends on balance (level of synchronization) of system’s development and relevant processes. in the development of innovation & technological systems security adapted evolutionary models, we proposed the main aspects of this type of systems (general laws, external system’s trends, internal system’s trends, trajectories of development). in the further our studies, we will consider the system security of technological & innovation systems development indicators in conditions of objective processes of rapprochement, interlacing and integration of national economies into the global economy and global innovation system. 6. acknowledgements the research was publicly funded by ministry of education and science of ukraine for developing of research project № 0117u003855 “institutional and technological design of innovation networks for ukraine’s national security systemic providing”. references: hekkert, m. 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[in russian]. baltic journal of economic studies 383 vol. 3, no. 5, 2017 corresponding author: 1 department of interregional cooperation problems, institute of economic and legal research, national academy of sciences of ukraine. e-mail: j.s.rohozian@gmail.com 2 department of economics and entrepreneurship, volodymyr dahl east ukrainian national university. e-mail: j.s.rohozian@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-383-390 interregional cooperation as a prerequisite for the economic development of amalgamated territorial communities in ukraine yuliia rohozian1 institute of economic and legal research, national academy of sciences of ukraine, ukraine svitlana noskova2 volodymyr dahl east ukrainian national university, ukraine abstract. research background: the implementation of the decentralization reform and the strengthening of trends of interterritorial disparities in ukraine leads to a restructuring of development plans at the amalgamated territorial communities (atcs) level: their impact on the development of cities, villages for each region separately and for the development of interregional cooperation in general. however, not all atcs are able to independently determine their strategic priorities and goals, position themselves in the conditions of the internal and external environment. the purpose of the article: provisions of the article provide a step-by-step explanation of the final stage of the atc development strategy, thoroughly expand the methodological recommendations for the development of programtargeted documents for the socio-economic development of communities (proposed by the ministry of regional development, construction, housing and communal services of ukraine, order no. 75 of 2016/03/30), which determines the relevance and purpose of this article. methodology/methods: this work is based on the generalization of the official methodological information in ukraine, on the official normative legal act of ukraine about the atc economic development, scientific and practical research of leading scientists and economists on the process of creating an atc development strategy. the methodological basis of atc strategic planning is the systemic and situational approaches, which include the methods of comparison and analysis, grouping, graphical method of information processing. value/originality: the provisions of the article reveal the essence of methodological recommendations for the development of program-targeted documents for the socio-economic development of communities (proposed by the ministry of regional development, construction, housing and communal services of ukraine, order no. 75 of 2016/03/30), pointing to the economic and legal shortcomings of its articles. for the first time in ukraine, the results of the atc development strategy in the context of interregional cooperation are presented in the step-by-step detailed description. instructions for each of the next steps of the final stage of the atc development strategy are developed: formulation of the atc mission; formation of a strategic vision, choice of priorities; formation of strategic and operational goals, definition of tasks for the atc development; mechanism for realizing the tasks and the most probable scenarios for the atc development; definition of financial resources; formulating a draft strategy and holding public hearings to discuss it; consideration of the draft strategy at the session of the local council, its adoption. the article is summarized by the algorithm, developed by the authors, for the creation and implementation of strategic goals of atcs in the context of interregional cooperation. the algorithm is aimed at both building the economic potential within the community (traditional approach to strategic planning for the atc development) and ensuring the development of the economic, social, and environmental spheres at the interregional level, which has been tested on the atcs in luhansk region. practical implications. results of this article will form the basis for the assistance to various atcs in ukraine in the matter of strategic planning since no clear and detailed actions for them have yet been recorded. also, this work is relevant for representatives of state authorities and scientists who deal with issues of interregional cooperation because no one in ukraine has ever considered these issues in the context of atc strategic planning. key words: amalgamated territorial communities, economic development, interregional cooperation, atc development strategy, decentralization reform in ukraine. jel classification: p25, d6, f63, r5, r11, p41 baltic journal of economic studies 384 vol. 3, no. 5, 2017 1. introduction ensuring sustainable development is one of the priority goals of the state policy of many countries being implemented both at the national and local levels (börzel and van hüllen, 2014). realization of fundamental reforms in socio-economic and political directions in ukraine, the formation of a corresponding system of atc values, and the reliable interaction of civil society institutions and public authorities gradually bring the country closer to realizing and ensuring the principles of sustainable development at all levels: national, regional, and local. in addition, issues of local development are now dominant in ukraine in accordance with the provisions of the association agreement with the eu (doidge, 2014) and are being implemented through the process of decentralization and the growth of a number of amalgamated territorial communities (hereinafter atcs). however, it cannot be denied, that the strengthening of tendencies of interterritorial imbalances in ukraine lead to the restructuring of development plans and at the community level: their influence on the development of cities and villages is of fundamental importance both for each region separately and for the development of interregional cooperation as a whole (doidge, 2007). not all atcs are able to independently determine their strategic priorities and goals, position themselves in the conditions of internal and external environment, and methodological recommendations for the development of program-targeted documents for the socio-economic development of communities” (proposed by the ministry of regional development, construction, and housing communal services of ukraine, order no. 75 of 2016/03/30) require a thorough expansion and step-by-step explanation in each stage of development strategy, especially – its final stage, which determines the relevance and purpose of this article. 2. research methodology this work is based on the generalization of the official methodological information in ukraine on the process of creating an atc development strategy, drawing attention to its imperfection. the provisions of the article supplement, expand, and substantiate each step of the final stage of this process in order to provide practical recommendations for atcs managers and other stakeholders to facilitate the process of creating an atc development strategy. the methodology of the atc strategic planning is based on four levels of knowledge: a general philosophical level (set of common views and knowledge about phenomena related to the atc development); general scientific level (understanding of common approaches, principles, atc organization form); specific methodology of sciences (aggregate knowledge of the economic development of atc). the methodological basis of atc strategic planning is the systemic and situational approaches. according to the system approach, the community should be regarded as a system consisting of certain interrelated elements that ensure its life activity, and elements of a larger system, which functioning and development are determined by economic laws and patterns characteristic. according to the situational approach, atcs are complex socioeconomic systems, characterized by a number of their unique features. also the research is based on methods of comparison and analysis (in the context of practical experience in the economic development of atcs development strategies), groupings and graphical method of information processing (in the context of creating an algorithm for the formation and implementation the atc strategic goals), is based on official normative legal act of ukraine about the atc economic development, scientific and practical research of leading scientists and economists (cyrek m.; fox w.f. and murray m.n.; blume l.; smith b.c.; małkowska a. and głuszak m. and others). 3. the current situation of atc development in ukraine in recent years, much attention has been paid to such a sectoral characteristic of the economy as the heterogeneity that dominates in advanced economies (hänggi, 2006). however, the diversity of activities carried out at different levels (national, regional, interregional), does not allow us to single out among them the dominant sectors of the economy (cyrek, 2014). this thesis allows exploring a comprehensive approach to the development of any set of administrativeterritorial units of any country in the world, including ukraine. the main attention in ukraine is still being paid to the decentralization reform, resulting in the creation of atcs, which in their activities are based on the main local regulatory document – atc development strategy. not only the level of atc development but also the region in which it is located depend on the effective formation of a strategic vision, values and goals in the development of a future program-target document. therefore, in this context, it is important that each step in the process of creating an atc development strategy corresponds to the strategic goals and directions of the regional development and the objectives of interregional cooperation of the adjacent territories (european bank for reconstruction and development, 2014). the practice of creating program-targeted documents at the local level proves that one of the most important factors for successful economic development is a direct public investment at the local level that creates conditions for private investment initiatives (fox and murray, 1990; blume, 2006). however, in ukraine, unfortunately, these conditions are not implemented baltic journal of economic studies 385 vol. 3, no. 5, 2017 385 at the level of the atcs, but the formation of the strategic vision, values and goals of the communities for the creation development strategy of its final stage is reduced to the usual wishes: improvement of the demographic situation; the activation of social policy, transition to targeted social assistance, achievement of a marked improvement in the material condition and living conditions; ensuring effective employment of the population, improving the quality and competitiveness of the atc labour potential; intensification of the development of the atc scientific, cultural and educational potential; improvement of the environment, etc. however, attention to this issue alone is not sufficient for the effective creation and implementation an atc development strategy, therefore, it is recommended to expand and divide its entire final stage into the following steps: the formulation of the atc mission; formation of a strategic vision, choice of priorities; the formation of strategic and operational goals, the definition of tasks for the atc development strategy; the mechanism for realizing the tasks and developing the most probable scenarios for the atc development strategy; definition of financial resources; formulating a draft strategy and holding public hearings to discuss it; consideration of the draft strategy at the session of the local council, its adoption (čepinskis, smilga and žirgutis, 2002). 4. the first detailed step for the atc strategy development the formulation of the atc mission is the starting point in the final stage of the development strategy creation process (figure 1) because it must reflect the highest goal of the community’s existence and activity, the long-term direction of its development, namely, interaction with the external environment (positioning and relations with the communities in other regions on the basis of interregional cooperation). this direction of development is often associated with the acquisition of the necessary values: reputation and image, so they refer the process of choosing a mission to such a category of marketing as branding. however, it is important to remember that the mission and the brand are not identical concepts. the atc mission is the high appointment of a particular community, which contributes to the formation of its priorities and strategic goals, clearly substantiates the purpose of its existence and activities (answers the question “what is this community for?”). it is carried out with wide public participation. the atc brand is an intangible asset, a figurative and psychological perception of a particular community in terms of its unique characteristics (answers the question “what is this community associated with?”). implemented by professionals, wide public participation is not provided. for the most complete and effective representation of an atc, the mission and brand should exist in close interconnection. the mission is the “framing” of the brand and, at the same time, the brand should be at the heart of the mission, otherwise the idea of community will be vague or similar to a strategic goal, is not correct. the process of formulating an atc mission must meet the following requirements: a mission must be realistic and appropriate for each community. so, for a small rural community, it is inappropriate to define a mission as “transformation into a world leader in the sphere of it technologies”; factors of expediency and concreteness are also very important – a mission is formed for a specific community, so it cannot be universal. often the mission is formulated too abstractly: for example, the thesis “improving the population life quality” sounds beautiful but requires specificity; if the atc has a clear specificity, it is advisable to reflect this in the mission fig. 1. the detailed content of the first step of the final stage of the atc strategy development source: own elaboration what values does this atc create? for whom are values created in this atc? what unique qualities does this atc represent? reasonable restriction of priorities for the atc development and focus on its strategic objectives adjustment of existing ones, as well as the development and implementation of new projects and programs in atc introduction of a mechanism to stimulate stakeholders and to integrate atc into national socio-economic processes enhancement of social stabilization in atc (active participation of residents in the creation and implementation of the development strategy) questions to be answered by the utc mission areas of practical application of the utc mission baltic journal of economic studies 386 vol. 3, no. 5, 2017 (if possible). the mission should be of interest, to unite the atc territorial parts (towns and villages) around the common goal, to promote an increase in the civic engagement level of the population in the region (to which atc belongs), and to ensure the development of links from the position of interregional cooperation. 5. detailed strategic step for the atc economic development the next step in the creation process of an atc development strategy is the formation of a strategic vision, the choice of priorities. strategic vision can be defined as a realistic dream, that is, a clear picture of the atc future (in 7 years) [ministry of regional development, construction, housing and communal services of ukraine, 2016]. such a presentation should be formed not abstractly but based on the current situation in atc. for this purpose, it is recommended to take into account the results of not only an internal analysis of the social and economic state of atc but also the results of a comprehensive analysis of current regional features of the territory where the community is located, and also take into account the interregional directions of its interaction with other communities. the formation of a realistic strategic vision is an important task for partnership in atc; it is an important step towards creating and implementing the entire development strategy and attracting local residents to it. it is important not to allow the formulation of the vision to be simply a wish list (for example, “comfortable community for life and business”), because such theses do not contain sufficient information for the atc development, do not serve as a guide for the implementation of specific actions. also, such theses do not fit in with interregional ties, so it is necessary to take into account the opportunities, problems, and assessment of risks (taking into account the territorial affiliation of a particular community and its interregional projects and programs). development priorities are formalized, described in a formal way, guides which must be achieved in the medium and short term. in order to comply with the principle of realism, the number of atc development priorities should be determined no more than five [ministry of regional development, construction, housing and communal services of ukraine, 2016]. determining development priorities is an extremely important step in the creation process of atc development strategy, which is the logical continuation of the strategic vision (čiegis, 2001). it should be noted that setting priorities also takes into account the support amount (taking into account the financial resources of regional budgets and private investors), the limited resources of the community itself and, therefore, it is necessary to strike a balance between priorities aimed at the development of various spheres of atc (a classic example in this context is the economic, social, and environmental component). a number of priorities should be reasonably limited because otherwise their list also risks becoming a simple wish list. it is also advisable to take into account the opinion of residents (by collecting data and questioning all stakeholders), for which it is recommended to include the following elements in the process of determining priorities: the direction of atc development; a clear understanding of the strategic vision of atc (within which the priorities are formed) and the methodology for achieving it; correlation of strategic vision and priorities with interregional processes, clear definition of the range of stakeholders (who benefits from implementing a particular priority in atc); the definition of responsible persons for the implementation of a priority in atc; the definition of specific indicators for assessing the state of implementation of a given priority. the third step in the creation process of atc development strategy is the formation of strategic and operational goals, the definition of tasks. the development goals are defined as the expected accomplishments based on the implementation results of interrelated tasks and activities aimed at solving the most important issues of atc development and solving problems [ministry of regional development, construction, housing and communal services of ukraine, 2016]. the main problem of many communities in ukraine is the lack of the necessary financial and human resources, so it is often possible to meet these theses, which are the basis of strategic goals, incorrectly and inefficient for the atc development. the most rational and simple solution to this problem can be assistance in the context of interregional cooperation – the migration of these types of resources can speed up the solution of the pressing problems in atc and give it time to implement more fundamental tasks. therefore, in the framework of this research, the strategic goal is defined as the socio-economic status of the community, is recognized by participants in strategic planning as the desired benchmark for its activities (achievable for 7 years), taking into account interregional links; has a quantitative and/or qualitative dimension. the main requirements for the atc strategic objectives: a) the number of strategic objectives. undoubtedly, there may be several desirable targets for the atc activity, but one should not put them much because the ways to achieve these goals can immediately become complicated. there is no legal definition of the number of strategic goals in ukraine, but the practice of atc development strategy creation indicates that it is advisable to limit to three goals (for each component of the socio-economic atc development – one goal), each of which should contain operational goals and objectives; b) when forming strategic goals, it is necessary to adhere to the unity principle: in aggregate, baltic journal of economic studies 387 vol. 3, no. 5, 2017 they must work for the overall atc result (in accordance with its mission and strategic vision), at the same time, each of them must meet its internal integrity (achieving the desired in a particular field); c) the strategic goals should correspond to the triad of benchmarks: first, reflect the problem that is to be solved; secondly, be aimed at the need (prevents similar problems in the future), which is expected to be met; thirdly, be directed to the future (it forms the needs that will arise in the future); d) strategic goals must be agreed – timely, useful, realistic, should fit into the atc economic situation, be based on interregional cooperation, and not violate the balance with other goals and priorities; e) strategic goals should be specifically defined in time, help focus on their implementation. to determine the operational goals and objectives of the atc development strategy, it is necessary to know the answer to the following questions: “how the achievement of the strategic goals of the atc will take place?”, “what actions need to be taken for this?” therefore, it is necessary to specify strategic goals – to move from general to specific, to disclose their content for operational purposes, and the content of operational goals – in tasks. the latter should be agreed by the members of the atc development strategy working group since they identify persons responsible for the tasks, set deadlines for their implementation, and determine the necessary resources. to implement this step, it is expedient to formulate a plan of concrete actions for each strategic objective on smart technology, that is, to create a structured list of all desired achievements, where tasks and low-level goals serve to achieve more serious, strategic goals. smart is an abbreviation, widely applied in the field of project management, each letter defines an appropriate characteristic for each goal and task: s – is “specific”, m – “measurable”, a – “attainable”, r – “relevant”, t – “time-bound” (freeman, 2006). in the formulation of tasks, as well as objectives, it is necessary to observe the expediency principle. if we assume a solution to a very large number of tasks, this will dispel the attention of planners and lead to unnecessary expenditures from the budget (grigoriev, 2013). if you focus only on those areas that are considered to be solved most successfully and quickly – the principle of the sufficiency of tasks will be violated to achieve the corresponding strategic goal. when all the objectives have already been chosen and formulated, the correctness of their choice can be verified using one of the fairly simple methods: cross-analysis of the constituent matrix swot (this analysis is carried out at the previous – the analytical stage of atc development strategy). the essence of using this method consists in pairing the previously defined elements of the swot matrix and generating corresponding comparisons for each block, which will form the basis for the next step – the creation of the most probable scenarios for the atc development (figure 2). after the formation of the most important elements of the strategy, it is necessary to develop a mechanism for implementing the tasks and the most likely atc development, including organizational and administrative measures. organizational and administrative measures are the consistent actions of the executive bodies of the city, settlement, and village councils aimed at achieving priorities and fulfilling the tasks of their development within the limits allocated or attracted for these purposes (lippman and blair, 1995). for each activity, it is recommended to provide information and data on its content and method of implementation, deadlines for implementation (in whole and in stages), identify executors, volumes, and sources of funding, broken down by years, indicator performance, and expected result from its implementation [ministry of regional development, construction, housing and communal services of ukraine, 2016]. the list of current and future atc development plans and projects is recommended to be developed in a comprehensive manner in the areas of local policy (social, economic, environmental). fig. 2. the detailed content of the third step of the atc development strategy final stage source: own elaboration comparison of the utc strengths and capabilities (to identify “points of the utc positive breakthrough”) developing utc leadership alternatives comparison of utc weaknesses and opportunities (to identify means of increasing competitiveness) elaboration of alternatives for the utc weaknesses development comparison of utc weaknesses and threats (to identify and assess risks and their negative impact on utc) elaboration of alternatives for the utc weaknesses elimination comparison of utc strengths and threats (to identify ways for reducing risks by taking utc advantages) elaboration of utc alternatives to eliminate threats baltic journal of economic studies 388 vol. 3, no. 5, 2017 such an integrated approach acts as a kind of guarantee against unilateralism and contributes to the balanced functioning of all the components of the social and economic atc development and the mitigation of existing contradictions. the list of plans and projects for each area may include the following elements: the name of the relevant priority, the strategic objective, to which the plan or project relates, details of the normative document approving the plan or project; the name of the operational goal and task, to which the plan or project is directed; a list of atc projects under implementation (including information on the project name, the name and contact details of the entity that introduces the project, the form of ownership, goals and objectives of each project, implementation phase, estimated value, volume and sources of financing, start date and expected period completion, forecast of the expected results of the project and information on the main activities of the project, implementation issues and necessary measures to address them); list of projects under preparation (includes information on the name of the project, name and contact details of the entity that introduces the project, the form of ownership, goals and objectives of each project, implementation phase, estimated value, volume and sources of financing, start date and expected completion date, forecast of the expected results of the project and information on the main activities of the project, problem implementation issues and the necessary measures to address them); a list of promising projects, the implementation of which is necessary to achieve strategic goals, promote the development of regional and interregional cooperation (in accordance with the priorities) of the strategy (including information on the project name, the name and contact details of the entity that implement the project, the form of ownership, goals and objectives of each project, coherence with relevant regional and interregional programs and plans, implementation phase, estimated cost, volume and sources of funding, start date, the expected completion, forecast of expected results of the project, and information about the main activities of the project, the problematic issues of implementation and the necessary measures to deal with them). in addition, the important component of selecting projects for atc development is the criteria, by which this procedure should take place. in this process, it is recommended to pay a close attention to the following: the relevance of a particular project to the atc priority sectors, regional and interregional cooperation (in terms of achieving the goals defined in the strategy), the availability and analysis of socio-economic project performance indicators (tax revenues to the local budget, workplaces, average wage, creation of social infrastructure facilities, etc.), the amount of private investment for the project, the level of co-financing from the state budget, etc. (smith, 2009). 6. algorithm formation of the final stage of the atc economic development for the formation of probable scenarios for the atc development, it is recommended to take into account the results of analysis of its economic and social state, indices of external interaction, and alternatives of development made at the previous step. the most successful and effective development scenario for the atc is the interregional scenario: it is based on a combination of three most important spheres of the atc’s activity (economic, social, and environmental), in the direction of which a number of important interregional projects are supposed to be implemented. it will create conditions for the facilitation and receipt of the necessary resources for atc from other regions (solving internal problems) and strengthen external relations between communities, helping to smooth out interregional disparities. the next step is to determine financial resources. for each position of tasks and for the implementation of the strategy as a whole, it is necessary to prepare a detailed financial plan (budget). financial support for the implementation of the atc development strategy can be carried out at the expense of the state budget, in particular, the state regional development fund, subventions from the state budget for the atc infrastructure development; funds of local budgets (including atc own budget funds), eu technical assistance funds, other international donors, and international financial organizations; means of investors, including on the terms of public-private partnership, the own funds of enterprises; other sources not prohibited by law [ministry of regional development, construction and housing and communal services of ukraine, 2016]. in addition, funds from other regions through the links between different communities based on interregional cooperation (implementation of joint projects, programs) are an important financial source. further, when the main sections of the draft strategy have already been developed, it’s necessary to collect them in one document, with which you can go back to the public discussion. in order to ensure openness and accessibility of information on the strategy’s main provisions, its project is to be posted on the atc official website, as well as on other information resources of the general access, after which it needs to be considered and adopted at a session of the local council. the draft strategy is recommended to be submitted to the relevant regional state administration to receive information, no later than 15 working days from the date of the project receipt, on the compliance with the strategic priorities, tasks and activities of the existing regional, interregional, and national strategies and action plan for its implementation. if it`s found that the strategy draft of the regional state administration is inconsistent, it`s advisable to finalize the project with appropriate baltic journal of economic studies 389 vol. 3, no. 5, 2017 recommendations. if the strategy draft in line, it is recommended to be submitted, taking into account the public discussion results. thus, the creation process of the atc development strategy (in its final stage), taking into account interregional cooperation, is rather complicated and time-consuming but it is impossible to avoid one of its steps for their importance and interrelation. figure 3 concludes this research by proposing an algorithm for the formation and implementation of atc strategic goals in the context of interregional cooperation. it is aimed at building up the economic potential within the community (the traditional approach to strategic planning for the atc in ukraine) and ensuring the development of economic, social, and environmental sphere at the interregional level. 7. practical application of the results this algorithm was tested in the creation process of atc development strategies in luhansk region (only its territory under ukraine’s control), which indicates its viability. practical application of the results in these areas when creating strategies for their economic development showed successful results. step-by-step and detailed algorithm led the atc representatives to establish their strategic priorities (they couldn’t do this more than 2 years). so, in the development strategy of bilokurakyne atc until 2020, the following strategic goals are formed: 1. development of business and investment attraction; 2. development of atc infrastructure; 3. energy saving, improvement, tourism. the development strategy of the novopskov atc until 2025 contains the following strategic objectives: 1. development of business and investment attraction; 2. development of atc infrastructure and provision of quality services; 3. clean environment – active recreation and tourism. 8. conclusions undoubtedly, the process of decentralization in ukraine carries a lot of positive changes and shifts, but the regulatory mechanisms of its implementation on the ground is extremely imperfect: there are no corresponding categorical apparatus, specific recommendations to those or other actions, there are no regulatory ratios at the interregional level, the means of program-target documents implementation. in addition, state aid, such as direct investment in specific projects at the local level, is the most commonly used and effective tool for the local development in the world (małkowska and głuszak, 2016). however, in our country, such funds are not being fully implemented, therefore, in order to achieve goals of sustainable development and becoming a full member of the european community, representatives of the ukrainian government (legislative and executive fig. 3. algorithm for the formation and implementation of the atc strategic goals in the context of interregional cooperation source: own elaboration relevant not relevant sp he re s an d ty pe s of re gi on al c oo pe ra tio n step 1. formation of the atc mission (see figure 1) step 2. forming the atc strategic vision, choosing priorities step 7. consideration and approval of the atc development strategy by the local government step 3. formation of atc strategic and operational goals, defining relevant tasks (see figure 2) step 6. formation of the atc draft strategy, its public discussion step 4. development of a mechanism for atc tasks and scenarios implementation step 5. determination of financial resources compliance with all criteria strategy implementation elimination of weaknesses and threats baltic journal of economic studies 390 vol. 3, no. 5, 2017 branches) need to go a long way of reforming from legislation institutions to subjects of local selfgovernment (united nations, 1996). in the local development process, atc strategies are an extremely important process that requires a careful approach and professional specialists. at the stage of determining the strategic vision, values, goals and objectives, it is necessary to adhere to the principles of realism and expediency, as well as take into account interests of atcs at the interregional level, as a result, the strategy will reflect the socio-economic status of the atc and its positioning in the external environment for the coming years. the consideration of interregional processes in the atc development strategies is of great importance through the participation in such projects, which leads to the formation of an economic, social and environmental sphere, concentrating resources both at the internal and external levels. the use of such an approach in strategic planning is effective because it aims to equalize conditions and living standards of the population in various communities of ukraine by ensuring equal access to resources and equal opportunities, creating favourable environmental conditions and an effective development system, taking into account interregional features. therefore, further research should be directed in addition, expanding, and clarifying the methodology for atc development strategies using interregional cooperation indicators, paying considerable attention to the process of attracting new sources of organizational, financial, and personnel potential of communities. references: börzel, t. a. and van hüllen, v. (2014). one voice, one message, but conflicting goals: cohesiveness and consistency in the european neighbourhood policy. journal of european public policy, vol. 21 (7), pp. 1033–1049. doi: 10.1080/13501763.2014.912147 doidge, m. (2014). interregionalism and the european union: conceptualising group-to-group relations. intersecting interregionalism: regions, global governance and the eu. dordrecht: springer, pp. 37–54. doidge, m. (2007). joined at the hip: regionalism and interregionalism. journal of european integration, vol. 29 (2), pp. 229–248. doi: 10.1080/07036330701252474 ministry of regional development, construction and housing and communal services of ukraine (2016). metodychni rekomendatsiyi shchodo formuvannya i realizatsiyi prohnoznykh ta prohramnykh dokumentiv sotsialnoekonomichnoho rozvytku obyednanoyi terytorialnoyi hromady [methodical recommendations on the formation and implementation of forecast and policy documents for socio-economic development of the united territorial community], kyiv. retrieved from: http://sed-rada.gov.ua/sites/default/files/static-page/2016/nid7618gromadi-9854.pdf hänggi, h. (2006). interregionalism as a multifaceted phenomenon: in search of a typology. interregionalism and international relations. london: routledge, pp. 31–62. cyrek, m. (2014). czynniki międzywojewódzkiego zróżnicowania udziału zatrudnienia wsektorze. oeconomia copernicana, vol. 1, pp. 117–133. doi: 10.12775/oec.2014.007 european bank for reconstruction and development (2014) the ukraine / russia crisis weighs on transition region's growth. economic prospects in ebrd countries of operations. ebrd office of the chief economist. retrieved from: http://www.ebrd.com/downloads/research/rep/rep_may_2014.pdf fox, w. f. and murray, m. n. (1990). local public policies and interregional business development. southern economic journal, vol. 57, no. 2, pp. 413–427. doi:10.2307/1060620 blume, l. (2006). local economic policies as determinants of local business climate: empirical results from a cross-section analysis among east german municipalities. regional studies, vol. 40 (4), pp. 321–333. doi: 10.1080/00343400600725178 čepinskis, j., smilga, e. and žirgutis, v. (2002). strategic management of sustainable development. organizational management: systematic research, vol. 22, pp. 55–67. čiegis, r . (2001). implementation of sustainable development in development strategies of cities and regions. in efficiency of public administration. kaunas: technologija, pp. 224–246. freeman, r . e. (2006). a stakeholder approach to strategic management. shanghai: shanghai translation publishing house, 354 p. grigoriev, l. (2013). scenarii razvitija jekonomicheskih institutov [scenarios of economic institutions development]. ekonomicheskaia politika, vol. 3, pp. 33–60. lippman, h. and blair, h. (1995) democratic local governance in ukraine: impact evaluation. washington: usaid, pp. 21–39. smith, b. c. (2009). if you promise to build it, will they come? the interaction between local economic development policy and the real estate market: evidence from tax increment finance districts. real estate economics, vol. 37 (2), pp. 209–234. doi: 10.1111/j.1540-6229.2009.00240.x małkowska, a. and głuszak, m. (2016). pro-investment local policies in the area of real estate economics – similarities and differences in the strategies used by communes. oeconomia copernicana, vol. 7 (2), pp. 269–283. doi: 10.12775/oec.2016.016 united nations (1996). indicators of sustainable development. framework and methodologies, new york: united nations. baltic journal of economic studies 7 vol. 3, no. 4, 2017 methodological instruments for forming the marketing strategy of agricultural production ecologization mariya bagorka1 dnipropetrovsk state agrarian and economic university, ukraine abstract. the purpose of the article is the investigation of the nature, objectives, and strategic categories of ecologization marketing strategy, development of algorithm of this strategy and determination of environmental, economic, and ecological instruments of implementation of this strategy in the agricultural sector. methodology. the basis of the formation of a marketing strategy for the ecologization of agrarian production is the systematic approach, which is based on the existence of implementation mechanisms that ensure system consistency, its purposefulness; interdependence; and complexity of its elements, which determines the integrity of the system; all tasks that execute individual elements of the system are interconnected; system elements and their associated actions have a certain subordination that builds a hierarchy; the system changes under the influence of specific factors, which determines its dynamism; the ability of the system to adapt to the variability of the external environment, while not losing its own individuality. methods for strategic analysis of macroand micro-environment factors were used to form the marketing strategy of ecologization. this process involves an analytical evaluation of the parameters of the external and internal environment with the help of general scientific and applied methods of strategic analysis. results. the article explored the ecologization strategy, presented its objectives in the field of agriculture, the basic categories of strategic directions and implementation of ecologization marketing strategies. an algorithm of environmental marketing strategies in agricultural production is developed, environmental, economic and environmental and economic tools to implement them are determined. practical implications. it is determined that marketing strategy of ecologization of agrarian production is a strategy of innovative development that can solve problems of economic growth, an increase of competitiveness of the agrarian industry, provide a high quality of life, national security, environmental protection, and high technical level of agricultural production in ukraine. value/originality. this marketing strategy is capable of ensuring the principle of unity for economic and ecological processes in the management of agricultural production and promoting radical restructuring of the relationship of the production process from the environment. this strategy takes into account the environmental factor in the economic activities of agrarian enterprises and aims at creating environmental products and services in agricultural production. key words: marketing strategy of ecologization, agrarian production, strategic categories, strategic analysis, marketing researches, ecological-economic mechanism. jel classification: m31, o13, q13 corresponding author: 1 department of marketing, dnipropetrovsk state agrarian and economic university. e-mail: masha010574@gmail.com 1. introduction the particularly relevant issue of the rational and sustainable use of natural resources is presented in the agricultural sector, which is the most sensitive contact zone in the system of mutual economic and environmental interests of humanity. for many years, in agriculture, a destructive effect on the environment increased. this necessitated fundamentally new vision of capabilities ensuring the environmental and economic balance in the agribusiness. today ecological improvement of economic activity is important; it suggests the ecological balance between the consumption of natural resources, agriculture, and the possibility of recovery of the environment. problems in the field of agriculture and improvement of its competitiveness can be addressed through effective strategies and mechanisms for innovation. such an innovation strategy, in our opinion, should be the ecologization marketing strategy of agriculture that ensures high quality of life, national security, environmental protection, baltic journal of economic studies 8 vol. 3, no. 4, 2017 and high technical level of agricultural production in ukraine. to date, the transition to new agribusiness systems is a complex process of developing a new strategy for innovation development, which is formed in parallel with the existing strategies. the marketing strategy of environmentalizing agrarian production is, in our opinion, an innovative strategy that allows integration of environmental priorities in the strategy of economic development. it is the marketing strategy for environmentalizing agrarian production to be a link between agrarian enterprises, market, and society, as well as to ensure the formation of public opinion and the market environment. the formation of an effective marketing strategy for the environmentalization of agrarian production, first of all, is necessary for a full supply of food security of the country, as well as the transformation of the agrarian complex into a highly productive branch of the national economy, therefore, the study of methodological approaches to the development of this strategy is relevant and practically significant. however, the problem of the formation of a marketing strategy for the environmentalization of agrarian production is still not sufficiently investigated in the theoretical as well as practical aspects. there is a need to deepen theoretical research and methodological developments associated with the formation of a marketing strategy for the environmentalization as a component of the ecological and economic mechanism for managing agrarian production. 2. the essence and purpose of the marketing strategy of ecologization of agrarian production ecologization is a direction of development of agriculture, based on the development of ecological methods of management, provides an extended reproduction of natural and human resources through the formation of sustainable ecological and economic systems aimed at increasing the volume of production of competitive products (tkachuk, 2014). it is the marketing strategy of ecologization that can ensure the principle of unity of economic and ecological processes in the management of agrarian production and will contribute to a radical restructuring of the relationship of the production process with the natural environment. the main objective of the marketing strategy is to ecologize agrarian production at different levels of management: guaranteed to ensure a high-quality and safe nutrition of the population in order to preserve the gene pool, to support the health of the nation, and to increase the longevity of life. ensuring environmental management of agriculture and protecting the natural environment. raising the competitiveness of agriculture through the modernization of agrarian production, innovative development of agribusiness, the introduction of information technologies, support for the production of new types of agricultural products, support for the cooperation of agricultural producers. production of environmentally sound agricultural products, ensuring its competitiveness in the domestic and foreign markets. the main purpose of environmental marketing at national and regional levels is to create conditions for economic entities, in which they are interested in maintaining and restored natural resources while implementing innovative approaches in their work. 3. stages of the formation of the marketing strategy of ecologization the basis of the formation of a marketing strategy for environmentalization of agricultural production is the main strategic categories that are considered the basis of strategic marketing. the process of developing an ecologization marketing strategy should be begun with the identification of key industry issues: economic, political, social, technological, and environmental, which need a strategic analysis. with forming ecologization strategies for the agricultural production, we propose the use of key strategic categories: mission statement, goals and objectives; strategic analysis of macro and micro factors; choice of priority strategic directions, forming tools for the implementation of this strategy; assessment and monitoring of its implementation. the initial stage in developing the marketing strategy of environmentalization is the definition of the mission, which is what is the main philosophy, the main purpose of the existence of this strategy (kudenko, 2012). in our opinion, the mission of the marketing strategy of ecologization is to ensure balanced development of the agrarian sector of the economy, that is, to maintain a balance between the economic system and the natural environment, which results in improving the long-term economic, social and environmental welfare of the society. with the help of this strategy, it is possible to solve the contradiction between the economic interests of producers and the preservation of the environment, that is, the provision of environmentally safe living conditions of the population. the main objective of the marketing strategy of ecologization of agrarian production at the state and regional levels is to create economic conditions for economic entities, in which they will be interested in preservation and restoration of natural resources potential when introducing innovative approaches in their activities. baltic journal of economic studies 9 vol. 3, no. 4, 2017 at the level of business entities, the main objective of the marketing strategy of ecologization of agrarian production is the development of economic organizational and economic mechanism of management of an agrarian enterprise with the application of its main components: planning, stimulation (motivation), an organization of management, control, etc. at the same time, it is necessary to orient production to meet the ecological needs of consumers. the external environment, in which there are domestic farms, is qualitatively different, escalating competition in the market, increasing its degree of uncertainty, there are unforeseen risk factors. that is why the work on the strategy begins with a comprehensive study of the market situation in the industry (danylyshyn, 2008). at the stage of strategic industry analysis, a special attention should be paid to the assessment of environmental and economic potential because of resource development concepts of marketing strategy changes the vector of reactive (reacting on changes in the environment) to proactive (prevention events) (andreeva, 2009). therefore, an essential step in the formation of a marketing strategy of the greening of agriculture, we believe it is providing strategic relevance, providing coordination of resources and production capacity with market conditions. the marketing strategy of environmentalizing agrarian production should be oriented towards the formation of sustainable competitive advantages. therefore, the results of the assessment of environmental factors are a prerequisite for the formation of a complex information and analytical support of marketing management marketing strategy for ecologizing agrarian production includes instruments of ecological and economic management. the traditional system of tools includes product, price, promotion, and distribution, that is, the main components of the 4p complex; from the consumer’s point of view – needs, costs, communication, and convenience. in contrast to the traditional system of tools of the marketing complex, the environmental strategy takes into account the environmental aspects of the marketing strategy (kuchmiov, 2014). the main requirements for the formation of a marketing strategy for the environmentalization of agrarian production are the following: 1) the reality, which involves its compliance with the situation, objectives, market, production and resource factors, experience and skills of the management system in the industry; 2) logical, internal integrity and consistency of individual elements; 3) compatibility with the external environment, providing an opportunity to interact with it; 4) risk is justified; 5) focus on the formation of sustainable competitive advantages. when forming this strategy, it is necessary to understand that it is not just about the one-time use of innovations to achieve instant advantages but about a continuous, detailed planned strategic innovation development that forms new methods and controls, transforming the intensive introduction of innovation processes into the factor of economic growth in the industry. 4. economic and environmental management methods in agrarian production the implementation of the marketing strategy of the greening of agricultural production by using environmental-economic management mechanism, based on up measures allow, in our opinion, changing the format of relations between production and the environment towards sustainable use, reproducing agricultural systems. economic management methods in the ecologization of nature management should include the creation of economic conditions that would encourage land users to achieve better results in their work. economic management methods of agricultural production include: ‒ providing favourable shortand long-term loans to implement projects of ecologically safe and economically effective technologies; ‒ partial or complete exemption from income tax in the case of funds for the purchase of ecologically safe fixed assets; ‒ preferential taxation and crediting for agricultural enterprises producing ecologically safe products and environmentally friendly production; ‒ ecological adaptation of tax and price systems; ‒ encouraging employees of enterprises producing ecologically clean products and compliance with environmental legislation (soil fertility, quality standards of production, improvement of environmental parameters); ‒ development of the possible variants for the refund of damages related to crop shortfalls in the production of ecologically safe products. economic instruments include promotional leverage, the use of preferential taxation and credit, and price incentives of environmental activities. environmental management tool provides certification and labelling of ecological products, which prove that they comply with the identified facilityspecific regulations. the process of certification and standardization should be conducted according to international standards, adapted to the conditions of ukraine (sadchenko, 2002). ecological and economic tools, in our opinion, are the part of an environmental marketing and include: ‒ production of ecologically safe agro products and its environmental positioning; baltic journal of economic studies 10 vol. 3, no. 4, 2017 ‒ pricing taking into account environmental costs; ‒ development of ecologically safe products market, which is based on international standards for ecological agricultural production; ‒ distribution of ecologically safe food products; the state should perform important functions to stimulate agricultural growth, social protection, the rise of the quality of life. this priority role of state regulation of agriculture, in any case, does not reduce the importance of market self-regulation. mechanisms of state actions should focus on supporting private initiatives aimed at the development of new technologies, stimulate innovative activity in rural areas (shkuratov, 2012). marketing is a tool for environmental management and can be implemented by forming appropriate environmentally focused strategies, which can ensure the principle of unity of economic and ecological processes in the management of agricultural production and promote radical restructuring of relations of production with the environment. formation of strategy of environmental marketing in the agricultural sector, in our opinion, is the integration of all administrative functions that also contribute to the ecologization of agricultural production, allocation, planning and forecasting of business initiatives for the investment basis, which is linked to production, formation, and stimulate demand for eco-friendly products, agricultural products, and ecosystem services. 5. conclusions it is established that marketing strategy of ecologization of agrarian production is a strategy of innovative development that can solve problems of economic growth, increase the competitiveness of the agrarian industry, provide a high quality of life, national security, environmental protection, and high technical level of agricultural production in ukraine. when forming a marketing strategy for environmentalizing agrarian production use the main strategic categories: definition of mission, goals and objectives; strategic analysis of factors of macroand micro-environment; the choice of priority strategic directions, the formation of tools for implementing this strategy; evaluation and control over its implementation. the main components of the marketing strategy of environmentalization of agrarian production include: commodity strategy: price strategy; sales strategy; promotion strategy. when implementing the marketing strategy of ecologization of agrarian production, a combination of ecological and economic instruments at the state regulation of ecological and economic components is important. references: andreeva n. (2009). marketing ecological strategies as a conceptual basis of sustainable development of the enterprise. mechanism of regulation of economy, 3 t. 2: 119-125. danylyshyn b. & lubchenko o. (2008). the marketing strategy of regional food market. bulletin of the national academy of sciences of ukraine, 5: 12-18. kudenko n. (2012). principles of strategic marketing. ministry of education and science of ukraine, state university "vadim hetman kyiv national economical university ", 14 part 1: 125-133. kuchmiov a. (2014). ecological marketing tools in the context of ensuring environmental safety. problems of material culture: 84-89. sadchenko e. (2002). principles and concept of ecological marketing. astroprint: 400. shkuratov o. (2012). organizational and legal mechanism of ensuring of ecological and economic security of agricultural production. agroecology magazine, 1: 10-14. tkachuk v. (2014). ecologization of production as a priority of the process of diversification of agrarian enterprises. effective economy. 4. [electronic resource]. – mode of access: http://www.economy.nayka.com.ua мария багорка методологический инструментарий при формировании маркетинговой стратегии экологизации аграрного производства аннотация. целью работы является исследование сущности, целей и стратегических категорий маркетинговой стратегии экологизации, разработка алгоритма данной стратегии и определение экологических, экономических и экологических инструментов реализации стратегии экологизации в сельскохозяйственном секторе. методология. основой формирования маркетинговой стратегии для экологизации аграрного производства является системный подход, основанный на существовании механизмов реализации, обеспечивающих согласованность системы, ее целеустремленность; взаимозависимость и сложность ее элементов, которые определяют целостность системы; все задачи, выполняющие отдельные элементы системы, взаимосвязаны; системные элементы и связанные с ними действия имеют определенное подчинение, которое строит иерархию; система изменяется под влиянием baltic journal of economic studies 11 vol. 3, no. 4, 2017 определенных факторов, определяющих ее динамизм; способность системы адаптироваться к изменчивости внешней среды, не теряя при этом своей индивидуальности. были использованы методы стратегического анализа макрои микро-факторов окружающей среды для формирования маркетинговой стратегии экологизации. этот процесс включает аналитическую оценку параметров внешней и внутренней среды с помощью общих научных и прикладных методов стратегического анализа. результаты. в статье рассмотрена стратегия экологизации, представлены ее цели в области сельского хозяйства, выделены основные категории стратегических направлений и реализация маркетинговых стратегий экологизации. разработан алгоритм стратегий экологического маркетинга, в сельскохозяйственном производстве, определены экологические, экономические и экологические и экономические инструменты для их реализации. практическое значение. установлено, что маркетинговая стратегия экологизации аграрного производства – это стратегия инновационного развития, которая может решать проблемы экономического роста, повышения конкурентоспособности аграрной промышленности, обеспечения высокого качества жизни, национальной безопасности, охраны окружающей среды и высокого технического уровня сельскохозяйственного производства в украине. значение/оригинальность. предложенная маркетинговая стратегия экологизации аграрного производства способна обеспечить принцип единства для экономических и экологических процессов в управлении сельскохозяйственным производством и способствовать радикальной перестройке отношений производственного процесса от окружающей среды. главной особенностью данной стратегии является то, что она учитывает экологический фактор в экономической деятельности аграрных предприятий и направлена на создание экологических продуктов и услуг в сельскохозяйственном производстве. baltic journal of economic studies 8 vol. 4, no. 1, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-1-8-15 food security indicators in ukraine: current state and trends of development mykola babych1, anna kovalenko2 mykolayiv national agrarian university, ukraine abstract. the purpose of the paper is to study the current state of food security of ukraine in order to identify the problem areas forming the system of food security in the country. methodology. assessment of the current state of the food security in ukraine is carried out according to the test method for determining key indicators of food security, approved by the cabinet of ministers of ukraine on 05.12.2007 № 1379 “some issues of food security” (as amended on 21.10.2011). results. the article deals with the current state of food security in ukraine for the next indicators: the daily energy value of the human diet, sufficiency consumption of certain products, the adequacy of supplies of grain in state resources, economic availability of food, differentiation value of food by social groups, market capacity of individual products, food self-sufficiency for a certain product. the study found that the state of food security in 2015 in ukraine satisfied the set threshold values and rules by the majority of indicators. practical implications. the value of particular indicators, calculated according to 2015 and compared to 1995, positively characterized the dynamics of food security in ukraine. however, there is a necessity for a balanced state policy of the internal market and the agrarian sector’s regulating. value/originality. it is an obvious fact that it is needed to respect the objectives set out in the strategy for sustainable development “ukraine-2030” in the directions of development, security, responsibility, and pride. key words: food security indicators, diet, grain food resources, economic availability of products, market capacity, food independence, differentiation value of food. jel classification: o13, p46, q18 corresponding author: 1 department of business economics, mykolayiv national agrarian university. e-mail: babichnn@i.ua 2 department of business economics, mykolayiv national agrarian university. e-mail: kovalenkoav@mnau.edu.ua 1. introduction the issue of food security is concerned with providing the population with the key food products in sufficient quantity and adequate quality, creation of state reserves and stocks of food and agricultural products of long periods of storage, as well as the timing of their safe export and import. addressing these issues requires an integrated management of agriculture and the consumer market, application of modern tools and incentives, and improvement of the system of foodstuffs continuous quality control. the formation of food security should be accompanied by monitoring organized by the nature of changes and their quantitative and qualitative assessments for the preparation of the appropriate guidelines and management decisions. as a result of monitoring, authorized executive authorities have to decide on changes in the food basket of basic social and demographic groups, and executive authorities have to decide on the changes and approve food kits to basic social and demographic groups (rada.gov, 2011). in terms of european integration, providing transparency of internal and external food markets, constant monitoring of the indicators of food security becomes more and more necessary. also, this will allow quickly respond to changes and generate corresponding public policies. talking about the monitoring indicators of food security, it should be allocated to the level where it is held: international, national, macro and micro level of households. the monitoring of food security indicators at the international (global) level is exercised by fao. information on the evaluation methodology and indicators mentioned directly on the fao’s official site (fao, 2017), which the organization brought together in a single database to provide an open access to information and creating a food security volume information system. indicators classified by measuring four components of food security  – availability, access, utilization, and stability. fao is currently creating indicators for food safety and nutrition monitoring baltic journal of economic studies 9 vol. 4, no. 1, 2018 (gsd 2) (fao, 2016) under the new global agenda “goals of sustainable development for 2016–2030”. the authoritative foreign researchers on the food security problems are zhengxia dou (2016), kathryn j. fiorella (2016), sarina macfadyen (2015), john wilkinson (2015), jessica fanzo (2015), and others. however, these researchers did not conduct investigations of food security in ukraine. by the cabinet of ministers of ukraine, the resolution “some issues of food security” № 1379 dated 05.12.2007 (rada.gov, 2007) contained a list of tasks to the executive power to monitor indicators of food security of ukraine at national, macro, and micro levels: 1) to the ministry of health, to determine every five years recommended by rational standards of consumption of basic products an average per one person; 2) to the ministry of agriculture and food, the ministry of social policy, and state statistical service, to provide within its authority submission to the ministry of economic development and trade every year until july 31, the information necessary to calculate basic indicators of food security; 3) to the ministry of economic development and trade, to prepare and publish each year before 1st september of the next period report on food security state in ukraine. on the official website of the ministry of economic development and trade of ukraine, there is no report on food security in ukraine for any period. regarding food security published only the balance of demand and supply of meat and meat products, sugar, milk and dairy products, vegetable oils refined on 01.04.2015, the estimated balance of supply and demand of grain in 2014/2015 marketing year by all categories of farms. over the last five years on the public domain (the official website of the vernadsky national library of ukraine), there are more than twenty scientific works devoted to the study of indicators of food security of ukraine. but, only three works of p. sukhoi (2016), krypa o., and golikova k. (2013) analysed the most of the indicators of food security at the national level. other authors, such as: lisak m. (2013), kotvytska n. (2012), olefirenko t. (2013), hryshova i. (2014), chorna n. (2013) explore the dynamics of consumption of basic foodstuffs. some indicators of food security, according to the methodology for determining the key indicators of food security, approved by the cabinet of ministers of ukraine “some issues of food security” (rada. gov, 2007), are available on the website of the state statistics service of ukraine, but they are in different information sources, not structured and not are required interpretation to the public. the monitoring of food security indicators at the households’ level in ukraine is not created. 2. materials and methods assessment of the current state of food security in ukraine performed according to test methods of basic indicators of food security, approved by the cabinet of ministers of ukraine “some issues of food security” (rada.gov, 2007): the daily energy value of the human diet, sufficiency of consumption of certain products, the adequacy of supplies of grain in state resources, economic availability of food, differentiation value of food by social groups, market capacity of individual products, food self-sufficiency for a certain product. the indicators of food security are: 1) daily energy value of the human diet, defined as the sum of products unit multiplications of certain types of foods that people consume during the day, and their energy value as follows: ev mzi i= �σ where ev – energy value of the daily diet of a person; i  – a kind of foodstuff; mi  – a mass of the i-product, consumed by a single person; zi – energy value per unit of mass of the i-product; 2) ensuring human diet with the main types of products, defined as the ratio between the actual consumption of the individual product and its rational norm by the formula: ñ ñ c f r = � where c  – consumption sufficiency indicator of a particular product; cf  – actual consumption of single product per person per year; cr  – rational individual product intake per person per year, agreed with the ministry of health; 3) the adequacy of supplies of grain in state resources, defined as the ratio between the amount of food grain in the state food reserve and volume of domestic consumption of bread and bread products in grain, equivalent to the following formula: g h x = � where g  – the indicator providing food grain resources; n – availability of food grain in the state food reserve; x – the average annual domestic consumption of bread and bread products in terms of grain1; 4) economic availability of products, defined as the share of total food expenses in the total aggregate household spending according to the formula: e b b x c = � where e – an indicator of the economic availability of products; bx – expenditure on food per year; bc – total expenditure for the year2; 1 limit (threshold) criterion for this indicator is its 17% level corresponding to 60 days of consumption 2 limit (threshold) criterion for this indicator is its 60-percent level baltic journal of economic studies 10 vol. 4, no. 1, 2018 5) differentiation of the value of food at social groups that monitored in dynamics and calculated as the ratio between the cost of food in 20 percent of households with the highest incomes and the cost of food in 20 percent of households with the lowest incomes according to the formula: d d d b m = � where d  – food value differentiation indicator; db  – index of value consumed in 20 percent of households with the highest income; dm  – index of value consumed in 20 percent of households with the lowest incomes; 6) market capacity of certain products that tracked in dynamics and determined in terms of quantity as the product of a particular product consumption and the average population according to the formula: v f ni i= � � where vi – the capacity of the domestic market of the i-product; i – a type of the i-product; fi – annual average consumption of the i-product; and n  – average annual population; 7) food self-sufficiency for a certain product, defined as the ratio between the volume of imports of a particular product in terms of quantity and capacity of its domestic market by the formula: p i v i i = � where p – the share of food import of the i-product; i – a type of the i-product; ii – import of the i-product; vi – the capacity of the domestic market of the i-product3. 3. the daily energy value of the human diet since 1990, the average daily calorie intake of food by the population of ukraine per capita constantly exceeded the threshold. in 2015, average daily nutritional intake of average ukrainian was 2799 kcal, which is 11.2% higher than the threshold criterion (2500 kcal). compared to 1990, calorie intake by the population of ukraine decreased by 22.2% (figure 1). however, since 1990 the average daily calorie consumption of plant products exceeded the threshold, and the average daily calorie intake of animal products constantly observed deficit. instead, only 28.3% of the average daily diet is provided by the consumption of animal products, which is 21.7% below the set threshold criterion (55%). thus, according to the proposed by o. v. kochetkov and r . v. makarov (2002), the classification of food security of the population in ukraine meets the third minimum level (2300-2800 kcal per capita), which provides for such volumes of food resources that make impossible the emergence of hunger, and that should be considered within planning the provision of population with food in emergency (crisis) conditions. it is obvious replacing of “expensive” calories by “cheapest one”, which allows satisfying energy demand but does not ensure intake of all essential trace elements, vitamins, and minerals. as a result, there is another problem of food security – overeating and obesity. deficient food diets can lead to the growth of obesity and diet-related, non-communicable diseases that are increasingly distributed among the poor people. it was found that obesity is associated with the lack of food security in a number of adults’ groups and is associated 3 limit (threshold) criterion for this indicator is its 30-percent level 0 1000 2000 3000 4000 5000 6000 7000 8000 1990 2000 2006 2008 2010 2012 2014 the limit (threshold) criterion total plant origin products products of animal origin figure 1. dynamics of the average daily calorie intake of food in ukraine per capita, kcal per day source: own calculations based on data from ukrstat.gov.ua baltic journal of economic studies 11 vol. 4, no. 1, 2018 with poverty. the coexistence of malnutrition and excessive eating significantly affected the countries that conduct rapid transformation and lay them on the double burden of malnutrition (fao, 2014). these countries, in particular, include also ukraine. 4. sufficiency of single product consumption optimum is a situation where the actual consumption of food by a person during the year matches a rational norm (tentative set of basic food commodities and food security in average per capita in ukraine for 2005– 2015), to wit the ratio between the actual and rational consumption is 1. in 2015 in ukraine, compared to 2013–2014 years, the actual consumption of major products by 20% position was located above or at the level of rational norms. stable positive dynamics is only in two product groups: grain products and potatoes (except in 1995) (table 1). as in previous years, actual consumption lags behind the rational norms consumption of animal products: milk and dairy products  – by 44.8%, meat and meat products  – by 46.4%. it should be noted that the discrepancy between actual consumption of animal products (except eggs) and norms of rational consumption is primarily due to a decrease in livestock production per person. in 2015, as in previous years, the deficit of fruits, berries and grapes (43.4%), fish and fish products (57.0%), sugar (6,1%) consumption is set. in addition, in 2015, in contrast to the 2013–2014 years, there is found insufficient, compared with rational norms, consumption of eggs (3.4% lower), vegetables and melons food crops (0.1% lower), and vegetable oil of all kinds (5.4% lower). the deficiency of basic food groups’ consumption particularly has a negative impact on children. if the child is faced with food insecurity, most likely, it will lag in the growth and suffer on disorders of the digestive system, which often precede irreversible consequences lag in growth (fao, 2016; fram, 2015). regarding the links between personal experience of food insecurity and overweight among children, the evidence compelling enough, although a range of other harmful consequences of food insecurity for children, including less healthy diets and negative psychosocial consequences have been well studied (iom, 2011). 5. the adequacy of supplies of grain in state resources at the beginning of 2015, the state intervention fund accounted for 516.1 thousand tons of grain and leguminous crops (agrarian fund, 2016), the amount of average annual domestic consumption of bread and bread products in terms of grain, according to statistics, amounted to 5897.0 thousand tons (ukrstat, 2016). accordingly, the indicator of sufficiency of grain reserves amounted to 8.6%, which is inconsistent with the provisions of the law of ukraine “on state support of agriculture of ukraine” (rada.gov, 2004), article 9 of which stipulates that the state intervention fund should be formed in the amount of at least 20 percent of domestic consumption. in addition, this indicator is less for 8.4% of the limit (threshold) criterion for these indices (according to test methods of basic indicators of food security) in 17%, corresponding to 60 days of consumption. 6. economic availability of food according to the state statistics service of ukraine in 2015, total expenditure of households on food amounted to 2207.23 uah per month against 1766.14 uah in 2014 (table 2). table 1 calculation of the adequacy indicator of food consumption per person per year, kilograms type of product rational rate* actual consumption indicator of adequacy of consumption 1995 2000 2013 2014 2015 1995 2000 2013 2014 2015 bread products 101,0 128,4 124,9 108,4 108,5 103,2 1,271 1,237 1,073 1,073 1,022 meat and meat products 80,0 38,9 32,8 56,1 54,1 50,9 0,486 0,410 0,701 0,686 0,636 milk and milk products 380,0 243,6 199,1 220,9 222,8 209,9 0,641 0,524 0,581 0,586 0,552 fish and fish products 20,0 3,6 8,4 14,6 11,1 8,6 0,180 0,420 0,730 0,540 0,430 eggs (pcs.) 290 171 166 309 310 280 0,590 0,572 1,066 1,072 0,965 vegetables and melons food crops 161,0 96,7 101,7 163,3 163,2 160,8 0,601 0,632 1,014 1,013 0,999 the fruits, berries and grapes (excluding wine) 90,0 33,4 29,3 56,3 52,3 50,9 0,371 0,326 0,626 0,600 0,566 potato 124,0 123,8 135,4 135,4 141,0 137,5 0,998 1,092 1,092 1,169 1,109 sugar 38,0 31,6 36,8 37,1 36,3 35,7 0,832 0,968 0,976 0,961 0,939 vegetable oil of all kinds 13,0 8,2 9,4 13,3 13,1 12,3 0,631 0,723 1,023 1,062 0,946 * calculation of the ministry of health of ukraine source: own calculations based on data from ukrstat.gov.ua baltic journal of economic studies 12 vol. 4, no. 1, 2018 table 2 expenditures on food and non-alcoholic drinks, uah per month indicator 2014 2015 2015 to 2014 (%) an average per household 1766,14 2207,23 125,0 in % to consumer expenditures 52,9 54,0 1,1 in % to monetary expenditures 47,8 49,6 1,8 in urban areas 1960,21 2432,01 124,1 in % to monetary expenditures 49,4 51,3 1,9 in big cities 2093,19 2628,29 125,6 in % to monetary expenditures 49,1 50,9 1,8 in small towns 1761,59 2157,30 122,5 in % to monetary expenditures 50,0 51,9 1,9 in rural areas 1375,64 1747,34 127,0 in % to monetary expenditures 43,7 45,4 1,7 source: own calculations based on data from ukrstat.gov.ua however, there was set a fluctuation of this indicator in terms of households’ categories in urban and rural areas – respectively 51.3 and 45.4%. this is explained by the fact that in most of the rural settlements, households produce food by their own, and therefore  – do not spend money on its purchase. on the contrary, the vast majority of the rural population is trying to get additional revenue due to the implementation of food received in their own household. in the regions of ukraine, there is also observed heterogeneity share of monetary household expenditures on food and non-alcoholic drinks: the lower in zakarpattia region, higher – in dnipropetrovsk region. relatively low level of the expenditure on food (by their share in the total amount of monetary expenditures) is observed in zakarpattia region, chernivtsi region, sumy region, ivano-frankivsk region, and luhansk region; critical level – in dnipropetrovsk region, odesa region, kherson region, and lviv region (figure 2). moreover, both increase and decrease of the expenditure on food proportion can have both positive and negative reasons and consequences. on the one hand, reducing expenditure on food share, which in itself reflects the positive momentum of indicator, may mean that consumers in the region produced a greater share of food by themselves (subsistence) or households’ income is higher (ceteris paribus), or food in the region is cheaper. on the other hand, such dynamics may indicate the lowest adequacy of an indicator of basic food kinds’ consumption in the region. thus, the indicator of the availability of food last year was 49.6% at its 60 percentage limit criteria. compared to the previous year, this figure declined by 1.9 percentage points. it should be noted a significant influence on the choice of certain food of preferences and traditional habits of certain types of products eating. comparison of the provision of basic food products indicator with the share spent on them in total food expenditures shows that almost the highest and lowest unit costs in 42,1 42,5 42,8 42,9 45,2 45,6 45,6 47,2 48,1 48,1 48,4 49 49,7 50 50,6 50,7 51 52,5 53,5 55,3 56,8 59,3 0 10 20 30 40 50 60 70 chernivtsi region sumy region ivano-frankivsk region luhansk region poltava region chernihiv region zaporizhzhia region vinnytsia region kharkiv region rivne region volyn region mykolaiv region ternopil region kirovohrad region kyiv region zhytomyr region cherkasy region khmelnytskyi region lviv region kherson region odesa region dnipropetrovsk region figure 2. the share of monetary household expenditures on food and non-alcoholic beverages by the region of ukraine, % source: own calculations based on data from ukrstat.gov.ua baltic journal of economic studies 13 vol. 4, no. 1, 2018 accordance to grain products (17.7%) and potatoes (1.6%). that is, exactly, those kinds of products on which rational consumption rates achieved, while the consumption of potatoes rational rate 22.8% over the bread products indicator. the same applies to the food, which is almost the worst (except fish) consumption adequacy indicators: the proportion of spending on meat and meat products and fruits, berries and grapes are respectively 20.6 and 0.5% (figure 3). 7. food cost differentiation for social groups according to the state statistics service of ukraine in 2015, 10 percent of households with the highest incomes on average spent on food 2822.06 uah per month, and 10 percent of households with the lowest incomes – 1653.68 uah. food cost differentiation factor for social groups was 1.71 versus 1.48 in 2014, i.e., during the study period, there was a slight decrease in the differentiation of social groups in terms of food spending. 8. the capacity of the domestic market of certain products compared with 1995, in 2015, there was an increase in capacity of the domestic market in the following food groups: meat and meat products – by 8.3%, fish and fish products  – by 97.2%, eggs  – to 35.9%, vegetables and melons food crops – 37.7%, fruits, berries and grapes – by 26.1%, oil – by 23.8% (table 3). at the same time, the largest deviations between actual and estimated market size for the rational consumption norms are established by groups of such food as meat 17,7 20,6 9,9 5,9 2,6 5,9 0,5 1,6 7,8 9,5 0 5 10 15 20 25 0 0,2 0,4 0,6 0,8 1 1,2 b re ad p ro du ct s m ilk a nd d ai ry p ro du ct s e gg s (p cs .) fr ui ts , b er ri es a nd g ra pe s su ga r indicator of adequacy of consumption the share of expenditure in the total expenditure on food, % figure 3. comparing the share of expenditure in the total expenditure on food sufficiency indicator of consumption in 2015 source: own calculations based on data from ukrstat.gov.ua table 3 assessment of the capacity of the domestic market, ths. tons type of product domestic market capacity actual subject to rational consumption norms 1995 2000 2015 2015 in % to 1995 1995 2000 2015 bread products 6641,9 6173,8 4422,8 66,6 5224,6 4992,4 4318,8 meat and meat products 2012,2 1621,3 2178,7 108,3 4138,3 3954,4 3420,8 milk and milk products 12601,0 9841,5 8995,0 71,4 19656,8 18783,3 16249,0 fish and fish products 186,2 415,2 367,2 197,2 1034,6 988,6 855,2 eggs 510,8 473,9 694,0 135,9 868,2 827,8 684,2 vegetables and melons food crops 5002,1 5027,0 6889,8 137,7 8328,3 7958,2 6884,4 fruits, berries and grapes (excluding wine) 1727,7 1448,3 2178,9 126,1 4655,6 4448,7 3848,4 potato 6404,0 6692,8 5891,5 99,0 6414,3 6129,3 5302,3 sugar 1634,6 1819,0 1527,6 93,5 1965,7 1878,3 1624,9 vegetable oil of all kinds 424,2 464,6 525,1 123,8 672,5 642,6 555,9 source: own calculations based on data from ukrstat.gov.ua baltic journal of economic studies 14 vol. 4, no. 1, 2018 and meat products – 36.3%, milk and dairy products – 44.6%, fruits, berries and grapes – 57.1%, sugar – 6.0%. 9. food self-sufficiency for a certain product meeting the needs of the population for food, within its purchasing power in 2014, as in previous years, is carried out mainly by domestic products (table 4). the most vulnerable positions in terms of dependence on imported positions are “fruits, berries and grapes” and “all kinds of vegetable oil”, the share of imports by these groups in the total consumption is respectively 27.0 and 30.5% at 30 percentage threshold criteria for this indicator. 10. conclusions the state of food security in 2015 in ukraine by most standards satisfies set thresholds and rules. the values of individual indicators, calculated according to 2015 compared to 1995, positively characterize the dynamics of food security of ukraine: ‒ found a significant increase in diets of ukrainians of those types of food, consumption of which is lagging behind most rational norms (meat and fish products), almost all types of products improved adequacy of consumption; ‒ needs of the population in food carried out mainly by domestic agricultural products; ‒ in ukraine, there is a high self-sufficiency of population for the main types of food. at the same time, the state of food security of ukraine cannot be characterized as stable positive: ‒ for products of animal origin, decreased average daily caloric intake of the population; ‒ worsened the accessibility of food for the population; ‒ adequacy levels of the grain supplies in state resources is lower compared to the maximum prescribed limit; ‒ set high level of food dependency (in terms of the rational norms of consumption) for meat, milk and fish products, fruits, berries and grapes; ‒ greatly exceeds the threshold percentage of import dependence of ukraine on fruits, berries and grapes, and compared to 1995 given indicator increased by 25.0 percentage points. ukraine with available resources, according to various researchers, can “feed” about 100-150 million people (kotykova, 2010). instead, there is a paradoxical situation, when country for export of raw materials (sunflower) is consistently among the top five world leaders and still has 40% of the value indicator depending on imported oil. obvious is the need for a balanced state policy regulating the domestic market and the agricultural sector. table 4 calculation of dependence on imported food groups type of product import of products, thousand tons dependence on imported food, % 1995 2000 2013 2014 2015 1995 2000 2013 2014 2015 bread products 200 1010 242 263 190 3,0 16,4 4,9 5,6 4,3 meat and meat products 19 38 332 201 158 0,9 2,3 13,0 8,6 7,3 milk and dairy products 58 50 548 357 78 0,5 0,5 5,4 3,7 0,9 fish and fish products 5 2 1,0 0,4 eggs 41 29 5 7 11 0,8 0,6 0,6 0,9 0,2 vegetables and melons food crops 309 179 237 225 95 17,9 12,4 3,2 3,2 1,4 fruits, berries and grapes (without reprocessing into wine) 126 11 1172 856 588 2,0 0,2 45,7 38,1 27,0 potatoes 123 177 23 40 17 7,5 9,7 0,4 0,7 0,3 sugar 11 7 4 0,7 0,4 0,3 vegetable oil of all kinds 296 223 160 48,9 39,7 30,5 source: own calculations based on data from ukrstat.gov.ua references: balances and consumption of basic foodstuffs by population of ukraine for 2015 (2016). in o.m. prokopenko (ed.). kyiv: august trade (in ukr.). retrieved from: http://www.ukrstat.gov.ua/ costs and resources of households in ukraine in 2015 (2016). in i. osipova (ed.). kyiv: august trade (in 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(2016). food wastage and opportunities for reduction (global food security), 8, 19-26, issn 2211-9124, http://dx.doi.org/10.1016/j.gfs.2016.02.001. baltic journal of economic studies 62 vol. 4, no. 1, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-1-62-67 global experience of social entrepreneurship development valentyn halunko1, andriy ivanyshchuk2 research institute of public law, ukraine tereziia popovych3 uzhhorod national university, ukraine abstract. the purpose of the article – to reveal features of the implementation of social entrepreneurship in the world. methodology. the theoretical and methodological framework of scientific developments consists of the research of scientists of modern times who work on the solution to development issues of social entrepreneurship in countries of the world, research data of consulting institutes, own research results. in order to provide validity of research results, the following methods are used: generalization – in the critical analysis of the content of works of scientists on solving the problems of the development of social entrepreneurship; information-logical analysis  – when studying data of international consulting institutes and associations; comparison – when comparing directions of the state support for the development of social entrepreneurship in different countries of the world; cause and effect relationship – for obtaining final conclusions. results. this article reveals optimal conditions for developing social entrepreneurship in countries of the world. a portrait of a successful entrepreneur of the world is formed. the state of social entrepreneurship and the directions of its development in advanced countries of europe, america, and asia are analysed. possibilities of adaptation of the global experience in the social entrepreneurship development for ukraine are determined. practical importance. results of this research can be useful for the ministry of social policy of ukraine, the ministry of economic development and trade of ukraine. value/originality – there are clarified conditions and strategic measures on the development of social entrepreneurship in ukraine. further research should be aimed at the improvement of stimulating mechanisms for the social entrepreneurship development as a global tool for solving problems of the socio-economic development of countries of the world. key words: social enterprise, social entrepreneurship, conditions of social entrepreneurship development, state support, europe, america, asia. jel classification: і38, h44, l31 corresponding author: 1 research institute of public law. e-mail: halunkov@i.ua 2 research institute of public law. e-mail: ivanyshchuk@i.ua 3 department of theory and history of state and law, uzhhorod national university. e-mail: ptp@urk.net 1. introduction the world experience persuasively testifies that even the growth of socially necessary costs, social responsibility in the field of entrepreneurship, and improvement of the functioning of the “third sector” of economies of many countries of the world are not able to solve the whole complex of existing socio-economic problems. this lays emphasis on a low efficiency of interaction of public sector and business structures, activities of organizations of the “third sector” towards overcoming unemployment, social inequality, numerous wars, ethnic rivalries, gender discrimination, poverty, etc. and, then, is the main reason for deepening research related to studying the role of social entrepreneurship as one of the forms of business organization, as well as stimulating mechanisms for its development in the world economic practice of entrepreneurship. 2. literature review social entrepreneurship as a scientifically meaningful problem became widespread in the early 90s of the xx  century; it was interpreted as an innovative approach, by which individuals can solve the serious social problems that their community faces (drayton, 2011). the concept of the social entrepreneurship development and the promotion of the social economy baltic journal of economic studies 63 vol. 4, no. 1, 2018 is now a part of the eu’s policy to overcome the social isolation of people in a fragile situation. as a result, the search for ways of achieving social goals within the framework of sustainable and inclusive growth, reflecting the experience of bulgaria, is of a significant interest (terziev, nichev and arabska, 2017). generalization of american and european experience in social entrepreneurship, approaches of russian scholars based on empirical research data (hoogendoorn, pennings and thurik, 2010; poltavskaya, 2015) allows asserting that social entrepreneurship as a branch of scientific research is at the stage of birth. and thus, there are virtually no effective mechanisms for its development stimulation. at the same time, development of theoretical provisions of social entrepreneurship, as confirmed by current studies, should be based on results of analysis, which covers the contribution of value generation, value comparing, and resource exchange efficiency and social entrepreneurship should be seen as an integration structure that promotes a clearer understanding of the process of creating social value (hlady‐rispal and servantie, 2018). in the context of the direction of these studies, the authors propose a variety of examples of solving social problems, in particular, the creation of municipal economic justice incubators, the purpose of which is to solve the problems of employment of former prisoners (baskaran, 2018). the importance of distributing non-profit organizations in the field of healthcare is also emphasized; in particular, the experience of india in this direction is interesting. in order to improve the sustainability of charity hospitals, it is proposed to focus attention on ensuring long-term financial well-being, disseminating and integrating the best practices of this type of social enterprises by expanding learning opportunities and sharing knowledge (chowdhury, 2015). for certain countries of the world suffering from socio-economic conflicts as a result of hostilities, ethnic rivalries, social entrepreneurship is considered as a mechanism for their solution on the set of positive effects from the activities of social enterprises and taking into account scenarios of the possible course of events in society, given the existing trends in the world (kryvovyazyuk and haranchevskaya, 2017). along with that, one should note the relationship of social entrepreneurship with the concept of sustainable development, which is achieved through the social reorganization and inclusive entrepreneurship (saxena, 2011). this can serve an opportunity for further adaptation of separate regulatory tools, which positively influence the sustainability of the socio-economic ecosystem in the nearest region of the enterprise operation in relation to the stimulation of development of social entrepreneurship in whole. it is also necessary to study features of state regulation of socio-economic responsibility of business (batchenko аnd dielini, 2017), which can be a positive experience for ukraine. 3. conditions for social entrepreneurship development in the world and successful social entrepreneur’s portrait according to data from the research of famous american foundation (thomson reuters foundation, 2016), top 15 countries with the best conditions for the development of social entrepreneurship include today the usa , canada, great britain, singapore, israel, chile, south korea, hong kong, malaysia, france, switzerland, germany, italy, columbia, and india. these countries have formed the best governmental support for social entrepreneurship, conditions for attracting qualified personnel, receiving respectable wages, attracting investments, understanding by the society of the need for social changes, provision of the growth of this sector of the economy. this convincingly shows that social entrepreneurship has become widespread in a large part of the world countries due to the principles of activities aimed at solving the existing social problems by means of introducing innovative entrepreneurial methods of work and providing the effect of a scale that reaches the international boundaries. along with that, each team of social entrepreneurs is oriented to leaders who, due to their exclusive initiative and volunteering provide the accessibility of objectives to be achieved. if we reduce all leaders of the rating of successful social entrepreneurs of the world to uniform parameters (forbes gallery, 2012), their portrait will be as follows: they are mostly men (66.7%) aged 18-28, less often  – women (33.3%) aged 20-29; absolute majority of them  – representatives of the usa (70.0%), also there are representatives of asia (12.9%), europe (6.5%), africa (6.5%), and other continents (4.1%); all of them are founders or cofounders of social entrepreneurial structures, and sometimes combine it with their activities’ management as general directors; among the selected spheres of social assistance, the priority belongs to medicine (20.0%), education and learning (20.0%), dissemination of information technology (20.0%), energy preservation (10.0%), issues of ecology and environmental protection (6.67%), solving food supply problems (6.67%), issue of infrastructural development (6.66%), and other services (10.0%); by scale of development of social assistance, activities of entrepreneurs are directed to the solution of problems: in the world in whole (23.3%), in countries of africa (33.3%), in countries of asia (13.4%), in countries of america (30.0%). research results showed that the most active social entrepreneurs direct the main attention to satisfy secondary and tertiary needs of people – in preserving health, education, as well as in solving environmental problems. baltic journal of economic studies 64 vol. 4, no. 1, 2018 4. the state of social entrepreneurship and the directions of its state support in the advanced countries of europe a number of countries of the world  – great britain, germany  – are among the countries with the best conditions for developing social entrepreneurship. according to research data of seuk (temple and gregory, 2017), in great britain, there are 67-70 thousand social enterprises, employing about 1 million workers, generating about 24 billion pounds sterling of revenue from activities, according to various estimates. a significant share of social enterprises operates up to 5 years (49%). about 34% of such enterprises carry out activities at the local level. more than 75% of trade income accounts for 74% of social enterprises, the largest share of which accounts for the state sector of the economy (20%). about 18% of income comes from international activities. the share of social enterprises, which produces innovations, in great britain is 50%, while among small and medium-sized businesses  – only 33%. it should be noted that two-thirds of social enterprises support people from disadvantaged groups, and 44% employ them. the average salary of the head of a social enterprise is 36 115 pounds sterling. about 51% of social enterprises are looking for funding of fewer than 100 000 pounds sterling. the most common form of financing activities – grants (82% of social enterprises applied for grants). such an activity is achieved due to the legislative consolidation of social entrepreneurship, local authorities’ support, and proper regulation of the development of social entrepreneurship. among the most effective methods and forms of state support for this sector should be distinguished: preferential taxation, state financing, support for enterprises engaged in the development of the local community by giving a priority to participation in tenders, promotion of the development of social entrepreneurs’ vocational education, creation of an investment fund of financial support for the development of social entrepreneurship, creation of a department of social entrepreneurship issues at the department of trade and industry, interaction of public authorities with non-state, public organizations, oriented to social entrepreneurship, associations and unions of entrepreneurs (social enterprise uk). as the results of the research program “social entrepreneurship as a force for more inclusive and innovative societies” (seforïs, 2016) show, in germany, there are now about 100 thousand social enterprises employing about 2.5 million workers. about 29% of social enterprises operate for less than 5 years. germany is defined by the prevalence of social enterprises’ cooperation with the national government (21%) along with the cooperation with local and regional governments. the share of german social enterprises producing innovation is 88%, which is the third indicator in the world after sweden and china. activities of social enterprises of this country focus on the development of the community, employment, and training (25%), education and research (22%), and healthcare (15%). the main sources of financing of german social enterprises are levies and sales in the market or governments (43%), grants (29%), and donations (10.5%). directions of state support for social enterprises of germany include: exemption from corporate income tax, inclusion of social enterprises as separate categories of target groups in state support schemes, financing of such enterprises by the national development bank and eu structural funds, promotion of volunteering, social enterprises’ support at the local and regional levels, legislative consolidation of development of social entrepreneurship. 5. the state of social entrepreneurship and the directions of its state support in the advanced countries of america the usa is the best country where business leaders strive to solve social problems. according to research data (social enterprise alliance, 2018), there are about 140 thousand social enterprises registered in the country that receive over 500 billion dollars of income and provided jobs to more than 10 million citizens, whose wage fund is at least 8.3% of the country’s payroll budget. along with that, up to 40% of these enterprises have fewer than five employees and only 8%  – more than 100 employees; 45% of enterprises have income less than 250 thousand dollars; 22%  – more than 2 million dollars; 35% of social enterprises – non-profit organizations; 20% – affect the economic development of the usa; 16% – focus on the workforce development; less than 10% – focus on the international level. state support for the development of social entrepreneurship in the usa is one of the best in the world and ranks 6th in the ranking of the best countries for the development of social entrepreneurship (thomson reuters foundation, 2016) and is realized in the following directions: stimulating social innovation, creating favourable conditions for support, promoting the dissemination and development of successful social initiatives, disseminating information on effective solutions to social entrepreneurship. one should also note a significant role of the social enterprise alliance in the support for social enterprises of the usa. canada occupies the second place in the world for the creation of conditions for the development of social entrepreneurship, including the first by the possibility of access to capital, the ability of social entrepreneurs to make a living due to work, as well as the pace of development of social entrepreneurship (thomson reuters foundation, 2016). the number of social baltic journal of economic studies 65 vol. 4, no. 1, 2018 enterprises in the country increases annually and is close to their number in the usa. thus, only ontario has registered 10 thousand social enterprises that have formed investment capital of 2.5 billion usd. social enterprises of canada (elson, p., hall, p. and wamucii p., 2016) mostly operate at the local level (58%), much less at the national (13%) and international level (10%). the main financial sources of their activity are grants (77% of social enterprises), banking credits (8%), finances of credit associations (7%), government structures (2%), financing of private persons. the state significantly promotes the development of social entrepreneurship by means of support for social initiatives, promotion of volunteering, social entrepreneurs benefit from social venture connexion – the first platform named mars and tmx group that unites social enterprises with funds and investors. 6. the state of social entrepreneurship and the directions of its state support in the advanced countries of asia among the countries of asia that create the best conditions for the development of social entrepreneurship, there are singapore, south korea, hong kong, malaysia. along with that, we consider appropriate to distinguish those providing the best state support towards the solution of social problems – south korea and singapore that fairly took the first and the second places correspondingly in the field of state regulation of social processes (thomson reuters foundation, 2016). development of social entrepreneurship in singapore (watanabe and tanaka, 2016) is considerably promoted by a lower corporate tax (17%) compared to other asian economies  – japan (40%), china (25%), and south korea (24%). in 2015, the national council of social service (ncss), ministry of social and family development (msfd), tote board, and sea established a new centre named “raise” for supporting the development of social enterprises by means of creating a centralized support window. it provides services to new social entrepreneurs on issues of financial support (in the form of grants and investments for covering different business stages, including startups), advisory services (on issues of cooperation with large corporations), education services (providing educational programmes), provision of offices. about three out of five social enterprises in singapore participate in raise and took advantage of these additional opportunities. south korea, unlike most of the countries with favourable development conditions for social entrepreneurship, has a much smaller number of social enterprises. according to research results (cagney, 2018), there are 1814 entities, however, all of them are certified by the ministry of labour and employment affairs and kosea, which allows receiving significant preferences from the state and, in particular, funds for the reimbursement of labour costs. social enterprises employ about 30 thousand people; the share of their contribution to the country’s gdp structure is 3%. in their activities, enterprises are oriented to solving problems of energy saving, education, international expansion in order to reduce unemployment and develop agriculture (hwang, jang, park, kim, 2017). state support for social entrepreneurship in south korea has a dual nature: on the one hand – it considerably strengthens the sector where social enterprises operate, on the other  – weakens business development as a whole. along with that, the main directions of the state support for the development of social entrepreneurship are the financing of the support for social initiatives, tax preferences, institutional provisions, and support for the international markets’ entry. 7. possibilities of adaptation of the world experience in development and regulation of social entrepreneurship for ukraine analysis of the global experience in development and regulation of social entrepreneurship in the advanced countries of europe, america, and asia points out that its adaptation is possible and useful. however, it will become possible taking into account the following conditions: firstly, it is necessary to legalize social entrepreneurship as in advanced countries of the world; secondly, national doctrine for the development of social entrepreneurship is required that will enable determining the tactics and strategy of actions to solve social goals; thirdly, it is needed to generate in society an understanding of the importance of social entrepreneurship as a global tool that can stimulate business development as a whole. as the first-priority steps that can improve adaptation of the global experience in the development of social entrepreneurship for ukraine, it is necessary: to introduce specialties “social entrepreneurship” and “regulation of social entrepreneurship development” in the training of specialists of economic and legal directions in higher educational institutions of the country; for advanced social enterprises – to become fullfledged participants of the social enterprise alliance; to create a centre for supporting the development of social enterprises; to introduce a mechanism for cooperation of the state, business, and community in the area of development of social entrepreneurship. 8. conclusions analysis of scientific papers of scientists of modern times showed that the role of social entrepreneurship in the development of the global economy is constantly increasing, requiring a deeper study of ways to achieve baltic journal of economic studies 66 vol. 4, no. 1, 2018 social goals in the advanced countries and, at the same time, features of state support for the development of social entrepreneurship. research results outline that social entrepreneurship development conditions can be considered the best if there are provided: its proper governmental support, optimal conditions for attracting skilled personnel, respectable wages, investment attraction for the development of social entrepreneurship, understanding in the society of the need for social changes, ensuring the growth of this sector of the economy. analysis of the world experience in the development of social entrepreneurship points out that in the advanced countries of europe, high activity of this sector is achieved due to legislative consolidation of its role in the economy of countries, support on the part of local authorities, proper regulation of development of social entrepreneurship, grant activities; in the advanced countries of america  – by means of stimulating social innovations on the part of the state, creating favourable conditions for supporting this sector’s development, dissemination of information data on viable solutions of the social entrepreneurship field; in the advanced countries of asia  – due to financing of the support for social initiatives, tax discrimination, institutional provision, support for the international markets’ entry. for ukraine, such an experience is useful, first of fall, from a perspective of the need of assigning a legal status to social enterprises, provision of the understanding in the society of the need for these changes, elaboration of ways to stimulate the development of social entrepreneurship and create a platform for solving a number of social problems – unemployment, low 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(2016). study of social entrepreneurship and innovation ecosystems in south east and east asian countries: country analysis: republic of singapore / the japan research institute. retrieved from: https://publications.iadb.org/bitstream/handle/11319/8063/study-of-social-entrepreneurship-and-innovationecosystems-in-south-east-and-east-asian-countries-country-analysis-republic-of-singapore.pdf ?sequence=1. baltic journal of economic studies 53 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 engineering educational and scientific institute named after yu.m. potebnia of zaporizhzhia national university, ukraine e-mail: asti09@ukr.net orcid: https://orcid.org/0000-0001-7687-5119 2 engineering educational and scientific institute named after yu.m. potebnia of zaporizhzhia national university, ukraine (corresponding author) e-mail: vitalina2006@ukr.net orcid: https://orcid.org/0000-0001-9588-7836 3 engineering educational and scientific institute named after yu.m. potebnia of zaporizhzhia national university, ukraine e-mail: valentinavoronkova236@gmail.com orcid: https://orcid.org/0000-0002-0719-1546 doi: https://doi.org/10.30525/2256-0742/2023-9-1-53-60 formation of a digital education model in terms of the digital economy (based on the example of eu countries) oksana buhaichuk1, vitalina nikitenko2, valentyna voronkova3 abstract. the relevance of the study is that the digital challenge is important and stimulating, requiring the formation of digital education in the digital economy. the purpose of the article is to develop a model of digital education as a factor of improving the efficiency of digital competencies that contribute to the development of the digital economy. the object of research is the formation of a digital education model as a factor in the implementation of digital literacy. the subject of the study is the impact of the digital education model on the development of the digital economy. the methodology for researching digital education, which cultivates a smart economy, smart governance and smart people, is represented by the agile methodology (flexible adaptive), based on the use of the values of artificial intelligence and deep learning, which can create effective tools for education, increasing their effectiveness through rapid change. the results of the study: 1) analyzes the formation of digital competencies in the context of the european educational paradigm that contribute to the development of the digital economy; 2) identifies the directions of implementation of digital competencies in the context of the european educational paradigm; 3) reveals digital tools and educational platforms that contribute to the formation of digital education; 4) formulates the concept of quality, inclusive, accessible digital education as a factor in improving digital competencies and adapting education to the digital age; 5) traces the impact of digital education and digital competencies on the development of the digital economy. the concept of digital education contains both its potential and its risks, which can have serious consequences for the future of the educational process if digital literacy is not developed. the combination of four factors – cultural change, technological innovation, national policy leadership and internal development of the digital education system – stimulates the digital transformation of society. key words: digital education, digital competencies, digital education model, european paradigm, digital skills areas. jel classification: a10, b10, o10, p10, p10 1. introduction the relevance of the topic is that the digital challenge is important and stimulating, as it changes not only access to knowledge, but also knowledge itself, which contributes to the development of the digital economy. the goal of digital education is to promote the success of all students and prepare them to be educated citizens. the basis of the digital education model in the digital economy is the formation of digital literacy, which requires the selection of digital tools, the development of professional digital skills, control of the digital work environment, the use of ict and its use in digital education will contribute to the development of digital literacy, which will make the formation and development of the digital economy impossible. the formation of the digital education model in the digital economy is a trend in the development of future baltic journal of economic studies 54 vol. 9 no. 1, 2023 educational innovation and transformation; a process that emphasizes technology to promote educational innovation and transformation, as well as its impact on the development of a digital society. now, in the process of building the new ecology of the digital economy, under the background of building a high-quality education system and the catalyst of theexternal pressure of covid-19, the digital transformation of education is facing a growth opportunity. however, there is still a certain gap between the current practice of digital transformation of education and the expected value orientation, so it is necessary to develop a model of digital education in the digital economy. therefore, it is necessary to pay attention to the relevant research on the digital transformation of education, and take a more proactive position to meet the wave of education reform in the world in the digital economy. 2. literature analysis and problem statement the article analyzes the formation of digital competencies necessary for the implementation of the tasks of the digital economy. the basis of the model of digital education in the digital economy is the formation of digital competencies. the works of andriukaitiene regina, voronkova valentyna and nikitenko vitalina played an important role in the analysis of these problems. "the concept of digital transformation of e-education in the european union: european experience" (2021); afanasieva lyudmyla, oleksenko roman. "interculturality as a successful model for the development of a multicultural urban community " (2018); voronkova valentina, nikitenko vitalina. "smart education in the digital age: from smart education to smart business" (2022), where digital education is presented as the education of an intelligent society that cultivates a smart economy, smart governance, and a smart person, as well as in the work of oleksenko roman; molydychenko valentin and sherbakova nina (2018) "neoliberalism in higher education as a challenge for future civilization". to clarify the directions of digital literacy in the digital economy, the works of valentyna voronkova, vitalina nikitenko, vlada bilohur, roman oleksenko, taras butchenko were used. "the conceptualization of smart-philosophy as a post-modern project of nonlinear pattern development of the xxi century " (2022) by voronkova valentina, kyvliuk olga. "philosophical reflection of smart-society as a new model of the information society and its impact on the education of the xxi century. future human image. future human image" by buhaychuk oksana, nikitenko vitalina, voronkova valentyna, andriukaitiene regina, malysh myroslava. interaction of the digital person and society in the context of political philosophy ("interacción persona digital y sociedad en el contexto de la filosofía política. cuestiones políticas" (2022)), in which the digital economy is presented as one that cultivates digital literacy. in other words, digital education is the use of digital tools to enhance or change the educational experience. to analyze the formation of a digital model of education as a factor in improving the effectiveness of digital competencies, the work of oleg panchenko was used. "formation of sustainable digital economic concept: challenges, threats, priorities" (2019); nikitenko vitalina, voronkova valentyna, andriukaitiene regina, oleksenko roman. "the crisis of the metaphysical foundations of human existence as a global problem of postmodernity and the ways of managerial solutions" (2021); nikitenko vitalina, voronkova valentyna, oleksenko roman, andriukaitiene regina, liudmyla holovii (2022). "education as a factor of cognitive society development in the conditions of digital transformation" (2022). in order to reveal the digital tools and educational platforms that contribute to the formation of digital education, it was necessary to turn to the analysis of the works of nesterenko olena, oleksenko roman (2020), "social philosophical reflection of the individual legal еducation philosophy as a basis for the democratic society functioning" (2020) by oleksenko roman. "human in the information society as an object of socio-economic reflection" (2017). the concept of quality, inclusive, accessible digital education as a factor of improving digital literacy and adapting education to the digital age was formed by analyzing the work of cherep a., voronkova v., cherep o. (2022). "humanocracy as a factor of improving human resources management in organizations" (2022). based on the current state of research, digital technologies can revolutionize the implementation of digital education tasks. these include digital learning, iot and cloud computing for decision making, data-driven optimization, and the adoption of digital education at all levels of the digital society and economy. 3. purpose and objectives of the study the purpose of the article is to develop a model of digital education as a factor in improving the efficiency of digital skills that contribute to the development of the digital economy. objectives of the study: 1) to analyze the formation of digital competencies in the context of the european educational paradigm that contribute to the development of the digital economy; 2) to find out the directions of implementation of digital competencies in the context of the european educational paradigm; 3) to reveal digital tools and educational platforms that contribute to the formation baltic journal of economic studies 55 vol. 9 no. 1, 2023 of smart education; 4) to formulate the concept of quality, inclusive, accessible digital education as a factor in improving digital competencies and adapting education to the digital age; 5) to trace the impact of digital education and digital competencies on the development of the digital economy. the object of the study is the formation of a digital education model as a factor in the introduction of digital literacy. the subject of the study is the impact of the digital education model on the development of the digital economy. 4. research materials and methods to develop a model of digital education as a factor of increasing the effectiveness of digital skills that contribute to the development of the digital economy, the agile method and philosophy are used to analyze the digital transformation of education, based on the use of artificial intelligence and deep learning values that can create effective tools for education, increasing its effectiveness through the rapid changes. digital education is based on data fabric methods that ensure flexible and sustainable data integration between platforms and business users; on the value of cloud platforms and autonomous systems; on the value of decision intelligence that combines data, social and management sciences for effective decision making in the context of the formation and development of the digital economy. the study is based on an axiological method that allowed to analyze the values of applications that expand the possibilities of adaptability; the values of hyper-automation that ensure accelerated growth and sustainability of the digital economy through the rapid identification, verification and automation of a large number of processes using big data; the values of computing that increase confidentiality, protect information at the level of data, software or hardware; the values of cybersecurity networks that ensure security. the leading approach in the study is a systems approach, which allows to show the development of digital education as a system consisting of interconnected subsystems that function as a whole, as well as to model the processes of digital education for the future. the system dynamics methodology and modern computing capabilities developed by the authors of the club of rome have contributed to the creation of high-quality, inclusive, and accessible digital education as a factor in improving digital literacy and adapting education to the digital age that will bring prosperity to all. to do this, it is necessary to rethink the way of understanding the world, behavioral and political models, to develop new trends and to model new development scenarios. 5. research result 1. digital literacy as a factor in the development of the digital economy in eu countries teaching through the integration of digital technologies is a stimulating challenge to draw the attention of governments and the public to the main problem of the modern digital world – the formation of digital education. digital literacy is an important element of learning, professional integration and civic life in a society whose technological environment is constantly changing. the digital skills reference framework (dsrf) defines digital skills and levels of progressive mastery throughout the learning process, which are constantly changing over time. the digital skills defined in basic education in advanced european countries are the subject of national certification issued through the pix online platform. the pix certification allows the certification of a digital skills profile certified and recognized by the state and through the registration in the inventory of the national commission for professional certification (cncp). the platform provides students with a digital skills certificate at the end of the cycle. the pix platform allows students to evaluate their progress through tests. starting in 5th grade, students register on the free pix platform where they can track their progress. contracted public and private schools have a pix orga space where teams of teachers can create test paths for different digital skills, track students' results, and support them in acquiring skills until they receive a certificate. the ministries of national education, youth and sport and higher education, research and innovation have developed a digital skills core framework (crcn) that applies from primary school to university. five domains of digital skills. the digital literacy framework consists of five domains and sixteen digital literacies. eight levels of progressive mastery of these skills are proposed for students in school, for students in higher education, and for adult learners. levels 1 to 5 are offered specifically for primary, middle and high school students. these digital skills are the subject of a certificate issued by the pix platform at the end of the fourth cycle of middle school and the last cycle of high school. pe – college of morcenx is implemented in school, college and high school. digital literacy is taught and assessed in lessons that are linked to programs and a common base of knowledge, skills, and culture according to a standardized digital literacy framework. levels of digital literacy are assessed on a scale defined by the reference system. calendar of milestones. in cycle 3, the digital skills achieved by students are recorded in the periodic assessment of the unified school system. at the end of cycle baltic journal of economic studies 56 vol. 9 no. 1, 2023 4, all students receive a digital literacy certificate. the certificate is recorded in the student's school record. an accompanying document introduces the digital skills reference framework, with appendices describing the levels of proficiency and suggesting ways to implement it. all levels and courses of digital education mobilize digital tools and resources that contribute to the development of digital literacy. the development of digital literacies is part of a long-term process that requires consideration of prior knowledge, progression through cycles and levels, and integration of the use and creation of digital literacies into learning approaches. various bodies are mobilized to develop a course of study that is integrated into the project of a school, institution or network. educational institutions rely on an accompanying document with relevant content and the formation of a digital culture in schools or institutions. teams of regional academic delegations for digital education (drane) and academic delegations for digital education (dane), digital consultants (1st degree digital reference teachers, 2nd degree digital reference teachers) can be mobilized to support this work. special attention is given to the activities carried out in cycle 3, especially in the context of school-college links. starting from cycle 4, pix orga tools can be used to develop a skills-based approach to work and a learning pathway. at the academic level, local authorities and various partners are involved in creating a working environment conducive to the acquisition of these skills. in cycles 2 and 3, progress is monitored by mobilizing the tools available in the institutions (single school document, digital workspace, skills management software, portfolios). particular attention will be paid to the accessibility of these services. the level of digital literacy mastery achieved by students in each of the five areas of the digital literacy framework is recorded in a periodic school report card. the purpose of tracking digital literacy proficiency is to keep students and parents informed of the level of proficiency achieved. in addition, these elements allow teachers to build a learning path based on previous learning. it is important that assessment encourages and supports learning. teachers are encouraged to take note of the most recent cm2 periodic report to determine student performance and identify the most appropriate instructional strategies. in secondary schools, this part of the unified school record (usr) can be completed a priori by any member of the teaching staff for each student. the school director will ensure that the educational council appoints a teacher to coordinate this task. in the 4th cycle and in secondary school from the 5th grade, students can register on the pix platform where their progress is regularly monitored. they train individually or in campaigns defined by teachers. the platform offers teachers a pix orga space for each institution, created as a dashboard for monitoring education, in order to: 1) choose test routes adapted to learning objectives through campaigns organized by skills; 2) assess students' digital skills with real-time monitoring of their participation; 3) analyze results by viewing them through the dashboard (success and failure rates for each question, for each skill, on an individual or collective scale, etc.); 4) prioritize learning needs, both individual and collective. public and private colleges and schools certify students in the fourth and final cycle (resolution of august 30, 2019). all colleges and schools are considered accredited institutions for certification. students must have previously created their digital skills profile on the pix platform by obtaining at least level 1 (maximum level = level 8) of the five skills in the reference framework (maximum number = 16 skills). no other prior certification, diploma or training is required. it is important that all students create a pix account. the certification test is customized for each candidate. its purpose is to test the pix skill profile by performing positioning tests on your pix account for free. the official certification test takes 2 hours. schools organize the certification according to the information circular and pix certification centers. the pix certification is recorded in the unified school record (at the end of the 4th cycle) or in the high school record (at the end of the last cycle) to certify the level of proficiency achieved by the student. it does not affect the acquisition of a national diploma or a bachelor's degree. the national curriculum is part of the master plan for professional development. its strategic mission is to carry out training activities, in close collaboration with academic training services, to ensure the formation of digital competencies (skills) that are a factor in the development of the digital economy. 2. digital literacy programs for digital education the development of a digital education model as a factor in improving the effectiveness of digital literacy contributes to the development of the digital economy. therefore, a model of effective professional development of teachers using digital technologies should be developed to improve teaching practice. various international organizations have developed programs for the implementation of digital literacy of digital education: 1. digital technologies for teaching (t4t) is a world bank program that helps countries implement effective teacher professional development programs that use technology solutions to train and support teachers. 2. refugee education development program. the unhcr refugee education report 2022, based on data from more than 40 countries, provides baltic journal of economic studies 57 vol. 9 no. 1, 2023 a clear picture of the state of refugee education. the document shows how refugee children and youth lag behind their peers in access to inclusive, quality education. 3. learning management systems for education. the world bank has developed guides on specific edtech topics aimed at providing digital education knowledge to improve digital learning skills. the learning management systems (lms) program is designed to serve as a starting point in the decisionmaking process to determine the best course of action for selecting and implementing an online learning platform. profuturo was highlighted as an example of good practice in the selection process for a new digital educational resource platform, including design, development, piloting and information gathering to ensure appropriate selection. the knowledge package includes teacher competencies and competency frameworks for distance and blended learning. profuturo was selected as an example of a framework that details what teachers need to know and do to improve their roles and develop their digital skills. 4. the global coalition for education's transformative innovation program in action. this document, published by unesco as part of the digital education transformation summit, presents a new global collaborative model promoted by the global coalition for education (gce). the program is based on a methodology that mobilizes actors and resources needed to develop proactive responses, coordinates actions to maximize impact and ensure efficiency, and provides opportunities for distance learning through a variety of high-tech, low-tech, and non-tech solutions. profuturo is mentioned as a partner of the global education coalition (gec) through its collaboration with the global learning house (glh), which provides free supplemental educational resources for recovery programs to reduce learning gaps created during covid-19, and provides teachers with resources to improve their pedagogical knowledge and practices using information and communication technologies (ict). 5. consultation programs on digital technologies and digital education in the 2023 gem report іn june, the international teachers' task force on education 2030 and the global education monitor (gem) team held a consultation meeting to gather feedback and input on the proposed research areas for the 2023 education technology report. the consultation focused on how education systems can help teachers effectively use and manage digital technologies, as well as the barriers they face. 6. the un summit on education transformation collected examples of good practices in education that contribute to the achievement of the sdgs, discussing the challenges of digital education and digital skills and the process of their implementation. profuturo was selected as an example of good practice for its innovative approach to digital education, which defines the digital environment in education as a space structured by different technological tools that allow users to access digital resources and services, the digitization of knowledge, artificial intelligence technologies and their application to education. digital technologies are seen as tools that help build digital literacy, create knowledge using digital technologies, and contribute to the development of digital education. digital education is about the approach to these tools, the thoughtful use of digital tools, and the impact of digital tools on learning. these "digital tools" can range from a powerpoint presentation to full moocs, including flipped classrooms. it can include blogging assignments, using social media in the classroom, creating curriculum, and using digital tools to test ideas. it is an attempt to transform teaching and learning through the thoughtful use of digital technologies. as such, it is primarily a critical pedagogical approach that uses digital tools in the classroom and explores their impact on education. digital education encourages teachers to give students the space they need to work independently and creatively, inviting them to create products that demonstrate "their own learning" as well as products that demonstrate knowledge. this emphasis on critical and independent thinking links digital education to the ideas of constructivism: students learn best when they are active participants rather than passive recipients of knowledge. learning is a social process, and the goal of teaching and learning is to provide students with a series of experiences that facilitate their connections and knowledge construction. the process of digital education itself revolves around three main ideas: collaborative learning, free will, and transformative learning. 3. educational platforms as factors in the formation of digital education and digital literacy the following can be distinguished between educational platforms as factors in the formation of digital education and digital literacy. educational platforms as factors in the formation of digital education consider the content, including concepts and skills, methods that they can use to achieve content goals. educators decide which technology can support content and instruction by asking three important questions: what will students learn, or what knowledge can they gain? what method(s) will help students achieve these goals? what tools and resources will students need to be successful? the use of technology can force teachers to see knowledge as dynamic and to rethink their role as interactive rather baltic journal of economic studies 58 vol. 9 no. 1, 2023 than prescriptive, finding opportunities for students to drive learning: 1. kahoot is an educational platform that offers question-based games. with this educational tool, teachers can create quizzes, discussions, or polls to supplement classroom instruction. the material is projected in the classroom, and students answer questions as they play and learn, promoting game based learning, increasing student engagement, and creating a dynamic, social, and fun learning environment. 2. classdojo is a digital classroom tool that improves student behavior by giving teachers instant feedback to their students and rewarding good classroom behavior with points. the program provides students with real-time notifications such as "bravo, david!" and "+1" for collaborative work. the collected information on student behavior can later be shared with parents and administrators via the internet. 3. edmodo is an educational tool that brings teachers and students together and is similar to a social network. it allows teachers to create online groups for collaboration, distribute educational materials, measure student performance, and communicate with parents. 4. project is a digital tool that allows users to create multimedia presentations. it also has dynamic slides where students can include interactive maps, links, online quizzes, twitter graphs, and videos, among others. during class, teachers can share academic presentations with students that are visually customized for different devices. 5. padlet is a digital bulletin board that allows participants (students and teachers) to post by attaching various images, videos, text files, links, etc. 6. padlet software tools motivate students to collaborate and think as a team, so customize the background and control who has access to the table. the biggest benefit of all these changes is that today 's students are going into the future with open minds and unlimited possibilities. 4. high quality, inclusive and accessible digital education as a factor of adaptation to the digital age the word "digital" is both a noun and a polysemous adjective with multiple meanings. the larousse dictionary states that digital is the representation of information or physical quantities by means of symbols, such as numbers, or by means of signals with discrete values. it refers to systems, devices, or processes that use this form of discrete representation, as opposed to analog. the term has become established in technical and scientific literature. digital refers to all programs that classify, sort, and distribute data. this term includes interfaces, smartphones, tablets, computers, televisions, and networks that transmit data. digital technology is a whole that includes tools, content, and use. digital practice is a specific human activity in sociotechnical environments based on information and communication technologies. as digital information becomes more accessible, students are confronted with a mass of data whose relevance is difficult to assess. they learn to critically analyze information from the media. the blog helps build social cohesion in the group and encourages authors to create and share. studies have evaluated three educational uses of a blog: 1) teaching students project management; 2) written expression in a foreign language; 3) peer support and assistance for new teachers. the digital agenda for education (2021–2027) is an updated policy initiative of the european union (eu) that sets out a common vision for high quality, inclusive and accessible digital education in europe and aims to support the adaptation of member states' education and training systems to the digital age. the action plan, adopted on september 30, 2020, is a call for greater cooperation at the european level in the field of digital education to overcome the challenges and opportunities of the covid-19 pandemic, to present opportunities for the educational and professional community (teachers, students) at the national, european and international levels. the digital education framework (2021-2027) promotes the development of digital education and digital literacy for the next generation, with the aim of creating a more sustainable, digital and resilient european union (nikitenko, voronkova, andriukaitiene, et al., 2021). the concept of digital education is a key factor in the realization of the european education area by 2027. it contributes to the objectives of the european skills plan, the european social action plan and the digital compass 2030: the european way for the digital decade. the commission has established the european digital education center, which has strengthened cooperation and exchange in the field of digital education at eu level. the digital transformation has transformed society and the economy, having a deeper impact on everyday life, and has demonstrated the need for higher levels of digital literacy in education and training systems and institutions. the covid-19 pandemic has accelerated the trend towards online and hybrid learning, opening up new and innovative ways for students and teachers to organize their teaching and learning activities and to interact more flexibly online. these changes have required a determined and coordinated effort at the eu level to support education and training systems in addressing the challenges identified and exacerbated by the covid-19 pandemic, while at the same time providing a longterm vision for the european digital education pathway (nikitenko, voronkova, oleksenko, et al., 2022). a 2018 study by the organization for economic cooperation and development (oecd) found that, baltic journal of economic studies 59 vol. 9 no. 1, 2023 on average, less than 40% of educators across the eu feel ready to use digital technologies in learning, with differences between eu member states; more than a third of 13and 14-year-olds participating in the 2018 international computer and information literacy study (icils) lacked basic digital skills; a quarter of low-income households do not have access to computers and broadband, with differences across the eu affected by household income (eurostat, 2019); 95% of respondents to the open public consultation on the digital education action plan believe that the covid-19 pandemic marks a turning point in the use of technology in education and training. the concept of digital education encompasses both its potential and its risks, which have serious implications for teachers, researchers, educational staff and students. to ensure that these risks are taken into account, it is necessary to define a legal and regulatory framework for digital technologies that guarantees transparency, nondiscrimination, accountability, data protection, intellectual property, cybersecurity, democracy, and freedom of action and choice. such an approach is essential to facilitate the development of the full potential of digital education in the digital age (nesterenko, oleksenko, 2020). 5. the impact of digital education and digital literacy on the development of the digital economy with the deepening of the fourth industrial revolution, new generation digital technologies such as big data, artificial intelligence and blockchain have been vigorously developed and applied, and the development of human society has comprehensively entered the digital era. the programs of eu countries have developed a comprehensive digital development deployment to accelerate the pace of building a digital society, adapting to the new trend of digital technologies integrated into the digital society. digital transformation has become a revolutionary force for countries to promote the modernization process and achieve effective governance. the share of digital transformation in global gdp is growing, and it has become a stabilizer of the economic downturn in the post-epidemic era. although digital transformation has given a new impetus to global economic digital development, it requires joint construction, education management. digital transformation has safeguarded the continued growth of the global economy, but the huge difference in the speed of transformation has also created new development challenges. to promote the coordinated development of the digital society, it is necessary to strengthen coordination and cooperation among different countries, governments and markets to achieve higher quality, more equitable and sustainable development based on digital innovation, so that the results of digital transformation can truly benefit ordinary people. the digital divide creates new inequalities as it becomes a barrier to digital use due to insufficient digital access opportunities, such as the internet (oleksenko, 2017). all this can lead to a new digital divide. for example, the lack of digital skills among the elderly, the lack of digital education in remote rural areas, the problem of teenagers addicted to the internet, the income gap caused by the level of digital literacy. the grand design of the digital society is gradually becoming a reality. the digital era has brought new meaning to people and the environment. digital transformation is the innovation of production methods, which has led to digital operations can be organized and managed through "one-stop shopping", "digital twin city " and "digital earth model". big data is a new stage in the development of informatization, the full realization of a new concept of progress. information technologies and their application in all aspects of economic and social development contribute to data (information) becoming an important strategic resource after material and energy resources. digital education lays the foundation for realizing the acquisition and accumulation of data resources; the network construction platform facilitates the circulation and aggregation of data resources; the possibilities of intelligent display through data integration and analysis represent digital intelligence. the digital economy refers to a set of economic activities with digital knowledge and information as key production factors, a modern information network as an important carrier, and the effective use of information and communication technology as an important driving force to improve efficiency and optimize economic structure. large data resources and advanced big data technologies are necessary conditions for promoting the development of the digital economy in the new stage of informatization (cherep, voronkova, et al., 2022). 6. conclusions digital education in europe promotes public private partnerships and integrates digital skills into the overall mission of education and teaching methods. at the same time, digital literacy is far from being able to secure the digital economy, as it is only one component of a complex ecosystem aimed at ensuring the proper use of digital technologies and quality education for all. despite the desire to innovate in their teaching methods, including through digital technologies, appropriate training opportunities for teachers and researchers remain insufficient. initial teacher training programs are often outdated and do not provide teachers with the digital skills that should be integrated into their teaching methods. digital literacy can serve as a complementary learning tool and should not be seen as a cheap alternative to high-quality initial teacher baltic journal of economic studies 60 vol. 9 no. 1, 2023 education and professional development. digital educational tools should be designed and used in the best way to meet the specific professional and educational needs of students, teachers and researchers, while respecting professional autonomy and academic freedom of teaching, so that teachers and students, especially those from the most vulnerable groups, have equitable access to digital technologies and ict tools. to achieve this goal, national governments need to plan sustainable public investments that have an impact and are effective enough to meet the pedagogical needs of teachers, researchers, educational staff and students. significant contribution to digital tools and software. in order to achieve this goal, national governments need to plan sustainable public investments that have an impact and are effective enough to meet the pedagogical needs of teachers, researchers, educational staff and students. significant contribution to digital tools and software. the availability of digital technologies creates a common set of services and architectures to host complementary products, including digital artifacts, digital platforms help generate ideas, identify and allocate resources, exploit digital market opportunities, gather information, and create innovations to meet the growing needs of users. references: andriukaitiene, r ., voronkova, v., & nikitenko, v. 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(2022). humanocracy as a factor of improving human resources management in organizations. humanities studies, 10 (87), 134–141. received on: 17th of january, 2023 accepted on: 20th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 196 vol. 3, no. 5, 2017 corresponding author: 1 department of business economy, mykolayiv national agrarian university. e-mail: kotikova@i.ua 2 department of business economy, mykolayiv national agrarian university. e-mail: aalbeschenko@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-196-202 an indication of the sustainable development of ukraine in global dimensions olena kotykova1, oleksii albeshchenko2 mykolayiv national agrarian university, ukraine abstract. the urgency of the research. in the early 90s of the last century, economists and scientists attributed ukraine to the undisputed leaders due to the existing resource potential and predicted its rapid economic growth. unfortunately, the predictions have not come true: over the last 25 years, ukraine has lost its advantages on certain indicators. as for the positions, which have been saved, ukraine should pay the unreasonably high price by the ecological and social conditions deterioration. target setting. the question is how the other countries have coped with these problems. moreover, in our opinion, the most valuable experience is the experience of post-socialist countries, which had the same problems as ukraine had like adaptation problems to the market environment. recent scientific researches and issues analysis. the most authoritative foreign researchers on the sustainable development problems are donella h. meadows, g. brundtland, м. ashby, n. droste, k. fiorella and others. the most authoritative researchers on the sustainable development problems in ukraine are mykhailo zghurovskyi and his project performers. uninvestigated parts of general matters defining. however, these researchers did not conduct the investigations of indication of the sustainable development of ukraine in comparison with the countries of post-socialist camp. the research objective. the survey target is a comprehensive study of ukraine in the global dimension of sustainable development index: the implementation of post-socialist countries ranking placement in the indices of economic, social and environmental dimension, the index of a sustainability, the index of economic measurement and index of harmonization, the components of quality of life and safety of life; the analysis of placement in these spaces in order to find patterns and distinctive features for a particular group of countries; setting of the countries’ placement features in the above mentioned spaces and the comparison of groups with ukraine. the statement of basic materials. the article deals with the author’s research results about ukraine’s place in the sustainable development measuring global index. the valuation is performed by measuring metric indices of sustainable development in the space of three pillars (economic, environmental, and social) in the context of quality and safety of life. conclusions. performed the ranking of the post-socialist states’ placement in the space of sustainable development index. the analysis of placement in these spaces in order to find patterns and distinctive features for a particular group of countries is made. peculiarities of the placement in the abovementioned spaces are outlined, and the comparison of these groups with ukraine is given. key words: sustainable development, quality of life, safety of life, social measurement index, economic measurement index, environmental measurement index. jel classification: р27, о57 1. introduction in the early 90s of the last century, after the collapse of the soviet union, assessing the prospects for the future development of the countries, the former republics, economists and scientists (heiets at al., 2003; shulha, 2009; petryshyna, 2014; harvard university, 1998; oxford university press, 2000) attributed ukraine to the undisputed leaders due to the existing resource potential and predicted its rapid economic growth. unfortunately, the predictions have not come true: over the last 25 years, ukraine has lost its advantages on certain indicators. as for the positions which have been saved, ukraine should pay the unreasonably high price by the ecological and social conditions deterioration. for example, among the countries of the former soviet union, ukraine, along with russia and belarus, has still a negative rate of natural population growth. however, if the population decline in belarus decreased from 41 to 11 thousand people from 2000 to 2012 (national statistical committee of the republic of belarus, baltic journal of economic studies 197 vol. 3, no. 5, 2017 2016), the population decline in russia decreased from 958 to 4 thousand people (russian federation federal state statistics service, 2016), but in ukraine for this period of time the population decline decreased from 373 to 142 thousand people (state statistics service of ukraine, 2015). and the reason for this population decline in ukraine is a prevailing rate of mortality compared to birth. this fact can have both objective and subjective preconditions. the objective preconditions are as follows: the country’s low level of medical care and physical culture, poor quality of food and drinking water, no proper living conditions for life. the subjective preconditions are as follows: young people do not want to give birth, and not because they do not like children, but because they do not see their children’s prospects. the question is how the other countries have coped with these problems. moreover, in our opinion, the most valuable experience is the experience of post-socialist countries, which had the same problems as ukraine had like problems of adaptation to the market environment, the formation of the political system, the establishment of private ownership, inefficient administrative management, irrational use of natural resources (use of energy-intensive technologies) and so on. 2. research objective and methodology the survey target is a comprehensive study of ukraine in the global dimension of sustainable development index: the implementation of post-socialist countries ranking placement in the indices of economic, social and environmental dimension, the index of a sustainability, the index of economic measurement and index of harmonization, components of quality of life and safety of life; the analysis of the placement in these spaces in order to find patterns and distinctive features for a particular group of countries; setting of the countries’ placement features in the abovementioned spaces, and the comparison of groups with ukraine. the assessment is carried out by the sustainability measuring metrics indices in the space of three components (economic, environmental, and social) in the context of quality and safety of life. the abovementioned metrics is developed by the institute for applied systems analysis of the national academy of sciences of ukraine and the ministry of education and science of ukraine. the methodology of evaluation and the analysis of sustainability, which is used in this study, include a model of sustainability, which is an interdisciplinary generalization of the models, which are known in the scientific, economic, and social fields of science and the technique of applying formal statistical methods and methods for expert evaluation to analyse the processes of sustainability. according to this methodology, the process of sustainability will be characterized by two main components: safety (csl) and quality (cql) of life (icsu, 2013). the index of sustainability is a quantitative measure of sustainability, taking into account the safety and quality of life. the quality of life component is an integrated assessment that considers together all the three dimensions of sustainability and, thus, reflects the inseparable relationship between the three spheres of society: economic, environmental, and social. the degree of sustainability harmonization reflects the balance between the economic, environmental, social, and institutional dimensions. the security of life component is an integrated assessment, which takes into account the total aggregate threats impact to the regions’ sustainability, and the index of the region’s vulnerability, in addition to the impact of the aggregate threats, reflects the degree of approximation of the region both to all threats in space, defined by minkowski norm (icsu, 2013). 3. research result according to the index of sustainability (table 1), in 2007, ukraine ranked the 72nd place among all the world countries. the index of sustainability in the country was 1,808, which is close to the index in south africa, bosnia and herzegovina, sri lanka, guatemala, tanzania. table 1 indexes of sustainability, quality and safety of life in post-socialist countries for 2007 country code for alpha-2 index of sustainability quality of life component index of life safety su st . d ev el op m en t in de x va lu e r an k am on g a ll co un tr ie s o f t he w or ld q ua lit y of li fe co m po ne nt v al ue r an k am on g a ll co un tr ie s o f t he w or ld en vi ro nm en ta l m ea su re m en t in de x ec on om ic m ea su re m en t in de x so ci al m ea su re m en t in de x th e de gr ee o f ha rm on iz at io n sa fe ty o f l ife in de x va lu e r an k am on g a ll co un tr ie s o f t he w or ld lt 2,397 23 1,159 21 0,676 0,683 0,649 0,978 1,238 36 bg 2,112 43 0,887 47 0,435 0,474 0,627 0,840 1,225 38 cz 2,206 37 0,959 40 0,345 0,623 0,693 0,735 1,247 34 pl 1,949 55 0,788 59 0,306 0,425 0,634 0,711 1,162 57 hr 2,300 32 1,035 32 0,690 0,402 0,699 0,773 1,265 32 sk 2,324 28 1,038 31 0,513 0,630 0,656 0,897 1,285 26 baltic journal of economic studies 198 vol. 3, no. 5, 2017 among the group of post-socialist countries, ukraine took the 16th place, ahead of the kyrgyz republic, tajikistan, and uzbekistan. according to the quality of life component value in 2007, ukraine ranked the 75th place in the world, giving the way to such countries as the republic of lithuania, bulgaria, poland, croatia, estonia, latvia, czech republic, slovakia, romania by the index. the worst value was recorded in the index of economic and environmental dimensions, where ukraine was ahead of only two countries – uzbekistan and tajikistan. according to the safety of life index value in 2007, ukraine ranked the 64th place in the world and the 13th place among the post-socialist countries, ahead of romania, georgia, kyrgyzstan, uzbekistan, and tajikistan. then, in 2007, ukraine was among five outsiders in terms of sustainability and quality of life component for all indicators except the social dimension index (fig. 1). 0 1 2 3 ee lv lt sk hr am cz ru bg pl ro ge kz md az ua kg tj uz index of sustainability quality of life component index of life safety fig. 1. indexes of sustainability, quality, and safety of human life rated in post-socialist countries for 2007 source: made by the author (global analysis of the quality and safety of human life, 2016) in 2010, ukraine’s place in the global ranking on the index of sustainability increased by three points. among the group of post-socialist countries, ukraine ranked just the 16th place, and like last year, it was at the top of five outsiders in all indicators except social dimension and life safety indices (table 2). ee 2,531 19 1,246 16 0,659 0,820 0,679 0,900 1,285 26 lv 2,412 22 1,145 23 0,712 0,605 0,667 0,934 1,267 30 ro 1,941 57 0,815 55 0,335 0,474 0,602 0,772 1,126 70 md 1,876 65 0,759 64 0,469 0,355 0,490 0,866 1,117 77 ua 1,808 72 0,659 75 0,299 0,331 0,511 0,759 1,149 64 ge 1,911 59 0,832 54 0,477 0,514 0,450 0,945 1,080 88 am 2,237 35 1,050 29 0,761 0,344 0,712 0,702 1,188 48 ru 2,142 40 0,795 58 0,604 0,337 0,435 0,764 1,347 18 kg 1,703 85 0,611 83 0,392 0,351 0,315 0,911 1,092 85 az 1,820 69 0,621 78 0,315 0,369 0,392 0,911 1,199 44 uz 1,516 101 0,412 104 0,119 0,279 0,316 0,655 1,104 81 kz 1,896 60 0,699 69 0,397 0,427 0,387 0,958 1,197 45 tj 1,555 99 0,437 101 0,177 0,288 0,291 0,793 1,118 75 source: made by the author (global analysis of the quality and safety of human life, 2016) table 2 indexes of sustainability, quality, and safety of life in post-socialist countries for 2010 country code for alpha-2 index of sustainability quality of life component index of life safety su st . d ev el op m en t in de x va lu e r an k am on g al l c ou nt ri es o f th e w or ld q ua lit y of li fe co m po ne nt va lu e r an k am on g al l c ou nt ri es o f th e w or ld en vi ro nm en ta l m ea su re m en t in de x ec on om ic m ea su re m en t in de x so ci al m ea su re m en t in de x th e de gr ee o f ha rm on iz at io n sa fe ty o f l ife in de x va lu e r an k am on g al l c ou nt ri es o f th e w or ld lt 2,350 31 1,125 26 0,646 0,615 0,686 0,955 1,225 39 bg 2,129 45 0,932 47 0,525 0,472 0,617 0,892 1,197 46 cz 2,425 22 1,214 21 0,709 0,669 0,725 0,967 1,211 41 pl 2,235 38 1,009 37 0,538 0,535 0,675 0,888 1,226 38 hr 2,268 34 1,000 38 0,653 0,435 0,645 0,827 1,267 29 sk 2,408 23 1,176 23 0,757 0,611 0,669 0,912 1,232 33 ee 2,392 25 1,121 27 0,553 0,703 0,686 0,896 1,271 27 lv 2,325 33 1,095 30 0,724 0,526 0,646 0,872 1,230 34 ro 2,091 50 0,992 40 0,620 0,510 0,589 0,920 1,099 84 md 1,713 83 0,619 83 0,445 0,146 0,481 0,602 1,094 87 ua 1,866 69 0,714 73 0,432 0,294 0,511 0,786 1,152 65 ge 2,015 56 0,876 49 0,549 0,535 0,432 0,897 1,139 67 am 2,051 52 0,860 52 0,493 0,325 0,671 0,723 1,191 48 ru 2,093 49 0,740 69 0,497 0,358 0,427 0,868 1,353 15 end of table baltic journal of economic studies 199 vol. 3, no. 5, 2017 in 2011–2012, ukraine’s position in the global dimension according to the sustainability index remained unchanged (table 3). among the post-socialist countries, ukraine climbs one step in the ranking index of environmental measurement with simultaneous fall in the unit of the rating value according to the index of the economic dimension. during this period in the overall ranking, ukraine’s position improved significantly according to the social dimension indicator, but the index value decreased. in the period of 2010–2011, ukraine closed the top five outsiders rating among the post-socialist countries. in 2013, according to the global rating, ukraine lost five positions, but the sustainability index value increased from 1,836 to 1,865 (table 4). thus, ukraine was among top five outsiders according to the quality of life components, namely, the economic dimension index and the degree of harmonization (fig. 2). 0 0,5 1 1,5 2 2,5 lv cz ee lt pl sk hr bg ge ro am ru kz ua az md kg uz tj index of sustainability quality of life component index of life safety fig. 2. indexes of sustainability, quality, and safety of life rated in post-socialist countries for 2013 source: grouped by the author (global analysis of the quality and safety of human life, 2016) from 2005 to 2013, ukraine’s position in the rating table on sustainability decreased from the 47th place in 2005 to the 74th place in 2013 (fig. 3). kg 1,774 75 0,653 78 0,463 0,359 0,308 0,830 1,121 77 az 1,961 60 0,761 65 0,451 0,474 0,394 0,923 1,199 44 uz 2,636 13 1,268 16 0,546 0,851 0,801 0,819 1,368 13 kz 1,907 64 0,720 72 0,413 0,464 0,370 0,907 1,187 50 tj 1,562 97 0,493 92 0,295 0,264 0,296 0,948 1,069 94 source: made by the author (global analysis of the quality and safety of human life, 2016) table 3 indexes of sustainability, quality, and safety of life in post-socialist countries for 2011–2012 country code for alpha-2 index of sustainability quality of life component index of life safety su st . d ev el op m en t in de x va lu e r an k am on g al l co un tr ie s o f t he w or ld q ua lit y of li fe co m po ne nt va lu e r an k am on g al l co un tr ie s o f t he w or ld en vi ro nm en ta l m ea su re m en t in de x ec on om ic m ea su re m en t in de x so ci al m ea su re m en t in de x th e de gr ee o f ha rm on iz at io n sa fe ty o f l ife in de x va lu e r an k am on g al l co un tr ie s o f t he w or ld lt 2,328 33 1,118 29 0,647 0,630 0,659 0,982 1,210 43 bg 2,101 47 0,965 44 0,527 0,503 0,642 0,892 1,136 70 cz 2,425 22 1,206 18 0,709 0,660 0,720 0,962 1,220 38 pl 2,282 35 1,039 37 0,539 0,571 0,690 0,892 1,243 31 hr 2,244 39 1,003 39 0,654 0,437 0,647 0,828 1,241 32 sk 2,396 24 1,161 23 0,757 0,585 0,670 0,895 1,235 34 ee 2,400 23 1,131 26 0,554 0,715 0,690 0,892 1,269 28 lv 2,336 32 1,098 31 0,725 0,517 0,661 0,864 1,238 33 ro 2,149 44 1,003 39 0,621 0,508 0,610 0,912 1,145 66 md 1,790 74 0,695 73 0,447 0,337 0,421 0,884 1,094 88 ua 1,836 69 0,686 74 0,434 0,255 0,500 0,745 1,149 64 ge 2,032 54 0,884 49 0,550 0,517 0,464 0,930 1,147 65 am 2,029 55 0,805 58 0,481 0,490 0,423 0,937 1,224 36 ru 0,296 50 0,743 67 0,498 0,359 0,429 0,868 1,353 15 kg 1,755 77 0,660 77 0,465 0,339 0,339 0,845 1,095 87 az 1,913 64 0,792 62 0,452 0,470 0,449 0,980 1,121 73 uz 1,438 103 0,390 100 0,162 0,204 0,310 0,730 1,048 100 kz 1,962 60 0,741 68 0,415 0,466 0,403 0,936 1,221 37 tj 1,624 89 0,473 91 0,296 0,256 0,266 0,938 1,151 62 source: made by the author (global analysis of the quality and safety of human life, 2016) end of table baltic journal of economic studies 200 vol. 3, no. 5, 2017 0,485 0,668 1,808 1,913 1,894 1,866 1,836 1,865 47 51 72 65 71 69 69 74 0 20 40 60 80 0 0,5 1 1,5 2 2,5 20 05 20 06 20 07 20 08 20 09 20 10 20 11 -2 01 2 20 13 index of sustainability the rating place of ukraine fig. 3. dynamics of ukraine’s rating place in the global dimension according to the index of sustainability (2005–2013) source: grouped by the author (global analysis of the quality and safety of human life, 2016) though the value of the indicator increased to 2008, the rating fell. this situation is explained by two factors: firstly, to 2007 the calculation method of sustainability index was somewhat different, but this factor does not affect the rating of the country’s place in the world; secondly, in other countries the increase of sustainability index is well ahead of the pace in ukraine, which allows them to climb the rating table. ukraine has reached a rather high level according to the components of inequality between countries and people and the limit of water use compared to other post-socialist countries. according to these indicators, the country takes the third place. ukraine has average values according to the components of energy security and child mortality – the 7th and the 9th places in the ranking, respectively. the worst situation in the country, according to the components of quality of life, is with the indicators of corruption level and the level of global diseases. according to these indicators, ukraine ranked the 16th and the 15th places respectively, and it is slightly ahead of the kyrgyz republic, tajikistan, and uzbekistan (fig. 4). 0 2 4 6 8 10 12 14 16 18 0 0,2 0,4 0,6 0,8 1 1,2 e ne rg y se cu ri ty t he b io lo gi ca l ba la nc e c or ru pt io n le ve l in eq ua lit y be tw ee n co un tr ie s an d pe op le c o 2 em is si on s c hi ld m or ta lit y n at ur al d is as te rs po lit ic al s ta bi lit y t he le ve l o f g lo ba l di se as es t he li m it of th e w at er us e min ua max rating place fig. 4. the rating place of ukraine among the post-socialist countries according to the safety of life components source: grouped by the author (global analysis of the quality and safety of human life, 2016) table 4 indexes of sustainability, quality, and safety of life in post-socialist countries for 2013 country code for alpha-2 index of sustainability quality of life component index of life safety su st . d ev el op m en t in de x va lu e r an k am on g al l c ou nt ri es o f th e w or ld q ua lit y of li fe co m po ne nt va lu e r an k am on g al l c ou nt ri es o f th e w or ld en vi ro nm en ta l m ea su re m en t in de x ec on om ic m ea su re m en t in de x so ci al m ea su re m en t in de x th e de gr ee o f ha rm on iz at io n sa fe ty o f l ife in de x va lu e r an k am on g al l c ou nt ri es o f th e w or ld lt 2,437 29 1,209 25 0,772 0,642 0,674 0,917 1,227 42 bg 2,156 47 1,018 43 0,558 0,540 0,659 0,907 1,138 80 cz 2,480 23 1,237 21 0,758 0,648 0,732 0,931 1,243 37 pl 2,437 29 1,171 29 0,732 0,591 0,698 0,907 1,266 33 hr 2,301 40 1,090 35 0,746 0,435 0,665 0,780 1,211 46 sk 2,403 32 1,177 27 0,792 0,547 0,678 0,845 1,226 43 ee 2,478 24 1,142 31 0,552 0,709 0,708 0,885 1,336 18 lv 2,499 21 1,225 22 0,851 0,559 0,682 0,822 1,273 30 ro 2,069 54 0,869 54 0,350 0,503 0,616 0,771 1,200 50 md 1,778 90 0,626 91 0,278 0,346 0,442 0,805 1,152 66 ua 1,865 74 0,669 85 0,303 0,299 0,517 0,721 1,196 51 ge 2,149 49 0,957 49 0,573 0,585 0,494 0,924 1,193 53 am 2,020 56 0,771 65 0,330 0,536 0,444 0,800 1,249 35 ru 2,008 57 0,660 86 0,283 0,357 0,447 0,778 1,349 16 kg 1,652 98 0,562 99 0,303 0,317 0,351 0,935 1,090 96 az 1,824 84 0,713 74 0,236 0,491 0,461 0,706 1,110 89 uz 1,428 112 0,402 111 0,088 0,211 0,331 0,537 1,025 111 kz 1,923 68 0,691 81 0,094 0,534 0,429 0,488 1,232 40 tj 1,600 104 0,451 107 0,162 0,305 0,289 0,740 1,149 70 source: grouped by the author (global analysis of the quality and safety of human life, 2016) baltic journal of economic studies 201 vol. 3, no. 5, 2017 4. conclusion from the abovementioned, we can conclude the following. ukraine, which in the late 80s had one of the best starting points for the countries of the group, was constantly losing the advantages of its economy, basic science, advanced education, quality of human capital. thus, according to the world data center for geoinformatics and sustainability (wdc-iasaforesight, 2016), during the years of independence, the ukraine’s economic downturn was at around 60% of the achieved production in 1991, which is comparable to the losses during the second world war of the german, japan, and the ussr economy. however, the economies of these countries reached the pre-war level indicators for about seven years, but the economy of ukraine during the years of its independence fell from the 8th-10th places in europe in 1991 to almost the last one. the fact that worries is that ukraine almost according to all defining indices, indicators, and sustainability indicators is significantly inferiors not only to the world leaders but to the most post-socialist countries, which were taken for comparison. during the study period, the republic of lithuania, estonia, and latvia (except 2010) kept a stable position of five post-socialist countries with the highest rating according to the index of sustainability. instead, ukraine (except 2013) according to the index of sustainability was one of the five outsiders of the group of countries with the kyrgyz republic, tajikistan, and uzbekistan (except 2010). to determine the future orientations of ukraine’s development, both threats and possibilities should be considered. ukraine’s objective advantage is its favourable geographical and geopolitical position. as for the labour potential availability and use, ukraine has significant advantages compared to other postsoviet countries – 42 million of the highly educated population (according to the uno the education enrolment rate in ukraine is 94%). being located on the shores of the black and azov seas, with a powerful gas and transport network in transit, ukraine is a “silk road” for energy, cultural, and commercial exchange between east and west. as for its territory, ukraine ranks the second place in europe (over 600 thousand square kilometres), which determines the optimal size for the accelerated development of the area. the availability of the significant land resource potential (a fertile soil and its large area), an impressive diversity of soil and climatic conditions provide considerable advantages in the development of agrarian and food sectors of the country’s economy. a high capacity by the bioclimatic potential for the people’s life creates the necessary conditions for the growth of the quality of life social component of the country’s population. it is important for ukraine to avoid fundamental mistakes. the risk is that much easier to prefer the successful “template”, particularly a visually attractive economic development, without a united, holistic model of environmental and social spheres. moreover, the implementation of sustainability concept does not guarantee the rapid growth of human welfare but will require hard work and consolidated efforts of politicians, managers, scientists, and all progressive people of ukraine. another condition for sustainability is the political will of the state’s senior management to go a hard, but the only correct way. the crisis of ukraine’s national ideology and strategy of development, which is delayed, can play a positive role. this is the role of the “blank page”, which gives ukraine a chance to use the best of the acquired by the international community. this is the experience of a harmonious and sustainable development of the society, in which people’s welfare, the environment, natural resources, and human capital embodied in the achievements of science, education, advanced technologies, and high moral values are the inseparable, equal, and mutually complementary categories, the ones that enrich each other. based on the results of the research and relying on the expert opinions of such international organizations and scientific and educational centres as the international council for science (ics, 2011), unido (unido – united nations industrial development organization, 2001) and the world’s leading universities and research universities such as oxford university, nistep (national institute of science and technology policy, japan), institute for critical technology and applied science (virginia tech), wageningen ur (research university, the netherlands), it should be noted that for ukraine the solution of the defined socio-economic and environmental problems involves changing the technological structure of the country’s development. these technologies include those associated with alternative energy (in the ranking of the world’s countries, according to the share of renewable energy, ukraine is among ten countries-outsiders), biotechnology, information and communication technology, the study of life and new materials. the priority areas for the development of these technologies should be the following: information and communication; electronics; the study of life; health care, medical care, and social security (ukraine ranks the 61st place in the world according to the global diseases indicator); agriculture, forestry, fishery and food; energy and resources; environment; nanotechnology and new materials; production and industrial infrastructure; social infrastructure; social technologies. we are deeply convinced (and this is confirmed by the results of the study) that corruption is one of the major obstacles to the economic growth and social development of ukraine’s society. corruption is one of the most pressing social problems, a phenomenon, which is formed as a method of government officials, politicians, and public officials, established for a considerable period of time on the level of mentality. however, to solve this problem without the political baltic journal of economic studies 202 vol. 3, no. 5, 2017 will of those who are in power is impossible. so, the immediate measures should be directed to: extensive economy liberalization (the cancellation of the most matching bodies in the economy and society, the reduction in the number of employees in these units); strengthening of responsibility for the avoiding of public reporting on profits and expenditures made by persons connected with the public service, for their close family members, or persons treated like them; tax reform and liberalization of the tax system should be carried out simultaneously with the increasing responsibility of individuals and entities for the violation of tax legislation; the transition to a civilized land market with the simultaneous solving of problems on the creation of local financial and credit system and insurance system for aic, including land bank, small and medium farmers, agribusiness transition to higher technological modes. references: zghurovskyi, m. 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(2000). ukraine. the search for a national identity, oxford: oxford university press. baltic journal of economic studies 47 vol. 3, no. 3, 2017 corresponding author: 1 department of finance and banking, state higher educational establishment “priazovsky state technical university”. e-mail: mints_a_y@pstu.edu classification of tasks of data mining and data processing in the economy aleksey mints1 state higher educational establishment “priazovsky state technical university”, ukraine abstract. the subject of the paper is methods of classification of data mining and data processing tasks in the economy, as well as their classification characteristics. methodology. the research used the general scientific methodology of analysis, synthesis, generalization, comparison. taxonomy methods are used in the compilation of the classification. the selection of actual economic problems is carried out by researching scientific publications on analysis and data processing. the purpose of the article is to compile an actual classification of data mining and data processing tasks in the economy and to refine the terminology of this branch of science. results. the classification of data mining tasks is proposed, consisting of four levels. all economic tasks of data mining are divided into two large groups: predictive and descriptive. each group is subdivided into several classes, which combine tasks with similar taxonomic features. these are the classes of tasks classification, regression, clustering, link analysis, and outlier analysis. classes of tasks are divided into types. an important criterion for this is the dimensionality of the input data representation. it means the number of neighbours for each individual data element. the data can be presented in the form of series, matrices, and graphs. the methods of analysing each form of data presentation vary considerably. the definition of data processing is clarified and a classification of relevant tasks is proposed. at the top level of classification, the data processing tasks are divided into two groups, depending on whether the order of the elements in the input data changes or not. the main classes of data processing tasks are identified, such as ranking, sorting, filtering, cleansing, recovery, and quantization. practical use. the results of the research can be used to model intellectual decision-support systems. they allow improving the processes of problem formulation in data mining and data processing tasks. also, it helps in the formalization of the procedures for selecting methods of their solutions. this leads to an increase in economic efficiency. key words: data mining, data processing, classification, economical tasks, regression, clustering, link analysis, outlier analysis. jel classification: b41, c10, c45, c80 1. introduction systematization and classification are the most important components of scientific research and in a number of sources are considered as one of the main functions of science. work on the systematization of knowledge contributes to the development of science and its transition from the empirical to the system level. if the classification is based on objectively existing (natural) signs, then it itself can be an instrument of scientific knowledge and serve to obtain new knowledge and patterns. at the present time, the theory and practice of intelligent computing are rapidly developing. there are constantly emerging new applications of the data mining and data processing. however, for the classification of these tasks, the methods that are proposed in the last century are still used. they do not take into account many areas of modern research, which complicates the systematization of knowledge in the field of intelligent computing. the current paper aims to compile an actual classification of data mining and data processing tasks in the economy and to refine the terminology of this branch of science. for this, it is necessary to systematize the existing approaches to the classification of data mining tasks. it is needed to select tasks that go beyond the existing classification and to propose natural classification features of data mining tasks in the economy. then it is needed to create a new classification, taking into account the actual economic tasks. similar problems must be solved for the data processing tasks classification. 2. analysis of existing approaches to data mining tasks classification depending on the purpose of the actions performed, it is necessary to select the tasks of data mining and data processing. we will dwell on this classification in detail. baltic journal of economic studies 48 vol. 3, no. 3, 2017 data mining can be defined as the process of translating data into information (larose, 2004). in other words, it is extracting the information from the “raw” data useful to the researcher. these data include the relationships hidden in the data array among its various subsets. by the term data processing we mean the processes of data transformation, that is, actions resulting in a different one from the same data array, with the given properties. the aim of these actions is to “improve” the data within the specified criteria. it should be noted that in the analysis, the dimensionality of the data at the output does not usually depend directly on the dimension of the input sample. at the same time, when processing data, the dimensions of the input and output samples are closely related. the tasks of data mining are divided into two large groups: predictive and descriptive. the predictive tasks are related to the construction of a model that can be used to predict the behaviour of the analysed system in a situation that has not previously been observed. they include the tasks of predicting bankruptcy, forecasting financial time series, and many others. the purpose of solving descriptive problems is to search for hidden regularities in the data, their description, and derivation of rules that can be used in the future to improve work efficiency. therefore, this group of tasks is also called the tasks of structured data mining. these tasks include a large number of marketing tasks related to the analysis of various target groups and the identification of preferences of their participants, the behaviour analysis problems, and others. descriptive and predictive problems should not be considered in isolation. thus, having studied the patterns of behaviour of a certain system within the framework of solving a descriptive problem, the results obtained can also be used to predict its behaviour. currently, data mining tasks usually use different classification options, shown in fig. 1. in this form, it is used in many studies devoted to the problems of data analysis, for example, by (gartner group, 1995), or (neelamadhab, pragnyaban, & panigrahi, 2012), or (larose, 2004). predictive data mining tasks descriptive c lu st er in g a ss oc ia tio n ru le s s um m ar iz at io n s eq ue nt ia l p at te rn m in in g p re di ct io n t im e se rie s an al ys is r eg re ss io n c la ss ifi ca tio n fig. 1. the generally accepted classification of data analysis problems let us consider the set of tasks shown in fig. 1. within the classification tasks, the problem of dividing a certain set of data into a predetermined set of classes is solved. the solution of the classification problem allows not only to study the existing data but also makes it possible to predict the future behaviour of the system. according to the number of classes, into which the input sample is divided, it is necessary to distinguish the problems of binary and polynary classification. with a binary classification, only two classes are allocated in the input sample (more precisely, one class and everything else). the binary classification reduces a large number of economic problems associated with the choice of two alternatives, one of which is interpreted as positive, and the other as negative. for example  – to issue or not to issue a loan; to accept or reject the project; to be or not to be. with a polynary classification, the input sample is divided into three or more classes. examples of such tasks are: pattern recognition, the definition of the borrower’s class, the segmentation of clients into wellknown classes and the like. despite the similarities in the formulations of binary and polynomial classification problems, the methods and tools for their solution vary considerably. solving the problem of regression involves identifying the relationship between independent (input) variables and dependent (output) ones. the essence of the solution is reduced to the derivation of a mathematical formula by a heuristic or analytical way, expressing the relationship between input and output data. the example of a regression problem is to determine the amount of credit that can be given to a client. the aim of solving the prediction problem is to approximate the determination of the values of some indicators in the future on the basis of the given values in the past and present. the examples of tasks of this class are forecasting the growth of the organization, forecasting the implementation of the budget, forecasting the need to recruit new employees, and the like. the purpose of solving the problem of time series analysis is to predict the future values of a certain set of data, where the value of the output variable depends not only on the past values of the variable but also on time. a characteristic feature of time series is the uniform distribution of input data over time. time series analysis is a kind of regression problem but as it uses specific input data and decision methods, it is allocated to a separate class. the problems of this class can be, for example, the study of trends in the stock market for forecasting exchange rate fluctuations. let us move on to the tasks of the descriptive group. w hen solving the clustering problem, it is required to find regularities in the array of input data, to baltic journal of economic studies 49 vol. 3, no. 3, 2017 allocate a number of zones (clusters) in it and to distribute data over these clusters. the task of clustering resembles the classification problem, with the essential difference that the classes themselves are not defined in advance. to solve the clustering problem, learning algorithms without a teacher are used. an example of the task of clustering is the grouping of potential consumers of goods in marketing. another example is the clustering of banks in the country’s banking system to analyse their sustainability. summarization task has become relevant in connection with the development of the internet and a sharp increase in the volume of information resources. the essence of it is to reduce a text document to a short summary that retains the most important points of the original document. in particular, such a task is the automatic compilation of articles annotations for issuing them in the results of search systems. initially, the summarization task was solved solely for test documents but now the scope of its application has expanded and covers all main types of information (images, sound, video). among its applications is a thematic content search, contextual search, identification of materials that violate the interests of rightsholders and legislative restrictions, etc. searching for association rules allows you to establish ties and relationships between variables in large databases. associative rules allow us to find patterns among related events, that is, they give an opportunity to answer the question: “with what probability are events a and b connected?” the sequence of occurrence of events does not matter. a classic example of the application of search algorithms for associative rules is the analysis of the shopping basket. so, bread and milk, tequila and lemon; diapers and baby food are often bought together. this makes it possible to rationally arrange the goods in the store, which increases its throughput and turnover. methods of searching for associative rules find application in medical diagnostics, geological prospecting, and other similar tasks, and at the stage of preliminary analysis of data, they find application in economic problems of all varieties. sequential pattern mining. unlike the search for associative rules, sequential pattern mining implies the identification of cause-effect rules, that is, takes into account the time factor and allows one to answer the question: “ with what probability does occurrence of event a entail event b?” events are usually assumed to be described by discrete values, which distinguishes this task from the task of analysing time series. sequential pattern mining is used, for example, in information and financial security systems to detect fraudulent transactions. 3. clarifying the classification of data mining tasks the classification shown in fig. 1 covers a wide range of urgent economic problems. however, the complexity of socio-economic processes and methods of their analysis constantly causes the emergence of new tasks. thus, in the fundamental research of han, kamber & pei (2012) on the concepts and technologies of data analysis, the problems of identifying fragments in data sequences (subsequences search), searching for data anomalies, the analysis of social networks are considered. the subsequence search function can be considered as a kind of clustering task, as applied to the analysis of dynamic, or time series. within the scope of the task, it is required to select and to find a sequence of data (fragment) corresponding to another sequence (query). in this case, the dimension of the query and the fragment (the number of elements of the series included in them) can vary significantly. a variation of the same problem is the search for fractals, that is, sequences of data that have the property of self-similarity (exact or approximate coincidence of data with its part). fractals can occur in sequences that describe the collective behaviour of people (crowd effect), which is relevant, for example, in the analysis of stock data. also, these tasks are solved in medical diagnostics, in the modelling of climate changes etc. detecting anomalies and outliers. it includes a wide range of tasks related to the finding and identification of such data elements that do not correspond to previously identified patterns. and such anomalies can be both new patterns (for example, new trends in stock data), and signals about the abnormal behaviour of the observation object. the object of anomalies search can be the results of measurements, time series, text information, graphs. the problems of finding anomalies are solved within the framework of information security systems, systems for detecting fraudulent transactions with bank cards, medical diagnostics and in many other areas. in addition, they can be used to clear data from noise. as a matter of fact, the problem of detecting anomalies and outliers is close to the task of identifying significant features, which gives grounds for uniting them under one taxon. analysis of social networks is a process of researching social structures, by presenting them in the form of vertices and connections, using the tools of graph theory and network theory. classical methods of analysis allow us to analyse the topology of social networks effectively, in particular, to identify key nodes and links, to identify weak links, and to find the shortest paths between nodes. however, in modern conditions, this is not enough since the role of social networks is continuously growing, and, baltic journal of economic studies 50 vol. 3, no. 3, 2017 consequently, the complexity of requests to them is growing. a significant number of practical problems in the analysis of social networks are reduced to the allocation of participants groups in the network for some generalizing feature. the more abstract this feature is, the more difficult the task becomes. the tasks of analysing social networks are relevant in economics, marketing, sociology, politics, historical research and many other areas (hunt, gentzkow, 2017). the study and comparison of the analysed data analysis problems made it possible to update the classification shown in fig. 1. the specified classification is shown in fig. 2. data mining descriptive clustering link analysis s um m ar iz at io n s eq ue nt ia l p at te rn m in in g a ss oc ia tio n ru le s se rie s s ub se qu en ce s ea rc h m at rix se ries predictive p re di ct io n t im e se rie s an al ys is regressionclassification a no m al y se ar ch s oc ia l n et w or ks a na ly si s graph g ro up in g ob je ct s m atrix graph n et w or k re la tio ns hi p outlier analysis b in ar y p ol yn ar y r eg re ss io n fig. 2. clarified classification of data analysis problems as can be seen from the comparison of fig. 1 and fig. 2, the number of grading grades is increased due to the allocation and order of taxonomic features. this allows you to better understand the relationship between different classes of problems and methods for their solution better, which ultimately increases the efficiency of data analysis. let us consider the features of the proposed classification. the dotted link line of the problems of prediction and analysis of time series with a regression taxon emphasizes the existence of regression problems in its pure form as problems of revealing the relationship between input and output variables. let us analyse the taxonomic category of clustering tasks. the analysis showed that the tasks of sequence search in data and analysis of social networks are also actually clustering tasks, differing only in the representation of input data and in the dimension of the grouping space. thus, subsequence search in dynamic series actually represents a clustering task in a one-dimensional space, where each element has only two neighbours  – the previous row value and the subsequent one. clustering in its pure form is usually called the task of grouping an array of input data, where each element (except for extreme and angular) has a fixed number of neighbours. in two-dimensional space, there are four neighbours, in three-dimensional – six, and so on. input data, in this case, are presented in matrix form. finally, the analysis of social networks is a task where each element of the input data (the top of the graph) can have an arbitrary number of neighbours, which in real social networks can reach several thousand (and for individual people even more). thus, we can conclude that it is the dimension sign of the grouping space (the number of neighbouring elements in the input data) that is a natural classification feature for clustering tasks, which is reflected in fig. 2. the tasks of searching for associative rules and identifying cause-effect relationships are placed under the taxonomy of the “link analysis” taxonomy. the basis for this is the similarity of tasks. as for the clustering taxon, the main difference between them is the representation of the input data and the dimensionality of the input data space. when the cause-effect relationships are identified, the events (analysed elements) are separated in time and, therefore, can be represented as a dynamic series. when searching for associative rules, the input data set is represented in a matrix form describing events that occur simultaneously or are close in time. since the structure of the resulting taxon “link analysis” resembles the structure of the clustering taxon, this gives grounds to assume the existence of another previously unknown problem of link analysis, the input data for which are presented as a graph. if we formulate its essence by analogy with other tasks of this taxon, it can be assumed that the search should be carried out for epicentres of network activity, that is, nodes, exerting a great influence on the processes occurring in the network or initiating such processes. in a broad sense, this task is reduced to identifying node control and managed nodes for each network. thus, it can be formulated as an analysis of interactions. at present, a similar task  – the search for a “zero patient” exists in medicine but the methods of its solution provide only a retrospective analysis and cannot be used to predict who can become such a “zero patient” in the future. in the context of economics, the analysis of interdependence can be used to predict the spread of crisis phenomena, to increase the effectiveness of advertising campaigns, to identify target customers. thus, the refinement of the classification of data analysis problems (fig. 2) made it possible not only to show the relationship between different classes of problems and methods for their solution but also to identify the criterion for the division of tasks into groups within the framework of individual taxa (presentation of input data in the form of a series, matrix, or graph), and also to formulate a problem that was not previously allocated to a separate class. baltic journal of economic studies 51 vol. 3, no. 3, 2017 4. classification of data processing tasks a clear classification of data processing tasks is still missing but, from the perspective of the definition proposed above, sorting, filtering, ranking, restoring, cleaning and quantizing data can be classified as such. let us consider these problems. sorting is a task associated with the arrangement of data elements in a given sequence or by grouping them. in the presence of a single sorting criterion or criteria in strict hierarchical submission, the task of sorting data is trivial. its complexity rises sharply with the complexity of the criteria field structure and its certainty. so, the task of sorting goods in ascending order, or decreasing client preferences, does not have a trivial solution. the term filtering has many meanings in various fields of knowledge (for example, in physics, chemistry, mathematics, radio engineering). with respect to economic data, filtration is considered to be the sampling of information that meets the specified criteria. the initial data for filtering can be represented as a series, an array or a graph. the complexity of filtering increases with the complexity of the criteria field structure and the decrease in their certainty. the task of ranking differs from sorting by the fact that for its solution it is necessary to define a method for determining the rank of each element of the input data sequence, that is, a method that allows the entire vector of element values to be rolled up into a single parameterrank. this allows you to compare any arbitrary number of elements from the input set, without its full sorting, which is effective for large volumes of processed data. the complexity of ranking increases with the complexity of the criteria field structure. for example, the task of ranking overdue loans in terms of the probability of their return cannot have a unique solution since the methods for determining this probability are themselves based on assumptions. the need for data recovery arises if the input sample contains omissions or some data is missing in it but there are hypotheses about the nature of their occurrence, allowing estimating the most probable values. the solution of this problem allows increasing the efficiency of machine learning by expanding the input data sample. the necessity of data recovery can arise when they are presented in any of the considered forms – in the form of series, matrices or graphs. in the latter case, the object of reconstruction is the connection between the vertices of the graph that are absent in the input sample. the data cleansing task, in fact, is inverse, in relation to the filtering task and involves the exclusion of “extra” data from the input sample. purification of the series involves the elimination of “emissions”, that is, data clearly beyond the main trend. the cause of such emissions can be both measurement errors and conscious distortions of information. in any case, the distorted data strongly influence the quality of the subsequent analysis, especially when using only formal methods, including machine learning. cleaning of the data presented in the matrix form is performed to eliminate factors that have little effect on the output indicators from the input sample of data or are completely unrelated to them. this procedure must necessarily precede the analysis of data. with respect to graphs, purification provides for the decimation of links and is applied both to input data and to certain types of economic-mathematical models, for example, to artificial neural networks. this eliminates weak links that have little effect on the overall result but significantly complicate the analysis. quantization is used in relation to dynamic series of data, if necessary, to reduce the number of their elements, that is, with the simplification of the series. there are such types as quantization by level and time quantization. in the first case, the range of values of a continuous or discrete quantity is divided into a finite number of intervals. if for a certain period of time the value of the dynamic series values did not exceed the limits of one interval, then as a result of quantization all these quantities will be replaced by a single value (d'yakonov, kruglov, 2001). in the second case, the partitioning of the dynamic series into intervals occurs over time. the values accepted by the elements of the series within the boundaries of each interval are replaced by one averaged value or several ones reflecting the limit values of the indicator for the period. the latter method is used to represent stock data. there are also varieties of quantization according to the level and time with a variable quantization step (mints, 2016). thus, the concept of “data processing” unites a wide range of tasks, which vary in complexity from trivial to those, for which obtaining an exact solution is almost impossible. taking into account that the latter can occur in each of the given classes, we can talk about the tasks of f ilt er in g s or tin g r ec ov er y c le an si ng r an ki ng q ua nt iz at io n data processing without change of the elements order with change of the elements order s er ie s graph m at rix s er ie s graph m at rix s er ie s graph m at rix s er ie s s er ie s m at rix s er ie s fig. 3. classification of tasks of intellectual data processing baltic journal of economic studies 52 vol. 3, no. 3, 2017 intellectual data processing, the classification of which is represented as follows (fig. 3). as can be seen from the analysis of fig. 3, the main classification feature suggests a sign of changing the order of the input data sample elements. changing of the elements order occurs while solving the tasks of ranging and sorting. input data are usually presented in the form of series or are reduced to them. in other tasks being concerned, there is no change in the order of the input data elements. in this case, it should be noted that methods for solving the problem with respect to data represented in the form of series, matrices, and graphs differ significantly. it should be noted that the quantization problem, as discussed above, is currently formulated exclusively with respect to dynamic data series. however, its location in one taxon with problems that can be solved with respect to matrices and graphs suggests that it is possible to consider quantization problems with respect to other forms of data representation. 5. conclusion thus, the analysis of data mining and data processing tasks allowed us to classify them according to the main taxa. it should be noted that, in view of the dynamic development of this area, it is not possible to form a complete and consistent classification of analysis and data processing tasks. therefore, the results obtained should be considered as plausible hypotheses about the representation of these problems. references: d'yakonov, v., & kruglov, v. (2001). matematicheskiye pakety rasshireniya matlab. spetsial'nyy spravochnik. st. petersburg, russia: piter, 480 p. [in russian]. gartner group advanced technologies and applications research note (1995). evolution of data mining. retrieved from: http://www.thearling.com/text/dmwhite/dmwhite.htm han, j., kamber, m. & pei, j. (2012). data mining: concepts and techniques. waltham, ma: morgan kaufmann, 740 p. hunt, a., gentzkow m. (2017). social media and fake news in the 2016 election. journal of economic perspectives, 2(31), p. 211–236. larose, d. t. (2004). discovering knowledge in data: an introduction to data mining. hoboken, new jersey: wiley & sons, 240 p. mints, a. yu. (2016). metod uproshcheniya dinamicheskikh ryadov s ispolzovaniyem geneticheskikh algoritmov. ekonomichnyi visnyk zaporizkoi derzhavnoi inzhenernoi akademii (economic bulletin of zaporozhye state engineering academy), 4, p. 120–124 [in russian]. neelamadhab, p., pragnyaban, m., & panigrahi, r . (2012). the survey of data mining applications and feature scope. international journal of computer science, engineering and information technology, 3, p. 43–58. алексей минц классификация задач интеллектуального анализа и обработки данных в экономике аннотация. предметом исследования являются методы классификации задач анализа и обработки данных, а также их классификационные признаки. методология. в исследовании использована общенаучная методология анализа, синтеза, обобщения, сравнения. при составлении классификации использованы методы таксономии. выделение актуальных экономических задач производилось путем исследования научных публикаций по анализу и обработке данных. целью статьи является составление актуальной классификации задач анализа и обработки данных в экономике, а также уточнение терминологии этой отрасли науки. результаты. предложена классификация задач анализа данных, состоящая из четырех уровней. задачи анализа данных задачи делятся на две большие группы: предсказательные и описательные. в рамках каждой группы выделены классы, объединяющие задачи со схожими таксономическими признаками. это классы задач классификации, регрессии, кластеризации, анализа связей, анализа отклонений. классы задач делятся на виды. важным критерием для этого является размерность представления входных данных, то есть количество соседей у каждого отдельного элемента данных. данные могут быть представлены в виде рядов, матриц и графов. методы анализа таких данных существенно различаются. уточнено определение обработки данных и предложена классификация соответствующих задач. на верхнем уровне классификации задачи обработки данных разделены на две группы, в зависимости от того, происходит изменение порядка элементов во входных данных, или нет. выделены основные классы задач обработки данных, такие как ранжирование, сортировка, фильтрация, очистка данных, квантование. практическое применение. результаты исследования могут быть использованы для моделирования интеллектуальных систем принятия решений. они позволяют усовершенствовать процессы постановки задач анализа и обработки данных, а также формализовать процедуры выбора методов их решения. это ведет к повышению экономической эффективности. baltic journal of economic studies 70 vol. 3, no. 5, 2017 corresponding author: 1 department of international management, kyiv national economic university named after vadym hetman. е-mail: tetyanagalakhova@gmail.com 2 department of economics and business, kyiv national university of technologies and design. е-mail: fok-mezentseva@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-70-78 the research of the leading position of a small enterprise in the field of market relations in the sphere of it services considering the freelance resource tatiana galahova1 kyiv national economic university named after vadym hetman, ukraine katerina fokina-mezentseva2 kyiv national university of technologies and design, ukraine abstract. the subject of research. it enterprise activities and methods of staff quantity optimization under the terms of freelance resources attracting with the aim of taking leadership positions in the market for it services. methodology: during the research, the following scientific methods are used – the methods of analysis, synthesis, and comparative analysis (studying demand and supply of freelance-resource of small it enterprises), the economic-statistical method (statistical analysis of empirical data, analysis of variation series of demand and supply distribution of freelance applications for a small it enterprise). the purpose of scientific research: the purpose of the article is to provide theoretical justification for using freelance-resource within a small it enterprise under the terms of freelance services demand and supply studying, which allows taking leading positions in the field of market relations in the sphere of it services. the conclusion of the research: the calculation of the full-time employees’ optimal quantity of small it-company is made, which is the most important task of determining the reasonable need for staff to ensure the company’s leading position in the field of market relations of it services. the purpose of the paper is to the research the competitive advantages and a leading position of a small company in the dimension of global market relations in the field of services, which is determined the use of online freelanceresource by small it enterprises. this approach belongs to the strategic management of expenditures of a small enterprise, which is the basis of the effective resources using a small enterprise and there is a prerequisite for establishing its leading position. the scientific achievements, which consider freelance-resource in the context of the export-oriented sphere of services as a new vector of the economic growth of ukraine, are systematized; the author’s approach to the definition of the category of “freelancers” and the consideration of the essence of freelance activity special features are presented. to determine the minimization of expenditures, the activity of a small it enterprise is analysed, within which full-time employees are working, whose employment depends on the number of freelance-applications for jobs, which are receiving over a period of time for the it enterprise needs. the statistical analysis of demand and supply within a small it enterprise is proposed, which determines the optimal quantity of full-time employees who complete the technical tasks based on the freelance-resource, which enables a small it enterprise to take a leading position in the field of market relations among similar small enterprises. today, in the new concepts of the network economy and the global reputation economy, there are trends that represent an objective reflection of modern transformational changes in the economy, which are associated with the use of freelance-resource, which is an essential factor in establishing the leading positions of enterprises in competitive markets. key words: freelance resource, leading position, it enterprise, variation distribution, demand, supply. jel classification: m210, с20, l230 baltic journal of economic studies 71 vol. 3, no. 5, 2017 1. introduction rapid globalization encourages new perspectives and, at the same time, creates new challenges in today’s market conditions, both at the level of the individual, and on the micro, macro, meso, and global levels, covering all spheres of society’s life, including the avantgarde and perspective sphere of it technologies. in this context, a significant objective dynamic of technological and social innovations significantly changes parameters and the ratio of demand and supply in global markets. in the conditions of the development of globalization processes, the tendency of virtualization, innovation and informatisation of the economy, in particular, those activities that require a wide audience, is increasingly using electronic resources not only for information provision but also for realization of actual operations. in today’s market conditions, global demand requires the most affordable international price, and the global offer seeks to ensure the formation of the price of such a format and its compliance with the global market situation. this mechanism ensures the functioning of all types of markets for goods and services, intellectual property objects, as well as identifies the latest trends in the labour market. dynamic development of the market of freelanceservices encourages the study of this phenomenon, because such a form of entrepreneurship is relatively new both in ukraine and globally, and also corresponds to the current development of market relations. the freelance market of services is in demand and is currently being presented on a large scale and high rates of development in the united states and in a number of economically developed european countries. by adapting the best practices of doing business, the market of the freelance services of ukraine and the cis countries is rapidly developing, attracting more and more new members both from the side of the providers offering their services and from individuals and organizations willing to cooperate on a remote basis. in the freelance-market format, it is worth noting that the peculiarities of expenditures of a small enterprise as an object of management are their diversity, constant review and making changes under the influence of the external and internal environment, with varying intensity and dynamics. there is an actual issue of precise quantification of the level of expenditures, their magnitude and dynamics, the determination of the impact of expenditures on the economic performance of a small enterprise and the finding of new methods for their optimization. it should be noted that the effectiveness of planning and controlling the level of expenditures also depends on the timely provision of information on all levels of management by the expenditures of the enterprise. in this context, a research that combines the theory of the effective use of human resources and statistical analysis to interpret the process of implementing freelance-based services for it operations in a small business is relevant. 2. literature review advanced enterprises with leading positions in the global market use their own unique strategies based on innovative technological resources and business practices. the stated format of enterprise strategies creates global competitive advantages through the implementation of a proactive rather than a reactive vector of development, anticipating global challenges and forecasting, global change, generating fundamentally new market opportunities, occupying new segments of the market that competitors have not paid attention to. according to o. gudzinsky, s sudomir, t. gurenko (2010) the ability to upgrade, the realization of the way of modernization of production processes, search for new sources of competitive advantages allow enterprises to be competitive, to be leaders in their markets. at the same time, according to o. maslyayeva (2011), competitors can take leading positions if the company ceases to improve and innovate. consequently, the competitiveness of the company depends on the latest efficient resources, both own and borrowed, the implementation of effective business strategies, success in innovation activities, global openness. it is interesting to study the scientists katarzyna sieradzka, radosław luft (2015), concerning the latest potential of the enterprise, which includes the following components: study and analysis of market conditions; demand and supply analysis; analysis of prospects of market development; analysis of economic activity and competitiveness of the enterprise; assessment of potential competitive opportunities of the enterprise; studying and evaluating the activities of competitor companies. it should be noted that the research of the company’s leading position in today’s market conditions is realized both by domestic and foreign scientists. in this context, in order to achieve the strategic goals of the enterprise, it is necessary to distinguish freelance activity, which in the narrow sense implies the transfer of a part of the functions of the enterprise to the third persons. today, “freelancer” is the most common and often used worldwide term that identifies independent it professionals and is particularly common in such areas as computer programming and design in all its manifestations (advertising, web design, interior design etc.), translation from foreign languages, multi-sectoral consulting activities. note that in 2016, 34% of the working population of the united states was engaged in freelance activities. according to the forecasts of scientists by 2020, the number of freelancers will reach 50%. according to a study by the european forum of independent baltic journal of economic studies 72 vol. 3, no. 5, 2017 professionals (efip), since 2000, the number of freelancers in europe has increased by 82%. at the same time, the number of small it enterprises is increasing in ukraine and, as a result, the number of freelancers increases, with ukraine ranked fourth in the world by their number after the usa, russia, and india, according to o. grishnova, o. savchenko (2016). burke a . (2012) noted that “freelancers are employees who supply their services for potential projects or time-limited remuneration tasks that are directly proportional to the outcome of the work. they assume all or most of the expenditures and risks of their own idle time, as well as the risks of low expectations of performance within the projects. freelancers assume all the costs and risks of economic inactivity between projects.” according to h. yoganarasimhan (2013), a freelancer is a person performing work without a long-term contract with the employer; that is, a freelance employee hired only to perform a certain list of works. also, a freelancer is an employee who is invited to perform work during outstaffing. it is emphasized that being outside the permanent staff of any company, the freelancer can simultaneously execute orders for different clients. researchers t. malone and j. laubacher (1998) believe that freelancers are independent professionals who carry out their work remotely using information and communication technologies. s. christopherson (2002) believes that the term “freelance” reflects the form of work on a contractual basis, self-organized work, which does not provide for a formally stable and continuous relationship with a single firm or employer. j. sapsed, r . camerani, m. masucci (2008) and others also point out that freelancers are a visible labour force, called differently as freelancers, contractors, consultants: self-employed agents of creative and digital growth. d. gefen, e. carmel (2012) suggest an expanded interpretation of the category of freelance in the information economy, as self-employment, labour autonomy, and the professional work of skilled professionals in the creative, managerial, scientific or technical spheres. since the late 1990s, the markets of remote work that operate in the online space are dynamically developing and connect freelancers and customers from all over the world, therefore, the phenomenon of “electronic self-employment” of professionals who are explored in the papers by h. aguinis, t.v. bludova, e.m. galakhov (2017), s. lawal, (2013). m. leung (2014), j. horton (2010), deserves special attention. when engaging freelance resource, you need to study the supply and demand in the market. in the work by q. yao (2012), this research is explored in the logistics outsourcing network, in which small and mediumsized enterprises began to work actively, which became possible with the development of innovations. n. roshchina (2014) conducts a theoretical study of peculiarities of the formation of demand and supply in the market of resources, which, depending on the conditions, have individual features that determine the principles of its functioning. in ukraine, more and more small businesses use outsourcing when support functions of business infrastructures are provided to external companies. among the benefits of this approach is reducing it costs, increasing the availability of it services, and improving the quality of support. thus, an overview of scientific studies of domestic and foreign scientists allows suggesting that freelanceactivity is not sufficiently investigated in the context of modelling the effective use of freelance-resource at the enterprise from the standpoint of studying supply and demand, which will give a possibility to analyse the ability of a small it enterprise to occupy a leading position in the field of market relations of it services. 3. the use of it freelance to attract professionals let us consider the activities of a small it enterprise that specializes in developing and implementing software products for business automation, building integrated systems of information security, protecting consumer rights, electronic paperless document circulation, it consulting and it outsourcing, as well as system integration and infrastructure (see gryshova i. yu., strielkowski w., shcherbata m., 2017). the use of it freelance to attract professionals to develop and maintain software and computer technology of the enterprise is becoming a widespread phenomenon. when applying for freelance, the it company expects that the delegated work is carried out not only on weekends but also at the hours outside the working hours. let us consider the it company, which employs 14 full-time employees who are looking for and applying for freelance-resource for the needs of the company. the employment of these employees depends on the number of freelance applications for jobs received over a period of time (per year) for the needs of the it enterprise. it is necessary to calculate the optimal number of staff of it enterprises so that the cost of organizing freelanceresource applications was minimal. through the study of the number of hours required for a staff member of the company to search and register, the proposed freelance applications, statistics were obtained. thus, statistical data on the demand for work (the number of search and registration for freelanceapplications), required for it company for 100 hours, as well as the frequency – the number of hours, during which the need for a staff member of the company to search and register freelance-applications, was recorded in the form of the following statistics: baltic journal of economic studies 73 vol. 3, no. 5, 2017 4 freelance-applications for the design of web-design were completed within 2 hours; 5 applications for the layout of web pages and 6 applications for graphic design – 4 hours, 7 applications for the ergonomics (usability) of the site – for 8 hours; 8 applications for adaptive web design – 10 hours; 9 applications for the use of flexible images (flexible images), 10 applications for creating a flexible layout, a gridbased layout. 11 applications of visual communications including orientation system – 12 hours; 12 applications of visiting sites and 13 applications of sites-quests – for 10 hours; 14 applications for creating promo sites – 8 hours; 15 applications for blog services – for 6 hours; 16 applications for the creation of product catalogues – for 2 hours. thus, a variation in the distribution of the demand for freelance applications for a small it enterprise was compiled (table 1). table 2 presents the calculation of indicators for estimating a number of demand-sharing requests for freelance applications for a small it enterprise. using the data in table 2, we find the basic numerical characteristics: the sample mean (10,32); the median (10), the range of the variation (12), the average linear deviation (2.41); dispersion (8.42), average square deviation (2.92). 4. calculating the relative variables of the variation let us calculate the relative variables of the variation: the coefficient of variation (28.11%), the linear coefficient of variation (23.35%), the coefficient of oscillation (116.28%), as well as the indicators of distribution: the central point of the third order (-2.51) the coefficient of asymmetry (-0,1 – the presence of the left-hand side of the essential asymmetry), the excess (-0,73  – flat-panel distribution), the average square error of the coefficient of excess (0,78 – deviation from the normal distribution is not significant), the structural coefficient of the pearson asymmetry (0,11). table 3 shows the calculation of central moments. we find the confidence interval for the general average. determine the value of tkp by the student distribution table: table (n-1; α / 2) = ttabl (99; 0.025) = 1.984. a  standard sample error for the average (0.2916), marginal sample error (0.579). then the confidence interval has the form: (10.32 0.579; 10.32 + 0.579) = (9.74; 10.9). thus, it can be argued that, with a probability of 0.95, the average value for larger volumes will not exceed the range found. let us calculate the confidence interval for the dispersion. the probability of going beyond the lower bound is: p (χ2n-1 <hh) = (1-γ) / 2 = (1-0.99) / 2 = 0.005. for the number of degrees of freedom k = 99, we find from the distribution table χ2: χ2 (99; 0.005) = 140.1695. table 1 variation in the distribution of the demand for freelance applications demand for freelanceapplications 4 5 6 7 8 9 10 11 12 13 14 15 16 130 frequency 2 4 4 8 10 12 12 12 10 10 8 6 2 100 source: built by the authors on http://qvp.ua/uk/ table 2 calculation of indicators for the distribution of demand for freelance applications xi frequency, fi xi * fi accumulated frequency, s |x xср|*fi (x xср)2*fi frequency, fi/f 4 2 8 2 12.64 79.885 0.02 5 4 20 6 21.28 113.21 0.04 6 4 24 10 17.28 74.65 0.04 7 8 56 18 26.56 88.179 0.08 8 10 80 28 23.2 53.824 0.1 9 12 108 40 15.84 20.909 0.12 10 12 120 52 3.84 1.229 0.12 11 12 132 64 8.16 5.549 0.12 12 10 120 74 16.8 28.224 0.1 13 10 130 84 26.8 71.824 0.1 14 8 112 92 29.44 108.339 0.08 15 6 90 98 28.08 131.414 0.06 16 2 32 100 11.36 64.525 0.02 total 100 1032 241.28 841.76 1 source: calculated by the authors baltic journal of economic studies 74 vol. 3, no. 5, 2017 we have a random error of the dispersion of the lower bound (6.01); the probability of exceeding the upper limit is 0.995. for the number of degrees of freedom k = 99, we find the following distribution table χ2: χ2 (99; 0.995) = 67.32756. we have a random error of the dispersion of the upper limit (12.5). consequently, the interval (6.01; 12.5) covers the parameter s2 with reliability γ = 0.99. we find the confidence interval for the average-square deviation (s(1-q)<σ<s(1 + q)) with the reliability γ = 0 and the sample size n = 100. according to the table q = q (γ; n) we define the parameter q (0; 100) = 0: 2.92 (1-0) <σ <2.92 (1 + 0), 2.92 <σ <2.92. thus, the interval (2.92; 2.92) covers the parameter σ with reliability γ = 0. the interval estimation of the general quotient (probability of the event). we find the confidence interval for the general quotient ((p * ε; p * + ε)). in this case, 2f (tkp) = γ, f (tkp) = γ / 2 = 0.954 / 2 = 0.477. according to the laplace function table, we find that tkp is the value of f (tkp) = 0.477: tkp (γ) = (0.477) = 2. with a probability of 0.954, with a larger sample size, these quotients will be in the given intervals. 5. test hypothesis about the normal distribution let us check the hypothesis that x is distributed in the normal law by means of the pearson consistency criterion. to test the hypotheses about the type of distribution, we calculate the empirical frequencies given in table 4. therefore, the critical area for this statistic is always right-handed: [kkp; + ∞). its limit kkp = χ2 (k-r-1; α) is found according to the distribution tables χ2 and the given value σ, k = 13, r = 2 (the parameters xcp and σ are estimated by the sample): kkp (0.05; 10) = 18.30704; ksost = 4.14. the observed value of pearson’s statistics does not fall into the critical area: ksost <kkp, so there is no reason to reject the main hypothesis. thus, it is fair to assume that the sample data for a number of requests for freelance demand for the it business have a normal distribution. 6. the distribution proposals of the suggested freelance applications by the it enterprise let us consider the statistical data of a number of distribution proposals of the suggested freelanceapplications by the it enterprise, which were obtained by examining the number of hours during which the it company forms proposals for the suggested freelance applications. thus, the statistical data on the offer of freelance-claims generated by the company for 100 hours and the frequency or the member of hours, during table 3 calculation of the central moments for the distribution of demand for freelance applications xi (x xср)3*ffi (x xср)4*ffi 4 -504.872 3190.791 5 -602.275 3204.103 6 -322.486 1393.141 7 -292.755 971.946 8 -124.872 289.702 9 -27.6 36.431 10 -0.393 0.126 11 3.773 2.566 12 47.416 79.659 13 192.488 515.869 14 398.688 1467.173 15 615.019 2878.291 16 366.501 2081.725 total -251.366 16111.523 source: calculated by the authors table 4 finding empirical frequencies and calculating values for the observed criterion of value i ui φi ni n*i ni-n*i (ni-n*i) 2 (ni-n*i) 2/n*i 1 -2.1783 0,0371 2 1.2787 -0.7213 0.5202 0.407 2 -1.8337 0,0734 4 2.5299 -1.4701 2.1612 0.854 3 -1.489 0,1315 4 4.5324 0.5324 0.2835 0.0625 4 -1.1443 0,2059 8 7.0968 -0.9032 0.8158 0.115 5 -0.7996 0,2897 10 9.9851 -0.01486 0.000221 2.2e-5 6 -0.455 0,3589 12 12.3703 0.3703 0.1371 0.0111 7 -0.1103 0,3961 12 13.6525 1.6525 2.7306 0.2 8 0.2344 0,3876 12 13.3595 1.3595 1.8482 0.138 9 0.579 0,3372 10 11.6223 1.6223 2.632 0.226 10 0.9237 0,2589 10 8.9236 -1.0764 1.1587 0.13 11 1.2684 0,1781 8 6.1386 -1.8614 3.4648 0.564 12 1.6131 0,1074 6 3.7018 -2.2982 5.2818 1.427 13 1.9577 0,0584 2 2.0129 0.01288 0.000166 8.2e-5 ∑ 100 100 4.136 source: calculated by the authors baltic journal of economic studies 75 vol. 3, no. 5, 2017 which the it company forms the offer of freelance applications, are as follows: 5 freelance-applications for the web design construction that an it enterprise has formed within 1 hour; 6 applications for the layout of web pages – 3 hours; 7 applications for graphic design – 4 hours, 8 applications for ergonomics (usability) of the site – 7 hours; 9 applications for adaptive web design – 11 years; 10 applications for the use of flexible images  – 12 hours; 11 applications for the creation of a grid-based layout, 11 applications for visual communications including the orientation system – 12 hours; 13 applications for visiting sites – 12 hours; 14 applications of quest sites – 11 years; 14 applications for the creation of promo sites  – 7 hours; 16 applications for a blog service  – 5 hours; 16 applications for the creation of production catalogues – 3 hours. thus, a variation of the distribution of the offer of freelance applications for a small it enterprise was compiled (table 5) table 6 presents the calculation of indicators for estimating the distribution of the offer of freelance applications for a small it enterprise. table 5 variation in the distribution of the offer of freelance applications freelance proposal 5 6 7 8 9 10 11 11 13 14 14 16 16 140 frequency 1 3 4 7 11 12 12 12 12 11 7 5 3 100 source: built by the authors on http://qvp.ua/uk/ table 6 calculation of indicators for the distribution of the offer of freelance applications xi frequency, fi xi * fi accumulated frequency, s |x xср|*fi (x xср)2*fi frequency, fi/f 5 1 5 1 6.26 39.188 0.01 6 3 18 4 15.78 83.003 0.03 7 4 28 8 17.04 72.59 0.04 8 7 56 15 22.82 74.393 0.07 9 11 99 26 24.86 56.184 0.11 10 12 120 38 15.12 19.051 0.12 11 12 132 50 3.12 0.811 0.12 11 12 132 62 3.12 0.811 0.12 13 12 156 74 20.88 36.331 0.12 14 11 154 85 30.14 82.584 0.11 14 7 98 92 19.18 52.553 0.07 16 5 80 97 23.7 112.338 0.05 16 3 48 100 14.22 67.403 0.03 total 100 1126 216.24 697.24 1 source: calculated by the authors using the data in table 6, we find the basic numerical characteristics: selective average (11.26); the median (11), the variation (11), the average linear deviation (2,162), the variance (6,972), the average square deviation (2,641). let us calculate the relative variables: the coefficient of variation (23.45%), the linear coefficient of variation (19.2%), the coefficient of oscillation (97.69%), as well as the indicators of the distribution form: the central point of the third order (-1), the coefficient of asymmetry (-0,0541  – the presence of left-sided non-essential asymmetry), excess (-0.73  – flat-panel distribution), excess (-0.65), structural coefficient of pearson’s asymmetry (0.0985). table 7 shows the calculation of the central moments. we find the confidence interval for the general average. we determine the value of tkp by the student distribution table: table (n-1; α / 2) = ttabl (99; 0.025) = 1.984. the standard error sample for the average (0.2654), the marginal error of the sample (0.527). then the confidence interval has the form: (11.26 0.527; 11.26 + 0.527) = (10.73; 11.79) thus, it can be affirmed that, with a probability of 0.95, the average value for larger volumes will not exceed the found range. let us calculate the confidence interval for the dispersion. the probability of going beyond the lower bound is: p (χ2n-1 <hh) = (1-γ) / 2 = (1-0.99) / 2 = 0.005. for the number of degrees of freedom k = 99, we find from the distribution table χ2: χ2 (99; 0.005) = 140.1695. we have a random error of the dispersion of the lower bound (6.01); the probability of exceeding the upper baltic journal of economic studies 76 vol. 3, no. 5, 2017 limit is 0.995. for the number of degrees of freedom k = 99, we find the following by the distribution table χ2: χ2 (99; 0.995) = 67.32756. we have a random error of the dispersion of the upper limit (10,36). consequently, the interval (4.97; 10.36) covers the parameter s2 with reliability γ = 0.99. we find the confidence interval for the average square deviation (s (1-q) <σ <s (1 + q)) with the reliability γ = 0 and the sample size n = 100. according to the table q = q (γ; n) we define the parameter q (0; 100) = 0: 2.654 (1-0) <σ <2.654 (1 + 0) 2.654 <σ <2.654. thus, the interval (2.654; 2.654) covers the parameter σ with reliability γ = 0. for the interval estimation of the general quotient (probability of the event), we find the confidence interval for the general quotient ((p * ε; p * + ε)). in this case, 2f (tkp) = γ, f (tkp) = γ / 2 = 0.954 / 2 = 0.477. according to the laplace function table, we find that tkp is the value of f (tkp) = 0.477: tkp (γ) = (0.477) = 2. with a probability of 0.954, with a larger sample size, these quotients will be in the given intervals. let us check the hypothesis that x is distributed in the normal law by means of the pearson consistency criterion. to test hypotheses about the type of distribution, we calculate the empirical frequencies given in table 8. 6. findings therefore, the critical area for this statistic is always right-handed: [kkp; + ∞). its limit kkp = χ2 (k-r-1; α) is found according to the distribution tables χ2 and the given value σ, k = 13, r = 2 (the parameters xcp and σ are estimated by the sample): kkp (0.05; 10) = 18.30704; ksost = 4.14. the observed value of pearson’s statistics does not fall into the critical area: ksost <kkp, so there is no reason to reject the main hypothesis. thus, it is fair to assume that the sample data of a number of requests of freelance demand for the it business have a normal distribution. taking into consideration that the demand and supply of freelance applications have normal distribution laws, we choose the maximum value from the average sample: max (10,32; 11,23) = 11, which is lower than the existing three units. thus, by analysing demand and supply, the calculation of the optimal number of full-time employees of a small it enterprise is made, which is the most important task of determining the reasonable need for staff to ensure the company’s leading position in the field of market relations of it services. 7. conclusions the rapid development of globalization encourages new perspectives and, at the same time, creates new table 7 calculation of the central moments for the distribution of the offer of freelance applications xi (x xср)3*ffi (x xср)4*ffi 5 -245.314 1535.668 6 -436.595 2296.488 7 -309.235 1317.342 8 -242.522 790.621 9 -126.975 286.963 10 -24.005 30.246 11 -0.211 0.0548 11 -0.211 0.0548 13 63.216 109.996 14 226.279 620.005 14 143.996 394.548 16 532.482 2523.965 16 319.489 1514.379 total -99.605 11420.331 source: calculated by the authors table 8 finding empirical frequencies and calculating values for the observed value of criterion i ui φi ni n*i ni-n*i (ni-n*i) 2 (ni-n*i) 2/n*i 1 -2.3707 0,0235 0.89 1.2787 -0.11 0.01211 0.0136 2 -1.992 0,054 2.045 2.5299 -0.955 0.9119 0.446 3 -1.6133 0,1074 4.067 4.5324 0.06736 0.00454 0.00112 4 -1.2346 0,1849 7.002 7.0968 0.00238 6.0e-6 1.0e-6 5 -0.8559 0,2756 10.437 9.9851 -0.5627 0.3166 0.0303 6 -0.4772 0,3555 13.463 12.3703 1.4632 2.141 0.159 7 -0.09847 0,397 15.035 13.6525 3.0349 9.2104 0.613 8 -0.09847 0,397 15.035 13.3595 3.0349 9.2104 0.613 9 0.659 0,3209 12.153 11.6223 0.1529 0.02337 0.00192 10 1.0377 0,2323 8.797 8.9236 -2.2025 4.8511 0.551 11 1.0377 0,2323 8.797 6.1386 1.7975 3.2309 0.367 12 1.7951 0,079 2.992 3.7018 -2.0082 4.0328 1.348 13 1.7951 0,079 2.992 2.0129 -0.00818 6.7e-5 2.2e-5 ∑ 100 100 4.144 source: calculated by the authors baltic journal of economic studies 77 vol. 3, no. 5, 2017 challenges in today’s market conditions, covering all levels and areas of the society. with the approval of trends of virtualization, innovation, and informatisation of the economy, the parameters and the ratio of demand and supply on the global markets are radically changing, demanding the most affordable international price and opportunities to ensure the formation of the price of such a format and its compliance with the global market situation. today, the freelance market as the newest global market, the advanced form of entrepreneurship, the modern format of relations between market subjects, is represented by largescale and high rates of development not only in the united states and economically developed countries of europe but also within ukraine and cis countries. in the freelance-market format, the peculiarities of expenditures of a small enterprise as an object of management are their diversity, constant review and making changes under the influence of the external and internal environment, with varying intensity and dynamics. therefore, the relevant question of precise quantification of the level of expenditures, their magnitudes and dynamics, determination of the impact of expenditures on the economic results of a small business and finding new methods for their optimization appears (see gryshova, zamlynskyi, shestakovska, 2017). the presented methodology involves the calculation of the optimal number of the staff of it enterprises so that the expenditures for organizing applications of freelance-resource were minimal. the presented study combines the theory of the effective use of human resources and statistical analysis for interpreting the process of implementing freelance services for it operations in a small business. thus, by analysing demand and supply, the calculation of the optimal number of full-time employees of a small it enterprise is made, which is the most important task of determining the reasonable need for the staff in order to ensure the company’s leading position in the field of market relations of it services. references: aguinis h., lawal s. o. 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(2014). upravlinnya vytratamy v systemi otsinky efektyvnosti diyalnosti pidpryyemstv promyslovosti [cost management in the system for assessing the efficiency of industrial enterprises activity]. economic bulletin of ntuu "kpi", no. 11, pp. 216-221. xu y., yao q. (2012). doslidzhennya lohistychnoho autsorsynhu rozdribnoho merezhevoho pidpryyemstva na osnovi vidpovidnosti mizh propozytsiyeyu ta popytom [research on logistics outsourcing of retail chain enterprise based on fit between supply and demand]. in: zeng d. (eds). advances in computer science and engineering. advances in intelligent and soft computing, springer, berlin, heidelberg, vol. 141 рp. 619-625. yoganarasimhan, h. (2013). znachennya reputatsiyi v internet-frilansernomu rynku [the value of reputation in an online freelance marketplace]. marketing science, vol. 32, no. 6, pp. 860-891. baltic journal of economic studies 45 vol. 3, no. 4, 2017 the risk of transfer of genes in the insurance protection of agricultural producers henrikh hudz1 taras shevchenko national university of kyiv, ukraine abstract. the paper deals with the risk of transfer of genes, its impact, and possible consequences for agricultural producers; the possibility of creating an insurance service, to address this risk. the purpose of the paper is to disclose the results of a study of the risk of transfer of genes in agriculture when organizing insurance coverage. the tasks of this paper are: to clarify the essence of genetic engineering as an object of providing insurance services; to define the concept of risk of transfer of genes, its specific features, impact, and possible consequences for agricultural producers; carry out a description of the possibility of creating an insurance service about the risk of transfer of genes. the object of the study is the risk of transfer of genes in insurance protection. the subject of the study is theoretical and methodological approaches to optimizing the risk of transfer of genes in insurance protection. methodology. this work requires attracting a large number of scientists from different fields. legal aspects covered in the eu regulation terms №1829/2003 and 1830/2003 of the european parliament and council. a considerable attention to the legislative regulation of genetic engineering and risks in the use of genetic modification is given to the cartagena protocol on biosafety. it should be noted that at present, economic literature and especially publications related to agricultural insurance protection do not pay attention to the risks associated with the transfer of transgenic organisms and the possibility of taking this risk to insurance. the work uses the experience of the us department of agriculture and the european center for insurance legislation. the results of the study showed that the introduction of the insurance mechanism has the main difference in the fact that this operation takes into account as a person who suffered a loss, could get more profit than the fact of causing damage to another farmer. in this regard, the first option of insurance may be the liability insurance of the latter. in any case, the insurance mechanism can combine risks in a large group of enterprises or individual farmers that are prone to it and this group can be expanded by separate provisions or by law. also, features of coverage of losses from the risk of gene transfer, namely, a separate factor – cross-pollination, are considered. key words: risk of transfer of genes, agricultural producer, insurance protection, crop insurance. jel classification: g22, o13, q13, q18 corresponding author: 1 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: gudz1991@gmail.com 1. introduction the task of world agriculture in the next 25 years is not only to meet the growing demand for food but also to help reduce poverty and malnutrition while producing an environmentally friendly product. due to population growth, demand in developing countries is projected to increase by 59% for cereals and 120% for meat products. since the growth rate of yields achieved by the traditional way of plant breeding and agronomic practices is reduced. the next stage of increasing crop yields in agriculture is the new scientific achievements of biotechnology. agro-biotechnology in europe is at a low level. only five countries of the european union (eu) grow genetically modified (hereinafter called gm, gmo) crops. this situation is the complexity of risk assessment, the variation of which depends on the specific direction of the genetically engineered technologies used. there is a need to organize insurance protection, which will compensate for losses as a result of the occurrence of an insurance event. 2. literature review various aspects of topical problems of genetic engineering and associated risks with this activity among foreign scientists who have dedicated their work, such as: p.  regal, b.  glick, j.  pasternak, k.  hoffmannsommergruber, h.  beckie, l.  hall, s.  warwick, j.  bernstein, m.  miller, s.  tierzieva, l.  hardell, m.  eriksson, i.  schuphan, b.  shmidt, g.  goldberg, b. koch, and others. legal aspects are covered in the eu regulation terms №1829/2003 and 1830/2003 of the european parliament and council. a considerable attention to the baltic journal of economic studies 46 vol. 3, no. 4, 2017 legislative regulation of genetic engineering and risks in the use of genetic modification is given to the cartagena protocol on biosafety (available at: http://bch.cbd.int/ protocol/text/), whose goal “is to promote an adequate level of protection in the safe transfer, handling, and use of living modified organisms resulting from modern biotechnology that may have adverse effects on the conservation and sustainable use of biological diversity, taking also into account risks to human health, and specifically focusing on transboundary movements”. it is worth noting that currently in the economic literature and especially publications relating to insurance protection of agriculture, attention is not paid to the risks associated with the transfer of transgenic organisms and the possibility of taking this risk for insurance. this issue, taking into account the organization of insurance protection of agricultural production, concerning issues, has been investigated to some extent by the us department of agriculture and the european center of tort and insurance law. there is a need to conduct an in-depth study of the theoretical and practical aspects of the impact of the risk of transfer of genes in the context of insurance protection organization. 3. methodology a genetic modification, also known as genetic engineering or recombinant dna technology, was first introduced in 1970. the term “genetic engineering” was first defined by any operation on a wide range of methods for modifying or manipulating microorganisms through heredity and reproduction processes. thus, the term includes both artificial selection and all presentations of bio-medical methods, among them artificial insemination, in vitro fertilization (for example, “from a test tube”), cloning. but, at the moment, the term refers to the technology of recombinant deoxyribonucleic acid (hereinafter called dna) or cloning of genes. this method allows the selection of individual genes for transmission from one organism to another, as well as between unrelated species. this is one of the methods used to introduce new features and characteristics into microorganisms. the products derived from this technology are usually called genetically modified organisms (hereinafter called gmo’s). it is necessary to find an answer to the question of  – “how much the use of gmo’s is safe?” this work requires attracting a large number of scientists from different fields. the cartagena protocol on biosafety to the convention on biological diversity uses the term “living modified organism” (hereinafter called lmo). article 3 of the lmo’s protocol defines it as any living organism containing a new combination of genetic material derived from the use of modern biotechnology, and “living organism” – like any biological entity capable of transferring or replicating genetic material, including sterile organisms, viruses (available at: http://bch.cbd. int/protocol/text/). gmo’s are officially defined in eu legislation – as “organisms in which the genetic material (dna) has been altered in a way that does not occur naturally: mating and/or recombining” (commission regulation (eu) no 1829/2003). genetic modification of plants is often linked to improve their ability to survive in harsh conditions, to provide greater resistance to pests and diseases, improve nutritional properties, and create conditions for resistance to the action of certain herbicides. biotechnologies create advantages of the perspective; however, the risks and threats that may arise in use remain to be investigated. the gene revolution historically consists of three generations of gmo’s (balasynovych, 2012): first generation – crops with resistance to herbicides, insects, and viruses (grown since 1996); second generation – crops with built-in vaccines and vitamins; third generation – gm plants that can produce pharmaceutical materials (biopharming – the cultivation of medicinal products in the body of the plant). 4. legal and regulatory framework the development of genetic engineering influenced the accessibility of information systems, opening the possibility of sharing genetic information with living organisms. ray goldberg, a professor at harvard business school, predicts that the traditional agroindustry and market relations system, as a result of widespread use of genetic engineering until 2028 will become a global industry with a turnover of $8 trillion us dollars (usda advisory committee on biotechnology and 21st century agriculture (ac21)). to assess safety, genetically modified food and feeds undergo a series of tests and studies. in the eu, genetically modified foods and feeds can be approved only after a through consideration by the principle of gradation, which often takes several years. first, the plant is tested in the laboratory or in greenhouses, and then for a limited time and in conditions of limited space, field trials are conducted. only if all of these tests show acceptable risks, a permission to sell a genetically modified plant can be granted. allowed sown areas are entered in the state register. as an additional security measure, the marketing authorization must be limited to a term of up to 10 years. after this, the request can be extended, and the plant is again tested based on the current state of scientific knowledge and confirmation that all the necessary conditions for the resolution are still being fulfilled. if it turns out that there is concern about the safety of the plant, the permit may be withdrawn at any time (federal office of consumer protection and food safety). baltic journal of economic studies 47 vol. 3, no. 4, 2017 in developing countries and developed countries, determining the impact of risk and controlling them are important aspects of farming. changes in weather conditions, climate, yield, price values, state policy, and the situation in world markets can lead to large-scale fluctuations in the production and, as a consequence, affect the incomes of agricultural producers. risk management includes the choice of strategies that reduce the social and financial consequences of possible changes affecting the production and profits of farmers. the five main types of risk in the agricultural sector are identified by the usda (united states department of agriculture): • production risk. occur from uncertain processes of natural growth of crops and livestock. weather, disease, pests, and other factors affecting both the quantity and quality of manufactured goods; • market risk (price). refers to the uncertainty about the prices that producers will impose on the goods or prices that they have to pay for the necessary resources. the nature of the price risk varies considerably depending on the goods; • financial risk. refers, for example, a situation where the producer takes the money and, accordingly, creates an obligation to repay the debt. the growth of interest rates and restrictions on the availability of loans are also aspects of financial risk; • institutional risk. the results of institutional risk lie in the uncertainty associated with government actions. tax laws, rules for the use of chemicals, rules for the disposal of livestock wastes, and the level of prices or financial support – are examples of government decisions that can have a significant impact on households and businesses; • human or personal risk. refers, for example, problems with human health. this can affect the reputation and financial condition of the enterprise. accidents, illness, death are all factors that can threaten business. insurance of risks of agricultural production in the world is an important element of the system of financial and credit support to farmers. the insurance system of the agro-industrial complex is a regulator of the processes of social and economic development in the agricultural sector, its task is not only to protect property at the time of the occurrence of the insured event and to compensate for immediate damage, but also to eliminate other violations – indirect damages resulting from the destruction or damage to property. thus, the purpose of insurance as an effective regulator of the insurance system of the agriculture industry complex is not only the protection of property but also the provision of conditions for the harmonious development of the industry (lobova, 2014). this article focuses on production risks, and in particular, related to the use of genetic engineering and biotechnology. in this context, production risk is the risk associated with the undesirable and often unintended consequences of the transfer of genetically modified characteristics that affect the quality and productivity of crops and the environment. to date, when the breakthrough of genetic engineering plays a big role in the world agriculture, it is impossible to fully understand all possible threats and challenges. since in the process of embedding a certain gene, the modified organism acquires or can acquire a number of properties, the appearance and features of which cannot be envisaged because of insufficient knowledge of the mechanisms of the functioning of the plant genome and the principles of environmental impact (soil, other plants, etc.). as a result, in the production of gmo’s, their commercial use, distribution, and consumption, a number of undesirable phenomena and risks arise that need to be investigated in order to prevent possible negative effects and manifestations of gmo’s in the future. consider the risks associated with the spread and use of gmo’s, namely the risk of transfer of genes. 5. risk of transfer of genes in this study, in our opinion, it is advisable to introduce the concept of “risk of transfer of genes”, covering all the features of the transfer of genetically modified materials in conditions of agricultural activities. the risk of transfer of genes can be characterized as the likelihood of an adverse or undesired event in the case of the transfer of genetically modified characteristics to organisms, not subjected to genetic modifications, and the severity or magnitude of consequences of this event. the risk of transfer of genes consists of the following possible factors of influence: horizontal gene transfer; cross-pollination of crops; the appearance of resistance transgenic toxins in insects; impacts on biodiversity. the consequences of the transfer of genetically modified characteristics to related (vertical gene transfer) and to foreign organisms, such as soil bacteria, are verified by testing in the approval process. horizontal gene transfer is extremely rare and does not lead to any side effects in previously approved gm crops since genes are used almost exclusively from those found in the nature of organisms. vertical gene transfer in plants occurs on a regular basis on plants with a similar degree of kinship in nature. therefore, we should expect this for genetically modified plants. the permission for the cultivation of genetically modified rapeseed in europe because of this remains very controversial. rape has some distant relatives in the wild, therefore, it is impossible to completely exclude outcrossing (unrelated or far related organisms), and thus, it is necessary to analyse, you can consciously reconcile with such a spread. for the genetically modified crops – maize and potato, which are allowed to grow and are allowed to date in europe – the transfer of genes is excluded due baltic journal of economic studies 48 vol. 3, no. 4, 2017 to the absence of related wild plants. the homeland of corn is the tropics and subtropics and in the europe itself, corn is not viable. potatoes cannot reproduce themselves in a natural environment in europe. europe is characterized by the largest share of collected insurance premiums in the world, followed by the insurance market of america. however, oversaturation with insurance products of most developed insurance markets in europe and america limits their ability to grow, while the insurance market in asia is characterized by rapid and significant growth potential (prykaziuk, 2012). the insurer must use standardized provisions to determine whether the insurance risk includes the following issues, such as: can the frequency and severity of possible events be evaluated? are the occurrences of this harm always random? at the moment, for risks associated with the use of gmo’s, there are clearly more unknowns than known variables for insurers. the following variables can be referred to unknown variables: • lack of statistical base for losses (for short or long term); • the technologies used to create gmo’s are constantly developing; • variation of available varieties of gm crops is constantly growing. thus, assessing the risks specific varieties of gm crops or influence of several species at once, it is difficult to characterize the long-term consequences. obviously, at the moment, the data are unknown variables by actuarial methods difficult to evaluate. therefore, assessing the risks inherent in specific types of gm crops or the influence of several species at once, it is difficult to characterize the long-term consequences. obviously, at the moment, the data are unknown variables by actuarial methods difficult to evaluate. 6. concept of insurance service one of the key problems that concern all types of insurance is a wide range of risk scenarios due to the difference in the potential of different plant species to transfer of genes. therefore, the achievement of a single insurance solution for all types of plants is almost impossible. the administrative expenses of the insurer at the same time (for production, marketing, risk management of specific insurance products) will be significant. another important issue concerns the degree of probable harm, should be covered under the terms of the insurance contract. this study examines the economic consequences of cross-pollination of gm crops with crops that do not contain genetically modified organisms. genetically modified and non-gm crops can probably be mixed during planting, during harvesting, seed drying, or during transportation for storage. pollen can spread from gm to non-gm plantation areas because of the influence of: wind; insects, are able to carry gmo’s; other animals. contamination can occur at one or several stages of production. this probability depends on several variables (koch, 2007): harvest of the specific culture; location; cross-breeding of related organisms/compatibility of crops; competitive features (advantages/disadvantages) of introduced features and environmental consequences. testing for the presence of genetically modified content in cereal crops becomes critical in assessing losses. in addition, testing is necessary to preserve the specific characteristics of culture behind all stages of the production chain. the concept of “segregation” is used in this article to explain the process, by which the crops are stored (gm and non-gm) separately to avoid mixing during harvesting; loading and unloading; transportation and storage. thus, this process requires that equipment (for example, a harvester) for planting and harvesting, freight transport for the transportation, storage facilities/elevators, subject to mandatory maintenance and regular cleaning. at the same time, this process can not include containerization – as the handling of goods by highly mechanized methods. unlike segregation, there is a hard and expensive process of differentiating products that require strict distribution, usually involving containerization. this process is called “ip-certification” (identity preservation certification). ip-certification is an international system of voluntary certification, provides for an independent certification body to certify the supply chain of non-gm agricultural raw materials or food products derived from it, as well as verification of the quality management system in place, from the seed of crops to the shelves of stores. ip-certification is carried out in accordance with the european union regulations for non-gmo’s, including the eu directive 2001/18 and rules 1829/2003 and 1830/2003 (commission regulation (eu) no 1829/2003; no 1830/2003). these documents establish requirements for all processes in the supply chain, including up to the supply of seeds, cultivation, sale, industrial processing, storage of agricultural crops, their transportation, as well as the selection and analysis of samples. ip-certification reduces the need for additional testing since the product is controlled to another subject with a reduced risk of transfer of genes. however, no segregation system can guarantee 100% purity. at present, the us grain market is characterized by large volumes and high-speed operations. the rapid adoption of biotechnological crops and the emergence of a number of products with input characteristics baltic journal of economic studies 49 vol. 3, no. 4, 2017 require the introduction of the enhanced monitoring system and the development of conditions to ensure safety from the onset of associated risk events. there is a complex and expensive method called "polymerase chain reaction" (pcr), which is an experimental method of molecular biology, which can be used to identify a specific foreign genetic material in plant dna. this method is difficult to adapt for rapid monitoring. the test takes 2 to 10 days, the cost varies 200–450$. also, the problem lies in the procedure for determining the sample size. most of the industrialized countries of the world set requirements for crops produced using biotechnology, which assesses their impact on the environment and safety as an end product. the regulation of gm products in the eu is carried out according to the rules for different types of gm crops. the allowed varieties of gm crops in europe are smaller than in the us. concerning the potential impact of large-scale production of biotechnological crops on the environment, the following problem areas can be noted: • potential for the spread of transgenes in other plants leads to harmful consequences, namely, the development of weeds with increased resistance and contamination of non-gm or organic crops; • increased resistance to transfer to pests (insects); • unexpected adverse effects on various groups of organisms in the ecosystem. at present, there is a small amount of information on the damage caused to the environment from the use of gm crops. risk assessment aims to increase consumer confidence and promote the smooth operation of markets. to develop a crop insurance program where the risk of transfer of genes will be introduced, it is necessary to consider how processes and procedures will be changed. in particular, the important issue is the procedure for determining the size of the insurance premium. the expected yield is sensitive to the sample, and even more so when there may be a risk factor for gene transfer. in many countries, data are used in only four years, while in some countries it is used for ten or more years to calculate the expected yield. taking into account the risk of transfer of genes, in our opinion, data should be used for ten or more years, through changing yield trends as a result of technological changes. also, the process of verification and control is an important issue. this issue is that the insurer needs to develop a methodology for checking and monitoring neighbouring areas (enterprises) from the insured, can carry a probable danger. creation of a database and data reduction by area in accordance with the levels of regions, regions, holdings, individual farms, is the initial task when creating conditions for the organization of insurance protection. insurance coverage of income loss can theoretically include various types of insurance, depending on the structure of liability for such losses. among them we can distinguish the following: insurance of commercial liability of gmos to third parties; insurance of liability for product quality or coverage of the presence of gm signs of goods produced by no gm farmer; agricultural insurance against pecuniary damage no gm farmer or if the consequences of the impact of the risk of transfer of genes were discovered only after the genetically modified product was transferred to customers; insurance of liability for the quality of products produced by gm seeds. however, determining the availability of coverage for each of these types of insurance is problematic for a number of reasons. consider the features of covering losses from the risk of transfer of genes, namely, a single factor – crosspollination. this study was given attention in the report of the european center for tortious and insurance law (koch, 2007). losses from cross-pollination, as a rule, are not included in the insurance coverage through the computability of a number of associated risks. especially in countries where the responsibility of farmers growing gm crops is rigidly regulated, there is no problem of finding evidence of causality. two alternatives for settling such losses from crosspollination incurred by farmers were developed in practice in parallel with the insurance decision (goldberg, 2000; koch, 2007): differently organized and financed compensation funds, as well as contractual features, for which the seed producer obliges itself to buy any of the farmers’ crops in neighbourhoods affected by unwanted cross-pollination at the price of non-gm crops. in such cases, any need for insurance does not arise. but given the economic realities and peculiarities of doing business, legislative regulation of each individual country, these alternatives are not effective for a wide range. if the losses from cross-pollination are covered by insurance, the question arises as to the extent and conditions, under which this insurance protection can be provided. in addition to agreeing on monetary limits, consideration in the first place should concern the development of safety standards to prevent the undesirable influence of gm in any gm culture. let us consider features of each type of insurance separately: 1. insurance of commercial liability of an entrepreneur who produces gm crops before third parties. since entrepreneurs/farmers who grow gm crops, in any case, are subject to liability for the consequences of their activities, in the event of damage caused to them, there is the possibility of including this risk in commercial liability insurance to third parties. the biggest obstacle is that the maximum insurance amounts are often low compared to the available financial losses. in addition, undesirable cross-pollination can also be considered as environmental damage and, in this case, a wide variety of exceptions, by sudden pollution. in the case of losses from cross-pollination, associated with those types of baltic journal of economic studies 50 vol. 3, no. 4, 2017 plants where growing gm crops almost inevitably leads to cross-pollination, insurance will be denied because of the lack of chance events. however, everything depends on the structure of the insurance contract. the most important factor in criticizing insurance, in this case, is the uncertainty in whether a farmer grows gm products are only liable if the legal limit of 0.9% is exceeded or the neighbouring area is insured (the other farmer) guarantees to his customers compliance with lower thresholds under the contract (koch, 2007). this is important because even if all the necessary safety standards are followed, it is virtually impossible to avoid any traces of cross-pollination, at least in the case of commercial growing gm crops. 2. agricultural insurance against material damage does not belong to the gm of the farmer. even if a farmer has concluded an agricultural insurance contract without any specific exemption (indication) that will concern gmos, the loss of income for unwanted cross-pollination can usually be covered since the contract covers a limited number of hazardous natural phenomena. by the time, traditional agriculture is the rule, and farmers who grow gm crops are an exception. 3. insurance of liability for product quality or coverage of the presence of gm signs of goods produced by no gm farmer. if the consequences of undesirable cross-pollination were not seen before the crop was sent to customers, then this type of insurance can be attracted, provided that the farmer is responsible for the consequences of cross-pollination under warranty provided to his client. it can be assumed that insurance coverage does include purely economic losses (provided that the legal system takes into account the consequences of cross-pollination not as harm to property but as economic losses). 4. insurance of the responsibility for the quality of products produced by gm seeds. covering losses from cross-pollination under the responsibility for the quality of products produced by gm seed producers is unlikely to play a significant role, since the manufacturer, as a rule, cannot be held accountable because its product is not defective. therefore, the responsibility, which producers may be subject to, may concern the obligation of the seed producer to inform and alert the gm of the farmer (the client) about the risks associated with growing gm seeds and inform about possible safety measures. this, however, suggests that the seed producer’s obligation must be reflected in the legal system, respectively. so, insurers must decide, in which form to offer the possibility of insurance coverage for the consequences of unwanted cross-pollination. they have several options for structuring the proposed protection: in addition to the ability to negotiate certain maximum insured amounts (events and annual aggregate limits, and franchises), the question of what types of plants and gm crops should be included. currently, more than 40 plant varieties already tested are planned to add genetically modified characteristics. since the probability of undesirable cross-pollination may be very different from each variety and, in some cases, cross-pollination even seems almost inevitable (for example, rape). based on this, one comprehensive insurance solution for all plant species cannot be found. on the other hand, insurers will have to clearly define the rules of professional practice in the cultivation of genetically modified plants as a prerequisite for covering losses of cross-pollination, at least where the relevant regulations are not available. this may, for example, include provisions on the erection of a clear division between no gm and gm crops; control and inspection in the compilation of agricultural machinery used in the fields of both types of crops; as well as criteria for the separation of both types of crops during storage and transportation. 7. conclusions consequently, the research carried out to find ways for solving the issue of organizing insurance protection for agricultural producers regarding the risk associated with the biotechnology industry has made it possible to find out the essence of genetic engineering and to identify the essence as an object of providing insurance services. in addition, the concept of the risk of transfer of genes, its specific features, influence, and possible consequences for agricultural commodity producers are defined. in our opinion, it is advisable to combine all considered factors, for generalization and identification of one common risk, namely, the risk of transfer of genes. by combining this group of factors with the inherent areas of genetic engineering in agriculture, it is possible to create a single program of crop insurance, which will protect agricultural producers from economic losses. the next step was to implement a description of the concept of an insurance service, to address the risk of transfer of genes. the stages in creating the concept of insurance services are defined, among them: types of compensation mechanisms are indicated. the types of compensatory mechanisms considered are to be modelled on the existing crop insurance market. in our opinion, in order to receive compensation, a separate economy (enterprise/farm), it is necessary to demonstrate the following characteristics: 1) the intention to make a product that has retained its identity to the manufacturer’s standards (composition of %-gmo, if allowed by the rules); 2) the use of technologies used to produce the product (description and characteristic); 3) actual financial losses incurred by the manufacturer for the period. holdings that have received this insurance before planting the crop will be entitled to such compensation if the above criteria are met. the public institution should seek the help of a responsible authority to ensure that the program is designed in such baltic journal of economic studies 51 vol. 3, no. 4, 2017 a way that it minimizes the consequences of potential adverse events. analysed existing tools and testing methods for checking and measure the availability of gmo’s. the following methods are described and characterized: segregation, ip-certification, pcr technique (polymerase chain reaction). the need for additional measures to ensure the economic security of the state is identified. the potential for the spread of transgenes in other plants leads to harmful effects, namely, the development of weeds with increased resistance and contamination of non-gm or organic crops; increasing resistance to pest control and unanticipated harmful effects on various groups of organisms in the ecosystem are important issues. however, in our opinion, a small amount of information on environmental damage caused by the use of gm crops is a major problem at the state level and requires a quick and effective approach to the solution. as biotechnology in agriculture is developing rapidly, and the number of crop species that are subject to the genetically modified material is increasing, there is a need to develop a methodology to protect traditional crop producers. also, given the insufficient level of legal and regulatory provision that would allow combining legislation in international markets and introducing a unified system of documentation for tools in checking and controlling activities. to the considered risk, the available theoretical and practical insurance base can be applied, as well as some specific features inherent in the risk of transfer of genes and allocate it in the insurance protection system. research on this subject requires additional justification and coverage and requires the involvement of a wide range of scientific and professional staff. at present, despite the substantial volume of publications on genetic engineering research in agriculture, labour, there have been no problems of organizing insurance coverage. a consideration of the possibility of organizing insurance protection with proposals at the legislative level is only the report of the european center for tort and insurance law (2009), which examined the issue of responsibility for the factor of cross-pollination. also, the report of the usda advisory committee on biotechnology and 21st century agriculture for 2012, considered the types of compensation mechanisms in the event of economic losses, due to the presence of genetically modified material in rural economy crops, among which the possibility of crop insurance is determined. however, further steps are identified in the development of such an insurance program. a further direction of research on this issue is the relationship of the subjects participating in the insurance process from the positions: risk analysis; involved instruments for determining the impact and consequences of risk; improvement of the legislative framework governing the organization, implementation and monitoring of gmos in the agrarian sector; search for features in the definition and calculation to develop an effective insurance service. references: balasynovych b. and yaroshevs'ka yu. 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(2007). liability and compensation schemes for damage resulting from the presence of genetically modified organisms in non-gm crops // reports (eu). european centre of tort and insurance law, retrieved from: https://ec.europa.eu/agriculture/sites/agriculture/files/external-studies/2007/liabilitygmo/annex1.pdf lobova o.m. (2014). “the risk insurance efficiency of business activity in the agricultural sector”. bulletin of taras shevchenko national university of kyiv. economics. – № 156. – p. 70 – 76. doi: http://dx.doi.org/10.17721/17282667.2014/156-3/14 muller b.p., zumdick a., schuphan i., schmidt b. (2001). metabolism of the herbicide glufosinate-ammonium in plant cell cultures of transgenic (rhizomania-resistant) and non-transgenic sugarbeet (beta vulgaris), carrot (daucus carota), purple foxglove (digitalis purpurea) and thorn apple (datura stramonium) // pest. manag. sci., vol. 57, № 1, p. 46–56. doi: http://dx.doi.org/10.1002/1526-4998(200101)57:1<46::aid-ps256>3.3.co;2-t philip regal: a brief history of biotechnology risk debates and policies in the united states, retrieved from: http://www.edmonds-institute.org/regal.html prykaziuk n.v. (2012). “developing of world insurance in post-crisis period”. bulletin of taras shevchenko national university of kyiv. economics. – № 135. – p. 22 – 25. doi: 10.17721 sholoyko a. (2012). “world experience state support of agriculture through insurance programs”. bulletin of taras shevchenko national university of kyiv. economics. – № 135. – p. 41 – 43. doi: 10.17721 the cartagena protocol. convention on biological diversity, retrieved from: http://bch.cbd.int/protocol/text/ usda advisory committee on biotechnology and 21st century agriculture (ac21). enhancing coexistence: a report of the ac21 to the secretary of agriculture, retrieved from: http://www.usda.gov/documents/ac21_ report-enhancing-coexistence.pdf генрих гудзь риск переноса генов в страховой защите сельскохозяйственных товаропроизводителей аннотация. в статье рассматривается риск передачи генов, их влияние и возможные последствия для сельскохозяйственных производителей; возможность создания страховой услуги для устранения этого риска. цель статьи – обосновать результаты исследования переноса риска генов в сельском хозяйстве при организации страхового покрытия. задачами этой статьи являются: прояснить суть генной инженерии как объекта предоставления страховых услуг; определить концепцию переноса риска генов, его особенности, воздействие и возможные последствия для сельскохозяйственных производителей; провести описание возможности создания страховой услуги. объектом исследования является риска переноса генов в страховой защите. предметом исследования являются теоретические и методологические подходы к оптимизации риска переноса генов в страховой защите. методология. эта работа требует привлечения большого числа ученых из разных областей. правовые аспекты, предусмотренные в правилах ес №1829 / 2003 и 1830/2003 европейского парламента и совета. значительное внимание к законодательному регулированию генной инженерии и рискам при использовании генетических модификаций уделяется картахенскому протоколу по биобезопасности. следует отметить, что в настоящее время экономическая литература, и особенно публикации, связанные с защитой сельскохозяйственного страхования, не обращают внимания на риски, связанные с передачей трансгенных организмов, и возможность взять этот риск на страхование. в работе используется опыт министерства сельского хозяйства сша и европейского центра страхового законодательства. результаты исследования показали, что внедрение механизма страхования имеет основное отличие в том, что данная операция учитывает, как субъект, которому нанесен ущерб, мог бы получить большую прибыль, чем по факту причиненного вреда другим фермером. в связи с этим, первым вариантом страхования может выступать страхования ответственности последнего. в любом случае, механизм страхования позволяет объединять риски между большой группой предприятий или отдельных фермеров, склонны к нему, и данная группа может быть расширена отдельным положением или законом. также, были рассмотрены особенности покрытия потерь от риска трансфера генов, а именно, отдельного фактора – перекрестного опыления. baltic journal of economic studies 107 vol. 3, no. 4, 2017 corresponding author: 1 department of sociology and political science, national technical university “kharkiv polytechnic institute”. e-mail: klimenkoelens@gmail.com analysis of the state of the leading sectors of the economy in donbas for the old industrial region – summer-autumn of 2014 elena кlymenko1 national technical university “kharkiv polytechnic institute”, ukraine abstract. the purpose of the article is to study the state of the regional industrial complex of the old industrial region of the east of ukraine, which suffered as a result of the military-political conflict that began in 2014. one of the objectives of the study is to analyse the process of destroying the foundations of the regional economy, as well as to assess the significance of the loss of donbas industries for the stable socio-economic development of all regions of ukraine. methodology. the method of analysis made it possible to study the process of destruction of industrial enterprises in the basic sectors of the regional economy of donbas since the beginning of the military-political conflict. the author defined the schemes of the operation of a part of enterprises operating in the temporarily occupied territory of the east of ukraine, who, becoming hostages to the situation, were forced to cooperate with representatives of the illegal authorities of the unrecognized republics to preserve production. result. the statistical method is used to analyse the financial and economic performance of industrial enterprises, with the purpose of assessing their role in the state economy of the country as a whole. the method of system analysis allowed the author to estimate the damage caused by the loss in the state economy of coal supplies, which was previously mined in the mines of donbas. thus, the fact of a decrease in industrial production in the east of the country was argued, which led to a significant drop in ukraine’s exports in general in such areas as supplies of ferrous metals, engineering products, and non-ferrous metallurgy. practical implication. the author analysed the facts of loss, as a result of dismantling and export of equipment, strategically important enterprises of the militaryindustrial complex of the country. the article reflects the problem of the growing ecological danger that has arisen as a result of the lack of control over the closed enterprises of the coal mining industry and the chemical industry. in addition, in the course of active hostilities, a number of industrial objects suffered significant damage, which leads to uncontrolled emissions of harmful substances into the atmosphere. the shutdown of mines and concentrators created yet another problem – the discharge of mine waters, their access to the surface, the flooding of significant areas and the entry of toxic waters into rivers that serve as a source of drinking water for residents, both the conflict region and the country as a whole, and neighbouring states. also, the technogenic threat is represented by the methane gas output to the surface displaced by groundwater. value/originality. the results of the research made it possible to depict the dynamics of the destruction of the economic complex of the old industrial region as a result of military operations in the territory of the state and illegal export of equipment of enterprises. all these actions led to the launch of negative processes in the ukrainian economy, provoking a deep social and economic crisis, which accelerated the destruction of the metallurgical, coal and chemical industries in the region. thus, today it is necessary to conduct an inventory of surviving and continuing enterprises, to quickly identify the risk zone, and develop strategies for minimizing and overcoming them in key sectors of the economy. key words: economy, ecology, export, metallurgy, coal mining, infrastructure, industry, military conflict. jel classification: l60, r11, r13 1. introduction in the context of a significant change in geopolitical realities (which are accompanied by the closure of russian markets for ukrainian products), the search for ways and mechanisms of reforming regional economic complexes and determining the prospects for diversifying the regional economy is becoming especially important for the economy of the old industrial regions of the east of ukraine. the successful solution of these issues depends on the prospect of achieving social and economic stability in donbas, which has assumed all the socio-economic, political, and institutional burdens baltic journal of economic studies 108 vol. 3, no. 4, 2017 caused by the changing geopolitical situation in the country. this is primarily due to the fact that in the zone of armed conflict were the traditional industrial regions of donetsk and luhansk regions. in the context of intensification of crisis phenomena in the economy, it is especially necessary to develop a set of adequate actions aimed at consolidating all available resources in order to minimize negative phenomena, as well as maximize the preservation and observance of social standards in the state. the aim of the article is to study the state of the regional industrial complex of the old industrial region of the east of ukraine, which suffered as a result of the military-political conflict that began in 2014. speaking today about the definition of ways to stabilize the situation in a particular region and the country as a whole, it is important to make an inventory of the current situation of the branches of the economy and the risks that have arisen in the leading industries that have appeared in the territory of the conflict. in particular, to determine the state of the basic industries, in order to determine the feasibility of maintaining existing production facilities, the restoration of destroyed or, in general, the complete conservation of abandoned enterprises. it is also necessary to study the social component of the life of the region. in the conditions of actual occupation of a significant part of the donetsk and luhansk regions, the burden on the budgets of other regions is increasing, the disproportion between the demand and supply of jobs in the labour market is growing. the political conflict of 2014 in ukraine, thanks to the support of the pro-russian forces, has become a trigger mechanism for unleashing a protracted military and political conflict in donbas, which resulted in a thousand losses among civilians, over a million “temporarily displaced persons” (so-called refugees), a stagnant regional economy from key old industrial regions, breached a monolithic economic system that fills the state budget of ukraine. an analysis of key trends in the development of the leading sectors of the economy of the old industrial region, conditioned by the ongoing military conflict between the state of ukraine and illegal armed formations, the self-proclaimed dnr and lnr , which operate with financial and military-technical support from russia, allows noting the following three key trends. 2. destruction of infrastructure destruction of infrastructure led to the inhibition of economic development of settlements, a sharp impoverishment of the population and the severance of internal and external economic ties in the region. due to the destruction of the railways, metallurgical enterprises in the region do not have the opportunity to regularly receive raw materials and materials, as well as send the already manufactured products to consumers, which implies a complete change of logistics. over 190 railway infrastructure facilities have been damaged at the donetsk, pridneprovskaya and southern railways, 49 of which are track facilities, 74 are electricity, 30 are automation and communications, and 11 are structures. according to the official data of “ukrainian railways”, to restore the damaged railway infrastructure in the east of ukraine at the beginning of 2015, about 900 million uah is required. footnote. almost 75% of production facilities in donetsk region as of december 2014 were destroyed or destroyed as a result of hostilities. in luhansk region, 22 city-forming industrial enterprises stopped their work (vosstanovit donbass, 2015). the first among the large enterprises of the region have ceased work since july 2014: novogorovsky machinebuilding plant, machine-building plant “betonmash”, pjsc “luganskteplovoz”, alchevsk metallurgical plant, stakhanov ferroalloy plant, llc “stal”, pjsc “concern stirol”, prat “sievierodonetske obiednannia azot”. the base industry of donbas economy remains the coal industry. donetsk region provided for ukraine 43% of the total volume of coal mining and two-thirds – coking coal. in luhansk region, more than 30% of all coal in ukraine was mined. in 2012, the aggregate share of donetsk and luhansk regions was 78,5% of the total coal production in ukraine, in 2013  – 76,6%, in may 2014  – 76,1 %. the share of donetsk region in the sale of goods of the extractive industry in 2013th was 24,1%, luhansk – 8,4%. industrial reserves of donbas coal 3,4 billion tons would be enough for more than 100 years. nevertheless, it was the coal industry that became one of the most damaged and damaged industries in donbas, which led to the unstable operation of the electric power industry, the metallurgical industry, coke chemistry, and utilities, and rising energy prices. in donetsk region, due to the instability of the situation, work was stopped at seven state mines: “makiivvuhillia”, “artemvuhillia”, “ordzhonikidzevuhillia”, “shakhterskantratsit”, “torezantratsit”, donbas mine management, “mospinska” mine and 13 private coal mining enterprises. pjsc “krasnodonvuhillia”; state enterprise “donbasantratsit”; se “anthracite”; se “luhanskvuhillia” has already stopped working in luhansk region. on the territory under the control of the ukrainian authorities work: 1. among the metallurgical enterprises continue their work: “azovstal” and ilyich iron and steel works. 2. among the machine-building enterprises continue their work: “novokramatorsk machine-building plant”, “electromashspetsstal”, “kramatorsk heavy machine tool building plant”, “starokramatorsky machine building plant”, “azovmash”. in the occupied territory, controlled by terrorists continued to work “by a special scheme” until march 2017, donbas’s heavy industry plants, whose owners baltic journal of economic studies 109 vol. 3, no. 4, 2017 formally re-registered them on ukrainian territory. in fact, these enterprises pay both taxes to the budget of ukraine, and they give 20% of the profits in dnr: donetsk metallurgical plant, donetsk state plant, yenakiieve iron and steel works, makiivka branch of yenakiieve iron and steel works, khartsyzsk pipe plant, dokuchaevsk flux-dolomite plant, llc “electrostal”. another reason for stopping key enterprises in donbas industry, apart from the ongoing hostilities, was the lack of sales markets for manufactured products. namely, to date, in view of the aggravation of the conflict, the russian market is actually lost to the ukrainian producers, on the way to the european alternative, there are many obstacles in the form of standards and brands. for example, the prospects for the reorientation of ukrainian exports of metallurgical and engineering products to the eu market are complicated by the lack of compliance of a significant part of it with european standards for this product, as well as the unsatisfactory environmental characteristics of such a production. existing capabilities of the domestic market of metal products are estimated by experts as much as 10-11  million tons, which is almost three times less than in export volumes. despite the fact that in ukraine since 2013 there are 43 technical regulations developed on the basis of the relevant eu directives, the degree of implementation of european standards in ukrainian enterprises remains insufficient, in view of obsolete production technologies and the need to modernize production. this represents a significant threat to the future development of export industries in the conditions of the consistent closure of russian markets. 3. the fall in industrial output the fall in industrial output also became a bitter reality in the region. on the one hand, donbas industry produced one-fourth of the total output of the state. according to the results of the pre-war 2013, the share of donetsk region in the industrial production of ukraine was 18,5% in money terms, luhansk  – 6,1%, together it was 24,6%. thus, donbas gave every fourth hryvnia of ukraine’s income, the withdrawal of which from budgetary funds inevitably led to the current economic crisis. in addition, the machine-building industry had close ties with production complexes in other regions of the country that regularly supplied components and did not just stay afloat but could also expand and modernize production (koshla, 2015). on the other hand, since the soviet times, historically, the main market for machine building products of donbas was russia, ceased to be a partner for ukrainian producers. however, the currency proceeds from the export of heavy industry products in donetsk and luhansk regions in 2013 amounted to 20% of the total. this makes it possible to say that before the conflict every fifth dollar of ukraine’s foreign exchange stock was donbas. in addition to the factories and territories of the occupied territories that have ceased to function in ukraine, they had to stop their work since the beginning of the winter: krukovka carriage plant; kremenchug steel plant; dniprodzerzhynsk association “dniprovagonmash”. ukrainian railwaymen consumed only 5% of their output; dnipropetrovsk association “yuzhmash”. also, until march 2017, the heavy industry plants of donbas worked on a “special scheme” and located in the occupied territory, were lucky enough to survive and retain at least a part of the production capacity of which remained only 20%: donetsk metallurgical plant; donetsk state plant; yenakiieve iron and steel works; makiivka branch of yenakiieve iron and steel works; khartsyzsk pipe plant; dokuchaevsk flux-dolomite plant; llc “elektrostal”. the management of these enterprises moved to unoccupied territory, officially re-registered them in ukraine, which made it possible to pay salaries when paying taxes (including military ones). given the complete absence of the banking system in the dnr and lnr in 2014–2015, the money of such enterprises was cashed in ukraine and transported in cash to the occupied territories. the terrorists, in turn, took their share of this money, the so-called “20% tax”, which was transferred to the “ministry of taxes and dues” of the dnr , and then the salary reached the employees. however, despite the existence of such a scheme, since october 2014, wage arrears have become a reality for employees of enterprises in the territory of the selfproclaimed republics. earlier, (in the pre-war period, at the beginning of 2014), at donetsk metallurgical plant, the average salary was 8 thousand hryvnia; the minimum salary of a labourer was 6 thousand hryvnia. as for ukraine, according to more than optimistic estimates of the ministry of energy, the decline in state coal mining in 2015 was almost 2 times, that is, up to 9 million tons, compared to 17 million tons from the already reduced in 2014. in january 2015, coal mining in ukraine amounted to 3,42 million tons, compared to 6,933 million tons for the same period in 2014. in connection with this, state enterprises “lvivvuhillia” and “volynvuhillia” were auctioned for the purpose of breaking the situation in the coal industry by attracting large capital in it and saving the industry. however, in conditions of a sharp drop in the hryvnia and the growth of interest rates on bank loans from 14% to 19%, and then 24%, it was unreal to find the oligarch who was able to invest in such assets, especially since the coal of the western ukrainian deposits is higher in ash content and with lower heating value than in the donbas, and therefore cheaper. the state is also, for a number of objective reasons connected with the conduct of hostilities in the east, unable to finance the development of these enterprises (in the state budget in 2015, 2016 and 2017 was not provided the allocation of baltic journal of economic studies 110 vol. 3, no. 4, 2017 money for the completion of the mine “novovolynska 10” which is capable to supply 900 thousand tons of coal per year), and it has not enough of own funds from mines to ensure coal mining in the western region (galickij, 2016). thus, in the coal mining industry of ukraine, there was not a very healthy situation, in which such a course of events may end with a traditional option for bankrupt enterprises when “lvivvuhillia” and “volynvuhillia” are tried by the government to sell under the scheme created by corruptor n. azarov. after bankruptcy, the mines will be sold at a tender with a single participant and a price reduction of up to $100, under the investment obligations of the buyer. despite such a difficult situation of the coal industry, “centrenergo” in 2014 bought coal from ukrainian miners at a price of 840 uah per ton, while economic realities said that for normal – minuscule work of mines, its cost should be at least 1250 uah per ton. but why should we pay more, kyiv officials decided, and began to buy on the black market coal from the self-proclaimed dnr and lnr for 450 uah per ton. thus, at a time when an obvious crisis was emerging in a number of industries in ukraine, which the country could no longer cope with on its own, in the occupied territories, a number of interested persons profitably utilized the situation with their own personal pocket. the government of ukraine did not lag behind them, having developed a brilliant scheme of legal extortion from the population for buying energy resources abroad, bypassing the russian federation  – “roterdam plus”. so the official cost of coal, for which the consumer paid, was equal to the basic purchase price, together with the cost of transportation from the coal exchange located in the seaport of rotterdam and amounted to 3,500 uah per ton. the process of decline in industrial production, which began as early as 2014, remains in 2015. in 2014, compared with the previous 2013, industrial production in donetsk region decreased by 31,5%. in the basic industries of the region, the traditional production chains “coal-coke-metal” and “coal-electric power” were broken. the volume of industrial output in donetsk region (excluding a part of the anti-terrorist operation zone), produced in january-april 2015, decreased by 2,1 times compared to the same period in 2014 (which contained 48,3%) (gosstat, 2015). in january-april 2015, compared with the same period in 2014, there was a decline in production in all major industrial sectors: production of rubber and plastic products, other non-metallic mineral products – by 38,9%, in engineering  – by 41,0%, in metallurgical production and production of finished metal products  – by 42,5%, in the production of coke and refined products – 2,3 times, in mining and quarrying – 2,6 times, in the production of food, beverages and tobacco products  – 3.1 times in the manufacture of chemicals and chemical products  – by 5 times, in light industry  – by 6,8 times. in january-april 2015, the volume of ordinary coal production was 4,2 million tons, which is 8,1 million tons less, or 2,9 times less than in january-april of the previous year. the volume of coal, including shipped ordinary coal and enrichment products, decreased 3  times; for january-april 2015 it was 3,2 million tons (ukrrudprom, 2015). thus, the decline in industrial production entails threatening nature, since not only indicates the termination of the work of a significant part of donbas’s industrial facilities but also the closure or suspension of the largest city-forming enterprises, which is fraught with rising unemployment in the region, as well as a significant decrease in budget revenues. 4. reduction of foreign exchange earnings due to falling exports in january-march 2015, exports of goods from donetsk region (excluding part of the zone of the antiterrorist operation) amounted to 891,1 million us dollars, which is 2,7 times less than in january-march 2013. the main problem of the metallurgical and machine-building industries of the economy of the east of ukraine, as well as of the entire industrial complex of the region, remained the concentration of sales markets in the russian federation and a small share of exports to other countries during the decades of the political crisis and military confrontation. in january-march 2015, in comparison with januarymarch of the previous year, exports to the russian federation decreased by 3,9 times, which until 2014 was the largest foreign trade partner of donbas. the export of all goods to the european market in january-march 2015 also decreased by 40,9%, compared with januarymarch of the previous year. the foreign currency proceeds from export supplies of ferrous metals from donetsk region, amounting to $ 708,4 million in january-march 2015, or 79,5% of exports of all goods, decreased 2,4 times, compared to january-march 2014. in january-march 2015, in comparison with januarymarch, 2014, exports of ferrous metal products decreased by 37,7%, machine-building products  – by 3,5 times, chemical products  – by 6,3 times, finished food products – 13,1 times. the result of the decline in exports of enterprises in donbas is felt throughout ukraine, through the reduction of foreign exchange earnings, since in the precrisis period every fifth dollar in the state treasury was earned by enterprises of the east of ukraine. according to the data of “metallurgprom” of ukraine, in the first quarter of 2015, the enterprises of the metallurgical industry of the country increased the negative financial result from the usual taxation activity in 65,4% compared to the corresponding period of 2014, which amounted to 21 billion uah. the export of ukrainian steel products fell to $2,1 billion, or 38,2% (ukrrudprom, 2015). baltic journal of economic studies 111 vol. 3, no. 4, 2017 5. high level of environmental hazard high level of environmental hazard is caused by the threat of man-made disasters of different levels that arose as a result of incorrect closures of enterprises or technological errors in emergency stop production. according to the state of the environment, donetsk and luhansk regions have traditionally been the most polluted regions and ranked first among other regions of ukraine in terms of the volume of pollutants entering the atmosphere. the deterioration of the geotechnical condition of the territory, due to the closure of the mines, activates the destruction of civil and industrial structures, communication and transport systems, the violation of the hydrological regime and the raising of the groundwater level, and the flooding of areas by the mine waters. the situation is complicated by the uncontrolled nature of the process, namely, as a result of the fighting; most coal enterprises were closed without proper conservation, which led to the emergence of technical poison waters into the common water basins of the region and the country. the total complexity in donbas is 248 mines that are depleted, not developed and pose a serious threat to environmental safety. under the influence of the waste waters of donbas mines (20,000 m³ hourly), the mineralization of water in the rivers increased more than twice in 2014, the content of sulphates is tripled, which is detrimental to the flora and fauna of the reservoirs. by january 2015, two-thirds of donbas coal mines were flooded, which means a contamination of groundwater and drinking water in the entire coal basin. in particular, in horlivka, 50 tons of mononitrochlorobenzene are located at the “alexander-zapad” mine, which, by its chemical characteristics, has the ability to actively react with other toxic substances. according to experts, uncontrolled flooding of mines will carry this dangerous mixture into the drinking water reservoirs of donbas. under the threat of poisoning are the tributaries of the seversky donets river, which will lead to pollution of territories not only in the east of ukraine but also in the rostov region, and also in the azov sea. there is a serious danger of radioactive contamination of the region. at the “yuny kommunar” mine in yenakiievo, in 1979, a nuclear explosion was carried out, as a result of which a capsule 29 meters in diameter was formed underground, filled with water with caesium and strontium. the adjustable drainage system maintained the capsule in a stable state. but after the commencement of hostilities, the mine “young communar” was abandoned, water pumping was stopped, which led to the gradual flooding and subsidence of the seams, and, therefore, jeopardized the integrity of the capsule. in this regard, it should be noted that the average horizons of this mine are connected to already flooded mines “yenakiieve” and “poltava”. a technogenic threat is represented by the methane gas output to the surface displaced by groundwater. so in the city of toretsk, located in the contact zone under ukraine’s control, due to the flooding of the mines “artem” and “pivdenna”, located in the territory of the dnr , methane gas enters the cellars of residential buildings and manufacturing plants, which periodically leads to poisoning people and provokes explosions. in addition, the groundwater level began to rise, which became completely unfit for consumption because of the entry of technical waters into them. also in the region, there is a high threat of chemical pollution. only in donetsk region, there are 6,5  thousand objects of increased man-caused danger, 2,388 of which are entered in the state register of highrisk facilities, among them 174 enterprises, where dangerous chemical substances are stored (11,7% of the national quantity). in terms of chemical risks, the greatest threat is represented by stirol and horlivka chemical plant, where 325,000 tons of hazardous wastes are stored. in luhansk region, there are 1128  chemical hazard facilities, of which 159 are objects of increased danger (zarovna, 2015). a very complicated situation develops in a phenolic plant located in the grey zone between the settlements skotovata (controlled by the dnr) and toretsk (controlled by ukraine), its shale-storage dam, which requires major repairs, is in the zone of constant shelling. in the event of its breakthrough, 33 thousand tons of liquid waste products containing phenol, naphthalene, formaldehyde, sulphuric acid and other petroleum products will pour into the novhorodske settlement, kryvyi torets river, and from it into the siverskyi donets river, which are sources of drinking water for donetsk and luhansk regions. therefore, the international committee of the red cross proposed the establishment of security zones, at least around the water supply facilities in donbas. the international expert-journalistic group bellingcat unveiled the results of its own investigation, which indicated 900 large industrial enterprises in one way or another of donbas threatening the ecological safety of them: 140 coal mines, 40 metallurgical plants, 7 thermal power stations, and 177 chemically hazardous industries, on 113 of which radioactive materials are used. 6. the lost industry of donbas military operations that unfolded in donbas since may 2014, swept the most industrialized areas of donetsk and luhansk regions. in the conflict zone, there was a coal mining industry in the region with mines and concentrating mills and a lot of industrial enterprises whose products are of strategic importance. for the economy of ukraine, donbas was not only a centre for the extraction of coal, advanced metallurgy, heavy engineering, and chemical production but also baltic journal of economic studies 112 vol. 3, no. 4, 2017 a region where a large part of its enterprises worked for the defence industry. as practice showed in the conditions of ato maintenance, industrial enterprises in donetsk and luhansk regions were threatened not only by military actions but also by a number of enterprises that manufactured products for the needs of the military during the summer and the first two months of the autumn of 2014, and were removed from our state. to the mercy of fate were left some factories of the defence industry, the development of which is not only unique but also secret. by not exact and scattered data, enterprises in luhansk, donetsk, krasnodon, and snizhne became mining of illegal armed formations. in the list of plants where equipment was dismantled, there are eight enterprises. they are ojsc “tochmash plant” (donetsk), ojsc topaz (donetsk), cjsc “luhansk cartridge plant” (luhansk), luhansk electronic machine building plant “mashzavod-100” (luhansk), ojsc “luhanskteplovoz” (luhansk), luhansk machine building plant named after parkhomenko (luhansk), “yunist” ojsc (krasnodon, luhansk region), branch of “motor sich plant” (snizhne). 1. “tochmash” factory (donetsk) specializes in the production of hydraulic equipment, hydraulic cylinders, pipeline fittings, the main products of which are “lyman complexes” designed for the radio suppression of aviation control lines in the frequency ranges 100400  mhz and 960-1215 mhz. among the owners of the plant are firms affiliated with russian structures: afk “sistema” vladimir yevtushenko and vab bank oleg bakhmatyuk. 2. ojsc topaz (donetsk) is a part of the state joint-stock holding company “topaz” (until april 2014, it was managed by the ministry of industrial policy, restructured by the ministry of a. yatsenyuk). the plant produced complexes for radio suppression of lines and control of aviation in the frequency ranges 100-400 mhz and 960-1215 hz (of the “liman” type), as well as modern radar stations (such as “kolchuga”). in the system of disclosure of the state commission for smida, smida does not name its customers, since the only sales channel for it is se ukrspetsexport (a marketing enterprise of the state enterprise “ukroboronprom”). over 95% of the plant’s products are exported. on september 2014, the parts of illegal armed formations exported to the territory of the russian federation a ready-made navigational complex “mandate”, proceeding to complete dismantling of equipment located in the enterprise. such well-thoughtout actions by the beginning of the autumn of 2014 have borne fruit. since already in september both dnr and lnr suddenly had an echeloned air defence system installed by specialists who had come from the russian federation. the basis of which lie “liman” and radar stations of the “kolchuga” type. 3. joint-stock company “luhansk cartridge plant” (luhansk) according to the weekly “business”, its founder is the company “bickford”, which in parallel with a number of business structures such as: kerch shipyard “zaliv”, jsc luhansk machine-tool plant “zaliv” is a part of the david zhvania’s property, one of the biggest sponsors of the victor yushchenko party “our ukraine”. although he claims that he has never been the owner of these enterprises, he only carried out effective management, for which he received solid fees. however, it is possible that the scandalous politician decided to save his capital by reselling the property in the occupied territories to russian business structures. however, zhvania did not comment on this situation. 4. luhansk machine-building plant named after parkhomenko (luhansk), owned by former deputy anatoly yagoforov, whose machines and equipment were transported to the russian federation. and this information was confirmed by russian media, which published an interview with the technical consultant of the plant, nikita druzev, who said that the equipment of the plant was transported to chuvashia, cheboksary. according to him, the decision was made by the owners of the plant. the main staff of the plant “moved” together with the machines and equipment. “the company worked for 12 years mainly in the russian market, therefore, the business owners decided to evacuate together with the team and equipment to russia,” the report said. 5. the equipment of luhansk electronic machine building plant “mashzavod-100” (luhansk) was also dismantled, where they developed and manufactured equipment for the production of single crystals of silicon, sapphire and other solid and super-hard single crystals that are components for the motor sich. this information is confirmed by the words of the nsdc speaker, andrei lysenko, who reported that in trucks that entered ukrainian territory as the first humanitarian convoy, the russians loaded the equipment of the “topaz” production association, which is engaged in the production of radar stations and equipment of luhansk machine-building plant named after parkhomenko, producing cartridges for small arms. 6. ojsc “yunist” (krasnodon, luhansk region) specializing primarily in the production of various types of relays, 94,6% of whose shares belonged to the state of ukraine and were managed by the state property fund. the company produced highly stable, highly accurate microminiature sealed relays weighing from 2 grams for special equipment of aviation, aerospace, missile industry. the plant was a monopolist in the cis for the production of low-voltage unpolarized relays of res 79, res 80, rps 42, rps 43 rek 21 – for special equipment for the aviation, aerospace, missile industry; automotive relays for electrical equipment of cars, trucks, passenger vehicles, agricultural machinery. the company “yunist” was a monopolist not only among the baltic journal of economic studies 113 vol. 3, no. 4, 2017 cis countries but throughout europe, in the production of specialized products for the rocket and aerospace industry, in particular, the supply of microchips used in the construction of missiles and submarines. just before the beginning of the ato, the plant supplied high-precision japanese equipment. the bulk of products were exported to russia, the customers were enterprises of the defence industry complex. “youth”, as well as “topaz”, belonged to the same ministry of industrial policy of ukraine, which was so successfully restructured. and consequently, the situation with the loss for the ukrainian defence industry of this enterprise is similar to the situation with ojsc “topaz”  – it was also exported to russia with all equipment. 7. «luhanskteplovoz» (luhansk) as a result of active privatization policy of l. kuchma in 2001, the assets of the plant were sold to russian “transmashholding”. the competitor at the auction was none other than igor kolomoisky. the state initiated the sale of 76% of the company’s shares. true, i. kolomoisky tried to find out the relationship with the rival in court, as a result, only in 2010, “transmashholding” was finally lucky to become a full owner of the enterprise. military operations in the east of ukraine for many representatives of big capital can be a reason for selling their assets to russia, so that the enemy will be able to get the most promising ukrainian capacities, not only from the military but also from the civilian sector. 8. such information appeared in relation to one of the branches of “motor sich” (snizhne, donetsk region), which produced blades and disks for turbines of jet and turbojet engines of aircraft and helicopters, was also the only one in the post-soviet space, which technology allowed the production of blades for turbines with built-in crystals (the cost of one turbine is equal to the cost of a german foreign car of the last model). the use of these technologies makes it possible to avoid overheating of turbines at excess speeds and increases engine power when speed is set to the limit. in addition, the export of the enterprise to russia was also interesting in the context of obtaining equipment for the manufacture of components for the engines of russian helicopters. 7. conclusions the information on exportation above the abovementioned enterprises was confirmed by the data of the main command centre of the ministry of defence of ukraine, in which it was reported that the militants, in cooperation with russian customers, had dismantled the equipment of strategic enterprises of the militaryindustrial complex. thus, in the transfer of a controlling stake in strategically important industrial enterprises of donbas defence complex, the representatives of russian capital can clearly see the hand of no president of ukraine. not a few efforts to deliver innovative technologies in the defence industry were made by the so-called “young reformers” of modern days who simply closed their eyes, and dismantled and removed equipment outside ukraine. so we can say with complete certainty that the collapse of the industrial enterprises of the military complex of the east of ukraine was planned long before the start of the military-political conflict, and it is obvious that not only the domestic oligarchs succeeded in implementing these grandiose plans. to this day it remains a mystery why the authorities, who know about the strategic military importance of these enterprises and the uniqueness of their developments, did not bother to evacuate in a timely manner either enterprises, production documents or specialists. perhaps there was a moment of underestimation of the enemy’s forces and capabilities, or there was a deliberate surrender of the giants of the defence industry. references: vosstanovit donbass: missija nevypolnima! retrieved october 20, 2015 from: http://ord-02.com/item/51999vosstanovit-donbass-missiya-nevyipolnima galickij a. (2016). kak izmenilsja ugol'nyj rynok ukrainy v 2016 godu. retrieved october 20, 2016 from: https:// delo.ua/business/kak-izmenilsja-ugolnyj-rynok-ukrainy-v-2016-godu-323757/ gosstat. za 2015 g. ukrainskaja promyshlennost upala na 13,4 %. retrieved january 21, 2016 from: http:// gordonua.com/news/money/gosstat-za-2015-god-ukrainskaya-promyshlennost-upala-na-134--116418.html zarovna t. (2015). 5 ekolohichnykh bomb donbasu, yaki mozhut zdetonuvaty pid chas viyny. retrieved june 24, 2015 from: https://www.obozrevatel.com/ukr/crime/53904-5-ekologicheskih-bomb-donbassa-kotoryie-mogutsdetonirovat-vo-vremya-vojnyi.htm koshla v. (2015). a nuzhen li donbass? retrieved april 2, 2015 from: http://avesta.tj/2015/04/02/a-nuzhen-lidonbass-2/ ukrrudprom. promyshlennoe proizvodstvo doneckoj oblasti za janvar-aprel 2015 goda sokratilos v 2,1 raza. retrieved march 20, 2016 from: http://www.ukrrudprom.ua/digest/ promishlennoe_proizvodstvo_donetskoy_ oblasti_za_yanvaraprel_2015_goda_sokratilos_v_21_raza.html baltic journal of economic studies 114 vol. 3, no. 4, 2017 елена клименко анализ состояния ведущих отраслей экономики для старопромышленного региона донбасса – лето-осень 2014 года аннотация. целью статьи является изучение состояние регионального промышленного комплекса старопромышленного региона востока украины пострадавшего в результате военно-политического конфликта начавшегося в 2014 году. одной из задач исследования является анализ процесса разрушения основ региональной экономики, а также оценка значения утраты отраслей донбасса для стабильного социальноэкономического развития всех регионов украины. методика исследования. метод анализа позволил изучить процесс разрушения промышленных предприятий базовых секторов региональной экономики донбасса с начала военно-политического конфликта. автором определены схемы функционирования части предприятий, работающих на временно оккупированной территории востока украины, которые, став заложниками ситуации, для сохранения производства вынуждены были сотрудничать с представителями незаконных властей непризнанных республик. статистический метод использован для анализа финансовых и экономических показателей предприятий промышленного комплекса, с целью проведения оценки их роли в государственной экономике страны в целом. метод системного анализа позволил автору оценить, ущерб от утраты в экономике государства поставок угля, который ранее добывался на шахтах донбасса. таким образом, был аргументирован факт уменьшения промышленного производства на востоке страны, что привело к существенному падению экспорта украины в целом по таким направлениям как: поставки черных металлов, продукции машиностроения и цветной металлургии. практические результаты работы. автором проанализированы факты утраты, в результате демонтажа и вывоза оборудования, стратегически важных предприятий военно-промышленного комплекса страны. в статье отражена проблема возрастающей экологической опасности, возникшей в результате отсутствия контроля над закрытыми предприятиями угледобывающей отрасли и химической промышленности. кроме того, в ходе активных боевых действий ряду объектов промышленности были нанесены значительные повреждения, что приводит к неконтролируемым выбросам в атмосферу вредных веществ. остановка шахт и обогатительных фабрик создала еще одну проблему – сброс шахтных вод, их выход на поверхность, подтопление значительных территорий и попадание ядовитых токсичных вод в реки, служащие источником питьевой воды для жителей, как региона конфликта и страны в целом, так и соседних государств. также техногенную угрозу представляет и выход газа метана на поверхность, вытесняемого грунтовыми водами. оригинальность проведенного исследования заключается в демонстрации динамики разрушения экономического комплекса старопромышленного региона в следствии ведения боевых действий на территории государства и незаконного вывоза оборудования предприятий. все эти действия привели к запуску негативных процессов в украинской экономике, спровоцировав глубокий социально-экономический кризис, что ускорило разрушение металлургической, угольной и химической отраслей региона. таким образом, сегодня необходимо проводить инвентаризацию уцелевших и продолжающих работать предприятий, оперативно определять зону рисков и разрабатывать стратегии их минимизации и преодоления в ключевых отраслях экономики. baltic journal of economic studies 358 vol. 4, no. 1, 2018 corresponding author: 1 department of history of state and law, institute of jurisprudence and psychology, lviv polytechnic national university. e-mail: sbr@gmail.com 2 department of administrative, financial and information law, uzhhorod national university. e-mail: slivkaoo@gmail.com 3 department of history of state and law, national academy of internal affairs of ukraine. e-mail: bashoa@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-358-365 the legal framework for the implementation of currency regulation in some foreign countries and in ukraine bohdan stetsiuk1 institute of jurisprudence and psychology, lviv polytechnic national university, ukraine oleksandr slyvka2 uzhhorod national university, ukraine oleksandr bashynskyi3 national academy of internal affairs of ukraine, ukraine abstract. the purpose of the article is to conduct a comparative legal study of laws and regulations that determine the legal framework for the implementation of currency regulation in some foreign countries and in ukraine and to define ways for improving domestic legislation in this area on this basis. the subject of the study is the experience of currency regulation in some european countries, usa, china, and ukraine. methodology. the research is based on a comparison of foreign exchange regulation in ukraine and abroad. based on the analysis of peculiarities of the state regulation of currency circulation in great britain, germany, france, poland, the usa, china, and in some other countries, the advantages and disadvantages of different regimes of state control over currency circulation are determined: from the regime of the floating rate to the rigorous state control. on the basis of the comparative legal study of certain provisions of the administrative legislation of ukraine, the possibilities and limits of the application of positive foreign experience in this area are determined. the results of the study showed that in order to implement foreign exchange management experience, it is necessary to postpone the final transition to establishing a floating rate regime, reinforcing state interference. at the same time, it is necessary to strengthen currency control not only over the implementation of foreign exchange operations but also over the activities of entities that determine the state policy in the field of currency regulation, as well as directly implement the relevant activities using the instruments determined by provisions of the current legislation. practical implications. the positive experience of the formation of the foreign exchange market in foreign countries shows that the gradual transition from a fixed to a floating exchange rate is the beginning of a natural market exchange rate formation, equalization of the balance of payments, and the gradual liberation of the national economy from the pressure of administrative and corruption restrictions. value/originality. conducting a comparative analysis of foreign exchange regulation in foreign countries is the basis for developing the most promising directions for the development of domestic legislation in this area. key words: foreign experience, currency regulation, currency exchange rate, currency control, eu countries. jel classification: g15, g17, g18 1. the relevance of the problem the current state of development of the world economy is characterized as extremely risky. the study of causes of disturbances of balance and economic stability in the world makes it possible to conclude on the significant role of monetary policy in strengthening crisis phenomena. the key issue for the country’s investment attractiveness is the ability of the rules of currency regulation to be as flexible as possible with respect to foreign investors (savka, miedieliaieva). most countries of the world have rules of currency regulation or currency control in one form or another. the existence of such rules of currency regulation has always been noted as an important component of state baltic journal of economic studies 359 vol. 4, no. 1, 2018 regulation, which affects all participants in foreign transactions in the country. the stability of the country’s economic development, high rates of economic growth are largely determined by the state of national currency relations, which, in turn, is determined by the monetary policy pursued in the country. foreign exchange policy as one of the main forms of regulation of foreign economic relations becomes of paramount importance in the practical realization of state influence on the course of all economic processes in order to implement the strategy of economic development and the development of an effectively functioning market mechanism in ukraine. that is why the study of foreign experience in the implementation of monetary policy becomes relevant and important since both the development of market relations and the expansion of foreign economic relations and general ensuring the economic security of the state and economic development depends on its effectiveness (sorokivska, 2013), which determined the relevance of the selected theme. a significant contribution to the study of the problem of choosing the optimal foreign exchange policy for countries with a transformational economy has been made by foreign and domestic scientists: j.  fraenkel, o.  bereslavska, ya.  belinska, o.i.  but, a.  halchynskyi, o.  dziubliuk, f.  zhuravka, zh.v.  zavalna, v. kovalenko, b. lapchuk, s. makukha, s.ya. morynets, o. romanyshyn. 2. the purpose of the article the purpose of the article is to conduct a comparative legal study of laws and regulations that determine the legal framework for the implementation of currency regulation in some foreign countries and in ukraine and to determine on this basis ways for improving domestic legislation in this area. many scholars and researchers are of the opinion that ukrainian currency control rules are restrictive and close to very strict ones. although the national bank of ukraine initiated a significant number of changes to existing exchange control rules by proposing amendments to existing legislation or by introducing its own explanatory rules, such changes are mostly partial and very slow. consequently, the ukrainian currency control rules remain backward and not renewed for a long period of time (savka, miedieliaieva). in terms of the globalization of all forms of international economic activity, the monetary policy of any country is one of the most important elements of its economic strategy since the national currency systems link the economies of individual countries into a single world economic complex (motorniuk, kalynovska, 2010). globalization of society not only contributes to the positive interpenetration of cultures, the strengthening of the country’s potential by joining the world’s best intellectual assets, the study of historical experience in solving socially important issues (sevruk, pavlenko, 2015). thus, an increase in the volume of foreign exchange operations in ukraine, effective organization of foreign economic activity of economic entities, development of the national currency system and a full-fledged currency market exacerbate the problem of the dialectic combination of market and administrative methods of economic management and require strengthening of the state regulatory influence on the activities of subjects of currency relations (melykh, 2012). in developed countries with a socially-oriented market economy, the entrepreneurial sphere of activity is its leading sector. it is because of it that a new layer of owners is formed – the middle class, which is the social base of the existing socio-economic system. 3. presentation of the main research material ukraine at the present stage of its development is on the path of significant transformations: the structure of economic relations is changing, new subjects of property and political activity are forming, the basic values are transforming, core values life, the way of life, and traditions are changing (sevruk, 2017). the transition from the planned and administrative management of the economy to market relations required from our state to create appropriate market institutions. realizing the importance of the formation of the non-state sector as one of the components of a market economy, ukraine, from the first years of independence, began to create legal conditions for the development of entrepreneurship (kamlyk, 2005). therefore, the monetary regulation of any state is realized through the mechanism of currency restrictions and currency control. when conducting currency regulation, the state regulates the system of international settlements performed by participants of foreign economic activity, and establishes (platonova, 1996): the scope and procedure for conducting foreign exchange transactions; procedure for the formation and use of the currency reserve of the country; procedure for the formation and use of currency funds of economic entities; the scope and procedure for the implementation of currency control. foreign exchange restrictions as a system of state measures (administrative, legislative, economic, and organizational) for establishing a procedure for conducting operations with currency values usually involve the regulation of international payments and transfers of capital, repatriation of export earnings, profits, notes and securities, the prohibition of free sale of foreign currencies (krokhina, 2015). baltic journal of economic studies 360 vol. 4, no. 1, 2018 in the passive balance of payments, such measures are used to restrict the export and “escape” of capital, stimulating the flow of capital in order to maintain the exchange rate: limiting the export of national and foreign currency, gold, securities, loans; control over the activities of the credit and stock markets, which means that transactions are carried out only with the permission of the ministry of finance and when providing information on the size of loans and direct investment abroad, the attraction of foreign loans provided the prior approval of the currency control authorities (in particular, for the issuance of bonds loans) so that they do not affect the national currency market, the market for loan capital, and the growth of money supply in circulation (krokhina, 2015); restrictions on the participation of national banks in the provision of international loans in foreign currency; forced redemption of foreign securities owned by residents and their sale for currency (germany resorted to this event before the second world war and great britain – in the post-war period); complete or partial termination of foreign debt repayment or payment in its national currency without the right to transfer abroad. with an active balance of payments in order to curb both the inflow of capital to the country and to increase the national currency, the following forms of currency and credit restrictions on international financial transactions are applied: depositing in a central bank’s non-interest account of new international obligations of banks (in germany in 1978, the minimum reserves of credit institutions that they are obliged to keep in the central bank were raised to 100% increase in foreign liabilities of banks; in japan, this rule was raised in march 1978 from 50% to 100% in order to suspend the flow of dollars into the country; in december 1978, it was reduced to 50% after the announcement of the us dollar support program; since february 1979 it was 0.25%) (krokhina, 2015); prohibition on non-residents’ investments and sale of national securities to foreigners (in switzerland in 1972–1974, partly, and from february 1978 to the end of 1979, the sale of short-term swiss securities to nonresidents was almost completely prohibited; in january 1978, sales of national securities for a term of two to four years to foreigners were prohibited in germany; in japan, the ban on short-term bonds purchases by nonresidents in yen was temporarily imposed in march 1978); mandatory currency exchange of national currency loans at the national central bank; prohibition on payment of interest on term deposits of foreigners in the national currency (a similar prohibition was in force in switzerland from november 1974 to february 1980 for the purpose of redistributing capital from the country to the euro-swiss franc market and reducing the exchange rate of the national currency) (krokhina, 2015); the introduction of a negative interest rate on deposits of non-residents in the national currency (from 12 to 40% per annum). at the same time, the interest is paid either by the bank’s depositor, or by the bank itself that is interested in attracting foreign currency deposits to the relevant government institution (this measure was applied at different times by belgium, the netherlands, germany, switzerland (1972–1979) in order to curb the inflow of capital; for example, in switzerland in 1978, the rate of “negative” interest was 10% in the quarter for contributions from non-residents in swiss francs to more than 5 million francs) (krokhina, 2015); restrictions on the import of currency into a country (this measure was introduced in switzerland in 1976– 1977; then the banking act of 1979 prohibited banks from storing banknotes in swiss francs in safes leased by foreigners, keeping checks for large amounts issued on their behalf by order foreign clients); restrictions on forward sales of the national currency to foreigners (in switzerland, these restrictions were practiced between november 1974 and march 1980, then they were mitigated: based on the sale of francs for up to ten days the limit was increased from 20 to 40% of the amount of the transaction as of 31 october 1974, for operations for a longer term – from 50 to 80%); the scheme of compulsory deposits (this measure was used in germany from march 1972 to september 1974; firms that are actively resorting by eurocredits, for which rates were lower than in the country, were obliged to place a part of the attracted capital at a non-interest account in the german federal bank) (krokhina, 2015). conducted analysis of the main approaches to the definition of mechanisms for the unshadowing of the ukrainian economy provides grounds for arguing that the main mechanisms, according to scientists, are economic (improving the tax system, reforming the national financial control system, stimulating investment processes, creating favourable conditions for business development, fighting corruption, etc.). it is necessary to agree with the opinion of s.o. pavlenko that corrupted ties, which are closely regulated in the legislative, executive, and judicial authorities, lead to the establishment of their dependence on criminal structures, which ensures the adoption of necessary decisions for them, in violation of current legislation or existing social norms (pavlenko, 2016). in our view, for the national economy, integrated into the world, the fuller implementation of the liberal idea of foreign exchange control is of great practical importance. at the same time, we cannot neglect the stage of transition from less liberal currency control to more liberal, so as not to suffer certain losses. as rapid liberalization of currency control, so unjustified tight measures can lead to negative social and economic baltic journal of economic studies 361 vol. 4, no. 1, 2018 consequences. for a deeper understanding of the essence of relations in the field of currency control in order to improve the national currency system, it is expedient to study the practice of currency control in developed european countries (dzhavaha, 2014). let us also dwell on the system of currency control in germany. legally, the system of currency control in this country has existed since 1949 when the law “on foreign exchange turnover and control of goods” was adopted (foreign exchange law). the law contained a prohibition (with the obligation to request permission) on transactions with property between citizens and foreigners, a ban on the movement of currency, provisions on currency control. and by this time, the law is the basic document defining currency relations in the country. in our time, currency control in germany is carried out on the basis of the foreign exchange law of 1949 (yalta interbank conference: more questions than answers, 2004). one of the main principles of the economy in germany is the free movement of capital. however, despite the capital movement liberalization, there is a strict control in the form of accounting of capitals that cross the state border. mostly, banks, as well as other lending organizations, which transfer collected and aggregated information to central banks of lands or directly to the central bank of the country, deal with this issue. such a collection and analysis of data on the movement of capital allows developing, if necessary, specific measures for the regulation of the currency market, and is also used in compiling the balance of payments of the federal republic of germany by a special unit of the deutsche bundesbank (federal bank) (kizenkov, 1997). as a result of the liberalization of currency legislation in the frg, the issue of organizing effective counteraction to the use of financial systems for the purpose of laundering of the proceeds of crime has become particularly relevant. therefore, the frg is actively involved in expanding international cooperation in the fight against money laundering, while taking appropriate measures at the national level. thus, in the system of currency control in germany, there are relevant legislative acts, currency transactions related to the movement of capital are monitored, and the fight against the legalization of criminal proceeds is carried out. the currency control authorities are the german federal bank, the central banks of land, commercial banks, and other lending institutions (dzhavaha, 2014). in 1989, in italy, the decree on currency regulation was adopted, which allowed carrying out any currency activity that did not contradict the law. since 1989, the italian foreign exchange office serves the circulation of all funds in foreign currency. together with the bank of italy, this body also manages official currency reserves. coordination of activities of these two institutions is ensured by the fact that the central bank manager is simultaneously the head of the italian foreign exchange office. control over export-import foreign exchange operations is also carried out by the customs services, which submit their received information about illegal actions in the financial sphere to the italian foreign exchange office and the guardia di finanza. in 1995, the italian foreign exchange office created a special department to combat the prevention of the use of financial institutions to launder criminal proceeds (kolesnikov, shmyreva, klimov, 1999). it is also worth studying features of the currency control system in great britain. the foundations of the current system of currency and export control of great britain were laid in the pre-war period – in 1939 when the prescriptions on defence (finance) and the law “on import, export and customs authorities” were adopted. since 1947 the law “on currency control” has entered into force, as well as more than 40 statutory documents, including orders, rules, and directives issued by the treasury and the bank of england (platonova, 1996). among the modern statutory instruments regulating foreign exchange controls, the law “on import and export” of 1990, the order “on export control of goods” of 1979 should be noted (khamaganova, 2001). the law “on currency control” provides authority and imposes obligations and restrictions on the circulation of currency values. currency control authorities include the treasury, the bank of england and authorized banks with exchange permit, as well as customs and excise authorities. british treasury is the main authority of the currency control. however, it delegated most of its powers to the bank of england, which directly exercises currency control. the bank of england manages its affiliates and authorized representative offices in most commercial banks (both domestic and foreign) located in great britain and executing a wide range of transactions with its permission. the customs and excise authorities control the movement of capital and currency across the border (shmyreva, 1999). thus, in great britain, individual elements of the currency control system continue to be applied. yes, there are restrictions on the circulation of currency values, control over foreign currency investment, the fight against the legalization of proceeds of crime, which involves the joint working group and the national bank of the united kingdom for financial investigations, are being actively pursued. in poland, with the commencement of the reform process, a fixed exchange rate was introduced – first to the us dollar, and then to the “basket” of the top five currencies, to curb inflation. in may 1995, the regime for fixing the exchange rate was changed to the “currency corridor”, the limits of which gradually expanded from ±7% to ±15%. since april 2000, as a result of the introduction of free floatation of the exchange rate on the baltic journal of economic studies 362 vol. 4, no. 1, 2018 polish zloty course, market factors begin to affect. in the mid-90s of the xx century, the national bank of poland actively used exchange rate policy to combat inflation. the strengthening of the zloty’s exchange rate in 2000– 2001 occurred as a result of the large privatization proceeds and consistent restricting monetary policy of the polish government, as well as the inflow of foreign capital (honcharuk, matsko, shparhalo, 2010). on july 27, 2002, a new law “on foreign currency” was issued in poland, which regulates the execution of foreign exchange transactions. this law abolished all restrictions on the movement of funds between poland and the eu countries. at the same time, the law provides for some restrictions regarding the movement of funds from non-eu countries. currency restrictions can be removed by obtaining currency permits that are of two types: general and private. the general currency permits are issued by the ministry of finance, and private ones – by the national bank of poland. the main measure of currency regulation was the transition to a flexible exchange rate and the introduction of the “free-swimming” regime in 2000. thus, the government and the national bank of poland were able to solve the problem of the impossibility of combining three goals, namely: stability of the exchange rate, capital mobility, and monetary autonomy (zhuravka, 2008). on the basis of the above analysis, one can conclude that the common for most developed european countries is the fact that in the post-second world war period, currency control was rather rigorous. with the improvement of their currency and financial status, such countries have gradually liberalized currency control. in intergovernmental relations, currency restrictions can be used to establish a currency blockade – an economic sanction in the form of one-sided currency restrictions of one country or group of countries in relation to another state, which impede the use of its currency values in order to force it to comply with certain requirements and are aimed at undermining its currency-economic situation. the application of such measures allows freezing the foreign currency values stored in the accounts with foreign banks of the state, against which the currency blockade is directed, to discriminate it as a trading partner. for example, in the period of the americaniranian conflict in november 1979, the usa blocked iranian bank accounts (12 billion usd) and cancelled some loans, demanding the release of american hostages, and ultimately in order to undermine the country’s economy, which began to pursue antiamerican policies. during the falklands conflict in 1982, britain blocked argentina’s currency assets, which then dropped off its example. in january 1986, the usa announced the currency blockade of libya, freezing its currency assets in american banks in order to force the country to abandon its independent foreign policy. in 2003, the usa froze iraq’s foreign currency accounts. international sanctions against iraq were abolished in the spring of 2003 after the us and british military operations in that country ended (krokhina, 2015). the currency policy is closely interrelated with the transformational and monetary processes taking place in the economies of different countries. thus, most eastern european and cis countries were undergoing stagflation at the stage of transformations, so central banks were forced to introduce a fixed exchange rate regime with the purpose of curbing inflation. further gradual recovery and the development of financial and money markets contribute to the liberalization of the exchange rate and the operation of the foreign exchange market as a complete monetary regulation tool (honcharuk, matsko, shparhalo, 2010). in general, it should be noted that for most countries of the world (which was and is), a widespread use of various currency restrictions and even a state monopoly in the currency sphere are peculiar. world experience shows that the choice of the exchange rate regime is an equally important element in the realization of foreign exchange policy. there are many good examples of using floating, fixed modes or their combinations. recently, however, most countries prefer the regime of floating exchange rates. this is determined by the fact that, in the long run, there is no alternative to the floating regime, because long-term stability at a fixed rate cannot be achieved. however, in the short run, currency policy is obliged to ensure a rigid limitation of exchange rate fluctuations. the use of foreign exchange restrictions is associated, at least, with a number of reasons: first, restrictions are used to strengthen the regulatory impact on the balance of payments; secondly, to solve problems of repayment of debts on foreign loans; thirdly, many states seek to concentrate foreign currency in their hands in order to spend it more effectively on economic development; fourth, in order to increase their foreign exchange reserves, they introduce such official rates, which market events cannot be sustained with limited reserves, because these rates differ significantly from potential market ones; fifth, in relatively poor countries, governments simply cannot allow free sale (and hence import and export) of the national currency since the latter is a debt obligation of the country, the possession of which allows at any time show it for payment (krokhina, 2015). thus, by combining the theoretical bases of the introduction of a floating exchange rate and the transition to inflation targeting with the practice of other countries and the economic characteristics of ukraine, one can conclude that there is a need to introduce a transitional period, during which it is worthwhile to ensure: 1) increasing the efficiency of monetary policy operations and increasing the share of refinancing operations and securities operations in the open market in the nbu emission policy; baltic journal of economic studies 363 vol. 4, no. 1, 2018 2) the gradual liberalization of the capital market and the development of the banking system, as the abandonment of currency restrictions requires a certain redevelopment of the financial services market regulation system; 3) maintaining a sufficient level of gross international reserves. by the end of march 2013, the volume of gold and foreign exchange reserves amounted to 24728.61 million usd. according to the expanded criteria for adequacy of risk-based reserves (loss of access to the international capital market, national capital escape, and growth of current account deficit), this volume is insufficient; 4) maintenance of the exchange rate from significant nominal fluctuations within the specified limits, since the advantage of a floating regime is the very possibility of smoothing out the negative effects of the globalization process by adjusting the nominal exchange rate (sorokivska, 2013). thus, a successful long-term foreign exchange policy should combine elements of flexibility and control, and its benchmark is to gradually shift to a floating exchange rate regime. consequently, currency restrictions in a number of cases are very closely related to credit and trade regulation. their arsenal is varied; ineffective forms are replaced by more adapted to the peculiarities of the monetary and economic situation of the country and competition in the world market. a particular attention should be paid to the comparative survey of foreign legislation on the legal status of digital money and state regulation of cryptocurrency business. canada. in june 2014, the governor general of canada approved a bill (transactions involving bitcoins) according to which: cryptocurrency exchanges are subject to registration at the financial transactions and reports analysis centre of canada (fintrac) (financial transactions and reports analysis centre of canada) as financial institutions; companies should ensure compliance with anti-money laundering legislation: to notify the regulator of suspicious transactions, to introduce user verification, and more; banks cannot open accounts for cryptocurrency exchanges that are not registered in fintrac. the bill extends both to companies incorporated in canada and companies that provide relevant services in canada but are registered in another jurisdiction. payment for goods or services using cryptographic goods is taxable as a barter transaction. in the case of sale of a digital currency, a tax on profit or a capital gains tax is imposed. cryptocurrency, obtained as a result of mining, carried out for commercial purposes, is subject to tax on income. the usa. the state of california, the first of all us states that allowed the use of crypto foreign currency at the legislative level. the law (assembly bill no. 129) allows any corporation, association, or private person in california to engage in a turnover other than legitimate us funds, and it came into force in early 2015. however, the management of the cryptocurrency business in the state is not regulated. in the state of new york, such a business was regulated in august 2015, when bitlicense – a license to run a cryptocurrency business was introduced by the new york state financial services department (the united states is falling behind in bitcoin regulation. kyle torpey). in the state of washington, the digital currency is the object of money transfers (money transmission) in the sense of the law “on unification of financial services”. this means that companies can execute crypto-currency transfers to a washington resident only after receiving the washington money transfer operator license (washington money transmitter license). this requirement also applies to exchanges that provide currency exchange services for cryptocurrency and vice versa. subject to this regulation are companies that provide cryptocurrency wallets to users and perform transactions for the exchange or transfer of digital currency. companies that provide cryptographic currency wallets should conduct a security audit of the computer system in order to obtain the appropriate license (uniform money services act). japan. in may 2016, the japanese parliament passed a law, according to which: cryptocurrency operators are subject to registration at the financial services agency; the agency has the authority to carry out stock market inspections and, if necessary, may apply administrative measures; cryptocurrency is recognized as a value similar to assets. in this case, the digital currency is not considered a legal tender, but as a means of exchange, through which you can buy goods, services or legal means of payment. taxation of cryptocurrency and operations with it in japan are carried out according to the standard rules defined in the tax legislation. thus, the income received by an individual as a cryptocurrency is subject to income tax (income tax), the income of a legal entity in a digital currency – corporate tax (corporate tax). the sale of cryptocurrencies is subject to a japanese analogue of value added tax ( japan makes first bitcoin-related drug arrest). for today, no one of the regulators (authorities) of the european union adopted special rules for the regulation of cryptocurrency activities. however, member countries carry out legal regulation of exchange business, in particular, cryptocurrency. some member states have legislative rules on the regulation of cryptocurrency business, whereas other countries do not conduct legal regulation of this business at all. in many of them, cryptocurrency business is regulated through reports, warnings, press releases, information notes issued by central banks or other regulatory bodies that do not have a mandatory order. in eu legislation, the legal regulation of cryptocurrency transactions is considered within the framework of the implementation of the policy of combating money baltic journal of economic studies 364 vol. 4, no. 1, 2018 laundering and terrorist financing (directive (eu) 2015/849; a comparative review of foreign legislation on the legal status of digital money and state regulation of cryptocurrency business). analysing this problem, it is necessary to separate the draft law of ukraine “on currency”. the draft law “on currency” was developed in connection with the necessity of legislative consolidation of principles of transparent foreign exchange policy of ukraine, regulation of the currency market, the need to restore the stability of the currency of ukraine, and create a favourable investment climate in the country. the current regime of currency regulation, which was established with the adoption of the decree of the cabinet of ministers of ukraine “on system of currency regulation and currency control” (vidomosti of the verkhovna rada of ukraine (vvr), 1993, no. 17, p.  184) and regulatory acts adopted in accordance with this decree, is obsolete and does not correspond to the modern european practice of the organization of currency regulation. the system of currency regulation is non-transparent for subjects of currency transactions and creates additional difficulties when entering into currency legal relations. moreover, the system of currency regulation and control is so inconsistent with time and demands of subjects of currency relations that cannot be changed by separate specifications/changes in the legislation and require a radical revision with the introduction of a new regime of currency regulation, which would correspond to the best practices of the european union for the introduction of a free movement of capital. the purpose of the bill is to establish a regime of currency regulation, which provides for the free exercise of currency transactions by their entities, aimed at improving the simplicity of such transactions, improving the investment climate and investment attractiveness of ukraine, as well as the implementation of commitments undertaken by ukraine under the association agreement between the european union and the european atomic energy community and their member states, of the one part, and ukraine, of the other part, in particular, the introduction of regulatory principles of the movement of capital of the european union (according to the directive of the eec council of 24.06.1988 № 88/361/eec) (explanatory note to draft law of ukraine “on currency”). adoption of the proposed draft law of ukraine will enable: ‒ to improve the legislative framework and bring it in line with the best european practices on the free movement of capital, which will expand the opportunities for residents to develop foreign economic activity and increase exports, contributing to the strengthening and development of the national economy; ‒ to create favourable conditions for investing capital in the ukrainian economy, developing international relations, removing tensions in relations with foreign partners, and it will also have a beneficial effect on the business activity of foreign business entities/individuals in ukraine; ‒ to improve the legislative provision of the implementation of a single state monetary policy, as well as the stability of the currency of ukraine and the currency market of ukraine, as factors of progressive development of the national economy and international economic cooperation. as a result of the efforts taken by the states over the past two decades, in almost all countries with a market economy, the state’s participation in increasing the competitiveness of domestic enterprises, in the development and cheapening of the necessary infrastructure for it has increased dramatically; the tax system, which encourages competitive enterprises, significantly rebuilds; rational investment, monetary and financial, and regional policies as the basis of currency regulation and currency control develop (krokhina, 2015). 4. conclusion summarizing the above, it should be noted that in the face of the overcoming negative effects of the financial and economic crisis, there is a need to solve the problems of the search for and implementation of such mechanisms of currency regulation and currency control, which would be most adequate to the current stage of development of the ukrainian economy. however, ukraine has no sufficient regulatory framework to counteract this phenomenon, dangerous for the state. a leading role in solving this issue is played by effective, impartial, and timely state financial monitoring, the system of which should be built on the basis of world experience. references: savka o.i., miedieliaieva o.s. suchasni problemy valiutnoho rehuliuvannia v ukraini [modern issues of currency regulation in ukraine] url: 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(2008). valiutna polityka v umovakh transformatsiinykh zmin ekonomiky : monografiya [monetary policy in terms of transformational changes in the economy : monograph] sumy : tov “cpc «dilovi perspektyvy», shei «uab of nbu», 336 p. transactions involving bitcoins. url: http://www.canadiantaxlitigation.com/wp-content/uploads/2014/ 01/2013-0514701i7.txt?utm_source=mondaq&utm_medium=syndication&utm_campaign=inter-article-link financial transactions and reports analysis centre of canada. url: http://www.fintrac.gc.ca/intro-eng.asp assembly bill no. 129. url: https://leginfo.legislature.ca.gov/faces/billnavclient.xhtml?bill_ id=201320140ab129 the united states is falling behind in bitcoin regulation. kyle torpey. bitcoin magazine. url: https://bitcoinmagazine.com/articles/the-united-states-is-falling-behind-in-bitcoinregulation-1461604211/ uniform money services act. interim regulatory guidance. washington state department of financial institutions. url: http://www.dfi.wa.gov/documents/moneytransmitters/virtual-currency-interim-guidance.pdf japan makes first bitcoin-related drug arrest. coindesk. url: https://www.coindesk.com/japan-makes-firstbitcoin-related-drug-arrest/ directive (eu) 2015/849 of the european parliament and of the council on 20 may 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorism financing and amending regulation (eu) № 648/2012 of the european parliament and of the council. url: http://www.sdfm.gov.ua/content/file/ site_docs/2016/20160516/directive%20(eu)%202015_ua.htm a comparative review of foreign legislation on the legal status of digital money and state regulation of cryptocurrency business. url: http://radaprogram.org/sites/default/files/infocenter/piblications/22.pdf explanatory note to draft law of ukraine “on currency” (17.03.2018), р. 3. baltic journal of economic studies 48 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 zaporizhzhia national university, ukraine (corresponding author) e-mail: 77anohin@gmail.com orcid: https://orcid.org/0009-0004-0772-6653 2 national aviation university, ukraine e-mail: k.v.mozharovska@gmail.com orcid: https://orcid.org/0000-0001-7414-6078 3 international humanitarian university, odesa, ukraine doi: https://doi.org/10.30525/2256-0742/2023-9-2-48-54 road accidents and the national economy: legal analysis andrii anokhin1, kateryna holovko2, serhii mul3 abstract. the present publication aims to conduct a legal analysis of the mutual influence of road accidents and the national economy, which is manifested at different levels of relevant public relations. the research subject is road accidents and the national economy. the publication’s methodology relies on an organic combination of well-known laws and techniques of dialectics (the transition of quantitative changes into qualitative, unity and struggle of opposites, and the negation of negation), general scientific methods of research (techniques of the logical method, comparative method, techniques of the sociological method, systemic and structural-functional methods), and special legal methods (legal statistics, formal-legal method, methods of comparative jurisprudence and legal modeling). results. road safety is inextricably linked with economic processes taking place in a particular state. in addition, as economic indicators affect the number of road accidents so the dynamics and consequences of road accidents significantly affect the national economy. the most important economic factors affecting the number of road accidents are as follows: underdeveloped road infrastructure, outdated vehicle fleet, poor financial and logistic support of law enforcement agencies, insufficient number of traffic enforcement cameras, and other innovative means of preventing road accidents. the priority in traffic accident prevention is the maximum automation of means ensuring road safety: coverage of all key traffic intersections with traffic enforcement cameras, equipment of modern cars with automatic speed limit systems and alcohol intoxication testers, which automatically block the ignition system, the development of a fleet of ai-based self-driving cars and automated traffic control systems. other economic and administrative means of road accident prevention are equally important, i.e., financial incentives for compliance with traffic rules, development and improvement of public transport efficiency, and investments in multi-level road infrastructure to reduce traffic congestion in available highways and transport interchange. key words: road accident, economy, traffic safety, economic indicators, prevention. jel classification: d73, k23 1. introduction law and the economy are interrelated systems, as law is a superstructure on an economic foundation. the economy provides the legal system with the means necessary to conduct legal activities. in turn, law ensures the enjoyment of the economic interests of social groups and society as a whole, complements economic activity, and gives it a legal form. the economic level’s influence on road safety is vividly manifested as the latter is directly associated with the quality of road infrastructure, obsolescence of the vehicle fleet, and the equipment of law enforcement agencies with the means necessary for prevention and countermeasures against offenses in the specific area of public relations. thus, a legal analysis of road accidents as an object of administrative regulation taken in conjunction with the national economy is a relevant research area and of theoretical and practical significance. the present publication aims to conduct a legal analysis of road accidents and study their influence on the national economy. the goal’s achievement requires the accomplishment of the following tasks: to determine a degree of scientific development of the topic under consideration; to establish the economic causes of traffic accidents; to characterize the influence of quantitative indicators of traffic accidents on economic processes; to summarize and compare the financial indicators of traffic accidents in ukraine and eu countries; to identify economic and legal means of preventing traffic accidents. baltic journal of economic studies 49 vol. 9 no. 2, 2023 v. sokurenko, a. stryzhak (sokurenko, stryzhak, 2021) devoted their contribution to the general characteristics of administrative law means of ensuring traffic safety in ukraine. administrative responsibility for traffic safety violation is fully covered in the work by o. kuzmenko (kuzmenko, 2016). o. salmanova (salmanova, 2002) studied administrative means of ensuring road traffic safety. different aspects of road accidents and challenging issues of ensuring road safety were covered in the article by prominent scientists v. babych, o. mukhina, and yu. pesotska "administrative responsibility for traffic violation"; o. bytiak "proceedings in cases of administrative automatically recorded offenses on road safety: individual issues" (bytiak, 2021); d. boiko "proceedings in cases of administrative violations of vehicle operation rules" (boiko, 2014); s. butnyk "on improving the legislation on ensuring road traffic safety " (butnyk, 2013); v. vvedenska "administrative mechanism of prosecution for automatically recorded road offenses" (vvedenska, 2014); m. veselova, a. mammedova "controversial issues of responsibility of vehicle owners for automatically recorded administrative offenses againsy road safety " (veselova, mammedova, 2018); s. husarov "administrative principles of public adminitsration of road safety in ukraine" (husarov, 2001); m. dolhopolova "some aspects of the application of laws on administrative offenses related to road safety by the courts of ukraine" (dolhopolova, 2003); m. lazarenko "theoretical and legal fundamentals of administrative regulation of road safety in automatic mode" (lazarenko, 2016); r . molchanov "features of proceedings in cases of administrative offenses against road safety committed by the patrol police" (molchanov, 2017); m. pluhatyr "compliance with constitutional guarantees when considering cases of admini strative offenses recorded in automatic mode" (pluhatyr, 2021); a. filippov "responsibility for administrative automatically recorded offenses in the field of road safety in the context of human rights" (filippov, 2016); h. yarmaki, r . pylypiv & m. veselov "administrative regulation of the activities of the patrol police to ensure road safety in ukraine" (yarmaki, pylypiv, veselov, 2019), and other well-known experts. however, the mutual impact of road traffic accidents and the national economy remains a poorly studied issue that actualizes the preparation of the present publication. 2. statistics of road traffic accidents in ukraine and eu countries road traffic accidents are one of the most destructive factors that cause heavy losses to the national economy, the state, and society as a whole. s. koziakov and m. berlin note that during 30 years of ukraine’s independence, almost 180 thousand people died in road accidents. according to official statistics, 26, 700 people were killed from 2011 to 2016, and 210,400 people were injured. at the same time, more than 42.6% of those killed in road accidents in 2016 were pedestrians and cyclists. road accidents in ukraine are the first most common cause of death for young people aged 15 to 24 years and the second most common cause of death for children aged 5 to 14 years (koziakov, berlin, 2021). such terrible figures prove the utterly unsatis factory state of road safety in ukraine and the need to take drastic measures to improve such a deplorable situation. s. koziakov and m. berlin highlight that the above figures are official statistics provided by the cabinet of ministers in two crucial documents with equally loud titles "strategy for improving road safety ". moreover, the implementation of the former document was planned for the period until 2020 (not implemented, including because the document was annulled by the adoption of another document). and the latter one is recent enough, adopted in 2020 and scheduled for 2024. these documents are more declarative by their nature. for example, the strategy for improving road safety in ukraine for the period up to 2024, approved by the resolution of the cabinet of ministers of ukraine on october 21, 2020, no. 1360-r, names traditional causes of road accidents and notes that road infrastructure also affects accident rates. thus, in 2019, there were 948 road accidents due to unsatisfactory road conditions, in which 51 people were killed and 359 – injured, of which 890 happened on principal roads and 58 – on local roads. in addition, global climate changes and abnormal snowfall in recent years have led to the formation of large-scale traffic congestion, long-term cessation of passenger and freight traffic, deterioration of people’s livelihoods, and significant economic losses. a large number of road accidents and their victims also affect the economy and health sector of ukraine. according to world bank experts, ukraine’s socioeconomic losses caused by road traffic injuries are estimated at uah 68.6 billion per year, which is about 1.91 percent of the gross domestic product (2019 calculations), including financial expenses associated with property damage, a decrease in labor productivity, and human losses due to severe road traffic injuries or deaths (on the approval of the strategy for increasing the level of road safety in ukraine for the period until 2024). baltic journal of economic studies 50 vol. 9 no. 2, 2023 guidelines for the strategy’s implementation are quite systematical but lack specifics (the phrases like "stimulating the development", "introducing modern technologies", "elaborating the procedure", "ensuring the audit", "determining infrastructure factors", etc. are mainly used). moreover, the action plan for the implementation of the strategy for improving road safety in ukraine for the period up to 2024, drafted by the ministry of infrastructure together with other interested executive authorities, predominantly contains the same declarative goals and expressions such as "improvement", "strengthening the role", "introduction of the training system", etc. in addition, it is a mystery how road safety progress in ukraine may be influenced by coordination councils on road safety in cities and other settlements (one of the plan points). the outcome of years-long "strategic" efforts of most government agencies with their programs and plans is sad – ukraine has one of the highest levels of road accident mortality and injuries in europe, and the level of road safety organization remains extremely low. this was repeatedly emphasized in their reports by experts from who, the world bank, and other international institutions. at the same time, unlike the members states of the european union, even during the quarantine, ukraine did not manage to decrease the statistics of road traffic deaths and injuries. in 2020, there were 168,107 road accidents, of which 26,140 entailed the deaths of 3,541 people and injuries of 31,974 people (koziakov, berlin, 2021). as of today, due to the introduction of martial law in ukraine and curfew restrictions in settlements, a decrease in the total number of road accidents has been recorded from the beginning, but it gradually returned to pre-war indicators. the temporary decrease in the indicators was "supported" by the fact that a significant number of traffic enforcement cameras did not work, the movement of civilian vehicles in the frontline zones was noticeably limited, and there was a drastic internal migration of the population to the western regions of the state, which decreased the vehicle fleet of metropolises in the east of the country. at the same time, it had an adverse impact on road safety due to the blackout in settlements caused by the strikes of the russian occupation forces on the energy infrastructure. in this regard, v. prykhodko and m. alexandrov hold that the administrative prevention of road accidents under martial law should consider the situation and adjust to the current conditions depending on the security level in each region. different territories were affected by the war differently. administrative measures on road traffic which have been relevant in peacetime can be challenging to implement in relatively peaceful territories and are generally impossible in hostilities. however, given martial law, it is worthwhile mentioning that the state of administrative prevention of traffic accidents in ukraine cannot be called satisfactory due to the high level of accidents, which is why the introduction of effective measures and improvement of current areas in road safety is necessary as soon as possible (prykhodko, aleksandrov, 2022, p. 111). a comparative analysis of road safety in ukraine and the eu member states deserves closer scrutiny. thus, s. koziakov and m. berlin emphasize that the number of road traffic deaths steadily decreased in europe in ten-year periods over the past 30, 20, and 10 years. 18,844 people died in road traffic accidents throughout the eu in 2020, which is 10,847 less than in 2010 (-37%). during the reporting period, 56,305 fewer people died on eu roads than it would have been if the death toll had remained at the same level as in 2010. the monetary value of human losses saved by the national economies of the eu member states through the prevention of road traffic deaths is approximately 156 billion euros (koziakov, berlin, 2021). the above figures indicate a substantial influence of road safety on the economic indicators of a particular state. during the 2010–2020 reporting period, the highest annual reduction of road deaths in the eu was achieved in 2020: 3,919 deaths per year were prevented compared to 2019 – an unprecedented reduction of 17% in one year. however, analyzing the 2020 statistics, europeans frankly admit that those exceptional results were not an extraordinary outcome of sweeping changes in road safety policy but rather an effect of unprecedented restrictions related to the covid-19 pandemic. a decrease of almost 40% in the number of road traffic deaths was evident in the eu, for example, in april 2020, when most european countries were in the firstblockade zone compared to april in the previous three years (koziakov, berlin, 2021). thus, the eu’s positive experience in introducing an economic analysis of the causes and consequences of road accidents, including an economic assessment of human losses resulting from fatal accidents, is critical to ukraine. 3. economic indicators of road accidents the following should be attributed to economic reasons for a road accident: – critical road conditions (triggered, among other things, by insufficient funding for the construction baltic journal of economic studies 51 vol. 9 no. 2, 2023 and repair of road infrastructure), e.g., bad lighting on the road, low-quality road surface, construction along roads with violation of protective zones, etc.; – the poor-quality vehicle fleet of a particular region or state as a whole, when the low standard of living makes people buy mostly second-hand cars that have already depleted their primary resource and need capital repair, replacement of key nodes, re-equipment, etc.; – insufficient level of financial and logistical support for the police and support services of the patrol police of ukraine: a frequent shortage of high quality certified equipment for measuring speed, detecting signs of alcohol or drug intoxication, bad quality of chest video recorders used by police officers, limited vehicle fleet of patrol police, etc.; – shortage of traffic enforcement cameras for an automatic traffic violation (speeding) recording due to their sufficiently high cost and maintenance complexity, which makes it impossible to cover all key intersections and highways with video surveillance; – underfunding of national and regional road safety programs, including the construction of new road junctions, bypass roads, tunnels and underground road crossings, the introduction of innovative means of traffic regulation and european standards of road infrastructure. the above list is non-exhaustive and requires a separate economic and legal study using statistical data and conducting relevant sociological studies. it is essential to dwell separately on the impact of road accidents on economic processes. thus, the increase in road accidents can considerably affect the national economy for the following reasons: – treatment and rehabilitation costs: road accidents often result in serious injury or death. treatment and rehabilitation of victims usually require considerable financial resources (which cannot be borne by the culprit and cannot be covered by insurance payments), which leads to increased healthcare and social service expenditures; – production losses: after a traffic accident, if the victim cannot work, he loses income and labor time. in addition, under serious accidents, when many cars are crashed, provoke traffic cessation, which causes delays in deliveries and production losses (especially in cases where the car is the primary means of production and purchased for credit funds); – losses for insurance companies: road accidents have a significant impact on insurance companies. the latter should pay a substantial amount of money to compensate for damage associated with accidents, which can lead to the a revaluation of auto insurance (the legal costs of recourse actions against accident perpetrators should be additionally mentioned); – losses for individual farms and regions: road accidents can influence individual regions due to additional costs (which were not provided for by local budgets) for the repair of roads and bridge crossings, a decrease in tourist flow in areas where frequent road accidents occur, and also lead to additional costs for transport and logistics (search for alternative ways and means of freight and passenger transportation); – adverse impact on the banking sector: the expansion in the number of road accidents results in the number of bad bank loans, if, for example, the lost vehicle was the principal means of production for a person, or a person who has lost his job due to injury cannot timely pay loan installments; – adverse impact on macroeconomic indicators: due to the increase in the number of road accidents with fatal consequences, demographic indicators are decreasing, which in turn causes a labor shortfall in industries and the service sector and reduces the economic activity of the population of a particular state. consequently, road accidents can considerably affect the country’s economy through treatment and rehabilitation costs, loss of production, negative profit for insurance companies, etc. in addition, road accidents can have different financial indicators that can influence the national economy. the most common financial indicators of road accidents are as follows: – costs of material inputs: it refers to costs associated with vehicle repair or replacement and other property holdings that have suffered damage in a traffic accident (it is essential to correctly and independently assess the material damage because a frequent problem faced by a person injured in an accident is an underestimation of the amount of insurance valuation of losses or, conversely, an overestimation of the loss amount by the interested subjects of auto expertise, which is often one of the methods of fraud); – treatment and medical care costs: these are the costs of medical care and treatment (rehabilitation) necessary to recover the victims’ health; – moral damage cost, which often becomes the subject of long-lasting lawsuits (compensation for moral damage can be claimed only in court, because the presentation of such a requirement does not belong to insurance companies’ duties); – loss of production: this is the loss of income that the victim could have received if he had not been involved in a traffic accident (lost profit, which is also established during legal proceedings on the relevant case by analogy with compensation for moral damage). it can also be losses for enterprises that depend on transportation; – insurance costs: these are motor insurance costs that shall be paid to insurers to compensate for losses incurred resulting from a traffic accident (paid voluntarily or under recourse claims to the perpetrators of an accident); baltic journal of economic studies 52 vol. 9 no. 2, 2023 – cost of investigation and justice: these are the costs of investigation and justice in cases when a traffic accident is associated with a breach of the law by road users (including a sufficiently high cost of automotive forensic examination – expert studies, in order to establish the mechanism and circumstances of a traffic accident, the technical condition of vehicles, reasons for the breakdown of their parts, as well as circumstances that were instrumental or could be instrumental in the occurrence of a traffic accident). all these financial indicators can significantly influence the country’s economy due to increased costs of health care, insurance, and road repairs, as well as loss of production and income of individual farms. taking into account the above statistics of road accidents in ukraine, these costs are multiplied by colossal figures and have a significant macroeconomic effect, triggering a heavy load on state and local budgets, incl. budgets of private law entities. 4. economic means of road accident prevention considering the above, it is necessary to dwell separately on the analysis of economic means of prevention of road accidents. here are a few of them: – introduction of a flexible system of fines for violation of traffic rules (from minor penalties for the first violation to the maximum amount of fines for the recurrence of a similar offense): fines can be an effective means of changing the behavior of drivers and increasing their legal awareness, a conscious attitude to road safety (however, we should keep in mind that a significant increase in penalties often has a short-term effect because drivers adapt to the situation, consider the possibility of imposing a fine as a professional risk, and a psychological paradox can also be activated when a person deliberately violates traffic rules enjoying it, because, as you know, stolen fruit is sweetest. therefore, the best option is to charge the driver with penalty points by authorized officials of the national police for each violation of traffic rules – after gaining a specific number of points, the driver’s license is withdrawn and they have to resit exams to obtain a new national driver’s license, or to apply such alternative penalties as public or corrective works, the challenge of which has a greater impact on the legal awareness of drivers); – improving vehicle safety: to reduce the risk of road accidents, it is advisable to use vehicles with safer technical characteristics and statutorily raise safety requirements (the critical situation with road safety in ukraine requires legislators to take drastic measures: it refers to the renewal of mandatory annual technical inspection of vehicles, the ban on using second-hand cars older than 10 years, and the obligatory installation of automatic speed limitation systems for new cars within settlements and automated alcohol testers involving the blocking of the ignition system in case of detection of alcohol intoxication in the driver, etc. – all options should be considered); – increasing investments in infrastructure development: well-developed and safe infrastructure can essentially reduce the number of road accidents, which can be achieved, in particular, by building separate lanes without the technical ability to cross into the oncoming lane, installing "smart" traffic lights (adjusting the intervals of permitted and prohibited modes depending on the time of day, the number of pedestrians and cars, etc.), interactive pedestrian crossings with automatic blocking of traffic, and other means of traffic control; – improving the transport system as a whole: an effective transport system with multiple alternative highways (including toll roads), multi-level transport interchanges, underground parking lots, ring roads can significantly reduce traffic congestion and the number of cars on roads, which in turn can reduce the number of traffic accidents; – enhancement of the efficiency of public transport: increasing the level of safety and quality (comfort) of public transport and reducing its cost can contribute to its widespread public use and, accordingly, unload roads (it is equally important to popularize bicycle transport with the simultaneous development of appropriate road infrastructure – bicycle paths, parking lots, bicycle rental points, etc.); – financial incentives to comply with traffic rules: for example, a person who has not committed any traffic violation during the year may receive certificates from the state for the purchase of motor vehicle parts, discounts on car maintenance from partner enterprises of the relevant programs, benefits when paying transport fees and taxes, etc. (similar measures are already being implemented in some arab countries); – investments in the development of artificial intelligence for creating unmanned vehicles and related infrastructure, when the driver’s role will be minimized and computer programs will carry out general traffic management (given the rapid progress of innovative technologies, the prospect of expanding the fleet of unmanned vehicles looks quite realistic, and such innovations should be met with legislative support through the approval of pilot projects for the construction and development of "smart" cities, which will prohibit the passage of ordinary vehicles and traffic regulation will be conducted by a computer program without human participation). in addition, a reasonable idea is the legislative regulation of the remuneration of road users who recorded traffic violations and voluntarily provided relevant records to law enforcement officers (the implementation of such an idea is rather baltic journal of economic studies 53 vol. 9 no. 2, 2023 possible only after the cessation of martial law and the renewal of dvrs use). thus, according to t. danylenko, at its meeting in october 2021, the verkhovna rada committee on digital transformation considered two new draft laws: the draft law of ukraine "on amendments to certain legislative acts of ukraine on strengthening the role of society in road safety control measures and compliance with the rules of vehicle stopping and parking" no. 5798 dated 16.07.2021 and the alternative draft law "on amendments to certain legislative acts of ukraine on strengthening the role of society in road safety control measures" no. 5798-1 dated 03.08.2021. t. danylenko believes that the relevance of these draft laws was enhanced after the introduction of automatic traffic violation recording on the roads of ukraine and, hence, replenishment of the state budget at the expense of numerous violators. by relying on the content of these draft laws, it is proposed to attract socially active citizens who have the desire and opportunity to maintain "public control" over safety on those road sections that are not directly controlled by officials of the national police and are not subject to automatic traffic violation recording. for example, a person who witnesses a traffic violation will be able to "work" as a law enforcement officer and record such violations via photography or video recording using special software and send the received information to the patrol police department, thus obtaining the status of a notifier. such a mechanism will make it possible to prosecute offenders in a few clicks. all you need is a phone or tablet with a camera and a dedicated app. the mobile device will record a violation of the traffic rules, and using the diia application the person will be able to send the relevant data to the police (danylenko, 2021). the realization of that kind of idea does not entail significant expenditures from the budget because notifiers will receive payments from the amounts of fines paid by traffic violators, which shall also be enshrined in the draft law. 5. conclusions the conducted study gives grounds to conclude that road safety is inextricably linked with economic processes taking place in a particular state. moreover, as economic indicators significantly affect the number of accidents, the dynamics and consequences of an accident significantly affect the national economy. the biggest problem in ukraine is the high road traffic mortality which is demonstrated by the statistics given in the publication. on the one hand, the state loses socially active citizens, on the other hand, drivers caused the accident obtain criminal experience – get a criminal record, which also negatively affects the development of society as a whole and the economy in particular, especially when for a person the car is a means of production, a tool for running a business, etc. the analysis gives grounds to assert that to overcome the adverse impact of road accidents on the state’s economy, the latter should make significant investments in the prevention of road accidents, introduce innovative technologies and foreign experience in preventing road traffic offenses. the priority should belong to automated traffic monitoring and the mechanism of bringing the guilty persons to administrative responsibility: stationary systems (cameras) for automatic traffic violation recording should cover all accident blackspots of roads, highways, and intersections in settlements; all new cars should be equipped with automatic speed limitation systems in settlements, as well as means of detecting signs of alcohol intoxication with an automated system of blocking the ignition system in the car; pedestrian crossings should also be equipped with traffic enforcement cameras with a facial recognition system. the listed measures of automation of traffic safety control and accident prevention require considerable investments from the state. however, taking into account the potential effects of their implementation, i.e., reducing the number of road traffic deaths and injuries, such investments are reasonable enough as nothing is more valuable than human life. moreover, the economic losses from the death of able-bodied citizens and children who make up the gene pool of the nation, are much greater that is confirmed by the statistics given in the publication. the prospect of further research on the relevant topic is conditioned by the need to conduct a separate study of the 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(in ukrainian) received on: 04th of march, 2023 accepted on: 25th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 64 vol. 3, no. 3, 2017 corresponding author: 1 department of accounting, analysis and audit, yuriy fedkovych chernivtsi national university. email: o-hudyk@chnu.edu.ua strategic financial analysis of the flour-and-cereals industry’s enterprises capital оlha khudyk1 yuriy fedkovych chernivtsi national university, ukraine abstract. the article is devoted to the theoretical and methodological principles of strategic financial analysis of capital. the purpose of the investigation is to develop the methodology aspects of the capital structure optimization of the flour-and-cereals industry’s enterprises. methodology. the dialectical method of understanding the economic processes is the theoretical and methodological basis of the investigation. such methods are used for achieving the purpose of the article: analysis and synthesis, induction and deduction, abstract and logical method, comparison, modelling, methods of economic statistics, fuzzy sets. results. on the basis of the present state of the methodology of the strategic financial analysis of company’s capital, it is theoretically grounded methodological approach to the capital structure optimization of the flour-and-cereals industry’s enterprises. as the result of the research, it is established that the level of equity profitability and effectiveness of company’s financial and economic activity are connected with the structure of funding sources. therefore, to determine the target capital structure, it is proposed to take into account comprehensively such factors as the adjusted profitability of capital (assets) before interest and weighted average cost of capital. since the company’s equity is characterized by a certain value, to determine the criterion of optimal capital structure, it is necessary to take into consideration the amount of expenses to maintain the existing funding structure. so, there is the necessity to use the modified model to assess the effect of financial leverage, considering the average cost of capital. the utilization of this criterion requires establishing additional limits of the optimal capital structure formation: restrictions on the functioning capital adequacy, on the level of financial stability, on the inalienability of differential of financial leverage, on the level of financial risk. the obtained results have the practical value because they contribute to systems integration of the strategic financial analysis of capital and the financial management requirements and create conditions for its implementation in practice of domestic enterprises. value/originality. the suggested model of capital optimization can be used to determine its structure according to the necessity in loan capital and its limit value, which may involve the company at an acceptable level of financial risk. key words: capital, financial leverage, financial strategy, strategic financial analysis, structure of capital. jel classification: g31, g32, m40 1. introduction in terms of dynamic changes in the environment, the achievement of an enterprise’s strategic goals and the efficiency of its activity primarily depends on peculiarities of capital formation, which main purpose is to ensure the necessity of the funding sources of various types of activities taking into account the dynamics of the available financial potential and to acquire the balanced structure of these sources on the bases of the established optimization criteria. the level of economic growth in the long term and competitive advantages increase of any business entity depends on the choice and substantiation of an effective strategy for managing capital. all this proves the importance of strategic financial analysis of capital as a methodological basis for study strategies. issues of the strategic financial analysis of capital are considered in the works of many national and foreign scientists, including l.ye.  basovskiy, i.o.  blank , t.v.  holovko, v.v.  kovalev, t.m.  kovalchuk , i.v.  nikitushkina, ye.m.  sych. however, it is difficult to adapt the existing models of the capital structure optimization to the realities of ukrainian economic practice and they do not take into account the features of the flour-and-cereals industr y ’s enterprises operation in the conditions of risk and uncertainty. the purpose of the investigation is to develop the methodology aspects of the capital structure optimization of the flour-and-cereals industry’s enterprises. baltic journal of economic studies 65 vol. 3, no. 3, 2017 2. the theoretical and methodological basis of capital structure optimization since the capital is a complex economic category, its investigation requires the introduction of a systematic approach, which provides that strategic financial analysis should be a continuing process at all stages of the capital circulation (the formation of the required amount of capital for the effective strategies implementation; the optimization of the capital structure in the process of its using; the identification and elimination of defects in the enterprises activity, and the substantiation of the areas of capital reinvestment to ensure the effective functioning of the business in the long-term perspective). as the result of the strategic financial analysis, a set of alternative managerial decisions concerning the financial sources definition, their structure optimization, the volume of additional amounts of debt substantiation should be prepared. it is necessary to develop such decisions in accordance with the optimal ratio among different groups of assets and sources of funding to ensure financial stability and liquidity in the strategic perspective. there is no consensus in the scientific literature about the issue, which capital structure is optimal because the utilization of every financial source has certain advantages and disadvantages. thus, the advantages of equity include: the high capacity to generate income from all activities; provision of financial independence and solvency in the long term, which reduces financial risk and the probability of bankruptcy; the level of counterparties and creditors confidence incense (especially important in the presence of long-term contracts). however, the application of the equity as a major source of financial resources is quite burdensome for the company because of its high cost, limited volumes of attraction for the various activities expansion, the lack of tax incentives. that is, using only equity, a company lowers financial risks but limits the rates of its strategic development, because does not provide the required amount of financial resources. in turn, the benefits of loan capital application include the possibility of raising the return on equity due to the effect of financial leverage, the application of the tax shield. however, in the case of implementation of an unfavourable scenario for the enterprise, a high share of loan capital causes the financial risk increase, the solvency and financial stability reduction. the attraction of loan capital is a rather complex procedure since depends not only on the available company’s financial potential but also on creditors’ decision about the capacity, volumes, and conditions of involvement, financial market conjuncture, the state of the banking system. thus, according to the advantages and disadvantages of different sources of funding application, it is necessary to develop managerial decisions concerning the achievement of a compromise between the amount of their involvement, based on the ratio of capital cost and the financial risk level, which in these economic conditions is the most appropriate, i.e. the optimal capital structure. l.ye. basovskiy thinks that optimal capital structure is the ratio of equity and loan capital, which leads to a maximum value of shares (basovskiy, 2008). this definition is quite common; on its bases, it is difficult to generate practical recommendations for a particular non-stock company. according to a.a. pereseda, the optimization of the capital structure – the selection of the most favourable ratio of internal and external sources at each stage of the company’s life cycle (pereseda, 2002). actually, the structure of capital depends on the strategic objectives, which are different for each stage of the company’s life cycle. quite logical, in our opinion, is the approach of i.o.  blank, t.v.  holovko, t.m.  kovalchuk, ye.m. sych. according to it, the optimal capital structure is such a ratio of own and loan capital, which provides the most effective proportionality between the rate of return on equity and the index of financial stability, that is, maximizes the market value of the company (blank, 2008; holovko, sahova, 2002; kovalchuk, 2015; sych, pylypenko, stasyshen, 2010). practice shows that until today there is no universal criterion for decision-making regarding an optimal ratio of equity and loan capital for different enterprises of one industry and even for the same company at different stages of its development. at the same time, there are a number of theoretical concepts, revealing approaches to creating the optimal capital structure, which can be roughly grouped into two groups  – the static and dynamic (table 1). the static theories substantiate the existence of an optimal capital structure that maximizes the company’s market value. within this group of theoretical concepts, it is proposed to make the managerial decisions concerning the choice of funding sources on the basis of the optimal capital structure (the aim of decision-making is to achieve this optimal structure). the dynamic theories are based on deviations from the target function and capital structure. the discussed theories of the formation of the optimal capital structure are based on contradictory approaches: from the mutual independence of the capital structure and the market value of the company to their mutual dependence. in addition, it should be noted that they can be used completely only in presence of developed financial market and absence of a financial crisis. despite the fact that the existing theories of capital structure are internally consistent and logical within certain limits, in the practical management of capital structure, it is necessary to take into consideration not only quantitative parameters but also a set of important qualitative factors and industrial characteristics influencing the rational structure of funding sources. in connection with this, the process of optimization involves the establishment of a target capital structure of the flour-and-cereals industry’s enterprises. in our baltic journal of economic studies 66 vol. 3, no. 3, 2017 opinion, the target capital structure is a ratio of own and loan financing sources, which entirely provides the growth in capital performance criteria at acceptable risk level and creates the opportunity to form the sufficient funds on satisfactory terms. 3. development of capital structure optimization model for the flour-and-cereals industry’s enterprises in the practice of financial management, different methodological approaches to capital structure optimization are used and, accordingly, different performance criteria of formation and utilization of capital (table 2) are set. as the result of the research, it is established that the level of equity profitability and effectiveness of company’s financial and economic activity are connected with the structure of funding sources. therefore, to determine the target capital structure, it is proposed to take into account such factors: the adjusted profitability of capital (assets) before interest and weighted average cost of capital. since company’s equity is characterized by a certain value, to determine the criterion of optimal capital structure, it is necessary to take into consideration the amount of expenses to table 1 the systematization of capital structure optimization theories № the theory the main aspects the static theories of capital structure 1 modigliani-miller theory the market value of the company is not dependent on financing strategies (i.e., capital structure), and is determined only by the efficiency of investment. 2 agent models the presence of agency conflicts due to asymmetric information. agent conflicts reduce the value of the enterprise: the loan capital has a disciplining effect. the inclusion of agency costs and expenses related to “difficulties”. 3 miller’s model the optimal capital structure is determined by the ratio tax rates. 4 static compromise theories the optimal capital structure is determined by the ratio of costs and benefits of loan capital. focusing on the deviation of actual capital structure from a target level of leverage and the determinants of the process of adaptation. 5 theory of hierarchy enterprises prefer internal financing sources compared with external. the debt burden reflects the necessity of external financing. the dynamic theories of capital structure 6 signal models the presence of asymmetric information among investors and managers. managers can change the capital structure to represent corresponding signals to investors. 7 dynamic compromise theories the presence of the enterprise’s target capital structure. the existence of the deviation between actual and target levels of leverage. the presence of convergence between these indicators. source: generalized on the basis of (piatak, haltsov, 2013; nykytushkyna, makarova, 2013; samoilikova, 2014) table 2 the methodological approaches to the capital structure optimization used in the practice of financial management method criterion legend formula number method of wacc wacc y *v min i n i i= → = → = −( ) −( ) → − = ∑ 1 1 r ni e max l lc e r r t max ebit db e c* * σσ ebit p max ps t ebit fe div s max risk min → = −( ) −( )− → → 1 wacc – weighted average cost of capital; yi – the proportion of each element in the total capital; vi – the relative value of each element of capital. (1) method of return on equity wacc y *v min i n i i= → = → = −( ) −( ) → − = ∑ 1 1 r ni e max l lc e r r t max ebit db e c* * σσ ebit p max ps t ebit fe div s max risk min → = −( ) −( )− → → 1 ni – net income; e – equity. (2) method of financial leverage wacc y *v min i n i i= → = → = −( ) −( ) → − = ∑ 1 1 r ni e max l lc e r r t max ebit db e c* * σσ ebit p max ps t ebit fe div s max risk min → = −( ) −( )− → → 1 l – the effect of financial leverage; lc – loan capital; rc– the level of capital (assets) profitability before interest; r – the level of interest; t – the tax level. (3) method of income volatility wacc y *v min i n i i= → = → = −( ) −( ) → − = ∑ 1 1 r ni e max l lc e r r t max ebit db e c* * σσ ebit p max ps t ebit fe div s max risk min → = −( ) −( )− → → 1 ebit – the income before interest and taxes; db – debt burden; σebitsample standard deviation of the income before interest and taxes; (4) method “ebit-eps” eps wacc y *v min i n i i= → = → = −( ) −( ) → − = ∑ 1 1 r ni e max l lc e r r t max ebit db e c* * σσ ebit p max ps t ebit fe div s max risk min → = −( ) −( )− → → 1 eps – the income per ordinary share; fe – the financial expense; divp – the dividends on preferred shares; s – the average number of ordinary shares. (5) method of financial risk wacc y *v min i n i i= → = → = −( ) −( ) → − = ∑ 1 1 r ni e max l lc e r r t max ebit db e c* * σσ ebit p max ps t ebit fe div s max risk min → = −( ) −( )− → → 1 risk – the level of financial risk (6) source: generalized on the basis of (grachev, 2010; diadiuk, kruhlova, foschan, 2014; zagainova, 2006; sysoeva, 2007) baltic journal of economic studies 67 vol. 3, no. 3, 2017 maintain the existing funding structure. so, there is the necessity to use the modified model to assess the effect of financial leverage, considering the average cost of capital (zagainova, 2006): 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) . (7) the utilization of the criterion (7) requires establishing additional limits of the optimal capital structure formation: the restriction on the functioning capital adequacy; the restrictions on the level of financial stability; the restriction on the inalienability of differential of financial leverage; the restriction on the level of financial risk. to determine the minimum required amount of functioning capital, the predictive value of profits before interest and taxes (ebit), current (ca) and non-current assets (nca), the previous forecast of long-term (ltlp) and short-term liabilities (stlp), financial expenses (fep) are considered. the prediction of equity is adjusted according to predictive addition to equity. the additionally required amount of loan capital can be determined:𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) . (8) where div  – projected dividends, rnew  – the interest rate on the additional amount of loan capital. the corrected forecast of financial expenses is defined by formula (9) and the adjusted weighted average interest rate on loan capital (i) – by formula (10): 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) , (9) 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) . (10) the restrictions on the level of financial stability implies that the index of capital structure (ics) and the index of long-term financial independence (ilfi) should be limited by normative values that reflect the level of acceptable loan capital funding and assets financing policy under considering industrial characteristics of the company : 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) . (11) 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) . (12) the restriction on the inalienability of differential of financial leverage is the main condition of the existing capital structure efficiency and of financial stability preservation while financial capacity increasing by attracting additional amount of debt: the adjusted weighted average interest rate on loan capital excess of the adjusted profitability of capital (assets) before interest (rca) leads to equity profitability decrease. it can be formalized as follows: 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) . (13) to substantiate the possible amounts of loan capital involvement, it is necessary to access the potential optimistic, realistic, and pessimistic level of the adjusted profitability of capital (assets) before interest and to calculate the differential of financial leverage for each of these levels. since in unstable environmental conditions the managerial decisions associated with the additional amount of loan capital are characterized by a high level of risk, their justification should be carried out based on the principle of prudence. according to this principle and to triples of fuzzy numbers transformation rules, the function of adjusted profitability of capital (assets) before interest is considered as a line. in accordance with interval paradigm for the selected criteria of effectiveness, there is an opportunity to obtain a negative result determined as p, 0≤p≤1. the concept of “opportunity” is similar to the concept of “probability” but it is not based on the coincidence hypothesis and does not establish the probability density in the interval of uncertainty. obviously, in the case 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) the level of financial risk p will be 0. similarly, if 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) then р=1. if 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) then the level of financial risk can be estimated by the formula: 𝐿𝐿м = 𝐿𝐿𝐿𝐿 𝐸𝐸 ∗ (𝑅𝑅𝑅𝑅(1 − 𝑡𝑡) − 𝑊𝑊𝑊𝑊𝐿𝐿𝐿𝐿) → 𝑚𝑚𝑚𝑚𝑥𝑥 ∆𝐿𝐿𝐿𝐿 ≥ 𝑁𝑁𝐿𝐿𝑊𝑊 + 𝐿𝐿𝑊𝑊 − (𝐸𝐸0 + ((1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ (𝐸𝐸𝐸𝐸𝐷𝐷𝐸𝐸 − 𝐹𝐹𝐸𝐸𝑝𝑝)) − 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 − 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 1 − (1 − 𝑡𝑡) ∗ (1 − 𝐷𝐷𝐷𝐷𝐷𝐷) ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝐹𝐹𝐸𝐸 = 𝐹𝐹𝐸𝐸𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 ∗ 𝑟𝑟𝑛𝑛𝑛𝑛𝑛𝑛 𝑖𝑖 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐸𝐸𝐿𝐿𝑝𝑝 + 𝑆𝑆𝐸𝐸𝐿𝐿𝑝𝑝 + ∆𝐿𝐿𝐿𝐿 = 𝐹𝐹𝐸𝐸 ∗ (1 − 𝑡𝑡) 𝐿𝐿𝐿𝐿 𝐷𝐷𝐶𝐶𝐶𝐶 = 𝐸𝐸 𝐿𝐿𝐿𝐿 ≤ 1,5 𝐷𝐷𝐿𝐿𝐿𝐿𝐿𝐿 = 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 − 𝑁𝑁𝐿𝐿𝑊𝑊 𝐸𝐸 + 𝐿𝐿𝐸𝐸𝐿𝐿 ≤ 0,2 𝑅𝑅𝑐𝑐 ∗ (1 − 𝑡𝑡) − і = 𝑅𝑅𝐶𝐶𝐶𝐶 − і ≥ 0 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 ≥ 𝑖𝑖 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 < 𝑖𝑖 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝 < 𝑖𝑖 ≤ 𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 𝑝𝑝 = (𝑖𝑖 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝)/(𝑅𝑅𝐶𝐶𝐶𝐶 𝑜𝑜𝑝𝑝𝑜𝑜 − 𝑅𝑅с𝐶𝐶 𝑝𝑝𝑛𝑛𝑝𝑝) , (15) and the amount of additional loan capital will be deemed appropriate if: p≤pd, (16) where pd – acceptable level of financial risk. 4. approbation of the suggested model of capital structure optimization as a result of the calculations, the following capital structure forecast of prat “korsun-shevchenkivske khlibopryimalne pidpryiemstvo” is obtained according to the optimality criterion at an acceptable level of financial risk of 15% (table 3). the optimization of the investigated company’s capital structure was carried out in several stages: initially, it table 3 modelling of the target capital structure of prat “korsun-shevchenkivske khlibopryimalne pidpryiemstvo” indicators 2016 2017 2018 2019 2020 1 2 3 4 5 6 financial result from operating activities, thousand hryvnias 66990 112530 179772 274890 404849 investment costs, thousand hryvnias 30295 35933 41230 46525 51823 financial expenses, thousand hryvnias 16000 16000 16000 16000 96000 the financial result of economic activity, thousand hryvnias 20695 60597 122542 212365 257026 net income, thousand hryvnias 16969.9 49689.54 100484.4 174139.3 210761.3 dividends, thousand hryvnias 4242.475 12422.39 25121.11 43534.83 52690.33 baltic journal of economic studies 68 vol. 3, no. 3, 2017 was determined the necessity in additional loan capital for each period, and then – the loan capital structure to maximize the key criteria considering based restrictions. the average level of modified effect of financial leverage is 0.1130. 5. conclusions the theoretical generalization and new problem solving of the strategic financial analysis of capital is performed in the article, allowing improving its theoretical and methodological principles. on the basis of the research, it is theoretically grounded methodological approach to the capital structure optimization of the flour-andcereals industry’s enterprises. the suggested model of capital optimization can be used to determine its structure according to the necessity in loan capital and its limit value, which may involve the company at an acceptable level of financial risk. 1 2 3 4 5 6 addition to equity, thousand hryvnias 12727.43 37267.16 75363.33 130604.5 158071 equity (initial), thousand hryvnias 174118 186845.4 224112.6 299475.9 430080.4 equity, thousand hryvnias 186845.4 224112.6 299475.9 430080.4 588151.4 long-term liabilities, thousand hryvnias 80000 80000 80000 80000 0 short-term liabilities, thousand hryvnias 142855 201805 289527 414292 585435 loan capital, thousand hryvnias 222855 281805 369527 494292 585435 target capital, thousand hryvnias 409700 505918 669003 924372 1173586 non-current assets, thousand hryvnias 165064 200997 242227 288754 340577 current assets, thousand hryvnias 244636 304921 426776 635618 833009 the share of equity 0.4561 0.4430 0.4476 0.4653 0.5012 the share of loan capital 0.5439 0.5570 0.5524 0.5347 0.4988 the cost of equity 0.0227 0.0554 0.0839 0.1012 0.0896 the cost of loan capital 0.0589 0.0466 0.0355 0.0265 0.1345 wacc 0.0424 0.0505 0.0572 0.0613 0.1120 the adjusted profitability of capital (assets) before interest 0.0734 0.1241 0.1698 0.2026 0.2467 differential of financial leverage 0.0146 0.0776 0.1343 0.1760 0.1122 index of capital structure 1.1927 1.2574 1.2339 1.1493 0.9954 index of long-term financial independence 0.3814 0.3391 0.3617 0.4339 0.4209 criterion ем 0.0371 0.0926 0.1390 0.1624 0.1341 * taking into account the repayment of principal source: calculated according to website of stock market infrastructure development agency of ukraine ending of table references: basovskij, l.e. (2008). finansovyj menedzhment [financial management], infra-m, moscow, russia, 239 p. blank, i.o. (2008). finansovyj menedzhment [financial management], elha, kyiv, ukraine, 724 p. holovko, t.v. & sahova, s.v. (2002). stratehichnyj analiz [strategic analysis], kneu, kyiv, ukraine, 198 p. grachev, a.v. (2010). analiz i upravlenie finansovoj ustojchivost'ju predprijatija [analysis and management of enterprise financial stability], finpress, moscow, russia, 336 p. diadiuk, m.a., kruhlova, e.a. & foschan v.v. (2014). financial leverage as a tool for assessing the risk of formation of the financial structure of the capital of a trading enterprise, businessinform, vol. 9, pp. 272-278. zagainova, yu.v. (2006). formation of the capital structure of a commercial bank, abstract phd thesis, novosibirsk, russia, 21 p. kovaljov, v.v. 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(2010). stratehichnyj analiz [strategic analysis], karavella, kyiv, ukraine, 304 p. baltic journal of economic studies 69 vol. 3, no. 3, 2017 nykytushkyna, y.v. & makarova, s.h. (2013). struktura kapitala korporacii: teorija i praktika [capital structure of the corporation: theory and practice], mgu, moscow, russia, 125 p. samoilikova, a. (2014). the building of optimal financing structure of enterprises' innovation and investment activity, european journal of economic studies, vol. 2(8): pp. 85-92. website of agency of development of stock market infrastructure of ukraine [electronic resourse].  – access mode: https://smida.gov.ua/ ольга худик стратегический финансовый анализ капитала предприятий мукомольнокрупяной промышленности аннотация. в статье рассматриваются теоретические и методологические проблемы стратегического финансового анализа капитала предприятия. целью исследования является развитие методических основ оптимизации структуры капитала предприятий мукомольно-крупяной промышленности. методика. методологической и теоретической основой исследования является диалектический метод познания экономических процессов. при проведении исследования для достижения поставленной цели использовались следующие методы: анализа и синтеза, индукции и дедукции, абстрактно-логический, сравнение, моделирование, методы экономической статистики, теории нечетких множеств. результаты исследования. на основе изучения современного состояния развития методики стратегического финансового анализа капитала обоснован методический подход к оптимизации структуры капитала предприятий мукомольно-крупяной промышленности. в результате проведенного исследования установлено, что эффективность использования собственного капитала и финансово-хозяйственной деятельности в целом находятся в тесной причинно-следственной связи со структурой источников финансирования. поэтому для определения целевой структуры капитала предлагается комплексно учитывать такие показатели, как прогнозный уровень скорректированной рентабельности капитала (активов) до выплаты процентов и средневзвешенная стоимость капитала. поскольку собственный капитал предприятия характеризуется определенной стоимостью, для определения критерия оптимальности структуры капитала возникает необходимость учета совокупной суммы расходов предприятия на поддержание существующей структуры источников финансирования. поэтому возникает необходимость использования модифицированной модели для оценки эффекта финансового левериджа с учетом средневзвешенной стоимости капитала. использование этого критерия требует обоснования дополнительных ограничений формирования оптимальной структуры капитала, среди которых считаем целесообразным выделение ограничения по достаточности функционирующего капитала, по уровню финансовой устойчивости, на положительность дифференциала финансового левериджа, по уровню финансового риска. полученные результаты имеют практическую ценность, поскольку будут способствовать системной интеграции стратегического финансового анализа с требованиями финансового менеджмента и создадут предпосылки для его внедрения в практику отечественных предприятий. значение/оригинальность. предложенная модель оптимизации капитала позволяет моделировать его структуру исходя из потребности в заемном капитале в каждый момент времени и его предельного объема, который может привлечь предприятие при приемлемом уровне финансового риска. baltic journal of economic studies 260 vol. 3, no. 5, 2017 corresponding author: 1 department of accounting and analysis, lviv polytechnic national university. e-mail: olesia.s.lemishovska@lpnu.ua doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-260-267 economic categories of “amortization” and “depreciation”: the history of accounting concept formation and development olesia lemishovska1 lviv polytechnic national university, ukraine abstract. the article deals with the formation and development evolution of the accounting concept of amortization and depreciation of fixed and intangible assets. the methodological sense of the amortization and depreciation accrual processes and the resulting methods of their reflection in the accounting system in the context of historically formulated accounting theories and individual concepts are analysed. an estimation of historical experience through the representation of amortization and deterioration as objects of accounting in interrelation with their economic content is carried out. the level of accounting methods’ validity for calculating and displaying amortization charges and the amount of depreciation of fixed assets in the context of their consideration from the position of capital, fund, reserve and regulatory item are analysed. the possibilities of applying separate historically formulated ideas for developing an improved concept of accounting amortization adequate for the modern economy are set forth. the aim of the article is a historiographic analysis of the principal approaches and methodological foundations of accounting conventions of amortization, depreciation, and devaluation of economic entities assets and appropriateness assessment using individual developments in modern theory and practice. the subject of the article is the study of content and nature of amortization and depreciation of fixed assets as general economic categories and accounting objects. methods of studying the theoretical and methodological basis are the dialectical method of cognition of conceptual processes of “depreciation” and “amortization”, analysis and synthesis, induction and deduction, comparison, an abstract and logical method of modelling. the practical significance of the work is that historical experience, important and necessary in modern conditions, can be adapted by incrusting several ideas of the past. value/originality. to develop and adapt accounting concept of amortization to the current conditions, it is advisable to turn to the ideas and conceptual approaches developed in previous historical periods. in particular, it may be considered advisable to use the conceptual framework of e. schmalenbach, who proposes the creation of a transit account “reserve for inflation” to account for deviations of the revalued value when placed on the balance of an object. the urgency and, obviously, the advisability of introducing such a “false” object is argued at once by several factors – the real existence of inflationary processes in the modern economy and dynamics of their continuation to the observational period is evident; devaluation of the purchasing power of the accumulated amortization resource; the rapid pace of technological progress does not allow talking about the reproduction of fixed capital by the method of “acquiring an analogue”. key words: accounting, fixed assets, amortization, depreciation, devaluation, concept, accounts, reserve, regulatory, accrual methods, renovation, fund, balance generalization. jel classification: b10, b41, m41 1. introduction in the theoretical and applied economics, the issues of the monetary value of objects, phenomena or processes that cannot be measured, weighed, and finally, objectively evaluated, have always been and remain the most problematic and controversial. throughout the entire historical period of economic science, depreciation and amortization of fixed (longterm) assets of economic entities of any type belonged to such objects up till now. in the modern general economic sense, amortization is usually understood as the process of gradual transfer of the fixed assets value (transferring it to the costs of production or circulation) as they depreciate and this value is used in the processes of fixed capital reproduction. so, the economic science (in any case, the domestic one), and furthermore, baltic journal of economic studies 261 vol. 3, no. 5, 2017 mostly adheres to the position that the amortization sources have a purely designated purpose and are sent to reproduction processes that, to some extent, retain fixed capital at the achieved level. the formalization of economic categories (“the amount of accumulated amortization (depreciation)”, “amortization fund (capital)”, “depreciation of fixed assets”) at all historical stages of economic science has been carried out in the accounting system and finds expression in specific accounting facilities and reporting items. the issue of amortization and depreciation calculating has been problematic and ambiguous throughout the history of accounting. in the coordinates of various scientific schools, accounting theories, own views and considerations, scholars in the field of accounting science tried differently to solve clearly the problematic issues that arose in the processes managing practice of the fixed assets (fixed capital) reproduction of the enterprise. with the technological development and the acquisition of the non-material component importance in the economic potential of modern economic entities, the problem of calculating the depreciation and amortization of fixed capital and reflecting them in the accounting system was further strengthened by updating research studies in the direction of developing and justifying an accounting concept of amortization and depreciation of non-economic resources of a modern enterprise. given the numerous historical developments and inventions in the field of the amortization and depreciation theory, the developed methods, procedural and conceptual principles of reflecting these objects in various accounting models, many scholars believe that it is reasonable to implement the accounting concept of amortization and depreciation with the use of separate basic principles, substantiated at different historical periods of accounting science development: “to improve the operations accounting on the amortization charging of fixed assets at the modern stage, one should take into account the experience and achievements of past generations, use the results of searches of predecessors, and use the knowledge and skills acquired by them” (shchyrska, 2013), it is advisable to conduct in-depth studies of the economic essence of the accounting concept of amortization in its historical development (kulikova, 2015). the abovementioned updates the direction of scientific research on historical developments in content, conceptual and methodological foundations and methods for recording depreciation and amortization of fixed capital of economic entities, the disclosure of results in public financial reporting, combining the possibilities of their real solution by referring to the developments in this area in different historical periods. 2. analysis of modern studies of economic categories of “amortization” and “depreciation” the historiographical analysis shows that the reflection in amortization and depreciation accounting of fixed assets was recognized as imperfect both by scientists of past historical periods and by modern scientists. at the same time, some modern problems of amortization and depreciation accounting are directly connected with the construction depravity of the conceptual and methodological foundations of past developments. in particular, p. khomyn notes that as a result of a mistake in the past and up to the present time, “amortization of fixed assets is mixed with the depreciation of these funds, and its formation is based on two diametrically opposed approaches, combined into an elective unity: reserve + regulator” (khomyn, pyrih, 2007). the group of scientists considers past developments as insufficiently deeply investigated, in particular, on the allocation of accounting procedures for the devaluation of assets and their amortization. for example, a. andreenkova notes that “the practice of calculating amortization and (or) devaluation of assets during the formation of a double-entry bookkeeping, when the main elements of modern accounting were born, and there was an understanding of the need to reflect results of amortization (devaluation) of assets in the accounting, at the moment it is not sufficiently investigated” (andreenkova, 2016). the discrepancy between the amortization (depreciation) and the loss of capital over 100 years ago was highlighted by the lviv scholar in the field of accounting p. tsompa: “the difference between the initial value and the value after one year shall be written off (amortized), which is econometrically nothing but a reduction in property and capital ... during amortization, this second economic action is completely absent” (tsompa, 2001). a few similar positions are held by modern scientists. for example, i. yaremko considers amortization as a reversion of capital property, pointing out that for the two-channel method of amortization of fixed assets, an illusion is created about the formation of an amortization fund as a new source (capital) for their reproduction (yaremko, 2005). despite the fact that the view on the amortization and depreciation as reserve, regulatory or stock (accumulation of target capital) objects has a long history, it has not been solved up to date. the conclusion made in previous historical periods by well-known scholars in the field of accounting is relevant both for past accounting systems and for modern accounting theory expressions “depreciation” and “amortization fund” (depreciation provision) are confusing for both who read the financial statements and the accountants themselves (mathews, perera, 1999). baltic journal of economic studies 262 vol. 3, no. 5, 2017 the unresolved part of the general problem concerns insufficiently researched ideas and conceptual bases of accounting concepts of amortization and depreciation of fixed assets formulated in the past, and the lack of subject analysis regarding the possibility of their use in modern developments. 3. the concepts of amortization and depreciation in historical retrospect historically, the practical application of procedures for calculating amortization and depreciation of fixed assets in various accounting systems, as well as the content itself (economic matter) of the accounting concepts of “amortization” and “depreciation” was also ambiguous. in the history of accounting amortization, researchers not only have different views on the time of its introduction into accounting practice but in many cases shifting such two accounting procedures  – property devaluation reflexing and its amortization (depreciation), one introduces a greater uncertainty of this accounting procedure. such a position on accounting amortization can be found both in the works of authors on the history of accounting of 19-20 centuries and in the studies of modern scientists. accentuation of this fact comes from the purpose of this article, that is, the study of past ideas and fundamentals of accounting amortization reflexion to justify the possibility and appropriateness of their use in modern developments. in modern international standardization, there are also two standards  – ias 16 “property, plant and equipment”, which presents the concepts of amortization and discloses the mechanisms for its accrual and ias 36 “impairment of assets”, which describes the corresponding process of changing the book value of an object. despite the fact that amortization as an economic category acquired a certain practical application and formalization as early as the sixteenth century, it has been the most controversial and ambiguous in the categorical apparatus throughout the entire historical period and up to the present. throughout the history of the accounting system development, there were different views among scientists and scientific schools on the economic content of amortization and depreciation of fixed assets, this caused ambiguous approaches to the construction of accounting methods, the provision of economic content used for such purposes accounts  – reserve, stock, intended in accounting to display accumulated funds for the purpose of replacing fixed assets (amortization) and regulatory, used to obtain their objective value on a certain date. the ambiguity of these accounting objects was not only local in a separate accounting system, but it was this diametrically opposite understanding of amortization that was one of the distinctive interpretations of modern accounting theory by two world-famous schools institutionalist  – as a reserve, personalistic  – as a regulator (sokolov, 1999). the identification of two terms “depreciation” and “amortization” in view of content and economic essence, their combination methodically in one account led to an even greater imbalance in their recognition and reflection as objects in the accounting system, increased the ambiguity in the representation of these objects by public reporting indicators. in the historical field of research on the accounting science formation and development, there are more or less unambiguous positions, on which the amortization sources are associated with a certain type of accounting in florentine firms. however, it is believed that these were only separate attempts to “build in” such accounting procedures without a specific methodology in accounting: “researchers at the school of accounting historians of professor cutter are absolutely sure that the accrual of amortization (in preserved books) was first carried out in the company of f. danini in barcelona in 1399, where amortization was accrued by a linear method” (andreenkova, 2016). however, there is no single-valued and universally recognized position of scientists when exactly a specific method for calculating amortization and depreciation emerged. mostly it is considered that for the first time the procedure for calculating amortization in accounting starts with the work of marcus vitruvius pollio, in which, as many well-known scholars in the field of accounting history recognize, the concept of “amortization” was first introduced. later (after several centuries) developments in the field of amortization are associated with the description of the english economist j. melissa (1588). the existing methodology came from the fact that the cost of the purchased inventory should be written off in equal parts to the detriment (covered by income), providing for an accounting entry – the debit of the “profits and losses” account and the credit of the “inventory” account. in fact, the described procedure concerns the accrual and recording of impairment of property. such a disposition is also given in the book by j. savary (1622-1690) “on the perfect merchant”, where the interpretation of the inventory accounting contains arguments on the content of amortization, which is associated with the devaluation of property. j. meyr (1757) formulated the theoretical justification for amortization as a reduction in the value of assets in revaluations in the most complete form. according to this theory, the evaluation of fixed assets at the beginning of the period (initial purchase price, estimated value in subsequent periods (revaluation, devaluation), as well as expenses for all types of repairs) was displayed in the debit of the inventory account, and on the credit  – the valuation of fixed assets at the end of the period, obtained by inventory. the calculated amount of “difference in the consumer (residual) value of fixed assets” was established on a subjective basis of the inventory process. baltic journal of economic studies 263 vol. 3, no. 5, 2017 in fig. 1 and 2, there is the content of accounting procedures aimed at direct and amortization fixed property devaluation. amortization as a process of systematic writing-off lost value in the operation of fixed assets in the production process and, accordingly, in one way or another, the accrued amount of amortization in the accounting system was in the 17th century. literary sources provide information on the use of the straight line amortization method at the carron ironworks plant in 1769 and at the boulton and walt plants in 1790: “the initial value of fixed assets was written off based on amortization rates for all types of fixed assets of 8% and for buildings  – 5%” (butynets, 1991). the industrial revolution created conditions, in which “merchant accounting” and the input-expenditure accounting system became inadequate to objectively reflect the main results of the organization’s activities (income, expenses, and profits). dynamic processes of capital assets accumulation to ensure factory production and entrepreneurial activity put forward the need for the methodological formalization of their depreciation, where amortization was one of the main conceptual problems of accounting. the order of amortization accrual became the most stable at the end of the 18 century when amortization required the accumulation of funds to cover the devaluation of expensive assets. at this stage of accounting, amortization development was associated with the transfer of the main property value to the newly created product, and depreciation was interpreted from the standpoint of reducing the consumer value of an object (physical and moral depreciation). in particular, mathews pointed out that the term “depreciation” was first introduced into practice as an abbreviated version of the concept of “diminution of value by reason of wear and tear” (mathews, perera, 1999). 4. problematic issues of approaches and methodological bases of amortization and depreciation concepts for fixed assets widely recognized and more or less clear formalization as an accounting category, depreciation received only in the 19 century under the onslaught of practice needs. during this period, mass railway construction began, which required large volumes of share capital. since inventory description dt account “household items” ct initial cost debit balance credit balance amount of accrued depreciation residual value dt account “profits and losses” ct loss of property value … trial balance fig. 1. procedure for amortization accounting fig. 2. procedure for devaluation accounting inventory description dt account “household items” ct initial cost debit balance credit balance cost of recovery depreciation dt account “profits and losses” ct loss of property value … inventory description trial balance baltic journal of economic studies 264 vol. 3, no. 5, 2017 the costs at the initial stages of construction were recorded in the account at the time of their occurrence, significant amounts of pseudo-profits were formed in subsequent periods, since amortization was not accrued and, accordingly, did not become a composite aggregate expense. despite the announced profit, shareholders demanded dividends, and the owners objectively considered it necessary to keep a part of the income (money sums), creating a so-called renovation fund (renovation). the practice of economic entities functioning on the basis of numerous founders (owners of the share capital) has put forward a new context of the reflecting accounting amortization process  – equipotentially to link accumulated amortization (an amortization fund is formed) with the reduction of fixed capital through physical and moral depreciation of assets. proceeding from such a disposition (depreciation of fixed capital = accumulated amortization fund), the consideration of the economic content of amortization was formed and developed  – accounting method that informatively provided for managing the reproduction of fixed assets, while maintaining fixed capital at a constant level. for this type of accounting purposes, b. pendof proposed a way of reflecting depreciation charges in the amortization accounts other than depreciation: the debit of the “expenses” account, the credit of the “amortization” account. this method was considered more informative since for its use the indicator of accumulated depreciation (amortization fund  – the amount of funds intended for simple reproduction of fixed assets) is formed. important in this context was also the maintenance of an additional record (the debit of the account “authorized capital”, the credit of the account “depreciation of fixed assets”, which declaratively informed on changes in the structure of own capital, acted as a control indicator of the accounting statements on the level of the residual value of the existing fixed capital of the enterprise). in accounting practice, there were always two close, but at the same time, distinct from the economic content terms “depreciation” and “amortization” of fixed assets. the dominant postulates of depicting depreciation and amortization of fixed assets in the accounting and reporting methodology are based on the idea of the french scientist j. dumarchey, who justified the amortization by the regulatory rather than the reserve and, therefore, amortization should be equal to the amount of depreciation. despite the various methodological approaches (the kind of accrual on the accounts of amortization and depreciation, the synthesized combination of these objects in the accounting system), the amounts of accrued amortization and depreciation have always been determined to be the same. in the works of scientists, “justification of differences in the economic content of amortization of fixed assets – as a reserve for their replacement and their depreciation as a regulator of their value on the relevant date” is presented (khomyn, pyrih, 2007). in particular, r . weizmann (1870-1936), positioned the amortization account with the adjustment to the account “fixed assets”, and e. sievers (1852-1917), as opposed to this, argued that with respect to amortization it was a new fund and because such an account is a stock, reflecting one of the sources of its own funds. on the assets amortization and its identification with the amortization fund, the well-known scientist g.  hetfil wrote: “only the sick imagination of people can recognize the amortization as of the fund”. opposite to this, the institutionalists considered the amortization account of the fund: amortization is a part of the nontaxable income, which is the amortization fund. the german scientist j. chenaux-repond also adhered to the position that amortization cannot be a tool for the return of funds: “it is not at all clear how the source of money is generated from the value of fixed assets that is reduced as a result of its exploitation, which, moreover, must act as a source of renovation” (chenaux-repond, 1924). a similar view was also followed by a. römer – “it is not known how reserves are created through depreciation, as it is a loss of property” (römer, 1923). scientists of the french accounting school attributed the economic compatibility of this type of accrual and accounting of the accumulated fund of fixed assets reproduction to the number of discussion questions, arguing that technological progress and inflation deprive amortization as an economic concept of any meaning: “amortization is an instrument of fiscal (tax) policy, and this policy affects the terms of their service, not the fixed assets exploitation conditions” (vyhovska, 2006). this argument was confirmed by the practical activities of subjects, first of all in terms of the capital reproduction at the same level in the inflation conditions. this aspect of the theoretical and methodological amortization foundations has received the greatest number of developments within the german accounting school, when there was a high inflation in this state (1914– 1918), which practice showed the lack of theoretical developments content on the use of adopted amortization methods in the accounting system from the point of view of the amortization fund formation as a source of acquiring new capital assets. to overcome this problem, the accounting practice, in parallel with the theoretical developments, in various ways, solved such problems. for example, the association of german engineering plants (verein deutscher maschinenbau-anstalten) has developed a practical guide to calculating amortization  – the “guidelines for balancing and amortization calculation in the engineering industry under the conditions of inflation” (“leitsätze für bilanzierung und abschreibungen im maschinenbau unter berücksichtigung der geldentwertung”). these principles, in particular, baltic journal of economic studies 265 vol. 3, no. 5, 2017 provided for equalizing entries in liabilities to reduce the devaluation level of the enterprise, establishing amortization through the costs of equipment renewal in the amount necessary at the time of fixed assets object restoration. undoubtedly, such a compulsorily arbitrary practical technique caused a number of theoretical objections; in particular, that fact can be guided by the future replacement cost because it is almost impossible even approximately. under inflationary conditions, development acquisition conditions by the replacement processes of some production means with other results of technological progress, the balance informativity problematics as for objectivity of the residual value of fixed assets, sources of fixed assets reproduction, the reliability of the calculated amounts of amortization charges as a part of expenses, a real loss of consumer value have appeared. it was in the german school for inflation conditions that the interpretation of the importance of depreciation for both theory and practice was established; it became obvious that amortization as a regulating balance sheet item is suitable for functioning only during periods of money purchasing power stability and must cease to function in that capacity when non-productive changes in value are effective (eremenko, 2013). the study of these problems in german accounting (early 20 century). the notion of the difference between the balance amortization (die bilanᵶielle abschreibung) and the calculation amortization (die kalkulatorische abschreibung) was formulated. the purpose of balance amortization is the preservation of amortization equivalents (derives from german abschreibungsgegenwerte and means “earned amortization”, that is, the money returned by the market as a part of sales proceeds), whereas the purpose of calculation amortization  – the cost estimate in the production (management) accounting. however, in the framework of this paradigm, there were also controversial provisions. in particular, e. schigut (1920) emphasizes the impossibility of renovating fixed assets in conditions of rising prices, if money devaluation is not taken into account in amortization. in contrast, another scientist g. peiseler (peiseler g. zeitgemäße betriebswirtschaft, 1921) argued that the amount of amortization cannot be adjusted or changed, since for a certain time the reserves change (increase) their value. these and similar judgments have generated uncertainty in the formulation of this type of amortization accounting concept. 5. evaluation of amortization and depreciation in the modern conceptual and methodological basis of accounting in the modern conceptual and methodological basis of accounting, the process of including amortization charges on fixed assets in the expenses composition is regulated, but after standard calculations, the entire amount of such deductions is equated to profits. in fact, the traditional target determined source of fixed assets composition reproduction was replaced by a synthesized source-profit. at the same time, the actual depreciation on the amortization amount reduces the book value of fixed assets, violates the disclosure capital logic not only as a self-increasing cost but also “confuses” the information about a real change in the share capital. the problem is considerably aggravated in the conditions of unprofitable activity of an enterprise when the amortization deductions “are” in the “retained earnings”, that is, they are presented in the balance in the section “own capital”. this form of hidden reduction of fixed capital is disclosed by domestic scientists because of the loss in the accounting methodology of the target content of this process (yaremko, 2010). the interdependence of reverse flows of fixed capital and the reduction of the share capital of enterprises in this work are disclosed in detail as shown in fig. 3, which is typical for domestic enterprises in general. in the modern accounting concept of amortization, the problem of amortization of intangible assets is separated. it should be noted that throughout the historical period, until recently, the amortization (depreciation) accounting on intangible assets was not carried out. it was assumed that this type of assets does gross (own) capital of the enterprise amortization (depreciation) of fixed capital reversal of fixed capital investing in equity reduction of share capital not purposeful use of depreciation funds fig. 3. the interdependence of the value of the share capital with the target direction of sources baltic journal of economic studies 266 vol. 3, no. 5, 2017 not lose its consumer properties during the period of its use. this view is somewhat justified, especially when this type of asset is viewed in the simplified classification coordinates for accounting purposes (asset recognition principles). determining usable life expectancy of intangible assets requires an individual approach since some of the assets in this asset group are subject to moral depreciation, which requires their replacement. a part of the intangible assets of such a value loss is not affected and, therefore, the question generally arises as to economic matter – why to amortize an asset (determine its depreciation) that brings additional cash flows and, without requiring additional costs, itself acquires greater productive power as an economic resource (trademark, brand, business reputation). the issue of book value is important (based on the expenditure principles of acquiring assets completely distort the original value), which requires a significantly different assessment and accounting. the issue is deepened when intangible assets in the accounting system need to be viewed in a wider spectrum, through their projection – the accumulation of productive economic resources (energy of the trade mark, trademark, business reputation, technology, including management etc.). on the one hand, as an important economic resource of a modern enterprise, this intangible component of equity capital should be made public in the public financial statements (balance sheet), that is, be put on balance. on the other hand, in modern business practices, the problem is not only their valuation, but it is difficult to determine results of the application of such assets. another extremely complicated issue and extremely important moment for amortization calculating for assets of this type is the problem of determining the usable life expectancy of various objects. this is due to the fact that depreciation of individual fixed assets occurs in different ways due to production conditions, individual for each enterprise and the impact of moral depreciation. disagreements between depreciation and amortization are presented in fig. 4 “when determining the amount of depreciation, it is suggested to use the integral depreciation coefficient, including physical, moral, and economic depreciation of various fixed assets” (yaremko, 2010). for a more objective evaluation of depreciation, it is necessary to establish standard methods for determining the degree and nature of physical, moral, and economic depreciation of various elements of fixed assets. when determining the amount of depreciation, it is proposed to use the integral depreciation coefficient, which includes all three types of depreciation: physical, moral, and economic: k = kph х km х ke, where k is the integral depreciation coefficient; kph – a factor of physical depreciation; ke  – coefficient of economic depreciation; km is the coefficient of moral depreciation. the economic content of the integral coefficient k is that it is an indicator of the final usefulness of the fixed asset. 6. conclusions the currently used concept of amortization (depreciation) accounting objectively leads to information difficulties in determining the objective residual value of fixed assets, the comparability of this cost with the size of the announced own (shareholder) capital, the establishment of a real monetary base for the reproduction processes management of irreversible capital of modern companies in tracking the movement of amortization resources from their occurrence to financial results as a result of many factors, including use of alternative methods for amortization calculating, a synthetic combination of depreciation and amortization in one object. technological progress, rapid replacement of production and other economic resources with new (other) more productive before the moments of total amortization and physical material depreciation, the uncertainty of the concept of “depreciation and amortization of intangible assets” poses an acute theoretical and applied need for the formation of a new, adequate to economic conditions, accounting concept of amortization. the basic problem, in our opinion, is connected with the differentiation of depreciation and amortization. to develop and adapt to the current conditions of the amortization accounting concept, it is expedient, in the author’s opinion, to turn to ideas and conceptual approaches of developments made in previous historical periods. in particular, it may be considered advisable to use the conceptual framework of e. schmalenbach, who proposes the creation of a transit account “reserve for inflation” to account for revalued impairment of fixed assets (depreciation) physical depreciation moral depreciation lifetime of moral depreciation lifetime of physical depreciation years b al an ce s he et a ss et , u a h fig. 4. differences between depreciation and amortization baltic journal of economic studies 267 vol. 3, no. 5, 2017 cost deviations when placed on the balance of an object. the urgency and, obviously, the advisability of introducing such a “fake” object is argued at once by several factors  – the real existence of inflationary processes in the modern economy and the dynamics of their continuation to the observational period is evident; devaluation of the purchasing power of the accumulated amortization resource; the rapid pace of technological progress does not allow talking about the reproduction of fixed capital by the method of “acquiring an analogue”. the idea put in the accounting concept of amortization in the 19 century as of considering amortization as a special liability – amortization capital (fund), can have absolutely positive embodiment in modern practice. it is generally recognized that the mechanism of the amortization effect is imperfect, including because of the lack of information of a growing nature about the accumulated amortization resource. this in many cases entails the use of such funds by companies not for their intended purpose, that is, amortization deductions targeted in meaning are directed to other needs. this automatically (outside the information field) weakens the share capital. the devaluation of the productive power of the accumulated depreciation resource (loss of purchasing power) occurs even under the condition of its targeted use – under the influence of inflation. the solution to this problem can be overcome by keeping amortization funds in bank accounts at a certain percentage. thus, historical experience is important and necessary in modern conditions. it can be adapted by incrusting several ideas of the past. references: shchyrska, o. v. (2013). ekonomichna sutnist poniattia “amortyzatsiia” ta “znos”: istorychnyi aspekt [economic essence of concept “amortization” and “depreciation”: historical aspect]. international collection of scientific labours, vol. 2 (20), pp. 478-485. kulikova, l. i. (2015). bukhgalterskaya kontseptsiya amortizatsii: istoriya stanovleniya i razvitiya [accounting concept of amortization: the history and development]. international accounting, no. 37 (379), pp. 2-15. khomyn, p. ya., pyrih, i. m. (2007). amortyzatsiia: ekonomichnyi zmist ta metodyka vidobrazhennia [amortization: economic content and method of mapping]. finances of ukraine, no 6, pp. 22-30. andreenkova, a. s. (2016). istoricheskiy vzglyad na protsedury bukhgalterskogo ucheta “amortizatsiya” i “obestsenivanie” v srednevekovykh kompaniyakh [historical view on accounting procedures “amortization” and “devaluation” in medieval companies]. bulletin of the adygeya state university “science magazine”, vol. 4 (190), pp. 55-58. tsompa, p. (2001). narysy ekonometrii i pobudovana na natsionalnii polit ekonomii teoriia bukhhalterskoho obliku [essays on econometrics and built on the national political economy accounting theory]. lviv : kameniar. (in ukrainian) yaremko, i. y. (2005) znos i amortyzatsiia neoborotnykh aktyviv – instrument otsinky kapitalu pidpryiemstva [depreciation and amortization of non-current assets – a tool for assessing capital of an enterprise]. lviv: new world-2000. (in ukrainian) mathews, m., perera, m. (1999). teoriya bukhgalterskogo ucheta [theory of accounting]. moscow: uniti. (in russian) sokolov, ya. v. (1999). bukhgalterskiy uchet: ot istokov do nashikh dney [accounting: from f. (1991). istoriia rozvytku bukhhalterskoho obliku [history of accounting]. zhytomyr: zhdti. (in ukrainian) chenaux-repond, j. (1924). commercial record. book close – tax balance, stuttgart. römer, a. (1923). the value preservation in the enterprise and the relevant tax law. berlin. vyhovska, n. h. (2006). bukhhalterskyi oblik: istorychnyi aspekt. rezultaty dysertatsiinykh doslidzhen zhytomyrskoi naukovoi bukhhalterskoi shkoly [accounting: historical aspect. results of dissertation researches of zhytomyr scientific accounting school]. zhytomyr: zhdtu. (in ukrainian) eremenko, t. v. (2013). rozvitie uchenie ob amortizatsii v germanii [development of the theory of amortization in germany]. finance and business, no. 3, pp. 116-124. yaremko, i. y. (2010). otsiniuvannia ta formuvannia vartosti mashynobudivnykh pidpryiemstv [estimation and formation of the cost of machine-building enterprises] (phd thesis), lviv: lviv polytechnic national university. baltic journal of economic studies 146 vol. 3, no. 5, 2017 corresponding author: 1 department of criminal law and justice, private institution of higher education «academician stepan demianchuk international university of economics and humanities». e-mail: dulibayevheniia@gmail.com 2 department of civil and legal disciplines, private institution of higher education «academician stepan demianchuk international university of economics and humanities». e-mail: olihor@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-146-150 relevant problems of ukraine’s integration into global economy yevheniia duliba1, oleh ilkiv2 private institution of higher education «academician stepan demianchuk international university of economics and humanities», ukraine abstract. the purpose of this research is to study the main problems that prevent ukraine from integrating into the global economy and to determine correct focuses of the foreign economic policy of ukraine against the background of strengthening of globalization tendencies throughout the world. the bases of this research are bases of business development of the foreign economic policy of ukraine and improvement of ukrainian economy against the background of international integration. at the heart of the research methodology is a dialectical method of scientific knowledge and, besides, special methods of research based on modern scientific bases of economic, management and related to them knowledge: economic and statistic method – for the assessment of the modern state of foreign trade and investment activity of ukraine; method of analysis and synthesis – for the determination of tendencies of development of integration processed in ukraine; comparative analysis – for comparison of information concerning development of specific indicators of foreign economic activities in ukraine. results. as a result of research, the main blocks of problems, which impede the integration of ukraine into the global economy, and requirements for their complex solution are determined. besides, interdependence and interdetermination of problems, which impede the integration of ukraine into the global economy, and requirements for their complex solution are explained. political and legal, economic, sociocultural, and infrastructural preconditions that are necessary for effective integration of ukraine into the global economy are highlighted. practical implications. analysis of the existing problems related to the actual economy, investments, innovation processes gives the possibility to determine the vector of development of ukraine’s economy taking to account recommendations concerning its improvement for the purposes of integration into global economy. value/originality. conducted research has provided the possibility to confirm the obtained results: integration of ukraine into the global economy is impossible without the development of the main strategic directions of integration, without carrying out reforms that would be helpful in improving ukraine’s reputation on the international stage. it is confirmed that without correct, scientifically well-grounded, carefully well-reasoned and gradually implemented policy in ukraine, any national strategy of economic and social development that makes provision for integration of our country into global economy cannot be successfully realized. key words: foreign economic activity, integration, global economy, economy of ukraine, globalization. jel classification: o19, o33, о52 1. introduction the modern stage of law and state formation in ukraine can be referred to transformational one that is connected with solution of socio-political and economic problems concerning formation of completely new model of state management, development of civil society that could meet world standards relative to human rights, especially taking into account obligations undertaken by ukraine according to the contract of association concluded between ukraine, on the one hand, and european union, european atomic energy community and their member countries, on the other hand. together with the gradual integration of ukraine into world legal terrain, need for improvement of national and international mechanisms of confirmation and enforcement of constitutional rights and human liberties also increases. there can be no doubt that protection of vital interests of a person or a citizen, of society and state, assurance of the stable development of society depends to the certain baltic journal of economic studies 147 vol. 3, no. 5, 2017 extent on the financial condition of the state and on its economic development. today it is quite obvious that ukraine is a state with a free market economy, however, further expansion of its participation in global economic integration and building its international market strength require determination of specific legal mechanisms of promotion in the global economy, determination of approaches to improving the competitiveness of the national economy. 2. results of previous researches as it is obvious from the results of analysis of scientific literature, the number of research papers dedicated to the investigation of the phenomenon of international regional integration of countries is rather small. world doctrine has a number of scientists-fundamentalists, who have laid the basis for terms, phenomena, and ties. we can find the main economic theories of international experience highlighted in works of: classicists – а. smith, d.  ricardo, neo-classicists – e.  hecksher, b.  ohlin, e.  mundell, r .  johnson, j.  r .  hicks, representatives of modern scientific concepts – s. robocc, k. simmonds, j.  м.  siroen, k.  j.  lancaster, s.  linder, j.  lafaille, f. perroux, i. kreivis, p. samuelson. besides, it is worth mentioning our ukrainian researchers, in particular, о. bilorus, і. burkovskyi, a. halchynskyi, yu. kozak, who have actually studied modern processes of the world economic globalization and range of problems concerning ukraine as a part of it. however, against the background of the realities of modern life, the problem of ukraine integration into global market is complicated because of difficulties in the political and economic situation inside the country. during last years, the development of ukraine’s economy has been significantly influenced by external and internal imbalances and by long-lasting military conflict in eastern ukraine. due to the financial and economic situation in ukraine, necessary measures have been taken in order to prevent financial downturn and to provide preconditions for the economic growth, increase of budget revenues, and realization of actions concerning rational use of public funds, exclusion of loss of revenues and social protection of citizens according to the economic possibilities of the country. in addition to the aforesaid, it should be mentioned that the ongoing issue of lack or insufficiency of funds in state budget results in the necessity of looking for new ways to solve this issue by using the international experience of overcoming the economic crisis and providing economic security of the country. international cooperation is one of the actual directions of cooperation between countries that is caused by strengthening the role of the latter in providing the global law and order by means of international law. economic, political, cultural or any other coexistence of our country with the european community and with other countries throughout the world foresee the obligatory implementation of international standards in different fields of social interactions, which also includes economic field. today’s political and legal realities give strong arguments for the necessity of creation of practical legal mechanisms for such international cooperation. 3. results of previous researches today the processes of international economic integration are dominant in the world economy’s development. they come together with significant dynamic globalization processes. in juridical science and in practice globalization is defined as a system, multi-faceted and multi-levelled integration of different existing all over the world state-legal, economic and financial, civil and political institutions, ideas, principles, moral and political, material assets, and variable relationships. under the influence of current globalization factors, such components of the ukrainian state-legal institutions as a form of state and law; methods of state activity; principles of enjoyment of rights; area of public authority extension; state and law sovereignty undergo evolutional changes. therefore, global processes have a great influence modifying the following functions of ukrainian state: 1) under today’s economic and socio-political conditions of functioning of the national state, some of its outdated functions, which have spent themselves, disappear and fall down (for example, commercial and organizational function, function of control over consumption area, cultural and educational function, etc.); 2) new functions appear or those functions, which have been secondary ones, develop and improve, – defence function, ecological function, demographical function, the social function of the state; 3) traditional functions of the state significantly change. this is primarily subject to economic function of the state. the state cannot be fully apart from the economic field and economic regulation; however, its influence has to be limited. the excessive interference of the state and overregulation of economic processes also have an injurious effect. for that reason, it is important to keep a balance between state interests and interests of business units, to determine rational legal boundaries of state interference into economic processes. thus, in order to solve the problem of state and economy cooperation, there should be such an approach created that would give the possibility for the state to combine organically administrative methods of economic management and pure market methods of management (financial leverages of the state over economy, state budget, credit and financial, taxation, customs policy, state orders and national loans, direct financial support for subjects of business relationships, export and import policy, baltic journal of economic studies 148 vol. 3, no. 5, 2017 etc.). whereas, state control over natural resources and main economic fields, protection of domestic market and interests of domestic goods producers in the domestic market, prevention of financial speculations and the similar have to become those methods of implementation of the economic function under the conditions of globalization. a particular attention has to be paid to the fact that an active development of globalization processes and international economic integration and, as a result, constant increase of the scope of international trade leads to the appearance of external threats to the national economy. the modern stage of development of the world economy is characterized by increasing influence of economic globalization, which is primarily characterized by a certain levelling of the meaning of state boundaries due to the fact that all international economic subjects perform their activity in the common open economic space. as it is known, one of the main directions of the national policy of ukraine is a support for the state integration into european political, economic, legal space with the aim to obtain membership in the european union. such a complicated social and economic process of building a close cooperation causes greater overall dependence of ukraine, first of all, in the economic area, on other countries-members of the european union. thus, under current conditions, integration of ukraine into global economic space is performed in two ways: 1) by its belonging to existing international (global) organizations and 2) by building biand multilateral relations with separate countries and also with neighbouring regions. social and political changes in ukrainian society and political and legal actions extensively performed by the state have determined the main vectors of development of the abovementioned integration processes. today ukraine is a member of the international monetary fund, of the world bank, of the european bank for reconstruction and development, and of the world trade organization. ukraine takes an active part in activities of the un economic commission for europe that encourages common european economic integration and cooperation of member states, provides sustainable development and economic prosperity. by performing its activity the un economic commission for europe initiates measures aimed at easing concerted actions for the economic development of european integration, increasing the level of economic activity in europe, supporting and strengthening of economic relationships both between european counties and between other countries all over the world. taking into consideration the fact that the un economic commission for europe sets regulations, standards and conventions to promote international cooperation in europe and outside, ukraine directs its activity to strengthen cooperation in respect of integration of energy, transport, ecology, and economy. these actions are performed by means of political dialog, negotiations concerning international legal documents, drafting of laws and regulations, exchange and application of the best european experience (unece, 2018). it is worth mentioning that the european union works close with ukraine in order to reach the greatest possible political association and the greatest possible economic integration according to the global strategy of foreign policy and security policy of the european union. in view of the abovementioned, it should be indicated that ukraine takes an inconsiderable part in the economic activity of other countries because our country is beyond the international flow of investment costs and international currency relations. in the report about global competitiveness for 2017–2018, which provides a unique understanding of factors of their productivity and prosperity, ukraine is on the 81st position among 137 countries (world economic outlook, 2017). due to this, it can be stated with certainty that ukraine is only on the initial stage of integration of national economy to the world structures and cannot become an equal partner in the global economy. only having increased the competitiveness of the national economy, and having created favourable conditions in order to get foreign investments into the economy and to win strong positions in the international market, one can speak about the integration of ukraine into global economic space. it has to be separately noted that european experience convincingly shows that constant increase and improvement of living standards of any country’s population can be achieved only by increasing productivity and by applying new better products and services that successfully compete in the marketplace. taking into consideration all this, innovations, which are the basis for sustainable development and economic growth, are of great importance for modern competitiveness. the situation in ukraine shall be characterized taking into account these circumstances. in today’s ukrainian realities, one can observe decrease of investment and innovation activities, weakening of the system of state regulation and control in economic sector, instability of legal regulatory activity in economic relations, critical state in core industries of the state, “shadowing” of the national economy that lead to importance of development and fulfilment of the national programs for the economic, scientific and technical development of the state. thus, it is obvious that ukrainian society has to deal with such main problems of deterioration of the economic growth: 1) exacerbation of the internal crisis, 2) critical slowdown of ukrainian economic growth, 3) degradation of the main macroeconomic performance, baltic journal of economic studies 149 vol. 3, no. 5, 2017 4) cutbacks in industrial production, 5) decline in economic activity, first of all, in investment activity, 6) loss of export revenues because of worsening of a conjecture of traditional raw materials and commodity markets, 7) shortfalls to the state budget and need for additional borrowings, 8) insufficient availability of investment resources, 9) deterioration of human well-being (households) and increase in the level of unemployment, 10) increase on the debt pressure, mainly in the public sector, 11) increase in shadowing of economic activity, 12) high level of corruption and its entrenchment in all spheres of the state management. the fourth imf credit tranche gave ukraine a possibility to implement necessary reforms, to enlarge gold and currency reserves, to postpone a default, to stabilize a macroeconomic situation by strengthening the confidence of partners, investors, and donors in the country. relative business deregulation in 2017, especially in building industry, and optimization of state fiscal policy together with the improvement of service delivery for tax payers, in particular by implementing an electronic system for vat return, have significantly increased a taxation base providing a surplus of state and local budgets and have encouraged reduction of shadowing economy share. as a result, information about improvement had a positive effect on the investment climate and has brought ukraine to 76th doing business-2018 rating position (doing business, 2018). due to the existence of many problems, which restrain the economic growth of the country, the desire of ukraine to build partner relationships and to cooperate with the european union, and to get afterward a full membership in this organization come to nothing. this is because of the fact that according to the maastricht treaty the eu candidate countries have to adhere to the following accession conditions in order to eliminate differences and to bring together national economies of member countries: 1) price stability – the inflation rate in the candidate country should not exceed the average inflation rate of three eu countries with the lowest inflation rates by more than 1.5%; 2) public finances stability – the annual national budget deficit cannot exceed 3% of the gross domestic product. the level of the state debt cannot exceed 60% of the annual gdp; 3) the level of interest rates for long-term credits should not exceed 2% of the level that exists in three eu countries with the best results; 4) currency exchange rate should not exceed the margins of the defined in the eu fluctuation range for exchange rates. the devaluations are prohibited during minimum two years (treaty on european union, 1992). thus, taking into account these criteria, it should be mentioned that, being unassisted, ukraine is not able to perform all necessary changes and, as a result of this, the integration of ukraine into global economic space is slowed down because of the existence of negative factors for the realization of global trade. according to the information given by the international monetary fund the most problematic factors are: taxation rates (21.7%), corruption (16.4%), access to financing (10.3%), tax regulations (9.3%), ineffective government bureaucracy (7.2%), inflation (5.5%), political instability (5.2%), and crime rate (4%) (global competitiveness index, 2017). moreover, stimulation of innovation activity in the country, increase in its innovative capacity, and increase in general effectiveness of the national economy are possible only by overcoming corruption that is the main barrier for the economic growth of many countries and essentially impedes the fulfilment of un programme for sustained development for 2030. according to results of the research performed by international non-profit organization transparency international acting against corruption and providing the analysis of the corruption in the world, ukraine has taken the 131st position among 176 countries due to the level of corruption. at the same time, the eu candidate countries have taken the following positions according to the level of corruption: montenegro – 64th, turkey – 75th, albania – 83rd, macedonia – 90th (transparency international, 2016). it should be stated that the effective integration of ukraine into the global economy requires certain political and legal, economic, sociocultural, and infrastructural preconditions. political and legal preconditions of integration consist of: the political certainty of ukraine, assurance of territorial integrity and creation of an adequate system of national security, fulfilment of international obligations, formation of correspondent legal system and preparation of effective mechanisms and instruments for its fulfilment. economic preconditions for the integration are the following: development and realization of the wellfounded programme of transfer to market relations by tending to denationalization and privatization, social protection of the population; assessment of the export capacity, development of the export-import mechanism for the regulation of foreign economic activities; solution to the problem concerning external debts. the main social and cultural preconditions for the integration are: revival and upbringing of the selfrespect, creation of conditions for the social and cultural life of ukraine’s population. formation of the infrastructural preconditions is associated with the development of transport communications (see, ground, air); development of modern information and communication systems and baltic journal of economic studies 150 vol. 3, no. 5, 2017 their connection to the international systems of crossborder cooperation. parameters of the state budget have a great influence on the development of economic processes in ukraine. by setting up incomes and expenses, the state budget influences a wide range of economic processes in our country and also serves as a guide mark for all subjects of the economy, affects their correspondent decisionmaking and their business behaviour. during the last years, the state budget of ukraine has been estimated on the basis of the main macroeconomic indicators that have been approved by the international monetary fund. thus, for modern ukraine that undergoes serious transformational processes, it is quite important to place special emphasis on the problematics of its integration into the global economy as the investigation of these issues is relevant not only for science but also is an urgent practical issue. 4. conclusions summarizing the results of the conducted research, it should be mentioned that a range of burning issues, which appear during the process of ukraine integration into the global economy, is not certainly limited only to those mentioned in the article. these and other problems are to be studied by scientists in order to develop effective political and legal mechanisms for this specified direction. to provide further integration into the global economy, reforms should be performed in ukraine, which would promote the improvement of the reputation on the international stage. it seems that integration of ukraine into the global economy in the near future is unreal. ukraine can become an equal partner of foreign economic relations and can take a rightful place in the global economy only after realization of a set of actions aimed at improving the competitiveness of the economy in the world market. among these urgent measures, the following actions can be highlighted: reduction of the excessive budget deficit, decrease of the national debt; promotion of competition in the labour market by providing the conformity between salary level and labour productivity, on the one hand, and price stability, on the other hand, realization of the actions intended for the economic recovery suitable for price stability, improvement of the control mechanisms for the functioning of the competitive environment, development of the public-private partnership, stimulation of innovations by developing services concerning support for the innovative projects, creation of the innovation networks, increase in the state purchases of innovative goods and services, improvement of access to domestic and foreign financial resources, acceleration of the implementation of directives on the domestic market, and improvement of mechanisms for the implementation of the eu acts of legislation. references: mission unece. electronic resources. retrieved from: https://www.unece.org/mission.html world economic outlook, april 2017: gaining momentum? retrieved from: http://www.imf.org/en/ publications/weo/issues/2017/04/04/world-economic-outlook-april-2017 doing business 2018. reforming to create jobs. electronic resources. retrieved from: http://www.doingbusiness.org/ reports/regional-reports treaty on european union (maastricht, 7 february 1992). electronic resources. retrieved from: https:// www.cvce.eu/obj/treaty_on_european_union_maastricht_7_february_1992-en-2c2f2b85-14bb-4488-9ded13f3cd04de05.html global competitiveness index 2017-2018. electronic resources. retrieved from: http://reports.weforum.org/ global-competitiveness-index-2017-2018/countryeconomy-profiles/#economy=ukr corruption perceptions index 2016. electronic resources. retrieved from: https://www.transparency.org/news/ feature/corruption_perceptions_index_2016 baltic journal of economic studies 33 vol. 1, no. 2, 2015 improving the system of mortgage crediting of residential real estate in ukraine alexander goloven1, vladimir korneev2, research institute of economics by ministry of economic development and trade of ukraine, ukraine abstract. the purpose of the article is to improve the system of mortgage crediting of residential real estate in ukraine. mortgage lending appeared in ukraine in the early xvii century, today the actual problem is a small percentage of the banking book long-term mortgage loans, because banks, on the one hand, tend to rotate without the risk of short-term funds, another potential borrower of these loans, unfortunately, is not creditworthy. however, despite the risks, this banking product is a significant factor in the redistribution and accumulation of funds, the transformation of private savings into investment resources, the problem of housing, but also contributes to the stabilization of the economy in the country as a whole. functioning and the distribution of mortgage capital, the possible financial risks, the interaction of the mortgage market by the financial, investment and monetary affairs, leads to a certain complexity of the mechanism of functioning of the mortgage market of ukraine in general. the relevance of this topic not only in the development of the housing market, but also the feasibility studies for the development of this issue. we present an analysis of the institutional environment of mortgage lending residential real estate, which gave an opportunity to identify and define the environment of modern residential real estate market, its relationship with other markets. methodology. the survey is based on institutional structure of the mortgage market that has evolved independently of other structures, independently within country under the influence of specific socio-economic environment and economic policy. results of the survey showed that mortgage lending can be providing the borrower with some free services, such as: long-term deposit on favorable terms, notary services, insurance, discounts on bank services, providing services to the bank and the developer, given appropriate training of the borrower and so forth. practical implications. as practice shows, most need mortgage loans young and wealthy clients. with this purpose, you need also to diversify the types of loans. young people without significant income, applying for social housing, while the wealthy – for luxury housing and placing home in a prestigious area of the city. value/originality. based on this survey bank mortgage lending should apply new forms and methods of mortgage lending, as well as implement the latest technology in the field of providing banking services and lending, especially mortgages not only in ukraine, but in other developing countries. key words: banking, mortgage, lending, market, institution, residential real estate. jel classification: g21, g29, g24 1. introduction corresponding author: 1 department of financial and budget policy, research institute of economics by ministry of economic development and trade of ukraine. e-mail: alexandr_goloven@ukr.net 2 department of financial and budget policy, research institute of economics by ministry of economic development and trade of ukraine. e-mail: vkorn27@list.ru at the moment in ukraine quite intensively a system of effective regulation of mortgage lending is being formed. this is primarily due to the fact that quite a large number of the population lack adequate housing, and secondly, banks provide loans for housing, as better collateral than housing do not exist today. the implementation of the policy of mortgage lending, in turn, requires the creation of conditions for development of the property market and constant expansion of the sphere of housing. in this case, only the state is able to take on organizational, economic, financial and legal support for the mortgage market residential real estate. the development of market relations in our country, the changing economic structure of society, especially in recent decades, that has guided both state and non-state legal institutions that can ensure effective functioning on the market. as evidenced by the experience of developed countries, the system of mortgage lending solves both economic and social problems. therefore, the introduction of our country effective system of mortgage crediting of residential real estate contribute significantly to socio-economic stabilization of the economy. to do this we first need to solve economic and legal problems in the field of mortgage, without which it is baltic journal of economic studies 34 vol. 1, no. 2, 2015 impossible to establish the legal institute of mortgage relevant content, which would ensure its effective implementation. however, the solution to these problems is very important and simple question, which is due not only to significant complexity of the mortgage relationship, but the ambiguity of their legal nature and many forms of application. the primary goal of state policy in the sphere of mortgage crediting of residential property must be consistent creation of institutional environment favorable for the development of national banking institutions and related organizations, their interaction with potential clients – borrowers, who need housing or its improvement. 2. improving the efficiency of mortgage lending coming from the nature of mortgage lending, which underpins the development of the real estate market, mortgage lending is a multifaceted education, which, in addition to the large number of elements inherent in the complex relationship between the relevant components. one of the key factors of improving the efficiency of mortgage lending as the basis for the development of the real estate market, as noted above, is the necessity of building efficient institutions in the existence and activity of which see the possibility of solving economic and social problems in ukrainian society. to focus on solving this problem required the clarification and understanding of the role and place of the mortgage market in the national economy, identification of functional connections of the mortgage market with other elements of the economic system, clarifying the factors affecting changes in the system of development of residential properties and its activity. obviously, compliance and reliability of such research to specific economic conditions is only possible with a clear understanding and definition of the institutional framework of mortgage lending residential real estate, especially in the context of post-crisis phenomena. in the context of the issue of the institutional framework of mortgage lending, in our view, it is useful to consider two categories in the field of institutionalism as an economic doctrine based on the study of human relationships, institutions, governance, regulation and law and society. the first category is “the institution”, the second “institute”. in the use of the terms “institute” (lat. institutio, in french, english: institution) and “institute” (lat. institutum, in french, english: institute) is manifest not only linguistically, but also essential content. so, considering some of the institute scientists in terms of customs, habits, informal systems, and the institute – in the sense of the formalized incarnation and formalizing institutions. some scientists under the institute of any stable community of people to achieve a full and real expression of certain goal – state, family, party, church, trade union, etc. and institution – institution – the body of law covering a range of public institutions: educational institutions, research institutions, banking institutions, building organizations, etc. by analysing the number of scientific publications, both domestic and foreign scientists (t. v. gaidai, d.  frolova, s. sorokina, a. v. inshakov, v. n. tarasevich, v. hamilton and others, which considers the approach to the interpretation of the term “institution”), we can conclude that in the field of mortgage lending “institution” – it’s the rules, that is, a mechanism, a process that due to the rules, regulations of mortgage lending and the institution is institutions, institutions, organizations and so on, which are the relevant levers of influence on the development of mortgage lending. some authors of the literature concerning the institutional structure of the mortgage market argue that it has evolved independently of other structures, i.e. independently within each country under the influence of specific socio-economic environment and economic policy. however, as a result of our studies and the aspect that mortgage lending has evolved as a result in general system of credit, and the findings of russian scientists e. chernich and o. starkova, it can be argued that the institutional organization of the mortgage market was only later borrowed and further developed independently. the justification for this assertion is based more on the fact that the institutional structure of the mortgage market has a number of common features of different areas of lending and solves almost the same problem on lending to various sectors of the national economy. note that the institutes and established on the basis of their institutions are the result of coordination of interests of subjects of mortgage financial relations. this primarily contributes to the formation of the mortgage market, and secondly, creates a system of institutionalizing concerted economic interests of its subjects. this approach to the study of formation, operation and development of the mortgage market because the mortgage market is a complex conglomerate of economic relations and forms that are integrated into the framework of economic order, which is generated and is reproduced with the direct participation of economic actors and on the basis of their economic interests. the negative side of development of institutes of mortgage lending is that the national banking system did not fully finance the real sector, as observed in the advanced economies. in addition, domestic banking institutions are the main part of credits give for a short period, and banks with foreign capital not at risk to provide long-term loans for housing construction, and limited to short-term, thereby contributing to the outflow of resources from the real sector of the economy. in our opinion, the state’s adoption of respective normative and legislative acts on the establishment of related institutes in the field of mortgage lending, which has the above factors and exercise control over their task, reduce the cost of both the construction of housing, and areas of mortgage lending. the existence of such organizations stimulate the interaction of supply baltic journal of economic studies 35 vol. 1, no. 2, 2015 and demand in the housing market, uniting developers, banking institutions and the population, promote the implementation of effective mechanisms for recovery of the mortgage market. 3. institution environment of mortgage lending residential real estate regulatory support in the processes of mortgage lending significantly affects the development of the property market, especially residential property, on which there is a constant demand and therefore should be effectively and vigorously developed the market of such proposal. the analysis of the institutional environment of mortgage lending residential real estate has provided the opportunity to identify and define the environment of modern residential real estate market, its relationship with other markets (pic. 1.1). as it’s shown in pic. 1.1, it can be argued that the implementation of the priority directions in the sphere of housing construction and mortgage lending is impossible without a comprehensive restructuring of the institutional environment and improvement of the institutional structure of mortgage lending residential real estate. that is, it is necessary to form a reasonably balanced and effective institutional structure that will enable a transformation in the mortgage complex, which will be translated into mainstream market transformation of the entire economic system and all economic complex of ukraine. an important role in the field of mortgage lending to residential property occupied by public authorities and various state and non-state organizations and institutions, and in the sphere of ensuring of effective formation and development of the real estate market, the mortgage market infrastructure (pic. 1.2). institutional structure is both the result and the instrument by which the subjects of the mortgage market to realize their economic interests, and ultimately ensure effective functioning of the estate and the welfare of the population. and for the implementation of these tasks play an important role is mortgage-backed securities. successful and fundamentally new development of mortgage housing crediting in ukraine will be impossible without the introduction and rapid development of institutional investors, which have become important suppliers of financial resources for the aforementioned market. first of all we are talking about the introduction and the economic and social as well as political and organizational support to non-state and non-banking institutions: foundations, companies. their role in the system of mortgage lending is very important, especially in the field of mortgage lending of housing construction. it should be noted that in establishing these financial institutions, which would provide financial resources for the construction of housing, ukraine significantly lags behind other countries. today the crucial issues are the selection of appropriate these funds and establish a reliable system to manage which will ensure minimization of possible costs of the assets of these funds and ensure their growth. in the current context of development of the national economy require a significant increase of the role of institutions such as mutual investment funds, insurance companies, credit unions, investment companies that should be particularly important investors of the mortgage housing market. the infrastructure of the residential real estate market type of residential real estate (social, elite, etc.) the control system of mortgage credit relations integration of the real estate market the primary and secondary markets of residential real estate the model of mortgage management monetary system and the direction of regulation of mortgage lending the national legislation in the field of mortgage lending residential real estate the competitive environment in the sphere of construction and lending the condition of the market of housing and communal services the mechanism of relations in the field of residential real estate foreign experience in the sphere of construction and housing the national legislation in the field of construction of residential property institutional environment of residential real estate pic. 1.1. the living conditions of mortgage of residential property note. created by the author baltic journal of economic studies 36 vol. 1, no. 2, 2015 state and non-state organisations and institutions t he n at io na l b an k of u kr ai ne banks institutions (commercial banks) financial-credit institutions saving mortgage bank associations infrastructure: joint investment institutions; institutes of mutual investment. universal banks specialized banks t he s ta te c om m is si on f or r eg ul at io n of fi na nc ia l s er vi ce s m ar ke ts t he b an k sy st em regulators p ar ab an ks s ys te m • notary authorities • real estate companies • depository • credit bureaus • rating agencies • assessing agency's • judiciary • the fund for guaranteeing deposits of natural persons • the unified state registers of rights • the cabinet of ministers of ukraine • ukrainian national mortgage association • the state mortgage institution • the local governments. specialized credit-investment organizations innovations investment insurance companies pension funds guarantee funds credit unions investment companies borrowers residential real estate lenders cooperative saving banks infrastructure: financial-industrial groups; agencies for housing mortgage lendig; savings building cashs. pic. 1.2. the institutional structure of mortgage lending residential real estate note. created by the author it should be noted that the activities of credit unions and cooperative banks in the mortgage market can be substantially strengthened through the establishment of effective legal framework for the expansion of cooperative housing mortgage loan. in modern conditions there is a need in the formation and other financial-credit institutions of mortgage lending of housing. but, in our view, today focus on issues such as the creation of a highly developed and efficient institutional structure of mortgage lending market residential real estate. a special role should be given with special banking institutions and credit agencies in the field of mortgage lending. in ukraine to the bodies, carrying out regulation in the sphere of mortgage lending belongs to the national commission on securities and stock market, state commission for regulation of financial services markets of ukraine, the national bank of ukraine, ministry of finance of ukraine, state tax service of ukraine and other bodies of state regulation, the state property fund, state committee of ukraine for construction and architecture. as noted above, baltic journal of economic studies 37 vol. 1, no. 2, 2015 regulatory functions in the mortgage housing market are also held by the local authorities. it is important to note that the authorities who regulate the mortgage market, and include legislative authorities, executive authorities at both the local and national levels. our proposed institutional structure of mortgage lending residential real estate should be an effective mechanism to relatively intensive housing development and lending. it is worth to noting that on the state level to legislatively regulate issues related to the functioning of existing and creation of new institutions, which would take a direct part in the processes of mortgage lending. the most efficient system in the construction and real estate crediting is the union of all the immediate participants of this process. this refers to the merging of structures that are associated with the construction, commissioning and real estate crediting, and also of local authorities who contributed to the construction of residential property, as well as monitored compliance with all regulations. 4. findings one common in ukraine directions of institutionalization mortgage residential real estate market is the creation of institutions such as investment in construction companies. example of a classic investment company is lcd “kyivmiskbud”, which was created in the late xx century. housing company “kyivmiskbud” unites as an effective and efficient mechanism to attract financial resources and an effective mechanism of investment and financing of construction and installation works, as well as to reduce the cost of development of infrastructure, manufacturing of construction materials, provision of transport and lifting means. in our opinion, the establishment of associations institutions operating on the mortgage lending market, will significantly improve the quality, capacity, will reduce construction time, as between financial and industrial organizations of these institutions develop special relationships, which, as a rule, not peculiar to the economy as a whole. the peculiarity of these relations is that such organizations are not subject to the general laws of transformation of the economy that are directly manifest in the fact that credits for real sector of economy are more expensive than the profitability of production in the construction sector. development of associations of manufacturers, builders, financial and insurance companies in the system of housing construction will allow to solve some important problems of the industry of mortgage lending for mass housing that are associated with a particular transitional stage of socioeconomic development of ukraine. it should be noted that today there are many positive factors that significantly affect the development of mortgage lending, however, there are negative. in turn, it’s necessary minimize the negative factors, which significantly reduce the possibility of mortgage lending, and some to eliminate through the development of effective measures on creation of appropriate conditions, namely: reduce interest rates on mortgage loans; extend mortgage loans for construction and purchase of residential property up to 30 years; create a functioning institutional infrastructure which would include intermediary structures, such as realtors and insurance companies on a contractual basis with bank, which provided a customer search for mortgage lending and conducted insurance mortgage loans; improve the legislative and regulatory framework, which would explicitly regulate the mortgage lending market residential properties and contributed to the growth of the construction of a primary residence. it should be noted that in the structure of organizationaleconomic mechanism of mortgage crediting of residential real estate important is the relationship between the bank and the borrower and the bank and the developer, which the process of control the process of financing the loan giving payment of bills of funding for the construction contractors provides bank information to a target use of funds (i.e. contracts for supply of materials, works and services, as well as the reports of subordinates, confirming the presence present materials in a warehouse, etc.) bank developer borrower pic. 1.3. the scheme of financing and control of housing construction note. created by the author baltic journal of economic studies 38 vol. 1, no. 2, 2015 is manifested in the processes of financing and control (pic. 1.3). in our opinion, the most rational scheme that we propose, should be the scheme that includes only direct participants of the mortgage market: the borrower as a direct investor housing lender, i.e. the bank shall credit the applicant for the purchase of housing, and the developer who builds residential facility. the bank acts in a dual role, first is lending to home buyers and secondly in financing of the developer. the bank is in the process of funding should not only finance, but also to exercise control over the use of financial resources. such processes of financing housing construction and control over the use of funds to promote compliance with the construction schedule and minimize level of risk. to ensure an effective mechanism of financing the construction and control functions as for conventional lending, are assigned to the credit division of the bank. it should be noted that in mortgage lending, which involved not only the borrower and the bank, and the developer and other entities, such as insurance companies, construction and transport companies and other business entities, therefore, to ensure effective and efficient mortgage lending residential real estate banking institutions need to extend the study of the demand for residential real estate and lending, while providing their complexity. 5. conclusions in our opinion, the study should be considered as a possible infrastructural division of the developer, and possible home buyers. at the same time allocated indicators such as down payment, loan term and interest rate. note that the initial deposit should be economically justified, based on the cost of the developer, at the stage of the construction and the timetable for construction. another positive aspect of mortgage lending can be providing the borrower with some free services, such as: long-term deposit on favorable terms, notary services, insurance, discounts on bank services, providing services to the bank and the developer, given appropriate training of the borrower and so forth. in addition to the above, it is worth considering the age of the borrower. as practice shows, most need mortgage loans young and wealthy clients. with this purpose, you need also to diversify the types of loans. young people without significant income, applying for social housing, while the wealthy – for luxury housing and placing home in a prestigious area of the city, and also to a smaller house. so, on the basis of the study note that in each embodiment, when bank mortgage lending should apply new forms and methods of mortgage lending, as well as implement the latest technology in the field of providing banking services and lending, especially mortgages. references bazylevych, v. d. (2008). mortgage market – kyiv, p. 214-220. klimko, g. n. (1997). basic economic theory: political economy aspect – knowledge, p. 20; 204-211. lagutin, v. d. (2004). the formation and development of system of mortgage lending. finance of ukraine, no. 1, p. 75-82. the official website of the state mortgage agency. [electronic resource]. – retrieved from: http:// www.ipoteka.gov.ua the official website of the ukrainian national mortgage association. [electronic resource]. – retrieved from: http://www.unia.com александр головень, владимир корнеев совершенствование системы ипотечного кредитования жилой недвижи мости украины аннотация. целью работы является совершенствование системы ипотечного кредитования жилой недвижимости в украине. ипотечное кредитование появилось в украине еще в начале хvii века, на сегодня актуальной проблемой является незначительная доля в банковском портфеле долгосрочных ипотечных кредитов, поскольку банки, с одной стороны, стремятся вращать без риска краткосрочные денежные средства, с другой, потенциальный заемщик этих кредитов, к сожалению, не является кредитоспособным. однако, несмотря на риски, этот банковский продукт является весомым фактором перераспределения и аккумулирования денежных средств, превращение частных сбережений в инвестиционные ресурсы, решение проблемы обеспечения населения жильем, а также способствует стабилизации экономики в стране в целом. функционирование и распределение ипотечного капитала, возможных финансовых рисков, взаимодействия ипотечного рынка по финансовым, инвестиционным и валютным вопросам, обусловливает определенную сложность механизма функционирования ипотечного рынка украины в целом. актуальность данной темы не только в развитии жилищного рынка, но и в целесообразности проведения исследований для развития этого вопроса. мы представляем анализ институциональной среды ипотечного кредитования жилой недвижимости, которая дала возможность выявить и определить среду современного рынка жилой недвижимости, его baltic journal of economic studies 39 vol. 1, no. 2, 2015 взаимосвязь с другими рынками. методология. в основе данного исследования лежит институциональная структура рынка ипотечного кредитования, которая развивалась независимо от других структур, независимо внутри страны под воздействием конкретных социально-экономических условий и экономической политики. результаты исследования показали, что следует учитывать как возможности инфраструктурных подразделений застройщика, так и возможности покупателей жилья. при этом выделяем такие показатели, как первоначальный взнос, срок кредитования и процентная ставка. отметим, что первоначальный взнос должен быть экономически обоснован, исходя из затрат застройщика, на этапе организации строительства и с учетом сроков строительства. ипотечное кредитование может стать предоставление заемщиком некоторых бесплатных услуг, таких как: долгосрочный депозит на выгодных условиях, нотариальные услуги, страхование, скидки на услуги банка, оказывающих услуги банка и застройщика, учитывая соответствующую подготовку заемщика и так далее. практическое значение. как показывает практика, большинство ипотечных кредитов берут молодые и состоятельные клиенты. с этой целью необходимо также диверсифицировать виды кредитов, где молодые люди без значительных доходов, претендующие на социальное жилье, а богатые – на элитное жилье. значение/оригинальность. на основе этого исследования банки ипотечного кредитования должны применять новые формы и методы ипотечного кредитования, а также внедрять новейшие технологии в сфере предоставления банковских услуг и кредитования, особенно ипотеки не только в украине, но и в других развивающихся странах. baltic journal of economic studies 32 vol. 3, no. 4, 2017 corresponding author: 1 department of economics and finance of the enterprise, kyiv national university of trade and economics. e-mail: ganushchak_t@ukr.net dynamics of development of financial safety of the enterprise as a complex economic security of the state tetiana ganushchak1 kyiv national university of trade and economics, ukraine abstract. the purpose of the paper is to the performance of the evaluation of the financial safety of the enterprise. to achieve the stated aim it has been necessary to solve the following tasks: to use the approaches as to the evaluation of the financial safety of the enterprise, to introduce the analysis system of the financial safety of the enterprise, to consider the structural logical scheme of the analysis procedure of the financial safety of the enterprise, to give the description of the integral indicator of the financial safety of the enterprise; to evaluate and compare companies in the paltry industry according to the level of their financial safety. methodology. methodologial basis of the research are the scientific methods, such as : method of logical generalization, dialectical method of recognition of the economic phenomena – to give the definitions of «economic security of the enterprise», «financial security of the enterprise», grouping method, analysis which were used to estimate indicator position of the financial security of the poultry company, graph method which was applied to compare integral estimation of the enterprise;methods of synthesis, deduction, induction, method of the expert estimation to calculate and implement integral marker of the financial security of the poultry company;method of the correlation analysis which was used to identify weight coefficients of the all sided figures of the solvency , business activity, profitability, financial steadiness, pay ability. the priority in methods using was defined by the particular tasks and goals. results of the research showned into a wide set of the ways of financial enterprise safety as a component of economic security of the state. there is an evaluation of enterprise financial safety on the basis of calculations of integral indicator, including combined indices of profitability (unprofitability), pay ability or the lack of that, business activity (fading), financial steadiness (unsteadiness), efficiency (inefficiency) of the property state. finally, the given work presents the system of financial safety of the enterprises, including the agents of financial security and subsystems of management to provide financial safety of the enterprises. practical implications. the given methodology of the integral estimation of the enterprise financial security on the basis of all sided markers of the profitability, financial steadiness , business activity has been implemented successfully into production joint venue ‘kyiv poultry farm’. value/originality calculations are done on the basis of the introduction of the personal formula of the integral estimation of the financial security of the enterprise as a component of economic security of the state key words: enterprise, definition, scheme, financial safety, integral indicator, economic security of the state, profitableness, solvency, business activity, financial steadiness. jel classification: g3, q1 1. introduction financial safety of the enterprise as a component of economic security of the state must be formed and put into operation on the basis of solving the problems, connected with multi factors which enable to control and foresee the modern surrounding for functioning the system of the financial safety of the enterprise. they are also connected with comparison of the dynamics of changes, diagnosis of the state, fast adaptation and taking decisions as to management depending on the spheres of the activity. the main issues in the paltry industry is the absence of the unified method of the evaluation of the financial safety, the unified approach as to the management of the mechanism of the provision of the enterprise financial safety , the authority realization and their deputies and top-managers their insufficient acknowledgement ; the unified mechanism of financial safety evaluation, created on the basis of the research about the peculiarities of the industry; taking into consideration the individuality of a separate firm or company; targeting the customers. the problem of the evaluation of the financial safety as a component baltic journal of economic studies 33 vol. 3, no. 4, 2017 of economic security of the state has been burning nowadays. 2. the lay out of the contents and giving grounds of the research results from the angle of economic targets there are different points of view at to the ‘security’, that is the proper ‘enterprise economic (table 1). economical safety is the core function of the enterprise activity to avoid the destructive processes. (bolbotenko, 2012) one of the main parts of the economical safety is financial safety of the enterprise. let us investigate the approaches as to evaluation of the financial safety of the enterprise (table 2). look at the structural logical scheme of the procedure of the analysis of the financial safety of the enterprise (figure 1). let us look in to the formula of the integral estimation of the financial safety of the enterprise which was calculated by experimental way and looks the following: (ganushchak, 2012) sfse=0,42sr+ 0,49 sp + 0,8 sbа + + 0,43 sfs+ 0,38sps, (1.) where sfs – integral indicator of the financial safety (insafety) of the enterprise; sr – combined indicator of the profitableness (unprofitableness) estimation ; sp – combined indicator of the solvency (insolvency) estimation; sbа – combined indicator of the estimation of the business activity (fading); sfs – combined indicator of the estimation of the financial steadiness (unsteadiness); sps – combined indicator of the effectiveness (ineffectiveness) of the property state. by means of the expert estimation there have been established norm meanings of the integral indicator of the financial safety of the enterprise, as the following: (-5 до 0] – the dangerous financial state of the enterprise; [from 0 to 1] – provision of the low level of the financial safety of the enterprise; [from 1 to 5] – provision of the middle level of the financial safety of the enterprise; [5 and higher] – provision of the high level of the financial safety of the financial safety of the enterprise . table 2 the approaches to the definition ‘evaluation of the financial safety of the enterprise’ author approach o.v. nusinova (nusinova, 2011) to the level of the financial safety of the enterprise the remust be anin fluence the rate of the compensation the loss of the capital value by means of dividend payment to the investors. if the dividend payments are equal or exceeds economical amortization then there is no lowering of the financial safety. if the economical amortization exceeds the sums of dividend payments then there appears debts with owners , which must be taken into consideration while calculate the initial business value on the basis of which the level of the financial safety is defined. biloshkurska n.v. (biloshkurska, 2011) the author suggest evaluating financial economical safety of the enterprise on the basis of the indicator including coefficient of the fund return of the fixed capital, coefficient of the labour productivity, coefficient of the capital-labor ratio coefficient return material coefficient working inventory turnover, coefficient depreciation khrapkina v.v. (khrapkina,2010) the author suggests undertaking the evaluation of the current rate of the financial safety according to the following approaches of the analysis: analysis of the financial reports of the enterprise within its financial manufactory activity, which includes enterprises structure capital analysis, liquidity which includes the analysis of the capital structure of the enterprise, analysis of its pay ability and financial steadiness , the analysis of the expenses, the analysis of the profits and debts, the analysis of the competitive advantages and comparative analysis as to the competitive, the analysis of the assortment of the products, the analysis of the level and quality of the enterprise management. і.і. bilomistna (bilomistna, 2014) the author states that it is a complex process, which includes not only the indicators to make the analysis, but the range of the boundaries in the limits of which the cert in indicator has to be. table 1 approaches to the meaning ‘enterprise economic security’ author approach kopitko n.i. (kopitko, 2015) the complex of means in the system of economic activity aiming the adaptation of the subjects of the socialeconomical relationships towards to changeable outer surrounding, defending the enterprise benefits, preventing inner and outer threats and to using the possibilities with maximum results alkema v.g. (alkema) notion involving many aspects to reflect the certain state and possibilities of the system object. the system of economic security – is the core function of the system which is realized due to a certain collection of the subsystems and elements.the system of the economic security under globalization conditions is complex open hieratic many leveled economic system. author’s approach it’s a complex of economic relations which exist to provide with constant well balanced interests of the enterprise and the state considering inner and outer factors of the influence and floating time. baltic journal of economic studies 34 vol. 3, no. 4, 2017 let’s look into dynamics. integral indicator of the financial safety of the jsc ‘plemptakhodadgosp brovarskiy’in the years of 2008-2016. (figure 2). according to figure 2 it is seen that the integral marker of the enterprise financial security in 2009 as to compare with the year 2012 tended to grow lower , in 2014 the given indicator grew up. in 2010 the indicator grows up, while from 2010 till 2012 the indicator became smaller. figure. 1. structural logical scheme of the procedure of the analysis of the financial safety of the enterprise the source: (petryna, 2010) defining the conditions of the enterprise performance підприємства the calculation of the quality and quantity indicators of the system of the financial security of the enterprise and their analysis crisis situation in the enterprise performance steady enterprise performance detecting and putting into operation methods to neutralize crisis events detecting and putting into operation methods of control and evaluation of the effective measures to guarantee a certain level of the financial security of the enterprise. -1,51 0,66 1,93 0,95 -0,42 1,063 1,31 1,557 1,804 -2 -1,5 -1 -0,5 0 0,5 1 1,5 2 2,5 2008 2009 2010 2011 2012 2013 2014 2015 2016 5,17 10,09 0,26 1,19 -1,46 -3,598 -5,814 -8,03 -10,246 -12,462 -14,678 r² = 0,8222 -20 -15 -10 -5 0 5 10 15 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 figure 2. integral indicator of the financial safety of the jsc ‘plemptakhodadgosp brovarskiy’in the years of 2008-2016 the source: worked out by the author on the basis of the national commission of the securities and stock market data (ukrainian enterprise reports) figure 4. integral indicator of the financial safety of the jsc of ‘kyivska poultry farm’ in the years of 2008-2016 the source: worked out by the author on the basis of the national commission of the securities and stock market data (ukrainian enterprise reports) figure 3. integral indicator of the financial safety of the jsc of thevasylkivska poultry farmin 2008-2016 the source: worked out by the author on the basis of the national commission of the securities and stock market data (ukrainian enterprise reports) 1,27 0,23 0,69 0,36 0,03 -0,189 -0,424 -0,659 -0,894 -1,5 -1 -0,5 0 0,5 1 1,5 2008 2009 2010 2011 2012 2013 2014 2015 2016 from 2013 to 2016 there is an increase in the indicator. let’s see the dynamics. integral indicator of the financial safety of the jsc of thevasylkivska poultry farmin 2008-2016. (figure 3). according to figure 3 integral indicator of the financial safety of the jsc of the vasylkivska poultry farming 2008-2016 it is seen that the this indicator since 2012 to 2016 was negative and in the year of 2016 . in 2018, it is also expected to reduce this indicator. let’s see the dynamics. integral indicator of the financial safety of the jsc ‘kyivska poultry farm’ in the years of 2008-2016. (figure 4). according to figure 4. integral indicator of the financial safety of the jsc of ‘kyivska poultry farm’ in the years of 2008-2016. in 2009, 2010 and 2012 there was a slight fluctuation in production. from 2013 to 2016 this indicator tended to decrease. let’s see the dynamics. integral indicator of the financial safety of the jsc ‘krushynsky paultry complex’ in the years of 2008-2016. (figure 5). according figure 5 integral indicator of the financial safety of the jsc of ‘krushynsky poultry complex’ in the years of 2008-2016. in 2008, compared with baltic journal of economic studies 35 vol. 3, no. 4, 2017 2009, financial security of the company grew. in 2011, compared with 2010, decreased. the positive dynamics was in 2012 and 2013. let’s see the dynamics. integral indicator of the financial safety of the jsc “ukraina poultry farm’ in 2008-2016 (figure 6). according to figure 6 integral indicator of the financial safety of the jsc of “ukraina poultry farm’ in 20082016. there was a dramatic shortage of production in 2009 and 2010. from 2013 to 2016 there is an increase in this indicator. also, it is projected that in 2017 and 2018 there will be an increase in the integral index of financial security of the enterprise. to concordance the calculations of the integral indicator of the financial safety of the enterprise in this economical branch can be presented in the following table. having considered table 3 data it is clear to see that the lowest integral indicator of the financial safety in 2010-2012 in jsc «vasylkivska poultry farm’ and it made up -4,97; -4,26; -2,01; -1,97; 0,26; -1,46 respectively, in 2008 jsc ‘plemptakhodadgosp brovarskiy ’», that is -1,51, in 2009 р. and 2015 р. 0,23; 0,36 respectively. the highest indicator of the financial safety was in jsc ‘krushynsky poultry complex’ in 2010 and it made up 10,01; 9,12; 6,88; 4,43 respectively, in 2008-2012 jsc vasylkivska poultry farm’ that is 5,17; 10,09 respectively, in 2015-2016 jsc ukraina poultry farm’ , that is : 10,763; 11,932 respectively. having considered table 4 data it is clear to see that the 1st place in the financial safety in the years of 2008, 2009 was in jsc ‘krushynsky paultry complex’; in 20112016 was in jsc ukraina poultry farm’, 2010 was in figure 5. integral indicator of the financial safety of the jsc of ‘krushynsky paultry complex’ in the years of 2008-2016 the source: worked out by the author on the basis of the national commission of the securities and stock market data (ukrainian enterprise reports) figure 6. integral indicator of the financial safety of the jsc of “ukraina poultry farm’ in 2008-2016 the source: worked out by the author on the basis of the national commission of the securities and stock market data (ukrainian enterprise reports) 0,91 4,86 4,43 1,56 2,4 2,736 2,704 2,672 2,64 0 1 2 3 4 5 6 2008 2009 2010 2011 2012 2013 2014 2015 2016 5,12 2,58 2,42 4,43 10,04 8,425 9,594 10,763 11,932 13,101 14,27 0 5 10 15 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 таble 3 grouped integral indicator of the financial safety in several enterprises of the poultry industry in the years of 2008-2016 enterprise years 2008 2009 2010 2011 2012 2013 2014 2015 2016 ‘plemptakhodadgosp brovarskiy’ -1,51 0,66 1,93 0,95 -0,42 1,063 1,31 1,557 1,804 ‘vasylkivska poultry farm’ 5,17 10,09 0,26 1,19 1,46 -3,59 -5,81 -8,003 -10,24 ‘kyivska poultry farm’ 1,27 0,23 0,69 0,36 0,03 -0,189 -0,424 -0,659 -0,894 ‘krushynsky paultry complex’ 0,91 4,86 4,43 1,56 2,4 2,736 2,704 2,672 2,64 ‘ukraina poultry farm’ 5,12 2,58 2,42 4,43 10,04 8,425 9,594 10,763 11,932 the source: calculated by the author on the basis of the national commission of the securities and stock market data (ukrainian enterprise reports) table 4 rating estimation of the financial safety of the enterprises in the poultry branch industry enterprise years 2008 2009 2010 2011 2012 2013 2014 2015 2016 jsc ‘plemptakhodadgosp brovarskiy’ 5 4 3 4 4 2 2 2 2 jsc vasylkivskapoultry farm’ 3 5 4 5 3 5 5 5 5 jsc ‘kyivskapoultryfarm’ 4 2 1 2 2 4 4 4 4 jsc ‘krushynskypaultry complex’ 1 1 5 3 5 3 3 3 3 jsc ukrainapoultryfarm’ 2 3 2 1 1 1 1 1 1 baltic journal of economic studies 36 vol. 3, no. 4, 2017 jsc ‘kyivskapoultryfarm’. the last place in the years of 2009, 2011, 2013-2016 was occupied by jsc vasylkivska poultry farm’; in 2008 by jsc ‘plemptakhodadgosp brovarskiy’, in 2010, 2012 by jsc ‘krushynskypaultry complex’. 3. conclusions the scientific results of the given research allow the author to solve the scientific task, which lies in investigation the task and working out necessary provision and giving better methodological and practical steps to the mechanism of the estimation of the financial safety of the enterprise. the research of the estimation of the financial safety of the enterprise has proved that the analysis of the financial safety by the scientists is done from the position of the effective enterprise performance. but it is not taken into account the dangers, which are escorted by financial managerial performance, production fading, non-effective property status, unsteadiness. having analyzed methodological approaches as to the estimation of the financial safety of the enterprise and clarifying a bunch of unsolved tasks, the author suggested the methodology of the analysis on the basis of the calculation of the integral indicator and taking into consideration the scientific method of the systematic analysis. to calculate the integral indicator of the financial safety of the enterprise is important to take in to consideration the combined indicators, which reflect financial state of the enterprise like: effectiveness (ineffectiveness) of the property status, profitability (unprofitability) liquidity, pay ability (non pay ability), financial steadiness (unsteadiness), business activity (fading). there have also been tack led the mechanism of practical calculations of the enterprise financial safety stat which is applicable in case target pursuing and giving the quantitative estimation of the safety in dynamics , comparison, having the rating estimation in a separate branch of production. references: alkema, v.g. theoretical principals in the development of the system of the economic security of the logistics units. [electronic resource]. retrieved from: http://ea.dgtu.donetsk.ua biloshkurska n.v. (2011). the resource component index formation of the economical or ganizational mechanism of the economical safety of the enterprise in cherkassy region, ukraine. notes of chernivtsi tradeand economy university. economical sciences, – chernivtsi. issue 4(44): 154-158. bilomistna і.і. (2014). estimation of the financial safety state on the basis of economy-mathematical modelling, science notes of kherson state university. – issue 4: 28-32. bolbotenko, i.v. (2012). the system forming factors of the economic security of the audition activity subjects. science notes of krok university, vol. 32, issue 1: 170-180. ganushchak т.v. (2012). the provision mechanism of the financial safety in poultry industry, thesis: 21.04.02. к., 22 p. khrapkina v.v. (2010). estimation of the level of the financial safety of the enterprise. – chernivtsi. issue.4(44): 191-194. kopytko, m.i. (2015). all sided provision with economic security of the enterprise: theses notes.: 21.04.02. к., 478 p. nusinova o.v. (2011). estimation of the financial safety of the enterprise. on the basis of owners’ interests, academical review. – issue2 (35): 60-64. petryna о.b. (2010). methodology of the estimation of the financial safety of the enterprise., science notes of the national timber technology university. issue 12: 229-237.20. ukrainian enterprise reports [electronic resource]. retrieved from: http://smida.gov.ua/ (date of revision 06/10/2017). татьяна ганущак динамика развития финансовой безопасности предприятия как составляющей экономической безопасности государства аннотация. целью данной статьи является оценка эффективности финансовой безопасности предприятия. для достижения поставленной цели необходимо было решить следующие задачи: использовать подходы к финансовой безопасности предприятия, внедрить систему анализа финансовой безопасности предприятия, дать описание интегрального показателя финансовой безопасности предприятия; оценивать и сравнивать компании в соответствии с уровнем их финансовой безопасности. методология. методическую основу исследования составляют общенаучные методы, а именно: методы логического обобщения, диалектический метод познания экономических явлений – для определения содержания понятий «экономическая безопасность предприятия», «финансовая безопасность предприятия»; методы группировки, анализа использовались для оценки индикаторного состояния финансовой безопасности предприятий птицеводства; baltic journal of economic studies 37 vol. 3, no. 4, 2017 графический метод применялся для сравнения интегральной оценки финансовой безопасности предприятия; методы синтеза, индукции, дедукции, метод экспертных оценок использовались для расчета и внедрения интегрального показателя финансовой безопасности предприятий птицеводства; метод корреляционного анализа применялся для определения весовых коэффициентов комплексных показателей имущественного положения, деловой активности, рентабельности, финансовой устойчивости, платежеспособности. приоритетность использования того или иного метода определялась конкретной задачей и поставленной целью. результаты исследования показали широкий набор способов финансовой безопасности предприятий как компонент экономической безопасности государства. существует оценка финансовой безопасности предприятия на основе расчетов интегрального показателя, в том числе комбинированных показателей прибыльности (убыточности), платежеспособности или ее отсутствия, деловой активности, финансовой устойчивости (неустойчивости), эффективности (неэффективности) состояния собственности. наконец, данная работа представляет собой систему финансовой безопасности предприятий, в том числе агентов финансовой безопасности и подсистем управления для обеспечения финансовой безопасности предприятий. практическая значимость. подтверждением практического значения полученных результатов является использование методики оценки финансовой безопасности предприятий с учетом комплексных показателей рентабельности, финансовой устойчивости, деловой активности и имущественного состояния была эффективно внедрена в производственный процесс ооо «птицефабрика киевская». baltic journal of economic studies 165 vol. 3, no. 4, 2017 corresponding author: 1 department of economics and management, odesa i.i. mechnikov national university. e-mail: evgenmaslennikov@ukr.net 2 department of economics and management, odesa i.i. mechnikov national university. e-mail: nlenskaya96@mail.ru theoretical aspects of state regulation of national macroeconomic environment yevgen maslennikov1, nataliia lenska2 odesa i.i. mechnikov national university, ukraine abstract. the question of the economic role of the state was put up for a long time and until now every state solves this problem in different ways and only for itself, on the basis of the accumulated experience taking into account its customs and traditions. the objective need to include the state in the economic process is determined by such factors as: the need to ensure public reproduction on an extended scale, ensuring the long-term interests of the population, maintaining the balance of socio-economic interests of different population groups in the country, ensuring the unity and integrity of the country's territorial space. for this reason, the purpose of the paper is to examine the main theoretical aspects of state regulation of the economy in historical retrospect and at the present stage of the development of society. methodology. methodological and informational basis of the investigation are scientific articles, materials of periodicals, resources of the internet. to achieve the goal set, the following general scientific and special methods were used: morphological analysis, system and structural-logical analysis, formalization, analogy, comparison and integration, tabular method. results. as a result of the research, scientific and theoretical grounds for state regulation of national macroeconomic environment were presented; forms and methods of state regulation, programming as a form of perspective state regulation and principles of economic planning were considered in more detail. practical implications. the considered forms of state regulation are relevant in the current conditions of management and can be applied by states in accordance with the level of economic development. value/originality. the authors presented innovative forms of state regulation methods, and analyzed their effectiveness. key words: state regulation, regulated economy, management, national macroeconomic environment, economic development, forms of intervention, programming, planning. jel classification: b300, h100 1. introduction the objective need for conscious regulation of the entire social economy is not just obvious, its realization has become a fact of the economic life of all developed countries with market economy. the entire experience of state regulation of national macroeconomic environment, the functions of the state in ensuring social and economic stability in society, and scientific and technological progress demonstrate that it is not just a matter of the impact on the course of reproduction that has occurred before, but of a new type of management when the entire public economy is consciously and constantly regulated. a fundamental conclusion about the need for such regulation was made at the end of the last century. however, if we take a look at the economy of developed capitalist countries, then only in recent decades it has been confirmed by the whole practice of regulating economic life, regardless of the doctrines proclaimed by the proponents of liberalism or keynesianism. 2. evolution of theories of state regulation the history of state regulation dates back to the end of the middle ages (mid-17th century). the main economic school was the school of mercantilists. it proclaimed active intervention of the state in the economy. mercantilists argued that the main indicator of the country’s wealth is the amount of gold. in this regard, they called for encouraging exports and curbing imports (didkivska, 2013). the next stage in the development of ideas about the role of the state is a. smith’s work “an inquiry into the nature and causes of the wealth of nations”, in which he argued that “the free play of market forces” (the “laissez faire” principle) creates a harmonious arrangement”. in accordance with the classical approach, the state must ensure the safety of human life and its property, resolve disputes, in other words, do what the individual either cannot do on his own, or does it inefficiently. in his description of the system of market economy, baltic journal of economic studies 166 vol. 3, no. 4, 2017 a. smith argued that ithe main driving force of economic development is the entrepreneur’s desire to achieve his private interests, ultimately increasing the welfare of both himself and society as a whole. the main thing was that for all business entities the basic economic freedoms should be guaranteed, namely: freedom to choose the sphere of activity, freedom of competition and freedom of trade. in the 1930s, after the deepest recession in the us economy, j. keynes put forward a theory in which he refuted the views of the classics on the role of the state. keynes’s theory can be called “crisis”, as he considers the economy in a state of depression. according to his theory, the state should actively interfere with the economy, since the free market lacks mechanisms that would truly ensure the economy’s exit from the crisis. the state should influence the market in order to increase demand, since the cause of capitalist crises is the overproduction of goods. keynes proposed several instruments: a flexible monetary policy, a new fiscal policy (didkivska, 2013). flexible monetary policy allows to step through one of the most serious barriers – inelasticity of wages. this is achieved by changing the amount of money in circulation. with an increase in the money supply, real wages will decrease, which will stimulate investment demand and employment growth. by the means of fiscal policy, keynes recommended the state to increase tax rates and finance these unprofitable enterprises at the expense of these funds. this will not only reduce unemployment, but will also relieve social tension. the main features of the keynesian regulatory model are: – the high share of national income, redistributed through the state budget; – creation of an extensive zone of state entrepreneurship on the basis of the formation of state and mixed enterprises; – wide use of budgetary and fiscal regulators to stabilize the economic environment, smoothing cyclical fluctuations, maintaining high growth rates and high level of employment. the keynesian model could be sustained only under conditions of high growth rates of the economy. however, in the 1970s the conditions for reproduction deteriorated sharply. the law of phillips was disproved, according to which unemployment and inflation cannot grow simultaneously. the keynesian ways out of the crisis have only untwisted the inflationary spiral. as a result of crisis, a radical restructuring of the system of state regulation took place and a new, neoconservative model of regulation developed. the theoretical basis of the neoconservative model was the concept of the neoclassical direction of economic thought. the transformation of the model of state regulation was the rejection of the impact on reproduction through demand, instead it was assumed that indirect measures of influence on supply would be used. proponents of the supply economy consider it necessary to recreate the classical mechanism of accumulation and revive the freedom of private entrepreneurship. economic growth is seen as a function of capital accumulation. it is carried out through two sources: own funds, that is the capitalization of part of the profit, and borrowed funds (loans). therefore, in accordance with this theory, the state must provide conditions for the process of capital accumulation and increase of labor productivity. the main barriers on this way are high taxes and inflation. high taxes limit the growth of investment, and inflation increases the cost of credit and thus makes it difficult to use borrowed funds for accumulation. therefore, neoconservatives proposed the implementation of anti-inflationary measures based on recommendations of monetarists and granting tax benefits to entrepreneurs (didkivska, 2013). reduction of tax rates will reduce the revenues of the state budget, increase its deficit, which will complicate the fight against inflation. this means that the next steps will be: reduction of government expenditure, refusal to use the budget to support demand and implementation of large-scale social programs (this may include the policy of privatization of state property). the next set of measures is the implementation of the policy of deregulation. this means elimination of regulations on prices and wages, liberalization (mitigation) of antitrust legislation, deregulation of the labor market. thus, the historical experience of the functioning of a consciously regulated type of social economy shows that its formation takes place within the framework of global trends in the change of types of social economy and appears in diverse forms. 3. functions of state regulation the stable functioning of market economy assumes that the state realizes its economic role by means of a corrective, regulating distribution processes, stabilization function and the function of creating legal conditions for economic activity (sokolovska, 2016). realizing the corrective function, the state carries out two main tasks: – adjusts the results of market processes; – provides the production of “public goods”. another important function of the state is the regulation of distribution processes occurring in the market system. in this case, the aim of state intervention is, as a rule, to reduce the difference in income and property between individual entities, which is determined by the operation of the market mechanism. baltic journal of economic studies 167 vol. 3, no. 4, 2017 stabilization function. instruments of fiscal policy are actively used by the modern state to ensure: – conjunctural stability; – high level of employment; – counteraction to inflationary processes. this policy has received the title of “fiscal” in the western economic literature and comes down to the following three basic principles: – if there is underemployment due to insufficiently high demand, then the latter should be increased by appropriate changes in budget expenditures and incomes (expansive budget policy); – if there is an increase in the price level (inflation), then government revenues and expenditures should be applied in such a way that the result would be a decrease in aggregate demand (counteractive budget policy); – if there is full employment with a stable price level, then public finance should be used in such a way that aggregate demand would remain unchanged (neutral budget policy). 4. forms of state regulation of the economy in the process of creating general legal conditions for economic activity, the state determines the forms and property rights, the conditions for concluding contracts and business agreements, the organizational and legal framework for the operation of enterprises, the rules for the operation of financial and credit institutions, and others. besides, social regulation is one the most important directions: legislative regulation of the minimum wage, working conditions at enterprises, social insurance and social security issues (guaranteed minimum, social assistance to the poor), relations within the framework of collective agreements. considering the form as an external expression of the content of state regulation, it is possible to single out such basic forms as law-making, support, stimulation, legalization, regulation and coordination. the essence of these forms, expressed through the activities of public authorities, is presented in table 1. table 1 main forms of state regulation and their essence no. form of state regulation the actions of public authorities in the implementation of regulatory forms 1 law-making development of state laws, local laws and other regulatory legal acts 2 support assistance to business entities 3 stimulation incentive activities in the involvement of various subjects into the economy 4 legalization granting permission for any activity to organizations, enterprises, institutions and individual entrepreneurs 5 regulation determination of the rules, defining an order of any activity 6 coordination organization of interaction, coordination of actions of various subjects in solving common problems state regulation is the process of state orientation of the reproduction of social capital, organized by a monopolized competitive-market mechanism in the direction of the envisaged variant of movement and development (malynovskyi, 2010). this definition does not exclude that at some points the state impact on the economy can be very tough, quite directive, and sometimes close, in fact, to management. let us point out the main forms of state intervention in the economy. first of all, it is important to distinguish the main forms: direct intervention, indirect intervention and economic programming. direct intervention. in all industrialized countries there is a more or less significant public sector of the economy. its dimensions can serve as a criterion for the economic role of the state, although this criterion is not absolute. the state has the capital in a variety of forms, provides loans, takes equity participation, is the owner of enterprises. this makes the state a co-owner of a part of the social capital. direct intervention of the state is the adoption of legislative acts designed to streamline and develop relations between all elements of the market system. examples of state regulation of the economy through the development of legislative acts are extremely diverse, for example, the adoption of the civil code, the tax code, laws against restrictive business practices (antitrust laws). indirect intervention assumes the implementation of state regulation by the use of main instruments of state economic policy, which are fiscal and monetary policy. economic programming is the highest form of state intervention in the process of reproduction, which is carried out on the basis of agreements between the state and monopolies. it includes: compiling forecasts for the development of the economy for the forthcoming period; the definition of the most common goals of economic policy for the entire economy as a whole; coordination of the entire state apparatus in the implementation of the planned program (malynovskyi, 2010). these directions of the state policy are closely connected with each other. 5. main methods of regulation considering the essence of state regulation of the economy, it is necessary to consider the problem of regularity. achievement of regularity presupposes the operation of a certain mechanism. first of all, the state should have some tangible and intangible resources of regulation that are means that can be used to implement these goals. among them there are public finances, the public sector of the economy, legislative law and a possibility of collecting and processing information. baltic journal of economic studies 168 vol. 3, no. 4, 2017 the practical and purposeful application of these means requires certain tools – methods of regulation. these methods can be classified as follows: – management of state property; – methods of economic influence – government consumption, social spending, fiscal policy, taxation, – regulation of monetary circulation and granting of credits, financing, financial selective regulation; – methods of administrative and economic influence – control over the credit system, income, pricing, contracts, “built-in stabilizers”; – methods of administrative influence carried out by introducing legislative or administrative restrictions that do not affect the movement of cost factors; – methods of information influence, as well as state economic legislation and inspection (hrynova, 2015). 6. programming as an innovative form of state regulation programming is one of the concrete forms, first of all, of long-term regulation, and therefore it can be defined as the process of organizing of production development by the state by means of regulatory and complex influence on its structure in accordance with the envisaged option of social and economic development and economic strategy. the programming of the economy is understood as the scheduling of an activity plan in which, in a certain sequence, the main economic objectives and goals set by the government are stated, and actions for economic development are defined (fig. 1). the concept of economic development comprehensive program industry program target program regional program fig. 1. main stages of programming being the most developed and generalizing form of regulation, programming does not shun the current influence on the economy. programs cannot provide the current regulation itself, but it is possible to outline a concept of economic policy, including tactical moments. programs may contain even some quantitative benchmarks for market regulation. we must not forget that the current regulation serves, anyway, the implementation of the prospective. the mixed form of regulation, known under the title of stabilization plans, adjoins programming, by means of which both perspective and current tasks are solved to maintain the balance of production, its more even dynamics. at its basis, stabilization plans belong to the market regulation (kruhliak, 2014). but to the extent that they serve to combat structural imbalances, they can be considered both as a form of structural regulation, and, consequently, as an element of the programming system. it should be noted that only some private programs and stabilization plans are subject to mandatory implementation, but their implementation can be stopped at any time. as for medium-term plans and economic budgets, they are recommendatory in nature and their implementation is not strictly mandatory. 7. application of the planning mechanism in the practice of state regulation planning is the most important tool of the economic mechanism. planning is a concrete form of realizing the objective need for coordinated, balanced development of all sectors and regions, all spheres of social reproduction. the need for planning on the scale of the entire economic system increases with the increase in the level of socialization of production and labor, the formation of a unified national economic complex, in which production, distribution, exchange and consumption are organically linked throughout the country. planning is a form of using the entire system of economic laws. planning allows to develop harmoniously all sectors of the economy, to use the material, labor and financial resources of the country rationally, to establish optimal inter-industry and intra-industry proportions, to locating the productive forces rationally in order to achieve greater economic efficiency of social production (kondratov, 2014). in the planning process, the interests of social stratum and groups (workers in different spheres and sectors, children, youth, older people), as well as regional and federal features are taken into account and interrelated. objectivity belongs to the key principles of planning. to realize the principle of objectivity means to improve the planned activity of central economic bodies, to direct the entire planned work. in planning, coordination of national, cross-sectoral, sectoral and regional approaches is needed. the country’s economy is developing a system of plans. it includes a unified plan for economic and social development of the country, sectoral and regional plans. any plan includes the following components: – goals and objectives, which, eventually, are the satisfaction of social needs; – ways and means to achieve the goals; – resources needed to solve planned tasks; baltic journal of economic studies 169 vol. 3, no. 4, 2017 – proportions, ensuring a balance in the development of the economy. a component of the planning activity is the practical work on its implementation and monitoring the implementation of the plan. the development of the plan is preceded by the stage of forecasting, when conditions, paths and tasks of the future development of the economy are revealed (fig. 2). main components of the plan resources principles goals objectives directions methods fig. 2. main components of the plan planning is based on the principles of objectivity, continuity, scientific character, political approach, a combination of sectoral and territorial. the principle of scientific validity of regularities of the development of material and technical base, of necessary structural changes and trends in economic transformations provides the basis for identifying the urgent needs, their scales, ways and the real possibilities of satisfaction. the principle of a political approach to the formation of planned installations is aimed at real transformation of economic planning into a factor that ensures the achievement of the fundamental goals of society. economic policy, being a reflection of progressive changes, takes precedence over a purely economic approach in planning. the principle of the targeted approach in planning is designed to ensure a meaningful unity of the plans made. it reflects, on the one hand, the multifaceted nature, the interdependence of economic processes, and on the other hand, their subordination, ultimately, to one common strategic goal. the principle of continuity of planning is aimed to ensure the interdependence of plans in time. it reflects the continuity of the economic processes themselves, expressing the progressive development of the economy. it is the temporary continuity of economic processes that makes it necessary to develop a system of plans that ensure the continuity of planning. the principle of combining sectoral and territorial planning reflects the need to ensure the integrated development of all regions of the country, the use of the funds of enterprises in this process, located in a particular region. the value of the optimal combination of the sectoral and territorial aspects of the plan is substantially increasing in modern conditions. one of the most important tasks of planning is to ensure the balance and constant support of proportionality in the development of the economy. this determines the special importance of the balance method in planning. 8. conclusions the conducted analysis has shown that, at different stages in the development of economic thought and the world economy, the problem of state regulation was mainly solved empirically and came down to a research of several aspects: analyzing the object of state regulation, determining the optimal combination of regulatory instruments, determining the role of the state in the economic system, searching effective way of distribution the powers between state institutions. w hen carrying out economic policy it is important to remember that both the state and the market are the great achievements of civilization. the market cannot function normally without the state that sets and maintains the “rules of the game” in the market economy. but there are also objective limits of state intervention. the market and the state are two powerful forces that do not oppose each other, but complement each other in the course of economic development. references: hrynova v.m. (2015). derzhavne rehuliuvannia ekonomiky. – kyiv: znannia, 398 p. didkivska l.i. (2013). derzhavne rehuliuvannia ekonomiky. – kyiv: znannia, 213 p. malynovskyi v.i. (2010). derzhavne upravlinnia. – kyiv: atika, 576 p. maslennikov y., balan o., selivanova n. (2017). identifying areas and components of the management decisions for small industrial enterprises the second and third group of simplified tax system. – marketynh i menedzhment innovatsii. № 3, p. 257-266. maslennikov y.i., yakubovskyi s.o., beliakova v.v. (2017). pryntsypy derzhavnoho rehuliuvannia natsionalnoi ekonomiky v umovakh hlobalizatsii. – visnyk odeskoho natsionalnoho universytetu. seriia: ekonomika. № 2(55), p. 65-69. kondratov o.m. (2014). suchasni tendentsii rozvytku derzhavnoho rehuliuvannia ekonomiky v ukraini. – ekonomika ta derzhava. №3, p. 61-65. kruhliak a.m. (2014). rol derzhavy v pidvyshchenni efektyvnosti antykryzovoho upravlinnia ekonomikoiu. – derzhava ta rehiony. №6, p. 98-109. baltic journal of economic studies 170 vol. 3, no. 4, 2017 poberezhets o.v. (2016). teoretyko-metodolohichni ta praktychni zasady doslidzhennia systemy upravlinnia rezultatamy diialnosti promyslovoho. – kherson: hrin d.s., 500 p. sokolovska a.m. (2016). ekonomichna funktsiia derzhavy ta osoblyvosti yii vykonannia v ukraini. – ekonomika ukrainy. №3, p. 33-37. евгений масленников, наталия ленская теоретические аспекты государственного регулирования национальной макроэкономической среды аннотация. вопрос об экономической роли государства был поставлен еще давно и до сих пор каждое государство решает эту проблему по-разному и только для себя, на основе накопленного опыта с учетом своих обычаев и традиций. объективная необходимость включения государства в экономический процесс определяется такими факторами, как: необходимость обеспечения общественного воспроизводства в расширенном масштабе, обеспечение долговременности интересов населения, поддержание баланса социально-экономических интересов различных групп населения в стране, обеспечение единства и целостности территориального пространства страны. по этой причине целью работы является рассмотрение основных теоретических аспектов государственного регулирования экономики в исторической ретроспективе и на современном этапе развития общества. методология. методологической и информационной основой работы являются научные статьи, материалы периодических изданий, ресурсы сети интернет. для достижения поставленной цели были использованы следующие общенаучные и специальные методы: морфологического анализа, системного и структурно-логического анализа, формализации, метод аналогии, сравнения и интегрирования, табличный метод. результаты. в результате исследования были представлены научно-теоретические обоснования государственного регулирования рыночной экономики; более подробно рассмотрены формы и методы государственного регулирования, программирование как форма перспективного государственного регулирования и принципы планирования экономики. практическое применение. рассмотренные формы государственного регулирования актуальны в современных условиях хозяйствования и могут быть применены государствами в соответствии с уровнем экономического развития. ценность/оригинальность. авторами были представлены инновационные формы методы государственного регулирования, и проанализирована их эффективность. baltic journal of economic studies 231 vol. 3, no. 4, 2017 formation of financial security of the enterprise based on strategic planning nadiya rushchyshyn1 lviv university of trade and economics, ukraine uliana nikonenko2 ukrainian academy of printing, ukraine zoryana kostak3 lviv university of trade and economics, ukraine abstract. the purpose of the study is to improve ways of forming financial security of the enterprise based on strategic planning. the subject of the research: formation of financial security of the enterprise on the basis of strategic planning. the methodological background of the research is a set of theoretical and general scientific methods: analysis and synthesis, theoretical and logical generalization, grouping, abstraction, and others. the paper provides a general description of the core approaches defining the concept of “financial security of the enterprise”. functional goals of financial security of the enterprise are outlined, namely: ensuring financial stability and independence; achievement of high competitiveness in the market of goods, works, services; ensuring high efficiency of financial and economic activity; ensuring high liquidity of assets, and increasing the market value of the enterprise; support for the appropriate level of business activity and image; formation of information security and commercial secrets; efficient organization of security of share capital and assets of the enterprise. the scheme of organization of financial security organization is considered based on strategic planning. it is determined that the strategic planning results in strategic plan (strategy) for ensuring the financial security of the enterprise. such a strategy should be consistent with both financial and the company’s overall strategies, as well as main goals and objectives. for the most effective implementation of the chosen financial security strategy at the enterprise, it is expedient to develop and implement a system of plans covering all aspects of the strategic planning process, including the target program, strategic, tactical, calendar, and individual plans. the system of plans should specify: the purpose of changes in the functioning of internal systems of the enterprise; terms of making changes; the work that needs to be done to make changes; their performers; necessary material, labour, and investment resources. when ensuring the financial security of the company, a special attention should be paid to the innovative development of the enterprise. the basis for the innovative development of an enterprise is the innovation potential, its formation and utilization in innovation activity. the algorithm of the strategic tasks ensuring the innovative financial security of the enterprise is proposed. the correlation between financial security and innovative development of the enterprise is explored, which is dual in nature, where both phenomena serve as the purpose of the enterprise and means of its achievement. conclusions. strategic planning at the enterprise, which is the basis for ensuring its financial security, will facilitate the creation of all opportunities for further financial and economic activity with positive results. at the same time, strategic planning should be based on the use of a number of measures: increase of the innovative and intellectual potential of the enterprise; use of advanced international experience in the management of material, labour, and financial resources of the enterprise; raising the skills of employees, etc. further research should be aimed at developing and implementing an effective innovation policy that can provide long-term competitiveness of domestic enterprises and increase their financial security. key words: enterprise, financial security of enterprise, strategic planning, innovative development of enterprise. jel classification: d21, j28, m21 corresponding author: 1 department of financial and economic security and banking business, lviv university of trade and economics. e-mail: nadiya_r@i.ua 2 department of financial and economic security, accounting and taxation, ukrainian academy of printing. e-mail: uliana-nikonenko@ukr.net 3 department of financial and economic security and banking business, lviv university of trade and economics. e-mail: kostakz@ukr.net baltic journal of economic studies 232 vol. 3, no. 4, 2017 1. introduction successful business activity depends to a large extent on the positive results of their activities, which cannot be achieved without proper financial security. it is the latter, in the changing conditions of the external and internal environment, serves as the background for the stable activity of enterprises, providing them with sufficient financial independence and allows them to withstand real and potential risks and threats. in view of the above, the chosen topic is relevant and requires further research in the direction of activating the role of strategic planning of business entities in shaping their financial security. the purpose of the paper is to improve the instruments ensuring the financial security of the enterprise based on strategic planning. to achieve the goal of research, the following tasks are set and fulfilled: to examine the economic essence of the notion “financial security of the enterprise”; to define the main functional goals ensuring the financial security of the enterprise; outline the sequence of activities in the process of organizing the financial security of the enterprise; to explore the correlation between financial security and innovative development of the enterprise; to propose an algorithm for the implementation of the strategic tasks of innovative financial security. the paper uses theoretical and general scientific methods of research: analysis and synthesis, generalization and abstraction, and others. 2. the economic essence of the concept of “financial security of the enterprise” in modern economic conditions, characterized by a lack of financial resources of enterprises and organizations and the weakening of their liquidity, the intensification of competition between domestic enterprises for the markets of their products, reducing the purchasing power of the population due to the presence of inflationary processes, etc., both among scientists and managers of domestic enterprises raise their attention to ensure an effective system of financial security of the enterprise. we believe that a key role in its formation should be given to strategic planning, which in the long run will ensure a sustainable process of enterprise development on an efficient and stable basis. in the domestic scientific literature, the financial security of the enterprise is considered as the dominant component of the economic security, on which depends the effective financial and economic activity of the business entity. k. goryacheva believes that “financial security is a financial condition characterized by, firstly, the balance and quality of the combining financial instruments, technologies and services used by the enterprise, and secondly, the resilience to external and internal threats, third, the ability of the financial system of the enterprise to ensure the realization of its financial interests, goals and objectives with sufficient amounts of financial resources” (goryacheva, 2004). according to lavrov y.v., “the essence of financial security of enterprises is the ability to independently develop and implement a financial strategy in accordance with the objectives of the overall corporate strategy, in an uncertain and competitive environment” (lavrova, 2010). from the standpoint of t. b. kuzenko, “financial security can be defined as the state of the most efficient use of information, financial indicators, liquidity and solvency, return on capital, within its limits” (kuzenko, 2013). we can also agree with the scientists (buryak p., chalapko l. (2014), koknayeva o. (2013)) who believe that financial security represents a state of the enterprise that allows ensuring financial equilibrium, stability, solvency, and liquidity of the enterprise in the long run; satisfies the needs of the enterprise in financial resources for the sustainable expansion; ensures sufficient financial independence; allows resisting existing and emerging dangers and threats that can cause financial damage to the enterprise, or undesirable change in the structure of capital, or forcing the company to liquidate; provides sufficient flexibility when making financial decisions; ensures the protection of the financial interests of the shareholders. in our view, the most thorough definition of financial security leads i. blank: “the financial security of an enterprise is a quantitatively and qualitatively determined level of its financial status, which ensures the stable protection of its priority balanced financial interests from identified real and potential threats of external and internal character, parameters, which are determined on the basis of the financial philosophy and create the necessary conditions for financial support for its steady growth in the current and prospective periods. therefore, the financial security of the enterprise is a dynamic feature of financial condition, which reflects its resilience to internal and external threats, the ability to sustainable and balanced development and to protect their financial interests” (blank, 2004). a generalized description of the main approaches to the definition of the essence of the “financial security of the enterprise” concept in the scientific literature is presented in table 1. 3. the process of financial security of the enterprise organization the main functional objectives of financial security of the enterprise organization should be: ensuring financial stability and independence; ensuring high efficiency of financial and economic activity; achievement of high competitiveness in the market of goods, works, services; baltic journal of economic studies 233 vol. 3, no. 4, 2017 ensuring high liquidity of assets and raising the market value of the enterprise; support for the appropriate level of business activity and image; formation of information security and business secrets; effective organization of security of own capital and property of the enterprise. the main functional objectives predetermine the separation of the necessary structural elements and the general scheme of financial security of the enterprise organization. the general scheme of the organization of financial security process covers the following measures, carried out consistently or simultaneously (fig. 1). table 1 interpretation of the notion “financial security of the enterprise” in the scientific literature author year definition arafeev v. 2010 the financial security of the enterprise is protection against possible financial losses and prevention of bankruptcy of the enterprise, achievement of the most effective use of corporate resources. buryak p., chalapko l. 2014 financial security represents a state, in which the company: is in a financial equilibrium, provides stability, solvency, and its liquidity in the long-term period; satisfies the need for financial resources for the sustained, extended reproduction; provides sufficient financial independence and protection of financial interests of the owners of the enterprise. koknaeva о. 2013 financial security defines the boundary condition of financial stability, which should be an enterprise for the implementation of its strategy, characterized by the ability of the company to withstand internal and external threats. кuzenko т. 2013 financial security is a state of the enterprise, which: 1) provides for financial equilibrium, stability, solvency, and liquidity in the long run; 2) ensure sufficient financial independence; satisfies the needs of the enterprise in financial resources for the sustained, expanded reproduction; 3) is able to withstand the existing and emerging dangers that seek to cause financial harm to the enterprise or to change in spite of the desire of the structure of own capital, or to forcibly liquidate an enterprise; 4) provides sufficient flexibility in making financial decisions. kovalchuk n., korbutiak а. 2014 financial security – the state of the most effective use of corporate resources of the enterprise, expressed in the best value of financial indicators of profitability and profitability of the business, quality of management, use. source: compiled by the authors based on (arefiev v. (2010), buryak, p., chalapko l.( 2014), kuzenko t., poltinina o. (2013), kovalchuk n., korbutiak a. (2014)) formation of the necessary financial resources general strategic forecasting and planning of financial security of the enterprise strategic planning of enterprises’ business general tactical planning of financial security tactical planning of enterprise’s business activity operational management of enterprises’ business activity conducting functional analysis of the financial security level general valuation of achieved level of financial security fig. 1. the general scheme of the process of financial security of the enterprise organization based on strategic planning source: (buryak p., chalapko l. (2014)) baltic journal of economic studies 234 vol. 3, no. 4, 2017 the result of strategic planning is a strategic plan (strategy) to ensure the financial security of the enterprise. such a strategy should be consistent with both the financial strategy and the overall strategy of the enterprise, to meet their goals and objectives. the strategy of ensuring the financial security of an enterprise should be considered as a model required for achieving certain goals within the framework of the corporate and financial strategy by coordinating, distributing and using financial resources of the enterprise in order to ensure an adequate level of financial security of the enterprise. the strategy defines the component (part) of the corporate mission and its objectives relating to financial security, results of the analysis of the internal and external financial environment, qualitative and quantitative parameters of the use of financial resources that meet the requirements of ensuring an adequate level of financial security, responsible for the implementation of the planned measures, the amount and sources of financial resources (budget) needed to ensure the financial security of the enterprise. when implementing the process of organization of financial security of an enterprise based on strategic planning, it is required to consider the following most important factors: the level of financial security and its characteristics; the state of the life cycle of the enterprise development; risks and threats within the internal and external environment and their changes; financial and economic opportunities of the enterprise; market conditions; modification of actions of subjects of the institutional environment in trade, etc. it should be noted that the configuration of policy measures to ensure the financial security of an enterprise is determined by the presence and features of external and internal threats to its activities. only due protection against negative factors and threats creates preconditions for increasing the efficiency of resource utilization and financial and economic activities in general. in this aspect, it is also important to monitor factors that pose a threat to financial security, since it is the basis for identification of threats and protection of the enterprise from internal and external risks stage 1 identification of the company’s access to financial, labour, and market opportunities achievement of the minimum acceptable financial efficiency of the use of resource support ensuring an adequate level of financial and economic efficiency of the enterprise strengthening financial stability, profitability, and solvency of the enterprise development of innovative and intellectual-personnel provision of financial security of the enterprise ensuring the development of the technical and technological base of the enterprise on the basis of innovative developments and best practices execution of mission and tasks at the appropriate stage of the life cycle, the creation of prerequisites for the successful innovative development of the enterprise stage 2 stage 3 stage 4 stage 5 stage 6 stage 7 stage 8 fig. 2. the algorithm of tasks of the strategy of innovative financial security of the enterprise source: developed by the authors baltic journal of economic studies 235 vol. 3, no. 4, 2017 its implementation. monitoring should become an important component of shortand mediumterm forecasting and development of a strategy for strengthening the financial security of the enterprise within the framework of its economic development policy (koknayeva, 2013). competitive position, as well as the innovative potential of the enterprise, impact the choice of strategy for strengthening financial security. after all, the ability to function is stably achieved at the expense of competitive advantages, that is, a set of innovative factors and parameters that ensure the identification and selection of the company from the total number of competitors and enable the ability to successfully develop in modern conditions. in order to successfully implement the strategy of innovative financial security of the enterprise, one must adhere to a clear algorithm of action, which is proposed in fig. 2. proposed in fig. 2 set of measures reflects not only the sequence of tasks’ implementation within the framework of the implementation of innovative financial security strategy but also determines the hierarchy of their importance (priority). the most important point in shaping the strategy of innovative financial security of the enterprise is to analyse the real and potential threats to the macro and micro environment. macro threats – high inflation in the country; low purchasing power of the population; unfavourable investment climate; imperfection of economic legislation, its instability; high level of tax rates; fluctuations in exchange rates, etc., and threats to the micro-environment may include threats from thirdparty suppliers of products, competitors, consumers, state and local authorities, etc. in order to prevent negative consequences in the form of threats to financial security, enterprises should consider in advance about the choice of measures and methods that will ensure the detection of a risky situation and will enable the elimination of its causes at the very beginning. in our opinion, for domestic enterprises, the most effective methods of managing risks and threats are their minimization, insurance, and diversification. 4. an innovative component in the formation of financial security of the enterprise when forming the financial security of the company, a particular attention should be paid to the innovative development of the enterprise. the basis of innovation development of an enterprise is the innovation potential, its formation and use in innovation activity. based on the balance sheet principle, three key components of the innovative development of the enterprise can be distinguished: financial, material, and intellectual, which are in cyclic interconnection and interdependence. the same components are projected onto the innovative development potential of an enterprise and provide it with effective development in the current and long-term periods. the connection between financial security and the innovative development of the enterprise is dual in nature, where both phenomena serve as the purpose of the enterprise and the means of its achievement. financial security, on the one hand, is a necessary prerequisite and a definite reflection of the innovative development potential since its processes are aimed at ensuring development processes. on the other hand, the process of innovation development of the enterprise should be directed, in particular, to the formation and functioning of systems for the provision of its financial security (voloschuk, 2014). currently, the majority of domestic enterprises are experiencing a complete stagnation in innovation activities. the number of enterprises that innovate every year is shrinking. this situation is a confirmation that in the innovation sector, the main source of financing innovative activity is the own funds of economic entities, which, for the most part, lack such a long-term and risky activity (kostak, 2016). the dynamics of the main indicators of innovation activity in ukraine is reflected in table 2. data represented in table 2 indicate that in 2012–2016, a significant reduction in the number of employees involved in the implementation of scientific research (in 66,428 people) was observed in ukraine. simultaneously, there was a decrease in internal costs for fundamental research and development – by 389, 6 million uah and a reduction in the number of table 2 dynamics of the main indicators of innovation activity in ukraine for 2012–2016 indicator 2012 2013 2014 2015 2016* deviation (+,-) 2016/2012 the number of employees involved in the research, individuals 164340 155386 136123 122504 97912 66428 internal costs for basic research and development, million uah 2615,3 2698,2 2452,0 2460,2 2225,7 389,6 introduction of innovative types of products, names 3403 3138 3661 3136 introduction of new technological processes, quantity 188 1576 1743 1217 * starting from 2015, frequency of the state statistical observation “innovative activity of enterprises” has been changed from “annual” to “biennial” source: statistical yearbook (2017) baltic journal of economic studies 236 vol. 3, no. 4, 2017 innovative types of products, indicating a low innovation activity of enterprises. in such a situation, managers of enterprises need to focus on the innovative components of the strategic development of the enterprise, pay much attention to the innovative upgrade of the material and technical base, use the international experience of management of intellectual resources, and attract highly skilled workers in the field of it technologies. for the most effective implementation of the chosen financial security strategy at enterprises, it is expedient to develop and implement a system of plans covering all aspects of the strategic planning process, including the target program, strategic, tactical, calendar, and individual plans. the system of plans should specify: the purpose of changes in the functioning of internal systems of the enterprise; terms of making changes; the work that needs to be done to make changes; their performers; necessary material, labour, and investment resources. in each strategic plan, it is necessary to determine the timing and nature of the measures aimed at achieving the goal. this document should include a number of elements: the overall strategy of the enterprise; action plan for creating competitive advantages; assumptions about the development trends and the nature of competition; changes in the environment; analysis of strengths and weaknesses of the enterprise; mission and goals; functional strategies and strategies in case of force majeure; resources needed to implement the strategy; assessment of the probability of strategic success; schedule of major events (buryak, chalapko, 2014). 5. conclusions from the conducted research and perspectives. summarizing the above, it should be emphasized that strategic planning at the enterprise, which is the basis for ensuring its financial security, will facilitate the creation of all opportunities for further financial and economic activity with positive results. at the same time, strategic planning should be based on the use of a number of measures: increase of the innovative and intellectual potential of the enterprise; introduction of advanced international experience in the management of material, labour, and financial resources of the enterprise; raising the skills of employees of the enterprise, etc. further research should be aimed at developing and implementing an effective innovation policy that can provide long-term competitiveness of domestic enterprises and increase their financial security. references: arefiev, v. 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(2010). the mechanism of financial security of the enterprise. bulletin of economy of transport and industry, no. 29, p. 127-130. kuzenko, t. poltinina, o. (2013). formation of the system of providing financial security of subjects of entrepreneurship on the basis of controlling. problems of the economy, no.1, p. 345-352. koknayeva, o. (2013). peculiarities of the methodological toolkit for the study of the financial-economic security of trade enterprises. retrieved from: http: // www pokaznyk_ocinky_.pdf. kovalchuk, n. korbutiak, a. (2014). approaches to assess the financial and economic security of domestic enterprises. business-inform, no. 10, p. 249-255. kostak, z. (2016). the role of financial and economic security in the strategic development of entrepreneurial structures. visnyk of lviv trade and economic university, issue 51, p. 149-155. statistical yearbook (2016). scientific and innovative activity in ukraine. retrieved from http://www.cisstat.com/ innovation/ukraine_publication_01.pdf. надежда рущишин, уляна никоненко, зоряна костак формирование финансовой безопасности предприятия на основе стратегического планирования аннотация. целью исследования является совершенствование путей формирования финансовой безопасности предприятия на основе стратегического планирования. предмет исследования: формирование финансовой безопасности предприятия на основе стратегического планирования. методологической основой исследования является совокупность теоретических и общенаучных методов: анализ и синтез, baltic journal of economic studies 237 vol. 3, no. 4, 2017 обобщение, абстрагирование и другие. в работе представлено обобщенную характеристику главным подходам к определению сущности понятия «финансовая безопасность предприятия». определены функциональные цели экономической безопасности предприятия, а именно: обеспечение финансовой устойчивости и независимости; достижения высокой конкурентоспособности на рынке товаров, работ, услуг; обеспечение высокой эффективности финансово-хозяйственной деятельности; обеспечение высокой ликвидности активов и повышение рыночной стоимости предприятия; поддержка соответствующего уровня деловой активности и имиджа; формирование информационной безопасности и коммерческой тайны; эффективная организация безопасности собственного капитала и имущества предприятия. рассмотрена схема процесса организации экономической безопасности предприятия на основе стратегического планирования. определено, что результатом стратегического планирования является стратегический план (стратегия) обеспечение финансовой безопасности предприятия. такая стратегия должна отвечать как финансовой стратегии, так и общей стратегии предприятия, соответствовать их целям и задачам. с целью наиболее эффективной реализации выбранной стратегии финансовой безопасности на предприятии целесообразно разработать и внедрить систему планов, охватывающих все аспекты процесса стратегического планирования, включая целевую программу, стратегические, тактические, календарные и индивидуальные планы. в системе планов должны указываться: цель изменений в функционировании внутренних систем предприятия; сроки внесения изменений; работы, которые необходимо осуществить для внесения изменений; их исполнители; необходимые материальные, трудовые и инвестиционные ресурсы. при формировании финансовой безопасности предприятия особое внимание следует уделить инновационному развитию предприятия. основой инновационного развития предприятия является инновационный потенциал, его формирования и использования в инновационной деятельности. предложен алгоритм выполнения задач стратегии инновационного обеспечения экономической безопасности предприятия. исследована связь между финансовой безопасностью и инновационным развитием предприятия, имеет дуальный характер, где оба явления выступают в качестве цели предприятия и средства ее достижения. выводы. стратегическое планирование на предприятии, которое является основой в процессе обеспечения его финансовой безопасности, должно способствовать созданию всех возможностей для дальнейшей финансово-хозяйственной деятельности с положительными результатами. в то же время стратегическое планирование должно базироваться на использовании ряда мер: повышение инновационного и интеллектуального потенциала предприятия; использование передового международного опыта в области управления материальными, трудовыми и финансовыми ресурсами предприятия; повышение квалификации работников предприятий и тому подобное. дальнейшие исследования должны быть направлены на разработку и внедрение действенной инновационной политики, способной обеспечить долгосрочную конкурентоспособность отечественных предприятий и повысить их финансовую безопасность. baltic journal of economic studies 131 vol. 4, no. 1, 2018 corresponding author: 1 department of accounting and taxation, mykolayiv national agrarian university. e-mail: dubinina@mnau.edu.ua 2 department of accounting and taxation, mykolayiv national agrarian university. e-mail: iryna_ksonzhyk@meta.ua 3 department of accounting and taxation, mykolayiv national agrarian university e-mail: sirceva@mnau.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-1-131-138 forensic accounting: the essence and prospects of development in ukraine maryna dubinina1, iryna ksonzhyk2, svitlana syrtseva3 mykolayiv national agrarian university, ukraine abstract. the subject of the study is a set of theoretical, organizational, and methodological principles for the development of forensic accounting in ukraine. general scientific and special methods of cognition are the methodological basis of the study. the content of the concept “forensic accounting” is specified using theoretical generalization methods; the comparison of audit and forensic accounting using comparison method is carried out. using the abstract-logical method and structural-logical analysis, features, current problems, and obstacles to the development of forensic accounting in ukraine are determined. the objective of the study is to consider the essence of the concept of “forensic accounting”, to introduce the main obstacles, and to propose a list of measures for its development in ukraine. as a result of the study, it is established that forensic accounting is a combination of legal and financial audit and forensic accounting expertise. therefore, experts of all these profiles should be involved to the forensic accounting, which will help the company solve the conflict situations related to fraud. it is substantiated that when improving the method of forensic accounting, it is necessary to understand its difference from the audit. the study found that the most common types of fraud faced by ukrainian companies are asset theft, unreasonable and inappropriate spending. the most common ways to detect fraud in ukraine are internal audit and informal internal sources. only 10% of ukrainian companies have experience in attracting external consultants to independent investigations. however, as practice shows, the very independent, unbiased view of the external specialist on the control system and business processes allows creating a high-quality system of preventive mechanisms for counteracting fraudulent actions and in general, improving the efficiency of business processes of the company. it is substantiated that forensic accounting is one of the effective instruments of an independent economic investigation. it is established that forensic accounting is quite new for ukraine and audit and specialized companies are only at the beginning of the path in this direction. in order to develop this type of services, audit and specialized companies were suggested to expand the range of services in the direction of forensic accounting and the appropriate procedure for carrying out such activities. in addition, it is necessary to take into account the foreign experience of the training of specialists in the field of forensic accounting, that is, to start the training of specialists by including specialized courses on forensic accounting in the curricula of higher educational institutions. it is also necessary to develop the cooperation of ukrainian professional organizations with foreign professional organizations in order to provide specialists with the possibility to obtain international certificates, as well as to involve audit, legal, and consulting companies in the process of professional training in forensic accounting. study conclusion. thus, forensic accounting includes a set of measures for the settlement of financial, economic, legal, commercial, and other issues that involve significant economic risks. the use of forensic accounting by domestic companies will increase the effectiveness of managing their business risks by adopting optimal management decisions and ensuring the profitability of the business. key words: forensic accounting, audit, economic investigation, fraud, risk. jel classification: l84, m20, m40, m49 baltic journal of economic studies 132 vol. 4, no. 1, 2018 1. introduction when carrying out financial and economic activities, business entities are often faced with various manifestations of fraud, which further adversely affect the results of their activities. identifying internal economic crimes during the normal operation of a large company is not easy since fraud is often a pre-conceived process. the most popular types of fraudulent operations remain: misappropriation of the assets, financial distortion, bribery. at the same time, the most popular method of concealing fraud abroad is the falsification of various documents. in large companies, corruption is the most widespread method of fraud, and in small ones, there are theft of cash, falsification of checks, etc. therefore, the detection and termination of unlawful economic actions in the company become a topical task, which can be handled by experienced professionals who have skills in conducting a forensic accounting. forensic accounting service is a fairly new phenomenon, even in countries with a developed market economy. the first consulting and audit firms that provide such a service are only appearing in ukraine. therefore, a number of relevant issues related to the development and spread of forensic accounting service remain open and require more in-depth research and decision. the objective of the study is to consider the essence of the concept of “forensic accounting”, to introduce the main obstacles, and to propose a list of measures for its development in ukraine. general scientific and special methods of cognition are the methodological basis of the study. the content of the concept “forensic accounting” is specified using theoretical generalization methods; the comparison of audit and forensic accounting using comparison method is carried out. using the abstract-logical method and structural-logical analysis, features, current problems, and obstacles to the development of forensic accounting in ukraine are determined. 2. the essence of the concept of “forensic accounting” forensic accounting is interpreted as an independent economic investigation, which is usually carried out in the interests of the owners (shareholders) of companies. in general, the term “forensic” is used to characterize independent initiative activities related to investigation, examination, analysis, evaluation, settlement of situations, and the development of procedures aimed at counteracting fraud, corruption, commercial bribery, evaluating contractual activities, resolving disagreements between parties regarding financial and business issues (suits, khoryn, kozeltseva, 2015). forensic is at the same time the science and art of investigating and preventing the facts of fraudulent actions by offenders, which are often the managers of large companies. it helps to identify potential financial and nonfinancial issues and focuses on both internal and forensic accounting and auditing framework accounting auditing and assurance investigation science • looking beyond numbers while examining financial reporting and business information systems. • compliance of gaaps and ifrs/ regional standards. • reframing of accounts based on legality and gaaps. • risk assessment and analytical procedures. • designing and performing extended audit procedures • compliance of standards of auditing, where applicable. • introspective and sceptical mindset for reviewing transactions and deals. • fixation of the direction of investigation on a realistic basis. • gathering evidence and clues through scientific and latest investigation techniques. • analysis of the psychological behaviour of human. • evidence documentation for legal proceedings. • litigation consultancy – jointly working with lawyers and clients engaged in litigation to provide expert advice regarding evidence and strategic proceedings. • computer forensic – providing assistance in electronic data recovery and retrieval. • expert witness – providing evidence and preparation of formal reports for filing in the court of law. fig. 1. forensic accounting and auditing services: anatomical sketch source: (crumbley, 2006) baltic journal of economic studies 133 vol. 4, no. 1, 2018 external analysis of corporate intelligence – the analysis of related individuals and the personal dynamics of the financial position of the top manager (kovbуl, 2017). when analysing the internal corporate intelligence: identification of the risks of fraudulent operations (according to fraud tree – this is the appropriation of assets, intentional distortion of financial reporting, bribery, kickbacks); analysis of the internal control system (financial, informational, legal, physical security); identification of inefficient managers in the company; transparency of tender procurement; efficiency of spending company’s expenses; transparency of sales. when analysing the external corporate intelligence: provision of preventive measures for raider attacks on the enterprise; elimination of conflicts of interest and ensuring transparency in the implementation of procurement; provision of company information security with the osint, humint, and others procedures (kovbel, 2017). along with the term of “forensic accounting”, there is also used the term of “forensic auditing” (weaver, 2008), which is usually understood as the study and evaluation of the financial information of the entity, the results of which can be used as evidence in court. obviously, there is no fundamental difference between these concepts since results of forensic accounting can also serve as evidence in the litigation process. (crumbley, 2006) stated that forensic accounting is an accounting that is suitable for legal review offering the highest level of assurance and including the now generally accepted connotation of having been arrived at in a scientific fashion (fig. 1). forensic accounting is a combination of legal and financial audit and forensic accounting expertise. therefore, experts of all these profiles should be involved in the forensic accounting, which will be able to comprehensively check every transaction, find violations where it, at first glance, does not exist. thus, the term “forensic accounting” should be understood as a set of measures for the settlement of financial, economic, legal, commercial, and other issues that involve significant economic risks by auditing, consulting, and specialized companies to meet the interests of owners (shareholders) of companies of various organizational and legal forms. 3. the main differences between forensic accounting and audit the main difference between the audit of the forensic accounting is that the audit activity is regulated at the legislative level, but the requirements for carrying out forensic accounting are not established by law. thus, the main legislative and regulatory documents regulating audit activity in ukraine are the law of ukraine “on audit activity” on april 22, 1993 no. 3125-xii and the law of ukraine “on audit of financial reporting and audit activity” on january 21, 2017 no. 2258viii (effective from october 01, 2018). in addition, international auditing standards are used while the implementation of audit activity published in the official language on the official website of the central executive authority, which ensures the formation and implementation of state policy in the field of accounting and auditing, which ensures their updating. also, there are other differences that are presented in table 1. table 1 comparative characteristics of audit and forensic accounting criteria for comparison audit forensic accounting objective expressing an independent opinion of the auditor on the compliance of the financial statements of the organization in all material respects with the requirements of national accounting requirements (standards), international financial reporting standards or other requirements. search, termination, and prevention of economic crimes in the organization subjects auditors, audit companies audit, consulting and law firms the presence of requirements for mandatory conduct in cases established by law yes no reporting audit report and other official documents list of possible reporting documents: report on conducting analytical procedures; report on established evidence of fraud; list of deficiencies in internal control of processes and results; possible fraud scenarios and schemes; recommendations on the risk management system source: formed by the authors baltic journal of economic studies 134 vol. 4, no. 1, 2018 at the same time, forensic accounting involves a wider range of analytical procedures than an audit. the auditor expresses an independent opinion as to the reliability of financial reporting, and the inspector discovers data indicating signs of violations and crimes. moreover, for their detection, other methods and mechanisms are used than during the audit. the fact that forensic accounting is based on both official and unofficial sources, in addition, independent economic analysis analyses not only the initial documentation, accounting, and management reporting, but also the testimony of employees, counteragents, independent experts, and former partners. in addition, the report on the inspection may be in the interest of one interested person, for example, one owner who suspected a partner in fraudulent acts or in relation to the general director of the company selected in the competition, in case of suspicion of fraud of the company’s funds (shestakova, 2013). 4. the prospects of development in ukraine the economic crisis in ukraine and the deterioration of the financial performance of business entities force the owners to take measures aimed at improving the efficiency of companies. one of the reasons for the deterioration of the financial performance of business entities is fraudulent actions and negligence of the personnel. so, in june 2017, kreston gcg, a part of the international auditing network kreston international, conducted an independent study “fraud in ukrainian companies.” the study covered 130 companies throughout the country, including recognized leaders in the fields of agriculture, construction, industrial production, food industry, pharmaceutical business, and many others. among the participants in the study, there were owners, directors general, and financial directors, first managers, heads of the internal security service etc. the key task of the study was: to estimate the extent of the spread of fraud in companies in ukraine; to establish measures taken to prevent fraudulent schemes in companies and organizations. the study found that more than half of companies (61.5%) had ever faced fraud, with nearly a third of companies recording some or other cases of fraud during the past 3 years. however, another group of companies (about 40% of respondents) points out that they have never faced fraud. in the opinion of (kovbel, 2017) kreston gcg’s partner, most likely, the reason consists not in the unique favourable atmosphere of companies, but in the absence or lack of effectiveness of control systems that create the illusion of no fraud. it is characteristic that in the sectoral section, representatives of the following sectors faced the cases of fraud significantly more often than in the whole market: industrial production, trade, food industry, and agriculture. the most common types of fraud faced by ukrainian companies are: asset theft, unreasonable and inappropriate spending (fig. 2). 41,9% 39,8% 28,0% 26,9% 22,6% 22,6% 18,3% 10,8% 9,7% 9,7% 7,5% 7,5% 5,4% 2,2% 4,3% 0,0% 20,0% 40,0% 60,0% theft of assets unreasonable or inexpedient expenses sabotage and negligence corruption and bribery leak of data illegal use of assets illegal acquisition of income or purchasing assets purchases of unmarketable goods and unjustified… falsification of accounting documents falsification of financial statements cybercrimes reduction of liabilities and revenues overstatement of assets illegal revenue recognition other fig. 2. types of fraud faced by ukrainian companies, % source: (data of kreston gcg report “fraud in ukrainian companies: current situation, mechanisms of counteraction”, 2017) baltic journal of economic studies 135 vol. 4, no. 1, 2018 a little more than a quarter of companies faced with such manifestations of fraud as sabotage, negligence, corruption, and bribery (28% and 26.9% respectively). the third group, which was faced by more than 20% of the companies in general, is theft of information and illegal use of assets. the most common methods for detecting fraud in ukrainian companies are an internal audit and informal internal sources (fig. 3). the latter ones are the most common way of detecting in the world as well, but unlike in ukraine, an efficient and secure channel for receiving information – a hotline (telephone or online) is developed for their use. in ukraine, only 9% of companies use it and about the same number are perceived as an effective channel (kovbel, 2017). almost a third of cases of fraud were detected by chance. at the same time, more often the practice of accidental detection is noted by representatives of the sectors of trade and industry, which often show cases of fraud. informal internal sources more often contribute to the detection of fraud in the field of agriculture, technology, transport and logistics (table 2). fig. 3. operations for detecting fraud in ukrainian companies, % source: (data of kreston gcg report “fraud in ukrainian companies: current situation, mechanisms of counteraction”, 2017) 43,4% 38,2% 32,9% 31,6% 30,3% 23,7% 18,4% 6,6% 2,6% 1,3% 2,6% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% internal audit informal internal sources accidental detection registration of suspicious transactions security service actions informal external sources due to rotation of staff hotline external investigation actions of law enforcement authorities difficult to answer table 2 operations for detecting fraud in the sectors of the economy, % means of fraud detection sectors of the economy trade agriculture food industry industrial production transport and logistics technology internal audit informal internal sources accidental detection registration of suspicious transactions security service actions informal external sources due to rotation of staff hotline external investigations actions of law enforcement authorities notes. the colour saturation (from darker to lighter) shows the intensity of using one or another method of detecting fraud. the lightest colour means that this method was not used to register a fraud source: (data of kreston gcg report “fraud in ukrainian companies: current situation, mechanisms of counteraction”, 2017) baltic journal of economic studies 136 vol. 4, no. 1, 2018 only 10% of ukrainian companies have experience in attracting external consultants to independent investigations. however, as practice shows, the very independent, unbiased view of the external specialist on the control system and business processes allows creating a high-quality system of preventive mechanisms for counteracting fraudulent actions and in general, improving the efficiency of business processes of the company. at present, foreign companies actively use independent economic investigations such as forensic accounting. with the help of forensic accounting, it is possible: to evaluate the effectiveness of organization of internal business processes; to conduct an independent financial examination; to discover the facts of financial fraud within the company; to protect own interests in court; to develop an effective individual system of internal financial security; to ensure effective and transparent interaction with counterparties; to protect the company from aggressive external interference by competitors. the concept of “forensic accounting” in ukraine is understood only by few experts. today this specific service has just started to be offered to domestic businesses. so far, small companies pay attention to it. among the services provided by domestic audit, legal and consulting companies, there is a forensic accounting service. however, forensic accounting companies (spencer & kauffmann, kreston gcg, deloitte consulting, otten consulting, credo-audit company) provide a very narrow range of services in this direction. therefore, in order to develop forensic accounting in the domestic market, we offer companies to expand the content of services for forensic accounting. the main content of the proposed forensic accounting service is presented in table 3. also, during the forensic accounting, we propose the following list of procedures, shown in figure 3. in order to develop this type of service in ukraine, it is also necessary to take into account the foreign experience of the training of specialists in the field of forensic accounting. namely, it is necessary to begin the training of specialists on forensic accounting by including specialized courses on forensic accounting in the curricula of higher educational institutions. it is also necessary to develop the cooperation of ukrainian professional organizations with foreign professional organizations in order to provide specialists with the possibility to obtain international certificates, as well as to involve audit, legal, and consulting companies in the process of professional training in forensic accounting. table 3 the proposed structure and content of forensic accounting services type of service content of the service financial investigations analysis of existing security systems of the company. assessment of procedures and internal policies. check of the effectiveness of the activity and evaluation of financial losses in the processes of production, supply, and sale. detection of facts and causes of fraud. search for stolen assets. organization of management and control to prevent financial fraud and fraud development of a fraud counteraction system preparation of a fraud counteraction plan. organization of the corporate hotline. organization of work of economic security and internal control service corporate intelligence collection and analysis of data on the reputation of business partners. information support in the course of financial investigations. search for stolen assets. information support in lawsuits and conflict situations. search for new business opportunities expertise forensic expertise – preparation of information for the adoption of administrative measures. pre-trial expertise – preparation of information for court proceedings. forensic examination – judicial support in ukraine and abroad; providing expert evidence protection of intellectual property, fulfilment of contractual terms investigation of the situation with the relationships arising from the licensing of various forms of intellectual property rights. a comprehensive investigation of problems related to the fulfilment of contractual terms automation of anti-fraud solutions diagnosis of existing fraud management practices. development and implementation of a target system for monitoring and managing fraud risk. development and implementation of anti-fraud systems source: formed by the authors baltic journal of economic studies 137 vol. 4, no. 1, 2018 5. conclusions thus, we can conclude that forensic accounting includes a set of measures for the settlement of financial, economic, legal, commercial, and other issues that involve significant economic risks. forensic accounting services may be provided by the audit, consulting, and specialized companies to owners (shareholders) of companies of various organizational and legal forms. unlike the audit, the procedure for the implementation of forensic accounting in ukraine at the legislative level is not regulated. in order to develop and expand the forensic accounting , it is necessar y to take into account the foreign experience of the training of specialists in this direction; audit, consulting and legal companies need to expand the range of ser vices in forensic accounting. the use of forensic accounting by domestic companies will increase the effectiveness of managing their business risks by adopting optimal management decisions and ensuring the profitability of their business. no yes yes no yes no yes planning accounting, auditing & investigation reporting initial meeting with client consider terms of the engagements agree subject matters and scope of investigation performing conflict of interest check prepare purpose, objectives, key issues & activities statement identify investigation boundaries and risks develop action plan & programme selection of approaches established/ standard? unique/specific? communicate objectives and approaches to key team personnel recognise issues site/ facility inspection or visit interviewing key informants (including experts) review of documents and records) assessment of risks and internal control collection of information initial assessment & review of information sufficient information? expand boundaries & scope verify information with objectives obtain evidences for legal proceeding sufficient & appropriate evidences ? expand investigation or change methodology documentation of evidence prepare draft report discussio n with lawyers, experts, panel members final forensic engagem ent report corrective, preventive actions & follow-up review preparation for legal proceeding &submissi on in court fig. 3. flow chart of forensic/investigative accounting source: (ca anandaraj saha, 2014) references: suits v.p., khoryn a.n., kozeltseva e.a. 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(2017) pro shakhrajstvo v ukrajinsjkykh kompanijakh [on fraud in ukrainian companies]. cyberwar and business. available at: https://biz.nv.ua/ukr/experts/kovbel/shahrajstvo-v-ukrajinskih-kompanijah-sprijnjattjatop-menedzhmentu-1717029.html (accessed 23 august 2017). kreston gcg report “fraud in ukrainian companies: current situation, mechanisms of counteraction”, 2017 available at: http://kreston-gcg.com/ua/press-releases. ca anandaraj saha (2014). а multidimensional approach to investigating frauds and scams: a study in the global and indian context. the management accountant, vol. 49, pp. 29-39. baltic journal of economic studies 158 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state biotechnological university, ukraine (corresponding author) e-mail: poltavetsanatolii949@gmail.com orcid: https://orcid.org/0000-0002-3310-3271 2 sumy national agrarian university, ukraine e-mail: bohdan.hnatkivskyi@lnu.edu.ua orcid: https://orcid.org/0000-0001-5146-9077 3 sumy national agrarian university, ukraine orcid: https://orcid.org/0000-0002-0624-2938 doi: https://doi.org/10.30525/2256-0742/2022-8-5-158-164 managing change in land resource use: the european experience anatolii poltavets1, bohdan hnatkivskyi2, olena havrylchenko3 abstract. the subject of the study is the management of shifts in the use of land resources. methodology. the research uses general scientific methods: theoretical generalization, methods of positive and normative analysis, and methods of statistical analysis. the goal is to study the european experience of managing the changes in the use of land resources. research conclusion. the comparative characteristics of the state of land use in european countries and ukraine were carried out. the place of ukraine in the european land use is shown. today in ukraine 32.7 million hectares of arable land is cultivated, which is about one third of the european arable land. according to the statistics, one ukrainian has twice as much agricultural land as one european. the total area of ukraine on the scale of europe occupies about 6% of its territory, the area of agricultural land is 19% of agricultural land in europe. the level of arable land in ukraine is 54%, while in europe this indicator reaches barely 35%. the main stages of changes in the use of land resources through the prism of the normative and legal component of land reform are highlighted. retrospective data on the formation of land relations, as well as the formation of the land market in ukraine are revealed. the main structure of all ukrainian lands was analyzed. the analysis of the ownership structure of agricultural land shows that the majority of land is privately owned – 31.0 million hectares or 75%, 8.7 million hectares or 21% are state owned, and 1.7 million hectares or 4% are communally owned. the dynamics of price changes for agricultural land in european countries are presented. it was noted that in comparison with 1990, before the establishment of an independent state, there have been drastic changes in the distribution of land according to forms of ownership, which is a direct result of the land reform. it was emphasized that despite the lifting of the moratorium on the sale of agricultural land, the land reform is still ongoing, and in connection with it, significant changes in the use of land resources are taking place. one of the most difficult tasks is to complete the reform of land relations and establish a unified land use system that can combine the freedom of land ownership, its effective use and social justice in the distribution of land. the world experience of managing changes in the use of land resources has shown that the liberalization of the agricultural land market has different scenarios for different countries. the ukrainian economy has been in need of market opening for a long time. key words: land resources for agriculture, agricultural lands, displacement management, agricultural enterprises. jel classification: e20, h56, o10 1. introduction the development of modern agriculture is characterized not only by constant changes in the organization and specialization of agricultural enterprises, but also by significant development dynamics, constant modernization of the material and technical base, business and technological processes, the need to strengthen environmental and social priorities for further functioning. therefore, considering the management of agricultural enterprises, it is necessary to solve many multivector tasks and functions, to use the resource potential intensively. the activities of agricultural enterprises are often characterized by intensive exploitation and inefficient use of natural resources; obsolescence, excessive energy and material consumption, multiple waste production technologies, insufficient level of secondary baltic journal of economic studies 159 vol. 8 no. 5, 2022 waste processing, inefficiency of the organizational and economic mechanism of nature use and nature protection activities. this causes a high level of anthropogenic burden on ecosystems, a decrease in biodiversity and environmental pollution; lack of positive social and ecological structural changes in the agrarian economy and real steps in its transfer to an innovative and investment model of effective functioning. the main stages of the development of land relations in ukraine, the evaluation of the land reform and the analysis of the use of agricultural land have been considered in the studies of many scientists. the ukrainian researchers have made sufficient progress in the consideration of this issue, but the disputes about the correctness of the chosen reform course, about the formation of a fair price for land after the lifting of the agricultural land market, and about the main aspects of management of changes in the use of land resources will not stop. therefore, there is a need for further study of these issues. the objective of this study is to examine the european experience in managing changes in the use of land resources. 2. preconditions for structural changes in the use of land resources the rational use of land resources contributes to the economic and social development of both urban and rural areas and of agricultural enterprises. a number of countries are trying to achieve these goals through land reform. the term "land reform" has different meanings in different countries, including the restoration of land rights to former owners, known as land restitution, and the redistribution of land rights, for example, through the transfer of public land to the landless or the seizure of land from large landowners for redistribution. land reform can also include land consolidation, in which all landowners in an area give up their land and receive new plots of comparable value, but under a scheme that promotes more efficient and productive land use (kovaliv, 2016; korobska, 2020; ivanyshyn, volkova, horlova, 2019; pankiv, 2012). reforms may also include changes in land relations in terms of the form of ownership of rights. for example, complex rights based on traditions and customs may be abolished in order to introduce simpler and more modern land transfer mechanisms. what happens to land can be planned in advance (as part of the spatial planning process), but it can also be the result of land and real estate tax reforms that change the value of land and thus its use (koshkalda, demchuk, suska, anopriienko, riasnianska, 2022). land reform programs usually affect selected areas, such as agricultural land. in rural areas, programs may be developed to promote changes in agricultural technology, direction of crop production, methods of land management, financing of production, or marketing of products. land was, is and will be the main national wealth. it is the basis of human culture and social organi zation. land is a natural resource without which no human activity is possible; therefore, agrarian reform primarily entails changes in the use of land resources, especially in land tenure. land reform is a system of interdependent measures of transformation of land ownership and land use carried out by the state, its goal is to create a system of land relations in the state based on guarantees of equality of land ownership rights of individuals, legal entities, as well as communities and the state. the implementation of this goal is aimed, inter alia, at solving such tasks as fundamental changes in the forms of land ownership, the provision of land plots to citizens, the introduction of land use fees, and the creation of factors leading to the formation of the land market (tretyak, tretyak, kuryltsiv, pryadka, tretyak, 2021). ukraine has huge land resources, but unfortunately they are used irrationally. the resolution of the verkhovna rada of ukraine "on land reform" dated december 18, 1990, established the goals, tasks and main stages of land reform implementation. the most important aspect of land reform was the transition from unified state ownership of land to various forms of ownership, including private ownership. in the complex of measures for further transformation of land relations, the institution of private ownership of landed estates plays the leading role, as private property rights were completely limited within certain regulations. the law lifting the moratorium on the sale of agricultural land plots plays a significant role in the redistribution of land and the legal consolidation of the land rights of the owners. global changes in land tenure patterns took place. millions of acres of productive land were transferred free of charge to rural and urban residents. they received plots of land for gardens, vegetable gardens, housing, the expansion of personal subsistence farms, and the organization of peasant farms. as a result of the land reform, the following significant changes were made: 1) the monopoly of state ownership of land was abolished; 2) collective farms and state farms were reorganized, and land was privatized; 3) a significant layer of peasant households was formed; 4) a fee for land use was introduced. baltic journal of economic studies 160 vol. 8 no. 5, 2022 the main stages of changes in the use of land resources through the prism of the regulatory and legal component of land reform are shown in figure 1. the analysis of the retrospective data shows that in comparison with 1990, before the proclamation of the independent state, there have been drastic changes in the distribution of land according to forms of ownership, which is a direct result of the land reform. for further analysis the data from 2014 will be used, i.e., before the annexation of crimea and the allocation of the ato zone: the area of state-owned land was almost 48%, privately-owned land was 52%, collective-owned land, which still existed in ukraine at that time, but in an insignificant amount, was only 0.1%. the collective form of land ownership arose as a result of the transitional stage of the reform: to ensure the transfer of land from state ownership (collective farms and state farms) to private ownership. in 1996, about 37% of land was collectively owned, while 60% was state owned and only about 3% was privately owned (ivanyshyn, volkova, horlova, 2019). furthermore, the state and communal forms of land ownership were demarcated, resulting in a communal form of land ownership. 3. analysis of structural changes in the use of land resources and european experience analyzing the ownership structure of agricultural land, it can be seen that most of the land is privately owned, 31.0 million hectares or 75%, 8.7 million hectares or 21% are state owned, and 1.7 million hectares or 4% are communally owned (figure 2). the main changes in the structure of the land fund since 1996 in terms of forms of ownership are that agricultural land was actively transferred to collective ownership as a result of such stages of land reform as denationalization, allotment (artificially issued state acts for virtual allotment to peasants) and privatization of land plots used by citizens until 2014. for comparison, data on the share of privately owned agricultural land in eu countries are presented (figure 3). according to the figures, the private ownership of individuals and legal entities in different countries ranges from a minimum of 49% (germany), 53% (austria) and 56% (estonia) to 99% (belgium, latvia) and 100% (switzerland, italy). according to the estimates of specialists in the field of land relations, today in ukraine there are 32.7 million hectares of arable land, which is about 1990–1992: resolution of the verkhovna rada "on land reform", december 18, 1990. 1992–1996: law of ukraine "on forms of land ownership", january 30, 1992. 1996–2001: constitution of ukraine 2001–2011: land code, october 25, 2001 from 2011 to the present: law "on the state land cadastre", 07.07.2011 2013: launch of the electronic state land cadastre 2021: lifting of the moratorium on the sale of agricultural land the main stages of changes in the use of land resources through the prism of the normative and legal component of land reform figure 1. the main stages of changes in the use of land resources through the prism of the regulatory and legal component of land reform baltic journal of economic studies 161 vol. 8 no. 5, 2022 one third of the arable land of europe. according to the statistics, one ukrainian has twice as much agricultural land as one european. the total area of ukraine on the scale of europe occupies about 6% of its territory, the area of agricultural land is 19% of agricultural land in europe. the level of arable land in ukraine is 54%, while in europe this indicator reaches barely 35% (table 1). in ukraine, until the lifting of the moratorium in 2021, when there was no market for agricultural land, lease relations developed actively. thus, in 2020, in the structure of use, 56% of agricultural land was leased from the owners, and 29% was cultivated by the owners themselves, 8% was leased from the state, and about 7% was not cultivated at all for various reasons. in addition, almost 22% (6.9 million people) of all landowners and land users are sharecroppers. according to the state geocadastre, in 2020 there will be 10.4 million hectares of agricultural land in the structure of state property. of these, 0.7 million hectares (7%) are located in the occupied territories. on the whole territory of ukraine 1.7 million hectares of agricultural land or (16%) were transferred to utc (land directory of ukraine 2020 – a database of the country 's land fund, 2021). after the lifting of the moratorium, the ukrainian agricultural land market is on the verge of major changes. there are different approaches to the circulation of land in different countries of the world. yes, most eu countries have open land markets: austria, belgium, the netherlands, germany, france, switzerland have liberalized and open land markets where there are no restrictions on foreign capital. state property 21% communal property 4% private property 75% structure of ownership of agricultural land in ukraine figure 2. structure of agricultural land ownership (land registry of ukraine 2020 – a database of the country's land fund, 2021) 49 53 56 60 66 70 75 79 80 80 89 90 91 91 93 98 98 98 99 99 100 100 0 10 20 30 40 50 60 70 80 90 100 germany estonia croatia ukraine czech republic netherlands ireland portugal finland belgium italy figure 3. share of agricultural land in private ownership in eu countries (2020) (land directory of ukraine 2020 – a database of the country's land fund, 2021) baltic journal of economic studies 162 vol. 8 no. 5, 2022 however, even in these countries there is a significant influence of public administration, e.g., in france, belgium and austria the vast majority of sales contracts are reviewed and approved by local public administration bodies (such as safer in france). denmark, finland and sweden are characterized by significant taxes, especially environmental taxes, and strong government support for agricultural enterprises. the degree of state influence on the management of changes in the use of land resources today depends on the socio-political system of the country, i.e., on the degree of centralization and decentralization of the management of land resources. taking into account the european experience, the authority to regulate land use is exercised by bodies of territorial communities and specialized institutions, for example, such as the agricultural real estate agency in poland, the department of land consolidation in denmark, the state land service in latvia, the national land service in lithuania, and the slovak land fund. organizational and legal forms of land use, as well as forms of ownership of land resources, vary. the analysis of the management of land resources in a number of countries has shown that in almost all of them there are various restrictions: in particular, restrictions on the maximum area of agricultural land per individual in some countries are as follows: – poland – 300 hectares, but taking into account inherited lands up to 500 hectares; – hungary – 300 hectares (for individuals and legal entities); – romania – 200 hectares (for individuals and legal entities); – denmark – 30 hectares (for those with professional education and farming experience). in ukraine, the law establishes the maximum allowable area of agricultural land owned by one person up to 100 hectares. in germany, the minimum property area is 1 hectare, in poland it is 1 hectare, and in japan it is 0.5 hectare. in ukraine, the minimum area of land ownership is not specified (ryasnyanska, 2015). in ukrainian reality, the situation has developed in such a way that for decades there has been no open free market for agricultural land, and narratives about the negative consequences of the free circulation of agricultural land have been imposed on society. thus, according to polls, more than 70% of citizens were against the opening of the market. one of the greatest fears was that land would be bought for nothing. however, there is a rational basis for these fears, as world experience shows that the market behaves differently. experts have analyzed the dynamics of changes in the price of agricultural land in european countries in the years following the beginning of market liberalization. different scenarios can be observed: a tendency to a gradual increase of the price in each subsequent year (czech republic, lithuania, hungary), a sharp increase of the price immediately after the opening of the market with a gradual decrease of the price (estonia, latvia, etc.) (table 2). in 2020, the price policy in european countries was formed as follows: the five leading countries that had the highest price for agricultural land are the netherlands, luxembourg, italy, great britain and ireland, the average price of which was $68.2 thousand/ha, $35.6 thousand/ha, $33.5 thousand/ha, $23.5 thousand/ha, $19.9 thousand/ha, respectively. however, there are a number of countries where the price did not exceed $3 thousand/ha, namely croatia, latvia, estonia and romania ($3.0 thousand/ha; $2.9 thou sand/ha; $2.9 thousand/ha; $2.1 thousand/ha respectively) (table 3). therefore, the action program of the government and partner countries should create levers to support the post-war economic development of ukraine. accordingly, the study of the world economic growth during the war in ukraine, the table 1 comparison of the state of land use in european countries and in ukraine indicator ukraine european countries eu countries land area, million ha 60,4 1015,6 437,4 land used for rural purposes, million ha 42,7 474,8 177,7 acreage, million ha 32,5 277,8 115,7 chernozem area, million ha 28 84 18 organic land for rural purposes, million ha 0,3 11,6 5,3 irrigated land, million ha 0,5 20,8 11,1 share of leased agricultural land, % 97 62 53 rural land area per capita, ha 0,9 0,6 0,44 grain export, million tons 34,8 130 38,5 investment price, thousands of dollars per 1 hectare 1 4 5,5 the price of 1 hectare of rural land, thousands of dollars 3,7 7,2 source: created by the author on (land directory of ukraine 2020 – a database of the country's land fund, 2021) baltic journal of economic studies 163 vol. 8 no. 5, 2022 analysis of the current state of the war economy and the proposal of measures for the post-war economic development of ukraine is quite relevant and timely (irtyshcheva, kramarenko, sirenko, 2022). at the stage of changing the administrative structure of territories, redistribution of fiscal and other powers, the question of assessing the efficiency of the newly created bodies of public administration remains controversial. the problem is also complicated by the need for effective implemen tation of the goals and strategies of sustainable development in the system of public administration and strategic planning at all levels (irtyshcheva, pavlenko, boiko, 2022). 4. conclusions thus, land has been, is, and will be the main national wealth. it is the basis of human culture and social organization. land is a natural resource without which no human activity is possible; therefore, agrarian reform primarily involves changes in the use of land resources, particularly in land tenure. however, the land reform that began in 1991 has not been completed. one of the most difficult tasks is still to complete the reform of land relations and create a unified land use system that could combine freedom of land ownership, effective use of land and social justice in the distribution of land. the world experience of managing changes table 2 dynamics of price changes for 1 hectare of agricultural land after market opening countries dynamics of price per 1 ha of agricultural land compared to the previous year, % years since the beginning of liberalization 1 2 3 4 5 6 7 8 9 10 11 12 czech republic 3 4 0 15 27 8 10 6 10 5 13 16 lithuania 4 32 37 13 29 -10 17 41 0 17 15 2 estonia 107 53 26 -6 5 0 -3 23 26 26 14 latvia 90 118 73 -6 -45 -48 48 20 82 26 16 poland 12 40 16 34 14 11 6 12 27 3 hungary 2 5 4 3 12 8 1 5 13 12 romania -3 45 7 15 9 15 37 6 6 bulgaria 5 33 -5 -7 47 35 4 31 19 slovakia 4 4 4 10 8 4 source: created by the author on (land directory of ukraine 2020 – a database of the country's land fund, 2021) table 3 prices for agricultural land in european countries countries max price, thousand $/ha average price, thousand $/ha min price, thousand $/ha netherlands 116,1 68,2 54,2 luxembourg 35,6 35,6 35,6 italy 57,0 33,5 17,9 great britain 31,6 23,5 18,3 ireland 24 19,9 19,9 denmark 19,9 17,3 14,0 slovenia 32,8 16,9 13,9 spain 131,3 12,8 6,6 greece 55,5 12,6 6,0 poland 13,3 9,7 5,7 finland 10,1 8,7 5,7 sweden 18,8 8,7 1,6 czech republic 6,5 6,5 6,4 france 11,9 6,0 2,6 bulgaria 7,2 4,6 1,6 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(2022). еvaluation of efficiency of regional public governance in the context of achieving goals of sustainable development. management theory and studies for rural business and infrastructure development, vol. 44(4), рр. 497–505. doi: https://doi.org/10.15544/mts.2022.49 received on: 2th of october, 2022 accepted on: 21th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 58 vol. 4, no. 2, 2018 corresponding author: 1 faculty of law, taras shevchenko national university of kyiv. e-mail: gubanof@ukr.net 2 private higher educational institute “college of finance and law”. e-mail: gubanovatamara@ukr.net 3 faculty of law, national university of life and environmental sciences of ukraine. e-mail: olenas.yara@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-58-63 improvement of the activities of state authorities of ukraine, which are responsible for adapting national legislation to eu legislation in the field of public service oleh hubanov1 taras shevchenko national university of kyiv, ukraine tamara hubanova2 private higher educational institute “college of finance and law”, ukraine olena yara3 national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the paper is to consider content and nature of adaptation of national legislation in the field of public service to the eu legislation and specify institutional component of this process. methodology. methodological foundations of the research of adaptation of national legislation to the ue legislation in the field of public service are determined by a set of methods of scientific knowledge, which allow considering this problem as a multifaceted, interdisciplinary phenomenon. the research strategy, underlying the integrated approach, primarily is based on the following methodological principles: formulation of fundamental theoretical concept; development of cross-cutting concepts and categories, which ensure the unity of the approach to the object of research. results. the article considered content and nature of adaptation of the national legislation in the field of public service to the ue legislation, as well as an institutional component of this process, it was conducted the analysis of competences of institutions that are responsible for adaptation. practical implications. on the basis of doctrinal provisions, as well as the norms of the current legislation, the author has identified the main range of problems of national legislation adaptation in the field of public service to the eu legislation, and possible ways to improve the efficiency of authorized subjects are considered. value/originality. it is determined that an important step in improving the efficiency of domestic institutions responsible for adaptation of national legislation to eu law in the field of public service is to strengthen cooperation with european experts on adaptation issues, especially in the terms of correct interpretation of acquis communautaire. key words: public service, eu legislation, national legislation, adaptation of legislation, institutions, competence. jel classification: k00, k1, k3, k33 1. introduction the implementation of european integration aspirations of ukraine requires numerical transformations in almost all spheres of life of modern ukrainian society. at the same time, the key instrument of their planned, systematic and well-timed implementation is the subjects with the powers of authority as under the current conditions the multifaceted support for the transformational processes in the direction of ukraine’s accession to the eu is a priority task of the public authorities. in this way, defining a role for all the european integration processes is attached upon institutional component – public service. in this context, an attention should be paid to the special significance of the problem of national legislation compliance in the field of public service with european standards, as the public service is a driving mechanism that will determine the probaltic journal of economic studies 59 vol. 4, no. 2, 2018 european future of our state. it is obvious that any transformations, in the direction chosen by ukraine, are impossible or extremely complicated outside of the activities of the competent subjects acting within the proper legal framework formed in accordance with the requirements of the eu legislation. for this very reason, the problem of national legislation adaptation to the eu legislation in the field of public service becomes on the front burner to date. within our research, an attention is focused on last but not least investigated aspect of the above-mentioned issue – the problem of improving the efficiency of domestic institutions, which are responsible for adaptation of national legislation to eu laws in the field of public service. writing this work, we partially relied on the scientific achievements of such scholars as a. arystarkhova, o.  yevhlevska, o. prylypchuk, m. smoliarova, o. tarasov, i. yakoviuk, and others. the purpose of our work is to consider the content and nature of the adaptation of national legislation in the field of public service to the eu legislation and identify the institutional component of this process and then outline the main range of problems in this area and consider possible ways to increase the efficiency of the activities of authorized entities. 2. key concepts of national legislation adaptation to the eu legislation turning to the immediate consideration of this problem, in the first place, we determine the significance of the key concepts for our study. according to the legally consolidated definition, an adaptation of legislation is a process of adjustment of the laws of ukraine and other normative legal acts in line with acquis communautaire, that is, the legal system of the european union (vidomosti verkhovnoi rady ukrainy, 2004). in the legal doctrine, the notion of adaptation of the national legislation of ukraine to the eu legislation is to be interpreted as a coherent process of approximation of its legal system, including legislation, lawmaking, legal technique, practice, law enforcement to the legal system of the european union in accordance with the criteria put forward by the european union to the states, which intend join it (smoliarova). however, more complete concept of adaptation is revealed in the process of comparative analysis with the concepts of implementation and harmonization of legislation. thus, the content of abovementioned categories was thoroughly analysed by tarasov o.v. supported by their use in the text of the ukraine– european union association agreement. the scientist drew such conclusions relatively their correlation: a) the category “adaptation”, as a rather broad category, is identical or includes the following more detailed categories: “approximation”, “convergence”, “achievement of conformity”; b) the category “implementation” provides, in accordance with the text of the association agreement, “realization”, “performance”, “application”, “compliance”, “introduction”; c) the category “harmonization” refers not only to national legislation but also to a wider range of corporate and technical norms, standards, methodologies, practices, etc., which directly affects the functioning of the economic system of society (tarasov). guided by the above laws, the scientist argues that according to the text of the association agreement, implementation is always linked to the universally accepted principle of faithful fulfilment of international obligations, while adaptation may be non-legally binding from the international legal point of view. at the same time, adaptation can act, but not necessarily, as one of the ways of national-legal implementation as international legal obligations and nominally optional international standards, international “soft law”, etc. as concerns harmonization, the author thinks that it also can be identified, on the basis of association agreement, with adaptation (tarasov). i. yakoviuk, considering these concepts in the context of european integration processes, also points out that the concept “harmonization” characterizes the process of bringing the legislation in line with eu legal rules, which takes place within the european union and is the statutory obligation solely of the member states. adaptation, from scientist perspective, also characterizes the process of bringing the legislation in line with eu laws, but it takes place outside the european union and applies to third countries in connection with their implementation of foreign policy course on european integration. they interpret implementation as a broad concept, as a special legislative procedure for the transformation of norms of international law into the norms of internal law (iakoviuk, 2012). the rectitude of these points of view is confirmed by the provisions of the criteria for the european integration part of the state target programs, which fixes the definition of all three concepts. in particular, the adaptation of legislation (convergence) is to be interpreted as a process of bringing the laws of ukraine and other legal acts in line with the acquis communautaire; harmonization (adjustment) – as a process of bringing national standards in line with the eu standards; implementation – as performance, realization of international legal regulations by the state (nakaz ministerstva ekonomiky ta z pytan yevropeiskoi intehratsii ukrainy, 2005). in the scientific literature, adaptation is characterized as a long, dynamic process, defined sequence of interrelated actions towards the change of the existing law and order, each link of which is logically connected with other elements that together form the program of self-development of the legal system (ievhlevska, 2009). baltic journal of economic studies 60 vol. 4, no. 2, 2018 3. stages and institution component of the process of adapting national legislation to the eu legislation in accordance with the law of ukraine “on national program for adaptation of ukraine’s legislation to eu law”, there are such stages of adapting national legislation as follows: 1) specification of the acts of acquis communautaire governing the legal relationship in the relevant field; 2) the translation of certain acts into the ukrainian language; 3) implementation of complex comparative analysis of the regulation of legal relations in the relevant sphere in ukraine and in the european union; 4) the development of recommendations for adjustment of the legislation of ukraine in line with acquis communautaire; 5) carrying out of economic, social, and political analysis of the consequences of the recommendations’ implementation; 6) determination of the list of draft laws; 7) preparation of draft laws of ukraine and other normative legal acts included in the list of draft laws and their adoption; 8) monitoring of the implementation of legislative acts of ukraine (vidomosti verkhovnoi rady ukrainy, 2004). a key role in the process of adapting national legislation to eu legislation in the field of public service is played by the institutional mechanism or a set of relevant institutions. in accordance with part viii of the law of ukraine “on national program for adaptation of ukraine’s legislation to eu law”, such institutions include the verkhovna rada of ukraine, the cabinet of ministers of ukraine, the authorized central executive authority in the sphere of adaptation of ukrainian legislation to the legislation of the european union, which is represented by the ministry of justice of ukraine. the verkhovna rada of ukraine has to perform the following functions: 1) to ensure the implementation of the program on issues that place under the competence of the verkhovna rada of ukraine; 2) to consider draft laws of ukraine developed for the program’s implementation; 3) to define the goals and tasks of the second and subsequent stages of the program implementation, establish their time limits; 4) in case of need, to amend the program; 5) to hear a report on the state of the program every year; 6) to provide expert examination of the legislative proposals, submitted to the verkhovna rada of ukraine by all subjects of the legislative initiative, on their compliance with acquis communautaire at all stages of the consideration of bills (vidomosti verkhovnoi rady ukrainy, 2004). the fact should be separately emphasized that, in order to facilitate the implementation of the european integration aspirations of ukraine, the verkhovna rada committee on european integration was formed, which was responsible for monitoring of the implementation of the national program for adaptation of ukraine’s legislation to eu law. in order to improve the activity of the verkhovna rada of ukraine relatively adaptation of the national legislation to the eu legislation, recommendations on internal reform and capacity building for the verkhovna rada of ukraine, approved by resolution of the vru dated march 17, 2016, no. 1035–19, consolidated a number of provisions. in particular, it is determined that: 1) in order to improve regulation of the legislative process, the verkhovna rada of ukraine, in particular, the verkhovna rada committee on european integration, should develop and approve annual work plans on approximation of the legislation (in a close cooperation with the cabinet of ministers of ukraine and people’s deputies of ukraine); 2) the verkhovna rada of ukraine has the right to expect that all draft laws submitted by the cabinet of ministers of ukraine will be accompanied by an explanatory memorandum (certificate, conclusion) regarding their compliance with the obligations under the association agreement; 3) the ability of the committees of the verkhovna rada of ukraine in the area of approximation of ukrainian legislation to the european union law should be strengthened, in particular, by establishing a responsible person for such work in each committee, taking into account the need to increase the level of cooperation between the committees of the verkhovna rada of ukraine; 4) in line with the increasing capacity of secretariat of cabinet of ministers of ukraine and in order to ensure the implementation of a qualified expert examination on the compliance of the european union law and obligations under the association agreement, it is necessary to strengthen the workforce capacity of the verkhovna rada of ukraine, as well as the secretariat of the verkhovna rada committee on european integration. relevant employees should be provided with the opportunity to familiarize themselves with the best practices of the european union and exchange of advanced practices in this area (working out draft laws, implementation and monitoring of the realization of approximated legislation, and the legislation weaknesses assessment). the next institution that is responsible for adapting national legislation to the eu legislation is the cabinet of ministers of ukraine, which performs the following tasks in this area: 1) ensures the program’s implementation, except matters related to the competence of the verkhovna rada of ukraine; 2) approves, after approbation by committee of the verkhovna rada of ukraine on european integration, an annual plan of measures for the program implementation; 3) annually provides expenditures for the program implementation measures in the projects of the state budget of ukraine (vidomosti verkhovnoi rady ukrainy, 2004). as a part of secretariat of the cabinet of ministers of ukraine, the bureau of european integration was baltic journal of economic studies 61 vol. 4, no. 2, 2018 formed, the main tasks of which are organizational, expert-analytical, informational, and other support for maintenance of the activities of the cabinet of ministers of ukraine, government committees, the prime minister of ukraine, the first vice prime minister and vice prime ministers, minister of the cabinet of ministers of ukraine and his deputies on issues of coordination, continuity and consistency of implementation of state policy, including on approximation of ukrainian legislation to the eu legislation (polozhennia pro biuro yevropeiskoi intehratsii sekretariatu kabinetu ministriv ukrainy). the ministry of justice of ukraine acting as the authorized central executive body in the sphere of adaptation of ukrainian legislation to the legislation of the european union: 1) annually submits proposals, in due order, on measures financing for the program implementation to take them into consideration in the draft of state budget of ukraine to the ministry of finance of ukraine; 2) together with committee of the verkhovna rada of ukraine on european integration, monitors the program implementation; 3) ensures implementation of the policy in the field of ukrainian legislation adaptation to the legislation of the european union; 4) performs scientific-expert, analytical, information and methodological support for the program implementation, translation of acts of acquis communautaire into ukrainian, and the preparation of a glossary of the terms of the acquis communautaire (vidomosti verkhovnoi rady ukrainy, 2004). in addition, accordingly to the resolution of the cmu dated october 15, 2004 no 1365, the coordination council for the adaptation of the ukrainian legislation to the legislation of the european union was established for the purpose of ensuring interaction between public authorities and non-state institutions during the implementation of the national program for adaptation of ukraine’s legislation to the eu law. the main task of the coordination council under the provisions approved by the specified resolution as follows: 1) proposals elaboration on cooperation development with the eu in the adaptation of ukrainian legislation to the european union one; 2) the formation of common approaches to the implementation of activities on adaptation of ukrainian legislation to the legislation of the european union; 3) determination of the list of executive bodies that are responsible for the organization of work on the adaptation of ukrainian legislation to the legislation of the european union; 4) preparation of the annual plan of measures for the implementation of the national program for adaptation of ukraine’s legislation to the eu law; 5) consideration of the state of implementation of the measures plan for the execution of the national program for adaptation of ukraine’s legislation to the eu law; 6) preparation and submission of annual report on the state of program implementation to the verkhovna rada of ukraine (postanova kabinetu ministriv ukrainy, 2013). however, the abovementioned bodies are not the only institutions, which are responsible for adaptation of the national legislation to the eu legislation. thus, sector ministries and other executive bodies implement the tasks of adapting legislation within their competence. some agencies and institutions also perform specific tasks, such as the national agency of ukraine on civil service and the national academy for public administration under the president of ukraine, responsible for training, retraining and advanced training of specialists in the field of european and euro-atlantic integration (adaptation of ukrainian legislation to the eu laws). according to the cmu resolution dated june 4, 2008, no. 528, it was created an institution with special competence in the sphere of adaptation of the national legislation to the eu laws in the field of public service – the centre for adaptation of the civil service to the standards of the european union (previously called “centre for support of civil service institutional development”). the main tasks of the centre are: 1) participation in the preparation of proposals on the formation of public policy and regulatory activities in the field of civil service and public administration, their adaptation to the eu standards, conduct of administrative reform and development of state institutions in the context of european integration of ukraine, the use of institutional instruments in ukraine; 2) scientific, expert, information-analytical, methodological, organizational, and other provision of preparation and implementation of programs and activities in the specified field; 3) improving existing and promoting the introduction of new standards and procedures for the work of civil servants and local self-government officials, the activities of state authorities and local selfgovernment bodies on the basis of best international practice; 4) participation in the implementation of modern information technologies in the work of state authorities and local self-government bodies; 5) advisory support of public authorities and local selfgovernment bodies, dissemination of legal, scientific and other information on the civil service and public administration, their adaptation to the eu standards, administrative reform and development of state institutions in the context of european integration of ukraine, in particular, the use of institutional instruments in ukraine; 6) participation in the implementation of cooperation between ukraine and the eu, consulting and methodological support and monitoring within the limits of its powers of executive authorities activity in fulfilment of obligations assumed by ukraine to the eu and international organizations; 7) assistance to the national agency of ukraine on civil service in fulfilling its tasks and functions regarding the use of institutional instruments in ukraine (postanova kabinetu ministriv ukrainy, 2008). baltic journal of economic studies 62 vol. 4, no. 2, 2018 4. conclusions clarified the essence and content of the process of adaptation of the national legislation to the eu legislation, as well as the list and institutions’ competence dealt with this problem, we will turn to the identification of the directions of increasing the efficiency of their activities. first of all, we think it is necessary to emphasize the most problematic aspects of adaptation of ukrainian legislation to the eu legislation in the field of public service in order to determine in the future ways of their solution, which will allow increasing the efficiency of the activities of mentioned institutions. for example, prylypchuk o.v., who has comprehensively analysed the problematic aspects of the problem under study, offers the following measures to resolve the existing problems related to the adaptation of the national legislation to the eu legislation: a) creation of one integral system of ukrainian legislation (combination of the adaptation process with the adoption of new regulatory legal acts to fill the gaps in the current legislation); b) the development by the state authorities of “harmonograms” in ukraine – schedules of legislation harmonization for certain branches of law; c) active involvement of foreign experts and maximum use of the eu technical assistance in adapting ukrainian legislation (prylypchuk, 2015); d) publications guarantee of the permanent reports of each responsible authority on the state of assistance in the implementation of the ukrainian legislation approximation to the eu legislation; e) establishment of an effective mechanism for the proper consideration of the recommendations of the eu institutions in order to stop the practice of ignoring them or “blind execution” (prylypchuk, 2016). in addition, the legislation in the field of public service, as any national legislation in the whole, is characterized by a large number of contradictions, gaps, and collisions, which greatly complicated the process of its adaptation. if in most european countries, at the stage of their aspiration for eu membership, this process took about seven years, but in ukraine this figure is twenty years, if counting from the moment of the chronological adoption of the first normative act in this sphere – resolution of the cabinet of ministers of ukraine dated june 12, 1998 no  852 “on launching the mechanism of ukrainian laws adaptation to the eu norms” (postanova kabinetu ministriv ukrainy, 1998). the above mentioned points out the necessity for systematic and meticulous work on the analysis and improvement of the existing legislation in the field of public service before the comparative analysis of the acts of the national legislation and the eu laws and adjustment them in line with each other. the existing problem is also complicated by the fact that ukrainian legislation in the field of public service is unified. the unsystematic nature of its structure, the collision of content as well as the presence of gaps combined with the unsettled process of rulemaking complicates adaptation of national legislation to the eu legislation, therefore, at the present stage, the responsible institutions for adaptation are required a simultaneous, integrated solution to a wide range of tasks, not only connected with the adaptation of national legislation to eu legislation, but also with the improvement of its content, legal technique, elimination of gaps, and systematization. an important step in improving the effectiveness of domestic institutions which are responsible for adaptation of the national legislation to eu laws in the field of public service is also the strengthening of cooperation with european experts on adaptation, especially in terms of the correct interpretation of acquis communautaire. however, the most urgent problem that requires an urgent solution is defined in the resolution of the verkhovna rada of ukraine dated march 17, 2016 no. 1035-19 “on measures implementation of recommendations on internal reform and increasing institutional capacity of the verkhovna rada of ukraine”: it is necessary to adopt a new law on the implementation of the association agreement and introduction of law rules of the european union instead of the obsolete law of ukraine “on national program for adaptation of ukraine’s legislation to eu law”. the transformation in the direction of statutory regulation of the adaptation process of ukrainian legislation to the eu legislation, as well as the process of rule-making in general, should be a significant shift that will promote the efficiency improvement of the activities of the above-mentioned institutions. references: vidomosti verkhovnoi rady ukrainy (2004) pro zahalnoderzhavnu prohramu adaptatsii zakonodavstva ukrainy do zakonodavstva yevropeiskoho soiuzu : zakon ukrainy vid 01.10.2011 № 1629-15 [on national program for adaptation of ukraine’s legislation to eu law: the law of ukraine dated 01.10.2011 no 1629–15]. vidomosti verkhovnoi rady ukrainy, no. 29, art. 367. smoliarova, m.l. poniattia ta zmist adaptatsii zakonodavstva pro pratsiu ukrainy do zakonodavstva yevropeiskoho soiuzu [the concept and content of the adaptation of the labour legislation of ukraine to the legislation of the european union]. retrieved from: www.nbuv.gov.ua/ tarasov, o.v. adaptatsiia, implementatsiia chy harmonizatsiia prava yes? [is it adaptation, implementation or harmonization of the eu law?]. retrived from: http://dspace.nulau.edu.ua/ iakoviuk, i. (2012) adaptatsiia i harmonizatsiia zakonodavstva v umovakh intehratsii: problema spivvidnoshennia [adaptation and harmonization of legislation in terms of integration: the problem of correlation]. visnyk akademii pravovykh nauk ukrainy, no. 4, pp. 29-42. baltic journal of economic studies 63 vol. 4, no. 2, 2018 pro zatverdzhennia metodyky vyznachennia kryteriiv yevrointehratsiinoi skladovoi derzhavnykh tsilovykh prohram : nakaz ministerstva ekonomiky ta z pytan yevropeiskoi intehratsii ukrainy vid 16.03.2005 №  62 [on approval of criteria  for the  european integration  part of the  state target programs: the order of the ministry of economy and european integration of ukraine dated 16.03.2005 no 62]. retrieved from: http://zakon5.rada.gov.ua/laws/show/z0438-05 ievhlevska, o.l. (2009) adaptatsiia zakonodavstva yak umova maibutnoho chlenstva ukrainy v yevropeiskomu soiuzi [adaptation of legislation as a condition for ukraine’s future membership in the european union]. derzhavne budivnytstvo ta mistseve samovriaduvannia : zb. nauk. pr., kharkiv: pravo, pp. 118-129. pro zakhody z realizatsii rekomendatsii shchodo vnutrishnoi reformy ta pidvyshchennia instytutsiinoi spromozhnosti verkhovnoi rady ukrainy: postanova verkhovnoi rady ukrainy vid 17.03.2016 № 1035-viii [on measures implementation of recommendations on internal reform and increasing institutional capacity of the verkhovna rada of ukraine: the resolution of the verkhovna rada of ukraine dated 17.03.2016 no 1035-viii]. retrieved from: http://zakon3.rada.gov.ua/laws/show/1035-19 polozhennia pro biuro yevropeiskoi intehratsii sekretariatu kabinetu ministriv ukrainy: dokument yevropeiskoi intehratsii [the regulation on the bureau of european integration of the secretariat of cabinet of ministers of ukraine: european integration document]. retrieved from: http://www.kmu.gov.ua deiaki pytannia adaptatsii zakonodavstva ukrainy do zakonodavstva yevropeiskoho soiuzu : postanova kabinetu ministriv ukrainy vid 16.03.2013 № 1365-2004-p [some issues of adaptation of ukrainian legislation to the eu laws: the resolution of the cabinet of ministers of ukraine dated march 16, 2013 no 1365-2004-п]. retrieved from: http://zakon3.rada.gov.ua/laws/show/1365-2004-%d0%bf#n79 adaptatsiia zakonodavstva ukrainy do zakonodavstva yes: stattia [adaptation of ukrainian legislation to the eu laws: an article]. retrieved from: http://shev.gov.ua/ pytannia tsentru spryiannia instytutsiinomu rozvytku derzhavnoi sluzhby: postanova kabinetu ministriv ukrainy vid 04.06.2008 № 528 [on issue of center for support of civil service institutional development: the resolution of the cabinet of ministers of ukraine dated 04.06.2008 no 528]. retrieved from: http://zakon1.rada.gov.ua/ laws/show/528-2008-%d0%bf prylypchuk, o.v. (2015) problemy adaptatsii zakonodavstva ukrainy do zakonodavstva yes [problems of adaptation of ukrainian legislation to the eu legislation]. derzhavne budivnytstvo, no. 1. retrieved from: http://www.kbuapa.kharkov.ua/ prylypchuk, o.v. (2016) realizatsiia adaptatsii zakonodavstva ukrainy do zakonodavstva yes: normatyvnopravove ta orhanizatsiine zabezpechennia [implementation of adaptation of ukrainian legislation to eu legislation: legal and organizational provision]. teoriia ta praktyka derzhavnoho upravlinnia, no. 3 (54). retrieved from: http://www.kbuapa.kharkov.ua/ pro zaprovadzhennia mekhanizmu adaptatsii zakonodavstva ukrainy do zakonodavstva yevropeiskoho soiuzu : postanova kabinetu ministriv ukrainy vid 12.06.1998 № 852 [on introduction of the mechanism of adaptation of the legislation of ukraine to the legislation of the european union: resolution of the cabinet of ministers of ukraine dated 12.06.1998 no 852]. retrieved from: http://zakon2.rada.gov.ua/laws/show/852-98-%d0%bf baltic journal of economic studies 311 vol. 4, no. 1, 2018 corresponding author: 1 management of innovation and investment activity department, taras shevchenko national university of kyiv. e-mail: maksym.sitnicki@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-311-318 development of a model of digital research universities maksym sitnicki1 taras shevchenko national university of kyiv, ukraine abstract. the aim of the article is studying modern trends in digital development and developing a universal model of digital research universities. the methodology of the research is based on the use of methods: analysis and comparison for the study of scientific thought in the field of the introduction of digital technologies in the activities of research universities of systematization in the process of singling out the spheres of use of digital technologies in the activities of research universities; graphics for developing a model of digital research universities. the research results are manifested in the generalized development of global scientific thought for the period of 2011–2018. on the use of digital technologies in research universities in the united states, britain, germany, canada, australia, new zealand, ireland, italy, south africa, brazil, ireland, finland, india. the results identify the current trends in global scientific research on the introduction of digital technologies concerning issues: the effectiveness of the formation of students’ own curriculum; digitization of scientific information; the emergence and development of digital scholarships in scientific libraries; studying the correlation between the number of downloaded articles from the digital space and the number of new articles being written; a reappraisal of the revolutionary role of digital technologies in the social sciences; the rationale for american scientists to create a new model that provides access to the academic platform for a global society; intensification of the exchange of digital data; analysis and comparison of advantages and disadvantages of digital storages; search for new components of research tools based on the study of digital methods; the global development of digital technologies and the enhancement of the effectiveness of digital research cooperation; the widespread use of the internet and other digital resources on the activities of research universities to improve the quality and semantic consistency of metadata, allowing to identify the digital preservation of research material. the proposed author’s definition of “digital research university” harmonized the scientific categorical apparatus in accordance with modern trends in the development of digital technologies in research universities. the practical implications of introducing this category in widespread use will be reflected in the rethinking of the role of research universities and the search for new forms of introducing digital technologies. the difference between the proposed category and the term “digital university”, already used in scientific consumption, is the wider coverage of the characteristics of research activities of research universities using digital technologies. the systematization of the use of digital technologies in research universities has made it possible to identify ten main areas: automation of the management systems of research universities digitizing literary sources in scientific libraries; automation of the educational process; online teaching; conducting final control; repository of diploma and doctoral thesis; student, teaching and research social networks; implementation of joint research online in digital networks; exchange of scientific data. identified spheres form a system of digital means for the educational and scientific activities of research universities. their characteristics allow highlighting the effects that arise in the process of introducing digital technologies in research universities. a three-level model of digital research universities has been developed. it combines nine basic elements: electronic portfolio; digital depository; digital training of teachers and researchers; an online platform for teaching; r&d market; research framing; virtual social networks; digital research networks; evaluation of research quality. the proposed three levels of the model reveal the basic role of its elements for the digital development of research universities and provide: the necessary internal infrastructure; maximizing the effects of using digital technologies; international subjectivization of research universities. the author’s definition of each element of the developed model is provided, disclosed their digital purpose, and enriched the categorical apparatus. the practical significance of the developed model is ensuring that the maximum is obtained from the use by the research universities of the digital technologies of the present, and waiting for humanity in a strategic future. key words: model of digital research universities, areas of use of digital technologies, modern trends in digital research, research universities. jel classification: f02, m15, c59, b22 baltic journal of economic studies 312 vol. 4, no. 1, 2018 1. introduction traditional forms of research universities are already working at the limit of their technological capabilities. this can be traced on an equal basis, both in educational and research activities. internet technologies and the ever-increasing opportunities for the digitization of knowledge make it possible to effectively study not within the walls of universities. knowledge transfer technologies have received new digital forms, and now anyone can get a university education from online sources. of course, the high role of the professor at the university will not be replaced by robotics and the need for live communication, consultations, and discussions will remain relevant. truth is born in the process of reflection, collective thinking, and creative atmosphere. these conditions are provided by classical research universities. but we should not exclude the appearance of such machines that will replace these supercomplex human relations and bring human processes of learning, thinking, and scientific search closer to them, and even surpass them. considering this novelty of the research topic, the modern trends in the transition to the digital space of all managerial processes are modernized and are relevant in view of the important research task  – to increase the efficiency of research universities in the digitalization era. the aim of the research is studying the current trends in digital development and the development of a universal model of digital research universities. to achieve the aim in the work, the following tasks are set: – to analyse literary sources in order to identify current scientific trends in the use of digital technologies by research universities; – granting of the author’s definition of the economic category “digital research university”; – to systematize and characterize the use of digital technologies in research universities; – to develop and characterize the model of digital research universities that will correspond to the technologies and processes that humanity expects in the strategic future. to solve the tasks and achieve the research aim, the following scientific methods are used: analysis, systematization, comparison, graphic. 2. literature review the conceptual study (liu, wang & cheng, 2011) shows how in the framework of global higher education world-class universities are considered as elite research universities. they play an important role in the development of human resources and the creation of new scientific information in the context of a knowledge-based economy. in this study (lynch & carleton, 2012), the reasonably important thesis is that the future of scientific libraries will be shaped by the wider development of research universities in the fields of digital creation, exchange, dissemination, and translation of knowledge. the book is published in great britain by authoritative scientists (goodfellow & lea, 2013). the authors describe the category “digital university”; study the issue of digital literacy in universities; the value of digital texts; the practice of academic literacy around twitter; lead effective practices for the dissemination of literacy, e-learning in a digital university; characterized digital cognitive literacy; investigate how digital literary knowledge affects the scientists and students’ behaviour; propose new approaches to the creation of digital content and cooperation. in work ( jagdish, kruti & ajit 2013) the effect of granting to 50th indian universities of electronic access to national and international scientific journals from the consortium of digital libraries is investigated. a  strong positive correlation is found between the number of articles downloaded by these 50 universities from available digital resources and research publications that were published after receiving this access. research (dutton, 2013) aims to help translate the diversity of perspectives that digitalization of the social sciences can bring. the further dissemination of digital research makes it increasingly important to strengthen the role of social sciences in interdisciplinary studies at the global level. using digital tools and techniques in archaeological research (agbe-davies, galle, hauser, & neiman, 2014), digital technology has revolutionized the rethinking of digital archaeological data. the authors conclude that digital technology was an underrated resource for practice and learning. the study is devoted to the development of american research universities, constantly dominating the world rankings (crow & dabars, 2015). the authors justify the need to create a new model that provides access to the academic platform to a wide range of representatives of society. the issue of the exchange of digital research data is considered in the work (bishoff & johnston, 2015). it is established that this practice is becoming more common, taking into account the requirements of publishers of journals, global scientific associations, and public expectations about the creation of more interdisciplinary research environments. the development of digital technologies in germany is shown in the work (roberta, tim & silke, 2015). authors are invited to review three projects focused on the use of digital tools implemented by an interdisciplinary team of scientists based on the goethe universität frankfurt. this study analyses, compares, and demonstrates the shortcomings of digital storage in six arab universities: alexandria university, damascus university, khartoum university, king saud university, petrol and minerals university and nayef university of the security sciences. this work (shin & lee, 2015) focuses on researching universities as a part of korea’s national research system. digital support for the economic development of the baltic journal of economic studies 313 vol. 4, no. 1, 2018 country is due to the innovative development of korean research universities. the study argues that digital methods are increasingly becoming key components of research tools (sparks, collins, & kearns, 2016). there are three special issues that are crucial for researchers working with digital methodologies: the ethical consequences of procedural violations, institutional responses in a neo-liberal university and the well-being of researchers. the authors insist that researchers continue to move the boundaries through digital research, but suggest that this should be done in a weighted way, given the immanent potential of digital disturbances. the possibilities of digital technologies are deeply analysed in the study (hargittai, & sandvig, 2016). the field of digital technologies offers both new research methods and new objects of study. since the digital environment is constantly evolving, researchers sometimes have to improvise, change their plans, and adapt. research (canhoto, quinton, jackson, & dibb, 2016) analyses the process of digital research collaboration between research universities, industry, and scientists in the context of implementing digital research projects. the authors proposed five practical principles for the successful development of joint research projects in the context of university cooperation in the uk. this work (tsatsou, 2016) shows a qualitative study of the use of digital tools, resources, and services by researchers in the uk. the author shows the use of digital research tools at the design stage of research to collect data and disseminate the results. also, the complexity and multiplicity of digital tools, resources and services used in research are assessed. the paper concludes that there are certain commonalities and differences in the practice of researchers with digital technologies, and this practice largely depends on the experience of researchers in conjunction with the relevant disciplinary traditions and etiquette. research (grimaldi, cavagnero, & gallina, 2016) focuses on the perception of postmodern generations of information retrieval in the digital space. the survey was conducted among 151 students of the first year of teaching at the faculty of education of turin university (2014–15). the activity on the internet and the perception of the economic value that respondents attribute to the information they find on the internet every day are analysed. in this study (barana, bogino, fioravera, marchisio, rabellino, 2016), the digital project “orient@mente”, developed by the university of turin from the 2014/2015 academic year, is analysed. the concept of the project is supporting students in the formation of their own curriculum at the university. students’ feedback shows a high appreciation for these innovative teaching methods and digital devices for studying mathematics and other disciplines. in the future, the university of turin is interested in expanding similar technologies with a focus on other courses. the issue of open education with access to social networks is explored in the work (fan & liu, 2016). it shows how universities, through an open access to knowledge, promote the development of many academic values through greater openness to society. using the example of a study of start-ups, the scale of the study of the digital economy in poland is shown (skala, 2016). the study presents the first survey in polish companies related to the digital economy. the study (primary research, 2016) provides detailed data on how faculties evaluate the efforts of their university for reporting, the publication of research results and other activities in the digital environment. the survey data is based on a survey of more than 500 scientists from more than 50 leading research universities in the us, canada, britain, australia, new zealand, and ireland. in work (koopman, & de jager, 2016), the features of storing and managing digital data on the example of institutions in south africa have been explored. it turned out that, although some researchers were already engaged in digital archival data in storage facilities, neither researchers nor universities carried out systematic management of research data. this book (stensaker, bilbow, breslow, & van der vaart, 2017) highlights various approaches and concrete examples of how world-class research universities from around the world work to improve teaching and learning. broad university initiatives and approaches in the field of introducing digital technologies are shown. the study (firima zona, ridwan, & uli agustina, 2017) examines in detail the impact of widespread use of the internet and other digital resources on reading habits and gave practical recommendations for improving the abilities of readers in the digital age. in work (hladik, 2017), the growing use of digital technologies in scientific work and communication in a university environment is explored. a particular attention is paid to the concept of the code of knowledge as a literary technology and the role of digital technologies in the humanities. digital technologies of an online class are investigated in work (boria sax, 2017). it is revealed that the electronic portfolio of educational material, the student communities are more interested, can continue to develop and expand independently even after the end of the training period. a classification of digital funds is carried out, using both statistical significance and the effects of differences among 902 universities in 54  countries (leydesdorff, bornmann, & mingers, 2017). the authors focus mainly on great britain, germany, and brazil. considered (lebard, brynn hibbert, & quinnell, 2017), how new digital technologies affect the cultivation of university science. the authors introduce the concept of the electronic laboratory notebook computer (eln), which is used in the research environment, and describe how they implemented it as a tool to provide students with a basic research experience. baltic journal of economic studies 314 vol. 4, no. 1, 2018 research (fierro, cardona arbelaez & gavilanez, 2017) reveals new horizons of international education in the digital age, has undergone significant changes. digital platforms have greatly facilitated students’ access to academic information. the importance of digital marketing and its components in international education for improving business practices is grounded. research (cox, 2017) shows new scientific needs, global events, and shifts, require a wider range of interaction of librarians with researchers and contradict the previous organizational structures. the paper shows the special circumstances at the national university of ireland galway, which formed a system for stimulating the work of the library staff. these include: the emergence of digital scholarships, the convenient technology of the research building, investing in digital archives and updating the digital strategy. finland’s experience in implementing information systems and harmonizing obsolete data models has been studied in the work (remes, alonen, maltusch, hällström & westman, 2017). it is established that the more investing in open science and research, the more it becomes necessary that the metadata that allows identifying the digital preservation of research material be qualitative and semantically consistent. in work (yan, & zhang, 2018), the scientific reputation of researchgate is analysed as one of the largest active academic sites of social networks in the world. this study collects rg user data from 61 us research universities at different levels of research, classified by carnegie institutes of higher education, to examine the impact of institutional differences on rg's reputation. the results confirm that rg is a scientific-oriented scientific social networking site, closely and realistically reflects the level of research activities of institutions. with the increase in the level of research activity of the university, its affiliated rg users tend to have larger rg scores, more publications and citations, as well as more views and followers, while the average number of readings of their publications and words is usually lower. 3. results definition based on the research conducted by the authoritative scientists in the field of digital content of research universities, it is established that the term “digital university” was widely accepted and characterized (goodfellow & lea, 2013, p. 2). the main emphasis is placed on the fact that, in the face of broad technological and structural changes, it became necessary to combine various forms of social practice around learning and technology. along with this, scientific activity has not found its full expression in this category. considering this, there is a need to introduce the economic category “digital research university” into scientific circulation, which will fully allow expressing the purposes and activities of these institutions. so, let us describe and characterize the author’s definition. digital research university is a research and educational institution that carries out its activity on the basis of automation of educational and research processes and provides a complete digital cycle for the creation, codification, archiving, storage, exchange, retrieval, and broadcasting of scientific and educational information that was created as a result of research activities. spheres of use of digital technologies in research universities based on the above definition of a digital research university, let’s systematize the use of digital technologies in research universities, table 1. table 1 areas of use of digital technologies in research universities № areas effects 1 automation of control systems of research universities optimization and efficiency improvement: – accounting and attestation of personnel; – financial management and reporting; – control over fixed assets; – accounting for applicants, students, and graduates; – security systems of the university. 2 digitization of literary sources in scientific libraries – improving the efficiency of searching for necessary literature; – providing the ability to view the sources of an unlimited number of users; – preservation (archiving) of valuable copies in electronic form. 3 automation of educational process – opportunity for students to form their own curriculum independently; – convenience in scheduling classes and consultations; – comfort of the evaluation process and the confidentiality of the presentation of the awarded points. 4 online teaching – expansion of the audience of listeners, both in the middle of university networks and providing wide access in the global environment; – wide possibilities of attraction to the educational process of auxiliary methodical materials and developments; – possibility of introducing paid courses for all those interested in the external environment, the account of listeners. baltic journal of economic studies 315 vol. 4, no. 1, 2018 model of digital research universities let’s develop a model of digital research universities that will correspond to technologies and processes that are relevant today and are waiting for humanity in a strategic future. a three-level model is developed, fig. 1, which clearly illustrates processes and infrastructure units, uses digital technologies in research universities, and is focused on providing not only modern needs but also hypothetical needs arising in the strategic future. let us characterize the components of this three-level model. 1. e-portfolio is a set of digitized educational and research materials of scientific and pedagogical staff of research universities, virtually displays the full set of tools and methods used in the training and research activities of employees. 2. digital depository is the basis of digitized educational and scientific literature that is contained in virtual archives of scientific libraries of research universities and databases. 3. digital training of teachers and researchers is a process of development that provides for the systematic upgrading of the scientific and pedagogical staff of research universities for the free use of digital technologies in educational and scientific activities. characterized elements represent the first level of the model reflecting the necessary internal infrastructure and processes in research universities to enable the introduction of digital technologies. 4. online teaching platforms is the availability of own and use of public platforms that serve as a means of digital communication between teachers of academic courses and training programs and students and volunteers. 5. r&d market is an infrastructure that provides effective communication between performers of 6 conducting the final control (testing, interview, compilation of intermediate control works, etc.) – increase the flexibility of the educational process; – automation of work verification and evaluation of results; – standardized tasks, equal conditions for students; – optimization of working hours of research university staff. 7 diploma and doctoral thesis repository – automatic verification of academic virtue; – systematization of scientific research directions; – the possibility of providing global online access to scientists from other universities or academic institutions. 8 student, teaching and research social networks – operational communication; – search for partners for educational and scientific interests; – formation of joint teams and teams. 9 carrying out joint research online in digital networks – optimization of time for interpersonal communication; – joint writing and editing of scientific texts; – operative analysis and discussion of the results of laboratory tests and experiments; – setting up professional software. 10 exchange of scientific data – online seminars, conferences, webinars; – online publication of scientific research results; – general bases of statistical and scientific information. source: developed by the author end of table 1 online teaching platforms r&d market research framing e-portfolio digital repository digital training of teachers and researchers virtual social networks digital research networks assessment of research quality i level ii level iii level fig. 1. model of digital research universities source: developed by the author baltic journal of economic studies 316 vol. 4, no. 1, 2018 scientific, research, theoretical and experimental research works and customers, buyers, and investors. 6. research framing is the process of mental classification by scientists of clusters of digital research information and ideas in the modern discourse of digital technologies, helps scientists to perceive development trends and use new digital technologies. elements that form the basis of the second level of the model contribute to maximizing the benefits and effects from the use of digital technologies in the educational and scientific activities of research universities and provide the process of rethinking and setting new tasks for digital modernization. 7. virtual social networks is a digital infrastructure that provides an instant communication process between teachers and scientists with the purpose of exchanging ideas and forming communities that realize joint thoughts. 8. digital research networks are territorial, interstate, and intercontinental scientific research associations in the digital space, ensuring the exchange of experimental data and results of laboratory research and implementation of joint scientific projects. 9. assessment of research quality is a system that provides assessments of the global significance of scientific research results using the tools of digital space. the given elements of the third level of the model contribute to the international subjectivization of research universities and the development of science through global research activities in joint transboundary networks and consortia. the overall balance of the developed model is ensured by the close interaction of its elements. the digital space gives unlimited possibilities of the flexibility of these elements and maximization of effects from their use by research universities. the model is universal and developed for the implementation by research universities, both elite world class, and those that seek to obtain such a status in a global environment. 4. conclusions having studied the development of scientific thought for the period of 2011–2018 regarding digital technologies, it has been established by the example of the research universities of the usa, great britain, germany, canada, australia, new zealand, ireland, italy, south africa, brazil, ireland, finland, india, that the current trends in digital research of scientists are: – the effectiveness of students forming their own curriculum in research universities; – digitalization of the archiving of scientific information in research universities; – emergence and development of digital scholarships in research libraries of research universities; – rationale for the need to identify elite research universities; – study of the correlation between the number of articles downloaded from the digital space and the number of new articles written in research universities; – reassessment of the revolutionary role of digital technologies in the rethinking of digital archaeological data is being studied by research universities; – justification by american scientists of the need to create a new model that provides access to the academic platform for a wide range of representatives of the global society; – issue of intensification of the exchange of digital data between research universities and the role of scientific social networks in this; – analysis and comparison of advantages and disadvantages of digital storages in research universities; – search for new components of research tools based on the study of digital methods; – effective ways of developing digital technologies in research universities should be based on a balanced approach and risk analysis; – expanding and enhancing the effectiveness of digital research cooperation between research universities in the world; – impact of widespread use of the internet and other digital resources on the activities of research universities; – improving the quality and semantic consistency of metadata, allowing to identify the digital preservation of research material. in fact, the above-mentioned areas of digital development in research universities are a priority in the scientific research of scientists from all over the world. the proposed author’s definition of the economic category “digital research university” harmonizes the scientific categorical apparatus in accordance with modern trends in the development of digital technologies in research universities. its difference from the term “digital university”, already used in scientific consumption, consists in a wider coverage of the characteristics of scientific activity of research universities using digital technologies. the systematization of the use of digital technologies in research universities has made it possible to identify ten main areas: automation of the management systems of research universities digitizing literary sources in scientific libraries; automation of the educational process; online teaching; conducting final control; repository of diploma and doctoral thesis; student, teaching and research social networks; implementation of joint research online in digital networks; exchange of scientific data. it is established that these spheres form a system of digital means for the educational and scientific activities of research universities. their characteristics allowed us to highlight the effects that arise in the process of introducing digital technologies in research universities. the developed model of digital research universities has united nine basic elements: electronic portfolio; digital baltic journal of economic studies 317 vol. 4, no. 1, 2018 depository; digital training of teachers and researchers; an online platform for teaching; r&d market; research framing; virtual social networks; digital research networks; evaluation of research quality. this model is presented in a three-level form. the proposed three levels reveal the main role of the model elements for the digital development of research universities and provide: – necessary internal infrastructure and processes to enable the introduction of digital technologies; – maximizing the benefits and effects of using digital technologies in the educational and research activities of research universities and providing a process of rethinking and posing new tasks of digital modernization; – international subjectivization of research universities and the development of science through global research activities in joint transboundary networks. the characteristics of the elements of the developed model, in fact, allow providing the author’s definitions of each of them, disclose their digital purposes, and enrich the categorical apparatus. the practical significance of the developed model is designed to provide the maximum from the use of digital technologies present and waiting for humanity in a strategic future. it is precisely the appraisal of existing and identification of new directions for the digital development of research universities that will be devoted to our further scientific research in this direction. references: abd allah mohamed abd allah aalyateem, nawaf bandr bn hameed. 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(2018). regular article: research universities on the researchgate social networking site: an examination of institutional differences, research activity level, and social networks formed. journal of informetrics, 12: 385-400. doi:10.1016/j.joi.2017.08.002 baltic journal of economic studies 118 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 dragomanov ukrainian state university, ukraine (corresponding author) e-mail: liliya.derman@gmail.com orcid: https://orcid.org/0000-0001-7408-7645 researcherid: hoc-5050-2023 2 dragomanov ukrainian state university, ukraine e-mail: b.v.skovronskyy@udu.edu.ua orcid: https://orcid.org/0000-0001-5413-6630 researcherid: hoc-7440-2023 3 dragomanov ukrainian state university, ukraine e-mail: s.s.rusakov@udu.edu.ua orcid: https://orcid.org/0000-0002-8494-9445 researcherid: k-8747-2018 doi: https://doi.org/10.30525/2256-0742/2023-9-2-118-128 fashion industry in ukraine: development and prospects lilia derman1, bohdan skovronskyi2, serhii rusakov3 abstract. the purpose of the article is to summarize and present the life cycles of the ukrainian fashion industry, its origin and development within its period, and in particular, during the period of full-scale russia's invasion of ukraine. methodology. the specifics of the study logically influenced its methodological foundations. as a result, the following methods were used: analysis, synthesis, analogy, comparative history and systematic approaches. this methodological framework allowed to compare the growth and development of the fashion industry in ukraine and worldwide in historical, cultural and fashion discourses. the findings presented in this paper are based on research conducted with associations, agencies and retailers in ukraine. results. the study highlights the potential and direction of development of the ukrainian fashion industry, as well as the economic situation and changes in consumer behavior during the years of ukraine's independence and the war period. practical implications. in times of war, the younger generation has higher income expectations than the market currently provides. the older generation, on the other hand, has shown greater caution and frugality, as well as lower income expectations. in such a situation, it is crucial to promote creative businesses that can provide high-paying jobs for the younger generation, as well as the garment industry that appeals to older workers. scientific novelty. the concretization of the scientific novelty is represented in the understanding of the essence of the fashion business in ukraine and its potential impact on the solution of socio-cultural, economic and environmental problems. the importance of further development of the fashion industry in ukraine in the context of contemporary transformations is outlined. key words: fashion industry, art industry, designer brands, cultural brands, retail, international subcontracting, creative economy, relocation, changing the business line, investment, sustainable development. jel classification: l67, l81, e30, n30 1. introduction ukraine became an independent state at the beginning of the 1990s. the transition period, characterized by a difficult economic situation and political changes, had a significant impact on all processes related to the formation and development of the ukrainian fashion industry. the fashion industry as such did not exist in ukraine during the first decade of the 1990s. there was a shortage of food and non-food items in stores due to high inflation. people waited in line for hours or even days to buy clothes. with the collapse of the soviet union, the government no longer had a monopoly on clothing production in ukraine. as a result, a so-called "free market" was established, where goods were sold on spontaneous markets and prices were set by the sellers themselves. typically, these goods were imported from neighboring countries such as poland, hungary, etc. at that time there was no clear and well-established economic form or specific legal standards for regulating these processes. however, over the next 5-10 years, baltic journal of economic studies 119 vol. 9 no. 2, 2023 ukraine developed regulations for businesses, tax and customs systems. notably, ukraine inherited the term "light industry " from the former soviet union. in turn, light industry serves as the oldest multisectoral industrial complex producing consumer goods. this includes the manufacture of textiles, accessories, sewn and knitted clothing, footwear, leather and leather goods, accessories, and toys. light industry enterprises also produce goods that can be used in production, such as cordage, ropes, synthetic leather, etc. according to the classifier of economic activities, the light industry of ukraine consists of 23 categories of economic activities, which are divided into three main groups. at the time of the collapse of the soviet union, there were about five thousand garment factories on the territory of today 's ukraine. in 1991 the number of such enterprises was halved. since the beginning of the 1990s, the production of light industry in ukraine has decreased about 10 times. this was mainly due to the collapse of economic relations. the number of employees decreased from 750 thousand in 1990 to 72 thousand in 2015. almost all of the companies in this diversified complex have been privatized, leaving less than 1% in state ownership. modern light industry is dominated by small and medium-sized enterprises, while women make up 90% of the workforce. the professional infrastructure of clothing enterprises inherited from the soviet union became a prerequisite for the development of the ukrainian fashion industry. in the 1930s, the first centers of the garment industry were established in kharkiv, which was the capital of ukraine until 1934. the central research laboratory of the clothing industry, specializing in the design of industrial clothing patterns, was one of the first state institutions established in the city. the kyiv house of fashion models (khfm), the first model house in ukraine, was founded in 1944 under the artistic direction of n. lozovsky. the artists of the lviv house of models, founded in 1953, were the first to experiment in this field, and the ukrainian theme later became one of the leading themes for many ukrainian fashion designers. at that time, ukrainian clothing companies did not have enough goods of their own production. as a result, hard to find and expensive raw materials for the production of finished goods were a challenge for the majority of enterprises. this is one of the factors that contributed to the development of "clothing markets", where consumers could buy lowquality items of standard style. a difficult economic situation in the country, when the average income was 10 c.u. (conventional units), affected the consumption of fashion goods. in the 1990s, it was common to buy clothes in design studios and "model houses", where clothes were made to measure at relatively high costs. simple, widely available, and inexpensive clothing became uninteresting; therefore, the typical consumer wanted to express himself through his clothing. individuals typically purchased the textiles from which skilled seamstresses made customized garments. as a result, the consumption of one-of-a-kind goods outpaced that of commercially available goods. in addition to sewing, knitting and needlework became popular. this was the beginning of recycling, which is still practiced today. the first step towards the establishment of the ukrainian fashion industry was taken in 1997 by a group of like-minded professionals who wanted to organize a fashion week in ukraine. this was the first step towards the creation of the ukrainian fashion business. in an official letter to the french fashion chamber, volodymyr nechyporuk, serhiy byzov, iryna danylevska, liliya pustovit and sonya zabuga asked for regulations on the organization of a fashion week. therefore, in 1997, these actions led to the creation of fashion seasons, and then, in 2006, the event was renamed ukrainian fashion week. this ceremony was recognized as the first professional ukrainian fashion platform, and it was at this time that the first ukrainian designers or clothing manufacturers presented their collections in the prêt-à-porter segment. these designers often lacked the proper professional qualifications, but at the time they offered a completely fresh perspective on the world of fashion, breaking the patterns and aesthetics that prevailed during the soviet union. the first designers who formed the elite of ukrainian fashion and the vector of its development were: oleksii zalevskyi, serhii yermakov, liliya pustovit and serhii byzov, olena vorozhbyt, tetiana zemskova, angela lysytsia, diana dorozhkina, oksana karavanska, liliya litkovska, olena serebrova, mykhailo voronin, viktor anisimov and others. the next step in the development of ukrainian fashion week (ufw) was the creation of initiatives such as odessa holiday fashion week, which ran from 2007 to 2017 and featured cruise fashion shows. in 2014, the projects new names and fresh fashion (2003 and 2006) merged into a new initiative called new generation day. this event took place at ufw on the day when "emerging" ukrainian designers showed their collections. in particular, with the help of the ufw, the national fashion award ("best fashion awards") was launched in 2010 to honor the personalities and leaders of the ukrainian fashion industry who contribute to its development. in 2005, the international public organization "public ukrainian fashion council" (ufc) was established to promote the development of professional activities of the fashion industry in ukraine and worldwide. the core mission of baltic journal of economic studies 120 vol. 9 no. 2, 2023 the organization is to facilitate contacts between designers, government agencies, manufacturers, retailers and other members of the fashion community, both local and international. in addition, the organization develops initiatives to address the priorities of the industry. for their part, the ufw and ufc organize and implement programs that promote the development and visibility of emerging designers. key events include the look into the future competition for young designers, which has been held annually since 2000, and the international young designers contest, which was initiated by the ufw in 2018 and has been held annually since then. before 2008, only kyiv had a significant presence in the fashion industry. since then, lviv has joined the development of the fashion industry by launching lviv fashion week. in 2020, ufw has established itself as a national initiative in the global fashion industry. at amazon tokyo fashion week (fashion experiment 01) in 2018 and new york (new york fashion week), the following ufw residents presented their ss19 collections: bobkova, dzhus, frolov, ruslan baginskiy, the coat by katya silchenko, valery kovalska and yelizavetta volosovska. today, the fashion industry in ukraine is growing at a moderate pace, with several nationally competitive fashion companies being established and expanding into international markets. the impetus for the development of the ukrainian fashion industry was an initiative called kyiv days fashion in 2010. it was basically a platform competing with ukrainian fashion week. mercedesbenz was the main sponsor of the event, which contributed to its worldwide reputation and naming as mercedes-benz kyiv fashion days (mbkfd). in particular, daria shapovalova and nina vasadze were the main coordinators and motivators. in addition to the fashion shows, mbkfd included a variety of other events, such as performances, installations, parties and educational sessions, where the leading authorities in the fashion industry gave their lectures. at the mercedes-benz fashion week event in kyiv, the top representatives of the fashion business such as international buyers, fashion editors, fashion critics and bloggers were always present in the front rows. mercedes-benz kyiv fashion days ended its activity in 2017, after a total of 15 seasons. the revolution of dignity that took place in 2013–2014, which raised the national spirit, also contributed to the development and international recognition of the ukrainian fashion industry. according to some experts, these events should have had a negative impact on the fashion business and set it back several years. however, these sociocultural, political and economic changes, as well as the war with russia, only boosted the spirits of designers, who united and worked extremely hard. the sense of national dignity and patriotism permeated all aspects of ukrainian society, including the fashion industry. ukrainian fashion designers and well-known companies offered clothes inspired by ukrainian culture. the collections were immediately popular. at the same time, they presented traditional ukrainian clothing transformed into contemporary designs that were popular with international celebrities, who wore outfits with ukrainian embroidery. famous fashion houses also adopted similar themes, incorporating ukrainian folk elements into their designs. since 2015, ukrainian designers have been actively exporting their unique clothing designs, which have become popular among influential people like bella hadid, emily ratajkowski, kim kardashian, and others. the revolution of dignity and the numerous initiatives of ukrainian designers have changed the public's attitude towards ukrainian goods. instead of being associated with "made in china", "made in ukraine" began to gain its own supporters. after all, the term "made in china" compared to "made in ukraine" indicated the perception of ukraine as a market with cheap labor and a fashion industry that could not produce high-quality and artistically interesting design products. however, inspired by ukrainian identity, interesting collections by ukrainian designers have radically changed this perception. during this period some ukrainian designers, including svitlana bevza, artem klimchuk, elena burenina, lake studio, poustovit, syndicate, ksenia schnaider, nadya dzyak, litkovskaya and others, presented their collections in paris and new york. some foreign retailers such as selfridges, barneys new york and 10 corso como also sell some ukrainian clothes created by ukrainian designers. from the early 1990s until about 2013, the majority of ukrainian designers worked independently. the emergence of a new generation of designers has changed this situation. the market is characterized by fierce competition, which has led to the emergence of a large number of diverse collaborations that offer new opportunities and prospects. in the creative sphere, examples of such partnerships are the cooperation of ukrainian designers with the film.ua group, private logistics companies such as nova poshta, etc. national and regional field business associations, including creative clusters, are currently being created in ukraine: ukrainian fashion week, ukrlehprom association, kharkiv fashion cluster, donbass fashion cluster, kyiv light industry cluster, western ukrainian fashion cluster, new fashion zone po, union of small and medium exporters pu, etc. baltic journal of economic studies 121 vol. 9 no. 2, 2023 thus, given the geographical, economic and political situation in ukraine, the fashion industry has been developing since the 1990s. these life cycles of the ukrainian fashion industry can be studied in a systematic way by looking at how the different stages and life cycles relate to each other. in this part, the covid-19 pandemic and other global economic and social conditions have brought ukraine to this point. 2. international subcontracting in ukraine it is possible to differentiate between companies that act as international subcontractors, brands and companies that act as designer brands. the pricing policy is developed according to this classification. however, many ukrainian companies are currently focused on promoting their own products rather than their cheap labor, which could be dumped. ukrlehprom, the ukrainian association of textile and leather industry enterprises, was founded in 2000. it is a voluntary association of 257 major enterprises of the garment industry, which together produce more than 60% of the total volume of goods produced in ukraine. in order to promote the development of garment and footwear producers, the association represents their interests before government bodies. according to the ukrlehprom association, at present, the ukrainian garment industry concentrates much more on international orders (international subcontracting or offshore assembly or production) (recycling or production abroad). according to the ukrlehprom group, these products account for 80 to 90 percent of the clothing industry. prominent foreign companies, especially fast fashion names, produce their goods in ukrainian textile factories. the largest importers of garment products (usually made-to-order) from ukraine among eu countries are germany (21.1% of imports), italy (19.4%), poland (10.4%), the united kingdom (9.5%), etc. the majority of ukrainian garment factories employ specialists with a high level of expertise. this allows them to reach both the ukrainian domestic market and international customers. santa-ukrainа was the first company to master international subcontracting, signing an agreement with the german company kaiser in 1993 for the production of men's trousers. after ukraine's independence, the company 's customer base grew to include next, mexx, laura ashley, bcbg, grossa moda and dolce & gabbana, as well as a dozen other european and american brands. it is even more paradoxical when these clothes return to ukraine under recognizable brand names. in the 1990s, the chernihiv elegant clothing factory received its first global subcontracting orders. it was a cooperation with consumers from the united states, for whom the factory produced coats. now the enterprise is able to produce 300 thousand pieces of ready-made clothing with the "made in ukraine" label. during the year, 99% of the factory 's services are provided by partners from the netherlands, germany, france, poland, lithuania, etc. before the war, the factory spent several years modernizing its operations at its own expense. since 2014 about 60% of the material and technical base has been modernized. ukrainian light industry enterprises have a wide geographical spread. some ukrainian garment manufacturers have worked or continue to work under the international subcontracting model. the largest of them include: "trembita", "volodarka", "elegant" (zaporizhzhia oblast), "elegant" (the city of chernihiv), "stritex" stryi garment factory, "halychyna", "luha", berdychiv clothing factory, closed joint-stock company "vesna zahid", tov "vaise-styl", tov "vd one", "mira 2007", "olteks", "polstar", "astra lux", arber fashion group, the "tekstyl kontakt"1. the majority of clothing companies continue to operate despite the war in ukraine. since 2016, when the eu-ukraine association agreement iv on a deep and comprehensive free trade area came into force, it has become easier to establish business relations under the international subcontracting model. hugo boss, douglas, mario dessuti, bexley, kaiser, roi robson, pierre cardin, dress master, mark spenser, new trend, mantex, benetton, kappahl, formens, nigitex, walker, polaris, sandro, de fursac, marc jacobs, comma and many others are just some of the well-known brands that are customers of ukrainian garment factories. it should be noted that smaller companies are more flexible and adaptable to social, economic and other changes. while it is easier for large companies to meet their responsibilities to suppliers and creditors, smaller companies are also capable of doing so. by buying in bulk, companies can get better deals on raw materials. large companies can invest more in modern technologies. working together under the international subcontracting model offers additional benefits. the client companies often invest in the modernization of their enterprises by purchasing equipment and 1 «трембіта», «володарка», «елегант» (запорізька обл.), «елегант» (м. чернігів), «стрiтекс» стрийська швейна фабрика, «галичина», «луга», «бердичівська швейна фабрика одягу», тов «весна-захід», тов «вайсе-стиль», тов «відіван-україна», «міра 2007», «олтекс», «полстар», прат «астралюкс», компанія «арбер фешн груп», компанія «текстиль контакт» baltic journal of economic studies 122 vol. 9 no. 2, 2023 installing modern technologies that meet all contemporary standards. 3. local companies with international representation during covid-19, a number of ukrainian apparel companies that had previously focused on the global market began to reorient themselves toward the domestic market. arber fashion group, "zhiva" and "vd one", among others, are some of the manufacturers that focus on the domestic market and enter the european market with their products. the production unit of arber fashion group, for example, produces more than 2 million items per year. "zhiva", which began its activity as an international subcontractor, now operates a clothing factory that produces about 3,000 units of high quality goods per month. the company produces products for the mass market. "vd one" initially produced uniforms for british police officers and dutch postal workers. currently, the company only fulfills its own orders. 4. socio-economic indicators of the fashion industry in ukraine in ukraine, the economic practice of business entities that are important players in the fashion industry market, i.e., those that truly serve as fashion designers, often differs from international practices. as already mentioned, the classification of ukrainian enterprises reflects the historically created clothing industry, which included model development as a component (design as a creative component). according to this system (the classification of economic activities, 2010), enterprises are registered, pay taxes, and carry out their activities in accordance with current legislation. the current leaders of the ukrainian fashion industry are registered as companies in the following industries 13 – textile manufacturing, 14 – clothing manufacturing, 15 – leather, leather products and other materials manufacturing, 46 – wholesale trade, except motor vehicles and motorcycles, 47 – retail trade, except motor vehicles and motorcycles, 74 – design (creative industries). for a comprehensive analysis of the ukrainian fashion industry market, despite the legal registration of items 13, 14 and 15 of the classification of economic activities, all elements that actually perform these activities were considered. in 2017, the cabinet of ministers of ukraine approved a list of enterprises classified as creative industries according to their activities. these included "specialized design activities" (74.10). 5. socio-economic indicators: exports and imports several factors have influenced the development of the ukrainian fashion industry, including geopolitical, economic, covid-19, global digiti zation, and, of course, the war related to the russian aggression against ukraine that began in 2013 and the full-scale invasion of ukraine on february 24, 2022. in recent years, ukrainian fashion brands have become more recognizable on the global stage. the activities of ukrainian companies in the international market have attracted the attention of fashion experts all over the world. this shows that ukrainian designers are capable of developing a suitable brand idea and making it physically distinctive. this is relevant not only for local customers, but also for international influencers. since the beginning of the revolution of dignity in 2013, ukrainian designers have expressed in their collections a synthesis of national cultural heritage and consumers' desire for self-identification and originality. although there have been great changes, there is still a problem with the stereotype that everything foreign is better than domestic. however, today ukrainian brands offer high quality products with interesting designs and reasonable prices. in addition, there are obstacles to the development of ukrainian designers and businesses, many of which are related to the lack of a defined business and marketing strategy, lack of public financial support, problems with customs, and the country 's dependence on foreign raw materials. according to the research conducted by ukrlehprom, during the revolution of dignity in 2014, the production of light industry decreased by 2.7% compared to 2013, and the number of employees decreased by 6.6 thousand.in januarynovember 2015, imports exceeded exports by usd 947,151 thousand (2.35 times).imports decreased by usd 664,296 thousand (-28.7%), while exports decreased by usd 332,287 thousand (-32%) compared to the same period in 2014. usd (-32.3%). in 2017, imports exceeded exports by usd 1,162.6 million (or almost 2.1 times). imports increased by usd 243.4 million (112.8%) compared to 2016 and amounted to more than usd 2.25 billion, while exports increased by usd 135.4 million (114.2%). usd (114.2%) and reached about usd 1.1 billion. exports increased by $135.2 million (114.2%) and reached over $1.1 billion. during the first month of the war in ukraine in 2022, businesses suffered greater losses than during the two-year pandemic. the extent of the damage is currently impossible to assess as the fighting in the country continues (february 2023). most of the baltic journal of economic studies 123 vol. 9 no. 2, 2023 surviving businesses continue to operate despite the war, looking for non-standard solutions such as changing the business line, relocating, etc. there are difficulties with logistics, shortages and lack of raw materials for businesses. design as a subcategory of the classification of economic activities (74.10 specialized design activities) shows rapid growth from 2013 to 2018. the total value added in the design industry in ukraine in 2018 amounted to 921.4 million uah, which represents about 37% of the total value added in the creative industry of ukraine in 2018. during the period of full-scale war, the creative industry of ukraine decreased by more than 40%, and 20% of its specialists left the country. according to the statistical report "creative industries in the first quarter of 2022" of the ministry of culture and information policy of ukraine, the volume of declared income in this industry decreased by 41% compared to the first quarter of 2021, while the total number of taxpayers decreased by 60%. the income from design was reduced by 54%. this indicates the loss of employment (37%), the relocation of personnel abroad, etc. at the same time, 39% of creative businesses report a decrease in orders and sales. about a quarter of creative businesses report a drop in turnover of more than 90%. in october and november of 2022, the federation of employers of ukraine conducted a survey on the current needs of the labor market. the survey included 836 companies from all industries and economic sectors in 23 regions of ukraine. according to the study, the majority of companies have reduced production volumes; about 60% of companies need additional investments in recruitment, sales markets, equipment, and so forth; while 33% of companies had vacancies during analysis of imports and exports of light industry goods january-november 2014, thousands usd january-november 2015, thousands usd january-november 2016, thousands usd january-november 2017, thousands usd exports imports exports imports exports imports exports imports knitwear 110 955 207 043 75705 128 665 75705 128 665 105469,8 158741,9 textile clothing 377 556 277339 202 978 168 797 355078,5 176740,4 378801,7 187916,2 used clothing 462 96594 93 87278 33,6 127720,2 120,1 154399,5 commodity structure of foreign trade in light industry of ukraine in 2019 exports imports thousand usd in % by 2018 thousand usd in % by 2019 thousand usd in % by 2018 thousand usd in % by 2019 light industry 1184636,2 97,1 3129621,0 117,6 clothing and clothing accessories, knitwear 123988,1 91,0 398458,3 152,9 clothing and accessories, textiles 391699,3 96,9 370227,1 152,9 this period, mainly for specialists with vocational training. 6. retail nowadays ukrainian consumers have become more rational and moderate. the buyer will appreciate the uniqueness of things that can be inherited. the majority of ukrainian enterprises currently consider e-commerce, collaboration, investment and international expansion as the most effective anti-crisis business strategies. in 2020 and 2021 ukrainian fashion week introduced the concept of "no season". this allowed designers to show collections out of season. ufw offered to present their collections in a variety of formats, both traditional and digital. virtual shows had been held in the past within ufw, but they did not generate much interest. in today 's society, however, digitalization has already had a significant impact on fashion. the fourth industrial revolution will dictate how products are created, presented and sold. for example, online commerce continues to influence the appearance of objects, including their color, pattern, cut, etc. before the pandemic and the full-scale war, the ukrainian market was seen as a market with great potential for well-known european brands. this is due to the country 's geographical location and relatively large customer base. the fact that many european retailers have not yet entered the ukrainian market is also significant. as of 2019, only 28% of all well-known global brands were present on the clothing market. such brands as h&m, zara home, defacto, and koton, among others, entered the ukrainian market in 2018. in addition, american brands such as ralph lauren, trussardi, karl lagerfeld, steve madden, the kooples, etc. are also available on the market. baltic journal of economic studies 124 vol. 9 no. 2, 2023 the appearance of these important companies indicates that the local ukrainian market continues to expand. despite the appearance of foreign brands on the local ukrainian market, ukrainian brands are gaining popularity as they can match or beat the prices of european competitors. in addition, the majority of ukrainian designers offer products with a national identity, which is in the interest of consumers. these characteristics are reflected in the cut, fabrics and decoration of products made using folk craft techniques. however, there is practically no high-quality ukrainian retail that would represent the interests of national designers. there are a few examples, such as "tsum kyiv" (ukraine's only department store with a classic layout), "vsi. svoi", etc. the ukrainian market needs to create a platform, including an online platform, as well as communities, groups and partnerships that can unite the interests of numerous designers. according to a study conducted by ukrainian fashion week in cooperation with the ukrainian fashion council, sales of designer brands in march-april 2020 were 77% lower than in march april 2019. the situation with employees was even more discouraging, as 43% of employees in design companies were on unpaid leave. it is undoubtedly true that the situation caused by the epidemic has forced some ukrainian designers to return to the domestic market. this includes designers who already have their own shops outside ukraine. under these circumstances, designers placed their expectations on the support of society, which had the potential to give preference to ukrainian producers. as it happened after the revolution in 2013, when people were inspired by the national spirit, they preferred ukrainian brands to those made in other countries. before the war, most of the goods were sold on the local market. during the war, sales declined and savings were exhausted, so clothing manufacturers re-profiled and developed a strategy for exports and cooperation with foreign partners. two months after the start of the war, when the market needed to resume operations, ukrainian retailers gradually reduced the number of closed stores. chernivtsi, ivano-frankivsk, uzhhorod, dnipro, kyiv, poltava, and other ukrainian cities were the first to open their stores again. today, despite all the aggravating circumstances, the majority of ukrainian retail stores have resumed their operations and adapted to the new working conditions. a survey of rau member retail chains shows that after 10 months, 15,190 out of 16,415 retail outlets are functioning. the percentage of active facilities is 93%, while the percentage of closed facilities is only 7%. however, it is the emigration of ukrainians abroad that has had the most negative impact on the country 's economy. there are over 7 million ukrainians living abroad, but the tendency to return is growing. since the outbreak of the war in ukraine, the vast majority of foreign retailers have ceased operations there, citing "security protocol" as the reason for their decision. these brands include: zara, inditex, h&m and supreme, as well as other popular mass-market labels. as a result, more clothing from ukrainian stores remains on the market. 7. sustainability obviously, fashion is influenced not only by digitalization, but also by environmental issues, which are increasingly reinforced by economic factors. digitalization is also a component. if the idea of sustainability was more of a trend before the pandemic and full-scale war, it is now an essential need. when russia attacks ukraine, the terrorist country is actually harming the environment. environmental destruction and pollution is a very serious problem for ukraine. in particular, there are no recycling plants for garbage, garment waste (textile waste), etc. some ukrainian brands such as ksenia schnaider, rcr khomenko and yana chevinska present themselves as sustainable fashion brands. the ukrainian association ukrlehprom is currently discussing with representatives of the european commission ways to further develop industrial cooperation in the field of textile production. by 2023, the textile products currently being manufactured must meet the following require ments: they must be durable, recyclable, and produced in compliance with environmental standards and social rights. these textiles will be predominantly made from recycled fibers that are free of potentially hazardous components. o. sokolovsky, one of the founders of ufw and the owner of the tekstyl-kontakt network of companies, is developing a promising investment project in this region. the project proposes the creation of the hempy ua industrial park, a center for cutting-edge technology in hemp cultivation and processing. the plant will produce industrial hemp fabrics, yarns, twines, ropes, tarpaulins and burlap. according to the owner of the company, the factory will produce more than 200 different products. the estimated total cost of the park construction is 200 million euros. the industry currently relies heavily on imported raw materials, mainly from china, turkmenistan, turkey, uzbekistan and italy. nevertheless, currently there are textile materials manufacturing companies operating in ukraine: baltic journal of economic studies 125 vol. 9 no. 2, 2023 "tekhnofiltr", "cheksil" worsted and cloth company, berezanka cloth factory, "sumykamvol", "vladi", "yaroslav", and the tekstyl-kontakt group of companies.2 8. fashion industry during the war in 2022: forecasts and prospects in the context of the war, ukraine is facing unprecedented challenges. as a result of russia's military aggression, the country 's economy is experiencing one of the most difficult periods in its history. intellectual and creative professionals find it easier to leave and continue work in a relatively safe place. manufacturing firms are geographically tied, so their mobility is limited. nevertheless, apparel companies relocate to safer locations and often change their line of business. according to the chairman of the board of ukrlehprom specialized association, during the war in ukraine in february 2022 – february 2023, a large number of enterprises were destroyed or damaged, and more than half of the clothing industry was destroyed. the majority of these enterprises are located in the occupied territories or in the war zone. before the war, there were 1,600 garment manufacturers in ukraine. many production facilities were located in the northeastern part of ukraine; sumy, chernihiv, and kharkiv were among the first regions to be attacked by the enemy. several plants in the kyiv region were also damaged; in the southeast, plants in kherson, zaporizhzhia, and luhansk remain destroyed, occupied, and looted. currently, about 60% of the companies are either closed or operating on a temporary basis. this is the result of both damage and lack of orders. it is obvious that the majority of foreign partners who once placed orders with ukrainian garment manufacturers have terminated their partnerships. faced with this situation, many enterprises are relocating their facilities, looking for investments, etc. in particular, the tekstyl-kontakt group of companies sets an excellent and dynamic example. in the first days of the war, the company 's factory in chernihiv was destroyed. now the reconstruction works have started. in addition, the company is preparing a new investment project for the rivne oblast. this is an automated sewing line for which ukraine currently has no analog. its production is expected to be competitive with china and other southeast asian countries in terms of productivity. in addition, ukraine's geographic location makes logistics more efficient in terms of both pricing and delivery times. the company is now negotiating with investors on the financial indicators of the post-launch readiness. the required investment is approximately 7.8 million eur . during this time of war, there is a serious shortage of freight transport and drivers in the country, which poses a problem for companies that need to relocate their operations. the relocation of production facilities is made possible in part by the government's business relocation program. the main carriers under this program are the ukrainian railways and ukrposhta, the ukrainian national postal service. the transportation costs are partially covered by the compensation provided by this system. the decision to relocate garment factories to the west and southwest of ukraine is also due to the fact that investors and insurers may not be willing to take risks and invest in enterprises even after the end of the war if they are located near the border with russia and the former front line. in this case, the lviv, ternopil, ivano-frankivsk and zakarpattia oblasts are given priority. these are the factors that will influence the geographical distribution of apparel companies in the near future. ukraine is also witnessing the merging of production facilities between local and relocated companies. for example, companies from ivano-frankivsk are helping some destroyed kharkiv garment manufacturers to create a whole new line of clothing. at the beginning of the war, the kharkiv garment factories that had been evacuated ordered embroidery from local producers, but after the resumption of work, the entrepreneurs offering embroidery services in kharkiv resumed cooperation with their former partners. this indicates the moral aspect of supporting local enterprises and possible plans of enterprises to resume their work in the occupied territories or in those that were on the front line. however, not all factories follow the strategy of relocation. some of them, such as one of the tekstyl-kontakt factories, the tk-style clothing factory, and the elegant clothing factory in chernihiv, plan to stay, because business is about restoring the city and its ecosystem, which is a moral component of business. the tekstyl-kontakt group of companies, which includes the tk-korosten clothing factory and the tk-style clothing factory, which resumed operations during the war, was able to increase the number of employees, maintain output at the level of the year 2021, and increase production. the latter uses a global subcontracting model. in addition to maintaining relations with existing customers, 2 прат «технофільтр», камвольно-суконна компанія «чексіл», «березаньська суконна фабрика», «сумикамволь», «vladi», «ярослав», група компаній «текстиль-контакт». baltic journal of economic studies 126 vol. 9 no. 2, 2023 the company was able to start working with new customers. nowadays, especially clothing companies are entrusted with the strategic task of ensuring the defense capability of the state. many ukrainian garment enterprises have changed their business and started fulfilling orders from government agencies, ministries and departments, such as the armed forces of ukraine, the territorial defence forces and the national guard of ukraine. thus, the garment factories began to produce items for special clothing and personal protection equipment against various types of damage. this change in the line of business is not only an effort to save businesses and support the economy, but also a reflection of the struggle on the home front. most of them are conscientious, proactive companies that set market trends. the relocation and the change of the business sector are supported by the state to a certain extent at the legislative level. for example, the tax and administrative burden on companies has been significantly reduced, and tax incentives have been introduced to provide the state with essential goods during the war. at the beginning of the war, the ukrainian fashion week team launched the support ukrainian fashion initiative. they sent a letter to the global fashion community asking for support for ukrainian democracy. as a result, 43 ukrainian designers collaborated to show their collections at fashion weeks in berlin, copenhagen, madrid, vienna, budapest, los angeles, malta, romania, and many others. these events were not only a way to support the brands, but also an opportunity to talk about the war in ukraine. fashion has always reflected social and cultural attitudes, historical events, and economic and environmental issues. ukrainian brands are using all available means to inform the world about the war in ukraine. they initiate charity fundraisers, provide clothing to the army, create charity nft projects, offer interviews to the international press, and participate in exhibitions, fashion weeks, and film festivals. the following festivals have shown ukrainian fashion films: la jolla international fashion film festival, roma international fashion film festival, pink apple film festival and others. for fashion brands, the priority is to support the country 's economy by preserving and creating jobs in the fashion industry. the frolov heart initiative, for example, has helped recruit three times as many embroiderers. frolov heart is a limited-edition clothing line featuring an anatomical heart embroidered with thread or beads, which serves as the brand's logo. frolov heart is a limited-edition series of clothing featuring an anatomical heart embroidered with threads or beads, which serves as the brand's emblem. currently, the litkovskaya brand has resumed operations in lviv to provide employment opportunities for its workers and forced migrants. some of the brands that have reprofiled or additionally loaded their production are frolov, pilsok, musthave, vorozhbyt&zemskova, keepstyle, andre tan, kachorovska, ruslan baginskiy, poustovit, coat by katya silchenko, frolov, bevza and gepur . these brands are currently engaged in the process of sewing uniforms in nonstandard sizes for the armed forces of ukraine. they produce uploading vests, balaclavas, clothing and footwear. the idol brand, for example, has started the production of a wide range of different products, including camouflage nets and other goods. of course, this is not the first experience of ukrainian brands in this area. for example, the frolov brand had the opportunity to support the people of the maidan during the revolution of dignity by participating in a voluntary project to provide bulletproof vests to the people there. today ukrainian designers are trying to introduce ukrainian products, cultural heritage and traditions to the world. this is true for the fashion business as well as for the whole creative industry. designers working in the newly formed ukrainian fashion industry are increasingly interested in incorporating elements of traditional ukrainian clothing into their collections. these elements include the use of traditional ukrainian cuts, silhouettes, fabrics and techniques such as embroidery, padding and embroidery with gold (or silver) (the coat (ss23 collection), litkovska, bevza, etc.). this makes it possible to create things that tell a story and will be a kind of reinterpretation of the code of the ukrainian nation that can be transmitted through fashion. in particular, this approach to making things can be combined with the principles of sustainable fashion, helping to preserve both culture and jobs. however, excessive use of cultural traditions in clothing and accessories can leave the handicrafts and decorative and applied arts segment behind. contemporary clothing concepts of ukrainian designers are dominated by yellow and blue palette pieces with ukrainian symbols (national flag, emblem of ukraine, viburnum and wheat ears), slogans and expressions ("freedom", "glory to heroes", "mariupol", "bucha"). the number of patriotic collections will increase in the near future. however, it is important to convey the ukrainian cultural code with more depth and consideration. therefore, new fashion will incorporate national codes and customs into its design elements and the dna of brands. the war has awakened national consciousness and strengthened the understanding of one's own identity, and this should be a turning baltic journal of economic studies 127 vol. 9 no. 2, 2023 point and a strong impetus for the development of a new ukrainian culture. at the beginning of the war, the bud v ua platform conducted a survey among ukrainian designers. according to the survey, before the full-scale invasion, brands were making a stable profit, and after the tragic events, only a third of brands returned to work. some have stopped working, but plan to resume their work. creative industries, including design, will also play an important role in the country 's recovery. investment in the creative economy will significantly accelerate the country 's development. the creative economy will promote digital transformation, which will bring transparency to processes at all levels, help bring back ukrainians who were forced to go abroad by providing them with high-paying jobs, and more. according to recent estimates, a significant percentage of ukrainian brands will cease operations, particularly due to the covid-19 outbreak and russia's full-scale war against ukraine. this could 0 5 10 15 20 25 30 35 40 brands activity after the outbreak of the war brands activity after the outbreak of the war 27.3% suspended, but ready to work 27.3% stopped operations 34.1% suspended for an indefinite period 2.3% start a new business abroad 4.5% start a new business in ukraine 0 20 40 60 80 100 the impact of the war on ukrainian brands category 1 59.1% decrease in sales volumes 13.6 % staff reduction 30% changed the direction of activity 7% significantly increased production for the needs of the army 20% are preparing to work internationally 90% of brands remain in ukraine 15.9% of brands are relocating 4.5 % are working without changes baltic journal of economic studies 128 vol. 9 no. 2, 2023 happen despite the huge expansion of e-commerce and online services. both large and small businesses are working to find new approaches to solving problems during the war. currently, many companies have launched websites with high quality content and online services. in order to update and reorganize their production facilities, companies are looking for funding. now companies are taking effective measures to survive, but all these efforts, including popularizing brands in europe and focusing on overseas consumers, are also temporary, as all brand activities should be focused primarily on the ukrainian consumer after the war ends. consumers will need affordable, quality clothing. therefore, it is crucial to establish a strong and robust economic, legislative and logistical framework that will allow brands to thrive in both the local and global markets. 9. conclusions in summary, the ukrainian fashion industry dates back to the 1990s. the creation and development of the fashion industry was influenced by geopolitical, social and economic factors, as well as russia's war against ukraine. in the 20s of the 21st century ukraine's production potential became attractive for foreign companies. however, the most important strategic goal for ukraine is to move from "made in ukraine" to "design in ukraine", from a country that provides raw materials or a favorable environment with cheap labor to a country that develops its own high quality product. during the war, only the strongest brands that had financial backing and the most flexible ones that were able to quickly adapt to the new reality will remain on the ukrainian market. the majority of brands will evaluate their expenses and look for alternative sales channels. the economic crisis will not subside immediately after the end of the war. obviously, the consumer's approach to the consumption of goods will become more reasonable and balanced. therefore, in this situation, it is important to maintain an emotional connection with customers and offer a product at a reasonable price. references: derman, l. (2020). formation and development of the fashion industry in ukraine. journal of art history notes, vol. 38, pp. 30–34. doi: https://doi.org/10.32461/2226-2180.38.2020.222073 zvynyatkivska, z. (2019). in progress. fashion of ukraine since 199. kyiv: arthuss, 336 p. tkanko, z. (2015). fashion in ukraine of the 20th century. lviv: artos, 236 p. (in ukrainian) ukrainian association of light industry enterprises (2022). available at: https://ukrlegprom.org/ua/ gorbul, t., & rusakov, s. (2022). cultural heritage in the context of digital transformation practices: experience of ukraine and the baltic states.  baltic journal of economic studies, vol. 8 no. 4, pp. 58–69. doi: https://doi.org/10.30525/2256-0742/2022-8-4-58-69 ukrainian fashion council (2021). available at: http://fashioncouncil.org.ua/info?fbclid=iwar0gtkw7 nqdoktmuw-xieptn2m3j-zphkthvjq8vjtxzr6dvhpskmdfwpsc ukrainian fashion week (2022). available at: http://fashionweek.ua/ online house of justice (2021). available at: https://online.minjust.gov.ua/edr-search/ liga zakon (2022). available at: https://biz.ligazakon.net/analitycs/210399_pereproflyuvannya-ta-relokatsyapdprimstva-na-perod-vonnogo-stanu-poradi-yurista government portal (2022). available at: https://www.kmu.gov.ua/npas/pro-vnesennya-zmini-do-postanovikabinetu-ministriv-ukrayini-vid-3-bereznya-2022-r-184-348 ministry of culture and information policy of ukraine (2023). available at: https://mkip.gov.ua/ pro-consulting (2022). available at: https://pro-consulting.ua/pressroom/rynok-odezhdy-v-ukraine-faktorysprosa association of retailers of ukraine (2023). available at: https://rau.ua/novyni/magaziniv-vtratili-merezhi-10/ federation of employers of ukraine (2023). available at: https://fru.ua/ua/media-center/news/membersevents/tekstil-kontakt-navit-pid-chas-vijni-prodovzhue-rozvivati-virobnitstvo?fbclid=iwar1yvtivgv6g2kepep2 x4kl9o8eql2ebz3p_-grgx_z0fc_rg jag881om98 received on: 10th of march, 2023 accepted on: 23th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 319 vol. 3, no. 5, 2017 corresponding author: 1 department of international marketing, alfred nobel university. e-mail: nastya25061987@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-319-328 a methodological approach to the strategic analysis of food security anastasiia mostova1 alfred nobel university, ukraine abstract. the objective of present work is to substantiate the use of tools for strategic analysis in order to develop a strategy for the country’s food security under current conditions and to devise the author’s original technique to perform strategic analysis of food security using a swot-analysis. the methodology of the study. the article substantiates the need for strategic planning of food security. the author considers stages in strategic planning and explains the importance of the stage of strategic analysis of the country’s food security. it is proposed to apply a swot-analysis when running a strategic analysis of food security. the study is based on the system of indicators and characteristics of the country’s economy, agricultural sector, market trends, material-technical, financial, human resources, which are essential to obtain an objective assessment of the impact of trends and factors on food security, and in order to further develop the procedure for conducting a strategic analysis of the country’s food security. results of the study. the procedure for strategic analysis of food security is developed based on the tool of a swot-analysis, which implies three stages: a strategic analysis of weaknesses and strengths, opportunities and threats; construction of the matrix of weaknesses and strengths, opportunities, and threats (swot-analysis matrix); formation of the food security strategy based on the swot-analysis matrix. a list of characteristics was compiled in order to conduct a strategic analysis of food security and to categorize them as strengths or weaknesses, threats, and opportunities. the characteristics are systemized into strategic groups: production, market; resources; consumption: this is necessary for the objective establishing of strategic directions, responsible performers, allocation of resources, and effective control, for the purpose of further development and implementation of the strategy. a strategic analysis of food security consists of two blocks: the analyses of the external and internal environment. it is proposed, in order to improve the validity of the strategic analysis, to evaluate strengths and weaknesses, threats, and opportunities at the time of analysis, as well as to explore the trends of their change in dynamics. for this purpose, the author proposed establishing the persistence of the identified strengths, weaknesses, threats, and opportunities. to accomplish it, the persistent strengths of possibilities include, in the author’s opinion, characteristics with a positive dynamic over the examined period while the persistent weaknesses and threats include, accordingly, those with a negative dynamic. practical implications. result of the present research is the advanced matrix of a swot-analysis of food security, which complements traditional method with the grouping according to the basic strategic groups of food security (production, market, resources, consumption), as well as the level of persistence of strengths and weaknesses, threats and opportunities, depending on the dynamics of the proposed characteristics. the main practical outcome of the developed procedure is the list of strategic recommendations based on the identified strengths and weaknesses, threats and opportunities of food security, depending on the level of their persistence. the value and originality of the scientific results are in that as a result of the proposed procedure, there will be built an effective instrument for carrying out a strategic analysis of the country’s food security. based on the strategic analysis of the persistent strengths, the author identified the main com-petitive advantages of the country’s food security, which are to be strengthened, while implementing supporting strategic measures and control. it is established that the non-persistent strengths of food security of ukraine would require a more effective management in comparison with those persistent, as well as development of an efficient mechanism of government support and regulation. minimization of the impact of persistent weaknesses on the level of food security and their transformation into strengths should be carried out under the condition of reforming the social policy of the state and creating a system of the state support for the agricultural sector. the task on resolving the problems associated with the impact of threats in accordance with the level of their persistence has to be dealt with gradually, with the further development of strategic measures to neutralize and protect food security and the factors that affect it, in particular, to utilize the potential of external opportunities. key words: strategic planning, strategic analysis, food security, swot-analysis. jel classification: q10, q18, o13, o21 baltic journal of economic studies 320 vol. 3, no. 5, 2017 1. introduction the period of transition to market relations calls for the ever-growing realization of the importance of strategic planning with a search for applying its methods at the national level. widespread use of strategic planning, employed nationally when devising strategies for the development of state economic management, is hindered by the inadequate level of knowledge about the methods and tools for the development of strategic plans, as well as their limited adaptability to the conditions of the national market. a given problem also applies to the country’s food security. theoretical and methodological aspects of strategic planning were addressed in numerous scientific studies. the works by ukrainian and foreign authors in the field of strategic planning and strategic management, which in detail highlight regularities of formation, the features of methodology, and the logic of evolution of strategic planning and management, include studies by r . l. ackoff, h. mintzberg, p. doyle, a. thompson, a. j. strickland, and others. however, methodological approaches and the implementation of the strategy of the country’s food security require further research and improvement. 2. the tool of swot-analysis in the scientific literature investigation of possibilities of applying a swotanalysis as a strategic management tool at the general economic level, at the level of the agricultural sector of the economy, including an analysis of the state of food security, was addressed in the scientific work of national experts. in particular, the study by s.m. khalatur reveals the state of the agro-industrial complex of ukraine under conditions of a global food problem and reports the swot-analysis conducted in order to specify potential internal advantages, internal shortcomings, potential external opportunities, and potential external threats (halatur, 2015). the author provided general recommendations on further development of the agri-food industry sector in ukraine. however, methodological and analytical capabilities of the tool of a swot-analysis for the evaluation of country’s food security and for the development of strategic directions regarding its implementation require deeper research. in the paper, the swot-analysis of the food security in ukraine was conducted using a classic algorithm of a given technique (varaskina, 2016). the author identified the strengths and weaknesses, threats and opportunities of food security; however, given the results of the analysis, he failed to construct the matrix of strategies and appropriate strategic directions for strengthening food security through the substantiation of strategic planning. o.v. skidan, in a study on the creation of a regional agricultural policy of food security, performed a swotanalysis of the current state of food security in the region (skidan, 2004). the scientist, however, while substantiating the practical aspects of running a swotanalysis of food security, did not take into consideration strategic directions for ensuring a high level of food security at the national level based on the results of the strategic analysis. thus, it should be noted that swot analysis as a tool of strategic analysis and planning of food security is of interest to scientists who study a given problem. there are no, however, at present any substantiated scientific approaches to the strategic analysis of food security using a swot-analysis, which would be based on the quantitative evaluation of strengths and weaknesses, threats and opportunities by employing a system of characteristics and indicators and would account for their changes in dynamic, and which would make it possible to form appropriate strategies taking into consideration the results of the conducted analysis in order to establish optimal strategic priorities and further effective allocation of resources when creating and implementing the strategies of food security. 3. procedure for performing a swot-analysis at present, there are a large number of scientific approaches to defining a methodology for strategic planning, and this very term refers to a set of specialized methods, principles, and rules for making management decisions aimed at achieving long-term goals of the examined object, improving its competitiveness, creating the base for successful and persistent development (lebedev, 2008). the methods and tools for strategic planning of food security are advisable to group according to such stages as the analysis of environment, definition of the mission and goals, the choice of strategy and basic scenarios, development of strategy, implementation of the strategy, evaluation and control over the implementation of the strategy (aaker, 2002). w hen substantiating the application of a method or a tool, one should take into consideration the specificity of food security, which is characterized by the dependence on a number of factors. one of the most important stages in the formation of a food security strategy is considered to be a strategic analysis of the external and internal environment since its methodical substantiation affects the efficiency of further strategic, tactical, and operational measures and managerial activities. at the stage of strategic analysis of the environment, the most common method is the swot-analysis, which is a classic tool for strategic planning of development of enterprises and makes it possible to determine the cause of efficient or inefficient activity of the examined object and establish appropriate directions in strategy depending on the results of the analysis. baltic journal of economic studies 321 vol. 3, no. 5, 2017 swot-analysis has been recently successfully applied at the national level. it is a brief analysis of external information, based on which a conclusion is drawn about the direction, in which the examined object must evolve, and resources are allocated for the areas of activity. the result of the analysis is the development of a strategy or a hypothesis for further verification. the classic swot-analysis implies determining the strengths and weaknesses of the object’s activity, potential external threats, and favourable opportunities, as well as their evaluation relative to strategically important goals and objectives (thompson, strickland, 1998). the result of planning is a swot-matrix, the matrix of opportunities and the matrix of threats. 4. results of the development of a procedure for conducting a swot analysis of the country’s food security we shall proceed to the consideration of the developed procedure of swot-analysis of the country’s food security. figure 1 shows implementation algorithm of the proposed technique. thus, the first stage of the algorithm implies conducting a strategic analysis. we shall start by making up a list of characteristics for the strategic analysis of food security in order to subsequently relate the specified characteristics to strengths or weaknesses, threats and opportunities. the characteristics will be matched with specific indicators whose estimation will be based on the open analytical information (state statistics service of ukraine, 2018). characteristics with the indicators are advisable to categorize in groups (mostova, vinichenko, 2016): 1. production. this group will include those characteristics that are associated with the analysis of trends in production, the production capacity of the sector, and its prospects for investment, for example: – sufficient production of food products (production sufficiency index); – profitability of agriculture (profitability level optimality index); – productivity at agricultural enterprises (rate of growth in labour productivity in agriculture). 2. market. this group reflects conditions, under which food products are supplied to the country, as well as trends in foreign trade of foodstuffs and their impact on the state of the agricultural sector, which is to be evaluated by the following characteristics: – food independence (food independence optimality index); – rise in prices for agricultural products (price rise optimality index); – balance of foreign trade in food commodities (trade balance optimality index). 3. resources. this group is to include those characteristics that make it possible to estimate food supplies, and to provide the agricultural sector with means of production, labour, and other resources, such as – sufficient grain reserve in the state resources (index of stock sufficiency); – self-sufficiency of food products (food selfreliance index); 1. strategic analysis of weaknesses and strengths, opportunities and threats to food security 1.1. identificati on of weaknesses and strengths, opportuniti es and threats 1.2. selection of indicators that correspond to weaknesses and strengths, opportunities and threats 1.3. analysis of indicators relative to optimal or normative value 1.5. formation of resulting list of weaknesses and strengths, opportunities and threats 1.4. confirmation of the persistence of weaknesses and strengths, opportunities 2. construction of the matrix of weaknesses and strengths, opportunities and threats (a swot-analysis matrix) 3. formation of strategy on food security based on the swot-analysis matrix fig. 1. algorithm for performing a swot-analysis on food security source: developed by the author baltic journal of economic studies 322 vol. 3, no. 5, 2017 – sufficiency of food product consumption (consumption sufficiency index). 4. consumption. in the author’s opinion, this group might include those characteristics that indicate the availability of food and its quality, balanced nutrition, labour wages in the country, the state of land use, in particular: – economic affordability of food products (index of economic affordability of food products) – balanced food consumption (consumption balance index); – daily nutritional energy value (daily nutritional energy value optimality index). those strategic groups of indicators that can be attributed to external opportunities or threats are advisable to categorize as follows. 1. production: – investment attractiveness of the agrarian sector of economy (the level of profitability of investments into agricultural production, the growth rate of capital investment, the growth rate of foreign direct investment, etc.); – attractiveness of the agricultural sector for employees (the ratio of wage in agriculture to the total average monthly salary in the country); – production of staple food products (the mean arithmetic growth rate of the volume of food production); – the volume of production in agriculture (growth rate of production output); – production potential of the agricultural industry (the mean arithmetic growth rate of yield, livestock productivity, etc.). 2. market: – foreign trade in food products (the mean arithmetic growth rate of import and export of products). 3. resources: – availability of basic means of agricultural production (the mean arithmetic growth of availability of agricultural machines per 10 thousand hectares, new capacities, quantity of livestock, sown areas); – production costs of agricultural products (optimality index of production costs of agricultural products); – availability of employees in agriculture (the growth rate of the number of employees in agriculture). 4. consumption: – environmental consequences of land use (the mean arithmetic growth rate of fertilization, re-cultivated soil); – the structure of land use (land use balance index); – the unemployment rate in the country (optimality index of the rate of unemployment growth) – the level of labour remuneration (index of real wages in the country, the ratio of wages in agriculture to the total average monthly salary in the country, and other). there will be conducted a comparative analysis for each indicator against the optimal or normative value. as a result, indicators will be presented in the form of a system of relative magnitudes in order to obtain an objective assessment of trends in food security in comparison with the regulatory values or those favourable by certain criteria. all indicators will be of the same dimensionality to ensure that they can be compared not only with the optimal or normative values, but also against each other. thus, the value of the indicator for the last year of the examined period that is equal to or greater than 1, reflects the positive trend and will be attributed to strengths and that one less than 1, accordingly, negative, and thereby will be attributed to weaknesses. as a result, based on the obtained information, we shall construct a matrix of strengths and weaknesses, threats and opportunities. to increase the effectiveness of strategic analysis, it is necessary not only to establish strengths and weaknesses at the time of conducting the analysis but also to examine trends of the mentioned aspects in dynamics. for this purpose, it is proposed to verify the persistence of the identified strengths and weaknesses, based on which, the persistent strengths and weaknesses will include only those that will be characterized, accordingly, by retaining a positive and a negative trend in a change in the indicator over the examined period. similarly confirmed is the persistence of the specified threats and opportunities. figure 2 shows a structure of the improved matrix of swot-analysis on food security. distinguishing between persistent and non-persistent strengths and weaknesses is required in order to set strategic priorities and further effective resource allocation when developing a strategy. persistent strengths will form the main strategic advantages that will support weaknesses and eliminate threats. persistent weaknesses require priority strategic measures aimed at their eradication, that is, to start with converting them into the non-persistent weaknesses, and subsequently – into the non-persistent strengths. non-persistent strengths must be the focus of attention as supporting strategic advantages, which are subsequently necessary to stabilize and maintain at the persistent level. non-persistent weaknesses have to be transformed into non-persistent strengths provided the effective strategic measures are put in place. thus, the block of strategic analysis of the internal environment of food security implies identifying the strengths and weaknesses and establishing their persistence. maximum attention must be paid to persistent weaknesses; increased attention is to be paid to the non-persistent weaknesses, while nonpersistent strengths will require supporting measures baltic journal of economic studies 323 vol. 3, no. 5, 2017 whose intensity will depend on specific strategic priorities of the state policy in the agrarian, trade, and social fields. persistent strengths should be used for the implementation of other measures in the strategy of food security. strategic analysis of the external environment of food security implies an assessment of the threats and opportunities in order to establish their persistence. the specified components are external relative to food security, but at the level of the state, they are to be managed. persistent opportunities should be considered as the main factor that in the strategic perspective will exert a positive impact on supporting the level of food security at the appropriate level and will help prevent the threats. when developing a strategy, and in the course of strategic planning of food security, it is appropriate, in order to enhance its level, to utilize both persistent opportunities and persistent strengths. persistent threats require increased attention and maximum concentration of state resources to minimize their negative impact on the level of food security. non-persistent opportunities should be taken into consideration in the course of strategic planning with respect to the uncertainty of the external environment, by introducing to the strategy for food security separate measures that would strengthen the non-persistent opportunities. non-persistent threats under conditions of effective management have to be converted into non-persistent opportunities or form the basis for the development of a block of strategic measures in order to neutralize and protect food security and factors, on which it directly depends. it is possible to conclude that the block of strategic analysis of external environment of food security includes the assessment of threats and opportunities and establishes their persistence. maximum attention should be paid to persistent threats and to developing measures to neutralize their impact, increased attention is to be paid to the non-persistent threats. persistent and non-persistent threats must be converted into opportunities for food security and become the source of its further strengthening. non-persistent opportunities should be backed up by appropriate supporting strategic measures related to the state regulation of agricultural, foreign trade, social policy. persistent opportunities require strategic measures aimed at their maximum implementation in the long term. next, it is necessary to construct an expanded matrix of weaknesses and strengths, opportunities and threats (matrix of swot-analysis of food security). a traditional matrix includes a resulting list of the strengths, weaknesses, opportunities and threats, which will additionally specify the indicated persistent strengths and weaknesses, as well as the opportunities and threats. in addition to the existing approach, the improved matrix of swot-analysis on food security implies the construction of the indicated main elements relative to fig. 2. the logical structure of the improved matrix of swot-analysis of food security source: developed by the author production market resources consumption persistent strengths persistent weaknesses persistent threats persistent opportunities non-persistent strengths non-persistent weaknesses non-persistent threats non-persistent opportunities food security baltic journal of economic studies 324 vol. 3, no. 5, 2017 the specified basic strategic groups: production, market, resources consumption. 4. practical implementation of the procedure for conducting a swot-analysis of the country’s food security we shall proceed to the consideration of practical aspects of the examined development. first, we shall demonstrate the implementation of the proposed procedure of strategic analysis of food security using the strengths and weaknesses as an example. results of calculations are given in table 1. strategic analysis of the opportunities and threats to food security will be performed in a similar fashion (table 2). the next stage of strategic analysis is the assessment of dynamics of strengths, weaknesses, threats, and opportunities of food security for the further confirmation of their persistence. for this purpose, based on the performed analysis (table 1 and table 2), table 1 indicators for the strategic analysis of food security and their further categorization into strengths or weaknesses strategic groups indicators 2011 2012 2013 2014 2015 production production sufficiency index 1.806 1.936 1.820 2.081 2.128 profitability level optimality index 0.643 0.543 0.277 0.310 1.017 rate of growth in labour productivity in agriculture 1.245 0.966 1.260 1.132 0.980 market food independence optimality index 18.619 24.680 22.128 20.239 34.059 price rise optimality index 1.018 1.282 1.087 0.910 0.797 trade balance optimality index 11.111 20.060 18.528 19.892 32.137 resources index of stock sufficiency 1.150 1.263 1.140 1.205 1.272 food self-sufficiency index 1.128 1.055 1.150 1.204 1.218 food self-reliance index 0.880 0.879 0.888 0.866 0.816 consumption index of economic affordability of food products 1.170 1.198 1.198 1.156 1.130 consumption balance index 0.497 0.519 0.532 0.525 0.514 daily nutritional energy value optimality index 1.180 1.182 1.188 1.176 1.120 source: developed by the author table 2 indicators for the strategic analysis of food security and their further categorization into opportunities and threats strategic groups indicators 2011 2012 2013 2014 2015 production level of profitability of investments into agricultural production 1.513 1.400 0.801 1.165 3.490 growth rate of capital investments 1.477 1.143 0.977 0.986 1.594 growth rate of direct foreign investments 1.074 1.008 0.990 1.066 0.794 ratio of wage in agriculture to the total average monthly salary in the country 0.680 0.670 0.695 0.711 0.749 mean arithmetic growth rate of the volume of production of foodstuffs 1.134 1.016 0.968 1.082 0.917 mean arithmetic growth rate of the volume of food production 1.339 1.033 1.173 1.209 1.466 mean arithmetic growth rate of crop yield 1.230 0.985 1.119 1.041 0.995 mean arithmetic growth rate of productivity 1.038 1.034 1.008 0.991 0.987 market mean arithmetic growth rate of food products import 0.911 0.994 1.103 0.950 0.680 mean arithmetic growth rate of food products export 1.087 1.465 1.223 0.981 1.255 resources mean arithmetic growth rate of availability of agricultural machines per 10 thousand hectares of soil 0.870 0.957 1.057 0.935 0.974 mean arithmetic growth rate of new capacities 19.861 1.331 1.770 0.396 mean arithmetic growth rate of livestock population 0.991 1.029 1.022 0.879 0.966 growth rate of sown areas 1.027 1.005 1.019 0.962 0.988 optimality index of production costs of agricultural products 0.887 0.950 1.044 0.706 0.719 growth rate of the number of employees in agriculture 1.151 1.056 1.094 0.986 0.971 consumption mean arithmetic growth rate of fertilization 1.053 1.027 0.785 1.022 optimality index of the growth rate of unemployment 1.087 1.144 1.082 0.935 0.798 index of real wages in the country 0.680 0.670 0.695 0.711 0.749 ratio of wage in agriculture to the total average monthly salary in the country 1.475 1.173 0.492 0.833 mean arithmetic growth rate of the area of re-cultivated soil 0.615 0.614 0.613 0.613 0.612 land use balance index 1.151 1.056 1.094 0.986 0.971 source: developed by the author baltic journal of economic studies 325 vol. 3, no. 5, 2017 we shall group separately the strengths and weaknesses with a positive and a negative dynamic over the examined period. similarly analysed are the detected threats and opportunities. results of systematization are given in table 3. next, we shall construct the improved matrix of swot-analysis of food security, which will include the resulting list of strengths, weaknesses, opportunities and threats in the context of basic strategic groups (production, market, resources, consumption) (table 4, table 5). strategic directions for improving the level of food security in accordance with the results of the analysis are advisable to develop in terms of strategic groups depending on the persistence of the identified strengths, weaknesses, opportunities, and threats. thus, based on the strategic analysis of the persistent strengths, we identified the main competitive advantages that the country’s food security has, and which should be strengthened at the national level. these include the sufficiency of food production, food independence, the balance of foreign trade in foodstuffs, self-sufficiency with food products, the sufficiency of grain reserves in the state resources. thus, the main strategic directions that must become the foundation of the sustainable level of food security are the following: increasing the volume of production, maintaining constant volumes of imported foodstuffs, control over foreign trade policy in order to keep the optimum ratio of export and import, improvement of market infrastructure, implementation of the effective policy for managing state reserves. it should be noted that, based on the data of analysis, the indicated characteristics require only supportive strategic measures and control, rather than fundamental changes. the non-persistent strengths of food security of ukraine require more effective management in comparison with those persistent. an increase in the proportion table 3 list of strengths and weaknesses, threats and opportunities of food security and the confirmation of their persistence strengths strengths with a positive dynamic 1. sufficient production of food products 2. profitability of agriculture 3. food independence 4. self-sufficiency of food products 5. balance of foreign trade in food commodities 6. economic affordability of food products 7. daily nutritional energy value 8. sufficient grain reserves in the state resources 1. sufficient production of food products 2. food independence 3. self-sufficiency of food products 4. balance of foreign trade in food commodities 5. sufficient grain reserves in the state resources weaknesses weaknesses with a negative dynamic 1. balanced food consumption 2. price indices for agricultural products 3. sufficiency of food products consumption 4. labour productivity at agricultural enterprises 1. balanced food consumption 2. sufficiency of food products consumption opportunities opportunities with a positive dynamic 1. investment attractiveness of the agrarian sector of economy 2. volume of production in agriculture 3. unemployment rate in the country 4. foreign trade in food products 1. volume of production in agriculture threats threats with a negative dynamic 1. investment attractiveness of the agrarian sector of economy 2. attractiveness of the agricultural sector for workers 3. availability of employees in agriculture 4. production potential of the agricultural industry 5. availability of basic means of agricultural production 6. availability of livestock at agricultural production 7. sown areas of agricultural crops 8. production costs of agricultural products 9. production of staple food products 10. influence of fertilization on the condition of soil and product quality 11. level of labour remuneration in the country 12. level of labour remuneration in agriculture 13. environmental consequences of land use 14. structure of land use 15. foreign trade in food products 1. attractiveness of the agricultural sector for workers 2. availability of employees in agriculture 3. level of labour remuneration in agriculture source: developed by the author baltic journal of economic studies 326 vol. 3, no. 5, 2017 of food expenses in the budget of households leads to the lower economic affordability of consumption. enhancing the economic affordability of food products, as well as the daily nutritional energy value, should become strategic directions of the agricultural policy and reforms in the state’s social policy. it is also advisable to develop an effective mechanism of state support for agricultural enterprises in order to increase the profitability of agriculture through the optimization of costs, which in turn will make it possible to keep food prices unchanged. the top priority task at the strategic level must be the minimization of the influence of persistent weaknesses on the level of food security, as well as the development of a plan of action for the elimination of weaknesses or converting weaknesses into strengths. as the performed analysis revealed, a weak link in food security is the balance and sufficiency of food products consumption. therefore, it is necessary to plan strategic measures to reform social policy of the state and to create a system of state support of agricultural producers in cattle breeding. the non-persistent weaknesses, which in terms of food security include labour productivity at agricultural enterprises and rise in prices for agricultural products, require improving the state regulation of food market and the development of measures to attract workers in the agricultural sector and to motivate people to work at agricultural enterprises in the long term. the problem of mismatch between the rate of rising of food prices and wages of the population requires a comprehensive socioeconomic policy aimed at improving the standards of life quality of people and their social protection. the persistent opportunities in the food security of ukraine include the stable growth of the volume of production in agriculture. the agricultural sector of the national economy is capable of providing the required volume of food production in the country. in terms of strategic perspective, this factor must be focused on table 4 the improved matrix of swot-analysis of the country’s food security (strategic analysis of strengths and weaknesses) groups of indicators production market resources consumption persistent strengths sufficient production of food products food independence. balance of foreign trade in food commodities. self-sufficiency of food products. sufficient grain reserves in the state resources. persistent weaknesses balanced food consumption. sufficiency of food products consumption. non-persistent strengths profitability of agriculture economic affordability of food products. daily nutritional energy value. non-persistent weaknesses productivity at agricultural enterprises rise in prices for agricultural products source: developed by the author table 5 the advanced matrix of swot-analysis of the country’s food security (strategic analysis of opportunities and threats) groups of indicators production market resources consumption persistent opportunities volume of production in agriculture persistent threats attractiveness of the agricultural sector for workers availability of workers in agriculture level of labour remuneration in agriculture non-persistent opportunities investment attractiveness of the agrarian sector of the economy. foreign trade in food products the unemployment rate in the country non-persistent threats investment attractiveness of the agrarian sector of the economy. production potential of the agricultural industry. production costs of agricultural products. production of staple food products. foreign trade in food products availability of basic means of agricultural production. livestock population at agricultural enterprises. sown areas of agricultural crops. influence of fertilization on the condition of soil and product quality. level of labour remuneration in the country. environmental consequences of land use. structure of land use. source: developed by the author baltic journal of economic studies 327 vol. 3, no. 5, 2017 supporting the level of food security at the appropriate level and on eliminating the threats. this is feasible by improving the competitiveness of domestic goods, increasing export potential, through the diversification of production. in terms of strategic perspective, it will contribute to strengthening the country’s food security. the non-persistent opportunities for food security in ukraine manifest themselves in the foreign trade in food products that has demonstrated a modest growth in export over recent years, in the improved investment attractiveness of agrarian sector of the economy, in the growth in capital investments, with the level of unemployment in the country decreased in recent time. strategic directions regarding the use of opportunities for strengthening food security, in this case, may include new investments to the agricultural sector of the economy, improvement in the competitiveness of domestic products and access to foreign markets, increase in food security indicators that characterize the affordability of food and the quality of nutrition. the persistent threats to food security in ukraine, according to data of the conducted analysis, include permanent unattractiveness of agrarian sector for workers, an insufficient number of people engaged in agriculture because of the low level of remuneration, lack of prestige to work in the agricultural sector. this, in turn, affects labour productivity and food security. the established persistent threats are the key obstacles that do not make it possible to effectively utilize the potential of the agricultural sector and threaten food security in general. thus, it is necessary to maximally concentrate state resources on minimizing the negative impact of persistent threats on food security and, in a strategic perspective, to develop measures for eliminating them and for converting them into opportunities. the non-persistent threats to food security include most of the identified characteristics: • insufficient investment attractiveness of agrarian sector of the economy for foreign investors; • ineffective implementation of the industrial potential of agricultural sector due to the fluctuations in yield and productivity of animals; • the growth of production costs of agricultural products, • fluctuations in the volume of food production, as well as import and export; • insufficient availability of the basic means of production at agricultural enterprises and low level of technical equipment; • the lack of stable growth in the sown areas and livestock population at agricultural enterprises; • negative effect of fertilization on the condition of soil and product quality; • the consequences of environmental problems of land use and failure to comply with the correct structure of land use; • the low level of wages in the country, which does not allow people to have high-quality food in sufficient quantity. the identified non-persistent threats under conditions of effective management could be converted into nonpersistent opportunities in a strategic perspective. the outlined circle of problems should be dealt with gradually, with the further development of strategic measures to neutralize them and protect food security and factors that affect it. thus, improving the efficiency of developing a state food security strategy requires the use of modern methods and tools of strategic analysis. the proposed original procedure for performing a strategic analysis of food security based on the swot-analysis is aimed at improving the process of strategy development, and thus will make it possible to optimize the allocation of resources and the search for directions to implement state policy in the agrarian sector of national economy, to regulate the internal market, social policy, by setting the priority of strategic measures. 5. conclusions the present study proposes an improved methodology of strategic analysis of food security based on the swot-analysis. strategic analysis of food security can be conditionally divided into two blocks: analysis of the external environment and analysis of the internal environment. to perform the analysis, we developed a system of indicators, which corresponds to the basic strategic groups of food security: production, market, resources, and consumption, in order to objectively establish strategic directions, responsible performers, resource allocation, and effective control over further development and implementation of the strategy. the indicators, derived from data about the last period of the analysis, are compared to values that are favourable for a specific criterion, or to normative values. as a result, we have obtained a system of relative magnitudes for the objective assessment of trends in food security. a block of strategic analysis of the internal environment of food security implies the identification of strengths and weaknesses and the establishment of their persistence as it is necessary for determining strategic priorities and further effective allocation of resources when working out a strategy. it is proposed that persistent strengths and persistent opportunities of food security include those that maintain a positive tendency in the corresponding indicators over the examined period. persistent weaknesses and persistent threats would include those that, on the contrary, demonstrate negative tendency in the corresponding indicators over the examined period. maximum attention in the course of development of the state strategy on food security will be required by persistent weaknesses, increased attention is to be baltic journal of economic studies 328 vol. 3, no. 5, 2017 paid to non-persistent weaknesses, and non-persistent strengths will need supporting measures whose intensity would depend on specific strategic priorities of the state policy in agricultural, trade and social fields. persistent strengths should be utilized for the implementation of different measures in the strategy of food security. a block of strategic analysis of the external environment of food security includes the assessment of threats and opportunities and the establishment of their persistence. maximum attention should be paid to persistent threats and to development of measures to neutralize their impact; enhanced attention is to be paid to non-persistent threats. persistent and non-persistent threats must be converted into opportunities of food security and into sources of its further strengthening. non-persistent opportunities should be supported by appropriate strategic measures in the state’s regulation of agricultural, foreign trade, social policy. persistent opportunities will need strategic measures aimed at their maximum implementation in the long term. further scientific research should address the development of scientific methods and techniques for determining the mission and goals, for choosing a strategy and basic scenarios, for developing the strategy of food security using strategic planning tools, specifically, developing strategic maps. references: ansoff, i. 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(2004). formuvannia rehionalnoi ahrarnoi polityky prodovolchoi bezpeky [the form of the regional agrarian policy of food and security] (phd thesis). zhitomir. varaskina, o. v. (2016). formuvannia orhanizatsijno-ekonomichnoho mekhanizmu prodovolchoi bezpeky v ukraini [the form of organisation-economical mechanism of food and beverages in ukraine] (phd thesis). poltava. halatur, s. m. (2015). mekhanizm adaptatsii ahropromyslovoho kompleksu ukrainy v umovakh hlobalnoi prodovolchoi problem [mechanism of adaptation of agroindustrial complex of ukraine in the conditions of global food problem]. visnyk dnipropetrovskoho derzhavnoho ahrarnoho universytetu [bulletin of the dnepropetrovsk state agrarian university]. 3: pp. 114-116. baltic journal of economic studies 280 vol. 3, no. 4, 2017 corresponding author: 1 department of international trade, kyiv national economic university named after vadym hetman. e-mail: tsyhankova@lycos.com 2 department of international trade, kyiv national economic university named after vadym hetman. e-mail: ibezverkha@gmail.com transformation of ukraine’s commercial diplomacy: reshaping the model tetiana tsyhankova1, iryna bezverkha2 kyiv national economic university named after vadym hetman, ukraine abstract. the article examines past and present changes in the system of commercial diplomacy of ukraine in the context of external and internal, old and new challenges. the aim of the study is to propose recommendations for the improvement of existing model and to identify lessons learned from ukrainian experience that could be useful for developing countries. the relevancy of the study is conditioned by the need to enhance the effectiveness of ukraine’s commercial diplomacy in the face of existing challenges. the applied methodology is a combination of methods used for theoretical and empirical research (observation, comparison, analysis and synthesis, system and structural analysis). we found that present distorted organizational set-up of ukraine’s commercial diplomacy is the result of the uncompleted process of integration of management of international economic relations to the ministry of foreign affairs. we argue that the introduction of a unified model is untimely but can be considered as promising in a more distant future. ukraine’s experience shows that without necessary prerequisites (a certain level of economic development and role in international relations, which require clear strategic vision and effective coordination of traditional and commercial diplomacies) and proper implementation, the introduction of the unified model is unlikely to lead to the desired outcome. results of the analysis also indicate that the promotion of export and investment needs further impetus. suggested recommendations address both organizational and practical aspects of ukraine’s commercial diplomacy. their implementation would have a positive impact on the style and effectiveness of ukraine’s commercial diplomacy and, therefore, competitiveness of the national business. key words: commercial diplomacy, economic diplomacy, export promotion, investment promotion, international trade, trade globalization, trade policy, trade missions, ukraine. jel classification: f19, f14, f13, f21, o52 1. introduction in the context of trade globalization and growing turbulence of economic development, diplomatic support for trade and investment is gaining in importance. a significant reduction of tariff barriers due to trade liberalization both at multinational and regional levels has not only increased competition but also expanded business opportunities for entering markets abroad. commercial diplomacy has become an integral part of government policy, contributing to the implementation of objectives aimed at supporting/stimulating national business and improving its competitiveness. there are ongoing discussions on the theoretical framework of commercial diplomacy with major works belonging to g.r . berridge, h. kopp, n.  kostecki, o.  narey, e. potter, k. rana, h. ruel. for the purpose of this article, we use a wider definition of commercial diplomacy (kopp, 2004) which suggests that commercial diplomacy is practiced at both micro or transactional level (assisting business in export and investment promotion through the provision of market information, facilitation of business contacts, organization of seminars, trade missions, trade fairs, lobbying and advocacy efforts) and macro-level (supporting business promotion through setting rules and regulations for trade and investment flows, negotiating regional trade agreements, relevant activity in the wto etc.). commercial diplomacy is focused on commercial gains. it is seen as economic diplomacy when political, geopolitical, and security issues come into its focus or are used as leverage for economic gains (okano-heijmans, 2011). nonetheless, the concept of economic diplomacy is wider and includes, among others, financial and development diplomacies. organizational and institutional arrangements of commercial diplomacy of different countries have their own specifics, and successful experience can often be used as an example to follow by others. however, the current body of literature lacks a discourse on how to choose an organizational model, as well as on possible baltic journal of economic studies 281 vol. 3, no. 4, 2017 constraints and complications that may arise in the course of its implementation. in 2010, ukraine started a transition to the unified model, in which functions of diplomatic support for trade and investment are carried out by the ministry of foreign affairs (mfa). we will look at the predicaments of this transition in an attempt to identify lessons learned from ukraine’s experience. the article also examines specifics of the country’s historical experience, existing global, regional and internal challenges affecting the issues and agenda of ukraine’s commercial diplomacy. a particular attention is paid not only to the organizational and institutional provision of commercial diplomacy but also to the activities of commercial diplomats. the relevance of the study is conditioned by the need to re-activate ukraine’s commercial diplomacy and enhance its effectiveness in the face of existing challenges. if based on consistency and strategic vision of ukraine’s development prospects, the proposed efforts would have a positive impact on the country’s export promotion and fdi attraction. 2. the organizational and institutional arrangement of commercial diplomacy existing typologies of organisational design for the export and investment promotion primarily relate to transactional level (agencies providing services for business) and mainly to export promotion, which might be due to the fact that fdi attraction in a number of countries falls under the competence of local authorities. loosely, export promotion systems may be attributed to three types: government-based, private sectorbased, and a mixture of both (hybrid) (seringhaus & botschen, 1991). in government-based systems, public institutions (mainly ministries) play a leading role (canada, france, usa). business support in private-based systems (austria, germany) is provided by a network of chambers of commerce and industry abroad with minimal government intervention. therefore, diplomats serving abroad focus primarily on advocacy and lobbying, if needed. in hybrid systems, the participation of private and public sector in export promotion is roughly equal (netherlands, sweden). more refined typology was suggested later to distinguish five models of organizational set-up for diplomatic support of export and investment promotion (rana, 2002). (1) unified model – foreign policy and foreign economic issues are handled by mfa (australia, brazil, canada). in brazil, for example, mfa is authorized to negotiate on trade with third countries and represent the country in the wto. some countries have export promotion agencies at the national level, but others don’t. (2) partially unified model – mfa and the ministry of trade or economy jointly establish a special unit (body) to support trade and investment (united kingdom), though diplomatic service abroad is unified. (3) the model of the third agency – mfa mainly does not relate to trade issues, which fall under the responsibility of an independent public or non-public institution(s). diplomats serving abroad cooperate with the representatives of this institution but their tasks never overlap (singapore, germany, austria). (4) competition model – mfa and other ministries have overlapping tasks and responsibilities without a clear division not only on issues of international trade and investment but also on meetings with foreign agencies and international organizations (india). (5) renunciation model – functions are fully separated. the ministry of trade or economy handles trade and investment promotion issues, while mfa does not play an active role in that (china). the organizational arrangement to some extent influences the institutional culture and, therefore, the style of commercial diplomacy performance. following the grouping of commercial diplomats for business promoters, civil servants, and generalists (kostecki & naray, 2007), one may distinguish proactive, reactive, and passive commercial diplomacy. proactive commercial diplomacy is client-oriented, i.e. businessoriented (usa, united kingdom, japan, ireland). the main task of diplomats is to provide the right level of information and consulting services for companies, often on a fee basis. in this style of diplomacy, commercial diplomats have high professional training. reactive commercial diplomacy is typical for countries where the ministry of trade or economy plays the leading role in export and investment promotion system. such diplomacy is less client-oriented, more responsive to government orders than to business needs. diplomats see commercial issues as an integral part of international economic relations (france, poland, china). passive commercial diplomacy is performed by career diplomats who serve business needs only occasionally or in addition to other diplomatic duties. they have less professional and technical training to support foreign economic activities. this kind of diplomatic style may be attributed mainly to developing countries that do not have a comprehensive export and investment support system, as well as proper funding to provide for the appropriate staff of diplomatic missions. 3. evolution of ukraine’s model of commercial diplomacy under the soviet union, because of the state monopoly on trade, all competences related to foreign trade policy and commercial diplomacy belonged to the central government in moscow. after gaining independence, in 1991–1994, ukraine started working on the establishment of the national system of management of foreign economic activity and creation of the necessary regulatory framework for foreign trade and investment. in 1991, the ministry of foreign economic relations of ukraine was established followed in 1993 by the trade baltic journal of economic studies 282 vol. 3, no. 4, 2017 missions (subordinated to and financed by the ministry) within the diplomatic embassies of ukraine. the next five years (1994–2000) were characterized by changes inherent to the further development of already established institutions. at the level of central executive authorities, the powers and functions of the bodies and units responsible for the foreign economic policy were separated; the system of implementation of a concerted state foreign trade policy was developed. in 1994, trade missions were transformed into trade and economic missions (tems) within the diplomatic missions of ukraine abroad. their operational management remained under the ministry of foreign economic relations, but funding was channelled through the mfa. in total, 55 tems were established within ukraine’s embassies abroad, based on the significance of trade and economic cooperation. in 1995, the ministry of foreign economic relations was transformed into the ministry of foreign economic relations and trade with expanded functions which, among others, included the protection of domestic producers from anti-dumping measures abroad. its regional bodies, the structural units on trade issues, were established in regional state administrations. in 2000–2010, as a result of administrative reform, the main role in the management of foreign economic policy and its implementation passed to the ministry of economy. it became the successor of the ministry of foreign economic relations and trade and some other bodies, including the national agency of ukraine for development and european integration, responsible for fdi attraction. tems started reporting to the ministry of economy. establishment of tems in 1994 with dual subordination to mfa (financing) and the ministry of foreign economic relations (operational management) gave rise to a permanent interagency fighting about the rationale for tems, which persisted after the ministry of economy acquired the function of foreign economic relations management in 2001. the reproaches concerning tems’ futility have not always been ungrounded. lack of ukraine’s experience in the development of international economic relations resulted in an insufficient professional level of tems’ staff neglecting business needs. the accounting chamber of ukraine concluded from the relevant audit in 2007 that tems performed their functions without meaningful objectives, strategic and program documents. it also pointed to overlaps in functions of tems and embassies’ economic counsellors, as well as to formality of internal evaluation process, which was based on tems’ reporting. the business also reproved tems for the lack of tangible support from diplomats. therefore, in 2010, with a view of conducting concerted foreign policy and in line with the next administrative reform, tems were closed down and the ministry of economy was reorganized into the ministry of economic development and trade (medt). as tems’ proxies, mfa created economic units at the embassies. however, this has not lead to a more effective representation of ukraine’s economic interests and export promotion and fdi attraction. one of the reasons is that the logical (for such a model) transfer of the relevant departments of the ministry of economy with their functions to mfa has never happened. consequently, the organizational model of commercial diplomacy became even more distorted when medt responsible for the development and implementation of the foreign economic policy was deprived of the mechanism for implementing this policy abroad. it still featured a partial overlap in functions and not welladjusted mechanism of coordination between the two major actors – medt and mfa. also, the mfa staff elicited much more reproach from business for the lack of proficiency and client-orientation as economic diplomats had to combine assistance to trade and investment promotion with other responsibilities, especially in the case of embassy’s work overload. ukraine’s reactive commercial diplomacy turned into passive. the significance that mfa attaches to commercial diplomacy is indirectly evidenced by nonmajor status of the division of economic cooperation. currently, the main actors of ukraine’s commercial diplomacy include medt with the state information and analytical centre for monitoring of foreign commodity markets under its umbrella; mfa with the network of economic counsellors at the embassies; local authorities; consultative, and advisory bodies, including temporary ones, like export promotion office at medt and investment promotion office under the cabinet of ministers of ukraine, established with the help of international and bilateral donors; other ministries; non-government organizations including business associations (for example, the chamber of commerce and industry, the union of industrialists and entrepreneurs) as well business entities. 4. global and regional challenges today’s global trade is characterized by a number of trends that are challenging for many countries. first, the slowdown in global trade precipitated at 1.3% in 2016 (w to, 2017a) under the influence of the significant slowdown in the economic growth after the global financial crisis of 2008. meanwhile, in the post-crisis period, trade in goods and services have opposite trends – trade in services proved to be more sustainable, maintaining positive dynamics. secondly, the number of protective measures taken by countries has been increasing. in particular, between midoctober 2015 and mid-may 2016, w to members introduced 154 new trade-restrictive measures versus 132 trade facilitation measures (w to, 2017b). baltic journal of economic studies 283 vol. 3, no. 4, 2017 thirdly, the structure of trade is changing – today the share of developing countries in global trade in goods is 44% against 20% in 1990. in the last decade, the volumes of fdi have almost doubled as compared to the late 1990s (meléndez-ortiz & samans, 2016). however, capital flows after 2008 became very volatile. in addition, a significant part of the world trade takes place in global value chains when the product crosses the borders moving from one stage of production to another, which leads to further enhancement of specialization and interconnection of economies. more than 70% of global trade today is the trade in intermediate goods and services and in investment goods; and the revenue generated in global value chains has, on average, doubled over the past 15 years (oecd, wto & world bank group, 2014). another modern feature is the intensification of trade regionalization through various regional trade agreements (rtas). on the positive side, rtas may open up access to another market and often settle issues that are not yet or partially regulated on the multilateral level. on the other hand, potential challenges of rtas are the discrimination of the trade partners which are not rta members, and the increase in transaction costs for companies built in global value chains at the intersection of different rtas. thus, the slowdown in global trade entails an increase in competition for markets, and the growing share of developing countries in global trade means the growing competition among exporters in developing countries. small and medium enterprises that make up the largest group of participants in global value chains face a significant number of barriers. one of them is information barrier when enterprises do not know how to find a partner built in a global value chain. trade regionalization poses a number of challenges, which require correct assessment of the rationale and effectiveness of the country’s participation in a potential or already existing rta, as well as the provision of a synergy among different rtas. increased international capital flows made capital cheaper, but due to the growing volatility, it is not always translated into new fdi important for developing countries. at the regional level, ukraine has several challenges, which affect not only the macro level but also have an impact on potential and existing exporters. they, in particular, include trade wars initiated by russia and the conclusion of an association agreement, which provides for the establishment of the deep and comprehensive free trade area with the eu. the first factor has been forcing exporters to look for new markets. the second one is promising in terms of future access to the eu market, fdi, and other economic opportunities. however, to take advantage of this potential, business needs assistance in identifying and adjusting to the needs of the new market in order to remain competitive. 5. ukraine’s policy challenges and structural problems for years, one of the internal challenges has been the lack of a strategic vision of foreign economic policy in terms of promoting exports and investments, which is also partly a reflection of the lack of ukraine’s experience in development of international economic relations. ukraine still does not have a strategy of economic or commercial diplomacy and/or foreign trade strategy. the development of the latter has been ongoing for the last two years; a draft strategy named “roadmap of ukraine’s strategic trade development for 2017–2021” was presented in april 2017 for further public discussion and approval. however, it did not contain any provisions for diplomatic support of export promotion. lack of proper funding is another chronic issue. it limits the number of diplomats abroad, restricts the range of tools for export and investment promotion, as well as the mobility of diplomats. export promotion agency is absent. there are attempts to address the issue by means of cooperation with international donors – the export promotion office was established in medt. however, such efforts are of a temporary nature – international practice of technical assistance shows that similar initiatives fully funded by international donors are unsustainable in mediumand long-term perspective if the government of the beneficiary country does not start undertaking funding commitments. meanwhile, ukrainian exports need a substantial support. this is evidenced by resumption of the trend of growing trade deficit in 2016, as well as by the reduction of the overall value of exports of goods (figure 1), which began in 2013 under the influence of the gdp slowdown in the previous year, the decline in world prices for traditional export goods, and the trade war, initiated by russia. later, these factors were followed by the annexation of crimea by russia; war actions in donbas region, which led to the loss of some production capacities, including those that produced export goods; and the restriction of the transit of ukrainian goods to kazakhstan and kyrgyzstan by russia. the issue of export diversification has long been on the ukraine’s agenda, and commercial diplomacy is expected to facilitate product and geographical diversification. however, indicators of the extensive margin of ukraine’s exports of goods give little reason for optimism. in five years, from 2010 to 2015, geographic concentration tended to decrease; the share of the top three markets in exports has declined significantly, reflecting the decrease in the share of exports to russia in recent years. at present, the geographic concentration is almost commensurate baltic journal of economic studies 284 vol. 3, no. 4, 2017 with the german one1 – the share of top three and top five markets in exports of goods totals to 26.2% and 36.9% respectively2. however, product concentration has increased: the share of top three and top five products in exports grew from 21% and 29.9% to 22.4% and 33.7% respectively. the share of top three products in ukraine’s exports of goods in 2015 was commensurate with the relevant indicator of germany but the share of the top five products exceeded german indicator by 6.4  percentage points. moreover, there was a reduction of active export lines (product subheadings) on hs 4-digit and even more on the 6-digit level: the total number of active export lines decreased to 3701 in 2015 which was lower than in 2010 (3924 lines) almost by 6% and even in 2005 (3724 lines). ukraine’s exports also suffer from another structural problem – the prevalence of products of the lower stages of processing. they kept on dominating in 2015: 2/3 of ukrainian exports were intermediate goods (44%) and raw materials (31%); the share of latter has almost doubled in the last five years (figure 2). although commercial diplomacy does not have a critical impact on quality upgrading or technological complexity of exports, it is capable to enhance other efforts, especially if it becomes niche diplomacy or has niche programmes aimed at promoting products with higher added value. over the last three years, medt has enhanced its efforts to promote exports. for the first time, trade missions are organized consistently and led by the trade representative of ukraine; the council of exporters in medt has started carrying out regional meetings. the activity of bilateral commissions was revived. however, analysis of extensive margin of trade shows that this work needs an additional impetus. 6. prospects for further transformation of the organizational model until recently, the integration of management of foreign economic relations with mfa was seen as an optimal model for commercial diplomacy in the national discourse. and the current distorted organizational arrangement is essentially the result of an incomplete process of such integration. however, mfa’s failure to improve the performance of economic diplomats questioned the rationale for mfa’s operational management and control of diplomatic support for the export promotion and fdi attraction. starting from 2012, there was a growing consent to re-establish trade missions (representative offices) abroad. despite criticism in the past, they tended to handle more practical aspects of trade and their staffs were more proficient than economic counsellors at the embassies. in 2014, the role of trade representative of ukraine was introduced to advance ukraine’s economic interests in foreign markets. though trade missions have not been established yet, the trade representative’s functions include coordination of trade missions’ operation abroad. however, the process evolves very slowly, not least because of the lack of unity in understanding the concept of prospective trade missions between the medt and the mfa, as well as the lack of financial resources. 1 germany is widely considered as a benchmark country with regard to export diversification. 2 because of relatively frequent revisions of the harmonized commodity description and coding system (hs) of the tariff nomenclature and different time lags of countries’ transition to a new hs edition as well as to ensure the comparability of data, these and most of other indicators were calculated based on un comtrade data mainly on 4-digit (1241 headings) and 6-digit (5311 sub-headings) levels of the hs 1996 edition in the world bank database (wits, 2017). -20000,00 0,00 20000,00 40000,00 60000,00 80000,00 100000,00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015* 2016* exports imports trade balance fig. 1. ukraine’s foreign trade in goods, in million usd * without data on temporary occupied territory of crimea and a part of the antiterrorist operation zone source: ukraine’s state statistics service 0 10 20 30 40 50 60 raw materials intermediate goods consumer goods capital goods 2005 2010 2015 fig. 2. structure of ukraine’s exports of goods (by stage of processing), in percents source: wits of the world bank baltic journal of economic studies 285 vol. 3, no. 4, 2017 although the transition to the unified model has not been completed, most experts recognize that this type of organizational arrangement of commercial diplomacy is unlikely to be implemented at this stage in ukraine in the presence of the institutional weakness of the existing central agencies which are not ready to manage large bodies, logistical problems, and difference in institutional cultures. however, they do not exclude the possibility of integration of foreign policy and foreign economic policy in one agency in the medium term. while it is difficult not to agree with the notion that integration of functions is untimely but the possibility of implementing such a model in a mediumterm perspective is arguable. it is rather a matter of a long-term perspective being conditional on not only institutional capacity but other fundamentals as well. the unified model is mainly used by small countries with limited human and financial resources and relatively narrow export product variety or by wealthy countries (canada, australia, and the scandinavian countries), to which successful performance proponents of the model often refer. however, it should be noted that australia, canada, scandinavian countries belong to the upper tier of middle powers3. they are placed in the second rank after the superpowers and are typically characterized by large populations, high level of wealth, and significant armed forces (berridge, 2014). these countries are donors of technical assistance to development and are considered or claim to be regional leaders. they have an extensive diplomatic network as their interests lie in various parts of the world. they lack sufficient authority to aggressively advance their agenda like superpowers, but their weight, resources, and reputation are enough to be mediators in solving many global issues, especially on the multilateral level. the integration of trade policy and foreign policy under the umbrella of mfa was a natural, though not always a simple process for these states. having reached a significant level of economic development, they found themselves capable of taking on greater responsibility and playing a bigger role in the international arena. accordingly, the new role and the need for the effective implementation of strategic objectives required a better coordination of the efforts of traditional diplomacy and commercial diplomacy, which transformed into economic diplomacy with consideration for development diplomacy and growing intertwine with foreign policy objectives inherent to such states. the commercial component of diplomacy of these countries, unlike ukraine, is institutionally and organizationally developed and well-established. today, ukraine cannot be attributed to upper middle powers, neither by the level of welfare (a lower middle income country, a recipient of international donors’ assistance to development) nor by the role in international relations. the implementation of economic diplomacy involves interweaving of goals, objectives, and tools of foreign and economic policy; and clearly defined strategy and priorities. instead, ukraine’s trade strategy is still emerging; and lack of consistency, strategy, and priorities were named as major challenges of ukraine’s foreign policy by national and international experts (iwp, 2016). given that the organizational structure needs to be transformed for a more effective implementation of strategies, tasks, and functions, it is obvious that an attempt to do the opposite – to change the organizational structure in hope that it will add strategic nature to foreign policy and foreign economic policy – is unlikely to lead to the desired outcome. 7. shaping a new model the most relevant task of ukrainian commercial diplomacy is to develop a client-oriented commercial diplomatic service reporting to and financed by medt. at the initial stage, considering existing financial constraints, it is expedient to establish several trade missions abroad that will play the role of regional hubs and have sufficient funding for business trips of commercial diplomats to other countries of the region, if needed. they should interact with embassies since the status of any trade representative is incomparable with the status of the ambassador who can reach high-level decision-makers in the government of a host country to promote certain agenda and/or to address persisting challenges ukrainian businesses face. in addition to trade missions in some countries, it is proposed to establish an official representative office of ukraine in the w to. currently, ukraine is represented there by the permanent mission to the uno branch and other international organizations in geneva; and because of lack of proper funding, representatives of ministries and departments cannot take an active part in the work of some committees. establishment of the official representative office in the w to will improve the information and analytical support of trade policy development, contribute to ukraine’s ability to defend and advance national trade-related interests, and activate work in bodies of different levels of the organization. there is a need for information and consultation support not only abroad but also in ukraine. it may be provided through an export agency (financed on a cost-sharing basis by the state budget, international/ bilateral donors’ assistance, and proceeds from fees for rendered services) or a structural subdivision of medt, which would administer government export promotion 3 the theory of international relations distinguishes superpowers, middle powers, small powers, and sometimes micro-states. baltic journal of economic studies 286 vol. 3, no. 4, 2017 programs. given the predominance of raw materials and intermediate products in ukraine’s exports of goods, it would be advisable to introduce programs focused on the promotion of goods with higher added value. one of the most important measures is the development of information and consultation portal. in 2008, the portal “state support of ukrainian exports” (ukrexport.gov.ua) was launched. it contains information on procurement, trade fairs, and other business opportunities abroad, as well as trade statistics, terms of export to other countries. however, the information on it is incomplete and mostly outdated. the export promotion office is actively represented in social networks and has its own website, though information on it is far from being comprehensive. the web-page of the council of exporters and investors in mfa provides overlapping information with other sources. the development of a single information platform would allow saving time business spends on searching for information on existing export opportunities, measures, and legislation and practical advice on how to start and develop export activities. with regard to the operation of prospective trade missions, it should be noted that the tasks of commercial diplomats and economic counsellors at the embassies who collect macroeconomic information are different. it entails the need for different information and networks of contacts. in particular, lack of knowledge or ignorance of specifics of doing business or making a trade in different countries and regions may result in losses for the exporter. in general, trade missions should provide a standard (approved by medt) set of services. the limited number of trade missions, at least initially, requires, on one hand, the higher mobility of commercial diplomats, and on the other hand, the possibility of rendering non-specialized services by economic counsellors or other embassy’s diplomats in cooperation with the medt in other countries. the lack of skilled personnel in mfa and medt calls for the development of necessary competences through trainings, as well as for possible engagement of businesspeople to the diplomatic service to overcome the passive attitude to business needs pertained to previous practice. given the dynamic changes in global economy, the approach to geographic allocation of trade missions and its personnel should not be static. the prioritization of markets today is largely determined by actual trends. instead, it is proposed to determine it on the basis of a regular and comprehensive analysis of market information with a view of ukraine’s comparative advantages in the specific export market, the volume of specific export market and forecasts of market growth for the next 3-5 years. that is, an attention should be paid to traditional markets, as well as to mass markets and emerging markets. the number of trade missions’ staff should be reviewed accordingly. this approach requires an enhancement of the analytical function of medt. at the initial stage, it is proposed to establish a small unit/sector, which would also provide assessments of implications of various trade policy measures, including assessment of an effect of potential rtas on ukraine’s economy. commercial diplomacy performance should be based on transparency, efficiency, and accountability principles. to ensure this, the work of commercial diplomats should be evaluated against the number of criteria including promptness and meaningfulness of response to business inquiries; overall number of companies and organizations served; number of events actively engaged in (as a participant, organizer, facilitator) in case of lobbying, advocacy, and coalition building activities and facilitation of business participation in trade exhibitions, fairs, etc.). at the very least, the random revision of reports with random interviews with companies served is imperative; and a summary of the consolidated report should be made public. at multilateral/global level, commercial diplomacy should be focused on advocacy tools to defend the interests of ukrainian producers, as well as on active work on various platforms in the wto to identify potential opportunities for the advancement of ukrainian interests; monitoring the implementation of the association agreement with the eu for further improvement of export terms for ukrainian exporters. at the bilateral level, commercial diplomacy is suggested to pay specific attention to minimizing trade barriers faced by ukrainian exporters with a view to facilitating access to markets. initiatives on potential rtas require careful approach as there is a need to analyse the impact of already signed agreements. at subnational level, it is proposed to introduce regular on-site or on-line consultations for representatives of local authorities. it would lead to a better coordination and communication, identification of synergies in promoting trade and investment. particular attention should be paid to establishing effective and consistent communication and coordination between major actors of commercial diplomacy. in terms of coordination on the level of central agencies, the main vector of efforts should be directed at overcoming and preventing interagency competition, especially between mfa and medt. the latest initiative – to establish the international trade council, a consultative and advisory body, headed by the first vice-prime minister, is a step in the right direction. the similar councils at mfa and medt will be liquidated. thus, the centre of coordination of export and investment promotion will move to the cabinet of ministers mitigating possible impulses for the competition. a special emphasis should be placed on further development of a dialogue with business community with a prospect of development of privatepublic partnership not only in ukraine but also abroad. baltic journal of economic studies 287 vol. 3, no. 4, 2017 8. conclusion ukraine faces a number of global, regional, and domestic challenges. they increase competition and expand business opportunities in international and national markets and raise awareness of the need in active support of export promotion and fdi attraction, as well as in the thorough assessment of the rationale and effectiveness of the country’s participation in potential or already existing rtas. though ukraine’s government has enhanced its efforts in this area recently, the results of the study indicate that the undertaken measures are insufficient and the work needs further impetus. we suggest a number of changes. recommendations involve the initial establishment of several trade missions, which would play the role of regional hubs, and ukraine’s official representative office in the wto, all reporting to and financed by medt. ukrainian commercial diplomacy should operate on principles of transparency, efficiency, accountability, and adaptability; strengthen client (business) orientation, enhance analytical work; develop necessary competences of personnel and introduce proper evaluation procedures, as well as improve coordination among major actors of commercial diplomacy. proposed efforts are aimed at activating commercial diplomacy which, in turn, would lead to the increase in the volume and variety of exports and fdi. on the other hand, ukraine’s commercial diplomacy currently shows some inertia not only in promoting exports and investments but also in its own transformation. we found that the present distorted organizational design is the result of the uncompleted process of integration of the management of international economic relations to the ministry of foreign affairs. nevertheless, the process will not be completed, and ukraine returns mainly to the previous organizational arrangement with some adjustments. ukraine’s experience of transition to the unified model of organisational design shows that without necessary prerequisites (a certain level of economic development and role in international relations, which require clear strategic vision and effective coordination of traditional and commercial diplomacies) and proper implementation, the desired effect is unlikely to be seen. a unified model is not considered appropriate for ukraine, at least in a short and medium run, but can be considered as promising in a more distant future. perspective studies may focus on identifying priority markets, products for advancement through niche diplomacy, and on analysis of existing approaches to the assessment of commercial diplomats’ work performance. references: berridge, g. r . (2014). international politics. routledge. 264 p. iwp. (2016). ukraine's foreign policy audit: recommendations for ukraine's foreign policy strategy. (publication). kyiv: institute of world policy. 62 p. kopp, h. w. (2004). commercial diplomacy and the national interest. washington, dc: american academy of diplomacy / bciu. 141 p. kostecki, m., & naray, o. (2007). commercial diplomacy and international business. in discussion papers in diplomacy. netherlands institute of international relations ‘clingendael.’ retrieved from http://www.offnews.info/downloads/commercial-diplomacy.pdf. meléndez-ortiz, r ., & samans, r . (2016). the e15 initiative: strengthening the global trade and investment system in the 21st century. geneva: ictsd and world economic forum. 698 p. oecd, wto & world bank group. (2014). "global value chains: challenges, opportunities, and implications for policy ". report prepared for the g20 trade ministers meeting sydney, australia, 19 july 2014 (publication). 53 p. retrieved from: https://www.oecd.org/tad/gvc_report_g20_july_2014.pdf. okano-heijmans, m. (2011). conceptualizing economic diplomacy: the crossroads of international relations, economics, ipe and diplomatic studies. the hague journal of diplomacy, 6(1): 7–36. rana, k. s. (2002). bilateral diplomacy. new delhi: manas publications. 283 p. seringhaus, f. h. r ., & botschen, g. (1991). cross-national comparison of export promotion services: the views of canadian and austrian companies. journal of international business studies, 22(1): 115–133. world bank. (2017). world integrated trade solution (wits). retrieved october 29, 2017, from https://wits.worldbank.org/. wto. (2017a). trade recovery expected in 2017 and 2018, amid policy uncertainty [press release]. retrieved october 29, 2017, from https://www.wto.org/english/news_e/pres17_e/pr791_e.htm. wto. (2017b). world trade statistical review 2016. geneva: wto. 165 p. retrieved from: https://www.wto.org/english/res_e/statis_e/wts2016_e/wts2016_e.pdf baltic journal of economic studies 288 vol. 3, no. 4, 2017 татьяна цыганкова, ирина безверхая трансформация коммерческой дипломатии украины: контуры новой модели аннотация. в статье рассматриваются прошлые и нынешние изменения в системе коммерческой дипломатии украины в контексте внешних и внутренних, старых и новых вызовов. цель исследования – предложить рекомендации по совершенствованию существующей модели и сделать выводы из опыта украины, которые могут быть полезны для развивающихся стран. актуальность исследования обусловлена потребностью в повышении эффективности коммерческой дипломатии украины в условиях существующих вызовов. методология представляет собой комбинацию методов, используемых для теоретических и эмпирических исследований (наблюдение, сравнение, анализ и синтез, системный и структурный анализ). мы выявили, что искаженная организационная система коммерческой дипломатии украины является результатом незавершенного процесса передачи управления внешнеэкономической деятельностью в ведение министерства иностранных дел. мы аргументируем, что переход к унифицированной модели является несвоевременным, но может быть перспективным в отдаленном будущем. украинский опыт показывает, что при отсутствии необходимых предпосылок (определенного уровня экономического развития и роли в международных отношениях, которая требует четкого стратегического видения и эффективной координации традиционной и коммерческой дипломатии) и надлежащей имплементации переход к унифицированной модели вряд ли приведет к желаемым результатам. результаты проведенного анализа также свидетельствуют о том, что продвижению экспорта и инвестиций необходимо придать дополнительный импульс. предложенные рекомендации касаются организационных и практических аспектов работы украинской коммерческой дипломатии. их имплементация может оказать позитивное влияние на стиль и эффективность коммерческой дипломатии украины и таким образом на конкурентоспособность национального бизнеса. baltic journal of economic studies 139 vol. 8 no. 4, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 ukrainian academy of printing, ukraine e-mail: shtangret.am@ukr.net orcid: https://orcid.org/0000-0001-5179-4996 3 educational and research institute for interdisciplinary expertise and sustainable development, ukraine e-mail: usuef@ukr.net orcid: https://orcid.org/0000-0003-3542-6952 doi: https://doi.org/10.30525/2256-0742/2022-8-4-139-150 human development in the context of socio-political crisis (on the example of modeling the coordination mechanism for regulating agricultural and construction policies) yuriy safonov1, andrey shtangret2, yaroslav kotliarevskyy3 abstracts. the goal is to achieve human development through the printed media. objectives – to study the socio-economic aspects of coordination of the activities of segmental components in the publishing industry; to find out and substantiate the strategic subjectivity of the state institutional regulation of the publishing industry of the national economy. methodology. system-structural approach – in the study of theoretical and methodological aspects of ensuring the development strategy of the publishing industry of the national economy in transformational conditions; comparative analysis – for comparing objects and phenomena, identifying the general and special, for studying the causes of changes that have occurred, identifying development trends. for the implementation of the scientific topic: "development of norms of consumption and norms of material waste in the production of textbooks and educational/teaching aids" 0122u002363. results. the results of the latest pandemic caused by the covid-19 virus and the active phase of the military confrontation have a decisive impact on the national economy and human development of our country. the current focus on agricultural development provides partial stabilization of the situation by maintaining an adequate level of food security and increasing food exports. in the long term, it is envisaged to use the existing advantages and revise the agrarian and construction policies, by coordinating them to create conditions for improving the human development situation in the country. to form the necessary theoretical basis for such changes, the definition of the term "state agricultural policy" was clarified and the list of strategic goals of the state agricultural policy was expanded. the current direction of construction policy is critically characterized. the essence of three dominants (continuation of land reform; decentralization; transformational changes in the development of agriculture), which should be taken into account when harmonizing agricultural and construction policies, is considered. the model of the coordination mechanism of agricultural and construction policy regulation was developed in order to create conditions for sustainable development of rural areas, which, accordingly, should contribute to the progress of human development. key words: human development, agrarian policy, construction policy, rural area, land reform, decentralization, transformation of agriculture. jel classification: o15, q15 1. introduction in recent decades, significant progress has been made in the field of human development, which is the development of people through human capacity building, by people and for people. this concept implies the expansion of freedoms for everyone. these freedoms have two components: freedom of well-being, consisting of functions and potentials, and freedom of subjectivity. in turn, potential capabilities are different sets of functions that a person can achieve. the millennium declaration and the formulated development goals, the main directions baltic journal of economic studies 140 vol. 8 no. 4, 2022 of sustainable development for the period up to 2030, as well as the presented global goals, which were approved by the un member states, are of great importance for this. human development is characterized by an index that combines three main dimensions: life expectancy at birth; average years of schooling and life expectancy; and gross national product per capita. it should be emphasized that human development, in particular in ukraine, remains uneven. according to the authors of the national report innovative ukraine 2020: " ukrainian economy and its society in the next ten or even twenty years will be divided into three, to some extent conditional, parts. the first and the most widespread is the one where the population will be mainly engaged in production, including agro-industrial activities... and for them the prospects of modernization due to innovative activities in traditional sectors of the economy are opening up. the second, relatively small one, is those who will be engaged in high-tech business, which will be integrated into global value chains, will carry out advanced scientific research on request and will be engaged in relevant educational activities. this also includes the development and production of modern weapons, which will lead to successful entry into world markets, including through new cooperation with eu countries. the third part is the impoverished mass of the population, including those who will lose their jobs as a result of structural changes and will not have the resources to receive appropriate education, and therefore will not work for the convergence of the first and second groups..." the pandemic caused by the covid-19 virus and the active phase of ukraine's military confrontation with the aggressor, in addition to the negative impact on the national economy, also affected the quantitative ratio of the above groups. printed products are of great importance for achieving the proper level of human development. the main consumer of information products for a long time was science as a relatively isolated system. but it is especially important for society that information products "circulate" in a much wider range. previously, the system "science – technology – production" was traditionally considered. according to the authors, the course of scientific and technical development should be supplemented by the component – "education". it is education at the present stage of human and social development that will determine the prospects and life cycle of the production product through modeling the quality level of the potential consumer and the economic system as a whole. education is an element-communicator of certain classical subsystems. the current difficult conditions of combating the latest pandemic and the intensification of military events require the rapid redistribution of all types of resources, the activities of agricultural enterprises contribute to stabilizing the situation in the national economy and directly affect the main dimensions of human development. this is confirmed by the data of the state statistics service, according to which in 2020 the net profit of agricultural, forestry and fisheries enterprises amounted to uah 81,129.2 million, while in general for all types of economic activity – uah 80,700.4 million, in industry losses were recorded at uah 39,807.5 million. another important parameter is the fact that 82.6% of agricultural, forestry and fishery enterprises were profitable, while in general for all types of economic activity this figure was only 71%. given the positive results, the authors believe that the wrong position is to passively observe the development of events without timely response to the emergence of new challenges. the defined concepts are related to the following dominant factors of rural development: the continuation of land reform, a new stage of which began on july 1, 2021; further decentralization, the first results of which revealed complex problems for which there are currently no effective instruments of state regulation; transformational changes in the development of agriculture, which are aimed at obtaining short-term benefits. without a timely response to the change of dominants, positive trends in the activities of agricultural enterprises can be stopped with the subsequent emergence of threats and a new crisis. with changes in agricultural and construction policies, these same dominants can contribute to sustainable rural development. the problems of agrarian and construction policy and rural development in relation to human development are in the field of view of such scientists as: o. borodina, a. veremeychyk, p. hayyduky, v. gotra, n. gushtyk, h. kaletnik, o. kozich, v. kravtsiv, v. melko, v. myagkokhod, o. pronina, v. romaska, z. titerenko, o. chan-hee, o. cherkasov. given the importance and depth of scientific research, the issue of comprehensive perception and improvement of agrarian and construction policy in order to create conditions for improving the human development situation in the country remains insufficiently studied. the study sets a number of tasks that provide for a consistent review of agricultural and construction policies with further clarification of the essence of the determining dominants as a basis for modeling the mechanism of coordination of regulation in order to create conditions for improving the level of human development of the country. to model the mechanism of coordination of regulation of agrarian and construction policies, the methods of induction and deduction, comparison and systematization were used in the study of the baltic journal of economic studies 141 vol. 8 no. 4, 2022 essential characteristics of agrarian and construction policies; synthesis and analysis – in assessing the results of land reform, decentralization and transformational changes in agricultural development; morphological analysis – to substantiate the content of the components of the mechanism of coordination of agrarian and construction policy; graphic – for clarity of presentation of theoretical and methodological material; abstract-logical – for theoretical generalizations and conclusions of the study. the study is based on a systematic analysis of materials of the state statistics service of ukraine. 2. presentation of the main material the complexity of the tasks is determined by the law of ukraine "on the basic principles of the state agrarian policy ", which does not define the term "state agrarian policy ", which is a significant problem that complicates the development of tactics and strategies by subjects (state and public institutions) to achieve the goals set out in the said legislative act. generalization of scientific achievements allowed to reveal the existence of several approaches ("orientation to the application of a set of measures", "direction of the state agrarian policy on the formation of favorable conditions for the development of the agrarian sector", "priority of rural development", "combined") to the interpretation of the essence of the concept of "state agrarian policy ", common to which is the emphasis on the term "policy ", which determines the actions, that is, the activities of the relevant bodies, with a focus on solving socially important problems. avoiding a thorough consideration of the essence of each approach, the authors offer their own version, which is formed by taking into account the cornerstone provisions and eliminating contradictions. as understood by the authors, the essence of state agrarian policy can be defined as the activity of the state, in accordance with a scientifically sound strategy, regarding interaction with producers of agricultural and other products and the population to implement a set of tactical measures for the rational use of natural resources, food security and development of rural areas in order to improve human development in ukraine. the authors made an attempt to combine the key factors of the existing approaches with the priorities of the state agrarian policy (herenafter – sap), in accordance with the european vector of the country 's development. it is about increasing food production, ecologization, rational use of natural resources, social development of rural areas, which is possible due to the intensification of the functioning of agricultural and construction clusters. article 1 of the law of ukraine "on the basic principles of the state agrarian policy for the period up to 2015" limits the scope of application of the state agrarian policy to "...agriculture and fisheries, food industry and processing of agricultural products, agrarian science and education, social sphere of the village, their material, technical and financial support." the absence of a new law today confirms the lack of flexibility of the state agricultural policy, the lack of strategic guidelines, the inability to respond quickly to new challenges. this is confirmed by the law of ukraine "on the principles of domestic and foreign policy ", in particular article 7, which defines the principles of domestic agricultural policy as follows: "...creation of conditions for the revival of the ukrainian village, efficient use of agricultural land, formation of a competitive agro-industrial complex, increasing its export potential, ensuring food security of the state; ensuring a high level of quality of agricultural products and food, formation of a transparent market for such products; formation of land market infrastructure, ensuring registration of title documents for land ownership." despite the fact that the last amendments to the legislative act were made in 2018, some of its provisions can be considered morally outdated and do not contribute to improving the human development situation in ukraine. the current modernization of the legislative framework of the state agrarian policy should be carried out taking into account the principles of the sap, in terms of interrelated regulation of agricultural production and rural development, the wto, on the use of the "green" and "yellow" boxes for financial support of national producers, and the fao, to ensure access to quality and safe food. in accordance with the above, the authors propose to amend the list of strategic goals of the state agrarian policy, which are defined in article 2 of the law of ukraine "on the basic principles of the state agrarian policy for the period up to 2015" (figure 1). the following positions require further explanation: – there are some detailed individual goals that are defined in the legislative act, in particular in the social sphere. the position on "preservation of the peasantry " is devoid of any specificity. the position of the authors is in line with the modern sap, when the population is offered both means and opportunities to meet all needs at a level not lower than in the city; – the emphasis is on supporting domestic producers; – the goal of protecting the interests of the population, which is the owner of land resources, is separately highlighted. this problem is related to the current stage of land reform and will be considered further. even at this stage, it can be argued that without control over the land market, the development of rural areas will not only be threatened, but will also cause a new social crisis. therefore, it can be stated that the current legislation is characterized by a significant lag baltic journal of economic studies 142 vol. 8 no. 4, 2022 behind the current needs of rural development. the erroneous focus solely on increasing agricultural production only complicates the situation, which against the background of economic instability can cause a complex social crisis, the solution of which requires significant resources and time. in accordance with the defined tasks, in the future the attention will be paid to the state policy in the construction industry. over the past 30 years, significant changes have taken place in the system of public administration of the construction industry. it is about partial re-profiling, periodic redistribution of functions and powers between state bodies. for example, in 1991–1992 there was the state committee of the ukrainian ssr for architecture, construction and protection of historical heritage, which in 1992 was reformed into the ministry of investment and construction, with the subsequent creation of the ministry of construction and architecture on its basis. nowadays, the industry is managed by the ministry of communities and territories development of ukraine, as well as departments within other ministries, in particular, the ministry of environmental protection and natural resources of ukraine and the ministry of infrastructure of ukraine. in this work, we agree with n. gushtyk that today "the state policy in the field of construction is carried out through the development, adoption and application of normative legal acts, building codes and regulations." among the main functions of public administration (forecasting, planning, organization, regulation, coordination and control), the priority is actually given to regulation, which provides for the implementation of measures by state structures to control the economic activities of market participants in order to solve the most important socio-economic problems of society. along with this actual restriction, which does not contribute to the development of construction in our country at a higher pace, we consider it appropriate to agree with o. kozych that within the framework of regulation "...formation of state agrarian policy is the activity of the state in accordance with a scientifically based strategy for interaction with producers of agricultural and other products, the population to implement a set of tactical measures aimed at the rational use of natural resources, food security and rural development in compliance with the principles of sustainable development guaranteeing food safety transformation of the agricultural sector into a highly efficient, competitive sector of the state's economy on the domestic and foreign markets preservation of the peasantry as a carrier of ukrainian identity, culture and spirituality of the comprehensive development of rural areas, solving social problems in the countryside ensuring sustainable development of rural areas improving the welfare of the rural population by creating jobs, developing infrastructure, meeting social and cultural needs implementation of investment support for innovative projects that are focused on more rational use of natural resources protection of the domestic producer by creating additional competitive advantages protection of the interests of the population that owns land resources stabilization of the market of agricultural products figure 1. the essence and strategic goals of the state agrarian policy source: supplemented by data: on the basic principles of the state agrarian policy for the period up to 2015: law of ukraine of 18.10.2005 № 2982-iv. information of the verkhovna rada of ukraine. 2006. № 1. p. 17. baltic journal of economic studies 143 vol. 8 no. 4, 2022 goals and objectives of the construction complex development, determination of objects of regulation, organization of the management system, determi nation of subjects of regulation and formation of their structure, delimitation of functions and selection of necessary methods of regulation, evaluation of regulation results." all these stages should be accompanied by the application of appropriate forms of state regulation, namely: financial and credit support of business entities, logistics, tax preferences and management assistance, information support. accordingly, it can be argued about the low level of state regulation. the position of v. melko is sufficiently well-argued, which proves that "...today we observe a low level of control by state authorities in the field of construction, as well as low efficiency of state regulation of construction activities: illegal construction without appropriate permits and land rights; violation of technical standards of construction; non-compliance with environmental safety standards; insecurity of investors and potential building owners; high level of bureaucracy and difficulty in obtaining permit documentation for construction works; low level of application of the financial and credit mechanism and insurance mechanism, etc." o. romansko also adds to the facts ... the development of recreational areas and places of rest and leisure, such as playgrounds and sports grounds... corruption, and sometimes fraud, which thousands of citizens fall victim to, left alone with their problems." the authors argue that today the actions or omissions of state structures regarding regulation in the construction industry are used contrary to the interests of society in favor of certain business structures. summing up, it is appropriate to emphasize that the state policy in the construction industry today, limited to the implementation of mainly regulatory management functions, does not create favorable conditions for improving the situation with human development in ukraine. the main investor is the population and business structures. while the population is focused on meeting the need for housing, businesses are interested in industrial infrastructure in accordance with their production needs. in addition, the problem of social infrastructure has a clear tendency to aggravation. earlier, three dominant factors that directly affect agricultural and construction policies were identified. the first of them reproduces the land reform that was initiated in the early 90s, in particular due to the adoption by the verkhovna rada of ukraine on december 18, 1990 of the resolution "on land reform", which stated that "...the task of this reform is to redistribute land with its simultaneous transfer to private and collective ownership, as well as to enterprises, institutions and organizations in order to create conditions for equal development of various forms of land management, formation of a multistructured economy, rational use and protection of land." it should be admitted that the declared focus on the free ownership, use and disposal by each owner of his part of agricultural land has not yet been fully implemented. the next important stage began on july 1, 2021, when the land market was launched, albeit with significant restrictions. it is important to form a general idea of the changes that directly affected the development of rural areas, for which land remains the most valuable resource. scientists of vinnytsia national agrarian university distinguish four stages of land reform: "... transformational to market environment (1991–1999); reformation (2000–2008); adaptation to wto membership (2009–2013); the current stage of external influence (since 2014)." according to the authors, the launch of the land market makes it possible to distinguish the fifth stage, which began on july 1, 2021. this phasing is due to the complexity of the transformation processes, which consisted in denationalization, that is, the liquidation of collective and state farms with the formation of new agricultural producers, with the change of ownership of the main resource – land. the prerequisites of the first one are the determination of the existence of an absolute monopoly of the state on land, the absence of payment for land as a resource that allows to obtain a product, and the lack of responsibility for the results of agricultural activities, when losses were covered by the state budget. the first stage was marked by legislative changes that provided for denationalization with the transfer of property rights to citizens, institutions and organizations. in accordance with the provisions of the land code of ukraine, which was adopted on march 13, 1992, land resources and land used by collective and state farms were transferred to collective ownership to the economic entities created on their basis, i.e. collective agricultural enterprises. despite this important step, members of the new entities did not become real owners of land resources. with the entry into force of the decree of the president of ukraine of august 8, 1995 "on the procedure of land sharing transferred to collective ownership of agricultural enterprises and organizations", the process of issuing certificates certifying the right to a land share began. it was with this step that the process of transformation of collective property into private property began, which was subsequently reflected not only in documents, but also in the actual allocation of land plots. along with legislative initiatives, before the implementation of the decree of the president of ukraine "on urgent measures to accelerate the reform of the agrarian sector of the economy " of december 3, 1999 № 1529/99, the main producers of agricultural products remained collective baltic journal of economic studies 144 vol. 8 no. 4, 2022 agricultural enterprises, the results of which had a clear tendency to deteriorate. for example, the total gross agricultural output in 1999 was 137.5 billion uah. in constant prices of 2010, when in the base year 1999 – 289 billion hryvnias. in the period 1995–1999, the average annual decline in production was recorded at 6.3%. only leonid kuchma's legislative initiatives, which provided for the division of land and property of collective agricultural enterprises, the introduction of compulsory rent and a fixed tax for producers, the allocation of preferential loans, etc. made it possible to change the situation. in 2000 the volume of gross output increased to 151 billion uah. it should be noted that l. kuchma in his actions relied on the achievements of scientists and was forced to confront a powerful agrarian lobby, whose representatives tried to adhere to the socialist approach in the state agrarian policy, that is, with the preservation of absolute control over land resources. the main directions of land reform during the presidency of l. kuchma p. haidutskyi mentions the following "...1) land reform (land parceling, inventory, valuation, land lease); 2) economic reform (transformation of collective and state farms into private economic structures); 3) reform of the market for products (abolition of state orders, introduction of exchange trade, development of market infrastructure); 4) reform of the state support system (introduction of a fixed tax, preferential lending, targeted grant programs, subsidizing leasing of machinery; 5) reform of the system of social development of rural areas)." about 60 decrees signed by l. kuchma on reforming, not only in terms of transformation of collective agricultural enterprises into private economic structures, but also on social development of rural areas, are the key point of land reform in ukraine. significant progress can be illustrated by the following analytical data, according to which in 2002 "...out of 42.7 million hectares of agricultural land, 32 million hectares were privately owned, 10.5 million hectares were state-owned, and 30 thousand hectares were communally owned." it is reasonable to agree with p. haidutskyi's position that l. kuchma stopped one step short of creating a land market, trying to solve this politically complicated issue by creating a land bank, but his initiative was not supported due to the interest of certain circles to take control of unshared land shares, the volume of which in 2002 was estimated at 3 million hectares. according to the land code of ukraine, which was adopted in 2002, a moratorium on the purchase and sale of agricultural land was established, which significantly slowed down the pace of land reform, effectively depriving 7 million citizens of the right to freely dispose of their property. within the framework of the third stage, which is connected with the accession of our country to the wto, official statistics indicate that agriculture is not subsidized until 2000, but as a budget-forming sector. membership in the wto, along with filling the domestic market, made it possible to increase export potential, and thus stabilize the national economy through the inflow of foreign currency. one cannot ignore the fact that export orientation has led to the emergence of new risks associated with dependence on the world market conditions. the fourth stage is related to the adaptation of the legislative field of ukraine to the terms of the "association agreement between ukraine and the eu", which requires changes in the institutions of state regulation of the agricultural sector in accordance with eu practice, in particular in terms of decentralization, development of local self-government and the formation of public policy mechanisms, promotion of human development in ukraine. the dominant of them is related to decentralization, but in the context of land reform, it is appropriate to emphasize the fact that since 2014, 1.68 million hectares of agricultural land have been transferred from state to communal ownership (as of 2019, but this process continues), which allows communities to receive additional financial resources for social development through their lease. this stage is also characterized by the annual postponement of the lifting of the moratorium due to the imposition of certain warnings on the society with which it was associated: – the possibility of acquisition by individual companies of large areas of agricultural land with further uncontrolled use without taking into account the interests of the population of rural areas; – speculative purchase of land from the population at low prices with subsequent resale at a higher price; – loss of land resources due to their acquisition by foreign companies; – incomplete reform of the land cadastre, which in combination with high centralization and corruption of officials does not provide the necessary level of protection of property rights of owners. a significant part of owners, not being interested in independent agricultural activities, leased them, which cannot be considered a rational use of the country 's land resources. this thesis is based on analytical data, according to which in 2019 the rental price of 1 hectare of agricultural land in ukraine was 80 usd. while in france it was 165 usd, in hungary – 194 usd, in bulgaria – 278 usd and in italy – 917 usd, which indicates a significant shortfall in income for owners. it is advisable to take into account that large agricultural holdings conclude lease agreements for a period of at least 7 years with the subsequent right of prolongation, which makes it impossible to increase the owners' income by renegotiating the agreement on more favorable terms. baltic journal of economic studies 145 vol. 8 no. 4, 2022 tenants suffer from the crushing of leasehold shares and cannot ensure further productivity growth. thus, the average share size is roughly 4 hectares, when "...the optimal size of a grain farm is 300-400 hectares, and animal husbandry is unprofitable with an area of less than 55 hectares." therefore, the losses from the moratorium are significant. in this paper, it is agreed with the authors of the article "strategy for the development of land relations in ukraine", who confirm that due to the existence of a moratorium on the purchase/sale of agricultural land and the existing state management of land resources, ukraine is significantly inferior to other countries in terms of agricultural efficiency. analytical data, according to which: "...the volume of added value of agricultural production per hectare of agricultural land in ukraine in 2019 amounted to 355 usd. usd, compared to 792 usd in poland, 502 usd in brazil, 1316 usd in germany, 1558 usd and 456 usd in the usa." the fifth stage, in addition to the launch of the land market, is interesting in relation to the issues under study because, in accordance with the provisions of the law of ukraine "on amendments to the land code of ukraine and other legislative acts on improving the management system and deregulation in the field of land relations", which was signed by the president of ukraine on may 24, 2021, determines the procedure for transferring land plots located outside settlements to communal ownership to village, settlement, city councils, which creates new resources for the development of rural areas. according to the results of the study, we argue that over the past thirty years there has been a significant change in approaches to the use of land as the main resource for agricultural production and rural development. the elimination of the state monopoly on land contributed to the formation of a new generation of owners, the transition from inefficient forms of organization in the form of collective and state farms, and later collective agricultural enterprises to private structures, the acquisition by local communities of land resources within and outside settlements as an additional source of income to finance socially important projects. today 's stage, marked by the launch of the land market, is characterized not only by a number of restrictions on free disposal, but also by a high probability of new risks associated with an increase in the number of raider attacks, financial constraints of medium and small farmers in access to land resources, a decrease in diversification in land use due to the increase in land resources owned by agricultural holdings, the release of labor with the deepening social crisis in rural areas. accordingly, the need to develop mechanisms that would allow to respond to the identified risks in order to prevent their further transformation into real threats to the agrarian sector of our country, form the basis for improving the situation with human development by using new opportunities that have emerged. one of the mechanisms should be related to the formation and development of agrarian and construction clusters, whose activities are focused on more efficient use of natural resources and creation of conditions for full satisfaction of the needs of the population of rural areas. the second dominant, defined as the one associated with decentralization. the relevance of administrative and financial decentralization, which actually began in 2014, o. pronina connects with "...insufficient funding for the development of rural areas, the weak development of the local selfgovernment institute, the lack of effective mechanisms for the implementation of sustainable rural development programs." the importance of the reform is justified by the multidirectional vectors of rural and agricultural development. since 2000, agricultural production has been characterized by generally positive dynamics, in particular in the cultivation and export of grain, while at the same time there has been a reduction in the number of employees at agricultural enterprises and deterioration of social infrastructure. the state agricultural policy provides support to agricultural producers in connection with the growth of their role in stabilizing the national economy. the decree of the president of ukraine "basic principles of rural social sphere development" (2000) and "state program of rural social sphere development for the period up to 2005" (2002), "state target program of ukrainian rural development for the period up to 2015" (2007) were mainly declarative in nature, as they did not contain a real mechanism of financial support for rural development. in the short period of time since the start of decentralization, some conclusions can be drawn about its results, but it is difficult to fully assess its impact on sustainable rural development, in particular because of the relationship with the land reform under consideration. therefore, the authors will focus on two facts: the tasks and expectations from decentralization and the real results for today, which concern rural areas. an important clarification is that decentralization is the whole system of public administration, not just rural areas. in the most general sense, decentralization is defined as "...the process of redistributing or dispersing functions, powers, people, or things from central control." that is, it is about the transfer of some functions from central government to local self-government bodies. for rural areas, given the analytical data on the level of employment, welfare, the ability to meet the needs of the population, the changes should be positive. it is not only about increasing the financial resources for the baltic journal of economic studies 146 vol. 8 no. 4, 2022 implementation of socially important projects, but also about the fact that local residents participate in the formation of requests for their development, based on real needs, are ready to join the implementation process and, in the future, act as consumers. the following points deserve attention: firstly, the possibility of using the so-called "social mobilization" method; secondly, the focus on the implementation of micro-projects, rather than large projects, i.e., with a clear definition of the end user. social mobilization consists in uniting different people into groups to meet a common need, based on their own capabilities. social mobilization is characterized by: a high level of self-organization, the absence of any restrictions for participants, priority in achieving common interests both through coordination and partial personal restrictions. personalization of needs is the basis for consideration of projects that are relevant within the community, they are inferior in scale to those that can be implemented under conditions of centralized management, but the effectiveness is much higher, in particular, due to passive support and active participation on the basis of partnerships. thus, it can be argued that decentralization as a process is designed to solve a number of complex problems related to improving the situation with human development, in particular in terms of multifunctional development within rural areas through the implementation of projects to support non-agricultural production with more efficient use of available resources and compliance with the principles of sustainable development. today, the results of decentralization in ukraine can be assessed only as intermediate, in particular, due to the low speed of changes in the transfer of powers and redistribution of financial resources. the emphasis is only on those points that relate to the development of rural areas as a basis for further development of a mechanism for coordinating the regulation of agricultural and construction policies. a. wiremeichyk and o. ruban offer the following information to characterize the current results of decentralization: "...before the reform, 92% of rural communities had less than 3,000 inhabitants, almost 11% of rural territorial communities had less than 500 inhabitants. at the same time, in more than 50% of rural communities, the subsidy was more than 70%. in general, 483 territorial communities were supported by subsidies for 90%." the above analytical data explains the gradual decline of social infrastructure in rural areas, which was caused by the dispersion of funding from the state budget, and its volumes could not be used for improvement, but only for the minimum level of support for socially important facilities. according to the decentralisation website, as of july 2021, 1,470 hromadas have been formed in ukraine, including 627 rural ones with a population of 4,926,682 people and a total area of 173,444.0 km2, uniting 3,291 councils. the number of amalgamated councils varies significantly – from 2 to 24. another fact is that the ahs include villages with centers in cities and urban-type settlements, which, accordingly, significantly complicates the analysis of trends in rural development before and after decentralization. for confirmation, the publications of v. gotra and a. kovach emphasize the fact that "...at the beginning of 2019, the composition of the united territorial communities included an average of 11 villages, but the majority (55%) with centers in the cities and towns of the city type on average, there are 14 villages per urban (rural) united territorial community, and 9 villages per rural community." the amalgamation of several villages around a city as an economic, social and cultural center provides such communities with significant advantages compared to rural amalgamted hromadas (herenafter – ahs), which leads to an imbalance in the level of development already at the initial stages of the reform. rural ahs with a small population and area and without functioning producers (taxpayers) are characterized by low capacity. by this term, the authors who prepared the practical guide on decentralization understand "...a hromada in which local sources of budget revenues, infrastructure and human resources are sufficient for local self-govern ment bodies to solve local issues envisaged by the legislation in the interests of the residents of the hromada." according to the above-mentioned website "decentralization", during 2015–2021 with a forecast for 2022, there is a positive dynamics of growth of the share of local budgets (without transfers) in the consolidated budget of ukraine. thus, this share in 2015 was 18.5%, and in 2019 reached 23.3% with a slight decrease in 2020 to 22.6%. it is also important that the share of transfers in revenues is gradually decreasing – from 59.1% in 2015 to 34.0% in 2020, which is partly due to the growth of local budget revenues. it is appropriate to agree with the position of z. titenko on the importance of voluntary amalgamation of more hromadas with a larger population, which due to the deduction of 60% of personal income tax allows to form a larger budget to achieve the goals of the hromada. small communities do not have the necessary human resources for development, although the exception is those where large budget-forming enterprises are located. in addition, the amount of state support in the form of subventions is carried out taking into account "...the area of the united territorial community and the number of rural population in such a territorial community with equal weight of both of these factors." baltic journal of economic studies 147 vol. 8 no. 4, 2022 according to official sources, today in ukraine there are signs of increasing disparities in the development of territories. thus, the average income per capita in january-may 2021 in ukraine amounted to uah 3358.4, which is 21.2% more than in the same period in 2020. in addition, in the regional context, the lowest level of this indicator was in transcarpathian region – uah 1,921.6, and the highest in the city of kyiv – uah 7,305.1. accordingly, the share of own income in total income in these administrative-territorial units was 49.4% and 90.6%. in addition to the risk of deepening disparities in the levels of development, the issues of territorial associations have become relevant today, which require the development of appropriate mechanisms. risks, according to the generalization and clarification, include: – reduction of the state budget if it is necessary to further perform the function of protection of socially vulnerable groups of the population; – weakening of control over the efficiency of the use of local budgets by the state in the absence or imperfection of the institution of public control; – imbalance between the powers and available resources of local self-government; – regional centres and ahs established with the participation of cities have greater economic and labour potential and developed social infrastructure, and therefore, acting as regional centres, become more attractive for further employment and permanent residence of the rural population, which deepens the demographic crisis in rural areas; – growing influence of local elites on the process of formation of revenues and expenditures of local self-government bodies in order to lobby the interests of their own business; – impossibility to meet the social needs of the population within rural ahs due to limited resources; – failure to take into account the socio-economic needs of ahs in the distribution of subventions; – the existence of the practice of influence of people's deputies on the distribution of subventions; – focus on achieving short-term goals, i.e., maintaining an acceptable level of social infrastructure, and lack of understanding of the need to achieve strategic goals in the form of increasing the investment attractiveness of rural areas. it is difficult to assess the results of decentralization unambiguously, given the fact that since 2014, changes have been made to the implementation process, which have significantly affected the level of capacity of the ahs to meet the socio-economic needs of the population. decentralization is accompanied by the emergence of a number of risks, the lack of response to which, in the form of the application of corrective mechanisms, can complicate the process of rural development. the third dominant factor – transformational changes in the development of agriculture – is directly related to the agricultural development of ukraine. thus, a group of scientists convincingly argues that the current situation with the lease of land resources has a number of threats associated with "...deformation of the structure of gross agricultural output (in 2014, crop production accounted for 71%, and livestock – 29%); refusal to keep livestock – 56% of enterprises are not engaged in it; large-scale spread of monocultures (the most profitable crops – wheat, corn, sunflower, rapeseed occupy 80% of the area), etc.” updated data, according to the state statistics service, indicate that the share of crop production increased to 79.1% in 2019, soybean acreage has increased 13 times in 29 years, and rapeseed – 15.5 times, that is, this disproportion has only increased. the focus on higher profits in the short term leads to a higher level of soil depletion due to non-compliance with crop rotation policy. if to add to this the uncontrolled use of cheap and low-quality agrochemicals, which harms the land and adversely affects the health of villagers bordering the fields, then in the future our country may lose part of the most valuable resource – fertile soils. these actions are partly related to the uncontrolled actions of tenants who are focused on making quick profits, which causes an environmental disaster and deterioration of the quality parameters of soils that remain in the ownership of the rural population, thereby complicating the possibility of achieving and maintaining sustainable development goals and improving the human development situation. scientific sources substantiate the need for the integrated application of "...market, state and corporate mechanisms of regulation" of agricultural production. in addition, the connection of tasks with the improvement of the situation with human develop ment is taken into account, which requires the development and application of a mechanism for coordinating the regulation of agricultural and construction policies, taking into account three key dominants: land reform, decentralization and transformational changes." (figure 2) the author's position differs from the existing view on the coordination of agrarian and construction policies as the basis for the development of agrarian and construction clusters, which forms the necessary basis for solving a whole range of complex problems that are characteristic of rural areas and are determined by the content of the three dominants. the integrity of the perception of the content of the identified dominants and the consideration of international experience in sustainable rural development allowed us to substantiate the strategy, goals and objectives that can be achieved through the harmonization of agricultural and construction baltic journal of economic studies 148 vol. 8 no. 4, 2022 state agrarian policy state construction policy l an d re fo rm d ec en tr al iz at io n t ra ns fo rm at io na l ch an ge s dominants regulation coordination mechanism mission sustainable development of rural areas achieving and maintaining the competitiveness of rural producers and ensuring a high standard of living while reducing the burden on the environment strategy creating favorable conditions for the development of entrepreneurship with the most efficient use of available resources (including land) and preservation of the environment and improving the quality of life of the rural population in accordance with the principles of circular economy purpose development of agricultural and non-agricultural production; increase of employment and incomes of the population; rational use of resources; increase of ah revenues; increase of investment attractiveness of ahs; development of production and social infrastructure; ensuring access to quality food; reduction of waste and losses; wider use of renewable energy sources; improvement of processing processes; application of innovations for adaptation to climate change tasks fair distribution of subventions between local self-government bodies, satisfaction of social needs of the population, control over the use of resources by the state and the community, equality in the development of local self-government bodies, selffinancing of local self-government bodies, rationality in the use of natural resources principles financial, logistical, labor, information, land, water resource development of rural economy. creation of agricultural and construction clusters. improvement of industrial and social infrastructure. ensuring food security result measures (legal, economic, organizational). support (regulatory, financial, scientific, personnel, information). methods (direct and indirect influence). means (administrative, economic, informational). tools (legislative, regulatory, administrative, organizational and economic) toolkit figure 2. model mechanism for coordination of agricultural and construction policy regulation as a basis for sustainable rural development and improvement of human development baltic journal of economic studies 149 vol. 8 no. 4, 2022 policy regulation, which, accordingly, should contribute to improving the human development situation in our country. 3. conclusions the study proves that without harmonization of agricultural and construction policies, taking into account the priority of rural production for further stabilization of the national economy and the need to form social infrastructure and diversification in the use of rural resources, threats may arise in the future, the impact of which will spread to industries of all countries. land reform, decentralization and transformational changes in agriculture require the prompt application of measures that would ensure the coordination of the interests of the state, business structures and the population in order to improve the situation with human development. the development of social infrastructure and creation of proper conditions for labor activity will contribute to the stabilization of economic, social and demographic situation in the whole country and individual regions. each position of the formed model of the coordination mechanism of regulation of agrarian and construction policy is supported by the considered key facts and is based on analytical materials on the activities of agricultural producers, construction enterprises, rural development. further research can be conducted in the direction of substantiation of ways to intensify the formation and development of agro-industrial and construction clusters. references: kaletnik, h. m., honcharuk, i. v., yemchyk, t. v., & litkovska, s. m. 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(2021). upravlinnia rozvytkom terytorii v umovakh detsentralizatsii [territorial development management in conditions of decentralization. economic analysis]. ekonomichnyi analiz, vol. 31, no. 1, pp. 7–16. received on: 11th of september, 2022 accepted on: 21th of october, 2022 published on: 30th of november, 2022 baltic journal of economic studies 12 vol. 3, no. 4, 2017 a financial and economic activities effectiveness evaluation as a condition of corporate management decisions making nataliia bieliaieva1 kyiv national university of trade and economics, ukraine abstract. the purpose of the paper is to substantiate, on the real figures, the need for enterprise’s financial and economic activities analysis as a condition of management decisions making to achieve the success of the company. methodology. the research is based on a comparison and analysis of data from the organization top management. so using matrix analysis in the paper, the financial and economic activities effectiveness is evaluated. based on these calculations, it is possible to make conclusions about the necessity of an identified management decisions regarding the future activity of the company. results. daily managers of various function levels accept hundreds and thousands of decisions regarding seemingly slight problems of the organization in general. at the same time, every such a decision, especially relating to the activity of the whole structure, should be clearly justified. such a need stems from the fact that every decision leads to certain consequences. if there is a need to make a decision relating to the future of the enterprise (e.g., embodiment, reorganization, etc.), it should be based on the data of the entire structure. and that is generally very difficult to do. many factors complicate the possibility of comprehensive evaluation of the company’s activity. at the same time, analysis of basic indicators will provide the specialist with some directions according to which the priority of the analysis can be indicated and appropriate management decision can be made. practical implications. it is built an effectiveness matrix of financial and economic activities of the enterprise. analysis of financial and economic activities makes it possible to design necessary strategic and tactical plan for the enterprise development, revealing its reserves of production efficiency increasing. so the aim of the paper is the assessment of the effectiveness of financial and economic activities of the company on the base of matrix analysis as a condition of adoption of necessary management solutions for the successful functioning of a company. value/originality. the obtained data provide a better understanding of the need for enterprise’s financial and economic activities analysis. so the main results of the evaluation and proposals of management decisions under described situation are determined. key words: management decisions, financial and economic activities of enterprise, matrix analysis, evaluation, economic results. jel classification: c51, d70, g30 1. introduction daily managers of various function levels accept hundreds and thousands of decisions regarding seemingly slight problems of the enterprise (organization) in general. at the same time, every such a decision, especially relating to the activity of the whole structure, should be clearly justified. such a need stems from the fact that every decision leads to certain consequences. if there is a need to make a decision relating to the future of the enterprise (e.g., embodiment, reorganization, etc.), it should be based on the data of the entire structure. and that is generally very difficult to do. many factors complicate the possibility of comprehensive evaluation of the company’s activity. at the same time, analysis of basic indicators will provide the specialist with some directions according to which the priority of the analysis can be indicated and appropriate management decision can be made. the relevance of such analysis is predetermined due to the fact that such evaluation will provide the evidence of the financial and economic activities effectiveness of the entire enterprise. and based on this, you can make defined management decisions. analysis of financial and economic activities makes it possible to design necessary strategic and tactical plan for the enterprise development, revealing its reserves of production efficiency increasing. so the aim of the paper is the assessment of the effectiveness of financial and economic activities of the company on corresponding author: 1 department of management, kyiv national university of trade and economics. е-mail: nswork@ukr.net baltic journal of economic studies 13 vol. 3, no. 4, 2017 the base of matrix analysis as a condition of adoption of necessary management solutions for the successful operation of a company. 2. analysis of recent researches and publications like any scientific problem, quite a lot of authors examined the financial and economic activities effectiveness evaluation in certain aspects. for example, h. savytska (1999) during the analysis of economic activities highlights certain stages that should be taken and allocates financial analysis as a part of a comprehensive analysis of enterprise’s economic activities. a. kovalev and v. pryvalov (1999) in their teaching determine the aim of the financial and economic activities techniques analysis not as in terms of identifying and assessing the financial condition of the company but in the perspective of information gathering for conducting work that should be directed towards its improvement. such scientists as n. rusak and v. strazhev (1999) consider in their work not only basic tasks and stages of the enterprise’s financial and economic activity analysis but also tools, with the help of which it is possible to implement it. ye. mnykh has described an interesting method (1998). it is based on a systematic analysis of financial statements − as a basis for comparison, the author used a complex regulatory model of financial sustainability of the enterprise, which connects different analytical ratios. beside this, to methodological approaches to the analysis of financial and economic enterprises activity are dedicated works of such scientists: y. balabanov (2009), y. blank (2007), v. ivakhnenko (2004), a. sheremet (2005) and others. however, as it can be seen, the defined problem was really studied thoroughly in the last century, at present times new researches on the matter are absent or essentially duplicate the aforementioned scholars. that is why this article just mentions names of the authors who were the first or the last, who actually examined outlined issues in details. furthermore, there is also a lot of domestic and foreign literature devoted to the management decisionmaking subject. a significant contribution to the study of management decisions’ problems was made by yu. bryhkhem, l. hapensky (2004), yu. honcharov (2014), v. sopko, m. benko, o. honcharenko (2016), h. ibarra (2015), a. tebekyn (2013), and many others. the nature, tasks, objectives, and functions of management decisions were investigated by scientists. also, there was identified the place of management decisions within the enterprise management system in general and considering management specifics. however, the problem still needs further researches; including the problem of the financial and economic evaluation of activities effectiveness as a condition of management decision-making process that still does not have proper justification. 3. calculations of activities effectiveness evaluation the main factors that are usually analysed in case of determining the effectiveness of financial and economic activities are, firstly, the execution of the financial plan and replenishment, as it necessary, its own working capital from profit and, secondly, the rate of turnover of working capital (assets). at the same time, we cannot consider these concepts separately. implementation of the financial plan ensures continuous activities of the organization. eventually, incessant work means that the company successfully operates, has demand for its services, and thus it is profitable and receives profits. income presence gives the possibility to replenish its own working capital that expands the boundaries of demand satisfaction and, therefore, the market. during the extension of the target market, the turnover of current assets, under normal conditions, should increase. therefore, the organization will get its income for services (products) earlier and can once again invest money either in activity expansion or in modernization (upgrading) of its assets; this ensures a complete cycle of the organization activity process. in general, the literature offers various methods of evaluating the effectiveness of financial and enterprise’s economic activities. each of them has certain advantages and disadvantages, some direction towards the analysis of determined block factors. we can also say about costeffectiveness that relates to an analysis of the costs – money, people, time, materials, etc. – that are expended as a part of a program in comparison to either their benefits of their effectiveness. and, of course, different analytical or mathematical approaches also have limitations. in this paper, the financial and economic activities’ effectiveness evaluation on the basis of matrix analysis is calculated. based on these calculations, it is possible to make conclusions about the necessity of an identified management decisions regarding the future activity of the company. despite these limitations, the methods used in the present study do provide a means to understand the general pattern of relative cost-effectiveness and provide a meaningful metric to gauge immediate outcomes. so the assessment gives us essential information about how our company is working and about the extent, to which we are meeting our activity goals. this is submitted in table 1. as it can be seen, the raw data for the matrix analysis of the financial and economic enterprise’s activities effectiveness are represented by following indicators: income (sales revenue), expenses, and net profit (which are indicators of financial performance report (statement of comprehensive income)). or it is called also profit and loss statement or income statement. and by the total value of assets, equity, and the number of employees that are presented in the balance-sheet baltic journal of economic studies 14 vol. 3, no. 4, 2017 (statement of financial position). in fact, those are the main basic indicators characterizing the company. these are general criteria that should be used as a basis for developing evaluative questions through the full range of evaluations topics. analysis of indicated indices in dynamics (e.g. elements of horizontal comparative analysis, which enables to determine the deviation (absolute and relative) of the actual level of the analysed indicators from basic (planned, last period, medium, etc.) level) or in relation to each other and gives basic information about the state of the organization (such as productivity, profitability (indicators) activities, availability of means, dynamics of enterprise’s activities, etc.). one approach to improving company’s activity is outcome assessment – the process of providing credible evidence that a top manager’s objectives have been obtained. for the matrix analysis and construction of appropriate matrix, it is needed to conduct intermediate calculations. they are submitted in table 2. index growth (see “index” in table 2) for each indicator is calculated as follows: i i i = indicator ndicator 1 0 , (1) where indicator1 – an indicator of the reporting period; indicator0 – an indicator of the basic period. usually, for the most complete vision of the situation (or for the adoption of management decisions that have an impact on the strategic development of the organization), there is a need to use data samples for at least four consecutive years. in this case, it is really observed dynamics of indicators change (if by this time it had been taken certain management decisions at the level of middle or top management, it is important to include information about the nature of these decisions. the change of particular indexes may indicate the effectiveness or negative consequences of some decision). nowadays the application of matrix analysis of indicators is a pretty promising direction in the analysis of the funding efficiency and the use of the enterprise’s property (assets). of course, depending on the specific situation, conditions of the organization activity may vary the methods, techniques of analysis, even a set of indicators (including their number) – depending on table 1 initial data for the matrix analysis of the financial and economic activities effectiveness evaluation № indicator symbol period, uah thou. basic reporting 1 income (sales revenue) i 272,5 327,4 2 expenses exp 240,5 271,8 3 net profit np 31,5 37,1 4 equity e 197,2 159,9 5 total assets a 537,8 610,5 6 average number of employees, persons en 8 10 source: option data from the author based on information from the organization top management table 2 interim calculations for the construction of the financial and economic activities efficiency matrix № indicator period index basic reporting 1 net income (net profit) per: np – 1 uah of income (or sales revenue) 0,116 0,113 0,974 – 1 uah of expenses 0,131 0,136 1,038 – 1 uah of equity 0,160 0,232 1,45 – 1 uah of total assets 0,059 0,061 1,034 – one employee of the enterprise 3,938 3,710 0,942 2 income (or sales revenue) per: i – 1 uah of expenses 1,133 1,205 1,064 – 1 uah of equity 1,382 2,048 1,482 – 1 uah of total assets 0,507 0,536 1,057 – one employee of the enterprise 34,063 32,74 0,961 3 expenses per: exp – 1 uah of equity 1,220 1,70 1,393 – 1 uah of total assets 0,447 0,445 0,996 – one employee of the enterprise 30,063 27,18 0,904 4 equity per: e – 1 uah of total assets 0,367 0,262 0,714 – one employee of the enterprise 24,65 15,99 0,649 5 total assets per: a – one employee of the enterprise 67,225 61,05 0,908 source: the author’s calculations baltic journal of economic studies 15 vol. 3, no. 4, 2017 what kind of information the structure wants to get from this analysis. the matrix model that reflects the results of matrix analysis is a rectangular table, elements (cells) of which reflect the connections between objects (indicators) of analysis (table 3). as it can be seen from the reduced matrix, a column “expenses” is calculated as the inverse indicator. in this case, a “growth index” for the indicator “expenses” is understood as “reduction index” – because it is desirable expenses to decrease, while the value of other indicators to increase. so, the calculation is also carried by formula (1), but it is used the inverse calculation of its indices. as a formalized form, it can be shown as follows (table 4): an indicator that characterizes the efficiency of organization’s financial and economic activities calculated as follows: å і i f і n = ∑ (2), where ii – a growth index of the i-s indicator; in – the total number of estimated growth indices (see table 3). an effective one is considered such activity if ef > 1. the size of the resulting generalized indicator is affected by many factors (in this case, indicators used in the analysis). for the analysed situation in this article, let us calculate the efficiency of financial and economic activities: åf = + + + + + + + + +0 974 1 038 1 45 1 034 0 942 1 064 1 482 1 057 0 961 0, , , , , , , , , ,7718 1 004 1 106 0 714 0 649 0 908 15 1 007 + + + + + + = , , , , , , overall, the effectiveness of financial and economic activities of the enterprise is calculated by formula (2) and is greater than 1; but the result shows that the efficiency of financial and economic enterprises activity increased by only 0.7 points. in this case, looking at the calculations, it should be noted that management of the enterprise must pay attention to the negative change in such factors as: – return on sales (section 1); – return on staff (section 1); – productivity per employee (section 2). to the extent that specific evaluations have specific purposes that there is no one right way to conduct an evaluation and that these criteria are interdependent and not mutually exclusive, their relative meaningfulness for a specific decision-making should be assessed and tradeoffs discussed in each case to ensure that key questions are addressed and to avoid unnecessary effort and expense. so based on analysis of last or considering previous results, the specialist can take some management decisions depending on a particular goal. if necessary to make further analysis, it is chosen methods, which can justify the reasons for the negative trends in indicators of the enterprise’s development. based on the results obtained in the framework of this analysis, manager, table 3 effectiveness matrix of financial and economic activities of the enterprise numerator denominator np i exp e a en np 1 x x x x x i 0,974 1 x x x x exp 1,038 1,064 1 x x x e 1,45 1,482 0,718 1 x x a 1,034 1,057 1,004 0,714 1 x en 0,942 0,961 1,106 0,649 0,908 1 source: the author’s calculations table 4 effectiveness matrix of financial and economic activities of the enterprise (formalized form) numerator denominator np i exp e a en np 1 x x x x x i np i np i 1 1 0 0 ÷ 1 x x x x exp np exp np exp 1 1 0 0 ÷ i exp i exp 1 1 0 0 ÷ 1 x x x e np e np e 1 1 0 0 ÷ i e i e 1 1 0 0 ÷ exp e exp e 1 1 0 0 ÷ 1 x x a np a np a 1 1 0 0 ÷ i a i a 1 1 0 0 ÷ exp a exp a 1 1 0 0 ÷ ⋅ e a e a 1 1 0 0 ÷ ⋅ 1 x en np en np en 1 1 0 0 ÷ ⋅ i en i en 1 1 0 0 ÷ ⋅ exp en exp en 1 1 0 0 ÷ ⋅ e en e en 1 1 0 0 ÷ ⋅ ÷ a en a en 1 1 0 0 1 source: the author’s option of writing general formulas baltic journal of economic studies 16 vol. 3, no. 4, 2017 firstly, needs to understand the dynamics of outlined indicators and to decide the implementation of actions aimed at eliminating negative dynamics. as an example, it may be the reduction of unprofitable production (and to increase an implementation of cost-effective), improving the conditions of workers (happy employee works more willingly) and others. 4. conclusions and perspectives of further researches the analysis of financial and economic activities efficiency shows, which areas need a special management attention (in terms of the certain management decisions adoption to improve process and performance), makes it possible to identify the most important aspects and a weak position in the enterprise activities. accordingly, the results answer the question what are the most important ways to improve the financial and economic situation of the company at a particular period of its activity. thus, the main purpose of the analysis is timely detection (exactly analysis) and deficiencies elimination (adoption of certain management decisions) in the organization activity, finding reserves to improve the financial and economic situation of the company, its solvency. the condition to it is the optimal management decisions relevant to the conditions, in which the organization operates. references: balabanov, i. 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(2013). metody prinyatiya upravlencheskikh resheniy [methods for making management decisions], moscow, izdatelstvo yurayt, 572 p. наталия беляева оценка эффективности финансовой и экономической деятельности как условие принятия решений в области корпоративного управления аннотация. целью работы является обоснование, на реальных данных, необходимости проведения анализа финансово-экономической деятельности предприятия как условия принятия управленческих решений для его успешной деятельности. методология. исследование основано на сравнении и анализе данных высшего руководства организации. таким образом, используя в работе матричный анализ, была оценена эффективность финансово-хозяйственной деятельности предприятия. на основе этих расчетов можно сделать выводы о необходимости принятия определенных управленческих решений относительно будущей деятельности компании. результаты. ежедневно менеджеры различных уровней управления принимают сотни и тысячи решений относительно кажущихся незначительными проблем организации. в то же время каждое такое решение, особенно касающееся деятельности всей структуры, должно быть явно обоснованным. такая необходимость связана с тем, что каждое решение приводит к определенным последствиям. если необходимо принять решение, касающееся будущего предприятия (например, слияние, реорганизация и т. д.), оно должно основываться на данных всей структуры в целом. baltic journal of economic studies 17 vol. 3, no. 4, 2017 и это, как правило, очень трудно сделать. многие факторы усложняют возможность всесторонней оценки деятельности компании. в то же время анализ основных показателей предоставит специалисту определенные направления, в соответствии с которыми может быть выбрано приоритетное, более важное направление анализа, и/или может быть принято соответствующее управленческое решение. практическое значение.  в  работе построена матрица эффективности финансово-хозяйственной деятельности предприятия. анализ финансово-хозяйственной деятельности позволяет разработать необходимый стратегический и тактический план развития предприятия, выявить его резервы повышения эффективности производства. таким образом, целью статьи является оценка эффективности финансовохозяйственной деятельности компании на основе матричного анализа как условие принятия необходимых управленческих решений для успешного функционирования компании. значение/оригинальность. полученные данные обеспечивают лучшее понимание необходимости проведения анализа финансовоэкономической деятельности предприятия. определены основные результаты оценки и предложения о возможности принятия управленческих решений в рамках рассматриваемой ситуации. baltic journal of economic studies 462 vol. 3, no. 5, 2017 corresponding author: 1 ural state university of economics, russian federation e-mail: jadransky@yandex.ua 2 ural state university of economics, russian federation e-mail: lena22021977@yandex.ru doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-462-468 time as a resource of the information economy dmitry yadransky1, elena chumak2 ural state university of economics, russian federation abstract. the article considers the category “time” in terms of the information economy. the subject of the study is the category of time acting as a resource of the modern economy. the main purpose of the article is the formation of the author’s concept of time as an economic resource in the conditions of the information economy. the methodological base is made up of concepts of foreign and domestic researchers regarding the concept of time; first of all, the concept of m. heidegger. in combination with a set of such general scientific and special methods of cognition as a dialectical, historical, systematic, descriptive, selective one, the article reveals the significance of time as an economic resource. existing methodological approaches to the study of this category become critically comprehensible. the concept is based on a resource approach. as a result, the crisis of applying the classical methodology of the industrial economy to the study of time as a resource of the information economy is determined. the main problem is the fact that the value of an information product is largely dependent on subjective factors and cannot be related to the total time spent on producing such a product. the transformation of the influence of time on the processes of production and consumption in terms of the information economy is considered. conclusions. based on the results of the study conducted, time as a public resource is proposed to be considered in 3 aspects: as a production resource (time of work), in which it reveals internal competition with other types of resources; as a promotion resource, in which the time of consumption of the corresponding product has an alternative with the time of consumption of another similar product (commodity competition); time as a resource of consumption or a personal resource (which determines the possibility and desire of the individual to consume a particular good). the article defines mechanisms of the influence of the time factor (as one of the important economic resources) on the process of social reproduction. the author’s concept of information flow rate is formulated, the resource phase of time is characterized, and the author’s list of differences of time functions in the information and classical economy is proposed. the author’s category “speed of information use” has been introduced, which is the basis for considering the possibilities of consumers of information to an adequate choice of the object of consumption. differences of time in the classical and information economy are formulated and their comparative analysis is carried out. specific features of consumption in the information economy, where consumption is associated with the search and interpretation of necessary information, are determined. the factor that complicates consumption is called the increasing rate of the information flow, expressed by the increase in the number of messages, which complicates the search and increases the number of errors in the choice of the information product. as a factor determining the price of labour in the information economy, it is suggested to consider the social demand for a particular product (information) and the subjective evaluation of the product by the consumer. it is proposed to consider time as a complex economic factor that acquires its resource value, only coinciding at a certain point of time with such characteristics of information as: content (adequacy), completeness, and price. in fact, at the theoretical level, an economic model of the space-time continuum is proposed, which creates the prerequisites for continuing the study of the proposed theory. key words: time, factor, information flow rate, creator of information product, price, resource. jel classification: a14, b49, j20 baltic journal of economic studies 463 vol. 3, no. 5, 2017 1. the relevance of the research topic in today’s dynamic world, time is one of the most important economic and scientific categories. given its decisive significance for economic processes, not all economic theories consider time as an economic category. of course, this has an objective explanation due to the fact that there is no single universally recognized theory explaining and describing such a thing as “time”, even at the present time, even in philosophy. economics, being a quantitative science, cannot exist without a clear methodological basis and adequate quantitative indicators. the existing theories of time, in fact, are a part of general theories and philosophical teachings, which are descriptive and not suitable for the use in the applied economics. the novelty of the topic is that under the conditions of the information economy, the “time” category from the viewpoint of the resource approach was not previously considered. in the description of economic processes, modern researchers use two basic paradigms of approaches to the study of time: kantian and marxist. it should be noted that both were formed in somewhat different epochs (respectively, preindustrial and industrial), while the modern stage of development of society and economy is attributed by more and more authors to the post-industrial era. we do not insist that the existing approaches have completely lost relevance, but in our view, at least, there is a need for their systematic scientific understanding within the framework of modern economic knowledge. attempts by most economists to avoid studies of time itself as a resource, we associate with i. kant’s narratives, in particular: “time is not an empirical concept derived from experience ... time is a pure form of sensory contemplation (kant, 1998). ...time is neither more nor less than a form of inner feeling, that is, contemplation of us and our inner state ... time is an a priori formal condition of all phenomena in general...” (kant, 1998). obviously, when carrying out calculations, the use of existentiel categories is difficult. moreover, under the conditions of the information economy, the process of production and consumption often acquires a virtual character and is differentiated by subjective time (the speed of information labour depends on the speed of the worker’s mental processes, the rate of consumption from the personal time available to the consumer). it should be noted that marxism and the dialectical materialism that developed in the ussr (as basic philosophical movements) gave a significant impetus to the use of time in certain instrumental studies. according to the representatives of dialectical materialism, time is an order, a sequence of changes in the stages of material processes, respectively – space and time are inseparable from matter (konstantinov, 1963). however, in modern information labour processes, dialectics loses its semantic basis  – the opposition (since the act of production and consumption can not necessarily be divided). proceeding from the fact that time in dialectical materialism is an objectively real form of the existence of a movement that characterizes the sequence of the unfolding of material processes and their duration, the rationing of labour has become a logical economic embodiment of this concept. the loss of clear boundaries of the movement of material processes within the modern reproduction process, as well as the high degree of its virtuality, in fact, lead to the boundaries of modern understanding of matter (5d movies, vegetables with meat taste, etc.). we do not enter into a discussion on changing the understanding of matter, but we consider it necessary to note that the information process of social reproduction is a continuous process (fig. 1), which cannot be correctly broken down in stages. moreover, in this process, there may not be at all a material basis (artefact). product creation product promotion product consumption fig. 1. the process of social reproduction in the information economy undoubtedly, the process of reproduction takes place during a certain time, but due to the fact that phases are shown in fig. 1 do not carry of a pronounced nature in the information product, their differentiation by time is difficult. also, it should be noted that the value of the product will largely depend on subjective factors and cannot be related to the total time spent on producing such a product. thus, the methodological basis for studying time in modern economic processes requires the use of a more specific methodology. in this case, dialectical materialism and classical marxism do not fully take into account peculiarities of social reproduction of the modern information product. in our opinion, the most universal methodological basis of theorizing is phenomenology (in the general principles described by martin heidegger (heidegger, 1993)). however, m. heidegger’s methodology as a phenomenological concept has a sufficiently high level of theorizing, which also makes it unsuitable for solving applied economic problems. statement of the research problem. the above processes form a special urgency for conducting such a study with the purpose to clarify the role of time in modern economic processes. achieving the purpose requires the simultaneous fulfilment of a number of tasks, in particular: the study of the transformation of scientific concepts about the category “time” in the modern economy; the possibility of applying the resource approach to the “time” category; the formation of directions for a possible quantitative measurement of time as an economic resource. baltic journal of economic studies 464 vol. 3, no. 5, 2017 2. the category of “time” in the modern economy the first profound studies of the influence of time on the results of social production were conducted by k . marx (marx, 1968). to date, it is his work that has the greatest practical importance. according to karl marx: “any material wealth is only a fleeting embodiment of this social labour, the crystallization of the production process, the measure of which is time  – the measure of the movement itself ” (marx, 1978). k . marx proposed the law of economy of time (marx, 1968). this law as a whole is fair for the conditions of the industrial economy. however, as virtualization of socio-economic relations progresses, the theses of this law lose their adequacy. in modern scientific literature, studies related to the analysis of time often came down to: consideration of the time factor in justifying management decisions (these studies can be viewed in the context of time accounting in the process of intellectual work); analysis of the actual time spent on material production (technical standardizing as a form of accounting for physical labour). foreign and domestic scientists made a significant contribution to the first direction: h. bierman (2003), i. blank (blank, 2003), p. vilenskii (vilenskii, 2008), and others. to the second  – f. taylor (taylor, 1991), a. gastev (gastev, 1972), and a significant number of modern researchers. a separate line of research was also the features of modelling of economic processes under conditions of dynamic temporary changes (zang, 1999). the concept of an economy based on a time factor was introduced by the german economist s. gesell as an alternative payment system (gesell, 1916). k . marx (marx, 1978) considered time as the most important economic category and as the main factor in the growth of labour productivity (time-saving). however, the globalization of the economy and the change of forms of competition among producers of the information product make classical concepts of time less suitable, which in fact are the product of another economic paradigm (the commodity economy). at the same time, according to k . marx, time to some extent determined the relationship between the producer and the consumer (reduction in the time costs led to a reduction in the product price and, consequently, to an increase in customer satisfaction). at the present stage, time turns into one of the most complex resources of the information economy, which cannot be characterized by simple dependencies. thus, we propose to consider time in the information economy as a complex, multidimensional category that determines the nature of relations between the producer and the consumer of the information product. 3. resource approach to the category of “time” resources, according to the author of the economic dictionary v. zolotogorov, are “...wealth and their sources” (zolotogorov, 2004). time, in this context, can act as a source of wealth only within the framework of the industrial economy. saving of time determines the reduction of circulation costs, the growth of labour productivity, and so on. however, in the context of the information economy, the speed of circulation is largely determined by the consumer, and not by the producer (seller). in consequence of this, the role of time as a resource of the information economy is substantially transformed (but not diminished). in the framework of this study, we will try to offer the author’s concept of time as a resource in the information economy. in the basis of theorizing, we lay the resource approach. the fairness of this approach, in our opinion, allows adequately correlating the aspect of production and consumption of an information product with the only, unconditionally exhaustible resource of a person – the time of life (yadransky, 2013). time as a public resource can be considered in 3 aspects (in accordance with figure 1): as a production resource (working time), in which it reveals internal competition with other types of resources (including past labour); as a promotion resource, in which the time of consumption of the corresponding product has an alternative with the time of consumption of another similar product, with the same amount of benefits obtained from consumption (commodity competition); time as a resource for consumption or a personal resource (which determines the possibility and desire of the individual to consume a particular good). it should be noted that the first two resources can be replaced by alternative ones and only the latter is essentially non-alternative. the process of creating an information (and not only) product is also value-differentiated by the time of life (the individual value of the time of the subject creating the product). it is this that determines the basic cost of an information product, which often has no material costs at its core. in this case, the price, along with the public value, is determined by the individual value of the time of its developer (creator) and the consumer. it should be noted that often without having a material nature at its core, information can easily be reproduced. in this case, the developer’s time is almost the only lost resource. in this context, the time is of the principal importance of the individual, regardless of the latter’s involvement in social reproduction or consumption. the individual’s lifetime is spent regardless of his desire and forms of social activity, therefore, each individual has a limited time to realize the available intellectual and physical potencies (which in turn were acquired as a result of baltic journal of economic studies 465 vol. 3, no. 5, 2017 the direct costs of the individual lifetime). this allows us to consider k. marx’s thesis in a new way: “for the individual, as well as for society, the comprehensive nature of its development depends on the preservation of time. any savings, in the end, comes down to saving time” (marx, 1968). speech in the case under consideration can go about saving own time as the unique exhaustible individual resource. at the same time, the time to prepare for the creation (consumption) of an information product and the immediate time for its creation (consumption) are simultaneously an object of saving. by analogy with the creators (consumers) of the information product, the entrepreneur is also interested in saving time since minimizing the time to prepare and create an information product increases economic results. however, over the fact that the phases of creation and consumption of an information product cannot be clearly structured, the increase in the productivity of information labour equally depends on its creator and consumer and, consequently, the time savings (in the marxist sense) goes beyond the capabilities of a particular producer. it should be noted that the information economy reduces risks of the entrepreneur. not having a material basis, and accordingly, the initial costs of material resources, entrepreneurial losses in case of impossibility of realization of the given goods are minimal. given the fact that classical political economy classifies wages as added value, the nature of entrepreneurial risk varies significantly. since the process of production, promotion, and consumption of the information product has a number of features, there is a need for a deeper analysis of the internal structure of the reproduction process in the information society. consumption is associated with the search for the necessary information and its interpretation. more and more increasing rate of the information flow, which is expressed in the growth of the number of messages, fundamentally complicates this search and increases the number of errors in the choice of the information product. speaking about the price of labour in the information economy, we can state that the main parameter determining the price is public demand and subjective evaluation of the product by the consumer. however, the product may be completely unnoticed and, therefore, completely unvalued. an interesting point of view on time as a resource is proposed by the russian author a. baskin who made an attempt to comprehend the category of “time” in the postindustrial society (baskin, 2006). the author introduces the concept of static and dromological resources, assuming the bivalence of time as an economic resource (characterized by interval duration and irreversibility of the move) (baskin, 2006). however, it is due to the irreversibility of the course that time is a resource in the information society. in fact, information becomes a resource only at a certain point in time, provided that it was noted by the consumer in the general information flow. irreversibility of the move makes the information resource permanently obsolete, and, consequently, losing its resource value (depreciates). it should also be noted that, in addition to timeliness (which discloses the phase of time as a resource), there are other characteristics that determine the value of information as a commodity. to these characteristics we include the price, adequacy, completeness. each of these parameters can be quantified, but in the information economy, information acquires the status of a resource only when the specified parameters coincide. thus, talking about the information economy is more correct not from the standpoint of time capacity (as suggested by a. baskin), but from the position of time-dependence. in other words, only depending on the time factor (timeliness), information acquires economic value and becomes an economic resource. accordingly, the laws of the classical economy begin to function. in general, the resource character of time is manifested in the one-moment coincidence of parameters shown in fig. 2. production price content completeness consumption price timely content timely completeness timely fig. 2. description of the resource information phase in our opinion, information as a commodity has a certain value only if factors shown in fig. 2 on the part of producers and consumers coincide. so, the price (liquidity) of an information product (which quickly becomes obsolete) is determined not only by the fact of completeness and adequacy of information but also by the availability of funds from the buyer at a particular moment in time. timeliness as a characteristic of a certain time interval is, in this case, a quantitative reflection of the time factor. it should be noted that as a consequence of the irreversible flow of time, this time interval (timeliness) is irretrievably lost (information becomes obsolete) in an extremely compressed period. in essence, this allows us to talk about the rate of the information flow (as an element of the information economy), calculated similarly to the speed in mechanics. in this case, the speed of information is a value equal to the ratio of the change in income from the information product (information) to the time interval for which this change occurred (1): d x v dt = . (1) it is a combination of the factors shown in fig. 2 where is the manifestation of time as a resource of the information economy. it should be noted that in this case, the economic result is a consequence of a combination of two types of resources – information and time. thus, baltic journal of economic studies 466 vol. 3, no. 5, 2017 time, being a resource of the information economy, has the property of direct influence on the economic result, so it requires clarification from the viewpoint of the possibility of its quantitative measurement. 4. directions of possible quantitative measurement of time as an economic resource to consider time as an independent indicator of the effectiveness of economic processes in the information economy is possible, taking into account a number of limitations. thus, the cumulative expenditure of time does not correctly reveal the labour coefficient of the information product, since they do not take into account the intensity of the information flow associated with this process. in this case, it becomes necessary to introduce the category “information flow rate”, which should characterize the intensity of the receipt of information messages (or units of information) per unit time. it is possible to consider the time factor within the quality of the flow (organization) of economic processes, however, it is necessary to take into account differences of this factor in different models of the economy. the differences are given in table 1. the information product differs from the noninformational one in that its consumption is more structured by time. since most of the authors of the information resource are referred to as inexhaustible, time (obsolescence) is practically its only limit. in this case, it seems expedient to introduce the category “speed of information use”. in this case, this indicator will disclose the average speed of the information flow used by the consumer of information during a certain time period (year, month). given that this indicator is dependent on a number of material resources, in particular material, energy, the main differentiating factor is time, or rather an individual (or cumulative) time resource of the consumer. it is worth paying attention to the opinion of a. marshall, who in particular notes: “the factor of time, which underlies the main difficulties in solving almost any economic problem, is in itself absolutely constant: nature does not know the absolute division of time into long and short periods, they invisibly pass into each other, and what for one problem appears as a short period turns out to be long for another one” (marshall, 1968). adding to this thesis the opinion about the subjective perception of one’s own time as an exhaustive resource, it becomes obvious that even the attitude towards the duration of a socio-economic process (and accordingly the desire to take part in it) acquires subjectivity and passes into the plane of socio-psychological analysis. american professor paul heyne notes that “any good is changeable. a higher money price encourages people to search for and use substitutes. and the higher the price, the greater the use of bypass routes” (heyne, 1992). the number of similar benefits in the information economy can be many times greater than in the industrial economy. however, the high information flow rate makes it difficult to find an alternative. in our opinion, the use of a price approach to understanding the causality of economic practices in the event of a change in the choice of an alternative in the information economy is not justified. we attribute this to the fact that price as an objective characteristic of the socially necessary expenditure of time loses its meaning. as an alternative to the price factor is the time factor. in particular, time, as a consumer resource e, cannot be replaced. undoubtedly, in part time expenses can be compensated by the acquisition of time-saving services, and within the framework of the cumulative time resource by means of prolonging longevity. however, when it comes to the consumption of certain information, the rate of its consumption depends on the rate of the information flow and the individual ability to process (absorb) the information flow at the specified speed. it is worth paying attention to the time that an individual considers possible to spend on the creation (use) of a certain amount of public utility. the price, in this case, reflects the time necessary for the exchange of its exhaustible resource (lifetime) to receive in return a certain amount of material and non-material goods. from these positions, the main value in assessing any economic practices, in our opinion, is the desire (willingness) to exchange its temporary resource (life) for a certain good. it is from the subjective sense of justice of such an exchange that satisfaction (dissatisfaction) with the economic exchange arises. table 1 differences in time in the classical and information economy index in the classical economy in the information economy level of human development total time required to prepare the intensity of the information-educational flow (the amount of information processed by a person) costs of direct and embodied labour relative time expenditure (efficiency) relative time expenditure (value of time) the efficiency of economic processes comparative time spent on production comparative consumption time for consumption the price, as an indicator of the cumulative expenditure of time value as an objective measure of time price as a subjective value indicator the speed of economic processes (turnover) duration (total costs) the effectiveness of the information product (the ability to cause consumer satisfaction for the minimum expenditure of personal time) baltic journal of economic studies 467 vol. 3, no. 5, 2017 returning to the thought of p. heyne, who considers time in a slightly different context, it should also be noted that the researcher believes that: “... buyers need time to find substitutes and start using them (i.e. goods). manufacturers also take time to come up with substitutes, produce them and draw attention to them. as a result, the scale of the increase or decrease in purchases depends very much on the duration of adaptation to price changes” (heyne, 1992). in this context, p. heyne, in fact, continues the idea of a. marshall: “time is also needed for consumers to get used to substitutes that can be used instead of this product, and perhaps also for producers to become accustomed to making such substitutes in sufficient quantity. it may also take time to develop a habit of new products and to discover ways of using them economically” (marshall, 1968). however, these approaches are more closely related to the valuation of a tangible commodity. the information product is much more complicated in terms of its replacement. on the one hand, in the dynamic information flow, it is necessary to find an analogue, on another one – the consumer often cannot, until the end of consumption, present the degree of satisfaction with the consumption of this product. being unsatisfied, the consumer has probably already exhausted the resource of time (in consequence of which the corresponding product has lost value) or he or she needs another (not similar) product because the time period has changed. consequently, in this case, the basis of consumer activity in the information economy is the process of promoting the information product. this process is reduced to the practical implementation of the time factor as an economic resource. all the above gives grounds for using time as a category of economic practice in the conditions of the information economy and allows considering it as an important economic resource in scientific theorizing. this resource explains and characterizes the sphere of relations, which until today have not been fully explored. modern attempts at two-dimensional measurement of supply and demand of an information product require their translation into a three-dimensional analysis plane, in which the third dimension is time. it is this 3-dimensionality, in our opinion, that determines the entire system of economic relations in the information economy. we associate this with the fact that any exchange occurs not only in space, but also in time, and accordingly, the complication of the nature of exchange forces us to rethink the time factor in modern economic models. on the other hand, time determines the appropriateness of economic relations and the degree of their antagonism. thus, we can state that time as a resource of the information economy is fundamentally measurable and can be quantitatively described. however, within the framework of this research, it is not possible to go completely to a quantitative description of time because of the need to continue theoretical studies, primarily aimed at determining the influence of the time factor on changing demand and 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(2013). chas, jak bezaljternatyvnyj obmezhenyj resurs [time as a non-alternative is a limited resource]. naukovi praci kirovoghradsjkogho nacionaljnogho tekhnichnogho universytetu. ekonomichni nauky, № 23, p. 199-206. baltic journal of economic studies 252 vol. 3, no. 5, 2017 corresponding author: 1 department of production management and innovation activity of enterprises, mykolaiv national agrarian university. e-mail: victor140679@gmail.com 2 department of production management and innovative activity of enterprises, mykolaiv national agrarian university. e-mail: agrobiznes.mnau@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-252-259 analysis of trends and prospects for development of export and import of goods and services by enterprises of ukraine at the regional level viktor kushniruk1, tetiana ivanenko2 mykolaiv national agrarian university, ukraine abstract. international economic relations at the level of export and import of goods and services have a significant impact on the development of the economy of each country. at the same time, the export of goods and services by enterprises of ukraine at the regional level plays an important role, which is a source of significant inflow of foreign exchange funds, ensuring financial stability and investment attractiveness. the subject of the research is theoretical, methodological, and practical aspects of the development of foreign economic activity by enterprises of ukraine at the regional level. the methodological basis of the study is the dialectical method of cognition and the basics provisions of economic science. the use of the system approach allowed considering the object and subject of research as a system and element of the general economic system. in the process of research, a number of methods are used, such as: abstract-logical, economic-statistical, monographic, and graphic. the purpose of the study is to analyse trends and prospects for the export and import of goods and services by enterprises of ukraine at the regional level. the stated purpose led to the following tasks: conducting research on the volumes of export and import trade in goods and services; identification of factors influencing foreign trade; definition of geographical changes in the sphere of foreign trade and the coefficient of export coverage by import; substantiation of cooperation with foreign partners on a toll basis. according to the results of the research, the following conclusions are obtained: trends and prospects of the export and import of goods and services are investigated; it is found that the low competitiveness of national industrial products, the crisis financial situation of most industrial enterprises, the lack of development of national certification systems and quality control of export goods, the low world rating of ukraine’s reliability for loans and investments affects foreign trade; a significant expansion of the geography of export trade and import supplies is revealed, which positively influenced the balance of foreign trade in goods and services. therefore, in order to build a highly efficient national economy, the foreign economic activity of ukrainian enterprises at the regional level should be oriented towards the development of export of finished products, rather than raw materials and partial import substitution for those products that can be successfully produced in ukraine. the process of import substitution solves a range of socio-economic tasks, such as the revival of the agro-industrial complex, the reduction of unemployment, and the strengthening of the country’s economic security. at the same time, the modernization of agrarian and industrial enterprises can take place at the expense of foreign exchange earnings from export. key words: international economy, foreign trade, export, import, pricing policy, agriculture. jel classification: f10, m21, q13, q17 1. introduction foreign economic activity is one of the important factors in the stable development of national economies of the world. export of goods and services are an essential source of tax revenues to the state budget. the urgency of studying the issue of the export and import of goods and services is that, using the advantages of the combined international scientific and technological potential, the international division of labour, ukraine will be able to solve economic tasks that will ensure the economic growth of the national economy and the wellbeing of the ukrainian population. the purpose of the study is to analyse trends and prospects for the export and import of goods and services by enterprises of ukraine at the regional level. baltic journal of economic studies 253 vol. 3, no. 5, 2017 the stated purpose led to the following tasks: conducting research on the volumes of export and import trade in goods and services; identification of factors influencing foreign trade; definition of geographical changes in the sphere of foreign trade and the coefficient of export coverage by import; substantiation of cooperation with foreign partners on a toll basis. the methodological basis of the study is the dialectical method of cognition and the basis of economic science. using the system approach allowed to consider the object and subject of research as a system and element of the general economic system. in the process of research, a number of methods were used, such as: abstractlogical, economic-statistical, monographic, and graphic. the information base of the study was legal and regulatory acts of ukraine, official statistical materials of the state statistics committee of ukraine, the main department of statistics of mykolaiv region, special scientific and reference literature, electronic resources of the internet. problems of development of the foreign economic activity of agrarian and industrial enterprises were considered in the works of many leading economists, in particular: h.  herasymenko, i.  honcharenko, h.  duhinets, a.  zadoia, a.  kliuchnyk, m.  kozik, v.  matvieieva, i.  steblianko, n.  tiurina and other well-known scientists. however, not all aspects of the problem are sufficiently studied, especially in terms of stimulating the development of export and import of goods and services by ukrainian enterprises at the regional level. 2. foreign trade in goods foreign economic activity is one of the most important factors in the development of the national economy. no country in the world is capable of independently developing its own production processes, ensuring economic growth without effectively taking advantage of the international division of labour and the combined international scientific and technological potential. this is especially true in today’s conditions, when intensive development processes of international economic integration, transnationalization, the international division of labour, globalization of the world economy. foreign economic activity promotes the development of perspective directions of export potential (tiurina, karvatska, 2013). improving the financial position of producers and exporters of goods and services in the region should be carried out at the expense of development of foreign economic activity by enterprises of the agricultural sector and industry. effective development of foreign economic activity should promote the expansion of production, updating of the material and technical base, an increase of volumes of produced products both in the agrarian sector and in the processing industry. all these measures should promote the creation of additional jobs and solution of socio-economic problems of society. export potential represents a certain amount of goods and services that the national economy is able to produce, involving its own and imported factors of production, and realize them in external markets with maximum efficiency for economic entities, regional economic complex, and the state as a whole (duhinets, kucheriavenko, 2012). foreign trade in goods is a prominent place in the foreign trade of the mykolaiv region. during 2010– 2016, there was an increase in export volumes by the year of 2012, and then their reduction began. the dynamics of import trade has been unstable for all years. in 2016, the negative tendency of the previous year has changed to positive (fig. 1). according to the state customs service of ukraine and company reports, in 2016, the volume of export fig. 1. dynamics of the volume of foreign trade in goods in the mykolaiv region baltic journal of economic studies 254 vol. 3, no. 5, 2017 of goods in the region amounted to $1664.8 million and increased compared with 2015 by 3.8%, import  – $678.3 million and grew by 18%. relative to 2010 export increased by 4.2%, import  – decreased by 21.7%. the growth of export of goods was ensured by an increase in supplies of vegetable products, readymade food products, and import – an increase in import of land transport vehicles, aircraft, floating means, mechanical and electrical equipment, and ready-made food products. the positive balance of foreign trade in goods amounted to $986.5 million (in 2015 it equalled $1028.4 million, in 2010 it was $731 million), with the prevalence of export over import 2.5 times (in 2015) and 2010 – respectively 2.8 and 1.8 times). enterprises of mykolaiv region in 2016 provided 4.6% of ukrainian export of goods and 1.7% of import, which corresponded to 6 and 11-12 places among the regions of the country. in comparison with neighbouring regions (kirovohrad, odesa, and kherson regions), mykolaiv region occupied leading positions, yielding only to odesa region in import trade. the volume of export trade of enterprises of mykolaiv region exceeded the same index of kherson region by 6.8 times, kirovohrad region by 3.9 times, and odesa region by 9.7%, the share of which in the national export of goods was 0.7%, 1.2%, and 4.2%. along with this, from mykolaiv region’s enterprises from abroad, they imported goods in 4 and 3.7 times more than in kherson and kirovohrad region. at the same time, the volume of import of our region by almost 44.7% was inferior to the volume of odesa’s import. in the national import, odesa, kirovohrad, and kherson regions occupied respectively 3.1%, 0.5%, and 0.4%. in 2016, 327 enterprises of the region came out to the external market, which is 8 units less than in 2015 and 91 units more than in 2010. instead, there was a significant expansion of export geography  – from 113 partner countries in 2015 to 131 countries in 2016. the main exporting partner countries were the russian federation, which accounted for 22.3% of total export, india – 10.7%, egypt – 10.5%, the islamic republic of iran – 5.4%, and spain – 5.2%. in 2016, there was a noticeable increase in export to india (by $95.1 million, or 2.2 times), due to an increase in the supply of mechanical equipment and grain crops; egypt ($53.9 million, or 44.6%), indonesia (by $48.5 million or 3.1 times), and the islamic republic of iran ($37.8 million or 1.7 times) due to the growth of export of grain crops, seeds and fruits of oilseeds. instead, export supplies to the russian federation declined (by $48.3 million, or by 11.5%), saudi arabia (by $41.4 million, or by 41.5%), israel (by $39.2 million, or 80.7%), and the republic of korea (by $35.7 million, or 71.1%). affected relations with the countries of the european union have been markedly intensified. export of goods to the eu countries amounted to $307.9 million and increased compared to 2015 by 26.1% (due to increased supply of ready-made food products and products of plant origin). the share of eu countries in the regional index has increased by 3.3 pp and amounted to 18.5%. the basis for export to the eu countries was identified products of vegetable origin, ready-made food products, textiles and textile products, live animals and products of animal origin. in the commodity structure of the region’s export, there were no significant changes. as in a year ago, it was dominated by three groups of products: vegetable products, which accounted for 56.9%, products of chemical and related industries  – 22.4%, mechanical and electrical equipment  – 9.5%. in addition, export of ready-made food products, fats and oils of animal or vegetable origin were noticeable. for the enterprises of mykolaiv region, there are considerable volumes of trade in agricultural products in the foreign market (fig. 2). the largest export deliveries of agricultural products were observed in 2012–2013, when the volume of deliveries exceeded a billionth mark, and its share in total export of goods approached to 50%. last year, after a two-year hiatus, the tendency to increase export of agricultural products was restored. fig. 2. dynamics of export of agricultural products by enterprises of the mykolaiv region baltic journal of economic studies 255 vol. 3, no. 5, 2017 according to the state customs service of ukraine, in 2016, enterprises of the region exported a variety of agricultural products worth $957.1 million, which is 14.2% more than in 2015 (compared with 2010  – by 34.5% more). the share of agricultural products in the total export of goods amounted to 57.5%, which is 5.2 pct. more compared to 2015 and by 12.9 pp – since 2010. almost all agricultural export was determined by crop production. in 2016, it accounted for 99% of supplies (in the previous year  – 99.3%). the structure of crop production export remained stable. the majority of it (74.7%), as in 2015, consisted of grain crops, which were shipped abroad for the amount of $707.6 million, 24.8% fell on seeds and fruits of oilseeds $234.6 million, 0.5% was vegetables ($4.9 million), barely a prominent part – edible fruits and nuts ($0.4 million). in 2016 along with an increase in the value of export of crop production, the growth of deliveries in real terms was observed, namely: sunflower seeds  – by 5.2 times, vegetables  – by 2.4 times, soybeans  – by 2.3 times, wheat – by 21.5%, barley – by 9.7%, corn – by 7.4%. at the same time, deliveries of rapeseed seeds – by 31.5%, edible fruits and nuts – decreased by 5%. at the same time, the average export prices for the main types of crop products declined, most for barley – by 16.8% (from $166.4 to $138.4 per ton), wheat  – by 11.9% (from $172.5 to $152 per ton), sunflower seeds – by 10.1% (from $406.9 to $365.8 per tonne). prices for corn were lower by 4.9%, soybeans  – by 0.6% and amounted respectively to $151.9 and $355.6 per ton. instead, the average export price for rapeseed increased by 1% to $398.1 per tonne. the expansion of geography of export deliveries of grain crops continued – from 57 countries in 2015 to 65 countries in 2016. the largest volumes were recorded in egypt (14.7% of annual grain export), indonesia (10.1%), spain (9.3%), saudi arabia (8.1%), and the islamic republic of iran (6.9%). seeds and fruits of oilseeds in 2016 exported to 44 countries, which is 10 countries more than in 2015. the main consumers of this type of agricultural products were egypt (29.8%), the islamic republic of iran (15.6%), turkey (12.7%), portugal (7.4%), france (7.2%), and spain (5.3%). the share of livestock production in export deliveries of agricultural products remains undetectable. in 2016, it fell 1% to 0.7% in the previous year, and the volume of supplies was $9.6 million versus $6 million. in the structure of livestock production in 2016, the majority of export (79.9%) were dairy products (condensed milk, butter, various cheeses and yoghurts), exported to 42 countries (mainly to the us, iraq, georgia, and bangladesh), 15.8% were exported live animals to libya, egypt, azerbaijan, turkey and france, 3.9% – for meat and edible offal to kazakhstan, panama and liberia, the rest identified animal products to belarus. recently, the region has seen an increase in the total number of enterprises involved in the import of goods. in 2016, imported goods of 300 enterprises of the region, which is 26 enterprises more than in 2015 and 53 enterprises more than in 2010. at the same time, the geography of import supplies has considerably expanded. in 2016, goods were imported from 102 partner countries, which is 10 countries more than in 2015 and 21 countries more than in 2010. the leading partner countries were belarus (14.1% of the total import), guinea (14%), the usa (7.7%), the russian federation (7.2%), guyana (5.9%), and poland (5%). in 2016, import deliveries from belarus (land transport, aircraft, floating equipment, mechanical equipment) grew significantly  – by $38.5 million, or by 1.7 times, belgium (mechanical equipment)  – by $4 million or 2.2 times, the united states (inorganic chemistry products, land vehicles, aircraft, floating devices, appliances and devices)  – by $13.9 million or by 36.2%. at the same time, the decrease in import was observed from guinea – by $19 million (or 16.7%), the russian federation  – by $18 million (or 26.8%) and guyana – by $14.9 million (or 27.1%). the growth of import trade with eu countries continued. in 2016, from these countries imported goods worth $200.1 million, which is 45.1% more than in 2015 (due to the increase of import of means of land transport, aircraft and floating means, mechanical and electrical equipment). at the same time, the share in regional import increased from 24% to 29.5%. of these countries, there were mechanical and electrical equipment, ready-made food products, land transport vehicles, aircraft and floating equipment, mineral products, precious metals and their products. the basis of the commodity structure of the region’s import was determined by four groups of goods: mineral products with a specific weight of 27%, mechanical and electrical equipment  – 18.4%, land transport vehicles, aircraft and floating means  – 17.7%, ready-made food products  – 10.8%. in addition, purchases of products of chemical and related industries, non-precious metals and products from them, products of vegetable origin, polymeric materials, plastics and articles thereof were notable. in 2016, the share of ground vehicles, aircraft, floating means  – by 6.6 percentage points, mechanical and electrical equipment increased by 2.1 pct., finished food products – by 1.1 ppt. instead, the share of mineral products decreased by 8 percentage points, of nonprecious metals and articles thereof – by 1.7 percentage points, of chemical products and related industries – by 1.6 percentage points. among the cities and districts of the region, enterprises of the city of mykolaiv differed the largest volumes of import, which, during 2016, imported from baltic journal of economic studies 256 vol. 3, no. 5, 2017 abroad goods for $360.8 million (1.5 times more than in 2015), which was 53.2% of regional import. the share of enterprises in the vitovskyi district was 41% in the region’s import, and the volume of deliveries amounted to $278.1 million (1.3% less than in 2015). among other administrative-territorial units, only enterprises of the city of voznesensk (2.4%) and novodeisk district (2%) were prominent. import of agricultural products is much smaller than their export (figure 3). during 2010–2016, the share of agricultural products in the total import of goods ranged from only 1.4% to 4%, while the largest deliveries were observed in 2013 in the amount of $35.3 million, which is 34.7% higher than the previous year’s supply. last year, import shipments grew significantly. in 2016, enterprises of the region imported agricultural products by $23.6 million, which is twice as much as in 2015, while its share in the region's import increased from 2.1% to 3.5%. compared with 2010, import purchases decreased by 0.9%, and the share increased by 0.7 percentage points. almost all import of agricultural products in 2016 determined the production of crop production, which accounted for 97.1% (in 2015 – 97.6%), and the volume of supplies increased twice (mainly due to increased import of edible fruits and nuts, seeds and fruits of oilseeds, vegetables) and amounted to $22,9 million. in the structure of import of crop production, 72.2% fell on edible fruits and nuts (citrus, grapes, dates, various nuts) from turkey, the islamic republic of iran and india, 20.4%  – on seeds and fruits of oilseeds (vegetable seeds for seeds, peanuts) from india, the usa and china, 4.4% for cereals (seed maize and rice) from romania, hungary and india, and 3% for vegetables from turkey, chile, belarus, and georgia. livestock products in import last year amounted to 2.9% (in 2015  – 2.4%). at the same time, the volume of deliveries increased by 2.4 times (due to increased import of products of animal origin and live animals) and amounted to $0.7 million. import of livestock products by 81.8% consisted of supplies of animal products from brazil and romania, 17.1% from live animals from hungary and france, the rest were meat and edible offal products from poland. the enterprises of the mykolaiv region for many years cooperate with foreign partners on a toll-free basis. starting from 2010, in the region as a whole there was a positive dynamics of operations with tolling raw materials, in 2014 began their gradual reduction, which continued in the past year. in 2016, the import of tolling raw materials decreased by 10.3% and amounted to $162.4 million. at the same time, the share of tolling raw materials in regional import decreased from 31.5% in 2015 to 24% in 2016. of the 38 types of goods that came from abroad as a tolling commodity, the vast majority (89.3% of the total import of tolling raw materials) accounted for mineral products, 5.4%  – ready-made food (raw sugar), 3.6%  – textile materials (knitted fabrics, synthetic yarns and synthetic staple fibres, special fabrics, wool and cotton). the main suppliers of raw materials, imported from 44 countries, were guinea (55% of total import of tolling raw materials), guyana (24.7%), brazil (11.8%), and much less sierra leone (3.2%), and germany (1.6%). export of finished products made from tolling raw materials in 2016 decreased by 3.9% and amounted to $381 million. at the same time, its share in regional export decreased by 1.8 percentage points and equalled 22.9%. almost all manufactured products (93.1%) were products of chemical and related industries, besides 3.5% of them were on ready-made food products, 2.4%  – of textile products. produced products came to 20 countries of the world, mainly to the russian federation (93.1% of finished products), kazakhstan (2.3%), germany (1.7%), and turkey (1%). the volume of export of tolling raw materials in 2016 amounted to $1.3 thousand against $2.6 thousand in 2015. finished products from this raw material were not produced by foreign partners. the barter trade was not carried out. fig. 3. dynamics of import of agricultural products by enterprises of the mykolaiv region baltic journal of economic studies 257 vol. 3, no. 5, 2017 3. foreign trade in services during 2010–2013, in the region, the gradual activation of foreign trade in services was observed (fig. 4). instead, since 2014, there was a reduction in both export and import of services. last year, with the decrease in export of services, there was an increase in their import. in 2016, export of services amounted to $421.4 million and decreased compared with 2015 by 5.4%, import amounted to $57.7 million and increased by 12.2%. the decrease in export volumes resulted from the reduction of services for the processing of material resources and transport services; increase in import  – due to increased transport services. the export-import coverage ratio was 7.3 at a surplus of $363.7 million (in 2015, the respective figures were 8.7 and $394.2 million). during 2016, there were 143 enterprises of the region in the external market, of which 128 or 89.5% were in the regional centre. they provided 51.3% of export and 96.9% of import of services, while export decreased by 51.3%, while import grew by 16.2%. another 48.4% of export and 3% of import fell to the enterprises of the vitovskyi district. in addition, the enterprises of the cities of voznesensk, pervomaisk, yuzhnoukrainsk, and ochakiv district came to the external market for services. over the past five years, the share of mykolaiv region in foreign trade in services of ukraine ranged from 1.6% to 4.6% in export and from 0.9% to 1.3% in import. in 2016 on the share of nationwide export of services, which was 4.4%, the region ranked 3rd among the regions of the country. in the import, the region took 9th place (1.1% of total ukrainian import). among the neighbouring regions, mykolaiv region is considerably inferior to odesa region, which ranks first in export, and six in the country’s import, with export almost twice as high as mykolaiv, and import more than doubled. at the same time, mykolaiv region provides 15.7 times more export and 3.3 times more import than kirovohrad region, 13.5 times more export and 11.5 times more than import of services than kherson region, which respectively occupy 20th and 17th place in export and 16th and 24th place in the import of services. last year, with a noticeable reduction in the number of enterprises that rendered services to foreign partners (from 138 in 2015 to 124 enterprises in 2016), the geography of export of services remained almost unchanged (119 countries versus 120 in 2015). the vast majority of services were provided to representatives of switzerland (in the amount of $277.3 million or 65.8%), in much smaller volumes – great britain ($19 million or 4.5%), latvia ($18.5 million or 4.4%), panama ($12.1 million or 2.9%), estonia ($7.4 million or 1.8%), the united arab emirates ($7.2 million or 1.7%), and the netherlands ($7 million or 1.7%). compared to 2015, a significant reduction in export of services to switzerland (by $27.9 million, or 9.1%), egypt (by $4.7 million, or by 91.1%), germany (by $2.1 million, or 40.9%), norway (by $1.9 million, or 93.4%), and france (by $1.4 million, or by 79.4%). almost stopped export to iraq (down from $4.9 million to $0.5 thousand). at the same time, the volume of services to the united arab emirates increased by $4.8 million (three times), latvia  – by $3.3 million (by 21.7%), estonia – by $2.7 million (1.6 times), and belarus – by $2.2 million (1.7 times). export of services to the countries of the european union amounted to $74.9 million, which is 5.6% more than in 2015. at the same time, the share of eu countries in the total export of services increased from 15.9% to 17.8%. these countries mainly exported transport services; repair and maintenance services not included in other categories; services for the processing of material resources; business services. fig. 4. dynamics of foreign trade in services in the mykolaiv region baltic journal of economic studies 258 vol. 3, no. 5, 2017 in the structure of export of services in the region, there were no significant changes. as in a year ago, it was dominated by services for the processing of material resources, which in 2016 was provided to foreigners in the amount of $206.7 million and transportation services – $179 million. in addition, foreigners received repair and maintenance services, which are not classified in other categories – $16.3 million, business services – $13.7 million. compared to 2015, the most notable structural changes affected repair and maintenance services, which did not fall into other categories, whose share increased by 1.5 percentage points, while the reduction of transport services by 0.6 percentage points, services for the processing of material resources – by 0.5 percentage points, business services – by 0.3 percentage points. last year, with a decrease in the number of enterprises that imported services (from 77 in 2015 to 72 enterprises in 2016), there was a slight expansion of their geography of services – from 65 countries in 2015 to 67 in 2016. at the same time, the main partner countries in the import of services remained great britain ($23.3 million or 40.4%), cyprus ($17.8 million or 30.8%), hungary ($3.9 million or 6.8%), estonia ($2.3 million or 4%), lithuania and the russian federation ($1.7  million or 2.9%). compared to 2015, import of services from great britain grew the most (by $7.6 million, or by 48.1%) and cyprus (by $6 million, or by 1.5 times), with its significant reduction from hungary (by $5.6 million, or by 58.9%). in 2016, import of services from the eu countries amounted to $50.9 million and 14.9% exceeded the volume of 2015 by increasing the volume of business services. at the same time, the share of these countries in the regional import increased from 86.1% to 88.2%. business, transport and travel-related services, royalties and other services related to the use of the intellectual property were imported from partners from eu countries. in the structure of import of services in the region dominated business services, which in 2016 was received in the amount of $41.5 million, travel-related services – $6.9 million, transportation services  – $6.5 million. in addition, royalties and other services were distinguished by considerable volumes, related to the use of intellectual property ($1.4 million), telecommunication services, computer and information services ($0.8 million), and repair and maintenance services not included in other categories ($0.5 million). compared to 2015, the structure of import is 8.3 pct. the share of business services has increased with the reduction of the share of transport services by 5.6 pct., services connected with travel  – by 1.9 pct., as well as services in the field of telecommunications, computer, and information services – by 0.7 pct. 4. conclusions thus, investigating the tendencies and prospects of the development of export and import of goods and services has been established, namely: low competitiveness of domestic industrial products; crisis financial condition of most industrial enterprises; insufficient development of domestic systems of certification and quality control of export goods; low world rating of ukraine’s credibility for loans and investments affecting foreign trade; a significant expansion of the geography of export trade and import supplies was revealed, which positively influenced the balance of foreign trade in goods and services. it is emphasized that in order to build a highly effective national economy, the foreign economic activity of ukrainian enterprises at the regional level should be focused on the development of export of finished products, rather than raw materials and partial import substitution for those products that can be successfully produced in ukraine. the process of import substitution solves a range of socio-economic tasks, such as the revival of the agro-industrial complex, the reduction of unemployment, and the strengthening of the country’s economic security. at the same time, the modernization of agrarian and industrial enterprises can take place at the expense of foreign exchange earnings from export. also in this situation, specialists in the field of foreign trade need to deepen knowledge on the assessment of foreign markets, the search for foreign partners, which will make it possible to plan new strategies for entering foreign markets. references: duhinets, h. v., kucheriavenko, h. v. (2012). pokaznyky otsinky rivnia rozvytku eksportnoho potentsialu rehionu [performance evaluation of the level of development of export potential of the region]. ekonomichnyj prostir, vol. 68. herasymenko, h. o. (2014). formuvannia i rozvytok eksportnoho potentsialu ukrainy v umovakh hlobalizatsii [formation and development of export potential of ukraine in the conditions of globalization]. bulletin of the berdyansk university of management and business, vol. 2 (26). honcharenko, i. v. (2014). osnovni faktory zabezpechennia konkurentospromozhnosti produktsii ahrarnykh pidpryiemstv na zovnishnikh rynkakh [the main factors of ensuring the competitiveness of agrarian enterprises' products in foreign markets]. scientific and practical journal "investments: practice and experience", vol. 3, p. 112-116. kliuchnyk, a. v. (2015). osoblyvosti rehuliuvannia rozvytku zovnishnoekonomichnoi diialnosti ahrarnykh pidpryiemstv [features of regulation of development of foreign economic activity of agrarian enterprises]. scientific herald of kherson state university, vol. 10, p. 121-124. baltic journal of economic studies 259 vol. 3, no. 5, 2017 kozik, m. o. (2015). vplyv eksportnoho potentsialu na rozvytok hospodarskoho kompleksu rehioniv v umovakh aktyvizatsii yevrointehratsiinykh protsesiv [influence of export potential on development of economic complex of regions in the conditions of activation of european integration processes]. investments: practice and experiences, vol. 20, p. 111-114. matvieieva, v. (211). deiaki aspekty zovnishnoi torhivli ukrainy v konteksti yevrointehratsii [some aspects of ukraine's foreign trade in the context of european integration]. journal of the european economy, vol. 6, no. 3, p. 280-293. steblianko, i. o. (2016). heohrafiia zovnishnoi torhivli ukrainy ta yii vplyv na strukturnyi rozvytok natsionalnoi ekonomiky [geography of ukraine's foreign trade and its impact on the structural development of the national economy]. black sea economic studies, vol. 11, p. 107-112. the verkhovna rada of ukraine (1991). zakon ukrainy "pro zovnishnoekonomichnu diialnist" [the law of ukraine "on foreign economic activity "]. retrieved from: http://zakon2.rada.gov.ua/laws/show/959-12 (accessed 7 december 2017). tiurina, n. m., karvatska, n. s. (2013). zovnishnoekonomichna diialnist pidpryiemstva [tekst] navchalnyi posibnyk [foreign economic activity of the enterprise]. kyiv: "center for educational literature" (in ukrainian). zadoia, a. o. (2016). zovnishnia torhivlia ukrainy: suchasni masshtaby, struktura i tendentsii [foreign trade of ukraine: current scales, structure and trends]. academic review, vol. 2 (45), p. 110-117. baltic journal of economic studies 203 vol. 3, no. 5, 2017 corresponding author: 1 department of economics, finance, and entrepreneurship, kherson state university. e-mail: petrenkovika1986@gmail.com 2 department of economics and finance, kherson state agricultural university. e-mail: allakarnaushenko88@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-203-207 joint enterprises in foreign trade activity of ukraine viktoriia petrenko1, alla karnaushenko2 kherson state university, ukraine abstract. the purpose of this work is to analyse the main indicators of foreign trade in goods in general in ukraine and in the context of joint ventures, and an analysis of changes in absolute indicators of foreign trade activity of a joint venture in the dynamics of economic activity of the joint venture in the foreign trade of ukraine. the methodology of the research in this paper is based on the analysis of statistical data on the share participation of joint ventures in the foreign economic activity of ukraine and consideration of the geographical structure of export and import of joint ventures for 2010–2016. the paper presents results of research on the share participation of joint entrepreneurship in the structure of foreign trade in goods both in ukraine as a whole and in the regions, in particular, the study of the geographical and regional structure of foreign trade activity of joint entrepreneurship in the context of export and import components. a detailed study of the geographical structure of export and import trade in the countries of far and near abroad with goods currently produced by joint ventures is presented, as well as a detailed analysis of the commodity structure of export deliveries and import purchases by joint ventures in the context of food and industrial goods is given. practical consequences are associated with the solution of relevant issues, first of all, the formation of a positive investment image of the country on the world stage, and results of the analysis of participation of joint ventures in foreign trade activities, the geographical, regional, and commodity structure of exports and imports seems appropriate to consider in the development of further policies on activation of foreign trade of ukraine, including growth and expansion of their export component. originality. the results of the analysis of the share participation of joint ventures in ukraine’s foreign trade activities, geographical, regional, and commodity structure of export and import of joint ventures should be taken into account in the development of further policy to intensify ukraine’s foreign trade. key words: joint venture, foreign economic activity, import, export, commodity turnover. jel classification: f10, p13, r10 1. introduction the history of joint entrepreneurship in ukraine has more than 20 years, the formation on the territory of the country dates back to the beginning of 1990. during the period of functioning in the territory of the country of joint entrepreneurship, there have been significant changes in the quantitative and qualitative composition of business structures, in the economic and legal conditions of their activity, state policy in the sphere of joint business. many aspects of this urgent problem for ukraine have emerged only in recent years, so the question of the creation, placement, production, and foreign economic activity of joint business requires a deep and comprehensive study. effective foreign trade activity of joint ventures is one of the key points of its successful operation in domestic and foreign markets, as it confirms its competitiveness and competitiveness of its products. in terms of exit from an economic crisis, such an approach should be a priority: it allows finding new markets and segments of manufactured goods, providing an inflow of currency to the country, creates conditions for the purchase of imported raw materials and semi-finished products for the production, saving jobs, attracting highly skilled personnel. thus, foreign trade activities can be considered as a strategic direction, a necessary condition for the successful operation and development of the enterprise. unfortunately, ukraine’s transition to a market economy without concrete state support was not entirely successful: instead of reducing raw material exports and increasing exports of finished products, including hightech, on the contrary, there was a reduction in the volume and the proportion of the latter and the replacement of it with raw commodities. therefore, analysis of dynamics of the structure of foreign trade turnover in the whole country, region is a characteristic of the situation, the export market condition, which enterprises, focused on baltic journal of economic studies 204 vol. 3, no. 5, 2017 the export of products, should consider obligatory. and, the more detailed this analysis is performed, the more informative it is to develop a foreign trade strategy. in this regard, it is important, in our opinion, to study, generalize, and conduct an analysis of the existing experience of foreign trade activities of joint ventures. 2. foreign trade activity of joint ventures the study of the development of joint ventures in ukraine in the dynamics indicates a steady increase in the number of these economic entities. thus, the number of operating joint ventures at the beginning of 2016 amounted to 39 units and increased by almost 20% compared to the level of 2010 and more than 2 times compared to the level of 2000. positive trend of the growth of the number of joint ventures created, including a high proportion of the number of operating ones, as well as a combination of the legal framework for their creation and a high level of economic development of ukraine, were reflected in the achievement by entities of joint entrepreneurship of significant results from their foreign economic activity. fig. 1. participation of joint entrepreneurship in foreign trade of ukraine so, results of the research on the participation of joint ventures in ukraine’s foreign trade are shown in fig. 1, showed that the share of their foreign trade turnover at the beginning of 2017 amounted to 18.8% of the total volume of foreign trade in the region as a whole and increased compared with the level of the previous year by 1%. 3. analysis of export activities of joint ventures in turn, the share of export operations of the joint business in the volume of export of goods in ukraine as a whole by the results of 2016 amounted to 15.5% and was marked with an insignificant but reduction compared to the level in 2015 and compared to the level of the last three years their activities from 2011 to 2014 inclusive. on the other hand, the share participation of joint ventures in the export deliveries of the region as a whole in 2015 is marked by pronounced growth. compared with the level of 2010 and starting from the first years of their creation and operation. in imported deliveries, the share of joint ventures at the beginning of 2016 amounted to 21.6% of the total import. the analysis of dynamics of specific values of the imported component of the joint venture in the import deliveries in the region, in general, indicates the stability of its growth and the significant advance of the similar component, starting from 2010 to the present day. on the other hand, the study of absolute indicators of foreign trade activity of joint ventures in recent years has shown that the foreign trade turnover of joint ventures in 2015 amounted to a surplus, the size of which amounted to – 301.9 million dollars, which indicates a significant predominance of the import part over the export. this trend has been traced over the past five years, starting from 2010 to the present day. a detailed analysis of results of foreign trade activities of joint ventures for 2015 showed that the volume of foreign trade in 2015 in value terms, although it reached 87.5 million dollars, but decreased by almost 20% compared with the level of the previous year and by almost 40% compared with the level of 2011. at the same time, the volume of export supplies made by entities of joint entrepreneurship in 2015 amounted to 47.8 million dollars, the absolute value of which decreased by more than 33% compared to the level of 2014 and more than 2 times compared with the level of 2011. the results of the above-mentioned study of the results of foreign trade activities of joint ventures showed that it is precisely the advance of the growth rates of imports of goods over the growth rates of exports of goods that led to a negative balance in foreign trade in goods. in turn, a comparative analysis of the main indicators of foreign trade in goods of ukraine as a whole and joint ventures, in particular, shows similar problems that are related to the presence of a steady tendency to reduction of both the volume of foreign trade turnover and the volumes of export of goods, and, accordingly, the presence of a negative balance of foreign trade in goods over the past five years. as for the negative balance of foreign trade in goods, the reason for this, in our opinion, is mainly related to the presence of so-called “investment imports”. it is assumed that “investment imports” in the near future will turn into export of products (works, services). investigation of specific indicators of joint entrepreneurship participation is considered in the foreign trade of ukraine, the graphic representation of which is given in fig. 2, showed that the leading position in terms of this indicator is shared by entities of the joint business, located on the territory of kyiv and dnipropetrovsk regions, where the share of their foreign trade transactions made respectively 45.7 and 41% of the total volume of foreign trade in the indicated zones in general. the important role in joint ventures’ achieving of these regions of the indicated level of baltic journal of economic studies 205 vol. 3, no. 5, 2017 foreign trade played the presence of these regional centres at the intersection of transport flows. subjects of the joint venture, located on the territory of kharkiv and odesa regions, occupy second positions according to the value of the investigated indicator by the share value of regional joint venture participation in the foreign trade of the specified regions. the study of results of foreign trade activities of entities of the joint business located on the territory of ukraine indicates a significant decrease in indicators of the share participation of these entities in the implementation of foreign trade in general for joint entrepreneurship for their contribution to the implementation of foreign trade operations in general in the context of these regions. fig. 2. reflection of foreign economic activity of joint ventures of ukraine thus, despite the high absolute values of the volume of foreign trade in export and import deliveries by joint ventures in metropolitan areas, their participation in foreign trade of regions is not so significant and amounts to only 11.9% and 2.2% of the total foreign trade turnover of these regions, respectively, a more detailed study of specific components in terms of exports and imports of joint entrepreneurship at the regional level has shown that the leading positions in export deliveries of regions are shared by entities of joint business located on the territory of kyiv (49.2%), dnipropetrovsk (21.6%), and odesa (21.5%) regions. a particular attention should be paid to the fact that the share of export supplies of joint ventures operating in the above-mentioned regions amounts to 26.8% of the total volume of export operations carried out by all business entities of the specified regions and 9.6% of the total volume of exports countrywide in ukraine. it is necessary to note rather low specific values of export operations received by joint ventures located on the territory of zaporizhzhia (7.3%), poltava (13.7%), and cherkasy (14.6%) regions, the total level of export supplies of which was only 9.4% of total exports of these regions and 5.9% of exports countrywide. 4. analysis of import activities of joint ventures with regard to import deliveries, the leaders in this area of activity are joint ventures located in the territory of odesa and kyiv regions, and the share of their imported operations amounted to 65.1% and 41% of the total volume of imports in the specified regions as a whole. subjects of joint venture, located on the territory of the city of kyiv (22.9%) and with a significant backlog of kyiv (17.8%), kharkiv (17.6%) regions, according to the value of the researched indicator, are approximately at the level reached by the region as a whole (21.6%). the study of the geographical structure of the export trade of joint ventures over the past 2016 year showed that the largest part of them belongs to countries of the near abroad, the main representative of which is poland, malta, the netherlands. results of the analysis of the export component of joint ventures in foreign trade with foreign countries showed that the most interest for the latter is represented by partners from brazil (6.2%) and the baltic states (3.3%), of which almost 2% are accounted for lithuania. countries such as norway (2.7%), ireland (2.5%), germany (2.5%), and poland (2.5%) are also leaders in trading positions from the far-abroad countries. the export breakdown of these enterprises is represented by the supply of potash fertilizers to the countries of the far abroad, such as brazil (6.2%), norway (2.6%) and others, which account for almost 11% of total exports of joint business entities. countries of the far abroad (4.5%) are also mainly the main consumers of petroleum products sold by joint ventures for export (5.1%). the leading position in the commodity structure of exports of goods to countries of the near abroad is the joint ventures’ sale of cars (21.9%), as well as parts and accessories for cars and tractors (0.8%), the main representative of which is the united kingdom (20.9%). significant positions in the commodity structure of food exports are taken by sales of joint ventures (6.4%), mainly in countries of the near abroad (6.3%). in another, the commodity structure of exports to the near-abroad countries is represented by the following items of food products: fresh or chilled beef (2.6%) and meat and offal of poultry (1.5%); dried, salted, smoked fish, and fish processed by other means (1.9%), and ready or canned fish and caviar (2.6%); milk and cream, unconcentrated, condensed and dried (5.5%) and buttermilk, yoghurt, and kefir (1.4%); butter (1.9%) and sugar (1.5%). the range of non-food products exported by joint ventures is represented by such industrial goods as: hosiery (1.9%), furniture and their parts (1.2%); rods and profiles of aluminium (1.7%), and non-porous, non-reinforced, non-laced, without lining plates, sheets, baltic journal of economic studies 206 vol. 3, no. 5, 2017 plastic film (1.6%); non-electric household appliances for cooking (1.4%); insulated wires, cables (1.4%) and plastic packaging (1.2%); metal structures made of ferrous metals (1.4%), and insecticides, herbicides (1.3%), as well as particleboards and fibreboards (0.8%). the analysis of conducting import purchases by joint ventures showed that the largest part of them belongs to foreign countries (51.7%), the main representatives of which are the republic of china and germany, each of them in the investigated period accounted for 15.5% and 5.6% of total imports by joint ventures. it should be noted that joint ventures in 2015 also successfully imported goods from poland and italy. thus, in the investigated period, from these countries, goods are imported in the amount of 445.9 million usd, their share accounted for 4.1% and 2.8% of the total volume of their imports. the share of countries such as switzerland, the united states, and norway is, on average, slightly less than 2% of all import revenues by joint ventures in 2015. the main representatives of countries of the near abroad, which account for 48.3% of the goods imported by the joint ventures in the investigated period, are estonia and austria, with a share of 44.8% and 2.6% of total import volume coming to the joint enterprises the share participation of moldova and kazakhstan in import deliveries of this kind of enterprises is insignificant and ranges from 0.3% to 0.4%, respectively. during the last five years, the quantitative and share values of imports by joint ventures, there is the presence of a steady tendency to surpass the growth rates of imports over the growth rates of exports of goods. as for the commodity structure of imports, the bulk of import purchases is represented by deliveries to the territory of the region, mainly from the russian federation, crude oil, including gas condensate, and petroleum products, the share of which in the period under study amounted to about one third (24.8%) of the total volume of import of joint ventures. considerable positions in the commodity segment of imports of these enterprises from far-abroad countries are represented by supplies from china of equipment for the production of paper pulp, paper, and cardboard (3.6%). medicines packaged for retail sale (13.3%), more than 90% of which are imported from far-abroad countries, occupy a high share in the structure of import of joint ventures. commodity structure of import of joint ventures is also represented by imports of fresh or chilled fish (1.2%) and frozen fish (0.9%) into the country, mainly from norway. imports of joint ventures cover a wide range of vegetables and fruits (3.1%), represented by imports of fresh citrus fruit (0.3%), apples, pears, and quinces (1.4%), apricots, cherries, peaches, plums (1.1%) etc., to the republic mainly from non-cis countries. for a more detailed study of the structural distribution of the product range of import supplies, one can mention the import of such industrial goods by the joint ventures into the country as steam boilers or other steam generators (1.9%) and equipment for heat treatment of materials (1.6%); centrifuges, equipment and devices for filtering, cleaning liquids or gases (1.0%) and electric transformers (0.8%); communication equipment and parts to it (1.6%) and consoles, panels, tables for electrical equipment (0.9%); insecticides and herbicides (0.7%) and amino-aldehydes, and phenol-aldehyde resins and polyurethanes (0.4%); non-porous, non-reinforced, non-slip, non-lining slabs, sheets, plastic film (0.9%) and rolled flat products made of non-alloyed steel (0.8%), as well as articles of hygiene for adults and children (0.2%). in our opinion, the participation of joint ventures in import operations is much broader and is determined by a number of peculiarities of the development of the ukrainian economy at the present stage. firstly, due to imports in our country, a significant part of the commodity resources of the retail trade is provided, the need for a wide range of consumer goods, especially foodstuffs, is met. secondly, more and more joint ventures are entering the external market as buyers of the necessary raw materials and semi-finished products to provide production processes, as well as machinery and equipment – to maintain the current level of the growth of technology. as a result, subjects of the joint venture are able to achieve significant results from production and trading activities, as well as an increase of employment of the country’s population is possible. 5. conclusion thus, the considered state of joint ventures of ukraine and certain aspects of their foreign economic activity indicates their significant role in the economy of the region and the priority of further development and is connected with the solution of topical problems, first of all, the formation of a positive investment image of the country on the world stage, and it seems expedient to take into account the results of analysis of the participation of joint ventures in ukraine’s foreign trade activities, geographical, regional, and commodity structure of exports and imports in the development of further policy to enhance ukraine’s foreign trade, including the growth and expansion of their export component. foreign trade in joint ventures is characterized by a high share of exports in commodity circulation. export orientation is important for the economic development of ukraine. export of joint ventures is represented by products of food (commodity grain, poultry meat products, dairy products, sugar) and non-food products (hosiery, furniture, rods and aluminium profiles, insulated wires, plastic packaging). at the same time, baltic journal of economic studies 207 vol. 3, no. 5, 2017 the presence of raw commodity groups in exports, both at the regional and national levels, reduces the positive effect of exports, reducing the profit of enterprises and the budget-profit of exported resources. preservation of a high share of export in the foreign trade of joint ventures of ukraine, development and re-equipment of productions, aimed at the export of products of a high degree of processing, primarily machine building, will have a positive effect on the economy of the country, its branch structure. an important source of economic development in ukraine can be an effective foreign trade with countries not only in europe but also in the asia-pacific region, aimed at developing the export potential of the finished product of the country. the situation in foreign trade formed in ukraine is characterized by the export of resources and preferential imports of finished products. at the same time, the research showed a sharp difference in the commodity structure of exports of joint ventures. one of the directions for increasing the share of export and import of joint ventures in the country’s foreign trade is the development of industrial potential for the processing of agricultural products. creation of joint ventures for deep processing of agricultural products in the country will allow compensating for a reduction in exports. references: derzhavna sluzhba statystyky ukrainy (2017). statystychnyi zbirnyk ukraina v tsyfrakh 2016 [statistical collection of ukraine in figures 2016], kyiv: informatsiino-analitychne ahentstvo. derzhavna sluzhba statystyky ukrainy (2017). statystychnyi zbirnyk «statystychnyi shchorichnyk ukrainy» [statistical collection «statistical yearbook of ukraine for 2016»] kyiv: informatsiino-analitychne ahentstvo. derzhavna sluzhba statystyky ukrainy (2016). statystychnyi zbirnyk «statystychnyi shchorichnyk ukrainy» [statistical collection «statistical yearbook of ukraine for 2015»] kyiv: informatsiino-analitychne ahentstvo. derzhavna sluzhba statystyky ukrainy (2015). statystychnyi zbirnyk «statystychnyi shchorichnyk ukrainy» [statistical collection «statistical yearbook of ukraine for 2014»] kyiv: informatsiino-analitychne ahentstvo. derzhavna sluzhba statystyky ukrainy (2017). statystychnyi zbirnyk «ukraina» [statistical collection «ukraine»], kyiv: informatsiino-analitychne ahentstvo. derzhavna sluzhba statystyky ukrainy (2013). statystychnyi zbirnyk «ukraina ta krainy snd» [statistical collection «ukraine and cis countries»], kyiv: informatsiino-analitychne ahentstvo. baltic journal of economic studies 53 vol. 3, no. 4, 2017 corresponding author: 1 state research institute of informatization and economic modeling. e-mail: olegguk1975@ukr.net macroeconomic aspects of competitiveness oleg hooke1 state research institute of informatization and economic modeling, ukraine abstract. in the process of globalization of world economic processes, the role of individual national economies increases, comparative advantages of the development of a country are formed, and their competitiveness is ensured. that is why it is worth emphasizing the importance of increasing the competitiveness of each individual country, based on its internal capacity. in a broad aspect, the competitiveness of the national economy is perceived as the ability of the country to ensure the balance of its external proportions and to avoid those constraints imposed by the foreign economic sphere, to self-organizing the improvement of their world economic ties. the competitiveness of the economy at the macro level is associated with the duration of the cycle of reproduction of the main productive assets and, accordingly, the jobs, productive forces of society and determined by the overall economic efficiency of investment. the criteria of competitiveness of the national economy are the growth of social productivity of labor, increase of social and economic efficiency of production and standard of living of the population. the competitiveness of the national economy determines sustainable socio-economic development of the country, as well as sustainable development predetermines the competitiveness of not only the country, but also all its levels. scientific results are obtained using special methods of research of economic objects and phenomena, that is, based on the correlation and regressive, comparative analysis (establishing the relationship between the indicator factor), as well as economic modeling. findings. generalizing analysis and the importance of the macroeconomic aspect of competitiveness were used in the research paper, which will allow to better respond to the economic situation, in accordance with the trends of the “green” transformation of the economy; which in turn will solve important problems of the development and implementation of its economic development strategy based on the principles of sustainable development and, accordingly, with the trends of the “green” transformation of the economy. the practical significance of this research paper is that the resulting conclusion and generalizations will help the state, regional government, local self-government, as well as enterprises, solve important problems of developing and implementing their economic development strategies based on the principles of sustainable development and, accordingly, along with the trends of the “green” transformation of the economy. value. in terms of a crisis of competitiveness, the advantages are primarily obtained not through improving the quality of products, but through reducing costs. thus, one of the goals of the ukrainian economy at the present stage is to become competitive and maximize the usage of its macroeconomic aspect. key words: competitive advantages, theoretical approaches and concepts of competitiveness, linking competitiveness with "sustainable development", the essence of "sustainable development", structural components of sustainable development. jel classification: e6, d41, e37, o11, o16, o2 1. введение стоит отметить, что основательный анализ экономики страны напрямую зависит от обоснования и исследования ее конкурентоспособности, с ее актуальными концептуальными подходами, что связано с воспроизведением производительных сил общества, а также улучшением своих мирохозяйственных связей. ведь достижение конкурентоспособной экономики в контексте устойчивого развития может определяться возможностью государства обеспечивать равные условия для стимулирования развития национального производства и экспорта, содействие экономической и предпринимательской активности с интенсивным применением инновационных решений и одновременно поддерживать и повышать в течение длительного времени реальные доходы населения, стимулировать социальное развитие общества, включая поддержку образования, здравоохранения, и обеспечивать максимальную энергоэфективность и экологичность в реальном секторе экономики и обществе. наиболее весомых результатов в конкурентоспособности экономики страны можно достичь, развиbaltic journal of economic studies 54 vol. 3, no. 4, 2017 вая ее на принципах устойчивого развития. экономическая, социальная и экологическая составляющие устойчивого развития являются приоритетами развития экономик ведущих стран мира. для украины, которая активно взяла курс на евроинтеграцию является крайне важным, чтобы национальная украинская продукция была экологической и удовлетворяла бы требования на европейских рынках. поэтому сегодня вопрос повышения конкурентоспособности экономики украины на принципах устойчивого развития стоит достаточно остро перед государственными органами, украинскими товаропроизводителями и институтами гражданского общества. поэтому целью данной статьи является определение макроэкономического аспекта конкурентоспособности, ее значение для экономики страны. это в свою очередь будет способствовать реализации условий для оптимального сочетания процессов повышения конкурентоспособности и обеспечения устойчивого развития. 2. экономическая сущность понятия конкурентоспособность в общем виде конкурентоспособность независимо от уровня управления  – это внутреннее свойство субъекта, которое проявляется только в ходе конкуренции, в процессе рыночных отношений, управляемое со стороны самого субъекта конкуренции; оно характеризуется большей степенью удовлетворения потребностей покупателей по сравнению с аналогичными объектами, представленными на данном рынке, и определяется конкурентными преимуществами в различных областях деятельности субъекта по отношению к конкурентам, что в совокупности позволяет не только удовлетворять потребности населения и производства, но и товаропроизводителя, осуществлять расширенное воспроизводство в условиях конкуренции (kudashov, holovachev, 2012). синтезирующим показателем, объединяющим конкурентоспособность товаров, товаропроизводителей (микроуровень), отраслей (мезоуровень) характеризующий состояние страны на мировом рынке (макроуровень) является конкурентоспособность национальной экономики. экономическая категория «конкурентоспособность национальной экономики» вошла в экономического оборота в 80-х годах хх века, в связи с обострением конкуренции между странами, хотя существовали и более ранние упоминания этого термина. 3. генезис понятия конкурентоспособность следует отметить, что начало xxi века ознаменовалось появлением многих новых теоретических подходов к определению конкурентоспособности национальной экономики: инновационно-информационной парадигмы глобальной конкурентоспособности; теории стадий экономического развития национальных экономик в зависимости от характера и источников экономического развития, теории глобального опережение конкурентов и уникальной ценности, инновационного подхода, направленного на инвестиции в человеческий капитал, а также в инфраструктуру и прикладные ндпкр, интегрального подхода, социально-институционального подхода (в украине после 4 лет падения выросло промышленное производство – госстат, 2015) и другие. с целью основательного анализа экономики страны, а точнее ее конкурентоспособности актуальны следующие подходы: факторный, изучающий динамику роста экономики нации (а это является основой движения позиций нашей страны на всех мировых рынках) ресурсный (имеется в виду оценка технологий, наличие или отсутствие капитала, который может быть использован для инвестирования, изучение как квалификации, так и численности человеческих ресурсов, природных ресурсов и, несомненно, экономико-географическое положение украины); рейтинговый, то есть определения состояния экономики в интегральном отображении, используя определенную систему показателей. в  любом случае такая система показателей конкурентоспособности государства включает в себя еще и отличительные особенности элементов народнохозяйственного механизма. но самое главное, что в системе показателей исследуется и внешнеэкономическая составляющая. именно этим определяется ведущая цель такой деятельности. в широком аспекте конкурентоспособность национальной экономики воспринимается как способность страны обеспечивать сбалансированность своих внешних пропорций и избегать тех ограничений, которые обусловливаются внешнеэкономической сферой. конкурентоспособность экономики на макроуровне связана с продолжительностью цикла воспроизводства основных производственных фондов и соответственно рабочих мест, производительных сил общества и определяется общехозяйственной эффективности капиталовложений (богиня, шевченко, 2008). вместе с развитием теории международной конкурентоспособности определение этого термина заметно модифицировались в направлении усложнения и расширения охвата факторов, влияющих на конкурентоспособность экономики. необходимо отметить, что, несмотря на широкое использование понятия «конкурентоспособности экономики страны», среди научных исследований до сих пор не существует ни одного четкого определения этого термина. не только отечественные, но и зарубежные ученые обращают внимание на элементы данной категории (в диапазоне от технологических к общему общественно-политических). baltic journal of economic studies 55 vol. 3, no. 4, 2017 таблица 1 трактовки понятия «конкурентоспособность национальной экономики» автор трактовки, характеристика по источнику президентская комиссия по делам конкурентоспособности американской промышленности состояние экономики, когда страна в условиях свободного и честного рынка может производить товары (услуги), которые соотносятся с требованиями международного рынка, и в то же время сохранять или повысить реальные доходы своих граждан world competitiveness report (1994 р.) является результатом преобразования ресурсов страны, то существующих (например, природные ресурсы), или созданных (инфраструктура, человеческий капитал) благодаря производственным процессам в экономические результаты, которые затем проверяются средствами конкуренции на международных рынках oecd (1996) способность компаний, отраслей, регионов, наций и наднациональных пространств создавать сравнительно высокий уровень доходов и уровень занятости на устойчивой основе, оставаясь открытыми для международной конкуренции world competitiveness yearbook (2011 р.) пространство экономических знаний, который анализирует факты и политику, формируя способность страны к созданию и сохранению окружения, способствует созданию большей ценности для предприятий и благосостояния world economic forum (2009) набор институтов, политики, факторов, определяющих уровень производительности факторов производства в стране. ключевым здесь является влияние на экономическую динамику в долгосрочном периоде обеспечивает стране защиту от нежелательных последствий экономических колебаний закон украины «о защите экономической конкуренции» соревнования между субъектами хозяйствования за получение преимуществ перед другими субъектами хозяйствования, вследствие чего потребители (субъекты хозяйствования) имеют возможность выбирать между несколькими продавцами, а отдельный субъект хозяйствования не может определять условия обращения товаров на рынке б.в. губский обусловлено экономическими, социальными и политическими факторами устойчивое положение страны на внутреннем и внешнем рынках, способность субъектов конкурентной борьбы противостоять международной конкуренции на внутреннем рынке и рынках других стран я.б. базилюк характеризует состояние общественных отношений в государстве по формированию и реализации экономической политики, для обеспечения условий стабильного повышения эффективности национального производства, адаптированного к изменениям мировой конъюнктуры и растущего спроса населения на основе достижения лучших, чем у конкурентов, социально-экономических параметров. я.а. жалило способность экономической системы обеспечивать социально-экономическую оптимальность любого влияния и внешних факторов а. гальчинский, в. геец, а. кинах, в. семиноженко способность производить и потреблять товары и услуги в условиях конкуренции с товарами и услугами, производимыми в других странах, при этом результатом конкуренции должен быть рост жизненного уровня населения при соблюдении международных экологических стандартов л.л. антонюк способность страны занимать и удерживать устойчивые позиции на определенных сегментах мирового рынка благодаря мощному экономическому потенциалу, что обеспечивает рост экономики на инновационной основе; развитой системе рыночных институтов; владении значительным интеллектуальным капиталом, инвестиционными ресурсами; гибким реагированием на изменения мировой конъюнктуры и, соответственно этому, диверсификацией производства, максимально отстаивая реализацию национальных интересов ради экономической безопасности и высоких стандартов жизни населения с.в. мочерный способность экономики данного государства конкурировать с экономиками других стран по уровню эффективного использования национальных ресурсов, повышения производительности народного хозяйства и обеспечение на этой основе высокого и постоянно растущего уровня жизни населения синтез качества и возможности успешной реализации продукции на конкурентном отечественном или международном рынке в определенный момент времени за счет достижения конкурентных преимуществ т.в. гринько синтез качества и возможности успешной реализации продукции на конкурентном отечественном или международном рынке в определенный момент времени за счет достижения конкурентных преимуществ р.а. фатхутдинов свойство объекта, характеризующее степень реального или потенциального удовлетворения им конкретной потребности по сравнению с аналогичными объектами, представленными на конкретном рынке о.с. богма, о.в. болдуева способность страны в условиях социально ориентированной национальной экономики обеспечивать высокое качество жизни нации на основе эффективного использования национальных ресурсов и эффективной системы производства товаров и услуг, отвечающих установленным международным стандартам дж. сакс определяется наличием в стране здорового рынка факторов производства и других характеристик, которые формируют потенциал для достижения стабильного экономического роста. здоровая экономика должна быть подкреплена ростом деловой активности, управляемая законом и стабильно работающими рынками д. долар и е. вульф сочетание достижения успеха в международной торговле на базе высокой технологии и производитель-ности с высокими доходами и заработной платой м. данн гибкость, с которой национальная экономика способна предвидеть структурные изменения и адаптиро-ваться к ним. важнейшим признаком конкурентоспособности является ее изменение во времени. м. портер производительность – основной элемент международной конкурентоспособности на национальном уровне б. скотт, дж. лодж способность экономики к производству, распределению товаров и предоставления послепродажных услуг для международного бизнеса ... таким образом, чтобы достичь большего уровня источник: сформирована автором на основе (kudashov, holovachev, 2012, bohma, boldueva 2010; poluneev, 2008 baltic journal of economic studies 56 vol. 3, no. 4, 2017 в таблице 1 приведено сравнение существующих признаков и трактовок категории «конкурентоспособности национальной экономики» с экономической точки зрения. как видим, большое количество экономистов тяготеют к определению этого понятия, как способность совершенствовать и производить услуги и изделия высокого сорта или меньшей стоимости, чем аналогичные у других производителей. следующие же тяготеют к определению «конкурентоспособности» в связи с согласованностью экономических структур и различных институтов государства с экономическим ростом, не выходя за рамки организации экономики мира в целом; экономика может считаться способной к конкуренции при условии, что вышеупомянутые институты страны и ее политика гарантируют продуктивное роста экономики. 4. концепции конкурентоспособности исследуя вопрос конкуренции, можно выделить следующие основные концепции конкурентоспособности национальной экономики: – способность страны продавать, повышать производительность, приспосабливаться к изменениям и внедрять инновации, привлекать инвестиции и человеческий капитал (denysov, nazareva, gryshchenko, 2016). – возможность продавать (экспортировать), привлекать ресурсы, приспосабливаться к изменениям внешней среды и получать доход (зарабатывать). на основе этих факторов выстраивается иерархия конкурентоспособности, в основе которой лежат три первых указанных фактора, а переход к четвертой стадии конкурентоспособности происходит благодаря накоплению знаний (okruzhajushhaja sereda ukrainy za 2014 god, 2015). – соответствие трем условиям: продается (экспортируется) достаточный объем товаров и услуг; аккумулированный прибыль от использования факторов производства, который по меньшей мере оправдывает вложенные средства и соответствует норме рентабельности в странах с похожим уровнем экономического развития; граждане довольны макроэкономическими условиями; – конкурентоспособность страны на мировых рынках (глобальная, национальная, международная), которая обусловлена стратегией захвата мировых рынков и зависит от внешнеэкономической деятельности государства. отдельные исследователи придерживаются мнения, что макроэкономическая национальная конкурентоспособность со временем будет вытесняться конкурентоспособностью отдельных предприятий (масштабность, глобальность действий тнк); – конкурентоспособность национальных предприятий как на внутреннем, так и мировом рынках. в этом случае конкурентоспособность экономики государства будет зависеть от позиции на рынке определенных национальных компаний и экономического потенциала страны. критериями конкурентоспособности национальной экономики является рост общественной производительности труда, повышение социальной и экономической эффективности производства и уровня жизни населения. конкурентоспособность национальной экономики обусловливает устойчивое социально-экономическое развитие страны, так же как устойчивое развитие предопределяет конкурентоспособность не только страны, но и всех ее уровней (bohma, boldueva, 2010). потенциал роста по всей стране может быть повышен за счет увеличения местной и региональной конкурентоспособности и создания более благоприятного климата для развития предпринимательства, инноваций и инвестиций. общие экономические показатели страны измеряются с точки зрения ее способности обеспечивать своих граждан растущим уровнем жизни на устойчивой основе и широкий доступ рабочих мест для тех, кто желает работать. конкурентоспособность означает устойчивый рост уровня жизни народа или региона, а также низкий уровень безработицы. 5. конкурентоспособность в контексте устойчивого развития очевидно, что глобализация, экономический и социальный прогресс, устойчивость и конкурентоспособность развиваются параллельно и оказывают существенное влияние друг на друга. конкурентоспособность должна основываться на широком видении экономики и общества. в современных условиях возникает необходимость в проведении исследования по разработке новой концепции «стойка конкурентоспособность», или «конкурентоспособность в контексте устойчивого развития» в условиях глобализации, причем большая часть исследований, направленных как на устойчивое развитие, так и на конкурентоспособность, должны взаимодействовать. такие дополнительные исследования приведут к появлению новых теоретических моделей и определять их макроэкономический аспект, описывать отношения между международной глобализацией, экономическим ростом, устойчивым развитием, благополучием и конкурентоспособностью. сущность «устойчивого развития» заключается в максимизации экономических и социальных доходов от процесса развития системы национального хозяйства, при условии защиты окружающей среды и обеспечения в долгосрочной перспективе воспроизводства природных ресурсов. в экономическом смысле устойчивое развитие означает не только рост национальной экономики и увеличение доходов на душу населения, но и улучшения всех элеменbaltic journal of economic studies 57 vol. 3, no. 4, 2017 тов социального обеспечения. устойчивое развитие должно сопровождаться необходимыми структурными изменениями в экономической и социальной сферах. сущность концепции устойчивого социально-экономического развития заключается в удовлетворении реальных потребностей человека без создания угрозы удовлетворения потребностей будущих поколений. устойчивое социально-экономическое развитие означает реализацию трех взаимосвязанных и взаимообусловленных целей: создание более конкурентоспособной, высокоэффективной и низкозатратной экономики; повышение жизненного уровня населения; улучшение экологической обстановки. схематично устойчивое развитие представлено на рис. 1. социальная составляющая экономическая составляющая социальная составляющая устойчивое социальноэкономическое развитие рис. 1. структурные составляющие устойчивого развития источник: составлено автором по данным (poluneev, 2008) стало очевидно, что экономическое благополучие, достигнутое за счет деградации окружающей среды, угрожает существованию человека как биологического вида, его физическом и психологическом здоровью, и особенно здоровью будущих поколений. в  этой ситуации у человека есть единственный выход – найти устойчивое равновесие между экономическим благополучием и сохранением благополучной для него среды и выйти на траекторию устойчивого развития. итак, конкурентоспособность национальной экономики воспринимается как способность страны обеспечивать сбалансированность своих внешних пропорций и избегать тех ограничений, которые обусловливаются внешнеэкономической сферой, обновлением и улучшениемсвоих мирохозяйственных связей. макроэкономический аспект конкурентоспособности проявляется в процессе конкуренции между различными факторами, определяет преимущества товаров, отраслей, территорий, государств относительно конкурентов и формирует возможность лучшего удовлетворения потребностей и интересов потребителей и способствует расширенному воспроизводству производства. 6. выводы из данного исследования и перспективы вопросы устойчивого развития должны как никогда стать главными вопросами современной экономической науки, поскольку реальное достижение достойной жизни, решение стратегических проблем развития регионов и зон, в том числе и достижения продовольственной безопасности страны, становится невозможным. без такого подхода тенденцию обеспечения устойчивого развития страны и ее регионов можно завести в тупик, и на повестке дня рано или поздно встанет вопрос разработки теоретических и методологических основ обеспечения устойчивого развития всего хозяйственного комплекса страны (poluneev, 2008). references: kudashov, v.i. holovachev, a.s. (2012). konkurentosposobnost' jekonomiki: innovacionnyj podhod: monografija. minsk: izd-vo miu, 484. in ukraine, after 4 years of decline, industrial production has grown  – state statistics. available at: http:// www.5.ua/ekonomika/v–ukraini–pislia–4–rokiv–padinnia–zroslo–promyslove–vyrobnytstvo–136640.html bohynia, d., shevchenko, a. (2008). jefektivnost' truda v rynochnoj jekonomike. ukraina: aspekty truda, 4, 3–6. fedulova, l. (2006). perspektivy innovacionnogo razvitija promyshlennosti ukrainy. jekonomika i prognozirovanie, 5, 58–76. herasymchuk, z.v. (2001). regional'naja politika stalogo razvitija: metodologija formirovanie, mehanizmy realizacii. nan ukrainy; institut regional'nyh issledovanij. luck : nadstir'ja, 528. denysov, v.t., nazareva, n.a. gryshchenko, o.v. (2016). adaptivnoe upravlenie – osnova uspeha dejatel'nosti promyshlennogo predprijatija. vesnik ogu, №8, 89–95. okruzhajushhaja sereda ukrainy za 2014 god. (2015). ctatisticheskij sbornik gossluzhbi statistiki ukrainy. kiev, 223. bohma, o.s., boldueva o.v. (2010). rol' innovacij v obespechenija konkurentosposobnosti nacional'noj jekonomike. vesnik zaporozhskogo nacional'nogo universiteta. jekonomicheskie nauki, № 3, 166–170. poluneev, ye.v. (2008). tehnologija jekonomicheskogo proryva: konkurentosposobnost' strany i opredelenie strategicheskih prioritetov. demografija i social'naja jekonomika, №2 (10), 29–41. baltic journal of economic studies 58 vol. 3, no. 4, 2017 олег гук макроэкономический аспект конкурентоспособности аннотация. в процессе глобализации мировых экономических процессов повышается роль отдельных национальных экономик, формируются сравнительные преимущества развития той или иной страны, обеспечивается их конкурентоспособность. именно поэтому стоит подчеркнуть важность повышения конкурентоспособности каждой отдельной страны, исходя из внутреннего ее потенциала. в широком аспекте конкурентоспособность национальной экономики воспринимается как способность страны обеспечивать сбалансированность своих внешних пропорций и избегать тех ограничений, которые обусловливаются внешнеэкономической сферой, самоорганизовывать улучшения своих мирохозяйственных связей. конкурентоспособность экономики на макроуровне связана с продолжительностью цикла воспроизводства основных производственных фондов и соответственно рабочих мест, производительных сил общества и определяется общехозяйственной эффективности капиталовложений. критериями конкурентоспособности национальной экономики является рост общественной производительности труда, повышение социальной и экономической эффективности производства и уровня жизни населения. конкурентоспособность национальной экономики обусловливает устойчивое социально-экономическое развитие страны, так же как устойчивое развитие предопределяет конкурентоспособность не только страны, но и всех ее уровней. научные результаты получены с использованием специальных методов исследования экономических объектов и явлений, то есть основываясь на основе корреляционнорегрессивного, сравнительного анализа (устанавливая взаимосвязь между факторами-показателями), а также экономического моделирования. результаты. в статье использован обобщающий анализ и значение макроэкономического аспекта конкурентоспособности, который позволит лучше реагировать на экономическую ситуацию, в соответствии с тенденциями «зеленой» трансформации экономики; что позволит в свою очередь решить важные проблемы разработки и реализации своей стратегии экономического развития на принципах устойчивого развития и, соответственно, с тенденциями «зеленой» трансформации экономики. практическое значение изложенного в статьи заключается в том, что полученный вывод и обобщения в ней послужит государственным, региональным органам управления, местному самоуправлению, а также предприятиям, решать важные проблемы разработки и реализации своей стратегии экономического развития на принципах и принципах устойчивого развития и, соответственно, с тенденциями «зеленой» трансформации экономики. значение. в условиях кризиса конкурентоспособности преимущества прежде всего добываются не повышением качества продукции, а сокращением расходов. таким образом одной из целей украинской экономики на современном этапе – это стать конкурентоспособной и использовать по максимуму ее макроэкономический аспект. baltic journal of economic studies 86 vol. 4, no. 2, 2018 corresponding author: 1 department management, admiral makarov national university of shipbuilding. e-mail: innauamd@gmail.com 2 department of finance, mukachevo state university. e-mail: stegneym@gmail.com 3 state enterprise “production association southern machine-building plant named after a.m. makarov”. e-mail: info@yuzmashair.com.ua doi: https://doi.org/10.30525/2256-0742/2018-4-2-86-92 innovative approaches to estimation of logistic potential and the purpose of logistic regional outsourcing development inna irtysheva1 admiral makarov national university of shipbuilding, ukraine marianna stehnei2 mukachevo state university, ukraine kostjantyn zavhorodnij3 state enterprise “production association southern machine-building plant named after a.m. makarov”, ukraine abstract. the aim of the article is to summarize scientific approaches to the definition of the category “logistics potential”, the justification of the methodology for assessing the favourability for the development of logistics outsourcing of regions of ukraine. methodology. we suggest investigating the level of favourability for the development of the logistics-outsourcing system of the region through an integrated assessment of its following components: infrastructure and logistics, socio-economic, transport, geographic. the calculation of the integral indicator for assessing the level of favourability for the development of the logistics-outsourcing system of regions of the country is carried out on the basis of summing the rank values of each of the abovementioned list of the synthetic component. і=∑ li + ∑ lj +∑ ek +∑ tm +∑ gn (i=1,…7; j=1,…5; k=1,…6; n=1,…4). separate components play an equal role in assessing the favourability for the development of the logistics-outsourcing system in the region. according to the final integral indicator, the place (rating) of each region is determined from the point of view of the potential of the logistics-outsourcing system of the region in the general composition of regions of the country. the suggested methodology for assessing the regions according to the level of favourability for the development of the logistics-outsourcing system provides an opportunity to compare the regions, identify the weak spots in the development of logistics services of regions in terms of components (infrastructure-logistic, socio-economic, transport, geographic), and find ways to improve regional logistics infrastructure and logistics outsourcing. results of the analysis showed that under other equivalent conditions, the variation of the gross regional product by 65.73% depends on the variation of capital investment in transport, warehousing, postal and courier activities, and this dependence is logarithmic. value/originality. a methodology for evaluating the favourability for the development of logistics outsourcing of the regions is proposed, the use of which enables to determine perspective directions of development of regional logistics infrastructure. key words: logistics potential, logistics outsourcing, logistics infrastructure, regional development. jel classification: c13, l90, o18, r49 1. introduction at the modern stage of development of transformation processes in the economy of ukraine, a considerable attention should be drawn to the process of formation of regional logistics-outsourcing systems, which purpose of functioning is to form an effective complex of logistics services and optimize logistics regional infrastructure based on the use of specialized (external) sources of logistics services. all this will allow optimizing structural proportions of production of a regional product and systematizing information, financial, and commodity flows of the region. importance of study and substantiation of development of logistics outsourcing at the level of baltic journal of economic studies 87 vol. 4, no. 2, 2018 the state, region, and enterprises is confirmed both by the theory and practice. so, according to data from the european business association, the bulk of the total cost of time of the process of turnover is the cost of warehousing, delivery, and other logistics operations. theoretical substantiations of logistics potential are reflected in the works of the following domestic and foreign scholars: syzdykbaieva b., raimbekov zh., zhumataieva b., freidman o. a., oklander m. a. issues of development of logistics outsourcing are outlined in the works of moroz o. d., semenenko a. i. however, these papers most often consider the concept of logistics from the viewpoint of enterprises or at the state level, more rarely – at the regional level. the necessity and appropriateness of further inquiries of the declared subjects is determined by the lack of methodology for assessing the regions of ukraine in terms of favourability to the development of logistics and logistics outsourcing, which would be based on statistical data of bodies of state statistics service and substantiate (prove or refute) expert estimations of the level of regional development of logistics, which are most often based on experience and intuition. the purpose of the article is to summarize scientific approaches to the definition of the category “logistics potential”, substantiate the methodology for assessing the favourability for the development of logistics outsourcing of regions of ukraine. 2. theoretical approaches to the determination of logistics potential of the region the rationality of formation of regional logisticsoutsourcing systems is confirmed by the fact that they will promote an increase in the level of investment attractiveness of the region and innovative development of business processes. and, as a consequence, the level of the population well-being in the region will improve. analysis of works of scholars testifies that most of the attention is paid to the assessment of regional transport potential (moroz, 2010; syzdykbaeva & raymbekov, 2013), and what about the assessment of logistics potential, corresponding assessments are mostly based on expert estimations (freydman, 2013; rakhmanhulov & kopylova, 2014), which cannot always be confirmed by statistical data. moreover, in our view, it is not enough to talk about logistics potential of the region, but appropriate to consider the regional logistics-outsourcing system. therefore, the lack of a single approach to the evaluation of the logisticsoutsourcing development of the region proves the necessity to conduct further inquiries in this direction. thus, in order to ensure development and socioeconomic growth of the region, it is necessary to investigate the essence of the concept of logistics potential. when interpreting the concept of logistics potential of the region, moroz o. d. (moroz, 2010) affirms that “it is possibilities of the region, which are related to ensuring the efficient movement of economic flows of the region,” and a group of scholars syzdykbaieva  b., raimbekov zh., zhumataieva b. (syzdykbaeva & raymbekov, 2013) define this category “an aggregate of indicators or factors that characterize strength, sources, capabilities, means, and other reserves that can be used in economic activity.” freidman o. a. (freydman, 2013) defines logistics potential as “an ability of a logistics regional system to ensure timely movement of material resources through the use of transport, warehouse, personnel, and climatogeographic resources of the region.” in the given definitions of the logistic potential of the region, some scientists define it through the possibilities of the region, and others through a set of indicators. in our view, the potential is capabilities, and economic assessment of potential is carried out by using a set of indicators. we are leaning towards a universal logistics concept based on the provisions (oklander, 2008): “– allocation of material flow as a holistic object of management; – construction of a logistics system – organizational and management mechanism of coordination that allows achieving effect due to a clear coherence in the actions of specialists of various services participating in the material management; – taking into account integral rather than local costs, accompanying material flow, and losses caused by inappropriate use of flow resources”. 3. evaluation of favourability for the development of logistics outsourcing of the region considering the understanding of different scientists of the concept of the logistic potential of the region, we propose to investigate the level of favourability for the development of a logistics-outsourcing system of the region through the integrated assessment of its following components: – infrastructural-logistics; – socio-economic; – transport,; – geographic. characteristics of the components of the methodology for assessing the favourability for the development of a logistics-outsourcing system of the region are presented in table 1. infrastructural-logistics component covers  7 characteristics, socio-economic component – 5  characteristics, transport – 6, geographic component covers 4 characteristics. the calculation of the integral indicator for assessing the level of favourability for the development of the logistics-outsourcing system of the country’s regions is carried out on the basis of summing the rank values of each of the above list of the synthetic component. baltic journal of economic studies vol. 4, no. 2, 2018 і=∑ li + ∑ lj +∑ ek +∑ tm +∑ gn, i=1,…7; j=1,…5; k=1,…6; n=1,…4. separate components play an equal role in assessing the favourability for the development of the logisticsoutsourcing system in the region. according to the final integral indicator, the place (rating) of each region is determined from the point of view of the assessment of the potential or favourability for the development of the logistics-outsourcing system of the region in the overall composition of regions of the country. in order to evaluate the level of favourability for the development of a logistics-outsourcing system of regions of ukraine, let us use the consolidated data for 2016 from the statistical collection “regions of ukraine, 2016” and the statistical collection “transport and communications of ukraine – 2016”. the first component of the methodology for assessing the favourability of development of a logisticsoutsourcing system of the region is called infrastructurallogistics and covers seven statistical indicators: – number of logistics companies with outsourcing services (l1); – number of subjects of edrpou (l2); – number of legal entities (l3); – filling stations by regions (l4); – the density of railways of general use by regions, km per 1 ths.sq.km of territory (l5); – length of public highways by regions, ths.km (l6); – the share of surfaced roads in total length by regions (l7). the numerical values of indicators of the infrastructural-logistic component are given in table 2. the ranking of all indicators of the infrastructurallogistics component is carried out in ascending order. the smallest value will correspond to rank 1, and the largest one will correspond to 24, the ranking results are given in table 3. thus, by the level of development of infrastructurallogistics component according to the methodology for assessing the logistics-outsourcing system of the region, first three positions of the ranking belong to dnipropetrovsk, kharkiv, and donetsk regions. the last place by the level of the infrastructural-logistics component is occupied by volyn region. in the same way, we conducted the assessment of the regional logistics-outsourcing system by other components: socio-economic, transport, geographic. the calculation of the integral indicator for assessing the level of development of the logistics-outsourcing system of the country’s regions is carried out on the basis of summing the rank values of each of the above list of table 1 characteristics of the components of the methodology for assessing the favourability for the development of the regional logistics-outsourcing system (the authors’ own development) components of assessment components of synthetic evaluation indicators infrastructurallogistics number of logistics companies with outsourcing services (l1) number of subjects of edrpou (l2) number of legal entities (l3) filling stations by regions (l4) the density of railways of general use by regions, km per 1 ths.sq.km of territory (l5) length of public highways by regions, ths.km (l6) the share of surfaced roads in total length by regions (l7) socio-economic an average number of employees of enterprises of the type of economic activity “transport, warehousing, postal and courier activities” by regions, ths. people (e1) the average number of full-time employees of enterprises of types of economic activity “ground and pipeline transport”, “water transport” and “aviation transport” by regions, thousand (e2) an average number of employees of enterprises of the type of economic activity “post and courier activities” by regions, ths. people (e3) profitability of all activity of enterprises by type of economic activity “transport, warehousing, postal and courier activities” by regions (e4) profitability of all activity of enterprises by type of economic activity “telecommunications (electric communication)” by regions (e5) transport cargo turnover of motor transport enterprises by regions, million tkm (t1) cargo turnover of maritime transport by regions, million tkm (t2) cargo turnover of river transport by regions, million tkm (t3) the average distance of transportation of one ton of goods by motor transport enterprises by regions, km (t4) the average distance of transportation of one ton of goods by maritime transport by regions, km (t5) the average distance of transportation of one ton of goods by river transport by regions, km (t6) geographic area of the region, ths. ha (g1) proximity to the capital, km (g2) common border with other states (number of neighbours), (g3) access to the sea, (g4) baltic journal of economic studies 89 vol. 4, no. 2, 2018 table 2 indicators of the infrastructural-logistic component of the methodology for assessing the favourability for the development of a logistics-outsourcing system of the region (compiled by the authors according to data of the statistical collection “regions of ukraine, 2016” and the statistical collection “transport and communications of ukraine – 2016”) regions of ukraine (l1) (l2) (l3) (l4) (l5) (l6) (l7) vinnytsia 431 28706 27349 299 41 9,0 94,3 volyn 51 19436 18673 169 30 5,8 93,6 dnipropetrovsk 622 95071 92438 459 49 9,2 99,9 donetsk 376 86568 84073 250 59 8,0 99,2 zhytomyr 135 28286 27160 215 34 8,3 97,5 zakarpattia 61 20856 19987 255 47 3,3 99,7 zaporizhzhia 385 44733 43274 307 36 6,8 97,6 ivano-frankivsk 48 25563 24326 185 36 4,1 100,0 kyiv 1949 57136 55351 511 28 8,6 99,8 kirovohrad 71 21621 20714 217 36 6,2 98,5 luhansk 234 41373 39850 97 41 5,8 99,2 lviv 261 60137 57750 383 58 8,2 97,9 mykolaiv 160 42152 41047 238 29 4,8 99,7 odesa 633 70369 68103 410 31 8,1 97,3 poltava 264 31482 30147 273 30 8,9 99,99 rivne 90 20262 19446 177 29 5,1 98,6 sumy 100 21984 21074 147 30 6,7 93,1 ternopil 44 20032 19271 185 41 5,0 99,5 kharkiv 828 69054 67297 553 48 9,4 97,5 kherson 96 25639 24726 222 16 5,0 99,3 khmelnytskyi 44 27981 26908 233 36 7,1 99,3 cherkasy 140 25911 24739 247 28 5,9 97,2 chernivtsi 45 15371 14709 179 51 2,9 99,8 chernihiv 36 20742 19786 169 27 7,2 93,7 table 3 evaluation of rank values of indicators of an infrastructural-logistics component of the methodology for assessing the favourability for the development of a logistics-outsourcing system of the region regions of ukraine r(l1) r(l2) r(l3) r(l4) r(l5) r(l6) r(l7) r(l) region’s ranking (l) vinnytsia 20 14 14 18 16 22 4 108 8 volyn 6 2 2 3 7 8 2 30 24 dnipropetrovsk 21 24 24 22 21 23 22 157 1 donetsk 18 23 23 15 24 16 13 132 3 zhytomyr 12 13 13 9 11 19 7 84 12 zakarpattia 7 6 6 16 19 2 18 74 14 zaporizhzhia 19 18 18 19 12 13 9 108 8 ivano-frankivsk 5 9 9 7 12 3 24 69 15 kyiv 24 19 19 23 3 20 20 128 4 kirovohrad 8 7 7 10 12 11 11 66 17 luhansk 15 16 16 1 16 8 13 85 11 lviv 16 20 20 20 23 18 10 127 5 mykolaiv 14 17 17 13 5 4 18 88 10 odesa 22 22 22 21 10 17 6 120 6 poltava 17 15 15 17 7 21 23 115 7 rivne 9 4 4 5 5 7 12 46 22 sumy 11 8 8 2 7 12 1 49 21 ternopil 2 3 3 7 16 5 17 53 20 kharkiv 23 21 21 24 20 24 7 140 2 kherson 10 10 10 11 1 5 15 62 18 khmelnytskyi 2 12 12 12 12 14 15 79 13 cherkasy 13 11 11 14 3 10 5 67 16 chernivtsi 4 1 1 6 22 1 20 55 19 chernihiv 1 5 5 3 2 15 3 34 23 baltic journal of economic studies 90 vol. 4, no. 2, 2018 the synthetic component. regions’ ranking according to the level of development of the logistics-outsourcing system is determined based on ranging (in descending order) of the integral indicator (see table 4). thus, by the level of favourability for the development of the logistics-outsourcing system, dnipropetrovsk region is in the first place. the second place is occupied by kharkiv, and the third place – lviv region. on the last place of the tanking of favourability for the development of the logistics-outsourcing system is chernivtsi region. according to materials of the development strategy of dnipropetrovsk region: “dnipropetrovsk region – one of the most economically developed regions of ukraine. however, the current structure of its economy is not a guarantee for the accelerated development of dnipropetrovsk region for the next period and a guarantee of stable improvement of the quality of life of inhabitants of the region for the medium term”. despite the fact that the density of all the roads of the regional significance of the dnipropetrovsk region is lower than the average in ukraine, the railway infrastructure of the region is better than road transport. it is these special characteristics of the region and a significant number of industrial enterprises that provide additional grounds for considering dnipropetrovsk region today the most favourable region of ukraine for the development of a logistics and outsourcing system. the proposed methodology for assessing the regions by the level of favourability for the development of the logistics-outsourcing system allows comparing regions, revealing weaknesses of the sphere of development of logistics services of regions in the view of components (infrastructural-logistics, socio-economic, transport, geographic), and finding ways to improve regional logistics infrastructure and logistics outsourcing. 4. gross regional product and transport investments in the framework of the study, it was interesting to analyse the dependence of the gross regional product on the size of investment resources in transport, warehousing, postal and courier activities. using the capabilities of the excel spreadsheet editor, we describe the dependence of the gross regional product on the size of capital investment in transport, warehousing, postal and courier activities (see figure 1). the regression equation is obtained in the form of a logarithmic curve that aligns the pattern of change with the coefficient of multiple determination equal to r² = 0,6573: y = 334,04ln(x) -3279.8 therefore, it can be argued that under other equivalent conditions, the variation of the gross regional product by 65.73% depends on the variation of capital investment in transport, warehousing, postal and courier activities, and this dependence is a logarithmic regularity. table 4 rank values of components and ranking of regions of ukraine by the level of favourability for the development of the logistics-outsourcing system (compiled by the authors based on conducted calculations) regions of ukraine r(l) r(е) r(t) r(g) і regions’ ranking vinnytsia 108 64 21 19 212 9 volyn 30 56 33 19 138 20 dnipropetrovsk 157 85 39 35 316 1 donetsk 132 73 14 36 255 7 zhytomyr 84 76 7 23 190 12 zakarpattia 74 49 42 28 193 11 zaporizhzhia 108 82 26 34 250 8 ivano-frankivsk 69 66 26 25 186 13 kyiv 128 72 46 19 265 5 kirovohrad 66 78 15 18 177 15 luhansk 85 33 3 40 161 17 lviv 127 90 44 28 289 3 mykolaiv 88 68 19 26 201 10 odesa 120 76 49 40 285 4 poltava 115 82 39 28 264 6 rivne 46 29 38 14 127 23 sumy 49 58 15 15 137 21 ternopil 53 36 32 13 134 22 kharkiv 140 87 34 37 298 2 kherson 62 48 36 39 185 14 khmelnytskyi 79 35 16 14 144 19 cherkasy 67 72 25 11 175 16 chernivtsi 55 35 7 19 116 24 chernihiv 34 37 27 47 145 18 baltic journal of economic studies 91 vol. 4, no. 2, 2018 5. conclusions and prospects for further research after analysing the current state of development of logistics services at the level of regions of ukraine, it is possible to identify the key directions for further research in the areas of development of regional logistics infrastructure and outsourcing: • ensuring availability and improving the quality of regional logistics-outsourcing services; • integration of logistics of border regions and national transport system to european and international logistics systems; • increasing the efficiency of public administration in the field of logistics; • development of transport and logistics infrastructure; • constant updating of fixed assets and information and technological systems of regional logistics; • increase of investment attractiveness of regions; • increasing the level of security of logistics processes; • increasing environmental and energy efficiency of transportation. the proposed methodology for assessing the favourability for the development of the logisticsoutsourcing system of regions is based on statistical indicators; however, it can be supplemented by other constituent indicators and expert assessments. if to consider and analyse in dynamics for a few years the results of such an assessment, this will allow improving the level of logistics services’ development in ukraine and increasing the competitiveness of the state in general and its regions. figure 1. dependence of the gross regional product on the size of capital investment in transport, warehousing, postal and courier activities (compiled by the authors according to data of the statistical collection “regions of ukraine, 2016” and the statistical collection “transport and communications of ukraine – 2016”) 47,6 346,1 191,3 1724,8 93,2 329,6 133,1 496,5 822,9 1998 317,9 609,9 871 650,7 y = 334,04ln(x) 3279,8 r² = 0,657 0 500 1000 1500 2000 2500 15 03 6 21 61 0 28 18 5 34 75 9 41 33 4 47 90 8 54 48 3 61 05 7 67 63 2 74 20 5 80 78 0 87 35 4 93 92 9 10 05 03 10 70 78 11 36 51 12 02 26 12 68 00 13 33 75 13 99 49 14 65 23 15 30 97 15 96 72 16 62 46 17 28 21 references: illiashenko, s.m. (eds.). (2009) marketynh: bakalavrskyi kurs [marketing : bachelor course]. sumy: vtd «universytetska knyha» [in ukrainian]. moroz, o.d. (2010) metodyka ocinky peredumov formuvannja rehionalnykh lohistyčnykh system [methodology for assessing the preconditions for the formation of regional logistics systems]. dnipropetrovsk: zb. nauk. pr. “ekonomičnyj prostir” – collection of scientific works "economic space", 36, 168-179 [in ukrainian]. syzdykbaieva, b., & raimbekov, zh. (2013) ocenka effektyvnosty razvytyja transportno-lohystyčeskoho potencyala rehyonov kazakhstana [estimation of efficiency of development of transport-logistical potential of regions of kazakhstan]. aktualni problemy ekonomiky – actual problems of the economy, 5, 473–481 [in ukrainian]. freidman, o. a. (2013) analyz lohystycheskoho potentsyala rehyona : monohrafyya [analysis of the logistic potential of the region: monograph]. yrkut·sk: yrhups [in ukrainian.] rakhmanhulov, a.n., & kopylova, o.a. (2014) otsenka sotsyalno-ekonomycheskoho potentsyala rehyona dlya razmeshchenyya obektov lohystycheskoy ynfrastruktury [assessment of the socio-economic potential of the region for the accommodation of logistic infrastructure facilities]. ekonomyka rehyona – economy of the region, 2, 254–263 [in russian]. oklander, m. a. (2008) lohistyka: pidruchnyk [logistics: textbook]. kyiv: tsentr uchbovoyi literatury [in ukrainian]. baltic journal of economic studies 92 vol. 4, no. 2, 2018 semenenko, & a. y. serheev, v. y. (2003) lohystyka. osnovy teoryy: uchebnyk dlya vuzov [logistics fundamentals of the theory: a textbook for high schools]. yzdatelstvo «soyuz» – soyuz publishing house [in ukrainian] timonina, m. b. (eds.). (2016) statystychnyi zbirnyk «rehiony ukrayiny, 2016 (chastyna ii)» [statistical collection «regions of ukraine, 2016 (part ii)»]. kyiv: derzhstat ukrayiny [in ukrainian]. karmazina, o. o. (eds.). (2016) statystychnyi zbirnyk «transport i zvyazok ukrayiny – 2016» [statistical collection "transport and communications of ukraine 2016"]. kyiv: derzhstat ukrayiny [in ukrainian]. stratehiya rozvytku dnipropetrovskoyi oblasti na period do 2020 roku. [strategy of the development of dnipropetrovsk region up to 2020]. retrieved from: http://www.minregion.gov.ua/napryamki-diyalnosti/ regional-dev/derzhavna-rehional-na-polityka/strategichne-planuvannya-regionalnogo-rozvitku [in ukrainian]. baltic journal of economic studies 115 vol. 3, no. 4, 2017 corresponding author: 1 department of technology and tourism organization, uman state pedagogical university. e-mail: zoryna_yur@ukr.net government support for small and medium-sized business and innovative activities pоlina kolisnichenko1 uman state pedagogical university, ukraine abstract. the purpose of the paper is to reveal the conditions of the innovative development of the small and mediumsized entrepreneurship in ukraine; the problems that suppress the innovative activity and small and medium-sized enterprises development; peculiarities of the tax incentives for the development of the entrepreneurship in the advanced countries and in ukraine; the main kinds and characteristics of the small and medium-sized enterprises public support. methodology. the methods of scientific research include: analysis and generalization for studying the main kinds and characteristics of the government support of the small and medium-sized enterprises; dynamic and comparative analysis for studying the problems and factors influencing the development of small and medium enterprises and innovative activity, peculiarities of tax incentives for business development; systemanalytical method for studying the conditions of the innovative development of the small and medium-sized entrepreneurship. results. the government's financial support priorities should be: optimal application of the fiscal regulation instruments (reduction of the amount of taxes, determination of the criteria for the maximum taxation amount, tax incentives etc.), maintenance of the self-investment of small and medium-sized enterprises as well as investment, financial means of the public influence over the development of the enterprises, effective combination of both direct and indirect forms of the innovative development support. practical implications. the obtained results can be used in the process of formation and implementation of the small and medium enterprise sector development strategy and innovative activity in the long-term perspective. value/originality. the obtained data can provide a better understanding of the direction of innovative business development in ukraine. key words: small and medium-sized enterprises, conditions, innovative development, government support, tax incentives, direct and indirect forms of support. jel classification: g18, о38 1. introduction the current state of the economic performance of ukraine has been stipulated by many peculiar concessions of the innovative activity in the state, uncertainty of the small and medium-sized enterprises development environment, slowdown of investment and financial incentives rate of economic, researchengineering and innovative activity. the selection of the innovative direction is among those especially popular and pressing present-time issues within the conditions of the effective economic reforming in our country. nevertheless, the innovative and investment activity of the small and mediumsized enterprises is constantly subject to retardation ( jurinetz, 2014). there are more than enough reasons, in particular, a low financing level of the innovative and scientific-research activity, weak motivation, and inefficiency of incentives to such kind of works, disconnection of science from practice and production processes (semynozhenko, 2014). a substantial progress towards the formation of a theory, concepts, methodology of the scientific research of the small and medium-sized enterprises development, peculiarities of the government regulation was made by the following ukrainian and foreign economists: and others. the theoretical and empirical basis for the development of the small and medium-sized enterprises, government regulation of the innovative activity on different levels of the national economy have become the background for the studies carried out by the following scientists, such as yu.  bazhal, т.  bova, v.  bondarchuk, т. vasyltsiv, z. varnalii, м. veber, v. haets, а. diehtiar, p. drucker, е. dolan, l. erhardt, ya. zhalilo, d. lindsey, і.  lutsykiv, а.  marshall, і.  mantsurov, yu.  nikolenko, yu.  pakhomov, ye.  panchenko, g.  simon, м.  skyba, о.  ustenko, а.  chukhno, f.  hayek, і.  yukhnovskyi etc. however, the trends for the small and mediumsized entrepreneurship operation in ukraine within the framework of the government regulation of the innovative activity require further theoretical and applied research. baltic journal of economic studies 116 vol. 3, no. 4, 2017 the purpose of the article is to reveal the conditions of the innovative development of the small and mediumsized entrepreneurship in ukraine; the problems that suppress the innovative activity and small and mediumsized enterprises development; peculiarities of the tax incentives for the development of the entrepreneurship in the advanced countries and in ukraine; the main kinds and characteristics of the small and medium-sized enterprises public support. 2. trends in the small and medium-sized enterprises’ innovative activity incentives since 2016 ukraine has concluded the agreement with eu for the participation of our country in the eu program on «cosme, competitiveness of small and medium enterprises (2014–2020)» aiming at the development and support of the small and mediumsized enterprises. this is the program financed by eu in the amount of 2,3 bln. euro and is directed to the creation of the favorable conditions for the development of the small and medium-sized enterprises, realized within the framework of the strategy «europe 2020» (моldovan & меdvedkova, 2015). such cooperation within the framework of cosme program will enable: the development of the national business environment; performance of the internationalization (search of partners in almost 65 countries of the world), will give the opportunity to increase the circle of business and economic relations; receive high-quality analytical and consulting services, related to export and import activity of the small and medium-sized enterprises; lay the groundwork and environment for the enhancement of the role of the small and medium-sized enterprises, culture of the business activity operation (educational programs, seminars, trainings, probation etc.); improve the regulatory conditions for the medium-sized enterprises development due to their implementation in the third countries «small business act for europe» in particular, promote the operation of sme envoys network; bring the domestic legislative environment into accordance with the european standards etc. it is the innovations commercialization, in other words, the transfer of innovative technologies, search for a foreign partner or an investor aiming to come into the market with the new technological products (service), an effective protection of copyrights and intellectual property rights that is a foreground job of the biggest cosme subprogram  – european enterprisenet work (een). the measures of financial assistance have become among one of the main components of the incentive system and should provide optimal application of the fiscal regulation instruments (reduction of the amount of taxes, determination of the criteria for the maximum taxation amount, tax incentives etc.), maintenance of the self-investment of small and medium-sized enterprises as well as investment, financial means of the public influence over the development of the enterprises. in many advanced countries there are applied different tax incentives for the development of the innovative activity of the entrepreneurial system, in particular, for the small and medium-sized enterprises, which, first of all is notable for the correlation between the tax liabilities to the research and development expenditures and maximum amount of tax liabilities (table 1). table 1 tax allowances for entrepreneurship development in advanced countries countries ratio of tax deductions to r&d expenses maximum tax deductions usa 3-5% of the total, 20% for costs exceeding the norm 25% of tax japan by 2008 large companies 8 10%, 20% of tax since 2008 small and medium enterprises 12% large enterprises – 30% of tax. small and medium enterprises – up to 100% of tax china 15% of the total, missing canada 20% of the total missing france 10% of the total 16 million euros source: developed by the author, taking into account (egorov, 2011) the gross domestic expenditure stake for research and development is important for the progress of innovative activity of small and medium-sized enterprises in the economically developed countries (table 2). the leading countries certify the extremely high indicators of the innovative activity development, as long as the governments of these countries allocate a lot of budget money to support the research and development. in ukraine, there were also made the attempts to apply the contemporary models of public regulation and tax influence, in particular, an investment tax credit. it provided the change of the income tax payment due date, namely «deferment of income tax payment, granted to the business entity for the specified period with the purpose to increase its financial resources for the implementation of the innovative programs, with subsequent compensation of the deferred amounts in the form of additional tax receipts through the general increase in profits, which will be received as a result of innovative programs implementation» (yurinets & zadorozhny & zvir, 2013). unfortunately, the process baltic journal of economic studies 117 vol. 3, no. 4, 2017 of implementation and the investment tax credit activity in ukraine has not been well-proven. in such a way, this fiscal instrument has not found practical use within the national conditions. the state financial incentives system of the small and medium-sized enterprises’ innovative activity provides an effective combination of both direct and indirect forms of the innovative development support. the most popular forms and methods of the small and mediumsized innovative activity promotion are shown in table 3. table 3 forms and methods of supporting smes innovative activity direct support for innovation activities of smes indirect support for innovation activities of smes implementation of public innovation programs for smes; grant for research and development; direct financing to firms (up to 50% on the cost of developing new technology); interest-free loans; creation of a technology innovation fund; free package provision of services; exemption benefits from payment of customs duties, etc. preferential taxation of innovative enterprises; preferential lending; state guarantees for business loans, tax depreciation allowances; stimulating the development of securities markets; reduction of tax rate on dividends and other income; stimulating the development of business angels network; creation and development of venture business, etc. source: developed by the author, taking into account (marchuk, 2006) instability of the applicable legislation (annulment of the tax relief for the people drafting the projects, indirect maintenance of the technological parks); withdrawal from the duty on imports while importing the new technologies to ukraine, as well as components and materials that are not produced in the country with the purpose to implement the innovative projects by the technological parks; some renewal of the customs privileges and tax incentives for those, implementing the innovative projects has a negative effect on the development of the innovative activity and the small and medium-sized enterprises. 3. kinds and characteristics of the government support of small and medium-sized enterprises the development of small and medium-sized business requires the maintenance of the state infrastructure facilities, conducting support and promotion of the small and medium-sized enterprises to the development, in particular, the innovative one, and within the state limits, the local and regional small and medium-sized enterprises development programs. particularly important for the system of the public support of small and medium-sized enterprises and infrastructure facilities of small and medium-sized enterprises is the financial, consulting and information support, promotion of export performance, training, education of managers, entrepreneurs, support in the scientific and technological sphere, the innovative domain and sphere of the industrial goods production (table 4). the systemic issues hamper the effective development of small and medium-sized enterprises in ukraine. the essential barrier features for the small and mediumsized enterprises operation primarily depend on the relationships between the business entities and regulatory authorities, which at this stage are complicated and not transparent, regulatory policy of the state, which is imperfect, besides, the national investment and innovative climate of which is far removed from the favourable one. a great deal of problems has been stipulated by the following factors: absence of conditions for the successful development of the small and mediumsized enterprises; the small and medium sized enterprises operation maintenance policy is ineffective, unproductive and inconsecutive; one may feel an excessive interference of the public authorities into the financial and economic activity of the small and medium-sized enterprises, low level of the legal culture of the entrepreneurs and regulatory authorities; low level of the innovative culture. in the course of the small and medium-sized enterprises and innovative activity development it is necessary to distinguish the following critical problems: complexity, inconsistency of the customs and fiscal fields which is characterized by the retardation of the entrepreneurship development process; weak development of different forms of cooperation in the innovative, scientific and technological sector; absence of results of the implemented entrepreneurship innovative development maintenance instruments; table 2 list of countries by research and development spending (% of gdp) country 2000 2003 2012 2013 2015 brazil 1,05 1,1 1,3 1,3 1,2 united kingdom 1,81 1,81 1,82 1,82 1,83 india 0,86 0,87 0,9 0,85 0,86 italy 1,04 1,09 1,3 1,2 1,2 china 1,00 1,23 1,8 1,9 2,0 germany 2,47 2,50 2,8 2,8 2,85 south korea 2,65 2,96 3,6 3,7 3,8 us 2,71 2,62 2,8 2,9 2,9 taiwan 2,05 2,16 2,3 2,35 2,4 ukraine 1,2 1,3 0,4 0,4 0,3 finland 3,35 3,45 3,9 3,95 3,95 france 2,15 2,20 2,3 2,3 2,35 sweden 2,47 2,56 3,41 3,45 3,5 japan 2,99 3,12 3,4 3,43 3,48 source: developed by the author, taking into account (european statistics) baltic journal of economic studies 118 vol. 3, no. 4, 2017 low level of the managers, entrepreneurs and personnel’s competence; low level of people’s erudition on the development prospects based on innovative activity; bureaucracy, insufficient investment and financial support of the innovative activity, scientific and research works on all levels of the economic activity. the settlement of the above-mentioned problem tasks requires the support strategy formation and implementation for the operation and development of the small and medium-sized enterprises for the longterm perspective. such strategy should be focused on creation of the favourable external environment for the development of small and medium-sized enterprises, formation of the complex mechanism to guarantee the rights, interests of the small and medium-sized enterprises, construction of relationships between the authorities and small and medium-sized entrepreneurs, on the basis of the constructive and trust-based principles. 4. conclusion the carried out analysis of the state of the innovative activity and small and medium-sized business development in ukraine within the context of the public support is indicative of substantial negative trends of table 4 kinds and characteristics of the government support of smes kinds of support characteristics support in the scientific, technical and manufacturing industries 1) financial support for infrastructure supporting smes in innovation, science, technical and manufacturing industries and manufacturing; 2) promotion of venture funds and enterprises; 3) improvement of the system of an economic development incentive; 4) preparation and implementation technology transfer actions and plans; 5) creating a favorable environment for innovative smes and start-ups and the signing of subcontract agreements; 6) creation of conditions for the cooperation between smes and large enterprises; 7) promotion of foreign investment and the development of mutually beneficial international innovation cooperation. consultation support 1) support for innovative infrastructure supporting smes (business consulting services firms); 2) business consulting and access to information online; 3) creation networks and technology platforms that can help interested entities to find relevant information. financial support 1) credit and loan guarantees for smes; 2) partial compensation of lease and guarantees payments; 3) partial compensation of interest rates on loans (for the implementation of innovative projects); 4) loans for the implementation of advanced technologies; 5) start-up financing and start-up loans; 6) financing to increase the use of renewable energy and energy efficiency technologies; 7) compensation of expenditures aimed at supporting cooperation between smes and large businesses, etc; 8) compensation expenditures on the creation of cooperation between smes and large business, ets. information support 1) creation and provision of information systems development, information and telecommunication networks; 2) promotion of entrepreneurship and innovative smes through internet and mobile technology; 3) provide information regarding the implementation of state, regional and local programs for smes development 4) provide information regarding the current efficiency and effectiveness of the use of public stimulation of smes; 5) provide information regarding the development of smes and infrastructure, etc. support the ongoing learning and development of managers and professional staff 1) creation and development of innovative firms’ networks, in particular business incubators; 2) development and implementation of educational and scientific programs; 3) formation of conditions for increasing the level of competence, professional knowledge and business qualities of specialists; 4) scientific, educational and methodological support of smes; 5) participation in international programs of experience exchange (qualification raising and staff retraining, transfer of technologies). export support 1) cooperation with foreign organizations; 2) promotion products and services to international markets; 3) formation of conditions for developing an export business plan; 4) access to foreign information and communication networks for the search of business partners. source: developed by the author baltic journal of economic studies 119 vol. 3, no. 4, 2017 the innovative process in the country, cutting of the enterprises innovative development rate, complexity of the small and medium-sized entrepreneurship operating procedures, reduction of the financial maintenance in the innovative sphere in comparison with separate countries of the world. because of the mobility, adaptedness, the flexibility of the activity, receptivity to the innovations, the small and medium-sized enterprises should become the key ones for the promotion of the innovations’ development and implementation. that is why the public support should primarily be concentrated on the small and medium-sized enterprises development, their innovative activity. a special consideration, within the context of the small and medium-sized enterprises public support should be given to financial, consulting, information support, promotion of export performance, training and managers (entrepreneurs’) education, support in the research and technical, innovative domain and a sphere of the industrial products manufacture. references: egorov, i. (2011). innovation policy: european experience and recommendations for ukraine, kyiv, phenix, тom 1, 214 p. marchuk, l. p. (2006). stimulation of innovative activity of small and medium enterprises: world experience, agricultural science of the black sea region, 4: 92–97. semynozhenko, v. (2014). in 2014 the government will continue the policy of forming an innovation infrastructure. government portal. retrieved september 13, 2017 from http://www.nas.gov.ua/siaz/ways_of_development_ of_ukrainian_science/article/13116.2.065.pdf моldovan, о.о., меdvedkova, n.s. (2015). concerning the expediency of introducing tax incentives for innovation and investment development in ukraine. analytical note. retrieved june 15, 2017 from http://www.niss.gov.ua/ articles/1315/ yurinets, z. v., zadorozhny, d. b., & zvir, v. v. (2013). development of innovation activity in ukraine and in the world. scientific herald of the national forestry university of ukraine: a collection of scientific and technical works, 23.10: 282–291. european statistics. retrieved august 15, 2017 from http://epp.eurostat.ec.europa.eu/portal/page/portal/ eurostat/home/. jurinetz, s. (2014). analyse der innovativen tatigkeit von unternehmen in der ukraine im kontext ihrer globalen wettbewerbsfahigkeit. the world economy. global and country-specific aspects, 35: 291–298. полина колисниченко государственная поддержка субъектов малого и среднего бизнеса и инновационной деятельности аннотация. целью работы является выявление условий инновационного развития малого и среднего предпринимательства в украине; проблем и факторы, влияющие на развитие малого и среднего предпринимательства и инновационной деятельности; особенностей налоговых стимулов для развития предпринимательства в разных странах; основных видов и характеристик государственной поддержки субъектов малого и среднего предпринимательства. методика. в работе использовались методы научного исследования: анализ и обобщение  – для изучения основных видов и характеристик государственной поддержки субъектов малого и среднего предпринимательства; динамического и сравнительного анализа – для изучения проблем и факторов, влияющих на развитие малого и среднего предпринимательства и инновационной деятельности, особенностей налоговых стимулов для развития предпринимательства; системно-аналитический метод  – для изучения условий инновационного развития малого и среднего предпринимательства. результаты. приоритетной задачей государственной финансовой поддержки должно стать: оптимальное применение инструментов налогового регулирования (уменьшение количества налогов, определение критериев для предельной границы налогообложения, налоговых льгот и т.п.), поддержка самоинвестирования субъектов мсп, эффективное сочетание прямых и косвенных форм поддержки инновационного развития, инвестиционные и финансовые средства воздействия государства на развитие предприятий. также необходимо совершенствование финансовой, консультационной и информационной поддержки, стимулирования экспортной деятельности, обучения и развития менеджеров, предпринимателей, поддержка в научно-технической, инновационной сфере и сфере производства. практическое значение. полученные результаты могут найти отражение в процессе формирования и реализации стратегии поддержки функционирования и развития малых и средних предприятий на долгосрочную перспективу. значение/оригинальность. полученные данные способны обеспечить лучшее понимание направления развития инновационной деятельности предпринимательства в украине. baltic journal of economic studies 70 vol. 3, no. 3, 2017 corresponding author: 1 department of general economic theory and economic policy, odessa national economic university. e-mail: katya.shatnenko@gmail.com the impact of global competition on the state of manufacturing in ukraine and developed countries kateryna shatnenko1 odessa national economic university, ukraine abstract. at the end of the 20th century, the economic structure was changed fundamentally in some countries. it was mostly related to the growth of global competition. one of the consequences of this process was the decline in manufacturing production in developed countries and in the post-soviet countries. the purpose of this article is to define the meaning and consequences of the decline in manufacturing production in developed countries and in post-soviet countries on the example of ukraine. methodology. this study is based on some general theoretical approaches such as analysis and synthesis, induction and deduction, etc. also, statistical analysis was used for discovering some economic trends. structural analysis was helpful for examining shifts in economic structure. correlation between different facts, which is crucial for the understanding of the transformation of manufacturing, was identified by applying the systems approach. the aim of the article is to reveal the impact of global competition on the state of manufacturing and to define the manufacturing development trend. results of this research showed that the decline in the rate of profit causes the transformation of economic structure. global competition made the production of some goods in developed countries less profitable due to the relatively high costs. the ability to transfer labour-intensive production to developing countries transformed economic structure in developed countries. it was the reason for a sharp decline in manufacturing production, which caused some economic and social problems. post-soviet countries had serious economic and social problems too. liberalization of trade made these countries face with global competition. this competition revealed extremely weak competitive positions of a great range of products. there was a massive decline in manufacturing production in ukraine. this study proves that the transformation of manufacturing is far from the end. first of all, it is related to the rising wages in developing countries. it makes labour-intensive production less profitable. the factor price equalization theorem shows that there is no further perspective to stay competitive using cheap labour force. that is why it is crucial to create favourable conditions for the development of innovations. by its nature, manufacturing is more diversified than other sectors, which gives more chances to produce innovations. strong manufacturing basis is also beneficial for providing employment, better standards of living, and sustainable economic growth. practical implications. developed countries can apply new approaches to their economic policies because they already have a quite strong innovative basis. these approaches should take into account current trends, which are considered in this article. ukraine, bearing in mind the deepening of its integration into the global economy, should substantially improve its competitive positions. that is why it is important to launch a long-term strategic program, which is relevant to ukrainian specific conditions. value of the study is in distinguishing of different nature of the same process in developed countries and in ukraine. it helps to define some perspectives of economic development. the results of the study can be used for creating economic programs. key words: manufacturing, deindustrialization, global competition, innovations, economic development. jel classification: o14, p24, p23 1. introduction the decline in the living standards of the population, widening of the income gap, and weak prospects for the economic growth have become the major economic and social issues in the developed countries. this is reflected in the appearance of a significant number of publications, the authors of which describe the current economic problems and come to the conclusion that it is necessary to take some urgent decisive measures to reverse existing devastating trend. they all agreed on the importance of innovations as the major component baltic journal of economic studies 71 vol. 3, no. 3, 2017 of economic growth. it should be noted that the development of innovations can be more intensive when the economy has a healthy manufacturing sector. the main purpose of innovations is to provide productivity growth, which can solve all the problems mentioned above. those countries, which went through the relatively large decline in manufacturing production, have to deal with serious social tensions. therefore, a lot of ideas are being discussed for the re-industrialization (unido, 2017). the idea of reindustrialization or new industrialization is quite appealing for scholars, who are specialized on post-soviet economies. this research is particularly focused on ukrainian economy, which is one of them. the decline in manufacturing production, which occurred as a result of the liberalization of the economy, was an extremely fast and destructive phenomenon. it looks like this decline in manufacturing production is the same feature, which developed economies have. however, the reasons for this phenomenon are quite different from those explaining this process in developed countries but some of the consequences are similar. the decline in manufacturing production was the reason for slowing down the economic growth and had a destructive effect on the standard of living. 2. views on the transformation of manufacturing since the 1970s, the process of declining of manufacturing production has been discussed among scholars and politicians. at that time, the economic structure of developed countries started to change significantly. this process was called “deindustrialization”. deindustrialization is generally defined as a process of declining in industrial production, particularly in manufacturing. this definition is not quite correct. for example, we cannot say that it is deindustrialization when the economy is in crisis or when it is social upheaval, although the manufacturing production is declining. meanwhile, the decline at the end of the 20th century had different nature, which is why it generated a lot of explanations. first of all, at that time, it was not clear if this process was beneficial or damaging for the economy. that is why all the arguments can be divided into two groups respectively. those, who consider the declining in manufacturing production as a beneficial process, claim that it is just a natural stage of economic development (rowthorn & ramaswamy, 1997; wolf, 2004).they argue that the labour productivity has become that high, so there is no need to have the same number of employees. that is why the growth of unemployment is not permanent. unemployed people will eventually get jobs in services. this point of view is common among supporters of post-industrial society concept. those with a different point of view pointed out that the situation was not that promising and favourable. according to some estimates, just a minor number of unemployed managed to find their jobs in services. bluestone (1983) noted in his article that in new england it was only 3 % of those, who lost their jobs, who transferred to the high-tech sector, 16% – to retail trade and low-wage service jobs. to conclude, with the rising of labour productivity, there should be the rise in standards of living. today the situation is quite opposite. some define deindustrialization as the decline in employment in the industrial sector. this definition is not correct as well. the decline in employment in the industry may occur due to the growth of labour productivity, as well as to the decline in industrial production. deindustrialization is a long-term process of declining in industrial production, which leads to a change in the structure of the economy. however, this process is difficult to determine, relying on statistics on the volume of production. for example, it can be that there is some decrease in employment in manufacturing, while the manufacturing production is growing in value terms. this can be explained by the implementation of new technologies, which is more sophisticated, so they are able to create more value. 3. the examination of causes and consequences of the transformation of manufacturing in developed countries the decline in manufacturing production occurred mainly not due to the growth of labour productivity but to the appearing of alternative ways to maximize profits. these ways were created by the intensification of the processes of globalization and by the rising prospects to make more profit in the financial sector. thus, deindustrialization in the us was induced by the fall in the rate of profit in manufacturing, which was caused by the intensification of international competition (brenner, 2006). by the 1970s, western european countries had restored after the war period. at the same time, so-called newly industrialized countries (south korea, brazil, taiwan) started to develop at a fast pace. therefore, a lot of products came into the global market, which also appeared to be highly competitive compared to the american ones. bluestone (1983, p. 36) pointed out that the profitability in the corporate sector in 1963  – 1966 was about 15.5%. by 1967–1970 the rate of profit on average had declined to 12.7%, and from 1975 to 1978 it fell to 9.7%. the auto industry had a significant decline in profitability by around 65%, the profit of industries producing electrical equipment fell by 49%, farm machinery – by 51%. the significant development of information technology and the liberalization of trade led to the acceleration of baltic journal of economic studies 72 vol. 3, no. 3, 2017 international capital mobility. in this regard, it provided the development of internationalization of production. the production transfer occurred both in physical aspect and through the outsourcing. manufacturing production started to move to the low-labour-cost countries. it made it possible to produce goods at lower cost and therefore to earn greater profits. this transferring of manufacturing production led to the rise in unemployment in developed countries. since then real wages stagnation is a major economic and social issue. the decrease in real wages means a reduction of the level of people’s well-being. at the same time, they managed to maintain their standards of living at a decent level applying huge amount of loans. this instrument proved to be unreliable because the loans must be paid off, so borrowers must have enough money to service them. as a result, inability to pay off the debts was crucial for triggering the global financial crisis. famous economist krugman (1994) noted that the international trade is favourable for all participants. as a result of globalization, society gets cheaper goods. the problem is the transferring of capital can cause some serious social and economic problems for a particular country (a decrease in real wages, an increase in unemployment). the ability to move production abroad has weakened the bargaining power of trade unions, especially on the level of wages. this is illustrated on the graph as an increasing gap between labour productivity growth and average real wages growth (international labour office, 2016). the decline in real wages occurred in 1973 to 1995, and then there was modest growth, which was interrupted by the financial crisis. relatively slow growth in real wages is observed since 2012 (economywatch, 2015). in the uk, a significant slowdown in the growth of real wages occurred in the 1980s–2000s (bbc, 2014). the fall in the rate of real wages has become an urgent problem for developed countries. it has led to the growth of income inequality. notably, that germany did not face with this problem in that huge scale. german manufacturing production declined relatively less than it did in the usa. partly it can be explained by some unique conditions. first of all, the fall of the berlin wall and the reunification of east and west germany played its role. east germans with low salaries started to migrate to the west germany. also, the increase in labour supply happened due to the inflow of migrants from eastern europe. as a result, the level of income was reduced, which made it quite profitable to produce in germany. developed manufacturing production was crucial for providing german economic growth. thus, globalization made markets extremely competitive. it created a strong incentive to find new ways of reducing production costs. the greatest value of competition is the ability to stimulate firms to innovate. in the end of the 20th century, globalization has created some extraordinary ways to be competitive. it provided the opportunity to reduce costs without implying innovations. the transfer of manufacturing enterprises was reasonable mainly for labour-intensive goods. while the capital-intensive production of goods, which is technically more sophisticated, was able to be competitive since it does not require a large number of workers. the development of this type of production is based on the availability of a highly skilled workforce and, in whole, on the favourable conditions to innovate. the theory of comparative advantage explains this change in manufacturing by the appearing of advantages to produce labour-intensive products in countries where labour is abundant. the factor price equalization theorem, which was proved by samuelson, may be useful for explaining some recent changes in the trade. the amount of demand for labour in developing countries has increased significantly, so its price started to increase. today it is not that cheap as it was about 10 years ago. samuelson fig. 1. trends in average real wages and labour productivity in developed economies, 1999–2015 baltic journal of economic studies 73 vol. 3, no. 3, 2017 argues that international trade tends to equalize factor prices. we can see now that there is some movement of prices of labour toward equalization. this theory helps to predict the trend of manufacturing development. the examination of a trend in the level of real wages makes it clear that the strategy of using cheap labour to get more profit will soon be non-effective. the rate of real wages growth in developing countries is far bigger than this rate in those developed countries, which manufacturing production was reduced. for example, over the decade the wages have increased by more than twice in china (international labour office, p. 12). the process of factor price equalization is going to get faster due to the reduction of transportation costs, the elimination of trade barriers and to the availability of advanced technologies. thus, there is a serious argument to predict the upgrading of the way of production. developing countries will face a similar problem of the rising unemployment, which was typical for developed countries in the 1970s and 1980s. within these new conditions, it will be impossible to stay competitive just by using cheap labour. the only way to get on well is to use innovations. competition is intensified by the informational technologies, which provide better access to information, give the opportunity to use new resources like crowdfunding and crowdsourcing, make it possible to develop innovations faster. at the same time, there are some forces, which are damaging for competition. first and foremost, this is due to the growth of monopolies. some countries find it reasonable to apply protectionist policy measures. all of these forces restrict competition but do not eliminate the need for the development based on innovations. structural change of the economy may be represented by the change in employment structure. some former manufacturing employees have found their jobs in the service sector or the financial sector. the service sector, which has become a priority in the economies of developed countries, was unable to provide sustainable development. it is worth to admit that at the moment there are no effective methods to regulate the financial sector. the service sector is not able to provide a sufficient number of jobs needed to ensure a decent standard of living. it does not require a large number of highly qualified staff, which, therefore, does not provide favourable conditions for the human capital development. the services sector is not able to stimulate extensive development of innovations. manufacturing by its nature has greater diversification, which increases the possibility of invention. it is also important to note that the expansion of the financial sector is often accompanied by the concentration of assets in the hands of a small number of agents. hence, one part of the population gets very high income while another one gets relatively low income with little opportunities to improve its well-being. thus, the income inequality is widening. it is important to provide the development of manufacturing to improve economy growth prospects. the development of manufacturing may have a multiplier effect on the services sector. the model of economic development based on innovative manufacturing appears to be the most effective. today it is clear that the importance of mass production is diminishing while the production of innovations is prioritizing. 4. the examination of causes and consequences of the transformation of ukrainian manufacturing the research of industrial transformation at the global level is useful for defining the effective ways of integration of ukraine into the world market. it is important to implement the strategic plan for the transformation of ukrainian industry. to get the best view of the state of ukrainian industry, we should identify the factors that influenced its formation. deindustrialization in ukraine was the result of liberalization of the economy. the economy was not ready to face with global competition, as the industrial base, which was formed in the ussr , was unsuitable for the development within market economy conditions. since this peculiarity was not taken into account by reformers, the industry started to undergo some serious destruction. it caused a large decline in industrial production, an unprecedented fall in real wages, quick widening of income inequality and rising unemployment. all these problems are still topical for ukraine. table 1 the state of manufacturing, unemployment and the dynamics of average monthly real wages in ukraine, 2012–2015 indices 2012 2013 2014 2015 industrial production indices of manufacturing, percent of the previous year 98,0 92,9 90,7 87,4 unemployment rate (ilo methodology), percent of economically active population of group aged 15–70 7,5 7,2 9,3 9,1 average monthly real wages of regular employees, percent of the previous year 114,4 108,2 93,5 79,8 source: state statistics service of ukraine, 2016, p. 31, 35, 107 baltic journal of economic studies 74 vol. 3, no. 3, 2017 a noteworthy fact is that even with low wages there was no considerable growth in foreign direct investment. it can be explained by highly unfavourable investment climate. the capital outflow intensified the destruction of ukrainian industry. it is just extractive industries managed to survive global competition. manufacturing was seriously ruined. ukraine has a relatively low share of production of innovative products. the share of industrial enterprises that implemented innovations in 2015 was 15.2% (state statistics service of ukraine, 2016). at present, ukrainian investment climate is worsening by the unstable social situation and the complexity of the reform process. there is quite good education system in ukraine though. it has possibilities to form highly skilled workforce. in 2015, only 6.5% of ukrainians aged over 15  had primary education or lower; 48.5% had a secondary education; and 45% had completed or were engaged in tertiary education. gross enrolment rates in secondary education are almost universal, at 99.2% (unesco data for 2014), which is above the oecd average (european training foundation, 2017). the problem is that the current structure of ukrainian economy does not require that many highly skilled workers. this leads to the migration of highly educated professionals and reduces prospects for the development of innovation. taking into account that intellectual capacity is the main factor of competitiveness today, the present situation looks quite disturbing. the competitiveness theory, particularly the theory of comparative advantage, entitle us to consider ukraine as a country with huge prospects of becoming rich and prosperous, as ukraine is very rich in natural resources. but the fact that ukrainian economy was formed while it was a part of the ussr made it weak and unstable within market economy conditions. false economic policy played a major role in forming conditions of inefficient use of ukrainian resources. as a result, ukraine is stuck in a group of less developed countries with the relatively low quality of life (zveryakov, 2016). the privatization process, which happened at the beginning of the 1990s, created the highly monopolized structure of ukrainian economy. the assets have been distributed among a limited circle of people  – the oligarchs. it was crucial for economic growth perspectives. the ability to obtain high monopoly profits does not motivate manufacturers to upgrade their production and to develop innovations. monopolies restrict the development of competition. porter (1990) argues that the competitive environment in the domestic market is highly important for creating the country’s competitive advantages. competition on the national level becomes the mechanism that stimulates firms to be competitive primarily in the domestic market, and then in the global market. the stronger competition in the domestic market, the more companies are getting ready to compete in the global market. moreover, ukraine as a post-soviet country has weak demand conditions. in the soviet period, it was impossible to pay enough attention to the quality of goods because there was a narrow range of goods. after the liberalization of trade ukrainian consumers were more demanding to the price of product rather to its quality. it can be explained by the low level of income. today the average level of income is still low, which impose strong restrictions on the development of competition. the lack of demanding buyers is a serious weakness of ukrainian demand. global competition has had various effects on the economic structure in developed and post-soviet countries. in developed countries, manufacturing production, which is technologically sophisticated and based on innovations, was not ruined, while in ukraine almost all of the products appeared to be uncompetitive. therefore, ukraine is facing a more challenging task  – to create favourable conditions for the innovation development. today the process of integration of ukraine into the global market is deepening, so it is crucial for ukrainian producers to upgrade their productive capacities to comply with the world standards. globalization has led to the development of more universal requirements for manufacturing. in the post-war period, innovations in manufacturing were represented mainly by resource-saving technologies. today there is a new requirement  – to develop environmentally friendly production. ukrainian manufacturers should take into account all the requirements and production standards. thus, ukrainian manufacturing should be reconstructed according to the modern world trends. it will provide the ability to stay competitive and to stop the long-drawn process of deindustrialization. to examine current perspectives of positive transformations in manufacturing, it is useful to look at the share of r&d spending. this share shows relatively poor opportunities for the development of innovations in ukraine. table 2 gross domestic spending on r&d (% of gdp) country 2000 2005 2010 2015 ukraine 0.96 1.69 0.83 0.48 the uk 1.639 1.572 1.677 1.701 poland 0.642 0.563 0.721 1.004 the usa 2.621 2.506 2.740 2.788 china 0.893 1.308 1.710 2.067 germany 2.392 2.423 2.714 2.875 russia 0.985 1.001 1.060 1.132 japan 3.002 3.309 3.252 3.492 republic of korea 2.180 2.626 3.466 4.232 israel 3.934 4.050 3.939 4.253 finland 3.246 3.330 3.726 2.903 source: oecd data, 2017; state statistics service of ukraine, 2017 baltic journal of economic studies 75 vol. 3, no. 3, 2017 to conclude, it is clear that ukraine has weak competitive advantages. in the global competitiveness report 2016–2017, ukraine is on the 85th place. moreover, its positions got worse compared to the last year (79th place) (world economic forum, 2016). it is important to create conditions for the economic growth in ukraine. it should be based on the developed manufacturing. it will enable ukraine to use the greatest advantage it has – a highly skilled workforce. in order to stick to the emerging trend of development and to be able to generate innovations, ukrainian manufacturers should primarily be supported by the government. at the present stage of social and economic development, economic growth is no longer a spontaneous process, which is generated solely by the market. modern economic development is directed towards the environmental friendliness and social justice. creating a strategic plan of ukrainian development should take into account these features. this plan should be supported by the government, business, public organizations, and international institutions. those countries, which have deindustrialization caused by the transformation of the planned economy to a market economy, are facing more difficult challenge than developed countries. it is connected to the modification of existing economic model. this modification requires the launching of a long-term strategic programme. it appears to be quite difficult to make it in ukraine due to the economic and political instability. 5. conclusions the global competition had a devastating impact on the manufacturing of those countries, which transformed their planned economies into the market economies. this was reflected in the growth of unemployment, the decline in real wages and in the widening of the income gap. therefore, in order to prevent further destructive tendencies, it is necessary to launch a process of new industrialization. the examination of the transformation of manufacturing production among different countries gives the idea that the development of manufacturing in a particular country can be provided only if there is a strong possibility to get a relatively high rate of profit. since the trend in the growth of wages in developing countries is getting stronger, it is clear that the maximization of profits is becoming possible only with the implementation of more productive technologies. it should be taken into account that the development of innovative technologies can get substantial development in a country that has demand for these technologies. manufacturing is able to make a strong demand for innovative technologies. it is noteworthy that invention requires problem determination and assessing existing possibilities of the production process. that is why the development of new technologies for manufacturing is hard to provide if there is weak manufacturing production in a country. the formation of a new manufacturing sector, which is capable to stay competitive in the long run period, is becoming an issue for all countries. it is important to understand that in order to improve the state of manufacturing each country should create its specific plan based on its unique conditions. this approach is able to enhance economic growth prospects and increase the standards of living. references: bbc (2014). drop in real wages longest for 50 years, says ons. retrieved from: http://www.bbc.com/news/ business-25977678 bluestone, b. (1983). deindustrialization and unemployment in america. the review of black political economy, 12(3): 27 – 42. brenner, r . (2006). the economics of global turbulence: the advanced capitalist economies from long boom to long downturn, 1945-2005. london, new york – 369 p. economywatch (2015). the real story about real wages. e-journal. retrieved from: http://www.economywatch. com/features/the-real-story-about-real-wages.06-09-15.html european training foundation (2017). ukraine: education, training and employment developments. european training foundation, torino – 16 p. international labour office (2016). global wage report 2016/17: wage inequality in the workplace. geneva: ilo – 150 p. krugman, p. (1994). competitiveness: a dangerous obsession. foreign affairs, 73(2): 28-44. oecd data (2017). gross domestic spending on r&d. retrieved from: https://data.oecd.org/rd/grossdomestic-spending-on-r-d.htm porter, m. (1990). new global strategies for competitive advantage. strategy & leadership, 18(3): 4-14. rowthorn, r . & ramaswamy, r . (1997). deindustrialization: causes and implications. imf working paper. washington (d.c.): international monetary fund – 38 p. samuelson, p. (1948). international trade and the equalisation of factor prices. the economic journal, 58(230): 163-184. state statistics service of ukraine (2016) ukraine in figures 2015. kyiv – 239 p. baltic journal of economic studies 76 vol. 3, no. 3, 2017 state statistics service of ukraine (2017). retrieved from: http://www.ukrstat.gov.ua/ unido (2017). the global manufacturing and industrialization summit (gmis). retrieved from: http://www.unido.org/news/press/global-manufacturing-10.html wolf, m. (2004). why globalization works. new haven: yale university press – 398 p. world economic forum (2016). the global competitiveness report 2016–2017. geneva – 383 p. zveryakov, m. (2016). lessons of the market transformation in ukraine. economy of ukraine, no. 8: 7-25. екатерина шатненко влияние глобальной конкуренции на состояние промышленности в украине и в развитых странах аннотация. в конце 20-го века произошли значительные изменения в экономической структуре разных стран. это было связано с ростом глобальной конкуренции. одним из последствий этого процесса стало сокращение промышленного производства, как в развитых странах, так и в постсоветских странах. целью данной статьи является определение значения и последствий спада промышленного производства в развитых странах и в постсоветских странах на примере украины. методология. данное исследование базируется на некоторых общих теоретических подходах, таких как анализ и синтез, индукция и дедукция и др. кроме того, статистический анализ был использован для изучения некоторых экономических тенденций. структурный анализ был полезен для анализа сдвигов в структуре экономики. корреляция между различными фактами, которая крайне важна для понимания трансформации производства, была определена путем применения системного подхода. целью статьи является выявление влияния глобальной конкуренции на состояние промышленного производства и определение тенденции его развития. результаты этого исследования показали, что снижение нормы прибыли вызывает трансформацию экономической структуры. глобальная конкуренция привела к тому, что некоторые товары в развитых странах стало менее выгодно производить из-за относительно высоких издержек. возможность переноса трудоемкого производства в развивающиеся страны изменила структуру экономики в развитых странах. это стало причиной резкого сокращения промышленного производства, что повлекло за собой появление ряда экономических и социальных проблем. постсоветские страны также имеют множество экономических и социальных проблем. либерализация торговли привела к возникновению на рынках этих стран глобальной конкуренции. эта конкуренция показала крайне низкую конкурентоспособность продукции. так, в украине произошло значительное сокращение промышленного производства. это исследование показывает, что преобразование промышленности во всех странах еще не закончено. прежде всего, это связано с ростом заработной платы в развивающихся странах. это снижает прибыльность трудоемкого производства. теорема выравнивания цен на факторы производства показывает, что исчезают дальнейшие перспективы оставаться конкурентоспособным, прибегая к использованию дешевой рабочей силы. именно поэтому важно создать благоприятные условия для развития инноваций. по своей природе промышленность более диверсифицирована, чем другие секторы экономики, что увеличивает возможность создания инноваций. сильная промышленная база также важна для обеспечения занятости, повышения уровня жизни и обеспечения устойчивого экономического роста. практическое значение. развитые страны могут просто модифицировать свою экономическую политику, поскольку у них уже есть достаточно мощная инновационная основа. эта модификация должна учитывать современные тенденции, которые рассматриваются в данной статье. принимая во внимание усиление интеграции украины в мировую экономику, ей следует существенно улучшить свои конкурентные позиции. именно поэтому важно запустить долгосрочную стратегическую программу, которая будет учитывать конкретные украинские условия. ценность данного исследования заключается в объяснении различного характера одного и того же процесса в развитых странах и в украине. это помогает определить некоторые перспективы экономического развития. результаты исследования могут быть использованы для разработки экономических программ. baltic journal of economic studies 255 vol. 4, no. 1, 2018 corresponding author: 1 department of criminal law & justice, zaporizhzhia national university. e-mail: wlacademic@gmail.com 2 department of finances, odessa national economic university. e-mail: tereza.vaslud@gmail.com 3 department of parliamentarism and political management, national academy for public administration under the president of ukraine. e-mail: syvaktetiana@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-255-261 methods of analysis of the effectiveness of public sector projects: features and constraints volodymyr lipkan1 zaporizhzhia national university, ukraine lydmyla vasutynska2 odessa national economic university, ukraine tetyana syvak3 national academy for public administration under the president of ukraine, ukraine abstract. the purpose of the paper is to consider the main provisions of methods of analysis of the effectiveness of public sector projects. a number of issues remain controversial in the methodology of analysing costs and benefits. so, in addition to determining the costs and benefits to be included in the analysis, one should outline the problem of assessing in the monetary equivalent of the social effects that society receives from the project implementation. methodology. the social nature and scale of tasks that are solved in the public sector deepen the issue of identification of social effects. discounting costs and benefits and assessing the social effect in the cost-benefit analysis involves the application of the rate of time preference. the parameters of this rate are analysed and substantiated in the study. in addition to the cba method, an attention is paid to other methods of efficiency analysis, in particular, the method of cost-effectiveness analysis, method of weighted cost-effectiveness analysis, method of cost-utility analysis. each method has its own specific features and limitations that determine the direction of their application. results. it is concluded that finding solutions in the direction of studying the relationship between the social rate of intergovernmental preferences and other methods of discounting will allow us to get an idea, in which range may be the value of social discount rate. the ability to determine the range will allow taking into account the specificity of the project being implemented. key words: cost-benefit analysis, social rate of discount, cost-effectiveness analysis, weighted cost-effectiveness analysis, cost-utility analysis. jel classification: j00, k10, k20, k23 1. introduction the feature of projects in the public sector is that their implementation contributes to the growth of the welfare of society and is a prerequisite for its development. it is worth noting that public sector projects are often characterized by negative profitability and, therefore, cash flows do not generate a commercial effect. at the same time, the importance of implementing such projects is to increase the welfare of society and to promote economic growth, capital accumulation, and increase in the competitiveness of the national economy. the benefits that society receives as a result of the implementation of public sector projects, due to their specificity, cannot be offered on the market and, therefore, market prices are not applied when evaluating such projects. in addition, during market failures, market prices do not reflect marginal benefits and costs (atkinson, 1980). the ineffectiveness of the market mechanism for revenue generation is the reason that complicates the use of classical investment analysis tools to assess the effectiveness of public sector projects. a classic method for analysing the effectiveness of public sector projects is the cost-benefit analysis method – cba. the analysis is conducted by comparing the benefits (social effects or results), measured in monetary terms, and the costs incurred. subsequently, the analysis tool was expanded. this led to the emergence of other methods for analysing the effectiveness of baltic journal of economic studies 256 vol. 4, no. 1, 2018 public sector projects, such as cost-effectiveness analysis  – cea, cost-utility analysis  – cua, weighted cost-effectiveness analysis – wcea. despite the rather significant experience of using tools for analysing the effectiveness of public sector projects, issues remain controversial about the methodology for assessing the social effects derived from their implementation. the problem is that it is necessary to determine precisely whether the social and cultural changes in the social situation (positive or negative) have become a consequence or result of the project implemented (williams, giardina, 1993). however, it is rather difficult to identify the social effect as a result of the project implementation, without understanding the nature of its origin. this is related to the fact that the social effect can be defined as a social benefit and as an externality. social benefit is the benefit of any activity that includes the benefit of the entity that carries out activities, as well as benefits to people who do not pay for it. at the moment, we are talking about evaluating the benefits based on a willingness to pay indicator (wtp), which reflects the readiness of the individual to pay money for a certain social benefit. however, the definition of the value of the social benefit is also quite problematic. to solve this problem, it is suggested to use the ordered binary choice models (ordered logit model, ordered probit model) (verbeek, 2008). another problem when analysing the effectiveness of public sector projects is the need to take into account the externalities associated with the results or effects of the project being implemented. in this case, there are issues regarding their identification by the form of manifestation. for example, if the implementation of the project contributed to the transfer of demand from one producer to another, then society as a whole has no gain or loss. here we are talking about the redistribution of cash resources within a single market. taking into account such monetary externalities for determining the costs and benefits does not make sense. however, there may be another situation. for example, project implementation has the consequence of saving or increasing resources for a group of producers or degrading or improving the environmental status of the region. it is clear that under such conditions there are real effects that maximize or minimize the volume of social benefits. the actual (technical) externalities affect the estimation of costs and benefits of the project. the problem is the choice of a range of the most significant externalities; moreover, it is necessary to distinguish those that do not have a redistributive character. this is a rather difficult task since the externalities can be manifested in the same processes but have different nature of occurrence. in addition, it makes no sense to take into account all externalities. therefore, in practice, there are certain limitations to take into account real externalities to determine the costs and benefits of the project. the first limitation concerns the consideration of only indirect externalities; the second one is that costs and benefits of the project should be assessed from the perspective of the impact of externalities on the development of society. thus, for a public comparator, the task is to maximize the difference between social benefits and social costs. public sector projects are not implemented right away. they have a certain period of life. therefore, when assessing the social effect, it is necessary to take into account changes in costs and benefits in time, that is, lead costs and benefits to the initial or final period. it is this aspect that determines the problem of choosing discounting methods for public sector projects. the complexity of the matter is that the public emphasis of public sector projects, the scale of tasks that are being solved, require the study of a wide range of factors for assessing the social effect. scientists agree that the social discount rate should be positive, but there are discussions about the choice of methods for estimating this rate. differences in the views of different researchers in determining the social rate of discount create a certain debate and encourage further research. the purpose of the article is to identify specific features and limitations of the methods used to analyse the effectiveness of public sector projects and to substantiate recommendations for their practical application. in order to achieve this purpose, it is necessary: to study the methodology of the analysis of the effectiveness of public sector projects based on comparing costs and benefits, focusing on approaches to determining the social discount rate; define the limits of application of the method of cea analysis and its modifications; compare existing methodologies for analysing the effectiveness of public sector projects to determine their specificities and areas of application. the research used the following methods: the method of comparative analysis  – to identify advantages and limitations in the study of methodology for analysing the effectiveness of public sector projects; method of generalization  – when analysing the accumulated experience in applying the methodology of the analysis of the effectiveness of public sector projects; scientific abstraction method to reveal the essence of social discounts; mathematical statistics for determining parameters of estimation of discount rate. 2. method of analysis of cost-benefit efficiency for the analysis of projects in the public sector, a system of methods based on a cost-benefit analysis (cba) is developed. however, as pointed out by researchers, for the analysis of costs and benefits, there is a significant gap between the theory and the practical application of analysis tools (dreze, 1985). the issue of the need to reduce this gap was considered in works baltic journal of economic studies 257 vol. 4, no. 1, 2018 of boardman a. (boardman, 2006), dasgupta a. k. (dasgupta, 1978). the reasons lie in the complexity of determining the social effect of project implementation. the issue of determining the social effect is quite controversial. in science, there are various approaches to its justification. these approaches have diverse, ambiguous, and conditional interpretations, although the essence of the social effect is understandable at the intuitive level of perception. f. vanclay (vanclay, 2003) substantiated a number of principles which, in his opinion, are fundamental to the identification of the social effect. the author emphasizes, firstly, that it is necessary to clearly understand the nature of the origin of the social effect, that is, only the effects, which have become a consequence of the project (for example, as a result of the project, the cost of working time to produce a unit of production reduces or the social situation improves). secondly, as f. vanclay points out, the indicator of improving the quality of life (public welfare) should be used as the basic indicator of the social effect. thirdly, it is necessary to take into account the opinion of society. through the survey, determine the degree of utility that society identifies with the resulting effect. as you can see, the costs and benefits of the project should be evaluated from the standpoint of the whole society. so, maximizing the difference between social costs and social benefits will determine the increase in social benefits. nb=b-c (1) where nb  – net present benefit; в  – present benefit (social effect); с – costs in the current period. the method of cba is of scientific interest to many researchers. the theoretical foundations of cba are rather thoroughly described in the economic literature by squire and layard (squire, 1989; layard, glaister, 1994). no significant achievement is the study of lomborg (lomborg, 2007), which developed a methodology for the use of cba for various sectors of the economy. an analysis of costs and benefits helps to assess whether a project is effective in terms of improving social well-being. this analysis is applied when full market assessments of consequences or outcomes of public sector projects cannot be identified over the inability to adequately describe individual components of total costs or full benefits with price indices, how much to take into account externalities and social benefits. this is the main advantage of the cba method. with the help of the cba methodology, it is possible to assess the impact of the project on changes in public welfare. the advantages of cba are, firstly, the ability to assess the aggregated long-term effect on the basis of bringing the net benefit indicator by discounting to the present moment, and secondly, the ability to compare projects between themselves and in time. the classical cba approach involves evaluating the effect through the definition of net present benefits brought to a certain point in time nb= b -c +sdr t t t t=0 n 1( ) ∑ , (2) where nb – net present benefit; bt  – benefits at time t; ct – costs at time t; sdr – social rate of discount; n – life cycle of the project. however, the methodological issue of determining the discount rate inevitably arises. the necessity of its application follows from the fact that the main volume of investments, as a rule, occurs at the initial stage of the project implementation, and the expected social effects appear only after its implementation. however, in a situation where market prices do not reflect the marginal benefits and costs for society (as a consequence of market failures), the market discount rate cannot be applied. this market failure is solved only under conditions of state intervention. consequently, it is impossible to estimate the social discount rate as a return on alternative projects given that the alternative yields of these projects are unobserved. the choice of sdr relates both to the timing (future benefits) and the size of the social distance (benefits to others). this is precisely what determines different approaches in the estimation of the discount rate. in the case of discounting time, decision-makers estimate the remuneration available at different times (the choice is made over a period of time, so the choice is intertemporal). in terms of social discounts, the choice raises concerns about remuneration for people who have different positions along the axis of social distance (choices are made within the social distance, so the choice is interpersonal). persons are distributed along the social distance axis according to a. karbowski’s criterion of closeness to the decision makers (karbowski, 2016). social rate of time preferences (srtp) reflects the willingness of society to abandon consumption at the present time in order to obtain certain benefits after project implementation. researchers focus on srtp establishment issues. some argue for the need to differentiate the social discount rate (baumol (baumol, 1952), pierce d. (pearce, 1985, 2003), sen a . k . (sen, 1961, 1967, 1982)), others – believe that a single discount rate should be used to discount public sector projects in a particular country (kula  e. (kula, 1985), evans d. (evans, 2004), lopez (2008)). the calculation of srtp is based on the solution of the problem of maximizing the public utility function, which is drawn on the utilitarian approach, which is based on the assumption that for the society the significance of the welfare of all members of society is baltic journal of economic studies 258 vol. 4, no. 1, 2018 the same. as a public function of utility, a function with constant elasticity is selected: u(c )= 1 1ct t 1μ ⋅ μ , (3) where u (сt) – utility derived from consumption; сt – consumption at time point; μ  – parameter of public utility function on consumption. the goal of maximizing utility, which reflects the individual’s choice for today’s consumption or deferred consumption for tomorrow, is determined for two periods: u(c )=u(c )+ u(c ) 1+ max(c ;c ) c + c 1+srtp =1 t 1 2 1 2 1 2 ρ → (4) where с1; с2  – consumption in different periods of time; u(сt) – public utility function of consumption; р – individual rate of time preference; srtp – the social rate of time preference. the equality of the unit of the amount of discounted flows in equation (4) is based on the assumption that there is no preservation, that is, the entire available volume of consumption is distributed between two periods. the result of solving the system of equations is the expression: sptr=(1+g) (1+ ),µ ρ (5) where ρ – the rate of time preference; g – the rate of consumption growth per capita; μ  – parameter of public utility function on consumption. to estimate the rate of time preference, the approaches that are formalized in (6) are used (evans, kula, 2011). in essence, the resulting formula is a linear approximation of formula (2). 1+srtp=(1+g) (1+ ), ln (1+srtp)=ln((1+g) (1+ )), ln(srtp+1)= μ μ ρ ρ µµ µ ln(1+g)+ln(1+ ), srtp= g+ ρ ρ⋅ (6) by analysing the parameters of the final expression (5), it can be concluded that srtp is additive and includes such components (ρ) that reflect time preference of the population and (μ∙g)  – the growth of public utility derived from consumption by society. in turn, the rate of time preference is the sum of the net rate of time preference and the parameter that reflects the risk to life. ρ=δ+l, (7) where δ – “net rate” of time preference; l – the level of risk to life or catastrophe risk. the “net rate” parameter (δ) in many techniques equates to zero, based on ethical considerations, so as not to undermine the welfare of future generations, that is, the benefits are not provided to any generation. however, m. olson and m. bailey (olson, bailey, 1981) state that when setting the zero discount rate, the probability of shifting time preferences in favour of future generations, that is, increasing one generation’s poverty in order to increase the welfare of the following, appears. it is believed that this parameter of the social rate of time preference is not subject to empirical analysis. for different approaches, the range of this rate is set from 0% to 0.5%. parameter (l) is interpreted as a catastrophe risk (life risk). this implies that there is a probability of events that all project achievements will void or radically and unexpectedly change. in the life risk assessment as a basis, the risk of a shortfall in income from the project implementation in the future is taken. when calculating parameter (l), it is necessary to pay attention to the fact that its value varies considerably. therefore, the ratio of total deaths to population is usually used in methodologies. the elasticity of the marginal public utility value or (μ) is determined by some methods based on the average saving rate. however, there is no unanimous opinion among the world scientific community. this indicator is quite varied by different methodologies. since the social discount rate is intended to identify benefits in the future, it is considered expedient to use the projected values of growth rates of consumption per capita (g) during the calculation. the growth rate of per capita consumption reflects the potential for more consumption in the future, which is achieved through the introduction of innovations and the development of technical progress (pearce, ulph, 1995). it is necessary to find out what horizons of forecasting should be applied during the calculations. however, it should be borne in mind that forecasts are more acceptable only in the short run. the problem of determining the social discount rate has a fairly wide range of judgments and requires a more in-depth study but in a separate format. based on the task, the emphasis, first of all, is on the justification of advantages and limitations of the cba methodology. in the defined context, cba limitations can also be considered as the disadvantages of social discounting. 3. cost-effectiveness analysis method the method of cost-effectiveness analysis (cea) has a significant distinguishing feature, which is that the benefits are not measured in monetary terms, but in physical units (kahn, 1969). the issue regarding the use of the cea methodology is rather controversial, so the comparison of different approaches is complicated, and thus the generalization of different opinions is difficult. the application of the method of cost-effectiveness analysis is not complicated by the need to assess the baltic journal of economic studies 259 vol. 4, no. 1, 2018 social effect in monetary terms, as in cba. however, there is a problem in comparing the results of the analysis of interventions that are different in nature. the high degree of sensitivity of results to the change in the indicator, which reflects the social effect received as a result of interventions, limits the positive characteristics of the cea method. this attracts a constant interest in the development of various variants of its modification. for a reasoned comparison of alternatives, it is necessary to compare not only the costs and results but the cost changes in relation to the change of results. consequently, in the case of cea, an incremental costeffectiveness analysis (icea) is carried out (tan-torres edejer, 2003). icer ñ å = ∆ ∆ , (8) where ісеr  – (incremental cost-effectiveness ratio) – an indicator of the ratio of increase in costs and productivity gains; ∆с – an increase of costs as a result of interventions; ∆e  – increase in the effectiveness (social effect) as a result of interventions. the analysis of indicators of formula (2) allows concluding that the lower the value of icer, the lower costs are directed to achieving a certain level of effectiveness, and the more effective the considered variant of intervention. as a limit, there is wtp (willingness-to-pay), which reflects the inclination of the financial decision-maker to pay for the corresponding project (levin, mcewan, 2001). in practice, the cea method is the most appropriate for use in choosing alternatives in the healthcare system, since its toolkit allows for project analysis and choosing the most appropriate option in case of achieving a goal, for example, to increase life expectancy. in the broad sense, cea is used, firstly, if it is necessary to decide on the choice of alternative, mainly when there is a need for intervention to determine the degree of intervention. secondly, when it comes to the generalization of health policy ( jamison, 2009). as cea is not measured by cost indicators, the result is expressed in such aggregated non-financial indicators as, for example, quality adjusted life years – qaly (an indicator expressed in years of life, adjusted for quality), or disability adjusted life years – daly (an indicator expressed in years of life, adjusted for the degree of disability). however, limitations can determine some distortion of qualitative assessments. for example, it is difficult to take into account the impact of changes in the ecological environment on disease. such results are difficult to take into account in daly or qaly indicators. there are certain preconditions and restrictions associated with the use of cea, in particular: the limitation of comparing interventions that have a different social effect; the complexity of taking into account time-based costs and effects; a high degree of sensitivity to the choice of indicator that reflects the social effect. undoubtedly, the analysis of cba is wider than the cost-effectiveness analysis, since all benefits at the time of application of the first one have cost estimates, and therefore, the effects of different projects can be compared. this is a fairly substantial statement for a public comparator, based on the premise of the social nature of the tasks being solved. the cea method can be used to make decisions when comparing projects whose effects are defined as homogeneous or can be measured in terms of key results. consequently, the limitation of cba analysis does not make it possible to decide if it is necessary to choose the option of investing resources of the public sector in different spheres of activity. the problem is the disparity of effects between themselves. 4. methods of weighted cost-effectiveness analysis there are cases when it becomes necessary to analyse the effectiveness of the project to combine several different social results that do not have a monetary equivalent. in such situations, it is necessary to evaluate the importance of each of them and to find a single composite mark. to obtain a single composite estimate, we use the method of weighted cost-effectiveness analysis– wcea (belli, 1996). this method is one of the modifications of the cea method. as a social effect, it is its conditional expression through an aggregate indicator, which includes various characteristics of the object of evaluation. to determine the final effect, it is necessary to assign certain weights to the indicators that collectively formulate the target. wce âèòðàòè w ei i i=1 n = ∑ × , (9) where wj – the weight of the i-th effect; еі – i-th effect. the method of wcea is characterized by weaknesses in expert analysis, that is, dependence on subjective thought. however, this method is widely used in assessing the effectiveness of educational programs and healthcare programs, since the benefits that society receives from such programs cannot be measured in monetary terms. 5. method of cost-utility analysis in the case where a project is subject to evaluation that is described by a spectrum of results or if the results differ not only in quantity but also in quality, it is expedient to apply a cost-utility analysis (cua) method. in essence, this method is a slightly complicated modification of the cost-effectiveness analysis. originally, it called generalized cea (torrance, 1971), and later  – utility maximization method (torrance, 1972). now, this method is singled out as an independent one. cua baltic journal of economic studies 260 vol. 4, no. 1, 2018 is distinguished by the fact that during the analysis, conventionally, similar quality results are used. the estimation of utility coefficients is carried out through expert assessments, which have methodological difficulties related to the qualification of experts, a clear statement of tasks, subjectivity of evaluations, and the complexity of processing information. cua c u = , (10) where с – costs; u – utility. it is advisable to use the cua method in cases where it is necessary to determine the result, taking into account side effects, whether it is necessary to determine a single criterion for comparing costs and benefits, whether there is a need for ranking the results for weighting, or whether decisions are made on choosing alternatives. 6. comparative characteristics of the methods of efficiency analysis the comparative characteristics of the methods used to analyse the effectiveness of public sector projects are given in table 1. the study of methods for analysing the effectiveness of public sector projects showed that, notwithstanding certain features of each of the considered methods, the main approaches to measuring costs, benefits, and results are based on a single theoretical basis. in this context, existing limitations in all methods of analysing the effectiveness of public sector projects reveal significant prospects for further research and improvement. 7. conclusions the investigated methods of analysis: cost-benefit, cost-effectiveness, weighted cost-effectiveness, costutility are a very important basis for making grounded decisions by public comparators regarding the direction of investment in the most demanded sectors of the economy. using the tools of efficiency analysis methods, they can distribute limited public resources according to policy priorities. one or more methods of analysis of efficiency can be used to analyse the effectiveness of public sector projects that are implemented within a single industry. the main thing is to determine in which units the result is evaluated. if the result can be estimated in cost units, then it is advisable to use the methods of cba and cua, and in other cases  – the methods of analysis of cea and wcea. choosing a social discount rate is a difficult task, as it involves assessing, among other things, the future benefits that other people may receive. a broad debate on determining the social discount rate has led to the formation of different views on the need to establish or differentiate the social discount rate or to determine its single value within a single country. w hen evaluating public sector projects, it is necessary to decide whether to use a single discount rate for the country as a whole and for all projects, or differentiated depending on the nature of the project. in general, discussions are about determining the size of the discount rate. in existing studies, as a rule, the method of time preference is mainly studied. in this case, an attention is not paid to the study of the relationship between the social rate of time preference and other methods of discounting. finding solutions in this direction will allow getting an idea of what range the social discount rate may be. the ability to determine the range will allow taking into account the specificity of the project being implemented. table 1 characteristic features of methods for analysing the effectiveness of public sector projects method of analysis characteristics applicability of the method of analysis cost-benefit analysis provides a comparison of aggregated benefits in monetary terms and public expenditures in a specific direction. it is used to compare different results in different fields of activity. cost-effectiveness analysis provides an assessment of benefits that do not have monetary value, but are expressed in physical terms as a result or consequence of the project implementation. allows you to determine public spending on the realization of a specific result and identify an alternative to its achievement. it is expedient to apply when public spending limits are determined and it is necessary to determine the ways of their best use in a certain direction. weighted cost-effectiveness analysis the multiplicity of benefits from the use of public expenditures, which cannot be measured in monetary units, is estimated. applicable when the project involves the acquisition of multiple social effects. cost-utility analysis results can be expressed in different units of measure because the costs and utility are compared. provides the use of a conditional comparative indicator close to the nature of results by using weight coefficients. applicable when analysing the effectiveness of the project, which involves a significant number of effects from the use of public funds. baltic journal of economic studies 261 vol. 4, no. 1, 2018 references: atkinson a., stiglitz j. 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(1993) efficiency in the public sector: the theory and practice of cost – benefit analysis. great britain: university press, cambridge. baltic journal of economic studies 77 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national university “odesa law academy”, ukraine (corresponding author) e-mail: bilatiunova@gmail.com orcid: https://orcid.org/0000-0001-7886-793x 2 ivano-frankivsk law institute of national university “odesa law academy”, ukraine e-mail: savchukrom@ukr.net orcid: https://orcid.org/0000-0002-3336-6565 doi: https://doi.org/10.30525/2256-0742/2022-8-5-77-85 the right to state service in the modern measure liubov bila-tiunova1, roman savchuk2 abstract. the article is dedicated to the accomplishment of a great number of meals, which stand for the defense of the right to state service for the protection of digitalization processes, as if the state service and the normatively established methods for the defense of the right to state service have been impeded. the purpose of the study is to form a comprehensive approach to the determination of the protection of the right to state service and the features of its protection caused by the use of information and telecommunication technologies. the subject of the study is the vector and priority of service legislation, which is in the middle of practical alternatives to information technologies. methodology: in the course of the study of victorious research and special methods of scientific knowledge, including those that are victorious every hour, the analysis of statistical zvіtnostі in the sphere of state service. result: it has been established that the right to defend the right to state service is the legislature of the possibility of a citizen of ukraine and a state service (in a broad sense) and a state service (in a narrow sense) to defend one's competences in state service. emphasis is placed on respect for the rights of state servicemen to promote the level of digital competencies as a warehouse right to state service. it was requested: a) to introduce amendments to the law of ukraine "on state service"; b) creation on the basis of the knowledge management web portal in the field of professional training "knowledge management portal" of an information system of automated information collection, which will allow in real time to receive relevant information about the organization of professional training of civil servants in the civil service system and in the aspect of individual state bodies. key words: state service, digital aspect, the right to state service, information and telecommunication technologies, administrative defense, judicial defense. jel classification: o10, h70 1. introduction the development of the state service necessitates the determination of state service relations in accordance with modern realities, their proper legal support and a comprehensive doctrinal rethinking. among the legal institutes of the state service law of ukraine, the institution of the right to state service and its integral component – the protection of the right to state service – are of great importance. however, the available scientific works (panova, 2020; bila-tiunova, 2020) have a fragmentary nature and do not provide a coherent theoretical understanding of all vectors of protection of the right to state service in the context of the development of information and telecommunication technologies. at the same time, the issue of protecting the right to state service in a practical aspect takes on special importance in the context of improving the legi slation on state service in the direction of digitalization, including: the use of information and telecommunication technologies in the provision of public services to state servants (on the peculiarities of the provision of public (electronic public) services, 2021); personnel management in the state service (strategy for reforming the public administration of ukraine for 2022–2025, 2021); implementation of open, transparent and effective public administration using the latest information and communication technologies (on the approval of the concept of the implementation of the information system of human resources management in state bodies and the approval of the plan of measures for its implemen tation, 2017); functioning of the information system of human resources management in state bodies in the field of public service (about the information system of human resources management in state bodies, 2020); ensuring the functionality of the knowledge management web portal in the field of baltic journal of economic studies 78 vol. 8 no. 5, 2022 professional training of civil servants "knowledge management portal" (on approval of the regulations on the knowledge management web portal in the field of professional training "knowledge manage ment portal, 2019) etc. at the same time, there have been significant changes in the consideration of public legal disputes in the digitalization of administrative procedural legislation – the main ideas of the concept of electronic justice (electronic court) have been introduced in accordance with the provisions of the procedural codes updated in 2017 (on amendments to the economic procedural code of ukraine, the civil procedural code of ukraine, the code of administrative procedure of ukraine and other legislative acts, 2017). the signing of the memo randum of understanding between the ministry of justice and the hague institute for innovation in law, which took place at the international forum "innovations in the sphere of justice" (2019), was a significant factor in the introduction of modernized aspects to the organization of the judicial process. as a result, the unified judicial information and telecommunication system operates in ukraine, which includes a set of information and telecommunication subsystems (modules) that ensure automation of the processes of activity of courts, bodies and institutions in the justice system, including document circulation, automated distribution of cases, exchange of documents between the court and participants in the legal process, recording the legal process and participation of the participants in the legal process in the court session in the video conference mode, drawing up operational and analytical reports, providing informational assistance to judges, as well as automating processes that provide financial, property, organizational, personnel, information and telecommunications and other needs of euits users (on the approval of the regulation on the procedure for the functioning of individual subsystems of the unified judicial information and telecommunication system, 2021). the identified legislative trends in the digitalization of administrative proceedings were studied at the doctrinal level (lahutina, osadchyi, zakalenko, kozachuk, bolshakova, 2019; zaikin, 2019: 66; petrov, barikova, 2019: 19; kivalov, 2019), and the relevant conclusions are the basis of this study based on with the possibility of protecting the right to state service within the limits of administrative proceedings. thus, the purpose of this research is to form a comprehensive approach to defining the protection of the right to state service and the features of its protection caused by the use of information and telecommunication technologies. 2. grounds and conditions for protection of the right to public service before proceeding to the description of the main elements of the protection of the right to state service, attention should be paid to certain doctrinal provisions that are important for clarifying its essence, in particular, regarding the relationship between the concepts "protection of the right to state service" and "the right to protection of the right to state service". as it appears, "protection of the right to state service" is a set of actions, provided by law, carried out consistently by the relevant subjects (state servant, head of state service, administrative court) in order to establish the presence or absence of a violation of the right to state service. thus, in this case, we are talking about the mechanism of pro tection of the right to state service, which consists of: a) normative and legal foundations – the law of ukraine "on state service", the state service of ukraine; b) institutional foundations – the head of the state service, the administrative court; c) procedural principles – the procedure for protecting the right to state service. regarding the essential characteristic of the "right to protection of the right to state service", it should be noted that this right can be considered in a broad and narrow sense, depending on the subjects of the request for protection. in a broad sense, this right applies both to persons who enter the state service (that is, they exercise their constitutional right to enter the state service) and to state servants during their state service. a narrow understanding of the right to protection of the right to state service involves an application for the protection of state servants during state service, and it is the narrow understanding of this concept that is provided for in art. 11 of the law of ukraine "on state service" (2015). thus, the right to protect the right to state service is a legally defined opportunity for a citizen of ukraine and a state servant (in a broad sense) and a state servant (in a narrow sense) to protect their powers in relation to state service. in this study, attention is focused on the protection of the state servant's right to state service. characterization of the features of the protection of the right to state service is impossible without referring to the reasons for the emergence of such a right for a state servant. at the same time, it should be noted that the legislator does not leave this issue to the discretion of the state servant, but provides a provision that outlines the main direction of determining the following grounds: "...violation of the rights granted by this law (that is, the law of ukraine "on state service") or the occurrence of obstacles in their implementation such rights..." (2015). since we are talking about the rights of a state baltic journal of economic studies 79 vol. 8 no. 5, 2022 servant granted to him by the law of ukraine "on state service", it is necessary to dwell, first of all, on the main points regarding the definition of these rights. it should be taken into account that it is only about the rights of a state servant, which are granted to him by the law of ukraine "on state service" (2015). on the other hand, the official rights of a state servant (that is, the rights provided for in the job description) are not subject to judicial protection. the basis for protecting the right to state service is the "occurrence of obstacles in the exercise of the rights" granted to a public servant by the law of ukraine "on state service" (2015). regarding this provision, it should be noted that it is quite abstract and such that, unlike the previous one, it is com pletely at the discretion of the state servant. no normative legal act provides at least an exemplary list of such obstacles. it is also important to pay attention to the fact that this group of reasons is quite closely related to the previous one, that is, the occurrence of obstacles in the exercise of the rights of a state servant is inseparable from the violation of the rights of a state servant, and in some cases it is quite difficult to distinguish between them. thus, a violation of the right to a clear definition of job duties, which manifests itself in a superficial (vague, non-specific) definition, can at the same time be an obstacle to the realization of this right. the issue of the right of state servants to increase the level of digital competences as a component of the right to public service deserves special attention. in the context of the above, attention is drawn to the memorandum signed between the ministry of digital information of ukraine and the nads regarding information and advisory and methodological support in the field of digitalization, the creation of useful training courses for the develop ment of a digital society and the relevant compe tencies of state servants (official website of the national agency for state service, 2022), which provides that the parties will cooperate in the following issues: a) promotion of increasing the level of digital literacy; b) formation and development of digital competencies of state servants; c) improvement of the assessment process and requirements for the digital competence of candidates for state service positions; d) development of training courses, implementation of training and testing in digital literacy; e) methodological and advisory support in the field of digitization, development of digital society and digital competencies of state servants, etc. digital literacy is an important requirement of the present time for all members of society in all spheres of public life. this is especially important for state servants, who must have modern professional digital competences. that is why the list of professional training needs for state servants has been expanded with the competence "digital literacy ". the corresponding proposals were supported at the government meeting and confirmed by the resolution of the cabinet of ministers of ukraine "on amendments to certain acts of the cabinet of ministers of ukraine" (2020). at the same time, it is not just about the ability to use a computer, laptop or tablet, but about the ability to effectively use modern digital technologies both at work and in professional and personal development. given the widespread use of digital technologies in the public service, government officials need the necessary competencies to properly implement digital change. technologies are becoming increasingly complex, diverse and developing at a fast pace, which requires state servants to constantly improve their own digital competence, which includes not only the ability to use computer tools in professional activities, but also to meet the challenges of cyber risks, avoid dangers in digital space, store confidential data, be able to effectively implement electronic services for citizens and solve problematic situations with the help of digital technologies. it should be noted that on the platform "action. digital education" (2022) already has several educational series on digital literacy for state servants. first, state servants can find out about their own level of digital literacy by passing appropriate test tasks. having determined your level, you can move to more complex levels and, thereby, master modern digital competences, since the number of bureaucratic, paper procedures is reduced, and the activity of a state servant acquires and will rapidly acquire the latest digital content in the future. in the process of increasing the level of digital competence of a state servant, the motivation to further improve the possession of digital tools, which will contribute to the efficiency and effectiveness of his official activities, becomes of special importance. turning to analytical and statistical data shows the following data regarding the professional training needs of state servants in 2022: 12 civil servants of category "a" (higher body of the state service) need to improve such competence as digital literacy (for comparison: such competence as "change management", need 59 people); 4,317 state servants (11.9%) of category "b" need training under general short-term programs aimed at improving such professional competence as digital literacy; 14,089 state servants (16.2%) of category "b" (the largest indicator among other competencies) need training under general short-term programs aimed at improving such professional competence as digital literacy (report on summarizing individual needs for professional training of state servants on 2022 year, 2022). baltic journal of economic studies 80 vol. 8 no. 5, 2022 thus, the analysis of the individual needs of state servants showed that the priority in 2022 is to improve the following competencies: 1) for category "a" (representatives of the higher corps of the state service) – change management, professional knowledge, communication and interaction, leadership, efficiency management and development of human resources, making effective decisions; 2) for state servants of category "b" and "b" – professional knowledge, digital literacy, implementation and perception of changes, commu nication and interaction (teamwork and interaction). in order to obtain operational statistical infor mation about the state of professional training of state servants in ukraine, it is advisable to create an information system of automated information collection in the nads based on the knowledge management web portal in the field of professional training "knowledge management portal", which will allow in real time to receive relevant information about the organization of professional training state servants in the state service system and in the aspect of individual state bodies. the final element of the structure of the right to state service as a whole is the right to its protection. the right to the protection of the right to state service is the result of the implementation of the constitutional provisions on the protection of the rights, freedoms and legitimate interests of citizens, the result of the democratization of the state service and bringing the legal regulation of the functioning of this social and legal institution into compliance with the norms and standards of the european union.the right to protection of the right to state service belongs to both citizens (that is, those who are not state servants, but wish to become them), and, in fact, state servants, which is defined by the laws of ukraine (on state service, 2015; on prevention of corruption, 2014; on the purification of power, 2014; on the principles of preventing and countering discrimination in ukraine, 2014; on citizenship, 2001; on ensuring the functioning of the ukrainian language as the state language, 2019), by resolutions and orders of the cabinet of ministers of ukraine (on part-time work of employees of state enterprises, institutions and organizations, 1993, on the approval of the procedure for conducting a competition for civil service positions, 2016, on the approval of the regulation on the commission on the higher corps of the sate service, 2016); by the orders of the national agency for state service (on approval of the procedure for the election of representatives of public associations to the composition of competitive commissions for the selection of persons for public service positions, 2016; on approval of the list of test questions, 2016; on approval of typical tasks for testing professional knowledge (typical tasks for testing knowledge, 2017; on the approval of the regulation on the center for evaluating candidates for public service positions; 2017, etc.). 3. administrative protection of the right to state service the administrative way of protecting the right to state service is as follows. a state servant has the right to apply to the head of the state service in a state body with a corresponding complaint only in writing. at the same time, the law "on state service" (2015) clearly defines: a) the form of the complaint is written; b) type of appeal – complaint; c) the term of appeal is 30 days from the day when it became known or should have become known about the violation of rights; d) the addressee of the complaint is the head of the state service of the state body. part 3 of art. 11 of the law defines the procedure for providing a response to a state servant's complaint – within 20 calendar days from the day of receiving the complaint, provide a substantiated written response (decision). at the same time, it should be noted that the mentioned article does not provide for cases of extension of the specified term. in essence, it is about two types of complaints with which a state servant can apply to the head of the state service of a state body in case of violation of his right to state service, in particular, a complaint: 1) outlining the facts of violation of his rights or obstacles in their realization; 2) outlining the facts of violation of his rights or obstacles in their implementation and demanding the formation of a commission to verify the facts stated in it. it is important to pay attention to the fact that such a request of a state servant is his right (can demand), and not an obligation. when considering the issue of the administrative method of protecting the right to public service, it should be borne in mind that in the structure of the nads, the department of control over the implementation of the right to state service has been created, which consists of two divisions: the control department and the special inspections department. the control office is entrusted with the main tasks, which are: carrying out control over compliance with the conditions of citizens' exercise of the right to state service defined by the law of ukraine "on state service"; ensuring the sending to relevant state bodies of requests for verification of information on candidates for positions (except for the positions of judges), appointments (elections) to which are carried out by the president of ukraine, the verkhovna rada of ukraine or the cabinet of ministers of ukraine, and summarizing the received baltic journal of economic studies 81 vol. 8 no. 5, 2022 information in accordance with the law of ukraine "on prevention corruption" (2014). in accordance with the tasks, the control office performs the following functions: in accordance with the established procedure, the national agency for state service ensures the implementation of control measures regarding citizens' exercise of the right to public service; reveals inconsistencies and/or violations of the law in the implementation by state bodies of procedures related to citizens' exercise of the right to state service; ensures the sending to state bodies of requests for verification of information regarding candidates for positions (except the positions of judges), appointments (elections) to which are carried out by the president of ukraine, the verkhovna rada of ukraine or the cabinet of ministers of ukraine, and summarizes the information received in accordance with the law of ukraine "on prevention corruption" etc. given that one of the main functions of the control office is to supervise compliance with the law of ukraine "on state service", the activity of this office clearly demonstrates that inspections are an important tool for monitoring compliance with the rights of state servants. thus, in just one year of the absence of the nads powers to carry out control, the number of lawsuits in court on matters of appointment, passing and dismissal from state service increased almost threefold – from 11,000 in 2019 to 30,000 in 2020 (department of control over the implementation of the right to civil service). in january-september 2021, specialists carried out 82 control measures in accordance with the procedure for the implementation of the national state service, its territorial control bodies over the observance of the conditions defined by the law "on state service" for citizens to exercise their right to state service. according to their results, 671 inconsistencies and violations of the requirements of the current legislation on state service by state bodies were established. the largest number of violations was recorded regarding issues of public service and compliance with the organi zational and legal principles of implementation of state policy in the field of state service. during 2022, it is planned to carry out 139 control measures in a number of ministries, central bodies of executive power and their territorial subdivisions, and other state authorities. equally important is the function of ensuring the conduct of special checks – one of the safeguards provided for by the law "on prevention of corruption", which is a comprehensive study of information about a person who wishes to hold a position, the appointment (election) to which is carried out by the president, the verkhovna rada or the cabinet of ministers of ukraine. the essence of this tool is to check the data on such persons for compliance with the conditions and restrictions set by the law. thus, in 2021, more than 3,230 requests were sent, of which more than 550 requests were made through the automated electronic sending of cryptographic messages through the system of interaction of authorities using otr kszi, and more than 300 summaries of information were formed based on the results. thus, the administrative method of protecting the right to state service is a formally established right of a person to apply to the head of the state service in a state body with an appropriate written complaint regarding the protection of his right to state service. institutional support of the administrative method of protecting the right to state service is primarily entrusted to the office of control over the implementation of the right to state service, whose activities require a significant digitalization update. 4. judicial protection of the right to state service the constitution of ukraine (1996) guarantees everyone the right to protect their rights and freedoms in court, as well as to appeal in court decisions, actions or inaction of state authorities (article 55). in confirmation of the above, in accordance with the decision of the constitutional court of ukraine (1997), "everyone has the stateguaranteed right to appeal in a court of general jurisdiction the decision, actions or inaction of any state authority, local self-government body... if he believes that their decisions, actions or inaction violate or infringe on his rights and freedoms or prevent their implementation, and therefore require legal protection in court". in addition, part 3 of art. 8 of the constitution of ukraine provides the right to appeal decisions, actions, inaction of subjects of power directly on the basis of the constitution of ukraine. according to clause 2, part 1, art. 17 of the code of administrative procedure of ukraine, disputes regarding acceptance into public service, its completion and dismissal from public service belong to the competence of administrative courts (2005). the issue of protection of a citizen's right to state service is assigned exclusively to the jurisdiction of administrative courts: a) regarding the acceptance of citizens for state service, its completion, dismissal from state service (clause 2, part 1, article 19); b) in relation to the appeal of the decisions of attestation and competition commissions, the decisions of which are binding for state authorities and local self-government bodies (clause 9, part 1, article 19); c) regarding the formation of the composition of state bodies, the election, appointment, dismissal of their officials (clause 10. part 1 of article 19). baltic journal of economic studies 82 vol. 8 no. 5, 2022 disputes regarding the acceptance of citizens for state service, its completion, dismissal from state service directly relate to the citizen's protection of his right to state service during appointment to a state service position. the analysis of judicial practice regarding the consideration by admini strative courts of cases related to disputes arising in connection with the appointment, passing and dismissal from state service in general, and state service in particular, seems interesting. the sixth appeals administrative court of ukraine considered the case regarding the appeal of the dismissal decision in connection with the establishment of the state servant's incompatibility with the position held during the probationary period (case no. 826/10649/18, 2020). based on the result of the case review, a decision was made regarding the illegality of the dismissal of a person from the state service position of category "b", since the case file lacks evidence of improper performance of duties by the plaintiff during the probationary period, given the presence of a prepared draft of the information certificate, as well as the absence of any evidence in the case file regarding the nature, scope and terms of the task defined by the plaintiff 's manager, according to which it would be possible to determine the inconsistency of the existing certificate with the purpose set by the plaintiff. the grounds for appealing the decision of the head of the state service on the termination of civil service are similar, but in this case the same court, but in a different panel, came to a conclusion regarding the legality of the dismissal of a person in connection with the establishment of the state servant's inadequacy for the position held during the probationary period (case no. 826/19218/16, 2019). disputes regarding the appeal of the decisions of attestation, competition and other similar bodies, the decisions of which are binding on the state authorities, relate to the exercise of the right to enter the state service, which is carried out through competitive selection. in accordance with the law "on state service" (2015), the commission or the competition commission, based on the results of the competition, recommends to the entity or the head of the state service the appointment of no more than three people to one state service position, from which the winner of the competition is determined. therefore, persons who did not get into the three-person rating list, or who got into the list, but not according to the rating placement in it, have the right to challenge the results of the competition in court. however, this is inconsistent with the provisions of clause 6 of art. 28 of the current law "on state service", which established that a candidate who is not determined to be the winner of the competition has the right to appeal the decision of the commission or the competition commission. thus, it is only about the winner of the competition, which is determined not by the commission or the competition commission, but by the subject of appointment or the head of the state service. therefore, a candidate who has not been identified as the winner of the competition should not have any claims against the commission or the competition commission, which determined him as a candidate among five other candidates (that is, the commission or the competition commission has fulfilled its task), and should appeal their decision, but should appeal the decision subject of appointment or head of the state service. thus, there is a conflict between clause 1 and clause 6 of art. 28 of the current law "on state service". as an example, the cassation administrative court of the supreme court of ukraine considered case no. 804/6325/17 (2019) regarding recognition as illegal and cancellation of the requirement to re-hold the competition. thus, at the stages of the competition "solving situational tasks and determining their results" for filling a vacant position in the state service category "b", which consist in achieving maximum objectivity when checking situational tasks by members of the competition commission on the condition of anonymity of the person who developed performed the situational task, it was established that in the lower right corner of each sheet of the solution to the situational task there is a personal signature of the contestant who completed this task. the court found that the violation of the principle of anonymity committed by the competition committee (placing signatures on each sheet of answer sheets) created the prerequisites for the identification of candidates and, accordingly, for the based evaluation of the respective works. the relevant circumstances created the conditions for recognizing the results of the competition as invalid and, accordingly, caused the need to re-hold the competition for the corresponding position. according to judicial practice, even in the event of violations of the tender procedure, the court may recognize these circumstances as insufficient to cancel the final tender decision (case no. 815/4701/16, 2021). the position of the court regarding the dispute in the case, which arose due to the fact that, as a result of the competition to fill a vacant position, the competition commission did not identify a candidate for this position, is interesting. the reason for this situation was that two candidates for the specified position scored the same number of points in the rating list, and according to the results of open voting initiated by the head of the competition commission, none of them received the majority of votes. thus, the supreme court of ukraine, as a baltic journal of economic studies 83 vol. 8 no. 5, 2022 member of the panel of judges of the administrative court of cassation, found that since the competition passed all the necessary stages, although the competition commission did not conduct a second interview, under the given legal regulation and the established circumstances of the case, the decision to hold a second competition is legitimate and justified. thus, judicial protection of the right to state service consists in consideration of this type of public-law disputes exclusively within the limits of administrative proceedings. it is noted that the subject of a public-law dispute, which is related to the protection of the right to state service, will concern: acceptance of citizens for state service, its completion, dismissal from state service; appealing the decisions of attestation and competition commissions, the decisions of which are binding on state authorities and local self-government bodies; c) formation of the composition of state bodies, election, appointment, dismissal of their officials. 5. conclusions the implementation of the constitutional right to state service is possible only under the condition of creating an effective and efficient organizational and legal mechanism for the protection of the right to state service, which consists of the following elements: a) legislative basis, i.e. a set of legislative acts that determine the grounds and procedure for protecting the right to state service); b) the institutional basis, that is, the system of state bodies (officials) that ensure the protection of the right to state service; c) procedural basis, i.e. a set of sequentially implemented actions aimed at ensuring the protection of the right to state service. it was determined that the right to protect the right to state service is a legally defined opportunity for a citizen of ukraine and a state servant (in a broad sense) and a state servant (in a narrow sense) to protect their powers in relation to state service. in this study, attention is focused on the protection of the state servant's right to state service. attention is focused on the rights of state servants to increase the level of digital competences as a component of the right to state service. it is proposed to amend the law of ukraine "on state service" by setting out content 11 in the following wording: "in case of violation of the rights granted by this law or obstacles to the realization of such rights, a civil servant within a month from the day when he learned or should have learned about that is, he can submit a complaint to the head of the state service indicating the facts of violation of his rights or obstacles in their implementation or apply to the court with a corresponding complaint." in order to obtain operational statistical information on the state of professional training of state servants in ukraine, it is advisable to create an information system for automated information collection in the nads on the basis of the knowledge management web portal in the field of professional training "knowledge management portal", which will allow in real time to 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available at: https://nads.gov.ua/storage/app/sites/5/%d0%be%d1%81%d0%bd%d0%be%d0%b2%d0%bd% d 1 % 9 6 % 2 0 % d 1 % 8 4 % d 1 % 8 3 % d 0 % b d % d 0 % b a % d 1 % 8 6 % d 1 % 9 6 % d 1 % 9 7 % 20%d1%81%d1%82%d1%80%d1%83%d0%ba%d1%82%d1%83%d1%80%d0%bd%d0%b8%d1%85%20 %d0%bf%d1%96%d0%b4%d1%80%d0%be%d0%b7%d0%b4%d1%96%d0%bb%d1%96%d0%b2%20 %d0%9d%d0%90%d0%94%d0%a1/zrazok-dlya-utochnennya-strukturnimi-pidrozdilamidocx-11.pdf the case on the constitutional appeal of dzyuba h.p. regarding the official interpretation of the second part of article 55 of the constitution of ukraine and article 248-2 of the civil procedure code of ukraine (the case of the citizen g. p. dzyuba regarding the right to appeal in court the illegal actions of an official): decision of the ksu dated november 25, 1997. available at: https://zakon.rada.gov.ua/laws/show/v006p710-97 decision of the sixth appellate administrative court of ukraine dated january 15, 2020, court case no. 826/10649/18. available at: https://reyestr.court.gov.ua/review/86989285 decision of the sixth appellate administrative court of ukraine dated february 11, 2019, court case no. 826/19218/16. available at: https://reyestr.court.gov.ua/review/79727667 baltic journal of economic studies 85 vol. 8 no. 5, 2022 decision of the supreme court of ukraine dated november 21, 2019, court case no. 804/6325/17. available at: https://reyestr.court.gov.ua/review/85804125 decision of the supreme court of ukraine dated december 20, 2018, court case no. 815/4701/16. available at: https://reyestr.court.gov.ua/review/78771572 decision of the supreme court of ukraine dated april 24, 2019, court case no. 826/2198/17. available at: https://reyestr.court.gov.ua/review/81431713 received on: 11th of october, 2022 accepted on: 24th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 16 vol. 4, no. 1, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-1-16-24 strategic priorities for the internal migration processes regulation in ukraine olga balueva1, elena chuprina2 donetsk state university of management (mariupol), ukraine abstract. as the result of the annexation of the crimea and donbass military conflict, there was an emergence of forced migration. it ought to be emphasized that today issues related to addressing problems of internally displaced persons (idps), are relevant and require an integrated approach. the increase in the number of idps in the country raises the issue of identifying the strategic priorities of the state policy. the purpose of this research is to formulate strategic priorities of the state policy of support for idps’. the subject of the study is theoretical and methodological principles of the state policy to support idps. the research methodology includes a set of scientific research methods that provide identifying the strategic priorities of the state policy for idps’ support, developing effective mechanisms for these priorities achievement, and conceptual vision of solving idps’ problems. in the course of investigations, the following methods are used: analysis while studying the main problems of internally displaced persons; logical synthesis and synthesis while drawing conclusions. results. scientific novelty of the article. in the article, the conceptual foundations of the idps support have been formed, an attention has been focused on the feasibility of using a strategic approach, which involves the formation and implementation of a set of strategically oriented measures aimed at solving the most acute issues and matters related to internal forced migration, directing the idps potential and internally displaced businesses to strengthen local communities and social and economic development of the resettlement territories. the main stages and conceptual foundations for the strategy formation on the idps support have been proposed. the strategy is based on an integrated approach to addressing idps and internally displaced businesses, taking into account the interests of host communities. practical implications. the result of the strategy implementation ought to be approved by the strategic migration model for ukraine’s internal migration aimed at promoting the implementation of the basic idps and internally displaced businesses rights; ensuring the social and economic integration of the idps into the host society; promotion of country territories’ social and economic development; reducing the level of social and psychological tension in host communities; creating new jobs; improvement of the investment climate; increasing the efficiency of using the country intellectual potential and its human resources. value / originality. solving the urgent issues associated with forced displacement processes, including integration and adaptation to host communities. key words: strategic priorities, government policy, internally displaced persons, support strategy, strategic management. jel classification: h11, j68, r23, o15 corresponding author: 1 donetsk state university of management (mariupol) e-mail: balueva@ukr.net 2 department of marketing, donetsk state university of management (mariupol) e-mail: eochuprina@ukr.net 1. introduction as the result of the annexation of the crimea and donbass military conflict, there was an emergence of forced migration. it ought to be noted that the category of internally displaced persons (idps), who were forced to leave their place of residence due to the war, was first recorded in ukraine in 2014, forming a new type of migration for ukrainian population. as of the end of 2017, 1.5 million citizens were forced to leave their places of residence and sought refuge in other parts of the country, which led to the redistribution of population between the territories (official site of the ministry of social policy of ukraine, 2018). the increase in the number of idps in ukraine requires the formation and implementation of a modern, integrated, balanced state policy aimed at solving the issues associated with internal forced migration, including the adoption of long-term solutions that can create effective national instruments of public administration for overcoming the negative baltic journal of economic studies 17 vol. 4, no. 1, 2018 consequences for both the idps and host communities, the integration of idps into the life of the host society in the areas of displacement for further comfort living, realizing the idps’ potential on a new place and strengthening local communities. the issues of idps’ difficulties are studied by such scholars as o. balakireva (balakireva, 2014), t.  doroniuk, a. solodko (doroniuk & solodko, 2015), e. libanova (libanova, 2014), o. malinovskaya (malinovskaya, 2015), and others. the problem of idps’ integration and adaptation in ukraine is very relevant and contains a significant number of unresolved issues that require active research. within this framework, the issue of identifying the strategic priorities of the state policy for idps’ support, developing effective mechanisms for these priorities achievement and conceptual vision for idps’ matters solving have been actualized. the purpose of the article is to formulate strategic priorities of the state policy of support for idps. 2. strategic component of internally displaced persons’ support the results of the research allowed stating that the undeniable positive feature of the current social development in ukraine is to raise the attention of politicians, scientists, and ordinary citizens to the issues of strategic priorities formation and achievement, strategic principles for management enhancement in various spheres of the economy and public administration development. strategic management in the field of idp support, aimed at a long-term perspective, creates favourable conditions for the further development of civil society in ukraine, the introduction of an effective mechanism for the interaction of its institutions with the executive and local self-government bodies on the basis of partnership and mutual responsibility, ensuring the implementation and protection of rights and human freedoms, and is aimed at involving idps into the economic, social, cultural, and political spheres of life in host communities. it ought to be emphasized that the readiness for the development and adoption of a state policy on internal displacement is an essential indicator for the recognition by the national authorities of the relocation and related responsibilities issues, and of the fact that they regard this issue as a national priority. un resolutions encourage state governments that are faced with relocations within the country to take government programs aimed at idps protecting and assisting. it is necessary to pay attention to the fact that in management theory, there is an integration of strategy and corresponding mechanisms, which mutually determine each other. it should be noted that the effective state policy implementation concerning idps is appropriate on the basis of the organizational and economic mechanism formation for ensuring strategic management in this area. it represents a set of organizational and economic methods and tools that, based on legal norms, allow the state and local governments to provide support for idps, taking into account the interests of host communities. the structure of the organizational and economic mechanism for providing strategic management in the idps’ support direction is presented in fig. 1. results evaluation. complex of measures adjustment taking into account the monitoring results strategic measures implementation monitoring principles of strategic management analysis of idps and host communities’ needs and issues strategic priorities’ formation for state policy on idps concept formation on idps support strategy on idps support development and implementation state program on idps support development and implementation organizational and economic and statutorylegal methods and tools for idps support fig. 1. the organizational and economic mechanism structure for providing strategic management on idps support source: developed by the authors baltic journal of economic studies 18 vol. 4, no. 1, 2018 it ought to be noted that the organizational and economic mechanism for providing strategic management on idps support is a complex and consists of separate elements: financial mechanism, institutional mechanism, investments attraction, a public-private partnership, state regulation and support mechanism. this complexity enhances its effectiveness. the authors of the article emphasize that the lack of a strategic component in the modern management of internal forced migration leads to an increase in the social isolation of citizens, increases the vulnerability to various forms of their rights violation. 3. strategic priorities for internally displaced persons’ support it should be emphasized that the strategic priorities of the state policy on idps are the most important directions aimed at solving the issues of this category of citizens and host communities connected with internal forced migration, which carry out a number of particular actions that the state or an authorized subject of management should take for the realization and protection of the idps rights, taking into account the interests of host communities in the short and long terms. the priorities of the state policy in this area are determined on the basis of the idps and host communities’ needs and priorities analysis, which in turn allow clearly defining the goals and strategy for their achievement. in the methodological framework, when substantiating priorities, the following principles need to be taken into account: ‒ the democracy principle means the activities openness to form a policy on idps support, the involvement of the scientific community and society in its development; ‒ the adaptability principle is realized through the policy on idps support formation taking into account possible changes in the external environment, which may result in the strategic objectives correction, priority measures for the idps protection and support, as well as mechanisms for its implementation; ‒ the purposefulness principle determines the directions of the state policy on idps support in order to achieve the common goal of all actors; ‒ the balance principle is manifested in the balance of interests of all subjects of state policy, displaced persons and population in the territories of displacement in relation to strategic goals and priorities; the balance of economic, social, and other goals; balancing the use of the resource base necessary to the goals’ accomplishment; ‒ the humanism principle expresses a system of views that determine the value of man as a person, his/her right to freedom, happiness, development, the identification of his/her abilities, which considers the benefit of a person as that for assessing social institutions; ‒ the synergy principle is synchronization of the major reforms implemented in the country and affect the formation of national tools on idps support and, at the same time, the coordination of the municipalities support directions in regional development; ‒ the subsidiarity principle involves the decentralization of power and the competence accomplishment in order to protect and support idps at the level of governance where they can be implemented more effectively. interaction of public authorities and local self-government with civil society institutes; ‒ the conceptual approach to idps support and protection principle should be based on the adoption of a basic document that would lay the main directions on idps state policy, aimed at formulating a concept of their support, socio-economic and psychological adaptation, integration into the host society, that would be followed both by government and private structures while choosing their further activities. it cannot be but mentioned that the strategic priorities of the state policy concerning idps are the basis for the idps support concept formation, as well as the relevant state program. according to the results of the research, idps face certain problems and obstacles when moving to the new place that affects the level of integration into host communities and often hinder the adaptation processes. among the main ones, the following should be noted: the employment; housing; material issues caused by difficulties with the employment and housing, loss of property and the need to adapt into a new city; cases of discrimination because of idp status, the existence of legal and administrative barriers that impede their rights realization. generally, it ought to be noted that forced displacement of citizens is associated with a number of challenges for many local communities, which are manifested in the growing burden on local labour markets, the issues of placement, employment, medical care, access to education, cultural and social reintegration, and can also become the cause of a social conflict. the authors emphasize that the crucial factor for the idps integration and stability is solving problems (for example, employment) for both the idps and local residents within the territorial community. therefore, the issues of integration and cooperation of local residents and idps, confidence building, mutual respect and partnership relations, that is, social cohesion enhancement of the population, are urgent. speaking about the problems associated with forced internal migration, one should pay attention to the difficulties faced by the displaced business as a result of hostilities. according to the results of the conducted research, among the main ones, the following can be noted: the difficulties associated with the evacuation baltic journal of economic studies 19 vol. 4, no. 1, 2018 of capital equipment and property; limited access to financial and credit resources, difficulties in obtaining a loan; unfavourable regulatory policy; complication with the enterprise or an individual entrepreneurship registration. in general, the internally displaced business has some potential to partially solve the issue of additional jobs creation (including for idps), and the local communities’ development. addressing the acute issues encountered by idps, internally displaced businesses and local residents within the territorial community requires systematizing the strategic priorities of the relevant state policy with the further development of applied mechanisms for their achievement. consequently, the formation of the main strategic priorities of the state policy regarding the idps ought to be directed in two ways: idps and internally displaced businesses encouragement; host communities support for the effective resolution of idps problems. within the framework of these strategic priorities, it seems advisable to develop measures that can ensure the realization of the idps’ basic rights. 4. idps support strategy it ought to be noted that in the generally accepted context, the management strategy, aimed at supporting the idps, is a system of conceptual provisions on the most effective directions of the migration policy development in the field of internal forced migration, solving the urgent issues associated with forced displacement processes, including integration and adaptation to host communities. strategy development is carried out stepwise, each of which is in its own way important, and therefore requires the creation of prerequisites for its successful implementation. the formation process of the idps support strategy consists of successive steps, namely: ‒ definition of the purpose and the main tasks, the realization of which will allow achieving the strategy; ‒ definition of criteria and factors of influence on the strategy formation and implementation process; ‒ definition of the tool, which provides the strategy main provisions implementation; ‒ definition of the resource base: financial, information support; ‒ substantiation of a group of acceptable generalized alternatives, their analysis, determination of the predicted environment condition; ‒ the choice of the most acceptable alternative; ‒ substantiation of standards and evaluation criteria, for which the analysis of results is planned; ‒ analysis of the achievement degree of the obtained results and their comparison with the planned ones. the authors emphasize that this strategy should be integrated with existing national strategies and programs aimed at idps support. using the positive world experience, a set of issues related to forced domestic migration in the country and established strategic priorities for the idps support, the main criteria to be met by the idp support strategy ought to be formulated (table 1). table 1 the main criteria to be met by the idp support strategy criteria criterion characteristic systemic influence on the national economic development raising the national economic competitiveness level, stimulating economic growth, the existence of a significant inter-sectoral multiplier, contributing to strengthening macroeconomic stability efficiency long-term implementation and duration of the achieved effect social orientation tangible results of the project in order to improve the quality of citizens’ life focus on the economic, social, legal systems modernization achieve the strategy goals through the reforms in these areas implementation use of national resource strategy orientation to strengthening national economic independence, decreasing dependence on fluctuations of the world economic situation integration integration possibility within the framework of the strategy implementation with the state and business efforts promotion of territorial development impact of the strategy on the economic and social situation in the regions of ukraine, the attraction of regional economic potential, development of interregional cooperation. source: developed by the authors the idps support strategy provides a systematic solution to the idps and host communities’ issues associated with the internal displacement of citizens and businesses, the promotion of social and economic integration and the idps adaptation and the realization of their potential in a new place for the resettlement areas development and local communities strengthening in order to overcome the negative consequences associated with these processes, the growth of country social and economic potential and the national economy development. within the general objectives of the idps support strategy, the following should be singled out: ‒ forming a common understanding of the changes taking place in migration policy, in particular, in the field of internal forced migration, and a united position on this issue; definition of the state policy directions in this sphere, and the influence of the internal forced migration processes on the resettlement territories development and the national economy as a whole; baltic journal of economic studies 20 vol. 4, no. 1, 2018 ‒ clarification in the course of discussions and information exchange of the most likely state, public, and private organizations actions in the field of idps support; ‒ the creation of a framework for the joint work of local communities, non-governmental organizations and enterprises in the field of idps support, aimed at strengthening the country’s economic and demographic potential; ‒ assistance to economic policy subjects in making their specific decisions, which allow increasing the focus and coordination of actions aimed at idps support. ‒ it ought to be emphasized that the idps conceptual support strategy provides: ‒ the realization of the basic rights of idps and citizens according to the constitution and in accordance with the international law principles; ‒ the implementation of a systematic approach that will ensure the maximum use of synergistic effects due to the presence of combined results, interdependent goals in the implementation of strategy individual system components; ‒ realization of economic, investment potential of internally displaced business and resettlement areas (fig. 2). the strategy is based on an integrated approach to address idps and internally displaced businesses, taking into account the interests of host communities. its formation and realization should be carried out principles of strategy formation: systemic; complexity; purposefulness; priority; efficiency; adaptation prerequisites for forming the idps support strategy: modern tendencies in the migration processes development; the need to combat discrimination in society; the cooperation between the idps and the community living in the host territories development the purpose of the strategy is to create a system for ensuring the protection of rights and legitimate interests of idps and internally displaced businesses, their integration with host communities, establishing effective cooperation between idps and host communities, state authorities, local self-government, and preventing the social isolation of idps, their vulnerability to various forms of rights violation methodological support (market methods): targeted planning of events; methods of carrying out marketing research; methods of strategic analysis methodical support (methods of state regulation): laws and regulations; targeted programs; fiscal policy; investment policy system components of the strategy: idps support; support for internally displaced businesses; host communities support to address the idps issues marketing support and information support strategy implementation results of the strategy implementation: promotion of the basic idps rights implementation; social and economic integration of the idps into the host society; promotion of the social and economic development of the country’s territories; reducing the level of social and psychological tension in host communities; creating new jobs; improvement of the investment climate institutional support financial support the mechanism of public-private partnership fig. 2. the conceptual basis for the idp support strategy formation source: developed by the authors baltic journal of economic studies 21 vol. 4, no. 1, 2018 according to certain system components, in compliance with which the complex measures are formed. it should be noted that the prerogative of management in the field of migration, including domestic one, is carried out by the government. however, it ought to be combined with a partnership involving a wide range of other actors. at the general level, taking into account the specifics of domestic forced displacement, this includes the idps and social partners: employers, trade unions, idps associations, public organizations, international organizations and foundations. the effectiveness of the strategy is determined by the goals achievement, namely: ‒ creation of conditions for the idps basic rights realization, which will overcome the negative consequences associated with the internal forced migration processes, to avoid social isolation of idps; ‒ creation of conditions for the social and economic integration of the idps into the host society through the full involvement of this category of citizens in the economic, social, cultural, and political spheres of the host communities; increasing their capacity at the local level, raising awareness of how to solve social and economic issues within host communities; ‒ promotion of the social and economic development of the country’s territories due to the realization of the idps’ potential and internally moved the business in a new place (taking into account regional peculiarities) and strengthening of local communities; ‒ reducing the level of social and psychological stress in host communities, building effective communicative interaction between idps and the local population, involving the idps in the local community life, thus avoiding conflict situations between idps and local residents; ‒ creating new jobs that will help reduce social tensions and unemployment; ‒ improving the investment climate and attracting foreign and domestic investors in order to implement housing construction projects. the main areas of practical implementation of the strategy (based on the identified systemic components) are the following: 1. idps support: presupposes a solution to a set of tasks, the main of which are the following: 1.1. realization of the right to work. this requires: ‒ the introduction of a programmatic approach to the comprehensive problem-solving of the idps’ issues, the formation and implementation of a state program aimed at idps protection and support, increasing the possibilities of idps employment, including through the implementation of joint projects with international organizations; ‒ introduction of tax incentives for employers and enterprises that have hired idps; ‒ creating opportunities for self-employment, retraining, advanced training. enhancing employment opportunities for idps and their adaptation to the regional labour market by reducing their retraining time in compliance with specific employers’ needs, direct internships at enterprises, institutions and organizations, individual and distance learning, and recognizing the results of non-formal vocational training; ‒ informing the idps about employment opportunities, available employment support programs, trainings, round tables, grants to open their own business; ‒ disseminating information and working out the experience of the national business cooperation platform, which aims to promote networking and cooperation between idps and members of local communities – entrepreneurs from different fields – in order to build a business, create new jobs and, in the long run, improve the business environment in ukraine. 1.2. realization of the right to housing. this requires: the creation of a reserve fund of housing (in communal property), to provide temporary accommodation for the most vulnerable categories of idps; ‒ introducing a system of preferential taxation for landlords who provide accommodation to idps, which enables them to enter into lease contracts and issue subsidies and encourage tax payments in accordance with current legislation; ‒ elaboration and implementation of the state mortgage lending program for the housing purchase on the primary or secondary market for a long time, the formation of the financial and legal mechanism of idps preferential crediting (with the mechanism elaboration for obtaining compensation for lost housing in the occupied territories); ‒ development and implementation of a state program aimed at the construction or purchase the affordable housing for idps with partial compensation of the construction (purchase) cost by the state (as an instrument of state housing policy, which implements the mechanisms of state support to idps, it is expedient to consider the potential of the state fund for youth housing assistance); ‒ consideration of the possibility to cooperate with non-governmental donor and investment organizations in the field of international housing projects implementation. ‒ elaboration of an organizational and legal mechanism for the losses and compensation assessment of lost housing and idps property as a result of hostilities and temporary occupation of the territory of ukraine. 1.3. overcoming the legal and administrative barriers that hinder the realization of the idps’ rights, impede access to livelihood facilities. this requires: ‒ development of measures set (including using marketing potential) aimed at effective communication interaction between idps and state authorities. improving the quality and accessibility of public services, as well as services working with the population; baltic journal of economic studies 22 vol. 4, no. 1, 2018 ‒ maximum simplification of the procedure for obtaining administrative services for idps (for example, registration of property rights, liquidation of legal entities, obtaining the necessary documents, etc.); ‒ creation of effective information and legal support of the internal forced migration process, objective, correct coverage of its main tendencies in order to form a positive image of the idps in society; ‒ preparation, publication, and dissemination of information materials for migrants on their rights in education, social welfare, and health. informing the idps regarding their rights, opportunities for realizing these rights, sources and resources for assistance receiving; ‒ formation and implementation of an effective system for the dissemination of information on idps by state authorities, expression of the position as for the interaction; ‒ use of libraries, social institutions, trust phones, etc. in order to inform and counsel the idps; ‒ provision of tax, levy, and other payments to enterprises and organizations involved in sponsoring, sponsorship, charity activities aimed at idps support; ‒ simplification of the procedure for pension issuing, proof of the right to pension payment; ‒ creating the state support of the educational online platforms work for obtaining ukrainian education for children from the temporarily occupied territory or from separate districts of donetsk and luhansk regions; ‒ development and implementation of teacher training programs for participation in distance education. workout the mechanism of material stimulation of teachers in connection with additional workload related to working with students on an online platform; ‒ taking into account the actual amount of idps when distributing a medical subvention to the relevant local budgets; ‒ assistance from the ministry of education and science to obtain licensing by the relevant educational institutions for conducting educational activities for the most demanded by labour market professions and specialties in order to conduct the professional training for idps; ‒ formation of an organizational and legal mechanism aimed at solving the idps discrimination issues in the banking sphere over the inability to independently choose a banking institution for servicing card accounts (pensions, social payments) and fully use the savings bank cards; ‒ encouraging banking institutions to provide loans when opening their own business. 2. support for internally displaced businesses. a solution to a set of tasks is foreseen, the main of which are the following: ‒ implementation of a programmatic approach to the integrated problem solving of internally displaced businesses, the formation and implementation of a state program aimed at its protection and support; ‒ introduction of mechanisms for the opening and support the idps’ business; ‒ introduction of preferential financial and credit mechanisms for supporting small and medium-sized businesses that will promote the social and economic development of host communities; ‒ development of a unified national base of production (commercial) areas and real estate by regions, which has to contain information on the availability of specialized premises by activity type, operational capacity, equipment, and an initial assessment of the retrofitting and commissioning costs; ‒ formation and implementation of the organizational and economic mechanism of the displaced business support in rural areas and peripheral districts; ‒ development of start-ups and youth entrepreneurial initiatives; ‒ promotion of local authorities on sales distribution of entrepreneurs and enterprises products made by idps (implementation of projects for holding exhibitions and fairs to promote products, information support for such projects). 3. host communities support in addressing idps issues. for this purpose, it is expedient to implement the following set of measures: ‒ studying the idps and local communities issues and needs in the areas of resettlement; ‒ providing local budgets of host communities with appropriate support from the state budget, taking into account the actual number and needs of idps living in these communities; ‒ formation of a positive image of the idps, building the mutual understanding between the inhabitants of the host communities and the idps; ‒ highlighting issues faced by idps, focusing on the common problems of settlers and residents of host communities; ‒ support the social dialogue in communities with the participation of host communities, idps, public associations; ‒ communicative interaction between the idps and the local population, the involvement of the idps in the local community life; encouraging idps to participate in community life, using the idps’ potential for community development by informing about opportunities for cooperation and partnership with civil society institutions, local authorities and host communities, community participation, public hearings, etc.; ‒ creation of a platform for public organizations, state bodies, etc., which deal with the idps issues for the systematization of their activities, development of joint projects; baltic journal of economic studies 23 vol. 4, no. 1, 2018 ‒ realization of projects on the social cohesion of the population: holding concerts, festivals, exhibitions, master classes, clubs of interests, sports events, seminars, round tables, environmental initiatives, etc. ‒ formation and implementation of an effective communication system for the information exchange between the idps, community, and executive authorities; ‒ attracting international assistance for the social and economic development of local communities and increasing their ability to respond to the need to address the idps’ urgent problems; ‒ community support in expanded networks of educational establishments, taking into account the idps’ needs, moved to such communities, and the existing needs of local inhabitants. the experience of foreign countries shows that to resolve idps’ issues, a special legislative base, administrative bodies for its implementation, coordination of the efforts of various departments, as well as proper financing from the state budget are necessary. given the limited resources available in conflict situations, international organizations can be of great help, and cooperation with them should take place within the framework of the policy of idps protection. the source of resources for the strategy implementation should be the combination of budget funds and the targeted financial and technical assistance provided by ukraine to international organizations and foreign countries, as well as attracting funds from private domestic and foreign investors. it should be noted that the strategy is proposed based on models of public-private partnership. it is proposed to use the following forms and models: joint activities (in parts of the strategy for the construction of infrastructure objects); leasing (in parts of the support strategy of idps); a contract (public order) for the construction of social infrastructure, housing, etc. it is necessary to emphasize the need for widespread dissemination of information about strategic and practical decisions taken within the framework of the strategy, provided with appropriate informational support of strategic measures integrated with marketing. taking this into account, it seems advisable to form a marketing program aimed at creating conditions for the full involvement of the host societies in the economic, social, cultural, and political life of the host communities, and is based on the analysis of the idps’ matters and the obstacles that affect the integration level into host communities and hinder adaptation processes; attracting public attention to them; studying and analysing public opinion on idps, forming effective communication channels with target groups. in the process of changing the social and economic, political situation in the country and taking into account the effectiveness of the measures implemented, the adjustments are to be made into the developed strategy (in particular, regarding its goals or implementation mechanisms), aimed at eliminating new challenges and maximizing the use of available opportunities. it is worth to be underlined that the strategy should become a fundamental document when developing and implementing programs on specific systems of idps and internally displaced businesses support and country social and economic development. 5. conclusions the increase in the number of idps in the country raises the issue of identif ying the strategic priorities of the state policy on idps. it is advisable to target their formation in two directions: idps and internally displaced businesses support, and host communities support for the effective resolution of idps matters. the strategic priorities of the state policy on idps are the basis for strategy further development, an action plan for the state, regional, and other programs. in the article, the conceptual foundations of the idps support have been formed, attention has been focused on the feasibility of using a strategic approach, which involves the formation and implementation of a set of strategically oriented measures aimed at solving the most acute issues and matters related to internal forced migration, directing the idps potential and internally displaced businesses to strengthen local communities and social and economic development of the resettlement territories. the main stages and conceptual foundations for the strategy formation on the idps support have been proposed. the strategy is based on an integrated approach to addressing idps and internally displaced businesses, taking into account the interests of host communities. the result of the strategy implementation ought to be the approved by the strategic migration model for ukraine’s internal migration aimed at promoting the implementation of the basic idps and internally displaced businesses rights; ensuring the social and economic integration of the idps into the host society; promotion of country territories’ social and economic development; reducing the level of social and psychological tension in host communities; creating new jobs; improvement of the investment climate; increasing the efficiency of using the country intellectual potential and its human resources. baltic journal of economic studies 24 vol. 4, no. 1, 2018 references: balakіreva, o. 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(in ukrainian) (accessed 21 november 2017). ofitsiynyy sayt ministerstva sotsialnoi polityky ukraiyny (2018) [official site of the ministry of social policy of ukraine]. retrieved from: http://www.mlsp.gov. ua/labour/control/uk/publish/article?art_id=190239&cat_ id=107177 (accessed 15 january 2018). baltic journal of economic studies 147 vol. 1, 2015 features of influence of macroeconomic measures of transformation on the state debt policy roman rudyk1, taras shevchenko national university of kyiv, ukraine abstract. the objective is to study the relationship between the debt policy and vector of macroeconomic measures which is reflected in the transformation of structure of budget deficiency payments. also, the article defines and characterizes three main phases of the government debt policy: pre-stabilization, stabilization and post-stabilization. the author analyzes main aspects of the relationship between dept policy and monetary one. methodology. the study is based on the works of domestic and foreign scientists engaged in research of the given problem. theoretical concepts are supported by statistical data of key macroeconomic indicators of ukraine’s economy. results of the survey showed that the relationship between the debt policy and measures of macro-regulation during the transformation has the stable and permanent nature, and the use of certain instruments of government debt management is exclusively possible for a definite direction of macro policy on the one hand, and they are the elements in the system of measures for its implementation on the other hand. in the pre-stabilization phase of transformation the debt policy synthesizes the expansive solutions of monetary and fiscal authorities, and a direct link between them mediate the expansion of demand in the public sector and the preservation of soft budget constraints for micro-units; in the stabilization phase the relationship between fiscal, monetary and debt policy becomes more indirect, but are direct in that part of the borrowing purposes, subordinated to the creation of macro-stabilization mechanism of transformation; in the poststabilization period the role of indirect interconnection between the debt measures and fiscal and monetary decisions increases, but the lack of a deep micro-restructuring and deep systemic and structural reforms cause the deterioration in the macro-economic state of the system, due to which the vector of government borrowing again gravitates toward the field of formation of the mechanism of stabilization. in the post-stabilization period the following contradictions are especially intensely manifested: firstly, the contradictions between the expansive fiscal policy and relatively restrained monetary policy, which is why the maintenance of the exchange rate and inflation on the equilibrium level takes place with the higher interest rates; secondly, there is an enhancement of contradictions within the system of fiscal policy and monetary policy. the formation of consumer-oriented reproduction proportions of gdp is one of the consequences of such a situation. key words: debt policy, macroeconomic stabilization, monetary policy, investment policy, periods of debt policy, public debt management. jel classification: h68, н63, g32 (both by self-regulation and by indirect government intervention). considering the rapid accumulation of public debt in case of market transformation in ukraine (and in other transformational economies) there is a steady dynamics of growth and increase of debt burdens in accordance with international standards of the country’s burdensomeness estimation, and macroeconomic position of government debt is considered to be relatively unstable. within this framework, debt is a determining factor in the process of structuring of budget expenditures and neutralization of ukraine’s balance of payments which determines the relevance of this study. 1. introduction the policy of government debt management is an important component of the ongoing financial policy and an essential component of the process of macroeconomic regulation. in a transformational economy the government debt management is the general expression of the state’s attitude to financial resources. as an important component of macroeconomic balancing the state borrowings have created a specific environment in which the impact on the dynamics of macroeconomic variables increasingly determined by measures of debt policy, rather than by the process of approaching the economy to equilibrium position corresponding author 1 department of finance, taras shevchenko national university of kyiv. e-mail: rria@ukr.net baltic journal of economic studies 148 vol. 1, 2015 the importance of place and role of the government debt in the financial system determined the constant attention of researchers to its various aspects. special attention is given to the works of the following western researches: r . barro, j. buchanan, p. elvort, n. kaldor, j.  keynes, p. krugman, a. lerner, karl marx, r . musgrave, l. mauer, f. mahlup, f.  modigliani, l. pazynetti, david ricardo, adam smith, john. stiglitz, p. harrod and others. various aspects of analysis of this issue are disclosed in the works of ukrainian scientists-financiers in particular in the writings of o. baranovskyi, o.  vasylyk, t.  vakhnenko, v.  geyets, v.  koziuk, g. kucher, v. lisovenko, z.  lutsyshyna, i.  liutyi, v. novitskyi, l. novosad, a.  plotnikov, v.  fedosov etc. external debts as an integral part of the modern international financial system were studied by such russian scientists-economists as a. vavilov, a. sarkisyants, a. fedyakina, etc. the purpose of the article is to identify and describe features of influence of macroeconomic measures of transformation on the state debt policy. 2. the features of macroeconomic measures in the transformational economy macroeconomic measures in the transformational economy have a number of distinctive features that demonstrate special aspects of both transition to a market economy, and development of a qualitatively new model of state interference with the economy. this is related to the fact that: • the transition to the macroeconomic regulation is carried out in a systematic and institutional vacuum which is filled gradually with the development of transformation. • reformation of different sectors and spheres of the economy carried out at different rates which is occurs due to: a) objective factors (various components of the economic system go trough the reforming with different intensity due to their functional, reproductive and technological features); b) subjective factors (to some extent, the transformation process has selective character, which is connected with both ethical factor of market transformation and the social doctrine of transformation); • macroeconomic measures mainly have features in the pre-stabilization phase of transformation (expansive policy) and in the stabilization and post-stabilization phases (restrictive and moderately simulative policy); • the use of instruments of macroeconomic regulation by the government institutions is slightly faster than the development of the system of transmission of political and economic decisions to the sphere of reproduction as the final object of regulation; • the formation of transmission channels for macrodecisions occurs with different intensity throughout the transformation. depending on the features of industryreproductive structure and nature of market transformation the efficiency of macro-regulatory instruments, including leverages of deficit financing, will be differentiated in proportion to the development of the abovementioned system of impulse transmission. the components of macro policies  – fiscal, monetary and investment policies, which are divided by functional features  – are systematically combined and implemented in interconnectedness with debt policy (which in principle is the part of fiscal policy). the content of the relationship between the debt policy and other types of macro policies can be manifested in such qualitative forms as: direct connection, when certain decisions regarding government debt can be directly attributed to a particular instrument of macro policies; indirect connection, when macrodecisions that lead or do not lead to changes in qualitative and quantitative parameters of the government debt are implemented through the use of debt instruments. the form of the relationship is changing during the process of market transformation. the relationship between debt and overall macroeconomic policies are sustainable and stable, and it is such that leads to the existence of the action field of mutual determination in which the tension increases in the process of macro-economic destabilization and decreases when the macro-system is in the relatively balanced state. 3. the main phase of the debt policy of ukraine the general vector of macroeconomic policies in the process of market transformation, in general, can be divided by stages of transformation (the first stage – liberalization, the second one  – macro-stabilization and the third one  – system adjustments), consequently, there will be a close connection between the content of macro-decisions and the direction of implementation of debt policy (sachs, j., pivovarsky, a., 1996). thus, in ukraine the maintenance of constant structural deficit and preservation of the system of soft budget constraints in the pre-stabilization period against the background of rising prices is seen as an attempt to hold expansionary macroeconomic policies. intensive deficit financing aimed at supporting the demand in the public sector and at the government acceptance of debt obligations of the subject of economic affairs in order to support demand in the state industrial sector reflect an attempt to prevent the transformational recession without going outside the framework of existing model of system organization of reproduction and avoiding the deep liberalization of economic activity. in such circumstances when the transmission channels for macro-regulation impulses have not built up yet, and the micro level, being in a state of adaptation to the market environment, is not able to respond with the supply elasticity to the strong signals of the demand, as well as the implementation of demand potential occurs according to the irrational system of budget expenditures organization and allocation of resources, monetization of the budget deficit, being reflected on the price growth, virtually left the sphere of supply inert to the integration of recovery incentives. growing demand in the public sector within the framework of active fiscal and monetary measures baltic journal of economic studies 149 vol. 1, 2015 that united in the system of deficit financing allowed supporting irrational economic decisions by shifting the inflatory-taxation burden to the society. processes of debt formation, which are subordinated to macroeconomic policy, combined fiscal and monetary measures. this is due to the fact that the expansion of domestic assets of nbu compensates for the deficit of tax revenues (emission for deficiency payments) and due to the fact that other measures were funded with emission which was written-off for government debt. as a result, trying to revive the situation in the real sector the government pursued expansionary fiscal and monetary policy, which is why the inflation explosion strengthened the tendency to unbalance the budget (the olivera–tanzi effect), therefore, the deficit financing switched to the self reproductive basis. given the above, in the initial phase of transformation the debt policy was in direct connection with fiscal and monetary ones and became almost the main instrument by means of which the priority measures of macro-regulation were materialized. the necessity of taking macroeconomic policy off into the mode of stabilization led to the revision of the role of debt policy in the system of government regulatory measures. however, this process has its own characteristics: • in the stabilization period there was an attempt to limit the budget deficiency substantively for the anti-inflationary purpose. however, the fiscal policy in this period can not be considered restrictive; • monetary control levers were subordinated to the objectives of deficit financing in the sense in which the fiscal imbalance and structure of deficiency payments serve as the imperative of the money supply of the central bank which, at the same time, conducted a pronounced restrictive policy using the available monetary policy tools; • taking into account experience of implementation of similar programs with the bretton woods institutions, in general, instrument of macroeconomic stabilization is not so much based on decisions regarding government debt as subordinated debt policy to the objectives of stabilization which eventually determines tendencies in the area of government debt; • implementation of the stabilization policy has fundamentally updated the system of the relationship between fiscal and monetary policy on the one hand and the debt policy on the other. this is connected with the fact that some debt formation factors (including the formation of the stabilization monetary fund and balance of payments support) are directly subordinated to the task of stabilization, and others, which are connected with the development of debt instruments in the market direction, revealed themselves as indirect means of carrying out macroeconomic policy. namely this gives place to the fact that starting from the stage of stabilization in the process of transformation the debt policy measures, with the development of marketoriented processes, retain their direct relationship with macroeconomic decisions, and created the preconditions for materialization of indirect connection with macroeconomic policy. in the world practice there are well-known macroeconomic stabilization programs in which the exchange rate (poland, estonia, and bulgaria) or money supply (ukraine, russia, latvia, and romania) used as the basis (bofinger, p., flassbeck g., & hoffmann, l., 1995). one can assume that in the system of macroeconomic stabilization, in which the exchange rate is seen by the monetary authorities as the basis, it is a necessity to have significant international reserves to prevent speculation in order to maintain its target value. in ukraine the money supply was chosen as the basis in the process of implementation of the macro-stabilization program but nbu started to form significant assets and liabilities in foreign currency namely with the help of credit cooperation with inf. recent data on the structure of the ppg debt in view of repayment currency as at 31.12.2014 is shown in figure 1. usd 44,89% eur 5,30% sdr 10,90% uah 38,32% jpy 0,35% cad 0,25% fig. 1. structure of public and publicly guaranteed debt by currency of repayment as of 31.12.2014 p. indirect connection of the debt policy with the measures for macroeconomic stabilization was materialized in transformation of the structure of the budget deficiency payment. as a result, the creation and emission of market debt instruments envisaged the replacement of nbu emission loans and the formation of domestic debt on a new basis. implementation of macro stabilization, being reflected on the deepening of reforms at the micro level, have an impact on the slowdown of free energy consumption by public sector enterprises through the accumulation of external debt. if in the initial period of stabilization of the economy the dominance of direct connection of debt policy with macroeconomic measures was traced, then in the prestabilization period instruments of government loans are increasingly beginning to be used indirectly in the regulation of macroeconomic processes under the simultaneous preservation of dominant role of the state borrowing for the maintaining of fiscal policy. speaking from the perspective of the implementation of the stabilization doctrine transformation, the fiscal policy would have to have the nature restraining aggregate demand. at the same time, fiscal government decisions in baltic journal of economic studies 150 vol. 1, 2015 the post-stabilization phase of reforms faced the effect of such transition regularity as repeated destabilization of the financial system (described by m. dąbrowski), which determined the dominant role of deficit financing in such a policy. attempts to increase the aggregate demand in the transitional economy using the deficit financing without resorting to fiscal restriction in post-stabilization period are exposed to structural and institutional barriers. a.  siedenberg and l. hoffmann note: “…as kornai noted  … keynesian effects will be actualized only after final formation of a strict budgetary environment: but as long as “socialistic” tendency of government expenditures towards the less productive sectors continues, this effect will be negative” (siedenberg a., & hoffmann, l., 1998). conduction of the soft fiscal policy, which is based on the debt expansion, will enhance the disbalance of reproduction processes without regard to systemic measures which would have positive macro and microeconomic consequences. as a result, channels of impulses transmission, from the point of view of decisions taken within a stimulating fiscal policy, not only do not undergo formation, but, on the contrary, experience growing tendency of their disintegration. the manifestation of crowding-out effect, reinforced by relatively tough monetary policy, appears on the separation of the real sector from monetary and budget ones. the debt crisis in ukraine, the gradual reduction in the primary deficit and the need to ensure a primary budget surplus with the purpose of the suspension of public debt growth imposes objective limits on the expansiveness of the fiscal policy. redistribution of taxes for the benefit of creditors and repayment of the government debt level the demand promotion even in the short term. as a result, the multiplier the effect of which is caused by government expenditure will decrease in quantitative terms. what is more, the need to limit the expansive fiscal policy decisions by actualization and the intensity of formation of the primary surplus will have the necessary character at a time when, in proportion to the deepening of transformation, the economy will hypothetically respond positively to the stimulating impulses from the extension and restructuring of public sector expenditures. the problem of the reorganization of budget expenditures is closely linked to the transformation of direct subsidies for economic agents into the indirect. as some studies show, budget constraints at the micro level become softer in the process of harder budget constraints formation at the macro level in the poststabilization period and in the absence of systemic changes (siedenberg a., & hoffmann, l., 1998). in other words, restrictive fiscal measures at the macro level are losing their effectiveness because the demand in non-productive sectors of the economy is increasing. according to our reckoning the objective limit in adoption of such a policy is the potential of accumulation of the government debt, considering its depletion, and the need to ensure primary budget surplus and certain level of social transfers in the budget. in this sense, the restraint of inefficient demand in the public sector will be compensated by the growth of marginal utility during the consumption of public goods. monetary policy as the part of macroeconomic regulation is released from the direct connection with the debt policy to the extent of strengthening of the stabilization tendencies and reform deepening. the transition to the financing of the budget deficit at the cost of loans on the market, weakening the emission activity of the nbu, has qualitatively upgraded the relationship between growth of the money supply and inflation, which is fundamental for the monetary regulation of macro processes. 4. the main aspects of the relationship between dept and monetary policy the development of the government securities market has qualitatively upgraded the instrumental apparatus of the monetary policy within the framework of the approaching of the debt policy to the market standards. in respect of the aspect of the relationship between the debt and monetary policies one can distinguish the following trends: • firstly, the national bank have got the opportunity to reorganize the system of refinancing of commercial banks by means of introduction of repurchase agreements and lombard crediting in the practice of monetary regulation; • secondly, in the process of development of the secondary market for government debt the national bank have got the opportunity to conduct the open market operations, indirectly influencing the dynamics of interest rates and money supply dynamics. according to some studies (piotrowska, m., 1998), namely open market operations have a considerable impact on the behavior of banks in the system of regulatory measures of central banks in transitional economies of central europe. • thirdly, the establishment of the government securities market has made it possible for nbu to control bank liquidity minimizing the excess reserves, due to this the access to the currency market was limited for the speculative capital, at the same time, the permission for banks to form the part of statutory reserves at the expense of assets placed in domestic government loan obligations has increased the attractiveness of the last, on the one hand, and has eased a burden on reservation for banks, on the other hand; • fourthly, yield rates dynamics on the market of government debt has become a determining indicator of the state of the monetary sector, depriving the nbu discount rate of these properties, at which, however, it was oriented almost to the time of the debt policy changing regarding internal borrowing; • fifthly, liberalization of access of non-residences to the trading on the primary and secondary market of domestic government loan obligations allowed the nbu to expand its international assets and to cover a substantial part of current account deficit of the balance of payments; • sixthly, the formation of reserves through the borrowings of the ministry of finance enabled the baltic journal of economic studies 151 vol. 1, 2015 monetary authorities in ukraine to reduce dependence on the imf stabilization credits, at least in the short term. despite the expansion of operational capabilities of monetary regulation using the transactions on the market of government borrowing, debt expansion has led not only to the contradictions between monetary and fiscal policies, but also to contradictions in the system of monetary management at the macroeconomic level. the abovementioned is the regularity for majority of countries with the transitional economy where there is a real revaluation against the backdrop of public sector deficits, accompanied by a softening of monetary and credit policy (popov, v., 1999). however, the intensity of the manifestation of the abovementioned contradictions is correlated with the intensity of government borrowings. firstly, despite the soft fiscal policy in the poststabilization period, which entailed the expansion of the monetary base of the central bank, the exchange rate policy has been mainly of a stabilization nature. secondly, usually in the transitional economy, and especially in countries where there was a stabilization, where the increase of the money supply was elected as a basis, central banks choose directly monetary base and the exchange rate as the choice of tactical objectives of monetary policy, and when targeting money supply as an intermediate target they take into account the dynamics of the monetary base and the level of the money multiplier. considering the fact that the investments in government securities are virtually risk-free, and their yield rates in the transitional economies are higher than the world one, namely the debt expansion of the government is a factor that triggers a speculative capital floating. ukraine is not the only country that faced this, and the manifestation of this phenomenon occurs with the increasing integration of financial markets in the world transformational systems. for example, in ukraine the intensive supply of domestic government loan obligations on the market attracted capital of the non-residents by pushing the interest rates. this, in turn, increased the demand for hryvnia and made it impossible to conduct the policy of moderate nominal devaluation to support the external balance. in this context, even at the decline in market interest rates foreign capital was attracted by the stable exchange rate, which provides high yield of domestic government loan obligations in foreign currency. the nbu maintenance of a stable, essentially fixed, exchange rate during the introduction of hryvnia was informal and had propagandist meaning; at the announcement of the currency corridor with a slight downward angle the nbu has officially pledged to maintain the stability of the nominal exchange rate. therefore, the inflow of capital into the market of domestic government loan obligations resulted in its excessive revaluation, and trying to ease that process the national bank expanded the monetary base through the formation of foreign assets, which is illustrated very well in fig. 2. the nbu did not try to sterilize the expansion of external assets at the time of inflow of capital into the market of domestic government loan obligations. the capital outflow from the market of domestic government loan obligations while maintaining both tactical and intermediate objectives of monetary policy in terms of exchange rate has automatically retransmitted on the necessity to transfer it into restriction mode. -10 -5 0 5 10 15 20 25 30 % money supply monetary base report of the national bank of ukraine, 2015 fig. 2. the growth of money supply and the monetary base in the years 2013-2015. (year on year change,%) however, the increasing interest rates and the yield on the government debt market could not resist the outflow of capital. formal analysis of the relationship of debt policy with reproductive one allows to state that it will have a direct character with the presence of adequate management model of allocation of the resources mobilized under the loan, in all other cases it will be indirect. in this sense, the first case demonstrates the correlativity of the connection between the growth of public debt, as a consequence of the deficit, and the supply of public goods of consumer or capital nature. in ukraine the growth of public debt does not mediate the growth of productive investment. the consumption of the public sector, concentrated using the tools of deficit financing, have only the current character since the capital expenditure is much smaller than the amount of the deficit. the implementation of capital expenditure should not be based on the standards of industrial society, according to which, during the debt financing of needs of the state society is not impoverished only due to the increase of fixed assets of the economy), but on the basis of trends of the formation of post-industrial civilization. in accordance with the study of v. andrushchenko (andrushchenko, v., 1999) this requires updating the methodology for determining the investment costs by attributing to them the cost of r & d and fundamental researches, investment in “human capital” and so on, the usefulness of which will be consumed by the present and future generations. given the above, the implementation of the debt policy at the macro level should tightly determine the restructuring of micro-level, stimulating the role of the innovative aspects of development in the transformational process. the government expenditures, being in systematic connection with the government borrowing, directly baltic journal of economic studies 152 vol. 1, 2015 affecting a particular trend of consumption and accumulation depending on the structure of budget expenses and accommodation of resources mobilized under the debt. however, government expenditures stimulated by the government borrowings, in addition to its pronounced orientation on the current consumption, is a factor that, according to the study of i. radionova, increasingly affects the state of external balance rather than the state of internal one (radionova, j.f., 1999). the maintenance of nominal exchange rate with the purpose of stabilization and anti-inflation theoretically acts as a factor stimulating the consumption. in addition to the fact that the exchange rate is an impact factor for the dominance of consumption in reproductive proportions it should be noted that it is an essential element in the system of communication of domestic productivity of factors and price level with the international ones. as it is shown in some studies (melamed, m., 1998), at the beginning of the transformation in ukraine the reaction to the low level of labor productivity, expressed in terms of gdp per capita, and to the prices, in comparison with the similar indicators in the usa, was naturally compensated by undervalued exchange rate. 6. conclusions the relationship between the debt policy and measures of macro-regulation during the transformation has the stable and permanent nature, and the use of certain instruments of government debt management is exclusively possible for a definite direction of macro policy on the one hand, and they are the elements in the system of measures for its implementation on the other hand. in the pre-stabilization phase of transformation the debt policy synthesizes the expansive solutions of monetary and fiscal authorities, and a direct link between them mediate the expansion of demand in the public sector and the preservation of soft budget constraints for micro-units; in the stabilization phase the relationship between fiscal, monetary and debt policy becomes more indirect, but are direct in that part of the borrowing purposes, subordinated to the creation of macro-stabilization mechanism of transformation; in the post-stabilization period the role of indirect interconnection between the debt measures and fiscal and monetary decisions increases, but the lack of a deep micro-restructuring and deep systemic and structural reforms cause the deterioration in the macro-economic state of the system, due to which the vector of government borrowing again gravitates toward the field of formation of the mechanism of stabilization. in the poststabilization period the following contradictions are especially intensely manifested: firstly, the contradictions between the expansive fiscal policy and relatively restrained monetary policy, which is why the maintenance of the exchange rate and inflation on the equilibrium level takes place with the higher interest rates; secondly, there is an enhancement of contradictions within the system of fiscal policy (restrictive tax policy and stimulating expenditure one) and monetary policy (in the process of intensive domestic borrowings and limited access to external markets the attempts to keep the money supply and the exchange rate at the target level is impossible and leads to the enhancement of credit restriction). the formation of consumer-oriented reproduction proportions of gdp is one of the consequences of such a situation. references andrushchenko, v. 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(1999) macroeconomic fundamentals of roles between the ministry of finance and the national bank. finances of ukraine, 2, 10-15. sachs, j., pivovarsky, a. (1996). economics of transition. lessons for ukraine. osnovy. the national bank of ukraine (2015). report of the national bank of ukraine. retrieved july, 2015 from http:// www.bank.gov.ua/files/stat.pdf piotrowska, m. (1998). the role of polish banks in monetary policy. global trends and changes in east european banking. krakow. роман рудык особенности влияния макроэкономических мер трансформации на долговую политику государства аннотация. целью работы является исследование взаимосвязи между заемной политикой и вектором макроэкономических мер, которая нашла свое отражение в трансформации структуры покрытия бюджетbaltic journal of economic studies 153 vol. 1, 2015 ного дефицита. также, в статье определены и охарактеризованы три основные фазы долговой политики государства: достабилизационную, стабилизационную и постстабилизационную. проведенный анализ основных аспектов взаимосвязи долговой политики с монетарной. методология. исследование основано на трудах отечественных и зарубежных ученых, занимающихся исследованием данной проблематики. теоретические концепции подкрепляются статистическим данным основных макроэкономических показателей экономики украины. результаты исследования показали, что взаимосвязь между долговой политикой и мерами по макрорегулированию на протяжении трансформации имеет устойчивый и постоянный характер, а использование тех или иных инструментов управления государственным долгом с одной стороны возможно исключительно при определенном направлении макрополитики, с другой – они являются элементами в системе мероприятий по ее реализации. в достабилизационной фазе трансформации долговая политика синтезирует в себе экспансивные решения денежной и фискальной власти, а непосредственная связь между ними опосредует расширение спроса в государственном секторе и сохранения мягких бюджетных ограничений для микроединиц; в стабилизационной фазе взаимосвязь между фискальной и монетарной и долговой политикой приобретает все более непрямой характера, однако является непосредственным в той части целей заимствований, которые подчинены созданию макростабилизационного механизма трансформации; в постстабилизационном периоде роль косвенного взаимосвязи долговых мероприятий с фискальными и монетарными решениями усиливается, однако отсутствие глубокой микрореструктуризации и глубоких системно структурных реформ обусловливают ухудшение макроэкономического состояния системы, из-за чего вектор государственных заимствований снова тяготеет к сфере формирования механизма стабилизации. в постстабилизационный период особенно остро проявляются противоречия: во-первых, между экспансивной фискальной и относительно сдержанной монетарной политикой, из-за чего поддержания валютного курса и инфляции на равновесном уровне имеет место при более высоких процентных ставках; во-вторых, усиливаются противоречия внутри системы фискальной политики (ограничительная налоговая политика и стимулирующее расходная) и монетарной (при интенсивных внутренних заимствований и ограниченного доступа к внешним рынкам попытки поддерживать на целевом уровне денежную массу и валютный курс оказывается невозможным и приводит к усилению рестрикции кредита). одним из последствий такой ситуации является формирование потребительски-ориентированных воспроизводственных пропорций ввп. baltic journal of economic studies 151 vol. 3, no. 5, 2017 corresponding author: 1 department of translation and philology, private higher educational institution “ivano-frankivsk king danylo halytskyi university of law”. e-mail: lena_zl@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-151-156 evaluation of small business influence on the economic development of the region olena zvarych1 private higher educational institution “ivano-frankivsk king danylo halytskyi university of law”, ukraine abstract. the purpose of the paper is to study the role and assess the small business development influence on the economic development of the region. methods. theoretical and methodological foundations of the research draw up the scientists’ works on the problems of economic development of the regions. during the scientific research, a complex of such methods was used: generalization and scientific abstraction – in order to specify the conceptualcategorical instrument and identify characteristics of the small business; monographic – in case of highlighting the scientists’ views on the investigated problems; comparative analysis – when identifying features of small business influence on the economic development of the region; mathematical modelling in economics  – to develop the methodology for the evaluation of small business development influence on the economic development of the region. results. special aspects of small business functioning as a factor of the economic development of the region that accommodates economic growth, the improvement of the product quality and social indicators of development, formation of the middle class, decrease of the unemployment rate, increase of the population living standards are researched. the ambiguity of approaches to the small business definition is established, the characteristic feature of which, in most cases, is the number of employees. however, the small business is distinguished for industrial enterprises and service-oriented companies, based on the structure of management, and also taking into account the self-regulation of small enterprises or their relations to the large enterprises or industrial group of companies. it is established that criteria for the evaluation of the efficiency of small business enterprises can be: increase in the entrepreneurship development rates, minimization of material and social losses of the society, increasing the share of small business in gdp formation, raising the level of social protection of the employee. method of the evaluation of small business development influence on the economic development of the region is proposed, which provides: the allocation of the priority areas of activity of small business entities that have a positive effect on the correspond territory; formation of the aggregate indices representing each of these areas; establishment of connection between the researched areas of the small business influence with the economic development of the region; building-up the compound integrated index based on the results of the correlation analysis parameters that have an effect on the economic development of regions; evaluation of the contribution extent of the small business to the economic development level of each region. practical meaning. it is established that the functioning of small businesses significantly influences the sectoral structure of the territory and the level of the population employment, while the influence on the infrastructure and the ecological state of the region is not so considerable. factors, that determine the efficiency level of the small business functioning and also have a significant influence on the economic development level of the region are singled out, namely: the number of small enterprises; products sold turnover; the number of employed and the proportion of employees in the small businesses. taking into account the specifics of small business, its strong influence on the economic condition of the local territories is substantiated, which in its turn determines the necessity for conducting the complementary measurements involving a local survey of the statistical information, particularly in large cities, mountainous areas, zones of ecological disaster. the methodology for the evaluation of the small businesses functioning at the local level allows us to specify actual reasons that stem the tide of small business in existing locations and to formulate the measures for their elimination. value/originality. on the ground of the conducted research, the conceptual principles of the small business influence assessment on the economic development of the region are proposed, which took the basis of the scientific research on formation effective model sustainable development region. key words: small business, economic development, region. jel classification: d22, r10, o10 baltic journal of economic studies 152 vol. 3, no. 5, 2017 1. introduction small business (sb) is one of the economic development factors and the social welfare improvement. it contributes to the gross domestic product growth, the improvement of product quality, the formation of the middle class, the reduction of unemployment, etc. however, if in the european countries the sb provides up to 60% of the budget revenues, then in ukraine this figure is only 0.18% (britchenko, 2010). as an integral sector of the market economy, the entrepreneurship has the pronounced regional orientation, because the small business enterprises plan their activities primarily based on the needs of the local markets, capacity and structure of the local demand, and the local authority within their power form the business climate. it is obvious that small business should be the factor of the regional level development, influence the economic development of the region. problems of the small business development in the economy of the regions of ukraine are considered in the aspect of the small business development by the specifics of the cities (babkina, 2010), the strategic key factors of the regional economic development (verkhohliadova, cherednichenko, stenicheva 2010); adaptation of small and mediumsized businesses to the economic management under the conditions of a crisis (humanetska, 2010), development of small business in different forms of state financial support (piskunova, 2010). economic growth of the region is also investigated on the basis of the business activities (kovalov, 2014). however, in these works, the support tools by the regional authorities of the small business development are most often studied. w hile the small businesses influence on the development of the region remains, commonly, out of attention. therefore, the purpose of the study is to research the role and assessment of the small business development influence on the economic development of the region. 2. characteristics of the small business the small businesses operation is usually considered at the regional level, since sb often use resources of the local market and sell their products, mainly, on the territory of their placement. the small business orientation to the local labour market closely connects it with the socio-economic conditions available in the region. there is no official or generally accepted definition of sb. more or less recognized is the definition of the european commission, depending on the number of employees, annual balance and turnover (table 1). however, enterprises are not considered sb, if other companies, not belonging to the specified category, own more than 25% of the capital. table 1 small business characteristics as defined by the european commission type of enterprise number of employees annual turnover, million euros annual balance sheet, million euros very small business < 10 and ≤ 2 or ≤ 2 small business < 50 and ≤ 10 or ≤ 10 definitions are used variously in different countries, but in most cases, the allocation of a particular type of enterprise occurs depending on the number of employees. as a rule, it is considered that a small enterprise should employ less than 50 people, although in some countries this figure is less. in some countries, the conditions are different for industrial enterprises and service-oriented companies; in this case, service enterprises tend to be smaller than industrial enterprises. in some countries, there is a distinction between autonomous small enterprises and those associated with a large enterprise or industrial group, or also small businesses are distinguished on the basis of the management structure (for example, the owner is personally engaged in the work of the firm or the enterprise is a family business). finally, the statistical definition of a sb often differs from the definitions, developed for economic policy conducting; for example, although a company with a staff of 60 people may not be related to the sb for statistical purposes, it may have the right to participate in social sb support programs. the main characteristic of the small business is “small” in the sense that the enterprise does not belong to 10 or 20 percent of the largest firms in the market or in the industrial sector. in ukrainian legislation, this issue is regulated by the commercial code of ukraine. the subjects of the small business are (commercial code of ukraine): – individuals registered in the manner prescribed by law as sole proprietors with the average number of employees for the reporting period (calendar year) does not exceed 50 persons and the annual income from any activity does not overgrow the equivalent of 10 million euros, determined by the average annual rate of the national bank of ukraine; – legal entities – economic agents of any organizational form and form of ownership, in which the average number of employees for the reporting period (calendar year) does not exceed 50 persons and the annual income from any activity does not overgrow the equivalent of 10 million euros, determined by the average annual rate of the national bank of ukraine (table 2). small business is a form of business organization that meets certain criteria. this form is legally fixed (commercial code of ukraine), and the characteristic feature of the entrepreneurship is the innovative principles. baltic journal of economic studies 153 vol. 3, no. 5, 2017 table 2 small business characteristics according to the commercial code of ukraine small business micro small number of employees ≤ 10 persons ≤ 50 persons annual income ≤ 2 million euros ≤ 10 million euros 3. the methodology of evaluation of small business development influence on the economic development of the region the main criteria of the effectiveness evaluation of the small business enterprises at present time are (kovalov, 2014): – increasing the entrepreneurship development growth rate as one of the factors of the economic development of the region; – minimization of material and social losses of society; – increasing the share of small business in gdp formation; – raising the level of social protection of employees, etc. to provide them, we suggest using the methodology of the sb development influence evaluation on the economic development of the region (fig. 1). at the first stage of the given methodology, at the regional level, we highlight the priority areas of the small business entities activity, which have a positive effect on the relevant territory. such approaches can be determined by each self-government individually depending on the characteristics of the territory development and the security level of the different approaches to services. at the second stage, in order to quantify the sb influence on the regional development, it is necessary to select the whole complex of indexes that would represent each of these approaches. the state statistics service of ukraine provides a number of statistical indicators that in one way or another characterize this phenomenon and can be used as resultant, or factorial features. by the logical analysis of the state statistics materials, the following relative parameters characterizing the development of small business in the region for each of the priority guidelines were selected: 1. sectoral structure of the territory  – the concentration factor; the number of small businesses per unit employed in the sb in the region; the share of turnover of sb in the total turnover of enterprises of the region. 2. local budget  – local budget revenues per person; the share of carrying-out of works/services for the public funds by the sb to the total quantity of such orders in the territories. 3. innovative potential of the territory  – the share of sb that use innovations in the total number of sb. 4. the infrastructure of the territory – the share of sb providing services to the subjects of the territory in the total number of sb; the share of entrepreneurs involved in the construction and repair of roads and landscaping territory in the total number of entrepreneurs. 5. attractiveness of the territory – the share of goods and services exported (imported) by the sb, in the total amount of foreign trade turnover of the region; the share of investments in the sb in the total volume of investments in the region. 6. policy of the region  – the share of sb in the total number of enterprises taking part in the political life of the region; the share of public associations of sb entities • determination of the priority guidelines of the small business influence on the region’s development • formation of the aggregate indicators that represent each of these areas 1 2 3 • establishment of the connection between the investigated areas of the small business influence and economic development of the region on the basis of the coefficients indicators of the pair correlation 5 4 • construction of a consolidated integral index based on the results of a correlation analysis of parameters that affect the economic development of regions • the assay of the small business contribution degree to the economic development level of each region fig. 1. stages of implementation of the methodology for small business development influence evaluation on the economic development of the region baltic journal of economic studies 154 vol. 3, no. 5, 2017 in the infrastructure of regional small business support. 7. ecology of the region – the share of sb involved in environmental protection activities in the total number of enterprises. the amount of sb financing in measures of environmental protection. 8. living standards of the population of the region  – the share of employed in sb in the total number of the employed population of the region; the average monthly salary of the sb employee in comparison with the average monthly wage in the region; the share of hired sb employees to the total number of employees in the region. in order to identify the link between the investigated areas of influence of sb with the economic development of the region, it is necessary to calculate the coefficient of the pair correlation of indicators, which characterize the functioning of small business and the level of economic development of the region – this is the third stage of the methodology. to evaluate the extent of the sb contribution to the level of economic development of the region, it is necessary to construct a consolidated integral index based on the results of the parameters correlation analysis, influencing economic development of regions (fourth stage). the calculation of the integral indicator of the sb influence on the economic development of the region involves the implementation of the several successive stages: 1. parameters normalization influencing the economic development of the regions to their specific average value: p x x ir ir io = , where pir – normalization coefficient; xir – the value of the і-th parameter for r-th region; xiî – the value of the і-th parameter for the country as a whole. 2. calculation of the integral index of the sb influence on the economic development of the region as the average geometric normalized parameters: d pr ir i n n =       = ∏ 1 1 , where dr – an integral indicator of the influence of the level of sb development on the economic development r-th region; n – the number of normalized coefficients. the presented integral index is a dimensionless value whose level is not limited by a certain interval. the reason for this is the calculation of the index on the basis of relative indicators, the value of which can many times exceed or be many times smaller than the value of a certain average level. the larger the value of the integral indicator, the greater the extent of the sb development influence level on the economic development of the region. thus, the sb functioning evaluation, conducted with the help of selective relative indicators, will characterize the extent of the sb contribution to the level of economic development for each region separately – the fifth stage. the empirical research base is presented by statistical materials of the state statistics service of ukraine characterizing the development of small business and economic development of regions of ukraine for 2010– 2016. as a result of correlation analysis as the key indicators influencing the economic development of the region, for the calculation of the integral indicator were selected: – the number of small enterprises per unit employed in sb in the region; – the share of the products sales volume by the small business in the total amount of the products sold in the region; – the share of the works/services execution for the public funds by the small business to the total number of such orders in the region; – the share of the non-governmental associations of sb entities in the infrastructure of regional support for small business; – the share of employed in sb in the total number of the employed population of the region; – the share of the sb employee to the total number of employees of the corresponding region. 4. applied aspects the results of calculations of the consolidated integral index in the context of the regions of ukraine for the period from 2010 to 2016 showed that the largest values of the small business development are achieved in kherson, chernivtsi regions – the value is higher on the average over 1,5 (table 3). moderate indicators of small business development  – from 1,0 to 1,5  – are received for such regions as kirovohrad, ivano-frankivsk, odesa, ternopil, chernihiv, zhytomyr, rivne, khmelnytskyi, mykolaiv, sumy, cherkasy, volyn, zakarpattia, sevastopol city, ar of crimea (for the period of 2010– 2013). all other regions have a low potential for small business development. this is due to the inadequate use of the small business development factors. the obtained calculations allow us to conclude that the greatest influence of small business on the economic development of the region is observed in rivne region and sevastopol city. the weak influence of small business on the economic development of the region is inherent to zakarpattia, khmelnytskyi, ternopil, donetsk, zhytomyr, and cherkasy regions. the insignificant contribution of the sb to the economic development of the country in the whole. to determine the specific reasons for the existing differentiation of the indicators of regions of ukraine, it is necessary to conduct a more in-depth study aimed at identifying the additional factors influencing the development of small business. it should be noted separately that the impact of small business on the level of economic development of ukrainian regions remains practically unchangeable. for the period from 2010 to 2016, the investigated baltic journal of economic studies 155 vol. 3, no. 5, 2017 influence on the average in ukraine remained on the same level. 5. conclusions thus, during the research, it is revealed that the functioning of sb has a different influence on the economic development of the region. the small business has the greatest influence on the sectoral structure of the territory and on the employment level of the population, and the smallest – on the infrastructure and the ecological state of the region. as factors determining the efficiency level of the sb operation, as well as those that have the greatest influence on the economic development level of the region, the number of small enterprises is allocated; the sold products turnover; the number of employed and the proportion of employees in sb. it should be noted that taking into account the specifics of small business, the strongest influence it has on the economic climate of the local territories. in this regard, for a more in-depth study of the ties between the degree of the small business development and the economic development level of the territories, it is necessary to carry out the additional measurements using the local survey of statistical information (for example, separate large cities  – regional centres, mountain territories, zones of ecological disaster, etc.). for this, it is necessary to determine the specifics of the small businesses functioning at the local level and to develop appropriate methodological tools for its evaluation. the development of this methodology allows us to define specific reasons that stem the tide of small business in existing locations and to work out the actions for the resolution of the existing problems in this sphere. table 3 consolidated integrated index of the small business development influence assessment on the economic development of the region region 2010 2011 2012 2013 2014 2015 2016 autonomous republic of crimea 1,28 1,27 1,25 1,26 vinnytsia 0,89 0,92 0,94 0,95 1,00 0,97 1,09 volyn* 0,96 0,99 0,96 0,98 1,08 1,07 1,05 dnipropetrovsk* 0,96 0,96 0,95 0,92 0,65 0,69 0,72 donetsk 0,64 0,62 0,64 0,64 0,62 0,62 0,68 zhytomyr 1,03 1,03 1,03 1,02 1,27 1,11 1,05 zakarpattia 1,04 1,02 1,03 1,00 1,01 1,01 1,06 zaporizhzhia 0,76 0,78 0,77 0,77 0,64 0,65 0,64 ivano-frankivsk* 1,37 1,37 1,35 1,29 1,50 1,52 1,51 kyiv 1,00 1,02 1,01 0,99 0,84 0,86 0,86 kirovohrad 1,24 1,28 1,27 1,24 1,41 1,50 1,56 luhansk 0,91 0,90 0,92 0,93 0,90 1,02 1,02 lviv* 1,02 1,00 1,00 1,00 0,89 0,73 0,80 mykolaiv 1,02 1,00 1,03 1,01 1,10 1,12 1,07 odesa* 1,34 1,36 1,39 1,39 1,14 1,17 1,21 poltava* 0,80 0,81 0,81 0,80 0,93 0,93 0,92 rivne 1,11 1,11 1,14 1,12 1,20 1,26 1,25 sumy 1,09 1,09 1,10 1,09 1,05 1,07 1,06 ternopil 1,28 1,20 1,14 1,14 1,14 1,18 1,36 kharkiv* 0,87 0,89 0,88 0,87 0,61 0,62 0,65 kherson* 1,28 1,32 1,39 1,39 1,72 1,78 1,67 khmelnytskyi 1,23 1,24 1,23 1,22 1,23 1,23 1,23 cherkasy 1,06 1,06 1,08 1,08 1,05 1,05 1,06 chernivtsi 1,47 1,42 1,43 1,41 1,58 1,63 1,64 chernihiv* 1,29 1,30 1,33 1,33 1,16 1,19 1,15 kyiv city* 0,72 0,73 0,71 0,72 0,41 0,41 0,38 sevastopol city** 1,35 1,44 1,51 1,59 * – without the indicator: “the share of the products sales volume by the small business in the total amount of the products sold in the region” ** – without the indicators: “the share of the products sales volume by the small business in the total amount of the products sold in the region” and “the share of the works/services execution for the public funds by the small business to the total number of such orders in the region” baltic journal of economic studies 156 vol. 3, no. 5, 2017 references: babkina, n. і. (2010). rozvytok maloho pidpryiemnytstva turystychnoi sfery v kurortnomu misti [small business development of the tourist sphere in resort city]. derzhava ta rehiony, 4, 4-6 [in ukrainian]. britchenko, i. h. (2010). vplyv maloho biznesu na rehionalnyi rozvytok [the influence of small business on regional development]. naukovyi visnyk poltavskoho universytetu spozhyvchoi kooperatsii ukrainy, 4(43), 15-18 [in ukrainian]. verkhohliadova, n. i., cherednichenko, o. d., stenicheva, i. b. (2010). stratehichni vazheli rehionalnoho ekonomichnoho rozvytku (na prykladi dnipropetrovskoi oblasti) [strategic key factors of the regional economic development (on the example of dnipropetrovsk region)]. derzhava ta rehiony, 4, 29-32 [in ukrainian]. small and medium-sized enterprises (smes) definition by the european commission. ec.europa.eu/growth/smes/ business-friendly-environment/sme-defini-tion_en. retrieved from: http://ec.europa.eu/growth/smes/businessfriendly-environ-ment/sme-definition_en hospodarskyi kodeks ukrainy [commercial code of ukraine]. zakon3.rada.gov.ua/laws/show/436-15. retrieved from: http://zakon3.rada.gov.ua /laws/show/436-15 humanetska, v. (2010). adaptatsiia maloho ta serednoho biznesu do hospodariuvannia v umovakh kryzy [adaptation of small and medium business to the economy management under the crisis conditions]. visnyk kyivskoho instytutu biznesu ta tekhnolohii, 2(12), 13-15 [in ukrainian]. kovalov, а. і. (2014). ekonomichnyi rozvytok rehionu na osnovi aktyvizatsii pidpryiemnytskoi diialnosti [economic development of the region on the basis of the entrepreneurial activity activation]. odesa: atlant, 178 p. [in ukrainian]. piskunova, о. v. (2010). modeliuvannia rozvytku maloho pidpryiemnytstva za riznykh form derzhavnoi finansovoi pidtrymky [modeling of the small business development in different forms of state financial support]. finansy ukrainy, 8, 115-124 [in ukrainian]. baltic journal of economic studies 9 vol. 1, no. 2, 2015 formation and implementation of public needs as a measure of improvement of society territorial organization larysa bogush1, institute of demography and social studies of the national academy of sciences of ukraine, ukraine abstract. the purpose of the paper is to study the relationship of the formation and implementation of the range of social needs with the evolution and activity is focused on the improvement of the territorial organization of society. methodology of research involves: the substantiation of the origin, factors for the development, approaches to classification, functions of public needs in the development of state and society; the study of the socio-humanitarian space of formation and realization of the needs of individuals, functional and territorial communities, as well as a mechanism of their satisfaction at the national and spatial scales (on the example of ukraine – a country with a developing economy, wherein the decentralization of powers in the field social welfare and consolidation of local communities are implemented at present). results. summarized and proved the patterns and trends of development, evolution, transformation of needs of social groups, functional and territorial communities of the population, as well as the relationship of these processes with the economic and institutional capacities and mechanisms of satisfaction of the spectrum of social needs in consideration of peculiarities, achieved and desired parameters of development of productive forces, human and other components of the social and humanitarian potential, cultural features of the society. the development of the institutional, functional and territorial organization of society, in fact, is a process of formation and implementation in the range of human needs (individual and collective), which is estimated with the factors, conditions and mechanisms of their satisfaction, including through the dynamics of the positions of the spectrum of social groups and subjects concerning the required amount of vital goods consumption. practical implications. social and political transformation stimulates the establishment of the multidirectional formation in the ukrainian economy of public goods, combining public and private (private commercial and non-profit) enterprises, institutions, organizations, that: provide services to the various strata of the population, which normalized within social guarantees volume and quality (based on public procurement, temporary contracts and corporate contacts, supported in the case of fulfillment of the conditions of resource intensity, the volume of budget financing, quality, terms of providing goods and services); are coordinated by budgetary and fiscal policy. significant factors of development of local communities and improvement of the investment climate in the regions are: the provision of social mobility (basis – an adequate level of personal incomes, the implementation of state policy for employment creation and assistance in the household arrangement of hired employees); socio-economic activation of the population (through the promotion of entrepreneurship, self-employment and innovation activity of business entities, labor migrations, improvement of professional and qualification potential of labor resources). value/originality. regulation of the organizational and economic mechanism of implementation of legislative guarantees for consumption of socially necessary services, satisfaction of the individualized needs of the ukrainian population, will contribute to: the improvement of the territorial organization of social infrastructure in accordance with the goals of the reform of administrative structure and enhancement the of the social powers of local budgets; increase of the effectiveness in processes of reproduction and the capitalization of socio-humanitarian potential. key words: public needs, social capital, welfare economics, public guarantees, socio-humanitarian space, territorial organization of society. jel classification: d6, e61, h4, h54, i3, o15 corresponding author: 1 department of social infrastructure, institute of demography and social studies of the national academy of sciences of ukraine. e-mail: bogush_lg@ukr.net baltic journal of economic studies 10 vol. 1, no. 2, 2015 1. introduction social needs in their individual, collective, territorial and public measurements are permanent leading factor and indicator of socioeconomic development (including aspects of reproduction and capitalization of sociohumanistic potential, providing and improvement of organizational and economic mechanism, social services and protection of population). the reason of rapid development of social security system and social insurance, fast accumulation of investments for realization of above said functions and for the world leading countries from the second half of xx century (as well as expansion of welfare state idea with characteristics of relevant quality of life and social security of citizens) is seen in necessity of increasing legitimacy of development model realized by present-day leaders of global economy. in particular, it is about versatile assistance to the management structure based on the latest technologies, and the industry focused on the mass consumer (el’yanov, 2003). transformation human and other components of the social capital into the key factors of socio-economic progress of the countries at industrial and post-industrial stages of development confirmed the importance of social protection in state policy of ensuring stable growth rates, and components providing of national security (in particular, to provide public consent). it’s based on the concepts of socially-oriented market economy and the social state, policy which is directed on the creation of allround conditions of person development and realization of its potential for worthy life providing with own hands. the social security is understood as legislatively recorded array of the social benefits which are undertaken with the state to make available to the citizens. the contents and basis of an institutionalizing are seen in social needs of the person as biosocial creature, exponents’ satisfaction of which at all levels of society organization (individual, family, collective, all-civil) and resettlement (local, regional, and nation-wide), define quality of life. taking into account the motives for self-development, leading world states pay essential attention to regulation of labour-resources providing of local management systems, increasing of their functioning efficiency in a way of innovative realization potential of economically active population and widening of its productive employment sphere, supporting of social (including interethnic, interfaith) stability of territorial communities (shlihter, 2002; goffa, 2003; lexin, gritsyuk, lexin, 2005). in a way, the goal of the paper is the investigation of process interrelationship of formation and realization of a social needs range with evolution and purposeful activities for the territorial organization improvement of society. it presumes: justification of origin, development factors, approaches to classification, functions of social needs for development of the state and society; study of sociohumanistic space of formation and realization of individual needs, functional and territorial communities, and also the mechanism of their satisfaction at the nation-wide and spatial levels (in particular, on the example of ukraine as emerging economies). considering interdisciplinary categories, social needs, social capital, formation and realization of socio-humanistic space, the methodology of research which assumes generalization and coordination of the array of socio-anthropological, sociological, socioeconomical, economical and institutional, politological, culturological approaches which explain regularities and tendencies of formation, evolution, transformation of social groups requirements, functional and territorial communities of population, and also economic and organizational opportunities, mechanisms of their satisfaction taking into account features are reached of parameters in development of productive forces and sociocultural environment of society (bogush, 2013). 2. origins and functions of social needs in state and social development the social needs of individual and population in present world are dual derivated of their biological and socially generated components and also above mentioned conditions and factors of formation and development of human populations and state society, supranational administrative formations. thus, social requirements are based first of all on the original (primary) human needs with formation and changes of interpersonal, family, collective, public relations and interactions of individuals, social groups and layers evolve into the array of derivative (quasi) needs are defined with components of subjects behaviour which individually motivated and socially caused. thus certain transformation, conditioned with standards of behaviour and features of interactions in society, other cultural influence and ideological factors continue to develop and suffer with the contents and mechanisms of satisfaction and natural need of individual. according to socially-economic approach, the main part of already mentioned needs (except for especially physiological), should be classified as the block of primary bio-social requirements connected with material and domestic providing, achievement and maintenance of life safety and environmental activity and also reproduction as social protection frame and translation of knowledge and experience within generations. in the context of civilized development, social needs (first of all in organization of collective life, self-affirmation and implementation of leader functions, knowledge, amateur performance and self-realization) are considered as the highest goals of society activity which form its own values, in other words, abstract ideas which realize public ideals and thanks to it serve as a benchmark (sydorchuck, kozak, 2008). social values are conviction about goals that should be achieved which wide known and recognized in society or social community and also ways and resources for their realization (pavlychenko, litvinenko, 2002). therefore the basis of formation and regulatory function of valuable orientations of personal, establishment of which baltic journal of economic studies 11 vol. 1, no. 2, 2015 are an inherent aspect of all human socialization. hierarchy of social and community values (the main categories include: theoretical, economic, political, law, moral, social, esthetical, and religious) defines the hierarchy of personal values and significantly influences on the history of society. founding on its own values and valuable orientations, society, state, nation or certain social group create the standard of behaviour as requirements which are obligatory in a way of performance for life regulation and effective society functioning, adjustment of necessary members interaction (shchokin, popovich, karmazina and others, 2000). the social norms are produced as public institute and authorities with the state are presented with constitutions, laws, the state industry, construction, sanitary standards and standards, instructions and other. in the specified context (including aspect of set in life support systems) it is expedient to consider development of society, its functional and territorial organization as history of formation in a circle of personal needs, factors, conditions and mechanisms of their satisfaction and also with dynamics of social subjects’ positions of the vital benefits volume, rather necessary for consumption. in a way, primary and derivative needs of individuals and social groups which form society, substantially comprise signs of mental structures and other properties of these subjects, significantly influence on architecture, the purposes and organizational and economic mechanisms of social and state functioning (thus, such institute based on the agreement of a certain territorial community concerning the acceptable forms of the relationship and interaction of all its groups and layers). considering requirements of own safety, a territorial community, the state and in general society process must regulate of formation and hierarchization of each their members’ and social groups needs which appear in the course of education, work, communication and creativity in a certain cultural and social environment in process of acquisition in individual life experience and understanding of the socio-historical facts and regularities. the reference point provides rationing and control of corresponding process needs satisfaction for the established socially necessary volume and on the political and development stability. social component (characteristics of human resources; estimates of a demographic situation and criminogenic risks; indexes of labour and educational capacities of the region, its consumer market and communication infrastructure) was approved in estimate techniques of investment appealing of the countries and regions long ago, supplementing the indicators resulting from a level of development and efficiency of the human capital using (an assessment of economic development and potential, the characteristic of a level of development of the market relations and business, including a role in these processes of local authorities, tax system, financial sector and potential, market infrastructure) (umanets, 2006). the leading selection criteria of the “problem” regions first of all needing the help to the central power in the sphere of creation of incentives of self-development (along with degree of development of production) are admitted the unemployment rate and prospects of expansion of employment (schlichter, 2002; goffe, 2003; leksin, gritsyuk, leksin, 2005). 3. classification, evolutional factors of social needs origin and evolution of human needs and society (as the highest level of self organization of populations’ living at the certain territory based on the general population origin and also community of emotional, language, communicational, professional, legal, and spiritual types of interaction (boronoev, smirnov, 2003) which found similarities in a list of such models and their classification. these models (a. maslow, zh. godfrua, b.v. prykin, f. hertsberg, d. mckleland, k. alderpher and others) are fully coordinated and interrelated don’t looking at the difference in in basic types of creation and level of generalization and considering the principal of primary needs transformation (tarnavskaya, pushkar’, 1997; meskon, albert, hedowry. 2000; khramov, bovtruck, 2001; kolot, 2002; hordey, 2003; oganyan, palamarchuk, rumyantsev and others, 2003). beside with actualization of the highest level needs in the process of full satisfaction in the lowest their types, mentioned above classification models of social needs, help to make such conclusions: – full satisfaction of the lowest level needs, connected with different aspects of life organization and providing of life security isn’t the exceptive condition for formation and needs satisfaction of higher level (intellectual, self realization and moral development). – system of human needs in society forms and realizes with inseparable entire and algorithm in post-industrial societies and as a rule it doesn’t correspond with on individual and collective (communal) levels of stable hierarchy and allow possibility about existence of some dominate needs; – actualization of certain needs in the process of their variety satisfaction can be realized according not only to the certain socially accepted group or hierarchical algorithm family but also to the dependence of dynamic, technical life conditions, material possibilities and morally-ethnical postulates of person relatively to gradation and needs satisfaction. – the influence on value marks, life and development of personal needs of lower level makes stronger with existence in society objective and subjective difficulties for needs satisfaction of the higher level. – to the objective needs are included first of all difficulties generated of social system with the attributes of property separations’ deepening and formation of divisional society which is characterized with low-paid job for most wage and self employed workers and also a list of limitations in ensuring of vertical social mobility of population and baltic journal of economic studies 12 vol. 1, no. 2, 2015 territory mobility of legally employed. as the result the prorated layers of workers and as a particular can’t fully satisfy needs in competitive able education, creasing of qualification and retraining, carrier development; – technical and technological features of countries development, in the periods of social and economical irregularity, crisis of researches and natural cataclysms and others. subjective difficulties are connected with psychological features and individuals and social groups which are derived from moral and ethical doctrines don’t looking at level of material prosperity which are dangerous with consumer-oriented mind attitude, nepotism, decrease in requirements, lumpenization and asocial marginalization and as the result – degradation of development potential of society in the format of existing civil and political order. considered above regularity of origin and evolution of personal and social needs and also ways to their classification may be generalized with the help of hierarchical model which includes the next kinds of needs classified in order of intensification of their evolution and historical development of human and society: – physiological, material and common needs (food, drinking, housing, habitat of acceptable quality, satisfaction of other physiological and domestic needs including concerning of a reproduction and the organization of a desirable lifestyle) – needs of security (in feeling of the individual security and communities to which it belongs, in predictability of personally significant spheres and directions of activity, in health); – needs of acquiring and straightening of social status (in a personal inclusiveness in society and certain community, in adequate perception around people, including in the family relations, career, leadership, etc.); – needs of adoption (achievement of success and competence, approval and respect); – informative needs (in knowledge and abilities, in research, understanding and under-standing, in accumulation and the analysis of experience); – moral and religious and esthetical needs (in harmonization of the personality, society and environment, in particular in aspects of the organization of conditions and a way of life); – needs for self-realization and self-updating (in the fullest realization and understanding of incentives of selfdevelopment of internal creative, professional and spiritual potential of the personality, in understanding of social responsibility) considering the hierarchy and content of social needs array of human, social groups and whole society in general which socially-economic context must be outlined: – on a functional purpose in the context of arrangement of activity and realization of system of values – material and household and welfare; – according to historically developed mechanisms of requirements satisfaction – public (in their structure – general and socially necessary, formed and realized at the nation-wide, collective and individual levels), and also private; – on emergency for the individual and social groups  – daily, periodic and incidental (it, in turn, created classification of consumer goods and services with the specified demand frequency, the territorial organization of the related economic activity and infrastructure). the main factors of development and actualization of social needs are: – scientific-technological (first of all state level features of scientific-technological progress, dynamic of modern circles and technically-technological statute); – target and productive parameters of social development macrosystem (features and effective parameters of differentiation, including division with to property signs, level and ratio of the monetary and cumulative income, volumes of consumption of socially necessary material and household and welfare goods and services; education level, social and labour mobility of the population in a regional section; the contents and evolution of approaches to determination of volumes and structure of a state order for training of workers and experts, level of compensation, privileges and social benefits, to the taxation of labour and investment incomes, rendering primary and specialized medical care, provision of housing is low and the middlepaid of layers, the organizations of access to information sources, spiritual and historical and cultural property); – culturally-ideological parameters (way of life of social groups and layers; the inherited and apprehended family, public and religious installations of worthy socioeconomic and household activity; the content of ideologies of national and ethnic self-identification of the population in aspects of the tolerant attitude towards representatives of other people, cultures and religions, opportunities and means of assimilation in society, including the acceptable types and mechanisms of economic activity and cooperation). in globalization conditions of socially-economic processes of states functioning and national management system (as developing and which got the post-industrial level of developing) to main evolutional tenders of needs should be applied in the aspects: in aspects civilization and society-creativities: – recognition of people equal rights on physical, intellectual, spiritual development and socially useful self-realization, and also a number of basic freedoms of the personality that provides creation of opportunities for achievement of a pyramid of requirements by each individual of top under an indispensable condition of fuller satisfaction of their basic types in material and household arrangement and ensuring safety of the environment of activity; – globalization of developments, substantial filling and an hierarchization of needs for borders of the countries, their political and economic associations, and also on a global scale along with an individualization of requirements (first of all the highest); baltic journal of economic studies 13 vol. 1, no. 2, 2015 in aspects of political, organizational and economic: – the constitutional recognition of the state concerning obligations their satisfaction in so-called socially necessary volume, formation of the contents and rationing of the corresponding guarantees that provides in particular standard and legal and target financial security (including standardization and control) activity in the sphere of production of goods and services, and also the development and improvement of the territorial organization of infrastructure intended for implementation of these obligations; – realization of ideologies of filling of requirements of the highest levels (informative, in achievement of professional competence and the social status, satisfaction with parameters of personal realization) the contents consolidating society, derivatives of that are maintenance of political stability and national security, formation of actual social security systems, creation of potential of self-development of territorial communities, socially responsible orientation of business; in aspect production and technological: – orientation to industrial technologies of satisfaction of requirements along with transition from mass to the individualized consumption of the corresponding goods and services are organized thanks to marketing of their markets (as to the integral element of addressing of the state social security and profitability of business activity), to development of interactive forms of satisfaction of requirements (including trade catalogue, electronic and exit, remote services of education and medical consultation); – socially-conscious optimization and reduction of material and household needs for interests of decreasing resource-and power consumption of economy, mitigation of negative anthropogenic effect on environment. 4. socio-humanitarian space of social needs realization the space of social and human (collective and interpersonal) relationship and connections or sociohumanitarian which is localized in administrativelyterritorial separating with array of immanent and biosocial human nature and popularity of relationship within main social institutes families, territorial and functional civil communities, state economy, the (i.e. between individuals, their groups and associations on status signs and the place of residence, subjects of managing and their associations, institutes of rationing, management and control of all activities’ spheres) concerning distribution and consumption of the benefits are created in a social production (material and non-material), reproduction, improvement and involvement of productive forces of the individual in economic activity (first of all her motivations and remuneration, external and in particular social efficiency). the purpose of these relations is formation and maintenance is wished (i.e. recognized expedient and rational, considering the available natural, material, human resources and reproduction conditions) social hierarchy, level and quality of life, the spatial organization of the environment of activity of society, and also level of coherence of interests of nationalities and faiths in regional, general and supranational scales (bogush, 2010). the material basis of establishing and functioning of socio-humanitarian space are such public institutes, objects, their multipurpose networks and systems which for achievement, an institutionalizing and expansion of powers of authority, satisfaction of material and nonmaterial requirements, an exchange of products of managing and interaction (with maintenance of certain levels of communication, trust and consent), accumulation, an exchange, transfer and converting of knowledge, cultural experience and heritage, promoting of beliefs and creativity are created by individuals, collectives, territorial communities, other communities (voluntary associations) of compact accommodation, conducting, economic and culturally-religious activity. in historical development socio-humanitarian space of compact living and housing in concrete human population, the list of steps happens from the array of hierarchicallyhumanitarian relationship in family and culturallyreligious community to the system of social relationship about involvement into the production, reproduction, improvement and ensuring of full realization of production possibilities of human. the certain organization of distribution and consumption, forms the basis of above said processes which can satisfy the human needs and also the practice of realizing and participation to this ethnicallyculturally-religious and socially-political heritage and traditions. it considers the deepening of connections between social institutes, ensuring of mechanism stability and tendencies for their interactive, complex of correspond infrastructure about functional and territorial indicators or with other words the creation of balanced system of social, communal and interpersonal relationship and connecting which defines and leads all spheres of human life. the synergetic effect of formation and developing of socio-humanitarian space (which made stronger or fainter the existent connection and regularities of its functioning is brightly showed in demographical and ethno-national processes. the features of all-national identity of population in certain country in general and concrete citizen are provided with its’ historical experience, subjective realizing, dynamic of material position, self-realizing of social status and other circumstances which may be generalized with level of life satisfaction (horshkov, tikhonova, 2008). demographical and ethnographical components of stability and balance of socio-humanitarian space it’s useful to under-stand as protection of living process and endless, natural and social reproduction of generations as representatives of title nation and racial minorities which are populated in certain region (country); their improvement is connected with increasing of life duration; increasing of demographic reproduction efficiency, getting a balance between array of national interests and baltic journal of economic studies 14 vol. 1, no. 2, 2015 needs, ensuring of ethnographic and gender tolerance and equivalence (nikitenko, solodovnikov, chernysh, 2008). pointed main features of socio-humanitarian space tell about opportunity of complex research about content, connections and interactions of its subjects, mechanisms and forms of organization in territorial and time aspects which in particular, appear in such important characteristics of certain territory (local system of resettlement, region, district, etc.) as: – level of its saturation with array of material elements which form and ensure of functioning of sociohumanitarian space (objects and networks of organization non-production life with resource potential such as main founds, financing and staff ). this level is showed in indicators of their territorial resettlement (namely – differentiations, concentration, uniformity of placement in the territory of the population and economic activity on satisfaction of his material and household and welfare requirements), which first of all depend on the organizational form of management and resettlement. – level of connectedness, in institutional and functional structures of socio-humanitarian space in local system of resettlement in region or country in territorial and time aspect (complexity and quality of nomination and regulation of activity about realization and improvement of human production possibilities, distribution and consumption of material and non-material goods which were created in social production and satisfy an array of its’ needs; level and conditions of horizontal and vertical social mobility); – socially-economical results of activity for satisfaction in materially-economic and socio-cultural needs; which are used for estimating of state efficiency. institutional characteristics of socio-humanitarian space are provided with qualities and dynamic of main social institutes: – economical (in particular property and coordination of management activity) – legal, including dominate institute of recourses circulation such as material, financial, political and others thanks of which infrastructure satisfies the non-production social needs (in the same time the legal institutes service as indicators of stratification and status structure of society); – cultural (in the realizing of ways to institutionalization of moral, ethic, ideology as the basis of formulation and development of cultural subsystem of socio-humanitarian space). 5. mechanism of social needs satisfaction at the national and territorial level actual problems in social ensuring of territorial community in the conditions of transitional economy is the disbalance of correspond legislative guaranties, level of their budgets and non-state financing, incompleteness and contradictions in normative base of resources supply for activity of satisfaction in necessary materially-economic and socially-cultural personal needs and regional communities, low efficiency of realization mechanism. the notions of social (socially needed) and private goods and services are the principal basis of mechanisms of legal power spreading in state affairs with the satisfaction of different individual, communal, social levels. the commercial goods are created with individual and corporative producers for satisfaction of personal needs or their voluntary communities and realizing on the free market in correspondence with connection of supply and of solvent demand. in a way, the production volumes of social goods which are used for common (paid and free) consumptions and are set with the affairs of state power in dependence on estimation of correspond social needs which is fixed in legislative guaranties as the result of historical consensus of social groups and layers (the coordination of state and social positions at the modern staged in democratic countries) with the reason of conditions about social association (state) and ensuring of stable existence. market regularities of supply and price creation of social goods must to be connected only with correspondence of production spending and volume of given social (include budget) resources (knyazev, 2008). the ensuring of legal order, road building, arrays of ingénue networks and infrastructure (which is needed for normal living of society) are especially-social goods (in mean of undivided by using) (elyanov, 2003). the list of socially needed goods may be defined with the actual social guaranties and legislatively formed standards of their realization (to rational and minimal norms) and also with the directions of state interference in market economy with the purpose of providing of stable management activity, compensation of problem and negatives of free market. in such way they include: – development of education (first of all the rapid development and providing of common and wide access to high and secondary education), medical care (include the balancing of informational streams between producers on the market of medical services and their consumers), science and culture which are important for wealth existence of population, improvement of social capital components. providing of basic (fundamental) of scientific researches, improvement of transport and communicational infrastructure with the goal of getting the multiplication effect with the means of technological innovations and improvement of production quality in different fields; – antimonopoly regulation in production and distribution of energetic, transport and other communicational services; – system of social transfers, donations and subsidies; – special protection within non-inflation regulation (elianov, 2003). market theory of production location (in particular, the theory of central places and transactional analysis) which is the principal for methodology of stable social development of regions and territory communities admits goods and services distribution by the bargained and nonbargained. baltic journal of economic studies 15 vol. 1, no. 2, 2015 goods of long-term using, self fabricated materials, services in the field of r&d (research and development), medical care, education, banc activity, tourism and among goods and services of the second category – the land and real estate objects, services in realization of goods, primary and secondary education, part of utilities, except for gas supply and the electric power, and also communication services, a number of credit and medical services) that are first goods which may be transported from sender to recipient (orekhovsky, 2008). with the opportunity of transportation, this separation is based on the differences in the methods of price creation if in the correlation of bargain goods and services form prices which are negligibly vary within the country (but close to worldwide prices in the conditions of open economy), so prices on non-bargain goods and services are isolated within local markets and that’s why the interregional prices between differs in several times (by the world comparing – in several dozen times). thus, benefits are generated with the supply of bargain production which is made with the main management subjects – the participants of the territorial separating of labour define the level of wealth of local population, level of prices depends first all on its’ solvent supply. low market efficiency in the sphere of its’ production of social goods is admitted as a key factor in formation of budget sector. as the result, economic subsystem for personal and common needs satisfaction. the permanent problem of market and budget trade off is important for functioning of this system (zyatkovsky, 2006). the fractional aspect of this decision about production of social goods is the state and private partnership which is management form based on the institutionallyorganizational union of state and private business which is established with the goal of realization of socially important projects (from municipal to national and international). it was based on the contract or concessional depute for undetermined period to physical person some part of economical, organizational and control functions in relative to public-legal property namely the state and municipal objects and services, natural resources, monopoly of the state for a number of kinds of activity (thus the mentioned objects don’t change form of ownership) (varnavskiy, 2002). institutionally-legal base of pspp (partnership of state and private property) first of all created with statutory instruments which connected with differentiation of state, regional and local power (particularly with current decentralization of power in ukraine, which is accompanied with translation of wide spectra of social functions into the managing of united territorial communities and local budgets). it should promote the autonomy of municipal affairs as legal person within empowerments are considered with contracts and concessions. national authorities depute objects of social sphere, gas and power economy, water supply and the sewerage, transport and communication systems, government buildings and constructions, sign agreements on rendering of services on the maintenance of social infrastructure, in spheres of health care, education and professional development of labor, support of socially vulnerable groups of the population, overcoming of excessive social differentiation, r&d (research and development), environment protection, city planning to private property or terminal owning and regulating of private capital. correspond contracts of regional and local levels are usually connected with developments and modernizations of settlements, their social security and the sphere of leisure, providing design, reconstruction, construction, equipment, management and the content of social objects, supply of their visitors with food, information equipment, etc (sorokina, 1999; varnavskiy, 2002). as the result, the increasing of mobility to the social requirements, assignment of more quality goods and services by the lower smaller expenses of production, decrease in load of budgets of various levels, refusal of the state and municipal sectors of inefficient forms of managing are combined with organizational experience, innovational and financial potential of private property. in a way, in production of social goods to regional and territorial communities of ukraine during decentralization of empowerments and realization of administrate form are defined: the state and municipal subjects are financed from budgets of various levels; the state and municipal subjects who, together with the budgetary resources, operate with receipts from providing paid services to natural and legal entities; the non-state actors functioning on the enterprise or non-profitable beginnings, whose activity is provided with the state order and contracts (including pspp), receipt of funds from providing paid services to various categories of consumers, non-state funds, patrons, sponsors. 6. conclusions development of institutional, functional and territorial organization of society, mainly is a formational and realization process of needs circle of person (individual and collective), which are estimated with factors, conditions and mechanisms of their satisfaction, including dynamic in variety of social communities and subjects in relation to necessary volume of life goods consumption. researching results admitted the necessity of social goods formation in the economy of ukrainian multidirectional education which combines state and non-state (private, commercial and non-commercial) enterprises, establishments, organizations, which services to different layers of population within certain volume quality of social security (based on the state order, temporary contracts and corporate non-market affairs supported in case of performance of conditions by the parties concerning resource intensity, volumes of the budgetary financing, quality, terms of granting goods and services) and in summary it’s coordinated with state social and fiscally-budget policy. supplementing each other, the state and noncommercial sectors of social sphere in baltic journal of economic studies 16 vol. 1, no. 2, 2015 the country and regional social complexes are capable to capture all space of legislative obligations of cultural and community service of the population. mechanisms which contents and productivity of actions for the solution of interaction state problems and private (including noncommercial) sectors in regions and resettlements of ukraine, as well as public consequences of transfer to the private sector of the social security functions which are traditionally stay in the state competence will depend on a level of control structures development activity of authorities (including within civil society), bases (among other things – transparency) business and partner activity. socially-oriented market economy predicts the leading with the state of corrective activity in sphere of macroeconomic regulating in social sphere with the directions, which ensure market development as sociallysimulative process(by creation of conditions for equal competence prevention of monopolies, restriction of overproduction, dumping prices and other factors of crisis). together with optimization of branch, territorial and investment streams other important factors for improvement of investment climate in regions are: – providing of social mobility (based on the socially level of civil profits, realization of measurement in state policy about self regulation of territory disproportions by the creation of new job places and assistance to arrangement of necessary staff ); – popularity “activation” (during the stimulated entrepreneurship, 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(2003). gosudarstvo i razvitie. mirovaya ekonomika i mezhdunarodnyie otnosheniya, 1: р. 3–14. лариса богуш формирование и реализация социальных потребностей как критерий совершенствования территориальной организации общества аннотация. целью работы является исследование взаимосвязей процессов формирования и реализации спектра социальных потребностей с эволюцией и целенаправленной деятельностью по совершенствованию территориальной организации общества. методика исследования предполагает: обоснование происхождения, факторов развития, подходов к классификации, функций социальных потребностей в развитии государства и социума; изучение социогуманитарного пространства формирования и реализации потребностей индивидов, функциональных и территориальных сообществ, а также механизма их удовлетворения на общегосударственном и пространственном уровнях (на примере украины – страны с развивающейся экономикой, где ныне осуществляется децентрализация властных полномочий в сфере социального обеспечения и укрупнение низовых территориальных общин). результаты. обобщены и обоснованы закономерности и тенденции становления, эволюции, трансформации потребностей социальных групп, функциональных и территориальных сообществ населения, а также взаимосвязь этих процессов с экономическими и организационными возможностями и механизмами удовлетворения спектра социальных потребностей с учетом особенностей, достигнутых и желаемых параметров развития производительных сил, человеческого и прочих компонентов социогуманитарного потенциала, социокультурной среды общества. развитие институциональной, функциональной и территориальной организации общества, по сути, является процессом формирования и реализации круга потребностей человека (индивидуального и коллективного), который оценивается через факторы, условия и механизмы их удовлетворения, в том числе через динамику позиций спектра социальных групп и субъектов относительно необходимого для потребления объема жизненных благ. практическое значение. общественно-политические трансформации стимулируют формирование в экономике общественных благ украины многосекторного образования, сочетающего государственные и негосударственные (частные коммерческие и некоммерческие) предприятия, учреждения, организации, которые: оказывают различным слоям населения услуги нормированного в рамках социальных гарантий объема и качества (на основе госзаказа, временных контрактов и корпоративных внерыночных связей, поддерживаемых в случае выполнения условий ресурсоемкости, объемов бюджетного финансирования, качества, сроков предоставления товаров и услуг); координируются государственной социальной и бюджетно-фискальной политикой. весомыми факторами развития территориальных общин и улучшения инвестиционного климата в регионах являются: обеспечение социальной мобильности (основа – достаточный уровень доходов граждан, реализация государственной политики по созданию новых рабочих мест и содействию бытовому обустройству кадров); «активизация» населения (через стимулирование предпринимательства, самозанятости и инновационной активности субъектов хозяйствования, трудовых миграций, совершенствование профессионально-квалификационного потенциала трудовых ресурсов). значение/оригинальность. урегулирование организационно-экономического механизма реализации законодательных гарантий потребления общественно необходимых услуг, удовлетворения соответствующих индивидуализированных потребностей населения украины будет способствовать: совершенствованию территориальной организации социальной инфраструктуры в соответствии с целями реформы административного устройства и усиления социальных полномочий местных бюджетов; повышению эффективности процессов воспроизводства и капитализации социогуманитарного потенциала. baltic journal of economic studies 1 vol. 4, no. 2, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-2-1-7 improving credit protection analysis methods reports of main agricultural enterprises yuliia aleskerova1, tetiana mulyk2, lidiia fedoryshyna3 vinnytsia national agrarian university, ukraine abstract. the purpose of the article is to improve the methodology for analysing credit support for the reproduction of fixed assets of agrarian enterprises. various techniques have been developed to analyse the effectiveness of the formation of fixed assets and the process of their reproduction. among them, the application of such types of analysis as horizontal and vertical (quantitative analysis of the structure of fixed assets and its changes), analysis of return on assets, capital intensity and profitability, indicators of extensive and intensive loading are widespread. less applicable are calculations of various coefficients, such as the rate of retirement, renewal, increase in fixed assets.). methodology. there are several approaches to analysing the effectiveness of the process of reproduction of fixed assets. a number of domestic scholars distribute such indicators to groups: natural and valuable. natural includes all the technical and economic performance of engines, machines, performance indicators of cattle, etc. among the highlights are indicators of economic, sectoral efficiency, and indicators of economic efficiency. results.  determining the efficiency of the loan support for the reproduction process involves the creation of a system of indicators that, by the structure and in aggregate, reflect the degree of efficiency of the use of the loan. indicators that are used today to assess the effectiveness of using credit support, have fundamental disadvantages, which makes it problematic for their practical application. practical implications. thus, some of them do not have a sufficiently significant theoretical justification, the same indicators have different names, are unsuccessful from the logical point of view, do not adequately reflect the needs of industry practices, others – when testing in the current accounting information, it is expedient to improve them. value/originality. the application of the analysis of reproduction of fixed assets will allow receiving growth of economic indicators of activity of agricultural enterprises on the basis of ensuring the continuous process of financing production by economically grounded sources of working capital formation, one of which is short-term bank credit. key words: methodology, analysis, credit support, fixed assets, agriculture, reproduction. jel classification: f65, g21, p34, q12 corresponding author: 1 department of finance, banking and insurance, vinnytsia national agrarian university. e-mail: tuv@email.ua 2 department of analysis and statistics, vinnytsia national agrarian university. e-mail: mulyk@vsau.vin.ua 3 department of analysis and statistics, vinnytsia national agrarian university. e-mail: fedorishina@i.ua 1. introduction in order to properly formulate recommendations for improving the methods and forms of credit support for the reproduction of fixed assets of agricultural enterprises, a detailed analysis is required. the method of analysis of credit support is quite a capacious concept and concerns the effectiveness of both credit support and the process of reproduction of fixed assets. therefore, we can talk about the need for a double formulation of the problem and the allocation of its micro and macro levels. the specifics of credit and credit support are studied, as a rule, with the application of an integrated approach to studying their substance, based on the dialectical method of cognition. this involves the use of various aspects of the analysis of the essence of the object under study and allows you to highlight the levels of study of the essence of the research object. in such aspects, we have identified the economic essence and content of credit, loan support, peculiarities of credit support for the reproduction of agricultural assets, which reveals the structure of the section. at present, the economy has identified a number of topical issues that are important for the sustainable functioning and development of the agrarian sector of the economy. priority ones include theoretical and methodological issues related to improving baltic journal of economic studies 2 vol. 4, no. 2, 2018 the efficiency of the system of financial and credit relations in the industry, in particular, credit provision. the state of the problem under study has certain attainment and achievements. the results of research generalizations of world experience and national practice that allow determining the problems of different forms of participation of banks in financing the reproduction of resource potential, in particular, of fixed assets are relevant. in addition to traditional lending to the needs of the industry, there are used special investment projects, the participation of banks as investors, the formation of units for financing innovative activity, use of leasing and mortgage operations. the purpose of this work is the improvement of methods of analysis of credit supply of the reproduction of main agricultural enterprises. the basis of the research is the dialectic method of recognition, the principle of historicism, used to study the profit as an economic category in the course of the historical development of society. the following common scientific methods were used to determine the tasks: analysis, synthesis, induction, deduction, comparison, grouping, analogy, systematization. 2. economic crisis effects on consumer behaviour for the analysis of the efficiency of forming the fixed assets and process of their recreation, different methodologies are presently worked out. among them, there are widespread applications of such types of analysis as horizontal and vertical (quantitative analysis of the structure of the fixed assets and her changes), analysis of return on capital, capital intensity and profitability, indexes of the extensive and intensive loading. settling of different coefficients belong to less applied, such as a coefficient of leaving , updating , increase of the fixed assets. in addition, efficiency of the use of the fixed assets is ver y exactly represented by the indexes of the use of technical equipment on the grouped descriptions that allow determining the influence of different factors on the indexes of efficiency (methods of analysis of factor: method of absolute differences, method of chain substitution and others like that) (harrington, wilson, 1989). the described methodologies are examined in different train aid from an economic analysis in the special literature. problems in assessing the effectiveness of using financial and credit resources are first of all raised in their relationship with the financial performance of agricultural enterprises. other important criteria include increasing the production potential, expanding the scope of the reproduction process, increasing the volume and quality of production. 3. differences in consumer spending behaviour among age groups according to researchers, it is precisely the inadequate quality of existing methods for analysing creditworthiness, the validity of approaches to calculating the parameters of financial security, making it difficult for a realistic assessment of the provision of credit resources by enterprises in the industry. it is emphasized that at the present stage of development of the economy of agriculture, it requires significant support for the processes of reproduction of resource potential. among the basic factors of the economic growth of agriculture, an important place belongs to the state of resources of industry, in particular, to the fixed assets. from the great number of sources of their recreation important is the credit providing. the objective need to use a loan for the reproduction of fixed assets is due to the specifics of the reproductive process in the field, which has a seasonal nature. on this time, in terms of low profitability of agricultural enterprises, low investment attractiveness of industry, considerable downstream, harmony in work of most basic resources, the credit providing of recreation of the fixed assets is the real source of forming of material base of agricultural production. the credit providing of agricultural enterprises is the effective event of the exit of the economy from a crisis. it especially topically for a period when an economy of the industry is in a slump and stabilizing and development is broken over the lack of the clear foreground programs of their development. there are a few approaches to the analysis of the efficiency of the process of recreation of fixed assets. the row of domestic scientists distributes such indexes on groups: natural and cost. all techno-economic indexes of work of engines, machines behave to natural, indexes of the productivity of cattle and others like that. among a cost distinguish the indexes of pertaining to the national economy, branch efficiency, and indexes of economic efficiency. as additional indicators, it is recommended to use the cost of production; the amount of gross and net income per unit of land; return on assets and productivity, calculated on the basis of gross income; the payback period of capital investments, etc. determination of the efficiency of the credit providing of reproductive process envisages the creation of systems of indexes that by a structure and in totality represented the degree of efficiency of drawdown. on the modern stage of development of credit relations, there is a practically absent analysis of the efficiency of the drawdown from the point of view of its influence on the results of productive-financial activity of agricultural enterprises on the whole and recreation of the fixed assets in particular. the reason for this according, to researchers (contino, 1996), is baltic journal of economic studies 3 vol. 4, no. 2, 2018 the lack of comprehensive methodological approaches to determining the effectiveness of lending developed in the light of the specifics of financial and economic activity of agricultural borrowers. to improve the organization of the crediting process of reproduction of fixed assets, “it is necessary to find out the level of its efficiency, using the system of cost and physical indicators” (contino, 1996). indicators that are used today to assess the effectiveness of using credit support have fundamental disadvantages, which makes it problematic for their practical application. thus, some of them don’t have sufficiently significant theoretical substantiation, the same indicators have different names, are unsuccessful from the logical point of view, do not adequately reflect the needs of industry practices, others – when testing in the current accounting information, they find expediency to improve them. the proposed methods contain an insufficient number of indicators with a weak link between them. they unilaterally and without proper completeness characterize the efficiency of using loans in the enterprise (forgionne, 1986). that is, according to the research carried out, it is the systemic approach to the study that the validity and appropriateness of the practical application of the developed methods for determining the effectiveness of the use of credit support depend on. as it was investigated, the reduction of the solvency of agricultural producers led to the suspension of the investment process, the reduction of the funding, technical, and energy equipment production. therefore, there is a need to determine the economic efficiency of ensuring the reproduction of fixed assets, including at the expense of credit resources (contino, 1996). however, at the current stage, the development of scientifically substantiated proposals to improve the definition of credit support for reproduction of fixed assets of agricultural enterprises is not sufficient. for the achievement of the put aim, it is necessary to solve the next tasks: – to estimate the modern state of the credit providing of recreation of the fixed assets of industry; – to define tendencies and influence of factors that determine their development; – to generalize methodical principles of determination of credit potential of agricultural enterprises. regarding credit potential, we have investigated and found that in this category (its interpretation) distinguish loan support bank – excess reserves of the bank or banking system and enterprises – the possibility of the additional attraction of credit resources (aleskerova, 2016). modern methods of assessing creditworthiness enable an assessment of the current financial situation of agricultural enterprises and their immediate future (aleskerova, 2016). however, most of the enterprises need to assess the amount of loans that are needed to finance costs and capital investments. as already noted by russian researchers “developed a methodology for assessing the minimum requirement of the economic entity in working capital, as well as the need for reproduction of outside negotiable assets, adjusted to secure the loan agreement from the side of the potential borrower own property” (todosіychuk, 2007). they also recognized that the assessment of needs of the enterprise in lending non-current assets is a priority in determining the credit potential and in general its value depends on the formed optimal structure of working capital. for this the following calculation is proposed: the additional need for sources of credit is calculated based on the recoverable value of fixed assets minus equity and long-term loans and loans. if the indicator is positive – there is a shortage of own funds for reproduction. taking into account the current national practice of using the method developed by researchers (forgionne, 1986), the following criteria are taken into account. determining the effectiveness of using credit support requires the availability of indicators that would objectively reflect the degree of use of credit in the enterprise and the methodology for their calculation. in connection with our research, the methodology of efficiency involves also taking into account the efficiency of attracting credit resources for the formation of production capacity in fixed assets. for example, rather a detailed analysis of current methods of credit security efficiency was conducted by wilson (harrington, wilson, 1989). it is established that “from the standpoint of the number of indicators, which determines the credit performance in the proposed methodological approaches, it is possible to distinguish two main directions. one group of scientists focuses on finding a single indicator of assessing the effectiveness of the loan; the other, on the contrary, proves the need for a system of indicators”. 4. survey methodology thus, it can be assumed that, at the present stage, a system of indicators has been formed that unites groups for analysing the efficiency of reproduction (use) of fixed assets and analysing the efficiency of credit sources. in the first case, the swingeing majority of researchers have stopped on the key elements of the methodology of determination of the efficiency of recreation of the use of the fixed assets after directions: 1) provision of fixed assets of enterprises; 2) state of fixed assets; 3) efficiency of the use of fixed assets. in the second case, the question is about the determination of project efficiency of sources of the credit providing, after directions: baltic journal of economic studies 4 vol. 4, no. 2, 2018 1) market of sources of credit support for reproduction of fixed assets; 2) availability of credit support for agricultural enterprises; 3) efficiency of programs and sources of credit provision. given these groups, we have formed table 1, which lists the typical indicators and their calculation formula for the efficiency of the process of reproduction of fixed assets. thus, the efficiency of the use of fixed assets is determined by a set of closely interconnected indicators that quantitatively express the ability of an agricultural enterprise to make productive use of material resources in terms of fixed assets in order to ensure the continuity of the reproduction process. each individual indicator involved in the methodological approach characterizes one of the parties, according to a certain criterion, the influence of the use of fixed assets on the efficiency of production. according to the researchers, the generalized criterion of the efficiency of functioning and reproduction of basic productive assets is the expressed ratio of the gross domestic product to the average annual cost of the main productive assets. according to researches, in 1990 this indicator for ukraine was 42.0%, in 1995 – 16.8%, in 1998 – 14.4%. that is, its reduction is observed. table 1 methodology for analysing the effectiveness of credit support for the reproduction of fixed assets index calculation ingredients security by main means capacity c=f/v c – capacity f – the average annual cost of the main productive assets v – volume of production fundamental arsenal f/a=f/r f/a – fundamental arsenal f – average annual cost of the fixed productive assets r – number of workers technical armament t/a=рз/r t/a – technical armament f – a cost of the fixed productive assets is on an operation r – a number of workers is on an operation state of fixed assets wear factor wf=aw/ f wf – wear factor aw – amount of wear f– initial cost of fixed assets coefficient of fitness cf=rv/ f ff – fitness factor rv– residual value f– initial cost of fixed assets coefficient of updating rr=fr/ ff rr – refresh rate fr– the cost of receiving fixed assets ff – cost of funds at the end of the year coefficient of leaving er=fd/ff erexit rate fd– the cost of disposal of fixed assets ff – the cost of fixed assets at the beginning of the year coefficient of increase gr=(frfd) gr – growth rate fr– the cost of receiving social funds fd – pay the disposal of fixed assets index of height ih=ff/ff (beginning of the year) ih – index of height ff – cost of funds at the end of the year ff – the cost of fixed assets at the beginning of the year coefficient of stability cs= (fafd)/fп cs – coefficient of stability fa – the cost of fixed assets at the beginning of the year fd – the cost of disposals of fixed assets efficiency of the use of fixed assets return on assets ra=v/f f – return on assets v – volume of products f – average annual cost of the fixed assets profitability r=p/f r – profitability p – annual profit f – average annual cost of the fixed assets a sum of profit per 1 hryvnia of fixed assets роз=p/f роз – a sum of profit per 1 hryvnia of fixed assets р – annual profit f – average annual cost of fixed assets baltic journal of economic studies 5 vol. 4, no. 2, 2018 it is this indicator that can objectively reflect the role of major productive assets in increasing the efficiency of social production. a methodological approach to determining the effectiveness of the use of fixed assets – a tool for financial and economic analysis, which is used to strengthen management functions. it quantitatively expresses the results of the influence of the use of fixed assets on the efficiency of the agricultural enterprise and, on this basis, provides an objective and complete information management system for a retrospective, operational, and prospective analysis and the adoption of economically sound management decisions. the application of the analysis of reproduction of fixed assets will allow receiving growth of economic indicators of activity of agricultural enterprises on the basis of ensuring the continuous process of financing production by economically grounded sources of working capital formation, one of which is short-term bank credit. to objectively assess the effectiveness of the use of fixed assets as a complex organizational and technical complex that has a defined socio-economic form, several groups of criteria have been identified that reflect this performance both in relation to the economy as a whole and at the level of the individual enterprise (todosіychuk, 2007). when considering the relationship between investment and the reproduction of major productive assets, many researchers (aleskerova, 2016) paid attention to the link between the level of inflation, the size of bank interest and the directions of flows of investment resources. they noted that “high borrowing interest limits or even eliminates the possibility of obtaining bank loans especially for the restoration of fixed assets. this is not the only negative finding of the influence that raises the costly credit for the sphere of material production. in this regard, it seems reasonable to propose the orientation of the nbu to the level of average profits in the production sector. such an event, along with a reduction in tax pressure can play a significant role in replenishing the resources of production enterprises and will contribute not only to overcoming the crisis phenomena but also to further economic development” (aleskerova, 2008). considered criteria for evaluating the effectiveness of reproduction/functioning of the main productive assets along with the advantages and have certain disadvantages. first, not all of them are accurately displayed in quantitative terms. second, each of them reflects only one aspect of the problem and does not give a complete picture of the state, change the efficiency of use and reproduction. based on such a scheme, recommendations were developed to improve the methods and forms of financial and credit support for innovative activities of small enterprises. on the basis of a comprehensive analysis of the directions of state financial support for the development of enterprises including their innovation activities in terms of providing the main means, and the need for indirect measures of financial support has been identified. in studies of another author (contino, 1996) to assess the attractiveness of enterprises, the index of viability index (іі) was proposed. this indicator takes into account the index of current activity (іса) and the index of estimation of the innovative potential of the enterprise (іір) and is their sum. the index of viability of current activities will vary according to a number of factors, which firstly will determine features of the enterprise operation, depending on the size, experience of its activities and the costs of implementing innovations; and secondly, they will be able to evaluate at different stages of its activity – from the very beginning to possible liquidation. the proposed index can be used to understand the logic of the main factors of enterprise development, to quantify their impact, to understand what factors and in what proportion it is necessary for the enterprise to mobilize to increase the efficiency of the activity. to reflect the activity of the innovation activity of the enterprise, the same author (forgionne, 1986) provided an index of innovation potential (іір), which is characterized by a share of the cost of innovation activities (cin) in the total cost (ci). the increase of this index testifies to the increase of innovative potential of the enterprise. it is established that this indicator should tend to one approach, which in modern conditions is due to the necessity not only to predict but also to increase the amount of resources that will be directed to innovative activity. the researchers also noted that the necessary condition for choosing the most effective lines of credit support for reproduction of fixed assets is the creation of a unified methodological and informational basis for the study of the state and prospects of innovative economic development. in the methodology, it is possible to predict the possibility of evaluating the effectiveness of the investment project. for this purpose, various authors suggest the following set of indicators (table 2). consequently, the method of the effectiveness of credit support for the reproduction of fixed assets should take into account the composition, sources of formation, perspective directions of use to increase production volumes. in economic research on the constancy of credit provision, it is important to study stochastic (correlation) relationships in economic analysis. stochastic connections (contino, 1996) are characterized by an approximation, uncertainty. they are detected only on average in a significant number of objects observed. each value of the factor index baltic journal of economic studies 6 vol. 4, no. 2, 2018 (argument) may correspond to a significant number of performance indicators (functions). stochastic dependence is a differential equation which component is functions that have random values. for our study, the attraction of credit resources in the reproduction of fixed assets gives rise to differences in the growth of profits at various enterprises even on other equal terms. this is due to the fact that the level of profit depends on the action of the factors that interact in the complex. the fact that the various factors interact optimally depends on the degree of influence of each of them on the magnitude of the effective indicator. to measure the degree of influence of each factor on the level of the effective indicator, factor analysis is used. necessary conditions for applying correlation analysis are: 1) the presence of a sufficiently large number of observations on the magnitude of the investigated factor and performance indicators (or the dynamics for the current year in the aggregate of homogeneous objects); 2) the investigated factories should have a quantitative dimension and reflect one or another source of information. use of correlation analysis allows solving the following tasks: to determine the change in the effective indicator under the influence of one or several factors, how much the value of the result will change when the factor is changed to 1; establish the relative degree of dependence of the result. some author (contino, 1996) state that “a prerequisite for choosing the most effective directions table 2 estimation of the efficiency of the innovative project indexes used name characteristic notes net discounted income net present value, npv this indicator characterizes the excess of total cash receipts related to the implementation of the investment project over the total cost of it and is calculated as the amount of discounted net payments during the estimated time period. if npv> 0, then the profitability of the project is higher than the norm given by the discount factor. at npv <0 the project profitability below the norm and from the project should be discarded. when comparing projects, the advantage should be given, in other equal terms, to a project with a high npv value. profitability index profitability index, pi characterizes the relative “return on the project” on the funds invested in it and is calculated as the ratio of npv to the current cost of investment in the project. internal rate of return internal rate return, irr the internal rate of return of the project shows the level of return on investment costs invested in the project and is calculated as a discount rate, at which the net discounted income (npv) of the project is zero. the decision to invest in a project is approved if the irr is higher than the interest rate on longterm loans. the irr is used to determine the terms for lending to creditors since it calculates the interest rate that can be paid without risk of undermining the project’s liquidity. since the irr is determined on the basis of current prices, it must be compared with the real value of capital. if the nominal interest rate on loans is d and inflation is d percent during the discount period, then the real value of capital will be d-d and, in particular, with this value, you should compare the irr . payback period payback period, pb the payback period of the project characterizes the period of time necessary to recover the investments invested in the project at the expense of the proceeds from its implementation and is calculated as a period of time, in which the net discounted project income (npv) is zero. in the practice of evaluating investment projects, a simple and discounted indicator of payback period is used. simple profit margin simple rate return, srr the criterion is calculated according to the formula and shows, which part of the investment costs is reimbursed in the form of profit within one planning interval. comparing the calculated value of the profit margin with a minimum or an average level of profitability, the investor may come to the conclusion that it is expedient to further analyse the projects. baltic journal of economic studies 7 vol. 4, no. 2, 2018 of innovation and structural policy is the creation of a unified methodological and informational basis for studying the state and prospects of innovative economic development”. at present, there is a sufficiently wide range of methods for solving tasks of assessing the effectiveness of investment projects and their sources. each of them provides some opportunities for a comprehensive analysis of alternatives and the selection of the best of them by one or another criterion. when analysing with the help of a mathematical apparatus, it is possible to observe a rather broad scope of their interaction and complementarity in terms of models and research tools. with regard to public funding, the main criterion for selecting investment projects claiming state support is the maximum budget efficiency. although there is a certain legal basis for replenishing profitable and linking the cost of the investment budget, its functioning is ineffective. according to a number of authors (cocheo, 1996), their main elements are the analysis of financial flows of costs and outputs, the calculation of the internal rate of effectiveness, the accounting of risk, as well as the separate elements of the mechanism of reproduction and credit provision. the question arises about the use of methods of financial mathematics and simulation in the competitive selection of investment projects claiming state support on the criterion of the highest return on hryvnia investments. 5. findings by the aim of creation of a mathematical model of the credit providing of support of reproductive process in agriculture, in particular, in terms of fixed assets, is the assessment of investments in the competitive selection of investment projects claiming state funding, the development of computational algorithms and computer implementation, the conduct of computational experiment for real systems. later, the use of indicators is determined, which allows us to draw conclusions about the interdependence of such important parameters of the enterprise’s activity as profitability of sales, profitability of assets, the coefficient of reinvestment of profits, and also the ratio of borrowed and equity capital, which enables to combine the investment strategy of an enterprise with a financial strategy (cocheo, 1996). the level of lending, the volume of required loans depends on a number of factors but the most significant among them is the share of own funds in the total amount of production costs. the correlationregression analysis method was used to determine the degree of correlation between the share of own funds and the volume of obtaining loans by agricultural enterprises. 6. conclusions thus, the current state of the credit system of ukraine is characterized by a number of shortcomings: 1) low mobilization of credit institutions by monetary resources and excess of demand for credit resources over their offer; 2) lack of reliable credit facilities and high risk of lending, which results in lending institutions placing mobilized resources mainly in the money market and credit risks offset by high-interest rates; 3) functioning of the lending market mostly for universal banks. specialized financial and credit institutions are only being formed, while the issue of quantitative development of credit institutions is acute. to overcome these shortcomings, the following measures must be taken: 1. create favourable economic and legal conditions for investing in deposits and developing a settlement system, restoring the confidence of depositors in lending institutions. 2. facilitate the development of a guarantee and insurance system, as well as secondary mortgage lending and debt markets, which will provide organizational stability to the credit system to respond to crisis trends. 3. to develop the systems of registration and appraisal of collateral objects, as well as centralized information systems. 4. to apply economic privileges to credit institutions that lend to the real sector of the economy, while limiting speculative operations and promoting the development of specialized lending institutions. references: aleskerova yu.v. (2008) analіz stanu ta efektivnostі kreditnogo zabezpechennya vіdtvorennya osnovnikh zasobіv sіlskogospodarskikh pіdpriemstv [analysis of the status and effectiveness of credit support for reproduction of fixed assets of agricultural enterprises]. oblіk і fіnansi apk, vol. 3, pp. 125-129. aleskerova yu.v. (2016) problemi vprovadzhennya bankіvskikh kreditnikh іnnovatsіy v agrarnіy sferі [problems of introduction of bank credit innovations in agrarniy sphere]. prichornomorskі ekonomіchnі studії, vol. 9, nn. 1, pp. 100-103. todosіychuk yu.v. (2007) vydy ta formy kreditіv u zabezpechennі vіdtvorennya osnovnikh zasobіv [types and forms of loans to ensure the reproduction of fixed assets]. ekonomіka apk, vol. 12, pp. 98–101. cocheo s. (1996) banking's new life on lease, aba banking journal. 11: 40-48. contino r.m. (1996) handbook of equipment leasing. a deal maker's guide, 2nd ed. – new york: amacom: 205. forgionne g.a. (1986) quantitative decision making, publishing company: 296. harrington d.r ., wilson b.d. (1989) corporate financial analysis, 3rd ed. richard d. irwin, inc.: 190. baltic journal of economic studies 68 vol. 4, no. 1, 2018 corresponding author: 1 department of economics and competition policy, kyiv national university of trade and economics. e-mail: geranzhel@gmail.com 2 department of economics and competition policy, kyiv national university of trade and economics. e-mail: svelte.s@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-68-76 the relevant temporal market definition in antitrust analysis anzhelika gerasymenko1, svitlana afendikova2 kyiv national university of trade and economics, ukraine abstract. the purpose of the paper is to compare various theoretical approaches to the relevant temporal market definition, collecting the arguments for their implementation under the different kinds of antitrust cases. it is vital for the markets with peak demand (transport, electricity, markets of intergenerational products) or discreet supply (agriculture). methodology. the survey is based on the theoretical and graphical modelling of product space perception by consumers. it investigates changes of the latter under different marketing strategies of a seller. statistical methods are used to analyse trends of demand and prices for iphones’ changes, as well as dynamics of electricity consumption. results. the paper reveals two facing approaches to the definition of relevant temporal market: 1) the discrete one that provides a short-run analysis of products’ substitutability and combines only those time periods that are characterized by a stable balance of demand and supply, as well as stable market equilibrium; 2) the coherent one that provides a long-run analysis of cyclical variation of the market. this cycling is based on the awareness of consumers and producers of intertemporal substitutability of products. the authors use the model of intertemporal competition to explain principles of these approaches and apply it to the iphone market analysis. they conclude that the coherent approach must be applied to the temporal market definition for the products with elastic demand. inelastic demand brings the necessity to apply the discrete approach to the temporal market definition. these conclusions cannot be applied to regulated markets. the system of government regulation is the main determinant of the temporal boundaries of such markets. practical implications. the results of this research can be used by competition agencies in antitrust cases to define the relevant temporal market, where the violations of antitrust legislation can occur. the correct definition of the market is the first step of structural analysis under antitrust cases that determinates the correctness of its next steps and finally  – accurate labelling of an antitrust violation. value/originality. the paper grounds capability of both (discrete and coherent) approaches to the relevant temporal market definition, determines the factors that define what the approach must be chosen, as well as the exceptions from the rule. key words: relevant market, temporal market, intertemporal competition, peak and off peak services, intergenerational products. jel classification: d47, d91, d92, l49, l94, o31 1. introduction the relevant market is a key term of antitrust economics. the term was first-ever used in 1948 in the court case united states v. columbia steel co. in response to the need to determine the geographical boundaries of post-merger competitive effects expansion. in that case, the geographical market boundaries were defined as the territory smaller than the nationwide market boundaries, although that decision of competition authorities was rejected by supreme court (us supreme court, 1948). the better-known case of the relevant market definition took place in 1953 in the court case of united states v. ei du pont de nemours & co. and was concerned the definition of product boundaries of the market. in the course of this case, the courts found that cellophane was in a market with other flexible wrapping materials. more specifically the supreme court found that there was a substantial cross-elasticity between cellophane and other flexible wrappings, and that cellophane and these other wrappings had reasonable interchangeability. what the courts failed to recognize was that, if du pont had market power over the relevant market that included cellophane and raised its price to the monopoly level, then was already exercising market baltic journal of economic studies 69 vol. 4, no. 1, 2018 power in the market for cellophane, so much so that any further increases in price would cause customers to migrate in sufficient numbers so as to render an attempt at a further price increase unprofitable. however, these other flexible wrappings might not have been viewed as close substitutes if cellophane were priced at competitive levels (stocking and mueller 1955; jamison, 2014). this court case became well-known in the theory of industrial organizations as “cellophane fallacy” and appeared in the relevant textbooks. however, it is interesting for us not only because of the meaning of the “cellophane fallacy” but as an illustration of the basic principles of relevant market definition. first of all, it is about the principle of substitutability. the us federal trade commission and the us supreme court decisions were based on the criteria that the substitutes belonged to the same relevant market. the substitutability of goods as a criteria of relevant market definition was described by j. robinson (robinson, 1934), f. scherer and d. ross (scherer & ross, 1990), m. coate and j. fischer (coate & fischer, 2006), y. li (li, 2009), t. teodorovicz, t. leandro and l.a. esteves (teodorovicz, leandro & esteves, 2015), and others. the substitutability principle is the main basis of the relevant market definition by the competition authorities of australia, bulgaria, the european union, israel, south korea, mexico, poland, romania, etc. (oecd, 2012). for example, according to the definition in the polish competition act, the relevant market is a market of goods, which by reason of their intended use, price, and characteristics, including quality, are regarded by buyers as substitutes, and are offered in the area in which, by reason of their nature and characteristics, the existence of market access barriers, consumer preferences, significant differences in prices and transport costs, conditions of competition are sufficiently homogeneous (oecd, 2012). modern competitive authorities explore not only demandside substitution but also supply-side one (ec, 1997) for defining the relevant market boundaries. it demonstrates one more important characteristic of the relevant market – the balance of demand and supply. when the goods are substitutable (in terms of demand or supply) and the market is balanced enough to support its members to keep certain equilibrium parameters of interplay that means the existence of the relationships of competition or monopoly between market participants. these relationships are the main evidence of the relevance of the studied market according to m. coate and j. fisher (coate & fischer, 2006), j. baker (baker, 2007), m. gacalov (gacalov, 2002), v. lahutin and others (lahutin et al., 2009). these relationships cannot exist between sellers of independent products. that means that the first step of any antitrust investigation is a definition of the relevant market. the legislation of the majority countries distinguishes two types of boundaries of the relevant market: product and geographical. for example, the european commission in the commission notice on the definition of relevant market for the purposes of community competition law announce that the relevant market combines the product market and the geographic market, defined as follows: • a relevant product market comprises all those products and/or services, which are regarded as interchangeable or substitutable by the consumer by reason of the products’ characteristics, their prices, and their intended use; • a relevant geographic market comprises the area, in which the firms concerned are involved in the supply of products or services, and in which the conditions of competition are sufficiently homogeneous (ec, 1997). recently the idea of expanding the list of relevant market boundaries has become popular. c. beatonwells (beaton-wells, 2003), c. filho (filho, 2011), v. lahutin (lahutin et al., 2009), b. marshall (marshall, 2007), m. motta (motta, 2004), f. russo and m.l. stasi (russo & stasi, 2016), b. zhang (zhang, 2009) suggest to define temporal boundaries of the relevant market in antitrust cases. this suggestion is supported by law in china, germany, poland, singapore, ukraine, united kingdom of great britain, and northern ireland (oecd, 2012). for example, the british guidance on market definition gives three examples that require detailed analysis of temporal market boundaries. there are: – peak and off-peak services. this can be a factor in transport services or utilities such as electricity supply, – seasonal variations, such as summer versus winter months, and – innovation/intergenerational products. customers may defer expenditure on present products because they believe innovation will soon produce better products or because they own an earlier version of the product, which they consider to be a close substitute for the current generation (oft, 2004). the similar list was announced by china’s antimonopoly commission. chinese guideline on definition of relevant market provides that timeliness shall also be considered in defining the relevant market, when a product’s production cycle, lifetime, seasonality, fashion, or a valid term for intellectual property protection has become an essential characteristic of the product (zhang, 2009). the common denominator of all the reasons for detailed analysis of temporal market boundaries is the imbalance between demand and supply of goods that appears on the different stages of market functioning. for example, the demand on the passenger transport services significantly increases in the peak hours or before holidays, while the supply of it is limited by transport infrastructure capacity that stays constant or increases insignificantly. this fact stimulates changes of parameters of market equilibrium compared to the offbaltic journal of economic studies 70 vol. 4, no. 1, 2018 peak period. the same situation is in tourism, where the demand is under the great impact of the seasonality, especially in the coastal regions; in fuel market and market of fertilizers, where the demand depends on the agricultural season duration; etc. the imbalance between demand and supply in markets of vegetables and fruits is induced by reduction of their supply in wintertime. in the markets of inter-generational products, it caused by the introduction of the next-generation product. all of these periods are characterized by different parameters of the market equilibrium comparing to off-peak ones – mostly higher price and lower output. in this context, the question is how to determine the temporal market boundaries: as separate discrete periods of peak and off-peak consumption or as the coherent periods between individual peaks of consumption? the article is dedicated to the investigation of this question. starting with the example of imbalance between demand and supply of intergenerational products caused by their introduction on the market, the second section provides the model of intertemporal competition. its analysis brings the arguments for applying the different approaches to defining the temporal market. the third section introduces the way of the intertemporal competition model’s use in the practice of temporal market definition via the example of imbalance between demand and supply of iphones as an intergenerational product. the findings of this analysis are expanded onto other kinds of temporal imbalances between demand and supply. the fourth section researches the role of state regulation in the temporal market definition. it brings the example of state regulation of the business activity of power plants in ukraine. the last section concludes. 2. the model of intertemporal competition the phenomenon of intertemporal competition was the subject of economic research in the mid-twentieth century. it appears on the market of durable goods, and, first of all, intergenerational ones. the buying of an intergenerational good at the moment of its launch excludes the consumer from the market for a long period. to support sales, the seller has to cut the intertemporal price. this fact has an effect on a specific form of the demand curve for these products. its elasticity increases gradually with the process of the life cycle of goods. at the moment of a new product launch, its demand is relatively inelastic. sometimes it even characterized by the positive value of price elasticity of demand, caused by the veblen’s effect. it pushes up the price of the good. while the product loses positions in the premium segment and moves into the mass-market (where the cross-elasticity between goods is usually significantly higher) the price elasticity of its residual demand increases. following the elasticity changes, the rational (in terms of neoclassical analysis) seller steadily reduces the price of the product as long as it gets to the value of marginal costs. knowing this fact, consumers consider the intertemporal substitution of products as a separate element g0t of the chain of substitutes. it is situated between the good g0 and its closest substitute gc (fig. 1). you can buy the good now in the seller’s market power zone (segment oa in the fig. 1) or you can wait and lose some time of consumption but buy the same product at the reduced price in the zone of intertemporal competition (segment ab). there is a big difference between market power zone and competition zone in terms of prices and, as a result, of the value of рg0 рg0 t рgc g go go t go t1 gc two discreet temporal markets рg0 t1 а в о coherent temporal market fig. 1. intertemporal competition in the salop’s circular city model source: constructed by the authors according to the research results baltic journal of economic studies 71 vol. 4, no. 1, 2018 the economic rent. for example, in the us video game market, this difference is about 170% (nair, 2007). there are two discrete time periods (oa and ab) with different supply and demand for goods, on the one hand, and the free move of consumers’ demand between the periods, on the other hand. ultimately the latter may cause the unification of these periods and reduction of the economic rent of the oa period up to zero. this is the point of the coase paradox. the understanding of the possibility to move the demand between the periods gives the consumer the perception of temporal substitutability of such goods’ consumption. as the demand-side substitution is a key indicator of the relevant market, we can broaden the latter from the one stage of the life cycle of an intergenerational product to the whole one according to the coherent approach to the temporal market definition. the exception is only several products and services of prime necessity, which elasticity demand is sufficiently low to abuse the dominant position inside the small temporal market. in these cases, it is better to apply the discreet approach to study the temporal market boundaries. the analysis in terms of supply-side substitution allows making the same conclusions. knowing the principles of the mechanism of intertemporal competitions, the seller tries to extend the zone of inelastic demand. the most general tool of this extension is to convince consumers that intertemporal price reduction will not happen at all or that the price reduction will not happen soon (avdasheva & rozanova, 1998). how the seller can do this? the spread of invalid information about keeping the prices is not good for the company in terms of optimizing the elasticity of demand for the nextgeneration products. the realization of the long-term strategy of high prices maintaining is also wrong in terms of the natural changes of residual demand elasticity. the best way is to postpone the prices reduction. this strategy is the most realistic and one that corresponds to the coase paradox. the seller can take the responsibility to keep the price at the primary level within a clearly defined period. its duration is a function of the initial level of the price, the expected price level in the future period, the dynamic of price elasticity changes, etc. graphically it looks like the movement of the axis of the intertemporal substitute from g0t to g0t1. it causes the extension of the market power zone from the segment oa to the segment ob, including those consumers for whom the alternative value of postponed consumption (expectation for the period t1) is higher than monopoly рg0 рg0 t рgc g go go t gc g g1 go go t gc в c рg1 discreet temporal market = coherent temporal рg0 t рg0 рgc two discreet temporal markets coherent temporal market d fig. 2. the strategy of planned obsolescence of a product in the salop’s circular city model source: constructed by the authors according to the research results baltic journal of economic studies 72 vol. 4, no. 1, 2018 increase in price in the zone of temporary market power. that leads to the stabilization of demand and supply and other parameters of market equilibrium within the relevant period that corresponds to the temporal market boundaries, which are wider than the discrete period of keeping the high level of price elasticity of demand for the new product but less than the period of full life cycle of the product. another tool of equilibrium parameters’ unification in the extended temporal boundaries is fulfilling the strategy of planned obsolescence of product. it means the systematic upgrading of the product based on science and technological progress (stp), producing the next-generation product when the demand for the product of the previous generation is too flexible for maintaining the price on the profitable level (tirole, 1996). firstly, this policy returns consumers (who bought the product in the previous period) to the market. secondly, it makes consumer expectation of lower price unreasonable. the utility of the consumption of intertemporal substitute at the reduced price is lower than it was for the same product in the in the moment of its introduction in the market by the amount that is higher than the cost of delay. fig. 2 shows the nextgeneration product with the axis g1, located to the left of the former position of the previous-generation product g0, while the consumption of the latter has shifted to the position of its intertemporal substitution g0t, creating different temporal relevant markets cb and bd. this means that the sales conditions are the same during all the period between the introductions of adjacent intergenerational products, answering the question of how to define the temporal market. 3. intertemporal competition model’s use in the practice of temporal market definition looking for the empirical evidence of the effectiveness of the intertemporal competition model, as well as the results, made on the base of its theoretical analysis, let’s explore the dynamics of worldwide demand for iphones (fig. 3). as it was described in the theoretical model, the demand, which was driven by the persuasive advertising, increases rapidly at the time of introduction of a new model of iphone. then the demand falls down and becomes constant up to the time of introduction of the next generation model (every second peak on the diagram is conjunctural and relates to the christmas holidays). the cycle repeats for every new iphone model. this means that the price elasticity of iphones’ demand, as well as demand and supply balance, are different in the first month of its sales comparing to the other part of the year, making the argument for the use of the discreet approach to the temporal market definition. however, the demand and supply of iphones in these two periods are closely connected by intertemporal substitutability. for example, the annual christmas peaks in fig. 3 indicate that many consumers consider the iphone purchased in december (three months after the start of the sales), as the substitute for iphone purchased at the time of its release on the market. they plan this purchase in the area of the lower price elasticity of demand, consciously postponing consumption. there can be two conclusions of it. the first one points at the existing of the single temporal market of iphones within the period between the introductions of adjacent iphone models. another one points at the validity of coase paradox in this market, which must be considered by the apple corp, while pricing. 30 40 50 60 70 80 90 100 m ar -2 01 2 m ay -2 01 2 ju l20 12 se p20 12 n ov -2 01 2 ja n20 12 m ar -2 01 3 m ay -2 01 3 ju l20 13 se p20 13 n ov -2 01 3 ja n20 13 m ar -2 01 4 m ay -2 01 4 ju l20 14 se p20 14 n ov -2 01 4 ja n20 14 m ar -2 01 5 m ay -2 01 5 ju l20 15 se p20 15 n ov -2 01 5 ja n20 15 m ar -2 01 6 m ay -2 01 6 ju l20 16 se p20 16 n ov -2 01 6 ja n20 16 m ar -2 01 7 m ay -2 01 7 ju l20 17 se p20 17 n ov -2 01 7 ja n20 17 m ar -2 01 8 g oo gl e t re nd s' s se ar ch v ol um e in de x ip ho ne 5 s ip ho ne 6 ip ho ne 6 s ip ho ne 7 ip ho ne 8 , x fig. 3. the dynamics of the worldwide demand for iphones, march 2012 – march 2018 source: google, 2018 baltic journal of economic studies 73 vol. 4, no. 1, 2018 notwithstanding the difference in the price elasticity of demand, the apple corp cannot set different prices on the same model of iphone in the first month of its sale, comparing to the subsequent ones, being under the risk of the first-period sales decrease according to the coase paradox. it decreases the price of the previous-generation model of iphone once a year  – in the moment of the next-generation model introduction (fig. 4), walking the line of the strategy of planned obsolescence of product. it allows the company unify the market equilibrium parameters within the whole cycle of demand change, being the argument for the use of the coherent approach to the temporal market definition, instead of the discreet one. these conclusions could be applied to the other cases of temporal market definition. let’s start with the example of seasonal imbalance between demand and supply. the quality and quantity of the agricultural products’ harvest (for example, apples), collected in summer and autumn season, determines annual supply and sales conditions. the consumers can easily move within the boundaries of the temporal market. they can buy apples in the summer time at the lower price and keep them within the year at their own expense or buy them at the higher price in the winter time. this difference in prices cannot be an indicator that approves the existence of two separate temporal markets of apples, while the intertemporal substitutability is an indicator of the single temporal market existence. the other example deals with peak and off-peak services in the transport. the transport company knows in advance about the irregularity of the traffic flow within the day, week or year. it considers it by planning the volumes and the schedule of service supply. the practice of such markets functioning witnesses that the transport companies mostly use the instruments of the cross-subsidization between periods instead price discrimination. therefore, the temporal market does not cover a separate period of the cycle (daily, seasonal, life cycle of a product), but the whole cycle. these both cases, as well as the intergenerational product case, bring enough arguments to applying the coherent approach to the temporal market definition. the exceptions must be made only for the markets with inelastic demand, where the possibility of intertemporal substitution is poor. many of such markets are under strict government regulation that raises the issue of the government regulation impact on the temporal market boundaries. 4. the government regulation impact on the temporal market boundaries government regulation can significantly change the institutional environment of the market that is one of the important determinants of market boundaries. let’s show it at the example of the ukrainian electricity market. this market is marked by at least three major cycles of its operation: daily, weekly, and annual (fig. 5). they illustrate the fluctuation of electricity sales up to 50% of the market capacity. according to the neoclassical logic, the interaction of demand and supply in each cycle peak and off-peak periods has to result in different equilibrium prices and outputs. that means the existing of at least six different temporal markets 649 549 449 649 549 449 649 549 449 649 549 [значение] 400 450 500 550 600 650 700 750 2013 2014 2015 2016 2017 $ iphone 5s iphone 6 iphone 6s iphone 7 iphone 8 fig. 4. the dynamics of the iphones’ basic model prices, september 2013 – september 2017 source: constructed by the authors on the data of the apple corp., 2013–2018 baltic journal of economic studies 74 vol. 4, no. 1, 2018 under the discreet approach to the temporal market definition. using the coherent approach reduces the number of relevant temporal electricity markets two times. considering the current ukrainian government regulation of power companies’ activity challenges the existence of the only one temporal relevant electricity market in ukraine – the daily one. the regulations of ukrainian wholesale electricity market (hereinafter – wem regulations) spells out that all the electricity producers have to submit operating capacity bids for each designed period of the next day to the system administrator of the power grid. the external inflow operators have to submit import and export schedules. the power suppliers have to submit the forecasts of electricity consumption. basing on this data, the system administrator of the power grid has to design load schedule for each power unit during each designed period of the next day (wem regulations, 2015). this means that the competition between electricity producers arises at the moment when they submit daily bids and repeats on a daily basis. it takes place due to the fact that such bids (taking into account restrictions and privileges, the system of priorities provided by applicable law, and the prices bid by the producers) determine whether or not a power unit will be put into operations, how long it will operate during the day, and at which capacity. the adjustment of the bid by the producers during the daily period is allowed in cases of emergency only. the set of grounds for the adjustment is set by applicable regulations. the validity of a bid that was not accepted is not extended to the next day, requiring a new act of competitive bidding. this means that there is no smaller market than the daily electricity market in ukraine because the fact of power plant’s inclusion into the load schedule depends on the terms of their daily bids, specified by hours. this also means that there is no wider relevant temporal market. next day the companies will submit new operating capacity bids, as well as price bids. these bids will create a new balance of power in the market and new parameters of market equilibrium. thus, the temporal boundaries of this market are just 24 hours. further statutory evidence that the ukrainian electricity market functions within the daily boundaries can be found in the state standard gost 13109-97 “electric energy. electromagnetic compatibility of technical equipment. power quality limits in public electrical systems” (gost, 1997), in the rules of relations between the se ‘national energy company “ukrenergo” and electricity industry facilities (entities) under conditions of parallel operation within the ukrainian united power grid (mfe, 2008), in the guidelines on inspection of thermal power plants, hydropower plants, and nuclear power plants readiness to participate in the regulation of frequency and voltage in the ukrainian united power grid (mfe, 2009), and in the ukrainian law “on electricity market”. although the latter has not become fully operational yet, it can be used as a landmark in the context of institutionalization of the existing business practices. article 1 of this law introduces a new category of the “day-ahead” electricity market (the day-ahead market), which constitutes a system of relations between participants of the dayahead market and the system operator of power grid in connection with the sale and purchase of electricity that is necessary to meet the demand of the day following the trading day (ukrainian law, 2017). among the trading platforms for the sale and purchase of electricity, offered by this law, this particular market in conjunction with the interday market and balancing market corresponds to the acting model of the electricity market. this is one more argument to support the singular day dimension of the temporal boundaries of this market. so, in such a case, the government regulation becomes the key determinant of the temporal market boundaries, while the economic and technological determinants are put on the back burner. the last two determinants would like to define the electricity market as a spot market with different equilibrium parameters for every second. however, these boundaries are denied with а) daily cycle b) weekly cycle c) annual cycle fig. 5. the cycling of the electricity market in ukraine source: constructed by the authors on the data of gerasymenko et al., 2016, p. 15, 41 10 11 12 13 14 15 16 ja nu ar y fe br ua ry m ar ch a pr il m ay ju ne ju ly a ug us t se pt em be r o ct ob er n ov em be r d ec em be r mln mwh 450 460 470 480 490 500 510 k mwh 20 21 22 23 24 25 26 1 3 5 7 9 11 13 15 17 19 21 23 k mwh baltic journal of economic studies 75 vol. 4, no. 1, 2018 the impossibility of producers to change their bids in response to changes in market conjuncture within the 24 hours. there are the same restrictions for the use of abovementioned approaches to the temporal market definition in other regulated markets. the temporal boundaries of the market of services of transporting the oil (or the gas) by pipelines depend on the time value of the auction lots for network access. the temporal boundaries of the market of heat supply services are determined by the most common terms of the delivery contracts; etc. 5. conclusion summarizing this investigation results, it should be stated that the question of the correct definition of temporal boundaries of the relevant market in the antitrust analysis is becoming more important now. as we can see from the above examples, these boundaries could be different and are dependent on the internal and external market parameters. among the latter are: government regulation of the economy, traditions and habits of the social groups and other institutional determinants. the structure of various temporal markets could be dramatically different that leads to the differences in the behaviour of companies and regulatory bodies according to the “structure  – conduct – performance” paradigm. the world’s practice of temporal market boundaries’ researching suggests two alternative approaches: discrete and coherent. the first one means the shortrun analysis of goods’ and services’ substitutability. it implies the combining of only those periods, that marked by a stable balance of demand and supply and stable parameters of market equilibrium. the second one means the long-run analysis of goods’ and services’ substitutability, which consider the cyclic variation inside the market. this cycling is aware of consumers and producers, being the base for intertemporal substitution. it allows transforming the question of temporal market boundaries into the question of the cost of postponed consumption. if the increase of the peak price is lower than the cost of postponed consumption, the consumer will purchase a product at the time, when the need arises. if it is not, the consumer will wait for the price cut. the even spatial allocation of consumers by the criteria of the cost of postponed consumption is the factor of peak and off-peak periods’ integration into the single temporal market, asking for applying the coherent approach to the temporal market definition. if such an allocation is not an even one and the prices change discretely (for example, because of a rapid drop of price elasticity of demand), the discreet approach to the temporal market definition should be applied. these conclusions are confirmed by business practice but they fail when there is a strong external interference with the market mechanism operation, inter alia in the way of government regulation of the market. for example, the strict regulation in ukrainian electricity sector determines the temporal boundaries of the relevant electricity market in the administrative way, fixing the interval of arising competition and the forms of competitive behaviour. neither coherent, no discreet approach to the temporal market definition is effective in such a market conditions. the same barriers to applying economic methods of market boundaries definition exist in other regulated markets. references: avdasheva,  s.b. & rozanova,  n.m. (1998) teoriya organizatsii otraslevykh rynkov [the theory of industrial organization]. moscow: magistr. baker, j.b. (2007). market definition: an analytical overview. antitrust law journal, vol.74, no. 1, pp. 129-173. beaton-wells, c. (2003) proof of antitrust markets in australia. melbourne: the federation press. coate, m.b. & fischer, j.h. (2006) a practical guide to the hypothetical monopolist test for market definition. potomac papers in law and economics. wp 06-01. retrieved from: http://ssrn.com/abstract=940667 ec, european commission (1997) commission notice on the  definition of relevant market for the purposes of community competition law. official journal of the european union, c  372. retrieved from: http://eur-lex.europa.eu/legal-content/en/txt/html/?uri=uriserv:l26073&from=en filho c.s. (2011) a legal theory of economic power. implications for social and economic development. cheltenham, northampton: edward elgar publishing limited. gacalov, m.m. (2002) sovremennyy ekonomicheskiy slovar-spravochnik [modern economic definition dictionary]. ukhta: ugtu. gerasymenko, a.g., vysochyn, i.v., borovyk, i.i. & telyatnikov, s.v. (2016) analiz stanu konkurentsii ta rynkovoi vlady na rynku elektrychnoi enerhii v ukraini. [analysis of the state of competition and market power on the electricity market of ukraine]. research report 0116u000417. kyiv: kyiv national university of trade and economics. google (2018) iphone google trends. retrieved from: https://trends.google.com/trends/explore?date=2012 03-01%202018-03-22&q=iphone gost (1997). elektricheskaya energiya. sovmestimost tekhnicheskikh sredstv elektromagnitnaya. normy kachestva elektricheskoy energii v sistemakh elektrosnabzheniya obshchego naznacheniya. [electrical power. electromagnetic compatibility of equipment. quality standard of electrical power in the general electrical power supply system]. gost  13109-97. retrieved from: http://odz.gov.ua/lean_pro/standardization/files/elektromagnitnaja_ sovmestimost_2014_03_11_1.pdf baltic journal of economic studies 76 vol. 4, no. 1, 2018 jamison,  m. (2014) defining relevant markets in evolving industries. working papers of warrington college of business administration no.  1317. retrieved from: https://warrington.ufl.edu/centers/purc/purcdocs/ papers/1317_jamison_defining%20relevant%20markets%20in%20evolving%20industries%20final.pdf lahutin,  v.d., bakalinska,  o.o., verteleva,  o.v. et al. (2009) konkurentsiia i konkurentna polityka: katehorii ta poniattia. [competition and competition policy: categories and terms]. kyiv: kyiv national university of trade and economics. li, y. 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[on electricity market]. no. 2019-viii dated april 13, 2017. retrieved from: h http://zakon5.rada.gov.ua/laws/show/2019-19 . us supreme court (1948) united states v. columbia steel co. 334  u.s.  495 retrieved from: https://supreme.justia.com/cases/federal/us/334/495/ wem regulations (2015) pravyla optovoho rynku elektrychnoi enerhii ukrainy, dodatok 2 do dohovoru mizh chlenamy optovoho rynku elektrychnoi enerhii ukrainy. [appendix  2 to agreement between the members of wholesale energy market]. retrieved from: http://www.er.gov.ua/doc.php?c=1285 zhang, b.h. (2009) china clarified definition to relevant market for antitrust enforcement and its impact on m&a transactions. retrieved from: https://www.hg.org/article.asp?id=7827 baltic journal of economic studies 59 vol. 3, no. 3, 2017 analysis of mortgage lending in banks in ukraine violetta kharabara1 yuriy fedkovych chernivtsi national university, ukraine abstract. the purpose is a mortgage market that occupies one of the major places among the financial mechanisms of economic stimulation and stable development of the economy. the mortgage market occupies one of the main places of financial mechanisms and economic incentives for the sustainable economic development. mortgage lending covers the provision of long-term bank loans for the purchase, construction of residential real estate, as well as for repairs or to develop their own small businesses, where the collateral for such loans is real estate. distinctive features of mortgages include: mortgages, like any collateral, in fact, is a way to ensure proper implementation of the other (main) liabilities – loan or credit agreement, lease, contract, compensation, etc.; the subject of a mortgage is always real estate. real estate includes land plots and everything that is firmly associated with them: buildings, perennial plants, etc.; mortgaged property remains in the possession of the debtor; the agreement between the creditor and the debtor on the establishment of a mortgage is formalized by a special document – the mortgage, which is also subject to state registration. the mortgage crediting is the method of accumulation of financial resources, effective instrument of bank activity, and an important factor in economic development of the country on the whole. research results are market of the real estate and financial services development, to the revival of fund market, here the mortgage crediting is capable not only of activating reforms in industries of the economy but also gradually providing the decision of housing problems of the population. practical consequences consist in the solution of problems that are related to the market for mortgage services of ukraine’s development from 2006 to 2016. value/originality. analysis of the mortgage market in ukraine shows that in recent years, its scope, dynamics, and trends do not meet the needs of either people or developers. at a time when the dynamics of macroeconomic indicators do not give hope for a quick exit from the crisis and high political risks increase the uncertainty of social development, long-term mortgage loans are risky for the banking sector and for borrowers. implementation methods in combination with the continuation of market reforms in ukraine will contribute to the economic growth and socio-economic development. key words: mortgage, mortgage lending, mortgage market, loan portfolio, mortgage refinancing. jel classification: g10, g21 corresponding author: 1 department of finance and credit, yuriy fedkovych chernivtsi national university. e-mail: viola.17@ukr.net 1. introduction the mortgage market occupies one of the most important places among financial mechanisms of economic incentives and steady economic development. mortgage lending is a method of accumulating financial resources, an effective tool for banking activity, and an important factor for the economic development of the county in general. promoting real estate development and financial services, recovery of the stock market, mortgage lending can not only activate reforms in the economy but also gradually ensure solving housing problems of the population. the use of this tool will significantly reduce tension in the housing sector by providing an average citizen the opportunity to acquire housing through a mortgage. however, despite its relevance, mortgage lending in ukraine has still not received a proper development. the share of mortgage in ukraine’s gdp is less than 1%, while for the countries of the average level of development the world bank has set this indicator at the level of 25% of gdp. throughout the eu, the figure is estimated to be over 52%, in the us – more than 76%. problems associated with mortgage lending have been studied by many economists, including: b. busov, o. hudz, m. demianenko, o.t. yevtukh, o.o. yevtukh, s.  kruchok, v.  lahutin, a.  somyk, a.  chupis, k.  palyvoda, b.  hnatkivskyi, i.  liutyi, o.  berehulia, l. labetska, o. kireev, i. kovalyshyn, g. andreeva. a wide range of different theoretical and methodological aspects of mortgage are reflected in the works of national scientists: m. haienko, n. hryshchuk, v.  kravchenko, v.  krylova, o.  nepochatenko, i. puchkovska, v. savych, s. yurhelevych. the work is devoted to the study of the essence of the category of mortgage lending, as well as the analysis of baltic journal of economic studies 60 vol. 3, no. 3, 2017 the current state of the housing market in ukraine. the institutional component of the mortgage loan market is assessed and the main problems and prospects of development of this sphere of economic relations in the state are considered. 2. methodical approaches real estate has always been appreciated in banking as a reliable guarantee of repayment. pledge of land and real estate for a long-term credit is called a mortgage. the mortgage is a kind of pledge of real estate (land, enterprises, buildings, structures, and other objects directly connected with the ground) in order to borrow money. in the case of non-payment of loans, the pledged property is sold, and amount of proceeds pays off the debt to the creditor. according to the law of ukraine “on mortgage”, mortgage is defined type of security of the fulfilment of the obligations by real estate that is owned and used by the mortgagor, under which the mortgagee has the right in case of nonfeasance by the debtor of the obligation secured by mortgage to get his claims covered by the object of mortgage mainly before other creditors of the debtor in the manner established by this law. mortgage lending is crediting on a pledge of real estate loans or crediting using mortgages as security for the repayment of credit. on the basis of analysis of the economic literature aimed at studying the nature and characteristics of the mortgage, its following features can be identified: ‒ mortgage is used as a tool for raising funds for the development of production; ‒ mortgage ensures the implementation of property rights to object ownership when implementing other forms of ownership (e.g. sale) is inappropriate in a particular situation; ‒ mortgage contributes to the creation of fictitious capital through the possibility of issuing securities, leading to the increase in collateral working capital by the value of created fictitious capital. in economic terms, the mortgage is a market instrument of implementation of property rights for real estate objects in cases where other forms of alienation (sale, exchange) legally or financially are inexpedient that allows raising additional funds for various projects. in ukraine, mortgage lending is regulated by a number of regulations, laws of ukraine “on the national bank of ukraine”, “on banks and banking activity”, “on investment activity”, “on financial and credit mechanisms and management of property at housing construction and real estate transactions”, “on restoring debtor’s solvency or declaring it bankrupt”, “on mortgage”, “on pledge”, as well as by housing, civil and land codes, and more. although the concept of “mortgage” and “mortgage lending” in the national and foreign literature is thoroughly researched and widely used in practice, the study of theoretical and practical aspects of mortgage housing is omitted. furthermore, some scientists have questioned the existence of this type of loan, namely mortgage construction loan, determining mortgage and construction loans as a “completely different types of credit”. w hile other scientists attribute credit for the construction using a mortgage as collateral for the borrowed funds to the mortgage. national bank of ukraine interprets residential mortgage loan as a long-term loan provided by individuals, partnerships owners of apartments or housing cooperatives for financing costs associated with the construction or purchase of an apartment or dwelling house (including land under this apartment building or infield), which are provided in the property of lender by the borrower’s acceptance of such housing (land under it, or infield) in bail. thus, the national bank of ukraine refers mortgage construction loan to housing mortgage credit. 3. research results the state of the mortgage market is significantly affected by trends in real estate market, in particular, by that part of the market, where a supply and demand are formed for real estate, which can be used as collateral for mortgage lending. mortgage lending has an influence on the growth of investment in construction. proof of this is the dynamics of capital investment through bank loans and other loans. showed that bank loans as a source of investment capital make up about 12–15%, and their volume unevenly fluctuated over the period. the largest share of bank loans was observed in 2008  – 15.8%, and the lowest in 2015  – 7.3%, and since 2008 there is the gradual decline in the share of bank loans in financing capital investments. it should be noted that the mechanisms of construction financing through mortgages exist in many countries. banks lend to both end-users – citizens, and producers – builders. this is due to the fact that mortgage lending to construction is very effectively combined with classical mortgage lending to individuals  – buyers. obtained loans and own funds of citizens are used to pay the cost of purchased apartments, and the developer is able to repay the earlier loan. the main macroeconomic factors of the depressed mortgage market are the sharp deterioration of the banking system, in particular, the fall in loans to the economy, the rising cost of deposits falling of bank capital, income, and gdp. since one of the main indicators of economic development is the growth rate of gdp and its volume, then an assessment of the level of mortgage lending is expedient in terms of mortgage portfolio related to gdp. baltic journal of economic studies 61 vol. 3, no. 3, 2017 in 2006 in ukraine, the share of mortgage loans to gdp was 1.9%, in 2012  – 7.9%, by the end of 2015  – 6.1%, characterizing the ukrainian mortgage market as underdeveloped. instead, the volume of mortgage loans in the us and in the eu is almost 50% of gdp, in the uk  – 60%, in the netherlands and denmark  – 70%. this is due to the fact that conditions for mortgage lending in these countries are very favourable: interest rates on mortgages in these countries are 3.5-3.75%, which is comparable to the rate of price increases, and practically zero real interest rates mortgage makes it extremely attractive. during the 2013–2016 years in ukraine, the state of mortgage lending is characterized by decreased growth rates of loans, rising interest rates, a reduction in the term loans and the number of banks offering mortgages. because of too high interest rates, ukraine has very significant potential demand for housing, which is sensitive both to changes in house prices and financing terms. bank claims to customers are rather rigid: the presence of official income sufficient to repay the loan, a good credit history. according to statistics from the national bank of ukraine, during 2007, there were fluctuations in the value of mortgage loans: loans in national currency increased – by 12 percentage points (p.p.) compared to 2006, while loans in usd and eur fell by 10.8 p.p. and 1.8 p.p. respectively. in 2008 compared to the previous 2007, mortgage loans in the national currency have been decreased  – 7.3 p.p. and loans in us dollars increased – 7.7 p.p., for loans in euro, significant changes have not occurred. during 2009–2012, a gradual increase in mortgage loans in local currency can be observed and a simultaneous decrease in the us dollars. already in 2013, their share in total mortgage loans was almost equal and amounted to 47.1%  – in local currency and 47.1  – in us dollars. during 2014–2015, the situation has changed, so that the loans in national currency decreased at the end of 2015, and amounted to 37.1%, and in us dollars, on the contrary, increased and amounted to 59.4%; loans in euro have not undergone substantial changes and remained at a low level – 2.55% of total mortgage loans. analysing the dynamics of mortgage loans for 2011– 2015, it can be concluded that the leading position in terms of the total volume of loans and, consequently, income for the period 2011–2015 among the analysed banks is taken by pjsc “privatbank” and pjsc “oschadbank”. regarding the indicator of a share of loans secured by real estate in the total volume of loans, there is a slightly different situation. in particular, the leaders on this indicator are pjsc “ukrsotsbank”, pjsc “kredobank” (table 1). demand for housing remains limited, the effect of temporary factors that supported it is especially confined in kyiv. loans for housing intensified but the amounts are too small to influence the market or create risks. the shift in the amount of supply can be attributed to changes in its structure by region, housing options offered for sale and terms of financing its purchase. prices for residential real estate in the capital in dollar terms are reduced but growing at a slower pace, the number of transactions is low but slowly growing. commercial real estate today is unattractive for investment. demand for housing remains is limited. the real income of the population has barely grown significantly in the ii quarter of 2016 after a significant drop in the result of a prolonged crisis. this is one of the first signs of early growth of purchasing power, which, however, is not enough to significantly increase the demand for table 1 dynamics of mortgage loans for the period of 2011–2015 (million uah) indexes years banks private joint stock company “oschadbank” private joint stock company “privatbank” private joint stock company “ukrsotsbank” private joint stock company “kredobank” total number of loans 2011 50 459 107 755 29 471 2 084 2012 51 337 123 452 25 400 2 450 2013 52 179 139 663 28 061 2 698 2014 70 236 161 830 32 630 3 691 2015 65 462 189 147 36 403 4 248 number of loans secured by real estate 2011 15 398 6 219 5 21 184 1 362 2012 19 897 11 834 18 172 1 430 2013 24 750 7 339 21 614 1 326 2014 29 762 23 996 1 711 2015 24 400 2 140 share of loans secured by real estate in the total number of loans 2011 30,5 9,93 64,9 65,3 2012 38,7 9,6 71,4 58,4 2013 47,4 5,25 77,02 49,2 2014 42,4 73,5 46,3 2015 67,0 50,4 baltic journal of economic studies 62 vol. 3, no. 3, 2017 residential real estate. therefore, it is determined by the factors, which under normal circumstances are secondary. first, the risk of losing deposits in insolvent banks forcing investors to withdraw money and buy housing. the impact of this factor is gradually eroding, due to the cleaning of the banking sector is coming to an end, the sustainable inflow of deposits indicates a slow recovery of confidence in the banks. second, the abrupt fall of hryvnia allows those accumulated before the crisis currency savings to find attractive price offers in housing and use them. the influence of these factors also decreased as a result of a stabilization in the currency market and depletion of savings. third, the demand from settlers from the occupied territories is almost fully implemented. in addition to home buyers, banks lend to developers. this applies both to the capital and to regions. large companies take loans for up to three years. smaller companies obtain short-term loans from banks and use them to maintain the pace of construction if newly built apartments cannot be sold quickly. however, total lending by developers is currently small. the main source of funding is the developers’ own funds and proceeds from buyers. in the face of declining inflation and interest rates, further growth of hryvnia mortgage banks and financing of developers can be expected. however, in the short term, its rate will moderate in view of the shortage of quality borrowers and the unresolved problem of foreign currency debt. given that today the scale of such lending is small, its growth will not create risks and so will not have a significant impact on housing prices. in the long term, to control risks creating housing market for financial stability, the national bank intends to carefully monitor the prices and start a systematic calculation of ltv indicator (loan-to-value ratio) for mortgage loans. 4. findings the analysis of the mortgage market in ukraine shows that in recent years, its scope, dynamics, and trends do not meet the needs of either people or developers. at a time when the dynamics of macroeconomic indicators do not give hope for a quick exit from the crisis and high political risks increase the uncertainty of social development, long-term mortgage loans are risky for the banking sector and borrowers. for the development of mortgage housing, in our opinion, there is a need for government assistance through: ‒ completing the legal framework for mortgage lending; ‒ stability of hryvnia; ‒ favourable development programs of a partial compensation of property value; ‒ creating competition between banks in the domestic market, which increases the attractiveness of the mortgage; ‒ activation of state involvement in mortgage lending; ‒ creation of favourable conditions for attracting financial resources in mortgage lending; ‒ lowering interest rates and increasing lending in accordance with international standards. the implementation of the above together with the continuation of market reforms in ukraine will contribute to the economic growth and socio-economic development. references: belikov, t. (2014). current state and prospects of development of mortgage lending in ukraine . scientific journal "business inform, 7: 304-308. lyubun, a. (2011). mortgages, 1: 392. sarmatytska, o. (2013). bulletin of the national technical university "khpi", 20 (993): 146-154. storozhenko, о. (2014). financial mechanism mortgage. bulletin onu, 1 (2): 141-145. yakushev a.m. (2006). development funding mechanism construction of housing: abstract dis. candidate. ekon. sciences specials. 08.00.10:240. виолетта харабара анализ ипотечного кредитования в банках украины аннотация. цель работы. ипотечный рынок, который занимает одно из главных мест среди финансовых механизмов экономического стимулирования и устойчивого развития экономики. ипотечное жилищное кредитование охватывает предоставление долгосрочных банковских кредитов на приобретение, строительство жилой недвижимости, а также на проведение ремонтных работ или на развитие собственного малого бизнеса, где залогом по такому кредиту является недвижимое имущество. отличительными чертами ипотеки являются: ипотека, как и всякий залог, по сути, является способом обеспечения надлежащего исполнения другого (основного) обязательства – займа или кредитного договора, договора аренды, подряда, возмещения вреда и тому подобное; предметом ипотеки всегда является недвижимость. к недвижимому имуществу относятся земельные участки и все, что прочно с ними связано: здания, сооружения, многолетние baltic journal of economic studies 63 vol. 3, no. 3, 2017 насаждения и т.д.; предмет ипотеки остается во владении должника; договор кредитора и должника об установлении ипотеки оформляется специальным документом-закладной, которая также подлежит государственной регистрации. метод. ипотечное кредитование – метод накопления финансовых ресурсов, эффективного инструмента банковской деятельности и важного фактора экономического развития страны в целом. исследовательские результаты. рынок недвижимого имущества и финансового развития услуг, к возрождению рынка фонда, здесь ипотечное кредитование способно не только, чтобы активизировать реформы в промышленности экономики, но и постепенно, чтобы обеспечить решение жилищных проблем населения. практические последствия заключаются в решении проблем, что связаны с рынком ипотечных услуг украинского развития с 2006 до 2016. оригинальность значения. анализ развития ипотечного рынка в украине свидетельствует, что в последнее время его объемы, динамика и тенденции развития не удовлетворяли потребности ни населения, ни застройщиков. в условиях, когда динамика макроэкономических показателей не дает надежды на быстрый выход из кризиса, а высокие политические риски повышают неопределенность развития общества, долгосрочное ипотечное кредитование является рискованным как для банковского сектора, так и для заемщиков. реализация методов в комплексе с продолжением рыночных реформ в украине будут способствовать экономическому росту и социально-экономическом развитии. baltic journal of economic studies 268 vol. 3, no. 5, 2017 corresponding author: 1 department of accounting and taxing, zaporizhzhia national technical university. e-mail: m.irina.y@mail.ru 2 department of accounting, analysis, taxation and audit, zaporizhzhia state engineering academy. e-mail: tanya_zp_zgia@ukr.net doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-268-275 accounting and analytical procurement of state financial control and directions of its implementation in ukraine iryna maksymenko1, tatyana melikhova2 zaporizhzhia national technical university, ukraine abstract. the growth of the constructive role of public financial control in management is a logical consequence of the modernization of the established system of state financial control and necessitates an update of the ideology and paradigmatic principles of state financial control. a retrospective review of the theoretical and practical aspects of the methodology and organization in the state financial control of ukraine suggests that in the scientific environment these issues are studied extensively. however, despite the scientific and practical value of these works, the question of the possible modernization of the modern system of state financial control in the conditions of ukraine’s integration into the world economic system remains unresolved for the time being and is still the subject of lively discussions. the subject of the study is theoretical and methodological principles and methods for the implementation of state financial control, as well as the results of the activities of the state audit office of ukraine for 2017. the purpose of the study is to substantiate the theoretical positions of the system of state financial control in ukraine, to analyse the activity of the state audit service of ukraine for 2017, and to suggest ways to improve it. to achieve the research goal, the following questions are addressed and solved: the analysis of the activity of the state audit service of ukraine was carried out, based on the results of which the financial impropriety and state of its elimination for 2017 were described; the analysis revealed an increased attention to the organization of an effective system of financial control of budgetary institutions, the continuous improvement of mechanisms of management and control over budgetary funds. method. to achieve the defined goal, a complex of general scientific and special methods was used: the method of system analysis and complex structures formalization; generalization and scientific abstraction; statistical method of data processing, grouping method. results. however, despite the scientific and practical value of these works, the question of the possible modernization of the modern system of state financial control in the conditions of civilization and formation transformation of society through the establishment of paradigmatic principles of public audit, which are already typical of most highly developed countries of the world, remain in ukraine today finally unresolved and still the subject of lively discussions. conclusions. an important requirement for the construction of a modern system of state financial control at all levels of management is the implementation of control on the basis of ensuring a clear interaction and coordination of efforts of all participants in financial and budgetary relations to solve tasks of state financial control. the modern system of public financial control should be designed in such a way that it can be quickly and effectively adjusted to the solution of new challenges. thus, only the complex realization of the measures specified in the study will provide the best effect from their introduction. in view of this, the need to improve the system of public financial control is particularly urgent and relevant. this contribution was supported by research work of the department of accounting and taxing of the zaporizhzhia national technical university no. 0115u004682 “transformation of accounting, analysis, and audit methods in the context of integration processes in ukraine”. key words: budgetary institution, budgetary funds, state financial control, state audit service of ukraine, taxes. jel classification: e44, e60, e69, g18, g20 baltic journal of economic studies 269 vol. 3, no. 5, 2017 1. introduction one of the main problems that governments across the world are likely to face is the lack of budget resources for the state to fully fulfil its functions and to ensure the provision of constitutionally mandated civil rights. this sets a task before all the state structures, which involved in the budget process: ensuring the targeted and efficient allocation of budget funds. the strengthening of financial control from the state for rational and efficient use of financial and material resources by budget institutions is becoming a top priority in recent years, as the number of violations in the budget sphere remains so significant that it requires continuous monitoring of the budget funds management efficiency. the growth of the constructive role of public financial control in management is a logical consequence of the modernization of the established system of state financial control and necessitates an update of the ideology and paradigmatic principles of state financial control. a retrospective review of the theoretical and practical aspects of the methodology and organization in the state financial control of ukraine suggests that in the scientific environment these issues are studied extensively. particularly important in this area are the works of i. basantsov (basantsov, 2014: 78-81), who deals with the issues of independent external audit in the system of public administration, as well as strategic directions of modernization of state financial control; f. butynets, in the field of view of which the economic basis for the organization and implementation of economic control and audit at enterprises of all forms of ownership; o. chul (chul, 2011: 193-202) , who explores the general theory of control, fundamentals of state financial control methodology and organization in ukraine, conducts an analysis of theoretical and methodological and practical principles of the functioning of the system of state financial control in ukraine, as well as directions of its development in conditions of economic transformations. however, despite the scientific and practical value of these works, the question of the possible modernization of the modern system of state financial control in the conditions of civilization and formation transformation of society through the establishment of paradigmatic principles of public audit, which are already typical of most highly developed countries of the world, remain in ukraine today finally unresolved and still the subject of lively discussions. the objective of the research is to analyse results of the state financial control in order to increase the efficiency of using budget funds in ukraine and ways to improve it. 2. the economic essence of state financial control the main tasks of the state financial control body are: implementation of state financial control over the use and protection the state financial resources, non-current and other assets, accuracy of demand determination in budgetary funds and liabilities incurrence, effective use of funds and property, the state and reliability of accounting and financial accountability in government departments and other executive bodies, state funds, funds of statutory state social insurance, budgetary authorities and economic entities of the public sector of the economy as well as enterprises, institutions, and organizations receiving (received during the period audited) funds from budgets of all levels, state funds and funds of compulsory state social insurance, or use (used in the period audited) public or communal property, in compliance with budget laws, statutory compliance on public procurement, economic entities activities, irrespective of forms of ownership, which are not assigned by law to the controlled institutions, according to judicial decisions, adopted in criminal proceedings. in accordance with the law of ukraine of 26.01.1993 no. 2939-xii “on basic principles of the state financial control implementation in ukraine” (as amended) and the regulation on the state audit service of ukraine, approved by the resolution of the cabinet of ministers of ukraine on february 3, 2016 no. 43, the main tasks of bodies of the state audit service of ukraine are the implementation of state financial control aimed at assessing the effective, lawful, targeted, efficient use, and preservation of public financial resources and budget savings achievement. during the implementation of the state financial control measures, there are a number of cases of excessive need for budget funds, implementation of budget expenditures, which with the budget code and the law on state budget are assigned to other levels of the budget (non-transferable proper authorisation), financing without approved budgets, etc. the implementation of such operations leads to excessive allocation of funds from budgets of all levels and, as a result, causes significant budget losses. thus, in the course of the state financial control implementation, the facts are established as for the overstatement the demand for budgetary funds, conducting expenditures out of public funds, which by budget code and the state budget law was taken to the budgets of another level (without the transfer of respective powers), financing without approved estimates, etc. the implementation of such operations leads to an unnecessary allocation of funds from budgets of all levels and, as a result, results in significant budget losses. by providing state control over the use of budget funds, with the state safe of public and municipal property maintenance, the state audit service, within the limits of the powers granted by the legislation, during 2017 studied the main trends in the state property management and implemented transactions with state property and funds. baltic journal of economic studies 270 vol. 3, no. 5, 2017 this control covers such important areas for society as education, healthcare and social protection of the population, science and culture, housing and communal services, fuel and energy and agro-industrial complexes, transport, defence, etc. control measures during the year have been carried out in accordance with quarterly work plans. in addition, the state audit service’s bodies conducted a number of control measures to fulfil the instructions of the cabinet of ministers of ukraine, as well as at the request of law enforcement agencies. the topics, under which control measures have been carried out in most ministries, other central executive bodies, large enterprises of the state and municipal sectors of the economy, local self-government bodies, etc., have been determined taking into account their relevance, social value, volumes of funds from the state and local budgets aimed at financing the budget programs and taking into account the risks of committing financial irregularities. 3. analysis of activities of the state audit service of ukraine in order to increase the level of management of local budget resources, optimize expenditures of local budgets, and strengthen their revenue, and within the framework of strengthening control over the implementation of local budgets, by 2017, the state audit service provided 39 control measures on the implementation of local budgets of different levels, among which 22 are revisions and 17  – audits. with the help of these control measures, there was revealed a number of problems and disadvantages in the state resources management, numerous cases of illegal and inefficient spending of budget funds, as well as the existence of substantial reserves for filling the revenue base of local budgets were identified. the detailed information regarding volumes of revealed and refund of such violations according to regions are presented in table 1. table 1 amounts of revealed and refund of violations when allocating budget funds by regions of ukraine for 2017 № region a number of objects where irregularities are detected during budgetary funds appropriation a number of detected violations during budgetary funds appropriation, (thousand uah) a number of compensated violations during budgetary funds appropriation, (thousand uah) with state budget funds with local budgets funds with state budget funds with local budgets funds 1 vinnytsia oblast 4 162,94 3408,83 162,94 3072,02 2 volyn oblast 7 4812,88 46,24 0,00 46,24 3 dnipropetrovsk oblast 1 4728,80 0,00 571,80 0,00 4 donetsk oblast 2 2633,21 0,00 511,69 0,00 5 zhytomyr oblast 8 4291,10 52,27 1487,61 0,00 6 zakarpattia oblast 3 1314,93 181,32 1314,93 181,32 7 zaporizhzhia oblast 6 1476,49 3088,66 1476,49 460,62 8 ivano-frankivsk oblast 1 0,00 41,23 0,00 18,02 9 kirovohrad oblast 2 428,61 1406,28 0,00 1406,28 10 luhansk oblast 2 415,46 908,34 415,46 908,34 11 lviv oblast 12 19486,01 1123,90 1618,64 636,30 12 mykolaiv oblast 1 0,00 63,69 0,00 0,00 13 odesa oblast 2 60,16 150,20 0,00 134,50 14 poltava oblast 4 461,46 160,75 0,00 130,99 15 rivne oblast 7 601,37 0,00 587,70 0,00 16 sumy oblast 8 2762,32 0,00 837,20 0,00 17 ternopil oblast 8 577,70 30,00 109,60 30,00 18 kharkiv oblast 7 5517,44 107,12 66,65 14,28 19 kherson oblast 8 8081,52 7813,70 6717,51 627,05 20 khmelnytskyi oblast 7 949,92 171,18 777,29 91,20 21 cherkasy oblast 12 9182,24 3261,43 1217,64 479,99 22 chernivtsi oblast 4 691,88 22,09 19,20 0,00 23 chernihiv oblast 11 924,36 460,86 907,18 460,86 24 kyiv oblast/ kyiv city 5 4478,11 372,52 56,84 0,00 in totality 133 74038,91 22870,61 18856,37 8698,01 apparat sasu 1 6050,00 0,00 0,00 0,00 total: 134 80088,91 22870,61 18856,37 8698,01 source: the author’s development baltic journal of economic studies 271 vol. 3, no. 5, 2017 the most large-scale and widespread financial violations that resulted in the loss of resources are: the sale of goods, works or services by economic entities (except for use, rent) free of charge or at a bargain price – almost 351.8 mln usd; illegal expenses due to the payment of the inflated value of performed work and/or provided services and overstatement of the number and cost of purchased goods – 264.6 million; non-charging and failure to deliver (incomplete transfer) of receipts to the general and special (except for the slush fund of budgetary establishment) funds of the budget – almost 206.6 mln uah; non-charging and failure to deliver by the state and municipal enterprises of a part of the profit to the budget – more than 156.9 mln uah; illegal payments to individuals (compensation, benefits, privileges and subsidies, pensions, scholarships), including those who did not have the right to receive them or in excessive amounts – more than 148.9 million uah; inappropriate expenses – almost 140.1 mln uah; writing-off the funds for costs/expenses without the receipt of goods, works or services or in volumes higher than their actual value – more than 138.6 mln uah; carrying out illegal (extra) wage payments – more than 111.7 mln uah; lack of funds and property values – 80.1 mln uah; non-payment and/or non-application of measures on the recovery of amounts of penalties provided for by the terms of the agreement – 71.3 mln uah; illicit alienation of property – 68.3 mln uah; unreasonable covering of expenses of individuals or legal entities, including in the absence of accounts receivable – more than 58.6 mln uah; loss of income due to the write-off of accounts receivable – almost 55.4 mln uah; excessive allocation (receipt) of budget funds to legal entities, beneficiaries owing to an overstatement of the relevant calculations or who did not have the right to receive them – 51.4 mln uah; liquidation (destruction, disassembly) of property, conducted contrary to the legislation  – more than 51.3 mln uah; coverage of the estimated cost of the special fund at the expense of the general fund (without the restoration of cash fund expenditures of the general fund) – almost 46.0 mln uah; payment of contributions to state target funds for illegal sums for the remuneration of labour or for an overcharge charge rate of almost 42.7 mln uah; underpayment of income from the sale of free-ofcharge goods, services from business entities by budget institutions – over 29,0 mln uah; overdue write-off for an accounting of intangible assets that are not available – 23.4 mln uah; insufficient payment, from the side of business entities, the appropriate income for the property, granted for use, rent – 22.7 mln uah; expenditures on charitable, sponsorship and other non-refundable assistance exceeding specified volumes or exceeding the maximum amount – 22.6 mln uah; implementation at the expense of the budget of one level of expenditures, which in accordance with the budget law should be implemented from the budget of another level – 22.4 mln uah, etc. the main reasons of such violations are low quality of internal control and irresponsible attitude by many budget managers and managers of enterprises, institutions and organizations. state audit service provides a systemic control over the elimination of deficiencies and violations detected by control measures and completeness of requirements fulfilment of the state service. so, in order to properly respond to violations of law enforcement authorities in 2017, over 1.4 thousand revision materials have been handed over. based on the results of control measures consideration during the reporting year, 669 pre-trial investigations have been initiated. the provided data indicate the need for increased attention to the organization of an effective system of financial control of budgetary institutions, continuous improvement of the mechanisms of management and control of budgetary funds. state financial control over compliance with budget legislation in budgetary institutions is aimed at ensuring effective and efficient management of budget funds and is carried out at all stages of the budget process by its participants in accordance with the budget code and other legislation, and provides [3]: budget funds management assessment (including conducting state financial audit); correctness of accounting and reliability of financial and budget reporting; achieving the savings in budget funds, their target use, efficiency and effectiveness in the activities of budget funds managers by adopting sound managerial decisions; conducting the analysis and evaluation of the state of financial and economic activity of budget funds managers; preventing violations of budget legislation and ensuring the interests of the state in the process of managing state-owned objects; substantiation of the planning of budget revenues and expenditures. thanks to the measures taken during 2017, the state audit service and its territorial bodies have provided compensation for losses of financial and material resources for a total amount of more than 611.5 mln uah. so, budgets and budget institutions, organizations and enterprises received almost 141.3  mln uah, as well as reimbursement and renewal of illegal, misplaced expenditures and a shortage of resources for the total amount of more than 470.2 mln uah. in particular: baltic journal of economic studies 272 vol. 3, no. 5, 2017 held by the executors of additional works, provided services or delivered goods more than on 77.0 mln uah; carried out netting of costs and adjustments of settlements totalling 33.1 mln uah; offset by a special fund the illegal expenditures made from the general fund estimates institution, organization (was to be made in the special fund)  – with over 18.0 mln uah; reduced budget allocations/allocations to budget funds administrators (including independently by the control bodies of control objects during the audit) for violations of excessive allocation of budget funds  – in the amount of almost 30.5 mln uah and for violations of misuse of budget funds – over 45.1 mln uah; adjusted payments with state social insurance funds (including credited to future payments)  – by 19.3 mln uah; returned funds to the accounts of the enterprise, institution or organization of state and communal ownership – more than 31.6 mln uah; funds returned to local budgets (except for the special fund of budgetary institutions) – 68.3 mln uah, as well as returned to the state budget (except for the special fund of budget institutions) – 25.2 mln uah; excessively paid salaries from persons who received them unreasonably (superfluously) on their applications were kept – almost 17.6 mln uah; returned illegally alienated property of state and communal property – by almost 6.0 mln uah; recovered funds from the guilty persons (including overdue paychecks) were collected  – almost 14.1 mln uah; returned material assets (in the amount of shortage) – almost 6.8 mln uah; received additional revenues to local budgets (except for the special fund of budget institutions) for the amount of more than 62.7 mln uah; received incomes to the accounts of enterprises (institutions, organizations) of the state form of ownership  – almost 24.3 mln uah and communal ownership – more than 6.2 mln uah; received incomes to the special fund of budgetary institutions and organizations financed from the state budget  – more than 5.1 mln uah, and also financed from local budgets – almost 8.4 mln uah; received revenues to the state budget (except for the special fund of budget institutions)  – 16.2 mln uah and so on. in particular, during january-december 2017, the state audit service provided state and local budgets with the funds set forth in the resolution of the cabinet of ministers of ukraine dated february 16, 2011 no. 106 “some issues for taxes, duties, payments and other budget revenues accounting” (with amendments) by codes of budget classification in the aggregate in the amount of more than 87.5 mln uah, which is 9.3% higher than the corresponding data for 2015. in its turn, filling the state and local budgets according to the results of control measures of the state audit service for the codes of the budget classification of incomes, the control over the proceeds for which have not been fixed for the state audit service in accordance with the resolution number 106, in 2016 amounted to a total of more than 41.9 mln uah, the share of which or more than 95% revenues to local budgets. in addition to this, the state audit service bodies are taking other measures on the part of the materials of control measures implementation. thus, according to the results of the analysis of public procurement (without access to the object of control by means of a request for documents), the bodies of the state audit service for the reporting period prevented violations in the field of public procurement for a total amount of 4.7 bln uah, of which abolished competitive bidding for a total of 3.8 bln uah and contracts concluded amounting to 889.9 mln uah have been cancelled. also, within the framework of carrying out an operational audit of economic entities of the state sector of the economy, as a result of the proper response of control objects to reservations of state auditors during january-december 2016, illegal and inefficient spending of state resources was forbidden against the total amount of 275.9 mln uah. the authorities of state audit service pay a considerable attention to the personal responsibility of officials who violate the financial-budgetary discipline (harasym, loboda, 2013). in 2017, for breach of financial discipline for administrative responsibility (articles 164-2, 166-6, 16412 and 164-14) as a whole there were attracted more than 5.4 million public officials for the total amount of administrative fines of more than 1.8 mln uah. to disciplinary action in the reporting period, there have been attracted 1081 officials, of which 134 is dismissed, to the material – 771 persons. in order to induce control objects to fulfil requirements for the compensation of identified losses of financial and material resources, the state audit service has brought to court in the interests of the state 143 lawsuits in the amount of more than 62.2 mln uah. in addition, 376 civil actions were initiated before the prosecutor’s office, the object of control or its governing body, and another state body. during 2017, the state audit service provided almost 1.7 thousand opinions and suggestions on the application of financial sanctions. in whole, according to the results of the control measures, in 139 cases budget allocations were suspended, in 1194  – operations with budget funds were stopped, and 114 budget administrators were reduced budget allocations for almost 30.3 mln uah. baltic journal of economic studies 273 vol. 3, no. 5, 2017 4. ways to improve public financial control in ukraine the proper interaction between the bodies of the state audit service and the bodies of the state financial inspectorate is one of the factors on which the effectiveness of the tasks and functions entrusted to the bodies of the state auditor services on the provision of an adequate level of fiscal discipline in the context of taxes payment in the state. taking into account the abovementioned facts, the issue of its improvement is under constant control of the state service. representatives of the sasu bodies are constantly involved in conducting joint actions with the bodies of the state financial inspection aimed at identifying and stopping abuses and violations in the financial and economic sphere of the state, including the budgetary field. the functioning of an efficient, high-quality, and transparent system of state financial control significantly increases the level of trust in the state both its own citizens and the foreign community, as well as creates the necessary conditions for the business development, economic growth of the country, the formation of a congenial investment climate, etc. key requirements to be met by the system of public financial control are presented in fig. 1. during the study of the contemporary trends in the state financial control at the government and local levels, it was determined that in the system of state financial control these requirements are often defied and ignored, leading to disadvantages of this system (table 2). as a result of the conducted research, we consider that in order to improve the state financial control, increase the level of efficiency of its implementation should be ensured: development of common conceptual foundations of the organization of state financial control, standardization of forms and methods of control activities; requirements for carrying out the state financial control in ukraine economic efficiency complexity of carrying out transparency of holding controllability of each base of state financial control improvement of control and continuity of development diplomacy and integrity of controllers the precise interaction of the axes of control subsystems fig. 1. key requirements to be met by the state financial control in ukraine source: the author’s development table 2 disadvantages of the system of state financial control in ukraine disadvantages of a legal status organizational deficiencies lack of legislative decisions on the formation of a holistic system of state financial control. insufficient attention to control actions that provide preventive control functions. the discrepancy between the rules of existing laws and regulations in the field of state financial control. duplication and parallelism in the work of regulatory authority of different levels, excessive overload of some objects by audits and inspections. non-execution of provisions of the current legislation in terms of ensuring proper interaction between the state financial control authorities, which increases duplication and parallelism in the work. the remoteness of bodies of the state financial service from the development, discussion, and adoption of organisational and legal measures to prevent violations. non-observance and violation of norms and principles of budget and tax legislation by participants in financial and economic relations. insufficient explanatory work with the community on the tasks of state financial control and on ensuring the elimination of committed violations; uncertainty in all spheres of state financial control. inadequate use in the control-and-auditing methods oriented to the determination of the effectiveness of the use of public financial resources. ineffective management of public funds and property lack of proper responsibility of officials for the violation of laws, rules, regulations and appropriate compensation of the lost resources. source: the author’s development baltic journal of economic studies 274 vol. 3, no. 5, 2017 adoption of standards for the implementation of state financial control to create an effective mechanism to resist violations and excessive use of law in the sphere of use of budgetary funds, as well state and municipal property; optimization of the organizational structure, clarification and delineation of the functions of the state financial control bodies; compliance with international principles of financial control at the state and regional levels, adaptation of the system of state financial control to european requirements; introduction of preventive forms of state financial control in the work of controlling entities; staffing improvement of the system of state financial control (preparation of material-and-technical, scientific and information-analytical support for system functioning of state financial control. 5. discussion analysing the results, it should be noted that the system of public financial control in ukraine has a number of problems and disadvantages that make it ineffective, costly and opaque. currently, there is not enough legal, informational, organizational, communicative, methodological, and personnel support for the implementation of state financial control. all these factors have a negative impact on the level of public confidence in the government, on the development of financial and budgetary relations in ukraine, inhibiting a number of transformations in this area. in view of this, the necessity to improve the system of state financial control is particularly relevant and urgent. it is possible to solve the problems and overcome the weaknesses in the organization and functioning of state financial control in ukraine through the consistent implementation of measures aimed at constructing a modern model of state financial control that would meet the needs of the national economy and the requirements of the european union. 6. conclusions consequently, the state financial control over accounting in budgetary institutions should be considered as a multi-faceted and complex system of checking the legality, timeliness and completeness of the formation of items of income and expenditure, the targeted use of budget funds for the relevant items of expenditure, as well as the analysis of rational and their effective use. in particular, the state financial control should ensure proper (economic, effective, efficient, and transparent) public finance management. that is, state financial control is an integral part of budget institutions stimulus spending and is intended to ensure the process of creating reliable information on the state of accumulation and use of budgetary funds, as well as the effectiveness of fiscal regulation to take timely and appropriate measures. to date, in ukraine, the following types of state financial control of budgetary institutions are used: financial and economic audit, state purchases and budget institutions inspection. the introduction of these types of financial control, taking into account the standards for state audit of public finances, contributed to increasing the efficiency of using budget funds. however, this analysis allowed revealing the main problems in the field of state financial control of budgetary institutions, which are the reason for a rather high level of violations of legislation. in order to increase the effectiveness of the state financial control of budgetary institutions, it is necessary, first of all, at the legislative level: to unite in a single system financial audit, checking the state purchases and budget institutions inspection; to develop a methodology for the above control measures implementation; to develop and implement a methodology for determining and assessing the risks of financial and economic activity of budgetary institutions in accordance with the fields of activity. solving these issues will reduce violations in the financial and budgetary sphere, improve the management of financial, material and labour resources of budget institutions, as well as fulfil their functions and tasks to achieve socially important goals for society. references: basantsov, i. v. 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(2013). reformuvannya orhaniv derzhavnoho finansovoho kontrolyu ukrayiny v umovakh yevrointehratsiyi [reform of state financial control in terms of european integration of ukraine]. ekonomichnyj chasopys – ххi, vol. 5-6 (1), рр. 53. resolution adopted by the general assembly № 69/228 (2014). promoting and fostering the efficiency, accountability, effectiveness and transparency of public administration by strengthening supreme audit institutions. retrieved from: http://www.un.org/es/comun/ docs/index.asp?symbol=a/res/69/228&referer=/ spanish/&lang=e (accessed 30 december 2017). the lima declaration (issai 1) (1977). approved at ixth congress of intosai, lima/peru, “intosai professional standards committee”. retrieved from: http://www.issai.org/media/12901/issai_1_e.pdf (accessed 30 december 2017). baltic journal of economic studies 135 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 national academy of management, ukraine (corresponding author) e-mail: svitrad98@ukr.net orcid: https://orcid.org/0000-0002-3680-7952 doi: https://doi.org/10.30525/2256-0742/2023-9-1-135-145 state governance for ukraine’s grow th and development: trade aspect svitlana radziyevska1 abstract. the quality of a country’s governance and public administration is a key factor in its economic performance and the well-being of its citizens. the objective of the paper is two-fold: first, to substantiate the importance of the good and strong state governance for efficient functioning of the national economy; second, to analyze the basic indicators of ukraine’s economy and its foreign trade, as well as to come up with the possible solutions to the identified problems. methodology. careful reading and examination of the conclusions made in theoretical and empirical works on state governance and government regulation by the ukrainian and foreign scholars served the basis of the research at the initial stage. the data, taken from the official site of the state statistics service of ukraine, served as the information source for using various methods, e.g.: mathematical, statistical, etc., which resulted in the analysis of the trends of the basic indicators of the economy of ukraine and its foreign trade: gdp and gross external debt, exports/imports/turnover of goods/services and goods and services taken together; dynamics of the balance of trade in goods/services, as well as goods and services taken together; exports to imports ratio (goods and services). results. the share of exports of goods in all exports of goods and services of ukraine has been increasing and in 2021 it reached 84%. the results show that: first, the trend of the volume of exports of goods for the period of 2016-2021 is y=5.11x+31.177 while that of services for the same period is y=0.5986x+9.9367; second, the balance of trade in goods has been negative since 2005 (except 2015), and continues to be negative throughout the analyzed period; third, the share of the goods with high-added value in exports has been declining. the in-depth analysis allows to conclude that in the conditions of the growing gross external debt of ukraine (e.g., for the period of 2006–2021 the trend is y=2811.1x+90308 while that of gdp for the same period is y=823.65x+135155) it is essential: firstly, to follow the trade strategy of the eu which focuses on exports of services as compared to goods; secondly, to improve the commodity composition of exports so that the goods are value-competitive as opposed to price-competitive. practical implications. it’s substantiated that the trade policy is to be formulated and implemented so that foreign economic activity of ukraine is more services-oriented and science-and-technology based. value/originality. the country is to occupy a more decent place in the world division of labor and is to be reintegrated into the world economy in the interests of the ukrainian people. key words: government, state governance, public administration, government regulation, foreign trade policy, basic trade indicators, economy of ukraine. jel classification: h10, f10, h13, h60, f02 1. introduction modern socio-economic transformations of planetary scale are significantly changing the place and role of the state in the local, national, and global dimensions, which increases the importance of discussing the problems of transformation of its functions in the context of globalization (grytsenko, 2021). since the end of the cold war and the so-called triumph of capitalism (francis fukuyama’s ‘end of history’), free-market neo-liberal economic development has become the accepted approach to economic activity across the globe, and the supranational institutions (the international monetary fund, the world bank, and the world trade organization) have actively sought to encourage the policies in this respect across the globe, which presented serious challenges to the very basis of governance in the world today: the nation-state ( jones, 2006, p. 9-12). however, contrary to baltic journal of economic studies 136 vol. 9 no. 1, 2023 the expectations of the supporters of free trade, "the invisible hand", and the market regulation as opposed to the government regulation, as well as all the discussions aimed at convincing the scholars that the time of the state as the key player on the global field of the world has been running out (e.g., ohmae, 2007), practical life of the leading economies has already proven the opposite – the role of the government has been strengthened and expanded (e.g., daokui & maskin, 2021). moreover, during the reforms and hard times (e.g., global financial crisis 2007–2009, covid-19, etc.) the effectiveness of state governance, the quality of public administration, and the success of quickly implemented policies are appeared to be the key factors in confronting a wide variety of domestic and international problems, many of which are not only of economic origin (e.g., korablin, 2021; report, 2011; bryant & sigurjonsson, 2022; honcharenko et al., 2020; halasiuk, 2019). thus, the state, its role in organizing the life of the society, the scope of its responsibilities are undergoing transformations under the impact of the current version of the neoliberal globalization. more broadly, government finds itself modified due to many challenges, but still remains: firstly, the guarantor of its citizens’ rights; secondly, the newlymodelled influential key player in market economy; third, the partaker in shaping the modern world economy. in fact, the debates on the essence of the local, national, regional, transnational, interregional, ‘network’, etc., as well as the world governance, its axiological dimensions are back on the agenda. the research on the problem of the state governance, public administration, government regulation is justified not only by the increasing attention to the above mentioned issues in the scientific circles (e.g., boltayeva & axmedova, 2021; grytsenko, 2021; riabets, 2022; radziyevskyy, 2007), but by the necessity to find the ways to improve the functioning of the ukrainian economy. the topicality of the issue is confirmed by the editors-in-chief of the journal of government and economics, d.d. li and e.s. maskin, who highlight the urgency of opening debates within the new field of government and economics, an emerging body of work that aims to better understand government’s role, incentives and behavior in a modern market economy, as well as to gain a better insight into how government actions shape the economy’s performance (daokui & maskin, 2021). the objective of the paper is two-fold: first, to substantiate the importance of the good and strong state governance for efficient functioning of the national economy; second, to analyze the basic indicators of ukraine’s economy and its foreign trade, as well as to come up with the possible solutions to the identified problems. 2. government and its role in modern market economy the goal of this section is to demonstrate that the role of government in the market economies of the leading countries of the world has been modified, strengthened, expanded. according to dr. a.l. way, professor of political science, the president of the cyberland university of north america, a government, comprised of public institutions and serving as the instrument of its overall political society, differs from all other institutions within the society. firstly, the government is universal in its reach within the society, its authority extending to all members of the society. secondly, the government claims a monopoly of control over the use of armed force and violence by the society and its members. thirdly, if the government and society are stable, governmental decisions and actions bear the force of political legitimacy, the decisions and actions being widely recognized within the society as morally and legally binding on all of its members. fourthly, the decisions of government are authoritative; i.e., they (a) are made and carried out for and in the name of the entire society, (b) are vested with the authority of the society, and (c) are binding on all members of the society. fifthly, the government, in making and enforcing its decisions, authoritatively allocates the benefits and costs of living in the society. sixthly, all governmental decisions and actions involve the spending of tax money and are therefore the business of the general public. among the major functions of modern government are foreign diplomacy, military defense, maintenance of domestic tranquillity, administration of justice, provision of public goods and services, promotion of economic growth and development, the operation of social-welfare programs, etc. (way, 2022). american scholars craig volden from the university of virginia and alan e. wiseman from vanderbilt university offer an initial glimpse into substantial research questions about the market and nonmarket impacts of government and self-regulation (volden & wiseman, 2012, p. 36), and they conclude that one of government’s most significant roles in society is to establish and enforce rules that influence how firms and individual consumers conduct their interactions. if given perfect information and total control, a social welfare maximizing government would presumably establish industry rules that ensured that the products and services being brought to the marketplace were endowed with a socially optimal level of quality. when government is not all-knowing or all-powerful, questions arise regarding how socially beneficial goods and services can emerge in a marketplace where firms have a clear incentive baltic journal of economic studies 137 vol. 9 no. 1, 2023 to produce low-quality goods and foist them on an ignorant public (volden & wiseman, 2012, p. 34–36). indeed, government’s role in the modern market economy has been expanded and it is within the scope of the national governance to ensure the proper functioning of the market: regulating financial markets, managing the monetary system, maintaining adequate market competition, protecting consumers, negotiating trade and investment agreements, and establishing and enforcing technical standards for products. historically, governments of european city-states negotiated trade agreements and protected trade routes. so, government’s role continues to expand. in china, europe, and the u.s., for example, there is currently intense pressure for government to regulate the behavior of internet platform companies such as facebook and tencent (daokui & maskin, 2021). m. bryant and t.o. sigurjonsson from iceland in their joint work support the idea of strengthening the state governance and government regulation for the effective functioning of the national economy: they share the lessons learned and argue that the failure of 97% of iceland’s financial system in october 2008, was not solely due to the tight coupling and complexity of the financial system but was the result of bankers and their owners, who took actions that violated system rules and regulations so that complete system failure was inevitable. the researchers explain the problem by the fact that in a brief period, iceland went from statism to neoliberalism with profound ill effects on its financial system, its public institutions along with its relationships with other nations (bryant & sigurjonsson, 2022, p. 354–364). the reforms, conducted in ukraine after the country obtained its independence, were characterized by the same mistakes, which are still to be corrected. french scholar agnès festré’s publication is of high relevance here as well, since it is devoted to michael polanyi, a very impressive and interesting scientist and philosopher, who, like his brother, social researcher, karl polanyi, the author of the "the great transformation", was very concerned, for both professional and family reasons (his mother was from vilnius), about the economic and political situation in the soviet union and the widespread diffusion of planning ideas including in the scientific domain. the aim of her paper is to show that, by considering polanyi’s mixed vision of the market economy as embedded in his broader pursuits into the nature of knowledge and liberalism, one can find coherence in his overall understanding of the interplay between spontaneous and organized orders of coordination, which otherwise cannot be found. one of the arguments is that polanyi’s and hayek’s views on liberalism and tacit knowledge are different, which made it possible for polanyi to agree with keynes that government should intervene to fight unem ployment and limit income inequalities while also upholding the concept of a self-organized economy and society in line with hayek (festré, 2021). it must be noted that growing state interventions combined with effective market mechanism functioning prove to be the most suitable during challenging times. for example, china, as well as india, got out of the global financial crisis in a much better shape in comparison with many nations of the world, and the global financial crisis proved that "when things do fall apart, the state remains the only institution capable of mobilizing the resources needed to confront large and systemic threats. the idea that the nation state had somehow outlived its usefulness in a borderless world was never very serious. since the state is pivotal to establishing an inclusive social contract and strengthening participatory politics, it is both imprudent and unrealistic to reduce or bypass its role in managing economic development and change" (report, 2011). ukrainian economist, prof. s.o. korablin in his study concludes that government regulation has become a key factor in transforming covid vaccines into the public good (korablin, 2021). importantly, the governments have been organized to get more resources for more efficient national operations, which is illustrated in the joint work of american and chinese scientists, who suggest detailed analysis of the size of government budgets (daokui & maskin, 2021). the economists display the ratio of government expenditure relative to gdp over time for key countries, including oecd and emerging market economies. the following results have been obtained. first, in the 250 years since the industrial revolution, the size of government has greatly expanded – in the mid-19th century, government budgets around the world made up 10% of gdp on average, while now it is around 39%. for the u.s., after the civil war, the budget of the federal and local governments accounted for 7% of gdp, while today, the ratio is 38%. second, across countries, high-income nations on average have larger governments per capita than low-income ones, e.g. the average ratio of government budget to gdp among developing countries in 2018 was around 32%, whereas that of for high-income – about 44%. just to make one comparison: the 2010 budget of the government of india, a large and low-income emerging market economy was 27% of gdp, whereas the u.s. government budget that year was around 43% of gdp. the third result is that for the past four decades, high-income countries have demonstrated a relatively stable government size as measured by the share of government budget in gdp. when an economy reaches an income level of around $10,000 to $12,000 usd per capita, the ratio tends to stabilize (daokui & maskin, 2021). baltic journal of economic studies 138 vol. 9 no. 1, 2023 specifically, the concept of neoliberal free-market has been widely reexamined and reshaped in the scientific literature in the beginning of the 21st century. for example, james k. galbraith criticizes even the concept of market: "the word market is a negation. it is a word to be applied to the context of any transaction so long as that transaction is not directly dictated by the state. the word has no content of its own because it is defined simply, and for reasons of politics, by what it is not. the market is the nonstate, and thus it can do everything the state can do but with none of the procedures or rules or limitations. it is a cosmic and ethereal space, a disembodied decision maker – a maxwell’s demon – that, somehow and without effort, balances and reflects the preferences of everyone participating in economic decisions. it is a magic dance hall where supply meets demand, flirts and courts; a magic bedroom where the fraternal twins quantity and price are conceived. it can be these things precisely because it is nothing at all" (galbraith, 2008, p. 19–20). nevertheless, it’s logical to agree with the academician of the national academy of sciences of ukraine, prof. a.a. grytsenko, who explains that the market as a mechanism for reconciling the private interests of economic entities and the state as the embodiment of general economic interests are complementary structures. in the study he proves that the main economic functions of the state are: expression and representation of general economic interests, ensuring economic needs of society as a whole and protection of public economic interests, while all the other functions are derivative (grytsenko, 2021). finally, the editorial board member of the journal of governance and regulation m.m. ali stresses that economic performance as a whole of the world depends on peace, tranquility, socio-economic conditions, health services, cultural and demographic stability, human rights protection which will provide the effective economic diplomacy with transparency, accountability, and fairness. the scholar underlines that to bring this stability, the world economy and the national economies need strong good governance with ethical values, morality, humanistic approaches, corruption-free, serious about environment protection, etc. (ali, 2022, p. 198). 3. governmental promotion of economic growth as the key objective of the state the current section focuses on the governmental promotion of economic growth as the key objective of the state in the globalized world economy since good and strong state governance contributes to much more efficient functioning of the economy at any stage of its development while strong institutions, high quality public administration are important prerequisites for successful delivery on national objectives and policies. the central government of a modern society seeks to facilitate and foster the growth and development of the nation’s overall economy. the government actively pursues public policies – especially in the areas of taxation, foreign trade, and regulation of and subsidies for domestic economic activities – designed to promote increased capital formation and industrial production, higher levels of commercial activity within the society, a more favorable balance of trade with foreign nations, and hence low levels of unemployment and widespread economic prosperity among the members of its own society. governmental promotion of economic growth has been around for approximately 500 years (way, 2022). theoretically, governance consists of the traditions and institutions by which authority in a country is exercised. this includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them (world governance indicators, 2022). the quality of a country’s governance and public administration is a key factor in its economic performance and the wellbeing of its citizens. in the eu, strong institutions and high quality public administration in member states are important prerequisites for successful delivery on the eu objectives and policies. today, dg reform is engaged in over 1 000 reform projects in all 27 eu countries. areas of intervention include the central administration, local administration, digital government, public procurement, better regulation, the judicial system, the fight against corruption and fraud and the better absorption of european structural and investment funds (directorate-general for structural reform support, 2020, p. 2, 11). taking into account the above mentioned, it is nevertheless obvious that good and strong governance presupposes formulation and implementation in a timely manner of a wide variety of national-level complimentary policies, e.g. trade, integration, industry, science & innovation, transport, education, health, culture, military, demography, food, energy, ecology, employment, pension, etc., aimed at targeting certain state objectives. the progress is made when the better economic, technological, and social indicators are observed in the national economy functioning , standard of living of citizens/society is improved, basic human rights are guaranteed, public welfare is achieved. as k. riabets emphasizes, the practical implementation of public administration functions is carried out by a system of public administration bodies, the level of efficiency of which depends on the correctly defined in specific situations the range baltic journal of economic studies 139 vol. 9 no. 1, 2023 of management functions and the understanding of their essence. the functions are closely related to the areas of public administration in which the goals and objectives of the state are to be met, and where planning , organization, analysis, forecasting , regulation, coordination, and control play their important roles (riabets, 2022). before considering the economic indicators and ways for improving the country’s efficiency, it is important to highlight that the objectives the government expects to achieve through promotion of economic growth and development include (1) increasing the industrial and military strength of the society, (2) ensuring the society 's unity and stability and the government's legitimacy, (3) enhancing the political support enjoyed by the incumbent officeholders in the government – political support provided by individuals and groups benefiting from the high employment levels and widespread economic prosperity, and (4) securing a broad tax base that will enable the government to fund its activities and programs (way, 2022). for ukraine, it is evident that formulation of government policies requires careful consideration of a variety of economic and non-economic parameters, and responsible leadership, while building the future, should take into account the country’s present development and its economic past, as well as make comparative analysis of the results of practical implementation of reforms conducted in different countries across the globe. it is also essential to recognize that government regulation or deregulation can bring the economy to prosperity or destruction. for example, the current state of the economy of ukraine is the result of reform and transformation mistakes: ukraine was one of the most developed republics of the ussr and its gdp is the third largest in the post-soviet space, after the russian federation and kazakhstan. even despite prolonged economic hardship, ukraine retains important industrial capabilities in the fields of steelmaking, aerospace, shipbuilding, chemicals and the manufacture of military hardware. moreover, thanks to well-educated human capital and the arrival of foreign investments, it has created a dynamic high tech sector with comparative advantages in the production of software, it services, and r&d activities. thus, as an emerging economy with a great deal of potential, ukraine is far from being a peripheral backwater (alonso-trabanco, 2022). relevant in this respect is the recently conducted research "the political economy transition in a developing country " focused on the lao people’s democratic republic economic transition from a centralised economy to a market economy. the purpose of the joint study is to investigate the variables that influence such transitions and the resulting modifications (sarkorn et al., 2022). the results demonstrate that such transition depends on both external (the role of laos, the influence of china, and the roles of international organizations) and internal factors (mechanisms of state ideology, economic reform, legislation and regulations, and the adaptation of the country’s leaders from one generation to the next). the research puts special emphasis on the ideological mechanism, new economic reform policies, legislation and regulations, economic transition history, etc. (sarkorn et al., 2022, p. 339–348). in this regard, ukraine can take some lessons from experience of the lao people’s democratic republic economic transition. for example, ideology or some axiological component is still critical and will always be an essential part for ensuring state governance effectiveness. furthermore, internal factors should be of no less significance in comparison with the external ones since any national economy is to be integrated or reintegrated into the world economy first and foremost in the interests of the nation itself and then, of course, the world. as it has already been emphasized in the works of domestic and foreign researchers, ukraine’s economic path has been characterized by the negative development trends for thirty years already. the neoliberalism ideology played its role in the process of the market economy creation: however, not all nations followed the offered set of recommendations and some transition economies analyzed them properly. the reforms resulted in the drastic decline of the national economy, emergence of oligarchs. the country enjoyed the high tech production, huge industrial manufacturing capabilities in strategic sectors, but at present it is oriented first and foremost on the extraction of raw materials and their primary processing. the great number of highly skilled professionals could not find job corresponding to their qualifications, and the majority of them was forced either to work in trade or emigrate abroad. the current economic situation is characterized by demographic crisis, poor gdp dynamics, high unemployment rate, low wages, gross external debt growth, dependence on imports, raw-materials exports, deindustrialization, capital outflows, tax evasion, etc. (sidenko, 2018; radziyevska, 2018; halasiuk 2019). nevertheless, there is always the way out for the country determined to find it, and it’s of critical significance to come up with the complex solution. today, in the modern world, in the conditions of the fourth industrial revolution and the implementation of the sixth technological mode, the economy finds itself transformed due to these fundamental changes. the determinative factor has become the right time for the introduction of the reforms, which depends predominantly on the actions of the state and the national business elite. these urgent actions will promote the formation baltic journal of economic studies 140 vol. 9 no. 1, 2023 of the socio-market economy, the knowledge economy, approval of justice and high technology (radziyevska, 2018). good and strong state governance is a necessary requirement for implementing reforms, and reform management is a central element of state administration. there is often a need to strengthen the steering , coordination and planning at the centre of the government to ensure effective public management. such improvements allow for an effective monitoring of reforms and for the early identification of strategic issues (directorategeneral for structural reform support, 2020, p. 5). china may also serve as an example to explain the point on the necessity of elaborating the right policy and putting it in practice at the right time since at different stages of this country 's development, the importance and advantages of foreign trade in china’s economic policy differed significantly. the active development of foreign trade in the first 10-12 years, especially with the socialist countries, became more stable during the "cultural revolution", when china began to modify ties with the outside world, considered as a source of currency inflows (military equipment, industrial equipment, etc.) for the purchase of technology samples and their subsequent production in china itself (boltayeva & axmedova, 2021). in summary, good and strong governance plays the key role in improving and contributing to much more efficient functioning of the state at any stage of its development, no matter whether the economy of it belongs to the category of the first, the second or the third world countries. 4. government regulation and foreign trade of ukraine the section’s objective is to analyze the basic indicators of ukraine’s economy and its foreign trade and to come up with the possible solutions to the identified problems. the analysis of the dynamics of ukraine’s exports and imports of goods and services during the period of 2016–2021 (tables 1 and 2) shows that the country has not solved yet one of its key problems – the trade deficit in goods, which reached 10.7 bln usd in 2019, the result of great surplus of high value-added imports of goods over exports comprised by agriculture, metals, and other low value goods. the balance of trade in goods has been negative since 2005, except for 2015 when it was positive of 610.7 mln usd (sardak, 2019). as table 2 demonstrates, the balance of trade in goods has been negative throughout the analyzed period of 2016–2021: in 2016 it was negative of 2888.1 mln usd; in 2017 – 6342.5; in 2018 – 9852.6; in 2019 – 10745.6; in 2020 – 5144.3 and in 2021 – 4770.8 mln usd. the balance of trade in services has been positive during the period of 2016–2021, e.g.: in 2016 – 4541.5 mln usd; in 2017 – 5238.2; in 2018 – 5329.1; in 2019 – 8633.7; in 2020 – 5670.7 and in 2021 – 4809,1 mln usd, which greatly contributed to decreasing the trade deficit in goods and services taken together, and even resulted in the positive balance of foreign trade in 2016 (1.8 bln usd), 2020 (0.5 bln usd), and 2021(0.04 bln usd). table 1 indicates that the trend of the volume of exports of goods for the period of 2016–2021 is y= 5.11x+31.177 table 1 dynamics of exports and imports of goods and services of ukraine, 2016–2021, bln usd 2016 2017 2018 2019 2020 2021 trends 2016–2021 exports of goods 36.4 43.3 47.3 50.1 49.2 68.07 y = 5.11x+31.177 exports of services 9.9 10.7 11.6 15.7 11.5 12.79 y = 0.5986x+9.9367 exports of goods and services 46.3 54.0 58.9 65.8 60.7 80.86 y = 5.7086x+41.113 imports of goods 39.2 49.6 57.2 60.8 54.3 72.84 y = 5.3114x+37.067 imports of services 5.3 5.5 6.3 7.0 5.9 7.98 y = 0.4371x+4.8 imports of goods and services 44.5 55.1 63.5 67.8 60.2 80.82 y = 5.7486x+41867 turnover of goods 75.6 92.9 104.5 110.9 103.5 140.91 y = 10.421x+68.243 turnover of services 15.2 16.2 17.9 22.7 17.4 20.77 y = 1.0357x+14.737 turnover of goods and services 90.8 109.1 122.4 133.6 120.9 161.68 y = 11.457x+82.98 source: author’s calculations based on the state statistics service of ukraine database. https://ukrstat.gov.ua table 2 dynamics of balance of trade in goods and services of ukraine, 2016–2021, bln usd 2016 2017 2018 2019 2020 2021 balance of trade in goods -2.8 -6.3 -9.9 -10.7 -5.1 -4.77 balance of trade in services 4.6 5.2 5.3 8.7 5.6 4.81 balance of trade in goods and services 1.8 -1.1 -4.6 -2.0 0.5 0.04 exports to imports ratio (goods and services) 1.04 0.98 0.93 0.97 1.01 1.00 source: author’s calculations based on the state statistics service of ukraine database. https://ukrstat.gov.ua baltic journal of economic studies 141 vol. 9 no. 1, 2023 while the trend of the volume of exports of services for the same period is y= 0.5986x+9.9367. the problem is that the share of exports of goods in all exports of goods and services of ukraine makes up for more than 75% (e.g.: 78.61% in 2016; 80.19 – 2017; 80.31 – 2018; 76.14 – 2019; 81.05 – 2020), and it reached 84% in 2021. the analysis suggests that to solve the problem it is necessary to focus ukraine’s trade strategy on promoting exports of services as opposed to exports of goods. and this is not only because trade in services has been contributing to a more favorable balance of trade with foreign nations, but essentially due to a strong tendency for more than thirty years already in the developed world to switch from manufac turing-led development to services-led development. the above mentioned point can be illustrated by the following example: in 2019, the services sector accounted for an average of 55% of gdp and 45% of employment in developing economies (nayyar et al., 2021). over and above that, services already accounted for 76% of gdp in advanced economies in 2015 – up from 61% in 1980 – and this share seems likely to rise. in japan, for example, services represent 68% of gdp; in new zealand, 72 %; and in the us, almost 80 % (world trade report 2019, p. 15). indeed, services are the backbone of the modern economy, contributing more to economic growth and job creation worldwide than manufacturing and mining activities or agriculture. furthermore, the eu is the world’s largest trader of services. in the eu’s "an open, sustainable and assertive trade policy ", adopted in february 2021, it is highlighted that "…the nature of trade will continue to evolve... it will become more innovation-driven, supported by intellectual property (ip) protection, with an increasing role of services trade compared to goods" (services in the eu’s trade strategy, 2022). since ukraine intends to become the member of the eu, it’s crucial to follow the example and examine the possibilities of enhancing exports of services, especially in view of the fact that services in the eu’s trade strategy occupy prominent position. without a doubt, manufacturing has been the surest way for lowand middle-income economies to reduce poverty and create good jobs. but developing nations have increasingly been redirecting their focus to the services sector to catch up with their developed counterparts. foreign scholars prakash loungani, chris papageorgiou, and ke wang stress that services exports from developing countries have grown tenfold since 1990, and at twice the rate of services exports from advanced economies; hence, developing countries’ share has increased from 3% in 1970 to almost 20% in 2014. this increase is not just due to higher exports of traditional services, such as travel and transport, but is also due to modern technology-enabled services, e.g. business services, computer and information services, financial services, etc. (loungani et al., 2017). similarly, world bank experts g. nayyar, m. hallward-driemeier, e. davies in their book underline that throughout history, industrialization has been synonymous with development. however, the trend of premature deindustrialization and the spread of automation technologies associated with industry 4.0 has raised concerns that the development model based on export-led manufacturing seen in east asia will be harder for hitherto less industrialized countries to replicate in the future (nayyar et al., 2021). they mention that the promise of services-led development in the future will be strengthened to the extent that technological change reduces the trade-off between productivity and jobs, and growth opportunities in services with potential for high productivity do not depend on a manufacturing base (nayyar et al., 2021). recent evidence shows that services seem to experience productivity growth through the same mechanisms that traditionally have made manufacturing the key driver of growth (loungani et al., 2017). as manufacturing’s share of economies across the development spectrum recedes, the services sector helps lowand middle-income countries to catch up with high-income countries (nayyar et al., 2021). nevertheless, for ukraine with the share of 84% of exports of goods in 2021 in all exports of goods and services, negative balance of trade in goods (table 2) table 3 dynamics of gdp and gross external debt of ukraine, mln usd, 2006–2021 2006 2007 2008 2009 2010 2011 2012 2013 2014 gdp 107753 142719 179992 117228 136419 163160 175781 183310 131805 debt 54512 79955 101659 103396 117343 126236 135065 142079 126308 debt/gdp, % 50.6 56.0 56.5 88.2 86.0 77.4 76.8 77.5 95.8 table 3 (continued) 2015 2016 2017 2018 2019 2020 2021 trends 2006–2021 gdp 90615 93270 112154 130832 153781 155582 200090 y = 823.65x+135155 debt 118729 113518 116578 114710 121739 125690 129711 y = 2811.1x+90308 debt/gdp, % 131.0 121.7 103.9 87.7 79.2 80.8 64.8 y = 1.924x+67.015 source: author’s calculations based on https://index.minfin.com.ua/economy/gdp/ & https://index.minfin.com.ua/economy/foreigndebt/ baltic journal of economic studies 142 vol. 9 no. 1, 2023 and the growing gross external debt (table 3), it also means that the trade policy is to ensure that the ukrainian goods on the world markets are more valuecompetitive as opposed to price-competitive. with this in mind, it is easy to agree with prof. nathaniel lane, whose research is dedicated to the political economy of development, the economics of the state, industrial policy, in particular – on the industrial policies behind the east asian miracle. in one of his recent publications prof. nathaniel lane argues that nations will continue to shape their economies through industrial policy. the scholar, through careful research design and attention to institutional detail, stresses that emergent studies are rapidly expanding what we know – and updating what we thought we knew– about industrial policies. the economist states that the tools from policy evaluation allow us to study the impact of endogenous industrial interventions, and he comes up with a proposal to take industrial policy more seriously. prof.lane concludes that it requires not only more serious evaluations of past policy but also a reevaluation of past empirical work and consensus (lane, 2020). the results, revealed in the recent study on ukraine’s foreign economic activity, indicate (table 4) that the share of exports of goods with high added value has been decreasing while the share of imports of those goods has been increasing (radziyevska, 2022). in this regard, the government is to pursue public policies to promote increased industrial production – and in the area of foreign trade it means growing volumes of high-added value exports – which, definitely, requires government regulation. since the objective of the government is to increase the industrial and military strength of the society (way, 2022), it is clear that ukraine’s trade policy should aim at improving the commodity composition of exports while focusing more on exports of services as opposed to those of goods. in addition, it makes sense to keep in mind while formulating the trade policy that technology allows for services to be increasingly unbundled: a single service activity can now be fragmented into tasks that are done at different geographic locations, such as business process outsourcing and online banking services. as with goods, services productivity can rise because of specialization (a finer division of labor) and scale (falling unit costs of production) (loungani et al., 2017). interestingly, in japan, science-based foreign economic activity is an important practical factor in the development of the country. it has made japan one of the world's economic, scientific, technological, financial and trade centers, ensuring deep integration into the world economy in the national interests (boltayeva & axmedova, 2021). to grow and develop ukraine requires the inflows of foreign direct investment and their appropriate use, the active involvement in global value chains and production networks, the much more services oriented and science-and-technology based foreign economic activity. now, we turn to the paper co-authored by german scientists, in which they reconsider the classic relationship between trade and economic development (gries & redlin, 2020). the scholars’ results suggest a statistically significant positive short-run and long-run global relationship between trade and income; however, a long-run relationship is observed only for high-income countries and with a relatively high degree of trade openness (gries & redlin, 2020). firstly, developing/emerging economy of ukraine belongs to the group of lower-middle income economies, so it doesn’t meet the first criterion of high-income countries. secondly, regarding the degree of openness, there have been debates for quite a long time as to what extend an economy should be opened to world markets. for example, a.r . alotaibi and a.v. mishra define trade openness as the ratio of exports plus imports over gdp (alotaibi & mishra, 2014). for ukraine in 2021, according to the above mentioned approach to calculating this indicator (tables 1 and 3), it means that the economy is too opened already and has been too opened for the period under analysis. to allow the national economy to be so opened it’s necessary for the state to be highly developed and to belong to the category of high-income countries. the high price competitiveness of raw material exports is mainly attained due to the exchange rate and low wages which means that ukrainians work more but are paid less while the national economy is losing its potential (pustovoit, table 4 dynamics of volume (mln usd) and share (%) of ukraine’s exports of value-added goods (commodity groups 84-90) in exports of all goods, 2014–2021 2014 2015 2016 2017 2018 2019 2020 2021 total exports of goods of commodity groups 84-90 7358,8 4776,0 4337 5051,3 5430,6 5524,8 5403,7 6105,3 total exports of all goods 53901,7 38127,1 36361,7 43264,7 47335,0 50054,6 49191,8 68072,3 the share of exports of commodity groups 84-90 goods in exports of all goods, % 13,65 12,52 11,93 11,68 11,5 11,04 10,98 8,97 source: (radziyevska, 2022) baltic journal of economic studies 143 vol. 9 no. 1, 2023 2021). in international markets, value competiti veness is inherent in a relatively small number of product groups of ukraine, that is why the national economy policies should aim at improving specialization of the country (halasiuk, 2019), and producing goods with increased technological complexity. the beginning of this process will mean the emergence of new qualitative changes in the economy, and the effectiveness of public policy of economic reform (pustovoit, 2021). american and chinese scholars also agree that one recent stylized fact that has emerged is that in countries with competitive new industries such as telecommunications, internet-related businesses, and electric vehicles, government seems to push more for economic openness (daokui & maskin, 2021). at the same time, many qualitative papers also draw an association between successful industrial policy and autocracy, given the successful deployment of industrial interventions across asia (lane, 2020). thus, the effective mechanisms of the state regulatory policy need to be put in practice so that the state control over foreign trade operations in ukraine is maintained. 5. conclusions the role of government in the market economies of the leading countries of the world has been modified, strengthened, expanded. the statistical indicators of state budget expenditures and the widening scope of responsibilities demonstrate that government is successfully meeting all the challenges thrown at it by strengthened integration processes in the conditions of the aggravation of the contradictions of globalization and regionalization. the current paper reveals that the market reforms were much more successful in the countries where the key role in the economy was played by the government. during the reforms and challenging times the efficient state governance, the strong institutions, the high quality public administration, the quickly and successfully elaborated and implemented policies are critical for confronting a wide variety of domestic and international problems, many of which are not only of economic origin. the central government of a modern society seeks to facilitate and foster the growth of the nation’s overall economy while good and strong state governance with ethical values, morality, humanistic approaches, etc. contributes to better functioning of the national economy at any stage of its development. the analysis of basic economic indicators of ukraine’s foreign trade allows to conclude that the trade policy should aim at improving the commodity composition of exports while focusing more on exports of services as opposed to those of goods. specifically, the results have shown that the balance of trade in goods has been negative while the share of exports of goods in all exports of goods and services of ukraine has been increasing. the share of the exports of goods with high added value has been decreasing. so, the trade policy is to ensure that the ukrainian goods on the world markets are more technologically complex and value-competitive as opposed to price-competitive. at the same time the balance of trade in services has been positive which greatly contributed to decreasing the trade deficit in goods and services taken together, and even resulted in the positive balance of foreign trade in 2016, 2020, 2021. in the conditions of the growing gross external debt with raw materials exports prevailing like those in the ldcs, it’s crucial for ukraine to change its path towards the group of the countries of the first world, which focus in their exports predominantly on services and high value-added goods. good and strong state governance will enable ukraine to take a more decent place in the system of the world division of labor and to join the group of highly-developed economies. to grow and develop ukraine requires the inflows of foreign 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(2012). governmental regulation and self-regulation. in the updated version of the report made at the 2008 annual meeting of the american political science association, 50 p. available at: https://www.vanderbilt.edu/csdi/events/prvtgov_wiseman.pdf baltic journal of economic studies 145 vol. 9 no. 1, 2023 way, a.l. (2022). the american system of government: politics & government in the u.s.a. politics & government: the essentials. cyberland university of north america. available at: http://www.proconservative.net/ cunapolsci201partoneb2.shtml worldwide governance indicators (2022). available at: https://info.worldbank.org/governance/wgi/ the future of services trade (2020). in world trade report 2019. world trade organization. 227 p. available at: https://www.wto.org/english/res_e/booksp_e/00_wtr19_e.pdf received on: 2th of february, 2023 accepted on: 13th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 188 vol. 4, no. 1, 2018 corresponding author: 1 department of accounting, finance and economic security, state institution of higher education “donetsk national technical university”. e-mail: leonid.katranzhy@donntu.edu.ua 2 department of economic cybernetics and further mathematics, state institution of higher education “donetsk national technical university”. e-mail: alexandr.podskrebko@gmail.com 3 department of economic cybernetics and further mathematics, state institution of higher education “donetsk national technical university”. e-mail: vitaliy.krasko@donntu.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-1-188-194 modelling the dynamics of the adequacy of bank’s regulatory capital leonid katranzhy1, oleksandr podskrebko2, vitaliy krasko3 state institution of higher education “donetsk national technical university”, ukraine abstract. the purpose of the article is to develop scientific and methodological recommendations for modelling the dynamics of the level of capital adequacy for ensuring the financial balance of the bank, sufficient controllability and increasing the efficiency of its activities. the article explores peculiarities of banking regulation and supervision in the process of capital formation. it is shown that the issue of formation of capital by banking institutions is actualized in the context of management reform and target tasks of the development of the banking industry of ukraine. given the state of the banking services market and its development trends, the unsettled problem of the capitalization of banks, it becomes important to improve the mechanism of capital formation. in order to improve the efficiency of bank regulation and management of capital formation, recommendations are proposed for modelling the dynamics of the adequacy of regulatory capital on the basis of determining the forecast values of its components. research methodology: the feasibility of using predictive models with the use of artificial neural networks is substantiated. in contrast to the classic trend, discussed in the article, the models with the architecture of the multilayer perceptron proved to be the most adequate and accurate. in addition to a point forecast of the dynamics of regulatory capital, the overall risk and the amount of the net foreign exchange position, their pessimistic and optimistic forecasts were constructed. the author’s proposals are formalized by appropriate calculation algorithms. modelling the dynamics of the adequacy of regulatory capital and its components in practice will allow more efficiently manage systemic and individual banking risks. key words: bank’s regulatory capital, capital ratios, adequacy of regulatory capital, forecasting, neural networks, modelling. jel classification: g21, g28 1. introduction solving many of the problems facing the ukrainian economy, namely, overcoming the socio-economic crisis, ensuring economic growth, increasing the participation of banks in the investment process, and increasing lending depends to a certain extent on the effective functioning of the banking system and the level of its stability. it is clear that at the present stage, only those banks that can quickly adapt to the trends of crisis recovery, to take precautionary measures, in advance anticipating the possible consequences of both their own risky activities and the negative impact of systemic risks will survive. the specific structure of capital with a high share of debt burden inherent in banks objectively determines the need for capital formation in accordance with financial risks. of course, not all risk assets can be fully covered. this is only a matter of determining the minimum adequate amount, that is, the proportion of the total risk borne by the bank owners. at the same time, each separate banking institution should have available capital sufficient to cover possible losses, support for solvency and financial independence. from these positions, modelling the dynamics of the adequacy of regulatory capital of the bank as one of the main regulatory requirements put forward by banks on the part of the state in the person of the regulator – the national bank of ukraine (hereinafter – the nbu) and taking into account the importance of the banking sector’s role in the development of the financial system and national economy in general, is a topical issue of research. baltic journal of economic studies 189 vol. 4, no. 1, 2018 2. review of the literature the problem of the formation of bank capital due to its theoretical importance and practical significance is in the area of constant attention of scientists. the issue of the factors affecting the formation of the capital structure of banking institutions and the transformation of banking resources, ensuring a higher level of capitalization of banks and the banking system as a whole, features of the functioning of banks with foreign capital are highlighted in the work of foreign and domestic scientists: r. gropp, 2009, o. ikpefan, 2012, t. koch, 2003, m. octavia, 2008, j. sinkey, 2002, m. alekseienko, 2002, a. vozhzhov, 2007, zh.  dovhan, 2008, r.  kornyliuk, 2012, s.  reverchuk, 2011, and others. given the exclusive role of administrative and indicative forms of state regulation of banking activity, of particular interest is the research in the part of the influence imposed by the regulator of prudential regulations and organization of banking supervision over the capital formation, among which are the work of the following researchers: d. gale, 2010, h. greuning , 2009, d.  hancock, 2006, v.  kovalenko, 2013, s.  naumenkova, 2015, o. khabiuk, 2008. the urgency and importance of issues regarding the application of mathematical methods for solving the problems of management of the formation of bank capital determined the purpose of the study. the purpose of this paper is to develop scientific and methodological recommendations for modelling the dynamics of the level of capital adequacy for ensuring the financial balance of a banking institution, sufficient controllability and increasing the efficiency of its activities. 3. statement of the main material despite the fact that in ukraine, in accordance with the current legislation (pro zatverdzhennia instruktsii pro poriadok rehuliuvannia diialnosti bankiv v ukraini), a system of prudential regulations of capital (minimum regulatory capital ratio  – h1, regulatory capital adequacy ratio  – h2, core capital adequacy ratio  – h3) and additional requirements in the form of the formation of buffers of capital (capital reserve (conservation) buffer, countercyclical buffer, system importance buffer) have been established for banks, the choice as an object of modelling the indicator of regulatory capital adequacy in this the study is not accidental due to a number of reasons: 1. currently, banks are actually calculated from the whole set of indicators, only two: the minimum regulatory capital ratio and the regulatory capital adequacy ratio. introduction to the practice of indicative banking regulation of the core capital adequacy ratio is scheduled from 01.01.2019, and capital buffers  – from 01.01.2020. in addition, the calculation of the regulatory capital adequacy indicator based on the recommendations of the basel committee on banking supervision for regulatory purposes is a common practice in many countries. 2. h2 ratio has a certain generalizing character: when it is calculated, the actual values of the regulatory capital are used, that is, the actual value of h1 and the total amount of risk (the sum of assets and off-balance sheet liabilities of the bank, weighted by the corresponding coefficients of credit risk). in turn, regulatory capital is the basis for calculating ratios: the maximum size of credit risk per one counterparty  – h7, large credit risks  – h8, the maximum size of credit risk for transactions with bankrelated individuals – h9, fixed capital as a component of the regulatory capital  – to calculate h3. capital buffers are determined as a percentage of the total risk. 3. although compliance with the regulatory capital adequacy ratio is not a complete guarantee of the timeliness and completeness of settlement of obligations, for depositors and creditors, the value of this indicator is rather informative, since the larger its size, the lower the share of risk they assume. the actual values of the h2 ratio indicate the bank’s ability to withstand crisis situations to some extent. proceeding from the theory of fiduciary duties, the growth of capital adequacy to potential risks can be considered as a signal that positively affects the level of trust in the bank. 4. the h2 ratio has a significant impact on capital decision-making. first, as well as any economic ratios and requirements set by the nbu, this ratio is mandatory. second, the bank is forbidden to pay dividends or to distribute capital in any form, if this leads to a breach of the regulatory capital adequacy ratio. thirdly, the possibility of expanding the activities of a banking institution is limited to the actual value of this indicator (the higher the value of the ratio of h2, the greater margin for expansion of banking activity). 5. the banks’ compliance with the regulatory capital adequacy ratio, among other things, allows, provided that the financial and credit institution is unable to restore its solvency, ensuring an acceptable level of bank failures, increasing the stability of the functioning of the banking system. in the generalized form, the procedure for calculating the regulatory capital adequacy ratio is as follows (1): í ðê à ñð âï 2 100= + ⋅ %, (1) where рк – bank’s regulatory capital; ар – assets and certain off-balance-sheet instruments, reduced by the amount of established reserves for active operations, by the amount of collateral for an unconditional obligation or cash in the form of a pledge of property rights, by the amount to an estimate, by the amount of non-issued bonds of an internal government loan and weighted by the appropriate credit risk factor depending on the risk group to which the asset belongs; baltic journal of economic studies 190 vol. 4, no. 1, 2018 свп  – the aggregate amount of the bank’s net foreign exchange position for all foreign currencies and bank metals. modelling the dynamics or predicting the adequacy of the regulatory capital of a banking institution is a complex and labour-intensive process that involves forecasting key performance indicators of the bank, namely, regulatory capital (рк), risk-weighted assets (ар), amount of net foreign exchange position (свп), and includes: time series analysis to identify its main components, such as trend, seasonality (cyclicity), residual (random) component. in order to improve the quality and reliability of the forecast, it is expedient to use not one model, but several, and compare them among themselves, estimating the forecast errors for each model. in this study, the trend models (linear and third-order hyperbolic) and the neural network (model of multilayer perceptron), in which neurons make the transformation of the input signals into output by the ratio (2) are used to predict the change in the adequacy of the regulatory capital of the bank (a. matviichuk, 2011). the expediency of choosing these models was due to a rather high value of the indicator of the determination coefficient (r2>0,8). based on indicators of informational suitability and assessment of the accuracy of the proposed models, the best of the models was identified. y w x b i n i i= ⋅ +       = ∑ϑ 1 , (2) where y  – output signal of a neuron; n  – number of inputs of this neuron; xi  – the i -th input signal of the neuron; wi  – the weight of the i -th input of the neuron; b  – adder bias parameter; ϑ ⋅ ( ) – neuron activation function. fig. 1 shows the dynamics of changes in the regulatory capital of one of the ukrainian banks for 1.5 years. 1 200 000 1 400 000 1 600 000 1 800 000 2 000 000 2 200 000 2 400 000 2 600 000 2 800 000 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 m ill io n u a h bank's regulatory capital (рк) regulatory capital of the bank fig. 1. dynamics of regulatory capital of the bank to construct the model series of the proposed trend models, the functional of ms excel for the model of multilayer perceptron was used – statistica. fig. 2 shows the change in the regulatory capital of the banking institution and the model characteristics of the linear and polynomial trend models, as well as the dynamics of regulatory capital, which is described by the model of a multilayer perceptron. y = 24 691,309t + 1 321 151,267 r² = 0,834 y = -32,431t3 + 2 530,097t2 26 010,933t + 1 518 077,641 r² = 0,900 1 200 000 1 400 000 1 600 000 1 800 000 2 000 000 2 200 000 2 400 000 2 600 000 2 800 000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 m ill io n u a h bank's regulatory capital actual changes in the regulatory capital of the bank (rc) neural network (rc) linear trend (rc) polynomial trend (rc) fig. 2. changes in the regulatory capital of the bank, which are described by trend models and the model of a multilayer perceptron an important task of forecasting is to determine the characteristics of the quality of the proposed models, one of the criteria of which is the informational suitability of the econometric model, that is, how validly the model chosen for forecasting explains the retrospective of the investigated changes in regulatory capital. as the estimated characteristic of the a priori quality of the forecast model, it is expedient to use the estimated values of the determination coefficient (o. plastun, 2014) (3). r y y y y t t n t t n 2 2 1 2 1 = −      −( ) ∧ = = ∑ ∑ , (3) where yt  – the actual value of the time series; yt ∧ – model values constructed according to the estimated parameters; y – selective mean value. table 1 summarizes the values of the determination coefficient for the above models, which describe the dynamics of the indicator of regulatory capital of the bank. table 1 the value of the determination coefficient of the dynamics of regulatory capital of the bank determination coefficient ( r2 ), p. units linear trend polynomial trend neural network 0,834 0,9 0,911 thus, each of the proposed models describes the output time series at an adequate level ( r2 > 0,8). the most appropriate model among the considered is the model of multilayer perceptron, the determination coefficient of which is 91.1%. baltic journal of economic studies 191 vol. 4, no. 1, 2018 in addition to assessing the informational suitability of models, it is expedient to evaluate their accuracy. in the statistical analysis of time series, there is a sufficiently wide list of characteristics of the accuracy of models. in order to avoid contradictions in the conclusions that may arise due to the use of a number of indicators, for the evaluation of the accuracy of the proposed models, one indicator should be used throughout the analysis process, namely, we will use the average approximation error  – a (3). the lower the value obtained for this indicator, the higher the accuracy of the model. it should be noted that at a < 5% the accuracy of the model is considered high (o. cherniak, p. zakharchenko, 2011). a n e y n y y y t tt n t t tt n = = − = ∧ = ∑ ∑ 1 1 1 1 , (3) where n – number of units in the aggregate; et – residual sum of squares. table 2 presents the estimated values of average approximation error for each of the three models. table 2 the value of the average approximation error of models of the dynamics of regulatory capital of the bank average approximation error (а), % linear trend polynomial trend neural network 6,58 5,67 3,6 thus, the model of a multilayer perceptron, the average error of approximation of which was 3.6%, was the best by the criterion of accuracy. table 3 shows the forecasted values of the regulatory capital of the bank (point forecast) with a depth of nine periods (quarter). table 3 forecasted values of the bank’s regulatory capital, thousand uah period linear trend polynomial trend neural network 56 2703864,6 2300447,1 2334302,5 57 2728555,9 2249745,4 2331278,5 58 2753247,2 2193012,6 2318402,9 59 2777938,5 2130053,9 2311312,0 60 2802629,8 2060674,9 2296867,1 61 2827321,1 1984680,9 2287072,1 62 2852012,4 1901877,3 2281247,7 63 2876703,7 1812069,6 2274888,7 64 2901395,0 1715063,2 2269772,6 fig. 3 graphically depicts changes in the regulatory capital of the bank, that is, the output time series, taking into account the projected values. equally important is the calculation of the confidence interval (interval forecast), which defines the limit values of the level of a series with a given confidence probability α . fig. 4 shows the point and interval forecasts of the value of regulatory capital, constructed using a multilayer perceptron. 1000000 1500000 2000000 2500000 3000000 m ill io n u a h 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 pessimistic forecast point forecast optimistic forecast fig. 4. point and interval forecasts of the value of regulatory capital, constructed using a multilayer perceptron thus, we obtained an adequate model that characterizes the dynamics of the bank’s regulatory capital, with the help of which the point and interval forecasts (interval width ± 10.1%) of changes in its values with the depth of the forecast in 9 periods or a quarter are calculated, which makes it possible to estimate the level of coverage of negative effects of the various risks that banks assume in the course of their activities. to obtain the projected value of the regulatory capital adequacy ratio h2 (1), similarly, it is necessary to calculate the forecasted values for the forthcoming quarter for risk-weighted assets (ар) and the aggregate amount of the net foreign exchange position (свп) for all foreign currencies and banking metals. fig. 5 shows the dynamics of the ар indicator, the model characteristics of the linear and polynomial trend models, and the risk-weighted assets’ changes described by the multilayer perceptron model. the combined data of the values of the determination coefficient and the average approximation error of individual models of the overall risk dynamics (ар) of the bank are presented in table 4. fig. 3. changes in the bank’s regulatory capital taking into account the projected values with a depth of nine periods 1500000 1700000 1900000 2100000 2300000 2500000 2700000 2900000 3100000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 m ill io n u a h neural network (rc) linear trend (rc) polynomial trend (rc) baltic journal of economic studies 192 vol. 4, no. 1, 2018 table 4 the value of the determination coefficient and the average approximation error of dynamic models of risk-weighted assets of the bank linear trend polynomial trend neural network determination coefficient ( r2 ), p. units 0,915 0,96 0,99 average approximation error (а), % 4,5 3,11 1,18 the most adequate model that characterizes the dynamics of ар is the model of a multilayer perceptron with a determination coefficient of 99% and average approximation error of 1.18%. table 5 presents the forecast values (point forecast) of risk-weighted assets (ар) with a depth of 9 periods, obtained on the basis of the above models. table 5 predicted values of bank risk-weighted assets, thousand uah period linear trend polynomial trend neural network 56 1709080 2334302,467 2959525 57 1706056 2331278,53 2956501 58 1693180 2318402,904 2943626 59 1686089 2311312,037 2936535 60 1671644 2296867,057 2922090 61 1661849 2287072,06 2912295 62 1656025 2281247,746 2906470 63 1649666 2274888,74 2900111 64 1644550 2269772,623 2894995 fig. 6 graphically depicts the dynamics of overall risk of the bank taking into account the projected values ар. construction with a sufficient level of adequacy and accuracy of the dynamics model of risk-weighted assets (overall risk) of the bank based on the neural network allowed calculating the point and interval forecasts (interval width ± 15.4%) – fig. 7. 15 000 000,00 17 000 000,00 19 000 000,00 21 000 000,00 23 000 000,00 25 000 000,00 27 000 000,00 m ill io n u a h 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 neural network(ар) linear trend (ар) polynomial trend (ар) fig. 6. changes in bank risk-weighted assets taking into account the projected values obtained with a depth of nine periods 0 500000 1000000 1500000 2000000 2500000 3000000 m ill io n u a h 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 optimistic forecast point forecast pessimistic forecast fig. 7. point and interval forecasts of the bank risk-weighted assets constructed using multilayer perceptron the next step in determining the forecast value of the h2 ratio is to forecast the aggregate amount of the bank’s net foreign exchange position on all foreign currencies and banking metals (свп), the dynamics and model characteristics of which are presented in fig. 8. y = 5 106,355t + 357 029,568 r² = 0,700 y = -9,454t3 + 932,597t2 20 596,052t + 518 194,822 r² = 0,897 300 000 350 000 400 000 450 000 500 000 550 000 600 000 650 000 700 000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 m ill io n u a h actual changes in the amount of the net foreign exchange position (свп) neural network (свп) linear trend (свп) polynomial trend (свп) fig. 8. changes in the amount of the bank’s net foreign exchange position, which are described by trend models and multilayer perceptron model indicators of information and prognostic suitability of the proposed models for свп are presented in table 6. as can be seen from table 6, the model of a multilayer perceptron is also the best model by information and prognostic suitability parameters. fig. 5. bank risk-weighted assets, which are described by trend models and multilayer perceptron model y = 218 483,819t + 11 099 516,343 r² = 0,915 y = -213,675t3 + 16 347,391t2 97 525,002t + 12 225 551,184 r² = 0,960 11 000 000 13 000 000 15 000 000 17 000 000 19 000 000 21 000 000 23 000 000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 m ill io n u a h actual changes in risk-weighted assets (ар) neural network (ар) linear trend (ар) polynomial trend (ар) baltic journal of economic studies 193 vol. 4, no. 1, 2018 table 6 the value of the determination coefficient and the average approximation error of dynamic models of the bank’s net foreign exchange position linear trend polynomial trend neural network determination coefficient ( r2 ), p. units 0,7 0,897 0,923 average approximation error (а), % 9,17 4,59 4,32 table 7 represents the forecast value (point forecast) of the net foreign exchange position (свп) amount with a depth of 9 periods, calculated using the above three models. table 7 forecast values of the amount of the net foreign exchange position, thousand uah period linear trend polynomial trend neural network 56 669424,2 642985,448 629166,438 57 678190,9 648091,803 623412,889 58 689228,2 653198,158 616291,266 59 692650,3 658304,513 607744,845 60 703351,1 663410,868 597716,902 61 709434,8 668517,223 586150,713 62 718119,5 673623,578 572989,554 63 725501,9 678729,933 558176,701 64 734401,2 683836,288 541655,43 fig. 9 shows the dynamics of the свп based on the predicted values obtained. 500 000 550 000 600 000 650 000 700 000 750 000 m ill io n u a h 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 neural network (свп) linear trend (свп) polynomial trend (свп) fig. 9. dynamics of the amount of the bank’s net foreign exchange position taking into account the received forecast values with a depth of nine periods using artificial neural network, which characterizes the dynamics of the total amount of the bank’s net foreign exchange position, point and interval forecasts were calculated (interval width ± 2.6%) – fig. 10. by carrying out modelling of three main components of the regulatory capital adequacy indicator, it is possible to obtain its forecast data in accordance with formula (1). 1900000 2000000 2100000 2200000 2300000 2400000 2500000 2600000 2700000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 m ill io n u a h optimistic forecast point forecast pessimistic forecast fig. 10. point and interval forecasts of the total amount of the bank’s net foreign exchange position, built with the help of multilayer perceptron fig. 11 shows the dynamics of the change of h2 taking into account the forecasted values of regulatory capital, risk-weighted assets, and the amount of the bank’s net foreign exchange position. as can be seen from fig. 11, the forecast of the dynamics of regulatory capital adequacy indicates a rather high overall risk of the banking institution and a small potential for increasing the volume of operations, given the increasing requirements of the nbu (gradual increase in the minimum size of regulatory capital to 500 million uah from 11 july 2024, introduction the core capital adequacy ratio (h3 ≥ 7%) from 1 january 2019, capital reserve (conservation) buffer from 0.625% from 1 january 2020 to 2.5% from 1 january 2023, countercyclical buffer from 1 january 2020 in the range of 0 to 2.5% depending on the lending activity of the bank and taking into account credit risks). 0,097 0,102 0,107 0,112 0,117 0,122 0,127 0,132 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 p .u n it s н2 forecast standard (≥10%) fig. 11. dynamics of the forecasted value of regulatory capital adequacy unfortunately, the problem of insufficient capitalization is widespread for a large number of functioning banks in ukraine. in order to solve it, in our opinion, it is necessary to attract additional equity capital, to develop plans to increase the capitalization of banks with the use of additional sources, to implement cost optimization measures, to introduce advanced risk management approaches, to stimulate banks to reinvest baltic journal of economic studies 194 vol. 4, no. 1, 2018 profits through changes in taxation (introduction of differentiated rates of income tax that is consumed and capitalized), to further adapt the national banking standards to international requirements, ensuring transparency of capital formation, protection of investors and so on. 4. conclusions in the course of the research, a number of varied econometric models were developed for the dynamics of the adequacy indicator of the regulatory capital of the bank and its components: regulatory capital, total risk level (risk-weighted assets), and the amount of the bank’s net foreign exchange position. based on the analysis, an adequate model has been substantiated and obtained that allows forecasting the value of h2. it was a neural model built with the help of a multilayer perceptron. the importance of determining the dynamics of regulatory capital adequacy is conditioned as by the bank’s internal needs associated with improving the risk management efficiency, making decisions on the formation of capital and its use, so by the needs of the regulator in the context of ensuring the reliability of the functioning of the banking system. in addition, the use of the proposed recommendations has prospects for choosing the regime of prudential regulation of banks, a reasonable determination of the size of capital buffers, including systemically important banks. references: gropp, r . heider, f. (2009). the determinants of bank capital structure: working paper series, 52. dr ikpefan, o. a. (2012). the impact of bank capitalization in the performance of nigerian banking industry (1986-2006). the journal of commerce. 4 (11), 24-39. koch, timothy w. (2003). bank management. cincinnati, ohio: south-western. 888. octavia, m., brown, r . (2008). determinants of bank capital structure in developing countries: regulatory capital requirement versus the standard determinants of capital structure. department of finance the university of melbourne, 35. sinkey, josef f. (2002). commercial bank financial management in the financial-services industry. prentice hall. 696. alekseienko, m. d. (2002). kapital banku: pytannia teorii i praktyky: [monohrafiia]. k.: kneu. 276. vozhzhov, a. p. (2007). pryroda y mekhanyzm transformatsyy bankovskykh resursov: dyss. na soysk. nauchn. stepeny dokt. ekon. nauk: spets. 08.00.08 «denhy, fynansy y kredyt». sumy. 446. dovhan, zh. m. (2008). kapitalizatsiia bankivskoi systemy ukrainy. visnyk nbu. 11, 10-14. kornyliuk, r . v. (2012). inozemni banky v ukraini: vplyv ta rehuliuvannia : [monohrafiia]. k.: kneu. 234. reverchuk, s. k. (2011). bankovskіi kapіtal v sіsteme vosproіzvodstva. ekonomicheskaia teoriia i istorіia ekonomicheskoi myslі. 1, 14-18. gale, d. (2010). capital regulation and risk sharing. international journal of central banking. 6 (4), 187-204. greuning, h., bratanovic, s. (2009). analyzing banking risk: a framework for assessing corporate governance and risk management. world bank publications. 422. hancock, d., lehnert, а., passmore, w., sherlund, s. (2006). the competitive effects of risk-based bank capital regulation: an example from u.s. mortgage markets . federal reserve board. 50. kovalenko, v. v. (2013). bankivske rehuliuvannia i nahliad: metodolohiia ta praktyka : [monohrafiia]. odesa: atlant. 492. naumenkova, s. (2015). bazel i, ii, iii: rozvytok pidkhodiv dlia zmitsnennia rehuliatornoi osnovy. visnyk kyivskoho natsionalnoho universytetu imeni tarasa shevchenka. 12 (177), 39-47. khabiuk, o. (2008).bankivske rehuliuvannia ta nahliad cherez pryzmu rekomendatsii bazelskoho komitetu: [monohrafiia]. ivano-frankivsk: oippo; sniatyn: prutprynt. 260. pro zatverdzhennia instruktsii pro poriadok rehuliuvannia diialnosti bankiv v ukraini: postanova pravlinnia nbu № 368 vid 28.08.2001. access: http://zakon4.rada.gov.ua/laws/show/ z0841-01/print1433753775359538 matviichuk, a. v. (2011) shtuchnyi intelekt v ekonomitsi: neironni merezhi, nechitka lohika: [monohrafiia]. k.: kneu. 439. plastun, o. l. (2014) prohnozuvannia finansovykh rynkiv: suchasni kontseptsii ta novi pidkhody: [monohrafiia]. sumy: dvnz «uabs nbu». 397. cherniak, o. i., zakharchenko, p. v. (2011) prohnozuvannia sotsialno-ekonomichnykh protsesiv: suchasni pidkhody ta perspektyvy: [monohrafiia]. berdiansk: vydavnytstvo tkachuk. 391. baltic journal of economic studies 64 vol. 4, no. 2, 2018 corresponding author: 1 department of finance, banking and insurance, tavria state agrotechnological university. e-mail: ivanvd@ukr.net 2 department of finance, banking and insurance, tavria state agrotechnological university. e-mail: yatsuh@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-64-69 the problem of unprofitable activity of enterprises in ukraine ivan demchenko1, olena iatsukh2 tavria state agrotechnological university, ukraine abstract. the subject of the study. a successful economy does not allow the loss of its main component: enterprises in modern conditions. if the companies of the country do not receive anticipated financial results, the entire financial system becomes vulnerable. this article is focused on research of the problem of loss-making enterprises in ukraine. it should be noted that the negative trend of a significant number of loss-making companies can be traced over a long period of time. the main reasons for ukrainian producing companies’ unsatisfactory financial results are described in this article. a hierarchy of factors that determine the financial security of enterprises is constructed. research of dependence operating profitability of businesses from inflation is done on the basis of statistical data. the tendency in the production of industrial output is shown. methods. the methods used by authors include correlation analysis, comparative analysis, a method of description, interpretation of statistical data, a method of observation. scope. the main task of the research remains the demonstration of the problem of non-profit activity of ukrainian enterprises and the allocation of key factors for the containment of economic growth. for this purpose, a study was made of the dynamics of financial results of subjects of entrepreneurial activity. the dependence of profit on operating activities of the economic sector and the rates of inflation of the national economy of ukraine is presented. conclusions. national business adapts to the transformation of the economy and, at the same time, overcomes the diversity of threats. performed analysis showed that enterprises in ukraine are strongly influenced by internal independent administrative measures factors. the shortage of financial resources and the complexity of attracting additional funds impede the further development of enterprises. however, the size of revenues and costs, and thus the final financial results will depend on the professionalism of company’s management. the problem of increasing insolvency among ukrainian companies is disclosed in this paper. profit formation is possible only if one takes into account the role of the state, changes in external and internal demand and maintaining competitiveness. key directions of financial stabilization and further business development in ukraine depend on the ability of entities to maintain an acceptable level of their own financial security. key words: financial crisis, entities, development, entrepreneurial sector, financial results, financial security. jel classification: g32, g33, m21 1. introduction the profitability of enterprises determines the character of the development of the ukrainian economy as a whole. profitable enterprises form income tax revenue and their business activity is maximal. the country needs a sufficient amount of financial resources due to the need for active reforms and maintaining defence capability. in addition, many contradictions and imbalances requiring settlement for the further development of the country there are in the ukrainian economy. the government aims to intensif y economic growth and create conditions for the development of enterprises. however, maintaining a large number of loss-making enterprises leads to lower tax revenues and putting pressure on the budget. the tax on profits of the enterprise is not made upon receipt of losses over the lack of the object of taxation. this situation is contrary to the principle of obligatory of the tax system of ukraine (adonin, 2015). in most cases, loss-making enterprises have poor financial performance, low business activity. they are characterized by a decreasing of production and sales, as well as the slow pace of innovation d evelopment. baltic journal of economic studies 65 vol. 4, no. 2, 2018 2. statement of a problem developed business sector forms the export potential and income tax revenue. there are creating jobs thanks to companies, as well as foundations of the country ’s financial safety are laid. any changes in the economy cannot occur without affecting the enterprise. moreover, the reforms and structural changes designed to create conditions for attracting investments, growth of business activity, and increase the profitability of enterprises. however, the number of unprofitable enterprises in the economy remains significant, despite numerous reforms and changes. conservation of a problem of a large amount of loss-making enterprises is especially important in comparison with other countries. for example, in the russian federation, the share of unprofitable enterprises did not exceed 33-36% in 2014–2016. research of the current state of the economy gives grounds to assert that the entrepreneurial sector of ukraine remains sensitive to a variety of adverse internal and external factors (hanzyuk, 2016). the objective reaction for companies is to reduce production and sales volumes, optimization of personnel structure. business leaves the market, and most importantly – has negative financial performance. the objective of this article is the investigation of financial results of ukrainian enterprises and identification of the main problems that cause unprofitable, and then offer ways to overcome the financial crisis. 3. the research method research materials: analyses, calculations, and articles formed the basis for writing this article. the scientific method became correlation analysis, comparative analysis, a method of description, interpretation of statistical data, a method of observation. 4. problem-solving 4.1. the financial results of enterprises in ukraine and the main reason for their loss since 2014, ukraine is actively pursuing reforms on the path to european integration, discarding the inefficient control mechanisms. the priority remains the establishment of mechanisms for fair market relations, as well as ensuring a socially oriented economy of the vector. a sharp change in the direction of development is displayed on the macroeconomic indicators almost instantaneously. in particular, the national currency depreciated by more than 3 times. the consumer price index amounted to 124.9% in 2014 and 143.3% in 2015. the fall of gdp amounted to -28.1% in 2014 (in million dollars) in 2014 and -31.3% (in millions of dollars) in 2015. these changes are displayed on the activity of enterprises of ukraine. the main problems of enterprises should be called: • decrease in domestic purchasing power of the population; • instability of national financial system and, as a result, limited access to financial resources. since 2014, ukrainian business has lost about 25% of the capital, which has remained in insolvent banks; • decrease in investment attractiveness and, as a consequence, the outflow of financial investments of foreign partners; • abrupt cessation of business contacts with the markets of the russian federation, which takes about one-third in the ukrainian export structure; • military aggression in ukraine, which led to a loss of about 18% of the country’s industrial potential; • high level of shadow economy; • instability of tax legislation, the abolition of state support and tax relief programs; • poor asset structure, the presence of obsolete technology and worn-out fixed assets. in addition, only 16.8% of enterprises in ukraine engaged in innovative activity in 2013 (grynko, gviniashvili, 2015). on the other hand, technology is one of the main stimulants of the global market formation. therefore, development of technology encourages the integration of markets (obradovic, 2015). the statistical information allows analysing the current situation with the financial results of ukrainian companies (fig. 1). 65 67 61 60 59 62 55,3 65,9 66,3 73,7 67,2 35 33 39 40 41 38 44,7 34,1 33,7 26,3 32,8 0 10 20 30 40 50 60 70 80 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 profitable enterprises, % unprofitable enterprises,% fig. 1. dynamics of profitable and unprofitable enterprises in ukraine, % source: built by the author based on (state statistics service of ukraine, 2016) from 2008 to 2012 there was a tendency of the growth of the share of unprofitable enterprises in the economy. the maximum value of this indicator amounted to 44.7% in 2012. in general, the number of companies with a negative financial result remained stable – about 33%. at the end of 2015 and 2016 may judge the downward trend in the loss ratio in the ukrainian economy. in baltic journal of economic studies 66 vol. 4, no. 2, 2018 particular, the share of unprofitable enterprises was minimal in 2015 – 26.3%. representation of the ukrainian companies will display more accurate the value of the financial result from operating activities (fig. 2). the figure shows the depth of the crisis in the economy. despite the minimal share of unprofitable enterprises for the entire period of the study (26.3%), in 2015 their financial performance (815.4 billion uah of loss) resulted in a negative value of the indicator for the entire economy of ukraine: -340.1 billion uah. losses of companies in 2014 were even greater: -523.6 billion uah for all subjects. for loss-making enterprises (33.7%), there is 858.1 billion uah of loss. 34,7 43,7 20,2 -4,7 31,6 63,3 59,2 29,3 -523,6 -340,1 80 y = 0,5175x5 13,715x4 + 129,31x3 529,29x2 + 905,86x 462,57 -600 -500 -400 -300 -200 -100 0 100 200 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 financial results of enterprises in ukraine, bln. uah polynomial financial result of enterprises ukraine, bln. uah fig. 2. dynamics of financial results of enterprises in ukraine, billion uah source: built by the authors based on (state statistics service of ukraine, 2016) for economic activity situation is mixed. the smallest share of unprofitable enterprises in ukraine in 2016 was observed in agriculture – 12.4% of total amount of enterprises in the industry. however, this situation is explained by preferential tax treatment (single tax, in which an object enters the land for agricultural purposes and the availability of tax relief vat). however, the financial result of unprofitable agricultural enterprises has led to a negative result overall industry: -214 million uah in 2016. the most profitable sectors of the economy ukraine in 2016 were a branch of financial and insurance activities (40.9 billion uah) and professional, scientific and technical activities (32.1 billion uah respectively). financial stabilization indicates overcome the peak of the financial crisis and lay the foundations for further growth. but there are still a great number of unprofitable and insolvent companies – about 32%. 4.2. financial and economic characteristics of the development of enterprises data on the financial results of the companies may be incorrect due to the high shadowing of the economy. there is an increase of the illegal black market and the redistribution of the real economy. periodically revealed violations in the field of nature and the extraction of valuable minerals (kaszuba, 2015). in fact, the outflow of funds in the informal sector occurs in any of the sectors of the economy. at the same time, the revenue part of the budget is suffering because of the informal sector enterprises activity is hidden from the state and does not simulate the development of the economy (osadcha, 2016). a great number of companies do not even put profit as a primary objective. often, the finished products are sold through a well-developed network of intermediaries, which leads to leaching of capital to offshore zones. a number of companies created for the control of resources and markets. this ensures the preservation of monopoly position in the industry. in the field of agriculture, which used the indirect support of the state in the field of tax regulation for a long time, subjects did not carry out a revaluation of assets. this leads to a distortion of data on income and the number of profitable enterprises. however, the situation may change due to the increased tax burden on agricultural producers. a strong influence on the development of business in ukraine has professional management, as well as willingness for innovations. the tendency to diversify production and to attract financial resources, the application of current approaches to the business organization, as well as the presence of a sound financial strategy for specific enterprises ensure the effectiveness of the overall economy. giving a description of the business, we should take into account the objective realities of economic development. this is a condition, which is objectively facing any enterprise. consider the impact of inflation on the performance of enterprises (fig. 3). 3,9 3,3 4 5,9 5 3,9 -4,1 1 7,7 y = 917,9x3 3302,5x2 + 3909,8x 1520,9 -6 -4 -2 0 2 4 6 8 10 0,9 1 1,1 1,2 1,3 1,4 1,5 fig. 3. dependence of the profitability of operational activity on inflation source: built by the authors based on (state statistics service of ukraine, 2016; solyanik, 2013) it can be noted that the increase in inflation leads to lower profitability. however, in the short term, there is an increase in profitability by increasing the value of baltic journal of economic studies 67 vol. 4, no. 2, 2018 the finished product (solyanik, 2013). note that sell products at a price that reflects the reality are not always obtained. in addition, companies face an increase in raw material costs and materials. only the professionalism of managers will depend on the timeliness and adequacy of the increase in the price of finished products. study of dynamics of industrial products production in ukraine (fig. 4) gives an indication of the volatility of this indicator. the wave nature of the production volume is often explained by the volatile external markets. a logical extension of the recession of 2011– 2013 has become a deep crisis and the decline in industrial production in 2014 and 2015 when the index of industrial production amounted to only 87%. in 2016, the figure for the first time from 2011 exceeded 100% (102.1%). however, the increase in production is connected with the low base of comparison primarily. among the salient trends of enterprises in ukraine, we should mention the tendency of falling net profit enterprises to reduce product sales index while capital growth (table 1). for example, such a situation is observed in 2012, 2013, and 2014 respectively. this indicates poor quality of management because the increase in cash flows from revenues did not cause the accumulation of profit. instead, the funds allocated to the increment of the capital of the company. 95 79,4 112,2 108 99,3 95,7 89,9 87 102,1 y = 0,0577x6 1,8137x5 + 22,496x4 138,76x3 + 437,28x2 639,49x + 415,01 60 70 80 90 100 110 120 2008 2009 2010 2011 2012 2013 2014 2015 2016 indexes of industrial output produced by enterprises in ukraine ,% polynomial fig. 4. dynamics of indexes of industrial output produced by enterprises in ukraine, % source: built by the authors based on (state statistics service of ukraine, 2016) as a result, the capital structure is unsatisfactory. enterprises overcharged interest on loans or have significant increases or penalties payable. this situation makes the achievement of innovative development and responsible coping strategies in the industry almost impossible. such trends are due to technological backwardness industrial complex of ukraine in comparison with developed countries of europe and the world. also inadequate is the technology, the structure of production, and the quality of the resulting product. for example, in the metallurgical sector in total output, the share of continuous casting of steel was 53.5% in 2011. instead of developed countries on this parameter is much higher – 93% (solyanik, 2013). the complexity of managing and adverse financial and economic environment cause pressure on the solvency of companies. for companies, it becomes more difficult to fulfil the obligations in time, while gradually increasing the amount of accounts receivable and current liabilities (fig. 5). by the way, in terms of inflation and a significant number of bankrupt enterprises counterparty significant portion of accounts receivable becomes irredeemable. 0 1000 2000 3000 2011 2012 2013 2014 2015 1426,7 1701,4 1566,6 1798,1 2517,2 1839,5 1990,9 2169,9 1673,8 2196,3 accounts receivable, bln. uah accounts payable, bln. uah fig. 5. dynamics of accounts receivable and accounts payable of enterprises in ukraine, billion uah source: built by the authors based on (state statistics service of ukraine, 2016) in 2014 and 2015, there was an excess of receivables over payables enterprises of ukraine to 124,3 billion uah and 320,9 billion uah respectively. companies were experiencing solvency problems due to unreliable customers and clients. performing current liabilities becomes difficult because companies reduced liquidity due to the high receivables. the means determined by the cognitive hierarchical model of destructive factors of influence on the financial security of enterprises (fig. 6) outlines the degree of action of factors of varied nature. levels are from table 1 dynamics of indices of profits, sales, and capital of enterprises in ukraine in 2011-2015 indexes 2011 2012 2013 2014 2015 index of net profit 396,4 63,7 -65,0 |2588,0| |63,3| index of sales of products 118,6 105,3 96,4 103,0 123,7 index of capital of enterprises 114,7 116,8 98,6 112,2 111,3 source: built by the authors based on (state statistics service of ukraine, 2016) baltic journal of economic studies 68 vol. 4, no. 2, 2018 the most significant (level 1) to the least influential (level  4). as a result, it was discovered that the lack of financial resources for enterprises has the most adverse effects. profits become the basis for further development, forming reserves and own financial resources of the enterprise. in this case, the shortage of own resources, along with the complexity of attracting additional sources of funding, lead to further aggravation of the financial crisis in the enterprise. 5. discussion at this stage of development, business sector of ukraine is in a difficult position. the economy is characterized by a large share of unprofitable enterprises (fig. 1), large losses (fig. 2), and the low efficiency (fig. 3). companies of all sectors, sizes, and ownership are forced to operate under a redistribution of markets, the rapid devaluation of the national currency, and the growth of non-payment. during the military aggression and falling real incomes of the population, the government has other priorities, hence the collapse of government support programs. the study (table 1) shows the inefficiency of the distribution of received cash proceeds by enterprises. it is explained by a large amount of borrowed funds, high cost and large size of the tax burden. as a result, companies are not able to invest in the development of its own advanced technologies and have to resort to a “survival” strategy. however, the existing capacity and potentially capacious internal market provide a hope for restoring profitable activity. economy’s restore performance conditions fixed assets through investment or aimed state support. at the same time, businesses need to diversify markets and to ensure the competitiveness and quality of the finished product. 6. conclusion a significant number of loss-making enterprises and a negative financial result are the problems of the national economy. business is rapidly trying to adapt to the new realities of management, as well as actively seeking new markets for finished products. in such circumstances, to the forefront of management’s ability to timely find and identify possible threats in a constantly changing level 1 level 2 level 4 level 3 low liquidity the complexity of access to credit support low profitability unbalanced settlement and payment relations shredding of capital and capacities of production low solvency of enterprises high level of financial and economic risk depreciation of fixed assets lack of current assets lack of financial resources t he a gg re ga te o f t hr ea ts to th e fi na nc ia l s ec ur ity o f e nt iti es in u kr ai ne ’s e co no m y fig. 6. hierarchical model of destructive factors of influence on financial results and financial security of enterprises of ukraine source: the author’s development baltic journal of economic studies 69 vol. 4, no. 2, 2018 environment. research has shown that successful and profitable will be the company that takes into account in its work ongoing reform processes, inflation, and the changing role of the state. the study demonstrated that to ensure the solvency, it is necessary to prevent the increase in accounts receivable and cooperate only with reputable customers and buyers. indexing on the inflation the debt level of protection against the depreciation of assets that are invested in products delivered or services rendered. further research should be focused on the creation of a system of crisis management and risk management. such enterprise management segments are designed to provide financial security for the activities, the formation of positive financial results, and timely neutralization of threats of any type. 7. acknowledgement this paper was supported by tavria state agrotechnological university’s scientific program no. 0116u002742 “developing scientific and methodological foundations of financial basis for the socio-economic development of rural areas in terms of increasing the autonomy of regions” references: abotsi, a., dake, g., agyepong, r . 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(2013) upravlinnja ekonomichnoju bezpekoju agrarnogo pidpryjemstva [management of economic security of agricultural enterprises]. scientific bulletin of lviv national university of veterinary medicine and biotechnology named. s.z. gzhytsky, volume 15 № 2 (56), pp. 081-089. baltic journal of economic studies 171 vol. 3, no. 4, 2017 corresponding author: 1 department of enterprise economics and human resource management, yuriy fedkovych chernivtsi national university. e-mail: viktormeglei@gmail.com specifications of ecological and economic development of the agricultural sector of ukraine viktor meglei1 yuriy fedkovych chernivtsi national university, ukraine abstract. the subject of the author’s research is the processes of development of the agrarian sector of ukrainian economy by ecological-economic specifications. the methodological justification is based on the use of fundamental principles that reflect the main strategies of agrarian development. the systematic approach to the characteristics of the agrarian system, complex by the structure and functional parameters in interaction with the external environment, is applied. methods of analysis/synthesis are used for the disclosure of the integral nature of the agrarian environment in the context of management of the main processes. the purpose of the author’s research suggests a consideration of the processes of formation of the agrarian system by economic and environmental interactions as modern dominant in the development of the agrarian sector of ukraine. the analysis of integral components of agrarian development with the reflection of interactions of the sphere of agrarian production and agrarian relations is carried out. the emphasis is made on the importance of the formation of an effective and promising domestic agricultural policy, in the basis of which is the activation of entrepreneurial initiatives, comprehensive development of the agrarian community, ecologically and socially oriented projects of reproduction of rural territories, innovative strategies of ecological and economic ascension of agriculture in ukraine. the resource base is considered as the economic basis of agriculture from the standpoint of the main sales markets, the state of transport infrastructure, the growth of world and domestic demand for agrarian raw materials and finished products, and the availability of relatively cheap labour resources. the agrarian production is analysed from ecological positions and influences of natural and climatic factors. the state of individual agro-ecological mismatches in agriculture of ukraine is explained, as well as the reasons of polluting impacts on the main natural spheres and some other unfavourable environmental actions. an attention is focused on the importance of reproduction of the ukrainian agrarian sector on the basis of the adjustment of the system of state regulation and on the definition of the coordination mechanisms between the sphere of influence of the state and market elements of the national agrarian economy. the motivational goals, operating target facilities, main directions of administrative tasks for the development of the state regulation system based on economic and environmental criteria are substantiated. the importance of managerial approaches in the system of state regulation of the development of domestic agricultural production on the example of plant growing is specified. the dependency between the production of crops by gross collection, yield, and annual needs of the country are analysed, in particular, by the food and export potential of individual plant crops, etc. the analysis of the most important strategic positions for the development of the domestic agricultural sector in the system of state regulation of ukraine for the near future is carried out. corresponding conclusions to the author’s research are made, reflecting the analysed specifications of development of the agrarian sector of ukrainian economy by ecological and economic indicators. at the same time, modern for ukraine approaches are proposed in the field of agricultural management, as well as new regulatory accents to stimulate agrarian development in specific areas. key words: agrarian sector, agrarian system, public administration, market regulation, agrarian production, plant growing. jel classification: q10, q18, q58 1. introduction the dominance of the agrarian environment, as typical for the ukrainian economy, is traditional and remains the same for the near future. this is explained by the historically long-standing culture of farming in ukraine, as well as by favourable natural and climatic conditions for the extension of the agrarian economy in various fields, a fairly high proportion of the population involved in the sphere of agrarian relations, significant entrepreneurial initiatives, that are related with agrarian baltic journal of economic studies 172 vol. 3, no. 4, 2017 production, trade of agricultural products, rural development, green/agrarian tourism, etc. the agrarian sector (as an important component in economic, ecological, and social terms) plays a significant role in the development of ukraine’s national economy in present market conditions. the agrarian sector performs a number of important macroand microeconomic functions; in particular, these are ensuring of food security of the country, providing processing industries with raw materials, creating economically justified volumes of export revenues, employment of rural residents, etc. at present, the structure of domestic agricultural production by the subjects of economic activity is changing positively – the share of agricultural enterprises is increasing rapidly, ahead of the growth of households. these components outline the typical situation in the agrarian environment of ukraine, which can be used as a basis for the reproduction at a new market level – structural, functional, communicative. along with significant opportunities, the agrarian sector of ukraine needs radical changes in the management of the main processes that determine development. first of all, it is refers to the importance of an effective combination of economic and environmental instruments, the formulation of progressive goals and the renewal of agrarian business motivation, as well as the adoption of effective solutions, in particular, taking into account international experience. therefore, it is important to conduct scientific and methodological researches, which are aimed at the disclosure of mechanisms for the development of the domestic agricultural sector and the direction of its reproduction in the context of modern globalization canons. the purpose of the study is to consider the processes of formation of modern agrarian system based on economic and environmental interactions as modern dominants, as well as to analyse the existing specifications of the development of ukrainian agrarian sector and to determine the prospects of domestic agrarian economy in the context of sustainable development as a target model. implementation of the target objects of the author’s research is made in accordance with the specification of the research tasks; in particular, the focus is made on the following components: to analyse the integral components of the development of the domestic agrarian sector; to substantiate the expediency of the system of state regulation of the agrarian sector by motivational purposes and ecological-economic tasks and their specification in the field of plant growing of ukraine; to define the coordination mechanisms between the sphere of influence of the state and market elements of the agrarian economy of ukraine; to note the prospects of ecological and economic changes in the domestic agrarian economy. the methodology of the author’s research is based on the use of fundamental principles that are defining the main strategies for the development of the ukrainian agrarian sector, as well as principles that find their implementation in the field of agrarian ecological and economic interactions. methodological substantiation of the specifications of reproduction of the agrarian sector by economic and environmental dominants is carried out using a systematic approach. studies of a functioning agrarian system in interaction with the environment are made based on systematic analysis/ synthesis. we also take into account the level of knowledge of the investigated object and its properties, as well as the purpose of the study. such methodological approaches allow conducting author’s research as logically acceptable and methodically reproducible. 2. integral components of the development of ukrainian agrarian sector domestic agrarian sector by its structure and functioning is complex and communicatively rich. on the one hand, it allows ensuring the cyclic processes of agricultural production in the form of farming, plant growing, livestock, and other industries. on the other hand, it allows reproducing agricultural relations at the level of agricultural production and diversified entrepreneurial initiatives, as well as developing the agrarian community comprehensively, forming an effective and prospective agrarian policy, enriching it with new ecologically and socially oriented projects and innovative development strategies, and practically implementing them at the level of individual subjects of agrarian business. the integral components of the development of ukrainian agrarian sector with reflecting the interactions between the sphere of agrarian production and agrarian relations in the author’s presentment are reproduced on the scheme (figure 1). this scheme simultaneously served as a reflection of the substantive directions of methodological analysis from the standpoint of the development of ecological and economic processes, methodological management of the activities of agrarian economy entities based on efficient complementary of systems of state regulation and market self-governance. in this approach, the elements of agrarian science and practice are closely intertwined. agrarian production is the economic basis of agriculture, it provides the necessary level of food security of the country, creates a powerful raw material base for the development of the processing industry, certain sectors of light, chemical, woodworking industry, alternative energy, etc. ukraine has appropriate resources to implement this. in particular, according to the ukrainian institute for strategic studies (institute for strategic studies “new ukraine”, 2015), the area of agricultural land is the largest in europe and counts 41.5 million hectares (70% of the country’s territory), of which 32.5 million hectares are used for growing crops. the development of the agrarian sector of ukraine baltic journal of economic studies 173 vol. 3, no. 4, 2017 is facilitated by the proximity of the main markets, transport infrastructure (railways, roads, and ports), the constant growth of world demand for food products and alternative energy, as well as the availability of relatively cheap labour resources. from the environmental point of view, agrarian production is influenced by natural and climatic factors and is directly involved in the complex agro-ecological system. so, at first glance, it may seem inappropriate that the agrarian sector, being almost an element of nature, causes in ukraine one-third of all polluting emissions and some other adverse environmental actions. the consequences of agro-ecological discrepancy are the low efficiency of processes in ukrainian agriculture. these processes include basic productional, financialeconomical, entrepreneurial, etc., as well as an attendant, which are linked to the insufficient ecological development of rural areas. this, as well as a significant number of other agro-ecological components (which will be considered in the future), determine the high relevance of issues concerning ecologization of agrarian production and the need to increase the efficiency of functioning of domestic agricultural enterprises as the main subjects of agrarian management. the study of this problem is not new (see, for example, khodakivska o. v., 2015; kupynets l. e., 2010; lopatynskyi yu. m., shkabara t. l., & zaremska o. m., 2001; zinchuk t. o., 2008), but it remains completely unresolved and now requires constant scientific decisions. among the economic reasons for a significant level of environmental risks in the agrarian sector of the national economy are the following: insufficient financial capacity of domestic agrarian enterprises, in particular, medium and small ones, to increase the level of environmental safety of production (according to the data of 2015, 11.1% of agrarian enterprises remained unprofitable (state statistics service of ukraine, 2017), although this is one of the lowest indicators of losses during the years of independence); the inadequate perception of the importance of ecological component in agricultural production by domestic agricultural producers; in particular, a significant share of households do not pay enough attention to the issues of ecology but mainly concentrates on subsidiary production as a form of economic survival; limited economic motivation (both at the national and regional levels) to environmentally-oriented agricultural development, which correlates with the previous points and is associated with the emergence of certain negative agrarian sector of the national economy agrarian production agrarian relations the field of farming the field of plant growing the field of livestock the field of forestry the field of organic farming other complementing agricultural sectors: gardening, beekeeping, greenhouses, etc. development of the agrarian market distribution and consumption of agricultural products creation of an effective agrarian community, agrarian unions agrarian policy of the state development of rural territories formation of a new agroecological culture of society fig. 1. strategic directions of development of the agrarian sector of ukraine developed by the author baltic journal of economic studies 174 vol. 3, no. 4, 2017 agro-ecological processes, in particular, environmental infractions in the practice of management, accompanied by environmental imbalances of different levels of complexity and so on. the above-mentioned situation determines the threatening impact of the agrarian sector of the national economy on the environmental situation as a whole. it should be noted that the public interest to ecological problems, and not only in the agricultural sector, has declined overall. for example, ecological specialties 5-10 years ago were a popular trend in higher educational institutions of ukraine but this profession remained largely not realized. there are constraining factors in the social component as well; in particular, the level of payments in the agricultural sector is lower than the average in ukrainian. although this gap has been decreasing in recent years, wages in agriculture in ukraine remain one of the lowest among economic activities. we can give another example: if earlier agricultural enterprises as systembuilding elements of the village sent a sufficiently large amount of funds for its social improvement, now this practice remains in the distant past. structural separation is characteristic of domestic agricultural production in the context of consideration (lopatynskyi yu. m., & todoriuk s. i., 2015). so, for today it is possible to distinguish three main groups of agricultural producers: 1) large enterprises (like agroholdings); 2) medium and small enterprises, farms; 3) households. such a division is decisive from the point of view of the unequal level of financial and economic revenues and the various impacts on the ecological and social situation in the countryside, both current and distant in time. the abovementioned and many other phenomena and factors predetermine the unbalanced development of domestic agrarian production, entrepreneurial activity in rural areas, agrarian relations between members of society and farms about the creation, exchange, distribution, and consumption of the total agricultural production. we consider that it is possible to solve the existing problems on the basis of the practical implementation of the concept of sustainable development of the agrarian sector of the national economy as a modern methodological base, which is a perspective course of the agrarian policy of ukraine. it should be noted that there are a significant number of regulatory mechanisms used by the government of ukraine on agricultural development at the country level and local councils at regional levels – legislative, administrative, economic, propagandistic, and other methods. 3. the condition of state regulation of the agrarian sector of ukraine progressive cyclical reproduction of the ukrainian agrarian sector as a necessary attribute of the national economy will be possible on the basis of a welldeveloped system of state regulation. in modern conditions, state regulation of the agrarian environment is, on the one hand, an important element in the development of the agrarian economy in terms of the deterministic structure of its main elements and multidirectional functional processes. on the other hand, it determines the coordination mechanisms between the sphere of influence of the state and market elements of the national agrarian economy. in relation to the latter, an optimal correlation is needed between the role of the state and the agrarian market, which may vary, depending on a significant number of internal and external socio-economic and political events. at the same time, it is important to constantly evaluate the environmental and economic situation in the agrarian sector on the basis of the current state monitoring, forecasting the consequences of environmental changes in the agriculture of ukraine, and adopting the necessary adaptive management decisions. the system of state regulation of the agrarian sector of the national economy existing in ukraine is developing in the light of its main institutional tasks. it is methodologically based on the implementation of socio-economic and environmental priorities of society table 1 motivational goals of the state regulatory system of the agrarian sector of ukraine task groups essential signs economic tasks to ensure: food security of the country; development of the main branches of the agroindustrial complex; an increase in the volumes of production of agrarian products; economic efficiency of agriculture; the free development of agricultural enterprises; functioning of the internal food market with modern infrastructure; the growth of international technical cooperation of the agrarian sector of ukraine; strong market positions of ukraine in the world, including european agro-food sector, etc. ecological tasks development of ecologically oriented agriculture on the basis of: monitoring of the environmental parameters of the agricultural management system; high-tech agrarian production, resource and energy saving technologies; the increase of the level of quality/safety of agrarian raw materials and products; production of environmentally friendly agricultural products; integrated development of rural areas with simultaneous environmental priorities; formation of a network of nature conservation farms and other institutions in the structure of agro-industrial complex baltic journal of economic studies 175 vol. 3, no. 4, 2017 as a whole, in particular, in the agrarian sector, and it is provided on the basis of the relevant guiding principles. existing target installations for the development of the state regulatory system and its importance should be reflected in economic and environmental criteria. our analysis of the main areas of management tasks in this area is reflected in table 1. our analysis of the most important strategic positions for the development of the domestic agricultural sector in the system of state regulation of ukraine for the near future is reflected in table 2. it is worthwhile to note modern approaches in the field of agricultural management in ukraine, new regulatory accents that are defined as guiding to action and are reflected in the proposed development concepts. in particular, it is about: increasing of accountability at all levels of government; multifaceted and adequate to needs stimulating of agrarian development by separate, specific directions; transparency of distribution of state or other support; allocation of target support groups in the agrarian sector, etc. 4. the system of state regulation of the branch of plant growing the agricultural production management system has a sufficiently targeted purpose to ensure the production of agricultural products of sufficient quantity and regulated quality, which in turn implements the necessary level of food security of ukraine. on the other hand, it is necessary to increase the reserves of production simultaneously, to ensure the effective use of existing and potential opportunities by agrarian enterprises, increase in their profitability, etc. plant growing as a highly developed branch of domestic agricultural production in the structure of the agrarian sector of ukraine serves as a basis for ensuring food security. primarily this is due to the cultivation of grain and leguminous crops used for the production of bread and some other socially important products. plant growing is the basis for the development of the oil and fat subcomplex of the country on the basis of growing sunflower and some other oil and oilseed crops. it provides the livestock sector with a forage base (forage crops), supplies a significant number of technical crops widely used in various sectors of the food industry – sugar, starch, alcohol, winemaking, brewing and others, as well as light, textile, pharmaceutical, and the like industries. indicators of the efficiency of the state regulation system of agrarian sector of ukraine in the field of plant growing by the main ecological-economic parameters should be considered as follows: – annual gross collection of crop production and its individual species, equivalent to the current needs of society; table 2 conceptual platforms for the development of the agrarian sector of ukraine name of strategic approach purpose and motivation of strategies, concepts, projects strategy of sustainable development “ukraine 2020” (relevant sections for agriculture) implementation of european standards of life in ukraine and enter of ukraine to leading positions in the world. determination of the main vectors of the corresponding movement – the vector of development, the vector of security, the vector of responsibility, the vector of pride concept of national environmental policy for the period till 2020 (relevant sections for agriculture) development of updated national ecological policy, the formation of an effective management system in the field of environmental protection, the realization of structural reforms and modernization of technological processes, the introduction of an ecologically balanced system of nature use (in particular, it concerns the agrarian sphere) strategy of development of agro-industrial complex and rural territories of ukraine for the period till 2020 development of strategic directions of the development of ukrainian agriculture for the future, addressing the real needs of the industry through a comprehensive process of consultation with interested parties, in particular, civil society, business, as well as international donors; increasing the competitiveness of agriculture and promoting the development of rural areas on a sustainable basis in accordance with eu and international standards strategy for agrarian sector development “3 + 5” conduct of reforms: 1. land reform; 2. state support reform; 3. reform of state enterprises and its implementation in the following areas: 1. development of rural areas; 2. development of sales markets; 3. organic production and niches products; 4. irrigation; 5. safety and quality of food products concept of development of rural territories outlining the main priorities of rural development and developing a mechanism for preparing the agrarian and rural sectors of the country to operate in conditions of free trade with the eu; integrated development of rural territories, based on the needs of territorial communities of villages, settlements, etc. usaid project “support for agrarian and rural development” annual grants program within the project strategic investment fund (aps) no. 01 for ukrainian farmers, smalland medium-sized agricultural enterprises with a view to studying world practice of production and marketing, their market development, creation of market products, entering to the international market project “the concept of development of farmers and agricultural cooperatives for 2018–2020” improvement of state agricultural policy, financial and information support and state support of farms, stimulation of increase of agricultural products with high added value, creation of favourable conditions for youth involvement in farm management baltic journal of economic studies 176 vol. 3, no. 4, 2017 – ensuring stable yields of main agricultural crops as one of the indicators of efficiency; – optimization of the structure of crop areas by economic indicators and ecological requirements, etc. based on managerial approaches in the system of state regulation of the development of domestic agricultural production, in particular, plant growing, it is important to find correlations between the production of crops and the annual needs of the country (in particular, the food need). in addition, it refers to the correlation between the export potential of individual crops and the free market development of individual economic entities (from the position of production structure of the management and the receipt of commodity weight). based on official statistical data (state statistics service of ukraine, 2017), we analysed and noted the peculiarities of production of the main groups of agricultural crops in ukraine that make up the food basis: grain and leguminous crops; technical; root crops and tuberous plants, vegetable and melon food crops; forage crops. there is a tendency towards stabilization and growth (starting from 2005) of the gross collection of certain groups and types of crops (state statistics service of ukraine, 2016): – grain and leguminous crops (in aggregate, forming such groups of crops as: food flours, forage (fodder), technical; by species composition – wheat, rye, barley, corn, oats; peas, soybeans, vetch, china, lupine, beans and others), starting from the statistical year of 2005 (except for 2012), is characterized by an increase in the production of the corresponding gross products. in particular, in 2016, the volume of production amounted to 66088.0 thousand tons, which is the largest indicator for the period, since 1990. an increase in the production of grain and leguminous crops allows actively developing the grain industry of ukrainian agribusiness, bakery, enterprises of baking industry, macaroni industry, confectionery, brewing, and other branches of the food industry; – oilseeds, which production in ukraine is constantly increasing, starting in 1990. in the period of 1990–2016, it increased by 6.8 times, from 2814.2 thousand tons in 1990 to 19192.4 thousand tons in 2016, respectively. the noted tendency concerns sunflower as the main oilseed crop, which production for the analysed period increased by 5.3 times, from 2570.8 thousand tons in 1990 to 13626.9 thousand tons in 2016; – potatoes belonging to the group of vegetable crops, which cultivation has stable high indicators, from 2011 – more than 20 thousand tons, which is confirmed by the culture of ukrainian food and its increased consumption as an alternative to more expensive products; – vegetable, fruit, and berry crops, whose production in ukraine reflects the stable needs of the population and is characterized by sufficient stability of production, which in 2016 amounted to 9414.5 thousand tons of vegetables and 2007.3 thousand tons of fruits and berries. today, the characteristic of the agrarian economic system of ukraine is the increase in the productivity of the main groups and strategically important species of agricultural crops; in particular, it concerns grain and leguminous crops, sunflower and other oilseeds, potatoes and other types of vegetable products, fruit and berry crops (fig. 2). for example, high yields in ukraine today are marked by winter wheat as the basic grain crop, the yield of some varieties of which has been record grain and leguminous soybeans oilseeds sunflower potatoes vegetables fruit and berry crops fig. 2. the yield of agricultural crops (centner from 1 ha of the area from which the crop was harvested) baltic journal of economic studies 177 vol. 3, no. 4, 2017 breaking in recent statistical years and amounting to more than 40-50 centners from 1 hectare of agricultural land. soybean yields as an important legume crop have grown significantly – from 10 c/ha in 2000 to 23 c/ha in 2016, the practice of large-scale cultivation of which in ukraine is to a certain extent new. such indexes of yields reflect the high level of implementation of breeding programs in the domestic agrarian economy, improvement of technical and technological processes of growing crops, increasing their productivity and other areas of development of highly productive agricultural production. in turn, these positive processes in plant growing from the standpoint of yield crops of main crops reflect the rather high level of efficiency of state regulatory processes. after all, ensuring stable yields of crop products requires overcoming of a significant amount of risks, among which the most important is changing climatic conditions, in particular, climate changes towards warming, complex environmental disasters, manifestations of natural disasters – droughts, hailstones, frost, floods and others. to this end, certain measures are envisaged at the state level, in particular, the introduction of insurance of agricultural products, which is presented in the law of ukraine “on peculiarities of insurance of agricultural products with state support”, is sufficiently advanced for ukraine. the development of the insurance system involves providing agricultural producers with funds from the state budget in the form of subsidies for the payment of a part of the insurance payment (insurance premium) accrued under the insurance contract (verkhovna rada of ukraine, 2017). 5. conclusions on the basis of the analysis of peculiarities of the ecological and economic development of the agrarian sector of the national economy, one should conclude that the basis of theoretical and methodological substantiation of the basic principles of reproduction of the agrarian sphere is the concept of sustainable development, which is recognized as the most promising by the overwhelming majority of domestic scientists. the specifications for the development of the ukrainian agrarian sector are based on the interconnection, interdependencies of agrarian production and agrarian relations, processes of public administration and market self-regulation. the formalization of agrarian processes requires fundamental changes. in particular, it should be done from the standpoint of the systemic management of the development of the agrarian sector, which will harmoniously combine both regulated and marketoriented, free economic relations that will contribute to the formation of new ecological-economic interactions and practical implementation in the form of successful agrarian development. agrarian production in ukraine has the relevant natural and climatic resources for the production of basic crops. its development is also contributed by to the growth of world demand for agrarian raw materials and finished products, the availability of sales markets (both domestic and foreign, in particular, european countries). in the field of plant growing, there is a tendency to increase yield and gross collection of certain groups of plant crops, in particular cereals, leguminous plants, oilseeds, fruit, and vegetables, etc. such indicators reflect the effectiveness of system processes of state regulation, state support in the direction of overcoming agrarian risks. realization of the resource potential of agrarian development requires the simultaneous formation of effective mechanisms for managing the agrarian development of the ukrainian economy taking into account the social interests of each member of society. in addition, these mechanisms should concern the prospects for the overall economic growth of the state, the effective reproduction of environmental parameters in the process of management at an acceptable level, which will reflect modern forms of manifestation of economic, social, environmental parameters as targetoriented and component-value-equivalent. such directions will serve as a methodological basis for further author’s development. references: institute for strategic studies “new ukraine”. (2015). the agricultural sector of ukraine: trends, subjects, reform prospects. kyiv: author. khodakivska o. v. (2015). ecologization of agrarian production. kyiv: national scientific center “institute of agricultural economy”. kupynets l. e. (2010). ecologization of the food complex: theory, methodology, mechanisms. odesa: institute for market problems and economic and environmental studies of the national academy of sciences of ukraine. lopatynskyi yu. m., shkabara t. l., & zaremska o. m. (2001). environmental aspects of agrarian entrepreneurship. bulletin of the sumy state agrarian university, 2, 197-201. lopatynskyi yu. m., & todoriuk s. i. (2015). determinants of sustainable development of agrarian enterprises. chernivtsi: chernivtsi national university. state statistics service of ukraine. (2016). crop production of ukraine: statistical yearbook. kyiv: author. state statistics service of ukraine. (2017). agriculture of ukraine: statistical yearbook. kyiv: author. baltic journal of economic studies 178 vol. 3, no. 4, 2017 state statistics service of ukraine. (2017). electronic resources. retrieved october 30, 2017 from http://www.ukrstat.gov.ua/ verkhovna rada of ukraine. (2017). law of ukraine “on specifics of state-supported insurance of agricultural products”. electronic resources. retrieved october 30, 2017 from http://zakon2.rada.gov.ua/laws/show/4391-17 zinchuk t. o. (2008). ecologization of agrarian production in ukraine: current state and development prospects in the conditions of european choice. bulletin of the sumy state agrarian university, 4(28), 135-143. виктор меглей спецификации эколого-экономического развития аграрного сектора украины аннотация. предметом выполненного авторского исследования являются процессы развития аграрного сектора экономики украины по эколого-экономическим спецификациями. методологическое обоснование проведено на основе использования фундаментальных принципов, отражающих основные стратегии аграрного развития. применен системный подход к характеристике аграрной системы как сложной по структуре и функциональным параметрам во взаимодействии с внешней средой. использованы методы анализа/синтеза для раскрытия интегральной сущности аграрной среды в разрезе управления основными процессами. на основе цели авторского исследования конкретизировано рассмотрение процессов формирования аграрной системы за экономическими и экологическими взаимодействиями как современными доминантами развития аграрного сектора украины. проведен анализ интегральных составляющих аграрного развития с отображением взаимодействий сферы аграрного производства и аграрных отношений. акцентировано внимание на важности формирования действенной, перспективной отечественной аграрной политики, в основе которой – активизация предпринимательских инициатив, всестороннее развитие аграрного сообщества, экологически и социально ориентированные проекты воспроизведения сельских территорий, инновационные стратегии эколого-экономического подъема сельского хозяйства украины. рассмотрено ресурсную базу как экономическую основу сельского хозяйства с позиций основных рынков сбыта, состояния транспортной инфраструктуры, роста мирового и внутреннего спроса на аграрное сырье и готовую продукцию, наличия сравнительно дешевых трудовых ресурсов. проанализировано аграрное производство с экологических позиций, воздействий природноклиматических факторов. объяснено состояние отдельных агроэкологических несоответствий в сельском хозяйствовании украины, причины загрязняющих воздействий на основные природные сферы и некоторые другие неблагоприятные экологические действия. сконцентрировано внимание к важности воспроизведения аграрного сектора украины на основе отладки системы государственного регулирования, определения согласовательных механизмов между сферой влияния государства и рыночными элементами национальной аграрной экономики. обоснованно мотивационные цели, действующие целевые установки, основные направления управленческих задач к развитию системы государственного регулирования по экономическим и экологическим критериям. конкретизировано значение управленческих подходов в системе государственного регулирования развития отечественного аграрного производства на примере растениеводства. проанализированы зависимости между производством сельскохозяйственных культур по валовым сборам, урожайностью и ежегодными потребностями страны, в частности продовольственными, экспортным потенциалом отдельных растительных культур и тому подобное. выполнен анализ наиболее важных стратегических позиций к развитию отечественного аграрного сектора в системе государственного регулирования украины на ближайшую перспективу. сделаны соответствующие выводы к авторскому исследованию, одновременно предложено современные для украины подходы в области управления сельским хозяйством, новые регуляторные акценты к стимулированию аграрного развития по конкретным направлениям. baltic journal of economic studies 131 vol. 1, 2015 methods of determination the interior potential of enterprise in making strategical assortment decisions svitlana malyuk1, mykolaiv institute of law, national university of odessa law academy, ukraine abstract. the analysis of the internal environment of the enterprise is aimed at assessing the strategic potential of the enterprise as a whole and its individual functional subsystems. the efficient activity of enterprise cannot be realized without a systematic definition and using the existing capabilities since, as a rule, the potential of the organization is higher than its actual implementation. it is not possible to put forward long-term goals, to form the most optimal strategy to achieve them without the characteristics of accumulated enterprises potential. from this point, the purpose of the paper is to study and establish the criteria that characterize the inner potential of the company during the implementation of assortment strategies. the method of evaluating of these indicators, as well as the selection of the assortment strategy according to the results has been suggested. methods. the research of the internal potential of pjsc “mykolaiv bakery №  1” is based on the expert questionnaire, which made it possible not only to identify a number of criteria for internal enterprises environment, which made it possible not only to identify a number of criteria for internal environment, as well as by experts to determine the parameter and boundary values of coefficients influencing the choice of the assortment strategy. the results of questionnaire showed that the main criteria of the characteristics of the internal potential of the company are: primary phases of the life cycle of the goods (were determined on the basis of the matrix "market growth – market share"); prospects of producing the assortment groups of goods (calculated using the integral coefficient of goods assortment); changes in sales amount (described by trigonometric dependencies); degree of the goods assortment realization (evaluated using the coefficient of realization); assortments balance according to the pareto rule (based on the pareto rule, as well as expert survey); the level of liquidity and solvency of the company (calculated using the absolute liquidity ratio). depending on the obtained limited parameters of coefficients were proposed following assortment strategies: a strategy for the elimination of the goods (the selection of such products, which look dubious from the point of view of the further attractiveness on the market and have to be re-certificated); the strategy of product differentiation (the process of developing a number of significant modifications of the product that make it different from the competitors goods), goods diversification strategy (production of additional products that will be offered to the new markets), a strategy of goods variations (based on a strategy of increasing the concentration of consumer’s usefulness effect from the using of goods). the practical significance. the research of the indicators of the internal potential of the enterprise allows to assess the internal strengths and weaknesses of the production realistically, to look for reserves, and therefore, to choose the optimal assortment strategy that will enable the company to maintain the level of competitiveness, and strengthen their competitive position in the industry. value/originality. obtained during research information can provide marketers of the investigated enterprise with more accurate information, received on the basis of a scientific approach that in prospect will allow to form effective assortment strategies. key words: internal potential of the enterprise, assortment strategy, product life cycle, the prospects of production assortment, the change in sales volume, the index of assortments realization, assortments balance, the level of liquidity and solvency. jel classification: m31, l15, l69 corresponding author 1 department of humanitarian subjects, mykolaiv institute of law, national university of odessa law academy. e-mail: svalmalyuk@i.ua baltic journal of economic studies 132 vol. 1, 2015 1. introduction analysis of the internal environment of enterprise is aimed at strategic potential assessment of the company as a whole and its individual functional subsystems. effective enterprise activity cannot be carried out without systematic estimation and use of existing resources, so far as the enterprise potential is usually higher than level of its actual implementation. without characteristics of accumulated potential of the company it is impossible to impose perspective goals, develop the most appropriate strategy to achieve them. while using the systematic approach to analyze the internal environment, it is appropriate to interpret it as interior potential of enterprise, which is a system of interrelated elements that carry out certain functions during the process of providing manufacture of products and achieving other enterprises goals. during researching the interior potential of pjsc "mykolaiv bakery №  1" we have conducted expert questionnaire, which allowed identifying criteria for evaluating the internal environment. the aim of our research is reasoning criteria that characterize the inner potential of the company in the implementation of assortment strategies, values and class limits of values and choosing the assortment strategy according to the achieved results of the evaluation of these indicators. 2. preferential phases of product life cycles preferential stages of product life cycles, included in the assortment nomenclature, which lets out by the enterprise we determine on basis of the matrix “market growth  – market share”: share of the assortment group in enterprise trade turnover m ar ke t s ha re gr ow th ra te ii – lc phase increase i – lc phase implantation h ig h iii – lc phase saturation iv – lc phase decrease l ow high low adapted by the author (evans, 2002; aaker, 2007) fig. 1. distribution of the enterprises product assortment in phases of the life cycle high growth rate (tpj) is considered to be higher than market average: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where opj  – average monthly amount of product realization of j-s enterprise; %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз   – total amount of average monthly product realization n-th number of enterprises in the industry during the reporting period. assortment share of group d pi in enterprises trade turnover, which is higher than average share for the company, conforms to the high market share: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз where %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз   – average monthly amount of trade turnover in i-th group; %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз   – total amount of average monthly trade turnover n-th number of assortment groups for the period. preferential phase of assortment production lc, according to (karpenko, 2009), defines the availability of own funds to invest into the assortment restoration. the bigger is the number of “cash cow” in the assortment bag and their specific weight in trade turnover, the higher are the investment abilities, because they are “the main contributors to the resources accumulation for developing products on the fast -growing markets ”( zvjaginceva, 2009). during researching we have reached the next conclusions about the assortment decisions of enterprise in context of the assortment products life cycle: 1. on the implantation and decrease phase we recommend to remove a part of the least promising goods from production and try to increase the revenues from the most promising goods by changing the outlet or creating modifications, changing the design, packaging etc.. these will ensure the extension of the life cycle at minimum costs. 2. on the increasing phase one should create extra assortment proposal modifications based on the existing or improved technology of producing goods, which are on the saturation stage. 3. on the saturation phase it is reasonable to invest into the creation of the newest assortment proposals (that can be the basis of the goods line ), or make goods with improved consumer properties. 3. prospects of producing the assortment groups of goods to rate this index can be used integral coefficient of assortment goods prospects according to all of the suggested specifications, proposed by putyatina l.m.: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз   – index of j-criteria of prospect according to the i-th assortment group of goods; %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз   – weight coefficient of j0criteria of prospect significance; (∑ϕi =1), deterring by expert assessments during the questionnaire; s – perspective criteria amount. experts took 3 main indexes as the basis of prospects of producing the assortment groups of goods: assortment group part in goods realization amount; assortment group part in paying off defrayal; profitability of producing the assortment group of goods. we determine the contribution of assortment group in paying off defrayal through establishing correlation between the total expenses for producing goods and baltic journal of economic studies 133 vol. 1, 2015 amount of turned out goods, distributing constant and variable components using the method of linear regression. distributing expenses is necessary for correct analyzing the costs. thus, in terms of part-charging facilities, financial results of the enterprise might deteriorate, as the result of making decisions to withdraw from production goods with the low level of paying off defrayal (unprofitable at costs ),but with no positive margin profit. correlation between costs and production scope is described by the following formula: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where i – assortment group of goods; с i   – stable expenditure, which refer to the i-th assortment group of goods (expenditure for maintenance facilities, general shops goods expenditure, general plants expenditure); п i   – rate of variable expenditure for one produced commodity; n i   – amount of producing the i-th assortment group of goods; оз i   – general costs for producing the i-th assortment group of goods. we determine the contribution of each assortment group in paying off defrayal of enterprise by the formula: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where р i  – amount of the income from realization of the i-th assortment group of goods. in terms of full realization of produced goods the role of profitability index of assortment group of goods is indisputable. however, often unrealized commodity accumulates in the enterprises storehouse . in that terms, the index of profitability is not enough. it is necessary to enter a relative index of profitability  – profitableness of goods producing, which characterize the return from funds invested in production. we suggest to determine the profitability index (rінi) by the following formula: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where с зал   – the sum of unrealized commodity for the beginning of the period; с витр  – the sum, spent on the output of the assortment group in the analyzing period. we determined the limiting values of integral coefficient of assortment groups prospectiveness in accordance with expert opinions in the questionnaire. as the result, the following strategic assortment decisions are determined in the context of limited coefficient values the assortment groups prospectiveness : 1. under к і пер < 0,2 the degree of assortments prospectiveness is low, so one should take out from production a part of the least promising assortment positions and try to increase the income from the most promising goods due to the changes of the market or creating modifications, changing design, packing etc.. under the minimal expenses these measures will ensure the prolongation of the goods life cycle. 2. 0,2 ≤ к і пер < 0,6 demonstrates the medium assortments prospectiveness level. in this case we suggest to create extra modifications of assortments proposals on the basis of improved technology of producing goods, which are on the stage of satiation. 3. к і пер > 0,6 indicates the high level of assortments prospectiveness. in this case one should invest into creation substantially new assortment positions (that can be the basis of the goods line), or create goods with improved consumer capabilities. 4. change of the sales amount if we assess the dynamics of sales, the change in indexes of periods is unsustainable. thus, the best reflection of seasonal demands character, which is accentuated in some articles (balabanova, 2006; zvjaginceva, 2009), is by trigonometric dependencies. we are interested only in the general tendencies of amount sales changes (increasing and decreasing) in absolute display, compared to the rate of market development. there is meaning to describe these tendencies by using the the tangent of slope angle of the lineal trend to the axis ox (first derivative of a linear trend in time) (kovtun, 2009). take this statement as a basis. to find the equations of linear regression use the method of least squares. then the regression equation will look like this: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where k – tangent of slope angle of the regression line to the axis ox; x  – months, (1,2, … 12); b  – constant; y  – the sales amount in natural or money display (or the part in sales amount). for finding the lineal trend of sales amount subordination (or markets parts) to time, we use the system of normal equations: n × b + k × ∑х i = ∑y i b × ∑x i + k ×∑(x i )2 = ∑x i × y i thence deduce: k = (n × (∑x i × y) – ∑х i × ∑y i ) / (n ×∑(x i )2 – ∑(x i )) this criteria lets us to qualify the dynamic of changing the relative part of enterprises market, which helps to form an opinion about changes in competitive positions, and the higher they are, the bigger opportunities ones have to put into the optimization of the assortment set, to differentiate assortment strategic decisions. according to the dynamic of changing part of enterprises market, we suggest to make the following decisions: 1. under k < 0 one can see the decrease of the sales amount, so it is reasonable to take out from production a part of the least promising assortment positions and try to increase the income from the most promising goods due to the changes of the market or creating modifications, changing design, packing etc. ... the firm loses its markets positions, so one should use the assortment strategies, and their realization will lead to pause the sales amount decrease, in other words will let to stabilize the state in short terms and with the minimal expenses. 2. 0 < k < ксер shows us the positive increasing temps of sales, but they still are lower, than markets average. so it is necessary to create extra assortment positions baltic journal of economic studies 134 vol. 1, 2015 modifications, on the basis of existing or improved technology of producing goods, which are on the stage of satiation. the firm realizes goods at the lower level of sales amount, than markets average, so product modernization becomes the priority direction in realization of assortment strategies. 3. under k > ксер the dynamic of sales amount is higher than markets average. in this case the firms positions are stable, they can work for the perspective, so one should invest into creation substantially new assortment positions (that can be the basis of the goods line), or create goods with improved consumer capabilities and advance them to the new markets. 5. the level of realization of goods assortments of the enterprise to our mind, firstly, the levels of realization of goods assortments of the enterprise represent markets demand on the enterprises production, and also characterize sales amount and output for the assortment position of the enterprise. we suggest estimating the levels of realization of goods assortments of the enterprise by the realization coefficient (крi): %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where зал. i   – the remnant in natural expression of the assortment group and for the end of the realization period; qnnp  – the output of the same assortment group in natural expression during the period. for the goods, for which the "accumulation of finished products" policy is not used for further realization (seasonal, contractual, etc.), coefficient крi characterizes the level of the demand for the produced good. limit values of realizability are set by an expert way during the questionnaire. as the result in the context of limited values of the realization coefficient were made the next decisions: 1. under крi < 0,2 commodity is in high demand. so there is a possibility to invest into creation modernized and fundamentally new assortment positions, or increasing the sales amount by changing the appearance and advancing them to the already mastered markets. 2. under 0,2 ≤ крi < 0,4 commodity is in medium demand. in this case it is expedient to work on the improving the consumer properties of the less successful goods, or increasing sales amount by changing their functional options. one should modify the existing assortment positions, bring them to the new markets, herewith producing technology can either change or not to change. 3. under 0,4 ≤ крi < 1 there is difficult goods selling. in this case we emphasize the necessity of improving production technology of assortment of manufactured goods. 4. under крi ≥ 1 commodity is not in demand, so one should reduce assortment by identifying unprofitable product lines positions and take them out of production, or change the strategic area of sales of existing product assortment. 6. the balance of the assortment by the pareto rule the balance of the assortment (“product bag”) by the pareto rule is defined by what part of the assortment positions (leader of sales) provides 80% of turnover. the most balanced “bag” will be those, which provides the ratio of 80/80 (mis’ko, 2010), the ratio of 80/20 is considered to be critical for the enterprise, which means that 80% of assortment positions ensures only 20% of trade turnover, in other words the biggest part of goods in “bag” doesn’t succeed at the market and should be taking out from producing. the bag is more balanced when is its parts are more evenly distributed between goods in the turnover. experts’ thoughts about the «assortment bags” level of balance came to the fixed parametric values and the level of its index. but we have defined the assortment strategic decisions by scale evaluation of "assortment portfolios" balance by the pareto rule: 1. 80/ (65-80)  – high level of assortments balance, so there is a possibility to invest into creation fundamentally new assortment positions and advancing them to the already mastered or new markets. 2. 80/ (30-65)  – medium level of assortments balance. one must work on the improving the consumer properties of the less successful goods, or increasing sales amount by changing their appearance. 3. 80/( до 30) – low level of assortments balance, which needs to improve the producing technology of assortment, that turns out by enterprise and reduce the assortment by finding out unprofitable assortment positions and taking them out of producing, or changing the strategic sales area of existing product range. 7. the level of liquidity and solvency the level of liquidity and solvency characterizes enterprises ability to attract credit resources to implement this or that assortment strategy. from a financial point of view the solvency is an indicator of the ability to repay the debt obligations in time, including loans, taken from bank (balabanova, 2006). the higher solvency is, the greater the possibility of obtaining loans. as the index, that characterizes solvency (liquidity) of enterprise, the majority of experts chose the absolute liquidity ratio (ка.л.). it shows what part of the shortterm loan obligations can be immediately repaid, if it is necessary (kanischenko, 2007). calculate the absolute liquidity ratio by the formula: %100* 1 ∑ = = n j j j pj op op t ∑ = n j jop 1 %100* ... .. 1 ∑ = = n j pi імтос імtoc d ∑ = n j імтос 1 ... ∑ = = s j j пер пijkі 1 *ϕ 𝑂𝑂з𝑖𝑖 = 𝐶𝐶𝑖𝑖 + п𝑖𝑖 × 𝑁𝑁𝑖𝑖 рі = ці − пі − сі/𝑁𝑁і 𝑅𝑅іні = сі × 𝑁𝑁і/�сзал + свитр� 𝑌𝑌 = 𝑘𝑘 × 𝑋𝑋 + 𝑏𝑏 qппр зал kpi і . = ка.л. = дс/кз , where дс – firms costs; кз  – short-term debts, including short-term loans and credits, settlements with creditors etc. recommendatory lower limit of indicator set in western literature – 0.2. in home practice, usually, the actual average values of the coefficient, much lower the values mentioned baltic journal of economic studies 135 vol. 1, 2015 in western literature (evans, 2002; aaker, 2007), that’s why the limits of intervals of values of this indicator, corresponding to low, medium and high level of solvency, we determine by experts. experts’ thoughts about the assessment of liquidity level came to fixed parametric values for this indicator. and we determined strategic assortment decisions for each of them in the context of intervals of coefficient values of absolute liquidity of the company: 1. under ка.л. > 06 enterprise gets the high level of solvency. we recommend to invest into into creation substantially new assortment positions (that can be the basis of the goods line), or create goods with improved consumer capabilities, by changing their structural content. financial abilities of the firm are stable, so one can work for perspective. 2. under 0,2 < ка.л. < 0,6 – level of solvency is medium. середній. at this time the financial position of the company requires stronger actions, aimed at creating extra modifications of assortment positions, on the basis of existing or improved technology of producing goods. 3. under ка.л. < 0, 2 level of solvency is low. in order to improve the financial situation of the company it is needed to choose the implementation of low-cost assortment strategies. one should take out of producing a part of the least promising assortment positions and try to increase the income from the most promising goods due to the changes of the market or creating modifications, changing design, packing etc. 8. conclusions during the research we have substantiated the basic criteria of the characteristics of internal potential of enterprise, which are important in the formation of the assortment strategy, and suggested the method of evaluation of these indicators and selection of assortment strategy according to results. we offered the results of the research the marketing department of pjsc "mykolaiv bakery №  1" for implementation in practice. the aim of the following research is evaluation of indicators of the external enterprises potential. references aaker, d. (2007). strategic market management. st. petersburg, 2007. – 496 p. balabanova, l. & holod, v. (2006). marketing management of competitiveness of enterprises, strategic approach. donets’k, 2006. 294 p. evans, j. (2002). marketing. sirin, 2002. 308 p. kanischenko, o. (2007). international marketing at ukrainian enterprises’ activity. kyiv, 2007. – 448 p. karpenko, j. (2009). flour-milling plants extremely need modern approaches to planning in nowadays. grain and bread, 4: 21-25. kovtun, o. (2009). the competitiveness of the enterprise: strategic context. lviv, 2009, 276 p. mis’ko, g. (2010). methodological approaches to assessing the economic strategy of the food industry in a competitive environment. the messenger of znu, 4: 61-67. putyatin, a. & putyatina, l. (1998). strategy and tactics of developing the enterprise in a competitive environment. industrial policy: theory and practice, 2: 57-67. zvjaginceva, o. (2009). marketing commodity policy of the bakery. the messenger of sau, 2: 46-52. светлана малюк методика оценивания внутреннего потенциала предприятия при принятии ассортиментных стратегических решений аннотация. анализ внутренней среды предприятия направлен на оценку стратегического потенциала предприятия в целом и отдельных его функциональных подсистем. эффективная деятельность предприятия не может осуществляться без систематического определения и использования существующих возможностей, поскольку потенциал организации как правило выше уровня его фактической реализации. без характеристики накопленного потенциала предприятия невозможно выдвигать перспективные цели, формировать наиболее оптимальную стратегию их достижения. исходя из этого, целью работы является исследование и обоснование критериев, которые характеризуют внутренний потенциал предприятия в процессе реализации ассортиментных стратегий. предложена методика оценивания данных показателей, а также выбор ассортиментной стратегии в соответствии с полученными результатами. методика. исследование внутреннего потенциала пао «николаевский хлебозавод № 1» основано на экспертном анкетном опросе, что позволило не только выделить ряд критериев внутренней среды предприятия, а также, с помощью экспертов определить параметрические и граничные значения коэффициентов, влияющие на выбор ассортиментной стратегии. результаты опроса показали, что основными критериями характеристики внутреннего потенциала предприятия являются: преимущественные фазы жизненного цикла товаров (были определены на основании матрицы «рост рынка – доля рынка»); перспективность производства ассортиментных групп товаров baltic journal of economic studies 136 vol. 1, 2015 (рассчитывалась с использованием интегрального коэффициента перспективности ассортимента товаров); изменения объемов продаж (описаны с помощью тригонометрических зависимостей); степень реализованности ассортиментов продукции (оценивали с помощью коэффициента реализованности); сбалансированность ассортимента по правилу парето (за основу взято правило парето, а также опрос экспертов); уровень ликвидности и платежеспособности предприятия (рассчитывался с помощью коэффициента абсолютной ликвидности). в зависимости от полученных граничных показателей коэффициентов были предложены следующие ассортиментные стратегии: стратегия элиминации товара (выделение таких товаров, которые выглядят сомнительными с точки зрения дальнейшей привлекательности на рынке и подлежат переаттестации); стратегия дифференциации товара (процесс разработки ряда существенных модификаций товара, которые делают его отличным от товаровконкурентов), стратегия диверсификации товара (производство дополнительных товаров, которые планируется предложить на новые рынки сбыта), стратегия вариации товара (основывается на стратегии повышения концентрации полезности потребительского эффекта от использования товара). практическое значение. исследование показателей внутреннего потенциала предприятия позволяют реально оценить внутренние сильные и слабые стороны производства, изыскать резервы, и соответственно, выбрать наиболее оптимальную ассортиментную стратегию, которая позволит предприятию сохранить уровень конкурентоспособности, а также усилить свои конкурентные позиции в отрасли. значение/оригинальность. полученные в ходе исследования данные способны обеспечить маркетологов исследуемого предприятия более точной информацией, полученной на основании научного подхода, что в перспективе позволит формировать эффективные ассортиментные стратегии. baltic journal of economic studies 329 vol. 3, no. 5, 2017 corresponding author: 1 department of political sciences and law, south ukrainian national pedagogical university named after k.d. ushynsky. 2 department of finance, university of state fiscal service of ukraine. 3 department of finance, banking and insurance, odesa institute of trade and economics of kyiv national university of trade and economics doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-329-333 impact of european integration processes on the necessity of long-term budget planning introduction in ukraine ganna muzychenko1 south ukrainian national pedagogical university named after k.d. ushynsky, ukraine tetiana koliada2 university of state fiscal service of ukraine, ukraine iryna churkina3 odesa institute of trade and economics of kyiv national university of trade and economics, ukraine abstract. the association agreement between ukraine and the european union was ratified in september 2014. ukraine has undertaken to implement and enforce eu standards, including in the financial sphere, which are regulated by international law. the purpose of the study is to determine the impact of european integration processes on the necessity of the long-term budget forecasting process introduction into the budget process of ukraine and the revelation of special budgetary rules regulated this process in the eu. the methodology. the list of requirements (budget procedures and rules) for their introduction by law into the budget process of ukraine was determined based on the generalization and systematization of normative legal acts that regulate the medium-term financial planning as the eu standard. the results showed that the long-term budget forecast developing procedure in the budget process will allow the government to timely identify the unfavourable trend in the state’s fiscal policy and introduce preventive measures, determine the full scale of economy’s and business’ reaction to the reforms’ introduction and new laws adoption, estimate fiscal space for fiscal policy implementation for coming years, take into consideration the budget forecast’s indicators during the annual adoption of budget decisions. the study defines the difference between the budget forecast and the planned budget: the forecast is for five years and more, the plan is for one year only; forecast indicators are not mandatory for implementation, they are only guidelines, and planned indicators are mandatory for implementation; the budget forecast is approved by the order of the cabinet of ministers of ukraine and annually specified, the planned budget (for the current budget year) is approved by the verkhovna rada of ukraine by adopting the relevant law, amendments are an exception and also approved by law. the practical implementation. governments of countries that systematically undertake long-term budget forecasts have developed effective measures to ensure the state sustainable development through the pension systems’ restructuring or the creation of special funds for future needs. publicity and availability of information about long-term sustainable development trends is a prerequisite for obtaining public support and confidence from the government’s efforts to reduce the long-term budgetary tension. key words: long-term budget planning, budget process, special budget rules. jel classification: e61, g28, h61, h68 1. introduction the transformation of the role of the budget as the most important instrument of the government’s targeted influence on the process of social production and the implementation of the long-term economic policy of the state in order to achieve sustainable development and increase the welfare of the population has necessitated the introduction of budget strategic planning and forecasting. in the conditions of increasing the unfavourable tendencies in the socio-economic development of most baltic journal of economic studies 330 vol. 3, no. 5, 2017 countries of the world (environmental problems, terrorist threats, aging of population, natural calamities, etc.), the demand for public services has increased, which has led to the growth of budget expenses and fiscal tightening (koliada, 2016). deceleration of economic growth forces governments to review the structure and volume of budget expenditures, to optimize budget expenses, to abandon spending on inefficient projects, because a significant increase of the part of the redistribution of gdp through the budget negatively impacts growth. among an up-to-day ukrainian scientists who made a significant contribution to the study of the issues of the formation and development of budget forecasting and planning, the development of methods of perspective financial calculations, which are adequate to market transformations in the state we can point o. cherniak, b. hrabovetskyi, hryshova i., v. heiets, i. kvasniuk, yu. kriuchkova, i. lunina, m. pashuta, and others. the scientific achievement of these scholars is to reveal peculiarities of scientific forecasting and planning, the study of methodological issues and the organization of economic forecasting and planning, the determination of the role and place of forecasting in the system of public administration. while paying tribute to the scientific work of the scholars on this issue, it should be noted that in modern economic science and law, the problem of the coordination of the organizational and legal provision of the procedure for developing a budget forecast in ukraine with the eu countries and justifying the necessity of its implementation to the budget process for making an intelligent decisions during the annual budget development and adoption. 2. background and necessity of elaboration of long-term budget plans the budget process consists of four stages. planning that includes drafting, reviewing, and adoption of the budget is the most responsible stage, on which the effectiveness of budget execution depends, as well as the fullness of taking into account the current political needs (interests) of the government coalition and the probability of achieving the state’s strategic priorities. since the budget period lasts one year only, the shortterm time horizon does not allow the government to effectively manage budget resources and leads to a loss of control over the fiscal position of the state, which became especially vulnerable in the conditions of dangerous growth of the volume of public debt. in addition, this situation leads to ignoring previous and current decisions for developing a draft budget for the next budget period. most countries in the world, including ukraine, have introduced medium-term budget planning for a threeyear time to overcome this negative practice in the budget process, which allows for a budget-balancing based on functional finances and increasing transparency in the management of state budget resources. the medium-term budget can be a kind of protectant to avoid unreasonable future government expenditures that can negatively affect the rate of economic growth and the welfare of the country’s population. at the same time, the indicators of budget revenues and expenditures for next years are only a forecast, which is periodically adjusted by the government in accordance with the trends of economic development and taking into account the various factors of influence that arise. the eu has moved to developing an annual budget based on strategic long-term forecasting for recent years. the common approach to developing long-term budgeting is to include projected estimates of income and expenditure for several years ahead of the current year, but the practice of the formation of a budget strategy is significantly different in each country. among the main tasks to be fulfilled by long-term budget planning, we can determine the following (baumann, 2015): political: the establishment of government program objectives in the general perspective. financial and economic: estimation of budgetary needs necessary for the realization of the defined goals and compliance with the annual balance between revenues and budget expenditures. general economic: reconciliation of probable expenses and revenues necessary for their coverage with general economic objectives and budgetary limits. in order to stimulate research in the area of developing long-term forecasts, special provisions (rules of procedure) have been introduced into the fiscal legislation of the eu countries. the particular chapters on the quality of budgeting and sustainability of public finances, as well as the need for public announcements and holding debates on such issues in parliaments were mandatory included to the annual reports on the convergence and stability. some countries have provided an additional legislative requirement for governments. in particular, in belgium since 2001, it was determined that the government should provide an annual memorandum on population aging; sweden introduced a mandatory report on expected longterm public finance implications as a result of the implementation of the proposed government proposals. 3. legislative environment for the organization of budget planning in eu countries all countries participating in the eurozone must observe fiscal parameters for the general government sector prescribed by the maastricht treaty and stability and development pact (sdp) (resolution, 1997). in particular, the upper limits for the annual budget deficit at the level of 3% of gdp and total debt to 60% of gdp. according to the sdp, the state should implement the baltic journal of economic studies 331 vol. 3, no. 5, 2017 principle of a balanced budget and develop annual programs to ensure stability and economic growth that contribute to the fulfilment of identified targets. the critical state of public finance has forced many governments, including european ones, to introduce new fiscal rules, the so-called “next generation” to combat the financial crisis, which take into account the phases of the economic cycle, that is, ups and downs of economic development. budget rules are long-term restrictions for major budget supplies in the form of quantitative limits of deficits, debt, expenses or revenues. according to the imf’s department of finance, at the end of 2012, more than 75 countries applied such rules at the country or supranational level, compared with only 5 in 1990 (budina, 2012). according to experts, new fiscal rules are able to manage the holding excessive increases in government spending and, thus, to ensure budget balance and debt sustainability of the state. additionally, some countries are implementing other institutional mechanisms, such as fiscal councils for monitoring fiscal policies and focusing public attention on its trends and outcomes. by ratifying the association agreement between ukraine and the european union in september 2014 (law of ukraine, 2014) ukraine has committed itself to implementing and enforcing eu standards, including in the financial sector, which are regulated by international law. in particular, it is about mediumterm financial planning as the eu standard, where article 9 of the framework budget directive (2011) stipulates that the eu member states are establishing valid, effective medium-term fiscal frameworks that provide for at least three years of financial planning in order to ensure long-term perspectives in national financial planning (council directive, 2011). at the same time, medium-term financial planning covers a five-year time horizon, where the first year is the current budget year, the second year is the year for which the budget is being drafted, and the third, fourth, and fifth years are a budget forecast. the framework budget directive (article 9) also defines a list of procedures relating to the medium-term budget framework. they are: establishment of comprehensive and transparent multiyear budgetary targets for the national deficit, level of indebtedness and other general financial indicators; giving an estimation and forecasts based on the assumption of maintaining policy intact for each article of revenues and expenditures in the state budget with detailed data on certain budget sectors (functions of the state) at the central (state) level and social insurance for the current budget year and beyond; preparation of a description of medium-term planned measures that have an impact on national finances, decoding the main revenue and expenditure items and explaining how they should correspond with the medium-term budgetary targets as compared to the estimation and forecasts based on the assumption of maintaining policy intact; assessing the question of how planned political measures with their direct long-lasting impacts to national finances will probably affect the long-term stability of public finances; using realistic indicators of macroeconomic and budgetary forecasts for the prospective estimations development, on which medium-term fiscal frameworks are based (council directive, 2011). thus, the framework budget directive’s rules and procedures implementation aim at the introduction of long-term perspective financial planning corresponded with the medium-term budgetary objectives of the state into the budget process. another regulatory document defining medium-term financial planning as an eu standard is the stability and growth pact (1997). this document regulates the technical conditions of control in the field of fiscal policy and the “oversize deficit procedure” – the requirements for limiting budget deficits (resolution, 1997). the 2009 economic and financial crisis has exacerbated the pressure on public finances of eu member states, in particular, in terms of rising public debt, and prompted a number of innovations to the stability and growth pact (2011) aimed at strengthening economic and financial supervision. if the stability and growth pact (1997) stipulates only limits on the maximum budget deficit – no more than 3% of gdp and public debt – no higher than 60% of gdp (in accordance with the maastricht treaty of 1992), then starting in 2013, when the “fiscal pact” came into force after ratification by all eu member states, new restrictions were introduced in addition, such as: medium-term budgetary objective (annual growth of government expenditures should not exceed their growth rates in the medium-term) (regulation, 1175); development of recommendations for the mediumterm budget forecast within the debt procedure (regulation, 1177); rule 1/20 to reduce the level of government debt (in case of the public debt size exceeding up of 60% of gdp, the annual 5% reduction of this excess is mandatory) (regulation, 1173); structural deficit of the state budget is no higher than 0.5% of gdp (for countries with a public debt below 60% of gdp – no higher than 1% of gdp) (directive, 2011). the pact set out the requirements for fiscal policy formulation and medium-term financial planning, which include a procedure for these “european budgetary rules” mandatory implementation in the national legislation of the countries ratified this document (25 states). it is anticipated that these innovations will contribute to ensuring economic stability in the country, restoring the confidence of economic agents baltic journal of economic studies 332 vol. 3, no. 5, 2017 to government actions and prevent future crises in the euro area and the eu. taking into account the course of ukraine’s integration into the european space and in order to effectively manage public debt, the issue of introducing special “second-generation” budget rules that exist in most eu countries and providing for special rules combining the size limitations for the budget deficit and public debt is relevant. in particular, it is a question of using as a supplementary indicator of budgetary security of the state a new indicator – the percentage of the structural deficit (surplus) of the public debt to gdp, that is, a deficit that would be possible under conditions of full or high employment of potential productive and labour resources and at the existing level of government expenditures and tax rates (koliada, 2015). as the current legislation of ukraine already contains norms imposing budget limits defined in the previous version of the stability and growth pact (1997), it is logical to assume that amendments to the budget code of ukraine will be introduced in the near future regarding the introduction of new budget limits, in particular, on reducing the level of government debt and the volume of structural budget deficits due to the existence of a threat to the national security and the need to adapt domestic legislation to european requirements. 4. prospects and benefits of long-term budget planning introduction in ukraine the difference between the budget forecast (strategy) and the planned budget is that the forecast is for five years and more, the plan is for one year only; forecast indicators are not mandatory for implementation, they are only guidelines, and planned indicators are mandatory for the implementation; the budget forecast is approved by the cabinet of ministers of ukraine order and annually specified, the planned budget (for the current budget year) is approved by the verkhovna rada of ukraine by adopting the relevant law, the amendments are an exception and also approved by law. the long-term budgetary planning introduction in ukraine or extension of the medium-term budget planning horizon to a five-year period should be based on the relevant constitution norms, as it is foreseen in germany, or the budget code of ukraine. such a provision should regulate the obligation to introduce a procedure for a five-year budget forecasting in the budget process, where the volume (in relative indexes to gdp) and the composition of probable expenditures and budget revenues should be determined in accordance with the scenarios of the country’s economic development, if necessary, to determine the sources for the budget deficit funding. the authority to make a budget forecast should rely on the ministry of finance of ukraine, which is approved by the cabinet of ministers of ukraine and submitted to the verkhovna rada of ukraine for consideration. at the same time, the annual correction of the budget forecast and its prolongation takes place in accordance with the trends and dynamics of the country’s economic development. based on previous scientists’ research, it is possible to identify elements of the budget strategic planning system, which consist of three large blocks: forecasting, program-targeted planning and strategic control. the first block includes the development of scientifically sound ideas about the budget strategy’s priorities and objectives, taking into account tasks of socio-economic development and national security of the country, as well as indicators of budgetary rules. the second block is the formation of a complex of measures identifying the sources and the amount of their financing, aimed at achieving program objectives and priorities. the third block is monitoring the budget strategy introduction, control over managerial decisions implementation, which have been made during the budget strategic planning process, as well as achieving strategic goals, taking into account the efficiency of the use of public funds (dementev, 2012). the governments of the countries that systematically undertake long-term budget forecasts have developed effective measures to ensure the state sustainable development through the pension systems’ restructuring or the creation of special funds for future needs. publicity and availability of information about longterm sustainable development trends is a prerequisite for obtaining public support and confidence from the government’s efforts to reduce the long-term budgetary tension. 5. conclusion the introduction of long-term budget forecast developing procedure as a component of the economic strategic planning system to the budget process, as well as its consolidation and regulation by law are actively used in most countries of the world as an instrument of state regulation of the economy. existence of the state’s strategic plan for development helped a number of countries to change the socio-economic situation in a qualitative way during the 20th century that, in particular, in the usa during the 1930s and 1940s, germany, france, and italy in the 1950s and 1960s, south korea in the 1970s, 1980s, china in the 1980s and 1990s. strategic budget planning is currently used in eu countries, the united states, canada, the uk, japan, the russian federation, and other states. eliminating the multidirectional priorities of state development, balancing budget revenues and expenditures, creating an effective mechanism for the concentration of resources for solving medium and long-term tasks are allowed by the budget strategy (forecast) which is codified by law. baltic journal of economic studies 333 vol. 3, no. 5, 2017 prospects for further research in this direction are to prove the necessity of legislative consolidation of the long-term budget forecast developing procedure in the budget process. it will allow the government to timely identify the unfavourable trend in the state’s fiscal policy and introduce preventive measures, determine the full scale of economy’s and business’ reaction to the reforms’ introduction and new laws adoption, estimate fiscal space for fiscal policy implementation for coming years, take into consideration the budget forecast’s indicators during the annual adoption of budget decisions. references: baumann, e. (2014). planning and forming of realistic and transparent budget. finances of ukraine, vol. 9, p. 7-20. budina, n., shekhter, a. (2012). watching of application of tax-budgetary rules. finances and development, vol. 9, p. 57-62. council directive 2011/85/eu on requirements for budgetary frameworks of the member states. official journal, vol. l 306, p. 41–47. dementev, v. (2012). the strategic planning is a mortgage of successful development. budget, vol. 7, p. 17-21. retrieved from: http://bujet.ru/article/193728.php directive 2011/85/eu: on requirements for budgetary frameworks of the member states. hryshova, i., zamlynskyi, v., shestakovska, t. (2017). implementing cluster forms into national education development strategy. science and education, vol. 5, p. 56-61. hryshova, i., nikolyuk, e., shestakovska, t. (2017). conceptualization of the organizational management mechanism of the development of the national education system in the context of its quality. science and education, vol. 10, p. 118-125. koliada. t. (2016). forming of budgetary strategy of ukraine: theory, methodology, practice – irpin: university of state fiscal service of ukraine, 396 p. koliada, t. (2015). debt management in the context of public finances stabilization in ukraine. economic magazine – ххі, vol. 7-8 (1), p. 82-85. law of ukraine 1678-vii association agreement between the european union and the european atomic energy community and their member states, of the one part, and ukraine, of the other part (kyiv, 16 september 2014) retrieved from: http://zakon4.rada.gov.ua/laws/show/984_011 resolution of the european council on the stability and growth pact (amsterdam, 17 june 1997). official journal, vol. 40, 236 p. regulation 1175/2011 amending regulation 1466/97: on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies. regulation 1177/2011 amending regulation 1467/97: on speeding up and clarifying the implementation of the excessive deficit procedure. regulation 1173/2011: on the effective enforcement of budgetary surveillance in the euro area. baltic journal of economic studies 289 vol. 3, no. 4, 2017 corresponding author: 1 department of economic cybernetics and marketing, cherkasy state technological university. e-mail: bonta89@ukr.net the marketing role in improving the competitiveness of the region yuliia shapoval1 cherkasy state technological university, ukraine abstract. the research objective is the sight of theoretical aspects formulation and prediction of competitiveness of regions within the framework of modern marketing positions. the evolution, programs, strategies, and factors of marketing are analysed, which affects the attractiveness of the regions. methodology. in the study process, a combination of the following methods is used: generalization and scientific abstraction to specify the key definitions and categories, monographic method  – for presenting the opinion of scientists regarding the directions of application of marketing tools in the process of managing the competitiveness of regions, comparative analysis – to detect features of application programs and marketing strategies. results. it is considered that regional marketing is a mechanism that provides a methodology and tools for ensuring the competitiveness of the territory. it allows determining the marketing type of territorial management, which is formed not from the wishes of the authorities (for example, in search for funds for the implementation of certain projects), but from the study of the needs of consumers (entrepreneurs, local residents, investors, tourists), which the territory has the opportunity to satisfy; analyse the market opportunities and determine the competitive advantages of the territory, as well as influence the sustainable economic growth. it is determined that the competitiveness of the region is defined as a potential opportunity to win in a competition between territories for the benefits that satisfy needs and are distributed among the population and business entities that identify themselves with the region, as well as visitors who have certain intentions in this region. in fact, we are talking about the choice of priorities, in which this territory has competitive advantages, the raise of which can lead to heightening living standards, which is an indicator of the competitiveness of the region. the practical implication. according to the concept of marketing, goals of the region, especially long-term, can only be achieved through the study of the consumer demand, therefore, it requires: to study not the production capacity but market needs and develop plans for their fulfilment; bind the goals and resources of the region; evaluate external influences on the territory; focus on the long term. key words: regional marketing, competitiveness, branding, image of region. jel classification: m00, m31, v39 1. introduction in the context of ukraine’s european integration intentions, growing globalization, and geo-economic competition, the problem of creating an adequate mechanism for planning the development of its regions, as administrative and territorial units of the state, is becoming more and more actualized. priority directions for reforming the sphere of regional development became: the introduction of an integrated approach to solving problems in order to achieve sustainable development and increase the competitiveness of the economy of the regions; borrowing the best tools strengthening regional development, developed in the countries of the european union. nowadays, it is implementing change bureaucratic management technologies for the client-oriented development of modern european mechanisms of local self-government on the principles of demonopolization of the economy and improvement of the competitive environment. regions today face the need to conduct an independent social and economic policy. that is why there is pointed an issue of the formation of an effective regional policy aimed at reforming the economy and, as a consequence, investment attraction. clearly developed and implemented the development of territories based not so much on centralized financial resources but the use and development of local capacity should be based on new market mechanisms of cooperation between different departments. baltic journal of economic studies 290 vol. 3, no. 4, 2017 2. literary review and the formation of article objectives determining the role of marketing in ensuring the competitiveness of country, region, and city was reflected in the scientific works of many foreign and domestic scholars, and all of them, of course, have a great theoretical and practical value, but declared developmental problems are so complicated and diverse that there are no unitary recipes for the formation of a competitive advantages. each territory forms them independently, which confirms the nature of various types of territorial marketing, which have been formed from practices provoked by the competition of territories and the growing role of local government (starostina, 2004). focus on the meaning of territorial marketing in the development of countries, regions, cities, and the transformation of the regional markets system is made by j. bitner and b. booms (bitner, 1992), l. budd (budd, 1998), a. szomnik (szomnik,2008), i. gordon and p. cheshire (gordon, cheshire, 1998), t. karpova (karpova), i. bunyak (bunyak, 2006), yu. makogon and v. biletskyi (makogon, biletskyi, 1998), and others. it is important to show that nowadays the main role plays innovative investment directions of increasing the competitiveness of regions. the purpose of the article is to determine the role of regional marketing by studying the directions of its implementation as a tool for increasing the competitiveness and investment attractiveness of the region. 3. presentation of the main material the modern region needs to be considered as a clearly defined political, social, institutional, and oriented space that has a dual nature. on the one hand, it is a multidimensional structure that combines various sub-systems, based on the interaction of natural, technological, and social processes that occur simultaneously, as well as economic, demographic, environmental, cultural, and political factors. on the other hand, the region is a link of the spatial structure of the economy, that is, the special type of economic systems that arise from development, based on interconnected production population and resource areas that allows the region to act as an independent subject of economic development. marketing of the region according to modern approaches can be defined as a way of establishing, creating, maintaining such relations with different market players that would provide the favourable position of the region concerning resources and target markets, and also allowed to meet the objectives of participants in these relations. thus, marketing of the region is aimed at detecting needs of counterparties region, coordination of these interests with the interests of the region, and achievement on this basis of competitive success and social-economic goals. marketing as a managerial reality undoubtedly evolves and, in this process, you can already find certain stages. in this context, the development of views of ph. kotler (kotler, 2000), a universally recognized authority in this field of knowledge is shown. analysing the evolution of views of the role of marketing, he highlights the following stages: 1) marketing becomes a function equivalent to production management, finances, personnel. 2) the role of marketing in comparison with the listed functions is increasing. 3) marketing is transformed into a basic function, which has subordinated others. 4) the consumer becomes a control point for the progress of listed functions. 5) consumer actions act as controlling, and marketing – as an integrator function. there are different approaches to the regional marketing function. thus, a part of the scholars emphasizes the marketing of regions to determine the characteristics of regions with using marketing tools, in particular, advertising, sponsorship, in order to enhance the image of the region, its place in the country and abroad (pankrukhin, 2006). in order to imagine the marketing of the region as a complete system, it is necessary to highlight principles of marketing of the region, subjects, objects, goals, elements, methods, the composition of the marketing program (fig. 1). formation of regional marketing subjects of marketing methods objects of marketing marketing program principles objectives fig. 1. formation of regional marketing management system source: developed by the author regional marketing is a mechanism that provides a methodology and tools for ensuring the competitiveness of the territory. it allows you to determine the marketing type of territorial management, which is formed not from the desires of power structures (for example, in search for money funds for the implementation of certain projects) but from the study of the consumers demands (entrepreneurs, locals, investors, tourists) that the territory has an opportunity to gratify; analyse market opportunities and detect the competitive advantages of the territory, and also affect the provision of sustainable economic growth. territory marketing is one of the strategic factors, as it is able to have a long-term impact on its economic development. territory marketing is a factor, on the one hand, and on the other – a mechanism for ensuring competitiveness. marketing of the region helps to carry baltic journal of economic studies 291 vol. 3, no. 4, 2017 out a structural analysis of the region’s economy in order to determine the effectiveness of the specialization of the region, possibilities of restructuring the economy in the presence of new competitive advantages. regional marketing programs are formed on the basis of the following principles: promotion of the region as a place for various projects, based on knowledge and forecasting of the needs of the economy, the current situation and opportunities of the region; an effective solution to the problems of the region’s economy; focus on long-term sustainable development; influence on the formation of needs and behaviour of subjects on investment market. the purpose of regional marketing is the effective use of existing ones, as well as the creation of new benefits for attracting to the regional economic agents able to increase the well-being of its inhabitants. among the programs promoting the region are branding – activities to create long-term benefits for the product, based on the active and emotional impact on the consumer of the trademark, including advertising that allocates goods (in this case, the region) among competitors and creates its positive image (brand), and the formation of the image of the region. marketing and branding of territories do not have one pattern. depending on the specifics of the region and the set of tasks, the structure and composition of the program promotion can be different. in fact, the entire process of forming regional marketing is divided into two blocks: the positioning of the region and its promotion program. the main factors that influence the attractiveness of a particular region, one area or another for investors and the population are as follows: 1. real level of development and prosperity of the region  – when choosing a region as population and investors usually take into consideration: the level of urbanization of the territory; migration situation, opportunities for labour and social mobility of people; demographic situation; functioning of the housing market; regional problems of development of education, healthcare, transport infrastructure, and some others. 2. the image of the territory  – a combination of emotional and rational representations arising from the comparison of all signs of the territory, own experience of people and rumours that affect the creation of a certain image. empirical research shows that there are following directions of marketing policy in the field of improvement image of territory: 1) realization of its three main functions  – place of residence, recreation places, and places of management; 2) improvement of the management and infrastructure of the territory; 3) increasing the competitiveness of enterprises located in the region. in this case, image marketing traditionally concentrates efforts on improving communicative aspects, information and advocacy of the previously created advantages of the territory. 3. reputation  – a dynamic characteristic of the life and activity of the territory, formed during a long period of time from the aggregate of reliable information about it. this information is firstly included on the comfort of living on the territory, security, social security, the authority of regional authorities, etc. in addition, the reputation of the territory is determined and its emotional attractiveness, for example, the presence of the seaside or historical memorials; the reputation of the region’s leadership in terms of efficiency and honesty of the execution of investment vouchers; financial and economic indicators of the regional development; investment activity in its territory. exactly the reputation of the region, territory, city, as international experience shows, serves the most important factor in its investment attractiveness. today the following basic strategies of territorial marketing are used. image marketing. the purpose of this strategy is to create and distribute, for example, potential investors or tourists a positive image of the territory. the leading image marketing tool is communication activities that demonstrate the openness of the area for contacts and open up wide opportunities for the acquaintance with it. marketing attractiveness  – aimed at increasing the attractiveness of the territory  – the most diverse (from competitive advantages to investors to the presence of attractions and entertainment for tourists) for human life, business development. infrastructure marketing is the most important and, in the long run, the most stabilizing element of marketing in the region since the infrastructure is the foundation of its attractiveness. often, this means reliable energy supply, clean drinking water, developed communications, good transport connections, and security in the streets of cities. in a number of cases (in particular, during the competition between cities for holding “eurovision–2017”) as the main elements of the infrastructure, first of all, the availability of modern concert halls, airports, hotels, roads were considered. marketing of the population, personnel  – for the development of the territory, each region can choose its own strategy, which is responsive to its features. so, areas with low employment and cheap labour can put this circumstance to attract investors in order to create new jobs. when implementing this strategy in relation to tourism, it is important to form a benevolent motivation of the local population in relation to tourists and other visitors. marketing of attractions, entertainment – this strategy complements marketing image. for its implementation, there are natural monuments (beautiful embankments of rivers, lakes, seas, mountain landscapes), historical heritage (museums, monuments of architecture, temples), interest in the life and work of famous people, baltic journal of economic studies 292 vol. 3, no. 4, 2017 cultural and recreational facilities (stadiums, cultural and shopping centres, parks). currently, the majority of subjects face the problem of improving the image and investment attractiveness of the regions, the allocation of priority directions of development, the creation of effective interregional cooperation programs. development of programs of regional marketing is a relevant task of economic development of all subjects. regional marketing creates the basis for the economic activity of regional enterprises, allows the implementation of effective market mechanisms at the macro and microeconomic levels, answers the majority of issues related to the allocation of primary goals and objectives of the region. a concrete regional marketing tool may be a regional promotion plan. under the promotion of the territory, one understands, first of all, an advertising campaign. in terms of promotion of the region, channels of promotion of information, its volume are determined, the level of its influence is monitored, and the necessary changes are made. it should include the following sections: research, economic analysis of the business environment and commercial activity; education; public relations, and advertising. the plan may be supplemented by sections on the financing of the region and control procedures. it is a system of actions that create and maintain competitive advantages of the region that can be sustained for a long time. this is one of the most effective methods for managing the development of the region (visionary, 2007). 4. conclusions consequently, regional marketing seems to be the most effective economic form of a solution of contradictions between the branch and the regional beginning, between the centre and regions in the management of the modernized economy of ukraine. a specific tool for regional marketing is the regional promotion plan  – an action system that creates and maintains the competitive advantages of the region for a long time. regional marketing in the regional markets system enables to create the best competitive advantages in favour of customers in comparison with other territories, promotes efficient use of resources for the purpose of the increase in competitiveness and image, promotes attraction of economic agents, increase in attractiveness and competitiveness of the region, aimed at ensuring sustainable development of the region, formation of long-term and mutually beneficial relations with internal and external partners. accurate and systematic application of marketing tools and technologies will enable the region to: generate additional resources for its functioning and attract the attention of all stakeholders; direct the activities of local authorities to meet the needs of external and internal actors to increase investment attractiveness of the region; to meet the needs of certain target audiences by forming long-term competitive advantages and identifying priority directions of the region’s development; to implement the principles of social, ecological and economic responsibility of territorial entities and to ensure sustainable socio-economic development of the region; to form, maintain, and develop mutually beneficial long-term relations with participants in the process of interaction, the purpose of which is to create new values aimed at ensuring sustainable development of the region. besides, marketing technologies form the scientific and applied bases for the development of regional strategic development programs, change the stereotypes of thinking of civil servants in order to prioritize the needs of citizens, enterprises, and organizations in the region, allow for flexible response to changes in the environment, reduce uncertainty in the adoption of management decisions, improve the quality of territorial administration, form a new type of management and organizational culture in local authorities in the direction of partnership and interaction with local communities, entrepreneurs, and investors. references: bitner j., & booms b. 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(in pol.) юлия шаповал роль маркетинга в повышении конкурентоспособности региона аннотация. целью исследования является рассмотрение теоретических аспектов формирования и повышения конкурентоспособности регионов в рамках современных позиций маркетинга. проанализирована эволюция, программы, стратегии и факторы маркетинга, влияющие на привлекательность регионов. методология. в процессе исследования были использованы комбинации следующих методов: обобщение и научной абстракции для конкретизации ключевых определений и категорий, монографический метод  – для представления мнения ученых относительно направлений применения маркетинговых инструментов в процессе управления конкурентоспособностью регионов, сравнительный анализ  – для выявления особенностей применения программ и стратегий маркетинга. результаты. рассмотрено, что региональный маркетинг является механизмом, который предоставляет методологию и инструментарий для обеспечения конкурентоспособности территории. он позволяет определить маркетинговый тип территориального менеджмента, формируется не от желаний властных структур (например, в поиске денежных средств для реализации определенных проектов), а от изучения потребностей потребителей (предпринимателей, местных жителей, инвесторов, туристов), которые территория имеет возможность удовлетворить; провести анализ рыночных возможностей и определить конкурентные преимущества территории, а также влиять на обеспечение устойчивого экономического роста. установили, что конкурентоспособность региона определяется, как потенциальная возможность побеждать в условном соревновании между территориями за блага, которые удовлетворяют потребности и распределяются между населением и субъектами хозяйственной деятельности, которые идентифицируют себя с регионом, а также приезжими, имеющих определенные намерения в данном регионе. фактически, речь идет о выборе приоритетов, в которых данная территория имеет конкурентные преимущества, усиление которых может привести к повышению жизненного уровня населения, что является индикатором конкурентоспособности региона. практическое значение. согласно концепции маркетинга, цели региона, особенно долгосрочные, могут быть достигнуты только путем изучения потребительского спроса, поэтому она обязывает: изучать не производственные мощности, а потребности рынка и разрабатывать планы их удовлетворения; связывать цели и ресурсные возможности региона; оценивать внешние воздействия на территорию; ориентироваться на долгосрочную перспективу. baltic journal of economic studies 105 vol. 1, 2015 the economic impact of foreign debt in greece olga korol1, nataliya cherkas2, lviv academy of commerce, ukraine abstract. the purpose. the impact of foreign debt growth on the social and economic performance of greece was shown. the parameters of gdp, consumption, interest rates, unemployment and government spendings were analyzed. methodology. data obtained for 2001-2014 was used for regression analysis, vector autoregression and as well as kalman filter. results. a multi-faced analysis of the debt for eu-member states and greece in particular was performed. the events and decisions of greek authorities leading to the crisis were summarized in structural and logical scheme. the recommendations for the economic policy of greece, based on the performed analysis were suggested. the practical applications. establishment of all weaknesses and empirical testing of the necessary indicators in this study was the basis for the justification of measures to stabilize the economic situation in ukraine and greece. value/originality. the mandel-fleming model and the model of balance of savings-investments was used for the first time for the theoretical interpretation of the nature of the debt crisis in greece, that under the influence of capital inflows caused by the deterioration of the current account balance and interest rate cuts. the increase in foreign borrowings has led to an increase in the budget deficit and reduction in savings. also for the first time performed regression-correlation analysis, in particular the kalman filter is used to study the effect of debt on macroeconomic performance of the greek economy. key words: greek crisis, public debt, economic growth, unemployment, consumption, exchange rate. jel classification: f34, g01, h63, h64 1. introduction a growing public debt, being very common phenomenon worldwide, threatens national economic stability, ability to maintain sustainable growth and social welfare. initial loan is usually aimed to support reforms and to cover temporary lack of financial resources. it is expected that in visible future country will benefit from the economic growth and fiscal revenues will provide the possibility to return the debt easily. however, in real life, especially in democratic countries, government’s life is short between elections, and often its policy does not care too much if there is moderate growth of public debt. pure management of debt, especially if accompanied with external economic shocks (for example unexpected decline in price for important export categories), unfortunately is common. this leads to the lack of ability to pay the debt causing default. the efficiency of debt management is one of the key factors contributing to the macroeconomic stability in the country. the case of greece is a striking example of overestimated expectations and populistic growth of government’s spendings causing dramatic debt growth and nearly default. the experience of greece is important for ukraine, since these countries share many common features. the most important of them include high rate of debt increase due to inadequate spendings on sports infrastructure before a major sports events (2004 olympics in athens, greece and euro 2012 in ukraine), as well as inefficient budget planning and huge populistic spendings. in ukraine it is furthermore complicated by the high level of corruption, trade complications related to the conflict with russia and urgent need for military budget increase. the recent debt crisis in greece has raised serious concerns about the current state of public debt in many industrialized countries. rising debt seemed to be quite harmless and innocent during the age of optimism as the growth rates of assets and seemingly secure economic development was observed. however, for various reasons in greece debt bubble has bursted and the future began to look uncertain for many other heavily indebted countries in europe, north america and asia. considering significant potential consequences of public debt research aiming the analysis of the reasons and potential consequences remains to be relevant and important nowadays. therefore, the purpose of this paper is to determine the causes and social consequences of the debt crisis in greece. objectives are the theoretical justification of the impact of external debt on social development and economic growth as well as econometric evaluation of the impact of this crisis corresponding author 1 department of international economic relations, lviv academy of commerce. e-mail: olya.korol@gmail.com 2 department of international economic relations, lviv academy of commerce. e-mail: natsanex@yahoo.com baltic journal of economic studies 106 vol. 1, 2015 on european union and more generally global economy. we have made an effort to develop theoretical models of the impact of external debt on the socio-economic development and to perform comparative analysis of the socio-economic impact of the crisis in other countries in eu and ukraine. 2. recent literature review the scope of the financial crisis exerts an interest to many foreign economists, including a. mateus (2009), l. bakheyt (2011), m. gulati (2012) who emphasize the necessity of debt restructuring. among the domestic scholars, the problem considered by o.t. yevtuh, o.o. yevtuh (2011) v.v. byba, r . mishchenko (2011). s. missio and s. vatska (2001) studied the structure of the profitability of greek, portuguese, spanish, italian, dutch, belgian, austrian bonds and their influence on the profitability of german bonds: it is found that there is no influence during the euro crisis on german ones. however, portuguese, spanish, italian belgian profitability actually increased along with their greek. thus, we can assume that there is still a positive effect on a number of negative processes in the economy of the euro area, but these results need careful and detailed study. ch. dritsaki (2013) performed an empirical analysis of the link between economic growth, export and external debt during 1960 to 2011 in greece. his study proved that there is “direct positive” relationship between exports and economic growth and also between economic growth and foreign debt in the short term. this study confirms earlier observations that sufficient export and budget discipline are essential for sustainable economic growth. а. ouyang and r . rajan (2014) in their study examined the relationship between external debt and exports growth. the authors found out that countries with flexible currencies, large reserve assets, a solid credit history, a welldeveloped bond market and highly concentrated banking system (to a limited degree of deregulation), are likely to have accumulated large levels of external debt (relative to gdp) without a negative effect on the export growth. к. amoatengand and v. amoako-adu (1996) investigated the relationship between exports, external debt and economic growth for 35 african countries using granger test. the results revealed a causal relationship between unilateral debt service and economic growth. g. karagol (2002) investigated the longand short-term bond debt and economic growth for turkey for the period 19561996. research shows that there is a negative relationship between external debt and economic growth in the long run. results of causality using granger tests found one-way relationships between debt service and economic growth. m. abdelmavla (2005) studied the effect of external debt on economic growth over the years 1978-2001 in the sudan. research shows that external debt and inflation adversely affects the economic performance of the country. b. saad (2012) examined the relationship of external debt, exports, economic growth and exchange rate stability in lebanon 1970-2010 years. to investigate this relationship, he used a vector error correction model (vecm) and granger test, the results of which revealed that there are both short and long-term relationships between these variables. general analysis of these studies reveals a strong evidence that the growth of public debt does not leas to economic growth. the case of greece is not an exception. its economic situation on the eve of 2008 did not raise any concerns regarding the further development until the global financial crisis has begun. when the budget deficit of greece has grown to a value of 12.7% of gdp, it turned out to hit a pretty strong european economy which was just about to sink, however it remains mysterious how such a dangerous threat was not recognized on the early stage. after eu integration the costs of borrowings suddenly plunged, which has further caused a number of other events that have made the situation critical: the falsification of financial statements, over lending into the economy, high social component of the economy and low industrial production respectively. all these factors have been amplified and delayed by reluctant help of eu member states. this turned a relatively stable economy into a drowning in debt nation which threatened the integrity of the eu and the stability of the euro currency. the problems of the eu regional imbalances cause serious challenges to the global economy through the considering the deep integration of the world economy. detailed study of the reasons and consequences of greek crisis remains to be important model of crisis development in indebted economy. 3. the effects of growth of external debt of greece the financial crisis in greece uncovered eu’s major problem in providing strict control over the financial discipline of particular countries. facing crisis in greece experts analyzed the performance of the eu countries. threatening situation has been observed in other southern european countries like spain, portugal, and italy. their government’s spendings were found to be inadequate to the economic performance. moreover the scale of spain and italy is incomparably bigger than only a 10-million greece. despite the fact that in february 2010 at the eu summit it was suggested to solve the greek problem by greece itself, following on insistence of germany, greece was provided with the support of the imf. the involvement of the fund was caused not so much by the desire to pass on his part of the cost, which remains one of the problematic issues in the european community as by a desire to use standards and external oversight imf to force greece to reduce the budget deficit to the rules defined by the european union. efforts around the world have focused on finding more efficient ways of recovery. countries, that are the world leaders, tried to develop and offer the most effective tools by public efforts. thus, the joint declaration of the summit of the world ’s leading g-20 has stated five areas baltic journal of economic studies 107 vol. 1, 2015 of implementation of anti-crisis measures to restore confidence, growth and employment, strengthening the control and regulation of the financial system, increasing capitalization and the reform of international financial institutions, promotion of international trade and international investment, avoiding protectionism, providing comprehensive, sustainable recovery and the formation of “green economy” (monitoring of anti-crisis measures, 2009). we analyzed the problem of the increasing of the debt in greece using mandel-fleming model (equation (1–3): ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − (1) ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − , (2) ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − , (3) using visual model we can trace the development of events in the greek economy (fig. 1). in 2004 there was the influx of capital, which caused the increase of investment i. growth of investment increased the income y in the country, leading to a negative current account balance ca in point b. also, the government pursued expansionary fiscal policy by increasing spending g and reducing taxes t, which also affected the amount of income y. as a result of a significant increase in income y, is line increases, which leads to more negative current account ca balance in point c and to lower the interest rate r. the situation in the greek economy could also be traced with a flow chart (fig. 2). as mentioned earlier, after joining the european union the doors of many financial institutions offering money in low–interest loans were opened to greece. since then, the financial bubble of the greek economy grew every year almost in double value. this situation was also reinforced by the ongoing olympic games for the organization of which funds were borrowed from european financial institutions. but money was not used for proper purposes: some went to the construction of unnecessary number of hotels and entertainment complexes (which, incidentally, supported the domestic construction industry), some settled in the pockets of government officials. thus, all factors combined contributed to the fact that greece faces two threats: either default or exit from the european union because germany did not intend to continue to support “lazy neighbors”. the longer and deeper the crisis is – the more painful is its resolution. drastic budget cuts lead to deep recession, people actively resisted the measures that were taken by the government, which put at risk the program of budget savings. for this reason many experts expected that the third package of financial aid will be needed. european union integration development of the economy increase of the debt cheap borrowings in the banks of eu development of the construction industry olympic games in athens «excessive» construction corruption and inefficiency of state machine low manufacturing part of the economy high social benefits and salaries threats debt growth, default exit of eurozone source: the author’s fig. 2. causal relations of debt crisis in the greek economy after joining eu bp0 bp1 lm0 a r0 b c lm1 r2 r1 is1 is0 y0 y1 y2 developed by the author from [shevchuk v. (2008)] fig. 1. growth of external debt in greece baltic journal of economic studies 108 vol. 1, 2015 the external debt, if wisely utilized could boost the economic growth and could have positive general impact on the gdp growth. however growing costs of debt repay caused a negative impact on the ability of the government to provide social services by creating an additional burden on the state budget. whether such an effect exists and how strong it will depend on many factors. first of all, it is the performance of the economy and the value of debt burden. the combination of these factors determine the cost of attracting new loans and service of existing, domestic interest rate, the level of the tax burden, the country’s capacity to attract foreign investment etc. therefore, the research of the socio-economic impact of public debt requires consideration of the development of the economy and public finances. 4. empirical research for empirical investigation of greece quarterly data for the period 2001-2014 were used, as it is more appropriate in this study to take into account the performance of the economy in greece after joining eu. all data is taken from the statistical databases of the international financial statistics. in order to validate the source data all variables are defined as logarithms and cleared of seasonality. in an empirical study we used a statistical model (4): ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − , (4) where a 0 , a 1 , a 2   – factors; y  – the dependent variable; debt t  – public debt of greece; u t  – error model. we studied the following parameters for greece: debt t  – public debt, millions; g t  – government spending, thousands of euros; gdp t   – gross domestic product, millions of euros; cons t   – household consumption, thousands of euros; rate t   – exchange rate, eur/usd; unempl t  – unemployment, thousands. granger test (table 1) was applied to determine the direction of causality between the indicators of public debt, gdp, consumption, interest rate, unemployment and government spending of greece. according to the granger test results (table 1) all the indicators would have the causality connection with public debt debt t , but rather weak causality effect is observed of the public debt debt t on unemployment unempl t , and for interest rate rate t and debt in the long run. consumption cons t has causality effect the debt as well as a reverse effect is observed, while the hypothesis about the lack of causality between government expenditure g t debt t can be discarded at the level of statistical significance of 5%. there is an evidence of mutual influence of causality between gdp and government debt. for a meaningful characteristics of the impact of government debt on gdp, consumption, interest rate, unemployment and government spending we used the following regression model (5-9). the results showed the rejection of the hypothesis of autocorrelation of the residuals. in all equations except the equation of the impact of debt on consumption the adjusted coefficient of determination r² is in the range 89-98%. ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − , (5) where r² –adjusted coefficient of determination. from the results of the regression analysis (5) it is implied that an increase in public debt debt t by 1% table 1 granger test for debt t , g t , gdp t , cons t , rate t , unempl t of greece (quarterly data) гіпотеза lags 1 2 3 4 g t does not affect debt t 1,468 (0,234) 1,133 (0,335) 3,242 (0,036**) 1,790 (0,161) debt t does not affect g t 17,018 (0,000*) 5,990 (0,006**) 2,858 (0,054***) 1,081 (0,386) gdp t does not affect debt t 5,659 (0,023**) 2,250 (0,122) 7,225 (0,000*) 4,774 (0,005*) debt t does not affect gdp t 0,137 (0,713) 3,308 (0,049**) 2,306 (0,098***) 1,515 (0,227) cons t does not affect debtt 3,446 (0,072**) 3,957 (0,029**) 2,412 (0,087***) 1,899 (0,141) debt t does not affect cons t , 9,765 (0,004*) 5,558 (0,008*) 4,451 (0,010*) 1,459 (0,243) rate t does not affect debt t 1,095 (0,303) 0,544 (0,586) 6,185 (0,002*) 4,081 (0,010**) debt t does not affect rate t 0,111 (0,741) 0,661 (0,523) 0,847 (0,479) 0,892 (0,483) unemplt does not affect debt t 3,026 (0,090***) 4,567 (0,017**) 3,681 (0,023**) 2,263 (0,079***) debt t does not affect unempl t 8,506 (0,006*) 1,098 (0,345) 1,730 (0,182) 1,359 (0,275) note: in parentheses are given p-criteria and statistical reliability (* – 1%, ** – 5%, *** 10%) source: the author’s own calculations based on [18] baltic journal of economic studies 109 vol. 1, 2015 increases gdp by 0.19%. this could be explained by the fact that the loans are taken in the international monetary institutions and banks to stabilize and maintain the sustainable development of the economy and the state. the country increases social spending and at the same time improves living standards and gdp grows. ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − (6) according to the regression analysis (6) the increase in government debt by 1% increases the household consumption cons t by 0.55%. this relationship could be explained the same as the previous one  – the bank loans are usually directed to maintain the growth of private consumption. ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − (7) from the results of the regression analysis (7) implies that the increase in external debt by 1% increases the government expenditures g t by 0.49%. this situation is quite predictable as in order to maintain the debt, the expansive fiscal policy instruments were used leading to taxes increasing and spending reduction. ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − , (8) the results of regression analysis (8) show that an increase in public debt by 1% increases unemployment unempl t by 0.46%. as in a economy that works like a single organism, the measures carried out after obtaining foreign loans, do affect all the fields systematically. the increased debt burden makes the government to raise tax rates, but it has a particularly negative impact on smes, which, unlike corporations, have no opportunities for efficient tax management. therefore, a decline in real wages caused by rising of external debt, makes a significant number of employees exempt from work. choosing between unemployment benefits and free time on the one hand, and full-time employment and low income – on the other, they usually choose the first. ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − (9) from the results of the regression analysis (9) implies that an increase in public debt by 1% increases exchange rate rate t by 0.21%, what is actually causes the price effect. also, there is a strong dependence of the dependent variable from its own lagged values. in order to verify the robustness of the 2sls results we used the model of vector autoregression (var). the estimation of the relationship between the public debt, gdp, exchange rate, unemployment rate and public expenditures. in order to test the stationary check we use the augmented dickey-fuller unit root test (adf). the adf test results indicate that the variables are stationary in the first differences (table 2). table 2 variables level 1st difference cons t -0,3212 5,8278* debt t -0,8620 3,6929* gdp t -1,5757 6,0725* g t -0,2590 6,6682* rate t -2,0953 4,5847* unempl t -0,7973 2,7264(***) source: the author’s own calculations based on [18] in order to test the cointegration between parameters of five groups the johansen test was implemented (table 3). as the test for long-run cointegration rejected the null hypothesis of the existence of at least one cointegrating among the dependent variables, the use of var model is suggested (10): ↑ 𝑌𝑌 =↑ 𝐶𝐶(↑ 𝑌𝑌−↓ 𝑇𝑇, 𝑟𝑟)+↑ 𝐼𝐼(𝑟𝑟)+↑ 𝐺𝐺+↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗), 𝐶𝐶𝑦𝑦, 𝐶𝐶𝐶𝐶𝑞𝑞, 𝐶𝐶𝐶𝐶𝑦𝑦∗ > 0, 𝐶𝐶𝑟𝑟, 𝐼𝐼𝑟𝑟,𝐶𝐶𝐶𝐶𝑦𝑦 < 0 𝑀𝑀 𝑃𝑃 = 𝐿𝐿(𝑌𝑌, 𝑟𝑟), 𝐿𝐿𝑦𝑦 > 0, 𝐿𝐿𝑟𝑟 < 0 ↓ 𝐶𝐶𝐶𝐶(𝑞𝑞, ↑ 𝑌𝑌, 𝑌𝑌∗) + k(↓ r − r∗) = 0, 0 ≤ k < 𝑙𝑙𝑙𝑙𝑙𝑙 = 𝑎𝑎0 + 𝑎𝑎1𝑙𝑙𝑙𝑙𝑙𝑙𝑡𝑡−1 + 𝑎𝑎2𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, +𝑢𝑢𝑡𝑡 𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡 = 1,988 + 0,603𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡−1 + (6, 307∗) 0,189𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−1 − 0,143𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 (2,980∗) (−3,291∗) 𝑅𝑅2 = 0,99 − 0,078𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 (−2,707∗∗) 𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡 = −0,247 + 0,168𝐶𝐶𝐶𝐶𝑈𝑈𝑆𝑆𝑡𝑡−1 + (0,867) 𝑅𝑅2 = 0,47 0,551𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡, (2,771∗) 𝐺𝐺𝑡𝑡 = −0,312 + 0,426𝐺𝐺𝑡𝑡−1 + (2,571∗∗) 𝑅𝑅2 = 0,89 0,496𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡−2, (2,914∗) 𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡 = −0,9016 + 0,9916𝑈𝑈𝑈𝑈𝑙𝑙𝑀𝑀𝑃𝑃𝐿𝐿𝑡𝑡(−1) + (15, 434∗) 𝑅𝑅2 = 0,92 0,460𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡 − 0,482𝐺𝐺𝑙𝑙𝑃𝑃𝑡𝑡, (4,115∗)(−3,312∗) 𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡 = 0,355 + 0,821𝑅𝑅𝐶𝐶𝑇𝑇𝑙𝑙𝑡𝑡(−1) + (9, 242∗) 𝑅𝑅2 = 0,93 0,211𝑙𝑙𝑙𝑙𝑙𝑙𝑇𝑇𝑡𝑡– 0,298𝐺𝐺𝑡𝑡, (1, 953∗∗∗) (−2,784∗) , 1 tt n i itit bxyay ε++= ∑ = − , where y t is a vector of dependent variables, x t is a vector of independent variables, a i is matrix of coefficients for the dependent variables, b is matrix of coefficients for independent variables, ε t is a stochastic factor. table 3 johansen test for debtt, ratet, unemplt, gdpt, gt, const the amount of equations lags critical indicators 1 2 3 4 5% 1% debtt, ratet, unemplt, gdpt 0 39.13306 75.50262 82.92908 96.28154 47.21 54.46 1 21.66716 33.55449 31.17714 49.14485 29.68 35.65 2 9.174384 13.62661 18.37705 25.56878 15.41 20.04 3 4.094871 4.319671 5.944698 9.252830 3.76 6.65 debtt, ratet, gt, const 0 34.73452 38.25822 33.82570 58.63629 47.21 54.46 1 18.18343 18.98927 19.32024 33.26596 29.68 35.65 2 9.569494 8.668262 7.362796 11.25112 15.41 20.04 3 2.935861 3.739445 3.127778 1.559133 3.76 6.65 source: the author’s own calculations based on [18] baltic journal of economic studies 110 vol. 1, 2015 var model deliver characteristics of short-term dynamics of dependent variable (first differences) with the consideration of its own lags values as well as values of other dependent variables, relative long term (or cointegrative) relationships and independent variables. var provides more complete characteristics of functional relationships including causality, change in time and influence among a few interrelated factors (cherkas n., 2006). according to the results of var (fig. 4), we can confirm the positive influence of the public debt of greece on the exchange rate and unemployment in the third period. the weight of unemployment rate in the decomposition of residuals is the largest and gradually increases to about 40%, while the share of gdp is about 10%. the results of the analysis by the method of vector autoregression are consistent to the 2sls estimates above. a. impulse function b. decomposition of residuals -0,02 -0,01 0 0,01 0,02 0,03 0,04 1 2 3 4 5 6 7 8 9 10 0 10 20 30 40 50 60 70 80 90 100 1 2 3 4 5 6 7 8 9 10 gdp_l rate_l unempl_l source: the author’s own calculations based on [18] fig. 4. impact of government debt to gdp, exchange rate and unemployment (model var) as between the variables of government expenditures, exchange rate, consumption and public debt there is a cointegration, we use the model of vec (fig. 5). this model brings out a description of the short term dynamics of the dependent variable (first differences) based on its lagged values and the other dependent variables, as well as the relevant long-term (or cointegrating) relations and independent variables. a. impulse function b. decomposition of residues -0,02 -0,01 0 0,01 0,02 0,03 0,04 0,05 0,06 0,07 1 2 3 4 5 6 7 8 9 10 0 5 10 15 20 25 30 35 40 1 2 3 4 5 6 7 8 9 10 g_l rate_l cons_l source: the author’s own calculations based on [18] fig. 5. impact of government spending on external debt, exchange rate and consumption (vec) using the autoregressive error correction model, we obtain the following results: growth of external debt leads to increase in expenditures, and therefore, in consumption. the currency depreciates because of public debt growth. the share of household consumption in the decomposition of residuals is the largest (35%) and expenditures is 30%. as for the exchange rate it is about 1% and does not grow in the next periods. having identified a long-term relationship between the variables (method of least squares and vector autoregression), further we apply the kalman filter approach to analyze the dynamics of flexible coefficients. the kalman filter is a recursive algorithm to express dynamic systems (cherkas n., shevchuk v., 2008). -0,1 0 0,1 0,2 0,3 0,4 0,5 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 gdp -0,1 0,1 0,3 0,5 0,7 0,9 1,1 1,3 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 cons source: the author’s own calculations based on [18] fig. 6. impact of government debt to gdp and consumption (kalman filter model) empirical results of kalman filter for the gdp and consumption (fig. 6) are in accordance with previously used statistical models and show the impact public debt throughout the period of research. -0,1 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 g -0,6 -0,3 0 0,3 0,6 0,9 1,2 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 unempl source: the author’s own calculations based on [18] fig. 7. impact of debt on government spending and unemployment (kalman filter model) the impact of debt on government spending and unemployment by the kalman filter model (fig. 7) show the results which corresponds with two previous models. the government expenditures have increase the public debt whereas unemployment impacts negatively. thus, the results of the above used methods (method of least squares, vector autoregression method and the kalman filter model) are summarized as follows: 1) the growth of public debt in greece increases the values of consumption, gdp, government expenditures and exchange rate; 2)  it is revealed that the debt decreases unemployment rate. 5. conclusions the main conclusion to be drawn out, that without any doubt, the crisis in greece had started much earlier than the world one. the combination of corruption and baltic journal of economic studies 111 vol. 1, 2015 inefficient use of budget funds even in the most developed economies would lead to financial ruin, not to mention the greece. it is clear that the peculiarities of the greek mentality together with unstable economy had developed into a deep debt crisis. as greece is unable to pay its debts independently, it pulls a sufficient amount of financial institutions into the same debt hole for several decades. through research performance greece revealed the relationship between indicators of public debt, consumer expenditures, gdp, exchange rate and unemployment in greece. it was established that the debt has quite a strong effect on the main macroeconomic indicators of the greek economy. therefore, the greek authorities should consider the effects of chronic borrowing in international financial institutions as greece is not able to service the debt. it could be concluded that external borrowing in greece were directed not for their original purposes  – while the money should be used in the industry, or for the other prospects for economic growth, they were actually used for consumption. thus, regarding the diversity and peculiarities of different countries of the eurozone, for solving the problems which led to the financial crisis, the approach based on the opportunities of the economies must be used. policies that can help, for example, portugal and spain, will not have such an effect on italy, and especially on greece. therefore it is particularly important to select the appropriate macroeconomic tools to improve the situation of national economies. references byba, v., mishchenko, r . 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[electronic resource]. – mode of access: http://www.uf.org.ua/additional/1599198_antikr14.04.09.pdf.23. abdelmavla and mohammed (2005)the impact of external debts on economic growth: an empirical assesment of the sudan:1978-2001. eastern africa social scienceresearch review, 21 (2): 53-56. amouteng, k., amoako-adu, v. (1996) economic growth, export and external debt causality: the case of african countries.appliedeconomics 28 (1), 21-27. bachheit, l., gulati, g. (2011) greek debt – the endgame scenarios. new york office at duke university, faculty of law, 1-13. dritsaki, c. (2013) causal nexus between economic growth, exports and government debt: the case of greece. procedia : economics and finance, 5: 251–259. gulati, m., j. zetlmeyer (2012) engineering an orderly greek debt restructuring. european bank for reconstruction and development and cepr , 29 january 2012, 1–11. karagol (2002) the causality analysis of external debt service and gnp: the case of turkey “central bank review, 2(1): 39-64. mateus, a. (2009) after the crisis: reforming financial regulation. university college of london college, november 12: 1-24. missio, c., vatska, c. (2001) financial infection and the european debt crisis. sesayfo working paper: monetary policy and international finance, 3554 (7), 1–33. ouyang, a., rajan, r . (2014) what determines externaldebt tipping points? journal of macroeconomics, 39: 215–225. saad, b. (2012) causality between economic growth, export and external debt: lebanon. international journal of economics and finance, 4 (11): 134–143. the international monetary fund [electronic resource]. – mode of access: www.imf.org. baltic journal of economic studies 112 vol. 1, 2015 ольга король, наталия черкас экономические последствия внешней задолженности греции аннотация. целью роботы является исследование влияния роста внешней задолженности на социально экономические показатели греции: ввп, потребление, процентную ставку, безработица и правительственные расходы. на основании данных за период 2001-2014 гг., использованы следующие методы: регрессионный анализ, векторная авторегрессия и модель фильтра кальмана. результаты. выполнено разносторонний анализ долговой ситуации в странах-членах евросоюза в целом и греции в частности. разработана структурно-логическая схема событий и деятельности власти, предшествовавших наступлению преддефолтного состояния в экономике греции. предложены средства и методы для выхода греческой экономики из кризиса. практическое значение. определение всех слабых сторон и эмпирическое тестирование необходимых показателей в ходе данного исследования стало основой для обоснования мероприятий по стабилизации экономической ситуации в греции. значение/оригинальность. впервые использована модель мандела-флеминга и баланса сбережений-инвестиций для теоретической интерпретации характера долгового кризиса в греции, в результате чего выявлено, что под влиянием притока капитала произошло ухудшение сальдо текущего счета и снижения процентной ставки, а увеличение внешних заимствований привело к росту дефицита бюджета и уменьшению сбережений. также впервые осуществлено регрессионно-корреляционный анализ, в частности использовано фильтр кальмана для исследования влияния долга на макроэкономические показатели греческой экономики. baltic journal of economic studies 18 vol. 1, no. 2, 2015 corresponding author: 1 department of finance, national academy of statistics, accounting and audit. e-mail: chutka.oksana@mail.ru nature and classification aspects of local budget revenues oksana vinnytska1, national academy of statistics, accounting and audit, ukraine abstract. the purpose of the article is to determine the essential characteristics of local budgets and justify their classification aspects. methodology. in the course of writing used general scientific and special methods of knowledge: dialectical and systemic-functional – to summarize the theoretical concepts of income of local budgets; analysis and synthesis – to detail the subject of research and study its components; logic synthesis – to justify approaches and proposals for the formulation of local budgets. results. proved that today there is no single view on the interpretation of economic categories “revenues of local budgets.” a refined concept of “local budget revenues” from the standpoint of material content, form, organizational structure and nature of local budgets. local budget revenues determined as part of the financial resources of society, which is accumulated by local authorities to enforce their tasks and functions to implement current and future challenges of social infrastructure in the regions. proved that the revenues of local budgets are derived from their own, and assigned to the established order of state taxes, fees and other mandatory payments. the main feature of their own revenues is the direct subordination of local government. the main feature is the fixed income long-term nature of their attachment to the appropriate budget. value/originality. proved that the presence in the economic literature of different classification criteria of local budget on various grounds provides multi classification that reflects all the features of the formation, use and functional differences revenues of local budgets. this approach provides the basis for improving the functioning of the theoretical foundations of the budget process in ukraine at the level of local authorities. key words: fiscal policy, government revenues, budget revenues, revenues of local budgets, tax revenues, types of income, classification of incomes. jel classification: e62, e64, e63 1. introduction studies of the revenue of local budgets ukraine is of particular relevance, especially because it is local governments characterize the level of economic development, arid through the proper implementation of the budgetary process ensure economic and social stability and adequate standard of living. strengthening financial, budgetary systems in the context of european integration processes require a rethinking of social and economic nature and the place and role of the budget in the economic system of the state, the theoretical study of the formation of the revenue base and use of proceeds budgets nature of the budget and its importance in creating an effective system of intergovernmental relations and territorial financial equalization. in view of this exceptional urgency acquire theoretical, methodological and applied research questions the role and importance of the budget, its adaptation to the requirements of market economic environment. in conditions of deepening disparities in development of different regions of ukraine revenues are problems in the circle of interests of research scientists, practitioners and the public. so a priority in the financial science. the need to address these problems causes relevance of the chosen research topic. 2. analysis of recent research and publications introduction of scientific publications made it possible to estimate the theoretical and practical level of development problems of formation of revenues of local budgets ukraine. an important contribution to research features of formation of local budgets made by such scholars as bondaruk t.g., a.p. kirilenko, yury s. and others. most sources, special attention is paid to the theoretical aspects of the nature and structure of local revenues and underestimated the role of fiscal adjustment. this study aims to determine the essential characteristics of local budgets and justify their classification aspects. in the course of writing used general scientific and special methods of knowledge: dialectical and systemicfunctional – to summarize the theoretical concepts of income of local budgets; analysis and synthesis – to detail baltic journal of economic studies 19 vol. 1, no. 2, 2015 the subject of research and study its components; logic synthesis – to justify approaches and proposals for the formulation of local budgets. 3. the main material. research essence revenue exploring the nature of budget revenues, to distinguish between the definition of “public revenue” and “budget revenue”, which are components of conceptual apparatus of financial science. revenues – an economic (financial) category, objective phenomenon, and budget revenues  – financial concepts are associated with the activities of the state, subjective actions of people. revenues – broader definition than budget revenues (fedosov, yurii, 2012). they include both budget revenues and net income of state enterprises. revenues cover the part of financial relations, which is associated with the formation of financial resources at the disposal of the state and state enterprises. this accumulated financial resources of the state belong to the central (concentrated in the state budget funds and purpose), and those that remain at the disposal of state-owned enterprises is decentralized (venger, 2009; romanenko, ogorodnyk, 2003). overall, budget revenues are treated as a collection of local revenues on the irrevocable basis, charged under the laws of ukraine. thus, the concept of budget revenues is a narrower concept of public revenues. it should also be borne in mind that some of the financial resources available to the state comes out of the budget, with other financial institutions, such as public credit, public insurance, etc. (tripak, 2011). thus, budget revenues are defined as revenues for the main national fund required for the smooth development of all sectors to improve welfare and cultural level of the people, defense, maintenance of public bodies and local authorities. exploring the notion of retrospective incomes of local budgets, we note that to the 19th century, term revenues of local budgets has not been used and the revenue of local government with central government revenues were interpreted as state or public. in his fundamental work “the wealth of nations. the study of the nature and cause of the welfare of nations “(1776) adam smith first expressed feasibility of delimitation of state and local budgets and, therefore, their income (a. smith, 1776). he stressed that in addition to public financial management, there is also the local financial sector, highlighting the types of income such as non-tax (income from capital, enterprises, state assets) and taxes. in soviet times the revenues of budgets categories examined by such scientists as n.rovenskyi and d.  butakov. the scientist n. rovenskyi in 1944 (lehkostup, 2010;rovenskyi, 1944) indicates the proper use of revenues, income and grouping on the basis of the recovery, it distinguishes between tax revenues and revenues arising economic activities of local authorities. the category of revenues of local budgets and consider as a set of economic relations that contribute to the territorial distribution of gross domestic product (gdp) of the state and ensure the development of financial base of local authorities (lehkostup, 2010). the biggest question of the nature and formation of local budgets in the financial science is acquired at the time of independence of ukraine. development of conceptual bases of local budgets in this time closely associated with the recognition of local government and the expansion of financial independence of heal authorities. however, many researchers do not distinguish the concept of focal budgets, giving the definition of budget revenues as a whole, both at national and local levels. under budget revenues authors of “budget system of ukraine” s.l. yurii and j. m. beskyd (yurii, beskyd, 2000) to understand the state of centralized resources that are necessary for the performance of the functions, the main activities of the state, due to the goals and objectives that characterize its essence. such revenues express the economic relations arising in the process of formation of funds of funds and at the disposal of the government and management (s.v.savchuk, 2012). in this definition reveals valuable, distribution character concept, but not set specific local budget revenues. v.v. asauf, a.v .dementiev budget revenues interpreted as funds received under the legislation available to the appropriate level of government (asaul, dementiev, 2010). budget revenues are divided into tax and non-tax sources and gratuitous transfer. in the current year budget revenue is credited as the balance that formed at the end of the previous year. o.r . romanenko in the manual “finance” (romanenko, 2004) revealed the economic nature of this concept. the national budget revenues scientist calls the economic relations arising from state entities and individuals in the formation of the country’s budget. however, scholars such as v.d. bazylevych, o.d.  vasylyk, o.p. kyrylenko, u.v. pasichnyk, v.v. pysmennyi, s.i. yurii delimiting the notion of state and local budgets. v. literate (literate, 2012) defines the revenues of focal budgets as part of the financial resources of local authorities with which to create a financial base to meet socîal needs. manifestations of relations arising in the process of lotai budget revenues are the revenues of various kinds, and the material and the material embodiment – cash funds raised in the capital budget and used for the intended purpose. professor u.v. pasichnyk (pasichnyk, 2008) focuses on identifying the economic substance of revenues, considered as a separate economic category expressing the scope of economic relations of society, which is associated with the formation, distribution and use financial resources of regional and local governments used to provide current and future challenges of the region. professor o.p. kyrylenko considers local budget revenues as revenues, consisting of equity and fixed baltic journal of economic studies 20 vol. 1, no. 2, 2015 income, which is defined for the long term, which should create the necessary conditions for the implementation of strategic planning (kyrylenko, 2004). the scientist stressed that own revenue receipts not included in the calculation of intergovernmental transfers to local budgets. as a result, this procedure provides a direct interest of local governments in increasing the revenue side. professor s„ george shared revenues of local budgets are fixed and control (yurii, 2003). from the standpoint of the scientist, considered as fixed income, which by law is fully reserved for certain budget and not be transferred to lower level budgets or partially fixed budgets higher level and to a certain extent be transferred to the budgets of lower level. however, the budget revenues is based not only on the fixed revenue sources. a separate administrative-territorial units assigned revenue sources may not suffice to cover the costs of the program of economic and social development. in such cases the regulatory returns. the above income characterized in that transmitted in the form of deductions from state taxes and fees from the budget to the budgets of higher level to lower level of rebalancing. v.d. bazylevych stresses that local budget revenues are derived from its own sources and assigned national taxes, fees and other mandatory payments (bazylevych, 2002). k.m. vladimirov, n.h. chuiko and o.f. rogalskyi (vladimirov, chuiko, rogalskyi, 2007) noted only that the revenues of local budgets is the financial basis of local government and the state is actively involved in the formation of revenues of local budgets, financially support it. they, like most authors, immediately begin to disclose the composition of local budgets and sources of their formation, not focusing on the concept. o.d. vasylyk and k.v. pavliuk (vasylyk, pavliuk, 2004) believe that the economic substance of local budgets manifested in the formation of funds which are financial support of local councils and local government administration, and use these funds to finance the maintenance and development of social infrastructure, local economy and more. thus, the study of scientific papers on the problems of formation of local budgets give reason to formulate their own definition of “local budget revenues” – a combination of monetary and economic relations of society to ensure the formation, distribution of financial resources at the regional level and optimal, efficient regional development with decentralized management in the face of local authorities. that is, the incomes of local budgets – are financial resources of local authorities, which are used for the development of a particular region and which should meet the scope of authority established by law. 4. classification aspects revenues and expenditures of local budgets the study of literature (bondaruk, 2013) suggests that aspects of the issue of classification of revenues and expenditures of local budgets is quite controversial, because each of scholars considers and distinguishes between types of classifications of income and expenditure from different perspectives. in that reason, there is no one universal classification of revenues and expenditures of the local budget. classification analysis of local budgets in the current conditions is of particular relevance. the scientific literature presents various criteria for the classification of local budgets, indicating that the multifaceted problems of coverage sources of local revenues and functional areas table multi classification of local budget revenues the criteria for classification items of income according to the budget code – own; – mounted. by section according to budget classification – tax revenues (taxes, fees and charges); – non-tax revenues (revenues from property and business activity, revenues from fines, etc.) – revenues from capital transactions (cash flow from the sale of ownerless property, property that the law passed heir to the state, and treasures) – official transfers (subventions, grants, subsidies) for localization – territorial income received in the territory of local government – income derived in other areas for socio-economic content – revenues from public entities, municipal, private, collective ownership; – funds received from the public under the terms of repayment – inverse income – placing local loans – irreversible revenues – payments and payments of businesses and individuals the level of centralization – decentralized – revenue used at the place of education – centralized – revenues that are concentrated in the state budget and other target funds centralized cash by means of attracting – taxes – fees – mandatory payments – other revenues by the method of mobilization – mandatory – voluntary the frequency of occurrence – ordinary – regularly included in income – emergency – included in income on exceptional but justified circumstances according to sources of formation and use of the form – income from property – revenues of local budgets, which are a source of revenue, cost – the sale of land – different types of payments by way of enrollment – income of the general fund – special fund revenues baltic journal of economic studies 21 vol. 1, no. 2, 2015 of use. multi classification of local budget revenues in the table. according to the code of budget classification, budget revenues are distributed in the following sections: tax revenues, non-tax revenues, revenues from capital transactions and transfers. depending on the location of the territorial local revenues advisable to separate: income received in the territory of local government, and the income derived in other areas, which are directed at a particular local budget. in the classification of income socioeconomic taken into account the existence of different forms of ownership. the most commonly used classification division revenues for tax and non-tax. also, budget revenues can be both mandatory and voluntary revenue. based on the sources of division formation, laid criterion, thereby be obtained revenues: income, personal income, other budgets funds and others. some authors share income on ordinary and extraordinary (momot, 2012). also, revenues are allocated general and special funds of the local budget. that is, there are different criteria for the classification of local budgets. the following multicriterial classification of local budget is characterized by complexity, logic and allows for more in-depth and comprehensive analysis of the composition and sources of income of local budgets. 5. conclusions in the context of the above study the nature and classification aspects of local budgets ukraine makes it possible to reach such conclusions. today there is no single view on the interpretation of economic categories “revenues of local budgets.” a refined concept of “local budget revenues” from the standpoint of material content, form, organizational structure and nature of local budgets. local budget revenues determined as part of the financial resources of society, which is accumulated by local authorities to enforce their tasks and functions to implement current and future challenges of social infrastructure in the regions. it is proved that the revenues of local budgets are derived from their own, and assigned to the established order of state taxes, fees and other mandatory payments. the main feature of their own revenues is the direct subordination of local government. the main feature is the fixed income of longterm nature of their attachment to the appropriate budget. the presence in the economic literature of different classification criteria of local budget on various grounds provides multi classification that reflects all the features of the formation, use and functional differences revenues of local budgets. this approach provides the basis for improving the functioning of the theoretical foundations of the budget process in ukraine at the level of local authorities. references asaul v., dementev a. & molchanov d. (2010). finance, credit and money. – appeal : textbook. allowance. – 322 p. bazylevych v. & balastryk l. (2002), public finances : teach. manual. society. – atika. – 368 p. bondaruk t.g. (2013) economic and statistical analysis of formation of local budgets. statistics, № 4, p. 7-15. fedosova b. & yuriia s. (2012) the budget system: textbook under sciences. ed. publication. – k. ternopil: tsul-economic thought. – 871 p. kirilenko a. (2004). local finance: textbook. – ternopol: acton. – 140 p. legkostup i. (2010). features of local budgets ukraine and ways to strengthen their revenue base. formation of market relations in ukraine, № 3, p. 165-170. literate v. (2012). local finance: teach. guidances. – ternopol: economic thought tneu. – 200 p. momot a.o. (2012), methodological approaches to classification of local budget. development management, № 8, p. 125-126. pasichnyk y.v. (2008) budget system of ukraine. textbook. 2nd ed., revised. and add. – k. knowledge. – 670 p. romanenko o.r . (2004) finance. – k .: centre textbooks. – 312 p. romanenko o., ohorodnyk, ziaziun s. & slavkova a. (2013). finance: teach method, to self. explore, discipline. 2nd ed., revised, and add. kneu, 387 p. rovinskii n.n (1944). ussr state budget. textbook for financial and economic institutions. – m.: gosfinizdat. – 385 p. [electronic resource]. – retrieved from: http://istmat.info/node/39283 savchuk s. (2012) the oretical and conceptual foundations defining revenue as the object budgeting. science and economics. №1(25), p. 81-89. smith a. (1776) wealth of nations. the study of the nature and cause of the welfare of nations. [electronic resource]. – retrieved from: http://www.kbuapa.kharkov.ua/e-book/tpdu/13 tripak m. revenues of local budgets ukraine : pragmatic and fiscal regulation / [electronic resource]. – retrieved from: http://library.tneu.edu.ua/index.php/nmkd/64-resursy-biblioteky/pratsi-vykladachivtneu/t/94-2011-09-05-09-52-41 vasiliko o. & pavlyuk k. (2004). the budget system of ukraine: the textbook. – k.: centre teach. years. – 544 p. venher v.v. (2009) finance: teach. ref. for students. hi. teach, bookmark. – kcenter of educational literature. – 432 p. vladimirov k.m., chuiko n. & rogalskyy a. (2007) local finance [text] : tutorial. – kherson: oldie–plus. – 352 p. yurii s. & beskyd j. (2000). the budget system of ukraine: training, guidances, for the studio. econ. spec. hi. teach, bookmark. – k .: nios. – 400 p. yuri s., ivanuh r . & dusanovskyy s. (2003) economic and social aspects of economic complex of ukraine : monograph. – ternopol: zbruch. – 468 p. baltic journal of economic studies 22 vol. 1, no. 2, 2015 оксана винницкая сущность и классификационные аспекты доходов местных бюджетов аннотация. целью статьи является определение сущностных характеристик доходов местных бюджетов и обоснование их классификационных аспектов. методы исследования. в ходе написания статьи использованы общенаучные и специальные методы исследования: диалектический и системно-функциональный – для обобщения теоретических концепций формирования доходов местных бюджетов; анализа и синтеза  – для детализации предмета исследования и изучения его составляющих; логического обобщения – для обоснования подходов и предложений относительно формулировки доходов местных бюджетов. результаты. обосновано, что на сегодняшний день не существует единого мнения о трактовке экономической категории «доходы местных бюджетов». предложено толкование понятия «доходы местных бюджетов» с позиций материального содержания, формы, организационной структуры и характера местных бюджетов. доходы местных бюджетов определены как часть финансовых ресурсов общества, которые аккумулируются местными органами власти для обеспечения выполнения возложенных на них задач и функций с целью реализации текущих и перспективных задач развития социальной инфраструктуры регионов. обосновано, что доходы местных бюджетов формируются за счет собственных и закрепленных в установленном порядке общегосударственных налогов, сборов и других обязательных платежей. главным признаком собственных доходов является непосредственная их подчиненность местному самоуправлению. главный признак закрепленных доходов заключается в долгосрочном характере их закрепление за соответствующим бюджетом. значение. обосновано, что наличие в экономической литературе разных критериев классификации доходов местных бюджетов по различным признакам обеспечивает многокритериальную их классификацию, отражает все особенности формирования, использования и функциональные различия доходов местных бюджетов. такой подход создает базу для совершенствования теоретических основ функционирования бюджетного процесса в украине на уровне местных органов власти. baltic journal of economic studies 141 vol. 4, no. 2, 2018 corresponding author: 1 department of world agriculture and foreign-economic activity, mykolayiv national agrarian university. e-mail: novikov@mnau.edu.ua 2 department of accounting and taxation, mykolayiv national agrarian university. e-mail: dubinina@mnau.edu.ua 3 department of accounting and taxation, mykolayiv national agrarian university. e-mail: kuzyoma@mnau.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-2-141-146 due diligence: essence and possible prospects of development oleksandr novikov1, maryna dubinina2, vitalii kuzoma3 mykolayiv national agrarian university, ukraine abstract. the subject of the study is a set of theoretical, methodological principles for the implementation of the due diligence procedure as an audit service in ukraine. the methodological basis of the study is general scientific and special methods of cognition. there was clarified the concept of due diligence as audit service using the methods of theoretical generalization, comparison of the accounting, and due diligence by the method of comparison. the peculiarities, current problems, and obstacles of the development of due diligence in ukraine are determined with the help of the abstract-logical method and structural-logical analysis. the objective of the study is to consider the essence of the concept of due diligence as an audit service, to identify the main obstacles, and to formulate prospects for its development in ukraine. in ukraine, the due diligence is equated to a legal audit. however, the concept of the legal audit is much narrower and characterizes the legal expertise of the company’s compliance with the requirements of the law. as a result of the study, it was found that due diligence is a procedure for conducting a comprehensive examination of an investment agreement in the framework of making a decision on effective capital investment by minimizing risks in order to preserve this capital and its potential future increase. it is proved that it is expedient to involve specialists of different professional orientations such as appraisers, lawyers, financiers, project managers, and crisis managers for the implementation of due diligence. the task team can include economists, engineers, security specialists and other experts. varieties of due diligence are considered and its differences from the traditional audit are determined. it is substantiated that when improving the method of due diligence, it is necessary to understand its difference with the audit. the role of the due diligence procedure in the conclusion of enterprise sales contract is determined, namely, the reduction of existing investment risks. the “success” of the agreements or their “failure” is explained by the nature of the emerging synergy, and also by the fact that enough time was spent on conducting the due diligence. the sequence and structure of the due diligence process, as an audit service, were defined, outlining the content of its individual stages and works, which gave an opportunity to develop the algorithm of the due diligence procedure. it is established that due diligence is a rather new phenomenon for ukraine, and audit and specialized companies are only at the beginning of the path in this direction. in order to develop this type of services, it was suggested that auditors and specialized companies expand the range of services in the direction of due diligence and the corresponding procedure for its conduct. the cooperation of ukrainian professional organizations with foreign professional organizations should be developed in order to provide specialists with the possibility to obtain international certificates, as well as to involve audit, legal, and consulting companies in the process of vocational training in the direction of due diligence. the conclusion of the study. thus, due diligence includes a set of measures to conduct a comprehensive examination of an investment agreement within the framework of making a decision on effective capital investment, which involves significant economic risks. the need for due diligence is due primarily to the fact that in today’s market relations, the requirements of investors, banking institutions, and buyers are increased to the transparency of information about the object of investment, lending or purchase. due diligence as a research tool allows you to get a realistic assessment of your business, to determine the financial position and business development trends, as a result of obtaining information that will have a qualitative impact on effective management decisions. key words: due diligence, audit, expertise, capital, investment agreement. jel classification: e22, g32, m20, m40, m49 baltic journal of economic studies 142 vol. 4, no. 2, 2018 1. introduction each enterprise interested in attracting external sources to finance its development needs to have a sufficient level of investment attractiveness, given the high competition of objects of real investments in the market of investment resources, especially in the current conditions of limited financial resources for the ukrainian economy. therefore, an assessment of the current level of investment attractiveness is analytically determined while minimizing the risks of making an erroneous decision, which is necessary for both sides of the process. firstly, the management of the enterprise needs it for a well-defined definition of the vector for further development of the company in order to improve its investment image. secondly, investors need to assess the status of potential enterprises-candidates, the prospects for their development, taking into account all the attendant factors that are important for them in order to make a decision on the choice of the recipient enterprise. carrying out the procedure of due diligence will help to create a complete picture of the actual financial condition of the enterprise and of all the risks that may have a negative impact. foreign scientists: l. gilman, j. camp, j. bower, s. foster reed, m. hudson, and others studied the peculiarities of conducting the due diligence procedure. among domestic scientists, v. lykhovchuk, i. tkachuk, o. hlynskyi, a. halkevych, and others scientists and researchers-economists devoted their works to the procedure of due diligence. however, due to the insignificant number of conducted due diligence procedures in ukraine, domestic scientists mainly use foreign experience in their studies. the subject of the study is a set of theoretical, methodological principles for the implementation of the due diligence procedure as an audit service in ukraine. the objective of the study is to consider the essence of the concept of due diligence as an audit service, to identify the main obstacles and to formulate prospects for its development in ukraine. to achieve the objective, the following tasks are foreseen: – to study theoretical and practical approaches to define the concept of due diligence in order to clarify it; – to carry out the classification of due diligence in order to identify specific directions for its conduct; – to determine the place of the due diligence procedure among audit services in order to distinguish the basic professional standard of audit as the basis for the acceptance of the task, implementation and reporting; – to construct an algorithm for the implementation of the due diligence procedure; – to identify peculiarities, current problems, and obstacles to the development of due diligence in ukraine. the general scientific and specific methods of scientific knowledge are used: theoretical generalization and grouping, comparison, abstract-logical, structurallogical analysis, classification, systematization, causal relationship. 2. the essence of the concept of due diligence at the present stage of development of the economy, the actualization of investment activity as an effective mechanism of enterprise development is an important issue. in foreign practice, the accompanying procedure for the investment process is the implementation of due diligence. translated from english, the term “due diligence” has the meaning of “ensuring due diligence”. for the first time, this concept appears in the us securities act of 1933 (sec). the due diligence was understood then as the method of disclosing information by the broker to the investor about the company whose shares were sold on the stock exchange. later a community of brokers was formed, which conducted a procedure on a permanent basis for the sale of securities. nevertheless, the term “due diligence” was not clearly defined, because of the impossibility of establishing common requirements for the task for different companies (spedding, 2009). the due diligence acquired a wide range of use in the banking sector in the 1970s. at that time, modern standards for due diligence were developed and implemented in switzerland. the goal of introducing such standards was the desire to avoid rigid government regulation and control over the banking sector. in 1977, swiss banks signed the agreement on the swiss banks’ code of conduct with regard to the exercise of due diligence, which defined a unified methodology for obtaining and storing data about clients wishing to open accounts and continue to be served at these banking institutions (dunant, 1988). in the 1990s, the integration of enterprises was vital for stability in a dynamic and uncertain environment in the united states. in such circumstances, it is necessary to obtain information for making investment decisions. but at that time, buyers were not in a position to implement the due diligence procedure, because it required time and access to the required information. the spread of this procedure was due to the sarbanesoxley act of 2002, which created a new mode of control and regulation of financial activities, and there were significant changes in the management and disclosure requirements of the issuer. subsequently, in the process of mergers and acquisitions, the buyer was given full and free access to information during the due diligence (nigh john, 2004). it is thanks to these changes that the due diligence procedure came from the banking sector to modern business. it represents a stage of the investment process, which includes a comprehensive analysis of the baltic journal of economic studies 143 vol. 4, no. 2, 2018 company’s activities from the point of view of financial analysts, auditors, and lawyers. to date, there is no scientifically substantiated definition of the concept of due diligence which, in our opinion, is due to the peculiarities of carrying out this procedure in accordance with each task. the study of the above-mentioned approaches to the interpretation of the concept of due diligence has enabled us to clarify this concept. thus, under the due diligence, we propose to understand the procedure for carrying out a comprehensive examination of an investment agreement in the framework of making a decision on effective investment of capital by minimizing risks in order to preserve this capital and its potential future increase. the classic classification of due diligence is presented in fig. 1. although the due diligence procedure involves undertaking a comprehensive analysis of the company’s activity, sometimes the concept of due diligence is understood as a perfect analysis and study of only a separate component of the company’s activities. this is due to the division of the procedure into species, according to the key direction of the implementation. we affirm that the main purpose of the due diligence procedure is to provide the investor with a complete picture of the real financial situation of the investment object and minimize the existing risks of transactions when making a decision on investing capital. 3. the main differences between forensic audit and audit in ukraine, due diligence is at the stage of development. in spite of the growing demand for this service, due to the expansion of domestic enterprises to international capital markets and current mergers and acquisitions, due diligence has significant problems in its implementation in our country. to date, in the law of ukraine “on auditing” a comprehensive examination of the object of investment “due diligence” (as a form of services) is not officially envisaged. despite the generally accepted world principles of due diligence, they are not standardized in our country. in addition, there is almost no scientific literature on this issue. studying the procedure of due diligence, it can be associated with an audit. however, it is not appropriate to identify the categories of “audit” and “due diligence”, since “due diligence” does not offer an opinion on financial statements, as audit does. the main purpose of this check is to collect information about the investment object and conduct procedures for assessing the potential risks associated with it. table 1 summarizes the main differences between the audit and the procedure of due diligence. at the same time, in the absence of the regulatory framework and regulation of the implementation of the due diligence procedure by the state, the demand for it exists and the customer expects to receive a full and substantive report on the results of a quality examination. that is why the most often executives of such expertise are auditing firms. the due diligence procedure can be considered as an assurance engagement. in accordance with international standard on assurance engagements (isae) “assurance engagements other than audits or reviews of historical financial information” (hereinafter referred to as the isae 3000), the assurance engagements include both verification tasks (where another party than a practitioner measures or evaluates the subject of the task with respect to criteria), and direct tasks (where the practitioner measures or evaluates the subject of the task with respect to the criteria). when performing the procedure of due diligence, it is advisable to follow the rules established by the international standards on quality control, auditing, assurance and related services (hereinafter isa). due diligence procedure financial due diligence legal due diligence (management due diligence tax due diligence buy-side due diligence vendor due diligence m&a due diligence fig. 1. classification of due diligence [summarized by the authors according to the sources (kasych, 2015, byrka, 2013)] baltic journal of economic studies 144 vol. 4, no. 2, 2018 on the other hand, the procedure of due diligence can be viewed as a coordinated procedure for financial information and one can be guided by the rules and regulations set forth in the international standard on related services 4000 “engagements to perform agreed-upon procedures regarding financial information” (hereinafter referred to as the isrs 4400). we believe that due diligence should be considered as an accompanying audit service, since this audit involves the collection, preparation, and analysis of information and, according to isa, related services include agreed procedures and compilation of information. isrs 4400 defines the purpose of the task of the agreed procedures, as the implementation of those audit procedures agreed by the auditor, the entity and any relevant third parties, as well as reporting on the actual results. the audit firm only provides a report on the actual results of the agreed procedures (due diligence) and does not express confidence in the financial statements. but the users of the report, in turn, assess by themselves the procedures and results given in the report and make their own conclusions on the basis of the work of the performer. understanding the nature of the due diligence procedure and its legislative and normative background is just as important as the definition of the purpose and stages of the due diligence procedure. this determines the success of its implementation in the future, and hence the success of the investment agreement. 4. prospects for development in ukraine based on the classical understanding of due diligence, users of the information obtained as a result of the task are potential investors willing to confirm the return on their investment, or the acquirer, who considers it necessary to establish the degree of existing risk and find out the real value of the estimated enterprise. but, given the nature of the “due diligence” and the results obtained during the execution of the task, users of this service may also be banking institutions willing to investigate the financial condition of the borrower and the owners of the enterprise, with the aim of disclosing information about the activities of the company for evaluation profitability of invested investments. this emphasizes the significance of the “due diligence” from the point of view of elimination and the maximum reduction of existing business risks and destructive factors of the environment, and stipulates the need for a qualitative task that should be based on the appropriate methodology. there is no doubt that one of the topical issues of the organization of the audit is the sequence of inspections, that is, the definition of stages of the audit. we have determined an algorithm for the implementation of the due diligence procedure. of course, the proposed scheme is not inviolable. it can be influenced by the approach to planning (sequential or parallel), the structure of the audit firm and the particulars of the entity under audit. the algorithm consists of the following steps: determining the scope of verification and cost of services; compiling a list of questions and necessary documents; carrying out of the inspection; drawing up a report; presentation of the report to the customer. the problem of implementing due diligence is to choose a specific practical task, and there is no task for implementing due diligence, which is similar to another. however, this process requires a kind of modification of the forms and methods to ensure the effective operation of modern enterprises. the substantiation of the relevance and peculiarities of the implementation of due diligence is that it will contribute to maintaining a high level of quality of audit services in a full-scale european integration. table 1 comparative characteristics of audit and due diligence procedure № criteria for comparison audit due diligence 1 objective giving the auditor an opportunity to express an opinion on whether the financial statements have been prepared in all material respects in accordance with the applicable financial reporting framework formation of a complete picture of the real financial position of the company, the physical availability of assets, all current and potential liabilities, as well as all tax, financial, and investment issues that may significantly impair the financial position of the company in the foreseeable future. 2 subjects certified auditors experts in the field of audit, accounting, analysis, finance, law, having experience of due diligence. 3 the presence of requirements for mandatory implementation in cases established by law yes no 4 reporting defined by isa agreed with the customer. the volume is affected by the task set before the performer * generalized by the author (kasych, 2015, nazarenko, 2011) baltic journal of economic studies 145 vol. 4, no. 2, 2018 for each individual enterprise, in the context of the due diligence procedure, a separate methodology should be developed to determine the continuity principle, which would cover all the features of the industry and the enterprise as a whole. nevertheless, in our opinion, it is possible to identify key validation procedures that would be universal and subject only to individual adjustments. these procedures include: – analysis of the data obtained at the preparatory stage concerning the industry, its structure, its staff, supply markets and markets, the price policy of the enterprise, etc. in order to form the idea of the possibility of continuous activity of the enterprise; – analysis of the main indicators of the efficiency of the enterprise, trends in their changes compared with the current state; – verification of conformity of financial statements to the current legislation; – research of the accounting system and internal control; – analysis of cash flows expected in the coming reporting periods, assessment of their level of adequacy to ensure uninterrupted activity; – research of the “dependence” of the enterprise on financial institutions (banks, credit unions, etc.), the ratio of borrowed capital and equity; – assessment of the provision of the company with the necessary personnel for normal operation (production, administrative personnel, other specialists); – verification of credit history, the presence of lawsuits, violations of legislation (fines, sanctions, etc.) and the negative consequences of these events; – consideration of possibilities of enterprise development, opening of new directions of activity or expansion of the client base and availability of concluded contracts with contractors; – final formation of the idea of an enterprise’s ability to conduct continuous activities (moskal, 2014). 5. conclusions in modern conditions in ukraine, the features of the procedure of due diligence have not been fully investigated and identified, and there is also the lack of practical implementation of due diligence in ukrainian enterprises. thanks to the study of foreign information sources and their practical experience, we have clarified the definition of the concept of “due diligence”. so, under “due diligence” we propose to understand the procedure for conducting a comprehensive examination of the investment agreement within the framework of making a decision on effective capital investment, by minimizing risks, in order to preserve this capital and potentially increase it in the future. according to the results of the study, we maintain that there is currently no regulatory framework that would govern the implementation of the due diligence procedure. in audit practice, it is quite logical to consider the procedure of due diligence as an audit service, namely, services that accompany the audit, and one should be guided by the standards established by the isrs 4400. the success of the due diligence procedure is influenced by a number of factors, including the purpose of the procedure, terms of its implementation, the composition of the working group, etc., and that is why the procedural tool for the adoption of the due diligence task requires a detailed study and definition of all existing aspects. it is determined that the main purpose of the due diligence procedure is the formation of the investor’s full understanding of the real financial condition of the investment object and minimization of the existing risks of transactions when making a decision on investing capital. the sequence and structure of the process of due diligence, as an audit service for describing the content of its individual stages and works, have been developed, and it has made it possible to develop an algorithm for conducting a due diligence procedure. thus, due diligence is currently a very relevant procedure. necessity is primarily due to the fact that in modern market relations, the requirements of investors, banking institutions, and buyers to the transparency of information about the object of investment, credit or purchase increase. due diligence, as a research tool, allows you to get a real assessment of the business, determine the financial situation and development trends of the enterprise, and as a result receive information that will have a qualitative impact on the adoption of effective management decisions. references: spedding l. s. (2009) the due diligence handbook. corporate governance, risk management and business planning. cima publishing, p. 709. dunant o. (1988) swiss bank secrecy: it’s limits under swiss and international laws, case western reserve journal of international law, vol. 20, pp. 541-575. nigh john o. (2004) due diligence under sarbanes-oxley, emphasis, vol. 1, pp. 2-5. silichieva n. ye. (2011) sutnist due diligencei mozhlyvi perspektyvy rozvytku v ukraini [essence of due diligence and possible prospects for development in ukraine], ekonomichnyi prostir (economic space), vol. 45, pp. 288-296. kasych a. o. (2015) diu dilidzhens yak kliuchovyi instrument analizu dotsilnosti investuvannia [due diligence as a key tool for analyzing the feasibility of investing], oblik i finansy (accounting and finances), vol. 4 (70), pp. 92-97. baltic journal of economic studies 146 vol. 4, no. 2, 2018 byrka m. i. (2013) zastosuvannia protsedury «diu-dilidzhens» v protsesi zaluchennia priamykh inozemnykh investytsii na pidpryiemstva [application of the procedure of due diligence in the process of attracting foreign direct investment in enterprises], biznes inform (business inform), vol. 1, pp. 81-85. nazarenko i. m. (2011) diu dilidzhens: sutnist, pryznachennia ta poslidovnist provedennia [due diligence: the essence, purpose and sequence of the implementation], naukovi pratsi kirovohradskoho natsionalnoho tekhnichnoho universytetu. ekonomichni nauky (scientific works of kirovohrad national technical university. economic sciences), vol. 20, pp. 360-366. moskal n. v. (2014) suchasni aspekty formuvannia zahalnoi stratehii audytu [modern aspects of the formation of the common audit strategy], visnyk natsionalnoho universytetu “lvivska politekhnika”, (bulletin of the national university “lvivska politekhnika”) vol. 797, pp. 269-273. baltic journal of economic studies 201 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 v.o. sukhomlynskyi mykolaiv national university, ukraine (corresponding author) e-mail: tanyastroyko@gmail.com оrcid: https://orcid.org/0000-0002-0044-4651 researcherid: aab-2925-2021 2 v.o. sukhomlynskyi mykolaiv national university, ukraine e-mail: irina.rehteta@gmail.com 3 "tekhnotsentr mykolaiv-avto", ukraine e-mail: burkun.v.v@gmail.com оrcid: https://orcid.org/0000-0002-4318-8483 doi: https://doi.org/10.30525/2256-0742/2023-9-2-201-210 innovation infrastructure as a foundation for business process development tetiana stroiko1, iryna rekhteta2, vitaly burkun3 abstract. innovation infrastructure is most often associated with research activities and high-tech production. from a strategic point of view, innovation infrastructure ensures the process of realization of new or improved products, processes or production methods, thus creating the basis for highly efficient activities. in this sense, the formation of innovative infrastructure is extremely important for ukraine as a basis for the development of high-tech industries and increasing the efficiency of business processes. methodology. the article presents the authors' method of calculating the formation of innovation infrastructure as a basis for the development of effective business processes. according to it, it is a set of objects that create conditions for innovation and the presence of such objects can conclude the formation of innovation infrastructure. the proposed methodological approach consists of three blocks, including target block, preparation unit, evaluation and diagnostic unit. in this case the object of evaluation is innovation infrastructure. therefore, the evaluation process should determine the level of innovation infrastructure formation. results. on the basis of the scores of the indicators of formation of innovation infrastructure, on the one hand, it is proposed to determine a generalized score of formation of innovation infrastructure by oblasts, and on the other – an integrated specific score by provision of its facilities. thus, the main indicators for assessing the formation of innovation infrastructure are the number of technology parks, the number of industrial parks, the number of science parks, the number of business incubators, the number of innovation centers, the number of free economic zones (with intellectual property units), the number of regional science centers. the correspondence of separate objects of innovation infrastructure with the stages of innovation process provided by them is given. it is determined that technology parks provide generation, transfer and development of knowledge, innovation centers – generation and transfer of knowledge, business incubators – acquisition and use of knowledge. taking into account this comparative characteristic, the weight coefficients of each object of innovation infrastructure are determined. on the basis of concretization, the average score of formation of innovation infrastructure in oblasts is determined, which corresponds to the integrated score of formation of innovation infrastructure of ukraine. practical implications. the rating of the effectiveness of innovation infrastructure by oblasts was calculated. the top five leaders are: kharkiv, zaporizhzhia, lviv, dnipro, and kyiv oblasts and the city of kyiv itself. the efficiency rating of the leading oblasts almost completely coincides with the indicator of innovation infrastructure development, with the exception of donetsk oblast, which has a better indicator of development than efficiency, and zaporizhzhia oblast, on the contrary, has an efficient infrastructure despite its low development. key words: innovations, innovation infrastructure, innovation process, business processes, research base, technology parks. jel classification: o10, o20, o30 1. introduction innovation infrastructure is most often associated with research and high-tech production. in the strategic aspect, innovation infrastructure provides the process of implementation of new or improved products, processes or production methods, thus creating the baltic journal of economic studies 202 vol. 9 no. 2, 2023 basis for highly efficient activities. in this sense, the formation of innovation infrastructure is extremely important for ukraine as a basis for the development of high-tech industries. accordingly, there is an objective need for the creation and development of innovation infra structure, which can fundamentally influence the restructuring of the economy and accelerate the development of the country as a whole. it can organize and combine all necessary human and material resources for the transformation of various parts of the economy in a relatively short period of time. to this end, the state must create conditions for the development of innovation infrastructure, identify the features of its operation, and minimize bureaucratic influence. 2. analysis of recent research and publications in the modern conditions of functioning of the globalized economic system, the questions of creation of innovative infrastructure and maintenance of the corresponding business processes arise. this concept is widely used in the economic environment, but has no single universal definition of this term. hammer and champy (2007) define a business process as "an organized set of actions in which, based on one or more types of source data, a valuable result for the customer is created". it is generally believed that the flow of business processes in infrastructure industries, particularly the flow of business processes in the innovation infrastructure, can be interpreted as a systematic sequential execution of logically related and interdependent tasks, the purpose of which is to identify primary suppliers of research and develop ment. as a result, it is necessary to obtain a new technology or product that meets or shapes market needs. in today 's globalized world, new products and services are constantly emerging, and those countries that do not keep pace with global trends and do not allocate sufficient resources to innovative development have no chance of remaining competitive in the global marketplace. it is worth noting the example of china, the number of patents and innovative enterprises, which has increased many times in recent years, so the country is rapidly moving from the status of a "copying" country to high-tech, creating favorable conditions for innovation (wei, xie, & zhang, 2017) and the development of business processes. it is important to note that the startups advertised in today 's world, which are often confused with innovative companies, are not always based on new technologies, any newly created company can call itself such a term. therefore, it is important to note that only innovative startups serve as a basis for stable economic development, as evidenced by the study of colombel (2016) and the focus on such structures should be a priority in the formation of innovation infrastructure. innovation infrastructure accelerates the process of innovation and implementation of ideas. it simplifies life both for innovators, for whom it creates all necessary conditions for productive work, and for producers, who have the opportunity to choose the most successful development concepts. the study of laser and stachrer (2016) proves the fact that innovative start-ups are more vulnerable in the market than companies created without the use of new technologies, so the importance of innovation infrastructure in creating a favorable environment for high-tech companies is undeniable. 3. research methodology in the course of the study, the authors presented their own method for calculating the formation of infrastructure, which will ensure more efficient business processes. the methodological approach to this assessment is shown in figure 1. innovation infrastructure is a set of objects that create conditions for innovation. it is the presence of such facilities that can lead to conclusions about the formation of innovation infrastructure. the proposed methodological approach consists of three blocks, including: – target block; – preparatory block; – evaluation and diagnostics block. the purpose and objectives of the assessment should be defined in the target block. determining the purpose of the evaluation is extremely important for its proper structuring and for obtaining the most complete and reliable information about the state of the object of evaluation. in this case, the object of the evaluation is the innovation infrastructure. with this in mind, the evaluation process should determine the level of development of the innovation infrastructure. however, this should not be an end in itself. the goal of its realization should be considered in depth, from a different perspective, in connection with higher-order goals. as the evaluation process is subordinated to the management process, and the achievement of the goal of evaluation of the innovation infrastructure should serve as a basis for ensuring the achievement of the goal of management of its formation in the future. thus, it would be appropriate to formulate the purpose of the assessment of the formation of the innovation infrastructure as follows: to create the basis for making managerial decisions on the formation of the innovation infrastructure of baltic journal of economic studies 203 vol. 9 no. 2, 2023 ukraine based on the determination of the level of its formation. achieving this goal is facilitated by solving several tasks: – assessment of the formation of innovation infrastructure in the regional context, which allows to get an idea of the presence of innovation infrastructure in the oblasts of ukraine and the uniformity of its distribution throughout the country, which depends on the degree of formation of innovation infrastructure in the country; – evaluation of the formation of innovation infrastructure in the country as a whole, which will allow in the future to trace the relationship between the formation of innovation infrastructure and the results of innovation and to create a basis for management decisions on the formation of innovation infrastructure. the preparatory block provides, first of all, for the creation of a list of indicators for the assessment of the creation of innovation infrastructure. nazarenko i. (2013), usmanova m. (2016) believe that the state's influence on innovation and its results should be based on the formation of innovation infrastructure, which is the main tool and mechanism of the innovation economy, through which all methods are used to influence the formation of the environment. describing the functions performed by individual objects of innovation infrastructure, the authors do not use quantitative indicators that could characterize its formation. paying tribute to the research of scientists, it is reasonable to develop a list of indicators for the assessment of innovation infrastructure, which can be the basis for a quantitative rather than descriptive assessment of the level of its formation, the system of which is presented in regional and object terms (figures 2, 3). as can be seen from the above figures based on the scores of indicators of innovation infrastructure, on the one hand, it is proposed to determine a generalized score of innovation infrastructure by oblast (figure 4), and on the other hand, to integrate specific score by providing its objects (figure 2). that is, there are two ways to calculate an integrated score assessment of the formation of the country 's innovation infrastructure: – direct way – aggregation of generalized point estimates of innovation infrastructure formation by oblasts; – alternative way – aggregation of the integrated specified score by providing it with objects. the relationship between these indicators can be seen in figure 3. t ar ge t bl oc k pr ep ar at or y bl oc k creation of the list of indicators for the assessment of the formation of innovation infrastructure assessment tasks: assessment of the formation of innovation infrastructure in the regional context; assessment of the formation of innovation infrastructure in the country as a whole e va lu at io n an d di ag no st ic s bl oc k data collection on indicators of assessment of the formation of innovation infrastructure of the oblasts determination of the score of the oblasts of ukraine according to the level of the indicators of assessment of the formation of innovation infrastructure calculation of the general point estimation of formation of an innovative infrastructure of oblasts of ukraine taking into account weighting coefficients interpretation of the integrated scores of innovation infrastructure formation by oblasts and the country as a whole choice of methods to assess the formation of innovation infrastructure determination of weight coefficients of individual objects of innovation infrastructure on the basis of their comparative characteristics calculation of an integrated score to assess the formation of innovation infrastructure in the country as a whole the purpose of the assessment: the formation of a basis for management decisions on the formation of innovation infrastructure of ukraine on the basis of determining the level of its formation figure 1. methodical approach to the assessment of the formation of the innovation infrastructure of ukraine baltic journal of economic studies 204 vol. 9 no. 2, 2023 thus, the main indicators for assessing the formation of innovation infrastructure are the number of technology parks, the number of industrial parks, the number of science parks, the number of business incubators, the number of innovation centers, the number of universities (with intellectual property units), the number of regional centers of science, innovation and informatization. these indicators make it possible to quantify the formation of the country 's innovation infrastructure. in this case, the assessment involves the use of several methods, including: – standardization method for converting the indicators into a single scale from 0 to 1 point; – expert assessment method for determining the weight of individual infrastructure objects; – aggregation method for summarizing the obtained scores to obtain generalized assessments of the formation of innovation infrastructure of oblasts and an integrated assessment of the formation integrated score assessment of the formation of innovative infrastructure in the country summary score assessment of the formation of innovation infrastructure by oblast score on the indicators of innovation infrastructure formation indicators to assess the formation of innovation infrastructure n um be r o f te ch no lo gy p ar ks n um be r of in du st ri al p ar ks n um be r of s ci en ce p ar ks n um be r o f bu si ne ss in cu ba to rs n um be r o f in no va tio n ce nt er s n um be r of u ni ve rs ity u ni ts fo r i nt el le ct ua l pr op er ty is su es n um be r o f r eg io na l ce nt er s of s ci en ce , in no va tio n an d in fo rm at iz at io n integrated score assessment of the formation of innovative infrastructure in the country integral concretized score assessment of the formation of innovation infrastructure by providing it with facilities score on the indicators of innovation infrastructure formation indicators to assess the formation of innovation infrastructure n um be r o f te ch no lo gy p ar ks n um be r of in du st ri al p ar ks n um be r of s ci en ce p ar ks n um be r o f b us in es s in cu ba to rs n um be r o f in no va tio n ce nt er s n um be r of u ni ve rs ity u ni ts fo r i nt el le ct ua l pr op er ty is su es n um be r o f r eg io na l ce nt er s of s ci en ce , in no va tio n an d in fo rm at iz at io n figure 2. system for assessing the formation of innovation infrastructure (regional section) integrated score assessment of the formation of innovative infrastructure in the country summary score assessment of the formation of innovation infrastructure by oblast score on the indicators of innovation infrastructure formation indicators to assess the formation of innovation infrastructure n um be r o f te ch no lo gy p ar ks n um be r of in du st ri al p ar ks n um be r of s ci en ce p ar ks n um be r o f bu si ne ss in cu ba to rs n um be r o f in no va tio n ce nt er s n um be r of u ni ve rs ity u ni ts fo r i nt el le ct ua l pr op er ty is su es n um be r o f r eg io na l ce nt er s of s ci en ce , in no va tio n an d in fo rm at iz at io n integrated score assessment of the formation of innovative infrastructure in the country integral concretized score assessment of the formation of innovation infrastructure by providing it with facilities score on the indicators of innovation infrastructure formation indicators to assess the formation of innovation infrastructure n um be r o f te ch no lo gy p ar ks n um be r of in du st ri al p ar ks n um be r of s ci en ce p ar ks n um be r o f b us in es s in cu ba to rs n um be r o f in no va tio n ce nt er s n um be r of u ni ve rs ity u ni ts fo r i nt el le ct ua l pr op er ty is su es n um be r o f r eg io na l ce nt er s of s ci en ce , in no va tio n an d in fo rm at iz at io n figure 3. the system of assessment of the formation of innovation infrastructure (specified by objects section) baltic journal of economic studies 205 vol. 9 no. 2, 2023 of innovation infrastructure of the country as a whole. it should be noted that there are many methods of standardization (normalization, rationing) of indicators, among which the most common are: – standardization on the maximum or minimum level; – standardization on the range of variation of data by indicators (the difference between the maximum and minimum level); – standardization on reference (optimal) values; – standardization on the standard deviation using the harrington function. these methods have advantages and disadvantages that limit the use of these standardization methods in solving certain evaluation problems of an applied nature. when standardizing the maximum or minimum values of indicators, a score is calculated by dividing the statistical value of an individual indicator by its maximum value (if this indicator has a positive meaningful load) or by dividing the minimum value by its statistical value (if this indicator has a negative meaningful load). this method is one of the easiest to use, does not require complex mathematical calculations, but has certain disadvantages: first, the one-sided limitation of the values of the indicators to maximum or minimum values; second, if the array of observations is replenished with new values that exceed the maximum or minimum limits, it is necessary not only to calculate the values of the score for new observations, but also to completely recalculate the scores of all previous observations. when standardizing the difference between the maximum and minimum values of indicators, a score is calculated by dividing the deviation of the statistical value of an individual indicator from its maximum value (if the indicator has a positive meaningful load) or minimum value (if the indicator has a negative meaningful load) by the difference between the maximum and minimum values of the indicators. this method is also easy to use, but has similar disadvantages as the previous method: first, the bilateral limitation of the maximum and minimum values, and second, if the array of observations is supplemented with new values beyond the maximum or minimum limits, it is necessary not only to calculate the score values for the new observations, but also to completely recalculate the scores of the values of all previous observations. if it comes to standardization with respect to the reference (optimal) value, it involves calculating the score by dividing the statistical value of an individual indicator by the reference (optimal) value of the indicator (if this indicator has a positive meaningful load) or vice versa, by dividing the reference (optimal) value of the indicator by its statistical value (if this indicator has a negative meaningful load). this method has an obvious advantage – it does not require recalculation of scores in case of replenishment of the array of observations, because the reference value corresponds to the threshold level of the indicator, the intersection of which is impossible for objective reasons. at the same time, there is a problem of determining the reference level, which is often solved by scientists on the basis of their own experience, i.e., characterized by a high degree of subjectivity. standardization using the harrington function involves calculating the normalized value of an indicator by dividing the deviation of the statistical value of a particular indicator from its arithmetic mean (if this indicator has a positive meaningful load) by the standard deviation of these indicators, and converting the resulting values into points on the harrington scale. like the previous one, this method does not require recalculation of scores of indicators in case of replenishment of the array of observations, and in addition to mine, does not require justification of reference values, ie has a fairly low level of subjectivity. at the same time, the application of integrated score assessment of the formation of innovative infrastructure in the country integral concretized score assessment of the formation of innovation infrastructure by providing it with facilities summary score assessment of the formation of innovation infrastructure by oblast sc or e on th e in di ca to rs of in no va tio n in fr as tr uc tu re fo rm at io n in di ca to rs to a ss es s th e fo rm at io n of in no va tio n in fr as tr uc tu re figure 4. the relationship between the elements of the system for assessing the formation of innovation infrastructure baltic journal of economic studies 206 vol. 9 no. 2, 2023 this method is a rather cumbersome and complex process that requires complex mathematical calculations, which is its obvious drawback. however, the disadvantages of this method are far outweighed by its advantages. based on the comparison of different standardization methods, the advantages of the latter are obvious compared to the other three methods, and the disadvantages are acceptable. the element by-element analysis will provide an opportunity to identify weaknesses in the infrastructure and develop an effective action plan for its development. it is necessary to compare the objects of innovation infrastructure according to the main stages of the innovation process, which are provided by this object of innovation infrastructure. these stages are knowledge generation, knowledge transfer, knowledge assimilation and knowledge utilization (zhuk, 2015). 4. empirical results this section presents the estimation results of the model (for the country as a whole and for each oblast) and the corresponding test statistics used in the estimation. table 1 shows the correspondence of individual objects of innovation infrastructure with the stages of the innovation process that they provide. as can be seen from the table, technology parks provide knowledge generation, transfer and development, innovation centers – knowledge generation and transfer, business incubators – knowledge acquisition and use. organizations that conducted research and development – the generation of knowledge, and departments of universities on intellectual property – the transfer of knowledge. taking into account this comparative characteristic, the weighting coefficients of each innovation infrastructure object were determined. in parallel, an expert survey was conducted (experts were specialists from the state statistics service of ukraine and technology transfer departments of universities and research institutes, representatives of the regional state administration, and the department of intellectual property of the medt of ukraine). regarding the importance of individual stages of the innovation process, it was found that the importance of knowledge generation is the highest and is 0.4, and the importance of other stages is approximately the same and is 0.2 (table 2). this is natural, because it is the generation of new knowledge that acquires the highest priority in modern conditions. thus, technology parks (0.33) and innovation centers (0.25) have the highest weight. taking into account these weights, the scores of the indicators should be aggregated into generalized estimates. also, within the framework of the preparatory block, data should be collected on the indicators of assessment of the formation of innovation infrastructure in the oblasts. at the same time, data should be collected for several periods (for example, for the last five years) by oblasts of ukraine. within the framework of the block of evaluation and diagnostics it is necessary to determine the scores of the oblasts according to the level of formation. the calculation of such scores is carried out in the following order: table 1 correspondence of innovation infrastructure objects to stages of the innovation process innovation infrastructure objects stages of the innovation process knowledge generation knowledge transfer mastering knowledge using knowledge technology parks + + + business incubators + + innovation centers + + university intellectual property departments + organizations that conducted research and development + table 2 alignment of innovation infrastructure facilities with the stages of the innovation process innovation infrastructure objects assessing the importance of objects sum weighting factor knowledge generation knowledge transfer mastering knowledge using knowledge technology parks 0.4 0.2 0.2 0.8 0.33 business incubators 0.2 0.2 0.4 0.17 innovation centers 0.4 0.2 0.6 0.25 university intellectual property departments 0.2 0.2 0.08 organizations that conducted research and development 0.4 0.4 0.17 total 2.4 1 baltic journal of economic studies 207 vol. 9 no. 2, 2023 1. the normalized value of the innovation infrastructure formation indicator is determined: zi хi хi xi jt jt jt jt � � � �� , (1) where zijt is the normalized value of the i indicator of the formation of the innovation infrastructure of the j oblast for the period t; xijt is the value of the i indicator of the formation of the innovation infrastructure of the oblast j for the period t; xijt – the arithmetic mean of the i indicator of the formation of innovation infrastructure by oblast for the study period; � xijt� � – standard deviation of the value of the i indicator of innovation infrastructure formation by oblast for the study period. the arithmetic mean of the indicators of innovation infrastructure formation by oblasts is determined by the formula: xi xi t j jt t t j j jt � � � � , (2) where xijt is the arithmetic mean of the i indicator of innovation infrastructure formation by oblast for the study period; xijt is the value of the i indicator of the formation of the innovation infrastructure of the oblast j for the period t; i i=1; – the number of the indicator of formation of innovation infrastructure; j j=1; – the number of the oblast of ukraine; t t=1; – the period number; i – the number of indicators of the formation of innovation infrastructure; j – the number of oblasts of ukraine; t is the number of years of the study period. as for the standard deviation of the value of the indicator i of the formation of innovation infrastructure by oblast for the period under study, this indicator should be calculated according to the following formula: � xi xi xi t j jt t t j j jt jt� � � � � � � ( )2 (3) where xijt is the arithmetic mean of the i indicator of innovation infrastructure formation by oblast for the study period; xijt is the value of the i indicator of the formation of the innovation infrastructure of the oblast j for the period t. 2. scores are determined using the analytical desirability function described by the following formulas: vо zi zijt jt� � � � �exp( exp( )) , where vо zijt� � is the evaluation of the i indicator of the formation of the innovation infrastructure of the j oblast for the period. on the basis of the scores it is proposed to determine the generalized scores of formation of the innovation infrastructure of the oblasts of ukraine, taking into account the obtained weights: yvо z вкі vо zіjt і і jt� � � � � � � � 1 , (4) where yvо zjt� � is the generalized point evaluation of the formation of the innovation infrastructure of the oblast j for the period t; vо zijt� � is the evaluation of the i indicator of the formation of the innovation infrastructure of the j oblast for the period. after calculating the overall score of innovation infrastructure formation in all oblasts for this period, it is possible to calculate the integrated score of innovation infrastructure formation: ivо z vо z j t j j jt � � � � � �� 1 , (5) where ivо zt� � is the integrated score of the country 's innovation infrastructure formation for the period t (direct method of calculation); yvо zjt� � is the generalized point evaluation of the formation of the innovation infrastructure of the oblast j for the period t. table 3 matrix for the calculation of the integrated score of the innovation infrastructure formation of ukraine for the period t oblast number indicator number weighted score on the line 1 2 … and 1 scores for innovation infrastructure by oblast summary scores for innovation infrastructure formation by oblast 2 … . average score by column specified integral scoring assessment of the formation of the country 's innovation infrastructure through the provision of its facilities of a certain type integral score assessment of the formation of the country 's innovation infrastructure baltic journal of economic studies 208 vol. 9 no. 2, 2023 in this case, to identify the reasons that influenced the value of the integrated indicator, a specific integrated score of the innovation infrastructure of the country for the period t can be determined due to the provision of its facilities: ікvо zі vо zі j t j j jt � � � � � �� 1 , (6) where ікvо zіt� � is the specified integrated score of the assessment of the formation of the innovation infrastructure of the country for the period t due to the provision of its objects of the ith type; vо zijt� � is the evaluation of the i indicator of the formation of the innovation infrastructure of the j oblast for the period. specified estimates are combined into a single indicator, taking into account the weights: ivо z вкi ікvо zіt і і t� � � � � � � � 1 , (7) where ivо zt� � – integrated score evaluation of the formation of the innovation infrastructure of the country for the period t (alternative method of calculation) (voloshchuk, stepashko, 2014). to simplify the calculations and verify their correctness, the matrix method is proposed to be used, which is shown in table 3. as can be seen from table 3, the average score of the formation of innovation infrastructure by oblast based on the specification corresponds to the result of an integrated score of the formation of innovation infrastructure of ukraine. as a result of the calculations, the values of the indicators are translated into a scale from 0 to 1, which allows to provide the obtained scores with a qualitative interpretation. the use of this scale allows a qualitative interpretation of the values of the obtained scores. the harrington scale is constructed using the desirability function, which has been widely used in various economic studies. one of the ways of implementing the desirability function is the harrington psychophysical scale, which establishes a correspondence between the qualitative evaluation of the parameter and its quantitative value and has universal application (lyutyk, 2016). on the basis of the desirability function, five intervals corresponding to the harrington scale are formed. at the same time, according to the authors, table 4 basic and adjusted harrington scale (harrington, 1965) linguistic assessment (basic scale) linguistic assessment (adjusted scale) desirability function value ranges very good high level of innovation infrastructure formation 0.80-1.00 good sufficient level of innovation infrastructure formation 0.63-0.80 satisfactory average level of innovation infrastructure formation 0.37-0.63 bad insufficient level of innovation infrastructure formation 0.20-0.37 very bad low level of innovation infrastructure formation 0.00-0.20 it is necessary to adjust the linguistic assessment in connection with the determination of the level of formation of the innovation infrastructure (table 4). thus, the scores for each indicator, generalized scores, and integrated scores can be interpreted using the above scale. a methodical approach to the assessment of the formation of innovation infrastructure, which is based on its integrated assessment and allows to take into account the number of innovation infrastructures, their regional distribution, the importance of individual innovation infrastructures, determined on the basis of their comparative characteristics, and to create a basis for balanced management decisions in the field of innovation infrastructure. the level of innovation infrastructure formation was studied on the basis of data for 2013–2018. in general, there is a general underdevelopment of the innovation infrastructure in ukraine, which received a score of 0.328. the formation of elements of innovation infrastructure is relatively equal, business incubators work best. according to estimates, kyiv has become the leader in the formation of innovation infrastructure with a score of 0.982 points. kharkiv oblast showed a sufficient level of innovation infrastructure with a score of 0.655. the average level of innovation infrastructure development in donetsk (0.460), dnipropetrovsk (0.494) and lviv (0.37) oblasts. an insufficient level of innovation infrastructure development is typical for a large number of ukrainian oblasts: kyiv (0.322), vinnytsia (0.318), sumy (0.304), zaporizhzhia (0.299), odesa (0.290), cherkasy (0.288), ivano-frankivsk (0.284), kherson (0.283), zakarpattia (0.261), zhytomyr (0. 258), poltava (0.255), volhynia (0.255), khmelnytskyi (0.254), ternopil (0.251), rivne (0.248), mykolaiv (0.228), kirovohrad (0.224), luhansk (0.217), chernivtsi (0.214). the worst situation is in chernihiv oblast (0.196). thus, according to the harrington scale, 1 oblast received a score of "very good," 1 oblast received a score of "good," 3 oblasts received a score of "satisfactory," 19 oblasts received a score of "bad," and 1 oblast received a score of "very bad". this result is due to the uneven economic development of the oblasts themselves. according baltic journal of economic studies 209 vol. 9 no. 2, 2023 to julian christ, the study of innovation must take into account the coefficients of inequality, which are to compare the behavior of such indicators, to which several axioms apply: – independence of scale, i.e., homogeneity of income; – homogeneity of the population involved in the innovations; – anonymity: personal characteristics other than income do not matter (christ, 2012). another reason is the uneven distribution of hightech universities, which, according to a study by ghio nicollo, are the primary basis for the formation of innovation infrastructure. it demonstrates, using italy as an example, that the localization of universities contributes to the rapid leakage of innovative start-ups that begin their creation in them (ghio, guerini & rossi-lamastra, 2016, p. 307). 5. conclusions ukraine has serious problems with the development of infrastructure sectors, in particular, their development is largely determined by the ability of the government to implement systemic institutional changes aimed at reform. first of all, it is about the implementation of the european integration policy. in particular, it is necessary to create favorable conditions for business development, implement real decentralization of power and complete administrative and territorial reform, ensure further liberalization of foreign economic activity and increase the efficiency of financial resources allocated by the eu to support economic reforms in ukraine (stroiko, bondar, 2017, p. 146). summarizing the results of the research, it is worth noting the main findings: 1. the method of calculating the formation of infrastructure for the effective flow of business processes is based on three blocks, including the target block, preparatory unit, evaluation and diagnostic unit. a list of indicators for the evaluation of the innovation infrastructure has been developed, which can be used as a basis for carrying out not a descriptive, but a quantitative assessment of the level of its formation. 2. based on the scores of the indicators of formation of innovation infrastructure, on the one hand it is proposed to determine a generalized score of formation of innovation infrastructure by oblasts, and on the other – an integrated specific score by providing its facilities. for example, the main indicators for assessing the formation of the innovation infrastructure are the number of technology parks, the number of industrial parks, the number of science parks, the number of business incubators, the number of innovation centers, the number of free economic zones (with intellectual property), and the number of regional science centers. the correspondence of separate objects of innovation infrastructure with the stages of innovation process provided by them is given. it is determined that technology parks provide generation, transfer and development of knowledge, innovation centers – generation and transfer of knowledge, business incubators – acquisition and use of knowledge. taking into account this comparative characteristic, the weight coefficients of each object of innovation infrastructure are determined. on the basis of concretization the average score of formation of innovation infrastructure in oblasts is determined, which corresponds to the integrated score of formation of innovation infrastructure of ukraine. 3. a methodical approach to the assessment of the formation of innovation infrastructure, which is based on its integrated assessment and allows to take into account the number of innovation infrastructures, to determine their comparative characteristics, as well as to create a basis for sound management decisions in the formation of innovation infrastructure. 4. the rating of the effectiveness of innovation infrastructure by oblast was calculated. the top five leaders are: kharkiv, zaporizhzhia, lviv, dnipropetrovsk, kyiv oblasts and the city of kyiv itself. the efficiency rating of the leading oblasts almost completely coincides with the indicator of innovation infrastructure development, with the exception of donetsk oblast, which has a better indicator of development than efficiency, and zaporizhzhia oblast, on the contrary, has an efficient infrastructure despite its low development. references: christ, j. (2012). innovative places, research clustering and co-agglomeration in europe. in innovative places in europe: research clustering , co-patenting networks and the growth of oblasts, pp. 117–218. colombelli, a., krafft, j., & vivarelli, m. (2016). to be born is not enough: the key role of innovative start-ups. small business economics, vol. 47 (2), pp. 277–291. available at: www.jstor.org/stable/43895737 ghio, n., guerini, m., & rossi-lamastra, c. (2016). university knowledge and the creation of innovative start-ups: an analysis of the italian case. small business economics, vol. 47 (2), pp. 293–311. hammer, m. (2007). reengineering of the corporation: manifesto of revolution in business. moscow: mann, ivanov and ferber, 288 p. harrington, e. (1965). the desirability function. industrial quality control, pp. 494–498. baltic journal of economic studies 210 vol. 9 no. 2, 2023 leitner, s., & stehrer, r . 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(2016). theoretical principles of innovation infrastructure formation in ukraine. bulletin of the eastern european university of economics and management. series: economics and management, vol. 1, pp. 74–84. available at: http://nbuv.gov.ua/ujrn/vsuem_2016_1_11 vinogradova, o. (2005) business process reengineering in modern management: monograph. donetsk: donduet them. m. tugan-baranovsky, 195 p. voloshchuk, r ., & stepashko, v. (2014). nonlinear normalization of statistical indicators for the problem of constructing integral indices. inductive modeling of complex systems, vol. 6, pp. 47–54. available at: http://dspace.nbuv.gov.ua/handle/123456789/83993 wei, s., xie, z., & zhang, x. (2017). from "made in china" to "innovated in china": necessity, prospect, and challenges. the journal of economic perspectives, vol. 31 (1), pp. 49–70. available at: www.jstor.org/stable/44133950 zhuk, m. (2015). ensuring the functioning of innovation infrastructure in terms of deepening integration. efficiency of public administration, vol. 44, pp. 64–72. received on: 03th of march, 2023 accepted on: 17th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 55 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 bilhorod-dnistrovsky city-district court of odesa region, ukraine (corresponding author) e-mail: oleksandrboarskij2@gmail.com orcid: https://orcid.org/0000-0001-9129-3766 2 national university "odessa law academy ", ukraine e-mail: yamaslova@gmail.com orcid: https://orcid.org/0000-0001-6725-7036 3 national university "odesa law academy ", ukraine e-mail: pekhnik2@ukr.net orcid: https://orcid.org/0000-0003-2534-7652 doi: https://doi.org/10.30525/2256-0742/2023-9-2-55-64 phenomenology of interest in the formation of human habit (anti-corruption aspect) oleksandr boiarsky1, yana maslova2, alevtina pekhnyk3 abstract. the subject of the study is the conceptual, theoretical and methodological foundations of the use of digital tools in law enforcement on the example of individual institutions (national agency for the prevention of corruption, ministry of justice of ukraine). methodology. general scientific methods were used in the research process. the comparison method was used to summarize the approaches of different researchers regarding the main dominants of the implementation of the idea of electronic registers and their interaction by default. the analysis was used to determine the quantitative and qualitative parameters that characterize the specifics of the activities of the national agency for the prevention of corruption, the ministry of justice of ukraine in the digital era. induction and deduction were used to determine the approaches to the main dominant legal forms of activity of the central bodies of state executive power. the results of the study showed that the introduction and application of digital skills in the activities of public authorities creates conditions for the effective performance of their powers, as well as contributes to the public interest in general. conclusion. it is concluded that the significance of interest for the development of human civilization is manifested in the fact that: a) interest, along with needs and values, motivating the social subject (individual, group, historical community, class, nation, society), is the driving force of the historical process (immanent – dynamic property of interest); b) the realization of interest is impossible without its awareness, which occurs in the process of constant comparison of the life situation of individuals, social groups, historical communities among themselves (intellectual and practical property of interest). it is established that the public interest in the activities of the anti-corruption body is expressed in ensuring the prevention and counteraction to corruption, which is specified through the main powers. it is noted that a potential conflict of interest will differ from the real one in the case when a private interest existing in the sphere of official activity contradicts official or representative powers and this actually affects, but cannot affect the performance of official duties, attention is focused on the actions to be taken by the subject who has a conflict of interest. key words: interest, human habit, people-centeredness, public interest, prevention of conflict of interests. jel classification: e43, d74 1. introduction the formation, development and improvement of the phenomenology of democratic statehood in ukraine is accompanied by powerful and permanent processes of municipalization of state and public life. one of the most important factors in these processes, along with the formation and further institutionalization of the constitutional-legal and socio-existential institution of local self-government, its subjects and bodies, is the development of the idea of interest in law as its driving force. it should be noted that a distinctive feature of the economic, political and socio-cultural crisis processes taking place in our society today is the reassessment of values and rethinking of the role, importance of man and his choice in relation to the emerging global problems of our time. after all, what until recently was perceived as inviolable postulates, today is either completely rejected or raises doubts about its "usefulness", significance, which leads to uncertainty and even confusion of a person, inability to quickly transform their ideas, views, value orientations – and baltic journal of economic studies 56 vol. 9 no. 2, 2023 as a result to shortcomings in the mobility of life aspirations and interests (shelistov, 2017: 6). it can be argued that a person in the system of coordinates of a democratic state based on the rule of law, where the rule of law was considered as an effective organization capable of providing everyone not only with the necessary minimum of rights and freedoms, but also guaranteeing a set of social benefits that allow to realize personal creative potential, to be confident in ensuring a decent existence, begins to lose its primary role and its strategic importance in favor of the actions of state institutions aimed at maintaining their power and self-preservation. under such conditions, it is important to study the essence of the concept of "interest" as a regulator of legal innovations in general and in certain areas of public relations (for example, in the field of corruption prevention). the sphere of corruption prevention was chosen because corruption is a destructive phenomenon that mediates crises in various spheres of public life, as some officials thus protect their own interests and the interests of persons close to them, neglecting the interests of the state and its citizens. under such conditions, the activities of the authorities contradict the interests of the state, which leads to its isolation from citizens and society. there is no doubt that the consequences of any violations of the law, including corruption, impede the development of a democratic, legal, social state, which ukraine proclaimed itself in article 1 of the constitution of ukraine (1996). the problem under study is due to the active processes of development of public power, including public self-government, in the context of the formation of a democratic state based on the rule of law, which, in turn, occur under the significant influence of globalization factors, especially the influence of legal globalization factors, which leads to the emergence of a single world legal space with the presence of common norms of behavior of states and peoples, which objectively implies the formation and emergence of the same behavioral and activity guidelines for individuals who are on the territory of national states – most of whom are either actively involved in the processes of international interstate integration or wish to join them in the near future. hence, it can be argued about the essential, axiologically and praxeologically important role of the phenomenology of interest (romain, 2015; shimazawa, ikeda, 2014; golladay, jain, 2020) in the formation and development of individual and collective collective habit of a person in general and its importance for the mechanism of corruption prevention. the purpose of the article is to establish the phenomenon of interest in the formation of a person's habit for the purposes of anti-corruption activities by defining: a) the concept of "interest" and its significance for human-centrism in law; b) the significance of "interest" in the activities of the national agency for the prevention of corruption; c) theoretical and applied features of preventing conflicts of interest. 2. the concept of interest and its importance for human-centrism in law the key term "interest" and various related legal concepts were introduced into jurisprudence, studied and widely used by german lawyers in the second half of the 19th century. the concept of interest was used by them mainly in the sense of benefit, use or benefit brought by a certain object. interests were understood as vital needs in a broad sense. they distinguished between material interests related to the use of external life benefits and spiritual or ideal interests. to reveal the profile issues, it is necessary to study the definitional characteristic of "interest", which by its semantic meaning contains a large number of characteristic features. for example, the "encyclopedia of sociology " contains the following definition of the term "interest": a) as the orientation of the subject to the objects significant for him, which is associated with the satisfaction of the individual's needs; b) as a real reason for the activity of social actors aimed at satisfying certain needs, which is the basis of direct motives, motives, ideas, etc. and is determined by the position and role of these actors in the system of societies and relations (interest encyclopedia of sociology). thus, in this definition, interest is characterized from two sides: on the one hand, as the orientation of the subject to the objects significant for him, which is associated with the satisfaction of the needs of the individual, that is, it assumes: a) the appropriate behavioral and activity guidelines (praxeological component), which b) is aimed at objects that are of particular importance to a person (personality) (value component), because they c) satisfy his needs (existential-consumer component) – here we can state the emergence of the relevant procedural-logical chain – first "the emergence of the individual's need for any object" – "understanding and awareness that such an object is of particular importance to him" – "formation of the relevant interest"; and, on the other hand, interest as a real reason for the activity of social actors aimed at satisfying certain needs that underlie the immediate motives, motives, ideas, etc., which is determined by the position and role of these actors in the system of societies – that is, interest: a) causes appropriate actions of social subjects (a higher level of baltic journal of economic studies 57 vol. 9 no. 2, 2023 generalization of the subject composition) (functional component), the reason for which is b) satisfaction of their certain needs (subject-object component), the basis of such needs c) are direct motives, motives, ideas, etc. (subjective-psychological component), and d) such manifestations of social subjects are determined by their position and role in the system of society or societies (social-determining component). based on the analyzed approach to the understanding of interest, there are general psychological and activity-behavioral blocks, which can be written in the following form – "needs arising from the manifestation of the internal nature of the subject, which are determined by his experience and position in society " – "the implementation by the subject of appropriate (many of which are predictable, taking into account the content of the individual and collective habitus) actions to achieve and realize the stated needs". such blocks, according to the authors, give a more complete picture of the existential-psychological and functional-activity components of interest as a social and socio normative phenomenology, since it acts as a determinant, result and at the same time the cause of the formation, development and improvement of individual and collective human habits, because its behavioral-activity component is based on the practical experience of a person in different life situations, which he acquired in the process of socialization. from the point of view of psychological approach, interest is a consumer attitude or motivational state that encourages cognitive activity, which unfolds mainly internally. in the conditions of cognitive activity formation, the content of interest can be increasingly enriched, including new connections of the objective world. emotional and volitional aspects of interest are manifested specifically – as an intellectual emotion and efforts related to overcoming intellectual difficulties. interest is closely connected with the actual human level of mastering reality in the form of knowledge (interest. psychological encyclopedia). a characteristic feature of this approach is the emphasis on the internal state of the subject, in our case a person. indeed, interest has a consumer character and forms a clear motivational state of intentions and behavior of a person, which encourages cognitive activity, which unfolds mainly in the internal plan. however, it should be borne in mind that such cognitive activity arises as a result of communicative interaction of a person with other members of society, acquaintance and use of relevant forms of life, which have a typified, stereotypical nature, that is, in fact, in the process of socialization (including legal socialization), and, ultimately, is the result of the individual and even more so the collective habitus formed by it. however, it should be borne in mind that such cognitive activity arises as a result of communicative interaction of a person with other members of society, acquaintance and use of relevant forms of life, which have a typified, stereotypical nature, that is, in fact, in the process of socialization (including legal socialization), and, ultimately, is the result of the individual and even more so the collective habitus formed by it. thus, it can be stated that such a more subjective psychological approach allows to reveal deeper processes that arise in human psychology, its individual and collective habits in the process of formation and implementation of local interest. in the modern encyclopedia, interest is interpreted as follows: 1) in sociology and economics – the real reason for social actions that underlies the direct motives (motives, ideas, etc.) of individuals and social groups involved in them; 2) in psychology – the attitude of a person to an object as something valuable and attractive to him. the content and nature of interest are related both to the structure and dynamics of motives and needs of a person, and to the nature of the forms and means of mastering reality that the person possesses (interest. psychological encyclopedia). this approach has already been analyzed above, but, according to the authors, it would have a higher level of scientific and praxeological productivity if these two approaches were combined into one doctrinal position. namely, if the interest was considered as a psychoactive reaction of a person and other subjects of society to external "stimuli" – life situations, the solution of which would lead to the emergence of the relevant social experience of these subjects and the implementation of appropriate behavioral and activity guidelines in the future, that is, appropriate practical behavior based on and taking into account such experience. in addition, in this approach, a significant axiological emphasis on the understanding and significance of interest for the individual is very attractive. the philosophical dictionary contains a more "down-to-earth" interpretation of the term under study – interest from the material point of view as a benefit, benefit ("to have one's own interest"). the one who has an interest in something is called an interested person; the one who constantly pursues certain interests or who is made some offer in the expectation of success is called an interested person. interest is something that excites and holds our attention because it has positive or negative value for our practical or theoretical needs. depending on the subject of interest, we speak of material and spiritual, scientific and artistic, general and private interests (interest. philosophical dictionary). baltic journal of economic studies 58 vol. 9 no. 2, 2023 thus, here is practically formed a cross-section of human psychological assessment of interest as an internal phenomenology of a person, which determines his need for something, participation in something, inclination to something, that is, to an object (subject) of the material or ideal world. moreover, here the system of coordinates is built around the studied phenomenology of interest, because the relationship between the "interested" and the "interested" here acquires its praxeological coloring and differs in the level of intensity and relevance for a person in relation to a particular object (subject) of interest. hence, in relation to the forms of life activity, which have existential and axiological significance for a person and are the basis of one's life experience, due to their typification and stereotyping, and in their totality form individual and collective habits, a person first (at the initial stage of socialization) acts as an interested subject, and then (in the process of further socialization and in the process of legal socialization) as an interested party, since the person considers these forms important for oneself, especially in the context of solving one's interests, since they are the basis of one's teleological dominants and satisfy one's needs. the encyclopedia of modern ukraine contains a more specific definition of the term under study, and it is in the activity-behavioral sense: interest is “a characteristic of a person's attitude to someone or something that expresses the positive or negative orientation of his activity, activity, historical creativity to find, choose, use or create ways, means, methods, norms, social institutions that can satisfy human needs.” interest, along with the needs and values that motivate a social subject (individual, group, historical community, class, nation, society), is the driving force of the historical process. the realization of interest is impossible without its awareness, which occurs in the process of constant comparison of the life situation of individuals, social groups, historical communities with each other (interest. encyclopedia of modern ukraine). that is, based on the above definition of the phenomenon under study, in contrast to the above positions, the emphasis is placed not only and not so much on the practical orientation of a person to realize his needs, but on the technological aspects of their formation, understanding, comprehension and implementation through the determination of the relevant determinants of behavior and the use of appropriate forms of its realization, namely, through the definition of their activities, historical creativity (determinants) – to seek, choose, use or create ways, means, methods, norms, social institutions (forms of implementation) that can meet human needs. thus, the significance of interest for the development of human civilization, its ubiquity and practical applicability are manifested in the fact that: a) interest, together with needs and values, motivating a social subject (individual, group, historical community, class, nation, society), is the driving force of the historical process (immanent dynamic property of interest); b) the realization of interest is impossible without its awareness, which occurs in the process of constant comparison of the life situation of individuals, social groups, historical communities among themselves (intellectual and practical property of interest). applied to the definition of a person's collective habit, it should be noted that the latter arises as a reaction to the relevant social "stimuli" from social groups, historical communities, classes, nations, society – that is, it is not only the possibility of occurrence, but also the fact of the emergence of a collective interest, which is realized through the relevant social practices of these subjects and leads to the formation of their collective habitus. in this sense, the sociological theory of pierre bourdieu is quite productive, in which the interest, first of all, refers to the "collective", to "social structures" and their "reproduction" (korkyuf, 2001: 250). at the same time, such an interest in no way negates the individual interest, moreover, both interests are in the respective genetic unity and interconnection as a whole and its part. therefore, the collective habitus arising from the collective interest in the relevant society is able to encompass what constitutes the individuality of individuals and their actions. thus, it is possible to interpret the individual in its relation to the collective and to emphasize the role of both individual and collective interest in the formation of the collective habit of man. hence, we can draw a general methodological conclusion that the category of "interest" plays a decisive role in the formation of individual human habit and its collective habit, which is based on individual life (behavioral and activity) experience of solving interpersonal (interpersonal), individualgroup, individual-collective issues of existential nature regarding the existence and stable functioning of the territorial human community in the relevant territory of the state under normal conditions of functioning of a democratic society. in the context of contextualization of interest as applied to the definition of a collective habit of a person, it should be noted that the latter arises as a reaction to relevant social "stimuli" from social groups, historical communities, classes, nations, society, that is, it is not only the possibility of occurrence, but the fact of the emergence of collective interest, which is realized through the relevant social practices of these subjects and leads to the formation of their collective habitus. baltic journal of economic studies 59 vol. 9 no. 2, 2023 3. the concept of "interest" in the activities of the national agency for the prevention of corruption the key subject of public administration in the field of preventing and combating corruption is the national agency for the prevention of corruption, which covers the entire territory of ukraine and whose specificity is the absence of its territorial bodies at the level of regions, districts, cities, etc. as a public administration entity in the field of preventing and combating corruption, the national agency is authorized to implement the state anticorruption policy. defining the activities related to the prevention and counteraction of corruption as the purpose of the national agency for the prevention of corruption and as a type of public administration, it should be noted that the prevention and counteraction of corruption is a specific administrative activity of public administration entities, which is an external expression of the implementation of the tasks of anti-corruption bodies aimed at preventing corruption acts with the help of specific administrative means in order to ensure public interests. at the same time, it is the public interest that determines the activities of the national agency for the prevention of corruption as a subject of public administration. the category of public interest is quite controversial for understanding in administrative law, which is due to the following: 1) the essence of public-law relations has a subjective-objective nature, that is, it is objectively described by the legal nature of this phenomenon and subjectively enshrined by the legislator in the norms of administrative law; 2) public interest is a certain aggregate of private interests, when the aggregate of private interests at a certain stage, according to the law of the dialectic of "mutual transition of quantitative and qualitative changes", turns into public interest; 3) in a general sense, public interest means the interest of the human community, population, people, etc. (averyanov, 2004: 24). public interest in the activities of the national agency for the prevention of corruption is expressed in ensuring the prevention and counteraction to corruption, which is specified through the main powers of this anti-corruption body: analysis of the state of prevention and counteraction to corruption in ukraine, approval of anti-corruption programs, control and verification of declarations of declaring entities, ensuring the functioning of the unified whistleblower reporting portal, the unified state register of declarations of persons authorized to perform state or local government functions, and the unified state register of persons who committed corruption or corruption-related offenses, etc. that is, the national agency for the prevention of corruption is an authorized entity whose activities are aimed at streamlining public relations to prevent corruption through the use of specially defined methods, ways and forms in order to ensure the public interest. it seems important to pay attention to the principles of the national agency for the prevention of corruption, which are enshrined on the official website of this body as values, namely: independence. "the interests of the people of ukraine are above all" means positioning the national agency for the prevention of corruption as a recognized authority in preventing and combating corruption, as an impartial and apolitical body (official website of the national agency on corruption prevention). in addition, according to the official website of the national agency for the prevention of corruption, the structural subdivisions of this specialized anti-corruption body include 19 entities, of which the department for the prevention of conflict of interest is a separate entity. 4. prevention of conflict of interest: theoretical and applied characteristics the international code of conduct for public officials (1996) stipulates that public officials must perform their duties in accordance with the law and with full integrity, must not use their official position for personal gain for themselves or their family, and must not have any financial or other interests incompatible with their office. this document also provides for the obligation to report activities that may lead to a conflict of interest. the powers of the national agency for the prevention of corruption to apply conflict of interest instruments are defined by the law of ukraine "on prevention of corruption" and are as follows: 1) the national agency for the prevention of corruption within seven working days provides explanations on the procedure for resolving conflicts of interest in case of receipt of a report of a real or potential conflict of interest (part 3 of article 28). this obligation of the napc corresponds to the right of a person to seek clarification from the national agency (part 5 of article 28); 2) as a form of external control, it is possible for an authorized person of the national agency to participate in the work of the collegial body as an observer without the right to vote (article 33) (on prevention of corruption, 2014). in the first case, the confirmation of the absence of a conflict of interest is provided by the national agency for the prevention of corruption in relation baltic journal of economic studies 60 vol. 9 no. 2, 2023 to specific actions (decisions), the possibility of which in the future or now raises doubts about the existence of such a conflict. this is due to the fact that the confirmation of the national agency for the prevention of corruption on the absence of a conflict of interest is of an individual nature, and the consequence of its receipt is the release of a person from liability for actions for which he/she applied for clarification, if in the future such actions were found to be a conflict of interest. that is why, in order to obtain clarification on the merits of the issue, the national agency recommends to indicate in the application complete and, if possible, documented information that discloses the content of the powers under which the person performs certain actions (makes decisions), private interest and, in general, the situation in which doubts about the existence of a conflict of interest arose. thus, the conclusion on the presence/absence of a conflict of interest, in addition to an exhaustive list of official or representative powers of a person, requires the establishment of the procedure and method of their implementation, which helps to determine the limits of discretion in making relevant decisions or taking actions, and therefore exclude or confirm the likelihood of negative impact on them, contradictions between private interest and official powers (implementation of measures to prevent and resolve conflicts of interest of entities authorized to perform the functions of the state or local self-government, as well as the establishment of prohibitions and restrictions). when establishing the presence/absence of a conflict of interest, the national agency for the prevention of corruption takes into account the provisions of the current anti-corruption legislation, the provisions of the annex "model code of conduct for civil servants" to the council of europe recommendation no. r (2000) 10, which states that a civil servant should not allow his/her personal interests to conflict with his/her public office. avoidance of such conflicts – real, potential or possible – is his duty (article 8) (recommendation of the committee of ministers to the member states of the council of europe on codes of conduct for civil servants, 2000), scientific conclusions on the essence of conflict of interest. doctrinal views on the definition of the concept of "conflict of interest" are quite diverse, but similar in content: a conflict of interest should be considered a situation in which the personal interest of a civil servant may affect the objectivity of the performance of his official powers and functions and in which there is a possibility of a conflict between the personal interest of a civil servant and the legitimate interests of citizens, organizations, society, the state, which may result in harm to these legitimate interests of citizens, organizations, society (volyanskyi, 2014): – a conflict of interest is a contradiction between public interests within a certain position and private interests of a person holding this position, arising from violation of the basic principles of civil service, violation of restrictions and prohibitions related to the civil service, dishonest performance of official duties by an official, in particular, noncompliance with the rights and legitimate interests of citizens, organizations, society and the state, non-compliance with the requirements of current legislation, low level of social security of civil servants (gudkov, 2014: 121); – a conflict of interest is a contradiction between public legal duties and private interests of an official, in which the official has his/her personal interests, which may adversely affect the performance of his/her duties and functions (bodun, 2009: 224), etc. that is, there is no doctrinal distinction between potential and real conflict of interest. according to o. p. khamkhodera (2019: 320), the essence of the conflict of interest as a tool for preventing corruption is that it is not just a contradiction or legal conflict between private and public interests, but a way to counteract corruption, and this is how it should be interpreted: 1) as the activities of authorized entities aimed at identifying possible causes of conflict of interest, timely elimination of these causes and settlement of the conflict situation within the current legislation of ukraine; 2) as a separate legal institution of administrative law, which is a set of legal norms aimed at regulating the activities of state bodies and other legal entities of public law related to the prevention and settlement of conflicts of interest as a way to combat corruption. the correlation of conflict of interest, regardless of its type, with corruption shows that these are multifaceted concepts. their interconnection is that the existence of a conflict of interest is a risk that can lead to corruption. the decision of the constitutional court of ukraine in the case of legally protected interest dated december 1, 2004 no. 18-рп/2004 states that "the conflict of interest is inherent not only in legal and non-legal interests, but also in a conglomerate of legitimate interests protected by law and law. it is about exclusively legitimate but competing interests of buyer and seller, debtor and creditor, employer and employee, consumer and producer, prosecutor and lawyer, investigator and suspect, etc. the interests of the citizen and the state, the individual and the society, the shareholder and the joint-stock company, the national and the universal, the private and the public, etc. are characterized by a certain conflict. the same decision baltic journal of economic studies 61 vol. 9 no. 2, 2023 of the constitutional court of ukraine also states that the etymological meaning of the word "interest" includes: a) attention to someone, something, interest in someone, something; curiosity, admiration; b) importance, value; c) what interests someone the most, what constitutes the content of someone's thoughts, concerns; d) aspirations, needs; e) what benefits someone, meets someone's aspirations, needs; benefit, profit (decision of the constitutional court of ukraine in the case of legally protected interest, 2004). generally speaking, a private interest will reflect what is important to a particular individual. if a person belongs to the category of entities covered by the law of ukraine "on prevention of corruption", he/she has private interests, but they should not be ensured by the special status of the person as an entity performing the functions of the state or local self-government. identification of a conflict of interest, according to v. p. vasiliev, is associated with the following factors: 1) the threat to the objectivity of a civil servant during his service; 2) the gap between private and public interest; 3) the possibility of harming the legitimate interests of other entities (vasiliev, dekhanova, kholodenko, 2009: 149). paying attention to the regulatory features of the prevention and settlement of conflicts of interest, it should be noted that they differ depending on the type of existing conflict – potential and real. the first of them is characterized by the following features: a) the presence of a public servant's private interest (any property or non-property interest of a person, including those caused by personal, family, friendly or other non-service relations with individuals or legal entities, including those arising from membership or activity in public, political, religious or other organizations) in the sphere in which he/she performs his/her official or representative powers; b) the possibility of a relationship between objectivity in decision-making or actions during service and what is important to a particular person. a real conflict of interest is possible provided that: there is a contradiction between the private interest of a public official and his/her official or representative powers; this will affect the objectivity or impartiality of his/her decision-making, or the commission or omission of actions in the performance of his/her official powers. thus, a potential conflict of interest will differ from a real conflict of interest in the case when a private interest existing in the sphere of official activity contradicts official or representative powers and this actually affects, but cannot affect the performance of official duties (maslova, 2021: 126). taking into account the needs of law enforcement, the letter of the high specialized court for civil and criminal cases dated may 22, 2017 "on bringing to administrative liability for certain corruptionrelated offenses" (on bringing to administrative responsibility for certain corruption-related offences, 2017) details the signs of a real conflict of interest, for the detection of which it is necessary to establish a simultaneous set of facts, for example, the presence of a private interest of a public official, which must be clearly formulated and defined. the fact of a conflict of interest mediates the need of persons who have it to take certain actions: 1) take measures to prevent conflicts of interest; 2) notify no later than the next working day from the moment when the employee learned or should have learned about the conflict of interest. the notification is addressed to the direct supervisor, and if the civil service position does not provide for a direct supervisor or it is a position in a collegial body – to the national agency for the prevention of corruption or a collegial body; 3) not to take actions and make decisions in conditions of a real conflict of interest, as well as not to persuade subordinates to commit any illegal actions in favor of their private interests or the interests of a third party; 4) take measures to resolve the conflict of interests. it is at this stage that a person may have doubts about the existence of a conflict of interest, and then he is obliged to seek clarification from the territorial body of the national agency for the prevention of corruption. the measure of independent settlement of the conflict of interest: a) occurs by deprivation of the relevant private interest (if the nature of the interest allows for its deprivation); b) related to the need for the manager to provide documents confirming the fact of deprivation of private interest (if the nature of the interest and the way of its deprivation provide for the possibility of documentary confirmation). if, for subjective or objective reasons, the deprivation of private interest did not occur, measures of external settlement of the conflict of interest are applied: 1) removal of a person from performing a task, taking actions, making a decision or participating in its adoption; 2) application of external control over the exercise of powers by a person (implemented in the form of verification by another employee of the body of the status or results of the task, verification of decisions or draft decisions, performance of the task in the presence of another employee of the body or participation of an authorized person of the national baltic journal of economic studies 62 vol. 9 no. 2, 2023 agency for the prevention of corruption in the work of the collegial body in the status of observer and without the right to vote); 3) limiting a person's access to certain information; 4) revision of the scope of official powers; 5) transfer of a person to another position (if it corresponds to his personal and professional qualities and is vacant); 6) dismissal (on prevention of corruption, 2014). thus, prevention of conflicts of interest as a tool for preventing corruption can be considered in two meanings: 1) as the activities of authorized entities aimed at identifying possible causes of conflict of interest, timely elimination of these causes and settlement of the conflict situation within the current legislation of ukraine; 2) as a separate legal institution, which is a set of legal norms aimed at regulating the activities of state bodies and other legal entities of public law related to the prevention and settlement of conflicts of interest. depending on the type of conflict of interest, the measures that should be applied to exclude the conflict of interest from practical activities will differ. summing up, it should be noted that the powers of the national agency in terms of providing clarifications, methodological and advisory assistance on the application of legislative acts on the prevention and settlement of conflicts of interest in the activities of persons authorized to perform the functions of the state or local self-government, and persons equated to them, is of great importance in the effectiveness of the corruption prevention mechanism (methodological recommendations for the prevention and settlement of conflicts of interest). this is further confirmed by the fact that in cases of violation of the requirements of the law of ukraine "on prevention of corruption" on the prevention and settlement of conflicts of interest, the national agency has the right: – to make orders on violation of the requirements of the legislation on prevention and settlement of conflicts of interest, other requirements and restrictions provided by the law of ukraine "on prevention of corruption"; – to submit to the head of the relevant body, enterprise, institution, organization an order to eliminate violations of the law, to conduct an official investigation, to bring the guilty person to the statutory liability; – to draw up protocols on the commission of relevant administrative offenses related to corruption (primarily under article 172-7 of the criminal code of ukraine, which provides for administrative liability for violation of requirements for the prevention and settlement of conflicts of interest). thus, in 2019, the authorized persons of the national agency revealed 768 violations of the law of ukraine "on prevention of corruption". as a result of inspections and monitoring of 117 persons, 515 reports were drawn up and sent to court in accordance with the established procedure (report on the activities of the national agency for the prevention of corruption for 2019, 2020). in 2020, within the competence of the department for compliance with the legislation on conflict of interest and restrictions on the prevention of corruption: 942 explanations were provided on the presence/absence of conflict of interest, the procedure for applying the rules for its settlement (556 on the application of the requirements of the legislation on the prevention and settlement of conflicts of interest in the activities of persons authorized to perform the functions of the state or local self-government and persons equated to them, 339 on the presence/absence of a conflict of interest in case of doubt, 47 on the procedure for resolving conflicts of interest in the actions of persons who do not have a direct supervisor); 239 protocols on administrative offenses related to corruption were drawn up and sent to court in accordance with the established procedure (report on the activities of the national agency for the prevention of corruption for 2020, 2021). 5. conclusions the conclusion is made about the importance of interest for the development of human civilization, its ubiquity and practical applicability, which are manifested in the fact that: a) interest, together with the needs and values, motivating the social subject (individual, group, historical community, class, nation, society), is the driving force of the historical process (immanent dynamic property of interest); b) the realization of interest is impossible without its awareness, which occurs in the process of constant comparison of the life situation of individuals, social groups, historical communities among themselves (intellectual and practical property of interest). it is established that the national agency for the prevention of corruption is an authorized entity whose activities are aimed at regulating public relations to prevent corruption through the use of specially defined methods, ways and forms in order to ensure the public interest. the public interest in the activities of the anti-corruption institution is expressed in ensuring the prevention and counteraction to corruption, which is specified through the main powers. it seems important to pay attention to the principles of the nacp activity, which are enshrined on the official website of this baltic journal of economic studies 63 vol. 9 no. 2, 2023 references: shelistov, yu. i. 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(2019). prevention of corruption in the public service. administrative law of ukraine. full course: textbook / galunko v., dikhtievskyi p., kuzmenko o., stetsenko s. and others. the second edition. kherson: oldi-plus. decision of the constitutional court of ukraine in the case of interest protected by law dated december 1, 2004 no. 18-рп/2004. available at: https://zakon.rada.gov.ua/laws/show/v018p710-04#text vasiliev, v. p., dekhanova, n. g., & kholodenko, yu. a. (2009). public administration. moscow: business and service. maslova, ya. i. (2021). prevention and settlement of conflicts of interest as a means of preventing corruption. legal position, vol. 2(31), pp. 125–128. body as values, namely independence. "the interests of the people of ukraine are above all" means positioning the nacp as a recognized authority in preventing and combating corruption, an impartial and apolitical body. in addition, according to the official website of the national agency for the prevention of corruption, the structural subdivisions of this specialized anticorruption body include 19 entities, of which the department for the prevention of conflict of interest is a separate unit. it is noted that a potential conflict of interest will differ from the real one in the case when a private interest existing in the sphere of official activity contradicts official or representative powers and this actually affects, but cannot affect the performance of official duties, attention is focused on the actions to be taken by the subject who has a conflict of interest. baltic journal of economic studies 64 vol. 9 no. 2, 2023 on bringing to administrative responsibility for certain corruption-related offences: letter of the higher specialized court for the consideration of civil and criminal cases dated may 22, 2017. available at: https://ksa.court.gov.ua/sud2118/pres-centr/news/351905/ methodological recommendations for the prevention and settlement of conflicts of interest. office of the executive directorate of the social insurance fund of ukraine in the dnipropetrovsk region. available at: http://www.fse.gov.ua/fse/control/dnp/uk/publish/printable_article/107287;jsessionid= def4eff58255d107b61697f3005908a4 report on the activities of the national agency for prevention of corruption for 2019. available at: https://nazk.gov.ua/wp-content/uploads/2020/04/zvit-nazk-za-2019-rik-15.04.2020.pdf report on the activities of the national agency for the prevention of corruption for 2020. available at: https://nazk.gov.ua/wp-content/uploads/2021/04/nazk-zvit-za-2020-rik-15.04.2021-1-1.pdf received on: 10th of march, 2023 accepted on: 27th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 208 vol. 3, no. 5, 2017 corresponding author: 1 energodar institute of public and municipal administration named after r.g. khenokh, classic private university. е-mail: director.eigmy@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-208-213 formation of marketing management system of the enterprise volodymyr tkachenko1 energodar institute of public and municipal administration named after r.g. khenokh, classic private university, ukraine abstract. in order to find out the level of effectiveness of marketing management and create an effective system, it becomes evident that a more in-depth study of the management of marketing activity as a process that occurs under the influence of a set of factors, which consideration can enable to better detect and solve existing problems, is necessary. the subject of the study is the theoretical and methodological foundations of management of the marketing activities of an enterprise and methods for evaluating its effectiveness. the purpose of the study is to build a system for managing marketing activities of an enterprise. in order to achieve the purpose of the study, the following tasks are set and solved: to substantiate theoretical and methodological foundations of the formation of the management system of marketing activity of enterprise, to specify components of this system, and to identify types of links between the components of the management system of marketing activity of enterprise and the factors influencing it and its efficiency, to determine composition of indicators of efficiency of marketing management system of enterprise. methodology. the paper uses the following methods and approaches to research: marketing approach, abstract-logical approach used in the study of theoretical and methodological foundations of interaction management, analysis of theoretical approaches to the formation of a management system for marketing activities of enterprise, inductive and deductive (used in determining factors influencing the formation of a management system for marketing activities of enterprise), systematization and generalization (to clarify the concept of “marketing management”), methods of science abstraction (to form a system of indicators characterizing the efficiency of enterprise marketing management). results. most approaches to the formation of marketing management systems are of a procedural nature, that is, they focus only on the implementation of basic functions of marketing management, and in order to determine the effectiveness of marketing activities of enterprise, the indicator that characterizes the ratio of costs to marketing activities of a company and financial result is used most often. thus it is impossible to track achievements of certain processes of marketing activity of enterprise and the efficiency of the operation of relevant divisions of the enterprise. however, the consideration of approaches to the management of marketing activities of enterprise made it possible to determine the need for the formation of such a marketing management system that takes into account types of connections of system components and considers the influence of factors of the enterprise marketing environment, and the methodology for evaluating its effectiveness made it possible to determine the appropriateness of the enterprise’s efforts. the practical significance and originality of the results obtained is the improvement of the management system of marketing activities of the enterprise, which allows, taking into account the influence of factors of the marketing environment, not only controlling the basic processes of marketing activity of the enterprise but also assessing the impact of these processes on the efficiency of marketing activities of the enterprise as a whole on the basis of “contributions/performance” principle. key words: marketing activity of enterprise, management system, factors of marketing environment, effectiveness. jel classification: l21, m10, m31 1. introduction rapid and permanent changes in the market environment require continuous improvement as of a system of marketing means of the enterprise, so in general of the management system of marketing activities of the enterprise. the process of managing marketing activities is aimed at creating an effective marketing complex of the enterprise: its commodity, pricing, communication policy and distribution policy. however, conducting an effective marketing policy requires the company to take a responsible attitude to the organization of all stages of the management process baltic journal of economic studies 209 vol. 3, no. 5, 2017 such as: planning, organization, implementation, and control of marketing activity. such circumstances dictate the need to streamline and improve marketing activities of the enterprise not only to achieve the final result but also to ensure a qualitative process organization. the process of managing the marketing activities of the company involves not only finding out the level of its efficiency but also determining the factors that predetermined such market positions of the enterprise. consideration of the influence of environmental factors and fulfilment of all management functions are impossible without creating an effective system for managing the marketing activity of the enterprise with an appropriate division of tasks among structural divisions of the enterprise. the purpose of the study is to build a system for managing the marketing activity of the enterprise. to achieve the purpose of the study, the following tasks are set and solved: to substantiate the theoretical and methodological foundations of the formation of the management system of marketing activity of the enterprise, to specify components of this system and to identify types of links between the components of the management system of marketing activity of the enterprise and factors influencing it and its efficiency, to determine composition of indicators of efficiency of the management system of marketing activity of the enterprise. the following methods and approaches to research are used in the paper: marketing approach, abstractlogical approach used in the study of theoretical and methodological foundations of interaction management, analysis of theoretical approaches to the formation of a management system for marketing activities of enterprise, inductive and deductive (used in determining factors influencing the formation of a management system for marketing activities of enterprise), systematization and generalization (to clarify the concept of “marketing management”), methods of science abstraction (to form a system of indicators characterizing the efficiency of enterprise marketing management). 2. the essence of management of marketing activities of the enterprise formation of a management system requires creating the necessary level of organization and rational use of integrated support for marketing activities. the essence and content of marketing activities reflect the objective conditions of market development, which to some extent loses chaos and falls under the regulatory influence of pre-established economic ties, where a special role is assigned to the consumer. the consumer places his or her demands on the product, its technical and economic characteristics, quantity, terms of delivery, and thus creates preconditions for the market distribution between manufacturers. implementation of marketing activities is an objective necessity of orientation of scientific and technical, production, and marketing activities of the enterprise, taking into account market demand, needs and requirements of consumers. issues of improving the management of marketing activity of the company are reflected in works of many scholars such as: p.  kotler, j.j.  lambin, m.  porter, l.  balabanova, a.  voichak, s.  harkavenko, a.  herasymchuk, v.  kardash, ye.  krykavskyi, n. kudenko, a. starostina. marketing management – the analysis, planning, implementation, and monitoring of activities designed to establish, strengthen, and maintain profitable exchanges with target buyers in order to achieve specific tasks of the organization, such as, for example, profitmaking, sales growth, increase of market share (kotler, 1999). according to l.v. balabanova, marketing management is the practical implementation of a carefully thoughtout integrated policy of the company in the market, which includes the organization, analysis, planning, implementation of activities aimed at achieving certain objectives of the enterprise in the market and control. marketing management is a set of measures that regulate the position of an enterprise in the market by means of marketing functions (balabanova, kholod, 2006). the essence of marketing management is to find the optimal number of customers necessary for the implementation of all volume of production produced by the company at this point. the task of marketing management is “to influence the level, time, and nature of demand in a way that helps the organization to achieve its goals” (danko, 2001). the very essence of marketing management is revealed when identifying the main marketing functions. among the most important functions of marketing are the following: analysis of the environment; market research; analysis of consumer needs; product planning; pricing; sales policy; product promotion; advertising; ensuring social responsibility. a.o. starostina understands under marketing activity such an enterprise management system, which is aimed at studying and taking into account the demand and market requirements for a reasonable orientation of production activity of enterprises for the production of competitive types of products that meet certain technical and economic characteristics in predetermined volumes (starostina, 2000). marketing activity of the enterprise is directed to establish, in sufficiently substantiated terms, considering market demands, current and, most importantly, longterm (strategic) goals, ways of achieving them, and real sources of economic resources, to determine the range and quality of products, its priorities, optimal structure of production and desired profit (danko, 2001). baltic journal of economic studies 210 vol. 3, no. 5, 2017 management of marketing activity at the enterprise is carried out in three directions: marketing mix formation, management of marketing service, internal marketing. consequently, marketing management system of the enterprise is a set of definite subjects, objects, tools, and methods of management that, in the process of interaction between them, are aimed at the effective management of marketing activities of the enterprise. 3. construction of marketing management system of the enterprise the interest of enterprises in results of their activities determines the need to increase the efficiency of all processes taking place at the enterprise, which is the result of the coordinated work of all services and divisions of the enterprise. its organization requires the development and construction of an effective system for managing marketing activities of the enterprise, taking into account specifics of the industry, in which the company operates. when building a management system for marketing activities, the following subsystems are identified: management (marketing management body of an enterprise) and managed (planning, organization, implementation, and control of marketing activities) (balabanova, kholod, 2006). evaluation of the effectiveness of each of the divisions of the enterprise, responsible for the effectiveness of components of a managed subsystem of marketing management of the enterprise, allows determining the efficiency of the use of resources by these units. organizational principles of marketing management of the enterprise consist in the structuring of tasks within the overall process of managing the marketing activity of the enterprise, creation of appropriate structural units (or distribution of certain functions among existing structural units), establishment of hierarchical and functional relationships between them (lambin, 2007; wells, 2014). the introduction of a marketing management system for an enterprise requires creating an effective model for its implementation (fig. 1). the model of management of marketing activity of the enterprise is a set of organizational structure, processes, technologies, resources, etc. necessary to create conditions that will facilitate the implementation of marketing advantages in the present and future business environment (kudenko, 2002). the main participants in the marketing management model are the responsible person providing the relevant services and a group of employees involved in the management process of marketing activities of the enterprise. implementation of the model of management of marketing activities should be carried out by the marketing department of the enterprise or a specially created body for managing marketing activities of the enterprise, which would carry out informationanalytical, regulatory, advisory, and control functions for improving marketing activity of the enterprise. the body of management of marketing activity of the enterprise should carry out general management and coordination of activity of all divisions of the enterprise. organization of management of marketing activities (management subsystem) marketing management system (managed subsystem) external factors in the marketing environment internal factors in the marketing environment planning of marketing activity of the enterprise organization of marketing activity of the enterprise realization of marketing measures of the enterprise control of marketing activity of the enterprise the efficiency of marketing activity of the enterprise m et ho ds o f p la nn in g, o rg an iz in g, im pl em en tin g, m on ito ri ng , a nd e va lu at in g th e ef fe ct iv en es s of m ar ke tin g ac tiv iti es c orrespondence of actual results to expected ones fig. 1. model of management of marketing activity of the enterprise baltic journal of economic studies 211 vol. 3, no. 5, 2017 strategic goals and tasks before the management body of marketing activities of the enterprise are put by the enterprise management, taking into account changes in factors of the internal and external environment of the enterprise, based on the corporate strategy of the enterprise. the influence of factors of the marketing macro environment affects the level of efficiency of marketing activities of the enterprise but does not directly and immediately affect its level. the macro environment refers to indirect environments, and its factors are uncontrolled by the enterprise, therefore, there is no feedback between macro factors and marketing management system. macroeconomic factors characterize the current operating conditions of enterprises, that is, certain threats or opportunities for the enterprise. factors of the micro-environment directly affect the activity of the company and the level of effectiveness of its marketing activities and feel its corresponding influence. however, factors of direct influence are poorly controlled by enterprises, and one of the tasks of the company’s services is to search for means of influencing these factors and strengthening feedback. the general corporate strategy of the enterprise is developed on the basis of the analysis of factors of the external and internal environment of the enterprise. after processing all the data received, determining the level of efficiency of marketing activity of the enterprise, finding out the problem areas in the system of managing marketing activities of the enterprise, and developing ways to increase the level of efficiency of marketing activities, the management body develops a set of specific tasks for improving the effectiveness of marketing activities for individual units of the enterprise and also controls the execution of tasks. in general, the effectiveness – the ratio between the achieved results and the costs for it. of course, the results can be estimated as the growth of sales volumes; increased profitability of the enterprise. however, in this case, an attention is paid to the process of forming the adherence of the audience to certain brands and the creation of a positive image of enterprises, decision-making on cooperation with certain organizations, implemented on the basis of the rational use of interested parties, the mechanism of marketing communications in the market. such parameters cannot be estimated by economic indicators. in connection with this, there is a need to introduce such a category as an assessment of the effectiveness of marketing activities – it is it involves assessing the marketing policy itself at the enterprise. the efficiency of the proposed system is determined by the final level of efficiency of the marketing activity of the enterprise, which is characterized by indicators of marketing activity. given this, in order to determine the effectiveness of marketing activities of an enterprise, a generalized criterion is most often used in the form of the following formula (danko, 2001): е = p/s, (1) where р – the result of the financial activity of the enterprise; s – the cost of their operation the aggregate annual economic effect of marketing activities more often than others is calculated by the formula (danko, 2001): е = еі – еj, (2) where еі – the average annual economic effect of the i-th marketing event; еj – expenses of the j-th article of the annual budget estimate for marketing activity (without separate expenses for the і-th event). with the help of the cumulative economic effect and efficiency gained on its basis, the marketing activity is assessed at the level of the entire enterprise. before that, one needs to calculate the effectiveness of individual marketing efforts. it is desirable as accurately as possible to assess the specific marketing event in accordance with functions of the unit that conducts it. it is especially important to evaluate the effectiveness of such components of marketing activity as: use of distribution channels of goods; organization of sales promotion; carrying out communication policy. in our opinion, the effectiveness of marketing activities of the enterprise can be determined only in terms of the verification of the correctness of all processes that marketing activities of the enterprise include (planning, organization, implementation, monitoring, and evaluation of the effectiveness of marketing activities). since all departments are interdependent and interact with each other, the effectiveness of the activity of each enterprise as a whole and the level of effectiveness of its marketing activity depends on the efficiency of each individual unit operation. the principle of “contribution/performance” communication between the management subsystem and components of a managed subsystem of management of the marketing activities of the enterprise requires, on the one hand (in the form of contributions), appropriate measures from the enterprise units to increase the effectiveness of certain aspects of marketing management and, on the other hand, the effectiveness of these efforts is assessed by the management body of the marketing activity of the enterprise and affects the further activity of these units. the composition of indicators, by which the effectiveness of the management system of marketing activities of an enterprise is determined, changes depending on the specifics of the market and sectoral conditions of its operation (table 1). baltic journal of economic studies 212 vol. 3, no. 5, 2017 table 1 determination of the level of compliance of efforts with effectiveness in the marketing activity of the enterprise contributions effectiveness marketing research costs, uah consideration of market needs, % the level of organization of processes of planning and control of marketing policy, points responsiveness to changes in market needs, points the level of validity of the company’s pricing policy, points profitability of enterprise production, cop. the level of conformity of the commodity range with consumer demand, % volumes of sales of commodity groups, uah the level of optimality of organization of sales channels, points the effectiveness of sales on separate sales channels, cop. the level of cost of communications policy of the enterprise, % increase in sales volumes after carrying out communication actions, % the proposed system of indices of contributions and effectiveness is intended to search for a kind of “balance of expenses of the enterprise” and allows determining the expediency of the enterprise’s efforts. effective marketing management is hard to imagine without harmonious and coherent action of all management functions, among which the system of strategic measurement – identification, development, communication, collection, and evaluation of performance indicators, directly related to the implementation of the mission of the organization and the achievement of its goals – occupies the first place (kaplan, norton, 2003). according to the methodology of the strategic measurement of business performance, the sequence of obtaining an assessment of the level of effectiveness of the marketing activity of the enterprise is as follows (artemenko, leus, 2010): 1. identification of criteria of marketing management system of the enterprise. 2. determination of contributions and their impact on each criterion. 3. ranking of contributions and results by priority (importance). 4. determination of indicators for each contribution and result. 5. practical application of selected indicators for the preparation and adoption of strategic management decisions. the feature of the application of strategic measurement systems to assess the level of efficiency of a marketing activity of an enterprise is the use in the calculation of the sum of normalized weighted ratings (using a tenpoint scale) is an assessment of results achieved by the company according to the relevant criterion. namely, the normalization of indicators allows comparing indicators for each of the criteria that have different units of measurement. comparing the estimates calculated for each of the criteria, you can see the weaknesses in implementing the company’s strategy. using this system of assessing the effectiveness of marketing activities of the enterprise allows seeing a picture of the coherence and validity of the efforts to improve marketing activities of the enterprise, that is, also performs an informational role in maintaining managerial decisions. 4. conclusions the research of approaches to management of marketing activity of the enterprise allowed proposing the following components of the system of management of marketing activity of the enterprise: the management subsystem (the body of management of marketing activity of the enterprise) and the managed subsystem (planning, organization, realization, and control of marketing activity). determination of the nature of the influence of factors on the marketing activity of the enterprise allowed substantiating the model of interaction of the marketing management system of the enterprise with factors of its macro and micro environment and characterizing the types of links between the system of marketing management and factors of the micro environment (direct influence of factors with weak feedback) and macro environment (indirect influence of factors, feedback is absent). criteria of the management system of marketing activity of the enterprise are associated with its final estimation by direct and inverse relationship on the basis of “contributions/performance”, which allows assessing the expediency of efforts of the enterprise to increase the efficiency of its marketing activities. prospects for further scientific developments in this direction are the definition and localization of the system of management of marketing activities of the enterprise as a component of strategic management. references: artemenko, l. p., leus, a. m. (2010). comprehensive assessment of the effectiveness of the strategic management system of the industrial enterprise. problemy systemnogo pidxodu v ekonomici [problems of the system approach in the economy]. retrieved from: http://www.nbuv.gov.ua/e-journals/pspe/2010_2/leus_210.htm. balabanova, l.v., kholod, v.v. (2006). strategic marketing management enterprise’s competitiveness – kyiv, profesional, 448 p. danko, t. p. (2001). management of marketing – moskow, infra-m, 224 p. baltic journal of economic studies 213 vol. 3, no. 5, 2017 kaplan, robert, s., norton, david, p. (2003). the balanced scorecard: translating strategy into action – moskow, olimp-biznes, 304 p. kotler, p. (1999). marketing management. analysis, planning, implementation, control – saint petersburg, piter, 887 p. kudenko, n. v. (2002). marketing strategy of the firm – kyiv, kneu, 245 p. lambin, jean-jacques (2007). management and market-oriented: strategic and operational marketing – saint petersburg, piter, 800 p. starostina, a. o. (2000). marketing researches. practical aspect – kyiv, vilyams, 262 p. wells, v. k. (2014). the influence of behavioural psychology on consumer psychology and marketing. journal of marketing management, 30 (11/12): 1119-1158. http://dx.doi.org/10.1080/0267257x.2014.929161 baltic journal of economic studies 129 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 institute of industrial economics of the national academy of sciences of ukraine, ukraine (corresponding author) e-mail: zaloznova.iep@gmail.com orcid: https://orcid.org/0000-0003-3106-1490 researcherid: a-9110-2018 2 institute of industrial economics of the national academy of sciences of ukraine, ukraine e-mail: oleksandrserdyk@ukr.net orcid: https://orcid.org/0000-0003-3049-3144 researcherid: b-7030-2018 3 institute of industrial economics of the national academy of sciences of ukraine, ukraine e-mail: msirynapetrova@gmail.com orcid: https://orcid.org/0000-0002-0515-5349 researcherid: i-4594-2018 doi: https://doi.org/10.30525/2256-0742/2023-9-2-129-136 institutional convergence in ukraine yuliya zaloznova1, oleksandr serdiuk2, iryna petrova3 abstract. the aim of the article is to develop recommendations for improving the level of institutional convergence in ukraine. to this end, the following tasks have been set and solved: an assessment of the level of institutional convergence in ukraine has been carried out, which includes an analysis of international indices characterising the quality of formal institutions and a further selection of indicators that are informative about convergent/divergent processes in the country; factors supporting institutional divergence in the country have been identified; recommendations have been developed to offset the importance of factors supporting institutional divergence. methodology. the methodological and theoretical basis of the study is a systematic approach to the analysis of processes and phenomena, institutional economic theory, scientific works of the classics of economic science, leading modern domestic and foreign scholars on the problems of institutional efficiency. results. the understanding of the essence of institutional convergence/divergence as a phenomenon characterising the local replacement of formal institutions by informal ones as a consequence of the unacceptable content of formal rules for a certain category of citizens and/or the low risk of being held accountable for their violation has been further developed. the level of institutional convergence in ukraine is assessed on the basis of the analysis of international indices (worldwide governance indicators, the rule of law index, the international property right index). it is noted that the indicator of the level of institutional convergence in ukraine is an important factor that should be taken into account in the development and preliminary assessment of the effectiveness of socio-economic projects, since the usefulness of such actions for society and, consequently, the efficiency of resource spending depends on the extent to which the public is ready to accept any public or private initiatives. recommendations have been developed to increase the level of institutional convergence by reducing the asymmetry of information in the communication system. it is determined that the asymmetry is a consequence of the high cost of information transmission and involvement of subjects in communication channels. it is proposed to digitise the systemic communication channels between the state, business and society, which will make the costs of attracting and transmitting information close to zero. practical implications. a scientific and methodological approach to increasing the level of institutional convergence is developed. value/originality. a methodology for assessing the level of institutional convergence in ukraine is proposed, which involves the selection of informative indicators of convergent/divergent processes in the country from international institutional quality indices and the systematisation of the information obtained. the concept of increasing the level of institutional convergence, which includes the digitalisation of public communication channels, is developed. key words: institutional convergence, ukraine, anti-divergent measures, informal institutions, formal institutions. jel classification: e02, f36, f55, o43 baltic journal of economic studies 130 vol. 9 no. 2, 2023 1. introduction the role of the state, as the representative of the public interest, is to regulate life in the interests of its citizens. in theory, this regulation should take place through the formalisation of established traditions, norms and rules. in practice, however, in every country in the world, there is a greater or lesser degree of discrepancy between the formal institutions regulated by the state and the informal norms and rules followed by particular social groups. the desirable state in which these two categories are identical is called "institutional convergence", while the opposite situation, in which formal norms and rules do not de facto apply to all spheres of social relations, is called "institutional divergence". when using the term "institutional convergence" in this study, attention should be paid to the context of its use in existing scholarship. typically, this term refers to the state of convergence (similarity) of institutions used within different systems (knack, 1996; keefer & knack, 1997; savoia & sen, 2012). for example, the similarity of formal institutions in the european union (eu) (schönfelder & wagner, 2019; kozyuk, 2016; iancu, 2009). given that the formal and informal institutional environments are essentially self-sufficient social systems within a single society, the institutions that create them can be studied for their convergence. accordingly, the term "institutional convergence" is logically used to denote the degree of this convergence, while the degree of divergence is characterised by the concept of institutional divergence. a high level of institutional divergence in society leads to an increase in the transaction costs of inter action between citizens, which in the opposite case (under conditions of convergence) are borne by the state. in other words, when actors use informal institutions, they spend their own resources to guarantee the fulfilment of the terms of an informal contract, to search for information, to ensure security, etc. consequently, divergence creates additional costs for the mechanism of the functioning of the economic system. the purpose of the article is to assess the level of institutional convergence in ukraine and to develop recommendations for its improvement. to this end, the following tasks have been set and solved: an assessment of the level of institutional convergence in ukraine has been carried out, which includes an analysis of international indices characterising the quality of formal institutions and a further selection of indicators that are informative about convergent/ divergent processes in the country; factors supporting institutional divergence in the country have been identified; recommendations have been developed to offset the importance of factors supporting institutional divergence. 2. genesis of institutional convergence/divergence institutional divergence as a phenomenon has various origins. it can stem from different perceptions within a society of effective ways of meeting individual needs, making it difficult to reach consensus on the content of formal institutions. at the same time, divergence can come from the state itself, or rather from its leaders. by ostentatiously introducing state institutions, they create the illusion that they are responding to society 's demand for certain models of order. in practice, however, the country 's leaders rely on the bureaucracy and tacitly apply informal rules and regulations in the state that maximise their own needs. in this case, the formal institutions serve both to maintain the appearance of meeting the demands of society and as an instrument of pressure on actors who act against the interests of those in power. the institutional divergence created by the state spreads from top to bottom, penetrating all spheres of society. over time, the idea that this is normal takes root in the minds of the population. society learns to manoeuvre between formal and informal institutions, thinking less and less about the original social contract that gave rise to the state. at the same time, there is a stratum of citizens (mostly ordinary workers, farmers, pensioners, housewives) who, because of the isolation of their sphere of activity, rarely encounter manifestations of institutional divergence and therefore believe that they live in a relatively convergent society. overcoming the institutional divergence in the above case is extremely difficult because any direct regulatory action (through formal institutions) will bump up against the well-established ability of institutionally active citizens (those who most often turn to institutions to regulate their activities) to manoeuvre between formal and informal institutions. that is, the introduction of new formal rules and regulations will encourage society to adapt its actions to the new institutions without changing the paradigm of relations. stability of relations, an additional psychological factor that makes it difficult to overcome divergence. kenneth arrow, a nobel prize winner in economics, notes: "social agreements are usually much harder to change than individual decisions. when you are obliged not only to yourself but also to many other participants in a common cause, the difficulty of changing this agreement becomes considerable." (arrow, 1974) in an environment where organisations are effectively regulated by informal institutions, changing the behaviour of each individual member, which would go against the established pattern of baltic journal of economic studies 131 vol. 9 no. 2, 2023 behaviour in the organisation, would at best risk ostracising them. therefore, individual members are not motivated to change their behaviour and thus maintain the divergent structure of the organisation. under static conditions, collective behavioural change is also unlikely, because informal organisational institutions are usually created to protect the interests of the majority of their members, or the interests of the organisation's leadership (in the case of a hierarchical organisation), which has sufficient leverage to suppress the will to change in the rest of the organisation. theoretically, under the above conditions, institutional convergence, i.e., the state in which formal institutions actually regulate all spheres of society, can be achieved through repression or through incentives. the first involves the introduction of severe penalties for breaches of formal norms and rules, together with total control over their implementation. the second is to create incentives that encourage society to abandon its own informal norms and rules in favour of formal institutions. that is, the state should create conditions under which it would be more profitable for the population to live by the law than to break or evade it. 3. assessment of the level of institutional convergence in ukraine since formal institutions are the quintessence of institutional convergence, international indices that characterise the quality of such institutions can be informative for the assessment. there are a number of reputable international indices that characterise the quality of institutions from different perspectives, namely the effectiveness of public administration, ease of doing business, respect for the rule of law, protection of property rights and freedom of economic activity. each of them alone is not sufficiently informative to characterise the degree of convergence in a society. however, the internal indicators (or sub-indices) on which such indices are based can provide more useful information. therefore, some of them can be considered as effective assessment tools. the informative value of internal indicators depends on the content of the phenomena being assessed. that is, on the extent to which the origin of a particular conjuncture of social relations (expressed by the indicators) is related to convergent changes in the intuitive environment. therefore, in order to develop a methodology for a comprehensive assessment of the level of institutional convergence in society, it is first necessary to analyse the internal indicators of various international indices for their origin in convergent/divergent processes. the analysis starts with the aggregate indicators of the worldwide governance indicators (kaufmann, kraay & mastruzzi, 2010), which, unlike the other internal indicators of the institutional quality indices presented here, are not reduced to a common indicator (index score). in other words, this methodology assesses the quality of public administration on the basis of a variety of factors, without any generalising characteristic. the world bank compiles the governance indicators once a year, assessing institutions based on various criteria, including: voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; and control of corruption. the indicators are rated on a scale from 2.5 (highest) to -2.5 (lowest). based on the analysis of the content of public administration quality indicators, serdiuk (2022) found that the indicator of political stability and non-violence (psnv)is the most informative about convergent/divergent processes in the state. partially dependent on the civil liberties factor, the political stability and non-violence (psnv) indicator measures the stability of formal institutions, the likelihood of abrupt change, political change, destabilisation and the likelihood of government overthrow by unconstitutional means or violence. the direct link between these phenomena and convergence or divergence processes is obvious, since the stability of formal institutions is the quintessence of society 's perception of these institutions. in the opposite case, society will rely on informal institutions in its everyday life and thus move towards institutional divergence. at the same time, the phenomena derived from the stability factor of formal institutions, such as destabilisation, the likelihood of abrupt changes and changes in political course, are related at the micro level to the degree of loyalty that society has to formal institutions. for example, citizens who are dissatisfied with the existing formal institutions will be inclined to take actions aimed at changing them, including illegal ones. thus, divergent processes will take place. given the direct link between the content of the psnv and convergence/divergence processes, the indicator can be identified as a quantitative assessment of the degree of institutional convergence in society. at the same time, it should be noted that such an assessment cannot be interpreted as comprehensive, since the scope of the indicator is limited to phenomena that affect the stability of the state order. that is, social processes that pose a potential threat to existing formal institutions. such processes are an undeniable, but not absolute, feature of convergence/divergence processes. institutional divergence can also occur under baltic journal of economic studies 132 vol. 9 no. 2, 2023 conditions of apparent political stability, when de facto formal norms and rules do not prevent the use of informal institutions. taking into account the factor of "non-informative stability ", the assessment of convergence based on the psnv indicator should be seen more as a consensus between the state and influential social groups. the key nuance for an objective assessment of convergence in this case is the extent to which influence is determined by the size of the group. in developed democratic, liberal countries, the de facto influence of each individual citizen is high, so that even a small group of such citizens has the potential to destabilise the political system. in authoritarian states, on the other hand, only a small group of elites is de facto influential. thus, in the first case, the state's consensus with influential forces is a direct sign of institutional convergence, while in the second case, convergence is more likely to be limited to elites than to society as a whole. the factor of "uninformative stability " can be levelled by a comprehensive assessment of the convergence/divergence phenomenon, taking into account the indicators of the level of stability together with the indicators of the influence of the broad masses of society. one of the key criteria for such an assessment is the level of the rule of law in the state, since in the modern world this factor determines the parity of relations in medium sized societies. in other words, the higher the level of the rule of law in society, the more equal the influence of each citizen, and the less imbalanced the potential for destabilisation. under such conditions, the state will be forced to reach a consensus with the population at large, which will lead to a movement towards institutional convergence. a number of reputable international organisations research and assess various aspects of the rule of law. among them is the world justice project (wjp), which has been annually compiling the relevant index for 139 countries since 2015. according to the assessment methodology, the rule of law index is an integral indicator of 8 internal indicators that characterise: civil and criminal justice; restrictions on the powers of government institutions; objectivity of the application of law; ensuring fundamental rights; order and security; openness of government; and the level of corruption (world justice project, 2022). the index indicators are rated on a scale from 1 (highest) to -1 (lowest). in addition to providing useful information on the influence of the general population, the rule of law index is also an indirect measure of the level of institutional convergence in a society, as it characterises the degree to which the authorities adhere to formal norms and rules. it should be noted that the indicators in the index have different levels of information about convergence/divergence. it has been established (serdiuk, 2022) that within the wjp index, the most informative indicators of convergent/divergent processes are the absence of corruption (ac) and the effectiveness of the right enforcement (re). the ac indicator characterises the level of corruption of public authorities. it covers three forms of corruption: abuse of influence for personal or collective gain, bribery, and misuse of public funds or other resources (world justice project, 2022). given that any manifestation of corruption is a direct sign of institutional divergence, the au indicator should be considered informative for assessing the level of institutional convergence. with regard to the factor of public influence, the au indicator characterises citizens on the basis of their material wealth. that is, corruption as a phenomenon creates the conditions for individuals to gain influence by bribing the creators and protectors of formal institutions (the authorities). as a result, the person who has committed such a bribe de facto leaves the sphere of influence of formal institutions and gains more influence over other citizens. the ac indicator therefore fulfils both assessment criteria. according to the methodology, the re indicator measures how impartially the legal framework is applied and how the rules set out in laws and administrative procedures determine behaviour within and outside government (world justice project, 2022). impartiality in the application of the law, or in other words, the impartiality of the actions of the protector of formal institutions, is a direct sign of institutional convergence. in the opposite case, when there is "selective justice", formal institutions of law are in a divergent state in relation to society. in order to improve the quality of the assessment and to completely eliminate the factor of "uninformative stability ", along with the identified indicators of the rule of law index, indicators that characterise the level of parity of influence of citizens should be taken into account. in this case, narrow-profile indices may be informative, as certain aspects of institutional bias may reflect informal state policy towards citizens. at the same time, generalised indices such as the rule of law index may mask important convergent/divergent features due to the scale of assessment. therefore, in order to objectify the assessment of the degree of institutional convergence, indicators from a narrowly focused index should be considered alongside indicators from the general "social stratification index". a narrower index that characterises the degree of stratification of society by influence is the international property rights index compiled by the property rights alliance (property rights alliance, 2022). this index is an integral measure of three sub-indices assessing the legal and policy baltic journal of economic studies 133 vol. 9 no. 2, 2023 environment, physical property rights and intel lectual property rights. each of the sub-indices in turn contains internal indicators that are scored on a scale from 10 (highest) to -10 (lowest). in the modern world, de jure guarantees of property rights protection apply to all segments of the population, and therefore any deviation from this norm can be seen as a sign of institutional divergence, based on the actual deprivation of legal rights of citizens and thus weakening their influence. therefore, the property rights protection indicator is potentially informative about the manifestations of institutional convergence/divergence. according to the results of the study (serdiuk, 2022), it was found that the indicator of protection of physical property rights (ppr), which belongs to the sub-index "physical property rights", meets the narrow-profile assessment criterion. the inadmissibility of the use of forced alienation of property rights (except in certain cases provided for by law) is a sign of institutional convergence in the state. in the context of the stratification of society, this means that de facto influential groups of people do not have the practical ability to appropriate the property of other citizens. thus, based on the results of the analysis of international indices of institutional quality, it was found that the most informative indicators of convergent/divergent processes in the state are: political stability and absence of violence (psvn); absence of corruption (ac); effectiveness of law enforcement (re); protection of physical property rights (ppr). therefore, they are eligible for evaluation (figure 1). the assessment found that the state of the institutional environment in ukraine is close to divergence. this is particularly true for the manifestations of institutional divergence leading to corruption. political stability and the absence of violence are also quite low. however, this can be explained by the annexation of crimea and the war in eastern ukraine1. the low level of institutional convergence in ukraine (or, on the other hand, the high level of divergence) makes it expedient to implement measures aimed at improving it. 4. identification of factors that support institutional divergence in the state individual motives that lead people to use certain institutions are shaped by the external environment. this environment de facto determines the behavioural guidelines of social actors (alchian, 1950). in this case, interest comes from the potential opportunities created by the guidelines, and constraints set limits to the guidelines. if an individual social participant is aware that the existing guidelines create opportunities for him/ her to benefit by depriving another of resources, he/she is more likely to follow this path. the logical structure of behaviour is as follows: guideline – acceptability of competition for a resource; motive – obtaining benefits; interest – maximising benefits at the expense of another; constraints – allowing to obtain benefits at the expense of another. at the same time, it can be expected that the other party will also follow this path. figure 1. scores of the "institutional convergence/divergence" indicators for ukraine 1 the indicator value for 2021 was used for the assessment. the indicator for 2022 is not yet available. however, it is clear that given russia's full-scale invasion of ukraine in february 2022, the indicator for this year will be significantly lower. 1 0 0 0-2,5 2,5 1 10 1,16 0,44 0,35 5,755 psnv re ac ppr baltic journal of economic studies 134 vol. 9 no. 2, 2023 institutional divergence creates freedom of action for social actors. that is, a person can choose which institutions to use to achieve his or her goals (formal or informal). under conditions of prevailing divergence, the returns to using formal institutions will be minimal, as most actors will play by informal rules. for example, if courts and officials are de facto part of a system of informal relations, and a legitimate decision is against the interests of that system, an appeal to the judiciary will have no effect. the aggrieved party will therefore be inclined to seek a solution within the system of informal relations. despite the low effectiveness of formal institutions in the context of institutional divergence, they remain an effective tool for overcoming the divergence itself. it should be noted that institutional divergence in a state is always relative. if divergence were absolute, i.e., all citizens followed informal rules, such rules would eventually be formalised and the society would move to a state of absolute institutional convergence. this implies that in any divergent society there is a significant layer of citizens who rely on formal institutions. these are usually ordinary workers, farmers, retired people and housewives who, because of the isolation of their sphere of activity, have little contact with the system of informal relations. there is also a proportion of citizens who use informal rules because formal institutions are ineffective. this means that formal institutions are more in line with their interests than informal ones, but they choose effective informal ways to solve their problems. all these people therefore represent a potential force for counteracting institutional divergence. since in a divergent society there is always an influential stratum of citizens who tolerate formal institutions, it is obvious that this force will be used by those with a claim to power (even if they are a key link in the system of informal relations). they will declare their commitment to formal institutions and appeal to them as effective tools for overcoming social and economic problems. in such circumstances, when a significant part of society demands institutional convergence, rejecting formal institutions entails risks and losses. the exposure of informal activities by interest groups (e.g. those seeking power) creates risks for those who will be held accountable. the extent of this risk depends on the activity and awareness of the impartial part of society, under whose pressure judges and officials (if they are involved in the system of informal relations) will not dare to sabotage the implemen tation of formal rules. such risks will encourage offenders to take measures to conceal their illegal activities, which will require additional resources. it follows that, in the context of institutional divergence, all those involved in the informal system of relations incur additional costs that would not have been incurred in the case of convergence. additional costs are not always an argument for actors to refuse to participate in the system of informal relations, as the benefits of participating in such a system may significantly outweigh the costs. it follows that the condition for actors to refuse to use informal institutions is that the costs of concealing illegal activities outweigh the benefits of engaging in the system of informal relations. 5. recommendations for increasing the level of institutional convergence as noted above, the cost of concealing illegal activities depends on the degree of risk of exposure, which in turn depends on the activity and awareness of society. the activity of society is an endogenous factor that depends on general attitudes and internal motives. it cannot be achieved by institutional measures alone. however, it is possible to create favourable conditions. in particular, by raising public awareness of the real situation in the country. in the context of solving the above problem, it is necessary to pay attention to the peculiarities of information dissemination within the system. the main principle of information dissemination is as follows: observation – transmission, or observation – analysis – conclusion – transmission (if necessary). in the first case, the result of the above sequence of actions is first-level information, characterised by a limited content of the phenomenon. second level information (the second case) is more meaningful, but more susceptible to subjective perception. depending on the structure of the organisation (the state should also be seen as an organisation), actors use one or another principle of information dissemination. existing communication systems determine the cost of information transmission, which, together with motives, determines the degree of information dissemination in society. in other words, if an actor has a certain interest in disseminating information that he/she knows, and if it costs him/her little effort or money to do so, he/she is likely to disseminate it to interested parties. however, low communication costs and limited incentives to disseminate information may not be sufficient to make information available to the general public. the cost of obtaining information is important. in the case of first-level information, the cost of acquisition is determined by the direct or indirect costs associated with monitoring the information source (time, technical equipment, hired staff, etc.). in the case of second-level information, the cost of analysis is added (own mental effort, baltic journal of economic studies 135 vol. 9 no. 2, 2023 expert work, computer equipment, etc.). therefore, the degree of diffusion can be expressed as the ratio of the sum of the costs and benefits caused by the transfer of information to each subsequent person. in other words, information will be disseminated as long as the benefits of its transmission to each subsequent person exceed the costs of its acquisition and dissemination. at the same time, it should be noted that the cost of obtaining information extrapolated to each individual decreases with the number of people to whom the information is disseminated. this means that, unlike the transmission factor, the cost of acquiring information does not depend on the number of people who possess it, and therefore, when comparing costs and benefits individually, the cost of disseminating information will decrease with the number of people to whom the information is disseminated. assuming that the amount spent on acquiring information is a constant value, the degree of its dissemination is mainly determined by the marginal cost of information transmission. over time, these costs have decreased due to the development of information communication systems. for example, from the very beginning, information about certain events was passed on verbally. later, they started using mail, telegraph, telephone and finally moved to digital information transfer. it should be noted, however, that at least in ukraine, the potential of digital technologies is not fully exploited, although there has been some progress in this regard, such as the diia application. digital technologies make it possible to reduce the marginal cost of information transfer to zero (gupta, 2019). the only issue here is to create and promote digital platforms that bring together information producers and recipients. today, local examples of such platforms are yelp – a website for the dissemination and search of information on the quality of services in the local market (restaurants, hairdressers, etc.); booking is an online hotel booking system that offers a wide range of possibilities for disseminating and searching for information on the quality of accommodation; google maps is a set of applications for mapping services with an integrated function for decentralised description of social facilities; and others. however, such platforms have a limited number of users, partly due to the subjectivity of both the platforms and the consumers. that is, consumers of information understand that firstly, the private owner of the platform has his own agenda and may therefore distort information to some extent to suit one's own interests, and secondly, information producers may also be biased or simply have no incentive to report events objectively. in view of the above, it can be concluded that in order to attract as many active users as possible to digital platforms, two key conditions should be ensured: firstly, trust in the information contained on the platform; secondly, benefits from the dissemination and receipt of information. in the first case, the state can act as an a priori source of trust (although, as previously demonstrated, not unconditional trust). that is, the platform should be created by the state, which will create in the minds of many potential users the idea that there is no mercenary purpose for such a step. trust in the information, coupled with the appropriate context of use, should contribute to the growth of the benefits that users derive from both the dissemination and consumption of information. consequently, it is advisable to create a nationwide digital platform where residents of the country can share information about events and the situation on the ground. the platform should be structured in such a way that users have access to interconnected information according to the following scheme: state – region – community – organisation. for example, at the organisational level, users will share information about the situation in the companies or institutions where they work. if necessary, they can submit complaints or suggestions to local, regional or national authorities. any complaint or suggestion should be followed up with an official report. under such conditions, the likelihood of malpractice being exposed will increase, as will the cost of concealing it. at the same time, visualising the results of citizens' participation in public life at the individual level will create an idea of the collective importance of the public, which will help to increase its activity. the rising costs of concealing malpractice due to increased public activism and awareness will reduce the usefulness of using informal institutions. at the same time, additional costs will not be able to completely eliminate the risk of exposure, and therefore it can be expected that a significant number of people involved in the system of informal relations will abandon this system in favour of formal "rules of the game". such actions will characterise the shift of society towards institutional convergence. 6. conclusions the study proves the expediency of implementing measures in ukraine aimed at increasing the level of institutional convergence, especially in terms of stopping the activities of informal institutions that grant illegal privileges to individual citizens in exchange for material rewards. in other words, it is necessary to eliminate informal institutions baltic journal of economic studies 136 vol. 9 no. 2, 2023 that enable corruption. this can be done by raising citizens' awareness of events and processes taking place in businesses, the community and the state. to this end, communication channels between the state, businesses and society should be digitised using digital platforms such as the diia app. the digitalisation of communication channels will make it easier for citizens to control the actions of politicians, civil servants, administrators, managers, entrepreneurs, etc. this type of control will have a positive impact on the effectiveness of the application of the law and the protection of rights to physical property (re and ppr indices). easier access to information for citizens will increase the costs of concealing wrongdoing by those using informal institutions. in this respect, informal rules and regulations will become an unattractive alternative to formal institutions, contributing to institutional convergence. references: alchian, a. (1950). uncertainty, evolution, and economic theory. journal of political economy, vol. 58, pp. 211–218. arrow,k. (1974). the limits of organization. new york: w. w. norton. gupta, s. (2019). digital strategy. a guide to rethinking business. kyiv: km-bооks. iancu, a. (2009). institutional convergence. doi: http://dx.doi.org/10.2139/ssrn.2528514 kaufmann, d., kraay, a., & mastruzzi, m. (2010). the worldwide governance indicators: methodology and analytical issues. world bank policy research working paper, 5430: 31. keefer, p., & knack, s. (1997). why don’t poor countries catch up? a cross-national test of an institutional explanation. economic inquiry, vol. 35, pp. 590–602. knack, s. (1996). institutions and the convergence hypothesis: the cross-national evidence. public choice, vol. 87, pp. 207–228. koziuk, v. v. (2016). institutional compensators for openness and fiscal expansion in central and eastern europe. journal of european economy, vol. 1 (15), pp. 3–34. property rights alliance (2022). about the property rights alliance. retrieved february 22, 2023, from https://www.internationalpropertyrightsindex.org/about savoia, a., & sen, k. (2012). do we see convergence in institutions? a crosscountry analysis, development economics and public policy working paper series, vol. 33, pp. 1–30. schönfelder, n., & wagner, h. (2019). institutional convergence in europe. economics, vol. 13, pp. 1–23. serdiuk, o. (2022). marking the level of institutional compliance in ukraine and ukrainian industry. economic herald of the donbas, vol. 2 (68), pp. 4–20. world justice project (2022). index: factors. retrieved february 22, 2023, from https://worldjusticeproject.org/ rule-of-law-index/factors/2021 world justice project (2022). what is the rule of law? retrieved february 22, 2023, from https://worldjusticeproject.org/about-us/overview/what-rule-law worldwide governance indicators (2022). wgi data sources. retrieved february 22, 2023, from https://info.worldbank.org/governance/wgi/home/documents#wgidatasources received on: 10th of march, 2023 accepted on: 25th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 19 vol. 3, no. 5, 2017 doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-19-24 modelling the economic security of regional external trade flows tatiana bludova1, natalia savchuk2 kyiv national economic university named after vadym hetman, ukraine abstract. subject of research: assessment and management of economic security of regional foreign trade flows of regions of ukraine. methodology: during the research, statistical analysis and analytical analysis (in the study of the main aspects of the formation of foreign trade flows of the region) are used. mathematical modelling in economics (when creating a model of the two-dimensional normal distribution of regional foreign trade streams) and methods of analysis for risk assessment, conditioned by the formalization of the uncertainty of the operation of regional foreign trade operations are also used. the purpose of scientific research: mathematical modelling in economics in the management of economic security of export-import flows of regions of ukraine; analysis of the structure of regional foreign trade flows in ukraine and their respective risks; creation of the field of economic security of foreign trade flows of the region. the conclusion of the research: the study of limits and quantitative analysis of the risk of regional foreign trade flows in some regions of ukraine is reduced to the creation of the area of crossing the main splicing ellipses of two-dimensional normal laws of export-import flows of these regions. after that, it will be possible to make a comparative assessment of the competitiveness and economic security of the regions. the purpose of the article is to develop an economic-mathematical model of quantitative risk analysis and to find appropriate boundaries of foreign trade flows of the region, which allows setting the thresholds of regional exportimport operations for optimal management of the process of foreign trade flows of the region. the foreign trade flows of ivano-frankivsk, mykolaiv, and kherson regions of ukraine based on a two-dimensional normal distribution are modelled. areas of threshold values of indicators of foreign trade flows of regions from the point of view of economic risk are defined, which, in contrast to existing one-dimensional approaches, takes into account elements of the interconnection of foreign trade flows of the region. the methodical conditions for constructing split ellipses of foreign trade flows of the region for comparative estimation of the risk of competitiveness and economic security of the regions are developed. this will make possible to conduct a systematic analysis of the region’s economic development and to take measures both at the local level and at the state level in order to neutralize a number of threats to its economic security. key words: export-import flows, differential function, two-dimensional normal distribution law, ellipse scattering. jel classification: r580, c120 corresponding author: 1 department of higher mathematics, kyiv national economic university named after vadym hetman. e-mail: bltavl@ukr.net 2 department of international finance, kyiv national economic university named after vadym hetman. е-mail: nvsavchuk@ukr.net 1. introduction it is known that the economic security of foreign trade operations of the region is related to the volumes of exports and imports, domestic prices, changes in the rates of national currencies, interest rates, aggregate demand and gdp, employment levels, and generally affects the macroeconomic equilibrium. at the same time, taking into account the complexity of the process of export-import operations in the region, the issues of mathematical modelling in economics of the risk of foreign trade flows of the region are not sufficiently studied, which play a significant role in the problem of regional economic recovery and management of the socio-economic development of the region. therefore, the problems of studying models and methods of mathematical modelling in economics of economic security of foreign trade flows of the region have become a priority. thus, the modelling of economic risk in the system of predictive-analytical calculations and improving the methods of managing regional risks is an important scientific task. the close relationship between the elements of the foreign trade sphere and the economy of the country, in general, determine the need for effective state policy aimed at optimizing all processes and eliminating disproportions between the levels of socio-economic development of the regions. taking this into account, baltic journal of economic studies 20 vol. 3, no. 5, 2017 the issue of establishing a system of indicators for regional export-import operations and their thresholds is relevant. 2. literature review expansion of exports plays a significant role in the development of foreign trade in ukraine. i.g. kurochkina (2015) believes that ukrainian producers need effective functional tools to stimulate exports – an increase in its physical and cost volume. according to the official website of the state statistics committee of ukraine (2015, 2016, 2017), we emphasize that in 2016, the surplus of the foreign trade balance amounted to 337.3 million dollars. according to the data, the volume of exports of goods and services in ukraine in 2016 amounted to 44.885 billion dollars, and import – 44.548 billion dollars. compared to 2015, exports shrank by 4.1% and imports increased by 3.7%. the foreign trade balance surplus amounted to 337.3 million dollars. in 2015, the surplus was 3.828 billion dollars. in january-november 2016, the import of goods exceeded exports by 2.324 billion dollars. the data are given without taking into account the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and a part of the area of the anti-terrorist operation. according to the official website of the state statistics committee of ukraine (2015, 2016, 2017), over 9 months of 2017 the export of goods amounted to $31327.2 million, imports – $35199.2 million. compared to 9 months of 2016, exports grew by 21.1% (by $5,454.5 million), import – by 27.3% ($7555.9 million). the negative balance was 3872.0 million dollars (9  months of 2016 were also negative – 1770.6 million dollars). foreign trade operations were conducted with partners from 219 countries of the world. it should be noted that, in the face of falling domestic purchasing power, exports are one of the most important factors of economic growth. l. dedyaev (2014) formulates the strategic goal of forming the commodity structure of ukraine’s exports taking into account high-tech products. m. kryvoruchko (2015) believes that the indicators of export and import flows of minerals in the regions of ukraine are not correlated with each other. t. melnyk, k. pugachevska (2015) investigated the import dependence and export slope of the industry of the regions of ukraine, which determines the consequences of exceeding the volume of imports over domestic production. v.v. oskolsky (2014) determines the reason for the low efficiency of the ukrainian export of the regions according to finger-kreinin index. v.g. andriychuk v.g., ivanov e.i. (2014) assesses the export-import flows of the regions after the signing of the association agreement with the eu when the conditions of foreign trade with european trading partners for ukraine have improved. lall, s.v., koo, j. and chakravorty, s. (2003) claim (using india as an example) that regions with less specialization and more diversified exports tend to experience higher rates of economic growth. lapshin v. i., kuznychenko v. m., ovcharenko yu. s. (2014) analysed indicators that characterize the state of export and import flows in the regions of ukraine in 2014 compared to 2013. marianne matthee and wim naudé (2008) estimated a cubic-spline density function for the herfindahl-index measure of export diversity. they found out that export diversity declines as the distance from an export hub increases. o. bilorus and o. havryliuk (2015) propose to intensify the search for internal reserves to increase the competitiveness of domestic products and diversify our country’s export position in the global economic space. this will provide the increase of volumes of external trade. 3. finding a differential function of a normally distributed two-dimensional random variable of export-import flows in the ivano-frankivsk region we shall use the following legend: grp – gross regional product; exr – total volume of export of the region; imr – total volume of export of the country. export regional dependency ratio l ex grp r exs r= . the coefficient of import regional dependence l im grp r ims r= . in general, the threshold values of the indicators are defined in the economic literature, as lrexs > 0 5, and lrims > 0 5, . figure 1 shows the value of coefficients lrexs , l r ims for those regions, for which the values of these coefficients belong to the interval (0,25;0,5) in 2016. 0,27 0,4 0,42 0,43 0,45 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,5 fig. 1. the value of the coefficient of regional dependence from export 0 25 0 5, ,< <lrexs in 2016 by the regions of ukraine source: built by the authors on http://www.ukrstat.gov.ua baltic journal of economic studies 21 vol. 3, no. 5, 2017 figure 2 shows the value of coefficients lrims for the regions, in which the values of these coefficients belong to the interval (0,25;0,5) in 2016. 0,26 0,26 0,31 0,34 0,36 0,4 0,41 0,43 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45 0,5 fig. 2. the value of the coefficient of regional dependence from import 0 25 0 5, ,< <lrims in 2016 by regions of ukraine source: built by the authors on http://www.ukrstat.gov.ua we will select the ivano-frankivsk region, which is represented in fig. 1 and fig. 2. the export-import flows for this region are characterized as follows: l l l l r exs r ims r exs r ims = = =0 4 0 34 1 17. , . , . . (1) although the export coverage coefficient is in the range of threshold values ( l l r exs r ims >1), the coefficient of regional dependence from import and the coefficient of regional dependence from export do not reach their threshold values by 20% and 32%. for the analysis of export-import flows of ivano-frankivsk region, we consider the system of two independent compatible random variables x (export) and y (import), which are statistically characterized by one-dimensional normal distribution laws – export regional flows (fig. 3a): n m x x( . , . ), ( ) . , .0 4 0 9 0 4 0 9= =σ ; (2) regional flows of import (fig. 3b): n m y y( . , . ), ( ) . , .0 34 0 92 0 34 0 92= =σ . (3) their correlation coefficient rxy = 0 . 2 4 6 8 10 0.1 0.2 0.3 0.4 2 4 6 8 10 0.1 0.2 0.3 0.4 a) 2 4 6 8 10 0.1 0.2 0.3 0.4 2 4 6 8 10 0.1 0.2 0.3 0.4 b) fig. 3. one-dimensional normal distribution laws – export regional flows (a) and imported regional flows (b) the differential function f (x, y) of a normally distributed two-dimensional random variable (x, y) of the export-import flows of ivano-frankivsk region for the period of 2014–2016 is as follows: f x y e x y ( , ) . . . . .= − −( ) − −( ) 1 3 352 0 4 1 62 0 34 1 6924 2 2 π (4) in space, the differential function (4) of the normal distribution (1) is represented by the surface (fig. 4). fig. 4 the surface of the two-dimensional probability density of export-import operations in the ivano-frankivsk region 4. determination of the area of permissible risk of export-import flows we find the equation of the main scattering ellipse if the confidence probability of a random variable (x , y) falling into the ellipse is 0.95. the equation of the principal ellipse of scattering has the following form: x y −( ) + −( ) = 4 4 3 5 9915 2 2 , (5) the plurality of points of the ellipse will be called the area of permissible risk of export-import flows in the ivano-frankivsk region. we determine the area of permissible risk of export-import flows of the region in such form: d x y x y= < < < <{ }( , ) | . . , . .0 4 0 6 0 4 0 6 . baltic journal of economic studies 22 vol. 3, no. 5, 2017 we find the probability of getting a normally distributed random variable (x, y) into the area of permissible risk. we calculate: p x y d( , ) . . . . . . . ∈( ) = −      − −            − φ φ φ 0 6 0 4 0 9 0 4 0 4 0 9 0 6 0.. . . . . ( ( . ) ( ))( ( 34 0 92 0 4 0 34 0 92 0 2 0       − −            = = − φ φ φ φ 00 28 0 06 0 07926 0 11026 0 02392 0 0068. ) ( . )) , ( , , ) ,− = − =φ p x y d( , ) . . . . . . . ∈( ) = −      − −            − φ φ φ 0 6 0 4 0 9 0 4 0 4 0 9 0 6 0.. . . . . ( ( . ) ( ))( ( 34 0 92 0 4 0 34 0 92 0 2 0       − −            = = − φ φ φ φ 00 28 0 06 0 07926 0 11026 0 02392 0 0068. ) ( . )) , ( , , ) ,− = − =φ p x y d( , ) . . . . . . . ∈( ) = −      − −            − φ φ φ 0 6 0 4 0 9 0 4 0 4 0 9 0 6 0.. . . . . ( ( . ) ( ))( ( 34 0 92 0 4 0 34 0 92 0 2 0       − −            = = − φ φ φ φ 00 28 0 06 0 07926 0 11026 0 02392 0 0068. ) ( . )) , ( , , ) ,− = − =φp x y d( , ) . . . . . . . ∈( ) = −      − −            − φ φ φ 0 6 0 4 0 9 0 4 0 4 0 9 0 6 0.. . . . . ( ( . ) ( ))( ( 34 0 92 0 4 0 34 0 92 0 2 0       − −            = = − φ φ φ φ 00 28 0 06 0 07926 0 11026 0 02392 0 0068. ) ( . )) , ( , , ) ,− = − =φ thus, for the random variables x and y, the exportimport flows of the ivano-frankivsk region, distributed according to one-dimensional normal laws, respectively, nx( . , . )0 4 0 9 , ny( . , . )0 34 0 92 , with a given confidence probability of 0.95, an area of admissible risk was found in the form of the principal split ellipse of the two-dimensional random variable (x, y) of the exportimport flows of the ivano-frankivsk region in the form of formula (5). the probability of a normally distributed random variable (x, y) in the permissible risk region is found. as a result of the calculations, it is established that in 2016 the calculated indicators for the ivano-frankivsk region are not within the thresholds, therefore, the foreign trade activity of these regions needs to be adjusted. 5. two-dimensional normal laws of distribution of export-import flows of the mykolaiv and kherson regions we have a sample of the general population (x; y) for the mykolaiv and kherson regions for 2014, 2015, 2016, and 2017. tables 1-2 present the numerical characteristics of the one-dimensional normal distribution of export (table 1) and import flows (table 2). the coefficient of correlation of export-import flows rxy for mykolaiv region is rxy = 0 9817, and for kherson region is rxy = 0 9811, . this indicates the connection between two random variables, which is close to the linear one. thus, the quantities are dependent and compatible. fig. 5 (a) shows a graph of the differential function of export flows for the mykolaiv region: à õ= =0 4958 0 1150, ; , ;σ (6) fig. 5 (b) shows a graph of the differential function of import flows for the mykolaiv region: b y= =0 6177 0 1343, ; ,σ ; (7) 0.2 0.4 0.6 0.8 1.0 1.2 0.5 1.0 1.5 2.0 2.5 3.0 3.5 0.2 0.4 0.6 0.8 1.0 1.2 0.5 1.0 1.5 2.0 2.5 3.0 а) 0.2 0.4 0.6 0.8 1.0 1.2 0.5 1.0 1.5 2.0 2.5 3.0 3.5 0.2 0.4 0.6 0.8 1.0 1.2 0.5 1.0 1.5 2.0 2.5 3.0 b) fig. 5. differential functions of export (a) and import (b) streams of mykolaiv region table 1 numerical characteristics of one-dimensional normal distributions of export flows of the regions region pearson criteria terms one dimensional normal distribution of export regional flows law asymmetry excess mykolaiv 9 0549 14 1, .< nexp( , ; , )0 4958 0 1150 0 3827, −0 4897, kherson 2 4158 14 1, .< nexp( , ; , )0 1994 0 0374 −0 0513, −0 6092, source: calculated by the authors table 2 numerical characteristics of one-dimensional normal distributions of import flows of the regions region pearson criteria terms one dimensional normal distribution of export regional flows law asymmetry excess mykolaiv 9 4833 14 1, .< nimp( , ; , )0 6177 0 1343 0 5058, −0 3002, kherson 9 1391 14 1, .< nimp( , ; , )0 2682 0 0523 0 0728, 0 5192, source: calculated by the authors baltic journal of economic studies 23 vol. 3, no. 5, 2017 similarly, in fig. 6 graphs of the differential function of export and import flows of the kherson region are constructed with values: à x= =0 1994 0 0374, ; ,σ ; b y= =0 2682 0 0523, ; ,σ 1.0 0.5 0.5 1.0 1.5 0.2 0.4 0.6 0.8 1.0 1.5 1.0 0.5 0.5 1.0 1.5 2.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 a) 1.0 0.5 0.5 1.0 1.5 0.2 0.4 0.6 0.8 1.0 1.5 1.0 0.5 0.5 1.0 1.5 2.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 b) fig. 6. graph of the differential function of import (a) and export (b) streams of the kherson region fig. 7 shows two-dimensional surfaces of the normal distribution, constructed according to formulas (6) and (7), respectively, of export-import flows of mykolaiv region (fig. 3 (a)): f x y e x x y ( , ) , , ( , ) , , ( , ) = − − − − − 171 85 13 8 0 4958 0 0132 127 1262 0 4958 2 π 00 6177 0 6177 0 018 2 , , , ( )+ −( )        y (8) export-import flows of kherson region (b): f x y e x x y ( , ) , , , , , ( = − −( ) − −( ) −1250 13 3 0 1994 0 0014 1003 1595 0 1994 2 π 00 2682 0 2682 0 0027 2 , ) ( , ) , + −        y (9) 6. findings for the diffusion ellipses of export-import flows of mykolaiv and kherson regions, we obtain the following equations: ( , ) , , ( , ) , ,x x y y− − − −( ) + −( )0 4958 0 0132 127 1262 0 4958 0 6177 0 61772 2 00 018 0 22359 , , ,= (10) x x y y−( ) − −( ) − + − 0 1994 0 0014 1003 1595 0 1994 0 2682 0 2682 2 , , , , ( , ) ( , )22 0 0027 0 23956 , ,= (11) figure 8 shows the diffusion ellipses of export-import flows for the mykolaiv (a) and kherson (b) regions constructed according to formulas (10) and (11) respectively. 0.2 0.4 0.6 0.8 1.0 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.10 0.15 0.20 0.25 0.30 a) 0.2 0.4 0.6 0.8 1.0 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.10 0.15 0.20 0.25 0.30 b) fig. 8. ellipses of scattering of export-import streams of the mykolaiv (a) and kherson (b) regions a) b) fig. 7. two-dimensional surfaces of the normal distribution of export-import flows of mykolaiv (a) and kherson (b) regions baltic journal of economic studies 24 vol. 3, no. 5, 2017 the crossing of the areas depicted in fig. 8 is shown in fig. 9. fig. 9. the crossing of the main splicing ellipses of exportimport flows of the mykolaiv and kherson regions the area depicted in figure 9 can be considered as a common area of permissible risk of regional foreign trade flows in the mykolaiv and kherson regions. consequently, the study of limits and quantitative analysis of the risk of regional foreign trade operations is reduced to the construction of the area of the crossing of the main splicing ellipses of two-dimensional normal laws of export-import operations. 7. conclusions thus, by constructing diffuse ellipses for regions of different types of development, which will be the areas of the threshold values of these indicators, it will be possible to carry out a comparative assessment of the competitiveness and economic security of the regions. this will allow conducting a systematic analysis of the region’s economic development and taking measures both at the local level and at the state level in order to neutralize a number of threats to its economic security. for other regions of ukraine, one can find the probability of a two-dimensional random variable reaching the main diffusion ellipse, which can be taken as an estimate of the permissible risk of their foreign trade operations. references: andriychuk, v. g., ivanov, e. i. (2014). vplyv uhody pro asotsiatsiyu mizh ukrayinoyu ta yes na mytne-taryfne rehulyuvannya i zovnishnotorhovelnyy rezhym storin [influence of association agreement between ukraine and eu on customs tariff regulation and foreign trade regime of the parties]. foreign trade: economics, finance, law, vol. 3, no. 74, pp. 4-15. bilorus, o. h., havryliuk o. v. (2015). stratehichni imperatyvy adaptatsiyi ta transformatsiyi zovnishnotorhovelnoyi diyalnosti ukrayiny v umovakh yevropeyskoyi intehratsiyi [strategic imperatives of adaptation and transformation of ukraine’s foreign trade activity in the conditions of european integration]. economy of ukraine, no. 11, pp. 4-15. dedyaeva l. m (2014). osoblyvosti formuvannya struktury eksportu ukrayiny [features of the structure of export structure of ukraine]. foreign trade: economics, finance, law, vol. 1, no. 72, pp. 21-27. kryvoruchko m. yu. (2015). resursna oriyentovanist eksportu ta importu yak faktor sotsialno-ekonomichnoho rozvytku rehioniv ukrayiny [resource orientation of export and import as a factor of socio-economic development of regions of ukraine]. business inform, no. 9, pp. 112-122. kurochkina i.g. (2015) analiz tendentsiy rozvytku svitovoyi torhivli tovaramy ta posluhamy [analysis of trends in the development of world trade in goods and services]. business inform, no. 9, pp. 37-42. lapshin v. i., kuznychenko v. m., ovcharenko yu. s. (2015) stan zovnishnoyi torhivli v rehionakh ukrayiny [the state of foreign trade in the regions of ukraine]. foreign trade: economics, finance, law, no. 2, pp. 255-267. lall, s.v., koo, j. and chakravorty, s. (2003) diversity matters: the economic geography of industry location in india. the world bank. (the world bank policy research working paper series no. 3072). retrieved from: https:// papers.ssrn.com/sol3/papers.cfm?abstract_id=2952868 marianne matthee and wim naudé. (2008) export diversity and regional growth in a developing country context: empirical evidence. retrieved from: http://web.unitn.it/files/download/19156/wp162008mattheeandnaude.pdf melnyk, t., pugachevska, k. (2015). perspektyvy importozamishchennya v ukrayini [prospects for import substitution in ukraine]. bulletin of the kiev national trade and economics university, vol. 2, no. 100, pp. 16-33. oskolsky, v. v. (2014). klasteryzatsiya – vahomyy faktor pidvyshchennya konkurentospromozhnosti ekonomiky ukrayiny [clusterization is a significant factor in increasing the competitiveness of ukraine’s economy]. ukraine economy, no. 11, pp. 38-56. ofitsiynyy sayt derzhavnoho komitetu statystyky ukrayiny (2015, 2016, 2017). [official site of the state statistics committee of ukraine (2015, 2016, 2017)] retrieved from: http://www.ukrstat.gov.ua. baltic journal of economic studies 139 vol. 4, no. 1, 2018 corresponding author: 1 department of general theoretical jurisprudence, national university “odessa law academy”. е-mail: naukavvd@gmail.com 2 centre for the preparation of masters of public service and professional judges. е-mail: knwittman@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-139-147 public administration of economic development in the context of the institutional theory valentina dudchenko1 national university “odessa law academy”, ukraine konstantin vitman2 centre for the preparation of masters of public service and professional judges, ukraine abstract. one of the priorities of socio-economic reform in ukraine is the modernization of the structure of the national economy and its growth. an effective structure of the economy, which will correspond to a socially oriented model of economic growth and will be based on the use of both the country’s competitive advantages in the global division of labour and the economic benefits of cooperation, will guarantee the independence of any country and will be the key to its dynamic development. the development of economic theory is due to the emergence of fundamentally new ideas, sustainable accumulation of knowledge, intellectual and meaningful updating of established concepts and theories, the formation of new scientific schools. a new paradigm of economic theory should explain the real processes in real economies, which operate on the principles of complex systems of synergistic nature and the theory of nonlinear dynamics. there is a process of theoretical polystructuredness both of mainstream and heterodoxy. an important task is to form an interdisciplinary dialogue between economists and scientists, which stipulates the relevance of the research topic. the subject of the study is the theoretical and methodological foundations and approaches to state management of economic development in the context of the institutional theory. the purpose of the study is to determine the role and influence of public administration of the development of the economy in the context of institutional theory and to develop strategic goals of the state’s innovation policy. methodology. directions of correlation of the system of economic development of the country and the potential of the state development with the historical preconditions for the emergence and development of the institutional doctrine of economic theory are investigated. based on the revealed interrelations, the necessity of using instruments of institutionalism for studying the economic development system is substantiated. the state, in all available ways, should encourage economic actors to develop and implement innovations, thereby creating favourable conditions for innovative and technological development of production, saturation of the domestic market with highly competitive goods and services, which, in turn, will strengthen export potential, fill the budgets of all levels, increase incomes of business entities, reduce unemployment and improve working conditions, increase social security of the population, and also strengthen the positive image of public administration and local self-government bodies. that is, the socio-economic development of the country depends directly on the innovation-technological potential and on the efficiency of public administration in its development at all levels of the economy. conclusions. the author generalizes the theoretical and methodological foundations of the country’s development in the context of the institutional theory: the system of economic development of the state has a set of direct and indirect links with the historical background of the emergence and development of an institutional doctrine of economic theory; the revealed directions of correlation contribute to the formation of a scientific and methodological basis for further study of economic development and economic potential of a country (state) in the context of the institutional doctrine of economic theory in its relation to the public administration theory; the economic development of a country (state) depends on the institutional environment, in which it operates, and is both an object of its influence and a subject that determines its transformation. the author investigates the theoretical principles of state regulation of innovative and technological development of the country’s economy. the existing strategies and programs of innovative development and innovation activity in ukraine are explored. the state of innovation and technology of the national economy and the potential of key sectors of the economy in terms of innovative development are analysed. key words: institutional doctrine, public administration, stimulation mechanism, innovative and technological development, state regulation, innovation strategy. jel classification: h76, h83, h72, o31 baltic journal of economic studies 140 vol. 4, no. 1, 2018 1. introduction issues of institutional architectonics have developed within the limits of modern scientific thought and have become the object of attention in most scientific studies, the content of which is associated with social dynamics and its management issues. the theoretical basis for the development of ideas of institutionalism can be considered works of t. veblen, w. hamilton, a. hobson, j. commons, and w. mitchell, which laid the foundation for the formation of a modern institutional paradigm. the emergence of institutionalism is associated with the failure of the idea of economic liberalism and general equilibrium (harmony of interests and non-interference of the state in economic life) to effectively solve the problems of the cyclical economic development of the economy (economic and social instability). traditionally, the main provisions of the institutional doctrine are used mainly within the limits of economic theory, which, of course, is quite a logical direction for scientific inquiry. at the same time, institutionalism as a direction of economic thought is used not only to “study the totality of socio-economic factors (institutions) in time but also to introduce social control over the economy” (andriuschenko, 2009). such a competence of institutionalism creates prerequisites for considering the possibility of using its toolkit in other scientific fields. for example, the issue of social control of a society in one form or another can be considered as one of the number of variants of manifestation of the subject of the scientific field of “public administration”, namely, due to the interrelation of this category with the problem of “assessing social, economic, political, cultural, environmental consequences” of state-management activity (bazylevych, leonenko, hrazhevska [ta in.], 2005). in addition, among the most important aspects of public administration, from a methodological point of view, along with others, “institutional (a set of institutions, state bodies, organizations involved in the implementation of management activities)” aspect is also distinguished (kniazev, 2010), which creates preconditions for using the theoretical and methodological basis of institutionalism to find effective ways to use resources in order to achieve sustainable economic development of the state (pokryshka, zhalilo, liapin [ta in.], 2010). in today’s conditions of development of the world economy, the economic role of the state depends on the level of participation in ensuring the conditions for the effective sustainable functioning of the national economy, which is based on the creation and use of innovative science-intensive products. therefore, to create development conditions, the state forms goals and principles of its policy and its own priorities (martynyuk, 2014). the purpose of the study is to determine the role and influence of public administration in the development of the economy in the context of institutional theory and to develop strategic goals of the state’s innovation policy. 2. methodology recently, the attention of domestic and foreign scientific thought to the problems of institutionalism has increased, which has led to the formation of separate scientific groups, centres of institutional research, specialized departments, etc. for example, at the institute for economics and forecasting of the national academy of sciences of ukraine, around the topic “institutional architectonics and dynamics of economic transformations”, a group of scientists led by a. hritsenko was formed, whose studies led to a new direction in scientific research within institutionalism. these researches are connected with the development of such an institutional model of social relations, the essence of which is natural in relation to the basic system of value orientations of citizens and their cultural and mental peculiarities of development. among the powerful scientific schools in russia, the issues of which include certain aspects of the institutional doctrine, it is necessary to highlight the volgograd scientific school of evolutionary and regional economics, headed by its founder o. v. inshakov, a team of scientists of the institute of economics of the russian academy of sciences, centred within the scientific direction “institutes of modern economics and innovative development” led by a. e. gordetskyi, a group of researchers from the institute for institutional studies at the national research university – higher school of economics, led by ya. i. kuzmin, and so on. among the scholars, whose scientific interests included institutionalism issues, are v.  v.  volchik, d.  p.  gavra, v.  v.  dementieva, v.  v.  dementiev, s.  g.  kirdina, o.  v.  kochetkova, p.  m.  nureiev, v. l. tambovtsev, v. m. tarasevych. despite the strong dynamics of the development of institutional doctrine, there are many promising areas of research, the general classification of which can be given by the main branches of socio-economic knowledge: economics, politology, sociology, public administration, law, etc. each of these areas has its own range of scientific competence within the scope of institutionalism, the framework of which is not stable and such that unambiguously determines the subject of scientific issues. for example, within the framework of public administration science, institutionalism problems were reflected in works of v.  h.  bodrov, n.  v.  kovalenko, a.  f.  kolodii, v.  v.  korzhenko, a.  o.  kuznetsov, e.  m.  kuchmenko, o.  ya.  lazor, v.  yu.  streltsov, and many others. given the multifaceted manifestation of the connections of public administration with the issues of institutional theory, one should pay attention to the existence of a plurality of possible areas of scientific research, each of baltic journal of economic studies 141 vol. 4, no. 1, 2018 which is unique and deserves the attention of scholars. to the issues of the state regulation of innovation activity at the national level, the works of the following domestic scientists are devoted: o.  amosha, v.  heiets, o. datsii, t. zhuravlova, l. lebedieva, o. melnychenko, p.  sabluk, and others. however, considering the research results of these authors on the management of the innovation process and the identification of innovation potential, it should be noted that they do not adequately cover state measures aimed at achieving the strategic goals of innovative development of the national economy. 3. the main text to explain our study of economic development from the standpoint of the theory of institutionalism, we consider it necessary to present the main factors that have led to the formation of these ideas in a separate direction of scientific thought. according to the team of authors led by professor v. d. bazylevych, the historical preconditions for the emergence of institutionalism were linked with: 1) monopolization and corporatization of the economy (transformational shifts in the market system); 2) instability of the market system; 3)  aggravation of the problem of employment; 4) increased influence of social organizations; 5)  emergence of the need for public control over the market mechanism; 6) aggravation of social contradictions; 7) a gradual loss of the position of the neoclassical doctrine of the self-sufficiency of a competitive market (bazylevych, leonenko, hrazhevska [ta in.], 2005). it is clear that these issues in one form or another have their own manifestation in the modern practice of the functioning of the socio-economic system of society. in our opinion, the above factors can be attributed to the determinants of influence on the process of economic development of the state and its innovative potential. the first direction. monopolization of the market of goods and services leads not only to the destruction of market principles of the functioning of the economic system but also to the distortion of the motivation mechanism of the development of business entities: 1)  monopolization at the first stage of its development leads to the destruction of the market pricing mechanism, the basis of which is the task of solving the problem of maximizing profits (for example, unjustified from an economic point of view, lowering the price of goods or services (dumping pricing) is aimed at the elimination of competitors); 2) the system of remuneration within the monopoly has a fundamental difference from the system of remuneration in a competitive environment (the monopolist, without having to compete for consumers’ preferences, may set wages at a level that is significantly different from the economically justified one. these features of manifestation of the influence of a monopoly on economic development cause its deformation. such a deformation is manifested through: excess supply of labour; distortion of the mechanism of pricing, including the cost of labour. in addition, the indirect effects of monopoly influence include: under-utilization of the productive potential of society, lowering the pace of the country’s socio-economic development; reduction of wages of employees as a result of increased competition in the labour market; increasing tax burden on the employed as a result of the necessary social compensation and support for the unemployed; increase in society’s expenditures on retraining unemployed people; exacerbation of the crime situation and the growth of crime; increasing social tension and political instability (zajchuk, 2006). in order to demonstrate the extent of possible losses of society (state) only from cyclical unemployment, the indirect source of which may be the process of monopolizing the markets for goods and services, one should mention the dependence that exists between the gdp of the state and cyclical unemployment. the mathematical model of this dependence was substantiated by a. okun, who proved that the excess of unemployment by 1% of the minimum sustainable level causes the lagging of the actual gdp volume from the potential by 2.5% (okun, 1981). the second direction. market system instability determines the lack of clear development prospects both for the socio-economic system as a whole and its components. the comparatively low probability of transformation of the social system according to the elaborated forecasts (development scenarios) leaves a set of options for developing existent potentials. target development direction of the economy of the country remains uncertain (given the impossibility to determine). one should pay attention to the fact that instability of functioning of the market subsystem of society considerably affects the political stability that, in its turn, is one of the conditions for the development of potentials of a personality (society). aggravation of political contradictions in social life diverts a large share of resources to solving conflicts and regulating economic relations (vejmer, 1998). the third direction. increasing influence of social organization under certain conditions can influence the economic development of society. for example, one of the methods of activities of labour union organizations is a strike, which depending on its duration can affect the skill level and professional qualities of employees. in this context, one should turn attention to the indirect influence of strikes conducted by trade unions. an illustrative example of such a multiplier is mass protests in greece in 2010–2011 against tough anti-crisis measures of the national government. according to estimates of economists from the european commission’s expert group, greece’s state budget in 2011 has received over 60 billion euros in taxes only, accounting for about 28% baltic journal of economic studies 142 vol. 4, no. 1, 2018 of the country’s gdp. one should pay attention to the fact that in countries with a low level of development of civil society, often the governing elite applies the practice of using the workers of certain enterprises (whose leadership is dependent on the authorities) to conduct political actions in support of a certain idea (afoncev, 2012). the fourth direction. solving the issue of social supervision over the market mechanism (public goods, externalities, natural monopolies, and information asymmetry (zajchuk, 2006) is possible through the state mechanism that, in correcting traditional market failures, exacerbates the problems associated with the power failure (direct democracy, representative power, bureaucratic provision, decentralization). in this context, the system of economic development is under the influence of externalities, which are determined both by market failures and power failures of governance. determination of directions of correlation for each of them with the social development system requires a separate research, thus we consider it possible only to give some generalizations (osypova, vodnik, klimova [ta in], 2003). market failures are traditionally associated with the imperfectness of a competitive model. by this model, participants of market exchange, on the one hand, strive for maximizing utility and, on the other, for maximizing income; moreover, it concerns both to a potential consumer of goods and services and to their producer. an ideal model of such a correlation is pareto optimal state (impossibility to improve economic status without worsening another one). in this context, a man as a carrier of labour potential is both a producer and a consumer of goods (services) and, accordingly, should achieve the efficiency by pareto, first of all, within his own personality. this is about, first of all, the correlation between public and private, spiritual and material, social and individual in the process of formation, development, and use of labour potential. for example, to satisfy each level of personal needs, an individual should use the relevant share of own labour opportunities, i.e. carry out a peculiar exchange of the result of the realization of the opportunities to a state of rest as a result of needs’ satisfaction. in terms of ideal state (pareto efficiency), each part of labour potential of an individual should be consistent with the hypothetically usable good (bazylevych, leonenko, hrazhevska, 2005). at the same time, the practice of functioning of market mechanisms testifies the existence of a certain limit both in the use of work opportunities of an individual (the existence of a potential, physiologically available for use) and in the correlation between the potential used and the resulting good. a result of this imbalance can be a condition, at which a person’s own labour potential unit, which is additionally used by a person, does not provide satisfaction for the corresponding share of needs. the process of maximizing utility and income sets a conditional limit, at which a person agrees to use the available labour opportunities and a business agrees to compensate (in the form of wages and employment benefits) lost opportunities for the person. there is no doubt that in such conditions, the establishment of pareto efficiency is impossible, and the process of approaching its status becomes possible only with the participation of society through the use of the state mechanism. power failures also have an impact on the process of forming, using, and developing labour potential. there is a situation, in which state power, by increasing the position of a person in the labour market (in the context of finding balances of interest between labour and capital), creates additional burdens on the person himself. for example, each society produces and distributes goods through a combination of individual and collective choices. the majority of individual choices, expressed by participation in markets and other voluntary exchanges, “promote such social values as economic efficiency and freedom. however, some individual choices that appear in situations that we qualify as market failures are departed from public values in predictable ways. the collective choice made by the bodies of government creates at least the opportunity to correct the conscious mistakes of an individual choice. an individual choice is sometimes unable to promote social values in a desirable and predictable way …” (vejmer, 1998). in addition, the establishment of necessary for the functioning of the socio-economic system as a whole bureaucratic procedure by the state creates additional obstacles, to overcome which people are forced to spend their own labour opportunities (for example, the execution of procedures related to the issuance of permits, certificates, reports, etc.). by the way, in the rating of tax systems paying taxes 2010, prepared by the world bank together with price waterhouse coopers, ukraine took the 181st place out of 183  countries under study. according to the research results, the average ukrainian enterprise pays for the year 147 taxes and payments, which is the worst indicator in the world (183rd place). as a comparison: in poland, the number of payments equals to 40, czech republic – 12, belarus – 107, georgia – 18, the usa – 10, france – 7, china  – 7. most taxes and payments (96) in ukraine are associated with labour taxation (pokryshka, zhalilo, liapin, 2010). execution of obligatory tax procedures, such as tax accounting, preparation and submission of reports, payment of taxes, etc., take 736 business hours (175th place) from entrepreneurs annually. as a comparison: in poland, similar costs are 395 hours, czech republic  – 613, georgia  – 387, the usa  – 187, france – 132, china – 504, belarus – 900. given the fact that only 3-5% of the total population have a bent for entrepreneurial activity, the use of their abilities outside the main activity becomes an unacceptable loss for society (reva, 2015). baltic journal of economic studies 143 vol. 4, no. 1, 2018 the fifth direction. a gradual loss of the position of the neoclassical doctrine of the self-sufficiency of a competitive market left a set of unresolved issues. ideology of market mechanism perfection and selfsufficiency of spontaneous market regulation (the basis of neoclassical direction of the economic theory) has appeared incapable of “studying dual economy characterized by a high level of concentration of production and capital along with predominant small and medium business sector” (kniazev, 2010; bazylevych, leonenko, hrazhevska [ta in.], 2005). the difference in views and value orientations of representatives of enterprises, different by the scale of production, and different opportunities of their influence on authorities determined a dislocation of balance in the business environment. new market disproportions (supremacy of the will of representatives of large capital) along with the aggravation of social contradictions create a real threat to the system of labour potential. for example, given the limited organizational resources, organizational structures of small and medium business have considerably fewer opportunities to support their competitiveness. this relates both to the labour productivity itself within the activities of entities of small and medium entrepreneurship (sme) and the system of administration of organizational activity. the situation occurs, at which representatives of sme, when not withstand administrative and tax burdens, are forced to reorganize their own organizational structures and sometimes terminate the business activity. given the fact that 60.5% of workplaces in the country account for the very organizational structure of sme that realize 54.4% of the total production (petrashevska, zhadanova, 2012), the issue of their transformation can considerably affect the supply-and-demand situation in the labour market. 4. result under the influence of global principal socioeconomic shifts in terms of formation of world information economy, the discussions on issues of the modern economic theory regarding its ability to explain, analyse, and suggest ways to develop a real market economy, became actual. an idea of consensus breaking in the economic theory, which was based on an orthodox keynes’s economic model, is being discussed in the western literature since the 70s of the xx century. at the beginning of the 90s of xx century, an american researcher m. bleaney said that the crisis of economic theory was caused not by its real content but the perception in society, normalization of the situation in the economy restored the reputation of economists and also their self-assurance (datsij, 2010). the foreign and domestic literature emphasizes that the evolution of economic theory has always been under the influence of various shifts of the real world economy. this is a dialectical process of mutual dependence and influence that contributes to the accumulation and formation of new theoretical knowledge. however, the modern economic reality is so multi-variant and movable that the rate of change is ahead of the pace of its study. in the message of the president of ukraine to the verkhovna rada of ukraine “european choice” it was proclaimed that “stimulation of scientific and technological development, implementation of structural and innovation strategy should become one of the main goals of the government, the verkhovna rada, executive and representative bodies in the field,” as well as that “the state can become the direct leader of innovative development, the customer and the organizer of research and development in the most modern areas of scientific and technological advance” (kontseptsiia naukovo-tekhnichnoho ta innovatsijnoho rozvytku ukrainy, 2016; amosha, 2005). at the national level, not only the priority of the innovative development of the national economy but also the place of the state in this process is determined. therefore, nowadays, innovative and technological development is becoming not only a strategic perspective but also a tactic of state economic policy. that is, the socio-economic development of the country depends directly on the innovativetechnological potential and on the effectiveness of the state’s stimulation of its development at all levels of the national economy. the state regulates the process of innovative development through the purposeful influence of the subject of public administration, which represents state power in the form of specially formed bodies and their systems, on the object of management, as a result of which the needs of the state and society in the innovation development are met. the spheres of state activity are directly transformed into the spheres of public administration, such as the development and implementation of state strategies, domestic and foreign policy, legal definition and regulation of relations throughout the society, the formation and implementation of the state budget, etc. (martynyuk, 2014). depending on the scope of managerial measures that are applied at various stages of state regulation, in the economic theory, the following groups of governmentmanagement decisions are distinguished (melnychenko, 2011; bakumenko, 2012): political government-management decisions. they are implemented in the form of doctrines, concepts, strategies, state programs and projects, the state budget, the formation and reform of the system of state power, state programs and state policy in various spheres of management and public life; legal state-management decisions. public administration is carried out through the constitution, laws, international agreements and treaties, decrees of the president, resolutions of the parliament and baltic journal of economic studies 144 vol. 4, no. 1, 2018 government, bylaws, orders of heads of central executive bodies, state and industry standards, etc.; organizational or administrative governmentmanagement decisions. a form of implementation  – provisions on central government bodies, orders, directions, minutes of meetings, instructions, and other organizational-subordinate and organizationalcoordination decisions, as well as measures of higher and central bodies of state power. if we analyse government-management decisions in more detail, taking into account the specifics of innovation-technological development, administrative measures (other than legal regulation) used by the state to manage this sphere of economy, l. lebedeva (lebedeva, 2016) distinguishes the following methods of state regulation of innovation processes, and direct methods among them: state target programs that provide funding for innovation in the priority sectors of the economy, which is determined by the state; administrative regulation, which provides direct subsidy financing provided in accordance with the current legislation; contract financing  – a system of contracts between customers and contractors, where the state acts as a customer and consumer of research and development, and executors – business entities. among the measures of indirect influence, the author considers those aimed at stimulating innovation processes and creating a favourable environment for innovation, which is, first and foremost, legal standards that outline the legal framework for active innovation activities and the protection of their intellectual property and information infrastructure. however, in our opinion, comprehensive state leadership in the results-oriented innovation field should include direct public-management measures: budget financing; targeted state programs; resource support; creation of service infrastructure; government orders (r&d contracts); creation of scientific and technical zones with a special regime of innovation and investment activity. measures of indirect influence should include: tax regulation; subsidy assistance; creation of a legal base aimed at protecting intellectual property rights (copyright); creation of social infrastructure; international cooperation; preferential lending; insurance of investments, etc. all these measures of public administration are carried out in accordance with the directions specified in the main statutory and legislative documents. first of all, the concept of scientific and technological and innovative development of ukraine, approved by the verkhovna rada of ukraine resolution in july 1999, determines the priority directions of state support for innovative and technological development (amosha, 2005; kontseptsiia naukovo-tekhnichnoho ta innovatsijnoho rozvytku ukrainy, 2016). they include: in the field of scientific development: the fundamental science, first of all, developments of domestic scientific groups that have world-wide recognition; applied research and technologies, in which ukraine has substantial scientific, technological, and production potential and which can ensure the output of domestic products to the world market; higher education, training of scientific and academic personnel on the priority directions of scientific and technological development; development of scientific principles for the development of a socially oriented market economy; scientific provision of the solution to issues of human health and environmental security; system of informational and logistical support of scientific activity; in the field of technological development: research and creation of conditions for highly productive work and modern life of a person; the development of means for the preservation and protection of human health, the provision of population with medical equipment, drugs, means of prevention and treatment; development of resource and energy-saving technologies; development of modern technologies and equipment for power industry, processing industries, in particular, agroindustrial complex, light and food industry; in the field of production: the formation of high-tech manufacturing processes, promotion of creation and functioning of innovative structures; the creation of competitive processing facilities; technical and technological updating of basic branches of the economy; the introduction of highly profitable innovation and investment projects, the realization of which can provide the fastest return and launch progressive changes in the structure of production and its development trends. at the same time, in 2009, the state developed the strategy of ukraine’s innovative development for the years of 2015–2025 in terms of globalization challenges that identifies a number of key areas of activity of public authorities on innovation issues (androschuk, zhyliaiev, chyzhevskyj, shevchenko, 2015): 1. provision of financial resources for the implementation of provisions of laws related to innovation and scientific and technological activities, including at the expense of the state budget of ukraine for 2015 and subsequent years. 2. improvement of the structure of public administration in the field of scientific and technical and innovation activities in the direction of clear delimitation and avoidance of duplication of functions of central executive authorities, the introduction of principles of individual responsibility and stability of the system of public administration in this area. 3. improving the efficiency and expanding the use of state support tools for innovation through mechanisms: provision of grants; direct investment; provision of financial guarantees; stimulating the participation of commercial banks in investing in innovation; provision baltic journal of economic studies 145 vol. 4, no. 1, 2018 of non-financial services and other types of nonfinancial support; state order for the development of the most important latest technologies in the priority directions of development of science and technology; development of the material and technical base of scientific and scientific-technical activities; insurance of objects of intellectual property rights, comprehensive protection of a fair producer from counterfeit products, anti-competitive actions through a system of economic, legal, organizational measures related to the system of management of industrial property (androschuk, zhyliaiev, chyzhevskyj, shevchenko, 2015). 4. working out the issue of tax incentives for business entities that: use a part of their profits to finance costs associated with scientific research and scientific and technical developments; direct their own funds for advanced training and retraining of scientific personnel; provide sponsorship to scientific establishments and higher educational institutions for scientific and scientific-technological activities. 5. the use of measures to determine the possibilities of state support and prospects for organizing production of competitive innovative products of the sixth technological mode (nano-, bio-, informationtelecommunication, and cals-technologies) in the territory of ukraine in the following directions: microelectronics; vehicles with hybrid engines; highly efficient agricultural production; computerized medical service; alternative energy sources and energy-saving technologies; intelligent mobile robotics. 6. promoting the development of information and analytical support for innovative development through: development of the system of state statistical observation in the field of scientific and technical and innovation activity, based on the indicators and standards used in the eu and oecd; development of the system of scientific-technical and patent-license information with the maximum use of possibilities of the internet; improvement of the system of evaluation of scientific works of the fundamental direction. 7. implementation of measures for the development of innovation infrastructure in ukraine: innovative business incubators, innovative development centres, technology transfer centres, and other organizational forms of infrastructure support for innovation, combining science, production, and business, including through state support. 8. carrying out: modernization of higher education, expansion of autonomy of higher educational institutions in educational, scientific, financial and economic activity; optimization of the network of higher educational institutions; creation of enlarged regional universities, transforming them into powerful scientific and technical, educational and scientificinnovation centres; changes in approaches to the formation of a state order for the training of specialists with higher education, including the training of highly skilled personnel on innovation issues (management, marketing, technology transfer, finance, commercialization); creation of a unified scientific and teaching-methodical mechanism of personnel training for the innovation sphere; state support to young people, who undergo training and probation in leading foreign universities and research centres on innovation activities; improvement of educational and scientific infrastructure and the system of fundamental and applied scientific research in higher educational establishments, implementation of scientific results in the educational process; comprehensive support of scientific and scientific-technical activities concerning further development of science in leading higher educational institutions, updating their material and technical base, in particular, by providing modern highvalue equipment, developing the structure of innovation activity and technology transfer for the implementation of scientific and technical developments (androschuk, zhyliaiev, chyzhevskyj, 2015). according to the strategy for the development of high-tech industries by 2025, developed by the ministry of economic development and trade of ukraine in may 2016, there are strategic directions for the modernization of high-tech industries that would contribute to the formation of an innovative economy, increase in technological efficiency, growth of competitiveness, and increase in the efficiency of existing national production: preservation and support for intellectual capital; provision of financial support for innovation, research and development of high technology; introduction of effective institutional mechanisms for the development of high-tech industries; creation of modern information and communication infrastructure; increase of exports of high-tech products and services; stimulation of the development of the latest futureoriented and advanced technologies; reduction of import dependence of the domestic hightech sector; providing a supportive regulatory environment and an independent regulator with appropriate powers; creation of economic incentives for the digitization of production. in addition, the strategy outlines the main 10 key and perspective sectors and areas of the economy that should become high-tech: the agrarian sector; military-industrial complex; creation of new substances, materials, and nanotechnologies; information and communication technologies; power engineering; hightech construction; development of human sciences, biomedical engineering, cellular medicine, pharmacy; development of transit infrastructure; tourism, recreation, and other directions. in general, the main areas of public administration declared in different periods are partly repeating and baltic journal of economic studies 146 vol. 4, no. 1, 2018 complementing one another. despite the fact that for ukraine the transformation of the raw material economy into the modern intellectual one is highly relevant, in recent years, there has been no significant progress in the field of the creation and introduction of high technologies in national production. describing the main economic indicators of national production according to technological modes (fig. 1), it can be stated that in 2016 almost 58% and 38% of total production of ukrainian products accounted for branches of respectively the 3rd and 4th technological modes, in particular, ferrous and nonferrous metallurgy, power engineering, universal and precision engineering and instruments industry, electronic engineering industry, inorganic and organic chemistry, polymers, motor transportation, coal and oil consumption, petroleum refining, etc. (yerokhin, 2006; dani derzhavnoi sluzhby statystyky ukrainy, 2016). as for capital investments in equipment retrofitting and modernization and investments, their extremely large share (83% and 75%, respectively) falls on these modes. this proves their outdatedness and the need for constant updating and repair. in addition, a significant part of the funds allocated for innovation and scientific development also falls on the 4th technological mode (correspondingly 60.8% and 69.8% respectively) but further development of the medium-tech sector will not contribute to the growth of the global competitiveness of the country. to this end, it is necessary to develop sectors of the 5th and 6th modes. unfortunately, the output of enterprises of the 5th and 6th technological modes accounts for an extremely small share  – only 4% and 0.1%. also, not much money is invested in scientific and technological and innovative development: the 5th mode  – 23% in the total amount of financing of r&d and 8.6% in the amount of expenses for innovation; the 6th mode  – 0.2% in both directions. however, this situation leads to an even more lagging economy of the state and its individual sectors or enterprises from the leaders of the world economy, who are already starting to introduce elements of the 7th technological mode based on cognitive technologies (data of the state statistics service of ukraine, 2014-2016). 5. conclusions in accordance with the foregoing, one can formulate the following main conclusions: 1. generalization of the theoretical direction of the development of institutional theory: the system of economic development of society (state) has a plurality of direct and indirect links with the historical background of the emergence and development of the institutional doctrine of economic theory; the revealed directions of correlation contribute to the formation of the scientific and methodological basis for further study of economic development and economic potential of a country (state) in the context of the institutional doctrine of economic theory in its relation to the theory of public administration; the economic development of a country (state) depends on the institutional environment, in which it operates, and is both an object of its influence and a subject that causes its transformation; the revealed relationships allow formulating assumptions about the possibility (necessity) of using tools of institutionalism to study economic development and formation of the economic potential of society (state) within the theory of public administration. in general, it can be stated that while the economy of ukraine is not developing in an innovative and 57,90 7,00 31,00 83,00 75,00 38,00 69,80 60,80 10,00 20,00 4,00 23,00 8,60 6,30 4,60 0% 20% 40% 60% 80% 100% production volume r&d financing the cost of innovation capital investment for technical reequipment and modernization investments 3rd 4th 5th 6th fig. 1. tentative distribution of economic indicators depending on technological modes in 2016 source: calculated by the author (data of the state statistics service of ukraine, 2014-2016) baltic journal of economic studies 147 vol. 4, no. 1, 2018 technological way, and the state is trying to develop industries, which are deliberately outdated in terms of technological progress while ignoring high-tech advanced fields of production. in this regard, the state strategy and tactics of development should include support for innovation, aimed at activating the creation and use of the latest high technologies, products, modernization of production processes, management and implementation of advanced innovative 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(2006). teoriia derzhavy i prava. akademichnyj kurs : pidruchnyk [theory of state and law. academic course: tutorial]. kiev: yurinkom inter. baltic journal of economic studies 157 vol. 3, no. 5, 2017 corresponding author: 1 department of finance, accounting and audit, national university of ostroh academy. e-mail: natalia.ivanchuk@oa.edu.ua 2 department of finance, accounting and audit, national university of ostroh academy. e-mail: julia.kharchuk@oa.edu.ua doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-157-161 administrative expenditures of social security funds in ukraine nataliia ivanchuk1, yulia kharchuk2 national university of ostroh academy, ukraine abstract. along with the expenditures for social protection, social security funds finance administrative direction, which should correspond to the amount of functions performed by a particular fund. the purpose of the paper is to determine ways to reduce administrative expenditures of state social security funds in the conditions of reforming ukrainian economy. for this purpose, the authors investigate distribution of the expenditures between social security funds, analyse dynamics and structure of assignments for fund administration, and suggest possible ways to rationalize maintenance cost for these institutions. methodology. administrative expenditures are an integral part of the cost of social security funds and include particular items of expenses in the budget of these institutions. applying a systematic approach to calculating the administrative costs of social security funds of ukraine the authors have taken into account the expenditures related to funding management, support for information systems, and organization of work with insured people. results of the survey showed that in 2007–2016 pension fund of ukraine incurred the largest part of social expenditures (more than 90%) compared with other social insurance funds (less than 10%). at the same time, the administrative expenses were divided approximately into two halves between pension fund and other social security funds. in 2015, the government launched a reform of social insurance funds that aimed to reduce funds to three institutions but a decrease in the total amount of administrative expenditures has not been achieved yet. in addition, pension fund of ukraine was least burdened with administrative expenses, while other social security funds with a relatively small share of social expenditures were burdened with administrative expenditures much more. practical implications. research showed that nowadays the existence of several social security funds in ukraine is economically inexpedient and it is essential to concentrate functions of social protection in one institution. in particular, it may be appropriate to keep pension fund, which should concentrate all current social functions of social security funds naming it single social fund of ukraine. value/originality. the assessment of administrative expenditures of social security funds in ukraine is a systematic survey that allows making a comprehensive analysis of expenditures for the maintenance of mentioned institutions compared with the volume of functions assigned to these establishments. key words: social security funds, administrative expenditures, merger of social security funds, pension fund of ukraine, disability insurance fund of ukraine, unemployment insurance fund of ukraine, accident insurance fund of ukraine, social security fund of ukraine. jel classification: h50, g23, j28, j65 1. introduction state social security funds are influential in ensuring social protection of the population in ukraine. under the conditions of modern economic reform, the financing of these institutions is an urgent issue. in general, the problem of the deficit is particularly relevant for pension fund, which increasingly burdens the state budget every year. in 2007, an excess of expenditures over own revenues of pension fund reached to 24.4 billion uah, while in 2016 this figure increased to 141.7 billion uah or more than five times. at the same time, in 2016, the deficit exceeded the amount of fund’s own income and was almost completely covered by the state budget financing. along with the expenditures for social functions, social security funds spend a certain amount of money on administrative direction, which should be expedient. administrative expenditures should correspond to the amount of functions performed by a particular fund. scientists have repeatedly investigated the issue of reforming social insurance funds in ukraine. results of recent studies in the context of administration baltic journal of economic studies 158 vol. 3, no. 5, 2017 suggest to ensure the effectiveness of management of social insurance funds (kovalevych, 2015; rozhko, 2013), to reduce the number of social insurance funds to two institutions – pension fund and social security fund (servatynska, 2016; berezina, 2015), unify the structure and competence distribution of social security fund management (koval, 2014). scientists also have noted that established social insurance fund does not function properly and the reform of the system of social insurance funds, which started in 2015, was not complete. (ivashchenko & maziarchuk, 2017). this proves the urgency of solving problems in the management of social security funds to achieve optimization of maintenance cost for these institutions. in this case, it is necessary to carry out a systematic survey that allows a comprehensive analysis of expenditures for the maintenance of mentioned institutions compared with the volume of functions assigned to these establishments. the purpose of the paper is to determine ways to reduce the administrative expenditures of state social security funds in the conditions of reforming ukrainian economy. therefore, it is necessary to perform such scientific tasks as investigating expenditures distribution between social security funds, analysing dynamics and structure of assignments for fund administration, and suggesting ways to rationalize the maintenance cost for these institutions. 2. survey methodology administrative expenditures are an integral part of the cost of social security funds and include particular items of expenses in the budget of these institutions. applying a systematic approach to calculating the administrative costs of social security funds of ukraine, the authors have taken into account expenditures related to funding management, support for information systems, and organization of work with insured people, in particular: 1. for pension fund of ukraine: – charges for cash services and a cash payment of pensions and benefits; – management of pension system; – compulsory state social insurance certificates and pension cards; – forms, registers for the appointment and payment of pensions; – creation of programmatic and technical support for the information and analytical system of pension fund of ukraine; – creation and introduction of the automated system for the accumulation fund of compulsory state pension insurance; – implementation of measures related to the targeted delivery of notifications about the simplified procedure for the provision of housing subsidies to families with pensioners; 2. for disability insurance fund of ukraine: – organizational and management activity; – duties of the insurer fulfilment; 3. for unemployment insurance fund of ukraine: – banking services; – support for the information-reference system of the unemployed; – maintenance of the executive directorate, its jurisdictions, state employment service training institute and fund management; – creation of conditions for the reception, provision of social services and development of the material base; 4. for accident insurance fund of ukraine: – measures to coordinate work with insured people; – performance of other work related to the coordination of insurance activity; – ensuring the work of the administrative board and supervisory board of the fund; – fund activity organization; – expenses for money transfer; – court costs and enforcement fee. 3. distribution of expenditures between funds pension fund of ukraine was established in 1990, accident insurance fund of ukraine and unemployment insurance fund of ukraine were created in 2000, and disability insurance fund of ukraine began its activity in 2001. in 2001–2010, economic entities paid four different types of social taxes from payroll, and each fund administered its social tax separately. from january 1, 2011, these social taxes were consolidated into a single social contribution and pension fund of ukraine started its administration. at the same time, the other three social funds continued to perform other functions remained. from october 1, table 1 structure of expenditures of social security funds in ukraine during 2007–2016 funds years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 share of pension fund expenditures, % 89.4 90.6 90.7 90.9 91.2 91.3 90.6 91.2 92.4 91.8 share of other social funds expenditures, % 10.6 9.4 9.3 9.1 8.8 8.7 9.4 8.8 7.6 8.2 source: the results were calculated on the basic of budget implementation reports of social security funds and of data from state statistics service of ukraine baltic journal of economic studies 159 vol. 3, no. 5, 2017 2013, the administration of single social contribution joined ministry of income and fees, and from may 21, 2014, state fiscal service of ukraine started to administer the mentioned contribution. during 2007–2016, total expenditures of social security funds increased from 111.8 billion uah to 276.1 billion uah (in 2.5 times) (table 1). as a social fund with the most difficult financial situation, pension fund of ukraine made the largest share of expenditures, compared with other social insurance funds. in general structure of expenditures of social funds, the share of pension fund in 2007 reached 89.4%, and in 2016 – 91.8%. at the same time, the share of other funds decreased from 10.6 to 8.2%. in 2015, the government launched a reform of social insurance funds that aimed to reduce administrative expenses to 600 million uah. in particular, social security fund of ukraine was created through the merger of accident insurance fund of ukraine and disability insurance fund of ukraine. however, today the activity of the newly established institution is still under construction. 4. administrative expenditures formation during observable period in unemployment insurance fund of ukraine, the main item of administrative expenditures was maintenance of the executive directorate, its jurisdictions, state employment service training institute and fund management (in 2007 the share of this item was 72%, and in 2016 it reached 91.3% of the administrative expenses of the fund). accident insurance fund of ukraine had a predominance of costs for fund activity organization (more than 90%). disability insurance fund of ukraine appropriated the largest share of administrative expenditures to the organizational and managerial direction (more than 90%). pension fund of ukraine spent the greatest amount of money on the management of pension system and creation of programmatic and technical support for the information and analytical system (97.2% in 2016 from the total value of fund administrative expenses). the survey of social funds administrative expenditures dynamics showed that, in ukraine, there was a tendency for their growth, in particular, in 2016 they increased by 2.1 billion uah or 77.8% in comparison with 2007 and reached 4.8 billion uah (table 2). as a criterion of administrative expenditures growth rate expediency, we have chosen the dynamics of real gdp. from provided data, it can be seen that the increase in administrative expenditures of social funds was often excessive because it outstripped the growth of real gdp. thus, we can estimate the dynamics of these expenditures positively only in 2011 and during 2014–2015. the structure of administrative expenditures of social security funds of ukraine shows that the mentioned expenses were divided approximately into two halves between pension fund and other social security funds (table 3). in 2007, the share of administrative expenditures of pension fund amounted to 49.4%, and in 2016 it reached 51.7%, while the share of other three funds decreased from 50.6% to 48.3%. this indicates a nonrational structure of administrative expenditures, because during 2007–2016 pension fund spent over 90% of the total expenditures of social security funds, while the other three funds financed less than 10%. table 2 dynamics of administrative expenditures of ukrainian social security funds and gdp during 2007–2016 indicators years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 nominal administrative expenditures of social funds, billion uah 2.7 4.0 3.8 4.6 4.8 4.9 5.2 4.6 4.7 4.8 growth rate of real expenditures of social funds, billion uah – 141.0 108.8 119.9 103.9 107.9 109.9 79.6 85.3 121.1 real gdp growth rate, % – 102.2 84.9 104.1 105.4 100.2 100 93.4 90.2 102.4 source: the results were calculated on the basic of budget implementation reports of social security funds and of data from state statistics service of ukraine table 3 structure of administrative expenditures of social security funds in ukraine during 2007–2016 indicators years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 share of pension fund administrative expenditures, % 49.4 49.3 51.7 47.1 46.9 50.4 49.6 50.1 51.3 51.7 share of other social funds administrative expenditures, % 50.6 50.7 48.3 52.9 53.1 49.6 50.4 49.9 48.7 48.3 source: the results were calculated on the basic of budget implementation reports of social security funds baltic journal of economic studies 160 vol. 3, no. 5, 2017 at the same time, the administrative expenses of pension fund reached 50% of all expenditures for the maintenance of social funds. this calls into question the expediency of several off-budget institutions that perform social protection functions in ukraine. in 2015, the merger of two institutions into social security fund of ukraine has been initiated and the intention was to reduce administrative expenditures by 600 million uah. however, according to the statistics (table 2), the decrease in the total amount of administrative expenditures has not been achieved yet and, on the contrary, they grew from 4.7 billion uah to 4.8 billion uah during 2015–2016. if to consider the structure of administrative expenditures in detail, it should be noted that the largest share belonged to unemployment insurance fund of ukraine – approximately 30%. the shares of disability insurance fund of ukraine and accident insurance fund of ukraine were within 10% in the structure of administrative expenditures. if to analyse the burden of social security funds with their administrative expenditures, it can be seen that the largest share of these expenditures belonged to unemployment insurance fund of ukraine (table 4). at the same time, in 2015 the reform of social security funds aimed to merger disability insurance fund of ukraine and accident insurance fund of ukraine, which had much smaller shares of administrative expenditures in their expenses. with the largest share of social spending, pension fund of ukraine was least burdened with administrative costs, while the other three social funds were much more burdened by administrative expenditures financing a relatively small share of social protection. 5. conclusions nowadays the existence of several social security funds in ukraine is economically inexpedient and it is essential to concentrate functions of social protection in one institution. liquidation of all social funds is a difficult task because it requires including a large number of additional items in the expenditure of state budget. that is why it may be appropriate to keep pension fund, which should concentrate all current social functions of social security funds naming it single social fund of ukraine. at the same time, it is necessary to ensure proper transfer of all payments into cashless forms through applying banking system. in addition, it may be essential to put the functions of abolished social funds on the administrative apparatus of pension fund because a significant part of its control function, related to administration of the single social contribution, was subsequently delegated to state fiscal service of ukraine. it is also advisable to entrust the management of single social fund only to state representatives because the state provides a social function mainly through the system of social security. at the same time, the cabinet of ministers of ukraine should appoint the entire composition of administrative and supervisory boards of single social fund after presenting it by the minister of social policy. the ministry of social policy of ukraine should keep control over the fund activity. we suggest including single social contribution and other proceeds of social security funds in state budget revenues as a tax source and also applying budget financing of single social fund. table 4 the share of administrative expenditures in expenses of social security funds in ukraine during 2007–2016 indicators years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 in expenses of disability insurance fund, % 5.0 6.3 5.5 5.1 5.6 5.4 5.7 5.2 7.1 6.5 in expenses of unemployment insurance fund, % 23.2 25.0 17.2 24.1 20.1 19.9 19.0 19.8 17.5 16.4 in expenses of accident insurance fund, % 9.6 10.6 9.8 8.6 10.4 8.7 7.3 6.5 6.2 6.6 in expenses of pension fund, % 1.9 1.9 1.9 1.8 1.6 1.6 1.6 1.4 1.4 2.3 source: the results were calculated on the basic of budget implementation reports of social security funds references: berezina, s. (2015). suchasni tendentsii v reformuvanni systemy sotsialnoho strakhuvannia ukrainy [modern trends in reforming of social insurance in ukraine]. bulletin of taras shevchenko national university of kyiv, economics, issue 3(168), p. 25–31. (in ukrainian) ivashchenko, a., maziarchuk, v. (2017). analiz stanu reformuvannia fondiv sotsialnoho strakhuvannya v ukraini [analysis of social security funds reform in ukraine]. kyiv, financial and economic analysis office in the vru, 20 p. (in ukrainian) koval, o. p. (2014). modernizaciya systemy sotsialnoho strakhuvannia v ukraini [modernization of the social security system in ukraine]. kyiv, the national institute for strategic studies, 38 p. (in ukrainian) baltic journal of economic studies 161 vol. 3, no. 5, 2017 kovalevych, d. a. (2015). reformuvannia systemy sotsialnoho strakhuvannia [social security reform]. cherkasy university bulletin: economics sciences, vol. 58, issue 2, p. 146-152. (in ukrainian) rozhko, o. (2013). shliakhy reformuvannia pozabiudzhetnykh tsilovykh fondiv sotsialnoho pryznachennia v ukraini [ways of reformation of off-budget special purpose funds of social setting in ukraine]. bulletin of taras shevchenko national university of kyiv, economics, issue 144, p. 41–44. (in ukrainian) servatynska, i. m. (2016). finansove zabezpechennia funktsionuvannia derzhavnykh fondiv sotsialnoho strakhuvannya [financial support for the functioning of state social insurance funds] (phd thesis), cherkasy state technological university. baltic journal of economic studies 319 vol. 4, no. 1, 2018 corresponding author: 1 department of comparative and european law, institute of international relations, kyiv national taras shevchenko university. e-mail: ksenya.smyrnova@gmail.com 2 department of international law, institute of international relations, kyiv national taras shevchenko university. e-mail: korynevych@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-319-327 the antitrust treatment of electricity market of ukraine: conundrum with the concept of collective dominance and eu experience kseniia smyrnova1, anton korynevych2 institute of international relations, kyiv national taras shevchenko university, ukraine abstract. the main purpose of the article is to provide comparison research of collective dominance doctrine and practice in the eu and the enforcement practice in ukraine. methodology. the paper focused on the compliance of amcu’s analysis of national electricity market in ukraine with the european law enforcement practice that arises from the international legal obligations of ukraine to use in its practice the eu competition rules according to article 18 of the treaty establishing the energy community and taking into account the criteria of interpretation in accordance with the eu case law. article 255 of the association agreement between ukraine and the eu that clearly provides the principle of transparency, non-discrimination, and neutrality in compliance with the procedures of the procedural justice and the right of defence also indicates a special actuality of the carried-out research in this field. the main practical impact of such research is to implement not only substantial norms of the eu competition law but its enforcement practice & to introduce it within the practice of amcu. value/originality. the paper examines a dominance doctrine, market power definition, economic strength, and collective dominance practice in the eu enforcement practice. a special attention was paid to enforcement practice in the electricity market. due to the fact that the investigation of ukrainian electricity market was provided for the first time in ukraine, there is no practice yet in this issue. this causes the necessity of wide comparative approach in the principles of collective dominance in the electricity market in ukraine. results. the paper finds that the amcu’s approach to electricity market regulation in ukraine confirms the necessity to reform the system of the governmental regulation in the wholesale electricity market and in the market of services for electricity transmission, necessity for the change of the system for tariff and pricing policy formation on the part of the national energy and utilities regulatory commission of ukraine and the ministry of energy and coal-mining industry of ukraine for developing the competition in electricity market and the need to follow the approaches and criteria of the eu competition law with regard to determination of the dominance in the market, which is stipulated by the international legal obligations of ukraine arising from articles 18 and 94 of the treaty establishing the energy community and art. 255 of the eu-ukraine association agreement. key words: competition; collective dominance; eu; ukraine; anti-monopoly committee of ukraine; wholesale electricity market. jel classification: k21, k23 1. introduction current wholesale electricity market of ukraine is, first of all, a unified, well-ordered centralized system of relationships between undertakings on the purchase and sale of electricity. the main legal and organisational principles regulating the general conditions of current wholesale electricity market of ukraine functioning are provided for in the constitution of ukraine, the law of ukraine “on electricity industry” (as amended), the judgment of constitutional court of ukraine dated february 12, 2002 № 3-рп/2002 (the electricity industry case), the regulatory acts of the president of ukraine, the cabinet of ministers of ukraine, the national energy and utilities regulatory commission of ukraine (hereinafter referred to as the neurc). the wholesale electricity market (wem), which is a well-ordered system for the electricity purchase and sale transactions, has already been functioning in ukraine for over fifteen years. at that, this market is under strict centralised governmental control and regulation. the governmental regulation of the energy market is carried out by the national energy and utilities regulatory commission baltic journal of economic studies 320 vol. 4, no. 1, 2018 of ukraine (neurc), basic responsibilities of which are: licensing and regulating the activities of natural monopoly companies; promotion of the development of competition in spheres of electricity and heat energy production and supply; adopting the pricing and tariff policy, protecting the consumer’s rights, implementing the electricity usage regulations. ukraine is a member of the energy community and has to fulfil the obligations concerning the implementation of the acquis, particularly in the electricity industry. in particular, art. 18 of the treaty establishing the energy community provides for the adherence of competition rules in this market (detailed in appendix iii and actually being a reproduction of the competition rules of the eu now contained in art. 101, 102, 106, and 107 tfeu. thus, the eu competition principles became the part of the ukrainian legislation, which is explicitly stipulated in the international treaty, which was agreed to by the verkhovna rada of ukraine by the ratification of the treaty establishing the energy community. the basis of legal regulation within the energy community for ukraine is the eu law, which should be implemented in the law of ukraine in accordance with the obligations under the international law stemming from obtaining full-fledged membership in the energy community since february 1, 2011. due to the eu exclusive competence of legal regulation of competition (art. 3 tfeu); national competition authorities and national courts have to coordinate their law enforcement practice and apply art. 101-109 of tfeu and regulation no. 1/2003 in a unified manner. however, not only the national legislation of the member states but also that of the countries launching a free-trade area with the eu must comply with the eu principles of competition (smyrnova, 2015). however, the standard practice of implementing the competition rules and unified rules of interpretation of the eu competition rules are inherent not only for the member states but also for the countries to have entered into association agreements with special provisions on competition within free-trade areas and as a part of the sectoral cooperation of the eu, in particular, the participant countries of the energy community. it is expressly emphasized by art. 94 of the treaty establishing the energy community. the eu-ukraine association agreement (aa) also provides for ensuring an effective competitive environment within the established free-trade area (art. 253-267) and reproduces the regulations of the eu law and contains provisions strictly referring to the regulations. so, eu common rules concerning the internal energy market apply to ukraine. at the same time, the association agreement determines the compliance between its provisions and the provisions of the treaty establishing energy community, giving priority to the rules of the latter in case of conflict between them. accordingly, the regulations of the association agreement cannot contravene the eu law, which is used in compliance with the provisions of this agreement. upon implementing the provisions of the association agreement regarding the cooperation of the parties in the energy industry, the parties assume the obligation to give a priority to the legal or other acts complying with the treaty establishing energy community and the effective eu law in this field. the compliance assessment should take into account all the decisions approved under the art. 91 of the treaty establishing energy community (art. 278 of the eu-ukraine aa). in this way, it should be mentioned that not only the legislative and law enforcement practice of european institutions but also the practice of the eu court should be implemented in the work of the national authorities of ukraine (smyrnova, 2014) since it is the court judgments where the unified law enforcement practice of the eu is reflected. furthermore, according to p. 3, art. 255 of the eu-ukraine association agreement, parties have taken obligations to use their competition law in a transparent, timely, and non-discriminatory manner. the transparency principle by nature reflects clarity, obviousness and comprehensibility without doubt or ambiguousness. there is no arguing that transparency is one of the fundamental principles of trade regulation (berezovska, 2015). furthermore, one of the fundamental principles of competition rules’ implementation is its nondiscriminatory manner with preserving the principle of procedural fairness and right of defence, which is also clearly stipulated in paragraph 3, article 255 of the association agreement. thus, it can be stated based on the above mentioned that the competition in the electricity market in ukraine should develop in observance of the eu competition law, which is provided for in art. 18 of the treaty establishing the energy community, and with the rules of interpretation being used, which comes from the eu judicial practice (that is, the case law). so, it seems necessary to determine the level of observance of the european law enforcement practice in the practice of the ukrainian competition authority and the observance of the international obligations to be committed to the principle of transparency, nondiscrimination, and procedural fairness provided for in art. 255 of the association agreement. the anti-monopoly committee of ukraine (amcu) on 24 december finished the special investigation of the market & on 1 june 2016 presented a report on the investigations provided during august-december 2015 into this sector of the economy (wholesale electricity market) that was the first in-depth analysis of this market (report). under this report, amcu baltic journal of economic studies 321 vol. 4, no. 1, 2018 stated on the dominant position of energorynok se as a sole purchaser and collective dominance of three undertakings on the basis of summing their shares. the main aim of the article is to analyse in a comparative manner the concepts of obstacles & criteria on assessment of relevant market, dominance and the concept of collective dominance in the eu. 2. market model and effects-based analysis and the concept of dominance in the eu, the market definition is important for all spheres of competition law (art. 101, as well as 102 of tfeu and the merger regulation application), but the approach to market definition differs depending on the behaviour type where the relevant market is to be defined (case t-62/98, volkswagen ag v. commission). the commission notice on relevant market (1997), as it was specified in the case amman & sohne, serves as a tool to increase the transparency of the activities of the eu commission and strengthen the consistency of its decision-making (case t-446/05 amman & sohne gmbh & co kg v commission). amcu inattentively analysed the relevant market and its report contains data concerning the electricity sold in the wem, data concerning the generating capacities of the wem and detailed data on the volume of the coal market. at the same time, there is no justification for the inclusion of the coal market into the analysis of nationwide electricity market. there are no key findings on generation, wholesale, firsttime sale (first level of supply) and retail. these data do not allow for determining the product boundaries of the nationwide electricity market. there are only ascertaining conclusions about the separation of the generation market, the wholesale electricity market, and the electricity transmission service market. the influence of the wholesale electricity market on the generation market and their mutual dependence are not studied, and no conclusions are given in this regard. at the same time, despite amcu states the existence of the retail market and the formation of final demand for electricity there, it has not provided the assessment of the influence of the retail market on the formation of volumes and prices on electricity as a product in the electricity generation and wholesale electricity markets. in the absence of a liberalised electricity market in ukraine and the peculiarities of price and tariff formation for this product type on a non-competitive basis, particularly due to the governmental regulation (fixation) by neurc of the tariff policy, the amcu should justify the product boundaries of the market more elaborately. moreover, we can stress that the definition of relevant product market cannot be based solely on econometric calculations. other elements, namely the physical characteristics of the product or the sphere of its application, have to be taken into account. the following factors are considered in the determination of the product market boundaries: the prices of products; the physical characteristics of products and services; the purpose of products and services; consumers’ preferences. in accordance with the eu practice, the commission uses economic instruments based on quantitative indicators to elaborate its analysis of determining the market boundaries. they include price correction analysis (case arsenal/dsp), critical analysis of loss (case ineos/kerling) and demand evaluation (cases unilever/sara lee, kraft/cadbury). the concept of the dominant position itself is not defined in the tfeu. the definition given by the eu court in the united brands case is constantly quoted in the majority of eu commission decisions and court judgments concerning the implementation of art. 102 of tfeu. the eu court has defined that it is “a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors and ultimately of its consumers” (case 27/76 united brands ). the definition of the dominant position according to the eu law was given by the eu court in the continental can case: undertaking holds the dominant position when it has a power to behave independently, which lets them act without regard on their competitors, customers, and sellers. it is situation when they, due to their market share or their market share together with ownership of technological knowledge, raw material resources or capital, have the power to set prices or control the production or distribution of a significant portion of the relevant product (case 6/72 europeembellage corp and continental can company inc. v. commission). later the eu court has confirmed and extended this definition in the hoffman – la roche case: “an undertaking, which has a very large market share and holds it for some time…, – is by virtue of that share in a position of strength, which makes it an unavoidable trading partner and which, already because of this secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position” (case 85/76 hoffmann-la roche & co. v. commission). the concept of dominance consists of three basic mutually related elements: (a) there must be a position of economic strength on a market which (b) enables the undertaking(s) in question to prevent effective competition being maintained on that market by (c) affording it the power to behave independently to an appreciable extent. firstly, dominance exists in relation to a market; it cannot exist in the abstract. it also implies that an undertaking either on its own or together with other baltic journal of economic studies 322 vol. 4, no. 1, 2018 undertakings must hold a leading position in that market compared to its rivals either independently or jointly with other enterprises. the second and third elements concern the link between the position of economic strength held by the undertaking concerned and the competitive process, i.e. the way in which the undertaking and other players act and interact on the market. both practice and doctrine prove that the size of the market share is not defined in the definition of dominance. this aspect differs significantly from the formalized legislative approach of art. 12 of the law of ukraine “on protection of economic competition”, where the analysis of the existence of market power is weakly defined narrowed to the right of undertakings to prove that they are subjected to competition. ability to act independently from one’s competitors, customers and consumers is the significant distinctive feature of this concept. besides, both the eu commission and eu court, while defining the dominant position, pay a special attention to how effectively the enterprise blocks the competitors entering the market, what is its market share, what is its economic potential and access to the market. accordingly, while studying the electricity market and the features of the dominant position, the amcu should have studied and justified the market power of undertakings, the undertakings’ opportunities to act independently from their competitors, consumers, suppliers, and customers, the opportunity of these undertakings to prevent effective competition and to establish and maintain prices above the competitive level. the fact of the dominant position in the market is proven by detecting the relative share of the monopolist by establishing the fact of existing monopolist’s contractual relations with potential competitors (rivals); a special system of relations with customers and suppliers not complying with the principles of fair competition in the relevant market. on determining the dominance in the market, the financial potential of a monopolist, the lack of competitors, the existence of potential dependence of third parties on the monopolist are taken into account. among other factors taken into account on the definition of the dominant position are the following: the proportion of shares of the enterprise and its closest competitors, the technological advantage of the enterprise over its competitors, the existence of a highly developed sales system and the lack of potential competitors. however, while studying all of these factors, their relation to the above elements of the dominant position must be considered (market power, competition prevention etc.); i.e. not only certain features or factors should be highlighted but also the examination whether they actually result in a market power of the undertaking must be carried out. procedurally, the abuse of dominant position examination is usually performed by the eu commission and then can be reviewed by the eu court. according to art. 102 of tfeu, one more issue has to be considered: if an enterprise occupies the dominant position, how significant is its market share? some part of the market may only be controlled in terms of supplies of a certain type of products or services. this is why it is important to determine the product market. as was established in the continental can case, the definition of the market is crucial for the assessment of dominant position, as “the relevant market is of essential significance, for the possibilities of competition can only be judged in relation to those characteristics of the products in question by virtue of which those products are particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable with other products” (case 6/72 europeembellage corp and continental can company inc. v. commission). that is extremely significant that the ecj has annulled the commission decision in this case due to the lack of arguments and evidence regarding the definition of the relevant market. the ecj also supports the approach according to which “... the separation of the market object allows for establishing the space within which certain competition conditions are functioning and a predictable dominant enterprise is operating” (case c-7/97 oscar bronner gmbh & cokg v mediaprint). unlike the ukrainian law, there are no certain mathematical criteria of dominance definition fixed in the eu. many criteria, on the basis of which the decision is made, are considered in each specific case. however, the market share of the monopolist has to be rather large, usually over 50% (sufrin, 2014; blanco, 2012; monti 2006). at the same time, according to the european practice, the existence of a large enterprise in the market does not mean that it occupies the dominant position at all. an enterprise gains the dominant position if it can act in the market of the specified product independently from its competitors. in other words, an enterprise occupies the dominant position if it has market power. the market share possessed by the enterprise serves as the first indicator for the consideration of the market dominance issue. if the enterprise possesses a relatively small market share, its position, naturally, cannot be dominant. in this regard, the commission establishes roughly that the size of the share under 40% is unlikely to be an indicator of market dominance (dg competition discussion paper on the application of article 82 of the treaty to exclusionary abuses, 2005). barriers to market accessing are another important factor that allows defining the existence of dominance. sorrowfully the amcu, on defining the barriers to market access, did not apply the existing experience of the european commission and the eu court regarding the definition and assessment of market barriers and their influence on competition and market power of market participants; in particular, the influence of baltic journal of economic studies 323 vol. 4, no. 1, 2018 electricity import on competition was not taken into account, and the existence of economic barriers for market entry and their influence on the market power were not justified economically. the existence of such barriers actually, factors leading to their appearance, the influence of these barriers on competition level in the market and the activity of the market participants, their leading to appearance or absence of market power were not analysed. while analysing the position of single customer (se energorynok) in the nationwide electricity market, legislative features of pricing by neurc with authority to control over the pricing in electricity market, and the authorities of the ministry of energy and coal-mining industry of ukraine (hereinafter referred to as ministry of energy and coal) and the restrictions containing in the law of ukraine regarding the freedom to act and independence in decision-making of se energorynok should be considered. under such legislative conditions, it is better to say that the monopsony of se energorynok in the electricity market is of a limited nature provided by the existing market model and the regulatory legal acts governing the relations in this market. in this way, the committee should not declare the monopoly of se energorynok based only on the fact that it occupies a 100% share of the market, and the functions and role of se energorynok not only as the “unified customer” but also as an element of the institutional monopoly of the state represented by the authorities defining the conditions of product turnover in this market should be studied. such an approach will comply with the main principles of defining the dominant position in the eu law, according to which the market share is not defined, and other factors defining the position of the undertaking in the market should be studied as well. 3. judicial interpretation of collective dominance concept in the eu the eu law theory and practice define the following three conditions, which give grounds to state the existence of collective dominance present: 1) each entity of collective dominance shall be able to obtain at low cost the information on the behaviour of other entities of collective dominance; 2) members of collective dominance shall have an influence on the undertaking, which: in case of any agreement between them – restricts competition, and in case of coordinated actions – deviates from the general policy at the given market; 3) the expected reaction of competitors, both existing and potential, shall not have any noticeable effect on expected results of coordinated actions (general policy of collective dominance of members in the target market). moreover, as further analysis of the eu judicial practice shows, the necessary conditions of collective dominance are also relations between the members of such dominance, joint policy on the price increase, etc., which allows them to act as a “single” economic unit in relations with customers. art. 102 of tfeu refers to the abuse of collective dominance condition by one or more undertakings. the eu court of justice (cases c-395/96 p and c-396/96 p of compagnie maritime belge transports, compagnie maritime belge and dafra-lines v. commission) established two stages necessary for collective dominance: establishing the fact of collective entity existence, and proving that the undertaking has a dominant position in the market. collective dominance can be performed by two or more undertakings that are legally independent of each other, provided that they are a collective undertaking from an economic point of view or act together as one in a particular market. it is necessary to establish economic relations or factors that may contribute to such relations. economic assessment and, in particular, evaluation of the relevant market structure is of significant importance. apparently, this judgment extended the concept of collective dominant position by taking into account potential opportunities that have not yet appeared quite clearly, however, it is another demonstration of a tendency to substitute formal legal criteria for an economic approach. therefore, this case has settled such necessary element of collective dominant position as legal and economic relations between the members of collective dominance confirming that these undertakings can act as a single “collective” undertaking, adopt a joint policy, and perform the collective market behaviour, particularly, in respect of prices. in case of collective dominance, the approach of the eu commission to the definition of interrelationships in the group, which was applied in the case of france v commission (cases c-68/94 and c-30/95), was also supported in subsequent cases, in particular, the case of gencor (case t-102/96), in which the eu court of justice has found that “the relationship of interdependence existing between the parties” creates potential coordination between them in sense of forming collective dominance. in case of airtours (case t-342/99), the eu court of justice established that the collective dominance exists, where each member of the collective dominant entity applies the conscious joint policy in the market on a long-term basis in order to sell without entering into any agreement or act jointly in the meaning provided for in art. 101 of tfeu. this test was applied by the commission and the eu court under conditions of high liberalisation of the market with established transparent competitive market conditions and under conditions of information exchange, as well as the inability of sellers and consumers to influence the market. all of the abovementioned cases reflect the behavioural approach of the eu commission on baltic journal of economic studies 324 vol. 4, no. 1, 2018 defining the collective dominance (petit, 2013; monti, 2001). the european competition law doctrine, which is the basis for positions of the eu commission and the eu court, states that structural analysis of the market is not sufficient for collective dominance analysis. a behavioural component, in this case, shall be the critical factor ( joilet, 1970). other scientists stated that the eu commission shall prove the fact of coordinated (parallel) behaviour of the participants while justifying the fact of collective dominance, otherwise, national competition authorities shall refrain from the collective dominance regime (mezzanotte, 2010). in cases of collective dominance, not only the amount of quantitative indicators of the corresponding market shares is calculated. market share is not the only or critical factor in the search for a dominant or collective dominant position (alison and sufrin, 2014). bright example is the judgment of the eu court in case of french republic and société commerciale des potasses et de l’azote (scpa) and entreprise minière et chimique (emc) v commission, where it was proved that the market shares of two independent enterprises in amount of approximately 60% cannot conclusively mean the existence of a collective dominant position (cases c-68/94 and c-30/95). in case of airtours (case t-342/99), the eu court developed a threelimbed structural test for determining collective market dominance. firstly, each firm knew how other members were behaving (they could monitor the market to see if they were adopting possible policy changes); secondly, there should be evidence of tacit coordination, which is stable and is observed for a long time (i.e., there was no incentive to depart from the common policy on the market); and thirdly, the foreseeable reactions of competitors (actual and potential), as well as consumers and clients would not jeopardise the results expected from the generally accepted policy. however, in its judgment in the case of impala (case t-464/04), the eu court not only confirmed the existence of these three criteria for identifying collective dominance but also clearly stated the need to attach evidence to these criteria and characteristics of the market. definition of such criteria is a result of considering collective dominance in previous cases. thus, in particular, in the case of taca (commission decision of 16 september 1998, iv/35/134) the commission analysed the relationship between enterprises in terms of their coordination of actions for the analysis of collective dominance. later in the same case, the eu court clearly stated that in order to prove collective dominance in the market, there must be proofs of the “factors of economic correlation between the enterprises” (cases t-191/98, t-212 – t-214/98 atlantic container line ab and others v commission). moreover, these criteria have been repeatedly used by the eu court in various cases for collective dominance. at the same time, the european practice also notes that such necessary element as coordination of actions of participants (collusive effect) within the collective dominance may take various forms, such as forms of direct coordination of a pricing policy. currently, in the energy domain, both european doctrine (scholz, purps, 2011) and european court practice are common in compliance with such criteria as the enterprises in this group shall be connected in such a way that they adopt the same behaviour in the market. the mentioned above confirm that the fact of collective dominance can be proved only on the basis of parallel cooperation. moreover, the european court took this position in one of its last judgments in case of laurent piau (case t 193/02). during the analysis of the doctrine and national laws of the eu member-states, it is also possible to assert that there is a synchronisation of approaches between the european court and national competitive agencies. consequently, the most widespread evidence of collective dominance is the evidence of the close parallel behaviour. however, while applying article 12 of the law of ukraine “on protection of economic competition,” the amcu ignored the legislation requirements that the dominance position of an undertaking in a market should be determined using the criteria applied to determine such dominance position under the eu law, in particular, in the practice of law enforcement and judicial practice in the eu. it is essential to note that the behavioural aspect of any collective dominance also appears from the analysis of provisions content of articles 1, 12 of the law of ukraine “on protection of economic competition” and of methodology provisions concerning the determination of the monopoly (dominating) position of undertakings. in particular, paragraph 5 of art. 12 of the law of ukraine “on protection of economic competition” is a special qualifying provision characterising such a situation on market when, in contrast to the individual dominance of a separate undertaking, the ability to determine or fundamentally influence the conditions of goods turnover in the market belongs to an undertaking not independently but jointly with other undertakings – in other words, to aggregate undertakings as a collective entity. provision of article 12 also indicates the fact that the aggregate part, namely formed jointly (but not cumulative, i.e. the part obtained arithmetically), of undertakings is a structure coefficient, on the basis of which any determination of dominating position shall be based. it means that exactly the taken together undertakings – so-called “an entity of collective dominance” – possess this market (monopoly) power and this power is present exactly thanks to their common (joint) behaviour. the object for analysis, in this case, is “entity of the collective dominance” and its market power as a collective entity that acts, versus other participants of the market and at that exactly due baltic journal of economic studies 325 vol. 4, no. 1, 2018 to such an integration a collective entity (i.e. thanks to the aggregated market power of all members of the collective entities that is demonstrated in a specified coordination and similarity, parallelism of competitive behaviour among them) has a possibility to obtain any uncompetitive advantages, determine conditions of goods turnover or block, limit the competition, in particular, increase the prices, which would be impossible individually for each separate undertaking that is a part of collective dominating entity. 4. conclusions according to european experts (chauve & others, 2009), the electric energy sector in whole is characterised by its uniformity (homogeneity) with a low elasticity of demand, which deprives the customers of usual instruments to regulate prices and supplies. in respect of the supply, it is also characterised by significant discrepancies between expenses for the implementation of different manufacturing technologies that are not reflected in the price formation of the supplier. during 2003–2004, the eu commission carried out the study of electricity market in the eu (according to the data of six member-states – germany, france, netherlands, belgium, spain, and great britain (excluding north ireland) and a public well-grounded detailed analysis of this market was presented with involving of leading expert centres of europe. however, during the study of the electricity market in ukraine, the amcu has not considered the experience of carrying out such studies in the eu since the principles, data retrieval, description of the principles and approaches used by the european experts are absent in studies of the amcu. it can be conditioned by the short timing of performing the study, usually such studies in the eu are carried out for several years, and in case the investigations of an antimonopoly body shall be prepared within a shorter period, a well-grounded study of competition carried out by the regulatory authorities in the field of the electricity industry and the expert community precedes it. but it does not cancel the groundlessness and the hasty conclusions of the amcu that in fact conflict with the concept of “collective dominance” in the eu law. in the european practice, there are single cases connected with the competition rules in the electricity market. most of them have relation to the concentration and state aid procedures. however, some of them also concerned abuse of the dominant position. in this connection, it is essential to refer to the analysis of case e.on (2008). so, taking into account an approximate parallelism with the report of amcu, it is essential to appeal one more time to the analysis and to the well-grounded study of the national electricity market that was not carried out in fact. besides, in the existing model of wem (wholesale electricity market) of ukraine, the amcu cannot be confined only to import and electricity generation market (wholesale market) as in case e.on, but it shall carry out a study of all the elements of the wholesale electricity market in ukraine taking into account interdependence and influence of all its elements on each another. considering the fact that the national electricity market of ukraine is set at the legislative level, separation of its single components shall be carried out in the process of studying their interdependence and analysis of the market power that does not belong to the manufacturers of electricity as a result of significant government regulation of this sector of the economy. at the same time, amcu has not yet studied this aspect in relation to se energorynok (state enterprise) that not only integrates the functions of the unified wholesale buyer and supplier but acts as a system formative element of market functioning being the disposer of payments system, spending unit of wem, the settlements centre, main operator of the electricity commercial accounting system in the regimented limits of awemps between the members of the wholesale electricity market of ukraine and appendices to them. the national electricity market is in fact an aggregate of commodity markets reflecting the relationships, which arise from the functioning of the united energy system of ukraine and are economically structured according to the awemp into the wem system that is characterised by the state of institutional monopoly depriving the participants of the market power as a result of governmental control and the conditions of the goods turnover in the market are specified by the public authorities. the “single buyer” market model is combined with government regulation represented by state enterprise “energorynok” and the national energy and utilities regulatory commission of ukraine (neurc) leads to the conclusion about actual absence of the market power of electricity producers and consequently the absence of a level of independence required for determining the dominance position according to the eu law. according to the european practice, it is possible to conclude that the amcu report and conclusions on the collective dominance do not cover the analysis of conditions, under presence of which there are grounds for determination of the collective dominance, in particular: і) conditions under which every undertaking, which is a part of collective dominance, shall have a possibility to easily obtain information concerning the behaviour of other undertakings in the market; іі) conditions under which the collective dominance participants shall have the possibility to influence the undertaking, which: in case of agreement between them – can restrict the competition and in case of coordinated activities – avoids the common policy in this market; ііі) conditions under which the expected reaction of competitors both baltic journal of economic studies 326 vol. 4, no. 1, 2018 acting and potential shall not significantly influence the expected result of agreed actions (the common policy implemented by collective dominance participants in the targeted market); іv) conditions under which economic, legal, and structural links providing an opportunity to implement the joint policy in particular, concerning the prices are present between the collective dominance participants; v) conditions under which the collective dominance participants possess the market power, i.e. can act independently from buyers, customers, and competitors. it is obvious that the sufficient link or connection between the undertakings should be the core concept of the case analysis. according to the words of dr. j. lubkin, head of unit of unit b1 of the european commission’s competition directorate-general, in charge of antitrust in the field of energy and environment (2015), the most important factor for analysing the competition in the electricity market are particular features of the market structure and high barriers for market entry together with particular “unique” price-making mechanism in electricity markets. accordingly, one of the essential elements of the collective dominance is the influence of its participants on the price. consequently, according to the eu law, if participants of collective dominance do not have a possibility to influence the price there will be no collective dominance even without consideration of issues of dependences between such participants. in this connection, the amcu should reflect this aspect of eu law enforcement practice in its report. on the basis of abovementioned, it is possible to conclude that the liberalization of electricity market that was started in the eu in the middle of 90th of the xx century was carried out through the relevant stages of supranational and national legislative regulation. the latest examples of the law enforcement practice in the field of compliance with the competition rules in the eu show that they became a basis for a new approach that was reflected in the adoption of the third package for the electricity market liberalization. so, the practice and the approaches of the european commission were and remain targeted at the market liberalization, decrease of the regulatory influence and development of competitive relationships. due to the fact that the national electricity market of ukraine is strictly determined in the legislation, any allotment of its separate elements shall be carried out together with the research of their dependences and analysis of the market power of all participants that take part in this market relations and, first of all, of public regulatory authorities. so, the statement about the collective dominance without proving the existence of coordinated policy and parallelism is superficial taking into account the fact that the parties are in the limited legislative field in respect of electricity demand and supply pricing, the policy in respect to which is formed unilaterally by the neurc. the need to change the structural state regulation of the wholesale electricity market and to change the legislative fixing of pricing and control over the pricing become the main factors for changing the energy market regulation. consequently, the amcu’s approach to electricity market regulation in ukraine confirms the necessity to reform the system of the governmental regulation in the wholesale electricity market and in the market of services for electricity transmission, necessity for change of the system for tariff and pricing policy formation on the part of the national energy and utilities regulatory commission of ukraine and the ministry of energy and coal-mining industry of ukraine for developing the competition in electricity market and the need to follow the approaches and criteria of the eu competition law with regard to determination of the dominance in the market, which is stipulated by the international legal obligations of ukraine arising from articles 18 and 94 of the treaty establishing the energy community and art. 255 of the eu-ukraine association agreement. references: alison j., sufrin b. (2014). eu competition law, fifth edition, text, cases and materials. oxford university press, 305. berezovska i.a. (2015). koncipciya prozorosti v ugodi pro asociaciyu mizh ukrainoyu ta es [the concept of transparency in the association agreement between ukraine and the european union]. law of ukraine, 8: 53-64. (in ukrainian) council regulation (ec) no 139/2004 of 20 january 2004 on the control of concentrations between undertakings (the ec merger regulation) (2004) official journal, l 024:1 – 22. council regulation (ec) no.1/2003 of 16 december 2002 on the implementation of the rules on competition laid down in articles 81 and 82 of the treaty (2003). official journal, l 1: 1–25. joilet r . (1970). monopolisation and abuse of dominant position – a comparative study of the american and european approaches to the control of economic power, the hague: martinus nijhoff, 1970, 239-245. mezzanotte f. (2010). using abuse of collective dominance in article 102 tfeu to fight tacit collusion: the problem of proof and inferential error. world competition, 33(1): 77-102. monti g. (2001). the scope of collective dominance under article 82, common market law review, 38: 131-139. monti g. (2006). the concept of dominance in article 82, european competition journal, 2(31): 45-46. ortiz blanco l. (2012). market power in eu antitrust law. hart publishing. baltic journal of economic studies 327 vol. 4, no. 1, 2018 petit n. (2013). collective dominance as effective tacit collusion in handbook on european competition law, substantive aspects, edward elgar, 325-332. philippe chauve, martin godfried, kristóf kovács, gregor langus, károly nagy, stefan siebert (2009). the e.on electricity cases: an antitrust decision with structural remedies, competition policy newsletter, 1: 51-54. scholz u., purps s. (2011). the application of ec competition law in the energy sector, world competition, 34: 449. smyrnova k. (2014). enforcement of competition rules in the association agreement between eu & ukraine, yeabook of antitrust regulatory studies, 7(10): 263-278. smyrnova k.v. (2011). the european integration of ukraine: topical issues. law of ukraine. no. 5: 148-152. smyrnova k.v. (2015) implementaciya polozhen pro konkurenciyu v ugodi pro asociaciyu mizh ukrainoyu ta es [the implementation of the competition provisions in the association agreement between ukraine and the european union], law of ukraine, no. 8: 75-82. (in ukrainian) smyrnova k.v. (2015). pravovui poryadok konkurencii v es (novitni tendencii rozvutku) [the legal order of competition in the european union (newest trends of development)] (dr. jur.sc.), kyiv: taras shevchenko national university of kyiv: 40 pp. (in ukrainian) the law of ukraine "on ratification of the protocol on ukraine's accession to the treaty establishing the energy community " of december 15, 2010, no. 2787-vi (2011). official bulletin of ukraine. no. 1. art. 13. the law of ukraine "on the ratification of the association agreement between ukraine, on the one part, and the european union, the european atomic energy community and their member states, on the other part" (2014). gazette of the verkhovna rada of ukraine. no. 40: 2021. the text of amcu’s presentation of the report (2015) (text available only in ukrainian, there is no english version of the report) retrieved from: http://www.amc.gov.ua/amku/doccatalog/document?id=125980&schema=main (accessed 28.03.2018). vickers j. (2006). market power in competition cases, competition law journal no2 (3):11. baltic journal of economic studies 79 vol. 3, no. 5, 2017 corresponding author: 1 department of finance, banking business and insurance, pylyp orlyk international classical university. e-mail: klimsvitl2017@ukr.net 2 department of economics and information security, pylyp orlyk international classical university. e-mail: ab011089kvf@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-79-83 the use of economic retro research for the methodological provision of capitalization of enterprises viktoriia harkava1, svitlana klimenko2 pylyp orlyk international classical university, ukraine abstract. the purpose of the article is to determine indicators that objectively allow attracting own or debt sources for capital expansion of enterprises. dynamic development of the agro-processing sector of the economy of ukraine is considered on the basis of interaction of agricultural and processing complexes of mykolaiv region of ukraine. methodology. determining indicators of formation and use of capital of enterprises is carried out after studying analytical support for the factor evaluation of market trends in the production of processing enterprises of aic (agro-industrial complex) of mykolaiv region that has developed processing industry and is based on studies of the period from 2005 to 2009 when a situation regarding the provision of processing enterprises significantly improved but, much as today, the state of business in relation to animal products was ambiguous. results of the research show that it was expedient to conduct a trend analysis, which purpose is comparison of the volume of agricultural products sold to processing enterprises and the production of core products by processing enterprises, determination of the main trend of dynamics of selected indicators by means of comparing each of positions in the period of 2005–2009. this allowed finding indicators for determining the requisite capital of enterprises. practical implications. substantiation of the financial restructuring of the capital of enterprises of aic enables their further development in terms of european integration and will ensure the attractiveness of investing in the agricultural complex of ukraine. value/originality. the authors formed an approach to identifying a need for a capital of processing enterprises based on developed economic models and analytical support for the factor evaluation of production market trends that made provisions for prerequisites for adequate determination of the potential of processing enterprises of aic. key words: processing enterprises of agro-industrial complex, factor evaluation of production market trends, financial restructuring of capital. jel classification: q12, o21, g32 1. introduction capital formation process is one of the prerequisites of functioning and conducting production activity, creating attractive investment image, ensuring firmness of modern domestic enterprises and successful realization of possibilities of their development in the long run, which defines necessity of identifying indicators of activity that determine the formation and rational use of enterprise capital. limiting possibilities of enterprises in relation to production, capital due to its mobility contributes to solving such economic tasks as: a combination of production and product demand; innovative development of production activity; reducing and cheapening costs of production and services. in 2017, ukraine sold agricultural products in the amount of 17.9 billion usd (2016 – 15.5 billion). in a total volume of foreign trade in agricultural and food products, the share of export is 79.4%. the most exported are grain crops – 36.2%, vegetable oil – 25.1%, and oil seeds – 11.3%. supplies of ukrainian processed and food products considerably increased for the 2017  year. however, the export of crop production (mainly raw materials) increased by 2.1  billion usd and was 16.7  billion usd. more important for the economy export of animal products grew by 371.4 million usd and reached about 1.3 billion usd [/zn.ua/economics/6]. thus, the need for capital is growing and requires using developed and proven methodological approaches to its formation and use. baltic journal of economic studies 80 vol. 3, no. 5, 2017 2. the modern use of economic retro research processing chain of the agro-industrial sector has the most efficient ties with agricultural enterprises, which are based on the organizational-economic unity of production, storage, and processing of products. analytical support for the factor evaluation of production market trends of processing enterprises of aic of mykolaiv region characterised by developed processing industry is based on research of the period from 2005 to 2009 when a situation regarding the provision of processing enterprises significantly improved but, much as today, the state of business in relation to animal products was ambiguous since the volume of sales of cattle and poultry increased but of milk and eggs – decreased. analysing production volumes of core products of processing enterprises of aic of mykolaiv region for table 1 production of core products by processing enterprises of aic of mykolaiv region for 2005–2009, tons production 2005 2006 2007 2008 2009 fresh (fresh-killed) or chilled beef and veal 789 1001 659 421 391 fresh (fresh-killed) or chilled pork 730 786 1030 774 945 fresh or chilled meat and edible offal of poultry 86 58 31 13 6 dried, salt or smoked pork 183 447 606 641 381 salt, in brine, dried or smoked poultry meat 37 141 201 235 190 sausage products 2620 3066 3142 3542 2607 semi-finished meat products (including poultry meat) 65 146 641 6139 540 smoked fish, including fillets 130 132 136 140 53 dried or salt fish except for fish fillets 225 213 154 120 81 fruit and vegetable juice, nectars 240648 289566 489781 463205 348625 juice for children 61308 74408 5947 4013 4288 natural canned vegetables 15861 19865 12637 19265 28678 unrefined sunflower oil 29822 59748 59618 25421 69094 processed fluid milk 15681 15053 15406 14856 9760 cream with fat content more than 8% 22 99 152 150 63 butter 3541 3658 3752 3931 2599 fat blends and spread products 2623 1813 3280 3460 3156 fresh unfermented cheese and sour milk cheese 16487 17616 18212 16784 15509 fat cheeses 10038 8760 10410 12286 11644 milk and cream condensed with sugar or without sugar or other sweetening matter 13735 9781 12150 10152 13381 fermented milk products 24365 25812 27947 27794 20983 flour 84257 81049 93681 83576 71332 groats 6061 2704 1385 1181 1686 prepared feed for cattle and poultry 49638 33479 31673 26388 30240 bakery products 51948 47208 44755 42690 37801 viennoiseries 1273 1103 1069 774 789 pryaniki and related products, sweet cookies; waffles 2100 2330 2877 2227 1221 noodles, not stuffed, not heat-treated or prepared in any other way 1140 886 610 599 515 grape wine, ths. dal 2213 2581 3059 3493 2822,8 natural non-carbonated mineral waters, ths. dal 11,4 43,3 95,2 71,7 96,4 natural carbonated mineral waters, ths. dal 839,1 837,9 1333 1360,5 1337,1 soft drinks, ths. dal 1763,4 1320,8 1851,3 2414,2 2994 table 2 indicators of primary production for processing enterprises of aic of mykolaiv region for 2005–2009, thousand tons indicator 2005 2006 2007 2008 2009 gross collection of grain and leguminous crops in all types of households (in weight after completion) 1763,4 1950,6 640,9 2385,9 2465,1 gross collection of sugar beets (industrial) in all types of households 145,5 283,0 53,1 14,3 12,67 gross collection of sunflower seeds in all types of households (in weight after completion) 426,8 499,2 259,7 517,3 553,1 gross collection of vegetables in all types of households 266,7 297,2 151,6 274,4 334,2 meat production in all types of households (live weight) 44,8 44,4 50,7 46,0 39,9 milk production in all types of households 432,3 413,1 379,2 368,8 367,7 egg production in all types of households, mln. pcs 313,7 327,0 336,7 386,3 473,9 baltic journal of economic studies 81 vol. 3, no. 5, 2017 2005–2009, decline of production of meat packing factories and fish canneries should be noted, which is caused by lack of raw materials in the sector, high credit interest rates for considerable raw material base recovery, low demand for products over the non-creditworthiness of the population and high price for products. indicators of primary production for processing enterprises of aic of mykolaiv region for 2005–2009 are presented in table 2. during 2005–2009, volumes of a gross collection of grain crops by all categories of farms of mykolaiv region are increasing that is also peculiar to the present time, however, reduction of cattle and cow population in all types of households is also observed. 3. a methodological approach to determining indicators of the enterprise capital formation in order to find results of the analysis of supply of processing enterprises of mykolaiv region, a trend analysis is conducted, which purpose is to compare volumes of agricultural products sold to processing enterprises and production of core products by processing enterprises, determine the main trend of dynamics of selected indicators by means of comparing each of positions in the period of 2005–2009. table 3 data on dynamics of volumes of agricultural products sold to processing enterprises of mykolaiv region for 2005–2009 year volume of agricultural products sold to processing enterprises of mykolaiv region, million uah 2005 2,24 2006 2,44 2007 1,45 2008 3,26 2009 2,65 during the analysed period, there is observed a tendency for increasing volumes of agricultural products sold to processing enterprises of mykolaiv region. the exception is a decrease in the indicator in 2007; the value was 1.45  million uah, which is determined, on the one hand, by general decline in production under the economic crisis, on the other, by low level of capital concentration, which makes it impossible to increase the volume of purchases of raw materials from manufacturing enterprises. similar problems are also taking place in processing enterprises of aic today. thus, directions obtained that point at a need for enterprises’ capital expansion can be used in modern practice. adjustment of time series is carried out by a right line described by a trend equation as a function: ty a at= +0 1 (1) where а0, а1 – parameters of trend equation; t – sequence number of time periods. we determine trend equation parameters а0 and а1 from the system of equations: a n a t y a t a t y t o i i n i i n o i i n i i n i i n i + = + = = = = = = ∑ ∑ ∑ ∑ ∑ 1 1 1 1 1 2 1 1 (2) estimated data for analytical adjustment of time series of production of core products by processing enterprises of aic in mykolaiv region, we determined by the linear trend (table 5). table 5 estimated data for analytical adjustment of time series of volumes of agricultural products sold to processing enterprises of mykolaiv region year volumes of agricultural products sold to processing enterprises of mykolaiv region, y conditional sign of time, t t 2 yt y a ato= + 1 2005 2,24 1 1 2,24 3,09 2006 2,44 2 4 4,88 6,18 2007 1,45 3 9 4,35 9,27 2008 3,26 4 16 13,04 12,36 2009 2,65 5 25 13,25 15,45 σ 12,04 15 55 37,76 46,35 we obtain the following trend equation parameters for volumes of agricultural products sold to processing enterprises of mykolaiv region: o i i n a y n = = == ∑ 1 46 3 5 9 27 , , (3) 1 1 2 1 37 76 55 0 69a yt t i i i n i i n = = == = ∑ ∑ , , (4) for the indicator of volumes of agricultural products sold to processing enterprises of mykolaiv region, trend equation is the following: y t= +9 27 0 69, , according to the computational table, the sum of time series is equal to the sum of time series calculated on the table 4 data on dynamics of production of core products by processing enterprises of aic in mykolaiv region for 2005–2009 year production of core products by processing enterprises of aic in mykolaiv region, million uah 2005 2,16 2006 2,67 2007 3,51 2008 4,35 2009 4,37 baltic journal of economic studies 82 vol. 3, no. 5, 2017 basis of analytical adjustment, which indicates that the smoothing of a time series is performed correctly. table 6 estimated data for analytical adjustment of time series of production of core products by processing enterprises of aic in mykolaiv region year production of core products by processing enterprises of aic in mykolaiv region, y conditional sign of time, t t 2 yt y a ato= + 1 2005 2,16 1 1 2,2 4,45 2006 2,67 2 4 5,3 8,90 2007 3,51 3 9 10,5 13,35 2008 4,35 4 16 17,4 17,80 2009 4,37 5 25 21,9 22,25 σ 17,06 15 55 57,3 66,75 according to formula 3 and 4, we obtain the following parameters of trend equation for the indicator of production of core products by processing enterprises of aic in mykolaiv region: oa = = 17 06 5 3 41 , , 1 57 3 55 1 04a = = , , the trend equation for the production of core products by processing enterprises of aic in mykolaiv region is as follows: y t= +3 41 1 04, , we present obtained results in graphic form in fig. 1. according to findings, the forecast of volumes of agricultural products sold to processing enterprises and production of core products by processing enterprises of mykolaiv region for 2010–2019 is made, which will allow grounding on the dynamics of dependence between these indicators. according to the obtained trend equation for the volumes of agricultural products sold to processing enterprises, the forecast value of the indicator in 2010– 2019 will be y2010=9,27+0,69х6=18,54; y2011=9,27+0,69х7=21,63; y2012=9,27+0,69х8=24,72; y2013=9,27+0,69х9=27,81; y2014=9,27+0,69х10=30,9; y2015=9,27+0,69х11=33,99; y2016=9,27+0,69х12=38,07; y2017=9,27+0,69х13=40,14; y2018=9,27+0,69х14=43,26; y2019=9,27+0,69х15=46,35 for the production of core products by processing enterprises of aic – y2010=3,41+1,04х6=26,7; y2011=3,41+1,04х7=31,15;y2012=3,41+1,04х8=35,6; y2013=3,41+1,04х9=40,05;y2014=3,41+1,04х10=44,5; y2015=3,41+1,04х11=48,95; y2016=3,41+1,04х12=53,4; y2017=3,41+1,04х13=57,85; y2018=3,41+1,04х14=62,3; y2019=3,41+1,04х15=66,75. volumes of agricultural products sold to processing enterprises production of core products by processing enterprises of aic of mykolaiv region ty 69,027,9 += ty 04,141,3 += fig. 2. forecasted data on volumes of agricultural products sold to processing enterprises and production of core products by processing enterprises of mykolaiv region for 2010–2019 4. conclusions the obtained forecast data allowed asserting about the possibility of growth of production of core products by processing enterprises of aic of mykolaiv region during 2010–2019, which took place for 2010–2017 and provides for the possibility of their growth for 2018–2019. the determined benchmarks justif y the necessity of financial restructuring of the capital of processing enterprises of aic of mykolaiv region for the purpose of its stable growth. volumes of agricultural products sold to processing enterprises production of core products by processing enterprises of aic of mykolaiv region ty 69,027,9 += ty 04,141,3 += fig. 1. results of trend analysis of volumes of agricultural products sold to processing enterprises and production of core products by processing enterprises of mykolaiv region for 2005–2009 references: arefyeva, o. v., lutska, t. v. (2009). biznes-protsesy pidpryiemstv sfery poslug: factory, formuvannya, konkurentospromozhnist [enterprise business-processes of service sphere: factors, forming, competitor possibility] kyiv: yevropeysky university [in ukrainian]. bezdenezhnykh, v. m. (2010). sovremenniye problemy innovatsii: restrukturizatsiya predpriyatiy s uchetom ih finansovoy ustoychivosti [modern innovation problems: enterprise restructurization oriented on financial stability] moscow: delo [in russian]. baltic journal of economic studies 83 vol. 3, no. 5, 2017 blagodatniy, v. i. (2008). formuvannya i upravlinnya oborotnym kapitalom na pidpryiemstvakh khliboproduktiv [formation and circulating capital management on bread product enterprises] kyiv: sec “agriculture economy institute” uaas. golovne upravlinnya statystyky mykolayivskoyi oblasti (2010). statystyka promyslovosti mykolayivskoyi oblasti [mykolayiv region industry statistics] mykolayiv: golovne upravlinnya statystyky mykolayivskoyi oblasti. golovne upravlinnya statystyky mykolayivskoyi oblasti (2010). statystyka strukturnykh obstezhen pidpryiemstv mykolayivskoyi oblasti [mykolayiv region structure observation of the enterprises] mykolayiv: golovne upravlinnya statystyky mykolayivskoyi oblasti. eksport ukrainskoy produktsii apk v 2017 godu vyros na 16,3% (2018). retrieved from: https://zn.ua/economics/eksport-ukrainskoy-produkcii-apk-v-2017-godu-vyros-na-16-3-273315_.html (accessed 17 january 2018). baltic journal of economic studies 93 vol. 4, no. 2, 2018 corresponding author: 1 department of management and economics of water transport, state university of infrastructure and technology. e-mail: karpo_2004@ukr.net 2 department of management and economics of water transport, state university of infrastructure and technology. e-mail: palyvoda_olena@ukr.net 3 department of finance, national university of trade and economics. e-mail: e95bond@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-93-98 simulation modelling of strategic development of transport and logistics clusters in ukraine оksana karpenko1, olena palyvoda2 state university of infrastructure and technology, ukraine olena bondarenko3 national university of trade and economics, ukraine abstract. the aim. the article is devoted to the development of methodological approaches to the strategic management of the development of transport and logistics clusters, which take into account opportunities and barriers, especially the domestic economic environment, as well as the specifics of certain types of economic activity. methods. the economic and mathematical model is substantiated using the savage criterion, which gives an opportunity to choose the optimal strategy of transport and logistics cluster development in the domestic conditions of management taking into account the different expectations of business entities. methods similar to the wald, bayesian and savage criteria were used for choosing optimal strategies in decision making theory and optimization problems of the following types were solved: when the distribution of states of the environment is unknown and assumed to be the most unfavourable; when it is known empirical expected distribution of environmental conditions and that is the average expected performance level for each indicator’s group; when it is known expected division of the priorities of the decision-making entity that is the average expected level of financial (organizational, etc.) support for a certain group of indicators. results. four types of “clean” cluster development strategies are identified and described, which can be used in various combinations by transport and logistics companies. the economic and mathematical model of the transport and logistics cluster performance is presented, which allows implementing a large number of combinations of types of cluster development strategy by taking economic, environmental, social and innovative measures, affecting different groups of performance indicators. the influence of all possible variants of the binary and ternary combination of different types of transport and logistics cluster development strategies on the cluster performance is considered. it is established that the greatest influence on the transport and logistics cluster performance is exerted by the combination of economic and innovative types of strategy. practical significance. given the interest of entrepreneurs in cluster forms of organization and the strengthening of cooperation with eu countries, present development promotes scientific approaches to modelling cluster development strategies in the economy of ukraine. relevance/originality. the developed simulation model increases the likelihood of implementing the most optimal combination of “clean” development strategies, contributes to a more accurate prediction of cluster development and as a methodological approach can be applied to various types of economic activity. key words: transport and logistics cluster, simulation modelling, strategic development of transport and logistics cluster, cluster performance, logistics, transport. jel classification: d85, o18 1. introduction the need to ensure competitive advantages of the national economy in the global economy motivates to search for organizational and managerial methods and forms that could, under the conditions of permanent economic and technological changes, contribute to the successful adaptation and development of economic actors. the formation and operation of regional clusters is a kind of answer to this task, because, as the world baltic journal of economic studies 94 vol. 4, no. 2, 2018 practice shows, they represent peculiar growth points that accelerate and strengthen the innovative orientation of the economy, lay the foundations of competitiveness and investment attractiveness. regional clusters also act as an instrument that forms a particularly favourable environment for the development of small and medium-sized business and promotes the generation of synergetic and multiplicative effects that have a positive influence on the development of the economy, raising the level and quality of life of the population, both in individual regions and in the country as a whole. in ukraine, there is a strong interest in the idea of economic development based on clusters, both among government officials and in the scientific and business environment. this is evidenced by the formal declaration of about two dozen clusters in various types of economic activity in ukraine. but it should be noted that the overwhelming majority of initiated clusters has merely declarative nature and does not provide for the real economic cooperation. however, given the interest of entrepreneurs and scientists in a cluster form of entrepreneurship and taking into account the increased cooperation with eu countries, there is an urgent need to develop scientific approaches to analysing and modelling strategies for the cluster formation and development in the economy of ukraine, forecasting the consequences of their operation in the domestic economic space, assessing the integral cluster performance. the research of the problems of cluster network operation is quite active and careful taking place in western and domestic economic science during the last decades. at present, the questions of the nature, types, goals, tasks, stages of formation, and mechanisms of interaction between enterprises in clusters, as well as directions and forms of the state support are comprehensively considered in the works of such researchers, as m.  porter, m.  castells, m.  enright, o.  solvell, g.  lindqvist, ch.  ketels, m.  voinarenko, v. tarasenko and others. despite the existence of significant scientific research results in the field of cluster development, the research and formulation of the peculiarities of cluster operation in certain types of economic activity, in particular transport and logistics, remains relevant. there is also a practical interest in the formulation and selection of the optimal cluster development strategies that take into account the opportunities and barriers, first of all, of the domestic economic environment. taking the above into consideration, the objective of the presented research is to develop an economic and mathematical model using the wald, bayesian, and savage criteria, and on its basis to analyse the influence of the binary and ternary combination of different types of transport and logistics cluster development strategies on the expected cluster performance, with the subsequent selection of the optimal strategy for cluster development under the domestic conditions of management. 2. types of probable “clear” strategies for the development of transport and logistics clusters the study of the practice of european clusters’ operation shows that the main types of performance that can be generated by the cluster cooperation are: economic, social, environmental, and innovative. in previous works, we implemented the modelling of cluster efficiency in abovementioned directions and calculated their integral indicators on the basis of groups of indicators (fig. 1) (karpenko, palyvoda, bondar, 2018). however, in order to ensure the efficiency of cluster performance, the necessary condition is the forecasting and selection of cluster development strategies that are optimal in the domestic business environment. to accomplish this task, we identified and studied four types of possible “pure” strategies for the development of transport and logistics clusters (tlc): 1) the strategy for the economic development of tlc, which is associated with changes in production, organizational and managerial activities of transport and logistics enterprises (tle), aimed at increasing profit and profitability of transport and logistics enterprises, increasing competitiveness, making the best use of available resources, improving the quality of transport and logistics services, increasing the share and developing new market segments, attracting investments, improving the management system, the widest implementation of information and communication technologies, etc. 2) the strategy for the environmental development of tlc, which is aimed at the implementation of environmental and economic interests by reducing harmful emissions into the environment through the use of cleaner modes of transport, reducing the influence of transport on the environment through the introduction of innovative technologies, achieving compliance of vehicles with the requirements of international environmental standards, raising the level of environmental consciousness of the population; 3) the strategy for the social development of tlc, which is aimed at achieving general welfare and collective security on the basis of mutual responsibility, transparency, ethical behaviour, observance of legal norms, observance of international norms, protection of human rights, increasing the number of jobs, improving working conditions, ensuring an uninterrupted improvement of the educational and professional level of workers, adequate wages, availability of social benefits; 4) the strategy for the innovative development of tlc, which provides for the efficient development and baltic journal of economic studies 95 vol. 4, no. 2, 2018 implementation of managerial, logistics and transport innovations based on strategic marketing, research and development works, modern information and communication technologies, available scientific and technical and intellectual potential of the enterprise, use of the channels of technology and knowledge transfer, development of intellectual needs of the staff, stimulation of creative approach to the tasks performed, constant knowledge development by the staff in the process of professional activity. 2. modelling the efficiency of the cluster functioning at different expectations in order to determine the dynamics of the groups of indicators of the tlc performance (fig. 1), recurrence relations were given: ft(xij)=g(dij1)xij+g(dij2)g(dij1)xij+g(dij3)g(dij2)g(dij1)xij, (1) where g(dijt) is the function of the expected value of the growth factor of the indicator xij for the year t, which is a linear function in the case when the factor is an indicator with a positive ingredient and inverse for a factor with a negative ingredient. the results of the previous modelling of the dynamics of integral indicators of the transport and logistics cluster performance are presented in table 1. table 1 integral indicators of the expected transport and logistics cluster performance by group indicators integral indicator of the tlc performance years of the tlc operation t=0 t=1 t=2 t=3 economic performance 0,2935 0,2976 0,3203 0,3591 environmental performance 0,1848 0,1865 0,1929 0,2068 innovative performance 0,2826 0,2920 0,3128 0,3470 social performance 0,2391 0,2423 0,2253 0,2696 source: developed by the authors the implementation of the above formulas is shown for the case g(x+)=x+ and g(x–)=1/x–. based on the data presented in table 1, we have modelled the evaluation matrix of performance. in the model example, let us assume that all xij acquire single values. consequently, this allows us to get the evaluation function with a positive ingredient of this type (formula 2): indicators of the economic performance – increase in revenues from the provision of services; – increase in workforce productivity; – increase in capital investments; – reduction of expenses from the provision of services; – increase in profitability (ratio of total revenues to total expenses). indicators of the environmental performance – reduction of emissions to the environment due to the use of environmentally friendly modes of transport; – reducing the impact of transport on the environment through the introduction of innovative technologies; – increasing compliance of vehicles with the requirements of international environmental standards (environmental safety of transport); – reduction of payments for taxes and fees (environmental tax); – reduction of fines for the violation of environmental legislation. indicators of the innovative performance – return on assets; – formation of new channels of technology transfer; – increase in the number of developed and/or implemented information and management innovations; – increase in the number of developed and/or implemented logistics innovations; – increase in the number of developed and/or implemented transport innovations. indicators of the social performance – creating additional jobs; – improvement of working conditions; – increase in the number and quality of social communications; –growth of the wage level of employees; – advanced training of employees, growth of social status and opportunities for self-realization. fig. 1. indicators of cluster performance baltic journal of economic studies 96 vol. 4, no. 2, 2018 f+ = 0 0665 0 0718 0 0790 0 0554 0 0610 0 0701 0 0652 0 0717 0 0816 0 , , , , , , , , , ,, , , , , , , , , , 0439 0 0453 0 0477 0 0665 0 0705 0 0762 0 0555 0 0584 0 0649 0 05443 0 0555 0 0584 0 0333 0 0349 0 0374 0 0217 0 0220 0 0231 0 0652 0 , , , , , , , , , ,, , , , , , , , , , 0672 0 0712 0 0549 0 0571 0 0605 0 0439 0 0452 0 0475 0 0217 0 02222 0 0233 0 0565 0 0610 0 0671 0 0652 0 0678 0 0719 0 0239 0 0268 0 , , , , , , , , , ,, , , , , , , , , , 0308 0 0717 0 0825 0 0990 0 0659 0 0692 0 0761 0 0652 0 0665 0 06992                                                             (2) after the “convolution” operation taking into account weighting factors, an evaluation matrix for the groups of indicators was obtained: f fij= = 0 297613 0 186544 0 242283 0 320350 0 192898 0 252709 0 35 , , , , , , , 99053 0 206828 0 269639 0 297613 0 186544 0 242283 , , , , ,             �. (3) for the study of the obtained evaluation matrix, approaches similar to the wald, bayesian, and savage criteria of selecting optimal strategies in the decisionmaking theory (vitlinskyi, velikoivanenko, 2004) were used, that is, the optimization problems of the following types were solved: 1. optimization provided that the distribution of states of the environment is unknown and assumed antagonistic (the most unfavourable) for the subject of decision-making: z=v→max, (4) j ij i i i min i max f w w w w w = = ∑ ∑ ≥ = ≤ ≤ ≤           1 4 1 20 1 0 v , , , (5) where wi is the relative share of available resources for the tlc development, which is directed to the implementation of the i-th strategy, wmin and wmax are respectively the least and most expected values, which in practice should be determined by expert evaluation, fij are the elements of the matrix f, v is the integral indicator of the tlc performance. on converting the model to an equivalent form: g t v min i i= = → = ∑ 1 4 1 , (6) j ij i i i min i max f t t w v t t t = ∑ ≥ = ≤ ≤ ≤           1 4 1 0 , , , (7) the result was obtained: w1=0,2847,w2=0,2293, w3=0,2563, w4=0,2297, v=0,2834. consequently, according to the wald criterion, in order to ensure the transport and logistics cluster performance in the amount of 28.34%, it is expedient to allocate 28.47% of the available resources to the implementation of the strategy of economic development, 22.93%  – environmental development, 25.63%  – social development, 22.97%  – innovative development of tlc. 2. optimization, provided that the empirical expected distribution of states of the environment is known, in our case, it is the average expected level of performance for each group of indicators. let us denote this distribution by λ=(λ1;λ2;λ3;λ4), 0≤ λ1 ≤1, ∑4i=1 λi=1. in this case, the bayesian criterion was applied and the following model is obtained: z v max= → , (8) j i ij i i i min i max f w w w w w = = ∑ ∑ ≥ = ≤ ≤ ≤           1 4 1 20 1 0 λ v , , , (9) in practice, it is expedient to use a model of this type after a certain period of time after the start of cluster operation; in this case, it is possible to estimate the value of λ=(λ1;λ2;λ3;λ4) empirically. 3. optimization, provided that the expected division of priorities of the decision-maker is known, in our case, it is the average expected level of financial (organizational, etc.) support for a certain group of indicators. this distribution was denoted by: µ µ µ µ µ µ µ= ( ) ≤ ≤ = = ∑1 2 3 4 1 4 0 1 1; ; ; , ,� � � � �i i i and the following model is obtained: z w v min v max i i i= → → = ∑ 1 4 µ , � � � � , (10) j ij i i i i i min i max f w w w w w = = ∑ ∑ ≥ = ≤ ≤ ≤           1 4 1 20 1 0 µ µ v , , , (11) 1. economic and environmental development of tlc. in this case, the following values are assumed: baltic journal of economic studies 97 vol. 4, no. 2, 2018 µ µ µ µ µ µ3 4 1 2 1 20 0 0 1= = > > + =, , , .� � � � � � we also considered the values of weighting factors as variables. after the implementation of the model, we obtained the following result: w w w w v1 2 3 40 6802 0 3198 0 0 0 2621= = = = =, , , , , , , .� � � � � � � � � � w w w w v1 2 3 40 6802 0 3198 0 0 0 2621= = = = =, , , , , , , .� � � � � � � � � � 2. economic and social development of tlc. in this case, the following values are assumed: µ µ µ µ µ µ2 4 1 3 1 30 0 0 1= = > > + =, , , .� � � � � � µ µ µ µ µ µ2 4 1 3 1 30 0 0 1= = > > + =, , , .� � � � � � after the implementation of the model, we obtained the following result: w w w w v1 2 3 40 6599 0 0 3401 0 0 2788= = = = =, , , , , , , .� � � � � � � � � � 3. economic and innovative development of tlc. in this case, the following values are assumed: µ µ µ µ µ µ2 3 1 4 1 40 0 0 1= = > > + =, , , .� � � � � � µ µ µ µ µ µ2 3 1 4 1 40 0 0 1= = > > + =, , , .� � � � � � after the implementation of the model, we obtained the following result: w w w w v1 2 3 40 6394 0 0 0 3606 0 2957= = = = =, , , , , , , .� � � � � � � � � � 4. social and environmental development of tlc. in this case, the following values are assumed: µ µ µ µ µ µ1 4 2 3 2 30 0 0 1= = > > + =, , , .� � � � � � µ µ µ µ µ µ1 4 2 3 2 30 0 0 1= = > > + =, , , .� � � � � � after the implementation of the model, we obtained the following result: w w w w v1 2 3 40 0 2768 0 7232 0 0 2269= = = = =, , , , , , , .� � � � � � � � � � 5. social and innovative development of tlc. in this case, the following values are assumed: µ µ µ µ µ µ1 3 2 4 2 40 0 0 1= = > > + =, , , .� � � � � � µ µ µ µ µ µ1 3 2 4 2 40 0 0 1= = > > + =, , , .� � � � � � after the implementation of the model, we obtained the following result: w w w w v1 2 3 40 0 3156 0 0 6844 0 2587= = = = =, , , , , , , .� � � � � � � � � � 6. innovative and environmental development of tlc. in this case, the following values are assumed: µ µ µ µ µ µ1 2 3 4 3 40 0 0 1= = > > + =, , , .� � � � � � µ µ µ µ µ µ1 2 3 4 3 40 0 0 1= = > > + =, , , .� � � � � � after the implementation of the model, we obtained the following result: w w w w v1 2 3 40 0 0 4358 0 5642 0 2753= = = = =, , , , , , , .� � � � � � � � � � the results of the study of influence of the binary combination of strategy types on the transport and logistics cluster performance are presented in table 2. as a result of the comparison of influence of the binary combination of different types of tlc development strategies, it has been discovered that the combination of economic and innovative types of strategy has the greatest influence on the transport and logistics cluster performance, which allows ensuring the expected integral performance in the amount of 29.57% after three years of the tlc operation. the results of the study of the influence of the ternary combination of different types of tlc development strategies on the transport and logistics cluster performance are presented in table 3. the comparison of influence of the ternary combination of different types of tlc development strategies has shown that the combination of social, table 2 results of the study of the influence of the binary combination of different types of cluster development strategies on the cluster performance variants of the binary combination of different types of tlc development strategies relative indicator of the tlc performance, v relative frequency, wi w1, economic performance indicators w2, environmental performance indicators w3, social performance indicators w4, innovative performance indicators economic and innovative 0,2957 0,6394 0 0 0,3606 economic and social 0,2788 0,6599 0 0,3401 0 innovative and environmental 0,2753 0 0 0,4358 0,5642 economic and environmental 0,2621 0,6802 0,3198 0 0 social and innovative 0,2587 0 0,3156 0 0,6844 social and environmental 0,2269 0 0,2768 0,7232 0 note: developed by the authors table 3 results of the study of the influence of the ternary combination of different types of tlc development strategies on the tlc performance types of tlc development strategy relative indicator of the tlc performance, v relative frequency, wi w1, economic performance indicators w2, environmental performance indicators w3, social performance indicators w4, innovative performance indicators social and innovative and environmental 0,2732 0 0,3333 0,3333 0,3333 economic and innovative and environmental 0,2605 0,3643 0,3178 0 0,3178 economic and social and environmental 0,2475 0,3964 0,3010 0 0,3026 economic and social and innovative 0,2455 0,4010 0 0,2993 0,2997 note: developed by the authors baltic journal of economic studies 98 vol. 4, no. 2, 2018 innovative, and environmental types of strategy has the greatest influence on the transport and logistics cluster performance, which allows ensuring the expected integral performance in the amount of 27.32% after three years of the tlc operation. on the basis of the developed economic and mathematical model, the influence of the binary and ternary combination of different types of tlc development strategies on the expected integral performance of transport and logistics cluster is determined (fig. 2). 4. conclusion as a result of the comparison of influence of the binary and ternary combination of different types of tlc development strategies, it has been discovered that the combination of economic and innovative types of strategy has the greatest influence on the transport and logistics cluster performance, which allows ensuring the expected integral performance in the amount of 29.57% after the first three years of operation of the formed transport and logistics cluster. 0,2957 0,2788 0,2753 0,2732 0,2621 0,2605 0,2587 0,2475 0,2455 0,2269 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 economic and innovative economic and social innovative and environmental social and innovative and environmental economic and environmental economic and innovative and environmental social and innovative economic and social and environmental economic and social and innovative social and environmental expected performance factor c om bi na tio n of ty pe s of t l c d ev el op m en t st ra te gi es fig. 2. results of comparison of the influence of the binary and ternary combination of different types of tlc development strategies note: developed by the authors references: porter, m. (1990) the competitive advantage of nations. london: mcmillan press, 875 p. castells, m. (2002) the internet galaxy: reflections on the internet, business, and society. oup oxford, 2002. 292 p. enright, m. j. (2000) survey on the characterization of regional clusters: initial results. working paper, institute of economic policy and business strategy: competitiveness program, university of hong kong, 2000. lindqvist, g., ketels, ch., sоlvell, о. (2013) the cluster initiative greenbook 2.0. stockholm: ivory tower publishers. url: http://www.clusterportal-bw.de/service/publikationen/cluster-cluster-initiativen-undnetzwerke/publikation/ publikationen/download/dokument/the-cluster-initiative-greenbook-20 voinarenko, m. p. (2011) klastery v instytutsiinii ekonomitsi: monohrafiia [clusters in the institutional economics: monograph]. khmelnytskyi: knu, triada-m. 502 p. (in ukrainian) tarasenko, v. (2015) terrytoryalnye klastery: sem ynstrumentov upravlenyia [territorial clusters: seven management tools]. moscow: alpina publisher. 201 p. (in russian) karpenko, o. о., palyvoda, o. м., bondar, n. м. (2018) modelling the integral performance of transport and logistics clusters. naukovyi visnyk polissia. [scientific bulletin polesie], no. 1. (13), vol. 2, pp. 155-160. vitlinskyi, v. v., velikoivanenko, g.i. (2004) ryzykolohiia v ekonomitsi ta pidpryiemnytstvi: monohrafiia [riskology in economics and entrepreneurship: monograph]. kyiv: kneu. 65 p. (in ukrainian) baltic journal of economic studies 254 vol. 4, no. 2, 2018 corresponding author: 1 department of enterprise economics, ukrainian national forestry university. е-mail: yakimtsov@nltu.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-2-254-260 analytic overlook of the methodology of synergetics in postnonclassical science viktor yakimtsov1 ukrainian national forestry university, ukraine abstract. purpose. this article reveals the main definitions of synergetics and methods that are being used in synergetic research. the differences-characteristics of classical, nonclassical, and postnonclassical science and their schematic illustration are described. there are criteria, by which the main methodological principles of synergetics are being chosen. the reasons that have caused an appearance of synergetics and its methodological apparatus and the framework of this apparatus are considered. the special aspects of nonlinearity of complicated systems, in our opinion, include the economic ones. methodology. such foreign and domestic scientists as wiener n. (2003), thom r. (1975, 1996), prigogine i., stengers i. (1986), zang v.b. (1999), and arnold v. (2004) have used methodological apparatus of synergetics in modern science. methodologically synergetics is open for those new conceptions that are being formed in certain disciplines. methodological principles of synergetics that cause the “colostral” principles are nonlinearity, nonclosure, and instability. the main principle  – the rule of nonlinearity is a contravention of the principle of the super offer in the certain phenomenon (process): the result of adding the impacts on the system is not the adding these impacts’ results. the causes’ results cannot be added. this means that the result of adding the causes does not equal to the union of causes’ results. results. for the synergy concept, the idea is typical that we see everything at once: the whole and its parts. it combines holism and elementarizm that are continuing each other. synergetics, in fact, integrates deterministic and probabilistic styles of scientific thinking. synergetics is the general theory of self-organization. it formulates the general principles of self-organization, valid for all levels of matter. a specific feature of the synergetic approach is to move from the study of simple to complex, from closed to open, from linear to nonlinear, from consideration of equilibrium and near-equilibrium processes to delocalization and instability, to the study of what happens far from equilibrium. practical implications. the synergetic approach has a great advantage over others. unlike cybernetics and systems engineering, research which focused on maintaining and preserving the existing state of dynamic equilibrium or order system, synergy, as logical extensions, studying systems in their dynamics and development. accordingly, if the cybernetics principle operates mainly negative feedback aimed at the preservation of order in the system, synergistic implemented the principle of positive feedback, whereby the changes that occur in the system, not extinguished, and accumulate and amplified. value/originality. as a result of the interaction of elements of the environment come to coordinated, cooperative behaviour, resulting in spontaneous, a new order, structure or dynamic mode. key words: synergetics, postnonclassical science, methodology, paradigm, system. jel classification: a13, b41, n10, o10, o30, q50 1. introduction during the last decades, a dialectic method of thinking and investigating has given place to brand new  – a synergetic approach that is based on the principles of global evolutionism – the combination of sciences about wild-life and inanimate nature, sciences about social development. in the field of economic research, this becomes a brand new level of cognition and provides a brand new decision, which, in its turn, provides the optimization of economic processes’ development and the effectiveness of economic growth and, in the last analysis, human well-being. effective development of ukraine’s national economy is as of today extremely current and complicated task. systematic-synergetic aspects and methods of analysis of interrelation between economic processes and phenomena intend to protect the country’s economy and increase social well-being. they also will allow considering the problem of effective development of baltic journal of economic studies 255 vol. 4, no. 2, 2018 country’s economy not only as a relatively separate system but also as one that has synergetic relations with various subjects of the systematic hierarchy of the country (political, organizational etc.). there is a real opportunity for understanding and solving the tasks, which are connected to the processes of globalization and internationalization, given that synergetics studies the regularities of appearance, formation, development, and functioning of systems that are self-organized, nonlinear, and open, economic synergetics, as of today, is on the upswing and ground nonlinear processes of social development. 2. results 2.1. development of synergetics in the 20th century from synergetics’ perspective, the economy is a selforganized, nonlinear, open, and dissipative system. this system is characterized by multilevel various interactions of its components, the combination of negative and positive feedbacks, interrelation of variability and selection of components, alternation of attractors and homeostasis. these systems are the real structures in open, nonlinear environments, which place the evolutionary processes. new science is an economic synergetics, which has appeared in the last decades, it forms its own methodology that is based on the laws of general synergetics and determines its categories and definitions. based on the above, we have defined the main definitions of synergetics’ methodology and methods that are being used in synergetic research. however, our research would be incomplete without an analysis and estimation of scientists’ views on the synergetics as a picture of the world, on synergetics as a research methodology and on synergetics as a science. such views have originated in different schools of synergetics’ scientists and, as it turned out to be, are a force and sense of their investigation and development. they complement the general picture and knowledge base about the synergetics  – new postnonclassical research way of investigations of complicated phenomena and objects by dint of complicated modern means and methods etc. synergetics as a quite young view of the world has originated due to the necessity of finding adequate, reasonable, calculated and forecasted by science answers to global challenges that civilizational human development makes. methods of synergetics, as stated above, are based mostly on the regulations of “immortal” science – mathematics. methodologically synergetics is open for those new conceptions that are being formed in certain disciplines. synergetics is inheritable because it falls into interdisciplinary sciences and is based on the methodological framework of mathematics, cybernetics, philosophy etc. in addition, synergetics is self-applicable, because it describes complicated processes and phenomena etc., basing on modern view and cognition of the world. the synergetic methodology is a methodology of interdisciplinary communication and modelling of modern reality, is open for new views, knowledge, methods of research and world cognition – the adaptive methodology of establishment and forecast of the most complicated processes and phenomena. as a rule, in the methodology of synergetics, scientists try to minimize a multivariable set of equations to a small number of significant equations that allows hereafter analysing nonlinear dynamics by significantly shortening (compacting) information. it can be understood by synergetics: 1. developmental systems theory (by v.s. stepin) (2003). 2. theory of systems that are composed of many subsystems (by h. haken) (1993, 2003, 2004). 3. theory of systems that go through the condition of instability and imbalance (by d. chernavskii) (2004). anyway, mathematical methods of synergetics create a multitude that grows and is a base of the methodology of synergetics. at this date, synergetics is quite fast integrating in the field of liberal sciences, there are approaches of sociosynergetics and evolutionary economics. methods of synergetics are being used in medicine, pedagogy, linguistics, psychology, history etc. according to i. prigogine and i. stengers’s ideas, right before our very eyes, the new worldview is being born – a dialogue of human and nature, where human has to realize his role and responsibility in his “community” with the natural laws (prigogine and stengers 1986). for the day, fundamental science pays more and more attention to supercomplex systems, directs its development path into the field of high technologies, economy, forecasts, risks, which forces it to become on the one hand interdisciplinary, on the other hand  – extremely precise and supercomplex, this science is called postnonclassical. postnonclassics as a science approach has originated at the end of хх century in tasks of the description of complicated, evolutionary systems and processes that evolve and self-organize, they can be quite differently interpreted. thus, the one, who interpret these tasks, becomes a surveillance subject of the process or phenomenon etc. he is provided not only with surveillance devices, but also with the certain level of knowledge, with culture, psychology, and society (social aspect’s impact on his life perception and view of life). humanity has travelled the way to such understanding over the last century. from newton’s deterministic physics and darwin’s idea in biology through the principles of relativity theory (a. einstein) to surveillance facility in quantum physics and hereafter through the modelling of development of the universe, baltic journal of economic studies 256 vol. 4, no. 2, 2018 the opening of the role of dynamic chaos and appearance of evolutionary natural science to modelling of historical systems that evolve. quintessence (centre, core) of these processes is a synergetics. however, it does not mean that its methods can and have to be commonly used; the methods of synergetics do not work where; there is no development of the system (systems). postnonclassics is mostly pronounced in tasks of optimal making decisions, ecologic tasks including human’s impact on nature, economic tasks of determining human needs considering his psychology and society’s possibilities. let us briefly describe the differences-characteristics of classical, nonclassical, and postnonclassical science by the scheme of philosopher stepin, v.s (2003). classical paradigm lies in the fact that human raises a question to nature or any object and the object (nature) answers: the investigation revolves only around the object. the impact of level of researcher’s life perception does not count. nonclassical paradigm  – investigator raises the question to nature and receives an answer from it, but in that answers the object’s aspects and the ways that his question’s raising are considered. the principle of the ratio of experiment’s result to studying (surveillance) facility is emerging, i.e. there is an impact of surveillance act on the system (object), which cannot be neglected. it can be schematically illustrated in this way: an express condition of nonclassical paradigm is the consideration of ways and methods of posing the questions and object’s aspects. postnonclassical paradigm lies in the fact that the investigator raises the question to nature, which gives an answer, but now the answer depends also on quality and characteristics of the investigator, object, ways of investigation, methods and level of understanding of the subject-investigator. as of today, such an approach is considered the newest, objective, and giving ample opportunities for studying the complicated phenomena and processes that are the object of synergetics’ studying. 2.2. methodological principles of synergetics the modelling of complicated systems, which evolve, not only of natural and of technical but also of liberal and economic, becomes mainstream and interdisciplinary direction of science in ххі century. that is why it is necessary to distinctly present the principles and methods (technologies) of approaches to such systems’ modelling. the main methodological principles of synergetics are being chosen by several criteria: 1. the principles of the methodology of synergetics can and mostly have to be in such dependence that they could be expressed one in terms of another. for example, the definition of “gene” cannot be defined without such definition as “organism”, which part it is. 2. systems of complicated phenomena and processes can be modelled and built in various coordinate systems of various measurements. then the problem of conversion of such systems from one coordinate system to another appears. 3. the number of principles has to be enough, but not too big. a person, who uses them, will not have an opportunity to simultaneously keep track of their maintenance in real modelling. 4. systemacity, systematic approach to the study of complicated processes, phenomena etc. this is an express condition (principle) of the methodology of synergetic investigations in any field of their use as of today. subject investigator methods of study object (phenomenon, process) subject investigator methods of study (necessarily) object (phenomenon, process) subject (features) investigator methods of study (features) object (phenomenon, process) fig. 1. schematic illustration of classical paradigm’s core fig. 2. schematic representation of nonclassical paradigm’s core fig. 3. schematic representation of postnonclassical paradigm’s core baltic journal of economic studies 257 vol. 4, no. 2, 2018 professor budanov, v.g. (2007) has studied the methodological principles of synergetics from a critical point of view of their really practical use in economic tasks of modernity. any evolutionary process is presented by a range of changes in conventional conditions of order and chaos in systems that are linked by phases of transition to chaos (system’s destruction) and way out of chaos (self-organization). only one of above said stages we call a homeostasis of the system. this is a stage of the table existence of complicated system as it was called existence by prof. budanov (2007). it, as a rule, is the longest and has stable characteristics, the rest of stages of existence of conditions of existence of complicated systems, phenomena, processes are called the colostral stages and crisis stages. such a classification is somewhat conventional because even in steady state condition of system’s existence, there is an element of chaos and the element of order may be found in chaos (crisis). the problem is in the degree of their blend, i.e. correspondence of one small part to another. nature, as a rule, evolves by “baby” steps, so the condition of existence is inherent to it. the principles of this condition are: 1) homeostatic and 2) hierarchical pattern. they characterize the phase of order, the stability of system’s functioning, clarity and description’s simplicity. for example, in nature, it is a day-night biorhythm, the circle of seasons etc. prof. budanov has distinguished also other five principles of the colostral stage: 1) nonlinearity; 2) imbalance (instability); 3) nonclosure; 4) dynamic hierarchical pattern; 5) surveillance (observance) (2007). these principles characterize the transformation stage, system upgrade, passing successive steps by this system by old order’s destruction and chaos of change of alternatives and eventually the inception of the new order. herewith first three principles are the principles of the methodology of synergetics that give birth to the colostral stage of the new system of order. and the last two of them are constructive, they provide the new system with its compilation of corresponding details and constructions (characteristics-aspects) and also give investigators an opportunity to understand, observe and describe “the new order” and they give him its coexistence with the environment. let us have a closer look at above-said principles and estimate them from a perspective of using the economic systems in synergetic methodology. ultrastability of the system is a phenomenon, which has to keep the system’s functioning within bounds – limits that allow it to have a sense of purpose (goal). according to n. wiener, any system has a purpose (goal) of its existence, according to which the systems’ motion is being corrected (2003). such a correction is being provided by corresponding signals, characteristics, features, and aspects, which hold any negative impact from outside under. for example, this is exactly how homeothermal creatures behave in nature when for survival as a goal they maintain the stable body temperature despite any temperature variations in the environment. the purpose (goal)  – the program of system’s behaviour in the condition of homeostasis (ultrastability) is called an attractor in synergetics. in space of system’s conditions, the attractor is a certain variety of characteristics of the phenomenon, process etc. which in due course the closest system’s conditions that are being drawn to. area (field) of attractor’s attraction is called his basin. it is worthy of note, that attractors exist only in open dissipative systems, i.e. systems that dissipate the energy, material and information and describe the final behaviour (condition) of the system, which usually is simpler than transient process. examples of simple attractors in mechanics are a pendulum that attenuates in the lowest point of motion or a ball at the bottom of the hole. these are the attractors of equilibrium. nevertheless, more complicated attractors are possible too, for example, the flight of an eagle in the air blasts, the air, on the one hand, moves from the ground and on the other hand  – downwind. if there is no such motion, then the eagle will not be able to hover (fly). such structures that exist only until they contain the additional flows of energy or material are called dissipative (those, which dissipate the energy) – are far from equilibrium and stability. living systems of existence are exactly such systemsstructures  – they die without a constant inflow (flushing) of energy or material through them, i.e. without the metabolism. this principle unites the ideas of cybernetics, system analysis, and eventually  – the synergetics. one more important principle is a hierarchical pattern of the systems-structures. the main hierarchy’s matter in nature is the fact that constitutive nature is the highest level in relation to lower ones that are a structureless element of chaos, i.e. just a construction material. for example, the hierarchical system “society” is the highest level, which consists of the lowest – people that form this society; atoms of material consist of cores, electrons etc. these are words, phrases, texts etc. in language; these are understanding, views, ideologies etc. in the world of ideas (science). these levels are hierarchical structures (ladders) that exist everywhere around us. always, when elements are being united in structures, they pass them a part of their characteristics, which become the characteristics of the system itself. such system’s characteristics are called “the order parameters” and their functioning nature is called the principles of submission, i.e. the variation of a parameter of the baltic journal of economic studies 258 vol. 4, no. 2, 2018 lowest order, by giving its characteristics to the general system, submits the generalized characteristics of the system (structure) of the highest order. the phenomenon of their specific, i.e. mutually agreed coexistence is called self-organization. it is worthy to lay emphasis on circular causality in phenomena of selforganization, interdependence and interconditionality of the behaviour of elements of two neighbouring orders. for example, in the stream (flashy flow), there is a water motion (main one) that sucks the small substances (sand, leaves etc.) in and forces them to move along with the water. these substances, in their turn, give their characteristics, in this case – pollutions, to the water. an important characteristic of such hierarchical systems is the impossibility of full reduction (junction of its components)  – a reduction of characteristics of structures of more complicated orders to the language (motion, features) of structures of more simple (low) orders of the system. a specific role in systems’ hierarchy is time because the synergetic principle of submission if described and defined by h. haken exactly in time  – temporary system’s hierarchy (1993, 2003, 2004). such closest levels in systems’ investigation are micro, macro and mega levels. above said principles of existence need their supplement with colostral principles, which are the driving force of evolution. methodological principles of synergetics that cause the “colostral” principles are nonlinearity, nonclosure, and instability. main principle  – the rule of nonlinearity is a contravention of the principle of the super offer in the certain phenomenon (process): the result of adding the impacts on the system is not the adding these impacts’ results. the causes’ results cannot be added. this means that the result of adding the causes does not equal to the union of causes’ results. customary borshch can be an example, it consists of n-number of ingredients and in the same time, it is not a simple union of its components, but it is the new quality of these components under the influence of heat treatment of these ingredients. the principle of super offer does not extend to nonlinear systems when two factors’ effect on the situation causes an effect, which has nothing to do with the results of the certain effect of each factor. the development in nonlinear systems is by nonlinear laws that lead to the multivariance of ways of selecting and of alternatives of exit from the state of imbalance and instability. in nonlinear systems, the processes, phenomena etc. can be of deeply threshold nature, when there is their slip-and-stick transformation to another feature during the gradual change of external conditions. herewith, the old structures are being damaged, sometimes there is their full destruction and they transform to qualitatively new structures. unbalanced, open nonlinear systems constantly create and maintain the inhomogeneity in the environment. there some unexpected consequences can appear between the environment and the system, because there the relations of positive feedback appear, which strengthen system’s equilibrium deviation. in the processes of analysis and synthesis of nonlinear systems’ components that self-organize, the resulting deduction (the answer) can be determined not by simple adding of each component, but by synergetic method  – generalized synthesizing impact not only of each component separately but also of their generalized effect in a greater degree. such an approach in economic research is extremely necessary, but unfortunately, as of today, it is not commonly used even in scientific research. in actual fact, it is the newest approach to study the economic processes, which is debatable, but extremely necessary for modern insight and generalization of processes of society’s economic growth. 2.3. prospects for synergetics today, in conditions of accelerated and instable development of the world and economic processes, the synergetics and its methodological apparatus have, in our opinion, the defining role. this is an attempt to realize, describe, solve, and forecast the principles of evolution of economic systems, phenomena, processes etc., to consider the causes of economic recoveries and recessions. the overwhelming majority of macroeconomic models that were developed and described earlier and as of today are the axioms or close to them for one economic process or the other, contain assumptions and are based on the postulate that the economy is a closedloop system. however, it means that the processes that occur in the closed-loop systems according to the second law of thermodynamics are being drawn to the equilibrium and in due course, these processes attenuate and stop. therefore, supposing that economic processes are being described by the closed-loop system, it is logical that these attenuating processes will lead to their edge state – the equilibrium. however, the economy and its processes are the closed-loop system that falls under influence of various external and internal factors. professor v. nusratulin (2006) has proved that the economy is instable and closed-loop by its core and nature. the special aspects of nonlinearity of complicated systems, which, in our opinion, contain the economic ones, lie in these facts: – nonlinearity causes indignations and agitations of the systems (fluctuations) and can strengthen or reduce them. for example, the investment in one economic process or the other, even quite insignificant increase of financial assets (financial investment volume) causes significantly bigger gdp growth; baltic journal of economic studies 259 vol. 4, no. 2, 2018 – nonlinearity causes threshold sensitivity to the changes. for example, in the economy, the demand decreases when the production price raises and conversely; – nonlinearity provides the suddenness of changes in course of processes in the system because many various factors have a significant impact on it; – nonlinearity’s special aspect is the fact that under a certain number of changes in the environment, the transformation to another feature may not happen. true and reverse thesis  – qualitative change of the environment causes the appearance of new opportunities – system’s components, which will lead to the change of the system itself. the impossibility to neglect the external and internal conditions’ impact on the system is a specific principle of the methodology of synergetics that is according to nonclosure (openness) of the system. all living systems, as well as society, are open systems; they consume the material and energy. it is the openness that allows such systems to evolve from simple to complicated one, to open a program of organism’s growth from cell-embryo to highly organized grown organism. this means that hierarchical level might develop and be complicated only during the exchange of material, energy, and information with other levels. inanimate nature, dissipation (system’s transformation of energy, which is arriving at the system to thermal energy) can also lead to regulation of the structures. for example, the evolution of the solar system. the synergetics has originated of the description of such systems in chemistry, physics and theory of laser. the most interesting the homeostatic structures are  – the structures that are not in equilibrium with the environment, in other words, such systems, which do not have maximally possible entropy. of course, any process, when the system transforms from one condition to another, occurs that way that it is impossible for this process to be in a reversed direction for the system to experience identic intermediate states and in such event for the surrounding bodies not to experience any changes. herewith the energy dissipation will certainly occur at the expense of emission, abrasion etc. therefore, almost all processes (phenomena) in nature are inconvertible; a part of the energy is being lost in them. the concept entropy is being introduced for characterizing the energy dissipation. therefore, the entropy is a function of system’s condition, when very insignificant changes in reversible process are equal to the ratio of the very small amount of heat that was added in this process to the temperature, which was there when this heat was added. the entropy can be constant only in closed-loop systems, i.e. such systems, where there is no energy exchange with external conditions (bodies). the word “entropy” in greek (entropia) means the turn, transformation. this concept was introduced to determine the measure of energy dissipation during the reversible processes in thermodynamics; this is a measure of the probability of any macroscopic state in physics, the measure of indeterminacy of certain research that can have various results  – in information theory. entropy as a sort of “measure of chaos degree” in systems is an extremely important characteristic in synergetic research about complicated open systems. the majority of objects that we are interested in and which are being investigated in this work are economic structures and processes, ecologic and natural phenomena, enterprises, social phenomena etc., are the open systems, instable, imbalanced, open and are being managed by nonlinear laws. the principle of nonclosure (openness) of the systems by hierarchical levels lays emphasis on two extremely important circumstances: 1. processes’ self-organization becomes possible – the openness of processes, structures, and systems of the macro level will lead to the possibility of the existence of same phenomena on the micro level. 2. analogous phenomena might also occur at the level of structures (systems) of the macro level and the mega level of managerial parameters of systems that change. during the transformation from one system’s condition to another, the system becomes in a mandatory manner open in point of imbalance (instability). one more methodological principle in research about synergetic systems is an instability, disequilibrium, imbalance. the system is instable if there are conditions that cause any small variations of its parameters, which change the system’s condition. such systems’ characteristic was considered their disadvantage for a long time and bifurcation points  – points of system’s transformation to another condition were considered the points that manage the systems. the significance of bifurcation points also lies in the fact that influence on the system’s behaviour, its further development and condition can be made only in them. it is also worthy of consideration that such circumstances as the unpredictability of bifurcation points’ impact on the behaviour and hereafter on the development of systems’ condition. r . thom (1975, 1996) and v. arnold’s (2004) catastrophe theory is sometimes called the bifurcation theory because it is able to forecast the process, which can occur in the future. there are two cross-functional pre-crisis symptoms of system’s behaviour, i.e. two “premonitory symptoms” of catastrophes. the first one is called “the lull before the storm” or the pre-crisis slowdown characteristic rhythms of the system. the second one is an increase of noise fluctuations in the system near the bifurcation point, i.e. increase of chaotic variation of system’s characteristics from their average values. baltic journal of economic studies 260 vol. 4, no. 2, 2018 3. discussion and conclusions synergetics can and even has to study such systems by constructive principles. constructive principles are the principles that give the investigator the opportunities to unite, coordinate and accumulate the principles of synergetics. the development of interdisciplinary approaches turned out to be very close in form and substance to teaching or scientific popularization. in both cases, it is necessary to comprehend the way passed by researchers, highlight it in the key ideas and results, most important “for the uninitiated”, and also ruthlessly throw out many details “dear to the author.” this path may present unexpected generalization and a new vision of problems to be solved. nonlinear dynamics (synergetics) offers a basic model, new concepts and techniques, that can be applied in this situation, and that cannot be. they can be the basis of the building of a new nonlinear cognitive paradigm and may remain separate findings in various disciplines. synergetics seems us to be no dogma or even no guide to action, but a way of looking at the problem, which is sometimes very useful, in fact. although, of course, we cannot discount the form, fashion, and charm of the people involved with the synergy. references: arnold, v.i. (2004) theory of catastrophes (in russian), 4th ed. moscow, editorial-urss. budanov, v.g. (2007) methodology of synergetics in the post-non-classical science and education, institute of philosophy. m.: lci publising house, 240 p. chernavskii, d.s. (2004) synergetics and information. dynamical theory of information. urss. haken, h. (2004) synergetics: introduction and advanced topics (springer, berlin, heidelberg) haken, h. (1993) advanced synergetics: instability hierarchies of self-organizing systems and devices. new york: springer-verlag, 424 p. haken, h. (2003) secretes of nature. synergetics: the learning about the interaction, 320 p. limited (2006) chichester, 1983. regular and chaotic dynamics, 136 p. wiener n. (2003) the creator and the future, 732 p. nusratullin v.k. (2006) nonequilibrium economy. 2nd prod. additional m: satellite company, 482 p. prigogine, i. stengers, i. (1986) order out of chaos. man's new dialogue with nature, 432 p. stepin, v.s. (2003) self-developing systems and postnonclassical rationality. moscow. thom, r . (1975) structural stability and morphogenesis: an outline of a general theory of models. london. thom, r . (1996) logos et théorie des catastrophes: à partir de l’oeuvre de rené thom, ed. jean petitot. colloque de cerisy-la-salle 1982 (patiño, geneva 1996). zang, wei bin (1999) synergetic economics. time and locusts in the nonlinear economic theory / v. zang, m. ostrovsky (translated from english) – moscow: mir, 366 p. baltic journal of economic studies 198 vol. 4, no. 2, 2018 corresponding author: 1 logistics department, national aviation university. e-mail: remyga_julia@ukr.net 2 logistics department, national aviation university. e-mail: poznyak_ov@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-198-208 a theoretical approach to the formation of subjects’ interaction in supply chains at risks conditions yuliia remyha1, oksana pozniak2 national aviation university, ukraine abstract. the purpose of the paper is to develop the substantiation of a multilevel subjective interaction of market logistics services participants taking into account the risks conditions in supply chains. methodology. the research is based on the use of the following general scientific and special research methods: the system and process approach  – to substantiate the theoretical positions to formation of multilevel subjective interaction and the concept of risk management in the supply chains; methods of logical-dialectical analysis – for the disclosure of the theoretical and conceptual provisions of the supply chain management and the determination of the relationship between main entities (participants) and the logistics operator in the supply chains at risks conditions. results of the research showed that three levels of subjective interaction between market participants of logistics services in supply chains could be formed. in this situation, there is a possibility to identify aspects and sources of increasing the efficiency of business processes’ integration in supply chains according to micro, meso, and macro levels. practical implications. the development of an adaption system to risk situations in the system logistics integrator activity (operator of the logistics market) which includes identification subsystems, prevention of the occurrence conditions, risks localization and dissipation, as well as procedures and methods for compensating for risk losses, allows adjusting the logistics operator’s activities in real time and evaluate its contribution to the performance of the supply chain. value/originality. the value of the research is to determine the exclusive role of the system logistics integrator as the main interaction subject in the market of logistics services and the grading subject of systemic risks in the supply chain. key words: supply chain, supply chain entities, logistics provider, logistics operator, system logistic integrator, risks conditions, risk management system, adaption system to risk situations. jel classification: d01, d16, d70, d9, f02, f15, l21, m2, r40 1. introduction in the context of globalization, the process of interaction of economic actors in the supply chain always occurs under uncertainty, therefore, there are risks. identification and competent risk management are necessary to ensure the sustainability of the organizations themselves and the entire supply chain that are formed as a result of this interaction. effective interaction of actors based on a long-term basis requires the consistency of interests of all participants in the supply chain and determines risk management system creation. the identification of risks of the supply chain makes it possible to model the options for interaction with the subjects and to predict the results of this interaction. consequently, the risk management system creation allows increasing the efficiency of logistics enterprises, to find ways of rational use of resources and to effectively apply logistics approaches to the practical activities of enterprises. this leads to an increase in the manageability of the supply chain, the certainty of the terms of interaction, the reduction of losses time, money, and all types of resources. today long-term and close partnerships between the supplier and the consumer are needed to meet differentiated needs of end-users and development of the potential utility of the proposal and the pooling of efforts to increase it for the successful and efficient functioning of the supply chain (harrison, hoek, 2007). the partnership should be based on mutually agreed goals aimed at achieving the overall economic effect (lysons, gillingham, 2005). the main objective of the partnership relationship between logistics companies is the transformation of long-term relationships that will be built on mutual trust, where quality, innovation, planning of delivery chains, management of transport baltic journal of economic studies 199 vol. 4, no. 2, 2018 risks, jointly created added value harmoniously complement the competitive price of goods or services (harrison, hoek, 2007). 2. investigating the activities of logistics operators in supply chains management of all the necessary processes of logistics enterprises based on a practical understanding of the economic and synergistic effect of the logistics concept, not only for transportation or providing storage services in the domestic market but also as a global phenomenon, which meets with the uncertainty demands or risks in the international foreign market. the dynamic development of the ukrainian market shows that logistics companies are trying to satisfy the needs and desires of consumers when using the full range of services, using modern information technologies and technical equipment, experience of leading foreign companies, while expanding the scope of their activities to increase profitability and other economic indicators, which characterize the competitiveness of the organization. previously, ukrainian logistics companies had an opportunity to operate on a single domestic market or within a single region. such regionalization of the enterprise’s activity could bring significant competitive advantages. however, enterprises that want to grow, flourish, do not consider narrow regional specialization as a competitive advantage. time is required to change its activities, to change development strategies  – to enter the international market. in other words, there is more and more such a concept among enterprises as “integration of supply chain management”. the concept of the supply chain also affected the development and integration of the participants and it actualized the evolution of the supply chain objectives with the evolution of the logistics operator essence (see figure 1). the intensive development of supply chains by the turn of the century has led to the expediency of using a special entity for managing the supply chain as an activity integrator  – the logistics operator. such a logistics company (operator) should integrate all functions related to the process of supplying products, form the optimal composition of integrated facilities, technologies, experience, and knowledge, coordinate logistics processes along the entire supply chain, and manage changes in the structure of the entire supply chain under uncertainty, implementing all their functions as moderators of this process. effective functioning of the supply chain needs longterm and stable relations system. to fulfil this condition, it is necessary to ensure the performance of such indicators as (stock, lambert, 2005): – failure is the likelihood of non-refusal when executing orders received from consumers within a fixed time; – longevity is the property of the chain and its constituent parts to remain operational over a long a re as o f c ha ng e efficiency improvements process improvements integration of processes supply chain management e-supply chain intelligent supply chain 1pl 2pl 3pl 4pl 5pl the end of the 80's the beginning of the 90s the middle of the 90s the end of the 90's the beginning of the 21st century the middle of the 21st century intellectual supply chain fig. 1. stages of the supply chain evolution source: revised by author based on data (krikavskij, 2006) baltic journal of economic studies 200 vol. 4, no. 2, 2018 period of time, operating in the average conditions (without overloads); – preservation is the ability of the chain and its parts to maintain efficiency after reservation, conservation or functional reconstruction. thus, the main driving forces for the development of supply chains at the present stage is the time factor that determines the need to accelerate the movement of material flow in the supply chain, as well as the space factor, namely the location and location of objects of logistics control (chuhray, hirna, 2007). it can be argued that an integrated approach to the formation of supply chains will help to achieve competitive advantages in the sphere of circulation, in the sphere of expenses, in the sphere of sales of products to all entities of this supply chain. from this, it follows that still, the main way to prevent negative consequences in the activities of logistics companies is to consider the logistics chain not as a set of separate functional activities, but as their integrated system, which requires the unity of management of the entire supply chain (see figure 2). thus, supply chain management (scm) is a complex, interactive, process, and system approach to managing all operations, from the place of supply of resources to the place of consumption. the main objective of the supply chain management should be to maximize the competitiveness and profitability of the enterprise (that is, the entire structure of the chain), taking into account the preferences of the end-user. in this regard, we can say that the integration of all processes within the supply chain should be aimed at increasing the overall efficiency of all participants in the supply chain. it should also be noted that scm is a complex process that is difficult to implement ideally in practice, as there are many difficulties encountered by the company in the operation of the company, which start from suppliers, continue during production, and end at the stage of consumption of goods and services. scm is mainly focused on the integration of processes implemented by partners within the supply chain, where the final customer is the main user (gattorna, 1998). the level of consumer satisfaction depends on the management of material and information flows throughout the supply chain. if the delivery period is broken or the product is not in stock, the entire logistics chain becomes vulnerable to competitors, as it can more logistically fulfil the task (stock, lambert, 2005). 3. development of logistics integrator in the supply chains the integration of key business processes is primarily important for improving integrated planning and controlling scm. integration as the principle of interaction in scm can be viewed on three levels of micro, meso, and macro (see figure 3). integration of business processes at the micro level is based on the principles of strategic interaction between the focus company and suppliers and customers. the difference from traditional forms of organization and management lies in the synchronization and integration of key business processes and planning and management models on the basis of a single information platform fig. 2. an integrated approach to supply chain management source: own research baltic journal of economic studies 201 vol. 4, no. 2, 2018 with suppliers and customers throughout the supply chain (smirnova, 2009). macro meso micro • directly supply chains • subjects of the supply chain • business processes in the logistics system fig. 3. levels of integration in supply chains source: own research obstacles to integration in supply chains at the micro level (volkov, 2011): 1. the concentration of one-off transactions to the detriment of long-term cooperation. 2. the insufficient intensity of goods and services flows in the mode of execution of orders of participants in supply chains. 3. the inconsistency of the organizational structure of the company with the methods of managing logistics processes on a cross-functional basis. 4. the effect of market and competitive barriers, such as restrictions on market entry, inadequate access to the market, commercial and other information, pricing, competition rules. 5. unsettled relationships with business partners, due, for example, to different approaches to solving issues related to transportation, cargo handling, storage, information exchange, etc. 6. financial barriers that flow from the problems of the financial and economic state of companies due to errors in forecasting, possible actions of competitors, seasonal fluctuations. let’s consider aspects and sources of the effective integration of business processes in supply chains in table 1. in modern conditions of market relations, there are various forms of integration of economic entities in the field of logistics services: contracts for integrated supply and sales management, organization of public warehouses and distribution centres, integration in management activities, formation of associations, consortiums, alliances, and unions in the field of logistics management , as well as in the creation of favourable conditions for the implementation of economic activities and the removal of mutual barriers. let’s consider the basic market advantages that allow us to realize the development of a strategy for integrating logistics companies in supply chains in table 2. preliminary conditions for the effective interaction of business partners in the conditions of cooperation are formulated (lukinskiy, panova, strimovskaya 2017): – the willingness of partners to cooperate on the basis of understanding their role in the logistics system; – application of advanced transport process technologies and terminal processing, which is determined by the state of the infrastructure; – mutual trust; – opportunities to achieve transparency in the costs of partners in the performance of joint work. also, the logistics company’s orientation to strategic cooperation with business partners requires differentiated work with clients  – not only with the already serviced company but also potential ones – that fall within its competence and can be attracted through partnerships with other operators. each supply chain within one industry is linked to other supply chains in the areas of coincidence of interests (the intersection of flows) of its counterparties: identical purchased products or services (svon, 2017). it is rational to refer with arguments that the benefits of integration can be obtained not only within a single supply chain but also between different supply chains of one or several industries (see figure 4). the idea of global integration of counterparties of various supply chains is to create a single information system for the search and management of data on sales and stocks of all counterparties participating in the system (see figure 5, figure 6). to ensure integration between supply chains, two modules should be identified (potaman, 2013): 1. performance management  – the module contains information on the performance of counterparts integrated into the system and serves to calculate kpi for each supply chain counterpart and identify bottlenecks. 2. unified information platform – the module contains information on the integrable counterparty, the supply chain to which it relates, and serves to: table 1 aspects and sources of increasing the integration efficiency of business processes in supply chains aspects of increasing efficiency sources of efficiency improvement mutually beneficial and long-term cooperation of participants in the chain; increase the accuracy of planning through unified information channels, synchronization of business processes, joint demand forecasting. reducing risks and increasing the reliability of plans and supplies; improving the quality of operational management through continuous monitoring of the entire supply chain, timely identification of deviations and irregularities in the functioning of the supply chain. reduction of overhead and transaction costs. using standardized procedures, documents allow you to eliminate duplication of effort and transmitted information. source: own research baltic journal of economic studies 202 vol. 4, no. 2, 2018 table 2 forms of integration in supply chains at the meso level forms of integration of enterprises in the industry examples of cooperation advantages and disadvantages of the form of integration informal agreements of enterprises on the joint fulfilment of certain actions for example, companies can jointly purchase goods to receive discounts for the volume of purchases; combine cargo for transportation, reducing transportation costs; coordinate the size of the package to facilitate cargo handling; use general lists of preferred suppliers, etc. the advantages of such relationships include flexibility and lack of commitment formal agreements of enterprises on the basis of written contracts establishing the obligations of each party; formation of a strategic union or partnership the basis for the formation of such unions is mutually beneficial joint work in the past when the enterprises have the confidence that none of them will be able to win if they begin to interact with other partners. strategic alliances provide for long-term obligations of the parties, which guarantee future orders and deliveries. for example, suppliers can reduce the range of products produced by releasing the remainder with the highest possible efficiency or concentrate on providing a small number of services, but of very high quality. customers also reduce the number of their suppliers, because they are confident in partners and that they do not have to look for more profitable options. however, either party can terminate cooperation without warning at any time convenient for it virtual enterprise the virtual partnership is a computer-integrated organization of economic entities in cooperative relationships, i.e. which work together and coordinate actions for profit. such partnership is based on the formation of a single organizational, technological, and information environment through the temporary pooling of resources of various enterprises. the virtual enterprise itself is not a legal entity; it can only be a coordinating body: for example, a management company that does not directly participate in the production and logistics process or one of the enterprises participates in the partnership, which is the main executor for a particular project. advantages: 1. decentralization, distribution and availability of mechanisms for the flexible formation of new organizational structures. 2. ability to quickly adapt to changing market requirements. 3. self-regulation and self-organization, coordination and interaction on the basis of business processes. 4. cooperation contributes to sharing risks between participants and reducing uncertainty disadvantages: 1. it induces the creation of new risks related to the interaction of enterprises. source: own research fig. 4. schematic representation of the different supply chains integration source: own research producer logistic integrator terminal distributor producer logistic integrator terminal distributor purpose of integration: searching for partners around the world purpose of integration: 1. searching for contractors around the world 2. checking the reliability of contractors purpose of integration: combining transport and warehouse resources integration objective: extensive and accurate reports baltic journal of economic studies 203 vol. 4, no. 2, 2018 a) compiling a catalogue of firms to find partners for each task; b) creation of an electronic platform for tenders. for the organization of a common resource, which consolidates on continuous basis information from each link of the supply chain, the following principles/ conditions must be fulfilled: – counterparties establish distinctions on the availability of information to other contractors of supply chains, both in the form of information and for each specific counterparty; – access to information in the system is only after integration of the counterparty into the system (providing data on a daily basis). let’s look at three levels of integration in the scheme (see figure 7). according to this scheme, a new subject of the supply chain appears – a system logistic integrator. the system logistic integrator is an intermediary specializing in organization and planning of commodity circulation within the framework of an organizational form of the economic flow (chain, network, channel, web) that implements a sequence of actions related to the coordination of flow processes between various elements – supply chain entities. duties of the system logistics integrator (sabatkoev, sultanov, 2012): 1. administers information flows from the client to the suppliers and back; 2. integrates it systems of counterparties in the supply chain: defines the interface, provides standardized electronic data interchange and data integration in it systems of companies. 3. forms an analytical and statistical centre to support logistics solutions. 4. provides monitoring and coordination of traffic flows. 5. coordinates the sphere of customs clearance in the logistics chain. 6. he is the manager of the quality system of all processes, including information, forecasting. the rights of a system logistics integrator: 1. receive timely and truthful information from all participants in the supply chain. 2. has an access to a complete and reliable package of documents for cargo from the cargo owner. 3. has the right to choose contractors who will carry out business processes in the supply chain. 4. to close access to a single information system to contractors with whom, for objective reasons, cooperation does not continue. 5. has the right to recover damages if they are incurred as a result of the actions of contractors. advantages of the integrated system for the customer (sergeev, 2015): fig. 5. illustration of the system operation at the level of one supply chain source: own research fig. 6. illustration of the system operation at the level of several supply chains source: own research producer logistic integrator terminal distributor unified information system unified information system baltic journal of economic studies 204 vol. 4, no. 2, 2018 1. acquires a permanent and reliable partner (longterm contract). 2. communicates with only one service provider  – the principle of a “single window”. 3. gets a clear vision of his logistics budget. 4. gets transparency in the processes. 5. gets an opportunity to continuously improve processes and optimize logistics costs. globalization processes in the world economy led to the need for global management of logistics systems. some experts see the future of logistics in the association of separate self-managed networks, which together form a global logistics system. these trends make it extremely important for logistics operators to be able to optimally set up and manage logistics processes at all levels of supply chain integration, thereby helping to minimize costs. 4. risk management system in supply chains in the supply chain, the partnership is a kind of relationship between partner companies that are characterized by openness, mutual trust, sharing of risks and benefits, which contributes to the efficient functioning of the chain as a whole. it should be remembered that the construction of the supply chain of a particular enterprise is individual in nature, so it affects the emergence of risks that had to be analysed, identified and eliminated by these “bottlenecks” in the supply chain. in turn, hau l. lee, the scientist and co-director of the global supply chain management forum at stanford university, claimed that managing the risks in supply chains on the global market is possible for those companies that will build their operations on the principles of three “a”: agility, adaptability, alignment (see figure 8). effective use of the benefits and levelling up of all the risks to the supply chain actors requires an effective risk management tool that will enable identification, diagnosis, monitoring, and development of a set of measures for the implementation of preventive, corrective, and managerial actions to address all possible uncertainties, which arise (or may arise) in the process of satisfying the needs of consumers with the supply chain participants in the conditions of global market instability distillation. the process of risk management, in the supply chain, should be systemic, timely, take into account multifactor effects and multivariate solutions, respond to the situation in the market. trends and strategies of the transport market actors should be aimed at strengthening the responsibility of interacting enterprises. this, in turn, will simplify the schemes of the interaction of all subjects of the process of cargo transportation. it will also allow logistics companies to reduce the risks of their activities by optimizing procedures at the most costly and problematic stages of traffic flow, as well as to reduce overall logistics costs. summarizing the methodological approaches to the risk management process has made it possible to establish that risk management should be carried out according to the following principles (vitlinskiy, velikoivanenko, 2004): – the principle of maximum coverage (involves the desire for the broadest analysis of possible causes and factors of risk); fig. 7. levels of integration in the supply chain source: own research baltic journal of economic studies 205 vol. 4, no. 2, 2018 – the principle of minimization (involves minimizing the types of possible risks and minimizing the degree of risk exposure to the activity); – the principle of adequate reaction (provides an adequate and rapid response to changes that may lead to a risk); – the principle of reasonable acceptance (assumes that enterprises can assume only a reasonable risk). taking into account the mentioned principles of risk management in the activity of logistic operators should be based on: 1) construction of an integrated supply chain that simplifies the risk management tasks; 2) transition from the management of individual functions or operations to the integration of activities and the integration of all possible risks in the supply chain; 3) use of the system-process view of interaction and mutual influence of risks, which will provide an integrated approach to the formation of an anti-crisis system of counteraction to risk; 4) interaction and coordination of business processes in the equitable distribution of risks, costs and revenues among all participants in the supply chain. we propose to consider a system of risk management as a set of mutually agreed methods, management tools, as well as procedures for making managerial decisions for the purpose of identifying, assessing, establishing causal relationships, developing managerial decisions for the prevention and neutralization of the consequences of a risk. structurally, such a device may not be allocated separately to the administrative unit (department); it may represent a virtual organization of collective interaction of supply chain entities. generally, the creation of a risk assessment system in supply chains is a complicated and labour-intensive process, taking into account all the heterogeneity of indicators and the need for their respective choices. an essential requirement is to take into account the role of each individual segment which is suppliers, manufacturers, logistics operators and distributors. such consistency will allow transparency to be provided fig. 8. principles of levelling risks in the supply chain source: completed by author based on (hau l. lee, 2008) agility adaptability alignment purpose purpose purpose quickly respond to shortterm changes in demand or supply; organically cope with violations of normal environmental conditions to adjust structure of supply chain taking into account structural changes in the markets; make changes to the supply network in accordance with the strategies and technologies create incentives to improve business performance methods methods methods 1. creation and support of information flow between the enterprise, suppliers and clients. 2. development of cooperation with suppliers. 3. planning operations on the principle of diversification. 4. creation of reserves in the form of inexpensive stocks, but as important components. 5. availability of a reliable logistics system. 6. develop an action plan in uncertain situations and form groups of crisis management. 1. tracking situations in the economies of different countries to identify new markets. 2. attracting intermediaries to find new vendors and logistics infrastructure. 3. evaluate the needs of end users, not just direct customers. 4. ensuring flexibility in the production process. 5. determination of the stage of the technological and life cycle of the company's products. 1. freely exchange information and knowledge with suppliers and customers. 2. clear definition of functions, tasks, responsibilities for suppliers and customers. 3. clear distribution of risks, costs, revenues in accordance with the programs of improving the enterprise's activities. the supply chain at risks conditions baltic journal of economic studies 206 vol. 4, no. 2, 2018 while simultaneously identifying the most significant aspects of the activity. the development of new strategies and organizational and economic measures for risk management in supply chains should be considered in modern conditions as a means of increasing the stability and profitability of the participants in the chain. uncertainty in the supply chain cannot reliably guarantee the full implementation of the obligations of logistics enterprises to the customer. an important feature is the fact that no one can act alone if it deals with global (international) risks. therefore, the result of the application of a universal risk management tool in the operation of the logistics operator should be the creation of an adequate system of counteracting modern threats. the risk management process in the supply chains is designed to provide an efficient combination of the required functionality, cost-effectiveness and flexibility, and, as a result, the sustainable profitability of all members of the supply chain. so, before you create a risk management system you need to: analyse the existing business processes of the logistics operator; find the main types of risk in business processes; clearly state the purpose, tasks, and requirements for risk assessment. the main ways to reduce the risks in the activities of logistics operators can be called insurance, reservation (self-insurance), hedging, distribution, diversification, minimization (asset and liability management), avoidance (rejection of the risk transaction). therefore, taking into account the whole range of methods for reducing risk levels and the size of losses for enterprises, we are offered an adaptive risk management system in the activity of logistics operators (integrators) as an instrument of a process approach to timely adaptation of enterprises to the environment conditions for the correction of their activities and increase the efficiency of its operation in compliance with risk situations or events that should include such subsystems as identifying risk types, preventing their conditions in occurrence (avoidance of risks), localization of risks, dissipation (dispersion) of risks, as well as the elimination of the consequences of risk events (see figure 9). an important feature of the adaption system to risk situations (asrs) in the activities of logistics operators is the tendency to reduce costs, especially in the transportation of goods and their protection against various types of risks. therefore, the result of the application of the asrs will be prerequisite for the establishment of a stable delivery system. such a system will provide effective control over the transportation of goods, the interaction of information flows, depending on the requirements of customers. it should be noted that an important feature that defines the asrs in the supply chain is the focus on reducing costs, especially when transporting goods and protecting them from various types of risks. in addition, fig. 9. adaption system to risk situations in the activity of logistics operators source: own research minimizing risks supply chain of the enterprise supply transportation production transportation customs transportation warehouse transportation consumer risk events risk factors identification of risks risk profile development ranking of risks risk management liquidation of risk events probability of risk adaption system to risk situations (managerial decisions) ri sk s w ar ni ng ri sk s lo ca liz ati on ri sk s di ss ip ati on lo ss es co m pe ns ati on pr od uc tio n re sto ra tio n an ticr isi s pr og ra m baltic journal of economic studies 207 vol. 4, no. 2, 2018 it is necessary to systematically analyse and evaluate the identified deficiencies in the supply chains (see figure 10). analysing this scheme, it should be determined that the main reasons for the strengthening of the role of partnership management and risk assessment in the supply chains are: increasing the level of responsibility of the logistics enterprises; increasing transparency of business; changes in international relations (including in international law); pressure from partners and the state; an increase in overall uncertainty in the business environment; ensuring continuity of supply; the desire to be more calm for all the supply processes. the risk assessment procedure in supply chains will allow all participants to: create an additional value for the company due to factors such as cost savings; reduce risk losses by 10%-30%; increase the predictability of financial indicators by stabilizing financial flows; increase the rating on the international scene; meet current international standards (remyha, 2013). 5. conclusions globalization and the integration of the world economy have led to the elimination of many traditional barriers to trade. there was an urgent need to develop international logistics coordination. the system logistics integrator is an intermediary specializing in the organization and planning of commodity circulation within the framework of an organizational form of the economic flow (chains, networks, channels, webs) that implements a sequence fig. 10. scheme of processes in the adaption system to risk situations in the supply chain source: own research analysis of external and internal factors (threats) of the enterprise isolation of "critical" points in the enterprise establishing a riskmeasurement scale the supply chain entities identification of the main risk groups in the enterprise analysis of the risk level of the enterprise as a participant in the supply chain control over "critical" risk points increasing the reliability of logistics processes estimation of the enterprise results as the supply chain entities minimizing the risk of supply chain entities entities (participant) of the supply chain entities (participant) of the supply chain minimize the supply chain risk establishing the factors (subjective and objective) of the impact on the occurrence of risk analysis of the main business processes of the enterprise, identifying the reasons for the emergence of "bottlenecks" (risk factors) development of "risk maps" of the enterprise as the supply chain entities selection of methods and development of criteria for assessing risk groups in the supply chain comparison with the risk level of other entities in the supply chain on the basis of benchmarking information diagnostics "for signals" reconciliation of failure / uncertainty of the enterprise as the supply chain entities evaluating the effectiveness of enterprise risk management in the supply chain baltic journal of economic studies 208 vol. 4, no. 2, 2018 of actions associated with the coordination of flow processes between different elements  – links of this form, and combining their interaction in accordance with the target system settings. integration as the principle of interaction in scm can be considered at three levels. integration of business processes at the micro-level is based on the principles of strategic interaction between the focus company and suppliers and customers. at the meso level, there is an integration of economic entities in the field of logistics services. there are various forms of integration: informal relations, formal relations, strategic alliances, virtual enterprises. at the macro-level, the idea of global integration of counterparties from different supply chains is to create a single information system for the search and management of data on sales and stocks of all counterparties participating in the system. at present, a new concept of consumption of a mass product is developing in the information market. within this concept, shared, remote resources provide the ability to scale calculations over networks in the form of paid services. the proposed adaption system to risk situations will allow quickly tracking the appearance of various types of risks. this, in the future, makes it possible to quickly adapt to the company, as well as to adjust its supply strategy in order to minimize the negative consequences. the research has proved the consideration of many factors and variability of risk situations, the complexity, and simplicity of their measurement, the validity, and cost of potential losses for the enterprise in the future. the verification of the reliability of the proposed system with the help of simulation allowed identifying the most significant risk factors and measuring their impact on the effectiveness of managerial decisions of the logistics enterprise. references: chuhray, n., hirna, o. formuvannja lancjuga postavok: pytannja teorii ta praktyky [formation of supply chain: questions of theory and practice], lviv: intellect-west, pp. 16-17. 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(in russian) baltic journal of economic studies 59 vol. 3, no. 4, 2017 corresponding author: 1 department of world economy and international economic relations, odesa i.i. mechnikov national university. e-mail: guralanastasiya@gmail.com 2 department of economic theory and the history of economic thought, odesa i.i. mechnikov national university. e-mail: lomachynska@gmail.com fdi and financial development as determinants of economic grow th for v4 countries anastasiya gural1, iryna lomachynska2 odesa i.i. mechnikov national university, ukraine abstract. the purpose of the paper is to analyze the influence of foreign direct investment (fdi) and financial development (qualitative and quantitative changes in the financial system and its components) on the dynamics of economic growth in v4 countries. in modern conditions, the financial system is a transfer mechanism of the business cycle and therefore affects the structure and dynamics of foreign direct investment, and especially the efficiency of their assimilation. the subject of the survey is the financial development and the fdi flows impact on economic growth. methodology. the survey is based on the evaluation of the equation, which is the barro regression specification. this model helps to find out the impact of the volume and depth of financial system on the dynamics of economic growth. gdp growth per capita is used as an indicator of economic growth. the paper proposes modeling results for the group countries (hungary, poland, slovak and czech republic). static data have been used for the period from 1992 to 2016. results. fdi has an important role in reforming and developing the national economies of the countries in visegrad group. however, today, there is a problem with the stability of fdi inflows and with the efficiency of their development, which negatively affects the dynamics of economic growth. an important factor is the insufficient level of national financial system development of the visegrad countries. all countries of the group have bank-oriented financial systems that are heavily dependent on foreign capital. at the same time, governments pay particular attention to the stability of banking sectors and set high standards for their sustainability. this holds back the financial development of the national economies of the visegrad group. at the same time, regression models for all countries confirm the importance of financial development in economic growth. the most important for v4 countries is to increase the size of the financial sector. simulation shows that the stock market has the biggest positive impact on economic growth. the creation and development of the regional financial market were proposed for the countries in the visegrad group. perhaps such an offer will not be in hungarian interests as it has a different financial system and investment policy than other countries in v4 group. however, other cee and former soviet countries will be able to join the regional market in the future. the obtained results should be taken into consideration when developing the macroeconomic policy of the visegrad group countries, implementing the policy of financial sectors development of these countries, and improving the policy of attracting foreign direct investment. key words: economic growth, foreign direct investment, financial system, financial development, countries of v4 group. jel classification: e44, f21, g20 1. introduction economies of v4 countries (poland, czech republic, hungary, slovak republic) have shown the stable growth rate during the long period of time. however, the global financial crisis (2008) has negatively affected the dynamic of economic growth. on the one hand v4 countries’ economies didn’t suffer from significant problems in comparison to other eu countries, but on the other hand pace of growth dropped significantly in comparison to their previous years. foreign direct investment (fdi) has had an important role in national economies development of visegrad group, although their influence is ambiguous. in general it can be concluded that fdi has positive impact on economic development. however, some scientists believe that this impact won’t last long and countries should not only absorb positive effects, but also develop them in different ways (fifecová, nemcová, 2015). the developed financial system is an important condition for the effective attraction and assimilation of baltic journal of economic studies 60 vol. 3, no. 4, 2017 fdi. the developed financial system can be defined, in general terms, as a set of agencies and institutions, forms and methods, financial relations’ fields, connected with the formation and use of centralized and decentralized money funds. modern research shows that its development anticipates fulfilment of three financial institutions’ functions, that speed up economic growth: evaluation and selection of investment projects, riskmanagement simplification and reduction of aggregate risks in economy, cut down the cost of capital attraction (king, levine, 1993). also, the effective financial system increases the return on innovation, alleviates the problem of moral risk, disciplines the activities of researchers and venture companies (stolbov, 2008). it can be concluded, that financial system has an increasingly important role as a transfer mechanism of business cycle. on the one hand visegrad countries managed to create a developed financial system which was effectively attracting fdi. on the other hand financial system is mainly made of the stable international banking sector. these countries require a more developed financial sector today with a variety of financial institutions. the purpose of the article is to analyze the impact of fdi flows and financial development on economic growth in v4 countries and to compare the results with previous publications in this field of study. the methodology of this survey is based on one of the barro regression specification. this model helps to find out the impact of financial development on gdp per capita growth as an indicator of economic growth. this type of model also has the indicator of investment that helps to find out the impact on economic growth and to compare financial development and fdi. four models were made for each country in v4 group. the data was taken from 1992 to 2016. 2. literature review there is a large amount of literature devoted to the analysis of the impact of foreign investment on the country’s economic prosperity. many contradictory conclusions were made by scientists. grossman and helpman, barro and sala-i-martin (1991, 2003) confirmed in their works that fdi positively affect the economic development, especially in developing and undeveloped countries. however, there is a certain necessity in the potential of host countries, human capital for the effective developing of new technologies, the existence of a certain legislative framework (protection of property rights, protection of intellectual property rights, etc.) and the existence of a well-developed financial system. it was considered in works of borensztein, gregorio and lee, smarzynska (1998, 2004). hermes and lensik (2003) in the paper “foreign direct investment, financial development and economic growth” have developed some models for determining the role of investment in the economic growth and have identified some peculiarities among countries. they explain that in addition to human capital, investment has bigger positive impact in 37 countries with more developed financial sectors. hence, financial development is an intermediary between fdi and economic growth. financial development should be comprehended as qualitative and quantitative, structural changes in financial system in general and in its components – financial institutions, financial instruments, financial infrastructure, financial behavior, etc. in the latest work, lomachynska, manchenko (2017) made some aggregated conclusions about positive impacts of fdi on economic growth in v4 group in the past. the authors claim that fdi has become the main factor in the country’s economic growth during the transformation period; fdi have contributed the new jobs for society, increased productivity and production efficiency and so on. they argue that fdi inflows have accelerated european integration, due to european origin of investment. also, fdi positively affected the balance of payment (yakubovskiy, zhuravliov, 2016). simionescu, lazányi, sopkova, dobeš and balcerzak (2017) investigated the determinants of a sustainable economic growth of v4 group. they point that fdi has the greatest impact on economic growth, except for the slovak republic. expenditures on education played a significant role only in the czech republic and the cost of new technologies has an impact only in hungary and in the czech republic. thus, they conclude that fdi has an equally important role as before in this group, so countries are focused on their involvement. afanasyev’s work (2004) investigates the interconnection between the influence of the financial sector and its separate components (banking sector and stock market) on the economic growth in 99 countries. the author concludes that financial development positively impacted economic growth at 2.2%. it is concluded, that the development of financial institutions positively influences the dynamics of fdi and economic growth. the most influential element of the financial sector is the national stock market (the greatest influence has the level of stock market development, but not its volume). the author also points that insignificant development of the financial sector has a strong positive effect on economic growth in countries with average developed financial sectors. 3. financial sector, fdi and national economic growth the economies of the visegrad countries are studied by scientists for many years. analyzing the main macroeconomic indicators (world bank, 2017) and financial stability reports of poland, czech republic, hungary and slovak republic (financial stability baltic journal of economic studies 61 vol. 3, no. 4, 2017 report may 2017, 2017) can be concluded that governments of countries manage to maintain positive trends, but growth rates slightly decreased. the gdp indicator is growing from 2009 in poland, czech republic and slovak republic, but indicator of gdp growth doesn’t attain the pace of growth in pre-crisis period. the indicator of gdp was shortening during the last three years in hungary, due to reduction in fdi inflows from eu countries and reduction of lending to business entities. the central government debts have declined in general over the last 3 years in the visegrad countries. it is a positive trend, especially for hungary. the average central government debt is 55% of gdp in poland, the czech republic and the slovak republic. the central government debt was 96% of gdp in hungary in 2015. the positive dynamics in hungary’s government debt reduction were achieved as a result of the debt obligations restructuring of social institutions and local governments, but government debt servicing remains high. the control of central government debts stays important due to the eu debt crisis and migration crisis, that has negative fiscal consequences in certain eu countries. the fdi inflow has significantly decreased after the financial crisis 2007-2008 in v4 group. the indicator of fdi inflows doesn’t exceed 4% of gdp in poland and the czech republic and no more than 6% of gdp in slovak republic over the past seven years. this indicator was mostly negative in recent years in hungary. this trend is connected with general reduction of eu financial assistance and with a decrease in the investment of private european companies to v4 group. the big amount of fdi inflow was directed to the real economy sector, for example constructing factories. nowadays, those projects function independently and do not need significant investments. however, the visegrad countries continue to pursue an active investment policy and improve an investment climate. fdi have been assimilated mostly through the international banks in the past. nowadays the government of each country attempts to coordinate investments’ flows and their assimilation through the investment funds and other non-bank financial institutions. financial systems are quite developed and bankoriented in poland, the czech republic, hungary and the slovak republic. another peculiarity is a high level of internationalization, that have had a positive impact in the past, but it is a restraining factor of financial development today. banking sectors are highly stable in v4 group. they haven’t gone through significant changes under the influence of the financial crisis. the government continues to carry out the policy to stabilize the banking sector; to carry out the stress tests and to control financial stability of banking institutions. the national stock markets remain weakly developed. poland’s stock market is actively developing especially until 2013. it was predicted that the warsaw stock exchange would be regional for the cee countries. however, the development of poland’s stock market has slowed down significantly over the past 3 years. stock markets are developing at an even lower pace in other countries. mostly domestic companies are listed there. the visegrads’ stock markets are underdeveloped, and their volumes are not sufficient for effective economic growth. other financial institutions are developing faster than stock markets. particular attention is paid to the development of investment and pension funds by national governments of v4 group. pension reforms are taking place in poland, hungary and slovak republic. these reforms still have negative consequences, but they are short-term. it is expected that they will positively affect the development of social economic prosperity of countries in the long-run. 4. data and methodological basis of the study. one of the barro's regression specification was selected for this regression analysis (stolbov, 2008). this specification is found in formula (1). gdppc a b* cap sm loans c* finassets gdp d * investment gdp = + + + + . . ε , (1) gdppc – annual growth rate of real gdp per capita; “capital of securities markets/loans” – the ratio of market capitalization to the volume of loans issued by commercial banks to private sector; “financial assets/gdp” – share of the total assets of central bank, commercial banks and non-banking financial institutions in gdp; “investment/gdp” – the share of investment in gdp, and “a” – free part of the regression equations; “b”, “c”, “d” – individual coefficients of sensitivity of the gdp per capita growth rate to the change of the corresponding variables, ε – the error of regression. indicator “capital sm/loans” shows the type of financial structure (bank-oriented or market-oriented). this indicator does not exceed 0,5 in all countries (poland, the slovak republic, the czech republic and hungary). hence, the financial system is bank-oriented. indicator “financial assets/gdp” characterizes the financial depth of the national economy setting aside the type of financial structure. its indicate whether financial development influences gdp per capita growth and how. indicator “investment/gdp” – reflects the importance of investment in the real sector of the national economy. it will be possible to make a conclusion on the role of financial development and investment in the national economic development, according to the results of the analysis. this approach, that used stolbov (2008), shows the link between financial and economic development of the country. in the analysis of 21 countries (different baltic journal of economic studies 62 vol. 3, no. 4, 2017 in terms of development), the author made the following main conclusion: the lower level of country’s development gives the greater likelihood that the indicator of financial depth negatively affects the rate of economic growth; there is a close link between financial and economic development that has direct or indirect influence (due to increased investment in the real sector, labor productivity) in developed counties; underdeveloped and developing countries should focus on the dominance of banking institutions in the financial system; developed countries should focus on the institutes of stock market; development of stock markets affects innovation activity more that banking development; financial development leads to a poverty reduction. 5. presentation of results data was used from 1992 to 2016 for the construction of regression models for poland and hungary and data from 2000 to 2016 was used for the czech and slovak republic because of the lack of a complete set of data. all data was taken from the world bank website. the table 1 presents the results for the four constructed models for each countries of visegrad group. an addition model was built for the czech republic, after excluding the indicator of investment. according to the results in table 1, it is confirmed that the investment in the real sector has the greatest influence on the development of the national economy of poland. indicator “cap.sm/loans” has a small positive impact on the dynamic of gdp per capita and the indicator of financial depth is insignificant. thus, it can be generalized that the further dynamic of economic growth depends on investment inflows in poland. paying attention to the structure of investment inflows and to the state of financial development in poland, it can be concluded that it is advisable to actively develop the financial system, using institutions of stock markets and non-banking institutions. the czech model results are differed the most from other countries in the group. indicator “cap.sm/loans” has the largest positive impact on the dynamic of gdp per capita growth. also, a positive, but less significant impact has the indicator of financial depth. investment in the real economy sector has a positive impact on the economic development, but this indicator is insignificant in this model. therefore, another model was build without indicator “investment/gdp”. new model demonstrates that the largest impact has financial depth. however, growth of indicator “cap.sm/loans” negatively affects the growth of the gdp per capita. it can be assumed that the current investment policy in’t sufficiently effective for national economic growth in czech republic. this may also be explained by the fact that the insufficient level of development and efficiency of the financial market negatively affects the structure and dynamics of investment inflows. most of the fdi that enters the czech economy continues to be assimilated through foreign banks in the country. the indicators “cap.sm/loans” has a significant positive effect on economic growth in hungary. however, indicators “fin.assets/gdp” and “investment/ gdp” negatively affect the dynamic of gdp per capita growth. this can be explained by the fact that there have been outflow of fdi from hungary in recent years, as well as high level of economy and financial sector internationalization. the positive dynamic of the economic growth is determined by indicators “cap.sm/loans” and “investment/gdp” in the slovak republic, according to the results of the model. financial depth indicator has a negative impact on the dynamic of the gdp per capita growth. it can be explained by the fact that the slovak republic has the least successful results of reforms, that were carried out in the 1990s, in comparison with other countries of visegrad group. nowadays, the slovak republic is less developed than other countries of v4 group. however, the slovak government has managed to ensure a stable positive dynamic of the main macroeconomic indicators in recent years. table 1 parameters of the regression models of poland, hungary, the czech and slovak republic country model poland gdppc * cap sm loans * fin assets gdp * in = + − +2 307 3 204 0 224 53 5, , . , . , vvestment gdp gdppc * cap sm loans * fin assets gdp * in = + − +2 307 3 204 0 224 53 5, , . , . , vvestment gdp , r2 = 0,751 fst = 50,818 relev. = 0,000 (3,199) (1,724) (0,565) (5,739) czech republic gdppc * cap sm loans * fin assets gdp *= + + +0 936 4 839 0 181 57 327, , . , . , iinvestment gdp gdppc * cap sm loans * fin assets gdp *= + + +0 936 4 839 0 181 57 327, , . , . , iinvestment gdp , r2 = 0,624 fst = 7,206 relev. = 0,004 (0,235) (1,127) (0,165) (2,843) gdppc * capsm loans * fin assets gdp = − +2 428 3 762 74 562, , . , . , r2 = 0,408, fst = 6,547 relev. = 0,007 (3,423) (1,854) (3,455) hungary gdppc * cap sm loans * fin assets gdp = + − −2 458 1528 348 0 090 3 79, , . , . , 55* investment gdp gdppc * cap sm loans * fin assets gdp = + − −2 458 1528 348 0 090 3 79, , . , . , 55* investment gdp , r2 = 0,280 fst = 4,350 relev. = 0,011 (1,550) (2,827) (0,142) (2,582) slovak republic gdppc * cap sm loans * fin assets gdp = + − +4 198 22 769 2 452 20 376, , . , . , ** investment gdp gdppc * cap sm loans * fin assets gdp = + − +4 198 22 769 2 452 20 376, , . , . , ** investment gdp , r2 = 0,644 fst = 40,680 relev. = 0,000 (2,496) (4,887) (2,001) (2,803) t statistics of indicators are indicated in brackets. source: calculated by the author (the world bank, 2017) baltic journal of economic studies 63 vol. 3, no. 4, 2017 thus, it can be concluded that the financial development has an important role in ensuring the economic growth of the visegrad countries. the institutions of the financial markets have the greatest positive influence on economic development. this should be used in national policies that aimed at financial development. 6. conclusion the analysis of the dynamic of fdi, the main indicators of economic development, the financial systems and its impact on economic growth allows making some conclusions for visegrad countries. 1. the analysis of the main macroeconomic indicators and indicators of financial development of poland, hungary the czech and slovak republic show that the countries of visegrad group manage to maintain a positive dynamic of economic growth. however, its pace is decreasing, despite the positive reforms that are taking place in the countries. the assessment of financial stability reports shows that governments are paying a lot of attention to the stability of banking system and setting a very rigid framework that reduces the pace of development in all v4 group. 2. the results of the regression analysis confirm conclusions that were mentioned earlier by other authors. the fdi and financial development have positive effect on the economic development of the countries in v4 group. however, there is a necessity for increasing volume of financial sectors rather than for the increasing financial depth in poland, hungary, the slovak republic. on the contrary, there is a need to increase financial system’s volume and depth in the czech republic. in addition, the stock market development has a greater effect on economic growth than banking sector development. thus, it can be claimed that financial development is a prerequisite for accelerating the economic growth of the visegrad group. 3. as was indicated a certain level of financial development is required for effective assimilation of fdi. the financial sector is characterized by a lack of development and efficiency in all countries in v4 group. this reduces the effectiveness of fdi development because the financial system does not play the role of mediator for investment inflows in national economy. the governments of the visegrad countries are trying to pursue the policies that aimed to develop the financial sector of the countries. these reforms have begun to take a place in recent years and have long-run prospects, so now can only be assumed that they should accelerate the paces of economic development. 4. the 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(2002). composition of foreign direct investment and protection of intellectual property rights. evidence in transition economies. policy research working paper, 2786. retrieved from https://openknowledge. worldbank.org/bitstream/handle/10986/15634/multi0page.pdf ?sequence=1&isallowed=y stolbov, m.i. (2008). vliianie finansovogo rynka na ekonomicheskii rost i delovye tsikly [impact of financial market on economic growth and business cycles]. ekonomika xxi veka – economy xxi century, 8, 55-69. world bank (2017). world bank data. countries and economies. retrieved from https://data.worldbank.org/ country yakubovskiy, s., & zhuravliov, o. (2016) transformatsiia ekonomichnykh system krain vyshehradskoi hrupy [transformation of the economic systems of the countries of the visegrad group]. odessa: onu, ukraine, 172 p. анастасия гураль, ирина ломачинская пии и финансовое развитие как детерминанты экономического роста для стран v4 аннотация. целью работы является анализ влияния прямых иностранных инвестиций (пии) и финансового развития (качественное и количественное изменение финансовой системы и ее компонентов) на динамику экономического роста стран вышеградской группы. в современных условиях финансовая система является передаточным механизмом делового цикла, а значит влияет на структуру, динамику прямых иностранных инвестиций и особенно на эффективность их освоения. предметом исследования является финансовое развитие и влияние потоков пии на экономический рост. методология. исследование основано на оценке уравнения, которое является спецификацией регрессии барро. эта модель позволяет оценить влияние объема и глубины финансовой системы, пии на динамику экономического роста. в качестве показателя экономического роста используется прирост ввп на душу населения. в работе предложено результаты моделирования для стран группы (венгрия, польша, словакия, чехия). использованы статические данные за период с 1992 г. по 2016 г. результаты. ппи сыграли важную роль в реформировании и развитии национальных экономик стран-участниц вышеградской группы. однако на современном этапе существует проблема стабильности притока пии и эффективности их освоения, что негативно влияет на динамику экономического роста. важным фактором этого является недостаточный уровень развития национальных финансовых систем исследуемых стран. все страны группы имеют банкоориентированные финансовые системы, которые сильно зависят от иностранного капитала. при этом правительства уделяют особое внимание стабильности банковских систем и устанавливают высокие требования к их устойчивости. это сдерживает финансовое развития национальных экономик стран вышеградской группы. в тоже время модели регрессии для всех стран подтверждают значимость для экономического роста финансового развития. наиболее важным для стран v4 является увеличение размеров финансового сектора. моделирование демонстрирует, что наибольший положительный эффект для экономического роста имеет фондовой рынок. предложено создание и развитие регионального фондового рынка стран вышеградской группы. возможно такое предложение не будет интересно венгрии, учитывая особенности ее финансовой системы и инвестиционной политики в сравнении с другими странами v4. в тоже время к региональному фондовому рынку v4 в будущем смогут присоединиться другие стран центрально-восточной европы и другие постсоциалистические страны. полученные результаты следует учесть при разработке макроэкономической политики стран вышеградской группы, реализации политики развития финансовых секторов этих стран, а также усовершенствовании политики привлечения прямых иностранных инвестиций. baltic journal of economic studies 25 vol. 4, no. 1, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-1-25-30 external experience for the execution of exchange regulation and possibilities of its application in ukraine yevgen barash1 institute of penal service, ukraine yurii kryvytskyi2 national academy of internal affairs, ukraine sergii ablamskyi3 kharkiv national university of internal affairs, ukraine abstract. the aim of the article is to conduct a comparative legal study of statutory legal acts, which define the legal framework for the implementation of currency regulation in some foreign countries and in ukraine and which determine on this basis ways to improve domestic legislation in this area. the subject of the research is the experience of currency regulation in some european countries, usa, china, and ukraine. methodology. the research is based on a comparison of foreign exchange regulation in ukraine and in foreign countries. advantages and disadvantages of different modes of state control over currency circulation are determined, on the basis of the analysis of peculiarities of the state regulation of currency circulation in the united kingdom, germany, france, poland, the usa, china, and in some other countries: from floating rate regime to rigorous state control. on the basis of the comparative legal study of certain provisions of the administrative legislation of ukraine, the possibilities and limits of the application of positive foreign experience in this field are determined. the results of the study have shown that in order to implement foreign exchange management experience, it is necessary to postpone the final transition untill establishing a floating rate regime. it is possible to make it by reinforcing state interference. at the same time, it is necessary to strengthen currency control not only over the implementation of foreign exchange operations but also over the activities of subjects that determine the state policy in the field of currency regulation, as well as over those, who directly carry out the corresponding activity using the tools specified by provisions of the current legislation. practical impact. the positive experience of the formation of the foreign exchange market in foreign countries shows that the gradual transition from a fixed to a floating exchange rate is the beginning of a natural market exchange rate and the equalization of the balance of payments and the gradual release of the national economy from the pressure of administrative and corruption restrictions. value/originality. conducting the comparative analysis of foreign exchange regulation in foreign countries is the basis for developing the most promising directions for the development of domestic legislation in this field. key words: foreign experience, currency regulation, exchange rate, currency control, eu countries. jel classification: f31, f33, o24 corresponding author: 1 institute of penal service. 2 department of theory of state and law, national academy of internal affairs. 3 department of criminal procedure and organization of pre-trial investigation, kharkiv national university of internal affairs. 1. the problem statement today, the ukrainian government faces an important task: to provide a stable hryvnia exchange rate, to strengthen the national economy of the country, to raise the level of well-being of each individual citizen. one of the main ways to solve these problems is the implementation of the effective currency regulation. however, it is sad to note that the state of currency regulation in our country leaves much to be desired, which can be proved by: firstly, the constant fluctuation of the exchange rate; and secondly, high inflation and depreciation of the hryvnia; thirdly, a sharp increase of the poverty, a decrease in its purchasing power; fourthly, the weakening of ukraine’s position in the international market. the issue of improving the legal framework for the implementation of currency regulation is baltic journal of economic studies 26 vol. 4, no. 1, 2018 particularly acute under such conditions. we should pay a special attention to foreign exchange regulation experience in this context. if we will analyse the positive experience of the leading countries of the world, it will help to identify weaknesses in domestic legislation and suggest solutions to these problems. 2. the state of research v.i.  mischenko, a.s.  galchinskyi, yu.m.  bezditko, o.i.  kabanets, v.d.  kolga, o.v.  boryshkevych, i.v.  krasnov, v.s.  biloshapka, o.o.  manuilenko, o.a.  kostiychenko, e.o.  alisov, l.k.  voronova, yu.v.  vashchenko, s.v.  mochernyi, o.v.  dziublyk, v.i. harkavenko and many other scientists studied some of the problematic issues of currency regulation. however, despite a large number of scientific researches, there is no single comprehensive study, which is devoted to foreign experience in the implementation of currency regulation. that is why the aim of the article is: to consider foreign experience in the implementation of currency regulation and to determine possibilities for its application in ukraine. 3. statement of the basic material considering the foreign experience of currency regulation, in our opinion, it is necessary to draw attention to three aspects: first, the experience of the eu; and second, we need to consider how currency regulation takes place in the united states; thirdly, it is necessary to pay attention to the countries of the east and, in particular, to china. among the countries of the european union, first of all, we want to talk about great britain, who left eu and it was one of the most acute and debated issues in 2017. but, actually, the official secession of the kingdom from the eu should take place on march 29, 2019, at 23:00 london time, and only after the uk will fulfil all the necessary conditions. the active development of currency regulation in britain began after the end of the second world war. the devaluation of 1949 did not solve problems of the english currency. the progressive deterioration in the balance of payments, which began in 1964, had led to the fact that neither foreign lending nor the raising of the discount rate by the bank of england could stop the decline in official gold and foreign currency reserves. every time, when the state of the balance of payments deteriorated, there were mass transactions involving the sale of pounds sterling, which worsened the currency position of the country even more. in november 1967, a second post-war devaluation was held at 14.3%. the pound sterling to the dollar had fallen to 2.4 dollars. this devaluation was supplemented by credit and financial constraints, the impact of which reflected the balance of payments situation after 1.5 years. in 1969-1971 years, england had a positive balance on current operations. therefore, in december 1971, the pound sterling was revalued against the dollar. the new rate was $2.6. but this stabilization was shortlived (shamova, 2007). the sharp deterioration of the balance of payments in 1972 forced the british government to establish a floating exchange rate regime for its currency. from this period began a sharp decline in the rate. in 1976, it dropped by 40% compared with 1971. the crisis of confidence in the pound sterling had led to the fact that since 1976, the government had a policy of restricting its role as a reserve currency, which accelerated the final disintegration of the sterling zone, which by the end of the 70s stopped to exist. since mid of 1977, the pound sterling strengthened against the dollar. it was connected with the wave of capital into the country due to the start of oil production in the north sea during the oil crisis. but due to the economic crisis of the 1979–1982 years, the outflow of capital from the country began and a tendency to depreciate the pound sterling appeared again. in recent years, one of the reasons why britain did not join the countries, which introduced the euro to the non-cash circulation since 1 january 1999, was the increase in the rate of this currency (shamova, 2007). the bank of england used various instruments in its fight with the inflation. the neo-keynesian approach to currency regulation prevailed by the end of the 1970s. three methods were used: the change in the interest rate of the bank of england, the change in the provisions of the reserve, and the direct selective methods of controlling the bank loans to the private sector. the main instrument of selective regulation was the so-called credit limits, that is, the establishment of quantitative limits on loans to the private sector. such limits were added with the instructions from the bank of england, about categories of borrowers, to whom should be given benefits in lending. besides, various restrictions on the purchase of commercial bills by commercial banks and discount companies were introduced, the terms of consumer credit were regulated, etc. (shamova, 2007). starting from may 11, 1999, the bank of england publishes a daily index of the exchange rate efficiency, taking into account the volume of trade in the eurozone. it is necessary to note that the main feature of great britain is that the currency control system does not exist in it, so you can actually buy back or return as much money as you want. you just need to declare about the import of foreign currency in your customs declaration but there is no legal prohibition to physically move money to and from the country. due to the fact that the united kingdom is still a member of the european union, there is still no control or obstacle to the transfer of money beyond its borders because each eu member state is governed by the same european laws, that is, it does not hinder the movement of the currency. the main regulatory act in the field of currency regulation in baltic journal of economic studies 27 vol. 4, no. 1, 2018 the uk is the law “on currency control”. provisions of this law provide authority and impose obligations and restrictions in the field of currency exchange. the currency control bodies include the treasury, the bank of england and authorized banks that have a currency license, as well as customs and excise authorities. the british treasury is the main body of currency control. however, most of its powers, it has delegated to the bank of england, which directly exercises currency control. the bank of england manages its affiliates and authorized representative offices in most commercial banks (both domestic and foreign), which are located in the uk and which execute a wide range of transactions with its permission. customs and excise authorities control the movement of capital and currency across borders (shmyreva, 1999). we need to note that the uk legislation lacks the rules that oblige participants in currency relations to ensure the receipt of foreign exchange earnings from non-residents on their bank accounts. if the price of the imported goods is not established in the british national currency, the conversion of other types of currencies to the british is made according to the average monthly rates. it should also be noted that on the uk government website, there is information that, in the case of payments for goods exported in foreign currency, exporters may experience a currency exchange difference due to exchange rate fluctuations. besides, on this website, you can find recommendations about how to avoid or minimize potential losses during conversion. talking about german experience of currency regulation, we should point out, first of all, that this country has an open and attractive attitude towards foreign direct investment. the legal framework for fdi in germany contributes to the principle of freedom of foreign trade and payment transactions, as it is provided by the law “on foreign trade and payments” (außenwirtschaftsgesetz).this legal act allows you to set restrictions on foreign direct investment both externally and abroad due to the reasons of foreign policy, foreign currency or national security. however, in practice, such restrictions are rarely imposed. we should note separately that, in cooperation with other eu members, germany has an impressive arsenal of rules and institutional procedures aimed at the implementation of currency regulation. in fact, in germany, currency regulation is carried out by the european central bank, which is in frankfurt, and it is headed by a multinational commission of delegates from the central banks of the participating countries. the german central bank, deutsche bundesbank, is responsible for the coinage of deutschemarks in circulation. it also sends representatives to the board of directors of the european central bank. within germany, it exercises various supervisory functions in the banking system, acting jointly with the federal financial supervision authority. considering the experience of germany in the field of currency regulation, we should also pay attention to the system of currency control. the system of currency control in germany is based on such legislative acts as: the federal law “on the german federal bank” (bundesbank), the federal law “on foreign exchange turnover and control of goods” (foreign exchange act) (khamaganova, 2001). according to german legislation, the exclusive competence in the field of capital movements and the operation of foreign exchange operations is owned by the federal bank. it should be noted that although there is the presence of a free movement of capital in germany, there is also control in the form of accounting for capital, which crosses the state border. information on the movement of capital across borders is collected and transmitted through banks and lending institutions to the bundesbank, where a data analysis is conducted. this analysis allows developing specific measures for the regulation of the foreign exchange market (platonova, 2006). as a result of the liberalization of currency control in germany, the issue of organizing counteraction to the use of financial systems for the purpose of money laundering, which was received by criminal means, became acuter. the federal law “on the identification of revenues gained as a result of serious criminal offenses” was adopted in 1993 in order to solve this issue. in accordance with this law, the function of controlling financial operations is assigned to the federal bank of germany. thus, the system of currency control in germany serves as a control over financial transactions with foreign currency, counteracting the legalization of criminal proceeds (lisovol, 2017). france is another eu country that we will focus on. it should be noted that the general principles for the implementation of currency regulation are determined by the european central bank. besides, the currency control in france was introduced in accordance with the law on currency regulation and control in september 1939. so, it was the beginning of the second world war, when france had significant problems in the monetary and financial sphere, foreign exchange controls covered all types of foreign exchange operations. the currency control bodies in france at that time were: the ministry of finance, in whose structure the treasury department was engaged in the development of strategic directions in the field of currency regulation and control, and the main customs office exercised control over currency transactions of a “commercial” character, as well as non-trading operations, which are connected with the movement of currency values across the border; national bank of france, which regulated and controlled financial transactions in foreign and national currency (credits, loans) (luchkovska, 2005). another country, which experience can be useful, is poland because this state simultaneously with ukraine is on the way of democratization of its society. in poland, a fixed exchange rate regime was introduced baltic journal of economic studies 28 vol. 4, no. 1, 2018 with the beginning of the reform process – first to the us dollar, and then to the “basket” of five leading currencies, in order to curb inflation. in may 1995, the regime for fixing the exchange rate was changed to “currency corridor”, the limits of which were gradually expanding from ± 7% to ± 15%. since april 2000, as a result of the introduction of free floatation of the exchange rate, different market factors are beginning to affect the polish zloty course. in the mid-90s of the xx century, the national bank of poland began to use actively exchange rate policy in the fight against inflation. the strengthening of the zloty’s exchange rate in 2000–2001 was the result of large revenues from privatization and a consistent restrictive monetary policy of the polish government, as well as the inflow of foreign capital (honcharuk, matsko, shparhalo, 2010). on july 27, 2002, a new law “on foreign currency” was issued in poland, which regulated the execution of foreign exchange transactions. this law abolished all restrictions on the movement of funds between poland and the eu countries. at the same time, the law provides some restrictions regarding the movement of funds from non-eu countries. currency restrictions can be removed by obtaining currency permits. these permits can be of two types: general and private. the general currency permits are issued by the ministry of finance, and private ones – by the national bank of poland (sorokivska, 2013). the main measure of currency regulation was the transition to a flexible exchange rate and the introduction of the “free-swimming” regime in 2000. this regime can be characterized by the fact that in the process of establishing a currency exchange rate in the currency market, there is an influence of the central bank of the country, which aligns the sharp short-term, and sometimes medium-term fluctuations of the rate in order to make it more predictable and stimulating foreign trade (khamaganova, 2001; harbinskarudenko, 2011). currency exchange rate systems in the country are often characterized by the simultaneous diversity of exchange rates, each of which is used for another set of transactions. multi-rate regimes can be applied when more than one course is claimed for the purchase and sale of currencies or when the purchase and sale rates differ by more than 2% (the smaller difference between the purchase and sale rates is used to cover the cost of transactions with foreign currency and it does not involve the presence of multiple rates). poland’s move to the euro was planned in 2007, but now polish politicians support the introduction of the european currency as later. the country’s path towards a single european currency will depend on whether the government can able to effectively reform the public financial system (harbinska-rudenko, 2011). the policy of currency regulation in poland is realized through the mechanism of currency restrictions and currency control. the purpose of currency control is to ensure compliance of residents and non-residents with currency legislation (ivanov d., 1998; harbinskarudenko, 2011). the system of currency control in poland is carried out on the basis of the law “on foreign exchange regulation and currency control in poland”. the national bank of poland is the main body that determines the currency policy of the country. the main component of foreign exchange policy is the introduction of a mechanism for adjusting the country’s balance of payments, which is one of the most important macroeconomic aspects of the nbp’s activities. in order to determine the strategies of currency exchange and monetary policy and the reform of the external sector of the economy, the national bank of poland also develops the forecast of the balance of payments, which can be used as a basis for negotiations with international organizations on the provision of financial assistance to the country (yurhelevych, 2000). in the context of this scientific study, we need to draw attention to the experience of the united states of america. the us government uses various currency regulation means that are implemented by the central bank of the country. so, one of the first means is to change the exchange rates when the bank raises or decreases the rate of accumulated funds. for example, if a bank reduces the rate, it leads to a reduction in the interest rate throughout the us banking system, which reduces the supply of money, affects the value of loans, that is, makes these loans more expensive. all this, in turn, makes the dollar stronger and more stable in comparison with other currencies. at the same time, assets in dollar equivalent provide greater profitability. a similar situation creates more demand for the dollar, bringing it out of circulation. the laws of supply and demand show that a smaller supply and more demand increase the price. when it comes to the dollar, it makes it possible to buy more foreign currency in the forex markets. the next is the treasury department of the united states, which is a government agency that also indirectly affects the exchange rate. it prints more money, which increases the offer, weakening the dollar. the department can also get a loan from other countries, which can be done through the sale of gold reserves from the state treasury. this not only increases the offer of money but also increases the debt. the third government instrument for the currency regulation in the united states is an expansionist (stimulating) fiscal policy. such a policy weakens the dollar by increasing the money supply but, at the same time, it generally has a positive effect on the country’s economy, ensuring economic growth, and contributes to the increasing confidence in the country’s economy from the investor’s side. sometimes this demand is so high that investors do not notice low-interest rate that they will receive by investing money in the economy. quite often there are cases where demand is even greater than the offer. baltic journal of economic studies 29 vol. 4, no. 1, 2018 when considering currency regulation in the usa, it is necessary to pay attention to the fact, how the government regulates foreign exchange trade. so, the chicago chamber of commerce regulates activities of brokers in the forex market. the chamber supervises all american forex brokerage companies, establishes its rules, and conducts criminal proceedings in case of violation of the rules of the current legislation. the power of the chamber was strengthened in 2010 by the dodd-frank wall street reform act. approximately 95 percent (which is almost $5.3 trillion) traded daily in the forex markets are currency transactions, not futures. brokers should register as trade advisers, or as futures trading dealers, and become members of the nfa (national futures association). the american national futures association is a self-regulating association. the purpose of the association is to protect the integrity of the us markets and protect investors from fraud. but this is not related to the value of any particular currency. in the conclusion, we want to say that changes in the exchange value of the dollar are an important factor for monetary policy since such an activity affects economic activity and prices in the united states. in addition, it should be noted that although the us monetary policy is not aimed at establishing a certain level of the dollar, however, taking into account the importance of the dollar’s impact on us prices and economic activity at the international level, this business direction is important both for the united states of america itself and for many other countries in the world. a special attention, in our opinion, we should pay to the experience of china. today the leading economists of the world recognize the economy of this state as one of the most powerful in the world, and its currency is perhaps the most stable one. there are currently two main provisions in china that define the key principles for the currency regulation and control over the foreign exchange market and other financial institutions. the following legal rules are: “rules of the people’s republic for the implementation of currency control” and “administrative provisions on currency settlements, sales and payments”. if we talk about the rules, they include 12 chapters, which are connected with the foreign exchange market and financial institutions. six of these chapters are aimed at regulating currency transactions of financial institutions. other provisions are aimed at regulating the exchange rate of the yuan and the foreign exchange market. thus, articles 33 and 36 regulate the exchange rate of the yuan and the corresponding control over foreign currency borrowing by banks. these two articles assume that the exchange rate of the yuan is floating and is based on the market demand and supply. dealers in the interbank foreign exchange market are special banks and other financial institutions involved in foreign currency transactions. they can set purchase and sale rates for their clients and trade in foreign currency. it should also be noted that article 27 of the rules defines the principles for the functioning of the currency business of financial institutions in china. it stipulates that financial institutions require from safe approval to conduct transactions with foreign currency, as well as to require a license for such transactions. neither organization nor individual can operate foreign currency without the approval of safe. financial institutions have all the necessary tools to be able to earn a foreign currency but they cannot operate outside the approved scope. when considering “administrative provisions for currency settlements, sales and payments”, it should be noted that this package of provisions is applied to regulate the retail trade market between yuan and foreign currencies. article 35 of the mentioned legal act defines the principles for the control of the exchange rate, and articles 2, 34, and 39 define the principles for exercising control over the activities of authorized financial institutions. besides, special provisions on the exchange rate of the yuan should be defined, in particular: a circular on exchange rate management and exchange of operational information, issued march 23, 1995. a circular on the foreign exchange market and the participation of a foreign investment enterprise in the system of bank replacement and sale on a currency exchange, issued on june 28, 1996. this legal act provides that foreign companies are allowed to participate in the currency market of china, where you can sell and buy yuan at the official rate. also, enterprises have an opportunity to constantly sell and buy yuan in the currency market. this provision also regulates the distribution of the exchange rate of yuan with 13 foreign currencies, which are listed in the business plan of currency banking supervision; official response of the state currency of the exchange administration to the chinese currency trading system about the beginning of the exchange of currencies in the foreign exchange market of ukraine in the interbank foreign exchange market, issued on january 14, 2002. separately, in our opinion, it is necessary to indicate the provisions defining the main principles of the activities of authorized financial institutions, in particular: 1) provisions on the foreign exchange business of banks, issued on september 27, 1997; 2) provisions on the definition of operations of foreign exchange business of banks, issued on may 16, 1996; 3) provisions on currency exchange business of financial institutions purchasing money, issued on january 1, 1993; 4) “on definition of foreign currency transactions for nonbank financial institutions”, issued on may 16, 1996; 5) provisions on foreign financial institutions of the people’s republic of china, which was originally issued on april 1, 1994; 6) detailed rules for the regulation of foreign financial institutions of the people’s republic of china, issued on january 30, 2002; etc. baltic journal of economic studies 30 vol. 4, no. 1, 2018 thus, currency regulation in china is characterized by rigorous control from the state’s side. besides, it is important to mention a rather wide list of normative legal acts that define both the legal basis for the implementation of currency regulation and the principles of the activity of authorized state authorities. the effectiveness of currency regulation in china also proves the rapid growth of the economy of this country over the past and a half decades. 4. conclusions at the end of the submitted scientific research, we want to say that ukraine is a young state, which stands on the way of carrying out deep reforms not only in the field of currency regulation but also the whole economy in general. the legislator in order to implement the foreign experience of currency regulation in ukraine, it is necessary to do such things as: wait with the definitive establishment of the floating rate regime, by intensifying state interference. in this regard, we note that in fact in ukraine, there has already been a transition from a fixed to floating exchange rate, which ideally should become the beginning of a natural market exchange rate, equalization of the balance of payments, and the gradual release of the economy from the pressure of administrative and corruption restrictions. however, practice has shown that such a situation: first, allows earning officials, who are not honest; second, the country’s population is not yet ready for such changes, because at the first fluctuation of the currency, there is some kind of panic, which in turn has a negative impact on the economy as a whole; it is necessary to strengthen currency control not only for the implementation of foreign exchange operations but also for the activities of 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(2000) valiutne rehuliuvannia : zarubizhnyi dosvid ta propozytsii shchodo ukrainy (tochkazoruekspertivukrainsko-yevropeiskohokonsultatyvnohotsentru) [foreign exchange regulation: foreign experience and proposals on ukraine (point of view of experts of the ukrainian-european advisory center)]. economics, finance, law, n. 10, p. 4. baltic journal of economic studies 86 vol. 8 no. 5, 2022 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: volobueva_elena@ukr.net 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: alex4hands@gmail.com 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: tatianaponomarova@ukr.net doi: https://doi.org/10.30525/2256-0742/2022-8-5-86-91 socio-economic determinants and consequences of criminal offenses against sexual freedom and sexual inviolability olena volobuieva1, oleksandra severinova2, tetiana ponomarova3 abstract. the purpose of the article is to reveal the essence of socio-economic determinants of criminal offenses against sexual freedom and sexual integrity; to conduct an analysis of differentiating economic consequences of sexual criminal offenses; to conduct an assessment of threats to economic security associated with the change in the quantitative indicator of sexual criminal activity, as well as to determine the measures necessary to neutralize threats and risks to the economic security of the state. scientific discussion of the problem of prevention of sexual crimes by improving the mechanism of social protection of the population is presented. the author's vision of the nature and content of the economic consequences of socially dangerous sexual acts is formulated. attention is drawn to the fact that a low level of well-being leads to the intensification of threats to economic security, which results in the formation of socio-economic determinants of all types of criminal activity, which is connected with the uneven economic development of the regions of ukraine, the unsatisfactory level of development of the agrarian sector in the economy, the lack of an established mechanism for regulating the international migration of labor resources in the conditions of globalization, and so on. the direct and indirect economic consequences of sexual violence are characterized and some foreign doctrinal approaches to their assessment are given. results. socio-economic determinants influencing the number of crimes against sexual freedom and sexual integrity have been identified. it has been proven that the economic consequences of sexual crimes can be divided into direct (actual material costs caused by direct sexual violence and those related to the need of victims for medical/social and legal assistance) and indirect (secondary material costs caused by the loss of financial resources, those resulting from the partial/full, temporary/permanent inability of victims to perform their work duties and those caused by the consequences of sexual violence). measures to neutralize risks and threats to the economic security of the state are proposed: 1) fight against the spread of legalization (laundering) of income obtained by criminal means; 2) creation of special treatment facilities for persons who have committed sexual crimes; 3) development of criminological strategies aimed at timely identification of risks of increasing sexual crimes; 4) expansion of the scope of social services for victims of sexual violence; 5) promotion of the development of small and medium-sized businesses, involvement of persons with disabilities in labor activity. key words: economic determinants, economic consequences, criminal illegal activity, criminal offenses against sexual freedom and sexual integrity of a person, social services, risk assessment, prevention. jel classification: k14, o35 1. introduction criminal and economic security are interdepen dent concepts and integral parts of the national security of the state. the aggravation of criminogenic threats leads to the destabilization of the sociopolitical situation in the country. in this respect, the improvement of general social measures to prevent criminal illegal activities (including by accelerating the rate of social and economic growth of the population) will not only solve the problem of complicating the criminogenic situation, but will also contribute to the further european integration of the country. in this context, violent socially dangerous acts, in particular those that violate sexual freedom and sexual inviolability, require attention. since 2017, it is possible baltic journal of economic studies 87 vol. 8 no. 5, 2022 to summarize the increase in the number of such acts: by the end of 2021, the growth rate of sexual crimes was 91.2%. offences against sexual freedom and sexual integrity of a person are characterized by an increased degree of social danger, audacity and immorality. the study of statistical information and judicial practice testifies to a close connection between the material problems of economic growth of ukraine and the negative dynamics of the investigated socially dangerous acts, which is due to the formation of a deterministic complex that contributes to the emergence of perverse deviations in the population. in the field of domestic scientific research there are a number of works directly or indirectly related to the issue of socio-economic determination of criminal offenses (a. babenko, b. golovkin, o. dzhuzha, o. dudorov, a. zakaliuk, o. kostenko, e. nazymko, v. shakun, and others). however, revealing the problem of negative impact of economic factors specifically on sexual criminal activity requires additional attention, which emphasizes the relevance of the topic of the article. the purpose of the article is to reveal the essence of socio-economic determinants of criminal offenses against sexual freedom and sexual integrity; to conduct the analysis of the economic consequences differentiation of sexual criminal offenses; to conduct an assessment of threats to economic security associated with a change in the quantitative indicator of sexual criminal activity, as well as to determine the measures necessary to neutralize threats and risks to the economic security of the state. 2. socio-economic determinants of crimes against a person's sexual freedom and sexual integrity today ukraine is on a difficult path of european integration, which determines the necessity of studying a number of acts of international legislation in order to adapt ukrainian legislation to the legislation of the european union. when considering the criminal and criminal procedural law of the european union (hereinafter – the eu), it should be noted that there is no single regulatory act that would regulate criminal and criminal procedural relations of the eu member states (horoshko, nazymko, pavliutin, 2022). the development of a modern state requires the improvement of directions that ensure the realization of the priorities of national interests of ukraine and its national security, one of which is the protection of rights and freedoms and legitimate interests of citizens of ukraine, as stated in the national security strategy of ukraine "the security of a person is the security of the country ", approved by the decree of the president of ukraine of september 14, 2020 no. 392/2020 (stratehiia natsionalnoi bezpeky ukrainy "bezpeka liudyny – bezpeka krainy ", 2020). thus, based on the title of the document, it can be concluded that the construction of a democratic, integral and sovereign state takes place through the increased protection of its citizens. the strategy also states that the source of threats to ukraine's independence, sovereignty and democracy remains the insufficient efficiency of state bodies, which complicates the development and implementation of effective policies. a low level of well-being creates hopelessness and uncertainty about the future, provokes violence that slows down development and perpetuates backwardness. the existence of radical social attitudes and environments, which are the basis for political violence and separatism, the activities of illegal armed groups and the spread of terrorism, is particularly dangerous. crime threatens the rights and freedoms, legitimate interests of people, society and the state. (stratehiia natsionalnoi bezpeky ukrainy "bezpeka liudyny – bezpeka krainy ", 2020). the low level of well-being also leads to the intensification of threats to economic security, which has the consequence of the formation of socio-economic determinants of criminal illegal activities of all kinds, which is connected with the uneven economic development of the regions of ukraine, the unsatisfactory level of development of the agrarian sector of the economy, the lack of an established mechanism of regulation of international labor migration resources in the conditions of globalization, etc. the connection between economic destabilization and an increase in the number of crimes against sexual freedom and sexual integrity of a person is caused by such factors as: 1) an increase in the level of unemployment leads to the search for alternative ways of earning, including – committing acts related to violation of morality, sexual freedom and sexual integrity; 2) labor migration of citizens has a potential risk of increasing the facts of human trafficking; 3) socio-economic inequality and the resulting aggression contribute to the development of deviations; 4) martial law complicates the operation of small and medium-sized businesses in the areas of active hostilities, leading to the loss of sales markets and personnel, disruption of logistics; participation in hostilities often leads to the emergence of posttraumatic stress disorders, such as alcohol and drug addiction (as a way of overcoming the disease), which contributes to social degradation and criminalization of the population. the given opinion about the correlation of alcohol addiction and the increase of the number of crimes against sexual freedom and sexual integrity is confirmed by the state statistics published on the website of the general prosecutor's office of ukraine, according to which in baltic journal of economic studies 88 vol. 8 no. 5, 2022 2017 33.3% of people who committed the specified socially dangerous acts were in a state of alcohol intoxication, in 2018 – 29.1%, in 2019 – 32.8%, in 2020 – 31.2%, in 2021 – 26.3%, as of november 2022 19.8% of people who committed sexually public dangerous acts were in a state of alcohol intoxication (statystyka. ofis heneralnoho prokurora, 2022). thus, it is possible to summarize a clear relationship between the unsatisfactory state of social and economic protection of the population and the development of sexual deviations. studying the information of the state statistical service gives reason to believe that the lack of the required number of jobs leads to the forced dismissal of citizens: in 2017, 1,698 citizens aged 15 to 70 were registered as unemployed, 23.2% of the total number were dismissed for economic reasons; in 2018, the number of such citizens was 1,578, 20. 7% were dismissed for economic reasons; in 2019 – 1,487, 21.5% – dismissed for economic reasons; in 2020 – 1,674, 22.9% – dismissed for economic reasons; by the end of 2021, 1,711 citizens were registered as unemployed, of which 22.9% were dismissed for economic reasons (statystyka. derzhavna sluzhba statystyky ukrainy, 2022). dismissal for economic reasons is the result of the financial and economic crisis caused by the annexation of the autonomous republic of crimea in 2014 and the occupation of part of the territory of the donetsk and luhansk regions, forced internal displacement and migration of people. the discrepancy between the officially registered and the real number of unemployed remains a real problem, which is connected with the growing tendency of people to engage in illegal activities, which are more profitable in the unstable political and economic situation. crimes against sexual freedom and sexual integrity are also committed by mostly able-bodied people who, for various reasons, do not work or study. according to the prosecutor general's office, in 2017, 273 people were identified as having committed crimes against sexual freedom and sexual integrity, 66.3% of them were able to work, but neither worked nor studied; in 2018, 326 such people were identified, 57.6% of them were able to work, but neither worked nor studied; in 2019 – 307 such people were registered, 69% – of them were able to work, but neither worked nor studied; in 2020 – 342 such people were registered, 68. 1% – of them were able to work, but neither worked nor studied; in 2021 – 330 such people were registered, 71.5% of them were able to work – but neither worked nor studied; in november 2022, 186 people were found guilty of crimes against sexual freedom and sexual integrity, 68.2% of them were able to work, but neither worked nor studied (statystyka. ofis heneralnoho prokurora, 2022). at the same time, the ratio of the age group of persons who committed the specified acts to the age group in which the highest unemployment rate is observed (18-28 years old) is also indicative: in 2017, crimes against sexual freedom and sexual integrity were committed by 29.6% of persons aged 18-28 years, in 2018 – 29.4%, in 2019 – 33.2%, in 2020 – 31%, in 2021 – 33.3%, as of november 2022 – 31.7% (statystyka. ofis heneralnoho prokurora, 2022). this situation can be explained by the relationship between the length of time a person dismissed for economic reasons spends looking for a new job and the appearance of destructive personality changes due to the loss of qualifications and professionalism, which causes deviations, including those of a sexual nature. consequently, a series of crisis phenomena in the economic sphere leads to the appearance of negative trends in the labor market, followed by a rapid deterioration of the situation in the field of employment. forced unemployment caused by economic reasons leads to the involvement of citizens in illegal activities, alcohol and drug addiction. all this determines sexual criminal activity, which is caused either by destructive changes in the materially insecure personality, or by the chosen methods of illegal earnings (pimping, prostitution, human trafficking, etc.). 3. economic consequences of sexual offenses sexual violence has a number of socially dangerous consequences, most of which are associated with the threat to the life and health of the victims, both at the time of the implementation of the criminal illegal intention and in the post-criminal stage. however, potential/postponed losses of a material nature are an obvious basis for defining a specific group of economic consequences. the economic consequences of sexual crimes can be divided into direct (actual material costs caused by the direct sexual violence and those related to the victim's need for medical/social and legal assistance) and indirect (secondary material costs caused by the loss of financial resources due to the partial/full, temporary/permanent inability of the victim to work as a result of the sexual violence). among the direct and indirect economic consequences, the following should be emphasized: 1) violation of the general equilibrium in the model of the economic cycle – destabilization of the resource market and the product market due to irreversible losses of the population: loss of the potential labor force caused by a decrease or loss of the opportunity to carry out labor activity due to temporary or permanent incapacity to work, as well as an increase baltic journal of economic studies 89 vol. 8 no. 5, 2022 in the death rate of the population due to sexual crimes. research conducted by the maryland coalition against sexual assault (mcasa) concluded that temporary absence from the workplace is not the only consequence of sexual assault that affects work activity. researchers have found that 50% of victims of sexual violence quit or were forced to leave their jobs within a year of the assault due to post traumatic stress that precludes continued employ ment (economic costs of sexual violence, 2021). in 2017, the ukrainian center for social reforms conducted a study on the economic consequences of violence against women in ukraine. it was found that the most serious demographic and economic consequences of violence against women are irreversible loss of life (death). its cost is estimated both in the equivalent of the loss of the macro economic result calculated for the current (particular) year, and by measuring the potential loss of this result for the period that the woman did not live to see: or up to the limit of premature mortality (65 years), set by the world health organization (hereinafter – who), or up to the average age of death (average life expectancy of women in the country). the macroeconomic outcome in such a calculation is evaluated either in terms of lost national product (e.g., gdp) or using the average annual earnings of a woman as the equivalent of lost income (ekonomichni naslidky nasylstva shchodo zhinok v ukraini. ukrainskyi tsentr sotsialnykh reform, 2017). the demographic costs can also be assessed as a destructive impact on the macroeconomics of the state due to a decrease in the labor resources of the population. the problem of relating demographic costs to the non-material aspects of sexual violence, such as limitations on life activities (loss of ability to care for oneself, mobility, communication, etc.), remains unresolved. 2) a decrease in the effectiveness of the education system due to the inability/unwillingness of victims of sexual crimes to exercise their right to education. the mcasa found that one of the reasons for the decrease in the income of the victims was the low rate of their education, as the persons who had experienced sexual violence were three times more likely not to graduate from high school than other citizens (economic costs of sexual violence, 2021). 3) significant financial costs associated with respon ding to sexual crimes and eliminating their consequences by law enforcement, medical and social institutions, etc. according to the white house council on women and girls, "rape and sexual assault: a renewed call to action," the united states spends between $87,000 and $240,776 annually to address the consequences of sex crimes. the report by farris, schell, & tanielian, the rand corporation, "enemy within: military sexual assault inflicts physical, psychological, financial pain," shows that emergency medical care for victims of sexual violence costs nearly $2,084 annually (economic costs of sexual violence, 2019). 4) individual financial expenses of victims for treatment of physical injuries, post-traumatic stress disorder, etc., caused by sexual offenses. according to the national alliance to end sexual violence report, "the costs and consequences of sexual violence and cost-effective solutions," rape costs victims more than any other crime, about $127 billion a year. (economic costs of sexual violence, 2019). the main individual expenses of victims of sexual crimes can be divided into (ekonomichni naslidky nasylstva shchodo zhinok v ukraini. ukrainskyi tsentr sotsialnykh reform, 2017): 1) damages related to medical care (including transportation of victims to medical institutions, clinical examination, purchase of medical equipment and payment for other medical services, consultations with specialists, etc.); 2) harms related to obtaining legal assistance and support (consultations, processing of documents, payment of court fees, etc.); 3) damages related to housing needs (forced relocation, related to the need to ensure the safety of the victim or his/her close relatives during criminal proceedings, resto ration of damaged housing/property/clothing, etc.). 4. assessment of threats to economic security in connection with the growth of the quantitative indicator of criminal sexual activity the economic security of the state can be understood as ensuring the necessary level of national security with its own financial and other resources, creating favorable conditions for the development of the economy and increasing the level of competitiveness of the country, protecting the vital interests of the individual, society and the state in the economic sphere from internal and external threats (hnatenko, 2021). among the key components of the state's economic security, it is necessary to emphasize external economic security, i.e., protection of national economic interests from the negative influence of external factors. ensuring the external economic security of the state presupposes the implementation of measures that allow to bring the state of foreign economic activity in line with national economic interests, and this will allow to create favorable conditions for sustainable economic growth. attention should also be paid to socio-demographic security. it means counteracting the negative impact of threats on social development baltic journal of economic studies 90 vol. 8 no. 5, 2022 and living standards of the population. effective public administration is necessary to overcome the main social threats, which manifest themselves at both the personal and societal levels. all social interests of citizens and society as a whole require a balanced state policy aimed at counteracting or adapting to the negative effects of external and internal threats. achieving the protection of demographic interests is impossible without balancing such processes as the age, gender and ethnic parameters of the population and immig ration (korchynskyi, 2019). sociodemographic security can also be considered from the point of view of potential threats to the health of women who have been the victims of crimes against their sexual freedom and integrity. at present, the net reproduction rate of the population per woman is quite low, which is the first indicator of the reduction of reproduction as a general trend. the second indicator in the structure of socio-demographic security is a decrease in the total birth rate, which can be caused by fertilization as a result of a sexual crime, termination of an unwanted pregnancy or impossibility of pregnancy due to trauma. the third indicator is the increase in the death rate of babies born to women raped, which is associated with the presence of sexually transmitted diseases (including hiv/aids, torch infections, syphilis, etc.). depopulation leads to economic decline. the strategy of economic security of ukraine for the period up to 2025, approved by the decree of the president of ukraine of august 11, no. 347/2021, defines the main challenges and threats in the field of macroeconomic security, such as a low level of wellbeing of the population, which leads to a decrease in domestic consumption and savings, an increase in poverty, especially among the working population; significant unevenness in the distribution of income of the population in the regional part, which provokes excessive internal migration of labor; intensive processes of migration of labor, which leads to an outflow of qualified personnel; a high level of unemployment (in comparison with other european countries) in the conditions of the existing mismatch between the demand and supply of labor resources on the market, as well as high competition on the labor market in industries with high wages and salaries; a high level of informal employment (in comparison with lower wages and salaries than in other european countries), which will keep the labor migration drain at a high level in the future; low growth rates of labor productivity. therefore, the dangerous and unsatisfactory level of the main components of economic security observed during the last decade makes it necessary to determine the strategic course in the field of ensuring economic security (stratehiia ekonomichnoi bezpeky ukrainy na period do 2025 roku, 2021). scientists rightly note that, based on some aspects of foreign experience, including historical, it should be noted that in the conditions of armed confrontation, even in the form of a hybrid military conflict, the solution of security problems becomes much more complicated and acquires special importance (indicated by the author) (fedchyniak, danylevskyi, nazymko, kuleshov, makarenko, 2022). international standards for the protection of persons from sexual violence also provide for protection against their involvement in prostitution, participation in the production of pornographic materials and any other form of sexual exploitation..., promotion of timely provision of legal and any other assistance necessary and sufficient to prevent secondary victimization..., actualization of the issue of restitution and compensation (indicated by the author) (nazymko, titochka, 2022). therefore, within the framework of the identified challenges and threats, it is advisable to implement the following measures aimed at neutralizing the risks to the economic security of the state by reducing the quantitative indicator of sexual crimes: 1) combating the spread of legalization (laundering) of the proceeds of crime, including activities related to the involvement of persons in prostitution, as well as the import, manufacture, sale and distribution of pornographic materials; 2) the creation of special institutions for perpetrators of sexual crimes (which will allow the redistribution of resources from eliminating the economic consequences of sexual violence to eliminating the public danger of the offender); 3) development of criminological strategies aimed at timely identification of the risks of increasing the number of sexual crimes (for example, the economic crisis caused by the covid-19 pandemic caused by the sars-cov-2 coronavirus, as well as the martial law imposed on february 24, 2022 in connection with the military aggression of the russian federation against ukraine, led to the loss of jobs, which in turn led to an increase in the number of violent crimes, including those against sexual freedom and sexual inviolability); 4) expanding the scope of social services for victims of sexual violence; 5) promoting the development of small and medium-sized enterprises and the participation of persons with disabilities in the labor force. 5. conclusions thus, the research conducted made it possible to conclude that the fight against criminal illegal activities, both in general and in terms of criminal offenses against sexual freedom and sexual integrity, baltic journal of economic studies 91 vol. 8 no. 5, 2022 should focus on the following economic factors in the conditions of the current global economic models, which is due to such reasons as 1) a high level of unemployment, the problem of rational distribution of resources, etc. are catalysts for alcoholism in the population, which negatively affects reproductive health and leads to a demographic crisis; 2) a low level of financial support leads to the search for alternatives, including – illegal ways of earning money; 3) dissatisfaction with social status and material security causes aggression, which is included in the mechanism of forming the intention to commit violent acts, including those of a sexual nature. references: economic costs of sexual violence (2021). available at: https://mcasa.org/assets/files/economic-costs-ofsexual-violence-with-long-term-costs-updated.pdf fedchyniak, a., danylevskyi, a., nazymko, y., kuleshov, o., & makarenko, t. 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(2021). zahrozy ekonomichnii bezpetsi derzhavy v umovakh hlobalizatsii [threats to the economic security of the state in the conditions of globalization]. aspekty publichnoho upravlinnia, vol. 9(1), pp. 55–62. doi: https://doi.org/10.15421/152105 ekonomichni naslidky nasylstva shchodo zhinok v ukraini. ukrainskyi tsentr sotsialnykh reform [economic consequences of violence against women in ukraine. ukrainian center for social reforms]. available at: https://ukraine.unfpa.org/sites/default/files/pubpdf/economy%20consequences%20violence_2017_1.pd korchynskyi, i. (2019). osnovni zahrozy ekonomichnii bezpetsi derzhavy v suchasnykh umovakh rozvytku [the main threats to the economic security of the state in modern conditions of its development]. available at: http://www.economy.nayka.com.ua/pdf/10_2019/81.pdf nazymko, ye., & titochka, t. (2022). yevropeiski standarty zakhystu nepovnolitnikh osib vid statevykh kryminalnykh pravoporushen [european standards for the protection of minors from sexual criminal offenses]. kryminalna polityka yevropeiskoho soiuzu ta ukrainy: problemy intehratsii. zbirnyk tez naukovo-praktychnoi internet-konferentsii (28 lystopada 2022 roku, kharkivskyi natsionalnyi universytet imeni v. n. karazina, yurydychnyi fakultet). kharkiv: khnu imeni v. n. karazina, рр. 85–89. statystyka. derzhavna sluzhba statystyky ukrainy [statistics. state statistics service of ukraine]. available at: https://ukrstat.gov.ua/operativ/oper_new.html statystyka. ofis heneralnoho prokurora [statistics. office of the prosecutor general]. available at: https://new.gp.gov.ua/ua/posts/statistika stratehiia ekonomichnoi bezpeky ukrainy na period do 2025 roku, zatverdzhenoi ukazom prezydenta ukrainy vid 11 serpnia 2021 roku № 347/2021 [strategy of economic security of ukraine for the period until 2025, approved by the decree of the president of ukraine dated august 11 2021 № 347/2021]. available at: https://zakon.rada.gov.ua/laws/show/347/2021#n11 stratehiia natsionalnoi bezpeky ukrainy "bezpeka liudyny – bezpeka krainy ", zatverdzhena ukazom prezydenta ukrainy vid 14 veresnia 2020 roku № 392/2020 [the national security strategy of ukraine "the security of a person is the security of the country ", approved by the decree of the president of ukraine dated september 14, 2020 no. 392/2020]. available at: https://zakon.rada.gov.ua/laws/show/392/2020 received on: 5th of october, 2022 accepted on: 21th of november, 2022 published on: 30th of december, 2022 baltic journal of economic studies 146 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 institute of international relations, taras shevchenko national university of kyiv, ukraine (corresponding author) e-mail: rushkovskyi@gmail.com orcid: https://orcid.org/0000-0001-5929-4339 2 institute of international relations, taras shevchenko national university of kyiv, ukraine e-mail: rasshyvalovd@ukr.net orcid: https://orcid.org/0000-0002-1404-9302 doi: https://doi.org/10.30525/2256-0742/2023-9-1-146-151 multinational companies' risk management strategies evolving on the brink of the new economic era mykhailo rushkovskyi1, dmytro rasshyvalov2 abstract. in today's dynamic macroeconomic environment, multinational enterprises (mnes) must have a welldefined approach to risk management in order to survive and thrive. the risk management strategies employed by mnes must adapt to the ever-changing global economy and the associated geopolitical and climatic changes. furthermore, the clear prospects for further developments in risk management research create new determinants for the evolution and development of corporate governance systems in mne. this is especially true in the new economic era, where globalization has opened markets to new opportunities and threats. risk management is a critical factor that impacts the financial, operational and strategic success of mne. therefore, it is imperative that mne invest in developing robust risk management strategies that can keep pace with the ever-changing world economic system. failure to do so could encourage potential business risks such as financial liabilities, low customer satisfaction, or reputational damage. it is clear that risk management is an essential part of ensuring success for mnes in today's dynamic macroeconomic environment. the subject and object of research are defined as corporate strategies of risk management of mne (including the approach to work with uncertainty, randomness and probabilistic thinking) and the process of their determination through the prism of influence of global economic determinants and the emerging new economic era. the reliability of the obtained results and conclusions of the research is substantiated by the choice of a natural methodological strategy, which includes description, explanation and prediction. research methodology is based on a combination of methods: theoretical analysis, synthesis, comparison, systematization, and generalization of scientific literature. the aim of the research is to identify the main corporate strategies of risk management in mnes, taking into account global economic changes, and to develop recommendations for their implementation. the studied risk management focusing exclusively on the past financial indicators of mne activity and the conducted analysis of the emerging global challenges of the new economic era show a gap between the existing approaches to the formation of risk management strategies, which are based only on international standards (including reporting standards), and the urgent needs of mnes dictated by global economic determinants. the research also creates clear prospects for further developments in the area of risk management strategies. it is suggested that more advanced approaches should be developed that take into account the dynamic nature of the international economic environment and its influence on the risk management strategies of mnes. in conclusion, the research shows that existing corporate risk management approaches are not effective enough to respond to global economic, geopolitical, technological and social changes. therefore, it is imperative for mne to develop more advanced risk management strategies that can better address these changes. in addition, it is important for mne to consider incorporating predictive analytics into their risk management processes to better anticipate potential risks before they occur. key words: risk management strategies, risk management, globalization, new economic era. jel classification: b22, d81, e44, f6, g32 baltic journal of economic studies 147 vol. 9 no. 1, 2023 1. introduction in today 's dynamic macroeconomic environment, a clear approach to risk management is more important than ever. regardless of industry, how quickly and effectively risks can be identified and managed will determine how successfully multinational enterprises (mnes) can recover and rebuild. the current challenges of the world economic system, geopolitical and climatic changes that mnes are facing, create a number of new determinants for the evolution and development of mne corporate governance systems, the key component of which should be an effective risk management system based on effective risk management strategies. modern mnes, as they strive to achieve their strategic, operational, financial and other goals, need to clearly understand the profile of risks they face. it is also important to view risk in the context of mne value creation and to move away from the traditional view of risk as something to be avoided. it is necessary to determine the optimal risk appetite and manage risk in all parts of the organization to keep risk within the defined appetite that will allow the mne to achieve its strategic goals. the mne risk management process should be systematic, comprehensive and holistic in nature. therefore, as part of the mne risk management strategy, it is important to reflect both approaches to the risk management process, as well as risk assessment criteria and models for the clearest formation of the mne risk profile. 2. risk management as a core mne management competency american scientist thomas coleman sees risk management as the art of using the lessons of the past to mitigate adversity and capitalize on future opportunities. in other words, it is the art of avoiding yesterday 's mistakes, recognizing that nature can always create new ways for things to go wrong. thus, risk management is much more than numbers; it is the art of using numbers and quantitative tools to truly manage risk. for coleman, risk is a central component of mne management. in assessing the overall risk of a company, coleman focused on the variability of profits and losses, which provides a structure of risk for different levels of mne management. he notes that risk management requires comfort with uncertainty, randomness, and probabilistic thinking. coleman argues that such an approach requires quantitative analysis to understand and deal with uncertainty, especially to inform and correct intuition. thus, the focus of risk managers should be on the critical evaluation of quantitative tools and mechanisms of their analysis (coleman, 2011). in addition, coleman argues that risk is associated with money – profits & losses and their volatility. the future results of the mne can be summarized in terms of profits & losses, and the uncertainty in profits & losses can be described by a distribution function that can represent many possible outcomes of profits or losses. for risk management, the main contribution of the distribution of profits & losses is to understand how variable they can be. in other words, if the distribution of profits and losses is known, that is, the possibilities of their correlation and the formation and reasons for this distribution are known, then almost everything about the financial risk of the mne becomes clear (coleman, 2011). the most important aspect of the distribution is its variability or spread. a common, well-known measure used to summarize the variability or spread of a distribution is volatility, also known as standard deviation. for most normal distributions, one standard deviation above or below the expected outcome indicates that the outcome will be out of range approximately 32% of the time. two standard deviations above and below the expected outcome indicates that the outcome will be outside the range about 5% of the time (coleman, 2012). one of the main objectives of risk management is to avoid a significant deviation or outcome from the expected one, i.e., a wide spread. although surprises do happen, the biggest surprise, good or bad, creates challenges for risk management. if the standard deviation of the distribution is known, mne management can predict the range of outcomes with the best and worst possible values for both the 68% and 95% confidence intervals, as shown in figure 1. knowing the endpoints of these ranges shows how good or bad the result could be. a result outside the 68% confidence interval would be a surprise, which could happen 32% of the time. an outcome outside the 95% confidence interval may occur only 5% of the time, but these surprises will be much better or much worse than the expected outcome. mne management needs to know how much better or worse the outcome could be in order to plan responses to such significant deviations. according to coleman, risk management should be the core strategic competency of any mne. he believes that the ability to manage risk effectively is the single most important characteristic that distinguishes successful mnes that survive over the long term from those that do not. in successful mnes, risk management has always been and remains the responsibility of management – from the board of directors to the managing director to the individual line manager. volatility risk measurement is retrospective, based on historical performance, but as coleman notes, understanding the past is extremely important because understanding current risks and baltic journal of economic studies 148 vol. 9 no. 1, 2023 how they would have behaved in the past is the first step to managing them in the future (coleman, 2011). because risk measurement techniques require knowledge and experience to be used properly, managers, board members and investors have a responsibility to understand their businesses and investments. existing risk management methods can assess risk, but cannot adequately represent extreme or unexpected "black swan" events. managers, board members and investors must learn to live with this uncertainty and avoid a false sense of security. coleman focuses on the risks when profits and losses change on the income statement. however, this narrow focus on profitability should be broadened to include consideration of liquidity with volatility of operating cash flows from the mne cash flow statement and a focus on solvency with volatility of cash flows from the mne balance sheet. this is emphasized by another us scholar, howard schilit (schilit, 2010). he notes that in this way, all three main mne financial statements can contribute to the risk management process. schilit believes that these three initial focuses of risk management are expanded to assess additional volatility as follows: – the focus on net income is expanded to include the margin ratio; – оperating cash flow liquidity is extended to take into account the quality of the mne's earnings and revenues. earnings quality is calculated by dividing operating cash flow by net income, while revenue quality is calculated by dividing cash collected from customers by revenues. according to the results of the analysis of the above three risk management focuses, taking into account additional volatility, schilit recommends considering the effectiveness of converting these indicators into cash within the framework of mne financial reporting. in developing coleman and schilit's views on the focus of mne solvency by means of cash, it is appropriate to consider the fixed cost coverage ratio, the sloan ratio, and altman's bankruptcy model. the fixed cost coverage ratio of mnes was studied by the american researcher emanuel miller according to the formula 1 (grove, clouse, 2017): fccr ebitda capex cashincometax interest debt � � � � � � fccr – fixed cost coverage ratio ebitda – earnings before interest, taxes, depreciation and amortization capex – capital expenditures calculation of fccr can be used as a risk management tool when carrying out investment activities within the framework of the global economic system. from miller's point of view, the optimal value of fccr for mne should be 1,15 or higher, depending on the level of risk appetite of the company. at the same time, in the banking system, a typical loan condition may provide for an fccr value not lower than 2.0. in 1996, american researcher richard sloan analyzed the efficiency of mne stocks based on their accrual ratio. sloan found that the financial performance of mnes with low accrual ratios outperformed their counterparts with high accrual ratios. according to the results of the study, sloan proposed to calculate the accrual ratio according to formula 2 (robinson, 2007): sloanratio net income cfo cfi total assets � � � � � � cfo – cash from operations cfi – cash from investments a value of sloan ratio between (-)10% and 10% means that mne is in a safe area for working with accruals. on the other hand, deviations from the specified range may mean problems with accruals in mne. in 1968, the american scientist edward altman developed a model of the bankruptcy of multinational companies according to the values of the zeta index (ζ). the developed model is a numerical measure used to predict the probability of mne bankruptcy figure 1. an example of the distribution of financial results for an mne for confidence intervals of 68% and 95% baltic journal of economic studies 149 vol. 9 no. 1, 2023 in the next two years. according to the altman model, the zeta index (ζ) is calculated using formula 3 (altman, hotchkiss, 2005): zetaindex a b c d e� � �� �� �� ���� � � � � � �1 2 1 4 3 3 0 6 1 0, , , , , a – ratio of working capital to total assets; b – ratio of retained earnings to total assets; c – ratio of earnings before interest and taxes to total assets; d – ratio of the market value of equity to total liabilities; e – ratio of total sales to total assets. according to altman's model, the lower the zeta (ζ), the higher the probability that the mne is headed for bankruptcy. a zeta (ζ) below 1,8 means that the mne is in financial distress and has a high probability of going bankrupt in the next two years. on the other hand, a score of 3,0 and above means that the mne is in the safe zone and is unlikely to file for bankruptcy. a score of 1,8 to 3,0 means that the mne is in the gray zone and has a moderate chance of filing for bankruptcy. 3. on the brink of the new economic era the past two and a half years have been extra ordinary in terms of increasing macroeconomic uncertainty and business cyclicality. the troubling combination of a global pandemic exacerbated by energy shortages, high inflation, and geopolitical tensions poses serious challenges for mnes in managing emerging risks and opportunities. the global economy faced similar challenges in the 20th century: immediately after world war ii (1944–1946), during the energy (oil) crisis (1971–1973), and during the collapse of the soviet union (1989–1992). each of these global economic challenges created a set of powerful determinants that defined a new economic era: the postwar boom (1944–1971), the era of discord and strife (1971–1989), and the era of markets (1989–2019), according to the mckinsey global institute classification (bradley, seong, smit, woetzel, 2022). table 1 shows the main differences between the eras through the prism of five main directions. the energy (oil) crisis of the 1970s has some common features that resonate with today: an energy crisis, a negative supply shock, the return of inflation, a new monetary era, the rise of multipolar geopolitics, competition for resources, and a slowdown in productivity in the west. the return to stability after the energy (oil) crisis of the 1970s required non-opec countries to invest in energy independence and tight monetary stabilization, including double-digit interest rates and recessions. however, the main feature that distinguishes today 's challenges from the 1970s crisis is the political, economic and financial globality of the table 1 the main differences between the eras through the prism of five main directions postwar boom 1944–1971 era of discord and disputes 1971–1989 era of markets 1989–2019 compound annual growth rate (cagr) of global gdp per capita (groningen growth and development centre, 2020) 2,9% 1,5% 2,4% world order decolonization of the world and the transition to two competing blocs and the doctrine of mutual assured destruction end of the cold war, development of non-western economies, introduction of fiat money a globally connected world based on factor cost arbitrage and cooperative economic rules technological platforms the golden age of engineering: the world becomes mobile, mechanized, and energetic developing consumer electronics and laying the foundation for digital technologies digitization: connected and enabled demographic forces explosive population growth, radical inequality between the "first" and "third" worlds fertility rates are falling around the world and are below the reproduction rate in the west. at the same time, life expectancy continues to rise global convergence to the small urban family with better health and education resource and energy systems oil boom supports rapid expansion of energy sector acute oil supply crisis, energy diversification, including nuclear energy a world rich in fossil fuels with global access, but harmful to the climate capitalization the rapid growth of "first world" countries as part of the transition to a peaceful life. industrialization, reconstruction and debt relief active growth of the chinese economy as western countries struggle with stagflation substantial debt growth with low inflation, supply and demand shocks as billions enter the global market economy baltic journal of economic studies 150 vol. 9 no. 1, 2023 global economic system. today 's supply crisis also differs from previous macroeconomic shocks, such as the 1997 asian financial crisis, the 2000 dot-com crash, and the 2008–2009 global financial crisis, which were mostly demand-side and largely contained within a region or sector. figure 2 presents the theory of the new economic era in the context of the five main areas defined above that mark its differences from previous eras. the factors described in the theory of the new economic era can create uncertainty in the operational and strategic activities of mne in the following directions: – the world order is moving toward multipolarity, which can mean regrouping into regionally and ideologically aligned groups. such multipolar changes and regionalization create new risks for multinationals operating in different countries; – technological platforms see the rapid growth of transversal technologies, particularly artificial intelligence and bioengineering, which, when combined, could create another great wave of progress in the new economic era. such technological advances may be at the forefront of geopolitical competition, creating new risks and opportunities for multinational corporations and global institutions; – demographic forces will transform a young world into an aging urban one, an era of infectious diseases may give way to an era of non-communicable diseases, and inequality within states may increasingly challenge the social fabric and the multinational corporations that support it; – resource and energy systems face the vulnerability of energy security in the age of markets and the direction of investment in low-carbon energy that must simultaneously meet growing energy demand. the transition to a carbon-neutral economy will be accompanied by geopolitical tensions between global producers and consumers of energy resources, creating a number of risks for energy mnes; – capitalization in the new economic era will involve an increase in the debt obligations of global participants in the world economy, with a potential shift in geographic focus from europe to asia, affecting the cash flows of mnes operating on different continents. 3. conclusions the studied risk management focusing exclusively on the past financial indicators of mne activity and the conducted analysis of the new global challenges of the new economic era show a gap between the existing approaches to the formation of risk management strategies, which are based only on international standards (including reporting standards), and the urgent needs of mnes dictated by global economic determinants. this gap must be addressed by the risk management functions and top management of mnes in order to shape the resilience of the mnes' business – a characteristic that is becoming extremely important in the current conditions of global economic and geopolitical uncertainty. over the past three decades, going global has meant unlocking specialization and scale, developing markets, and creating multinational corporations. in 2021 alone, the federal reserve's low interest rates and abundant funds forced u.s. companies to spend $506 billion on foreign mergers and acquisitions (grant, haider, mieszala, 2022). figure 2. the concept of the theory of the new economic era in the context of the main directions baltic journal of economic studies 151 vol. 9 no. 1, 2023 today, however, the foundations of globalization are facing major destructive factors, a recent example of which is russia's military aggression against ukraine. the management of mnes is faced with the serious question of whether their companies can still remain global players, and if so, in what way. according to the u.s. national intelligence council's global trends 2040 report (the national intelligence council, 2021), competition for global influence is likely to reach its highest level since the cold war over the next two decades. in the midst of these challenges, the value of business resilience is growing. in addition, a study by international consulting firm mckinsey, "resilience for sustainable inclusive growth" (brende, sternfels, 2022), found that mnes rated as more resilient created more shareholder value than their less resilient counterparts throughout the lifecycle of major economic shocks over the past two decades. all of this adds up to clear prospects and determinants for further developments in the field of risk management strategies. references: coleman, t. (2011). a practical guide to risk management. research foundation of cfa institute. available at: https://www.cfainstitute.org/-/media/documents/book/rf-publication/2011/rf-v2011-n3-1-pdf.pdf coleman, t. (2012). quantitative risk management. new york: j. wiley & sons, рp. 20–21. schilit, h. (2010). financial shenanigans: detecting accounting gimmicks that destroy investments. cfa institute conference proceedings quarterly, 27(4): 67–74. doi: http://dx.doi.org/10.2469/cp.v27.n4.1 grove, h., & clouse, m. (2017). the role of risk management in corporate governance: guidelines and applications. risk governance and control: financial markets & institutions, 7(4-1): 92–99. doi: http://doi.org/ 10.22495/rgc7i4c1art1 robinson, e. ( january 5 2007). barclays phd’s build hedge fund giant inside. no. 3 u.k. bank. business week, рp. 80–89. altman, e., & hotchkiss, e. (2005). corporate financial distress and bankruptcy: predict and avoid bankruptcy, analyze and invest in distressed debt. third edition, j. wiley & sons, jersey city, n.j. doi: https://doi.org/ 10.1002/9781118267806 bradley, c., seong, j., smit, s., & woetzel, j. (2022). on the cusp of a new era? mckinsey global institute. available at: https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/on-the-cusp-of-a-new-era groningen growth and development centre (2020). maddison project database 2020. university of groningen. available at: https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database2020?lang=en grant, a., haider, z., & mieszala, j. (2022). how to build geopolitical resilience amid a fragmenting global order. mckinsey & company. available at: https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/ how-to-build-geopolitical-resilience-amid-a-fragmenting-global-order global trends 2040. the national intelligence council (2021). available at: https://www.dni.gov/files/odni/ documents/assessments/globaltrends_2040.pdf brende, b., & sternfels, b. (2022). resilience for sustainable, inclusive growth. mckinsey & company. available at: https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/resilience-for-sustainableinclusive-growth received on: 7th of february, 2023 accepted on: 13th of march, 2023 published on: 31th of march, 2023 baltic journal of economic studies 184 vol. 4, no. 3, 2018 corresponding author: 1 department of mathematics and computer science, vasyl stefanyk precarpathian national university. e-mail: ira.nyk@gmail.com 2 department of economics, vasyl stefanyk precarpathian national university. e-mail: nsuduk@email.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-184-188 main contractor – subcontractor relations in the framework of contract theory iryna nykyforchyn1, nataliia suduk 2 vasyl stefanyk precarpathian national university, ukraine abstract. the purpose of this paper is to study optimal relationships between customer, main contractor, and subcontractor. we make the following assumptions: main contractor and subcontractor have types that specify expenses and outcomes for all actions that can be performed. the higher type has fewer expenses for the same action, and optimal action increases with type. contractors announce their types but can cheat, i.e., not reveal true types. the action and the respective remuneration are specified by the higher authority accordingly to the type declared. incentives are paid so distorting real type is disadvantageous both for main contractor and subcontractor. we consider these assumptions to be compatible with economic practice. methodology. we apply methods of contract theory, probability theory, and variation calculus, appropriately modifying apparatus of classic basic incentive problem. variety of types of (sub-)contractors available is described via probability distributions. then expected values of profits for participants are calculated as integral functionals. maximization of these functional results in implicit equations for optimal incentive functions. results. a method for optimization of activity of all participants is developed. its requirements are traditional and non-restrictive; hence the expected area of applications is wide enough. optimal actions and incentive functions are found. formulae for the influence of expected main contractor and subcontractor’s productivity and expenses on customers profit and payoffs are presented. conclusions. it is shown that generally customer does not need to collect information about real subcontractor, relying on main contractor, but should take into account the actual situation in the respective branch. in the case when the customer is fully informed about this situation, contractor’s expected profit does not depend on subcontractor’s type (although it is only a mathematical expectation and a concrete result can vary). key words: contract theory, principal, agent, incentive compatibility, main contractor, subcontractor. jel classification: d82, d86 1. introduction the organizational and economic mechanism for managing the region is a complex set of tools and processes affecting the social and market conditions of regional cooperation, which ensure the efficiency of the regional economy and improve the quality of life of the population (blahun, dmytryshyn, & leshuk, 2017). this mechanism carries out the following major large-scale processes: 1) direct management of the public sector of regional development; 2) coordination of various types of activities and processes of the socio-economic development of regions; 3) market stimulation of economic processes. stimulation is an external influence on an object, the motivating effect of which corresponds to its motives. previously, economists paid less attention to how objects of economic activity respond to different incentives and, accordingly, how to create incentives for optimal behaviour. in the last third of the last century, this issue became the basis of economic research studying the economics of incentives, information economics and economy of contracts (laffont & martimort, 2002). these areas are close enough and it is difficult to draw boundaries between them. in the theory of contracts (bolton & dewatripon, 2005), hierarchical structures with different amounts of power of the participants at different levels are considered, however, as a rule, incentive functions (principles of remuneration under contract fulfilment) are established by the highest governing centre, based on its interests. this agrees well with the realities of a large company but does not accurately describe the interaction of independent entities when the contractor independently optimizes the activities of the subcontractor, and the main customer does baltic journal of economic studies 185 vol. 4, no. 3, 2018 not always have full information about the final executors. regional development requires the daily solution of production tasks that involve numerous business entities; in particular, contractors involve subcontractors, forming a branched contract contractual tree within each project. in today’s realities, when management links are weakened, the main functions of regional governance are the decentralization of competences, the reduction of hierarchical levels of management with the consolidation of solved tasks and responsibilities, the clear separation of strategic and tactical tasks. the purpose of our article is to analyse the relationship “customer – contractor – subcontractor”, i.e., the “vertical links” in the hierarchy (cf. (nykyforchyn, 2017) for analysis of “horizontal links”). the proposed model is rather schematic, however, allows us to draw some conclusions about the optimal behaviour of participants. we do not impose severe restrictions on functions that describe the costs and the effect of the participants, making only assumptions that are traditional for the theory of contracts. 2. the main assumptions of the model consider a model including a centre and two agents such that the centre is a principal for the first agent and the first agent is a principal for the second one. each of the agents has his type (in fact, his productivity), which is known to him only and specified with a number q and q respectively. an agent can inform his principal of another type q̂ or q̂ (pretend to be of another type), cf. (cabrales & charness, 2000). according to the declared type q̂ , the center requires the action ω=ω(q̂ ) from the first agent, and, after having it completed, pays t(q̂ ) (the function t is previously announced to the first but not to the second agent, the function ω is known to the principal only). expenses of the first agent are reduced depending on the effect h of the second agent’s action and are equal to c(q,ω)–h. the effect of the first agent’s action is determined with a function h(q,ω). the first agent, being the principal for the second one, requires the action θ=θq(q̂ ) respective to the type declared and pays the incentive tq(q̂ ). functions θq and tq depend on the parameter q , hence we use equivalent denotations θq(q̂ )=θ(q ,q) and tq(q̂ )=t(q ,q). function θq (but not the parameter q) is previously announced to the second agent. the second agent performs the required action, which expenses equal to c(q ,θ), and reduces expenses of the first agent by h=(q ,θ,ω) . thus the profits are: r=h(q,ω(q̂ )–t(q̂ ) (centre); r1=t(q̂ )–c(q,ω(q̂ ))+h(q ,θq(q̂ ),ω(q̂ ))–tq(q̂ ) (first agent); r2= tq(q̂ )–c(q ,θq(q̂ )) (second agent). we assume that the first agent’s type is continuously distributed between q_ and q _ with the density f1 and the distribution function f1. similarly, let f2 and f2 be the density and the distribution function of the second agent’s type between q_ and q _ . these distributions are considered independent and known to all participants, as well as the functions h, c, c. 3. incentives for the second agent we also assume that the mentioned functions are such that that announcing incorrect type is disadvantageous. for the second agent, this results in the classic conditions taking the derivative of the first condition with respect to q and substituting into the second one, we obtain t''q–cθq(q,θq(q))θ'q(q)–cθθ(q,θq(q))2–cθ(q,θq(q)) θ''q(q)=0 thus: cθq (q ,θq(q))θ'q(q)<0. assuming spence-mirrlees condition cθq<0, we obtain that in the pair of incentive compatibility conditions (ic1), (ic2) the second one can be replaced with the inequality θ'q(q)>0, i.e., the desired action of the second agent has to increase with its type. having this satisfied, we can be sure that q _ =q and the derivative of the second agent’s profit with respect to his type is equal to . taking into account that expenses decrease with type, obtain cq<0, hence >0, i.e., the profit r2>0, which is called information rent, increases with his type. it is natural also to require that the second agent’s action is not unprofitable (individual rationality): r2= tq (q̂ )–c(q ,θq (q̂ ))≥0 clearly, it is sufficient for (ir) that the above inequality is valid only for the least value of r2, i.e., for the lowest type q_ of the second agent. therefore the first agent prefers the least possible function r2 such that r2=0 for type q_, which implies that the information rent can be expressed via the calculated above derivative and the action function: r2(q ,q)= –∫q_ q cq (q̂ ,cq (q̂ )) dq̂ . thus, the optimal incentive function equals tq(q)=c(q,θq(q))+r2(q,q)=c(q,θq(q))–∫q_ q cq(q̂ ,cq (q̂ )) dq̂ . such reasoning is typical for the basic incentive problem (grossman & hart, 1982; grossman & hart, 1983). baltic journal of economic studies 186 vol. 4, no. 3, 2018 4. optimal action function of the second agent and incentives for the first agent now consider the profit (the information rent) of the first agent in view of q̂ =q. for his type distortion to be disadvantageous, it is necessary that expected information rent has a maximum in q̂ =q. calculate this expectation: er1(q̂ )=∫q_ q r2(q̂ ,q̂ )f2(q)dq=–∫q_ q (t(q̂ )– –c(q,ω(q̂ ))+h(q,θq(q),ω(q̂ ))–tq(q))f2(q)dq= =t(q̂ )–c(q,ω(q̂ ))+∫q_ q (h(q ,θq(q),ω(q̂ ))– –c(q ,θ(q ,q))+∫q_ q cq (q̂ ,θ(q̂ ,q̂ )) f2 (q)dq̂ )(f2 (q)dq since all the summands of the latter expression but h do not depend on q̂ , we can by analogy to the above calculations show that similar incentive compatibility conditions have to be valid: this is (ic1+) condition. we again take the derivative of the first condition with respect to q and substitute the result into the second one, hence cωω (q,ω(q))ω'(q)<0 and, assuming spence-mirrlees condition cωq<0 also to be valid, obtain an equivalent inequality ω'(q)>0, which means that the desired action of the first agent increases with his type. note that the “utility” h of the second agent for the first one depends on the both agents’ actions and the second (but not the first) agent’s type. due to such “splitting” the function h does not take part in the simplified form of the condition (ic2+). assuming incentive compatibility conditions to hold, consider the possibility of maximization of er1(q) for q̂ =q , and, respectively, ω(q) already fixed. change the order of integration: = to maximize this functional while θq runs through all non-decreasing continuous functions, we equate to zero the derivative of the integrand with respect to action, hence solving this equation with respect to ω for all q with q being a parameter, we obtain a function θω(q), which is the optimal action that the first agent will require from the second one. observe that the latter equation depends not directly on q , but on the action ω=ω(q) that the second agent should perform, therefore, the optimal for the first agent action of the second agent is a solution θω(q)=θω of the equation (hθ (q,θω(q),ω) – cθ (q,θω(q))) f2 (q)+cqθ (q,θω(q)) (1–f2(q))=0 recall that due to (ic2) θω should satisfy the requirement >0 for all ω. calculate the derivative again positivity is obtained, hence the mathematical expectation of the first agent’s information rent also increases with his type independently of the form of “utility function” of the second agent for the first one. only optimality of stimulation of the first agent by the centre and of the second agent by the first one is sufficient. the (ir+) incentive compatibility condition er1≥0 for the first agent can be verified for his lowest type q_ only, therefore, we can put er1(q)=0 and, taking into account the above-calculated derivative, obtain er1(q)= –cq (q,ω(q)), hence the incentive function is: baltic journal of economic studies 187 vol. 4, no. 3, 2018 and is determined with the selected increasing action function qω. 5. optimization of the centre profit which is left is to find a function ω(q) that maximizes the expected centre profit. taking derivative with respect to ω, obtain an equation for the action function: f q h q q c q q q q h qq q q q 1 ( ) ( )( ) − ( )( ) + ∂ ∂ ( )( )        ∫ω ωω ω ω ω, , , , θ θθ � (( ) ( ) ( )( ) − ( )( )( ) ( ) + ( )( ) − ( )( )( , , ( ,ω ω ωq c q q f q c q q f qq q q q�θ θθ2 21 )) + ∫ ( )dq h q q q q ω ω( , �θ f q h q q c q q q q h qq q q q 1 ( ) ( )( ) − ( )( ) + ∂ ∂ ( )( )        ∫ω ωω ω ω ω, , , , θ θθ � (( ) ( ) ( )( ) − ( )( )( ) ( ) + ( )( ) − ( )( )( , , ( ,ω ω ωq c q q f q c q q f qq q q q�θ θθ2 21 )) + ∫ ( )dq h q q q q ω ω( , �θ (q)f q h q q c q q q q h qq q q q 1 ( ) ( )( ) − ( )( ) + ∂ ∂ ( )( )        ∫ω ωω ω ω ω, , , , θ θθ � (( ) ( ) ( )( ) − ( )( )( ) ( ) + ( )( ) − ( )( )( , , ( ,ω ω ωq c q q f q c q q f qq q q q�θ θθ2 21 )) + ∫ ( )dq h q q q q ω ω( , �θ f q dq c q q f qq2 11 0( ) + ( )( ) − ( )( ) =ω ω, � in view of the equation θ ω, we see that the first integral is zero, hence the equation becomes of the form similar to the form of the equation for the second agent’s action but with a summand depending on the function h � and θ : f q h q q c q q h qq q q q 1 ( ) ( )( ) − ( )( ) + ∫ ( )( , , ( ,ω ω ωω ω �θ (q) f q dq c q q f qq2 11 0( ) + ( )( ) − ( )( ) =ω ω, � the functional of expected centre profit can have a maximum in its solution if it satisfies the condition ω'' (q)>0. the latter equation implies that the optimal action of the first agent that is selected by the centre depends on the expected productivity of the second agent, with the exception of the degenerate case when the utility of the second agent is the same for all actions of the first agent. on the other hand, this productivity affects the expected centre profit according to the above formula. 6. conclusions under rather general assumptions, we have obtained methods for optimization of activity of all participants in the presented model. the derived formulae allow performing computational experiments for specific types of functions describing expenses and productivity of main contractor and subcontractor. at the same time, certain conclusions can be drawn even without such concretization. first, if control is “incentive compatible”, then main contractor’s expenses on payments to a subcontractor are on the average compensated by the customer; hence the expected profit of the main contractor depends on his own properties only, i.e., on expenses and utility for the customer. second, optimal action required from the contractor accordingly to its type, as well as expected centre profit, generally depends on expected subcontractor properties. this means that there is no need for the customer to collect information about real subcontractor. the customer can rely on the main contractor in the optimization of subcontractor activity but should take into account the actual situation in the respective branch (in the form of the probability distribution of the parameter that specified expenses and productivity). this conclusion correlates with the main result of (melumad, mookherjee, & reichelstein, 1995), who also suggested contracting delegation. describe explicitly assumptions of the model necessary for the conclusions drawn to be true. customer and contractor define incentive function so that true types of agents are revealed. contractor accepts contract before the true type of a subcontractor is known and incentive function for subcontractor is announced after incentive function for the contractor (so the customer cannot guess contractor’s real type). expenses functions and effect functions (but not the types that are parameters of these functions) are known to all participants. we do not consider possibilities of participants’ coalitions. further research will focus on computational experiments and on verifying that the revelation principle does not prevent us from finding more effective strategies for the participants. baltic journal of economic studies 188 vol. 4, no. 3, 2018 references: blahun i., dmytryshyn l. & leshuk h. (2017). simulative model for evaluation of investment processes in the regions of ukraine. investment management and financial innovations, 14(3), 322-329. bolton p. & dewatripon m. (2005). contract theory – cambridge, mass & london, england: mit press. cabrales a. & charness g. (2000). optimal contracts, adverse selection and social preferences: an experiment. economics working papers 478, department of economics and business, universitat pompeu fabra. grossman s. & hart o. (1982). implicit contracts under asymmetric information. quarterly journal of economics, 1, 110-124. grossman s. & hart o. (1983). an analysis of the principal-agent problem. econometrica, 51(1), 7-45. laffont j.-j. & martimort d. (2002). the theory of incentives. the principal – agent model – princeton & oxford: princeton university press. melumad d.n., mookherjee d. & reichelstein s. (1995). hierarchical decentralization of incentive contracts. the rand journal of economics, 26(4), 654-672. nykyforchyn i.v. (2017). simulation of active systems with dependent incentives of agents, herold of volyn institute for economics and management, 19, 178-184. (in ukrainian) baltic journal of economic studies 8 vol. 4, no. 2, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-2-8-14 innovation-driven grow th model in the present context of business performance tetiana aloshyna1, dmytro kozenkov2 national metallurgical academy of ukraine, ukraine abstract. over the last decade, domestic enterprises have faced serious problems in the sphere of innovative development. government’s reluctance to finance innovations has become the major obstacle leading to temporary freezing of innovation activity of enterprises. the study aims at investigating the theoretical foundation of innovative modelling of entrepreneurship and elaborating business development model of modern industrial enterprises, taking into account innovation components and the current state of the country’s economy. the theoretical and methodological basis of the research is the conceptual provisions and scientific developments of experts in innovative development and issues relating to the management of innovation processes, published in monographs, periodicals, proceedings of scientific and practical conferences on the problem. in spite of the significant contribution of domestic scholars in research and elaboration of the theoretical background of the country’s innovative development, there are a number of aspects regarding the innovations in performance modelling of industrial enterprises, which remain unclear. results. at the present stage of development, industrial enterprises are bound to seek internal financial resources for innovative development or carry out modernization involving both domestic and foreign investments. in addition, managers of industrial enterprises have realized that innovation activity is the key to the company’s successful performance in competitive business environment. although a significant part of domestic investment has been forwarded to innovative business development, there is a problem with the integral planning of innovative activity. conclusions and directions for further researches. the authors have developed and proposed the basic model of innovative development of ukrainian industrial enterprises. the model is based on the above-mentioned models of innovative development taking into account specific characteristics and factors in business model elaboration. this model envisages the development of innovation-oriented enterprise consistent with the context of economic performance. the results of the research can be used for modelling and comprehensive assessment of the model implementation in the enterprises in dnipro region. key words: innovations, innovation-driven growth model, innovation process, scientific and technical progress, intensification of innovation activities, characteristics and stages of innovative development model. jel classification: o310, c510, o300, o320, o330 corresponding author: 1 department of management, national metallurgical academy of ukraine. e-mail: tatiana.aloshyna@gmail.com 2 department of management, national metallurgical academy of ukraine. e-mail: 13managua@gmail.com 1. introduction historically, science, technology, and innovation have always been key factors in societal development. highly developed countries have intensified and accelerated innovation activity over the past decades. currently, the innovation trend is becoming increasingly widespread, which provides for competitive advantages to business entities, fosters their market positions and, therefore, it favours economic upturn of the countries, which boosts the development of domestic innovation entrepreneurship. unfortunately, ukraine lacks for environment support of innovation-based economic development these days. the national economy still demonstrates a high level of power consumption and non-competitiveness. the latest research into national business performance has shown that ukrainian companies have a complex of problems related to elaboration and implementation of innovative development strategies, particularly, as regards uncertainty of performance outcomes. that is why the subject of the research is still of high relevance. baltic journal of economic studies 9 vol. 4, no. 2, 2018 2. analysis of recent research and publications the theoretical framework of innovative development and issues concerning the management of innovation processes have been presented in the papers by such prominent researchers as: afuah a., obłój k., hamel g., adamenko o.a., andronnikova n.g., barkalov  s.a., geets v.m., danilishyn b., dzhedzhula v.v., epіfanova  і.yu., tsvik o.g., zakharchin g.m., illyashenko  s.m., kolotyuk o.i., rogoza m.e., petukhova o.m., fedorenko v.g., huchek m., and others. in spite of the significant contribution of domestic scholars into research and elaboration of the theoretical background of the country’s innovative development, there are a number of aspects regarding innovations in industrial performance modelling, which remain unclear. 3. goals and objectives of the study the aims of the study are to investigate the theoretical foundation of innovative entrepreneurship modelling and to elaborate a business development model of modern industrial enterprises involving innovation components and taking into account the current state of the country’s economy. for this purpose, the study focusses on defining the “model of innovative development”, describing a methodology for innovative development modelling, as well as presenting the basic model of innovative development of ukrainian industrial enterprises. 4. analysis of theoretical approaches to modelling innovative development the main constituents of the model of innovative development are such economic categories as “model”, “innovations”, “development model”, and “business model of an enterprise”. let’s consider some of the mentioned categories in details. in general terms, the model is a representation of an object, system or concept in the form, which may differ from the actual configuration. model is a source of information about the object. it helps to interpret, understand or improve the object. models are seen as copies of an object, regardless of the fact that they can be made of different material and within a different scale or display certain characteristics of the object in an abstract form. in the context of the research, the model is a detailed profile with the outlined system and logical structure, built on innovation basis (andronnikova, barkalov, burkov, kotenko, 2001). such a model consists of interdependent qualitative and quantitative indicators that characterize different economic phenomena. there have to be defined sources and regulation mechanisms, as well as incentive and efficiency of the innovationbased character of a dynamic enterprise. any model, concept or scheme should be based on general cornerstone principles such as: – integrity (complexity); – cause-and-effect relationship (interrelation, convergence, coexistence of the old and the new); – synergy; – emergence (derivation of the tree of objectives for the entire system and its components); – structuredness; – adaptability (mobility); – alternativeness (interchanging of ground-breaking ideas, options); – consistency; – non-additivity (synthesis of the old, the contemporary, and the new) (zakharchyn, 2008). in its turn, innovation is a transformation of potential scientific-and-technological advance into the practical realm, embodied in new products and technologies. contemporary theoretical literature in the field of economics provides diverse definitions of innovations depending on the subject and object of the research. some scholars define innovation as a process. particularly, according to v. fedorenko (fedorenko, 2003), innovation is a process aimed at the creation, production, development, and qualitative improvement of new products, technologies, and organizational forms. m. khuchek considers innovations as changes. he supposes that innovation is a change in engineering and technologies, organization, ecology, economy, and social life of an enterprise (khuchek, 2002). in accordance with the 1st article of the ukrainian law “on innovation activity”, innovation is a newly created (applied) and (or) improved competitive technology, a product or a service, as well as an organizational and technical solution of industrial, administrative, commercial or another kind of nature, which significantly improves the structure and the quality of production and (or) of social sphere. a list of innovation objects was stated in the 4th article of the above-mentioned law. objects of innovation include: – innovative programs and projects; – new knowledge and intellectual products; – business equipment and processes; – the infrastructure of manufacturing and enterprise; – organizational and technical solutions of industrial, administrative, commercial or another kind of nature, which significantly improve the structure and quality of production and (or) social services; – raw materials, mining and processing facilities; – marketable output; – foundation mechanism of a consumer market and marketable output distribution and sales. the development model is the next economic category, which has a morphogenetic nature of the examined notion. according to the authors, development model baltic journal of economic studies 10 vol. 4, no. 2, 2018 is the main projection of overall economic processes of a company, proposed to management for key goals achievement. creation of development model is hardly possible without the elaboration of business-model of an enterprise on the whole. k. obłój defines a business model as a general conception of the company operation. in the author’s opinion, a business model is a combination of a strategic conception of a company and a technology of its practical realization, considered as the elaboration of a value chain securing effective operation and regenerating its resources and skills efficiently (obłój, 2014). a. afuah gives the following definition of a business model (afuah, 2014): “a business model is a set of company’s activities, its performance techniques including the stipulation of required time, aimed at creating superior customer value (low-cost or differentiated products) and securing position for value take-over.” g. hamel presented an interesting definition of business model in terms of innovativeness (hamel, 2007). he interpreted business-model as a foundation of innovative business conception. according to hamel, implementation of new business models, especially in highly innovative economy sectors, undermines old business approaches to a greater degree rather than the introduction of new technologies does. the innovative conception of business operations has to be built on the basis of drastic innovations, which break new ground opportunities in the market. g. hamel offers a model structure with four major elements including: – basic strategy; – strategic facilities; – communication and relationships with clients; – network costs. summarizing above-mentioned definitions, the authors have proposed the following definition of innovative development model, which is an expression of priorities, directions, structures, incentives, strategies, and mechanisms that shape the innovation policy of the enterprise. it is the basis of business model elaboration, grounded on innovations and underlying processes of the enterprise. 5. methodology for forming the innovative development model elaboration of the innovative development model is based on research and assessment of various options of innovative solutions, which meet the company’s business image and objectives of its development. it is necessary to say that innovation activity is a dynamic system that requires periodic adjustments taking into account possible changes in external conditions and new opportunities for the company’s growth (pyetukhova, silakova, 2011). stages of elaboration of the innovative development model of enterprises are presented in fig. 1. coordination of innovative strategy of the enterprise with its general business strategy (which aims at solving strategic tasks) is a specific characteristic to be taken into account while elaborating an innovative model. strategic tasks directly influence optimization of company’s structure and define its harmonized paramount targets. the effectiveness of these objectives depends on the characteristics of the innovative model, which plays an important role in the consistent and coherent performance of an industrial enterprise. thus, in the present conditions of economic development, it is possible to use several types of innovative development. this possibility is stipulated by a group of factors (fedorenko, 2003): – geographical location of production facilities; – market (trade area) for final products; – nature of the response to needs and conditions of social progress; fig. 1. stages of the creation of innovative development model of the enterprise analysis of the external and internal environment of the enterprise formation of the goals and objectives of innovation development of innovative strategies defining innovation potential of production calculation of efficiency of innovative projects and implementation of an innovative model of development baltic journal of economic studies 11 vol. 4, no. 2, 2018 – potential risks and challenges for the company; – external characteristics of the industry; – specific nature of various innovative models. it should be noted that the model has to be designed with consideration of all above-mentioned factors and priorities of economic development of the company. there are various models of innovative development, described in the economic literature. such models are generalized and explained in table 1. table 1 characteristics of models of the innovative development of the company № name of the model the main characteristics of the model 1 model of state support financing from the state budget; guaranteed food security and alignment of scientific and technical potential 2 local innovation environment accumulation of industrial, scientific, and financial capacity, combined joint innovation process of enterprise development; creation of innovative technologies, products, and logistics 3 intra-industry clusters unification of research and development in a single innovation chain; concentration on solving business problems with the use of business logistics and financial resources 4 intra scientific and technical complexes establishing cooperation with other innovation actors; creating innovative systems with the implementation of all factors that impact on industrial activity; transfer of technology and quality of scientific and technological capacity with minimal resources; 5 mixed a combination of elements of other models; serving the interests of industrial enterprises. undoubtedly, there are no expressively outlined models of innovative development in precise (ultimate) formulations. the most common conception is a model mixed of five others listed above. this model has to be adapted to the needs of each particular company. in each case, a company determines key elements of the model stipulating its production function. herewith, innovative development model has to be based on innovative changes in all spheres of enterprise performance. therefore, implementation and extension of innovations by enterprises should take into account: innovation of products; innovation of processes; innovation of personnel; innovation of management activities; innovation of culture. transition to an innovative model of a company’s performance is determined by the direct influence of environmental factors. such factors are divided into certain groups. different approaches to classification of innovation factors are described in the economic literature. and in our opinion, it is necessary to apply traditional pestfactors for holistic analysis of the model and research of the following groups of factors: – political and legal; – economic and information; – engineering and technologies; – organizational; – socio-cultural. more detailed description of each group of abovestated factors is presented in table 2 below. table 2 the main factors of innovative development № factors of innovative development influence quantity 1 political and legal – creation of a legal framework for the innovative development of ukrainian enterprises on the basis of laws and regulations; 2 economic and information – acceleration of vertical and horizontal integration in the international space; – influence through the increased competition in the old markets and new markets in line with the needs of society. 3 technical and technological – creation of new ways to satisfy needs; – stimulation of innovative development by improving the level of education, knowledge, and level of scientific development; – impact on the technical and technological aspects of innovative enterprises. 4 organizational and management – impact on innovation sphere through institutional governance and institutional and organizational changes. 5 socio-cultural – a detachment of socio-cultural impact of innovation on the influence of many other factors. there are three innovative development models subject to the level of factors and innovation process arrangement in the company: 1. innovative development based on internal organization, when innovation is elaborated and tested inside the enterprise by its functional units employing planning and monitoring of their interactions within an innovation project of the company. 2. innovative development based on external organization. such a model envisages elaboration of baltic journal of economic studies 12 vol. 4, no. 2, 2018 innovations by means of contracting when bid requests for elaboration and testing are allotted to external agencies. 3. innovative development based on external organization with the help of venture companies. in this case, a parent company has to establish affiliated venture companies for the innovation project implementation. these affiliated companies underwrite additional funds for new projects realization (zakharchyn, 2008). 6. the basic model of innovative development of ukrainian industrial enterprises the authors have developed and proposed a basic model of innovative development of ukrainian industrial enterprises. worked-out model is based on the above-stated models of innovative development taking into account specific characteristics and factors of business model elaboration. this model envisages the development of innovation-oriented enterprise consistent with the context of economic performance (fig. 2). in the authors’ opinion, the basic structural components of innovative development model of an industrial enterprise should be: – a basic strategy of the company; – strategic directions of business performance; – a market of business activities. the basic strategy of the enterprise should consist of the following elements: objectives; mission; the structure of the company’s potential; competitive position of the company; its financial result from the strategy implementation. the basic strategy has to be oriented to the process of targeted consistent change of the company’s standing in accordance with its innovation potential. the latter is an ability to create new opportunities for subsequent business performance by the implementation of new solutions, ideas, and outcomes of innovations. the above-stated elements of the strategy define strategic directions of the company’s development, which play a role of the vector of activities and a guideline for the company’s development in the current economic conditions. strategic directions of business performance and company’s strategy itself shall be considered in a close connection with each other because they are mutually conditioned. introduction of innovations in all areas of the enterprise activity is a prerequisite for strategic directions’ change and strengthening of the company’s position in the market. in accordance with the developed model, strategic directions of the company shall be associated with the expansion of the market by means of permanent research fig. 2. basic model of innovative development of industrial enterprises rival iv rival ii rival iii rival i external environment client vi client ii client v client i client iii client iv customer strategic direction objectives potential baseline strategy mission skilled sales and production profit competitiveness market development gain of clients pricing policy study of demand in no va ti on baltic journal of economic studies 13 vol. 4, no. 2, 2018 of market demand and maintaining of competitive prices providing that quality of products is high. market analysis of the company’s activities has to be done with its breakdown into structural components and market participants. under the market structure, we understand the balance of supply and demand for goods and services in the market. market participants are competitors, suppliers, and customers. the model, proposed by the authors, stipulates a close relationship between a company and its consumers, on the one hand, and a company and its competitors, on the other, all together operating in the same market. therefore, market analysis of the needs, opportunities, and activities of both consumers and competitors should be a top-priority task and an activity guideline at all stages of the model functioning along with innovative vectors of industrial enterprises’ development. it should be noted that proposed modelling of the company’s innovative policy in modern conditions of economic development involves achievement of relevant goals: – development of viable industrial complex fostering competitiveness in domestic and foreign markets; – satisfying consumers’ needs in the market for the company’s business activities; – reducing the company’s dependence on suppliers; – increasing capabilities for the market expansion exploiting competitive advantages and implementing innovative components; – improvement of the company’s competitiveness by increasing its workforce capacity, resource and innovative potential. 7. conclusions over the last decade, domestic enterprises have faced serious problems in the sphere of innovative development. government’s reluctance to finance innovations has become the major restraint, which has led to the temporary freezing of innovation activity of enterprises. at the present stage of development, industrial enterprises are bound to rely on internally financing innovative development or carry out modernization involving both domestic and foreign investments. in addition, managers of industrial enterprises have realized that innovation activity is the key to successful performance of the enterprise in the competitive business environment. although a significant part of domestic investment has been forwarded to innovative business development, there is a problem with the integral planning of innovative activity. to summarize: 1. there is no common view on the definition of a model of innovative development. the main constituents of the “model of innovative development” are such economic categories as: “model”, “innovations”, “development model”, and “business model of an enterprise”. summing up the above-mentioned definitions, the authors have proposed the definition of innovative development model as an expression of priorities, directions, structures, incentives, strategies, and mechanisms that shape the innovation policy of the enterprise. it is the basis of business model elaboration, grounded on innovations and underlying processes of an enterprise. 2. the authors have laid out the main characteristics, principles, factors, and stages of forming the innovative development model. thus, the elaboration of the innovative development model is based on several steps, namely, arranging the stages of modelling procedure, coordinating the innovative strategy of an enterprise and its general business strategy, and including all factors in innovative development. studying theoretical sources made it possible to develop the model of innovative business development described in the paper. 3. the model presented is a visualized concept of involving and implementing innovative components in industrial enterprises’ development strategies. the model takes into account the company’s market environment and activities of all market participants enabling it to differentiate strategic directions of enterprise development in theoretical and practical terms. references: adamenko o.a. (2010) kontseptualni zasady innovatsiynoho rozvytku pidpryiemstv [conceptual frameworks of innovative development of enterprises]. naukovi pratsi natsionalnoho universytetu kharchovykh tekhnolohiy, no. 35, pp. 5-10. andronnikova n.g., barkalov s.a., burkov v.n., kotenko a.m. (2001) modeli i metody optimizacii regionalnyh programm razvitiya [models and methods of optimization of regional programs of development]. moscow: ipk ran, 60. (in russian). afuah a (2014) bussiness model innovation. concepts, analysis and cases. new york : routledge, p. 376. danylyshyn b. & chyzhova v. (2004) naukovo-innovatsiyne zabezpechennya staloho ekonomichnoho rozvytku ukrayiny. [scientific and innovation guarantee of sustainable economic development of ukraine]. ekonomika ukrayiny, no. 3, pp. 4-11. retrieved from: http://www.investplan.com.ua/pdf/4_2017/3.pdf dzhedzhula v.v., epіfanova і.yu., tsvik o.g. (2017) іnnovatsіyna dіyalnіst yak chinnik konkurentospromozhnostі pіdpriemstva. [innovative activity as a factor of competitiveness of the enterprise]. іnvestitsіi: praktika ta dosvіd, no. 4, pp. 5-8. baltic journal of economic studies 14 vol. 4, no. 2, 2018 fedorenko v.h. (2003) innovatsiyna i investytsiyna stratehiya ukrayiny [innovation and investment strategy of ukraine]. ekonomika ta derzhava, no. 8, pp. 16-27. geets v.m. (2015) baryery na shlyakhu rozvytku promyslovosti na innovatsiyniy osnovi ta mozhlyvosti yikh podolannya. [barriers to industrial innovative development and opportunities to negotiation]. ekonomika ukrayiny, no. 1, pp. 4-25. hamel g. (2007) the future of management, boston, harvard business review press, 288. illyashenko s.m. (2010) stratehichne upravlinnya innovatsiynoyu diyalnistyu pidpryyemstva na zasadakh marketynhu innovatsiy [strategic innovation management on the marketing innovation basis]. aktualni problemy ekonomiky, no. 12, pp. 111-119. kolotyuk o.і. (2017) іnnovatsіyna dіyalnіst yak skladova konkurentnogo potentsіalu pіdpriemstva mashinobuduvannya [innovative activity as a component of the competitive potential of the machine-building enterprise]. vіsnik nats. tekhn. un-tu "khpі": zb. nauk. pr. ser.: ekonomіchnі nauki., no. 24 (1246), pp. 15-18. khuchek m.v. (2002). іnnovatsіi na pіdpriemstvakh ta ikh vprovadzhennya [innovations at the enterprises and their introduction]. moscow: luch, 258 (in russian) obłój k. (2014) strategia organizacji. pwe polskie wydawnictwo ekonomiczne, p. 416. pyetukhova o.m., silakova h.v. (2011) rozvytok modeley innovatsiynoho protsesu [development of models of the innovation process]. the journal of zhytomyr state technological university, no. 2 (56), pp. 96-103. rohoza m.ye., verhal k.yu (2008) teoretychni aspekty formuvannya modeli stratehichnoho innovatsiynoho rozvytku pidpryyemstva [the theoretical aspects of forming the strategic models of innovative company]. ekonomichnyy visnyk natsionalnoho hirnychoho universytetu, no. 3, p. 91-96. zakharchyn h.m. (2008) innovatsiyna kultura v innovatsiyniy systemi pidpryyemstva [innovation culture in the innovation system of enterprise]. kultura narodov prychernomorya, no.125, pp.19-21. zakon ukrayiny (2002) «pro innovatsiynu diyalnist» from  04.07.2002  №  40-iv retrieved from: http://zakon0.rada.gov.ua/laws/show/40-15 baltic journal of economic studies 276 vol. 3, no. 5, 2017 corresponding author: 1 private higher educational institution “financial law college”. e-mail: gubanovatamara@ukr.net 2 faculty of law, national university of life and environmental sciences of ukraine. e-mail: olenas.yara@gmail.com 3 department of agricultural, land and environmental law named after academician v.z. yanchuk, national university of life and environmental sciences of ukraine. e-mail: marinad@meta.ua doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-276-280 socio-economic and legal aspects of environmental crime in ukraine tamara hubanova1 private higher educational institution “financial law college”, ukraine olena yara2 national university of life and environmental sciences of ukraine, ukraine maryna deineha3 national university of life and environmental sciences of ukraine, ukraine abstract. the increased danger of environmental crime is primarily determined by an increase in anthropogenic pressure on the natural environment, which, in the conditions of the global environmental crisis, threatens to cause significant, often non-renewable, damage to the vital interests of man, society, and the state. ukraine belongs to the countries with the worst ecological situation. pollution of the environment reached unprecedented levels in recent years. the purpose of the study is to reveal the essence and causes of environmental crime in ukraine, socioeconomic aspects of the identified phenomenon, analyse the impact of negative consequences of environmental crime on the ukrainian economy, as well as study legal aspects of criminal liability for environmental crimes and international legal standards on the raised issues. the subject of the study is the socio-economic and legal aspects of environmental crime in ukraine. methodology. in order to achieve the goal, the authors of the study carried out an analysis of the definition of the system of environmental crimes in the scientific literature, various statistical data on the state of the ecological situation and crime in ukraine, as well as laws and regulations defining the national environmental policy of ukraine. as a result of the study, the essence and causes of environmental crime in ukraine are highlighted, socio-economic aspects of the phenomenon, the impact of negative consequences of environmental crime on the ukrainian economy, and legal aspects of criminal liability for environmental crimes and international legal standards on the raised issues are revealed. value/originality. the raised issues repeatedly attracted the attention of many researchers; in the scientific literature, various aspects of environmental crime were given attention in the works of famous scholars in the field of criminal and environmental law, experts in the field of economics of natural resources. however, the value of the research carried out is the lack of coverage in the scientific literature of the socio-economic aspects and legal principles of environmental crime in ukraine. the authors of the study for the first time emphasized the need to abstract from the outdated orientation and move to global constructive cooperation on the basis of recognition of the priority of universal values, a joint search for effective ways out of the deep crisis that humanity has fallen out of its own life. key words: ecological crime, crimes against environment, ecological crisis, socio-economic consequences, criminal liability. jel classification: i1, q5, k14, k32 1. introduction anthropocentric ideas about relations between man and nature come into conflict with reality, as evidenced by the facts of human impact on the environment. as a result of the irrational and uncontrolled use of natural resources, the signs of an ecological catastrophe are becoming more and more clearly defined. to our great regret, ukraine belongs to the countries with the worst ecological situation. environmental pollution reached unprecedented levels in recent years. only economic baltic journal of economic studies 277 vol. 3, no. 5, 2017 losses, without taking into account environmental damage, according to experts, in ukraine every year account for an amount equal to half of the national income (mytrofanov, loktionova, 2010). scientific and technological advance and the increase of anthropogenic pressure on the environment inevitably lead to an aggravation of the ecological situation: the environment is polluted, natural resources are depleted, the natural connection between man and nature is lost, and the economic and political struggle for the markets for raw materials, living space intensifies. the technogenic and anthropogenic load on the environment in ukraine is several times higher than the corresponding indicators in the developed world and continues to grow. our state has the highest level of land cultivation in europe, water consumption, deforestation. according to the concept of the national environmental policy of ukraine for the period up to 2020, approved by the order of the cabinet of ministers of ukraine on 17 october 2007 no. 880р, about 15% of the territory of ukraine with a population of more than 10 million is in a critical ecological state. the density of emissions of pollutants in the atmosphere has lately exceeded 130 kilograms per inhabitant of ukraine. the problem is complicated by the fact that the state almost does not take care of problems of environmental pollution and the restoration of natural resources, there are no effective mechanisms of environmental protection, the ukrainian legislation on environmental protection is inadequate, although it is identified as one of the main forms for ensuring environmental safety and rational use of natural resources. from the point of view of international and domestic criminal liability laws, the facts presented are crimes against the environment  – environmental crime, the counteraction of which must be carried out not only through the criminalization of socially dangerous acts against the environment, the implementation of criminal responsibility for their commission, and in combination with economic, political, moral, educational measures, etc. (mytrofanov, loktionova, 2010). another side of the implementation of criminal liability for environmental crimes – compensation for damage to the environment and human health. the raised issues attracted the attention of many researchers. in scientific literature, various aspects of environmental crime were given attention in the works of well-known scholars in the field of criminal and environmental law, experts in the field of economics of natural resources, in particular: v.i.  andreitsev, a.p.  hetman, i.i.  karakash, i.o.  krasnova, n.r .  malysheva, h.s.  polishchuk, a.v.  stepanenko, yu.a.  turlova, m.a.  khvesyk, yu.s.  shemshushenko, and others. however, socio-economic aspects and legal principles of environmental crime in ukraine require additional research, which determines the relevance of the identified topic. the purpose of the article is to reveal the essence and causes of environmental crime in ukraine, socioeconomic aspects of the identified phenomenon, analyse the impact of negative consequences of environmental crime on the economy of our state, as well as study legal aspects of criminal liability for environmental crimes and international legal standards on the raised issues. 2. disclosure of the essence of environmental crime in ukraine environmental crime is a social and legal phenomenon that poses a danger to the biological foundations of the existence of mankind and consists of a combination of criminal acts envisaged by the criminal law that encroach upon the environment or its individual natural resources (land, subsoil, atmospheric air, water, forests, objects of the natural reserve fund, flora and fauna, etc.), as well as constitutional environmental rights of citizens (polishchuk, 2006). although the vast majority of ecological crimes are crimes of low-to-medium severity, on a scale they are not less dangerous to society than others. consequences of crime in this area are the state of the crisis in ukraine as a whole and its impact on the health of people (polishchuk, melnyk, 2009). in turn, the ecological crisis significantly affects the economy of our state. thus, according to the ministry of ecology and natural resources of ukraine, the average annual gdp losses due to the deterioration of the environment are 10-15%. at the same time, according to the international institute of environmental management (switzerland), the level of environmental damage in ukraine is at least 15-20% of gdp and is one of the highest in the world. at the same time, the ecological crisis in ukraine is by no means an accidental phenomenon isolated from the state of general economic development, but on the contrary  – as a regularity and essential attribute of a deep systemic crisis (khvesyk, stepanenko, 2014). the current ecological situation in ukraine is largely determined by the existence of large-scale environmental crime, which is not reflected in official statistics. thus, the analysis of statistical data on the state of ecological crime in ukraine shows that its share in the overall structure of crime is about 0.3-0.5%. over the past 14 years, relative indicators of environmental crime have doubled: from 0.28 in 2002 to 0.57 in 2016 (turlova, 2016). 3. legal principles of application of criminal liability for environmental crimes in ukraine in the system of the mechanism of legal regulation of environmental protection of ukraine, an important role is paid to criminal-legal rules. state in accordance with art. 16 of the constitution of ukraine takes responsibility for ensuring ecological safety and baltic journal of economic studies 278 vol. 3, no. 5, 2017 maintaining ecological balance on the territory of ukraine. ukraine at the present stage of development of our state is forced to use one of the most severe means of influencing criminal responsibility to prevent the negative consequences of unlawful human behaviour in the environment (mytrofanov, loktionova, 2010). in the criminal code of ukraine on april 5, 2001 (hereinafter  – the cc of ukraine), punishments for offenses against the environment are stipulated by the articles of section viii of the special part “crimes against the environment”, which contains 21 articles. but at the same time, the legislator regards it as a crime against the security of mankind  – an ecocide (mass destruction of flora or fauna, poisoning of the atmosphere or water resources, as well as other actions that could lead to an ecological catastrophe) as a particularly dangerous crime against the environment, including it to section xx of the special part of the cc of ukraine “crimes against peace, security of mankind and international law and order”. in the scientific literature in the definition of the system of ecological crimes, the division of crimes against the environment into the following categories is proposed: crimes of an international nature that violate the ecological safety of mankind (article 441 of the cc of ukraine); ecological crimes, which consist in violation of the procedure for carrying out ecological examination, rules of environmental safety during production activities, which caused (or created a danger of causing) significant environmental damage (articles 236, 253 of the cc of ukraine); crimes in the field of nuclear and radiation safety (articles 265, 265-1, 267, 267-1, 274 of the cc of ukraine); crimes in the field of biological safety (article 326 of the cc of ukraine); ecological crimes, which lead to ecological danger, namely: failure to take measures to eliminate the consequences of environmental pollution and conceal or distort information about the ecological state or morbidity of the population (articles 237, 238 of the cc of ukraine); crimes in the field of waste management (article 268 of the cc of ukraine) (turlova, 2016). according to scientists, a large part of the criminal law setting liability for committing these crimes is practically “dead” (turlova, 2016). yes, at no time were accounted crimes under art. 441 of the cc of ukraine “ecocide”. in june 2015, the criminal proceedings under this article on the fact of a fire at a petroleum station near kyiv were later closed in part 1 of art. 284 of the cpc of ukraine. separate articles establishing liability for crimes in the field of nuclear and radiation safety are not in practice applicable. only three times during 2005–2015 there were signs of violation of the rules of nuclear or radiation safety (article 274 of the cc of ukraine) (prosecutor general’s office of ukraine, 2005). at no time in the days of independent ukraine, criminal cases were not instituted under art. 237 “failure to take measures to eliminate consequences of environmental pollution”, 244 “violation of legislation on the continental shelf of ukraine” of the cc of ukraine. single cases of registration of such crimes as “concealing or distorting the information on the ecological state or morbidity of the population” (article 238 of the cc of ukraine)  – 1, “explosive work in violation of rules for the protection of fish stocks” (article 250 of the cc of ukraine) – 2, “designing or operating facilities without environmental protection systems” (article 253 of the cc of ukraine) – 2, “marine pollution” (article 243 of the cc of ukraine) – 4 (polishchuk, 2006). according to experts, the state of ecological crime in ukraine is characterized as critical. during januarymay 2017, 6626 environmental crimes were registered in ukraine. the data of the statistical information of the prosecutor general’s office of ukraine allowed to determine that the greatest number of crimes against the environment was registered for: illegal felling of the forest (article 246 of the cc of ukraine) – 4339; illegal occupation of fish, beasts or other aquaculture (article 249 of the cc of ukraine)  – 806; violation of rules of protection or use of subsoil objects (article 240 of the cc of ukraine)  – 638; contamination or damage to land (article 239 of the cc of ukraine)  – 278; illegal hunting (article 248 of the cc of ukraine)  – 141 (prosecutor general’s office of ukraine, 2017). at the same time, the share of registered environmental crimes of low gravity was 54.1%, medium gravity  – 45.6%, severe – 0.2%, especially severe – 0.1%. according to the statistics of the state judicial administration of ukraine in 2016, according to legally enforceable sentences, the courts applied a fine of up to 807 persons for the amount of 204 312 uah as the main type of punishment for environmental crimes (articles 236–254 of the cc of ukraine) (state judicial administration of ukraine, 2016). it should be noted that it is a criminal law fine as a form of punishment established in the vast majority of sanctions applied for environmental crimes. the purpose of applying this type of punishment as a fine is the impact on the consciousness of the perpetrator through the encumbrances of the economic nature, as well as the change in his negative unlawful behaviour of confirmation of economic disadvantage of committing a crime. as a result of ecological crimes, qualitative properties of the natural environment, natural resources as an economic category deteriorate, and their value as an object of management decreases. in this regard, it can be argued that the imposition of a fine as the main penalty for committing environmental crimes under the cc of ukraine is appropriate but it would be advisable to increase their size (karakash, 2015). at the same time, it should be emphasized that for the crimes against the environment, the legislator must nevertheless provide such restrictions on the rights and freedoms of guilty persons (penalties) that would reliably prevent the commission of crimes in this area. baltic journal of economic studies 279 vol. 3, no. 5, 2017 the study of world experience is of great importance for the establishment of optimal criminal responsibility. thus, in 2006, ukraine signed the convention on protection of environment through criminal law cets no. 172 on 4 november 1998, with the requirement of further ratification. part 1 of art. 2 of the convention defines a list of intentional criminal offenses to be classified as crimes in accordance with national law: 1) the release, emission or introduction of substances or ionizing radiation into air, soil or water that causes death or damage to the health of any person, poses a significant risk of causing death or harm to the health of any person; 2) illegal discharges or emissions of substances or ionizing radiation into the air, soil or water that cause or are capable of causing serious damage to the life or health of any person, cause or are capable of causing harmful effects on the air, water, soil, fauna or flora; 3) illegal emissions, processing, storage, transportation, export or import of hazardous wastes that cause or are likely to cause death or cause serious damage to the health of any person, cause harmful effects on the air, soil, water, fauna or flora; 4) illegal hazardous activity of an enterprise that cause death or is capable of causing death or serious harm to any person’s health, cause harmful effects on atmospheric air, soil, water, fauna or flora; 5) the illicit manufacture, circulation, storage, transportation, export or import of nuclear substances or other harmful radioactive substances that cause or may cause death, cause or may cause serious damage to the health of any person, the quality of air, soil, water, animals or plants in the event that such actions are committed intentionally. according to article 6 of the convention, sanctions for environmental crimes should include imprisonment and monetary sanctions and may include an obligation to restore the environment. article 7 of the convention provides for the possibility of confiscation for environmental offenses. thus, the convention provides for four types of punishment for offenses against the environment: imprisonment, monetary sanctions, confiscation, environmental restoration. at the same time, an important lever for environmental law and order is the restoration of the environment. unfortunately, this kind of punishment is not foreseen in the ukrainian criminal law. in the scientific literature, one can find suggestions on the establishment of such a type of punishment as imposing on a guilty person the duty to compensate for the harm done in kind, that is, to restore the environment. thus, scientists emphasize that the primary purpose of punishment for environmental crimes must be real (in kind) reimbursement of damage to the natural environment, and everything else should be considered as additional (fatkulyn, 2009). that is, fulfilment of the duty to eliminate the harm caused to the natural environment, natural objects should occur in kind. the form of eliminating such damage should be determined by the court. such an offer is interesting and promising. regarding monetary sanctions (fines) as a type of punishment for environmental crimes, despite their role as a powerful stimulus element, a means of preventing further offenses, world practice (primarily the usa) proved the exceptional stability of the business, especially the large, capable of paying multimillion fines without tangible consequences. instead, imprisonment is in this case precisely the kind of punishment that not only performs educational function more efficiently but also does not allow transferring environmental costs of subjects-polluters to consumers through the pricing policy (krasnova, 1992). unprecedented in its nature and importance in the process of determining the legal framework for the application of criminal liability for environmental crimes in eu law is the eu council framework decision 2003/80 on 27 january 2003 on criminallaw protection of the environment. the framework decision is a regulatory act of the eu in the field of harmonization of criminal, criminal-procedural, and criminal-enforcement law. in the introductory part of the framework decision, the eu is concerned about the increase in environmental crime and its consequences, which are increasingly spread beyond the borders of the state, in which the crime was committed (paragraph 1). in addition, the decision states that environmental crimes are a problem that the member states unleash together and after the resolution of which must be taken concerted environmental actions based on criminal law (paragraph 3). the framework decision also states that each member state should take the necessary measures to ensure that criminal offenses are punishable by effective, proportionate criminal measures, including imprisonment in serious cases (paragraph 1, article 5). 4. conclusions the process of harmonizing the ecological and legal principles of ukraine with standards in force in the eu is expedient and necessary for harmonization of rules and provisions in the acts of environmental legislation, further harmonization with acts in other branches of legislation, including criminal, requirements of provisions of international agreements of ukraine through the overcoming of certain gaps, which create legal conflicts. environmental crime  – a phenomenon that manifests itself and is exacerbated in different countries of the world, has a truly global character and makes the attention of scientists and practitioners from many countries in the world to find ways to solve the above problems. in the second half of the xx  – early xxi  century, the state of the environment deteriorated significantly, reaching a level dangerous to life and health. and not only through the global baltic journal of economic studies 280 vol. 3, no. 5, 2017 integration of efforts of all countries of the world but also, according to vernadskyi’s noosphere doctrine, the integration of philosophical, legal, political, natural, and technical and economic knowledge (vernadskyi, 1977). therefore, it is necessary to move away from the outdated orientation and to move on to a global constructive cooperation on the basis of recognition of the priority of universal values, to jointly find effective ways out of the deep crisis that mankind has fallen out of its own life activity. references: fatkulin, s. t. (2009). ugolovno-pravovaya okhrana zemli [criminally-legal protection of the land]. moscow: rap. (in russian) karakash, i. i. (2015). vydy yurydychnoi vidpovidalnosti ta osoblyvosti yikh za-stosuvannia za porushennia pryrodnoresursovoho y ekolohichnoho zakonodavstva [types of legal responsibility and peculiarities of their application for violation of natural resource and environmental legislation]. current problems of state and law, no. 3, pp. 430–441. khvesyk, m. a., stepanenko, a. v. (2014). ekolohichna kryza v ukraini : sotsialno-ekonomichni nas-lidky ta shliakhy yikh podolannia [ecological crisis in ukraine: socio-economic consequences and ways to overcome them]. economy of ukraine, no. 1(626), pp. 74–86. krasnova, i. o. (1992) ekologicheskoe pravo i upravlenie v ssha [environmental law and governance in the usa]. moscow: baykalskaya akademiya. (in russian) mytrofanov, i. i., loktionova, v. v. (2010). dovkillia pid okhoronoiu zakonu pro kryminalnu vidpovidalnist [the environment protected by the law on criminal liability]. kremenchuk: pp shcherbatykh o. v. (in ukrainian) polishchuk, h. s. (2006). kryminolohichna kharakterystyka ta zapobihannia zlochynam proty dovkillia [criminological characteristics and prevention of crimes against the environment] (phd thesis), kyiv: kyiv national university of internal affairs. polishchuk, h. s., melnyk, o. v. (2009). stan i tendentsii ekolohichnoi zlochynnosti v ukraini [the state and tendencies of environmental crime in ukraine]. scientific works of the national academy of internal affairs, no. 4(65), pp. 120–126. prosecutor general’s office of ukraine (2005–2015). iedynyi zvit heneralnoi prokuratury ukrainy pro kryminalni pravoporushennia (2005–2015). [consolidated report of the prosecutor general’s office of ukraine on criminal offenses (2005–2015)]. retrieved from https://www.gp.gov.ua/ua/stst2011.html?dir_id=104402# prosecutor general’s office of ukraine (2017). iedynyi zvit heneralnoi prokuratury ukrainy pro kryminalni pravoporushennia (sichen–traven 2017 rr.) [consolidated report of the prosecutor general’s office of ukraine on criminal offenses ( january–may 2017)]. retrieved from https: //www.gp.gov.ua/ua/stst2011.html?dir_ id=110381&libid=100820# state judicial administration of ukraine (2016). zvit derzhavnoi sudovoi administratsii ukrainy shchodo zvernennia do vykonannia rishen sudiv u chastyni mainovykh stiahnen za 2016 r. [report of the state judicial administration of ukraine on the application to execute court decisions in respect of property fines for 2016]. retrieved from https://dp.court.gov.ua/tu04/stat/zvizver turlova, yu. a. (2016). kryminolohichnyi analiz suchasnoho stanu ekolohichnoi zlochynnosti v ukraini [criminological analysis of the current state of ecological crime in ukraine]. herald of the national prosecution academy of ukraine, no. 3(45), pp. 66–72. turlova, yu. a. (2016). systema ekolohichnykh zlochyniv [the system of environmental crimes]. uzhhorod national university herald. series “law”, vol. 2, no. 36, pp. 103–109. vernadskyi, v. i. (1977). razmyshleniya naturalista. nauchnaya misl kak planetnoe yavlenie. kniga vtoraya [reflections of the naturalist. scientific thought as a planetary phenomenon. book two]. moscow: nauka. (in russian) baltic journal of economic studies 147 vol. 4, no. 2, 2018 corresponding author: 1 department of financial markets, university of state fiscal service of ukraine. e-mail: anna_oleshko@ukr.net 2 department of economics, kyiv national university of culture and arts. e-mail: etymoshenko@i.ua 3 department of economic theory, national and international economics, classic private university. e-mail: yelena.trohim@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-147-150 formation of the cashless economy in ukraine and in the world anna oleshko1 university of state fiscal service of ukraine, ukraine olena tymoshenko2 kyiv national university of culture and arts, ukraine оlena trokhymets3 classic private university, ukraine abstract. the purpose of the paper is to study the trends in the development of the cashless global economy and the prospects for the formation of the cashless economy of ukraine. methodology. the survey is based on the economic analysis of indicators of the number of debit and credit cards, the use of contactless payments, the spread of payments through mobile devices, and the volume of cashless transactions. the targeted indicator (target) of the cashless payments in ukraine in 2020 and the share of cash in gdp will be no less than the average meaning in european union. results of the survey showed the identification of advantages and threats of the cashless economy and in the formation of the digitalization development activities. practical implications. proposals for the development of cashless payments can be implemented in the monetary policy of ukraine. value/originality. increase in cashless payments in the economy, in the payment for goods and services, e-commerce, consumer crediting, social payments, pensions, and subsidies will lead to economic growth increase and integration processes in ukraine. key words: cashless global economy, cashless economy, monetary policy, e-money, digital currency. jel classification: e51, e52, f65, g15 1. introduction a key transformation in the global money and credit market is the transition to innovative cashless money, the refusal from cash payments, and thus, construction of cashless global economy. formation of a cashless society requires some time and is determined by historical preconditions (batiz-lazo, efthymiou, 2016). leading countries receive additional drivers of economic growth and impact on the countries with emerging markets in the implementation of cashless payments. the influence of highly developed countries on the formation of the cashless economy in emerging and developing countries is multidirectional. on the one hand, emerging market countries gain an access to innovative money market technologies and expand their ability to participate in international payment systems. on the other hand – the rapid growth of highly developed countries leads to an increase in the gap in innovation and financial development between them and the countries with emerging markets. in this context, it is important for ukraine to speed up the process of transition to cashless economy and its further integration as an equal partner in international economic relations. the purpose of the paper is to study the trends in the development of the cashless global economy and the prospects for the formation of the cashless economy of ukraine. in order to identify the level of development of cashless economy, the following indicators are used: digitalization of the financial sphere, the number of debit and credit cards per person, the use of contactless payments, the spread of payments through mobile devices, and the volume of cashless transactions. baltic journal of economic studies 148 vol. 4, no. 2, 2018 2. world trends in cashless global economy cashless payments in the world market are growing rapidly: in 2015, their volume amounted to 1.66 trillion usd, which is 14% more than in 2014. in international cashless payments, the share of credit cards in 2015 reached 580 billion usd, and the share in the e-commerce market was 30%. according to the mckinsey&company results of the research, the correlation of cash and cashless payment in the world is 85 to 15 and the most successful is a cashless economy of south america with the largest contribution from canada and the usa and western europe (fig. 1). the most successful countries in the cashless economy implementation in 2017 are canada, swiss, britain, france, usa, china, austria, germany, japan, and russia. the number of payment cards in these countries is average 2 per person. cryptocurrency is an innovative financial instrument as a decentralized digital value, which has a cryptographic protection of the record. there are about a thousand types of cryptocurrency nowadays (their number is constantly changing), among which the most widely used are bitcoin, ethereum, ripple, bitcoinсash, litecoin, and others. innovative technologies in the financial system are based on innovations in the field of biometrics, artificial intelligence (or digital intelligence), cryptography, cloud computing, blockchain. today there is a rapid development of financial and technological companies that are developing technological projects in the field of finance, mainly in the banking system  – fintech. the total investments in fintech in 2010–2015 had grown four times and reached 19 billion usd, of which the main part was invested in the development of innovative products in the field of payments and credits. the largest amount of investment had attracted the usa – 7.0 billion usd, uk  – 1.8 billion usd, and china  – 1.6 billion usd. in general, these countries hold 73% of the world’s investment in fintech. the level of success in implementing the concept of the cashless economy is determined by the share of cash in the money circulation of the country. for this purpose, the ratio of cash to gdp is used. based on this indicator, the most successful cashless economy development is observed in the highly developed countries  – canada (the share of cash in gdp is 3.8%), the uk (3.6%), norway (1.9%), denmark (3.0%), and sweden (1.9%). on the contrary, the share of cash in gdp in ukraine is 17%, belarus – 19.7%, moldova – 15.7%, russia – 12.5%. assuming that in 2017, sweden and norway abandoned the turnover of cash denominated in national currency and turned to entire cashless payments. denmark followed the same example. the formation of the cashless economy is an inevitable process for all subjects of international economic relations (fürst, 2017), and for ukraine, it is an accelerating factor for european integration and economic growth. 3. prospects for the formation of the cashless economy in ukraine the cashless economy transition program has begun in ukraine, as well as in the whole world. the purpose of the program is to ensure the gradual transition to cashless payments showing the following results in 2020: – share of cash in gdp – 7.5%, – number of pos-terminals  – 11 thousand units per 1 million people, – level of cashless payments  – 55%, also through the national payment system “prostir” – 30%. today in ukraine, more than half (53%) of cashless transactions are conducted on the internet, in the developed countries of the eu this figure reaches 90 percent. total number of payment cards in ukraine exceeded the number of population and in 2017 it was more than 59.9 million cards (fig. 2). credit cards are given mostly for salary projects together with debit cards. at the same time, the main 35 2 52 9 34 7 1 0 20 40 60 80 100 asia-pacific (developed countries) asia-pacific (developing countries) north america south america west europe east europe africa share of cash payments, % share of cashless payments, % fig. 1. the share of cashless payments in the world in 2015 baltic journal of economic studies 149 vol. 4, no. 2, 2018 disadvantage of the short-term crediting to households by means of credit cards is the high commission compared to eu countries and some nis countries. it is necessary to mention that since december 2015, the european parliament has restricted the commission for credit cards at 0.3%. on the contrary, in ukraine, the commission for using credit cards is 1.4%. as for the cryptocurrency market development, in ukraine, the concept “cryptocurrency” and regulation of transactions and operations with it do not subject to the legal regulation regime. despite the existence of legally established practices of cryptocurrency use in the world ( japan, usa, canada, sweden, etc.), its complex legal nature does not allow it to be identified with any of the related concepts (cash, currency, currency value, legal instrument, electronic money, securities, money surrogate, etc.). despite the absence of legal regulation, the amount of the bitcoin market in ukraine is 2.5% gdp. besides, ukraine is in the top-4 countries with the cheapest bitcoin mining: mining of one bitcoin is 1852 usd (3rd place  – uzbekistan (1788 usd), 2nd place  – trinidad and tobago (1190 usd), 1st place – venezuela (531 usd). the introduction of the cashless economy requires purposeful state influence on the growth of cashless payments in the area of personal payments, real estate, payment for goods and services, e-commerce, transport, rent, tourism, wage payments, purchasing consumer goods, consumer crediting, rural economy crediting, government payments, social benefits, pensions, and subsidies. 4. advantages and treats of the cashless economy the advantages of the cashless economy are the following: – cost reduction on money circulation maintenance; – cost reduction on money processing; – increased protection against robbery and money counterfeiting; – shadow economic sector reduction; – increasing the transparency of the formation of incomes and expenses of corporations, businesses, the sector of state administration and households; – reduction of operating expenses of banks, increase of their commission income and liquidity; – access to additional opportunities and services; – the time of the transaction; – the ability to pay in any currency and country of the world; – ease of use. according to the opinion of those who do not support the total transition to cashless payments, the “electronization” of monetary and commodity operations will lead to the absolute control by global financial institutions (banks mostly) over the economic and personal life of the planet population. today banks possess full information about clients and are able to control their financial flows. at the beginning of the 20th century, r . hilferding (1910) introduced the term “organized capitalism”, in which banks set control over the economy and “organize” public life. another argument, which is not in favour of the cashless economy, is the presence and a steady growing tendency of cyber risks in digital technology (wellisz, 2016). cyber risks include targeted hacker attacks, software and hardware bookmarking equipment, espionage and informers, exploitation of vulnerabilities in obsolete equipment, etc. the third warning to the formation of cashless economy is the spread of cryptocurrency. when deciding on the further introduction of cryptocurrency in the economy and finance, the following should be taken into account: – the cryptocurrency is not tied to national states and, therefore, its ownership and circulation and turnover are not controlled; share of cashless payments by payment cards 39%; three times increase for the last 5 years cashless operations (transactions) 2.3 billion operations; 835 billion uah, which is 46.2% more than in 2016 number of payment cards 59.9 million cards; 1.43 cards per person contactless payments 2.7 million payments, which is 37.8% more than in 2016 fig. 2. the level of the cashless economy development in ukraine baltic journal of economic studies 150 vol. 4, no. 2, 2018 – the cryptocurrency doesn’t serve “any socially useful function” (stiglitz, 2017); – the behaviour of bitcoin in the stock market corresponds to r . schiller’s theory of “financial bubbles” (shiller, 2008); – the cryptocurrency is often used to finance terrorism, criminal acts, and the shadow sector; – the cryptocurrency transactions allow avoiding paying taxes; – the cryptocurrency rate is formed under the influence of its demand/supply, that is, when absolute demand drops, it becomes insignificant; – the cryptocurrency is not a measure of value that it does not express the price of the commodity; – the cryptocurrency is not a means of payment, thus a number of purchases are insignificant; – the cryptocurrency is concentrated in a small number of anonymous owners, which is a threat to absolutize their power in the money market; – the cryptocurrency is subject to hacker attacks and theft. however, despite the threats and warnings to the total transition to cashless payments, this trend is an objective reality, and in the upcoming years, the society will fully feel the changes caused by the new phase of the genesis of the cashless global economy. thus, new technologies and informatisation became the main factors of exponential growth of the financial sector in the world. at the same time, banks carry the greatest costs for the acquisition and production of new technologies and innovative solutions. the introduction of credit cards, internet banking, mobile banking, mobile applications, and other innovations substantially modified the economic mechanism, the basic provisions of the monetary policy of national states and the lives of ordinary citizens. 5. conclusions the correlation of cash and cashless payments in different regions of the world and national states depends on the level of the development of democracy and economy, the level of openness of the economy, the share of the shadow sector and corruption, the level of penetration of the terminal network, mentality, culture, literacy of the population and motivation to cashless payments. the introduction of electronic money, including cryptocurrency as a virtual currency, and alternative methods of payment, on the one hand, simplifies (makes more comfortable) economic life. on the other hand  – it has some threats, firstly, the total control of banks and non-banking institutions over customers in connection with their possession of a significant amount of personal and biometric data, and secondly, the spread of cybercrime and the destruction of banking systems as a result of hacker attacks. digitalization of the social life and financial sphere is based on a fundamentally new philosophy of financial and economic relations between the population, business, and the state. references: batiz-lazo b., efthymiou l. (2016) the book of payments: historical and contemporary views on the cashless society. london: palgrave macmillan. fintech investment landscape. innovate finance. retrieved from: https://new.innovatefinance.com/wp-content/ uploads/2018/02/final-2017-vc-investment-landscape_9feb.compressed.pdf (accessed 27 march 2018). fürst h. (2017) a world becoming cashless. description and analysis. munich: grin verlag. hilferding r . (2006) finance capital: a study of the latest phase of capitalist development. london: routledge. shiller j. r . (2008) how today's global financial crisis happened, what to do about it. – princeton university press. stiglitz j. (2017) bitcoin ought to be out lawed. world economic forum. retrieved from: https://www.weforum.org/agenda/2017/11/joseph-stiglitz-bitcoin-ought-to-be-outlawed/ (accessed 27 march 2018). wellisz c. (2016) the dark side of technology. finance & development (electronic journal), vol. 53, no. 3. pp. 14−17. retrieved from: http://www.imf.org/external/pubs/ft/fandd/2016/09/pdf/wellisz.pdf (accessed 27 march 2018). baltic journal of economic studies 391 vol. 3, no. 5, 2017 corresponding author: 1 department of management, ivan franko national university of lviv. e-mail: okssenyshyn@gmail.com 2 department of management, ivan franko national university of lviv. e-mail: chopko_n@yahoo.com 3 department of tourism, ivan franko national university of lviv. e-mail: zhukiryna0312@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-391-399 integral estimate of the effectiveness of performance of indices of state target programs for the protection of the natural environment in ukraine oksana senyshyn1, nataliya chopko2, iryna zhuk3 ivan franko national university of lviv, ukraine abstract. this scientific article deals with the integral estimate of the effectiveness of performance of indices of the state target programs for protection of the natural environment in ukraine, namely  – the subject of the research is quantitative indices of the state target program “forests of ukraine” for 2010–2015 and their estimate. methodology. the methodological basis of the study is the system of indices for the estimate of effectiveness and performance of the state target programs for the protection of the natural environment that include the following indices (indicators): an integrated index of financing the program actions and indicators of co-financing. the author applies integrated indicator of financing the program tasks and actions to assess the actual level of financing the program from various sources through the entire period of the program implementation and to carry out a comparative analysis of financial support for various programs implemented at the expense of the budgetary funds and other sources. the author uses indicator of co-financing for calculating the ratio of actual and planned indicators of the attraction of the funds from other sources (public borrowings, extrabudgetary funds) per 1 uah of the budget funds. results. proceeding from the analysis of quantitative indices of the state target program “forests of ukraine” for 2010–2015, it was established that for all 5 years of activity, the planned level of budget financing of the program has not been achieved. in particular, in 2010–2011, operations and tasks of the program had been financed from the budget funds by 77% and in 2014–2015 by 33% and 27% respectively. during the entire period of the program implementation, the average annual rate of actual financing from all sources attained 147%, including 53% from the state budget and 206% from other sources of financing. the author has proved that the said indices of the performance of the program’s operations remain to be at a high level r2 6 = 70. practical application. the author has come to the conclusion that the calculated indicator of co-financing of the state target program “forests of ukraine” can be used for the approval of managerial decisions on the assessment of performance of the public contracting authority in terms of attraction of funds from the local budgets and extrabudgetary funds as an important component of organization of the program implementation process. value of the study results. application of multidimensional quantitative indices in the process of assessment of effectiveness of the state target program “forests of ukraine” that, according to the developed algorithm, are calculated proceeding from their numerous parameters, provided the possibility to assess the combined impact of different effects by way of constructing a single quantitatively determined integral parameter for the program – the performance index. key words: comprehensive program of natural environmental protection, programming, level of financing, performance, effectiveness, integrated indicator of financing program activities, indicator of co-financing. jel classification: q56, h 53, c3 baltic journal of economic studies 392 vol. 3, no. 5, 2017 1. formulation of the problem state target programs for the protection of natural environment appear to be the instrument for the implementation of national environmental policy with the aid of specific program guidelines, measures, tasks, target projects with various mechanisms of their realization. the potential of international, national, and nationwide ecological programs is a lot greater with a more perfectly determined mechanism of management. issues of the use of the mechanism of the state target programs and assessment of their effectiveness in the economy of ukraine were considered in the scientific research works of such scientists-economists as v.  m.  heiets (2008), l.  s.  hryniv (2010), b.  m.  danylyshyn (2008), o.  s.  zarzhytskyi (2012), l.  h.  melnyk (2003), t.  o.  moshchytska (2010), o.  v.  faichuk (2015), l.  m.  yakushenko (2015), l. d. yatsenko (2015) and others. the objective of the article is to estimate the effectiveness of using budget funds of the state target program “forests of ukraine” for 2010–2015 through the prism of determination of integral indicators, namely: an integrated indicator of financing the program operations and the indicator of co-financing. 2. regulatory protection of the natural environment in ukraine in order to implement an effective state policy of protection of natural environment, rational use and reproduction of natural resources in ukraine in the period of 2010–2016, the following state programs of protection of the natural environment are being implemented: 1. nationwide target program “drinking water of ukraine” for 2011–2020 (verkhovna rada ukrainy, 2011). 2. state target ecological program for monitoring natural environment (kabinet ministriv ukrainy, 2007). 3. nationwide program of development of the mineral-raw materials base of ukraine for the period up to 2030 (verkhovna rada ukrainy, 2011). 4. state target program “forests of ukraine” for 2010– 2015 (kabinet ministriv ukrainy, 2009). 5. nationwide target ecological program of radioactive waste materials management (verkhovna rada ukrainy, 2008). 6. state target ecological program of development of the crimea (“ecologically safe crimea”) for 2011– 2015 (kabinet ministriv ukrainy, 2011). 7. nationwide target program of water economy development and ecological rehabilitation of the dnipro river basin in the period up till 2021 (verkhovna rada ukrainy, 2012). 8. nationwide program of the formation of the national ecological network of ukraine for 2000–2015 (verkhovna rada ukrainy, 2000). in order to carry out an effective state policy of protection of the natural environment, rational use, and reproduction of forest resources in ukraine, the state target program “forests of ukraine” for 2010–2015 was developed and approved by the decree of the cabinet of ministers of ukraine № 977 of september 16, 2009 (kabinet ministriv ukrainy, 2009). elaboration of this program was predetermined by the international commitments of ukraine signed on the resolution of the 4th ministerial conference on protection of forests of europe “strengthening of interaction in sustainable forest management in europe through the interdepartmental collaboration and national forest programs”. 3. estimation of complex economic effectiveness of the state target program “forests of ukraine” the system of quantitative indices of the state target program “forests of ukraine” for 2010–2015 (hereinafter referred to as the “program”) is used to assess the effectiveness of using budget funds, particularly, from the state borrowings (kabinet ministriv ukrainy, 2009). it should be noted that economic effectiveness of the program can be estimated provided that the estimated activity has the clearly defined objectives, tasks, and the end result. subsequently, it will be possible to correlate the costs incurred with the achieved result and, thereafter, estimate the economic effectiveness of the works carried out. as a rule, the question of estimating the complex economic effectiveness of a particular activity is raised in case of implementation of the program activities, particularly, of the state target programs for the protection of the natural environment (stp pne) (ministerstvo ekonomiky ukrainy, 2010). determination of the effectiveness of the stp pne in general and by its stages is based on the use of a system of indices (indicators) that are calculated as a ratio of actual and planned indices of the program tasks accomplishment and ensure, taking into account deviations of these indices, decision-making based on the assessment of the degree of achievement of the established program goals and the planned effectiveness of spending the funds. comparison of actual indices of stp pne with the planned indices (approved by the program) is made by way of: • estimation of expenses from the state budget and other sources for carrying out the program’s activities and execution of its tasks (indices of expenditures); • assessment of the degree of accomplishment of the intermediate and end goals of the program implementation using indices of the volume of the works performed and services rendered in the result of the program tasks and activities accomplishment (product index); baltic journal of economic studies 393 vol. 3, no. 5, 2017 • determination of the degree of achievement of quality parameters of the performed works and services rendered (indices of quality); • assessment of cost-effectiveness of the resources used for the execution of the program tasks (indices of effectiveness); • assessment of the level of attraction of funds from the budget and extrabudgetary sources and their ratio (co-financing indicators). taking into account the above said, the system of indices for the assessment of the effectiveness and performance of the stp pne must include the following criteria and indices (indicators): an integrated index of financing the program activities and the indicator (index) of co-financing. 4. indicators of estimation of economic effectiveness of the state target program integrated index of financing of the program activities and tasks is calculated for the assessment of the actual level of financing of the program from various sources throughout the entire period of the program implementation (or in the preceding year), as well as for carrying out the comparative analysis of the financial support for various programs implemented with financing from the budget and other sources. integrated index of financing activities of the target program in the t-th year (kt) or in the period from the beginning of implementation (kl, including the l-th year) is determined as the weighted average of indicators of the actual level of financing from the state budget and other sources (local budgets and extrabudgetary funds), calculated separately for each year provided that the sum of the weight values of indices of the actual level of financing from various sources during the period of implementation of the program is equal to 1, and the weight of index of financing from other sources exceeds the corresponding coefficient of budget funds (ministerstvo ekonomiky ukrainy, 2010): • in the year (1) • in the period in general, including the l-th year (2) where сф t, спл t  – actual and planned (according to the approved program) volumes of financing the program from the state budget in the t-th year of implementation of the program respectively; vф t, vпл t  – actual and planned (according to the approved program) volumes of financing the program from other sources (extrabudgetary funds) in the t-th year of implementation of the program respectively; n – number of years of the period of the program implementation. for the calculations q = 0,54, h = 0,46. index of the performance of the stp pne shows the summary estimate of the performance of the budget spending intended for the execution of program activities aimed at the achievement of the established intermediate or end goals throughout the period preceding the t-th year or in a separate year. this index is calculated (ministerstvo ekonomiky ukrainy, 2010): • in the year (3) where rt  – integrated index characterizing performance of the program in the t-th year. • in the period of the program implementation including the l-th year (4) where rt  – integrated index characterizing summarized performance of the program in the years of implementation preceding the l-th year (including the l-th year); etф(т), e t пл(т) – actual and planned indices of economic effectiveness respectively, characterizing economic effect by the ratio of the obtained results (product indices) and expenditures of budgetary and other funds (that predetermined development of this product) by the m-th parameters of the economic effect formation in the t-th year; ztф(p), z t пл(p) – actual and planned (according to the approved program) respectively volumes of the executed works or manufactured products, rendered services (product indices) characterizing the result of execution of the program in the t-th year by the р-th parameter of the involved product components (р=1,…р); qtф(q), q t пл(q)  – actual and planned (envisaged by the program) respectively indices characterizing quantitative parameters of the quality of executed works, manufactured products (or rendered services) depending on the results of execution of the program in the t-th year by the g-th parameter of the quality parameter (g=1,...,g). indicator (index) of co-financing – is calculated through the ratio of actual and planned indices of the attraction of funds from other sources (state borrowings, extrabudgetary funds) per 1 uah of budget funds and determined from the formulas (ministerstvo ekonomiky ukrainy, 2010): • in the year (5) • in the period of implementation of the program (including the l-th year) (6) where dt – the ratio of actual and planned indices of attraction of funds from other sources (extrabudgetary baltic journal of economic studies 394 vol. 3, no. 5, 2017 funds) per 1 uah of the state in the t–th year; dl  – average annual index of attraction of funds from other sources per 1 uah of the state budget funds in the period of implementation of the program (including the t-th year). the program co-financing indicator must be used in decision-making to assess the performance of the public contracting authority in terms of attracting funds from the local budgets and extrabudgetary funds (other sources of financing) as an important component of the organization of the program process. 5. results of estimation of complex economic effectiveness let us consider economic results of the use of the system of integral indices on the example of implementation of the state target program “forests of ukraine” for 2010–2015 (table 1). indices of the program’s effectiveness have deteriorated: on the average, the planned level of spending per 1 thousand hectares of hunting lands connected with protection and reproduction of hunting animals was exceeded by 60%, spending per 1 hour of aerial surveillance for the protection of forests from fires, rental of helicopters, and establishment of special platforms was exceeded by 71%, spending for the forests shaping and rehabilitation per 1 hectare was exceeded by 134%. the program’s quality index “survival of forest species” in 2010–2015 was maintained at a high level (94.1% – 97.7%). of the three product indices selected for the study in the analysed period (2010–2015), only one index reached the planned level of financing (table 2). this became possible owing to a considerable overrun of actual spending on the planned spending from other sources of financing. the average annual table 1 estimate of an integrated assessment of the performance of the state target program “forests of ukraine” for 2010–2015 name of index symbol u/m 2010 2011 2012 planned actual % executed planned actual % executed planned actual % executed input information financial support total mln uah 1641,01 1806,10 110,1% 1854,98 2312,73 124,7% 2036,80 2558,70 125,6% from state budget c(t) mln uah 585,58 458,41 78,3% 751,73 538,46 71,63% 871,95 564,3596 64,72% from other sources (own funds of forest users) v(t) mln uah 1055,43 1347,69 127,7% 1103,25 1774,26 160,82% 1164,85 1994,338 171,21% product indices forestation area (forest planting and seeding) z(t)1 thou uah 28,7 27 94% 52,3 22,6 43,21% 62,4 18,2 29,17% tending forest species (area of forests shaping and rehabilitation) z(t)2 thous. ha 366,7 326,5 89% 373,2 335,2 89,82% 366,9 327,6 89,29% fire belts and fire lines z(t)3 thous. ha 293,24 327,7 112% 295,31 342,6 116,01% 296,69 488,7 164,72% productivity (effectiveness) indices volume of average expenses per 1 thous. ha of hunting lands connected with the protection and reproduction of hunting animals e(t)1 uah. 1740 2131 122% 1810 2353 130,00% 1880 2549 135,59% change of expenses per 1 hour of aerial surveillance e(t)2 uah/ hr. 4000 6700 168% 4452 7719 173,38% 4919 8449 171,76% quality indices survival of forest species q(t)1 % 80 78 98% 86 82 95,35% 85 80 94,12% results of calculations integral index of financing in each year k(t) 1,050 1,198 1,222 in period including 1 & 2 and 1, 2 & 3 years, etc. k(t) 1,124 1,157 index of performance in each year r(t) 1,458 1,438 1,669 in period including 1 & 2 and 1, 2 & 3 years, etc. r(t) 5,829 13,736 level of co-financing in each year d(t) 1,631 2,245 2,645 in period including 1 & 2 and 1, 2 & 3 years, etc. d(t) 1,938 2,174 baltic journal of economic studies 395 vol. 3, no. 5, 2017 table 2 financing of separate indices of the state target program “forests of ukraine” for 2010–2015 product indices mln uah source of financing 2010 2011 2012 pl an ne d ac tu al % ex ec ut ed pl an ne d ac tu al % ex ec ut ed pl an ne d ac tu al % ex ec ut ed forestation area sb funds 106,75 90,23 84,50 231,05 96,01 41,60 299,60 79,75 26,60 other sources 13,87 20,67 149,00 14,68 20,30 138,30 16,03 20,36 127,00 total 120,62 110,89 91,90 245,73 116,31 47,30 315,63 100,11 31,70 tending forest species sb funds 418,51 328,67 78,50 454,92 379,55 83,40 499,48 422,23 84,50 other sources 1002,39 1280,53 127,70 1048,78 1692,75 161,40 1106,27 1904,96 172,20 total 1420,90 1609,20 113,30 1503,70 2072,30 137,80 1605,75 2327,19 144,90 fire belts and fire lines sb funds 60,32 39,51 65,50 65,76 62,90 95,70 72,87 62,38 85,60 other sources 39,17 46,50 118,70 39,79 61,22 153,80 42,55 69,02 162,20 total 99,49 86,01 86,05 105,55 124,12 117,60 115,42 131,40 113,80 end of table 1 name of index symbol u/m 2013 2014 2015 planned actual % executed planned actual % executed planned actual % executed input information financial support total mln uah 2268,66 2703,47 119,2% 2533,90 3077,08 121,4% 2804,08 4235,30 151,0% from state budget c(t) mln uah 1043,76 562,10 53,85% 1249,29 443,99 35,54% 1450,41 396,11 27,31% from other sources (own funds of forest users) v(t) mln uah 1224,90 2141,37 174,82% 1284,61 2633,10 204,97% 1353,67 3839,19 283,61% product indices forestation area (forest planting and seeding) z(t)1 thou uah 83,5 14,2 17,01% 95,1 5,2 5,47% 107,7 2,4 2,23% tending forest species (area of forests shaping and rehabilitation) z(t)2 thous. ha 365,4 318,7 87,22% 367,2 295,5 80,47% 368,7 305,5 82,86% fire belts and fire lines z(t)3 thous. ha 297,45 342,7 115,21% 298,82 292,78 97,98% 299,25 351,87 117,58% productivity (effectiveness) indices volume of average expenses per 1 thous. ha of hunting lands connected with the protection and reproduction of hunting animals e(t)1 uah. 2010 2090 103,98% 2050 3188 155,51% 2100 6246 297,43% change of expenses per 1 hour of aerial surveillance e(t)2 uah/ hr. 5,4 8,3 153,70% 5,9 22,1 374,58% 6,5 16,6 255,38% quality indices survival of forest species q(t)1 % 88 85 96,59% 87 85 97,70% 89 86 96,63% results of calculations integral index of financing in each year k(t) 1,192 1,270 1,657 in period including 1 & 2 and 1, 2 & 3 years, etc. k(t) 1,165 1,186 1,265 index of performance in each year r(t) 1,085 2,017 2,990 in period including 1 & 2 and 1, 2 & 3 years, etc. r(t) 22,578 39,540 65,216 level of co-financing in each year d(t) 3,246 5,768 10,385 in period including 1 & 2 and 1, 2 & 3 years, etc. d(t) 2,442 3,107 4,320 source: compiled and calculated by the author based on the reports of execution of stp “forests of ukraine” for 2010-2015 baltic journal of economic studies 396 vol. 3, no. 5, 2017 level of financing in 2010–2015 attained the following figures of the product index by items: “forestation area (planting and seeding)”  – 21.4% (from the state budget  – 17.3%, from other sources of financing  – 111.8%), “tending forest species (area of forests shaping and rehabilitation)”  – 154.9% (from the state budget  – 72.2%, from other sources of financing  – 192.9%), “fire belts and fire lines”  – 89.3% (from the state budget – 52.9%, from other sources of financing – 172.8%) respectively. in the entire five years of action, the planned level of budget financing of the program has not been achieved. in 2010–2011, the program’s activities and tasks were financed from the budget funds by 77% and in 2014– 2015  – by 33% and 27% respectively. in the entire period of the program implementation, average annual index of actual financing from all sources attained 147%, including 53% from the state budget, and 206% from other sources of financing. the results of the calculations show that the determined indices of the performance of the program’s activities remain to be at a high level r2 6 = 70. on the whole, we arrive at the conclusion that in 2010–2015 the forest industry was working steadily, its enterprises fulfilled their tasks. the state target program “forests of ukraine” for 2010–2015 was being implemented effectively. regional forestry development programs were elaborated on its basis and approved by the local self-government bodies or regional state administrations. according to the data of the ministry of economic development on monitoring of implementation of state target programs, the state target program “forests of ukraine” for 2010–2015 in 2015 was one of the most extensive state target programs of ukraine implemented through the attraction of funds from other sources in the program’s structure of financing (ministerstvo ekonomiky ukrainy, 2016). taking into account deductions of taxes, duties, and mandatory payments to the consolidated budget, according to the results of 2010–2015, forestry enterprises of the state forestry agency returned to the state more than 3 uah for each hryvnia received from the state (fig. 1). enterprises of the state forestry agency spent 5 times more of their own funds for the implementation of the program than they had received from the state budget. the main indices that can be used to assess effectiveness of implementation of the state target program “forests of ukraine” for 2010–2015 are indices that provide an opportunity for the identification of general trends in forest management, quantitative and qualitative changes in the forest reserves of ukraine: forest cover, changes in total area of forest reserves, area of timber sites and area end of table 2 product indices mln uah source of financing 2013 2014 2015 average level of financing, %p la nn ed ac tu al % ex ec ut ed pl an ne d ac tu al % ex ec ut ed pl an ne d ac tu al % ex ec ut ed forestation area sb funds 424,10 62,53 14,70 513,30 30,26 5,90 644,87 25,60 4,00 17,30 other sources 17,10 20,73 121,20 18,07 13,29 73,60 19,51 15,63 80,10 111,80 total 441,20 83,25 18,90 531,37 43,56 8,20 664,38 41,23 6,20 21,40 tending forest species sb funds 539,84 429,89 79,60 584,42 377,11 64,50 635,59 324,30 51,00 72,20 other sources 1162,94 2049,32 176,20 1220,15 2540,90 208,20 1284,89 3697,67 287,80 192,90 total 1702,78 2479,21 145,60 1804,57 2918,01 161,70 1920,48 4021,97 209,40 154,90 fire belts and fire lines sb funds 79,82 69,68 87,30 151,57 36,61 24,20 169,95 46,21 27,20 52,90 other sources 44,86 71,32 159,00 46,39 78,91 170,10 49,27 125,90 255,50 172,80 total 124,68 141,00 113,10 197,96 115,52 58,40 219,22 172,11 78,50 89,30 source: compiled by the author based on the reports of execution of stp “forests of ukraine” for 2010–2015 fig. 1. payment of taxes and mandatory payments by forestry enterprises of the state forestry agency and budget financing of the industry for the implementation of the state target program “forests of ukraine” for 2010–2015, mln uah source: compiled by the author based on the reports of execution of stp “forests of ukraine” for 2010–2015 3159,6 1972,7 1498,6 1415,1 1151,5 1327,5 432,6480,8 611,3 569,2 715,0 600,3 0,0 500,0 1000,0 1500,0 2000,0 2500,0 3000,0 3500,0 2010 2011 2012 2013 2014 2015 payment of taxes and mandatory payments budget financing of the industry baltic journal of economic studies 397 vol. 3, no. 5, 2017 of lands covered with forest vegetation, total growing stock reserves, reserves of mature and overmature plantations, average growing stock increment, species composition of forests per 1 hectare of area covered with forest vegetation, distribution of forest reserves by the departmental affiliation, distribution of forest areas by categories depending on the main functions they perform, etc. these indices can be obtained only by taking the state inventory of forests (lisovyi kodeks, verkhovna rada ukrainy, 1994) and after obtaining consolidated documentation from the state forest cadastre. the last such inventory (summary of data on the natural, economic status and legal regime of the forest reserves) was taken as of 01.01.2011, which made it possible to identify positive changes in the forest reserves of ukraine, namely: increase in total area of forests and improvement of forest cover in ukraine (15,9 %); increase in the share of forest areas performing predominantly ecological and social functions; increase in the area of mature and maturing growing stock that allows increasing gradually the allowable cutting in forests fit for exploitation; increase in total and average reserves of growing stock per 1 hectare; increase in the area of economically valuable species. it was planned that in the result of the implementation of the program, the area of forests in ukraine will grow by almost 0.5 million hectares and forest cover percentage will be 16.1% by 2015. however, the state forest inventory that was to be taken in 2015 as envisaged by the normative-legal acts and by the program has not been taken because of the absence of allocation in the state budget for these purposes. in the future, the next state inventory of forests of ukraine that in accordance with paragraph 8 of the procedure for keeping the state forest cadastre and forest inventory, approved by resolution of the cabinet of ministers of ukraine № 848 of 29.06.2007, must be taken once every five years, and then there will be obtained all the necessary indices, by which, comparing them with the indices of the state inventory as of 01.01.2011, it will be possible to assess in detail effectiveness of implementation of the state target program “forests of ukraine” for 2010–2015. 6. conclusions proceeding from the results of the analysis made, it can be stated that the main condition for the effective implementation of state target natural environmental protection programs is their even financing throughout the entire period of their implementation both from the budgetary and from extrabudgetary funds with their uninterrupted control at all stages of implementation. application of the proposed methodological approach to the construction of effective indices of implementation of programs provides the possibility to determine parameters of priority ranking of budget financing of state target programs for the next year on the basis of calculation of the comprehensive assessment of the actual process of implementation of programs in progress taking into account correspondence of the achieved program results to the established priorities of socio-economic development. application of multidimensional indices of the product, quality and effectiveness in the process of determining the performance of programs that, according to the developed algorithm, are calculated by many parameters, makes it possible to estimate the total impact of various effects by constructing a unique for each program quantitatively defined integral parameter – the performance index. this is why we believe that the following proposals will contribute to the improvement of the process of elaboration of state target programs for the protection of the natural environment in ukraine: 1. promotion of innovation activities and research works in the sphere of monitoring the state of natural environment, including: providing sufficient state support for the research programs for the assessment of natural resources potential of ukraine, elaboration and introduction of the system of indices for the balanced development and spatial planning methods, impact of factors of the natural environment on health of the population and demographic tendencies; conducting fundamental research with the formation of a new ideology of life of the ukrainian society, aimed at ecologization of the economy, manufacture, consumption, policy, education; conducting economic assessment of the cost of natural resources; promotion of scientific research in the field of effective teaching methods, tools for the assessment of balanced development, formation of attitudes towards life and values, etc. 2. increasing the degree of public involvement in the preparation of state projects for the natural environmental protection. 3. ensuring a transparent information support and access to reports on the execution of state programs in the sphere of protection of natural environment. 4. establishment by the developer of state natural environmental protection programs of stable two-way communication and collaboration with the public environmental organizations and active population. 5. keeping population by the public contracting customers of state environmental protection programs constantly informed about the matters pertaining to the solution of local and national environmental problems and to the process of transition to a balanced development with the active involvement of mass media. baltic journal of economic studies 398 vol. 3, no. 5, 2017 6. improving the effectiveness of management and professionalism of executors of the state programs in the sphere of natural environmental protection, including: ensuring proper improvement of qualification of persons, authorized to perform state functions, in the matters of balanced development, particularly, in the matters of balanced planning; support in decision-making in the use of natural resources, in the implementation of investment projects that have an effect on the quality of life of people, only in a transparent manner with the involvement of interested persons; introduction of clear mechanisms for the accountability of citizens at all levels; promoting a fuller integration at the vertical level between the local and state power authorities in decision-making. the use of the proposed calculation of the integral performance indices creates the basis for the application of the system of rating of state target environment protection programs as an effective tool for the redistribution of budget funds for the execution of more effective programs and projects thus improving the effectiveness of the use of budget resources. references: danylyshyn, b. m. (2008). naukovi narysy z ekonomiky pryrodokorystuvannia [scientific essays on economy of the use of natural resources]. kyiv: rvps ukrainy nan ukrainy. (in ukraine) faichuk, o. v., faichuk, o. m., voytsekhivska, v. v. (2015). efektyvne finansuvannia derzhavnykh tsilovykh ekolohichnykh prohram [effective financing of state target ecological programs]. economist, 7, pp. 31–33. heiets, v. m. (2008). derzhavni tsilovi prohramy ta uporiadkuvannia prohramnoho protsesu v biudzhetnii sferi [state target programs and streamlining the program process in the budget sphere]. kyiv: naukova dumka. (in ukraine) hryniv, l. s. (2010). rehionalni tsilovi prohramy [regional target programs]. lviv: lvivskyi natsionalnyi universytet imeni ivana franka. (in ukraine) lisovyi kodeks no. 3852-хіі of january 21 (1994). [forest code]. (verkhovna rada ukrainy). ofitsiinyi sait verkhovnoi rady ukrainy. retrieved from: http://zakon4.rada.gov.ua/laws/show/3852-12 (accessed 15 december 2017). melnyk, l. h. (2003). ekolohichna ekonomika [ecological economy]. sumy: universytetska knyha. (in ukraine) moshchytska, t. o. (2010). derzhavni tsilovi prohramy yak diievyi instrument stymuliuvannia rozvytku ekonomiky [state target programs as an effective tool for stimulation of economic development]. problemy ekonomiky, 3, pp. 28–33. nakaz pro metodychni rekomendatsii shchodo provedennia otsinky ekonomichnoi i sotsialnoi efektyvnosti vykonannia derzhavnykh tsilovykh prohram no. 742 of june 24 (2010). [order on methodological recommendations for assessment of economic and social effectiveness of implementation of the state target programs]. (ministerstvo ekonomiky ukrainy). ofitsiinyi sait ministerstva ekonomiky ukrainy. retrieved from: http://www.me.gov.ua (accessed 07 december 2017). postanova pro derzhavnu tsilovu ekolohichnu prohramu provedennia monitorynhu navkolyshnoho pryrodnoho seredovyshcha no. 1376 of december 5 (2007). [resolution on the state target ecological program of monitoring natural environment]. (kabinet ministriv ukrainy). ofitsiinyi sait kabinetu ministriv ukrainy. retrieved from: http://zakon2.rada.gov.ua/laws/show/1376-2007-%d0%bf (accessed 27 november 2017). postanova pro derzhavnu tsilovu ekolohichnu prohramu rozvytku krymu na 2011–2015 rr. no. 539 of may 25 (2011). [resolution on the state target ecological program for the development of the crimea for 2011–2015]. (kabinet ministriv ukrainy). ofitsiinyi sait kabinetu ministriv ukrainy. retrieved from: http://zakon2.rada.gov.ua/ laws/show/539-2011-%d0%bf (accessed 29 november 2017). postanova pro derzhavnu tsilovu prohramu lisy ukrainy na 2010–2015 rr. no. 977 of september 16 (2009). [resolution on the state target program «forests of ukraine» for 2010-2015]. 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(verkhovna rada ukrainy). ofitsiinyi sait verkhovnoi rady ukrainy. retrieved from: http://zakon2.rada.gov.ua/laws show/245515 (accessed 25 november 2017). zakon pro zahalnoderzhavnu tsilovu prohramu rozvytku vodnoho hospodarstva ta ekolohichnoho ozdorovlennia baseinu richky dnipra na period do 2021 roku no. 4836-vi of may 24 (2012). [the law on the national target program for the development of water economy and ecological rehabilitation of the dnipro river basin in the period up till 2021]. (verkhovna rada ukrainy). ofitsiinyi sait verkhovnoi rady ukrainy. retrieved from: http://zakon3.rada.gov.ua/laws/show/4836-17 (accessed 29 november 2017). zarzhytskyi, o. s. (2012). aktualni problemy pravovoho zabezpechennia ekolohichnoi polityky ukrainy (teoretychni aspekty) [current problems of legal support of ecological policy of ukraine (theoretical aspects)]. donetsk: natsionalnyi hirnychyi universytet. (in ukraine). baltic journal of economic studies 95 vol. 1, no. 2, 2015 budget planning in financial management nataliya melnichuk1, national academy of statistics, accounting and auditing, ukraine abstract. the purpose of the paper is to determine the nature, targets, functions, principles and methods of budget planning and development of classifications due to its types. the essence of budget planning presented by various authors, is own interpretation (the process of developing a plan of formation, distribution and redistribution of financial funds according to budget system units during the reporting period based on budgetary purposes and targets defined by socio-economic development strategy) is proposed. methodology. the following methods such as cognition, induction, deduction, analysis and synthesis have been used in the process of survey. results of the survey proves that budget planning plays an essential role in the financial management. on condition business environment changing even the best management system can become obsolete. the immediate reaction to the new trends in the financial system as a whole, in the industry is possible with budget planning as well. it also allows to make appropriate adjustments to the plans. adjustment of long-term, medium-term and short-term plans makes it possible, without changing goals, to change ways of their achievement and thus to raise the level of efficiency of budget funds formation and use. it is necessary to revise the whole system plans, including their mission and goals in the case of global changes in the external and internal environment. practical implications. the proposed approach to the classification of budget planning types allows to cope with the shortcomings of modern planning in the public sector (the development of the targets according to the state budget expenditures in ukraine remains a formality and it rarely complies with realities. value/originality is specified in the proposed interpretation which differs from existing ones that provides clarification of budget planning purpose in financial management; classification of budget planning principles, which differs from previous approaches in more deep detailed elaboration; classification criteria of budget planning types by distinguishing nine properties that makes its implementation more efficiently. key words: budget, financial resources, planning, financial management, budgeting, public authorities. jel classification: g28, g31, g32 corresponding author: 1 department of finance, national academy of statistics, accounting and auditing. e-mail: natasha_shevchuk_2012@mail.ru 1. introduction budget planning takes an essential position in the budgeting. the quality of the budgeting performing and the level of socio-economic development of the country depends on the correct definition of budget targets. performance of the state financial position analysis, advanced planning conduct, determination of objective relationships and long-term trends in the structure of financial resources and factors that define these trends development in the future are possible with the financial statements resulting from budget planning. necessary financial proportions according to the plan of economic and social development are provided ; the amount of revenues and reserves of growth as well as expenditures and reserves to reduce them are determined; an adequate financial base of social protection is created; revenues and expenses are allocated between the individual links of the budget system material and budgetary provisions are formed in the process of budget planning [akhlamov  a. & holynskaya  o., p. 20]. therefore, the study of budget planning in financial management is an extremely important area of study. among the scientists and practitioners studying theoretical and practical principles of budget planning are the following: vasilyik o. and pavliuk k. (2004) hordieieva l. and derkach  n. (1995), kuzmynchuk n., feshchenko l., pronoza p. (2008), mochernyi s. (2001), oparin v., fedosov v. and safanova  l. (2004), pasechnik iu. (2003), stoian v., yurii s. and mats m. (2002). however, despite the constant paying attention to the area studied by both scientists and practitioners, some issues are insufficiently known, particularly for budget planning in financial management, identification of its types. 2. scientific approaches to determining the definition of “budgeting” the synonym to the term «budgetary planning» is «budgeting».it is necessary to explore the essence of the definition for theoretical principles of budget planning summarizing. there is no definition of the term “budget planning” in the budget code. the leading ukrainian baltic journal of economic studies 96 vol. 1, no. 2, 2015 economists give different interpretations due to studied category. having analyzed definition of “budget planning” and having considered the peculiarities of the budget planning type we denote it as the process of developing a plan of formation, distribution and redistribution of financial resources according to budget system units formation, during the reporting period based on budgetary purposes and tasks defined with socio-economic development strategy of the country. according to the purpose of survey, the main targets of budget planning are: determining sources completeness of cash for taxes and duties to the budgets of different levels. the total state demand in cash appears in the process of budget planning. it is necessary for the implementation of socio-economic society development. different opportunities are taking into account, as well as practical mobilization feasibility of a newly created value of gross domestic product to the budget performed with entities. meanwhile, in this period, when the targets of financial resources concentration to ensure basic (critical) areas of socio-economic development are set, the redistributive role of the budget process excessively increases; achievement of the highest efficiency in the allocation of budgetary resources between the budgets of regions, sectors of the economy and specific expenditures. the budget plan must meet the purpose of socioeconomic development and contribute to the efficiency growth of social production; allocation of budget resources to provide proportional and dynamic development of society. development of society is predominantly dynamic. however, individual economic subjects as well as entire regions develop not equally evenly; transparency and control over financial and economic activity of business entities to comply with the intended use and austerity in the use of funds and tasks completeness of income taxes and duties to the budget. state institutions financed from the state and local budgets have been taken to the financing based on estimates since 1997 for introducing effective state control over budget expenditures; formation of necessary resources. availability of budget reserves enables to provide uninterrupted financing of the planned measures even in cases where revenues budget are not met. budget reserves are the source of damage caused with natural forces of nature. it is difficult to avoid liquidation of imbalances arising from the budget implementation without them. budget planning is a type of management, associated with the development budgets of different types and for different objects, forming their consolidation patterns for consolidated budgets using the combination of certain methods (fig. 1). methods of budget planning are the ways and techniques being applied for plans targeted to public sector entities development. as it is shown in fig. 2 today, there are two approaches to determining the methods of budget planning. according to foreign practices eight methods of budget planning are distinguished (automatic, majoration, minoration, direct assessment, budgeting from scratch, basic budgeting, program budgeting, program targetoriented budgeting). таble 1 scientific approaches to determining the definition “budgeting” author definition vasylyk o. and pavlyuk k. (2004) a scientifically grounded process of determining the sources of formation and directions of budgetary resources using in the state’s economy in order to ensure sustainable economic and social development.. derkach m. and hordieieva l (1995) centralized distribution and redistribution of the gross national product and national income in the process of the budget drafting and implementation in all budget system branches and in all types of financial plans based on the state plan for socio-economic development of ukraine. mochernyi s.. (2001) budgeting process for specific objects for a short period (one year) to determine on the basis of multivariate analysis in the form of money or in the kind of expenditures and revenues, optimize their structure to achieve the goals of the organization considering the presence of certain constraints and environmental factors influence performance. safanova l. (2001) the set of organizational, technical, methodical and methodological steps in determining the income and expenditure budgets during their preparation, review and approval mochernyi s. (2001) process of budget drafting, review and approval for next year. it covers a series of administrative measures and methodology for calculating individual budget items. pasichnyk yu (2003) the formation of budget content indicators performed by legislative and executive bodies of a certain level for a specific period of time feschenko l.a, pronoza p. and kuzmynchuk n.(2008) a scientifically grounded process of determining the sources of formation and directions of budgetary resources being used in the state’s economy in order to ensure sustainable economic and social development. fedosov v. and oparyn v (2004) financial management tool aimed at improving the effectiveness and transparency of the public sector, with setting budget goals not only for the next (planned) year, but also for the future, including the medium-term (three years) perspective. yurii s., stoian v and. mats m (2002) centralized distribution and redistribution of gross domestic product and national income in all levels of the budget system and in all types of financial plans on the basis of the state program of economic and social development of the country compiled by the author baltic journal of economic studies 97 vol. 1, no. 2, 2015 ukrainian scientists distinguish the following nine methods of budget planning (coefficients, regulatory, balancing, target-oriented, economic and mathematical modeling, extrapolation, expert evaluations, analytic) (pasichnyk yu., 2003)]. each method can not be separated from each other in its pure form. all methods are interrelated and need complementarities. at the same time, it should be mentioned that some researchers, currently are identifying the concept of different methods of budget planning. there is an example when the term “regulatory method” is identified with the “line-item” method. this approach is quite controversial, because “normative method” refers to the methodology of the budget development, fig. 1. methods of budget planning compiled by the author world practices domestic practices automatic majoration coefficients regulatory minoration balancing direct assessment target-oriented direct credit economic and mathematical modeling approaches to methods determining extrapolation expert evaluations analytic budgeting from scratch basic budgeting program budgeting program targetoriented budgeting while the “itemized method” is not only the approach to the budgeting process and but its methodology implementation. it also concerns the following methods such as coefficients and analytical method. the important methodological system constituents of budget planning except methods are also its principles and functions. overall, budget planning can only be effective if it is based on certain principles. the main principles of budget planning are: integrated approach to key indicators of economic and social development in close relationship with available budgets; optimal using of budgetary funds to provide the development of economy and social sphere foreground directions with prime budgetary funds; rational identification of budgetary funds sources and their redistribution through the budget system links; unity in the use of budget indicators, in the implementation of budget payments, in the application of a sole methodology of trends and directions of development forecasting; scientific substantiation of plans involving reality of forecasting calculations, their economic substantiation, using advanced methodologies, norms and standards. we believe this approach is not perfect because it does not fully characterize and reveals budget planning. therefore, we consider it necessary to provide our own definitions of classification principles of the studied definition (fig. 2). the principle of unity implies that budget planning is systematic. it requires that budget planning covers all the public sector, trends, changes and feedbacks in the financial system affecting the budget. the principle of continuity is expressed in the fact that the process of budget planning should be carried continuously out as well as developed plans should consistently replace each other. the principle of flexibility is interconnected with the principle of continuity in providing the plan and the budget planning process with properties to change their targeting due unity accuracy continuity participation flexibility complexity the principles of budget planning optimality necessity priority concreteness scientific substantiation concreteness balancing reality fullness integration economy periodicity variability fig. 2. the types of budget planning principles compiled by the author baltic journal of economic studies 98 vol. 1, no. 2, 2015 to unforeseen circumstances. the principle of accuracy means plans compliance with internal and external factors affecting the revenue and expenditure side of the budget. due to this purpose, it could be possible to resort to detailed specification. the principle of participation means that all those involved in the budget process become a participant of planned activities regardless of their position and what functions they perform. the principle of complexity is that all decisions regarding budget planning should be complex and provide accounting changes both in separate articles or chapters, and in the outcome of the budget process in general. the principle of optimality focuses on the implementation of social, scientific and technological and organizational progress, as well as on full reserves implementation, the public sector financial funds using. the principle of necessity implies understanding the mandatory plans using on receiving or using the budget financial funds. the principle of priority stipulates that plans development must be based on the priority of budget planning, its certain sections or articles. the principle of scientific substantiation involves the budgets construction on the basis of balanced, scientifically grounded indicators and calculations. the principle of concreteness requires that the plan indicators should be specific and directly related to object planning. the principle of objectivity involves the construction process of budget planning due to objective information. the principle of balance reveals in labor, material and financial resources balancing. it means that plans are developed in a way to keep the revenues and expenditures balance, sources of its formation, etc. the principle of reality comes from the necessity of dominant functions performed by the competent authorities due to budgetary resources. the principle of all transactions completeness leading to the revenue and expenditure side of the budget should be reflected. the principle of integration is predetermined with the needs of close relationship (both horizontally and vertically) between different types and levels of budgets. implementation of this principle means when developing budgets of lower level, targets provided with the budget of higher level are taken into account. the principle of economy is reflected in the fact that compliance with all the above principles makes sense if the income and expenditure analysis shows the budget surplus. the principle of periodicity implies that budgets should be drawn to certain periods. the principle of variability is that due to budgetary planning an opportunity to consider alternatives in the area of formation, distribution and financial resources using in public sector is created, as well as to assess the cumulative effect of targets on the final result and to choose a more effective program of social development or a separate political unit. the functions of budget planning is reflected in the fact that they make it possible to ensure the state financial resources balancing as well as to determine the real source of income, budget and fiscal policy priorities in expenditure, to implement depending on the period current by the level of activity active passive by the degree of fixation perspective statistical flexible by implementation means automatic manual by effectiveness identifying proactive depending on the coverage degree special coding preventive group depending on the specific targets ordinary by levels nationwide regional organizations on the basis of time short-term long-term fig. 3. the types of budget planning compiled by the author effective management of public debt, to put a common fiscal policy at all levels of government into practice. as the researcher azarov m.ya. (2010) denotes its level largely depends: first of all on clarity formulation of goals and targets; secondly, it depends on information reliability being used to prepare the draft budget; thirdly, it depends on methodology of budget planning indicators. there are several functions of budget planning: reflecting the budget policy, implemented by legislative and executive power in the state; choosing the rational ways of budget support due to the predictable level of economic and social development through effective use of available resources in the society; implementation of the necessary level of budgetary resources redistribution to achieve the rates and proportions of economic development and improvement of social welfare; establishing of rational forms of budgetary resources mobilization and identifying their optimal structure on their basis. having considered the essence of the definition “budgeting”, its goals, targets, principles, methods and functions we find it important to examine its types that will help better to understand the detailed budget planning in financial management. in 2001 safanova l. mentioned that it has become traditional to single out the following types of budget planning: consolidated, territorial and addressed. however we consider that other types of budget planning besides mentioned ones should be singled out. we offer our own classification of budget planning, displayed in fig.3. depending on the period: the current budget planning is a type of budget planning, providing forecast revenues and baltic journal of economic studies 99 vol. 1, no. 2, 2015 expenditures for next year, which is periodically précised towards the budget compliance with the adopted goals. the perspective budget planning is reviewed and approved by the representative body of power simultaneously with the budget law for the next fiscal year. in the process of perspective budget planning all the expected revenue as well as all the expected costs are considered. in these circumstances in each program the total estimated costs are calculated and distribution of expenses is set by years according to the adopted budget classification. generalized information should include annual summary, including study data on estimated revenues and the list of planned expenditures on the basis of the commitments. notion implementation means: the automatic budget planning involves planning budget revenues and expenditures, with direct application of automated devices avoiding human interference. the manual budget planning is the type of planning carried out directly by the performer with a precise calculation of formation and financial resources use indicators in the public sector. this type of planning is applied in individual cases. with the level of activity: the active budget planning – involves planning directly during the budget process. the active budgetary planning using allows preventing the emergence of negative phenomena, which can adversely affect the budget funds formation and use. the passive budget planning is the type of planning carried out just before the budget process starting in determining the direction of future results. with the degree of fixation the statistical budget planning involves planning, based on the probability theory and mathematical statistics applying. it allows to record the actual level of planning quality in the last reporting period, as well as to influence the budget process, to ensure its management. the flexible budget planning is budgeting involving constant adjustments of planned information which is analysed due to the financial resources formation and use in the public sector and due to making appropriate changes in the planning process. by the effectiveness the identifying budget planning involves planning in the budget process where data on actual results is compared to planned. because of this budget planning negative feedback may occur the action aimed at returning the process to the originally specified directionis is initiated; as well as positive feedback encouraging action aimed at eliminating deviations from plan. the proactive budget planning is the type of planning based on the results of forecast calculations. for example, if the projected costs begin to exceed the planned budget, it is necessary to implement the plan of action to avoid such deviations in the future. depending on the coverage degree the coding budget planning is the budget planning, carried out due to each code of various classifications of income and expenditures. the group budget planning is the budget planning held immediately due to several general codes of income and expenditures of different classifications. depending on the specific targets the preventive budget planning allows preventing the emergence of negative phenomena, in the budget planning. the ordinary budget planning is the budget planning performed to identify and to eliminate negative phenomena arising in the budgetary planning. the special budget planning is the budget planning that is responsible for determining the specific targets of the special budget planning. with levels the national budget planning involves participation of international financial institutions, foreign consultants, scientific institutions of ukraine, the cabinet of ministers of ukraine, all ministries and departments, committees of the verkhovna rada of ukraine, some mps and ngos. the regional budget planning involves structural subdivisions of the legislative and executive authorities, mps, scientists and public figures. the budget planning of organizations involves experts of economic units. on the basis of time the longterm budget planning is carried out by the appropriate authorities for the long term. this type of budgeting is used when developing national programs aimed at reforming or improving the socio-economic development. the shortterm budget planning is carried out in the short term (month, quarter, year). we can see in fig 3 that in spite of existing types there is an appropriate division of the budget planning with the following classification criteria: it depends on the purpose of carrying out, execution time, the degree of coverage, specific targets and ways for implementation, methods, results, level of budget planning and some time. this classification reflects new features, which can be viewed according to different types of budget planning both short-term and long-term. 3. conclusions thus, it has been denoted that budget planning takes an essential position in the financial management. on condition that business environment changing even the best management system can become obsolete. the immediate reaction to the new trends in the financial system as a whole, in the industry is possible with budget planning as well. it also allows to make appropriate adjustments to the plans. adjustment of long-term, medium-term and short-term plans makes it possible, without changing goals, to change ways of their achievement and this way to raise the level of efficiency of budget funds formation and use. it is necessary to revise the whole system plans, including their mission and goals in the case of global changes in the external and internal environment. the proposed approach to the classification of budget planning types allows to cope with the shortcomings of modern planning in the public sector (the development of the targets according to the state budget expenditures in ukraine remains a formality and it rarely complies with realities. according to art. 38 listed in budget code of to the verkhovna rada of ukraine simultaneously with the draft law on state budget for the planning year, figures of consolidated budget of ukraine based on the main types of revenues, expenditures and funding for the next three budget years are served. however, that work is done indeed formally. firstly it occurs because baltic journal of economic studies 100 vol. 1, no. 2, 2015 of the macroeconomic forecasting unreliability, frequent adjustment of tax laws, changing of previously selected priorities in budgetary expenditure under the influence of various political forces, and secondly, these forecasts are not really used in the work of the budget formation targets for the following years), as approval of substantial budget targets and standards for several years remains essential, not just directly for the following year. references azarov, m. (2010). state budget management in ukraine. – кyiv: zovnyshnya torhivlya. – 816 р. akhlamov, a. & holynskaya, o. (2010). fiscal policy and budget planning in terms of forecasting uncertainty: the regional level. – кyiv: nаsu. – 44 р. derkach ,n. & hordieieva, l. (1995). the budget and the budget process in ukraine. – dnepropetrovsk: porohy – 257 р. fedosov, в. (2004). budget management. – кyiv: кnеu. – 864 р. feshchenko, l. (2008). the budget system of ukraine. – кyiv: коndor. – 440 р. mochernyi, s.(2001). economic theory. – кyiv: academiya. – 154 р. pasechnik, u. (2003). the budget system of ukraine and foreign countries. – кyiv: znannya-press. – 523 р. safanova, l.d. (2001). budget management. – кyiv: кnеu. –110 р. vasilyik, o. & pavlyik, k. (2004). public finance of ukraine. – кyiv: centre of educational literature. – 544 р. yurii, s., stoyan, v. & mats, m. (2002). treasury system. – теrnopol: kart-blansh. – 394 p. наталия мельничук бюджетное планирование в управлении финансами аннотация. в статье приведена сущность бюджетного планирования разными авторами, предложено собственное трактование. обоснованы особенности осуществления бюджетного планирования в современных условиях хозяйствования. исследованы задачи, функции, принципы и методы бюджетного планирования. разработана классификация видов бюджетного планирования. целью статьи является определение сущности, задач, функций, принципов и методов бюджетного планирования, а также разработка классификационных признаков его видов. предметом исследования является совокупность финансовых отношений, которые возникают во время бюджетного планирования в системе управления финансами. методология исследования. в процессе написания статьи были использованы следующие методы: познания, индукции, дедукции, анализа и синтеза. выводы. таким образом, бюджетное планирование играет чрезвычайно важное значение в управлении финансами. ведь даже самая лучшая система управления может устареть, если изменятся условия осуществления деятельности. а с помощью бюджетного планирования возможно своевременно реагировать на новые тенденции в финансовой системе в целом, в области и вносить соответствующие коррективы в планы. корректировка долгосрочного, среднесрочного и краткосрочного планов дает возможность, не меняя целей, менять пути их достижения следовательно, повышать уровень результативности формирования и использования средств бюджета. в случае глобальных изменений во внешней и внутренней среде, возникает необходимость пересмотреть всю систему планов, включая миссию и цели. предложенный подход к классификации видов бюджетного планирования позволяет преодолеть недостатки современного планирования в бюджетной сфере (разработка прогнозных показателей по расходам государственного бюджета в украине остается формальностью. в соответствии со ст. 38 бюджетного кодекса украины в верховную раду украины вместе с проектом закона о государственном бюджете на планируемый год подают показатели сводного бюджета украины по основным видам доходов, расходов и финансирования на следующие три бюджетных года. в то же время на практике такая работа проводится формально, во-первых, связано с ненадежностью макроэкономического прогнозирования, частым корректировкой налогового законодательства, изменением под влиянием различных политических сил ранее выбранных приоритетов в бюджетных расходах, во-вторых, такие прогнозы на самом деле не используют в работе по формированию показателей бюджета на последующие годы), поскольку существенным представляется утверждение бюджетных целей и норм на несколько лет, а не только на непосредственно следующий год. baltic journal of economic studies 195 vol. 4, no. 1, 2018 corresponding author: 1 department of insurance, university of lodz. e-mail: jurij.klapkiv@uni.lodz.pl 2 department of insurance, maria curie-skłodowska university in lublin. e-mail: liuba.klapkiv@gmail.com 3 department of accounting in the industrial sphere, ternopil national economic university. e-mail: zarudna@bigmir.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-195-201 online distribution of insurance of civil liability of owners of vehicles, the experience of poland, opportunities of ukraine jurij klapkiv1 university of lodz, poland lyubov klapkiv2 maria curie-skłodowska university in lublin, poland nataliia zarudna3 ternopil national economic university, ukraine abstract. distribution of insurance services online is practically possible only with respect to unified and simple products. the most massive of them is civil liability insurance of vehicle owners, the terms of which are unified by the state, which allows treating this insurance product as optimal for distribution through the internet. such a distribution can significantly reduce the cost of acquiring and servicing this insurance service, which is an additional element of competition for insurance companies. in this paper, the dynamics of internet access in ukraine and poland was investigated. the relationship between the internationalization of poland and the share of insurance premiums received from online sales in the total number of insurance premiums of non-life companies is determined. the purpose of the research is: substantiation of the distribution potential of civil liability insurance of vehicle owners through the internet in ukraine. method (methodology). in order to realize this purpose, the existing state of online sales of risk insurance services in the republic of poland is analysed. for analysis, in particular, methods of analysis of dynamics and correlation were applied. empirical studies use statistics from mtibu, knf, gus, internet live stats, and kpmg reports. results. it is substantiated that the growth of sales of insurance through the internet correlates in geometric progression with the index of internetization. it is determined that in addition to the technical component of distribution through the internet, a regulatory and legal component plays an important role. the practice of distributing online services of insurance of civil liability of vehicle owners substantiated the need for substantial elaboration of the ukrainian legislation in the sphere of protection of client interests in such transactions. practical implications. taking into account the research results, it is proposed to significantly elaborate the mobile applications of insurance companies, both in ukraine and poland in order to ensure the supply appropriate for the countries of western europe. the necessity of substantive reform of the current legislation in order to bring it closer to the eu standards, namely, in accordance with the insurance distribution directive, as was the case in poland, is determined. value/originality. for the first time, there was a study of opportunities for online distribution of insurance products in ukraine, which became legally possible from february 2018. based on the dynamics of the dependence between internetization and online sales of insurance products in poland, significant prospects for this distribution channel are determined. key words: insurance, innovations, high technologies, insurance services, distribution, internet. jel classification: g22, l81 baltic journal of economic studies 196 vol. 4, no. 1, 2018 1. introduction the development of modern technology in the world is the driving force behind changes in the methods and techniques for selling products and services. these changes also include the possibility of distributing insurance services in eastern europe and in ukraine, in particular. the main accelerator of these changes is the distribution of access to the internet. new, alternative methods of selling standard insurance products are being formed through e-commerce. these methods relate to non-traditional forms of distribution of insurance services (klapkiv, 2016). they allow removing some restrictions on traditional channels. as the experience of ukraine proves, legal rules are at the core of the law, which in fact provide the possibility of selling online insurance services, in particular, the most massive and mandatory form – insurance of civil liability of vehicle owners. in developed european countries, the distribution of insurance services through the internet coincides with the possibility of access to the internet in the mass consumer and read from the second millennium of our era. with regard to insurance of civil liability of vehicle owners, the internet is becoming one of the most important channels for the distribution of insurance services, mainly due to the low cost of distribution and ever easier access of the population to the internet, including through smartphones. the purpose of the article is to substantiate the significant potential of distributing insurance of civil liability of vehicle owners through the internet in ukraine, using an analysis of the current situation in the countries of central and eastern europe and, in particular, the republic of poland. methodology. the dependencies between internetization in poland and the size of insurance premiums received from sales through the internet are determined. comparisons of ukraine’s internetization and dependency in neighbouring poland outline possible sales of online insurance services. the main hypothesis of the study is the thesis that the growth of sales of insurance services through the internet correlates in a geometric progression with the index of internetization provided the appropriate legislative regulation. in empirical studies, statistics of mtibu, knf, gus, and kpmg reports are used. for analysis, in particular, methods of analysis of dynamics and correlation were applied. 2. opportunities for distributing insurance services online distribution is the process of moving products and services from manufacturer to end user. given the specificity of the insurance product and features and capabilities of high technology, the process of distributing online insurance services can be interpreted as the representation and distribution of insurance services, as well as to a certain extent, their support in the process of insurance coverage and the implementation of insurance payments. distribution of insurance is a manifestation of ties and market relations between buyers and suppliers of insurance products (klapkiv, 2007). in the case of insurance services with an inverse production cycle, the correct choice of acquisition method is extremely important for ensuring the effectiveness of an insurance company’s activities (payne, 1997). distribution of insurance services takes on different forms, among which the main ones are distinguished – direct and indirect channels (fig. 1). direct channels are characterized by the fact that in relations between d is tr ib ut io n ch an ne ls mediated (indirect) multi-agents brokers banks others immediate (direct) branches and agents directly phone through mobile applications internet through the website fig. 1. division of distribution channels of insurance products source: own study on the basis of (witkowska, 2008) baltic journal of economic studies 197 vol. 4, no. 1, 2018 consumers (buyers) and insurers (suppliers), there are no third parties (intermediaries) (monkiewicz, pazio, 2003). traditional forms of direct (immediate) distribution include sales performed by employees of insurance companies, including agents working on the affiliate network of the insurer. unconventional forms of direct distribution use new technologies for the sale of insurance services, that is, sales through the internet, phone or smartphone. these channels are usually referred to as direct sales. as scientists point out, the use of modern technologies in the distribution of insurance services, and in particular, in the insurance of civil liability of vehicle owners, generates far lower sales costs (bojanowska, wójcik, 2015). in addition, new technologies facilitate the reach of customers who prefer digital channels and promote the popularization of insurance products, especially among young people. selling insurance with the use of the internet has many advantages from the viewpoint of the client. rating websites, online calculators, or mobile apps allow quickly collecting information, comparing suggestions, and getting a comfortable home-based purchase. this makes it easier to access insurance products. however, it should be noted that the internet or smartphone as a sales channel works primarily on simple insurance services such as: civil liability insurance of vehicle owners or travel insurance (handschke, kaczała, 2004; witkowska, 2008). one should agree that most insurance products are quite complex. in this regard, the implementation process requires “consultation” with specialists ( jaworski, lisowski, 2004). nevertheless, the development of computer technology and smartphones made it possible to compare complex products and their components, which contributes to the increase in the range of insurance products sold online. the complexity of insurance products often requires, besides technical equipment, knowledge in the field of insurance, that is, the use of services of insurance intermediaries. in the traditional, classical sense, insurance intermediary is an insurance agent or insurance broker. however, organizational changes and the practice of the insurance market have led to the creation of new, non-traditional types of insurance intermediaries, which include banks, auto dealers or travel agencies (zieniewicz, lisowski, 2015). 3. internetization of society as a basis for the distribution of insurance services online the internet provides enormous opportunities for developing marketing and improving the methods of product insurance management of insurance companies. insurance companies are finding new ways to profit from these opportunities (dutta, kwan, segev, 1997). activities of insurance companies that took place on the world wide web and their results have also evolved (krol, hoffman, 1993). previously, some insurance companies created sites but did not use the possibility to distribute their products through them (klapkiv, niemczyk, vakun, 2017), contenting with the information component of websites (finne, grönroos, 2017). currently, more and more insurance companies are focusing on automating processes and providing online services. the beginning of the distribution of insurance products in poland can be considered as 2005 when their volume amounted to 0.01%, and already in 2016 shows 17.35%. since 2013, the potential number of consumers with widespread internet access in ukraine has come close to the size of poland. the main growth of online distribution in poland has been since 2014; in 2015  – by 2.37% in relation to 2014, and to 10.24% in 2016, which is due to the adoption of the relevant legislation. 0 5000 10000 15000 20000 25000 30000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 the inhabitants with internet access, thousand poland internet users ukraine internet users fig. 2. the dynamics of the internetization of inhabitants of ukraine and poland in 2005–2016 source: own research on the basis of (internet users by country, 2016) the home-based internet access of the residents of ukraine and poland is improving year by year (see figure 1). in the years of 2005–2016, on average, 59.75% of households had access to the internet. between 2005 and 2016, the share of households with internet access in poland increased to 73 percent of the population, with an increase of 39 percent. in ukraine, there was a 41% increase in this time period. the lack of official statistics and, in general, the possibility of concluding an online agreement up to 2018 in ukraine makes it necessary to limit the analysis of the dynamics of the change in the percentage of sales of insurance products of insurance companies online in the total direct insurance of these companies only to poland’s experience. the study evaluated the empirical nature of the dependence between the percentage of people having access to the internet and the insurance premium from internet sales of property insurance products in poland, mainly civil liability insurance for vehicle owners. for this purpose, the relationship between variables of linear regression was studied and the parameters and degree of baltic journal of economic studies 198 vol. 4, no. 1, 2018 alignment on empirical data were estimated. the results showed that there is a significant linear correlation between the internetization index and the share of sales of online insurance products with a positive trend (pearson correlation is 0.72, average estimation error – 3.43%, determination coefficient  – 51.86%). however, the correspondence of linear regression with empirical data is not satisfactory. the correlation diagram in figure 3 indicates that the ratio between the percentage of internetization and the share of insurance premiums from the online insurance products is exponential. -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 0 10 20 30 40 50 60 70 80 90 t he s ha re o f t he p re m iu m fr om o nl in e di st rib ut io n in th e to ta l a m ou nt o f i ns ur an ce p ay m en ts fr om d ire ct sa le s [% ] citizens' access to the internet [%] fig. 3. the share of online sales of insurance products and the percentage of citizens with internet access in poland in 2005–2016 (in %) source: own research based on data of knf and gus parameters of the curve of exponential regression were estimated by the formulas (mruk, 2003): log log log a y b x n = −∑ ∑ (1) log log log b n x y y x n x x = − − ( ) ∑ ∑∑ ∑ ∑2 2 (2) where x  – an indicator of internetization, y  – share of premiums from online sales in the total number of insurance premiums, n – the number of observations. the regression curve of the theoretical form is obtained. the resulting curve for the average error margin is 1.79%, and the estimation of 86.84%, better matches the exponent of empirical data. the exponential model explains 86.84% of the volatility of premiums from online sales, while the linear model  – only 51.86%. the predicted share of the premium of 85% of the internetization is 28.81 +/1.79%, with 87% of the internetization it will be 36.72 +/1.79%, provided that it will not change depending on the type of correlation. the main advantage of selling insurance online is reducing the cost of distribution. according to scientists, online sales of civil liability insurance for vehicle owners reduce costs by 30% (cholewiński, 2018). 4. rationale for the need to create a legally favourable environment the basis for online sales of insurance services is the european parliament and council directive (ec) 2016/97, adopted on 20 january 2016 on the insurance distribution (insurance distribution directive, 2016). this act came into force on 23 february 2016, which meant that the member states had to change the laws and regulations of their countries by february 2018. that is why in poland on 15 december 2017 a law on the distribution of insurance services was adopted (ustawa o dystrybucji ubezpieczeń, 2017), where article 4.2 treats as a distribution channel websites of insurance companies or other media, through which the client has the opportunity, directly or indirectly, to conclude an insurance contract. the law on consumer rights dated 30 may 2014 provides significant benefits to online financial services’ consumers and facilitates the possibility of termination table 1 risk insurance premium from direct sales and online sales made in poland in the years of 2005–2016 years total premium on risk insurance, direct sales (in thousand zł) chain dynamics (%) risk insurance premium received from online sales (in thousand zł) chain dynamics (%) the share of the premium from online distribution in the total amount of insurance payments from direct sales (%) 2005 3775525 100,00 409 100,00 0,01 2006 3781364 112,54 1130 2012,41 0,03 2007 4255589 103,69 22740 230,89 0,53 2008 4412439 84,89 52506 155,48 1,19 2009 3745718 92,22 81638 121,45 2,18 2010 3454481 115,29 99151 118,88 2,87 2011 3982654 99,34 117876 143,90 2,96 2012 3956239 105,72 169619 104,33 4,29 2013 4182497 94,75 176970 102,23 4,23 2014 3962993 71,00 180915 107,78 4,57 2015 2813690 117,56 194996 294,37 6,93 2016 3307731 100,15 574011 276,28 17,35 source: own research of knf baltic journal of economic studies 199 vol. 4, no. 1, 2018 of the contract, which is important from the point of view of gaining experience for ukraine, ensuring the possibility of rejecting an agreed contract within 30 days after its conclusion. in our opinion, the legal and regulatory framework that combines the legal force of contracts and consumer protection will promote the sale of online insurance products in ukraine, as is the case in poland. in our opinion, given the noted experience of poland, there is a need to streamline and substantially reform the current legislation in ukraine. positive is the attempt of regulation at the level of the national commission’s order, which carries out state regulation in the field of financial services markets №3631 dated august 31, 2017, “on approval of amendments to the regulation on peculiarities of concluding contracts of compulsory insurance of civil liability of owners of land vehicles,” according to which since 7 february 2018 contracts of internal obligatory insurance of civil liability of vehicle owners can be concluded in electronic form, which confirms the significance of the lag in the development of the regulatory framework. confirmation of the fact of its significant incapacity is the first fine for the lack of an insurance policy of civil liability of the vehicle owner issued in late february 2018 by representatives of the police of ukraine to the owner of the policy, purchased online. the reason for the fine is part 1 of art. 126 of the code of ukraine on administrative offenses that for the motor vehicle driving by a person who does not have a policy (contract) with him, the osago provides for the imposition of a fine of 25 non-taxable minimum incomes of citizens (kodeks ukrainy pro administratyvni pravoporushennia, 2018). 5. the potential of mobile applications in the process of distribution and provision of insurance services. however, the number of unquestionable advantages and opportunities, coupled with significant internetization of the population of ukraine in the event of significant reform of the legislation and updating of legal norms, will ensure a steady growth in the sales of insurance through the internet. with the help of a smartphone, the client in poland has the opportunity (kulik, 2015; grzywaczewska, 2015): • report an insurance case • call for help in the event of an insured event; • determine the accident location using gps; • make a telephone call to the call centre of the insurer; • examination by broadcasting video using a mobile application on the client’s smartphone to company employees in an office that has the ability to remotely assess the damage; • maintenance of damage; • make and send photos of the damage; • record a review of the damage to the video through a mobile application; • track the processing of a case with a mobile application; • appeal the insurer’s decision. in fact, the functionality of mobile applications is increasingly underlying the choice of customers. for the benefit of mobile applications, it is worth recognizing the fact that they allow using an insurance product, both at home and abroad, which is important for the development of travel insurance (volosovych, klapkiv, 2016). in ukraine, over the lack of relevant legislation, the insurers’ actions regarding mobile applications are somewhat limited and go beyond the scope of insurance activity, the pzu developed the call & travel pzu application, more informative as functional content, to support travel abroad. in fact, the main advantage of this application is the possibility of prompt and free communication with the contact centre of the assisting company. the rest of the functions are informational: • information about the addresses and telephone numbers of medical centres in the area of their location; • an opportunity to photograph the necessary documents (insurance policy, passport, etc.) and send them directly to the assisting company; • a description of “first-aid kit” with the medicines necessary for any trip; • a first aid guide describing the main diseases for adults and children; • a medical phrasebook in several foreign languages; • information on insurance rules and policies; • current news, information about the events held in pzu. mobile applications combine the benefits of using the internet with a computer or smartphone in one place. true, they are not the optimal channel of contact, but it is noticeable that for clients, they represent all the more important value precisely with respect to property insurance products with a high frequency of minor damages. according to kpmg research (kpmg, 2016), most customers would like to have an access to potential features of the insurance company’s program. the question then arises as to how insurers will respond to consumer expectations and their desire to get a new product service channel and contact with the company. a system of direct elimination of losses is in great demand. this system allows compensation for losses in an insurance company, in which the victim has an insurance policy of osago, and not as before  – from the insurer, who has insured the responsibility of the perpetrator of the damage (bednarczyk, jańska, 2015, s. 49). this system is presented in the offer of insurance companies of ukraine and poland. increasingly, it is the functionality of mobile applications that is the basis of customer choice. on this basis, it can be assumed that in the coming years, baltic journal of economic studies 200 vol. 4, no. 1, 2018 the applications that are installed on smartphones will become very popular. in most cases, they are faster than mobile websites that require the input of data every time. taking into account the analysis of the options available in ukraine and the republic of poland in mobile applications of insurers compared to the opportunities offered by mobile applications to western european clients (table 2), one can note that not all the technical capabilities of the program are used yet in poland and a significant reform of the current legislation is required for its use in ukraine. at the same time, effective innovations in the insurance sector are copied by companies in the competition for half a year (klapkiv, 2003), what, in this respect, is in favour of the development of online distribution of civil liability services for vehicle owners in ukraine and poland. the foregoing allows predicting the rapid spread of popularity of mobile applications of insurance companies. 6. conclusions statutory regulation in ukraine updated in february 2018 allowed online distribution of civil liability insurance for vehicle owners. it made possible to analyse the possibilities of development of distribution of insurance products on the example of the insurance of civil liability of vehicle owners, using the experience of the republic of poland, as a country with an approximate number of potential consumers with internet access. it is revealed that in poland the spread of internet insurance has been developing in geometric progression in recent years. in ukraine, the improvement of access of citizens to the internet is also noted that allowed confirming the hypothesis put forward at the beginning of work. it is determined that the main reason for the growth of internet insurance sales is the new possibilities of mobile applications. it is the internet availability and technical development that allows us to talk about the significant potential of this distribution channel. indeed, not only the sale of insurance services takes place, but also the maintenance, prevention or even elimination of losses. a factor that substantially impedes the development of distribution in ukraine and provides significant opportunities in poland is the existing legislation. standards operating in the eu are much more useful to the client and think about most of the technical features of online distribution. insurance companies of both countries, when developing mobile applications in order to create a new distribution channel of insurance, should focus first of all on the expectations of users, that is, todays and potential customers. table 2 mobile application opportunities in ukraine, poland, and western europe western europe poland ukraine information search search for branch/insurance agent information about threats information about threats purchase of insurance services simplifying the purchase of travel insurance buying civil liability insurance payment at the application level review before purchasing insurance, video streaming direct and short-term insurance service of the insurance policy certificate of accident-free driving record access to a client account from a mobile app information about the predicted danger information about scheduled meetings viewing client’s insurance policies reminders about insurance cases payment revision renewal renewal of an insurance contract loss occurrence application for an insurance case instructions for action after the loss occurrence appointment to a hospital or auto workshop loss maintenance appeal against the insurer’s decision loss overview through video streaming review of insurance payments’ history tracking the state of damage liquidation source: own development based on kpmg research baltic journal of economic studies 201 vol. 4, no. 1, 2018 references: bednarczyk t., jańska a. 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(2015) zmiany w kanale agencyjnym na rynku ubezpieczeniowym w polsce, „annales universitatis mariae curie-skłodowska, sectio h oeconomia” nr 4, p. 335-345. baltic journal of economic studies 8 vol. 4, no. 3, 2018 corresponding author: 1 educational and scientific institute no. 1, national academy of internal affairs. e-mail: dmitro@gmail.com 2 department of civil law and process, national academy of internal affairs. e-mail: bov@ukr.net 3 department of law, higher educational institution of ukoopspilka; “poltava university of economics and trade”. e-mail: ruslan1974@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-8-14 administrative and legal principles of activities of tax authorities in ukraine and eu member countries: comparative legal analysis dmytro andreiev1 educational and scientific institute no. 1, national academy of internal affairs, ukraine oleg basai2 national academy of internal affairs, ukraine ruslan bilokin3 higher educational institution of ukoopspilka “poltava university of economics and trade”, ukraine abstract. the aim of the article is a comparative legal analysis of the administrative and legal principles of activities of tax authorities in ukraine and eu member countries, including the consideration of structural subordination and the place of these authorities in the system of executive power in eu member countries, the scope of authority of their officials; search and characterization of foreign experience, which would be acceptable for implementation and use in national conditions. the subject of the study is the administrative and legal principles of the activities of tax authorities in eu member countries. methodology. the research is based on a direct comparison of features of the structure and coordination of tax authorities in the european union and ukraine. the example of the experience of germany, france, sweden, and other countries determines the advantages and disadvantages of different operating conditions of the tax authorities. based on a comparative legal analysis of the provisions of the current legislation of ukraine, the possibilities and limits of the application of positive foreign experience in this sphere are determined. the results of the study revealed that the experience of eu countries in providing and organizing the activities of tax authorities in most cases is based on the centralization of the system of tax authorities within a certain executive body, and provision of officials of the latter with a wide range of authorities, and active using of information technology in their activities in taxation and tax control. practical implications. interrogation of the foreign administrative and legal principles of the activities of the tax authorities indicates that to increase the operating efficiency of the national system of such departments, it is expedient to extend the limits of their administrative influence, as well as improve the activity by introducing the latest information technologies, following the example of spain, austria, etc. however, a comparative legal analysis enabled to determine that the current administrative and legal model of organizing the system of tax authorities is better than in the eu countries, since the existing state fiscal service of ukraine is a completely independent agency, which ensures a higher level of objectivity, rationality, and impartiality of its activities. relevance/originality. a comparative analysis of the administrative and legal principles of the activities of tax authorities in ukraine and eu member countries is the framework for developing the most promising sectors of national legislation in this sphere. key words: administrative and legal principles, eu member countries, foreign experience. jel classification: d73, o52 baltic journal of economic studies 9 vol. 4, no. 3, 2018 1. relevance nowadays, ukraine is on a new stage of its development due to the entry into the european union. this aspect calls for the reformation of many spheres of public life in the country through the implementation of european standards in the legislation. in this context, taxation is one of the key objects that need to be improved considering international experience, because the state budget of ukraine depends directly on the efficiency of its functioning. however, it should be noted that taxation is a quite broad sphere, and the main point in its provision is the activities of tax authorities. all the same, the officials of these agencies are in charge of tax collection monitoring, tax entities accounting, bringing to justice those responsible for tax legislation violations, etc. in the course of european integration, the issue of forming an effective and efficient system of tax authorities, whose activities would ensure the stability of the tax system and increase revenues to the state budget, arises. however, improvement of these departments is impossible without conducting a comparative legal analysis of the administrative and legal principles of tax authorities in ukraine and the eu member countries. since foreign experience will facilitate to synthesize the most perfect model of organization of tax departments on the example of different states. 2. literature review the theoretical basis of this scientific research was the works of many scientists, who analysed the administrative and legal principles of the activities of various organizations and tax authorities in particular, namely: s.m. dobrovolska, ya.v. melnyk, k.o.  kolchenko, p.m.  talanchuk, i.s. hrishchenko, o.v.  kuzmenko, d.v.  radko, and others. it is also important to note the scientific and practical value of the research covering some aspects of the organization and operation of tax authorities. v.i. kravchenko, v.h.  kniaziev, m.p.  kucheriavenko, m.e. tarasov, d.h.  chernik, and others studied the mentioned issues. however, despite the relevancy of the administrative and legal principles of the activities of tax authorities, no thorough interrogation of the latter from a comparative perspective has been carried out. the aim of the article is a comparative analysis of administrative and legal principles of tax authorities in ukraine and in the countries of the european union. 3. the main material consideration and comparison of the administrative and legal principles of the organization of national and foreign systems of tax authorities require defining the concept of “administrative and legal principles”. the basis of the etymological content of this phrase is the term “principle”, which according to the explanatory dictionaries of ukrainian language, is interpreted as: 1) the basis of something; a fundamental source or basis of something; 2) initial, main position, norm; 3) the basis of the outlook, the rule of conduct; 4) the way, method of doing something (busel, 2005; bilodid, 1972). in the scientific legal literature, the term is used frequently, in particular, within the concept of “legal principles”. according to o.o. punda, the latter are defined as a source, “legal basis”, on which different types of different activities are constructed. explicitly, this is initial fundamental provisions of activity in a particular sphere (punda, 2001). according to other researchers, legal principles are the normative generalization of the highest level, the concentrated summary of the content of law (pavlenko, 2009). m.o. margulis defines broadly enough the essence of legal principles, emphasizing that the latter characterize, above all, the complex influence of law on social relations, reflecting its effectiveness, that is, the maintenance of law and order. the legislation provides for legal principles at the level of normative prescriptions and doctrines, which establish and regulate the most important aspects of state and public organizations, fixes goals, defines legal possibilities and means, which ensure the gradual development of social relations. the legal principle is a dialectical unity of the reference and the result, inherent and obtained that exists in the implementation of legal influence (margulis, 2006). a. strekhaliuk notes the philosophical content of the category “principles of law”. he argues that in their philosophical and legal concepts, john rawls, friedrich hayek, and lon l. fuller define the principles of law as a set of requirements to the legal system or as necessary conditions for the existence of the legal system and effective functioning of a “well-ordered society”. that is, the principles of law have a clearly defined normative character. in fuller’s theory, the principles of law are the principles of the internal morality of law (strekhaliuk, may 14-16, 2009). therefore, the legal principles are the legal basis of something, an ideological model, on which any legal category, phenomenon, institution, etc. are founded. however, this definition explains the essence of legal principles in their classical, general theoretical form. it should be emphasized that the latter are a meaningful basis of the category of administrative and legal principles of a certain type of activity, the specificities of which are under thorough consideration of many scientists. for example, n.s. panova emphasizes that the administrative and legal principles are a set of administrative and legal norms, which determine the main values, doctrines, tasks, forms, and methods of development of the normative and regulatory activity of specific state bodies, departments, structures, etc. (panova, 2008). baltic journal of economic studies 10 vol. 4, no. 3, 2018 v.o. kryvolapchuk and v.м. klymenko define the administrative and legal principles as the means of determination (consolidation) of legal parameters (grounds, limits, methods) of a certain activity (kryvolapchuk, klymenko, 2014). according to d.h. zabroda, administrative and legal principles are a combination of parameters (characteristics) of the social phenomenon and legal relations, which require settlement using administrative and legal means. in addition, the scientist argues that in modern native textbooks and teaching manuals on the administrative law the terms “organizational and legal principles”, “administrative and legal principles”, “administrative and legal regulation”, “administrative law” are used (zabroda, 2013; bytiak, harashchuk, diachenko, et al., 2007; koval, 1998). therefore, the content of the category of administrative and legal principles of the tax authorities’ activities can be outlined. accordingly, in our opinion, they are initial provisions; a set of standards; a normatively defined and ensured by a circle of administrative norms model of the work of the tax authorities, according to which the latter are organized, as well as their functional orientation is defined. turning specifically to a comparative analysis of the administrative and legal principles of the activities of tax authorities in different countries, it is advisable to draw attention to national experience in this field. nowadays, in ukraine, fiscal functions are implemented by the state fiscal service (hereinafter – sfs). according to the regulation on the state fiscal service of ukraine, the latter is a central executive body, which activities are directed and coordinated by the cabinet of ministers of ukraine through the minister of finance and which implements the state tax policy, state policy on state customs, state policy on administering a single contribution to compulsory state social insurance, state policy on combating offenses in the application of tax, customs legislation, as well as legislation on payment of a single contribution (pro derzhavnu fiskalnu sluzhbu ukrainy, 2014). the main tasks of sfs are: 1) realization of the state tax policy and policy on state customs, the state policy on combating offenses during the application of tax, customs legislation; control, within the limits of authorities provided for by law, for revenues to the budgets and state target funds of taxes and fees; the state policy on monitoring the production and circulation of alcohol, alcoholic beverages, and tobacco products, the state policy on administering a single contribution, as well as the combating violations in the application of legislation on payment of a single contribution; the state policy on monitoring the timely execution of settlements in foreign currency within the statutory period; compliance with the order of cash settlements for goods (services), as well as control over licenses for economic activities subject to licensing in accordance with the law, commercial patents; 2) making proposals to the minister of finance for ensuring the formation of: the state tax policy; the state policy on state customs; the state policy on combating offenses during the application of tax, customs legislation, monitor receipts to budgets and state trust funds of taxes and duties, customs, and other payments; the state policy on monitoring the production and circulation of alcohol, alcoholic beverages, and tobacco products; the state policy on administering a single contribution, as well as the combating violations in the application of legislation on payment of a single contribution; the state policy on monitoring the timely execution of settlements in foreign currency within the statutory period; compliance with the order of cash settlements for goods (services), as well as control over licenses for economic activities subject to licensing in accordance with the law, commercial patents (pro derzhavnu fiskalnu sluzhbu ukrainy, 2014). therefore, the tax authorities of ukraine have a wide range of functions. according to them, to organize its activities sfs: provides, within the limits of the authorities provided by law, the implementation of measures for the prevention of corruption and control over their implementation in the apparatus of sps and its territorial bodies; staffs the sfs apparatus and leadership positions in the territorial bodies, forms a personnel reserve for corresponding positions, organizes work on training, retraining, and advanced training of employees of the sfs apparatus, its territorial bodies; organizes scheduled financial work in the sfs apparatus and its territorial bodies, exercises monitoring of the use of financial and material resources, ensures the organization and improvement of accounting in accordance with the procedure established by law; provides the territorial authorities of sfs with methodological and practical assistance in organizing work, monitors such work; organizes information and analytical support for sfs and automatization of its activities (pro derzhavnu fiskalnu sluzhbu ukrainy, 2014). it should be noted that sps and its territorial bodies have units of the tax police. in accordance with section xviii-2 of the tax code of ukraine, the tax policy is a system of special units for combating tax offenses acting within the respective supervisory bodies, and monitors the compliance with tax laws, performs operational and search, criminal and procedural, security functions (pro derzhavnu fiskalnu sluzhbu ukrainy, 2014; podatkovyi kodeks ukrainy, 2011). the key objectives of the tax police are: prevention of criminal and other offenses in taxation and budgeting, their disclosure, investigation, and proceedings in cases of administrative violations; search for persons who are hiding from the investigation and the court for criminal and other offenses in taxation and budgeting; baltic journal of economic studies 11 vol. 4, no. 3, 2018 prevention and counteraction of corruption in regulatory bodies and disclosing its facts; ensuring the safety of officials of the regulatory bodies, protecting them against unlawful acts related to the performance of official duties (podatkovyi kodeks ukrainy, 2011). it should be noted that the experience of the eu member countries in the organization of the tax system differs significantly from the national one. o.o. bandurka argues that the experience of ukraine on constructing the tax system in general is rather limited since, under administrative-command socialism, relations between the state and enterprises were based on the direct withdrawal of a significant part of their income to the budget in the form of deductions from profit and various payments. the experience of countries with a long history of the effective functioning of the tax system shows that the precondition for such establishment is the provision of bodies, specially authorized for combating tax offenses, with a sufficiently wide range of rights, as well as a clear definition of their responsibilities. in addition, the scientist argues that in the developed countries of the world, taxation and tax authorities are one of the pillars of their economic systems. they are quite complex, considering, on the one hand, the number of taxpayers and the number of types of taxes and fees, and on the other hand, the amount of legal regulation. therefore, special state bodies are needed to implement the fiscal role of the state and ensure effective budget revenues (bandurka, 2007). the mentioned above proposition is confirmed by the example of the administrative and legal principles of the activities of the tax authorities of many countries of the european union. for example, in italy, along with the state police and the carabinieri corps, the general command of the financial guard, forming a part of the ministry of finance, monitors receipts of mandatory payments to budgets, and accordingly the disclosure and investigation of economic crimes in taxation. t.v. saraskina noted that this body was formed in 1881. it consists of the central and regional commands. the central command is located in rome, and three special units, the central unit of tax police, the special unit of the currency police, the central service for the investigation of organized crime in the economy, are subordinated to it (saraskina, 2000). the main functions of this department are control over the payment of taxes, prevention, disclosure, and investigation of financial crimes. it should be noted that the officials of the general command of the financial guard have fiscal responsibilities of tax inspections and police rights in terms of control, in particular, operational measures and criminal investigations. they have the right of access to enterprises, firms, banks, and to any documents in order to verify the objects of taxation and tax control without obtaining a court order for such actions (saraskina, 2000; heha, 1997). in greece, the system of fiscal authorities is headed by the ministry of economy, which has two subordinated independent entities, the state economic service with the task of charging and collecting taxes and other mandatory payments, reviewing, controlling, and issuing documents of payers, and the service for combating economic crimes, which is equated to the state police with the task of checking compliance of taxpayers with the rules of fiscal legislation (harust, 2005). it is worth to consider the administrative and legal principles of the activities of the tax authorities of germany because the experience of this state in filling the budget with the help of special, legally determined payments is quite progressive. this aspect is related to the specificities of this country development. in particular, o.p. kyrylenko, t.o. kizyma, n.ya. kravchuk, v.p. horin, and others stated that historically and chronologically, germany became one of the first countries in the world, where, under the influence of the workingclass movement and trade union organizations, social laws were introduced: sickness insurance, disability, retirement provision for workers, restrictions on the use of child labour. in 1891, germany was the first to introduce a global income tax; in 1916, first introduced a tax on turnover, or a universal excise tax, on the basis of which, subsequently, vat was introduced. in modern conditions, germany is one of the most economically developed countries in the world (kizyma, kravchuk, horyn et al., 2013). the main tax authority in germany is the tax service, which is a department of the federal ministry of finance. the federal tax office has a central unit, which is responsible for taxes. besides the central apparatus, the german system also has a regional apparatus (the länder). each of the länder (regions) has its own ministry of finance. accordingly, today germany has 16 territorial units, called the länder, and 16 similar the länder ministries of finance. usually, a politician, not a specialist in taxation, is elected to the post of minister. the person who understands taxes and whose opinions are heeded is the senator or his first deputy. he/she is an official. typically, a high-level specialist is chosen for this position. a university professor, who has retired, or a high-ranking official of the tax service can be chosen. the senator is responsible for enforcing tax laws (law and institutions of the european union, 1994). moreover, some scholars state the presence of law enforcement functions in the activities of the tax service of germany and its subordinate units. for example, in a separate state for the purpose of criminal and administrative prosecution of violators of tax legislation, special units, departments of criminal cases and penalties, are formed in the financial authorities (teliatnikov, 1993). these bodies include well-trained investigative departments with a high level of material and technical support, such as eavesdropping and sound recording equipment, laboratories where it is possible to analyse the authenticity of documents baltic journal of economic studies 12 vol. 4, no. 3, 2018 submitted by taxpayers, handwriting, as well as carry out chemical and other forensic examinations. german tax authorities receive information on tax evasion from the police, prosecutors, security services, and citizens. according to an internal instruction, such informants are paid a reward of up to 10% of the amount accrued for nonpayment of tax penalties. during the tax control, german tax authorities have the right: to withdraw financial documents from banks, insurance companies; to apply confiscation of business documentation; to conduct investigations on advocates and consultants’ charges of tax evasion (arnim, bartlshperger, begge, et al., 1994). for comparative analysis, the administrative and legal principles of the activities of tax authorities in france are remarkable. in its economic growth, this country is considered one of the most powerful, which is reflected in the specificities of the system of control and tax authorities. in the course of her scientific research, k.p. proskura determines that the main body in taxation in france is the general directorate of taxes, which is a part of the ministry of economy, finance and industry. the specified body performs tax tasks (preparation of draft laws on taxation, determination of the total amount of tax revenues, an organization of tax control, conducting tax expertise, etc.) and certain civil legal tasks (control and accounting of civil and land legal relations, recording various inventories, etc.). the organizational structure of the tax body is based on the functional-territorial principle and has three levels: national, regional, and lower. the office of national and international controls carries out control over the activities of large enterprises, which is a part of the central office. lower divisions inspect small businesses only. french tax authorities have the right to decide on the liquidation of an enterprise if, within three months, it or its actual location cannot be found (proskura, 2012). s.o. koretska notes that in the structure of the above-mentioned department, there are special structural units, such as the central tax administration and the central administration of customs and other revenues. the central tax administration consists of five departments: department of preparation of tax legislation; department of general tax administration, which provides for the accumulation of tax revenues in the state budget; dispute department, which deals with complaints and prepares legal materials engaged; department of land and state property, which is responsible for cadastral valuation and lands, management of movable and immovable state property; personnel department (koretska, 2011). analysing the administrative and legal principles of the activity of tax authorities in the eu, the experience of the kingdom of sweden is worth considering. the tax system of this country is characterized by high taxation. tax revenues in the swedish budget make up more than 50% of gnp. income tax and profits tax provide 40% of all tax revenues, and social tax provides 25%. in addition, swedish law does not provide for tax breaks. however, such a tax system has provided sweden with the smallest difference in the world between the highest and lowest levels of consumption. other characteristic features of the swedish taxation system are stability, flexibility, high-quality state regulation, anti-inflationary orientation (stukalo, lytvyn, derkach, 2014). a well-developed tax system in sweden should require an efficient and extensive tax administration structure that would ensure respect for and compliance with tax laws by all without exception. however, the kingdom of sweden, along with countries such as belgium, denmark, portugal, finland and others, has a relatively compact structure of tax authorities (nosikov, 2016). the authority to collect taxes, verify their correctness, and collect tax arrears is charged to a special agency, the national tax office, though subordinated to the ministry of finance and the government, but independent of the latter organization. the activity of the service is based on the principle that proper things must be done simply, while illegal must be difficult to implement. the organizational structure of the tax authorities is based on three models. everyone must pay exactly as much as provided for by the parliament; the one, who has not paid fully, should pay total sum; and the one, who has overpaid, should get surplus of money back. the return of surplus of paid taxes operates immediately (in automatic mode); there is no delay (yarenko, 2009; lykova, 2013). m.o. vysotsky underlines one more important feature of the organization of tax authorities of the kingdom of sweden. the scientist indicates that some departments (inspections) are in charge of working with large taxpayers, others work with foreign enterprises. the departments (inspections) of indirect tax, which staff has specialists in foreign economic activity, carry out the calculation and payment of vat. in addition, the national tax office is authorized to administer taxes and fees, keep records of taxpayers, verify tax declarations, serve tax advisory, observe and monitor compliance with tax laws, etc. (vysotskii, 2002; udiak, 2014). it should be noted that the tax authorities of the kingdom of sweden operate with the high level of automation. thus, for tax control, the declaration of taxpayers is in an electronic form entirely. at the same time, v.m. melnyk accentuates the rather unusual (as for the east european countries) practice of “guardianship” in relation to the payer. thus, local tax departments are obliged to send the declaration to the company a month before the deadline for its submission, reminding the payer of duties. moreover, the timeliness of such “reminders” is monitored quite strictly (melnyk, 2004). the financial intelligence service is in charge of the investigation of crimes and tax offenses in the kingdom of sweden. structurally it is a part of the chief police department. this is an extremely interesting experience baltic journal of economic studies 13 vol. 4, no. 3, 2018 in combating tax evasion because, despite some of the highest tax rates in europe (which should have caused a significant level of crime), there is no separate tax police service in this sphere (udiak, 2014). in spain, the administrative and legal principles of the tax authorities are under constant improvement since the 70s of the twentieth century, after the tax reform. therefore, in 1992 the organizational structure of the tax service was changed. in particular, out of the ministry of economy and finance, the tax administration was allocated and then the tax agency was formed on its basis. it organized the tax service, tax authorities and planned their activities; monitored compliance with tax legislation; provided regional, provincial, and municipal tax administrations with material and technical support. the main tasks of the tax agency were: to reduce indirect taxes and indirect tax burden, establish the assistance system for taxpayers, and the develop information services for taxpayers and tax assistance by phone, create a database of questions and answers, shorten terms for answering questions and citizens’ requests; to strengthen the regime of objective evaluation by modules. mostly they were designed to work with small business entities to simplify the procedure for paying taxes and improve the efficiency of their collection; to inspect and control the performance of tax duties and combat crime (stukalo, lytvyn, derkach, 2014). in addition, n. kiriienko notes that the staff of the newly formed tax agency is divided into inspectors and tax agents. tax inspectors have extensive authorities, even the right to reduce penalties up to 50 points for co-operation in making decisions based on the results of inspections. a tax agent must have a secondary vocational education; he performs less-skilled work, such as verification of facts, selection of information and other (kirienko, 1999). in the activities of the tax authorities of spain, as in many other european union countries, information technologies are introduced and used actively. thus, in their work, officials of tax authorities use information from the data bank on taxpayers. such a data bank, formed in the information department, accumulates information on wage payments, on the activities of persons of free occupations, on real estate and transactions with it, on financial transactions with securities and currency funds, sale and purchase abroad, on founders of joint stock companies, including individuals, the results of inspections over the past 6 years (in spain the statute of limitations is 5 years), as well as information from third parties about the debt. there are no privacy restrictions for collecting information by this department (kniazeva, chernika, (eds), 1997). 4. conclusions therefore, a comparative analysis of the administrative and legal principles of the activities of tax authorities of ukraine and the eu member countries revealed that foreign experience in the sphere of control and coordination of the tax system has a wide range of positive moments. some aspects of active models of constructing and operating tax offices in europe are quite logical and effective; consequently, in our opinion, it would be expedient to use them in ukraine. therefore, it is necessary to adopt the experience of the eu countries with regard to: firstly, the scope of the administrative authorities of the controlling bodies and their officials, that is, a wide range of authorities in all issues related to the imposition of fines, inspections, etc.; secondly, the introduction, regulatory support, and active use of information technologies in the activities of tax authorities to improve the efficiency of the work of the latter. however, based on the comparative analysis of the administrative and legal principles of the activities of tax authorities in the eu and ukraine, it can be concluded that nowadays the national organizational model of the state fiscal service is more accomplished. the structural subordination of this department proves it. contrasting such developed countries as germany, france, italy, etc., sfs in ukraine is not a part of the structure of the ministry of finance, in accordance with legislation, that, in our opinion, ensures the objectivity and impartiality of the activities of the latter and its officials. references: busel v.t. 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(2014). analiz administratyvno-pravovykh zasad diialnosti derzhavnoi sluzhby okhorony pry mvs ukrainy [analysis of the administrative and legal principles of the activity of the state guard service at the ministry of internal affairs of ukraine]. nauka i pravookhorona [science and law enforcement], 1(23), 5-11. zabroda d.h. (2013). administratyvno-pravovi zasady: sutnist ta zmist katehorii [administrative and legal principles: the nature and content of the category]. administratyvne pravo i protses [administrative law and process], 2(4), 45-51. bytiak yu.p., harashchuk v.m., diachenko o.v. et al. (2007). administratyvne pravo ukrainy: pidruchnyk [administrative law of ukraine: textbook]. yu.p. bytiak, (ed.). k.: yurinkominter, 544 p. koval l.v. 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(2004). dosvid administruvannia podatkiv u zarubizhnykh krainakh [experience of tax administration in foreign countries]. visnyk podatkovoi sluzhby ukrainy [bulletin of the tax service of ukraine], 38-39. retrieved from: https://www.zakon-i-normativ.info/index.php/component/ lica/?href=0&view=text&base=1&id=221209&menu=331807 kirienko n. (1999). nalogovaia sistema ispanii [tax system of spain]. vestnik nalogovoi sluzhby ukrainy [bulletin of the tax service of ukraine], 47 p. kniazeva v.g., chernika d.g. (eds) (1997). nalogovyie sistemy zarubezhnykh stran: uchebnik dlia vuzov [tax systems of foreign countries: textbook for higher educational institutions]. m.: zakon i pravo, yuniti, 191 p. baltic journal of economic studies 33 vol. 4, no. 4, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-4-33-38 research the crisis indicators impact of the socio-economic character on the ensuring of the state security serhii bielai1, dmytro korniienko2, oleksandr kotukha3 abstract. the conditions of globalization put forward new threats to the existence of the traditional way of life. at present, poverty of the population, considerable property differentiation, lack of middle class, and low level and quality of life in the ukrainian society are especially dangerous and threatening crisis phenomena of socioeconomic character in ukrainian society. this fact confirms the statistics of criminal offenses in the sphere of providing the basis of state security, as well as in the field of providing public services, economic activities, and property crimes. thus, all this, undoubtedly, actualizes the study of the issue of ensuring ukraine’s state security from threats of socio-economic nature. providing state security is in the sight of a large number of leading scientists. note that in this case, the study of the crisis phenomena of the socio-economic nature itself and their impact on the provision of state security has not been given sufficient attention. therefore, the subject of the study is the definition of the methodology of the impact of crisis phenomena of a socio-economic nature on the state of ensuring the state security of ukraine to develop a model for the emergence and impact of crisis phenomena of a socio-economic nature on the state of state security. let’s mention that sufficient attention is not paid to the research of crisis phenomena of socio-economic nature and their impact on the maintenance of state security. methodology. to determine the theoretical and methodological principles of crisis phenomena in ukrainian society, to study the state of ensuring the state security of ukraine, and to develop a model of the emergence and impact of crisis phenomena of a socio-economic nature on the state of security, functional provisions of the theory of state administration, social economics, economic theory, system analysis, and also a collection of other general scientific and special methods are used, namely: systematization of legal acts, structural analysis, historical method, method of comparative analysis, welfare theory, hypothesis, induction and deduction, analysis and synthesis, structuring and organizational modelling. practical implications. the emergence of crisis phenomena with a socio-economic component requires governments to make timely and effective management decisions. such phenomena take central place among the threats to society in the system of ensuring state security. the main crisis phenomena of socio-economic character in ukraine are identified as high levels of corruption, high levels of poverty, significant property differentiation of the population, social inequality, and lack of a middle class. the analysis of crisis phenomena shows that the most acute, mass, and socially dangerous crisis phenomena are caused by low living standards and unresolved social problems. they are the basis of grave social conflicts between the people and the authorities. there is a developed model of the emergence and impact of the crisis phenomena of a socio-economic nature on the state and shows that today the study of threats to state security, which arose on the socio-economic basis, deserves special attention. the most expedient and relevant is the study of the crisis phenomena of the socioeconomic nature and the development of mechanisms for state regulation of these phenomena. key words: state security, crisis phenomena of socio-economic origin, socio-economic system, social tension, modelling. jel classification: d63, d74 corresponding author: 1 kyiv faculty of the national academy of the national guard of ukraine, ukraine. e-mail: belwz3@ukr.net 2 kyiv faculty of the national academy of the national guard of ukraine, ukraine. e-mail: korniienko@ukr.net 3 lviv university of trade and economics, ukraine. e-mail: kotuha1@ukr.net baltic journal of economic studies 34 vol. 4, no. 4, 2018 1. introduction the conditions of globalization put forward new threats to the existence of the traditional way of life. at present, poverty of the population, considerable property differentiation, lack of middle class, low level and quality of life in the ukrainian society are especially dangerous and threatening crisis phenomena of socioeconomic character in ukrainian society. this fact confirms the statistics of criminal offenses in the sphere of providing the basis of state security, as well as in the field of providing public services, economic activities, and property crimes. thus, all this, undoubtedly, actualizes the study of the issue of ensuring ukraine’s state security from socio-economic threats. providing state security is in the sight of a large number of leading scientists. g. p. sitnik’s scientific intelligence touches upon the state administration in the sphere of national security, g. novitsky – study of the theoretical and legal principles of providing state security of ukraine, v. yu. bogdanovich – analysis of the problems of the state military security. the works of m. sungurovsky and v. a. lipkan are devoted to theoretic and methodologic principles of the system of ensuring state security. v. p. gorbulin and a. b. kachinsky considered the issues of strategic planning in the field of state security. g. o. ponomarenko paid attention to the administrative issues of ensuring the internal security of the state. to the block of economic security and counteraction to economic crime, a big number of works by o. e. koristin, v. t. belous, v. v. kovalenko are devoted. social determinants of national security were considered by a. l. balanda, problems of social security – by l. i. ilchuk, o. o. davidov. we have to note that in this case, the study of the crisis phenomena of the socio-economic nature itself and their impact on the providing of state security has not been given sufficient attention. therefore, the purpose of the article is to carry out a study on the methodology of the impact of crisis phenomena of a socio-economic nature on the state of ensuring the state security of ukraine in order to develop a model of the emergence and impact of crisis phenomena of a socio-economic nature on the state of its security. 2. legal principles of identification of crisis phenomena of socio-economic character according to the law of ukraine “on national security of ukraine”, “national security of ukraine” defines “the security of state sovereignty, territorial integrity, democratic constitutional order, and other national interests of ukraine from real and potential threats.” the national interests of ukraine set the vital interests of man, society, and the state, the realization of which is ensured by the state sovereignty of ukraine, its progressive democratic development, as well as safe living conditions and welfare of its citizens. threats to the national security of ukraine are the phenomena, trends, and factors that make it impossible or complicate or make it impossible or difficult to realize the national interests and preserve the national values of ukraine (on national security of ukraine, 2018). at the same time, it is possible to note that the legislator is evolving in certain specified terms. the most significant change came from the definition of “national security”, where state sovereignty, territorial integrity, and democratic constitutional system have become paramount in the interests of national interests (the national security strategy, 2015). under the state security, we understand the security of the state sovereignty, territorial integrity, and democratic constitutional order and other vital national interests from real and potential threats of non-military character (on national security of ukraine, 2018). crisis phenomena of socio-economic nature create threats to the providing of material, intellectual, and spiritual values. in the system of providing state security, they gain especially significant value. social security integrates all kinds of security, such as economic, political, military, information, ecologic, scientific and technological, and others. the present situation proves that the most dangerous is the synergistic synthesis of economic and social danger, namely, the impact of the economic crisis on social security. in this case, there are crisis phenomena of a socio-economic nature. the main threats to national interests in the socioeconomic sphere are: – the inconsistency of the programs of reforming the country’s economy and the results of their implementation to certain social priorities; – ineffectiveness of the state policy on increasing the labour incomes of citizens, overcoming poverty, and balancing productive employment of the able-bodied population; – the crisis of the system of health protection and social protection of the population, as a result of which there is a dangerous deterioration of the health of the population; – the spread of social diseases, in particular, drug addiction and alcoholism; – worsening of the demographic crisis, strengthening of the ageing trend of the nation; – reduction of the opportunities for obtaining a quality education by representatives of the poor class of society; – manifestations of moral and spiritual degradation of society; – the growth of the child and adolescent homelessness, vagrancy; – uncontrolled migration processes, depletion from the country of good-skilled personnel; – reduction of population and its natural increasing. baltic journal of economic studies 35 vol. 4, no. 4, 2018 the following threats may be added to this list: – increasing the number of people living below the poverty line; – significant property differentiation of the population (increasing the financial gap between the incomes of the poor and wealthy citizens); – a small percentage of the population forming the middle class of the state; – the growth of social tension in society, the readiness of the population to take active action, increase of the probability of mass riots. therefore, in the system of ensuring state security, it is necessary to develop and implement effective mechanisms for the state regulation of these phenomena. 3. the methodology of studying the nature of crisis phenomena of the social and economic character recent crises in the countries of western europe and north africa, which are social in nature, show that the most acute, mass, and socially dangerous crisis phenomena are phenomena caused by low level and quality of life of the population and unsolved social problems. they are the basis of conflict situations that arise between people of the country and the authorities. that’s, the most expedient and relevant is the study of the crisis phenomena of social and economic nature. crisis phenomena of social and economic character are considered in various scientific theories. for example, the theory of the social and economic development of the regions considers the crisis phenomena of a social and economic nature as threats hindering economic development (kuznetsov, 2004). sociology considers these phenomena as threats to social protection of the population (maistro, protsiuk, 2010), conflictology – solving social conflicts on social and economic basis (herasina, panov, osipova, 2002), national security – prevention and elimination of emergencies of social nature on social and economic basis (lipkan, 2009). however, the only approach is practically not presented today. consequently, based on the above, it can be noted that the most negative effects on the state of ensuring state security in the social and economic sphere are crises. in many languages, the crisis means different phenomena; in general, there is a threat. in chinese, the term “crisis” means two words – “danger” and “opportunity”. the crisis in greek (krísis – decision, turning point) – a turning point, a difficult transition state, exacerbation, a dangerous unstable situation. for social and economic systems, n. stetsyuk provided the appropriate definition: “the crisis is a natural process (if not imposed from the external environment) faced by any social and economic system, it represents the state of instability, generated external and internal factors that threaten the viability of the system in the environment” (stetsiuk, 2006). consequently, in this definition, the presence of a threat is the central position. currently, scholars divide the crisis into three main groups for the causes of the emergence (kukushkyn, 2001): natural crises, due to natural conditions of life and human activity; social crises that arise in the process of social relations in society; environmental crises caused by natural conditions, due to human activities. crisis phenomena of a social and economic nature refer to social crises, so let’s consider the classification of social crises in the future. according to the structure of the socio-economic system, social crises are distinguished by economic, social, political, economic, psychological, technological, etc. according to our study, the analysis of economic and social crises is more appropriate as the crisis phenomena of a socioeconomic nature are on the brink of collisions between economic and social crises. economic crises reflect sharp economic disputes in social and economic systems, that is, in the processes of production and sales of goods and services. by classical definition, economic crises include only overproduction of goods that do not have sales due to the low solvency of the population (over-production crises). in our time, under the definition of economic crisis, first of all, we understand the global financial crises (mamalui, hrytsenko, hrytsenko, 2006). variants of economic crises also include stock, financial, currency, and other crises. consequently, economic crises concern, first of all, economic processes in social and economic systems, but thus the state of human life (solvency) is also taken into account. social crises arise when aggravation of clashes and contradictions between social groups. in social and economic systems, these are: employees and managers of organizations, trade unions and entrepreneurs, workers of enterprises and state authorities, etc. that is, social crises, above all, are associated with conflicts and conflict situations (lantsov, 2008). the causes of social crises can be both economic crises and other areas of life (political, environmental, technological, and other problems of society). thus, based on the above analysis of economic and social crises, it is possible to note that the crisis phenomena of a socio-economic nature relate, first of all, to human life and the level of threats that these phenomena can cause. the result is a conflict situation (social conflict) on an economic background that threatens state security. economic and social crises lead to the emergence of crisis phenomena of social and economic nature in the form of deteriorating living conditions and the emergence of conflict situations (social conflicts). the social and economic system is a complex holistic system, in which all elements are interconnected, therefore, the crisis phenomena of social and economic nature can lead to today’s crises, first of all, to the social baltic journal of economic studies 36 vol. 4, no. 4, 2018 ones. however, the emergence of environmental crises due to crisis phenomena of socio-economic nature is also possible, because by their nature they are generated by people. natural crises do not depend on human activity but global warming causes natural disasters, which are the result of the technological activity of mankind. thus, we can conclude that the main crisis phenomena of socio-economic nature are: high poverty rate of the population; significant property differentiation of the population; social inequality; the absence of a clearly pronounced middle class. 4. model of the emergence and impact of crisis phenomena of socio-economic character on the state of state security figure 1 shows the model of the emergence and impact of crisis phenomena of socio-economic nature on the state of state security. in an era of globalization, there is an increasingly tangible impact of the external economic environment on the ukrainian economy. the global financial crisis has revealed the government’s failure to effectively counter external economic threats. the financial assistance of the international monetary fund requires the government of ukraine to reduce the cost of social security for the population, increase tariffs for communal services, etc., which causes a worsening the level and quality of life of the population and numerous protests. the requirements imposed by the international community on the export of ukrainian goods, raw materials and services, prices for energy resources procured by ukraine, have a negative impact on the economy and contribute to the emergence of crisis socio-economic events. ineffective governmental activities and geopolitical influence on ukraine have a negative impact on the socio-economic system, namely on the production, distribution, exchange, consumption of material and other goods. economic and social crises lead to a high level of poverty, ineffective social security of the population, significant property differentiation of the population, high levels of corruption, and lack of middle class. as a result, there is social tension in society. it is a definite indicator of the level and quality of life of the population. the task of executive authorities and local self-government is to monitor the level of social tension and take appropriate measures to reduce it in order to prevent the emergence and reduction of the level of threats to state security of socio-economic nature. threats can be manifested in the deviant way of life of the population (drunkenness, drug addiction, hiv transmission, divorce, suicide, migration of the population, etc.), high levels of crime (quackery, fraud, theft, banditry, terrorism) and the emergence of social conflicts (protest rallies, mass disorder, revolution, armed conflict). these threats lead to a decrease in the life expectancy of the population, a high mortality rate, and a low fertility rate, that is, before the demographic crisis in ukraine. today, one of the main threats to state security is the demographic crisis in ukraine. until recently, threats to national security were more explored in the military and foreign policy spheres and related to military conflicts between countries. but world events prove the urgency of threats to the state’s internal security, namely, the low level and quality of life of the population and social tensions that affect the demographic factor. l. kostrovets argues that the mode of population reproduction, its quantitative and qualitative composition can stimulate or inhibit the emergence and development of internal and external social conflicts, to be a catalyst for the separatist aspirations of a part of the population, that is, to carry out a destructive influence on the state of the state security, even if a stable international situation. the developed model shows that today the study of threats to state security, which arose on the socioeconomic basis, should have special attention. the multifaceted social and economic processes in ukraine, the deterioration in the level and quality of life of the population, social tensions lead to deformation and destruction of public life, political stability in the state, and require public authorities to take more into account the internal policy of the socio-economic factor in state security and develop state mechanisms of counteraction to the crisis phenomena of socio-economic nature. thus, it may be noted that at the present day in ukraine, public authorities need to introduce mechanisms to counter crisis phenomena of socio-economic character. during the development and implementation of these mechanisms, there are contradictions, namely, socioeconomic crisis phenomena are the consequences of the economic crisis in the social sphere, they are expressed in an alarming state of vital activity of the population, leading to conflict situations. conflicts can be resolved by improving the living conditions of the population. it is impossible for ukraine because the economy is in a crisis situation; there are no funds for social programs. government actions, in this case, are aimed at the development of the economy and not the social protection of the population. in addition, the international community, which helps ukraine in economic development (international monetary fund, etc.), sets out requirements for reducing social security, not to mention its increasing. 5. conclusions on the basis of the mentioned facts in the article, it is possible to draw conclusions. 1. the emergence of crisis phenomena, containing the socio-economic component, requires the government to take timely and effective management decisions. baltic journal of economic studies 37 vol. 4, no. 4, 2018 such phenomena occupy a central place among the threats to society in the system of ensuring state security. 2. the main crisis phenomena of socio-economic character in ukraine are identified as high levels of corruption, a high level of poverty, a substantial population differentiation of property, a social disparity and middle-class lack. 3. analysis of crisis phenomena shows that the most acute, mass, and socially dangerous crisis phenomena are those caused by low living standards and unsolved high level of corruption high level of poorness social inequality absence of middle social class social tension failure of ukrainian authorities geopolitical influence on ukraine protests breach of the peace riot revolutions armed conflicts demographic crisis population migration birth rate reduction increasing mortality lowering life expectancy cycle development crisis consequences influence of other countries socio-economic system production of materials and other goods distribution of materials and other goods trading of materials and other goods consumption of materials and other goods socio-economic crisis phenomenon figure 1. model of the emergence and impact of crisis phenomena of socio-economic character on the state of state security social problems. they are the basis of grave social conflicts between people and authorities. 4. the developed model of the emergence and impact of the crisis phenomena of socio-economic nature on state security shows that 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(in russian) ukaz prezydenta ukrainy vid 26.05.2015 r. № 287/2015 «pro stratehiiu natsionalnoi bezpeky ukrainy» [decree of the president of ukraine 26.05.2015. № 287/2015 «on the strategy of national security of ukraine»]. retrieved from: http://zakon5.rada.gov.ua/laws/show/287/2015 (accessed 10 august 2018) zakon ukrainy «pro natsionalny bezpeky ukrainy» [the law of ukraine «on national security of ukraine»]. retrieved from: http://zakon1.rada.gov.ua/laws/show/964-15 (accessed 10 august 2018) baltic journal of economic studies 61 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 luhansk state university of internal affairs named after e.o. didorenko, ivano-frankivsk, ukraine (corresponding author) e-mail: comcriminal@gmail.com orcid: https://orcid.org/0000-0002-2693-3592 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: lsv300lsv@gmail.com orcid: https://orcid.org/0000-0001-8192-785x 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: germanov110489@gmail.com orcid: https://orcid.org/0000-0002-0151-7680 doi: https://doi.org/10.30525/2256-0742/2023-9-1-61-70 socialization of artificial intelligence and transhumanism: legal and economic aspects mykola karchevskyi1, serhii losych2, serhii germanov3 abstract. the article aims to determine the promising directions for the development of legal regulation in connection with the development of technologies of artificial intelligence and transhumanism and the economic impact of this development. dangerous forecasts of technological development require analysis of prospects of legal regulation in this area. with the help of the "task-method-provision" methodology, the perspective tasks of legal regulation are formulated in connection with the hypothesis of artificial intelligence and in the context of the technological development of transhumanism. legal regulation should ensure maximum diversification of technological choices. technology should not be limited but, on the contrary, should be as diverse as possible. if the law creates conditions/requirements to create as many different technological solutions as possible, this will effectively prevent the development of negative impacts. the significance of the global problem becomes a question of legal safeguards for the effective development of the information environment. vast amounts of information accumulated by humanity in a lifetime will require new legal mechanisms. results. a method of assessing the prospects of legal regulation of social relations related to the use of technologies is proposed. it consists of consistent answers to questions concerning 1) the expediency of banning or regulating certain technologies, 2) the method of regulation, and 3) the ways of ensuring the implementation of norms regulating the development of technologies. the article substantiates the following theses: the impossibility of prohibiting the development of technology, the expediency of legal incentives for the efficient use and minimization of the risks of misuse of technology, the necessity to ensure the maximum diversification of technological solutions, the change of the range of legal professions against the background of the convergence of legal and technical sciences; legal guarantees for the efficient development of the economy and the information environment. key words: law, transhumanism, artificial intelligence, technological neutrality, informational environment, economic impact. jel classification: k1 1. introduction scientific and technological progress requires solving the problems of effective integration of modern technological achievements into society. this problem is not new to lawyers. the current legislation contains a significant part of rules regulating the use of one or another technology. some approaches have been developed to solve the typical problems of legal regulation in this area. for example, the current level of development of robotics updates the appropriate legal support issues. at the same time, the emergence of artificial intelligence is one of many hypotheses of technological development. moreover, science is also widely presented as a hypothesis of the technology of transhumanism, the development of human capabilities due to technological changes in their bodies. therefore, it is necessary to determine the meaning and purpose of legal regulation in terms of technological development. the article aims to determine the promising directions for the development of legal regulation in connection with the development of technologies of artificial intelligence and transhumanism and the economic impact of this development. baltic journal of economic studies 62 vol. 9 no. 1, 2023 2. hypothesis i. artificial intelligence approaches to the legal regulation of robotics1. any legal or scientific text must begin with a clear definition of the subject of research. however, in the case of robots (artificial intelligence), this question is more complex and pronounced. given the relevance of the problem of organizing the scientific discourse on the socialization of artificial intelligence (robots), and the "danger" of getting caught up in the approaches to defining the concepts of "robot" and "artificial intelligence", in this paper these concepts will be used as identical. some researchers propose a solution in the classical system of legal coordinates. the rights and obligations of robot developers, their owners and those who operate robots are considered. for example, the report of the special rapporteur of the un human rights council, christophe heinz, notes 1) the need for a coordinated position on the proliferation of traditional legal mechanisms for the protection of life and health in the use of remotely piloted aircraft and combat drones; 2) the expediency of considering the issue of autonomous weapons systems solely in the context of disarmament (civil law rules on robotics). the "classical" approach is also presented in the results of the european robolaw project. the purpose of the project was to formulate proposals for the legislative reflection of modern achievements in robotics. the issues of legal regulation in the use of so-called autonomous vehicles, surgical robots, the use of robotics in prosthetics, social robots and care robots (d6.2 guidelines on regulating robotics) were considered. another approach is to consider robots as subjects of law. for example, a researcher at the massachusetts institute of technology, kate darling, believes that so-called social robots – partners that work in close contact with humans (playing with children, caring for patients, cleaning rooms, etc.) and evoke emotional attitudes – may in the future receive limited rights similar to the current legal rights of cats, dogs, and other domestic animals. (darling, 2012) some researchers suggest considering robots as possible full subjects of law. for example, the professor at the university of washington, ryan calo, the issues of legal regulation of robotics and distinguishes two groups: "robots as objects of law" and "robots as subjects of law". (calo, 2016) peter asaro explores the prospects of criminal liability for robots. (asaro, 2007) the multidimensional problem of artificial intelligence updates the problem of efficient organization of appropriate scientific discourse. let us formulate critical issues of legal regulation of robotics and suggest possible approaches to their solution. let's imagine that one finds oneself in ancient rome. there is slavery. also, here in the senate, one of the patricians says, "dear people! i believe that enslaved people are also human beings, so we must have equal rights." such an idea would hardly have been noticed, and the one who expressed it would most likely have been accused of a state crime and of an absolute misunderstanding of social processes and needs. it is time to sort things out, but plenty of data are available for scientific analysis of the tendencies and regularities of human history. a similar problem exists today. the rapid development of technology has brought the issue of artificial intelligence from the fantastic level to the everyday level. a huge number of purely technical and social problems can be called the idea of "socialization of artificial intelligence". (karchevskyi, 2012) can a robot get rights and bear responsibilities? what are the crimes of artificial intelligence and what is the punishment for them? how will the labor market change? what types of work can be entrusted to robots, and what types of work (if any) will be left to humans alone? what to do with employment in conditions of population growth and projected contraction of the human labor market? what will be the training of robots? finally, the main issue is how to protect humanity. a prerequisite for a practical scientific discussion of the legal regulation of robot socialization is to determine the structure of the problem field and to formulate the critical issues to be analyzed in the first place. in this article, the authors try to propose one of the possible approaches to solving this problem. the first question of legal regulation of the development of artificial intelligence concerns the expediency of prohibiting (limiting) scientific developments in this field. understanding the dangers of uncontrolled development of artificial intelligence, some scientists insist on banning relevant research and controlling the spread of the technology as strictly as in the case of nuclear energy. today, the danger of weapons systems with artificial intelligence (autonomous weapons) is actively discussed. elon musk, stephen hawking, steve wozniak, and the world's leading 1 it is clear that any legal-scientific text must begin with a clear definition of the subject of research. however, in the case of robots (artificial intelligence), this question is not simple and obvious. given the relevance of the problem of organizing the scientific discourse on the socialization of artificial intelligence (robots) and the "danger" of getting tied up in the approaches to defining the concepts of "robot" and "artificial intelligence", in this paper these concepts will be used as identical. baltic journal of economic studies 63 vol. 9 no. 1, 2023 artificial intelligence (a.i.) scientists believe that humanity may be going too far in the arms race and are calling for everything possible to be done to prevent a catastrophe. the volunteer organization future of life institute has published an open letter calling for an end to the "a.i. arms race" (autonomous weapons: an open letter from a.i. & robotics researchers). elon musk sees artificial intelligence as the greatest threat to humanity: "robots can start the war by publishing fake news and press releases, tampering with email accounts, and manipulating information. the feather is stronger than the sword." (elon musk on the main threat to humanity) the relative cheapness of the development of artificial intelligence systems (due to the success of the technology) will inevitably ensure the development of not only autonomous weapons systems. as a result, the emergence of robots (including complex hardware and software complexes for the internet) designed to commit crimes is very likely. (dupont, stevens, westermann, joyce, 2019, p. 33–37). other scientists think about the impossibility of stopping the development of technology. as the famous ukrainian scientist v.i. borisov notes, technologies, no matter how dangerous they may be, will inevitably be invented and spread regardless of one's desire and attitude towards them. in authors’ opinion, this approach is more pragmatic and realistic. the ban on artificial intelligence research cannot be effective in principle. an example would be relevant to the prohibition of the development of autonomous weapons. unlike nuclear weapons research, the development of autonomous weapons systems is cheaper and therefore more affordable. with the development of information technology, this activity will become even more accessible, and the samples of weapons obtained will become even more dangerous. in such conditions, the legislative prohibition of the development of autonomous weapons will lead to a situation where the security and law enforcement agencies will be equipped on the order of magnitude worse than criminals, terrorist organizations, etc. thus, the answer to the first question about the legal regulation of the socialization of artificial intelligence is that, despite the potential dangers, it is impossible to completely prohibit the development of artificial intelligence systems; legal regulation in this area should provide incentives for the socially effective use of technologies and minimize the risks of technology misuse. amy webb states, " we need to start having a more sophisticated and intelligent conversation about our current laws, our emerging technology, and how we can get those two to meet in the middle." (hao, 2019) for example, in the late 80s of the last century, columbus-america claimed rights to the property of the sunken ship s.s. central america. the peculiarity of the claim was whether the court admitted that the boat and the treasures found with the help of a remote-control device were human (plaintiff ). nevertheless, the court recognized the right and formulated rules for the further resolution of such lawsuits (calo, r ., 2016). such a decision has led to the explosive development of underwater battery technology in both the commercial and defense sectors. at the same time, mankind should control the development of technology. therefore, the next issue of legal regulation in the socialization of artificial intelligence is how to implement the legal regulation of the use of artificial intelligence. as already mentioned, there are two approaches in the scientific literature. first, in the classical system of legal coordinates, today there are specific solutions: the rights and obligations of developers, owners and users of robots are defined. in this way, the problems of using autonomous vehicles, so-called "social" care and surgical robots, innovative prosthetics, etc. are solved (d6.2 guidelines on regulating robotics). another approach, which takes us back to the example of ancient rome, is to consider robots as subjects of law. today, such a solution may seem like science fiction with unfounded legal romanticism. the main argument is that an artificially created robot follows a fixed program and has no freedom of choice or free will. since the latter is an attribute of the subject, the question is supposedly closed. however, there is no doubt that at a certain stage in the development of technology and the complication of relations in the field of robotics, the decision-making process of the robot, although based on the program, becomes so complex that it can be considered an act of human behavior. in science, research has already been presented, which examines the legal subjectivity of artificial intelligence systems. (nowik, 2021) the approaches presented are therefore not mutually exclusive. they can be considered as different stages of legal regulation of robotics. it is clear that consideration of the issues under the classical scheme "developer-owner-user" is relevant and requires the current level of technology. decisions proposed within this understanding can provide sufficiently effective legal support for modern military, industrial, social work, etc. it is also clear that the complexity of the technology will require a transition to a new, more complex regulatory framework. most likely, the legal regulation of the socialization of artificial intelligence will move from considering the robot as an object of relation to assigning its rights and responsibilities. in this context, it is worth paying attention to the conclusions of one of ryan calo's studies, "robots in american law". in his opinion, there is a tendency baltic journal of economic studies 64 vol. 9 no. 1, 2023 in the law to "blur the line" between understanding a robot as either a tool or a person; this concerns external characteristics, the ability to be creative, and, ultimately, the presence of free will. (calo, 2016) reflecting on the presence of robot will, the author notes such a feature of modern technology as an emergence. the latter is that the properties of the system are not reduced to the sum of the properties of its components. such properties of the system are not inherent in its elements (calo, 2016). g.n. andreev and l.l. savello give an exciting example of emergence: "if any person for the first time in his life sees separate parts of a bicycle (steering wheel, wheel, saddle, transmission chain, etc.), it is unlikely that by the form (property) of each detail it will bring the main property of this set: the ability to accelerate after unification the movement of its owner; this ability is an emergence of a system called a bicycle." (andreev, savello, 2009) that is, although each element of a complex system of artificial intelligence is subordinated to the program and, accordingly, does not have a will, with the development of technologies, given the emergence of these systems, there will be grounds to say that there is a will in artificial intelligence. r . calo's arguments cannot be taken as a whole; they are somewhat controversial and more focused on the precedent of the system. however, they indicate that the "classical" legal scheme, the understanding of robots as tools, is not capable of providing a legal reflection of the entire process of the sociali zation of artificial intelligence. thus, the first issue of the legal regulation of the socialization of artificial intelligence concerned the strategic problem of the prohibition or regulation of artificial intelligence. the second issue is related to how to ensure the legal representation of the use of robots. the third, in turn, is associated with the organization of the implementation of rules governing the use of artificial intelligence. maintaining the ability to control social processes will require humanity to create an effective legal system for robots. when robots acquire the status of subjects of law, new areas of justice will emerge. in addition to traditional justice, one can speak of the emergence of two new types, conventionally called "mixed justice" and "justice of artificial intelligence". for mixed justice, there will be forms of resolving legal disputes between individuals, legal entities, society, and robots. the justice of artificial intelligence will include forms for resolving legal disputes between robots. in addition, the functioning of this justice system will provide countermeasures against robots that pose a threat to social development and stability. copying the human justice system for artificial intelligence needs to be clarified. fundamentally different physical characteristics and needs require that such an approach be rejected a priori. however, the creation of this system is a prerequisite for humanity to be able to control the development of social processes. most likely, the justice of artificial intelligence will be created on the basis of robots. the physical and intellectual data of a person will have to be more obvious for the effective functioning of this justice system. the creation of such a system requires the synthesis of precise algorithms of experience gained during the existence of traditional justice. such generalization should become one of the main areas of modern legal science. it is noteworthy that there are legaltech projects in which a.i. studies the current legal practice (mcmullan, 2019). however, ensuring justice for robots requires more than creating a copy of the existing practice of traditional justice. however, the experience gained by humanity in the field of justice is an important source of information for ensuring legal regulation of the work of robots. it is worth noting that the thesis of using the experience of traditional justice, together with the inappropriateness of creating its computerized copy, is receiving an exciting confirmation today. there is a debate on the introduction of criminal risk assessment algorithms. some courts already use them to determine the type of punishment, the feasibility of staying in prison and the severity of the ages. this reduces bias because judges make decisions based on data processing rather than their own, possibly subjective, beliefs. but it raises a fundamental question. because the basis of the algorithm is a previous decision, it (the algorithm) can amplify and perpetuate bias, generating more biased data for further cycles of even more biased solutions. (hao, 2019) for example, if before a judge a person with a low income, the algorithm is very likely to advise the court to imprison. the next time in a similar situation, the algorithm will be even more categorical, the next – more and more the solution to the problem is not in copying or constructing a computer remake of the traditional case law approach to traditional justice. promising here is the expansion of the number of arguments used by the court. the use of artificial intelligence technologies and big data can bring the classical legal requirements for the objectivity, completeness and comprehensiveness of the trial to a fundamentally new level. (karchevskyi, big data, 2018) 3. hypothesis ii. transhumanism the above suggestions were supported and found some development in the work of colleagues. thus, o.e. radutnyi proposes to consider artificial intelligence as a subject of law. (radutnyi, 2018). baltic journal of economic studies 65 vol. 9 no. 1, 2023 katkova t.g. updates the issue of supplementing the civil code with norms on the peculiarities of civil liability in robotics. (katkova, 2017) however, the formulated proposals are based on the hypothesis of the development of autonomous artificial intelligence, while in science skepticism about the reality of fully autonomous artificial intelligence is all the more noticeable. there is even such an unconfirmed assumption that the predictions of its appearance are usually made by those who are very superficially faced with the technical side of the issue. for example, based on an empirical study of modern robots, david mindell formulates "myths" as misconceptions about the prospects of robotics. (mindell, 2015) the experience with the introduction of robotic technologies is far from pointing to the emergence of a fully autonomous artificial intelligence in the future, for the socialization of which the proposed proposals for legal regulation will be relevant. in the history of science, this is far from being the only case where lack of knowledge about the subject leads to the formulation of wrong conclusions. consequently, a systematic approach to solving the problem of legal regulation prospects in the context of development of modern technologies requires consideration of an alternative hypothesis. technological progress can occur through the physical integration of man and technology. how, in this case, will the legal status of a person who enhances his abilities through numerous technological implants change? how can implants with artificial intelligence be used? this question was partly studied by n.a. savinova. (savinova, 2012) researchers of the problems of transhumanism consider the complexity of these questions. by definition, according to nick bostrom, "transhumanism is a way of thinking about the future based on the fact that humans in their current form are not the end of our evolution." transhumanism is defined as "an intellectual and cultural movement that advocates the possibility and desirability of a fundamental improvement in the human condition through the application, development, and widespread access to technologies that eliminate aging and enhance human intellectual, physical, and psychological capabilities." transhumanism can also be seen as "the study of the consequences, potential benefits, and threats of technologies that can overcome basic human limitations, and the related study of ethical issues arising from the development and use of such technologies.” (bostrom) the position of v.p. karchevskyi and n.v. karchevskaya is also worth mentioning: "evolution has created a civilization of people, now it is creating a civilization of robots. the task of researchers and designers is to achieve friendly and effective coexistence of these civilizations. the emergence and development of cyborgs show the mutual influence of the human and robotic civilizations." (karchevskyi, karchevskaya, trufanova, 2019) in order to solve this task of establishing the prospects for legal regulation in the context of the development of modern technologies, the article will focus on possible social transformations caused by the use of transhumanist technologies. according to n.o. komlieva, the application of human technology activates the possibility of creating a fully controlled human evolution in the interests of global corporations (komlieva, 2018). on the other hand, o.y. rybakov and s.v. tykhonova pay attention to the emergence of a new form of freedom – morphological freedom. (rуbakov, tykhonova, 2017) a. sandberg defines such freedom as the right of every non-disabled person to change his or her body based on his or her own desires and needs, which, from a legal point of view, means the extension of the human right to one's own body, the transition from ownership to change of one's own accord. (rуbakov, tykhonova, 2017) the issue of natural reproductive rights, which includes both natural and technologically mediated forms of implementation (assisted reproductive technologies, surrogacy, donation of genetic material, posthumous reproduction, and designing children), is underway. (rуbakov, tykhonova, 2017) there is a problem of overpopulation on the planet due to the success, cheapening, and widespread technology to overcome aging (bostrom, p. 28). one of the possible negative developments in the future is the discrimination of both ordinary people and cyborgs (individuals whose bodies contain implanted devices). discrimination of humans is possible, for example, in the labor market. cyborgs may be discriminated against for security reasons (restrictions on staying in certain public places, use of certain means of transportation). it is also likely that political rights will be restricted. both variants are dangerous because they create a strong potential for social conflicts. (maiorov, potapov, volkova, 2018). the article suggests the possibility of funda mentally new threats connected with learning in life and evolution of natural objects and human beings. a.v. maiorov, a.d. potapov, and a.a. volkov distinguish two types of such interference. first, biogenetics is associated with the use of methods of nanobiotechnology. cognitive is based on the convergence of info-cognitive and socio-humanities. the first is related to the creation of artificial living organisms with certain properties (effective medicines or weapons of selective defeat). the second is related to the effects on the psychophysical sphere of a person to control the consciousness and body. (maiorov, baltic journal of economic studies 66 vol. 9 no. 1, 2023 potapov, volkova, 2018). there are even such hypothetical scenarios of the end of the world as "gray slime" and "black slime". in the first case, uncontrolled nanobots absorb all the earth's biomass by running a self-replication program embedded in them. in the second, nanobots are intentionally created and used to destroy biomass. it is also clear that crimes against life and health will be committed in fundamentally new ways. the proliferation of technologically advanced implants will make them vulnerable to technological attack by many people. like today 's cases of massive computer malfunctions caused by malicious software, massive attacks on the lives and health of people with implants will be possible. having recorded such dangerous predictions for the development of transhumanist technologies, consider the prospects for legal regulation in this area using the task-method-support analysis used in the previous part of the paper. with the help of this method the perspective tasks of the legal regulation formulated earlier in the context are fulfilled. regulation or prohibition? the answer to this question is almost similar to the one obtained in connection with the hypothesis of autonomous artificial intelligence: prohibition is impossible, and legal regulation in the sphere of the use of technologies of transhumanism should ensure the most effective use of their advantages and minimization of negative consequences. moreover, in view of the above-mentioned danger of corporations, legal regulation should also include limiting the destructive effects of global corporations. what is the way of regulation? the answer to this question is to extrapolate the scientific regulations for developing reliable systems to the problems of using transhumanist technology. when developing systems to manage, for example, a nuclear reactor or a passenger plane, there is a standard safety requirement to develop multiple backup systems that perform the same functions. suppose one of the systems fails and begins to signal an emergency (about its absence) by mistake. in this case, the rest will work adequately and the problem of safe management of the complex system will be solved. besides, the development of backup systems should be carried out by different teams of engineers, who must use different technological solutions, different elements, etc. this principle is called diversification of design solutions to increase the reliability of backup systems. the idea of extrapolation of this principle to the sphere of legal regulation of the use of technologies of transhumanism is as follows: if the conditions/ requirements of the proper form for the creation of as many different solutions in the field of technology of transhumanism, it will ensure effective prevention of the development of negative consequences. the example of the "epidemic" of implants is simply impossible if the principle of legal regulation of the use of technology of transhumanism will be mandatory diversification of decisions. this principle is also promising for solving the problem of the destructive influence of global corporations. a separate aspect of legal regulation should be the provision of legal safeguards for the implementation of morphological and reproductive freedom. it is clear that in order to solve this problem effectively; it is necessary to accumulate experience of possible abuse of such freedoms. however, this is a rather typical task of legal regulation – the search for a balance between the realization of the right of a particular person and the need to ensure overall security, stability and development. the prohibitions of biogenetic and cognitive problems, socially dangerous violations of morphological or reproductive freedom, and violations of the requirements of diversification of technological decisions will become the new codes of criminal law regulation. how to ensure the implementation of regulatory requirements? controlling the development and use of certain technologies will require an effective monitoring system. moreover, the analysis of the information obtained will be much more complex and will require fundamentally new professional competencies. the traditional division of tasks between lawyers and specialists will be highly ineffective. as a result, legal and technical sciences will converge and new legal professions will emerge. at the same time, legal regulation of the use of modern technologies should be technologically neutral. for example, part 3 of art. 190 of the criminal code of ukraine provides for liability for "fraud committed in large quantities or through illegal operations using electronic computers". at the time when the new criminal code of ukraine came into force (21 years ago), the use of computer technology for committing fraud could indicate an increased social danger of the attack. however, the spread of e-commerce and remote banking services was insignificant. they were used by large corporations. therefore, the provisions of part 3 of art. 190 of the criminal code of ukraine clearly defined the range of acts reasonably considered to be an exceptionally qualified type of fraud, close to the degree of public danger of fraud in large volumes. however, the rapid penetration of information technology in the financial sector led to a qualitative change in this type of fraud. law enforcement bodies record a significant amount of such crimes related to damage, corresponding to signs of simple or sophisticated fraud (part 1, part 2, article 190 of the criminal code of ukraine, maximum punishment – up baltic journal of economic studies 67 vol. 9 no. 1, 2023 to 3 years of imprisonment). can it be considered reasonable, and this is precisely what the interpretation of the norm requires, that a criminal assessment of such actions under part 3 of art. 190 of the criminal code (maximum penalty of up to 8 years' imprisonment)? the question is rather rhetorical. in the current conditions, there is no reason to argue that the use of computers in the process of committing fraud increases the level of social danger of the offense. there is a situation where a technology-oriented legal provision (part 3 of article 190) loses its relevance due to the existence of provisions relating to a specific technology. a similar example can be derived from the criminal regulation of cryptocurrencies. with a high degree of probability, it is possible to predict the appearance of proposals to supplement the criminal code with relevant special regulations. at the same time, a deeper analysis of the current legislation shows the possibility of legal reflection of the latest technological trends with the help of existing general norms (karchevskyi, 2018). the speed of technological development requires the abandonment of legislative formulations that refer to specific types of technologies. any law referring to a specific technology will have a minimal useful life. in conclusion, it would be desirable to draw attention to the current state of affairs and the relevance of the issues raised for the ukrainian legal field. today, ukraine is not a leader in the development of modern technologies (although the world's first encyclopedia of cybernetics was published in ukrainian). some see this as a positive thing, because the risk of new threats is supposedly much smaller. however, this is not the case. there is a well known problem called the "digital divide". the success of the social group, the country is directly dependent on the possibility of access to modern information technology. social groups and countries that do not have (limited) access to the latest information technology have a very low probability of getting it in the future. over time, the difference in the level of technology used will increase. in addition to the obvious problems with domestic production, there is a situation where the current legislation to some extent blocks the development of modern information technologies. in particular, it concerns access to personal data and state information resources. moreover, the scheme of legal regulation is such that it does not provide for dynamic and predictably productive implementation of projects in the modern spheres of the use of information technologies. in such circumstances, the first thing to do in order not to be on the sad and hopeless side of the "digital divide" is to liberalize and deregulate as much as possible the activities related to the processing of personal data. this will create the basis for the rapid development of modern information technologies in ukraine: the internet of things, big data, etc. ambitious, innovative projects will become possible. the security of personal data, which will be highly acute, will receive new, much more effective solutions. active use of personal data in the legal sphere will create a market necessary for the development of its processing and protection technologies. however, the legal regime governing personal data represents only a fraction of the global legal problem. this can be called the formation of legal guarantees for the effective development of the information environment. this is a complex issue related to the legal regulation of information technology, economy, provision of access to information and formation of information resources. at the same time, the regulation of the formation of information resources should include not only today 's issues of creating databases, media activities, prevention of manipulation of public consciousness, etc. an independent aspect of the problem should be the construction of an optimal legal regime for preservation of accumulated human data and access to this resource. the creatures, which hundreds of millions of years ago observed the formation of coal seams (or themselves became their part), could hardly predict the emergence of coal industry, metallurgy, thermal power plants, etc. it is a similar process today. mankind is accumulating huge amounts of data. how it will be used in the course of time is unknown, but it will be used. if so, it is necessary to study the possibilities (feasibility) of legal regulation of storage and use of data accumulated by mankind. furthermore, it will be necessary to resolve the ownership of such assets, transferring them to the status of exclusive property of the people of the state (planet) or data that can be freely used by anyone. the regime of large arrays of spent data can be organized based on the legal mechanisms used today to regulate the use of subsoil or archaeological activity. finally, the regulation of the information environment can be seen as the establishment of a coordinate system for the future legal assessment of both artificial intelligence and technologically advanced humans, since this area will be the overwhelming part of their socially significant activity. 4. conclusions to continue the discussion, the most radical view of humanity 's prospects in technological development is the concept of technological baltic journal of economic studies 68 vol. 9 no. 1, 2023 singularity. its author, v. vinge, believes that the speed of progress will be overwhelming after the emergence of intelligence that surpasses humans. humanity will find itself in a "regime that is no less radically different from our past than we, humans, are different from the lower animals. such an event will be cancelled, perhaps in an instant, by the inadequacy of all human laws. the uncorrected chain reaction will begin to develop exponentially, with no hope of regaining control of the situation." (vinge, v. the coming technological singularity) according to w. wind, this will lead to artificial intelligence (a.i.) or intelligence augmentation technology (iat). thus, it can be concluded that the technological singularity is considered to be a generally negative outcome of the two hypotheses under consideration. however, despite the arguments about the inevitability of such a scenario, the analysis of prospective legal issues shows that humanity can maintain control over the situation. this refers to the issue of effective legal regulation. the following provisions are formulated regarding the long-term tasks of legal regulation in connection with the hypothesis of the development of artificial intelligence and the hypothesis of the development of transhumanist technologies: 1. the development of technologies cannot be prohibited. despite the risk of dangers, an absolute prohibition of the development of artificial intelligence systems or transhumanist technologies is impossible. legal regulation in this area should provide incentives for the socially effective use of technology and minimize the risks of technology abuse. a separate task of legal regulation in this context should be to limit the destructive effects of global corporations. 2. legal regulation should ensure maximum diversification of technological choices. technology should not be limited but, on the contrary, should be as diverse as possible. if the right is to create conditions/requirements for the creation of as many different technological solutions as possible, this will effectively prevent the development of negative effects. for example, the known negative scenarios of the implantation epidemic (causing harm to humanity by violating the functioning of all implanted devices) will be impossible due to the guaranteed availability of alternative technological solutions. 3. the classical scheme "developer-owner-user" is urgent and widespread among modern technologies. however, the complexity of technologies will require the transition to a new, more complex scheme of legal regulation. the legal regulation of the socialization of artificial intelligence will move from considering the robot as an object of relations to the allocation of rights, duties, and responsibilities. it will be necessary to solve the problem of the legal status of a physical person whose abilities are enhanced by the technologies of transhumanism. hypothetically, this problem does not seem complicated and can be solved by adding certain aggravating or mitigating circumstances, restrictions on the occupation of certain positions, the performance of work, etc. 4. in addition to traditional justice, the emergence of two new types of justice – "mixed justice" and "artificial intelligence justice" – is introduced, whose functioning will confront robots that threaten social development and stability. artificial intelligence justice will be based on robots. such a system will provide a generalization of precise algorithms of experience gained during the existence of traditional justice. 5. ensure legal safeguards for the implementation of morphological and reproductive freedom by balancing the exercise of the right of a particular person with the need to ensure general security, stability and development. 6. resolution of the limits of criminal law regulation in biogenetic and cognitive problems, socially dangerous violations of morphological or reproductive freedom, and violations of the requirements of diversification of technological decisions. 7. as the development and use of certain technologies will require an effective monitoring system, the analysis of legally relevant information will become much more complex and require fundamentally new professional skills. the traditional division of labor between lawyers and specialists will become highly ineffective. there will be a convergence of legal and technical sciences. a solution will be needed to define and develop new legal professions. in this context, the wording of new laws should be made technologically neutral. this approach will ensure the necessary stability of legal regulation in the conditions of rapid changes in the technological reality. 8. the significance of the global problem becomes a question of legal safeguards for the effective development of the information environment. the vast amounts of information that humanity has accumulated in its lifetime will require new legal mechanisms. existing rights of ownership of information and intellectual property rights are likely to be supplemented by new institutions similar to the right to use subsoil and the right to archaeological activity. the complexity of these issues should be considered as the establishment of a coordinate system for the future legal assessment of both artificial intelligence and technologically advanced humans, since it is precisely in this area that the overwhelming part of their socially significant activity will take 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(2012). kryminalno-pravove zabezpechennia rozvytku informatsiinoho suspilstva v ukraini: teoretychni ta praktychni aspekty [criminal legal support for the development of the information society in ukraine: theoretical and practical aspects]. kyiv: tov "dsk", 342 p. vinge, v. the coming technological singularity. acceleration studies foundation. available at: http://www.accelerating.org/articles/comingtechsingularity.html ylon mask nazval hlavnuiu uhrozu dlia chelovechestva [elon musk spoke about the main danger for humanity]. available at: http://korrespondent.net/tech/science/3869375-ylon-mask-nazval-hlavnuui-uhrozudlia-chelovechestva received on: 17th of january, 2023 accepted on: 26th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 77 vol. 4, no. 1, 2018 corresponding author: 1 department of state-legal, administrative-legal, and criminal-legal disciplines, donetsk university of economics and law. 2 department of civil law and procedure, national academy of internal affairs of ukraine. 3 department of anatomical pathology, forensic medicine and law, vinnytsya national pirogov memorial medical university. doi: https://doi.org/10.30525/2256-0742/2018-4-1-77-84 administrative and legal principles of the functioning of the financial system in ukraine and european countries: a comparative analysis andrii holovach1 donetsk university of economics and law, ukraine andrii petrovskyi2 national academy of internal affairs of ukraine, ukraine oksana adamchuk3 vinnytsya national pirogov memorial medical university, ukraine abstract. the purpose of the article is a comparative analysis of administrative and legal principles of the functioning of ukrainian and european countries’ financial systems and further determination of ways to improve domestic legislation in this area. the subject of the study is the experience of european countries in state regulation of financial systems. methodology. the research is based on a comparison of foreign experience in the legal regulation of the financial system using the example of european countries with current state regulation of the financial system in ukraine. due to the used arsenal of general scientific and special-scientific methods and techniques of scientific knowledge, the content of administrative and legal principles of the functioning of the national financial system in conditions of liberalization of foreign economic relations, strengthening of integration and globalization processes in international financial and commodity markets was characterized and determined. the results of the comparative legal study revealed the absence of a general model of the financial system state regulation in ukraine; rather, the presence of administrative and legal framework for the provision of financial sector’s certain components, in particular, banking, investment, tax and budget, financial services market, etc. practical implications. administrative and legal principles of the financial system functioning in certain european countries expose greater effectiveness of the financial system state regulation in comparison with ukraine. most european states support the policy of regulating the financial system as a holistic, indivisible phenomenon, gradually shifting away from its interpretation as a set of separate segments. on this issue, significant influence has been made by the european union, which introduced integration of the most important functions in the regulation of the eu financial system and assigning these functions to a separate group of special bodies. it is expedient to include this experience in the legal system of ukraine in order to increase its economic stability. relevance/originality. a comparative legal study of world experience in the administrative and legal regulation of the financial system functioning in ukraine and european countries provides a better understanding of prospects for development of national administrative legislation in this area. key words: administrative and legal principles, financial system, state regulation. jel classification: d73, p43, h83 1. the relevance of the topic the vital activity of any state depends on the functioning of a large number of different elements, such as the society, legal system, security and inviolability of its territories, etc. one of the most important components is the economy of the country. in ukraine, the financial sector is at a transitional stage now due to a number of factors: first, ukrainian state is relatively young compared to other european countries; second, a rapid shift of the national economy from a planned to market form; third, the restructuring of regulatory framework and state policy transformation in economics under the “pressure” of european standards. moreover, some incompleteness and shortcomings of the financial baltic journal of economic studies 78 vol. 4, no. 1, 2018 system of ukraine need further reformation and development. thus, the issue of a state influence on the financial sphere, that is, its state regulation, is important. in this case, relations, which occur, are regulated by rules of many branches of law. hence, in the modern legal system of the state, there are corresponding administrative and legal principles of the functioning of the financial system of ukraine. it is appropriate to note that this aspect is not a novel in foreign countries. in particular, in each european country, there are a certain authority and legal principles of support and influence on the financial sector that are relevant to follow. it should be emphasized that in the scientific sphere, the question of comparing the administrative and legal principles of the functioning of the financial system of ukraine and european countries was not properly addressed. moreover, the lack of theoretical and practical justification of this aspect confirms the high level of its relevance. a comparative analysis of the administrative and the legal framework for the functioning of the financial system in european countries and ukraine enables to find positive and negative factors of activity in this area, as well as to understand what experience should be applied. 2. past research review the financial system is a multidimensional phenomenon, therefore, a large number of foreign and domestic scientists of various scientific fields research it, in particular: voronova l.k., oparin v.m., borynets sya., afanasiev m.p., vasylyk o.d., lunina i.o, sadovskyi  v.m., mikhailov a.m., and others. the issues of the administrative and legal mechanism of the financial system regulation were considered in works by such theoreticians as: bandurka o.m., averianov  v.b., zasunko s.s., kolpakov v.k., stolbovyi  v.p., sushchenko  v.d., and others. foreign experience of state regulation of financial systems was highlighted in works of w. mcdonald, t. rose, d.  trachtman, and others. instead, a comparative analysis of ukrainian and foreign administrative principles in ensuring the financial system functioning has not been properly carried out. the purpose of the article is to conduct a comparative analysis of administrative and legal principles of the functioning of the financial system in ukraine and european countries. to reveal this problem, first, it is necessary to outline the features and define the content of categories “administrative and legal principles” and “financial system” as separate phenomena. it should be noted that the concept of “administrative and legal principles” is quite common in the scientific literature. in addition, it consists of two independent terms that have a broad content. thus, in accordance with provisions of the dictionary, “administration” is revealed as a bureaucratic management by means of orders and directives (busel, 2005). in turn, the word “principles” is used as: the basis of something; the main thing, on which something is based, established; the initial, main position, principle; the basis of the outlook, the rule of conduct; the way, method of doing something (bilodid, buriachok, 1972; zabroda, 2013). therefore, administrative principles can be defined as the bases, priorities of public administrating. moreover, the term “legal” denotes their connection with a particular branch of law, that is, administrative. the latter is considered by scholars as a set of legal norms, which regulate public relations of managerial nature in order to fulfil the tasks and functions of the state, and which appear in executive power, the internal organization of other state bodies, as well as in carrying out external legal authorities by public organizations and their bodies (alforov, vashchenko, dolgopolova, kupin, 2011; administratyvne pravo ukrainy, 2000). from this perspective, melnik r .s. and bevzenko v.m. argue that administrative law regulates such groups of social relations as: social relations that arise out of human and civil rights and freedoms provision by the subjects of public authority, primarily public administration; social relations in public administration of a state and communal property objects; social relations in the internal organization of public authorities; public relations in the interaction of public authorities with civil society institutions (melnyk, bevzenko, 2014). therefore, administrative and legal principles can be defined as codified bases of state bodies’ authority, concerning public administration in certain spheres of social relations. considering this interpretation, the administrative and legal principles are not separate principles of the work of certain state bodies, but a set of rules of law, which contain provisions of initial, key ideas of management in a certain field of social relations. in the present research, such a sphere is the financial system, the content of which also needs further elaboration. it should be emphasized that the main feature of the financial system is its systemic nature, that is, the presence of the structure of interconnected elements. the idea of a system as a special form of unity of categories dates back to ancient greece (agoshkova, ahlibininskiy, 1998; bilinskyi, 2011). it is characteristic that each element is a completely independent category, which can have its own purpose of existence, task, etc. however, together such elements acquire common features, and their target orientation may change. in this regard, a logical question arises, what the financial system represents and what elements compose it? there baltic journal of economic studies 79 vol. 4, no. 1, 2018 are several scientific views on defining the content of this category. for example, oparin v.m. argues that the issue of defining the content of the financial system should be considered from two perspectives: the substantive content and the institutional structure. under the substantive content of the financial system, a set of separated but interrelated units (finance of business entities, state (public finance), international finance, financial and insurance market), which reflect the particular forms of financial relations, is meant. according to institutional structure, the financial system is a set of financial institutions that ensure its effective functioning, organization and implementation of financial activities of its subjects (bubryka, solonar, utkina, 2016; oparin, 2006). kirilenko considers the financial system as a set of separate areas of financial relations, which are interconnected and have centralized or decentralized funds of money, as well as an appropriate management apparatus and legal support (kyrylenko, 2002). according to popov, the financial system is a set of historical economic relations as for the formation, distribution, and use of funds of money of the state, economic entities, and households, distribution and redistribution of gdp, which are realized by means of a financial body in accordance with the state financial legislation (popov, 2012; ganzitska, 2016). according to orliuk, the category of the financial system has multidimensional nature, that is, its content can be defined in three “dimensions”, namely: as a set of financial institutions that contribute to the creation and use of funds specifically for the financial performance of the state; as a set of state authorities and bodies of local government, which carry out the management of financial activity of the state as a whole, as well as enterprises, institutions, and organizations, which participate in it; as a set of public finances, finances of business entities, international finance and the financial market (orliuk, 2010; myrhorod-karpova, 2017). considering the diversity of approaches, it can be concluded that the financial system of a state is a set of social relations that arise in the distribution and use of entire monetary resources, are implemented in the activities of individual entities and provided by the state, which determines the features, forms, and procedure for conducting financial activities. agreeing with the scientific position of nesterenko, it should be noted that these relations are consolidated into integral institutions, which, in turn, are a part of the financial system structure. for that reason, the latter includes public finances, finances of business entities, international finance and financial markets (nesterenko, 2013). moreover, financial markets include banking, tax and budget, investment, financial services markets, etc. therefore, after outlining the essence and features of all the necessary concepts, it is possible to determine what constitutes the administrative and legal principles for the functioning of the state financial system. in this research, these principles are considered as a set of legal norms that establish the key principles of management activities of state authorities in the field of organization and provision of the financial system as a set of relations regarding the distribution and use of monetary resources. in other words, these principles regulate the features of the existing model of state and legal regulation of the financial system as a whole. the administrative and legal principles of the financial system functioning can be found in the provisions of many legislative and subordinate regulatory legal acts of ukraine. for example, in the law of ukraine “on financial services and state regulation of financial services markets”, article 20 states that state regulation of financial service activities is carried out through: 1) running the state registers of financial institutions and the registers of individuals, who are not financial institutions, but have the right to provide certain financial services and licensing of financial services; 2) legal regulation of financial institutions; 3) supervision over financial services market participants (except for financial services customers); 4) application of coercive measures by the authorized state bodies; 5) other measures on state regulation of financial services markets (pro finansovi posluhy ta derzhavne rehuliuvannia rynkiv finansovykh posluh). moreover, similar provisions are contained in the law of ukraine “on investment activity”. chapter iii of the law defines the purposes, forms, and limits of legal state regulation of investment activity. specifically, its purpose determines implementation of economic, social, scientific and technical policies based on the goals and indicators of economic and social development of ukraine, state and regional programs of economic development, state and local budgets, in particular, the amount of their investment activities provided for by them. simultaneously, privileged conditions are created for investors investing in the most important areas for meeting social needs, first, in the social sphere, technical and technological improvement of production, creation of new workplaces for citizens, who need social protection, introduction of discoveries and inventions in the agriculture, in the implementation of programs for the consequences of the chernobyl accident elimination, in the production of building materials, in education, culture, protection of cultural heritage, environmental protection and health (pro investytsiinu diyalnist). under these conditions, the main forms of the state regulation of investment activities are public investment management, regulation of investment activity, control over the implementation of investment activities by its participants and investors (pro investytsiinu diyalnist). baltic journal of economic studies 80 vol. 4, no. 1, 2018 in banking, state regulation is limited. according to articles 4 and 5 of the law of ukraine “on banks and banking activities”, banks, formed in accordance with the laws of the state, determine independently directions of their activity and specialization by types of services. public authorities and local governments are prohibited from influencing management or employees of banks in the course of their duties or interfering in bank activities (pro banky i bankivsku diialnist). instead, in accordance with the legislation, the national bank of ukraine, a special central state authority, regulates banking activities, as well as supervises over the banking system in order to promote financial stability within powers provided by law (pro banky i bankivsku diialnist; pro natsionalnyi bank ukrainy). forms of administrative and legal influence on the banking system are also defined legally: 1) registration of banks and licensing of their activities; 2) establishment of requirements and restrictions on the activities of banks; 3) application of sanctions of administrative or financial nature; 4) supervision over the activities of banks; 5) provision of recommendations on the activities of banks (pro banky i bankivsku diialnist). it is worth noting that in state regulation of fiscal and tax relations, the administrative and legal principles of the financial system functioning demonstrate the change in the vector of public administration in this field due to its reformation. confirmation of this fact can be found in the provisions of the strategy of sustainable development “ukraine 2020” approved by the decree of the president of ukraine dated january 12, 2015. paragraph seven of the document states that the purpose of the tax reform is to form a tax system, which is simple, economically fair, with minimal time spent on the calculation and payment of taxes, able to create necessary conditions for sustainable development of the national economy, and provide sufficient coverage of the state budget of ukraine and local budgets. the main areas of the reform are transition from supervisory and punitive functions of fiscal authorities to servicing that helps in the calculation and execution of tax payments, rather than is aimed at filling the budget through financial sanctions and overpayments; reduction of the number of taxes and their size, as well as simplification of the procedure of calculation and payment; introduction of electronic services for taxpayers; reduction of tax burden on wages in order to take them out of shadow; improvement of ukrainian legislation aimed at the reinforcement of combating tax evasion schemes for both legal entities and natural persons, in particular, improving the administration of value added tax, creating a system of tax control according to the degree of risk in the activity of taxpayers, ensuring openness of access to payment information taxes, improving legislation on transfer pricing issues, implementation of control over expenditures of individuals (pro stratehiiu staloho rozvytku «ukraina-2020»). therefore, the analysis of current legislation has shown that at present, there are a large number of administrative and legal principles for the financial system functioning, which are provided for in legal rules that regulate key aspects of state influence on certain spheres of the financial system’s components. moreover, the conducted research revealed that a general model of the financial system state regulation is not developed in ukraine. there are only administrative and legal principles for providing certain components of the financial sector, in particular, banking, investment, tax and budget, financial services markets, etc. in these areas of state regulation, independent political courses are formed; therefore the general inconsistency of administrative and legal regulation of the financial system is evident. due to this, in ukraine, a large number of state authorities with different powers in the financial sphere exist. at present, the financial system is coordinated by the cabinet of ministers of ukraine, the verkhovna rada of ukraine, the accounting chamber, the president of ukraine, the ministry of finance of ukraine, the state treasury, the national bank, fiscal authorities, etc. such a control and regulation mechanism is extremely cumbersome and ineffective, which ultimately leads to negative economic consequences for our country. european experience of administrative regulation of the financial systems and financial activities differs significantly. it is worth noting that the features of the current stage of the world economic development are the liberalization of foreign economic relations, strengthening of integration and globalization processes in the international financial and commodity markets, which is due to the openness of national economies and cooperation of countries in various spheres of economic activity. thus, the openness of the national economy contributes to the development and improvement of economic, productive, financial, social, cultural, and other interrelationships between countries (denysiuk, 2015). a remarkable example of this fact is the european union (hereinafter – the eu). the main thing is that a large number of states are now a part of the eu. this international organization, represented by a special body, coordinates the functioning of financial systems of the member states to ensure economic stability in the eu. in addition, such an approach does not preclude the existence of appropriate national mechanisms to maintain the functionality of financial systems in the very member states. a key difference in the regulation of financial systems in european countries is in perceiving the role of the state in this process and the content of the financial system as a whole. financial consolidation and formation of large financial conglomerates demand replacement of a traditional regulatory paradigm based on consideration of the financial system as a set of segregated segments baltic journal of economic studies 81 vol. 4, no. 1, 2018 (insurance, banking, stock, etc.) for one that takes into account the interconnectivity of different financial intermediaries and establishes for them the same rules and supervision principles. for example, on this basis in the european union, a new european system of financial supervision has been created, the key institutions of which have become the european systemic risk board and established by the european commission’s proposal three sectoral bodies: 1) european securities and markets authority; 2) european banking authority; 3) european insurance and occupational pensions authority (giorgio, di g., carmine di noia, 2005; the level 3 committees welcome the new institutional arrangements on european financial supervision; baldych, 2013). at the national level, in economically advanced countries, the financial system regulation is also based on consolidation of a large amount of authority within one or more core bodies that implement a common economic policy, which affects all spheres and components of the financial system. administrative regulation of the financial system in the territory of this state is carried out by a single, key institution, the treasury (harust, tolkachov, 2017). it should be noted that the state treasury of great britain is one of the oldest state agencies, but in terms of numbers, it is one of the smallest. the treasury is a political and creative department with several functions that link it with the public and industry. it is connected with financial markets mainly through the bank of england. historically, its main function was to control public funds spending, but now it is responsible for management of british economy so as to achieve the economic goals set by the ministries and agreed with the parliament (yurii, stoian, mats, 2002; bulhakova, kolodii, 2002). the treasury of great britain has a wide range of functions in support of the financial system. in particular, this authority regulates issues related to: 1) public spending, which includes departmental spending on labour costs and pensions in the public sector, as well as an investment; 2) oversight of the financial services market; 3) strategic oversight of the uk tax system; 4) supervision of economic stability (united kingdom government: hm treasury). in addition, in accordance with british law, among the main functions of the treasury is development, preparation, and execution of the state budget; development and execution of the state fiscal policy; tax system management; management of the structural units of the treasury; development of tax legislation, simplification and computerization of tax legislation; financial and economic forecasting; planning and control over public spending, maintaining budget balance, timely and efficient budget coordination, preparing a financial and budget report, and submitting it to parliament; realization of the policy of relations with the european community, maintenance of the balance of profits and expenses related to eu membership, etc. (havrylishyn, kozyrieva, 2007). the german model of administrative regulation of the financial system is similar to british one because it is also based on the unification of powers within the framework of several main bodies of financial coordination. on the territory of germany, the federal financial supervision authority carries out oversight functions in the financial sector. this body has a wide range of authorities and has the right to issue sub-normative acts and regulations within the limits of its competence. in addition, the authority also carries out banking supervision together with the german federal bank. the latter, in the process of ongoing control, assesses documents, reports, annual financial statements and audit conclusions, and so on. it should be noted that the federal financial supervision authority issues licenses for banking, insurance, and financial services, as well as oversees credit institutions, financial conglomerates, insurers, investment and pension funds and securities market (horuzhii, 2016). similar administrative and legal principles of the financial system functioning exist in other european countries as well. in particular, in poland, the polish financial oversight commission carries out state financial regulation. this is a body of financial supervision with an autonomous competence and a separate budget that oversees banks, insurance companies, insurance intermediaries, investment companies, asset management companies, investment and pension funds, providers of payment services and electronic money, credit bureaus and securities markets (horuzhii, 2016). in sweden, the state regulation of the financial system is implemented by the financial supervision authority. it is a public institution responsible for financial oversight of banks, money, payment institutions, the securities market (including exchanges, clearinghouses), investment and pension funds, consumer lending services, savings and loan associations, as well as insurance and insurance intermediation activities. it is funded at the expense of annual regulatory fees and at the expense of license fees. the agency is subject to the ministry of finance of sweden (horuzhii, 2016). the principles of administrative regulation of the financial system of spain, the most priority areas of which are fiscal, banking, and financial markets, are quite interesting. state regulation of the tax sector is characterized by a high level of efficiency due to numerous reforms in the 80 years of the twentieth century. in order to simplify the procedure for paying taxes, improve taxpayer accounting, and strengthen combat against tax crimes, the reorganization of the tax service was carried out through a series of organizational measures, in particular: introduction of identification numbers for all taxpayers, both for legal entities and for individuals; baltic journal of economic studies 82 vol. 4, no. 1, 2018 the introduction of tax labels, which contains all the information on a taxpayer: the identification number, all types of taxes payable by a taxpayer, payment deadlines (issued to legal entities at registration, and sent by mail to individuals); introduction of mandatory submission of a tax return together with tax labels; introduction of tax vectors and memos, in which taxes are defined and their payment periods are determined; establishment of close cooperation with banking institutions and structures; change in the organizational structure of tax management and the tax service in general (stukalo, litvin, derkach, 2014). to support the stock market, the national stock market commission monitors the proper functioning of the system, checks spanish securities markets and activities of all participating organizations. in addition, the commission also monitors the transparency of the spanish stock markets and the correct pricing, protects investors. the activity of this body concerns companies that issue securities for public placement, secondary stock markets and companies offering investment services (stukalo, litvin, derkach, 2014). although the banking system of spain is a set of different government agencies and private banking institutions, it is based on principles of strict centralization. in particular, the bank of spain, the central bank of the country, is the main institution that regulates the banking system and implements monetary policy in the country. the bank of spain is subordinated to the ministry of economy and finance, to which the government delegates powers in the field of monetary policy. the ministry of economy and finance develops provisions for the bank of spain to follow when implementing the monetary and credit policy of the government, defines the principles of the bank’s disciplinary and control functions, establishes the procedure for the bank to carry out operations with private banks, etc. (stukalo, litvin, derkach, 2014; rudenko, tokar, 2010). 3. conclusions therefore, the comparative analysis showed that the administrative and legal principles of ukrainian financial system functioning differ significantly from european ones, which is manifested in the features of state regulation of the financial sphere, in general, and its separate components, in particular. for that reason, the present research enables to conclude the following. 1. the existing administrative and legal principles of ukrainian financial system functioning are characterized by general inconsistency. in other words, they are disconnected that prevents the creation of a general financial policy in our country and its further realization. in all cases, the administrative and legal principles provided for in the norms of legislative and subordinate acts relate to state regulation in certain spheres of the financial system’s constituent elements. 2. the absence of a single legal basis for the national financial system state regulation in practice leads to engagement of a large number of various state bodies, whose powers, in some cases, are repeated causing controversy. this negative aspect has a direct impact on the efficiency of financial activities and the development of the national economy. 3. analysis of foreign experience has shown that most european states support the policy of regulating the financial system as a holistic, indivisible phenomenon, gradually shifting away from its perception as a set of separate segments. a significant influence on this issue has been made by the european union, which introduced integration of the most important functions in the regulation of the eu financial system and assigning these functions to a separate group of special bodies. 4. it has been determined that nowadays the financial system state regulation of many european countries is based on consolidation of coordinating and supervisory functions. one or several clearly defined bodies carry out the national regulation of financial relations in european countries such as germany, poland, sweden, spain, etc. in the uk, the many years’ experience is outstanding. in this country, the treasury is a single body, which is in charge of the regulation of the financial system of the country. this organization works today quite effectively, which is confirmed by the fact that the uk economy is one of the most developed in the world. therefore, in some european countries, the administrative and legal principles of financial system functioning reveal the greater effectiveness of the financial system state regulation in comparison with ukraine. thus, the given foreign experience should be included in the legal system of our state in order to increase its economic stability. references: busel, v. t. 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(in ukrainian) baltic journal of economic studies 262 vol. 4, no. 1, 2018 corresponding author: 1 department of economic theory and the history of economic thought, odessa i.i. mechnikov national university. e-mail: i.lomachynska@onu.edu.ua 2 department of interregional economic development of the ukrainian black sea region, institute for market problems and economic and ecological research of the national academy of sciences of ukraine. e-mail: ivelina.od@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-262-270 innovation potential: impact on the national economy’s competitiveness of the eu developed countries iryna lomachynska1 odessa i.i. mechnikov national university, ukraine ivelyna podgorna2 institute for market problems and economic and ecological research of the national academy of sciences of ukraine, ukraine abstract. the success of the economy of each country is determined by its innovation development. the purpose of the paper is to investigate the essence of innovation potential and its role in providing the national economy’s competitiveness under the conditions of technological changes on the example of the european union developed countries. the subject of research is the innovation potential of austria and germany. methodology. the study is based on a comparative analysis of approaches to determination and evaluation of innovation potential in specialized economic literature. analysis and synthesis and the system approach were used to outline the entity of innovation potential, to explore and structure its elements in the context of providing the national economy’s competitiveness. the quality and quantity analysis were used to discover general characteristics of the eu countries’ innovation development, special aspects of the national innovation systems of austria and germany, the role of innovation potential in the national economies competitiveness of these countries. the method of mathematical modelling in economics, in particular, regression analysis based on annual data for the period from 1995 to 2015, was applied to assess the impact of innovation potential on the austria and germany competitiveness. the absolute value of gdp and the share of export of goods and services in gdp are used as a dependent variable. elements that characterize the country’s innovation potential were used as independent variables: the share of researchers in r&d of total population, the share of labour force with advanced education of total working-age population with advanced education, expenditure on tertiary education as a percentage of gdp, r&d expenditure as a percentage of gdp, patent applications as a percentage of total population. results of the survey of theoretical works showed that the most multifaceted and comprehensive approach to determining the essence and elements of innovation potential is the “resources-results” approach. this very approach was used for empirical analysis of austria and germany’s innovation potential and evaluation of its impact on the national economic competitiveness of these countries. it has been found that the greatest impact on the development of germany’s national economy is provided by: scientific resources, financial and economic resources, human resources. the most important elements of austria’s innovation potential are financial and economic resources, scientific resources, human resources, as well as the effectiveness of innovation. generally, the results of the empirical study show a significant contribution of innovation potential to the national economy’s competitiveness of the eu developed countries. it was revealed that a pivotal role in the implementation of innovation potential belonged to the state and its efficient innovation policy. practical implications. elements of innovation potential (that has a positive effect upon austria and germany’s economic development) indicate differences in the general characteristics and efficiency of national innovation policy. this allows us to determine and ground the main directions of innovation policy to increase innovation potential efficiency. it was revealed that austria should adjust its education policy: education system should be more oriented towards the r&d development and its implementation in the economy. germany should improve an efficiency of innovation policy (especially in export-oriented industries) and the effectiveness of implementing the r&d results in the baltic journal of economic studies 263 vol. 4, no. 1, 2018 1. introduction innovation is the basis and the driving force of economic growth and the determinant of the national economy’s competitiveness. the external economic priorities of countries are changing under the current conditions of globalization, informatisation, and transformation of world processes. today, one of these priorities is the transnationalization of the world economy through the development of foreign economic activity through the expansion and deepening of bilateral trade and economic relations between countries. in this context, innovation-based competitiveness is becoming a key factor in the success of the countries’ economic development. with the growth of global uncertainty, sustainable development can take place only when it relies on a competitive economy, the researchers note (heiets, danylenko, zhulynskyi, levenets, libanova, & onyshchenko, 2010). according to scientists, modern economic growth is characterized by the defining importance of scientific and technological progress and the intellectualization of the main economic resources. the innovation component of gdp growth of developed countries increased from 1980 to the beginning of the 21st century: from 31.0% to 34.6% in the us, from 30.6% to 42.3% in japan, from 45.5% to 50.0% in europe (heiets, et al., 2010). a great number of international organizations research deals with the study of innovation potential. the development of this problem is actively carried out by the world bank, the us national science foundation, the world economic forum (wef), the organization for economic cooperation and development (oecd), the maastricht economic research institute on innovation and technology (merit, the netherlands), and the commission of the european communities (ces). european countries take 15 of 25 first places in the global innovation index ranking (cornell insead wipo, 2017): germany – 9th; austria – 20th. all this allows us to assume that innovations always have played an important role as the basis of the national economies’ competitiveness of austria and germany. the purpose of the paper is to investigate the essence of innovation potential and its role in providing the national economy’s competitiveness under the technological changes on the example of the european union developed countries. to achieve this goal, it is necessary to solve the following tasks: to determine the essence of innovation potential in the “resourcesresults” approach, to discover and structure its elements for the evaluation of innovation and scientific and technical potential, and to assess their role for competitiveness of the national economies of austria and germany. to solve these problems, the main approaches to the definition of innovation potential were considered in the specialized economic literature, its essence in the context of providing the national economy’s competitiveness was justified on the basis of analysis and synthesis methods; innovation potential elements were systematized using the method of comparative and system analysis. based on the qualitative and quantitative analysis, the special aspects of the eu developed countries innovation policy and austria and germany national innovation systems were determined. further, the influence of innovation potential elements on the competitiveness of austria and germany was evaluated on the basis of mathematical modelling in economics, in particular, regression analysis using annual data for the period from 1995 to 2015. 2. theoretical background of the research during the last decade, a large number of scientific and practical works was devoted to the study of an innovation development, especially within the context of the national economy’s development. various aspects of this problem are covered in the works of such authors as p. drucker, l. fedulova, c. freeman, a. galchynskyi, m. gaman, v. heiets, z. kalcsú, d. magyar, c. nauwelaers, f. porter, a. reid, v. semynozhenko. in the context of the current economic development, the category “innovation potential” deserves a special attention. the concept “innovation potential” was first introduced by c. freeman in the 1970s-1980s. he believed that innovation was a system of measures to develop, exploit, and deplete the economic, social, and institutional capacity of key innovations. the practical aspect of the “innovation potential” concept is reflected in the works of p. drucker, where he studies the sources of modern industry development (drucker, 2009). economy, optimize education and employment policies. value/originality. the obtained results can be used for further developing and improving the investment policy of germany and austria. further research of separate resources and elements of innovation potential will allow expanding the opportunities for the national economy competitiveness increasing that is important in the context of tougher international competition. key words: innovation potential, technology, competitiveness, innovation policy, innovation-led growth, innovation potential elements, eu, austria, germany. jel classification: с50, о32, о33 baltic journal of economic studies 264 vol. 4, no. 1, 2018 the survey of studies (nauwelaers & reid, 1995; kalcsú & magyar, 2009) allows us to generalize that the innovation potential means the ability to create, implement, and master both own and acquired innovations. thus, in general terms, innovation potential can be defined as a set of resources, processes, and conditions that are necessary and sufficient for the implementation of innovation activity to achieve the goals of innovation and technological development. in the economic literature, there are no unified methodological approaches to innovation potential evaluation, distinguishing the structure elements and determining its factors. some authors explain it as a set of innovation resources (financial, material, intellectual, scientific and technical) that provide an opportunity for innovation activity and creation of innovation technology, products, services – it should be considered as a resource approach to the innovation potential definition others examine the innovation potential from the standpoint of the result of innovation: the real product obtained in the innovation process. in this case, the innovation potential is presented as possible, produced in the future, innovative products (kornilov & beliaev, 2012). we are of the opinion that innovation potential should be considered from two sides: the innovation process and the result of this process. thus, the combination of resource-based and results-based approaches deserves the greatest attention. the key indicators for assessing innovation potential in the framework of the resourceefficient approach are presented in figure 1. an identical methodological approach to the evaluation of innovation development is used to determine the global innovation index (gii). gii is an indicator of the countr y ’s innovation and technological development: the efficient use of resources. it is calculated by the method of the international business school insead in conjunction with cornell university and the world intellectual property organization (wipo) and represents the most comprehensive set of indicators of innovation development in various countries of the world. the index is calculated as the average of two sub-indices: available resources and conditions for innovation (innovation input) and practical results (innovation output). thus, the final index is a cost-effectiveness ratio, which allows an objective assessment of the effectiveness of efforts to develop innovations in a particular countr y (cornell insead wipo, 2017). european countries show high results in the gii world ranking. in the gii 2017 report, european countries take 15 of 25 first places in the world ranking. europe is strong in human capital, scientific researches, infrastructure and business development level. european countries are almost leading half the indicators in composing the gii, including the highly skilled specialists’ share in general employment, university and industry cooperation, patent applications and scientific and technical articles and the quality of scientific papers (the world intellectual property organization, 2017). fig. 1. innovation potential in the “resources-results” concept source: developed by the authors baltic journal of economic studies 265 vol. 4, no. 1, 2018 3. innovation development in the european union countries innovation is vital for european competitiveness in the global economy. the eu is implementing policies and programmes to support the innovation development to increase investment in r&d. the eu commission is developing policies that support innovative development in priority areas and sme and helps to accelerate the broad commercialization of innovations, mainly through the program “horizon 2020” (the european commission, 2017). small and medium-sized enterprises (smes) are a priority area in eu innovation policy. the smaller the company, the more it encounters restrictions on innovation or the commercialization of the innovations. according to the european commission (2017), about 63% of companies with from one to nine employees having introduced at least one innovation since 2011, compared to 85% of companies of 500 or more workers. however, an important challenge for smes remains the lack of financial resources to commercialize innovation. innovation takes on enormous importance in crisis periods. the success of national innovation policy depends on the government’s ability to foresee and actively promote the innovations during the depression and recovery periods (akaev, 2010). overcoming structural crises requires the introduction of innovations at the centre of any governments’ decision-making process, while “innovation policy must become growth policy and vice versa” (mazzucato & perez, 2014). at the same time, innovation policy should influence: financial market, labour market and especially taxation (mazzucato & perez, 2014). research and development expenditure (r&d) is the main indicator of public and private sector activities targeted at getting competitive advantages in science and technology. the 20-years statistics of eu countries r&d expenditure dynamic (fig. 2) demonstrates the following. during the 1996–2007 r&d expenditure were stable at 1.6-1.7%. since 2008, the level of eu countries r&d expenditure skyrocketed from 1.77% in 2007 to 1.93% in 2009. the positive trend continued in the following years, and the indicator exceeded 2% in 2012. such dynamics show that the eu pays due attention to innovation development. that is especially important during the fundamental technological changes that are currently going on. the example of the european union developed countries, which achieved a significant result in the construction of an innovation-oriented economy, shows that balanced government innovation policy provides sustainable economic development. thus, government support for innovation sector is extremely important because of the risks that inevitably arise in the process of innovation. for a more in-depth research of the innovation potential and its impact on the national economy of individual countries, in particular, their competitiveness, further we will consider this problem on the example australia and germany. 4. innovation potential of austria austria ranked 15th in the world in terms of gdp per capita (the world bank, 2017). despite the fact that the austrian contribution to the world gdp is about 0.5%, austria took the 20th place in the global innovation index ranking 2016 (the world intellectual property organization, 2017). according to the european patent office (2017), austria ranks 14th in the world ranking by the number of patents registered for the first time and 7th by the patent applications for 1 million citizens. in 2015, the number of patents increased from 1964 to 1992. leaders were power engineering, special machinery, transport, medical technologies, measurement and control instruments. the austrian innovation-based economy determines national high competitiveness. according to the global competitiveness index, austria ranked 18th in 2017 (the world economic forum, 2017) rising to one position. austrian innovation policy analysis shows that the measures designed to create new mechanisms for organizing interaction between the industrial and scientific sectors at different levels are constantly being undertaken in the country. there are great numbers of different business forms, research and industrial centres. clusters and competence centres are the largest of them. a network of clusters was established in 2008 on the ministry of science, research and economics initiative, in cooperation with the federal states. these clusters unite enterprises, technological parks, and scientific centres to support business and science cooperation under the industry 4.0, as well as to increase the smes competitiveness (trade representation of the russian federation in the austrian republic, 2017). fig. 2. research and development expenditure (% of gdp) source: developed by the authors, taking into account (unesco, 2017; the world bank, 2017) baltic journal of economic studies 266 vol. 4, no. 1, 2018 the basis for the austrian high-tech economy sector success is active r&d and focus on the implementation of their results. leading innovation companies are supported at the state level through the austrian research support agency (ffg). it is the national austrian agency for financing industrial r&d. the ffg estimates that around 420-450 million euros are annually allocated as grants to stimulate innovation r&d (trade representation of the russian federation in the austrian republic, 2017). ffg classifies austria as one of the 3 leading european sites for research in the field of ict. in particular, 15-20% of all austrian r & d in ict is channeled into the development of microcircuits. the successful development of ict companies in austria is facilitated by the participation in the eu framework programs (österreichische forschungsförderungsgesellschaft, 2017). the austrian innovation system and its prospects are the subject of constant discussions in political and scientific circles. according to independent assessments, austria does not belong to the so-called innovation leaders, it tops the list of so-called innovation followers – countries whose innovation level is at the level is the average european and higher (the european commission, 2012). summarizing the innovation potential of austria, one can single out a high level of spending on r&d (3.07% of gdp in 2016) (the world bank, 2017). the share of r&d expenditure in austria is at the level of 3.07-3.10% of gdp for the third consecutive year, according to eu targets 2020. according to this indicator, austria is on the third place in the eu after finland and sweden, and above germany with a rate of 2.88% since 2012 (the world bank, 2017). overall private sector financing reached 64 percent (unesco, 2017), which almost corresponds to the optimal ratio of state-business investments, according to european experts: 1/3 to 2/3. at the same time, it is worth noting some potential human resources problems: the share of graduates with higher and higher technical education in austria is almost twice lower than in europe (the world bank, 2017). austria has consistently ranked at a high average among eu innovation ratings: on 8–11th place among 28 eu countries (trade representation of the russian federation in the austrian republic, 2017). there are still several deterrents to improve these ratings: human resources problems, as well as a significant backlog in the development of venture capital financing – in recent years, this indicator as a percentage of austria’s gdp has decreased by 8 percent, while the eu average has grown by 10 percent (trade representation of the russian federation in the austrian republic, 2017). experts believe that an increase of industrial companies innovation potential is possible through comprehensive measures, including: formation of scientific priorities, development of principles for supporting the scientific and industrial sector, personnel training, simplification of research and innovation activity management, sustainable and increasing funding for r&d (trade representation of the russian federation in the austrian republic, 2017). the analysis of the austrian government’s measures in support of r&d shows that there were a number of steps in this direction during the recent years. 5. innovation potential of germany the german economy is the largest, most stable and competitive economy in europe. germany took the 2nd place in the world in global competitiveness index for 2017–2018 (the world economic forum, 2017). over the past 10 years, germany has entered the world’s leading positions in research and innovation spheres, despite the crisis. today, german innovations have the highest demand in the world. the country ranks first in the world in some innovation products research and production, while in others it seeks to reach the leading positions in the near future. germany confidently ranks first in europe in innovation products export: exports of hightech products are 16.6% of total exports in 2016 (the world bank, 2017). the country could not provide such a high innovation products level without investment in science and scientific developments. r&d expenditure to gdp is one of the most important indicators of the national economic development. germany is very attentive to this indicator, evaluating r&d expenditure as an opportunity to provide constant growth and sustainable economic development to maintain national economy’s competitiveness in the world market. in 2015, the total amount of german r&d expenditure reached 112 billion us dollars (the world bank, 2017). state financing reached about 19 billion us dollars when austria has a high degree of dependence on public funding (about 36% of total expenditure on r&d) (unesco, 2017). focusing on the european “strategy 2020” (it is planned to achieve the indicator of r&d expenditure at 3% in the eu countries.), germany has already exceeded its target and seeks to further increase its spending on science and research. this indicator is planned to increase to 3.5% by 2020. priority r&d areas are: energy and ecology, healthcare, communications, engineering and transport, security. key sectors among them are: alternative energy sources, electric car industry, information technology, energy efficiency, health (emphasis on caring for the elderly), healthy eating of the population, etc. (trade representation of the russian federation in the federal republic of germany, 2017). the german government notes the need to maintain high r&d level in the priority field of science and baltic journal of economic studies 267 vol. 4, no. 1, 2018 technology using both governmental and public support mechanisms, improving the professional scientific training in higher education institutions and paying attention to fundamental research that makes it possible to maintain the german science competitiveness in the world. the german r&d management system consists of bodies and departments at the federal and land levels. the council for science (wissenschaftsrat – wr) is one of the main advisory bodies in the field of science that determines the priority areas of scientific research in germany. the main source of r&d funding is the bmbf, the body responsible for the general formation of state r&d policy. the allocation of r&d funds is based on the principle of public-private partnership. the public funding share is about one-third, two-thirds are provided by industry (trade representation of the federal republic of germany, 2017). germany national innovation system (nis) is a complex and diversified system, including government authorities, scientific and educational organizations, high-tech business, primarily smes. in total, there are about 750 research organizations in the frg that receive funds from the state budget. in addition, special centres for research and development have been established, working directly with industrial enterprises. about 460 thousand people are engaged in r&d, about half of them – scientists and engineers (trade representation of the federal republic of germany, 2017). the development of the innovation-based economy is an effectiveness criterion of public policy according to the policy of the german government. the government claims that only innovation-led growth will provide germany with global competitiveness. in this regard, the german government is increasing investment, improving education and research quality, promoting the cooperation between universities, research institutions and the industry. to stimulate innovation processes, a set of measures is being implemented to create favourable conditions for the rapid implementation of r&d results into the industrial sector. german government increased innovation research funding to 3% of production across the country in 2016, the, with a target of 3.5% for 2017 (trade representation of the federal republic of germany, 2017). the r&d development should help to reduce costs of national enterprises, as well as increase their competitiveness. all this makes it possible to evaluate german innovation potential as high one: resource base, conditions for innovation development and implementation, and the practical results achieved in implementing the innovation policy. the method of mathematical modelling in economics, in particular, regression analysis based on annual data for the period from 1995 to 2015, was used to assess the impact of innovation potential on the austria and germany competitiveness. the absolute value of gdp and the share of export of goods and services in gdp are used as a dependent variable. elements that characterize the country’s innovation potential were used as independent variables: the share of researchers in r&d of total population, the share of labour force with advanced education of total working-age population with advanced education, expenditure on tertiary education as a percentage of gdp, r&d expenditure as a percentage of gdp, the patent applications as a percentage of total population. 6. innovation potential as a determinant of competitiveness: empirical research the impact of national economy’s innovation potential on the competitiveness growth was investigated using mathematical modelling in economics, in particular, regression analysis. annual data for the period 1995–2015 were used for the research. we used the value of gdp and exports of goods and services as competitiveness indicators. as independent variables, we defined a number of ones characterizing the national innovation potential (fig. 1): the share of researchers in r&d of total population (χ1), the share of labour force with advanced education of total working-age population with advanced education (χ2), expenditure on tertiary education as a percentage of gdp (χ3), r&d expenditure as a percentage of gdp (χ4), – as a “resource” and the patent applications as a percentage of total population (χ5) – as a “result”. information resources and infrastructure are important elements of the innovation potential having a high level in austria and germany. their role in providing the competitiveness of these countries is beyond doubt. therefore, we do not include these elements in the model. we will investigate the impact of the innovation potential on the absolute value of the gross domestic product (y1) of germany and austria. constructing the model for germany, the variables χ2 χ4 χ5 were excluded from the model as insignificant by step-wise selection of independent and evaluation of their significance. the obtained model has the form: y1= 0,662*χ1 + 0,382*χ3 (1) by analysing the statistical results of the model (1), it was found that the model is significant with 99% probability by the fisher criterion. all independent variables are significant with a confidence level of 99% and affect the dependent variable by the student’s criterion. the r-square and its corrected value are about 0.854 and 0.837, respectively, that means the statistical quality of the constructed model. thus, the dynamics of the number of researchers in r&d and government spending on advanced education has a direct impact on germany’s gdp growth. germany is an export-oriented country that is its competitive advantage in the eu. the share of high-tech baltic journal of economic studies 268 vol. 4, no. 1, 2018 export in the total export of goods is 16.7% (the world bank, 2017). in this regard, we will evaluate the impact of germany’s innovation potential on exports of goods and services (y2). when constructing the model, the variables χ3 and χ5 were excluded from the model as insignificant by stepwise selection of independent and evaluation of their significance. as a result, the following model was obtained: y2=1,737*χ1 – 0,538*χ2 – 1,247*χ4 (2) the model is statistically qualitative according to the r-square and its corrected values are 0.947 and 0.937, respectively. estimating the significance level of the model (2), it can be argued that the model is significant with 99% probability by the fisher criterion. all the coefficients are significant with 99% probability and affect the dependent variable by the student’s test. based on the results of the model, it can be concluded that the growth of german exports of goods and services depends on the increased number of researchers in r&d. the share of labour force with higher education among people of working age with advanced education and expenditures on r&d has a reverse effect on gdp dynamics. it can be concluded that there are some obvious problems in the human resources’ element of the german innovation potential. on the one hand, it is possible to affirm an effective government education policy that has been conducted for many years, as evidenced by direct dependence on gdp. on the other hand, the growth of the labour force with advanced education affects negatively the country’s exports that can also be explained by the consequences of the global financial crisis, the eu debt crisis, and the migration situation in the country, which are typical for the research period. it is necessary to note a nonoptimal structure of higher education graduates in terms of innovation development, namely, the shortage of technical majors graduates. under the current conditions of globalization, the humanitarian, social, and public spheres majors are becoming increasingly popular. growing immigration leads to an increase in the number of people with higher education, but it can be assumed that their education level does not meet the requirements of the modern technological mode of the german economy. the results for germany can also be explained by the fact that high-tech products are mostly sold on the domestic market and are less exported due to a high price competition in international markets. competition with asian countries leads to a cost increase of new patents, so the r&d comparative costs are also increasing. during the regression analysis, there has been revealed an ambiguous interconnection between the economic competitiveness and r&d expenditure and not revealed the interconnection with patent applications. thus, despite the high efficiency of germany’s innovation policy, its effectiveness is insufficient. this can be explained by the fact that not all r&d results are fully implemented. so, germany should further strengthen its position in the world high-tech products market by searching for new ways to reduce its cost, needs to improve the policy orientated on speeding up the broad and effective implementation of r&d results in the real sector of the economy. to analyse the impact of innovation potential on the competitiveness of austria’s national economy, we will construct a regression model using a similar set of independent variables and the volume of gdp as a dependent (y3): y3 = 0,194*χ1 + 0,808*χ4 + 0,232*χ5 (3) after the analysis in spss, it can be concluded that this variation of factors are largely explained the selected dependent variable, according to the determination coefficient and its corrected value are 0.931 and 0.916. the evaluation of the model showed that all coefficients are significant and affect the dependent variable by the student’s test, and the dependence is significant with 99% probability by the fisher criterion. so, the positive impact on the gdp of austria is provided by researchers in r&d, r&d expenditures, and the patent applications. the share of high-tech export in the total export of goods and services in austria is 13.4% that is lower than in germany (the world bank group, 2017). the impact of innovation potential on the volume of exports of goods and services (y4) as an indicator of the austrian competitiveness will be examined. as a result of regression analysis, the following model was obtained: y_4 = 0,798*χ1 0,667*χ3 + 0,519*χ4 (4) the model evaluation (4) determined the high level of its significance by the fisher criterion. by the student’s criterion, all independent variables are significant with 95% confidence level and affect the dependent variable. the r-square and its adjusted value are 0.835 and 0.799, respectively. as a result, it can be summarized that the researchers in r&d and r&d expenditures have a direct impact on the export of goods and services, as well as gdp. the expenditure on tertiary education and the export of goods and services in austria are inversely related. there is no correlation between patents and gdp. so, the results of researching the impact of innovation potential on gdp and the export of goods and services in austria are almost identical. it can be generalized that, other things being equal, austria innovation potential in the context of the national economy’s competitiveness is used more efficiently than germany in the period under study. it should be noted that as the scientific, financial, and economic resources of baltic journal of economic studies 269 vol. 4, no. 1, 2018 the innovation potential, as the results of innovation activity have been identified with the positive effect for austria’s gdp. however, the impact of the human resources of innovation potential on austria’s gdp was not revealed. in this regard, the austrian government should further integrate the education system with the development and implementation of r&d in economic activity. moreover, the model of the dependence of exports and advanced education expenditures revealed an inverse dependence. it can be assumed that this is a consequence of austria’s modern education policy aimed at the growth of graduates with higher technical education the indicator is almost half that the eu average (the world bank group, 2017). as a result, there is a large investment in education today, and return on investment is expected in the future. such disputable modelling results for both countries can be explained by the fact that the study period is a recession phase of the long economic cycle. moreover, the indicators used for the mathematical modelling are not completely objective: it is more profitable for multinational companies, which are mainly implementing the newest technologies in mass production, to carry out production in subsidiaries than to produce goods and services in its own countries of origin and then export them. 7. conclusion under the modern conditions of technological changes and globalization, it is important to use innovation potential to provide the development of national economy and increase its competitiveness. the most complete and comprehensive approach to the evaluation of innovation potential is the “resourcesresults” approach. the main elements of the innovation potential are scientific, human, technical, financial and economic, information resources, as well as the effectiveness of innovation (patent applications, the volume of exports of high-tech products, etc.). germany and austria as developed countries have sufficient information resources and are characterized by a high level of infrastructure development. analysis of the innovation potential elements impact on gdp and export of goods and services in germany and austria revealed that the greatest impact on the national economy’s competitiveness of developed eu countries is provided by scientific, financial and economic and human resources. for austria, the significance of the effectiveness of innovation has been also revealed. generally, innovation potential plays an important role in providing the competitiveness of the austria and germany national economies in the global economy. at the same time, the innovation potential is not fully utilized. among the reasons for this are economic, financial, social instability as a result of the 2008 global financial crisis, the eu debt crisis, migration processes. in addition, the human resource is not optimal. in this regard, countries need to correct the innovation policy aimed at strengthening the interconnection between the innovation potential elements. austria should pay more attention to the integration of such elements as education, science, r&d development and implementation. it is advisable for germany to improve the innovation policy in the context of increasing efficiency and effectiveness of implementing the r&d results in economic activity, as well as the creation and use of human resources. references: akaev, a. a. 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(2017). gross domestic expenditure on r&d (gerd). retrieved from: http://uis.unesco.org/indicator/ sti-rd-gerd-total baltic journal of economic studies 68 vol. 4, no. 3, 2018 corresponding author: 1 department of banking, odessa national economic university. e-mail: zavadska.diana@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-68-73 determining the role of banks in the financing of innovative development processes of the economy diana zavadska1 odessa national economic university, ukraine abstract. the paper states that the success of ukraine’s development, in the context of the transition to the model of ukraine’s innovative development, contributes to a clear choice of priorities, among which the main thing is to ensure high rates of economic growth. the role of banks in reproductive processes is proved, which corresponds to modern problems of innovative development of the ukrainian economy. the scientific approaches of various economic theories (neoclassical, monetarist, keynesian, institutional, and the concept of financial mediation) are investigated. advantages of studying the world experience of economic theory are to determine its connection with banking activities. but this does not entail the task of carrying out a complete historical study of all economic concepts relating to the impact on the economic development of the financial market itself and its subjects. the author highlighted the task of studying the relationship of development, participation of banking sector actors, and trends in the development of new paradigms in the theory of financial intermediation. the purpose of the article is to conduct an analysis of the theoretical provisions on determining the role of banks in financing innovative development of the economy. methodology. the information base of the research is the results of scientific research results in determining the influence of the monetary sphere, interest rates, production, investments, and state on the processes of reproduction of the economy, published in monographic studies and publications in periodicals. during the research, methods of logical generalization, comparative analysis, system approach that takes into account the dynamic functional dependence between the state of the whole, development and the balance of its constituent elements are used. results. the article emphasizes that the issue of activating the activity of banks in the investment market has become particularly significant. a critical analysis of research and development of leading scholars has led to the conclusion that there is no generally accepted idea of determining the place and role of banks in the growth of the country’s economy. it is established that the representatives of neoclassical theories of mediation most thoroughly considered the theoretical positions regarding the definition of the role of banks in the revitalization of economic growth. practical implementation. the practical significance is in the fact that scientific research clearly, understandably, and consistently proves the importance of the participation of banks in reproductive processes. the results obtained in the future will be used to develop recommendations for defining the directions of interaction between banks and enterprises of the real sector of the ukrainian economy in order to enhance the processes of bank financing of innovation development of the economy. value/novelty. the article substantiates the special role of banks in economic growth, which is determined by the increase in business activity, the impact on the increase of money supply in circulation, the priority of credit operations aimed at the country’s crisis recovery. key words: economic theories, bank, role, financing, economic growth, innovative development. jel classification: e1, o1, o2, o3 1. introduction a particular task for the development of ukraine’s modern economy is to increase the role of banks in shaping the necessary resources for implementing innovation policy. in order to ensure the innovative development of the domestic economy, necessary are the creation of new production capacities, renewal of fixed assets, which is crucial for the growth of labour productivity, resource conservation, and ensuring the competitiveness of ukrainian products. these transformations require large-scale innovation-oriented investments, provided with appropriate sources of financing. in this regard, the issues of development of bank loans, as sources of funding for projects of baltic journal of economic studies 69 vol. 4, no. 3, 2018 modernization of the real sector of the economy, are of particular importance. major difficulties in implementing the innovative potential of the ukrainian economy actualize the need to increase the role of bank loans and, accordingly, the banks and they are characterized by insufficient volumes of domestic resources of domestic enterprises, low rates of structural transformations, inefficient government support, lack of policies to stimulate investors, imperfect legislative framework, high credit risks, associated with insufficient solvency of enterprises, underdevelopment of innovation and investment infrastructure. 2. problem statement due to the objective need to attract investment resources to innovative programs and projects focused on priority areas of economic development in ukraine, the issue of activating the activities of commercial banks in the investment market has gained a special significance. participation of the banking sector in solving a multifunctional and complex problem of the formation and development of innovative business in ukraine requires the scientific basis for the development and implementation of an effective investment and financial policy of commercial banks. the necessity to fulfil the abovementioned important strategic objectives of the innovative development of the domestic economy requires to define the role of banks in reproductive processes that would meet the current specific conditions of global financial instability and the objectives of the innovative development of ukrainian economy and to form the theoretical basis for practical measures of the impact of modern banks on economic growth, which determined the purpose of our study. the purpose of research is to conduct an analysis of the theoretical provisions on determining the role of banks in financing innovative development of the economy. 3. results the analysis of economic literature made it possible to conclude that the problems of determining the place and role of banks in the reproduction process are discussed by researchers for a long time, but there is no generally accepted opinion. in our view, among a large number of different theories, which substantiate scientific approaches to determining the impact of banks on economic growth, the role of banks is most thoroughly disclosed in the neoclassical, keynesian, institutional economic theories and paradigms of financial intermediation. 3.1. the role of banks in neoclassical economic theory representatives of neoclassical school (böhm-bawerk, 1890; menger, 1871; fisher, 1907; wicksell, 1935; wicksell, 1936; hicks, 1939) considered necessary to conduct a more detailed study of conditions of market equilibrium, studying the mechanism of functional relations in the field of monetary and credit relations. i. fischer was a supporter of ideas for regulating the investment cycle through monetary policy. in the research paper “the theory of interest” (fisher, 1930) he made an attempt to create an investment model of the economy and considered the reproduction regulator as the difference between the expected rate of return on investment and the rate of interest. i. fischer emphasized that for investments it is necessary that the rate of income necessarily exceeds the rate of interest. further development of the provisions of the neoclassical school has been affected by such important factors as the aggravation of problems of resource limitation, false choice, and asymmetry of information. actions of central banks to stimulate the supply of money, which ensure the continuity of reproduction, led to an increase in the cost of obtaining fast and reliable information and related credit risks. the above resulted in lower readiness of banks to lend to innovative projects of the real sector of the economy. followers of the neoclassical direction determined the money supply as the single most important factor affecting the level of production, employment, and prices, emphasized that the change in the money supply directly affects aggregate demand and nominal gdp. as the main factor of changes in economic activity, they recognized the changes in solvent demand for goods and services caused by the inability to stabilize the cash flow in the absence of complete information on future development. 3.2. the role of banks in monetarist economic theory the next direction of economic theory, which determines the role of banks in economic development, is the monetary theory. theoretical studies of monetarists (mill, 1848 (1909); mill, 1867; pigou, 1927; marshal, 1923; marshal, 1879; friedman, 1948) developed on the grounds of the need to develop special activities (institutional measures) and increase state expenditures aimed at reducing information risks and developing the credit market, as well as open market operations, which have an impact on banks’ reserves and lending rates. m. friedman and other monetarists (friedman, 1968; friedman, 1970; johnson, 1971; thornton, 1995) considered a relatively high share of deposit money in the money supply as the basis of the influence of the central bank on the corporate sector. therefore, they attached a special importance to administrative methods of influencing the lending activity of banks and the regulation of money supply. the identified methods, in their opinion, should influence the distribution of resources between industries, supporting economic activity, which will increase the role of banks in innovative economic development. baltic journal of economic studies 70 vol. 4, no. 3, 2018 3.3. the role of banks in keynesian economic theory although representatives of keynes’s theory (keynes, 1936; stiglitz, sen & fitoussi, 2008 (2016); tobin, 1970; tobin, 1981 (2004)) preferred the study of production processes in their research papers but did not assign the essential role to banks and their influence on reproduction processes. they argued that the basis of economic growth is an increase in the volume of government spending and investment, rather than the activities of business entities and banks. consequently, the supporters of the keynesian theory in their studies devoted a considerable attention to determining the role of the state in macroeconomics. in contrast to the neoclassicists, who determined the basis of economic development in exchange, the keynesian theory’s representatives did not deny the importance of exchange but determined the dominant role of the production process, which creates added value. keynesians, highlighting the special role of the central bank, argued that with the help of state intervention in the money market it is possible to regulate the interest rate in the long run. in their view, monetary policy should actively promote economic growth on the basis of providing a sufficient amount of money in circulation and, consequently, the maximum reduction of the interest rate. later, the followers of this theory argued that money is important, but economic management with monetary policy is not so effective means of stabilization as a fiscal policy. thus, the keynesians underestimated the role of banks and their influence on reproductive processes and considered the basis of economic growth as an increase in government spending or public investment, rather than an increase in money in circulation and volumes of bank loans. 3.4. the role of banks in institutional economic theory new trends in the development and change of banks’ role in reproduction processes are defined in their scientific works by representatives of the institutional direction of economic theory. it should be noted that in the early stages of the development of the theory of institutionalism, its representatives denied the possibility of a positive role of banks in financing the economy. for example, the classics of institutionalism (veblen, 1904 (2007); commons, 1934; galbraith, 1967 (2008)) assessed bank capital as parasitic and denied the positive influence of banks on the processes of reproduction of the economy. under the institutions, they understood, first of all, the socio-psychological phenomena of the life and activities of people who rely on their habits and are enshrined in legal acts, that is, they investigated the economy on the basis of law and politics. subsequently, representatives of neo-institutionalism (coase, 1990 (1993), north, 1990; north, 2005) acknowledged the possibility and need for state influence on monetary, financial, and credit institutions. they investigated the banking business using the categories of “consumption”, “utility”, and “alternative costs”. later, under the influence of w. mitchell (mitchell, 1913 (1929)), representatives of institutionalism began to recognize the possible and necessary state influence on the development of the economy based on monetary, financial, and credit factors, in conjunction with socio-cultural problems and taking into account psychological aspects. the development of industry, the strengthening of the role of banks in the financial market, the changing conditions of the functioning of the economy under the influence of globalization, information and communication technologies have become the subject of an analysis of the main provisions of the theory of institutionalism, which was formed as a special direction of economic theory in the early twentieth century. the basis of the standard provisions of the modern institutional-evolutionary theory was the recognition of the growing role of banks in economic development. the most important role here was played by j. schumpeter (schumpeter, 1912 (1982)), who unambiguously linked banks with the nature of market economies: “the banker, therefore, is not so much primarily a middleman in the commodity “purchasing power” as a producer of this commodity … he has himself become the capitalist par excellence … he is essentially a phenomenon of development, though only when no central authority directs the social process. he makes possible the carrying out of new combinations, authorises people, in the name of society as it were, to form them. he is the ephor of the exchange economy.” consequently, the recognition of the essential role of banks in economic development has become one of the standard provisions of modern institutionalevolutionary theory. the merit of the representatives of this theory, especially j. schumpeter, is the study of issues of functioning of the banking sector, caused by the transition from the state monopoly to banking autonomy, issues of interconnection of banks and the real sector of the economy, the formation of the market of banking products and services, which, in our opinion, became a prerequisite for intensifying the participation of banks in financing the needs of innovative development of the economy (schumpeter, 1934 (2011); schumpeter, 1939). 3.5. the role of banks in financial intermediation concepts at the end of the twentieth century, a new concept of the theory of financial intermediation begins to form in relation to determining the role of banks in activating the processes of economic reproduction, the essence of which is to consider the bank as a growth multiplier (hodgman, 1961; hodgman, 1963; king, 1986; sinkey, 1979; sinkey, 1992). baltic journal of economic studies 71 vol. 4, no. 3, 2018 this concept is based on the effect of deposit expansion – the expansion and growth of deposits under the influence of issued loans, also known as the multiplier effect, on the basis of which investment leads to the growth of production through the chain of technological connections in the economy. it should be noted that the effect of the banking multiplier was noted in the research by j. schumpeter. he emphasized that banks finance new loans when creating new deposit money. that is, in all cases when a borrower has received a new loan from a bank, this loan is issued through the creation of a new deposit for the same amount and on behalf of the same client, which was considered a very serious factor in the vulnerability of financial systems. note that in modern neoclassical theories of intermediation in providing funds available for lending, banks are considered as intermediaries in the distribution of real savings. the process of lending in this version begins with the attraction of banks deposits from depositors at the expense of real resources from their previously accumulated savings and ends with the provision of the same real resources on loans to borrowers. but in real terms, the functioning of financial intermediaries of such institutions simply does not exist. modern banks create new money, which, in turn, creates conditions for increasing the volume of financing of innovative needs of economic development during the period of growth. but at the same time, banks, with the insufficient regulation of borrowing and borrowing processes, accumulate risks. from the beginning of the twenty-first century, under the influence of the development of innovations on the basis of new information and communication technologies, globalization, knowledge economy, researchers began to pay more attention to the participation of banks in financing innovations. for example, the role of the banking sector in financing innovation has been evaluated in studies by a number of analysts. in the work of a. herrera and r . minetti (herrera & minetti, 2007), the influence of banks on innovation through lending is considered. the authors emphasize that the duration of credit relations positively affects the innovative activity of companies. this effect is more important for food products than for technological innovations. researchers also note that banks do not have special knowledge to develop and evaluate innovation, but simply finance those investments that create conditions for the introduction of new technologies. in their scientific works, researchers e. alemani, с. klein and others (alemani, klein, koske, vitale & wanner, 2013) emphasize the significant role of the banking sector in the innovative development of the technological process. innovation activity was stimulated mainly by intergovernmental banking deregulation. the research of other authors was conducted in the plane of assessment of the impact of banking deregulation on the level of innovation risk. in the course of this study, the authors conclude that national and intergovernmental banking deregulation has a significant impact on the level of innovation risk for new private firms, while it does not affect the investment of government firms and mature private firms. in terms of activation of innovative processes and the need of their financing, an important issue is the definition of limits and possibilities of the presence of banks in the venture market. in the research of t. hellmann (hellmann, lindsey & puri, 2008), the role of the bank as a venture investor is investigated in detail. it has been shown that banks are oriented on those enterprises, which in the future can switch to banking services. thus, banks are given the opportunity to get a synergistic effect from the combination of venture and banking business, which gives them an advantage over venture companies. this trend was proved on the basis of data analysis of specific enterprises: the largest increase in lending was observed in those companies, which investments were carried out by banks, while those companies that received venture capital from venture companies showed fewer dynamics. 4. conclusions the obtained results allow formulating the conclusions that: 1. the neoclassical direction of economic theory, formed in the conditions of development of the industrial-market economy, paid attention to the study of conditions of market equilibrium, the mechanism of functional relations in the field of exchange, that is, representatives of the neoclassical school in their scientific works pay more attention to the processes of exchange than their predecessors. 2. monetarists grounded the role of monetary policy as the main instrument that determines the level of economic activity and the possibility of financing innovation. 3. economic stability, in the opinion of the keynesians, is ensured by the state support through the regulated system of relations between the state and the banks, by encouraging investment and innovative bank loans with a low-interest rate. 4. determining the role of banks as intermediaries passively performing the technical function of monetary mediation of exchange transactions in the financial market is unlawful in accordance with the institutional direction of economic theory. 5. according to the views of the representatives of the theories of financial intermediation, the role of banks is manifested in: increased business activity, the ability to influence the growth of money supply in circulation, the promotion of economic growth, and the country’s crisis recovery, baltic journal of economic studies 72 vol. 4, no. 3, 2018 which requires qualitative and adequate regulation of their activities at the micro and macro levels; the possibility of venture investments with the further involvement of companies in banking services. however, the priority, when performing the role of a venture investor, is the implementation of credit operations. 6. the analysis of the content and peculiarities of each of the theories considered in the article allows concluding that it is precisely the works of scientists-representatives of the neoclassical theories of intermediation that the most thoroughly consider the theoretical positions that further will be used by us in determining effective areas of interaction between banks with clients, developing fundamentally new banking instruments for investing in innovative business, the use of which will help to increase the role of banks in the innovative development of ukraine. references: böhm-bawerk e. 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(2013). new indicators of competition law and policy in 2013 for oecd and non-oecd countries. oecd economics department working papers. hellmann t., lindsey l. & puri m. (2008). building relationships early: banks in venture capital. review of financial studies, vol. 21, no. 2, pp. 513-541. baltic journal of economic studies 70 vol. 4, no. 2, 2018 corresponding author: 1 department of economic cybernetics, vasyl stefanyk precarpathian national university. e-mail: dmytryshyn_l@hotmail.com 2 department of tourism and hotel and restaurant business, king danylo university. e-mail: lena_zl@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-70-77 innovations as a priority factor of the regional economic development lesia dmytryshyn1 vasyl stefanyk precarpathian national university, ukraine olena zvarych2 king danylo university, ukraine abstract. the goal of the paper is to study the role and assess the innovation impact on the economic development of the region. methodology. theoretical and methodological foundations of the research draw the works of scientists on the problems of economic development of regions. in the process of scientific research, a complex of such methods was used: content analysis, generalization, systematization – in order to specify the conceptual-categorical apparatus and identify features of innovation; dynamic, statistical, comparative analysis – when identifying the innovation influence features on the economic development of the region, mathematical modelling in economics – to develop a methodology for assessing the innovation impact on the economic development of the region. results. features of an innovative approach to the economic development of regions in the context of obtaining sustainable competitive advantage and strengthening of positions of regions on the international arena. the analysis of the innovativeness level of the regions’ development was carried out and the methodical approach for determining the degree of innovation effectiveness in a hierarchical regional section was proposed, which is based on the use of tools of the multidimensional statistical analysis. at the same time, the effectiveness of regional innovation involves the implementation of these stages: formation of the statistical data matrix on the basis of the regional innovation factors by types of input and output, defying the degree of innovation of each region, determining the innovation effectiveness measure in the hierarchical regional context. it is established that the semantic interpretation of the regional innovation effectiveness requires clarification of the classification procedure of regions taking into account the chosen methodology for the correlation of input and output indices. it is substantiated that the innovation efficiency definition should take into account interregional differentiation, as a result of which the measure of the effectiveness of regional innovation, which takes into account: the ties between the country and regions forming a hierarchical structure, the connections between the innovation index of the region of input type, and the innovation index of the region of output type. practical importance. it is established that the use of a single combined indicator and the rating table does not allow you to track the complexity of the innovation process itself, with innovation indicators shifting in favour of those countries specializing in high-tech industries, in particular, in high-tech manufacturing. the significance of the influence on innovation, in addition to financial, economic, and educational factors is substantiated, as well as technological, organizational and managerial, and especially social and psychological factors. on the basis of calculating the innovation efficiency of regions for the different values of the given index, it is established that its magnitude affects the place of the region in the classification of regions taking into account the chosen methodology of the correlation of input and output indices. in determining the degree of innovation effectiveness in the national context, it is proposed to use the regional innovation multiplier. its value directly determines the position of the country with regard to the effectiveness of the use of innovations in a regional context and, therefore, can serve as a benchmark for national policy in this aspect. importance/originality. on the basis of the conducted research, a methodical approach is proposed to evaluate the effectiveness of regional innovation on fundamentally new principles, which add an opportunity to reproduce the innovative potential and increase the technological and the information level of all spheres of economic activity of the region, to achieve a high level of competitiveness of its activity. key words: region, economic development, innovations, innovation index, regional innovation effectiveness. jel classification: r10, o10, o30 baltic journal of economic studies 71 vol. 4, no. 2, 2018 1. introduction innovation is one of the determining factors in the competitiveness of the regions. the modern role of the economic region in the global economy is determined by the localization in its space of innovation and creative activity. the region, aimed at introducing innovations, undergoes continuous transformations, creates highly technological products, timely adjusts its strategic goals, which leads to stagnation. an innovative approach to the economic regions’ development contributes to the efficient use of the potential and resources of these spatial units, as a result of obtaining a sustainable competitive advantage and changing the place of economic regions on the international arena. in the regional innovation system, different types of institutions have, to varying degrees, implemented the functions of production, circulation, and absorption (lundval, 1992). absorption of knowledge is basically enterprises, for the production of knowledge corresponds to universities and research institutions, both private and governmental. the circulation of knowledge is due to such factors as the regional innovation system, the business context institutions, regional authorities, innovation financing institutions, as well as research organizations and universities. given the role that innovation processes play in today’s economy, identifying and taking into account their peculiarities is a necessary condition for ensuring the economic development of the regions and the state as a whole (dolishnii, 2006). the concept of “innovation” is interpreted as the transformation of potential scientific and technological progress into an actual, resulting in new products, technologies, methods of production (peresada, 2002). in spite of numerous developments, it should be noted the need for further development of scientific-methodological principles and practical recommendations for the analysis and assessment of innovation in the economic development of the regions, especially in the context of prospects for the development of interregional integration processes (storonianska, 2009). in connection with the foregoing, the goal of the research is to study the role and assessment of the innovation impact on the economic development of the region. 2. research results further, to determine the level of innovation of the regions of ukraine, it is proposed to use, on the one hand, the structural dimension of development as an instrument of multidimensional statistical analysis, and on the other hand, indicators of the european innovation scoreboard (eis) 2017 (“methodology report”, 2017). based on this approach, it is proposed to determine the effectiveness of regional innovation in the next sequence: – to form the matrix of statistical data on the basis of regional innovation factors separately by input and output types; – to determine the innovation measure in each region; – to determine the innovation effectiveness measure in a hierarchical regional context. determination of matrices of statistical data. the european innovation scoreboard defines four distinct areas for identifying regional innovation: 1) knowledge creation and entrepreneurship; 2) investments; 3) innovative activity; 4) influences. allocated spaces can be grouped in the form of matrices by the following hierarchical or metric characteristics: – in the national context, – in terms of regions in each country, – in the context of the meters of each group of input, – in the context of the meters of each group of output. according to indicator characteristics, indicators of regional innovation are grouped separately by input and output types and their respective national statistically calculated indicators and units of their measurement are selected (table 1). construction of the regional innovation index. the next step is to build an innovation measure in the region type of input and output. the construction of the regional innovation index of the input type relies on the partial indices defined for the two groups of meters: – knowledge creation and entrepreneurship; – investments. the partial index of regional innovation type of input for each metric group using data for all regions in all countries is the arithmetic mean of the normalized values of each indicator for each region in each country. the normalized value is defined as the ratio of the deviation of the indicator from the minimum in the country to the deviation of the maximum and minimum values countrywide. thus, we obtain a value, which changes range is from 0 to 1. the construction of the output regional innovation index relies on partial indexes for defined groups of metrics: – innovative activity; – influences. the principle of calculating partial indices is the same as for input indexes. the constructed partial indices serve to construct regional innovation indices of input and output. these indices are, by analogy, the arithmetic mean of their partial indices. therefore, their values will also vary in the interval [0, 1]. since all eis indicators are stimulators, then the interpretation of the indices is as baltic journal of economic studies 72 vol. 4, no. 2, 2018 follows: the closer to 1 index value shows the higher innovation input or output type. both indices also enable the regions to be organized according to their level of regional innovation at the national level, taking into account the costs of innovation and the effects of innovation. an important criterion for assessing regional innovation is its effectiveness. the basis for assessing the innovation efficiency of the region is the size of the input and output type indexes. such an approach will allow the allocation of the regional spaces of the following classes: class i includes regions, for which the value of the input index is higher than the value of the output: input output > +1 α , where α – the value, given a priori. class ii includes regions, for which the value of the indices input and output is equal: 1 1− ≤ ≤ +α α input output . class iii includes regions, for which the value of the input index is lower than the output value: input output < −1 α . introduction of the parameter α to determine the effectiveness of the region’s innovation will allow individualizing the estimates through the perception of the researcher’s assessment. the presented procedure of measuring regional innovation allows determining the extent, to which the innovation of the region is effective (strahl, 2007): m k k n nk n ck= = =10 1 1, ,..., , ,..., , where c=0,1,2; mk n – a measure of the innovation efficiency of the region p, which belongs to the country p. the effectiveness of the country’s innovation. the measure of the effectiveness of the country’s innovation p in the hierarchical region is determined by the formula (strahl, 2007): meik m k k n k n k k = ⋅ = ∑ 1 100 , where meik – a measure of the effectiveness of the country’s innovation p; mk n – the innovation efficiency table 1 indicators of regional innovation by input and output types indicators of regional innovation calculation methodology and measurement units factors that represent regional innovation of input type 1 knowledge creation and entrepreneurship 1.1 human resources 1.1.1 the number of postgraduate alumnus number of postgraduate alumnus per 1 thousand population, % 2 investments 2.1 finance and support 2.1.1. r&d w expenditure in the public sector the ratio of r&d w expenditures in the public sector and the higher education sector to the grp, % 2.2 brand investments 2.2.1 r&d w expenses in business ratio of cost of r & d w in business to grp, % factors that represent regional innovation of output type 3 innovative activity 3.1 innovators 3.1.1 industrial enterprises with new products or processes the ratio of the number of industrial enterprises to new products or technological processes to the total number of industrial enterprises, % 3.1.2 industrial enterprises with marketing and organizational innovations the ratio of the number of industrial enterprises that implemented marketing and organizational innovations to the total number of industrial enterprises, % 3.1.3 industrial enterprises with innovations in the company the ratio of the number of industrial enterprises that introduced new products or processes both in their own production and in other companies to a large number of industrial enterprises, % 3.3 intelligent assets 3.3.1. patent applications the share of applications for inventions in gdp adjusted for cpi, % 3.3.2 trademark orders the share of patents in gdp adjusted for cpi, % 4 influences 4.1 influence on employment 4.1.1 employment in activities requiring knowledge the ratio of the number of employees involved in the implementation of research and development to the gdp adjusted for cpi, % baltic journal of economic studies 73 vol. 4, no. 2, 2018 measure in the region p, which belongs to the country p; к – the number of regions in the n-th country, n n= 1 2, ,..., . it is easy to note that the value of the measure of innovation efficiency in the hierarchical regional section belongs to the numerical range [0,01; 1]. measures closer to the minimum mean that the country has a weak position in terms of the innovations’ effectiveness in a regional context, and closer to 1 values indicate the high efficiency of innovation in the country in a regional context. the demonstrated approach to determining the measure of innovation efficiency in a hierarchical regional section is based on the use of instruments of multidimensional statistical analysis and the statistics data of the european union or the state statistics service of ukraine in the field of innovation. empirical results. the analysis of innovation was carried out on the example of indicators, shown in table 1 for the regions of ukraine for the period of 2010–2016. on the basis of normalized values, matrices of indices of regional innovation are formed separately according to the input and output types (table 2-3). since all eis indicators are stimulators, the closer to 1 index value shows higher innovation input type. as can be seen from figure 1, for the period under the study, the highest level of innovation is inherent to kyiv and kharkiv region. all other regions have values lower than 0,25. accordingly, it can be concluded that there is no regional and state policy to stimulate and support innovation, as the costs for them are too scanty, especially on a regional scale. all funds for innovation remain in the centre, thus stimulating the development of the economy of regions of ukraine on the principle of “centre-periphery”. such centripetal model leads to decrease in the interest of domestic and, in particular, foreign investors in the regional innovation support, and, on the other hand, further concentrates innovation potential in the centre. regarding the results of the introduction of innovations, the leading positions are again occupied by kharkiv region, kyiv and sevastopol cities (figure  2). somewhat higher values in comparison with the input index are zaporizhzhia, sumy, odesa, ivano-frankivsk, mykolaiv, and lviv regions. this suggests that innovation, besides financial-economic table 2 indices of input regional innovation, % 2010 2012 2013 2014 2015 2016 ukraine 0,22 0,22 0,22 0,24 0,14 0,17 autonomous republic of crimea 0,13 0,10 0,09 -* -* -* vinnytsia 0,05 0,03 0,02 0,06 0,04 0,03 volyn 0,03 0,03 0,04 0,05 0,17 0,17 dnipropetrovsk 0,13 0,13 0,12 0,15 0,07 0,10 donetsk 0,09 0,07 0,08 0,02 0,01 0,00 zhytomyr 0,02 0,02 0,02 0,04 0,03 0,02 zakarpattia 0,04 0,05 0,06 0,07 0,02 0,02 zaporizhzhia 0,21 0,22 0,18 0,21 0,18 0,28 ivano-frankivsk 0,12 0,09 0,04 0,06 0,07 0,06 kyiv 0,12 0,10 0,09 0,10 0,01 0,03 kirovohrad 0,01 0,01 0,01 0,03 0,02 0,01 luhansk 0,05 0,06 0,05 0,04 0,13 0,10 lviv 0,29 0,22 0,24 0,26 0,14 0,12 mykolaiv 0,08 0,08 0,08 0,10 0,05 0,05 odesa 0,15 0,16 0,16 0,19 0,13 0,13 poltava 0,03 0,04 0,05 0,06 0,04 0,04 rivne 0,02 0,01 0,01 0,03 0,03 0,03 sumy 0,09 0,15 0,10 0,16 0,08 0,09 ternopil 0,04 0,04 0,04 0,04 0,36 0,36 kharkiv 0,69 0,70 0,72 0,76 0,45 0,45 kherson 0,07 0,06 0,06 0,08 0,02 0,02 khmelnytskyi 0,01 0,02 0,02 0,01 0,03 0,02 cherkasy 0,05 0,05 0,05 0,07 0,04 0,04 chernivtsi 0,11 0,07 0,07 0,10 0,05 0,04 chernihiv 0,03 0,03 0,02 0,05 0,02 0,01 kyiv city 0,79 0,77 0,76 0,76 0,49 0,61 sevastopol city 0,25 0,20 0,26 -* -* -* * – no data available. baltic journal of economic studies 74 vol. 4, no. 2, 2018 table 3 indices of output regional innovation, % 2010 2012 2013 2014 2015 2016 ukraine 0,33 0,37 0,38 0,40 0,40 0,40 autonomous republic of crimea 0,13 0,10 0,12 -* -* -* vinnytsia 0,20 0,26 0,37 0,29 0,25 0,25 volyn 0,08 0,16 0,14 0,10 0,11 0,16 dnipropetrovsk 0,23 0,24 0,27 0,28 0,23 0,35 donetsk 0,17 0,22 0,21 0,22 0,10 0,12 zhytomyr 0,15 0,33 0,33 0,15 0,26 0,23 zakarpattia 0,28 0,24 0,19 0,25 0,36 0,25 zaporizhzhia 0,31 0,47 0,50 0,46 0,46 0,47 ivano-frankivsk 0,29 0,43 0,44 0,45 0,35 0,29 kyiv 0,15 0,15 0,22 0,21 0,25 0,24 kirovohrad 0,14 0,23 0,28 0,24 0,41 0,23 luhansk 0,11 0,18 0,18 0,21 0,22 0,10 lviv 0,31 0,29 0,32 0,40 0,45 0,43 mykolaiv 0,25 0,31 0,34 0,34 0,56 0,41 odesa 0,26 0,35 0,35 0,37 0,48 0,45 poltava 0,09 0,07 0,10 0,09 0,24 0,16 rivne 0,11 0,21 0,24 0,22 0,09 0,12 sumy 0,47 0,44 0,39 0,38 0,43 0,41 ternopil 0,21 0,39 0,22 0,27 0,34 0,49 kharkiv 0,67 0,81 0,85 0,94 0,94 0,94 kherson 0,21 0,28 0,32 0,29 0,36 0,27 khmelnytskyi 0,15 0,42 0,35 0,20 0,16 0,12 cherkasy 0,25 0,29 0,30 0,23 0,29 0,27 chernivtsi 0,24 0,24 0,21 0,21 0,41 0,38 chernihiv 0,14 0,25 0,26 0,16 0,16 0,20 kyiv city 0,75 0,73 0,72 0,69 0,57 0,60 sevastopol city 0,56 0,70 0,50 -* -* -* * – no data available. 0,01 0,02 0,02 0,03 0,03 0,04 0,04 0,04 0,05 0,05 0,05 0,07 0,07 0,07 0,07 0,07 0,08 0,11 0,11 0,12 0,15 0,15 0,20 0,21 0,21 0,24 0,63 0,70 0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 kirovohrad khmelnytsk rivne zhytomyr chernihiv vinnytsia poltava zakarpattia donetsk cherkasy kherson chernivtsi luhansk mykolaiiv ivano-frankivsk kyiv volyn autonomous republic of crimea sumy dnipropetrovsk ternopil odesa ukraine lviv zaporizhzhia sevastopol city kharkiv kyiv city figure 1. average indices of innovation input type for the period of 2010–2016 baltic journal of economic studies 75 vol. 4, no. 2, 2018 and educational factors, has another impact, not reflected in the eis. the effectiveness of innovations also depends on technological (orientation on the modern technologies development and market needs in new products), organizational and managerial (state of management, ability to innovate, change, restructuring, regional management structure) and, in particular, socio-psychological (attitudes, expectations and a reaction to the introduction of innovations) factors. the next step is to assess the effectiveness of regional innovation, determined from the comparison of input-type innovations to the output-type innovation indices (table 4). figure 2. average values of innovation indices output type for the period of 2010–2016 0,12 0,12 0,13 0,17 0,17 0,17 0,19 0,20 0,23 0,24 0,25 0,26 0,27 0,27 0,27 0,28 0,29 0,32 0,37 0,37 0,38 0,38 0,38 0,42 0,44 0,59 0,68 0,86 0,00 0,20 0,40 0,60 0,80 1,00 autonomous republic of crimea volyn poltava rivne luhansk donetsk chernihiv kyiv khmelnytsk zhytomyr kirovohrad zakarpattia dnipropetrovsk vinnytsia cherkasy chernivtsi kherson ternopil lviv mykolaiiv ivano-frankivsk odesa ukraine sumy zaporizhzhia sevastopol city kyiv city kharkiv table 4 the innovation effectiveness evaluating of the regions of ukraine 2010 2012 2013 2014 2015 2016 1 2 3 4 5 6 7 ukraine 0,68 0,58 0,57 0,60 0,35 0,44 autonomous republic of crimea 1,01 0,97 0,70 -* -* -* vinnytsia 0,24 0,10 0,07 0,19 0,15 0,14 volyn 0,31 0,18 0,28 0,52 1,64 1,05 dnipropetrovsk 0,57 0,54 0,45 0,54 0,29 0,30 donetsk 0,55 0,35 0,39 0,07 0,07 0,01 zhytomyr 0,16 0,06 0,07 0,24 0,11 0,10 zakarpattia 0,15 0,19 0,29 0,28 0,07 0,08 zaporizhzhia 0,67 0,46 0,35 0,47 0,39 0,60 ivano-frankivsk 0,41 0,21 0,10 0,13 0,21 0,20 kyiv 0,80 0,62 0,40 0,49 0,05 0,12 kirovohrad 0,05 0,04 0,02 0,11 0,04 0,06 luhansk 0,44 0,31 0,28 0,21 0,62 0,99 lviv 0,92 0,77 0,74 0,64 0,31 0,28 mykolaiv 0,31 0,25 0,24 0,30 0,08 0,12 odesa 0,59 0,45 0,44 0,53 0,27 0,28 poltava 0,32 0,52 0,49 0,64 0,15 0,25 rivne 0,17 0,05 0,06 0,12 0,28 0,22 sumy 0,20 0,35 0,26 0,41 0,20 0,22 ternopil 0,20 0,09 0,16 0,16 1,06 0,74 kharkiv 1,04 0,87 0,85 0,81 0,47 0,48 baltic journal of economic studies 76 vol. 4, no. 2, 2018 1 2 3 4 5 6 7 kherson 0,32 0,23 0,20 0,27 0,06 0,07 khmelnytskyi 0,06 0,04 0,05 0,07 0,17 0,20 cherkasy 0,20 0,15 0,16 0,29 0,15 0,15 chernivtsi 0,46 0,28 0,34 0,46 0,11 0,10 chernihiv 0,24 0,12 0,09 0,29 0,12 0,06 kyiv city 1,05 1,05 1,05 1,10 0,86 1,02 sevastopol city 0,44 0,28 0,53 -* -* -* * – no data available. end of table 4 on the basis of assessments of regional innovation, the degree of innovation efficiency of ukrainian regions is determined, which depends on the value α . thus, when α = 0 01, we can select the following regional spaces: – kyiv city – belongs to class i, in which costs for innovation exceed the obtained results throughout the period under study (the input innovation index exceeds the value of the output innovation indicator); – class ii is an empty set; – vinnytsia, dnipropetrovsk, donetsk, zhytomyr, zakarpattia, zaporizhzhia, ivano-frankivsk, kyiv, kirovohrad, luhansk, lviv, mykolaiv, odesa, poltava, rivne, sumy, kherson, khmelnytskyi, cherkasy, chernivtsi, chernihiv regions, the city of sevastopol – belong to class iii, namely, the expenses for innovation are less than the obtained results (the value of the input type index is lower than the value of the output type index); – all the rest of the region migrated from one class to another during the period under study. in the case when α = 0 8, , the regions were regrouped into classes: – class i is an empty set; – dnipropetrovsk, zaporizhzhia, luhansk, lviv, odesa, kharkiv, kyiv city, sevastopol city, autonomous republic of crimea – belong to class ii, namely the expenses for innovation and the obtained results are approximately the same in size; – kirovohrad, khmelnytskyi regions – belong to class iii, namely, the expenses for innovation are less than the obtained results (the value of the input type index is lower than the output type index value); – all the rest of the region migrated from one class to another during the period under study. it is interesting, that when α = 1 all regions are in class іі. thus, we can conclude that while approximating α to 0 or 1 regions are concentrated in one of the classes. if α is inside the range between 0 and 1, then the regions are sprayed across different classes. the proposed measure of innovation efficiency of the regions has allowed determining the effectiveness measure of the country’s innovation (mеic). table 5 gives estimates of the mеic for different values of α . table 5 the evaluation of the effectiveness measures of innovation in the national context (меіc) parameter 2010 2012 2013 2014 2015 2016 α=0,01 0,89 0,96 0,96 0,96 0,92 0,92 α=0,2 0,87 0,90 0,93 0,93 0,89 0,89 α=0,4 0,80 0,83 0,87 0,86 0,85 0,82 α=0,6 0,57 0,70 0,70 0,60 0,82 0,78 α=0,8 0,30 0,43 0,43 0,35 0,60 0,53 α=1 0,10 0,10 0,10 0,11 0,11 0,11 as can be seen from table 5, the significance of the measure of innovation efficiency in the national context belongs to the numerical range [0,01; 1]. measures that are closer to the minimum mean that the country has a weak position in terms of the effectiveness of innovation in a regional context, and closer to 1 value indicate the high efficiency of innovation in the country in a regional context. increase in value α leads to a reduction in the assessment of the effectiveness of innovation in the national context. that is the indicator α can be interpreted as the regions innovativeness multiplier. its value directly determines the position of the country with regard to the effectiveness of the use of innovation in a regional context and, therefore, can serve as a benchmark for national policy in this matter. 3. conclusions thus, on the basis of the conducted analysis of the innovation assessment, a methodological approach is proposed for determining the degree of innovation efficiency in a hierarchical regional section based on the use of instruments of multidimensional statistical analysis. an analysis of the innovation of the regions of ukraine based on the use of the proposed methodological approach made it possible to draw the following conclusions: – the proposed eis does not contain a basic innovation model that justifies the choice of innovation dimensions and indicators and reflects the reasons that innovation policy may affect; – the use of a single combined indicator and rating table does not make it possible to control the complexity of the innovation process itself; baltic journal of economic studies 77 vol. 4, no. 2, 2018 references: dolishnii, м.і. (2006) rehionalna polityka na rubezhi хх-ххі stolit: novi priorytety. [regional policy at the turn of xx-xxi centuries: new priorities]. kyiv: scientific thought, 512 [in ukrainian]. lundvall, b.a. (1992) national systems of innovation: towards a theory of innovation and interactive learning. london: pinter publishers, 342 [in english]. methodology report on european innovation scoreboard 2017. retrieved from: http://ec.europa.eu/docsroom/ documents/25101 [in english]. peresada, а.а. (2002). upravlinnia investytsiinym protsesom [investment process management] kyiv: libra, 472 [in ukrainian]. strahl d. (2007) propozycja miary efektywności innowacyjności w hierar-chicznym przekroju regionalnym z wykorzystaniem european innovation scoreboard. prace naukowe akademii ekonomicznej we wrocławiu. ekonometria, 19, 9-18 [in polish]. storonianska, і.z. (2009) mizhrehionalni intehratsiini protsesy v ukraini: tendentsii ta perspektyvy rozvytku [interregional integration processes in ukraine: trends and development prospects]. lviv: institute for regional studies of the national academy of sciences of ukraine, 392 [in ukrainian]. – too many indicators determine innovations in hightech industries. it shifts the innovation indicators on behalf of those countries that specialize in high-tech industries, in particular, in high-quality production; – many indicators are highly correlated, and these indicators can thus cover and measure the same aspect of the innovation process; – many indicators for ukrainian statistics are not available and, therefore, missing data can jeopardize the reliability and correctness of comparing the results of ukraine’s innovation activities with other countries; – for the period under the study, a high level of innovation is inherent only in kyiv and kharkiv regions. all other regions have values lower than 0,25. accordingly, it can be concluded that there is no regional and state policy to stimulate and support innovation, as the costs for them are too scanty, especially on a regional scale. all funds for innovation remain in the centre, thus, stimulating the development of the economy of the regions of ukraine on the principle of “centreperiphery”; – according to the evaluation results of the innovations implementation, the leading positions occupy kharkiv region, kyiv and sevastopol cities. somewhat higher values compared to the input index have zaporizhzhia, sumy, odesa, ivano-frankivsk, mykolaiv, and lviv regions. this testifies to the fact that innovation, besides financial-economic and educational factors, has an impact, as well as other, in particular, technological, organizational-managerial and, especially, sociopsychological factors; – when calculating the measure of the effectiveness of the innovation of the regions of ukraine for various of them, it is established that this magnitude affects the place of the region in the classification of regions of ukraine in view of the chosen method of the ratio of input and output indices. moreover, when approaching α to 0 or 1, the regions are concentrated in one of the classes. if α is inside the range between 0 and 1, then the regions are sprayed across different classes; – in determining the measure of the effectiveness of innovation in the national context, it is suggested that the indicator α can be interpreted as the regions innovativeness multiplier. its value directly determines the position of the country with regard to the effectiveness of the use of innovations in a regional context and, therefore, can serve as a benchmark for national policy in this aspect. baltic journal of economic studies 134 vol. 4, no. 4, 2018 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. 2 volodymyr the great educational and scientific institute of law, ukraine. 3 kharkiv national university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-134-139 protection of constitutional cultural rights and freedoms of citizens by the constitutional court of ukraine mykola inshyn1, yurii міroshnychenko2, yurii paida3 abstract. the aim of the article is to explore the place and role of the constitutional court of ukraine in the mechanism of constitutional cultural rights and freedoms protection within the context of ukrainian constitutional justice reforming. the subject of research is the protection of constitutional cultural rights and freedoms of citizens by the constitutional court of ukraine. methodology. scientific research is based on the use of philosophical, general, and special scientific methods and techniques of scientific cognition. the dialectic method allows examining the phenomenon of protection of constitutional cultural rights and freedoms of citizens by the constitutional court of ukraine within the dynamics of its evolution and interaction with other legal concepts. the systemic method made it possible to present the mechanism of protection of constitutional cultural rights and freedoms of citizens as a combination of interrelated elements. the formal-legal method was used to analyse the regulatory framework of protection of constitutional cultural rights and freedoms of citizens by the constitutional court of ukraine along with relevant decisions of this judicial body. results obtained upon completion of the research give an opportunity to claim that the protection of constitutional cultural rights and freedoms of citizens by the constitutional court of ukraine may be performed on the basis of both direct and indirect access of persons to the constitutional jurisdiction body through the regulatory compliance assessment (constitutional recourse and initiation of legal action by certain state power bodies and its officials through constitutional claim filing). practical outcomes. research provides: examination of doctrinal and applicable aspects of the constitutional court of ukraine activity on the protection of constitutional rights and freedoms of citizens; characteristics of general theoretical essence of constitutional cultural rights and freedoms of citizens with distinguished types; analysis of peculiarities of protection of constitutional cultural rights and freedoms of citizens by the constitutional court of ukraine in the course of its powers exercising. value/originality. on the basis of a comprehensive study of constitutional doctrine, ukrainian legislation and implementation practices certain proposals are elaborated regarding the improvement of the effectiveness of the constitutional court of ukraine activity in the area of protection of constitutional cultural rights and freedoms of citizens. key words: constitutional justice, constitutional court of ukraine, constitutional rights and freedoms of citizens, mechanism of protection of constitutional rights and freedoms of citizens, constitutional cultural rights and freedoms of citizens, protection of constitutional cultural rights and freedoms of citizens by constitutional court of ukraine. jel classification: k2, k13 1. introduction processes of the ukrainian state and society democratization and ukraine’s transformation into a law-governed and socially-oriented country require improvement of current and establishment of new mechanisms aimed at the adaptation of progressive ideas in the area of protection of constitutional rights and freedoms of citizens along with constructive, efficient relations between individuals and state power bodies. citizens’ rights and freedoms are one of the essential indicators of current civilization. modern condition of state and legislative development process sets a task for the legal science to carry out a comprehensive analysis of key concerns related to organization and activities of the constitutional court of ukraine (hereinafter referred to as “ccu” or “the court”) as a specialized subject established to protect constitutional rights and freedoms of citizens (bryn, 2010), including the cultural ones. baltic journal of economic studies 135 vol. 4, no. 4, 2018 constitutional rights and freedoms of citizens are one of the most important elements of the social and political system presented as the standard in the course of society’s achievements evaluation, an indicator of its development level. through this element, all individuals are involved in obtaining the material and spiritual benefits, government institutions, legal forms of willingness and private interests’ realization. quality of constitutional rights and freedoms enforcement defines the level of individual’s development, his/her life and health, honour and dignity, inviolability and safety (маtskevych, 2012). of the utmost importance in the system of essential rights and freedoms of ukrainian citizens are the cultural rights and freedoms, which is determined with its essence, content, and specific enforcement mechanism. for ukraine, the key problem itself is the proper enforcement of constitutional rights and freedoms of citizens that starts with the establishment of relevant state mechanisms for its protection – therefore, it is defined as exceptional for the state legal system of which is undergoing the process of transformation (kravchenko, 2011). after the ccu had been established, many different approaches and visions of content and activity character, procedures of constitutional justice body formation, its role and scope of authority in the area of citizens’ constitutional rights and freedoms enforcement were presented by the scholars. modern legal science still hasn’t studied the problems of ccu functioning as the subject of constitutional cultural rights and freedoms protection in full scope. lack of legal traditions and slow process of civic society establishment, low level of citizens’ legal literacy and failure to accept the principle of state power distribution in practice resulted in a poor understanding of the ccu functional purpose by both society and government. the powerful protective potential of the latter is still underrated mainly over the lack of reinterpretation and realization of its capacity, functional purpose, forms and methods of influence on enforcement of constitutional cultural rights and freedoms of citizens (bryn, 2010). 2. the objective of the article in connection with this, of the utmost importance has become the study of the ccu’s place and role in the mechanism of protection of constitutional cultural rights and freedoms of citizens in the context of ukrainian constitutional justice reforming, which presents the objective of this article. its successful achievement stipulates accomplishment of the following tasks: firstly, study doctrinal and applicable aspects of the ccu activity related to constitutional rights and freedom protection; secondly, characterize the theoretical background of constitutional cultural rights and freedoms of citizens and distinguish its types; thirdly, analyse the peculiarities of protection of constitutional cultural rights and freedoms of citizens by the ccu in the process of its powers execution. analysis of recent search and publications. multiple aspects of protection of constitutional cultural rights and freedoms were studied by ukrainian scholars including t. bryn, s. holovatyi, a. holovin, m. koziubra, о. kravchenko, о. martseliak, v. radzievska, а. selivanov, а. tkachuk et al. 3. core material presentation protection of citizens’ rights and freedoms is ensured in the law-governed state with the help of a system of procedures, mechanisms, and institutions aimed are enforcing the individual rights on the basis of constitutional law and order. these procedures, mechanisms, and institutions possess certain dynamics, which is shaped by the perpetual transformation of the social environment. the proper level of protection of rights and freedoms of citizens is traditionally ensured with the written constitution presented as a basis for state power excesses limitation and protection of individual as the highest social value. one of the key achievements of ukrainian constitutional jurisdiction and its main task is to protect the rights and freedoms of citizens. the ccu acts are aimed to ensure that the rule of law principle is observed in the course of interpretation of the constitution’s provisions related to prioritization of citizens’ rights and freedoms by the state. the ccu decisions, conclusions, and rulings are the forms presenting its acts, which protect citizens rights and freedoms, established and guaranteed by the constitution – therefore, the abovementioned protection of rights and freedoms may be characterized as superior as they are not a subject to anyone’s appeals, conclusive due to independence of the court’s will based on the constitution’s provisions (selivanov, 2005). according to o. martseliak, constitutional-legal mechanism of ukrainian citizens’ rights and freedoms protection is presented as a system of fundamental rights and freedoms of citizens, its guarantees, state power bodies, local self-governance, and other institutions ensuring enforcement and protection of citizens’ rights and freedoms, which is fixed in the constitution (constitutional laws), unified and regulated internally (маrtseliak, 1997). v. radzievska notes that the legal mechanism of citizens’ rights and freedoms enforcement is a complex multicomponent system of institutes, means, and techniques, the functional unity of which is aimed at the enforcement and protection of citizens’ rights and freedoms (in case of actual violation or any threat of being violated). its structure is composed of two subsystems – regulatory and institutional, which are interrelated and constantly interacting. internal cohesion of all elements of these subsystems, its constructive orientation at citizens’ baltic journal of economic studies 136 vol. 4, no. 4, 2018 rights and freedoms protection is a condition of the mechanism’s effectiveness. regulatory component of the citizens’ rights and freedoms protection mechanism is presented as a set of legal rules fixed in legislative acts of the state (as laws). it is taken as a background and objectivizes the legal environment conditions to enforce the citizens’ rights and freedoms. in its background are the constitutional-legal rules establishing the constitutional rights and freedoms with its guarantees, it also comprises rules defining the legal status of subjects authorized with certain powers related to citizens’ rights and freedoms enforcement along with legal means and relevant conditions. in its systemic unity, these rules define the general constitutional legal order in the area of citizens’ rights and freedoms protection and enforcement (radzievska, 2013). institutional component of the legal mechanism of citizens’ rights and freedoms enforcement comprises the system of state power bodies, other authorized subjects, which ensure establishment, enforcement, protection of citizens’ rights and freedoms within the scope of their authority and according to the law (radzievska, 2013). constitutional control is one of the essential components of the mechanism of constitutional protection of rights and freedoms in the most developed states – a special role is given to judicial constitutional control. according to the historical background and legal traditions of different countries different models of constitutional control were formulated – american (traditional), french, european, and amparo remedy. ukraine has established the european model of constitutional control, which stipulates that centralized control is carried out by the specialized body of constitutional jurisdiction (тkachuk, 2012). the key task of the ccu is to guarantee the primacy of the constitution by exercising the delegated powers. when settling the constitutional disputes within the ccu scope of competence, it ensures the enforcement of constitutional provisions, guarantees the protection of citizens’ rights and freedoms. establishment of the ccu itself had been an important step in the strengthening of the constitutional basis of our state and law, effective protection of citizens’ rights and freedoms, modification of the ukrainian constitution into a practically applicable legislative act. the constitutional-legal content of the ccu activity related to enforcement of citizens’ rights and freedoms is revealed through the state key obligation fixed in article 3 of the constitution of ukraine – a function of constitutional order guaranteeing on the basis of prioritization of citizens’ rights and freedoms. the function of the constitution superiority guaranteeing creates preconditions for the exceptional placement of the ccu within the state mechanism of citizens’ rights and freedoms protection – this condition explains the peculiarities of its legal status as a state constitutional jurisdiction body (radzievska, 2013). according to the opinion of o. kravchenko, the ccu protection of citizens’ rights and freedoms comprises activity performed by means of settling disputes related to constitutionality of laws, other legislative and regulatory acts issued by state power bodies, interpretation of constitutional provisions resulting in its cancellation upon condition of their inconsistency with the constitution and restoration of rights and freedoms guaranteed by it or clarification of the legislator’s opinion expressed through the norms subject to interpretation – it promotes the proper enforcement procedures initiation (kravchenko, 2011). protection of citizens’ constitutional rights and freedoms is a basic area of the ccu activity performed literally in the course of each case consideration both directly and indirectly. in general, when cases related to protection of citizens’ constitutional rights and freedoms are being considered by the ccu, its decisions are based on the concept that all legal opinions must facilitate the enhancement of constitutional system and guarantee the axiological understanding of individual rights and freedoms. due to the fact that state and individual interests and obligations are of different nature, objective and subjective components f core rights may not coincide. constitution of ukraine is oriented at social interests and citizens’ rights and freedoms as the top priority – therefore, establishing it; constitutional justice is tasked to detect this sense when we speak about the settlement of disputes on right or official interpretation of legal norm (constitutional justice). having analysed the powers and practice of the ccu activity, we may claim that each format of a relevant legal action, stipulated by the law of ukraine “on constitutional court of ukraine” dd. july 13, 2017, may refer to the protection of constitutional rights and freedoms. subjects of all ccu legal actions within the scope of their authority take part in the implementation of the mechanism of citizens’ rights and freedoms protection. legal protection of subjects of constitutional legal actions within the mechanism of fundamental citizens’ rights and freedoms, primarily related to analysis and inspection of legislative acts’ constitutionality, is presented in the form of performance of obligation on ensuring enjoyment of citizens’ rights and freedoms and gains characteristics of specific form of access to constitutional jurisdiction body granted to individuals. in its turn, a constitutional complaint is a form of direct reference of individual or legal entity (except legal entities in public law area) to the ccu in regard to relevant constitutional rights and freedoms protection. also, the official interpretation of the constitution is an effective method of ensuring full enjoyment of constitutional rights and freedoms by the citizens. due to this method of interpretation, content and essence of constitutional rights and freedoms are identified along with relevant scope and guarantees. baltic journal of economic studies 137 vol. 4, no. 4, 2018 interpretation of provisions related to rights and freedoms gives an opportunity to harmonize its content with modern requirements. results of official interpretation are mandatory for all legal subjects and present a ground for the restoration of violated rights and freedoms (тkachuk, 2012). constitutional rights and freedoms of citizens as a legal category present a comprehensive and harmonized system, which regulates all crucial areas of social life: personal (private), political, social, economic, cultural etc. (shemshuchenko, karpachova, kostetska et al., 2008). constitutional provisions establishing citizens’ rights and freedoms are based on its system defined by the constitutional law theory. cultural rights comprise an integral part of citizens’ constitutional rights and freedoms system. the specialized literature identifies cultural rights as a group of aimed at meeting the cultural and spiritual needs of individuals (legal encyclopedia). according to the opinion of s. lysenkov, cultural rights are the system of constitutional citizens’ rights and freedoms aimed at ensuring development and fulfilment of their intellectual demands, skills, talents, and participation in society’s spiritual life (lysenkov, 1995). thus, t. kostetska interprets cultural rights and freedoms as an opportunity to maintain and develop the national uniqueness of individual, access to spiritual heritage of his/her ancestors and all the mankind, their adoption and application, participation in research activities (right to education including education in native language, freedom of involvement in research, technical or creative activity etc.) (shemshuchenko, karpachova, kostetska et al., 2008). a comprehensive study of legal nature of constitutional cultural citizens’ rights and freedoms carried out by m. matskevych justifies his opinion that this is a separate group of individual rights and freedoms, which deserves to be separated from the group of social and economic rights and freedoms (маtskevych, 2012). he considers constitutional cultural citizens’ rights and freedoms as certain limits defining the person’s behaviour fixed in the constitution and aimed at the achievement of certain social benefit in the area of cultural relations along with capacity to behave in proper way, demand equal behaviour from other subjects and request protection of the abovementioned rights and freedoms from competent state and other authorized power bodies (including the ccu) and its officials (маtskevych, 2012). constitutional cultural citizens’ rights and freedoms include: 1) right to education (part 1 of article 53 of the constitution); 2) right to access to full and free preschool, secondary, vocational, and higher education in state educational establishments (part 2 of article 53 of the constitution); 3) right of students to state fellowships and allowances (part 3 of article 53 of the constitution); 4) right to free education in state educational establishments on competitive basis (part 4 of article 53 of the constitution); 5) right of citizens representing national minorities to enjoy their right to education in native language or attend native language course in state educational establishments or national cultural unions (part 5 of article 53 of the constitution); 6) freedom of literary, creative, research and technical activity (part 1 of article 54 of the constitution); 7) right of every ukrainian citizen to use results of one’s intellectual or creative work (part 2 of article 54 of the constitution); 8) right to possess, use, and dispose of one’s property, results of one’s intellectual or creative work (part 1 of article 41 of the constitution) (маtskevych, 2012). citizens’ rights and freedoms, established by the constitution (including cultural), are harmonized with relevant provisions of international legislative acts regulating the human rights issues (golovin, 2011). enjoyment of constitutional cultural citizens’ rights and freedoms in ukraine promotes spiritual development of individual and formation of national ideology as a social phenomenon. the ccu activity is of crucial importance for the development of a national system of constitutional cultural citizens’ rights and freedoms and relevant legal guarantees. thus, the ccu defines education as one of the priority areas of society’s economic, spiritual, and cultural development. right to education is right of individual to obtain certain skills, knowledge and evolve professionally to ensure sustainability and security on a national level (the ccu decree № 5-рп/2004 dd. march 4, 2004) (golovin, 2017). in this context, the ccu confirmed that, according to the content of applicable ukrainian law on education, full secondary education is delivered first of all with the use of textbooks as a key means of accomplishment of tasks set for relevant educational establishments. effectiveness, in this case, depends on the provision of access to school textbooks – its absence may be critical in terms of quality evaluation. therefore, school textbook is a conventional, integrating or coordinating tool used by students to obtain knowledge. provision of free textbooks to students by the state is a guarantee of secondary education accessibility. free use of textbooks is one of the state guarantees for obtaining a full secondary education (the ccu decree № 18-рп/2002 dd. november 21, 2002 in a case initiated by legal action (47 people’s deputies of ukraine) regarding the compliance of decrees of the cabinet of ministers of ukraine “on establishment of fees for use of textbooks in secondary schools”, “on amendments to decree of the cabinet of ministers of ukraine № 1031 dd. august 31, 1996” and par. 5 of decree of the cabinet of ministers of ukraine “on cancellation of decree of the cabinet of ministers of ukraine № 1128 dd. july 22, 1998” to constitutional provisions). the ccu decree № 5-рп/2004 dd. march 4, 2004 (legal action initiated by 50 people’s deputies of ukraine on official interpretation of part 3 of article 53 of baltic journal of economic studies 138 vol. 4, no. 4, 2018 the constitution), states that “state ensures access to free pre-school, secondary, vocational, and higher education in state educational establishments” – court explained that accessibility of education is itself a constitutional guarantee of enjoying the right to education on the basis of equality principles defined by article 24 of the constitution, so no individual is to become a subject of refusal to enjoy his/her right to education with state obligation to provide opportunities for the enjoyment of certain rights. free education is also fixed as a constitutional guarantee – it means that individuals are provided with educational services in state educational establishments without any fixed fees established in any format (within the scope defined by part 3 of article 53 of the constitution). according to parts 2 and 3 of article 53 of the constitution, full secondary education is mandatory and free – it means all related expense are covered from the state budget. free education stipulates that citizens are entitled to receive relevant services according to established standards without any fees paid and on a competitive basis (part 4 of article 53 of the constitution within the scope of delivering educational services to citizens (state order) (selivanov, 2005; constitutional justice). all of the above mentioned ccu legal opinions were presented in the applicable law of ukraine “on education” on september 5, 2017 (the law of ukraine «on education»). in order to ensure freedom of literary, creative, research and technical activity, the ccu (decree № 9-рп/2001) ruled as unconstitutional the provisions of paragraph 2 on research activity seniority (starting from the date of academic degrees/ranks awarding) of the decree of cabinet of ministers of ukraine “on list of positions taken by research staff of state research institutions, organizations and positions taken by research and teaching staff of state higher educational establishment (iii-iv accreditation level) with right to receive pension and cash allowances during retirement according to the law of ukraine “on research and technical activity” № 923 dd. may 27, 1999 (selivanov, 2005). functions of preventive and sequent control performed by the ccu are itself an important component of the system of state measures aimed at guaranteeing the enjoyment of citizens’ cultural rights and freedoms. in one hand, such an activity of the ccu allows to prevent potential violations of these rights and on the other hand – improve the ukrainian legislative system by de-facto eliminating laws and other regulatory acts or its separate provisions, which failed to regulate relevant relations including the area of protection of citizens’ cultural rights and freedoms (golovin, 2011). in this context, т. bryn justifies the statement that constitutional control over ensuring and protection of constitutional cultural rights and freedoms simultaneously provides the “updating” impact on civil society and formation of lawgoverned state (bryn, 2010). 4. conclusions therefore, taking the abovementioned into account, we may state that the ccu is an important element of the mechanism of constitutional cultural rights and freedoms protection. recognition of the latter as essential and natural along with ensuring of its enjoyment is not only a requirement of modern ukrainian constitutionalism but its key principle. the ccu powers, established by applicable constitution and the law of ukraine “on constitutional court of ukraine”, allow protecting constitutional cultural rights and freedoms of citizens in full scope through relevant legal actions. protection of constitutional cultural rights and freedoms of citizens by the ccu may be carried out on the grounds of direct and indirect access of individuals (citizens) to constitutional jurisdiction bodies through the regulatory control over the legal actions initiated by state power bodies and its officials (constitutional complaints related to the establishment of legislative acts’ compliance with constitutional provisions). full scope of protection of constitutional cultural rights and freedoms of citizens is promoted by relevant powers delegated to the ccu – preliminary and sequent control; it ensures full enjoyment of relevant constitutional cultural rights and freedoms by citizens during the process of the constitution amending and ratification of international agreements along with protection of these rights and freedoms from any limitations or its content narrowing during the adoption of new legislation or presentation of amendments to applicable ones. the official interpretation of the constitution is an important element of ensuring the protection of constitutional cultural rights and freedoms. references: bryn, t. (2010). the constitutional court of ukraine as a component in the mechanism of citizens’ rights and freedoms protection: extended abstract of phd in law thesis: specialty 12.00.02 «constitutional law; municipal law». kharkiv, 19 p. маtskevych, m. (2012). constitutional-legal background of citizens’ cultural rights and freedoms protection in ukraine: [monograph]. ivano-frankivsk: міsto nv, 464 p. kravchenko, o. (2011). protection of citizens’ rights and freedoms by the constitutional court of ukraine: doctrinal, applicable and comparative aspects: extended abstract of phd in law thesis: specialty 12.00.02 «constitutional law; municipal law». kyiv, 16 p. selivanov, a. (2005). citizens’ rights and freedoms protected by the constitutional court of ukraine: legal stances of modern constitutional justice doctrine. kyiv: logos, 104 p. baltic journal of economic studies 139 vol. 4, no. 4, 2018 маrtseliak, о. (1997). controlling and monitoring agencies in constitutional-legal mechanism of protection of citizens’ fundamental rights and freedoms in ukraine: extended abstract of phd in law thesis: specialty 12.00.02 «constitutional law; municipal law». kharkiv, 22 p. radzievska, v. (2013). constitutional court of ukraine as a component of the mechanism of protection of citizens’ fundamental rights and freedoms: extended abstract of phd in law thesis: specialty 12.00.02 «constitutional law; municipal law». kyiv, 16 p. тkachuk, а. (2012). constitutional court of ukraine as a component of the mechanism of protection of citizens’ fundamental rights and freedoms: model approach : extended abstract of phd in law thesis: specialty 12.00.02 «constitutional law; municipal law». kyiv, 20 p. constitutional justice in protection of citizens’ fundamental rights and freedoms and settlement of disputes on the power subjects’ competence: analytical report (2008). kyiv. verkhovna rada publishing house, 96 p. the law of ukraine «on constitutional court of ukraine» № 2136-viii dd. july 13, 2017. retrieved from: http://zakon.rada.gov.ua/laws/show/2136-19 shemshuchenko, y., karpachova, n., kostetska, т. et al. (2008). constitutional rights, freedoms and obligations of citizens in ukraine: [monograph]. kyiv: yurydychna dumka, 252 p. legal encyclopedia: in 6 vol. under the editorship of y. shemshuchenko et al. (1998). kyiv: ukrainian encyclopedia, vol. 3. 792 p. lysenkov, s. (1995). social and individual value of citizens’ cultural rights and freedoms. philosophical issues of law and law enforcement activity: set of scientific works. kyiv: ukrainian academy of internal affairs, pp. 62-66. golovin, a. (2011). protection of citizens’ rights and freedoms in the course of justice execution by the constitutional court of ukraine: [monograph]. kyiv: logos, 307 p. golovin, a. (2017). human rights: interpretations by the constitutional court of ukraine, 2nd edition, amended and modified. kyiv: logos, 399 p. the law of ukraine «on education» № 2145-viii dd. september 5, 2017. retrieved from: http://zakon.rada.gov.ua/ laws/show/2145-19 baltic journal of economic studies 288 vol. 4, no. 3, 2018 corresponding author: 1 department of accounting, analysis and audit, odessa national polytechnic university. e-mail: n.selivanova.odessa@gmail.com 2 department of civil law disciplines, odesa i.i. mechnikov national university. e-mail: zilkovska@ukr.net 3 department of criminal law, criminal procedure and criminalistics, odesa i.i. mechnikov national university. e-mail: anyuta@te.net.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-288-294 analysis of taxation burden in ukraine in 2014–2016 natalia selivanova1 odessa national polytechnic university, ukraine liudmyla tokarchuk2, oleg chuvakov3 odesa i.i. mechnikov national university, ukraine abstract. tax relations of enterprises with a state take a significant place in their state and economic life, as it is evidenced by the appearance of tax accounting, which is fixed in legislation. the analysis of burden of taxation is rather a relevant issue for ukraine’s economy at the present stage of development because the rate of the burden of taxation is the main criterion of efficiency of the state’s tax system, the formation of which is tried to be initiated in the project of tax code. because of the insufficient level of the burden of taxation, the government budget receives fewer means, and that’s why the government of the state won’t be able to perform their functions effectively and completely. to provide the optimum level of the burden of taxation is one of the first-priority tasks of the tax system of each country. the purpose of the paper is to research the existing practice of taxation of activity of the enterprises of ukraine, which allows analysing the tendencies of the level of burden of taxation according to the norms of tax law and developing proposals for its optimization. methodology. the informational and methodological base of research is the statistical data of the ministry of finance of ukraine, the official site of the state statistics service of ukraine, laws and regulations concerning taxation in ukraine, materials of scientific periodicals and the internet resources. to achieve the purpose of the research, the following methods have been used: knowledge of formal and dialectic logic, systemic and structural analysis. results. the tendencies of the burden of taxation in ukraine have been analysed according to such directions: analysis of types of charged payments to the state budget of ukraine, analysis of volumes of compensation on value-added tax, analysis of new taxes and fees for an individual, analysis of burden of taxation in ukraine according to the international ratings. the conducted researches showed that strengthening of rating of our country in the world economic scope in general and in different spheres in particular (trade, financial, social and so on) is impossible without the formation of the strong internal basis for development, which tax system provides. ukraine has the potential for improvement of institutional, administrative, and economic levers in this sphere. along with this, it is necessary to avoid actions, which allow “artificially” increase the rating of the country without real improvement in this sphere, because it can influence image and reputation of the country negatively, arousing mistrust towards the system of state administration and regulation. practical implications. the recommendations, offered by the authors, according to the results of the research, can be useful both for the developers of the economic policy and for the subjects of business activity for the purpose of optimization of the burden of taxation in the country. value/originality. the originality of the research, which has been carried out by the authors, is in the justification of the factors that influence the level of burden of taxation of business in ukraine and the development of proposals concerning its optimization for the purpose of simplification of the burden of taxation on businessmen of the country. key words: burden of taxation, tax system, taxes, fees, state budget, value added tax, personal income tax, taxation indicator. jel classification: h24, h61, k34 baltic journal of economic studies 289 vol. 4, no. 3, 2018 1. introduction development of enterprises and creation of the favourable environment for it is the first-priority task of the state, because “a free hand of a market” does not always allow providing necessary and equal conditions. importance of assessment of such conditions and their comparability in different countries of the world for investors, creditors, and other interested people (“stakeholders”) are caused by their interest to the condition of development, specific conditions and protection of their interests. from this standpoint, the assessment of the factor of the taxation burden is the basic reference point with the organizational and methodical provision of the accounting policy of an enterprise. theoretical basis and practical questions of development of taxation system are lit in the works of domestic and foreign authors. the question of burden of taxation, its influence on economic activity and financial results of payers, reasons and its consequences of uneven distribution among the subjects of business entities, tendencies and the ways of change are laid down in the works of domestic economists o. balan, v. savchenko, l. shablista, a. sokolovska, z. varnaliy, v. vishnevskiy. the authors of the last publications, who considered questions of taxes and burden of taxation in ukraine and in the world, are i. bilous, g. datsenko, n. korkun, o.  korotkevich, n. lokhanova, i. lomachynska, y. panura, m. stepura, o. timchenko. during 2014–2016, the government of ukraine carried out the tax and budget policy on the background of the unstable development of the world economy and instability in the international financial market. the filling of the budget’s revenues occurred in the conditions of the reformed tax law, according to the norms of the tax code of ukraine. the analysis of burden of taxation is rather a relevant issue for ukraine’s economy at the present stage of development because the rate of the burden of taxation is the main criterion of efficiency of the state’s tax system. the purpose of the paper is to research the existing practice of taxation of activity of the enterprises of ukraine, which allows analysing the tendencies of the level of burden of taxation according to the norms of tax law and developing proposals for its optimization. the following main directions of the analysis of the burden of taxation in ukraine are offered and presented by such spheres (figure 1). the informational and methodological base of research is the statistical data of the ministry of finance of ukraine, state fiscal service of ukraine, public service of statistics of ukraine, laws and regulations concerning taxation in ukraine, materials of scientific periodicals and the internet resources. to achieve the purpose of the research, the following methods have been used: analysis and synthesis methods, knowledge of formal and dialectic logic, comparative, systemic, and structural analysis. 2. the structure of charged payments to the state budget of ukraine the first direction of analysis of the burden of taxation in ukraine is the analysis of types of charged payments to the state budget of ukraine. the following features can be highlighted among the features of the filling of the budget’s revenues in 2014-2016 (table 1). so, in the dynamics for 2014–2016, the largest specific weight, in the structure of tax payments and fees, occupies the value-added tax on the goods imported to the territory of ukraine (38.3% in 2014, 33.9% in 2015 and 36.0% in 2016). along with it, it is possible to note the growth in the structure of tax payments of the amount of the personal income tax for three years (from 4.5% in 2014 to 11.9% in 2016), that is due to the increase of a tax rate and the increase of a salary. the situation concerning the amount of taxes except the grants on manufacturing and import in a section of branches of the economy for 2014-2016 is the following (table 2). as we can see from table 2, the main and the largest budget’s fillings are: 1) agriculture, forestry and fishery; 2) building; 3) wholesale and retail trade; 4) repair main directions of the analysis of the burden of taxation in ukraine analysis of types of charged payments to the state budget of ukraine analysis of volumes of compensation on value-added tax analysis of new taxes and fees for an individual analysis of the burden of taxation in ukraine according to the international ratings figure 1. directions of the analysis of taxation burden in ukraine source: developed by the authors baltic journal of economic studies 290 vol. 4, no. 3, 2018 of vehicles and motorcycles; 5) processing industry; 6) information and telecommunications; 7) financial and insurance activity. the following branches continue to be granted: a) water supply; sewerage, wastes handling; b) art, sport, entertainments and recreation. it also should be noted that there is a positive tendency of taxes increase in absolute measures in 2015 and 2016, and it displays the improvement according to the results of 2014 in 5 million uah. the second offered direction of analysis of ukraine’s burden of taxation is the analysis of volumes of compensation on value-added tax. table 1 charges to the state budget of ukraine in a section of separate payments, as a component of the analysis of ukraine’s burden of taxation types of tax payments to the state’s budget of ukraine as of 31.12.2014 as of 31.12.2015 as of 31.12.2016 mln uah % mln uah % mln uah % enterprise tax 39941.9 14.3 34776.3 8.5 54344.1 10.8 personal income tax 12645.8 4.5 45062.0 11.0 59810.5 11.9 collecting and payment for special use of natural resources 19036.1 6.8 39803.8 9.7 44092.2 8.8 excise tax on the excise goods manufactured in ukraine 28085.5 10.0 38783.8 9.5 55116.3 10.9 excise tax on imported excise goods on the customs territory of ukraine 16855.4 6.0 24326.8 5.9 35006.2 6.9 value-added tax on goods manufactured in ukraine (taking into account budgetary compensation) 31737.0 11.3 39688.0 9.7 54052.7 10.7 value-added tax on goods imported to the territory of ukraine 107287.3 38.3 138764.3 33.9 181453.3 36.0 taxes on international trade and external operation 12608.7 4.5 40300.8 9.8 20371.0 4.0 rent payment and fees on fuel and energy resources 5987.5 2.1 7245.4 1.8 279.0 0.1 other taxes and fees 5993.1 2.1 666.2 0.2 -645.8 -0.1 total 280178.3 100 409417.5 100 503879.4 100 source: systematized by the authors (state fiscal service of ukraine, 2014-2016) table 2 taxes except for the grants on manufacturing and import i n a section of branches of the economy for 2014-2016 (mln uah) branch of economy years 2014 2015 2016 agriculture, forestry, and fishery 1353 1389 3223 extractive industry and development of quarries -7595 -385 253 processing industry 6044 6563 10167 electrical supply, gas supply, supply with steam and air conditioning -7517 -3649 1274 water supply; sewerage, wastes handling -1245 -869 -258 building 1198 1612 2463 wholesale and retail trade; repair of vehicles and motorcycles 4431 3969 5983 transport, stores, post and express activity 1068 1289 1554 temporary placement and catering services 427 310 308 information and telecommunications 1697 2856 3422 financial and insurance activity 1397 1769 2802 real estate transaction -2238 742 1152 professional, scientific and technical activity 1336 1605 2318 activity in the sphere of administrative and support service 770 789 1131 state administration and defence; obligatory social insurance 91 118 180 education 107 130 191 health protection and providing social assistance 188 339 478 art, sport, entertainments and recreation -1993 -2328 -2683 providing other types of service 476 505 766 total -5 16754 34724 source: systematized by the authors (state fiscal service of ukraine, 2014-2016; public service of statistics of ukraine, 2014-2016) baltic journal of economic studies 291 vol. 4, no. 3, 2018 in practice, taxation of different states of the world can be allocated into a number of taxes that got universal recognition, one of which is the value-added tax (vat). on the background of the performance of tax obligations by ukraine’s enterprises, receiving compensation of value added tax becomes the actual issue and it is a significant part of financial resources for the enterprises, and the existing situation of this issue is highlighted in table 3. the discrepancy between the tax revenue of vat to the budget and the financial needs of the state aggravates the problem of increase in efficiency of administration of this tax and the search of funds concerning the increase of revenues of this tax, because the deficiency of financial resources affects negatively on welfare of the population, and it does not only deepen the crisis phenomena in the economy but also complicates the process of their overcoming. 3. new taxes and fees for an individual in ukraine for 2014–2016 the next offered direction of the analysis of ukraine’s burden of taxation is the analysis of new taxes and fees for an individual. in order to carry out the revenues to the budget, new taxes and fees, which concern individuals, were introduced in 2014, but in 2015–2016 the taxes rates were continued and changed (table 4). according to table 4, it can be seen that the main changes, which have been provided by ukraine’s law from the 24th of december 2015 №909-viii “on modification to the tax code of ukraine and some acts of ukraine, concerning the provision of balance of the budgetary revenues in 2016” (verkhovna rada of ukraine, 2016), are the following: 1) the income tax on an individual – the rates have been changed. earlier it was 15% for monthly income up to 10 sizes of the minimum wage (for the 1st of january 2016 – 13780 uah) and 20% from the excess sum, but now 18% is used to any sum of income. the exception is made by pensioners, who receive over three sizes of the minimum wage (from the 1st of january 2016 – 4134 uah), and from the sum of such excess, the income tax copes with a rate of 15%. 2) for the incomes, charged as a win or a prize in favour of residents or non-residents, the rate of the income tax is 0% (but earlier it was a double size of taxation basis, or 30%). 3) passive incomes: the rate of income tax is 18% (earlier it was 20%), except the dividends on shares and table 3 volumes of compensation on value-added tax from the state’s budget by years (mln uah), as a component of the analysis of ukraine’s burden of taxation period the rest of the sums stated before the compensation for the beginning of the period (year) compensations paid in cash enlisted sums, stated into accounts of payers, in the reduction of tax obligations rejected sums, stated before the compensation on the current account new sums, stated before the compensation into the account of a payer the rest of the sums stated before the compensation for the end of the period for 01.01.2017 12 876.4 94 405.4 1 963.0 1 217.4 94 857.6 12 172.2 for 01.01.2016 13 499.7 68 405.3 38 096.1 2 454.1 855.4 71 654.3 for 01.01.2015 1 237.7 source: systematized by the authors (ministry of finance of ukraine 2014-2017) table 4 new taxes and fees for an individual, as a component of the analysis of ukraine’s burden of taxation for 2014–2016 taxes 2014 2015 2016 the tax on passive income, including on deposits 15 % 20% 18% the tax on pensions 15% (from 10 thsd. uah) 15 % (3654 uah), if the sum is more than 12180 uah – 20% 15% (3654 uah), if the sum is more than 12180 uah – 20% the tax on the housing real estate: 1) preferential meters have not been changed – 60 m² for flats and 120 m² – for houses 2) over 300 m² and for the houses over 500 m² – 25 thsd. uah of the tax for a year 1% of the size of minimum wage 24.36 uah for 1 m² for a year 3% of the size of minimum wage the fees from cars’ owners with an engine displacement of more than 3 thsd cc. 25 thsd. uah 25 thsd. uah 25 thsd. uah military fees (from incomes) 1.5% from incomes; 1.5% from incomes; 1.5% from incomes; fees upon purchase of currency cash (from a sum) 0.5% 2% 2% the tax on the inheritance of more than 1 mln uah 5% from a sum 5% from a sum 5% from a sum source: systematized by the authors (tax code of ukraine, 2014-2016) baltic journal of economic studies 292 vol. 4, no. 3, 2018 corporate rights, charged by residents-payers of profits tax of enterprises. for such revenues, the rate is 5%. consequently, the deposits of ukrainians raise the banking system and economy of neighbouring poland. according to the information of the national bank of poland, as of the end of 2015, the citizens of ukraine placed their deposits in polish banks on approximately 900 mln plz that makes more than 230 mln usd. it is almost twice more than in 2014 when the size of the deposits of ukrainians was 500 mln plz (128 mln usd) (bizresurs, 2016). it should be noted that, in accordance with the tax code of ukraine (paragraph 265.2.2 clause 265.2 item 265) income tax on residential property is not subject to taxation: buildings of orphanages of a family type; residential property owned by large families and foster families, which have three or more children, but no more than one such facility for the family and dormitories. these norms have a social orientation, which is a form of state support for the functioning of family-type orphanages by exempting from taxation. 4. the comparison of ukraine’s indices of “taxation” with indices of other countries and group of the countries the fourth direction of the offered analysis of the burden of taxation in ukraine is the international rating, where the particular place is allocated by the estimation of the tax system in the country. according to the report for 2017 (world bank, 2017), ukraine takes the 84th place among 190 countries by rating “doing business” in 2017 (figure 2) by taxation indicator, and it is for 1 position worse in comparison with the rating “doing business” in 2016. at the present moment, the leader is new zealand. by the average calculations of the experts, one point in the rating of “doing business” brings the state approximately 500-600 mln usd of investments. the “taxation” indicator is estimated by such indices as: − a number of tax payments; − time for calculation and payment of taxes − general tax rate (% from profit to taxation); − index of procedures after submission of the reporting and payment of taxes, which is measured on the basis of assessment: а) time, spent on calculation of compensation according to vap; b) time, which is necessary for obtaining this compensation; c) time, which is necessary for error correction, adjustment of reporting, conducting and finishing procedures of tax audit. we offer the evident comparison of ukraine’s indices of “taxation” indicator with indices of other countries and group of the countries (table 5), which was received by synthesis of reports of the doing business in 2017 (world bank, 2017) and the paying taxes in 2017 (pwc, 2017). the comparison shows that ukraine has favourable conditions on such indicators as “a number of tax payments” and “the index of procedures after submission of the reporting”, but too much time for calculation and payment of taxes and there is rather high general tax rate. as it is pointed out in the report “paying taxes 2017” (pwc, 2017), the world companies spend on average 251 hours on the calculation of taxes, preparation of the reporting and their payment, carry out 25 payments at the average general tax rate 40.6% from profit to taxation. in the report “paying taxes 2017” (pwc, 2017), ukraine is analysed in comparison with 19 countries of eastern europe and central asia. among these countries, ukraine has the lowest number of tax payments (together with georgia) – 5. in other countries, it is provided from 6 (azerbaijan) to 51 (kyrgyzstan) payments. figure 2. the position of ukraine in the doing business ranking by taxation indicator by years, as a component of the analysis of ukraine’s burden of taxation source: systematized by the authors (doing business, 2017; world bank, 2017) baltic journal of economic studies 293 vol. 4, no. 3, 2018 the general tax rate is one of the highest – 51.9% (ukraine is outstripped only by belarus – 54.8% and tajikistan – 65.2%). one of the highest indices is the index of time for calculation and payment of taxes – 355.5 (higher index is only in bosnia and herzegovina – 411 hours). according to the index of procedures after submission of the reporting, ukraine is in the middle of this mini-rating. it is necessary to approach such positive indicators critically. so, the reduction of a number of tax payments is substantially “artificial” taking into account the changes, which have been brought into the structure of property and resource taxes (table 6). as it can be seen, the taxes were not reduced; they were combined into two taxes, in which several subspecies are distinguished. in recent years, reduction in a number of subjects of business activity is observed but the position of ukraine is growing in the international ratings (in particular in the doing business and the paying taxes). the strengthening of the rating of our country in the world economic scope in general and different spheres in particular (trade, financial, social, and so on) is impossible without formation of the strong internal basis for development, which is provided by the system of taxation. despite some positive shifts, ukraine has the potential for the improvement of institutional, administrative, and economic levers in this sphere. along with this, it is necessary to avoid actions, which allow “artificially” increasing the rating of the country without real improvement in this sphere because it can influence image and reputation of the country negatively, arousing mistrust towards the system of the state administration and regulation. 5. conclusions to sum up, it should be noted that improvement and optimization of the burden of taxation are connected with the solution of the following issues: 1) improvement of administration of taxes, implementation of new approaches to the analysis of the financial-economic activity of payers, monitoring of their activity and determination the enterprises that belong to a risk group. 2) increase of the control on completeness of declaring and timeliness of taxes payment, strengthening of work table 5 the comparison of ukraine’s indices of “taxation” indicator with the indices of other countries and group of the countries, as a component of the analysis of the burden of taxation of ukraine countries and group of the countries indices a number of tax payments time for calculation and payment of taxes general tax rate (% from profit to taxation) index of procedures after submission of the reporting and payment of taxes, (0-100) ukraine (rating – 20) 5,0 355,5 51,9 79,3 europe and central asia 17,6 221,5 33,8 71,9 оесd 10,9 163,4 40,9 85,1 new zealand (rating – 2) 7,0 152,0 34,3 96,9 poland (rating – 47) 7,0 271,0 40,4 92,2 georgia (rating – 22) 5,0 270,0 16,4 87,2 source: systematized by the authors (world bank, 2017; pwc, 2017) table 6 transformation of a number of taxes and fees, as a component of the analysis of taxation burden of ukraine 2011–2014 yrs. 2015–2017 yrs. fee for the first registration of the vehicle payment for land real estate tax, differing from the land plot property tax, which consists of: − real estate tax, differing from a land plot; − transport tax − tax on land rent payment for transportation of oil and oil products by the main oil pipelines, transit transportation of natural gas and ammonia by pipelines across the territory of ukraine rent payment, which consists of: − rent payment for subsoil use for mining; − rent payment for subsoil use for purposes not related to mining; − rent payment for use of the radio-frequency resource of ukraine; − rent payment for a special use of water; − rent payment for a special use of forest resources; − rent payment for transportation of oil and oil products by the oil pipelines, transit transportation; rent payment for oil, natural gas and gas condensate produced on the territory of ukraine payment for subsoil use fee for the use of the radio-frequency resource of ukraine fee for a special use of water fee for a special use of forest resources source: systematized by the authors (tax code of ukraine, 2010-2017) baltic journal of economic studies 294 vol. 4, no. 3, 2018 with enterprises that belong to a risk group, transit and fictitious enterprises, elimination of “tax holes”. 3) avoidance of corruption risk through anticipation of a clear definition of bases for conducting unscheduled exit inspection of a payer by tax authorities for the definition of the reliability of the budgetary compensation. 4) impossibility of registration of fictitious enterprises. 5) introduction of special control over the activity of newly formed enterprises at the initial level (up to one year), in particular, the introduction of monthly submission of tax declarations, use of financial guarantees and separate tax audits. 6) increase in the level of tax culture, development of the partnership, direction of tax administration activity for needs of a taxpayer. thus, the level of assessment of burden of taxation in ukraine shows that taxation has a moderate character in comparison with the market-developed countries of the world and there is the basis for the formation of organizational and methodical providing of enterprise’s tax policy in a part of taxation. references: balan о., maslennikov y., selivanova n. (2017). identifying areas and components of the management decisions for small industrial enterprises the second and third group of simplified tax system. marketing i menedgment innovatzij – marketing and management of innovations, no 3, 257-266. bizresurs. (2016, april 26). ukrainzi derzhat v polskih bankah pochti $230 mln. [the ukrainians keep in polish banks nearly $230 mln.]. retrieved from: http://bizresurs.com.ua/news/ukraincy-derzhat-v-polskikhbankakhpoch.html doing business (2017). retrieved from: http://doingbusiness.org lomachynska i. (2014). vplyv fiskalnoi polityky derzhavy na finansovu stiikist ukrainskykh pidpryiemstv [influence of fiscal policy on financial stability of ukrainian companies]. visnyk odeskoho natsionalnoho universytetu. ekonomika. –odesa national university herald, vol. 19, issue 2, no. 5, 173-177. (in ukrainian) ministry of finance of ukraine (2018). vypolneniye gosudarstvennogo byudzheta ukrainy [implementation of the state budget of ukraine]. retrieved from: https://index.minfin.com.ua/finance/budget/gov/ public service of statistics of ukraine (2017). retrieved from: http://www.ukrstat.gov.ua/ pwc (2018). paying taxes 2017. retrieved from: http://pwc.com/gx/en/paying-taxes/pdf/pwcpayingtaxes-2017.pdf savchenko v.f. & los a.f. (2011). ozhinka rivnja podatkovogo navantazhnnja v ukaine [assessment of level of burden of taxation in ukraine]. economichnij chasopis – ххi – economic annals-xxi, no. 9/10, 25-28. (in ukrainian) sokolovska a.m. (2008). metodologichni ta metodichni aspecti viznachennja podatkovogo navantazhennja na pratzy, capital i spozhivannja [methodological and methodical aspects of definition of burden of taxation on work, capital and consumption]. finansy ukrainy – finansi ukraini, no. 1, 65-76. (in ukrainian) state fiscal service of ukraine (2015-2018). plany ta zvity roboty derzhavnoi fiskalnoi sluzhby ukrainy plans and reports of the state fiscal service of ukraine. retrieved from: http://sfs.gov.ua/diyalnist-/plani-ta-zvitiroboti-/237691.html verkhovna rada of ukraine (2010). law of ukraine. podatkovij kodeks ukraiyny [tax code of ukraine]. no. 2755-vii. retrieved may, 2018, from: http://zakon2.rada.gov.ua/laws/show/2755-17 (in ukrainian) verkhovna rada of ukraine (2016). law of ukraine. pro vnesennja zmin do podatkovogo kodeksu ukraiyny ta dejakih zakonodavchih aktiv ukraiyny chodo zabezpechennja zbalansovanosti budzhetnih nadhodzhen u 2016. [about the introduction of amendments to the tax code of ukraine and other legal acts of ukraine concerning balance of budgetary revenues in 2016]. retrieved maу, 2018, from: zakon3.rada.gov.ua/laws/show/909-19 (in ukrainian) world bank (2017). doing business 2017: equal opportunity for all: comparing business regulation for domestic firms in 190 economies. retrieved from: http://www.doingbusiness.org/~/media/wbg/doingbusiness/ documents/annual-reports/english/db17-report.pdf baltic journal of economic studies 315 vol. 4, no. 4, 2018 corresponding author: 1 pjsc “international academy of personnel management”, ukraine. e-mail: sybiga@gmail.com 2 phei “college of finance and law”, ukraine. e-mail: gubanovatamara@ukr.net 3 taras shevchenko national university of kyiv, ukraine. e-mail: r.melnik@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-315-320 modern methodological approaches to the investigation of ensuring and protection of human right to access to public information oleksandr sybiha1, tamara hubanova2, roman melnyk3 abstract. the purpose of the paper is to study the preconditions of the necessity to use new scientific tools during the study of issues related to the ensuring and protection of human right to access to public information; to characterize the main scientific approaches to modern researches in the sphere of safeguarding human right to access to public information; to identify promising directions for further research on this topic. methodology. the paper presents the examples of a negative use of scientific methodology in conducting research in the area of administrative law and procedure and also draws attention to the need to reconsider an obsolete scientific methodology that does not correspond to the current realities and negatively affects the development of legal science. it indicates and characterizes the main preconditions of the necessity to use new scientific tools while investigating the issues related to ensuring and protection of human right to access to public information. in the context of the research of peculiarities of administrative and legal coverage and protection of human right to access to public information, it is proposed to use the systems approach, which is extremely effective in analysing complicated legal phenomena and processes and permits to study the peculiarities of substantive, procedure and procedural legal regulation as a cohesive whole. practical implications. the system approach is an extremely promising technique for studying legal reality. its use allows synthesizing all the knowledge about legal phenomena (legal rules, legal relations, legal consciousness, etc.), which is accumulated during the past stages of formation and development of domestic legal science, for a deeper insight into the development and functioning of law in general and administrative law in particular. value/originality. problems that exist in legal science in general and in the science of administrative law, in particular, can be solved only with the help of new scientific tools, specifically, by applying the system approach. the use of the systems approach in case of studying the issues of ensuring and protection of the human right to access to public information would allow combining all studies that were performed on this issue in substantive, procedure or procedural parts of the administrative law. key words: administrative law and procedure, methodology, public information, right to access to public information, administrative legal proceedings. jel classification: i2, k1, k23 1. introduction the problems that currently exist in the science of administrative law and procedure are conditioned by different factors: rapid changes in the economic, political, and socio-cultural spheres of society, which require significant changes in the national legislation, the gap of branch studies to the needs of society, and therefore, the legal science doesn’t manage to respond promptly and adequately to changes taking place in the society, etc. at the same time, the main problem of the modern legal science of ukraine, and especially of the science of administrative law and procedure, lies in the fact that scientific tools, which are used by the science in order to learn legal phenomena in the modern world, are out of date. it is impossible to produce high-tech products using obsolete equipment, as to improve the production and enhance its technological qualities, it is necessary to upgrade the equipment, which will produce such products, to elaborate administration at the enterprise, to advance professional competence of personnel, etc. the same processes should take place in the sphere of juridical science. the complication of baltic journal of economic studies 316 vol. 4, no. 4, 2018 social relations governed by law requires more advanced scientific tools, through which legal phenomena and processes are recognized in the modern world. unfortunately, we have to state that there is still no full comprehension of this problem among ukrainian legal scholars, who automatically continue to explore the new phenomena for administrative law and procedure with the help of outdated methodology. under the new conditions, the methodology that was used for the soviet administrative law does more harm than provides benefits for the development of branch science, as its use often leads to wrongheaded or untrue results. in the context of the outlined problem, it is relevant to define modern scientific tools of researches in the sphere of ensuring and protection of human right to access to public information. during the years of ukraine’s independence, firstly, there took place a gradual transformation of ukrainian society with limited use of information into a new-day information society, and secondly, the rapid development of information relations in ukraine, which was under the influence of a spread of the latest information technologies throughout the world, led to a gradual development of the national information legislation, thirdly, the mechanisms for enforcement of the right to access to public information were outlined in the current legislation by consolidating the relevant administrative procedures and access modes to information; fourthly, repeated violations of human right to access to public information by the public administration bodies favoured the consolidation of mechanism of judicial protection of the violated right in the current legislation. all these legal phenomena and processes can be investigated in the science of administrative law and procedure only with the help of new scientific instruments. the general issues of methodology use in researches on the problems of administrative law and procedure were covered in the papers of v. b. averianov, ya.  v. zadorozhnia, v. k. kolpakov, d. m. lukianets, and many other domestic scholars. at the same time, it should be noted that traditionally these issues are related to the theory of state and law, hence, are hesitantly raised by the representatives of administrative law and procedure, as a rule, in the context of covering the shortcomings of soviet administrative law science or in conducting research, which is mainly based on the application of one approach of scientific knowledge. 2. problems of the application of scientific methodology in legal science the modern problem of using scientific methodology in juridical science has two dimensions. the first is that a formal attitude to the methodology became widespread in branch legal sciences, that is, it was given up to be used as a tool for research practice but it is used as an attribute for the execution of research work. if you get acquainted with the content of the research papers that were written in ukraine over the last decade, you can see that very small percentage of them contain author’s explanations regarding the methodology of research. in rare instances, the author explains a paper structure, specifies the framework of categories of the work, draws attention to the specifics of involved scientific tools in comparison with other works, which were written earlier on similar subjects, and suchlike. the majority of the authors mention the methods of scientific knowledge only when making up the introduction of a dissertation, which is a mandatory requirement for the defence of that sort of papers. this pro forma approach to the methodology usage doesn’t have anything in common with a genuine research activity and its results. for example, hereupon, o. m. mykolenko states that the lack of a methodological approach in the paper indicates an unsystematic character of information presentation (it becomes marked in the paper’s structure or in the discrepancy between the subsection title and its actual content), the lack of a scientific problem that is solved in the course of study (so this kind of paper is usually descriptive), the lack of conclusions that would solve the existing problem (therefore, such a paper is overloaded with conclusions, which only state the fact that exists in a real legal reality) (mykolenko, 2018). the second dimension of the current problem of scientific methodology application in legal science is that fresh problems of the science of administrative law and procedure require new tools for their solution. 3. preconditions of the need to use new scientific tools for research of ensuring and protection of human right to access to public information among the conditions for the need to use new scientific tools in modern researches of administrative and legal phenomena in general and issues of ensuring and protecting the human right to access to information, in particular, one can distinguish the following. 1. the transformation of ukrainian society into an information society. for example, o. v. lohinov outlines three types of information society: 1) a society of new type, which is evolved as a result of the global social revolution and generated by the rapid development and convergence of information and communication technologies; 2) a society of knowledge, that is, a society where the main condition of the welfare of every person and every state is knowledge gained through unimpeded access to information and the ability to deal with it; 3) a global society where the information exchange will have neither temporal, nor spatial or political limits that, on the one hand, will promote the interpenetration of cultures, and on the other hand, will open up new baltic journal of economic studies 317 vol. 4, no. 4, 2018 opportunities for self-identification to each community (lohinov, 2005). the development of the national information legislation and promotion of research activities in this sphere is conditioned, first of all, by the fact that ukrainian society being an information society of new kind tries to transform into an information society, which refers to the second or third type, which not only declares information rights of natural and legal persons but also creates real conditions for their implementation and provides legal mechanisms for protection of violated rights. 2. reform of administrative law as a branch of law. this reform concerns the institutional issues of administrative law because it involves reconsidering and clarifying the content of the subject and the method of administrative-legal regulation, the system of administrative law, the system of subjects of administrative law and their legal status, etc. these changes influence the framework of categories and concepts of administrative law. the terms as “public administration”, “administrative procedure”, “administrative services” were rarely used in scientific works at the end of xix – beginning of xx centuries and have recently become the key categories of modern administrative law. for example, when it investigates the peculiarities of ensuring and protection of human right to access to public information, it raises the question of the distinction between the subject of administrative law and the subject of information law. on the one hand, there is the re-examination of administrative law system with the clarification of elements included in this system but, on the other hand, there is an endeavour to substantiate the expediency of establishment of an independent branch in ukrainian law system – information law. the right to information and the right to access to public information, as a rule, are implemented through administrative procedures provided for by the current legislation and are related to the provision of administrative services. in this case, there is a need to specify the place of the procedure for access to public information in the general system of administrative procedures, to determine the place of the subjects of relations in the sphere of access to public information in the general system of subjects of administrative law, as well as to define the peculiarities of the provision of public information in the general system of administrative services. the issues under consideration can’t be solved using outdated scientific tools. they require the search for new scientific approaches to highlight the problems of administrative law enforcement and protection of human right to access to public information. 3. the lack of comprehensive researches that would, firstly, combine all early studies on ensuring and protection of human right to access to public information and, secondly, unite the analysis of substantive, procedure and procedural administrative law on ensuring and protection of the human right to access to public information. 4. comprehensive analysis of researches on ensuring and protection of human right to access to public information the right to information, especially its enforceability and implementation, is a research subject of constitutional, administrative, and information law. therefore, in this area, it is important to use not only the achievements of administrative law and procedure but also the achievements of other branch legal sciences. the holistic character of a research lies in the fact that a scholar not only investigates a legal phenomenon with the help of existing tools but also takes into account the results of previous investigations, compares them with the conclusions that the author achieved in the course of the study, tries to identify tendencies which were conditioned by a certain historical stage, etc. for example, the analysis of scientific papers on ensuring and protection of human right to access to public information shows as follows: the studies of representatives of constitutional law were mainly focused on the reasons for non-compliance with the constitutional requirements for ensuring access to public information by public administration bodies, the issue of essence of human right to access to public information and mechanism of its implementation were fragmentarily considered in the following papers (n.  v.  kushkova, o. v. nesterenko, e. p. teptiuk, and others); the papers of representatives of administrative and information laws considered the issues of ensuring human right to public information, as they comprehensively studied the content of such concepts as “public information”, “human right to access to public information”, “procedure of public information access” and others (v. yu. baskakov, t. v. hrushkevych, yu. v. dyka, l. v. kuzenko, o. o. kukshynova, k. s. mashtak, s. m. taradai, and others). it is very important that the study on the issues of ensuring and protection of human right to access to public information combines an analysis of the rules of substantive, procedure and procedural administrative law. today, it is relevant in the context of reforming administrative law and formation of its system. the emergence of administrative legal proceedings in ukraine contributed to the development of democratisation of our society but also generated a number of theoretical problems in the doctrine of administrative law, some of which are currently unresolved: a) is the set of rules regulating administrative legal proceedings a part of the system of administrative law (its branch or sub-branch) or does it create an independent branch of law – “administrative procedural law”? baltic journal of economic studies 318 vol. 4, no. 4, 2018 b) if administrative legal proceedings are regulated by administrative procedural rules, so which rules do regulate the activities of public administration bodies regarding the provision of services (by administrative procedure or administrative procedural rules)? c) the recognition of the existence of administrative procedural rules along with administrative procedure rules does not comport with contemporary views of the types of legal rules in the theory of law that currently divides the legal rules into two types – substantive and procedural. there are constant discussions among the representatives of administrative law towards the abovementioned issues that are presented in juridical literature (v. m. bevzenko, a. t. komziuk, o. v. kuzmenko, and others). at the same time, it is obvious that there is a range of issues that require a comprehensive analysis in the area of administrative law and procedure, that is, taking into account the peculiarities of substantive, procedure and procedural parts of the administrative law. for example, the investigation of human right to access to public information can be performed solely from the point of view of administrative substantive law and such study should focus on: a) the concept of information and its types; b) the concept of public information and its types; c) the content of human right to access to public information in the system of other administrative rights of a person; d) the characteristic nature of administrative and legal status of a person who has the right to access to public information, etc. the human right to access to public information can be investigated exclusively from the point of view of administrative procedure law. in such studies, attention will be drawn to: a) the mechanisms, methods, types of enforcement of the right to access to public information; b) stages or steps of the procedure for the implementation of this constitutional right; c) the legal status of participants of the enforcement of the right to access public information, etc. but the investigation, for example, of judicial protection of human right to access to public information, cannot be performed solely from the point of administrative procedural law, because the disclosure of this topic is not limited by the solution to procedural issues, it is closely related to the peculiarities of regulation of the right to access to public information by substantive and procedural rules of administrative law. the analysis of scientific papers shows that the substantive and procedural rules of administrative law, which establish the content of the human right to access to public information and regulate the procedure for the implementation of this right, are researched to the full extent in the science of administrative law of ukraine. while the administrative procedural rules regulating the procedure of consideration of disputes by administrative courts over appeals against decisions, actions or passivity of public information administrator in terms of access to public information, are not adequately investigated. recently, studies connected with the peculiarities of administrative legal proceedings in certain cases categories have been enhanced in ukraine (o. v. bacherikov, t. f. veselska, ya. s. riabchenko, n. v. shevtsova, o. v. yatsun etc.). it should be noted that most of them mainly focus on the problems of administrative process avoiding the examination of issues of substantive and procedure parts of the administrative law. for example, ya. s. riabchenko in her work, devoted to the peculiarities of administrative legal proceedings on issues of appealing regulatory documents, covered the specification of the content of the procedure for appealing regulatory acts in administrative legal proceedings and the definition of the principles of this proceeding (riabchenko, 2010). o. v. yatsun describing the peculiarities of administrative proceedings in land disputes confined herself, firstly, to the description of the content, features, and types of land disputes, which are settled in the procedure of administrative legal proceedings, and secondly, the definition of the procedural principles of proceedings for the consideration and resolution of land disputes with the participation of entities of public administration (iatsun, 2011). at the same time, the science of administrative law and procedure has achievements, which comprehensively consider the problems of administration of justice in administrative courts. for example, o. v. yevsikova investigating the peculiarities of protection of tax relations in administrative courts of ukraine lays emphasis on the characteristics of content of tax relations in ukraine and the peculiarities of their legal regulation, and then continues with the analysis of the procedural arrangement for the consideration of cases in a county court, within the framework of the appellate and cassation proceedings (ievsikova, 2012). a similar approach was used in the paper of a. v. krasovska. considering the peculiarities of administrative legal proceedings in cases over the termination of legal entities’ activities on claims of authorities, in the first chapter of the work, the scholar focuses on the consideration of the substantive grounds of the claim’s causes for the termination of legal entities’ activities and in the second and third chapters reveals the specifics of administrative proceedings in this category of cases (krasovska, 2012). the need for a comprehensive study of the issues of judicial protection of human right to access to public information is also confirmed by the existence of the resolution of the plenum of the high administrative court of ukraine dated september 29, 2016, no. 10 “on practical application of the law on access to public information by administrative courts” (high administrative court of ukraine, 2016). the content of this resolution shows that the main problem of considering disputes over appeals against decisions, actions or inactivity of an information administrator baltic journal of economic studies 319 vol. 4, no. 4, 2018 by administrative courts, in terms of access to public information, doesn’t lie in the weaknesses of administrative procedural legislation or shortcomings in the activity of administrative courts, but in the peculiarities of administrative and legal regulation of substantive and procedural relations, that is, related to the definition of content and types of public information, information access modes, procedures for access to public information, including classified information, and so on. 5. new scientific tools in solving problems in the administrative law in our opinion, the foregoing is a sufficient reason to argue that currently existing problems in juridical science in general and in the science of administrative law, in particular, can be solved only with the help of new scientific tools. the conceptual framework, which successfully has been used by the science for many years, malfunctions in increasing frequency, in particular, because of its inconsistency to contemporary tasks and their very formulation. the systems approach acts as one of the ways of such deepening, associated with the development of new methodological directions in science (melnyk, 2010). the systems approach is extremely effective in the analysis of complex objects, which include the sphere of providing and protection of the human right to access to public information. this sphere has several qualitative definitions (substantive, procedural, procedure) and, in this respect, several directions of its development (clarification of the content of the right to access public information, improvement of the procedure for access to public information, generalization of administrative courts’ jurisdiction in order to increase the level of protection of human right in the sphere of access to public information). to sum up, we want to emphasize that the systems approach is an extremely promising method for studying legal reality. its application permits to synthesize all the knowledge about legal phenomena (legal rules, legal relations, legal consciousness, etc.), which was accumulated during the past stages of the formation and development of domestic legal science, for a deeper insight into the laws of development and functioning of law in general and administrative law in particular (melnyk, 2010). 6. conclusions in the light of the analysis of modern methodological approaches to research on the provision and protection of human right to access to public information, the following conclusions can be drawn. 1. the current problem of using scientific methodology in legal science has two dimensions. the first is that in branch legal sciences, there is a widespread conventional attitude to the methodology, that is, it was given up to be used as a tool for research performance but is used as an attribute for the execution of research work. the second is that fresh problems of the science of administrative law and the procedure require a new scientific tool for their solution. 2. among the preconditions for the need to use new scientific tools in modern studies of administrative and legal coverage and protection of human right to access to public information, it is necessary to highlight the following: a) the transformation of ukrainian society into an information and its subsequent development in a new direction; b) the reform of administrative law as a branch of law with the gradual definition of legal rules’ place in the system of ukrainian law that regulate administrative proceedings; c) the lack of comprehensive research that would, first of all, combine all previous research on the issues of ensuring and protection of human right to access to public information and, secondly, unite the analysis of the rules of substantive, procedure, and procedural administrative law on ensuring and protection of human right to access to public information. 3. the current problems of juridical science in general and the science of administrative law, in particular, can be solved only with the help of new scientific tools, namely, by applying the systems approach. the application of systems approach in the study of issues of ensuring and protection of the human right to access to public information will give an opportunity to combine all studies that have taken place on this issue in substantive, procedure or procedural parts of the administrative law. 4. based on the foregoing, we believe that the issue of research methodology improvement in the sphere of ensuring and protection of human right to access to public information is a promising one for the further development of administrative law and procedure. references: mykolenko, o. m. (2018). funktsii administratyvno-deliktnoho prava : teoriia i praktyka : monohrafiia [functions of administrative-tort law: theory and practice: monograph]. odesa: feniks (in ukrainian) loginov, o. v. (2005) administratyvno-pravove zabezpechennia informatsiinoi bezpeky orhaniv vykonavchoi vlady [administrative and legal support of information security of executive authorities] (phd thesis), kyiv: national academy of internal affairs. riabchenko, ya. s. (2010). oskarzhennia normatyvno-pravovykh aktiv v administratyvnomu sudochynstvi [appeal of regulatory acts in administrative proceeding] (phd thesis), kharkiv: yaroslav mudryi national law university. baltic journal of economic studies 320 vol. 4, no. 4, 2018 iatsun, o. v. (2011). osoblyvosti provadzhennia po zemelnym sporam za uchastiu subiektiv publichnoi administratsii v poriadku administratyvnoho sudochynstva [peculiarities of proceedings on land disputes with the participation of public administration actors in the procedure of administrative legal proceedings] (phd thesis), zaporizhzhia: zaporizhzhia national university. ievsikova, o. v. (2012). zakhyst podatkovykh pravovidnosyn u administratyvnykh sudakh ukrainy [protection of tax relations in administrative courts of ukraine] (phd thesis), kyiv: national aviation university. krasovska, a. v. (2012). osoblyvosti administratyvnoho sudochynstva u spravakh pro prypynennia yurydychnykh osib za pozovamy subiektiv vladnykh povnovazhen [peculiarities of administrative proceedings in cases over termination of legal entities’ activities on claims of authorities] (phd thesis), lviv: lviv university of business and law. high administrative court of ukraine (2016). pro praktyku zastosuvannia administratyvnymy sudamy zakonodavstva pro dostup do publichnoi informatsii : postanova plenumu vyshchoho administratyvnoho sudu ukrainy [on practical application of the law on access to public information by administrative courts: the resolution of the plenum of the high administrative court of ukraine dated 29.09.2016, no. 10]. retrieved from: http://www.vasu.gov.ua/plenum/post_plenum/postanova_plenumu_10_29-09-2016/ melnyk, r . s. (2010). systema administratyvnoho prava ukrainy [the system of administrative law in ukraine] (phd thesis), kharkiv: kharkiv national university of internal affairs. baltic journal of economic studies 65 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 donetsk state university of internal affairs, kropyvnytskyi, ukraine (corresponding author) e-mail: kuzyanna@ukr.net orcid: https://orcid.org/0000-0003-3957-7387 2 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: serg_bychin@ukr.net orcid: https://orcid.org/0000-0002-2895-1217 3 donetsk state university of internal affairs, kropyvnytskyi, ukraine e-mail: iryna_ozerna@ukr.net orcid: https://orcid.org/0000-0002-6106-3860 doi: https://doi.org/10.30525/2256-0742/2023-9-2-65-72 the definition and structure of financial security hanna buha1, serhii bychin2, iryna ozerna3 abstract. the purpose of the article is to clarify the definition and structure of financial security. the subject of the research is the definition and structure of financial security. financial security is defined as the most important element of the country's economic security in modern conditions; approaches to the definition of the concept of economic security are characterized; the concept of financial security is defined; administrative and legal relations in the field of financial security are characterized; the structure of administrative relations in the field of financial security is determined; threats to financial security are identified; threats to the development of the insurance market are identified; problems of the market of non-banking financial services in ukraine are characterized; factors ensuring the competitiveness of the non-banking financial sector in modern conditions are characterized. methodology. general scientific methods of formal logic (analysis, synthesis, deduction, induction, analogy, abstraction and modeling) are used in the article. results. thus, the financial security of ukraine should be understood as a complex, dynamic, social system with an extensive network of interconnected and interdependent elements and connections, which guarantees the state's ability to effectively form, preserve against depreciation and rational use of financial resources and is aimed at stabilizing the socio-economic development of the country, ensuring its stability, as well as the formation of prerequisites for preserving the integrity and unity of the state financial system, maintenance of financial obligations. key words: financial security, economic security, elements of financial security, insurance market, threats to financial security. jel classification: f52, h55 1. introduction modern complex state-building period in ukraine is caused by a combination of political, economic, legal, social and other phenomena and processes of external and internal origin, creating new threats and risks to the national economy, its material basis for systematic and full functioning of public institutions. in the conditions of the ukrainian people's choice of a pro european vector of development and other measures aimed at the comprehensive reorientation of state policy in accordance with new values and ideals, there is an objectively urgent need to ensure the proper organization and functioning of the domestic economic security system. this is especially relevant in the current period of economic destabilization and the negative consequences of many globalization processes (the global economic crisis, a decrease in economic activity due to quarantine restrictions, the loss of parts of the donetsk and luhansk regions of ukraine, the occupation of the autonomous republic of crimea and sevastopol, etc.), which inevitably leads to the transformation of the economic system, changes in the geo-economic situation of the country, weakening of the existing positions in various branches of this sphere, decline of the national economy and impoverishment of the population. in view of its real importance, and even from the position of real significant influence on most european integration measures, achieving positive results in this direction is justified as one of the main tasks of the democratic, social and legal ukrainian state (melnyk, 2021). it should also be emphasized that in the current conditions of development of economic integration of the world economy the process of international circulation of capital acquires gigantic scales, exerting a noticeable influence on the state and further development of the economy of any state. baltic journal of economic studies 66 vol. 9 no. 2, 2023 however, their withdrawal from ukraine has become permanent, which has a destructive effect on the development of the domestic economy and poses a real threat to economic security. the result of this process is the reduction of investment resources and the artificial demand for foreign credits, the insufficiency of financial revenues from foreign economic activities, and the reduction of the country 's currency reserves. this process leads to a decrease in the stability of all segments of the money market, money circulation and aggravation of the problems of the national economy. the sphere of activity of nfi is no exception, with the help of these institutions various credit and financial operations are carried out, funds are legalized (laundered), and all this is preceded by the commission of certain violations in the financial sphere. therefore, it is not surprising that at this stage of development of the society, the priority direction in the field of national security is precisely financial security. the economic and financial development of a country determines its future, opportunities and potential. financial security is not only one of the most important components of the system of state interests, but also a decisive condition for observance and realization of both state and non-state interests of the country. the issue of regulation of administrative and legal relations in the sphere of ensuring financial security occupies one of the first and most acute positions today, especially in ukraine, and remains the most relevant. the purpose of this article is to clarify the definition and structure of financial security. 2. the most important element of the country's economic security in modern conditions is financial security it should be noted that, as a. i. bondarenko rightly states, "the most important element of the country 's economic security in modern conditions is financial security, since the influence of global financial systems on an individual state is shifting to a qualitatively new level. taking into account the dominant position of the financial component in the modern economy, we have the right to characterize the latter as an economy managed by financial mechanisms with the help of financial tools, financial incentives and for financial purposes." (bondarenko, 2018) it should be added that the level of opportunities for economic security in the matter of protection of the national economy largely depends on financial security and its optimal state. according to yu. v. truntsevsky, "the concept of financial security is the most important element of a broader concept – economic security. thus, one of the significant aspects of ensuring the economic security of the country is the state of its financial system (the state budget and other institutions), the ability of this system to provide the state with financial means sufficient to perform internal and external functions." (truntsevskiy, 2007) undoubtedly, such activity occupies one of the important roles among the vectors of state policy and is aimed both to promote the development of economy and to minimize the risks of appearance of new destructive factors for it, as well as to prevent strengthening of destructive influence of the existing ones (melnyk, ivashchenko, 2018). it is impossible to carry out a balanced policy of effective protection of national economic interests without a stable functioning financial system and, consequently, an adequate material base. based on this, v. i. melnyk suggests that such a subsystem significantly influences the economic component. this is explained, first of all, by the fact that it is the basis for the necessary stability and competitiveness of the economy. the level of capabilities of the studied component of state security depends on its optimal state in terms of the real ability of material support to protect the national economy (melnyk, 2020). carrying out general characterization of financial security in the field of nfu activity as an object of administrative and legal protection and clarification of its role for the national economy, in authors' opinion, it is appropriate to dwell on the conceptual definitions. any research is based primarily on clarifying the terminology and its place in science, comparing it with foreign research and determining its place in public life (cherniei, 2015). the existence of generally accepted definitions indicates a certain level of scientific progress in this or that branch of science at the current stage of development. and clarifying the meaning of a certain terminological unit and defining its essence makes it possible to avoid vagueness and ambiguity while characterizing it. obviously, this will contribute to consistency, logical order and unification of terminology, because similar cases of inconsistencies have repeatedly become the subject of active discussion among representatives of scientific, expert and professional communities. studies on the problems of defining the essence of administrative-legal relations, as well as their structure and types, are widely represented in scientific literature. moreover, the modern doctrine of administrative law primarily takes into account the trends of humanization of science, therefore the essence of administrative law shifts to the provision of services to the population, and not to the administration of power. thus, taking into account the content of administrativelegal relations, which are the material result of the implementation of the norms of administrative law, it is possible to speak about the baltic journal of economic studies 67 vol. 9 no. 2, 2023 formation of a modern paradigm of administrative legal relations. v. b. averianov (averianov, 2003) believes that administrative-legal relations are social relations regulated by legal norms, in which their parties (subjects) are interconnected and interact through the exercise of subjective rights and obligations established and guaranteed by relevant administrative and legal norms. 3. approaches to defining the concept of economic security according to the first approach, economic security is a certain state of economy, capable of resisting external and internal threats. thus, l. p. honcharenko says that economic security is a state of economy that ensures a sufficient level of social, political and defense existence and development of the state, invulnerability and independence of its economic interests in relation to possible external and internal threats and influences (honcharenko, akulinina, 2015). v. s. pankov, who studied national economic security, understood it as a state of the national economy characterized by stability, "immunity " to the action of external and internal factors that interfere with the normal functioning of social reproduction and undermine the achieved standard of living of the population, thereby causing increased social tension in society, as well as a threat to the very existence of the state (pankov, 1992). v. o. honcharova defined national economic security as such a state of national economy in which stability and ability to withstand adverse conditions for the development of internal and external processes are preserved (honcharova, 2001). according to the second approach, methods of neutralization of existing threats were determined as a key element of economic security. in particular, o. v. skoruk emphasized that economic security of the state is the state of its economy, which ensures that sustainable and scientifically based methods of neutralizing the negative impact of internal and external threats are created, the necessary conditions for stable socio-economic development of the state, protection of national economic interests and improvement of the welfare of citizens appear (skoruk, 2016). almost similarly, z. v. hbur substantiated the opinion that economic security is ensured by stable and justified methods of leveling the influence of threats from the internal and external environment, which creates suitable conditions for the development of a stable socio-economic system (hbur, 2018). in his works, v. i. muntiian defined economic security as a national complex of mea sures aimed at permanent and stable development of the state economy, which includes a mechanism for countering internal and external threats (muntiian, 1998). according to the third approach, economic security is associated with the ability of the economy to develop in order to ensure sustainable development of the state. for example, ya. a. zhalilo says that economic security is a complex multifactorial category that characterizes the ability of the national economy to expand reproduction in order to satisfy at a certain level the needs of both its own population and the state at a certain level, and to resist the destabilizing effect of factors (zhalilo, 2001). t. v. tsvihun points out that economic security implies the ability of the national economy to ensure its independent development, stability of civil society institutions, sufficient defense potential of the state under various adverse conditions and events, as well as the ability of the country to protect its own interests from external and internal threats (tsvihun, 2017). at the same time, a broader definition of economic security was formulated by d. o. koshikov, with whom this paper fully complies. thus, economic security is a component of the national security of ukraine, which represents the state of social relations formed with regard to the distribution, exchange and consumption of material and immaterial goods and services, which characterizes their safety and resistance to external and internal threats, ensures the protection of national economic interests, promotes the realization of socio-economic rights and freedoms of citizens, and also creates conditions for further development and growth of the national economy and ensures the state's competitiveness in the global economic environment (koshykov, 2020). 4. the concept of financial security based on the above, the financial security of ukraine should be understood as a complex, dynamic, social system with an extensive network of interconnected and interdependent elements and connections, which ensures the state's ability to effectively form, preserve against depreciation and rationally use financial resources aimed at stabilizing social economic development of the country, ensuring its stability, as well as the formation of prerequisites for maintaining the integrity and unity of the state financial system, servicing financial obligations. in comparison with other subsystems, it has the closest connection with the economic component, taking into account its really important role. having systematized scientific views on the category "financial security ", o. v. tikhonova proposes to emphasize another approach to the determination of baltic journal of economic studies 68 vol. 9 no. 2, 2023 financial security – behavioral (behavioristic). thus, in her opinion, the definition of "financial security " is interpreted according to one of the following approaches: functional, institutional, behavioral and complex (tykhonova, 2012). 5. administrative and legal relations in the field of financial security administrative-legal relations in the field of financial security are regulated by legal norms. social relations in the sphere of financial security are regulated by legal norms in which their parties (subjects) are interconnected and interact through the exercise of subjective rights and duties established and guaranteed by the relevant administrative-legal norms and the state. according to v. a. lipkan, such administrative-legal relations are a type of administrative-legal relations, therefore, endowed with some characteristic features (lipkan, 2008): – оbligations and rights of the subjects and objects of relations connected with the activity of state administration bodies; – administrative-legal relations in the sphere of security are a part of relations in the sphere of administration, they arise in everyday practical implementation of tasks and functions of the state to ensure financial security; – in these relations, one of the subjects is a state administrative body or a public organization vested with state powers in the sphere of financial security; – these relations arise on the initiative of either the object or the subject, and the consent of the other party is not a mandatory condition for their occurrence; – administrative-legal connection is a special relationship between its participants, one of which, under the given circumstances, has the right to demand from the other such behavior as is provided for by the administrative-legal norm; – the subject of security management is obliged to implement its own material, legal and procedural rights, i.e., the right is also considered as the obligation of the subject of administrative-legal relations in the field of financial security; – in case of violation of the norms regulating public relations in the sphere of financial security, the violator is liable both to the other party and to the state; – administrative-legal relations in the sphere of financial security are not always relations carried out on the basis of power and coercion. they can be carried out both on the basis of authority and subordination, as well as on the basis of equality of the parties, when each party must fulfill certain requirements of the legal norm. therefore, the existence of mutual rights and obligations is an inherent feature of administrative legal relations in the sphere of financial security; – sanctions applied to the parties of administrative and legal relations in the field of financial security depend on the degree of public danger of the offense; – disputes arising between the parties to administrative and legal relations shall be settled in administrative and other courts. depending on the characteristics of the participants, administrative and legal relations can be internal and external. in the first case the obligatory body enters into relations with other bodies of providing financial security, in the second – interacts with citizens, non-state enterprises providing services in the field of financial security. however, the state, represented by the authorized bodies, by means of coercion and management, establishes and implements the relevant rights and obligations, rules and norms of conduct in clearly defined spheres of public life. therefore, the primary role in determining the content of administrative-legal relations belongs to their parties. these parties are the subjects of providing financial security – the bearers of rights and obligations in the sphere of financial security provided by administrative and legal norms, who are capable of exercising these rights and fulfilling the assigned obligations. the decisive feature that distinguishes the content of security from administrative-legal positions in the field of financial security is the fact that one of the parties is a holder of legal authority over other subjects, which is granted to him by administrative norms. such subjects are subjects of financial security. administrative-legal relations are formed when these subjects exercise their powers and administrative functions (bryhinets, 2017). in general, administrative and legal relations in the sphere of financial security are characterized by two important features: on the one hand, they are forms of social relations, since people or their associations necessarily participate in them, and on the other hand, they are forms of organizational relations, which in the process of their implementation solve the tasks of administrative activity to create favorable conditions for the realization of national financial interests. 6. the structure of the administrative relations in the field of the financial security administrative relations in the field of financial security have their own structure (composition). its elements include: subjects, objects, legal facts. the subject of administrative relations in the field of financial security of the nfi is the subject of administrative law, which has entered into specific legal relations in the field of financial security, regulated by the norms of administrative and baltic journal of economic studies 69 vol. 9 no. 2, 2023 financial law, in particular: nbu, nssmc, antimonopoly committee, law enforcement bodies, non-governmental bodies and organizations, citizens. the subject of administrative and legal relations in the field of financial security of the nfi is money and credit and the nfs activity of the nfi in it. the basis for the appearance of change or termination of administrative and legal relations in the field of financial security of the nfi are legal facts (actions, events), the main feature of which is the ability to cause legal consequences. legal acts meet the requirements of administrative, legal and financial norms: administrative acts – decrees and orders of the president, resolutions and orders of the cabinet of ministers of ukraine, etc. in the field of financial security. the security sphere is characterized by legal acts of an individual nature, since they directly create specific administrative and legal relations. thus, administrative and legal relations are directly created between a person appointed as the head of the group and other employees. unlawful acts are crimes, misdemeanors that entail the application of coercive measures. the commission of a crime causes the emergence of a certain circle of relations concerning the application of the norms of substantive and procedural administrative law. with regard to the special nature of security relations, most of them are protected by criminal law (galunko, pravotorova, 2021). the main criteria for ensuring financial security in this area are the sufficiency of financial resources, their balance and liquidity, which enable the sustainable development of nfis and the banking system in general. elements of financial security should include the following: – the efficiency of the financial system, i.e., its ability to ensure the achievement of the strategic and tactical development goals of the nfs and nfi; – independence of the financial system, which means the ability of the state to independently determine the objectives, mechanisms and methods of its functioning; – competitiveness of the financial system, that is, its ability to fully perform its tasks and functions in the conditions of existence and influence of the financial systems of other countries and global financial actors. 7. financial security threats threats to financial security are a set of real or potentially possible phenomena and factors that pose a threat to the realization of national interests in the financial sphere. threats complicate self-regulation of the economy and realization of financial interests, cause financial indicators to exceed their thresholds. it is the task of the state to identify threats, measure the level of their danger, take appropriate measures to prevent and eliminate threats and negative consequences of their influence. 8. threats to the development of the insurance market the following threats to the development of the insurance market include: imperfect legal regulation of insurance; lack of liquid financial instruments for effective investment policy; low capitalization of domestic insurers; delay in the introduction of compulsory health insurance with the participation of insurers; absence of legal basis for the introduction of investment and pension insurance; opaque state regulation; non-transparent financial reporting of the insurance sector; lack of quality statistical information in the insurance sector; low level of services provided by individual insurers and fraudulent schemes in the insurance sector; use of insurance as a mechanism for optimizing taxation and tax evasion. despite the nominal growth of the main indicators of the development of the insurance market, it remains extremely insignificant in terms of the volume of statutory funds, equity, assets, insurance reserves. insurance companies do not accumulate a significant amount of investment resources and therefore do not have a significant impact on the processes of expanded reproduction, growth of the state economy and the welfare of citizens. in the competition to attract financial resources, the insurance market is currently losing significantly to the banking system. at the same time, today the risks of domestic legal entities are not sufficiently covered by insurance, as this area was practically not developed ten years ago, when the risks of industrial enterprises were not subject to insurance. the need to modernize the insurance market of ukraine is obvious and it is connected with the transition from the redistribution model of this market (in the interests of financial and industrial groups) to the development of real insurance. the prospects for the development of the insurance market in ukraine are primarily related to the increase in the share of long-term (cumulative) insurance. this will require a balanced development of voluntary and mandatory forms of insurance and the creation of innovative insurance products. trust companies, credit unions, pawnshops, leasing and factoring companies, non-state pension funds currently have very little influence on ukraine's economic development. their total assets amount to about 0.5% of gdp. the urgent need to create a non-state pension system in ukraine is connected with the need to gradually reform the existing state baltic journal of economic studies 70 vol. 9 no. 2, 2023 pension system and introduce elements of the accumulation system. thus, unlike developed countries, where the funds accumulated by non-bank financial institutions are one of the most important sources of investment, domestic insurance companies, pension funds and mutual funds have not yet been able to attract sufficient funds, and their financial power is rather insignificant. the main reasons limiting the development of domestic non-banking institutions are the insufficient level of development of the economy and industry, the underdevelopment of the stock market and its infrastructure, the imperfection of the legislative framework, and the low level of income of the population. 9. problems of the market of non-banking financial services in ukraine according to o. s. vlasiuk (vlasiuk, 2014), the main problem of the market of non-banking financial services in ukraine is its extremely insufficient development. this is due to a number of reasons, among which the following should be emphasized: organizational and legal: – lack of a clear vision of nfis in the country 's financial and banking system, as well as a clear government policy regarding their activities; – incomplete and sometimes inconsistent regulatory framework; – minimization of state regulation and control over nfis, its imperfection and lack of clarity; – inconsistency of measures concerning the organization of state supervision over the activities of financial intermediaries; – lack of adequate level of market competition and effective incentives for further development of the network of financial intermediaries; – unresolved issues of interaction of the nfu with institutions and organizations of the banking sector of the economy; – imperfect taxation of financial intermediaries, which leads to the concealment of activities and the use of these institutions for tax evasion. economic: – low solvent demand of legal entities and individuals for financial services; lack of budget funds for the organization of full-fledged financial intermediation; significant undercapitalization of financial intermediaries, insufficiency of their assets and reserves to carry out full-fledged activities; – overflow of solvent demand for financial services to the banking system or to foreign financial intermediaries as a result of undercapitalization. functional: – a relatively narrow range of financial services offered to clients; – the unbalanced portfolios of financial inter mediaries and the virtual absence of at least minimal risk management practices; – extremely low technological level of operations; – lack of proper traditions, long-term positive experience of working with clients; – low level of management and marketing in the market of financial services; imperfect market infrastructure. personnel: – insufficient professional level of specialists; – actual lack of qualification requirements for many of them. information and analytical: – insufficient scientific research on the formation and development of the insurance market, leasing and the market of non-banking financial services in general; – inadequate statistical base in the field of financial services; – poor provision of information and consulting on financial intermediation activities; – lack of a base of unscrupulous clients of financial and banking institutions; – absence of specialized publications on the topics of insurance, leasing, non-governmental pension plans, and so on; – lack of ratings of financial intermediaries that would be trusted by the market and general opacity of the sector for potential investors, participants and clients. the above indicates low efficiency of the domestic market of financial services and, consequently, a threat to financial security. at present, this field of activity is not recognized by the society as objectively important and necessary. the place and role of financial intermediation in the national economy have not yet been clearly defined. thus, the threats to the development of nfs in ukraine are as follows: – insufficient capitalization of nfu; – low solvency of individuals and legal entities, low level of trust of citizens in institutional investors; – lack of effective system of protection of rights of consumers of financial services; – insufficient awareness of the activities of the nfu in ukraine; – low level of transparency of financial institutions; – imperfection of the legislative framework and the system of state regulation; – incompleteness and inconsistency of the process of formation of the nfu system; – insufficient protection of investors' rights; – lack of an effective system of protecting the rights of consumers of financial services; – insufficient awareness of the activities of the nfu in ukraine. to ensure an acceptable level of financial security of the state, it is necessary to create adequate reserves and purposefully apply budgetary, tax, monetary baltic journal of economic studies 71 vol. 9 no. 2, 2023 and other mechanisms of state regulation that correspond to market conditions (vlasiuk, 2014). security itself in the monetary and credit sphere (monetary and credit security) is focused on ensuring the stability of the monetary unit, availability of credit resources and maintaining the level of inflation that does not suppress economic growth and increase the real income of the population. such security is manifested in monetary policy as a set of measures in the sphere of money circulation and credit aimed at regulating economic growth, curbing inflation and ensuring the stability of the monetary unit, providing employment for the population and balancing the balance of payments. the implementation of a well-designed monetary policy by the state requires the separation of its strategic and tactical objectives. 10. factors ensuring the competitiveness of nfs in modern conditions factors ensuring the competitiveness of nfs in modern conditions should be: – adaptation of the legislative and regulatory framework of ukraine to the requirements of eu legislation and the basel committee on banking supervision; capital adequacy (stability, reliability, expansion of access to financial markets, implementation of mergers and acquisitions); – the required asset quality (liquidity, solvency, profitability, stability, risk diversification, availability of creditworthy borrowers); – availability of financial innovation. at the same time, today the nfs of ukraine does not properly fulfill the function of financial support for stable economic development. in order to minimize the risks that may result from insufficient stability, transparency and competitiveness of the nfs of ukraine, it is necessary to create a body (for example, the national bureau for state regulation of financial services markets), similar to the liquidated national financial services commission, the sole activity of which will be aimed not only at control and supervision, but also at reforming nfis and implementing the best european practices. concentration of such powers in the nbu, whose activities cover both banking and non-banking spheres, is burdensome and less effective. state policy in the sphere of nfs should be aimed at: – improvement of coordination of the activities of financial sector regulators; – creation of a system of risk identification, monitoring and ongoing analysis of the financial services market to ensure the possibility of taking preventive measures to ensure financial security; – increasing the transparency and openness of the activities of financial institutions and the body that carries out state regulation and supervision over them; – enhance the solvency and financial stability of nfis; – ensure adequate protection of consumers of non-banking financial services; – preventing the use of nfis for unproductive withdrawal of capital abroad. taking these measures will make it possible to ensure protection of national interests of the state in case of emergence and aggravation of risks of a fragmented nature in the financial sphere, to create a mechanism of state management of risks in the financial sphere, to minimize the consequences of global risks, which will contribute to balance of the financial sphere and ensure effective functioning of the national economy and economic growth of the state. 11. conclusions thus, in the modern conditions of reforming economic relations, the development of financial markets is characterized by extraordinary speed and dynamism. in the financial industry, competitive advantage and technology are closely intertwined and interconnected. the growth of confidence in the markets of financial services, the efficiency of their work largely depends on how and by what rules the financial sector functions. there are various problems that need to be solved in the activities of financial institutions in ukraine and around the world. the rapid growth of technologies and communications, the development of information technologies and their active use in the field of financial services contribute to the emergence and improvement of various types of crimes, the annual losses of which are estimated at billions of dollars on a global scale (buha, 2020). therefore, the definition of the conceptual bases for the formation of an effective and efficient state risk management mechanism in the financial sphere, aimed at the prevention of crisis phenomena and minimization of their consequences, will ensure the effective functioning of the national economy and economic growth of the state. and financial security of financial and credit institutions is the main element of their economic security. at the same time, in a certain way, it is an independent element and represents such a state of their financial resources, which ensures effective (profitable) activity, protection of financial interests and the ability to preserve their financial capabilities under the influence of various dangers and threats. that is, the main focus of financial security should be aimed at ensuring the effective use of financial resources and maintaining them at a 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(in ukrainian) received on: 11th of march, 2023 accepted on: 21th of april, 2023 published on: 23th of may, 2023 of financial services in all conditions. the latter includes active activity in attracting financial resources and their effective investment. based on the above, it can be stated that financial security covers all aspects of financial activity of non-bank financial and credit institutions and ensures their stability and competitiveness on the market (buha, 2020). consequently, financial security of ukraine should be understood as a complex, dynamic, social system with an extensive network of interconnected and interdependent elements and connections, which ensures the state's ability to effectively form, protect against depreciation and rational use of financial resources, the system aimed at stabilizing socioeconomic development of the country, ensuring its stability, as well as the formation of prerequisites for maintaining the integrity and unity of the state financial system, servicing financial obligations. baltic journal of economic studies 361 vol. 4, no. 4, 2018 corresponding author: 1 uzhhorod national university, ukraine. e-mail: nataliashelever@gmail.com 2 uzhhorod national university, ukraine. e-mail: 8nadezhda@ukr.net 3 uzhhorod national university, ukraine. e-mail: gwm.econ@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-361-365 features of foreign investors’ protection in administrative legal proceedings of ukraine natalia shelever1, nadiia buletsa2, vitaliy gerzanych3 abstract. in a difficult economic situation in ukraine, the attracting of foreign investment is the priority direction of economic development. in practice, there are often cases of violation of the foreign investors’ rights by officials. therefore, an important issue of the present is the study of the foreign investors’ rights protection mechanism since they are important economic entities. ukraine has an outflow of foreign investment. this is due to the imperfection of the current legislation, economic instability, corruption, unfairness of counterparties, unlawful actions of state bodies, and the absence of an effective mechanism to protect the rights of foreign investors. therefore, the objective of the article is to study the peculiarities of administrative legal proceedings of foreign investors protecting, to analyse the current state of protection of foreign investors in ukraine by administrative courts, and to analyse the problems that arise in practice. it should be noted that the researchers did not investigate the peculiarities of administrative legal proceedings of foreign investors’ protection. a considerable attention is paid to protecting foreign investors in the context of economic legal proceedings. therefore, the issue deserves special attention. methodology. the authors substantiated the necessity to improve the current legislation concerning the protection of foreign investors in the administrative legal proceedings. based on the analysis of the current legislation norms, one can conclude that most norms are only declarative. therefore, the authors provide appropriate proposals for improving domestic legislation using positive foreign experience. results. the article reveals the peculiarities of the appeal of decisions, actions and inactivity of the subjects of authority by foreign investors, the relevant judicial practice is analysed there, the european experience is investigated in order to implement it in domestic legislation. the authors discuss the current state of protection of foreign investors in ukraine by administrative courts and the problems that arise in practice. particular attention is paid to the lack of proper legal protection of foreign investors. in this regard, the appropriate proposals are provided by the authors that will contribute to improving the investment climate in ukraine. practical implications. foreign investment has a positive effect on the economic situation of any state. in order to achieve investment attractiveness, ukraine needs to provide it with adequate judicial protection. value/originality. the urgent question of the present is the protection of foreign investors in the form of administrative legal proceedings. the necessary step is the implementation of positive international experience on this issue in domestic legislation. key words: economic development, economic transformation, foreign investor; administrative proceeding, subject of authority, judicial protection. jel classification: d63, k40, k41 1. introduction foreign investment is the engine of economic transformation in any country. in ukraine, for the sake of economic change, foreign investments are needed. however, every foreign investor who puts his funds in the economy of another country should have guarantees of his rights protection. one of the most effective forms of such activities protection is judicial protection. in practice, we often see that the subjects of authority, for example, tax authorities, customs authorities violate the rights of foreign investors. ineffective judicial protection of domestic courts leads to the fact that foreign investors appeal to international courts and this is not a positive indicator for ukraine. 2. statement of the article’s task in this regard, the study of the peculiarities of administrative legal proceedings of foreign investors protecting is relevant. analysis of the issues that arise in baltic journal of economic studies 362 vol. 4, no. 4, 2018 practice in appealing of decisions, actions, the inaction of authority subjects, providing the suggestions for improving the current legislation based on the study of positive european experience are important issues today. this is the objective of our study. our task is to analyse the current legislation of ukraine that regulates the actions of authority subjects appealing proceeding, relevant judicial practice, to identify the existing problems related to the protection of foreign investors in administrative proceedings, and to indicate the ways of its solution. 3. review of the literature the scholars did not pay enough attention to the study of administrative legal proceedings of the rights and interests of foreign investors’ protecting. this issue is considered in general as a way of protecting the rights of investors and their protection in the context of economic legal proceedings. therefore, the issue under investigation deserves special attention. the following scholars, such as: o. zeldina, o. okhotnikova, o. podtserkovny, o. polyak, d. prytyka, o. semerak, o. khrimly, and others, were engaged in the protection of investors’ rights. however, there are some problems related to the rights of foreign investors’ protection through administrative proceedings that remain unresolved. 4. analysis of the investment climate in ukraine negative trends in the development of the ukrainian economy, the annexation by the russian federation of the autonomous republic of crimea, the war in the east of ukraine, the instability of ukrainian legislation lead to low investment position of ukraine. the hamburg institute of the world economy (hwwi) together with the independent audit and consulting company bdo international business compass ranked the investment attractiveness of the countries (from 2016). according to it, at the end of 2008, ukraine occupied the 18th place, in 2015 it went down to 89 positions, in 2016 – the 130th place in this ranking. consequently, from 2008 to 2016, ukraine managed to make very adverse developments (international business compass, 2016). if we analyse the chart below, then it can be seen that in 2017 and in the first quarter of 2018, the inflow of direct investment in ukraine is also not high (official site of the state statistics service of ukraine, 2018). the economic growth is impossible without the involvement of foreign investors who will invest their money in the ukrainian economy. however, every investor seeks to have a guarantee that in a foreign country he will receive the effective legal protection of his legitimate rights and interests. therefore, the priority task for our state is to create favourable conditions for the activity of foreign investors. this will be facilitated by the effective judicial protection of foreign investors from illegal decisions, actions or inaction of the state, its bureaucracy, which, unfortunately, remain the main “raiders” in the country. the administrative courts protect the foreign investors from the arbitrariness of officials. 5. protection of foreign investor by the administrative court the authorities and local self-government have repeatedly stressed the need to attract foreign investments into the ukrainian economy and create favourable conditions for investors. however, recently, de facto, the outflow of foreign investment has been observed in ukraine. because of this, our country does not properly protect foreign investors. in accordance with the law of ukraine “on the regime of foreign investment”, the legal guarantees of foreign investments protection are divided into: guarantees from changes in legislation; guarantees from forced removal, as well as illegal actions of state authorities and its officials; compensation and indemnification to foreign investors; guarantees in case of termination of investment activity; guarantees of income transfer, profits, and other amounts in connection with foreign investments (rada. gov, 1996). as to judicial protection, g. p. timchenko notes: 1) the judicial form of protection is the activity of judges who are the bearers of the judiciary in accordance with the constitution; 2) the judicial form of protection is as much as possible adapted to the resolution of disputes related to the violation or the possibility of violating subjective rights and legitimate interests since the activity of courts for resolving disputes takes place in a special 5,0 4,0 3,0 2,0 1,0 0,0 the inflow of direct investments (equity) in ukraine (aggregate sum from the beginning of the year) 1,0 0,4 0,5 0,7 2,8 3,8 4,4 1,9 1,2 january-march january-june januaryseptember year 2016 2017 2018 billion usd baltic journal of economic studies 363 vol. 4, no. 4, 2018 procedural form; 3) the judicial form of protection is universal since any subjective right and legitimate interest may be defended in court (o. xrimli, 2016). one of the ways of protecting the rights of investors is the recognition by the court of invalid acts of the authorities. beside this, there is guarantees compensation to investors caused by unlawful actions or inactivity of the authorities, as well as guarantees compensation to investors in case of adoption by the bodies of state power or local self-government acts that violate the rights of investors. in accordance with art. 7 of the law of ukraine “on the judiciary and status of judges” everyone is guaranteed the protection of his rights, freedoms, and interests within a reasonable time by an independent, impartial, and fair court established by law (rada.gov, 2016). in order to protect its violated right, the foreign investor, first of all, must apply to the court with the claim. the claim provides the investor with the opportunity to exercise his right to protection. it is advisable to distinguish the following of the foreign investor protection mechanism: 1) the appeal of a foreign investor to court with a claim; 2) consideration of this claim in court; 3) the decision by the court; 4) execution of the court decision in case of claims’ satisfaction. therefore, in order to protect his violated rights, the foreign investor, first, must apply to the national court with the corresponding claim that is the most effective means of the subjective law protection. a claim is a public legal instrument that is used to bring proceedings; it is a kind of “starter” of a competitive judicial mechanism. the significance of the claim form is its universality and engagement of those who are interested in restoring property relations and law and order by the subjects of the court (kolesov, 2004). if we analyse the court practice in ukraine, we can conclude that foreign investors to the customs authorities file most claims. as for example, let us analyse the case no. 2а-4168/09/2670 of august 20, 2009. the district administrative court of kyiv considered the claim of the ukrainian-hungarian limited liability company “intercomtrans” to the state customs service of ukraine for the recognition of the tax clarification such that does not comply with the law. it had been established that the plaintiff, in this case, is the enterprise with foreign investments, and accordingly, such enterprises have privileges on the import duty. the customs authority has ordered to pay import duties in connection with the fact that corporate rights have been sold to another non-resident. the court refused to comply with this claim. at present, many cases are dealt with in administrative courts, where foreign investors are claimants (osoblyvosti sudovogho zakhystu inozemnykh investoriv v ukrajini, 2018). the actual issues of the present are tax disputes. investigating this category of cases lawyers come to the idea that administrative courts protect the tax authorities themselves, not taxpayers. very often the burden of proof lies with the taxpayer, although in accordance with the legislation of ukraine should be the opposite. in 2017, the procedural legislation of ukraine has undergone significant changes. on october 03, 2017, the verkhovna rada of ukraine adopted the law of ukraine “on amendments to the commercial procedural code of ukraine, the civil procedural code of ukraine, the code of administrative legal proceedings of ukraine and other legislative acts”. in accordance with the code of administrative legal proceedings of ukraine, the jurisdiction of administrative courts extends to the cases in public legal disputes. it should be noted that in practice, there are problems of power separation between economic and administrative courts. in accordance with the code of administrative proceedings of ukraine, administrative courts consider public legal disputes. these are the disputes, in which the subject of authority is obligatory one (code of administrative legal proceedings of ukraine: law of ukraine № 2747-iv of july 6, 2005) it is necessary to pay attention to certain categories of disputes that could not be divided between courts of different jurisdictions. thus, the permanent dilemma between economic and administrative courts was resolved in the new edition of the civil code of ukraine, and it was determined that the cases concerning the appeal of acts (decisions) of business entities and their bodies, officials in the field of organization and implementation of business activity fall under the jurisdiction of economic courts. an exception is made in relation to acts (decisions) of the subjects of power authorities taken for the fulfilment of their power management functions, and disputes of which the individual is a non-entrepreneur. these disputes fall under the jurisdiction of the administrative court (zeljdina, 2018). by the way, in france, the conflict tribunal was created. this is the specialized court for disputes over jurisdiction. such an institution also should be introduced in ukraine. it should be noted that, according to the calp, administrative courts do not consider the claims that are derived from the claims of private legal disputes. there is no need to appeal to the courts of different jurisdictions for solving the single controversial situation. a foreign investor, when appealing to an administrative court with a public legal claim, may also combine it with a claim for damages to him. when filing a claim to a court, a foreign investor must ask the court to apply measures to secure a claim in order to guarantee the execution of a court decision. indeed, in practice, there are the cases when the court decision has come into force, but it is impossible to execute it, and it remains only a sheet of paper. in ukraine, there is a need to create the judicial body that would deal with issues of protecting the property baltic journal of economic studies 364 vol. 4, no. 4, 2018 rights of foreign investors and ensuring their unrestricted investment activity. it is advisable, in conjunction with the supreme court of intellectual property, supreme anti-corruption court, to establish the supreme court on foreign investment. one of the categories of cases that would have the right to consider this court would be the disputes of foreign investors with the state authorities of ukraine. one of the peculiarities of the judicial protection of a foreign investor is the issue of the real execution of the decision. enforcement proceeding is the final stage of the trial. without the execution of court decision, the meaning of justice is lost. the decision of the administrative courts is quite a complicated category of enforcement proceedings since the party of the trial is the state and the decisions are executed by the state executive service. in practice, the problematic issue is the court control of its decisions’ implementation. in accordance with art. 382 of the calp of ukraine, a court that has passed a judicial resolution in an administrative case may oblige a subject of authority that is not in favour of a decision to file a report on the execution of a court decision in a court order. as a result of consideration of the report of the authority subject on the execution of a court decision, or in the absence of such a report, the judge may decide to set a new term for filing a report, impose a fine on the responsible subject of authority in amount from twenty to forty subsistence minimum for able-bodied persons (code of administrative legal proceedings of ukraine: law of ukraine № 2747-iv of july 6, 2005). thus, based on the foregoing, one can see that such a control consists of the court right to require an official to report on the execution of the relevant court decision. that is, to oblige officials to submit the report is the right of the court and not its duty. in practice, there are cases where the plaintiff applies the court with a statement to obligate the defendant to submit a report on the implementation of the decision, but the court refuses to comply with such an application, in fact, ignoring the claims of the plaintiff. we believe that such a gap in the legislation will enable unfair subjects of authority to refrain from executing judicial decisions in favour of foreign investors. it is necessary for the legislator to amend the current legislation and to consolidate the duty of the court to oblige officials who “lost” the case in the court to submit a report on the execution of the court decision in time determined by the court. 6. conclusions of the study and prospects for further exploration in this direction in order to improve the economic situation in ukraine, it is necessary to attract foreign investors. to do this, it is necessary to form clearly the policy of economic development. in order to increase the flow of foreign investment, it is necessary to improve the investment climate by reducing administrative barriers, tax pressure on business, and guarantee effective judicial protection. the important issue today is the overcoming of corruption in the government that actually frustrates foreign investors, generates an outflow of foreign investments from the country. the ukrainian government should ensure legal protection of foreign investment. in addition, a foreign investor must have proper judicial protection in our country. the judicial protection form is universal and takes precedence over other forms of protection. it is effective because the court decision finally resolves the case. other forms of protection acquire this character only at the request of the conflicting parties. the administrative courts protect the rights, freedoms, and interests of individuals, the rights and interests of legal entities from violations of authorities’ subjects. in practice, the cases of the rights, freedoms, and interests of foreign investors’ violations by officials are often encountered. therefore, these economic entities must apply to the court in the procedure of administrative legal proceedings, that is, an appropriate requirement to protect their rights and interests. in ukraine, the problem is that practically many norms of law have only declarative character, and the courts do not fully protect the foreign investors, which promotes the outflow of foreign investment from our state and negatively affects the economic situation in ukraine. actual issues of the present are the real implementation of administrative courts’ decisions because without its execution such a judicial decision remains a simple sheet of paper. it is important to provide an effective mechanism for the execution of such court decisions. when analysing the calp of ukraine, one can come to the conclusion that it is aimed at increasing the level of the protection of foreign investors’ rights in ukraine. however, a number of issues remain unresolved and impede the effective investment to the ukrainian economy. therefore, the legislator should take into account the positive foreign experience, in particular, the european union countries to address the relevant issues. references: rejtyngh investycijnoji pryvablyvosti krajin bdo [investment attractiveness rating of bdo countries]. international business compass 2016. retrieved from: https://www.bdo.ua/uk-ua/news-2/2016/business-compass-2016 (accessed 18 july 2018) ofitsiinyi sait derzhavnoyi sluzhby statystyky [official site of the state statistics service of ukraine]. retrieved from: http://www.ukrstat.gov.ua (accessed 18 july 2018). (in ukrainian) on the regime of foreign investment: law of ukraine № 93/96-vr of march 19, 1998. vidomosti verkhovnoji rady ukrajiny. 1996. n 19. art. 80. baltic journal of economic studies 365 vol. 4, no. 4, 2018 khrimli, o. h. (2016). zakhyst prav investoriv u sferi hospodaryuvannya : teoretyko-pravovyy aspekt [protection of investors' rights in the field of economics: theoretical and legal aspect] [monohrafia]. k.: yurinkom inter. (in ukrainian) on the judiciary and the status of judges: law of ukraine № 1402-viii of june 02.2016. vidomosti verkhovnoji rady ukrajiny (bulletin of the verkhovna rada. 2016. no. 31, art. 545. kolesov, p. p. (2004). protsesualnyye sredstva zashchity prava [procedural remedies for law] [monographiya]. velikiy novgorod: izd-vo novgu im. yaroslava mudrogo. (in russian). osoblyvosti sudovogho zakhystu inozemnykh investoriv v ukrajini [features of judicial protection of foreign investors in ukraine]. retrieved from: http://svit.org.ua/osoblivosti-sudovogo-zaxistu-inozemnix-investoriv-vukra%d1%97ni/ (accessed 18 july 2018) code of administrative legal proceedings of ukraine: law of ukraine № 2747-iv of july 6, 2005. vidomosti verkhovnoji rady ukrajiny. 2005. no. 35-36, 37. art. 446. on amendments to the commercial procedural code of ukraine, the civil procedural code of ukraine, the code of administrative legal proceedings of ukraine and other legislative acts: law of ukraine of october 3, 2017. no. 2147-viii vidomosti verkhovnoji rady ukrajiny. 2017. no. 48. art. 436. zeljdina, o. (2018). zakhyst prav investoriv jak skladnyk investycijnoji pryvablyvosti ukrajiny [protection of investors' rights as a component of ukraine's investment attractiveness]. pidpryjemnyctvo, ghospodarstvo i pravo, 3, 51-55. baltic journal of economic studies 328 vol. 4, no. 1, 2018 corresponding author: 1 department of criminal law and criminology, university of the state fiscal service of ukraine. e-mail: supruntanusha@gmail.com 2 department of criminal process and criminalistics, university of the state fiscal service of ukraine. e-mail: zvezda171088@gmail.com 3 department of criminal and criminal-procedure law, national university “kyiv-mohyla academy”. e-mail: shkelebei_vika@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-1-328-333 grounds for limiting property rights in the application of temporary seizure of property in criminal proceedings tetiana suprun1, tetiana yatsyk2 university of the state fiscal service of ukraine, ukraine victoria shkelebei3 national university “kyiv-mohyla academy” kyiv, ukraine abstract. the purpose of the paper is to investigate reasons for the restriction of property rights in the application of temporary seizure of property in criminal proceedings and to determine promising directions for further research on the issues. the issue of measures to ensure criminal proceedings and observance of human and civil rights and freedoms was investigated by a number of domestic scientists, but the degree of investigation of grounds for restricting property rights in the application of temporary seizure of property in criminal proceedings in the context of amendments made to the cpc of ukraine in recent years remains insufficient. that is why the study of the grounds for limiting property rights in the application of temporary seizure of property in criminal proceedings is now of particular urgency. methodology. methodological basis of the research is a set of philosophical, general scientific, special scientific methods. the method of logical-semantic analysis is used to clarify the meaning of multi-valued concepts, the application of the method of system analysis allowed investigating the place of the institute of property rights in legal literature and legislation of ukraine. the method of grouping and the system and structural approach are used for classifying the distribution, ascertaining the internal structure, and analysing the interconnections between elements of the concept of ownership and the category of property rights restriction. results. the paper examines the factual and formal legal grounds for limiting the ownership of a suspect, accused, and other persons in the application of temporary seizure of property in a criminal proceeding. the conclusion is drawn on the need to clarify the factual grounds for the temporary seizure of property for cases where such a seizure is carried out by a person who has carried out legal detention in the manner prescribed by articles 207, 208 of the cpc of ukraine and is not an investigator, prosecutor, or other authorized official. practical implications. proposals regarding the resolution of individual legal conflicts in the current cpc of ukraine are provided. key words: right of property, temporary seizure of property, restriction of individual rights, criminal proceedings. jel classification: j00, k00, k11 1. introduction in modern conditions, the right of property is not only the basis of property independence of participants in public relations, which is a prerequisite for a market economy. at present, the inviolability of property rights has become, without exaggeration, one of the fundamentals of a modern democratic society and a rule of law. on this issue, one should agree with a.s. nersesian, who observes: “only citizens with property can claim to be the stable basis of the functioning of any society, and the illegal deprivation of property on the part of the state means its legal arbitrariness and inherent in the main authoritarian and totalitarian regimes” (nersesian, 2015). in these circumstances, mechanisms become important that allow ensuring a balance between private and public interests in criminal proceedings and creating preconditions for the persons who own the property to exercise their powers in relation to their property and, at the same time, to achieve the objectives of the baltic journal of economic studies 329 vol. 4, no. 1, 2018 criminal proceedings, which, as n.s. morhun notes, in many cases, can only be carried out subject to the restriction or even deprivation of property rights during the investigation of criminal offenses (morhun, 2015). therefore, the issue arises as to the grounds for limiting ownership in the application of temporary seizure of property in criminal proceedings. the issue of measures to ensure criminal proceedings and respect for human and civil rights and freedoms was investigated by a number of domestic scholars such as yu.p.  alenin, yu.m.  hroshevyi, v.s.  zelenetskyi, o.p. kuchynska, l.m. loboiko, yu.m. miroshnychenko, o.r .  mykhailenko, n.s.  morhun, a.s.  nersesian, s.m. smokov, and others. however, the degree of investigation of grounds for restricting property rights in the application of temporary seizure of property in criminal proceedings in the context of changes made to the cpc of ukraine in recent years is still insufficient. problem statement. the main tasks solved by this article are as follows. 1. to investigate the grounds for limiting property rights in the application of temporary seizure of property in a criminal proceeding. 2. to identify promising directions for further research on the issues studied. 2. definition of the concept of property rights and the concept of inviolability of property rights institute of property rights in the objective sense is complex (multidisciplinary), that is, that unites the rules of various branches of law, in particular, constitutional, civil, administrative, criminal. the said institution covers a set of rules that establish the general principles of property belonging to certain persons, and regulate and protect the belonging of material goods to specific individuals (novoselova, 2001). according to v.v. aliamkin, the inviolability of property rights is a fundamental principle of guarantees of the protection of property rights and economic human rights, which is realized through the relevant material and procedural rules of the current legislation of ukraine at the presumption level. this constitutional rule at the presumption level must be carried out unconditionally and provide both all the branches of law and the activities of state bodies, in particular, the judiciary. any encroachment on property right is definitely unlawful if it is committed without the knowledge of the state and has no appropriate act of law enforcement (aliamkin, 2011). o.v. dzera argues that the right to property is a statutory right, which establishes the absolute affiliation of property to a person (owner) and defines its rights and obligations with respect to this property (dzera, 1996). in the objective sense, the right of private property to citizens is a set of legal rules that establish and protect the citizens’ ownership of property of the consumer and financial and productive purpose and provide owners with the right to own, use, and dispose of this property at their own discretion, to use it with any purpose, unless otherwise provided by law. legal right of ownership is formed as a combination of the three most important powers – the right of ownership, the right to use, the right to dispose (dzera, kuznetsova, pidopryhora, 2000). the concept of inviolability of property rights as a basis for criminal proceedings is determined by n.s. morhun as the original idea of the criminal process of a statutory nature, which consists in directing the content and form of criminal proceedings to protect the person from unlawful interference in its ability to own, use or dispose of its own property within the limits established by law at its own discretion (morhun, 2015). 3. the content of category of restriction on the right of ownership regarding the content of the category of property rights restriction in the legal literature, there is currently no single position. so, o.p. kuchynska, t.i. fulei, r.v. barannik consider that restriction on the right of ownership is to remove certain powers from its content (kuchynska, fulei, barannik, 2013). instead, n.s. morhun supports the position, by which the power to be restrained is not removed from the contents of the property right. the proprietor may exercise a limited subjective right only to the extent possible within the constraints. in the opinion of n.s. morhun, restriction of property rights is a deterrent that prevents the owner from realizing his own private interest contrary to public interests. this restriction is imposed only on the basis of the law and does not remove the powers from the subjective right of ownership, but only blocks, in whole or in part, the possibility of its implementation (morhun, 2015). o.v. rozghon considers the restriction of the right of property as external influence on the subjective right of ownership of a particular person, embodied in the relevant legal relationship with his or her participation, involves compressing, reducing the ability of the owner to exercise his powers and consists in specific orders to the owner to take certain actions or refrain from certain actions (rozghon, 2005). thus, the restriction on the right of ownership does not preclude the exercise of powers of the owner but allows it in the presence of certain conditions that must be observed. restriction induces the owner to tolerate certain actions of third parties in the field of his legal domination or to refrain from certain actions (aliamkin, 2011). in view of the foregoing, for the purposes of this study, under the restriction of property rights in the application of temporary seizure of property in criminal proceedings, we propose to understand objectively existing baltic journal of economic studies 330 vol. 4, no. 1, 2018 circumstances of a temporary nature that by depriving a suspect, accused, and other persons of the possibility of exercising certain powers in relation to their property, limit the freedom to carry out actions with their property and consist of specific orders to the owner to take certain actions or refrain from certain actions. in this case, the general features of the restriction on the right of property in the application of the temporary seizure of property will be as follows: a) it is some oppression of the fullness of property rights; b) necessarily formally defined, that is, enshrined in laws and regulations, moreover, solely at the level of law and the fundamental law; c) is established given the public interests, namely, for the purpose of legal protection of rights and legitimate interests of other persons (soloviov, 2011). 4. grounds of restriction on the right of ownership in criminal proceedings in relation to the issue of grounds of restriction on the right of ownership in criminal proceedings, it should be noted that, according to p. 2 of article 223 of cpc of ukraine (holos ukrainy, 2012), grounds for carrying out an investigative (search) activity are the availability of sufficient information indicating the possibility of reaching its goal. in a criminal proceeding, grounds for carrying out an investigative (search) activity are conditions, upon which its conduct is possible, and these conditions are divided into factual and formal legal (sheyfer, 1981). using such a classification, in addition to theoretical needs, ensures a more faithful understanding and application of the law as related to conducting investigative (search) activity in practice, as well as the implementation of prosecutorial supervision, departmental and judicial control. as both factual and legal grounds for carrying out an investigative (search) activity can be subject to prosecutorial supervision, departmental and judicial control. both legal and factual grounds can be subject to appeal, act as an independent subject of lawfulness and justification for conducting investigative (search) activity (rudenko, 2015). with the application of this approach in the study of the subject of this scientific work, the factual and formal legal grounds for limiting ownership in the application of temporary seizure of property in a criminal proceeding are subject to a priority analysis. 5. factual grounds of restriction on the right of ownership in the application of temporary seizure of property in criminal proceedings factual grounds of restriction on the right of a person in the course of proceedings are a set of data sufficient to make a decision under the law as to the need to restrict certain rights of a person in such actions (litvinova, 2017). also quite common in the scientific literature is the definition of factual grounds for procedural action as sufficient data for the assumption that from the sources specified in the law information can be obtained that is the purpose of a certain procedural action (shepitko, 2005). that is, the reasonableness of a certain procedural action is directly linked to the existence of the appropriate grounds for the conduct of such an action. legislation of ukraine determines three grounds for temporary seizure of property: 1) legal detention of a person; 2) search; 3) examination. in turn, detention is divided into two groups: detention by any person (“ordinary citizen”) and detention by an authorized person (nersesian, 2015). so, p. 2 of article 207 of cpc of ukraine (holos ukrainy, 2012) grants every person the right to conduct legal detention in the following cases: 1)  committing or attempting to commit a criminal offense; 2)  immediately after the commission of a criminal offense or the continuous prosecution of a person suspected of committing a crime. at the same time, according to p. 3 of article 207 of the cpc of ukraine (holos ukrainy, 2012), such a citizen has the duty to immediately deliver the detained person to an authorized official, or to immediately inform the authorized official of the detention and location of the person suspected of committing a criminal offense. in this case, the obligation to perform a temporary seizure of property is also assigned to this person. moreover, as a.s. nersesian mentions, such a duty, in fact, gives the citizen the rights of an authorized official without giving him special training or real authoritative powers (nersesian, 2015). in the case when the person who carried out the detention notifies an authorized official of the fact of detention and is waiting for the departure of such an official at the place of commission of a criminal offense, this circumstance is not very significant. however, this situation is quite different in the case when a citizen who has stopped a pocket theft, or a street robbery or supermarket security that stopped a theft in the trading room, deliver the suspect to the investigation authorities or the prosecutor’s office on their own. a.s. nersesian quite rightly notes that in such cases, universal morality dictates to individuals the duty to return the stolen property to the legal owner, and the cpc of ukraine – to carry out the temporary seizure of property. obviously, failure to comply with the cpc rules, in this case, can at least be theoretically recognized as an offense, although it will be essential in the understanding of the criminalprocedural law  – the issue is open and controversial (nersesian, 2015). the fact should also be noted that such a citizen, in accordance with p. 3 of article 207 of the cpc of ukraine (holos ukrainy, 2012) has a duty to immediately baltic journal of economic studies 331 vol. 4, no. 1, 2018 deliver the detained person to an authorized official, or immediately inform the authorized official of the detention and location of the person suspected of committing a criminal offense. in this case, the responsibility for fixing the temporal seizure of property is also assigned to a person, which imposes on him procedurally significant duties, which not only go beyond his competence and training but also can lead to the destruction or damage of traces of a criminal offense. the issue of temporary seizure of property during a search or examination also deserves a particular attention. the procedural purpose of the search, in accordance with article 234 of the cpc of ukraine holos ukrainy, 2012), is the detection and recording of information about the circumstances of a criminal offense, the search for a criminal offense or property that was obtained as a result of its commission, as well as the location of wanted persons. the examination, in turn, is carried out with the aim of identifying and fixing information about the circumstances of the commission of a criminal offense. instead, the main purpose of the temporary seizure of property is: – regarding the subject of a criminal offense – its return to the legal owner, and if this item is related to the illicit traffic – confiscation and destruction; – in respect of funds or other property that was intended (used) to persuade a person to commit a criminal offense, to finance and/or provide material support for a criminal offense or reward for its commission, as well as for property (funds) obtained as a result of a criminal offense and/or revenues from them, as well as property in which they have been completely or partially converted  – ensuring the interests of the state in the confiscation of property, as well as the victim (civil plaintiff ) in the event of reimbursement of damage caused by a criminal offense. so, according to a.s. nersesian, only one group of things or documents included in the temporarily seized property can perform a unique evidentiary function  – found, manufactured, adapted or used as a means or tool for committing a criminal offense and (or) retained its traces (nersesian, 2015). it is also necessary to agree with the position of n.s.  morhun that the courts in practice often come to the conclusion that only the seized items and documents included in the list, on which the court was directly granted permission to find them, as well as the property arrested according to the rules of article 98 of the cpc of ukraine, can be recognized as evidence (holos ukrainy, 2012). at the same time, there is no provision in the current cpc for a temporarily seized property without the imposition of arrest by a court in accordance with rules of p. 5 of article 171 of the cpc of ukraine to be recognized as material evidence (morhun, 2015). summing up the above, there is now a need to elaborate the factual grounds for the temporary seizure of property for cases where such seizure is carried out by a person who has carried out legal detention in the manner prescribed by articles 207, 208 of the cpc of ukraine (holos ukrainy, 2012) and is not an investigator, prosecutor, or another authorized official. we believe that for this category of persons, it is expedient to limit the list of things that may be temporarily withdrawn, taking into account the absence of special training of such persons. then the relevant list should include: 1) things, documents, money, etc. used as means or tools for committing a criminal offense or who have kept its traces; 2) things, documents, money, etc., used to persuade a person to commit a criminal offense or reward for its commission; 3) things, documents, money, etc., which are the subject of a criminal offense, including those connected with their illicit circulation; 4) things, documents, money, etc., obtained as a result of a criminal offense. 6. formal legal grounds of restriction on the right of ownership in the application of temporary seizure of property in criminal proceedings in the general case, legal grounds are considered to be the set of conditions provided for in the criminalprocedural law that give an investigator the right to perform a certain investigative action (kovalenko, 2008). a.p. chernenko understands legal grounds as the relevant legal provisions foreseeing the circumstances with which these provisions come into force. these circumstances are the factual grounds, in the opinion of the said author (chernenko, 2004). as legal grounds for the application of relevant enforcement measures, m.a. pohoretskyi proposes to consider a number of conditions under the criminal procedural law that allow the authorized subject of criminal process to make a decision on their application (pohoretskyi, 2007). regarding this issue, the opinion of o.m. kalachova deserves attention; when classifying grounds of measures to ensure criminal proceedings, she uses terms “factual” and “formal” since factual grounds are always based on factual data, and formal – on a normal procedural form of giving a procedural status to a person as provided for in the legislation (kalachova, 2008). under the legal ground of deprivation or restriction on the right of ownership in criminal proceedings, n.s. morhun proposes to understand as a procedural document that gives an investigator, a prosecutor the right to perform a procedural action, during or after the results of which expropriation or restriction on the right of ownership is possible. for the most of procedural actions, which conduct is related to the expropriation or restriction on the right of ownership, according to n.s.  morhun, the decision of the investigating judge is such a legal ground (morhun, 2015). given the above, for the purpose of this research, we propose to use the concept “formal legal grounds of baltic journal of economic studies 332 vol. 4, no. 1, 2018 restriction on the right of ownership in the application of temporary seizure of property in criminal proceedings” that we propose to understand as the relevant legal provisions foreseeing the circumstances with which these restrictions on the right of ownership in the application of temporary seizure of property in criminal proceedings come into force. general conditions for conducting procedural actions and taking decisions aimed at deprivation or restriction on the right of ownership are: a) the possibility of making a decision only by a court; b) reasoning of this decision; c) the adoption of a decision in accordance with the procedure provided for by the cpc of ukraine. the requirement for the adoption of a decision only by a court is that resolving the issue of restricting or depriving property right at the stage of pre-trial investigation can be carried out only by an investigating judge or a judge determined in accordance with article 247 of the cpc of ukraine (holos ukrainy, 2012). the requirement to make a procedural act motivated obliges the court, justifying a court decision, to indicate the arguments that it used (took into account) for making the final conclusion. the statutory obligation to comply with the order of decision requires a court to decide on a case-by-case basis in strict conformity with the cpc rules governing the particular case of restriction or deprivation of property rights (bandurka, blazhivskyi, burdol (etc.), 2012). it should be noted that not all restrictions on property rights require a court decision in criminal proceedings. the given case is provided in accordance with p. 2 of article 16 of the cpc of ukraine (holos ukrainy, 2012), according to which the temporary seizure of property without a court decision is allowed. however, this restriction is possible only on the grounds and in the manner prescribed by the cpc of ukraine. investigating the issue of formal legal grounds for restricting property rights in the application of temporary seizure of property in criminal proceedings should, first of all, be based on the fact that the general grounds for the temporary seizure of property are enshrined in article 167 of the cpc of ukraine (holos ukrainy, 2012). according to the said article, temporary seizure of property is the actual deprivation of a suspect or persons owned by the property specified in paragraph 2 of this article, of the ability to own, use, and dispose of certain property before the decision on the issue of the seizure of property or its return. temporarily seized may be property in the form of things, documents, money, etc., for which there are good reasons to believe that they are: 1) found, manufactured, adapted or used as a means or tool for committing a criminal offense and (or) retained its traces; 2) intended (used) to persuade a person to commit a criminal offense, to finance and/or provide financial support for a criminal offense or reward for its commission; 3) the subject of a criminal offense, including those associated with their illicit traffic; 4) obtained as a result of a criminal offense and/or revenues from them, as well as property in which they have been completely or partially converted. this issue deserves a particular attention due to the fact that some scholars do not consider temporarily seized things, for which the investigating judge gave permission during the search (myroshnychenko, 2013). things and documents seized on the basis of the decision of the investigating judge, made on the basis of results of consideration of the petition of the investigator in accordance with chapter 15 of the cpc of ukraine are also not considered as such (holos ukrainy, 2012). thus, the amendment to part 2 of article 168 of the cpc of ukraine (holos ukrainy, 2012), paragraph 2 and 3, created a legal conflict, which consists in the fact that when a court decision specifies certain property to be seized (in this case, electronic information systems or their parts, mobile terminals of communication systems), then such property cannot be considered temporarily seized. in order to solve this collision, a.e. rudenko proposes to amend paragraph 2 of part 2 of article 168 of the cpc of ukraine (holos ukrainy, 2012) as to provide that the temporary seizure of electronic information systems or their parts, mobile terminals of communication systems for the study of physical properties that are important for criminal proceedings is forbidden it is proposed to seize such items only if they are included in the list, for which the explicit permission to search in the decision on the search permit is given (rudenko, 2015). summarizing the above, formal legal grounds for the restriction on the right of ownership in the application of temporary seizure of property in criminal proceedings are the requirements of article 167 of the cpc of ukraine (holos ukrainy, 2012). in the case of the temporary seizure of electronic information systems or their parts, mobile terminals of communication systems for the study of physical properties that are important for criminal proceedings, such a reason is a court order, in which they are expressly indicated. 7. conclusions according to the results of the investigation of the factual and formal legal grounds for the restriction on the right of ownership in the application of temporary seizure of property in criminal proceedings, we can draw the following conclusions. 1. there is a need to clarify the factual grounds for the temporary seizure of property for cases where such seizure is carried out by a person who has carried out legal detention in the manner prescribed by articles 207, 208 of the cpc of ukraine (holos ukrainy, 2012) and baltic journal of economic studies 333 vol. 4, no. 1, 2018 is not an investigator, prosecutor, or other authorized official. for this category of persons, it is expedient to limit the list of things that may be temporarily seized, taking into account the absence of special training of such persons. 2. there is a need to resolve the legal conflict created after the addition of part 2 of article 168 of the cpc of ukraine (holos ukrainy, 2012) by paragraphs 2 and 3. taking into account the above, we consider the scientific search for solutions to the above-mentioned range of problems as one of the promising directions for further study of issues of restriction on the right of ownership of a suspect, accused, and other persons in criminal proceedings. references: nersesian a. s. (2015) zabezpechennia mainovykh prav hromadian i yurydychnykh osib pry zastosuvanni tymchasovoho vyluchennia maina u kryminalnomu provadzhenni [provision of property rights of citizens and legal entities in the application of temporary seizure of property in criminal proceedings]. sudova apeliatsiia, no. 2, pp. 50-56. morhun n. s. (2015) zasada nedotorkanosti prava vlasnosti u dosudovomu kryminalnomu provadzhenni [the principle of inviolability of property rights in pre-trial criminal proceedings] (phd thesis), kyiv. novoselova l. a. (2001) opredelenye obektov prava sobstvennosty [definition of objects of ownership]. hrazhdanyn y pravo, no. 2, pp. 21-27. aliamkin v. v. (2011) dekilka mirkuvan shchodo zabezpechennia prava pryvatnoi vlasnosti [several considerations regarding the provision of private property rights]. pravo ta upravlinnia, no. 1, pp. 12-16. dzera o. v. (1996) rozvytok prava vlasnosti hromadian v ukraini [development of property rights of citizens in ukraine]. kyiv: venturi. (in ukrainian) dzera o. v., kuznetsova n. s., pidopryhora o. a. (2000) pravo vlasnosti v ukraini [the right of property in ukraine]. kyiv: yurinkom inter. (in ukrainian) kuchynska o. p., fulei t. i., barannik r . v. (2013) pryntsypy kryminalnoho provadzhennia u svitli praktyky yevropeiskoho sudu z prav liudyny [principles of criminal proceedings in the light of the practice of the european court of human rights]. nizhyn: tov “vyd-vo “aspekt-polihraf ”. (in ukrainian) soloviov o. m. (2011) obmezhennia prava vlasnosti: deiaki aspekty problem [restriction on the right of ownership: some aspects of the problem]. proceedings of the aktualni problemy tsyvilnoho prava: materialy kruhloho stolu, prysviacheni pamiati profesora chynhizkhana nufatovycha azimova (ukraine, kharkiv, december 23, 2010), kharkiv: pravo, pp. 107-109. holos ukrainy (2012) kryminalnyi protsesualnyi kodeks ukrainy: zakon ukrainy vid 13 kvitnia 2012 r. [criminal procedural code of ukraine: law of ukraine on 13 april 2012]. holos ukrainy, no 90-91. sheyfer s. a. (1981) sledstvennye deystviya. sistema i protsessualnaya forma [investigative actions. system and procedural form]. moscow: yurid. lit. (in russian) rudenko a. e. (2015) zakhody zabezpechennia kryminalnoho provadzhennia, shcho obmezhuiut mainovi prava pidozriuvanoho, obvynuvachenoho ta inshykh osib [measures to ensure criminal proceedings restricting the property rights of the suspect, the accused, and other persons] (phd thesis), kyiv. litvinova i. (2017) pidstavy obmezhennia prava osoby na nedotorkannist zhytla u khodi obshuku [grounds for restricting the right of a person to the inviolability of housing during the search]. pidpryiemnytstvo, hospodarstvo i pravo, no. 10, pp. 212-216. shepitko v. yu. (2005) kriminalistika [criminalistics]. kharkov: odissey. (in russian) rozghon o. v. (2005) mezhi ta obmezhennia prava vlasnosti [limits and restrictions on the right of property] (phd thesis), kharkiv. kovalenko ye. h. (2008) kryminalnyi protses ukrainy [the criminal process of ukraine]. kyiv : yurinkom inter. (in ukrainian) chernenko a. p. (2004) kryminalno-protsesualna rehlamentatsiia slidchykh dii [criminal-procedural regulation of investigative actions] (phd thesis), kharkiv. pohoretskyi m. a. (2007) funktsionalne pryznachennia operatyvno-rozshukovoi diialnosti u kryminalnomu protsesi [the functional purpose of operative-search activity in the criminal process]. kharkiv: arsis ltd. (in ukrainian) kalachova o. m. (2008) vyznachennia slidchym protsesualnoho statusu osib, shcho berut uchast u dosudovomu provadzhenni [definition by the investigator of the procedural status of persons participating in pre-trial proceedings] (phd thesis), luhansk. bandurka o. m., blazhivskyi ye. m., burdol ye. p. (etc.) (2012) kryminalnyi protsesualnyi kodeks ukrainy. naukovopraktychnyi komentar [criminal procedural code of ukraine. scientific and practical commentary]. kharkiv: pravo. (in ukrainian) myroshnychenko yu. m. (2013) problemni pytannia tymchasovoho vyluchennia y areshtu maina za novym kryminalno-protsesualnym zakonom [problematic issues of temporary seizure and arrest of property under the new criminal procedure law]. porivnialno-analitychne pravo, no. 3, pp. 310-312. baltic journal of economic studies 31 vol. 4, no. 5, 2018 corresponding author: 1 kharkiv research institute of forensic examinations, ukraine. 2 kharkiv national university of internal affairs, ukraine. 3 kharkiv national university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-31-35 audit as a form of control of the state financial inspection of ukraine ihor bohdaniuk1, vladyslav kolisnichenko2, olena ustymenko3 abstract. the aim of the article is to review the audit as a form of control of the state financial inspection of ukraine and to analyse its forms and types. the subject of the study is the audit as a form of control of the state financial inspection of ukraine. research methodology. the research is based on the use of general scientific and specialscientific methods and techniques of scientific knowledge. the dialectical method made it possible to investigate the definition of the audit as a form of control of the state financial inspection of ukraine and the procedure for its appointment. the comparative legal method was used in order to compare doctrinal approaches to this issue. interpretation of the content of normative legal acts of domestic legislation was carried out with the help of the normative-dogmatic method. these acts regulate the problem of appointment and conduction of the audit. the system-structural method was used for the study of the audit institution as a whole (system) with the coordinated functioning of all its elements. methods of analysis and synthesis helped to study some parts of this institute to formulate further conclusions about its most optimal functioning. practical impact. the analysis of types of audits, as well as their characteristic features, helped to develop recommendations for improving the procedure for conducting audits by the state financial inspection of ukraine, as well as to identify problematic issues that require further consideration and research. correlation/originality. in the research, there was made a proposal about audits, which are carried out by the state financial inspection of ukraine and its territorial bodies. the proposal was to make them a form of forecasting control. it was recommended to qualify the fact of prevention the officials of the controlling body from carrying out the audit, checking or not providing the necessary documents for audit and verification as an administrative offense. a special attention was paid to the timeliness of the selection of explanations from the involved persons during the detection of offenses. key words: audit, form, control, state financial inspection of ukraine, financial control. jel classification: m42, m48 1. introduction the form of control is an external manifestation of concrete actions, carried out by the state financial inspection’s bodies of ukraine, for the realization of the tasks assigned to them. forms of control are very different, as the main function of the state financial inspection. specific forms, in which control can be made, are set with the help of different regulatory and legal acts, depending on the type of control (departmental or under departmental): from laws to internal acts, which are extending exclusively to the system of bodies of the state financial inspection. taking into account all the mentioned, we can make the conclusion that the legal regulation of the forms of state financial control of the state financial inspection of ukraine and its territorial bodies includes a number of problematic issues. their solution will increase the effectiveness of control activities. besides, we need to mention the fact that today the number of forms of financial control of the sfi of ukraine has increased due to the allocation of the check of public procurement inspections. that is why many scientists pay attention to this mentioned form. this has led to the fact that many scientists did not pay the necessary attention to the most forms in this field. particularly, we are talking about such a form as an audit. 2. state of research certain problematic issues of the forms of control of the sfi of ukraine were considered only in the context of related issues. such scientists studied these issues as: l. p. bila, yu. p. bityak, g. v. atamanchuk, a. m. bandurka, o. m. kurakin, a. f. melnik, v. v. novikov, o. p. orliyuk, o. a. pavlyiukh, yu. m. starilov, v. v. kopeichikov and many others. baltic journal of economic studies 32 vol. 4, no. 5, 2018 however, in spite of the considerable amount of scientific developments, in the legal literature, there is no comprehensive study of certain forms of control, which is carried out by the state financial inspection, especially we are talking about the audit. that is why the aim of the article is: to consider the audit as a form of control of the state financial inspection of ukraine. 3. presentation of the main material at the beginning of studying the main issue, we should note, first of all, that the audit is carried out to identify the facts of violation of legality, probability, and expediency. the financial and economic documentation, regarding the correctness of accounting, storage of resources and material resources, timeliness and completeness of reporting, are analysed during the audit (voronova, 2006). in our opinion, such a description of the purpose and nature of control in this form significantly narrows the content of the phenomenon. and surely we should note that the definition of the purpose of the audit as the detection of violations of legality, probability, and feasibility is largely due to the design of item 2 of the procedure for conducting inspections by the state financial inspection, its territorial bodies, approved by the decision of the cabinet of ministers of ukraine as of april 20, 2006 no. 550 (kabinet ministriv ukrainy) (hereinafter – procedure for inspection no. 550). in this decision, it is stated that the audit “should ensure the detection of violations of the law, the establishment of guilty in their admission of officials and financially responsible persons.” as we can see, the obligation to detect violations is established and this fundamentally differs from the predictive nature of control. as we have noted, this very formulation of the question directly affects the direction of control activity, bringing the punitive function of control to the forefront and the efforts of controllers to identify the facts of violations, in order to determine the control measure effective under all circumstances. as it was proved, today it is necessary to change the purpose of the control. and such changes, we consider, should find their reflection in item 2 of the procedure for inspection no. 550 (kabinet ministriv ukrainy). it should be made in order to make audits, conducted by the state financial inspection of ukraine and its territorial bodies, as a form of forecasting control. first of all, it should be aimed at developing the system, adjusting the measures, and if necessary (in case of detection of the violation) – establishing the perpetrators and bringing them to some responsibility. there are such audits with the following features: 1. by content: they can be documentary and actual. documentary audits can include an audit of various financial documents. during the actual audit, not only the documents are checked, but also the availability of cash and property. 2. during the period under review, audits can be frontal and selective. in the frontal (full) audit, the entire financial activity of the entity for a certain period is checked. the selective (partial) audit is a check of financial activity only for a limited period of time (kapaieva, liakh, 2004). according to the criterion of control, l. k. voronova in addition to full and partial audits also allocates complex audits, which are usually carried out by a group of specialists. they study a wide range of interdependent issues and make thematic (or targeted) revisions, which are aimed at clarifying certain issues, exploring a particular area of work (topics), a particular area of activity of the subject being examined or a particular type of operations. the scientist calls the cross-check as one of the subspecies of complex testing. it covers the financial and economic activities of several organizations or enterprises, related to each other by subordination relations (voronova, 2006). we fully agree with the existence of these types of audits, but we consider that allocation of all four types, according to the audit criterion, is not totally correct. we consider that it is necessary to distinguish thematic and complex audits (and this is the point 3 among types of audits) according to this criterion, and frontal (full) and partial (selective) should be allocated by the criterion of the control period. 3. on an organizational basis: they can be planned (provided in the plan of work of the relevant body) (kapaieva, liakh, (2004); unscheduled (they are conducted to some extent, suddenly, out of plan, if there are important grounds established by the current legislation: in case of complaints from citizens or other information on violations of financial discipline, or oversight in work that requires urgent verification; or at the request of the competent state authorities) (voronova, 2006). l. m. kapayeva and m. s. lyakh, according to this criterion, also distinguish complex audits, which are conducted jointly by several supervisory bodies. we believe that the selection of this type of audits should be carried out according to another criterion. particularly, it is necessary to allocate such criteria for the distinction between different types of audits as the basis for conducting audits and subjects of financial control. moreover, the allocation of this kind of revision is rather doubtful, because the analysis of paragraph 2.32 of the procedure for inspection no. 550 (kabinet ministriv ukrainy) indicates the coverage of the concept of a complex audit of a certain set of financial and economic activities of the object of control. it is unlike the audit, during which only certain issues of the financial and economic activity of the object of verification are checked (and this is paragraph 3). therefore, it is expedient to distinguish between audits with the involvement of specialists and joint audits, which are conducted together with the other bodies of control. they differ from the audits carried out baltic journal of economic studies 33 vol. 4, no. 5, 2018 exclusively by officials of the state financial inspection of ukraine and its territorial bodies (this is the 5th type). 4. l. k. voronova proposes to allocate such audits, according to the basis of the appointment as: repeated (they are conducted after a certain time after the initial financial audit, in the case when the audit process was defined as bad, or in order to control the elimination of the revealed violations. such an inspection is carried out on the same issues and for the same period as the original one); additional (to identify issues that were not addressed before the initial inspection, and mainly – due to new circumstances) (voronova, 2006). we believe that the criterion for differentiation of these kinds of revisions is rather exact because, on the basis of the distinction, we can distinguish scheduled and unscheduled audits. the same types of data are allocated based on the necessity of assigning another, except for the primary audit, due to quality or new circumstances. 5. based on destination, l. k. voronova proposes to highlight such audits as a repeat (it is conducted after a certain time after the initial financial audit if it is recognized as poorly conducted, or in order to control the elimination of the revealed violations). 6. by place of conduct: audits can be field (carried out at the location of the object of control) and cameral (conducted at the location of the financial control body). 7. by the nature of the monitored indicators: the formal ones, which verify the correctness of the documents (for example, when it is necessary to determine the validity of signatures, the presence of corrections, the correctness of filling the requisites); arithmetic (they evaluate the correctness of mathematical calculations and taxonomy) (voronova, 2006). regarding the procedure for audits and the implementation of their results, as in the case of public procurement audits, planned audits are conducted on the basis of the audit program, which consists of two copies, with the handing of one of them to the object of control under the receipt (clause 4-7 of the procedure for inspection no. 550 (kabinet ministriv ukrainy)). unplanned audits have well-defined bases for conduction, without which audit out of the plan is not allowed. particularly, such bases are introduced in art. 11 of the law of ukraine “on the basic principles of implementation of the state financial control in ukraine” as of 29 january 1993 no. 2939-xii (verkhovna rada ukrainy). unplanned field audits of subjects of economic activity, regardless of ownership, which are not assigned to the controlled institutions by the mentioned law, are carried out by the state financial control bodies by a court decision, adopted on the basis of a petition of the investigator, the prosecutor to ensure the investigation during the criminal proceedings. a public financial control body, prosecutor or investigator initiating an unscheduled outbound audit, submits to the court a written substantiation of the grounds for such an audit and the date of its commencement and termination, and documents, which according to parts five and seven of this article proves about the origin of the bases for such an audit, and for the request of the court – they give other information (poriadok provedennia perevirok orhanamy derzhavnoi finansovoi inspektsii ukrainy). one of the distinctive features of a planned and unscheduled audit is the announcement of their beginning of the control object. if during the conduct of a planned field audit, the subject of control reports to the control object one of the specified methods on the dates of its beginning and ending (at the same time, the planned field audit starts no earlier than 10 calendar days after the message control object is sent). but unscheduled audits are conducted without any notice (paragraph 8 of the inspection procedure no. 550). in order to begin the field audit, officials of the controlling body and the involved specialists should be admitted to the objective. in the presence of the bases provided in the law, it is necessary for admission to show the direction and the copy of the judgment, which should be presented on a receipt (in case of unscheduled field audit by a court decision) (clause 12 of the procedure for inspection no. 550 (kabinet ministriv ukrainy)). the direction for the audit should include the date of its issue, the name of the state financial control body, purpose, type, grounds, the date of the beginning of the audit and the date of its completion, the position, title and surname of the officials of the state financial control body that will conduct the audit. the audit direction is valid on the condition of the existence of the signature of the head of the state financial control authority, which is sealed by the state financial control body. a court decision on permission for carrying an unscheduled field audit, which copy is submitted to the object of control, it should include the bases for such an audit, the date of its beginning, and the date of termination. and in case of carrying out an audit of subjects of economic activity that are not covered by the law of ukraine “on the basic principles of implementation of the state financial control in ukraine” dated january 26, 1993, no. 2939-xii, to the controlled entities, there also should be a number of criminal proceedings, body conducting the pre-trial investigation, date and grounds for notification of suspicion of a criminal offense (poriadok provedennia perevirok orhanamy derzhavnoi finansovoi inspektsii ukrainy). it this context, it is necessary to pay attention to the problem of legal regulation of counteraction to officials of the state financial inspection of ukraine and its territorial bodies, and to specialists, who are involved in the audit, or their absence of access to the objects. the matter is that the structure of such offense as “impeding employees of the state financial control body in carrying out audits and inspections” is provided in art. 164-2 the purchase of the ap, entitled “violation of the legislation on financial matters” and it includes, in addition to the specified composition, five more. baltic journal of economic studies 34 vol. 4, no. 5, 2018 from their number, four relate to the object of control of the event (accounting reports, accounting, etc.), one relates to the conduction of it (interference), and the last relates to the period after the control measure (rejection of measures to compensate the perpetrators for losses from shortages, wastes, theft and mismanagement). as we can see, the composition of offenses is composed in one article, but it should be resolved in some separate articles while specifying the objective side of such an offense as an obstacle. particularly, it seems necessary to clearly state that the prevention of officials of the controlling body to carry out audits, inspections or non-provision of necessary for audit, and checking documents is among the number of actions that should be classified as an administrative offense: for today it is “violation of legislation on financial issues”, in the future, we consider it will be a separate article. if we talk about the audit, then the place and access to information, documents of the controllers should be provided to the objects. the audit in accordance with paragraph 16 of the procedure for inspection no. 550 (kabinet ministriv ukrainy), as well as the examination of public procurement, is carried out by two complicated content methods: actual or documentary verification. an actual check can include an inventory, inspections, and control measurement of the performed works, the correctness of use of raw materials and materials consumption norms, the output of finished goods and natural losses by organizing control starts into production, control analyses of finished goods and others of similar actions with participation of the corresponding specialists of supervisory authority or other bodies, enterprises, institutions and organizations. in accordance with clause 18 of the procedure for inspection no. 550 (kabinet ministriv ukrainy), in case of detection of violations of the legislation, officials of the controlling body should require written explanations from the employees of the control object, who are involved in the revealed violations. officials of the controlling body may require written explanations from the employees of the object of control in order to clarify the individual circumstances of the financial and economic activity of the object of control. besides, they can also require information from other persons in accordance with the law. we want to pay attention to the principled discrepancy of the control subjects in case of detection of violations of persons involved in violations, and other employees of the object of control. the audited officials are required to take an explanation from them when it comes to the involved persons. and this is logical in view of their further use in the case file of the violation. the timeliness of the selection of explanations will contribute to their objectivity. the lack of time for discussion and understanding and judgment of the revealed violation allows obtaining accurate information. and on the contrary, when the discussion took place, and the person had some time to think, then explanations can differ radically from those, which were received by auditor’s right after identification of the fact. therefore, the obligations to collect explanations from all persons are quite logically available in a complex of powers of the body of financial control. in contrast to this obligation, the right of the controller to collect additional information about the fact of the commission of the offense also exists. they can do it due to the selection of explanations from the employees of the control object or other persons not involved in the commission of the offense. such explanations are extremely important regardless of the subject, who will consider and make decisions on drawing up the protocol, the opening of criminal proceedings, and further consideration of the case. separately we should mention the right to initiate the issue of extracting originals of financial and economic and accounting documents, which testify about the violation of the law. besides, the object of control is not guaranteed their preservation and the possibility of their forgery is not excluded also (paragraph 20 of the procedure for inspection no. 550 (kabinet ministriv ukrainy)). such rights, as well as the obligation to take explanations, in the future, can ensure the possibility of proving certain persons in committing an offense (either criminal, or administrative, or any other) in the manner prescribed by law. 4. conclusions thus, the state financial inspection of ukraine during making the control in the form of an audit, its results and conclusions are included in such act as a document, which officially formalizes the course of the control measure, its results and conclusions made by the subject of control. in this context, it should be noted that in practice there are some unusual facts when, during establishing violations or their features, the auditors do not carry out a proper set of audit activities. and, as a result, such facts are not qualified as a violation, and its amount is not calculated and accordingly, it is not presented to the guilty parties. and therefore, the violation can be mentioned in the act (certificate), but however, the responsible person is not identified and nobody deals with the return of the lost sums of money. there is also a practice of not well quality documentation of violations, ranging from elemental lack of references to violated legal acts and grammatical mistakes ending with illegal and unconfirmed conclusions. sometimes, these mistakes make it impossible even to understand the essence of the statement outlined in the act. that is why, there is no doubt that only the competent, consistent, complete statement of information, which was received by the auditors during the control measure, contributes to the achievement of the objective of financial control. therefore, managers have to pay attention to these issues constantly. baltic journal of economic studies 35 vol. 4, no. 5, 2018 references: voronova, l. k. (2006). finansove pravo ukrainy: pidruchnyk [financial law of ukraine: studybook]. pretsedent; moia knyha. kabinet ministriv ukrainy. postanova pro zatverdzhennia poriadku provedennia inspektuvannia derzhavnoiu finansovoiu inspektsiieiu, yii terytorialnymy orhanamy vid 20.04.2006 № 550 [cabinet of ministers of ukraine. resolution on approval of the procedure for inspection by the state financial inspectorate, its territorial bodies dated april 20, 2006 no. 550]. retrieved from: http://zakon3.rada.gov.ua/laws/show/550-2006-%d0%bf/ card2#card kapaieva, l. m., liakh, m. s. (2004). finansove pravo: navchalnyi posibnyk [financial law of ukraine: studybook]. kyiv: tsentr navchalnoi literatury. verkhovna rada ukrainy. zakon ukrainy «pro osnovni zasady zdiisnennia derzhavnoho finansovoho kontroliu v ukraini» vid 26.01.1993 № 2939-xii [verkhovna rada of ukraine. the law of ukraine "on the basic principles of the implementation of the state financial control in ukraine" of 29 january 1993 no. 2939-xii]. retrieved from: http://zakon3.rada.gov.ua/laws/show/2939-12 poriadok provedennia perevirok orhanamy derzhavnoi finansovoi inspektsii ukrainy [the procedure for conducting inspections by the bodies of the state financial inspection of ukraine]. retrieved from: http://www.tvoiprava.com.ua baltic journal of economic studies 123 vol. 4, no. 3, 2018 corresponding author: 1 department of land and agricultural law, yaroslav mudryi national law university. e-mail: gannakor@ukr.net orcid: http://orcid.org/0000-0002-7062-1027 2 department of civil, labour and economic law, oles honchar dnipro national university. 3 department of civil, economic and environmental law, national technical university “dnipro polytechnic”. e-mail: legezajul@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-123-132 assessment of the economic efficiency of it application at enterprises ganna kornienko1 yaroslav mudryi national law university, ukraine mykola chabanenko2 oles honchar dnipro national university, ukraine yulia leheza3 national technical university “dnipro polytechnic”, ukraine abstract. the article covers theoretical aspects of the necessity of information technologies’ introduction and development at the enterprise. there was substantiated the importance of the introduction of modern information technologies and their influence on the effective activity of the enterprise. there were generalized the conditions and consequences of technologies introduction, the main trends of it development at enterprises, and possibilities of modern technologies use. the composite analysis of the methods for assessing the efficiency of information technology use conducted made it possible to compile the methods into three groups (methods of financial analysis, methods of qualitative analysis, methods of predictive analysis) and to distinguish their characteristics and possibilities of use. there were considered the most popular structural modules of the corporate information and technological system (cis) in the world. there was the generalized structural composition of the erp-system with mrp, srm, crm, and csrm modules. there were determined the main characteristics of it systems, advantages and disadvantages of integrated crm modules – customer relationship management system, bi data analysis systems (sap, microsoft dynamics ax, oracle bi systems), communication management system with srm providers; 1c: enterprise 8 – system of bookkeeping and management accounting use and the possibility of their association in cis as: csrp enterprise resource planning system (customer synchronized resource planning). resource planning technologies are functionally related in such a system, modules of crm strategies are integrated, interaction with buyers and customers and bookkeeping analysis and accounting are synchronized. the method of economic efficiency determination with the improvement of calculation algorithm is proposed. the main stages of assessing the effectiveness of it introduction and application at the enterprise can be summarized in three stages: preparation – analysis and assessment of the technology selection; introduction – analysis and assessment of direct costs and substantiation of expediency; implementation – assessment of economic efficiency of application and calculation of intellectual depreciation and possible stepwise modernization of information technology in future. the multiplicity of introduction goals and sources of it payback requires a differentiated approach to the determination of the criteria for their effectiveness assessment. there was developed an algorithm of determination of the economic efficiency of it introduction in the activity of the enterprise. the traditional way of profit assessing from the it introduction does not ensure full consideration of qualitative and strategic efficiency, therefore, it requires additional use of predictive methods that allow supplementing quantitative calculations. the author proposed to calculate the efficiency of introduction, modernization, and use of it projects, use of scenarios analysis methods, which include the black-scholes model and the binomial model for calculating the effectiveness of real options. the author considers the application of the black-scholes-merton model to be the most expedient because, in contrast to the binomial one, it is easier to use but allows obtaining a result with minimal errors, without significant time costs close to the definitions of the binomial model. the use of such a model has already proven effective not only when calculating the effectiveness of real options, but there are also positive results of the study when using them in other areas of analysis. we consider it economically feasible to use methods determined by the author to assess economic efficiency of it use. key words: information technologies, cis of the enterprise, it development trends, problems of it introduction, assessment of it efficiency, assessment of costs, assessment of it application, black-scholes-merton model. jel classification: с31, с58, g24, g35 baltic journal of economic studies 124 vol. 4, no. 3, 2018 1. introduction in the current context, the development of the business environment, the trends of information, the impact of global innovation and technological standards of enterprises operation, effective business dealing in ukraine becomes impossible without the introduction of information technologies that are able to ensure the integration and communication of enterprises at the modern business level. information technologies become an essential part of the business of each enterprise as it provide: automation of business processes of the enterprise, improvement of the quality of goods and services, accelerate transfer, analysis, and storage of a large amount of information, accelerate the speed of servicing and efficiency, improve the processes of customization, taking into account the individual needs of the clients. the introduction of information technologies at the enterprises objectively causes transformational changes in activities, changes the algorithms of interaction in structural units, changes the regulatory functionality of the enterprise, and increases the level of qualification competence. substantiation of the problems of it introduction effectiveness at the enterprises was started both in studies of foreign scientists and in the works of ukrainian scientists. the development of information technologies in the management of enterprises was studied by such scientists as: arefieva i.y., ashvanden  s., batiuk  a.y., karpenko s.h., kanonenko i.v., mykhailov  p., nefodova l.i., novak v.o., novakivskyi і.і., etc. the following scientists, such as: vendorov a.m., vovk i., zelynskyi s.e., karpov d.v., kalnytska i.v., kravchenko v.h., martyniuk o.a., müller-stevens g., pleskach v.l., and many others paid special attention to the peculiarities of projects realization connected with the introduction of new information technologies or improvement of the existing information system at the enterprise. scientists’ works highlight the relevance of information technologies introduction, their roles, prospects, and strategic priorities in details and widely. but not enough attention is paid to the problems of application of technologies, specific algorithms and the tactical decision of certain technologies definition necessary for the enterprise development. problems in assessing the economic efficiency of it use and managing information require further research and development of an economic mechanism for their introduction. unfortunately, enough attention is not paid to the problems of information technology use as a means of the enterprises’ efficiency increasing in ukraine under objective conditions. the main purpose of the paper is to generalize the methodological foundations and to deepen the methodological provisions for assessing the economic efficiency of it introduction and use at the enterprises. 2. the methodology of research the generally accepted approach to determine the effectiveness of the it introduction is the ratio of profits and total costs of the enterprise. however, the efficiency assessment only on the basis of one indicator reduces the scope and gives a limited economic presentation. the problem is that the impact of information technology on the profitability of an enterprise is mediated and manifests through the improvement of business processes of the enterprise, increasing the efficiency of analytical data obtaining, managerial decision-making, etc. it is difficult to measure the actual profitability of it introduction from the enterprise’s overall profit. therefore, the value of the efficiency indicator will not be able to provide accurate information on the rationality of a particular information technology introduction to some extent. this is due to the problems of determining the results of automation since it is not enough to calculate the efficiency as the difference between the resources spent and the savings received in the present context. the effects become much more complex and should be evaluated in terms of the strategic goals of the entire enterprise development. the information technology market is developing very dynamically, responding to the needs of the business environment, so there are new csrp (customer synchronized resource planning), enterprise resource planning that implement resource planning technologies, integrate client-oriented strategy modules, and synchronize interaction with buyers and customers. this is the information systems of the next generation, if mrp, mrpii, and erp are focused on the internal organization of the enterprise, then csrp systems contain a complete cycle of business technology from the design of future product, taking into account the customer’s requirements to warranty and service maintenance (kravchenko, 2008). according to the world’s consulting companies, stock reserves on the majority of enterprises, in which such systems had been introduced, decreased by an average of 11%, operating expenses decreased by 12%, administrative expenses – by 10%, timeliness of deliveries improved – by 13%, observance of production plans – by 12%; the production cycle decreased – by 14%. however, 27% of surveyed business heads have stated that they did not return the investments that were spent on information systems introduction, and 28% cannot assess the effects obtained. only 35% of companies introduce integrated information systems without exceeding the budget and only a third of such projects is completed according to the calendar plan. as a result, a lot of enterprises do not receive the expected preferences: on average only 8% of them receive from 80 to 100% of the planned functions. the modern stage of enterprise management automation is also characterized by the growth of indirect effects: baltic journal of economic studies 125 vol. 4, no. 3, 2018 standardization of processes, integration of various information products, flexibility and speed of response to the needs of consumers, which adds complexities to the assessment process (algorithm, 2013; vovk, mykhailov, 2013). the effectiveness of information systems using in the economic management of an enterprise directly depends on two main factors: the impact on improving the efficiency of management and reducing the cost of the enterprise that improves the profitability of the enterprise. the processes of enterprise’s information infrastructure management and, in particular, the processes of it (information technology) introduction are associated with the well-grounded investment of resources for the acquisition of technology, development of projects, carrying out of preparatory works, development of new management technologies and personnel training. the main stages of assessing the effectiveness of it introduction and application at the enterprise can be summarized in 3 stages: preparation – analysis and assessment of technology selection; introduction – analysis and assessment of direct costs and substantiation of expediency; implementation – assessment of the economic efficiency of the application and calculation of intellectual depreciation and possible stepwise modernization of information technology in future. economic efficiency is calculated at all stages of is design and introduction (kanonenko, 2010; kalnytska, 2010): 1) when surveying an enterprise to create an is, a preliminary calculation of expected economic efficiency is performed; 2) at the stage of working technological design, a detailed calculation of expected economic efficiency is performed; 3) upon is introduction into industrial operation, the actual economic efficiency is determined. however, at the early stages of preparatory and design work, calculations are predictive. the calculations of economic efficiency after the introduction or modernization of the information system or individual information technologies are often considered under two methodological directions in the domestic economic literature, the first is based on calculations of the annual economic effect, the second one – on calculations of the integrated economic effect (algorithm, 2013; vendorov, 2006). when calculating the annual economic effect, there is a comparison of the annual volume of sales, production costs, sales profits in the reporting period (after changes in the enterprise’s information system) with similar indicators in the base period (before changes in the enterprise’s is). in the case of integral economic effect calculation, the comparison of the indices of the expenditure and revenue sides of the enterprise activity for the entire accounting period from the beginning of the introduction of changes to the enterprise’s is is carried out. however, both methods for economic efficiency calculation cannot accurately assess the contribution of is to the overall economic development of the enterprise. this is due to the multitude of factors that can affect the indexes being compared. for example, the annual volume of sales may change due to the introduction of new technological developments, changes in demand or advertising policies. therefore, we believe that it is necessary to determine the economic effect of it use based on all factors: economic, organizational, technical, and social at all stages of the is application (batiuk, 2004). for this purpose, a complex of various methods of analysis, which can be divided into three groups: methods of financial, qualitative and predictive analysis, is used (see: table 1. made by the author on the basis of (boda z, 2004; karpenko, 2004; martunyuk, 2012; nefiodov, 2009). financial analysis is a generally accepted tool for justification of any business project. the methods of this analysis use traditional approaches to the financial calculation of economic efficiency taking into account the specifics of it. the advantage of financial methods is in their basic principles, borrowed from the classical theory of the economic efficiency determination. also, with the help of financial methods, it is possible to assess the economic parameters of introduction and application of iss by analogy with the assessment of any other investment project. the methods of qualitative analysis complement quantitative calculations that help to assess all the factors of is effectiveness and match them with the overall strategy of the company. this group of methods allows professionals to choose the most important characteristics of systems for them independently depending on the specifics of products and activities of the enterprise and to change the correlation between the indicators using the coefficients of significance. predictive methods use statistical and mathematical models to assess the probability of risk occurrence. such methods are used to assess the future effect of the information system; they are not common in practice, as the others (novakivskyi, 2010). all groups of methods for assessing the economic efficiency of the is operation at the enterprise allow obtaining multi-faceted information on the use of it and is at all stages of the enterprise development. but despite the fact that in the present context any enterprise has a fairly large selection of different methods and methodologies for assessing the effectiveness of is use, businessmen prefer analysis with two indicators: total cost of ownership (tco) and return on investment (roi). the total cost of ownership indicator (tco) describes the full set of costs for the introduction and use of iss, where, in addition to direct costs for is development, introduction and operation, indirect costs associated with downtime and human factors are taken into account. baltic journal of economic studies 126 vol. 4, no. 3, 2018 table 1 composite analysis of methods for assessing the effectiveness of information technology use name of the method characteristics of determination possibilities of use methods of financial analysis return on investment, roi the determination of efficiency is carried out by calculating the ratio of the amount of profit or loss to the amount of investments. unambiguous interpretation; the indicator reflects the absolute benefit of the project. it does not take into account the difference in terms of project implementation; it is difficult to choose the year (period) specific to the project; as a rule, the net profit, not the cash flow, is taken into account; it is impossible to determine the best project with the same roi, but different investments; absence of risk analysis. internal rate of return, irr the methodology assumes determination of the relative permissible rate of return of the project. to determine the profitability or unprofitability of a project being implemented, the irr indicator is to be compared with the price of the financial resources involved. allows comparing projects with a completely different level of funding; takes into account risks; takes into account the discounted value of future cash flows; takes into account cash flows throughout the lifecycle of the project; has clear criteria for decision-making. sometimes it calculates non-objective rates of return or gives an approximate result; the complexity of determining the revenues from the quality indicators improvement; does not show the amount of cash receipts. accounting rate of return, аrr the ratio of net profit to the difference between investments and the liquidation value of assets is calculated. the algorithm of calculation is simple, which determines the wide application in practice. it takes into account the income from the liquidation of assets, the useful life of which has expired. it is applicable only to assess the effectiveness of projects with a short payback period. rapid economic justification, rej the key idea of the methodology is to look at it in terms of the company’s business priorities, strategic plans for its development, and the main financial indicators (roi, etc.). rej methodology defines the potential revenue from achieving the set critical success factors and the cost of information technology introduction that is presented in the form of cash flows. reasonableness of results; taking into account both quantitative and qualitative effects from the it introduction; taking into account risks; the possibility of comparing alternative projects; the speed and quality improvement of analysis and justification of investment attractiveness of projects. it is recognized as the most complex and comprehensive tool for assessing the is introduction project; does not allow to assess the projects of modernization of it infrastructure as a whole effectively. methods of qualitative analysis total cost of ownership, тсо a calculation methodology designed to help users and heads of the enterprise to determine the direct and indirect costs and benefits associated with any component of computer systems. the assessment of efficiency is carried out by comparing the tco index of the enterprise with tco indexes of other enterprises of the same profile. it allows avoiding unprofitable and unnecessary costs and keeping the total amount of costs at a reasonable level and maximizing the benefits of information technology use, the cost for their support. it is associated with business tasks; is not useful for risk assessment and for determining the ways of is compliance with strategic objectives of the company; significant time expenditures; the complexity of determining the value of indirect costs of the project. activity based costing, abc the methodology consists in the complex study of actions aimed at the object of information technologies at the introduction stage and the functions of the object in the process of use in order to identify the reserves of cost minimization at the stages of its design, introduction, and use while maintaining or improving its functions and increasing its usefulness for consumers. it allows more precise definition of the product value, which makes it possible to make justified strategic decisions on the pricing of products, through which companies can pay more attention to improving the efficiency of high-priced transactions, etc.; allows pointing at the possible ways to improve value indicators; productivity increase, cost reduction, labour intensity, time and quality improvement; the process of functions describing may be too detailed; the model is quite complicated in application, it is difficult to maintain; for a high-quality realization of the method, special software is required; the method “goes out of date” due to organizational changes; most often the stage of collecting information about data sources by function is underestimated; insufficiently supported by operational management. net present value, npv the essence of the methodology is to carry out a comparative analysis of the amounts of initial investments and the current value of future cash flows. takes into account the time factor in calculations. the calculation of such an assessment will require detailed forecasting of cash flow receipts for the entire project lifecycle, not taking into account the risks of the project. baltic journal of economic studies 127 vol. 4, no. 3, 2018 economic value added, eva eva reflects the value creation process and is defined as the difference between the net operating income of the enterprise and all expenses incurred by the enterprise for the it infrastructure. it combines simplicity of calculations and possibility of determining the market value of an enterprise; provides a measurement of “surplus” value created by investments; is an indicator of the quality of managerial decisions that are made; allows assessing the effectiveness of individual divisions of the enterprise. there is a delay between the moment of introduction of one or another system or the moment of making changes in existing business processes and changes in eva indicators; the complexity of future profits determination. total economic impact, tei it is a heterogeneous methodology, which allows assessing the introduction project of one or another component of the information system of the enterprise in terms of three indicators – “value”, “benefits” and “flexibility”. analysis of risks arising in the process of acquiring, introduction, and operation of a component of an information system that is being analysed. it has a narrow range of applications. it is used for the analysis of introduction options of a specific it infrastructure component of the enterprise. methods of predictive analysis applied information economics, аіе the aie methodology involves increasing the accuracy of the “real economic value of investments in security technology by determining the return on investment” index before and after investing. provides an opportunity to assess the probability of risk emergence and the emergence of new opportunities through statistical and mathematical models; allows reducing the uncertainty of expenses, risks, including non-obvious ones. the need for statistical observations and a large amount of statistical data. the necessity of systemicity. real options valuation, rov the basis of the methodology is the key concept of building a model of “flexible company capabilities” in the future. the methodology considers security technologies as a set of capabilities with a high degree of detail. the correct decision is made after careful analysis of a wide range of indicators and consideration of the set of results or options for future scenarios that under the methodology terms are called a dynamic plan of management decisions or flexibility that will help organizations adapt better or to change their course in information security field. it assumes an assessment of a wide range of indicators. the possibility of omitting other project risks from the field of view. economic value sourced, evs the methodology assumes expanding the use of such tools as eva, internal rate of return (irr), and return on investment (roi) for it assessment; the evs methodology goes a step further, trying to determine the parameters of time and risk and to add them into the equation. evs is based on the risk management method. it is possible to apply the probability of a timely and qualitative execution of the product development project. the necessity of systemicity; the impossibility to predict changes in the technical and economic performance of the enterprise under the modern economic conditions accurately. source: drawn up by the author end of table 1 3. results and discussion since the 90s of the xx century, domestic enterprises have been making attempts to introduce integrated information systems and it for automation of business processes. the first integrated management attempts were erp (enterprise resources planning system). modern erp systems incorporate large subsystems: financial management, mrp material management, production management, mps (master production schedule), project management, service maintenance management, pond-draining system pds (sic – statistical inventory control), personnel management, automation systems for design and development activity and engineering process (cad / cam cad / cam / cae / pdm) (vovk, 2011). the last of the standards integrated into the erp-ii systems is the csrp (customer synchronized resource planning) – resource planning, synchronized with customers, which embraces customer relationships either. thus, if mrr , mrrii, and frr are oriented on the internal organization of the enterprise, сsrр contains a full cycle – starting from designing the future product of buyers, taking into account the customer’s requirements for warranty and after-sales service maintenance (karpov, 2010). baltic journal of economic studies 128 vol. 4, no. 3, 2018 undoubtedly, there are many problems in the selection, introduction, and operation of both complex information systems and separate it. in our opinion, the problem of outdated is existing at the enterprises is in the first flight among identified problems of inefficient it use, that is why they are not able to perform their functions effectively and do not allow the integration of modern it modules. the informality and chaos of the internal principles of enterprise management hold the second place among the it introduction problems, which lead to uncertainty in the tasks of information provision (karpov, 2010), the current situation on the market for vendors and consulting is characterized by two peculiarities: there is a large number of proposals for information systems development and introduction, on the one hand, and almost no experience of their successful implementation, on the other hand. at the same time, the price of one apm, for example, erpsystem fluctuates within 10-40 thousand us dollars, and the average lifetime is 15 years (algorithm, 2013). the next problem of it application in enterprises is the lack of a substantiated process of business process planning and in general planning of economic activity, strategic directions of development, as a result of which there is no need for the introduction of modern complex cis (novak, 2006; karpov, 2010). separately the problem of coordination of the strategic objectives of the enterprise with the possibilities of information technology use can be distinguished. despite the fact that it technology is a separate segment interacting with the implementation of strategies for goals achieving for the enterprise, the structure of information system can be changed under the influence of external environment and innovation development of the enterprise (pleskach, 2004). summarizing the identified approaches to the assessment, we can propose a separation of the main important stages for the formation of a model for assessing the effectiveness of the information systems introduction at the enterprise: stage 1. assessment of business environment of the enterprise. the study begins with the identification of issues important for the enterprise. this allows analysts to link the it-structure with problems important to the success of the enterprise. firstly, there should be determined the critical factors of the enterprise’s success, there should be made a plan for their achievement, and there should be determined the indicators of critical success factors achieving. the identification of work that is most relevant to achieve the identified success factors in accordance with the chosen strategy is provided below. csrm figure 1. the complex structure of the modern erp ii-system with the csrp block (customer synchronized resource planning) source: grouped by the author table 2 it technologies used in the activities name of it technology characteristics of it technology advantages of use disadvantages of use crm system – customer relationship management automated data collection on buyers and constant information communication with buyers the availability of feedback from buyers, the ability to automate the distribution of information among buyers and information receiving from them limited usage due to a large number of buyers or lack of feedback communication with many of them bi data analysis systems (sap, microsoft dynamics ax, oracle bi systems) processing of a large amount of information at a high rate allows receiving and analysing data on the performance of the enterprise in a quick manner, generating reports much faster than in erp systems not adapted to the activity features of many enterprises or (networks) supplier relationship management, srm the automated system of supplier relationship management srm integrates with other sap business suite modules, supports data exchange with erp and scm systems. optimization of purchasing activity limited use only in relationships with suppliers. transferring sales risks to suppliers software product 1c: enterprise 8 the automated system of bookkeeping and management accounting analysis integrates with other software products, automates management of sales, reserves, purchases, financial accounting and bookkeeping it considers only buyers and suppliers among contracting parties (it is officially forbidden in ukraine since 2017) source: drawn up by the author baltic journal of economic studies 129 vol. 4, no. 3, 2018 stage 2. selection of business project. it is necessary to find information technology for each work defined in the first stage, with which it is possible to improve its efficiency. at this stage, a heuristic-functional analysis is made, which identifies bottlenecks in each of the selected business processes and chooses such a solution that allows eliminating the identified shortcomings and obtaining a qualitative result from the is introduction. stage 3. identification of the risks network. at this stage of research, various types of risks that may exist or already exist in the enterprise business environment and inherent to it-projects, as well as uncertainties that arise directly at the assessment stage, are determined and measured. stage 4. assessment of costs for information technology or general is. at this stage, the volume of investments necessary for information technologies introduction is determined. at the first stage, it is necessary to assess the cost for it project introduction, to determine the amount of investment necessary to achieve the goal. assessment of the cost for the introduction of information technology or cis (complex information system), consists of two stages: assessment of total capital and current costs associated with the introduction and use of it; and assessment of the reasonableness of a certain amount of costs. let’s consider such a scheme in more details (algorithm, 2013; vendorov, 2006; kalnytska, 2009). 1) assessment of direct costs for information technology introduction is calculated by the formula: z z z z z z zï іò òç ïç îï íï ñç і= + + + + + (1) where: zï іò means direct costs for it introduction, zтз means the costs for the acquisition of technical support; zпз means the cost for the acquisition of software; zоп means labour costs for project participants; zнп means the costs for personnel training; zc3 means deductions for social actions; zi means other direct costs for introduction. 2) the estimation of indirect costs for introduction (zí іò ) is carried out according to a similar scheme, according to the specification of arising derived costs. 3) let us analyse the assessment of costs for it maintenance and use during its lifecycle. the second stage assumes forecasting of the annual costs for information technology maintenance during the cycle of their useful application. annual costs are determined by the formula (2): z z z z zóò іò îï ð ñç і= + + + (2) where: zóò іò means costs of annual information technology use; zоп means labour costs to maintain and improve technological competence; zp means costs for third-party services; zc3 means costs for social activity; zi means other costs for it use. 4) the next stage of the analysis assumes identification of downtime losses (ріт) associated with the planned or unplanned termination of information technology using, costs associated with the elimination of system crashes and other possible losses. determination of the magnitude of potential losses that arise while using such information technologies is based on statistical data of other enterprises or accumulated at this enterprise (algorithm, 2013; kalnytska, 2009). summarizing, we can determine the aggregate value of costs by the formula (3): z z z z ðçàã іò ï іò í іò óò іò іò= + + + (3) zçàã іò – means total costs for it introduction and use. but the calculation of tco only does not provide a reasonable assessment with regard to the feasibility of the information system use. in fact, it is necessary to consider not only the costs but also the benefits of the is introduction, which are determined according to the return on investment index (rd). this method allows assessing the profitability of investments in purchase and introduction of is and is calculated by the formula (4) (vendorov, 2006): roi = (payback-tco)/tco*100%, (4) where: payback means the benefits of system introduction. as a rule, the benefits or the main effect of the introduction of information systems is the increase in labour productivity: 1. saving of working time of employees of the enterprise. 2. efficient use of human resources at the enterprise. 3. reduction of cost for carrying out one or another transaction at the enterprise. upon calculation of direct and indirect costs of it introduction, let’s assess the reasonableness of estimated costs, by their comparison with the average indexes of enterprises of the same business sector and by costeffectiveness determination. the second stage assumes the calculation and assessment of the enterprise’s profit from the information technology introduction. the choice of the method for it effectiveness assessment depends on organizational efficiency and material profit, the receipt of which provides the introduction of information technology. there are three types of efficiency from the introduction of information technology distinguished in the scientific literature, namely: direct efficiency, qualitative efficiency, and strategic efficiency (algorithm, 2013; vendorov, 2006; kalnytska 2009; martunyuk, 2012; nefiodov, 2009). direct efficiency is defined as direct financial profitability resulting from the application of it. qualitative efficiency affects the enterprise’s profit indirectly, by improving the characteristics of processes, and improving the quality factors of production development. strategic efficiency means profitability that is displayed in the long run. for example, competitiveness increase, expansion of the market of goods, qms introduction, etc. the multiplicity of introduction goals and sources of information technologies payback requires a differentiated approach to determine the criteria for their effectiveness assessment. in order to carry out a baltic journal of economic studies 130 vol. 4, no. 3, 2018 comprehensive assessment of the effectiveness of it use, it is also necessary to take into account the influence of external and internal factors of the enterprise operation. the assessment of current performance should include comparing the results obtained with the average profit margins in the branch; with indicators of market leaders or desirable indicators. the assessment of proceeds from it introduction begins with the determination of the sources of economic efficiency of it use, which depends on the functionality of the chosen system. total profit from it introduction is determined by the formula (5): ∆ ∆ ∆ ∆s s s sіò ïë ë ïð= + + (5) where: ∆sit means total profit from it introduction; ∆sпл means profit related to the improvement of planning efficiency; ∆sл means profit related to the improvement of efficiency of procurement management and supply logistics; ∆sпр means profit associated with the improvement of efficiency of the sales management process at the points of sale. however, we believe that the given method of assessment of profit from information technology introduction does not ensure full consideration of qualitative and strategic efficiency, enterprise goals plans of it introduction assessment of direct costs for it introduction assessment of indirect costs for it introduction assessment of costs for it maintenance assessment of possible costs for it introduction assessment of general costs for it control of justification of costs for it introduction assessment of profit from it introduction assessment of the economic efficiency of it project assessment of the results unjustified figure 2. the algorithm to determine the economic efficiency of information technology introduction at the enterprise baltic journal of economic studies 131 vol. 4, no. 3, 2018 therefore, requires additional use of qualitative methods that allow supplementing quantitative calculations. among the various methods for assessing the effectiveness of information systems introduction, the most important are those methods that allow assessing the effectiveness prior to implementation of the project, at the stage of feasibility study. they include: internal rate of return (irr), roi (return on investment), tei (total economic impact), npv (net present value), eva (economic value added) (table 1). it should be noted that the key point in these methods’ use is to assess the predicted effect of the it system introduction. taking into account that predictive values are used in these methods, the validity of numerical estimates of the direct benefit from the system introduction may not be sufficiently reliable and may reduce the probability of resulting quality (kanonenko, 2010; body, 2004). the methods of scenario analysis proved itself to be most effective in calculating the effectiveness of real options; however, there are positive results of their use in other areas of analysis in the scientific literature. we consider it economically feasible to apply such methods to assess the economic efficiency of it use. the most well-known is the scenario analysis method, the blackscholes model, and the binomial model (body, 2004). the method of scenario analysis allows obtaining approximate results, therefore, the use of this methodology is relevant if the use of it does not significantly affect the implementation of the enterprise’s strategy or if the assessment of the effectiveness of information technology is implemented in the regime of resource saving. the black-scholes and binomial models, by contrast, allow determining assessment results in a fairly precise manner. in our opinion, the black-scholes-merton model is most relevant, since in contrast to the binomial it is easier to use, however, it allows obtaining the result with minimal errors, without significant time costs, close to the definitions of the binomial model. c s n d ke n drt= ( ) − ( )−0 1 2 , (6) p ke n d s n drt= −( ) − −( )− 2 0 1 , (7) where: d s k r t t 1 0 2 2 2 =       + +      ln ã ã , d s k r t t d t2 0 2 2 1 2 =       + −       = − ln ã ã ã , n (x) – is the integral function of standard normal distribution, determines the probability whether the variable with a standard normal distribution is less than x value. s0 means the initial stock price k means the price of the option execution r means the risk-free interest rate t means the term before the option expiration (in years) σ – standard deviation of continuously accrued profitability per share assessment of the effectiveness of information technology use by the real options method should be considered not as an alternative to the net present value method (npv) but as a method of supplementation and refinement of the assessment obtained during calculations of the traditional discounted cash flow. at the final stage, the economic efficiency of the introduction and application of information technology is calculated. as a criterion for the indicator of economic efficiency, we will use a general indicator that determines the value generated by the effect of it introduction, that is, the quantitative indicator of capital gains from the use of information technology or information system. such an indicator is calculated as the net present value (npv), calculated on the basis of cash flow discounting method, and takes into account the value of it acquired by the enterprise. 4. conclusions modern information technologies are able not only to satisfy the requirements of production systems to the fullest extent but also act as an important prerequisite for their adaptive development. world experience in the field of computer technology and information technology in recent years indicates a significant increase in the rate of scientific-and-technological advance. the high rate of information technology introduction contributes to the increase in the number of information and software technologies and technical devices used in the production and economic activities of enterprises of all sectors. technologies allow raising the methods of management to a qualitatively new level and using the management information of the enterprise not only for internal purposes but also for the development of cooperation relations with contractors and increase of the customers’ loyalty. modern information systems enable the implementation of such opportunities as: long-term and operational planning; development of new types of products; formation of production plans in accordance with sales plans; production management; planning of raw materials and materials flow; planning and accounting of finished goods flow; planning the resource requirements for rhythmic production; processing, analysis, and approval of applications from the enterprise subdivisions for the necessary materials; provision of a continuous production cycle; optimization of materials disposition; construction of databases and classifiers of enterprise materials; providing a deep level of details of cost elements. baltic journal of economic studies 132 vol. 4, no. 3, 2018 there was carried out the analysis of selection, introduction, and use of it in the activities of enterprises, and there was revealed a number of problems and specifics of their application. the main ways of these problems solving should be the following: change of the traditional outdated information system at the enterprise; management’s belief in the need to invest in modern it systems of strategic potential management of the enterprise, by way of economical substantiation of their expediency; clear definition of strategic goals and tasks of the enterprise’s it system; development of an effective system of the strategic potential management of the enterprise. but modern information technologies that implement these functions require significant financial and resource investments, therefore, the relevance of determination of the economic efficiency of their introduction and subsequent use prompts the search for new methods of calculation. along with traditional and classical methods of financial, qualitative, and predictive analysis, there was proposed an improved methodology for economic efficiency calculation. the proposed methodology is based on the use of the black-scholes-merton model of real options calculation, combined with the traditional algorithm for calculation of feasibility of introduction and efficiency of information technology using at the enterprise on the basis of the net present value npv and direct costs, which will create an effective tool for measuring qualitative and quantitative effects and risks. in our opinion, this will allow making the right managerial decisions regarding the choice and application of it systems. further perspectives of scientific direction will be related to the research of the effectiveness of individual components and an integral indicator of determination of economic efficiency and validity. references: nefodov l.i., markozov d.o., ilhe i.h. (2013). alhorytm otsinky ekonomichnoyi efektyvnosti vprovadzhennya informatsiynoyi tekhnolohiyi u torhivelnu orhanizatsiyu [algorithm for assessing the economic efficiency of information technology implementation in a trade organization]. visnyk ntu «khpi». seriya: novi rishennya v suchasnykh tekhnolohiyakh, № 4(978), pp. 55-60. batyuk a.ye. (2004). informatsiyni systemy v menedzhmenti: navch.posibnyk [information systems in management: teaching manual]. lviv: nu "lviv polytechnic", "intellect-west". (in ukraine) vendrov a.m. (2006). praktikum po proyektirovaniyu programmnogo obespecheniya ekonomicheskikh informatsionnykh sistem [workshop on the design of software for economic information systems]. moscow: finances and statistics. (in russian) vovk i. (2011). problemy avtomatyzatsiyi upravlinnya resursamy pidpryyemstva zasobamy erp-system [problems of automation of enterprise resource management by means of erp-system]. sotsialno-ekonomichni problemy i derzhava, vol. 2(5). retrieved from: http://sepd.tntu.edu.ua/images/stories/pdf/2011/11vipres. pdf zelinskiy s.e. (2006). avtomatizatsiya upravleniya predpriyatiyem [automation of enterprise management]. kiev: condor. (in ukraine) karpov d.v. (2010). problemy vnedreniya erp – sistem [problems of implementation of erp – systems]. vestnik nizhegorodskogo universiteta im. n.i. lobachevskogo, no 4(1), pp. 233-239. kalnitskaya i.v. (2009). upravleniye organizatsiyey: modeli informatsionnykh sistem: monografiya [organization management: models of information systems: monograph]. moscow: iad "university book". (in russian) karpenko s.h., popov v.v., tarnavskyy h.a. informatsiyni systemy i tekhnolohiyi: navch. posib. dlya stud. vyshch. navch. zakl [informational systems and technologies: teaching. manual for studio higher tutor shut up]. kyiv: maup. (in ukrainian) kononenko i.v. (2010). model i metod optimizatsii portfeley proyektov predpriyatiya dlya planovogo perioda [model and method of optimization of portfolios of enterprise projects for the planning period]. vostochnoyevropeyskiy zhurnal peredovykh tekhnologiy, no. 1/2 (43), pp. 9-11. kravchenko v.h. (2008). proektuvannya avtomatyzovanykh informatsiynykh system: navch. posibnyk [designing of automated information systems: teaching. manual]. derzhavnyy vyshchyy navch. zaklad «kyyivskyy natsionalnyy ekonomichnyy un-t im. vadyma hetmana. kyiv: kneu. (in ukrainian) martunyuk o. (2012). application of intelligent technologies in economic security a company. scientific economic journal. «actual problems of economics», № 12, рp. 234-238. (in ukrainian) mikhaylov p.i. (2012). informatsionnyye tekhnologii v roznichnoy torgovle [information technologies in retail trade]. retrieved from: http://imspm.spb.ru/articles/271655.php nefodov l.i., markozov d.o. (2009). informatsiyna tekhnolohiya pidtrymky pryynyattya rishen z upravlinnya bahatonomenklaturnym zapasom [information technology support for decision-making on management of multinomenclature stock]. skhidno-yevropeyskyy zhurnal peredovykh tekhnolohiy, vol. 3, n 5(39), pp. 28-32. (in ukrainian). novak v.o. (2006). informatsiyne zabezpechennya menedzhmentu. navch. posibnyk [information provision of management. teaching manual]. kyiv: condor, 2006. (in ukrainian) novakivskyy i.i., fedak t.v. (2010). informatsiyni systemy v menedzhmenti: systemnyy pidkhid. navchalnyy posibnyk [information systems in management: a systematic approach. tutorial]. lviv: «natsionalnyy universytet lvivska politekhnika». pleskach v.l. 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(in ukrainian) baltic journal of economic studies 99 vol. 4, no. 2, 2018 corresponding author: 1 department of management and marketing, mykolaiv national agrarian university. e-mail: vvclochan@gmail.com 2 department of economic cybernetics and mathematical modelling, mykolaiv national agrarian university. e-mail: ivclochan@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-99-105 improvement of the mechanism of state regulation of investment in the innovative development of the agrarian sector vyacheslav klochan1, iryna klochan2 mykolaiv national agrarian university, ukraine abstract. the purpose of this article is to analyse the main factors of innovative development of the agrarian sector, to run a research on investment support of innovations, which will enable to determine the main directions of improvement of the mechanism of state regulation of investment in the innovative development of the agrarian sector of the country. the methodology of the research is to substantiate the necessity of state support of innovative development of the agrarian sector, as a priority direction of its investment support, which involves the implementation of a set of measures to change existing trends, reducing the amount of financing of scientific and technical works, and reducing the number of research institutions involved in the development and implementation of innovative products in agriculture, while creating an institutional environment for development and implementation of agrarian innovations through the national and regional investment funds, promotion of the implementation of scientific developments into production by expanding the availability of financial resources through public and private partnerships and the commercialization of research results. the results of the study indicate that ukraine’s agriculture has potential opportunities to improve its competitive advantage in world markets. however, in order to strengthen them, it is necessary to take a number of measures: to form economic and political support for agricultural enterprises using scientific equipment and new technologies; to ensure the creation and distribution of a network of innovative funds to support innovative business at different levels; to orient all loans and support in ukraine to implement innovative projects in specific areas of production development, including innovation and investment support of agricultural enterprises; provide additional tax incentives for enterprises producing innovative products, which will increase the financial resources for the implementation of innovation projects and innovation program; clearly identify the legislative provision of funding and form a mechanism to support small businesses. practical meaning. the identified development priorities can serve as a basis for creating conditions for the domestic agricultural enterprises to implement the offensive strategy in foreign markets, supporting constructive competition in the domestic market, which will stimulate agrarian formation to innovation, ensure close integration of production and science, in order to facilitate the advance development of scientific and technological sphere. value/originality. the results of the study indicate that improving the investment provision of the agrarian sector of the economy involves determining the prospects for its long-term development based on scientifically based methodological approaches, the use of which allows measuring changes and expected socioeconomic outcomes. key words: investment, investment support, innovation, agriculture, state regulation, financing. jel classification: е22, е65, g28, o13, o31, q16 1. introduction the innovative development of ukrainian agriculture is based on the implementation of the state agricultural investment policy aimed at activating innovations as a major component of the overall strategy of increasing national competitiveness. the identified priorities are the creation of conditions for the domestic agricultural enterprises to implement the offensive strategy in foreign markets that will support for constructive competition in the domestic market, which will stimulate agrarian formations to innovations, ensure close integration of production and science, in order to promote the advanced development of the scientific and technological sphere. baltic journal of economic studies 100 vol. 4, no. 2, 2018 2. financing of the innovative activity in the ukrainian agriculture in modern conditions of the reduction of investment activity, a significant depreciation of fixed assets leads not only to deceleration of the extended but also further reduction of the simple reproduction. the overcoming of certain problems requires the formation of a rational structure of production potential and creation of conditions for its more effective use. this testifies the need for the transition to an innovative type of development and improvement of the mechanism of state regulation of investing innovations in the agrarian sector of the economy. it should be noted that most scientists interpret innovation activity in agriculture as an integrated process of the creation of new or more productive high-yield varieties, livestock, elite seeds, high-yield agricultural machines and aggregates, the introduction of advanced technological, organizational, economic, and managerial decisions, etc. (yatsenko, 2004). in this regard, table 1 represents the main indicators of financing innovative activity in ukrainian agriculture. over the past six years, the number of scientific organizations involved in the development and implementation of innovative agricultural products has decreased by 27%, while funding for scientific and technical work is fluctuating, but it is steadily decreasing because of the state budget. financing scientific works using own funds of scientific institutions has doubled. all this indirectly indicates the decline of scientific institutes, the reduction of research and innovation products in the agrarian sector. 3. the main factors of innovative development of the agrarian sector the innovative development of agricultural producers involves the comprehensive use of hightech factors of production in the technological, organizational, economic, and managerial spheres to ensure the stable and high competitiveness of agricultural products in the domestic and foreign markets. in the formation of the main directions of innovative development of agricultural commodity producers, the priority should be on the complexity, which means participation in the innovation process of all subjects of the innovation cycle (developers of ideas, entrepreneurs, investors, etc.). so far, the imperfection of the mechanisms of the innovations introduction, the lack of a holistic system of scientific and technical information do not allow to implement an effective scheme of interaction between research institutions and practices. a preliminary analysis of the conditions and factors influencing the innovative development of the agrarian sector has allowed dividing them into negative (restraining innovative development) and positive (which contribute to accelerating innovation processes). negative ones include: – the risk of innovative processes in the agrarian sector; – underfunding of innovative activity in the agrarian sector; – absence of a holistic state innovation policy and direction of the strategy of agricultural development; – insufficient staffing of agro-industrial production in the field of innovation management. positive factors: – departure from the administrative management of the economy; – variety of the management forms; – desire to increase professional staffing capacity; – growing demand for innovations in a certain stratum of agricultural commodity producers. at the present stage of development of the national economy, connected with the entry and adaptation to the requirements of the world market, we observe the emergence of a complex situation of domestic business, especially in the agricultural sector of the economy. this situation is determined, first of all, by the low competitiveness of agrarian enterprises in comparison with foreign producers. such a situation requires the active introduction of domestic and world experience in agrarian business activities that are in line with contemporary world development trends (ilchuk, sadchykov, 2015). table 1 the key indicators of financial expenses on performing of scientific work on funding sources and industries (agricultural sciences) indicators 2011 2012 2013 2014 2015 2016 2016 in % till 2011 the number of scientific institutions 161 151 135 127 132 118 73,29 financing of expenses for scientific works, total, million uah 564,0 647,0 636,1 590,8 605,4 557,9 98,92 including at the expense of the state budget funds 443,7 512,7 489,4 451,1 411,9 396,5 89,36 the volume of scientific works, performed for own funds of scientific institutions, million uah 88,6 95,8 103,3 81,0 124,5 219,2 247,40 calculated by the author on the basis of data from the state statistics service of ukraine, 2017 baltic journal of economic studies 101 vol. 4, no. 2, 2018 4. the investment provision of innovations in agriculture innovative development of the agrarian sector of the economy depends on the investment of the main branches of agriculture. creating conditions for macroeconomic balance will increase the business activity of agricultural producers as a result of the targeted influence of aggregate factors (investment, marketing, production, etc.) to ensure the development of their economic, investment, and innovation potential. the dynamics of investment attraction is not the only thing that has been analysed during the study of investment support. also, the ratio of economic and investment indicators characterizing the degree of volatility of the investment activity of the agrarian sector (fig. 1) was analysed. thus, investment support for innovation is the actual result of a complex dynamic interaction of its components, potential investment opportunities and the likelihood of achieving a definite final the investment providing of innovations in agriculture investment potential provision of natural resources presence of front-rank financial instruments investment risk logistical support for agricultural commodity producers legal framework of innovativeinvestment activity realization appreciation of market value of agricultural enterprise geographical and economic location of agricultural commodity producers efficiency of productive activity provision of labour resources development of scientific and technical base of agriculture corruption risks a price advance on investment commodities erroneous choice of financial instruments unforeseen changes of innovative products investing terms non-fulfilment by investors of obligations worsening of political situation in a country an unacceptable public investment policy in relation to agrarian sector demand worsening on innovative products for agricultural production imperfect dataware of agrarian sector fig. 1. the investment provision of innovations in agriculture baltic journal of economic studies 102 vol. 4, no. 2, 2018 goal of the innovative activity of an agricultural producer. in order to create favourable conditions for innovation and investment development of the production activity of agricultural producers in ukraine, it is necessary to minimize the financial risks of agriculture that hold back potential investors. measures for the financial improvement of the agrarian sector should become a priority in the state agrarian policy. 5. state regulation of the innovative development process in agriculture domestic economists distinguish three main strategic directions of resource and technological renewal of the agrarian sector of the economy (trehobchuk, 1997): – application of technologies that contribute to cheapening of agricultural products without significant losses of its quality; – introduction of technologies that potentially give an opportunity to improve the quality of food and agrarian raw materials; – the use of technologies and biological means that ensure the production of environmentally friendly products and guarantee safe agricultural activities. economic analysis shows that in ukraine, the innovation sphere occupies a small proportion of the total volume of production (about 10%). moreover, the main principles of the state innovation policy in the field of agriculture are: – definition of state priorities of innovative development; – formation of the regulatory framework of innovation activities; – creation of conditions for the development of domestic scientific and technical potential; – ensuring the cooperation and interaction of science, education, production, financial, and credit sphere (kabinet ministriv ukrainy, 2008). in order to implement the state innovation policy of ukraine in 2005, the state agency for investments and innovations was created (later reorganized into the state agency of ukraine for investments and development), which participates in the formation and implementation of state policy in the investment field and innovation activities and prepares proposals for the state support in realization of investment and innovation projects in the real sector of the economy. according to the statutory documents, in the process of competitive selection of innovation and investment projects for their financial support at the expense of the state budget, the following criteria are taken into account: 1) technological or scientific-technical level of the project; 2) the competitiveness of products and the prospects of markets; 3) cost-effectiveness of the project (an estimation of the planned volume of profit from the project implementation, payback period, etc.); 4) the budget efficiency of the project; 5) availability of resource and energy saving technologies in the project; 6) social significance of the project (creation of new jobs, wage growth, improvement of working conditions); 7) possible impact of the project on the environment. implementation of the effective innovation and investment support for the production of agricultural commodity producers in modern conditions is a guarantee of their effective activity. it also provides an opportunity for growth and provides long-term competitive advantages. for this purpose, the scope of innovations is regulated by the ukrainian laws called “on science and scientific and technical activity”, “on scientific and scientific-technical expertise”, “on special regime of investment and innovation activity of technological parks”, “on priority directions of innovation activity in ukraine”, “on investment activity”, “on protection of rights to inventions and utility models”, “on protection of rights to trademarks for goods and services” and other laws in the patentlicensing sphere, laws on the creation of special (free) economic zones and territories of priority development, tax laws, etc. (ilchuk, sadchykov, 2015). the innovation process in the agrarian sector is characterized by two main features: 1) the developing idea is undergoing technical testing and is implemented in agro-industrial production; 2) the social necessity of development and the significance of its results for the agrarian sector and the national economy as a whole. the initial stages of the innovation process in the agrarian sector, namely, fundamental and applied research, are carried out in ukraine mainly by a system of research institutions of the national academy of agrarian sciences of ukraine and higher educational institutions of the agrarian sector. however, due to the lack of proper funding, outdated material and technical base, only a small number of scientific institutions are conducting research on the selection of promising varieties of plants and animal breeds based on genetic engineering methods, biotechnological methods of pest control, and nanotechnologies. implementation and development of innovations are constrained by other factors, among which the most important are low solvency of farms and the lack of reliable and complete information about domestic scientific developments in the agriculture (yermakov, hrebennikova, 2011). innovations in the agrarian sector of the economy require information support from the state side and proper financing, which is important when entering the market of scientific and technical products, as well as competition with foreign counterparts. this plays baltic journal of economic studies 103 vol. 4, no. 2, 2018 the crucial role in the import of agricultural machinery, seeds and plant protection products. the financing of scientific development for agriculture needs to be carried out at all stages of the innovation process, as the introduction of development into production should stimulate the demand for research of the domestic scientific institutions. functioning of agrarian science in conditions of the uncertainty of the reasonable price for scientific products and legislative regulation of this issue does not contribute to the process of innovation. at the same time, studying the world experience of the stimulation of innovation activity shows that the importance of the innovative component in the development of economies of foreign countries is constantly increasing, and activation of innovation activity is fully supported. innovative development of the agrarian economy is ensured by an appropriate innovation policy implemented through innovation and investment development of the agricultural activity of agricultural producers. modern innovation policy is a set of scientific and technical, production, managerial, financial and sales and other activities related to the promotion of new or improved products on the market; this is a complex and risk-free process, which course is determined by the initial technical, financial, economic, and social conditions (hudzynskyi, ivaniuta, 2010). the state policy in the field of innovation policy is to provide significant structural changes in the economy, technology or technologies. its implementation includes: material and financial provision of longterm programs for the development of scientific and technical infrastructure (laboratories, research centres); creation of the mechanism of financing innovations with high risk; implementation of scientific and technical programs that require inter-sectoral cooperation or “joint work” of science with agriculture; satisfaction of strategic and social needs. an innovative potential as a system of factors and resources plays a key role in ensuring the effective development of innovative processes in agricultural production, which includes: – market potential reflects the level of availability of the company’s opportunities for external market needs of innovations, which are constantly generated by the relevant market environment; – intellectual potential – determines the possibilities of generating innovations, bringing them to the level of new technologies, structures, organizational and managerial decisions in the development of enterprises; – human potential – characterizes the capabilities of employees of the enterprise to apply new knowledge and technologies, organizational and managerial decisions, in order to develop and produce new innovative agrarian products; – technical and technological potential – the ability to quickly reorient production capacities and establish a cost-effective production of new agricultural products that meet market needs; – informational potential – information security of agrarian enterprises, the degree of completeness and accuracy of information necessary for effective innovative solutions; – financial potential – compliance with the financial state of investment attractiveness, creditworthiness and the system of effective financial management of enterprises in the agrarian sector to ensure the sustainability of innovation activities at all stages of the innovation cycle; – motivational potential – characterizes the company’s ability to harmonize and coordinate the various interests of the subjects of the innovation process: developers of innovations, investors, suppliers, etc.; – communicational potential – the existence of communication links that reflect the level of certainty and effectiveness of the company’s interaction with the elements of the environment, which contribute to the goal of innovation activities; – research potential reflects the availability of created reserves of research results sufficient to generate new knowledge, the ability to conduct research to test ideas, innovations, and the possibility of their use in the production of new products (ilchuk, sadchykov, 2015). stimulation of the development of the innovative potential of agricultural sectors can be achieved in various ways. however, the main two areas should be identified: – creation of incentives in order to obtain additional profits from agricultural producers, investments aimed at the development of innovations, markets. as a result of the implementation of new schemes for the promotion of products and the provision of innovative activities; – the emergence of the workers’ personal interest before the innovation renewal of production since, at the expense of obtaining additional profit their income becomes stable over a longer period of time, provided by the innovative renewal of fixed assets (bezpiata, 2016). the system of state regulation of the development of innovative agrarian sector should be expressed in the development of the legislative and regulatory framework aimed at activating the innovative activity of agricultural producers, development and implementation of innovation and investment policy, support for the information-analytical environment of innovative processes (fig. 2). thus, improvement of government control mechanism and support for agricultural commodity producers’ innovative development process is a step towards the creation and improvement of legislation that regulates the innovative activity of agricultural commodity producers. baltic journal of economic studies 104 vol. 4, no. 2, 2018 fig. 2. improvement of government control system of the innovative development process in agriculture government control over innovative development process in the agrarian sector of the economy stimulation of agricultural commodity producers’ innovative development support for research and information environment of innovative processes in agrarian sector providing access to information of agricultural commodity producers system improvement of agrarian innovative enterprises’ taxation (tax deductions, tax vacations) guard of intellectual ownership rights improvement of the existing legal framework of innovative activity support for agricultural commodity producers formation of flexible charts of agroinnovations creation financial providing on the state-private partnership basis determination of pricing organizational order on agro-innovation formation of the favourable infrastructure of the agro-innovations market introduction of agro-innovations through national and regional branch investmentinnovative funds 6. conclusions further, permanent, development of ukraine agriculture is possible only on the basis of the effective innovative-investment providing of agricultural commodity producers’ productive activity. agriculture of ukraine has potential possibilities for the improvement of the competition positions on world markets, however, for their strengthening, it must carry out the row of events: to form economic and political support for agricultural enterprises that use a since equipment and new technologies; to provide creation and distribution of innovative funds network for the support for innovative business on different levels; to 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(in ukrainian) baltic journal of economic studies 76 vol. 4, no. 4, 2018 corresponding author: 1 research institute of public law, ukraine. e-mail: halunko@i.ua 2 research institute of public law, ukraine. e-mail: kurkovaksena@ukr.net 3 research institute of public law, ukraine. e-mail: 6222410@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-76-86 methods of assessing the efficiency of internet marketing communications valentyn halunko1, kseniia kurkova2, vitalii oksin3 abstract. the purpose of the study is to systematize the methodological foundations for evaluating the effectiveness of marketing communications on the internet. in the literature, there are often limited definitions of interactivity, which do not reveal the essence and do not allow fully realizing the marketing opportunities associated with its phenomena. today, interactive video, gaming technologies, which are increasingly used in the creation of advertising and communication materials, provide unprecedented opportunities for users to create and flexibly change their own scenarios for the development of events, to guide the history of the video and its heroes, which, among other things, makes it possible to make the presentation object not only goods or services but also the practice of behaviour in different situations of their purchase and consumption. in internet marketing communications, preconditions for estimating the time budget, general stay in the network, implementation of specific behavioural scenarios of the full-fledged functioning of the user as a representative of the target audience, including through various devices and due to multimedia character, are formed. optimization of internet communications of enterprises is carried out on the basis of cyclic interactive communication and timely adjustments of parameters of the received traffic from automated services such as google analytics, yandex metrica, comagic, and others. an audience behaviour analysis becomes possible by the use of cookie data. this fragment of data stored on internet users’ computers reveals the broad opportunities for enterprises to target their advertising, identifying the target audience, for example, by geographic location of users, tracking their interests, counting impressions and passing through banners. due to the high level of inherent interactivity, simplification of activity realization, and its coordination in a virtual environment, with real results, the development of marketing communications on the internet contributes to the transition from the integrated application of specialized tools and technologies to their genuine integration. these new opportunities, subject to their implementation, will update one more aspect – the achievement of the effectiveness of internet communications in marketing. attempts and methodical options for the formation of a holistic set of marketing communications, with their declared effectiveness, have become widespread. the author proposes a more adaptive system for evaluating the effectiveness of marketing communications, where a balanced system of indicators and stages of work are complemented by the classical algorithms that create the necessary preconditions for preventing or neutralizing the identified problems in the organization of internet marketing communications. the effectiveness of the cpm model depends entirely on the derivative results of user behaviour (review of site materials, ordering and purchasing goods). therefore, depending on the goals of the campaign, that is, expanding the target audience or promoting sales, the result may be more predictable. the success of online platforms is based on the consistent development of activities, which is harmonized by three benchmarks: differentiation, effectiveness, efficiency. if earlier, marketing monitoring of the audience and behaviour of internet users was mainly based on the features of its persons or contingents, and the information context, today it needs to be integrated (contextual targeting, retargeting, and other tools). key words: internet marketing communications, interactivity, marketing activities, media market, media budget, cpm models, audience selection algorithms, economic efficiency. jel classification: м31, l86, d83, g14 baltic journal of economic studies 77 vol. 4, no. 4, 2018 1. introduction the progress of civilization gave rise to and resulted in the intensive development of the internet environment – a global information hypermedia system based on special technological solutions and appropriate infrastructure. by responding to the latest community demands for the organization of communications and access to the knowledge and experience of humanity, the internet is simultaneously an environment for cooperation and communication, a means of worldwide broadcasting and dissemination of information, with the necessary complementarity and synergy of all branches of knowledge and life aspects of society. the internet serves as a convenient and economically attractive virtual business area with a powerful arsenal of fundamentally new tools to improve profitability. the urgency of the work is to study both the concept and classification of internet communications, as well as to analyse the possibility of its practical use. globalization, informatisation, and virtualization at the end of the xx century became the key themesvectors of the influential paradigm of the sciences of man and society, changed the direction in understanding the laws of evolution. informatisation and virtualization substantially change the nature and laws of market development, industrialization and technological progress, the development of network flexible forms of intercultural and international engagement of all elements of socioeconomic systems, deny the organizational dominant of national and material, limiting transaction costs, speed, and spatial range in the execution of operations. the issues of internet marketing development are considered in the scientific works of such scholars as p. braslavskyi, s. harkavenko, l. hlinenko, t. zatonatska, s. illiashenko, i. kozak, m. lebedenko, i. lytovchenko, m. makarov, o. muzyka, v. pylypchuk, v. pleskach, t. prymak, i. reshetnikova. founders of studies on internet marketing development were the following scholars: j. beaumont, e. awad, g. milne, r . wilson, w. hanson. the works of these authors cover the principles and foundations of marketing in the global network, as in a special environment for the promotion of goods and services in the market, modern approaches to managing the marketing complex, the specific application of its individual tools. it should be noted that in existing scientific papers, insufficient attention is paid to the issues of assessing the economic efficiency of internet marketing, its methodological algorithms and techniques, as well as a new systematization of classification approaches, which take into account the interpenetration of previously isolated elements. the purpose of the study is to systematize the methodological foundations for assessing the effectiveness of marketing communications on the internet. 2. the methodology of research the development of communications, their means, and technologies has serious and large-scale sociopsychological, cultural, and economic consequences for the entire society, including for marketing. h. mcluhan defines the leading role of communication technologies as a decisive factor in the process of formation of socio-economic systems: “…the personal and social consequences of any means of communication, that is, any our extension outward, come from a new scale brought about by each such extension or new technology in our affairs” (mcluhan, 2006). after all, any extensions of channels and communication devices, time and functionality of the person’s stay in the online mode is connected and causes changes in the limits of his/her consciousness and the horizons of perception of the prospect. in the literature, there are often limited definitions of interactivity that do not reveal the essence and do not allow fully realizing the marketing opportunities associated with its phenomena (andropova, 2009). in particular, “interactivity is the principle of organizing a system, in which the goal is achieved through an information exchange among elements of this system” (bozhkova, 2013). leaving aside the nature of the intended interaction, the researchers create the preconditions for errors in classifications, methodological developments, and the evaluation of the effectiveness of communications. today, interactive video, gaming technologies, which are increasingly used in the creation of advertising and communication materials, provide unprecedented opportunities for users to create and flexibly change their own scenarios for the development of events, to guide the history of the video and its heroes, which, among other things, makes it possible to make the presentation object not only goods or services but also the practice of behaviour in different situations of their purchase and consumption. accordingly, among advertisers and representatives of different target audiences, commercials are gaining in popularity that not only and not so much provide (represent) information in graphics, video or other format as they interact with the user, turning it from observer to event participant, fully integrate processes of active presentation of proposals and persuasion in making purchasing decisions. such technologies and practices provide a high level of consumer engagement in communication and sales processes, high quality and performance of contact with the audience (gayeva, 2015). thus, we will define interactive marketing communications as a mutually active informational interaction of market participants that are multilevelly connected in real time by content and contexts, in order to increase the efficiency of exchanges and meet their needs. baltic journal of economic studies 78 vol. 4, no. 4, 2018 in our view, interactivity in internet marketing communications should be considered at three hierarchical levels: i. interactivity, where the user of information becomes its active generator. ii. socialization of communication projects, when the subject of discussion becomes the basis of a large-scale social movement. iii. interpenetration of global social networks, internet communities, and similar associations, collective actors (of communication, procurement, etc.). in internet marketing communications, the preconditions for estimating the budget of time, general stay in the network, implementation of specific behavioural scenarios of the full functioning of the user as a representative of the target audience, including through various devices and thanks to multimedia, are formed (nikiforova, 2017). internet marketing communications must be fully integrated into the cycle of interactive and renewable interaction with consumers, which results guarantee enterprises profitability and business development. optimization of internet communications of enterprises is carried out on the basis of cyclic interactive communication and timely adjustments of parameters of received traffic from automated services such as google analytics, yandex metrica, comagic and others (orap, 2016, setevaya ekonomika). an audience behaviour analysis is made possible by the use of cookie data. this small piece of data stored on internet users’ computers reveals a wide range of opportunities for businesses to target their ads, defining a target audience, for example, by geographic location of users, tracking their interests, counting impressions and passing through banners. due to the high level of inherent interactivity, simplification of implementation of activities and their coordination in the virtual environment, but with real results, the development of marketing communications on the internet contributes to the transition from the integrated application of specialized tools and technologies to their genuine integration. these new opportunities, subject to their implementation, update one more facet of the already outlined problem – the achievement of the effectiveness of internet communications in marketing. table 1 technologies and means of interactivity of communications name description “live” projections software and hardware complexes and visualization tools projecting the image on any surface with a flexible active image or video change touch screen monitors (displays) and surfaces (display windows etc.) coordinate devices that allow you to implement a flexible interface for accessing information or buying products and services that are activating and sensitive to the user touch image interaction tools (thinglink) possibility to designate any object of a website or message, click on which expands windows with the content of a certain subject 3d (4d) holograms and displays multidimensional objects and spaces that make it possible to thoroughly and comprehensively view the desired object or provide a full-fledged presence effect. internet marketing communications еmail marketing bulletin board systems (bbs) search advertising media (banner) advertising video (digital) advertising background advertising rich media lead generation website sponsorship targeting search engine marketing search engine optimization social media optimization social media marketing viral marketing direct internet marketing figure 1. the system of marketing communications on the internet baltic journal of economic studies 79 vol. 4, no. 4, 2018 3. results and discussion the objective market forces and innovation in the field of technology contribute to the modern development of the internet, all its components, the creation of new forms of value for the market. according to the research company “pingdom”, the global audience of internet users in the period of 1993–2017 has increased to more than half of the world’s population (figure 2), and the quantitative indicators of the progress of technological capabilities and infrastructure in their dynamics are fully consistent with moore’s law (zakon mura), doubling every 5 years. in january 2018, the number of internet users in the world reached 4,021 billion people (the entire population of the planet is 7.6 billion). the social networking audience in 2018 amounts to 3.196 billion people, that is, by +13% more than in 2017. and 90% of users access it through mobile devices, and 3,722 billion people use mobile internet access technologies. in 2018, mobile phones are used by 5.135 billion people – 4% more than in 2017. the most dynamic development is observed in africa, the middle east, and asia. according to published data from international research companies, the number of internet users in the middle of 2017 amounted to only 3.04 billion people (obzory rynkov, 2018). the internet is unevenly distributed throughout the world. top 10 countries by a number of internet users: china – 772 million, india – 350 million, usa – 277 million, japan – 110 million, brazil – 110 million, russia – 87 million, germany – 72 million, indonesia – 71 million, nigeria – 70 million, mexico – 59 million. almost 1 million people first started using social networks every day in the last year. more and more senior people are joining social networks. only on facebook, the number of users aged 65 and older has increased by almost 20% over the past year. the number of teenagers aged 13 to 17 who use facebook has also increased, but only 5% since january 2017. an average user spends about 6 hours a day on the internet. the leaders are thai residents who spend 9 hours and 38 minutes online. the largest amount of time in social networks, for the third year running, is spent by filipinos – an average of about 6 hours a day. global spending on e-commerce in 2017 reached almost $1.5 trillion, only on consumer goods. adding costs to other categories, such as online, tickets, tours purchase, digital content, and mobile apps, then the total world e-commerce price will be closer to $2 trillion. uk residents are more likely to make online purchases, with annual spending exceeding $2000 per user. against the background of the growth of the internet audience, the natural and predictable is the increase in the capacity and progress of the market and individual segments of internet marketing communications. however, the trends in the media and communications market in ukraine are not unambiguous. the sensitivity of individual users and corporate sector of the economy to fluctuations in the state of affairs is determined by different factors. requests for information exchange and use of network infrastructure remain high and have stable and active growth for all categories. marketing activities of enterprises directly depend on investment expectations, business climate conditions. accordingly, advertising budgets that ukrainian advertisers allocated for advertising and promoting it on the internet, as well as using other media channels, increased up to 2014. ukrainian advertising coalition (vrk) has figure 2. graf of internet users in the world from 1993 to 2017 source: developed on the basis of (obzory rynkov, 2018) baltic journal of economic studies 80 vol. 4, no. 4, 2018 established that the volume of the ukrainian market in 2012 amounted to 13.6 billion uah, in 2013 – 14.6 billion uah, in the crisis 2014 for the country, the ukrainian advertising and communications market lost almost a quarter of the national currency budgets, the total volume of which amounted to 11.3 billion uah (internet world stats, 2018). the volume of income from the creation and placement of advertising in ukraine in 2014 amounted to 9065 million uah and has grown to 10003 million uah in 2017. the main platform for video advertising, which is the most popular and cost-effective in operation, is youtube, whose audience in ukraine already reaches 14 million unique visitors per month. accordingly, the average cost of advertising on it is also high – about 4-5 dollars per thousand impressions, with the expected range of fluctuations depending on the type of commercials, its duration, the target audience, and the possibility to be ignored by the user. instagram provokes competition to youtube as an advertising platform. experts note the high potential of efficiency and growth of internet communications in the development of services in the field of communications, managing the reputation of companies in social networks, the use of online gaming technologies (industriya kompyuternykh igr obgonyayet kinoindustriyu). analysis of the results of monitoring researches on the distribution of advertising budgets testifies the validity of the conclusions about the need to streamline and improve the classification approaches for structuring the complex of internet communications (orap, 2016; nikiforova, 2017). on the one hand, there are contradictions and inconsistencies in evaluations of various experts, for example, specialists from the ukrainian advertising coalition and starlight sales and others (kashin, 2014). on the other hand, important directions and types of communications are delayed or indirectly displayed. at the end of 2016, there was a change in the distribution in the structures of evaluation of the advertising and communications market. its main goal was precisely the harmonization of terms and concepts in accordance with those generally accepted in the european and world advertising markets. it is important table 2 the volume of the media advertising market in ukraine (2014-2017, billion uah) 2014 billion uah 2016 billion uah 2017 billion uah relative deviation 2017/2016 тр (%) tv advertising 3930 3986 4606 115,5 direct advertising 3555 3755 4088 108,9 tv sponsorship 375 431 518 120,2 press advertising 1670 1320 1248 94,5 оон advertising 1030 952 1045 109,7 billboard outdoor advertising 875 821 903 109,9 transit advertising 70 64 69 107,8 radio advertising 290 304 333 109,5 cinema advertising 30 24 26 108,3 online advertising 2115 2355 2745 116,6 total media market 9065 8941 10003 111,9 table 3 distribution of advertising budgets of the internet sector by sectors of the economy in 2014-2016, % category 2014 2016 percentage of change in budget volume, 2016/2014the volume of advertising budgets, % food 13 12,1 -7% vehicle 12,3 12 -2% electronics and technology 11,8 11,2 -5% hygiene, household chemicals 11 8,4 -24% telecommunications 10,7 8,3 -22% finance 7,9 7,5 -5% pharmacy 3,9 7,2 85% spirits 4,3 5,6 30% retail 8,1 4,9 -40% online stores 1,3 4,5 246% baby stuff 4,1 3,4 -17% entertainment 2,9 3,4 17% other 8,5 11,6 36% baltic journal of economic studies 81 vol. 4, no. 4, 2018 that internet advertising received an international classification that is as close as possible to the definitions of interactive advertising bureau (iab) (ofitsiynyy sayt ukrayinskoyi asotsiatsiyi internet-reklamy, 2018). when choosing media, companies take into account both the volume of media consumption and the cost of reaching their audience by each channel. due to the high level of coverage, the tv has the lowest cost per 1000 contacts (cpt) – 15 uah. in the second place – banner advertising on the internet – 40 uah. the most expensive kind of media are cinemas, the cost of reaching 1000 contacts is 949.2 uah. that is why television retains its traditional position and leads with coverage of almost 95%. in turn, the use of such media as the press and radio becomes smaller every year, their share decreased by 20% for the period of 2008-2016. it is important to note the differences in the integration of offline marketing, which is aimed at the logic (sequence) of advertising messages in the context of enterprise strategy, and online, based on a permanent and personalized interaction with the client. the latter, among other things, exacerbates the issue of effective cross-communications. the more differentiated media become, the more important it is to take into account the peculiarities and variability of their requirements in joining marketing efforts for the effectiveness of maintaining contact with the audience, as well as the full implementation of the communication concept based on original, creative solutions (petrovskiy, 2012). attempts and methodical options for the formation of a holistic set of marketing communications with their declared effectiveness have become widely distributed in professional literature and practice. however, even with their foreseen separation of online tools into a separate group, they are not lacking in contradictions, do not have a single effective systematization. a successful combination of classical and new approaches is the concept of a modern interpretation of the theory of integrated marketing communications – ttl (trough the line), which complex is formed by the unification of elements of atl (above the line) and btl (below the line). paid and one-sided reporting of information to consumers by the use of atl tools (advertising in the press, on radio and television, in cinema, outdoor advertising) can only be conditionally considered uncharacteristic for btl (sales promotion, direct marketing, public relations, participation in exhibitions, online advertising) (berezin, 2014). the proactive elements used to provide interactivity (games, education, discussions, virtual demonstrations and excursions, etc.) are a guarantee of efficiency and must be combined with all the tools of the marketing communications package that is possible in the internet environment. they cannot be classified in one of the classification groups: btl or ttl (kubka, 2017). it is in this direction, which is often identified with btl or ttl activities, that about 70% of the total budget of marketing communications is invested in the late xx and early xxi centuries. contradictions that arise as a result of isolation in the implementation of operations and works provided by communication technologies, violations of the integrity of communications do not allow fully implementing marketing strategies in interaction with consumers, ensuring their high efficiency. in particular, the content of messages, content of websites are often not harmonized with the image of the company, its brands; the information content does not meet the principles of necessity and adequacy, visibility and interactivity of the presentation; requests not of the target audience but of search robots are satisfied; means of visualization, principles and standards of corporate culture change the meaning and perception of marketing information; there is a conflict of goals and objectives for the promotion of goods and services (hendrik pol, 2015). the author proposes a more adaptive assessment system, where a balanced system of indicators and magazines transport cinemas radionewspapersоонinternet (banners) tv 55,3739,5515,82 118,65 237,3 316,4 500 949,2 figure 3. the effectiveness of various media by the cost per thousand (срт), uah baltic journal of economic studies 82 vol. 4, no. 4, 2018 stages of work are complemented with the classical algorithms that create the necessary preconditions for preventing or neutralizing the identified problems in the organization of internet marketing communications. at the first stage, a conceptual model of communication is being developed that links internet marketing strategies with predictable user behavioural scenarios within the object-information model of a special program or project. thus, a basis for the full integration of internet communication tools into marketing is created, interactivity and creative synthesis of methods and means of interaction with the audience, which does not deny the achievement of predicted economic results, are ensured. after all, with the development of the market, consumer needs, increased competition, an increase in the number of channels, communication devices, as well as the integration of offline and online sectors – each problem of effective interaction, communication support for consumers becomes non-trivial. the procedures for planning and organizing internet marketing communications are not confined to an intuitive definition of the structure of tools and budgets used, as a percentage of revenue or profit, according to objectives and objectives (kpi), based on retrospective data, special studies (sov), estimates of econometrics (roi), etc., and become the stages of system harmonization of actions within the integral business model of the enterprise. at present, in the processes of pricing, payment for information and communication intermediaries, there is virtually no clear ranking (braslavskiy, 2003, kubka, 2017, berezin, 2014). the effectiveness of the cpm model depends entirely on the derivative results of user behaviour (review of site materials, ordering and purchasing goods). therefore, depending on the goals of the campaign – target audience expansion or sales promotion – the result may be more or less predictable, but not guaranteed. for the first group of tasks, it is more acceptable to use cpc models; however, it also does not allow completely preventing artificial overestimation of attendance rates and others. the latter is ensured by the use of the cpl terms (kubka, 2017; smolyanyuk, 2013). the cpl, cpa, and cpo models provide the prerequisites for the active and interactive participation of enterprises in communications and interaction with potential customers. filling out an order form event marketing ttl branding affiliate and trade marketing the main components of marketing communications expositions, demonstrations presentations, tastings representative events for clients conferences, workshops personal selling sponsorship, charity direct marketing merchandizingpublic relations exhibitions, fairssales promotion btl print advertising indoor-video outdoor advertising media advertising atl figure 4. distribution of tools of marketing communications by places of proactivity baltic journal of economic studies 83 vol. 4, no. 4, 2018 or participating in special offers guarantee economic benefits of at least 50%, nevertheless, the higher cost of service and the risk of losing potential customers through the establishment of rigid priority filters in the development of communications with the target audience make the cpa model more popular. similarly, the price of productive communication with the guaranteed sale of goods/services is high and may amount to 10-30% of the sum of their order by the buyer (emelyanov, 2002; yerofeyev, 2016). accordingly, optimizing the parameters of communication programs and projects, taking into account the cost and effectiveness of placing marketing information on the network, leads to the choice of advertisers of cpa models in more than 70% of cases, cps – about 50%, and 25-35% of companies selects cpl. other models have a mostly supporting or complementary role. such a division, albeit with certain variations in the ranges, is peculiar for the usa, europe, including its eastern part (obzory rynkov, 2018). complexity in using the models of organization of interaction and payment for partner services, providing banners, ads, thematic publications, and other elements of communication creates the preconditions for the effective management of communication efficiency. it is logical to use cpm and cpc models in the early stages of the product lifecycle in the market, as well as for subjector audience-specific recourses where it is important to provide certain awareness of the potential audience. in order to ensure the popularity and establishment of initial contact with potential consumers, the necessary condition is the active interest of the network’s user, which makes fair the payment for the actions in the cpo, cpa, cpl models. they are also acceptable for the maintenance of retail offline sales of already known products, such as dairy products, professional services, etc., whose direct sale in the internet environment is complicated (yaroshenko, 2017). in order to take into account the important aspects of each position, the transition between them, in implementing an integrated marketing communications program, in our view, it is advisable to propose appropriate taxonomic models that can increase the effectiveness of marketing communications on the internet. at this time, advertisers through stock exchanges (auctions) are purchasing information to certain audiences at sites (publishers and networks). at first glance, trade is based on accurate data, however, the situation of uncertainty and high risk remains. the main elements of the system that cause this are auctions and primary data. in the absence of efficient filters, instead of which the experience is often offered, in the form of corrected databases or behaviour patterns or manifestations of randomness, formalized in the algorithms, the latter introduce large errors in the plans. automation of the procedures for the operation of the advertising system provides the expenditure of funds, which marketers are ready to invest, by machines according to a specific algorithm. in most cases, optimization is carried out according to context, user profile, rfmp (yaroshenko, 2017). thanks to the improvement of advertising purchase algorithms, it is possible to optimize the target audience based on the location, context of the requested information, rfm, etc. taking into account sociodemographic parameters, consumer interests, etc. require creative approaches to segmentation using a large number of unique criteria. such algorithms have already begun to be used by leading world companies such as google and yandex but the overall level of their use by domestic enterprises remains rather low. in solving the above problems, it is possible to make some recommendations. the success of online platforms is based on the consistent development of activities, which is harmonized by three benchmarks: differentiation, effectiveness, efficiency. if earlier, table 4 model for determining the levels of probability of communication and economic performance in collaboration with internet market intermediaries model marketing result economic efficiencypossible fully or partly guaranteed cpm (cost per mil) – fixed price/payment (ppi – pay per impression) for thousands of ad impressions, banner, or other media. х cpc (cost per click) – price/payment (ppc – pay per click) per click on the carrier of marketing information. х cpl (cost per lead) – price/payment (ppl – pay per lead) per lead (the fact that the users perform a useful action, with the receipt of certain information about them). х х cpa (cost per action) – price/payment (ppa – pay per action) for a specific user action (viewing a certain number of pages, participating in a poll, etc.). х х cpо (cost per order) – fixed payment subject to ordering by the visitor on the advertiser’s site. х х cps (cost per sale) – price/payment (pps – pay per sale) per sale. х baltic journal of economic studies 84 vol. 4, no. 4, 2018 marketing monitoring of the audience and behaviour of internet users was mainly based on the features of its persons or contingents, as well as the information context, today it needs to be comprehensively integrated (contextual targeting, retargeting, and other tools). audience targeting, as a tool for improving the efficiency of an advertising campaign, can be carried out according to the criteria of geography, advertising areas, time and frequency of impressions, language parameter, age and gender of the user. continuous optimization of an advertising campaign by adjusting data from ad networks and combining multiple types of targeting ensures maximum effect from advertising. after reaching the internet user, and the first signs of forming his/her loyalty as a consumer, it is expedient to use retargeting. targeting allows enterprises to reduce the cost for attracting the target audience and, with proper use, gives the relevance of the information of advertisement messages to interested users in order to increase the loyalty to this type of message. thus, the optimality of the current message in marketing communications will be ensured by the interactivity and dynamism of content and structure based on formats, content, conditions, and audience. this becomes possible due to a single advertising platform that includes cross-channel attribution, a single profile for each user. the control of the correctness of the target audience selection algorithms should be established on the basis of the identification of the limited sample of persons (n) among those involved in communications (n), the scale of the error (q). if q ≤ qпр, that is, below the permissible deviation level for a sample of a selected representation, then the operating mode remains unchanged. in such a situation, the risks of an advertiser (β) who can pay messages to non-prospective network users are balanced with the risks of an intermediary (α) who may not be able to pay for the communications of potential customers (emelyanov, 2002): α β = − = − − = − − = ∑ ∑ 1 0 0 1 1 0 0 c c c c c c d d n d n d n n d ñ d d n d n d n n d ñ (1) / (2) where d0,1, d – the number of mistakenly covered individuals in the internet users’ group checked for compliance with the selection criteria; с – permissible error value for a given group of network participants involved in the communication. d0,1 or q – random variables determined by the ratio q = d/n. in different situations, uncertainty in the work with the target audience, as well as the level of effectiveness of the intermediaries in the performance of their functions, it is possible to simplify or, conversely, increase control over the efficiency of communications. similarly, activity is regulated using the probability (p) of the appropriateness or inappropriateness of the local group of persons involved in communication with a certain share of random (unpromising) users of the network. this probability is determined by the expression under the sign of the sum in formulas 1 and 2. p(q0) = 1-α, (3) p(q1) = β. (4) in the case of acceptability of simplified control procedures for the application of the hypergeometric distribution of random variables, it can be replaced by binomial. if nq is in the range of 0.1-20, then it is possible to use an even simpler poisson distribution (emelyanov, 2002): p q e dd c d ( ) ! = − = ∑ λ λ 0 (5) using the formulas given above, it is possible to form different partnership options for communication systems that differ significantly in the choice of source data (emelyanov, 2002). at the same time, the realization of real calculations is available to specialists with the usual level of training. so, if internet resources provide coverage of 2250 users corresponding to the target audience with a concurrent error in the local control group n = 125 (table values) at 1%, then the number of random participants should not exceed 4, р = 95%, α = 5%. that is, every 100 of the periods, on average, 5 times the results of the work will be mistakenly rejected and, therefore, not paid. the advertiser is risking here five times to pay for work unreasonably, the results of which – 6.2% of random and commercially unpredictable participants of communication. accordingly, the second one of the problems declared at the beginning of the article finds its solution – the concentration of the majority of the enterprises on a narrow audience of consumers. so, online advertisers are mostly interested in young people aged 19-23. and here it is economically viable and relevant to see the application of new, more complex approaches to the choice of the target audience, its elemental and structural optimization. 4. conclusions the growth of the internet users’ audience is a steady and global trend, which is intensif ying with the increase of means and options for access to the internet, multimedia, and an increase in the time spent by consumers online. in the context of the growth of the internet audience, as well as the media communications market as a whole, in ukraine, the market for internet marketing communications increases its capacity and improves, with some fluctuations of the indicators of the market conditions during the crisis periods. baltic journal of economic studies 85 vol. 4, no. 4, 2018 among advertisers and representatives of different target audiences, commercials are gaining in popularity that not only and not so much provide (display) graphic, video or other information as interact with the user, turning him from observer to event participant, fully integrate the processes of active presentation of offers and persuasion in making purchasing decisions. internet marketing communications must be fully integrated into the cycle of interactive and renewable communication with consumers, whose results guarantee enterprises profitability and business development. the volume of revenues from the creation and placement of advertising in 2017 amounted to 10003 million uah. the proactive elements used to provide interactivity (games, education, discussions, virtual demonstrations and excursions, etc.) are a guarantee of efficiency and must be combined with all the tools of the marketing communications package that is possible in the internet environment. in order to ensure the popularity and establish initial contact with potential consumers, the necessary condition is the active interest of the network’s user, which makes fair the payment for the actions in the cpo, cpa, cpl models. thanks to the improvement of advertising purchase algorithms, it is possible to optimize the target audience based on the location, context of the requested information, rfm, etc. taking into account sociodemographic parameters, consumer interests, etc. requires creative approaches to segmentation using a large number of unique criteria. such algorithms have already begun to be used by leading world companies such as google and yandex, however, the overall level of their use by domestic enterprises remains rather low. references: andropova, n. p. 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(2012). optimizatsiya reklamnykh zatrat i pribylnosti sayta v tselom [optimization of advertising costs and profitability of the site as a whole] retrieved from: http://www.megaindex.tv/conference/etarget_2012. setevaya ekonomika [network economy]. retrieved from: http://ru.wikibooks.org/wiki/ %d0%a1%d0%b5%d1%82%d0%b5%d0%b2% setevizatsiya mira [networking the world]. retrieved from: https://www.deutschland.de/ru/topic/ekonomika/ innovacii-tehnologii/setevizaciya smolyanyuk, o. v. (2013). marketynhova skladova sotsialnykh merezh: svit ta ukrayina [marketing component of social networks: the world and ukraine]. ekonomika ta derzhava, no 8, pp. 112-117. the econimist intelligence unit. retrieved from: http://country.eiu.com/ukraine yaroshenko, a. (2017). digital marketing management of activia: a long-distance race. retrieved from: http://www.slideshare.net/goldenalf/digital-marketing-management-of-activia-a-long yerofeyev, s. (2016). targetirovannaya reklama: rabota nad oshibkami [targeted advertising: work on mistakes]. retrieved from: http://blogssmartzone.com/94185-.html zakon mura [moore's law] retrieved from: https://uk.wikipedia.org/wiki/%d0%97%d0%b0%d0%ba%d0% be%d0%bd_% baltic journal of economic studies 349 vol. 4, no. 3, 2018 corresponding author: 1 chernihiv national university of technology. e-mail: shkarlet@ukr.net 2 department of finance, banking and insurance, chernihiv national university of technology. e-mail: maksim-32@ukr.net 3 department of economics and business finance, kyiv national university of trade and economics. e-mail: e_zhuk@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-349-357 determinants of the financial services market functioning in the era of the informational economy development serhiy shkarlet1, maksym dubyna2 chernihiv national university of technology, ukraine olena zhuk3 kyiv national university of trade and economics, ukraine abstract. the financial services market is an integral part of the national economy of any country. this causes the existence of the objectively available interconnection between the said systems. that is why, by the transformation of the outlined market, some changes in the functioning of the national economy and vice versa take place. the outlined processes become the most comprehensible in the process of studying of issues of the financial services market development in the environment of the active introduction of the information technology by financial companies in their work, that is, generally in the era of the information economy development. that is why, in view of the above, within the work, the purpose of the study was defined as follows: the identification and substantiation of the determinants of the financial services market transformation within the information economy. to achieve this goal, the following tasks were set and solved: to define the essence of the information technology market; to identify the nature of the information economy; to substantiate the advantages of information technologies introducing in the field of the financial services for their consumers and producers; to find out the main transformational processes in the financial services market functioning, which occur as a result of the active introduction of new information technologies in the field of financial services provision. method. the classic methods of scientific research are used in the article, among which are the following: observation, abstraction, comparison, systematic approach, analysis, and synthesis. results. the peculiarities of the financial services market development in ukraine are investigated; the characteristic features of the influence of the information technologies introduction in the sphere of providing the financial services on their consumers and producers activity are analysed. the main determinants of the financial services market functioning during the era of the information economy development were also identified, which include the following: the introduction of the online platforms for the customers servicing, improving the quality of the banking settlement and cash services, change in the process of granting loans to the economic actors. the reasons for such changes and their peculiarities are substantiated. practical implications. the obtained results form the theoretical basis for the knowledge of the financial services market transformations in the process of the active development of information technologies and allow determining the basic trends of such changes. also, the results of the study provide an opportunity to identify further trends in the changing financial services market, models of the financial intermediaries’ functioning, and use this knowledge by planning and forecasting the financial intermediaries’ activities. value/originality. the conducted research is relevant, taking into consideration the total impact of the information technology on the development of all spheres of the society, takes into account the peculiarities of the financial services market development under the pressure of such technologies. this research was carried out within the framework of the scientific work implementation of the department of finance, banking, and insurance of chernihiv national university of technology (no. 0115u001149) on the topic: “financial stability of the economic systems in the crisis conditions of management”. key words: financial service, financial institution, fintech company, phishing, information technologies. jel classification: g2, g23, o32 baltic journal of economic studies 350 vol. 4, no. 3, 2018 1. introductions in the modern world, the information technologies penetrate all spheres of the society and determine the further development of many of them. the outlined technologies become the drivers of colossal changes within different social systems and transform their functioning, adapting it to the new requirements of our reality. the use of the information technology is an objective condition for further progress of a society, states, regions, individual enterprises, and every person. information becomes not only the most important resource of progress but also an objective condition for its implementation. the information technologies that have already filled up all spheres of human life are actively used in the functioning of economic systems of various types. in the dualistic unity of the economy and information technology, the information economy has emerged and is actively developing. for the economic structures, the outlined technologies have huge potential for their further development, increasing the efficiency of functioning and increasing the competitiveness of many markets for goods, services, and capital. the financial services market is an objectively existing and integral part of the financial market functioning of the country and the national economy. in its essence, the outlined market is an open and complex system, which actively interacts with the external environment. this necessitates the transformation of such a market under the pressure of various factors of external influence, including the information technology. given the fact that within the financial services market, there is a movement of the financial resources between individual entities since, within such a process, some of them transfer funds to the disposal of others, then the information technologies provide enormous opportunities for increasing the efficiency of the outlined process, increasing the level of trust between the producers and the consumers of the financial services, and accelerating the development of such a market. the current financial services market in ukraine is developing at a fast pace, experiencing periodic crises of a different nature. however, the financial institutions are some of the first economic entities trying to implement the information technology in their activities, as it increases both their competitiveness and the quality of the service provision to their clients. such a process is ongoing and every year the level of transformation of the financial services market under the influence of the information technology is only increasing. the above outlines the necessity of studying the peculiarities of the information technologies influence on the financial services market, identifying the main determinants of this market transformation within the information economy. issues of the information economy are being studied by many scholars today, among which the following should be highlighted first of all: antonenko b.g., bazhal yu., geyets v.m., graham t., grynkevych  s.s., gryshchenko  a.a., gruzina i.a., dziad o.v., krystynevych s.a., malyk i.p., nikolayev ye.b., popadynets o.v., sukharev o.s., tolstiakov r .r ., chumachenko m.ye., and others. the issue of the financial services market functioning is found in the scientific works of such scholars: asmadson а., bobrov ye.a., vaymanov о., vyshyvana  b.m., voytenko o.м., esh s.m., klessens s., kovalenko  yu.m., podzygun і., santimero а., tytova v.a., tretiakov  м.м., herring r ., yuriy s.i., yurchuk g.v., yashchuk v.v., and others. some aspects by the research of the information technology role in the development of the financial services market were studied in the works of the following researchers: alekseyev v.i., berko a.yu., opanasovych o.v., sergeyeva o.s., tlusta g., тrofymchuk m.i., and others. however, given the considerable scientific progress, which has already been formed within the scientific works of these scientists, it should be noted that the works devoted to the system substantiation of peculiarities of the financial services market transformation under the influence of the information technologies are not enough, taking into consideration the potential of such technologies for changes in all spheres of modern society. this substantiates the choice of the topic of the article and its relevance. 2. functioning of the financial services market in space of the information economy development to realize a thorough and substantiate research of the impact of the information technology on the financial services market transformation, from the very beginning, it is necessary to identify the essence of the main economic categories: the financial services market and the information economy. within the article, the information economy will be considered as a type of economic system, in which information plays a key role in the development of the main spheres and industries of the national production, is an integral part of the implementation of production, distribution, exchange, and consumption processes, the further functioning of such a system is directly related to the creation and implementation of new information technologies in the activities of the economic actors. the financial services market will be understood as a set of economic relations, arising in the process of realization of the non-material form of the interaction results, which is inherent in the consumer value, between the entities in the process of satisfaction by some participants (producers) of the needs of others (consumers) on a mutually beneficial basis, the coordination of their interests at their baltic journal of economic studies 351 vol. 4, no. 3, 2018 own expense, account of clients or at the expense of the attracted financial resources of other entities in accordance with the current legislation in order to profit, saving the value of assets or achieving a social effect from the implementation of such interaction (shkarlet, 2017). it should be noted that the financial services market functioning is always connected with the need to process large volumes of information about clients, separate segments of the financial market, to analyse trends of the enterprises’ operation in the real sector of the economy, the state of which always affects the level of the activity of the specified market. the introduction of the information technology has simplified the process of collecting such information and working with it, which allowed the financial institutions to take into consideration new opportunities to create additional financial products and offer them to their customers. it is in this aspect that the information technology contributes to the financial services market development, which is transformed under their influence. the functioning of the financial services market in an era of the active development of the information economy is a dynamic process and partly chaotic. that is why it is difficult to analyse the development of such a market in the era of active implementation of the information technology. this is especially evident during the research of the interaction of such a market and the information economy system with the aim of formulating and substantiating the theoretical, methodological, and methodical provisions of this interdependent connection. the complexity of the analysis of the dual influence between the financial services market and the information economy is that this market is a part of the national economy and the basis of its major transformations affects the change in the economic actors’ activity. in turn, the information and innovation products, which are developed within the limits of separate enterprises, specially established fintech companies, which are not part of the financial services market themselves, are, however, part of the information economy, have an impact on the development of such a market. the availability of such an epistemological problem creates the necessity of introducing in the course of conducting similar studies a set of assumptions that can justify the author’s approach to the consideration of the topic of the article. in this research, the main emphasis will be placed on identifying the trends by the financial services market functioning within the system of the information economy. the process of influencing the market itself on the development of this type of economy will be considered fragmentary. thus, more attention will be focused on the knowledge of the peculiarities of the transformation of financial intermediaries’ activities in ukraine, in the context of the active introduction of new technologies for the provision of the financial services. accordingly, the financial services market will be investigated as a single system for which the impact of such information innovations is exogenous. accordingly, the financial services market will be investigated as a single system, for which the impact of such information innovations is exogenous. consequently, considering the outlined market as a structured system, it is difficult to identify and substantiate the essence of all possible variants of the information technology impact on the development of individual components of such a market and on it in general. this is due to the complexity of such a market, in which many financial companies and their clients operate. for example, in the first place, the financial services market is changing due to the transformation of the work of the financial intermediaries themselves. firstly, the information technologies are introduced into the work of such institutions, which facilitates the managerial functions automation, enhances the management quality and contributes to the growth of the financial institutions efficiency. secondly, such a market is also transformed through the demand formation by the non-financial companies (fintech institutions), which are directly involved in the development of new information products for different institutions. batkhin yu. observes fintech, which appeared as an alternative to classical financial institutions, has already become a phenomenon that transforms the payment market. global research shows: 82% representatives of the world financial market are expected to be more likely to engage fintech startups in the next three to five years. according to mastercard studies, more than 87% of the representatives of the ukrainian banking market fully support the introduction of the innovations, and more than half of the respondents are ready to implement financial-decision-making (bathin, 2018). according to accenture, the fintech startups in the whole world in 2017 were able to attract $27.4 billion with financing by 18% more than in 2016. 3. features of information technologies’ influence on the activity of the main subjects in the financial services market information technologies have an opportunity to exercise their influence not only on the financial intermediaries’ activity but also on all participants in the financial services market. at the same time, such an impact can be both positive and negative. its basic advantages include the following: for consumers of the financial services: – a simple and convenient way to make payments through an online platform; – saving time due to the lack of need to visit structural subdivisions of the financial institutions; baltic journal of economic studies 352 vol. 4, no. 3, 2018 – no need to communicate with the bank employees, which simplifies the process of obtaining the financial services by the clients and reducing the level of the conflict situations; – the convenience of payment implementation throughout the day; – increasing the level of their own financial resources management through the use of their own cabinets of clients on the sites, for example, the banking institutions, which displays all information about cash flow (privat 24, raiffeisen online etc.); – reducing the cost of obtaining information about their own accounts, the speed of its receipt; – the ability to make fast payments and transfer funds from one account to another; – obtaining an opportunity to use certain types of banking services free of charge; for the producers of financial services: – attracting new customers by creating and providing more competitive financial services; – expansion of the list of the financial services that can be provided to clients; – increasing the channels of the financial products sale for customers (using sms, e-mail, personal cabinets, etc.); – reducing the operating costs of the financial institutions through the transfer of the customer service to online mode, which does not require a wide network of branches and affiliates; – application of mechanisms for processing large amounts of data allows you to create individual financial products and maximally satisfy the needs of consumers in the relevant services; –introduction of technologies for processing large amounts of the management information, which make it timely, simplify the way of obtaining such data between different structural units of the financial institutions, which improves the quality of management; – the ability, through the data processing, to generate statistical, analytical reports, which will be created in an automatic mode and meet the needs of the financial institution’s management and the external consumers of such information; – increase the speed of managing the managerial information online through the introduction of unified systems for the automatic control of financial institutions with the hierarchical systems of access to various types of data; – reducing the number of errors in the process of the data processing and creating the necessary reports, which increases the quality of the information and affects the efficiency of the financial institutions’ management; – mechanisms’ introduction for the business processes automation, which makes it possible to simplify operations of a financial institution, to increase the efficiency of its work by reducing the number of employees and the probability of errors; – enhancement of cooperation between different financial units of structural units through the improvement of processes of circulation and exchange of information between them, etc. consequently, the impact of the information technology on the financial services market development is indeed positive in most cases and comprises an enormous potential for its further transformation and the introduction of new innovative products. however, the experience also shows that the interaction in the system “technologymarket” is not always unambiguous from the standpoint of assessing only the impact of the relevant technologies on the change of a particular economic object, sometimes changes occur within the object itself and require the use of the information technology and then the relationship is transformed into the following form: “market-technology”. the outlined only emphasizes the complex correlation of information technologies and the general information economy and the financial services market. let us consider it more thoroughly. in fig. 1, the model of the interaction between the financial services market and the information economy is constructed (dubyna, 2017). 4. determinants of the transformation of the financial services market within the framework of the information economy let’s consider the decisive determinants of the financial services market transformation within the information economy, which had a powerful influence on the change in this sphere of the customer service. according to our belief, the following can be attributed to them. 1. implementation of online platforms for providing the financial services to consumers, which completely transform the process of providing the specified services. the information technologies, as already mentioned, permeate the entire sphere of the financial services. implementation of modern technologies in the process of their provision is one of the conditions for increasing the competitiveness of financial institutions in the competitive market for financial services. within this market, there is a struggle for reliable clients between the financial intermediaries and simplifying the settlement process, getting loans is an asset and encouraging new clients to come to these institutions. the fact of the online platform “privat bank”, “privat 24” implementation can serve as a sample. the availability of its own system of the internet customer service allowed the bank to obtain an additional channel for the services provision, a source of income generation for the bank, and the possibility of attracting new customers, who are interested in simplifying the procedures of the settlement and cash services. the introduction by the bank of special conditions for using such a platform allowed not only to increase the number of the clients, but also to increase the number of the issued credit and deposit baltic journal of economic studies 353 vol. 4, no. 3, 2018 cards, to increase the volume of the settlement and cash operations and to partially unload the cash offices in separate branches of the bank. online servicing is primarily associated with the ability to carry out the settlement transactions over the internet. in this case, financial institutions, in most cases – commercial banks, have developed actively in recent years the models of the internet banking, where the creation of the online systems is on the most important place. that is why, it is difficult not to argue with yuriy g. that in the information age, the financial institutions are obliged to provide the clients with the service and the ability to manage their finances in a 24/7 mode. this is not about the basic needs like money transfer or utility payment but also the ability to open a deposit, issue or repay a loan (yuriy, 2016). during the last two years, all system banks in ukraine have created the online platform for providing the financial services market the information economy endogenous potential for the information technologies introduction exogenous potential for the information technologies introduction the potential of the financial services market development in the field of the information economy functioning i s f o r m e d i s f o r m e d in the financial institutions there is a demand for new innovative technologies in this area, which contributes to the development of the it services in the country as a whole. the financial institutions through the financial services market contribute to the financial and economic development of various economic actors increasing the speed of obtaining the financial information improves the financial activity of the economic entities the financial institutions, by introducing modern information technologies into their activities, increase their competitiveness, which positively affects the competitiveness of the country as a whole the development of the internet commerce requires an increase in the innovation level in the financial services field for the relevant calculations implementation the increase of the level of the innovative re-equipment of the business entities of different types requires the new technologies introduction in the field of the financial services provision the growth of the national economic systems openness contributes to an increase in the rate of the capital flow between the states, which requires the development and implementation of the appropriate technologies in the financial services provision the competition growth between the financial institutions requires the continuous introduction of the information technology to maintain their competitiveness the transformation of the state regulation system of the financial institutions activities requires the implementation of the necessary information technologies for processing the data and producing the reports the growth of the economic information volume requires the introduction of the appropriate technologies for its processing figure 1. the interaction between the financial services market and the information economy source: compiled by the authors baltic journal of economic studies 354 vol. 4, no. 3, 2018 the financial services to clients. this situation was objectively dictated by the time and the intensification of processes of the information technology penetration into the field of the financial services. in addition, the introduction of the abovementioned systems promotes transparency of the customer service by the banks, which is ensured by the constant ability of consumers to check their own resources, the volume of debt on the credit products, and the amounts of the accrued interest. 2. transformation of the system of the banking settlement and the cash servicing of customers, which completely changes the process of paying by the customers for goods, works, and services. such technologies have an impact on a wide range of consumers, who today have certain types of bankcards. the number of such clients is already large and constantly growing. the essence of the transformation is to simplify the process of paying the bills by consumers. by doing such an operation, they do not need to dial a pin code to confirm payment within a certain amount. the system itself only implements the identity of the client card. according to the ukrainian processing centre, the number of payments by the contactless cards increased 3 times in 2017 and occupies 19% of all purchases by cards at pos-terminals. the dynamic growth of these indicators, in turn, contributed to a 23% increase in the number of pos-terminals that can accept the contactless cards. currently, 96% of all pos-terminals, connected to the ukrainian processing centre and located in trading network, accept for payment the contactless cards. further transformation of settlement services will, in the opinion of the scientists, lead to the rapid introduction by financial institutions of mechanisms of the contactless customer service. other financial intermediaries will be joined to the banking institutions, for which it will be easier to communicate to customers the particulars of providing them with the specific financial services and attract new customers. gradually, the difference between a smartphone and a purse will disappear in favour of the first, which will allow the client to use a mobile phone to implement a wide range of financial services. another service is the international transfers. the smartphone can become not only a convenient payment tool but also a personal identifier. here we are talking not only about the calculations but also about the development of electronic administrative services: from the queues, people will gradually move on the internet (trofimchuk, 2012). the introduction of technologies for the contactless customer service is associated with the transition of producers not only to financial services but also to other goods and services, to the reduction of the number of corporate cards, which provide the customers with the discounts and transfer them to the electronic form and use the smartphone hereby. it further simplifies the customer service and will result in the disappearance of the need to store a significant number of plastic cards from various financial institutions. an important aspect of increasing the convenience by using the bankcards will be their digitization, which will allow transferring all bank cards online. in particular, alfabank (ukraine) became the first bank in the country, which thanks to the introduction of push provisioning technologies gave a unique opportunity to digitize their clients’ cards directly into mobile banking without the need to install the google pay application. now the ukrainians do not need to carry several bank cards with them: all of them can be “settled” in the smartphone (mironenko, 2018). another trend of the future in the field of the financial services will be the model of the customer identification by the biometric data, which is currently only being actively developed by the scientists for further implementation in this field. the application of such a mechanism will increase the level of security in providing the financial services and minimize the number of the abuses. according to the researchers’ predictions, 29% of the smartphone owners will use fingerprint authentication in 2018. by 2023, their number will grow to more than ¾ of the smartphones’ owners. 43% of smartphones will have a fingerprint reader in 2018. by 2023, the devices with biometric sensors will be twice as high. already more fantastic, far to realization, however, perspective are processes of the use of chips in a person with the coding of all necessary information for simplifying the implementation of the everyday operations. in the field of the settlement services, the customers actively use mobile phones, which greatly simplifies the process and increases its speed and flexibility. in particular, we’d like to note that according to the research future market insights, in the world, the number of mobile payments by the results of 2016 will increase by 42% – to almost 27 million transactions. at the same time, the volume of mobile payments, according to experts, for 2016 amounted to about 768 billion dollars, against 549 billion dollars in 2015. it is forecasted that by 2020 the volume of the mobile transactions will increase on average by 39.1%, to 2.89 trillion dollars. the leading players in the global mobile payment market are paypal, visa, mastercard, google wallet, apple pay, and alipay. 3. transforming the process of providing the credit products by various financial intermediaries, which changes the traditional mechanisms of lending to economic entities. the credit operations have always played a key role in the development of financial intermediaries, especially those who directly lend loans to individuals and legal entities. today, the outlined sphere, taking into consideration a significant historical process of baltic journal of economic studies 355 vol. 4, no. 3, 2018 its formation, transformation, and development, has become considerably more complicated by its essence: new types of loans appeared, mechanisms of their provision have changed, new financial instruments have gradually emerged, which allowed to raise funds for credit institutions and provide them for use by other entities, etc. however, the process of granting loans is also undergoing significant changes, which allows asserting the transition of lending operations to a new stage in their development. the information technologies do not only change the mechanism of granting the loans, but affect the speed of decision-making on lending (in many cases, for example, consumer loans are issued by banks on the basis of the established algorithms that check the customer’s data and give out the result at once), an opportunity to check the credit history of the clients. such mechanisms are already beginning to be used in the process of providing services to business entities and the sale of other, first of all, consulting and operational ones. the introduction of new information technologies in the process of providing the financial services leads to a significant transformation of such a process and, in general, the business model of the financial institutions’ operation. in the future, the professions of cashiers, operators, consultants will gradually disappear. let’s consider that “credit analysts, even at the current level of technology development, can replace artificial intelligence by 90%. consequently, risks of the human factor that arise when dealing with clients disappear and seriously affect the reputational capital of financial institutions” (mironenko, 2018). in the work of the credit institutions, special programs for calculating the cost of loans are used, calculating the entire schedule of the loans’ repayment, calculating the fines and overdue payments. all this is done in automatic mode and can greatly simplify the process of issuing a loan. quite often, the software of the financial institutions is unified with databases of the credit history bureau, which minimizes lending to fraudsters (dubyna, 2017). there are also obstacles to switching completely to the online loan mode for clients of financial institutions in ukraine. in particular, in accordance with the current legislation, future borrowers must place their own signature in a loan agreement, which certifies the beginning of its operation. in order to solve this problem, the banks offer their clients to get a contract through the courier services. however, in general, such a mechanism is difficult to be implemented and it is not very convenient. one of the trends of the credit market and total credit operations is operations such as person-toperson type, which actively began to develop over the past years. the essence of these operations is to combine a person who has temporarily free financial resources and is ready to provide them with a loan, and a client who needs such resources. in most cases, such a lending institution has a position of a serving company, which combines the interests of its clients through their personal interaction. this service was widely provided by privatbank. according to sophie guibaud, vice president for european affairs, fidor bank, earlier, the seos of the banks rarely promoted the implementation of innovations, preferring to focus on the needs of shareholders than on the needs of customers. however, in 2016 everything changed: a quarter of the financial institutions in the world were acquired by fintech companies, and 60% consider the possibility of cooperation with them (grinkov, 2016). the credit market in ukraine will experience a significant influence of the innovative technologies, which will increase the efficiency of its functioning and minimize the risks of both the borrowers and the creditors. the number of credit institutions in the country is constantly increasing; loan offers are also growing. however, the cost, for example, of loans, provided by credit companies is very high and unattractive to consumers. this situation requires from financial institutions to find new mechanisms for providing credit services, their transformation, and development of new types of products. the unstable economic situation in the country, the undeveloped financial market, the persistent financial and economic crises, which are experienced by the country, and a significant devaluation of the national currency complicate the process of lending to all economic actors in the state. it should be noted that besides the banking institutions in ukraine, actively following the financial and economic crisis of 2008–2009, various types of credit companies began to develop. this situation was caused by a sharp rise in the financial resources deficit for the customers, which eventually contributed to the increase in the demand for the corresponding loan products. according to the research of ukrainian e-commerce expert, under the results of 2016 in the market of online lending, 13 companies providing microcredit services to the population are represented exclusively through the internet. in particular, such companies should include the following: bystrozayem, cash point, ccloan”, credit365, crediton, creditup, eurogroshi, ikapusta, klt credit, moneyboom, moneyveo, mycredit, and ultracash. out of them, considerable activeness in the market is demonstrated by moneyveo, credit365, and moneyboom (gusev, 2017). the foregoing gives grounds for asserting, that the financial services market will be significantly affected by the introduction of new information technologies in the field of interaction between the producers and the consumers of such services. such a process is inevitable and will only deepen in the future. however, baltic journal of economic studies 356 vol. 4, no. 3, 2018 despite all the benefits of the information technology to change the reality of the existing systems, they also carry threats to their functioning. such main threats include the following: – a significant complication of the process of the financial services providing by various institutions, which requires the introduction of new technologies, regulation of the employees’ actions of such institutions, development of new mechanisms for their provision; – the need to attract highly-skilled workers to organize the work in the field of combating the cybercrime and to build real-functioning systems to counter the thirdparty intervention in the work of financial institutions; the amount of the cyber-shot money withdrawn from the electronic payment cards of the ukrainians in 2016 increased to 339.13 million uah. often cyberattacks use such kind of fraud as “phishing” – calls to the bank customers in order to tame requisites of payment cards, necessary for conducting transactions without using a card. according to the ema research, in 2016, the cyberattacks received from the illegal operations of “phishing” 5 times more than in 2015 – 275.45 million uah. in addition, the loss of bankcards’ users from the fraudulent transactions on the internet in 2016 doubled – to 63.68 million uah. the number of phishing sites, which lurk card details from payment cardholders, in 2016 became a record number – 174 fraudulent web resources were detected and closed. compared to 2015, the scale of phishers’ actions increased more than 4.5 times (174 sites in 2016 and 38 sites in 2015). on the contrary, in 2017, the number of phishing sites began to decline – from 174 to 108. – in order to maintain their own competitiveness, financial institutions are obliged to create countermeasures against the fraudulent behaviour within the financial services market, which causes an objective necessity for implementing the corresponding mechanisms and technologies by such institutions and is accompanied by additional expenses; – the need to acquire licensed software products results in an increase in the cost of implementing the online financial service delivery systems; – the lack of full transition to the electronic document management, which is stipulated by provisions of the current legislation of ukraine, and complicates the process of interaction with various state authorities and requires the spending of additional resources of employees of financial intermediaries; – significant costs for providing the effective information security systems within individual financial institutions in order to prevent unauthorized penetration and their disclosure and use by other persons. there are also other barriers to the active introduction of the information technology within the financial services market, which impede the penetration of such technologies into a particular sphere. however, the development of the information economy in the state is an inevitable process of further development of the society and will occur objectively, regardless of desires of individuals, politicians, etc. that is why the financial services market will continue to undergo strong transformations under the pressure of modern and new information and innovation products. 5. findings the article identifies determinants of the transformation of the financial services market within the information economy. a detailed analysis of advantages and disadvantages of the information technology introduction from the point of view of both producers and consumers of financial services is performed. the defining determinants that characterize the most noticeable changes in the financial services market under the pressure of new information technologies were the processes, which are actively developing today within such a market and, above all, related to the implementation of online customer service platforms, improving the quality of the banking settlement and cash services, change in the process of granting loans to the economic actors. the mentioned directions of the transformation of the financial services market are considered in detail. also, the features of their occurrence in modern conditions of such market functioning are described. 6. conclusions the extremely important role of the information technology in the development of the financial services field is also emphasized within the article. namely, these technologies transform all stages of providing these services to their customers. they also change the working system of financial service providers and require them to introduce new financial products. further research in this area will only deepen the understanding of modern processes of changing the interaction system between the financial intermediaries and their clients. in particular, it is interesting to use the process approach to the very mechanism of providing the financial services, which will allow identifying and classifying already existing information technologies, used by financial institutions at certain stages of the development and implementation of such services. as well, from the scientists’ point of view, issues of data systematization concerning the possibilities of information products’ use in separate segments of the financial services market (credit, deposit, insurance, investment) and substantiating the essence and peculiarities of such technologies’ use remain worthy further research. baltic journal of economic studies 357 vol. 4, no. 3, 2018 references: 339 mln uah (2017). biznes – business, 4-5, 6. retrieved from: https://www.business.ua/primarily/portret_ nedeli_23_29_yanvarya-360893 batkhin yu. 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(in english) baltic journal of economic studies 209 vol. 4, no. 2, 2018 corresponding author: 1 state research institute of the ministry of internal affairs of ukraine. е-mail: rvo2000@ukr.net 2 department of security management, law enforcement and anti-corruption activities, educational and scientific institute of law, interregional academy of personnel management. е-mail: kozak@gmail.com 3 department of security management, law enforcement and anti-corruption activities, educational and scientific institute of law, interregional academy of personnel management. е-mail: iov2018@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-209-213 prerequisites for the introduction of modern forms of self-employment of the population and their impact on the country’s economy valeria riadinska1 state research institute of the ministry of internal affairs of ukraine, ukraine oleksandr kozachenko2, oleh ihnatiuk3 educational and scientific institute of law, interregional academy of personnel management, ukraine abstract. the article is devoted to the relevant issue of introduction of new forms of self-employment and labour in the national economy. the basic indicators of employment of the population are analysed. they testify that recently the number of employed people has decreased, and the number of people who have organized their activities has increased. researches showed that during 2017, industry differences in nominal and real wages also deepened. the highest average monthly nominal wage in ukraine remained in financial-insurance and information and telecommunication activities, and the smallest – in land transport, construction, industry, education, and healthcare. it is substantiated that such disagreements create serious socio-economic problems at the local and regional level. these problems have become the prerequisite for the study of new forms of employment and labour, such as outsourcing, outstaffing, freelance, e-lance, coworking. the described models of the business organization use the work of specialists for a certain period of time or volume of work. in this context, the significance of outsourcing as an instrument of enterprises’ access to the necessary resources, an increase of their competitiveness, and reduction of transaction costs is researched, as well as opportunities for development and strengthening of staffing through outstaffing. the advantages of these new forms are: reduced tax base; maintaining the status of a small business; avoiding labour risks and additional grounds for inspections; simplification of accounting. a special attention in the article is devoted to models of self-employment or labour activity of professionals for job search and earnings. such professions as freelancer and e-lancer, as shown by the research, provide the opportunity to work remotely and carry out all activities through the internet. professional areas of e-lancers are as follows: design and graphics, website development and support, writing of advertising and informational texts, programming, advertising, marketing, photography, audio and video, consulting, engineering, and other business services. one of the first explored common platforms (freelance platforms) was hackerspaces, that is, places where gathered people with common interests, and there were such platforms at the expense of membership fees. a comparison of a hackerspace with coworking has shown both common and distinctive features. the main difference is that when building coworking platforms, most often there is cooperation with private business as the organizer of this platform. there is also a certain public sector involvement, but unlike more developed european countries, this sector in ukraine is too small. coworking, first of all, provides assistance in the form of premises and technical support, in order to increase its efficiency and economic activity. the article proposes a methodology for calculating self-employed population in ukraine that will allow representatives of free trades to be attracted to official business activities. key words: outsourcing, outstaffing, freelance, e-lance, coworking, labour market, self-employment, information development. jel classification: j01, e24, f66 baltic journal of economic studies 210 vol. 4, no. 2, 2018 1. factors influencing the formation of new forms of employment and labour the state of labour and employment of the country’s population depend on socio-economic factors that directly affect the development of the national economy. the modern labour market is shaped under the influence of factors such as the general unsatisfactory economic situation, the development of innovation and the innovative integration of technologies, changes in the needs of employers and workers, the state of general uncertainty. in these conditions, an exit for those who are left without work, and for entrepreneurs, there is a search for more flexible models of working process construction. it is at the expense of new, effective forms of employment and labour that it is possible to reduce costs and increase profits. therefore, the main task of research it to analyse modern forms of labour organization and possibility of their development in ukraine. also appropriate is to develop a methodology for calculating the selfemployed population. 2. theoretical research of labour market and employment of population the rapid development of information technology in all economic spheres contributed to the emergence of new forms of employment and labour, such as outsourcing, outstaffing, freelance, e-lance, coworking. scientific research of the basic principles of the formation of the labour market and employment of the population as a whole and the development of the socio-labour sphere are highlighted in the works of such scholars as: bondarevska (2017), maslii (2017). despite the prevalence and popularity of such form of employment as outsourcing considered in suprun (2017), neuberg (2012), there are prerequisites that restrict its use, in connection with which it is necessary to identif y these problems and propose solutions to them. important contributions to the research and the disclosure of topical issues of outstaffing have been made and are being dealt with today by scientists such as в. de koven, b. (2013), hagen (2002) and others. freelance issues began to be investigated not so long ago. among foreign researchers, this issue was considered by craven (2007), esposto & annakis (2016), chatterjee, a., varshney, l. r ., & vishwanath, s. (2017) and others. in the course of studies of freelance, in the context of the development of information technology, a concept of “electronic freelance” (e-lance) is introduced. today there is no absolute academic definition of the term “coworking”. uda (2013) interpreted “coworking” as a joint work of equal people. he tried to consider this model from the theoretical side. more broadly, this concept is discussed in the work by cabral, v., & van winden, w. (2016), who not only formulated the definition of coworking but also outline the purpose and objectives of this model. the analysis of publications allows asserting that, in spite of a certain amount of theoretical research, the issues of introducing new forms of labour and employment in accordance with the legislation, defining their advantages and disadvantages for economic development, analysis of indices of those persons interested in self-employment are still insufficiently disclosed and require additional development. 3. labour market analysis from the standpoint of informal and formal employment issues of employment of the population and labour market development in general regularly attract the attention of domestic and foreign scientists. since issues of employment, wages, tax burden, and other problems of economic development concern not only economic but also socio-political interests (craven, 2007). as to the functioning of the domestic labour market, it depends not only on the state of the ukrainian economy but also on the demand and supply of labour in other countries. in order to determine the feasibility of applying nonstandard forms of employment, we will use the results of the analysis of the able-bodied population. during 2017, the number of employed people decreased by 125.3 thousand people or by 0.9%, while the number of persons who organized their activities increased by 6.9 thousand people or 0.3%. in 2017, the number of the informally employed population decreased by 299.1 thousand people in comparison with the previous year and amounted to 3.7 million persons or 22.7% of the total number of the employed population (state statistics service of ukraine). usually, informal employment is inherent in the population of certain socio-economic groups. according to the methodological provisions on determining the informal employment of the population, approved by order of the state statistics service dated 23.01.2013 № 16, the informally employed population includes: employed in enterprises of the informal sector (unregistered, self-employed, employers and their hired workers, free-working family members); freeliving family members at formal sector enterprises; hired employees working in informal workplaces of the formal sector (suprun & yelisieieva). thus, informal labour relations predominated in the self-employed sector, where the share of the population working in informal workplaces amounted to 74.3%, while among those employed by such persons was 13.1% (state employment service of ukraine). in the structure of the employed population, there were changes in the status of employment among the formally and informally employed population (fig. 1). baltic journal of economic studies 211 vol. 4, no. 2, 2018 the most widespread distribution of informal employment was among young people aged 15–24 and persons aged 60–70 years. if we analyse the professional areas, in which searchers were more active in 2007–2017, then the situation is different. so, ten years ago, people were more often looking for work in the retail sector  – 15%. at the same time, today the sphere of sales has to divide the championship with the it and telecommunications sector – by 11%, respectively. 4. impact of wages on employment of the population according to statistical data (state employment service of ukraine), the scale of self-employment at the moment is very difficult to assess, since there is no mechanism at all. the number of such workers is constantly increasing, as also evidenced by the demand for services rather than for industry. this is primarily due to the payment for labour. as a result, in 2017 even sectoral differences in nominal and real wages deepened. as before, the leaders in terms of the average monthly nominal wage in ukraine remained financialinsurance and information and telecommunication activities. moreover, real wages (calculated by dividing nominal wages by the consumer price index) in these areas of the ukrainian economy grew faster than in land transport, construction, industry, education, and even more so in healthcare. moreover, by subsectors and individual enterprises, the payment for labour may differentiate, which, in turn, negatively affects the personnel provision of enterprises and their work. under certain circumstances, it even creates rather serious socio-economic problems, at least at the local and regional level (esposto & annakis, 2016). 5. characteristics of modern forms of employment and labour. the legal and regulatory framework in ukraine the standard of world practice is non-standard forms of employment and labour in the form of “outsourcing”, “outstaffing”, “freelance”, “e-lance”, and “coworking” (de koven, b., hagen t., cabral, v., & van winden). their characteristics are given in table 1. fig. 1. formal and informal employment of the ukrainian population for the first half of 2016–2017 (in % to the corresponding status in employment and type of workplace) state employment service of ukraine 84,9 25,3 86,9 25,7 15,1 74,7 13,1 74,3 0% 20% 40% 60% 80% 100% employed self-employed employed self-employed і half of 2016 і half of 2017 formally employed population informally employed population table 1 characteristics of modern forms of employment and labour models of business organization using the work of specialists for a certain period of time or the amount of work models of self-employment, labour activity of professionals for job search and earnings outsourcing transfer by the organization of certain business processes or production functions to service another company that specializes in this field for a period of at least 1 year freelance the work of a high qualification professional who does not work in the state of the company and has no labour relations, and independently sells his/her services in the market to different clients; work at home outstaffing staffing by state, attraction by a company of an external specialist who has the relevant knowledge, professional age, and experience for the duration of the project e-lance workers carrying out their activities remotely, using informational network technologies, such as workers of computer specialties, journalists, translators, etc. coworking this is the platform, on which freelancers work; an intermediary between the end customer of the product and the performers themselves. baltic journal of economic studies 212 vol. 4, no. 2, 2018 as research has shown in ukraine, these services are not so widespread so their legal regulation at the moment is still insufficient and imperfect. 5.1. outstaffing for example, with regard to the organization of outstaffing, the law does not clearly define even its term, however, it provides for such a type of activity as “activities of business entities employing employees for the further performance of their work in ukraine with another employer,” which is identical to the concept of outstaffing. also, it is possible to provide a definition – an economic or civil law agreement, according to which the person providing the service (resident or non-resident) sends to the disposal of another person (resident or non-resident) one or more individuals to perform the functions specified in this agreement. 5.2. outsourcing in turn, the definition of outsourcing is an agreement whereby the customer entrusts the contractor with certain tasks, in particular, the part of the production process or the full production process, the provision of recruitment services, and auxiliary functions. thus, outsourcing is the transfer by one company of certain business processes, functions, or specific tasks to another company (outsourcer) that specializes in the relevant field. apart from the fact that outsourcing/outstaffing frees internal resources, the customer also gets additional benefits in the form of: • reduction of the tax base due to the fact that it is not necessary to keep employees in the state and pay taxes; • you can “leave the status of a small business” when a lot of employees can “work” out of the state of a company; • avoiding labour risks with employees (occupational injuries, personnel records, vacation packages, etc.); • avoiding additional grounds for inspections; • simplification of the accounting process, etc. as noted above, the difference between the terms lies in the fact that when outsourcing works are performed or services are provided, a certain business process is carried out, and in the case of outstaffing  – one company provides employees to another for the execution of works, including for a certain period, that is, it provides for a transfer of specialists, not the end result. 5.3. freelance as for freelance in ukraine, it is practically not regulated. the concept of “self-employed person” envisaged by legislation frightens its criteria and strange approaches to taxation, so everyone who is not required to register this status is not looking for unnecessary problems for themselves. freelance is legalized only by registration of individual entrepreneurs. however, information and communication technologies open up new opportunities for freelancers, allowing them to work remotely, that is, to make all necessary business communications through the internet (to search for orders, negotiate, transfer final results, receive payment). in this connection, the standard concept of e-lance was introduced. professional areas of e-lancers are as follows: design and graphics, website development and support, writing of advertising and informational texts, programming, advertising, marketing, photography, audio and video, consulting, engineering, and other business services (chatterjee, varshney, & vishwanath, 2017). 5.4. coworking one of the first explored common platforms (freelance platforms) was hackerspaces, that is, places where gathered people with common interests, and there were such platforms at the expense of membership fees. if to compare hackerspace with coworking, both common and distinctive features can be found. the main difference is that when building coworking platforms, most often there is cooperation with private business as the organizer of this platform (cabral, & van winden, 2016). there is also a certain public sector involvement, but unlike more developed european countries, this sector in ukraine is too small. 6. methodology for calculating self-employed population foreign studies of self-employment are conducted quite actively, and there is also a record of such categories of employees (maslii, 2017). it is difficult to estimate the scale of self-employment in ukraine today, as there is no statistical information. thus, the number of self-employed population or people who are self-employed can be determined by the formula: чсп=чб–чоб where чсп – unemployed or self-employed population; чб – unemployed people who need employment (the jobless); чоб  – officially registered unemployed at the time of identification of persons who need employment. чб=тр–з–нен where тр – labour resources; з – employed population; нен– inactive population; тр=нп–ппп where, нп – able-bodied population of working age; ппп – working teenagers and pensioners; baltic journal of economic studies 213 vol. 4, no. 2, 2018 пн=чол(16-60)+ж(16-57)–і–ппв where, чол(16-60) – men aged 15-60; ж(16-57) – women aged 15-57; і – disabled persons of groups i and ii of working age; ппв – pensioners of working age з=зоф–зне оф+тм where зоф – employed in the formal economy; зне оф – employed in the informal economy; тм  – labour migrants. нен=с+нж+дн с – students; нж – unemployed women who care for children; дн – housewives, as well as non-working people. the calculations made by this method give not 100% accuracy, as statistical indicators in ukraine are not all displayed in a timely manner, the analysis of the working population and in general, the calculation of the existing population have not been carried out for a long period of time. it is also necessary to take into account in more detail the indicators of migration and some professional occupation, which has certain features (sailors). in spite of a number of shortcomings, the methodology will make it possible to distinguish a significant part of the self-employed population and develop mechanisms for their more effective involvement in formal business activities. 7. conclusions and proposals for further researches on forms of employment and labour of the population investigating various aspects related to the development of new forms of employment and labour can be reflected in socio-economic studies since the leading role belongs not to market but to the value causes of choosing this type of employment. outsourcing, outstaffing, freelance, e-lance, coworking are new categories that are extremely diverse in terms of characteristics compared to traditionally employed employees and correspond to the new labour market formed by information development. when introducing new, non-standard forms of employment, an enterprise obtains a number of advantages: optimizes staff costs; regulates the working time, taking into account the economic situation at the enterprise; reducing the cost of production; flexibility of personnel policy; improvement of financial and economic indicators. however, there are also a number of threats: imperfection of the legislative framework; lack of social protection of workers; lack of control over the workplace safety, the threat of leakage of confidential information (bondarevska, 2017). therefore, the modern national labour market needs to react to changes that are intensively implemented and developed by state authorities in the form of new forms of employment. references: bondarevska k.v., krysha v.v. (2017) non-traditional forms of employment of the population and their development [text]. young scientist, №11. maslii n. (2017) analysis of the structure of the population of ukraine in 2015-2016 and intensification of the internal and external migration. mechanisms of interaction between competitiveness and innovation in modern international economic relations: collective monograph / edited by m. bezpartochnyi, in 4 vol. / isma university. riga: landmark sia, vol. 2, p. 121-134. state employment service of ukraine: official website [electronic resource]. url: http://www.dcz.gov.ua state statistics service of ukraine: official website [electronic resource]. url: http://www.ukrstat.gov.ua/ suprun, n.a., & yelisieieva, l.v. (2017) development of innovative forms of entrepreneurship in ukraine in terms of globalization challenges of the xxi century. scientific bulletin of polissia, [s.l.], v. 1, n. 4(12), p. 212-215. brad neuberg (2012) the start of coworking (from the guy that started it). retrieved from: http://codinginparadise.org/ebooks/html/blog/start_of_coworking.html de koven, b. (2013) the coworking connection. deepfun with bernard de koven. retrieved from: http://www.deepfun.com/the-coworking-connectio hagen t. (2002) do temporary workers receive risk premiums? assessing the wage effects of fixed-term contracts in west germany by a matching estimator compared with parametric approaches. labour. vol. 16 (4). p. 667–705. craven, m. (2007) top tips for a successful freelance career. itnow, 49(6), 19–19. doi:10.1093/itnow/bwm051 esposto, a., & annakis, j. (2016) from standard jobs to “green jobs”: a strategy for developing markets. corporate ownership and control, 14(1). doi:10.22495/cocv14i1c1p5 chatterjee, a., varshney, l. r ., & vishwanath, s. (2017) work capacity of regulated freelance platforms: fundamental limits and decentralized schemes. ieee/acm transactions on networking, 25(6), 3641–3654. doi:10.1109/tnet.2017.2766280 uda, t. (2013) what is coworking? a theoretical study on the concept of coworking. ssrn electronic journal. doi:10.2139/ssrn.2937194 cabral, v., & van winden, w. (2016) coworking: an analysis of coworking strategies for interaction and innovation. international journal of knowledge-based development, 7(4), 357. doi:10.1504/ijkbd.2016.10001777 baltic journal of economic studies 194 vol. 4, no. 4, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 odessa national medical university, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-194-201 key development factors for the ukrainian economy olha kryshevych1, olena terzi2, olha starytska3 abstract. the aim of the article is to reveal the key factors of economic development of ukraine at the present stage. in order to achieve the goal, the following tasks are addressed: the main tendencies of ukrainian economic development are revealed; the main factors of influence are substantiated; the prospects of economic development of the state are considered. the subject of the study is the key development factors of the ukrainian economy. methodology. the analysis of legal regulations of ukraine and scientific literature enabled to examine the current economic situation, the status of ukraine and to determine strategic priorities and goals of economic development of ukraine; in addition, dialectical method, scientific abstraction method, methods of system analysis were used. the results of the study revealed the authors’ perspective on the strategy, ways, and mechanisms to overcome the systemic crisis and to guide the country to the dynamic growth. the solution of socio-economic problems is linked with the protection and strengthening of demographic potential, priorities of human development, tasks of consolidation of the ukrainian political nation and formation of an integral socio-humanistic space of ukraine. practical implications. the situation and important trends of economic, social, political, legal, and humanitarian development of ukraine under threats and risks related to crisis processes in the modern world are analysed. the macroeconomic changes, transformations of the real economy, energy, and ecology insecurities are reflected. the issues of achieving effective public administration, overcoming the political crisis, stabilizing the financial sector, developing power – business – civil society dialogue, and transforming the socio-humanistic sphere are considered. relevance/originality. the study revealed the state of affairs in the economic system of ukraine, as well as perspective tendencies of the ukrainian economy were further developed. key words: factors, economy, economic sector, european integration, strategy. jel classification: o52, o17, l1 1. introduction in 1991, ukraine gained only the attributes of a sovereign state. but it did not immediately succeed in filling them with real content. particularly dangerous was the incompleteness of the development of the national economy. the transition from the administrativedirective to the market economy, from the all-union economic complex to its own economic system could not be painless. this is confirmed by the experience of other countries (ekonomika ukrainy v umovakh nezalezhnosti: problemy ta perspektyvy). as a part of the national economy, there are constant structural, organizational, and other changes that are conditioned by the peculiarities of its economic system and are characterized by certain tendencies and laws of development, which determines the relevance of the chosen topic. the research of the theoretical and practical aspects of the current state of the ukrainian economy is carried out in the scientific works of such scholars as n. g. bazavluk, v. m. gheits, a. lazareva, a. mazaraki, t. melnyk, v. i. melnikova, a. p. melnikova, s. o. pavlenko, o. v. savich, i. v. savich, v. g. sevruk, t. v. sidlyaruk, j. s. stud, i. yu. tour, a. v. shkurupii, g. m. shvedova. to reveal the main factors of economic development of ukraine at the present stage. to achieve the goal, the following tasks were solved: the main tendencies of the ukrainian economy development were revealed; substantiated the main factors of influence; prospects of development of the economy of the country are considered. the development of the world economy in the period up to 2020 will be marked by the influence of a number of factors and megatrends, which will lead to significant changes in the general picture of the world economy and modification of the forms of its organization. taking into account the place of ukraine on the brink of western european and eastern european christian civilization, the formation of a new global architecture puts ukraine in austere geopolitical, geostrategic, and geo-economic challenges, the answers to which it should find in the period up to 2020. baltic journal of economic studies 195 vol. 4, no. 4, 2018 2. the main material the world economy has entered the final stage of the world stage of development, during which the european civilization dominated the world. the manifestation of this was the diminution of the role of the us and the west in general in the global economy and international trade and the dispersal of influence and the formation of a new international architecture – both political and financial and economic. this process raises the challenge to the specific interests associated with the privileges that have provided the individual countries with the existing global financial and economic architecture, so the emergence of a new international order cannot fail due to numerous confrontations (pro stratehiiu staloho rozvytku "ukraina – 2020"). the national economy of any state is a complex economic, social, organizational, scientific and technological system. it has a total economic potential, among which distinguish: natural resource, industrial, labour, scientific and technical. it should be noted that in the economy of ukraine in 2016, the slow economic growth trends began. the active increase in capital investment, which was due to unfavourable current trends in both external and domestic markets, while maintaining access to credit and extremely weak budget stimulants indicates healthy processes of adapting the business to macroeconomic risks, responding to competitive challenges, and may precede the stage of cyclical recovery. however, still so far: the ukrainian economy remains weakly diversified and, therefore, vulnerable to fluctuations in world market conditions, characterized by low levels of innovation and resource efficiency. the sources of export-raw material development, which are based on the intensive growth of metallurgical and raw-material exports in conditions of the low exchange rate of hryvnia, are in fact practically exhausted. ukraine can no longer maintain competitive positions in the global economy at the expense of cheap labour and savings in the development of education and health; one of the essential characteristics of the domestic economy is bifurcation: official wages and unofficial, management income and balance, the market value of real estate and balance, etc. (stud, 2018). taking into account the peculiarities of the modern period of national development, which are associated with the emergence of profound political contradictions, not only those measures, which are connected with the elimination of critical backlogs, become extremely important for ukraine. more than ever, valid and timely actions are taken on the processes of preserving the country’s competitive advantages, as well as the strengthening of control over the processes and phenomena that exist in the area of potential threats and are not yet critical (shkurupii, bazavluk, 2014). factors influencing the formation of the national economy of ukraine are divided into objective and subjective. to objective factors include: the collapse of the soviet union and the breakdown of traditional economic ties; significant raw materials and, first of all, energy dependence on other countries; deformed, irrational, inefficient structure of the national economy (a highly monopolized, militarized economy with a powerful industrial potential that is difficult to undergo structural restructuring); resource-consuming consumable production; significant dependence on foreign aid; severe consequences of the chernobyl accident; a large share of production in the shadow sector (melnykova, melnykova, sidliaruk, tur, shvedova, 2011). the following subjective factors influence the formation of the national economy of ukraine: the slow progress of market transformations; the unpreparedness of the government and the population to reform, difficult and painful process of adaptation to new economic conditions; the inconsistency of relations between legislative and executive authorities; abolition of the state from the performance of regulated functions, errors and miscalculations of the government; insufficient number of qualified specialists (lack of reform team); political instability; the growth of social tension, huge differentiation of incomes, impoverishment of a significant part of the population; the ukrainian mentality (socio-psychological peculiarities of the nation, which consist of conservatism, caution, excessive tolerance, hope for someone’s help) (melnykova, melnykova, sidliaruk, tur, shvedova, 2011). it should be noted that ukraine has developed a strategy for introducing european standards of life in ukraine and ukraine’s emergence of leading positions in the world. for this, the movement will be carried forward by such vectors:  the vector of development – ensuring sustainable development of the state, the implementation of structural reforms and, consequently, the improvement of living standards. ukraine should become a strong economy with advanced innovations. to do this, first of all, it is necessary to restore macroeconomic stability, to ensure sustainable growth of the economy in an environmentally friendly way, to create favourable conditions for economic activity and a transparent tax system;  the vector of security is the provision of state, business, and citizen security guarantees, protection baltic journal of economic studies 196 vol. 4, no. 4, 2018 of investments and private property. ukraine should become a state capable of protecting its borders and securing peace not only in its own territory but also in the european region. the defining basis for security should also be the provision of fair and impartial justice, urgent purges of power at all levels, and ensuring the implementation of effective anti-corruption mechanisms. at the end of the twentieth century, the world community recognized that corruption is a global problem for every country and that the problem needs to be addressed. the result was the adoption of a whole range of international legal acts (mandatory and recommended), prepared and adopted by the united nations, the organization for economic cooperation and development, the organization of american states, the council of europe, the european union, and the african union. international legal instruments differed in scope, but all aimed at one – to establish common standards for combating corruption by ensuring the implementation of anti-corruption laws at the national level (sevruk, 2014). contemporary organized crime poses a danger not only to the national interests of individual states but is also a direct threat to international security since it has acquired a transnational character. first of all, it concerns countries with an unstable sociopolitical and economic situation, which are at the stage of economic and political transformation, to which ukraine also belongs (pohoretskyi, 2007; pavlenko, 2017). the leaders of organized crime groups pay special attention to the search and establishment of corruption ties among law enforcement officials, regulatory activities in the field of economics, judges, heads of local authorities, and other officials whose competence includes the adoption of important for organized crime groups solutions. this contributes to the increase in the number of corrupt officials who hold a responsible position. it should also be taken into account that corruption is characterized by a high level of latency (dzhuzha, 2007; pavlenko, 2013). representatives of a criminal enterprise for the purpose of realizing their participation in such specific illegal activities as operations with illicit goods and services, monopolization of the market, use of corruption, intimidation against competitors and law enforcement agencies in order to reduce the amount of prosecution (hula, 2015; sevruk, 2017). a particular attention should be paid to the safety of life and health of a person, which is impossible without effective medicine, the protection of socially vulnerable groups of population, the safe state of the environment and access to quality drinking water, safe food, and manufactured goods;  the responsibility vector is to ensure that every citizen, regardless of race, colour, political, religious or other beliefs, gender, ethnic or social origin, property status, place of residence, language or other characteristics, will have access to high-quality education, healthcare systems, and other services in the public and private sectors. territorial communities will independently resolve issues of local importance, their well-being, and will bear responsibility for the development of the entire country;  the vector of pride is to ensure mutual respect and tolerance in society, pride in its own state, its history, culture, science, and sport. ukraine should take a worthy place among the leading countries of the world, create decent living and working conditions for the education of its own talents, as well as the attraction of the best world specialists from different fields (pro stratehiiu staloho rozvytku "ukraina – 2020). however, it should be noted that for products that are exported from ukraine, there is a low level of use of the latest technologies. the volume of exports of domestic high-tech products in monetary terms during the last time grew. by the value of export, the dynamics were as follows: in 2010 – $1441 million, 2011 – $1908 million, 2012 – $2623 million; in terms of percentage of hightech products in 2010 amounted to 4.3% in relation to the total volume of exported products, in 2011 – 4.4%, and in 2012 – 6.4%. at the same time, it should be emphasized that ukraine is far behind the leading countries in producing the abovementioned products: the share of high-tech goods in the total volume of exports of the philippines was 48.9%, malta – 45.7%, singapore – 45.3%, china – 26.3%, switzerland – 25.8%, france – 25.4%, great britain – 21.7%, united states – 17.8%. on average, this indicator was 7.6% in 2012, in the eu countries – 15.4% (world bank data). the share of information and communication technologies in the total volume of exported products is even lower compared to the world index – in ukraine this figure was 1.1% in 2012, in the world – 10.4%, in the eu countries – 5.3%. it should be noted that the share of information and communication technologies in ukraine during the last 10 years has not changed significantly, ranging from 0.5 to 1.5% (naukova ta innovatsiina diialnist v ukraini, 2013). the highest result for this indicator is observed in hong kong – 42.2%, in the philippines – 29.5%, in singapore – 28.4% (world bank data). an important factor in the formation of an innovative economy in the country is the introduction of advanced technologies. in 2013, ukraine received the 94th position under the sub-index “technological readiness”, having decreased by 13 points in comparison with 2012 (81st place). the first positions in the overall ranking of technological readiness of countries are sweden, luxembourg, norway, great britain, denmark. the highest level of access to state-of-the-art technologies is inherent in finland, sweden, norway, switzerland, and the united kingdom. ukraine occupies the last place in the components of the baltic journal of economic studies 197 vol. 4, no. 4, 2018 sub-index “technological readiness”: with the availability of the latest technologies – 106th place, the development of technology at the company level – 100th place, fdi and technology transfer – 131st place. somewhat better indicators of technological readiness demonstrated by ukraine on the level of access to the global internet: by the number of people using the internet – 93rd place, according to the indicator of broadband internet subscribers per 100 population – 71st place, by volume of internet-traffic (kb per user) – 84th place, according to the indicator of mobile internet users for 100 people – 94th place (the global competitiveness report 2013-2014). indicators indicate a low level of technology development in ukraine. the indicator of the innovative and intellectual development of the country is a high level of business competitiveness. in ukraine, among the components of the sub-index “business competitiveness”, six indicators belong to potential threats, three to critical backlogs. relative competitive advantages are absent at all. among the critical shortcomings, the following should be noted: the low level of state support for the development of clusters – 136th place, the nature of competitive advantage – 112th place (the base of a competitive prevailing country of cheap labour and cheap natural resources), readiness to delegate authority – 124th place. the result of ukraine in the number (81st place) and quality (73rd place) of the local suppliers network, the presence of companies in the value chain (87th place), the control of domestic companies over distribution channels (60th place) is rather low, the complexity of production processes (97th place), using the marketing complex (77th place) (the global competitiveness report 2013-2014). thus, products produced by domestic companies are predominantly labour-intensive, based on outdated technologies, cheap labour and natural resources. thus, in the ukrainian economy, there are such negative factors of influence: 1. the risks of the global economy. decreasing the growth rates of the world economy. activation of hostilities in eastern ukraine. 2. deployment of the russian federation “hybrid war” in new areas. 3. aggravation of the domestic political crisis, in particular, the government and/or parliamentary crises. 4. excessive inflation acceleration on the basis of “warming up” the consumer market, which will lead to too tight monetary policy, inhibition of capital investment, and inhibition of economic activity in general. 5. excess of the planned devaluation indicator, set in the budget. failure to achieve the expected additional revenues to the budget and the pension fund from raising the minimum wage that will force the budget gap to go through increased domestic borrowing and threaten macroeconomic destabilization, or forced monetary policy aggravated, or, alternatively, reducing budget expenditures, of which the most immediate development spending will be reduced (stud, 2018). separately, an attention should be paid to ways of counteracting the shadow economy of ukraine. thus, the sphere of activity of the shadow economy can be any activity that is defined by the state as legal, as well as illegal activities. today, the shadow economy is most widespread in the following legal activities: production and distribution, in particular, productive capital; investment; bank stock exchange; insurance; resource-mining and distribution; provision of medical services; any intermediary activity, etc. (lazareva, 2016). according to o. v. savych, i. v. savych, the priorities of the state policy in the sphere of shadowing of the economy of ukraine are: to improve existing methods of calculating the level of the shadow economy, taking into account world practice; creation of conditions for the de-socialization of the socio-political process; improving the efficiency of public finance management at all stages of planning your use of budget funds; improvement of foreign economic activity and improvement of interagency interaction; improvement of legislation in the field of combating economic crimes; stimulating the development of cashless settlements; improvement of fiscal administration; counteracting the shadow economy in the real sector by reducing transaction costs and improving the state licensing system; fighting corruption and raising the level of legal culture of the population; strengthening of the protection of rights to intellectual property objects; strengthening of economic security of the state in the process of deepening international and global economic integration (savych, savych, 2015). summing up, it should be noted that the task of counteracting the shadowing of the ukrainian economy is particularly acute in the context of modern geopolitical challenges, european integration processes. the abovementioned directions of counteraction to the shadow economy of ukraine form the main essential basis for the further elaboration of a comprehensive plan for the reduction of the economy of ukraine. countering the shadow economy of ukraine requires the conduct of multidisciplinary research, the development of a comprehensive counteraction strategy in cooperation with foreign partners, primarily with a view to using their positive experience in combating this threatening phenomenon for national security (savych, savych, 2015). despite all of the above, it is necessary to create conditions that will ensure the successful reformation of the national economy of ukraine. to do this, it is necessary: to form a real idea of national development; the existence of a single program of transformation, political will and a team of reformers; rapid (as much baltic journal of economic studies 198 vol. 4, no. 4, 2018 as possible) reform; economic liberalization (from the old bureaucratic system to transparent market relations) and a capable government; unity and consolidation of the whole society; ensuring the equivalence of the ukrainian economy with the external economic environment; ensuring high social welfare and social protection of the population; the need for the ecological balance of the national economy; as soon as possible introducing an innovative model for the development of the national economy (mazaraki, melnyk, 2011). in order to further develop the export potential of mechanical engineering, it is necessary to create innovative enterprises using technologies of 5-6 methods, to stimulate the development of production of new technology (for example, planes, ships) at certain operating enterprises under the proper state incentive policy. in our opinion, the following factors will influence the development of foreign trade in ukraine in the future: significant share in the export of commodities and products with a relatively low value added will remain. in order to revive their exports, the improvement of the quality of goods will be of great importance through the technological modernization of metallurgical enterprises and the restoration of demand for metals on world markets; ukraine’s dependence on imports of energy resources will continue, although further reduction of gas consumption in industry can be expected in the conditions of increasing technological level of the main energy-consuming productions; the real final consumption of households, which was the driving force behind the growth of ukraine’s gdp over the past three years of pre-crisis, is steadily declining due to conservative wage labour policies and high inflation. the low solvency of households has an impact on imports in the direction of its cheapening, which will contribute to reducing the deficit of the trade balance. ukrainian economy continues to suffer from loss; almost 40% of enterprises are loss-making and accumulating significant amounts of corporate debt. it is possible not only to restructure debts but also to use the mechanism of the bankruptcy of enterprises and change of owners to speed up the crisis (mazaraki, melnyk, 2011). in the period up to 2020, the evolution of the european union will take place with the transition from the prevalence of the territorial expansion policy to the policy of internal ordering and deepening of integration. the recent enlargement of the eu has led to a significant increase in the heterogeneity of its internal structure, due to a significant increase in differences not only in the levels of social and economic development but also in the institutional features of the participating countries. understanding of these differences leads to an increase in the rejection of the further expansion of the functions of the communist bodies of the eu and, consequently, to the blocking of internal institutional reforms necessary for the extended existence. this objectively narrowing the field for the implementation of the policy of further eu enlargement, as within the framework of the old institutional mechanisms of the european union, it could prove fatal to the fate of the eu itself. under these conditions, the main efforts will be directed towards finding ways to strengthen the cooperation of the current members of the union. at the same time, even the partial disintegration of the european union with the formation within it of subregional integration groups with varying degrees of intensity of mutual relations (the model of concentric circles) is possible. it is important for ukraine to reduce its gap with the eu countries as soon as possible in institutional, innovative development and living standards (pro stratehiiu staloho rozvytku "ukraina – 2020"). implementation of the strategy involves the achievement of 25 key indicators assessing progress in implementing reforms and programs: 1) in the world bank’s doing business rating ukraine will rank among the first 30 positions; 2) ukraine’s credit rating – rating on liabilities in foreign currency on the scale of the rating agency standard and poor’s – will not be lower than the investment category “bbb”; 3) according to the world economic forum (wef), the global competitiveness index, ukraine will enter the top 40 countries of the world; 4) the gross domestic product (per purchasing power parity) per capita, calculated by the world bank, will increase to $16,000; 5) net inflows of foreign direct investment in the period of 2015–2020, according to the world bank, will amount to more than $40 billion; 6) the maximum ratio of the state budget deficit to the gross domestic product, according to the calculations of the international monetary fund, will not exceed 3 percent; 7) the maximum ratio of the total amount of public debt and guaranteed by the state debt to the gross domestic product, according to the calculations of the international monetary fund, will not exceed 60 percent (according to the maastricht convergence criteria); 8) the energy intensity of the gross domestic product will be 0.2 tons of oil equivalent per $1000 of the gross domestic product, according to the international energy agency; 9) expenses for national security and defence will amount to not less than 3 percent of the gross domestic product; 10) the number of professional soldiers per 1,000  population will increase from 2.8 to 5.6 persons according to the stockholm international peace research institute; 11) according to the transparency international corruption perceptions index, ukraine will enter the top 50 countries of the world; 12) according to the results of the survey, the level of confidence of the expert environment (lawyers) in court will be 70 percent; baltic journal of economic studies 199 vol. 4, no. 4, 2018 13) according to the results of a national survey, the level of public confidence in the law enforcement bodies will be 70 percent; 14) updating the personnel of civil servants in law enforcement agencies, courts and other state bodies by 70 percent; 15) the limit of the share of one supplier in the total amount of purchases of any energy resources will be no more than 30 percent; 16) the average life expectancy of a person will increase by 3 years; 17) the share of local budgets will be at least 65 percent in the consolidated state budget; 18) the share of penetration of broadband internet, according to the world bank, will be 25 subscribers per 100 people; 19) 75 percent of graduates of secondary education establishments will have at least two foreign languages, which will be confirmed by international certificates; 20) ukraine will take part in the international study on the quality of education pisa and will be included in the top 50 countries of the study; 21) ukraine, together with the world bank, will develop an indicator of the welfare of citizens, will be determined by its target values and will monitor the changes of such indicator; 22) according to the results of a nationwide poll, 90 percent of ukrainian citizens will be proud of their state; 23) ukraine will win at least 35 medals during the xxxii summer olympic games; 24) global competitiveness index in the talent struggle, which is expected by one of the world's leading business schools insead), ukraine will be among the top 30 nations in the world; 25) 20 films of ukrainian production will be released in 2020 (pro stratehiiu staloho rozvytku "ukraina – 2020"). summarizing all of the above, we think it is necessary to pay attention to the rationale of innovations in ukraine separately. one of the most important factors of the competitiveness of the economy is the innovation of the country. the only relative competitive advantage of ukraine for this criterion is the availability of scientists and engineers, which ranked 46th among 148 countries, according to the estimates of the wef. relatively high is the ranking of ukraine in quality of research institutions – 69th place, with the cooperation of universities and enterprises in the field of research and development – 77th place, by the number of patents per million population – 52nd place. worst result ukraine demonstrates for the capacity for innovation – 100th place, the cost of research and development companies – 112th place, state procurement of advanced technological products – 118th place (the global competitiveness report 2013-2014). the cost of research and development is one of the main indicators of the level of innovation development in the country. the intensity of research and development (research and development as a percentage of gdp) is used as an indicator of the relative size of investment in creating new knowledge. the highest rate of research and development intensity is characteristic of israel – 4.38% of gdp in 2011. the following positions are: korea – 4.03%, finland – 3.78% of gdp; japan – 3.39% of gdp; sweden – 3.37% of gdp; iceland – 3.11% of gdp; denmark – 3.09% of gdp; germany – 2.88% of gdp; switzerland – 2.87% of gdp; the united states – 2.77% of gdp (oecd science, technology and industry scoreboard 2013. innovation for growth). in general, the intensity of research and development in the eu is 1.94% of gdp, in oecd countries – 2.37% of gdp. in the cis countries (except for the russian federation, where this figure was 1.2% of gdp), the share of research and development costs is less than 1% of gdp. in ukraine, the intensity of research and development amounted to 0.75% of gdp in 2012, in 2011 – 0.73%. the highest intensity of research and development in ukraine was observed in the period from 2000 to 2005. at that time, the share of research and development expenses amounted to 1.1-1.2% of gdp (naukova ta innovatsiina diialnist v ukraini, 2013). in general, it should be noted that ensuring the sustainable economic growth of ukraine’s economy requires solving a number of important problems. in ukraine, it is necessary to implement the principles of continuous increase of competitiveness by eliminating critical backlogs, which relates above all to factors that are crucial for an efficiently oriented stage of economic development (according to the classification of the modern economic systems of the wef). these are the critical lag behind the following rating criteria: “efficiency of commodity markets” (where ukraine ranks 124th among 148 countries of the world) and “efficiency of the financial market” (117th place). the level of technological readiness of the country (94th place) is also quite low, which poses a potential threat to ukraine’s economic development and its competitiveness. at the same time, ensuring competitiveness is impossible without a proper level of basic factors. therefore, there are good reasons to state that the most important problems that require urgent resolution are the reorganization of the institutional system, the ineffectiveness of which results in excessive administration being carried out within the existing state regulation practice. the bureaucracy, the lack of transparency, and the corruption of the state apparatus also negatively affect the state of ukraine’s competitiveness (ukraine occupies the 137th place by this indicator). significantly, especially taking into account the latest developments in the history baltic journal of economic studies 200 vol. 4, no. 4, 2018 of ukraine, there is the provision of macroeconomic stability. as of 2013, ukraine ranked 107th for this indicator. 3. conclusion correction of economic policy does not affect its strategic directions. its basic positions remain unchanged: the transformation of the economy and the implementation of this process at an accelerated pace, despite all the opposition to the conservative forces. the young ukrainian state faces extremely complex and important tasks in the field of the economy. on their solution, our progress towards a civilized life depends to a large extent. therefore, the implementation of the economic program of the newest ukrainian state should become a bloody affair of every citizen of the country. in order to reduce the impact of the global crisis on ukraine’s economy and its foreign trade, political will and the coherence of government, business and society as a whole are needed. the export potential of the ukrainian economy and the need for import revenues are reflected in its foreign trade balance, which requires constant research of factors and ways of the least painful way out of the crisis and ensuring the next effective rise (mazaraki, melnyk, 2011). thus, ukraine’s economic development today requires, as ever, a well-balanced and sound macroeconomic policy aimed at further stabilization. since the radical socioeconomic transformations that took place during the last decade have caused both positive and negative changes in ukrainian (pavlenko, sevruk, kobko, 2017). ultimately, it becomes clear that the time has already come for the development of the ukrainian economy’s development strategy on an innovative basis and the adoption of relevant legislative acts, the experience of which is being developed and implemented in many countries of the world, including the countries of the european union – great britain, germany, poland (national academy of sciences of ukraine, 2015). in this regard, today it is necessary to analyse in detail the already existing legislative framework regulating innovation activity in ukraine, and the introduction of effective proposals for the change of such a base taking into account the tasks of modernizing the economy on an innovative basis (yunin, sevruk, pavlenko, 2018). references: ekonomika ukrainy v umovakh nezalezhnosti: problemy ta perspektyvy [ukraine's economy in the conditions of independence: problems and perspectives]. retrieved from: http://ru.osvita.ua/vnz/reports/econom_ history/24818/ (in ukrainian) pro stratehiiu staloho rozvytku "ukraina – 2020" [on strategy of sustainable development "ukraine – 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[scientific and innovation activity in ukraine: data set]. k.: information and publishing center of the state statistics service of ukraine, 287 p. retrieved from: http://ukrstat.gov.ua (in ukrainian) the global competitiveness report 2013-2014. retrieved from: http://www3.weforum.org/docs/wef_global competitivenessreport_2013-14.pdf. lazareva, a. (2016). vplyv tinovoi ekonomiky na ekonomichnu bezpeku derzhavy [influence of the shadow economy on the economic security of the state]. ekonomiko-pravova paradyhma rozvytku suchasnoho suspilstva. retrieved from: https://studlib.org.ua/index.php/eprs/article/view/78/74 (in ukrainian) savych, o. v., savych, i. v. (2015). osnovni chynnyky ta shliakhy protydii tinizatsii ekonomiky ukrainy [the main factors and ways of counteracting the shadow economy of ukraine]. efektyvna ekonomika. retrieved from: http://www.economy.nayka.com.ua/?op=1&z=3827 (in ukrainian) mazaraki, t., melnyk, t. 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(2018). priorities of economic development of ukraine in the context of european integration. baltic journal of economic studies, 4(3), 358-365. baltic journal of economic studies 140 vol. 4, no. 5, 2018 corresponding author: 1 vadym hetman kyiv national economic university, ukraine. 2 national university of the state fiscal service of ukraine, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-140-144 financial offenses in the circulation of medicines in the context of globalization oksana kuzmenko1, tetiana matselyk2, viktoriia chorna3 abstract. the aim of the article is to study theoretical legal principles of financial offenses in the circulation of medicines in the context of globalization. the subject of the study is financial offenses in the circulation of medicines in the context of globalization. methodology. the study is based on general scientific and special-scientific methods and techniques of scientific knowledge. the historical and legal method enabled to determine the challenges of the circulation of medicines in ukraine. the comparative legal method enabled to compare doctrinal approaches to the differentiation of medicinal products in the pharmaceutical market in ukraine and the eu as a whole. the system-structural method contributed to the consideration and identification of the most negative effects of the shadow circulation of medications on the ukrainian economy. the methods of grouping and classifying were the basis for the author’s approach to the identification of types of trafficking in medicines in ukraine. the technical legal method enabled to interrogate the state of affairs in the regulatory and legal regulation of the national system of the pharmaceutical market of ukraine and highlight the problematic issues of drug trafficking in the pharmaceutical market of ukraine, as well as the negative trends in increasing the total medication circulation in the shadow pharmaceutical market. the results of the study enabled to highlight the drivers of the prosperity of drug trafficking in the pharmaceutical market in ukraine. practical implications. in the study: first, the key aspects of the definition of the concept and types of financial offenses in the circulation of medicines are outlined; second, the challenges of detection of financial offenses in the circulation of medicines in ukraine are underlined, and scientific approaches to certain financial and legal challenges of detection, available in the special literature, are analysed and compared; third, the author’s original perspective concerning potential solutions to the challenges of detection of financial offenses in the circulation of medicines in ukraine is substantiated. relevance/originality. the original author’s approach to the definition of the concept, types, and challenges of detection of financial offenses in the circulation of medicines is the basis for developing the most promising areas of improvement of domestic legislation in this sphere. key words: corruption, public administration, financing, shadow economy, financial offenses, medicines. jel classification: d73, h76 1. introduction the current development of ukraine requires the introduction of globalization trends in all spheres of public administration with the aim of improving the country ’s economic situation, social protection of the population, raising the standard of living of citizens and the standards of medical care, the active introduction of advanced information technologies, etc. undoubtedly, these trends concern the sphere of the circulation of medicines. to date, the issue of globalization of the circulation of medicines through the provision of adequate quality, safety, and affordability is determined as relevant and vital not only in ukraine but in the entire international pharmaceutical industry. in legal science, the issues of procurement of medicines were studied by domestic and foreign scientists, such as n. o. vetiutneva, s. h. ubohov, o. v. kuzmenko, v. k. kolpakov, h. h. pylypenko, a. p. radchenko, m. v. rymar, o. h. strelchenko, l. o. fedorova, and others. however, public procurement of medicines is not considered enough, consequently, the chosen topic of the scientific article is relevant and important. therefore, consideration of the doctrinal approaches to public procurement of medicines becomes relevant and constructs the aim of this article. for its successful achievement, the following tasks should be solved: first, to outline the key aspects of financial offenses in the circulation of medicines; second, to analyse the perspectives available in the specialized literature in baltic journal of economic studies 141 vol. 4, no. 5, 2018 relation to the types of medicines and the concept of the circulation of medicines; third, to propose an author’s original approach to the definition of financial offenses in the circulation of medicines in ukraine. 2. main material to describe the category “globalization in the circulation of medicine”, it should be noted that the term “globalization” (from english “globe”) is used in several meanings: – a prolonged process of integration between the world national economies to solve the global problems of mankind; – a complex phenomenon of economies interdependence, arising out of the exchange of goods and services and flows of capital; – the process, due to which the achievements, decisions, and activities of people in one part of the globe affect significantly individuals and their communities in all parts of the world (hlobalizatsiia ta hlobalni problemy liudstva); – process of world economic, political, and cultural integration and unification (pashkov, june 17, 2013); – the objective social process of the growing interconnectedness and interdependence of national economies, national political and social systems, national cultures, as well as the humanity and environment interaction. the basis of globalization is the development of world markets for goods, services, labour, and capital (hlobalizatsiia ta hlobalni problemy liudstva). it must be emphasized that globalization is not limited to socio-economic changes only, that is, in spreading a market model of a neoliberal pattern throughout the planet. globalization also promotes the spread of the neoliberal economic doctrine in the world, which puts a free market exchange in the basis of all human relations, completely liberalizes economic life, and exempts capital from state and society control. the most orthodox model of neo-liberalization excludes the state interference in the economy at all. according to the strategy of ukraine’s innovative development in 2010-2020 under the challenges of globalization, market reforms in the new post-soviet countries, including ukraine, were carried out on this model. by removing the state from direct participation in the economic process, neoliberalism has caused not only the separation of the financial system from material production and the transfer of competition from it into the sphere of financial transactions, but also created the conditions for its exploitative behaviour in relation to the sphere of production, the speculative component growth in the economy. while at the beginning of neo-liberalization, 90% of international financial transactions belonged to the real economy and only 10% were speculative, by the mid-1990s, this ratio has changed to the opposite. finally, neoliberalism contributes to the strengthening of the capitalization of innovation and inhibits their socialization (stratehiia innovatsiinoho rozvytku ukrainy na 2010-2020 roky v umovakh hlobalizatsiinykh vyklykiv). objectively, neo-liberalism increases the risk of the crisis in innovative economic development. this crisis is specific to countries with different stages of economic development. for countries with a developed economy, the crisis occurs due to the dominance of the financial factor in economic growth; for less developed ones, due to the gradual destruction of their innovative potential. the latter is fully applicable to ukraine. the tools of globalization enable 15% of the planet’s population, the so-called “safe countries” of europe and the united states, to consume 75% of all resources extracted by all humanity, while 85% of the remaining population obtain 25% of resources (ospishchev, lukianchenkova, 2011). according to who estimates, human health is 70% dependent on lifestyle and nutrition and only 15% on the medical service and genetic features (zotova, krikun, latyk, 2006). it should be noted that the concentration of economic power on the part of individual entities could reach extreme parameters, without formal violation of the legislation on economic competition. this problem can be acute if foreign companies, in particular multinational corporations reach such a level of economic power (zadykhailo, 2006). in addition, the growth of expansion of transnational corporations can adversely affect the development of national economies through the creation of conditions, under which national producers are not in a position to compete with powerful companies and are forced to give up their interests to sustain their market position (peshko, 2006). therefore, in ukraine, an expansion of foreign producers displaces domestic producers from their own markets (nazarenko, reshetniak, 2011). these circumstances make domestic producers use various kinds of economic malpractice, including corruption, financial offenses to maintain the economic growth rates of their own pharmaceutical companies, as well as for their own enrichment. it should be noted that the pharmaceutical market is among the five most profitable branches of the international economy (hladkykh, 2015). all this indicates that medicines are of constant need and the demand for them grows. in addition, the world pharmaceutical market purposefully demonstrates the growth of this demand in almost all stages. the statistical dynamics of the growth of the international pharmaceutical market supports this trend. therefore, according to the estimates of the institute of information security of health, the total world circulation of medicines in the pharmaceutical market, compared to 2017, will increase from $1.1 trillion dollars to $1.4 trillion by 2020 (statystychna informatsiia derzhavnoi sluzhby statystyky ukrainy). at present, pharmaceutical companies are increasing marketing costs (about $27 billion); accordingly, the share of financing for the creation of new medications is decreasing, which reduces the development of the pharmaceutical industry. meanwhile, functioning and the competitiveness of any pharmaceutical company require baltic journal of economic studies 142 vol. 4, no. 5, 2018 releasing a number of new original medications (brands). accordingly, even large corporations cannot create such brands that need about 10 years of research and hundreds of millions of dollars a year to be manufactured. consequently, large corporations are united into even larger structures whose budgets reach between $1 billion and $8 billion annually (myronyshyna, 2007). for example, the top 10 largest international pharmaceutical corporations that have been merged by another one, are: acquirers: actavis, amgen, valeant pharmaceuticals, perrigo, mckesson, astrazeneca, shire, forest laboratories, salix pharmaceutica, and target companies merged with larger corporations: onyx, bausch & lomb, forest laboratories, elan corp, celesio, bms diabetes, viro pharma, aptali, santras. globalization in the circulation of medicine in ukraine has significantly affected the industrial production of medications. thus, for today, industrial production of medicines is carried out by such enterprises as interchem slc, arterium corporation, biopharma, borshchagov chemical and pharmaceutical plant, darnitsa prjsc (pharmaceutical firm), enzym prjsc, tm vishpha (zhitomir pharmaceutical factory), indar prjsc, medicines of ukraine uc, lubnyfarm jsc, farmak jsc, which synthesize pharmaceutical substances, create original medicines, provide ukraine with them, and export abroad. the ukrainian pharmaceutical industry produces more than 1,400 medications, half of which are sold on the domestic market. domestic manufacturers are developing analogues of imported medicines, but they cannot fully meet their needs. an acute problem is the provision of vital and essential medications, on which the life of patients depends (importozamishchennia: pohliad vitchyznianykh vyrobnykiv). however, under challenges of globalization, ukrainian producers are forced to lose their pharmacological markets and progressively commit financial frauds and corruption crimes against financial reporting to protect their own companies from destruction. they do not shun the development and supply of counterfeit medicinal products to the market. therefore, according to the state medical service, in ukraine, during the establishment of criminal responsibility for counterfeit medicines or their circulation, total fraudulent medications increase, since over the last five years, this central executive authority has issued 310 resolutions on banning the circulation of 326 series of 183 names of fraudulent medicines. during this period, the state medical service sent 440 service letters to the law-enforcement bodies, such as the ministry of internal affairs of ukraine, the national police of ukraine, the security service of ukraine and their territorial units, with relevant materials regarding detected facts of fraudulent medicines. meanwhile, 141 criminal proceedings were registered by the investigating authorities of the ministry of internal affairs of ukraine (from november 2015, national police of ukraine) in the uniform register of pretrial investigations (7 in 2012; 55 in 2013; 20 in 2014; 27 in 2015; 32 in 2016; 46 in 2017) according to art. 321 of the criminal code of ukraine (“counterfeiting of medicines or circulation of counterfeit medicines”) indicate a negative dynamics and an acute problem of the circulation of counterfeit medicines in ukraine and the need to improve regulatory and legal mechanisms to counteract this phenomenon (melnychuk, 2011). such indicators are due to the low purchasing power of citizens, in addition, the cheapness of local medicines makes “white” counterfeiting disadvantageous for them; therefore, the “black” counterfeiting of rather expensive local drugs, for example, antibiotics replaced by cheap analogues, is becoming increasingly common. such fraudulent medicines are made within the country because uncontrolled production and outlets, as well as the import of “in bulk” (it remains only to pack and stick labels), exist. another way is to attract an administrative resource and funds to develop new ways of producing and selling counterfeit medicines that do not fall under the concept of a criminal offense and thus provide an opportunity to implement illicit schemes for enrichment in the pharmaceutical market of the state. for example, business entities could be created, such as legally operating firms officially registered, which have appropriate licenses, but under the guise of legal activities, sell counterfeit medicines; legally operating distribution companies created with the participation of domestic producers of medicines that illegally produce foreign medications; one-day firms created by executives of other types of firms that sell counterfeit medicines, which are for one or two transactions and function using false documents (registration and permits). the counteraction to the illegal activities of these entities is complicated by their use of contactless schemes and the internet, leading to counterfeiters’ commission of a criminal offense under art. 190 of the criminal code of ukraine (fraud) (kryminalnyi kodeks ukrainy). it should be noted that in the circulation of medicine in ukraine, a range of unresolved problems occurs. for example, in the circulation of medicine, along with various bans on the sale and storage of certain medicines (for example, atf-long, cratal), offenders buy these drugs and illegally transport to the former ato area (today jfo). that is, an uncontrolled distribution of drugs goes. the other side of the coin concerning the use of atp-long is ineffectiveness in tablet form, as proven by ukrainian researchers of medications. however, these medicines are actively used (offered) by certain ukrainian medics, who profitably cooperate with pharmaceutical companies, and are prescribed to patients by now. such medicines are distributed not only in ukraine but also sold in foreign markets: belarus, armenia, albania, kazakhstan, kyrgyzstan, russia, etc. another problem is taxes. for example, conducting tax audits at pharmacological enterprises, such as the borshchagov chemical and pharmaceutical plant, where baltic journal of economic studies 143 vol. 4, no. 5, 2018 from 2016 to 2018, together with other companies, fraudulent firms were created to cover the illegal converse of non-cash funds in cash, as well as to execute sales transactions. this scheme serves to reduce tax payments. in the course of the electronic reporting analysis, the tax authorities found that offenders recorded only a portion of the purchased goods while selling medicines to the companies of the real economy on a completely different nomenclature. directly, the official documentation reflected selling some medications (for example, polyplasdone, kavomax) to the address of: kyiv vitamin factory jsc, kusum pharm, farmiko ltd., etc. in addition, in april 2016, the management and employees of the plant were accused of large-scale fraud. that time, through 58 individuals, they tried to withdraw more than 11 million hryvnias. the management and employees faced from 3 to 8 years imprisonment (yak borshchahivskyi). a separate and rather significant problem in the circulation of medicine is the offshore accounts of former company executives. for example, this topic can be considered in case of the borshchagov chemical and pharmaceutical plant. therefore, in fact, the main stake is held by the family of the former head of the borshchagov chemical and pharmaceutical plant. to date, the largest stake is held by dismissed executives, their family, relatives, members of the supervisory boards and the accountant. for example, the borshchagov chemical and pharmaceutical plant’s shares are nominally held by the entire management, up to 2.6%, but because of the offshore registration in the virgin islands (lenik group and beldor group), they actually own 41.5% of the company. the second largest stake, up to 29.9% of the shares, previously belonged to the city of kyiv, but in 2016, they were bought by the pharmaceutical firm “darnitsa,” which was among the top three “players” in the pharmaceutical market. up to 26% of the shares are still on the account of 300 current and ex-employees of the plant. accordingly, the change of management will be ineffective, because the “former” still have control over the company, since more than 40% of the shares are owned by only 2 companies apparently that are located not in ukraine. therefore, a “chunk” of the plant is owned by two offshore offices of the plant management, up to 41.5%. the first is the lenik group s.a., which is located on the virgin islands and has 20.3169% stake in the plant and beldor group s.a., which has 21.2636% of the shares, located there too (yak borshchahivskyi). moreover, the fraudulent conspiracy of doctors and pharmaceutical companies is problematic, because with the consent of health officials, they prescribe certain medications to patients, advising to buy them in certain pharmacies. for “services provided” doctors received money, as well as tourist trips to foreign countries, from representatives of pharmaceutical companies. for example, doctors try to prescribe as many medicines as possible to patients, including those with several months before the expiration date. (from the sale of such medicines, doctors receive 10% per one preparation from 50 uah (1.5 usd) and 20% per drug from 80 uah (3 usd) (yak borshchahivskyi). facts of fraud in the circulation of medicine are also often manifested in free release at inflated prices and in large batches of medicinal products subject to release on the special prescription form no. 3, which must contain a medical stamp, a personal seal and a physician’s signature, resulting in the illicit narcotic drug trafficking. it should be noted that the problem of financial offenses in the circulation of medicine does not bypass any country. for example, in the united states, the most common medical actions that can entail large fines and sometimes even criminal liability: overstatement of medical services bills; conducting of procedures in the absence of clinical indicators; kickbacks; abuse in relations with the industry (ovcharenko, rieznik, 2017). at the same time, the united states introduces effective methods of countering financial offenses in the circulation of medicine. in this country (and in other european countries), a health insurance system operates to ensure transparency of payment and all payment transactions, conducted by doctors and transferred to a health facility. it serves as the guarantor of the free provision of a certain amount of medical services upon the occurrence of the insured event (health problem). in japan, the regulation of healthcare differs slightly. in this country, the priority is the continuous improvement of medicine. this is manifested in investment activity: in japan nowadays, health care costs make up 8.1% of gdp. moreover, the contributions to technical equipment are made: there are no multi-volume paper manuscripts in the country; patient service is based on the latest advances in technology and computer technology, which facilitates the work of health staffs as a more progressive reporting method (ovcharenko, rieznik, 2017). 3. conclusion therefore, in order to reduce financial offenses in the circulation of medicine in the context of globalization, it is necessary: first, to standardize treatment by introducing standards for each clinical case, determining further doctor’s actions. second, to reform the system of remuneration for medical personnel by raising the rate of official salaries. third, to introduce public control institutes, in the form of a voluntary association of independent medical specialists involved in the verification in the circulation of medicine. fourth, to conduct information campaigns targeted at different social groups to promote the elimination of a tolerant attitude towards corruption in the medical sphere, to develop a conviction of financial offenses in the circulation of medicine, to improve cooperation between authorities and citizens in this area through active public policy on preventing or stopping criminal acts in this area. baltic journal of economic studies 144 vol. 4, no. 5, 2018 references: hlobalizatsiia ta hlobalni problemy liudstva [globalization and global problems of humanity]. mizhnarodni ekonomichni vidnosyny. retrieved from: https://pidruchniki.com/1256060753395/ekonomika/globalizatsiya_ globalni_problemi_lyudstva (in ukrainian) pashkov, v. m. 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(in ukrainian) baltic journal of economic studies 137 vol. 9 no. 2, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 university of customs and finance, ukraine (corresponding author) e-mail: sr.karpenko@gmail.com orcid: https://orcid.org/0009-0004-7736-2525 2 black sea research institute of economy and innovation, ukraine orcid: https://orcid.org/0000-0003-0841-4534 3 deputy director of the publishing house "helvetiсa", ukraine e-mail: vikhliaievm@gmail.com orcid: https://orcid.org/0000-0002-1906-5176 doi: https://doi.org/10.30525/2256-0742/2023-9-2-137-145 state policy on public-private partnerships in the space industry in the structure of the innovative economy of ukraine serhii karpenko1, oleh holovko2, mykhailo vikhliaiev3 abstract. the purpose of the article is to conduct a comprehensive analysis of state policy regarding public private partnerships in the space industry in the structure of the innovative economy of ukraine and to develop relevant proposals for the current legislation. the methodological basis of the research is the comparative method, which allows to consider the most effective approaches to the analysis of state policy on public-private partnership in the space industry in the structure of the innovative economy of ukraine, as well as system structural, structural-functional methods, the method of moving from the abstract to the concrete. the results of the research are the formulation of the definition of state policy regarding public-private partnership in the space industry, under which it is proposed to understand the activities of public administration subjects, which is a set of formed and legally established goals, tasks, functions and interests, which are directed by these subjects at solving the tasks of development of public-private partnership in the space industry in the structure of innovative economy of ukraine, and their practical activities for the implementation and achievement of the specified goal. the practical implications of the study are that the means of state policy regarding public private partnership in the space industry in the structure of the innovative economy of ukraine are an important tool for the implementation of state policy. the value of the research lies in the fact that the state policy on public-private partnership in the space industry in the structure of the innovative economy of ukraine performs the role of a means by which in a state-ordered society, in the form of developed state activity, goals determined objectively by public needs and national interests should be correlated to ensure the sustainable development of public-private partnership in the space industry and its available material and intellectual opportunities, subjective desires and goals of the dominant social forces with real historical conditions, which determine the main directions and tasks of state activity to ensure the achievement of these goals. key words: state policy, public-private partnership, innovative economy, space industry, space activity. jel classification: o10, e60 1. introduction the state policy on public-private partnership in the space industry of ukraine is an important tool for the implementation of state policy in the field of space – the activities of relevant authorized entities, which are entrusted with the tasks of implementing state policy in this area. therefore, the content of the state policy on public-private partnership in the space industry of ukraine is determined by the tasks of the state policy in the field of space and is a set of formulated and legally established goals, tasks, functions and interests that the state authorities are guided by in their state management of the space sphere, as well as their practical activities to implement and achieve the planned result. in other words, the state policy of public-private partnership in the space industry of ukraine is the state activity of authorized subjects related to the sphere of outer space. 2. the content of public-private partnerships in the space industry the content of the state policy on public-private partnerships in the space industry of ukraine is baltic journal of economic studies 138 vol. 9 no. 2, 2023 determined by the general direction of state policy, which is an important element in the development of statehood at any time. in response to the main challenges of modern times, the state determines the path of its development and implements state policy. at the same time, the space sphere is one of the areas of state regulation due to the multivector nature and wide applicability of the results of space activities. the (high) role of space activities in ensuring state security (ghilorme, etc., 2021) and the development of the economic system as a whole has been noted more than once (bulat, osadcha, kutumov, etc., 2018). thus, it is believed that the sphere of space activities undoubtedly belongs to the sphere of direct interests of the state. state policy as a broad concept can be the subject of study of various sciences, including administrative and legal sciences. it turns out that it is impossible to talk about the activities of public-private partnership entities in the space industry of ukraine without analyzing the concept and the main elements of state policy, which confirms the need to characterize the institute of public policy regarding public-private partnership in the space industry of ukraine when studying issues of public management in this area. public policy is an important component of the life activities of the society, which has a large number of dimensions and characteristics, it forms an appropriate system and mechanisms of socially oriented state administration, because it is aimed at improving the quality of life of citizens and ensuring social stability. the analysis of the definitions of state policy in the domestic scientific literature shows the presence of a wide range of definitions of state policy and variants of its understanding, however, each point of view is based on a corresponding criterion or emphasizes a certain conceptual aspect. all this allows to note that the issues of the concept and content of state policy are constantly at the center of attention of scientists who try to cover all aspects of state policy: processes, factors, institutions, tools and models, to consider the strengths and weaknesses of existing approaches to the study of state policy. the problem of the application of state policy in various spheres of public life requires further study. an integral part of the state policy in any sphere should be the goals and principles established by the development of the state policy in a certain sphere of activity. today in ukraine there is no uniform practice of normative and legal consolidation of state policy. thus, state policy in certain areas is established by law, for example, state regional policy, state regulatory policy in the sphere of economic activity, state policy in the field of science and scientific and technical activity. often, separate elements of state policy are established by law, for example, the goal of state policy (creation of conditions for dynamic, balanced development of ukraine and its regions, ensuring their social and economic unity), principles of state policy (in the field of standardization, state export control, etc.), the goal and principles of state policy (in the field of higher education, in the field of employment of the population, etc.) or basic principles of state policy (in the field of labor protection, in the field of waste management, etc.). there are also isolated cases when the state policy is embodied in legal acts of executive authorities, for example, the state policy in the field of preservation of library collections as a part of the cultural heritage and information resources of the country. the mentioned circumstances allow to conclude that in ukraine today there is no unified approach to solving the problem of embodying state policy in normative legal acts of different legal powers, and there are also different bodies issuing these acts. in addition, unified concepts that would determine the directions of state policy have not been developed (palagnyuk, 2012). and meanwhile, the state policy fulfills the role of a means (program) by which in a state-ordered society, in the form of a detailed state activity, objectively determined by social needs and national interests, the goals of ensuring sustainable development of society and its existing material and spiritual capabilities must be correlated, subjective desires and goals of political elites with actual historical conditions, as well as determining the main directions and tasks of state activity to ensure the specified goals (kovbasyuk, vashchenko, 2014). the state policy for a certain period of time with the help of normative legal acts determines the will of the state concerning the exercise of state power both in certain spheres of social life and in society as a whole. as it can be seen, ensuring an effective publicprivate partnership in the space industry of ukraine is an important condition for successfully solving the tasks of state policy in the field of space activities. this is convincingly evidenced by a fairly large number of publications by domestic researchers, in which individual components of the public-private partnership mechanism in the space industry are considered: the shortcomings of its legislative support (l.f. daderko, a.m. gurova and others), promising ways of regulating legal relations in the field of space activity (a. v. khridochkin, m. g. okladna and a. r . korchevska and others), the legal regime of the use of the results of space activity (o. s. stelmakh, l. zhuravlyova and others), the priority place of the results of space activity in the structure of the innovative economy (y. v. buhun, t. o. garbuz and others). baltic journal of economic studies 139 vol. 9 no. 2, 2023 however, the relevance of the problems related to the implementation of the development of the state policy on public-private partnership in the space industry of ukraine does not decrease. moreover, new obstacles remain insurmountable and constantly appear on the way to reform the existing system of public management in the field of space activities. it is about the still inefficient state administration and the lack of coordination of the activities of public-private partnership entities in the space industry of ukraine and the existence of outdated legislation, which does not correspond either to the european acts or to the current state of development of social relations in ukraine. according to the author, there are still unduly complicated procedures for state registration and protection of rights to the results of space activities, which, due to their lack of publicity and transparency, pose risks of corruption and discrimination, as well as legal uncertainty regarding the jurisdiction of disputes in the field of space activities. there is also a separation of academic science from business due to the lack of modern infrastructure for commercialization of scientific achievements and their introduction into production, as well as the lack of culture and respect in society for the results of space activities, and transparent and accessible procedures for acquiring and protecting rights to the results of space activities (ogurtsov, polishchuk, 2014). in addition, the problems of public management of rights to the results of space activities created at the expense of the state budget and centralized national funds remain unsolved. there is also a problem of legislative regulation of issues of protection of interests of subjects of public-private partnership in the space industry of ukraine. in particular, the domestic legislator pays considerable attention only to the procedure of granting rights, but does not think much about both the fate of the protected result of space activity in its further life cycle and the consequences of its implementation. and finally, today in ukraine there is a problem in many areas, especially computer programs, where there are still incentives to consume products manufactured in violation of the rights of subjects of public private partnerships in the space industry of ukraine. one of the main tasks of ukraine at the current stage of development remains the implementation of european norms on public-private partnership in the space industry of ukraine, as well as international treaties, the binding approval of which was given by the verkhovna rada of ukraine. in addition, the absence of an effective state policy on public-private partnership in the space industry is explained, first of all, by the lack of a national strategy for the development of the sphere of space activity in ukraine – a long-term plan, according to which the tasks of public management of the sphere of space activity should be implemented. there is also an urgent need for direct legislative consolidation of this strategy, because today there is no single normative legal act that would generalize and define the state policy regarding public-private partnership in the space industry of ukraine. a unified scientific approach to this problem is still missing. ukraine urgently needs a document of a fundamental nature, which would determine the main directions of state activity in the development of space activities. in any case, the more important elements of any direction of state policy are its goals (defined on the basis of objective circumstances of development of the world community as a whole or one of the spheres of activity), tasks (which must be solved to solve the tasks) and principles (basic ideas of implementation of state policy, which determine the essential provisions on which the entire system of state administration in a separate sphere is built). 3. principles of public-private partnership in the space industry the state policy on public-private partnership in the space industry of ukraine should be based on certain principles, the clarification of which has an important theoretical and practical significance, as it allows to determine its direction, patterns of development and functioning. the principles of the state policy on public-private partnership in the space industry of ukraine are the basic regulations on which the activities of its subjects are based. they reflect the peculiarities of the sphere of space activities and determine the prospects for development and improvement of the legislation on space activities. at the same time, it is reasonable to assert that there are two groups of such principles (kharkivska, 2014), the first of which is the basic (general) principles characterized by general, generally recognized provisions that apply to the entire state policy on state regulation in any sphere of public life. these include the principles of the rule of law, respect for human and civil rights and freedoms, continuity, legality, ensuring the unity of state policy, openness, transparency and accountability. the second group of principles of state policy on public-private partnership in the space industry of ukraine consists of special principles, which are characterized by a narrower scope of application and are determined by the specifics of such a particular sphere of state administration as the sphere of space activity. taking into account the peculiarities of the sphere of space activities, a group of special principles should be defined. baltic journal of economic studies 140 vol. 9 no. 2, 2023 the first special principle of the state policy in this sphere should be the recognition of space activity and its results as the highest socio-economic value of ukraine. in fact, the main driving force of economic and social development in the world and especially in ukraine is the innovative potential of the country. this thesis is confirmed by global trends: first, the most important part of the national public wealth is the product of space activity; second, economic activity is increasingly turning into a process of continuous innovative innovations (horbulin, shekhovtsov, shevtsov, 2016); third, the competitiveness of business entities, the survival of entire industries and states directly depends on the ability to perceive and produce the product of space activity; fourth, the phenomenon of the result of space activity, i.e., the result of the discovery and exploration of outer space with the help of space technologies, acquires special importance in overcoming the crisis and reproducing the economy. dynamic, large-scale and sustainable development of the space sector has become a decisive factor for any country in increasing the competitiveness of the economy, ensuring economic growth, raising the standard of living of the population, defense, technological and environmental security. the next special principle should be the state guarantee of creating favorable conditions for the effective functioning of public-private partnership in the space industry of ukraine. the fact is that the development of ukraine, taking into account the current realities of economic, social and military challenges, is impossible without concentrating efforts on finding ways to develop and modernize the domestic economy. such development, as a rule, is increasingly based on the creation and implementation of various objects in the economic and social infrastructure – products of space activity, and protection of the rights of scientists, engineers and inventors in the field of space. the experience of countries with developed economies confirms that activities in the space sphere, innovation and creativity of technical solutions in it mostly determine the strategy and tactics of rapid and complex development of the state, its high technical level of production, and integration of scientific, technological component industry. the organization of an effective system of law enforcement in the process of creation and use of various results of space activity directly affects the development of national scientific and technological and scientific and technical spheres of life of the state, improving their investment image and introducing a favorable innovation climate (havrish, voitko, buhun, 2015). therefore, preservation, strengthening and development of space potential of the state is considered one of the priority interests of ukraine. today it is important to find ways to create an effective innovation system capable of ensuring technological modernization of the national economy, increasing its competitiveness on the basis of advanced technologies. it is necessary to improve the market of the results of space activities, the state system of legal regulation of the space industry, and to turn the scientific potential of the country 's space sphere into an effective resource for economic growth. recognition of the results of space activity as those that ensure the successful development of all other forms of socially useful activity requires the need to focus state capabilities (creative potential, material resources, funds, etc.) on the comprehensive development of public-private partnership in the space industry of ukraine. another special principle of the state policy of public-private partnership in the space industry of ukraine should be the state guarantee of creation of conditions for continuous improvement of educational, scientific and cultural development of the space sphere, as well as continuous populari zation of knowledge about space. the issue of dissemination of knowledge about outer space is relevant for ukraine, which is connected with the existing situation in the field of protection of outer space and problems, which sometimes arise as a result of insufficient level of knowledge and culture in this direction in society. among them is the problem of space pollution, which is already a serious threat to the safety of people, property and health of the population of certain regions and the state of the environment. the world's oceans are gradually being polluted, the natural water cycle is being disturbed, changes in the composition of the atmosphere are taking place, although they are still insignificant, and so on. all this gives reason to say that space is gradually becoming a special part of human habitat and activity, and the meaning of the term "natural environment" is being expanded to include near-earth space. thus, the process of environmentalization of space is already underway, which is understood as "the expansion of the sphere of human habitation, its interaction with nature to cosmic scales, the exit of the sphere of interaction between society and nature beyond the borders of the planet, the process of development, "socialization" of the universe. an important special principle of the state policy of public-private partnership in the space industry of ukraine is the principle of a fair balance of private and public interests in the sphere of publicprivate partnership. the legal instruments necessary to ensure the proper functioning of public-private partnership in the space industry of ukraine in the context of building an innovative economy should be designed based on the need to coordinate the baltic journal of economic studies 141 vol. 9 no. 2, 2023 divergent interests of representatives of this industry, to prevent and neutralize potential conflicts between them (beglyi, 2006). at the same time, with a certain degree of generalization, the carriers of private interests in the researched field should be considered as the creators of the results of space activity and subjects that involve the latter in economic turnover. public interests in the general sense are embodied in the interests of the state and regional public authorities. a special place is occupied by the public interests focused on the needs of the society as a whole, end users and non-commercial consumers of socially useful results of space activities. the given characterization of private and public interests, diverse in content and subjective composition, which are implemented in the sphere of publicprivate partnership in the space industry of ukraine, indicates that the effective functioning of the specified relations can be ensured only by legal regulation, organically combining dispositive and imperative principles, based on the equal subordination of all participants of these relations to the socialeconomic order. in addition, special principles of the state policy on public-private partnership in the space industry of ukraine should become the principle of prevention of use of the results of space activities without the consent of the right holders, except for the cases established by law, as well as the principle of economic validity of establishing fees for the provision of services in the sphere of public-private partnership in the space industry and prevention of unjustified complications and delays in procedures for protection of the results of space activities. with the help of the system of specified basic (general) and special principles, the state approach to the state policy of public -private partnership in the space industry of ukraine should be formed. considering the issue of the state policy on public-private partnership in the space industry of ukraine, it should be noted that one of the key elements of the development of the entire sphere of space activity is the determination of its purpose. therefore, based on these conceptual theoretical foundations of understanding the essence of state policy, the goal of state policy regarding public private partnership in the space industry of ukraine should be defined as the creation of appropriate conditions for achieving the highest possible level of development of the space sphere by ensuring the functioning of effective mechanisms for protecting and ensuring the rights of sub-objects of state policy regarding public-private partnership, as well as stimulating space activities of members of society. at the same time, it should be emphasized that the goal of the state policy on public-private partnership in the space industry of ukraine is particularly relevant today in connection with the adoption by the president of ukraine of the sustainable development goals of ukraine until 2030, which provide for the implementation of several socio-economic and political-legal reforms, the purpose of which is to bring national norms and standards closer to european ones (on the goals of sustainable development of ukraine, 2019). fulfillment of these tasks requires gradual transition to civilized, legally regulated principles of interaction of the subjects of state policy in the sphere of public-private partnership in the space industry of ukraine, introduction of a modern mechanism of state regulation of the sphere of public-private partnership in the space industry of ukraine, as well as construction of the national economy based on active use of scientific knowledge and highly effective innovative technologies in it. 4. priorities of public-private partnership in the space industry the correct definition of its tasks, which represent the desired result of the activities of the subjects of public-private partnership in the space industry in this area at a certain, relatively stable interval or at a certain moment of social development related to the achievement of the goal of state policy in this direction. the need to introduce the concept of "the task of the state policy on public-private partnership in the space industry of ukraine" is due to the fact that the process of social development is dynamic, due to the influence of both objective and subjective factors. in this regard, the public authority, in order to achieve the goal of the state policy on public-private partnership in the space industry of ukraine, is forced to periodically correct the formulation of tasks, and accordingly – to specify and modify the principles, methods, policy directions and methods of using state resources. the existence of the state policy tasks related to the public-private partnership in the space industry of ukraine allows to divide the process of achieving the state policy goal in this sphere into intervals and to highlight its main directions, for which one can formulate one's own "desired" results of the activities of the relevant entities of the public-private partnership. the objectives of the domestic state policy on public private partnership in the space industry of ukraine should be as follows: improvement of the national system of public-private partnership in the space industry in ukraine and abroad, taking into account internationally recognized norms and principles; adoption of laws providing for the use of strong dissuasive administrative and criminal sanctions against violations of the right to the results of space baltic journal of economic studies 142 vol. 9 no. 2, 2023 activities and their harmonization with international norms and standards; empowering law enforcement agencies to take the necessary measures to detect violations in the sphere of public-private partnership in the space industry; provision of the court with powers to simplify the confirmation of rights to the results of space activities in order to expedite legal proceedings, prohibiting illegal activities; creation of the necessary conditions for the functioning of a civilized market of the results of space activities and implementation of an effective mechanism for their commercialization; stimulation of the creation and rapid introduction into the economic circulation of new results of space activities, commercialization of scientific and technical achievements in the field of space; state support of invention, innovation and creative intellectual work in space; activation of the processes of creation of non-governmental organizations for the protection of the results of space activities, promotion of public initiatives of right holders interested in the protection and enforcement of their rights, formation of a legal culture among the population. one of the most important stages in the formation of a proper system of public-private partnership in the space industry in ukraine is the justification of the strategic vector of the development of the state policy in this area through the determination of priority directions. the effectiveness of the implementation of this policy, the degree of achievement of its goals and the solution of relevant tasks depend on the correctness and justification of the choice of priority directions of the state policy regarding public-private partnership in this field. analysis of the situation in ukraine with the definition and implementation of priorities forces us to return to the understanding of the very concept of priority and its role in the implementation of a certain state policy. it has already been repeatedly noted that the priority directions for the development of space in ukraine, as well as the strategic priorities of space activity, are too broad to be a reliable means of concentrating the scientific creative potential, the efforts of the entire society to solve the most urgent problems of today (ryzhenko, galagan, 2018). in addition to the reasons related to the shortcomings of the system of state regulation, the insufficient innovative culture of the apparatus and the purely bureaucratic tendency of the latter to replace the real case with its imitation, an important role was also played by the fact that the very concept of priority with regard to the sphere of space activity was not clearly formulated, as its functions in the implementation of the state policy on public-private partnership in the space industry of ukraine were not sufficiently clearly defined. meanwhile, the c ategorical concept of "priority areas" involves selecting from the set of tasks the most important ones, the implementation of which will contribute the most to the achievement of the set goal. priorities can be seen as a formalization of assigning different weights to properties, giving more importance to some properties and less to others. they are an important element in strategy formulation and decision making. priorities are a kind of hierarchy in which certain goals are prioritized over others. at the same time, they are guided both by political expediency and the demands of society, the current moment and the results of formal analysis (hurkovsky, druk, 2017). moreover, one gets the impression that some scientists and managers have already formed the idea that the introduction of state priorities means that, in general, only those directions that are included in the list of priorities can count on state support, and all others should be stopped. obviously, with such an understanding, most experts could not afford to formulate too narrowly, because that would mean taking responsibility for the termination of many interesting and, at least in the long run, important works. therefore, when formulating priorities, attempts are made to be as broad as possible, so as not to leave anyone out. however, in the absence of a unified strategic line, forecasting further consequences, state policy measures in the field of space activities do not have the proper effectiveness, which is confirmed by many years of foreign and domestic experience. in this paper, it is believed that the priority directions of the state policy on public-private partnership in the space industry of ukraine should be determined precisely with due regard to the above circumstances. and the first of these priorities is the creation of favorable socio-economic, organizational and legal conditions for space activities. undoubtedly, the main determining factor in the development of the sphere of space activity is the technical nature of modern production, which is global in its content and manifests itself in the translation of the entire complex of production processes into a set of operations that are programmed in nature and automated in their functioning. in this case, the demand for scientific intelligence is growing sharply, since the automation of production entails the emergence of a social demand for creative professionals capable of implementing complex algorithms of production processes. therefore, the successful development of space as a strategic resource depends, first of all, on the decentralization and liberalization of the process of state management of scientific, technical and innovative activities (kolodiazhna, 2018). it is also important to note that the most promising results of space activities are, as a rule, created as a result of baltic journal of economic studies 143 vol. 9 no. 2, 2023 space activities carried out on the basis of relatively small scientific centers and enterprises. successful development of space activities is impossible if the state does not create appropriate conditions for it. that is, the task of the state policy regarding public-private partnership in the space industry of ukraine should be, on the one hand, the creation of conditions for the comprehensive development of the creative abilities of each person through the relevant state (regional) educational and scientific programs, and, on the other hand, the promotion of the development of scientific and technical and innovative activities on the ground. the next priority direction of the state policy on public-private partnership in the space industry of ukraine is to stimulate the use of the results of space activities in economic and innovative activities. as it is known, the innovative way of development includes the improvement of the production sphere with the use of certain innovations. the world-class innovations are provided first of all by patented inventions, and if the enterprise modernizes its production on the basis of modern patent or license solutions, then it is a truly innovative way of development. the possibility of such a path is primarily determined by the scope and level of research and development work implemented in patented technical solutions. the process of implementation of the results of space activities is a complex and multifaceted problem. at the same time, the main role of the state is to regulate the processes of legal protection and introduction of the results of space activities into the economic circulation and to ensure the protection of rights and legitimate interests of authors, organizations, investors and the state as a whole. it is common knowledge that in all industrialized countries the state scientific and technical policy consists of three main elements: definition and establishment of priorities of scientific and technical development, according to which technologies are created (smernytskyi, 2017) (as a rule, directions are chosen in which there are already certain successes ("technologies"), financial and resource support for the creation of technologies and their commercialization ("finances"), infrastructure and management (management). the specified parts should form a single mechanism of commercialization of innovative activities, and the absence of one of them makes the whole. in addition, during the implementation of the policy of stimulation of innovative activity of industry by financial methods of direct state regulation, there is a strong and constantly growing trend of transition from state subsidization of industrial enterprises developing new science-intensive products to mechanisms that increase the financial responsibility of industry for obtaining development and use of scientific results. the most common among them today are state loans or state guarantees to ensure the receipt of bank loans; state contracts for the development, production, and supply of strategically important science-intensive products; share participation in financing is ordered by the scientific research industry (as a rule, up to 50% (lebedeva, 2017). non-financial mechanisms of direct government regulation include, in particular, export-import quotas, which are used to ensure the necessary level of competition in national markets for knowledge-intensive products. another priority of the state policy in the field of public-private partnership is the provision of effective protection of the results of intellectual creative activity and the right to them. in the conditions of globalization, the following factors pose particular difficulties for the protection and protection of the results of space activities: informational transparency of the borders of the nation-state, inconsistency of individual elements of the political and legal field regarding the protection of the results of space activities in the nation-state, the desire to increase competitiveness on the scale of the state and increase competition between states, which stimulates the desire to introduce innovative technologies not only on the part of individual companies, but also on the part of the state (kuznyakova, 2015). in this regard, the problem of improper use of the product resulting from space activities becomes not only a problem of unfair competition, but also acquires a scale of problems that are actively discussed at the international level. among the priority directions of the state policy on public-private partnership in the space industry of ukraine, international cooperation in this field occupies an important place. the creation of a modern system of public administration in the field of space activities in ukraine, its improvement and development are impossible without international cooperation in the field of space activities. international cooperation has a significant impact on the socio-economic development of ukraine, in particular on foreign trade, entrepreneurship, innovation and investment policy, and the formation of ukraine's scientific and technological potential. today, ukraine's participation in international cooperation in the field of space activities is realized mainly in the following forms: active cooperation with the international telecommunications satellite organization (intelsat), including specific participation in the work of its governing bodies, permanent specialized committees and working groups of this international organization; сooperation in the field of space activities with baltic journal of economic studies 144 vol. 9 no. 2, 2023 the european space agency (esa) in the form of work aimed at the integration of ukraine into the european union (a particularly important aspect is technical cooperation with the european commission). the ukrainian side has the opportunity to use various instruments of external technical assistance, such as the instruments of the european organization for the exploitation of meteorological satellites (eumetsat), the european satellite telecommunications organization (eutelsat), etc.; participation in unions, treaties, agreements, conventions, the administrative functions of which are performed by the international telecommunications satellite organization (intelsat)); participation in unions, treaties, agreements, conventions, the administrative functions of which are carried out by the international telecommunications satellite organization (intelsat); cooperation with regional international organizations (in particular, the arab satellite communications organization (arabsat)); bilateral intergovernmental cooperation and cooperation at the level of relevant departments of foreign countries (indeed, the fruitful cooperation in the field of space activities with the us government continues). in bilateral relations with ukraine, the us pays special attention to the issue of protection of rights to the results of space activities. at the initiative of the us government, the ukrainian-american space enforcement cooperation group plays the role of an effective means of solving pressing problems of rights holders and government agencies (zhuravlyova, 2016). throughout the years of the organization's activity, many meetings have been held to discuss issues of improving ukrainian legislation in the field of space activities, increasing the effectiveness of combating its violations in ukraine; cooperation with non-governmental and public organizations whose activities are related to the sphere of space activities (american, european and ukrainian companies in ukraine: committee for space research (cospar), international astronautical federation (iaf), polish space agency (polsa)), european space agency (esa), national space research and development agency (nasrda), office national d'etudes et de recherches aérospatiales (onera) and others. bilateral cooperation in the field of intellectual property also takes the form of intergovernmental commissions and committees). 5. findings thus, the state policy on public-private partnership in the space industry of ukraine should be understood as the course (main directions of development) of state regulation of social relations, developed in the process of interaction between the state and public institutions, as well as individual citizens, arising during the implementation of state management in the sphere of space activity, prepared for implementation and implemented by executive authorities. and although when defining the state policy one of the components of the definition is often the "activity " of the state management bodies, the state policy itself is a static phenomenon and must be implemented by a state machine consisting of state bodies and institutions. the implementation of the policy is entrusted to the executive authorities. solving the problem of delimitation of competence of executive authorities in public private partnership in the space industry of ukraine and developing proposals for improvement of the system of state regulation is impossible without studying the administrative and legal status of these authorities. 6. conclusions according to the author, the state policy on public-private partnership in the space industry of ukraine should be understood as the activity of the relevant subjects of state administration, which is a set of formed and legally established goals, tasks, functions and interests, which are guided by these subjects during the time of solving tasks for the development of space activities, and their practical activities for the implementation and achievement of a defined goal. it performs the role of a means by which in a state-ordered society, in the form of developed state activity, objectively determined by public needs and national interests, the goals of ensuring sustainable development of the sphere of space activity and its available material and intellectual capabilities, subjective desires and goals of the rulers must be correlated social forces with real historical conditions, which determine the main directions and tasks of state activity to ensure the achievement of the specified goals. the state policy on public-private partnership in the space industry of ukraine with the help of legal acts fixes for a certain period of time the will of the state on the exercise of state power in this sphere. references: beglii, o. v. (2006). state regulation of space activities and national security of ukraine in the conditions of transition to sustainable development. legal bulletin. air and space law, vol. 1, pp. 31–36. bulat, a. f., osadcha, n. v., & kutumov, i. v. (2018). institutional support of space economy. geotechnical mechanics, vol. 141, pp. 151–165. baltic journal of economic studies 145 vol. 9 no. 2, 2023 havrysh, o. a., voitko, s. v., & buhun, yu. v. (2015). synthesis of breakthrough technologies in the space industry based on a combination of research, scientific and technical, production and investment activities. economy and the region, vol. 6, pp. 3–10. guillorme, t. v. (2021). assessment of environmental risks of space activities as a determinant of global security. economy. finances. right, vol. 9(1), pp. 15–19. gorbulin, v. p., shekhovtsov, v. s., & shevtsov, a. i. (2016). the space industry of ukraine: priority areas of activity in new conditions. strategic priorities. series: politics, vol. 1, pp. 5–12. gurkovsky, v. i., & druk, v. v. (2017). problematic aspects of the implementation of the main directions of state policy in the information sphere in the context of modern challenges. public administration, vol. 2, pp. 101–107. kovbasyuk, yu. v., & vashchenko, k. o. (2014). state policy: a textbook. kyiv: nadu, 448 p. zhuravlyova, l. (2016). to the problem of commercialization of us space activities. scientific journal of the m.p. drahomanov npu. series 6: historical sciences, vol. 14, pp. 173–183. kolodyazna, i. v. (2018). development of innovative activity of the enterprise in conditions of competition. scientific bulletin of the uzhhorod national university. series: international economic relations and world economy, vol. 18(2), pp. 58–62. kuznyakova, t. v. (2015). state policy in the field of intellectual property: history of development and international experience. problems of engineering and technical education, vol. 48–49, pp. 80–90. lebedeva, v. k. (2017). national scientific, technical and educational policy in the conditions of european integration. problems of the economy and political economy, vol. 2, pp. 142–151. ogurtsov, a. b., & polishchuk, o. v. (2014). attracting financial assets under state guarantees – a mechanism for stimulating investment activities of space industry enterprises economy and the state, vol. 4, pp. 114–117. palahniuk, yu. v. (2012). "state policy " and "public policy ": theoretical aspect. scientific works [of the petro mohyla black sea state university of the kyiv-mohyla academy complex]. ser.: governance, vol. 169, pp. 63–67. on the sustainable development goals of ukraine for the period up to 2030 (2019): decree of the president of ukraine dated september 30, 2019 no. 722/2019. available at: www.president.gov.ua/documents/ 7222019-29825 ryzhenko, i. m., & galagan, o. ya. (2018). state participation in space activities: legal approaches and consequences. advanced space law, vol. 2, pp. 50–62. smernytskyi, d. v. (2017). state policy in the field of scientific and technical activity science and law enforcement, vol. 2, pp. 5–16. kharkivska, k. v. (2014). concepts and principles of the state policy of regulation of economic activity. scientific bulletin of the international humanitarian university. series: jurisprudence, vol. 10-1(1), pp. 221–225. received on: 02th of march, 2023 accepted on: 18th of april, 2023 published on: 23th of may, 2023 baltic journal of economic studies 244 vol. 4, no. 4, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. e-mail: orlov1284@ukr.net 2 kharkiv national university of internal affairs, ukraine. e-mail: ua_law_2014@ukr.net 3 kharkiv national university of internal affairs, ukraine. e-mail: ket_khrom@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-244-251 ethno-religious terrorism: essence, dimensions, concept yurii orlov1, andrii yashchenko2, yurii danylchenko3 abstract. the objective of the article is to identify, describe, and explain the essence of terrorism as a general civilizational criminal phenomenon, the characteristics of dimensions of its reproduction and the formation of its concept on this basis. the results of the study provided the grounds for several conclusions. first, ethno-religious terrorism is manifested as a cultural phenomenon, a special segment of the inhumane discourse of hostility and aggressive social practices. it appears as a reaction to the systemic planetary crisis of managing economics, culture, consumption of natural resources, and becomes possible in the result of the massive loss of identity, fragmentation of the world-view. secondly, we have established that the specified type of terrorism is a segment of aggressive and violent crime, in the collective and psychological basis of which there is the religious and ideological and/or ethnic domination in the systems of socio-political practice, which is achieved through intimidation as a result of committed murders, destruction or damage to property, objects of nature and offenses of a preventive nature (financial, human resources, information, and other provision). thirdly, ethno-religious terrorism exists within three dimensions: individual (the act of sacrifice, catharsis), group (integration, social orientation) and general (administrative practice, political criminal activity, the postmodern phenomenon of the culture). the applied value of the study is that the suggested vision of the nature and dimensions of ethno-religious terrorism can be used to improve the systemic principles of counteracting its reproduction. the latter should be reflected in the improvement of the provisions of the united nations global counterterrorism strategy through the consolidation of a coherent, coordinated system of level differentiation of anti-terrorist activities’ directions and measures. we note that without changing the basic approaches within the cultural, political, and economic aspects of the interaction of nations and peoples of the world with regard to their diversity and parity, proper autonomy, without stopping the global tendency towards marginalization, it is impossible to effectively counteract to ethno-religious terrorism. value/originality. the new vision of a complex, multidimensional nature of ethno-religious terrorism has been formed in the work. its nature is grounded as a civilizational phenomenon reflected on the level of discourse, mass social practices, global managerial strategies. it forms an empirically grounded theoretical basis for increasing the effectiveness of counteracting ethno-religious terrorism in europe and the world in the whole. key words: terrorism, ethnos, religion, phenomenon, dimension, violence, hostility. jel classification: z12, n4 1. introduction modern terrorism appears as a completely independent phenomenon, which is very complex in epistemological and praxeological aspects. first of all, it is visualized in the field of political life, and therefore, fairly defined by the researchers in the most general scope as a specific form of political violence. however, it is its external side, which does not reveal all possible dimensions, the clarification of which is important for the effective prevention of terrorist acts and the systematic reduction of the terrorist threat in general. statecraft of legal and politological doctrines does not allow admitting that terrorism, and especially its ethno-religious type, is multidimensional and is not limited to a political aspect, even in cases of frankly politicized terrorist acts with explicit political demands. therefore, the complexity of the study of ethnoreligious terrorism is not only and not so much in its logical correlation with other types of terrorism and the allocation of certain specific features on this basis, baltic journal of economic studies 245 vol. 4, no. 4, 2018 as its comprehension, first of all, within cultural and communicative, discourse-psychological nature. taking into account the tendencies of radicalization of ethnoreligious confrontations, the growth of social tension in the european countries against the backdrop of the migration crisis, the maintenance of the high activity of such terrorist organizations as the “islamic state”, “boko-haram” and similar organizations, the in-depth study of the phenomenon of ethno-religious terrorism becomes extremely relevant. the objective of the article is to provide a scientific description and explanation of the essence of ethnoreligious terrorism, dimensions of its reproduction, as well as the formation of the relevant concept on this basis. the empirical basis for this study was the statistical data, analytical reports of interpol, europol, the united nations counterterrorism department, reports in the mass media, expert assessments of law enforcement officers, scholars in the field of religious studies, and cultural studies experts. 2. civilizational preconditions of ethno-religious terrorism ethno-religious terrorism is a very complex phenomenon both in scientific and in purely praxeological and ontological dimensions. the complexity of its research is not only and not so much in the logical correlation with other types of terrorism (or some kinds, there are different approaches in science to categorical dismemberment, differentiation of terrorism) and the allocation of certain specific features on this basis, as in its comprehension, apprehension, above all, discourse and psychological nature. it is no coincidence that the emergence of ethno-religious terrorism is associated with the second half of the xx century. the period of prosperity of postmodernism as a metasystemic and, at the same time, extremely controversial philosophical world-view coincides with this period. it has spread its flexible, incomplete subject and methodological boundaries to all spheres of knowledge and practice without any exception. while the postmodernism to a large extent is not a product of surrealistic intension, but an explanatory category of social status, a deliberate, balanced, largescale intellectual reaction to the given, to the same fragmented reality, which is successfully deconstructed by its adherents. however, without deepening the subtleties of this philosophy, nevertheless, we must emphasize the need to designate at least the most epistemologically significant its provisions, according to rightly observation of s. a. datsiuk, against the background of dysfunctional humanitarian theories in the conditions of a complex and supra-dynamic universe “it is only philosophy that is capable ... of creating new models and new ideas in the form of meaningful fields, where the civilization plays, that is, new perspective spaces, where civilization directs its social energy” (datsiuk, 2017). at the same time, we will deliberately confine ourselves only to a concise, criminologically significant description of the recognized postmodernist postulates, principles that are used not only by artists but also by humanists – researchers of the problem of humanity and sociality in and of itself. it is known, in particular, that one of the epistemological pillars of postmodernism is the primacy of discourse over reality; scepticism in relation to the “truth of life”, based on the value-oriented domination of personal mythology; the desire to challenge the logic of culture, which stands for direct perception of reality. these provisions, analytical approaches are grounded in the works of r. bart, j. baudrillard, g. vattimo, j. derrida, j. f. lyotard, e. fromm, m. foucault, and others. it seems that the borrowing of a non-linear postmodern understanding of the general cultural and psychological context of atomicity, simulation of sociodynamics is useful from the criminological point of view (at least in the course of our study). the operation of such a vision of sociality, based on the pluralism of the realities*, provides an awareness of the absence of the integrity of the world-view, even in conditionally homogeneous social groups, the parallel coexistence of many normative (in the moral, religious, political, legal sense), which are developed in accordance with different scenarios, in different time measurements, and with different meaning (and sometimes without it) of the factor of national statehood, regionalism, individual identity. under such circumstances, more or less largescale social consolidation is a rather great problem. the way of returning to the possibilities of the latter lies in the area of updating of the vital interests, the formation of families, communities and, eventually, states began with their unity. this is the way how terrorism appears in its modern interpretation. at the same time, the multicultural and secularized world is quite naturally very sensitive to the issues of preservation and affirmation, the expansion of the capacities (including state-building) ethnic groups, as well as religious messianism both at the local and global levels. thus, ethno-religious terrorism can be regarded as an element of postmodern culture. it also concerns the culture itself. with unconditional negative significance, * a number of factors contributed significantly to its adoption: 1) the intensive development of information technologies, which served to erode the boundaries of social communities; 2) the cessation of the confrontation of global political ideologies that constructed alternative concepts of the universe; 3) the anomie of transitive societies, which are formed in most world countries in the second decade of the xxi  century, facing the threat of hostilities, climate change, totalitarian practices, multicultural eclecticism, and aggressive reactions on it against the background of migration processes, terrorism, etc. baltic journal of economic studies 246 vol. 4, no. 4, 2018 extremely dangerous, immoral and unlawful, but nevertheless, it is a component of the culture of mankind in the era of deconstruction of reality. in this case, m. n. lipovetskyi rightly observes that mythologies do not die, but they reproduce themselves in language, discourse, social rituals (lipovetskyi, 2004). and if it is necessary – such a discourse is quite possible to construct, actualize, introducing certain social groups into an emotionally resonant activity, and others – into a traumatic, sacrificial state. to achieve such goals, terrorist practices are effective. terrorist activities in fact, both on the one hand and on the other hand, contribute to the consolidation, mobilization and, ultimately, the identification, inclusiveness of individuals to social groups: either “fighters for justice”, “daily creators of exploits” (in the terminology of p. sorokin), or real and potential victims of acts of terrorism. but this is the difference in assessments. the psychological nature of these processes – remains unchanged. in this aspect, in order to illustrate the phenomenon of contemporary terrorism, we consider accurate the opinion of i. hassan, a well-known american social philosophe, who more than forty years ago, convincingly substantiated the grounds and criteria of contrasting postmodernism with modernism. in his more recent works, he demonstrates a certain epistemological reversal within postmodernism and argues about “trusting realism” that replaces postmodern suspicion with respect to reality with aesthetics of trust and concentration on the issues of identity (hassan, 1987). in the same vein, k. stierstorfer also points out that the postmodern aesthetics of trust leads to “credible realism” that redefines the relation between subject and object. the aesthetics of trust, in fact, according to the scholar, is a return to reality, and not to individual objects. in its distant line, such a return will require identification with reality itself (stierstorfer, 2003). it is obvious, talking about terrorism, in no case we do not mean any aesthetics. but considering stated thoughts, it seems important the perception of the idea of such a return or a turn, but not so much the association of the so-called “return to reality” with the aesthetic component of life. a human being in the process of life contacts only with some clusters of his time; others are projected into its social experience by certain traces of activity (in the categories of contemporary conceptualism – fantasies), which in the optics of personal mythology and collective archetypes, acquire diachronically incorrect qualities that entail socio-psychological disorganization, loss of identity. the latter a priori are existentially non-equilibrium states, sources of social activity, including deviant, criminal. moreover, the existence, as an individual experience of reality, is increasingly detached from the latter, losing relations with its discursive basis. the ideas of m. heidegger, formulated in the world-famous work “being and time”, and which served as the foundation for understanding the relationships between the person and the world of the postmodern era, are no longer fully consistent with the after-postmodernist challenges, which are associated, first of all, with the phenomenon of excessive acceleration of time. it is aptly emphasized by l. s. rubinstein, who admits in the form essential to essay (in the original language): “it is difficult to get used to the fact that your biography, your personal material experience somehow imperceptibly become not even the history, but archaeology” (rubinstein, 2004). at the same time, the rate of changes is intensively increased not only in the material, technological, but, most important, in the social environment. it becomes obvious that a conditional modern man does not live by his time. the category of time is in general eroded, loses any stable content, being expansive into an indefinite perspective; ontologization of everyday life has the principled limitation and fragmentation. in the modern sense, the theoretical concept of h. m. minkovskyi (which grounds can already be seen in the writings of j. locke) about a single, integral and indivisible substance, “space-time”, does not work. the consequences of such processes are still not fully understood by science, at least for the reason that they are permanent, constantly changing, continuous. one can certainly state the only thing: we deal with a peculiar social agnosia*, the coexistence of numerous parallel dimensions of social reality, which necessarily, with an objective necessity, conflict with each other. this happens, first of all, at the individual level of being and extrapolated into the group level. at the same time, it is important to emphasize that the achievement of equilibrium, the complementarity of the individual and the joint requires the internalization of stable and, at the same time, discursively simple and individually accessible to the synchronized experience of the systems of value-orientated coordinates. in the sociological and philosophical terminology of conceptualism, there is habitus. moreover, the history proves: nationality and religion are the most powerful (both constructive and destructive) grounds for the formation of the latter. in the projection of the discourse of hostility, these grounds acquire a specific social form and meaning, which are associated in the science with the category of “ethno-religious terrorism”. it is necessary to emphasize the connection between objective disorganization, loss of identity, the existential gap on the one hand and terrorism on the other hand. the first is the cultural and psychological basis for the second. the unity of people around the common goal and the corresponding activity inherent in ethno* agnosia is a term introduced for the scientific treatment by s. freud to denote neurological deviations, which entail an abnormality of the recognition and holistic perception of external objects (sachs, 2017). baltic journal of economic studies 247 vol. 4, no. 4, 2018 religious terrorism, it is possible only on the basis of trust (personal authority, the personal ideology of internalisation, ideology) as the compensation for the loss of social landmarks. it can be based on either the factor of ethnic community, or the desire to reconfigure the world, or local (regional, state, local) structure of relations, first of all – political, according to religious and ideological cliché. ethnos (as a mental and political substance) and religion are one of the basic categories underlying the system of factors of social consolidation. and if a postmodern society needs such a consolidation, there will always be subjects who use this need for personal, corporate, and even state-owned purposes. no wonder un secretary-general kofi annan at the press conference on september 19, 2001, after the notorious terrorist attacks in the usa on september 11, 2001, manifested: “we must break through to the root causes of terrorism ... conflicts, poverty, ignorance and racism. in reality, desperate people become easy prey to terrorist organizations” (annan, 2001). a politician in the most general aspects, but aptly, stressed the social base of terrorism, and its basic, close to the consequences (but remote from the root causes), a set of factors: the loss of identity, exclusivity from the sociodynamic structure, exclusivity within sociological and criminological values (z. bauman, ya. i. hillinskii, r . lenoir, etc.) as a manifestation and product of global inequality, globalization in the whole. therefore, ethnicity, internationalist secularism and religious ideologies are the “whales”, which are traditionally the basis for the structure of social consolidation. at the same time, the beginning of the xxi century was marked by a significant functional subversion of each of them. only intensified terrorist threats put the national security issue in the agenda of international political and legal discourse, determining the corresponding metamorphosis of the domestic and foreign policy life of the countries of the american, european, and asian continents. and this is not an accident. ethnic mentality, embodied in political ideology and religion, is reincarnated in modern times, by reliable means of social updating and mobilization under conditions of anomie. the success (in the functional sense) of their use is confirmed by extensive historical experience. but here it is important to realize a very subtle psychological peculiarity of the theme of ethnos and religion. nowadays they are not only the basis of habitus – the organizing matrix of socio-dynamics. at the present time, they perform a full-fledged role of the so-called ligature. ligatures are called deep socio-psychological relations (skeleton of social association), the presence of which, according to r . dahrendorf, gives the meaning to the choice. they, the scholar remarks, as if strengthen the community and keep their members together. they can be also described as the subjective side of the norms that guarantee social structures (dahrendorf, 2006). r . dahrendorf, as a researcher who thoroughly feels and understands the “breath of postmodern”, also emphasizes that modernity itself is “a departure from adulthood by its own fault”, that is, from the states of dependence created by people (dahrendorf, 2006). in this case, religion is a powerful form of social ligature. “however, this is also the problem of religious fundamentalism, catholic, orthodox, jewish or islamic. in all these cases, the essence lies in the absence – if you want secular – of the independence of the right to believe in god ... in societies threatened with anomie, it is not unexpected that people who do not have certain beliefs are fond of absolute, total ligatures ... they give people arms in order not to feel helpless” (dahrendorf, 2006). however, as in the case of ethnic re-identification (and virtually – in updating the basic vital characteristics to the state of empathy), appealing to religious and ideological connotations is only a mean of social mobilization, but not an end in itself. in this context, e. gellner, to our mind, is right, who relates a similar situation to manipulate as disorganized and anonymous social communities “not with the manifestation of historical rights but with very modern claims to power” (gellner, 2003). therefore, one must agree with v. o. korshunov, who points out that the current state of political terrorism allows us to assert that it transforms the religious and ethnic aspects of social life into a political plane, using ethnic and religious extremism as the basis for the further development of a political struggle in a terrorist form (korshunov, 2008). it is also important to emphasize that the essential element of the psychological content of ethno-religious terrorism, which forms a kind of request for habitus, is fear, permanent anxiety. and this is not about the fear done by terrorist acts among the population of the states, but about the fear of those individuals, who cling to the ideology of terrorist organizations to those quasinormative systems that serve as a marginal alternative to deconstructed reality. as r . dahrendorf observes in this regard, the fear of the threats that bring with them the lack of norms (or their unfair nature, including because of the exclusivity of an increasing number of people from the socio-dynamic structure – author’s note), became a part of the feelings in the life, and it is associated with confusion to have the opportunities to escape the difficult situation (dahrendorf, 2006). people want to be among equal to themselves because only here they feel confident in the face of an infinite world full of dangers. evidently, there are many ethnic conflicts that have erupted in europe and elsewhere. the irish, the basques, the corsicans want to be among them, even if the fee for it should be freedom and well-being. it is not enough to protect the rights of national minorities; there baltic journal of economic studies 248 vol. 4, no. 4, 2018 must be the own state (dahrendorf, 2006). thus, accommodation of interests and the severity of the dangers (first of all, the existential ones) in the modern world without the support is quite natural for people by uniting according to the apparent (though nowadays, it is not as much as in the previous stages of human development) features – nationality, beliefs. relatively massive anxiety in social groups is a psychological foundation, the presence of which enables the formation of a specific habitus through the imposition of terrorist ideologies. in regard to the terrorist ideologies or, more precisely, the ideological basis of ethno-religious terrorism: such a system of coordinates is played by religious beliefs (dogmas) and/or quasi-scientific secular doctrines justifying, substantiating the pretentiousness of a certain type of religious world-view to a practically expressed dominance (in the political, economic sphere) or ethnic as it is – to various objects of reality, mostly to political power. however, ethno-religious terrorism cannot be crucially described in a dichotomic way as a factor and product of confrontation between islam and christian religion or any other global religious ideological systems. the studied type of terrorism is also reproduced on the basis of confrontation between representatives of the same religion, but different schools of thought, patriarchates, etc.: for example, between catholic irish and british protestants, between sunni and shiites, etc. nevertheless, in spite of the substantial variety of different schools of thought, kinds, types, denominations, and other group features of the system of religious norms and values, ethno-religious terrorism in its social and psychological genetics is an integral phenomenon. a clear and understandable view of the world is in its very first principle, where the corresponding complex of religious dogmas is the resources for its construction. it is this view of the world that is the foundation of the same habitus. and the fundamental conflict of origin with the changing, ultra-dynamic modernity lies in it. thus, ethno-religious terrorism in a subjective and, at the same time, an intersubjective meaning appears as a result of the heyday of totalitarian thinking, the desire to “fit” the objective variety of the world under a harmonious and non-alternative system of criteria of the general welfare. in this aspect, we believe that v. havel is right arguing that the most convincing project of “the common benefit” reveals itself to inhumanity at the very moment when provoking the first involuntary death (havel, 2016). 3. dimensions of ethno-religious terrorism there are at least three dimensions of perceiving ethno-religious terrorism: separate (individual – legal, individual and psychological), partial (socio-psychological, group), and general (managerial – political, economic; mass – cultural and psychological). the reproduction of terrorist practices at the individual level, from the standpoint of their performers, is like a manifestation of a destructive, hostile (in the terminology of e. fromm) aggression and self-oriented aggression*. from the standpoint of administrators (senior executives) – is like an instrumental one. this circumstance allows us to ascertain the phenomenologically binary nature of the crimes of ethno-religious terrorist orientation as hate crimes, where the intensification of their reproduction is a purposeful and generally guided political process. in this regard, this cannot be considered as the entire correct standpoint of those scholars, who consider exclusively political technology in the terrorism, including in ethno-religious terrorism. such standpoints suffer from unilateralism. for example, the point of view of s. ashmovi, a former egyptian judge, a scholar of islamic law, who concluded that the militant doctrine of fundamentalists is not faith, but the political ideology, which they use in their own interests (kozhushko, 2000; dmytriiev, zalysin, 2008). in this and similar cases, which are not phenomenological, there is a mix of levels of reproduction and analysis of terrorist practices. for the sake of completeness of the research, such an approach is unacceptable. ethno-religious terrorism on the meso-level of its reproduction, that is, on the group, trans-personal level, is very special, sub-constructivist segment of contemporary discourse, critically separated from the human (the idea of anthropocentrism) of the key factor, the direct experience of the perception and recognition of objective reality and, at the same time, emotionally resonant for the grandiosity of religious and/or ethnic domination in the political, economic, and cultural spheres. at the same time, it is important to note that consolidation within terrorist organizations (quasiorganizations) paradoxically occurs on the basis of the establishment of social opposition, disintegration, the instrument of which is the language of hostility, opposition and aggression, achieved through a special, perspectively oriented interpretation of religious texts and/or historical (quasi-historical) events, processes. such a disintegration tendency of totalitarian discourse is aptly mentioned by s. shvarts, who notes that “... there is one implicit common side in wahhabism, stalinism, * the first in the newest history ethno-religious terrorist attacks involving suicide bombers occurred in the 1980s. so during the 1981 terrorist attack in beirut, a palestinian suicide assassin directed his vehicle to the gateway of the iraqi embassy. the result of the action was the death of 64 people. in april 1983, a suicide bomber representing the islamic jihad organization crashed his minibus into a wall of the american embassy in beirut (180 people died). in october of that year, 241 american soldiers died, when another terrorist from the islamic jihad, who was driving a truck, crashed into the wall of barracks, occupied by us marines. on the same day, another suicide bomber blew up his car, crashing into the barracks of the french army in beirut (dmytriiev, zalysin, 2008). baltic journal of economic studies 249 vol. 4, no. 4, 2018 and nazism. all of them engrain the mentality of “two worlds”, in their followers, that is, two totally separate realities within human society. those were “imperialist camp” and “camp of peace and socialism” in the time of communists. the wahhabites perceived the world in a similar way. they strived for “ummah” (that is, the world muslim community), was self-sufficient, without any external relations ... thus, they split the planet into a “house of war” and “peace house”, or “house of islam”, like communists divided it into two spheres, the capitalist and socialist” (kozhushko, 2000; dmytriiev, zalysin, 2008). ethno-religious terrorism in the socio-energy sense, that is, at the highest, universal level of analysis, is an ambivalent phenomenon: on the one hand, its immanent property is entropy character, the desire for the restoration of the social status quo through the establishment of the dominant world-view (it is to the large extent inherent to the radical-religious target instructions in the terrorist organizational system) and, therefore, the maximum balance of unified social structures, procedures, and the course of history in the whole. 4. sacralisation of social contradictions as an instrument of ethno-religious terrorism it is important to realize from an instrumental point of view that ethno-religious terrorism is largely the result of a kind of sacralisation of the most varied contradictions, first of all – economic and political. it is the sacralisation process is one of the basic factors in the radicalization of the confrontation of various social groups: the conflict between them, whatever it may be, either valid or imaginary, is transferred from the plane of secular interpretations to the plane of existential experiences and thus becomes a complimentary value. sacralisation in its turn allows to actualize the collective empathy, and on this basis – consolidation with the further internalization of the conflict environment. 5. ethno-religious terrorism as a special discourse of hostility another important aspect of the sacralisation of terrorism as a sphere of contradistinction and opposition is the discourse. its value cannot be underestimated. at the proper time e. husserl, j. patočka, m. heidegger in their well-known works convincingly proved the role of qualitative characteristics of the linguistic environment within the content of sociodynamics. therefore, there is no need in this work to address the basic, first of all, philosophical and psychological, categories that determine the discursiveness of sociality and socialization, social and anti-social activity. at the same time, it would be appropriate, in our opinion, to emphasize the ambivalence of discourse, its variability, and contextuality. “what, in fact, was the word of christ? – v. havel wonders. – was it the beginning of the history of salvation and one of the strongest cultural impulses in the world history – whether it was the spiritual embryo of the crusades, the inquisition, the extermination of american cultures, the expansion of the white race, which caused so many tragedies, including the fact that now most of humanity falls into the sad category of the third world?” (havel, 2016). in other words: there is no discourse outside the context. context is the result of the construction of reality, where not so much personal experience, but its interpretations suggested by the external subject occur in the context of the information society. language, as we know, is a transpersonal phenomenon; it does not belong to the subject and is always historically deterministic. according to this, it naturally follows that ethno-religious terrorism is, first of all, a discursive phenomenon and, secondly, as already noted, a product of modern civilization, and therefore, its root causes should be sought in its fundamental contradictions. therefore, one can state that centres of concentration of radical religious and ethnopolitical ideologies and practices are not accidental and totally artificial. they are formed in places, where there are historically grounded reasons for this. 6. the polarization of world perception – the basis of ethno-religious radicalization from the point of view of the phenomenological approach to criminological analysis, we pay attention to the significance of the polarization of a world-view, which necessarily accompanies the ethno-religious terrorism; it is a valid sign of radicalization of any social movement. l. s. rubinshtein, as a thinker who subtly marks the symptoms of social pathologies, has the question on the reason why the rudiment of an archaic tribal consciousness has been actively employed nowadays and the binary opposition “own – alien” has acted on the forefront? why “ours – not ours” is stronger and more respectable than “truth – false”, “good – bad”? (rubinshtein, 2016). although the scholar and philosopher contemplates in the context of the cultural and psychological peculiarities of the contemporary russian society, this problem goes far beyond the latter, which is not unique or something extraordinary in this sense. resentment (namely, this socio-psychological phenomenon describes the determination of the aggressiveness and narcissism of marginal social groups) is a logical continuation and complement of totalitarian and binary thinking, a companion of a diachronic world-view, which, although not limited to ethno-religious platform, however, is the most radicalized and, which is essential, generally managed ontologization in adverse social environments in numerous countries of the world. baltic journal of economic studies 250 vol. 4, no. 4, 2018 understanding of the socio-psychological basis of ethno-religious terrorism is also implied in the same analytical scheme. due to the formation and use of a specific sacralised discourse in a disoriented, anonymous social environment, a social community that may well be non-structured, transborder (for example, in social networks), there are preconditions for a monopoly (as a result of dichotomy and opposition based on ressentiment) of the claims of the carriers of quasi-religious or secular-ethnic (or mixed) world-views on non-alternative domination in the systems of social practices. as a rule, there is no place for a person in such coordinate systems. universalism and fundamentalism of their principles and objectives reach a grotesque scale, an inhuman essence. 7. understanding of ethno-religious terrorism in the narrow sense, ethno-religious terrorism is a kind of aggressive and violent crime, the basis for the restoration of which is the religious-ideological and/or ethnic domination in the systems of social and political practice, which is achieved through intimidation as a result of murders, destruction or damage of property, objects of nature, and interlocutory crimes (financial, human resources, information, and other provision). in the broad sense, ethno-religious terrorism – a phenomenon of modern civilization, a specific segment of inhumane discourse, which is reproduced in the system of ideology of confrontation, hostility, hatred to religious-ideological and/or ethnic, embodied into a social (having a political outlet) activity of the other, and also corresponding anti-social, criminal practice that robust expresses the desire for value and normative homogenization of social life, the affirmation of ethnic identity, and the recognition of its political pretentiousness. 8. conclusions 1. ethno-religious terrorism is a special kind of terrorism, which is allocated on the basis of ideological and motivational components of criminal activity. their basic constructive elements, the categories “ethnos” and “religion”, carry out a philosophical (explanatory) and socio-consolidating function, integral parts of its implementation in the system of ethno-religious terrorist practices are opposition, ressentiment, dominance, and violence. 2. socio-psychological grounds for ethno-religious terrorism are individual and collective fear, anxiety in conditions of anomie and social disorganization. a mean of feeding this state of collective anxiety is the hated (inhuman) discourse of hostility. it is an instrument of categorization and empathy (emotional saturation) of hatred in the form of a clear normative and value system that justifies religious or ethnic pretentiousness, thus forming a cascade of targeted guidance. the latter, as a rule, are extremely simple; do not require a deep understanding. and essentially they do not succumb to it, because they certainly demonstrate their scientific insolvency, immorality. 3. ethno-religious terrorism is a three-dimensional phenomenon, where individual, group and general social aspects are combined. an individual dimension additionally reveals differences in the nature of terrorist practices by the perpetrator of an offense (the act of personal sacrifice) and its organizers, administrators of the highest level (the act of political control). 4. the basis of the controversy of the oppositional, narcissistic in its essence, “unity” of social groups is mainly an irrational, narrative system of impulse, which objectively can be fuelled exclusively by a mythological, planted on an archaic monologue (rigid, not adjusted to the format of dialogue and clarification of semantics, the search for a compromise and conventions) consciousness, by a discursive basis. at the same time, ethno-religious terrorism is a phenomenon of modern culture, civilization in general, which reflects the most fundamental contradictions of its development that threaten the existence of all mankind. 5. a comprehensive strategy to counteract modern, ethno-religious terrorism in europe and in the world should, in general, cover a coherent, coordinated system of level differentiation of the directions and measures of anti-terrorist activities. its development is a matter of further research. references: datsiuk, s. a. novyi slozhnyi mir [a new complex world]. uainfo. pravda iz blohov. retrieved from: http://uainfo.org/blognews/1498207581-novyy-slozhnyy-mir.html (accessed june 23, 2017) (in russian) rubinshtein, l. s. 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(in russian) baltic journal of economic studies 69 vol. 1, no. 2, 2015 methodological peculiarities of rural economy research from neoruralism standpoint nataliia kutsmus1, zhitomir national agroecological university, ukraine abstract. the purpose of the study is to summarize the existing theoretical and methodological approaches to understanding the essence of the notion ‘rural economics’ and to reason that multifunctionality is a precondition of stable development. the methodology of research is based on a systematic approach, according to which rural economics is considered to be an open type of social and economic system that transforms exogenous and endogenous potential of rural territories into a certain level of rural development. the methodology of rural economic development is based on the following methodological approaches: economic, ecological, social and institutional, each one of which completes the idea of interdependence of rural economics and its territorial basis, i.e. rural area. the subject of study is a scientific-theoretical and applied principles of rural economy development. the results of the study demonstrate that agro-centric model of rural economics, the development of which focuses on formation and support of goods safety, is being displaced by multifunctional model in conditions of strengthening of human-centric priorities of the social development. contents of this model lies in the perception of the rural economy as a diversified, multifunctional socio-economic system, whose development aimed at the welfare of the rural population. as the goal of rural economies is ensuring high welfare standards of the rural population, providing interconnection problems in the functioning of the system of rural development policy. it’s proved that the sustainable development of the rural economy it provides for the implementation of the set of economic and socially important function that displays the development of socio-economic system beyond the actual production and contributes to its focus on material and non-material welfare of the rural population. qualitative changes in the properties of the rural economy aiming at self-development and self-organization, maintaining equilibrium, the interaction of all subsystems, requiring a phased increase in the capacity of individuals, households, communities and businesses; further increase links between towns and villages. one of the preconditions for the formation and implementation of multifunctional model of rural economy defined set of social and economic relations that occur in rural areas and connected to their inner potential and human capital, and are aimed at the welfare of the rural population. the article stressed that sustainable development of the rural economy is possible only if economic growth combined with social transformations that accompanied solving socially important issues. however, it is concluded that neorealism is a conceptual framework for evolutionary transition methodologies for sustainable rural development to a higher level of quality – “reasonable” development. practical significance of made theoretical and methodological conclusions regarding selected aspects of the research is to build a philosophical vision of priorities and promising model of rural economies, whose role in economic and social growth of the country is constantly increasing, especially under the influence of available military and political challenges and economic changes. key words: rural economy, rural development, rural community. jel classification: r13, q01, r11 corresponding author: 1 department of management of foreign economic activities, zhitomir national agroecological university. e-mail: kutsmusn@ukr.net 1. introduction the intuitive clarity of the concept of “rural economy” reserves the existence of a number of scientific approaches and attempts to identify its essence, especially in continuous transformations both in the agricultural sector of the national economy and in the social and political processes. the concept of “rural economy” that gradually included in the agricultural and terminology so-called “rural” research, most researchers mainly perceived only as a phenomenon, its content contrary to the urban economy or, conversely, as a synonym of agricultural economics. insufficient theoretical and methodological argumentation of the essence, functions and principles of the rural economy on the one hand, and the lack of a clear common methods of identification, – on the other – lead to the search for new scientific and baltic journal of economic studies 70 vol. 1, no. 2, 2015 theoretical approaches, able to explain the deep meaning of this phenomenon. 2. methodology of research research methodology concepts and views are represented in the works of foreign and domestic scientists with theories of economic development and scientific ideas and trends ruralism and neoruralism that define the principles, functions, models and mechanisms of the rural economy as open socio-economic system. argument theoretical statements and findings was based on a systematic approach that includes specific economic and general scientific research methods. 3. phenomena “rural” and rural economics in terms of the systemic-structural approach, the concept of “rural economy” is derived from the universal category of “economy” and received clarification regarding its criterion of belonging to the “village”. in a general sense the economy (from the greek oikonomia – economic management) – is the most important sphere of public life, which through the use of various resources made production, exchange, distribution and consumption of human activity, emerging and evolving system of productive forces and economic relations, which manage different types of economic laws (mocherny, 2000). in theoretical constructions of the concept of “rural” is considered from the perspective of different social actors and case studies that show that if the “urban” associated with industry and modern technology, expanding their participation in society and its development, everything that relates to agriculture, by contrast, is associated with the simplicity associated with retardation and traditions. in particular, h. crèvecoeur (crèvecoeur, 1981) establishes a series of semiotic binard, which, in his opinion, describing the differences between “rural” and “urban”: rural simple physical labor triviality → → → → urban intellectual mental work sophistication the fallacy of this approach is in points attempts to clear delineation of “rural” and “urban”, because in the context of globalization, the increasing complexity of relationships between different economic systems and business social relationships, the evolution of administrative principles of interaction of communities, leading to a gradual leveling these binary oppositions. in addition, due to the spread of information and communication and manufacturing technologies, new standards of living, there was a historic defeat and the traditional image of the entire “village”, waiver of its location and clear differentiation. as a consequence, one of the dominant ideas of modern scientific research is redefining the concept of “rural”, limiting its use as opposite to the “city”. according to f. entrena, the division into “rural” and “urban” in modern terms is possible only through social order in which the livelihoods of the vast majority of members of the local rural communities linked to agriculture, and they are predominantly autarchic entities, which microcosm built in the economic and social, institutional and cultural dimensions (entrena, 1998). in other words, at the forefront scientist gave the lifestyle category and specify its relatively rural areas. however, use as identity foundations is rural way of life, which is defined as the integral expression made man of personal development, conditions of work and life, which together form the rural social space, returns the discussion to determine the nature of the concept of “rural” in the mainstream of its interdependence ‘ bonds of agriculture. according to h. tavira and f. tapir, though the latter is the dominant activity in rural areas, but not the only, but the traditional primary, secondary and tertiary sectors of the economy under the influence of ideology practical implementation of sustainable development environmental and attached as rural tourism, telecommunications etc. (tavira, 2008). therefore, to identify the meaning of “rural” should be added as methodological approaches and paradigms of social capital and participatory development. in both cases, the emphasis is on local community that focuses on the use of mechanisms of participation in the formation of social capital and different production capacities are adapted to possible commercial competencies and thus promote self-development. developing the idea of the existence of the phenomenon of “rural”, an american scientist g. nelson in his book “towards the new ruralism” (2009) argued that “rural” research should include ethnographic observation to ensure proper complexity, historical observation to gain depth literary and cultural observations for qualitative evaluation methods of display characteristics of rural society, as well as multi-vector theoretical observation in order to create a true sense principles and supplement existing knowledge in all rural (nelson, 2009). 4. ruralism and neoruralism scientific current, so-called “rural” research linked with numerous works of domestic and foreign scientists, scientific ideas that form the theoretical and methodological postulates of the theory ruralism. ruralism as social and political philosophy, considering the rural way of life in close relationship with agriculture and in areas remote from urban centers, and finds it more complete and stable than life in the city. outside of research, covering the concept of “rural” ruralism can be seen as an ideological current that promotes principles of social life peculiar to rural areas. ideas ruralism suffered harsh criticism on the part of j. bassett, who see it as a ubiquitous form of discrimination (usually unrecognized) into the residence in the rural areas, which often affects those people who have suffered other forms of discrimination based on gender, race, class and etc. (basset, 2003). the basis for discrimination while serving traditional attributes of “rural” that lead to the peasant class inferiority compared to the urban population simplicity, ignorance, failure to mental work and so on. baltic journal of economic studies 71 vol. 1, no. 2, 2015 focusing on agriculture and rural generated by his lifestyle, in essence ruralism approaching agrarianism. t. hovan explained last ideology with the following provisions: firstly, agriculture is the only occupation that gives full independence and self-sufficiency; secondly, a farmer holds in society a strong, stable position because it has a sense of identity, historical and religious tradition, harmony of life; thirdly, farming communities in their attitudes to work and co-operation is a particular model of society; fourth, the spiritual benefit of farmers created as a result of direct contact with nature; fifthly, farming is a way of life, able to create the ideal social values (govan, 1964). evolution theory and methodology rural research has led to the emergence of the concept of the rural economy. one of the most common methodological approaches to the study of the content and features of rural economy is its interpretation as an aggregate of economic entities as participants of economic activities located in rural areas that come about in the economic relations of production and exchange of products and services. this approach, which is antagonistic towards the urban economy, rural economy treats as unique thanks rural characteristics of its components: accommodation in rural areas, direct or feedbacks from agricultural production, use of resources and rural residents, etc. (syusyura, 2010). in organizational terms, the rural economy – a set of enterprises, institutions and organizations (or units), individuals – entrepreneurs, other businesses and households located in the administrative-territorial unit or on the economic territory of some settlements in rural areas (translocal, 2012). keeping the idea of the close relationship the rural economy and the environment, representatives of the american school rural studies characterized the essence of the rural economy as a system which provides a harmonious relationship between the regulation of agricultural flora and fauna on the one hand, and human environment – on the other. this function is recognized as a key in the creation of economic power by which farmers develop selection methods nomenclature and methods of production to maximize their own profits and prosperity of the nation (ise, in 1920). n. drozdov in his studies emphasized the importance of the rural economy as a sector of the national economy, thus giving it as a socio-economic system of management in rural areas, providing maximum effect of life of the village, such features as the relative isolation, openness and dynamism, ordering. a key feature of the rural economy the author found a combination of economic and social activities (drozdov, 2013). d. syusyura when trying to identify the meaning of “rural economy” by establishing goals of its operation, composition, quality performance management process allowing for the current stage of the evolution of economic relations in the countryside offered quartet scientific views that characterize it from the standpoint of structural, process, system and functional approaches (syusyura, 2010). from the standpoint of the process approach rural economy – this whole art directed and harmonious (sustainable) use of natural and acquired resources and opportunities in rural areas for livelihood (human). in terms of systematic rural economy categorized open economies, including subsystem resources and the rural areas, and management subsystem usage. functional approach to understanding the essence of the rural economy stresses economic relations in rural areas aimed at the satisfaction of prevailing socio-economic and natural environment. the content of the structural approach to the interpretation of the rural economy is expressed through a set of different subjects of economic activities using natural and acquired resources and opportunities in rural areas. a more detailed concept of structuring the rural economy revealed in studies g. taylor offers three possible that, in his view, options: the first of them under the rural economy is formed by economic agents associated with agriculture; the second option structure of the rural economy include entities other than the agricultural activities as their hired managers; third denies the existence of the rural economy, but argues about the existence of which is formed from a combination of traditional economy and agriculture (taylor, 1911). thus, the position of the author actually identifies the agrarian rural economy, ignoring the nonagricultural activities that are an indispensable part of the economy of rural areas, as leader of the peasants living environment. outside the concepts of traditional managerial discourse differentiation and systematization of theoretical principles of individual studies rural economy allows to distinguish methodological approaches such as: economic  – rural economy – an economic system open, objective of which is to ensure economic growth of rural areas; eco – intensification of economic activities within the rural economy increases the load on the environment and threaten biodiversity; institutional – accentuation attention to the lack of adequate forms of self-governance and economic development processes in rural areas that form the endogenous potential of rural economy; social – rural economy acts as a mechanism for implementing rural public goods through the activity of rural society. 5. rural areas as a basis for rural economics despite a substantial diverse direction analyzed theoretical and methodological approaches integrating ideological basis of existing studies rural economy are its territorial area of reference to rural areas. rural area as a territorial basis for the development of the rural economy, is a complex multifunctional natural, social, economic, industrial and economic system with its inherent quantitative structural, natural and other characteristics of m. baranovskyi identifies several approaches to the definition of “rural areas” – administrative, industrial, settlement, territorial, complex. the generalization of these approaches the author gives grounds to state that firstly, rural development is a complex entity which performs multiple functions; secondly, they include territory outside baltic journal of economic studies 72 vol. 1, no. 2, 2015 urban areas; thirdly, they include not only the spatial area as a basis for development of the agricultural sector and rural settlements and rural society and entities (baranovskyi, 2011). thus, the rural area is not only a particular area but also a set belonging to her economic and human resources availability, and the possibility of combining the use of which provide conditions for endogenous development of rural economy. from the standpoint of the territorial approach, based on the above methodological features modern vision of rural determining fair to the rural economy as “... a combination of types of economic activity on natural and acquired resources and the rural areas; art of purposeful and harmonious use” (syusyura, 2010). thus for the development of the rural economy determined balancing personal interests of individuals and the general interest of local communities to protect the environment, social cohesion and economic growth as well as focus on the mobilization of joint efforts in the implementation of local development projects. it should be noted that the feature of the concept of the rural economy, formed under the influence of methodologies ruralism is exclusiveness agrarian centric model of operation. agrarian centrism considered by modern scholars through the recognition of agriculture engine in ensuring social progress in rural areas, the identification of agriculture and villages dominate the politics of rural development tasks such as ensuring proper development of agriculture, increase agricultural production, solve the problems of food security (baranovskyi, 2011; polishchuk, 2014). despite the closeness of the relationships of man with nature, particularly underlined in the concept agrarian centrism, it has a distinct relationship to the capitalist model of economy. in particular, the japanese scientist a. tsutomu stated that each stage in the evolution of capitalism was characterized by a special form agrarian centric and problems arising in the agricultural sector is not isolated and considered it as part of a dynamic political economy (barshay, 2004). based on the above, it is obvious that agrarian centric provides not only focus on agriculture as a key sector of the economy formed in rural areas, but special way of life dependent on it as in material, so also in social and cultural understanding. therefore, agrarian centric is not only a kind of paradigm model of rural economic system, where agriculture is the top development but also the current world outlook, reflecting the dominance of the environment in general and agricultural production, particularly in human life support. accordingly, based on the model agrarian centric rural economy put a set of entities whose activities are directly or indirectly linked to agriculture, carried out in rural areas and aims to increase the competitiveness of agricultural production by increasing production volumes and its intensification, income growth in the agricultural sector. in terms of scientific criticism can be said about unrealistic, narrowness this approach as being in rural areas and those economic entities that do not meet the outlined framework, confirming the case for other models of development and the rural economy other than agrarian centric. therefore, in this study as the methodological basis used by the perception of the rural economy as a system of different sectors and activities and socio-economic relations in rural areas aimed at the welfare of the rural population. the last statement that provides prosperity in implementation, not only physical but also social and spiritual needs of man, in fact, makes the development of the rural economy to provide high, progressively-oriented standards for rural development. the origins of scientific and practical problems of formation and implementation of rural development policy date from the second half of the twentieth century. in particular, dr. w. johnston in his book “agriculture and structural transformations in developing countries” (1970) considered rural development as part of the structural transformations that lead to the diversification of the rural economy, reducing the weight of agriculture in providing employment and production ( johnston, 1970). under the influence of evolutionary changes in the process of european integration in the agricultural sector rural development entered a qualitatively new meaning and is characterized as integrated (interdisciplinary) process that includes not only economic indicators of growth and development of agricultural production, but also environmental safety and adaptation of rural communities to the changing conditions functioning. an important role in political partnership and expand the range of influence of knowledge economy on rural development and capacity build its capacity through the latest technological advances. native school of theorists rural development stresses human centrism guiding the process. in particular, о.  borodina rural development would take “a process which ensured harmonious socio-economic progress in rural areas on the basis of self-organization of rural communities with the greatest possible use of factors of endogenous development (local assets) when combined with external opportunities” (theory, 2010). in addition, the author’s previous positions, t. zinchuk notes that the new rural development paradigm instead agrarian centrism human centrism is when a person has to form itself around him an environment ensuring the quality of life and the state as a subject of management should create only the necessary conditions for this in the form of public goods (zinchuk, 2010). thus, the set of existing scientific and theoretical views on the problem of understanding the essence of rural development proves direction of the process to implement the needs and interests of the rural population and determines actively contributing village community, which, due to the use of economic system of rural areas existing endogenous and debt exogenous capital claims to a certain level of social security and material goods. positioning rural economy as a socio-economic system open, transforming endogenous and exogenous potential baltic journal of economic studies 73 vol. 1, no. 2, 2015 of rural areas in some level of rural development (fig. 1), justified to the identification of methodological bases its development on the ideological provisions of the theory neoruralism, which is an evolutionary consequence of the deepening of the traditional agrarian centrism concepts of rural economy, focused on agricultural production and food security. in addition, it displays the development of socio-economic system beyond the actual production, focusing on providing material and non-material well-being of the rural population. neoruralism – as configuration practice alternative social dynamics – would expand the target agrarian centric framework of rural economy on the basis of its versatility. in other words, neoruralism – a conceptual framework for evolutionary transition methodologies for sustainable rural development to a higher level of quality – “reasonable” development (kraus, 2013), that is, base on innovation and knowledge; transfer the benefits of urban space for life in terms of environmentally favorable agriculture environment inherent in rural areas. philosophy neoruralism theory defines failure and challenges discrepancy globalized humanistic model of society agrarian centric rural economy and gave it a new logic – the logic of versatility. it is about becoming multifunctional model of rural economy, which is aimed not only at the development of social and economic system of open type, which provides transformation of capital of rural areas in a related level of agricultural development rural areas ednogenic potential – a bunch of assets formed on the basis of internal natural, resource, technological, human, innovational potential external environment exogenic potential exogenic potential rural economy social and economic growth happening due to the development of human and social capital of rural society rural development table 1 comparative characteristics agrarian centric and multifunctional models of rural economy comparative features agrarian centric model multifunctional model purpose revenue growth in the agricultural sector economic growth in rural communities while preserving the environment and goal – promoting investment in the agricultural sector; – income support agricultural producers. – improving the competitiveness of rural areas as places of residence and the business environment; – ensuring equal conditions for all sectors of the rural economy. function – production of agricultural food products; – creation of raw materials for processing plants; – forming the export potential of the agricultural sector; – ensuring agricultural employment; – ensuring food security. – ensuring the well-being of the population; – ensuring food security; – promoting regional and general national economic growth; – reducing the gap between urban and rural areas in the level of socio-economic development. role of rural area the territorial basis, providing a set of inputs for agricultural development. the territorial basis, providing a set of endogenous resources for progressive rural development role of trades of economy – agriculture a key sector of the economy; – integrating agriculture and agribusiness. diversified system of equal conditions for all participants of economic relations human role human a factor of effective management and development of agricultural production human the media production and public relations, the ultimate goal of social development principles of development – the economic benefit; – profit maximization; – economies of scale; – using advanced production technologies; – social responsibility farmers. – management of internal resources; – human centrism; – diversification of economic activities; – effective employment; – social responsibility. fig. 1. structural and logic model of rural economics as a social and economic system of open type baltic journal of economic studies 74 vol. 1, no. 2, 2015 agriculture, the implementation of its economic content in the national economy, and many-sided promotion of life and the rural population, including – and outside agriculture. 6. multifunctional model of development of rural economics the deep meaning of the phenomenon of rural economy by its versatility manifested in the fact that despite the industrial nature, it focused on people and create better conditions for its life (tab. 1). therefore, the main conditions for sustainable development of the rural economy is a gradual increase in the capacity of individuals, households, communities and businesses; further increase links between towns and villages. however, the sustainability of the process regarding the rural economy as a system provides qualitative change in its properties, particularly aimed at the capacity for selfdevelopment and self-support equilibrium, the presence of the interaction of all subsystems (fig. 2). the versatility of the rural economy is closely linked not only to the increase of its economic importance, but goals: improving the competitiveness of rural areas as places of residence improving the competitiveness of rural areas as business environment ensuring equal conditions for development of the rural economy sectors rural economy development factors economic growth of rural society under terms of preservation of natural environment and ensuring social protection target principles of development: progressiveness; integration of people; complementarity and subsidiarity; sustainable industry development; differentiation of local content policy; tools for development: diversification of rural economics development of local selfgovernments computerization of rural economic space indicators of rural development: economic: the volume of production and services in rural areas; the structure of land resources; level of financial stability subjects of rural entrepreneurship; the growth rate of investment per capita; consumer price index. social: lifelength; provision of public goods; the level of social tension; level of unemployment; the level of poverty; equality of rights and freedoms; the level of social capital; per capita revenues; the level of activity of local initiatives. environmental: the level of load of subjects production on the environment; maintenance of ecological balance; the preservation of natural soil fertility; the preservation local and natural amenities; promoting ecological culture among the rural population. internal: production potential; the processes of cooperation, integration and diversification; economic ties and relations; investment attractiveness; development of innovations; social environment of rural areas. external: climatic conditions; budget, credit, tax policy; scientific and technical progress; state agrarian policy and rural development; state protectionism. fig. 2. conceptual model of stable development of rural economics baltic journal of economic studies 75 vol. 1, no. 2, 2015 also with the expansion of social mission, as economic growth in rural communities increases the economic potential of rural areas and promote temperance negative social and demographic trends that threaten the existence of the village. based on this principled position, it can be argued that the multifunctionality of rural economy is a prerequisite of sustainable development. the concept of sustainable development triad “social sphere  – environment – economy” takes on unique features – its purpose is to ensure the well-being of present and future generations through natural and ecological life support systems, in which the economy will play a role in engine development (shubravska, 2005). in other words, sustainable development is ensured conditions for economic growth combined with social transformations that accompanied solving socially important issues. 7. conclusions and perspective for further development regarding sustainability of the rural economy is of particular importance due to the exclusive proximity of the system to the environment on the one hand, and the critical problems of socio-economic development of the village – on the other. on this basis, the sustainability of the rural economy beyond the ability of the system to keep steady balanced economic growth that does not threaten the safety of the environment, as it implies achieving convergence of rural communities, maintaining social stability, ethical standards and cultural diversity, rural way of life overall, the social consensus based decision-making involving all members of the rural community. agricultural evolutionism in the plane of theoretical concepts and methodological principles of formation, operation and development of the rural economy contributed to the emergence of modern multifunctional model that takes into account not only the agricultural component of the economic system, but also a set of social and economic relations that occur in rural areas connected with their inner potential and human capital and aimed at the welfare of the rural population. however, implementation of this model in the practice of rural economies requires formation of the institutional environment, develop mechanisms for activation of local initiatives and enterprise, redefining the content of state agrarian policy to supplement its social sector priorities that determines the prospects of further research direction launched. references baranovskyj, m. (2011). rural areas of ukraine: level of development, transformational changes, concepts of reforming. naukovyj visnyk nacionalnogo universytetu bioresursiv i pryrodokorystuvannya ukrayiny. 163(1), р. 19–25. barshay, a. (2004). the social sciences in modern japan: the marxian and modernist traditions. university of california press. basset, d. (2003). ruralism. 88 iowa low review. borodina, o. & prokopa, i. (ed.). (2010). theory, policy and practice of rural development. kyiv, in-t ekon. ta prognozuv. crevecoeur, j. (1981). letters from an american farmer and sketches of eighteenth century america. new york: penguin. drozdova, m. (2013). the role of innovative strategies in rural economy development. ekonomyka y socyum. 4(9), р. 384–387. entrena, f. (1998). cambios en la construccion social de lo rural. de la autarquia a la globalizacion. madrid, tecnos. govan, t. (1964). agrarian and agrarianism: a study in the use and abuse of words. journal of southern history, 30(1), р. 35–47. hedberg, c. (ed.). (2012). translocal ruralism: mobility and connectivity in european rural spaces. springer. ise, j. (1920). what is rural economics? quarterly journal of economics, 34, р. 300–312. johnston, b. (1970). agriculture and structural transformations in developing countries: a survey of the research. journal of economic literature, 8(2), р. 369–404. kraus, s. (2013). a call for new ruralism: reinvestment in metro-region agriculture is integral to metro-region sustainability. smart growth network: national conversation on the future of our communities. [electronic resource]. – retrieved from: www.sagecenter.org./new-ruralizm.pdf mochernyj, s. (ed). (2000). ekonomichna encyklopediya: u trox tomax. t. 1 vydavnychyj centr “akademiya”. nelson, g. (2009). towards the new ruralism. harvard university. polishhuk, ya. evolution of rural development in ukraine: eurointegrational survey. innovacijna ekonomika, 3 (52), р. 119–126. shubravska, o. (2005). sustainable economic development: concept and direction of research. ekonomika ukrayiny, 1, р. 36–42. syusyura, d. (2010). to the question of rural economy identification. problemyi sovremennoy ekonomiki, 3, р. 418–420. tavira, n. & tapia, f. (2008). the emergence of the relation between rural development and gender. uaemex, 48, р. 203–234. baltic journal of economic studies 76 vol. 1, no. 2, 2015 taylor, н. (1911). the place of economics in agricultural education and research. wisconsin agricultural experiment station research bulletin, 16, р. 94–130. zinchuk, t. (2010). transforming of agrocentrizm into policy of rural economy. visnyk zhytomyrskogo nacionalnogo agroekologichnogo universytetu, 2 (27), р. 3–12. наталия куцмус методологические особенности исследования сельской экономики с позиций неорурализма аннотация. целью статьи определено обобщение существующих теоретико-методологических подходов к пониманию сущности понятия «сельская экономика» и обоснование многофункциональности как условия обеспечения устойчивого развития. методология исследования базируется на системном подходе, с позиций которого сельская экономика рассматривается как социально-экономическая система открытого типа, трансформирующая экзогенный и эндогенный потенциал сельских территорий в определенный уровень сельского развития. формирование методологии развития сельской экономики увязывается с такими методологическими подходами, как: экономический, экологический, социальный и институциональный, каждый из которых дополняет идею взаимозависимости между сельской экономикой и ее территориальным базисом – сельской местности. предметом исследования выступают научно-теоретические и прикладные основы развития сельской экономики. результаты исследования доказывают, что на смену агроцентрической модели сельской экономики, развитие которой фокусируется на формировании и поддержании продовольственной безопасности, в условиях усиления человекоцентрических приоритетов общественного развития приходит многофункциональная модель. сущность этой модели заключается в восприятии сельской экономики как диверсифицированной, полифункциональной социально-экономической системы, развитие которой направлено на обеспечение благосостояния сельского населения. в качестве цели развития сельской экономики определено обеспечение высоких стандартов благосостояния сельского населения, что формирует взаимосвязь проблемы функционирования этой системы с политикой сельского развития. обосновано, что обеспечение устойчивого развития сельской экономики предусматривает реализацию множества экономических и общественно значимых функций, а также выводит процесс развития этой социально-экономической системы за пределы собственно производства, способствует ее фокусировке на материальном и нематериальном благосостоянии сельского населения. качественные изменения свойств сельской экономики, направленные на саморазвитие и самоорганизацию, поддержание состояния равновесия, взаимодействие всех подсистем, требует поэтапного повышения потенциала отдельных людей, домохозяйств, общин и предприятий; дальнейшего наращивания связей между городом и деревней. одной из предпосылок формирования и реализации многофункциональной модели сельской экономики определена совокупность социально-экономических отношений, возникающих на сельских территориях и связанных с их внутренним потенциалом и человеческим капиталом, а также нацеленных на обеспечение благосостояния сельского населения. в статье отмечается, что устойчивое развитие сельской экономики возможно лишь при условии экономического роста в сочетании с социальными преобразованиями, сопровождающиеся решением общественно важных вопросов. в то же время, сделан вывод, что неорурализм является концептуальной основой для эволюционного перехода методологии устойчивого сельского развития на более высокий качественный уровень – «разумного» развития. практическое значение сделанных теоретико-методологических выводов относительно данной проблемы исследования заключается в формировании философского видения приоритетов и перспективной модели развития сельской экономики, роль которой в экономическом и социальном росте страны постоянно усиливается, особенно в условиях существования военно-политических вызовов и экономических изменений. baltic journal of economic studies 74 vol. 4, no. 3, 2018 corresponding author: 1 volga research institute of economics and organisation of agroindustrial complex. e-mail: nii_apk_sar@mail.ru orcid id: http://orcid.org/0000-0002-5534-9424 wos researcherid: j-1962-2018 2 volga research institute of economics and organisation of agroindustrial complex. e-mail: nii_apk_sar@mail.ru orcid id: http://orcid.org/0000-0002-5739-9003 wos researcherid: i-9774-2018 3 volga research institute of economics and organisation of agroindustrial complex. e-mail: nii_apk_sar@mail.ru orcid id: http://orcid.org/0000-0002-9959-9628 wos researcherid: i-9767-2018 doi: https://doi.org/10.30525/2256-0742/2018-4-3-74-79 method of introducing innovation to land use in agriculture evgeniy zavorotin1, alla gordopolova2, nataliya tiurina3 volga research institute of economics and organisation of agroindustrial complex, russian federation abstract. the purpose of the research is to make the method of introducing innovations, taking into account its economic, environmental, and social aspects. methodology. to carry out the research, a multilateral approach to assessing the choice of technology, changing the operational capabilities of technology, get an integrated effect is applied. results. the method of introducing innovations is recommended to take into account the quantitative and qualitative reproduction of the technical base of agricultural production. the method consists of five stages, including the division of the target into macro-, meso-, micro-levels, remote observation of changes in soil characteristics, consideration of the interaction of participants in land relations during the creation of projects, the use and next adjustment of the results of scientific achievements, comparison of potential benefits with actual data. it contains an economic calculation that confirms the advantage of minimal tillage over traditional technology. the authors have proved the expediency of using the sowing complex of the sc “kuzbass”, reducing the cost of labour, the purchase of fuel and fuels and lubricants and others. the total savings of operating costs will be 1628.1 roubles from 1 hectare, or 51.6%. the development of new technologies in agricultural land use makes it possible to obtain economic benefits, ecological and social effect. the scientific novelty of the research is to improve the method of introducing innovations, taking into account economic, ecological, and social aspects by streamlining the interrelated processes of using scientific achievements in agricultural land use: structuring the goal, obtaining analytical information, the use of a multilateral approach to the evaluation of technology choices, change in the operational capabilities of technology, the establishment of an integral effect. practical implications. the author’s method is recommended to state bodies, agricultural organizations in order to develop organizational, managerial, socio-economic, ecological, technical and technological areas for increasing the efficiency of agricultural land use, contributing to optimization of working conditions, preserving and improving the quality of the land, use of resource-saving equipment and of the progressive achievements in agriculture, etc. conclusion. the research defines the economic indicators of innovative soil cultivation technology, lists the ways to achieve environmental benefits and social efficiency. key words: method, innovation, minimal tillage, land use, agriculture, efficiency. jel classification: c40, o31, q15, q16 1. introduction currently, the state of land use is characterized by heterogeneity, instability, uncertainty of further development. it is affected by the destruction of the cover, salinization, desertification, etc. more than a third of the country’s soils of agricultural land in the country are subject to degradation processes. agricultural machines strongly compact the arable land. soil fertility is reduced as a result of the permanent cultivation of sunflower (zavorotin, afanasief et al., 2017). in this situation, effective agricultural land use is necessary. in our opinion, it should be implemented through amendments and additions to legislative documents, baltic journal of economic studies 75 vol. 4, no. 3, 2018 redistribution of financial resources, application of administrative, economic instruments for regulating land conservation activities, technical and technological modernization (zavorotin, gordopolova et al., 2017). thus, the purpose of the research is to make a method for increasing the efficiency of agricultural land use. the objective of the research is to scientifically substantiate the need to apply innovations in agricultural land use. the scientific novelty of the method of introducing innovations consists in justifying the application of soil-saving, soil restoration technologies, creating investment attractiveness of innovative projects, preventing deterioration of physical properties of the soil, reducing crop losses, enhancing the agricultural land use culture, improving social and labour and other relationships. 2. theory the introduction of modern high-performance equipment and the application of innovative technologies make it possible to implement the priority areas of the strategy for scientific and technological development of the russian federation and ensure an increase in the efficiency of agricultural land use. efficiency is traditionally determined by the ratio of the result obtained to a unit of resource or production costs. in our opinion, effective agricultural land use should be systemic, an organized use of the functional potential of lands with minimal costs and negative consequences, most adapted to legal, economic, environmental, and social conditions. many modern foreign scientists were engaged in the identification, structuring of the main issues of the effectiveness of agricultural land use, determination of ways to solve them. i. kühling, g. broll, d. trautz have quantitatively evaluated the changes and patterns of decreasing the intensity of land use and proved the importance of developing a strategy for sustainable land management (kühling, broll & trautz, 2016). r.i. rozum, i.v. liubezna, o.m. kalchenko determined the influence of environmental and economic factors on the quality and fertility of soils, the efficiency of land use, confirmed the need to create a material base for increasing the level of economic returns of the land (rozum, liubezna & kalchenko, 2017). b.j. cade-menun, l.d. bainard, k. laforge, m.  schellenberg, b. houston, c. hamel established an increased degradation of soil after cultivation of sunflower and an increased compaction of soil by reason of heavy agricultural technics (cade-menun, bainard et al., 2017). the conservation and restoration of soil fertility, the construction of models for assessing the intensity of degradation processes, are examined by d.а. davidson (davidson, 1980), s. assouline, g. govers, m.a. nearing (assouline, govers & nearing, 2017). the formation of legal, process-functional, normative, comparative approaches to the creation of methods to increase the efficiency of agricultural land use is required. 3. structure of the author’s method the author’s method of introducing innovations argues the need for scientific achievement for the use of agricultural land for agrotechnical work with the preservation of productive properties of the soil, improving the working conditions of workers. the method of innovation introduced by the authors is designed to improve the efficiency of agricultural land use. it consists in carrying out interrelated successive actions: 1) setting purposes and objectives of the introduction of scientific developments at mesoand micro-levels – technical re-equipment of agricultural organizations for soil conservation activities; 2) monitoring – identification of the possibilities of preserving land quality indicators, including on the basis of results of land-distance methods of detailed study of agricultural land, analysis of environmental problems in the agriculture of the region; 3) interaction of participants in land relations with state scientific institutions – justification of the choice of ways of equipping with material and technical means; 4) adaptation of developments to the conditions of the region – the exploitation of equipment with its further improvement; 5) estimation of the cumulative effect – getting economic, ecological, social efficiency. 4. features of the author’s method technical erosion leads to a significant decrease in soil fertility, which is a prerequisite for the development of relevant scientific provisions and the division of the overall objective of this method into separate blocks (figure 1). modern high-tech products for the implementation of diagnostics with elements of accurate farming involve scanning the soil cover, monitoring the change in the economic status of lands, etc. they perform operational processing, import, structuring and preserving reliable analytical information. this allows you to choose the optimal management decisions that are consistent with the goals and tasks set at the first stage. relations between the state, scientific organizations, manufacturers of agricultural machines, financial institutions, and participants in land relations are formed on the provision of mobile technical means. the choice of methods and tools can be automated with the use of information and communication technologies. the input parameters are set by the results of the agroecological assessment (survey) of agricultural land. at the output, projects are being developed to implement the results of scientific achievements. financial institutions provide baltic journal of economic studies 76 vol. 4, no. 3, 2018 an opportunity for manufacturers, owners, land users, landowners, tenants to obtain appropriate funds. in the process of constant accumulation of data on the application of new resource-saving technologies in agricultural land use, scientific institutions assess characteristics of machines and technologies taking into account the natural and climatic conditions. in this case, there is a need to improve the structural elements of the machinery in use, improve products, materials, technologies in order to obtain maximum effect. for example, in areas of risky farming, the imperfection of sowing complexes is manifested; they should be supplemented with appropriate devices. adding technological elements will slow the movement of aggregates on the field, which can increase costs and the number of passes. the consolidated assessment of economic, environmental, and social indicators should be carried out taking into account the results of activities carried out at previous stages of realization of the method. 5. substantiation of the use of technical means an example of innovative technology in agricultural land use can be minimal tillage in the cultivation of crops with the use of sowing complexes (sc “kuzbass”, kemerovo, russia), including the location of the object through the global navigation satellite system (glonass, russia). traditional tillage includes a combination of technological operations – from disking to sowing – involving at least 5 machine-tractor aggregate (chernyaev, zavorotin et al., 2012). in one pass of the sowing complex, the following operations are performed: cultivation, sowing, fertilization, harrowing, reconsolidation, land levelling. innovative technology can have several advantages: economic – decrease costs by reducing equipment units, the number of operations, ecological – conservation of the humus horizon, soil moisture conditioned to the limitation of the effect of erosion and deflation, social – the absence of the need to hire workers to perform activities on the classical scheme without loss of productivity. the economic estimation of the relevant indicators for the sowing of cereals with traditional or minimal tillage of soil is presented in table 1. thus, the most significantly reduced costs for the purchase of fuel and fuels and lubricants – by 1177.4 roubles per hectare, or 88.2%. despite the high cost of the sowing purpose: development of the science of land use and exploitation of agricultural machines level: federal objective: to achieve the innovation level of agricultural production level: regional objective: the introduction of new machines and technologies in the agricultural land use level: enterprises, farms objective: increase soil fertility, crop yields economic aspect: attracting and allocating funds for growth of economic potential economic aspect: distribution of investment resources economic aspect: increase in profit, decrease in costs ecological aspect: intensive cultivation of agricultural crops taking into account the standards of ecological safety of land use ecological aspect: improvement of the quality of agricultural land ecological aspect: avoidance of penalties for violation of land legislation social aspect: formation of a land use culture social aspect: improving the quality of life of owners, land users, landowners, tenants and rural population social aspect: improvement of working conditions figure 1. structuring of the general purpose of the method of introducing innovations into agricultural land use by macro-, meso-, and micro-levels proposed by the authors source: the author’s development baltic journal of economic studies 77 vol. 4, no. 3, 2018 complex, significant costs for its maintenance, repair, storage, and depreciation in comparison with traditional tillage, the total cost savings of operating costs will be 1628.1 roubles per hectare, or 51.6%. the economic benefits can be calculated on the basis of typical investment indicators (pototskaya, 2013). investment indicators of minimum tillage are presented in table 2. so, for the third year of operation of sc-8.5 “kuzbass”, there will be a full compensation of investment costs, net present value (integral effect) will amount to 749.4 per 1 hectare, roubles. the ecological estimation consists of the assessment of the effectiveness of agricultural land use. it will have a systemic character if the coefficient of the ecological component is determined – the ratio of the actual percentage of the increase in soil density to the permissible (10%) established on the basis of kaczynski research (1965). with traditional soil cultivation, machine and tractor aggregate compact the soil by 15-20%, which reduces the yield of cereals by no less than 5% (table 3). when using sc “kuzbass”, the arable is compacted to 0.05 g/cm3, or 4.17%, less than when applying classical processing methods, which has a positive effect on the yield of grain from 1 hectare. innovative technology leads to satisfactory agrotechnical conditions since the calculated change in soil density does not exceed the normative value of the coefficient of the ecological component. the ecological effect consists in reducing the negative impact of machinery on the ground, preventing compaction and destroying the structure of the soil. the social estimation consists of identifying the most important problems in this area of innovationnon-optimal number, inappropriate qualification of employees, inadmissibility of the proposed changes by workers (iurkova & serdobintsev, 2016). the revealed interrelation of the accepted design decision with possible consequences is presented in table 4. table 1 operating costs for traditional or minimal soil tillage calculated by the authors* technological operation machine-tractor aggregate cost per hectare, roubles wages of workers energy resources depreciation maintenance, repair, storage of equipment other total traditional technology disking tractor t-150k + disc harrow ldg-15 12.5 89.5 56.8 33.9 96.3 289.0 plowing tractor t-150k + plow pln-6-35 111.9 802.3 104.7 146.6 582.7 1748.2 harrowing tractor t-150k + coupling sp-11 + harrow bzss-1.0 9.1 65.1 10.6 9.8 47.3 141.9 cultivation tractor t-150k + coupling sp-11 + cultivator kps-4 15.6 112.1 47.8 50.2 112.9 338.6 sowing tractor t-150k + coupling sp-11 + sowing szs-2.1 37.2 266.5 58.4 62.5 212.3 636.9 3154.6 innovative technology combined tractor t-150k + sowing complex sc-8.5 “kuzbass” 22.1 158.1 345.1 492.4 508.8 1526.5 1526.5 saving costs per 1 hectare, roubles 164.2 1177.4 –66.8 –189.4 542.7 1628.1 *note: the authors made a calculation based on the data of the agricultural organization of the saratov region table 2 investment indicators of minimum tillage* name of the indicator step 0 1 2 3 inflow (cost savings) per 1 hectare, roubles – 1628.1 1628.1 1628.1 outflow (investments) per 1 hectare, roubles 2634.4 – – – cash flow per 1 hectare, roubles –2634.4 1628.1 1628.1 1628.1 discount coefficient 1 0.833 0.694 0.579 discounted cash flow per 1 hectare, roubles –2634.4 1356.2 1129.9 942.7 accumulated discounted cash flow per 1 hectare, roubles –2634.4 –1278.2 –148.3 749.4 *note: the authors made a calculation based on the data of the agricultural organization of the saratov region baltic journal of economic studies 78 vol. 4, no. 3, 2018 social efficiency is expressed in improving working conditions, reducing the time spent in carrying out basic work in agricultural land use. 6. conclusion on the basis of the research of scientific works, the authors of this paper prove the relevance of made methods ensuring the fullest use of the functional of land for agricultural purposes with the use of advanced technologies for obtaining optimal economic results and reducing negative environmental and social consequences. the integrated method of introducing innovations, developed by the authors, makes it possible to determine and scientifically substantiate the demanded areas for increasing the efficiency of agricultural land use. the authors established the general purpose of the method and specified sub-goals depending on the economic, environmental, social components for the federal, regional levels, the levels of enterprises, farms. comparative analysis of traditional and minimal soil treatments has been carried out, the expediency of taking into account ecological and social aspects is proved, the calculation of cost saving per hectare, discounting indicators, the coefficient of ecological component is done, the impact of innovations on the social environment is identified, taking into account endogenous and exogenous factors. the method is recommended for use by public authorities to achieve innovative levels of agricultural production, regional agricultural authorities – for the introduction of new machines and technologies in agricultural land use. farms, agricultural organizations, consumer and production cooperatives can apply this method to increase soil fertility, increase yields of agricultural crops. table 3 the estimation of the state of the soil using the proposed ecological parameter* name of the indicator technology traditional innovative density of soil, g/cm3 before tillage 1.20 1.20 after tillage 1.39 1.25 fact change of soil density, % 15.83 4.17 coefficient of ecological component 1.58 0.42 *note: the authors made a calculation based on the data of the agricultural organization of the saratov region table 4 the impact of innovations on the social environment factors impact positive negative endogenous development of business activity of project participants, changing the structure of production personnel, saving working time underestimation of technical capabilities of agricultural organizations, insufficiency and incompetence of labour resources exogenous acceptability of innovation for scientific potential, increase in the number of jobs in the region social harm, inconsistency of results with expectations, decrease in the number of jobs in the region source: the author’s development references: assouline s., govers g. & nearing m.a. (2017). erosion and lateral surface processes. vadose zone, vol. 16, p. 12. doi: 10.2136/vzj2017.11.0194. cade-menun b.j., bainard l.d., laforge k., schellenberg m., houston b. & hamel c. (2017). long-term agricultural land use affects chemical and physical properties of soils from southwest saskatchewan. canadian journal of soil science, vol. 97, issue 4, pp. 650-666. doi: 10.1139/cjss-2016-0153. chernyaev a.a., zavorotin e.f., kosachev a.m., polulyah yu.g. et al. (2012). handbook of the economist of agricultural production. saratov, saratov source, 348 p. davidson d.a. (1980). soils and land use planning. london, longman, 129 p. iurkova m.s. and serdobintsev d.v. (2016). increase in investment appeal and competitiveness of agrarian and industrial complex of volga region. perspectives journal on economic issues, vol. 2, pp. 49-63. kachinsky n.a. (1965). physics of soils. moscow, high school, 324 p. kühling i., broll g. & trautz d. (2016). spatio-temporal analysis of agricultural land-use intensity across the western siberian grain belt. science of the total environment, vol. 544, pp. 271-280. pototskaya l.n. (2013). some aspects of optimization of investments in agrochemical services. nauchnoye obozreniye: teoriya i praktika (scientific review: theory and practice), vol. 6, pp. 211-216. baltic journal of economic studies 79 vol. 4, no. 3, 2018 rozum r .i., liubezna i.v. & kalchenko o.m. (2017). improving efficiency of using agricultural land. scientific bulletin of polissia, vol. 3, pp. 193–196. doi: 10.25140/2410-9576-2017-1-3(11)-193-196. zavorotin e.f., afanasiev v.i., gordopolova a.a., tyurina n.s. et al. (2017). organizational and economic mechanism of sustainable development of the agro-industrial complex and rural areas in the volga region. saratov, saratov source, 300 p. zavorotin e.f., gordopolova a.a., tiurina n.s. & iurkova m.s. (2017). land relations: features of transformation in modern russia. economic annals-xxi, vol. 163(1-2(1)), pp. 56-59. doi: 10.21003/ea.v163-12. baltic journal of economic studies 154 vol. 1, no. 2, 2015 mne specific factors of corporate capital structure: comparative analysis in terms of financial resources demand and supply sergiy tsyganov1, olga zalisko2, institute of international relations of kyiv national taras shevchenko university, ukraine abstract. this paper investigates corporate capital structure of multinational enterprises. its core subject is focused on corporate capital structure defining factors that are specific for mne rather than for domestic corporations. substantial part of scientific literature concentrates on country specific and firm specific factors of corporate capital structure with most research devoted to domestic corporations. the main goal of our paper is to discover among plenty of corporate capital structure factors those that are specific for mne and to develop a new approach for analyzing these factors in terms of financial resources demand and supply. there are some corporate capital structure factors that influence directly and some that have indirect influence while there is also another set of factors having both direct and indirect influence on indebtedness. different theoretical and empirical research confirm different directions. methodology of our study is based on analysis of two fundamental market driving forces that are demand and supply. their influence on corporate capital structure is of a primary origin and that is why the suggested approach is to our mind theoretically significant and practically important. demand factors imply that a corporation creates demand for financial resources and its capital structure is defined internally. supply factors imply an external capital structure since it is created by external investors’ supply of financial resources. on empirical level, we use the primary data of corporate financial statements to analyze the leverage of mne based in different countries and representing different industries. the key results of our study show that the main mne specific factors of capital structure include such demand factors as multinationality level, assets tangibility and political risk. the first two are firm specific factors that can influence corporate capital structure either directly or indirectly according to different theories and empirical studies. political risk is a country specific factor which affects mne indebtedness level directly. exchange rate risk is another factor of mne capital structure substantial influence. it can be either demand or supply factor that brings mostly to indirect influence on corporate indebtedness level. these factors obviously affect domestic corporations capital structure as well but to a much lesser extent. we also consider a set of behavioral factors to be essential for mnes though they also affect domestic corporations. key words: mne capital structure, country specific factors of capital structure, firm specific factors of capital structure, demand factors of capital structure, supply factors of capital structure. jel classification: f21, f23, g32 1. introduction capital structure of multinational corporations is nowadays affected by a number of different factors. most of them underlie existing theories of corporate capital structure and have been deeply explored in contemporary scientific literature. other factors do not actually have such a fundamental magnitude and are only the object of separate empirical tests. moreover, some empirical tests suggest individual factors that are unique for only certain mnes under certain conditions and cannot be applied all others not equal. the most common approach to investigate capital structure influencing factors is to distinguish between firm specific and country specific factors. firm specific factors influence the capital structure on the level of a corporation and are internal in this sense. they are often of microeconomic origin. country specific factors appear on a country level and are independent on a corporation itself. in these terms, they are regarded as external factors. many of them are actually traditional macroeconomic factors. however, another significant issue underlies the research of mne capital structure. depending on the nature of their influence, all capital structure factors can be divided corresponding author: 1 department of international finance, institute of international relations of kyiv national taras shevchenko university. e-mail: s_tsyganov@ukr.net 2 department of international finance, institute of international relations of kyiv national taras shevchenko university. e-mail: olga.zalisko@gmail.com baltic journal of economic studies 155 vol. 1, no. 2, 2015 into two groups: demand and supply factors and this issue is paid little attention to in the literature nowadays. the core goal of the present paper is to investigate main factors of corporate capital structure specific for mne rather than to domestic corporations in terms of funding demand and supply. this problem is of a crucial importance considering two main issues. first, any market force driven with demand or supply is of a different nature. the order, direction and what is even more important the pattern of their influence on mne capital structure differ significantly. second, demand and supply nature of mne capital structure formation will help better understanding the problem core idea and its main crucial points. this criterion is actually the primary one in view of main macro and microeconomic theories. moreover, we aim to mark out mne specific factors and to stress on international specifics of capital structure formation. considering the above mentioned the pointed problem appears to be scientifically significant and practically important. its relevancy also corresponds with current processes and trends in a global economy where mnes have become the key actors and their transactions can hardly be overestimated in terms of their volumes and influence on business and finance. mne move huge financial resources between their affiliates located in many countries throughout the world thus making their network global, on the one hand. on the other hand, all these transactions are internal from corporate point of view and this is what makes global markets of such funding internal for mnes dithering geographic borders. 2. literature review the mne capital structure problem has been widely explored in contemporary scientific literature. all in all this great pile of scientific works can be divided into two main parts. the first one deals with the problems of corporate financial leverage in the sense of an economic effect produced by debt financing on corporate financial efficiency. this group of scientific research is represented with a number of traditional theories of corporate capital structure, particularly the dominating miller-modigliani paradigm (modigliani and miller, 1958). this theory states that a corporation market value is higher when it uses debt and equity than when it uses only shareholders capital. this is due to a tax shield which implies that a firm can cut its tax expenses by using debt financing in its capital structure. this is because interest can be deducted and excluded from corporate taxable income. traditional approach to corporate capital structure considers the influence of capital structure on corporate weighted average cost of capital (wacc) and its market value. it primarily states that optimal wacc can be reached at the expense of maximizing debt financing level until certain point after which wacc will increase (weston, 1963; solomon, 1963). the mentioned theories imply static capital structure that does not change but instead affects other corporate ratios, market and financial efficiency as a whole. however, the second group of theories implies dynamic capital structure that is influenced with specific factors. this is what actually our paper deals with. in mainstream of dominating paradigm, this group is uppermost represented by the third part of modigliani & miller theory that along with corporate income taxes considers personal taxes as well. this miller theory affirms that the average level of taxation is lower for dividend income than for interest profit and that is why investors prefer investing in stocks rather than in bonds (miller, 1977). this motivation moves corporate capital structure towards equity capital. the pecking order theory affirms that a corporation should attract financial resources in compliance with certain hierarchy: internal funds or reinvestments, debt capital and then new equity (myers and majluf, 1984). it considers new equities to be issued when they are overvalued in the market. this will facilitate attracting more financing. agency theory implies that managers do not always act for benefit of shareholders and creditors ( jensen and meckling, 1976). the activity of top managers should be controlled that is associated with extra costs and agency expenses that are finally bared by shareholders. this point explains why corporate capital structure is gravitated towards equity rather than debt. the theory of asymmetric information of signaling theory assumes that corporate managers have insider information and use it (ross, 1977). all others equal positive prospects of corporation development are attributed to new debt issue because managers do not want to share future profits with the large number of shareholders. market perceives this as a signal and responds with increasing the stocks prices. thus, the capital structure is likely to be in favor of equity capital to ensure certain standby for additional debt issue. there is one of traditional theories that reconciles static and dynamic issues of corporate capital structure. this is a trade-off theory which states that capital structure is influenced with bankruptcy costs as well as by tax shield considerations in the opposite way (kraus and litzenberger, 1973). thus, the trade-off between them should be found and that would be an optimal capital structure. the mentioned theories have actually provided a rather deep insight into factors influencing corporate capital structure though there is a large portion of factors not covered and explored mostly in the framework of empirical research. as to the latest research, (mokhova and zinecker, 2014) explored macroeconomic factors of corporate capital structure that are actually related to the country specific group. jõeveer, 2013 explored both firm specific and country specific factors of capital structure for corporation in transition economies. one interesting point about empirical studies results is that they often give different and sometimes opposite conclusions. for instance, explaining capital structure from the point of view of different approaches particularly trade-off, agency and pecking order theories produce quite different interpretations. thus, these baltic journal of economic studies 156 vol. 1, no. 2, 2015 approaches appear to be contradictory in many cases but are still theoretically significant and meaningful. eventually one can point out many influencing factors with some of them being specific for only certain mne under certain conditions. in our study we attempt to explore most typical factors affecting corporate capital structure especially for the case of mnes and those ones mostly covered by the scientific literature. the distinctive point of our approach is that we investigate these factors in terms of demand for funding produced by mnes and financial resources supply produced by investors. to the best of our knowledge, this criterion is seldom used in contemporary literature and if so only individual factors are considered and no general insight is presented. we also aim to stress on mne specific factors among others typical for domestic corporations as well. 3. country specific factors political risk is a factor that substantially affects not only mne and affiliates capital structure but also corporate efficiency in general. it is mostly associated with relatively less developed economies. this risk can appear in unstable countries where governments can restrict repatriation, dividends transfer, block funds etc. political risk can be of a micro and macro origin. macropolitical risk concerns all corporations on the territory of foreign country irrespective of their activity. it implies possible expropriation of ownership in host country and the appearance of different ethnic, religious, racial and other conflicts. micropolitical risk applies to certain industries, activities, corporations and even individual projects. micro type of political risk is predominantly typical for mnes and it mostly arises as a result of corruption and mismatching of mne and local governments goals. in terms of capital structure, political risk basically brings about the increase in affiliates indebtedness level while external debt accounting for major part of it (desai et al., 2004). this is because the increase in political uncertainty contains such risks as restriction on repatriation and interest transfer, different exchange restrictions etc. mne naturally respond with restricting internal transfers abroad in order to minimize such risks. more detailed research of political risks influence on modern mne capital structure confirm that such influence should be regarded in terms of different forms of political risk realization. it can be realized for instance in strict administrative forms like government direct interference into repatriation issues or softer ones that could not even be introduced in more stable and developed business environment (kesternich and schnitzer, 2010, p. 208). it has been empirically proved that increase in political risk brings about the increase in mne equity capital share (kesternich and schnitzer, 2010). this is because such restrictions result in investment projects returns cut while the level of expenses remains the same. as to the debt capital, the case is rather ambiguous. optimal level of debt financing decreases with increase of political risk in the form of complete or gradual expropriation since the last brings about higher bankruptcy risks. development level and conditions on local capital markets is also an important factor of mne capital structure. it is well known that mne affiliates use less external debt funding and more internal in countries with low level of capital markets development and where the level of creditors rights protection is weak. this is because attracting financing on such markets is rather expensive (desai et al., 2004). it means that internal financing can replace more expensive external. as a result, mne would have competitive advantages over local corporations that can attract funding on domestic markets only. the level of creditors’ rights protection directly affects financial markets development uppermost the markets of debt. there are two opposite views of this matter (cho at al., 2014). the first one focuses on resources market supply and affirms that high level of creditors’ rights protection positively influences the use of debt fund by corporations. this point is explained by the fact that the proper level of protection allows creditors to lend on better terms because they are confident to get their loans back and corporations in turn get more debt funding in their capital structure. the second view emphasizes market demand and affirms that the proper creditors’ rights protection level negatively affects corporate indebtedness level. illustration of this point appears as follows. in case of financial distress equity holders (uppermost) and other creditors don’t want to lose control over a corporation. different countries treat creditors, stockholder and managers in different ways. in the usa, that is considered to have the poor creditor rights protection level, for example, managers rather than creditors are considered to have the prior right to elaborate and implement corporate anti-crisis strategy (cho at al., 2014). in countries with high level of creditors’ rights protection managers can be dismissed during financial distress and replaced by creditors. interested managers thus are to be interested to use less debt capital. though contemporary scientific literature contains empirical verification for both views, it mostly confirms the idea that high level of creditors’ rights protection facilitates the decrease in long-term debt share, for example (cho at al., 2014). the authors explored 151,855 corporations from 48 countries and their capital structure under influence of a special index of creditors’ rights protection in the period between 1991 and 2010. capital structure was explored via long-term debt ratio that was calculated as a relation of long-term debt to total assets. creditors’ rights protection index is an index elaborated by djankov et al., 2007. it can reach values of 0, 1, 2, 3 and 4, where 0 is the lowest level of creditors’ rights protection or its actual absence and 4 is the highest level. besides the main conclusion mentioned above we should consider three following important quantitative results of this study. first, the sample average long-term debt ratio is 0.58 though it does not exceed the level of 0.23 if considering any of 48 countries. second, this maximum value of 0.58 corresponds to respective baltic journal of economic studies 157 vol. 1, no. 2, 2015 maximum value of djankov index that is 4. third, the sample average ratio is 0.12 with an index value of 2. besides creditors’ rights protection conditions on local capital markets are also defined by such legal factors as investors’ rights protection, corporate information disclosure requirements, burden of proof, public enforcement etc. the overall idea of these factors influence implies that they speed up the information dissemination, decrease agency costs and bankruptcy costs (mishra and tannous, 2010). under these conditions, creditors tend to lend more and require lesser returns. this in turn brings about that corporations increase the level of debt financing. among country specific factors contemporary scientific literature points out the level of bankruptcy code and respective legal rules and regulations development as well as individual technical factors such as audit standards etc. (antonczyk and salzman, 2014). in countries with powerful and detailed bankruptcy codes corporations tend to have higher shares of debt funds in their capital structure, since creditors’ rights are considered to be strongly protected and they tend to lend at more favorable terms (giannetti, 2003). though this factor is closely connected with the previously mentioned one, it theoretically implies narrower sense. more progressive accounting and audit standards can influence the level of informational asymmetry and soften agency conflicts (antonczyk and salzman, 2014). thus, the capital structure can be explained in terms of agency theory and it tends towards debt all others equal. a country legal system in general is also regarded as corporate capital structure factor. in this sense one should distinguish between civil law and common law that are basically two main sources of law nowadays. countries with dominating common law suggest investors a better protection compared to the countries where civil law dominates (la porta et al., 1998). it means that in common law countries corporate capital structure tends to have more equity than debt. as to these factors they obviously influence not only mne but domestic corporations as well. notwithstanding, we consider them to be of crucial importance for mne by two main reasons. first, domestic corporations have some conditions as given. they have what they have in their domestic economy and that is often a constant. these conditions are sort of external variable for local corporations that cannon be changed. mne can vary between countries and choose among all possible sets of conditions and domestic constants. this can be regarded as an internal variable for mnes since they can change them by either investing or not or by using special internal fund repositioning instruments and international debt shifting strategy. second, mnes have much more opportunities to avoid some possible domestic restrictions or to decrease their negative influence. in these terms the mentioned factors are quite suitable for mne to deal with. all in all there can be a lot of country specific factors affecting corporate capital structure. the matter is which of them can be rationally grounded and explained and what is more important in the course of our study which of them are more influential for mne rather than for domestic corporations. we tried to cover those factors, which have been explored in scientific literature and are typical for mne. 4. firm specific factors an interesting research subject would be to compare capital structure of domestic and multinational corporations. such test has hardly been carried out in the full statistical understanding of this issue. we mean three core points here. first, the availability of data for a maximum number of countries and for mne as well as for domestic corporations. second, the availability of data for all possible industries. third, the availability of methodologically comparable data, which can be presented either in one standard or another. these points bring about that the study of this type contains mostly some of the above-mentioned limitations. we do not pretend to 1 these three mnes have been selected from unctad top-100 non-financial tncs rating considering different industries and different home countries being represented. table 1 long-term debt ratio of mnes from different home countries year toyota motor corporation nestlé sa wal-mart stores inc. 2004 0.1927 0.0806 0.1907 2005 0.2061 0.0672 0.1936 2006 0.1963 0.0683 0.2178 2007 0.1923 0.0531 0.2028 2008 0.1843 0.0597 0.2043 2009 0.2168 0.0808 0.2114 2010 0.2312 0.0670 0.2136 2011 0.2156 0.0544 0.2425 2012 0.1971 0.0664 0.2434 2013 0.2068 0.0860 0.2039 2014 0.2063 0.0929 0.2176 2015 0.2145 average 0.2041 0.0706 0.2130 domestic average 0.11 0.15 0.15 notes: 1. calculated by the authors using corporate consolidated financial statements for respective years. 2. the ratio is methodologically computed as a relation of long-term debt to total assets. 3. reporting financial years end on different dates in different countries: the usa (wal-mart stores inc.) – december 31, switzerland (nestlé sa) – december 31, japan (toyota motor corporation) – march 31. 4. ‘average’ is computed as a simple arithmetic average. 5. ‘domestic average’ is a figure presented in (cho et al., 2014) and is an average long-term debt ratio for domestic corporations in japan, switzerland and the usa respectively. baltic journal of economic studies 158 vol. 1, no. 2, 2015 fill this gap in the present study but just try to compare some typical mnes from different home countries and representing different industries1 (table 1). the above-mentioned issues of mne activity on international markets allows assuming that they would have relatively more debt in their capital structure, particularly due to more favorable borrowing conditions on internal and international markets. however, the data of table 1 shows that 2 of 3 average ratios for mne substantially exceed the average ratio of 0.12 for domestic corporations from the mentioned study. the equal 0.2041 and 0.2130 for toyota motor corporation and wal-mart stores inc. respectively. only the average ratio for nestlé sa is smaller – 0.0706. what is important, average ratios for toyota and wal-mart also substantially exceed average ratios for domestic corporations in these countries that equal 0.11 and 0.15 respectively. for nestlé this figure is again more than twice lower, though this difference can be explained by industry specificity. to support this contradiction we must mention that a traditional statement of such hypothesis stems from dunning oli paradigm. it implies that mne have unique specific assets including technology, patents, brands and what is more important the ability to create such assets that allows them to successfully compete in international markets (rogach, 2005). such hypothesis statement allows to assume that mne must have relatively low ratios of debt capital usage since the availability of specific assets affects the increase in returns and growth potential, high market-to-book equity ratios that is typical for low debt using companies (park et al., 2013). empirical results of this research show, that us multinationals and domestic corporations do not differ significantly in their capital structures. most studies however confirm the idea that mne use relatively less debt in their capital structure than domestic corporations (lee and kwok, 1988). this is explained mostly using the agency theory according to which mne have higher level of agency expenses and information asymmetry and thus tend to cut debt financing (burgman, 1996). agency costs also increase due to greater vulnerability of mnes to local legal and political factors (doukas and pantzalis, 2003). another important for mne firm specific factor of corporate capital structure is the tangibility of assets. here the literature considers what type of assets – tangible or intangible – prevails in corporate asset set. according to the trade-off theory, intangible assets are more sensitive to corporate problems and this brings about the lower investor value during financial distress or bankruptcy (hart and moore, 1994). the idea of this message is that intangible assets have lower liquidation value. it means that corporations with more tangible assets can afford attracting more debt financing since tangible assets have higher liquidation value. in terms of agency theory, intangible assets are riskier and can be replaced by riskier assets. thus, they can be lost or illegally expropriated with higher probability. tangible assets are less risky and are more often used as a collateral thus decreasing creditor’s agency risk. therefore, corporations tend to increase the share of equities in their capital structure if they have relatively more intangible assets. the pecking order theory states that corporations with higher share of tangible assets are less exposed to information asymmetry compared to corporations with higher shares of intangible assets. it means that equity issue is cheaper for such corporations and thus the use of debt decreases. the importance of this factor for mne has two main explanations. first, the existence of intangible assets is one of the main features of mne. it helps them compete on the global marketplace and provides them competitive advantages before domestic corporations. this point arises particularly from eclectic oli paradigm. mne actually use intangible assets much more intensively compared to domestic corporations. second, besides having these specific intangible assets mne have unique ability to create new assets of this type. they often create global internal markets for these assets where a unique system of pricing and circulation exists. more than 2/3 of global market of technologies is mne internal market with technology being the direct product of mne specific intangible assets. 5. firm and country specific factors along with purely firm specific and purely country specific corporate capital structure factors, there is a small group of factors of dual character. they can be country specific as well as firm specific while being of a crucial importance for mne in any case. these are an exchange rate risk and a behavioral factor. exchange rate risk is inherent for mne to much higher extent than for domestic corporations. it is also closely connected with such macroeconomic factors as inflation and interest rates. if for example the currency of a country where an mne affiliate is located depreciates an mne will be interested not to extract cash flows from this economy in more stable currency. it means that debt financing is to be redistributed in favor of external (in terms of corporate internal financial system) resources. such funding can be attracted on local market of a host country. in this case, exchange rate risk would be absent. it is however rather difficult to estimate whether this will bring about the redistribution between equity and debt in corporate capital structure. to our mind, it will rather result in cut of debt financing, especially in countries with relatively weak currencies. the reason is as follows. internal funding from a parent generates a certain affiliate capital structure. the currency weakness brings about that the loans repay substantially changes the affiliate’s future cash flows. it must repay much more that it received in local currency what considerably increases risks. the increased future cash flows will as a result bring about the reverse influence on capital structure to much higher extent than they did when the loan was received. it means that a corporation must introduce additional measures to restore the capital baltic journal of economic studies 159 vol. 1, no. 2, 2015 structure back. financing in the form of fdi looks more attractive in this case. exchange rate risk can be either firm or country specific factor as has already been mentioned. if we consider the host country with weak currency in general, the exchange rate risk will concern all affiliates of foreign mne having assets in more stable currencies. if for example an affiliate in a country with strong currency attracts capital issuing papers in weak currencies the exchange rate risk will actually be such for this affiliate only. other companies in this country will not face this type of risk. to decrease or eliminate exchange rate risk influence on capital structure mne often use a so-called international debt shifting strategy. another factor that can be either firm specific or country specific is a behavioral factor. it should actually be regarded as a group of factors rather than as a single one. if considering for example gender and age structure of corporate management bodies behavioral factors which appear to be firm specific ones since decisions are taken at corporate level influenced by behavioral features of certain individuals. women tend to borrow less than men that is explained not only by their attitude towards future returning of borrowed money but also by their more emotional perception of loans as such. thus mne where women prevail in management bodies tend to have more equity and less debt in their capital structure. age of corporate top management, according to behavioral theories, negatively affects debt financing. thus, corporations where young men dominate in management bodies usually use relatively less equity and more debt in capital structure. being a country specific factor, behaviorism considers corporate capital structure in terms of country’s cultural, religious, social, mental and other features. the general behavioral idea is that unlike traditional assumptions about individuals rational behavior aimed at utility maximization in real life people do not often follow such behavioral pattern since they can be optimistic and overconfident (malmendier et al., 2011). it means that individuals consider the probability of favorable events higher than it really is and they are sure that they know about these events more than they really do. thus, real life financial decisions of individuals particularly regarding the corporate capital structure are substantially defined by mentioned irrational issues. most scientists agree that such behavioral features as overconfidence and optimism positively influence the indebtedness level for two basic reasons. first, managers that overestimate their company profitability consider its stocks to be substantially undervalued and thus prefer debt financing. second, overconfident managers consider their corporation cash flows to be less volatile than they really are and therefore underestimate the probability of financial distress and bankruptcy. according to this approach, countries are considered in terms of their individualism level that is a factor of corporate capital structure (antonczyk and salzman, 2014). individualism is something that defines the level of overconfidence and optimism of individuals, particularly corporation managers. the main conclusion of the mentioned research is that corporate managers in countries with high individualism level show overconfidence and optimism that brings about more substantial shares of debt in corporate capital structure. to our mind, the mentioned cultural and behavioral peculiarities are specific for mne. multinationals operate in cross-cultural environment and their managers and even workers represent different nationalities, cultures and religions. religion is among important behavioral factors of mne capital structure. catholics and protestants for example differently perceive indebtedness as such. some research show that in catholicism dominating countries corporations have higher shares of debt in their capital structure than corporations in protestantism dominating countries do (baxamusa and jala, 2014). it is also well known that islamic religion and the sharia have extremely negative attitude towards lending as such (to much lesser extent to borrowing). that is why in islamic countries corporations tend to have capital structures with much lower shares of debt. for cross-cultural environment of mne operations this conclusion should be used in terms of corporate management religious structure analysis especially on the level of strategic decisions taking. 6. demand and supply approach we have considered the two widespread criteria of corporate capital structure classification that imply the distinguishing between country specific and firm specific factors and between economic and non-economic factors. however, to our mind one more important criterion allows to classify them into demand and supply factors. the core idea underlying is the origin of a factor influence. some factors can be driven by either demand or supply and they have a double origin. in these terms by demand we mean the demand for funding from mnes and by supply we understand the supply of financial resources, that is created by investors ready to buy corporate securities or to lend them money. the importance of this criterion can be grounded by two principal reasons. first, from economic point of view the motivation arising under demand influence and under supply impact differ significantly. in a demand driven case the capital structure is defined by financial decisions of a corporation itself, since it creates the demand for financial resources. demand is in fact a result of one or another policy of corporate capital structure that is in turn a sort of endogenous issue from corporate point of view. a supply driven motivation is exogenous from corporate point of view. corporate capital structure policy is in this case a response to changes in certain external conditions – resources supply. second, demand factors substantially exceed supply ones in terms of their quantity as well as in terms of their magnitude. the matter is that demand as such is a result of corporate decisions and baltic journal of economic studies 160 vol. 1, no. 2, 2015 affects capital structure much intensively. major capital structure theories have demand factors underlying. the explored factors are arranged according to the demand or supply character of their influence and classified according to the possible direction of their impact (table 2). table 2 factors of mne capital structure (use of debt funds) factor influence direction direct indirect direct and indirect firm specific factors assets tangibility d internationalization and multinationality d country cpecific factors bankruptcy code development d / s source of law – civil d / s source of law – common d / s audit and accounting standards d creditors’ rights protection d / s disclosure requirements s legal system development d / s political risk d host country capital market development d / s country and firm specific factors exchange rate risk d / s behavioral factors: management gender – men d management gender – women d management age d country individualism level (overconfidence and optimism) d religious factor – islam s religious factor – catholicism s religious factor – protestantism s notes: 1. elaborated and compiled by authors. 2. «direct and indirect influence» means that different theories and / or empirical research different possible directions of impact are explored. 3. «d» – demand factor. «s» – supply factor. «d / s» – a factor can be either a demand factor or a supply factor. the table 2 data allows to state that the suggested classification criterion allows making the following important generalizations and conclusions. first, all firm specific factors are demand factors. they define the mne capital structure by creating a demand for financial resources from corporations2. second, country specific factors are mostly supply and demand factor. on the one hand, they affect corporate financial decisions and, on the other, they define the general situation in a country including macroeconomic conditions thus affecting the decisions of investors who invest in corporate securities. third, there are factors that can affect corporate capital structure either on the level of a firm or on a country level. they are the exchange rate risk factor and a set of behavioral factors. some of them are demand factors and others are supply factors while some can be demand and supply factors. fourth, all country specific and firm specific factors influence the corporate capital structure of mnes and their affiliates as well as of domestic corporations. however, some of them are especially important for mne and to a lesser extent for domestic corporations. some factors cannot influence the capital structure of domestic corporations at all. for example, firm specific factors in table 2 are typical for mnes though there can be much more factors influencing the capital structure of domestic corporations as well. among them are, for example, corporate income tax, profitability, liquidity and others. fifth, firm specific factors have stricter influence and their effect can be clearly distinguished for mnes and for domestic corporations. at the same time country specific factors produce much wider effect on corporate capital structure which is much more difficult to be divided into multinational and domestic subeffects. that is why there are much more country specific factors that can be typical for mnes. notwithstanding, there are factor affecting corporate capital structure purely for multinationals. they are exchange rate risk, level of multinationality, host country capital markets development level and political risk. 7. conclusions factors of corporate capital structure can be either firm specific, country specific, firm and country specific. different theories and empirical research explain the influence of different factors on corporate capital structure differently, that is why some factors can affect directly and / or indirectly. some factors of corporate capital structure influence either mnes or domestic corporations, but some of them are typical for mne to a larger extent. they are the level of multinationality and internationalization and assets tangibility on the level of a firm. among country specific factors mne capital structure is substantially affected by political risks and the level of host country capital market development. other country specific factors influence mne as well as domestic corporations. among factors of combined influence exchange rate risk is essential for mnes, while a set of behavioral factors is also substantial for mnes but also affects domestic corporations. one important criteria underlies the pattern of different factors influence on capital structure. according to the origin of influence, they can be divided into demand and supply factors, while some of them can be demand and supply factors at the same time. demand factors imply that a corporation creates demand for financial resources and its capital structure is defined internally. supply factors imply an external capital structure since it is created by external 2 by “all firm specific” we mean not only those factors covered in our study but all influencing factors. they are all demand factors. baltic journal of economic studies 161 vol. 1, no. 2, 2015 investors supply of financial resources. firm specific factors have much stricter influence and their effect can be clearly distinguished for mnes and for domestic corporations. country specific factors produce much wider effect on corporate capital structure which is much more difficult to be divided into multinational and domestic sub-effects. that is why there are much more country specific factors that can be typical for mnes. notwithstanding, there are factors affecting corporate capital structure purely for multinationals. they are exchange rate risk, level of multinationality, political risk, assets tangibility and the level of host country capital market development. behavioral factors also substantially affect mne capital structure but also influence domestic corporations. references antonczyk, r .c., salzmann, a.j. 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(1963). a test of cost of capital propositions. southern economic journal, vol. 30, issue 1, p. 105–112. baltic journal of economic studies 162 vol. 1, no. 2, 2015 сергей цыганов, ольга залиско факторы структуры капитала тнк: сравнительный анализ в контексте спроса и предложения финансовых ресурсов аннотация. в данной статье рассматривается структура капитала транснациональных компаний. основным предметом её внимания являются факторы структуры капитала, характерные именно для тнк, а не для национальных корпораций. значительная часть научной литературы посвящена анализу корпоративных и страновых факторов структуры капитала, причём большая часть работ посвящена национальным корпорациям. основной целью нашей работы является выявление среди множества факторов корпоративной структуры капитала тех, которые являются характерными для тнк, и формирование нового подхода к анализу этих факторов – на основании анализа спроса и предложения финансовых ресурсов. среди факторов корпоративной структуры капитала некоторые осуществляют прямопропорциональное влияние на уровень использования заемных средств, а некоторые – обратнопропорциональное. различные теоретические и эмпирические исследования подтверждают разные направления такого влияния. методология нашего исследования базируется на анализе двух главных движущих сил рынка – спроса и предложения. их влияние на корпоративную структуру капитала является первичным, и поэтому предложенный подход, на наш взгляд, является теоретически значимым и практически важным. факторы спроса предполагают, что корпорация создаёт спрос на финансовые ресурсы, а структура её капитала формируется на внутреннем уровне. факторы предложения рассматривают структуру капитала как внешнюю субстанцию, поскольку она формируется под влиянием предложения финансовых ресурсов со стороны внешних инвесторов. на эмпирическом уровне мы используем первичные данные финансовой отчётности тнк, на основании которых анализируем уровень задолженности тнк разных стран базирования и разных отраслей. основные результаты нашего исследования свидетельствуют, что главными факторами структуры капитала тнк, которые в гораздо меньшей степени характерны для национальных корпораций, являются такие факторы спроса, как уровень транснациональности, материальный характер активов и политические риски. первые два являются факторами корпоративного уровня и могут осуществлять как прямое, так и непрямое влияние на структуру капитала. политический риск является страновым фактором и прямопропорционально влияет на уровень использования заёмных средств. валютный риск также существенно влияет на корпоративную структуру капитала. он может быть как фактором спроса, так и фактором предложения, осуществляя преимущественно обратное влияние на уровень корпоративной задолженности. эти факторы, очевидно, также влияют на структуру капитала национальных корпораций, однако в гораздо меньшей степени. мы также рассматриваем комплекс поведенческих факторов таким, что существенно влияет на структуру капитала тнк, хотя эти факторы оказывают влияние и на национальные корпорации. baltic journal of economic studies 40 vol. 1, no. 2, 2015 problems of the efficiency increasing of transportation by air of ukrainian ssr (1960-1980) anatoliy gorban1, kyiv state maritime academy, ukraine abstract. the article is devoted to the problems of the efficiency increasing of the air transportation. the difficulties of increasing the efficiency of transportation by air in ukrainian ssr in 1960-1980 were researched, factors that adversely affected the organization of the transport sector were determined and depicted. the article analyzes what caused such difficulties and it was found out that the causes of these difficulties are connected with the organizational problems of air transport of ukrainian ssr, which negatively affected the operation of the industry. the central aim of the research is to focus on the main problems of air transport of ukrainian ssr. so, we should say that the transport operation of those years was distributed too unevenly and was dependent on the population density of the territory of the republic. purpose of the article is to determine, compile and analyze the factors that negatively affected the organization of air transportation of the ukrainian republic and reduced the efficiency of its operation. results of the research shows technical, organization and economical deficiency of air transport of ukrainian ssr which caused the ineffectiveness of this type of transport and determines the nature of such difficulties. statement of the problem. during the specified period (1960–1980) the air transport had undergone rapid development. many new airlines were opened, airports were being built and reconstructed, the terms of exploiting of turbojet aircrafts were increased, the speed of planes was increasing. all these facts ensured safe and reliable air connection of all district centers, connected ukraine with the other soviet republics and foreign countries by air corridors. ukrainian department of civil aviation became the biggest regional department of the ministry of civil aviation of the ussr. but, at the same time the intensity of the increase of cargo and passenger transportation since 1970s led to accumulation of difficulties of different nature which were connected with both cargo transportation and passenger one. this provides the evidence of insufficient effectiveness of the air industry. key words: air transport, transport effectiveness, airports, freight and passenger transportation, technical and economic factors. jel classification: a10, a13, l23 corresponding author: 1 department of social sciences, kyiv state maritime academy. e-mail: ekaterinagoroshko@mail.ru 1. introduction after rebuilding the economy (1960-1980) the volume of the passenger and freight transportation by air was constantly growing. the opportunities of aviation in agriculture were more widely used. air connections were rapidly expanding and quite firmly connected cities of ukraine with each other and with large industrial centers outside the country. the number of airlines which connected ukraine with foreign countries also increased. ukrainian pilots were transporting 12% of passengers and every 4th citizen of the republic used the air transport. annually, the airports of ukraine departed about 13 million of passengers and more than 270 thousand tons of cargo and mail. this was the result of constant introduction of new complex of operating system and new airport areas. but, while planning the development of air and land-based components of air transport, the cost of their operation and maintenance was not properly considered which affected the overall economic condition and efficiency of air transport. during soviet period the development of air transport system was mostly investigated in ukrainian ssr in the context of the work retrieval system on the whole. and even such comprehensive team works as “history of socialist economy of the ukrainian ssr” [tsdavo, 1976] and “regional problems of the transport system development of the ukrainian ssr” [tsdavo, 1976] stressed the achievements of the industry – increase of traffic and carrying capabilities, carrying out technical reconstruction. but there wasn’t given an objective analysis of the effectiveness of the transportation by air. nowadays due to new opportunities to study archive materials concerning activities of civil aviation, which was restricted in soviet time, researchers got the opportunity to carry out unprejudiced analysis of gains and drawbacks in the affair of air transportation development in 60–80s of xx century in the ukrainian ssr. baltic journal of economic studies 41 vol. 1, no. 2, 2015 2. statistical indicators of air transport a major factor that affected the efficient organization of air transportation of the ukrainian ssr was the fact that the hauling work in ukraine was distributed too unevenly and depended on the population of a city or industrial region, except for airports serving the resort areas of crimea, odessa, mariupol, carpathians. thus, most departures were made from the best equipped airports of the cities which had about one million inhabitants and well-developed network of land transport and from the major resort centers [tsdavo, 1976]. the evidence of it is given in the table below. table 1 the intensity and dynamics of the basic aero hubs of the ukrainian ssr on the verge of 70–80 years provided mia flight 1979 1980 total 2312691 2520818 intensity of flights hourly daily airports 1979 1980 1979 1980 boryspil 1951 2148 135 149 kharkov 1790 1974 145 150 donetsk 1038 1262 60 78 simferopol 803 878 65 75 kyiv 648 600 50 48 lviv 300 350 24 27 dnepropetrovsk 244 280 30 32 [3, 3] as the above statistical data show, the leading airports in ukraine had clearly positive trend of intensification of traffic work. but regional airlines of the republic were in much worse situation. their characteristic features often were frequent failure of key indicators of passenger transportation, delays in flights and incomplete downloads. so, for dnipropetrovsk airports of peripheral joint squadron the characteristic feature was the fact that regularity of flights indicated by the schedule was constantly decreasing and did not exceed 77%. in the 1970s the number of cases of flight delays and even cancellations sharply increased, which was often «written off» on weather conditions. so in 1975 there were 2062 schedule violations occurred and in 1976 its number increased to 2654, with a significant number of them, as was defined by inspection – 65% occurred due to the fault of personnel of of transport organization services [tsdavo, 1976]. similar problems occur in the zaporozhye united squadron, where the regularity of flight times also were often disrupted. thus, in 1976 there were 5601cases of delayed flights, including the central schedule – 2181 flights. analysis of the causes of flight delays showed that 90.2% of them occurred due to poor organization of ground services and only 6.8% were delayed because of adverse climate conditions [tsdavo, 1976]. thus, violation of the regularity of flights on a single centralized schedule become a very serious problem, which was exacerbated each year and affected the overall performance of air transportation. thus, in 1975 the regularity performance indicator of the planned flights was 71.9% and in 1976 – only 67%. that means that during a year the regularity of flights fell almost by 5%, and it is unacceptably high for such hightech organizational and technical system as air transport. only in 1976 there had been 380 cases of violation of the regularity of flights due to the fault of personnel [istoria sotsyalystycheskoy economee sssr , 1980]. as already noted, the chronic failure of transportation plan, low payload, failure to fulfill distance of flights were particularly characteristic feature of «regional» airlines. thus, in kirovograd united squadron passenger tariff plan was not fully implemented by 7-8 thousand of people each year due to failure to depart passengers systematically. progress data (tonne/kilometers) were not performed, primarily due to low payload of airplanes jan-40, an-2. chronic failure to fulfill medium range of flight options became a phenomenon [tsdavo, 1976]. thus, in the crimea average distance of departures was reduced to 50 km, so that no passenger tariff plans were implemented [tsdavo, 1976]. but especially unsatisfactory in the «regional airline» was the situation with freight transport plan, which was not generally performed. thus, in 1976 the plan volume of freight shipments was not fulfilled by eight airlines, including even such as: boryspil – 749 tons odessa – 771 tons, simferopol  – 225  tons, kherson – 229 tons, kiev – 170 tons zaporozhye – 125 tons, chernivtsi – 95 t rivne – 31 tons [tsdavo, 1976]. 0 100 200 300 400 500 600 700 800 pic. 1. volume of cargo delivery of air enterprises (1976) thus, despite the relatively rapid overall development of ukrainian air enterprises, economic efficiency of their work did not meet proper requirements. after all, while 10 years of essential funds and fund supply of airlines increased more than doubled, the amount of work performed (in ton/kilometers) increased by only 25%, labor productivity – 20%, and the cost has decreased only by 19% . however, as already has been noted, the regularity of flights was not kept significantly, which did not exceed 75%.in the mid-1980s. in fact, the time the passengers had to spend at airports before and after the flight was not decreased. baltic journal of economic studies 42 vol. 1, no. 2, 2015 that caused the reason why internal republican passenger service by air transport did not actually demonstrate sufficiently significant advantages in terms of speed of movement and comfort compared to rail [tsdavo, 1976]. as the result, the great share of air transportation in total passenger freight of the republic in 1989 decreased to 8,6% [tsdavo, 1976]. 3. influences the negative point in the air passenger transport was unsatisfactory level of passenger service. thus, in 1965 kovyuh n. – head of uutsa pointed out many shortcomings in service of passengers on local routes, many airports did not organize basic amenities for passengers, and sometimes did not even have adequate facilities for recreation and waiting for departure. for transit passengers they hardly organized direct flights and slowly implemented measures to improve passenger service in resort areas. serious deficiencies existed in catering of passengers and they did not organize sell of items of first need and press [goncharov, 1988]. but this was left out of attention of the management leaders of this industry. as the head of the service of passanger transportation a. chernyshov reported to the leaders of the management department and the ministry of civil aviation, in 1976 there were 1464 claims, letters and notifications from passengers. characteristically, the total number of complaints which criticized the shortcomings due to the fault of the personnel of the enterprises and departments were 363 against 320 that occurred in 1975. passengers pointed to serious deficiencies in ensuring the regularity of flights, the rudeness and inattention, in violation of the rules of procedure and ticket sales, the poor organization of registration, landing and meeting passengers, bad information and reference work in complaints, letters, statements. characteristically, many airlines, particular such as: boryspil, donetsk, dnipropetrovsk, lviv, simferopol, kharkiv, kherson with the planned increase in the number of personnel, including the part, which was directly involved in those gaps connected with passenger service. thus, the donetsk, dnipropetrovsk, lviv, simferopol and kharkiv airlines significantly worsened their operation even in such divisions as information and referral service [tsdavo, 1983]. it should also be noted that because of numerous cases of basic negligence of employees of airports ukrainian civil aviation authority always had to indemnify customers for damaged or lost property. the world associate consultant uutsa g. banina in the report on legal issues in 1978 stated that the total number of claims and lawsuits, which were in 1978 filed by passengers on the loss, shortage, damage to baggage was 507 cases worth more than 322  thousand . rub. characteristically however, that claims for losses were satisfied only to 124 claimants for the amount of 80,545 rubles. (growth in comparison with 1977 by the number to 79 and the amount to 3035 rubles.). in general, the various categories of complaints to uutsa were received: 651 claims and lawsuits in the amount of 640 thousand. rub., for the same period in 1977 – 432cases in the amount of 312 thousand. rub., it is more than doubled (the number at 219, the sum of – at 328,517 rubles.) [tsdavo, 1960]. not always effectively aircrafts were used during agricultural works too. in particular, the performance of aviachemical works due to organizational and technical reasons always had significant downtime of aircrafts. it should also be noted that there was no proper care to the ground for inter-farm lanes paved. because of this, in 1976 14 of them were completely inadequate, and a significant number of them were in need of a repair [tsdavo, 1974]. but funding for the new construction and to maintaining in good condition the existing inter-farm aerodromes was not planned [tsdavo, 1974]. often enough the serious difficulties appeared as a result of delays with getting fuel and other air oils. so, in 1983 ukrainian airports were not fully supplied by oil refining plants according to the existing funds of 63500 air fuel, including lysychansk orp – 40 thousand tons, kremenchuk orp – 23.5 thousand tons [tsdavo, 1972]. there is a growing trend of increasing downtime of aircrafts for reasons that were dependent on poor organization of most airlines. that is why in 1974, compared with 1971, the downtime due to fault of certain services and the general downtime occurred in uutsa increased more than twice. especially great number of the downtime was due to organizational and technical assessment faults of aviators which were in voroshilovograd united squadron  – 53%, micholayiv – 47,8%, dnipropetrovsk – 43,8%, zaporizhzhia– 40,3% [tsdavo, 1979-1980]. voroshilovograd; 53 micholayiv; 47,8 dnipropetrovsk; 43,8 zaporizhzhia; 40,3 pic. 2. volume of systematic downtime in % (1971) the use of aircraft in agriculture was accompanied by other negative factors which were mentioned at the third rally of young leaders in agricultural aviation in january, 1976. many speeches presented evidence of abuse in the operation of airchemical work in agriculture, raised the question of restoring the proper order to the process of flight documentation. it was noted that the governing structure of airlines did not exercise proper control over the airchemical work, which led to numerous false flight time records and size of treated areas records, as well as other disorders – counterfeiting barohram, gross errors in the calculation of treated areas , which reduced the baltic journal of economic studies 43 vol. 1, no. 2, 2015 effectiveness of the aviation and did not give proper economic effect to the farms. these numerous facts were detected in kiev, kharkov, vinnitsa and on other airlines [tsdavo, 1979-1980]. reliability of air transport was not at the proper level. the number of preconditions that could cause aircraft accidents was increasing. typically, they were the result of poor performance of flight navigator department, technical department and low discipline of the service which supplies with fuel and lubricants [tsdavo, 1965]. logically, all these facts led to the growth in the number of avia cases due to the faults of avia specialists, especially among navigators. thus, in 1974 there were 18 accidents, in 1975 – 12 accidents, in 1976 – 16 accidents 16 [tsdavo, 1965-1969]. especially confuses the fact that more than 60% of catastrophes 50 % of dangerous accidents were the consequences of low professional training of departments of avio navigators and low executive discipline of the land based specialists [tsdavo, 1965-1969]. one manifestation of this was the improper state of security and fire protection of aircraft parking, which required the creation of access control and secure fencing area of airports, which, however, just was not done in most airports. the access control posts were equipped only in kyiv, lviv and kharkiv. as the transportation safety inspections of air transport show often even standard baggage inspection procedure was not organized properly [tsdavo, 1990]. as the result there were numerous cases when various hazardous substances were in the luggage [tsdavo, 1976]. and absolutely unacceptable fact that not all airports had properly equipped fire station [tsdavo, 1990; tsdavo, 1976]. 5. conclusions the analysis of fundamental changes in air transport of the ukrainian ssr in 1960-1980’s of xx century shows that this, in general, positive process was also marked with several rather significant and negative moments. thus, the air transport of ukraine was characterized by uneven transport work in the regions of the republic, systematic disruption of flights, incomplete aircraft loading and constant underestimation of the planned range. characteristic features of air transport were: insufficient level of passenger service, improper maintenance of interfarm airfields that adversely affected the use of aircraft in agriculture. the planned volumes of freight traffic were not systematically performed. this chronically reduced economic efficiency of airlines. references tsdavo (1976). analys promushlenosteу i finansovoy aktivnosti avyapredpryyatyy. f. 184. p. 1, 131-132, 199, 232, 275. tsdavo (1976). analys pisem pasazurov za zetvertui kvartal 1976 uuha. f. 184. p. 1-2. tsdavo (1978). analys kadrovoy rabotu predpriatey uuha 1978. f. 184. p. 1-34. tsdavo (1976). zakluchenie proizvodstvenno-hozyaistvennoi deayatelnosty uuha. f. 184. p. 1-2, 35. istoria sotsyalystycheskoy economee sssr (1980). (t. 6. p. 589). – moscow: nauka. tsdavo (1976). spravka, doklad, informaziya po rabote uuha. f. 184. 1853. p. 1-2, 45-47. tsdaho (1987). lustu zk kpu, souznuh ministerst pro roboty zaliznuchnogo transporty (18.01.1986-02.03.1987), p. 1, 39. n.e. goncharov (1988). regionalnue problemu razvitiya transportnoy sustemu ukrainskoi ssr: moscow: yntytut kompleksnyh problem tansporta, p. 158-159 tsdaho (1983). zapusku, dovidku, informazii viddily transporty ta zvyazky zk kpy z putan transport ta zvyazky (28.01.1981-22.12.1983). 6, р. 25. tsdaho (1960). protocol zakrutogo partyynoho sobraniya partorhanyzatsyy machine uhuhvf ot 01/10/1961. – f. 293. 2. tsdaho (1976). protocol partsobranyya ekonomicheskih slyzb uuha. f. 293.1-2, 4-16. tsdaho (1974). protocol otkrutogo sobraniya partorhanyzatsyy partyynoho uuha 11.26.1974 g (1974) f. 293. 7-8. tsdaho (1972). protocol sobraniya apparata. f. 293. 17, 6, 11-12. tsdavo (1979-1980). analiz sosotoyaniya bezopasnosti poletov. f. 184. 2278. 2-3, 56. tsdavo (1965). reshenie soveta pri yfchalnike uuga. f. 184. 3-8, 56-74 tsdavo (1965-1969). postanovlenie presidiuma zk profsousa aviarabotnikov. f. 184, 48. tsdavo (1965-1969). postanovlenie presidiuma zk profsousa aviarabotnikov. f. 184, 48. the economy of the ussr in 1989. (1990). – kyiv. technology, 463. tsdavo (1976). doklad nachalnika ypravleniya na tretem slete moloduh peredovikov selhohazyaitvennoi aviazii. f. 184. 32-38. baltic journal of economic studies 44 vol. 1, no. 2, 2015 анатолий горбань проблемы повышения эффективности перевозок воздушным транспортом усср (1960-1980 гг.) аннотация. транспорт – один из важнейших отраслей хозяйства. он обеспечивает производственные связи промышленности и сельского хозяйства, осуществляет перевозки грузов и пассажиров, является основой географического развития труда. обмен и структура транспортных перевозок, как правило, отражают уровень и структуру экономики, а география транспортной сети и грузопотоков – размещение производительных сил. основными преимуществами воздушного транспорта являются скорость, качество поставок, географическая мобильность – позволяющая легко расширять и менять трассы. достаточно важным является историко-экономический анализ воздушного транспорта усср, а также исследование того, что способствовало развитию перевозок данным видом транспорта, а что сдерживало этот процесс. цель исследования: выявить, обобщить и проанализировать факторы, которые негативно влияли на организацию работы воздушного транспорта республики и уменьшали эффективность его функционирования. предмет исследования – воздушный транспорт и его роль в грузовых и пассажирских перевозках. для проведения анализа перевозок воздушным транспортом, был использован статистический и аналитический методы. в нашей статье исследованы трудности по повышению эффективности перевозок воздушным транспортом усср; определены факторы, которые негативно влияли на организацию транспортной работы отрасли, найдены характерные для отрасли острые проблемы материально-технической переоснащения. нами выявлен характер трудностей в повышении эффективности транспортной работы отрасли, а именно, неисполнение основных показателей грузовых перевозок и пассажирооборот, задержка рейсов и неполная загрузка воздушного транспорта. выводы. выяснено, что региональные, областные авиапредприятия находились в ненадлежащем материально-техническом состоянии, а за межхозяйственными аэродромами вообще не было установлено должного надзора. все это порождало условия для систематического нарушения регулярности полетов. проведенный анализ воздушного транспорту усср (1960-1980 гг.) дал возможность сделать соответствующие выводы, а именно: для работы воздушного транспорта украины были характерны неравномерность перевозочной работы по регионам республики, систематические нарушения графика выполнения рейсов, неполная загрузка авиа судов и постоянное занижение плановой дальности полетов. характерными чертами работы воздушного транспорта были: также недостаточный уровень обслуживания пассажиров, ненадлежащее содержание межхозяйственных аэродромов, что негативно влияло на применение авиации в сельском хозяйстве. систематически не выполнялись запланированные объемы грузовых перевозок. все это хронически снижало экономическую эффективность работы авиапредприятий. baltic journal of economic studies 400 vol. 3, no. 5, 2017 corresponding author: 1 department of accounting and taxation, mykolayiv national agrarian university. e-mail: syrtseva@ukr.net 2 department of finance, banking and insurance, mykolayiv national agrarian university. e-mail: melnykolga19@gmail.com doi: http://dx.doi.org/10.30525/2256-0742/2017-3-5-400-406 infrastructure activation of innovative development of ukrainian agrarian sector svitlana syrtseva1, olga melnyk2 mykolayiv national agrarian university, ukraine abstract. the purpose of the paper is a justification of roles and identifying areas of improving the functioning of innovation infrastructure that will boost innovation in the agricultural sector of ukraine. methodology. the methodical basis of the study consists of general scientific cognition methods of economic phenomena and processes. realization of the work tasks required such methods: theoretical generalization method – during study of scientific papers, legislative and regulatory acts; abstract logical method – to summarize theoretical and methodological provisions, as well as define the research goal; system approach method – identifying areas for improving the functioning of the innovation infrastructure of ukrainian agrarian sector. results. found that in modern development conditions, a network of innovative structures that would provide infrastructure support for innovation development in the agricultural sector should be represented by such institutions as: agricultural innovation clusters, science parks, business incubators, venture funds, advisory services. taking into account the international experience of the main institutions of infrastructural maintenance of innovative development, suggested areas of improvement and optimization of their formation and functioning to ensure innovation in the agricultural sector of ukraine. proved that the formation of agricultural innovation regional clusters should be represented by the following stages: a preliminary analysis and identifying promising areas and productions; selection of the cluster members; the strategic planning stage; setting goals and objectives; work scheduling of the cluster members in order to implement strategies; control over the execution of the approved programs and projects. taking into account the global model of organization of advisory services, determined that the development of agricultural advisory system should be implemented through extension services, organized at the agricultural universities that provide links with rural youth, agricultural enterprises, and scientific organizations. proved, that two groups of methods – direct and indirect – should represent the most important directions of the state policy on the development of venture investments of innovative development of the agricultural sector. value/originality. the formation and functioning of the optimal system of institutes of innovation infrastructure with the help of appropriate tools and methods will promote the active introduction of innovations in the agrarian sector of the economy and bring it to a qualitatively new level of development. key words: innovative development, infrastructure, agrarian sector, science park, business incubator, innovation cluster. jel classification: o31, o18, о13, q16 1. introduction crisis tendencies, which define the ukrainian economy of last years, determine the need for further development of mechanisms to strengthen the competitive position of agricultural enterprises. permanent growth, renewal, and development of domestic agricultural enterprises can be achieved when using modern tools of implementing the strategy of innovative development. innovations allow the company to achieve its goals – namely to reduce production costs, increase profits, and eventually expand its operations and gain a foothold in the market. improving efficiency of the agricultural sector and accelerating its innovation development is possible, first of all, if the appropriate infrastructure. works of many prominent scientists and economists (datsiy, 2004), (zubets, 2010), (kyrylov, 2015), (makarenko, 2008), (russell, 2003), (shebanin, 2014) and others were dedicated to research problems of the innovation development of agricultural enterprises. despite the baltic journal of economic studies 401 vol. 3, no. 5, 2017 depth of the conducted research, some issues related to ensuring the promotion of the innovative development of agricultural enterprises require further study. in particular, there remain relevant issues of formation and functioning of innovative infrastructure as one of the most important mechanisms for the involvement of agricultural enterprises in the process of innovation. on the basis of a systematic approach, the role and importance of innovative infrastructure development in stimulating the innovative development of the agrarian sector of the ukrainian economy are substantiated. with the help of abstract-logical method and structural-logical analysis, features, modern problems, and obstacles to its formation and functioning are determined, as well as the main directions of development are defined. 2. the formation of agricultural innovation clusters according to the law of ukraine “on innovation activity”, innovation infrastructure – a combination of businesses, organizations, institutions, their unions, associations of any form of ownership, providing services to support innovation. it ensures the functioning of the reproductive process, based on innovation, making it a key factor in the implementation process of modernization and innovative development. considering this, it becomes necessary to modernize existing infrastructure and the additional establishment of new institutions of infrastructure to support an innovative business that would have a systematic relationship and do stimulating and providing functions (goncharenko, 2014). in modern development conditions, a network of innovative structures, which would provide infrastructure support for innovation development in the agricultural sector, should be represented by such institutions as: agricultural innovation clusters, science parks, business incubators, venture funds, advisory services. thus, agrarian innovative territorial clusters are one of the most effective forms of integration that could result in a maximum synergy for the sustainable development of the agricultural sector of ukraine. however, as noted by scientists, the development of agricultural clusters in ukraine hamper the following factors: imperfect legal framework for the operation of clusters and the consequent lack of support for agricultural enterprises cluster initiatives on the part of the state; weakness of existing agricultural clusters because of the low level of competition in the internal market; lack of trust between public authorities and business, as well as between individual companies; danger of losing the right to receive benefits agricultural enterprises and grants for any organizational changes or production; “isolation” of science and education from agricultural production (sobkevych, rusan, yurchenko, 2013). as a result, ukraine has a very low level of development and operation of regional innovation clusters in the agricultural sector. their creation and operation are table 1 key elements of public policy to support the development of agricultural clusters in ukraine elements characteristic formation of the legal field of cluster organization of the rural development consolidation, especially on the level of economic legislation, the legal regime of functioning clusters in ukraine, in particular, through the introduction of the legal category of “cluster”; paragraph 2 of article 7 “measures of state stimulation of depressed areas development” of the law of ukraine “on stimulating regional development” shall be amended to read: “providing state support to small enterprises, including financial, promotion of infrastructure objects of the development of the entrepreneurship” improved cooperation in the “region – science – production” regional centres of the agricultural production scientific providing should advertise and demonstrate the advanced research and development products that will promote such developments in industrial activities of enterprises cluster associations; regional and district state administrations on the basis of orders of the agricultural cluster members should form an order for higher education and vocational training of specialists in ukraine and specialists of the required profile along with their future employment in the cluster structure providing support for the development of agricultural clusters at the regional level regional and district state administrations should: carry out organizational and economic support to initiatives of the enterprises and organizations of cluster association through the development of social and industrial infrastructure of the region; develop websites and a single database with information on existing regional clusters, inform entrepreneurs about the benefits of cluster model of production during the events of enterprise development, create electronic forms of application for businesses that wish to become members of clusters, thereby eliminating information vacuum for potential investors, as well as will attract domestic and foreign capital to clusters; implement at the local level a procedure for issuing permits following the principle of “single window”, which will speed up licensing procedures (especially in construction and land acquisition); partially financing of the social, industrial, and home infrastructure through public-private partnerships within the agreed project source: (sobkevych, rusan, yurchenko, 2013) baltic journal of economic studies 402 vol. 3, no. 5, 2017 mainly the initiatives of the producers themselves. therefore, experts identified a number of key elements of government policy to support the development of agricultural clusters (table 1). also, in our opinion, the application of the cluster approach to innovation development of the agricultural sector should be based on the positive experience of foreign countries. also noteworthy is the experience of norway, where the agro-industrial clusters occupy a leading position. formation of agro-industrial clusters in norway largely was the result of the abolition of state support and billing the agricultural sector. conducted employment policy in this area was based on the use of cluster benefits and attraction of skilled professionals. because of the development of special education system, its average level within the cluster has recently increased significantly. thus, in the mid-80s of the xx century, unskilled workers’ share was more than 75%, by the end of the 90s – less than 50%, and today – about 36%. using the innovative technologies in agro-industrial clusters in norway is aimed at improving product quality, as well as production costs reducing and development of new markets (krasnokutsky, 2010). thus, given the international experience, the formation of regional clusters of agricultural innovation should be made in the following order (figure 1). 3. directions of development of business incubators in the international practice among the major institutions of innovative development of infrastructure, business incubators are the most common. today, there are more than 4,000 business-incubators worldwide, among them from 850 to 1100 are officially registered in the us, about 800 – in western europe, and more than 20 – in ukraine. the main functions of a business incubator include (nemchenko, 2010): providing entrepreneurs stages procedures preliminary analysis and identifying promising areas and productions analysis of resource potential of the region, analysis of production traditions investigation of the structure of production (number and power of households, the relationship between positive and negative factors of their development) selection of cluster members formation, ranking and selection criteria of cluster members analysis of production potential of the cluster members stage of strategic planning setting goals and objectives formation of the organizational structure of a cluster risk assessment of integration approval of the work plan of the future of the cluster according to development criteria signing of contracts and agreements organization of cluster members in order to implement strategies development of plans and documentation signing of contracts and agreements overseeing the implementation of approved programs and projects determination of the monitoring criteria definition and division of responsibility between the parties of the cluster analysis and evaluation of the efficiency of the cluster as a whole fig. 1. the procedure of formation of regional agricultural innovation cluster source: (golovnya, 2013, golubev, voronov, dorokhova, dugin, 2013) baltic journal of economic studies 403 vol. 3, no. 5, 2017 supporting and production facilities, leased on favourable terms; consulting services; assistance in conducting market research; search for potential investors; information and resource support of existing and newly created small businesses; educational activities. the main components of the functioning of business incubators in the agricultural sector should be management centre, logistics centre, information technology centre, innovative technology centre, market research centre, consulting centre, investment loan centre and the centre of training programs and technologies (figure 2). however, it should be noted that the operation of innovative business incubators in the agricultural sector is accompanied by a number of obstacles, including: lack of legislative and regulatory and methodological framework of business incubators; shortage of own financial resources, business incubators; poorly developed venture capital. thus, the main directions of development of business incubators in the agricultural sector are the development of appropriate legal and regulatory provision that would clearly regulate activities of business incubators; use of foreign experience of its creation; provide adequate financial support from the state and private investors. fig. 2. model of a business incubator in the agricultural sector source: (fedorenko, 2010) business incubator management centre (coordination and control of business units, legal, accounting, financial regulation activities, and the creation of innovative enterprises in the agricultural sector) logistics centre (providing companies the necessary equipment, office supplies, industrial and laboratory purposes) advisory centre (providing qualified consulting services to small agribusinesses in various areas of activity) information technology centre (providing necessary professional software, free access to the internet and other information resources, building its own local area network within the business incubator to facilitate access to internal and external customers to their business necessary for business, legal and regulatory, and other information) centre for innovative technologies (selection, analysis, assessment, design, testing of innovative technology of ecological orientation, implementation of the project planning software and preparation for their innovation commercialization) centre for marketing research (market research, strategy development, product promotion in domestic and foreign markets, ensuring the relationship and cooperation with other companies) investment loan centre (provision of financial resources) centre for educational programs and technologies (training, development of manuals, instructions, seminars, exhibitions, conferences) baltic journal of economic studies 404 vol. 3, no. 5, 2017 4. transfer of innovations based on agricultural consulting the network of advisory services is a major communicative chain of the regional markets and the most efficient mechanism for providing innovations to the agricultural sector. within the consulting services should be developed and recommended projects that are fully equipped with personnel, machines, and finances, which will be possible only in the interaction of sellers of appliances and technologies, financial institutions and agricultural universities. this relationship will be also provided with advisory services. also making its activities within the process of transfer of innovation and diffusion of innovations in agricultural production, advisory services thus stimulate scientific progress, increase in jobs and investment in the production expansion. taking into account the international experience, today it is possible to use these models of organization of advisory services: 1) services created as structural branches of government units – ministries, regional departments of the agricultural development etc.; 2) services organized on the basis of large multiregional or sectorial universities, agricultural colleges, and specialized schools; 3) farmers’ organizations or associations to provide consulting services; 4) consulting services as departments of commercial firms; 5) private consulting services. depending on the activity of the interaction between extension services and agricultural enterprises, such possible models of the transfer of innovation in the agricultural sector through agricultural advisory services can be distinguished (table 2). these models of transfer of innovations in agriculture based on agricultural consulting can be effectively used, depending on the level of innovation environment, and the willingness and ability of agricultural producers to accept and implement innovations. in our opinion, developing of the agricultural consulting system should be done primarily through advisory services, organized at the higher agrarian educational institutions, which retain links with rural youth, agricultural enterprises, and scientific organizations. therefore, first of all, we should promote the training of expert advisors. 5. venture financing of innovative development the most effective and common form of intensification of innovation in a market economy conditions is venture financing of innovative projects related to high risk. but now venture financing in the agricultural sector of ukraine is underdeveloped. the problem lies in the imperfections of the legal, technical and organizational provision of various aspects of investment support of innovation. in our country, only some elements of emerging complex infrastructure of support of venture capital (venture capital funds, expertise and consulting services management company venture enterprises and projects, specialized information services, etc.) can be found. in addition, many developers of new products and services do not have knowledge about the process of venture financing innovation from initial stages to the commercialization of the results of a market economy. weak innovation activity of most agricultural enterprises is due to the lack of sufficient economic incentive among producers, largely due to low consumer demand in the domestic market. to promote the development of venture financing, ukraine has established association of private investors. but unfortunately, the sectors of agriculture presented to the association only three projects, which is extremely less in comparison to other sectors. therefore, one of the most important tasks to ensure the further innovative development of the agricultural sector of table 2 models of transfer of innovation in the agricultural sector based on agricultural consulting types of models specifics model 1 informing all concerned about the emergence of new techniques or technologies and other innovations by publishing bulletins, information through the website and more. in this model, the interaction between extension services and agricultural enterprises is minimal model 2 the consultant is an active mediator between the carrier of innovative knowledge and agricultural enterprises. in such circumstances, the main task of the consultant is bringing information about the proposed innovation and efficiency on the results of testing of carrier (developer) innovations model 3 interactive informing of all interested parties of the emergence of new techniques or technologies and other innovations through periodic seminars, training courses, workshops, and so on model 4 consultant demonstrates the innovative technology at its research site (for example, plants a new variety or working on innovative technology from the previously known varieties). a potential client can see the difference in yield and laboriousness reduction in the experimental area compared with its own (control) plots model 5 consultant demonstrates the innovative technology in practice in the real terms. for example, he sows popular culture, using innovative technology on the land that provided by the potential client. after harvesting potential customer will be able to visually verify the effectiveness of the proposed innovative technology, comparing the yield at the experimental area and other areas source: (glebova, 2012) baltic journal of economic studies 405 vol. 3, no. 5, 2017 the economy is an enabling environment for increasing investment activity in the field of venture capital financing innovation of agricultural enterprises. the most important directions of the state policy on the development of venture investments of innovative development of the agricultural sector should be represented by two main groups of methods – direct and indirect (table 3). direct methods of venture capital support should include specific mechanisms of state support aimed at increasing the supply of venture capital. these programs primarily should be implemented in the form of financial incentives – namely, direct public investment and government loans. indirect methods of venture capital support should include a favourable legal framework for the regulation of relations in the field of venture capital investment, promoting new forms of venture capital investments, tax incentives, guaranteeing investments in capital stock. thus, the implementation methods of government support and stimulate venture investment will positively affect the innovative development of the agricultural sector as it ensures increasing their attractiveness to potential investors. 6. conclusions thus, in the formation of an effective infrastructure of innovative development of the agricultural sector must take into account the positive experience of international practice and domestic business conditions, territorial and sectorial features that will combine the best global models with national realities innovation. the formation of agricultural innovation regional clusters should be represented by the following stages: a preliminary analysis and identifying promising areas and productions; selection of the cluster members; the strategic planning stage; setting goals and objectives; work scheduling of the cluster members in order to implement strategies; control over the execution of the approved programs and projects. the main components of the functioning of business incubators in the agricultural sector should be management centre, logistics centre, information technology centre, innovative technology centre, market research centre, consulting centre, investment loan centre, and the centre of training programs and technologies. the development of agricultural advisory system should be implemented through extension services, organized at the agricultural universities that provide links with rural youth, agricultural enterprises, and scientific organizations. the formation and functioning of the optimal system of institutions of the innovation infrastructure by means of appropriate tools and methods will contribute to the active implementation of innovations in the agrarian sector of the economy and taking it to a qualitatively new level of development. table 3 the main directions for the state support of venture financing of the innovative development of agricultural enterprises directions aim direct methods government direct investment direct investments in venture capital funds that stimulate the development of innovative agricultural enterprises government loans long-term loans at low-interest rates and (or) non-refundable credits venture funds indirect methods regulatory support development of the legal framework, which regulates legal relations in the field of venture capital investment; development and legislative consolidation of new forms of venture capital investment to finance innovative projects; legislative regulation of the right to higher education institutions on a share in the capital of innovative enterprises tax incentives creating a favourable tax treatment of income from securities transactions; eliminating double taxation of investors involved in the formation of venture capital funds that finance agricultural enterprises information support development of an informational environment that allows inventors, innovative agricultural businesses and investors to find each other and promotes the development of cooperative ties between them; training and consulting of agricultural producers, including dissemination of information on promising innovative projects and potential investors guaranteeing investments in capital stock ensuring the return of the losses from venture capital investments in the agricultural sector, which is characterized by a high level of risk source: made by the author references: datsiy, a. i. 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(2013). formuvannja aghropromyslovykh klasteriv jak faktor innovacijnogho rozvytku v postkryzovykh umovakh [forming of the agro clusters as a factor of innovation development in postcrisis conditions]. efektyvna ekonomika [efficient economy] (electronic journal), no.  4. retrieved from: http://www.economy.nayka.com.ua/?op=1&z=1921 (accessed 9 december 2017). golubev, a., voronov, l., dorokhova, v., dugin, a. (2013). kontseptualnye osnovy sozdaniya innovatsionnykh klasterov v apk regiona [conceptual basis for the creation of innovation clusters in agribusiness in the region] scientific herald of the national university of bioresources and nature management of ukraine, vol.  181, no. 3, pp. 61−73. goncharenko, a. v. (2014). infrastrukturne zabezpechennja innovacijnogho rozvytku aghropromyslovogho vyrobnyctva [infrastructure support of the innovative development of agricultural production]. investments: practice and experience, no. 24, pp. 61-64. krasnokutsky, p. a. (2010). agropromyshlennye klastery kak perspektivnaya forma integratsii v agroprodovolstvennom sektore: zarubezhnyy opyt i rossiyskie realii [agro-industrial cluster as a promising form of integration in the agrifood sector: foreign experience and the russian realities]. nikonovskie chteniya, vol. 12, pp. 237-238. kyrylov, yu. (2015). forming the paradigm of competitive development of the ukrainian agricultural sector under conditions of globalization. management theory and studies for rural business and infrastructure development, vol. 37, no. 1, pp. 70-79. makarenko, p. m. (2008). konceptualjni zasady systemnogho innovacijnogho onovlennja siljsjkoghospodarsjkogho vyrobnyctva [conceptual framework of system innovational renovation of agricultural production]. agrosvit, no. 1, pp. 17-20. nemchenko, a. b., nemchenko, t. b. (2010). biznes-inkubatory v sferi suchasnoji derzhavnoji pidtrymky rozvytku reghionaljnoji innovacijnoji infrastruktury [business incubators in the field of modern state support of regional innovation infrastructure]. proceedings of the kntu. economic science, vol. 17, pp. 36-42. russell d. archibald (2003). managing high-technology programs and projects. new york: john wiley & sons. shebanin, v. s. (2014). konceptualjni zasady i priorytetni naprjamy efektyvnogho rozvytku aghrarnogho universytetu [conceptual framework and priority areas of effective development of the agricultural university]. economy of the aic, no. 1, pp. 5-13. sobkevych, a., rusan, v., yurchenko, a. (2013). analitychna zapyska shhodo derzhavnoji polityky pidtrymky rozvytku aghrarnykh klasteriv v ukrajini [policy paper on public policy to support the development of agricultural clusters in ukraine]. national institute for strategic studies under the president of ukraine. retrieved from: http://www.niss.gov.ua/articles/760/ (accessed 9 december 2017). zubets, m. v. (2010). pro strateghiju utverdzhennja innovacijnoji modeli rozvytku aghrarnoji ekonomiky [strategy on strengthening innovation model of agricultural economics]. economy of the aic, no. 12, pp. 23-18. baltic journal of economic studies 15 vol. 4, no. 3, 2018 corresponding author: 1 faculty of educational, methodological and scientific affairs, kyiv faculty of the national academy of the national guard of ukraine. e-mail: belwz3@ukr.net 2 department of research and organization, national academy of the national guard of ukraine. e-mail: fozzy_i@ukr.net 3 department of administrative law and procedure and customs security, university of state fiscal service of ukraine. e-mail: tilchikvv@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-15-21 the innovative approach to the crisis situations monitoring of the social and economic origin that endanger the security of ukraine serhii bielai1 kyiv faculty of the national academy of the national guard of ukraine, ukraine ihor morozov2 national academy of the national guard of ukraine, ukraine vyacheslav tylchyk3 university of state fiscal service of ukraine abstract. the purpose of the article is the explanation of innovative principles of the crisis situations monitoring of the social and economic origin that threaten the national security of ukraine. the topicality of the crisis situations monitoring of the social and economic origin by the authorities that endanger the security of ukraine is proved. the concept of “crisis situations monitoring” of the social and economic origin is defined. it is a system of monitoring, evaluating, and forecasting of social and economic threats to national security. methodology. the crisis situations occurrence characteristics search on the internet model allows searching the text files on the internet with the help of the text files in order to evaluate the current situation, forecast the consequences of crisis situations of social and economic origin such as mass protest activism in regions of the country for further settlement. in view of this, the existing informative and analytical systems of the text information analysis systems are researched; the standard procedures of content analysis are investigated. the statistical analysis model is developed. in this regard, the list of significant indicators that determine the level of threats of social and economic origin and can lead to crisis situation consequences – the mass protest of public participation is formed. the threat level estimation model of the social and economic origin using modern theoretical and practical statistical methods and geographical information system methods is developed. the threat level forecasting model of the social and economic origin allows forecasting the crisis situation progress. with this end in view, the methods of the social crisis forecasting of social and economic origin are researched; the structured scheme of this mechanism is developed. practical implications. the innovative approach to the crisis situations monitoring of the social and economic origin that endanger the security of ukraine is developed. it is based on the usage of crisis situations occurrence characteristics search model, statistical analysis model, the threat level estimation and forecasting model of the social and economic origin. the themes for future research will be devoted to explanation and development of response mechanisms to the social crisis that threatens the national security of ukraine. key words: crisis situations of social and economic origin, national security, monitoring, innovations, econometric and statistical methods, econometric modelling. jel classification: c49, с50 baltic journal of economic studies 16 vol. 4, no. 3, 2018 1. introduction today ukraine is a young european country that aspires to become a modern and developed social and legal state with a strong market-driven economy. towards this end in view, the government is developing and implementing reforms in the political, economic, social, scientific, technological, and other fields. however, the major obstacle for sustainable development is the modern threat to the national security that is reflected by increasing poverty rate, reducing level of the middle class, significant wealth disparity of the population, high level of government corruption and so on. currently, a special attention should be paid to the research of threats that have emerged on social and economic grounds. present clearly demonstrates numerous crises of the social and economic origin. the economic crisis and its aftermath led to the recession of economic development and thus affected the extension of social problems and reduction of society standard of living and also the exacerbation of tensions in society. it is clearly demonstrated by the social and economic measures of ukrainian regions. the statistics of the most significant criminal offenses happened in 2013–2017 presented by the prosecutor general’s office of ukraine (common reports of criminal offenses, 2017), confirmed the existing threats. the expansion in the number of reported crimes based on the main criteria of the “crimes against national security” section, “crimes against public safety” section, and “crimes against public order and morality” section proves the likelihood of threats that are the repercussions of the crisis situations of the social and economic origin. another group of criteria related to “crimes in the area of performance and professional activities related to the provision of public services” section, “crimes in the sphere of economic activity” section, and “crimes against property” section characterize the existence of a crisis in the ukrainian society most thoroughly. hence the existing management mechanisms are not able to deal with the abovementioned social and economic threats efficiently. thus, it is urgent to research this question based on the theoretical and methodological foundations of the crisis situations monitoring of the social and economic origin that threat the national security of ukraine. the theme of human development, the vital state of being in society and living standards in society have been researched by such scientists as s.m. ayusheyeva, b.d. byelobrov, o.s. dudolad, o.v. zhadan, n.v. ilchenko, a.i. ilyash, d.v. kolesnikov, v.o. mandybura, o.a. melnichenko, u.y. sadova, f.v. uzunov, and others. the security aspect of living abilities under the situations of crisis events of the social and economic origin, social conflict and cooperation of public authorities and the population has been researched by such scientists as o.h.  afenkina, t.v.  biletska, s.i. bilosorochka, i.y.  vorobyova, n.p.  dovgan, m.o. kizim, k.i. kozlov, m.m. kononenko, t.a. malyarenko, v.a. mozharovskyi, o.v. pankova, n.v. stezhko, a.v.  stoyka, v.v. uzunov, a.a. haletska, o.v. chernyavska and others. the research of the monitoring issue of the crisis phenomena and the termination of the crisis situations with the huge protest participation of the population has been performed by such scientists and experts as y.p.  babkov, a.v. basov, v.m. batsamut, v.y.  bohdanovych, a.l. vysidalkin, h.a. drobakha, m.v. korniyenko, s.o. kuznichenko, v.y. lisitsin, m.m.  orlov, i.y. svyda, m.i. skryhonyuk, o.o. trush, o.m. shmakov and others. the scientists have studied the theoretical foundations of the crisis occurrence in social and economic systems; have presented the basic strategies regarding the estimation of the level of the society standard of living; have determined the ways for the reduction of the social tension level and for the social conflicts regulation; have covered the certain questions of crisis phenomena forecasting and regulation of the crisis situations etc. however, despite the wide range of research works about various aspects of crisis management of the social and economic origin, there is no complete mechanism of the social and economic threats’ monitoring. thus, this particular problem is urgent in present conditions of the social development. the aim of the article is the explanation of innovative principles for the crisis situations monitoring of the social and economic origin that threaten the national security of ukraine. 2. legal bases for crisis situations monitoring the main laws and regulations that declare the issue of national safety and security arrangements are: the law of ukraine “on national security of ukraine” (on national security of ukraine, 2018) and the national security strategy of ukraine (the national security strategy, 2015). further, let us consider the causes. article 7 of the law of ukraine “on national security” identifies the threats to national security and the most urgent of them are: the lack of an effective financial crises prevention program; increase of credit risks; critical state of food supplies of the population; discrepancy of the reform programs of the national economy and the results of their implementation of certain social priorities; ineffective policies for improving the labour incomes, poverty reduction and balancing the productive employment of the working population; exacerbation of the demographic crisis; increase of the child and adolescent neglect, homelessness, vagrancy etc. article 8 of the law of ukraine “on national security” defines the main directions of the state policy regarding the national security of the country’s activity. thus, the main directions are: laying the groundwork for sustainable economic growth; food supply security; baltic journal of economic studies 17 vol. 4, no. 3, 2018 the significant strengthening of the social dimension of the economic policy, the real increase of the living standards that will be primarily based on the increase in wages and early payment of wages and social benefits guaranteed by law, urgent strengthening target orientation of material support, reducing the unemployment; laying the conditions for poverty reduction and overcoming of the excessive social stratification; preservation and strengthening of demographic and labour resource potential; overcoming of the demographic crisis processes; elimination of homelessness, vagrancy and straying of children and adolescents. thus, it can be noted that the issue of the prevention and settlement of crisis situations of the social and economic origin that threat the national security of ukraine in the law of ukraine “on national security” has been determined quite clearly. the national security strategy of ukraine defines the direction of the government policy regarding the crisis response of the social and economic origin. the main challenging issues (determined in 3.4 chapter) that can threaten the security of ukraine are: the economic crisis, the depletion of state financial resources, lowering of living standards; distorted governmental control and corrupt squeeze on business; mismanagement of national debt; reduction of the household wealth and rise in unemployment levels. the basic directions of the state policy on national security of ukraine have been determined in section 4 of the national security strategy of ukraine. the principal strategies for the effective security sector development and defence are: “centralized management of security and defence sector in peacetime, also in crisis situations that threaten national security and special period, interagency coordination and collaboration; ... improvement of the state strategic planning, development of the unique system of monitoring, analysis, forecasting, and decision-making in national security and defence sector, ensuring the effective coordination and functioning of the united system of situational centres of state relevant government bodies of the security and defence sector” (on national security of ukraine, 2018). the point of government policy is to implement the economic reforms, the basic content of which is to create conditions for overcoming poverty and excessive stratification in society, to approach the social standards to the level of central and eastern europe countries – the european union, to achieve the economic criteria that are necessary for ukraine to become a member of the european union. thus, from the above reasoning, it should be mentioned that today the national security strategy of ukraine determined the task for the state administrative body of the crisis phenomena monitoring. it comprises the development of the unique system of the monitoring, analysis, forecasting, and decision-making in the sphere of national security. the main threats that lead to the crisis situations of the social and economic origin are: high poverty rate, wealth disparity, social disparity, the absence of the vivid middle class. 3. the structure of the innovative approach to crises situations monitoring according to the research of national security arrangement system, a special attention should be paid to the countermeasure of the controversial crisis phenomena repercussions of the social and economic origin. here we provide such phenomena as violent civil disorders, rebellions, revolutions etc. these are the most dangerous phenomena and the main task of the monitoring is its early identification. the settlement of crisis situations that comprise social and economic component is the pressing issue of national security arrangements. such phenomena ask to be treated as urgent and demand early effective management decision from the country’s government. it is possible to avoid the social conflict in a society in case of the successful solution to a conflict situation. the escalation of the conflict leads to social crisis and it can be overcome in case of successful public policy and efficient administration of local self-government authorities. if the problematic issues that cause the social and economic crises are not solved, the crisis will have the irreversible ruining character and lead to the social catastrophe. in view of this, it is our opinion that the crisis situations monitoring of the social and economic origin is a system of monitoring, evaluating, and forecasting of social and economic threats to national safety. during the development of this mechanism, it is appropriate to use innovative approaches. according to the law of ukraine “on innovation activity” (on innovation, 2012) we should understand newly-formed (implemented) and (or) improved competitive solutions, output and services and also organizational and technical questions of productive, administrative, commercial character and others that improve the structure and quality of production and (or) the social sphere considerably. the innovative activity under section 3 of the law of ukraine “on innovation activity” involves: production and dissemination of new types of equipment and technologies; advanced cross-industry structural changes; implementation of the long-term scientific and technological programs with long terms of the return on investments; funding of fundamental studies for quality changes of the productive forces; development and introduction of new resourcesaving technologies in order to improve the social and environmental situation (lavrova, 2012). according to y.v. lavrova, the innovations are the eventual result of the innovative activity in the form of baltic journal of economic studies 18 vol. 4, no. 3, 2018 new or improved product or process with qualitative advantages while its usage, projection, production, sale and also it can be used for practical purposes and has a social advantage (lavrova, 2012). therefore, on the assumption of the innovative principles, the methodology of socio-economic threat monitoring innovative approach should comprise three stages: 1) analysis, the development of the theoretical foundation; 2) the organizational aspect, the development of the methodological foundation; 3) test for adequacy in the social and economic system. as follows from the research according to the mentioned methodology, the structure of the innovative approach to crisis situations monitoring of the social and economic origin that threaten the national security has been formed. the innovation consists in the geographic information system implementation as the platform of the monitoring. this platform has been used as the basis for the implementation of crisis situations occurrence characteristics search model. the existing informative and analytical systems of the text information analysis systems have been researched in order to develop the crisis situations occurrence characteristics search on the internet model (figure 1); the standard procedures of content analysis have been investigated; the crisis situations occurrence characteristics search model with the help of text templates has been explained; the text templates on the principles of the calculation of content analysis standard procedures definitions that allow implementing the crisis situations occurrence characteristics search method of social and economic nature have been chosen. the developed model allows searching the text files on the internet with the help of the text files in order to evaluate the current situation, forecast the consequences of crisis situations of social and economic origin such as mass protest activism in regions of the country for further settlement. the sources for finding such information may include: text files in nets provided by media (periodical electronic publication); internetpages of different sites that display operational news and announcements (especially regional and local); proper thematic blogs; social networks (vkontakte, odnoklassniki, twitter, facebook, etc.) that are considered to be additional means of obtaining the necessary information by authority of the competent bodies of state administration. 4. development of models for crisis situations monitoring the statistical analysis model has been developed. in this regard, the list of significant indicators that determine the level of threats of social and economic origin and can lead to consequences of crisis situations – the mass protest of public participation – has been formed. the indicators are classified into groups: economic advancement (fixed investments, volume of export and import of services, volume of export and import of products); the consumer market and wages (the volume of retail trade turnover, average wages by regions, the index of actual wages, consumer price index, the arrears in wages); labour-market (the need for employees of enterprises, employment of unemployed citizens, the economic activity of the population, unemployed citizens in accordance (with the method of the international labour organization); demographic situation (the number of existing and permanent population, internal and external migration, births and deaths); crime (the total number of recorded crimes, the number of reported grave and especially grave crimes, crimes against public safety, crimes against public order and morals). the mechanism of correlation and regression analysis of indicators of threats of social and economic origin with the consequences of the crisis situations (mass protest activity of the population) that allows forecasting the crises has been formed. it is established that the implementation of the mechanism of correlation and regression analysis is not always possible because of the probability of correlation dependences existence between the values of the mentioned indicators. the threat level estimation model of the social and economic origin has been developed. it consists of four levels of the threats (lower, higher, high, and critical) and demonstrates the state security situation in this direction (figure 1). it should be mentioned that each level of the threats may grade into another level and remain unaltered. “lower” threat level is characterized by the satisfactory level of the economic situation and social welfare in the country. this is a situation when public authorities and local governments perform tasks without complications. “higher” threat level corresponds to the occurrence of crisis situations of the social and economic origin. this is a situation when public authorities and local governments implement measures to restore the economy and social security. “high” threat level corresponds to the occurrence of mass public protest activity, such as riots. this is a situation when state and local authorities implement measures to restore the economy and social security. “critical” threat level corresponds to the occurrence of conditions of the social disaster and imposition of the emergency administrative and legal regimes. this is a situation when the public authorities impose the emergency legal and administrative regimes. it has been used the taxonomic method (plyuta, 1989) to evaluate the levels of threats that allow analysing the diverse criteria. according to the algorithm of the taxonomic method, it has been suggested to use real past crisis situations in society that led to social disaster as the reference point. baltic journal of economic studies 19 vol. 4, no. 3, 2018 the classical method of k-means clustering has been analysed. this method has explained significant issues regarding the use of this method in the estimation mechanism of crisis situations of social and economic origin. consequently, the modified method of k-means clustering analysis has been developed (bielai, lisitsyn, 2014). it combines the taxonomic method and the method of k-means clustering that allows analysing and forecasting the current crisis situations. the statistical analysis modelthe crisis situations occurrence characteristics search on the internet model the threat level estimation model of the social and economic origin geographic information system the data basis of social and economic indicators of crisis situations the data basis of crisis situations occurrence characteristics on the internet the taxonomic method, the clustering analysis based on k-means method lower higher high critical the threat level forecasting model of social and economic origin passive search forecasting technique adaptive forecasting normative active forecasting scenario methods search passive forecasting data-smoothing method decision making lower higher high critical the current level of threats forecasting levels of threats figure 1. the structure of the innovative approach to crises situations monitoring of the social and economic origin that threaten the national security baltic journal of economic studies 20 vol. 4, no. 3, 2018 the threat level forecasting model of the social and economic origin has been formed. it consists of active regulation (scenario method) (novikov, chhartishvili, 2002) and passive search (data-smoothing method, adaptive forecasting) forecasting techniques (klebanovoy, kizima, 2010). the time series smoothing method allows to predict the emergence of a crisis with a long-term view (two years or more) using the moving average method and for a short term (within one period) by using exponential smoothing. the adaptive forecasting models have certain advantages as they are used in processes that do not always have fixed regularities-trends; adapt its structure and parameters quickly to modification of terms; take into account the time series levels’ non-equivalence – data discounting mechanism. consequently, the adaptive forecasting models have been selected for the research, such as basic brown model. this model represents the process of development as a linear trend with variable data. in order to predict the consequences of crisis situations of social and economic origin such as mass protest activity rate, it has been used scenario modelling search active forecast, which will help to develop a list of most probable (typical) scenarios of crises that may occur in the ukrainian society. it has been suggested to use the reflexive control to develop the scenarios of crisis situations. now, therefore, the structured scheme of the threat level forecasting model of the social and economic origin has been developed. thus, the innovative approach to the crisis situations monitoring of the social and economic origin that threaten the security of ukraine is based on the classical statistical analysis and forecasting methods combined with modern technologies of collecting, analysing, and plotting of spatial data on the electronic map with the help of technologies of the geographic information system. such an approach allows collecting the information, evaluating and forecasting the crisis situations in regions of the country. the mentioned innovative approach has been also reduced to practice with the help of the proper programming module. 5. conclusions 1. the central task of the national security arrangement is the response to the crisis situation of social and economic origin. such phenomena require timely and effective management decisions from country’s governments. the main task of monitoring is to forejudge the crisis situations in advance. the monitoring of crisis situations of social and economic origin is a system of monitoring, evaluating, and forecasting of social and economic threats to national security. 2. the crisis situations occurrence characteristics search on the internet model has been developed. it has been elaborated on the basis of definition of thematic text templates that describe the appearance of crisis situations in society and allows searching the text files on the internet with the help of the text files in order to evaluate the current situation, forecasting the consequences of crisis situations of social and economic origin such as mass protest activism in regions of the country for its further settlement. in view of this, the existing informative and analytical systems of the text information analysis systems have been researched. thus, the crisis situations occurrence characteristics search on the internet model (figure 1) has been developed; the standard procedures of content analysis have been investigated; the classified table of the text templates choice has been formed; the crisis situations occurrence characteristics search model has been explained; the factors that characterize the crisis situations with the mass protest activity of population have been classified. 3. the threat level estimation model of the social and economic origin using modern theoretical and practical statistical methods and geographical information system methods have been developed; the indicators of the crisis situations of the social and economic origin that determine the level of socioeconomic threats to national security and may lead to the crisis situations with the mass participation of population have been explained; the modification of k-means clustering method by applying and explaining four clusters i.e. the levels of threats that allow to subsume the crisis situation to the certain stage of the social situation in the region and forecast the situation primarily has been performed. 4. the threat level forecasting model of the social and economic origin that allows forecasting the crisis situation development has been formed. with this end in view, the methods of the social crisis forecasting of social and economic origin have been researched; the search active forecasting methods implementation i.e. the data-smoothing method have been explained. it allows to predict the occurrence of a crisis with a longterm view (two years or more) using the moving average method and for a short term (within one period) by using exponential smoothing and also linear adaptive forecasting models that are used in processes that do not always have fixed regularities-trends, adapt its structure and parameters quickly to the modification of terms; and take into account the time series levels’ non-equivalence; the implementation of normative active forecasting i.e. scenario modelling method that allows developing a list of most probable (typical) scenarios of crises that may occur in society has been proved. 5. themes for future research will be devoted to explanation and development of response mechanisms to the social crisis that threatens the national security of ukraine. baltic journal of economic studies 21 vol. 4, no. 3, 2018 references: bielai s.v., lisitsyn v.e. 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https://doi.org/10.30525/2256-0742/2018-4-2-15-23 analysis of institutional risks of sustainable sea development in ukraine natalya andryeyeva1 institute of market problems and economic & ecological studies of national academy of sciences of ukraine, ukraine volodymyr hotsuliak2 kyiv national university of trade and economics, ukraine stanislav gorbachenko3 odessa i.i. mechnikov national university, ukraine abstract. the research objective is to define institutional risks in the process of formation of the institutional environment of the maritime economy sphere within the context of the implementation of international sustainable development policy into ukrainian economy. the article considers the risks and threats of the emergence of institutional risks and “traps” in the economy, their influence on maintaining sustainable development of the maritime economic sphere in ukraine. the article analyses peculiarities and causes of the crisis situations of 2013– 2017 in the ukrainian maritime economy, discovers the existing structural imbalance of institutional environment and offers a set of measures for the integration of national objects of the maritime economy into european maritime clusters. methodology. the research defines the essence and interrelation of institutional risks and institutional “traps” in the modern institutional theory. it was established that institutional “traps” in the maritime economy emerge due to management misjudgements in relation to new regulations suggested by policymakers and inefficient institutions without taking into account the existing economic and environmental risks for economic activities at the microeconomic level. that is to say when the state ignores the main institutional threats: resilience of shadow arrangements; a procedural overload of the management system; immaturity of the regulatory-legislative sphere, resource-intensiveness of organisations and their interrelations. practical implications. the conducted research on the existing institutional risks (traps) of the ukrainian maritime economy allowed discovering the level of structural deformations of the institutional environment in accordance with sustainable development methodology, to offer an action plan for improving the institutional environment that would allow removing the existing social, economic and environmental risks. value/originality. the article demonstrates that though institutional risks are of common nature for various countries and scopes of activity, they do not work in the same way and have different symptoms of emergence in each separate sphere, in particular, in maritime economy. thus, the recommendations for their prevention and overcoming substantially differ from each other. the research offers a set of priority tasks for overcoming the crisis phenomena in the sphere of the maritime economy of the ukrainian black-sea region related to the transition of ukrainian business structures to sustainable development. the authors have determined that institutional risks that influence various segments of economic activities are complex in nature. in this context, determination of interrelations between institutional risks and other types of risks, in particular, economic and environmental ones, becomes especially important. key words: institutional risks and “traps”, sustainable development, maritime economic sphere, ukrainian black sea region. jel classification: b52, o44, q01, r49 corresponding author: 1 department of economic and environmental problems of seaside regions, institute of market problems and economic & ecological studies of national academy of sciences of ukraine. e-mail: andreevann@ukr.net 2 department of financial analysis and audit, kyiv national university of trade and economics. e-mail: vgotsuliak@ukr.net 3 department of economics and management, odessa i.i. mechnikov national university. e-mail: stas_gorbachenko@ukr.net baltic journal of economic studies 16 vol. 4, no. 2, 2018 1. introduction relevance of research works on institutional risks of sustainable development of the ukrainian black sea region’s maritime economic sphere is conditioned by the lack of regulation of strategic development priorities, low level of environmentalization of economic activities virtually in all the production domains, increasing degradation of the natural and resource potential, and exacerbation of economic, social, and environmental situation essentially in all regions of ukraine. in ukraine, in the current conditions, a special place should be given to the institutional policy of establishing it as an economically independent (sovereign) maritime state. at the same time, it is necessary to clearly understand that, firstly, the role of the maritime factor will be growing each year for ukraine and will play a landmark role in the future; secondly, establishment of ukraine as a maritime state is, first of all, closely related to the development of port industrial areas. we deem it necessary to underscore that the state interests of ukraine and global community related to sustainable development of maritime economic sphere are determined by the geoeconomic and geostrategic importance of using the black sea for transportation and reclamation of its resource potential. in general, the state interests of ukraine in the maritime domain constitute a total of economic, social, political, environmental and other interests of the state. but it is due to the uncertainty of the institutional reforms in accordance with the world standards that the further balanced development of the maritime economic sphere is slowed down. this article determines the essence of institutional risks, demonstrates interrelations between institutional risks and institutional “traps”; provides research on separate most topical and problematic aspects of formation of the institutional environment related to ensuring economic and environmental interests of ukraine within the context of sustainable development of the management systems for objects of functioning of the ukrainian black sea region’s coastal zone. analysis of research works and publications. determining institutional risks (traps) and improvement of the institutional environment of the maritime economy sphere in ukraine in accordance with the international paradigm of sustainable development and the best world practices is a new problem both for the economy of ukraine and for the entire international community, which tends to become very topical in the nearest future. the analysis of general approaches to the formation of state institutional policy, social and economic situation, problematic environmental issues of sustainable development of the maritime economic sphere of the ukrainian black sea region have motivated ukrainian researchers for intensive and deep study of the phenomenon of formation of the new institutional foundation related to overcoming the current economic and environmental imbalance and discovery of crisis phenomena in the formation of the state maritime policy. issues of the creation of rules and regulations for the functioning of societies have been considered by a large number of renowned scientists, analysts, and practitioners of institutional theory, state governance, and other directions of economic or social sciences.  thus, j.  brennan and j.  buchanan (2005), e.  ostrom (1990), j.  mokyr (2002) favour the social nature of their emergence.  in the works of p.  knopfel, s.  varon, n.  malysheva (2010), t.  eggertsonn (2005), v.  lowndes (1996), there can be traced an inclination towards the consideration of this range of problems from the point of view of political variations.  r .  coase (2007), d.  north (1997, 2010), e.  furubotn and r .  richter (1991) tend to see the transformation of economic environment as the reason for changes of institutions.  gradstein (2008) pays a special attention in his research to determining the interrelation between institutional “traps” and economic growth. however, as a rule, the points of view of each author complement each other when it comes to the causes of the emergence of institutional risks or “traps” in the public sphere. unfortunately, examination of most of the studies allows emphasizing that institutional risks are usually considered only through the social and economics lens. at the same time, most of the scientific articles do not pay any attention to the environmental aspect of studies. the modern approach to the international sustainable development paradigm provides for comprehensive social, environmental, and economic consideration of the existing transformational issues of formation of the institutional infrastructure of the economy. a number of ukrainian scholars have made their contribution to the research to determine the mechanisms and tools related to institutional support of sustainable development of the maritime economic activities of the objects of ukrainian black sea region, in particular: r .  kryzhanovskyi (1991), o.  hromova (2001), b.  burkynskyi and v.  stepanov (2008), a.  fylypenko, v.  baryshnikova (2013), and others. the applied task of the research is the discovery of problems and assessment of crisis situation related to the formation of new institutes in economic and environmental spheres of the objects of maritime economic activities of the ukrainian black sea region, as well as the development of offers to improve the institutional environment. 2. the methodology of implementation of the theory of institutional risks in the maritime economic sphere of ukraine institutional aspects of development are currently acquiring a special importance. in the presentday conditions, ignoring an institutional crisis or attempting to tackle it with typical measures aimed baltic journal of economic studies 17 vol. 4, no. 2, 2018 at overcoming local issues (for instance, financial and economic or economic and environmental crisis) using examples of developed countries, where institutional crisis is absent or far less evident, leads to its conservation or growth, which would permanently reduce the efficiency and management capabilities of public administration, as well as efficiency and competitiveness of national economy. a special group of institutional risks is constituted by the risks arising out of the unconcerted behaviour of the state in the economic and environmental management sphere. all of this can lead to growing social tensions and risks of emergence of civil unrest. as a result, the economy of ukraine is deprived of efficient possibilities of growth, and the country’s political structure is isolating itself in the system of unresolved issues of its own economic and environmental efficiency of sustainable development, which reduces the country’s competitiveness and bears unforeseen consequences for the functioning of the state organism. thus, the issues of investigating the risks of activation of institutional “traps” arise on a new scale, for these traps can potentially cause emergence of new shadow arrangements in the country’s economy (corruption, large-scale cases of monopolistic collusion on the markets, latent lobbying of individual interests etc.) alongside the new conditions of functioning of the society and state. overcoming such risks requires a nonlinear response to the emerging social, economic and environmental challenges by way of changing the quality of institutions and institutes, i.e. realization of efficient institutional transformations. the interdisciplinary approach to studying risk allows considering risk in the context of institutional analysis. scientific and analytical literature usually defines the institutional risk as a social and economic phenomenon characterized by a possibility of the advent of an undesirable event caused by institutions of the economy. there is a controversy in the economic science regarding the nature and conceptual framework of institutional functions and dysfunctions. the institutional theory determines that the function of coordination is expressed in the fact that awareness of a separate rule allows individuals to carry out mutually beneficial actions (kouz, 2007). this function ensures coordination of actions of economic entities and reduces the level of uncertainty in social and economic relations. the distributive function provides for the prohibition of certain actions, the concentration of resources only with unprohibited ones or those that are directly suggested. institutes carry out redistribution of resources, expenses, and benefits from certain economic entities to others. informational and motivational functions of institutes are also distinguished. these functions are not universal, but their failure also leads to inefficiency of institutes. dysfunctions of institutes determine their inefficiency, there emerges a possibility that interests and objectives of economic entities will not be achieved, and an institutional risk comes up. therefore, the author’s understanding of the reason of emergence of institutional risks is related to the disorders in the institutes of the economy. research of the main functions of institutes and consequences of their disorders allowed singling out the results of institutional dysfunctions: 1) institutional uncertainty; 2) institutional traps; 3) atrophy, degeneration, and extinction of an institute; 4) institutional conflict and rejection of an institute. to sum up the above, let us specify the definition of an institutional risk as a social, economic, and environmental phenomenon that is caused by dysfunctions of institutes, which is characterized by the possibility of advent of an undesirable event for an economic entity, which hinders realization of its economic interest due to growth of transaction costs. study of peculiarities of reformation of the maritime economic complex of ukraine, first of all, envisages paying most of the attention to the stages of institutional uncertainty and discovery of an institutional trap. there were attempts in the world’s scientific literature to research the reasons for the emergence of institutional traps. naturally, an institutional trap can be avoided or overcome by means of revision of formation rules for organizations’ (enterprises’) structure and the structure of their relations in the context of transactional and transformational expenses, as well as of the level of inefficient institutions’ penetration into economic activity. therefore, management mechanisms should be used for modelling relations between economic entities, inside them, and with government agencies by means of operating all the expenses of economic entities to carry out business activities (weimer & vining, 1998). as a result, in realistic conditions of a competitive (not necessarily a market) environment, the crucial role is played by the level of behavioural preparedness and predictability of balance of interests of direct and indirect competitors in a future system (weimer &vining, 1998). institutional transformations emerge as a result of the development of situations of collective and constitutional choice, in particular, a situation of institutional choice (ostrom, 1990)  – achievement of political and economic consensus in the society by the entire range of interested parties. thus, according to e. ostrum (1990), the situations deemed as typical are those when institutional traps come into play as a result of three principal risks prevailing in the process of choice of reaction and behaviour of economic agents in the conditions of institutional transformation: total hostility; limited perspective; and unpredictable result. the risk of total hostility. the essence of the risk can be determined in the following way: efforts to prevent the threat of “resilience of shadow arrangements” (for example, reduction of official payments, limitation of baltic journal of economic studies 18 vol. 4, no. 2, 2018 time frames for consideration of applications etc.), in case of preservation of the threats of “procedural overload” and “resource-intensiveness of the enterprise’s organization”, leave the environment without changes. the risk of limited perspective. efforts to remove the threat of the “resource-intensiveness of the enterprise’s organization” (for example, introduction of short timeframes for procedures, guaranteeing inviolability of property, investments, contractual terms etc.), in case of preservation of the threats of “resilience of shadow arrangements” and “procedural overload”, will create the conditions where each economic agent, due to the previously obtained informal connections, will be trying to use them in a most efficient way in the algorithm of passage of the procedures and, if possible, expand them, so that the removed competitive obstacles turn into fullfledged competitive advantages. the risk of the unpredictable result. activities of government agencies aimed at neutralization of the “procedural overload”, in case of preservation of the threats of “resource-intensiveness of the enterprise’s organization” and “resilience of shadow arrangements”, will create a situation of confusion for market participants and government officials. therefore, destruction of the usual algorithms of maintaining economic decisionmaking may result only in the complication of economic activities. informal expenses will only grow due to the necessity of establishment of new shadow arrangements; moreover, there will also be an increase in time necessary for entering the market or entering into agreements between counterparties or in unsustainable use of natural resources. for the majority of economic agents, it becomes unclear, which type of behaviour they should choose and what results they should expect (abide by new formal rules or adjust the shadow arrangements) because no result can now be achieved automatically. the agents’ decisions are now more and more depending on how they would construe the contents of the new procedures, and on whether they would really abide by those procedures (knopfel, larue, varon, & malysheva, 2010). this increases direct risks related to the achievement of the desired result for each participant and brings into question the acceptance of any new rules in a long-term perspective. as a result, there emerges an unsystematic (dispersed) resistance, which was clearly demonstrated by the attempts of implementation of reforms in the ukrainian marine economic sphere in 2013–2017. therefore, an attempt to transform the institutional framework (a number of fundamental regulations) is followed by a change in the structure of stimuli for economic agents. that is to say, in the process of establishment of any reforms, in order to improve their understanding by market participants, it is necessary to be aware of the strategic consequences of a change of a specific institution on the environment of operation, and on the extension of knowledge about its potential possibilities. continuous accumulation of various institutional traps promotes gradual unfolding of negative phenomena in the institutional environment, which with the time becomes a cause of the emergence of an institutional crisis. it is noteworthy that as a result of the global financial and economic crisis, in ukraine, there occurred a dramatic exacerbation of the main drawbacks of the national economy with prominent features of theretofore latent institutional crisis (zhalilo, 2009), its overflowing from economic into social, political, and environmental domains. 3. institutional imbalance and risks of the policy of sustainable development of objects of ukrainian port industrial areas the peculiarity of determining economic and environmental problems of development of ukrainian maritime coastal areas is conditioned, first of all, by the reformation of the maritime economic complex and the necessity to actively use modern forms of investment into the development of port infrastructure. a seaport and industrial infrastructure within port industrial areas is a complex subsystem, which is closely related to the economic, social, and environmental subsystems of the region and is developing under the influence of the factors of external (globalization, socialization, and environmentalization of the economy, integration processes etc.) and internal environment (institutional environment of a region, its level of competitiveness etc.). therefore, evaluation of competitiveness and efficiency of functioning of facilities of port industrial areas requires determination not only of its functional characteristics but also of its role in ensuring the quality of transportation and transshipment operations of the facilities of port industrial areas, as well as economic growth of the region. it should be noted that during the last year, ukraine rose from the 85th to 81st position in the rating of competitiveness (global competitiveness index, gci). one of the key criteria of the rating is an evaluation of the competitiveness of transport infrastructure. the quality of port infrastructure in ukraine has been constantly growing in the recent years, while that of the railway one is decaying. as for the motorways, ukraine is among the ten countries with the worst roads in the world. this is declared in the annual report of global competitiveness index issued by the world economic forum. as for the quality of infrastructure, during the last year, ukraine worsened its rating by three points falling from the 75th to 78th position, its grade being 3.9 of the 7-point scale. as a positive aspect of development, it should be emphasized that ukraine has been included into indicative maps of the european transportation network ten-t. this means that in the nearest future, ukraine’s transport baltic journal of economic studies 19 vol. 4, no. 2, 2018 infrastructure should become an integral part of the eu infrastructure and develop in a harmonious accord. the trans-european transport network (ten-t) project envisages the creation of a new transportation system on the territory of the eu up to 2030 uniting 94  maritime and river ports, 38 international airports, and nearly 15 thousand kilometres of high-speed railways. there are two corridors going towards the territory of ukraine  – the mediterranean corridor (from the iberian peninsula up to hungarian-ukrainian border) and the rhine-danube corridor (through the waterways of main and danube, with arms from munich to prague, žilina, kosice, and up to ukrainian border). analysing the state of infrastructure of the maritime economy complex, it should be noted that it is closely connected with the consideration of the development of port industrial areas. at present, the legislative framework of ukraine does not have an unambiguous approach to the definition of the term of the essence of port industrial areas. in the opinion of the authors, this term should be considered in two aspects. firstly, port industrial areas is a form of territorial organization of maritime economy and neighbouring coastland, interrelated and interdependent association of maritime ports, industrial enterprises, coastal settlements, social and manufacturing infrastructure, whose location in the coastal area is caused by the usage of resources of land and sea, as well as by maintenance of environmental, social-economic, and external economic functions. secondly, port industrial areas are cluster associations of coastland population centres, neighbouring facilities of port and industrial infrastructure operating within the limits of specific territories. the article offers the following classification of types of activities carried out within the frameworks of the functioning of the facilities in the coastal zones, in particular: • business operations of ports, commercial and naval transport (infrastructure of ports and facilities of port enterprises; dredging; dumping; building of hydrotechnical constructions; intermodal centres within ports, ship repair and shipbuilding facilities; navigational objects); • geological prospecting works, drilling operations and development of raw resources deposits within the territorial waters (in particular, prospecting and extraction of oil and gas); • fishery (operations of the fishing fleet with relevant port infrastructure, as well as fish processing enterprises; aquaculture operations: fish breeding, farming of shellfish etc.); • business operations of portside plants belonging to other industries (metallurgical, chemical, agricultural enterprises (excluding fish processing)); • recreation and resort operations (usage of beaches and seashore areas for health improvement and recreation); laying of pipelines and communication lines. maritime economic activities in ukraine are, first of all, based on the extensive infrastructure system of maritime ports. this system includes 18 maritime trade ports with 4 maritime fishing ports operating together as a complex. modern trends of development of objects of port industrial areas in the ukrainian black sea region show positive dynamics. thus, according to the data of the ukrainian sea ports authority, in 2017, the cargo turnover in the maritime ports of ukraine preserved positive dynamics for the entire 12 months. from january to december of the previous year, the maritime ports of ukraine processed 132.57 million tons of cargoes, which is 0.6% more compared to 2016. this is indicated in the operation data of the ukrainian sea ports authority. the volume of transportation of import cargoes in 2017 rose by 29.1% year on year to 20.479  million tons, the volume of export cargoes fell by 1.7% to 98.517 million tons. within the import structure, the largest growth (6-fold) occurred with chemical and mineral fertilizers – from 20.66 thousand tons in 2016 to 123.63 thousand tons in 2017, and oil  – from 506.98 tons to 848.76 tons (by 67.4%). coal and ore also demonstrate a sharp rise in cargo turnover, their transshipment volumes rose by 64.2% and 15.9% compared to 2016 to 6.141 million tons and 6.491 million tons respectively. grain has an important share in the export cargoes turnover  – almost 38 million tons, and metallurgy products  – 14.91 million tons. at the same time, exports of vegetable oils rose to 5.2 million tons (19% growth compared to 2016). the volume of transit cargo processing rose by 14% to 11.804 million tons, and the volume of container processing rose almost up to 531 thousand teu. at that, the largest volumes of cargo were processed by the pivdennyi port – 41.889 million tons with transshipment increasing by 6.6% compared to 2016. the odesa port – 24.12 million tons, mykolaiv – 23.533 million tons, and chornomorsk – 17.633 million tons. thus, in 2017, ukrainian maritime ports increased cargo processing by 0.832,53 million tons compared to 2016 (table 1). the data analysis allows to state that ukrainian ports mostly deal with transshipment of cargoes with essential impact on the environment, and therefore, we deem it extremely necessary to determine table 1 total volumes of cargo processing in maritime ports of ukraine in 2016–2017 indicator total for maritime ports 2016 2017 % total cargoes 131745.91 132578.44 100.6 liquid 10788.58 11016.26 102.1 dry-cargo, loose 93413.41 95745.71 102.5 unit load 27543.92 25816.47 93.7 baltic journal of economic studies 20 vol. 4, no. 2, 2018 institutional risks of negative impact on sustainable development of the ukrainian maritime economy. in addition, it is worth mentioning that recently alongside with development of ports, there has also been a dynamic growth of the port-side industry. enterprises of oil and fat sector have recently seen the greatest development in the maritime coastal zone of the ukrainian black sea region, in particular, in odesa region. the growth in exports of sunflower oil, which in most cases is carried out through seaports, has a special meaning for the entire external trade of ukraine. according to the state fiscal service of ukraine (the state fiscal service of ukraine), in 2016, over 4.8 million tons of this type of oil was shipped abroad to the total amount of $ 3.7 billion, which is a 10% increase in the total volume of ukrainian exports. the following can be named among the most significant conflict and crisis issues constituting an institutional “trap” and slowing down sustainable development of objects of maritime coastal zones: • imbalanced operations of separate structural elements of the maritime coastal zones’ objects are conditioned by the absence of programand goal-oriented approach to the development of ports, maritime fleet, port-side industrial and recreation facilities, as well as other objects of maritime coastal zones; • low efficiency of the fulfilment of innovation and investment plans and development programs for maritime coastal area objects is conditioned by the inadequacy of managerial decisions regarding their implementation, especially in conditions of crises; • low efficiency of financial and economic, commercial and operational activities, as well as measures for the provision of environmental, industry-related and new types of the safety of development of port industrial areas, is conditioned by the inadequacy of regulatory environment and organization of management of maritime economic activities. the cause-and-effect basis of the problem of the necessity of improvement of the institutional system for managing environmentalization of port industrial areas of ukraine is as follows: • intensive man-made transformation of the natural and resource potential of territories and offshore zones as a result of deployment of industrial, transport, utility and other objects, including those posing threat to population and environment; • extensive (inefficient) usage of natural resources (resource-intensive production), conditioned by the low level of technological development; • consumer attitude towards natural resources and environmental systems, the predominance of bureaucratic and temporary interests in contrast to long-term ones; • saturation of coastal territories of ukraine, especially in certain regions, with environmentally dangerous facilities; • continuous practice of evaluation of investment projects and decision-making on the deployment of dangerous business systems and facilities without a comprehensive assessment of their impact on the environment and taking into account factors and forecasts of natural and man-made risks; • the insufficiency of regulatory framework on maritime environmental management from the point of view of both contents and structure (including the fuzzy character of obligations, authorities and responsibility of government agencies of various hierarchy levels and separate persons regarding decision-making on deployment and operation of dangerous facilities, responsive measures to situations related to resource and environmental safety); • the inadequacy of the system of government environmental regulation, including economic instruments of maritime environmental management and environmental protection activities, mechanisms for prevention and reduction of volumes of damage, stimulation of reduction of environmental pollution and relative indicators of resource usage, mechanisms of environmental insurance, funding of environmentally beneficial investment projects; • the inadequacy of organization of prompt response in case of resource and environmental emergencies caused by natural or human factors. this situation is conditioned by the persistence of systemic negative trends in 2013–2017 on the governmental level in relation to the reformation of the maritime sphere in general, including the following: 1) lack of proper regulation on the issues of property rights to port complexes and coastal facilities of the port-side industry. prevalence of state ownership due to lack of investments does not allow efficiently renewing the vessel fleet of ports and carrying out infrastructure works. the maritime industry needs reorganization of the ownership system and transfer of a certain share of port infrastructure facilities to private investors; 2) persistence of technological inferiority problems in maintenance of the principal port operations mainly due to the obsoleteness of port complex, non-compliance of the throughput capacity of ukrainian maritime ports infrastructure with international standards; 3) persistence of high tariff rates on servicing container transportation in maritime ports of ukraine; 4) uncertainty in the issues of assurance of economic and environmental safety. in particular, the port infrastructure system is lacking relevant port constructions for warehousing and processing environmentally hazardous cargoes; 5) persistence of low environmental quality of the internal transportation network, limitation of the speed of transit traffic (fylypenko & baryshnikova, 2013). analysis of the existing practice of functioning of national maritime coastal zones shows that there is an ongoing diversification of port services going beyond baltic journal of economic studies 21 vol. 4, no. 2, 2018 the actual port limits (its internal and external water area) and encompassing a large number of onshore and other business operations of the transportation chain. such factors, on the one hand, condition association of transportation process participants seeking to obtain a greater economic effect from common operations; on the other hand, they stimulate implementation of innovations in the organizational and technological process of functioning of the port economy. at the same time, there exist a number of factors with a negative impact on the very environmental quality of service provision in the commercial maritime ports of ukraine, and among them, the following structural institutional imbalance will be gaining particular importance: 1. the absence of a unified comprehensive environmental program of development for both maritime sector of ukraine in general, and its separate components. in the recent years, a number of resolutions have been adopted aiming to develop the maritime industry. at the same time, the above-mentioned regulatory framework has a predominantly fragmentary nature where different regulatory documents cover only some of the industry development aspects, are not interrelated and do not take into account environmental peculiarities of regions’ development. a number of laws have been adopted in ukraine regulating the issues of strategic priorities in the development of the innovation and investment sphere of the objects of industry and transportation of maritime coastal areas, in particular, of public-private partnership. at the same time, the national legislation still has not defined such new forms of organization of business as “cluster” in general and “environmental cluster” in particular, there is no legal regulation of types, forms, and peculiarities of creation and operation of clusters. the drafts of regulatory aspects on the formation of the bases of state policy in the sphere of clustering are still waiting for approval. 2. different departmental affiliation of enterprises and institutions operating in the maritime industry leads to incoherent management decisions, the absence of coordination of the state environmental, as well as innovative and investment policies related to the development of maritime economic complex and optimization of its infrastructural maintenance. state-owned seaports and shipping companies of ukraine are subordinated to the ministry of infrastructure; fishing-industry and fishing ports  – to the ministry of agricultural policy and food; while educational institutions training maritime industry experts are subordinated to the ministry of education and science. the issue of formation of environmental policy is a priority for the ministry of environment and natural resources. 3. the absence of systemic environmental information and methodological support of economic entities whose activities are related to a maritime economic complex of the region, lack of training of highly qualified experts in environmental specialties; 4. low level of investment into environmental innovations of the country’s maritime economic complex, insufficient level of interaction of the maritime economic complex with educational and scientific institutions, wear of the principal manufacturing facilities, outdated technologies that are used for transportation and processing of cargoes determine the low environmental quality of transportation and transshipment services. the present-day dynamic situation is conditioned by the significant renovation of science and scientific directions in the system of the interrelation of economy, society, and nature. this research is using the perspective of scientific approaches to economicenvironmental security of maritime economic industry to define the author’s vision regarding the determination of problematic issues of the existing economic-environmental imbalance of development of port industrial areas of ukraine, also, on the basis of implementation of international experience into national legislation, there were suggested recommendations regarding the improvement of environmentalization management of functioning of maritime coastal zones facilities of the ukrainian black sea region by the institutional system. it should be noted that the infrastructure of maritime ports of ukraine should achieve a new level of development that will ensure proactive development for satisfying the needs of economy and society; will ensure improvement of the system of assurance of safety of human life and prevention of human-caused emergencies at sea and adjacent territories; will be based on the modern technologies of works performance that are safe for people and environment; will ensure equal possibilities for operation of transportation process participants of all ownership types; will allow more comprehensive use of the country’s transit potential; and will promote expedited integration of ukrainian transportation system into the international and european transportation systems. in its turn, the environmental component of the strategy of sustainable development of enterprise should determine the objectives of innovative activities of maritime commercial ports, as well as define the choice of means for their achievement and sources of those means. the priority objectives of the sustainable development strategy of port industrial areas, first of all, have to be as follows: creation of maritime environmental clusters; improvement of quality of transshipment process and port services; separation of social and environmental component of cost price of cargo transportation and port services provision; improvement of technical level and efficiency of use of the main production facilities; intensification of loading and unloading works by baltic journal of economic studies 22 vol. 4, no. 2, 2018 means of improvement of organization and technology of transshipment; optimization of energy use by way of introduction of energy saving technologies and usage of unconventional energy sources; assurance of safety of seafaring in the port aquatic area and its vicinity; raising efficiency of use of labour resources; assurance of environmental safety of the transshipment process. the abovementioned problems require a search for new forms of integration of financial, industrial, and intellectual capital with the aim of development of material environmental and competitive advantages of the functioning of the ukrainian maritime economic complex. the international practice shows that clusters presupposing informal voluntary association of enterprises and organizations (producing goods and services and operating on a certain territory) have a great potential in relation to raising the competitiveness of national economic entities on both internal and external markets. the principal objectives of the cluster include optimization of the process of use of the region’s and industry’s available economic potential. a case in point of cluster development is the european union countries where clusters in the marine sphere have been in existence for many years. in november 2005, the european network of maritime clusters (enmc) was created in paris. the european network of maritime clusters is a confederation of clusters or equivalent structures. it has to be understood as a best practices dissemination and exchange platform through the website, informal talks, and an annual summit during which each country gives a brief presentation of the economic situation of its maritime sector and the recent actions of its national organization. the aim is to establish a framework for future common targeted actions. all of the member organizations are, or tend to be, cross-industry organizations gathering all or a part of the maritime subsectors of their countries. the type of each national cluster varies, with some being almost state-controlled or purely private-owned or being an intermediate mix. some clusters include inland navigation and or logistics sectors, port industries, coastal tourism, insurance, and finance in their scope; others do not (enmc website). at present, clusters as a form of organization of interaction between different sectors of maritime industry are becoming more and more wide-spread. but, unfortunately, environmental infrastructural elements and objectives are absent in the philosophy of formation of international maritime clusters. therefore, with the aim of implementation of the sustainable development paradigm into maritime economic activity in general and industrial port operations in particular, we suggest the building of maritime environmental clusters within ukraine. to generalize the international experience, we should note that the following definition is the most relevant to the present-day requirements of economic activities: maritime environmental cluster is a territorial and sectoral voluntary informal association of enterprises and organizations of port operations and related maritime economic industries, which closely cooperate in the process of realization of regional strategy of sustainable development of maritime economic complex with scientific, educational, financial, consulting, and other economic structures, as well as local government agencies with the aim of raising the environmental level of quality of economic operations and competitiveness of all the participants of the association and economic growth of the coastal region. in the authors’ opinion, the environmental maritime clusters that are offered to be built in the coastal area of ukraine should include environmental infrastructural objects of the industrial port sphere; mineral mining sector; dredging, development of sea hydrocarbon resources; sea recreational activities; burial of waste and dredging waste; as well as financial and scientificeducational institutions whose activities are aimed at environmentalization of maritime economic activities. 4. conclusions within the framework of the conducted research, it was proven that the further sustainable development of separate industries and markets of ukraine is first of all related to the formation of the institutional environment. in the conditions of unstable socialeconomic and environmental situation in the state, research of institutional risks and “traps” will be gaining a special importance. the definition of an institutional risk presupposes that emergence of an institutional trap is not a unique phenomenon for separate economic systems. it has a relatively stable set of risks that come into play automatically in case of disturbance of the balance of growing costs threats prevention for economic agents (transactional and transformational) regarding maintenance of certain property rights transfer and exchange institutions in the market. these risks are as follows: total hostility; limited perspective; unpredictable result. secondly, the course of post-crisis restoration in ukraine bears signs of development of the institutional crisis in all domains of public life, in particular, in public administration, as a result of the longterm accumulation of institutional traps in the country’s economic system. and, thirdly, removal or prevention of any institutional trap, as well as unblocking of an institutional crisis in ukraine is possible as a result of institutional reforms based on prediction and modelling of economic agents’ behaviour. the author of the article proves that formation of an institutional system of port industrial areas integrated management in ukraine needs to be organically interconnected: with the structural reorganization of ukraine aimed at raising the social-economic and baltic journal of economic studies 23 vol. 4, no. 2, 2018 economic-environmental efficiency of use of the black sea natural resources of high priority for ukraine; with reformation of the entire system of public administration and local self-government based on integration of efforts of the state and regional government agencies, entrepreneurs, non-governmental organizations, and population. the following are the most important issues of formation of an efficient institutional system of sustainable development of the facilities used for economic activities in maritime coastal areas of ukrainian black sea region: scientifically grounded organization of relations between territorial and sectoral subjects of environmental management that function within objects of maritime coastal areas (seaside territories  – industrial port areas) with the aim of subsequent entry into the european maritime cluster; formation of special institutes and regulatory framework for economic operations in the coastal area of the black and azov seas, which should be based on new legislative acts of ukraine, which have to be developed within relatively short terms; development and realization of the main directions of formation of the national maritime policy taking into account the priority of the environmental factor and creation of the system of integrated management of the ukrainian sector of the black sea coastal area, which would promote establishment of ukraine as a maritime state, strengthening of its state independence, improvement of its international authority and affirmation of the ability of ukraine to comprehensively resolve important social-economic and economical-environmental issues. references: brennan, j. & buchanan, j. (2005) the reasons of rules. constitutional political economy. spb.: ekonomicheskaya shkola [in russian]. ostrom, e. (1990) governing the commons. the evolution of institutions for collective action. ny: cambridge university press. knopfel, p. larue, c. varon, f. and malysheva, n. (2010) analysis and piloting of public policy. kyiv: higher institute of public administration in switzerland, alerta [in ukrainan]. eggertsonn, t. (2005) imperfect institutions: possibilities and limits of reform. the university of michigan press, michigan, usa. lowndes, v. (1996) varieties of new institutionalism: a critical appraisal. public administration, vol. 74, pp. 181-197. kouz, r . (2007) firm, market and law. moscow: new publishing house [in russian]. nort, n. (1997) a. institutions, institutional changes and the functioning of the economy. moscow [in russian]. nort, n. (2010) b. understanding of the process of economic changes. moscow: higher school of economics [in russian]. furubotn, e. & richter, r . (1991) the new institution economics: a collection of articles from the journal of institution & theoretical economics. tubingen: mohr. gradstein, m. (2008) institutional traps and economic growth. international economic review, vol. 49, no. 3, pp.1043-1066. kryizhanovskiy, r .a, gromova, e.n., & galushkina, t.p. (1991) morskaya ekonomika [marine economy]. moskow: nauka [in russian]. gromova, e.n. (2001) economic and environmental regulation of marine environmental management: public and market methods. odessa [in russian]. burkynskyi, b.v., & stepanov, v.m. (2008) economic and ecological safety of the sea business. odesa: phoenix [in ukrainian]. weimer, d. l. and vining, e. r . (1998) analysis of the policy: concepts and practice. kyiv: osnovy [in ukrainian]. zhalilo, y. a. (2009) theory and practice of forming an effective economic strategy of a state. kyiv: niss [in ukrainian]. the state fiscal service of ukraine (2017) electronic reporting. retrieved from: http://sfs.gov.ua/elektronnazvitnist [in ukrainian]. fylypenko, a.o., & baryshnikova, v. v. (2013) priorities of the development of the ukrainian marine economy in the conditions of globalization: an analytical report. the region branch of national institute of strategic research in odessa, odessa, phoenix [in ukrainian] enmc website (2017) european network of marine clusters. retrieved from: http://enmc.eu/who-we-are baltic journal of economic studies 152 vol. 9 no. 1, 2023 this is an open access article, distributed under the terms of the creative commons attribution cc by 4.0 1 state scientific institution "institute of education content modernization", ukraine (corresponding author) e-mail: sum1971@ukr.net orcid: https://orcid.org/0000-0001-5623-1965 2 state scientific institution "institute of education content modernization", ukraine e-mail: 1spartak@ukr.net orcid: https://orcid.org/0000-0003-0117-294х 3 state scientific institution "institute of education content modernization", ukraine e-mail: zsv@bigmir.net orcid: https://orcid.org/0000-0002-6133-1087 doi: https://doi.org/10.30525/2256-0742/2023-9-1-152-162 practical aspects of publishing textbooks, pedagogical/teaching and methodological guides and normalizing the cost of materials* yuriy safonov1, ievgen bazhenkov2, svitlana zayets3 abstract. taking into account the society's demand on the efficiency of budget funds management, further optimization of budget expenditures, improvement of the quality of educational services, the strategy of providing textbooks and manuals for students of general secondary education and teachers should be developed and approved, the problem of development of standards of paper consumption for the production of textbooks was solved. manuals for modern printing equipment and their approval. the research was carried out using general scientific methods, in particular, theoretical generalization, methods of statistical analysis, graphic method of visualization of research results. the purpose of the article is to identify the features of development of directions of regulation of publishing of educational literature in ukraine on the basis of adaptation of european experience, to develop approaches to creation of a system of standardization of production costs of printed materials. it was found out that in modern scientific literature the debate on the justification of the ways of development of the publishing and printing sphere, the necessity of real state support and standardization of production costs of printed products continues. the authors studied the trends in book publishing in countries with a high level of education and a developed educational literature publishing industry, which determines the demand for books and the development of the publishing industry. systematized and analyzed information on the printing of textbooks and teaching aids in ukraine, outlined the problems associated with the need to control the spending of budget funds. it was found that the current system of publishing educational literature in ukraine is characterized by an insufficient level of achievement of target indicators in the use of state budget funds intended for the production of book products. characterization of the main principles of activity of the largest publishing houses of educational literature in ukraine was carried out on the basis of the indicators of the total circulation of books and by order of the ministry of education and science of ukraine. the consequences of the armed aggression of the russian federation for the domestic book publishing industry are analyzed, which require a shift of the emphasis of effective management to optimization and cost minimization. due to the outdated and imperfect system of rationing, the necessity of the scientific institution to carry out complex preparatory work on the legislative regulation of technical standards of costs and standards of material waste in the production of textbooks and educational-methodical aids has been determined. key words: textbooks, manuals, publishing houses, printing to order, foreign book publishing experience, development of cost norms and norms of material waste. jel classification: h52, m11 * the article is designed according to the scientific topic № 0122u002363 1. introduction it is impossible to build a post-industrial information society without providing adequate quality education. and the quality of secondary education fully depends on the level of providing students with textbooks and manuals to achieve their learning outcomes and baltic journal of economic studies 153 vol. 9 no. 1, 2023 the formation of competencies necessary for life. indicators of the production of printed products, primarily textbooks and teaching manuals, serve as indicators of the cultural, educational and intellectual development of the nation. if the decline in the publishing of educational literature continues, in the coming years it will significantly reduce the human and intellectual potential, the ability of ukraine to restore and develop its economy, to rearm it technically and technologically. in accordance with the law of ukraine "on education", the state guarantees free provision of textbooks (including electronic), manuals for all students of general secondary education and teaching staff. in compliance with the procedure for the use of funds allocated in the state budget for the implementation of state measures in the field of education (the procedure for using the funds, 2020), each year expenses are planned for the printing of textbooks and manuals for students and teachers, for persons with special educational needs, for institutions of professional (vocational and technical) education, the series "school library ", dictionaries, pedagogical and methodical literature, conducting a competitive selection of textbooks for applicants to full general secondary and higher education, supply of textbooks, manuals, pedagogical and methodical literature and keeping reserve funds, etc. in order to increase the volume of provision of educational literature, in recent years a tool has been created for transfers from the state budget to local budgets for general secondary education, which can be used for improving the qualifications of teachers (to the extent determined by the legislation), providing students and teachers with textbooks (manuals), educational equipment, teaching aids and for other purposes determined by the legislation (londar, 2021). the latest audit of the efficiency of the use of state budget funds allocated for the provision of textbooks, manuals, carried out by the accounting chamber of ukraine (decision of the accounting chamber, 2020) testified that the ministry of education and science of ukraine has not fulfilled the powers entrusted to it by legislation to ensure the needs of students of full general secondary education and teaching staff in educational literature in 2019 in accordance with the volumes specified in the normative acts, namely detailed calculations of the need for state budget funds for the provision of textbooks and manuals have not been carried out; due to the unresolved issue of the application of the norms for the cost of offset paper for the production of textbooks, manuals for modern printing equipment, an objective calculation of the cost of paper (as part of the cost of textbooks) and control over the real costs of publishing houses is not ensured. according to the experts of the center for economic strategy (repko, sakhno, teleton, 2020), the current situation on the textbook market in ukraine looks better thanks to a number of measures implemented and planned in 2020–2021 aimed at increasing the efficiency of production of educational literature at all levels for institutions of secondary education. however, the armed aggression of the russian federation, the resulting crisis phenomena in the economy radically change the assessment of the processes of domestic book publishing, require the development of new approaches to the management of available resources: the emphasis of effective management shifts to the optimization and minimization of costs. for the effective management of the publishing of educational literature there is a need for objective information, first of all, for the standardized accounting of the consumption of materials in the production of textbooks and educational-methodical aids. the purpose of the work is to study the problematic aspects of the practice of publishing textbooks and educational/teaching manuals, to identify the peculiarities of the development of directions for regulating the publication of educational literature in ukraine based on the adaptation of european experience, to develop approaches to the creation of a system of normali zation of production costs for materials in printing, which will contribute to the possibility formation of relevant information for making effective management decisions on the economical use of budget funds. 2. literature review the publication of textbooks and pedagogicalmethodical manuals in ukraine requires systematic research and comprehensive measures that would contribute to its efficiency and control over the economical, productive and effective use of the allocated budget funds. scientific works and practical activities do not pay due attention to the problematic issues of textbook publishing, increasing the efficiency of the production of educational literature. in addition, most of the scientific works were developed before the russia's armed attack and the economic crisis in the country, they do not provide recommendations for further development of the publication of educational literature in the special conditions of the country, in some sources the information is already somewhat outdated. according to many scientists, publishing and printing is an important means of raising the cultural baltic journal of economic studies 154 vol. 9 no. 1, 2023 and educational level of citizens, their education and mobilization to solve the most important tasks of economic and social nature, mastering the laws of social development, struggle for social progress, democracy and freedom (durnak, shtangret, martyniv, shlakhetko, 2008). the publishing and printing industry is very sensitive to the economic development of the country, acting as a kind of indicator of the socio-economic condition of the country. the reaction of the industry to changes in the economy is manifested after about six months. the unfavorable state of the ukrainian economy aggravates the problems of the domestic publishing and printing industry (shtangret, durnak, melnikov, 2010). calculations made by scientists showed that in 2005–2010 in the publishing and printing industry of ukraine the material type of economic growth prevailed. the industry was at a crossroads where, on the one hand, there was growth without development and, on the other hand, growth based on development (shvayka, senkivskyi, melnikov, 2012). in modern scientific literature the discussion on the justification of the most effective ways of development of the publishing and printing sphere continues. the mission of industrial enterprises should be aimed at satisfying the interests of consumers of publishing and printing products, comply with the doctrine of information policy of the state, and contribute to the general strengthening of information security of the ukrainian society (prib, 2014). the study of the prospects for the development of the printing industry and the factors affecting the development of the industry, the identification of the main problems faced by enterprises of the printing industry during the implementation of their activities in 2005–2012, revealed that the development of the printing industry had a clear trend of growth, a transition from printed products to digital media, and therefore the demand for printed products will be somewhat reduced (dovgan, vorzhakova, 2013). the peculiarity of the publishing and printing business is a high degree of social responsibility due to the nature of the purpose of the products. the lack of real state support in the publishing and printing industry in ukraine leads to the instability of the functioning of business entities, which affects their activities, provokes the deterioration of performance indicators, the decline of most enterprises of municipal and state ownership, which, in turn, does not provide opportunities for development (palyha, bazyluk, palyha, 2019). analysis of current trends in the production of books and brochures in ukraine in 2019–2020 shows that educational and methodical publications, scientific literature, fiction for children and adults are preferred. however, there is a need to solve at the state level the issue of systematic preferential lending to the subjects of the industry, attracting investments from other areas of business to its development on conditions favorable to partners, established in legislative acts (buryak, 2021). one of the trends in the modern book publishing market is printing on demand. this model, as one of the innovative solutions, allows to control the costs of printing and storage of literature, helps to react quickly to the demand, to avoid or save risky investments, to control the market situation (onyshchuk, tatarinova, 2021). the cost accounting of the production of printed products is also in the focus of domestic scientists and requires further research on theoretical and practical issues (taking into account the improvement of production technologies and management sciences). according to scientists (drury, horngren, foster, etc.), one of the main ways to reduce costs in enterprises is to create a system of their effective management. however, the issue of cost management of enterprises in the publishing and printing industry is still not considered at the appropriate level, which requires its further improvement (sosnovska, zhydetska, 2016). insufficient study of the problems of the production of textbooks by the technologically obsolete polygraphic method and the validity of the norms of material consumption leads to inefficient spending of the budget funds for printing of textbooks, purchase of the necessary raw materials and their delivery (report on the review of the state budget expenditures in the sphere of education and science in view of the national activities in the sphere of education of the ministry of education and science of ukraine, 2021). 3. key statement generalization studies of textbook publishing abroad strongly suggest that domestic publishers face many more challenges than textbook publishers in other countries. in many countries, publishers really support modern authors, make efforts to improve their products, and teachers are conscious about the choice of textbooks. in the usa, the specific weight of expenditures on printed textbooks in the structure of budgetary expenditures on education is negligible. out of the total amount of 550 billion dollars spent annually on education in the united states, about 5 billion (1%) was spent on printing textbooks. however, precisely because of the lack of budget funds for printing textbooks, the administration of the american states of california and texas announced plans to abandon printed textbooks in favor of electronic books (polyansky, 2010). baltic journal of economic studies 155 vol. 9 no. 1, 2023 in poland, the program of providing textbooks at the expense of the budget provides for free provision of textbooks and teaching aids for all students of primary (elementary) schools. the school buys them with funds provided by the ministry of national education – for example, in 2018, 404 million zlotys were allocated for these purposes, and in 2019, 286 million zlotys (glushko, 2021). in the netherlands, there is a free market for the development and distribution of textbooks. publishers focus on primary and/or secondary education and/or vocational, higher or academic education. there is no regulation of textbooks. publishers compete with each other and sell textbooks themselves. in the netherlands, textbooks are chosen by the schools themselves. in primary school, the whole team of teachers usually makes the decision to adopt a new textbook. in secondary education, the teachers of a subject (the so-called "section") usually decide which new textbook will be adopted. the director's role is mainly economic: textbooks must be paid for by the school, which receives money from the ministry of education, culture and science, so the price of the textbook is an important criterion for acceptance. however, directors usually do not interfere in the decisions of the section. however, schools receive support in the selection process. the national textbook information center, which is an agency of the ministry of education, culture and science, provides on its website information about all textbooks regarding the content (especially the coverage of the curriculum), the offer on the market and some pedagogical and didactical features of the textbook. in addition, the website of the foundation for curriculum development often publishes the experiences of other schools (slo, 2022). in finland, all the costs of education in the country come from the state budget. the comprehensive school is completely free, including all educational materials, health care, counseling, tutoring and psychological services, as well as transportation if living 3-5 km from the school. upper secondary and higher (i.e., academic and vocational) education is also free. however, students have to pay for textbooks and transportation. all other services are very inexpensive or completely free. textbooks are updated as needed. there is no periodicity, teachers choose the textbooks they wantto use during the school year and make recommendations to those responsible for purchasing textbooks. the selection of a textbook is based on the prestige of the author and/or publisher and the skillful marketing of the publisher. books with attractive covers are preferred. teachers pay attention to those textbooks that are most in demand among colleagues (golovina, 2021). according to scientists, all countries are trying to keep up with the progress, but not all are following the same path. in some countries the state regulation of book publishing and distribution dominates, in others the prerogative is given to market relations of intelligence in the field of book publishing (onyshchuk, tatarinova, 2021). however, the international practice of democratic countries shows that funds for textbooks should be directed as close as possible to those who will use them, that is, directly to each educational institution. in this case, the purchase of educational literature will be carried out by each educational institution independently. this will create conditions for the development of the market of educational products on the basis of free competition and equal rights. to perform functions corresponding to public interests in the field of educational services, in particular, to organize the publication, purchase, storage and delivery of textbooks and manuals (including electronic), educational and methodological literature for students and teachers of general secondary, vocational (professional-technical) education in ukraine in 2020 was allocated the budget program 2201260 "nationwide measures in the field of education". in the aforementioned 2020–2022 budget program, most of the funds were specifically allocated to the printing, delivery, and storage of textbooks (figure 1). thus, in 2020 uah 620.8 million (85.7% of the total amount of expenditures of the budget program) are allocated for the publication and supply of pedagogical and methodical literature, holding a competitive selection of textbooks for students of general secondary education, and keeping a reserve of textbooks and manuals. in 2021 it will be 617.9 million uah (79.8%), but in 2022 – only 43.7 million uah (34.8%). in the state budget for 2023, 156 billion uah has been allocated for financing education, including 0.8 billion uah for the publication and purchase of more than 5.7 million textbooks and manuals (zhiriy, 2023). in ukraine, the production of book products is characterized by the following indicators: the number of subjects that published books (coea code 58.11) in 2021, compared to 2015, decreased from 1,234 to 951 (or by 22.9%) (state statistics, 2021 ); the number of titles of book products during this period increased from 19,958 to 21,095 (or by 5.7%). the total circulation increased from 36,409.8 to 44,753.6 thousand approx. (or by 13.6%), (table 1). the data given in table 1, show that educational and methodical literature publications are in the lead in the range of book flows by purpose, both by baltic journal of economic studies 156 vol. 9 no. 1, 2023 titles and by circulation (in 2021 – 6,573 printed units with a circulation of about 31,639.6 thousand copies), which as a percentage of the total number of titles is 31.2% and 70.7% of the total circulation; compared to 2020, the number of titles increased by 520. units, or by 8.6%, circulation – by 3,137.9 thousand copies, or by 11.0%. according to o. afonin, the president of the ukrainian association of publishers and book distributors, in the domestic book publishing sector the percentage ratio of indicators from 2022 to 2021 will be: titles – 36.4%, circulation – 20.2% (afonin, 2022). it is obvious that the publishing of educational books has suffered the greatest losses in recent years. the current shortage of paper textbooks, especially for elementary school, and the financial inability of the state to finance their printing, deepens the educational gap that was created during the two previous "coronavirus" years, and which the entire generation of current elementary school students will not be able to overcome, and therefore will be lost both to themselves and to the state, which in the coming years will need a powerful educated and intellectual personnel resource. ukrainian book publishers are trying to expand the range of their products, so they willingly participate in tenders for the printing of educational literature. the textbook market in ukraine has long been considered highly monopolized, according to some estimates – up to 80%. the current situation looks better thanks to a number of measures aimed at increasing efficiency at all stages of production of educational literature for secondary educational institutions (repko, sakhno, teleton, 2020). 620845,6 27000,0 76588,6 617917,4 27300,0 129135,8 43655,3 29500,0 52465,3 publication and delivery of educational and methodical literature, conducting a competitive selection of textbooks for applicants of complete general secondary education, storage of a reserve of textbooks and manuals production of graduation documents about education other areas of use of budget funds 2020 2021 2022 figure 1. estimated expenditures under the budget program "state-wide measures in the field of education" in 2020–2022, thousand uah source: compiled by the authors according to (on amendments to the passport of the budget program under the cpcpc 2201260, 2020, 2021, 2022) table 1 publication of books and brochures according to the target purpose in ukraine in 2015–2021 year total editions among them are educational and methodological editions number of printed units edition, thousands of copies average circulation, thousand of copies number of printed units in % of the total volume edition, thousands of copies in % of the total volume average circulation, thousands of copies 2015 19 958 36 409,8 1,8 6 818 34,2 16 223,0 44,6 2,4 2016 21 330 48 978,0 2,3 7 098 33,3 27 146,1 55,4 3,8 2017 2 2047 45 127,2 2,0 7 107 32,2 24 398,2 54,1 3,4 2018 22 612 47 022,1 2,1 7 226 32,0 29 636,4 63,0 4,1 2019 24 416 61 250,6 2,5 7 895 32,3 37 280,1 60,9 4,7 2020 18 967 41 946,7 2,2 6 053 31,9 28 501,7 67,9 4,7 2021 21 095 44 753,6 2,1 6 573 31,2 31 639,6 70,7 4,8 source: compiled by the authors according to (official site of the book chamber of ukraine, 2021) baltic journal of economic studies 157 vol. 9 no. 1, 2023 private publishing houses "ranok" and "geneza", "stary lev publishing house", "textbook – bohdan" publishing house, "gramota" publishing house are long-time players in the publishing business of educational literature in ukraine (table 2). with the beginning of the russian invasion the book industry suffered greatly, printing presses in kharkiv were stopped, offices and warehouses of some publishing houses were damaged (zahorui, 2022). due to the extremely difficult conditions in which domestic publishers find themselves, in order to create equal conditions of competition among publishers developing modern educational content for ukrainian general educational institutions, it table 2 the largest publishers of educational literature in ukraine publishing house printed products books were published in 2018, thousands of copies notes total volume by order of the ministry of education and culture ranok publishing house llc the subject matter of the publishing house is aimed at the school audience (teaching manuals, test and examination tasks). 7 300 2 977 founded in 1997 by viktor kruhlov (kharkiv). the only publishing house in ukraine that has its own electronic logistics center for prompt delivery of products to any corner of the country. repeated winner and laureate of various competitions and book forums. "stary lev publishing house" the publishing house creates books for the whole family: cartoons, fairy tales, rhymes for babies, stories for schoolchildren, teenage series, non-fiction books for different ages, exquisite poetry, interesting novels, atlases and albums, and even anti-stress coloring pages. 2 006 1 105 the publishing house was founded in 2001 by mariana savka and yurii chopyk in lviv. it is one of the largest in the ukrainian book market and has gained popularity in the international publishing arena. it actively cooperates with foreign publishers both in the direction of buying licenses and selling rights abroad. "gramota" publishing house llc textbooks and manuals for elementary, middle and high school, vocational and technical education, higher school; scientific, popular science and art publications; fiction. 1 396 508 it was established in december 2000. the books of the publishing house occupy the first places in ukrainian book ratings and have won numerous prizes and awards. since 2005, textbooks for secondary schools have been winners of the allukrainian textbook competition. llc publishing house “navchalna knyha-bohdan” the publishing house publishes children's books and fiction, translated works of world-famous authors. 1 967 182 for almost 20 years, the publishing house has been working to meet the needs of national schools and higher education institutions in the field of educational literature, creating new original textbooks, dictionaries, methodical manuals, reference books and encyclopedic editions that meet modern world and state standards. in addition, the publishing house publishes children's and fiction literature, translated works of famous world authors. the publishing house is also engaged in book trade. geneza publishing house llc specializes in educational and science literature. produces many books specifically related to the school curriculum. 4 779 1 755 the publishing house began operations in 1992. throughout its history genesis has been an innovator in publishing. professional editors and artists, together with well-known authors, create textbooks and manuals for students, which are approved by the ministry of education and science of ukraine. source: compiled by the authors according to (rating of ukrainian publishing houses, 2018) baltic journal of economic studies 158 vol. 9 no. 1, 2023 is necessary to solve the problem of overcoming the minimum print run threshold of 40 thousand copies, to lower the threshold for co-financing by the state and publishers to 10 thousand copies. it is also necessary to solve the problem of authors' remuneration, which is 2-3% for a circulation of 100,000 textbooks, while 80% is the cost of printing. 4. discussions in the conditions of lack of budget funds, in order to save them and increase the level of provision of educational literature for students, the question of objective calculation of expenses for paper (as a part of the cost of textbooks) and control over the real expenses of publishing houses is urgent. the rapid introduction of the latest digital tools into the technology of publishing educational literature also requires a review of the norms of material consumption in the production of textbooks and pedagogical/teaching aids. under the conditions of application of an effective system of cost rationing in the production of textbooks and educational/teaching manuals, it is ensured that relevant information on production costs and the possibility of timely prevention of overspending will be obtained. in today 's conditions of fierce competition in the publishing industry, in order to ensure effective control over the cost of materials, methods of accounting for the actual cost of the volume of manufactured products are usually used, i.e. the inventory method is used for materials whose use is not standardized due to the existence of an imperfect rationing system. an off-contract costing method is also used: production costs are collected according to specific orders and contracts. multi-order costing requires well-organized analytical accounting with order number assignments and order documentation. control over the consumption of paper for printing and other production materials would be effectively carried out by the method of documenting deviations from the norms. for this purpose it is necessary to have the standards for the consumption of printing inks, cardboard and cover materials for bookbinding processes, cotton wool, gauze, non woven materials, threads, wire, materials for finishing processes, binding materials in the production of bindings, glue and material waste standards (paper waste in bookbinding processes; cardboard and cover waste standards in bookbinding processes) in the production of textbooks and educational/teaching manuals. waste from the production of offset printing forms that can be used are: photographic film and photographic paper; solutions for processing photographic film containing silver compounds; original forms are steel and aluminum plates. usable wastes from the production of printing processes are used: paper, steel and aluminum plates (used machine forms), thickened ink residues, gum. the amount of paper waste during preparation for printing, during the printing process, paper breakage, paper residues on sleeves, internal roll defects is determined according to the norms of paper waste for the technological needs of production, approved in 1983. in order to objectify the accounting of direct costs (author's fee, cost of paper, cardboard, binding materials, cost of production of original layouts, etc.), some studies propose to develop an electronic card index or registration journal, where each individual card will summarize information for each issue in a section costing articles (yaremko, glushko, 2010). considering the peculiarities of the activity of book publishing enterprises, it is possible to confirm the reliability of the formation of the cost of products (services) by drawing up an alternative balance of raw materials and materials using average indicators in the industry and normative costs approved by the internal documentation of the enterprise. this allows to assess the quality of the internal control system of the enterprise. book publishers need up-to-date standards to determine the level of costs that they can use as a guide in their day-to-day operations. in addition, they are also needed by customers to control the rational use of materials in the production process, and to analyze the reasons for material overruns for each order. until 01.01.2022 gost 14.322-83 "standardization of material consumption" was in force in ukraine, which contains general provisions on the establishment of standards, namely, useful consumption of materials; technological waste caused by production technology; loss of materials. the norms of consumption of materials in the manufacture of products did not include (paragraph 1.5 of gost 14.322-83): wastes and losses not related to the established technological processes and organization of production (for example, losses of materials during their transportation and storage); losses and wastes caused by non-compliance with the requirements of standards and technical conditions; costs of raw materials and materials related to defects, testing of samples, repair, adjustment of equipment, packaging of finished products. the general technical requirements for the production of textbooks and teaching aids for general educational institutions are contained in the standard of organizations of ukraine – sou 18.1-02477019-07:2015 "polygraphy. textbooks baltic journal of economic studies 159 vol. 9 no. 1, 2023 and teaching aids for general educational institutions", which is valid from 24.10.2019 to 31.12.2024. in ukraine there is also a thorough method of standardization of book publishing, but these standards, developed in the 2000s by pjsc "ukrainian research institute of printing industry named after t.h. shevchenko", were designed for outdated equipment, a large part of which is currently morally and physically worn out. in 2000–2012 specialists of taras shevchenko ukrainian research institute of printing industry, a corporate enterprise of sjsc "ukrvydavpoligrafiya", issued 20 regulatory documents on standardization of material costs in the printing industry for information, economic, regulatory and technical support of the printing industry, namely: cotton, gauze, non-woven materials, threads, wire for the production of book and magazine products; adhesives for the production of book products; materials for the production of offset printing forms; materials for the finishing processes of printed products; binding materials for the production of bindings; paper for gluing the base of the book block and paper and cardboard for the cover of the book block; binding cardboard waste; inks for the printing of book, magazine and visual products on sheet offset machines; inks for printing book products on roll offset machines; waste paper from bookbinding and binding processes for the production of book and magazine products; waste paper for the technological needs of production during the printing of book, magazine and visual products on sheet offset machines; waste paper for the technological needs of production during the printing of book and magazine products on roll offset machines; consumption of paper, cardboard and covering materials for the production of book products, etc. in accordance with the fourteenth paragraph of item 5 of the recommendations of the accounting chamber based on the results of the audit of the efficiency of the use of state budget funds allocated to the ministry of education and science of ukraine for the provision of textbooks and manuals, regarding the development of norms for paper consumption for the production of textbooks and manuals for modern printing equipment and their approval, the directorate of science and innovation of the ministry of education and science of ukraine should contact scientific institutions, higher education institutions specializing in issues of development of norms of paper consumption for the production of textbooks, manuals for modern printing equipment and their approval. pjsc "ukrainian research institute of printing industry named after t.h. shevchenko", corporate enterprise sjsc "ukrvydavpoligrafiya" carries out the development of quality standards, material costs and instructions. however, insufficient state funding has a negative impact on its scientific activity, which is why there are currently no modernized standards for the consumption of materials for the printing and publishing industry, in particular for the production of educational literature. this problem can be solved by providing the pjsc "ukrainian research institute of printing industry named after t.h. shevchenko" with the state order for the development of cost norms and waste standards for the production of book products on modern printing equipment. 5. conclusions the situation in the publishing and printing industry remains complex, ambiguous and controversial. significant losses due to the russia's aggression, lack of working capital, high taxes and interest rates, low solvency of the population and legal entities have led to a decrease in demand for printed products and an increase in receivables. however, in general, the textbook industry in ukraine in comparison with other countries was developed and promising until 2022. it is based on the ideas of multivariability of textbooks, their competitive selection, granting pedagogical workers the right to choose future textbooks, introduction of elements of objectivity, transparency and impartiality in the procedures of publishing educational literature, etc. at the same time, it is necessary to develop new approaches to updating the procedure for preparing textbooks and educational materials, in particular, the introduction of market mechanisms for state procurement, an increase in royalties to textbook authors, the introduction of new approaches to financing the field of textbook publishing, etc. without waiting for the end of the war, it is necessary to immediately approve the strategy for the development of reading for 2021–2025 "strategy of reading as a way of life" and to direct a part of the financial aid provided to ukraine by the allies to the implementation of the measures prescribed in it, which concern the subjects of book publishing in ukraine, namely introduction of benefits for the resumption of activities of book publishers, in particular, exemption from income tax for a period of 5 years; introduction of preferential loans for the restoration and development of publishing houses, in particular, state guarantees for loans; innovative re-equipment of ukrainian publishing houses and the printing base thanks to the introduction of state support, in particular, through preferential customs clearance of printing equipment, printing materials not produced in ukraine (paper, cardboard, ink, glue, etc.). baltic journal of economic studies 160 vol. 9 no. 1, 2023 the key challenges that determine the prospects for further research are: the need to substantiate and develop standards for material consumption and standards for material waste in the production of textbooks and educational/teaching manuals for the purpose of forming a competitive policy for book publishers; introduction of monitoring of the cost of services of publishing houses and printing houses (with the provision of economic justifications) for the objective determination of the cost of printing textbooks, manuals during the formation of the project estimate; transformation of state procurement mechanisms in accordance with the legislation of ukraine on public procurement, as well as relevant eu standards. according to the authors, it is the implementation of these areas that should be the subject of cooperation between scientists, experts and representatives of book publishers in the near future. references: afonin, а. (2022, december 19). deiaki pidsumky vydavnychoho roku v umovakh viiny [some results of the publishing year during the war]. ukrainian publishers & booksellers association. available at: http://www.upba.org.ua/ index.php/uk/vydavnytstva (in ukrainian) buryak, s. (2021). knyhovydavnycha diialnist suchasnoi ukrainy: stan, tendentsii ta perspektyvy rozvytku [book publishing activity of modern ukraine: state, trends and prospects of development]. bulletin of the book chamber, vol. 1, pp. 10–21. doi: https://doi.org/10.36273/2076-9555.2021.1(294).10-21 (in ukrainian) dovgan, l.e., & vorzhakova, y.p. (2013). stan ta perspektyvy rozvytku polihrafichnoi promyslovosti ukrainy [state and prospects of development of the printing industry of ukraine. economy and state, vol. 6, pp. 34–38. (in ukrainian) drury, c. (2021). management and cost accounting. print book, english, publisher: cengage, andover. durnak, b., shtangret, a., & melnikov, o. 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(2019, april 25). yak robliat pidruchnyky za kordonom. finskyi dosvid [how do textbooks abroad. finnish experience]. new ukrainian school. available at: https://nus.org.ua/articles/pidruchnyky-finskyj-dosvid/ guzhel, y. (2017, november 27). nakaz pro normuvannia vytraty materialiv u vyrobnytstvi [order on rationing the consumption of materials in the production]. uteka. available at: https://uteka.ua/ua/publication/commerce12-dokumentooborot-2-prikaz-o-normirovanii-rasxoda-materialov-v-proizvodstve (in ukrainian) horngren, c.t., foster, g., datar, s.m., rajan, m., ittner, c., & baldwin, a.a. (2010). cost accounting: a managerial emphasis. issues in accounting education, vol. 25(4), pp. 789–790. kilkist diiuchykh sub’iektiv hospodariuvannia za vydamy ekonomichnoi diialnosti u 2010–2019 rokakh [the number of operating business entities by type of economic activity in 2010–2019]. state statistics service of ukraine. available at: http://https://www.ukrstat.gov.ua/operativ/menu/menu_u/sze_20.htm londar, s.l. (2021). udoskonalennia finansuvannia systemy osvity ukrainy yak peredumova uspishnoho reformuvannia: monohrafiya [improving the financing of the education system of ukraine as a precondition for successful reform: monograph]. kyiv. (in ukrainian) official site of the book chamber of ukraine. release of book production in ukraine in 2021. available at: http://www.ukrbook.net onyshchuk, m., & tatarinova, l. (2021). deiaki tendentsii knyhodrukuvannia ta knyhorozpovsiudzhennia u sviti v umovakh pandemii covid-19 [some trends in typography and book distribution in the world in the context of the covid-19 pandemic]. bulletin of the book chamber, vol. 9, pp. 6–10. (in ukrainian) onyshchuk, m.i., & tatarinova, l.v. (2021). industriia knyhy u sviti: osoblyvosti ta tendentsii rozvytku: monografiya [book industry in the world: features and trends of development: monograph]. kyiv. (in ukrainian) palyha, e.m., bazyluk, v.b., & palyha, i.e. (2019). udoskonalennia korporatyvnoho upravlinnia vydavnychopolihrafichnykh pidpryiemstv [improvement of corporate governance of publishing and printing enterprises. bulletin of economic science of ukraine, vol. 2 (37), pp. 73–77. doi: https://doi.org/10.37405/1729-7206. 2019.2(37).73-77 (in ukrainian) palyha, e.m., & bosak, i.p. (2016). suchasni tendentsii funktsionuvannia pidpryiemstv vydavnycho polihrafichnoi haluzi ta alternatyvy yikh rozvytku [modern trends in the functioning of enterprises of the publishing and printing industry and alternatives to their development]. scientific bulletin of uzhhorod university. series "economics", issue 1(47), vol. 2, pp. 285–290. (in ukrainian) polyansky, p.b. (2010). do pytannia pro perevahy i vrazlyvi mistsia elektronnykh pidruchnykiv [to the question of the advantages and vulnerabilities of electronic textbooks]. problems of a modern textbook, vol. 10, pp. 15–31. (in ukrainian) baltic journal of economic studies 161 vol. 9 no. 1, 2023 poriadok vykorystannia koshtiv, peredbachenykh u derzhavnomu biudzheti dlia realizatsii zahalnoderzhavnykh zakhodiv u sferi osvity [the procedure for using the funds provided in the state budget for the implementation of national measures in the field of education]: resolution of the cabinet of ministers of ukraine dated february 19, 2020 no. 131. available at: https://zakon.rada.gov.ua/laws/show/131-2020-%d0%bf#text (in ukrainian) prib, k.a. (2014). formuvannia stratehii rozvytku pidpryiemstv vydavnycho-polihrafichnoi haluzi [formation of a strategy for the development of enterprises in the publishing and printing industry]. intellect ххі, vol. 6, pp. 30–38. (in ukrainian) pro rozghliad zvitu pro rezultaty audytu efektyvnosti vykorystannia koshtiv derzhavnoho biudzhetu, vydilenykh ministerstvu osvity i nauky ukrainy na zabezpechennia pidruchnykamy, posibnykamy " [on consideration of the report on the results of the audit of the effectiveness of the use of state budget funds allocated to the ministry of education and science of ukraine for the provision of textbooks, manuals]: decision of the accounting chamber of april 28, 2020 no. 11-1. available at: https://rp.gov.ua/upload-files/activity/collegium/2020/11-1_2020/ r_rp_11-1_2020.pdf (in ukrainian) pro vnesennia zmin do pasportu biudzhetnoi prohramy na 2020 r. [on amendments to the passport of the budget program for 2020]: order of the ministry of education and science of ukraine dated may 20, 2020 no. 660. available at: https://mon.gov.ua/storage/app/media/budzhet/2020/07/30/byudzhet%202020/zminy%20do% 20pasportiv/660-kpk-2201260.pdf (in ukrainian) pro vnesennia zmin do pasportu biudzhetnoi prohramy za kpkvk 2201260 na 2021 rik [on amendments to the passport of the budget program under the cpcpc 2201260 for 2021]: order of the ministry of education and science of ukraine dated december 24, 2021 no. 1440. available at: https://mon.gov.ua/storage/app/media/ budzhet/2021/zminy.do.pasp.byudzh.prohr.2021/12/24/zminy.pasp.kpk-2201260-24.12.21.pdf (in ukrainian) pro zatverdzhennia pasporta biudzhetnoi prohramy za kpvpk 2201260 na 2022 rik [on approval of the passport of the budget program under the cpcpc 2201260 for 2022]: order of the ministry of education and science of ukraine dated march 26, 2022 no. 272. available at: https://mon.gov.ua/storage/app/media/budzhet/ 2022/pasporty.byudzhet.prohram/04/06/nakaz-272-26.03.2022.pro.zatv.pasporta-2201260.na.2022.pdf (in ukrainian) pro zatverdzhennia planu zakhodiv shchodo vykonannia rekomendatsii rakhunkovoi palaty za rezultatamy audytu efektyvnosti vykorystannia koshtiv derzhavnoho biudzhetu, vydilenykh ministerstvu osvity i nauky ukrainy na zabezpechennia pidruchnykamy, posibnykamy [on approval of the action plan for the implementation of the recommendations of the accounting chamber based on the results of the audit of the effectiveness of the use of state budget funds allocated to the ministry of education and science of ukraine for the provision of textbooks, manuals]: order of the ministry of education and science of ukraine dated 06.07.2020 no 894. available at: https://rp.gov.ua/upload-files/activity/collegium/2020/11-1_2020/894.pdf (in ukrainian) proiekt stratehii rozvytku chytannia na 2021–2025 roky "chytannia yak zhyttieva stratehiia" [draft reading development strategy for 2021–2025 "reading as a life strategy "]. ministry of culture and information policy of ukraine. available at: https://mkip.gov.ua/files/pdf/%d0%a1%d0%a2%d0%a0%d0%90%d0%a2%d0% 95%d0%93%d0%86%d0%af%20%d0%a0%d0%9e%d0%97%d0%92%d0%98%d0%a2%d0%9a% d0%a3%20%d0%a7%d0%98%d0%a2%d0%90%d0%9d%d0%9d%d0%af.pdf (in ukrainian) rating of ukrainian publishing houses (2018). bookforum. available at: https://bookforum.ua/p/rezultatyknyzhkovogo-roku-ukrayinskyh-vydavnytstv (in ukrainian) rating of ukrainian publishing houses (2018, january 30). bookforum. available at: https://archive.bookforum.ua/ rejtyng-ukrayinskyh-vydavnytstv (in ukrainian) repko, m., sakhno, h., & teleton, a. (2020, october 6). ohliad biudzhetnoi prohramy "zahalnoderzhavni zakhody u sferi osvity ". analitychnyi brif [review of the budget program "national measures in the field of education''. analytical brief ]. centre for economic strategy. available at: https://ces.org.ua/review-of-the education-budget-program shtangret, a.m., durnak, b.v., & melnikov, o.v. (2010). vydavnycha sprava ta polihrafichna diialnist v ukraini: rehionalnyi aspekt [publishing and printing activity in ukraine: regional aspect]. technology and technique of printing, vol. 4, pp. 206–216. (in ukrainian) shtangret, a.m., & shlakhetko, v.v. (2008). suchasni tendentsii rozvytku pidpryiemnytstva u vydavnychopolihrafichnii haluzi ukrainy [modern trends in the development of entrepreneurship in the publishing and printing industry of ukraine]. bulletin of economic science of ukraine, vol. 2(14), pp. 160–162. (in ukrainian) shvayka, l.a., senkivskyi, v.m., & melnikov, o.v. (2012). ekonomichnyi rozvytok vydavnycho-polihrafichnoi haluzi ukrainy: doslidzhennia sutnosti, pokaznykiv, faktoriv i rezultativ [economic development of the publishing and printing industry of ukraine: research of the essence, indicators, factors and results]. scientific notes, vol. 4(41), pp. 95–102. (in ukrainian) slo (stichting leerplanontwikkeling) (2022). available at: http://www.slo.nl sosnovska, o.o., & zhydetska h.v. (2016). suchasni problemy upravlinnia vytratamy na pidpryiemstvakh vydavnycho-polihrafichnoi haluzi [modern problems of cost management at the enterprises of the publishing and printing industry]. scientific notes, vol. 2, pp. 213–220. (in ukrainian) yaremko, i.y., & glushko, o.v. (2010). accounting for expenses at printing enterprises: state and prerequisites of development. scientific bulletin of nltu of ukraine: collection of scientific and technical works, іssue 20.10, pp. 266–273. available at: https://nv.nltu.edu.ua/archive/2010/20_10/266_jare.pdf (in ukrainian) baltic journal of economic studies 162 vol. 9 no. 1, 2023 zahorui, а., & khmelovska, o. (2019, december 22). 9 months of invasion: how ukrainian publishers work during the war. chytomo's. available at: https://chytomo.com/en/9-months-of-invasion-how-ukrainianpublishers-work-in-times-of-war/ zhiriy, k. (2023, january 13). u minfini rozpovily, shcho bude z finansuvanniam osvity pid chas viiny [the ministry of finance told what will happen to the financing of education during the war]. unian.net. available at: https://www.unian.ua/economics/finance/u-minfini-rozpovili-shcho-bude-z-finansuvannyam-osviti-pid-chasviyni-12107997.html (in ukrainian) zvit pro ohliad vytrat derzhavnoho biudzhetu u sferakh osvity i nauky v chastyni zahalnoderzhavnykh zakhodiv u sferi osvity ministerstva osvity i nauky ukrainy [report on the review of state budget expenditures in the fields of education and science in terms of national activities in the field of education of the ministry of education and science of ukraine]. available at: https://mon.gov.ua/storage/app/media/budzhet/2021/03/18/zvit%20 pro%20ohlyad%20vytrat%20derzhavnoho%20byudzhetu%20u%20sferakh%20osvity%20i%20nauky_18_03.pdf (in ukrainian) received on: 20th of january, 2023 accepted on: 27th of february, 2023 published on: 31th of march, 2023 baltic journal of economic studies 315 vol. 4, no. 5, 2018 corresponding author: 1 non-governmental organization “noosphere”, ukraine. e-mail: tetiana.b.serediuk@gmail.com 2 cherkasy state technological university, ukraine. e-mail: yurockv@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-315-319 common features and distinctions bet ween high technology and innovation tetiana serediuk1, yurii vdovychenko2 abstract. the goods, which are positioned on modern global markets as innovative and high-tech products, occupy more and more segments, owing to the contemporary modifications of the innovation diffusion theory and the ways of its implementation on high-tech markets. however, the meaning of the term “high technology” and “innovations” is quite disputable. an identification of the ontological characteristics of these definitions is of particular interest and practical value in terms of the transformation of a scientific and methodological framework for control of innovation diffusion in conditions of invariance on the market of high-tech information technology. therefore, the author’s article is aimed at the identification of the above-stated definitions and generalization of their distinctions. methodology. the methodology of the article is based on the theoretical researches of ukrainian and foreign scientists, which are synthesized, systematized, and analysed to identify the distinctive features of “high tech” and “innovations”. one of the critical methodological tool, represented in the research, is an application of frequency analysis using online service “google books ngram viewer”, which enabled us to compare frequency of references in scientific researches of the term “innovations” and “high technologies” as well as to compile analytical database of the research. results. as a result of the author’s study, it has been established that the frequency of using the term “innovations” is continuously increasing and the definition itself has a huge variety of interpretations. this paper suggests generalizing the innovations as the implementation of the new idea, which produces widespread and long-term changes. as distinct from innovations, a term “high technology” means the narrower spectrum of radical changes. although it has a few names, such as “high-technology”, “high tech”, “high-tech”, “hi-tech”, which, besides technology, can have other functionality. practical implications. the presented results make it possible to develop more efficient communication channels for innovation diffusion, more precisely to identify innovators and mechanisms of their involvement in corporate activities, alternative forms of innovative activities in corporations. value/originality. as a result of the study, it has been proved that technologies have common features with radical technical innovations, such as high science intensity, enhanced efficiency. nevertheless, while being distributed on the market, innovation becomes a commodity and high technologies remain the same until the creation of state-of-the-art technologies. on this basis, it is possible more precisely to introduce innovations of it companies according to information technology market segments. key words: global, markets, goods, modifications, theories, diffusion, innovations, high technologies, corporations. jel classification: l00, n7, o14, o17, o3, y30 1. introduction in conditions of modern dynamic economy and reduction in the duration of product cycles, a key to commercial success is an ability continuously and promptly to create new products and processes, driven by the development of new technologies. the emergence of new technologies depends on the efficiency of researches. thus, according to data of the world bank (2017), for the period between 2000 and 2014, a number of r&d scientists has increased by 1.39 times (from 807 to 1127 scientists per a million of people), and a number of patent applications, submitted to the world intellectual property organizations (wipo), – by 2.08 times for residents and 1.77 times for non-residents (up to 1.7 and 0.8 millions of patent applications). the number of scientific and technical articles in journals has increased by 1.9 times (from 1.2 to 2.3 million articles) for the period between 2003 and 2016. at the same time, proceeds from intellectual property used for the same period has increased by 3.59 times (from 92,059 to 330,084 billion us dollars), demonstrating an increase in the efficiency of researches. baltic journal of economic studies 316 vol. 4, no. 5, 2018 a final result of the research is to gain new knowledge that will become a foundation for high technologies and innovations. cutting-edge technologies, which implement the innovative developments, are called high technologies. creation of new high technologies is always based on innovations, which is the key driving force of economic development and is mainly a combination of the available production factors (schumpeter, 2011). sometimes high technologies and innovations are identified as the same ones. the high technology world is characterized by an extremely high level of market and technological uncertainty (moriarty & kosnik, 1989), and innovations in the high-tech sphere are not always welcomed by society. thus, dvorak keyboard, that has been developed for decades, despite its advantage over the standard qwerty keyboard, is not so widespread (rogers, 2010). at the same time, most of the available innovations have been developed as a response to discrete events, problematic stories and new technological opportunities (taalbi, 2017). despite the fact that high technology sector is usually considered as a dynamic sector of the economy, since 2000 a very significant slowdown of entrepreneurial activities has been documented, primarily, in the usa (haltiwanger, hathaway & miranda, 2014). it leaves relevant the issue of the study of high-tech market development and peculiarities of innovation diffusion in this market. in modern global markets, the goods, which are positioned as innovative and high-tech products, occupy more and more segments owing to modern modifications of innovation diffusion theory and the ways of their implementation on high-tech markets. however, the meaning of the terms “high technologies” and “innovations” is still quite disputable. an identification of ontological characteristics of these categories is of considerable interest and practical value in terms of the transformation of a scientific and methodological framework for control of innovation diffusion in conditions of invariance on the market of information technologies. the current paper aims to demonstrate the terminological distinctions between high technology and innovation. 2. definition of high technology in the literature, the term “high technology” is close to the term “high-technology”, “high tech”, “high-tech”, “hi-tech” (figure 1). fig. 1 shows that in the second half of the 1980s of хх century the acronym “high-tech” became popular. the term “high-tech” was used as an acronym of high technology or an adjective that means using, requiring or involved in high technology: high-tech product, high-tech industry, high-tech cluster, high-tech sector. “hi-tech” is often understood as architectural or designer style. the term “high technology” is used to define technology. high technologies are characterized by the high degree of uncertainty in the achievement of a final result, uniqueness, prompt obsolescence, shortening of the life cycle – some of the high technologies are outdated at the stage of introduction into production (skyba, 2014). a typical feature of high technology is high science intensity, high risks, and rapidity of changes in high-tech markets. table 1 shows definitions of high technology by different authors. thus, high technology is a cutting edge technology, having a high knowledge intensity, which enhances the value of product or process for the consumer in the sense that the consumer obtains better quality, reduced costs or easier use of products in comparison with the outdated technology. modern high technologies are information technologies, programming, robotic technology, computing technology, aerospace technology, nanotechnologies, artificial intelligence, microelectronics, nuclear power engineering, biotechnologies, pharmaceutics, and gene engineering. 0.0001% 0.0002% 0.0003% 1970 1980 1990 2000 fr eq ue nc y phrase high tech high technology high technology high tech hi tech figure 1. the frequency of n-grams “high technology” etc. source: data from google books ngram viewer (https://books.google.com/ngrams) baltic journal of economic studies 317 vol. 4, no. 5, 2018 3. definition of innovation in the literature, the term “innovation” is used very often, even too often. for the last years, it has become just another buzzword (shaver, 2014). according to the data of google books ngram, a frequency of use of the term “high technology” is significantly lower than the use of the term “innovations” (figure 2). table 2 shows definitions of the term “innovation” by different authors. thus, innovation is the implemented new ideas, which produce widespread or long-term changes. creation and introduction of innovations is an efficient tool for enhancing efficiency and competitive advantage of individual enterprises, as well as the entire industries. in case of successful diffusion, the innovation becomes a commodity. 4. common features and distinctions a review of the recent literature indicates linkages between high technology and innovation. the majority of existing articles fail to provide clear distinctions between the features of high technology and innovation. comparing the terms “high technologies” and “innovations” butko (2017) defines the latter as a broader notion, which encompasses a wider spectrum of radical changes. a common feature of high technology and an innovation is that they must have been implemented. in case of innovation, the level of maturity of products ultimately reduces the qualification requirements and it subsequently becomes a commodity: products become reliable, production processes – standardized, and price premium, obtained from the initial technological table 1 definitions of high technology author definition shanklin, ryans & ryans (1987) 1) an industry that has the double number of technical employees and doubles the r&d outlays; 2) technology that requires a strong scientific/technical basis; can obsolete existing technology rapidly; as new technology comes on stream its applications create or revolutionize market and demands. laliberté (2010) 1) any highly technical or specialized technological equipment or application; 2) mostly used for technology involving complex electronics or software. skyba (2014) a synthesis of science, art and technological knowledge. butko (2017) 1) technologies, based on systematized advanced knowledge, which can be materialized in certain products; 2) ensure more efficient cost-benefit ratio in comparison with previous technologies, exceeding the performance indicators of previous analogues or having no analogues in the past; 3) trigger a chain reaction of innovations or initiate dynamic processes of sociocultural systems self-organizing. keeble, wilkinson (2017) 1) a catch-all phrase usually denoting industries producing technologically-advanced, sophisticated and changing products; 2) firms and industries whose products or services embody new, innovative and advanced technologies developed by the application of scientific and technological expertise. source: formed by the authors 0.0000% 0.0005% 0.0010% 0.0015% 0.0020% 1920 1940 1960 1980 2000 fr eq ue nc y phrase innovation high technology figure 2. comparison of frequency of n-grams “innovation” and “high technology” source: data from google books ngram viewer (https://books.google.com/ngrams) baltic journal of economic studies 318 vol. 4, no. 5, 2018 advantage, is exhausted (nahm, 2014). at the same time, science intensity of products reduces. in the case of hightech products, qualification requirements and science intensity are high during the whole product cycle. ding (2016) notes that 95% of innovations in the high-tech sector are seen in the technical areas. oslo manual highlights four types of innovations (oecd, 2005): product innovations, process innovations, organizational innovations and marketing innovations. high technologies are usually related to the first ones. 5. conclusions therefore, based on the analysis of publicly available studies, it has been established that the frequency of using the term “innovations” is continuously increasing, and the term itself has a huge variety of interpretations. this paper suggests a generalized interpretation of the new idea, which produces widespread or long-term changes. as distinct from innovations, the term “high technology” means the narrower spectrum of radical changes, however, it has a few names, such as “hightechnology”, “high tech”, “high-tech”, “hi-tech”, which, besides technology, can have other functionality. it can belong to high technology, architectural or designer style. concerning the ontological characteristics, we suggest understanding is as cutting edge technologies, including the high level of knowledge intensity that enhances the value of product or process for the customer in the sense that such level ensures better quality, reduces costs or makes use of product easier in comparison with the outdated technology. high technologies have common features with radical technical innovations, like high science intensity, increased productivity; although, in the result of market diffusion innovation becomes a commodity and high technologies remain the same before the creation of the new advanced technologies. the results presented enable us to develop more efficient communication channels for innovation diffusion and more precisely to identify innovators and mechanisms of their involvement in corporate activities, alternative forms of innovative activities in corporations. on this basis, it is possible more precisely to introduce innovations of it companies according to information technology market segments. therefore, it is advantageous to study innovation diffusion in high-tech markets, taking into consideration the specifics of such innovations. table 2 definitions of innovation author definition dosi (1988) the search for, and the discovery, experimentation, development, imitation, and adoption of new products, new production processes, and new organizational set-ups. west and farr (1990) refers to the deliberate initiation and application within a firm of ideas, processes, products or procedures which are new to the adopted unit and are created in order to benefit the firm or the wider society. oecd (2005) the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations. o’sullivan & dooley (2009) the process of making changes, large and small, radical and incremental, to products, processes, and services that results in the introduction of something new for the organization that adds value to customers and contributes to the knowledge store of the organization. christensen (2013) refers to a change in one of the technologies, using which an organization transforms labour, capital, materials, and information into products and services of greater value. dos santos faria (2014) means technologies or practices that are new to a given society and they are not necessarily new in absolute terms. mckinley, latham, & braun (2014) any novel product, service, or production process that departs significantly from the prior product, service, or production process architectures nahm (2014) the process, used by firms to develop, master, and commercialize new product designs, services, and production processes. includes the process used to introduce new and improved technologies and practices in commercial markets. tidd and bessant (2014) described as the process of creating value from ideas. witzel (2014) the process of introducing a new idea that creates a widespread or long-term change. mukhtar (2016) in general, innovation can be considered as an interactive process to bring value into the market. in many cases, the process is initiated by a technological breakthrough from research activity. this activity is followed by other activities such as manufacturing and marketing. source: formed by the authors baltic journal of economic studies 319 vol. 4, no. 5, 2018 references: butko, b. o. (2017). vyznachennia ekonomіchnoi katehorіi vysokotekhnolohіchnoho produktu v kontekstі synerhetychnoi paradyhmy hlobalnoho rozvytku [high technology economical category within the context of synergetic paradigm of global development]. naukovyi vіsnyk khdu: serіia “ekonomіchnі nauky”, 27, 22-25. retrieved june 13, 2018, from: http://www.ej.kherson.ua/journal/economic_27/economic_27_1.pdf christensen, c. (2013). the innovator's dilemma: when new technologies cause great firms to fail. harvard business review press. ding, r . (2016). innovation efficiency of high-tech industries in china (doctoral dissertation, university of nottingham). dos santos faria, p. i. (2014). the executive compensation: pay-for-performance or innovation in high technology firms (doctoral dissertation, universidade do porto (portugal)). dosi, g. (1988). the nature of the innovative process. in g. dosi, c. freeman, r . nelson, g. silverberg, & l. soete (eds.), technical change and economic theory. london, ny: pinter publishers. haltiwanger, j., hathaway, i., miranda, j. (2014). declining business dynamism in the us high-technology sector. ewing marion kauffman foundation. keeble, d., wilkinson, f. (2017). high-technology clusters, networking and collective learning in europe. routledge. laliberté, g. (2010). innovation in high technology (1/2). retrieved june 5, 2018, from: https://www.slideshare.net/ slideshare_guy/innovation-in-high-technol ogy-12 mckinley, w., latham, s., braun, m. (2014). organizational decline and in novation: turnarounds and downward spirals. academy of management review, 39, 88-110. moriarty, r . t., kosnik, t. j. (1989). high-tech marketing: concepts, continuity, and change. mit sloan management review, 30(4), 7. mukhtar, d. (2016). implementation of technology driven policy initiatives in emerging economies: the case of malaysia's commercialization of research and development fund (doctoral dissertation, nottingham trent university). nahm, j. m. (2014). varieties of innovation: the creation of wind and solar industries in china, germany, and the united states. cambridge: massachusetts in stitute of technology. o’sullivan, d., dooley, l. (2009). applying innovation. thousand oakes, ca: sage publications. oecd/eurostat (2005). oslo manual: guidelines for collecting and interpreting innovation data, 3rd edition, the measurement of scientific and technological activities, oecd publishing, paris. retrieved from: http://dx.doi.org/10.1787/9789264013100-en rogers, e. m. (2010). diffusion of innovations. simon and schuster. schumpeter, j. (2011). theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle. ukrainian translation by v. starko. kyiv, publishing house of “kyiv-mohyla academy”. (in ukrainian) shanklin, w. l., ryans, j. k., ryans, j. c. (1987). essentials of marketing high technology. lexington books. shaver, e. f. (2014). the many definitions of innovation. retrieved june 12, 2018, from: http://www.ericshaver.com/ the-many-definitions-of-innovation/ skyba, і. p. (2014). іnstrumentalne znannia і vysokі tekhnolohіi [instrumental knowledge and high technologies.]. naukovі zapysky kutep, 282-293. retrieved june 13, 2018, from: http://er.nau.edu.ua:8080/handle/ nau/18372 taalbi, j. (2017). what drives innovation? evidence from economic history. research policy, 46(8), 1437-1453. retrieved from: http://dx.doi.org/10.1016/j.re spol.2017.06.007 tidd, j., bessant, j. (2014). strategic innovation management. john wiley & sons. west, m. a., farr, j. l. (1990). innovation at work. innovation and creativity at work: psychological and organizational strategies. chichester: wiley. witzel, e. w. (2014). wheel of innovation: how leaders' attitudes and behaviors drive disruptive technology in the us navy. andrews university. world bank. international economics dept. development data group (2017). world development indicators. world bank. retrieved june 13, 2018, from: http://databank.worldbank.org/data/download/wdi_excel.zip baltic journal of economic studies 39 vol. 4, no. 4, 2018 corresponding author: 1 supreme court of ukraine, ukraine. e-mail: bernaziuk1979@gmail.com 2 supreme court of ukraine, ukraine. e-mail: nv417170@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-39-44 legal regulation of the financial supply of the constitutional court of ukraine ian bernaziuk1, nataliia kovalenko2 abstract. the aim of the article is to study the history and modernity, the doctrine and practice of legal regulation of financial support of the constitutional court of ukraine. the subject of the study is the legal regulation of the financial support of the constitutional court of ukraine. methodology. scientific research is based on the use of philosophical, general scientific and special scientific methods and techniques of scientific knowledge. the dialectical method allowed considering the legal regulation of the financial support of the functioning of the constitutional court of ukraine in development and interaction with other social and legal phenomena. the historical method is aimed at reconstructing the genesis of legal regulation of the financial support of the constitutional court of ukraine at various stages of its formation. the formal legal method enabled to characterize the specificities of the legal regulation of financial support of the constitutional court of ukraine by legal constructions and legal terminology. comparative legal method contributed to the study of the specifics of the legal regulation of financial guarantees of the independence of constitutional justice bodies in certain countries of the world. the results of the study revealed that the characteristic feature of socio-political transformations in modern ukrainian society is ongoing reformation of constitutional justice, one task of which is to strengthen the financial independence of the ccu as potentially the most effective institution for the protection of human and civil rights and freedoms, establishment of legal, constitutional ukraine. practical implications. in the study, firstly, the views of experts on the legal regulation and practice of financing the constitutional court of ukraine as a body of constitutional jurisdiction were considered; secondly, the specificities of legal regulation of financing of the constitutional court of ukraine before the reform of constitutional justice in 2016–2017 were studied; thirdly, the current state and prospects of improving the financial support of the constitutional court of ukraine were analysed. relevance/originality. on the basis of a comprehensive study of the constitutional doctrine, domestic and foreign legislation and practice of its implementation, directions of strengthening the financial independence of the constitutional court of ukraine are proposed. key words: constitutional justice, constitutional court of ukraine, reform of constitutional justice, independence of constitutional court of ukraine, financial support of constitutional court of ukraine. jel classification: k3, k13 1. introduction modern efforts on the transformation of ukraine into a legal democratic european state are impossible without establishing the supremacy of the current constitution of ukraine. therefore, it is logical that the issue of proper legal protection of the basic law is extremely relevant, interesting, though difficult. indeed, the problem of legal protection of the constitution, which arose almost immediately after the formation of original ideas of constitutionalism and first constitutional acts, continues to be one of the main objects of scientific discussion in the modern theory and practice of constitutional law (fedorenko, 2015). according to the principles of a democratic, legal, social state, the constitutional justice of the constitutional court of ukraine serves as the guarantor of their consistent implementation and formation of real democracy. the competence of the constitutional court of ukraine (hereinafter, the ccu, the court) enables to confirm the significant potential for a direct effect of the constitution of ukraine. it is an arbitrator between the branches of power, ensuring the stability and proper functioning of public authorities and local self-government bodies, guaranteeing constitutionality for legal act adoption. at present, the ccu is a body of constitutional jurisdiction, which significantly influences the national legal system of ukraine and occupies an important place among the jurisdictional institutions because it determines the condition and dynamics of protecting human and civil rights and freedoms (kuzmenko, 2012). baltic journal of economic studies 40 vol. 4, no. 4, 2018 2. the aim of the article one of the main reasons for the weakening of the ccu authority over the last decade is the lack of guarantees of the independence of its activities, in particular, financial ones. therefore, the study of the history and modernity, the doctrine and practice of legal regulation of the financial support of the ccu acquire a special relevance, which is the aim of this scientific article. for its successful implementation, the following tasks should be solved: first, to consider the views of specialists on legal regulation and practice of financing the ccu as a body of constitutional jurisdiction; second, to analyse the legal regulation of financing of the constitutional court of ukraine before the reform of the constitutional justice in 2016-2017; third, to study the current state and prospects for improving the financial support of the ccu. literature review. it should be noted that some aspects of financial (budget) provision of the ccu functioning were interpreted in the works of m. i. koziubra, p. f. martynenko, m. d. savenko, m. v. savchyn, m. f. selivon, v. e. skomorokha, i. d. slidenko, v. m. shapoval, s. v. shevchuk. 3. the main material thus, effective performance of the ccu’s tasks and functions determined in accordance with the current domestic legislation is possible only on condition of sufficient financial support of this body, which is a guarantee of its independent functioning. the independence of the ccu in exercising its authorities is provided by various guarantees, that is, a set of specific conditions, means, and methods. material and financial independence and autonomy of the ccu are the basis for the realization of its independence as a whole (chupryna, 2006). according to v.ye. skomorokha, the most important element of the ccu independence is proper conditions for its activities and functioning. this is provided by the financing of the constitutional court, remuneration of judges, their pensions, etc. the constitution of ukraine charged the state to finance, establish proper conditions for the constitutional court and judges’ performance providing for the expenditures for the maintenance of this institution in the state budget of ukraine (article 130 of the constitution of ukraine), not having determined a clear mechanism for this norm implementation (skomorokha). the experience of the parliament of ukraine gives evidence on the use of the “wallet rights” to influence the independence of the court. in particular, by adopting the state budget of ukraine for 1998, the verkhovna rada of ukraine, “without a vote”, without any preliminary discussion and available reasons, contrary to the recommendations of the government and the budget committee, without consulting the leadership of the ccu, reduced the state expenditures for the maintenance of the court almost by 40%. nothing of this kind has taken place in relation to any other authority (skomorokha, 2006). the law of ukraine “on the constitutional court of ukraine” as of october 16, 1996, does not contain such a mechanism as well, besides article 31 provides for that the proposals regarding the financing of the constitutional court and the draft of the corresponding estimations should be submitted by the head of the court to the cabinet of ministers of ukraine and the verkhovna rada of ukraine when drafting the state budget of ukraine. the proposals are not obligatory for the bodies, to which they are submitted and, therefore, they determine financing at their discretion that affects the independence of the ccu and its judges. according to v. ye. skomorokha, in the law of ukraine “on the constitutional court of ukraine”, it is necessary to determine the specific percentage of national gross profits allocated to the financing of the court, and mandatory consideration of the draft estimations proposed by the head of the ccu for the government and parliament. the total financing proposed by the ccu can be reduced only in cases of limiting the financing of all the highest bodies of state power. reducing financing should be adequate, that is, for a clearly defined and equal percentage for all. the draft estimations should be made in presence of judges and they should monitor its implementation, which will limit the internal impact on judges by providing them with a bonus, material assistance or allocation of funds for welfare needs. approval of the draft budget for each year and hearing of the quarterly information of the head of the ccu on the use of budgetary funds at the court is provided for in paragraph 8 of the ccu rules. however, in practice, these provisions are not performed by the csu (skomorokha). the total remuneration of the head of the ccu cannot exceed the total remuneration of judges by more than 10%. a greater difference in wages diminishes the importance of the judge’s judicial power in constitutional proceedings (skomorokha). the practice of financing the constitutional court of italy shows that one of the conditions for its independence is financial independence. any restriction of this independence is recognized by the court as unconstitutional. first and foremost, this independence is manifested in the self-determination of financial needs. in case of necessity to reduce the amounts provided for the functioning of constitutional bodies, representatives of all political forces make decisions to charge the government, together with the heads of constitutional bodies, under the general agreement and considering the existing financial difficulties, to determine the reduction of expenses in the budget of the constitutional body (skomorokha, 2016). in other scholarly works, on the basis of considering guarantees of independence of the ccu, v. ye. skomorokha concludes that the budget financing of the court should include the following points: baltic journal of economic studies 41 vol. 4, no. 4, 2018 1. in order to ensure the budget autonomy and financial management of the constitutional court, the estimation of its expenditures should guarantee the possibility of independent constitutional justice and cannot be reduced compared to the previous fiscal year. 2. if the cabinet of ministers of ukraine considers it necessary to reduce the total expenses of the ccu, then proportionally (in percentage terms) the total funding of other branches of power should be decreased. the discussion should involve the head of the court. in case of disagreement, the proposals of the head of the ccu are included in the draft budget with the conclusion of the cabinet of ministers of ukraine. 3. the funding level for the next year should be discussed in the parliament with the participation of the head of the ccu or his deputy. 4. costs of maintenance of the ccu may be attributed to protected items of the budget. 5. management of budget funds for the support and maintenance of the ccu functioning in accordance with the estimation approved by the court shall be exercised by the head of the ccu without the influence of other branches of power. therefore, observance of the principle of financial independence of the constitutional court depends on the economic capabilities of the state, the level of legal culture of senior officials, and a number of other factors of objective and subjective character (skomorokha, 2016). according to m.v. savchyn, the basis of financial and material support for the independence of the court is the implementation of the pro rata principle in financing the maintenance of judicial institutions, which enables fair allocation of expenditures for their maintenance, necessary for ensuring the right of defence (consequently, process of law), the rights of the person to judicial protection. in its disposition of the case on financing of the courts, the ccu stated that the restriction of expenditures for the financing of the judiciary does not guarantee the proper conditions for the full and independent implementation of justice and the functioning of courts and undermines the trust of citizens in state power, endangers the consolidation and protection of fundamental human and civil rights and freedoms. in case of a deficit of the state budget of ukraine, the reduction of expenditures for the financing of courts should be conducted on the pro rata principle, with the consent of the ccu and the supreme court of ukraine (savchyn, 2003). in addition, m. v. savchyn suggests that the rules of the ccu should reflect the provisions of the law of ukraine “on the constitutional court of ukraine” as of october 16, 1996, regarding the proposals on the total financing of the court when drafting the state budget of ukraine (article 31). the ccu has already expressed its position on the issue of financing of courts but these issues should be regulated clearly in the rules of court to increase the guarantees of independence of the body of constitutional justice (savchyn, 2003). m.f. selivon notes that the secretariat drafts estimations for the ccu for the next year. it is examined in the permanent committee of the court on budget and personnel and approved by the ccu (clause 1, section 7, chapter 2 of the rules of the ccu). subsequently, the head of the ccu transmits this document to the cabinet of ministers of ukraine and the verkhovna rada of ukraine. the analysis of the procedure and justification of the draft budget for financing the ccu in the ministry of finance of ukraine, the cabinet of ministers of ukraine, committees of the verkhovna rada of ukraine, as well as the approval of the budget at the plenary session of the parliament, reveals that provided for in the legislation guarantees of financial independence of the court at these stages of the budget procedure are insufficient. while the above-mentioned bodies discuss the budget of the ccu, in essence, decisions taken do not consider the special status of the latter and the procedure is the same as for other state bodies and budgetary institutions (selivon, 1998). the analysis of the previous version of the law of ukraine “on the constitutional court of ukraine” on october 16, 1996, from retrospective, suggests that financing of the ccu has been a separate line in the state budget of ukraine. proposals on the total financing of the ccu and the draft budget were submitted by the head of the court to the cabinet of ministers of ukraine and the verkhovna rada of ukraine when drafting the state budget of ukraine for each subsequent year (pro konstytutsiynyi sud ukrainy zakon ukrainy). in a popular commentary to the above article 31 of the law of ukraine “on the constitutional court of ukraine” as of october 16, 1996, s. l. lysenkov notes that after the approval of the verkhovna rada of ukraine, the state budget becomes a law. the total funds allocated to finance the activities of the ccu are as a separate line in it and gain the power of the law, and therefore, cannot be changed by any government bodies or officials (lysenkov, 1998). the head of the ccu leads and organizes its performance and better than anyone else knows its needs. that is why the law empowers him to submit proposals to the cabinet of ministers of ukraine and the verkhovna rada of ukraine regarding the total financing of the ccu together with the draft of the corresponding estimations (lysenkov, 1998). the scientific and practical comments of the law of ukraine “on the constitutional court of ukraine” on october 16, 1996, under the general editorship of a. a. stryzhak state that according to part 1 of article 31 of this law, the financing of the ccu in a separate line in the state budget is one of the guarantees of independence of the single constitutional jurisdiction body. according to the decision of the constitutional court of ukraine no. 6-rp as of june 24, 1999 (a case on financing of courts), the centralized procedure for baltic journal of economic studies 42 vol. 4, no. 4, 2018 financing of the judiciary from the state budget of ukraine to ensure the proper economic conditions for full and independent implementation of justice, financing of court needs (expenses for consideration of court cases, utilities, repair and security of court premises, purchase of office equipment, postal expenses, etc.) should limit any influence on the court and is aimed at guaranteeing judicial activity consistent with the principles and requirements of the constitution (stryzhak, 2009). according to subparagraph 3, clause 1, section 2 of the rules, the head of the ccu submits for the approval of the court draft estimates for each subsequent year. at its meetings, the ccu considers proposals regarding the total financing of the court, approves the draft estimates for each fiscal year; hears the information of the head of the ccu on the use of budget allocations (subparagraphs 7, 9, clause 1, section 7) (stryzhak, 2009). the reform of the domestic constitutional justice in 2016–2017 included the introduction of changes to financial ability and independence of the ccu. according to article 1481 of the constitution of ukraine on june 28, 1996, the state provides the ccu with financing and appropriate conditions for the activity. the state budget of ukraine determines separately the expenses for the activity of the court considering the proposals of its head. the size of the remuneration of the ccu judge is provided for by the law on the ccu (konstytutsiia ukrainy), and not by government decrees as before (kyrychenko, june 2017). furthermore, article 48 “guarantees of the financial independence of the court” of the law of ukraine “on the constitutional court of ukraine” as of july 13, 2017, stipulates that expenditures on the financial support of the court’s activity are determined by a separate line in the state budget of ukraine. expenditures for financial support of the court’s activities cannot be reduced in the current budget period. the total expenses for financing the court’s activities in the next year may not be lower than the expenditures in the preceding fiscal year. the court, in accordance with the budget code of ukraine, functions as the main spending unit of the state budget of ukraine regarding the financial provision of its activities (pro konstytutsiynyi sud ukrainy). it is important to ensure the tradition of effective application and practical implementation of these regulations in the activities of the verkhovna rada of ukraine and the cabinet of ministers of ukraine. thus, according to the annual information report of the ccu for 2017, the law of ukraine “on the state budget of ukraine for 2017” as of december 21, 2016, the court has been designated as the main spending unit under the budget program 0801010 “ensuring constitutional jurisdiction in ukraine”. the strategic objective of the court as the main spending unit is to ensure compliance and implementation of the constitutional regulations, human and civil rights and freedoms, the principles of the social and state system in ukraine, person’s access to constitutional control. the total expenditures of the ccu as the main spending unit in 2017 amounted to 148 485.1 thousand uah, including: current expenditures up to 131 070.0 thousand uah, capital expenditures up to 17 415.1 thousand uah. unlike previous years, in 2017, the ccu received the necessary capital resources to upgrade the material and technical base to create the prerequisites for the effective implementation of the new strategic task, that is, to increase access of citizens and other persons to the constitutional justice and to implement powers of constitutional complaints handling. due to development expenditures, in 2017, the capital repairs of some premises of the administrative building of the ccu with the functional complex arrangement (meeting room, consultation room, and hardware technical office) were carried out to ensure one of the court senate functioning, and three halls of meetings of the chamber of the ccu were also arranged. an important trend in using financial resources in 2017 is the comprehensive modernization and updating of the information and communication systems of the ccu. an important step towards the implementation of the principles of transparency and openness of the ccu was the introduction, on a new technical basis, of an online broadcast of open parts of the plenary sessions of the court for citizens of ukraine and other individuals to obtain information on the work of the ccu directly. in view of the strategic objective, some unsolved issues in 2017 on the financial support of constitutional proceedings should be also noted. in particular, the issue of cost planning on the involvement of experts, specialists and translators is problematic due to the lack of appropriate legal regulation. in addition, the mechanism of compensation of expenses incurred by witnesses involved in the constitutional proceeding remains unresolved. in accordance with the law of ukraine “on the constitutional court of ukraine” as of july 13, 2017, the archive and library of the ccu are created and function. these institutions should become public and accessible centres for professionals, scholars, and all interested persons. however, the conditions for ensuring such publicity in the ccu have not been created. there are neither premises of the relevant technical standard, nor sufficient financing aimed at developing a library fund and improving the special technical conditions for storing cases of constitutional proceedings up to 100 years. to solve these problems, the provided plan for the ccu functioning should be implemented, that is, the three buildings of the court should operate, of which only two are currently under construction (shchorichna informatsiyna dopovid konstytutsiynoho sudu ukrainy za 2017 rik). it should be noted that the regulation of article 48 of the law of ukraine “on the constitutional court of ukraine” on july 13, 2017, according to which the baltic journal of economic studies 43 vol. 4, no. 4, 2018 total financing of the activities of the ccu for the next year cannot be less than the total expenditures in the previous fiscal year, is not fully consistent with one of the main principles of the budget the system of ukraine, that is, the principle of justification. therefore, failure to comply with this provision may cause the unproductive use of funds, excessive overstatement of needs. for that reason, the current legislation regulates issues of organizational support for the activities of the ccu, while certain provisions of the legislation in determining the total financing of the activities of the court need to be improved (zvit pro rezultaty finansovoho audytu konstytutsiynoho sudu ukrainy). 4. conclusions therefore, the analysis conducted enables to assert that the characteristic feature of socio-political transformations in modern ukrainian society is ongoing reformation of constitutional justice, one task of which is to strengthen the financial independence of the ccu as potentially the most effective institution for the protection of human and civil rights and freedoms, establishment of legal, constitutional ukraine. ultimately, all reforms must serve the main public interest, that is, the wellness of a person who should live in conditions of guaranteed rights and freedoms, a high level of culture, science and education, material security, peace and safety (kryvytskyi, 2018). with the enactment of the law of ukraine “on amendments to the constitution of ukraine (on justice)” as of june 2, 2016, and according to the recommendations of the european commission for democracy through law (the venice commission), the ccu acquired the status of an independent institution that is different from the courts of general jurisdiction. consequently, the status of a judge of the ccu, the procedure for selecting candidates for this post have been changed, as well as an exhaustive list of grounds for dismissal of the judge of the court has been provided for and the jurisdiction of the ccu to terminate the powers of the judge of the court has been extended. in addition, the basic law of ukraine contains the ccu regulations aimed at strengthening the independence, which guarantee the financing of the court and appropriate conditions for its activities. the current legislation regulates the issue of financial independence of the ccu. moreover, the practical application of the article 48 of the law of ukraine “on the constitutional court of ukraine” on july 13, 2017, regarding the determination of expenditures not less than the expenditures in the previous fiscal year, needs to be reconciled with one of the basic principles of the budgetary system of ukraine, the principle of justification. references: fedorenko, v. (2015). ponovlennia avtorytetu konstytutsiynoho sudu ukrainy yak zaporuka efektyvnoho funktsionuvannia derzhavy [the renewal of the authority of the constitutional court of ukraine as a guarantee of the effective functioning of the state]. pravo ukrainy, 5, 97-110. (in ukrainian) kuzmenko, o. o. (2012). konstytutsiynyi sud ukrainy v systemi vyshchykh orhaniv derzhavnoi vlady [the constitutional court of ukraine in the system of supreme bodies of state power] (dissertation abstract of phd in specialty 12.00.02 constitutional law; municipal law). k., 20 p. (in ukrainian) chupryna, l. (2006). biudzhet konstytutsiynoho sudu ukrainy – odna z harantiy zdiysnennia konstytutsiynoi yurysdyktsii v ukraini (finansovo-pravovyi aspekt) [the budget of the constitutional court of ukraine is one of the guarantees of the implementation of constitutional jurisdiction in ukraine (financial-legal aspect)]. visnyk konstytutsiynoho sudu, 3, 37-42. (in ukrainian) skomorokha, v. ye. konstytutsiynyi sud ukrainy v mekhanizmi derzhavnoi vlady [the constitutional court of ukraine in the mechanism of state power] (dissertation of phd in specialty 12.00.02). kh., 230 p. (in ukrainian) skomorokha, v. (2006). nezalezhnist konstytutsiynoho sudu ukrainy ta ii harantii. biudzhetne finansuvannia naivazhlyvisha harantiia yoho samostiynosti ta nezalezhnosti [independence of the constitutional court of ukraine and its guarantees. budget financing the most important guarantee of his independence and independence]. visnyk konstytutsiynoho sudu ukrainy, 3, 10-24. (in ukrainian) savchyn, m. v. (2003). konstytutsiynyi sud ukrainy yak harant konstytutsiynoho ladu [constitutional court of ukraine as a guarantor of the constitutional order] (dissertation of phd in specialty 12.00.02). k., 218 p. (in ukrainian) selivon, m. f. (1998). problemni pytannia formuvannia i vykonannia biudzhetu konstytutsiynoho sudu ukrainy [problematic issues in the formation and execution of the budget of the constitutional court of ukraine]. visnyk konstytutsiynoho sudu ukrainy, 5-6, pp. 91-98. (in ukrainian) pro konstytutsiynyi sud ukrainy zakon ukrainy [on the constitutional court of ukraine]. law of ukraine no. 422/96-vr of october 16, 1996. retrieved from: http://zakon.rada.gov.ua/laws/show/422/96-%d0%b2%d1%80 lysenkov, s. l. (1998). zakon pro konstytutsiynyi sud ukrainy: popul. koment. [on the constitutional court of ukraine: the popular cometary]. zakony ukrainy. k. : lybid, 103 p. (in ukrainian) stryzhak, a. a. (2009). zakon ukrainy ‘pro konstytutsiynyi sud ukrainy’: nauk.-praktych. koment. [the law of ukraine "on the constitutional court of ukraine": sciences-practical]. a. a. stryzhak, ya. v. rybalko, m. v. savchyn (eds.). k.: in yure, 328 p. (in ukrainian) konstytutsiia ukrainy [the constitution of ukraine]. no. 254k / 96-vr of 28 june 1996. retrieved from: http://zakon5.rada.gov.ua/laws/show/254к/96-вр. (in ukrainian) baltic journal of economic studies 44 vol. 4, no. 4, 2018 kyrychenko, yu. ( june 2017). konstytutsiynyi sud ukrainy: problemy zabezpechennia nezalezhnosti: analitychnyi zvit [constitutional court of ukraine: problems of independence: analytical report]. retrieved from: https://rpr.org.ua/wp-content/uploads/2017/07/2017-06-25-dri-bp-ccu_indpn-almost_final-ua .pdf. (in ukrainian) pro konstytutsiynyi sud ukrainy [on the constitutional court of ukraine]. law of ukraine no. 2136-viii of july 13, 2017. retrieved from: http://zakon.rada.gov.ua/laws/show/2136-19. (in ukrainian) shchorichna informatsiyna dopovid konstytutsiynoho sudu ukrainy za 2017 rik, zatverdzhena na zasidanni konstytutsiynoho sudu ukrainy postanovoiu konstytutsiynoho sudu ukrainy [annual information report of the constitutional court of ukraine for 2017, approved at the sitting of the constitutional court of ukraine by the resolution of the constitutional court of ukraine] (no. 17-p/2018 of march 29, 2018). retrieved from: http://www.ccu.gov.ua/docs/2064. (in ukrainian) zvit pro rezultaty finansovoho audytu konstytutsiynoho sudu ukrainy, zatverdzhenyi rishenniam rakhunkovoi palaty [report on the results of the financial audit of the constitutional court of ukraine, approved by the decision of the accounting chamber] (no. 18-2 of september 13). retrieved from: http://www.ac-rada.gov.ua/doccatalog/ document/16753286/zvit_18-2_2017.pdf ?su. (in ukrainian) kryvytskyi, yu. v. 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(in ukrainian) baltic journal of economic studies 140 vol. 4, no. 4, 2018 corresponding author: 1 tavria state agrotechnological university, ukraine. e-mail: przixl136@gmail.com 2tavria state agrotechnological university, ukraine. e-mail: eremenko.denis.mobile@gmail.com 3 bohdan khmelnytskyi melitopol state pedagogical university, ukraine. e-mail: gribovadiana@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-140-144 features of the use of resource potential in peasant farms serhii kalchenko1, denis yeremenko2, diana hrybova3 abstract. the purpose of the article is to analyse the modern features of the development of peasant farms as a component of domestic agricultural production, taking into account their double socio-economic nature. methodology. when writing the article, such methods were used as abstract-logical method – for revealing the theoretical foundations of the functioning of peasant farms, monographic – in the study of the views of scientists on the problems of peasant farms’ development, as well as the study of foreign experience of state policy in this area, analysis and synthesis – for assessing the performance of peasant farms of consumer and product types. results. the current state of development of the national agrarian sector is characterized by the special significance of small forms of agricultural production, which in the domestic legal field, scientific and statistical literature are defined as individual peasant farms, households, rural households, peasant farms, and others. ensuring the development of small forms of agrarian production is an important part of the effective functioning of the domestic agricultural sector as a component of the national economic system. in turn, this leads to the need to analyse the features of the use of available resource potential, as well as the economic performances of representatives of this group of farmers. practical implications. according to the results of the study, the differentiated nature of the functioning of this component of agrarian production is substantiated. a comparative analysis of typical representatives of households of commercial, subsistence and commercial, and subsistence farming is conducted. it is proved that farms of the commodity group show the highest results from the sale of the final product, at the same time, households of the consumer-commodity group more efficiently use land resources. in determining the strategic development directions for this component of agrarian production, a preliminary differentiation of the household is required in accordance with the level of marketability and the nature of the use of available resource potential. key words: agricultural production, peasant farms, efficiency, differentiation. jel classification: q10, q12, q16 1. introduction the current state of development of the national agrarian sector is characterized by the special significance of small forms of agricultural production, which in the domestic legal field, scientific and statistical literature are defined as individual peasant farms, households, rural households, peasant farms, and others. despite its rather amorphous official status, this group of farmers occupies an important place among producers of agricultural products. in particular, their share in the overall structure during 2016 in grain and leguminous crops was more than 20%, sunflower – 15%, vegetables – 85%, fruit and berry crops – more than 80%, in meat and milk production sectors – respectively 36 and 74%. ensuring the development of small forms of agrarian production is an important part of the effective functioning of the domestic agricultural sector as a component of the national economic system. in turn, this leads to the need to analyse the features of the use of available resource potential, as well as the economic performances of representatives of this group of farmers. it should be noted that at the moment there is no single system of methodological approaches to assess the effectiveness of their functioning, which also negatively reflects on the level of reliability of information about the general condition and prospects for the further development of representatives of small forms of agricultural production. the above circumstances, in our opinion, require optimization of theoretical and methodological support in the field of study of specifics of using the resource potential of this segment of domestic baltic journal of economic studies 141 vol. 4, no. 4, 2018 agricultural production, taking into account not only purely economic but also the social aspects of its representatives. the latter is particularly relevant given the fact that the modern peasant farms of ukraine also carry out village-forming functions. 2. world experience in ensuring the effective use of resource potential of peasant farms it should be noted that under present conditions, in the vast majority of developed countries, the functioning of peasant farms is carried out on a commodity basis, which involves the implementation of appropriate state support measures, among which should be noted the promotion of the development of service cooperatives. analysing the peculiarities of foreign experience in the development of farm enterprises, one should note the important role of state institutions that ensure the effective operation of the small agricultural business through the implementation of a system of regulatory and organizational measures to increase their level of competitiveness. it should be noted that, in general, the nature of the cooperation of state institutions with representatives of agrarian entrepreneurship involves not direct targeted assistance to a specific agrarian, but assistance in the formation of appropriate mechanisms to enable farmers to independently solve the problems of optimizing the use of resource potential. farm enterprises in developed countries are not able to fully compete with large agricultural companies; therefore, the very fact of the existence of a favourable state policy in this area is not objectionable to anyone. particularly relevant is the european practice of cooperative construction precisely for countries with the post-planned economy, where ensuring the effective operation of cooperative organizations as full-fledged components of market mechanism that is based on competition, requires appropriate measures by state institutions. a positive example in this aspect can be the policy of stimulating the cooperative movement in the agricultural sector carried out by the ministry of agriculture of the republic of kazakhstan. taking into account the insufficient activity of kazakh farmers in the field of cooperative construction, the government has developed a system of regulatory and organizational measures aimed at changing the relevant negative practices. in particular, the government draft law “on cooperation”, submitted to the parliament of the republic of kazakhstan, establishes the priority of cooperative organizations towards individual farmers in terms of receiving state aid. as we see, the problem of avoiding the monopoly dictate of intermediaries is international for small agricultural producers. the solution to this problem turns out to be universal too, namely, the creation of a system of cooperative organizations that provide their members with the appropriate services. the practical experience of the countries that have joined the eu and successfully develop agrarian production is very valuable. one such example is the state policy of the polish government. to improve the professional level of persons employed in agriculture in poland, state support for educational activities of state and private institutions and organizations is provided. the subject of study includes: studying the minimum requirements for the compliance of the person prior to conducting the agricultural activity, economy and management in agricultural production, the popularization of new directions of agricultural activity in order to seek higher income; the organization of animal welfare and environmental protection. as we see, the issue of increasing the efficiency of using the resource potential of peasant farms in the developed countries of the world involves not only the provision of targeted assistance, stimulation of the development of cooperative construction, but also the implementation of advisory and educational measures aimed at raising the qualification level of members of household. 3. theoretical aspects of the functioning of peasant farms in ukraine it should be noted that one of the features of operation of the peasant farms of ukraine is their heterogeneity, both in terms of industry and socio-economic nature. despite the fact that the main purpose of economic activity of representatives of this segment of agrarian production is to ensure the development of a specific peasant family in accordance with the principles of extended reproduction, each of them solves this problem, taking into account the state of resource potential (first of all, land and labour resources), as well as the stage of functioning of the family itself (creation, flowering or decay), which, in turn, determines the range of goals set and measures for their solution. we propose the following differentiation of peasant farms, based on the level of merchantability of their products as the main indicator of the nature of economic activity. commercial farming. these are unregistered farms or individual enterprises where hired labour is actively used. the activities of agrarians in most cases coincide with the spheres, in which farmers and private traders are employed and the vast majority of their products are in need of further processing or used as a material component of other productions. commercial and subsistence farming. households organize economic activity in such a way that a smaller part of the production is created to meet the food needs of the family, and the vast majority of production is for sale. subsistence farming. unite the least socially active part of the population, who for various reasons suspend baltic journal of economic studies 142 vol. 4, no. 4, 2018 their technological development. the products manufactured, mainly crop plants, are mostly used for self-sufficiency. a small part of the output is for sale, and the sales process has a primitive character. in order to study the features of the functioning of each of the groups of peasant farms, we conducted questionnaires in 516 households operating on the territory of the steppe zone of ukraine. according to the results of the questionnaire, one typical household from each group is selected. subsistence farming. it consists of one person of retirement age, who is able to work but has no ability to perform long-term physically tedious operations. the main sources of income are government payments and proceeds from the sale of agricultural products, mainly fruits and berries. hired labour is not used. commercial and subsistence farming. it consists of four people; two of them are of retirement age. all household members are able-bodied; however, only two can carry out physically exhausting types of work. the revenue part of the budget is formed at the expense of state payments (wages and pensions), as well as proceeds from the sale of agricultural products, in particular, fruits and vegetables. hired labour is not used. commercial farming. it consists of two persons of working age, one of whom is a pensioner, but both are able to perform physically exhausting types of work. the main source of income is the sale of agricultural products, as well as cash receipts in the form of pension payments and wages. since the main direction of agrarian production is the cultivation of cereals, the household involves hired labour with its own agricultural machinery for seasonal field work (ploughing, harvesting, etc.). 4. analysis of activities of peasant farms in ukraine in order to analyse the results of the abovementioned peasant farms, we have applied a methodology developed by the specialists of the nsc “institute of agrarian economics” of the national academy of agrarian sciences of ukraine, which involves taking into account of the labour costs of members of a household in the monetary equivalent (sabluk, meselveseliak, luzan, 2001). based on this methodology, the following indicators were calculated: “conditional salary”, “conditional net income”, and “conditional level of profitability”. a comparative analysis of economic performances of the peasant farms indicates that commercial farming shows the best indicators, where the means of mechanization are actively used, and the cultivated production is intended not for consumption but for further sale. thus, in particular, the value of the conditional net income is 40 thousand uah, which is 6 and 10 times higher than the similar indicators of households of commercial-subsistence farming and subsistence farming (table 1). the conditional level of profitability is 104.9%, exceeding the corresponding value of commercial-subsistence farming and subsistence farming by 40 and 80 points. at the same time, it should be noted that this result is achieved at the expense of the consumer nature of the use of land resources and the application of simplified technological schemes. this conclusion is confirmed by the results of an analysis of the level of efficiency of land and labour resources in peasant farms. households of commercial and subsistence type show the highest value of conditional net income per 1 hectare, which is more than 3 times the same indicator of commercial farming and 1.5 times – of subsistence farming (table 2). in the subsistence economy, there are also high relative indicators of sales revenue, as well as gross income, but the active use of manual labour negatively affects the level of conditional net income and conditional profitability. thus, we see that the economic activity of different groups of peasant farms is based on its own principles of functioning, which determines the peculiarities of the use of the resource potential. in this regard, it should be noted that the key to the effective development of table 1 the efficiency of economic activity in peasant farms № indicators subsistence farming commercial-subsistence farming commercial farming 1 number of members, persons 1 4 2 2 land area, ha 0,04 0,42 10 3 cost of manufactured production, uah 4838,0 27161,7 78300,0 4 revenues from sales, uah 1917,0 16617,0 78300,0 5 labour costs, man-hour 194,0 1126,4 2285,5 6 costs of production, uah 240,0 2760,9 23128,6 7 conditional salary, uah 1280,4 7433,9 15084,3 8 gross income, uah (4-6) 1677,0 13856,1 55171,4 9 conditional net income, uah (8-7) 396,6 6422,2 40087,1 10 conditional level of profitability, % 26,1 63,0 104,9 source: according to the results of the questionnaire baltic journal of economic studies 143 vol. 4, no. 4, 2018 peasant farms, the transformation of their commercial share into family farms, is to ensure the diversification of sectoral trends in this segment of agricultural production, using the positive aspects of economic activity inherent in all groups of the domestic peasantry. 5. conclusions in such a way, ensuring the effective use of the resource potential of peasant farms is an important component of the competitive development of the agrarian sector of the national economy. in developed countries, appropriate measures include material and logistical, organizational, and information support. one of the problems of its introduction is the heterogeneous nature of domestic peasant farms, a high share of households of subsistence and subsistence-commercial types, which activities are carried out in accordance with some other principles. according to the research results, the need to analyse peculiarities of economic activities of peasant farms in ukraine has been proved. based on the data of the anonymous questionnaire, the differentiated character of the functioning of this component of agrarian production is substantiated. using an alternative methodology for evaluating the results of the production and commercial activities of peasant farms, a comparative analysis of typical representatives of households of the commercial, subsistence-commercial, subsistence farming is conducted. it is proved that farms of the commercial group show the highest results from the sale of the final product, at the same time, the households of the subsistence-commercial economy more efficiently use land resources. the importance of creating conditions for accelerating the transition of farms of the subsistence and commercial group to the commercial principles of economic activity is substantiated. the article stresses the need to ensure the systematic development of peasant farms in ukraine as a full-fledged component of domestic agricultural production. the direction of further research should be the development of a strategy for the competitive development of peasant farms in the system of agrarian production, taking into account the specified commodity differentiation and specifics of the use of available resource potential. its main purpose should be to create conditions for increasing the number of peasant farms of the commercial type by increasing the level of efficiency of the use of available resource potential. table 2 the efficiency of the use of land and labour resources in peasant farms* indicators subsistence farming commercial-subsistence farming commercial farming per 1 ha revenues from sales, uah 47925,0 39564,3 7830,0 costs of production, uah 6000,0 6573,6 2312,9 gross income, uah 41925,0 32990,7 5517,1 conditional salary costs, uah 32010,0 17699,8 1508,4 conditional net income, uah 9915,0 15291,0 4008,7 per 1 member of household revenues from sales, uah 1917,0 4144,3 39150,0 costs of production, uah 240,0 690,2 11564,3 gross income, uah 1677,0 3464,0 27585,7 conditional salary costs, uah 1280,4 1858,5 7542,2 conditional net income, uah 396,0 1605,6 20043,6 source: according to the results of the questionnaire references: goryov, v. p., zbarsky, v. k. 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(2017). stan ta perspektyvy rozvytku silskykh terytorii [status and prospects of development of rural territories]. ekonomika apk, 6, 5. (in ukrainian) baltic journal of economic studies 144 vol. 4, no. 4, 2018 chayanov, a. v. (1989). krestyanskoe hozyaystvo: izbrannyie trudyi [peasant farm: selected works]. (in russian) chelyntsev, a. n. (1928). russkoe selskoe khoziaistvo pered revoliutsyei [russian agriculture before the revolution]. (in russian) malik, m. ya., zaiats, v. m. (2013). teoretychni zasady ta napriamy transformatsii osobystykh selianskykh hospodarstv [theoretical principles and directions of transformation of personal peasant farms]. ekonomika apk, 5, 87-95. (in ukrainian) malik, m. ya., shpykuliak, o. g. (2018). tendentsii i perspektyvy rozvytku osobystykh selianskykh hospodarstv [development trends and prospects of individual peasant farms]. ekonomika apk, 1, 11. (in ukrainian) baltic journal of economic studies 85 vol. 4, no. 1, 2018 corresponding author: 1 department economic of enterprise, state higher educational institution “national mining university”. e-mail: hrybinenko.o.m@nmu.one 2 department of economics of enterprises, state higher educational institution “national mining university”. e-mail: shahoian.s.m@nmu.one doi: https://doi.org/10.30525/2256-0742/2018-4-1-85-92 globalization as a challenge to ukrainian exporters of iron ore raw material olha hrybinenko1, svitlana shahoian2 state higher educational institution “national mining university”, ukraine abstract. the purpose of the article  – to identify the main characteristics of iron ore mining and beneficiation enterprises that allow carrying out income-generating export activity in terms of increasing the level of globalization of the country. methodology. information background of the research consists of publications of kof rating of the level of globalization of countries of the world (1991–2016), annual reports of the united states geological survey (1995–2016), statistical data of the state statistics service of ukraine (2012–2016), scientific publications and findings of experts of the national and world markets for iron ore. achieving the purpose of this article provides for the following stages and methods of scientific research: time series analysis  – for evaluating dynamics of globalization index for ukraine, dynamics of global iron ore production and export of iron ore raw material by ukrainian producers; vertical analysis  – for determining the structure of global iron ore production; methods of qualitative analysis (expert estimation)  – for defining characteristics of mining and beneficiation enterprises that allow ensuring competitiveness in the global market; generalization – for determining options of sales of ukrainian iron ore production in international markets in terms of globalization. results. high-level globalization of ukraine makes it significantly dependent on the condition of global markets of key export branches of the national economy. ukraine belongs to the top ten countries with the largest reserves of iron ore and its production in the world; however, an insignificant part of the market doesn’t allow influencing its condition. the surplus of iron ore and deficit of iron-ore pellets in the global market stimulate the interest of ukrainian mining and beneficiation enterprises in projects on improving their existing production facilities. the volatility of the global market for iron ore raw material increases the level of financial and investment risks. practical significance. the established trends in globalization of ukraine and the status of ukrainian producers of iron ore raw material in the global market allow us more thoroughly analyse their competitive advantages in the long view and develop risk reduction programs. alternatives to sales of ukrainian iron ore production of vertically-integrated holding under globalization are made. value/originality. determined advantages of ukrainian exporters of iron ore raw material in the global market that, in terms of high-level globalization of the country, are provided by the corporate synergy of the transnational vertically-integrated exporting company. key words: globalization, iron ore global market, export of iron ore raw material, transnational companies, international mining and smelting holding, export strategy in terms of globalization. jel classification: f15, f23, l61, l72 1. introduction globalization as a basic process and phenomenon that characterises the contemporary development of the world economy causes not only the revival of international trade, it also promotes a deeper level of integration of international economies, their interdependence, creation and implementation of common interests, conflict generation, other worldwide phenomena. global rating and level of development of countries depend on many factors that both government agencies and economic entities should take into account in determining their own strategies in the globalized world. considerable volume of exports of goods and services, leadership in innovation, high level of population wellbeing, and other indicators of countries of g7 prove that economic development of a separate country, increase in revenues of its enterprises and citizen income are possible upon condition of intensive use of opportunities of the global market and world economy. the openness baltic journal of economic studies 86 vol. 4, no. 1, 2018 of the national economy arising from the international integration of the country has both positive and negative sides, which is determined by export assets of the country and required import. as a large by population size, territory, and natural resources european country, ukraine makes considerable political and legislative efforts for the formation of a stable basis of economic activity of national enterprises in leading markets of the world. conclusion of the association agreement with the european union, free trade agreements with canada, georgia, and other countries, simplification of cargo customs clearance procedures, switch to international accounting standards, improvement of state regulatory bodies and other measures form international prospects for ukrainian business, however, contribute to the improvement of its dependence on the world market condition. due to this, national enterprises should consider international trends; this considerably increases the level of complexity of business environment analysis and forecasting, development of business strategies, assessment of investment attractiveness of projects. exports of goods/services to other countries of the world have always been a source of incomes for ukraine. a feature of ukrainian exports was its structure, namely, a high share of production of mining and metals sector (mms) that for a long time formed up to 60% of annual inflow of foreign currency in ukraine. in 2015–2017, the share of mms gradually decreased to 20% at the expense of a dynamic increase in exports of products of the agroindustrial complex (aic). such a change in the structure of export revenues of the country was determined not only by improving competitive advantages of aic enterprises and demand for their production but also deterioration of the economic situation in the world market of mineral resources, for example, iron ore raw material (iorm). as a result, it increased risks to export strategies of ukrainian companies of mining and metals sector, which in some periods led to losses, termination of production development investment programs. the other side of national producers’ access to foreign markets is the increase in the level of the national market openness, in particular, in terms of imports of iron ore raw material. given the above, relevant is the issue of assessing development prospects of iron ore mining and beneficiation enterprises in the conditions of strengthening the processes of globalization. 2. analysis of recent research and publications prospects of iron ore mining and beneficiation enterprises of ukraine in internal and external markets, features of innovative development, and strategic issues in the field of production, marketing, corporate finance are considered in works of many ukrainian and foreign scientists. for example, issues of mining and metals sector of ukraine formed as a result of slowdown of the growth of world market for ferrous metals are studied by s. kulytskyi (kulytskyi, 2015), focusing attention on strategies of owners of iron ore enterprises regarding their provision of financial sustainability and investment in projects that will ensure reduction of production expenses. assessing export orientation of ukrainian iron ore enterprises, i. savchuk (savchuk, 2017) stresses that it becomes impossible to increase steel production and rolling necessary for the needs of the military-industrial complex of ukraine. features of the methodology for evaluating the level of countries’ globalization, as well as dynamics of the globalization of ukraine and its nearest neighbour countries, are studied by n.p. stuchynska (stuchynska, 2017). t.v. zlunitsyna (zlunitsyna, 2016) notes the negative influence of the extensive use of powerful iron ore reserves in ukraine on its specialization in the international division of labour and concludes about state strategy on activity in the internal market for iron ore production. according to m.v. kyryku (kyryku, 2016), international integration of ukraine should be accompanied by system government measures on promoting innovation and investment security of mms enterprises, in particular, management of real investment volumes and r&d financing processes, the attraction of foreign direct investment in the industry. studying the influence of marketing concepts on the formation of development strategies of iron ore enterprises in terms of globalization, v.m. tkach (tkach, 2015) notes a significant dependence of production development projects on characteristics of a mined deposit, impossibility of rapid manoeuvring the range of marketable products, long-term depreciation of fixed assets value, etc. in the context of obtaining competitive advantages, l. horoshkova (horoshkova, 2014) proves the expediency of vertical integration of mms enterprises given the positive forecasts of an increase of prices for iorm, coal, electricity tariffs. lowering of transaction costs and reduction of indirect taxation of intermediate products became the basis for these conclusions, which is important in view of high resource and energy intensity of steel production and risks of decreasing competitive advantages of the national metallurgy in the global market in terms of approaching raw material and energy prices to the world level and strengthening competitive pressure on the part of newly-introduced facilities. d.a. dovhan (dovhan, 2016) stresses on the formation of a new, cluster structure of the national mining and metals sector based on innovation improvement of their production, the relevance of expansion of national product consumption, consolidation processes in the industry. in the issue of ukrainian export promotion, it is important to achieve the highest quality of export, which is evaluated by indicators of its concentration and diversification. t.o. vlasiuk (vlasiuk, 2015) proves a considerable gap between ukrainian export indicators and those of developed countries, which indicates a focused specialization of the country. baltic journal of economic studies 87 vol. 4, no. 1, 2018 summing up the directions of scientific research, we note that the vast majority of authors are of the opinion about the presence of interest of different subjects in solving strategic issues of international integration of ukraine into the world economy and the need to coordinate concepts of national, branch, and microeconomic development with the consideration of capacity of iron ore mining industry of ukraine. thus, issues of economic security of mining and beneficiation enterprises taking into account the orientation of state export strategy towards more knowledge-intensive industries require constant attention. in particular, insufficient attention is paid to the identification of characteristics of mining and beneficiation enterprises that allow them to maintain profitability in terms of volatility of the world market for iron ore material. 3. the purpose and methodology of research the purpose of the article  – to identify the main characteristics of iron ore mining and beneficiation enterprises that allow carrying out income-generating export activity in terms of increasing the level of globalization of the country. achieving the purpose of this research provides for the following stages: assessment of the level of globalization of ukraine; appraisal of iron ore reserves and trends in the world market for iron ore raw material; evaluation of dynamics of ukrainian production and export of iron ore raw material; identification of the main characteristics of ukrainian iron ore mining and beneficiation enterprises that determine prospects for their activity in terms of globalization. for solving the tasks of the study, the following methods of scientific research are used: time series analysis – for evaluating dynamics of globalization index for ukraine, dynamics of global iron ore production and export of iron ore raw material by ukrainian producers; vertical analysis – for determining the structure of global iron ore production; methods of qualitative analysis (expert estimation)  – for defining characteristics of mining and beneficiation enterprises that allow ensuring competitiveness in the global market; generalization  – for determining options of sales of ukrainian iron ore production in international markets in terms of globalization. 4. the level of globalization of ukraine influence of global markets on the national economy of a separate country is determined by volume, structure, geography, level of concentration of its export, and many other indicators of foreign economic activity of subjects of the national business. the level, conditions, ways of international integration of the country within internationalization, transnationalization, and globalization processes occupy an important place. evaluation of globalization level for 207 countries of the world is provided by kof globalization index, according to which ukraine ranks among top 100 of the most globalized countries. in the period of 1991–2016, the mentioned globalization index of ukraine increased in 2.4 times (from 29.97 to 70.71), and in 2017  – somewhat decreased to 70.24 (fig. 1). as a comparison, the netherlands has the highest globalization index  – 97.29, and the channel islands are characterized with the lowest one  – 1.0 (kof swiss economic institute, 2017). the level of globalization of a country is calculated by indicators of economic, social, and political spheres, each of which can be a catalyser of a deeper international integration of this country. the most developed key factor of globalization in ukraine is its political sphere, which is strengthened by the orientation of ukraine’s strategy towards european integration, encouragement of export initiatives of enterprises, etc. the most dynamic key factor of the globalization of ukraine is its economic sphere, which index for the period of 2001–2016 increased from 49.73 to 68.89 (+38.5%). economic globalization is evaluated by commodity flow, services of capital, as well as corresponding 49,73 68,89 61,06 86,27 70,71 0 10 20 30 40 50 60 70 80 90 100 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 economic globalization social globalization political globalization overall globalization index fig. 1. the level of globalization of ukraine according to kof globalization index compiled by the author according to data (kof swiss economic institute, 2017, long) baltic journal of economic studies 88 vol. 4, no. 1, 2018 restrictions, in particular, customs tariffs, taxes, hidden barriers, control over the capital movements. australia, brazil, and china, as the largest countries that produce iorm, have overall globalization indexes of 90.05, 61.4, and 62.02 respectively, which speaks about different state strategies on integration to the world economy. for example, political globalization of china is evaluated by the index of 84.26, and economic and social globalization  – 52.84 and 54.23 respectively, thus, the supply of products to the market of china will require meeting specific requirements, rules, adaptation to the culture of business partners. in this context, an increase of social globalization of ukraine, which assesses qualitative and quantitative characteristics of global communications, the convergence of national cultures, becomes relevant. thus, due to globalization, complex direct and mediated relations regarding movements of capital, people, technology, commodities, ideas, etc. are created. in the aspect of results of activity of iron ore mining and beneficiation enterprises, these aspects of globalization determine requirements to the quality of production, conditions of supply, possibilities of entrance to international markets and competition with iorm producers from other countries of the world, opportunities to attract foreign capital, control activities of national producers through companies with foreign registration, optimize product supply logistics, etc. 5. dynamics and structure of global iron ore production scales of production activity of national companies, quality of mineral reserves in the country, cost of other factors of production, prices of transportation companies, state customs policy, and other factors make an influence on the attractiveness of iorm product supply in the world market and in the market of a separate importing country. iron ore production (concentrate, pellets, agglomerate) is conducted by many countries of the world, and ukraine, having the fourth largest reserve of these mineral resources, is ranked among the top 10 of the largest countries that produce iorm. the volume of global iron ore production is characterized by a general increasing trend since 2001, however, in 2015–2016, a decrease in the mentioned volumes is observed (fig. 2). a general cause for this is a fluctuation of global gdp, 1020 2330 2280 2230y = 74,892x + 650,92 r² = 0,9023 0 500 1000 1500 2000 2500 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 fig. 2. iron ore statistics: world production, million metric tons compiled by the author according to data (mining engineering , 2017; usgs mineral resources program, 2016; usgs mineral resources program, 2017) fig. 3. structure of global iron ore production in 2016, million metric tons; % compiled by the author according to data of the united states geological survey (usgs mineral resources program, 2017) australia; 825; 37,0% brazil; 391; 17,5% china; 353; 15,8% india; 160; 7,2% other countries; 120; 5,4% russia; 100; 4,5%south africa; 60; 2,7% ukraine; 58; 2,6%canada; 48; 2,2% united states; 41; 1,8% iran; 26; 1,2% sweden; 25; 1,1% kazakhstan; 21; 0,9% baltic journal of economic studies 89 vol. 4, no. 1, 2018 a specific cause  – deterioration in demand for iorm. for example, slowdown in gdp growth of prc (the biggest world importer of iorm), its state strategy on the development of own iron ore deposits force exporters of iorm to diversify international product sales markets and to cut down prices (2015, 40 $/mt, cfr china contract, 62% fe (unctad, 2017). in contrast, plans of government regarding concessional lending for construction and business encouragement for ensuring higher gdp growth rates contribute to price raising (2016, 84 $/mt, cfr china contract, 62% fe (unctad, 2017). in 2016, china imported over 1000 million tons of iron ore at the cost of 93 billion usd, where 640 million tons – ore from australia, and 215 million tons – ore from brazil. the share of ukraine in global iron ore production in comparison with leaders is low (australia, brazil, prc) and undergoes fluctuations, for example, it was 2.0% in 2014, in 2015 – 2.9%, in 2016 – 2.6% (fig. 3). the presented state of ukrainian producers of iorm doesn’t allow influencing the market, which determines their potential strategic actions: to reduce production cost, to curtail export, to get state support, to search for other foreign markets, etc. 6. export of ukrainian iorm in terms of globalization export of iron ore raw material (iorm) by ukrainian producers in the period of 2012–2014 increased annually in natural units, but the decline in demand and lower prices in the world market of iorm have determined the downward trend in export revenues (fig. 4). the most successful for ukrainian exporters of iorm was 2013 (3.74 billion usd), and the worst result, almost twice as low, was observed in 2016 (1.83 billion usd). in 2013–2014, an increase in export volumes provided lower cash inflows. in 2016, export of iron ore raw material was 5% of the export value of ukraine as a whole. the constancy of the downward trend in export revenues is confirmed by high (significant) determination coefficient r2 = 0.67. consequently, the maintenance of export revenues at an attractive level for enterprises is ensured by an increase in the volume of export of products in kind. it updates for mining and beneficiation enterprises the issue of preparing new fields for development, but the national legislative regulation of land relations significantly complicates the process of siting of new land plots. according to expert estimates of specialists of the analytical department of the state enterprise “ukrainian industrial external expertize,” investment company “investment capital ukraine” (icu), the surplus of iron ore in the world market is 20-50 million tons (yvanova, 2016). according to ingrid mcmahon, manager of the investor and communications department, ferrexpo, which controls the activity of iron ore mcc in the poltava region, there is a shortage of iron ore pellets. the increase in the demand of metallurgical enterprises for pellets is compounded by the technological catastrophe and the downfall of the brazilian manufacturer samarco, an increase in the environmental requirements of the chinese government to its own producers of iron ore agglomerate. a significant aspect of developing a commodity strategy is the difference in the price of pellets from the price of lump ore, which increases the attractiveness of investment in projects for improving the enriching cycle (interfax-ukraine, 06.07.2017 12:25). it should be noted that iron ore, which does not require enrichment, is extracted by zaporizhzhia iron ore company in ukraine. other mining and beneficiation enterprises in poltava and dnipropetrovsk regions of ukraine enrich the extracted ore as a result of the low content of iron in the ore, their commodity products are iron ore concentrate and agglomerate, pellets. the volume 35137,6 37969,2 40894,3 45707,6 39203,33131,7 3738,9 3315,4 2092,0 1827,2y = -425,59x + 4097,8 r² = 0,6702 0 500 1000 1500 2000 2500 3000 3500 4000 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2012 2013 2014 2015 2016 e xp or t, m ill io n u sd e xp or t, th ou sa nd to ns export, thousand tons export, million usd fig. 4. dynamics of export of iron ore raw material (iorm) by ukrainian enterprises in 2012–2016 compiled by the author according to data of the state statistics service of ukraine baltic journal of economic studies 90 vol. 4, no. 1, 2018 of investments that can direct enterprises to the development of production capacity will depend, first of all, on the ability to accumulate the relevant financial resource, the forecast of the world market, prospects of the domestic ukrainian market as an alternative to international markets. it is the domestic market that allowed metinvest holding (metinvest holding, 2017), which controls the activities of three kryvyi rih iron ore plants, to secure the sale of their products due to the presence of associated metallurgical plants in the holding’s structure. consequently, in addition to gaining a certain competitive position in the world market, national producers of iron ore raw materials should maintain a status quo in the domestic market. staying in the mining and processing enterprises as a part of a vertically-integrated holding can be understood as a factor in the economic security of the plant (shahoian & hrybinenko, 2017). this is confirmed not only by the supply of the plant’s production for metallurgical enterprises of the holding in ukraine but also by facilitating access to the markets of north america, europe, south-east asia. in particular, there are used professional services of the freight forwarding company associated with the holding, long-term agreements with the stevedoring company, which carries out ore handling in ports. together with the ukrmetaluhprom association of enterprises, the problems of non-compliance by pjsc “ukrzaliznytsia” with contracts for the transportation of iron ore raw materials to european countries are solved (censor.net, 12.12.17 14:41). according to o. kalenkov, the chairman of ukrmetalurhrom, in november 2017, the average level of provision of mms enterprises by open wagons was 29%, resulting in over 300 thousand tons of iorm, which led to the creation of the surplus stock of commodity products, lack of export earnings. consolidation of the assets of the mining and smelting metals sector of ukraine through the formation of vertically integrated structures for gaining competitive advantages should be considered in the context of strategies for increasing the profitability of products that are closest to the final consumption. it is a metallurgical product in the mining and smelting holding and, therefore, the activity of extractive enterprises can depend substantially on the prospects of metallurgical enterprises in international markets and the domestic market (fig. 5). for example, the director of sales of metinvest d. nikolaienko noted that the loss of control over the metallurgical enterprises of the holding (alchevsk iron & steel work, yenakiieve iron and steel works, donetsksteel) in the occupied eastern territories of ukraine led to directing iron ore raw materials to the prc market (interfax-ukraine, 24.04.2017 15:34). consequently, the optimization of processes and reduction of mining and concentrating enterprises’ costs, originating due to corporate synergy (shahoian, solodovnyk & chernenko, 2016), has an inverted negative effect. the development of ukrainian iron ore plants is appropriate to determine, taking into account trends in specialized and related world markets (metal), but also to assess the markets for metal products and machinery, trends in the national energy market, in particular, the coal industry (pashkevych, 2011). this choice correlates with the state export strategy of ukraine (government portal, 27.12.2017 12:48), in which the emphasis is placed on strengthening the support for mechanical engineering enterprises, which will increase iorm metal metal goods ukrainian market engineering products synergy of vertical integration of mms raw materials markets markets of products with greater added value iorm imports metal imports imports of metal goods international markets iorm exports 2 1 3 global environment fig. 5. alternatives of sales of ukrainian iron ore products of vertically-integrated holding in terms of globalization: 1 – exports of iorm by mining and concentrating enterprises; 2 – sales of iorm to metallurgical enterprises of the holding in the domestic market; 3 – exports of products of metallurgical enterprises of the holding baltic journal of economic studies 91 vol. 4, no. 1, 2018 the demand for the products of the mining and metals sector. realization of this approach is possible in the conditions of stimulating the domestic demand for metal and metal products for construction, development of machines and mechanisms, which, in the conditions of innovation and competitiveness of the latter, will allow the suppliers of raw materials  – enterprises of mms  – to obtain significant positive economic results in the conditions of globalization. 7. conclusions high-level globalization of ukraine makes it significantly dependent on the condition of global markets of key export branches of the national economy. ukraine belongs to the top ten countries with the largest reserves of iron ore and its production in the world; however, an insignificant part of the market doesn’t allow influencing its condition. the surplus of iron ore and deficit of iron-ore pellets in the global market stimulate the interest of ukrainian mining and beneficiation 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(2016) perspektyvy vitchyznianykh vydobuvnykh pidpryiemstv na mizhnarodnykh rynkakh zalizorudnoi produktsii [prospects of domestic extractive enterprises in international markets for iron ore products] globalization challenges in xxi century: socio-economic strategy of ukraine’s revival (ukraine, kyiv, may 24, 2016) (eic a.a. mazaraki), kyiv: kyiv national university of trade and economics, pp. 67-69. available at: https://knteu.kiev.ua/file/mtc=/4acce37697b365e48a541750d9eb47d1.pdf (accessed 06 may 2017). baltic journal of economic studies 189 vol. 4, no. 3, 2018 corresponding author: 1 department of finance and banking, poltava national technical yuri kondratyuk university. e-mail: rector@pntu.edu.ua 2 department of finance and banking, poltava national technical yuri kondratyuk university. e-mail: olia.bondarevska@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-189-197 principles of assessing the economic security of the region volodymyr onyshchenko1, olha bondarevska2 poltava national technical yuri kondratyuk university, ukraine abstract. the subject of the study is the theoretical and methodological aspects of assessing the economic security of the region. the purpose of the article is to develop a methodology for assessing the economic security of the region on the basis of the analysed basic methods and techniques. research methodology. the theoretical and methodological basis of the study is the fundamental provisions of economic theory, modern concepts of economic security on the meso-level, scientific works of ukrainian and foreign scholars, and state laws and regulations on the assessment of economic security. in the course of the research, general scientific and special methods of research were applied, namely: theoretical generalization, scientific abstraction, and system analysis – during the generalization of theoretical foundations of the subject-object sphere of research, comparison study – during the establishment of causal relationships, data classification and systematization, comparative analysis – when identifying the positive and negative sides of the investigated methods of assessing economic security, abstract-logical analysis – in the process of drawing conclusions. the research results show that the use of methods of monitoring and analysis of the key economic indicators, on the basis of which the integral indicators of components of regional economic security and the overall integral indicator are calculated, allows carrying out a comprehensive analysis of the current state of economic security, determining its positive and negative tendencies in general and by separate functional constituents. the methodology for assessing the economic security of the region is proposed, which allows fully taking into account the impact of threats on the economic security of the region and evaluating it in a complex way with the use of a system of indicators. the threshold, critical, and satisfactory value for an integrated assessment of the regional economic security and individual components are calculated. intervals of satisfactory, unsatisfactory, critical, and absolutely unsatisfactory state of economic security of the region are determined. practical implementation. the obtained assessments of the regional economic security are useful for making decisions in order to avoid destructive processes of socio-economic development of regions. further research directions are related to the calculation and analysis of the state of economic security of regions of ukraine, determination of the degree of influence of threats on the regional economic security, development of a model for ensuring regional development security. key words: regional economic security, indicator, indicator analysis, functional analysis, modified method, threshold value, weight coefficient, integral index. jel classification: c18, c02, o18, r10, r13 1. introduction at the current stage of development of ukraine, the issues of regional security, development and improvement of interregional relations are of key importance. the study of the socio-economic situation in the country shows that the causes of threats to economic security are of a regional nature. the growth of disproportions in the socio-economic development of regions contributes to the emergence and further strengthening of negative processes in the economic complex that affect the stable functioning of the economy and the sovereignty of the state. the deepening of differences in the levels of competitiveness of ukrainian regions as a result of the influence of destabilizing factors creates a danger both for the economy of the state as a whole and its individual regions. therefore, there is a need to develop scientific and methodological provisions and tools for assessing the economic security of territorial systems. baltic journal of economic studies 190 vol. 4, no. 3, 2018 the main purpose of the article is to develop a methodology for assessing the economic security of the region on the basis of the analysed basic methods and techniques. the theoretical and methodological basis of the study is the fundamental provisions of economic theory, modern concepts of economic security on the meso-level, scientific works of ukrainian and foreign scholars, and state laws and regulations on the assessment of economic security. in the course of the research, general scientific and special methods of research were applied, namely: theoretical generalization, scientific abstraction, and system analysis – during the generalization of theoretical foundations of the subject-object sphere of research, comparison study – during the establishment of causal relationships, data classification and systematization, comparative analysis – when identifying the positive and negative sides of the investigated methods of assessing economic security, abstract-logical analysis – in the process of drawing conclusions. 2. analysis of recent research and publications despite the urgency of issues of assessing the economic security of the region, research in this area cannot be considered full, systematic, and complete. and, first of all, this concerns the choice of the method of evaluation, since it is precisely it that forms the basis of the methodology for assessing the economic security of the region with a combination of interrelated methods and techniques of conducting valuation operations. this assessment methodology largely determines the quality of assessments of the regional economic security. in developing methodological support for assessing the economic security of the region, such methods as indicator (sukhorukov, 2009; humeniuk, 2014; babets, 2013), functional (sukhorukov & kharazishvili, 2012), methods of relative tempo indicators (sukhorukov & kharazishvili, 2012), economic tools (sytnyk & oluiko & vavrynchuk & lytvyn, 2007), expert evaluations (shlemko & binjko, 1997), optimization (rozen & inshekov & mylnichenko, 2011), scalarization (mikhalevich, 1989) were used. each of these methods has advantages and disadvantages, which is why they are often used together. currently, in ukraine there is no uniform methodology for assessing and diagnosing the state of economic security of the region and, accordingly, a generally accepted list of key indicators, their thresholds, algorithm for calculating the level of economic security in the region, which causes a high interest of scientists to study the economic security at the meso-level. 3. results 3.1. systematization of the basic methods for assessing the economic security of the region in the economic security science of the meso-level, a number of methods for assessing the economic security in the region are developed, analysis and comparison of which indicate their significant differences. the indicator method and the method of functional analysis are the most common in assessing the economic security of the region. indicator method is to identify positive trends in the indicators of economic security of regions. the complexity of the assessment is ensured by the use of a system of indicators (quantitative parameters), in which each of the indicators characterizes a certain aspect of the economic security in the region. indicator method allows comprehensively assessing the economic security of the region, because if not all (depending on the system of indicators), then its main aspects are evaluated. the main methodological difficulties in applying the indicator approach are to determine the type, composition of indicators, their threshold values, depending on the type, level, and initial state of this system. the functional analysis involves assessing the regional economic security in terms of its components. economic, financial, investment-innovation, demographic, social, etc. constituents are most often used in assessing the economic security of the region. the main advantages of the functional approach include complex nature since the main processes that affect the level of economic security in the region are studied. when ordering aggregate units in functional analysis, it is necessary to aggregate all the features of a set into one integral estimate. aggregation of features is based on the provisions of the theory of “additive value”, according to which the value of the union equals the sum of the values of its components. in addition, a method for monitoring and analysing the dynamics of the main indicators of economic security in the region has a widespread use in security science since it provides an opportunity to trace the change in time of the main indicators, to compare the characteristics of individual units of groups and aggregates in general, to study the structure of phenomena and laws of their development. however, these methods also have disadvantages associated with the determination of weighting coefficients and the relative change in the importance of the latest in time. the use of methods of expert assessments (“brainstorming”, delphi, pattern, synectic method, and analogy method) allows calculating the integral index of reliability of the region or risk assessment of the region with the application of logical rules of making decisions, which experts form on the basis of their own knowledge. however, expert methods have baltic journal of economic studies 191 vol. 4, no. 3, 2018 their own disadvantages: difficulties with the search for competent experts, the complexity of the procedure for obtaining reliable information, the lack of guarantees of the reliability of the results in relation to the possible interest of experts in the evaluation results. methods of mathematical apparatus, including multivariate statistical analysis (correlation, regression, cointegration, component, factor, cluster, frequency, harmonic, spectral and cross-spectral analysis, time series analysis) allow calculating the dynamics of indicators of economic security in the region, identifying laws of past development, and evaluating the possibility of their transfer to the future. among these methods, the cluster analysis method to group regions or countries by the level of threats to economic security is most often used (ponomarenko, klebanova, chernova, 2004). the methodology for determining the level of economic security in ukraine is the basis for a modified methodology for assessing the economic security of regions. it differs from the methodology used at the macro-level, a list of indicators, which contains indicators of the region’s development by life spheres (investment, foreign economic, scientific and technological, production, financial, energy, ecological, social). however, the use of the methodological recommendations for calculating the level of economic security of the state at the regional level may prove to be very costly both in terms of costs and time due to a large number of indicators that will slow down the efficiency of the determination of economic security. the analysis conducted shows that in assessing the economic security of the region, it can find a wide range of methods and approaches that have advantages and disadvantages, which does not allow choosing one of them. a number of methods have theoretical-cognitive value and have not received a practical application, and some of them served as the basis for available methodological developments. 3.2. analysis of methods for assessing the economic security of the region currently, in ukraine there is no uniform methodology for assessing and diagnosing the state of economic security in the region and, accordingly, a generally accepted list of key indicators, their thresholds, algorithm for calculating the level of economic security in the region, which causes a high interest of scientists to study the economic security at the meso-level. thus, v. muntiian proposed a methodology for assessing the economic security in the region, which is carried out by different spheres of the economy, envisages the calculation of integral indicators and their threshold values for each of them, and is based on methods of expert assessments (muntiian, 1999). the latter, actually, holds back the application of the methodology over the complexity of obtaining expert assessments. the methodology of a. stepanenko and m. herasymov involves the definition of an integral indicator of the economic security of the region based on the arithmetic mean values of standardized indicators that are stimulants or destimulants. calculation of indicators of economic security of the region by this methodology is carried out in stages: standardization of indicators characterizing economic security; definition of the integrated assessment of the region; determination of coefficients of the economic security of the region (stepanenko & herasymov, 2002). the methodology of estimation, analysis, and forecasting of economic security of the region by t.  klebanova and n. chernova is based on methods of multivariate statistical analysis, econometric modelling, and adaptive filtration (klebanova, chernova, 2003). as the normative thresholds, the values of points of the upper (the best value of the indicator from the whole number of regions of ukraine) and the lower (the worst value of a certain indicator from the whole number of regions of ukraine) poles are used, which respectively indicate the state of the region by the indicator (safe or dangerous). in the multi-authored monograph, edited by h. kozachenko, the socio-economic component of the region’s economic security is distinguished, which should be evaluated according to a number of criteria: the economy’s ability to sustainably grow, the stability of the financial system of the region, the support of the region’s scientific potential, the dependence of the regional economy on imports of the most important types of products, the relationship of the region with the countries of near and far abroad, the level of poverty and unemployment in the region, the quality of life of the population, demographic component (kozachenko, ponomarev, lyashenko, 2003). z. herasymchuk and n. vavdiiuk developed a methodology for the diagnosis of regional economic security that allows grouping regions according to the state of safety, risk, threat or danger depending on the intensity of the influence of negative factors by several features: firmness, stability and development ability, preconditions for autopoiesis, foreign economic openness, protection from potential conflicts (herasymchuk, vavdiiuk, 2006). when selecting the threshold values of the economic security criteria of the region, the peculiarities of the region’s development and the unified threshold values of economic security that have proved their usefulness in the countries of western europe are taken into account. in the estimation of economic security, a. sukhorukov used optimization models, methods of indicative, discriminant analysis, expert assessments, and scalarisation. he highlighted two theoretically meaningful ways to assess economic security and its components at the regional level: identifying the probability of occurrence of certain threats and assessing the possibilities of their prevention, baltic journal of economic studies 192 vol. 4, no. 3, 2018 elimination or mitigation, determining the degree of influence of some threats on the economic security of the region based on the k-means iterative method. the aggregate level of economic security in the region is determined using the method of adaptive kalman-bucy filter; calculation of integral indexes – definition of the state of economic security of the region based on the analysis of the system of indicators, which allow holistically and adequately perceiving the nature of socio-economic processes due to their compliance with regional interests and standards of economic security (sukhorukov, kharazishvili, 2012). for each indicator, the threshold, optimal lower and upper values are highlighted using: modelling (development of macroeconomic models that adequately reflect the influence of internal and external factors in the current period); analogue approach in choosing relevant indicators in the analogue countries; legislative approach, which provides for the establishment of thresholds for indicators in the legislative framework; implementation of experience of other countries; expert evaluations and calculations by experts of international organizations. a. humeniuk developed a methodology for determining the integral indices of the components of economic security of regions based on the results of the vertical (dynamics of the level of security according to the selected components of the economic security of the region) and horizontal (changes in the separate components of regional security) analysis. in the system of economic security of the region, a. humeniuk highlighted the investment, innovation, financial, foreign trade, food, social, and demographic components. comprehensive diagnostics of economic security by a. humeniuk provides for the assessment of values of the indices in the security corridor. the state of economic security of the region is normal, in which the value of the index of the corresponding type of security is between the lower and upper limits. if the index value is between the upper norm and the upper limit or between the lower norm and the lower limit, then this corresponds to the pre-crisis state of economic security. if the value of the integral index goes beyond the lower or upper limit, this indicates a crisis security condition. the lower and upper limits are defined as the arithmetic mean of underdeveloped and highly developed countries of central and eastern europe. as the value of the lower norm, the average value of the corresponding indicator of underdeveloped countries is taken, and for the upper one – the average indicator of developed countries of eastern europe (humeniuk, 2014). in order to assess the economic security of the region, i. babets combined methodological approaches to the assessment of integral indicators of sustainable development with the methodology for calculating the level of economic security in the region. this approach is based on the interconnection of sustainable development and economic security as socio-economic categories, their interconditionality and interdependence. on the basis of this, i. babets developed a modified methodology for assessing the economic security of the region, which: is based on provisions of the methodology for calculating the level of economic security of the state; contains a list of indices, indicators of the region’s development in terms of life spheres (investment, foreign economic, scientific and technological, production, financial, energy, ecological, social). in addition, it is proposed to be used for replacing absolute indicators with relative indicators in the assessment of economic security in the region and to take into account the possibility of identifying individual indicators based on the existing statistical base in ukrainian regions. in the normalization of values of actual indicators, the maximum (for the indicator-stimulator of security) or the minimum (for the indicator-destimulator of security) value of the indicator selected by regions of ukraine for the period under study is used. the integral indicator for each component of the economic security of the region is calculated according to a method similar to the calculations at the state level (the sum of products of normalized values of indicators on their weighting coefficients). weighting coefficients are determined using the model of the main components of statistica in the factor analysis module, which allowed minimizing the subjectivity of the assessment of economic security (babets, 2013). o. preobrazhenska considered the regional component of economic security in its relation with the concept of sustainable development by such basic components of economic security of regions as investment and financial, and the index of sustainable development of the region calculated in the space of three dimensions (economic, environmental, and social) (preobrazhenska, 2014). the basis of the methodology for assessing the regional economic security by a. tatarkin, o. romanova, a. kuklin, and v. yakovlev are methods of comparative analysis. the advantages of their methodology are: completeness of coverage of spheres of economic development of the region (the system of indicators of economic security in the region contains indicators of production, scientific and technical potential, food security, employment, living standards, budget and financial security, demographic processes, law and order, and environmental protection); development of indices for the region’s economic security to be considered normal, pre-crisis, and crisis; ranking of regions according to the type of economic security by providing a score assessment of crisis situations using an expert method (blagodatskikh & bogatyrev & bushuev i dr., 1998). baltic journal of economic studies 193 vol. 4, no. 3, 2018 a. illarionov developed a methodology for assessing the rate of economic growth of the region by the key macroeconomic indicators and their dynamics (illarionov, 1998). the most important factor determining the economic and social characteristics of the region is its economic development level determined by the size of the gross regional product per capita. therefore, various criteria of economic security are reduced to the factors that ensure the rate of economic growth per capita. when assessing economic security of the region, some authors (k. efremov, ye. georgadze, m. kremlev, v. fedorov, m. sergeev, a. fedoryshcheva, o. ralchuk, v. senchagov, t. agapova) consider only the thresholds of economic security indicators, refusing to calculate the integral index of economic security in the region, which to some extent makes it impossible to assess its overall condition (efremov, georgadze, 2002; kremlev, fedorov, sergeev, 2001; fedoryshcheva, ralchuk, 2002; senchagov, 2002; agapova, 2001). v. senchagov drew attention to the need to select indicators of economic security of the region, taking into account the specifics of the development of the regional system, by distinguishing two groups of indicators: indicators-criteria of economic security and additional analytical-information indicators (senchagov, 2005). e. oleynikov used the classification of indicators of economic security, through which it is possible to analyse threats to economic security at the macroand mesolevels and in certain sectors of the economy. for economic security, quantitative production indicator indicators were assigned, and partial macro-level indicators adapted to the region were used as social indicators (oleynikov, filin, vidyapin i dr., 2005). however, in this case, the identification of threats to the economic security of the region is complicated by the lack of division of indicators by the main components of economic security. the analysis of the methodical basis for assessing the economic security of the region revealed the lack of unity of views on the components of economic security and the list of indicators. a characteristic feature of the analysed methods for assessing the economic security of the region is the tendency to evaluate its individual components, rather than obtaining a comprehensive assessment of the region’s economic security. 3.3. the proposed methodology for assessing the economic security of the region in ukraine, there are still no legislative guidelines approved for assessing the economic security of the region, the generally accepted list of key indicators, their thresholds, and the algorithm for calculating the integral index of regional economic security. therefore, it is expedient to present the results of the conducted research on the economic security of the region, which to some extent eliminated the noted disadvantages inherent in the analysed developments in the methodological provision for assessing the economic security of the region. for the systematic assessment of the regional economic security, a combination of indicator and functional analysis is most appropriate. the assessment of the economic security of the region using the indicator approach is based on the definition of the system of indicators of economic security of the region and their limit values. the representativeness of the system of indicators, which describes the region’s economic security, directly affects the reliability and objectivity of its assessments. indicators of economic security of the region are statistical indicators of the region’s economy, which most fully characterize its phenomena and trends, describe the current state of the economy of the region in comparison with the previous stages. they consist mainly of normative characteristics and indicators that describe threats to the regional security, are guidelines that determine the boundary of negative processes, signalling the weakening of economic security. their values warn about possible threats and dangers (kosevcov, zinjko, 1996). the procedure for determining the integrated assessment of the region’s economic security is presented in figure 1. for an integrated assessment of the level of economic security in the region, we select indicators that fully and comprehensively reflect the level of economic security. the set of indicators for assessing the economic security of the region is marked as x. it is divided into subset xi according to the content of indicators. then the set x is a union x x i n n= =1  , where the subsets of xi do not intersect in pairs. we denote the number of indicators in the subset xi as mi and the j-th indicator in the subset xi as xij. we have equality x x m j n iij i= { } =       =1 1 . the following indicators are selected for the study. 1) subset x1 – financial security indicators: x11 – local budget revenues (in % to grp), x12 – efficiency of using revenues, x13 – the budget expenditures index (taking into account transfers) per capita, x14 – the ratio of the sum of received transfers to the sum of budget revenues transferred to the state budget, x15 – the ratio of tax and non-tax revenues to the local budget, %, x16 – the share of tax revenues in the total revenues of the local budget, %, x17 – the share of official transfers in the total revenues of the local budget, %, x18 – transfers from the state budget (in % to grp). 2) subset x2 – social security indicators: x21 – the ratio of average wages and subsistence level, times, x22 – the ratio of the average wage in the region and the average wage in the country, baltic journal of economic studies 194 vol. 4, no. 3, 2018 x23 – the unemployment rate of the able-bodied population (according to the ilo methodology), %, x24 – the level of long-term unemployment in an ablebodied age (the ratio of the number of unemployed over six months to the total number of unemployed), %, x25 – the share of the population living below the poverty line, or the share of the population with incomes below the subsistence level, %, x26 – the share of utility costs in the total household consumption expenditure, %, x27 – consolidated budget expenditures on healthcare, % to grp, x28 – consolidated budget expenditures on education, % to grp. 3) subset x3 – mesoeconomic security indicators: x31 – gross regional product index, x32 – index of grp per one economically active citizen, x33 – the share of the economically active population in the region’s population, %, x34 – industrial production index, x35 – agricultural production index, x36 – retail trade index. 4) subset x4 – investment-innovative security indicators: x41 – capital investments (in % to grp), x42 – foreign direct investments (in % to grp), x43 – the volume of foreign direct investments per one economically active citizen, (at the end of the year), usd, x44 – the share of industrial enterprises that introduced innovations in the total number of industrial enterprises, %, x45 – the share of innovative products in sold industrial products, %. 5) subset x5 – foreign economic security indicators: x51 – export-import coverage ratio, times, x52 – export dependence ratio (in % to grp), x53 – import dependence ratio (in % to grp), x54 – the share of enterprises engaged in fea, %. 6) subset x6 – demographic security indicators: x61 – depopulation rate, %, x62 – total fertility rate, per mil, x63 – total mortality rate, per mil, x64 – population migration rate, %. for the study, the period of duration of t years and several regions were chosen. the value of the xij indicator for the p-th region in the t-th year is marked as xij pt. all indicators from the x set are divided into two subsets – stimulants (their growth indicates an increase in the level of economic security in the region) and destimulants (their growth indicates a decrease in the level of economic security in the region). for each xij indicator, the threshold value λij is defined. for indicators-stimulants, the real value should exceed the corresponding threshold value, and for indicatorsdestimulants – on the contrary. for each xij indicator, the mean square deviations σij are determined by the formula σ ij p p t t ij pt ijx x pt = −( )= =∑ ∑1 1 2 where p – the number of regions studied, t – duration of the studied period (in years), xij – the average value of xij for the studied period in all regions studied. figure 1. the algorithm of an integrated assessment of the economic security of the region source: compiled by the author baltic journal of economic studies 195 vol. 4, no. 3, 2018 for each subset xi, the vectors ai1, ai2 and ai3 are constructed. dimensions of these vectors are equal to the number of mi indicators in the sets of xi. the components of the vector ai1 are the threshold values of λij of the set xi, the components of the vector ai2 represent the difference λij – σij between the threshold values and the mean square deviations of the indicators, the components of the vector ai3 – the difference λij – 2σij between the threshold values and the doubled mean square deviations of the indicators. these vectors are used to determine the threshold, critical, and satisfactory values of integral estimates. denote the components of the vector ai1 through xij 1, the vector ai2 – through xij 20, the vector ai3 through xij 30. we get equalities xij ij 1 = �λ , xij ij ij 2 = −λ σ , xij ij ij 3 2= −λ σ . the given values of the indicators are determined by the formula x x ij pt ij pt ij = λ . a similar transformation is also used for the components of the aik vectors, where k=1,2,3, resulting in vectors: a a m j ai i ij ij i ij ij 1 2 31 1 1 1 1 1 2 = …( ) = −       = = −   , , , ,� � � σ λ σ λ    = m j 1 . for each xij, the maximum and minimum values from the set v p t t tij pt ij ij ij ij { } =       = − −        1 1 1 1 2  ; ; σ λ σ λ � are defined, that is, from the set of derived values of this indicator, supplemented by the values of components of the vectors a a ai i i1 2 3, ,� � corresponding to this indicator. the resulting minimum and maximum values are marked accordingly vij max and vij min. let us turn from the resulted values of indicators to their normalized values. for indicators-stimulants, normalized values are determined by equality w v v v v ij pt ij pt ij min ij max ij min = − − , and for indicators-destimulants – equality w v v v v ij pt ij max ij pt ij max ij min = − − , similar transformations are performed for components of a a ai i i1 2 3� � �, , vectors and a a ai i i1 2 3� � �, , vectors are obtained. integral assessments of certain types of economic security are obtained by the formula w a wi pt j m ij ij pt i = = ∑ 1 , where wi pt – an integrated assessment of the level of the i-th type of security in the p-th region for the t-th year, aij – weighting coefficient reflecting the influence of the j-th factor on the integral estimation of the i-th type of economic security. to determine the coefficients aij, a covariance matrix of the parameters included in the set xi is determined. the coefficients aij are proportional to the squares of components of the eigenvector of this matrix, which corresponds to its maximum eigenvalue. threshold, critical, and satisfactory value of the obtained integral estimation are calculated on the basis of coefficients aij and components of vectors a a ai i i1 2 3, , . the components of the vector ai1 are designated as ai j j mi 1 1 { } = , components of the vector ai2 as ai j j mi 2 1 { } = , components of the vector ai3 as ai j j mi 3 1 { } = . then the threshold value of the integrated assessment of the economic security of the region is determined by equality q a ai j m ij i j i = = ∑ 1 1 , the critical value – by equality k a ai j m ij i j i = = ∑ 1 2 , satisfactory value – by equality g a ai j m ij i j i = = ∑ 1 3 . these values divide the interval [0; 1], which includes all the values of the integrated assessment of the region’s economic security, into the following areas: area of the satisfactory state from gi to 1; area of the unsatisfactory state from qi to gi; area of the critical state from ki to qi; area of the completely unsatisfactory state from 0 to ki. having assessed the state of economic security of the region by each functional component, an integrated assessment of the region’s economic security is generally determined by the formula w wpt i n i i pt= = ∑ 1 η , where w pt – an integrated assessment of the level of economic security in the p-th region for the t-th year, wi pt �– an integrated assessment of the level of the i-th type of security in the p-th region for the t-th year, ηi – weighting coefficient reflecting the importance of the i-th type of security. since the security of all functional components is equally important, the value ηi n = 1 is taken for all types. threshold, critical, and satisfactory values for an integrated assessment of the economic security of regions are as follows: q q i n i i= = ∑ 1 η , k qk i n i i= = ∑ 1 η g g i n i i= = ∑ 1 η . on the basis of these values, areas of satisfactory, unsatisfactory, critical, and absolutely unsatisfactory state of economic security of the region are identified. assessing the economic security of the region using the proposed methodological recommendations allows fully taking into account the impact of threats on the economic security of the region, comprehensively assessing the economic security of the region using a system of indicators. the obtained assessments of the region’s economic security are useful for making decisions in order to avoid destructive processes of socio-economic development of regions. 4. conclusions the results of the research conducted on the methodological basis for assessing the economic security of the region show that the use of monitoring baltic journal of economic studies 196 vol. 4, no. 3, 2018 and analysis methods of key economic indicators, on the basis of which the integral indicators of components of regional economic security and the overall integral indicator are calculated, allows us to carry out a comprehensive analysis of the current state of economic security, to determine its positive and negative tendencies in general and by separate functional components. the proposed methodology for assessing the economic security of the region includes the following stages: preparatory, analytical, comprehensive diagnostics of the region’s economic security. at the preparatory stage, a selection of indicators is carried out that fully and comprehensively reflect the level of economic security; their division into stimulants (the growth of which increases the level of economic security of the region) and destimulants (the growth of which reduces this level); definition of the threshold value for each indicator. the analytical stage involves comparing the actual and the threshold values of the indicators, the definition of the adjusted values of the indicators, the choice of the maximum and minimum values from the set of adjusted values obtained, the transition from the adjusted values of the indicators to their normalized values, the calculation of weighting coefficients for each indicator. at the stage of comprehensive diagnostics of the region’s economic security, integrated estimates of individual components of economic security, the integral index of economic security of the region in general, and the intervals of satisfactory, unsatisfactory, critical, and absolutely unsatisfactory state of economic security of the region are calculated. further research directions are related to the calculation and analysis of the state of economic security of regions of ukraine, determination of the degree of influence of threats on the 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(in russian) baltic journal of economic studies 151 vol. 4, no. 2, 2018 corresponding author: 1 university of the state fiscal service of ukraine. e-mail: papavl@ukr.net 2 university of the state fiscal service of ukraine. e-mail: o.v.tilchik@ukr.net 3 department of civil law and process, lviv trade and economic university. e-mail: kotuha1@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-151-158 ontology of scientific cognition of shadow economy and economic shading pavlo pashko1, olga tylchyk2 university of the state fiscal service of ukraine, ukraine oleksandr kotukha3 lviv trade and economic university, ukraine abstract. the purpose of this article is to characterize deformation problems of the domestic economy, particularly the influence of negative factors on it, resulting in its shading. this article analyses the approaches to statement that the shadow economy is one of the major global risks of the coming decade. the context of legal regulation is directly related to form an effective system of ensuring of ukraine’s national security is possible under the condition of thorough development of the areas of counteraction to individual threats in the relevant spheres, including the economy. at the same time, a special attention is paid to the view that the economic shading although is officially recognized as a threat to national security, however, the notion that should denote this phenomenon and be a basic one is not formulated in any current normative legal act. the formation of the concepts of “shadow economy” and “economic shading” in the interconnection is a logical stage of cognitive activity within both the economic and legal sciences. the practical significance of the results of scientific research is the formation of the hypothesis, the essence of which is the new knowledge about the shadowing of the economy as a legal category on the basis of systemdefined signs, causes and of dialectical connection of the phenomenon of the shadow economy and the process of dynamic transformation. a given hypothesis is intended to change the strategic directions and guidelines in the formation of economic policy to neutralize harmful processes of shading of the legal sectors of the economy. the value of the results obtained of the current research is due to the transnational nature of the phenomenon of the shadow economy and connection of such a phenomenon with other harmful processes that are produced within the economic space and lead to the institutionalization of the global economic crisis. methodology. a methodological framework of the economic security research is defined by complex of scientific cognition methods that allow us to look at this problem as a multi-aspect, interdisciplinary phenomenon. on the basis of the system-based, structural, systemic-functional, and other scientific approaches, the idea of the economic security has formed a complex systemic category covering the theoretical and practical level of economic activity. key words: shadowing of the economy, shadow economy, administrative and legal provision, administrative and legal measures, prevention of corruption, offenses in economic sphere, counteraction of shadowing of economy, money laundering of proceeds from crime. jel classification: h20, h30, k23 1. introduction deformation problems of the domestic economy, particularly the influence of negative factors on it, resulting in its shading, now are widely discussed both in the scientific community, speeches of the politicians and at the household level. it is caused, in particular, by the statement that the shadow economy is one of the major global risks of the coming decade. today, the shadow economy in ukraine reached a critical level, and are about 50 percent of gross domestic product (hereinafter – gdp), moreover, the greatest attention in recent years has been paid to its increasing caused by a due complication of the political and economic situation in ukraine. moreover, it is impossible to estimate the mass (level, volumes etc.) of the shadow economy, because the fluctuations in determining the baltic journal of economic studies 152 vol. 4, no. 2, 2018 ratio of the shadow economy to gdp are from 15 to 70 percent. it can hardly be considered as satisfactory, which indicates the need to continue the scientific research for the results formation that will provide the practical needs. the higher mentioned determines the active development of research, the subject of which are the regularities and determinants for the formation of the economy shadowing, the methods of its calculation, the impact on various economic institutions, in particular, on national security in the field of economy and finance. economic security in the broad sense is a national program for the development of productive forces and industrial relations, which takes into account the interests of all social groups and involves their participation in its implementation. in the narrow sense, it is a number of methods and means of counteracting the negative manifestations of market forces, which are manifested as a result of unorganized participation in world economic processes. thus, the mechanism of economic security providing consists of two blocks: the first one is the protection of national interests from the factors of negative influence (protection), and the second one is the realization of economic interests (tsishkovskiy, strelnikov, 2007). the essence of economic security is manifested and specified through the system of its partial forms – the system of economic security providing, which more or less has an economic component (muntian, 1999). to form an effective system of ensuring of ukraine’s national security is possible under the condition of thorough development of the areas of counteraction to individual threats in the relevant spheres, including the economy. 2. economic shading as a category of the security system of ukraine in view of the noted above, it is worthwhile to start with the thesis that security is an element of the legal system, where society and the state are its objects, and the economy, as the economic activity of society, is a system of economic relations, which is directly concerned to the important spheres of social life, connected to production, distribution, exchange, and consumption of material goods, aimed to meet human needs. interacting with all spheres of social relations in public life, the economy is socialized and becomes a part of the social life of a person (kochev v.a., 2010). by its political and economic base, it penetrates into the public sphere of life and, therefore, acquires legal form, aimed at influencing stately on the economy in general and in the interests of man and society to following approach by hermann hoppe (1995), but the legal “foundation in the form of property rights and supremacy of the law” is the necessary condition for its successful functioning (north, 2010). thus, economics, security and law are interrelated, because a society is their family (skakun, 2013). thus, the research of the phenomenon of economic shading as a threat to ukraine’s national security should be carried out in a plane where the achievements in economy, sociology, law, and science of secure are combined, and the concepts and theories made by the scientists should not produce discrepancies and inconsistency of approaches to the affected scientific issues since this threatens unproductive duplication of research and, accordingly, ineffective use of scientific potential and financial resources (popovych, 2001). in view of the abovementioned, it should be noted that the economic shading although is officially recognized as a threat to national security, however, the notion that should denote this phenomenon and be a basic one is not formulated in any current normative legal act. appeal to the research of national economists, lawyers, and sociologists made it possible to establish that, instead of the term “economic shading”, the term “shadow economy” is used. the same, in essence, “substitution” is also observed in the provisions of individual legal acts. thus, in the law of ukraine “on fundamentals of national security of ukraine” (2003), “shadowing” of the national economy is among the threats of national security in the economic sphere. the methodological recommendations on calculating the level of economic security of ukraine (approved by the decree of the ministry of economic development and trade of ukraine dated october 29, 2013 no. 1277) (2013) indicate the existence of such an indicator of the level of macroeconomic security as the level of “economic shading” and indicates that it is calculated accordingly to the methodological recommendations for calculating the level of the shadow economy (order of the ministry of economy dated february 18, 2009 no. 123). the higher mention allows suggesting that the authors of this document identify the following two concepts. obviously, there is a substitution of terms, which are called different in content or one-way, generic phenomena – the shadow economy and the economic shading. it is clear that in these circumstances, research concerning their differentiation and correlation became more actual and there is a necessity to refer to the scholars’ research on the problems of the shadow economy to actualize the “economic shadowing” as an object of scientific research and the formation of appropriate principles for counteracting the spread of this threat. 3. shadow economy and economic shadowing: the definition of the essence of phenomena describing any phenomenon, we can say that it is worth firstly to address the lexical meaning of the constituent concepts that make it. the notion of “economy” (from the greek οίκοςνομος – literally is the art of household baltic journal of economic studies 153 vol. 4, no. 2, 2018 management) can mean the following: the science of using a variety of limited resources, as well as production, marketing, distribution, consumption of goods and services; economy (household management), sphere of human economic activity, in which the life benefits are created, distributed and consumed. the adjective “shadow”, according to its lexical meaning, characterizes the economy as a part of the whole phenomenon (economy), closed from the implementation of the organization and management by the authorized entities. the above-mentioned phrase “shadow economy” is the most widespread, but there are other terms used to describe this phenomenon in the scientists research and are used as synonyms: “informal economy”, “black economy”, “grey economy”, “illegal economy”, “informal economy”, “secret economy”, “unregistered economy” etc. this situation is connected both with the international nature of the phenomenon and with its correlation in accordance with the field of knowledge (the characteristic of the described phenomenon as interbranch one), within which it is applied and investigated. national scientists do not always distinguish between the shadow economy and the economic shadowing. even mentioning the system of institutional threats to economic security, z.s. varnaliy speaks about the “shadow economy”, although in the text of the law of ukraine, and indeed in the publication the scientist individually defines the shadow economy, indicating that it is a key form of the institutional threats system and it is the economic activity of business entities, which is not taken into account, is not controlled, and is not taxed by the state and/or is aimed at receiving income through violation of the current legislation. however, it continues to speak about the systemic consequences of economic shadowing in ukraine, which are the losses of the effectiveness of monetary and credit policy levers due to the high volumes of uah and foreign exchange mass turnover etc. (varnalia, 2015; varnalia, 2017). speaking about the negative consequences of the manifestation of this or that phenomenon, foremost, it is necessary to establish its mutuality and interdependence with other phenomena. accordingly, it is possible to trace on the integral approach to determining the mass of so-called “shadow” income, since the authors of the above conclusions take on the function of the shadow economy, which is mediated by negative consequences for the economy as a whole for the basis. applying the above formula, it is possible to establish that “shadow income”, mediated by the negative factors of its existence, is equal to the amount of damage caused to the so-called “legal economy”, which is the initial (primary) point for the development of the listed consequences in the social sphere. in this approach, an attention is focused on damage to the state, and not to the general national interests, whose correlation (damage to the state and to the national interests) can get somewhat opposite result, since, having received income, any person satisfies his (private) interest, the latter does not always become the object of counteraction, in some cases, it is even the object of protection (defence) (varnalia, 2015; varnalia, 2017). this is confirmed by the thesis, according to which the “shadow economy” is endowed with a “positive function” and is mediated by the approach to the necessity of determining the limits of state intervention in the economy as a whole. swiss economist d. cassel has identified three positive functions that perform the shadow economy in a market economy as follows: 1) the function of “economic ink”; 2) the function of “social shock absorber”, which allows mitigating unwanted social contradictions in society between different segments of the population, since informal employment facilitates the material state of the poorly-formed groups; 3) the function of the “built-in stabilizer”, since its resources are gradually moving to the legal economy (matzievsky, 2010). such an approach, while transposing its provisions into domestic scientific research, leads to certain inconsistencies, since it raises a remark about the possibility of combining the indicated positive function of the “shadow economy” with the content of this phenomenon, which is considered as an antipode to the economy, which is carried out in the legal field. in other words, it is made the assumption about the positive impact of the offenses on the social and economic development of society; therefore, it is not possible to establish the dialectical interconnection between the positive reasons for the aim of “shadow economy” with its negative consequences. it should be noted that the actual “shadow economy” is not recognized as a threat to the national interests, as opposed to “shadowing”. however, characterizing the latter one, it is often indicated on an increase in the mass of the shadow economy, simultaneously it determines as critical one when its correlation to the economy has reached the 30 per cent barrier. this correlation certifies the strengthening of its negative, destructive impact on the economic system. therefore, an increase in the mass of the shadow economy above the permissible value, obviously, as a result of shadowing, is an indicator of the threat in this case. the content of the threat is directly related to its form, under which the ways of external expression of the threat are understood. the form provides the content of the threat a factual certainty in the objective world, which determines its boundaries. due to the form, the threat becomes available for research and evaluation (varnalia, 2009). in support of this, it is worth to point out the indisputable of the fact that the large volumes of the shadow economy are a factor of deepening of imbalances existing in the economy, while remaining one of the baltic journal of economic studies 154 vol. 4, no. 2, 2018 greatest challenges to the state economic security, the trends of change will continue to determine scenarios of the state economic development in whole, as they are characterized by a stable reciprocal dependence between the indicators of economic levels security and shadow economy (report on conducting a national risk assessment in the field of prevention and counteraction to the legalization (laundering) of proceeds from crime and terrorist financing 2016). 4. the main approaches to the content of the phenomenon called “shadow economy” attempts to single out the obligatory components of the shadow economy and their signs are made in the legal encyclopaedia, edited by y.s. shemshuchenko, which states that the shadow economy can be defined as economic processes (production, distribution, exchange, consumption of the goods and services), which are hidden by their participants from the control of the state and society, are not fixed by state statistics, and the material results of these processes do not fall to the national gross domestic product (shemshuchenko, 2002). that is, the authors emphasize the importance of allocating two basic components that characterize the shadow economy – they are the following: economic processes and their material results. the features of the economic processes that allow enlisting them to the shadow ones, according to the scientists, are the fact of concealment of the economic processes from the control of state and society. at the same time, the authors do not focus on specifying the way of such concealment (legal or illegal), even it is not indicated, and a sign of concealment is a way or a condition that characterizes the activity. the second sign of economic activity is that it is not fixed by state statistics. moreover, again, the reasons for the absence of such fixation are not specified. the development of a unified approach to the problem of the shadow economy was carried out by a group of experts from national and international statistical organizations. the result of this work was a publication summarizing the international experience in (2002), under the title “measuring the nonobserved economy”. it is worth to point out that in the “guide ...” the experts emphasize those tasks that were not highlighted before this work, namely: the formation of a single, new optimal approach to shadow economy understanding; developing of the measures to reduce shadow, illegal activities, activities in the informal sector or the production of households for their own final consumption. it is primarily aimed at ensuring that production activities are “observed” as more as possible, or in order to collect sufficient data to be displayed in national accounts. accordingly, by giving some insight into the causes and extent of shadow and illegal activities, “guide …” does not provide advice on shadowing reducing, since this is not a matter of statistics (measuring the non-observed economy, 2002). also, a partial attention paid to tax evasion in this research is related only to the types of activities that fall within the scope of the production of the снс-93. tax evasion connected to the types of activities which are non-productive one and are not included in gdp is not being explored (on approval of methodological provisions for calculating the volume of the economy that is not directly observed, and the organizational scheme for conducting and using the calculations of the economy, which is not directly observed, 2018). it is worth noting that the necessity of taking into account the results of illegal activity (crimes in particular and offenses in general) during the formation of an assessment of the threat to the national economy is undoubtedly correct, since the unlawfulness as a sign of the phenomenon reflects its essence as a violation of the security state. however, it is not clear from the given definitions, which are formulated taking into account the content of the phenomenon of the “shadow economy”, which elements should reflect its internal structure – income, indicators, actual economic activity, its material results or, in general, economic processes. in addition, it is impossible to establish a causal and consequential connection between the processes and results, in particular, the research needs a “plane” in which they are located. this is primarily connected with the characterization of the “result” as a category of statics, and the “processes” – to the dynamics. nowadays the scope and conditions for the implementation of certain types of activity that belong to the so-called “productive part” of the shadow economy have significantly changed. actually, the objects are to be included to such “productive part” needs to be reviewed, especially in the theory. in case if previously, as an example, the results of households, tutoring, etc. were often presented, today, such an economic activity is regulated, and its results make up a significant part of the population’s income. within the accounting and statistical approach, it is not possible to assess the extent, structure, and impact of illegal activities that are not related to the production of real gdp. the elements of the shadow economy, on the one hand, are all types of purely criminal and economic crimes, which extremely expands the limits of the shadow economy, and on the other hand, the system of national accounts, which is connected only with the analysis of production and consumption of gdp, which is often accompanied by the desire to reduce statistical errors in the process of calculations. there is also a category of economic offenses and crimes, for which under this methodology it is impossible to make a quantitative assessment, taking into account their specific impact on the economic system. the imperfection of the information base of statistical calculations is a significant problem. baltic journal of economic studies 155 vol. 4, no. 2, 2018 official statistical indicators are based on the results of regular statistical observations, including information from the government agencies, in particular, controllers. in this case, it is worth noting the lack of a unified approach to the criteria and elements filling the relevant databases. in particular, this can easily be seen on the example of the state fiscal service of ukraine, which is the central executive body that implements both the state tax policy and the policy in the field of state customs, etc. however, the approaches for the formation of statistical data by this entity in these areas are different since they remain unchanged from the time when there were separate central bodies that ensured the implementation of the respective policies of the state. the further development of tax and customs affairs is based on the creation and implementation of an electronic integrated system for tracking the movement of goods throughout the supply chain to different countries, continuous tax, customs and audit control from the border to the final buyer on the basis of a unified commodity description of goods, its introduction in the accounting, tax and customs accounting, which will be carried out electronically. the transition to a new level of governance allows creating a mechanism that will work more effectively to ensure ukraine’s national interests and security, will be the basis for counteracting the shadow economy. therefore, one of the important directions for increasing the effectiveness of counteraction the economic shadowing should be to improve the mechanism for the formation of reliable results from statistical observations. this will be facilitated by the unification of approaches to the criteria, components of filling the relevant databases of related controlling entities, verification of the information provided by them. the strategic importance of such proposals is actualized by the transition from the electronic society to the information, the possibility of ensuring the transparency of the activities of the higher mentioned entities to counteract the economic shadowing and the use of countermeasures not related to interference with the activities of the participants in the economic sphere. in general, the accounting and statistical approach can be effectively used to identify the productive sectors of the shadow economy and assess its scale, for the formation of economic and legal policies. although the scientists point out varnalia z.s. (2006) that it needs to be complemented by other approaches that are more capable of reproducing the redistributive nature of unlawful and socially harmful economic activity, it is worth noting that it produces a blurring of the limits of “state regulation of the economy” and “state counteraction to the shadow economy.” some representatives of the economic science indicate: “shadow economy” is the economic term and it is not worth to be transferred to the legal ground. the “shadow” economy is, above all, an economic base for economic crime. it consists of three blocks: 1) the legal (unregulated by the state) production of goods and services; 2) violation within the limits of permitted economic activity (illegal manufacture of officially authorized goods and illegal provision of officially authorized services, tax evasion and other obligatory payments within the official economy, currency and financial and stock violations and fraud); 3) prohibited activities (criminal offense and corruption) (turchynov, 1987). at the same time, the two most powerful blocks of the “shadow economy”, identified by the author in this research, are, in essence, evidence of an economic crime, diluted by a very small extent of administrative offenses. and only one block is legal, unrelated to behaviour that violates the law since it exists within the limits of the authorized state activity. it is worth noting that the author of the approach, which became the basis for characterizing primarily by the economists of illegal activities as an economic activity, is g.s. becker. the scientist in the work “crime and punishment: an economic approach” has developed a new direction of research – the analysis of crimes as a type of activity, which subjects choose rationally, comparing the benefits and costs of probable arrest and punishment (becker, 1968). this approach has become widespread, first of all, in defining the concept of “shadow economy”, according to which, along with the types of economic activities that are carried out with violations, economic crimes, unregulated households, and their content includes crimes of a general criminal character. also, it should be noted that the scientist was intended to investigate not the actual criminal activity as a part of the shadow economy, but the cost of committing a crime at particular stages and in general. an attempt to understand and determine the ratio of criminal activity and economic (legal) activity in connection with their sole purpose – the achievement of economic benefits is valuable. characteristics are not exclusively economic activity, but activities in the field of economics, aimed at obtaining material benefits (result). 5. the essence of economic shadowing as a process of forming a threat to national security in the economic sphere due to the thorough development of the concept of “shadow economy”, it seems methodologically to be correct formulating the concept of “economic shadowing”, which will enable the reflection of the unity of these concepts, due to the fact that they characterize a single fact (phenomenon), at the same time, will contribute to the allocation of mandatory signs of the latter one as a threat and specification of the systemically forming element, object of counteraction in order to ensure economic security. separate individual attempts to define the term “shading” exist in foreign scholars, but their value is determined exclusively by the enrichment of scientific baltic journal of economic studies 156 vol. 4, no. 2, 2018 thought and often does not differ from the already established legal traditions, which only produce criticism of their views and do not allow marking their originality. in a number of definitions, the concept of “shadow economic activity” forms the basis (defines the meaning) of the term “shadow economy”, as well as, in fact, the concept of “shadowing”. in view of the fact that the term “activity” means doing something in a certain way, “shadow economic activity” from a lexical point of view specifies the actual way of carrying out such activity in the corresponding sphere – the economy (buzel, 2009). accordingly, the adjective “shadow”, obviously, means that the activity is carried out by concealing (analogue – shadowing). the indicated duplication in the definition of two non-identical concepts requires a delineation of activities that will determine the architecture of the concepts. since the concepts analysed are mediated primarily by statistical purposes – counting, then it is subject to both the results of activity and the number of facts of activity. nowadays it is difficult to determine the activity as latent because, again, there are two main approaches to the characterization of this feature: concealment as a “way of doing business” – hidden activities and concealment as a “result of activity” – activities of concealment. within conceals: in one case, the activity and its results, in the other only the results. however, when it comes to unregulated activities, it is hidden, but only in connection with the lack of a requirement for it in a particular way to conduct, “detect”, record, etc. that, in fact, the subject makes it does not hide, but including it into the shadow economy, researchers seeking to identify the major sign of activity “hidden”, describe the unregulated activities as well as “hidden”. the difference in these approaches is obvious; therefore, understandable are problems in determining the means of influence aimed to “fade”, “withdrawal from the shadow” activities, belonging to the shadow economy. since it (these measures) cannot be complex, paying attention to these characteristics, they, are being only called the complex, but in fact are divided into at least two different groups, indicating that it is dependent on “the structural elements of the shadow economy.” since this activity is considered to be illegal, some scientists consider “lawlessness”, or rather, “illegality” of activities both in the case of its implementation outside the law, while summarizing, not separating the reasons: in one case – it is generally lack of regulation, in the other – violation of the legal regulations. 7. conclusions based on the analysis of the approaches to research and the formulation of the concept and content of the “shadow economy”, it should be noted that the characteristic of its own activities is the common denominator in disclosing the essence of the concept and the notion of “economic shading”. however, the nature of such activities will be significantly different, since the formation of a “shadow” in the plane of the economy is a consequence of shading (shadowing), so the “shading activity” and “activity associated with the result of shading” are the objects of characteristics. a common feature of the shadow economy and economy is a fact that they appear in the economic space as a result of their activity, in particular, today, in most branches of law, which deal with offenses and responsibility for their commitment, the focus is on the business activity. according to its volume, any results of the activity, limited by the sphere of management, are counted, in other words, the result of a manifestation of the social activity of a person within the economy (economic activity as its component). due to the fact that activity and its results are interdependent, it is obvious that the shadow economy proportionally depends on the processes of shadowing and, therefore, it seems logical firstly to calculate, and then to detect. detection of criminal activity is mediated by its own result (damage). the level of the shadow economy is directly mediated by the result of the active behaviour of the subject in the field of economics (whether it is possible to concretize according to the above example – management). however, when it (activity) does not meet the requirements set by legal norms, it will be characterized as shadow activity (the content of the process of shadowing). that is, the activity of a person, which is mediated by the sphere of management or receiving a material result, benefits, etc. in a prohibited way, will be a shadow economy. only in this case, one can apply a complex approach to the research of the phenomenon of the shadow economy since the activity of a person is determined by the subject of studying sociology, economics, criminology and other legal science. at the same time, the processes of shadowing of the economy also need to be counted since, along with the total volume of the shadow economy, which is an indicator of normal social and economic development, the definition requires either the volume or, rather, the level of threat to national interests in the economy. the above stipulates the necessity of forming a system of counteraction to the shadow economy, which will consist primarily of the targeted formally determined influence of the relevant subjects by legal means on the object (persons) by protecting and defence of the rights and freedoms, etc., in particular, economic relations both from violations by other subjects of management, and from violations committed by the subjects of power authorities. the formation of the concepts of “shadow economy” and “economic shading” in the interconnection is a logical stage of cognitive activity within both the economic and legal sciences. only under this condition we are able to clarify with the system-forming categories and provide a consistent and mutually objectionable baltic journal of economic studies 157 vol. 4, no. 2, 2018 research, based on the achievements of predecessors, representatives of various sciences, and are able to withstand to criticism. shadow economy is a broad approach is an activity in the field of economics aimed at obtaining a material result that is not reflected in official statistics and is not included in gdp. economic shading is a complex process of formation and implementation of economic mechanisms 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(2017) tinova ekonomika v systemi instytutsionalnykh zahroz ekonomichniy bezpetsi ukrayiny. tinova ekonomika: svitovi tendentsiyi ta ukrayinski realiyi: materialy mizhvidomchoyi naukovo-praktychnoyi konferentsiyi [shadow economy in the system of institutional threats to the economic security of ukraine. shadow economy: world trends and ukrainian realities: materials of the interdepartmental scientific and practical conference] (kiev, june 23, 2017) / red. v.v. chernye, s.s. chernyavsky, v.i. shakun and others k.: national acad. inside cases, pp. 29-32. (in ukrainian) baltic journal of economic studies 78 vol. 4, no. 2, 2018 corresponding author: 1 department of management technology, lviv polytechnic national university. е-mail: pavlo.g.ilchuk@lpnu.ua 2 department of information technology, state agrarian and engineering university in podilya/ е-mail: mushenik77@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-78-85 influence of development of national innovation systems on the economic efficiency pavlo ilchuk1 lviv polytechnic national university, ukraine іryna mushenyk2 state agrarian and engineering university in podilya, ukraine abstract. development of modern economic system is taking place based on the concept of “knowledge economy”. and thus the main method to stimulate economic development is to introduce innovations. within the functioning of national innovation systems, there is the integration of science, education, capital, and production that, on the one hand, allows creating innovations and, on the other, stimulates the development of the economy precisely due to the formation of the synergetic effect of cooperation of many participants of innovative process. the subject of research is the interrelation of innovative activity with economic efficiency and economic growth at the macrolevel. therefore, the purpose of the research is to evaluate influence of development of national innovation systems on the economic efficiency, and a number of tasks are carried out in order to achieve it: development of integrated indicators to evaluate operating efficiency of national innovation systems, identification of relationship between the level of development of national innovation systems and the level of economic development of countries, evaluation of development of individual national innovation systems, and determination of influence of the level of national innovation systems’ development on the economic growth of countries. the methodology of research of influence of development level of national innovation systems on the economic growth of countries is based on building integral indices, which are calculated by using the method of geometric average of partial indices and construction of regression models, which allow evaluating the influence of development of national innovation systems on the economic efficiency. in the paper, the author’s method of forming integral indicator to evaluate the level of development of national innovation systems is developed and a method of evaluating their influence on the economy is proposed. testing of the methodology of evaluation of national innovation systems’ development is carried out based on data of national innovation systems of six countries: ukraine, great britain, latvia, germany, poland, and france. the work proves the existence of a close positive interrelation between the index of national innovation systems’ development and the index of gdp per capita, which is peculiar for all countries under study. also, there are built regression models according to data of calculation of the index of national innovation systems’ development and its elements with a quite high reliability, which allows using them in order to forecast gdp per capita under conditions of national innovation systems’ development. moreover, the paper identifies individual features of the influence of separate directions of the functioning of innovation systems on the level of economic development of the countries under study, which provides an opportunity to conduct strategic management for separate directions of the functioning of national innovation systems. key words: innovations, innovation system, development, economy, influence, integral indicator. jel classification: o11, o31, o47 1. introduction currently, development and increase in the efficiency of national economy acquire a special relevance. one of the ways to stimulate the development of the economy is to introduce innovations. foundations of the modern concept of innovative development of the economy in the early 90s of the xx century are developed by b.-а. lundvall, c. freeman, and r . nelson. according to the main provisions of such a concept, efficiency of development of an innovationbaltic journal of economic studies 79 vol. 4, no. 2, 2018 based economy depends both on the efficiency of activities of separate subjects of innovative process and the efficiency of cooperation of all subjects of national innovation system during the creation and diffusion of innovations (fedirko, 2007). further research of the conceptual foundations for the formation of national innovation systems was carried out also by n. sharif (2006), j. fagerberg, d. mowery (2005) and r . nelson (2000), and other scholars. within the functioning of national innovation systems, there is the integration of science, education, capital, and production that, on the one hand, allows creating innovations and, on the other, stimulates the development of the economy precisely due to the formation of the synergetic effect of cooperation of many participants of innovative process. thus, it is the level of development and efficiency of national innovation systems that determine the level of innovative capacity of the national economy, as well as the general level of economic competitiveness under conditions of global competition. the purpose of the research is to evaluate the influence of the development of national innovation systems on the economic efficiency. in order to achieve the purpose, the following tasks are determined: 1) development of integrated indicators to evaluate operating efficiency of national innovation systems; 2) identification of interrelation between the level of development of national innovation systems and the level of economic development of countries; 3)  evaluation of development of individual national innovation systems; 4) determination of influence of the level of national innovation systems’ development on the economic growth of countries. the methodology of research of influence of development level of national innovation systems on the economic growth of countries is based on building integral indices, which are calculated by using the method of geometric average of partial indices and construction of regression models, which allow evaluating the influence of development of national innovation systems on the economic efficiency. 2. issues of formation and evaluation of the operation of national innovation systems given the wide range of updated or newly created processes, products, solutions, etc. predicted by innovations, there is a need to create a system that would ensure the introduction of innovations into economic activity. creation and development of modern national innovation systems are regulated at the legislative level. the legislative framework for the functioning of national innovation systems began to form in the 80s of the xx  century on the basis of regulation of technological innovations. at the beginning of the xxi century, such a legislative framework was formed almost in all countries of the world and continues to improve at the expense of regulation of state innovation policy, the activity of separate institutions, and formation of development concepts of national innovation systems. in particular, in ukraine in 2009, there was approved the concept of development of national innovation system (order of the cabinet ministers of ukraine, 2009), which purpose is to create conditions for increasing labour efficiency and competitiveness of domestic producers by means of technological modernization of national economy, improving the level of their innovative activity, production of innovative products, application of advanced technologies, methods of organization and management of economic activity in order to improve human well-being and ensure sustainable economic growth. the level of competitiveness of national economy depends exactly on the efficiency of functioning of the national innovation system. so, according to data from the world economic forum, it is the influence of innovative factors on economic development that is one of the most important parameters of the national economic competitiveness index. in 2017–2018, the economy of ukraine was at the 81st place in the world by the level of competitiveness, which is determined, first of all, by innovative and educational factors. thus, by the level of development of national innovation system, ukraine occupies the 61st place (by the presence of researchers – 25th place, by the potential for innovation – 51st place, by the level of patenting – 52nd place, by the level of quality of research institutions  – 60th place, by the level of higher education – 35th place, by the level of the primary education  – 53rd place). whereas according to core indicators  – 96th place, the efficiency of commodity markets  – 101st place, the efficiency of the labour market  – 86th place, the development of the financial market – 120th place (the global competitiveness report, 2017-2018). as an additional confirmation of the previous conclusion, it should be noted that in 2017–2018, the highest level of competitiveness is in switzerland (1st place), the usa (2nd place), singapore (3rd place), the netherlands (4th place), and germany (5th place). as an example, the level of development of innovation system in switzerland is also the highest in the world – 1st place, innovation system of the usa – 2nd place, while other groups of factors of competitiveness level of economies of these counties range from 1 to 83 (the global competitiveness report, 2017-2018). the data of the global innovation index can serve as a confirmation of foregoing data (the global innovation index, 2017). by 2017, switzerland ranked 1st in the world by the level of the global innovation index, while the netherlands (3rd place), the usa (4th place), singapore (7th place), and germany (9th place) also belong to the countries with the highest level of innovation activity. therefore, baltic journal of economic studies 80 vol. 4, no. 2, 2018 based on using various methodologies and indicators, one can affirm that the influence of efficiency of national innovation system on the level of competitiveness of national economy is determinant and absolute. issues in determining the efficiency of innovative development of the economy are studied for a long time. basic developments in this field are carried out at the beginning of the 90s of the xx century when the first methodological tools to evaluate innovations began to emerge (oslo manual (oslo manual, 1992), using patent data as science and technology indicators (using patent data as science and technology indicators – patent manual, 1994) and so on). however, research in the field of efficiency of national innovation system continues. in general, two groups of methods are used for analysing the efficiency of national innovation systems: parametric (with exact characteristics of the resulting evaluations) and nonparametric (based on a stochastic evaluation of the resulting estimates). the main methods of evaluation of the efficiency of national innovation systems include data envelopment analysis (dea), deterministic frontier approach (dfa), stochastic frontier approach (sfa) (kotsemir, 2013). thus, evaluation of the efficiency of national innovation systems is carried out as on the basis of international comparison of performance indicators of different national innovation systems, so based on the development of analytical models or integral indicators (balzat, hanusch, 2004). 3. review of theory and literature researchers conducted an evaluation of the efficiency of a number of national innovation systems. so, b.  jankowska, a. matysek-jędrych, and k. mroczekdąbrowska (2017) carried out an evaluation of the efficiency of national innovation systems of poland and bulgaria. g. hua (2015) evaluated the efficiency of china’s national innovation system. j. guan і k. chenc (2012) applied data envelopment analysis (dea). koria r . et al (2014, p. 1-18) conducted a comparative analysis of the efficiency of national innovation systems of ghana and kenya. for today, the oecd (organisation for economic cooperation and development) system of indicators became the most widespread (oecd, 1997), based on which the evaluation of the relationship of innovation activity with economic efficiency and economic growth is carried out. however, problems of assessing the availability, quality, and completeness of the use of resources, their availability, and link between institutes of national innovation systems, the effectiveness of processes for creating innovation, the mechanism for their expansion are not resolved (titarenko, 2013). moreover, there is no generally accepted system of indicators that determine the scale, strength, and efficiency of operation of national innovation systems. in order to evaluate the operating efficiency of national innovation systems, most of the researchers develop their own methods by improving existing nonparametric methods. as a rule, researchers develop integral indicators, based on which assessment of the operating efficiency of national innovation systems is carried out. methods developed by b. jankowska, a. matysek-jędrych і k. mroczek-dąbrowska (k-means clustering) can serve as examples of such developments (2017). formation of integral indicators for evaluating the operating efficiency of national innovation systems and their influence on the economy, as a rule, is taking place based on the consideration of separate spheres of national innovation systems. in particular, the work ( jankowska, matysek-jędrych, mroczek-dąbrowska, 2017) considers 7 spheres of national innovation systems (institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, creative outputs), which are described by individual indices. 4. evaluation of national innovation systems’ efficiency in order to concretize formation of an integral indicator of evaluation of national innovation systems’ efficiency, it is appropriate to consider 4 directions of the functioning of subjects of national innovation systems, which is the basis for the formation of gdp of any national economy: 1) entrepreneurial activity; 2) innovative activity; 3) educational and professional activities; 4) welfare of the population. we propose to evaluate the level of national innovation systems’ efficiency based on a single integral indicator – an index of development of national innovation systems. we recommend calculating the development of national innovation system index ( іdnis ) by the formula of geometric average of partial indices, which characterize all directions of the functioning of subjects of national innovation systems: і і і і іdnis de dia depa wp= * * * ;4 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 11( ); (1) where іde  – entrepreneurship development index; іdia  – innovation activity development index; іdepa  – development of educational and professional activities index; іwp  – the welfare of the population index. the calculation of the integral indicator on the basis of product of indices will provide the reasonableness and methodological correctness of comparisons of parameters of national innovation systems’ operation on the basis of the universal scale and will allow performing correct comparisons both as by an integral index of the baltic journal of economic studies 81 vol. 4, no. 2, 2018 development of national innovation systems and in the context of its individual elements. the proposed methodology for calculating the integral index of national innovation systems’ development envisages building partial indices of separate directions of national innovation systems’ operation. this allows avoiding excessive information load of the integral index, however, allows conducting a complex assessment of the level of national innovation systems’ development, reducing the influence of infoglut, and carrying out strategic management of separate directions of national innovation systems’ operation. therefore, elements of national innovation system development index are four main indices, which calculation considers all parameters of development of national innovation systems according to abovementioned four directions of the functioning of subjects of national innovation systems. in particular, based on development entrepreneurship index ( іde ), the level of entrepreneurial activity development in the country’s economy is taken into account: і і і і іde ne c t edb= * * * ;4 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � 2( ); (2) where іne  – enterprises number index; іc  – gross capital formation index; іt  – turnover or gross premiums written index; іedb  – ease of doing business index. in such a way, the evaluation of entrepreneurship activity in the country in general is carried out at the expense of applying the entrepreneurship development index, which allows evaluating general business potential of economic entities in the country, conducting a comparison of such a potential of individual economies, and taking into account the activity of all potential subjects of national innovation systems. from the point of view of the effectiveness of national innovation systems, the most important is the innovation activity development index ( іdia ): і і і і іdia ip rde r p= * * * ;4 3� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �(( ); (3) where іip  – charges for the use of intellectual property index; іrde  – research and development expenditure index; іr  – researchers in r&d index; іp  – patent applications, residents and non-residents index. the use of such an index will allow evaluating general level of innovative activity in the country’s economy, as well as considering the main parameters of innovation systems based on different approaches: on the basis of a revenue-based approach – because it considers revenues generated by the commercialization of innovations, based on the cost-oriented approach – since it takes into account the costs of financing innovations, as well as on the basis of the approach for assessing labour potential – because it takes into account the number of researchers and the amount of patenting of innovations. we recommend calculating the development of educational and professional activities index ( іdepa ) as follows: і і і іdepa lfae u ee= * * ;3 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � 4( ); (4) where іlfae  – labour force with advanced education index; іu  – unemployment index; іee  – adjusted savings: education expenditure index. the use of such an index will allow evaluating the general level of educational attainment in the country as on the basis of labour potential indicators, so based on dynamics of education financing. also, an important element of such an index is taking into account unemployment level that ensures considering the negative impact the exclusion of a part of employees from the innovation system. we consider appropriate to calculate the welfare of the population index ( іwp ) as follows: і і і іwp gdi he i= * * ;3 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � 5( ); (5) where іgdi   – gross domestic income, derived as the sum of gdp and the terms of trade adjustment index; іhe   – household final consumption expenditure index; іi  – inflation index. the application of such an index is absolutely necessary from the viewpoint of confirmation of the final goal of the functioning of national innovation systems – increasing the welfare level of the population the methodology for calculating indices і і і і і і і і і іne c t ip rde r p lfae ee gdi, , , , , , , , , ,� � � � � � � � � � � � � � � � � � � � �іhe is as follows: i x x = 1 0 , � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � � � � 6( ), (6) where x1 , x0   – current and previous values of indicators. the methodology for calculating indices for і і іedb u i, ,� � � � � is as follows: i x x = 0 1 , � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� � � � � � � � � � � � � � � � � � 7( ), (7) where x1 , x0   – current and previous values of indicators. testing of the methodology of evaluation of national innovation systems’ development is carried out based on data of national innovation systems of six countries: ukraine, great britain, latvia, germany, poland, and france. calculation of the national innovation system development index and its individual elements is made according to data for the last decade: for the period of 2006–2016. for all abovementioned countries, indices of national innovation systems’ development for 2006–2016 were calculated (table 1). this allowed obtaining the initial data for the second task of scientific research  – the establishment of the interrelation between the level of development of national innovation systems and the baltic journal of economic studies 82 vol. 4, no. 2, 2018 level of economic development of countries, as well as the influence of the development of innovation systems on economic efficiency. 5. influence of the level of national innovation systems’ development on economic growth the level of development of national innovation systems was determined based on development indices of national innovation systems, while the level of economic development of the country was determined based on gdp per capita index. in order to analyse the relationship of the index of development of national innovation systems, its elements, and gdp per capita index, there is built a matrix of correlations presented in table 2. according to data from table 2, it can be concluded that there is a close positive interrelation between the index of national innovation systems’ development and the index of gdp per capita, which is peculiar for all countries from the sample. this testifies that the growth of values of the index of national innovation systems’ development is accompanied by an increase in the gdp per capita index, and consequently  – an improvement of the indicators of innovation in the country leads to an increase in the efficiency of national economies. this conclusion is valid for all studied countries. based on analysing elements of the index of national innovation systems development, one can argue about the availability of a close positive interrelation of the development of educational and professional activities and improvement of the population welfare level and gdp per capita for all the analysed sample of countries, which is confirmed by values of corresponding correlation coefficients close to 1. instead, there is no single trend in the formation of interconnections between the level of entrepreneurial activity, as well as innovation activity and gdp per capita. for example, in great britain, latvia, and france, there is a close positive relationship between the level of entrepreneurship development and gdp per capita, which is confirmed by the proper economic situation in the countries. however, the crisis situation in ukraine leads to a weak negative relationship between the level of entrepreneurship development and gdp per capita, as evidenced by the value of the correlation coefficient at -0.2864, and therefore, we can conclude that the level of entrepreneurship activity in ukraine is low, and also, there is a high level of economy’s shadowing. values of correlation coefficients of the index of innovation development and the index of gdp per capita require additional explanation. practically for all the analysed countries (except ukraine), a weak positive relationship between the development of innovation activity and gdp per capita was identified, which, at first glance, is strange for highly developed countries whose economy is based on an innovative approach. however, the main explanation for the revealed interrelation is that the level of development of many national innovation systems (in particular, great britain, latvia, poland, and france) is extremely high and its further growth is slow and it causes significant fluctuations in the resulting figures. w hile ukraine has a significant reserve of growth in the level of development of the national innovation system precisely due to the development of table 1 results of the calculation of the national innovation systems development index country 2007 р. 2008 р. 2009 р. 2010 р. 2011 р. 2012 р. 2013 р. 2014 р. 2015 р. 2016 р. ukraine 1,1065 1,0621 0,8832 1,0636 1,0526 1,0447 1,0511 0,8881 0,9079 1,0476 great britain 1,0320 0,9848 0,9129 1,0134 1,0089 0,9864 1,0319 1,0917 1,0348 0,9905 latvia 1,0401 1,0405 0,7704 1,0197 1,1589 1,0285 1,0216 0,9526 0,9327 1,0918 germany 1,0547 1,0338 0,9756 1,0436 1,0544 1,0017 1,0286 1,0638 0,9881 1,0279 poland 1,0547 1,0961 0,9208 1,0681 1,0432 1,0183 0,9975 1,0674 1,0108 0,9954 france 1,0623 1,0445 0,9419 1,0416 1,0256 0,9733 1,0182 1,0279 0,9749 1,0209 source: calculated by the authors according to data (state statistics service of ukraine, trading economics, eurostat, world bank) table 2 the matrix of the correlation of the national innovation systems development index, its elements, and gdp per capita index countries indicators іde іdia іdepa іwp іdnis ukraine -0,2864 0,7484 0,8886 0,9367 0,9552 great britain 0,5961 0,3079 0,7607 0,9760 0,7821 latvia 0,7124 0,1177 0,8527 0,9523 0,6720 germany 0,1753 0,5818 0,8807 0,9893 0,8361 poland 0,4074 0,0592 0,7840 0,9990 0,8053 france 0,6020 0,2145 0,8728 0,9930 0,8305 source: calculated by the authors according to data (state statistics service of ukraine, trading economics, eurostat, world bank) baltic journal of economic studies 83 vol. 4, no. 2, 2018 innovative activities of economic entities. therefore, the development of the national innovation system in general and innovation activity in particular are extremely important for ukraine, since such measures will be accompanied by a significant increase in gdp per capita. in order to reveal interdependences between the index of national innovation systems’ development and the index of gdp per capita, regression models were built (table 3). building such linear regression models was carried out based on data from six countries (ukraine, great britain, latvia, germany, poland, france) for the period of 2006–2016. table 3 regression models of the interrelation of the index of national innovation systems development and the index of gdp per capita countries model r2 ukraine y = -1,7826+2,7760*іdnis 0,9124 great britain y = -0,6121+1,5931*іdnis 0,6116 latvia y = -0,2143 + 1,2613*іdnis 0,5515 germany y = -1,6392 + 2,5871*іdnis 0,6991 poland y = -1,2612 + 2,2409 *іdnis 0,6485 france y = -0,9577 + 1,9367 *іdnis 0,6897 source: calculated by the authors according to data (state statistics service of ukraine, trading economics, eurostat, world bank) all the models obtained have a high level of reliability (r2>0,5), which testifies to the possibility of their practical application for the purpose of forecasting resulting indicator. also, for all models, there is observed a direct linear interdependence between the index of national innovation systems development and the index of gdp per capita, which proves the necessity of further intensive development of national innovation systems in order to ensure effective development of the economy in general. in order to detail the interdependence between elements of the index of national innovation systems development and the index of gdp per capita on the basis of analogous statistical data, linear regression models of the interrelation of elements of the index of national innovation systems development and the index of gdp per capita are built (table 4). the reliability of obtained regression models is considerably higher (r2>0,9) that provides the possibility to use them for the purpose of forecasting gdp per capita in terms of national innovation systems’ development. it should be noted that the influence of separate elements of the index of national innovation systems development differs for different countries (table 5). table 5 the nature of the influence of elements of the index of national innovation systems development on the index of gdp per capita (direct/inverse) countries іde іdia іdepa іwp ukraine direct direct direct direct great britain direct inverse inverse direct latvia direct inverse inverse direct germany direct inverse inverse direct poland inverse direct direct direct france direct direct direct direct source: calculated by the authors according to data (state statistics service of ukraine, trading economics, eurostat, world bank) for ukraine, as well as for france, a direct linear dependence of economic development on the dynamics of all elements of the index of national innovation systems development (entrepreneurial, innovation, educational and professional activities, and welfare of the population) is observed. therefore, in order to achieve sustainable economic growth in these countries, it is necessary to ensure the development of national innovation systems by all four abovementioned elements. at the same time, a priority of economic growth in great britain, latvia, and germany is the development of entrepreneurial activity and increase in the welfare of the population. while innovation activity and educational and professional activities in these countries are maximally developed and thus may remain at the current level of development or grow at a low pace, since additional investment in these activities will not have a significant impact on gdp growth in the countries. instead, in poland, a high level of small business development is revealed (which constitutes about 95% of economic entities), which does not allow directly influencing the growth of the economic table 4 regression models of the interrelation of elements of the index of national innovation systems development and the index of gdp per capita countries model r^2 ukraine y = -2,824+ 1,564*іde+ 0,377*іdia+ 0,218*іdepa+1,580*іwp 0,967 great britain y = -1,744+ 0,104*іde -0,149*іdia -0,462*іdepa+ 3,230*іwp 0,977 latvia y = -2,286+ 0,175*іde -0,034*іdia -0,337*іdepa+ 3,484*іwp 0,912 germany y = -2,479+ 0,055*іde -0,296*іdia -0,206*іdepa+ 3,928*іwp 0,985 poland y = -2,025 -0,064*іde+ 0,096*іdia+ 0,114*іdepa+ 2,852*іwp 0,999 france y = -1,970+ 0,030*іde+ 0,048*іdia+ 0,053*іdepa+ 2,825*іwp 0,988 source: calculated by the authors according to data (state statistics service of ukraine, trading economics, eurostat, world bank) baltic journal of economic studies 84 vol. 4, no. 2, 2018 efficiency. therefore, in order to ensure the growth of gdp, first of all, poland should promote the growth of innovation and also educational and professional activities and welfare of the population. 6. conclusions development of modern global economic system is taking place on the basis of the concept of “knowledge economy”. and thus the main method to stimulate economic development is to introduce innovations. formation of national innovation systems allowed, on the one hand, providing formation of synergetic effect from the cooperation of many participants of innovative process and, on the other, making the state a key subject of the development of national economy by means of formation of state innovation policy. thus, states receive another one tool to improve the level of competitiveness of national economies under conditions of global competition at the expense of national innovation systems development. the main group of methods for analysing the efficiency of national innovation systems is nonparametric methods, and applications of own approaches for improving existing nonparametric methods at the expense of development of integral indicators for evaluating the operating efficiency of national innovation systems have become widespread among scholars. in the paper, the author’s method of forming integral indicator to evaluate the level of development of national innovation systems is developed and the method to evaluate their influence on the economy is proposed. it is proposed to concretize formation of national innovation systems on the basis of 4 directions of functioning of subjects of national innovation systems (entrepreneurial activity, innovative activity, educational and professional activities, welfare of the population), which consideration is taking place during the calculation of integral indicator that reflects the level of development of national innovation systems  – the national innovation systems development index. testing of the methodology of evaluation of national innovation systems’ development is carried out based on data of national innovation systems of six countries: ukraine, great britain, latvia, germany, poland, and france. for all abovementioned countries, indices of national innovation systems development were calculated according to data for 2006–2016. this allowed obtaining the initial data for the second task of scientific research  – the establishment of the interrelation between the level of development of national innovation systems and the level of economic development of countries. and, therefore, the paper proves the necessity of further intensive development of national innovation systems in order to ensure effective development of the economy in general. the work proves the existence of a close positive interrelation between the index of national innovation systems’ development and the index of gdp per capita, which is peculiar for all countries from the sample. this testifies that the growth of values of the index of national innovation systems’ development is accompanied by an increase in the gdp per capita index, and consequently  – an improvement of the indicators of innovation activity in the country leads to an increase in the efficiency of national economies and their competitiveness level. construction of regression models according to data of calculation of the index of national innovation systems’ development and its elements with a quite high reliability will allow using them in order to forecast gdp per capita under conditions of national innovation systems’ development. also, the paper identifies features of the influence of separate directions of the functioning of innovation systems on the level of economic development of the countries under study. in particular, it is proved that high level of innovation development almost in all countries under study (except ukraine) does not allow to achieve significant economic growth precisely because of the active stimulation of innovation activity. and thus it is appropriate to stimulate the development of national innovation systems of abovementioned countries through other directions (in particular, entrepreneurship activity, educational and professional activities). however, it is worthwhile to stimulate the development of national innovation system of ukraine, above all, at the expense of intensification of innovation activity, which will make a considerable positive impact on the country’s economic growth. so, the paper proposes the author’s method for evaluating the development of national innovation systems on the basis of calculation of integral indicator that reflects the level of development of national innovation systems  – the index of national innovation systems development. testing of the methodology of evaluation of national innovation systems’ development is carried out based on data of national innovation systems of six countries: ukraine, great britain, latvia, germany, poland, and france; the existence of a close positive interrelation between the index of national innovation systems’ development and the economic growth in analysed countries is proved. the possibility of practical application of the proposed method for evaluating the development level of national innovation systems increases the importance of the results obtained. baltic journal of economic studies 85 vol. 4, no. 2, 2018 references: balzat, m., & hanusch, h. 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(2013) trends in the development of the national innovation system in ukraine. visnyk sumsu, series economics, 4: 155-161. trading economics. electronic resource. retrieved from: https://tradingeconomics.com website of eurostat. electronic resource. retrieved from: http://ec.europa.eu/eurostat/data/database website of the world bank. world bank group. electronic resource. retrieved from: https://data.worldbank.org/ indicator baltic journal of economic studies 295 vol. 4, no. 3, 2018 corresponding author: 1 department of administrative law and procedure, national academy of internal affairs of ukraine. e-mail: rainbow.m84@gmail.com 2 department of management and administration, nova kakhovka institute of humanities, open international university of human development “ukraine”. e-mail: oleolex.22@gmail.com 3 department of legal sciences, nova kakhovka institute of humanities, open international university of human development “ukraine”. e-mail: alex0674682444@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-295-301 conglomerate management of enterprise as socio-economic system maryna spivak1 national academy of internal affairs of ukraine, ukraine olesia khokhuliak2, anastasiya inshyna3 nova kakhovka institute of humanities, open international university of human development “ukraine”, ukraine abstract. in modern conditions of political, economic, and social globalization, it is difficult to overestimate for ukraine the need for research and introduction of new forms of enterprise management. world tendencies of the interaction of business elements are characterized by decentralized integration, in which, preserving their legal and industrial identity, small and medium business is united in economic communities, trying to withstand large monopolistic associations. the modern business environment in the dual model at one pole is represented by corporations, tncs, mncs, and at the other pole – by free entrepreneurs (freelancers), the number of which is steadily growing. the contradictions and shortcomings of both poles are harmonized by the intra-national integration of economic interests. new business models of economic interaction arise that require new models and forms of management, require the creation of new, adaptive formats of business interaction that involves the mandatory inclusion of standards for sustainable development (economic, environmental, and social mechanism). such a new form of management, in our view, can be an innovative model of conglomerate management, which implies not only conglomerate mergers and acquisitions of corporations but also new mechanisms for interaction of small business structures of different economic and sectoral orientation. the terminology and the theoretical basis for studying the conglomerate as a socio-economic system that includes the basic phrase “socio-economic system” were defined. such a form of organization of socio-economic systems, which would consolidate high competitive advantages, innovative orientation, and significant expansive potential, is proposed. on the basis of generalization of the corresponding theoretical provisions and revealed peculiarities of the formation of spatially localized systems, we assumed that emerging as local “points” of economic growth zones, individual elements or subsystems of enterprises are transformed into territorial production complexes (hereinafter abbreviated as tpc), and then – by implementing the missing infrastructure and institutional components into a variety of cluster forms, into conglomerates. as a result of the research, the following scientific substantiations and conclusions are formulated: 1. for the first time, the term “conglomerate management” was proposed as the aggregate interaction of enterprises united into a spatially localized socio-economic system and a methodological approach to managing such complex structures. 2. a terminology for investigating the purposeful transformation of society and the economy into an additive socioeconomic system is developed. such studies are especially relevant for the modern domestic economy, which contains controversial characteristics of the deterministic and nondeterministic economic model, as well as poorly predicted agglomerate and synergistic effects. 3. a model for organizing and managing conglomerates of a new type is formed. the architecture of the conglomerate enterprise management model as an element of a socio-economic system with an innovative basis as a priority for the dynamic development of a conglomerate is proposed. baltic journal of economic studies 296 vol. 4, no. 3, 2018 4. we also find it economically sound to create a model of developing the strategic potential of an enterprise as an open socio-economic system, to use the mathematical apparatus of studying models of the fractal type that describes the evolution of a modelled system of fractal objects. 5. a parametric characteristic of the formation of a deterministic model of conglomerate control of a fractal type as a socio-economic system was developed and brought to the form of an economic-mathematical model. key words: complex structured enterprises, socio-economic system, economic growth zone, territorial production complexes, conglomerate, deterministic model, conglomerate management. jel classification: g30, м19, о20, с22 1. introduction the trajectory and speed of economic and social processes, changes that occur in the macroeconomic space, naturally and sometimes simultaneously create the necessary prerequisites for the emergence and development of modern tools, methods, and models for developing the strategic potential of enterprises, taking into account global strategies for balanced development. the more intensive the influence of global exogenous factors, the more urgent the problem of creating and implementing a modern additive management model that will allow setting regulated vectors for balanced development, which is especially important for complex structured organizations, which include corporations and concerns. the existing economic and social conditions do not raise doubts that large complex structured organizations are systems of an open type that are in a state of constant dynamic fluctuation and their integrity is determined by a complex of internal and external links and a way of interacting constituent elements. in modern conditions of political, economic, and social globalization, it is difficult to overestimate for ukraine the need for research and the introduction of new forms of enterprise management. world tendencies of the interaction of business elements are characterized by decentralized integration, in which, preserving their legal and industrial identity, small and medium-sized business unites into economic communities, trying to withstand large monopolistic associations. the modern business environment in the dual model at one pole is represented by corporations, tncs, mncs, and at the other pole – by free entrepreneurs (freelancers), the number of which is steadily growing. the contradictions and shortcomings of both poles are harmonized by the international integration of economic interests. new business models of economic interaction arise that require new models and forms of management, require the creation of new, adaptive formats of business interaction that involves the mandatory inclusion of standards for sustainable development (economic, environmental, and social mechanism). such a new form of management, in our opinion, can be an innovative model of conglomerate management, which implies not only conglomerate mergers and acquisitions of corporations but also new mechanisms for interaction of small business structures of different economic and sectoral orientation. classical mechanisms of interaction are transformed into modern methods and technologies of management combining globalization information trends with strict economic and legal conditions for survival in the market, regardless of the size of the company. defining the theoretical basis for studying the conglomerate as a socio-economic system, it is necessary to determine the terminological apparatus, which in this case includes the basic phrase “social and economic system.” in this concept, the three largest scientific categories are synthesized: the system as a set of subsystems; economic system (as a subsystem); social system (as a subsystem). it is expedient to characterize the scientific category “system” by using the general theory of systems; the main representatives of the scientific school are such scientists as m. mesarovich (mesarovich, 1978 (ed)), l. zade (zade, 1974), r . akoff (akoff, 1972), a. uemov (uemov, 1978), r . kálmán (r . kálmán, p. falb, m.  arbib, 2004), s. beer (beer s., 2010), i. prigozhin (prigozhin i., 1986), and others. continuous research of systems leads to the discovery of new properties and principles of their functioning, development, and transformations. this makes it possible to apply new tools, methods, and approaches to studying systems with different properties. to study the economic system, from the point of view of research practice, it seems possible to apply the socio-economic approach. it consists in the fact that the studied object is an economy; it is viewed as a complexly organized socio-economic system. within the framework of such a holistic system, diverse socioeconomic relations are realized. this approach allows objectively considering and analysing the system of views that form these relations. its application allows identifying the possibilities of not only individual subsystems (spheres) but also integral factors of combining these subsystems, which by themselves, by simple addition, are not manifested. as a part of the socio-economic approach, such scientists as p. bourdieu (bourdieu, 2001), m. abolafia (abolafia, 1998), v.  inozemtsev (inozemcev, 2005), v. martsinkevich (martsinkevich, 2003), m. weber (weber, 1978), l.  robbins (robbins, 1993), k. polanyi (polanyi, 2001) consider the economy not simply as a set of baltic journal of economic studies 297 vol. 4, no. 3, 2018 specific actions but as a set of economic and noneconomic actions (often referred to as “social actions” for the purpose of simplicity). we use this statement as a theoretical basis for studying the object of investigation. proceeding from a review of existing ideas about socio-economic systems, it is obvious that today in the scientific literature an established concept of it as a kind of integrity has not yet formulated. the main attention is paid primarily to the study of socio-economic relations implemented within the system. today, not only economists but also representatives of related sciences – economic sociology, political science, and psychology – are actively engaged in such studies. moreover, outside the area of their study, the fact remains that the form in which these relations are realized is a socio-economic system as a way of existence of content (socio-economic relations), inseparable from it and serving as its expression. in this connection, there is a need to study, analyse, and supplement the conceptual framework that can characterize an enterprise as a socio-economic system of a conglomerate. distinguish the elements of the subsystem as an objectively necessary environment for functioning that can ensure the development of the enterprise’s economy, social and economic relations inside and outside its boundaries, and will affect the structure of the entire social and economic system of the conglomerate, i.e. to form new methodological approaches to the concept of managing a set of interacting enterprises as a conglomerate socio-economic system. the purpose of the article is to systematize scientific categories and highlight the modern economic definition of “conglomerate enterprise management”, which will allow identifying promising directions for the formation of a complex structured innovation model of conglomerate management as a socio-economic system. 2. the methodology of research using the postulates of systemic and socio-economic approaches, studies of the interconnection and interaction of economic and social action, it can be argued that the socio-economic system is a complex system, in which man is the central element, functions as the main participant in reproduction and as the main factor and stimulus for developing the whole system. thus, the object of research expands from the narrow framework of a simple object – the economic system to a supercomplex object – the socio-economic system. using the terminology of economic synergetics (delokarov, 2000; dobronravova, 1990; sinergetike – 30 let, 2000; shvets, 2007), the socio-economic system should be viewed not so much as a mode of production, a market or a set of interacting economic entities and objects, but as a complex system prone to self-organization. the formation of the economy of a new type, the establishment of institutions, and the formation of new adaptive and modern models of the operation of enterprises of different scales and legal forms of ownership require a radical change in the vision and approaches to the spatial-organizational allocation of elements of socio-economic systems. in this connection, it becomes necessary to define such a form of organization of socio-economic systems that would consolidate high competitive advantages, innovative orientation, and significant expansive potential. in order to study the laws of development and trends of formation, we propose to consider the socio-economic system in the form of spatially localized systems, for which the gradual change of the existing institutional forms, the formation of complex diversified structures of integration interaction can provide an evolutionary transformation of the economic, social, and technological modes of the economy (kochubej, 2005; cheshkov, 1999). we propose a postulate that enterprises as business structures of a new format are integrated into conglomerates, and thus retain the advantages and capabilities of a dynamic, self-organizing system that seamlessly interacts with elements of other systems, business structures, social and financial institutions. on the basis of generalization of the corresponding theoretical provisions and the revealed peculiarities of the formation of spatially localized systems, we assume that emerging as local “points” of economic growth zones, individual elements or subsystems are transformed into territorial production complexes (hereinafter – tpc) and then – by implementing the missing infrastructure and institutional components, into a variety of cluster forms, the architecture of which is presented in figure 1 (formed on the basis of (merkulova, 2014; mykhajlenko, 2006; skripnichenko, 2011). the experience of the formation of conglomerates in developed countries shows that the zones of economic growth are subsequently formed into separate structural units of the tpc, and this testifies to the need to build a fundamentally new system of regional, territorial, and corporate governance that can ensure the manifestation of agglomerate effects to meet the growing needs, the economy of the enterprise, and its transition into the form of a conglomerate. this, in turn, will affect the socioeconomic development of the region (kalynychenko, 2010; melnik, 2005; tarasevich, 2005). at the same time, the author proposes to use the postulates of the theory of fractals as a methodological basis for solving multifaceted problems of regulating the development of the system and the mechanisms for its self-organization, which makes it possible to carry out studies of the evolutionary process of transforming territorial “points” into zones of economic growth, and then transforming them into a tpc (miziuk, 2006). the formation of adaptive development conditions will allow the territorial-production complexes to create various forms based on conglomerate mechanisms, with the subsequent creation of a unique locally integrated socio-economic system (miziuk, 2006). baltic journal of economic studies 298 vol. 4, no. 3, 2018 3. results and discussion applied methods for assessing socio-economic transformations do not fully meet modern challenges since they usually do not contain methods for interpreting the results of research. the absence of a full theoretical elaboration and revealing the high importance of the problem, creating points of economic growth allows actualizing this issue within the framework of the proposed study. in the process of generating new points of economic growth, it is necessary to fulfil the following criterial requirements: complexity, efficiency, and social orientation, which will ensure a safe and balanced development of the economy of the conglomerate. in favourable conditions, the points of economic growth are transformed into zones of economic growth (blonska, 2010; tarasevich, 2013). first of all, such points of economic growth should provide for a comprehensive regional development since the goal-setting object is all sectors and spheres of the region’s activities, as well as the economic and social processes within it that may not have clearly defined boundaries of the socio-economic system, nevertheless, possess all its attributes. the criterion of integral efficiency is fundamental for generating points of economic growth since the use of the available financial and resource potential should ensure the growth of investment volume, the growth of the economy’s assets (capitalization of markets: industrial, stock, commodity) and, as a result, maximum cost effectiveness and profitability of resources. social orientation of points of economic growth manifests itself in such categories as life expectancy and health status, level and lifestyle of the population. the “social standards of the quality of life” adopted in the country make it possible to determine the feasibility of developing new approaches to the management of spatially localized systems. the implementation of key elements of the concept of sustainable development, which ukraine joined after the rio summit (2012), must be supplemented with the requirements: 1. improved scientific and methodological tools, directions of innovative development of enterprises and conglomerate; 2. socio-economic parameters specific to the ukrainian economy, in particular, targeted reduction in the level of corruption. we propose to introduce a set of indicators given and grouped by indicator vectors as a basis for the economic and mathematical modelling of the deterministic conglomerate management model of the fractal type (table 1, figure 2). in the process of development, there were studied (osnovy modelirovanija system, 2012; urmancev, 1988). some analysts believe that the ukrainian economic development model refers to nondeterministic, that is, implantation of infrastructure and organizational and legal registration of clusters forming the main components of tpc the main components: localization specialization; management; competitiveness; optimal placement; labour resources; natural resource base; technological equipment; business processes; information communications; primary production; state regulation. transformational field of the reproductive process of a locally integrated system social infrastructure; human capital assets; financial and credit infrastructure; innovation infrastructure; transport and logistics; communications infrastructure; service infrastructure; regulatory institution; cluster technologies. economic growth zone figure 1. the architecture of the model of conglomerate enterprise management as an element of the socio-economic system source: (the author’s development) baltic journal of economic studies 299 vol. 4, no. 3, 2018 under certain input parameters, the initial result is more uncertain, stochastic, even probabilistic. experts in the field of macroeconomics argue that the economic model of the national economy as an object cannot be represented in the form of a classical economic-mathematical model since we are dealing with non-linearity (multivariance of development paths and the need for choice) and the indeterminacy, chaos, and irreversibility of evolutionary processes. we are convinced of the opposite and we consider the model of the ukrainian economy as deterministic provided a correct information base, qualitative methodological tools, and effective goal-setting. parameters of scientific and methodological terminology (нмт group) with positive vector dynamics actually reflect the direction of social and economic transformations taking into account conglomerate synergies and implantation of cluster infrastructure. at the same time, we consider the level of implementation of the cluster infrastructure as a single-valued correlation of this parameter with the effective corporate and innovative components of the economy as a whole. the conglomerate management model (мку) describing the system v (x1, x2, ..., xn; r) has the form: мку = (z1, z2, ..., zm; q), (1) where: zi ∈ z, i = 1, 2, ..., n q – set of relations over x – the set of incoming parameters, outgoing states of the economic system, z – set of economic relations, representations of elements and subsets of x (figure 2). q (vx) – sets of indicator vectors (smt, di, ei, fi, si, id, pfac) table 1 parameters of formation of a deterministic model of conglomerate management of a fractal type indicator vectors (v) symbols in the model, vector direction estimated figures (z) scientific-methodological terms ⇑ smt level of conglomerate economy level of conglomerate synergy level of implementation of the cluster infrastructure demographic indices ⇑ di number of the resident population (thousand people) density of population (people/sq. km) average number of employees (people) rate of natural increase, infant mortality share of older people in the total population migration balance of the region and country economic indicators ⇑ ei number of enterprises registered in the state register of the region (units) volume of shipped goods, performed works and services of its own production, and organizations for “pure” types of economic activity per capita (thousand uah). volume of real investments in fixed assets per one enterprise (thousand uah) volume of housing stock in the region per capita (sq. m) volume of gross agricultural output per capita (thousand uah) volume of retail trade through all channels of sales in the region per capita (thousand uah) finance indicators ⇑ fi capitalization of markets (industrial, stock, commodity) the balanced financial result per one enterprise (thousand uah); aggregate income per capita – wages, taking into account the purchasing power parity – the cost of the consumer basket (thousand uah) deficit (surplus) of the regional budget, taking into account the parity of the country’s budget (thousand uah) social indicators ⇑ si number of employees amount of social payments level of money savings of the population, etc. level of consumption of basic foodstuffs level of health protection, level of education level of provision with various material goods (housing, communications, own cars, information means) innovative development ⇑ id volume of investment in infrastructure volume of investments in new developments and technologies number of new enterprises with innovative technologies number of clusters with a level of profitability higher than the industry average parameters (level) of fight against corruption ⇑ pfac quantitative rotation of managerial personnel in the state segment ukraine’s position in international corruption ratings socio-information anti-corruption propaganda in the media relevant legislative framework and anti-corruption monitoring system baltic journal of economic studies 300 vol. 4, no. 3, 2018 we also offer to maximize the presented set of parameters (table 1) z1-m in vector dynamics, as positive characteristics of the macroeconomic development of the conglomerate economy. then, the economicmathematical model of conglomerate synergetics will look like: n m ир мку = σ σ xi xj vij zi zj → max (2) х=l z=l the problem (2) is solved by the gradient projection method or the method of possible directions. the optimal ratio of economic development indicators can also be determined using the solver optimizer of microsoft excel. 4. conclusions as a result of the research, the following scientific substantiations and conclusions are formulated: 1. for the first time, the term “conglomerate management” was proposed as the aggregate interaction of enterprises united into a spatially localized socioeconomic system and a methodological approach to managing such complex structures. 2. a terminology for investigating the purposeful transformation of society and the economy into an additive socio-economic system is developed. such studies are especially relevant for the modern domestic economy, which contains controversial characteristics of the deterministic and nondeterministic economic model, as well as poorly predicted agglomerate and synergistic effects. 3. a model for organizing and managing conglomerates of a new type is formed. the architecture of the conglomerate enterprise management model as an element of a socio-economic system with an innovative basis as a priority for the dynamic development of a conglomerate is proposed. 4. we also find it economically sound to create a model of developing the strategic potential of an enterprise as an open socio-economic system, to use the mathematical apparatus of studying models of the fractal type that describes the evolution of a modelled system of fractal objects. 5. a parametric characteristic of the formation of a deterministic model of conglomerate control of a fractal type as a socio-economic system was developed and brought to the form of an economic-mathematical model. the author sees further prospects in studies of latent symptoms that affect the phased formation, firstly, of the zones of economic growth, and then – the tpc, and the transformation of conglomerates into a socio-economic system containing signs of a universal economy. v (x1) z1 v (x2) z2 v (x3) z3 z – sets of economic relations conglomerate management model figure 2. formation of the deterministic model of conglomerate management of fractal type (мку) references: akoff r . 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(in english) baltic journal of economic studies 36 vol. 4, no. 5, 2018 corresponding author: 1 institute of law and psychology, lviv polytechnic national university, ukraine. e-mail: bnp1969n@gmail.com 2 chernivtsi institute of law, national university “odessa law academy”, ukraine. 3 lviv university of trade and economics, ukraine. e-mail: kotuha1@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-36-39 essence and content of category “financial investigations” and concept development amid european integration nadiya bortnyk1, julia tsurcan-saifulina2, oleksandr kotukha3 abstract. the article carries out analysis of essence and content of financial investigations as one of the main countermeasures to shadowing the economy and, in particular, anti-money laundering. features of the implementation of the fatf recommendations and other international organizations regarding the legal and institutional support of conducting financial investigations in ukraine and other european union countries are determined. systematization of scientific views on the definition of “financial investigation” and the practice of carrying out the relevant activities both in foreign countries and in ukraine allowed formulating approaches to the unification of the term “financial investigation” in the national scientific format. the methodological basis of the research consists of general scientific and special methods and techniques of scientific knowledge, which are used as a single set, namely, the logical-semantic method, the method of convergence, and also the formal-logical method are chosen to define the concepts of “financial investigation”, “analytical research”, “anti-money laundering”, “interaction of subjects of the national system of anti-money laundering”, etc. the comparative legal method is used to study the positive foreign and domestic experience of institutional and legal provision of financial investigations in the fight against money laundering, as well as to analyse and characterize the requirements of international organizations regarding the implementation of european union legislation in the domestic legislation on issues of the legal framework for anti-money laundering. practical implications of the paper are to reveal and systematize problems to be solved by improving the domestic legal and regulatory framework for organizing financial investigations in the system of anti-money laundering measures, while the new principles of its formation proposed by the authors can be implemented in practical terms and result in improving the information and spatial format and enhancing the interaction of the subjects of ensuring national economic security. key words: economic security, financial security, state security, legal regulation, shadowing of economy, fight against corruption, legalization (laundering) of illegally obtained income. jel classification: f52, h56, d73 1. introduction the organization of the work of subjects of national systems for combating crime and other economic offenses, in particular, the legalization (laundering) of illegally obtained income, terrorism financing, and proliferation of weapons of mass destruction, is constantly monitored and controlled by the committee of experts of the council of europe on the evaluation of anti-money laundering measures and the financing of terrorism – moneyval. experts of moneyval determine the criteria for evaluating the technical compliance with each of the fatf recommendations and the results, indicators, data, and other factors used to assess the effectiveness of implementing the fatf recommendations (fatf recommendations dated 16.03.2012) by a country that is undergoing a certain round of mutual evaluations. in this case, the maximum compliance with the above recommendations for the introduction of measures to counteract the legalization (laundering) of illegally obtained income is required. among such measures, an important place belongs to financial investigations. in accordance with these recommendations, the term “financial investigations” means the study of financial affairs related to criminal activities for the purpose of: determining the extent of criminal networks and/or crime rate; establishing and tracking illegally obtained income, terrorist funds, or any other assets, which baltic journal of economic studies 37 vol. 4, no. 5, 2018 are subject to or can be subject to confiscation and submission of evidence that may be used in the course of criminal prosecution (fatf recommendations dated 16.03.2012). as scientists point out, financial investigations include measures to counteract plundering of state funds, cybercrime, corruption, tax evasion, money laundering, terrorist financing, trade in arms, drugs, people, etc. (cherniei, 2017). striving to ensure compliance with the obligations of countries regarding european integration, one should listen to eberhard schmidt-aßmann’s warning regarding the interpretation in accordance with the current law of european communities, in particular, the eu directives, which has already been recognized, however, given it, the preconditions and implications are still rather an uncertain instrument. it should cover all national legislation, and not only laws specifically adopted for the purpose of implementing a directive, and should also be binding not only for judges but also public administration bodies of the member states. all this makes sense in the policy of integration. however, here too, one cannot ignore some of the warning processes. these warnings relate to the fact that constitutional european law often uses very broad and uncertain in this sense terms. instead, being bound by the law, in any case, implies a certain degree of justification. one cannot ignore the threat that the uncertain provisions of directives will be transposed to the national legislation and will cause the formation of discretionary powers of the subjects of law enforcement (eberhard schmidt-aßmann, 2009). 2. the concept “financial investigation” in theory and legal acts the concept “financial investigations” has come into a modern lexicon and practice. as a general rule, it is a specific activity related to the study of documents and other sources in order to find out information about the turnover of funds, origin and establishment of property, etc. such activity is carried out by various entities: financial intelligence, control and supervisory bodies, law enforcement agencies, consulting companies. so, putting one or another content in this concept, it is used by ordinary citizens, representatives of mass media, scientists, practitioners, it is mentioned in draft laws and regulations, which propose to determine the status of special subjects that will specialize in the specified types of investigations. some scientists believe that “financial investigations” as a procedural activity should be understood as the collection, consolidation, comprehensive consideration, study of essential data relevant to the case, the circumstances of the committed violation associated with the encroachment on the relations regarding the formation, distribution, redistribution, and use of monetary funds (financial resources) of subjects of economic relations. combining in this definition “procedural activity” which is a certain “hybrid” of financial control and work of law enforcement bodies with the classical definition of finance, we consider “violation in the financial sphere” as a movement of money outside the legal framework (pimenov, 2003). other scholars point out that financial investigations should be considered as a practical (procedural) activity and as a scientific direction. under the financial investigation as a procedural activity, they understand the collection, comprehensive consideration, study of the essential circumstances of the committed violation in the field of monetary relations that arise in the process of distribution and redistribution of the value of gross social product and a part of national wealth in connection with the formation, distribution, and use of monetary funds. at the same time, under financial investigations, they consider the direction of scientific research on violations in the financial sector that aims to develop an effective methodology, methods of prevention, detection, and investigation of these violations, as well as recommendations for building an effective financial system that basically prevents committing violations (kondrateva, goriunov, 2003). periodically, proposals are made, in particular, for the action plan of ukraine to improve the national financial monitoring system by the results of round 5 of the moneywal assessment regarding the definition of the term “financial investigations” in national legislation. at the same time, certain members of the said council on the prevention and counteraction of the legalization (laundering) of the proceeds from crime, terrorist financing, and financing of the proliferation of weapons of mass destruction, objected to this proposal, substantiating this with the fact that one of the elements of the pre-trial investigation today is conducting investigative (search) actions, which in their content actually are a “financial investigation”. in this regard, the separation of the obligation to support financial investigations of pre-trial investigations is superfluous (materials of the 5th convocation of the council meeting, 2018). these arguments are not indisputable, in particular, taking into account the experience of legal regulation of financial investigations by countries with the post-soviet past. for example, in the republic of lithuania, measures are actively being implemented to implement antimoney laundering standards and in order of the prosecutor general of the republic of lithuania no. і-73 as of 19 march 2013 “recommendations for financial investigations”, the definition of the concept of financial investigation is proposed. in accordance with the said legal act, a financial investigation is disclosed as a process of collecting information about the property of any form belonging to a person or related individuals and legal entities, agreements and financial transactions in order to find property possibly baltic journal of economic studies 38 vol. 4, no. 5, 2018 obtained by a criminal or other illegal means or property of an appropriate value to ensure possible confiscation or extended confiscation or a possible civil claim, and to collect other information relevant to the investigation related to property transactions and financial transactions (order of the prosecutor general of the republic of lithuania, 2013). the same order stipulates that a financial investigation shall be related and carried out in such types of investigation as: pre-trial, criminal intelligence, or other, in accordance with the law. moreover, in contrast to the provisions of ukrainian legislation, in which the concept of financial investigation and its relation to other criminal proceedings in general are not defined separately, the order determines that the financial investigation is conducted in parallel with the pre-trial investigation, while the principles of procedural interaction of subjects who conduct a financial investigation and a prosecutor – procedural leader of the pre-trial investigation (order of the prosecutor general of the republic of lithuania, 2013). in this approach, a reasonable understanding of the ratio of financial investigation and criminal proceedings is formed. it is recognized that these activities differ in content, direction (by object and purpose), and methodology, respectively, the concepts of “financial investigation” and “criminal proceedings” are not identical. by formulating and consolidating the concept of financial investigations, one should consider the experience of countries where there is the active practice of financial investigations and their scientific and methodological substantiation within the scope of activities of economic entities. in particular, the service “financial investigations” is quite common in the field of consulting. many consulting and audit companies have specialized financial investigative units, so-called “forensic” groups (efimov, bushueva). financial investigations are carried out in the form of a retrospective verification of the company’s activities, estimation of losses and lost profit, a search of guilty persons, and collection of evidence by private organizations (tylchyk, 2017). in particular, kreston gsg is a representative of an international network in the field of audit and consulting services with resources of over 20,000 professionals in 108 countries around the world. it is appropriate that financial investigations involve the detection of facts of bribery and other corruption manifestations, misappropriation and dispossession of assets, falsification of financial reporting, theft of information, negligence. it is equally important to understand the concept of “financial investigation” to clarify the concept used sometimes as synonymous to “forensic accounting”, which is revealed with a reference to the webster dictionary by combining the concepts of accounting and forensic medicine. as a result, this activity is disclosed as by methodologies in the field of accounting used for the application of the system of documentation and analysis of economic and financial transactions for resolving legal issues (dedkov, 2004). it should be considered that financial investigations are not tasked to cover the entire set of financial flows and financial information for verification, established rules and regulations. there is a task before financial investigations – by conducting a specialized study to identify and fix the financial component of the criminal activity. it may differ from the deviations found during the financial control, special complexity, intent, and concealment of traces of illegal activity. all of this implies the presence of a special methodology in the financial investigations, and also the active use of additional information sources, such as extended databases, results of operational-search and investigative measures (law enforcement agencies), the results of private detective activities and the practice of purchasing the necessary restricted information (company security and consulting services). in this regard, interesting is the experience of the republic of belarus, where the decree of the president of the republic of belarus as of 23.10.2012 “on some measures to prevent illegal minimization of amounts of tax obligations” is in force, which regulates the systematic conduct of measures to terminate pseudostructures, include them to a special register, and bring their clients to the responsibility prescribed by law. this decree discloses the concept of the register of commercial organizations and individual entrepreneurs with an increased risk of committing offenses in the economic sphere, as well as criteria for assigning business entities to this register (decree of the president of the republic of belarus as of 23.10.2012). unlike this country, in ukraine, until now, no decision was made on the compulsory general electronic declaration, the introduction of which was announced in march 2018. this would significantly contribute to narrowing the range of opportunities for money laundering. 3. features of financial investigations in the study of intangible assets international experience shows that regulatory authorities should have sufficiently wide powers to exercise control over financial institutions, collect and transmit information about suspicious transactions. the effectiveness of combating money laundering is closely linked to the ability of regulators to access the necessary information, even if the law contains provisions on commercial and banking secrecy. money laundering schemes are constantly being improved, and the reaction to the emergence of new forms of legalization through the length of the legislative process will be constantly late. for example, money laundering schemes using such an instrument as intangible assets are usually quite confusing and intangible assets in such cases serve as a convenient tool for redistributing cash. since intangible assets are not physical, and the definition of their value is imperfect and nonbaltic journal of economic studies 39 vol. 4, no. 5, 2018 transparent, so operations with them can be a convenient tool for achieving various goals, including those used in various schemes for the legalization of illegally obtained income: – in order to create the visibility of the legality of income (royalty) of individuals; – for the withdrawal of funds to foreign jurisdictions; – to reduce the tax burden on business entities. in fact, the main weakness of intangible assets in such cases is the subjectivity of their pricing and their actual availability. in some cases, offenders complicate the schemes of money laundering with intangible assets, using financial instruments that mask the very nature of transactions or several additional intermediaries. it should be noted that such operations can be related directly to the very predicate crime and to money laundering. analysing this issue, it is necessary to pay attention to another instrument of money laundering, this is the establishment of facts of using the mechanisms of financial assistance to conceal illegally obtained income, here problematic issues appear in the course of collecting evidence base to establish the origin of funds legalized in the activity of economic entities of the real sector of the economy by providing financial assistance. it is advisable to provide for the possibility of prosecution not only for money laundering, even in the absence of a sentence for a predicate crime, as recommended by experts, but also for actions aimed solely at providing the legalization of illegal income that may be obtained in the future. 4. conclusions the analysis of theoretical developments, as well as the provisions of certain laws and regulations regarding the definition of “financial investigation”, allows us to state that there is no single approach to its formulation. this can be explained by the following basic circumstances: a) features of national economic and legal doctrines; b) features of the formation of the national procedural, in particular, criminal procedural law; c) the selection of certain means of interpreting international fatf standards and their implementation into national legislation; d) branched sphere of practical application by many subjects with different legal status. in this connection, financial investigation in countries with legal systems close to ukrainian one is formulated as: criminal proceedings in cases of crimes committed in the sphere of economy and finance (i.e., criminal proceedings) or as an economic category used to designate measures of ensuring economic and financial security of enterprises, consisting of: due diligence, assets recovery, judgement enforcement, litigation services, bankruptcy fraud, corporate fraud investigation, forensic accounting and fraud. establishing the ratio of financial investigation and criminal proceedings, it is worth recognizing that these activities differ in content, direction (by object and purpose), and methodology, respectively, the concepts of “financial investigation” and “criminal proceedings” are not identical because depending on the purpose of conducting “financial investigation” it may include criminal procedural activities. references: international standards on combating money laundering and terrorist financing and proliferation of weapons of mass destruction – fatf recommendations on 16.03.2012, as amended. cherniei, v. v. at al. (2017). the shadow economy: world trends and ukrainian realities [text]: materials of the intersociety research-to-practice conference (kyiv, 23 june 2017). national academy of internal affairs of ukraine. general administrative law as an idea of regulation: foundations and tasks of administrative system formation / eberhard schmidt-aßmann; eic o. syroid. 2nd edition. k.: “k.i.s.”, 2009. pimenov, n. a. (2003). financial investigations: main approaches. bulletin of the financial academy, 1(25), 25. kondrateva, e. a., goriunov, a. r . (2003). revisiting the development of the scientific definition of financial investigations. bulletin of the financial academy, № 1(25), 21. materials of the 5th convocation of the meeting of the council on the prevention and counteraction of the legalization (laundering) of the proceeds from crime, terrorist financing, and financing of the proliferation of weapons of mass destruction. 2018. retrieved from: http://www.sdfm.gov.ua/articles.php?cat_id=285&lan order of the prosecutor general of the republic of lithuania “recommendations for financial investigations” on 19 march 2013. retrieved from: https://censor.net.ua/news/238090/litva_gotova_podelitsya_s_ukrainoyi_opytom efimov, v. s., bushueva, n. v. (2014). challenges and threats to financial credit system of the rf in modern conditions. the potential of the socio-economic development of the russian federation in the new economic conditions, materials of the international research-to-practice conference. retrieved from: https://cyberleninka.ru/.../ metodologicheskie-podhody-k tylchyk, o. (2017). administrative and legal provision of counteraction to shadow economy: the monograph. publishing house “helvetica”. kyiv. dedkov, a. v. issues of forming the institute of financial investigations. retrieved from: http://www.finman.ru/ articles/2004/2/1759.html decree of the president of the republic of belarus as of 23.10.2012 “on some measures to prevent illegal minimization of amounts of tax obligations”. retrieved from: http://pravo.newsby.org/belarus/ukaz0/uk336.htm baltic journal of economic studies 321 vol. 4, no. 4, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. e-mail: sinyavskaya.elen@gmail.com 2 classic private university, ukraine. e-mail: pokataeva.olga1978@gmail.com 3 classic private university, ukraine. e-mail: victor30077788@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-321-325 on the expediency of granting tax exemptions in the sphere of set tlements improvement olena syniavska1, olga pokataіeva2, pavlo pokataіev3 abstract. the purpose of the paper is to investigate the procedure of provision of economic incentives in the sphere of settlements improvement in the context of elements of development, in particular, the provision of tax privileges. methodology. the survey is based on the analysis of the elaboration of the regulatory framework in the cis countries regarding the application of tax privileges to economic entities that take an active part in the sphere of settlements improvement in terms of elements of development. the norms, which provide tax incentives in the tax codes of the republics of uzbekistan, kazakhstan, the kyrgyz republic, the russian federation, and ukraine, are considered. provided proposals for the improvement of the tax legislation of these countries in the direction of application of tax incentives to natural and legal persons are based on the statement of the need to enhance the ecological component of a settlement, maintain its aesthetic appearance, create comfortable conditions for people living in it. results. in the course of the investigation of the state policy on waste management in the cis countries and analysing the modern legal and regulatory framework towards the provision of tax incentives to economic entities, which operate in the sphere of waste management, or towards natural persons, who acts in a private procedure, the necessity to grant them benefits on corporate profit tax, value-added tax, personal income tax, land fees is substantiated. studying the state and regional policy on planting of greenery on the territory of settlements as an element of improvement, it is justified the necessity to grant tax privileges to enterprises, institutions, organizations, which take an active part in the process of planting by virtue of corporate profit tax, and to allow the use of special tax regimes for the enterprises the main activity of which is cultivation and realization of ornamental plants. it is proposed to consider the possibility to relive economic entities belonging to representatives of small business from payment of property tax for small outdoor amenities. practical implications. the presented proposals for granting tax exemptions to economic entities that take an active part in the improvement of settlements will contribute to increase of motivation for the promotion of waste sorting, the manufacture of containers, garbage trucks, facilities of waste sorting plants; the intensification of activities on waste recycling and manufacture of products made of secondary raw materials; planting of greenery on the territory of settlements, which will contribute to betterment of the appearance of the settlements, creation of favourable, comfortable conditions for the population, improvement of the ecological situation. value/originality. the article gives action-oriented proposals to bring modifications to the tax codes of the cis countries towards the simulation of natural and legal persons to invest funds in sanitary clean-up of the territory from domestic waste for the implementation of rational waste management and for actions aimed at waste collecting. key words: tax privileges, taxpayers, improvement of settlements. jel classification: e62, h25, h54 1. introduction modern rapid development of settlements and annual growth of population density in the megalopolises (expansion of the urbanization process as a socioeconomic process, which is characterized by geographical conditionality and expressiveness in the space accompanied by the growth and development of urban settlements , the increase in the volume weight of urban population, the spread of urban lifestyle in the country and the region, in particular) cause the necessity to solve tasks aimed at creating favourable, comfortable, aesthetic living conditions for the inhabitants of settlements. baltic journal of economic studies 322 vol. 4, no. 4, 2018 the solution of the problems of settlements improvement is a topical issue, which contributes to the revival and socio-economic development not only of a separate administrative-territorial unit but the state as a whole. the development of the qualitative infrastructure as a component of assurance of settlements improvement of high-level will promote the growth of entrepreneurial activity, employment creation, increase of economic potential of regions, growth of budget revenues of all levels as a financial basis for the solution of social problems connected with guarantee of a high living standard for people. a complex improvement of settlements is considered as the implementation of a set of works on organization (restoration) of road and pavement surfacing, installation of equipment for traffic safety, planting, provision of outdoor lighting, and out-of-home advertising, installation of street furniture, implementation of other measures aimed at improving engineering-technical territory condition, improving its aesthetic appearance (art. 22 of the law (the verkhovna rada of ukraine, 2005). the issue of the rational use of the settlements territory as an element of improvement was considered in the following papers: v. i. demchenko, ye. o. ivanova, s. d. kravchenko, i. v. nahorna, a. i. ripenko. o. p. kokits, n. i. oliinyk provided recommendations on the formulation of a model for the creation of the scenario for an urban development. і. і. kulichenko, s. v. nesterenko, o. s. slieptsov, i. l. subota studied the rational accommodation of buildings on certain types of foundations in the complex engineering and geological conditions; formation of small buildings; development of the architecture of civil buildings. a. v. skrypnyk devoted her research to the problem of taxation in the sphere of waste recycling (skrypnyk, 2015). however, in order to increase the motivation of economic entities and the population regarding waste management, conservation of natural resources, creation and maintenance of the aesthetic appearance of a settlement, it is expedient to apply economic incentives, in particular, to provide tax privileges to those legal and natural persons who fulfil all abovementioned conditions. we will conduct the opportunity analysis of the application of tax privileges in the terms of elements of settlement improvement. the purpose of the article is to examine the procedure of provision of economic incentives in the sphere of settlement improvement, in particular, the provision of tax privileges, in the context of redevelopment. 2. tax privileges in the sphere of household waste management the economic aspect of the issue of rational waste management is connected with the need that the population pays for processing. the main method of financing for waste processing in the world is an inhabitant tax, and there is manufacturers’ tax in those countries, which have waste sorting system, recycling, and implement environmental legislation (skrypnyk, 2015). it is expedient to apply tax incentives in order to increase taxpayers’ motivation in relation to rational wastes management, which, first of all, negatively influence the appearance of the settlement’s territory and environmental situation. the european legislation lays down waste management standards, the main objective of which is to minimize the negative impact on the environment and human health (directive 2008/98/ec of the european parliament and of the council). in addition, para. 28 of the directive indicates the need to avoid waste generation and to use waste as a resource aimed at ensuring the source separation, collection, and recycling of priority waste streams. to facilitate and improve recovery capacity, if it is technically, ecologically, and economically feasible, the separate waste collection should be provided. in addition, art. 11 of the directive presents recommendations on relevant measures to encourage the re-use of products and preparing for re-use activities, using economic instruments (the european union, 2008), which include tax privileges. in the ukrainian legislation in the law “on waste” there are provisions, which confirm the possibility of application of tax privileges. in particular, para. “в” of art. 18 shows the authority of the cabinet of ministers of ukraine in waste management to ensure organizational and economic principles and to encourage the separate collection and recycling (the verkhovna rada of ukraine, 1998). the powers of the local state administrations in the sphere of waste management include the creation of the necessary conditions to motivate the population to be involved in collecting and preparing of certain types of waste as secondary raw materials (para. “н”, art. 20 of the law), and local authorities are endowed with similar powers (para. “i” art. 21 of the law). in addition, para. “д” of art. 21 of the law of ukraine “on waste” stresses on the adoption of measures to motivate commercial entities engaged in waste management but without any specification what the legislator meant. but para. “в” of art. 38 of the law “on waste” clearly indicates the possibility to provide tax privileges for enterprises that recycle and reduce the volume of waste generation and introduce low-waste technologies in manufacturing. paragraph “a”, art. 40 of the law of ukraine “on waste” specifies that economic entities which introduce technologies aimed at reducing the volume of waste generation, recover wastes in the process of manufacturing (work performance, provision of services), carry out their collection and storage, implement manufacturing of waste recycling equipment, may be provided with privileges for taxation of profit on the sale of products manufactured with waste use. however, insight into the content of the tax code of ukraine (hereinafter referred to as the tc of ukraine) baltic journal of economic studies 323 vol. 4, no. 4, 2018 made it possible to conclude about the absence of such a standard for the provision of tax benefits on income tax. the only exception is a temporary relief from profit taxation for japanese entities, which perform bortnychi sewage treatment plant modernization project in the framework of “project of reconstruction of sewage treatment facilities and construction of a production line for sewage-sludge treatment and utilization of the bortnychi aeration station” (para. 38, subsection 4 of the “transitional provisions” of the tc of ukraine) (the verkhovna rada of ukraine, 2010). at the same time, these business entities are temporarily relieved from value added tax. however, relatively the value added tax, undertakings carrying out operations for the supply of paper and paperboard for recycling (waste paper and waste) are temporarily relieved from the value added tax (by january 1, 2019), although this provision doesn’t concern on the system of settlement improvement. in the republic of kazakhstan, procedures for the implementation of services for the organization of the collection, transportation, processing, disposal, use and (or) recycling of waste are released from the value added tax (para. 21, part 5, art. 372 of the tc of the republic of kazakhstan (the parliament of the kazakhstan, 2017). in addition, when calculating paid amount of landfills, which carry out the disposal of municipal waste, for emissions, for the amount of solid waste that is generated by individuals at their place of residence, and a reduction coefficient 0.2 is applied to payment rate (para. 2, art. 577 of the tc of the republic of kazakhstan (the parliament of the republic of kazakhstan, 2017)). consequently, examined the procedure of incentives’ provision for individuals and economic entities in the cis countries in the sphere of waste management, in particular, regarding tax privileges, we can observe the lack of support from the state in this direction. it is advisable to propose ways of tax legislation improvement in the following direction: – provision of privileges for the profit taxation of enterprises that carry out the sales of products manufactured with the use of waste. privileges may be granted in the form of a reduced income tax rate. the release of these undertakings from payment of the value added tax in connection with the implementation of operations for the supply of such products, as well as operations for the supply of equipment, which is meant to be used for manufacturing of products made of waste, to the customs territory of the country; – provision of privileges for profits taxation of enterprises engaged in waste management, in particular, to allow enterprises to reduce their income for the expenses amount related to the purchase of accessories, equipment, vehicles used for transportation, sorting, storage of waste for their recycling. granting of privileges for value added tax in the case of operations for supplying of accessories, equipment, vehicles used for the abovementioned purposes to the customs territory of the country; – provision of privileges for individuals who carry out sorting of household refuse by creating containers for separate waste collection in their own territory, for example, to permit a reduction of income that is subjected to personal income tax for the amount of costs associated with the purchase/creation, the establishment of such containers, and the costs associated with payment to enterprises that carry out garbage removal; – to play an active role for the attraction of domestic industrial enterprises for the manufacture of containers, garbage trucks, and buildings of waste sorting plants, providing them with exemptions from corporate income tax, value added tax, land tax (land use fees) in the form of tax holidays for a certain period of time; – to consider the possibility of encouraging individuals if they collect and store certain types of waste as a secondary raw material. so, paper and paper wrappers are raw material for the production of toilet paper, newsprint, roofing material. glass container can be raw materials for the production of new glass, decorative tiles with significant electricity savings. incentives can be in the form of exemption from the payment of personal income tax, for income got from the paper delivery in the form of waste paper for re-processing it in the future. 3. provision of privileges in the sphere of cleaning and landscaping of settlement territory the study of the regulatory framework in the cis countries provided an opportunity to draw the conclusion that, as a rule, taxpayers who take part in the improvement of settlements have the opportunity to obtain benefits from property tax or land tax. thus, in ukraine, lands exempted from land tax, in the conditions if there are buildings that ensure the functioning of roads, namely: snow-protecting structures and plantings, anti-mudflow and antisnow slide facilities, protective plantings, noise barriers, wastewater treatment constructions; facilities for parking and rest, which are in state ownership (subparagraphs 283.1.4, para. 283.1, art. 283 of the tc of ukraine (the verkhovna rada of ukraine, 2010)). in the republic of uzbekistan, the enterprises of housing and municipal services and other municipal economy of the general public are released from the property tax of legal entities, who directly provide management, maintenance, and operation of the housing stock, organization of sanitation and cleaning service, improvement and planting of greenery, outdoor lighting of cities and settlements, for the operation of water intakes, distribution networks (with treatment facilities) and distribution of water, operation of sewage networks, etc. (article 269 of the tc of the republic of uzbekistan (the parliament of the republic of uzbekistan, 2007)). baltic journal of economic studies 324 vol. 4, no. 4, 2018 in the kyrgyz republic, actions for the supply for natural persons of services for the use of sewage, elevators, disposal of solid and liquid waste, provision of hot and cold water, heat, electricity and gas for household purposes (para. 1, art. 240 of the tc of the kyrgyz republic (the parliament of the kyrgyz republic, 2008)). but the landscaping of settlements’ territory plays an important role in the redevelopment sphere. green areas can improve sanitary and hygienic conditions of settlements protecting them from dust, regulating the thermal regime, purifying and humidifying the air. green areas are of great importance for the formation of the urban architecture, enriching the variety of its landscape by the diversity of forms, colours and texture of trees and shrubs. in addition, in many countries, the territory greening programs were approved. thus, the decree of the president of ukraine “on certain measures for preservation and recreation of forests and green plants” obliges local authorities: to develop regional programs for the development of ornamental horticulture; to create new green areas, parks, squares, involving enterprises, institutions, representatives of public organizations in this process (verkhovna rada of ukraine, 2008). in the russian federation, many regions adopted a number of legal acts, in particular, “on approval of the strategy for settlements landscaping in saratov region” (government of saratov region, 2017), the order “on approval of the concept for landscaping of municipal entities in the voronezh region” (department of natural resources and environment of voronezh region, 2011). enterprises, organizations, institutions should take an active participation in the process of greening, but regulatory legal acts of ukraine, the russian federation, and kazakhstan do not provide tax benefits. in addition, in accordance with para. 291.4, art. 291 of the tc of ukraine, agricultural goods producers can choose a preferential taxation such as a simplified tax system, accounting and reporting, except for those entities that have more than 50 percent of the income received from the sale of agricultural products of their own production, is the income from the sale of ornamental plants (the verkhovna rada of ukraine, 2010). usually, such conditions of management will not contribute to motivation raise for participation in the greening program, in particular, the ornamental horticulture development program. in our opinion, in order to improve the level of settlements’ greenery, those companies that take an active part in this process should get the possibility of exemption on income tax by reducing the amount of income of the enterprise to the amount of expenses associated with the participation in the process of planting of greenery (purchase of ornamental plants, inventory for planting with the use of own funds), and enterprises the main activity of which is the cultivation and sale of ornamental plants should be allowed to use special taxation treatment. 4. provision of privileges to business entities engaged in activities with the use of street furniture street furniture is one of the elements of municipal improvement and it is an element of decorative or other equipment of the object of amenity. they include: arbours, pavilions, canopies; park arches (arcades) and columns (colonnades); street vases, flowerpots and amphorae; decorative and game sculpture; street furniture (benches, wooden seats, tables); stairs, balustrades; park bridges; fences, gates, lattices; information stands, boards, signboards, etc. (p. 2, art. 21 of the law (the verkhovna rada of ukraine, 2005)). in ukraine, the entities of small and medium-sized businesses, which carry out their activities by virtue of street furniture, are relieved from payment of immovable property tax, which is different from the land plot (subparagraphs 266.2.2, para. 266.2, article 266 of the tc of ukraine (the verkhovna rada of ukraine, 2005). similar privileges take place in the tc of the kyrgyz republic. according to arts. 324, 328, a lowering factor of 0.8 from the tax base is applied to the tax rate on the property for tax objects, such as: temporary premises from metal and other structures (kiosks, containers for business purposes) (the parliament of the kyrgyz republic, 2007). but, as a rule, activities with the use of such forms are carried out by small business entities that require state support, and it would be expedient the governments of the republic of uzbekistan, kazakhstan draw attention to the provision of the possibility of exemption from payment of property tax for street furniture, and it would contribute to the development of entrepreneurial activity and, consequently, the creation of new job positions, an increase in tax revenues, etc. 5. conclusions the state policy on waste management in the cis countries was studied and the modern regulatory framework for the provision of tax privileges to economic entities and individuals engaged in waste management is analysed. in the course of investigation of the state waste management policy in the cis countries and analysing the current regulatory framework for the provision of tax privileges to economic entities that carry out activities in the sphere of waste management, or in relation to individuals who carry out activities in a private procedure, it was justified the need to grant them tax breaks for corporate income tax, value added tax, personal income tax, land fees. regarding the policy of greening of settlements’ territory as an element of improvement, it was substantiated the necessity to provide tax privileges of corporate profit tax for enterprises, institutions, organizations that take an active part in this process, and enterprises, the main activity of which is cultivation and sale of ornamental plants should be allowed to use special tax regimes. it is proposed to consider the possibility of release from payment of property tax for street furniture, business entities belonging to small business representatives. baltic journal of economic studies 325 vol. 4, no. 4, 2018 references: the verkhovna rada of ukraine (2005). pro blahoustrii naselenykh punktiv: zakon vid 6 veresnia 2005 r., n 2807-iv. 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(2015). problemy finansuvannia ta opodatkuvannia u sferi utylizatsii vidkhodiv v ukraini ta sviti [problems financing and taxation in the sphere of recycling in ukraine and in the world]. ekonomika ukrainy, 12, 59-69. retrieved from: http://nbuv.gov.ua/ujrn/ekuk_2015_12_7 the european union (2008). dyrektyva yevropeiskoho parlamentu ta rady yes 2008/98/ies “pro vidkhody ta skasuvannia deiakykh dyrektyv”: mizhnarodnyi dokument. dyrektyva vid 19 lystopada 2008 roku [directive 2008/98/ec of the european parliament and of the council “on waste and repealing certain directives)]. retrieved from: https://menr.gov.ua/news/31288.html the verkhovna rada of ukraine (1998). pro vidkhody: zakon ukrainy vid 5 bereznia 1998 r. n 187/98-vr [on waste: the law of ukraine dated march 5, 1998 n 187/98-вр]. retrieved from: http://zakon2.rada.gov.ua/ laws/show/187/98%d0%b2%d1%80/print1509793533482428 the verkhovna rada of ukraine (2010). podatkovyi kodeks ukrainy (zi zminamy ta dopovnenniamy): zakon vid 02 hrudnia 2010 r. № 2755-vi [the tax code of ukraine (as amended): the law of ukraine dated december 2, 2010 № 2755-vі]. retrieved from: http://zakon2.rada.gov.ua/laws/show/2755-17 the parliament of the republic of kazakhstan (2017). o nalogakh i drugikh obyazatelnykh platezhakh v byudzhet: kodeks respubliki kazakhstan ot 25 dekabrya 2017 g. № 120-vi zrk [on taxes and other statutory payments to budget: the code of the republic of kazakhstan dated december 25, 2017 № 120-vi зрк]. retrieved from: https://online.zakon.kz/document/?doc_id=36148637#pos=361;-120 the parliament of the republic of uzbekistan (2007). nalogovyy kodeks respubliki uzbekistan: zakon ot 25.12.2007 g. № zru-136 (s izmeneniyami v sootvetstvii s zakonom ruz ot 18.04.2018 g. № zru-476) [the tax code of the republic of uzbekistan: the law dated 25.12.2007 № зру-136 (as amended in accordance with the law of the ru dated 18.04.2018 № зру-476)]. retrieved from: http://fmc.uz/legisl.php?id=k_nal the parliament of the kyrgyz republic (2008). nalogovyy kodeks kyrgyzskoy respubliki (s izmeneniyami i dopolneniyami po sostoyaniyu na 22.12.2016 g.): zakon ot 17 oktyabrya 2008 g. № 231 [the tax code of kyrgyz republic (as amended as of 22.12.2016): the law dated october 17, 2008 № 231]. retrieved from: http://online.adviser.kg the verkhovna rada of ukraine (2008). pro deiaki zakhody shchodo zberezhennia ta vidtvorennia lisiv i zelenykh nasadzhen: ukaz prezydenta ukrainy vid 04.11.2008 r. № 995/2008 [ on certain measures for preservation and recreation of forests and green plants: the decree of the president of ukraine dated 04.11.2008 № 995/2008]. retrieved form: http://zakon1.rada.gov.ua/cgibin/laws/main. cgi?nreg=995%2f2008 government of saratov oblast (2017). ob utverzhdenii strategii ozeleneniya naselennykh punktov saratovskoy oblasti (s izmeneniyami na 26 dekabrya 2017 goda): postanovlenie ot 13 iyunya 2017 g., n 303-p [on approval of the strategy for settlements landscaping in saratov oblast (as amended of december 26, 2017): the resolution dated june 13, 2017 n 303-п] retrieved from: http://docs.cntd.ru/document/467713977 department of natural resources and environment of voronezh region (2011). ob utverzhdenii kontseptsii ozeleneniya munitsipalnykh obrazovaniy voronezhskoy oblasti: prikaz ot 15 dekabrya 2011 g. № 236 [on approval of the concept for landscaping of municipal entities in the voronezh oblast: the resolution dated december 15, 2011 № 236]. retrieved from: http://docs.pravo.ru/document/view/21478976/20698182/ baltic journal of economic studies 256 vol. 4, no. 5, 2018 corresponding author: 1 international humanitarian university, ukraine. e-mail: arabadjinb@gmail.com 2 national university odessa academy of law, ukraine. e-mail: manelo4ka@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-256-265 retrospective and modern aspects of the development of charity natalia arabadzhy1, iryna korniienko2 abstract. the article considers the retrospective and modern aspects of the development of charitable activity in the socio-economic sense, which is the assistance to other persons at the expense of own welfare or free time, and provided that this assistance does not harm other persons and is carried out within the law. charity should benefit not only the immediate recipient of benefit but also society as a whole. the authors emphasize that the conducted study supports their hypothesis that under the conditions of globalization, society increasingly focuses on social issues that arise as a result of insufficient state resources and so charity becomes a factor in their successful resolution. the development of charity is a system of social, economic, and cultural factors. one of the stages of the development of charity was the creation of charitable foundations specializing in various fields: scientific, cultural, sporting, educational projects, assistance to needy families, help for orphanages, hospitals, fundraising for expensive treatment and other projects. in today’s world, the attitude towards charity as a professional occupation has become widespread, becoming a “social norm.” charitable funds are a separate and important component of the charitable institution. the concept of “charity” came into the public consciousness as a humanistic call of a person to go to the needy, regardless of religious, national, racial, social affiliation or political or ideological beliefs. retrospective analysis showed that forms of philanthropy in the advanced form existed already in ancient rome and ancient greece; in medieval europe, they already acquired the status of state and social policy at the legislative level. in the christian aspect of ancient rus of the adoption of the orthodox faith in 988, the foundations of charity are laid as socio-ethical norms of society. in the second half of the xviii century, as a result of secularization, charitable societies, hospitals, almshouses, open by public organizations and private individuals arise, that is, there are social and state institutions of charity. and charitable funds, which are socio-economic professional activities, are beginning to develop. from ancient to modern times, charitable activity is carried out in the forms of patronage, sponsorship, volunteering, fundraising. modern trends of charity include: increase of the non-profit sector and its internationalization; cooperation of charitable foundations, development of a social partnership with business, state bodies, and foreign funds; professionalization through the creation of network charity. in turn, charity abroad is characterized by growing professionalism, a variety of forms and programs of cooperation, the growth and expansion of the sphere itself and its importance for non-profit, in particular, socio-cultural activities. the undisputed leader in this area is the usa – the birthplace of modern sponsorship and fundraising. the authors conditionally distinguish three levels of charity. the typology and general characteristics of foreign charitable foundations, typical for the usa, european countries, and ukraine, are presented. features of creation and functioning of quasi-public funds are considered. on a global scale, the foreign activity of the us foundations is significant, and the expenditures exceed the official foreign aid budgets of many countries. however, their presence in ukraine is relatively low. the volume of support is negligible compared to official support amounts: according to the oecd, the amount of grants actually received by ukraine from other states and multilateral donors in 2011–2017 amounted to more than 5 billion usd while less than 0.1 billion usd came to ukraine from us foundations. but this does not exclude the role of private donors in solving certain problems, in particular, in terms of supporting civil society, protecting the rights of vulnerable groups of the population, etc. key words: charity, evolution of charity, society, social policy, us charity, funds in ukraine. jel classification: g23, n31, n23, h49, h89, i38, i39 baltic journal of economic studies 257 vol. 4, no. 5, 2018 1. introduction economic, social, political, and cultural transformations of the last decades have created the prerequisites for the emergence in our country of the charity institutes characteristic of societies that have gone through the path of modernization. a large number of facts indicate the deployment of processes of their formation, despite the fact that they occur not very smoothly, not harmoniously, and as a rule contradictory. in such circumstances, it would be natural to conduct a wide range of studies of this process, both from the specific positions of various social sciences and in the context of interdisciplinary synthesis. let us consider retrospective and modern aspects of the development of charitable activity in the socioeconomic sense, which is the assistance to other persons at the expense of own welfare or free time, and provided that this assistance does not harm other persons and is carried out within the law. charity should benefit not only the immediate recipient of benefit but also society as a whole. charity cannot be accompanied by a violation of human rights, on the contrary, it, first of all, is aimed at protecting the socio-economic rights of the individual and cannot be carried out in violation of the law (benevolensky, mersiyanova, 2010; opіlat, 2015). in the context of globalization, we are increasingly focusing on social issues that arise because of the lack of state resources, and as a result, charity becomes a factor in their successful solution. the development of charity is a system of social, economic, and cultural factors. education of the population should form the people’s desire for environmental improvement. in these circumstances, when the effects of financial and economic reforms are felt, first of all, on socially vulnerable groups, charitable activity becomes of special significance in providing assistance to the poor. one of the stages of development of charity was the creation of charitable foundations specializing in various spheres: support of scientific, cultural, sports, educational projects, assistance to the families of dead and wounded servicemen, assistance to orphanages, hospitals, provision of funds for treatment, etc. (opіlat, 2015). cardinal economic and social transformations have led to radical changes in public life, in particular, in charity. charitable activity and its role in society are influenced by numerous interacting tendencies of the modern world, such as the evolution of power; modernization and globalization of the economy; technological progress, which leads to the emergence of new ways of communication; the accumulation of experience in the implementation of charitable activities, which increases the ability to make reasoned decisions. in today’s world, the attitude towards charity as a professional occupation has become widespread, become a “social norm.” there are exchange and development of various ideas and technologies between organizations and countries. charitable funds are a separate and important component of the charitable institution. insufficient funding encourages the search for innovative models of additional funding for socio-cultural development. multi-channel financing of culture, education, and science, which is based on a combination of budget and extrabudgetary sources, becomes a dominant position. the purpose of the study is to determine the retrospective and contemporary aspects of socioeconomic development of the evolution of charity as a socially useful activity. additional studies are also required for the formation of promising directions for expanding charity in countries with urgent needs through an extrapolation review of the development of charity in the world, an extended review of the current state of charity, the formation of charitable foundations, and an analytical review of us charitable activities in the world and ukraine. 2. the methodology of research the concept of “charity” came into the public consciousness as a humanistic call of a person to go to the needy, regardless of religious, national, racial, social affiliation or political or ideological beliefs. recent studies in social sciences have shown that the moral principles of charity do not contradict the religious canons of any of the three world religions. the charity was perceived by ancient societies in egypt, china, and india as one of the human virtuous qualities. it was seen as disinterestedness and social payment to the needy. the charity was known to the ancient jews. in the talmud, charity is denoted by the word “tzedakah” (righteousness or justice). the followers of judaism had various forms of manifestation of charity: the practice of debt relief, debt cancellation, charitable treasuries serving the redemption of captives, and providing a dowry to the poor newlyweds (levandovsky, 1995). however, as an independent sphere of human being, charity appears in ancient greece. this was related to the fact that the greek society, having accumulated a certain spiritual experience, among other areas of its existence begins to allocate a special sphere, where there are friendly feelings, moral relations and relationships. thus, the concept of “charity” (philanthropy) is formed, which means love for people, a friendly attitude of one individual to another, and friendship. in the roman church, the emphasis was placed on helping the sufferer on the very act of almsgiving. the purpose of charity was not to help the neighbour but the gifts in the name of god, who buys eternal bliss (shtal, 1978). in the historical context of social charitable events of the period of antiquity, in particular in the odyssey of the ancient greek poet homer, the original form of charity – alms (shtal, 1978). charity in that period was baltic journal of economic studies 258 vol. 4, no. 5, 2018 based on polis ideology, a kind of socially useful activity: alms were made mainly for the sake of social and cultural goals (govorenkova, 2004). as shtal i. v. (1978) noted, the absorption of the individual by the state in ancient greece was, as is known, even in the social nature of consumption, so, of course, the issue of care for the poor was surely a state issue. on the other hand, the poorest part of the population was slaves, whose provision was the sole responsibility of their owners. in europe, the french king charles the great began the guardianship over the poor in 779, and he imposed a tax in favour of the poor on all vassals, bishops and abbots, obliging them to maintain a certain number of the poor. at the same time, it was forbidden to ask alms and give it. the indicated policy did not reduce the needy, on the contrary, their number increased (levandovsky, 1995). there was a need for more active state intervention in the process of combating poverty. at this stage, there were legislative approaches to the regulation of poverty and begging in european countries. during the xvi century, “poor relief acts” were adopted in england, france, and germany. the famous law of queen elizabeth (1601) even empowered local parishes to collect a special tax for the poor (poor rate). legislative acts of european monarchies, adopted during the middle ages, became, in fact, the first laws on public welfare. civil society assumes the responsibilities of rendering assistance to all needy; the ideology of christian mercy is replaced by the ideas of social engineering. state forms of relief are emerging, as well as attempts to create specialized social institutions (almshouses, shelters). the most widespread philanthropic activity takes place in the second half of the xix century, especially in england, france, and germany, where it relied on significant support of state power (kotilko, 2011). historians also found the need to provide assistance to “poor and deserted” in the treaty of prince oleg with the greeks in 911 (govorenkova, 2004). since the adoption of the orthodox faith in russia in 988, the foundations of charity – the moral duty of the rich to help the poor are laid (kotilko, 2011). helping the needy becomes the foundation of the ideology of the christian religion. this is also stated in the statute of volodymyr the great of 996, where a special part of society, which was separated from the christian flock and was named as church or almshouse people, was handed over to the church. this part of society in all their church and nonchurch affairs was in charge of ecclesiastical authority. it consisted of the following: secular and regular clergy with their families; laity who served the church, or those who solved various worldly needs of people; homeless and poor people (stupak, 2009). in a further development, as emphasized by historians d. i. bahalii and l. i. lanchukovska, brotherhoods that created and held schools and hospitals occupied a significant place in the charitable church activity in ukraine. in sloboda ukraine, the first charitable affairs of the brotherhoods date back to 1678 (lanchukovska, 1997). d.i. popov notes that in the second half of the xviii century, as a result of secularization (the removal of church lands from the monasteries), the closure of monasteries, there was a sharp decline of church charity. at the same time, charitable societies, hospitals, almshouses opened by public organizations (zemstvos, cities) and private individuals, arise massively. eparchial guardianships were created for poor representatives of spiritual ranks who had the right to raise funds in their parishes (popov, 1907). at the end of the xviii century, charitable establishments for numerous soldiers’ children are started to be formed; the technicum for the deaf is established in pavlovsk; in 1811, obstetric institute with maternity hospital for poor women, and also houses for soldiers’ widows are established. in 1802, the first almshouse was opened as a house for the poor in gatchina, the custody house for the blind (charitable russia, 1901). studying the formation of charitable orphanages, p. ye. horbunov stated that this idea has emerged in society in the second half of the xix century, the purpose of these establishments is as follows: come to the aid of families suffering from poverty, give a moral orientation to children who live in poverty from the cradle, to deprive cities of child beggars. for this purpose, the orphanages committee was established, which activity was aimed at social security of orphans (charitable russia, 1901). studying charity as an attribute of civil society, scholars m. f. dmytriienko and o. v. yas draw attention to the ukrainian traditions of charity. the kyivan princes, the cossack hetmans and the colonels carried out charitable acts and showed mercy, built churches at their own expense, and contribute huge funds to monasteries. d. i. yavornytskyi wrote that hetman petro konashevych-sahaidachny was famous for his charity, he was worried about people’s education, the placement of public schools, and he left for the poor hospitals and cash payments for their living until the end of their days (yavornytskyi, 1991). investigating the historical traditions of the world about guardianship of the poor, p. i. heorhiievskyi noted that gradually the matter of assistance to the neighbour is formalized, degenerated, it is no longer a help considered to be a charitable deed, but a sacrifice, a donation of the rich to the poor as depriving himself of some share of material wealth. such an approach permeates charity in europe in the middle ages. so, since 1547 in france, the focus is again on the need to care for the poor, it becomes a state matter, and taxes in favour of the poor appear (vaillant, 1906). in 1597, the charitable uses act was presented in england, which stated that charity funds could be used to help elderly, helpless, and poor people, to support sick and crippled soldiers and seamen, etc. (vaillant, 1906). in other countries of the world, the beginning of the xx century was marked by the emergence of private baltic journal of economic studies 259 vol. 4, no. 5, 2018 charitable foundations. the first private charities were established in the usa. thus, the carnegie corporation of new york was founded in 1911, the rockefeller foundation in 1913, and others. thus, charity becomes a part of entrepreneurship, the owners of large companies have sought to avoid excessive taxes and hide their property from income tax. as we see, a charity in the world is gradually becoming the prerogative of large companies, which are ready to give up a small part of the funds in order to protect their property. at the heart of such charity are the purely economic interests of individuals and legal entities. the french researcher é. vaillant, analysing the peculiarities of charity at the beginning of the xx century, wrote that public trusteeship is becoming a new form of charity. the state of the ruling bourgeoisie, taxing the people, helped the poor not so much in order to reduce their poverty, so much so to soothe their anger against oppressors (vaillant, 1906). since 1917, social policy in the field of charity in the territory of the russian empire is fundamentally changing. with the formation of the soviet union, the existing in the russian empire charitable organizations are started to be liquidated. guardianship of those who suffer becomes solely a function of the state (private foundations, 2010-2017). the phenomenon of publicprivate philanthropy in the soviet union loses its significance. the emergence of an independent state of ukraine once again set the need for society to return to the best christian traditions, including the need for the revival of charity. analysing the phenomenon of charity and its manifestation in the life of society, ye. a. shelekhov emphasizes that charity is an important auxiliary mechanism that partly eliminates the shortcomings of the social policy of the state (kotilko, 2011). in today’s conditions, the question arises about the social responsibility of business representatives for their activities and their awareness of the need for charitable activities for the benefit of society. unfavourable tendencies in the ukrainian economy cause the actualization of the self-organization of society and its moral aspect. the role of the latter was emphasized by scottish economist a. smith, who argued that the basis of obtaining wealth is selfish interest – the “invisible hand of the market”, forcing a person to interact with other people, studying own interests while also contributing to the general benefit: “give me what i need and you will get what you need…” (menger, 1870) the issue of self-organization of society through the achievement of personal goals was studied by many representatives of the austrian school of economics. representatives of the austrian school were convinced that complex social phenomena can be explained as a consequence of the actions of specific individuals who in their economic activities follow certain economic laws. one of the founders of the austrian school, ludwig von mises, acknowledged that often institutes arise as an unintended result of actions aimed at achieving other goals, but for the study of institutions and the evaluation of their effectiveness, it is necessary to use the mind in social analysis (mises, ludwig von, 1949). emphasizing that human activity always involves the use of means to achieve a specific goal, mises wondered whether the planned state intervention was the appropriate means to achieve the desired goal. menger (menger, 1870), mises (mises, ludwig von, 1949), and rothbard (rothbard, murray n., 1998) – all of them were united in the fact that the main problem of economic science is not the description of the market, which it would be in a situation of equilibrium – this is impossible – but the study of the interaction of forces that make up the market process. an idea that unites all areas of the social economy is to analyse human activity, which allows formulating the basic economic principles of charity: charity is the deprivation of a human from the need for charity. in other words, sponsorship, donations, and assistance should be aimed at ensuring that the person who receives it no longer needs it. however, in the works of many economists, issues of charity as a specific kind of redistribution of economic benefits, principles of charitable organizations, prospects for the development of economic foundations of charitable activities in ukraine are not sufficiently explored. 3. results and discussion the social policy of the state, ideally, is the derivative of institutionalizing the cooperation of citizens in the realization of their personal social and charitable aspirations and social state and non-state institutions. the wider the field of consensus, the less tangible the confrontational component of social policy, the more so on other equal terms, this policy is stable, strong, and predictable. but the consensus in this case is the coincidence of personal philanthropic aspirations of citizens. why do the actions of the state are needed for their implementation? the answer is given by economic theory, and in a simplified presentation, it is as follows. if a citizen is not sure that the goal for which he is ready to spend his energies and money will be supported by the forces and means of many fellow citizens, for him it is often irrational to do individual actions. for example, a small donation will not change anything in the state of health. however, a citizen may willingly vote to withdraw this amount from him in the form of a tax if he is sure that, firstly, he the actions approved by him will be financed, and secondly, due to taxation, funds of other persons will be attracted too (opіlat, 2015). there are several conditional levels of charitable activity. the first one is that in which charity is carried out on a purely individual basis without the need for any developed institutional form. at the second level, baltic journal of economic studies 260 vol. 4, no. 5, 2018 charity is represented by the activities of formal and informal structures of civil society, such as charitable foundations. institutionalization within such structures allows, on the one hand, uniting efforts and, on the other hand, efficiently and in a controlled manner spending the donations of great benefactors (paweł dziekański, 2017). this, of course, helps to achieve more complex and meaningful goals than at the first level. but for the second level, there are boundaries, and where philanthropic goals go beyond them, a further complication of charitable institutions is required, based on their integration into the institutional framework of the state. opportunities to achieve social goals are sharply increasing. for this reason, the number of resources involved and used at the third level is much higher than in the second, not to mention the first one. however, the transition from level to level is, in essence, an increase in the institutional capacity of actions, but not a change in their nature. nature, however, is most directly manifested where charity cannot be concealed with the envelope of state policy (the picture is obscured if the state is accustomed to perceive as something separate from citizens). analysis and forecast of mature social policy are impossible beyond the context of charitable activities. the task of developing self-regulation in the field of charity and volunteering in ukraine is also very important. the transition from the existing system of monitoring charitable organizations is necessary, which is carried out almost exclusively by state authorities, to the system of state and public control, in which, along with state bodies, associations and unions of charitable organizations take part (martynyuk, 2015). formation and development of the system of self-regulation, mixed public-public control allows providing a reliable multi-faceted information system aimed at disclosing the activities of charitable organizations, needed both for donors and potential beneficiaries, and for the state, willing to verify the justification for granting possible benefits for charitable activities (benevolensky, mersiyanova, 2010). typology and general characteristics of foreign charitable foundations. foreign private funds can be categorized with a certain share of conventionality according to the sources of financing and activities. so, american funds for analysis purposes are divided into five main groups, namely (raik, kristi, 2006): – independent funds – charitable organizations, based on a financial endowment, the founders of which are private individuals (such as the charles stewart mott foundation) or families (e.g. bill & melinda gates foundation); – funds funded by companies. by their “nature” they are practically similar to independent charity organizations; however, unlike them, they are created by companies, not by private individuals; – operating funds – organizations that manage projects funded by the third party, but in some cases, they may also finance certain projects at their own expense; – community funds – are, in fact, instruments for mobilizing financial and other resources from different sources to meet local needs; – public funds are organizations that collect public funds to finance their own grant programs. most community funds are also public funds. in the european space, in our opinion, the structure of the non-state private funds’ sector has the following classification (toepler stefan, 2016): – private funds – organizations based on a financial endowment created by individuals or families (similar to us independent funds); – operating funds – funds created for the management of certain institutions or projects (these funds are similar to the corresponding american organizations); – funds financed by companies – independent legal entities and correspond to similar types of funds in the usa. these structures are created mainly by large companies (corporations); – funds owned by companies – are created to manage companies, in particular, to prevent fight for control and among successors. for example, the robert bosch stiftung gmbh owns bosch; – funds with public administration – organizations with a private endowment that is under the state administration; – funds with state financing – government-created organizations, the funds for the endowment of which are also provided by the state. quasi-public funds it should be noted that for some countries in the west, the practice of distributing a part of international assistance through funds, which are formally independent and non-governmental, has become traditional. at the same time, such funds can be called quasi-public, because to some extent their activities are under the supervision of the government. for example, support for the development of democracy is under the influence of a donor country’s political model (toepler stefan, 2016). the activity of quasi-public funds corresponds to the foreign policy of the state. their activities are primarily aimed at supporting non-governmental organizations and civil society, where quasi-public funds show better efficiency. thus, quasi-public funds are legally independent organizations, which are mainly statefunded and to some extent dependent on the state’s policy (in particular, their activity is one way or another in line with the state policy in the relevant areas and under its particular supervision). the use of funds has a number of advantages over official assistance: greater flexibility and innovation; faster reaction to change the working environment; less dependence on bureaucratic processes; lower reporting baltic journal of economic studies 261 vol. 4, no. 5, 2018 requirements; the work of “independent” funds is less associated with interference in the internal affairs of countries. a classic example of quasi-public funds is the german political foundations, which are also called “party” (viva). they began their active foreign activity back in the 1960s in latin america, and later the german model of the international work of party funds was tested in post-authoritarian countries such as spain and portugal in the 1970s. the funds provided support to parties or individuals in other countries, which over time allowed the construction of appropriate partner networks around the main institutionalized political trends in europe (building foundations, 05.06.2010). german political foundations have become a model for imitation in other states. and now, such political funds are already established and operate in a number of western european countries. in particular, in the 1970s, party funds were created in austria, and in the 1990s the german model was introduced by the netherlands (the strategic goal – to support the process of global democratization) and sweden (the strategic goal – to support the development of democracy in the postsoviet space). in 1992, the westminster foundation for democracy began its activities in great britain. the largest parties in spain in the 2000s also created the respective party funds to support ideologically close political parties abroad. today, similar organizations are developing in the countries of central and eastern europe, which had previously been the object of supporting the relevant western funds (building foundations, 2010). today in ukraine, there is no special law that would apply to the activities of various types of funds. in 1997, the law of ukraine “on charity and charitable organizations” was adopted, replaced by the law of ukraine “on charitable activity and charitable organizations” in 2012 (law of ukraine, 2013). the first charitable foundations operated in the format of associations. according to the current legislation, a charitable organization is a legal entity of private law whose founding documents define charitable activities in one or several areas determined by this law as the main purpose of its activity. the list of charitable areas includes (law of ukraine, art. 3, 2013): 1) education; 2) healthcare; 3) ecology, environmental and animal protection; 4) prevention of natural and technogenic disasters and elimination of their consequences, assistance to victims of disasters, armed conflicts and accidents, as well as refugees and persons in difficult living conditions; 5) guardianship and trusteeship, legal representation and legal assistance; 6) social protection, social security, social services and poverty reduction; 7) culture and art, cultural heritage protection; 8) science and research; 9) sports and physical culture; 10) human and civil rights and fundamental freedoms; 11) development of territorial communities; 12) development of international cooperation of ukraine; 13) stimulation of economic growth and development of the economy of ukraine and its separate regions and an increase of ukraine’s competitiveness; 14) assistance in the implementation of state, regional, local, and international programs aimed at improving the socio-economic situation in ukraine; 15) assistance in defence capability and mobilization readiness of the country, civil protection in emergency situations of peace and war. according to the state fiscal service, in early 2016, more than 15 thousand charitable foundations and organizations were registered in ukraine. there is a lack of information on the activities of a number of entities over the lack of their financial reporting. however, in 2015, 9500 entities reported spending on charitable programs worth almost 9.4 billion uah. almost one-third of all charitable spending fell to top 5 largest funds. at the same time, the largest 100 funds spent in the amount of 6 billion uah (two-thirds of the amount indicated). thus, the rest of the charitable foundations and organizations accounted for only 3 billion uah or somewhat more than 300 thousand uah on average per entity (gulevskayachernysh anna, yaroshenko lesya, 2016). in 2005, the first professional association of ukrainian charitable foundations and associations was created – ukrainian philanthropists forum (upf). the founders of the upf were the initiative centre to support social action “ednannia” and “renaissance” international foundation. this was done with the participation of international donors: the charles stewart mott foundation, the institute for sustainable communities/ucan, and the polishamerican-ukrainian cooperation initiatives (vinnikov alexander, 2008). today, the association has about 30 full members and about 10 associated ones. the upf has been conducting a national philanthropic rating for several years. in 2016, only 89 charitable funds and organizations that publicized their tax reporting took part in the ranking. they accounted for 1.8 billion uah or more than a quarter of the total spending on charity in 2016 (gulevskaya-chershin, 2017). these data indicate that ukraine is developing a private philanthropic sector; however, an assessment of the real scale, directions, and results of initiatives and projects supported by ukrainian philanthropists needs special research. activities of american charitable foundations in ukraine. the vast majority of american charity organizations are relatively small institutions focusing on solving predominantly local problems. however, the us baltic journal of economic studies 262 vol. 4, no. 5, 2018 nonprofit sector is large in size – as of september 30, 2017, the us internal revenue service (irs) register had 1.3 million charitable organizations (irs data book, 2017). in the fiscal year of 2015, 16 209 thousand us charitable organizations that filed tax returns had assets worth 3.7 trillion usd and total revenues 2 trillion usd (lanchukovska, 1997; menger, 1870). it is worth noting that most of the income and expenditure of charitable organizations in the usa – the results of the work of non-profit health and educational institutions. a considerable part of the education and health sector in the usa – non-profit organizations. donor funding and grants were smaller. funds and goods attracted by donors amounted to 204 billion usd, and issued grants – 172 billion usd; from a total of 172 billion usd for grants in 2015 fiscal year, american organisations received 89.6 billion usd, private individuals from the usa received 57.7 billion usd, and individuals and organizations outside the usa received 25.2 billion usd (organizations balance usa, 2015). consequently, a small share of us charitable organizations’ resources is directed abroad: less than 15% of total grants and slightly more than 1% of total revenues. however, 25 billion usd is an amount that exceeds the combined annual budget of foreign aid from germany and britain (the largest bilateral official donors after the usd). in exchange for tax exemptions, us charitable organizations are required to submit detailed information on their work to the us internal revenue service (form 990). these reports are publicly accessible with some exceptions. in particular, information about recipients of grants outside the usa is a part of the reporting but is not made public as regards to public charities (foundation directory online). information on funding and geographic region of the recipient is published. activities of private foundations are regulated more thoroughly (for example, they must use at least 5% of their assets for charitable purposes) and they submit more detailed accounts. in the usa, there are a number of organizations collecting information about the performance of charitable organizations. in particular, the foundation centre maintains a database of information on the overwhelming majority of the grants provided by the us private foundations (foundation directory online). information is collected from public accounts and grant information provided by some foundations directly to the foundation centre. the database contains data on grants provided in 2003-2015 and a more limited set of data for 2016, 2017, and 2018. for example, as of the end of august 2018, the database contains information about 2.3 million grants given in 2015 by 74 161 donors to 333 627 recipients worth 76.1 billion usd. of these, 4 572 donors provided grants to 39 875 recipients for a total of 16.8 billion usd to work outside the usa. it should be noted that a significant part of grants in support of other countries is provided for american organizations – 6.7 billion usd out of 16.8 billion usd. the main areas of support were healthcare and education (burakovsky, angel, kravchuk, yuhimenko, 2018). in general, us charitable foundations paid relatively little attention to ukraine. as at the beginning of august 2018, the foundation centre database contained information about 1 521 grants worth a total of 103.5 million usd or 0.1% of the total amount of external grants from us private foundations. is it a lot or a little? given that ukraine accounts for 0.6% of the world’s population and 0.3% of world gdp, it is quite small. it should be noted that the classification of grants by the geography of activities is conducted by the foundation centre on an algorithmic basis and, therefore, is not always accurate. in addition, a number of grants were issued to work in several countries. in order to estimate the volumes of funds directly received by ukraine, we, first of all, excluded from the list those grants for which the geography of the work was determined incorrectly (shtal, 1978; stupak, 2009). secondly, we estimated the share of ukraine in grants that were implemented in several countries at the same time. according to our calculations, ukraine in 2011-2018 received approximately 72.8 million usd from the cf of the usa (gulevskaya-chershin, 2017). within this article, we will analyse the support provided to ukraine by american foundations since 2011. the largest private us donors in ukraine during this period were the national endowment for democracy, the foundation to promote open society, the charles stewart mott foundation, and the cocacola foundation. table 1 the main donors of ukraine according to the foundation centre database in 2011-2018 the name of the charity organization amount, million usd national endowment for democracy 25,0 foundation to promote open society 11,1 charles stewart mott foundation 8,0 coca-cola foundation 4,1 nationale postcode loterij (the netherlands) 3,0 sigrid rausing trust (great britain) 1,1 ukrainian women's fund (ukraine) 1,1 other 17,6 source: compiled by the authors based on burakovsky і., angel ye., kravchuk v., yuhimenko s. (2018) the volumes of annual support for ukraine from us charitable foundations ranged from 9 to 14 million usd. the peak of revenues fell to 2014 – at the height of the revolution of dignity, and the least value was observed in 2012. annually several hundreds of grants ranging from 10 to several million usd were issued. the largest baltic journal of economic studies 263 vol. 4, no. 5, 2018 grant was a grant from the netherlands lottery nationale postcode loterij unicef for the amount of 3 million usd in support of homeless teenagers in ukraine and moldova (gulevskaya-chershin, 2017). there are also a number of “specialized” donors in ukraine that provide funding to organizations in a relatively narrow area, as well as donors that support only individual projects. for example, tides foundation has funded a number of aids treatment projects, inclusive education, and the protection of the rights of persons with disabilities. the elton john aids foundation supported the work on aids prevention among vulnerable groups of the population within several projects. omidyar network fund supported the creation of the new citizen platform and the work of the public television. mama cash has supported several lgbt organizations and women’s rights organizations. the disability rights fund supported projects for people with disabilities such as inclusive education, adoption of regional strategies, access to justice, accessibility of the transport system, and others. the global fund for children supported rehabilitation and psychological support for children with disabilities, early intervention for children, and adaptation of orphanages’ graduates. the total funding from the aforementioned donors amounted to 4.3 million usd (burakovsky, angel, kravchuk, yuhimenko, 2018). a fair amount of money was drawn from us foundations in support of religious communities in ukraine, support for religious education in ukraine, support for humanitarian initiatives, in particular, for the jewish community of ukraine. the tikva jewish community (3 million usd) and the ukrainian catholic university (2.3 million usd) were the most successful in attracting funding from american private donors and jointly attracted almost two hundred grants since 2011. 4. conclusions in dictionary literature, the concept of “welfare” is interpreted as all useful, serving human happiness, wellbeing – this is life in abundance, calm and happy state; charity – a willingness to do good, help the poor. in scientific literature, the charity was seen as a system of measures aimed at the organization of assistance to the poor in the presence of appropriate social and economic relations. figure 1. main directions of grants in ukraine for 2011-2018 distribution of grants for goals is based on a certain algorithm. each grant may belong to different target classifiers. therefore, the total amount of distribution does not correspond to the total amount of grants. significant amounts were allocated to medicine, the protection of human rights, and the development of civil society. compiled based on burakovsky і., angel ye., kravchuk v., yuhimenko s. (2018) baltic journal of economic studies 264 vol. 4, no. 5, 2018 from ancient to modern times, charitable activity is carried out in the forms of patronage, sponsorship, volunteering, fundraising. modern trends of charity include: increase of the non-profit sector and its internationalization; cooperation of charitable foundations, development of a social partnership with business, state bodies, and foreign funds; professionalization through the creation of network charity. in turn, charity abroad is characterized by growing professionalism, a variety of forms and programs of cooperation, the growth and expansion of the sphere itself and its importance for non-profit, in particular, socio-cultural activities. the undisputed leader in this area is the usa – the birthplace of modern sponsorship and fundraising. in recent years, the process of institutionalization of charity has intensified in ukraine: the number of specialized funds is increasing; there appear public organizations whose tasks are to coordinate the efforts of various charitable actors. on a global scale, the foreign activity of the us foundations is significant, and the expenditures exceed the official foreign aid budgets of many countries. however, their presence in ukraine is relatively low. the volume of support is negligible compared to official support amounts: according to the oecd, the number of grants actually received by ukraine from other states and multilateral donors in 2011–2017 amounted to more than 5 billion usd while less than 0.1 billion usd came to ukraine from us foundations. but this does not exclude the role of private donors in solving certain problems, in particular, in terms of supporting civil society, protecting the rights of vulnerable groups of the population, etc. in order to improve charitable activities in ukraine, many more steps must be taken in the sphere of harmonization of the current legislation, the development of state and private mechanisms of socioeconomic policy, tax legislation, social and spiritual support of the needy groups of the population, whose number in the country is increasing year by year. and charity should not become the main mechanism for maintaining the living standard of the population; it should become an auxiliary mechanism for the development of the socio-cultural potential of the population, preventive and health complexes, and the scientific and educational level. references: benevolensky, v. b., mersiyanova, i. v. 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(1991). hetman petro konashevich-sagaidachny. dnipro: sich. baltic journal of economic studies 200 vol. 4, no. 5, 2018 corresponding author: 1 south ukrainian national pedagogical university named after k.d. ushinsky, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-200-208 the eu strategy for the danube region as an inclusive form of cross-border economy yurii maslov1 abstract. the article considers the process of creation and features of activities of various types of transborder formations peculiar for the european union. today the cooperation within euroregions becomes more and more widespread practice both in the eu and among the regions of countries-participants of the union and those ones neighbouring to the eu, including ukraine. the problem of modernization of the eu regional policy in the context of the intensification of globalization processes is touched upon. the influence of global factors and changes in the eu regional policy on the transformation of ukrainian regional policy is determined. in the context of the development of the regional policy of ukraine, problems of economic development and well-being of citizens in ukrainian regions are identified; development directions for the cooperation of ukraine and the eu in this area are established. the purpose of the article is to consider issues of cross-border economy, cross-border region, classify them, define features of euroregion and, based on the analysis conducted, consider imperatives and problems related to the development and introduction of the danube strategy and identify the place and opportunities of ukraine in this association. the macro-regional approach to solving the tasks of the integration policy of the european union chosen by the european union committee allows uniting the territories according to the principle of their mutual supplementation, reducing the barriers of national borders and creating new opportunities for cross-border regions. the danube strategy, despite the common principles and methodologies for the formation of euroregions, has obvious features. firstly, the region is characterized by deep imbalances both between countries and within countries themselves. secondly, the strategy is an example of a multidisciplinary approach to territorial planning in the region and has a pronounced ecological character, and environmental problems are solved in the search for a compromise with the tasks of socio-economic development. thirdly, being the internal strategy of the european union, however, has a significant external dimension, the incorporation of which can be quite a challenge. there are four main directions for the regional development in the danube strategy (so-called “pillars”: association, ecology, well-being, strengthening). for each direction, priority areas are designated that are supervised by the coordinating countries. conceptually, the eusdr is a continuation of the europe-2020 strategic document of the eu and proclaims the achievement of the region of “smart, sustainable and inclusive development” as its main objectives. at the same time, a kind of paradox is that the danube strategy aimed at levelling social, economic, institutional gaps in the region generates them by the very principles of its existence. it is hard to imagine that unequal countries, getting too different funding, will be able to equalize their capabilities at the finish. the strategy will help realize the eu’s obvious desire to transform the danube into an internal transport artery with a highly developed infrastructure and improved cargo traffic, which will allow connecting the north sea with the black and azov seas, placing the transportation of resources of caspian region and asia under control of european structures. the creation and activity of cross-border regions make a significant contribution both to the strengthening of political and economic integration within the eu and to the development of cooperation between the member countries of the union and neighbouring states. key words: european union, cross-border associations, euroregions, danube region, integration, macro-regional approach. jel classification: r11, r38, r50, l51, f60 baltic journal of economic studies 201 vol. 4, no. 5, 2018 1. introduction at present, in europe and in other parts of the world, the phenomenon of cross-border cooperation of regions is becoming increasingly popular. in practical terms, such cooperation is realized through the creation of cross-border associations of administrative-territorial units (regions) of various states. regions of the eu countries have especially rich experience in this field due to both historical background and modern practice of political and economic integration. most researchers consider a cross-border region as a special limited space that unites administrativeterritorial units, communities or groups of people of different states that enter into different relationships with each other. there are also definitions, the reference point of which is the concept of cross-border cooperation. the eu regional policy was formed and implemented under the influence of globalization factors, a complication of the interrelation of “regionalism – globalism”, transnationalization of the economy, features of the modern regionalization of the global market, formation of a new model of spatial architectonics of the world market. the european union, the result of these influences, as well as the european market, is an example of a regionalcentrist model of development, which initially united countries with developed market economies, gradually expanding the market and joining countries with medium and low levels of development. at the same time, the european union is viewed as an experience of structuring transnational space (malishevskiy n., 2016). this is due to the fact that in the last two decades in the european union, two parallel processes took place: formal regionalization, within the framework of the administrative-territorial structure; informal regionalization, which is carried out as a result of the transformation of the global space, the formation of the poles of economic growth, the allocation of regional markets. as a result, three types of regional economic systems have emerged in the eu: a) formal, unified; b) functional (concentrated around the focal centre – a large company, a shopping centre, a research centre); c) perceptual (determined by the human attitude to the territories) (kodric, 2011). the “europe of the regions” – “europe of the market” discussion ended with the adoption of the eu regional policy oriented towards administrative-territorial regionalization, promoting the socio-economic convergence of countries and regions, that is, equalizing territorial disparities by supporting non-competitive regions. its main areas were identified: – promoting the restructuring and development of depressed areas (problem regions) (where the level of gdp per capita over the past 3 years is <75% of the average – greece, ireland, eastern regions of germany, etc.); – providing financial assistance to regions where is stagnation of the industry (old industrial regions); – combating long-term unemployment, support for employment initiatives; – financing the development of agricultural areas and accelerating the restructuring of agriculture; – assistance to underpopulated regions, where the population density is no more than 8 people per 1 sq.km (sweden, finland); – reduction of differentiation in the levels of economic development of countries – new eu members (countries of central and eastern europe). to facilitate the statistical analysis of backward regions, the unified classification system was developed – nuts (nomenclature of territorial units for statistics). regional policy is the second largest expense item in the eu budget after the common agricultural policy and a no less significant area of activity for the european union (kuzmin, 2014). 2. the methodology of research a number of works by foreign and domestic scholars are devoted to issues of regional development in the eu countries and ukraine, in particular, jacques miller, d. bil, g. marcou, p. hildreth, i. hladii, v. chuzhikov, n. mikula, a. mokii, o. reut, m. ombrembalskyi, m. dolishnii, l. prokopenko, and others. despite consideration of the problems of the regions, the formation of regional policies in the eu and ukraine, mega-regional contradictions within the framework of the common european economic space, the economic literature does not pay enough attention to assessing the challenges generated by modern processes in the global environment, diagnosing regional development risks in ukraine, which actualizes the proposed topic for scientific inquiry. the interaction of regional authorities with eu institutions and bodies is organized in different ways. it takes place indirectly and directly, during the planning and implementation of the eu regional policy – through the committee of the regions, during the cohesion forum held annually by the european commission, in the framework of the activities of the brussels offices of the regions. established in 1994, the committee of the regions, a special advisory body consisting of representatives of local and regional authorities of member states, replaced the advisory board of regional and local authorities established by the european commission in 1988, whose task was to advise on the formulation and implementation of regional policy. the committee of the regions, basing its activities on the principles of subsidiarity, maximum approximation to the interests and needs of eu citizens, as well as partnerships of different management levels in the process of making pan-european decisions, to a certain extent, coordinates work in the field of regional policy (brinkhoff, gabbe, martinos, 2012). baltic journal of economic studies 202 vol. 4, no. 5, 2018 the change of institutional architectonics of the eu regional policy was influenced by the treaty of lisbon. the latter did not recognize the committee of the regions as one of the elements of the eu institutional mechanism. at the same time, the committee was able to appeal to the court of justice of the european union in order to protect its prerogatives in case of violation of the principle of subsidiarity (communication from the commission to the european parliament, 2010). most researchers consider a cross-border region as a special limited space that unites administrativeterritorial units, communities or groups of people of different states that enter into different relationships with each other. there are also definitions, the reference point of which is the concept of cross-border cooperation. for example, the interpretation of m. perkmann, who characterizes a cross-border region as a single territorial unit, consisting of areas whose authorities participate in cross-border cooperation programs (perkmann, 2013). thus, a cross-border region is not only a space in the physical sense but also a social unit with its potential, formed on the basis of certain agreements. formation of a cross-border region can rely on cultural or ethnic ties of adjacent territories, a common historical heritage or a community of interests (political and socio-economic). it is believed that the most cohesive transboundary regions are based on a combination of all three of the above factors. in general, the formation of cross-border associations is based on the desire of neighbouring territories to achieve strategic partnership, resulting in the formation of relatively small regions, the level of integration in which may even exceed the degree of interdependence between the participating territories and other regions of the state to which they belong. often, cross-border formations have not only their own government bodies but also a representative office in brussels. the main goal of creating cross-border formations is the formation of a unified structure for coordinated problem solving and the achievement of tasks set by the participating regions. all transboundary associations can be very conditionally divided into two large groups, although they can vary considerably in their goals, competences, and capabilities. the first group: euroregions and similar structures. the euroregion can be defined as a territory that includes border administrative divisions of at least two neighbouring countries, the area of the euroregion is crossed by at least one state border. researcher v. a. shaliamin notes that “the euroregion, on the one hand, can be defined as a geographically limited part of the border area, which is formed from territorialadministrative units on both sides of the border, united by common interests in developing the economy, protecting nature, preserving culture, and intensifying scientific exchanges. on the other hand, the euroregion is a kind of umbrella project, within which bilateral and multilateral specific sectoral projects are implemented” (merkulova, 2014). although these entities are not identical in legal status and organization, they have many common features: they operate on a permanent basis, and not temporarily for the implementation of certain projects; have a separate identity from the participants; have their own administrative, technical, and financial resources; have their own decision-making system; unite two or more administrative divisions that are parts of different states (besides, non-governmental organizations such as trade unions, chambers of commerce etc. also can participate); cooperate at the regional and not at the state level; have their own management bodies and structures; develop many areas of cooperation, where traditionally a lot of attention is paid not only to the economic aspect but also to socio-cultural issues (cooperation in health care, culture, science, environmental protection, etc.). at the same time, depending on the wish of the founding parties, the euroregion may or may not be a legal entity (eurostat regional yearbook 2012). the second group: working communities. they are also permanent formations, however, unlike euroregions, they do not have their own identity, their own decision-making process and powers separate from the powers of their members. they are largely dependent on the states, under the jurisdiction of which are the units belonging to the community. compared to euroregions, the range of tasks of working communities is significantly narrower: their activities are mainly focused on solving problems that are relevant for all participants and not related to the existence of a common border. the most common areas of cooperation are consultations, information sharing, and cultural projects (more rarely – economic cooperation). these structures unite a large number of member countries and large territories, while euroregions have a small area of coverage (brinkhoff, gabbe, martinos, 2012). in practice, cross-border formations may include not only regional and local authorities but also chambers of commerce, regional business associations, and other interested organizations (perkmann, 2013). cross-border formations can be attributed to a variety of political networks, which should meet the following conditions for the successful functioning and fulfilment of the tasks set. firstly, the presence of a “leader” – a person or structure that deals with all organizational issues, organizes necessary meetings and conferences, prepares an agenda, disseminates information about crossborder education activities, seeks support for projects by relevant government agencies and financial funds, attracts new participants, monitors the timely and accurate fulfilment of obligations by all members of the cross-border formation. secondly, the ability to benefit all interested parties is to create a situation where it is more beneficial for potential participants in a cross-border formation to participate in a cross-border project than not to participate in it. baltic journal of economic studies 203 vol. 4, no. 5, 2018 thirdly, the ability to attract actors and resources – participation in any common project involves the investment by participants of one or another of their resources in the common cause. very much depends on the willingness of interested parties to invest their resources. fourthly, limiting costs – participation in crossborder projects involves not only benefits but also certain costs, which are often proportional to the equity contribution. coordinators of cross-border projects try to prevent the situation of a zero-sum game, as this can lead to frustration and the exit of the losing participants from the project. if the costs become too large for all participants, then the project ceases to exist. fifthly, enforcement of fulfilment of commitments – the leadership of cross-border formations should be able to make the participants to clearly fulfil their commitments. this can be done through informal arrangements or by more formal means, such as concluding conventions, contracts, setting up a supervisory committee, etc. (malishevskiy, 2016). speaking about the success criteria of a cross-border association, it is important to take into account not only the immediate result expressed in material achievements (economic benefits, building infrastructure, etc.) but also the effect of such actions as adjustment of cooperation mechanisms among the regions of different countries, organization of the communication process, developing an algorithm for solving problems and making joint decisions, creating conditions for the development of regional innovations, etc. it is necessary to take into account the reserve that is being created for the implementation of future projects in the framework of possibly other interregional groups (martunyuk, 2015). the attention of the supranational level to the crossborder regions increased with the development of the regional community policy. the reform of structural funds, the concepts of levelling and identifying the endogenous potential of the regions have led to the intensification of cross-border cooperation. of course, this is not only the merit of the eec but the growth of euroregions stimulated financial support, and that in turn caused the growth of euroregions in the territories mastered by the eu. the insufficiency and imperfections of the model of cross-border cooperation led to the emergence in 2006 of a new instrument for regulating cross-border cooperation in the context of european integration – the creation of the european grouping for territorial cooperation – egtc. this instrument of the regional policy of the european union was created to “strengthen and create better conditions for cross-border cooperation” among eu countries (malishevskiy, 2016). the european grouping for territorial cooperation (egtc) is designed to complement the cross-national level of euroregions and potential applicants. it was created as a stable legal structure with an autonomous legal personality that exists within the legal framework of member states, but the egtc necessarily includes representatives of regional authorities, which contributes to the deepening of cross-border cooperation and creates conditions for building a more flexible management system. in the framework of current trends, this form is considered the most optimal form of interaction between the partner countries. 3. results and discussion the macro-regional approach to solving the problems of the integration policy of the european union chosen by the eu committee in brussels allows uniting the territories according to the principle of their mutual supplementation, reducing the “barriers” of national borders and creating new opportunities for cross-border regions. the european union strategy for the danube region (eusdr) (communication from the commission to the european parliament, 2010) became the second macro-regional strategy in the framework of the implementation of the eu regional policy, the model for which was launched in june 2009. the danube region is a functional area defined by its own river basin. collaborating organizations, such as the danube commission and the international commission for the protection of the danube river, deal with specific issues. the strategy extends this approach in order to set priorities in terms of integration. geographically, this concerns primarily but not only: within the eu – germany (baden-württemberg and bavaria), austria, the slovak republic, the czech republic, hungary, slovenia, romania, and bulgaria, as well as beyond its borders – croatia, serbia, bosnia and herzegovina, montenegro, the republic of moldova, and ukraine (regions along the banks of the danube). the strategy remains open to other partners in the region. since the danube flows into the black sea, it must undoubtedly be linked to the development prospects of the black sea region, which has a population of more than 100 million people and is the fifth largest territory of the eu (eurostat regional yearbook, 2012). the danube macro-regional strategy, despite the common principles and methodologies for forming euroregions, has obvious features. firstly, the region is characterized by deep imbalances both between countries and within countries themselves. secondly, the strategy is an example of a multidisciplinary approach to territorial planning in the region and has a pronounced ecological character, and environmental problems are solved in the search for a compromise with the tasks of socio-economic development. thirdly, being the internal strategy of the european union, however, has a significant external dimension, the incorporation of which can be quite a challenge. four main directions for the regional development in the danube strategy are determined (so-called “pillars”: association, ecology, well-being, strengthening). baltic journal of economic studies 204 vol. 4, no. 5, 2018 for each direction, priority areas are designated that are supervised by the coordinating countries. there are 11 such areas in total (table 1). projects selected to achieve the goals and objectives set within priority areas have leaders responsible for their implementation, in the person of countries, subregions, non-profit organizations, as well as private economic entities (kodric, 2010). thus, the main directions of the strategy are the idea of “smart, sustainable and inclusive development” of the danube region based on the formation and implementation of promising areas of identified pillars. the danube macro-regional strategy is unique in that it implies the abandonment of the traditional model of development (through classical urbanization and industrialization of territories) and the transition to a more intensive format – through modernization, development, and introduction of technology innovations into existing capacities and infrastructure, as well as through improving the quality of human capital (the imperative of smart development). the main priorities include environmentally sound, not subject to the risks of natural and technogenic origin (the imperative of sustainable development), and the imperative of inclusive development is coordinated, cumulative development of all parties and aspects in the relationship and not at the expense of each other. according to the stated goals and scope, the eu macro-regional strategy for the danube region is an extremely large-scale project of brussels. however, its implementation, in our opinion, will inevitably face a number of objectively arising challenges related to socio-economic and institutional imbalances. the danube region is characterized by serious heterogeneity. within its borders, one can distinguish both highly developed urbanized and rich agricultural territories, as well as less developed and even depressed areas. it includes both countries-members of the european union and those that, to varying degrees, claim to receive this status, and non-members of this integration association. they have different political and economic traditions and peculiarities, which affect their ability to develop infrastructure, preserve the environment, and carry out socio-economic policy. the countries with one of the highest standards of living in the eu and countries where the share of the population at risk of poverty or not integrated into the main society exceeds 40% are in the eusdr field of action. in 2014 in bulgaria, this figure was fixed at 49.1%, in romania – 40.3%, on average in the eu this social group accounts for 24.2%. the majority of the population of bulgaria (72.1%), hungary (70.7%), romania (89.5%), slovakia (88.6%), slovenia (53.1%), croatia (62.2%), and the czech republic (72.0%) lives in regions where gdp at purchasing power parity (ppp) per capita is less than 75% of the average regional gdp in 27 eu countries, and for 85 out of 320 regions of the danube strategy, this figure will be below 50% of the average for the eu-27, and all of them are located in bulgaria, hungary, romania, slovakia, and croatia (eurostat regional yearbook 2016). particularly vividly, regional differences between the danube countries are visible in the ratio of the productivity of the richest area in the region and the poorest (15.2:1). thus, the level of gdp per capita of the capital of bavaria, munich, is 330.2%, and the similar indicator of bulgarian silistra – 21.7%. against the background of the average unemployment rate among the economically active population of 4.3% for austria and 5.5% for germany in 2012, in croatia and slovakia it was 15.9 and 14.0%, respectively, in bulgaria – 12.3%, hungary – 10.9% (eurostat regional yearbook 2016). the stuttgart region of baden-württemberg has become the leader in the danube region in terms of table 1 the main directions of the eu strategy for the danube region pillars і. association іі. environmental protection іі. building well-being iv. strengthening pr io ri ty a nd c oo rd in at or s improving mobility and multimodality: the development of inland waterway transport (austria and romania) restoration and maintenance of water quality (hungary, slovakia) building a knowledge society through the development of science and education, the introduction of information technology (slovakia, serbia) building institutional capacity and improving the quality of cooperation (austria, slovenia) development of road, rail, and air transport (slovenia and serbia) environmental risk management (hungary, romania) supporting the competitiveness of entrepreneurship, including cluster development (baden – württemberg – germany, croatia) cooperation in the interests of security and the fight against organized crime (germany, bulgaria) stimulating more sustainable energy (hungary, czech republic) conservation of the biological diversity of the region, landscapes, air and soil quality (bavaria – germany, croatia) investing in the professional skills of the population of regions (austria, moldova) support of culture and tourism, contacts between people (bulgaria, romania) baltic journal of economic studies 205 vol. 4, no. 5, 2018 expenditure on research and development, it allocates more than 5% of gdp (5.83%) for these purposes. in karlsruhe and tübingen of baden-württemberg, upper bavaria of bavaria, as well as in vienna and austrian styria, this figure exceeds 3%. at the same time, in the former socialist countries of the danube basin, the maximum level of r&d expenditure varies from 0.77% (south-west region of bulgaria) to 2.47% (central bohemian region in the czech republic), i.e. in most of them it is below the average for the european union – 2.01% of gdp (eurostat regional yearbook 2016). the different status of danube states in relation to membership in the european union predetermines their unequal opportunities in obtaining financial resources for the implementation of their projects. eu structural funds money will be available for member countries. only through the european regional development fund (erdf), the cohesion fund, the european social fund (esf) in the period from 2007 to 2013 for the implementation of the tasks of the first pillar – development of transport, energy, and tourism – 34.5 billion euros were allocated. funding for the second pillar programs related to environmental protection is estimated at 19.5 billion euros. 38.1 billion euros were allocated for the development of science, education, and information technologies, and 3.4 billion for the strengthening of security. the countries-neighbours of the european union that belong to the danube basin (moldova and ukraine) can only claim funds allocated under the european neighbourhood policy (enp). another challenge to the success of the danube strategy is the unequal opportunities of participants in the field of management and administration. eu regional policy directly changes the territorial organization of the participating countries. it is aimed at activating new players of the regional policy in the face of the authorities of the subregional and local levels, ngos, small and medium enterprises. however, such structures of civil society are well developed in countries with long-standing democratic traditions and federal structure, austria and germany, where they have the necessary legal powers, experience in conducting regional policy, and relevant institutions. the situation in the former socialist countries is somewhat different. the issue of harmonization of the national interests of the neighbouring member countries in the framework of the eusdr is also problematic (yurasova, 2013). as a result of geopolitical changes of the last decade of the xx century, most of the danube basin was in the european union space, and the european union got new opportunities to solve the problems existing in the region and more effectively realize its potential. by 2020, the association plans to increase its freight traffic on the danube to 300 million tons per year. for comparison: all ukrainian ports handled almost 146 million tons of cargo in 2016 (yurasova, 2013). in the danube region, ukraine is represented by four regions (ivano-frankivsk, zakarpattia, odesa, and chernivtsi), with a population of about 6 million people. in 2016, the government of ukraine approved the state program for the development of cross-border cooperation for 2016–2020, which identified priorities, tasks, activities, and 25 major projects for cross-border cooperation, almost half of which are aimed at solving the development priority tasks of the very danube region. the participation of ukraine at the state level in the development of the strategy from the very beginning was formal and declarative. as a result, ukraine was not included in the list of states that are responsible for specific priority areas. for example, romania – for activities in the following areas: increasing mobility and communication between different types of transport – water transport (with austria, and ukraine – only interested party), the development of culture and tourism, interpersonal contacts (together with bulgaria), and environmental risk management (with hungary). at the same time, in spite of the competition existing between the states of the danube basin, there are issues that cannot be resolved without joint efforts. thus, the danube strategy in the field of transport development sets itself the following goals: – to increase the volume of transportation of goods by 20% until 2020 compared with 2010; – to eliminate the existing navigation “narrowing” on the river in order to ensure navigation of vib-type ships throughout the year by 2020; – to improve the travel time of competitive passenger traffic between the main cities; – to develop effective multimodal terminals in the ports of the danube in order to link inland waterways with rail and road transport by 2020. now the share of danube shipping in the total volume of traffic on inland waterways in europe is about 10%, which creates an idea of its significant reserves. this reserve really exists. however, the transportation market is under constant pressure from various factors, in particular, the global financial and economic crisis. in addition, the danube shipping route often does not compete with rail and road transport. according to experts, the main reason for the traditional weakness of the danube shipping market is the underdeveloped infrastructure and the uneven development of its individual elements. it is this factor that inhibits the introduction on the danube of new, above all – high-speed, transportation technologies that could compete with the railways and highways in terms of time and cost. the tasks assigned require serious financial resources and, in technical terms, efficient design solutions. given the limited financial resources of each of the nation states, the goal can be achieved only through joint efforts. the financing agreement for the danube transnational program was signed by ukraine in december 2017. the law on ratification of financing was signed by the president of ukraine only in october 2018. baltic journal of economic studies 206 vol. 4, no. 5, 2018 the implementation of the agreement will contribute to the fulfilment of the obligations defined by the association agreement between ukraine and the european union, as well as the socio-economic development of the ukrainian part of the danube region, which covers the odesa, ivano-frankivsk, chernivtsi, and zakarpattia regions. the program is one of the financial instruments of the european union for the implementation of the eu strategy for the danube region, participation in which opens for ukrainian partners the opportunity to receive funding and implement projects together with partners from european countries of the danube region. under this program, the european union and hungary will provide ukraine with a donation of 5 million euros for projects that will be selected on a competitive basis according to its rules. funding is expected in four areas: “innovation and social responsibility”, “environment and cultural responsibility”, “improving infrastructure links and energy efficiency”, “good governance in the danube region”. the implementation of the projects will strengthen interregional and cross-border cooperation and partnership in the areas of development of transport infrastructure, energy, entrepreneurship, communication networks, culture, education, tourism, healthcare, etc. in our opinion, one of the most powerful latent reserves for the development of economic cooperation in the danube strategy is the use of the ethnic potential of diasporas living in ukraine. for shaping a sustainable economic design strategy, the use of the possibilities of ethnic identity can lead to the formation of loyal conditions due to the use of the transparent possibilities of diasporas. the following major diasporas live on the territory of ukraine: bulgarian (about 204.7 thousand, mainly in the odesa region – 150.6 thousand people and zaporizhzhia region – 27.4 thousand); romanian (about 151.1 thousand people); hungarian (about 120 thousand, but recently its number is rapidly decreasing). engaging diasporas as ethnocultural communities with collective interests and goals can contribute to the development of a strategy at the national, regional, and local levels. the formation of informational interaction between diasporas and relevant national-cultural associations with the authorities, local self-government, and other public organizations and movements will help to create unique tools for resolving issues of ethno-social, ethno-political, and ethno-conflict policies. 4. conclusions the creation and activity of cross-border regions make a significant contribution both to the strengthening of political and economic integration within the eu and to the development of cooperation between the member countries of the union and neighbouring states. speaking about the results of cross-border formations, it is worth paying attention to a certain negative potential. the activity of cross-border regions, especially euroregions with a high degree of integration, can contribute to the development of separatist tendencies at the level of national states since the radical regional authorities have access to an alternative agency to the state, through which they have the opportunity to realize their economic and political interests. cooperation between ukraine and the eu in the field of regional policy today focuses on the following areas: 1) implementation of the memorandum of understanding to establish a dialogue in the field of regional policy; 2) the establishment of interaction between representatives of local and regional authorities of ukraine and the eu in the framework of the committee of the regions of the eu; 3) participation in the implementation of the eastern partnership pilot regional development program; 4) implementation of projects at the regional level taking into account eu financial instruments (european neighbourhood and partnership instrument, european investment bank, neighbourhood investment facility); 5) ukraine’s involvement in the implementation of the eu strategy for the danube region; 6) facilitating the involvement of ukrainian regions in the activities of european regional associations, in particular, the assembly of european regions, the association of european border regions, the council of european municipalities and regions, the conference of peripheral maritime regions, the conference of presidents of regions with legislative powers. conceptually, the eusdr is a continuation of the europe-2020 strategic document of the eu and proclaims the achievement of the region’s “smart, sustainable and inclusive development” as its main objectives. at the same time, a kind of paradox is that the danube strategy aimed at levelling social, economic, institutional gaps in the region generates them by the very principles of its existence. it is hard to imagine that unequal countries, getting too different funding, will be able to equalize their capabilities at the finish. an attempt to eliminate the disparities in the region may lead to their strengthening and consolidation; more developed countries will go forward. the initiators of eusdr do not conceal that one of the goals of the strategy is to create a “water-transporting european union”. this implies the unification of the danube and rhein navigation. however, given the weak technical equipment of most of today’s ships belonging to the countries of southeast europe and the obvious advantages of the rhine shipowners, this will most likely lead to the bankruptcy of some danube shipping companies (including, for example, ukrainian) and the next assertion of western european domination on the danube. in addition, the eu strategy for the danube region aims to ensure that technical, navigation, legal, and environmental regulations on navigation on baltic journal of economic studies 207 vol. 4, no. 5, 2018 the danube, as well as to unify and harmonize radio communication standards with the standards adopted in the eu. obviously, all this may hinder the navigation activities of other participants remaining outside the framework of the strategy. of all the aspects of the development of the danube region which have been updated by the eusdr , in our opinion, the most problematic is the innovation sphere. disproportions in this area seem overwhelming. especially since interstate cooperation between leading and catching-up countries is determined as the main approach to solving the problem and involves the use of the first available new technologies. in other words, it all comes down to the banal transfer of scientific developments already developed in the west to more backward players in the region, which will be presented as a process of their modernization. a platform for the emergence and implementation of these innovations will still remain more advanced regions. despite the significant external component, it should be recognized that the eusdr is an internal eu strategy aimed at solving the internal problems of the association. the entire decision-making process is concentrated within european institutions; coordination at the political level remains the prerogative of the european commission. the high-level group is represented by eu member states, non-member countries will be invited to its meetings only in some cases. a differentiated european approach consists in preference to individual eu members and the entire community, although they may not be beneficial in their consequences for neighbouring countries. the danube macro-regional strategy will help to realize the eu’s obvious desire to turn the danube into an internal transport artery with a highly developed infrastructure and improved cargo traffic, which will allow connecting the north sea with the black and azov seas, placing the caspian and asian resources transportation under control of european structures. in addition, the eusdr can be viewed as a mechanism for implementing some of the objectives of the eastern partnership program – the integration of the neighbouring countries into the eu’s influence through the harmonization of national legislation and legal norms in the field of trade liberalization, transport services for inland water transport, technical, navigation, and environmental rules for shipping on the danube with european ones. summarizing the above, it should be emphasized that the main challenge for the eusdr remains the excessive heterogeneity of the danube macro-region. despite the considerable financial resources allocated for the implementation of integration policy objectives, the era of consolidation in the eu will not come soon, because the mechanisms used, including the macroregional approach, if not aggravate, then certainly fix the gap between the leaders and the laggards. as a part of the deepening of integration processes, the use of the potential of euroregions requires special attention (today, 8 euroregions have been created on the territory of ukraine) and the intensification of cross-border cooperation. despite the vast european experience, the development of many models of the functioning of this institution in ukraine, the implementation of cross-border projects has not received sufficient development. the creation of the carpathian, bug, and lower danube euroregions, which could play an important role in blurring the borders with the european union, does not have a proper legislative base. when introducing the european model in ukraine, the “policy of intentions” dominates in interregional policy, while the experience of cooperation and introduction of joint projects is so low that it gives some researchers ground to talk about the inefficiency of the euroregions. references: brinkhoff, a., gabbe, j., martinos, h. (2012). institutional aspects of cross-border cooperation. retrieved from: http://www.aebr.net/publikationen/pdfs/inst_asp_99.en.pdf communication from the commission to the european parliament (2010). communication from the commission to the european parliament the council, the european economic and social committee and the committee of the regions. european union strategy for danube region: brussels, 2010. retrieved from: http://eur-lex.europa.eu/ lexuriserv/lexuriservdo?uri=celex:52010dc0715 communication from the commission to the european parliament, the council (2009). communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions concerning the european union strategy for the baltic sea region. brussels, 2009. retrieved from: http://eur-lex.europa.eu/lexuriserv/lexuriserv.do?uri=celex:52009dc0248:en:n0t eurostat regional yearbook 2016. eurostat: website. retrieved from: http://epp.eurostat.ec.europa.eu/cache/ ity_0ffpub/ks-ha-12-001/en/ks-ha-12-001-en kochubej, n. v., kochubej, r . v. (2005). sinergeticheskaja metodologija issledovanija socialno-ekonomicheskih sistem [synergistic research methodology of socio-economic systems]. socialno-jekonomicheskie problemy informacionnogo obshhestva. l. g. melnik (ed). sumy: universitetskaja kniga. (in ukrainian) kodric, m. (2011). the eu strategy for the danube region: what potential contribution to regional stability and cooperation: bruges regional integration & global governance papers. retrieved from: http://www.cris.unu.edu/ filead-min/workingpapers/brigg_papers/brigg_4_2011.pdf baltic journal of economic studies 208 vol. 4, no. 5, 2018 kuzmin, v. m. (2014). transgranichnoye sotrudnichestvo rossii i yevropeyskogo soyuza v formate yevroregionov na severe yevropy i regione baltiyskogo morya v svete novoy programmy territorialnogo sotrudnichestva «obyektiv 3» [cross-border cooperation between russia and the european union in the format of euroregions in the north of europe and the baltic sea region in the light of the new program of territorial cooperation "objective 3"]. retrieved from: http://convention2008.risa.ru/paper/download/251/1/ malishevskiy, n. (2016). yevropeyskiy soyuz regionov: realnost ili utopiya? [european union of regions: reality or utopia?]. retrieved from: http://www.belarustime.ru/information/opinion/bc24523edec2ff5d.html martunyuk, o. (2015). actual forms of agrarian business organizing under contemporary conditions. scientific economic journal. «actual problems of economics» actual, 8(170), 188-193. merkulova, e. a. (2014). metodicheskij instrumentarij vyjavlenija tochek jekonomicheskogo rosta v regione [methodical toolkit to identify points of economic growth in the region]. socialno-jekonomicheskie javlenija i process socio-economic phenomena and processes, 10 (9). retrieved from: http://cyberleninka.ru/article/n/metodicheskiyinstrumentariy-vyyavleniya-tochek-ekonomicheskogo-rosta-v-regione (in russian) people at risk of poverty or social exclusion by age and sex. eurostat: 13.03.2013. retrieved from: http://appsso.eurostat.ec.europa.eu/nui/show. do?dataset=ilc_peps01&lang=en (access date: 15.04.2013) perkmann, m. (2013). cross-border regions in europe. significance and drives of cross-border cooperation. retrieved from: http://spiral.imperial.ac.uk/bitstream/10044/1/1407/1/perkmann%20european%20urban%20 regional%20studies%202003%20cross-border%20 regions.pdf regional cohesion and competition in the age of globalization (2000). cheltenham: edward elgar publishing limited. yurasova, l. a. (2013). yevropeyskaya strategiya razvitiya dunayskogo regiona: problemy i perspektivy [european strategy for the development of the danube region: problems and prospects]. problemy natsionalnoy strategii, 4(19). retrieved from: https://riss.ru/images/pdf/journal/2013/4/05.pdf baltic journal of economic studies 244 vol. 4, no. 3, 2018 corresponding author: 1 department of economics, tavria state agrotechnological university. e-mail: rechkanegerey@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-244-253 investigating market prices for agricultural production means and agricultural products kateryna rechka1 tavria state agrotechnological university, ukraine abstract. at the present stage of development of ukrainian agribusinesses, pricing for agricultural products is one of the major tasks to be solved. it is well known that the price significantly impacts business performance since it determines both production cost recovery and business profit. in a market economy, the success of agribusinesses largely depends on how reasonable prices for their products are. however, the current sluggish pricing process at agribusinesses argues the lack of effective methodological and theoretical support for decision-making in the field of pricing policy, which often leads to material miscalculations when pricing, and consequently to significant losses. thus, it is necessary to study pricing principles, methods, and features in the sector and their impact on the efficiency of agribusinesses. the purpose and objectives of the study: the study aims at determining the factors, methodological approaches and peculiarities of pricing for agricultural products and agricultural production means in the present-day conditions. background: the peculiarities of pricing in the agrarian sector and the influence of the price mechanism on the ukrainian agrarian sector are examined by many domestic scientists. among the works published in recent years, the fundamental studies by m.m. artus, r.f. brukhanskyi, v.b. vavryk, v.v. hudak, ye.m. kyryliuk, m.z. matviichuk, m.k. parkhomets, b.y. paskhaver, ye.a. firsov, o.m. shpychak, and others deserve a special consideration. although, it should be noted that there are significant changes in how certain factors impact pricing for agricultural and agrarian products. for the reasons given, it is necessary to continue investigating the corresponding processes. the research methodology is based on the dialectical method of cognition of the current market situation, in which agribusinesses function, the method of theoretical generalization, analysis and synthesis to determine theoretical framework for studying pricing for agricultural products, determining pricing methods and rationalizing their application, a systematic approach to determining pricing factors and interrelations between them. having examined, synthesized and critically evaluated studies on pricing in the agricultural sector at the stage of its reform and the market-oriented agricultural model, the following theses have been formulated. a broad methodological and theoretical base for pricing is laid in classical works on economic theory. although, there have been different trends, concepts, and schools within the issue. they can be classified according to two main and even alternative price theories: 1) labour theory of value and price; and 2) marginal utility theory. their content is well-known and developed in many studies in economics. for the said reason we only note that currently, domestic scientists suggest various points of view on base and basis of pricing. many of them argue that in the market system of economic management, regardless of its model and national characteristics, the law of value functions in all spheres and branches of the economy. results. the author focuses on the peculiarities of pricing for agricultural products, considers the causes and consequences of a significant fluctuation in prices for certain types of products and shows an increasing influence on the pricing of foreign economic transactions and the concentration of agricultural production. it is concluded that agribusinesses strengthen their positions in pricing their products, which is proved by improving selling price variation in the context of individual producers and their groups. the practical implication of the results of the study is as follows applying in practice the suggested recommendations that allow providing a comprehensive definition of the factors affecting the price of agricultural products. value/ originality. knowledge of theoretical foundations of pricing is one of the most important success factors in the practical application of experience. very relevant is the analysis of numerous price strategies of foreign companies related to differences in the positioning of companies and goods, the speed of penetration of the national and the world markets, the formation of brands, relationships with competitors and consumers, systems of stimulation of demand and sale, movement of goods products, the ratio of wholesale and retail components of the sales complex. key words: selling price, agricultural products, agribusiness, price variation, price disparity. jel classification: e30, d40, d46, q10, q13 baltic journal of economic studies 245 vol. 4, no. 3, 2018 1. introduction in today’s conditions, one of the most important social problems is the problem of economic growth of the country, which focuses on the attention of politicians and leading scholars of economic science. the problem of ensuring high-quality economic development in ukraine and in the world is gaining momentum due to the global exacerbation of socioeconomic and financial problems. indeed, the dynamics of economic growth gives us a description of the development of the national economy, its place on the international scene. on the basis of its data, there is an opportunity to draw conclusions: on the standard of living of the population, about how the problem related to the resource constraints are being solved. support for economic development, its rates at an optimal and stable level, is among the main longterm goals of the government of any country in the world, as a part of its economic policy, which has been observed over the past decades. in this regard, the emergence of functional studies that reflect the theoretical and practical aspects of ensuring sustainable economic growth and the development of agrarian production in ukraine under present conditions are very timely and important in the scientific world. strengthening globalization processes, ukraine’s european integration in the direction of the eu, in particular, will contribute to the growth of exports of agricultural products. at the same time, the most pressing problem for the latter is the formation of a more efficient structure of export of agricultural products. first of all, it is about increasing the share of ready-toeat products. economic growth and development in the agricultural sector as a sphere of the national economy and its primary production chains are determined by numerous conditions and factors. the driving forces of this process, mainly at the micro level, i.e. economic entities, are generally investigated. there is a system of internal (endogenous) factors affecting their economic development. the thesis that the latter is significantly influenced by a number of external (exogenous) factors, in particular, climatic and natural conditions in agriculture, is theoretically substantiated and practically proven. apart from the above factors, the rest can be divided into political (political stability), legal (economic law), social, and economic. a system of these factors creates a macro environment, in which each production agristructure functions and correspondently its economic growth and development or its decline and even destruction (economic bankruptcy). 2. pricing as an external influence on economic growth an individual, an economic entity, is the dominant driving force of economic growth and development. if he/she is an entrepreneur-business manager, his/her main goal is to obtain and maximize profits. “economic interest in managing the agrarian sector,” as notes p.t.  sabluk, “largely depends on external factors, which under market conditions radically changed the order of income generation in agribusinesses. the times demand to produce what can be sold and gain profits” (sabluk, 2008). the profit is ultimately determined by the difference between the product/service price and its cost price. as to the goods produced and offered for sale, for the seller of such goods, the “production costs” (cost price) component is fixed in a purchase and sale transaction. it is beyond the influence of both market counterparties. to achieve the desired profit, its increase at given market prices is possible only with a reduction in production costs and an increase in profit caused by such a reduction. in other words, with respect to the goods marketed, the market price is an external influence on the profitability of agribusinesses. an increase in profit, its maximization can be realized provided the highest possible price of the goods under the given market conditions and a specific act of selling the goods. but the market price may be reduced to a minimum level. the minimum price for a particular product is the marginal price that covers production and selling costs (cost price). in this case, the return is zero. there are no profits at all. at lower prices, the production ceases to have its meaning, i.e. becomes unprofitable and the commodity producer is unable to carry out even simple reproduction. meanwhile, in terms of incentives for economic growth and development, the minimum price may ensure survival and further reduction in costs, profit-earning and an increase in profits as well. as to market prices, on the surface level, a number of concepts are used that somehow characterize them as: “reasonable”, “low”, “factory”, “moderate”, “acceptable” and so forth. it is quite obvious that prices should be theoretically substantiated and satisfies the “selfish” interests of the commodity producer and society, that is, promote economic growth and development of both the enterprises and the national economy. considering the fact that in the market conditions production is aimed at gaining the profit, then any prices should ensure it for the producer. for the reasons above, scientists and political economists have always had an undying interest in pricing. in this regard, however, “quantity has not transformed into quality.” neither in the past nor in the present has a single “theory of value and prices” been developed. instead, there are different and even alternative points of view on this issue. it is a complex multi-vector and requires special fundamental, methodological, and theoretical research. it should be also taken into account that during the transformation from a centrally planned economy to a market economy, a number of works by ukrainian scientists were devoted to the theory and practice of pricing. baltic journal of economic studies 246 vol. 4, no. 3, 2018 that is why, in the context of the research area, the price is analysed only as an external influence on the profitability of agroproducers, and accordingly on the economic growth and development of individual agribusinesses and their aggregate (agriculture). 3. analysing the pricing theories in soviet times, it was generally accepted that only the “labour” theory of value is scientifically substantiated. all the others are contrary to the market economy. since the 90s of the last century, domestic scientists began introducing other approaches to determining the intrinsic substance of market prices. let us distinguish the most typical of them. the labour theory of value. its supporters believe that no one has refuted the marx’s formula c + v + m. the cost of goods is determined by the costs of socially necessary labour (c + v), and the price must recover costs and ensure the surplus value (m). this is the requirement of an objective law of value, the violation of which leads to significant losses, up to halt to a business. the price should cover production costs, circulation costs, and provide every properly operating enterprise with required profit – the fundamental rule of a market economy that determines the feasibility of an enterprise in the market and in the industry. “currently, the main issue that must be resolved is the compliance with the objective law of value.” (mesel-veseliak, 2012) the intersectoral exchange, like any exchange process, is regulated by the law of value. however, a relation between the non-equivalence of the intersectoral exchange and the law of value is quite specific. the law of value stipulates that the sum of the prices of all goods to be exchanged must equal their social value. this equality cannot be realized at the level of an individual commodity, but when the goods are considered in the entirety of the exchange process, it becomes contingent and necessary in accordance with the law of large numbers (valentynov, 2002). “the labour theory of value can be refuted by a theory that offers the substance of the prices common to all goods, which are weightier for abstract work and more closely related to the price. this, however, is not given” (hosh, 2001). the concept of market base and market prices: “the basis for pricing under market conditions is the ratio of product supply and demand” (melnyk, 2009). the pricing is significantly influenced by “...the ratio of supply and demand for a certain type of goods” (demediuk, 2013). the multi-factor market pricing: “under market conditions, prices for manufactured products are determined by supply and demand, quality, production and selling costs, and taxes and market charges. finally, the price is a monetary reflection of the commodity value and its value for buyers.” (cherven, 2007) “the price of goods contains a conflict: it is almost always low for the seller, and high for the buyer. price harmonization takes place in the market and is based on the law of supply and demand, where the supply is based on the theory of labour value, and the demand – on the theory of marginal utility. the theory of labour value examines the problem from the producer’s standpoint, and the theory of marginal utility – from the consumer’s standpoint”. (stratehiia rozvytku ahrarnoho sektoru ekonomiky na period do 2020 roku, 2013). the above gives grounds to conclude that there is no single theory of value and prices. the thesis that the labour theory of value is the only one scientifically substantiated theory, which was popular in the soviet times, was proven to be wrong. any of the theories are valid to some extent, and different pricing theories focus on different aspects of this complex process. thus, the labour theory of value and prices emphasizes production costs (c + v). scientists argue that the market compensates commodity producers for the public, not individual expenses, and non-equivalent exchange occurs only when the price of goods does not cover them and does not bring profit. since individual expenses (cost price) in this sector are significantly differentiated in accordance with businesses, it is normal for the market economy when some businesses receive an excess profit (due to low cost compared to the public one), and some make no profit at all. the differentiated individual expenses encourage businesses to achieve social production costs and reduce them in order to obtain excess profit as a result of innovative development. and in this context, the market constantly encourages commodity producers to introduce scientific and technological advances in production and contributes to the development of the industry. such pricing is typical for a competitive market, which provides an equivalent exchange based on the law of value, i.e. prices are formed at average costs. but with limited natural resources, e.g. agricultural land and its fertility, climatic conditions, more adverse business conditions in relation to the factors may be acceptable. in other words, agricultural prices theoretically should be based on costs incurred in the worst lands. this is due to the fact that the land is a unique, space-limited resource, and there is land rent. that is, all parcels of land, except for the worst ones, bring excess profit. however, due to the difficulty in determining prices for agricultural products from the worst land, this idea has not been put into practice, and the prices are formed at average costs. the latter makes it difficult to solve the problem of disparity of price for agricultural products and material and technical resources entering the agriculture sector and requires to solve the disparity in its own way (melnyk, 2016; semenova, 2013, stratehiia rozvytku ahrarnoho sektoru ekonomiky na period do 2020 roku, 2013). but the said refers to highly competitive markets, where all its subjects gain profits on the difference between baltic journal of economic studies 247 vol. 4, no. 3, 2018 the price of production and the average industry costs. if any subject of the agrarian market takes a monopoly or oligopolistic position, then he/she will take advantage of that position to dictate his/her terms to partners. the economic realization of the market monopoly is earning monopoly excess profit by using price factor. there are monopoly (oligopoly) high prices in the market of agricultural production means, and there are monopoly low purchasing prices in the agricultural market. in both cases, the agrarians incur the loss appropriated by their counterparts in those markets (melnyk, 2016). summarizing numerous scientific approaches to the price base, we believe that each of them is worthy of attention, and all of them are mutually complementary. the study is not aimed at developing another approach to pricing. there is probably no need for it. we are rather interested in the practical aspect of pricing, namely: the market price at a given cost price determines the producer’s profit, which is the main goal, the motivator of all economic entities involved. in terms of the law of value, each commodity producer with socially necessary expenses gains profit according to his/her average rate. those whose expenses are lower gain excess profit, while those whose expenses are higher lose a share of the average profit. such pricing and profitability correspond to market management principles and objective economic laws. the above provision is implemented in the conditions of the free competition market, the so-called perfect market. almost all domestic scientists have to admit that agrarians generally have the least market power in all markets and accordingly experience economic pressure in both markets: in the input market – from the enterprises of the first sphere of the agro-industrial complex, in the output market – from the third sphere, primarily mediators. in other words, agrarians, compared with other agrarian market participants, have less opportunity to defend their interests. as a consequence, the long-term non-equivalence of intersectoral relations within the agro-industrial complex often called “disparity or price discrepancy” is not in favour of the agricultural sector. all domestic scientists agree that price disparity has an adverse influence on agriculture: poor material and technical base; reduced remuneration of labour; and suspended social development of rural areas. prices for agricultural products do not reimburse their cost of production. the specific losses in the industry referred to in works on economics are as follows. the agribusinesses lose 8.37 billion uah of their average annual income because of price disparity, and the agricultural workers are underpaid 3.34 billion uah because of disparity in remuneration of labour. the total lost profit accounts for 128 billion uah, which also includes a reduction in budget financing (sabluk, 2008; semenova, 2013). the price disparity in the agricultural sector can be caused by different reasons. they are generally caused by special characteristics of the industry. an increase in non-equivalent intersectoral exchange can be explained by increasing dependence of agriculture on industries that buy its products and sell the means of production to it, as a result of a deeper social division of labour. ultimately, inelastic demand for agricultural products is typical for the agricultural market. all of the above lead to price diktat from the enterprises of the first and third spheres of the agro-industrial complex. thus, the market mechanism, in the agrarian market where oligopolistic mediators dominate, leads to the fact that the agrarian producer loses profits or even suffers losses, and the mediators gain excess profit. that explains why for many years agriculture is actually on the verge of simple reproduction. the adverse influence of “price disparity” on the profitability of agribusinesses today is probably the most significant among the factors that hinder the agrarian sector from developing and contribute to its destruction. this applies to both economic and social components. the accuracy of the data given can be disputed. after all, the case in hand is about a potential loss, and even according to their minimal estimate, annually the agrarians receive 40-50 billion uah less, which is twice the amount of net profit earned by agribusinesses in 2014 (20.3 billion uah). at best, prices for agricultural products provide a simple reproduction for most agribusinesses, which conflicts with the laws of the market economy. as a result, the money, which has not been received by peasants, is appropriated by other agrarian market participants (melnyk, 2016). in the final analysis, agriculture is one of the least profitable since the surplus value is to some extent appropriated by those who buy their products. provided that there were equivalent exchange conditions, this could be avoided. hence, the conclusion to be drawn is that the price factor of agribusiness profitability hinders its economic growth and development. in a perfect market, the price of goods is close to its value. the more perfect the market, the more the commodity price is close to its value, and the profit to the surplus value. monopoly low prices or monopoly high prices are a means to calculate the latter, its free transfer by agricultural producers to the buyer, or to the seller who sells products to agricultural producers, that is, agricultural production means. it should be noted that almost all agrarian economists argue that the agrarian market is imperfect. it is first of all about the non-equivalent intersectoral exchange and price disparity in agriculture from the first and third spheres of the agro-industrial complex. based on this, most scientists conclude that the experience of the developed countries and domestic practice show that the market economy does not provide such pricing in the agrarian market that would promote economic growth and development of agriculture. baltic journal of economic studies 248 vol. 4, no. 3, 2018 concerning the set of causes that explain the increasing discrepancy between prices for agricultural products and production resources for agriculture, scientists emphasize the relative disadvantage of agriculture, primarily due to high monopolization of allied industries. this forces agricultural commodity producers to accept prices that are formed in uneven distribution of market power. other causes include: inelastic supply of agricultural products and demand for them; inequality between scientific and technological progress and increasing demand for agricultural products; high immobility of agricultural resources; inequality of the speed of capital circulation in various sectors (valentynov, 2002). “in market conditions, the profit regulates the production. it is the factors of long-term return of advanced capital and the profitability of current costs that measure the investment attractiveness of the specific industry. agriculture belongs to the industries that are unable to accumulate capital and create excess profit. due to slow capital turnover and dependence on climatic and weather conditions, agriculture is considered to be one of the riskiest industries. it is difficult to predict prices for products, amount of products and marginal costs for agribusinesses. the monopsonic structure of the market makes the situation more complicated. having market power, processing and procurement enterprises exert a significant pressure on agricultural prices. thus, the agrarian sector becomes non-competitive and unattractive for investment due to the lack of government regulatory measures aimed at agricultural price support” (kozak, 2009). foreign and domestic practices clearly show that the agrarian market is far from the perfect. it is characterized by inelastic demand for agricultural products and, to a certain extent, their surplus (both absolute for developed countries and relative for prohibitive market prices due to low incomes of the population). however, at least in theory, market conditions in any economic field and industry should ensure exchange equivalence. otherwise, what was the reason to create an entrepreneurial and market environment for ukrainian agriculture is to denationalize the latter. after all, in recent years, the vast majority of scientists suggest that government should intervene in market pricing mechanisms. thus, it is of significant practical importance to scientifically substantiate the objective necessity for the government to interfere in market pricing mechanisms in the agrarian market. it is evident that over the years since independence the agrarian market has been imperfect since it lacks for equivalent intersectoral relations. “the current agrarian market model formed over the last two decades makes it possible to provide tangible financial performance only to large producers – agrarian holdings. at the same time, small and mediumsized farms are not developed properly.” (stratehiia rozvytku ahrarnoho sektoru ekonomiky na period do 2020 roku, 2013) due to imperfect intersectoral economic relations, the price mechanism in particular, over the last 15 years the industry has lost more than 600 billion uah, which caused a significant decrease in funds channelled for its material and technical facilities and remuneration of labour, which are twice lower in the agriculture sector when compared to the industry. the low profitability of most agribusinesses does not facilitate the key driving force of economic growth and development of agriculture – the satisfaction of the economic needs and interests of its subjects. it should be noted that most scientists, investigating the nature of the non-equivalent interchange exchange, consider it is a perennial problem of agriculture in market conditions and it is impossible to avoid it completely. now let us consider theoretically the market capacity to settle, provide equivalent intersectoral relations in agribusiness, and give an answer whether the state intervention in this process is objective. 4. regulating the market for intersectoral relations in the agro-industrial complex as we have already noted, most domestic scientists agree that objective economic law of value operates in agriculture as well, and, accordingly, its self-regulation. and this means that the price is based on the social cost of production and sale of goods. that is, market prices are formed on the basis of the law of value, which is the law of prices. and here, as the scientists rightly believe, it is important to determine what costs are involved since in practice individual expenses, especially in agriculture, differ significantly in the industry. they can be divided into three groups for convenience: high; average; and low. according to the labour theory of value (and it is logical), the market price should compensate for the costs incurred in socially normal production conditions, with an average level of technical and technological equipment, professional skills, and the average intensity of labour. such costs are more or less in line with the economic units that currently produce most of the products. but even common sense and logic give grounds to assert that for the seller the commodity price, with all price manipulation, has a lower limit – the costs of production. moreover, the commodity producer has not only to reimburse the costs incurred. his/her activity is aimed at gaining a profit. the buyer, who creates the demand, is primarily interested in the “marginal utility” of the product and, of course, he/she considers his/her ability to pay. any commodity producer, therefore, will fail to reproduce even simple production, if the market price does not constantly compensate for it. in this case, the following are possible: 1) incomplete reproduction; 2) production specialization change; 3) economic bankruptcy. that is, the case in hand is the decline and destruction of a certain type or branch of production (melnyk, 2016). baltic journal of economic studies 249 vol. 4, no. 3, 2018 the development of the productive forces is accompanied by significant shifts in the production structure. certain types of production are reduced and even completely replaced by others (for example, ironmaking and steelmaking are largely replaced by plastic and ceramics). however, it is impossible to imagine the suspension of production in the agriculture sector, where products of vital importance and raw materials for many processing enterprises are produced. theoretically, the world division of labour makes it possible for small countries, for example, iceland. for most countries of the world, mass imports are issues of food and economic security, a demand for considerable funds. if agriculture is considered within the national economy of those countries, in which it is the main agricultural producer, the massive bankruptcy of agribusinesses without government intervention would inevitably lead to an increase in prices to a level of sufficient profitability (subject to socially necessary costs). market conditions would naturally increase the concentration, centralization, and integration of production and reduce the public spending. the whole society would benefit from this, but there would be a significant decrease in the number of economic entities. therefore, now most of the western countries support smalland medium-sized farms, as discussed above. a rather different situation is observed in ukraine. the government support is insufficient. the rural households survive due to their mostly subsistence consumption character. in the sector of agricultural enterprises, expenses are compensated for about 9/10  agribusinesses. others are satisfied with relatively low profitability, and every tenth enterprise is unprofitable. in the end, all this significantly hinders the economic growth and development of agriculture. thereby, settling parity intersectoral relations in the agro-industrial complex is a pressing issue. it requires to develop ways to activate the main factor that affects the profitability of agribusinesses, and thereby their main economic goal achievement. science and practice have proved that in current conditions one of the most accessible is free competition market relations, and accordingly spontaneous self-organization. however, as it has been already noted, this option is not used in almost all countries with developed market economies. agriculture is regulated both by the market and by the state. how exactly it is sufficiently covered in many economic works. in particular, back in the late 90s of the last century, s. demianenko noted that now more and more economists abandon themselves to the idea that it is quite difficult to reach price parity, and in general, its expediency is questionable. and with it, significant shortcomings of the concept of price parity are emphasized. therefore, now most western economists incline to two other concepts of equalization of production opportunities in agriculture and other industries. these are the concepts of income parity and resource parity, which currently are the most popular in agrarian policy. the concept of income parity provides that in agriculture, net profit and profitability (the share of profit in the price of agricultural products) should be the same as in other economic sectors. the concept of resource parity lies in the fact that agriculture should ensure the same resource efficiency as non-agricultural sectors. first of all, it is meant the resource productivity and production optimization, at which resources would be optimally (in terms of resource allocation between different sectors of the national economy) involved in the production. the national agrarian policy should be based on the parity of incomes between agricultural producers and workers in other sectors, as well as the resource productivity parity. this means a retreat from the concept of agricultural and industrial price parity. the concept of income parity is much broader than the concept of price parity. it consists in equalizing the incomes of agricultural workers with the incomes of workers in other sectors and provides for a set of measures aimed at achieving that, including maintaining prices for industrial resources for agriculture, subsidizing certain types of agricultural products (in particular livestock), creating a favourable tax climate for agrarian enterprises, and improving social living conditions in rural areas. the implementation of the concept of income parity will increase the incomes of agricultural producers (which are now half as low as the national average) and balance the development of the agrarian sector as well (demianenko, 1998). the issues of state regulation of prices and incomes in ukraine should neither be underestimated nor overestimated. at least since independence, it has been very problematic. let us consider what agribusinesses themselves can do in the current marketing environment in ukraine. to answer the question posed, the agricultural market has been analysed (table 1). as can be seen from the table, in 2015, “other channels” account for the lion’s share of agricultural products, – 86.0%. and it has significantly increased over the last 20 years. only 2.0% was sold in the market. this raises the question about what the most economically significant agricultural product sale, – “other channels” include. it should be noted that in 1990, there were no “other channels” for any of the products except for grain and leguminous crops (3.2%) and eggs (0.2%). who personifies this “encoded” agricultural sale channel, that is, who buys the agricultural products? the scientists give an unambiguous answer to this question – various mediatory structures, grain traders in particular. concerning the latter, economists believe that the largest grain traders in the ukrainian and foreign markets occupied their niche long ago, and still hold baltic journal of economic studies 250 vol. 4, no. 3, 2018 their positions. according to the ukrainian agrarian confederation, the top three grain traders provided about 38% of exports, and the top seven – about 3/4 of ukraine’s total grain exports. international trader representatives remain the largest exporters of ukraine’s grains (serna pe, louis dreyfus commodities ukraine ltd, suntrade ac, kernel trade llc, alfred c. toepfer ukraine llc, etc.), and among the companies with domestic capital, the largest are agroexport and adora. of the 600 companies exporting grain, the largest accounts for about 60-70% of the shipped grain. the total number of exporters is practically unchanged over the years. most of them are in kyiv, odesa, mykolaiv, and kherson regions. domestic grain traders made a significant impact on the production and sale of grain, focusing on exports, they actively developed their trade infrastructure by creating regional grain elevator networks and investing in domestic port facilities. due to private investment, grain exports from 2003 to 2010 grew from 6 million tons to 36 million tons (vlasenko, 2015). the vast majority of scientists criticize the dominance of mediators in the agricultural product market (table 2). some researchers rightly believe that one should not absolutize mediator malpractice in the agricultural products market. that is, in a more general approach to the problem, mediation should not be perceived only as a negative phenomenon. after all, the presence of mediators is typical for a market economy as a whole, at all stages of its development. as is generally known, almost all trade performs such a role, once separated from the industry. and this is beneficial to both sectors and their primary structures. the agrarians also will benefit from specializing in direct production and transferring such functions as transportation, storage, processing, and sale of products that require funds, time, and professional skills to mediatory structures. the latter have the opportunity to obtain “economy of scale” in selling products since they serve many agricultural producers, they have the opportunity to thoroughly study the market situation, use marketing structures, and minimize transaction costs. table 1 the structure of the main agricultural products sold by ukrainian agribusinesses according to sale channels (as a percentage of total sales) types of products to processing enterprises to shareholders to population as remuneration of labour in the market other channels 1990 2014 1990 2014 1990 2014 1990 2014 1990 2014 grain and leguminous crops 80.4 3.3 4.7 13.2 0.2 3.2 3.1 3.2 88.7 oil crops 98.9 6.1 0.3 0.8 0.3 2.0 91.6 sugar beet 100.0 93.6 6.4 livestock and poultry (live weight) 94.8 23.5 0.1 3.3 0.3 1.8 16.6 0.1 68.8 milk and dairy products 99.1 94.9 0.8 0.1 0.1 1.3 3.7 eggs 98.1 3.5 0.4 0.2 1.3 14.5 0.2 81.8 source: (statystychnyj zbirnyk “silske hospodarstvo ukrainy” za 2015 rik, 2016) table 2 the assessment of mediatory structures in the agricultural product market by domestic scientists author interpretation m.v. zubets “currently, the domestic market is mainly controlled by mediatory structures, whose main purpose is to pay as cheap as possible for the grown produce to the agricultural producer when buying and sell as expensive as possible to the consumer. this leads to the impoverishment of agricultural producers, buyers are unable to buy products at high prices. this results in artificial overproduction and creates an opportunity for a mediator to export the products. such actions nullify almost all the government efforts to support the agricultural sector, and most importantly, the absence of market self-regulation since the results of the supply and demand interaction, in this case, are reaped by mediators” (zubets, 2007) v.ya. mesel-veseliak “... various trader formations, which undertook to sell agricultural products. they set purchase prices which are not for benefit of agrarians, trade in the world market and appropriate all the earnings” (mesel-veseliak, 2009) m.o. pohoretskyi “... the domestic agricultural commodity producer leaves it to mediators to deliver products to the ultimate consumer. the mediators often take advantage of that, setting a very high margin between the purchase price and the selling price. ultimately, the consumer receives products at excessively high prices, and the mediator becomes the most profitable participant in the market, producing nothing and spending very little. the government must solve this problem by constantly influencing the mediatory structures and issuing relevant laws” (pohoretskyi, 2013) p.t. sabluk “an analysis of export selling prices shows that at the export stage up to 70% of the total revenues from the sale of agricultural products in the world market are formed, and expenditures at this stage in most types of products do not exceed 20%” (sabluk, 2011) source: summarized by the author baltic journal of economic studies 251 vol. 4, no. 3, 2018 the most important thing for direct agricultural producers is to get a fair price for their products. but in ukraine, mediators dictate prices to them, i.e. establish a monopoly low level (melnyk, 2016). 5. conclusions thus, a branched commercial mediator system has been created in ukraine’s agricultural market. they wedged themselves in between agricultural producers and ultimate consumers. such mediators are not superfluous since they are engaged in moving products from the producer to the ultimate consumer. under certain conditions, the mediator is beneficial for the producer, the ultimate consumer and society provided they conduct a proper price policy in respect of both their counterparties. to date, “...a rather branched and practically uncontrolled commercial mediator system has wedged in the market turnover mechanism. thus, agrarian products move as follows: the agrarian enterprise – the mediator – the ultimate consumer ...therefore, the price formed in this way is virtually unprofitable for agrarians and production becomes unprofitable. but the mediator buys the product for a song (the cost price is higher than the offered price) and sells it to the ultimate consumer at the price, which provides the mediator with high profit. so, the market mechanism can be represented as follows: the agribusiness – losses; the mediator – excess profits; the processing enterprise – profits; the ultimate consumer. thus, losses incurred by the agribusiness are transformed into excess profits gained by the mediator and profits made by the processing enterprise ... their participation in the agrarian market is determined by the algorithm: to buy as cheap as possible to sell as expensive as possible” (khorunzhyj, 2011). it should be noted that there is no official data on the excess profits gained by agrarian market mediators. accordingly, it is impossible to accurately determine losses born by agribusinesses as a result of not selling their products to the ultimate consumer by themselves. losses from price disparity can only be hypothesized. the above refers to all agrarians: “agricultural producers do not have direct access to the market since the market is shared primarily by mediatory structures that operate according to non-transparent schemes for selling food products” (kotkalova, 2010). under such conditions, it is urgent to use all possible directions, mechanisms, and levers to ensure that agricultural producers directly participate in the entire food chain to move their products to the ultimate consumer. how exactly? it is well-known that this requires handling costs, from transportation, storage, reprocessing, and processing of agricultural products to the formation of trade and logistics infrastructure, the construction of grain elevators and port facilities, commodity exchanges, auctions, and formal markets. it is clear that producers take risks and bear possible losses when storing products. the agrarian market eventually becomes more transparent and predictable for all its participants. the above gives grounds to conclude that in the current economic conditions, most agricultural enterprises do not sell their products directly to domestic ultimate consumers, not to mention foreign consumers. this is due to many reasons. the main of them are: lack of common facilities for agribusinesses to use when moving their products from the producer to the ultimate consumer. it is primarily about different types of cooperatives, common grain elevators, processing enterprises, wholesale markets, firms, and so on. in selling products to processing enterprises, it is important to establish long-lasting and mutually beneficial relationships between agrarians and processors. it is important to compensate socially necessary expenses to agricultural enterprises and a normal profit gained by them, in other words, to obtain mutual maximum benefits by each of the participants. creating these conditions does not exclude the presence of mediators in the agrarian market. but they will have to act in a competitive environment. this will significantly decrease the government regulation and support of market prices. is it possible for individual agricultural producers to sell products to the ultimate consumer? it is probably possible only for those who have reached production overconcentration, agroholdings in particular. the others need to join their efforts to implement those functions that are currently performed by mediators. the experience of economically developed countries gives grounds to assert that one of the effective ways to reach the ultimate consumer is to create “own mediators”, as a rule, non-profit ones. such mediators also act in the agrarian market according to the algorithm: “to buy as cheap as possible to sell as expensive as possible”, for example, supply and marketing cooperatives. but such savings are distributed among the cooperative members. other ways for the producer to directly access the ultimate consumer or processing enterprise are also important. in ukraine, the cooperative movement has not developed properly due to the negative impact of objective and subjective reasons. currently, the following directions are deemed as the most actual (for more or less large-scale agribusinesses). first, to create joint ventures to develop an extensive network to perform certain functions in the supply chain from the producer to the ultimate consumer. for example, the construction of joint warehouses, elevators for storage of products. domestic scientists have repeatedly pointed to the fact that, for example, the effectiveness of grain production is affected by a term of realization. agribusinesses that do not have warehouses (elevators) for storing grain are forced to sell their products in julyaugust when grain prices are sharply reduced due to an baltic journal of economic studies 252 vol. 4, no. 3, 2018 increase in supply. agribusinesses that have their own elevators and enough working capital can sell grain, soya beans, and sunflower seeds in january-june when prices are high. therefore, for lack of elevator capacities in ukraine, it is advisable to have own granary in order to increase profitability in the production of grain, soya beans, rapeseed, sunflower seeds. an agribusiness project provides for the construction of an elevator with a capacity of 40 thousand tons. in addition to drying and storing own grain, the business may provide such services to other agribusinesses, which will provide extra earning and improve return on investment in the elevator (ilchuk, 2015). secondly, an important direction in diminishing agricultural price disparity is to build an effective contractual system, conclude long-term contracts (on a long-term basis) as to the amount, quality, terms and, most importantly, the price. it is clear that the latter is the principal and most controversial item of the contract as both counterparts have opposite interests. the practice of relations between agricultural producers and buyers of agricultural products indicate the lack of an effective contractual system that would guarantee reduction of risks for buyers and sellers, timely payment and would be a medium to avoid bankruptcy and sale of non-profitable companies. the problem can be solved by developing an appropriate legislative framework for concluding, maintaining, and executing contracts, bearing responsibility for non-fulfilment of contractual obligations and protecting the party whose rights have been violated. overseas experience confirms the importance of a contractual system for marketing agricultural products. for example, in the usa 90% of broilers, up to 30% of veal, and a quarter of all wholesale trade are sold in accordance with contractual relations between the producer and the supplier, with clearly defined volume and cost of production. such measures make product quality control more effective and the market situation more predictable for all its operators (hura, 2013). references: valentynov v.l. 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(2013). osoblyvosti dii tsinovoho mekhanizmu na rynku silskohospodarskoi produktsii [features of the price mechanism on the market of agricultural products]. ahrosvit [scientific and practical magazine agrosvit]. no. 18, pp. 40-46. statystychnyj zbirnyk «silske hospodarstvo ukrainy» za 2015 rik. (2016). statistical collection "agriculture of ukraine" for 2015 / state statistics committee of ukraine. stratehiia rozvytku ahrarnoho sektoru ekonomiky na period do 2020 roku: zbirnyk materialiv chotyrnadtsiatykh richnykh zboriv vseukrainskoho konhr. vchen. ekonomistiv-ahrarnykiv. (2013). [strategy for the development of the agrarian sector of the economy for the period up to 2020: a collection of materials of the fourteenth annual meeting of the all-ukrainian cong. scientist economists-agrarians] (kyiv, october 16-17, 2012). khorunzhyj m.j. (2011). problemy tsinoutvorennia na silskohospodarsku produktsiiu [problems of pricing on agricultural products]. ekonomika apk [economy of agroindustrial complex]. no. 1, pp. 57-67. cherven i.i. (2007). ahrarnyi rynok vymahaie vyvazhenoi tsinovoi polityky [the agrarian market requires a wellbalanced pricing policy]. ekonomika apk [economy of agroindustrial complex]. no. 3, pp. 99-104. baltic journal of economic studies 366 vol. 4, no. 4, 2018 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: nadezdash@ua.fm orcid: http://orcid.org/0000-0001-5932-658 2 classic private university, ukraine. e-mail: olgagaltsova67@gmail.com orcid: http://orcid.org/0000-0003-0012-0371 3 zaporizhzhia national university, ukraine. e-mail: irina.varlamova.zp@gmail.com orcid: http://orcid.org/0000-0002-9921-3297 doi: https://doi.org/10.30525/2256-0742/2018-4-4-366-374 developing a methodology to assess the environmental and economic performance index based on international research to resolve the economic and environmental problems of ukraine nadiia shmygol1, olga galtsova2, iryna varlamova3 abstract. the urgency of the research. developing a new approach to economic and environmental problems grounded on the need to form new awareness and responsibility makes it necessary to conduct an in-depth study of the causes and nature of such problems at the current stage of the national economic development. the problem of developing and substantiating indices in countries such as the united kingdom, canada, the united states, is decided by special institutes. at the international level, numerous agencies, organizations, and committees such as who, un, unesco, oecd, the world bank, the european commission, the committee on environmental modelling (isem) are addressing this issue. for a comprehensive assessment of the sustainability of development, take into account the socio-economic and environmental indicators, as well as separate a group of institutional indicators. but for ukraine, it is impossible to identify the links that require more attention and material support for raising the level of development both nationally and globally. consequently, the method of calculating the index of sustainable development, taking into account the peculiarities of the functioning of the national economy, needs to be reconsidered and improved. target setting. both the state and the enterprises ignored the issues of environmental pollution, which gradually led to a threatening situation for the economy and the environment. meanwhile, in the current context, economic and environmental problems remain unresolved and are increasingly deepening. uninvestigated parts of general matters defining. analysis of the resource potential revealed the urgent need to develop a clear and functioning mechanism of economic and environmental development, shaping the ecological awareness of the nation as a whole, managers and policy-makers, improving and transforming the existing regulatory framework and environmental legislation, as well as the corporate environmental management systems, in particular, based on the environmental performance index. the research objective. the goal of this article is to study the nature of economic and environmental problems of the industrial enterprises and to develop a model of the regional environmental and economic performance index aimed at reducing the environmental costs of the economic growth, ensuring the environmental sustainability of the region, and mitigating the harms in terms of public health. the statement of basic materials. there is evidence proving that the economic problems are mainly caused by the lack of attention to environmental issues. it is proved that to resolve the abovementioned problems, first, there is a need to develop the national economic and environmental awareness based on the national context, using international standards and introducing the best practices of international organizations. conclusions. thus, the strategic approach to ensure the sustainable socio-economic development of the country from the standpoint of the economic and environmental model is a transition from the implementation of separate measures to the development and implementation of an economic and environmental concept of the comprehensive public production rationalization. key words: economic and environmental problems, ecological regulation, environmental and economic performance index, economic and environmental awareness, mechanism of economic and environmental development. jel classification: q50, q57, q51, q56 baltic journal of economic studies 367 vol. 4, no. 4, 2018 1. introduction the world community is showing increasing interest in ways to achieve sustainable development of countries and regions, as well as protect the interests of the population. in this context, sustainable development is considered, on the one hand, in the context of changing the relationship between man and nature in order to expand the opportunities for economic growth, and on the other – as a coordinated global strategy for the survival of mankind. consequently, the current issue is the question of combining the ecological and economic and social components of development so that in the transition from generation to generation promoted safety and quality of life, the state of the environment, improved and society’s needs were determined by the progressive social development. during the crisis and especially in the post-crisis period, the issues of environmental pollution and its impact on the economic situation of the country are particularly important for ukraine. a negative legacy of the previous economic system is negligence to the problem of environmental pollution, in particular, in the industrial regions where a lot of resources are concentrated. both the state and the industrial enterprises that were under its strict control ignored the issues of environmental pollution, which gradually led to a threatening situation for the environment and the economy. therefore, the problems, which had not been resolved in the past, gradually accumulated, deepened, and thus created a threat of economic and environmental crisis in ukraine. most researchers and practitioners deemed it possible to resolve such problems by developing measures to eliminate the negative consequences caused by the activities of industrial enterprises. it was suggested to introduce fees for the use of natural resources and for environmental pollution. however, those fees were so small that it was much more cost-effective for companies to continue polluting the environment and pay fines. the second way to resolve such problems is to install pollution control and treatment facilities, which is very costly for enterprises and requires significant investments. as the domestic companies have a weak investment base, there is a need to attract foreign capital, but since foreign funds are provided at high-interest rates and only for short periods, it is not cost-effective to invest money in environmental measures and innovative technologies. all this leads to further deterioration of the economic and environmental situation in our country. in our opinion, one of the effective ways to improve the economic and environmental situation in ukraine is to develop economic and environmental awareness – an eco-economic paradigm, which will help to resolve complex problems at the national, regional, and local levels, will allow to develop the algorithms to create an economic mechanism to achieve the resource potential, and to make complex decisions, harmoniously combining the rational use of natural resources with the concept of socio-economic development of the country. developing a new approach to economic and environmental problems grounded on the need to form economic and environmental awareness and responsibility for decision-making, makes it necessary to conduct an in-depth study of the causes and nature of economic and environmental problems at the current stage of national economic development by introducing a new methodology to assess the environmental and economic performance index of the regions of ukraine. both the state and the industrial enterprises that were under its strict control ignored the issues of environmental pollution, which gradually led to a threatening situation for the economy and the environment. therefore, the problems, which had not been resolved in the past, gradually accumulated, deepened, and thus created a threat of economic and environmental crisis in ukraine. 2. actual scientific researches and issues analysis and the research objective current realities reaffirm the urgency and the need for scientists and practitioners to study the nature of environmental problems and their impact on the economic situation both on an economic entity and on the country as a whole. this problem has been widely studied in many scientific publications of national and international scientists. it should be noted that the environmental aspects in the activities of industrial enterprises were studied by such scientists as o. amosha, o. balatskyi, p. barna, a. zhulavskyi, ye. lapin, l. melnik, ye. pozacheniuk, o. syromiatnykova, v. feshchenko, etc. (barna, 2009; melnyk, 2006; pozacheniuk, 2008; feshchenko, 2009; syromiatnykova, 2008). the theoretic foundations to study the linkage between the economy and the environment and the problem of sustainable eco-economic development of the industrial enterprises has been laid by such scientists as b. burkynskyi, t. halushkin, l. hranych, b. danylyshyn, m. dolishnii, t. domina, v. yevtushevskyi, yu. lysenko, a. sadekov, and v. shevchuk (dolishniy, 2006; domin, 2003; lysenko, 2003; shevchuk, satalkin, bilyavskyy, 2004). publications of the following economists were aimed at solving the problems of improving the economic and environmental management of the enterprises: n. bondarenko, o. veklych, h. hryhorian, v. hrynova, m. kyzym, v. lukianykhina, a. nyz, v. ponomarenko, i. semeniak, v. trehobchuk, l. ukrainska, v. khesle, m. khokhlov, and v. shepa (lukianykhina, 2002; veklych, 2000). research studies of the following foreign authors have been of great importance to attain the current level of the environmentally sustainable economy: r. welford, g. winter, a. gouldson, k. gofman, a. gusev, t. dyllick, baltic journal of economic studies 368 vol. 4, no. 4, 2018 ye. korotkov, g. motkin, d. ottman, n. pakhomova, k. peattie, m. porter, i. potravnyi, c. richter, n. reimers, p. roberts, g. serov, w. hopfenbeck, s. schmidheiny, etc. meanwhile, economic and environmental problems remain unresolved and are increasingly deepening in the context of current activities of the national industrial enterprises. uninvestigated parts of general matters defining. analysis of the resource potential revealed the urgent need to develop a clear and functioning mechanism of economic and environmental development, shaping the ecological awareness of the nation as a whole, managers and policy-makers, improving and transforming the existing regulatory framework and environmental legislation, as well as the corporate environmental management systems, in particular, based on the environmental performance index. the goal of this article is to study the nature of economic and environmental problems of the industrial enterprises and to develop a model of the regional environmental and economic performance index aimed at reducing the environmental costs of the economic growth, ensuring the environmental sustainability of the region and mitigating the harms in terms of public health. 3. analysis of the indicators of national production ecologization one of the most important factors in ensuring the transition of a society to the sustainable development model is the increased economic and ecological efficiency of the economic activities at the regional level. ukrainian economy faces the need to undergo deep restructuring and renewal to create conditions for the accelerated modernization of production processes and to ensure the competitiveness of the national products while reducing the negative environmental impacts. the economic policy can only be effective if the environment is preserved and should stipulate introduction of a conceptual framework for a strategy in the area of environmental management and protection, as well as its implementation to ensure sustainable economic, ecological, and social development of the region. the role of production ecologization can be revealed through the following functions: reproductive, spatial, and socio-ecological. the reproductive function is based on the possibility to create optimal conditions for preservation and reproduction of the environmental assets in order for the future generations to effectively use them. the spatial function is determined by the scientifically grounded system of eco-zoning, development of the territorial nature management patterns, and identification of the discrepancies within the eco-economic areas. it helps to optimize the location of production facilities and rationalize the environmental management and protection. the main goal of this function is to find a balance between human activities and nature. the socio-ecological function is related to environmental education, as well as good production practices. it should be noted that the issue of making the national production more eco-friendly stems from the growth of technological environmental impact. according to the state statistics service of ukraine, harmful emissions into the atmosphere increased in 2011-2014. whereas in 2011 this indicator amounted to 4,373.6 thousand tons with a decreasing trend, in 2014 it grew up to 5,186.6 thousand tons (by 18.6 percentage points). water pollution considerably decreased in 2014 as compared to 2011 – by 42.7% (figure 1). thus, there is a paradox, when in spite of the production decline due to the economic recession negative impact on the environment is growing. in their turn, negative environmental trends lead to the need of additional financial expenditures or funding redistribution to support and improve the efficiency of the existing economic structure and develop a new structure based on the sustainable development concept. thus, we would like to analyse the dynamics of capital investments and current expenditures on environmental protection and rational use of the natural resources in ukraine in 2011-2014 (table 1). figure 1. dynamics in air emissions and water pollution in ukraine baltic journal of economic studies 369 vol. 4, no. 4, 2018 the data presented in table 1 clearly demonstrates that in 2014, the capital investment growth rate increased as compared to 2013 (31.8%), while in 2011-2013 there was a decreasing trend in this indicator. investments in resolving the issues of atmosphere protection and climate change are going down. the level of investment in such areas of environmental activities as wastewater treatment and waste management is increasing. worryingly, the scope of capital investments in the rational use of natural resources, as well as in environmental research decreases every year (figure 2). to identify the types of economic activities, which are the major polluters, we will analyse some of them (table 2). the biggest pollutants in terms of pollutant emissions are agriculture, forestry, and fisheries (0.09 tons per employee), and the smallest – industrial producers (0.02 tons per employee). as for the carbon dioxide emissions, the indisputable leader is the industry (90.08 tons per employee), with agriculture accounting for the smallest amount of carbon dioxide emissions (0.32 tons per employee). analysis of the indicators of national production ecologization shows that the environmental situation remains challenging and poses significant threats in terms of human existence and activities. it is supported by the fact that in 2014 ukraine ranked 95th out of 178 countries in the international ranking based on the environmental performance index calculated by the yale university scientists using 25 indicators. in 2012, it ranked 102nd among 132 countries. going up in the rating most likely occurred due to the increase in the number of countries analysed, with the least table 1 dynamics of capital investments and current expenditures on environmental protection and rational use of the natural resources by environmental management activities, million uah environmental management activities 2011 2012 rate of change in 2012 as compared to 2011, % 2013 rate of change in 2013 as compared to 2012, % 2014 rate of change in 2014 as compared to 2013, % capital investments and current expenditures, total 12,039.65 6,589.3 54.73% 6,038.8 91.65% 7,959.9 131.81% protection of the atmosphere and climate change issues 1,475.3 2,462.7 166.93% 2,411.9 97.94% 1,915.1 79.40% wastewater treatment 5,388.33 846.9 15.72% 834.1 98.49% 1,222.2 146.53% waste management 3,865.89 730.5 18.90% 713.9 97.73% 784.0 109.82% environmental research (r&d) activities 49.9 6.1 12.22% 6.2 101.64% 6.2 100.00% table 2 the volume of emissions per employee by types of economic activities, 2014 economic activities volume of emissions, thousand tons number of employees, thousand people emissions per one employee, tons pollutants carbon dioxide pollutants carbon dioxide agriculture, forestry and fisheries 89.9 974.1 3,091.4 0.09 0.32 industrial production 5,100.8 261,064.2 2,898.2 0.02 90.08 transport, warehousing, postal and courier services 166.5 4,332.6 1,113.4 0.04 3.89 figure 2. dynamics of capital investments in environmental protection and rational use of natural resources, as well as environmental research baltic journal of economic studies 370 vol. 4, no. 4, 2018 developed african countries ranking lower in the rating. currently, there is a danger of deterioration of the environmental situation in ukraine, which can be explained by the impact of economic, political, cultural, and other factors. it should be noted that the environmental situation can be stabilized by forming new values, revising the structure of people’s needs, goals, priorities, and activities. experience of the countries with developed market economies confirms that strengthening market relations and competition involves a significant increase in the technical and technological level of the national production, enhancement of the resource and energy conservation, and structural transformation of the economy to reduce the environmental pollution. in ukraine, the situation is exacerbated by the fact that the economic reforms do not reflect all complexity of the economic processes, and in the context of crisis, the society is not aware of the new environmental problems. this confirms that resolving the issues of rational resource management, environmental protection and safety significantly influences the parameters of economic dynamics. usually, when resolving environmental problems, the focus was on technical and technological aspects. however, at this stage, along with raising environmental requirements to the management and production technologies, ecological safety comes to the fore and becomes a decisive factor in the economy, determining its further effective development. 4. environmental problems let us give a more detailed consideration to the environmental problems, which may be resolved using an integrated approach through the joint efforts of as many countries as possible. in recent years, the negative impact on the environment is growing and the number of global environmental problems is increasing. the environmental problems are not unified or isolated. these problems are relevant to all countries of the world and branches of production and have a significant impact on the economy both at the national and international levels. an indisputable proof of the linkage between the economy and the environment is the existence of a number of urgent problems to be resolved at all levels of the economy (figure 3). it should be noted that the economic problems are mainly caused by the lack of attention to the environmental issues. the main reason for careless attitude to the natural resources and their irrational use is the lack of economic and environmental awareness at the level of an individual, an enterprise, and at the country level. the impact of human activities ultimately leads to increased human involvement in the natural processes, which is accelerating and intensifying. that is why in recent years more and more referrals are made to issues related to the economic and environmental security both at the national and international levels. current developments have caused the need to realize a significant number of problems related to the negative environmental impact, indicating the onset and start of the economic and environmental awareness formation. the most important environmental problems, which directly or indirectly affect the country’s socioeconomic development, are: environmental pollution, ozone layer depletion, waste management, reduction in the number of species, demographic crisis, anthropogenic landscape changes, deforestation, irrational use of the natural resources, chemical and biological pollution, freshwater shortages, dangerous diseases, epidemics, etc. unresolved environmental problems lead to negative consequences for both social (poverty, low level of human development) and economic (low competitiveness, labour productivity) development. figure 3. economic and environmental problems baltic journal of economic studies 371 vol. 4, no. 4, 2018 first and foremost, solving this problem requires a reasonable and balanced policy to regulate and control the efficiency and rationality in using the national resources by limiting the anthropogenic impact, establishing monetary liability for violation of the sanitary regulations, and strict control over their implementation. it should be noted that industrial enterprises are the main source of environmental pollution. the negative impact of industrial enterprises is revealed in the increased volume of harmful emissions into the atmosphere, determining the future trends of demographic and socio-economic development of the society. the increase of the negative environmental impact can be explained by the lack of economic and environmental awareness as a result of low responsibility at the microand macro-levels. one of the most popular methods to resolve the problem of environmental pollution by industrial enterprises is to increase fines. however, this method is inefficient and ineffective as the amount of such fines is so small that companies prefer to pay the fines rather than reduce the emissions, considering that their benefits significantly exceed the costs they incur. human needs are constantly growing, making it necessary to expand the scope of economic activities and to change the proportions of the world economy, production capacities, technologies, range of products, as well as industrial and personal consumption. production and consumption models, which shaped in the world, no longer meet the requirements to ensure harmonious coexistence of humans and nature. the global environmental and closely related to it socioeconomic crisis which currently became a threat to the human existence was caused by two “explosions” – population explosion, i.e. a sharp population increase in the last century together with the formation of the “consumerism” economy, on the one hand, and rapid industrial and energy development – on the other. most scientists believe that it was the uncontrolled population growth, which was the main reason for the global environmental crisis, leading to other consequences. however, in our opinion, the reason of the unsatisfactory ecological and economic development level is the lack of understanding of the need for sound environmental management to ensure sustainability and stability for future generations; hence the decisive factor is not the amount of resources but the rationality and efficiency of their use. the complexity of the current economic processes makes it necessary to develop a sustainable development concept. the global economic development agenda within the un millennium declaration approved on 08.09.2009 (resolution a/res/52/2) stipulates that all countries are to ensure environmental sustainability in the context of anthropogenic impact. in line with this agenda, researchers from the yale and columbia universities together with the world economic forum developed an international environmental performance index (epi), which is openly published every two years since 2006. this index is based on two strategic goals: reducing environmental stresses on human health; promoting ecosystem vitality, and sound natural resource management. 5. using epi: advantages and disadvantages using epi as a basic indicator characterizing the level of environmental security of ukraine for comparison with other countries has both advantages and significant disadvantages when making management decisions at the level of the country and its regions. the advantages of using epi: 1. the index allows comparing the position of ukraine with other countries of the world. 2. epi components allow defining the strengths and weaknesses of ukraine in terms of environmental protection and sustainability. 3. the epi assessment methodology is publicly available and accessible, which allows assessing the impact of different management decisions on its value to a certain extent. 4. the level of expertise, the accuracy of inputs, and the lack of subjectivity when calculating epi make it trustworthy. on the other hand, practical use of the environmental performance index as an indicator of the national economy’s development is associated with certain objective challenges, which significantly narrows the area of its application: 1. the methodology of epi calculation has been constantly changing in 2006-2018. every single report was different from the previous one in terms of the range of assessment indicators and the number of countries covered with the research. the most recent changes in the epi assessment methodology took place in 2018 report: currently, it contains 24 indicators and is calculated for 180 countries of the world. thus, constant changes in the calculation methodology and the number of countries covered and used as the comparison base do not allow using this indicator to analyse the dynamics of the indicator for a particular country. 2. certain indicators included into epi, such as the group of indicators “biodiversity and habitat” may not be calculated based on the public data of the state statistics service of ukraine. as for the researchers of the yale and columbia universities, they receive the inputs from international agencies, world research institutions, and governmental bodies. the following methods are used for data collection: remote sensing; observations from the monitoring stations; surveys; academic studies; national industry reports; state statistics, etc. the indicators, which may not be received through continuous or sampling observations, are calculated based on the statistical baltic journal of economic studies 372 vol. 4, no. 4, 2018 models developed. that is why for the purposes of this study we can only use the calculated indicators with twoyear observation periods for our analysis. however, it is hardly possible to make similar calculations for regular monitoring of the situation. 3. the environmental performance index is calculated for every country as a whole. however, natural and climatic conditions of different regions of ukraine, as well as their industrial and agricultural development, vary. every region has its peculiarities in terms of economic capacity, social development, natural resources, and environmental pollution level. therefore, it is not enough to assess epi at the national level for the effective environmental management of ukraine. there is a need to make such assessments for all regions of the country. thus, taking into account the abovementioned drawbacks, within this study, it is offered to develop an alternative methodology to assess the environmental and economic performance index for the regions of ukraine. this index should cover three strategic goals as shown in figure 4. 6. strategic goals let us review each of the strategic goals in more detail: 1. reducing the environmental costs of economic growth. any economic growth is associated with the increasing negative anthropogenic impact due to the growing environmental pollution. we may say that for the society, there are certain environmental costs it has to pay for every percent of the economic growth. the regions of ukraine vary greatly in terms of their industrial structure. for example, the biggest air polluters in dnipro and donetsk regions are primary production, processing industry, and electric power supply, in vinnytsia and chernihiv regions – agriculture, forestry, and electric power supply, etc. every industry has its average added-value standard and level of pollution. the indicators of this group are relative performance indicators, which allow comparing the environmental harms and economic performance. the harms are calculated in terms of the scope of air pollution, use and discharge of sewage waters, mineralization of sown areas, use of pesticides, accumulation of solid wastes, and deforestation. as for the economic performance, it is calculated as the gross regional product or the manufacture of agricultural and forestry products: i eh grp ep = , (1) where iep – environmental performance index of the economic growth; eh – environmental harms; grp – gross (or industrial) regional product, c.u. 2. ensuring environmental sustainability of the region. environmental sustainability of the region directly depends on the intensity of environmental harm caused. calculation of the environmental harm intensity stipulates assessment of the rate of expansion, i.e. attribution of harms to the territory of the region. that is why the indicators of this group are based on the following formula: i eh ra el = , (2) where iel – regional environmental load indicator; ra – region area, ha. 3. mitigating the harms in terms of public health in regions. practical statistics widely uses relative indicators, which compare the harm caused and the population size. for example, air emissions per one person. however, in our opinion such indicators, which are based on the population size for comparison purposes, yield little information due to the following reasons: – if the emissions on a certain territory remain on the same level, while the population grows, this indicator is reducing. however, the health of each individual will be influenced by the same scope of emissions. – if the population of a territory with persistently high environmental load grows, it means that a higher percentage of people face negative manifestations of the anthropogenic impact. that is why we would like to offer using a multiplicative model to calculate environmental harms in terms of public health: regional environmental and economic performance index reducing the environmental costs of economic growth ensuring environmental sustainability of the region mitigating the harms in terms of public health in regions figure 4. functions of the regional environmental and economic performance index baltic journal of economic studies 373 vol. 4, no. 4, 2018 i eh ph n n= × , (3) where ih – indicator of the environmental harm caused to human health; ehn – normalized environmental harm; pn – normalized population size. each of the factors presented in the model (3) varies in the range from 0 to 1. thus, the resulting indicator ih will also take values in the same range [0; 1]. reducing the scope of environmental harms or reduction in the population size of the region will lead to the minimization of ehn and pn indicators. in turn, it will make the ih indicator approach zero. vice versa, the increase of the normalized factors within the accepted values will automatically bring the ih indicator closer to 1. normalization procedure is used to bring the indicator values to a consistent format using a formula: і і і і і norm worst best worst = − − , (4) where іnorm – the normalized value of the environmental and economic performance index; i – entry value of the index; іbest – the best possible value of the index which should be approached; іworst – the worst value of the index. the іbest and іworst values are selected based on the і values calculated for all regions. to allow monitoring of the resulting index dynamics, іbest and іworst values were defined based on the 2014-2016 data. if the indicator was to be maximized, then іbest was equal to the maximum value for all regions in recent years and іworst was equal to the minimum value. if the indicator was to be, vice versa, minimized, then іbest was equal to the minimum value and іworst – to the maximum. the above indicators are converted to the regional environmental and economic performance indicator (ri) using the additive and multiplicative model: ri i e iep el h= + + →α α α1 2 3 max, (5) where іåp, іål, іh are, correspondingly, group indices for the first, second, and third strategic goal; α1, α2, α3 – weight coefficients to measure the weight of every strategic goal. weight coefficients α1, α2, α3 may take values from 0 to 1, with their sum equal to 1. in the regional index, every strategic goal should have equal impact on the ri. it is possible provided that the mean square deviations of each component should be equal to one another, i.e. σ α σ α σ α1 2 3і і іåp ål h( ) = ( ) = ( ). to ensure the above equation, it is sufficient to resolve the following optimization problem in relation to the unknown weight coefficients α1, α2 and α3, using numerical methods: σ α σ α σ α σ α1 2 2 2 3 2 і і і і tfåp ål ål h( ) − ( )  + ( ) − ( )  → ( )min , (6) α α α1 2 3 1+ + = ; α1 1≤ , α2 1≤ , α3 1≤ ; α1 0≥ , α2 0≥ , α3 0≥ . group indices for each strategic goal were calculated based on the corresponding normalized values of the indicators using the following formulas: і і n і і n і і åp åp norm k k n ål el norm k k n h h norm k = = == = ∑ ∑, , , , , , ; ;1 1 1 2 1 2 kk n n = ∑ 1 3 3 і і n і і n і і åp åp norm k k n ål el norm k k n h h norm k = = == = ∑ ∑, , , , , , ; ;1 1 1 2 1 2 kk n n = ∑ 1 3 3 (7) where n1, n2, n3 is the number of indicators for the first, second, and third strategic goal, respectively. the formulas (7) stipulated using the indicators with equal weight coefficients. if the expert decision-making has different preference patterns, such formulas take an additive and multiplicative format. 7. conclusions the issue of environmental management efficiency, overcoming the environmental crisis and improving the relations between industrial production and nature requires resolving environmental contradictions in the current environmental management. focus exclusively on technical and economic growth with no linkage to the environment led to depletion, exhaustion, and the degradation of natural resources, environmental deterioration and negative social consequences. thus, the strategic approach to ensure sustainable socio-economic development of the country from the standpoint of the economic and environmental model of the natural resource management reform implies transition from implementation of separate measures aimed at the resource conservation to the development and implementation of an economic and environmental concept of the comprehensive public production rationalization and ensuring its sustainable operation. to consider environmental factors and criteria, norms, and restrictions, it is necessary to establish effective control over the environmental conditions, as well as functional leverages to regulate environmental and economic relations. we developed a model of the regional environmental and economic performance index aimed at reducing the environmental costs of the economic growth, ensuring the environmental sustainability of the region, and mitigating the harms in terms of public health. this index takes into account drawbacks of the practical application of the international index – epi: it is fully based on the official data of the state statistics service of ukraine, which are publicly available; allows monitoring such developments in dynamics and by regions. besides, it is worth mentioning that the problem of interaction between the environment and the economy may not be resolved without the formation of economic and environmental awareness, taking into account the national context, to raise the level of both individual and collective responsibility for the consequences of irresponsible actions in the future. baltic journal of economic studies 374 vol. 4, no. 4, 2018 references: barna, p. v. 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(1997). strakhovanie riska zahriazneniia okruzhaiushchey sredy i eho metodolohycheskie osobennosti [insurance risk of environmental pollution and its methodological features]. sumskyy hosudarstvennyy tekhnycheskyy unyversytet. reimers, n. f. (1992). nadezhdy na vyzhyvanie chelovechestva, kontseptualnaia ekolohiia [hopes for the survival of humanity, conceptual ecology], ekolohyya. the state statistics service of ukraine. emissions of pollutants and greenhouse gases into the atmospheric air from stationary sources of pollution. retrieved from: http://ukrstat.gov.ua/ baltic journal of economic studies 87 vol. 4, no. 4, 2018 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: natagermanjuk@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-87-92 investments in the development of innovative management in the company natalia germanjuk1 abstract. the subject of research. this article determines that in conditions of global transformational processes, the sphere of innovation activity becomes of particular importance in the economy of advanced countries. its development provides socio-economic growth of local companies and a state, in general, requiring significant financial resources. consequently, the subject of this study is the management of innovation activities at the enterprise with the achievement of maximum effectiveness, as well as the identification of interconnection between innovations and investments. methodology. conducted research shows, the condition of development of domestic technologies is unsatisfactory: ukraine occupies the last place among european countries. innovative activity is associated with investments, whose government support in our country is rather small in the context of the state’s gdp. content analysis is carried out on materials of works of domestic and foreign scientists using information from ukrainian legislation and statistical data provided by experts. in the process of preparing the paper, the following general scientific methods of research are used: logical analysis, observation, formalization, synthesis, abstraction. the purpose of a study is to analyse the nature of the innovation activity of companies, to establish its unbiased relationship with investment processes in order to identify areas for improving the innovation and investment situation in ukraine. important is to substantiate the expediency of improving the innovative management of ukrainian enterprises in the focus of implementation of new projects by finding the necessary sources of financing. as a result – effective management of the company is capable of satisfying consumer demands and increase profits. conclusions. thus, the analysis of the relationship between innovations and investments has shown that the situation in ukraine is characterized by a deficit of state support in the investment and innovation sector, and difficulties in attracting finance. the latter is directly related to the political situation, instability, the lack of clear legislative rules of direct action, as well as insignificant pay for the work of inventors. at the same time, the positive direction of innovation development in ukraine is the tendency to increase venture companies (with the use of foreign experience), which directly provides investment in the latest local finds. improving the investment and innovation situation in ukraine is possible by creating a set of incentives for attracting investment, further investing in human capital, raising wages for researchers; growth of inflow of foreign investments; providing tangible state support to enterprises and more favourable lending conditions for them, etc. it is important to ensure transparency of legislation, to perfect the conditions of functioning of business space and the state of market infrastructure, to take measures to improve the state of the environment. key words: investment, innovation, innovative management, competitiveness, venture fund. jel classification: g0, o3, m1 1. introduction today in the transformative conditions of functioning of market space, the concept of an innovative management occupies the main role in the management of any company that is directly related to the determination of competitiveness level. innovative management is a certain coordination-economic method and the directions of control of all stages and types of innovative processes at the enterprise with maximal effectiveness. the latter is a part of the investment management studying the mechanisms of investing recourses in the development of the innovation sphere, the expediency of their direction and profitability. as we know, the main objective of modern management is to provide the most effective ways to apply the innovative strategy in the company at certain stages of development. in the realization process of this, the management mechanisms orients to solve the following essential tasks: the guarantee of high temps of enterprise increase and its competitiveness; maximization of profits thanks to effective innovative activity; minimization of risks during the financing of baltic journal of economic studies 88 vol. 4, no. 4, 2018 progressive projects; maintaining the business stability and solvency while the embodiment of new processes; search for ways to accelerate the creation of innovative projects. modern scientific findings tell about the most effective capital investment is the new products financing: the enterprise can get super profits from a successful innovative launch. a great potential for progressive operations provides the consumer demand and forms the market of scientific-technological, socio-economic innovations. the urgency of research in any economic sector needs to the calculated capital investments with the purpose of getting socio-economic effects, extra profit and growth of competitiveness of a company. herewith the certain regularity observes: the higher revenue is expected to get, the more costs are necessary to innovation at the incarnation stage. 2. literature review considerable amount of works of well-known foreign economists, particularly j. schumpeter (1982), b. twiss (1989), b. santo (1990), m. huchek (1992), p. drucker (2007), j. stirling (2011), b. brown (2015), and others is devoted to theoretical issues of the development of innovation and investment environment, the identification of ways to attract financial resources for the implementation of the latest developments, also of the need of enterprise management in the direction of the introduction of modern finds. the purpose of the research of many ukrainian scientists is to study the following significant issues: assessment of the investment appeal of companies and the feasibility of attracting investments for the aim of implementation of innovative projects – z. lytvyn (2014); influence of innovations and investments on strategic activity of enterprises, identification of development factors that should be taken into account during the formation of innovation-investment state policy – i. andryushchenko (2014); management of investments and innovations in the company, monitoring of demand for progressive developments, their effectiveness – o. skibitsky (2009); definition of priority guidelines for improving innovation and investment activity in the current transformed conditions – s. usherenko (2014); analysis of the main directions, potential opportunities, and threats of progressive development of ukraine – m. sokach (2016); modelling of innovative entrepreneurship, cooperation of science with production and universities – o. tkachuk (2016); system of international indicators for assessing the country’s resources and possibilities for realizing the potential of ukraine in order to accelerate the innovative development – o. levkovsky (2017), etc. such problems, we think, require further discussion: the prospects of development of ukrainian innovation space, with emphasis on the importance of more active search and attraction of investments by domestic companies in high-tech finds. 3. goals and tasks of the article innovative sphere of the enterprise is tightly interconnected with investments: the realization of innovations provides for the definitions of sources of their financing – the part of attracted funds gears towards progressive operations that require the deepest researches. the purpose of the article is to analyse the nature of the innovation activity of companies, to establish its unbiased relationship with investment processes in order to identify areas for improvement of the innovation and investment situation in ukraine. in our opinion, it is possible, first of all, due to the concentration of financial investments in the priority sectors of innovation development in the regions through the use of quality management, which will contribute to the economic growth of the state. clarification of this fact is the main task of our research. 4. the main material of research the investment policy of the enterprise is a set of tactical management solutions that address the ways of attracting and spending funds for the target of investing. the main strategic types are classified according to the place of resources receipt and direction of investment activity. criteria for the attractiveness of finding resources are the reality of their using, potential capacity, economic effectiveness, and level of application risk. the own means of company differ the biggest availability, which orients the administration at their effective using and they have the low-level the loss of control for assets. engagement of credit resources also contributes to the innovative projects’ implementation, but it has a low reach degree. elements of the attractiveness of innovative projects for investors are divided into financial-economic and non-economic. as a rule, depositors are interested in the possibility of obtaining of high incomes, but sometimes invest money in the realization of a new product without getting of direct economic profit. so, this applies to experimental medical projects, progressive ecological measures that most often have the negative financial results. usually, enterprises are active in this direction in order to maintain their own image. in making decisions concerning financing innovative projects, the investors need to know the period during which the funds will be returned and terms of receiving the calculated profit (porshnev, 2016). achievements of essential competitive advantages and innovative result depend on balancing between purpose, tasks, and scopes of financial investments. baltic journal of economic studies 89 vol. 4, no. 4, 2018 the investment process is a long-term capital engagement, which uses with aim of development, expansion of production and getting of incomes. the main sign of new products is a scientific and technical novelty and productive application. any successful company operates in conditions of own constructive activity – uninterrupted process, which orients at the creation of the new product that can satisfy progressive social or individual needs. the ultimate result of innovation management is the realization of advanced discovery and mastery of the production process. stimulus to create the innovative projects can be as scientific-technical development, so marketing researches in a direction of the detection of dissatisfied consumer needs. the main criteria for choosing innovations are presented below (table 1). on the basis of scientific researches, it is established that beginning of investment in innovative management of the company may be the next sequence of actions: choice of investment policy; monitoring of investment objects; creating a portfolio of objects; evaluating the rationality each of the proposed objects; determination of the effectiveness of the project, analysis of innovation portfolio. in whole, management of innovative process in the company has four stages: 1) conducting fundamental research and obtaining an invention; 2) applied studies; 3) experimental projects; 4) commercialization of technological innovation, its full use. it is clear that, in order to survive in today’s competitive conditions, an enterprise must constantly introduce progressive innovations into its own business. innovative activity is an important requisition of socio-economic development oriented, first of all, at the increase in competitiveness products, which are proffered. the concept of competitiveness includes the characteristic of goods that distinguishes them from a competitor’s analogues concerning the level of compliance with certain needs and costs of their satisfaction. the main details of goods competitiveness are the consumer signs and price. such factors as advertising, the image of the enterprise, service level also play a significant role. the effective management of a company towards increasing the degree of product competitiveness ensures the optimal balance of its elements – growth of goods quality, reduction of production costs, and improvement of service level. each of these items can be considered like a complex separate object of management. in particular, the price, quality of raw and electricity, the workers’ qualification, the salary of staff and administrative expenses affect the costs volume. at one time, all components are determined by the technical level of production, the construction of manufacturing process and management. we note the usa among world countries allocates the largest means to innovative research and development. according to the rating data of the global competitiveness index, every year the state spends 405 billion dollars on science (to 2.7% of gdp). china takes the second place, in which the financial researching volumes make up 338 billion dollars a year (2.1% of gdp), the third – japan, 160 billion dollars. for comparison: on the support of innovations, ukraine spends from the budget 16 billion uah per year – 0.8% of gdp (forbes, 2016). the base of the company’s prosperity, as we think, is a subordination of interests to goals of designing, manufacturing, and marketing of competitive products with an emphasis on long-term success and consumer needs. herewith the income from the implementation of the innovative product during lasting time can be absent and the resources are only consumed. after that – the innovation is rapidly spreading, providing a return on investment in it at least fifty times. otherwise, the project is considered unsuccessful. companies focus their activities on the development and introduction of new products in the presence of potential types of risk (table 2), as well as, separately, of their additional type – innovation risk. table 1 selection criteria for innovations selection criteria essence compliance with goals of company image of the enterprise; acceptable level of risk; planned implementation time market probable need for a product; the possibility of commercial success; expected sales volume; cost/product cost ratio; initial expenses and sources of their receipt; competition strategy; necessary sales channels scientific and technical compliance with general sales strategy; the probability of technical success; costs and terms of project; patent purity; availability of scientific and technical resources; prospects for scientific and technological development financial movement of costs and incomes in time; influence at other products productive production capacity; production costs; safety of production; the need for cooperation ecological structure and amount of energy resources used; structure and amount of emissions; utilization conditions of products source: (goller, 2017) baltic journal of economic studies 90 vol. 4, no. 4, 2018 table 2 classification of potential risk in business activity type of risk part, % systematic financial risks 100 operation risk 89.6 credit risk 14.3 information risk 9.1 personnel risk 3.9 cheating business partners 1.2 source: (official site forbes, 2017) innovation risk represents the probability of losses when investing funds in new technology, a complete guarantee of expected demand for which is practically absent. the most inherent today are such its varieties: implementation of a mistakenly selected project; lack of agreement between partners; marketing risk associated with supply and sales conditions. business leaders of enterprise, first of all, must learn to effectively manage innovation risks in order to avoid possible negative performance. it is advisable to manage the innovation processes of company activity in such a way the personnel perceived the implementation of progressive developments into production as a favourable opportunity and expected profit in near time. so, innovations are the employment and well-being of every worker at the enterprise. the important prerequisite of innovative policy serves moral aging of manufactured products or technologies. to prevent the latter, it is advisable to check timely the goods and equipment, which are produced, working conditions analysing the market and sales channels. one of the main indicators of the development level of innovative activity in the state is material support of scientific workers that is an important factor constraining the “brain drain”. so, according to the new york times, researchers are most appreciated in canada, the usa, italy, the united kingdom, and saudi arabia where their monthly salary is on average equal to $5000-$9000. in recent years, revenues of scientists in india have risen markedly, exceeding the $7000. in china, where a few years ago scientists received about $250-$300, the government has increased salaries in times as the development of science and education is the part of a national program of economic growth. in ukraine, according to data of international foundation for research in educational policy and state statistics service, the average monthly salary of teachers and scientists ranges between $100-$300, which leads to negative consequences: by various estimates, from 6000 until 9000 representatives of intellectual professions are leaving our country every year. at the same time, the age of 80–85% scientific staff is approaching the retirement (forbes, 2016). recently it takes place the appearance of state programs, which declare the transition of ukraine at the innovative direction of social economic development with government support providing. it is also considered the project of innovative codex and creation of a national venture company. the use of progressive research of neighbouring countries by domestic scientists is growing, but the noticeable shifts are absent in the innovative development of the state. relative to the eu countries, the minimal indexes of innovative activity are in portugal – 26%, greece – 29% and even they improve the ukrainian indicators. compared with the leading states such as netherlands (62%), austria (67%), germany (69%), denmark (71%), and ireland (74%), our country lags almost at five times – for the resolution of the verkhovna rada of ukraine (2017). today, a special system of investing in new projects and one of the main mechanisms for the growth of many foreign enterprises is venture capital investment. among such companies, there are dec, apple, compaq, sun, microsoft, intel, silicon graphics, google, skype. venture capital is used by the countries of the eu, taiwan, china, israel, and so on. more than 600 appropriate funds registered in ukraine, from which function a little over 100. the spheres of their activity, as a rule, are building and energy resources trade. some venture funds engaged in the financing of other traditional projects or not large food innovations (uaib, 2017). the indicators of such institutions show the absence of special incentives and warranty to invest the resources in innovative domestic projects in connection with the presence of a high-risk level. today the primary function of ukrainian venture funds is the “instrumental” one, which legislatively contributes to the improvement of taxation processes in ukraine. about the financing of ukrainian innovative projects, we need to note the presence of essential potential for the attraction of investments observes in the kyiv region. it is about the creating of industrial parks, production modernization, development of agricultural sphere, alternative power engineering, aviation branch, and tourism. at most, modern investors interest in the innovative improvement of the agrarian and production sectors in this area. regional administration engages in the prosperity of local tourism in order to build the competitive service market, according to the results of the forum (2015). all these can serve the practical guide in direction of innovative activity growth of enterprises in other ukrainian regions. 5. conclusions and recommendations for the further research thus, an analysis of the relationship between innovation and investment has shown, there are indispensable state support and supportive market environment for the development of the innovation sector in countries such as the usa, china, japan, the baltic journal of economic studies 91 vol. 4, no. 4, 2018 netherlands, austria, etc. in turn, most appreciated are the researchers in canada, the usa, italy, great britain, saudi arabia, south africa, as evidenced, above all, by high wages and the creation of appropriate conditions for creative innovative search. the listed contributes to the progressive development of companies, provides their competitiveness on the world market and the growth of the state’s economy as a whole. regarding ukraine, noticeable shifts in this direction, unfortunately, are not observed. the situation is characterized by a deficit of government support in the investment and innovation sector, difficulties in attracting of finance. the latter is directly related to the political situation, socio-economic transformation processes, instability, the lack of clear legislative rules of direct action, as well as the insignificant pay of the work of inventors, which causes “brain drain” from our country. discovered, at the enterprise, in the process of innovation activity, there is an additional type of risk – an innovative one that does not provide full guarantees of the demand of a particular innovation, which may result in totally unjustified investments in development and implementation of high-tech projects. the important direction in order to prevent the last, as we believe, is a thought-out decision making on the implementation of the latest product based on the perfect monitoring of market demand of consumers, the availability of business talent and work experience with successful innovative products at managers. in addition, the positive direction of ukrainian innovation development is a tendency to increase venture companies (with using of foreign experience) that directly provides investment in the latest local finds. however, indicators of these institutions activity testify, there are no special incentives and guarantees to invest in such projects – in the presence of a high-risk degree. in fact, the main attribute of ukrainian venture funds is the legitimate promotion of taxation processes improving. it has been revealed that kyiv region has a significant potential for attracting investments in future innovations, in particular, it is about the modernization of industrial facilities, development of the agrarian sector and alternative energy, aviation industry, tourism, etc. as we see, it is possible to improve the investment and innovation situation in ukraine due to the concentration of financial investments in the priority areas of innovation development in the cut of regions through the use of effective management, which will contribute to the economic growth of our state. necessary is the creation of a complex of incentives for attracting of investments, further investing in human capital, increasing salary for researchers, which can provide accelerated implementation of modern technologies at domestic enterprises; growth of the inflow of foreign investments; providing tangible government support to companies (government procurement, tax breaks, simplification of licensing procedures, financing) and more favourable lending conditions. there are important: ensuring transparency of legislation, improving the conditions of the business space functioning and the state of market infrastructure, the realization of measures for the betterment of the environment. references: vriatuvaty maibutnie: pershyi reitynh innovatsiinykh kompanii ukrainy [save the future: the first rating of innovation companies in ukraine]. retrieved from: http://forbes.net.ua/ua/magazine/forbes/1416757vryatuvati-majbutne-pershij-rejting-innovacijnih-kompanij-ukrayini zakon ukrainy «pro investytsiinu diialnist» № 1560-12 vid 23.07.2017 [law of ukraine "on investment activity " № 1560-12 from 23.07.2017]. retrieved from: http://zakon2.rada.gov.ua/ laws/show/1560-12 zakon ukrainy «pro innovatsiinu diialnist» № 40-15 vid 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(2015). when does investment in political ties improve firm performance? the contingent effect of innovation activities. asia pacific journal of management, no. 32(2), pp. 363-387. baltic journal of economic studies 128 vol. 1, no. 2, 2015 the formation of institutional environment of agricultural land consolidation in ukraine andriy popov1, v.v. dokuchaev national university of kharkiv, ukraine abstract. every theory requires an application tool. land consolidation is the multidisciplinary tool for sustainable rural development with its dynamic structure that gives possibilities getting the best solutions for land management decision. that is why the main purpose of the article is a theoretical study and development of scientific and practical recommendations concerning the formation of institutional environment of agricultural land consolidation in ukraine. the subject of study is the formation of agricultural land consolidation. methodology. the study used the following methods: dialectical, logical and abstract, system analysis (theoretical and methodological generalizations, defining the essence of the content of institutional environment of agricultural land consolidation). this paper identifies the role of the institutions in economic development and characterised the regulatory, procedural, distributive, informational, development and accumulation functions of agricultural land consolidation institution. as a novelty items offered and provided the detailed description of the main components of the institutional environment of agricultural land consolidation such as: traditional and mental, legal, causal, organizational and structural, and procedural. the essence of institutions of each of these components and their meaning and relationships are presented. theoretically investigated that the formation of institutional mechanism of consolidation should be a symbiosis of both traditional and market institutions based on democratic principles under community participation. the article focuses on the feasibility of the formation of mechanism for monitoring the effectiveness of institutions. as the result of the study the author proposed to consider the institutional environment of agricultural land consolidation as a regulatory system harmonizing relations of the agricultural production, social and natural resources, designed to optimize the production, based on the actual requirements and restrictions of the existing institutes and institutions to guarantee a rational use of land resources. practical implications. analysis of current situation in ukraine suggests that the urgent task is particularly not only to create, design and import of the land consolidation institutions but also to provide the diagnostic of their maturity and suitability for the current level of the land consolidation relations. this conclusion is supported with the lack of a specific state policy on development of land consolidation and distrust in government initiates. the author also provides a list of necessary actions required for the development of the agricultural land consolidation in ukraine. key words: institutional environment, institutions, land consolidation, procedure, formation, organization. jel classification: d02, o17, o43, p25, p37 1. introduction the world experience shows that one of the main factors that determine the level of func-tioning and developing of agricultural land consolidation in the framework of a sustainable rural development is its institutional environment. in ukraine during the transitional period a definite structure of this environment have been formed, but this form has disorganised and unregulated version and so far has not yet led to the improvement of economic, social and environmental state of rural areas. nowadays, in the context of market institutions development an urgent task is to build up common rules for the agricultural land consolidation and as a result to arrange all its main elements such as objectives, functions, tasks, and justification of basic directions on order to establish an in-stitutional environment mechanism for land consolidation realisation. analysis of recent research and publications shows that kilochko (2009), martyn (2011), tkachuk (2009), tretyak (2002) and shvorak (2008) partly paid attention to the problems of agri-cultural land consolidation development. at the international level vitikainen (2004), van dijk (2002, 2004), sonnenberg (2002), thomas (2004, 2006), food and agriculture organization of the united nations (2003, 2008) and others also studied this issue. corresponding author: 1 department of land management and cadastre, kharkiv national agrarian university named after v.v. dokuchayev. e-mail: popov_andriy@knau.kharkov.ua baltic journal of economic studies 129 vol. 1, no. 2, 2015 however, in the works of these authors there is practically no comprehensive study of land consolidation institutional rearrangements. despite the great scientific interest of professionals to the problems of institutional environment of agricultural land consolidation numerous theoretical, methodological and practical issues remain unsolved. the relevance of this research is confirmed with incompleteness of scientific development of organizational arrangements of the institutional environment of consolidation, from the one hand, and with the essential practical importance of this problem for the state – on the other hand. the aim of paper is a theoretical study and development of the scientific and practical recommendations concerning the formation of institutional environment of agricultural land consolidation. the study used the following methods: dialectical, logical and abstract, system analysis (theoretical and methodological generalizations, defining the essence of the content of institutional environment of agricultural land consolidation). 2. the role and functions of institutions the conditions of land consolidation development are significantly created with the institution. according to the new institutional economic theory the institutions are defined as behaviour rules, as regulatory principles that establish or, vice versa, prohibit some certain methods of the action (melnyk, vasina, zheljuk, popovich, 2011). by the level of formalisation, the institutions are divided into formal and informal. the formal institutions include the written legislative regulations (for individual landowners, land users, non-governmental organizations are fixed with business contracts). the informal ones are presented with social norms (at the level of individual participants in land tenure are presented by business agreements). natural institutions are those which occur as an automatic reaction to the certain changes in the economic environment and non-natural ones are those which appear as a result of a purposeful human activity. the institutions that play a major role in the economic system are considered as basic (e.g, the institution of property, entrepreneurship, competition, etc.). complementary institutions – are the institutions that are formed around the basic ones and have a supporting role in the economy. the role of institutions in the economic development is related in the implementation of their functions. in the scientific literature such functions of institutions as: regulatory, procedural, distributive, informational, development and accumulation are distinguished. the institutions have an influence on the transformation of land tenure during land consolidation providing through the implementation of above-mentioned functions. the regulatory function of institutions is in its ability for coordination, harmonization, management, cooperation, stratification (ordering of succession) of participants’ interactions in land consolidation and to governance of their operations and development. the institutions regulate the activities of the interested parties in carrying out of land consolidation with means of the establishing the restriction in the set of available alternatives and determining the motives of their behaviour. the clearness of the rules in the sphere of land consolidation reduces the level of uncertainty for the participants in the market economy system and increases the degree of its awareness about the possible changes in the environment caused with the behaviours of the other actors. if land consolidation actors know the rules of activity, they have an opportunity to predict reactions of the opponents as to their own actions and can define the directions of their interaction with environment elements. the procedural function of the institutions is in the formation of the regulations of economic behaviour of the land tenure actors concerning land consolidation with means of the norms and rules of an institutional framework. the distributive function is affected the distribution of economic re-sources in the society and represented by a system of the institutions and their activities. this feature of the institutions is found not only because of the impact on the trade turnover framework within a general economic conjuncture, but also because of the formation of the certain types of the institutions which provide the movement of resources under clearly defined rules. for example, the functioning of the institutions such as the state land cadastre and the state registration service, land surveying organizations, executive bodies on land resources, – is a code of rules by which there are land transactions and which must strictly be followed by the parties who have signed or intend to sign the agreements. thus, the distributive function of the institutional system is realized both through the internal self-organization of land consolidation actors and through general functioning rules (stated by the law) and by market institutions as well. the informational function of the institutions is determined by its ability to transmit to the land consolidation actors the information about the rules and regulations, the use of which will con-tribute to the formation of a positive effect in their activities. under the conditions of the obvious lack of information the institutions reduce the uncertainty in order to choose in land consolidation sphere. the lack of information leads to uncertainty of choice and can cause great loss of the re-sources while making this choice. the institutions help land consolidation actors to find new sources of available resources, to save them while choosing, and to apply effective technologies. the institution function of the development and accumulation defines the rules of activity and interaction of those land consolidation stakeholders who have common objectives, use the same methods and ways of their achievement or coordination. the changing of objectives, reviewing its relevance and also the transformation of their technologies achievements result in a qualitative change of institutions. baltic journal of economic studies 130 vol. 1, no. 2, 2015 3. theory of the institutional environment the effectiveness of any system is defined with the development of an institutional environment. in economics the institutional environment is considered as the elaboration of basic political, social, legal and economic rules to which human behaviour must conform in order to receive basis for the production, exchange and distribution (fao, 2008). thus, the institutional environment is a distinct set of different institutions which define the framework of functioning and development of economic actors. the development of institutional environment of the agricultural land consolidation in ukraine may be favourable under the condition of adjustment of institutional interests of the actors and agents of the institution. the contradictions arising within the institution are the impulse for its improvement and are solved at the following informal institutions formal institutions i nst i t u t i ona l e nv i r on m e nt of a g r i c u l t u r a l l a nd c ons ol i da t i on legal component: 1. institute of legal security 2. institute of land property rights organizational and structural component: 1. institute of executive authority 2. institute of land owners and users 3. civil society institute (nongovernmental organizations) 4. institute of financial and economic management (stimulation) procedural component: 1. institute of state land cadastre 2. institute of land management 3. institute of property rights registration 4. institute of land mobility (market) traditional and mental component: 1. traditions 2. habits 3. stereotypes 4. mentality 5. beliefs/conviction 6. land tenure etc. casual component: 1. the structure of agricultural land use 2. the system of agricultural production 3. consequences of land reform fig. 1. the structure of the institutional environment of agricultural land consolidation* the author’s own work levels: at the first level – in the case of disagreements in agents’ interests within the general interest of institutional subject it is needed to eliminate special, unusual forms and methods of economic interactions or to separate different interests to another groups of interest; at the second level it is reasonable to fix new rules or regulations within the individual community of land consolidation participants if the localization of some specific forms of cooperation is found. thus, there are two possible options for solving contradictions: 1) the rejection of the rules and regulations which in the process of testing were false; 2) the final fixing of their rules and regulations as formal ones that guarantee the effective relationships between land consolidation actors. the third level is the opposition of the parties and the formation of a new institution. the development of institutional environment is defined with quantitative and qualitative characteristics of the institutions. therefore, in making the institutional environment of the land consolidation system it is necessary to find the answers to a number of questions: 1) how many institutions there should be to optimize the functioning of such a system; 2) the set analysis of which the institutions guarantees a proper understanding of the essentiality and content of the land consolidation system; 3) how many actors have to interact in order the institute become a full-fledged one. the rules that are used in the relations between the actors become an institute only when the majority follows it. the level of validity of institutionalization in the relations concerning transaction costs is a key element to ensure the optimality of institutional environment. in other words it is the value of the resources required for the creation and use of the institutions (melnyk et al., 2011). the institutional environment is always changing due to the institutional changes caused with the mismatch between the existing institutions, modified conditions and the environment. the changes in the institutional environment are based on the implementation of institutional technology. the institutional technology is the technology related with the generating (designing, projecting) and also the importing of the new institutions that can provide reducing of transaction costs for implementation of the agricultural land consolidation (melnyk et al., 2011). baltic journal of economic studies 131 vol. 1, no. 2, 2015 4. the institutional environment of agricultural land consolidation in our opinion, the main components of the concept “institution of agricultural land consolidation” are: traditional and mental, legal, causal (cause-effect), organizational, structural, and procedural (popov, 2013). the components of the “institution of agricultural land consolidation” in the institutional environment are presented as a system of the institutes or the certain factors. the inter-consistency of these institutions creates an institutional environment for the development of agricultural land consolidation. with the purpose to better systematize the institutes that form the institutional environment of agricultural land consolidation we developed a scheme (fig. 1) based on the mentioned above basic components. 4.1. the legal component the legal component of the institutional environment of land consolidation is represented with the system of two major institutes of legal security and land property rights. the institute of legal security at the legislative level determines the legal principles of land consolidation, its actors and objects, general legal responsibility for providing land consolidation. it should be clarified what land concerns to consolidation, only agricultural or forest, water and urban. the legislation should necessarily determine: what methodological approaches of land consolidation can be used and in what cases; is the voluntary land amalgamation belongs to land consolidation or not; in what cases it is necessary to carry out comprehensive (compulsory) land consolidation; whether the special law on land consolidation is needed; objectives and levels of providing land consolidation; whether the land consolidation procedure is considered as a specific event or as land management (cadastral) activities. the institute of land property rights relates to the transformation of property relations regarding land ownership, their legal regulation, achieving a certain balance between the freedom of a land owner and public interest in the use of the land during the providing of land consolidation. land legislation supporting the structural changes, measures concerning nature protection and a sustainable land management; monitoring the using of natural resources and environment. the institute of land property rights will inevitably influence the social conditions of a modern village; it will change the traditional forms of functioning and traditional way of life in its various manifestations. 4.2. the organizational and structural component organizational and structural component includes such institutions as the executive authority, the land owners/ users, civil society (non-governmental organizations  – ngos), the financial and economic management (stimulation). the institute of executive authority consists of the central office agencies such as: the ministry of agriculture and food, the ministry of justice, the ministry of environment, the ministry of infrastructure, the ministry of social policy, the departments of state land cadastre, land management, registration and others. this institute represents the executive authorities and their ac-ceptance of responsibility for the participation in the implementation of land consolidation according to the levels of providing: national, regional or local (popov, 2013). the institute of land owners/users includes all owners and users of the land parcels interested in land consolidation and those who relate to its implementation. landowners and land users can represent their interests individually or collectively by creating different committees or associations. the civil society institute involves non-governmental organizations participating and monitoring the process of land consolidation from the public point of view. these ones include local communities or their representatives, various associations of farmers, entrepreneurs, producers, environmental protection and others. the role of private organizations in land consolidation participating procedure and the possibility of state-private partnership creating should be identified and regulated. the institute for financial and economic management comprises measures to encourage the land consolidation providing with reducing the fees, giving tax benefits, improving conditions for easy access to subsidies and loans, exemption for a period of taxes and so on. 4.3. the procedural component the procedural component of institutional environment of land consolidation involves a set of institutions such as: state land cadastre, land management, registration of property rights and land mobility (market). the institutes of state land cadastre, land management, and registration of property rights provide timely the legal definition and establishment of land parcel boundaries, land readjustment procedures, the legal status of land parcels, including the right to lease, mortgage, servitudes or restrictions (encumbrances) to land. cadastral and registration systems must provide the basis for identifying the rights of the holders and landowners. the quality of procedures and project development of land consolidation directly depends on the quality of the maintenance of the land cadastre and registration system – that is on the efficiency of providing reliable, objective, accurate and detailed information concerning the present land use of consolidation territory. the institute of land mobility includes: land bank, land exchange, land registration and cadastral systems, credit institutions, licensed land management and land evaluation organizations (public and/or private). the land mobility in land consolidation projects is defined as the coordinated social relations extent of land rights re-structuring through the sale, purchase, exchange or lease from one owner to another as it proves possible during the re-allotment process. in general, institutional frameworks of modern agricultural land consolidation should be based on the establishing of causal (cause-effect) relationships between baltic journal of economic studies 132 vol. 1, no. 2, 2015 the problem of land fragmentation and a sustainable rural development, as well as the improvement of institutions and technology management. the effectiveness of land consolidation procedure can be achieved only if the feedback will be “land consolidation actors – land consolidation object”. in other words, the land consolidation actors have to get information about the achievement (or no achievement) effect from the land consolidation object, appreciate it and adjust their own decision to the fact that the system can function in a given mode. it should be noted that feedbacks are the essence of the cause-effect relationship characterized with the fact that the result of previous actions influence the next management decision about the implementation of land consolidation. without such communication, without obtaining the information from the land consolidation object as to the previous effect the consolidation actor could strengthen the destructive impact of the land consolidation system. 4.4. the casual component the knowledge of causal relationships about land consolidation allows to expose the essence of the processes and on this basis to give a correct assessment of the results achieved in the current situation, identifying the potential for increasing efficiency of measures, and justifying plans (schemes, projects) and administrative decisions. without studying causal relationships the overall picture of the investigated object breaks up into separate parts and internal and external communications are lost. therefore, it is impossible to predict and evaluate the consequences of administrative actions on land consolidation results. the causal relationship is a stable unchanged and regular one. the efficiency of land consolidation is based on identifying, measuring and understanding these relationships. the classification, systematization, modelling and measurement of causal relationships are major methodological issues of land consolidation. only with understanding causal relationships of different activities it is possible to identify by which factor or managerial influence (type and methodical approach of land consolidation, its efficiency, the amount of income received by landowners/users, environmental and social indicators etc.) will change the final results after land readjustment, and on this basis to justify any decision of land consolidation. 4.5. the traditional and mental component it is known that the historical customs, traditions and mental features have a significant impact on the willingness of the population and the executive authorities on the development and effectiveness of land consolidation implementation. therefore, traditional and mental component is an integral part of the institutional environment of land consolidation. traditional and mental component consists of: valuable and motivational characteristics of the social community; the system of the elements of spiritual life and the world view that defines the appropriate behavioural patterns, activities, lifestyle of different social groups and individuals; the set of values, symbolic, conscious or subconscious feelings, ideas, attitudes, beliefs and worldview. therefore, considering these factors it is necessary to use different methods of working with land consolidation actors in the different regions – land consolidation procedure must consider the peculiarities of the regions in ukraine, because ukraine is quite heterogeneous in natural conditions, history, traditions and mentality of people. so, the land consolidation rules that are inherent in the east or southeast of ukraine can not be carried on to western ukraine and vice versa. at the same time, land consolidation providing at a regional level should not be directed in favour of some regions and to the detriment of others be-cause the regions of ukraine are not separated, they are united, complementary and mutually enrich each other as the whole. 5. findings it is important to take into account the presence of financial resources and human capacity for successful implementation of land consolidation. land consolidation designers should be able to use the experience of similar reforms in other countries. finally, we need a strong political will and support of the people. today, there is a real distrust in the government initiates. there is a fear of losing land parcels due to the land readjustment (re-allotment). moreover the rejection of the market mechanism for the land mobility (including the agricultural land) can be a significant obstacle for the development of land consolidation. we should remember that the land consolidation procedure must be accessible, understandable, transparent, as simple as possible and suitable to use. in ukraine the urgent task is particularly not only to create, design and import of land consolidation institutions but also to provide the diagnostic of their maturity and suitability for the cur-rent level of land consolidation relations. therefore, in ukrainian realities of the development of a new land consolidation system a special attention should be paid to the creating of an instrument for monitoring the effectiveness of institutions, fixing them in daily land consolidation actors’ livelihoods and timely replacement according to the changes in land consolidation strategy due to the globalization and integration processes. the national experience shows the importance of this approach because the introduction of the institution in the economic life does not guarantee its viability, incorporation and compliance. this is confirmed by the fact that even under the existing legislative framework of land tenure in ukraine landowners, land users, an agricultural farm, and different companies often ignore the formal rules. thus, the establishment and improvement of the institutional environment is related to the process of institutionalization, which consists of the unity of the following components: in the short term – the declaration by law specific rules and regulations of baltic journal of economic studies 133 vol. 1, no. 2, 2015 behaviour of land consolidation actors; in the long run – legitimization and public recognition, fixing of this recognition in “unwritten” rules and within the individual and social behaviour. the formation of a modern institutional environment of land consolidation should create favourable conditions for the attracting domestic and foreign investments, further economic structuring of the agricultural sector, and the reduction of regional asymmetries of socio-economic development. the realization of economic, social and environmental priorities at the local, regional and national level will depend on the usefulness of individual units (institutions) of institutional environment of land consolidation. 6. conclusions the main criterion of agricultural land consolidation development in ukraine is a stable institutional regulation – the ability to perform the functions of regulation for a long time. in our opinion, the institutional environment of agricultural land consolidation should be considered primarily as a regulatory system harmonizing relations of the agricultural production, social and natural re-sources, designed to optimize the production, based on the actual requirements and restrictions of the existing institutes and institutions to guarantee a rational use of land resources. the specific methodological base of institutional environment of land consolidation is the implementation of the principles of a sustainable development. thus, the main directions of institutional system of agricultural land consolidation at present include: 1)  development of institutions of state intervention and regulation of land consolidation; 2) improvement of land market mechanisms, lease relations, mortgage, and sale; 3) development of institutions focused on social services; 4) innovation through investment in the economy; 5) establishment of the formal framework for land consolidation procedure with the aim to guarantee its open and transparent implementation and to control the land consolidation actors; 6)  development of financial mechanism and infrastructure of land consolidation. references van dijk, t. (2002, april). central european land fragmentation in the years to come – a scenario study into the future need for land consolidation in central europe. paper presented at fig xxii international congress, washington, d.c., usa. [electronic resource]. – retrieved from: https://www.fig.net/resources/proceedings/ fig_proceedings/fig_2002/ts7-16/ts7_16_vandijk.pdf van dijk, t. (2004). land consolidation as central europe’s panacea reassessed. in: proceedings of symposium on modern land consolidation, september 10–11, volvic (clermont-ferrand), france. [electronic resource]. – retrieved from: http://www.fig.net/commission7/france_2004/papers_symp/ts_01_vandijk.pdf fao. (2003). opportunities to mainstream land consolidation in rural development programmes of the european union. land tenure policy series, rome. kilochko, v.m. (2009). zemelna reforma i neobhidnist konsolidatsii zemel u silskomu gospodarstvi. zemleustrii i kadastr, 2, р. 18-20. martyn, a. (2011). konsolidatsija zemel silskogospodars’kogo priznachennja v ukraini: mehanizm zdiysnennja. [electronic resource]. – retrieved from: http://zsu.org.ua/andrij-martin/92-2011-06-14-08-46-34 melnyk, a.f., vasina, a.ju., zheljuk, t.l, popovich, t.m, (2011). natsionalna ekonomika. kyiv: znannja. popov, a.s. (2013). instytutsiyni zasadi konsolidatsii zemel silskogospodars’kogo priznachennja. naukovi pratsi donetskogo natsionalnogo tehnichnogo universytetu, serija: «girnicho-geologichna», 1(18), р. 271-277. sonnenberg, j. (2002, april). fundamentals of land consolidation as aninstrument to abolish fragmentation of agricultural holdings. paper presented at fig xxii international congress washington, d.c. usa. [electronic resource]. – retrieved from: www.fig.net/pub/fig_2002/ts7-4/ts7_4_sonnenberg.pdf thomas, j. (2004, september). modern land consolidation – recent trends on land consolidation in german. paper presented at fig commission vii-symposium, volvic, france. [electronic resource]. – retrieved from: www.fig.net/commission7/france_ 2004/papers_symp/ts_03_thomas.pdf thomas, j. (2006, october). what’s on regarding land consolidation in europe? paper presented at xxiii fig congress, munich, germany. [electronic resource]. – retrieved from: www.fig.net/pub/fig2006/ papers/ ts80_03_thomas_0311.pdf tkachuk, l.v. (2009). konsolidatsija zemel: efektyvne vikorystannja ta ohorona v umovah transformatsii zemelnyh vidnosyn. lviv: vyd-vo lvivskogo nau. tretyak, a.m. (2002). teoretichni osnovy zemleustroju. kyiv: izu uaan. vitikainen, a. (2004). an overview of land consolidation in europe. nordic journal, 1, р. 25-44. shvorak, a.m. (2008). teoretychni osnovy konsolidatsii zemel: zmist, meta, zavdannja, printsipy. zemleustrii i kadastr, 4, р. 11-13. baltic journal of economic studies 134 vol. 1, no. 2, 2015 андрей попов формирование институциональной среды консолидации земель сельскохозяйственного назначения в украине аннотация. каждая теория требует прикладных инструментов. консолидация земель является многодисциплинарным инструментом устойчивого развития сельских районов, который на основе своей динамической структуры предоставляет возможности для принятия наиболее лучших вариантов решения вопросов по управлению земельными ресурсами. именно поэтому главной идеей статьи есть теоретическое обоснование и разработка научно-практических рекомендаций по формированию институциональной среды консолидации земель сельскохозяйственного назначения в украине. предметом исследования выступает процесс формирования консолидации земель сельскохозяйственного назначения. методология. в процессе исследования использованы следующие методы: диалектический, абстрактно-логический и системного анализа (теоретические и методологические обобщения, определение сущности содержания институциональной среды консолидации земель сельскохозяйственного назначения). в статье рассматривается роль институтов в экономическом развитии и представлена характеристика их функций таких как: регулятивной, регламентной, распределительной, информационной, развития и накопления. как элементы новизны предложена и предоставлена подробная характеристика основных составляющих институциональной среды консолидации земель: традиционно ментальная, правовая, причинно-следственная, организационно-структурная, процессуальная. представлено содержание институтов каждой из этих составляющих и их значения и взаимосвязи. теоретически исследовано, что формирование институционального механизма консолидации должно быть симбиозом как традиционных, так и рыночных институтов на демократических началах с участием общины. в статье акцентируется внимание на целесообразности формирования механизма мониторинга эффективности институтов. результат. автор предлагает рассматривать институциональную среду консолидации земель сельскохозяйственного назначения как регуляторную систему гармонизации взаимоотношений сельскохозяйственного производства, социальных и природных ресурсов, направленную на оптимизацию производства с учетом фактических требований и ограничений действующих институтов и институтов по обеспечению рационального использования земельных ресурсов. практические последствия. анализ сложившейся ситуации в украине показывает, что неотложной задачей является не только создания, проектирования, импорт институтов, но и диагностирования их зрелости и пригодности для сложившегося уровня развития отношений по консолидации земель. это положение подтверждается отсутствием специальной государственной политики по развитию консолидации земель и существующим недоверием по отношению мероприятий проводимых правительством. также, автором предлагается целый ряд необходимых действий для развития консолидации земель сельскохозяйственного назначения. baltic journal of economic studies 252 vol. 4, no. 4, 2018 corresponding author: 1 institute of jurisprudence and psychology, lviv polytechnic national university, ukraine. 2 national academy of internal affairs, ukraine. 3 yaroslav mudryi national law university, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-252-257 international cooperation in financial fraud investigation volodymyr ortynskyi1, yuliia chornous2, nataliia pavliuk3 abstract. the aim of the article is to formulate theoretical principles and practical recommendations for the implementation of international cooperation in the investigation of financial fraud. the subject of the study is international cooperation in the investigation of financial fraud. methodology. the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the historical and legal method enabled to determine the preconditions for the origin of financial fraud as a crime of international nature, the establishment of the institute of international cooperation in criminal proceedings. the comparative legal method enabled to compare doctrinal approaches to the differentiation of tasks and forms of international cooperation in the investigation of financial fraud. the system-structural method enabled to determine the tasks of the pretrial investigation bodies in the investigation of financial fraud considering the functional aspect of the relevant bodies and individuals. the methods of grouping and classification were the basis for the author’s approach to the definition of features of financial fraud as a crime of an international nature. the technical legal method enabled to examine the state of affairs in the legal regulation of the application of international cooperation measures in the investigation of financial fraud at the international and national levels, to identify its shortcomings, which determine the problems of practical implementation, to develop recommendations aimed at their elimination. the results of the study revealed that improvement of the international cooperation in the investigation of financial fraud involves the use of new methods and means of investigation (legal proceedings within the framework of international legal assistance, joint investigation teams, etc.); working out effective interaction with the competent authorities of foreign countries and international organizations. it is important to conclude international cooperation agreements, including interagency agreements; to improve the national legislation to comply with the provisions of international law; to harmonize the legislation of ukraine and european states. practical implications. in the research, financial fraud is defined as a crime of an international nature; the problematic issues of its investigation are determined; features of international cooperation in the investigation of financial fraud; the areas of its efficiency improvement are suggested. relevance/originality. the original author’s approach to the formulation of theoretical principles and practical recommendations for the implementation of international cooperation in the investigation of financial fraud is the foundation for the elaboration of the most promising areas for the development of national legislation and practical activities in this sphere. key words: financial fraud, investigation, international cooperation, international agreements. jel classification: g15, f37 1. problem statement and its relevance the issues of international cooperation in the investigation of crimes of an international character are now the concern of scientists and experts. modern economic crime causes enormous losses to the state, because of the possibility to destabilize the foundations of its socio-economic system. its features are high latency, dynamism, and rapid adaptation to new conditions and business rules, the sustained nature of organized groups’ activities in the form of criminal business under the cover of various marketbased institutions, interregional and transnational criminal affiliations, and the application of effective means of counteraction to law enforcement bodies. nowadays, the problem of counteracting economic fraud in financial relations becomes very acute, because it poses a threat to different states and the entire world community, while its investigation necessitates implementation of measures of international cooperation. baltic journal of economic studies 253 vol. 4, no. 4, 2018 2. the aim and tasks of the study the aim of the article is to formulate theoretical principles and practical recommendations for the implementation of international cooperation in the investigation of financial fraud. to achieve this goal, the following tasks should be solved: to characterize financial fraud as a crime of an international nature; to identify the problematic issues of its investigation; to reveal specificities of international cooperation in the investigation of financial fraud; to suggest ways to improve its efficiency. 3. the main material financial fraud is a complex of interconnected and common by forensic features means of lucrative offenses against state financial resources, economic entities, and citizens via fraud and abuse of authority. financial fraud determines the specifics of modern economic crime and is fundamentally different from the previously known (traditional) ways of acquisition of someone else’s property by a number of features, primarily: 1) financial fraud is based on specific techniques for misappropriation, that is, a complex of connected financial and related crimes consisting of the basic crimes (determining the content of technique of criminal activity for misappropriation); auxiliary (subordinate) crimes aimed at arranging, committing, and concealing crimes; supplementary (side) offenses committed at the same time taking into account factors relevant for the criminal-legal qualification, such as crimes related to the corruption of officials of public and private law; 2) financial fraud is committed in regulated by the rules of financial law relations concerning formation, distribution, redistribution, and use of financial resources of the state, economic entities and citizens; 3) financial fraud is committed by persons included in the system of connections and relations concerning the implementation of the financial and economic activity, which enables to use market institutions and financial instruments (fiscal relations, bank transactions, lending, investment, insurance, etc.); 4) financial fraud involves a clear algorithm of structured and skilfully managed acts of criminal behaviour (criminal schemes) concerning preparing, committing, and concealing crimes, characterized by the dynamics, rapid adaptation of criminals to changes in economic conditions and legislation; 5) technical coincidence of fraud preparation with legitimate financial and economic activities, as well as masking the signs of a crime under the civil-legal (economic) relationship at the stage of realization of criminal intent, complicates the detection of signs of crime by law enforcement bodies (cherniavskyi, 2010). modern civilization, characterized by the acceleration of globalization and integration of the economies of individual countries into a single space, inevitably leads to the internationalization of crime. the latter becomes a factor that threatens the security of national economic systems. financial fraud is a specific phenomenon in modern crime, as it manifests itself within individual states and, at the same time, covers the territories of many countries, becomes international in nature, is committed by transnational organized criminal groups. therefore, the study of the specificities of combating fraud in individual countries, examination of the positive and negative aspects of legislative and enforcement practice, as well as countermeasures, are extremely important in international cooperation, because ukraine is on the path of european integration and involved in european and global financial processes. the international wrongfulness of financial fraud is defined by the provisions of international treaties (the un convention against transnational organized crime of 2000 and the protocols thereto (konventsiia oon proty transnatsionalnoi orhanizovanoi zlochynnosti pryiniata rezoliutsiieiu 55/25 ha vid 15 lyst. 2000 roku), the convention on laundering, search, seizure and confiscation of the proceeds from crime of 1990 (konventsiia pro vidmyvannia, poshuk, aresht ta konfiskatsiyu dokhodiv, oderzhanykh zlochynnym shliakhom), the 1999 criminal law convention on corruption with the 2003 additional protocol (konventsiia oon proty koruptsii), the un convention against corruption of 2003 (kryminalna konventsiia pro borotbu z koruptsiieiu), etc.). states undertook to make joint efforts to counteract various manifestations of financial fraud and related offenses. violations of financial legislation in most european states are criminalized by international regulations. in particular, the convention on the protection of financial intelligence of the european union (1995) proposed to include in national laws a number of fraudulent delinquencies as unfavourable for the interests of the european union. for example, the eu council framework decision on combating fraud and counterfeiting of non-cash means of payment (2001) states that each state is obliged to criminalize intentional acts against bank payment facilities (kachka, 2004). due to the recommendations of the european union, the composition of criminal acts against the financial system in the legislation of european countries, as a rule, is carefully structured. however, there are some divergences in the legislation of the countries of the european union regarding the definition of the concept and qualification of fraud. therefore, the criminal law of the majority of european union countries provides for the following types of financial fraud: insurance, that is, a fraud committed to obtain the sum insured; banking, that is, a fraud aimed at the illegal obtaining of bank loans, other loans or property preferences; criminal bankruptcy, that is, a deception aimed at creating features of insolvency or baltic journal of economic studies 254 vol. 4, no. 4, 2018 unlawful actions in case of liquidation of an enterprise; tax, that is, a deception of the state and its bodies, such as illegal reduction of the total taxes to be paid, or refund of value added tax under export schemes; stock, that is, fraudulent actions on the securities market and in stock trading. the analysis of law and its application in the united states of america is of particular interest as well. this country has faced financial fraud long before others and has gained some experience in counteracting this phenomenon. in the united states of america, criminal liability for property and economic crime is established both at the federal level and in individual states. however, economic crimes are criminalized mostly by federal legislation, which is related to the need of effective implementation of the united states obligations regarding the security of trade, financial system, etc. (cherniavskyi, 2010). fraud in the us federal criminal law is an extensive system of the most sophisticated and complex by form acts presented by schemes, techniques, methods, means, transactions, and performances that are of deceptive (fictional, imaginary, fictitious) nature encroaching on various objects (property, credit, banking and tax matters, relations in entrepreneurship and healthcare, etc.). illegal operations via electronic computing form the so-called “computer” crimes, in which the computer is a means or tools for fraudulent misappropriation (dementeva, 1992). therefore, financial fraud as an international crime is characterized by the following features: social danger, manifested in causing damage to economic relations; international wrongfulness, defined by international agreements and national laws of the states; investigation as a priority task of law enforcement bodies of states. financial fraud is a specific phenomenon in modern crime, because of manifestations both within individual states and in many countries if committed by transnational organized criminal groups. to counteract various forms of financial fraud effectively, international agreements have been concluded and implemented in accordance with the national legislation of the states. in the absence of an appropriate international agreement, the principle of reciprocity should be used. subjects of international cooperation can be divided into two groups, such as the authorized (central) and competent bodies of the states; international institutions and organizations. during the investigation of financial fraud, law enforcement (competent) bodies cooperate in collecting evidence, exchanging evidence, guidance, background information, and other issues to fulfil the tasks of criminal proceedings. authorized (central) and competent state bodies are defined in international agreements and specified in the national legislation of the states. it is important that regardless of the definition in the legislation of a particular state of the bodies responsible for the implementation of measures of international cooperation (“law enforcement”, “judicial authorities”, etc.), in the international legal relations, they are defined as “authorized (central)” and “competent”. this enables to use generic terms, which are specified in individual cases. considering the specificities of international cooperation in the investigation of financial fraud, the appropriate levels of its implementation can be defined. at the first level, there are joint activities of state bodies; bodies with the status of authorized (central) and competent; separate officials. these activities are aimed at forming the basis of cooperation. at the second level of cooperation, specific practical tasks are implemented in the investigation of financial fraud. these are the coordinated activities of specific law enforcement bodies, their individual units and employees, such as investigators, operational workers, experts, prosecutors performing the tasks. under these conditions, cooperation is realized to exchange information of mutual interest; to search for persons hiding from criminal prosecution, as well as those who have disappeared untraceable; to search for items that are of interest to the investigation (forged documents and money, valuables, property, etc.); to plan and coordinate actions within the investigation; to exchange legal regulations, methodological recommendations, statistical information, work experience; to carry out scientific research and practical measures on counteraction to financial fraud and other forms of international crime. international cooperation in the investigation of financial fraud involves the constant exchange of information. mostly it concerns features of crime (committed or planned); physical persons and legal entities involved in the crime, as well as victims; structure, sphere of activity and links of an organized criminal group; items that are the subject of a criminal offense, are of interest to the investigation; traces of a crime, material evidence that may help to clarify the circumstances of the criminal proceedings, etc. the procedural information exchange takes place within the framework of international legal assistance; in addition, the data obtained in this way (documents in accordance with the procedural form) are used for proving during the criminal proceedings by the competent authorities of the requesting state. non-procedural information exchange takes place between individual representatives of the competent authorities of the states. for example, it is employee consulting, background information provision. this information is briefing material predominantly that facilitates the adoption of procedural and tactical decisions. implementation of international cooperation in the investigation of financial fraud is characterized by specificities. the main of them include: baltic journal of economic studies 255 vol. 4, no. 4, 2018 – considering differences in the laws of the states and functioning of socio-economic institutions; – regulation by international law and compliance with the principles of reciprocity and sovereignty of states; – the possibility of a refusal to execute the request in case of potential damage to the sovereignty, security of the state or other important interests; if the information requested relates to information constituting state secrets and for other reasons specified in international agreements and by national legislation; – the geographical distance of subjects of interaction language and cultural differences, unusual features of procedural legislation of a foreign state (nurbekov, 2012); – special subjects of realization of the set tasks and used communication channels; – long deadlines for fulfilling the tasks that should be considered when planning a financial fraud investigation; – independence of subjects of cooperation from each other, imperfect direct interaction; – dependence of interaction outcomes on the completeness and reliability of briefing materials, preliminary preparation (chornous, 2012). a progressive form of international cooperation in the investigation of crimes is the creation and operation of international (joint) investigative teams. in particular, according to article 19 of the united nations convention against transnational organized crime of 2000, in cases that are the subject of an investigation, prosecution or trial in one or more member states, the competent authorities involved may establish joint investigation bodies (in case of appropriate treaties or arrangements) (konventsiia oon proty transnatsionalnoi orhanizovanoi zlochynnosti pryiniata rezoliutsiieiu 55/25 ha vid 15 lyst. 2000 roku). according to chapters 1-2 of article 20 of the second additional protocol of 2001 to the european convention on mutual assistance in criminal matters of 1959, a joint investigation team may be set up where: a party’s investigations into criminal offences require difficult and demanding investigations having links with other parties; several parties conduct investigations into criminal offences, which circumstances require coordinated, concerted action in the parties involved. a request may be made by any of the parties concerned. the team is set up in one of the parties, in which the investigations are expected to be carried out (yevropeiska konventsiia pro vzaiemnu pravovu dopomohu u kryminalnykh spravakh 1959 roku…). the legislation of ukraine provides for that in ukraine, the general prosecutor’s office of ukraine is the body to make decisions on setting up a joint investigation team. the relevant provisions are in part 2 of article 571 of the criminal procedural code of ukraine (kryminalnyi protsesualnyi kodeks ukrainy…). the convention on mutual assistance in criminal matters between the member states of the european union of 2000 provides for the possibility of the creation of joint investigation teams by the competent authorities of the member countries of the european union for the implementation of specific measures for a specified period. in addition to representatives of the law enforcement agencies of the organization member states, which are a part of joint investigative teams, the possibility of involving employees of europol and eurojust is provided (shostko, ovcharenko, 2008). in this respect, the signing and ratification of the agreement on operational and strategic cooperation between ukraine and the european police office in 2016 (uhoda mizh ukrainoiu ta yevropeyskym politseiskym ofisom pro operatyvne ta stratehichne spivrobitnytstvo vid 14 hrud. 2016 r.) is an important step, because article 5 stipulates that ukraine and europol offer each other support in the setting up and operation of joint investigation teams. procedural, organizational, forensic principles of the setting up and functioning of joint investigative groups require the elaboration, development of an algorithm of action of law enforcement officers, conclusion of international interagency agreements between law enforcement agencies (chornous, 2017), because this form of international cooperation is appropriate in the investigation of financial fraud. a number of important tasks in the investigation of financial fraud can be solved with the help of international organizations. a system of un bodies has a number of institutions that contribute to the countering economic crime at the international level. in particular, the centre for international crime prevention, the financial action task force on money laundering (fatf), the g8 senior experts group on transnational organized crime (the lyon group), the international criminal court, and others. at the regional level, the activity is coordinated by agencies set up within the council of europe. the international criminal police organization (interpol) is of special importance among the global international organizations in countering international crime. interpol provides for countering such manifestations of international criminal activity as financial fraud, money laundering, transnational organized crime, tax evasion, non-return of foreign exchange earnings, legalization of vehicles, counterfeiting of credit cards, means of payment, securities and money, contraband, theft of state funds, banking crimes, corruption, crimes of officials, raiding, illegal interference in computer networks, malware (viruses) distribution, etc. in the investigation of crimes, cooperation with interpol is carried out mainly to exchange information; identification and verification of persons, items by accounting of interpol and foreign police; to conduct international search through interpol channels, baltic journal of economic studies 256 vol. 4, no. 4, 2018 to provide extradition; to assist in procedural actions within international cooperation. interpol requests enable to get information about the investigated financial fraud, such as illegal activities of entities; persons suspected of committing a crime and their links; seat or residence of suspects who have left abroad; the way of committing a crime, the circumstances of his commission; illegal activities of organized criminal groups; commercial structures, other legal entities located abroad involved in unlawful activities; the main areas of legal entities activity, their total authorized capital, information on their managers, founders; stolen vehicles and their owners; narcotic drugs, psychotropic substances, antiques, counterfeit documents, money and other objects related to the crime; analytical, scientific, statistical, and reference information on law enforcement activities, etc. interpol uses a number of tools to achieve its objectives. one of them is the use of the information retrieval system 1-24/7, which is the global telecommunication system, based on the latest information technologies, provides high-quality and confidential round-the-clock direct access to the information resources of the general secretariat of interpol, and also allows the exchange of information between the ncb of interpol of different states. interpol is equipped with a computerized criminal information system (icis), which enables to search for various information: identification of offenders, bank accounts used by them, names and addresses of legal entities involved in a crime. the automated search system (asf) allows ncb of interpol and the practical bodies to conduct an electronic search of certain information in data banks. this system enables to transfer images between the interpol ncbs of different countries. information and analytical support for interpol are being carried out; in particular, the analytical criminal intelligence (aciu), staffed by qualified analysts, carries out its professional analysis (chornous, 2012). it is important to interact with interpol in conducting procedural actions within the framework of international cooperation in criminal proceedings. however, these procedural actions are carried out via international legal assistance. similarly, information on the persons, including citizens of ukraine and legal entities, that open financial accounts with foreign banks, as well as the movement of funds, the conclusion of agreements between ukrainian and foreign legal entities, constitute banking or commercial secrets and may be communicated to foreign the competent authorities only after considering the official appeal as international legal assistance. in explicit cases, interpol capabilities can be used to transfer requests for international cooperation. for example, article 24 of the convention on laundering, search, seizure, and confiscation of the proceeds from crime, 1990 (konventsiia pro vidmyvannia, poshuk, aresht ta konfiskatsiyu dokhodiv, oderzhanykh zlochynnym shliakhom) states that any request or notification under paragraph 1 and paragraph 2 of this article (concerning a direct link between the central and judicial authorities) may be made through the international criminal police organization (interpol). another strategy of international cooperation in the investigation of financial fraud is connected with the european police office or europol. europol is a specialized body of the european union that coordinates the actions of the police and other competent authorities of the european union, collects, analyses, and exchanges information on crimes and persons involved in their commission, performs other tasks. europol is authorized to counter organized crime, terrorism, and other forms of serious crime, including the various forms of financial fraud affecting two or more member states in a way that requires a common approach by the member states, because of significance and consequences of such crimes (uhoda mizh ukrainoiu ta yevropeyskym politseiskym ofisom pro operatyvne ta stratehichne spivrobitnytstvo vid 14 hrud. 2016 r.). the basis of europol’s activities is the provision of information support for the cooperation of the competent authorities of the european union countries in countering international crime. the information exchange system provides an opportunity for the europol member states to exchange information, necessary for conducting investigative and operational activities, with each other, europol and third states in a secure mode. europol cooperates with interpol, as well as with other international organizations. europol operates in the member states of the european union. europol also cooperates with states that are not members. therefore, on december 14, 2016, the agreement on operational and strategic cooperation (uhoda mizh ukrainoiu ta yevropeyskym politseiskym ofisom pro operatyvne ta stratehichne spivrobitnytstvo vid 14 hrud. 2016 r.) was signed between ukraine and the european police office, ratified by the law of ukraine on july 12, 2017. article 1 of the agreement provides for that its objective is to establish cooperation between ukraine and europol to support ukraine and the member states of the european union in the prevention and countering organized crime, terrorism, and other forms of international crime. in accordance with the europol council decision on the tasks of europol, cooperation may include the exchange of information and expertise, general summaries, results of strategic analysis, information on criminal investigation procedures, information on methods of crime prevention, participation in trainings, as well as providing advice and support in selected criminal investigations (uhoda mizh ukrainoiu ta yevropeyskym politseiskym ofisom pro operatyvne ta stratehichne spivrobitnytstvo vid baltic journal of economic studies 257 vol. 4, no. 4, 2018 14 hrud. 2016 r.). the agreement will significantly strengthen the cooperation of the competent authorities of ukraine with the european police office in countering financial fraud. 4. conclusions and perspectives of further research an international nature of financial fraud necessitates the improvement of the methodology of its investigation, including means of international cooperation for the accomplishment of the tasks. the urgent tasks of improving international cooperation in the investigation of financial fraud are the use of new methods and means of the investigation (procedural actions within international legal assistance, creating joint investigation teams, etc.); effective interaction with the competent authorities of foreign countries and international organizations. it is important to conclude international cooperation agreements, including interagency agreements; to improve national legislation compliant with the provisions of international law; to harmonize the legislation of ukraine and european states. references: cherniavskyi, s. s. (2010). finansove shakhraistvo: metodolohichni zasady rozsliduvannia [financial fraud: methodological principles of investigation] (monograph). kyiv, hi-tech press, 624 p. (in ukrainian) konventsiia oon proty transnatsionalnoi orhanizovanoi zlochynnosti pryiniata rezoliutsiieiu 55/25 ha vid 15 lyst. 2000 roku [the un convention against transnational organized crime, adopted by general assembly resolution 55/25 of november 15, 2000]. (2006). zbirnyk mizhnarodnykh dohovoriv ukrainy pro pravovu dopomohu u kryminalnykh spravakh. bahatostoronni dohovory. kyiv. (in ukrainian) konventsiia pro vidmyvannia, poshuk, aresht ta konfiskatsiyu dokhodiv, oderzhanykh zlochynnym shliakhom [the convention on laundering, search, seizure and confiscation of the proceeds from crime of november 8, 1990]. (2006). zbirnyk mizhnarodnykh dohovoriv ukrainy pro pravovu dopomohu u kryminalnykh spravakh. bahatostoronni dohovory. kyiv. (in ukrainian) konventsiia oon proty koruptsii [convention of the un against corruption of october 31, 2003]. (2010). ofitsiynyi visnyk ukrainy, 10, 506. (in ukrainian) kryminalna konventsiia pro borotbu z koruptsiieiu (еts 173) dodatkovyi protokol [additional protocol to the criminal law convention on corruption of may 15, 2003]. (2006). ofitsiynyi visnyk ukrainy, 44, 2939. (in ukrainian) kachka, t. (2004). borotba z vidmyvanniam hroshei: kompleksnyi porivnialno-pravovyi analiz vidpovidnosti zakonodavstva ukrainy acquis yevropeiskoho soiuzu u sferi borotby ta zapobihannia lehalizatsiyi dokhodiv, otrymanykh zlochynnym shliakhom [combating money laundering : comprehensive comparative legal analysis of the compliance of ukrainian legislation with the acquis of the european union in combating and preventing the legalization of proceeds from crime]. kyiv, referat, 288 p. (in ukrainian) dementeva, e. e. (1992). ekonomicheskaia prestupnost i borba s nei v stranakh s razvytoi rynochnoi ekonomikoi (na materialakh ssha i germanii) [economic crime and struggle against it in the countries with developed market economy (on materials of the usa and germany)]. moscow, 240 p. (in russian) nurbekov, i. m. (2012). orhanyzatsiia i taktika vzaimodeistviia s inostrannymi kompetentnymi organami pri rassledovanii prestuplenii mezhdunarodnogo kharaktera [the organization and tactics of interaction with foreign competent authorities in the investigation of crimes of international character] (monograph). doctor of law, professor a. h. volevodz (ed.). moscow, yurlitinform, 248 p. (in russian) chornous, yu. m. (2012). teoriia i praktyka kryminalistychnoho zabezpechennia dosudovoho slidstva u spravakh pro zlochyny mizhnarodnoho kharakteru [theory and practice of forensic provision of pre-trial investigation in cases of crimes of an international nature]. monograph. kyiv, skif, 448 p. (in ukrainian) yevropeiska konventsiia pro vzaiemnu pravovu dopomohu u kryminalnykh spravakh 1959 roku z dodatkovymy protokolamy 1978 ta 2001 roku do nei: ratyfikovana zakonom ukrainy vid 16 sich. 1998 r. [the european convention on mutual assistance in criminal matters of 1959 with the additional protocols of 1978 and 2001 ratified by the law of ukraine of january 16, 1998]. (2006). zbirnyk mizhnarodnykh dohovoriv ukrainy pro pravovu dopomohu u kryminalnykh spravakh. bahatostoronni dohovory. kyiv. (in ukrainian) kryminalnyi protsesualnyi kodeks ukrainy [criminal procedural code of ukraine of april 13, 2012]. retrieved from: http://zakon2.rada.gov.ua/laws/show/4651-17 (in ukrainian) shostko, o. yu., ovcharenko, o. m. (2008). prospects of cooperation of ukraine with the european institutes in counteraction to organized crime. the issue of combating crime: collection of scientific works, 15, 110-122. kharkiv. (in ukrainian) uhoda mizh ukrainoiu ta yevropeyskym politseiskym ofisom pro operatyvne ta stratehichne spivrobitnytstvo vid 14 hrud. 2016 r. [agreement on operational and strategic cooperation between ukraine and the european police office of december 14, 2016]. retrieved from: http://zakon.rada.gov.ua/laws/show/984_001-16 (in ukrainian) chornous, yu. m. (2017). aktualni pytannia stvorennia i diialnosti mizhnarodnykh spilnykh slidchykh hrup [topical issues of the creation and operation of international joint investigation teams]. krymynalyst pervopechatnyi: mezhdunar. nauch.-prakt. yuryd. zhurn., 14, 36-47. kharkiv. (in ukrainian) baltic journal of economic studies 214 vol. 4, no. 2, 2018 corresponding author: 1 management of innovation and investment activity department, taras shevchenko national university of kyiv. e-mail: maksym.sitnicki@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-214-221 franchising model of commercialization of scientific libraries’ services at research universities maksym sitnicki1 taras shevchenko national university of kyiv, ukraine abstract. the aim of the article is the formation of an innovative model for the commercialization of the services of scientific libraries of research universities in order to increase their financial autonomy. the methodology of the research is based on the use of methods: scientific generalization, systematization, comparison, modelling. the object of research is the activity of scientific libraries of research universities, which strive to vary in the current conditions of rapid technological development. the research results consist of the systematization of the main and secondary functions of scientific libraries of research universities. a new economic category of “digital franchising” has been proposed and characterized as a model of cooperation between the franchisor and the franchisee when the rights to use and represent the company of the franchisor in the intercontinental digital space are transferred. the franchisee has the right to use the company name, services, goods, technological processes, and software of the franchisor to create its own digital network of sub-franchisees and digital products on the basis of the conditions specified in the contract. such kind of franchising will allow settling relations in a digital cyberspace, promptly developing and getting new, yet not completely studied forms. comparison of traditional and digital models of franchising has allowed to show differences on ten basic criteria: costs for building a network; speed of interaction; level of managerial flexibility; updating of the system; the possibility of expanding the network; financial control; brand management; rate of return; the speed of information about new services; need for operational management. the revealed discrepancies are mainly characterized by different time frames for implementing managerial decisions and excellent approaches to the formation and use of the necessary financial and organizational resources. the author has developed an innovative franchise model, which makes it possible to effectively commercialize the services of scientific libraries. this model is based on the use of franchising by building a broad network of digital services. the peculiarity of digital franchising is revealed, which consists in the essential optimization of expenses for organizing the activities of scientific libraries, in comparison with the traditional model, and speeding up the pace and quality of service. the practical significance of the obtained results lies in new opportunities for pushing a new wave of development of methods for commercializing the services of scientific libraries of research universities and their dissemination at the global level. using the developed innovative franchise model will be useful for theorists and practitioners engaged in the development of strategies for the development of research universities and their scientific libraries. the main conclusion of the research is that the introduction of a developed marketing tool by talented managers with an entrepreneurial type of thinking will become a source of financial autonomy for scientific libraries of research universities they manage. digital expansion in a strategic perspective will absorb all the major information flows that affect the development of the world. libraries of research universities, as key centres for aggregation and translation of scientific information and knowledge, should be ready for such scenario and already experiment with new tools for the future, which is digital franchising. key words: digital franchising, franchising model, scientific libraries, research universities, commercialization of services. jel classification: m21, m31 1. introduction the twenty-first century is characterized as a digital era. in such dynamic conditions for the development of technologies, it is necessary to generate new models of interrelations that ensure the functioning of mechanisms of research universities with the maximum useful return. modern research universities in many countries of europe and the world need to find alternative sources of baltic journal of economic studies 215 vol. 4, no. 2, 2018 financing that will enable them to ensure their financial autonomy. this is due to the limited state funding and the lack of belief that research universities can become even more effective and build a modern management model. first of all, we want to draw attention to the development of scientific libraries of research universities. in fact, they are the basic unit of strategic importance. in them, research universities realize the functions: storage of knowledge in funds; digitization of knowledge, set out on paper; providing coworking space for comfortable work of users; serve as a platform for the formation and exchange of knowledge between users. against the backdrop of these functions, the main characterizing library is the provision of the information capability of the learning process and the conduct of research. libraries of research universities are simply doomed to become a centre for the concentration of young people with high intellectual potential and to provide them with all the conditions for creating and disseminating new knowledge. in fact, the meeting place, self-education, writing scientific papers, coworking events and other, worldwide libraries of universities, understand the importance of the scientific library in their development. the european practice of using scientific libraries demonstrates their great popularity among students and researchers of different age and status. this well-established tradition of creating comfortable working conditions for every visitor is the key to such frenzied popularity of scientific libraries in the eu. in the scientific and public libraries of the european union, you can observe all modern technologies for construction, design space design, modern furniture, innovations in the preservation and cataloguing of information sources, accessories and equipment for librarians. the main task for today is the development of the existing potential and the search for new forms of commercialization of library services to ensure their financial autonomy. 2. literature review scientific libraries need to be managed as creatively as possible. this opinion is shared by basamygina i. & apanasenko a. (2009), that in their scientific work, approaches to the marketing management of library activity in modern economic conditions were widely considered. the authors presented the concept of creative library management, focused on satisfying the present and future documentary and information needs of users through analysis, forecasting and stimulating the demand for library products. sherman a.j. (2011) devoted his work to strategies for attracting intellectual capital for franchising relationships and the latest trends in franchising. the author widely discloses the essence of franchising as a key element of the growth strategy and analyses issues of financial strategies in the process of implementing the franchising business concept. it shows strategic and structural alternatives to franchising, structuring of licensed programs and agreements. dant r .p., grünhagen m. & windsperger j. (2011) in their study explain the unique features of franchising, stimulating innovators. four unique franchising elements are analysed. leusing b. (2011) on the example of germany reviewed the changes made to the management system of higher education institutions, based on the introduction of business practices in their activities. they determine the implementation of franchising concessions in the german education system, as well as franchising higher education programs in an international context. using new models of commercialization of services, entering new markets always brings its positive dividends. scientists baldwin j. and yan b. (2012) investigated how market growth contributes to higher productivity. the authors concluded that access to new international and domestic markets leads to an increase in the productivity of globalized organizations. the issue of franchising in the sphere of culture has been extensively studied in previous publications of sitnitskiy m. (2013). the specifics of the franchising implementation in the sphere of culture are detailed. the question of using the franchising model in the sphere of culture was raised for the first time. the phenomenon of franchising is characterized, the main opportunities, advantages and disadvantages of franchising in the sphere of culture are systematized and the author’s definition of the concept of “franchising in the sphere of culture” as an economic category is provided. successful examples of franchising development of media products for television, cinema, comics, games, and merchandising on the us market johnson d. (2013) are shown. franchising in the field of mass media provides a unified portrait of the overall cultural production of the media industry. iliasa a. (2013) shows the development of the concept of franchising in germany for more than 30 years. it is noted that in 2012 the industry turnover amounted to more than 60  billion euros. many companies that start their business decide to join the franchise system to start a business, numerous companies supplement their sales through the franchise sales channel and some work through international franchising. opportunities and risks of franchising in general with the conceptual idea of a “global office” are analysed. neklessa a. (2016) in his study justifies the opinion of the rapidity of the technological development of mankind and determines the priority industries that will become a key in the future. the author prophesies franchising with a key role, noting the following: “in other words, the franchise of the future becomes the subject of reflection: promotion of complex social formats and baltic journal of economic studies 216 vol. 4, no. 2, 2018 business projects in the competitive field, delegating the possibility of their cloning with certain privileges and reservations.” soni b.k. & trivedi j. (2016) – this study is aimed at studying the business model of franchising across individual sectors, one of which is education. the main aim of the work is to study the relationship between the support provided and the conflict zones between the franchisor and the franchisee. henricks m. (2016) is considering increasing employment in franchising companies in the us in 2016 on the basis of the report of the international franchise association (ifa) in washington. the experience of organizations that contributed to the development of business in the region is highlighted. calderon-monge e., pastor-sanz i. & ribeirosoriano d. (2016) explored the experience of spain on how the behaviour of the brand influences the decision of potential franchisees in spain. the findings confirm that franchising is an alternative to the business strategy that firms apply when faced with adverse changes in the environment, such as those caused by the economic crisis in spain. boulay j., caemmerer b., evanschitzky h. & duniach k. (2016) – the relationship between multifunctional franchising and productivity in four main tasks in the management of the franchise chain: growth, uniformity, local response, and systemwide adaptation. dada o., jack s. & george m. (2016) explored the prospects for franchising in education. the model of overcoming the geographical distance between universities is shown on the basis of the introduction of the franchise cooperation approach. karaduman i̇. & arici g. (2016) in the study examined the impact of the international franchise association (ufrad) on the decision-making process of franchise companies. the authors stressed the effectiveness of the franchise approach for the successful development of the network without the need for experience in training people. stanford a.o. (2016) focused on environmental factors associated with international franchising in singapore. this study is the basis for building a marketing plan for franchising. in addition, this work serves as a guide for potential investors. lazorenko t. & frolova a. (2017) researched the conceptual apparatus of franchising and the history of its emergence on a global scale. modern imperatives of the development of scientific libraries, which are researched by sitnitskiy m. (2017), determined the need for technological re-equipment and change of traditional approaches to the management of scientific libraries, which should be based on effective european and world practice. the issue of pricing for the services of organizations that created franchising networks was investigated by jeitschko t.d., jung y., kim j. (2017). obligations under a joint marketing agreement allow organizations to use their individual prices, which leads to increased profits and a reduction in the excess of consumers. o’neill r . (2017) reviewed issues related to the decision-making process of franchisees. he analyses the necessary prerequisites for effective decision-making by the franchisee about starting a business, especially as to whether to start a new business or become a franchisor. beere r . (2017) reviewed the definitions of franchising in the understanding of the system. the author shows the history of the franchising development, as well as questions of its dominance in international markets. the prerequisites for the appearance of franchising and its influence on the sectors of the economy of countries and their structure are investigated. with the help of two sectoral case studies, the author shows how franchising enables the cardinal transformation of the industry structure from one fragmentation into a single consolidated one. fernando varotto l. & aurelianosilva l. (2017) examined the legal form of the franchise concept as a structured business system in the us, around the 1860s, when the singer company created a network of resellers for sewing machines. the authors conducted a large-scale study of the main theoretical views on the phenomenon of franchising in international academic journals, which is shown the evolution of the industry, highlighting the main issues. based on 130 articles, from 1966 to 2015, five relevant theories of franchising are explored: 1) the theory of resource collection; 2) the theory of the agency; 3)  analysis of transaction costs; 4)  the theory of signalling, and 5) the theory of property rights. a descriptive statistical analysis was conducted to determine the main authors and trends with the most commonly used associated theories in franchising documents. scott n. (2017) presented the systematized information of experts and franchisees about the international potential of franchising given its significance for the uk economy. mallapragada g. & srinivasan r . (2017) argued that the growing trend towards improved innovation results is to go beyond the domestic markets through franchising. the positive effect of franchising on product innovation is strong for companies with high financial influence but weaker for companies with high scarce resources. the results show that the concentration of franchising companies has a contingent impact on products and processes of innovative consequences. so, franchising arises as a competing mechanism (for alliances and joint ventures). daley j. (2017) in his work presented information about several problems related to the conclusion of transactions for franchise ownership through brokers franchising. the author developed proposals for the prevention of brokers and the hiring of consultants on franchising. international aspects of franchising have been investigated by rosado-serrano a., paul j. & dikova d. (2018). the work analyses the literature and synthesizes existing knowledge related to global experience. future directions of further research in the field of baltic journal of economic studies 217 vol. 4, no. 2, 2018 international franchising have been identified, which consist of studying: cultural sensitivity, institutional barriers; motivation of management; ways to optimize finance. ghantous n., das s.s. & chameroy f. (2018) explored the management capabilities that ensure the interconnection of the effectiveness of international franchisors. it is revealed that intercultural communication improves the performance of control and adaptation of contracts for know-how. perdreau f., chaudey m., chanut o. & fadairo m. (2018) paid much attention to the study of the necessary scope for the duration of international franchise contracts. in a comprehensive research, sitnicki m. (2018a) determined the main priorities for development of eu research universities on the basis of an analysis of the ranking indicators of world-class universities. in the next paper, sitnicki m. (2018b) actualized the use of franchising in the sphere of services of scientific libraries and disclosed the details of the feasibility of implementing such model in practice. 3. goals of the article the goal of the article is the formation of an innovative model for the commercialization of the services of scientific libraries of research universities in order to increase their financial autonomy. proceeding from the goal, the following tasks were set in the work: 1. to systematize the main and secondary functions of scientific libraries of research universities. 2. to propose a new economic category “digital franchising”. 3. to compare the traditional model of franchising and digital franchising. 4. to develop an innovative franchise model, which makes it possible to effectively commercialize services of scientific libraries of research universities. 4. methodology and empirical results the countries of the european union have ample opportunities to develop their own research universities and their structural units through an access to special eu funds, systematically finance programs for such development at local, national, and regional levels. in the process of transformational transformation, there is an urgent need for research universities to find alternative sources of funding that will allow them to receive a systemic income and develop their own material base. proceeding from acquiring ever wider popularity in the european union, and successfully implemented in the usa, ideas for developing the entrepreneurial potential of research universities, we suggest exploring the use of the marketing tool for franchising in the field of culture, to which libraries belong. we believe that the use of this franchising approach in the activities of scientific libraries of research universities will become a tool for commercializing library activities and strengthening their own financial autonomy. this way of constructing a commercial network of services provided by the library of research universities looks like when all its participants work on a common system, namely, the method of cooperation, in which the franchisor (the seller – the scientific library) transfers the franchisee (the buyer – specially formed with the participation of the franchisor to the intermediary, including through online) the right to use their trademark and unique library services. in a sense, franchisees and franchisers act almost like vertically integrated structures in the sphere of culture, because the parties are interconnected and each produces part of the service, eventually, they get to users, which distinguishes this kind of franchising among others. we understand that at first glance this idea seems sceptical and the established opinion about the scientific library as the centre of concentration of the obsessive and not ready for the perception of all new persons prevails. but we will try to argue the prospects of implementing this tool for developing the marketing potential of scientific libraries and increasing their financial autonomy. in fact, we are talking about the areas of the emergence and application of franchising in the activities of scientific libraries, which may be of interest to franchisees for commercial activities and network development. in the current economic realities, characterized by limited financial resources, it is necessary to build economic mechanisms that will pay for the functioning of scientific libraries and bring dividends. if we analyse the economies of the world, then a significant percentage of organizations in various fields of management in the us, europe, and ukraine are working on a franchising business model, fig. 1. fig. 1 shows that the most developed countries of the united states and the european union ensure the 0 10 20 30 40 50 60 70 80 usa europe ukraine 80 67 23 the share of franchising organizations, % fig. 1. the share of organizations in the market working on a franchise model source: (developed by the author on the basis of the franchise group, 2017) baltic journal of economic studies 218 vol. 4, no. 2, 2018 development of their own economies in the majority on the basis of using a franchising business model. the most famous franchise model has reached in the us, france, germany, and poland. a significant reserve for the expansion of the franchising market is observed in ukraine, but it is caused by a number of economic and political factors constraining such development and, thus, forms the pent-up demand for this development model. by the criterion of organizing a franchising system, the following types are distinguished: direct; development of territories; master franchising. let’s characterize each of them. 1. direct franchising – the franchisor independently provides franchisee services specified in the contract, as well as independently monitors and supports (providing advice, training, marketing, and advertising support) to the franchisee. this kind of franchising is the simplest and most common method of network development. the contract is concluded directly between the franchisor and the franchisee to open one franchise point. 2. territory development – the area developer gets the right to open franchise points within a certain territory with the involvement of sub-franchisees. the agreement regulates the basic conditions for the creation of a certain number of franchising points for a certain period of time in a certain territory. as a rule, the rights to use the trademark and innovative technologies are transferred only after signing each separate franchise agreement with the sub-franchisee. such a model of development is more often used by franchisors, who want to retain certain control characteristic of direct franchising, and at the same time avoid the need for selection and training of a large number of franchisees. 3. master franchising – in this case, the franchisee receives a large number (sometimes all) of the franchisor’s rights and obligations. based on the agreement, the master franchisee has the right to independently sell franchises (sub-franchises) in a certain territory. usually, master franchise contracts are concluded for a whole country, or even for several countries; the main goal is to expand the franchisor to other countries and thus increase the value of the company. we suggest adding this classification, also digital franchising. so let’s give a definition. 4. digital franchising – a model of cooperation between the franchisor and the franchisee, when the rights to use and represent the company of the franchisor in the intercontinental digital space are transferred. the franchisee has the right to use the company name, services, goods, technological processes, and software of the franchisor to create its own digital network of sub-franchisees and digital products on the basis of the conditions specified in the contract. such a kind of franchising will allow settling relations in a digital cyberspace, promptly developing and getting new, yet not completely studied forms. so, proceeding from the concept of digital franchising, a colossal knowledge base of scientific libraries of research universities can be used in the creation and dissemination of a professional consulting centre for the search and provision of scientific information focused on a certain subject matter. it is possible to create a separate brand for this activity and distribute it by opening mobile points in the provision of information services of a scientific direction. the geography of such items can be intercontinental, and this will give an opportunity to scientists who do not have the physical or financial ability to come and work professionally and aggregate information, qualitatively enough to receive such a service in their city. digital franchising will make it possible to combine the leading consulting sites on-line around the real problem of access to the world base and effective search for knowledge. a digital system for automating franchising is being created. it has a network public institutions (franchisee) scientific libraries (franchisee) consulting companies (franchisee) research centres (franchisee) the main scientific library of the research university (franchiser) fig. 2. a franchise model for the provision of services by scientific libraries of research universities source: (developed by the author) baltic journal of economic studies 219 vol. 4, no. 2, 2018 of franchisees and a detailed briefing on the procedures and conceptual framework for the provision of library services. thus, the franchisee has the ability to quickly resolve issues arising in the process of work. let’s depict a franchising model of the commercialization of services of scientific libraries of research universities, fig. 2. in fig. 2, an innovative business model based on digital franchising is proposed, and it is possible to effectively commercialize the services of scientific libraries of research universities. this model is based on the extensive use of the library funds of the main scientific library of the research university (franchisor) by building a wide network of digital services through franchising relations with a network of partners representing various institutions of public life. let’s characterize in detail the relations with these institutions, acting in the proposed model as a franchisee. 1. scientific libraries – small university libraries in cities, districts and towns that can act as a franchisee and provide digital services to users of their region by using the digital platform of the franchisor. it is quite clear that the main libraries of research universities should create a unique technology that will effectively aggregate information in a focus request and instantly distribute it in the necessary directions that were defined in the franchisee’s client request. 2. research centres are institutions that have in their structures many command and project associations and groups aimed at solving the scientific problems posed to them. ensuring the need for relevant, timely and objective information is an extremely important factor for the successful achievement of project objectives. such organizations can act as franchisees and implement a large-scale policy of franchiser expansion into new markets and client platforms. 3. public institutions – a set of institutions, where an adjacent service can be the satisfaction of information needs of people. for example, the “cafe-informant”, where the concept of the institution is the combination of high-quality food, comfortable space and aggregation of information on a specific topic in the visit to the institution. honestly speaking, there have not been such places yet, but the implementation of this concept of institutions is quite natural, given the intensification of people’s lives and the massive transition to digital space. 4. consulting companies – organizations that are responsible for a high-quality array of aggregated data, help to make decisions for company executives of various activities. it is quite feasible to introduce a model of digital franchising in such organizations and to enable them to use this concept to increase the efficiency of their own commercial activities and use a broad knowledge base. this model is based on the use of franchising by building a wide network of digital services that makes it possible to obtain the following effects from such activities: – social – the provision of highly developed intellectual persons to join consumption and the creation of scientific knowledge “without leaving home” and significantly saving time; – popularize scientific libraries and make it possible to use their funds not only for those who study and work in research universities but also for all who wish and have the scientific ability to create knowledge; – create a broad franchise business model for the provision of quality library services, thus creating jobs and giving a ready innovative model of work to selfemployed, qualified entrepreneurs. table 1 allowed showing the main differences between the traditional model of franchising relationships and the table 1 comparison of the traditional model of franchising and digital franchising № criterion traditional franchising model digital model of franchising 1 network construction costs significant, permanent moderate 2 interaction speed slow, limited by the distance and capabilities of communication tools instant, due to the full automation of business processes, maintenance, briefing and interaction 3 level of management flexibility low high 4 renewal slow, with high probability of adaptation of individual modules and procedures, regional features fast and at the same time all network partners 5 the possibility of expanding the network limited by material resources global, intercontinental 6 financial control complicated automatic reporting and control of all transactions of franchisees 7 brand management centralized slow centralized dynamic 8 rate of return moderate high 9 speed of informing about new services operational instant 10 the need for operational management in some cases absent source: developed by the author baltic journal of economic studies 220 vol. 4, no. 2, 2018 digital model, corresponds to the modern trend of the transition of many business processes and information flows into the digital space. in fact, the digital franchise model allows gaining more control over the franchisee and improving the efficiency of business processes by reducing administration time and reducing financial costs. thus, the proposed model of digital franchising will allow scientific libraries of research universities to enter the intercontinental space not “proceeding” from their walls. 5. conclusions summarizing studies of ways to commercialize the services of scientific libraries of research universities, let’s note that franchising in the sphere of culture is a dynamically developing phenomenon in europe and the world; therefore, it is expedient to experiment with its implementation in a timely, innovative, and prospective manner. the systematization of the main and secondary functions of research libraries of research universities has made it possible to identify the most important of them, which are the provision of information opportunities for the process of teaching and research. the new economic category “digital franchising” is offered, the classification of franchising, based on the organization of the franchising system, with a new kind, is complemented by the modern and future forms of partnership, taking into account the rapid development of the digital space. comparison of traditional and digital models of franchising allows showing differences on the ten main criteria: the costs of building a network; speed of interaction; level of managerial flexibility; updating of the system; the possibility of expanding the network; financial control; brand management; rate of return; the speed of information about new services; need for operational management. the revealed discrepancies are mainly characterized by different time frames for implementing managerial decisions and excellent approaches to the formation and use of the necessary financial and organizational resources. an innovative franchise model has been developed; it is possible to effectively commercialize the services of scientific libraries of research universities and is called upon to realize the critical need for changes in approaches to the management of scientific libraries of research universities. the introduction of this marketing tool by talented managers with an entrepreneurial type of thinking will become a source of financial autonomy for the scientific libraries of the research universities they manage. digital expansion in a strategic perspective will absorb all the major information flows that affect the development of the world. libraries of research universities, as key centres for aggregation and translation of scientific information and knowledge, should be ready for such a scenario and already experiment with new tools for the future, which is digital franchising. references: baldwin, j., yan, b.: market expansion and productivity growth: do new domestic markets matter as much as new international markets? journal of economics & management strategy, 21, 469-491 (2012). doi:10.1111/ j.1530-9134.2012.00330.x basamygina, i.n., apanasenko, a.a.: marketing kak tekhnologiya upravleniya sovremennoy bibliotekoy: nauchnoprakticheskoe posobie [marketing as a technology management modern library: a scientific and practical guide], moscow: litera, 128 (2009). 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(in ukrainian) doi: https://doi.org/10.17721/1728-2667.2017/194-5/5 soni, b.k., trivedi, j.: franchising in india: a study of the relationship between the franchisor and the franchisee. asbm journal of management, 9 (1), 57-69 (2016). stanford, a.o.: franchising opportunities and threats in singapore. international journal of business, marketing, & decision science, 9 (1), 116-127 (2016). baltic journal of economic studies 371 vol. 4, no. 5, 2018 corresponding author: 1 national metallurgical academy of ukraine, ukraine. e-mail: faizova4444@gmail.com 2 national mining university, ukraine. e-mail: ma_riva@ukr.net 3 ukrainian state university of chemical technology, ukraine. e-mail: lowleyhome@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-371-378 prospects for improving the methodology of strategic enterprise management svitlana faizova1, marina ivanova2, tetiana pozhuieva3 abstract. the prospects and directions of improvement of the methodology for strategic enterprise management have been highlighted. the subject of the research is theoretical and methodological aspects of creating a strategic enterprise management system based on the concept of a balanced scorecard (bsc). it has been revealed that in the context of changing the concept of the enterprise strategic development toward the growth of its intellectual capital as the main factor of competitiveness, the evolution of the enterprise management and planning system from strategic enterprise management to balanced enterprise management is taking place. the balanced scorecard has been defined as the basic concept of balanced enterprise management. the purpose of the study is to outline the prospects and directions for improving the methodology of strategic enterprise management under the conditions of its evolution into balanced enterprise management. results. on the basis of a mathematical representation of the sphere of strategic responsibility (ssr) of the enterprise as an organizational and infrastructural environment for balanced enterprise management, it has been proved that the interaction of the ssr content components results in a synergistic effect of its expansion. this, in turn, determines the necessity and possibility of distributing the company’s ssr beyond its management and involving the initiative owners in the process of balanced enterprise management. accordingly, the prospects for improvement of the strategic enterprise management methodology have been defined as an integration of strategic management systems, approaches, methods and the bsc with non-traditional eventological methods combined with the analytic hierarchy process. it has been proved that, from the standpoint of the eventology, subjective observations and the mathematical apparatus of the theory of random events allow identification of general statistical regularities of the probabilistic set distribution in various, including management, systems. from the standpoint of a balanced approach, the need for enriching the methodology of the bsc as a system of balanced enterprise management, using the eventological analysis, is being boosted by the need to take into account the growing number of random, multi-directional and seemingly unrelated factors in the management process. methodology. the following research methods were used in the study: the expert assessment method, factor analysis – for the formation of the management panel of the bsc; the eventological scoring and analytic hierarchy process – for balancing and structuring key performance indicators (kpi), economic and mathematical methods – to analyse the ssrs of the enterprise as an organizational and infrastructural environment for balanced enterprise management; a critical analysis – to compare alternative approaches to the formation of the bsc. value/originality. to achieve the purpose of the study, the bsc methodology has been presented as a system of balanced enterprise management. a methodical approach to balancing and structuring kpis, using the results of eventological analysis and analytic hierarchy process, has been proposed. its practical implications include the possibility of reaching the target balance of indicators taking into account weighing coefficients of the main indicator selection criteria, the possibility to determine the whole system balance index as the average of the balance indices of each of the indicators that characterize the enterprise performance. the ways of implementing the methods of e-scoring and analytic hierarchy process for the assessment and correction of the enterprise’s strategy have been studied. integration of e-scoring with the strategic enterprise management method and the bsc methodology provides an effective vertical communication as the basic principle of balanced enterprise management, which extends the scope of strategic responsibility to subordinate initiative owners. key words: strategic enterprise management, balanced scorecard, balanced scorecard methodology, methodology of eventological analysis, analytic hierarchy process. jel classification: m10, м41, b41, b49, c13 baltic journal of economic studies 372 vol. 4, no. 5, 2018 1. introduction with the advances of the economy, enterprises are changing the marketing orientation of their strategy toward the growth of their intellectual capital as the main factor of competitiveness. as a consequence, the strategic enterprise management is being increasingly focused on the management of intangible assets, and strategic enterprise management is going up to a qualitatively new level of development, i.e. to the level of balanced strategic management. unlike strategic enterprise management as a system for developing and implementing a strategy in the interests of owners, management and clients, balanced management will be a system of managing a strategy for increasing the company’s value from the standpoint of all groups of economic and managerial influence, through balancing all the aspects of the enterprise’s activities. the basic concept of balanced enterprise management is the balanced scorecard (bsc). alongside the change in the concept of strategic development, the bsc is being transformed from the strategic enterprise management tool into an integrated system of strategic enterprise management as a more complex economic system. certain signs of such tendency have been noticed by both foreign (ashworth, 2006; martin, 2006) and domestic researchers (ivakina, 2007). however, the existing studies deal mainly with subproblems of the evolution of the bsc-based strategic enterprise management, considering the bsc in a limited methodological format. methodological aspects of forming a management panel of the company’s metrics and self-diagnostics of the company’s strategic potential as a necessary condition for the effective formation of its balanced management are imperfect and lack research. the development of methodological principles of the bsc in the process of formation of balanced enterprise management, integration of methodical approaches and tools of strategic enterprise management and the bsc, their enrichment with non-traditional methods are in focus. accordingly, the purpose of the study is to generalize and develop scientific and methodological foundations, to develop a methodology for strategic enterprise management under the conditions of its evolution into balanced enterprise management, to outline the prospects and directions of its improvement. this involves considering the following issues: analysis of preconditions for the integration of the strategic management systems, approaches, methods and the bsc with non-traditional eventological approaches combined with analytic hierarchy process (ahp); definition of the bsc methodology as a balanced enterprise management system; analysis of the methodical foundations for the formation of a management panel of indicators using the methods of e-scoring and analytic hierarchy process; justifying their possible applications for the assessment and correction of the company’s strategy. 2. preconditions for integrating the methodology of the eventological analysis with the methodology of balanced enterprise management the formation of balanced enterprise management implies the creation of an appropriate organizational and infrastructural environment, which we define as a sphere of strategic responsibility (ssr). the coordinate area of the ssr is represented in figure 1 in a threedimensional coordinate system, where the mission, vision and strategy of the enterprise are the centre of the ssr; x is strategic goals; y is strategic competencies, that is, directions of activity, strategically important for the enterprise and corresponding to its csfs (critical success factors) / kpi (key performance indicators); z is strategic resources, tangible and intangible, including tools for the strategic enterprise management. the sphere of strategic responsibility of radius r with the centre at the origin can be mathematically represented as the second-order equation: x2+у2+z2=r2. (1) z r mission, vision, values • x y figure 1. coordinate area of the sphere of strategic responsibility baltic journal of economic studies 373 vol. 4, no. 5, 2018 then the area of the ssr will be sссв=4π r2=4π [(х–х0)2 + (у–у0)2 + (z–z0)2], (2) where (х0 у0 z0) are the coordinates of the centre of the sphere of strategic responsibility. consequently, the interaction of the content components of ssr results in a synergistic effect of the expansion of the enterprise’s ssr (with a coefficient 4π) (zhilin, 2004). the resulting effect is amplified by a more complicated strategic management system, according to higher strategic goals, enhanced resources and competencies. this, in turn, determines the necessity and possibility of expanding the company’s ssr beyond its management and involving the subordinate initiative owners in the process of balanced enterprise management. the search for appropriate mechanisms, including non-traditional ones, such as the procedure/methodology of eventological scoring (e-scoring), is becoming an urgent issue. eventology is a scientific concept of the influence of events on the mind and matter; it reveals general and eventual patterns inherent in the mind and matter in all event manifestations and properties (vorobyev, 2006). from the standpoint of eventology, subjective observations and the mathematical apparatus of the theory of random events allow identifying the general statistical regularities in the distribution of the probabilistic set in various systems, including management systems. examples of the use of eventological methods in management are: evaluating the creditworthiness of borrowers in the banking system, optimization of securities portfolio risks, customer assessment in the system of retail and wholesale trade. the existing practice of using eventological methods to give numerical values to nonfinancial indicators and metrics of unidentified intangible assets (yerokhina, 2013; satsuk, 2010) should be extended to: selection, structuring and balancing of kpis; selfdiagnostics of the strategic potential of the enterprise in the process of monitoring the achievability of the strategy and its relevant corrections. from the standpoint of the balanced approach, the need to enrich the bsc methodology by the methods of eventological analysis is boosted by the need to take into account the growing number of random, diverse and seemingly unrelated factors in the process of managing. 3. bsc methodology as a balanced enterprise management system the structural-logical model of the bsc methodology as a system of balanced enterprise management is represented in figure 2. the methodology of the bsc as a balanced enterprise management system combines techniques and technologies of interrelated structural elements of the strategy management: from defining the strategy to detecting its “bottlenecks” through monitoring the level of managerial excellence, with a subsequent self-assessment diagnostics of the enterprise’s strategic potential and assessing its adequacy for the implementation of the strategic management improvement script, followed by relevant corrections of the strategy and balanced scorecard. 4. formation of the management panel of indicators using the methods of e-scoring and analytic hierarchy process we consider the methodology of the bsc (balanced enterprise management system based on the bsc) as a system involving: traditional methods and technologies of the bsc (cascading, decomposition, etc.); traditional methods and technologies of strategic enterprise management (managerial, financial and economic diagnostics, script analysis, brainstorming, etc.); and non-traditional methods of eventological analysis and analytic hierarchy process. the core stage in creating a managerial panel of enterprise indicators is the selection, structuring and balancing of the kpis. the list of the main criteria for selecting the kpis for the management panel (strategic orientation and efficiency, functionality, balance of interests of the subjects of management, the possibility of cascading, ease of calculation, motivation and profitability) is subordinated to the task of their cobalancing, ranking them in importance and determining their interdependence to create the top-management panel using the methods of e-scoring and analytic hierarchy process. the ізз indicator balance index is used for a quantitative evaluation of the balance; it is calculated by the method of e-scoring as a conditional probability of the target event s – “the strategic indicator is generally balanced with the management panel indicators” in the conditions of the occurrence of a certain combination of the questionnaire events. e-scoring allows integral evaluation of a targeted event occurrence on the basis of a probabilistic distribution set of the questionnaire questions (vorobyov, 2004; vorobyev, goldenok, 2003; sherykalova, 2010). according to the existing method, if the estimate of the probability of the event under consideration is performed within the framework of a probability space: (ω, f, p) with the algebra: f of events measured and probability: p, then all the set of events: x being analysed will be considered as measured relative to algebra f, i.e.: x f⊂ ; ω is the space of elementary target events. according to the method of e-scoring, the basic difference between the questionnaires for the target group of experts in comparison with the experts’ evaluation is the formulation of a questionnaire containing closed questions and binary responses. the purpose of the survey is to assess the probability of the target event. events are divided into two groups: elementary events: хі ⊆ ω are events formulated in the questionnaire questions, and questionnaire events: £ ⊆ ω – events that are modelled by respondents in the process of their answers to the questionnaire. using the questionnaire survey, one can estimate the probability of the occurrence of the target event s based on the relationship between the elementary event: хі ⊆ ω and the questionnaire event: £ ⊆ ω. a set baltic journal of economic studies 374 vol. 4, no. 5, 2018 technologies of the bsc (cascading, decomposition, etc.); traditional methods and technologies of strategic enterprise management (managerial, financial and economic diagnostics, script analysis, brainstorming, etc.); and non-traditional methods of eventological analysis and analytic hierarchy process. management diagnostics financial and economic diagnostics swot-analysis assessment of compatibility and innovation by bsc experts’ assessment script analysis matrix analysis factor analysis statistical observations experts’ assessment brainstorming strategy decomposition construction of strategy maps e-scoring, ahp e-scoring, ahp cascading decomposition construction of individual strategic maps expert evaluation ranking quality of strategic management by bsc defining the integral indicator of management efficiency statistical observations comparative method analytical method script analysis e-scoring, ahp strategy formalization monitoring the level of strategic managementbsc implementation control bsc startup specification strategy visualization formation of csfs selection, structuring and balancing of the крі constructing the managerial panels of indicators for company’s units and initiative owners selecting a bsc template defining the calculation algorithm and specifying the kpi numerical value strategic management assessment monitoring the level of strategic management bsc assessment strategy correction developing a strategic management improvement script forecast correction of bsc self-diagnostics of strategic potential bsc correction defining and structuring the sphere of strategic responsibility strategy defining strategy development figure 2. structural-logical model of the methodology of the bsc as a system of balanced enterprise management of experts evaluating the state of the research object is m = {η, λ, ..., υ}. in accordance with the e-scoring method, the set x is considered as the set of elementary probable events, in which each question of the questionnaire about the factor: хі (i = 1,...,n) can be represented as хi={х1, х2,..,хn}, where the k-th variant is the answer to the question хі, which represents a certain level of the value of the factors: хі (k=1,...,рi). in this case, events with a fixed baltic journal of economic studies 375 vol. 4, no. 5, 2018 k can have a different structure of dependence, therefore, the set {х1,х2,....,хn} also has a certain structure of dependence. statistical processing of the questionnaires gives the frequencies: p(j,0) and p(j,1) of the experts’ giving positive or negative answers, respectively, to j-th question (statistical probability of a specific elementary event). for statistical processing and subsequent interpretation of the survey results according to majority rule, the method of e-scoring analysis uses the parameter: α = 0.5 (if the frequency of the experts’ positive answers to a question of the e-scoring questionnaire is higher than or equal to 0,5, then the experts’ response is considered to favour the target event and vice versa). the e-scoring technique imparts a positive weight: ω( )s x∩ ≥ 0 and ω( )s xc ∩ ≥ 0 to the elementary event х, both favourable and unfavourable for the event s. a probable interpretation of this weight takes the following form: ω( ) ( ) ( ) ( )s x p s x p s x p x∩ ≈ ∩ = , (3) ω( ) ( ) ( ) ( )s x p s x p s x p xc c c∩ ≈ ∩ = (4) to define ізз, the tool apparatus of e-scoring is used: a formula for calculating the conditional probability of the target event s in the occurrence of a specific combination of the questionnaire events, modelled by experts in the process of their answering the questionnaire. in this case, the event takes into account the features of the 3 possible eventological structures of the elementary events (formulated in the questions of the questionnaire): least intersecting, independent and embedded. thus, the conditional probability: p s t xs ∪( )( ) is calculated for the target event s in the occurrence of a specific combination of questionnaire events interpreted as a terrace event: t(x)⊆ω for alternative eventological structures of the elementary events. for the least intersecting events, the calculation is carried out according to the formula: p s t x s x s x s x s x x x x c x x c ∪ ∈ ∈ ∈ ( ) = ∩ ∩ + ∩ ∑ ∑ ∑ ( ) ( ) ( ) ( ) ω ω ω , (5) where ω is the space of elementary target events s; x is a set of selected factors characterizing the state of the object of analysis and represented in the questionnaire; x is a set of basic criteria of balance, which are reflected in the questionnaire; ω(sx) is the results of the interpretation of questionnaire events-answers as positive responses, contributing to the target event; ω(sсx) is the results of the interpretation of questionnaire events-responses as negative; сs is a complement to the target event s. hence, ignoring the level of importance of the selection criteria, index of the balance of each bsc indicator: із is: із = p s t xs ∪( )( ) . (6) the proposed questionnaire for an e-scoring analysis of the kpi balance in a value-oriented enterprise is presented in table 1. in order to obtain a more objective assessment of the level of balance of each of the indicators to be included in the bsc, the calculation of ізз uses weighing coefficients (rзі), which measure the importance of the kpi selection criteria on the basis of the ahp mathematical tools. there are x criteria that justify the selection of indicators to the bsc, and each criterion has a different level of importance. experts should compare the criteria pairwise using the scale of preference (table 2). the pairwise comparison of the importance of criteria to be used for the selection of indicators to the bsc produces an inverse-symmetric matrix a, which has the form: a a a a a a a j j i i = 1 1 1 12 1 21 2 1 2 ... ... ... ... ... ... ... , (7) where aij is the criterion degree of preference, defined using the scale of preferences. note that: аji = 1 / aij. the expert-generated matrix of pairwise comparisons a is the basis for the calculation of the corrected matrix ас, whose elements are calculated by the formula: c a a ij ij ij i k = = ∑ 1 . (8) table 1 questionnaire for e-scoring analysis of kpi balance question х main criteria for selection of indicator elementary events (хі ⊆ ω) – events, formulated in the questions of the questionnaire 1 strategic orientation and efficiency is it possible to assess the degree of implementing the enterprise’s strategy using the indicator? 2 functionality can a strategic initiative owner really influence the results of using the company’s potential or activation of its growth potential by reaching the indicator metric? 3 balance of interests does reaching the indicator metric increase the enterprise’s value in the opinion of different consumers of information? 4 possibility of cascading does achieving the indicator affect the performance of other levels of management and other owners of strategic initiatives? 5 ease of calculation does the initiative owner understand the algorithm of calculating the indicator or the way of making a specific decision based on a text description of the indicator? 6 degree of motivation does the indicator serve to achieve strategic goals? х7 economy does the enterprise have an information base for calculating the indicator? baltic journal of economic studies 376 vol. 4, no. 5, 2018 the data of the matrix ас are used to define a vector of weighing coefficients of the criteria for selecting indicators for the balanced scorecard rj: r r r rj = 1 2 .... (9) each of the weighting coefficients is calculated according to the formula: r c k çj ij j k = = ∑ 1 , (10) where k is the number of criteria to be used for the selection of indicators to the balanced scorecard. thus, vector r determines the importance of each criterion used to justify the selection of an indicator to the bsc. in order to verify the correctness of the matrix a design and subsequent calculations, it is necessary to determine the consistency ratio (saati, 1993): âï і і ï â = , (11) where іп is consistency index; ів is random index. the random index depends on the number of criteria used for the selection of indicators to the balanced scorecard. the consistency index is calculated according to the formula (saati, 1993): і ïï k k ï = − − 1 , (12) where пп is a consistency estimator, which is defined by the expression: ïï a rij çj i n j k = × == ∑∑ 11 . (13) if the consistency ratio is less than 0,1, then the matrix is formed correctly and further calculations will be reliable. taking into account the degrees of importance of the criteria used for the selection of indicators, the balance index in the bsc for each of them will be calculated according to the formula (in a situation of least intersecting elementary events): içç s x r s x r s x r x x çi çi x x c çi x x c = ∩ ∩ + ∩ ∈ ∈ ∈ ∑ ∑ ∑ ω ω ω ( ) ( ) ( ) . (14) similarly, the formula for calculating із is modified, and the corresponding balance index ізз for other eventological structures is defined. the calculated ізз allows assessing the level of balance of each indicator (close to or greater than: α = 0,5) and the validity of its inclusion in the bsc: high balance (ізз ≥ 0,7), average balance (0,5 ≤ ізз < 0,7) and low balance (ізз < 0,5). it is also possible to determine the highest priority indicators and lagging metrics. the balance index of the entire system of indicators, which takes into account the degree of importance of each criterion to be used for the selection, will be: iç içç n çàã i i n = = ∑ 1 , (15) where n is the number of indicators selected for the bsc using the main selection criteria, i = 1, 2 ... n. 5. self-diagnostics of strategic potential of the enterprise by the e-scoring method a prerequisite for the effective formation of balanced enterprise management is the adequate level of strategic potential of the company, its intellectual capital as the main source of growth of its market value. the existing level of strategic potential may be quite sufficient for implementing one type of valueoriented strategy but insufficient for another. this requires self-diagnostics of the company ’s strategic potential. unlike controlling, self-diagnostics involves the staff, each employee of the enterprise in the process of strategy management based on the proposed methodological approach to assessing the strategic potential of the enterprise, which includes defining an intellectual potential index that takes into account the level of importance of the criteria used to assess the strategic potential through a combination of eventological scoring methods and analytic hierarchy process. the questions in the proposed questionnaire for e-scoring analysis of the company’s strategic potential (table 3) cover various aspects of the qualitative level of intellectual capital of the enterprise as the basis of its strategic potential. table 2 the scale of preferences for the criteria of indicator selection degree of preference score in points explanation equally preferred 1 the two criteria are rated equally important for the selection of indicators for the balanced scorecard. moderately preferred 3 there is a slight preference of the first criterion to the other in selecting indicators for the balanced scorecard. medium preference 5 the importance of the first criterion has a medium advantage over the other. strongly preferred 7 the importance of the first criterion significantly exceeds the importance of the other. absolutely preferred 9 the first criterion in terms of importance is absolutely preferred to the other. intermediate values 2, 4, 6, 8 applied, if a compromise solution is needed to determine the importance of a criterion. baltic journal of economic studies 377 vol. 4, no. 5, 2018 the assessment is carried out by designated respondents, who are experts from the production and management units of the enterprise. the conditional probability of the occurrence of the elementary event s is estimated: “the necessity and possibility of establishing balanced enterprise management,” i.e., the integration of bsc into the system of strategic enterprise management. elementary events хі ⊆ ω, which are the events formulated in the questionnaire, are grouped according to the structure of intellectual capital of the enterprise as the basis of its strategic potential. calculation of the conditional probability of the target event s in the situation of the least intersecting elementary events allows determining the index of intellectual potential ііп, which takes into account the importance of the assessment criteria by the formula: ііï = ∩ ∩ + ∩ ∈ ∈ ∈ ∑ ∑ ∑ ω ω ω ( ) ( ) ( ) s x r s x r s x r x x çi çi x x c çi x x c , (16) where rзі is the weighing coefficient or the degree of importance of the i-th criterion for assessing the intellectual capital of the enterprise according to its characteristics/structural components; і=1,2…50. the strategic potential of the enterprise is considered sufficient for the implementation of balanced enterprise management if in the index of intellectual potential is within the interval: ііп = {0,5; 1}. according to the proposed bsc methodology, selfdiagnostics of the company’s strategic potential, based on a combination of methods of e-scoring and ahp allows identifying the main problems and factors of increasing the value/level of the analysed object, which is done through analysing the questionnaire events (responses) interpreted as those that do not contribute to the occurrence of the target event – the desired level of enterprise management. 6. conclusions the bsc methodology as a balanced enterprise management system combines the techniques and technologies of interrelated structural elements of strategy management: from defining the strategy to identifying its “bottlenecks” through the procedure for monitoring the level of management excellence, the subsequent self-diagnostics of the enterprise’s strategic potential and assessing its adequacy for implementation the strategic management improvement script, followed by the relevant corrections of the strategy and balanced scorecard. integration of e-scoring with the bsc method ensures the effective functioning of vertical communication as the basic principle of balanced enterprise management, extending the scope of strategic responsibility to subordinate owners of initiatives. the proposed methodical approach to balancing and structuring the kpis, based on the results of eventological analysis and analytic hierarchy process, table 3 questionnaire for e-scoring analysis of self-diagnostics of intellectual potential of enterprise (fragment) хі elementary event хі ⊆ ω management capital х1 indicators of annual budgets are real and aimed at achieving operational financial goals х2 we feel the effectiveness of managerial decisions х3 we know our competitive advantages х4 our operational activities are subject to the achievement of strategic goals х5 the organizational structure of the management allows prompt response to changes in the internal and external environment х6 regular analysis of the implementation of the plans is carried out х7 we appreciate the management style of senior officers х8 the management of the enterprise has the necessary level of professionalism and creativity х9 the enterprise has many levels of management that slow down the timely and reliable communication of information to the lower levels of management. х10 we respond promptly to the problems faced by customers х11 we thoroughly analyse the results of the implementation of current plans throughout the year х12 we have a clear understanding of our place in the enterprise management system х13 we set only real goals for ourselves х14 plans of our management are always co-balanced х15 our material remuneration depends on the achievement of strategic goals information capital хі (i = 16,...,25) х16 the information system of the enterprise is only focused on accounting, and not on an individual information consumer human capital хі (i = 26,...,40) х26 we are aware of real opportunities to show our skills and abilities and make a good career organizational capital хі (i = 41,...,50) х41 achievement of strategic goals is our priority baltic journal of economic studies 378 vol. 4, no. 5, 2018 enables achieving the established level of the balance of indicators taking into account the weighting factors of the major selection criteria; it allows determining the balance index of the whole system as the average of the balance indices of each of the indicators characterizing the enterprise performance. the extension of the subject field of the eventological analysis and analytic hierarchy process to the assessment of the company’s strategic potential makes it possible to turn bsc into a “working model” for managing the enterprise strategy. references: ashworth, g., dzhejms, p. (2006). menedzhment, osnovannyj na cennosti: kak obespechit cennost dlja akcionerov [value-based management: how to provide value to shareholders]. moscow: infra-m. (in russian) ivakina, i. (2007). zbalansovana systema pokaznykiv [balanced scorecard]. kharkiv: faktor. (in ukrainian) martin, dzhon d., petti, viljam dzh. (2006). vbm – upravleniye, osnovannoye na stoimosti. korporativnyy otvet revolyutsii aktsionerov [value based management: the corporate response to the shareholder revolution]. dnepropetrovsk: balans biznes buks. (in ukrainian) saati, t. (1993). prinyatiye resheniy. metod analiza iyerarkhiy [decision making with the analytic hierarchy process]. moscow: radio i svyaz. (in russian) satsuk, t. p. (2010). postroyeniye sistemy upravleniya finansami organizatsiy na osnove kontrollinga (na primere torgovykh setevykh kompaniy) [construction of a financial management system for organizations based on controlling (by an example of trading network companies)]. (phd thesis), sankt-peterburg. retrieved from: oldvak.ed.gov.ru/common/img/uploaded/files/.../2010/.../satsuktp.do sherykalova, m. i. (2010). metod eventologicheskogo skoringa dlya sluchaya nechetkogo sobytiya, interpretiruyushchego anketnoye [method of eventological scoring for the case of a fuzzy event that interprets the questionnaire]. krasnoyarsk: kgtei, sfu. vorobyov, o. yu. (2006). vvedeniye v eventologiyu: uchebnoye posobiye [introduction to the eventology: tutorial]. krasnoyarsk: ivm so ran, krasgu. (in russian) vorobyov, o. yu. (2004). eventologicheskiye struktury i eventologicheskiy skoring [eventological structures and eventological scoring]. e-zapiski fam seminara, 8, 73-113. krasnoyarsk: ivmsoran. (in russian) vorobyov, yu., goldenok, e. and others (2003). teoriya sluchaynykh sobytiy i eye primeneniye [theory of random events and its application]. krasnoyarsk: ivm so ran. (in russian) yerokhina, a. v. (2013). sozdaniye effektivnoy sistemy finansovogo kontrollinga v obshchestvakh s ogranichennoy otvetstvennostyu [creation of effective financial control system in limited liability companies]. (phd), sanktpeterburg. (in russian) zhilin, d. m. (2004). teoriya sistem [theory of systems]. moscow: urss. (in russian) baltic journal of economic studies 106 vol. 4, no. 2, 2018 corresponding author: 1 department of administrative and commercial law, zaporizhzhia national university. e-mail: t_deputy@ukr.net 2 department of administrative and commercial law, zaporizhzhia national university. e-mail: ssg777@ukr.net 3 department of administrative and commercial law, zaporizhzhia national university. e-mail: an_any@rambler.ru doi: https://doi.org/10.30525/2256-0742/2018-4-2-106-113 gifts for a public servant: whether it is worth to comply with the rules tetiana kolomoets1, semen stetsenko2, anna sharaia3 zaporizhzhia national university, ukraine abstract. the article substantiates the expediency to distinguish a kind of “gift relations in the public service” – “gift relations with the participation of close persons of a public servant.” the author draws attention to the specificity of the subjects of the relevant relations, which is a public servant (a person empowered to exercise the functions of the state or local self-government and “serve” for a public interest) and close persons of the public servant (persons connected with the public servant by means of family, friendly relations) a gift in these relations differs by peculiarity because it is oriented solely to the person of a public servant, and not to his professional activities, his special legal status. its presentation does not imply any influence on the “purity” of the professional activities of a public servant. in view of this, it is inappropriate to consider the normative consolidation of the appropriate “personal” (it is also called “private”, “ordinary”, “normal”) gift to requirements for cost, grounds, the periodicity of receiving. at the same time, despite the specifics of “gift relations with the participation of a public servant,” they cannot remain outside the regulatory framework. such regulation allows strengthening the foundations of determinacy in the “gift policy” of the state and eliminating the grounds for use of “gifts from close persons” as a means of “indirect” influence, including inappropriate, on the professional activities of public servants or concealment of unjust enrichment of the latter. the author justifies the inappropriate use of prohibitions and restrictions in the regulation of appropriate kind of “gift relations in the public service.” instead, the introduction of an obligatory annual declaration where public servants point all gifts, including “personal” ones, indicating donor’s personality, the nature of the relationship with him, the market value of the gift. a similar obligation is proposed to provide for close persons of a public servant (first of all, family members as well as close persons who live together with a public servant) in order to strengthen the principles of transparency of “gift relations with the participation of close persons of a public servant,” confirmation of the history of relationship, funds sources for gift’s presentation (the indication of funds sources for the gift is mandatory for this group of persons). for the effective use of the declaration, proposals are formulated to unify the provisions of anti-corruption, tax and tort legislation in the aspect of compliance with the requirements for obtainment of gifts by public servants from their relatives. key words: close persons, public service, public servant, gift, corruption, declaration, rules, gift receiving. jel classification: k00, k11, k19 1. introduction in the context of active search by the interested public, subjects of public administration of effective means of corruption prevention in the public service, increasingly the attention is focused on ones, the resources of which traditionally have been undervalued. “gift prohibitions”, “gift restrictions” occupy pride of place among them. however, it should be noted that, first of all, they are oriented to public servants and rightly so. they are empowered to implement the functions of the state and local self-government related to prohibition or restriction of gifts reception as means of influence on professional activity and should be oriented to such persons. despite the relatively small, in cost nature, “influence power” of a gift on the professional activities of a public servant, it is not possible to evaluate it in the scale of public service as a whole. due to the active use of the gift resource, it possible to achieve a significant influence on “purity” of the public service, which, in turn, will contribute to the growth and diversification of corruption in all its manifestations. it is that requires formation of the legislation that is a baltic journal of economic studies 107 vol. 4, no. 2, 2018 perfect in content and effective in the application and which would regulate the principles of “gift policy in the public service” in all possible external forms of its manifestation. despite the fact that in the legislation of a large number of countries of the world there are “gift prohibition”, “gift restrictions” related to public servants, the rules of conduct with various types of gifts, the principles of public liability for non-compliance with the relevant provisions, unfortunately, “gift relations” with the participation of relatives of public servants are regulated rather fragmentarily. practice also shows that such relations are quite common, and the possibilities (including inappropriate) of “gift influence” on a public servant in his professional activities through (or with the participation) his close persons is quite significant. for this reason, it is quite timely, logical, and justified to study the resource of “regulation of gift relations with the participation of close persons of a public servant” as an integral element of the modern “gift legal policy”, which will allow formulating certain “rules of the game”, the observance of which will eliminate the prerequisites for the use of a gift’s potential as a “means of unlawful influence” on a public servant separately and public service as a whole. regulatory fixation of the principles of the appropriate gift relations will contribute to effective counteraction to corruption in all its manifestations in the modern public service. all these facts lead to the formulation of the article purpose, which due to analysis of the resource of “gift relations in the public service with the participation of close persons of public servants” lies in the determination of the main guidelines of their regulatory control under the current conditions of activation of the prevention and counteraction of corruption in all its manifestations, thereby eliminated the “grey zone” that has been existing for a long time in the legal basis of such opposition and impedes the latter. 2. the issue of “gift relations” in the public service in the legislation of different countries of the world it is worth to start from the fact that in the legislation of many countries the issue of “gift relations” in the public service has found its sufficiently detailed regulation as at the level of separate legislative acts (as a rule, it has anticorruption content (for example, ukraine, georgia) and as codified tortious acts (for example, denmark, great britain, finland, france, germany), codified or other acts oriented to fix the ethical rules of conduct of public servants (for example, the usa, brazil, poland, greece, italy, ireland). the principles of “gift relations” with the participation of public servants are regulated sufficiently detailed in the predominant majority of the relevant acts, which make sense. as they are called, using their powers, to realize the functions of the state or local self-government, in accordance with them the rules of conduct are regulated and the non-observance of which, in turn, leads to the possibility of bringing public servants to legal responsibility. such an approach of the legislator is a logical as it is necessary to foresee the levers of prohibition, restriction on the activity of the person who, in the course of his professional activity, “serves the public interests.” in relation to the activity of such person, it is necessary to foresee elimination (or minimization) of corruption risks, negative influence on “purity” of his professional activity. as a result, it is possible to find provisions in the legislation of the countries of the world that prohibit the receiving of gifts by public servants directly related to their professional activities (for example, china, ukraine, russia, georgia, germany, france), determine the maximum cost of gifts that public servants can receive from other persons as a manifestation of honour, respect for their bona fide professional activity (for example, in singapore – fifty singapore dollars, in brazil – one hundred reals, in denmark – one hundred and thirty euros), regulate the handling rules with various kinds of gifts as a “contact model” and “contactless model” of relations (for example, standards of ethical conduct for employees of the executive branch, codified in 5 c.f.r , part 2635 as amended 76 fr 38547, the law of ukraine dated 14.10.2014 “on prevention of corruption” (art.  23, 24), the resolution of public ethics commission no. 3/00 (2000) on gifts to civil servants within the framework of the code of conduct for senior civil servants in the federal executive branch of brazil (certificate of intent no. 37 on 18.08.2000 and presidential decree on 21.08.2000), the grounds of different types of legal responsibility for failure to comply with the relevant provisions. in scientific professional sources, the attention is also focused on “gift relations in the public service” with an emphasis on the principles of behaviour of public servants, prohibitions, restrictions on their activities, grounds for their liability for unlawful acts. it is possible to highlight several directions of enhanced scientific analysis of the relevant issue: a) with an emphasis on the specifics of regulatory consolidation and the practice of applying in a particular state (for example, in brazil (vasileva, 2015), singapore (gladchenko, 2014), japan (kolyshkyna), russia (gafurova, 2015), ukraine (kolomoiets, 2018), slovenia (nysnvevich, 2016), indonesia (tolmachev, 2016) etc.; b) in the aspect of comparative legal analysis through the example of several states (zimneva, chumakova, 2015) or a significant number of states (kolomoiets, verlos, pyrozhkova, 2018); c) with the emphasizing of one or several problematic aspects of regulation (for example, the normative definition of a gift and its place in the contiguous conceptual series, the variety of gifts, the rules of gifts handling in different circumstances, the differentiation of principles of legal responsibility for breach of “gift rules”, etc. (bonsing, langsted, 2013). at the same time, despite baltic journal of economic studies 108 vol. 4, no. 2, 2018 the availability of relevant scientific and normative thematic sources, the issues related to the regulation of “gift relations with the participation of close persons of public servants”, unfortunately, are under-investigated and almost not regulated. hence, there are issues which differ in their relevance. whether public servants can receive gifts from their close ones? whether it is possible to use close persons for unlawful influence on a public servant by means of “gift relations”? whether a public servant uses “gift relations with close persons” as “external form” of concealing of corruption acts or acts connected with corruption? to answer these and concerned them the issue, it is necessary to analyse the resource of “gift relations of public servants with the participation of their close persons” taking into account the provisions of the legislation of different states designed to regulate these issues. 3. subjects of “gift relations of public servants with the participation of their close persons” first of all, it is necessary to focus on the subjects of these relations. such are the public servant and his close persons. in relation to the first one, his main decisive feature is a special legal status, which consists in the fact that this person is authorized by the subject of public administration to perform functions of the state or local self-government and for this reason is lodged by a certain amount of public authority that can be used in the process of his public activity, “service to the public interest”. legislations of different states use several terms to indicate the appropriate group of persons. the most widespread are “public servant”, “civil servant”, “official of local self-government”, “official”, etc. these terms form peculiar adjacent thematic terminology series. they are correlated with each other either as absolute synonyms or as adjacent synonyms of different volumes of regulatory notation. the legislator of each state establishes an official term and standard definition, which is the basis for the relevant legislation, to regulate “gift relations in the public service”. for example, in ukraine in special anti-corruption legislative act (the law of ukraine dated 14.10.2014 “on prevention of corruption”) the legislator, identifying the subjects covered by the relevant legislative act, offers their list (art. 3 of the law) which can be divided into five groups: a)  persons authorized to perform functions of the state or local self-government (they are still offered to be called “functionaries of the public sector”); b)  persons who, for the purposes of the relevant law, are equated with persons authorized to perform the above-mentioned functions (they are proposed to be conventionally called “quasi-functionaries of the public sector”); c) persons who are permanently or temporarily hold positions related to the implementation of organizational-management or administrative duties, or specifically authorized to perform such duties in legal entities of private law (so-called “functionaries of private sector”); d) candidates for post of elected positions, as well as candidates for headman post (“candidates for certain positions of functionaries of public sector”); e) other persons (so-called “non-functionaries”) (khavroniuk, 2018). at the same time, one article uses several terms as “civil servants”, “officials of local selfgovernment”, “servicemen”, etc., and their definition is fixed in other legislative acts (on civil service, service in local self-government bodies, diplomatic service, etc.). the analysis of the content of the latter allows separating the indication of the “public” nature of activity, empowerment, and service (therefrom “service”) to the public interest. georgian legislator chose somewhat different approach to the solution of this issue. thus, in the law of the republic of georgia dated 21.12.2016 “on the conflict of interests and corruption in public institution”, the basic term is “public servant”. and although, the legislator does not propose the very definition of a public servant in this legislative act, at the same time, it notes that for the purposes of this act, a public official is “public servants” introduced by the law of georgia “on public service” as well as persons engaged in activities in institutions that are equated with state ones. in addition, they are not persons performing auxiliary functions (auxiliary servants) (art. 2–1 of the law). at the same time, the legislator moves on and clarifies its position, indicating that public servants (accordingly for gift relations too) are considered civil servants, professional public officials (officials), persons who work in the public service under an administrative contract (art. 2–1 of this same law). in order to eliminate the grounds for free interpretation of the provisions of the legislation on this issue, the legislator, using the term “official” to denote the subjects of service (including gift) relations, proposes their list (art. 2 of the same law) (on the conflict of interests and corruption in public institution dated 21.12.2016 no 157. as we see, in spite of the use of various terminology to determine the subject of “gift relations”, it can be said that the term “public servant” is used as a generalized to the rest, and features that are inherent to the subject of “gift relations” are typical for the laws of any state, which allows asserting that this subject of “gift relations” is a special subject, a subject with a special legal status. in relation to another subject of the relationship, it should be noted the following. in the legislation of different countries, you can find different terms for its determination: “family members”, “close persons”, “close relatives”, etc. despite their relative external similarity, they should not be confused and it is necessary to focus on the one, who is detached by the legislator as another subject of “gift relations”. for example, in ukraine, these are “close people” (art. 23 of the law) and they should be clearly distinguished from “family members” (art.  1 of the same law). consequently, in ukraine, baltic journal of economic studies 109 vol. 4, no. 2, 2018 “close persons” are offered to be recognized as persons who can be divided into two groups: a) those who in any circumstances are considered as such (their list is given, beginning from “husband, wife, father, mother, and even to a person who is under guardianship or care); b)  those for the recognition of which as close persons there is necessity of three features, namely: joint residence, connection with a common life, the existence of mutual rights and responsibilities with mentioned person – a public servant. so, listing the first group of people, for some reason, it was forgotten about niece (nephew), uncle (aunt), groom (bride), greatgrandfather (great-grandfather), thereby arbitrarily drawing the degrees of kinship (khavroinuk, 2018). separating the second group of people, the legislator offers their features, the proof of which in practice is associated with significant difficulties, as evidenced by the generalization of the results of a trial of cases over non-compliance with restrictions on the receipt of gifts by public servants. under these conditions, the question arises, whether a public servant can get a gift from his friend or neighbour? it is impossible to attribute such persons to “close persons” according to the above-mentioned features, although such practice of presentation of “personal gifts”, “private gifts” is very common in different countries. the conditions of “gift relations” can be complicated – the receipt of gifts by a public servant from a person who carries out any activity in the sphere of realization of the functions of the state or local self-government by a public servant, if there is a long-lasting friendly relationship between the two persons. is it possible to receive gifts under such conditions? this person does not belong to the category of “close persons”, and at the same time “subordinate person” in the classical sense cannot be recognized as such. the legislation of georgia uses another term – “close relatives” (family members, lineal relatives, stepchildren, sisters, brothers, and stepchildren of parents and children of a person) (art. 4 of the georgian law). in addition, relatively “gift relations”, it is proposed to use the term “family members” (husband, wife, minor children, stepsons (stepdaughters) of a person, as well as persons who permanently reside with a person (art. 4 of the law). such an approach to the definition of the subjects of “gift relations in the public service” looks more considered as in the process of law enforcement it involves the concentration of attention either on family ties or on a joint permanent residence, eliminating the need to prove common life, etc. but nevertheless, the issue of a gift from a friend or a neighbour remains open. in this aspect, the us approach to the solution of this issue looks interesting, namely: among the whole variety of gifts, there are “gifts made on the basis of personal relationships”. that is, the legislator allows a public servant to receive a gift from a person with whom is “in family or friendly relationship, and not in relation to a position of service” (§ 2635. 204 standards of ethical conduct for employees of the executive branch, codified in 5 c.f.r , part 2635 as amended 76fr 38547). however, there must be evidence of “history of relationships”, the facts of payment of a gift by members of a family or friends of a public servant, etc. this type of gifts is also called “private gifts”, “personal gifts”, “normal gifts” due to their disconnection with the professional activities of a public servant, and vice versa, its direct connection with a person, his private life (bonsing, langsted, 2013). thus, to specify another subject of “gift relations in the public service”, despite the use of a large number of different terms, the emphasis is laid on its direct connection with the person of a public servant, his private life by means of the normative consolidation of the conditions of family, friendly relations, common, permanent residence, the existence of a common way of life, mutual rights, responsibilities, etc. connection with the professional activities of a public servant, a desire to influence in any way such activities, including its “purity”, should remain outside of attention for this subject. despite the variety of terms used to identify this subject of “gift relations”, it can be argued that there are conditionally two approaches of the legislator to resolve this issue. the first one is narrow, indicating a family relationship with a public official (prevalent use “family members”, “close relatives”, “family members”), and the second one is wide, indicating both family and other personal (person-related) ties (prevalent use of the term “close persons”, that is, persons “who are (stay) close, beside”). for the purposes of law enforcement, taking into account existing practices, it is expedient to use the term “close persons”, however, with the normative consolidation of all diversity of the manifestation of personal relations. this will allow eliminating “grey zone” in the terminology series of normative grounds for the definition of the subjects of “gift relations in the public service” and the dividing of so-called “personal” gifts as a separate kind of gifts. 4. specification of gifts in “gift relations with the participation of close persons of a public servant” it is important to find out what exactly can be considered as gifts in “gift relations with the participation of close persons of a public servant”. a generalized analysis of the legislation of different countries shows that the basic approach in the normative resolution of this issue is an enumeration of possible external forms of gift existence (however, the number of such forms and the sequence of their mention in the corresponding list differ). for example, a gift (it should be clearly noted that the official definition is also fixed either in a special anti-corruption legal act, or in an act that consolidates the principles of ethical conduct of public servants, or baltic journal of economic studies 110 vol. 4, no. 2, 2018 in another act, the content of which is “oriented” to regulate relations of public service) is recognized as “a reward that has the form of any material wealth with value sense (including money, fees, securities, debts relief, services, benefits, privileges, etc.)” (in singapore), “money reward, refraining from actions or other actions or things that may have money term, as well as services, payment of expenses on education, transportation, local travel, accommodation, meals in natural or in any other form” (in the us), “funds or other property, benefits, privileges, services, intangible assets that are provided free of charge or at below minimum market price” (in ukraine) (kolomoiets, 2018). thus, it is traced the legislator’s desire to enumerate as much as possible potential external forms of expression of a gift and to emphasize the presence of their value feature, which is also quite logical. the basic definition of “gift” is used for “gift relationship with the participation of close persons of a public servant” as well as for any other types of “gift relations in the public service”. however, it has already been noted the expediency of distinguishing a special kind of gift – “personal”, “private”, “ordinary”, which should be used in the analysis of “gift relations with the participation of close persons of a public servant.” this raises the question: if this is a special kind of gift, there should be its special features, which distinguish it from all variety of gifts. what are its specific features? taking into consideration the specifics of “gift relations with the participation of close persons of a public servant” in the aspect of their subjects, as already noted, one could argue that a gift in such relationships should be characterized by its exclusive personal (in relation to the person of a public servant) orientation, connection with relatives, friendly relations with the person provides it (offers). hence, it is quite logical to assume that the legislation should not consolidate any restrictions (indications at all) for this type of gifts regarding its value, grounds, the frequency of receipt, etc. otherwise, it contradicts the expediency of separation and hence the existence of such kind of gift that is directly related to a person, and not with his special legal status, professional activity, the sphere of activity, etc. the exclusively personal orientation of such a gift is directly connected with the grounds for its presentation (receipt), which also should be directly related to the personal life of a public servant, a history of the relationship with a close person who gives this gift. consequently, any events in the life of relevant subjects such as birthday, marriage, the anniversary of friendly relations, the birth of a child, etc., can serve as legal facts for the emergence of “gift relations with the participation of close persons of a public servant”. in practice, in general, there should be no difficulties associated with the attribution of a gift for a public servant from his close person to “personal” (“private”, “ordinary”). if the person who gives (offers) a gift to a public servant is his close person in accordance with the provisions of the current national legislation and this fact is confirmed by the history of their relations, there are reasons to consider it as “personal” (“private”, “ordinary”). there should not be any indications in the legislation relatively its correspondence to any visions of hospitality, historical or national traditions of gifts presentation, communicating, maintenance of friendly or family relationships, as this gift is not related to the professional activities of a public servant, his special legal status, it is not foreseen the possibility to use it for any (including unlawful) influence on the “purity” of his professional activities. there should not be any risks from such a gift for public service. at the same time, unfortunately, in the practice there are cases of the use of so-called “complicated gift relations with the participation of close persons of public servants”, when close persons of a public servant act as “mediators” in gift relations. that is why it is impossible to remain “gift relations with the participation of close persons of a public servant” without normative regulation. an analysis of the provisions of the legislation of different states suggests that in most cases, it is consolidated the provision that public servants are allowed to receive gifts from close persons. this is quite justifiable. however, there are no any restrictions relatively their quantity, cost, the frequency of receipt, correspondence of gifts with certain criteria of content, which again is quite justified. at the same time, the state should regulate the appropriate “gift relations” using other than prohibitions or restrictions, methods to eliminate the misuse of the resource of such relationships. 5. introduction of the obligation of annual declaring of gifts for a public servant the introduction of the obligation for a public servant to declare estate, including from relatives, gifts every year looks optimally. this practice has been quite widespread in different countries for a long time and has approved itself positively. for example, in latvia declaration of gifts is mandatory for all public servants, including both for those who hold election posts and parliamentarians, in germany, spain, and the united kingdom, the declaration of gifts is mandatory for those who hold political post and for members of parliament, while in hungary this obligation applies only to members of parliament. in poland, gifts are declared only by those who hold elective posts at the local level and political positions, while in france, parliamentarians declare all state gifts regardless of their value. (villoria, synnerström, bertok, 2010). it is important that the legislation should stipulate that gifts are subjected to the mandatory declaration, incl. received from relatives, whose value on the day of reception exceeds a certain clearly defined amount. the latter may equal to the value of the so-called “allowed” gifts for a public servant that can mediate his professional activities (in the uk – 140 pounds sterling, in russia – three thousand baltic journal of economic studies 111 vol. 4, no. 2, 2018 roubles, in singapore – fifty singapore dollars, in ukraine – one living wage for an able-bodied person at a one-time reception of a gift, etc.). it is important to consolidate the duty of a public servant to declare this gift, indicating its market value and the person who provided it. in addition, it should be clearly understood that the institute resource of the “declaration of gifts in the public sphere” should be used systematically: the law should have a unified approach to the determination of all, including “personal” (“private”, “normal”) gifts in the aspect of their value, the obligation to indicate the identity of the donor (in order to, in case of doubt, determine the sources funds for the corresponding gift). it is necessary to introduce the obligation of family members of public servants to declare incomes and expenses, including and in a part of the gifts given to a public servant, thereby eliminating the collision that exists to date in the legislation of most states on this issue (a public official, submitting a declaration, must also indicate the information of family members, although the latter are not obliged to do so and they are not legally responsible). the introduction of such practices will contribute to the clearness of “gift relationships with family members” regarding the reliance that this gift was purchased at their own expense. the same rules can be extended to close people who live together with a public servant and those who are “as close as possible” to the possibility of “indirect influence” on the professional activities of a public servant through a gift for him. implementation of a mandatory declaration by them, including gifts given to a public servant, will contribute to the certainty of the appropriate kind of “gift relations in the public service” (first of all, in terms of the legality of funds sources). as for the relatives as a whole, the introduction of total declaration in the country is possible only under certain conditions, taking into account the priorities of domestic policy, time limits, and therefore, in the long run, this is a very real mechanism for monitoring the “gift relations with the participation of close persons of public servant.” under such conditions, close persons will be obliged to declare the gifts given to a public servant, indicating the sources of funds for this. by this moment, it is logical to declare “personal” (“private, “ordinary”) gifts received from close friends annually by a public servant, indicating the person who provided the present, the market value of this gift. that, in turn, will provide an opportunity for anti-corruption actors and the interested public, if there are doubts, to concentrate their attention on the close person of a public servant in order to find out the reasons for the emergence of “gift relations”. it should be noted that in the legislation of some countries such provisions have already been consolidated (for example, georgia, singapore). thus, taking into account the specifics of the appropriate variety of “gift relations in the public service”, the optimal means of their regulation is the introduction of declaration of things by the subjects of these relations, with the simultaneous unification of the provisions of anti-corruption (in terms of regulation of “gift relations”) and tax legislation (declaration duty, value nature of the gift should be declared, indication of the donor’s person and the nature of the relationship with him/her, etc.), the introduction of legal liability for the breach of the obligation to declare, strengthened the guarantees of performance of duty, eliminating the grounds for the existence of “indirect gift relations with the participation of close persons of a public servant” (when such persons are actually used to conceal the receipt of “prohibited gifts”, which are directly related to professional activities of a public servant to influence the impartiality, bona fide of his professional activities). it is important to note that provisions of the tort law in the terms of identification of the principles of legal liability for failure to comply with the obligations by the subjects of “gift relations with the participation of close persons of a public servant” in general, regarding declarations must be consistent with the realities of time, anticipate such measures of responsibility that would be balanced with the nature of the commissioned unlawful act, would involve the achievement of the goal of prevention, education, and adequate punishment and would be effective in its application. 6. conclusions in the context of the search for the best means to prevent and combat corruption in all its manifestations, corruption offenses in the public sphere, it is important to define the legal principles of “gift relations in the public service”. among the diversity of “gift relations in the public service,” it should be distinguished a special kind – “gift relations with the participation of close persons of a public servant”. the latter are directly related to the receipt of “personal” (“private”, “ordinary”) gifts by public servants from persons with whom public servants are related by family, friendly relations, including for a long period of time. nevertheless, in order to eliminate the prerequisites for the illegal use of the resource of “personal” (“private”, “ordinary”) gifts, the law should consolidate the basic principles of regulation of relations associated with the receipt of gifts by public persons from close persons. it will allow avoiding so-called “indirect gift relations in the public service” associated with the use of close persons as “hidden links” in “gift relations”, aimed at influence on, including illegal, impartiality and honesty of the professional activities of a public servant, on the “purity” of the public service as a whole. in order to resolve this issue, it is considered important: a) the awareness that the subjects of the appropriate kind of “gift relations” are a public servant (a person with a special legal status who has a certain amount of authority to implement the functions of the state or local selfgovernment, “service” to the public interests) and close persons (persons connected with a public servant by baltic journal of economic studies 112 vol. 4, no. 2, 2018 family, friendly, including long-term relationships) that requires the regularization of the official terminological series and normative consolidation of definitions “close people”, “family members” (the first of which differs by generalized nature and covers other); b) the distinction among all diversity of gifts in the public service of the “personal” (“private”, “ordinary”) gift directly oriented to the person of a public servant without any connection with his professional activities, special legal status, possibility of any influence on the “purity” of his professional activities. it, in turn, makes it possible to use the existing norm of the definition “gift for a public servant” for the purpose of its distinguishing in terms of enumeration of possible external forms of its existence. at the same time, it is inappropriate to fix any features of its value, reasons, frequency of receipt, and compliance with certain notions related to this kind of the gift as it is contrary to the nature of “gift relations with the participation of close persons of a public servant”; c) it is impossible and inexpedient to regulate this kind of “gift relationship” by means of the use of any restrictions or prohibitions, at the same time, these relations cannot be outside the regulatory influence. in order to resolve this issue, it is possible to introduce a mandatory annual declaration by a public official of all received “personal” (“private”, “ordinary”) gifts with an indication of the person who provided them, the nature of the relationship with him, the market value of this gift. to strengthen control over compliance with the requirements for the legislation on the “purity” of public service, it is expedient to secure the normative consolidation of the obligatory declaration by family members and close persons of a public servant (who live together, and in the future, by all persons), and on gifts provided by them to a public servant with indication of the funds sources for it. all “personal” (“private”, “ordinary”) gifts should be declared, the cost of which exceeds the value nature of “permitted” gifts for the receipt by public servants related to the professional activity. in the context of unification of the provisions of the national anti-corruption, tax and tort (in terms of the principles and measures of liability for non-compliance with the mandatory annual declaration) legislation, it is possible to achieve a positive result in the effective use of the resource of “personal” (“private”, “ordinary”) gift for a public servant. references: vasileva, v.m. (2015) regulirovanie konflikta interesov na gosudarstvennoy sluzhbe: brazilskiy opyt (chast 2) [regulation of conflict of interests in public service: the brazilian experience (part 2)]. voprosy gosudarstvennogo i munitsipalnogo upravleniya, vol. 3, pp. 165–190. gladchenko, l.v. (2014) ob opyte singapura po protivodeystviyu korruptsii [on singapore’s experience in countering corruption]. problemy natsionalnoy strategi, no. 3 (24), pp. 126–138; astafyeva, e.m. (2016) borba s korruptsiey v singapure: strategiya i praktika [fight with corruption in singapore: strategy and practice]. aziya i afrika segodnya, vol. 1, pp. 52–59. kolyshkyna, s.s. korruptsionnye skandaly v yaponii na rubezhe xx – xxi vv. [corruption scandals in japan at the turn of the xx – xxi centuries.]. retrieved from: http://syberleninka.ru/article/u/ gafurova, a. kh. (2015) k voprosu o darenii predmetov roskoshi, kak izmenchivoy sostavlyayushchey etapov razvitiya obshchestva. osobennosti polucheniya podarkov gosudarstvennymi sluzhashchimi [on the issue of presentation of luxury goods as a volatile component of the stages of society development. peculiarities of gifts receipt by civil servants]. vestnik kgu imeni n.a. nekrasova. yuridicheskie nauki, no. 6, pp. 169–172. kolomoiets, t. o. (2018) obmezhennia shchodo oderzhannia podarunkiv osobamy, upovnovazhenymy na vykonannia funktsii derzhavy abo mistsevoho samovriaduvannia za zakonodavstvom ukrainy: naukovopraktychnyi komentar [restrictions on the reception of gifts by persons authorized to perform functions of the state or local self-government under the legislation of ukraine: scientific and practical commentary]. zaporizhzhia: publishing house “helvetica”, pp. 40. nysnvevich, yu.a. (2016) protivodeystvie korruptsii: fenomen slovenii [anti-corruption: the phenomenon of slovenia]. mezhdunarodnaya ekonomika i mezhdunarodnye otnosheniya, issue 60, vol. 3, pp. 36–48. tolmachev, n.a. (2016) borba s korruptsiey v indonezii na sovremennom etape [the fight against corruption in indonesia at the present stage]. problemy dalnego vostoka, no. 4, pp. 93–99. zimneva, s., chumakova, a. (2015) legal regulation of civil servants in russia and germany receiving gifts. russian law journal, vol. iii, issue 3, pp. 142–151. kolomoiets, t., verlos, n., pyrozhkova, y. (2018) gift for a public servant – a manifestation of respect, reward or a means of unlawful influence. baltic journal of economic studies. riga: publishing house “baltia”, vol. 4, no. 1, pp. 227–234. bonsing, s., langsted, l. (2013) gifs for public employees: an administrative and criminal law and criminal justice. undue, no. 21, pp. 163 – 184. khavroniuk, m.i. (ed.) (2018) naukovo-praktychnyi komentar zakonu ukrainy «pro zapobihannia koruptsii» [scientific and practical commentary of the law of ukraine “on prevention of corruption”], кyiv: vaite. o nesovmestimosti interesov i korruptsii v publichnykh uchrezhdeniyakh: zakon gruzii ot 21.12.2016 goda № 157 [on the conflict of interests and corruption in public services: the law of georgia dated 21.12. 2016 no 157] retrieved from: https://matsne.gov.ge/ru/document/download/33550/55/ru/pdf baltic journal of economic studies 113 vol. 4, no. 2, 2018 kolomoiets, t. o. (2018) obmezhennia shchodo oderzhannia podarunkiv osobamy, upovnovazhenymy na vykonannia funktsii derzhavy abo mistsevoho samovriaduvannia za zakonodavstvom ukrainy: naukovopraktychnyi komentar. [restrictions on the reception of gifts by persons authorized to perform functions of the state or local self-government under the legislation of ukraine: scientific and practical commentary]. zaporizhzhia: publishing house “helvetica”, pp. 40. villoria, m., synnerström, s., bertok, j (2010) etyka derzhavnoi sluzhby: zapobihannia konfliktu interesiv ta vymohy do zakonodavstva [ethics of the civil service: prevention of conflict of interests and requirements to legislation]. kyiv: centre for adaptation of the civil service to the standards of the european union, pp. 104. baltic journal of economic studies 82 vol. 4, no. 5, 2018 corresponding author: 1 national academy of internal affairs, ukraine. e-mail: alex0674682444@gmail.com 2 national university of ostroh academy, ukraine. 3 dnipropetrovsk district administrative court, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-82-86 specificity of remuneration for public servants oleksii drozd1, viktor kostiuk2, vasyl ilkov3 abstract. the aim of the article is to determine the specificities of the remuneration for public servants in ukraine. the subject of the study is the remuneration for public servants in ukraine. methodology. the study is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method enabled to interrogate the development of the institution of remuneration for public servants in ukraine. the comparative legal method enabled to compare doctrinal approaches to this issue. the system-structural method enabled to determine the elements of the remuneration for public servants. methods of analysis and synthesis helped study separate parts of this institute to formulate further conclusions about its most optimal functioning. the logic-semantic method was used to determine the content of the concept of “remuneration for public servants”. the normative-dogmatic method enabled to analyse the content of legal regulations of the domestic legislation on the issue. practical implications. the determination of the specificities of the remuneration for public servants in ukraine enabled to make recommendations for improving the remuneration system of this category of workers, as well as identify problematic issues that require further consideration and research. relevance/originality. the author’s definition of the concept of “remuneration for public servants” is proposed and the specific features of this institute, insufficiently studied before, are analysed. the article analyses the specificities of the remuneration for public servants. their list is determined and the content of each of them is disclosed. the specificities of the remuneration for public servants are substantiated in comparison with other categories of employees. key words: remuneration, public servants, public service, labour, working conditions. jel classification: m54, f66, j08 1. introduction the performance of a workforce depends on many factors, such as organizational (for example, the level of organization of labour in an enterprise, institution or organization), socio-economic (working conditions, material and social security), material and technical (the novelty of the technologies used in the work process), etc. along with the listed elements, primarily, ensuring the performance depends on the perfection of the system of remuneration, because remuneration is the main motivation of a person to work. in this context, public servants are no exception. public servants are a special category of employees because the effectiveness of the adoption of state management decisions and the state bodies’ responsibility and function execution depends directly on their official activity. for such persons to implement their official competence in a proper manner, material incentives for good and high-quality work are necessary. the system of remuneration for public servants, in contrast to other categories of citizens, is regulated by the rules of a special legal act, the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu, 2016), as well as decrees of the president of ukraine, resolutions of the cabinet of ministers of ukraine, etc. the specific nature of the remuneration for public servants, in addition to the specificities of the labour functions of such persons, is also predetermined by the need to increase the motivation of public servants and the interest of highly qualified specialists in entering the public service. the relevance of the study of the specifics of the remuneration for public servants is also predetermined by the fact that the public service is the corruptionrelated sphere. corruption is one of the most threating phenomena of the present day, which negatively affects public administration and reduces the efficiency of state authorities and local self-government. one of the main incentives for the development of public service personnel, as well as refraining from corruption, is the remuneration of labour at the appropriate rate enough to satisfy most needs of public servants. therefore, the issue of the specificity of the remuneration for public servants remains relevant for research. baltic journal of economic studies 83 vol. 4, no. 5, 2018 2. literature review in the scientific literature, many works are devoted to this issue. however, considering the recent adoption of the law of ukraine “on public service” as of december 10, 2015 (pro derzhavnu sluzhbu, 2016), as well as the fact that mostly, the remuneration for public servants is considered in certain aspects (for example, as a prevention of corruption as motivation, as an encouragement, or according to its constituents), the specificity of the remuneration for public servants have not been properly investigated nowadays. this theoretical institute is formed due to the contribution of the experts of the legal and economic sciences, such as m. o. bahmet, v. d. bondar, v. m. vehera, a. o. holovachova, m. s. ivanov, m. i. inshyn, m. r . kapinus, o. v. kuzmenko, i. h. pakhonova, o. a. sokolova, v. b. tyshchenko, v. s. furtatov, v. m. shchehortsov, and others. however, given the recent reform of the legislation on public service, an analysis of the current specificity of the remuneration for public servants is topical. 3. main material in their works, domestic scholars prefer to consider the remuneration as rewards, which the owner or an authorized body pays to an employee for the work performed, and which is simultaneously a means to motivate the worker to improve the performance and a way to meet his/her needs (holovachova, 2016). such a definition reveals that nowadays labour remuneration is a major incentive for workers to improve performance, as well as for professional development. in addition, the remuneration enables a person to maintain his/ her standard of living that satisfy basic needs or higher. therefore, in the context of the institution under consideration, analysis of this definition leads to the conclusion that the state remuneration system of public servants is a guarantee of the effective public service because in this way public servants are motivated to realize their own potential while performing their professional duties. in economic science, remuneration is considered as a complex multidimensional economic phenomenon, which reflects the interaction of many economic processes, as an important element of social reproduction and development of the market relations system, as well as a category, designed to ensure a decent standard of living (dorohan-pysarenko, 2014). in this study, the abovementioned concept is not suitable, because it contains a vaguely worded essence of the category under the study, such as “interaction of many economic processes.” therefore, the nature of remuneration remains unclear, as well as its preconditions or application. therefore, in our opinion, the interpretation of the essence and specificity of the remuneration for public servants due to such a definition is not appropriate. formulating the definition of the “remuneration for public servants,” the role of such persons in the functioning of state institutions should be considered, the state is obliged to provide a decent remuneration, both at the entry into office and throughout the official career. v. m. vehera argues that the rate of the pay depends on socio-economic capacities of the state, but such payments must ensure the constitutional right of everyone to an adequate standard of living for themselves and their families. the state creates for a person the conditions, under which he/she has the opportunity by the work to really provide vital functions for themselves and their families (vehera, 2015). therefore, in its essence, the remuneration for public servants must meet the following conditions: 1) the state must create all conditions for a person to exercise his/her right to work in the public service; 2) the total remuneration for public servants depends on the socio-economic capabilities of the state; 3) the state is obliged to ensure a decent remuneration for public servants, both at the time of entry into office and throughout the official career; 4) the rate of the remuneration for public servants should correspond to the specificity of their official competence and the importance of the functions performed; 5) the total remuneration for public servants must ensure the livings of the public servant and his family members. m. r . kapinus distinguishes the following specificities of the remuneration for public servants contrasting to other types of remuneration: 1) the salary of public servants must ensure an adequate standard of living for an employee and his family; 2) the salary of public servants should ensure attraction and retaining competent and highly-skilled staffs; 3) the salary of public servants should ensure the avoidance of corruption and increase the efficiency of the public service functioning (kapinus, 2005). each of these features is appropriate. first, as repeatedly noted, the main purpose of remuneration for any person is to ensure livings for him/her and members of his/her family. second, its rate must be competitive in the labour market because the public service needs qualified personnel. in addition, the attraction of high-quality personnel does not guarantee that such an employee will remain in service for a long period. third, the rate of the salary of a public servant should be sufficient to avoid corruption risks. the analysis of the provisions of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu, 2016) confirms the absence of the definition of “remuneration for public servants” in it. however, the analysis of the content of this legal act reveals that part 1 of article 50 states that the state provides an adequate remuneration for public servants for the professional performance of official duties, encourages them to perform in productive, effective, faithful and initiative manner. therefore, considering only specificity of the sphere, the following baltic journal of economic studies 84 vol. 4, no. 5, 2018 essential features of the remuneration for public servants can be distinguished: 1) the level of the pay should be adequate for the professional performance of official duties; 2) the remuneration for public servants should encourage them to work in a productive, effective, faithful and initiative manner. therefore, the remuneration for public servants is a remuneration, paid in conditions created by the state in accordance with its socio-economic capabilities, which is decent both at the time of entry into office and throughout the official career for the professional performance of official duties, corresponding to the specificity of the official competence and the importance of the functions performed by a public servant, designed to provide livelihoods of the public servant and his/ her family members, as well as the remuneration for public servants should encourage him/her to work in a productive, effective, faithful, and initiative manner and to avoid corruption. the review of the scientific literature reveals that the specificity criteria for the remuneration for public servants are not considered by domestic scientists. in a. a. sokolova’s work, the specificity of the remuneration for public servants is conveyed, according to the following criteria: 1) the subject of receiving, that is, a public servant; 2) the subject of implementation, that is, the state represented by its body; 3) the source of funds, that is, the state budget; 4) implemented in the order, at the rate and on the terms established by the legislation; 5) provided for the official activities of public servants; 6) made in the form of regular monetary payments (sokolova, 2016). in our opinion, most of these categories certify the specificity of the remuneration for public servants, however, according to the regulations of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu, 2016), in the remuneration for public servants, a number of really specific features remain unaddressed. firstly, according to part 2 of article 50 of the law, remuneration has a special structure, which is a salary, various allowances, recompenses and premiums. secondly, article 51 of the law provides for remuneration groups and a public servant salary scheme, which is also worthwhile disclosing as a specific feature of the remuneration for public servants. some of the features listed are inappropriate. for example, the feature “provided for the official activities of public servants” does not disclose the specificity of the remuneration for public servants, since the remuneration of all categories of workers is provided for labour (official) activities. the feature “made in the form of regular monetary payments” is also not suitable for the following reasons. firstly, article 94 of the labour code of ukraine (kodeks zakoniv pro pratsiu ukrainy) provides for that a salary is a remuneration, calculated in monetary terms as a rule. that is, the form of monetary payment is not a solely specific feature for the remuneration for public servants but extends to almost all types of employment relationships. secondly, in this context, it is more appropriate to distinguish the structure of the remuneration for public servants as a specific feature. therefore, the specificity of the remuneration for public servants is: 1) the subject of receiving remuneration is a public servant; 2) the subject of implementation of remuneration is the state represented by its body; 3) the source of funds is the state budget of ukraine; 4) in a special structure, containing the salary, various allowances, recompenses and bonuses; 5) in special remuneration groups and salary schemes of public servants. 1. the subject of receiving remuneration is a public servant. according to part 2 of article 1 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu, 2016), a public servant is a citizen of ukraine who holds public service position in a state authority, another state body, its staff (secretariat), receives salaries at the expense of the state budget and implements official powers established for this position, and directly related to the execution of the responsibilities and functions of this public body, and also adheres to the principles of public service. it should be noted that even the legislative definition emphasizes that public servants receive a salary for the performance of official duties. such persons are citizens who work in state authorities and local self-government and play an important role in solving the tasks of the ukrainian state. ensuring the fulfilment of these tasks also depends on the remuneration for public servants. consequently, the specificity of this feature is that remuneration can be made only in relation to one group of citizens, clearly defined in the law, that is, public servants. 2. the subject of implementation of remuneration is the state represented by its body. in part 2 of article 5 of the law of ukraine “on remuneration” no. 108/95-vr as of march 24, 1995 (pro oplatu pratsi), the subjects of remuneration organization include state authorities and local self-government bodies. in this context, “remuneration organization” means that total remuneration for public servants is determined at the state level. a specific public authority or local government, in which a public servant works, does not accumulate salary funds and does not affect its employees’ salaries by its decisions. the state body is obliged to remunerate an employee but carries out only its organizational part. the specificity of this feature is that the subject of implementation of the remuneration for public servants is actually two-levelled: at the first level, the state that forms the salary fund of public servants and determines the amount of the remuneration for public servants; at the second level, state authorities and local self-government bodies are responsible for paying such funds. baltic journal of economic studies 85 vol. 4, no. 5, 2018 3. the source of funds is the state budget of ukraine. this is evidenced, first, by the analysis of part 2 of article 1 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu 2016), which states that a public servant receives salaries at the expense of the state budget. second, part 4 of article 150 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu 2016) stipulates that the source of the payment fund for the remuneration for public servants is the state budget. namely, the remuneration fund for public servants is formed at the expense of the state budget, as well as funds from the state budget within the framework of assistance programs of the european union, foreign governments, international organizations, donor institutions. therefore, the procedure for the use of such funds coming to the state budget shall be approved by the cabinet of ministers of ukraine, and not directly by state authorities and local self-government bodies. furthermore, the regulation of article 4 of the law of ukraine “on remuneration” no. 108/95-vr as of march 24, 1995 (pro oplatu pratsi) provides for that for institutions and organizations financed from the budget (i.e., state bodies), the source of funds for remuneration are funds allocated from the corresponding budgets, grants. thus, since the state authorities and local self-government are non-profitable, the indicated feature is that their full maintenance, including personnel remuneration, is carried out at the expense of the state. 4. a special structure, containing the salary, various allowances, recompenses, and bonuses. part 2 of article 150 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu 2016) stipulates that public servant remuneration shall form the following components: 1) salary; 2) allowances for seniority; 3) public service allowance; 4) recompense for an additional workload due to the performance of duties of a temporarily absent public servant in the amount of 50 percent of the official salary of a temporarily absent public servant; 5) recompense for additional workload in connection with the performance of vacant position duties of public service at the expense of saving the salary fund for the corresponding position; 6) bonuses (in case of assigning). an analysis of article 52 of this legal regulation demonstrates that the allowances may be established for each calendar year of public service experience or for rank, and recompense may be established for an additional workload due to the performance of duties of a temporarily absent public servant or for the vacant position of public service. in turn, the main criterion for a bonus is the personal contribution of a public servant to the overall performance of the state body, or a bonus may be paid monthly, quarterly or annually in accordance with the decision of the head of the public service. the specificity of this feature is in the specified structure of remuneration inherent exclusively in the public service. 5. special remuneration groups and salary schemes of public servants. the last specific feature of the remuneration for public servants is linked to special remuneration groups and public servants salary schemes. part 1 of article 51 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu 2016) provides for that public service positions are divided into nine groups: 1) heads of state bodies; 2) first deputies of heads of state bodies; 3) deputy heads of state bodies; 4) heads of independent structural units of state bodies; 5) deputy heads of independent structural units of state bodies; 6) heads of departments of independent structural units of state bodies and their deputies; 7) chief specialists of state bodies; 8) leading specialists of state bodies; 9) specialists of state bodies. in fixing the salary for each group of public servants, their jurisdiction over the state or local government body is considered, for example, whether it applies to the entire territory of ukraine or to the territory of one or more regions, or to the territory of one or several regions, cities of regional significance. consideration of the groups of public servants and the jurisdictions of the state bodies in which they are serving enables to set up the amount of their remuneration. for example, part 3 of article 51 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu 2016) provides for that the minimum salary of the first group in state bodies, which jurisdiction extends over the entire territory of ukraine, is not more than seven minimum salaries of the ninth group of state bodies, which jurisdiction extends to the territory of one or several regions and cities of regional significance. this enables to conclude: first, the public servants of the first group claim, above all, the maximum possible remuneration; second, public servants of bodies which jurisdiction extends over the entire territory of ukraine also have advantages in remunerating employees of other government agencies. the lowest level on this list is the employees of state and local self-government bodies, which jurisdiction is valid on the territory of one or several regions or cities of regional significance. in addition, the total remuneration for public servants may not be less than two minimum subsistence incomes for ablebodied persons, the rate of which is set for january 1 of the calendar year, and which is 1762 hryvnias as of january 1, 2018. therefore, the specificity of the remuneration for public servants is specifics of its rate fixing, since it takes into account the following criteria: 1) the particularity of the public service position; 2) the jurisdiction of the body in which he/she works; 3) the minimum subsistence income for able-bodied persons as of january 1. baltic journal of economic studies 86 vol. 4, no. 5, 2018 4. conclusions therefore, the remuneration for public servants significantly differs from the remuneration of any other categories of employees. above all, the provisions of a special legal act regulate it, with no less importance of decrees of the president of ukraine and resolutions of the cabinet of ministers of ukraine, etc. the subjects of receiving such payments are only persons who occupy a position in the public service in a state body or local government. meanwhile, the state body carries out exclusively an organizational role, and the state carries out the formation of salary funds, as well as fixes the amount of remuneration. in addition, salaries of public servants are characterized by a special structure and payroll. this is determined by the specificity of the labour function of a public servant to fulfil the responsibilities of the state. references: pro derzhavnu sluzhbu (2016). [on public service]. vidomosti verkhovnoi rady ukrainy, 4, 43. (in ukrainian) holovachova, a. o. (2016). materialna skladova motyvatsiinoho mekhanizmu efektyvnoi pratsi derzhavnykh sluzhbovtsiv [the material component of the motivational mechanism for efficient work of public servants]. zbirnyk naukovykh prats kharkivskoho natsionalnoho pedahohichnoho universytetu imeni h. s. skovorody. "pravo", 25, 26-32. (in ukrainian) dorohan-pysarenko, l. o. (2014). oplata pratsi derzhavnykh sluzhbovtsiv: orhanizatsiino-oblikovyi aspekt [remuneration of public servants: organizational-accounting aspect]. visnyk poltavskoi derzhavnoi ahrarnoi akademii, 3, 127-131. (in ukrainian) vehera, v. m. (2015). vstanovlennia rozmiru minimalnoi zarobitnoi platy yak sposib derzhavnoho rehulyuvannia oplaty pratsi v ukraini [establishing the rate of the minimum wage as a method of state regulation of wages in ukraine]. kharkiv: pravo. (in ukrainian) kapinus, m. r . (2005). shliakhy vdoskonalennia systemy oplaty pratsi derzhavnykh sluzhbovtsiv u suchasnykh umovakh ukrainy [ways of improvement of the system of remuneration of public servants in the modern conditions of ukraine]. derzhavne upravlinnia: teoriia ta praktyka, 2, 34-39. (in ukrainian) sokolova, o. a. (2016). shchodo suttievykh oznak pravovoi katehorii "oplata pratsi derzhavnykh sluzhbovtsiv" [on essential features of the legal category "remuneration of public servants"]. visnyk natsionalnoi akademii pravovykh nauk ukrainy, 4, 161-170. (in ukrainian) kodeks zakoniv pro pratsiu ukrainy [the code of labor laws of ukraine]. vidomosti verkhovnoii rady ursr. appendix to no. 50. (december 17, 1971). (in ukrainian) pro oplatu pratsi [on remuneration]. vidomosti verkhovnoi rady ukrainy, 17, 121. (in ukrainian) baltic journal of economic studies 4 vol. 2, no. 1, 2016 tax optimization as a decisive factor of economic development (the case of poland) mykola andriyash1, institute of international relations of taras shevchenko national university of kyiv, ukraine abstract. the main purpose of the paper is to compare the system of taxation and tax optimization in poland with solutions in the selected eu member states and its influence on economic development. the paper presents the system of taxation in poland compared with fiscal solutions in selected eu countries. it also discusses the typology of tax solutions referring to tax optimization in europe. methodology. the author used the primary and secondary data from the central statistics office (gus), pricewaterhouse coopers’ research and the eurostat. the research methods used for the purpose of data analysis included economic analysis of legal acts, descriptive statistics, and comparative analysis. results showed that the level of tax loading in poland is more moderate than in other developed countries of the world while the mechanism of administration of taxes and collections is much more successful. the share of receipts collected by the decentralized administration has been increasing steadily since the major administrative reform of 1999 and the local finance law enacted in 2004. eliminating the category of special sections of industrial production and inclusion of revenues/income to the proposed form of income tax would be very desirable. this would indicate the practical implementation of smith’s tax principles concerning tax equity and an ability of taxpayer to pay levies. practical implications. tax optimization is to balance the tax loading level through offering benefits and preferences which would stimulate the economy of the country and will not cause aggravation of the problem of relocating tax loading from one tax payer to another. many national states, noticing the phenomena of tax evasion and tax avoidance are implementing or going to implement specific reforms which help to improve the system of tax control with the aim of creating conditions which make tax and collections evasion impossible. value/originality. the results of the conducted research form the basis for drawing synthetic conclusions and making recommendations not only for poland as for developing countries. determining the most appropriate composition of government tax reforms in aspect of optimization remains an interesting issue for further research. key words: tax optimization, tax loading, economic activity, tax coefficient, effective tax rate, economic entity, financial provision, tax evasion. jel classification: e62, h21, h22, h26 corresponding author: 1 department of world economy and international economic relations, institute of international relations of taras shevchenko national university of kyiv. e-mail: andrijashko@ukr.net 1. introduction the system of taxation and tax burden significantly affects the performance efficiency of all economic entities without exception. the influence becomes even more important with activation of innovative processes. economic support of innovations and their implementations into production is one of the most critical factors for increasing innovation activity at the enterprise which, in its turn, defines a longterm economic competitiveness. however, such support should exist not only in the context of intra-corporate mechanisms but at the governmental level as well. an important area of institutional support of innovativeinvestment process is tax system improvement. the level of the tax burden is defined by the ratio of total tax payments (excluding individual income tax) to gross value added (titov, gigul’skiy, 2013). it is notable that one of the lowest rates in this regard in europe is in poland, one of the few countries which successfully and without serious consequences managed to overcome the hardest financial crisis in 2007-2009 and was not severely affected by the sovereign debt crisis in 2010-2011. thus, one of the main objectives of this paper is to perform economic analysis of tax optimization process under conditions of crisis and economic growth. an illustrative example in this regard is poland. the global financial crisis and concomitant economic slowdown has had a strong and negative impact on public finances in poland. this effect was magnified by numerous tax cuts introduced in poland in the years 2007−2009, which were not matched by the equivalent reduction in expenditures. as a result, both general government deficit and debt widened substantially. according to baltic journal of economic studies 5 vol. 2, no. 1, 2016 the estimates presented by the central statistical office (gus 2012), in 2011 the general government deficit, measured in esa-95 standards, reached a level of 5.1% of gdp (as compared with 7.8% in 2010) and the debtto-gdp ratio stood at 56.3% of gdp (54.8% in 2010). in order to mitigate the risk related to fast debt increase the government introduced a mixture of expenditure cuts and tax increases. these measures embraced inter alia introduction of an expenditure rule, changes in the funded defined contribution scheme (limiting transfers to open pension funds – ofe) and adjustment of indirect taxes (value added tax was raised from 2011 by 1 pp.). since beginning of economic transformation the case for flat tax in poland has been frequently made in the public debate (boratyński, borowski, 2012). surprisingly little, however, has been said so far on the long-run macroeconomic effects of changing the tax regimes towards single pit rate on the polish economy. the empirical research on this topic barely exists and papers published so far addressed only the revenue effects of the tax reform (neneman, piwowarski, 2004). the problem of tax optimization, the tax structure, the measurement of taxable basis (income, capital), and determining optimal (or sub-optimal) tax rate seems to be more important in the developed countries. also, have been little explored tax concessions lead to implications for; inter alia, production, incomes, trade, rural society, and other economic categories (soliwoda, pawlowskatyszko, 2014). the aim of this paper is an attempt to compare the system of taxation and tax optimization in poland with solutions in the selected eu countries and its influence on economic development. the following research tasks are included: (i) analyzing the system of taxation in poland, including proposals for its reform, and (ii) presenting the typology of tax solutions referring to optimization. 2. the system of taxation in poland poland became the first state in the eastern europe which rejected communism and began to implement political and economic reforms not only actively but also successfully. in 1989 poland faced two strategic tasks: membership in nato and the european union. to accomplish those tasks the country actively implemented social, economic and legal transformations which allowed us to call poland a “european tiger”. nevertheless, the development of polish state does have its political and legal drawbacks and economic errors. as we all know, you do not make mistakes, if you do not work, but today the mistakes of polish government are mirrored in the recession of economic reforms, increase of the budgetary deficit and in economic stagnation, in general. on the background of these processes, the tax system in poland serves as a safety ring (european commission, 2014). on referendum 1997 a new polish constitution was adopted (and later approved by the polish national assembly). according to the polish constitution taxes can be imposed only as provided for by law and cannot be unreasonably high. however until now the level of taxation in poland is still relatively high and it concerns both individuals and entities. there are grounds for it as the main sources for reinforcing the budget of poland are: (1) indirect taxes (including, vat and excise taxes); (2) tax payments from enterprises; (3) tax payments from individuals. other charges and payments do not significantly affect the budget. however today, poland integration into consolidated european fiscal space objectively requires serious tax reforms and adaptation of the tax system to the norms of european legislation (table 1). the period for tax transformations today does not depend on the expectations of polish authorities and the first steps in this direction have already been made (bartosik, 2012). in poland there is a two-level taxation system consisting of governmental taxes payable to the federal budget and local taxes payable to local budgets. according to the general rule, entities and individuals who are not the residents of poland, are subject to taxes equally as the residents of poland unless otherwise is provided in international agreements ratified by poland. the main taxes in poland are profit tax, income tax, value added tax, excise tax (fig. 1). entities conducting their table 1 overview of last tax reforms in poland corporate income tax the corporate tax was extended to cover certain types of partnerships which had previously been used for tax avoidance purposes. vat the temporary increase in the standard vat rate was extended for another three-year period (until the end of 2016). excise duties and other taxes on energy products and electricity excise duty on natural gas for heating was introduced, with effect from november 2013. excise duties on alcohol and tobacco excise duties on tobacco products were increased by 5% and duties on alcohol by 15%. other measures in april 2015, the government presented a package of further reforms designed to improve both tax compliance and the efficiency of tax and customs administration. a consolidation of organizational functions within the tax administration has been announced. a single database of tax identification numbers was introduced to replace the local databases managed by the tax offices. source: (tax reforms in eu member states / publications office of the european union – 2014 report) baltic journal of economic studies 6 vol. 2, no. 1, 2016 business on the territory of poland or raising revenues on its territory must be registered in appropriate tax authority and obtain identification tax number. fig. 1. eu & efta (number of tax payments) source: (pricewaterhousecoopers’ research / the world bank and international finance corporation – paying taxes 2015–2014 edition) tax administration system in poland has several levels: (1) local tax authorities/ regulatory tax authorities which control tax payments on their territory and are authorized to accept individual administrative acts (explanatory statements) regarding taxpayers applications. however these statements are only of recommended nature; (2)  tax chambers controlling tax authorities and they are authorized to review decisions adopted by these authorities (raczkowski, 2015); (3) ministry of finances controlling the state of tax system in poland in general and it has authority to give official interpretation of tax legislation. 3. overall trends in tax optimization in poland the overall tax burden in 2012 remained close to 2011 level at 32.5% of gdp (increase of 0.2%), and remained nearly 7 percentage points below the eu-28 weighted average (39.4%). among neighbouring countries, this value is higher than in slovakia (28.3%), but lower than the tax-to-gdp ratios in the czech republic (35%), hungary (39.2%) and germany (39.1%). indirect taxes (13.1% of gdp) accounted for 40.4% of total tax receipts and continue to play a more important role than direct taxes, which in 2012 raised 22.3% of total tax revenues. this trend goes against the eu-28 trend where indirect and direct taxes make up respectively 34.5% and 33.4% of total taxes. however, the trend could be at a turning point as, in 2012, the indirect tax share dropped by nearly 3% compared to 2011, whilst the share of direct tax rose nearly by 1%. social contributions (12.3% of gdp) accounted for well over a third of total tax revenues in 2012 (37.7%), which is 5.4 percentage points above the eu-27 average (32.4%) (eurostat statistical books, 2014). the share of receipts is collected by the decentralized administration has been increasing steadily since the major administrative reform of 1999 and the local finance law enacted in 2004 (9.1% in 1999). it has remained stable since 2007, oscillating around 13% (12.7% in 2012). the allocation to the central government (49.2% in 2012) has also remained stable in the period under consideration. the share accruing to social security funds stopped a downward trend in 2011, when it stood at 35.0% and increased to 37.4% in 2012. the overall tax burden decreased progressively from 37.1% of gdp in 1995 to 31.5% in 2004, reflecting mostly the reduction of statutory tax rates. in contrast, the 2005– 07 period was characterized by an increase in the tax-togdp ratio, which reached a level of 34.8% in 2007. this strong upward trend was driven mostly by an increase of vat revenues as a result of a strong domestic consumption, and by robust growth of pit revenue due to the rise of employment. the tax-to-gdp ratio has decreased between 2008 and 2009, mostly due to the changes in pit which implied a net loss of the budget revenue coming from direct taxes. over the last three years the tax-to-gdp ratio slightly increased from 31.8% in 2009–10 through 32.3% in 2011 to 32.5% in 2012, perhaps in relation to the increase by 1 percentage point of statutory vat rates that occurred in 2011. indeed vat revenues increased by 11.8% in 2011 (and by 10.2% in 2010), while they dropped by 5.1% in 2012 comparing to 2011. moreover, the vat revenue to gdp ratio decreased from 8.0% in 2011 to 7.3% in 2012 (european commission, 2014). the consumption taxes in poland mirror the eu trend; after their 2009 slight decrease to 11.7% of gdp they bounced back in 2010 to the level of 12.5% of gdp and continued to rise to 12.6% in 2011. however, in 2012 the index of consumption taxes decreased to 11.8% of gdp (whereas the eu-28 weighted average remained stable in 2011 and 2012 at the level of 11.2%). this is reflected as well in the corresponding itr , which stood at 19.3% in 2009 (lowest since 2004), but bounced back to 20.5% in 2010 and 20.8% in 2011, as did the eu average (at 19.7% in 2010 and 19.9% in 2011). the itr on consumption, on a declining trend from 1995 to 2001, picked up since as a result of a strong vat and excise duties revenue growth after the introduction of excise duties on energy, increased vat rates on certain items in 2002, increase of the statutory vat rates by 1 percentage point in 2011, broadening of the vat base, and in the aftermath of poland’s accession to the eu. the decrease in 2009 was most likely caused by lower consumption levels triggered by the economic downturn and lowering receipts from the vat and excise but also change to the structure of vat receipts (shift towards goods and services taxed at a preferential rate). the 2010 and 2011 recovery, common for most eu countries, was most likely caused by the growing market confidence and a temporary increase of statutory vat rates by 1 percentage point that has started since 2011 and was meant to end in 2013 (but instead was prolonged for another three-year period of 2014–16). it appears that this fuelling of vat revenues has reached its potential, however, in 2012. baltic journal of economic studies 7 vol. 2, no. 1, 2016 taxes on labour, amounting to 13.1% of gdp, are the seven lowest in the eu (the eu-28 average 20.1%). in fact, over the last 16 years poland has experienced a significant tax shift away from labour taxation (-3.9 percentage points). the itr on labour has been steadily decreasing since its 10-year peak in 2006 (35.4%), to climb to 32.0% in 2011 and to 33.9% in 2012, 2.2 percentage points below the eu-28 weighted average (36.1%). tax wedge on labour (on 100% average wage of a single person without children) amounted in 2012 to 35.5% a 1.1% increase comparing to 2011 34.3% of labour cost — but still the seven lowest in eu. it is also the lowest tax wedge in the region, where the neighbouring countries such as slovakia (39.6%), czech republic (42.4%) hungary (49.4%) and germany (49.7%) all impose higher burdens on labour (the world bank and international finance corporation, 2014). in august 2010 the polish government adopted a multiannual financial plan proposing increase in indirect taxes (about 0.4% of the gdp). a series of measures in the vat area came into force in 2011, of which the most important is the temporary increase (for the years 201113) of the vat rates by 1 percentage point, from 7% to 8%, and from 22% to 23%. in 2013 these temporary increased rates were extended for the period 2014–16. at the same time, a new reduced rate of 5% has been introduced for, amongst others, basic foodstuff. moreover, as of 2012 the vat rates for certain products, including medical devices, clothing and clothing accessories for infants and children’s footwear, increased from 8% to 23%. from 2013, the 23% rate is due to apply for arts and crafts and on non-public postal services. the government increases gradually the excise duties rates on tobacco products (by 4% a year) but also for fuels (jet engine fuels, diesel and intrinsic bio-components). excise duties on car fuel remained untouched over period 2007–11, but in 2012 the excise on diesel has increased substantially. in line with the energy directive, as of 2012 the excise tax is also applicable to coal, lignite and coke, so far exempted. in may 2010 poland’s government introduced reforms to the pension system scheme when transfers to privately managed pension funds were cut from 7.3% to 2.3% of workers’ salaries and the 5% difference was redirected into the public old-age pension system (kryńska, 2014). the law on pension funds was amended again in december 2013 with effect from 1 february 2014 to slightly increase the pension fund contribution up to 2.93% of a salary. based on this law all present members of the privately managed pension funds will have the right to abandon the pension fund and choose the state social security scheme instead (the first choice will have to be made between april and july 2014 and then every two years). depending on this choice further decrease in contributions for privately managed pension funds may occur as only contributions of those members who will stay within the fund system will be transferred to funds. moreover, based on this law privately managed pension funds will have to transfer about half of their assets, composed of government bonds, to the public old-age pension system where the bonds will be redeemed. resulting transfers have been estimated at approx. eur 37.5 billion (circa 7% of gdp). 4. methods of tax optimization evaluation at enterprise level any corporate tax optimization bears some risk. moreover its implementation requires expenses, that is why it is necessary to conduct a detailed analysis before optimization to define if the costs and the risk worth it. tax planning and its efficiency should be placed against the tax burden of the enterprise. if the latter against the company revenue does not exceed 10%, then further measures to reduce taxes are going to be senseless. if this figure is over 60%, tax planning is always inefficient as this figure requires the change of business activity or tax jurisdiction (nickel, vansteenkiste, 2008). the basic criterion of optimization is traditionally considered as a balance between economy from the taxes and costs for implementing tax optimization schemes. simple and easy to use criteria, it can be calculated as at the stage of tax planning and using factual data. its analysis gives the answer to the question if the proposed method of optimization is reasonable. however despite relative character of these criteria and its evident advantages, it has a number of drawbacks. the researcher anna bobrova (2014) developed a universal criteria for tax optimization taking into account not only costs for developing and maintaining the optimization scheme of a certain tax and the total savings but also the following factors: type of a taxpayer (1); tax share in a taxpayer’s tax burden (2); interest degree of tax authorities in this tax (3); legislative complexity of the tax (4); duration of optimization scheme (5). the factors 1 and 2 are interrelated as the organizational structure of a company defines the standard structure of a tax burden of a taxpayer. using a general calculation formula, it is possible to take into account the structure of a tax burden for each individual taxpayer. dependence of optimization criteria on the tax share in a taxpayer tax burden is linearly proportional: the higher amount to be paid, the greater relative economy. the factor of tax authority’s interest should be taken into account as the border between optimization and tax avoidance shifts towards tax legislation breach. the bigger share for budget revenue provides a certain tax resource, the higher probability that this tax will generate a great interest among tax authorities. consequently, factor 3 can be expressed by means of a tax share in budget tax revenue. dependence of a universal criterium for tax optimization on the factor 3 is inversely proportional: the greater attention of tax authorities (the larger tax share in the budget), the less will be the economy (bobrova, 2014). legislation complexity of the tax also reflects optimization capabilities. complex branch multi-step baltic journal of economic studies 8 vol. 2, no. 1, 2016 schemes for building a number of taxes provide multiple precedents for optimization. the number of tax regulations is so simple and laconic that they do not allow any other effective ways for their optimization. the more complex the tax, the easier it is to find optimization conditions for it and even the lowest level of the economy will be considered a positive effect . taking into account everything that was said before, the formula for universal tax optimization criteria will be the following: 𝑈𝑈𝑈𝑈𝑒𝑒𝑓𝑓 = 𝐸𝐸𝑛𝑛 𝑆𝑆𝑚𝑚 × 𝐾𝐾2 × 𝐾𝐾5 ÷ 𝐾𝐾3 × 𝐾𝐾4 where: ucef – is universal tax optimization criteria; en – is economy from taxes in the result of optimization, in monetary units; sm – are the costs for developing and maintaining optimization scheme, in monetary units; k2 – is coefficient taking into account factor 1 or 2. in the final version of the formula the sign of optimization is taken into account. it is explained by the fact that during development of optimization schemes affecting a group of taxes, it is not always possible to reach a maximal reduction of all the constituting elements. sometimes reduction of one group of taxes is accompanied by the growth of the other tax group. in this case, tax shares in a tax burden and in budget tax revenue should be calculated. 5. size and development of the shadow economy within poland and of its neighbouring countries the average size of the shadow economy in 27 eu-countries is 22.3% in 2003 and decreased to 18.4% (of official gdp) in 2013. the biggest ones are with 14.6% unemployment and self-employment, followed by tax morale with 14.5% and gdp growth with 14.3%. the size of tax evasion (accounting for indirect taxation and selfemployment activities) was on average 4.2% (of official gdp) in poland, 1.9% in germany and 2.9% in the czech republic (schneider, raczkowski, 2014). many national states, noticing the phenomena of tax evasion and tax avoidance are implementing or going to implement specific reforms, such as the following: a) bulgaria, 2012: adopted a fiscal strategy to improve tax collection and control the avoidance of taxation; b) cyprus, december 2012: allocated special funds for tax avoidance and financial abuse control in their successive budget for 2013. imposed a number of obligations on both the business and the tax administration to improve information sharing and tighten tax regulations. nonresidents are required to file annual tax returns and foundations are expected to account for dividends and interest; c) latvia: adopted the so-called “zero declaration” for the legal notification of non-declared income to combat tax evasion and tax avoidance; d) portugal, 2010: adopted solutions enabling more control of tax evasion; e) estonia: reinforced their controls against tax avoidance by controlled foreign companies (cfc), including specifically the restrictions on the use of transfer pricing systems; f ) uk: seems to be the most successful and far going in its struggle against tax avoidance and evasion. since 2010 they have earmarked almost 1 billion pounds for the control of tax abuses, tax avoidance (tax optimization) and tax evasion. they employed almost 2.5 thousand new employees at hmrc and allocated a special team of offshore co-ordination unit to combat tax offenses in tax havens. they have provided for a possibility of publishing names of tax legislation abusers or offenders and established a penal tax rate of up to 200% against their tax evaders (salo, 2013). the size and development of the shadow economy of poland it had a value of 27.7% in the year 2003, which then steadily declined to 25.3% in the year 2008, increased slightly to 25.9% in the year 2009 and since then decreased to 23.8% for the year 2013. if we consider the direct neighbours of poland, germany, the czech republic, slovakia and lithuania, germany had a shadow economy of 17.1% in the year 2003 which declined to 14.2% in the year 2008 and increased to 14.6% in 2009 and then decreased again to 13.0% in the year 2013. in the czech republic we had a shadow economy of 19.5% in 2003 which decreased to 16.6% in 2008, increased to 16.9% in 2009 and decreased again to 15.5% in 2013. in slovakia we had a shadow economy of 18.4% in 2003 which decreased to 16.0% in 2008, increased to 16.8% in 2009 and decreased again to 15.0% in 2013. in lithuania we had a shadow economy of 32.0% in 2003 which decreased to 29.1% in 2008, increased to 29.6% in 2009 and decreased again to 28.0% in 2013 (zucman, 2014). what type of policy conclusions can we draw from these results? • the reduction of the shadow economy can be achieved using various channels that governments can influence. the main challenge still is to bring shadow economy activities into the official economy in a way that goods and services previously produced in the shadow economy are still produced and provided in the official economy. only then the government gets additional taxes and social security contributions and transfers value added from the shadow into the official economy; • the main driving forces of the shadow economy are indirect taxes, followed by self-employment and unemployment. hence, to reduce the shadow economy these are the most efficient policy options; • it is essential to liquidate tax havens which are currently a tool for commercial and wholesale tax evasion through complicated structure of tax avoidance – which appears to be difficult in the medium term or even longterm – due to increasing number of beneficiaries who have the possibilities of hampering political and organizational precautious measures through their accumulation of the capital; baltic journal of economic studies 9 vol. 2, no. 1, 2016 • fighting tax evasion from vat-fraud is maybe the most important policy goal. if also in the european union all member states try to efficiently fight tax fraud by making the vat-system more efficient with clear-cut rules and little exemptions, then this would lead to great success in reducing this type of tax fraud. due to the lack of the common fiscal policy it is unlikely to, among others, harmonize tax rates, and therefore the eu states having the highest tax rates should expect heightened risk of the tax reclaim fraud through numerous dummy transactions and buffer companies within intra-community trade. thus, it may lead to elimination of some honest business entities from the market which will be unable to compete with fraudulent entities in terms of the price. budget losses triggered by the growing tax gap because of tax refunds undue will increase the deficit (and thus the public debt), and they may translate into spending cuts in the following tax year, which may impact the rate of economic growth. 6. conclusions summarising the results of conducted investigation it should be noted that the level of tax loading in poland is more moderate than in other developed countries of the world while the mechanism of administration of taxes and collections is much more successful. however, some scientists consider that a real level of tax loading is much higher and it has a bad influence on the economy of the country and causes social tension in the society. the problem of the equality and proportionality of the apportionment of tax pressure among tax payers is still unsolved. the main task of officials, experts and scientists is to balance the tax loading level through offering benefits and preferences which would stimulate the economy of the country and will not cause aggravation of the problem of relocating tax loading from one tax payer to another. this problem can be solved by means of improving the mechanisms of tax administration since the expenses for the management of tax payments are not always grounded within the period they were spent. the solution as to the offering benefits should be taken on the account of the sphere of tax payer activity; i.e. the benefits should be given mainly to the investment and innovational enterprises to attract investors to concrete regions or branches of the economy which are not interesting for running entrepreneurial business under the regime of general system of taxation. it is necessary to emphasize that one of the most important ways of the optimization of tax pressure on payers is efficient policy of tax planning. it helps the economic entities to regulate the level of tax loading independently and legally by means of their own method of tax loading estimation and analysis of taxes which have to be paid. the vital tasks on the way to the optimization of tax loading in poland are the following: – legislative improvement of the system of tax control with the aim of creating conditions which make tax and collections evasion impossible; – regulation of taxation and accounting systems. the tasks determine the urgency of the theme of investigation and emphasize the necessity of conducting further research in this direction. references bartosik, k. (2012). popytowe i podażowe uwarunkowania polskiego bezrobocia [demandand supply-side determinants of unemployment in poland], gospodarka narodowa [national economy], szkoła główna handlowa [warsaw school of economics], warsaw: p. 11-12. bobrova, a. (2014). possibilities of optimization of taxes the enterprise on the basis of the international experience. economics and management – 3/2014: p. 203-221. boratyński, j., & borowski, j. (2012). the long-term economic impact of the flat tax in poland. cge simulation under alternative assumptions. bank i kredyt 43 (3), 2012: p. 5–30. european commission. (2014). taxation trends in the european union / [data for the eu member states, iceland and norway] // eurostat statistical books – 2014 edition – taxation and customs union – luxembourg: publications office of the european union – 2014: p. 127-131. european commission. (2014). tax reforms in eu member states / tax policy challenges for economic growth and fiscal sustainability – 2014 report – luxembourg: publications office of the european union – 2014: p. 1-147. neneman, j., & piwowarski, r . (2004). trzeci etap reform. jaki system podatkowy, www.case.com.pl. kryńska, e. (2014). labour taxation in poland compared to the other oecd countries. comparative economic research, volume 17, number 3, 2014: p. 47-62. nickel, c., & vansteenkiste i. (2008). fiscal policies, the current account and ricardian equivalence. working paper, p. 935, european central bank. raczkowski, k. (2015). dimensions of the function of information provision of tax authorities in management of public levies. economics and management – volume 7/issue 2/ 2015: p. 63-70. salo, s. (2013). optimization of tax loading on the economy as the main direction of tax policy improvement of the country. journal of applied economic sciences ( jaes) ( journal of applied economic sciences ( jaes)), issue: 3(25) / 2013: p. 353-360. schneide,r f., & raczkowski, k. (2014). size and development of the shadow economy and of tax evasion within poland and of its neighbouring countries from 2003 to 2013: some new facts. the economic security of business transactions. management in business, chartridge books oxford, oxford 2013: p. 3-31. baltic journal of economic studies 10 vol. 2, no. 1, 2016 soliwoda, m., & pawlowska-tyszko, j. (2014). agricultural taxation in poland vs. solutions in selected eu countries. economic science for rural development no. 33, 2014: p. 99-107. the world bank and international finance corporation. (2014). paying taxes 2015: the global picture / pricewaterhousecoopers’ research // – 2014 edition. – w.: – 2014: p. 1-166. titov v., & gigul’skiy g. (2013). valuation of influence of tax systems on the effectiveness of industrial enterprise performance. scientific and technical statements stu. economic sciences № 4 (175), 2013: p. 113-120. zucman, g. (2014). taxing across borders: tracking personal wealth and corporate profits, the journal of economic perspectives 28 (4): p. 121-148. николай андрияш оптимизация налогообложения как предопределяющий фактор экономического развития (пример польши) аннотация. основная цель работы заключается в сравнении систем налогообложения и налоговой оптимизации в польше с соответствующими налоговыми процессами в отдельных государствах-членах ес, а также изучение их влияния на экономический прогресс в целом. в работе представлена структура, особенности и специфика системы налогообложения в польше по средством экономического анализа принятых фискальных мер в отдельных странах ес. также обсуждается типология налоговых мер, относящихся к приоритетам налоговой оптимизации в европе. методика. автор использовал первичные и вторичные данные из центрального статистического управления (цсу), исследований pricewaterhouse coopers и евростата. методы исследования, используемые для целей анализа данных, содержат экономический анализ правовых актов, описательные части статистики и сравнительного анализа. результаты показали, что уровень налоговой нагрузки в польше более умеренный, чем в других развитых странах мира, а механизм администрирования налогов и сборов является гораздо более успешным. доля поступлений, собранных с помощью децентрализованных административных налоговых органов неуклонно растет, так как фундаментальные основы для этого были заложены еще соответствующими реформами 1999 года и революционным финансовым законодательством, принятым в 2004 году. исключение некоторых категорий стратегических отраслей промышленного производства из режима частичного налогообложения и включение полученных доходов / прибыли в систему прогрессивного налогообложения является очень верным шагом. это указывает на практическую реализацию принципов налогообложения адама смита, касающихся налоговой справедливости и способности налогоплательщика по уплате обязательных платежей. практическое значение. налоговая оптимизация, чтобы сбалансировать уровень налоговой нагрузки, предлагает определенный спектр льгот и преференций, которые стимулировали бы экономику страны и не вызывали бы обострения проблемы перемещения налоговой нагрузки с одного плательщика налога к другому. многие национальные государства, заметив такое явление как уклонение от уплаты налогов, немедленно начинают осуществлять или намерены реализовать конкретные реформы, которые могли бы помочь улучшить систему налогового контроля с целью создания условий, которые делают уклонение от уплаты налогов и сборов невозможным. значение/оригинальность. результаты проведенного исследования являются основой для составления синтетических выводов и выработки налоговых рекомендаций не только для польши, а также для соседних развивающихся стран. определение наиболее подходящего фискального курса налоговых реформ правительством в аспекте оптимизации остается интересным научным вопросом для дальнейших исследований. baltic journal of economic studies 358 vol. 4, no. 3, 2018 corresponding author: 1 educational and scientific institute of distance learning and advanced training, dnipropetrovsk state university of internal affairs. e-mail: junin@ukr.net 2 department of organization of research work, national academy of internal affairs. e-mail: vovasevruklev@gmail.com 3 department of organization of research work, national academy of internal affairs. e-mail: pavlenko0212@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-358-365 priorities of economic development of ukraine in the context of european integration oleksandr yunin1 dnipropetrovsk state university of internal affairs, ukraine volodymyr sevruk2, sergiy pavlenko3 national academy of internal affairs, ukraine abstract. the aim of the article. although a large number of original and meaningful works by both domestic and foreign scientists studied issues on the topic under consideration, it should be noted that the problem of defining profitable spheres in the economy of ukraine remains poorly researched. this also concerns the definition and development of the specificities of an innovative approach to the ukrainian economy in the context of european integration and globalization challenges. the subject of the study is the priorities of the economic development of ukraine in the context of european integration. methodology. based on the analysis of laws and regulations of ukraine and scientific literature, the current economic situation, status of ukraine, and strategic priorities and goals of ukrainian economic development are interrogated. the results of the study revealed that nowadays ukraine declared european integration as a key priority of economic policy. the intention of our state to meet the requirements of the modern world economic system caused the need to develop the integration strategy of ukraine, it is a way of modernizing the economy, overcoming technological backwardness, attracting foreign investments, applying new technologies, creating new jobs, increasing the competitiveness of domestic commodity producers, entering the world markets. practical implications. it is proved that presently the institutional transformation of the ukrainian economy towards its green growth is not determined enough due to imperfections, inconsistencies, and inefficiencies of existing mechanisms. the strategic priorities of the formation of new “green” economic areas and ecological transformation of the economy of existing industries are analysed. relevance/originality. for ukraine, the eu is an important strategic partner, including the investment and foreign trade sectors. therefore, the future of our country in the eu will be determined by signing the association agreement. it is proved that the eu as an integration association will hold the status of the leader in international economic relations; therefore, for ukraine as a european state, an important step is to form a new strategy for economic development of the eu. key words: economy, economic sector, european integration, innovation development, green economy, strategy. jel classification: o17, o1 1. problem statement in current conditions of the world economy, each country tries to achieve a high level of the socioeconomic development. to meet increasing demands for the parameters of the national economy dictated by globalization, ukraine must develop a strategy for the improvement that can reflect adequately our state by means of macroeconomic indicators and a standard of living of the population (chorna, 2018). in 1991, ukraine gained sovereignty. however, apart from independence and autonomy, it inherited own economic system, which for that time of ukrainian statehood was not able to meet the needs of ukrainian people. it should be emphasized that for 17 years, ukraine has been trying to bring the economy out of crisis phenomena, which repeatedly causes a depressive process in the economic situation in ukraine, affecting both the regional level and the state as a whole. baltic journal of economic studies 359 vol. 4, no. 3, 2018 from 2014, ukraine has confirmed the course toward integration with the european union. from this period, a new stage of economic development has also begun in all spheres. nevertheless, unfortunately, it should be noted that still, the ukrainian economy is coming out of a protracted crisis. at the current stage of state establishment, ukraine’s integration into the european union is an integral part of the further democratization of our country, the formation of civil society (medvedev, 2014). therefore, the radical socio-economic transformations that have taken place over the last decade have caused both positive and negative changes in modern ukrainian society (pavlenko, sevruk, kobko, 2017). because of the changes in society, along with positive tendencies, individual negative ones appear and largely hinder the development of statehood in ukraine. a serious concern is the problem of economic stability (mohilevskyi, sevruk, pavlenko, 2017). it should be emphasized that the development of the ukrainian economy in recent years demonstrates unsustainable dynamics that confirms various adaptations of its branches to the challenges of the present, and results in lower investment and innovation activity and competitiveness. in addition, ukraine is steadily “honourable” among the most corrupt countries (kondratenko, 2018). according to the results of a survey conducted by investment company dragon capital (kyiv) and the european business association, there is a widespread corruption in ukraine and a lack of trust in the authorities, judiciary and law enforcement bodies. interfax-ukraine informs that as stated by a joint press release of organizations, respondents rated the indicated obstacles at 8.5 and 7.5 points according to the 10-point scale of importance (rates are equal with last year’s – ed.). the third place in the rating was the factor of monopolization of markets and the seizure of power by oligarchs (5.9 points), while the military conflict with russia and unpredictable exchange rate (5.6 points each) respectively occupied the fourth and fifth positions. the repressive actions of law enforcement bodies occupy the sixth position in the ranking (4.6 points). this is due to the widespread unlawful actions of the prosecutor’s office, the security service, and police. other positions belonged to a constant change in statutory regulation, complex administration of taxes, and currency restrictions (koruptsiia ta nedovira do sudovoi systemy ye osnovnymy pereshkodamy dlia investytsii v ukrainu – opytuvannia). furthermore, in 2014, a significant deterioration of the economic situation was due to the military operations in the east of ukraine, which caused a chain reaction of imbalance in all macroeconomic indicators. affected by the events of 2014, the current economic situation is characterized by further deterioration. among the main factors that determined economic trends in 2015 were low external and domestic demand because of economic growth inhibition; decrease in purchasing power of the population because of real incomes reduction; complicated relations with major trading partners and outflow of investments. under the absence of appropriate measures to stabilize the situation, the complex interaction of indicators led to increasing economic decline. ukraine suffered territorial losses, faced with the threat of economic collapse and the loss of statehood because of aggression on the part of russia, a nuclear-weapon state. during 2014, the ukrainian economy was operating in extremely unfavourable conditions. russian aggression caused ukraine unprecedented humanitarian and social losses and serious destructive processes, including the destruction of infrastructure on the territory of combat operations, disruption of established production linkages and crucial supply of resources, partial loss of external markets and export potential. meanwhile, radical reform of domestic economic mechanisms, absolutely indispensable for the country, remained vague, and some changes were introduced very slowly (tiutiakh, 2017). reforms of the system of social support in ukraine should be based on the principle of purposefulness, which will enable real social measures to be provided to those members of society who really need this help, according to their life circumstances. the provided social assistance should include the targeted activities authorized by law state bodies. it is aimed at supporting individuals who have difficult life situations and who for objective reasons cannot independently provide their means of subsistence at a level not lower than the subsistence level, which is determined by law. the effective legal regulation and ensuring equal access to state social support in the form of subsidies will contribute to the introduction of amendments and additions to the law of ukraine “on housing and communal services” regarding the accounting of actual amounts of income during the calculation of subsidies to individuals providing social services. considering some of existing economic disparities in the purpose of subsidies, subsidies should be monetized urgently and the real income of recipients of social support should be verified to confirm the right to benefits. this will enable to introduce a single approach to such a form of social assistance as a subsidy aimed at supporting the life of the poorest group of ukrainian population (tyshchenko, 2018). according to analysts, from 2017 to 2018, ukraine’s economy continues the recovery trend after a positive breakthrough in 2016, which led to an increase in the gross domestic product by about 1.5%. leading ukrainian economists expect that gdp growth may accelerate by 2.1% in the coming year, industrial production will grow by 2.5%, and inflation will slow down to 10% from 12-13% in 2016 (obukhovska, 2017). one of the main problems facing ukraine, as a european state, is the need for the rapid economic shift baltic journal of economic studies 360 vol. 4, no. 3, 2018 to the path of innovative development. the current crisis has demonstrated the danger and hopelessness of focusing on the export-raw material development model and the use of benefits associated with the relatively low cost of labour. the overcoming of the crisis and transition to sustainable growth depend on the effectiveness of state and business efforts in deploying diversification of the economy, raising its level of innovation usage, and creating conditions for the realization of creative abilities of the population that has a european level of education in ukraine. 2. literature review the theoretical and practical aspects of the current state and innovative development of the ukrainian economy in the context of european integration were studied in the scientific works of such scholars as: a.a. broiaka, b.v. burkynskyi, m.v. verteletskyi, t.p.  halushkina, d.f. dukov, v. zapukhliak, i. ivashchuk, o. ivashchuk, l.l. kalinichenko, m. kondratenko, s.i.  lozynska, a. neholiuk, k. obukhovska, v.ye. reutov, d.i. sirokha, o.v. tyshchenko, o.v.  tiutiakh, o.p.  khaietska, s.m.  chernous, n.p. chorna, r .s.  chornyi, s.k.  shandruk. the aim of the article. although a large number of original and meaningful works by both domestic and foreign scientists studied issues on the topic under consideration, it should be noted that the problem of defining profitable spheres in the economy of ukraine remains poorly researched. this also concerns the definition and development of the specificities of an innovative approach to the ukrainian economy in the context of european integration and globalization challenges. 3. the main material such a path necessitates significant changes in the institutional environment of doing business in ukraine, the formation of a favourable innovative climate, intensification of research and development, a breakthrough in the use of modern information and communication technologies. ukraine has to overcome a significant backlog in innovation activities of enterprises compared to the developed countries of the world and, first of all, its neighbours, the eu countries. in ukraine, this parameter does not exceed 20% (according to surveys of innovative activities), while the eu average, let alone the countries that are innovative leaders, is 44%. moreover, the low costs for research and development do not meet the innovative course, especially in the ukrainian industry (innovatsiina ukraina 2020: natsionalna dopovid). the future of ukraine is an innovative, europeanoriented economic policy. it is important for domestic enterprises to increase their potential, to develop capacities for the realization of opportunities, to establish high-tech production, to introduce principles of free international trade. the strategy of “building up,” which is based on the principle of steady growth of own scientific, technological, and innovative potential to occupy the leading positions in the world market, should be the main strategy of ukraine’s innovative development (kalinichenko, 2016). in august 2017, the moody’s investors service, a rating agency, for the first time in nearly two years changed the sovereign rating of ukraine from stable to positive (a step from caa3 to caa2). in the structure of ukraine’s gdp, the share of enterprises of the 4th (planes, cars, ships, etc.) and 5th (mobile communication, microelectronics, and computer science) technological structures is small. they do not meet the innovative course and the low costs for research and development, especially in the ukrainian industry. therefore, traditionally the reason for the low level of innovation of the enterprise is considered lack of funds. at the same time, over 3 billion uah were spent on the innovation of ukrainian enterprises, of which about 64% were spent on the technological innovations (kondratenko, 2018). nominal gdp in ukraine has increased over the last six years due to an increase in the average price level. this fact is confirmed by the fall of real gdp from 1 079 346 million uah in 2010 to 996 236 million uah in 2016 at constant prices in 2010. recently, gdp has been increasing due to the construction industry (prices are rising); increase of the share of agriculture in the structure of gdp (≈12%); changes in the banking and financial sector. the economic well-being of citizens is linked closely to gdp per capita (lozynska, 2011). analysis of its changes confirms trends similar to the dynamics of gdp. thus, nominal gdp per capita is steadily increasing, while real gdp per capita is decreasing. while in 2010 it amounted by 24 798 uah per person, in 2016, real gdp in 2010 prices fell by 5.8% to 23 346 uah per person, indicating the impoverishment of the nation (broiaka, 2017). comparing the dynamics of macroeconomic indicators of ukraine with other countries, in the european union in general, gdp per capita is more than 35 thousand dollars, and the number of people living in 28 eu countries is more than half a billion, according to estimates of the european bureau of statistics (eurostat). overall, throughout the european union in 2016, the average gdp growth rate is 2.3% (latvia – 4.8%; lithuania – 3.9%; the netherlands – 3.8%; spain – 3.1%; austria – 2.9%; germany – 2.1%). non-eu countries also show high growth rates: romania – 5.7%; czech republic – 5.5%; poland – 4.4%; sweden – 3.9% (osnovy svitovoi ekonomiky, 2017). gdp per capita is one of the most accurate ways to assess the economic development of the state. the latest report index of economic freedom of the heritage foundation, the international organization, contains baltic journal of economic studies 361 vol. 4, no. 3, 2018 indicators of gdp and gdp per capita (by ppp). in 2017, this indicator in ukraine was $2205; compared with the leading countries of the world, ukraine’s gdp is significantly behind and our country is at position 133 among 187 countries of the world under study (reytynh krain za vvp na dushu naselennia u 2017). according to the international monetary fund (imf), the indicator of ukraine’s gdp in comparison with neighbouring countries lags seriously. compared to ukraine, the gdp of the cis countries is much higher than that of the european union countries. international rating agency moody’s predicts that in ukraine gdp per capita will remain the smallest among the cis countries in 2017–2018 years (khaietska, 2018). nevertheless, compared to, for example, 2013, the gdp indicator in 2016 fell by 14.1%. exports of coal and metals from this area were banned that affected the country’s economy. however, the economy managed to cope with the effects of the blockade, and in 2017, its growth amounted to about 2%. in addition, the normal scope of export of goods from the country was restored due to the conclusion of an agreement on the deep and comprehensive free trade area between ukraine and the european union in january 2016 (s&p onovylo prohnoz vvp ukrainy na 2017-2018 roky). it should be noted that production in key industries has stopped falling and began to recover primary due to industry, agriculture, and metallurgy. according to statistics, in 10 months of 2016, the economy of ukraine received 3.1 billion dollars fdi, which is 41% more than in 2015, of which 2.2 billion dollars came to the country as a result of the banks’ capital accumulation by shareholders. to attract investment and stimulate business, in 2016, the national bank continued to ease actively currency restrictions imposed in 2014 and mitigate monetary policy. these steps became possible due to the stabilization of the hryvnia exchange rate. however, to improve the lives of tangible citizens of our country, higher rates of economic growth are needed, and hence more reform and effective corruption combating. even with the pace of economic growth of 3-4%, recovery to the level of pre-crisis 2013 will take 4-5 years (obukhovska, 2017). therefore, it is necessary for ukraine to distinguish several positive stages of the economy formation overall. it is primarily to determine exactly what potential ukraine has nowadays for effective development and stabilization of the economy, which will have a positive impact on poverty reduction and economic growth of the state. in addition, the experience of the advanced foreign states concerning the “green” economy should be implemented presently. therefore, this article reveals the process. in the present time, ukraine has a potential for growth, namely: agriculture and everything connected with it (35% of ukrainian exports is agricultural products, moreover, ukraine can produce twice as much); high tech (ukraine has thousands of high-tech companies, mostly small, it’s a great competitive advantage); supply (now many polish medium-sized enterprises are transferring their production to ukraine). our country can become a powerful “sub-supplier” to european markets, as bulgaria and romania did. however, today, relations with poland are worsening, so there are certain risks (kondratenko, 2018). another important institutional component of the innovative economic development is the creation of institutional capacity for entry into foreign markets of producers with highly processed products, as it is the result of an innovative way of development, especially for small and medium-sized businesses, which potential is frequently used in ukraine in contrast to many successful eastern european countries that have come a long way. ukraine should overcome this way throughout a structural crisis and considerable unemployment. overcoming difficulties and entering an innovative way will require an appropriate policy and strategy of state support for exports in small and medium-sized businesses. for this, the main state institutions, similar to the ministry of industry and trade of the czech republic, or the ministry of industry and energy of germany, sectoral ministries and departments, financial, banking, and insurance companies and a large number of public organizations should be involved to deal with the reduction of institutional barriers and the promotion of companies to new markets and their support in these markets. moreover, export support for high-tech small and medium-sized businesses is the basis of the institutional conditionality of the state’s actions (innovatsiina ukraina 2020: natsionalna dopovid). it should be noted that although ukraine is called the european breadbasket, last year we bought products worth three billion dollars. in addition, the average citizen of ukraine is 400 times poorer than ordinary swiss. the average resident of ukraine for one year produces goods and services in the amount of 46 thousand hryvnias but receives a salary of 23 percent more, 62.8 thousand hryvnias. for example, the german earns 47 thousand euros for the state and receives for its work 46 thousand euros. our indicators show not the persistent work of ukrainians but the economic imbalance. the main reason for it is the raw material economy, due to which all our products cost very little. in addition, the shadow economy and low productivity role contribute to it. recently, the credit suisse bank published a study on living standards in different european countries. according to its results, switzerland has taken the leading position, where the wealth of every adult is 576 thousand dollars. ukraine came last in the ranking with a score of $1,337 (neholiuk, 2016). in addition, today the population decreases to 35 million people. the main cause of the demographic crisis is the reduction in the number of able-bodied baltic journal of economic studies 362 vol. 4, no. 3, 2018 citizens. representatives of the older generation begin to retire massively, and young people look for employment options abroad. in other countries, ukrainians look for both work and higher education. for example, in 2014, more than 40 thousand students from ukraine studied abroad. their return to their homeland is questionable (neholiuk, 2016). weak implementation of high technologies, lack of innovation infrastructure, low innovation activity makes it impossible to characterize any of the regions of ukraine as a high-tech. however, innovation is still a determining characteristic of modern scientific, technical, industrial, social, economic, and social processes of our state. this is stated in the strategy of sustainable development “ukraine 2020” (ukraine’s entering leading positions in the world; ukraine should become a state with a strong economy and advanced innovations), in the national report “innovative ukraine-2020”, in the project “strategies of innovative development of ukraine for 2010–2020 under globalization challenges” and other state programs and documents (kondratenko, 2018). the main thing is not even money but young educated staff and science in the first place. unfortunately, practically they are not used in ukraine, because there is no internal demand for intelligence and new knowledge, there is no infrastructure that will provide this demand. intellect and knowledge are one of the main reserves of the country, and the only renewable resource (kondratenko, 2018). therefore, the continuation of economic development without a radical change in the current economic model will lead to the deployment of environmental threats and make sustainable development impossible. in this regard, economists, sociologists, politicians, representatives of natural sciences and business began to seek new ways of development that would restore the environment and, at the same time, provide a decent standard of living for the population (cato, 2009; burkynskyi, halushkina, reutov, 2011). the “green” economy represents the system of relations involving production, distribution, exchange, and consumption, which are based on the principles of ecologically oriented activities, support the preservation and restoration of the natural environment, and provide a minimal negative impact on it through the development of “green” sectors of the economy and the reduction of “brown,” creation of “green” jobs, and production of “green” goods and services. the goal of the “green” economy is to create an effective environment for economic and social progress based on minimizing the negative impact on the environment and the efficient use of natural resources while maintaining a decent standard of living for the population. analysis of ukrainian state economy, conducted on the basis of data for 2005–2012, enables to identify a number of key issues that determine the need for a “green” course. these issues concern using resources (restorative and non-renewable), preservation and restoration of the natural environment, economic activity, employment, public consumption, etc. using resources is accompanied with significant losses due to both obsolete technologies and ineffective pricing policies (in particular, for those business entities that use them in the production process and end users): losses of water taken during transportation were significant and amounted to 15.4% (2.3 billion cubic meters) and 16% (2.35 billion cubic meters) respectively in 2005 and 2012; leakage and unaccounted water consumption due to improper condition of water supply systems (some water supply networks) amounted to 25% (2005) and 30.2% (2012) of all water supplied to the water supply network, because 38.2% of the total length of the water supply networks were dilapidated and unserviceable; ukraine occupies 95th place among 122 countries on the level of rational use of water resources and water quality; heat losses in 2005 made up 10.3% of the produced (13.1 million gcal), and in 2012, 13.3% (13.8 million gcal); electricity losses in public utilities amounted to 13.3% of the produced (24.8 billion kwh) in 2005 and 11.5% (21.7 billion kwh) in 2010 (innovatsiina ukraina 2020: natsionalna dopovid). the main tasks to be solved in implementing a “green” economy in ukraine are: the formation of new “green” industries; modernization of existing production in order to substantially increase their resource efficiency/ productivity with simultaneous reduction of waste, emissions, and discharges that have a negative impact on human health and environment; introduction of a sustainable production and consumption model; formation of “green” infrastructure as a system of institutional support for “green” development in general and with an emphasis on primary types of economic activity; ensuring qualitative progress in modernizing the system of standards and their wide implementation by business entities; development of activities and support for projects aimed at waste disposal, emission and discharge reductions, provision of recycling; support for innovation development (in terms of developing and implementing eco-innovations); development of “green” employment and increase of “green” jobs (innovatsiina ukraina 2020: natsionalna dopovid). the adoption and targeted implementation of a “green” course in ukraine can significantly improve the situation, but the expected results depend on how effective and even aggressive the policy in this area is. several scenarios of development are worth considering, namely: a) maintenance of the tendencies that have developed in previous years (development as it is); b) concentration of efforts on progress in certain areas (non-systematic or departmental approach); c) concentration of all necessary resources on the complex “green” development (eyes on leaders). baltic journal of economic studies 363 vol. 4, no. 3, 2018 within the implementation of these goals in 2020 and 2025, the following results, estimated on the basis of “green” indicators, can be expected: carbon productivity of gdp: –under scenario “a” will reduce reaching by 2020 by 0.95 and by 2025 by 0.87 usd per 2005 ppp/kg со2; – under scenarios “b” and “c” will increase by 1.3 and 1.8 usd per 2005 ppp/kg co2; water productivity of gdp: –under scenario “a” will increase respectively by 2020 by 23 and by 2025 by 25 usd per 2005 ppp/m3; –under scenarios “b” and “c” will be respectively 24 and 32 usd per 2005 ppp/m3; the productivity of agricultural land relative to gva of agricultural sector: –under scenario “a” will decrease by 2020 by 45 and by 2025 by 52 usd per 2005 ppp/ha of agricultural lands; –under scenarios “b” and “c” will increase by 67 and 89 usd per 2005 ppp/ha of agricultural land; material (non-energy) productivity of gdp: –under scenario “a” will increase respectively by 2020 by 0.85 usd and by 2025 by 0.91 usd per 2005 ppp/ kg of extracted non-energy materials; –under scenarios “b” and “c” will be respectively by 1.2 and 1.4 usd per 2005 ppp/kg of extracted non-energy materials. the index of the ecological efficiency of ukraine, which characterizes the efficiency of ecosystem conservation – under scenario “a” will not be more than 47, while under scenario “b” will be no less than 51. in all cases, under scenario “c” by 2025, it can be expected that the “green” indicators will at least reach the current average for the oecd countries. according to the strategy, to stimulate economic development, the government focuses primarily on attracting investment and innovation, accelerating the development of high value-added production and introducing new technologies, upgrading production facilities and infrastructure. finally, the “green” economy should start developing first in certain regions of ukraine with a basis for development, as well as gradually spread throughout the state using innovative approaches. in this regard, the transformations that took place in the economy and the system of public administration of ukraine during the years of independence led to a number of negative consequences in regional development. first, this is an increase in the share of depressed regions from 24% to 60%, a decrease in the gross regional product per capita (less than 70% of the 1991 level), formation of the inefficient regional development management system, deterioration in the investment attractiveness of regions, increase in the complexity of investment involvement into regional development. to achieve the main goals of the state strategy for regional development for the period up to 2020 (reducing the differentiation of regions by the level of economic development, reforming the system of public administration by regional development, improving the competitiveness of regions), it is extremely important to stimulate investment in the economic development of the regions of the country and increase the efficiency of their use. investment strategy implementation tools (agreements on the regional development, state programs for overcoming the depression of certain territories, state programs for the development of transfrontier cooperation, state target programs in certain spheres of the socio-economic development, state target programs for the development of separate territories and other) are neither a comprehensive, effective system, nor used on regular basis, while legal norms do not conform to european standards. all of this requires a clear justification of scientific and methodological approaches and recommendations for the formation of an integrated mechanism of public investment management in regional development (dukov, 2018). therefore, ukraine needs to transform its economy into an economy competitive with the european states. nowadays, european states are aimed at the transformation of the economy into the most competitive in the world with innovation and knowledge dominating in development and economic growth, but not all countries can meet the requirements. the revision of the principles of the lisbon strategy contributed to the emergence of new priorities for the development of the eu and the introduction in 2010 of a new strategy called “europe 2020. a european strategy for smart, sustainable and inclusive growth.” the europe 2020 strategy focuses on the areas (europe 2020, 2010). such as the development of knowledge-based economy and innovation (no less than 3% of the eu’s gdp should go to r&d, at least 40% of young people must have university education, the proportion of students, who left school undergraduate, does not exceed 10%); sustainable development (efficient use of resources, consideration of environmental problems, competitive economy) (reduction of harmful emissions into the environment should be by 30%, reduction of greenhouse gas emissions should be by 20%, increase of the share of renewable energy in final consumption should be up to 20%); employment and social inclusion (75% of the population aged 20-64 must be employed, including women and able-bodied elderly citizens, reduction of the number of people living below the poverty line) (ivashchuk, 2013). 4. conclusions the young ukrainian state faces extremely complex and important tasks in the sphere of the economy. the integration into the european union depends largely on their solution. therefore, the implementation of the economic program of the newest ukrainian state should become a vital concern of every citizen of the country. for that reason, primary ukraine should focus on baltic journal of economic studies 364 vol. 4, no. 3, 2018 corruption combat and return of citizens’ trust to state bodies, judicial and law-enforcement system. until this is achieved, the economic instability and outflow of financial capital can be expected as negative consequences. in addition, the negative dynamics in the service sector, including education, healthcare, and the financial sector still cause slower pace of overall economic growth. moreover, weak external demand and conflict in the east of the country remained factors of deterrence. on the other hand, the growth of gross fixed capital formation, which exceeded 20%, was the main positive surprise in 2016, as it concerned mainly investment in manufacturing equipment, which indicated an improvement in the investment climate. nevertheless, ukraine will need additional external financing to cover the net repayment of external loans by the real sector, which is estimated at about $7 billion annually for 2017–2019. therefore, prolonged cooperation with the imf and other international lenders will remain important for restoring international reserves and increasing investor confidence. the gdp indicator in ukraine continues to remain at a rather low level, which is a significant problem that the country needs to overcome. ukraine should increase its production and export of finished products, which in the future will increase gdp. many factors offset the results of government actions aimed at increasing gdp, among them: a monopoly on the market of important sectors of the economy (alcohol, coal, fuel), corruption, market shadowing, the war in the eastern part of the country. to overcome all these problems and achieve efficiency in the future, significant and effective reforms are needed (khaietska, 2018). finally, now it is the time for the ukrainian economic development strategy on an innovative basis and the adoption of relevant legislative acts, developed and implemented in many countries of the world, including the countries of the european union, such as great britain, germany, poland (innovatsiina ukraina 2020: natsionalna dopovid, 2015). therefore, today it is necessary to analyse in detail the existing legislative framework that regulates innovative activity in ukraine, and implementation of effective proposals for the change of this framework considering the tasks of economic modernization on an innovative basis. to fulfil these tasks, transition of the national economy to the “green” model of development based on sustainable production and consumption, decoupling of economic growth and implementation of 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(in ukrainian) baltic journal of economic studies 10 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-10-14 development of providing public services in the economy as a guarantee of efficiency in european integration processes natalija berlach1, galina striiashko2 abstract. the transitional period, in which most of european and the world countries today are, is in need of renewal and continuity of integration processes in vital areas to which the economic sphere itself belongs. ensuring the introduction of universally accepted standards for the provision of public services in the economy into the practice of public administration actors is today a priority task of absolutely all countries that have declared in their basic law the principles of the rule of law and the rule by law, the recognition of a person, its life and health as the highest value. significant obstacles to the gradual and systematic nature of such activities, determined by the aggravation of social tension in society, external aggression, the peculiarities of domestic doctrine and legislation, which are formed using well-defined concepts, at the same time, today contain ambiguous provisions on content, in particular, the notion of public services, their varieties, procedures for their provision, performance indicators. the abovementioned causes the necessity to search for the best ways to eliminate the above inconsistencies, which lead to real inhibition of activities as to ensure the quality provision of public services in the economic sphere. only the cautious implementation of the principles and criteria for evaluating the provision of public services, as implemented in foreign countries (great britain, germany, the usa, france, hungary, the baltic states etc.), should take into account the peculiarities of social relations that have developed in a specific state, in particular, in ukraine one should take into account the complications associated with the current crisis in the political and international situation and, first of all, the urgent need for service orientation of public administration bodies in the economy and the financial sphere. at the same time, the presence of such features should not negatively affect the principle of gradualness and the continuity of the implementation of international standards in this area. methodology. the solution of the set purpose is realized using the cognitive potential of the system of philosophical, general scientific and special methods. the comparative legal method is dominant, which allowed determining the development directions of domestic statutory enactments in order to bring them in line with the generally accepted standards for the provision of public services, the experience of highly developed economies. methods of grammatical review and interpretation of legal norms have contributed to identifying gaps and other shortcomings in legislation that regulates the provision of public services in the economy, developing proposals for its improvement. practical implications. the introduction of effective, timely, and consecutive steps to ensure the provision of quality public services in the economy, based on the unification of the standards of developed countries in the world, which will mean the implementation of an important step towards the global economic crisis recovery. moreover, an example of the development of public service functions in european countries will demonstrate real achievements of an important task of reformation in countries with less developed democracy and insufficiently high investment climate index. key words: public service, administrative service, efficiency of service provision in the economy, quality of service provision, guarantees of effectiveness of public administration of the economy. jel classification: g18, o16 corresponding author: 1 state research institute of ministry of internal affairs of ukraine, ukraine. e-mail: 40natalija@gmail.com 2 university of the state fiscal service of ukraine, ukraine. e-mail: striashko@ukr.net baltic journal of economic studies 11 vol. 5, no. 1, 2019 1. introduction the key to the existence of a successful and socially oriented society is to direct the activities of executive authorities and local self-government bodies to ensure the maximum promotion of legal economic activity of subjects of various forms of ownership. the achievement of such a purpose is directly related today with the stability and quality of public services provided by the public administration in all countries of the world. national scientific doctrines contain provisions on the state and improvement of efficiency in this area. however, one cannot but recognize the significant differences in the indicators of the state and quality of public services provided, especially in the economic field, in european countries, which is associated with different historical conditions of their formation and development and the laws of development of their economic systems. it is also worth agreeing with the observations of certain scholars that public services in the field of the economy are considered in the scientific sources of the post-soviet camp (mostly legal) primarily as a process of servicing by individual actors, first of all by power entities (tylchyk, 2011) while in the world such services are interpreted as a result of serving the society through both public services and other instruments of state regulation (monetary policy, taxation policy, etc.). the above provisions actualize the necessity for the scientific and practical search for ways to increase the efficiency of providing public and not just administrative services in the economy in the unity of the purpose of their development, taking into account national characteristics and integration aspirations, by unifying procedural aspects. herewith, the study of the positive experience of individual countries in providing this direction of activities in relation to the prospects for its expansion becomes of special significance. 2. public service as a form of public administration activities to regulate economic relations in the usa, canada, singapore, korea, malaysia, hungary, electronic governance is being implemented within the framework of the society’s information development strategy, which is based on the coordination of priorities, circumstances, and resources available. such e-government is primarily aimed at providing electronic access to the most commonly used public services, developed by the united nations methodology, which involves four phases. thus, singapore became the first country where in 1999 a large-scale government portal ecitizen centre (www.ecitizen.gov.sg) was created. the portal supports several sections: business, defence, education, employment, healthcare, housing, law and order, and more. the estonian government, in the framework of the implementation of the concept of “e-government”, created and launched in june 2001 an internet portal “today i decide” (tana otsustan mina), through which any resident of the republic can take part in the governance – to express their opinion on what is happening in the country, to propose amendments to bills etc. in the usa, where ideas about the need to develop e-government were first announced at the state level in 1998, the launch of the firstgov.gov portal (now – usa.gov) was the result. today, this system covers almost 80% of all institutions. also in the usa, there is a nationwide program “first priority – customers”, which involves monitoring the quality of services provided and studying consumer expectations. in hungary, in 2001, an e-government program was introduced directed to integrate information technology development strategies and projects across sectors and government institutions to provide citizens with high-quality services. today, the office of the authorized minister coordinates 36 programs that are implemented in 17 state institutions, which ensures the transparency of governance and the quality of service provision. in malaysia, reforms in implementing the system of electronic public services are being introduced by the administrative modernization & management planning unit under the prime minister department (tyshchenko, 2010). the objectives of these reforms are to ensure effective intraand interdepartmental coordination and provide easier access to public services for economic entities and citizens. the process of improving the provision of public services is undoubtedly linked to adhering to the principle of customer feedback. regarding the current situation in ukraine, scholars and government officials state that the main challenge for the development of e-government in the state is to ensure the electronic interaction of state information resources. almost every state body faces the need for access to one or another state register or database. moreover, as the researchers rightly point out, such access is an important means to ensure the quality of the tasks performed by authorized agents, including in the field of economic security (pashko, tylchyk, kotuha, 2018). e-procurement, an electronic declaration system, common customs territory etc., need integration with many state registries and databases for their full functioning. the lack of electronic interaction of state systems does not make it possible to simplify the procedure for providing services and to comply with the requirements of the law of ukraine “on administrative services” regarding the prohibition on requiring from the subjects information or data that are in other authorities, that is, have already been provided by citizens earlier (resolution of the cabinet of ministers of ukraine “on approval of the concept for the development baltic journal of economic studies 12 vol. 5, no. 1, 2019 of the digital economy and society of ukraine for 2018–2020 and approval of the action plan for its implementation” as of january 17, 2018, № 67-р). as ya. kail rightly points out, the analysis of foreign experience of countries such as great britain, the usa, australia, canada, germany, hungary, poland, china, south korea, the netherlands, brazil allowed identifying the main approaches and principles used in the world practice of the system of providing public services in the economy; these processes are carried out within the framework of administrative reforms, the main directions of which are: the provision of state and municipal services on the basis of public administration standards; implementation of reforms with widespread use of information and communication technologies, improvement of the provision of public services using the principle of consumer feedback over a long period of time. the ideology of this strategy is to ensure greater transparency of the public sector for consumers and improve the quality and availability of public services and information about them (kail, 2010). as an example of the development of the use of information technology for providing services in the economy that greatly simplify access to such services, it is appropriate to consider activities of separate units of the state fiscal service of ukraine that presented an innovative project “check and drink”. within this project, software is proposed developed as a computer program, so all smartphone’s owners can install this application. the application enables checking the availability of enterprises’ licenses for the production and sale of alcohol, as well as licenses for the sale of tobacco products in a particular region. also, this application simplifies access to information about the business entity and its production quality and is simultaneously aimed at preventing the sale of excisable products to minors. each citizen can freely use the program and notify about violations, including on the part of representatives of fiscal bodies. users of the application can make a complaint about a violation of legislation by company or enterprise, namely, inform about problems with a fiscal check, the sale of counterfeit products, the sale of products to minors, and other violations. the complaint is immediately mailed to the body of the state fiscal service of ukraine and will be considered in the nearest future. it is envisaged that the program will enable creating equal business conditions, make the odesa region more attractive for tourists, and increase state budget revenues from the sale of the excisable group of goods (fighting the shadow turnover of the excisable group of goods can be using a smartphone). it should be noted that the european union in 1992 introduced the anglo-saxon concept “generic service” that means a minimal service of the established quality which is provided to any user by an affordable price. in addition to the concept “generic service” legislation of the european union also includes a concept of “services provided under the authority of state bodies” enshrined in the general agreement on trade in services. these services, according to the specified agreement, are defined as “any services provided neither on a commercial basis nor on competition among these services’ suppliers” (simpson, 2004). therefore, in the european union, in addition to paid services, there are a number of services provided by the state free of charge and determined by the state in special orders. 3. criteria for distinguishing public services in order to satisfy public interest in the economy the concept “public services” has its characteristic features, which can be as common for several countries, so have some differences taking into account peculiarities of the interior of one or another country. in france, public services are characterised by the main four criteria: satisfaction of public interest, continuity, adaptability, equal access for everyone to services (tykhomyrov, 2007), which can be used also in the process of analysing this category in other world countries, taking into consideration general trend of countries to satisfy human needs and direction to the improvement of quality of public services provided. we consider it appropriate to reveal the content of these criteria. continuity as the next criterion of public services is not less important. this criterion in france is represented in the following forms: liability in the event of a break in the provision of a public service; application of unpredictability theory; the right to strike of public service agents within the established limits, which should be preceded by corresponding notice in five days; forced engagement of personnel to perform work. adaptability is manifested in the fact that public authority when taking the obligation of direct management of providing a public service, assigns it to those agents that are able to adapt services to generally recognized needs that exist within the country at the moment. such a criterion is also quite important since the ability of the government to adequately react to urgent necessities of society is one of the preconditions for normal and economically and politically stable life of the country. equal access for all to public service should be understood as the impossibility to establish any discriminatory restrictions in relation to citizens consuming public services. any restriction, if the need for its existence appears, should be general in nature and apply to all without exception. equal access to public services is the reverse side of the rule of equality of all before public duties (tykhomyrov, 2007). the basic law of the federal republic of germany as of 23 may 1949 provides for the possibility of transferring the function of public authorities to provide services to private organizations, keeping control over this baltic journal of economic studies 13 vol. 5, no. 1, 2019 activity and the possibility of its legislative regulation (basic law of the federal republic of germany, 1949). the french constitution also provides for the possibility of delegating the functions of providing services to private organizations through the issuance of relevant regulations (the constitution of france, 1958). in the administrative system of france, there are administrative institutions that are more or less consistent with our idea of the department. one of the types of such institutions is the so-called services of national competence (services à compétence nationale – scn). the establishment of such services, in turn, was envisaged by decree no. 97-463 as of may 9, 1997, and the services themselves were legally removed from the central administration. the difference between these services from the central administration lies in the fact that they do not participate in the formation of public policy, do not control its implementation, and act solely as its technical tool. in addition to the services of national competence in france, there are a number of independent administrative authorities (autorités administratives indépendentes – aai), although they are government agencies, they have received full autonomy from the central administration in accordance with the law. as a rule, such independent administrative authorities may be called bureaus, commissions, councils, supreme councils, mediators, intermediaries (kozyrin, 1996). at the federation level in the usa, the system of executive authorities consists of the president, departments, government corporations, independent agencies, and other institutions. the legislation stipulates that among the abovementioned bodies, administrative bodies are only those that do not carry out military or foreign-policy functions and have the authority to make decisions on the legal status of individuals, that is, to decide on their rights and obligations. administrative management implies “not just execution but management mainly through regulation, carried out with the help of the delegated to administration rulemaking and judicial powers” (kozyrin, 1998). article 82 of the spanish constitution regulates the procedure for the delegation of functions of the state through the adoption of a special law, indicating the terms of delegation, its boundaries and objectives, principles and criteria. for this purpose, the constitution stipulates that “general cortes may delegate powers to the government to issue statutory enactments that have the force of law on certain matters, except as provided for in this constitution” (the spanish constitution, 1978). consideration of provisions of some statutory enactments of foreign countries can serve as an impetus for ukraine to create a similar system of regulation of the sphere of providing public services, structure and organization of public administration bodies. alongside with that, it should be noted that in the event of a decision on the feasibility of introducing such an experience in ukraine, it is necessary to conduct a balanced analysis of the possibilities of implementing this experience, in whole or in part, as well as the usefulness of taking into account the provisions of the legislation of spain regarding the timely delegation of functions (manychil, 2012). 4. conclusions the analysis of scientific and normative sources for the provision of public services in the economy allows pointing out that the well-considered implementation of the principles and criteria for evaluating the provision of public services in foreign countries (great britain, germany, the usa, france, hungary etc.) should include consideration of the peculiarities of social relations developed in a particular state, in particular, as exemplified by ukraine (one should take into account the complications associated with the current crisis in the political and international situation). at the same time, the presence of such features should not negatively affect the principle of gradualness and continuity of the implementation of international standards in this area. the foreign experience of increasing the efficiency of providing public services in the economy indicates that these issues are most effectively solved within the framework of special programs for the development of public administration of the relevant area, in terms of the recognition and gradual implementation of one of the main tasks – raising the standards of public services, improving their organization and distribution, promoting entities with significant achievements in the provision of public services, in particular, in the economy. investing in such projects may involve associations of business entities of individual regions, subject to the principles of transparency and voluntary. the directions of improvement of the domestic legislation concerning the provision of public services taking into account foreign standards are singled out: a) the development of the theory of public services, that is, the consolidation of conceptual and categorical provisions, principles of public services, criteria for the quality of their provision etc. in the concept of public services; b) unification of legal regulation of administrative procedures by adopting the relevant legal act; c) consolidation in legal acts of types of legal guarantees of ensuring the legality of the provision of public services: control over the activities of public administration entities in providing public services; the prosecution of public servants for refusing to provide a certain type of public service, etc.; d) bringing in line with european experience requirements for adoption, amendment, cancellation, and appeal of individual administrative acts that are the result of providing public services; e) further study of the role of discretion of public service providers and limitation of abuse of powers in the process of their implementation. baltic journal of economic studies 14 vol. 5, no. 1, 2019 references: tylchyk, v. (2011). administrative and legal mechanism for the resolution of tax disputes: thesis for cand. sc. ( jurisprudence): 12.00.07. tylchyk viacheslav viacheslavovych. irpin. tyshchenko, o. (2010). international experience in implementing e-governance. retrieved from: http://ena.lp.edu.ua/bitstream/ntb/14125/1/82_176-177_maket-ena-ntb%28099%29.pdf tylchyk, o., pashko, p., kotukha, o. (2018). ontology of scientific cognition of shadow economy and economic shading. baltic journal of economic studies, 4(2), 151-158. doi: 10.30525/2256-0742/2018-4-2-151-158 on approval of the concept for the development of the digital economy and society of ukraine for 2018-2020 and approval of the action plan for its implementation: order of the cabinet of ministers of ukraine as of 17 january 2018 № 67-р. retrieved from: https://www.kmu.gov.ua/ua/npas/pro-shvalennya-koncepciyi-rozvitku-cifrovoyiekonomiki-ta-suspilstva-ukrayini-na-20182020-roki-ta-zatverdzhennya-planu-zahodiv-shodo-yiyi-realizaciyi kail, ya. ya. (2010). foreign experience of standardization of state and municipal services. national interests, priorities, and security, 21(78), 71-78. fighting the shadow turnover of the excisable group of goods can be using a smartphone. press service of the state fiscal service of ukraine. retrieved from: http://sfs.gov.ua/media-tsentr/novini/248812.html simpson r ., synkov o. m. (2004). regulation of services of general interest in the eu. study guide. k.: iir knu named after taras shevchenko. tikhomirov, yu. a. (2007). public services and law: scientific and practical guide. m.: norma. basic law of the federal republic of germany as of 23 may 1949. retrieved from: http://www.proektua.org/ uploads/zakon/constitution_of_germany.pdf the constitution of france as of 3 june 1958. retrieved from: http://www.megabook.ru/article.asp?aid=641796 kozyrin, a. n. (1996). administrative law of foreign countries. study guide. m.: publishing house “spark”. kozyrin, a. n. public administration in foreign countries. retrieved from: www.kozyrin.ru/userfiles/documents/ articleak.pdf the spanish constitution as of 27 december 1978. retrieved from: http://tehnorai.su/pr/konstituciya-ispaniiskachat-tekst.html manylich, l. i. (2012). public services in the activity of the state tax service of ukraine: organizational and legal principles [text]: thesis for cand. sc. ( jurisprudence): 12.00.07. manylich liudmyla ivanivna; national university of life and environmental sciences of ukraine. kyiv. baltic journal of economic studies 227 vol. 4, no. 1, 2018 corresponding author: 1 faculty of law, zaporizhzhia national university. e-mail: t_deputy@ukr.net 2 department of constitutional and labour law, zaporizhzhia national university. e-mail: verlos79@gmail.com 3 department of criminal law and justice, zaporizhzhia national university. e-mail: pyrozhkovaznu@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-1-227-234 a gift for a public servant – a manifestation of respect, reward or a means of unlawful influence tetiana kolomoets1, natalia verlos2, yuliia pyrozhkova3 zaporizhzhia national university, ukraine abstract. the article, based on analysis of scientific works and legislation of different countries, singles out problematic issues of legal regulation of relations connected with the reception of gifts by public servants. it is substantiated that in modern conditions a gift, unfortunately, can be used not only as a manifestation of respect and gratitude but also an unreasonable enrichment of public servant and unlawful influence on him, his official activity. fragmentation, contradiction in the content of the “gift” legislation, its saturation with its evaluative and generalizing provisions predetermines the existence of “grey” zones in the legal basis of the use of a gift resource for public servants. analysing existing prohibitive, restrictive, permissive models of “gift relations in the public service”, the expediency of introducing an absolute prohibition on gifts for public servants is justified. it is proposed to provide exceptions for “ordinary” gifts, “official” gifts, and gifts on the occasion of special personal events, with the definition of limits of allowed behaviour. the mandatory declaration of all gifts received by a public servant, indicating its sources, seems expedient. the normative definition of a “gift” is proposed to be fixed in a special anticorruption legislative act, focusing on its disinterested symbolic, non-systematic nature, the legitimacy of acts of the servant as the basis for the gift, and the absence of any arrangements for its provision between the public servant and the “donor of a gift.” as a result, it eliminates its mistaken association with unlawful benefits, public servant’s labour compensation, incentive, and indemnity payments. taking into account the specifics of “official” (“business”) gifts, detailed regulation of rules of conduct with them is proposed, including the possibility of their redemption, with the priority of realization and protection of public interest. the necessity of unification of legal principles of regulation of “gift relations in the public service” and coordination of provisions of anti-corruption (in the part of special prohibitions and declaration as a means of preventing conflicts of interest in the public service), tax (in terms of declaration of incomes and determination of the legality of their sources), and tort (liability for breach of established regulations) legislation is grounded. it is considered appropriate to form uniform legal standards for the implementation of “gift policy in the public service.” key words: reward, prohibition, corruption, restriction, reception, gift, gift relations, public servant, public service, rules, unlawful acts, donor, conflict of interest. jel classification: d73, h83, d74 1. introduction in the search for the best means of preventing and counteracting corruption offenses and corruptionrelated offenses, an in-depth analysis of the traditional means of prevention of the conflict of interest in the professional activities of public servants is important. among the latter, a prominent place belongs to special restrictions or special prohibitions on the reception of gifts by the abovementioned persons (special subjects, taking into account the peculiarity of their legal interest and sphere of professional activity) as these gifts are usually used in conjunction with the declaration of these persons of their income and expenditures (including gifts as a part of the first one). the fragmentation of the statutory regulation of relations related to the implementation of the state’s “gift policy” with regard to public servants, to the dispersion of the relevant principles in numerous legal acts that are diverse in terms of legal force, oversaturated by appraisal concepts, to the simultaneous absence of clear criteria for determining models of lawful and unlawful behaviour, including concerning the declarations for gifts, predetermines baltic journal of economic studies 228 vol. 4, no. 1, 2018 the prevalence of violations of special restrictions by public servants, in particular, with the avoidance of legal liability. elimination of such a state of affairs should play the role of the priority task of the current regulatory and law-enforcement activity of any state, taking into account the positive existing experience, approved by time and practice, and the formation of uniform legal standards of “gift relations in the public service.” the issue of regulation of “gift relations in the public service” attracted the attention of a considerable number of legal scholars, representing various branch specialties. this is quite justified, given that in different countries, corresponding relations are subject to the regulation of various branches (administrative, criminal, etc.). some aspects of legal regulation of “gift relations in the public sphere,” definition of permitted, prohibited behaviour models were covered in works of a. hafurova, d. paihin, v.  vasyliev, s.  zymnieva, h.  chumakova, s.  bonsing, l.  langsted, i.  bykieiev, k.  berdnikova, v.  nastiuk, v.  bielievtsova, o.  klok, o.  dudorov, m.  khavroniuk, and others, which were used when writing this paper. at the same time, despite all the diversity and plurality of sources, by this time, there are no complex works with a comparative legal analysis of legal provisions, the practice of law enforcement, proposals for the development of common legal standards of “gift policy in the public service”, which determines the relevance and significance of in-depth scientific thematic study. the purpose of the paper lies in distinguishing the problem issues of “gift policy in the public sphere” on the basis of analysis of various sources, thus identifying the real resource of the gift and formulating specific proposals on the legal regulation of relations of gifts’ reception by public servants, their declaration, eliminating the preconditions for conflicts of interest in the public service. 2. key research findings in order to find out what is really a gift for a public servant, one should focus first of all on what should be considered a gift. the analysis of the legislation of different countries, scientific works of representatives of various scientific schools allows suggesting that the legislator in different countries clearly delineates a gift in the aspect of private law regulation (contractual relations, including with the participation of public servants, when the latter acquire the status of ordinary subjects of contractual relations, without emphasis on the specifics of their legal status, the peculiarity of their professional activity) and special gift relations in the aspect of anti-corruption regulation (with the emphasis on attaching a gift to the special status of a public servant, to his professional activities, oriented towards satisfying public interests). emphasizing “special gift relations” associated with public service, the legislator fixes the definition of a gift. thus, in ukraine, a gift is considered to be a “cash or other property, advantages, benefits, services, intangible assets that are provided (received) free of charge or at a price below the minimum market” (article 1 of the law of ukraine “on prevention of corruption”). at the same time, at the level of by-laws, the official legislative definition may be elaborated. thus, in particular, the rules of ethical conduct and corruption prevention in the bodies of the state fiscal service, approved by the order of the sfs on 01.12.2017, no. 979, stipulate that the gift should also be considered “free education, transportation, accommodation, and food, both those provided directly, and through the purchase of tickets, subscriptions, or reimbursement after payment was made”. in the usa, a gift is considered as a “monetary remuneration, refrain from any actions or other actions, items that may have a monetary expression” (standards of ethical conduct for employees of the executive branch, approved by the regulation of the united states office of government ethics). the same document clarifies that gifts may be expressed “... in the natural form, or in a different form (reimbursement of expenses, purchase of tickets, etc.)”. canada’s law provides that a gift for a public servant can be considered any item, service, action, etc., if it can be expressed in monetary form (bikeev, 2013). analysing the proposed definitions, it can be argued that, despite the variety of external forms of the expression of a gift, its main features nevertheless are: a) the relationship with a special subject – the person to whom the gift is offered, as well as: b) its free-ofcharge basis (or sometimes concealed minimum cost), which makes it impossible for the presentee to perform a similar action in relation to the person who proposes (provides) the gift; c) the legitimacy of the presentee’s actions as a basis for the emergence of gift relations. several clarifications should be made. undoubtedly, the spontaneity of actions of the person who provides the gift (“gift donor”), the absence of any prior agreements between the subjects of gift relations is a specific feature that is inherent in relations with the so-called “special gift,” “gift relations in the public service,” and this has repeatedly drawn attention of legal scholars. the absence of a preliminary arrangement is related to the lack of the obligation of the gift’s recipient to take any action in relation to the presenter (gift donor). it is the selfless nature of “gift relations in the public sphere” that is their specific feature. it is entirely possible to support the position of i. bykieiev that the gift in this aspect should be regarded as “a thing, a material object, which the donor, on his own terms and for free, presents in order to provide pleasure or the benefit to the recipient of a gift ... at the expense of the gift the donor initiates the legal relations, sends a reminder of himself ” (bikeev, 2013). giving a gift, the donor does not expect from a public servant any reciprocal action, a reverse adequate response. that is why it is quite legitimate to regulate at the legislative level the prohibition for public servants baltic journal of economic studies 229 vol. 4, no. 1, 2018 to receive gifts directly related to their professional activities in the realization and protection of public interests, as well as gifts from subordinates, which may predetermine a certain “need for a reverse adequate response,” which is a kind of encroachment on the “purity of official activity,” the impartiality and fairness of the latter. such a prohibitive model of gift relations is enshrined in the laws of many states. for example, in the usa, ukraine, germany, denmark, finland, china, the netherlands, and other countries, it is prohibited to receive gifts that are directly related to professional activities and from subordinates. for violation of the relevant provisions, criminal liability is provided. in poland, such prohibitions apply to persons assigned to political positions, and officials in elected positions in local self-government bodies, and in hungary – members of parliament (manuel villoria, staffan synnerström, jános bertok, 2010, p.  20). in moldova, the ban on the receipt of gifts extends to civil servants for the entire period of their official duties (gafurova, 2015), and the prime minister of latvia is able to receive all gifts given to him during the exercise of his powers only after leaving the post and only in terms of their redemption (gafurova, 2015). such a prohibition seems to be quite justified, given that the gift to a public servant, as a rule, is not granted “for no special reason.” the practice of analysing “gift relations” suggests that “nobody gives public servants, especially regarding their business activities, gifts for no particular reason” (zimneva, chumakova, 2015). they are provided before or after the satisfaction of certain “interests,” although in practice these facts are difficult to prove. however, “gift relations” are preceded by or are the result of relations involving the exercise by a public servant of his or her powers regarding elements of the legal status of the donor or persons associated with him. it is these gifts that pose a threat to the “purity of service” and should be prohibited for any public servants. however, in some countries, “gift giving relations” in the public service are legally enshrined, although there are few such examples. thus, in particular, in japan, exchanging gifts between public servants (“okaeshi”) (translated from japanese – “return”) is foreseen. upon receiving a gift, a public servant is obliged to give the donor (“actually return”) a gift of approximately the same value (bikeev, 2013). without denying the specifics of such a model of “gift relations in the public service” and its admissibility for japan, nevertheless, it should be assumed that there are a large number of problems related to its practical implementation and, therefore, the expediency for borrowing by other countries. it is also necessary to focus on the legitimacy of actions of a public servant as the basis for the emergence of “gift relations in the public service.” it is the lawful nature of acts (actions or inaction) of public servants that prompts the donor, and in this aspect, the gift should be distinguished as a reaction (before or after) to lawful acts and unlawful benefits as a reaction to unlawful acts of a public servant. the gift is associated with “positive” and unlawful benefit – with the “negative” acts of a public servant. that is why the gift can be regarded as a manifestation of “respect, gratitude, recognition of acts of a public servant” (zimneva, chumakova, 2015). at the same time, it should not be considered as a promotion in civil service law, which is directly related to “public approvals, the recognition of personal merits, successful and faithful fulfilment by the person of his or her official duties, the results achieved with the provision of a person with material, moral, status, and other benefits, values, guarantees, privileges, etc.” (armash, berlach, bolokan at al., 2017). it is not worth to equate the gift with the payment for labour as a whole, taking into account the specific features of the latter, as well as a compensation payment, which may also have a one-time nature, but significantly different grounds, procedure, subjects of provision. in the legislation of some foreign countries, a clear distinction is made between remuneration and a gift. thus, the law of the russian federation on 25.12.2008 “on corruption counteraction” provides for the prohibition to receive remuneration (loans, monetary and other remuneration, services, payment for entertainment, rest, transport expenses) and gifts not stipulated by the legislation in connection with the performance of official (job) duties (chernogor, zaloilo, ivaniuk, 2017). interesting is the ratio of a gift with a present, souvenir, the mention of which can be found in the legislation of many foreign countries, as well as in the works of legal scholars. for example, the code of conduct for senior civil servants in the brazilian federal executive branch (nfa code) – certificate of intent no. 37 on 18.08.2000 and presidential decree on 21.08.2000 – prohibits any remuneration and gifts (article 9), travels and signs of hospitality (article 7) (vasileva, 2015). the explanation of the ministry of justice of ukraine on 28.07.2011 at one time stipulated that “the permitted gift may be ... manifestations of hospitality, namely: invitation for coffee or dinner on a modest scale ... for establishing business relations and strengthening working relations” (kolomoiets t.o. restrictions on the reception of gifts by persons authorized to perform functions of the state or local self-government under the legislation of ukraine: scientific and practical commentary, 2018). in great britain, members of parliament or their spouse or partner are required to declare any gift, service, remuneration or hospitality worth more than 1 percent of parliamentary salary if in one way or another it is directly related to membership in a parliamentary chamber (manuel villoria, staffan synnerström, jános bertok, 2010). at the same time, it is allowed to receive “notebooks, calendars, and other stationery products of “insignificant” value with the logos of the producing companies,” which allows them to be considered as baltic journal of economic studies 230 vol. 4, no. 1, 2018 advertising products. in the republic of belarus, it is allowed to receive “... souvenirs during official events” (kolomoiets t.o. gifts for public servants in ukraine: prohibition, restriction or permission as an optimal model of legal regulation, 2018). the code of conduct for eu commissioners in section 1.11 establishes a prohibition on signs of hospitality, with the exception of those provided during official diplomatic events and as signs of courtesy (though, again, the appraisal concept is used). the participation of a commissioner in any event on an invitation should not be considered as hospitality (sten bonsing, lars langsted, 2013). in brazil, in the code of conduct for senior civil servants in the federal executive branch, bans on gifts, rewards, signs of hospitality and services are fixed in general in separate articles, with the listing of their possible external forms of manifestation, though without official definitions. in this regard, in the case of gifts (“brindes”), in the resolution of the commission on public ethics cep no. 3/00/2000), the nfa code stipulates that they are provided “as a sign of courtesy, a marketing tool, on the occasion of events of historical or cultural character” (vasileva v.m., 2015, p. 176-177). a souvenir (from french souvenir, latin subvenio “come”) is traditionally considered as a kind of gift in memory (a certain remarkable event, a memorable date, achievements in sports, science, culture, national or local specifics, etc.), a present (from old slavonic гість “guest”) – as a thing which a person who “enters the house, transfers to the owner, to get “good food” (pryma, 2016). consequently, a souvenir, a present, and a gift form a single thematic conceptual series, while closely related to “the subjective judgment of a person based on the historically established customs, rituals, traditions, tastes, historically predetermined guidelines of the public consciousness concerning benevolent attitude towards the person, moral and ethical norms of communication” (kolomoiets t.o. restrictions on the reception of gifts by persons authorized to perform functions of the state or local self-government under the legislation of ukraine: scientific and practical commentary, 2018). they are associated with symbolism, insignificant value, small size, and unsystematic provision (reception). at the same time, taking into account the specifics of the subject of obtaining gifts and his or her professional activity, it is impossible to underestimate the possibility of the gift’s influence on the “purity” of the relevant activity. especially since the legislation is over-saturated with such “grey zones” (sten bonsing, lars langsted, 2013), which create the basis for the diversified use of the gift resource for a public servant. unfortunately, the absolute prohibition on the reception of gifts by public servants is not provided for in the legislation of all states. the prevailing is the so-called “mixed” model of “gift relations in the public service,” which, along with the general prohibition, also contains special restrictions (model of behaviour with certain limits) for the receipt of gifts by the specified persons, which creates certain problems in practice. due to the fact that the criteria for determining the limits of permissible conduct are not clear in the majority and the provisions that determine these limits are oversaturated by evaluative and generalized provisions, in practice there is a variation in the discretion of the subject of interpretation in the observance of special restrictions, control over the latter, including in relation to the simultaneous use of other means to prevent conflicts of interest in the professional activities of a public servant. for example, the ukrainian legislation provides that the abovementioned persons can receive gifts, if they are not prohibited and also comply with generally accepted notions of hospitality, correspond to the value (no more than one living wage for the able-bodied person on the day of receiving the gift), source (from the same person or group of individuals), and periodic criteria (once or several times during the year from one source) (on corruption prevention: law of ukraine on 14.10.2014). the cost boundaries of “gift relations in the public service” are also characteristic of the legislation of foreign countries. for example, in france, the cost limit of a gift is equal to 35 euros; in great britain, the cost of a gift to a member of the government or to a designated person cannot exceed 140 pounds sterling. a person can keep a gift of greater value if he or she pays to the state treasury a difference between its real value and allowed (bikeev, 2013). in this case, parliamentarians and civil servants cannot accept any gifts (manuel villoria, staffan synnerström, jános bertok, 2010). in singapore, ministers and their family members can take gifts of up to 50 singapore dollars; more expensive gifts can be redeemed through an auction (bikeev, 2013). in the republic of belarus, public servants can accept gifts during official protocol events, if their value does not exceed “five basic values” (kolomoiets t.o. gifts for public servants in ukraine: prohibition, restriction or permission as an optimal model of legal regulation, 2018), in the russian federation, the cost of a gift should not exceed three thousand roubles, and in the usa – twenty dollars per donor in each particular case, however, the legislation contains clarification that the total cost of gifts from one source during the year (hence, emphasis on all the features of the allowed gift) cannot exceed fifty dollars (however, these limits do not apply at all to cash money) (standards of ethical conduct for employees of the executive branch: regulation of the united states office of government ethics). somewhat different are the cost limits for gifts for senators and congressmen – two hundred and fifty and three hundred us dollars respectively, and in brazil, the value limit for any gift cannot exceed one hundred reals (vasileva, 2015). despite some certainty of the criteria of the value sign of the gift, unfortunately, it is impossible to acknowledge such a practice of rule-making as positive. baltic journal of economic studies 231 vol. 4, no. 1, 2018 this is determined by the fact that the legislator does not adhere to the unity of legal principles of “gift relations in the public service.” by offering in one regulatory legal act criteria for determining the maximum cost of a gift granted to a public servant, the legislator in another act (and sometimes in the same) offers an approximate (and sometimes exhaustive) list of those objects, services, benefits, which in any case are allowed as a gift. for example, the regulation of the united states office of government ethics includes the following: soft drinks, light snacks served separately from the main meal, greeting cards, honour badges, memorable gifts for the presentation of the institution, awards for the winners of the competition, etc. (standards of ethical conduct for employees of the executive branch: regulation of the united states office of government ethics). i. bykieiev, analysing the relevant question, forms a list of those items that are usually considered as allowed (at the level of sub-legal regulation) of gifts: “books, booklets, albums, some art products, flowers, candies, products of the donor himself or things, which are brought from another territory ... sometimes items of home appliances that cause associations” (bikeev, 2013). however, some countries have chosen a slightly different vector of legislative regulation of “gift relations in the public service,” generally avoiding the valued criterion of the allowed gift. for example, in china, at the legislative level, a list of prohibited items to receive as a gift is secured. these are virtually all items, with the exception of books. violation of established prohibitions is considered as a crime, which provides for criminal liability in the form of a death penalty. in addition, cases of contradictory and conflicting legal principles governing the regulation of “gift relations in the public service” are uncommon, when the legislator actually creates the preconditions for the possibility of receiving gifts by public servants without observing the requirements regarding their value, periodicity, sources of income. thus, the basis for the possible use of the gift resource as a measure of unlawful influence on the “purity” of the public service, as well as unjust enrichment of the public servant, is created. for example, in the russian federation there is a collision of the provisions of three statutory legal acts, namely: the civil code, which, along with the general prohibition to receive gifts by persons authorized to perform functions of the state or local self-government, at the same time allows the person to receive “ordinary gifts,” the value of which does not exceed three thousand roubles, the criminal code, which provides for liability, but does not specify the minimum amount of wrongful remuneration, as well as a special anti-corruption law, which establishes an absolute prohibition on receiving gifts and other remuneration by public servants. it is interesting to note the experience of denmark, the legal position of its supreme court in relation to the conflict of provisions regulating the principles of “gift relations in the public service,” as well as enshrined in various statutory legal acts (namely, the criminal code and a special anti-corruption law) is that there is the “limit of tolerance of violations,” which can be equal to 40% of the cost of the allowed gift. accordingly, a public servant who has received a gift, which value exceeds the cost of a permitted (for example, jubilee) gift by 40%, should not be criminally liable (sten bonsing, lars langsted, 2013). along with the clear criterion for determining the value limit of a gift for a public servant, the law of countries can simultaneously contain other provisions, namely: “minimal gifts,” “traditionally small gifts,” “gifts at very low cost,” “socially acceptable gifts,” “small gifts for special events,” etc(sten bonsing, lars langsted, 2013). certain questions also arise in relation to monitoring compliance with the law in determining the periodicity of accepting gifts by the person during the year, thus eliminating “systematic gift relations in the public service,” which significantly threaten the impartiality and objectivity of the professional activities of a public servant. as already noted, in the legislation of many countries, gift relations are regulated with an emphasis on the frequency of their occurrence during the year and the total value of gifts for the whole year, obtained from one source. for example, in ukraine, a public servant can receive gifts for a year, the aggregate value of which does not exceed the maximum limit, or one time, or several times from one source. similar provisions are enshrined in the laws of the usa, brazil, great britain, and other countries. in order to ensure control over the observance of these provisions of the legislation, it is fully justified to introduce a unified registration of gifts received, with the indication of its sources (“gift donor”) and the date of receipt. accepting that the practical implementation of the said proposal is connected with additional formal procedures, time expenditures, etc., as an alternative, it is possible to offer mandatory declaration by all public servants of all gifts received during the year, indicating the sources (“donors”) of their provision (this practice already exists in latvia, sweden, and finland (on the issue of attitude to gifts within the system of fighting corruption). the contradictory nature of provisions, the oversaturation of legislation with the evaluative and general provisions on determining the value limits of gifts for public servants, as already noted, predetermines the prevalence of the practice of receiving gifts, which “unjustified” nature (namely, this term is basic in relation to the definition of grounds for accepting gifts by the relevant subjects) is difficult to prove. that is why the prohibitive model of “gift relations in the public service” seems more appropriate since it clearly defines the impossibility of any acts related to gifts (fixes “taboo” in relation to any gifts for any public servants), eliminates grounds for the variability of the interpretation of statutory provisions, promotes the unification of enforcement, simplifies the baltic journal of economic studies 232 vol. 4, no. 1, 2018 control and the possibility of bringing the perpetrators to legal liability for violation of the established prescriptions. this model will eliminate the grounds for the so-called “indirect gifts” (which are actually addressed to a public servant but are provided to their relatives); they are also referred to as “gifts through other persons.” introducing, along with such a prohibition, the duty to declare all gifts received, indicating the sources of their receipt, as by public servants so by their close persons, can actually strengthen the principles of transparency of “gift relations in the public service,” contributing to the “purity” of the public service, eliminating the preconditions for using the gift as a means of unlawful influence on a person. public officials, like other individuals, can also receive gifts that are not directly related to official activity, including from their close ones. at the same time, such gifts are not limited by their value, periodicity, and sources. this practice is widespread in all states, which is fully justified (so-called “normal gifts,” “ordinary gifts,” “private gifts” etc.), and provides for the mandatory declaration of gifts received since the latter is income received. it is considered expedient to introduce the indication of the source of gift’s receipt, along with the obligation to declare the corresponding gift by a public servant. in turn, in case of doubts as to the legality of obtaining such a gift, it allows asking certain questions to the “gift donor.” it is important to ensure the unification of the legal basis for declaring gifts received by public servants by extending the obligation to declare to all (and not only those whose value exceeds the limits) gifts, since all this is a person’s income, although, for example, in the united kingdom, members of the parliament must declare only gifts worth more than one percent of their salary, and members of the german parliament – five thousand euros, while their colleagues from france must declare all the gifts regardless of their value (manuel villoria, staffan synnerström, jános bertok, 2010). the regulation of such a proposal will eliminate the practice of the existence of “grey zones” in the legislation on the declaration of gifts, when the maximum price limit of a gift allowed for a public servant significantly (several-fold) differs from the minimum value limit of the gift that is to be declared by this person (for example, in ukraine the first position is equal to one (two) living wage for an able-bodied person, and the second one – to five, and hence there is a question regarding gifts that on a cost basis are between these two positions). since a gift for a public servant is an income, including generally acknowledged bonuses, prizes, privileges, winnings in a lottery, etc., in order to eliminate any doubts as to the “purity” of his or her business activities, all gifts accepted should be declared. it is appropriate to ask whether there may be exceptions to the general prohibitive model of “gift relations in the public service”? yes, besides the so-called “private gifts” (“normal gifts,” “ordinary gifts,” that is, gifts from close persons, with the confirmation of the last legal sources of funds for their provision), public servants may well receive gifts “on the occasion of certain special events.” for example, in the usa, the law provides that public servants can accept, including from their colleagues, subordinates, gifts on the occasion of “special events of personal nature – marriage, birth, retirement, transfer to another job, etc.” (§2635.304 of the regulation of the united states office of government ethics). in ukraine, the provisions of such content are regulated with the possibility of accepting gifts by public servants, including from subordinates, concerning special events of personal or traditional importance, public or professional holidays (paragraph 25 of the rules of ethical conduct and corruption prevention in the bodies of the state fiscal service, approved by the order of the sfs on 01.12.2017, no. 979). however, such exceptions should stipulate statutory value limits of the gift, the exclusiveness of the character of the gift, and the obligatory declaration by the public servant of all gifts received since this is also his income. it is also quite right to question the expediency of extending the prohibition on the reception of “business” (“official”) gifts or their declaration. among all the diversity of gifts, the main place is occupied by the so-called “business,” they are also called “official” gifts. these are gifts, accepted by public servants as representatives of the state, territorial community, state, communal enterprises, institutions, organizations, in the performance of their duties during official events. the specificity of such gifts also determines the peculiarity of the statutory regulation of principles of accepting them (a separate legal act, a separate section of a special legal act, etc.). it is unlikely that it is expedient to foresee a ban on their receipt, taking into account the specifics of these gifts, which, although directly and specifically provided to a public servant, are the property of the state, the community, etc. at the same time, the rules for handling such gifts require a detailed definition (transmission terms, the procedure for issuing the transfer, storage, destruction, etc.), as well as the responsibility for their violation. given that these gifts are not revenue for public servants, it is also inappropriate to introduce a duty to declare them. however, it is quite possible to regulate the issue of the redemption of a given gift by a public servant (subject to a certain procedure), unless this is detrimental to the public interest. this practice exists, for example, in latvia, singapore, and other countries. given the weighed detailed regulatory regulation of such relationships, it is quite possible to reduce the costs of the state, the community, etc. for the storage of the corresponding gifts and simultaneous provision of additional filling of the corresponding budgets. in order to eliminate the preconditions for considering “business” (“official”) gifts as a means of undue influence on public servants, their unjustified enrichment, it is necessary to ensure baltic journal of economic studies 233 vol. 4, no. 1, 2018 officiality, transparency (first of all with regard to the source of receipt) of “gift relations,” thereby eliminating the privacy manifestation (personalization of the gift, its encouragement, financing, including in any form, size, on the part of private persons, etc.). a well-defined statutory regulation of this issue should contribute to this. 3. conclusions the current state of legal regulation of “gift relations in the public service” predetermines the presence of a significant number of problematic issues that do not allow, unfortunately, on the one hand, to fully use the gift resource as a manifestation of respect, gratitude, recognition to a public servant and, on the other hand, create preconditions for considering it as an unwarranted reward of such a person and means of unlawful influence on him. the lack of unified legal standards for regulating the relevant “gift relations” leads to the dispersion of the consolidation of legal principles in various legal acts, the provisions of which differ not only in a fragmentary nature, as a consequence – many “grey zones,” but also contradictory in nature. the collision of the content of the relevant acts, the saturation of the latest with valuation and generalized provisions, which creates preconditions for subjective discretion in the process of interpretation and enforcement, is rather widespread. the lack of a formulated thematic conceptual framework, as well as a systematic approach to the normative consolidation of the bases of using the resource of prohibitions and restrictions on the reception of gifts by public servants in the aspect of behavioural patterns, criteria for expressing the limits of the permitted cost together with the declaration of these gifts, results in widespread practice of obtaining unwarranted gifts by public servants, unlawful influence on the “purity” of their professional service activities, as well as the avoidance of legal liability by guilty persons. in order to eliminate this state of affairs, it is considered expedient: 1) statutory definition of a gift in a special anti-corruption legal act, with an emphasis on the legitimate nature of acts of a public servant as the basis for the possible provision of the gift, as well as the selfless symbolic, non-systemic nature of the gift itself and the spontaneity of the donor initiative (“donor of a gift”). thus, providing a separation of gifts for a public servant from unlawful benefits, promotion, remuneration for labour (payment for labour), compensation payments. 2) to formalize the prohibitive model of “gift relations in the public service”, removing the influence on the “cleanliness of the official activity” of the person. as exceptions to the general rule, provision should be made for: a) the reception of “private gifts” by public officials (“ordinary gifts,” “normal gifts”), that is, gifts that are completely unrelated to his or her official activity, including from the relatives, with the obligatory indication of sources for gifts by the latter; b) accepting “official” (“business”) gifts, which, although are issued by specific public servants in the course of their official activities during official events, are the property of the state, the community, etc. it is expedient to see a detailed statutory regulation of the rules of handling such gifts (including the possibility of their redemption), and the bases of legal liability for their violation; c) reception of gifts on the occasion of special personal events of a public servant, with the definition of an approximate list of such events, the allowed cost limits of the gift, the exceptional nature of the gift. 3) the normative consolidation of an obligatory declaration by all public servants of all received gifts, indicating their sources, as well as determining the principles of legal liability for non-compliance with these provisions. 4) unification of statutory principles of regulation of “gift relations in the public service” and hereby the harmonization of the provisions of anti-corruption legislation in the part of special prohibitions and declaration of incomes of public servants, tax legislation in relation to declaring incomes of public servants and “donors of gifts” for them, as well as tort law in part of determination of the principles of legal liability of the perpetrators for violation of the relevant legal requirements. it is the practical implementation of the relevant proposals that will promote maximum transparency, certainty of “gift relations in the public service,” use of the gift resource as a manifestation of respect, gratitude to the public servant, and elimination of any grounds for considering it as a means of unjustified enrichment of a public servant or unlawful influence on his or her official activity. references: rules of ethical conduct and corruption prevention in the bodies of the state fiscal service, approved by the order of the sfs on 01.12.2017 № 979. url: http://sfs.gov.ua/baneryi/protidiya-koruptsii/antikoruptsiynaprograma-dfs/291898.html standards of ethical conduct for employees of the executive branch: regulation of the united states office of government ethics / the code of federal regulations. № 5. part 2635. url: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahuke wibtkzxkunzahwjc8akhc3jcw4qfggxmae&url=https%3a%2f%2fwww.oge.gov%2fweb%2foge.nsf%2f 0%2f85bc960edcdc284885257ea6006557fa%2f%24file%2f4e6d8560a22d479885e24b6699d71adc1. doc&usg=aovvaw2xpvqe2yvxmrsnjf18llmo bikeev i.i. (2013). issues of delimitation of a bribe from a gift in russia and abroad: practice and trends. actual problems of economics and law. № 1. p. 245-249. baltic journal of economic studies 234 vol. 4, no. 1, 2018 ethics of the civil service: prevention of conflict of interests and requirements to legislation / manuel villoria, staffan synnerström, jános bertok; [translated from english by i. chupryn]. k.: centre for adaptation of the civil service to the standards of the european union, 2010, 104 p. gafurova a.kh. (2015). to the issue of gifting luxury goods as a volatile component of the development stages of society. features of accepting gifts by civil servants. vestnik of kostroma state university. legal sciences. № 6. p. 169-172. svetlana zimneva, anna chumakova. (2015). legal regulation of civil servants in russia and germany receiving gifts. russian law journal. volume iii. issue 3. p. 142-151. encouragement in civil service law: study guide / n.o. armash, yu.a. berlach, i.v. bolokan [at al.]; under the general editorship of t.o. kolomoiets, v.k. kolpakov. – k.: in jure, 2017. 360 p. chernogor n.n., zaloilo m.v., ivaniuk o.a. (2017). the role of ethical and moral standards in ensuring compliance with prohibitions, restrictions, and requirements established to counter corruption. journal of russian law. № 9. p. 130-141. vasileva v.m. (2015). regulation of conflict of interest in public service: the brazilian experience (part 2). public administration issues. issue 3. p. 165-190. kolomoiets t.o. (2018). restrictions on the reception of gifts by persons authorized to perform functions of the state or local self-government under the legislation of ukraine: scientific and practical commentary. zaporizhzhia: publishing house “helvetica”, 40 p. kolomoiets t.o. (2018). gifts for public servants in ukraine: prohibition, restriction or permission as an optimal model of legal regulation. juridical scientific and electronic journal. № 1. p. 92-96. sten bonsing, lars langsted (2013). “undue” gifts for public employees: an administrative and criminal law and criminal justice. № 21. p. 163-184. pryma v. (2016). hospitality as an unconditional gift: to the problem statement. culture and art in the modern world. issue 17. p. 91-96. on corruption prevention: law of ukraine on 14.10.2014. gazette of the verkhovna rada of ukraine. 2014. № 49. art. 2505-6 (with subsequent amendments and additions). on the issue of attitude to gifts within the system of fighting corruption. url: http://e-notabene.ru/pr/ article_827.html baltic journal of economic studies 133 vol. 4, no. 3, 2018 corresponding author: 1 bohdan khmelnytsky national university of cherkasy. e-mail: s-kornovenko@ukr.net orcid: http://orcid.org/0000-0002-6268-2321 2 department of world history and special historical disciplines, drohobych ivan franko state pedagogical university. e-mail: telvak1@yahoo.com orcid: http://orcid.org/0000-0002-2445-968x 3 department of ukraine’s history, drohobych ivan franko state pedagogical university. e-mail: vilnickiy@gmail.com orcid: http://orcid.org/0000-0002-4969-052x doi: https://doi.org/10.30525/2256-0742/2018-4-3-133-141 evolution of peasant land tenure during the ukrainian revolution of 1917–1921 sergey kornovenko1 bohdan khmelnytsky national university of cherkasy, ukraine vitalii telvak2, vasyl ilnytskyi3 drohobych ivan franko state pedagogical university, ukraine abstract. the subject of the study is the evolution of peasant land tenure during the period of the ukrainian revolution of 1917-1921. the contribution supports the assumption that the ukrainian revolution of 1917-1921 was a peasant one by its character. the principal agent of ukrainian history of that period was the peasantry. peasant revolutionary activity dramatically affected the state of land tenure in ukraine. it clearly underwent radical changes. the essence of these transformations was the elimination of landlordism and the expansion of the peasant land tenure. the main subject of land relations in ukraine during the ukrainian revolution of 1917-1921 was a peasant landowner. the methodological basis of the study was the concept of the “great peasant revolution”, put forward in the scientific works of v. danilov, t. shanin. its main statements were further developed in the latest developments of n. kovalev, i. farenii, s. kornovenko, and other scholars. peasant revolution of the early twentieth century laid the foundation of all the revolutionary transformations deploying in ukraine in the first decades of the twentieth century. a socio-cultural approach is the core methodological benchmark of our study. one of the features of the socio-cultural paradigm is a certain universalism, which makes it possible to study cultural, political, economic, and other elements as a whole, as well as consider society as a unity of culture and sociality. considering these basic principles, the peasantry at the beginning of the twentieth century appears as a complicated socio-cultural phenomenon where a well-established routine, the land, the work on it, peasants are closely interconnected. the peasantry was the conservative basis of civilization, a specific form of culture, which reminded statehood by the way of socio-cultural organization. peasant economy was a socio-cultural phenomenon, object and subject of agrarian policy, it occupied an important place in the social division of labour as a peculiar microscope; and most importantly it was the structural component of the ukrainian revolutionary society of that time. the purpose of the paper is to investigate the evolution of peasant land tenure during the period of the ukrainian revolution of 1917-1921. the basis of the analysis is the agrarian policy adopted by bolsheviks, n. makhno, p. wrangel. the study of these examples clarifies the evolution of peasant land tenure in the ukrainian village during the period of the ukrainian revolution of 1917-1921. as a result of the study, the following conclusions were substantiated. a deliberate policy of liquidation of large land tenure in ukraine in 1917-1918 by the soviet authorities was not carried out. attempts for its implementation took place in ukraine only in 1919 and were not successful in the end. the makhnovists were much more effective in their endeavours. firstly, they did not provoke resistance from peasants of various wealth; secondly, their policy was introduced before the bolsheviks came to power; and thirdly, their policy was legalized by the relevant decisions of the congresses. p. wrangel conducted a policy of liquidation of large land tenure in ukraine in 1920. in its essence, it was similar to the one of soviet power and makhno. at the same time, it varied qualitatively from the soviet one: 1) it had a more thoughtful, systematic, purposeful character; 2) the government of the south of russia managed to move away from declarations and eliminated large land tenure in practice; 3) the future of statehood, for which p. wrangel fought, was clearly linked with the peasantry; 4) he did not identify private ownership of land with large land tenure. the latter was understood as a component of the institution of private land ownership. p. wrangel believed that possession, use, and disposal of land were the essence of the peasants’ aspirations for land ownership. therefore, only large land tenure suffered the liquidation. key words: peasant land tenure, large land tenure, peasantry of ukraine, peasant ownership of land, state ownership of land. jel classification: r14, p14, h82 baltic journal of economic studies 134 vol. 4, no. 3, 2018 1. introduction the ukrainian revolution of 1917-1921 is a significant event in the history of the ukrainian nation at the beginning of the twentieth century. in view of this, the scientific interest in it is strengthened and both by domestic and foreign historians (verstiuk, 2003; panchuk, 2000; verstiuk, holovchenko, ostashko, pyrih, soldatenko, sokalskyi, 2011; farenii, 2014). it is quite natural, given the scale and radicalism of the changes caused by this socio-cultural phenomenon. the tendencies not only to identifying the previously unknown or hushed pages of history but also to the conceptual understanding of the ukrainian revolution of 1917-1921 have become notable in the latter-day historical research (verstiuk, 2011). in particular, there have been appearing more and more adherents of the concept of “great peasant revolution” at one time represented in the research heritage of v. danilov and t. shanin. the concept mentioned has been much referred to at the scientific events of different levels (revoliutsiinyi protses, 2014; farenii, 2014; soldatenko, 2014). in our opinion, the understanding of the ukrainian revolution of 1917-1921 as multidimensional and holistic historical and socio-cultural phenomenon seems to be new and reasonable. however, we believe that a peasant component was the most significant one of all its components (kornovenko, 2014). accordingly, the peasantry was the most active subject of the ukrainian revolution of 1917-1921. this gives us the reason to talk about the peasant nature of the ukrainian revolution. at the same time, this does not contradict the fact that the ukrainian revolution was the national-democratic revolution in its character. one of the proofs that the ukrainian revolution of 1917-1921 was peasant in its character is that peasant revolutionary activity fundamentally affected the state of land tenure in ukraine. it underwent radical changes. the essence of these transformations was the elimination of large land tenure, the expansion of the peasant land ownership. the main subject of land relations in ukraine during the ukrainian revolution of 1917-1921 was a peasant owner. the purpose of the study is to investigate the evolution of peasant land tenure during the ukrainian revolution of 1917-1921. the basis of the analysis was the agrarian policy of the bolsheviks, n. makhno, p. wrangel. the study of these examples clarifies the evolution of peasant land tenure in the ukrainian village during the ukrainian revolution of 1917-1921. the achievement of this goal involves solving such research tasks: 1) to reveal the content of the soviet agrarian innovations in solving the issue of peasant land tenure in 1917-1919; 2) to analyse the evolution of peasant land tenure in the theory and practice of the makhnovists; 3) to find out the essence of the transformations of land relations in the policy of p. wrangel. the methodological basis of the study was the concept of the “great peasant revolution”, proposed in scientific works of v. danilov, t. shanin. its main provisions were further developed in the latest developments of n. kovalev, i. farenii, s. kornovenko, and other scholars. peasant revolution of the early twentieth century laid the deep foundation of all the revolutionary transformations experienced by ukraine in the first decades of the twentieth century. a socio-cultural approach is the core methodological benchmark of our study. one of the features of the socio-cultural paradigm is a certain universalism, which makes it possible to study cultural, political, economic, and other elements as a whole, as well as consider society as a unity of culture and sociality. considering these basic principles, the peasantry at the beginning of the twentieth century appears as a complicated socio-cultural phenomenon where a well-established routine, the earth, the work on it, peasants are closely interconnected. the peasantry was the conservative basis of civilization, a specific form of culture, which reminded statehood by the way of socio-cultural organization. peasant economy was a socio-cultural phenomenon, object and subject of agrarian policy, it occupied an important place in the social division of labour as a peculiar microscope; and most importantly, it was the structural component of the ukrainian revolutionary society of that time. in our study, the term “agrarian policy” is understood as a component of the internal economic policy, which contains socio-economic and socio-political components. the socio-economic part deals with such crucial issues in the life of the peasantry as land reform and the settlement of current agricultural issues: improving land management, increasing agricultural land cultivation, providing farms with agricultural equipment, seed funds, cattle, etc. the socio-political aspect concerns the forms and methods of cooperation between the authorities and the peasantry, the legal status of the peasants. sometimes the agrarian policy is identified with the land one. in our view, the land policy is an important component of agrarian, but it concerns more the conditions of agricultural production and not the production itself. similarly, agrarian and land issues are often considered identical. in our opinion, they correlate with each other as agrarian and land policy, that is, the land issue is a part of agrarian, more concerned with forms of ownership of land than industrial relations. the agrarian question is the question of land ownership forms, types of agricultural enterprises, and the laws of agricultural development. peasant question – the question of socio-economic, socio-political, legal status of the peasantry, its subjectivization as a part of the russian imperial socio-cultural organism. baltic journal of economic studies 135 vol. 4, no. 3, 2018 2. soviet agrarian innovations from 1917 to 1919: declarations and realization in modern historiography, the proposition that the agrarian factor was among those several determining factors that led to social and political upheavals in the russian empire in the early twentieth century is axiomatic. despite all efforts of the authorities to balance it, before the ukrainian revolution of 1917, the agrarian issue transformed into an acute socio-economic and socio-political problem. this largely defined it that the ukrainian revolution of 1917-1921 was peasant by its character. landlordism was one of its ingredients that on the one hand, most peasants were discontent with and on the other hand, it caused the opposition of the authorities before and during the ukrainian revolution of 1917-1921. it was its transformation or immunity that were the subjects of fierce debate, defining the nature of the government agricultural initiatives and activities in the early twentieth century and the orientation of the agrarian policies of various political and military forces within the ukrainian revolution of 1917-1921. in our opinion, one of the distinctions of the ukrainian revolution of 1917-1921, is that notwithstanding the fact that its antagonistic participants implacably treated each other; they had the same views and adhered to similar ideas of the solutions of the then acute socio-economic and socio-political issues. the confirmation of our thesis is the attitude of the bolsheviks, n. makhno, and p. wrangel to the idea of landlordism. soviet historiography, defending the ideology of the ruling party, consistently emphasized the fact that only the wise leadership of the bolsheviks under lenin abolished landlordism within the revolution of 1917-1921. it was supported by citing the “decree on land”, adopted by the second congress of soviets at the night of 8 to 9 october, 1917, the law “on socialization of land”, adopted by the third congress of soviets, january, 23-31, 1918, and other legislative initiatives of the soviet rule aimed at eliminating private ownership of land in general, and landlordism in particular. additionally, the thesis that, first, the soviet agricultural policy was consistent with the fundamental interests of the whole peasantry, and, secondly, no one of the participants of the revolution had distributed more land to the peasants than the soviets, was imposed (trapeznikov, 1976; illereckaya, 1981; istoriya krestyanstva sssr, 1986). thus, the idea that the bolsheviks were the only political force being able to meet the long-standing aspirations of the peasantry was affirmed. the abovementioned soviet myth had no place for the other participants of the revolution. in terms of the ideology of those times, it was logical and justified. from the standpoint of historical objectivity and truth, the roles of the opponents were ignored; their image was shaped like that of the goofy subjects of history. this simplified view of the developments of the ukrainian revolution of 1917-1921 was justly criticized by the researchers in the late 1980s – early 1990s. for example, through citing rather convincing arguments, t. osipova questioned the thesis that the “decree on land” met the interests of all peasants (osipova, 1990). when it comes to the ukrainian realities, this document, rather, became the catalyst not of the elimination of landlordism but of the peasants’ land squatting and self-redistribution. we believe that the decree legally originated the liquidation of landlordism, but its results were not legitimized. we are convinced that the elimination of landlordism is a deliberate policy of the government and the authorities, a component of the land policy, which should be comprised of the legislation and of the activities of the competent authorities, aimed at eliminating landlordism, and all this should be accompanied by legitimizing the results. the policy of the soviet power in ukraine in 19171918 aimed at the elimination of landlordism was not coherent. the attempts of its implementation took place in ukraine only in 1919. it turned into a fiasco. it was recognized by the soviet researchers (trapeznikov, 1976). they saw the reason to it in the fact that the soviet government did not eliminate the landlordism; it was sooner bringing the usage of land under the state rule. the eternal desire of the peasants to own/manage/ use the land was completely ignored by the bolsheviks. landlordism was replaced by the state land ownership. this pattern of events significantly weakened the position of the soviet power in ukraine (kulchytskyi, 1996; kulchytskyi, 1992; kornovenko, 2005). in fact – the soviet power could not any longer stay in the territory of ukraine. in fact, on the eve of the offensive of the armed forces of south russia, the bolsheviks were left without the support from the rear – the peasantry. 3. agrarian policy of n. makhno n. makhno’s policy and activities in eliminating landlordism were much more effective. coming from a peasant environment, n. makhno surprisingly subtly understood the psychology of the peasants, their aspirations and desires: “in front of me i saw my friends, peasants – those anonymous anarchist revolutionary fighters, who in their lives never knew what it means to fool each other. they were of pure peasant nature, they were difficult to convince of something, but if convinced, if they understood you and believed, and if that belief was not betrayed, they magnified this ideal at every turn, anywhere where it was possible ... we cognized the village from experience...” (makhno, 1929). n. makhno was sure that peasants, feeling desperate in the agricultural policy of the provisional government and the central rada (council) demanded to quickly and fairly resolve the land issue. n. makhno advocated the elimination of private property, the socialization of the land and was against any authorities and advantages of one over another. his plan of actions included four main points: 1) the association of peasants with the baltic journal of economic studies 136 vol. 4, no. 3, 2018 group formed by n. makhno; 2) the isolation of the peasants from the influences of the other parties; 3) the gradual transfer of power to the locally elected bodies; 4) the formation of the political culture of the peasants, “...so that in their struggle for the land and freedom of self-government [they] ... could rely on themselves...” (makhno, 1929). the last item was attached much importance to by the peasant leader. nestor makhno knew that only close contacts among him, the force that he represented, and the peasantry would, at least within hulyai pole, a town in the south-east of ukraine, implement the program and meet the eternal desire of farmers. “...to take drastic steps on dispersing government institutions in hulyai pole and outlaw private ownership of land, factories, and other businesses we were, alongside with tracing the echo of our movement in urban areas, to approach the peasant masses, make sure of the stability of their revolutionary potential, let the peasants feel that we are close to them and are full-heartedly loyal to those ideas and thoughts that we voice at the meetings and peasant rallies” (makhno, 1929). the supporters of nestor makhno made their program provisions public and fixed them in the resolutions of congresses at different levels. concerning the land issue, which was actively discussed by the delegates of the second congress of the representatives of peasants’ and workers’ councils of 35 districts from the hulyai pole territory and the makhno supporters, there was passed the following resolution: “... the earth belongs to nobody and it may be used only by those who work on it and who handle it, the land should belong to the ukrainian toiling peasants’ use, it should be free of charge and based on the egalitarian and labour standards” (verstiuk, 1992) comparing this resolution to the content of the third universal, one can see the ideological similarity of two documents, on the other hand – the hostility of the political forces that prepared it, to one another. at the above convention, the delegates who were supporting makhno put forward such a proposal: “... we only insist that the peasants, who have so far been farmers, should be provided the unconditional right to manage the land the way they want, at least during this single season, otherwise the peasants and the workers will be left without bread. they say that our agriculture is destroyed, the peasants experience the deficit of the farming tools and the like, and i have to say that it is a slight exaggeration. indeed, some tools and implements are broken, and the households lack horses, but still if the peasants are given land and promised that everything they have toiled will be theirs, then, of course, the land will be sown” (verstiuk, 1992). the peasants unreservedly trusted n. makhno, moreover – they believed in him. i. herasimenko, the w hite guard officer, wrote, “the sympathies of the peasants were on the side of makhno, and when in the conversation with the member of the makhno grouping one could openly and sharply criticize makhno, any angry criticism in the presence of a pro-makhno peasant could result in the death of a faultfinder” (volkovynskyi, 1992). the reason for the fanatical devotion to the peasant leader is multifaceted. first, as s. semanov rightly observes, in russia, which suffered deep revolutionary shocks, the embittered and impoverished lower classes were dreaming of an earthly paradise and as it is typical of the young people to hurry, to want everything and immediately the anarchism bribed them by its directness and simplicity of plans (semanov, 2004: 55). secondly, while the provisional government and the central council were not decisive in their actions and delayed any of them, and the bolsheviks had no power, the makhno people carried out the confiscation and redistribution of the estates of landlords, and thus liquidated landlordism. thirdly, fighting against all regimes, n. makhno always and everywhere defended the interests of the peasantry, protecting them from the austro-german occupation, the bolsheviks, the w hites, and the petlurites. fourth, he knew exactly what the peasants were aspiring at and how to achieve this. n. makhno tried to implement the political principles, which he adhered to. june through august of 1917 was a period of active discussions and decision-making by the peasants of the makhnocontrolled territory of the most important issue – the land one. at the may congress in olexandrivsk, they adopted a resolution, which dealt with the transfer of land, compensation-free, for the use of the toilers, which was reflected in the declaration of the hulyai pole peasants’ union (makhno, 1929). in june 1917, the villagers refused to fulfil their lease obligation, requiring to deprive landlords and kulaks of the land after the harvest and to divide it among themselves (makhno, 1929). during the armed assail of l. kornilov, in hulyai pole there took place the congress of the soviets, which, among other agenda items, discussed the issues of the practical elimination of landlords and kulaks. the anarchist-communists spoke to the delegates and offered not only to redistribute the land but to organize in the estates free agricultural communes with the participation of the peasants, landowners, and kulaks. if the latter refused they could be offered a redistributed norm of the land to hold their own personal farms (makhno, 1929). this way makhno gained significant popularity among peasants and got their support. nestor makhno, unlike his opponents who strongly delayed the redistribution of land and were afraid of peasant uprisings, realized that it was impossible to suppress them or somehow postpone, hence he headed the peasant movement and gave the land to those who toiled it. in this respect, he recalled: “...i convened all landlords and kulaks, deprived baltic journal of economic studies 137 vol. 4, no. 3, 2018 them of their documents on the acquisition of land property. according to these documents, the land department made accurate records of all resources of land that belonged to the landlords and kulaks. at the council of workers’ and peasants’ deputies, there was organized the committee of farmhands and the farmhand movement against the landlords and kulaks was initiated…” (makhno, 1929). in mid-august 1917, at the initiative of n. makhno, who at that time headed a local village council, there was held an inventory of the equipment remaining from the landlords and kulaks: “revolutionary workers were thirsty for action. i offered to my peasants to delegate some persons to the land committees and hurried to divide the church, landowners’ and public lands to be sown by winter crops and to plow, preparing for the spring’ (makhno, 1929). on the 25th of september 1917, he signed a decree of the county council on the socialization of land and its redistribution among the peasants (volkovinskij, 1991). not wasting time, the peasants launched the implementation of a newly signed document. “farmers have actively set to work, but when they went into the field and began to divide the land, it became clear that the land which they had sown by winter crops should be left to each peasant for this year with the recoupment of some sum for the community, so as to equalize public funds spent on social needs, in which those who have neither taken nor cultivated land this year will not pay their share. in general, the peasants took the land that was to be plowed in winter, and redistributed it, despite the threat of state agents” (makhno, 1929). so, as the said above confirms, the policy of the liquidation of landlordism in ukraine, which was implemented by n. makhno, firstly, was more effective than the soviet one. it did not cause resistance from the peasants of different wealth. secondly, it was implemented before the bolsheviks’ coming to power; its results were legalized by the relevant decisions of the congresses. the policy of the liquidation of landlordism in the territory, controlled by the russian army in 1920, was carried out by p. wrangel. essentially it was similar to that of the policy of the soviets and makhno. at the same time, it differed from the soviet one in the following: 1) it was more thought-out, systemic, and purposeful; 2) the government of the south managed to move away from declarativeness and eliminated landlordism; 3) the future of the statehood for which the russian army fought, p. wrangel undoubtedly linked with the peasantry; 4) he did not identify private ownership of land with landlordism. landlordism was understood as a component of private ownership of land. p. wrangel believed that to possess, use, and dispose of land was the essence of the eternal aspirations of the peasants to own the land. therefore, it was only landlordism that underwent the liquidation. 4. transformation of land relations in the policy of p. wrangel p. wrangel conducted a policy of liquidation of large land tenure in ukraine in 1920. in essence, it was similar to the one of soviets and makhno. at the same time, it varied qualitatively from the soviet one: 1) had a more thoughtful, systematic, purposeful character; 2) the government of the south of russia managed to move away from declarative and in practice eliminate large land tenure; 3) the future of statehood, for which p. wrangel fought, he clearly linked with the peasantry; 4) he did not identify private ownership of land with large land tenure. the latter was understood as a component of the institution of private ownership of land. p. wrangel believed that possession, use and disposal of land – the essence of the aspirations of peasants to land ownership. therefore, the only large land tenure suffered the liquidation. the agrarian legislation of the government of south russia was published on may 25, 1920 (old style). a package of documents included the following: “notification of the government of the land issue”, “the injunction on the earth”, “regulations on the transfer by the government of the lands belonging to the state, the state land bank, and privately owned lands of agricultural use to the property owners, who have cultivated the land”, and “the interim on land institutions” (tsdahou, f. 57, acc. 2, case 428; vrangel, 1992). in the government report, the essence of the agrarian reform was clarified: the land should be given to its owners who work on it. the reform was determined by the purpose of p. wrangel’s government: 1) to protect the land management in the form, in which it was found at the time of innovation; 2) to pass to the masters who work on the land, the state-owned and privately owned lands used for agricultural purposes; 3) to create in the village decent conditions for the economic development and increasing prosperity, for the peasants not to suffer from encroachments and uncertainty. the communication also dwelt on the mechanism for the implementation of the agrarian reform: the land was alienated from the former owners, but they kept their right on some lands, the size of which, depending on regional characteristics, was determined by the local land agencies comprised of peasants. the government approved the decisions of these agencies. the informational communication identified the categories of land that were subject and not subject to alienation. the latter included: 1) the lands acquired through the peasants’ land bank and which did not exceed the established norm; 2) pieces and plots allocated for the hamlets; 3) parish plots, estates, and highly cultured lands; 4) lands of the agricultural research and education institutions; 5) the plots of land that did not exceed the specified size. baltic journal of economic studies 138 vol. 4, no. 3, 2018 the lands which were alienated were fixed for those peasants who were cultivating those lands at the time of the release of both – the law, and the informational communication. the size of those lands was determined by the local land agencies, but could not be less than the standards set by the peasants’ land bank. this distribution was fixed by the act that recognized the unquestionable ownership. on its basis, the documents were published and they finally fixed the ownership of land by new owners after payment of all of its cost to the state. the lands, though without their immediate delimiting, passed in a lifelong, hereditary property for ransom because there was to be assuredness that the lands would be in the property of the economically strong owners who could handle them (tsdahou, f. 57, acc. 2, case 428, р. 75–79). p. wrangel believed that peasants themselves, through the established organs of power, were to solve the agrarian question. the authorities of the crimea, which was under the power of the white guard, designing the control and management system, revised the role, place, and significance of the peasant initiative and selforganization. the township and rural structures were considered to be the support for the local authorities, the foundation on which the frame of the renewed russian statehood was being erected. this position provided that the leading role in the implementation of the government initiatives in the political and economic field belonged to the peasant self-government bodies. that is why the government of the “white” crimea did not interfere with the peasant initiative of restoring rural and township gatherings, the institution of the village and township foremen. at least, we have not found any written memory of it in the sources employed for the research. on the contrary, historical sources indicate that the commanders of the military units located in the counties of the northern tavria received clear instructions from the chieftain of how to behave in relations with the authorities of the peasant selfgovernment. thus, the heads of the civil departments of the army pledged to fully support the activities of the township and village chiefs, and the meetings convened by them (darf, fr . 3801, acc. 1, case 2, p. 24–24 zv.). it found support in the “provisional regulations on land institutions”. that way p. wrangel and his supporters tried to build such a model of “dialogue” with the peasantry, in which the agrarian question, relevant for the latter, would be solved by the peasantry through the “county and district land boards, comprised of peasants” (svedeniya, 1928). the government authorities relegated a much more modest role and functions to themselves. as g. glinka noted in his letter to v. maklakov, the “governmental authorities do not make any orders to the local authorities when it comes to the land issues, they only help, assist, and prevent the intrusion of any anti-state elements...” (pismo, 1928). the telegram to the chief of the dzhankoy district ran: “give full support to the provincial land mediator in gradual establishing in townships the electoral county gatherings for the elections of the county land councils.” the simferopol provincial land mediator b. schleifer got similar instructions concerning the pre-election work in simferopol, evpatoria, and perekop counties (darf, fr . 355, acc. 1, case 5, p. 81, 83). soon, when his ideas were proved by experience, at the end of july 1920, the commander-in-chief issued the order, by which the posts of the rural commandants were cancelled. by this, the authorities eliminated the impact of the militaries on the work of government in rural areas (rdva, fr . 101, acc. 1, case 174, p. 41 zv.). township and county land councils, whose decisions were approved by the provincial land council, became those bodies that took over the legitimate functions of liquidation of landlordism within the wrangel agrarian reform. the important mission of conducting the preliminary work of determining the conditions of the future distribution of agricultural land among the owners, who worked on it, was commissioned to the county council. among the priority tasks to implementing which the activities of those bodies were directed, there was the task to determine the location, composition, and quantity of the lands that were leased, not cultivated by the owners, and were without proper care. in addition, it was necessary to find out who, in what sequence, and in what amount is entitled to receive the land. thus, alpha and omega of the township land councils’ activities were: 1) the registration of the fund of agricultural land, which was to be distributed primarily; 2) the development and submission for the approval by the county councils the documents on the size of plots assigned to new owners; 3) compiling the list of persons who have been offered to withdraw the land; 4) land ownership; 5) determining the maximum limits that remained for the former owner; 6) estimates the average yield for the past 10 years (daark, fr . 1668, acc. 1, case 1a, p. 50–51). the formation of the local land administration, which had rather extensive powers, was, in our opinion, a significant step forward in attracting peasants to the nation-building. this legally fixed the intention of the crimean white guard leaders to make the peasants an effective force in carrying out the agrarian reform, as well as in nation-building of the generally updated model of the russian statehood. it should be noted that during the liquidation of landlordism n. makhno also widely attracted the peasant initiative and their independent activities. thus, speaking against a centralized bureaucratic power, old or new bureaucracy, he made great efforts to organize the peasants’ union, which would create conditions for the peasants approaching the land issue on their own initiative and declaring it socialized. it was makhno’s ideal of peasant freedom: they were to decide on their baltic journal of economic studies 139 vol. 4, no. 3, 2018 own and cope with everything on their own. in addition, through the union, the peasantry would actively join the revolution, spread and deepen it, clear the way for its development, and would define its essence. this also reflected the understanding by the peasants of the complex social and political vicissitudes of 1917-1921. the decision on the distribution and the procedure itself were carried out, in accordance with n. makhno’s doctrine, by the peasants, that is – by their delegates to the township convention of land committees. that convention pointed out the landlords’ estates and their lands for the organization there of voluntary agricultural communities (lobachov, 2001; mahno, 1929). most of the lands of large landowners’ estates during the wrangel’s agrarian reform were subject to alienation and redistribution of them into private property among the peasants who were in need of additional patches of land. in particular, in the estate of azekah belonging to b. beckman and located in the tav-badrak township, by the township land board decision 60 tenths (60 tenths of a square kilometre) of the arable land and 91 tenths of the uncultivated land passed into the peasants’ ownership. in the same township, 403 tenths of the field arable land and 155 tenths of the pastures from s. safronov’s “molla al” estate passed to their new owners (tsdahou, f. 5, acc. 1, case 322, р. 3). by the decision of the kabariy township, the lands of the estates whose owners did not cultivate the land on their own, were subject to the immediate redistribution. first of all, it concerned such estates as: tetiy, bink, kuchuk, toksaba, and ekaterinovka (darf, fr. 355, acc. 1, case 5, p. 4). the distribution of the landlords’ estates was especially actively performed in the front-line districts, such as the dniprovsky one. the novo-troitsk township land council in the presence of the engineer rudin passed the decision about the alienation of 600 tenths of the land in ginsburg’s estate and transferring the land into private ownership of 18 lessees. the hromov township land council was planning to transfer to private ownership of 60 tenants 2 thousand of the tenths from faltz-fein’s estate; 2 thousand of the tenths of the leased land from sheiner estate was transferred into the private ownership of 85 peasants who worked on that land, and 320 tenths from mashkalov’s estate were passed to the 15 lessees who cultivated it (doklad, 1928). the positive socio-political resonance among the peasantry was caused by the distribution of land in the atmanay estate. by the decision of the township land council, 500 tenths of its land were allotted for 22 peasants (darf, fr. 355, acc. 1, case 5, p. 173). the peasants from the yekaterinoslav province who came for salt in the ukluh estuary and to atmanay could not believe that the landlord’s land had become the property of the local peasants. then they were taken to the fields where they saw the surveyors. the latter were paving the limits of the allotted land patches (doklad, 1928). the yekaterinoslav peasants were shocked. they saw firsthand that p. wrangel did not only declare but also realized in practice the agrarian reform. against the background of social and political instability and socio-economic crisis in soviet ukraine, the situation in northern tavria and the crimea had changed to advantage. the yekaterinoslav farmers couldn’t but see that. thus, p. wrangel did not only declare the withdrawal of the excess land from the big landowners but also implemented this idea into practice across the county and township land councils. the minimum of the arable land was left to the landowners. most of the land was redistributed among the peasants for repurchase. according to our estimates, which coincide with the data suggested by v. tsvetkov (tsvetkov, 2006) the land was redistributed for peasants in different ways in more than 20 large estates. in average, the size of the peasants’ land, according to n. ross’ information grew by 100 tenths or more, and that of landlords decreased from 100 to 600 tenths (ross, 1982). in our opinion, considering the processed historical sources, the adjustments made to the rules of the land distribution on october 4, 1920, the maximum of landlords’ lands should be limited by 400 tenths while that of the peasants’ lands ranged from 60 to 250 tenths. 5. conclusions the ukrainian revolution of 1917-1921 was of a peasant character. the active subject of ukrainian history of the period was the peasantry. peasant revolutionary activity has dramatically affected the state of land tenure in ukraine. it has undergone radical changes. the essence of these transformations was the elimination of large land tenure, the expansion of the peasant. the main subject of land relations in ukraine during the ukrainian revolution of 1917-1921 was a peasant owner. a deliberate policy of liquidation by the soviet authorities of large land tenure in ukraine in 1917–1918 was not carried out. attempts for its implementation took place in ukraine only in 1919 with no success. the bolsheviks were not the only ones who declared the abolition of large land tenure as a priority task for agrarian reform. n. makhno was one of the first who not only declared but also practically eliminated great land tenure in ukraine during the revolution of 1917-1921. we believe that the makhnovist were much more effective in conducting agricultural policy comparing with soviets. firstly, they did not provoke resistance from peasants of various wealth; secondly, their policy was introduced before the bolsheviks came to power; and thirdly, their policy was legalized by the relevant decisions of the congresses. p. wrangel conducted a policy of liquidation of large land tenure in ukraine in 1920. in its essence, it was similar to the one of soviet power and makhno. at the same time, it varied qualitatively from the soviet one: 1) it had a baltic journal of economic studies 140 vol. 4, no. 3, 2018 more thoughtful, systematic, purposeful character; 2) the government of the south of russia managed to move away from declarations and eliminated large land tenure in practice; 3) the future of statehood, for which p. wrangel fought, was clearly linked with the peasantry; 4) he did not identify private ownership of land with large land tenure. the latter was understood as a component of the institution of private land ownership. p. wrangel believed that possession, use, and disposal of land were the essence of the peasants’ aspirations for land ownership. therefore, only large land tenure suffered the liquidation. if the soviet liquidation of large land tenure was transformed into state expropriation of lands, then makhno and wrangel aimed at giving lands to peasants with the further legitimization of this process. prospects for further developments. the further study of the influence of peasant revolutionism on the land policy of national governments during the period of the ukrainian revolution of 1917–1921 is substantiated. references: darf – derzhavnyi arkhiv rosiiskoi federatsii [state archive of the russian federation]. daark – derzhavnyi arkhiv avtonomnoi respubliky krym [state archive of the crimean autonomous republic]. rdva – rosiiskyi derzhavnyi voiennyi arkhiv [the russian state military archive]. tsdahou – tsentralnyi derzhavnyi arkhiv hromadskykh obiednan ukrainy [central state archive of public organizations of ukraine]. verstiuk v., holovchenko v., ostashko t., pyrih r ., soldatenko v., sokalskyi v. 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(in russian) baltic journal of economic studies 261 vol. 4, no. 2, 2018 corresponding author: 1 department of accounting and analysis, lviv polytechnic national university. e-mail: i.yaremko@i.ua 2 department of accounting and analysis, lviv polytechnic national university. e-mail: voskresenskat@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-261-267 transaction costs of enterprises: the issue of accounting and analysis management igor yaremko1, tetiana voskresenska2 lviv polytechnic national university, ukraine abstract. major obstacles to securing rational organization of accounting and analytical support system of the enterprise transaction costs management are examined. organizational and methodological peculiarities of accounting and analysis of economic entities’ transaction costs are defined. characteristic aspects of official transaction cost reporting in accounting system as a part of administrative, marketing, and other operating expenses are analysed. exclusively approximate estimate of most kinds of transaction costs is recorded. a significant impact of the amount and structure of transaction costs on the efficiency of managerial decisions regarding further enterprise activity and competitive performance is proved. certain approaches to accounting and analytical reporting of the enterprise transaction costs are formed. the aim of the article is to investigate basic approaches to and methodological foundation of identifying, accounting, and analysis of economic entities’ transaction costs, as well as their compliance with modern economic realia. the subject of the article consists of the in-depth clarification of content and economic matter of transaction costs under the conditions of modern economy; definition and generalization of chief problems in adaptive accounting of transaction costs management; justification of accounting reporting of transaction costs with due regard to peculiarities of their formalized and unofficial component reporting in accounting system. methods of studying into theoretical and methodological background of investigation there are general scientific methods of obtaining knowledge (analysis, theoretical generalization, comparison), which were basically applied while studying approaches to the identification, as well as accounting and analytical reporting of transaction costs; methods of systematization – in establishing preconditions and challenges of accounting and analytical reporting of transaction costs; systematic approach – in determining the scheme of transaction costs origin as far as national economic subjects are concerned; statistical methods – used while analysing the rates of transaction costs. the practical significance of the work consists in the investigation of current methodological aspects of identification, as well as accounting and analytical reporting of transaction costs, in order to work out adaptive mechanisms of their pegging, accounting, and analysis under unstable economic conditions, and what is more, analysis of significance of their influence on competitive capacity of enterprises under the conditions of disequilibrium national economy. value/originality. the originality of the work consists in the practical reinforcement of scientists’ theoretical insights and formulation of improved mechanisms for the identification, accounting, and analysis of transaction costs. the theory of transaction costs introduced by r. coase and adapted to unstable conditions of the national economic system development has been taken as a basic concept of identification, accounting and analytical reporting of enterprises’ transaction costs. key words: accounting of transaction costs, transformational costs, official and unofficial transaction costs, identification and estimation of transaction costs, economic analysis of transaction costs. jel classification: d23, d61, m41, о17 1. introduction the instability of the global economic situation has led to a shift in priorities and, as a consequence, approaches to evaluating the efficiency of enterprises. in hard-to-predict economic conditions of enterprise functioning, one of the dominant indicators of evaluating the efficiency of their activities is the value and level of incurred costs. the current practice of management by both domestic and foreign business entities and analytical reviews of the activities of wellknown world companies show that under the current unstable economic conditions, the greatest problems baltic journal of economic studies 262 vol. 4, no. 2, 2018 arise in the information support for sound and efficient cost management, in particular, transaction costs. at the same time, along with the difficulties associated with the formation of qualitative information support for managing the transaction costs of an enterprise, there are problems with the choice of economic tools for their accounting and analytical reflection and analysis. this is due to the incapability of most economic tools to ensure a fair matching of the expediency and efficiency of transaction costs in current activities and their projections in the formation and maintenance of a satisfactory state of long-term conditions for the development of an entity. an important role in the study of the value, structure of transaction costs, and ensuring their proper accounting and analytical reflection is due to the fact that in the pre-crisis period, their management played a secondary role in the overall management process, which led to their unreasonable growth in certain sectors of the domestic and world economy. the lack of objective grounds for the excessive growth in the value and level of transaction costs of economic entities in practice led to a reduction in the working capital of the vast majority of both individual enterprises and countries as a whole. the shifting of the emphases of the evaluation of the enterprise efficiency through the prism of transaction costs requires the formation of adequate informational accounting and analytical support that can determine the expediency of costs, control their value, forecast the possible consequences of transaction costs incurred for the current and future activities of a company. 2. preconditions of transaction costs’ accounting and analysis volatility and variability of the world financial and economic situation caused the need to revaluate current approaches to the performance evaluation of economic entities’ activity. under such economic conditions, enterprise efficiency evaluation on the basis of the amount of earned profit or its relative index (profitability) does not make it possible to make adequate conclusions to a high degree of accuracy regarding true perspectives of the enterprise concerning defining and following the selected business line. under dynamically unstable conditions, overall costs or their certain components are considered to be significant, complex, and one of the key appraisal objects for the assessment of enterprise activity. in the economics literature, alongside with the research into transformational costs (associated with manufacturing), scholars bring forward numerous arguments on the necessity of accounting and analysis of transaction costs (for marketing mechanism functioning) that are of major importance under the conditions of disequilibrium economy. a closer attention to the research into transaction costs is due to dynamically uncontrolled and massive growth of their amount, which led to the expansion of world economic crisis in 2008–2018. numerous current calculations made by foreign and national scholars have proven the influence of transaction costs on the violation of world economic stability. according to scholars’ calculations (based on scientifically grounded methods) that were recorded in the economics literature, a rapid increase in the amount of transaction costs of enterprises was fixed. generalizing information from the sources (lemeshchenko, 2010; kolodnyaya, 2008; shepelenko, 2008), it should be noted that at the beginning of the xix century, the amount of transaction costs was about 20-25% from total expense amount and, in the xxi century, their amount in certain branches of economy is within 50-80%. the more developed the economy of the country is, the lower the transaction costs are (primarily off-the-books). enterprises operating under the conditions of disequilibrium economic system and politically-oriented economy usually bear a considerable amount of both on-therecord and off-the-books transaction costs. 3. applying macroeconomic indices to predict the level of transaction costs having studied the value of certain macroeconomic indices, it is possible to define the trends of transaction costs quite clearly, though in some ways indirectly, on macroand microlevels. for such purposes, it is suggested using and analysing the value of the ease of doing business index considering its structural and indicative components. this index is calculated and published annually in the appropriate report by the world bank. using the information on value and dynamics of this index, it is possible to characterize variations of transaction costs in view of different countries taking into consideration their rating defined on the basis of ease of doing business index. studying the declared values of aggregative indicative components of the ease of doing business index (business registration, obtaining building permission, connection to energysaving systems, property registration, receiving a loan, protection of minority investors’ rights, taxation, international trade, contract performance security, solution to insolvency problems) in dynamics (table 1), it can be noted that there is a moderate decrease in transaction costs, which shows the growth of index value within the country. the above-noted approach to trend analysis of changes in transaction costs is rather simplified because in the process of calculating the ease of doing business index, only a small number of factors, which have a great influence on the amount of transaction costs, is taken into consideration. at the same time, such factors as level of corruption in the country, infrastructure quality, exchange rate change, level of politicization baltic journal of economic studies 263 vol. 4, no. 2, 2018 of the economy and dependence on international credits/subsidies are not taken into consideration while calculating the ease of doing business index though it is advisable to consider these factors while analysing the level of transaction costs. however, in order to somehow compensate for inaccuracies (or to prove its reliability) of analysis of transaction costs level (low, average, high) carried out using the ease of doing business index, the analysis may be supplemented with such informative indices as the perception of corruption and the level of shadow economy (table 1). if the ease of doing business index was determined for certain branches of the country’s economy, conclusions concerning the dynamics of transaction costs would be more accurate. this is due to the fact that the amount, constituents, and structure of transaction costs are different in various economic realms depending on the branch specificity. some branches need various kinds of permissions and agreements for their current performance (for example, building industry, machinery manufacturing, etc.) so the amount of transaction costs at such enterprises will be larger in comparison with the enterprises that do not need a special permission documentation for their activity. having analysed the information in table 1, it may be noted that the level of transaction costs in ukraine is high as indicated by the level of shadow economy and corruption perception index value. growth dynamics of the level of shadow economy may prove the increase in the amount of an unofficial part of transaction costs. thus, generalized analysis of the above-mentioned macroeconomic indices attests persistently high level of transaction costs in certain branches of domestic economy. the specified macroeconomic indices recommended for determining the level of transaction costs may be also used to carry out a comparative analysis of such costs level in various countries of the world, hence setting the trends for changes of macrolevel transaction costs in one or another country. scholars pay more attention to the study of transaction costs because such costs are hard to predict, their value growth is uncontrolled, and due to prevailing negative influence on the competitive performance of enterprise activity. thus, optimization, usually by means of transaction costs minimization, is one of the crucial tasks of enterprises and governments. “it is clear that zero transaction costs are theoretical abstraction rather than reality description…, practical goal of economic policy should be to minimize transaction costs to the extent possible and not to entirely abolish them” (vítek, 1998). 4. analysis of the latest studies on identification, accounting, and analytical reporting of transaction costs in the economics literature, there are numerous theoretical and application-oriented publications regarding the definition and accounting of transaction costs. in certain academic papers, scholars pay a particular attention to the investigation of ontological aspects of transaction costs’ definition, formation and generalization of transaction costs classification, the practicability of reporting such costs in the enterprise accounting system. r . coase (1993) was the first who officially claimed the presence of transaction costs in the economic system, highlighting their significant influence on the enterprise. h.v. kolodnaia (2008) conducted a comprehensive study of the analysis of transaction costs’ role in the course of enterprise development. o.v.  shepelenko (2008) in her work analysed the theoretical and methodological background and set forward practical guidelines for transaction costs management designed to secure economic growth in ukraine. among other things, the author built up a concept of transaction costs controlling mechanism in the ukrainian economy founded on institutional approach and principles of system development (shepelenko, 2008). n.v.  hordopolova, v.y.  hordopolov (10) disclosed prerequisites and sources of transaction costs origin, mechanism of their origin, study procedures, and information support of such procedures. m.v.  verhunenko (2008) analysed the level of transaction costs in the business sector of ukraine in comparison with member countries of the european union and defined trends of their change, as well as obstacles to the integration of ukraine into table 1 macroeconomic indices for determining trends of changes in the general level of transaction costs in ukraine index 2012 2013 2014 2015 2016 note ease of doing business index (0-100)`* 189 countries 44,27 (152) 48,87 (137) 58,64 (112) 61,72 (96) 62,90 (83) the lower the value is, the better, the fewer obstacles to doing business corruption perception index (0-100)** 26 25 26 27 29 the closer the index value to 100 is, the higher the country rating is level of shadow economy*** 34 %gdp 35% gdp 40 %gdp 43% gdp 41 % gdp positive meaning of the decrease in the share of the shadow economy in gdp *the source of information is the website of the world bank **the source of information is the website transparency international *** the source of information is the website of the ministry of economic development and trade of ukraine baltic journal of economic studies 264 vol. 4, no. 2, 2018 the world economy. t.i. kurylo, t.m. sliozko (2016) studied the notion of transaction costs in relation to institutes and institutions in an institutional environment, as well as peculiarities of their formation in the agricultural sector. the influence of institutional environment sector on transaction costs formation was defined. o.m. halytskyi (2013) set forward an approximate estimation procedure algorithm of transaction costs associated with agricultural goods sales. the algorithm is based both on accounting and reporting data usage and determining foregone earnings in order to estimate implicit transaction costs. 5. approaches to the identification, accounting, and analytical reporting of transaction costs; their adaptation to disequilibrium economic conditions taking into consideration an upward trend of transaction costs, it is worth mentioning that the necessity of their accounting and analysis is caused by determining the influence of transaction costs on competitive performance of certain enterprises, as well as states or their unions. despite the urgent need of enterprises caused by current unstable economic realia to form accounting and analytical security of transaction costs. here are the main obstacles to rational organization of accounting and analysis of transaction costs, provided in the economics literature (lukichev, 2010; verhunenko, 2011): – theoretical and methodological disagreements over the determination of subject-matter of transaction costs; – lack of efficient legal leverages over individual elements and the total amount of transaction costs; – lack of detailed and reasoned classification of transaction costs because of their interrelation and complementarity with transformational costs; – the necessity for the development of efficient approaches to the identification and estimation procedure of transaction costs on macroand micro levels; – indefinite (implicit) nature of certain types of transaction costs (lack of documenting of most of them); – time-based delimination of origin of certain transaction costs components; – the considerable proximity of transaction costs estimation, applying procedures suggested in the academic literature. given the fact that transaction costs largely influence financial, economic, and business activity of enterprises, it is appropriate to determine peculiarities of their origin with due account for the nature of transaction costs. a simplified scheme of transaction costs origin in the process of economic entities’ cooperation is depicted in fig. 1. fig. 1 shows that transaction costs arise between enterprises when they are making agreements on cooperation (1). in particular, transaction costs arise before the conclusion of the agreement and they are connected with the search for clients, negotiations, and alignment of interests. another part of transaction costs (2) arises when the agreement obligations between the parties are being fulfilled. these are costs associated with the control over fulfilment of the contract items, their alterations (adaptations) when there are changes in the market or in its particular segment. besides, transaction costs enterprise a internal transaction costs enterprise b internal transaction costs state and nonstate institutions internal transaction costs 1.making agreement on cooperation 2. ownership transfer 3. granting licenses, permissions, etc 3. granting licenses, permissions, etc external transaction costs international organizations and funds 4. cooperation external transaction costs external transaction costsexternal transaction costs fig. 1. a simplified scheme of transaction costs origin within domestic economic entities baltic journal of economic studies 265 vol. 4, no. 2, 2018 associated with enterprise management and activity (3) arise in the process of its cooperation with state (fiscal service, government, deputy corps, customs, judicial authorities) and non-state (insurance company, notary office, and bank) institutions in the process of obtaining permissions for a certain activity, tax payment and non-tax payment, customs clearance of goods, etc. transaction costs arising in the process of interaction between enterprises are microlevel costs having an impact on the activity of any given enterprise. macrolevel transaction costs arising in the process of cooperation with international organizations and funds (4) are associated mainly with getting a loan or financial aid. they are defining for certain states. in the process of such cooperation, governments of countries implement the requirements they had in order to develop a closer cooperation with international organizations and funds and meet the requirements. in fig. 1, it is noted that transaction costs may have internal and external forms of manifestation. internal transaction costs may arise in the process of cooperation between shareholders (minority and majority), shareholders (owners) and enterprise management, enterprise and its employees. external transaction costs go beyond the enterprise and arise in the process of their cooperation with the other parties of the economic system. range of problems associated with accounting and analysis management of transaction costs is caused by lack of structured informational background concerning their amount, level, and structure; certain components of transaction costs are reported as administrative costs (representational expenses, travel expenses, acquisition of licenses), marketing expenses (advertising costs, warranty repairs), other operating costs, financial and investment costs. separate mapping of transaction costs on individual accounts for operating costs accounting leads to underestimation of their overall impact on the economic entity performance (expenses, prime cost, profit, competitive capacity). apart from that, only on-the-record part of transaction costs is reflected in accounting system while “off-the-books costs connected with overcoming bureaucratic barriers remain out of accounting records, constitute enterprise’s commercial secret and, in some cases, they may significantly outweigh on-the-record part” (verhunenko, 2011). while on-therecord transaction costs are mapped in the accounting system, off-the-books costs can be usually estimated approximately applying heuristic methods (expert) or cannot be estimated at all due to the lack of evidence or facts of their realization. enterprise management or owners often do not disclose information on the amount of off-the-books transaction costs because they are usually illegal so it makes sense to report such transaction costs in the system of managerial accounting. 6. analysis of transaction costs dynamics as exemplified by machine-building enterprises in order to determine the trends of changes of the transaction costs amount as far as domestic economic entities are concerned, let us make their analysis (using on-the-record financial accounting) as exemplified by machine-building enterprises (table 2). the amount of on-the-record transaction costs is provided in table 2. the information on the trends of table 2 trend data to analyse transaction costs of machine-building enterprises over a period of 2012–2016 criteria, thousands hryvnias. 2012 2013 2014 2015 2016 pjsc “conveyer” transaction costs as a part of operating expenses, thousands hryvnias 16320 6519 6614 7848 8734 the amount of transaction costs (prime cost), % 123,17 53,83 49,69 55,64 46,78 the amount of transaction costs (net profit), % 109,71 50,30 45,11 48,52 39,32 pjsc “korosten machine building plant” transaction costs as a part of operating expenses, thousands hryvnias 3246 2927 3748 3261 2948 the amount of transaction costs (prime cost), % 19,27 18,96 31,72 24,49 20,80 the amount of transaction costs (net profit), % 16,49 16,82 33,89 23,92 20,44 pjsc “beryslav machine building plant” transaction costs as a part of operating expenses, thousands hryvnias 15070 13055 42374 65543 46318 the amount of transaction costs (prime cost), % 17,24 14,53 47,36 140,58 52,04 the amount of transaction costs (net profit), % 15,13 13,20 43,59 134,25 47,58 pjsc “odesa machine building plant” transaction costs as a part of operating expenses, thousands hryvnias 29238 9466 11231 12990 16711 the amount of transaction costs (prime cost), % 174,43 66,01 86,03 66,30 59,69 the amount of transaction costs (net profit), % 134,22 66,34 79,88 72,07 48,85 pjsc “drohobych machine building plant” transaction costs as a part of operating expenses, thousands hryvnias 4636 4796 7199 5433 5010 the amount of transaction costs (prime cost), % 37,43 67,44 82,44 96,67 54,30 the amount of transaction costs (net profit), % 24,39 45,41 62,37 95,62 41,18 baltic journal of economic studies 266 vol. 4, no. 2, 2018 transaction costs is presented in table 2 and it shows that transaction costs trend upward in a majority of enterprises under investigation as far as absolute value, prime cost, and net profit are concerned. although the enterprises under investigation belong to the same branch, the amount of transaction costs as a part of their profit differs, due to specific operational peculiarities. as far as enterprises under investigation are concerned, an average value of transaction costs within these enterprises ranges from 20 to 80% in profit value. there is a need in their systematization and analysis because the on-the-record value of transaction costs influences final financial results of the enterprise activity. n.v. hordopolova, v.y. hordopolov (2010) emphasize the necessity of well-ordered and constant accounting of transaction costs, “separating transaction costs in accounting and their analysis are necessary because such costs are scattered among various business and support units of the enterprise and their amount remains unknown for the managerial apparatus though their product costs in high-tech spheres may reach 20% and more”. that is why systematization of information on transaction costs and their detailed list are gaining significant importance as it allows adjusting the value of certain components of transaction costs in current mode helping to reduce the total value of transaction costs. the problem of measuring transaction costs lies in the fact that it is not always possible to determine their amount and rate their dynamics. only the on-therecord constituent of transaction costs is subject to quantitative measurement of transaction costs, while off-the-books constituent is practically impossible to measure as a part of the traditional accounting system. under such conditions, off-the-record transaction costs are measured applying qualitative methods establishing the direction of their change or determining the influence (positive, negative) on enterprise performance efficiency. at the same time, it should be pointed out that “nowadays there is no universal, worked out, quantitative method of transaction costs accounting, which is caused by difficulties in accounting and estimation of certain transaction costs categories, as well as a considerable amount of their classifications and definitions” (halytskyi, 2013). thus, in the process of accounting management, there are good reasons to group transaction costs typologically in view of certain transactions (exchange, administration, rationing, etc.) with the further specification, when transaction costs may arise, be modified and integrated into other types of enterprise expenses. information on transaction costs grouped in such a manner will be used for their estimation and analysis. such scholars as p.s. lemeshchenko (2011) and h.v. kolodnia (2008) emphasize in their works that transaction costs are irrational, noting that “the general conclusion that can be made on the basis of transaction costs theory is that division of labour and exchange transactions, on which economic activity is based within market model, lead to huge and irrational in terms of social usefulness expenses” (lemeshchenko, 2011). transaction costs have become the key factor of the enterprise natural selection, signalling the necessity for changes of organizational structure in order to ensure company’s strong position on the market (kolodnia, 2008). in other words, transaction costs may be considered to be a kind of indicator of the necessity for changes in the enterprises’ inner structure, forms and methods of their cooperation with counterparts, directions of their activity, market segments, etc. conclusions concerning total value of transaction costs regulation, the structure of their certain constituents and dynamics depend on the quality of accounting and analytical analysis of transaction costs. this is due to the fact that in order to conduct the analysis of transaction costs accounting records are used (70-80% out of all the information), and they do not fully reflect composition and structure of transaction costs and so “the problem of determining their composition still remains unsolved because of a large share of irregular, specific, uncontrolled expenses of probable or expected nature. this is the reason why it is impossible to gather information on their actual state within accounting system that deals with carried out business operation facts” (kurylo, slozko, 2016). thus, a major part of transaction costs, basically associated with corruption element, cannot be measured directly. consequently, the first priority goal of financial and economic services is to manage accounting procedures of transaction costs because accounting is a basic informational framework for the analysis and evaluation of transaction costs with a view to making management decisions concerning further enterprise performance. while using the information obtained in the process of transaction costs analysis, economic entities may need to manage and keep records of certain transaction costs constituents that have not been reflected in this information system. necessity for accounting and analysing transaction costs is conditioned by the need of their minimization, and more precisely, optimization that requires qualitative information support, with the help of which it is possible to determine rational structure of transaction costs, predict their further dynamics, define macro and microeconomic factors of enterprise transaction costs’ changes. given the fact that transaction costs result from the interaction between certain economic entities, between enterprises and public institutions, informational transparency of transactions is the basic and important factor of their optimization. 7. conclusion therefore, while managing accounting and analysis of transaction costs, it should be considered that their certain types may be of probable nature and for this baltic journal of economic studies 267 vol. 4, no. 2, 2018 reason they cannot be reflected in the traditional accounting system. efficient accounting of transaction costs allows making efficient decisions on optimization of their value and structure, as well as gives an opportunity to influence their dynamics in a certain way. alongside with that, it should be pointed out that management of transaction costs accounting and analysis becomes difficult on account of certain factors associated with transaction costs origin and increase: constant increase in the number of transactions; overwhelming globalization of economic processes, their dynamism and the fact that they are hard-topredict; politicization of economic systems of countries, their unions and global economic system; asymmetry of information. based on the results of the research conducted, it may be noted that basic suggestions of scholars regarding management of transaction costs accounting may be confined to the introduction of a separate account or a system of sub-accounts to expenditure accounts of operating activity. however, scholars’ advisory suggestions do not solve the problem of the rational organization of accounting and reduction of off-the-record transaction costs of enterprises without documentary evidence, calling for the use of alternative accounting system for their recording and control. the dynamism of economic systems at the level of both enterprise and state has shifted managerial accents of company’s management from increase in profits to optimization of costs, and primarily transaction costs that have an overwhelming influence on the competitive capacity of an enterprise and in most cases on ensuring sufficient conditions of their existence and development. information support, which is mainly formed within accounting system, is essential for the purpose of developing efficient managerial mechanisms for transaction costs. however, taking into consideration the existence of on-the-record and offthe-books constituents of transaction costs, qualitative information support necessary for management and control may be formed only when information from both bookkeeping and managerial accounting is used, which is the direction for further investigation. references: halytskyi o.m. (2013) orhanizatsiino-ekonomichni pidkhody do obliku ta otsinky transaktsiinykh vytrat u silskohospodarskykh pidpryyemstvakh [organizational and economic approaches to accounting and evaluation of transaction costs in agricultural enterprises], pp. 14-28. (in ukrainian) hordopolova n.v., hordopolov v.y. (2010) oblikovo-analitychne zabezpechennia upravlinnia transaktsiinymy vytratamy [accounting and analytical support for managing transaction costs]. bulletin of zhdtu, no 4(54), pp. 62-64. (in ukrainian) kolodnyaya g.v. (2008) transaktsionnye izderzhki kak faktor evolyutsii firmy [transaction costs as a factor in the evolution of the firm] (phd tesis), moskva, 43 p. (in russian) kouz r . (1993) priroda firmy [nature of the firm]. моscow: delo, pp. 192. (in russian) kurylo t.i., slozko t.m. (2016) transaktsiini vytraty v instytutsionalnomu seredovyshchi ahrarnoho sektoru ekonomiky [transaction costs in the institutional environment of the agrarian sector of the economy]. ekonomichni studii, no 2 (10), pp. 71-75. (in ukrainian). lemeshchenko p.s. (2010) institutsionalno-evolyutsionnaya teoriya novoy ekonomicheskoy reform [institutionalevolutionary theory of new economic reforms.]. ekonomicheskie nauki vestnik nizhegorodskogo universiteta im. n.i. lobachevskogo, no 3 (2), pp. 619-624. (in russian) lukichev m.y. (2011) upravlenie transaktsionnymi izderzhkami stroitelnykh korporatsiy [management of transaction costs of building corporations] (phd tesis), moscow. – 23 p. (in russian) ofitsiinyi sait ministerstva ekonomichnoho rozvytku i torhivli ukrainy. retrieved from: http://www.me.gov.ua/ documents/list?lang=uk-ua&id=e384c5a7-6533-4ab6-b56f-50e5243eb15a&tag=tendentsiitinovoi ekonomiki. ofitsiinyi sait transparency international. retrieved from: http://www. transparency.org/cpi2015#results-tableofitsiinyi sait world bank. retrieved from: http://www.doingbusiness.org/custom-query shepelenko o.v. (2008) upravlinnia transaktsiinymy vytratamy v ekonomitsi ukrainy [management of transactional costs in the economy of ukraine]. (phd tesis), donetsk, 35 p. (in ukrainian) verhunenko m.v. (2008) analiz transaktsiinykh vytrat rehuliatornykh vytrat v konteksti intehratsii ukrainy v svitovu ekonomiku [analysis of transaction costs of regulatory expenditures in the context of ukraine's integration into the world economy]. naukovi pratsi donntu. seriia ekonomichna. vol. 33, no 2, pp. 232-239. (in ukrainian) vítek l. (1998) ronald h. coase: společenské náklady, teorie externalit a jejich řešení. in externality a možnosti jejich řešení: sborník referátů z teoretického semináře. [h. coase: social costs, theory of externalities and their solutions. in externality and possibilities of their solutions: proceedings of the theoretical seminar]. katedra veřejné ekonomie. masarykova univerzita. brno. baltic journal of economic studies 22 vol. 4, no. 3, 2018 corresponding author: 1 department of civil law, zaporizhzhia national university. e-mail: bondar.znu@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-22-27 public administration in the field of land use and protection and state land policy in ukraine: problems of correlation oleksandr bondar1 zaporizhzhia national university, ukraine abstract. the purpose of the paper is to study the problems of functioning and improvement of the organizational and legal mechanism of public administration in the field of land use and protection in ukraine in their correlation with the issues of formation and implementation of the land policy of the state. methodology. the essence of the problem under investigation is the lack of consistency in the implementation of land reform in ukraine since its independence, which negatively affects the effectiveness and stability of the organizational and legal mechanism of public administration in the field of land use and protection. it, in turn, requires a detailed analysis of existing approaches to the formation and implementation of state land policy as an ideological and organizational basis for the development of the land system in the country. analysis of recent researches and papers. issues of legal ground for land reform in ukraine, public administration in the land field were developed by a range of researchers, including, among others, volodymyr andreitsev, pavlo kulynych, anatolii miroshnychenko, volodymyr nosik, vitalii semchyk, mykhailo shulha, and others. at the same time, the degree of investigation of legal problems of the formation and implementation of state land policy, their interrelation with the issues of modernization of the management system in this area is still insufficient. results. the state of legal ground for the development of state land policy and its correlation with the ecological, economic, and social policy of the state were analysed. the emphasis is on state target programs as an important economic-legal instrument of public administration in the land sector. the state of the institutional support of control and supervisory activities concerning the use and protection of land is examined. the conclusion on the necessity of the elaboration of an integrated regulatory legal act, which should consolidate key aspects of state policy in the land sector, is made. value/originality. the analysis of the institutional support of control and supervisory activities in the land sector provides grounds to argue that this activity should be considered as an important element of the organizational and legal mechanism for ensuring sustainable development, and the reform of the system of the relevant authorities should not weaken the potential of this important function of public administration. key words: public administration, land resources, land use, land protection, state land policy. jel classification: k1, k11, k32 1. introduction one of the key vectors of the transformation of the land system in ukraine, which has begun since its independence, is a fundamental modernization of the system of public administration in the field of land use and protection. the decree of the president of ukraine dated may 30, 2001 no. 372/2001 “on the main directions of land reform in ukraine for 2001-2005”, among the priority areas of state policy in the field of land relations regulation, indicates, in particular, enhancement of the efficiency of state administration by land resources, improvement of land monitoring, management of state land cadastre and land evaluation, betterment of the control over arrangement over land use and protection (the decree of the president of ukraine, 2001). this is entirely right approach, as the latest land reform in the state cannot be reduced only to a change in the system of land ownership relations, putting aside the issue of effective land management in order to ensure sustainable use and effective protection of these natural resources. in this context, there is a suitable definition of prof. volodymyr andreitsev for land reform as “the system of actions, which are regulated by special land legislation, of various subjects and a set of organizational, economic, environmental, scientific-technical, land management, baltic journal of economic studies 23 vol. 4, no. 3, 2018 and state-legal tools, aimed at radical transformation (change) and improvement of land legal relations in accordance with the modern needs of the development of society and the state, the provision of land interests and human and civil rights of ukraine, the state and legal persons” (andreitsev, 2007). at the same time, as in 2006 prof. volodymyr nosik writes in a monograph entitled “ownership of the land of the ukrainian nation”, “during 15 years ukraine <...> has been trying, without leading to a logical conclusion, to implement at least four models of land and agrarian reforms in practice, different in directions, consequences, methods, structure, legal forms, which either contradicted each other by virtue of its principles regarding the right to land ownership and land use, or proposed new directions of land reform crossed out the reforms that had been initiated before” (nosik, 2006). among the regulatory legal acts of the ukrainian land legislation, which not only regulate certain social relations but also fix the state and determine the tendencies of development of these relations, it worth emphasizing the resolution of the cabinet of ministers of ukraine dated june 7, 2017 no. 413 “some issues of improvement of management in the field of use and protection of agricultural lands of state ownership and disposal”. this document, in particular, points that “state land policy can be considered as such that is in the stage of formation and doesn’t meet european and world criteria and requirements for proper land resources management in full measure” (the resolution of the cabinet of ministers of ukraine, 2017). the mentioned statutory regulation, firstly, states the existence of unresolved problems in the investigated area and the need to find new approaches to their solution, and secondly, establishes a clear link between such categories as “state land policy”, “land reform” and “public administration in the land sphere”. the constitution of ukraine declares in arts. 13, 14 that land is the main national wealth, which is under the special protection of the state, and consolidates the foundations of the legal relationship of land ownership. art. 16 of the fundamental law places obligations to ensure environmental safety and maintain ecological balance in its territory on the ukrainian state (the constitution of ukraine, 1996). in order to realize these strategic tasks, it is necessary to formulate and consistently implement the state land policy as an ideological and organizational basis for the development of the relevant branch of law. the current legislation of ukraine doesn’t have definitions for “state land policy” or “land policy”, as well as a normative consolidation of the concept of “legal policy”. at the same time, these categories are rather actively used in regulatory legal acts, not to mention theoretical studies where they are paid a considerable attention both on the part of lawyers-scholars and political scientists, economists, and representatives of other sciences. we note that the use of concepts of “land policy” and “land law” as synonyms may look controversially. however, in view of the lack of wellestablished definitions and approaches to understanding legal policy and its relationship with other types of state policy, in our opinion, it can be considered acceptable as the state policy in the field of land use and protection, both at the stage of development and at the stage of implementation, is strictly bound and regulated by legal instruments. as valentyna minieieva noted in the dissertation study, those types of state policy (constitutional, financial, environmental, etc.), which are realized through the action of law, are varieties of legal policy (mineeva, 2004). 2. legal frameworks of the establishment of state land policy the background of the state policy of ukraine is laid down in the law of ukraine dated july 1, 2010 no. 2411-vi “on principles of domestic and external policies” (hereinafter referred to as the law on principles of policy). art. 9 of this legislative domestic policy in the environmental field includes such key vectors as, among other things, the provision of citizens’ constitutional rights to a safe environment, the creation of environmentally and technologically safe living conditions of the population, preservation of the natural environment, improvement of the national environmental policy, introduction of a system of ecologically balanced use of natural resources (the law of ukraine, 2010). by the way, it seems somewhat controversial and tautological in the context of the above-mentioned correlation between the concepts of “internal policy in the environmental field” and “national environmental policy”. such a sufficiently free manipulation by the terms without a clear definition of their content and correlation between them, in our opinion, indicates a certain declarative character of the relevant legislative provisions and their interpretation rather as political and legal slogans but not filled with the real legal content of the rules. the next important step in our study is to establish a correlation between the state’s environmental policy and its land policy. the generally accepted assertion is that in the system of social relations, the land is “characterized by multidimensionality of performed functions.” in addition to the function of property, <...> land is used as a means of agrarian and agricultural production, a spatial basis for the resettlement of people, the placement of production, transport, and other infrastructure, which is necessary for the life activity of modern society, its cultural and spiritual values” (semchyk, kulynych, yermolenko, and others, 2013). so, “there are many intricate and complex linkages between the economy, the social sphere and the environment, in which land use and space usually act as the vehicles for transmitting externalities” (beinat, nijkamp, 1998). baltic journal of economic studies 24 vol. 4, no. 3, 2018 based on the foregoing, we can conclude that the state land policy, besides the environmental component, should have commercial (economic) and social one. among the fundamentals of domestic economic policy, enshrined in art. 7 of the law on policy principles, it is worth mentioning those that directly or indirectly relate to the land sphere, namely: ensuring the competitiveness of the national economy, achieving its high growth rates, guaranteeing the state of inviolability of all forms of ownership as the basis of a market economy system, creating favourable conditions for the development of entrepreneurship, creation of conditions for the revival of the ukrainian village, efficient use of agricultural lands, the formation of a competitive agro-industrial sector, increase of its export potential, guarantee of food security of the state, ensuring a high level of quality of agricultural products and foodstuffs, the development of a transparent market for such products, the formation of land market infrastructure, ensuring the registration of land title documents, the development of transport infrastructure, improving the efficiency of use of transit potential of the state (the law of ukraine, 2010). in its turn, art. 8 of the law on the principles of policy determines priorities in the social sphere, among which there are such important land-law issues as follows: ensuring the rights and freedoms guaranteed by the constitution of ukraine on the basis of the introduction of european standards of social protection, the achievement of effective demographic development, the elimination of poverty, and the reduction of social stratification (the law of ukraine, 2010). in terms of the basics of the state land policy, the law of ukraine dated june 21, 2018 no. 2469-viii “on national security of ukraine” (hereinafter referred to as the law on national security) cannot be ignored as it is stated in p. 4 art. 3 of this act, “state policy in the fields of national security and defence is aimed at ensuring military, foreign policy, state, economic, information, ecological safety, and cybersecurity of ukraine, etc.” (the law of ukraine, 2018). it seems clear that the formation and implementation of state land policy should be carried out through the prism of ensuring the fundamental national interests of ukraine, the law on national security refers to them, in particular, its integration into the european political, economic, security, legal space, membership in the european union and north atlantic treaty organisation, sustainable development of the national economy, civil society and the state to secure the growth of the level and quality of life of the population (the law of ukraine, 2018). it is worth emphasizing the use of the category of “sustainable development”, as the concept of sustainable development is the dominant methodological platform in recent decades in the whole world and in ukraine, in particular, and due to which the entire diversity of human activity in relation to nature is developed. studying the economic problems of land use management, roman kuryltsiv, rightly emphasizes that “the achievement of sustainable development should be considered as a mandatory, logically inevitable stage of improving the methods of resource management in an environment where there is an increased demand for them requiring a reorientation of institutional and managerial processes for its achievement” (kuryltsiv, 2017). 3. state target programs as an economic and legal instrument of public administration in the land sector state target programs, which should be the result of a comprehensive and well-balanced state forecasting activity, take a key place in the system of economic and legal tools used in developing and implementing state policy. according to art. 1 of the law of ukraine dated march 23, 2000 no. 1602-iii “on state forecast and development of programs of economic and social development of ukraine”, this forecast is defined as “scientifically grounded prediction of the directions of country’s development, separate branches of the economy or separate administrativeterritorial units, the possible state of economy and social field in the future, as well as alternative ways and terms for achieving the parameters of economic and social development” (the law of ukraine, 2000). w hereas, according to art. 4 of the aforementioned law, the system of forecast and program documents of economic and social development includes, in particular, national programs of economic, social development, other state target programs (the law of ukraine, 2000). the foundations for the development of the abovementioned programs are directly laid down in the law of ukraine dated march 18, 2004 no. 1621-iv “on state target programs”, art. 1 of which formulates their concept as “a complex of interrelated tasks and activities aimed at solving the most important problems of the development of the state, certain branches of the economy or administrative-territorial units, and are carried out using the funds of the state budget of ukraine and agreed according to deadlines of execution, the composition of performers, resources provision” (the law of ukraine, 2004). we note that state regulation of the economy, social sphere, and natural resources use is an integral attribute of the developed countries of the world. as marta lesiv says “the eu directs significant efforts to support agriculture, increase its efficiency and satisfy the needs of the rural population, and encourage nonagricultural activities in a village that can provide additional income for the peasants. all this is carried out within the framework of the implementation of the eu rural development policy in conjunction with other initiatives aimed at the revival and support of the village, the preservation of its authentic traditions and identity” (lesiv, 2015). baltic journal of economic studies 25 vol. 4, no. 3, 2018 4. problems of institutional provision of public administration in the field of land use and protection consequently, we considered the legislative acts that formed the general principles of state policy of ukraine, in particular, environmental and land. turning to the industry level, in the first place, it is necessary to refer to the provisions of the law of ukraine dated december 21, 2010 no. 2818-vi “on the main principles (strategy) of the state environmental policy of ukraine till 2020” (hereinafter referred to as the strategy). among the prime causes of environmental problems in ukraine, this normative document marks the existing system of public administration in the field of environmental protection, the regulation of the use of natural resources, the lack of a clear separation of environmental and economic functions (the law of ukraine, 2010). therefore, goal 4 of the strategy, which is to integrate environmental policy and improve the system of integrated environmental management, seems quite logical and top. and its practical implementation is another matter. let’s consider this through the example of a task provided by the strategy as “institutional development and enhancing the effectiveness of public administration in the environmental sector,” and we will choose the field of control and supervision. the choice of the latter one, in our opinion, is interesting from the scientific and practical-applied point of view because one of the main vectors of the modernization of public administration, which was consolidated in the activities program of the cabinet of ministers of ukraine approved by the resolution of the verkhovna rada of ukraine dated december 11, 2014. no. 26-viii is the formation and implementation of a new public administration policy, which should foresee, in particular, the introduction of a regulatory model that includes the number and functions of supervisory bodies in accordance with the eu standards and the ukraine–european union association agreement (the resolution of the verkhovna rada, 2014). consequently, in december 2002, the state inspection for the control of land use and protection (derzhzeminspektsiia) was created as a governmental body of state administration as a part of the state committee for land resources of ukraine. the state inspection for the control of land use and protection was tasked with organization and implementation of state control over compliance with the requirements of land legislation by all subjects, adherence to the established procedure for acquiring and realizing the right to land, use of land parcels in accordance with the intended purpose, maintaining state recording and land registration, the reliability of information on the availability and use of land, distribution, design, construction, and commissioning of objects that negatively affect or may affect the state of land, implementation of measures to secure land from water and wind erosion and so on (the resolution of the verkhovna rada, 2002). the purpose of the state land inspection, as noted in the decree of the president of ukraine dated august 19, 2002, no. 720, was to increase the efficiency of state land management, improve control over their use and protection (the decree of the president of ukraine, 2002). at the same time, in august 2009, the state land inspection as a separate executive body was closed down (the resolution of the cabinet of ministers of ukraine, 2009) although in june 2010 it was restored with certain peculiarities in the previous format (the resolution of the cabinet of ministers of ukraine, 2010). however, in november of the same year, this inspection was finally eliminated (the resolution of the cabinet of ministers of ukraine, 2010). besides, during this short period of time, the state land committee was abolished, and the state agency of land resources of ukraine appeared in the state system of central executive authorities. at the beginning of september 2014, the state ecological inspection of ukraine (derzhekoinspektsiia), the state agriculture inspectorate of ukraine (derzhsilhospinspektsiia, it has received relevant powers of state ecological inspection since the moment of establishment), and the state agency of land resources of ukraine represented the main subjects of the land control. in addition, the resolution of the cabinet of ministers of ukraine dated september 10, 2014, no. 442 “on optimization of the system of central executive bodies” abolished the state agricultural inspectorate of ukraine (but de facto, the liquidation process was prolonged for years), and functions for the implementation of state supervision (control) in part of compliance with land legislation, the use and protection of lands of all categories and forms of ownership, soil fertility were devolved on the state ecological inspection (the resolution of the cabinet of ministers of ukraine, 2014). there was the merger of the main supervisory powers of the land sector in the state ecological inspection of ukraine, however, it was short-lived as the government resolution dated july 22, 2016 no. 482 “on amendments to certain other resolutions of the cabinet of ministers of ukraine” as the above powers were devolved to the state service of ukraine for geodesy, cartography and cadastre (derzhheokadastru) (the cabinet of ministers of ukraine, 2016). in the context of the foregoing, it seems good the statement in the policy brief “proper environmental governance in the eastern partnership countries: a good deal of work outstanding”, prepared by ukrainian and foreign experts, that administrative reforms in these countries weakened the institutional structure in the field of environmental protection in some parts, and the emphasis on the need to ensure that the deregulation under these reforms does not lead to an increase in the risks to the environment (policy brief ). in our opinion, long-term reform processes in the executive branch baltic journal of economic studies 26 vol. 4, no. 3, 2018 of the state do not allow achieving integrated unity of the legal, institutional, functional, and economic subsystems in the mechanism of public environmental management, in particular, land management, the formation of which determines the level of efficiency and effectiveness of such mechanism as integrity, the importance and the need of which were noted by prof. vasyl kostytskyi (kostytskyi, 2004). 5. conclusions as a result of the study, we note that, in general, sufficient legal principles were formed in ukrainian legislation for the development of a balanced and consistent state land policy. at the same time, the normative consolidation of the content of this policy is fragmentary. it requires the concentration of efforts of the state, public institutions, business structures, scientific and expert groups in order to develop an integrated normative legal act that should consolidate key aspects of state policy in the land sector, tools and stages of its implementation, monitoring and control, in particular, public. public administration in relation to land resources is an area which, on the one hand, depends directly on the principles enshrined in the state land policy, on the other hand, is subjected to existing approaches to the development of a system of executive branch authorities in the state that are not characterized by stability, which negatively affects the current course of land reform in the country, the state of land resources and the environment in general. the analysis of the institutional support of control and supervisory activities in the land sector provides grounds to argue that this activity should be considered as an important element of the organizational and legal mechanism for ensuring sustainable development, and the reform of the system of the relevant authorities should not lead to weakening the potential of this important function of public administration. references: on the main directions of land reform in ukraine for 2001-2005: the decree of the president of ukraine dated may 30, 2001, no. 372/2001. retrieved from: http://zakon3.rada.gov.ua/laws/show/372/2001 andreitsev v.i. (2007). zemelne pravo i zakonodavstvo suverennoi ukrainy: aktualni problemy praktychnoi teorii : monohrafiia. 2-he vyd., vypr. [land law and legislation of sovereign ukraine: actual problems of practical theory: monograph. 2-nd revised ed.]. kyiv: znannia. (in ukrainian) nosik v.v. (2006). pravo vlasnosti na zemliu ukrainskoho narodu: monohrafiia. [property right to land of the ukrainian people: monograph]. kyiv: yurinkom inter. (in ukrainian) some issues of improvement of management in the field of use and protection of agricultural lands of state ownership and disposal: the resolution of the cabinet of ministers of ukraine dated june 7, 2017 no. 413. retrieved from: http://zakon2.rada.gov.ua/laws/show/413-2017 the constitution of ukraine dated 28.06.1996. retrieved from: http://zakon2.rada.gov.ua/laws/show/ 254%d0%ba/96-%d0%b2%d1%80 mineeva v.i. (2004). pravovaya politika rossiyskogo gosudarstva v oblasti ekologii: problemy realizatsii [legal policy of russian state in the ecology field: problems of implementation] (phd thesis), stavropol: north-caucasus federal university. on principles of domestic and external policies: the law of ukraine dated july 1, 2010 no. 2411-vi. retrieved from: http://zakon2.rada.gov.ua/laws/show/2411-17 semchyk v.i., kulynych p.f., yermolenko v.m. [and others] (2013). problemy rozvytku ahrarnoho ta zemelnoho prava ukrainy: monohrafiia [problems of the development of agrarian and land law of ukraine]. kharkiv: pravo. (in ukrainian) beinat e., nijkamp p. (eds.) (1998). multicriteria analysis for land-use management. netherlands: springer. (in english) on national security of ukraine: the law of ukraine dated june 21, 2018 no. 2469-viii. retrieved from: http://zakon2.rada.gov.ua/laws/show/2469-19 kuryltsiv r .m. (2017). intehrovane upravlinnia zemlekorystuvanniam v konteksti staloho rozvytku: teoriia, metodolohiia, praktyka [integrated land use management in the context of sustainable development: theory, methodology, practice] (dr. thesis), kyiv, national university of life and environmental sciences of ukraine. on state forecast and development of programs of economic and social development of ukraine: the law of ukraine dated march 23, 2000 no. 1602-iii. retrieved from: http://zakon0.rada.gov.ua/laws/show/1602-14 on state target programs: the law of ukraine dated 18.03.2004 № 1621-iv. retrieved from: http:// zakon0.rada.gov.ua/laws/show/1621-15 lesiv m.m. (2015). orhanizatsiino-ekonomichni mekhanizmy zabezpechennia rozvytku silskykh terytorii krainchleniv yevropeiskoho soiuzu [organizational and economic mechanisms for the development of rural areas of the member states of the european union], lviv. on the main principles (strategy) of the state environmental policy of ukraine till 2020: the law of ukraine dated december 21, 2010 no. 2818-vi. retrieved from: http://zakon0.rada.gov.ua/laws/show/2818-17 on activities program of the cabinet of ministers of ukraine: the resolution of the verkhovna rada of ukraine dated december 11, 2014 no. 26-viii. retrieved from: http://zakon2.rada.gov.ua/laws/show/26-19 baltic journal of economic studies 27 vol. 4, no. 3, 2018 on establishment of the state land inspection: the resolution of the verkhovna rada of ukraine dated 25.12.2002 no. 1958. retrieved from: http://zakon5.rada.gov.ua/laws/show/1958-2002--%d0%bf on improvement of the system of state land management and control over their use and protection: the decree of the president of ukraine dated 19.08.2002 no. 720. retrieved from: http://zakon5.rada.gov.ua/ laws/show/720/2002 on additional measures for regulation of land relations: the resolution of the cabinet of ministers of ukraine dated 26.08.2009 no. 901. retrieved from: http://zakon3.rada.gov.ua/laws/show/901-2009-%d0%bf on establishment of state inspection for the control over land use and protection: the resolution of the cabinet of ministers of ukraine dated 21.06.2010 no. 477. retrieved from: http://zakon5.rada.gov.ua/laws/show/4772010--%d0%bf on liquidation of the state inspection for the control over land use and protection: the resolution of the cabinet of ministers of ukraine dated 22.11.2010 no. 1068. retrieved from: http://zakon2.rada.gov.ua/laws/show/10682010-%d0%bf on optimization of the system of central executive bodies: the resolution of the cabinet of ministers of ukraine dated 10.09.2014 no. 442. retrieved from: http://zakon2.rada.gov.ua/laws/show/442-2014-%d0%bf on amendments to certain other resolutions of the cabinet of ministers of ukraine: the resolution of the cabinet of ministers of ukraine dated 22.07.2016 no. 482. retrieved from: http://zakon3.rada.gov.ua/laws/ show/482-2016-%d0%bf proper environmental governance in the eastern partnership countries: a good deal of work outstanding: the policy brief. retrieved from: http://web.archive.org/web/20131113111835/http://www.irf.ua/files/ukr/ programs/euro/toloka_env_gov.pdf kostytskyi v.v. (2004). ekonomiko-pravovyi mekhanizm okhorony navkolyshnoho pryrodnoho seredovyshcha: teoriia ta praktyka [economic and legal mechanism of environmental protection: theory and practice], kyiv, koretsky institute of state and law of national academy of sciences of ukraine. baltic journal of economic studies 80 vol. 4, no. 3, 2018 corresponding author: 1 department of management and economic security, bogdan khmelnytsky national university of cherkasy. e-mail: natazachosova@gmail.com 2 department of business economics, kyiv national university of technologies and design. e-mail: babinaamilo@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-80-87 identification of threats to financial institutions’ economic security as an element of the state financial security regulation nataliia zachosova1 bogdan khmelnytsky national university of cherkasy, ukraine nataliia babina2 kyiv national university of technologies and design, ukraine abstract. government structures should start financial security regulation at the macro-level with the definition of a list of threats, which impact on participants in the financial market can destabilize their activities and lead to negative trends in the financial system functioning and development. the state of financial security of a country depends on the level of economic security in its financial sector. unstable and unprofitable work of financial institutions poses a threat to the state financial security because it means the inability to fully meet the financial interests of the population and business structures. therefore, it is important to establish a list of factors that can have a negative impact on their economic security level. purpose. the research objective is to establish a list of external, hybrid, and internal threats to financial institutions’ economic security for the purposes of regulating the state of financial security of the state. methodology. for obtaining scientific results, the monographic method and the method of theoretical generalization were used in the article. on the basis of research materials of such scientists as baranovsky o., bovsunovsky g., vovchenko r., gladkikh d., furman v., gallagher h., makmakhon v., morrow r., de oliveira i. s., stickings a., elliot d., matanda e., adrian t., liang n. we systematized a list of hybrid and internal threats to financial institutions’ economic security. in the paper, we used analysis techniques to establish trends in the number of bank and non-bank financial institutions in ukraine during the last four years (2014, 2015, 2016, 2017). a list of internal threats to financial intermediaries’ economic security has been generated while using information, obtained through comparing data from the survey and questionnaire of respondents – experts in the field of financial institutions economic and financial security management. top management representatives of various types of professional financial market participants were interviewed during 2015, 2016, 2017; their answers have been analysed and the most significant threats to the normal functioning of the financial sector, and hence to the state financial security, have been identified. results of the survey. it is established what threats to financial institutions economic security, and as a consequence, to the state financial security, can be called traditional ones. hybrid threats to the ukrainian financial market and its participants are systematized. the internal threats to the economic security of financial institutions are specified. thus, the range of threats to the state financial security, the origin of which is the professional activity of economic entities in the financial market, is found out. practical implications. today, financial institutions are characterized by a large number of traditional and new threats to economic security, which they should learn in order to cope with because without this action their stable work will be impossible and it will also reduce the level of the country financial security. the list of threats found in the study can be used as an informational basis for the development of state strategies for ensuring the financial security of the state over the next five years. value/originality. for the first time since gaining independence, ukraine is experiencing a period of financial instability associated with military actions and the crisis of political power. to traditional threats to economic and financial security at the micro and macro levels, their new variations are added. they can only be detected in a timely manner by an expert in the field of security science and by a specialist in the practice field of managing a financial institution. the result of this study is a synergy of theoretical and practical specialists’ efforts towards the search for effective approaches to the regulation of the state financial security through the threat-oriented management of financial institutions. key words: economic security, financial institutions, financial security, regulation, threat. jel classification: d53, e44, g2 baltic journal of economic studies 81 vol. 4, no. 3, 2018 1. introduction the urgency of the research. the past 2014-2017 were quite complicated for the financial market of ukraine. dozens of banks and other types of financial institutions were declared bankrupt and passed (or are still in the process of passing) the liquidation procedure. lack of financial assets began to affect even the largest and the most stable participants in financial services markets, which significantly reduced their assets over the last four years. the main reason for this obstacle was the loss of a significant part of clients by financial institutions. at the same time, economic and political instability and its manifestations led to the emergence of a large number of unconventional threats to the financial intermediaries’ economic security. this destabilized their activities and had a destructive effect on the level of the state financial security. target setting. only developing a state policy of financial security regulation aimed at coordinating and controlling the activities of financial market participants, stabilizing their financial situation, and raising the level of economic security, it will be able to stop the destruction of ukraine’s economy financial architecture. however, it is necessary to start this process from the identification of modern threats to financial institutions’ economic security. actual scientific researches and issues analysis. the issue of specifying the threats to the operation of financial institutions and individual segments of the financial market in the system of ensuring the state financial security is reflected in the works of well-known scholars. thus, there are some threats specific to the financial security of the stock market and related to the circulation of securities (baranovsky, 2016). in the insurance market, there are specific manifestations of threats to the financial security of insurance companies (bovsunovska, 2015). the number of threats to the financial security of the banking sector in the national economy and the banking security of ukraine is constantly increasing (vovchenko, 2013, gladkikh, 2015). attempts to create a general list of threats to the economic security of domestic financial institutions are constantly being made (furman, 2015). certain threats to the economic security of financial institutions, the financial market as a whole, and as a consequence – the state financial security – are considered more detailed and require some special attention (gallagher, mcmahon, morrow, 2014; de oliveira & stickings, 2016; elliott, 2017; matanda, 2015; adrian & liang, 2016). uninvestigated parts of general matters defining. the timely identification of threats, the impact of which may have negative consequences for the level of financial institutions economic security and the state of the country financial security, should be the first stage in the process of effective state regulation of the country’s financial security. the research objective. the research objective is to identify the threats to the economic security of financial institutions in order to obtain an information basis for setting concrete targets for the development of instruments for regulating the state financial security in order to minimize the risks for the stable functioning of professional participants in the financial market of ukraine. methodology. during four years (2014-2017), the analysis of the state of the financial market in ukraine was carried out systematically and the diagnostics of the state of certain financial institutions economic security of different types were carried out. in 2015, a questionnaire was developed to identify the internal threats inherent in modern financial intermediaries, which could be indicated only by individuals who directly work in financial institutions in positions providing them with access to comprehensive information on the economic security level. a sample of survey objects was made – 10% of the total number of institutions in the market from the banking segment, the insurance segment, the segment of asset management companies, the segment of financial companies (factoring, leasing companies), and the segment of credit unions. experts were selected for questioning – they were representatives of financial institutions top management. in 2015-2017, an expert survey for identifying internal threats to the economic security of financial institutions was conducted. its results, received at the beginning of 2018, are presented in this scientific paper. the logic of material presentation. the authors identify changes in the number of banking and non-bank financial institutions in the financial market of ukraine during the last four years. the second part of the main material presents the results of observations on the emergence and manifestation of various traditional types of threats to the economic security of professional participants in financial services markets. the third part systematized hybrid threats that due to the impact on the condition of certain types of financial institutions have negative consequences for the level of the state financial security as a whole. the fourth part presents the results of elaborating questionnaire data of experts, which were interviewed in order to determine the list of threats, which impact is particularly noticeable in the process of managing the financial institutions’ economic security and regulating the level of the state financial security. 2. the current state of the financial market as an environment for the threats formation the state of the financial market is important for the level of the state financial security. in the financial environment, the movement of capital flows, the transfer of assets from investors and financial donors to recipients are taking place; here financial resources are created and multiplied to fill the state budget and to catalyse the development of the economic system, baltic journal of economic studies 82 vol. 4, no. 3, 2018 etc. the destructive processes that may occur during the functioning of the financial market should be timely recognized by the state regulators. in ukraine, they are: the national bank of ukraine (nbu), the national commission that performs state regulation in the field of financial services markets, and the national commission on securities and stock market. as the main characteristic of the condition, in which the state financial market is, we consider the number of institutions that operate in it. the trend towards its reduction is evidence that the level of economic security of professional market participants is insufficient to ensure their profitability, financial sustainability, and competitiveness. the financial market, where weak and volatile companies operate, cannot guarantee the realization of the financial interests of the population, economic entities, and government structures of the country. as of the beginning of 2018, a tendency towards a gradual and continuous reducing of the number of banking and non-bank financial institutions is typical for the financial market of ukraine (figure 1). according to figure 1, in 2014, the number of financial intermediaries (banking and non-bank institutions) in the financial system of ukraine decreased by 43 institutions, in 2015 – by 160  institutions, in 2016 – by 204 institutions, and in 2017 – by 162 institutions. only in the course of 2015, the banking segment of the financial system lost 28% of its participants, and consequently, its financial potential significantly decreased. we can positively estimate only the tendency to slow down the rate of decrease in the number of professional participants in the financial market in 2017. however, leaving the market of a large number of financial institutions for four last years is a negative characteristic of its current state. such a trend indicates the existence of many threats that accompany the activities of financial intermediaries and lead to bankruptcy and liquidation of those institutions which level of economic security is insufficient to continue the normal business activity. 3. traditional threats to the economic security of financial institutions by 2014, the main types of threats to the activities of banks and their economic security were recognized such as: ‒ decrease in the level of active and passive banking operations; ‒ fluctuations in exchange rates; ‒ fraud by customers and own bank staff; ‒ low quality of bank assets; ‒ lack of a due check of clients financial reliability in attempts to expand the volume of lending; ‒ leakage of information about managerial, investment, financial decisions from insiders; ‒ loss of customers in the competition; ‒ attacks by intruders on offices and branches of banks, especially on regional departments with a low level of physical protection; ‒ cyberattacks; ‒ corruption, erroneous actions of the regulator, etc. 26 114 180 151 17 46 24 11 1% 5% 7% 6% 9% 28% 20% 12% 0% 5% 10% 15% 20% 25% 30% 0 20 40 60 80 100 120 140 160 180 200 2014 2015 2016 2017 non-bank financial institutions, quantity* banks, quantity non-bank financial institutions (share of all institutions on the market)* banks (share of all institutions in the market) figure 1. reduction of the number of institutions in the financial market of ukraine *non-bank financial institutions include: insurance companies, credit unions, non-state pension funds and their administrators, managers of construction financing funds and real estate funds, product managers in groups, pawnshops, public-law legal entities, financial services companies that provide combined services and lessors baltic journal of economic studies 83 vol. 4, no. 3, 2018 between 2014 and 2017, there appeared other threats that traditionally were not inherent to professional players in the banking sector. thus, the military actions in the east of the country led to the fact that the nbu by resolution of august 6, 2014, ordered the banks of ukraine to suspend the provision of financial services in a number of settlements, which at that moment were not controlled by the ukrainian authorities. this caused the loss of a significant amount of material and financial resources, as well as of actual and potential customers. there are problems concerning compliance with the economic standards of banks in the banking sector. the instability of the exchange rate, which dynamics, in some cases, is completely unpredictable, remains a significant threat. in the insurance market, such threats to the economic security of insurance companies are intensified: ‒ the loss of their financial stability over the lack of access to sources of funding for current activities caused by the withdrawal of capital companies abroad by foreign investors and the termination of investment support by non-resident shareholders of domestic branches and insurers’ departments, ‒ decrease in the number of clients due to the rising cost of services and the loss by some citizens the sources of permanent income in the context of the conflict deployment in the east of ukraine. its consequences have also led to an increase in the number and size of insurance payments. also, crisis trends in the banking sector have led to a reduction in the amount of financial resources that banks have previously directed to lend to the activities of insurance companies; foreign insurers, whose branches were opened in ukraine, and their investors, having weighed all the risks and calculated possible losses, directed the capital into more reliable investment instruments. as the problem of the ukrainian insurance market, there remains the fact that a great part of insurance companies reimburse losses and expenses not by increasing the efficiency of operations and profitability of business but by attracting insurance premiums and revenues, without paying sufficient attention to the issue of forming insurance reserves. banks operate according to a similar scheme, by returning deposits to individuals and legal entities whose term of payment has come, financial assets, according to which the term of payment should come later. the big threat to the economic security of modern insurance companies traditionally remains a fraud by both – their own personnel, who can steal client bases, policy forms, tangible assets of an institution or exhibit excessive risk aversion in the provision of insurance services, and companies clients that often provide false information about the object of insurance or about an accident. the most important for the economic security of credit unions are such types of threats, as: ‒ the possibility of losing of non-profit status, ‒ the dependence of repaying a credit on factors that are not affected by the manager (for example, loss of health or dismissal from the work of a credit union member); ‒ the inconsistency of the current legislation regulating relations between cooperative and financial activity; ‒ lack of state support in the sphere of consumer cooperation; ‒ weak market position compared to other types of financial institutions; ‒ reduction in the number and volume of deposits and loans; ‒ reduction in the number of credit unions members; ‒ increase in the percentage of arrears on loans; ‒ need to increase the level of services prices. this list can be supplemented with the following types of threats: the introduction of settlement transactions registers in credit unions; lack of right for individual businessmen, farmers, cooperatives, and non-profit organizations to use the credit unions services – this significantly reduces the number of credit unions’ potential clients; lack of a mechanism for guaranteeing deposits of credit unions members; insufficiency in guaranteeing the rights of credit unions members; imperfect system of prudential supervision in the credit institutions market. among the main threats to non-state pension funds (npfs) can be named the creation of “internal” captive funds with distorted goals and redistribution of resources in favour of founders. the threat of mistaken estimation by managers of funds asset value, in which it is planned to invest financial resources for preserving and multiplying them, remains rather substantial. regulatory prohibitions in using some areas of depositors’ funds placement set a limited space for effective managing of the investment portfolio of npfs and joint investment institutions in ukraine. the existence of unreasonable quantitative restrictions for the structure of fund assets complicates the mobility of investment capital flows. among the threats to the economic security of financial companies and pawnshops remain: ‒ low effectiveness in the legislative protection of the financial interests of housing construction financing funds trustees; ‒ the absence of statutory and regulatory enactments regulating the problem aspects of pawnshop activity while interacting with clients; ‒ legislative unregulated factoring activity in the collector business and, as a consequence, a low level in the protection of citizens’ interests before collectors; ‒ inaccessibility of financial services users to reliable information about the activities of these financial institutions due to their low level of transparency. this list can be supplemented by such types of threats as lack of financing activities sources, lack of investment resources, high level of operational risk and competition. baltic journal of economic studies 84 vol. 4, no. 3, 2018 4. hybrid and internal threats to the economic security of financial institutions types of threats that are unconventional for financial institutions but now have a significant impact on the results of their operation are hybrid threats. the functioning of the financial market and its participants is currently under the control of a hybrid war caused by the conflict situation in the east of ukraine. accordingly, in the economic sphere, financial institutions can act as subjects of hybrid warfare, and their products and services – as instruments of hostilities. hybrid threats to the functioning of the financial market and its professional participants are systematized in table 1. despite the strong influence of external and hybrid threats on the economic security of domestic financial institutions, one should not forget about the threats of internal origin. internal threats to the level of financial institutions’ economic security are shown in table 2. the offered threat list is not exhausted. with each passing year, new forms and types of threats to the financial security of financial institutions will emerge in the financial market; therefore, the topic of the initiated research will not lose its relevance. at the same time, for the effective regulation of the level of the state financial security, the authorities will have to determine the priority threats to the economic security of institutions in the financial market in order to focus the main resources and efforts on their elimination. 5. views of experts on threats to the economic security of financial institutions in order to identify in the current list the threats that need to be first taken into account when managing the economic security of various types of financial institutions, as well as identifying the threats specific to different types of financial institutions, an expert survey was conducted. the mechanism for working with experts included the following steps: forming a sample of financial institutions (10% of financial institutions from each of the studied segments on the financial market – the banking sector, insurance sector, investment companies sector, financial companies sector, credit unions companies – were selected); there was sent a questionnaire requesting it to be filled in to each financial institution that was included in the sample: to three representatives of the senior management – for banks and insurance companies, to two representatives for amc, to one representative for all other types of financial institutions (anonymous questionnaires filling was allowed); receiving completed questionnaires and analytical processing of the received data. taking into account the number of financial institutions in the ukrainian market at the beginning of 2018, the analytical base for this year of the study was as follows (figure 2). table 1 hybrid threats to ukraine’s financial market functioning and to the activities of its participants hybrid threat impact on the state of the financial market, financial security of the country, and activities of financial institutions a large number of financial institutions with a high proportion of russian capital in the financing structure the deterioration of the business reputation of professional market participants and the loss of public confidence in financial institutions and government, which allows the use of the capital of an unfriendly state in the financial system insolvency of financial institutions with russian capital, their loss-making destabilization of the financial market architecture, bankruptcy of business entities that are counterparties and partners of pro-russian financial institutions, limiting the possibilities for returning assets to their stakeholders legalization of capital from the occupied territories through the infrastructure of domestic financial institutions expansion of the shadow financial sector boundaries, fall of national currency value, caused by inflation, increase in the number of extraordinary inspections of the financial institutions’ activities that block their work using domestic financial institutions for directing financial resources aimed at the expenditure in the occupied territories setting up the process of implementing financial products and services to finance terrorism, deteriorating the reputation of domestic financial institutions in the european and global financial markets, loss of investors the impossibility of safe using pro-russian billing electronic payment systems slowing the movement of financial flows, impossibility to meet the financial interests and needs of certain categories of customers non-repayment of loans by borrowers, non-fulfilment of obligations under customer agreements of clients staying in the occupied territories loss of assets, destabilization of the financial system state, lowering of the financial stability levels and financial institutions profitability, limitation of their resource base for carrying on the business activity, leaving the financial market the subordination of individual financial institutions that have russian co-owners or investors, to the government decision of a neighbouring state, and neglect of the domestic legal base violation of financial interests of ukrainian citizens, loss of trust in the financial system, withdrawal of financial resources from the domestic financial system, negative investment image of the state as a whole the deterioration of domestic financial institutions reputation by means of information warfare reduction in the number of clients, partners, investors; refusal of the stakeholders to use financial services baltic journal of economic studies 85 vol. 4, no. 3, 2018 table 2 internal threats to the level of financial institutions’ economic security internal threat influence on financial institutions’ economic security low professional level of the personnel, its qualification, the tendency of employees to commit fraudulent actions high risk of losing material, financial, information resources and customer base both through incompetence and through criminal actions of the employees opportunistic behaviour of insiders regarding the interests of financial institutions a decrease in the level of the institution business reputation, loss of partner relations, a decrease of its value for investors in the market management inclination for excessive risk in the process of managerial, investment and financial decision making unexpected financial losses due to failures, deteriorating financial condition of institutions, loss of customers, partners, investors and their financial assets lack of information and analytical support in the process of countering threats, the low relevance of information resources irrational structure of the economic security system, excessive costs for the organization of protection and ineffective management of economic security ineffective time management financial losses or lack of profits over late management and financial decisions improper financial reserves in the situation of financial destabilization inability to compensate for the consequences of the negative impact of external and internal threats on the state of the institution economic security miss of the staff reserve for timely replenishment of the staff need for additional time and financial resources to find qualified staff use of unlicensed software, untimely updating of programs the probability of hacker attacks, the possibility of access by third parties to confidential information absence or low efficiency of access control systems the probability of third-party penetration into the building of the institution; theft, damage to the property of the institution and information about its activities low level of technical and technological support the inability to organize the proper level of work with clients and the protection of the institution assets the absence of a professional guard the probability of abduction, property damage lack of monitoring in the economic security system failure to evaluate the economic security level, to detect flaws in its system of management, and timely identify the threat to the economic security of the institution denial of the legal department in the structure or position of a full-time lawyer lack of legal protection of the institutional interests loss, abduction, damage to information resources; their use against the interests of the institution the risk of using information with a low level of certainty or lack of necessary information while making managerial decisions 82 294 296 1233 3788 29 30 120 3832 87 60 120 38 0 200 400 600 800 1000 1200 1400 1600 banks insurance companies asset management companies financial companies (factoring companies, leasing companies, pawnshops) credit unions number of institutions in the market number of institutions in the sample number of experts figure 2. analytical basis for assessing the threats to the economic security system of financial institutions in 2018 made by the author using data from government regulators baltic journal of economic studies 86 vol. 4, no. 3, 2018 the results of the expert assessing of 10% of financial institutions from each segment of the financial market are summarized in table 3, which shows the average interval values of the analysed indicators. so, most managers of financial institutions do not see the likelihood of their companies’ bankruptcy throughout the year. the state of economic security and the level of financial institutions management efficiency have received sufficient assessment only in the banking system, but banks also have reserves for improving these indicators. in table 4, we systematized the results of the answers received in the questionnaires on the question concerning the impact of specific threats on the state of financial institutions’ economic security. the identification of threats to financial institutions’ economic security, the definition of their specific types for ukrainian financial intermediaries, and those forms that have been reducing the efficiency level of the financial market functioning for several years, allow us to set guidelines for a mechanism in regulating the level of table 3 quantitative results of the assessment of threats to financial institutions’ economic security, 2018 (as of the beginning of the year) indexes banks insurance companies investment companies (amcs) factoring companies leasing companies pawnshops credit unions the probability of bankruptcy by the end of the year 0-10% 51-90% 0-10% 51-90% 51-90% 0-10% 51-90% the state of economic security (from the maximum possible 100%) 61-80% 21-40% 21-40% 0-20% 0-20% 0-20% 0-20% level of effectiveness of top management 61-80% 61-80% 61-80% 21-40% 21-40% 21-40% 21-40% reducing customers confidence over 50% over 50% 11-50% over 50% 11-50% 11-50% over 50% reducing the number of customers 11-50% over 50% over 50% 11-50% 11-50% 0 over 50% the need to increase assets 21-40% 61-80% 61-80% 61-80% 61-80% 0-20% 81-100% the deterioration of business reputation over 50% over 50% 11-50% over 50% 11-50% 11-50% over 50% the need to attract additional financial resources 81-100% 61-80% 81-100% 81-100% 81-100% 61-80% 81-100% reducing the demand for financial services 41-60% 61-80% 61-80% 61-80% 61-80% 21-40% 41-60% the need to increase regulatory capital 1-20% 1-20% 1-20% within normal limits within normal limits within normal limits within normal limits the level of “qualitative” assets 21-40% 21-40% 41-60% 0-20% 41-60% 0-20% 0-20% loss of information (cases per year) 1-5 1-5 1-5 0 0 0 1-5 fraud over 20 times 11-20 0 11-20 11-20 11-20 11-20 raider attacks 1-2 0 0 0 1-2 0 0 failure of customers to fulfil obligations over 21% over 21% over 21% over 21% over 21% over 21% over 21% level of staff qualification (from the maximum possible 100%) 21-40% 21-40% 21-40% 21-40% 21-40% 0-20% 0-20% liquidity level 5-10% 0-0,5% 0-0,5% 0-0,5% 0-0,5% 0-0,5% 0-0,5% the permissible level of risks to be taken 61-80% 61-80% 81-99% 81-99% 81-99% 81-99% 81-99% made by the author using expert assessment table 4 results of diagnostics of the influence of some threats on the state of financial institutions’ economic security type of threat banks insurance companies investment companies (amcs) factoring companies leasing companies pawnshops credit unions political pressure + ‒ ‒ ‒ ‒ ‒ ‒ distrust of investors, creditors + + + + + + + financial illiteracy of the population + + + + + + + increase of economic and prudential norms + ‒ + ‒ ‒ + + falling of income levels + + + + + + + corruption and nepotism + + ‒ ‒ ‒ ‒ ‒ increase of tax pressure + ‒ ‒ ‒ ‒ ‒ + economic downturn + + + + + + + competition with foreign institutions + + + + + ‒ ‒ instability of the exchange rate of hryvnia + + + + + + + made by the author using expert assessment baltic journal of economic studies 87 vol. 4, no. 3, 2018 economic security for its participants and to determine state priorities for minimizing threats and losses from their implementation. for organizing the process of regulation, the level of state economic security, it is advisable to propose a formula for dealing with threats: it is easier to prevent, than to avoid, to avoid is more rational than to counteract, to counteract is better than to manage, to manage is cheaper than to compensate for the consequences. preventing the threat, as well as avoiding it, can be done only on condition of timely recognizing of their inherent nature for the institution. thus, identifying threats is the first and main stage in managing economic security. a concrete list of the most significant threats to financial institutions economic security is a necessary tool for ukraine’s financial security regulation process. since the stable operation of the financial market is the basis of a stable and viable financial system, its infrastructure, which is being built on the institutions of financial intermediation, needs state support in the crisis period of functioning that is characteristic for modern ukraine. at the state level, mechanisms for reducing the level of exposure to the most significant threats to the financial institutions economic security should be clearly defined, the directions for stabilizing the status of systemically important market participants have to be developed, the directives and imperatives of the security-oriented activity of domestic financial intermediaries while realizing their professional functions must be created. fierce and close monitoring of their compliance should become the basis of an innovative approach to state regulation of ukraine’s financial security. 5. conclusions the results of the study, lasting for four years, show that as of the beginning of 2018, financial institutions in ukraine are characterized by a large number of both traditional threats to economic security and their newest forms, with which companies still should learn to fight since, without it, their further stable and costeffective activity will be impossible. the identified lists of external, hybrid, and internal threats should be used as an informational resource for decision-making by state structures regarding the vectors for regulating the state financial security level in ukraine, which is largely determined by the level of financial institutions economic security. in the long run, the specification of directions in state regulation of ukraine’s financial security remains an important theoretical and practical task. the separate vectors of state regulation should be aimed at minimizing the threats being identified by us within the framework of this study to financial institutions’ economic security. references: baranovsky o.i. 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(2016). monetary policy, financial conditions, and financial stability. federal reserve bank of new york staff reports, no. 690, p. 44. natsionalna komisiya, shcho zdiysnyuye derzhavne rehulyuvannya u sferi rynkiv finansovykh posluh (2017). richni zvity natskomfinposluh [annual reports of the national financial services commission]. retrieved from: https://www.nfp.gov.ua/ua/richni-zvity-natskomfinposluh.html (accessed 10 april 2018) natsionanyy bank ukrayiny (2018). pokaznyky bankivskoyi systemy [indicators of the banking system]. retrieved from: https://bank.gov.ua/control/uk/publish/article?art_id=34661442&cat_id=34798593 (accessed 27 april 2018) ukrayinska asotsiatsiya investytsiynoho biznesu (2018). osnovni tsyfry [basic figures]. retrieved from: http://www.uaib.com.ua (accessed 27 april 2018) baltic journal of economic studies 17 vol. 1, 2015 why is it reasonable to invest in renewable energy in ukraine? yuliia bashynska1, institute of regional researchers of national academy of sciences of ukraine, ukraine abstract. the purpose of the paper is to present the current status of renewable energy development in ukraine and to highlight the main advantages of investing in renewables in ukraine. the purpose is also to reveal the biggest renewable energy installations in ukraine. the paper displays the main financial initiatives of several international organizations and world economic leaders that have already announced plans to aid ukraine’s transition to renewable energy. methology. the survey is based on an analysis of the natural potential, legislative frameworks of the industry and active financial programmes. results of the survey provide the most attractive opportunities for investing in the emerging market of renewable energy in ukraine. the survey also shows the amount of economically viable potential of different renewable energy sources. besides, it is expected that renewable energy will enhance energy security and reduce the negative impact of industry on the environment. practical implications. since 2009 when the green tariff was first introduced in ukraine, the renewable energy sector has been developed to a great extent. although the sector faced some policy challenges in 2015, such as the imposition of new taxes, but technologies experienced rapid growth. nowadays the use of renewable energy sources is a priority way of sustainable energy system building in ukraine. there are several state and regional financial initiatives promoting renewable energy sources. as policymakers have focused on the renewable energy development, new investment centered in energy efficiency technologies. there will be a big step in the direction of renewables usage in private housing complexes. due to the survey, the main problem of renewable energy development is lack of funding. all the efforts made by the government create an enabling environment for foreign direct investments in renewable energy in ukraine. value/originality. wide renewable energy use would be a good solution for ukraine to decrease the amount of imported energy resources. boosting of renewable energy will also help to tackle global warming and negative changes of climate. that is why promoting of renewables use is very important for ukraine. on the other hand, renewable energy can become a profitable business for investors. key words: renewable energy, investments, energy efficiency, capacity, development, project. jel classification: e 22, o38, q01 corresponding author 1 department of еnvironmental policy and natural resources, institute of regional researchers of national academy of sciences of ukraine. e-mail: yu.bashynska@ukr.net 1. introduction “by supporting ukraine, you support a new future for europe and the entire free world. by supporting ukraine, you support a nation that has chosen freedom in the most cynical of times” petro poroshenko, the president of ukraine, the joint session of the united states congress, september 2014. one of the main problems with the current ukrainian energy sector is low energy efficiency and too much consumption of natural gas, oil, and coal. due to recent advances in technology there are several excellent alternatives to traditional energy sources such as gas, coal and oil. these alternatives are renewable energy sources and they are available in nearly every country in the world, as the sun shines and wind blows everywhere. today’s economic climate and pressing environmental issues make it ever more crucial to promote sustainable development in order to save our planet’s natural resources for future generations. i believe that renewable energy sources are the best all around solution for enriching ukraine’s industrial, agricultural and residential sectors. based on the successful implementation of renewable energy throughout the european union, ukraine is advantageously positioned to become a highly energy effective and independent state. ukraine has long been a key energy partner on the continent and already possesses renewable energy infrastructure and rich natural resources that, properly tapped, will greatly reduce dependence of ukraine on fossil fuel imports from russia. the current ukrainian government has already identified renewable energy as a baltic journal of economic studies 18 vol. 1, 2015 very high priority for securing independence from russian gas and oil imports in the near future. with the adoption of directive 2009/28/ec ukraine committed to a binding 11% target of energy from renewables in gross final energy consumption in 2020, up from 5,5% in 2009, and 10% in the transport sector. a major expansion in renewable electricity generation is planned, in particular from wind, but also from solar photovoltaic, biomass, and large-scale hydro. renewable sources (bioethanol) goal for the transport sector was listed as a voluntary 5% share of the total fuel volume in 2013. this amount then became a mandatory 5% in 2014, though ukraine did not manage to meet its target of 5% for 2014 (shevchuk and malysheva, 2014). there is a very ambitious plan of action to increase energy efficiency already underway that calls for the reduction of energy intensity by 20% until 2015, as compared to 2008, which is very difficult to achieve, given the present constraints in legal and financial support. the second, possibly even more crucial reason for promoting renewables in ukraine is ecological. to a large extent, leaders in business and government share consensus that investing in renewable energy is the most desirable way to promote sustainable development. the traditional methods for generating electricity currently in use produce heavy pollutants and continue to cause negative outcomes linked to diseases, structural damage, biosphere disruption, and species degradation. 2. the gas factor in ukraine the single most factor driving the development of renewables is the desire for more autonomy in economic relations with russia. ukraine has remained dependent on russian gas, oil, petroleum and nuclear fuel since gaining independence in 1991. throughout the decade immediately following independence many domestic and foreign policy decisions were tied to speculations on the price of natural gas in particular. in the present situation, in which relations between ukraine and russia are extremely tense, ukraine’s security and autonomy relies on reaching energy independence. the only alternative would be for russia to continue to set inflated gas price increases, a trend that has adversely affected both ukraine and europe in the past. in 2014 ukraine is slated to import highly over-priced gas ($485 per 1 thousand m3 ). although russia is continuing to sell gas to europe at a lower rate, the majority of this gas and other fuel products sold to european clients transits through ukrainian territory. it should be mentioned that in 2013 ukraine imported nearly 26 billion m3 of gas from russia. the price of this gas, which was not economically justified, was a heavy burden for the ukrainian budget. the ukrainian government is considering a multiple options plan for replacing russian gas, as the 2015-2016 heating season will be a big challenge for the country. unfortunately, russian gazprom has proven that it is an unreliable and unpredictable partner to ukraine. that’s why every effort needs to be made to diversify the energy sector of ukraine and to safeguard the country against inevitable future breakdowns in relations with gazprom. wide renewable energy use would be a good solution for ukraine to decrease the amount of imported energy resources. according to the energy industry research center, ukraine’s heating supply accounts for about 40 percent of all gas imported from russia, which could be replaced with renewable energy within three to five years. by 2030, renewables could account for about 15 percent of ukraine’s electricity supply, up from about 2 percent now, with adequate investment (wingfield, 2014). the ukrainian government is encouraging the renewable energy sector to achieve four important nationwide aims: to improve energy security, to reduce the dependence on fossil fuels imports, to boost clean energy generation, and to and lower greenhouse gas emissions. in order to support these four priority areas, the state provides guarantees to all investors involved in renewable energy projects. according to the law on state guarantees to promote the use of renewable energy sources, which was adopted in june 2011, ukraine guarantees that all electricity produced from renewables will be purchased at the established green tariff for the duration of the green tariff application. the green tariff rate is established individually for each business entity and each renewable energy source until 2030. 3. projected growth many positive steps forward in renewable energy development are already taking place. several international organizations and world economic leaders have already announced plans to aid ukraine’s transition to renewable energy. the u.s. agency for international development (usaid) recently launched a program that aims to help 17 ukrainian cities conduct energy reform and improve energy efficiency, with emphasis on developing a renewable energy sector. usaid has promised us $13.5 million towards the program (vorotnikov, 2014). the logic follows that with the rapid growth of industry and population, ukraine will need more electricity and heat production. it is more efficient to cover the deficit of energy that will occur in the future with renewable energy sources than with traditional energy. achieving this aim for ukraine is not easy because of many factors. the main reason is the lack of funding for renewable energy development. the current political infrastructural changes and budgetary constraints in ukraine pose specific challenges to immediate state investments in the construction of renewable energy objects. thus, ukraine must attract more foreign investment in renewable energy projects. during last few years, ukraine has developed renewable energy more intensively than traditional, enhancing energy security and reducing the negative impact of industry on the environment. following the results of 2011-2013, more solar and wind power plants were installed than coal and gas power plants, both in number and by installed capacity. in 2013 the total new renewables capacity reached 535.5 baltic journal of economic studies 19 vol. 1, 2015 mw. during the period of 2011-2012 more than two 2 billion euros were invested in the renewable energy sector. according to ebrd, ukraine may soon become a key leader among environmentally friendly economies in europe with its renewable energy sector being among the most prospective and attractive for investments. the forecast is that investments in ukrainian renewable energy generation, including solar and wind energy, biomass and biofuel production, could reach nearly 5 billion usd in the next 5 years (yevtushenko, vakht. 2012). 4. areas of investment: hydro, wind, solar, biomass for 2014 ebrd has prolonged financing energy efficient projects in ukraine, launching a new financial programme of 100 million euro to develop sustainable energy sources and to promote energy efficiency in ukraine. having invested 2.8 billion usd into renewable energy projects, ukraine has outstripped several other developing countries, even those with slightly higher economic rakings: turkey, thailand, morocco, argentina, mexico and all countries of latin america excluding brazil. according to unep data, ukraine was among ten dominant countries of the world in asset finance* of renewable energy assets in 2012. investments in renewable energy rose from 919 million usd in 2011 to 2.8 billion in 2012, which is equal to 205% of growth. the advance was driven by the financing of a series of small hydro projects totaling 980 mw and worth 2.1 billion in the dnipro river. the largest project in another sector was that for the 90mw, 126 million botievo wind farm (phase 1) on the cost of the azov sea in zaporizhia region (global trends in renewable energy investment, 2013)1. in 2013 wind power llc signed a loan agreement in the amount of 138 million euro for the second phase of the botievo wind farm. the construction is expected to be complete by the end of 2014. the loan was granted by the landesbank berlin (lbb), one of the largest banks in germany. the loan has a tenure of 10 years and will be used for financing the second stage of the botievo wind farm, which includes thirty five vestas wind turbines v112-3,0 mw with total capacity of 105 mw. the total investments in botievo wind farm are valued at 340 million euro. despite the difficult political and economic situation in ukraine, wind power llc is not going to stop constructing wind farms in ukraine. the company is planning to build 2 new wind farms with a total capacity of 350 mw in the south of the country. wind energy is being developed in ukraine at a fast pace. during 2013 alone 95.3 mw of new wind energy capacity was put into operation. thus, on the 31st of december 2013 the total installed capacity of wind energy sector in ukraine amounted to 371.2 mw compared with 276 mw in 2012, which corresponds to the rate of growth of the industry at a level of 56%. the amount of electricity generated form wind reached 633 million kwh which is equivalent to 0.33% of total electricity generation in ukraine. in general, at the end of 2013 the total capacity of mounted wind turbines in the country amounted to 472.9 mw, and 101.7 mw of them are currently under connection to the grid. furthermore, many projects of wind power plants construction were started in lugansk, kherson regions and in crimea. in 2013, all wind farms of ukraine produced more than 630 million kwh of electricity, accounting for 0.33% of total electricity production in the country. thanks to "green" electricity produced by wind energy, co2 emissions have been reduced by 512 000 tones. the leading wind power companies in ukraine are “wind parks of ukraine” ltd and “wind power " ltd dtek (uwea, 2014). in terms of the entire territory of ukraine it’s not a powerful achievement, but it’s only the beginning of wind energy development in the country and we hope it will continue. a significant growth was seen also in solar energy. in 2012 the installed capacity of solar energy accounted to 372 mw which is 95,8% more than in 2011. the share of solar energy in all renewables capacity was 6% and 0.7% of all electricity generation. due to the forecast made by the company energici holdings inc, in 2017 the total installed solar capacity in ukraine will amount to 3087 mw. ukraine took the 22nd place in the world in comparison with the other solar markets. the legislation is also attractive with stimulus and policies in 5 categories out of 14. at various stages of implementation there have been more than 100 projects of solar power plants construction with a total capacity of over 1380 mw. most of the objects are built by foreign companies from portugal, germany, france, austria, czech republic, israel and some ukrainian developers. due to hans-josef fell, who framed the german renewable energy legislation, ukraine can produce enough biogas even to export it to europe instead of russian natural gas. the main reason that hampered the development of electricity generation from biogas in ukraine was the absence of "green tariff " for biogas until april 2013. due to the new legislation, the companies that produce electricity from biogas or biomass can claim to sell it to the national energy market at the price of 0.1 euro/kwh (the rate of "green tariff " for march 2014) . nowadays there are only five companies generating electricity from biomass and four entities using biogas which work on “green tariff ” in ukraine. besides, according to the review of the energy sector of ukraine prepared by the international energy agency, ukraine should develop a new energy strategy that will allow it 1 all money invested in renewable energy generation projects (excluding large hydro), whether from internal company balance sheets, from loans, or from equity capital. this excludes refinancings. baltic journal of economic studies 20 vol. 1, 2015 to make full use of the country’s potential for renewable energy development, particularly biogas and municipal waste for heat and power generation. before the political crisis, ukrainian solar energy was rated as the most attractive for investing among eurasian countries and took 29th position at the world list. after a positive change of government and the election of a new president, there is now an even stronger political will in ukraine to attract the funds to support an even wider range of renewables. 5. current initiatives thanks to a joint investment by ebrd and eig engineering a first biomass heat power plant was constructed in the kyiv region with a capacity of 6 mw. total planned capacity of the plant is 18 mw and it will help ukraine to save 40 million cubic meters of natural gas annually. for now the plant works in a test regime. the option of using biofuel (wood, straw and other waste of agricultural plants) is especially attractive and economically sound for villages and towns with no more than 20,000 residents and they happen to account for nearly half of the country’s population. in today’s difficult economic climate most ukrainians cannot afford to buy pv systems, wind turbines or biogas machines because they are too expensive. that’s why small utility-scale projects are not widespread in ukraine. most of the realized projects are of large capacity. but thanks to global trends, solar and wind systems prices have fallen. for ukraine the sharply reduced cost of solar pv systems is a good sign. it means that a greater amount of pv capacity can be installed at a lower cost. the ukrainian renewable energy market is very attractive for foreign investors now because it is just being developed. additionally, over a 5-year period to the first quarter of 2014 the worldwide average cost of electricity has declined by 53% for crystalline silicon pv systems, and 15% for onshore wind turbines. over the same timeframe, the cost per mwh of coaland gas-fired generation has increased in many countries, including ukraine (global trends in renewable energy investment, 2014). energy-smart technologies is a brand new branch of industry for ukraine that is just now entering a rapid stage of development. the rich prospects to be found in ecologically-friendly production may soon also lead to establishing an energy-efficient car industry within the country. ukraine is in the process of designing a scientific research test center for safe, environmentally-friendly and energy-efficient vehicles that will involve a new state-ofthe-art complex of laboratories with high-tech equipment. 6. the five main reasons to invest: 1) ukraine possesses a very rich natural potential of all renewable energy sources: • the country’s wind technical potential is one of the highest among cis countries (around 5,000 mw). according to the wind energy association, wind energy potential in ukraine is estimated at 30 000 gw h. ukraine is in top-four european countries, most suitable for generating electricity from wind. the greatest wind energy potential is located in the vast areas adjacent to the black sea and the azov sea, as well as the carpathian mountains, transcarpathian and lower carpathian areas. ukraine’s renewable energy sector currently produces power at a much lower cost than other countries. for instance, producing one mw h of wind energy costs roughly usd 33,1 compared with usd 145 in the czech republic, and usd 50 in china in terms of 2012 (ervin and o’sullivan, 2012). ukraine has an impressive potential of biomass available for energy generation. according to the ministry of agrarian policy of ukraine, potential of biodiesel production is estimated at 1 mln tons/year and nstitutio production – 2 mln tons/year. biomass technical potential is high: nearly 50 twh. biomass energy production can be based on agricultural and forestry waste. annual economic potential of crop waste expected to be equivalent to 14 million tons of coal. the full annual biomass resources available in ukraine are equal to 70 million tons per year. to use it it’s possible to create a network of stations with the total capacity of 7000 mw. moreover, biomass energy development in ukraine is the most cost-effective due to the presence of stable raw material during the day and night and all seasons, as opposed to more expensive and cyclic solar energy and wind. • according to the ukrainian agricultural confederation, burning even a half of the straw and corn stalks left on the fields can produce the energy equivalent of 11-13 bn m3 of natural gas. • average solar technical potential is close to 4 kwh/ m2/ day. the potential of solar energy in ukraine is high enough for a wide introduction of the heat energy and pv equipment almost on the entire territory. use of the available technical potential can allow saving nstitu. 5 bln. m3 of natural gas. an average annual amount of the total solar radiation which accesses 1 km2 of the surface on the territory of ukraine is within 1070 kwh/m2 in the northern part of ukraine up to 1400 kwh/m2 inn the south of ukraine and higher in the ar crimea. the period of effective operation of the helioenergy equipment in the southern regions of ukraine is 7 months (from april to october), in the northern regions  – 5 months (may to september  – data of unido, gef). by comparison, the amount of solar energy reaching the earth’s surface in ukraine in terms of 1  sq.m is higher than in germany which has been the world’s top pv installer for several years. • technically feasible hydro power potential of small rivers of ukraine amounts to about 8.4 billion kwh or about 4,5% of total electricity consumption in 2010. majority of hydro power plants need modernization. according to the ukrainian legislation, small hydro power plants are those electric power stations with installed generation capacity not exceeding 10 mw. western region of ukraine has the baltic journal of economic studies 21 vol. 1, 2015 biggest potential for development of small hydro power stations, but it requires some investments in this sector (ervin and o’sullivan, 2012). • hydroenergy has been historically strong, but technology needs upgrading. ukraine’s 22 400 rivers are a significant source of renewable energy capacity in the form of hydroelectric potential. however, because only 110 of these rivers are broader and longer than 100 km, future hydroelectric growth will come from small hydroelectric installations. the ministry of energy and coal industry provides estimating that hydroelectric capacity could reach 5.8 gw by 2030. and according to data provided by the renewable energy institute of the national academy of science of ukraine, the hydroenergy potential could even reach 12.5 gw (ukraine alternative energy sector outlook, 2011). 2) in ukraine there is an enabling legislation to support the renewables sphere. the main advantage is high “green tariffs” and exemption from some tax and customs duties. tax exemptions are granted to: enterprises selling energysaving equipment of their own production (on 80% of income) and enterprises implementing energy-saving projects (on 50% of income). enterprises generating electricity from renewable energy sources and biofuel producers are exempt from income taxes until 2020, inclusive. no customs duties or vat are leveraged on equipment imported for renewable energy production. additionally, the state energy market is obligated to purchase all electricity generated from renewable energy sources. 3) the ukrainian renewable energy market is not widely advertised and promoted abroad. for this reason levels of foreign investment and competition have so far remained low, but are expected to grow exponentially. the share of renewables in total energy supply is still very low (below 3%) but the number of companies engaged in this sector is increasing. 4) ukraine has a developed scientific and technical base for renewable energy development. in addition, the country has developed the production of modern high-tech equipment for the “green” energy during the last three years. ukraine is one of europe’s largest producers of solar panels and components to them, though they are often more expensive than imported equipment. ukrainians also have their own research and development achievements in this area. recently, the american journal of r&d magazine has ranked among the best world scientific developments the autonomous energy supply system, invented by scientists of the national university “lviv polytechnic”. this device can charge household appliances, mobile phones and illuminate a small room. the system that catches stray light, can, for example, be sewed to a bag or a tourist tent. another ukrainian inventors led by the chief designer doctor olexiy onipko developed a wind turbine that can generate electricity at a low wind speed. the successfully designed rotor installation is driven even when the wind speed is of 0.1 m per second. this device can be used almost on the entire territory of ukraine. the advantage is that the turbine operates in a wide range of wind speeds – up to 20m / s. so at a speed of 15m / s its efficiency is equivalent to the classical powerful wind plant. the invention won the “green oscar” in the global competition as the best invention in the field of renewable energy in 2013. 5) active national programs and international organizations’ support for renewable energy projects. • european union: budget support to the implementation of the energy strategy in the field of energy efficiency and renewable energy, capacity building on domestic solar heating, hot water and insulation for rural and remote areas, implementation of energy efficiency measures in several cities, etc.; • the ukraine sustainable energy lending facility (uself) is an investment facility of up to €50 million established by the european bank for reconstruction and development (ebrd) for fostering renewable energy projects in ukraine; • national project “ energy of nature” (pre-feasibility studies, partner search and investment support): construction of wind farms (eur 40 million for a 10 mw plant) and solar power plants (eur 150 million for a 100  mw plant), with an irr of 15-20% and a payback period of 5-7  years (data of state agency for investments and national projects of ukraine) ; • national project “biomass energy” (pre-feasibility studies, partner search and investment support): construction of co-generation plants using biomass in kyiv and other industrial cities and operation during more than 25 years (investment up to eur 7 million) with an irr of more than 25% and a payback period of 5 years; • the green for growth fund southeast europe (ggf) provides megabank, ukraine with a credit line for financing energy efficiency (ee) and renewable energy (re) investments to ukrainian micro, sme and corporate clients. through its technical assistance facility (taf) megabank is supported with a technical assistance component for development of ee strategy and loan products with the final goal of institutionalizing the ee lending into the bank’s structure. according to the the brattle group/seia report the energy independence provides great energy and economic security. germany would have been in a much more difficult situation with the recent crisis in ukraine if it were not for the country ’s strong renewable energy market. but this sort of energy independence is important all around the world, especially if we take into account oil and the potential to electrif y our ground transport. as the recent ukraine crisis has shown, the transition has also helped reduce the exposure of germany to potentially volatile input prices to the traditional power system, a benefit that has largely remained unquantified, but could prove significant in the future (shanan, 2014). baltic journal of economic studies 22 vol. 1, 2015 7. сonclusions for ukraine it is ver y important to develop renewable energy because of the critical dependency on imports of fossil fuels and tough ecological problems within the countr y, but also throughout europe. the main obstacle to wide renewable energy sources use is the lack of funding. because of the budget deficit, the state cannot afford enough financing to fully transition to a renewable energy sector at the present time. however, recent changes make investment in ukrainian renewables highly favorable. the current government is encouraging private entities to invest in the renewable energy sector by providing enabling legislation and beneficial economic initiatives such as a “green tariff ”. thus, it is economically beneficial not only for ukraine, but also for the e.u. and u.s. to invest in ukrainian renewable energy development, because the u.s. and e.u. cannot solve global warming on their own. moreover, since ukraine borders the e.u. directly, sustainable ecological conditions in ukraine will also have a positive impact on its neighboring countries. ukraine is the largest country by landmass in europe and possesses a great renewables potential, tech capital, human resources, and geostrategic position between europe and russia. now is a prime time for foreign investors to capture an emerging market. investments in ukraine’s low-carbon future need to be made now. given the recent positive political changes in ukraine, there is a determined political will and support to attract investments in this new and exciting sector. references brian wingfield (2014, april, 29). ukraine seeks renewable energy investors to loosen russia’s grip. renewable energy world. retrieved from: http://www.renewableenergyworld.com/rea/news/article/2014/04/ukraineseeks-renewable-energy-investors-to-loosen-russias-grip?cmpid=bionl-tuesday-april29-2014 carolyn ervin, anthony o’sullivan, elena miteva, attracting investments in renewable energy in ukraine. private sector development policy handbook. oecd. nov. 2012, p. 16. fs-unep collaborating centre, global trends in renewable energy investment 2014, р. 16. retrieved from: http://fs-unep-centre.org/publications/gtr-2014 vladislav vorotnikov (2014, april, 22 ), renewable energy may help ukraine abandon russian gas. renewable energy world. retrieved from: http://www.renewableenergyworld.com/rea/news/article/2014/04/renewableenergy-may-help-ukraine-abandon-russian-gas?cmpid=solarnl-tuesday-april22-2014 press release of the ukrainian wind energy association (uwea), 2014. ukrainian wind market in 2013. retrieved from: http://www.uwea.com.ua/news.php?news_id=183&lng=eng sergiy yevtushenko, vladimir vakht. (2012). renewable energy in ukraine, industry overview. retrieved from: http://investukraine.com/wp-content/uploads/2012/06/renewable-energy-in-ukraine_230_230_www.pdf state agency for investments and national projects of ukraine, national project energy of nature. presentation available at: http://www.ukrproject.gov.ua/en/project/energy-nature shevchuk, v., malysheva, n., kovalchuk. the policy of energy-efficient development and climate change. monograph / v. shevchuk. – k.: cp “comprint”, 2014. – 64 p. united nations environment programme (unep) and bloomberg new energy finance, global trends in renewable energy investment, 2013, p. 25. retrieved from: www.unep.org/pdf/gtr-unep-fs-bnef2.pdf unido, gef. available potential of solar energy development in ukraine. retrieved from: http://www.reee.org.ua/ en/renewable-energy/solar/ zachary shanan (2014, august, 8), german solar feed tariffs wildly successful. reneweconomy. retrieved from: http://reneweconomy.com.au/2014/german-solar-feed-tariffs-wildly-successful-63851 юлия башинская почему стоит инвестировать в возобновляемую энергетику в украине? аннотация. целью работы является представление текущего состояния развития возобновляемых источников энергии в украине и выделение основных преимуществ инвестирования в возобновляемые энергетику в украине. целью также является показать самые большие установки возобновляемых источников энергии в украине. статья отображает основные финансовые инициативы ряда международных организаций и мировых экономических лидеров, которые уже объявили о планах, чтобы помочь переходу украины на возобновляемые источники энергии. методика. исследование основано на анализе природного потенциала, законодательной базы отрасли и действующих финансовых программ. результаты исследования дают наиболее привлекательные возможности для инвестирования в развивающийся рынок возобновляемых источников энергии в украине. исследование также показывает количество экономически жизнеспособного потенциала различных возобновляемых источников энергии. кроме того, ожидается, что возобновляемые источники энергии будут способствовать укреплению энергетической безопасности и снижению негативного воздействия промышленности на окружающую среду. практическое значение. с 2009 года, когда зеленый тариф baltic journal of economic studies 23 vol. 1, 2015 был впервые введён в украине, сектор возобновляемых источников энергии в значительной степени развит. хотя сектор столкнулся с некоторыми проблемами смены политики в 2015 году, например, введение новых налогов, но для технологий виэ наблюдается быстрый рост. в настоящее время использование возобновляемых источников энергии является приоритетным путём построения устойчивой энергетической системы в украине. есть несколько государственных и региональных финансовых инициатив, способствующих использованию возобновляемых источников энергии. как только политики сосредоточились на развитии возобновляемых источников энергии, новые инвестиции последовали в энергоэффективные технологий. ожидается будет большой спрос в направлении виэ в частных жилых комплексах. в следствие исследования, главная проблема развития возобновляемых источников энергии является недофинансирование. все усилия правительства сейчас направлены создать благоприятную среду для прямых иностранных инвестиций в возобновляемые источники энергии в украине. значение/оригинальность. широкое использование возобновляемых источников энергии будет хорошим решением для украины, чтобы уменьшить количество импортируемых энергоресурсов. повышение уровня использования возобновляемых источников энергии также будет способствовать решению глобального потепления и негативных изменений климата. именно поэтому продвижение использования возобновляемых источников энергии очень важно для украины. с другой стороны, возобновляемая энергетика может стать прибыльным бизнесом для инвесторов. baltic journal of economic studies 145 vol. 4, no. 4, 2018 corresponding author: 1 dnipro state agrarian and economic university, ukraine. e-mail: karamushka.o.m@dsau.dp.ua 2 dnipro state agrarian and economic university, ukraine. e-mail: moroz.s.i@dsau.dp.ua 3 dnipro state agrarian and economic university, ukraine. e-mail: vasylievan@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-145-150 information component of innovative support for agricultural enterprises capital oleksandr karamushka1, svitlana moroz2, natalia vasylieva3 abstract. the importance of researching the information component of innovative capital support is due to the formation of the knowledge economy and the need to increase the competitiveness of domestic agrarian enterprises. innovative renewal of the capital of agrarian enterprises is a key to improving the efficiency of their work: increasing production and sales, reducing production costs, and increasing productivity. at the same time, the problem of the influence of the information component of innovation on capital remains open, which is a reserve for increasing the efficiency of its use and allows us to develop approaches to ensure the profitability growth of agrarian enterprises. separate aspects of the use of innovations in the agrarian sector of the economy were considered by j. sayer, k. g. cassman, h. van es, j. woodard, g. ye. pavlova, and others. the aim of this article is to research interconnections that arise between the information component of innovation and types of the capital of an enterprise, taking into account agrarian specificity. methodology. during the research and writing of the article, methods were used: monographic, abstract-logical, mathematical statistics, observation. results. any innovation is dual in nature, including the material foundation and the information component. innovation on the impact on economic processes of enterprises appropriately divided into production (technical, technological, chemical, biological, and managerial) and sales (product and marketing). according to the results of the research, the scheme of the influence of types of innovation on the types of the capital of agrarian enterprises was developed. empirical studies have shown that the information component of production innovation is methodical and instructional documentation, warranty contract obligations, production licenses, patents, plant and animal breed rights, databases and electronic services of an innovator with their offers, automated information management systems of the enterprise, staff training programs. the information component of sales innovation are the certificates of products quality, brands and trademarks, the standards of the quality of products of the importing countries, characteristics of target market segments, automated customer databases, licensing agreements for the sale of product, data on monitoring of the sectoral markets, pre-contracted deliveries of products, tools e-commerce, etc. conclusions. the information component of various types of innovation that are inherent in agrarian production is considered. relationships between types of capital and innovation are explored. the specificity of the use of the information component of innovation in the sectoral section is analysed on the example of grain production and pig farming. the scheme of complex innovative support of enterprise capital is offered. the information component of innovation is detailed. it is recommended to use the information component in full, taking into account the sector specificity of agrarian enterprises. key words: agrarian enterprises, sources and types of capital, information component of innovations, sectoral specificity of innovation support. jel classification: q19, o31, d24, d8 1. introduction the agrarian sector plays an important role in the national economy, providing the population with food, as well as while processing enterprises worth raw materials. it brings stable income and currency revenues to the budget and promotes the development of rural areas. however, there is a significant differentiation of performance indicators and environmental friendliness of individual producers, indicating management problems. one of the key elements in ensuring the economic development baltic journal of economic studies 146 vol. 4, no. 4, 2018 of agrarian enterprises and the competitiveness of their products is the rational application of innovation for the use, attraction, and increase in capital. in a context of globalization and the modern knowledge economy, the effectiveness of innovation depends on comprehensive and high-quality information support at all stages of their implementation, from analysis of proposals and target selection to practical use. world experience shows that innovative modernization of capital for enterprises in general, and agrarian ones in particular, is an important factor in increasing production and sales volumes, reducing the cost of production, increasing investment attractiveness, enhancing productivity and profitability. therefore, the issues of innovative capital support are very important. separate aspects of increasing the efficiency of production on an innovative basis are the purpose of research of both domestic and foreign scientists and practitioners. in particular, ye. a. romanenko and i. v. chaplia investigated the peculiarities of the innovation mechanism and the innovation engineering at the enterprises (romanenko, chaplay, 2016). in the work, s. khalatur proposed an innovative doctrine of agricultural development in ukraine based on the synergy process of the three basic strategic elements: human resources, innovation and environmental factors (khalatur, 2017). g. ye. pavlova investigated the level and feature of management in the innovative development of the agrarian sector and its influence on economic growth and the formation of bioeconomics (pavlova, 2015). j. sayer and k. g. cassman, studied innovation in agricultural production, which helps to increase the productivity of land use and quality of food products without increasing the pressure on the environment (sayer, cassman, 2013). h. van es and d. woodard, considering contemporary agriculture through the prism of digital technology, emphasized the need for an integrated mix of innovation in production processes, analysis and forecasting, and human capital and knowledge of farmers (van es, woodard, 2017). nowadays agrarian enterprises are widely using innovation, but their potential is not entirely utilized, focusing only on the material component and neglecting the information one. investigating the influence of the information innovative component on capital, as a significant reserve for improving the efficiency of its use, allows us to develop approaches to ensure the profitability growth of ukrainian agrarian enterprises. the research objective is to establish and justify the relationships that arise between the information component of innovation and the types of enterprise capital, taking into account the specifics of agricultural activity. 2. research methodology the theoretical and methodological basis of the research is the modern economic theory, the work of domestic and foreign scientists on the problems of using innovations in the production, management, and business processes of ukrainian agricultural enterprises. while writing the article, the materials of the food and agriculture organization of the united nations, the state statistics committee of ukraine, the ministry of agrarian policy of ukraine, the proposals of innovators and the experience of using innovations by domestic agricultural enterprises were used. the research used the following methods: monographic (in the analysis of modern scientific research using innovations in the work of agrarian enterprises) abstractlogical (with theoretical generalizations and formulation of conclusions); mathematical statistics (selective, series of dynamics in the study of the state and the identification trends in the production and marketing of agricultural products) observation (in the analysis using innovations by domestic enterprises). 3. the influence of innovation on the types of the capital of enterprises capital is a set of monetary, material, and intangible resources of an enterprise, which are involved from different sources for applying in production, marketing, and investment processes in order to generate income. the capital of the company consists of the main, turnover, intellectual, human, and social ones. the basic capital of agrarian enterprises includes land, buildings, and structures of agribusiness, agrarian machinery and equipment. working capital contains cash, crop material, fertilizers means, plant and animal protection, feed, fertilizers, biologically active additives, chemical support, and so on. intellectual capital is a general set of knowledge, experience, relationships, which can bring profits or benefits to the company. the intellectual capital of agrarian enterprises includes copyrights for plant varieties or breeds of animals, patents, author’s certificates, technical documentation of agricultural production, trademarks, logos, software tools for automation of production and sales. human capital covers a set of skills, knowledge and personal qualities of individual employees and the whole personnel. social capital is represented by relationships between the enterprise and its partners and client line enterprises its image and business reputation. on the basis of belonging and sources of income, there exist own and borrowed capital (andriychuk, 2013). equity is a means of production and sales belonging to the owners of the enterprise. in the process of economic activity, it grows at the expense of the profit or decreases, compensating losses. the borrowed capital is invested by the third parties on the terms of return and payment for use. the borrowed capital includes loans, issued bills, payables, leasing equipment, labour resources involved in outsourcing, franchise, and the like ones. in the conditions of integration and globalization, ukrainian agrarian enterprises should follow the world baltic journal of economic studies 147 vol. 4, no. 4, 2018 tendencies of innovative development of agriculture. innovation in business processes can be divided into production and sales ones. the first group involving: technical, technological, chemical, biological and managerial innovation. the second group includes: product and marketing innovation. the purpose of implementing innovation is to support (improve) the formation, attraction, development, and rational use of capital. any innovation is dual in nature, that is, it consists of a material basis and an information component. integrated innovative capital support of an agrarian enterprise requires establishing of links between types of innovation and capital, as reflected in the author’s result in figure 1. the basic capital is affected by technical, technological, and managerial innovations, which are aimed at the purchase and use of energy and resource-saving technologies and management systems, directed to the automated production process. the working capital is associated with biological, chemical, managerial, and product innovation, including high-yielding varieties and breeds, means of plant and animal protection input, inventory management and product quality management. intellectual capital is under the influence of technological, managerial, and marketing innovation that facilitate the definition of strategic benchmarks in the production and sales activities of the enterprise. human capital relies on the introduction of technological, managerial, and marketing innovations aimed at the professional development of personnel. social capital is formed under the influence of managerial and marketing innovations, which help in improving the enterprise’s image and business reputation and increasing its value in the development of rural communities. the information components of technical, technological, chemical, and biological innovation are methodical and guidance documents reflecting with the peculiarities of their implementation and application, warranty obligations, quality certificates for consumables, production licenses, patents, plant and animal breed rights, databases and electronic services of innovators with their offers (veterinary medicines, means of protection). information components of managerial innovation is a set of information flows of the enterprise and software for collecting, processing, and transmitting data between units of management and investors, automated means of production process management, in particular, information systems in accounting, decision support, electronic document turnover tools, staff training programs. the information components of product innovation are the quality basic (1) (2) (5) working (3) (4) (5) (6) intellectual (2) (5) (7) human (2) (3) (5) (7) social (5) (7) technical (1) technological (2) biological (3) chemical (4) managerial (5) product (6) marketing (7) c a p i t a l o w n b o r r o w e d p r o d u c t i o n s a l e s i n n o v a t i o n figure 1. scheme of complex innovative support of the agrarian enterprise capital source: compiled by the authors baltic journal of economic studies 148 vol. 4, no. 4, 2018 certificates of manufactured products, brands and trademarks, product quality standards of importers, characteristics of target market segments. information components of marketing innovation are automated customer databases, license agreements for sales, analytical reviews and forecasts for sectoral markets, preliminary contracts for the supply of products, contracts for the lease of warehouse capacities or charter carriers, electronic means of sale. 4. practical use of information components of innovation we will describe using information components of innovation taking into account the sectoral differences in ukrainian agriculture. one of the leading sub-sectors of plant growing is grain production with an average profitability over the past 3 years at 36%. this is due to the large volumes of cultivated lands, significant export potential, and demand for ukrainian grain in foreign markets. grain group is represented by three main crops: wheat, corn, and barley. in the course of the study, it was found that wheat belongs among the grain crops in the territory of ukraine because it is in high demand, brings annually 50-60 billion uah of income is profitable with a profitability level of 11% on average over the past 10 years (ukrstat.gov.ua, 2017). large annual wheat collections amounting to 23-25 million tons allow ukraine to traditionally enter the top-10 countries of the world in terms of its production capacity, with an export potential of about 70% of the total grain yield (15-17 million tons). however, because of the natural and climatic conditions of ukraine, wheat cultivation is risky. in unfavourable years, grain producers harvest only 15-16 million tons of grain, which leads to losses of about 18-20 billion uah their income (ukrstat.gov.ua, 2018). based on the processing of statistical data, it was established that the second stage in grain crops in ukraine belongs to the production of corn. this is due to the rather high average yield of this crop at the level of 60 c/ha (ukrstat.gov.ua, 2017). annual production ranges from 25-28 million tons and provides income at the level of 40-50 billion uah, with exports up to 70% (16-20 million tons). even in adverse years, yields at the level of 40 c/ha allow you to get income on a par with 30 billion uah (ukrstat.gov.ua, 2018). there are three of the leaders in the production of barley, the annual income of which is more than 20 billion uah. the gross barley harvest of more than 9 million tons allowed ukraine in 2014 to be among the top three world leaders in terms of its production. about 40-50% or 4-5 million tons of harvested barley is destined for export. however, the production of barley is also risky, because in recent years its cultivation was sometimes even unprofitable. even the maximum yield of spring barley (33 c/ha) in ukraine is only 30% of the genetic potential of modern varieties, which means that agricultural enterprises lose about 4 billion uah of income in unfavourable years (ukrstat.gov.ua, 2018). in the leading countries of the world, due to the implementation of innovative technologies, the yield of grain crops is up to 50% higher than in ukraine in favourable years. thus, the main task of the workers of the agrarian sector is to increase the productivity of each hectare of crops, because, without the use of innovative agrarian technologies, domestic grain producers receive only 25 to 40% of the genetically possible grain yield (depending on the grain crop) (fao, 2018). the process of grain production and marketing can be divided into five stages: preparatory (soil tillage, fertilization, selection of seeds), sowing campaign, caring for crops (growing crops, protecting against weeds and pests), harvesting (harvesting, delivering to the place of refinement and storage) and distribution (conclusion of contracts, advertising campaigns, and sales). information components of innovation to the first stage include: information systems for supporting parallel driving, gps navigation technology of autopilot and differentiated applying of chemicals, tracking techniques, and fuel consumption control, electronic maps and logistics, operational analysis of the results of satellite field monitoring, systems of decision-making support bases on the recommended varieties and hybrids of grain crops, centralized information systems in the control of production processes, software for training personnel. for the second stage of crop production, it is advisable to use the information innovative components of innovation, such as: interactive systems of gps navigation to control the speed of sowing machinery, expenditures of seeds and fertilizers, weather monitoring systems to optimize terms of cultivation. relevant informational components of innovation to the third stage are: methods for calculating norms, timing and schemes of applying fertilizers and plant protection means obtained from drones’ check of grain crops, autopilot technology with rtk stations, which ensure the accuracy of applying fertilizers and chemicals from 10 to 2.5 cm. on the fourth stage of grain production, it is promising to use the information components of innovation aimed at: optimizing the technology routes during harvesting, taking into account grain yields to, the system of express grain assessment for its further storage and bringing to the condition on its own leased capacities, obtaining quality certificates for sales, in accordance with the contractual demands. at the fifth stage, the actual distribution of innovative information components are designed to maintain sales of cultivated grains with maximum benefit, by means, the analysis of regional markets by e-commerce, the placement of lots for online trading, for example, on the site https://graintrade.com.ua/. baltic journal of economic studies 149 vol. 4, no. 4, 2018 the meat production cluster in the livestock sector of ukrainian agriculture is oriented towards the domestic market with a low level of solvent demand, which provides annual consumption of 51.4 kg, which is 36% lower than the physiological norm. in the structure, as production and consumption, the leading are poultry meat, then the pork, and significantly inferior beef. poultry meat production is mainly concentrated in industrial complexes. beef suppliers are households. pig farming is more interesting for innovation management. statistical data indicates a low profitability of the industry at 0.2-12.6% in 2012–2015 and unprofitability of 4.1% in 2016 (ukrstat.gov.ua, 2017). an important factor is a growth of methane emissions and air nitrogen precipitates and environmental pollution. accordingly, innovations in pig breeding should be aimed at increasing the profitability of pork growing and marketing and the environmental aspects of the industry. hence, innovation in pig farming should be primarily aimed at increasing the profitability of hogs raising and pork marketing and committed to the contemporary environmental standards. in this case, the informational components of technical innovation are the methodical materials on the constructing and equipping pig farms, the system of electronic animals’ identification using subcutaneous microchips, electronic boxes, boluses, software for managing production processes. technological innovation is necessary to improve animal breeding programs and increase feed conversion through differentiated formulas and feeding forms for different sex-age groups of hogs. the information basis for the use of biological innovation is the databases of high-yielding breeds of pigs facing demands of food market segments, genetic characteristics of the main herd of the enterprise and breeding puppets. information components of chemical innovation include veterinary and sanitary support for production, namely, the introduction to new methods of prevention and treatment based on automated animal health monitoring systems to reduce mortality and prevent epidemics, for example, based on the current information at the portal http://pigua.info. management innovation should focus on reducing non-productive costs. it covers free software, (arranging production programs for raising animals in openproj, preparation of documentation in writer, analytical and predictive calculations in calc) and modelling tools for inventory management, determining the optimal feeding rate for each pig genital age group, etc. the information components of product innovation in pig breeding are the differentiated purchase prices of processing enterprises and requirements for age, weight, and quality animal conditions. information components of principal marketing innovation are optimization of logistic sales flows by localization of production capacities around primary processing enterprises (slaughter factories) and sales on a cooperative basis. a promising means of marketing can be the adoption of electronic clients’ orders for piglets, for example, using a profile in social networks. 5. conclusions during the research, the following were specified: technical, technological, chemical, biological, management, product and marketing innovations taking into account the industry specificity, which made it possible to make a number of conclusions. solving the problem of using innovation for own and borrowed capital largely depends on the structure and scale of production of a particular enterprise and its resource component. the vectors of influence by types of innovation on types and sources of capital are substantiated, which will allow optimizing the choice of innovation for its modernization and attraction. in ukraine, grain production is traditionally an export industry. in order to increase the quality of grain production and its export, enterprises should focus on the development and attraction of intellectual and fixed capital. also, grain producers have to evaluate the social aspect of their activities, that is, to assess the environmental consequences, preventing excessive chemicalization and depletion of the soil. with respect to equity in a pig farm, innovations are expediently aimed at increasing the productivity of production and reducing costs, implementing new production and marketing technologies, creating and using different databases, applying professional and free software, and training of employees. the implementation of innovation aimed at reducing air water, soil pollution with waste is also relevant. on the basis of the innovation analysis in grain production and pig farming, it is possible to find common features for the borrowed capital in the form of leasing and basic capital, lending – for advancing working capital, franchising – for intellectual, outsourcing – for human, crowdsourcing and branding – for social capital. the prospect of raising funds for grain growers is the futures agreement. investors of pork producers may be processing enterprises when concluding long-term contracts. based on the research, recommendations were given on the use of information components of innovation to support the capital of agrarian enterprises in the production of grain and pig products. the information component defines the parameters of use and implementation of innovation, in particular, the ways and conditions of application, the need for integrated communication with other innovation for synergistic effects on types of capital, etc. further research will be aimed at transferring the results to other sub-sectors of agriculture in ukraine. baltic journal of economic studies 150 vol. 4, no. 4, 2018 references: romanenko, y. a., chaplay, i. v. (2016). modern administrative tool of the innovative development of the enterprise (scientific bulletin of polissia), no. 8, р. 2, pp. 268-275. (in ukrainian) khalatur, s. (2017). innovative doctrine development of agriculture growth of ukraine (technology audit and production reserves), vol. 4, no. 36, pp. 19-26. pavlova, g. ye. (2015). innovative development of the agrarian sector of the national economy: theoretical foundations, methodology, mechanisms of the management. kyiv: dks tsentr. (in ukrainian) sayer, j., cassman, k. g., (2013). agricultural innovation to protect the environment. pnas, vol. 110, no. 21, 8345-8348. retrieved from: http://www.pnas.org/content/110/21/8345. van es, h., woodard, j. (2017). chapter 4: innovation in agriculture and food systems in the digital age, in “the global innovation index 2017. innovation feeding the world”, tenth edition, geneva, switzerland, 97-104. retrieved from: http://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2017-chapter4.pdf. andriychuk, v. h. (2013) economics of enterprises of agricultural sector. kyiv: kneu. (in ukrainian) statistical yearbook “agriculture of ukraine for 2016” (2017). in o. m. prokopenko (ed.). kyiv: state statistics service of ukraine (in ukrainian). retrieved from: http://www.ukrstat.gov.ua fao (2018). crops. retrieved from: http://www.fao.org/faostat/en/#data/qc statistical yearbook “crop production of ukraine 2017” (2018). in o. m. prokopenko (ed.). kyiv: state statistics service of ukraine (in ukrainian). retrieved from: http://www.ukrstat.gov.ua/ baltic journal of economic studies 198 vol. 4, no. 3, 2018 corresponding author: 1 transcarpathian qualification and disciplinary commission of the bar. 2 department of criminal law and criminal process, uzhhorod national university. 3 department of civil law and process, uzhhorod national university. doi: https://doi.org/10.30525/2256-0742/2018-4-3-198-202 economic and legal characteristics of factoring operations in ukraine petro nemesh1 transcarpathian qualification and disciplinary commission of the bar, ukraine iryna nesterova2, vasil fennych3 uzhhorod national university, ukraine abstract. the objective of the article is to determine the economic and legal aspects of factoring operations in ukraine, to disclose the specificity of the legal regulation mechanism of factoring operations, and to determine the peculiarity of economic activities financing with the help of factoring. the subject of the study is the ukrainian experience in the formation and development of factoring activity. methodology. the research is based on the historical and comparative method, with the help of which the study of the introduction of factoring in ukraine is made. the analysis determines the reasons for the lack of development of classical factoring in ukraine, where legal constructs of factoring operations do not correspond to the economic substance of this type of financial activity. on the basis of the comparative legal analysis, there are determined countries with classical factoring markets and the largest amount of working capital. the results of the study point out the construction preventing reasons of the classic factoring market in ukraine, aimed at the development of smalland medium-sized businesses. they are related to not only the drawbacks of domestic legislation and practice of its application but economic factors as well. factoring companies have weak financial potential and no substantive financial amounts since accounts receivable are financed by companies at their own expense. funds request from bank loans or other borrowed funds for these purposes decreases annually. practical implications. the positive experiences of the classical factoring market abroad demonstrate that for the implementation of classical factoring market, cheap loans or means of currency issuing for securities (such as bonds) should be available. moreover, the proper implementation by the law enforcement authorities of the decree on debt collection from the debtor should be ensured, as it reduces the risk to the factor. this makes the search for non-traditional ways of guaranteeing the restitution of funded accounts receivable unnecessary. originality. the comprehensive analysis of the factoring market state in ukraine, its legal and economic aspects are the basis for developing the most promising directions of domestic civil legislation progress in the field of factoring activity. key words: factoring operation, economic-legal analysis, factoring agreement, accounts receivable. jel classification: d02, p51, f53 1. exposition of the problem and its connection with important scientific and practical tasks accounts receivable may prove to be a serious test for an enterprise delivering goods or providing certain services, the successful overcoming of accounts receivable will depend on the professionalism of the decisions taken. in some cases, external factors (inflation, credit risks, country’s domestic policy, foreign economic factors, etc.) may affect these decisions, which lead to impairment of deferred payments; in turn, it may cause significant damage to the enterprise up to its bankruptcy. accounts receivable increases in ukraine yearly, forcing companies to look for solutions for the working capital shortage. one of the financial tools for a solution is factoring operations, which allow the enterprise to receive money immediately after the delivery of goods (or services). the main benefit is no waste of time for completion of deferred payment. n.m. shevchenko and g.v. kravchenko underline occurrence of factoring in domestic economic for a good reason. there were objective prerequisites: a deterioration of payments state, solvency decrease, and the growth of economic entities debts (levchenko, kravchenko, 2009). baltic journal of economic studies 199 vol. 4, no. 3, 2018 acquisition with the help of the factoring institute of accounts receivable in ukraine has a number of significant drawbacks that lead to failure of the factoring market developing in our country. the analysis of these drawbacks will help to understand the situation in this sphere (on the example of ukraine) of the financial services market and to outline ways for solving this problem. analysis of the latest research and publications. investigations in the sphere of the factoring market and its legal implementation were to the greater extent made by economists than lawyers. economists have analysed the economic substance of factoring operations (t.m. holyk ta l.o. matviichyk, a.d.  mineev, l.v. nederia, etc.) while lawyers have revealed the peculiarity of factoring operations’ legal support (i.  bezklubyi, k.d. gasnikov, a.o. zghama, a. tokunova, ya.o. chapichadze, etc.) statement of the article’s task. the objective of the article is to determine the economic and legal aspects of factoring operations in ukraine, to disclose the specificity of the legal regulation mechanism of factoring operations, and to determine the peculiarity of economic activities financing with the help of factoring. 2. presentation of the main research material with a new substantiation of the scientific results obtained nowadays commodity relations cannot exist without a loan. the result of crediting is the transfer of values from one business entity to another extended until the moment of obtainment of the equivalent. such relationships relate to the deferral or instalment payment by the debtor due to goods transferred in his favour, performed work or rendered services. the result of this type of relationship is the occurrence of a monetary obligation between economic entities. the obligation may be implemented after the expiry of the prescribed period. the claim right that has arisen from the creditor to the debtor may have an independent worth and to become factoring agreements subject (zavhorodnii, 2005). this is unacceptable for the subject of entrepreneurial activity not to pay for the delivered goods (performed work, rendered service). frozen assets do not facilitate commercial circulation in no way and, therefore, they have to attain a material worth. thereby, their material worth would be included in the turnover. this became a precondition of legal institutes occurrence aimed at the inclusion of accounts receivable in contractual transactions (iuhas, popovych, 2015). one of such legal institutes became the institute of factoring agreement. it is proverbially that civil and economic-legal treaties serve as a legal form of mediation of economic relations. from the legal point of view, factoring operations are regulated by the civil code of ukraine and the commercial code of ukraine. moreover, determining the general conditions and the order of concluding factoring agreement is provided by the civil code (part 2 of article 350 of the civil code of ukraine) (commercial code of ukraine: law of ukraine no. 436-iv of january 16, 2003), which contains chapter devoted to the factoring agreement (chapter 73), as well as the rights and obligations of the parties to this contract and their responsibility (the civil code of ukraine: law of ukraine no. 435-iv of january 16, 2003). due to the fact that factoring operations are a kind of financial services provided by banks or other financial institutions, the legislative regulation of factoring transactions is also executed by the law of ukraine “on financial services and state regulation of financial services markets”, which includes factoring to financial services (item 11 part 1 of article 4) (on financial services and state regulation of financial services markets: law of ukraine no. 2664-ііі dated july 12, 2001), and the law of ukraine “on banks and banking”, which defines factoring as a lending operation. (item 3, part 1 of article  49) (on banks and banking: law of ukraine no. 2121-ііі dated december 7, 2000). the fact that factoring operations simultaneously belong to different types of operations is contradictory in the normative regulations. thus, the commercial code of ukraine refers factoring to banking operations (article 339), while civil code of ukraine determines the factor (funding source) as the bank or another financial institution, which has the authority to exercise factoring transactions (part 3 of article 1079). the contradiction between civil and economic regulation of the same legal institutes is traditional for domestic legislative practice. however, for the successful development of the factoring market in ukraine, it would be efficient to develop a single normative act. and so, with the help of this act, ukrainian legislation would determine the economic and legal peculiarities of the factoring operations’ development. as far as factoring services are provided when the company is experiencing a shortage of working capital and, as a rule, small and medium-sized enterprises in the light industry (food, printing, pharmaceutical, agricultural, etc.) conclude factoring agreement. since big business does not experience financial difficulties due to funds from other activities and greater availability of bank loans. although, factoring has a number of significant advantages (comparing to crediting): 1) debt repayment is carried out of funds, which in exceptional cases are received from the debtors, and from working capital of the client, while bank crediting repayment is carried out of working capital of the client; 2) factoring can be unlimited, while the loan is granted for a specified period, and its prolongation requires a rather complicated procedure of adjustment with the bank; 3) there are no costs for deposit insurance while factoring, and the loan is provided for collateral in the form of a pledge, guarantees, and bail; 4) the simplified package of documents is required for factoring processing; baltic journal of economic studies 200 vol. 4, no. 3, 2018 5) the received funds are used by the client on his own, while the crediting funds may be used exclusively for the purposes specified in the credit agreement; 6) using factoring, the c lient can receive a number of additional services from the bank; 7) the financing amount depends on the amount of accounts receivable, while the loan amount depends on such factors as overpast income on the current account, security available, bank debt, etc. (ruda). in spite of such significant advantages, there is no developed classic factoring in ukraine. thus, classical factoring operation occurs when the bank or other financial institution that has the right to carry out factoring transactions (factor) provides the client with a financing fee (usually up to 120 days) in exchange for the client’s concede of claim rights to the debtors (which have arisen out of delivery contracts, services provision, etc.) in favour of the factor. in exchange for the claim right to accounts receivable, factor immediately pays an advance to the client. the advance usually takes up to 90% of the ceded obligations’ worth, and the rest of the amount is returned after the corresponding payments from the debtor are received. factors’ services are paid at the expense of the commission for the financing or other payments’ provision, as well as interest per annum for the use of money (sambirskyi). british economists m. foreman, j. gilbert, and f. seelinger define “true” factoring as an open full-service agreement, which includes financing, credit risk insurance, debt collection, and other non-recourse services. other factoring types are only its distortions and in fact cannot be considered as factoring, they believe. while m. bikers defines factoring as a long-term agreement between a factoring company and a supplier who sells goods under commodity credit. and factor is obliged to buy accounts before they are received. and additionally, depending on the agreement, the factor is obliged to provide services such as keeping a debtors’ book and administration of accounts receivable, debt collection, protection against losses in case of bad debts that may arise during buyers’ bankruptcy (palchuk, 2010). while in ukraine, factoring is considered as transactions, in which a bank or other financial institution that has the right to provide factoring services repurchases accounts receivable from another bank or a credit institution and afterwards independently collects debt from the debtor. such contracts are concluded to get rid of problem accounts receivable, to repurchase own loan from the bank or other purposes related to valuable assets transfer. in the current economic situation that has developed over recent years, most of the factoring agreements belong exactly to this type. these operations, as the chief of the association of ukrainian factoring companies “ukrfaktor” notes, is not a factoring in the classical meaning of this concept (sambirskyi). but their utilization is not limited by ukrainian legislation. according to part 1 of the article 1077 of the civil code of ukraine under factoring agreement (financing under the cession of the monetary claim right), one of the parties (a factor) shall transfer or be obliged to transfer the funds into disposition of the other party (a client) for a fee, and a client shall cede or be obliged to cede a factor his right of the monetary claim to the third person (a debtor). a client may cede the factor his monetary claim to a debtor aimed at providing for the fulfilment of the client’s obligation to a factor. the parties to the factoring agreement are the factor and the client. a factor may be a bank or other financial institution, which has the right to perform factoring operations. while a client to the factoring agreement may be a physical person or a legal entity, an economic agent (article 1079 of the civil code of ukraine), that is, it could be the bank itself, which has problem loans. although, according to provisions of the international convention unidroit “on international factoring” (ukraine joined in 2006 (about ukraine's accession to the unidroit convention on international factoring: law of ukraine no. 3302-iv dated 11th of may, 2006)), the supplier may or will assign to the factor receivables arising from contracts of sale of goods made between the supplier and its customers (debtors) other than those for the sale of goods bought primarily for their personal, family or household use (item “а” of part 2). under this convention, a transaction is factoring if it meets at least two of the following conditions: finance for the supplier, including loans and advance payments; maintenance of accounts (ledgering) relating to the receivables; collection of receivables; protection against default in payment by debtors (item “b” of part 2) (about international factoring: unidroit convention of may 28, 1988). even if factoring agreements are concluded and their clients are not banks but enterprises, the unformed classical factoring in ukraine results in mixed factoring agreements. this happens due to the weak development of current legislation. upon terms of these agreements, factors attempt to add obligations on customers. and this kind of agreements does not correspond to factoring operations, and as a result, they may cause an enterprise’s economic activity closure. thus, according to part 1 of article 1084 of the civil code of ukraine, if according to the provisions of the factoring agreement, a factor finances a client by way of purchasing the monetary claim right from a client, a factor shall acquire the right for all the sums receivable from a debtor to perform the claim, and a client shall not be liable to a factor in case the sums received by him being less than the sum paid by a factor to a client. part 2 of the mentioned article provides that if the objective of cession of the monetary claim right to a factor is to ensure the client’s performance of the obligation to a factor, the factor shall be obliged to submit a report to the client and to transfer a sum of money exceeding the baltic journal of economic studies 201 vol. 4, no. 3, 2018 client’s debt secured by the cession of the monetary claim right, unless otherwise is stipulated by the factoring agreement. if the sum received by a factor from a debtor was less than the client’s debt to a factor secured by the claim right, the client shall be obliged to pay the factor the remaining debt. hence, article 1084 of the civil code of ukraine establishes the classic factoring contract in the first part: financing of accounts receivable is concluded without any caveat, and a client shall not be liable to a factor in case the sums received by him being less than the sum paid by a factor to a client. it is clear that signing by the bank of such an agreement obliges bank to sum up the pros and cons and to be as effective as possible in recovering accounts receivable. the second part of article 1084 of the civil code of ukraine describes a less risky for the factor type of factoring agreement. so, the lack of funds or the risk of non-payment relies on the client, not on the factor. however, the civil code of ukraine clearly states the existence of a single condition for such a factoring agreement: there must be a certain initial obligation between the factor and the client (it may be, for example, a loan agreement). in this case, the factoring agreement serves as a guarantee for the loan agreement realization. and if the debtor under the factoring agreement will not pay to the factor or will pay them in less quantity, the bank has the right to demand the repay the debt from the client. as lawyers indicate, banks often identify factoring with regression (reversible) with the kind of factoring provided in part 2 of article 1084 of the civil code of ukraine. and in order to evade the maximum risks, banks impose on the client the obligation to pay the sum (that wasn’t received) from the debtor, even when there are no grounds for this. there were a lot of cases when the factor insisted on the mixed factoring agreement with the conditions specific to the contract of bail. thus, the agreement of the debtor’s monetary claim to the factor was provided by a bail, and the guarantor was the client himself. but such an agreement cannot be considered as lawful. thus, according to part 1 of article 553 of the civil code of ukraine, a bail under a bailment agreement shall warrant to the debtor’s creditor for the fulfilment of his obligation. the civil code of ukraine does not specify any clear and exhaustive criteria a person (intending to become a surety) should correspond to. however, as the practice shows, the bail’s essence as means of ensuring the fulfilment of the obligation is that the third party (the guarantor) undertakes to be responsible to the creditor for a violation of the obligation by the debtor. this third person, as a rule, is independent of the creditor and the debtor, at least formally. as for the case described above, there cannot exist “third person”, moreover an independent one. as far as, the client under the factoring agreement is the direct participant in the main obligation, which is secured by bail. therefore, based on the legal nature of the surety, the client cannot become a guarantor in this case. since he/she is closely related with a factor and a debtor. and he/she is even far more interested in fulfilling debtor’s duty than the debtor is. by imposing on the client additional obligations of suretyship, the bank does not take into account the legal nature of this type of the obligation at all. in addition, the client is in a very disadvantageous position. in this case, the amount of the money is taken into account, primarily. so, as a rule, advance financing for factoring is not executed for 100%, but approximately 70-80% of the total amount of the claim rights’ cession. while a surety is given for the debtor to fulfil his/her obligation to repay the debt in favour of the bank, the client undertakes to be responsible for failure to fulfil this obligation in the full amount of all monetary claims (100%) (soroka). thus, the legal constructs of factoring operations in domestic practice do not correspond to the economic essence of this type of financial activity. and it has long and powerful tendencies abroad. particularly, according to the factors chain international organization, economically developed countries, in 2015 had the classic factoring market estimated with enormous amounts: china – 406 102 million euros, the united kingdom – 350 622 million euros, italy – 183 004  million euros, the united states – 95 000  million euros. as example were taken counties that according to the world bank in 2015 were among the top ten countries with the highest gdp. what concerns ukraine, according to the national commission for regulation of financial services markets, the number of factoring agreements in ukraine in 2015 was 16.56 billion hryvnias or about 631.5 million euros. the share of classical factoring was only 5.6 billion hryvnias or 213.6 million euros (sambirskyi). in the classic factoring market in ukraine, such companies as arma factoring, fc factoring, factor plus, and factoring finance are represented. among the banks, the most active in providing classic factoring services are 7 institutions – fuib, raiffeisen bank aval, unicredit bank, otp bank, alfa-bank, pivdennyi bank, ukreximbank. credit agricole works exclusively with one client, the auchan network (sambirskyi). 3. conclusions of the study and prospects for further exploration in this direction reasons preventing to construct the classic factoring market in ukraine, aimed at the development of small and medium-sized businesses, have a complex nature. not only are they related to the drawbacks of domestic legislation and practice of its application, but economic factors as well. factoring companies have weak financial potential and no substantive financial amounts since accounts receivable are financed by companies at their own expense. funds request from bank loans or other borrowed funds for these purposes decreases annually. cheap loans or means of currency issuing for securities (such as bonds) baltic journal of economic studies 202 vol. 4, no. 3, 2018 are available abroad. moreover, the important problem that impedes the development of the classical factoring market in ukraine, the proper implementation by the law enforcement authorities of the decree on debt collection from the debtor. there is a possibility to avoid debt payment that produces the risk to the factor and makes the search for non-traditional ways of guaranteeing the restitution of funded accounts receivable. references: levchenko n.m., kravchenko h.v. (2009). faktorynh yak instrument efektyvnoho upravlinnia debitorskoiu zaborhovanistiu. ekonomichnyi prostir, № 23/2, pp. 242-251. matviichyk l.o., holyk t.m. (2018). sutnist ta rol faktorynhovykh posluh u bankivskomu sektori ukrainy. aktualni problemy sotsialno-ekonomichnykh system v umovakh transformatsiinoi ekonomiky: zbirnyk naukovykh statei za materialamy iv vseukrainskoi naukovo-praktychnoi konferentsii (12-13 kvitnia 2018 r.). part 1. dnipro: nmetau, pp. 31-35. mineev a.d. (2014). effektivnost faktoringovyih operatsiy kommercheskih bankov : dis. ... kand. ekon. nauk: 08.00.10. moskva, 221 p. nederia l.v. (2014). faktorynhovi operatsii: tekhnolohiia provedennia ta oblikovi protsedury. sumy: mriia-1 ltd; uabs, 320 p. bezklubyi i. (2005). do pytannia pro yurydychnu pryrodu dohovoru faktorynhu. pidpryiemnytstvo, hospodarstvo i pravo, № 3, pp. 89-91. gasnikov k.d. (2005). sravnitelnaya harakteristika dogovora finansirovaniya pod ustupku denezhnogo trebovaniya (faktoring) po pravu rossii i anglii: diss. … kand. yurid. nauk: 12.00.03. moskva, 214 p. zghama a.o. (2013). pro faktorynh yak hospodarsko-pravovyi dohovir. pravove zhyttia suchasnoi ukrainy: materialy mizhnar. nauk. konf. prof.-vykl. ta aspirant. skladu (m. odesa, 16-17 travnia 2013 r.) / vidp. za vyp. v.m. dromin ; nu "oya". south region center of npr of ukraine. odessa: phoenix, t. 2, pp. 739-749. tokunova a. (2011). mistse faktorynhu v systemi prava ukrainy. pidpryiemnytstvo, hospodarstvo i pravo, № 1, pp. 114-117. chapichadze ya.o. (2000). dohovir faktorynhu: dys. … kand. yuryd. nauk: 12.00.03. kharkiv, 189 p. zavhorodnii v. (2005). faktorynh: osoblyvosti deiakykh operatsii. hlav. bukh. bezblankov otchetnosty, № 9, pp. 25-35. iuhas e.f., popovych m.s. (2015). ekonomichnyi zmist faktorynhu: sutnist ta mistse v rynkovii ekonomitsi. naukovyi visnyk uzhhorodskoho natsionalnoho universytetu. seriia: mizhnarodni ekonomichni vidnosyny ta svitove hospodarstvo, vypusk 1, pp. 89-95. commercial code of ukraine: law of ukraine no. 436-iv of january 16 (2003). vidomosti verkhovnoi rady ukrainy, no. 18, no. 19-20, no. 21-22. art. 144. the civil code of ukraine: law of ukraine no. 435-iv of january 16 (2003). vidomosti verkhovnoi rady ukrainy, no. 40-44. art. 356. on financial services and state regulation of financial services markets: law of ukraine no. 2664-ііі dated july 12 (2001). vidomosti verkhovnoi rady ukrainy, no. 1, art. 1. on banks and banking: law of ukraine no. 2121-ііі dated december 7, (2000). vidomosti verkhovnoi rady ukrainy, no. 5-6, art. 30. ruda o.l. faktorynh: osnovni perevahy ta nedoliky pered kredytuvanniam. retrieved from: http://www.rusnauka.com/2_kand_2008/economics/26074.doc.htm (date: 10/06/2018) sambirskyi m. chomu v ukraini ne rozvyvaietsia klasychnyi faktorynh? retrieved from: http://blog.liga.net/ user/msambirskiy/article/24424 (date: 10/06/2018) palchuk o.i. (2010). faktorynh yak spetsyfichna finansova posluha. visnyk natsionalnoho universytetu «lvivska politekhnika». ser.: menedzhment ta pidpryiemnytstvo v ukraini: etapy stanovlennia i problemy rozvytku, no 682, pp. 168-173. sambirskyi m. stan ta perspektyvy rozvytku klasychnoho faktorynhu v ukraini. retrieved from: http://ukrfactor.com/novina/?n=26 (date: 10/06/2018) about ukraine's accession to the unidroit convention on international factoring: law of ukraine no. 3302-iv dated 11th of may (2006). vidomosti verkhovnoi rady ukrainy, no. 16, art. 139. about international factoring: unidroit convention of may 28, 1988. retrieved from: http://zakon5.rada.gov.ua/laws/show/995_210 (date: 10/06/2018) soroka a. faktorynh: «shtuchne dykhannia» chy «evtanaziia» dlia biznesu? retrieved from: http://blog.liga.net/ user/asoroka/article/18548#fb-root (date: 10/06/2018) baltic journal of economic studies 233 vol. 5, no. 1, 2019 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: cherep.av.znu@gmail.com 2 zaporizhzhia national university, ukraine. e-mail: smsvell@yandex.ua 3 zaporizhzhia national university, ukraine. e-mail: konf.econom.znu@gmail.com orcid: https://orcid.org/0000-0001-6473-6074 doi: https://doi.org/10.30525/2256-0742/2019-5-1-233-238 development of approaches to personnel management before the phase of the merging process of enterprises alla cherep1, valentina helman2, andrii lynenko3 abstract. purpose. modern business is increasingly focusing on alternative options for integration among corporate growth stimulation measures, in particular, through the formation of new strategic alliances, collaboration with enterprises and start-ups, as well as through mergers or acquisitions. that is why the research is aimed at solving problems of effective management of personnel in the process of merger of enterprises, in particular, in the machine building industry by merging, takeover or otherwise integrating business, as well as at developing modern approaches to personnel management in business mergers. hr systems should be adapted to the specific conditions of the merger or takeover of business structures, taking into account the relevant phases of the process of enterprise integration. methodology. the methodological basis of the study consist of general scientific methods of analysis and synthesis, comparative study of the economic processes in the management of personnel in the conditions of mergers and takeovers of business structures. the empirical method is used to describe the problem of taking into consideration the management of particular features of individual phases of the process of enterprise integration. this monographic study of a defined problem has given an opportunity to obtain results of practical significance and scientific value. results. the necessity of taking into account the specifics of the individual phases of the merger of enterprises in the management of integrated business personnel is substantiated. it has been obtained the further development of hr-tools, hr-methods, and hr-practices, the use of which during the business mergers will help to address the shortage of key skills and improve the efficiency of the integrated business. practical implications. applied guidance on human resources management can be successfully implemented in the machine-building enterprises of ukraine in the process of their merger with the aim of creating a more efficient integrated entity. the results of the study provide an opportunity to clearly outline the peculiarities of the phases of the process of business combining, which necessitate the use of appropriate hr-tools, hr-methods, and hr-practices for the integrated business. originality. the novelty of the results is the conceptual scheme of the personnel decision-making in the conditions of organizational changes in the combination of machine-building enterprises taking into account the three-phase process of their integration. the article focuses on the crucial importance of using hr-practices in accordance with the phases of the merger process to ensure the success of mergers and takeovers, resulting in new business combinations. the article explores hr-practices in the field of mergers and takeovers, which create new business combinations. the expediency of using hr-tools and hr-methods is proved for domestic enterprises operating in the field of machine-building, which are interested parties of integration processes. the developed human resources recommendations make it possible to increase the organizational efficiency of functioning of newly formed and already existing associations of machine-building enterprises. key words: hr-tools, hr-methods, hr-practices, mergers and takeovers, business integration, personnel management, business combinations. jel classification: g34, m12, m21 baltic journal of economic studies 234 vol. 5, no. 1, 2019 1. introduction today, the practice of concluding merger or takeover agreements has extended to ukrainian business as well. the most widespread sense of mergers/takeovers is one of the additional ways of consolidating business, expanding enterprise activities and spheres of influence in a single market. the negative aspects include the fact that the m&т process is quite lengthy and may take years; besides, large companies are finding it more difficult to achieve a quick reaction to the variability of the environment. taking into account “external variables” and “internal variables” is important in such processes and they determine the success of integration. importance is given to the role of human resources in the processes of mergers and takeovers, an adaptation of personnel management systems to specific conditions of mergers or takeovers of business structures. the main role of hrm in the process of merging companies is to mitigate the possible negative impact of processes of changing ownership or form of management on organizational effectiveness by creating a mechanism for reducing ambiguity that occurs in the process of organizational change. this provides a better understanding of the integration of enterprises by employees and their managerial staff and increases the motivation to the successful integration of enterprises through mergers or takeovers (correia, cunha, scholten, 2013). the studies of theoretical, methodological, and practical issues related to the role of hrm in m&тs, how hrm centrality affects the relation between ownership change and performance, are explored in the work of domestic and foreign scientists, including p. m. bal, p. christman, m. cording, m. f. correia, r . c. cunha, l. dorenbosch, s. jackson, d. r . king, c. lakshman, c. k. love, m. scholten, r . schuler, o. v. stalinska, m. l. tsurkan, and others. after analysing different approaches of scientists to determining the specifics of human resource management in the context of organizational change, one is clear that today there is a need for in-depth research and further development of the use of hrpractices, hr-tools, and hr-methods for enterprises operating in the field of machine-building and which are stakeholders of the integration processes. 2. causes of inadequate attention to personnel management in the process and after the merger of enterprises mergers and takeovers of entrepreneurial structures are quite popular forms of organizational change in the business. however, such situations of mergers and takeovers are accompanied by radical changes, which provoke problems for the established work of enterprises that are united in the organizational sense, creating powerful internal turbulence (cording, christman, king, 2008; lakshman, 2011). integration processes are widespread today in the business environment around the world, and the machine-building is no exception. however, in ukraine, the tendency towards the merger of enterprises is not so tangible; however, it still has a significant impact on the development of the economy as a whole. thus, according to the results of the annual survey of executives of the largest companies in the world conducted by pwc analysts in 2018, in ukraine 30% of the polled ceo (49% in the world) chose the creation of the new strategic unions among the measures to stimulate corporate growth over the next 12 months, the collaboration with other enterprises and startups was chosen by 18% (in the world – 33%), and mergers and takeovers were selected by 14% (in the world – 42%). the analysed data are grouped in table 1. table 1 the results of the survey of ceo in the world and ukraine on measures to stimulate corporate growth through integration, percentage of respondents measures to stimulate corporate growth world ukraine new strategic alliances 49 30 collaboration with businesses and startups 33 18 mergers and acquisitions 42 14 the more clearly indicated tendencies for the integration of enterprises are represented in figure 1. consequently, a significant proportion of the surveyed ceo of large ukrainian enterprises envisages participation in the integration processes during the next year, therefore, attention to the problems of effective management of personnel during organizational changes caused by mergers, takeovers or other associations of enterprises is justified by the objective need to ensure the successful integration of business. mergers and takeovers in business can be successful but they can also lead to major failures. mergers and takeovers of enterprises that are conducted quickly without proper organizational support and appropriate training of staff are generally doomed to failure. some problems in the merger of enterprises can be explained by financial and market factors, but a significant number of failures is due to ignoring questions related to human resources management in the process of integration and after the formation of a business association. numerous studies confirm the need for systematic consideration of various problems and activities in the area of human resources associated with mergers and takeovers by participants in business associations. in fact, recently the research in sectors has shown that 50–70% of all mergers, takeovers, and other corporate transformations do not reach the desired level of success, primarily due to human resources problems of integrated business formations (tsurkan, 2017). baltic journal of economic studies 235 vol. 5, no. 1, 2019 there are many reasons that cause some disregard for human resources management in the process of merging enterprises. the main reasons for this are: – lack of awareness that human resources have a decisive influence on the success of the processes of merging enterprises, in particular, of the machine-building industry; – lack of universal models or tools for managing human resources in mergers or takeovers; – the emphasis in mergers and takeovers, as a rule, shifts to other problems, rather than human resources, their adaptation to change and motivation to work effectively under new conditions; – insufficient study of the peculiarities of personnel management in the process and after the merger of enterprises, in particular in ukraine. experts point out that in the merger or integration of enterprises in any other way, human resources professionals must participate before, during, and after the merger of enterprises into a new integrated business structure. hr-systems should be adapted to the specific conditions of the merger or takeover of business structures. research shows that a merger of enterprises, whose hr-practices are fully integrated, goes more smoothly and employees remain content and motivated at any transition (schuler, jackson, 2001). 3. the need to take into account the three phases of mergers or takeovers in personnel management to improve the efficiency of m&т processes, the top management of enterprises should use personnel methods that develop integration opportunities, in particular, after the merger of machine-building enterprises. taking into account the experience of enterprises that take part in mergers and takeovers, a three-phase model of enterprise merger can be distinguished, which includes the following phases: the first – before the merger; the second – the merger that is the integration of partners; the third phase – after the merger, which involves the development of a new organizational structure. typically, these three phases cover a wider range of business functions, namely business strategy, finances, marketing, sales, it and production, but according to the merger or takeover phase, there are some questions that reflect problems that are most closely related to human management resources in the integration process (bal, dorenbosch, 2015). according to the information above, it is important to take into account the peculiarities of the phases of mergers or takeovers, as well as the specifics of the management of human resources in the process of making personnel decisions in the context of organizational changes. the conceptual scheme of personnel decisions in the conditions of organizational changes during the merger of machine-building enterprises is represented in figure 2. thus, the first stage is a preliminary merger that involves the planning of a merger or takeover process. at the first stage, there are many problems with the staff, as well as other related issues. for example, one of the reasons for a merger is to try to get the key advantage of another company, which is often manifested in talented employees who will be very useful in the future for the newly established integrated business structure. the problem with the personnel faced by enterprises involved in mergers and takeovers in the first phase of planning organizational changes can be as follows: – the formation of a team on personnel or the definition of a leader in the process of merger or takeover; – planning and coordination of the process of merger or takeover of enterprises in the field of machine-building; 49 33 42 30 18 14 0 10 20 30 40 50 60 new strategic alliances collaboration with businesses and startups mergers and acquisitions world ukraine figure 1. trends in the business integration in the world and in ukraine according to the survey results of the ceo of large enterprises, percentage of respondents baltic journal of economic studies 236 vol. 5, no. 1, 2019 – the need for a comprehensive study of other processes for the integration of business. integration of the business partners is the second and probably the most important phase, which includes various activities of participating companies. in general, integration is a process, due to which two companies combine after the announcement of mergers or takeovers. it is desirable at this stage to choose an integration manager, which should focus only on a specific process of merger and takeover. the following problems with personnel issues that emerge at the enterprises at the integration phase of the partners are: – problems of designing effective teams; – creation of a new organizational structure for the management of integrated business formation; – problems with retaining the key employees of the merged enterprises; – the motivation of workers in the new conditions of their work; – effective management of change processes; – the need for well-considered personnel policy. one of the most important tasks for the personnel department or personnel manager is to solve who will stay and who will go. the important targets of the personnel service include: a selection of candidates, the creation of new teams, emphasis on communication, the creation of a new corporate culture and organizational management structure. the last stage – the third one is characterized by the creation of a new integrated business entity. in the process of creating new combinations, there are problems of adjustment, working out all functions and “fine” settings. the following points can be attributed to staff problems that arise at the last phase of mergers or takeovers: – strengthening the leadership and staffing of the merged enterprise; – assessment of the new corporate culture; – an analysis of new development strategies and security structures etc. (bal, dorenbosch, 2015). among the important tasks faced by the personnel service at this phase of the association of machinebuilding enterprises, there are as follows: designing and creating a new structure; reconciliation of two new cultures with each other; mandatory consideration of the interests of key stakeholders in business integration. 4. possibilities of solving problems of personnel management in the merger of enterprises analysing the potential threats to the growth prospects of enterprises, according to a survey of their ceo, conducted by researchers at pwc (2018), one can be stated that the problem of the shortage of key skills specialists in ukraine ranked second place by its importance after social instability. problems with the lack of qualified specialists, their attraction, keeping in the company, and effective management of personnel, in particular, in the process of merger or takeover, are also very topical for top management of enterprises in central and eastern europe (figure 3). problems of providing integrated business with qualified specialists with key skills can be successfully solved if machine-building enterprises – members of the association will implement modern hr-tools and the first phase – before the merger or takeover training personnel for organizational changes, clear assignment of new obligations, authorities, and responsibilities of each employee the second phase is a direct business association motivation and stimulation of personnel for coordinated work in conditions of organizational changes, coordination, and control the third phase – after the merger of enterprises adaptation of personnel to new working conditions, ensuring its development, acquiring new skills, and applying them in practiced ef in in g h r -i ss ue s an d pr ob le m s fo r e ac h ph as e of m er ge r o r t ak eo ve r u se o f r el ev an t h r -p ra ct ic es , t oo ls , an d m et ho ds a t e ac h ph as e the three-phase process of integration of machinebuilding enterprises through mergers or takeovers figure 2. conceptual scheme of personnel decision-making in the conditions of organizational changes in the merger of machine-building enterprises baltic journal of economic studies 237 vol. 5, no. 1, 2019 methods of personnel management, with consideration of the three phases of mergers or takeovers that have already been characterized. in addition, if the association of machine-building enterprises takes place at the level of international cooperation, the following features of the human resources management of a transnational corporation (stalinska, 2018) should be taken into account: – the cosmopolitan nature of employees, the existence of workers, who are mostly members of a high-level elite who are constantly moving from one country to another; – the existence of significant differences in the cultural background of workers; – the existence of a difference in remuneration and other privileges between foreign and local staff; – widespread use of it-technologies for maintaining communication with the personnel of the integrated business-structure of the international level; – the need for an effective strategy of convergence and harmonized management of the various functions of staff across borders. analysis of the best hr-practices in companies proves the effectiveness of informing employees ahead of time about planned future changes. the top management should have an initial plan, which specifies the timing for employees to be informed about organizational changes. such measures make it possible to minimize worries and circulation of rumours by workers, as well as ensure that staff is focused on their job functions (love, 2000). particular attention should be paid to retaining the best employees at work. talented employees play a key role in successful restructuring but they are often one of the first freed because of the inexplicability of future prospects in the enterprise. at the same time, in order to maintain the moral standing of employees, decision-making by management should be impartial and consistent for all employees, excluding particular attitudes towards some of them. creating the conditions of justice is to distribute rewards and punish those who deserve them. even in times of change, it’s important to mintain an appropriate level of corporate culture. 5. conclusions personnel aspects of mergers and takeovers may be offset by legal and financial implications but the success of such a process, as a rule, depends on staff, sustained support for business expansion, in particular, hrmanagement. employees should be seen as a source of growth, sustainability or success. the novelty of the results of the conducted research is the conceptual scheme of the personnel decisionmaking in the conditions of organizational changes in the combination of machine-building enterprises taking into account the three-phase process of their integration, in particular, each phase such as “before merger or takeover,” directly “during the business combination” and “after the merger of enterprises” has features of management of human resources. the first phase involves training personnel for organizational changes, a clear division of new authorities, powers, and responsibilities of each employee. the second phase focuses on motivating and stimulating staff to work together in conditions of organizational change, coordination, and control. the third phase should adapt the staff to the new conditions of work, to ensure its development, acquisition of new skills, and their application in practice. besides the application of hr-practices (e.g. a plan for informing employees about the key moments and timing of organizational changes, keeping the best employees), hr-tools (such as benchmarking, planning, a balanced hr-system), and hr-management techniques in the process of consolidation of machine-building companies can increase the success of the integration of participating companies, as well as improve the indicators of organizational efficiency of the newly created business structure accordingly. effective governance is key to merge or takeover and identify a new culture. success in any association is defined by financial, technological, and personnel aspects. today hr-function becomes a strategic player in the business. 89 51 36 0 10 20 30 40 50 60 70 80 90 100 ukraine central and eastern europe world figure 3. percentage of ceo interviewed in 2018 who consider the lack of key skills to threaten the prospects for their business growth baltic journal of economic studies 238 vol. 5, no. 1, 2019 further research will focus on identifying the characteristics of personnel management depending on the forms of enterprise mergers, for example, the creation of a cluster or strategic alliance of enterprises, or the formation of a consortium on a temporary basis, as well as the development of methodological approaches to calculating the cost-effectiveness of the application of modern methods and techniques of personnel management in integrated business structures. references: bal, p. m., dorenbosch, l. (2015). age-related differences in the relations between individualised hrm and organisational performance: a large-scale employer survey. human resource management journal, 25(1), 41-61. cording, m., christman, p., king, d. r . (2008). reducing causal ambiguity in acquisition integration: intermediate goals as mediators of integration decisions and acquisition performance. academy of management journal, 51(4), 744-797. correia, m. f., cunha, r . c., & scholten, m. (2013). impact of m&as on organizational performance: the moderating role of hrm centrality. european management journal, 31, 323-332. lakshman, c. (2011). postacquisition cultural integration in mergers & acquisitions: a knowledge-based approach. human resource management, 50(5), 605-623. love, c. k. (2000). mergers and acquisitions: the role of hrm in success. ontario: irc press. schuler, r ., & jackson, s. (2001). hr issues and activities in mergers and acquisitions. european management journal, 19(3), 239-253. stalinska, o. v. (2018). osoblyvosti upravlinnia personalom na bahatonatsionalnomu pidpryiemstvi [particularities of personnel management at a multinational enterprise]. economy and society, 14, 735-739. the anxious optimist in the corner office. what’s on the mind of 1,293 ceos around the world? pwc’s 21st ceo survey. (2018). kyiv: pwc ukraine. retrieved from https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2018/ua tsurkan, m. l. (2017). innovacijni mekhanizmy upravlinnja rozvytkom personalu korporatyvnykh pidpryjemstv intehrovanykh kholdynhiv [innovative management mechanisms for the personnel development of corporate enterprises by integrated holdings]. thesis for a degree of candidate of economic science. pryazovskyi state technical university, mariupol. baltic journal of economic studies 101 vol. 1, no. 2, 2015 analysis of the forms of placement of the orphans and deprived of parental care children and its effectiveness in ukraine svitlana mykoluk1, ternopil national economic university, ukraine abstract: the purpose. this article is devoted to the systems analysis of theoretical and practical aspects of forming of social security system of orphans and children deprived of parental care. methodology. covered a topical issue – placement of the orphans and deprived of parental care children. characterized each form of the children placement emphasizing their fundamental difference and problem questions, consequences and lacks of such determination, are lighted up. results. offered a new approach to the forms of the children placement. modern realities of the state development need considerable rethinking of essence of social security of children, and accordingly raising of new tasks which this system is called to decide, and mechanisms of realization of social security of children, which must be adequate to the markets conditions. essence and functions of population social security of orphans and children deprived of parental care, are analyzed in the article. practical meaning. analysis of management activity in the field of social arrangement of children tells that the main its result is the arrangement of orphans and children deprived of parental care into the different forms of arrangements (adoption, guardianship (trusteeship), foster home, orphanage of family type, care home). we offer to consider the process of quality estimating with help of indicators of efficiency in depends on the priority in arrangement form of child (efficiency of management activity in the questions of adoption (ead), efficiency of management activity in the questions of guardianship (trusteeship) (eg), efficiency of management activity in the questions of foster homes creation (efh), efficiency of management activity in the questions of creation family type orphanage, (ecfto) efficiency of management activity in the questions of care homes creation (echc)and general efficiency of management activity in the field of social arrangement of children (earr). value/originality. this approach makes it possible to improve the oversight function of the regional administration for further planning and adjustments of the management activities effectiveness indicators in the region. key words: adoption, guardianship, fostering, family-type orphanage, boarding school, management activities, effectiveness. jel classification: j12, j13, o35, o38 corresponding author: 1 department of engineering management, ternopil national economic university. e-mail: mukolyk_s@mail.ru 1. introduction today in ukraine there is no comprehensive analysis of the state care forms for orphans and children deprived of parental care. similar studies have been made in the works of scholars, such as v. chippolino, i. pesch, a. gubanova, n. ryzhyi, n. nizhnik and others. however, scientists have worked in the conventional theoretical aspect, illuminating just certain nuances of family forms for orphans and children deprived of parental care. this is the reason why the level of the scientific researches remain low and does not meet the requirements of the time. a. gubanova considers the adoption as the most preferred form of the existing family types for children (gubanova, 2011). we are not opposed to such approval, but there are doubts about the other existing family types for children. n. rudyi pays special attention to the guardianship (care) in family types for children and considers it as one of the major family forms, because the family ties are retained (rydyi, 2011). in our opinion, this is not exactly the right position, because this form of the placement does not match the typical family model. we offer to take a critical look at the forms of children placement and find out if they all have the right to be called as “family”. 2. analysis of the forms of government children the obligation to take care of every orphaned child, in accordance with the ukrainian constitution, is the responsibility of state (the constitution of ukraine, 1996). the guardianship authorities are engaged in the placement of such children. consider the current form of governmental placement of orphans and children deprived of parental care (fig. 1): family forms of placement (adoption, guardianship (care), foster care and familybaltic journal of economic studies 102 vol. 1, no. 2, 2015 type orphanage) and institutions for orphans and children deprived of parental care (medical, training, educational and other institutions for children) (the law of ukraine on january 13, 2005, the number 2342). despite the common name “family forms”, which actually means the education of children in the family, each of these forms differ from each other both on the legal and organizational grounds. to understand the fundamental difference, consider every form of family placement of the children. undoubtedly, the best of all existing forms of family placement of children is adoption of a child rights-native (resolution of the cabinet of ministers of ukraine on october 8, number 905). only this form of the placement meets all existing “interests of the child” and deprives the child the status of orphan or child deprived of parental care. adoption creates between the adoptive parents and the child mutual obligations and rights provided by the family code of ukraine for children and their biological parents. this means that adoption is a special form of child protection, which establishes the relationship between the child and the people, who are not his own father or mother. it is also important, that the adoption gives the child a real family. considering the above, it is necessary to legalize the concept of “interests of the child” as one, that excludes the priority of interests of the adoptive parents to the interests of the child. the main thing with the adoption is the creation of conditions for the full development of the child, the child’s education, preparation for independent life and work. it is important, that from the time, when the child has been adopted, it acquires personal property and non-property rights of the adopted child (in later life and among his children and grandchildren) and the adopter (including his close relatives by birth). we consider it appropriate to add to the list of documents for the adoption also notarized consent to the adoption of a child from grandparents of the adopted children (parents of the adopters). particular attention should be given to inter-country adoptions. the situation, that exists in this area requires a clear legal regulation and control. national interests of ukraine corresponds to joining the hague convention on protection of children and cooperation in respect of intercountry adoption of 1993. after all, only close cooperation between the country of origin of the adoptive parents and country of origin of the child, you can protect the rights of the adopted child. it should be noted, that the secrecy of adoption in ukraine continues to this day, in violation of the un convention on the rights of the child (adopted children have the right to know their biological parents). despite a number of shortcomings of the current legislation of ukraine, we believe, that adoption can only be called as the form of family placement of children. the most common form of the placement of orphan or child deprived of parental care in ukraine is guardianship (resolution of the cabinet of ministers of ukraine on october 8, number 866). ukrainian legislation determined, that the guardian or trustee appointed mainly people in the family, relative of the ward: grandparents, at least – uncles and aunts of children. thus, the child is brought up in a family environment, keeping blood ties. we believe, that this form of the placement of the child should be called exactly guardianship and not the family. family forms of placement suggests the presence of parents (father, mother). an exception may be the custodial family, when the guardian is not a relative of the child. in this case, this guardianship should be considered as a prototype of a foster family. family forms institutions for children adoption guardianship (trusteeship) foster family familytype orphanage other education al training medical state placement of children fig. 1. the current forms of the state placement of children baltic journal of economic studies 103 vol. 1, no. 2, 2015 a child under guardianship (trusteeship) retains the status of orphan or child deprived of parental care, and have all social benefits. as with adoption, the law does not set a limit of the number of children, that can be arranged under the guardianship (trusteeship) in one family. in ukraine, since 2002, began an intensive creation of foster families and family-type orphanages. consider these forms of child’s placement. foster family – a single person or family, who voluntarily, for certain monthly payments from the state take for bringing up and to live together between one and four orphans or children deprived of parental care. foster family – a single person or family, who voluntarily, for certain monthly payments from the state provides education and living together between one and four orphans or children deprived of parental care. between the agency of trusteeship and guardianship and the foster parents must be sign an agreement on the duties and responsibilities for the common residence, education and maintenance of children in the family of adoptive parents. (resolution of the cabinet of ministers of ukraine on april 26, 2002, number 565) the family type children`s home (orpahanage) – single family, that voluntarily, for certain monthly payments from the state provides education and living together for at least five orphaned children or children deprived of parental care. the total number of children in such family can not exceed 10 people (including own children of the adoptive parents). the placement of children in family-type orphanage is only possible on the basis of the decision of the guardianship authority, which provides for the mutual responsibilities and obligations of the parties. (resolution of the cabinet of ministers of ukraine on april 26, 2002, number 564). thus, in foster homes and orphanages there are conditions close to normal family life. children, during the stay in a foster family or family-type children’s home, retain the status of orphan or child deprived of parental care, and enjoy all the social benefits. in our opinion, these forms of care for orphans can not be called as family, because they, unlike adoption and guardianship, are temporary and assume no legal obligation after the termination of the contract (decision) cohabitation, education and maintenance of orphans and children deprived of parental care. we believe, that the foster families and familytype orphanages should be attributed to the residential institutions of family forms of education (mini-boarding). a child, who is left without parental care, temporarily can be arranged with the decision of the guardianship authority in institutions for orphans and children deprived of parental care. placing the child in such institution does not exempt public entities from the obligation to continue work on the implementation of the rights of the child in the family. so, according to the above said arguments, we offer our vision of the names of the sovereign-governmental forms of care for orphans and children deprived of parental care (figure 2). 3. the effectiveness of administrative activity sphere of placement of children the main result of the work of state structure is to achieve its main goal: placement of orphans and children deprived of parental care in family-based education forms (adoption, guardianship (trusteeship), foster care, family-type orphanage. therefore, management activities are aimed at the realization of this objective. given that the purpose of the object that receives a management decision and is aimed at state placement of children mini-boarding institutions for children family forms adoption medical training guardianship, trusteeship family-type orphanage foster-family guardianshi p forms other educational fig. 2. forms of the state placement of children (proposed) baltic journal of economic studies 104 vol. 1, no. 2, 2015 increasing the number of placement of children – orphans in family forms of education we can talk about social efficiency of management. therefore, management activities are aimed at the realization of this goal. this means, that the main purpose of the object, that receives a management decision, is one and it aims to increase the number of placement of orphans in family forms of education, so we can talk about social efficiency of management. social efficiency of the management shows the extent to which demand for the service is met. based on the analysis perform basic management tasks on the placement of children in various forms of education, in our opinion, can be assessed results of administrative activity. the evaluation process in this case is to determine the effectiveness of management activities, depending on the priority forms of children`s placement. the evaluation result will determine, how efficiently and effectively the structure of management worked and were the main goals of management for a certain period achieved. so we offer a variety of formulas, using which it is possible to assess the effectiveness of management activities, depending on the form of the placement of the child. we suggest the following method to evaluate the effectiveness of management activities in the field of social placement of children. so on the primary accounting of services for children is the defined number of orphans and children deprived of parental care. it is important to note, that not all status children, in accordance with the applicable law, suitable for all forms of placement. with the number of children who are adopted, and the number of children available for adoption, you can determine the effectiveness of the structure of administrative activity in matters of adoption. 𝐸𝐸aa = 𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑔𝑔 = 𝐶𝐶𝑔𝑔 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑓𝑓ℎ = 𝐶𝐶𝑓𝑓 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑒𝑒𝑓𝑓𝑒𝑒ℎ = 𝐶𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑏𝑏 = 𝐶𝐶𝑏𝑏𝐶𝐶 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑠𝑠 = 𝐶𝐶𝑓𝑓𝑒𝑒 𝐶𝐶𝐶𝐶 × 100, % (1) eaa – effectiveness of administrative activity in matters of adoption,%, cad – number of adopted children, cav – number of children available for adoption. it is clear, that the higher the percentage of efficiency of administrative activity in matters of adoption is, the more children will be adopted and the mechanism of administrative activity would work better. thus, according to the proposed formula (1), with the qualitative work of the management`s subjects, the effectiveness of administrative activity in matters of adoption should be close to 100%. there are four possible forms of placement of children: guardianship, foster care, family-type orphanage, boarding schools. we believe, that the same method can be arranged to calculate the ratio of children to the different forms of education of the total number of children who are registered. this analysis will allow to calculate the percentage of administrative activity of the structure and to determine its effectiveness in terms of forms of children`s placement: 𝐸𝐸aa = 𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑔𝑔 = 𝐶𝐶𝑔𝑔 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑓𝑓ℎ = 𝐶𝐶𝑓𝑓 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑒𝑒𝑓𝑓𝑒𝑒ℎ = 𝐶𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑏𝑏 = 𝐶𝐶𝑏𝑏𝐶𝐶 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑠𝑠 = 𝐶𝐶𝑓𝑓𝑒𝑒 𝐶𝐶𝐶𝐶 × 100, % (2) eg – effectiveness of administrative activity in matters of guardianship (trusteeship), % cg – number of children, that are arranged under the guardianship, ca – number of children, who are in a primary account. 𝐸𝐸aa = 𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑔𝑔 = 𝐶𝐶𝑔𝑔 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑓𝑓ℎ = 𝐶𝐶𝑓𝑓 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑒𝑒𝑓𝑓𝑒𝑒ℎ = 𝐶𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑏𝑏 = 𝐶𝐶𝑏𝑏𝐶𝐶 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑠𝑠 = 𝐶𝐶𝑓𝑓𝑒𝑒 𝐶𝐶𝐶𝐶 × 100, % (3) efh – effectiveness of administrative activity in matters of establishment of foster homes, %, cf – number of children who have arranged to foster families, ca – the number of children, who are in the primary account. 𝐸𝐸aa = 𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑔𝑔 = 𝐶𝐶𝑔𝑔 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑓𝑓ℎ = 𝐶𝐶𝑓𝑓 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑒𝑒𝑓𝑓𝑒𝑒ℎ = 𝐶𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑏𝑏 = 𝐶𝐶𝑏𝑏𝐶𝐶 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑠𝑠 = 𝐶𝐶𝑓𝑓𝑒𝑒 𝐶𝐶𝐶𝐶 × 100, % (4) eefth – effectiveness of management activities on the establishment of family-type homes, %, cch – the number of children, who had set up in children’s homes, ca – the number of children, who are in the primary account. 𝐸𝐸aa = 𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑔𝑔 = 𝐶𝐶𝑔𝑔 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑓𝑓ℎ = 𝐶𝐶𝑓𝑓 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑒𝑒𝑓𝑓𝑒𝑒ℎ = 𝐶𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑏𝑏 = 𝐶𝐶𝑏𝑏𝐶𝐶 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑠𝑠 = 𝐶𝐶𝑓𝑓𝑒𝑒 𝐶𝐶𝐶𝐶 × 100, % (5) ebs – effectiveness of administrative activity in matters of boarding schools, %, cbi – the number of children, who are organized in boarding institutions, ca – the number of children, who are in the primary account. 4. conclusions thus, the proposed formulas (2, 3, 4) for calculation of the efficiency of administrative activity in matters of placement of children into care (guardianship), the creation of foster families and family-type homes will allows to analyze the effectiveness of the activity of the control subjects in social arrangements for children. it is clear that the highest rate should be according to the formula (2), as the placement of children into guardianship, usually retains the family relationships of the child (guardian – grandfather, grandmother) is a priority for the placement of the child in foster families or family-type orphanages. equation (5) efficiency of administrative activity in matters of placement of children in boarding institutions shows the percentage of children, placed in boarding school for children, who are in the primary account on the service for children. it is clear, that this indicator should be the lowest, because the placement of the child in a boarding school is the worst for the child and disgraceful management solution for control subjects. given the fact, that the end result of management activity spheres of social organization aimed at the placement of children in the family forms of education so that you can evaluate the effectiveness of management activities in the field of social placement. thus, we propose to evaluate the effectiveness of management activities in the field of children’s social placement with the following formula (6): 𝐸𝐸aa = 𝐶𝐶𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑔𝑔 = 𝐶𝐶𝑔𝑔 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑓𝑓ℎ = 𝐶𝐶𝑓𝑓 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑒𝑒𝑓𝑓𝑒𝑒ℎ = 𝐶𝐶𝐶𝐶ℎ 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑏𝑏 = 𝐶𝐶𝑏𝑏𝐶𝐶 𝐶𝐶𝐶𝐶 × 100, % 𝐸𝐸𝑏𝑏𝑠𝑠 = 𝐶𝐶𝑓𝑓𝑒𝑒 𝐶𝐶𝐶𝐶 × 100, % (6) baltic journal of economic studies 105 vol. 1, no. 2, 2015 esp – effectiveness of management activities in the area of social placement of children, % cfe – number of children, that are arranged in the forms of family education, ca – number of children, who are in the primary account. the proposed approach to evaluate the effectiveness of management activity areas of social placement in the region, make it possible to provide a control function to further planning and adjustment of these parameters. the problem of child abandonment is not new. in each country the problem of the placement of such children is solved differently, given the specificity and the mentality of the country. even in the post – soviet countries there are significant differences. for example, the number of children in foster care in the different countries are not the same (in russian adoptive families can bring up to eight children, in ukraine – up to four). there are differences in the definition of the status of children’s homes and foster families (in russian familytype orphanage is an institution, a legal entity, and in ukraine – it is a family). although this problem has a social character, it is not sufficiently investigated. this is evidenced with the absence of the index in the universal decimal classification (udc). questions for childhood are located in different sections of the classifier. we consider it to appropriate for the development of scientific research in this area and for the practical solution of a number of problems in the area of care for orphans and children deprived of parental care, to provide the recommendations of the international federation for information and documentation (federation internationale de documentation) to amend the udc supplemental index “the child. social orphanhood. state system of placement of children”. references gubanova v.v. 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foster family” on april 26, 2002, number 565. resolution of the cabinet of ministers of ukraine “on approval of the family-type orphanage” on april 26, 2002 number 564. светлана мыколюк анализ форм устройства детей-сирот и детей, лишенных родительской опеки и ее ефективность в украине аннотация. цель работы. статья посвящена системному анализу теоретических и практических аспектов формирования системы социального устройства детей-сирот и детей, лишенных родительской опеки. методика. освещена чрезвычайно актуальная проблема современности – устройство сирот и детей, лишенных родительской опеки. охарактеризованы все формы устройства ребенка, подчеркнуто их принципиальное отличие друг от друга. освещены проблемные вопросы, последствия и недостатки такого устройства. результат. предложен новый подход к формам устройства ребенка. современные реалии развития государства требуют значительного переосмысления сущности социального устройства детей, а соответственно, постановки новых задач, которые призваны решать эта система, и механизмов осуществления социального устройства детей, которые должны быть адекватные рыночным условиям. в статье раскрываются сущность и функции социального устройства детей-сирот и детей, лишенных родительской опеки. практическое значение. анализ управленческой деятельности сферы социального устройства детей говорит о том, что основным ее результатом есть устройство детей-сирот и детей, лишенных родительской опеки в разные форму устройства (усыновление, опека (попечительство), приемная семья, детский дом семейного типа, интернатное учреждение). процесс качественной оценки управленческой деятельности предлагаем рассчитывать с помощью показателей эффективности в зависимости от приоритетности форм устройства ребенка (эффективность управленческой baltic journal of economic studies 106 vol. 1, no. 2, 2015 деятельности в вопросах усыновления (eус), эффективность управленческой деятельности в вопросах опеки (попечительства) (eо), эффективность управленческой деятельности в вопросах создания приемных семей (eпс), эффективность управленческой деятельности в вопросах создания детских домов семейного типа (eдбст), эффективность управленческой деятельности в вопросах интернатных заведений (eи) и общую эффективность управленческой деятельности в сфере социального устройства детей (eу). значение/оригинальность. этот подход позволяет улучшить контрольную функцию органам регионального управления с целью дальнейшего планирования и корректирования показателей эффективности управленческой деятельности регионов. baltic journal of economic studies 295 vol. 4, no. 4, 2018 corresponding author: 1 lviv university of business and law, ukraine. e-mail: business_law@ukr.net 2 lviv polytechnic national university, ukraine. e-mail: irazhar@ukr.net 3 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. e-mail: olga.merdova@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-295-300 corruption as a negative social phenomenon hindering the economic development of the state zhanna semchuk1, iryna zharovskaya2, olga merdova3 abstract. the purpose of this article is to analyse the current state of fighting corruption as one of the negative phenomena that hinder the economic development of the state, parasitizing the whole body of ukrainian society. it is emphasized that existing in society, being a product of social relations, corruption permeates various social spheres of society, deforms various groups of social relations. it is appropriate that a narrowly chosen approach to preventing such a negative phenomenon significantly reduces the effect of such an activity and, as a result, does not enable to form an autonomous system that would be resistant to other accompanying risk factors. it is worth paying attention to the problems that are gaining the objective acuteness in recent times and are to oppose the state regulation of the economy by administrative methods and the so-called “freedom” of the development of economic relations. the need for operational intervention in the economy by state institutions through the adoption of managerial decisions, taking into account the growth of the global economic crisis, produces a separate phenomenon – economic corruption. however, the strong link between the social and economic spheres indicates the need for a comprehensive counteraction to such a socially dangerous phenomenon. along with this, the determinants of the spread of corruption in ukraine are characterized by their social nature, and less – by an economic one. it is stressed that corruption can be considered as a kind of social corrosion, which erodes and destroys public authorities, in particular, the state and society as a whole. the article reveals the content and significance of corruption, its types and forms. it is indicated that corruption – a social phenomenon that has a social conditionality and rules of social development and influence on social processes. the social nature of corruption manifests itself first of all in the fact that it has historical origins and social preconditions. practical importance of the scientific research is to find out the causes and consequences of corruption for the economic development of the state, which is extremely important for improving the current legislation of ukraine, which cannot be effective without conducting a high-quality anti-corruption expertise, built on a clear mechanism for conducting such an examination and reliable, validated methodologies. methodology. the methodological foundations of the study of corruption are determined by a set of methods of scientific knowledge, which allow considering this problem as a multidimensional, multidisciplinary phenomenon. the research strategy, which is the basis of the integrated approach, grounds, first of all, on the following methodological principles: the formulation of a general theoretical concept; the development of cross-cutting concepts and categories that ensure the unity of the approach to the research object. key words: corruption, corruption offence, anti-corruption expertise, economic development, causes and consequences of corruption, anti-corruption measures. jel classification: k10, z18 1. introduction the adoption of democratic principles of the rule of law, equality of all before the law today has become one of the priority tasks of our state. the basis for this was a series of events that took place in ukraine and forced the state to go through the way of the leading countries of the world with a developed democracy, in particular, european ones. however, despite all the efforts, there are a number of problems that hinder the processes of full and qualitative development of the state, which must be opposed by all, both the state and the public. baltic journal of economic studies 296 vol. 4, no. 4, 2018 one of such problems was the problem of corruption, which is now parasitizing throughout the whole large “organism” of society. the great explanatory dictionary of modern ukrainian language for a reason interprets the term “parasite” as “an organism that lives within another organism or grows into it and is fed by its tissues, juices, etc.” (the great explanatory dictionary of modern ukrainian language, 2009). the scale of the spread of corruption in the world and the growing attention of the international community to this negative phenomenon have turned corruption into a global problem of our time. due to the active position of a number of international organizations and public propaganda, corruption has become perceived not only as a problem of corrupt states but also as a problem of those states and foreign companies that corrupt them. today, anti-corruption measures are also being implemented by governments of individual states and by various international, civil, and non-governmental organizations. a large number of countries have introduced in government policy a wide array of anti-corruption measures that deserve extraordinary attention, study, and use. as a result, the so-called global anticorruption consensus emerges and develops gradually in the global community. in the fight against this evil, the anticorruption consensus claims to combine efforts between various social and political forces, in particular, between the left-wingers and the right-wingers, between liberals and conservatives, between globalists and antiglobalists (andrianov, 2011). therefore, corruption, as an extremely negative social phenomenon, requires a profound scientific study and analysis. this is primarily determined by the fact that most of the problems that affect from time to time different spheres of our society, especially in the unsuccessful resolution of some economic problems, crises that have taken place and are taking place against the backdrop of political confrontation in the country, are directly related to the influence of the phenomenon of corruption on these processes. the urgency of studying this phenomenon lies in its phenomenal ability to exist in each country, regardless of historical development, level of the economy, social development, and availability of legislative framework, which should counteract this. its uniqueness consists in the ability to constantly develop, transform into a variety of new forms of manifestation, to improve, to adapt to the existing legal framework, and to coexist along with the obligatory principles inherent in a legal, democratic state: legitimacy, the rule of law, equality of all before the law, observance of rights and freedoms of citizens. the global community has been genuinely interested in this phenomenon for the past few decades, and foreign experts and scientists are making a lot of effort in order to capture all aspects of this phenomenon. since the phenomenon of corruption erases any interstate and inter-scientific frontiers and, at the same time, absorbs by its influence almost all spheres of life, its study takes place comprehensively and consistently, globally, and attention, first of all, is given to the nature of the emergence and development of tools, due to which it is possible, if do not overcome, then at least localize and minimize its scale and impact on society. 2. definition of corruption, its possible forms and types the phenomenon of corruption for history, law, and society is not new. proceeding from the conclusions of the research of the science of history, this phenomenon existed from ancient times, from the moment of the emergence of the state and the creation of its bodies endowed with authority and administrative powers (miroshnychenko, 2010). however, throughout the history of its existence, this phenomenon has one characteristic feature – it is harmful in legal, social, economic, and other aspects. the term of corruption is derived from the combination of the latin words correi and rumpere: correi – the obligatory involvement of several representatives of one of the parties in one case, and rumpere – to violate, break, damage, cancel. so an independent term was formed – corrumpere (bartoshek, 1989), which means participation in the activities of several (not less than two) persons, whose purpose is to “spoil”, “destroy”, “damage” the normal development of the judicial process or the process of managing the affairs of society (tiemnov, 1994). most often, the term “corruption” applies to the bureaucratic apparatus and political elite. according to one of the existing definitions, corruption is the failure of the state, with the help of incentives, to direct the useful interest of a person in a productive direction. considering the issue of corruption and the possibilities of legal influence on it, k. surkov (surkov, 1991) emphasizes that corruption should be understood as the use in any form by officials of state, executive, judicial power, institutions and organizations of economic management, public associations of their official position for obtaining property, services or privileges for themselves or third parties. a well-known russian scholar n. kuznietsova emphasizes that corruption should be considered not only as legal but also as moral relations (kuznietsova, 1993). o. dudorov, who in his scientific publication considers corruption as a social, economic, and moral evil, follows the same position (dudorov, 1994). v. hvozdetskyi, who notes that corruption is a complex and multidimensional (legal, economic, political, moral and psychological) social phenomenon, studied corruption as a social, psychological, and moral baltic journal of economic studies 297 vol. 4, no. 4, 2018 phenomenon. the social nature of corruption manifests itself in the fact that it: has a social conditionality (is a product of social life); has its social price, which society pays for the existence of corruption, significantly affects the most important social processes; has historical origins and global character, is a legal, economic, political, psychological, and moral phenomenon; has the ability to adapt to social realities, constantly mimic and modify (hvozdetskyi, 2012). o. tylchyk considers corruption as the determinant of economic shadowing while defining the complex social, economic, and legal nature of such phenomena (tylchyk, 2017). many scientists considering issues of the essence of the phenomenon of corruption, the causes of its occurrence and existence, as well as counteracting this negative phenomenon, judge corruption to be one of the obligatory signs of organized crime, emphasizing the fact that in a number of cases, organized crime and corruption are so much closely connected that this gives grounds for highlighting corruption as one of the signs of organized crime. this opinion is expressed by m. melnyk (melnyk, 2001), o. tylchyk (tylchyk, 2017), l. arkusha (arkusha, 2000), p. bilenchuk, s. yerkenov, a. kofanov (bilenchuk, yerkenov, kofanov, 1999), o. kvasha (kvasha, 2010), o. ohorodnykov (ohorodnykov, 2011), o. kalman (kalman, 1997), o. zhovnir (zhovnir, 2009) and others. the notion of corruption is defined by ukrainian law, in particular, art. 1 of the law of ukraine “on prevention of corruption”, as “the use by a person specified in part one of article 3 of this law of his/her authority or related opportunities for the purpose of obtaining an unlawful benefit or acceptance of such benefit or acceptance of a promise/offer of such benefit for himself/herself or other persons or, accordingly, the promise/offer or provision of unlawful benefit to a person specified in part one of article 3 of this law or at his/her request to other natural or legal persons in order to persuade this person to misuse his/her authority or related opportunities” (on prevention of corruption, 2014). instead, many scholars believe that it is hardly possible to give a single, comprehensive definition of corruption, which would accurately distinguish between corrupt phenomena and those that are not corrupt in all cases. consequently, a number of scholars, whose views we support, believe that one of the most erroneous interpretations of corruption is the attempt to squeeze it in the framework of exclusively criminal manifestations (tylchyk, 2017). a significant number of authors believe that corruption as a social phenomenon is a much larger formation than the totality of purely criminogenic manifestations. in real life, there are many other its types that have never been considered criminal. taking into account the abovementioned thoughts, we believe that conditionally corruption can be classified using a variety of features, criteria, and peculiarities of manifestation. in particular, one can distinguish the following types of corruption: – administrative (and petty as its kind); – business (business, entrepreneurial, financial); – corruption related to the pressure on the state (aggression, capture); – political. administrative corruption should be understood as intentional distortion in the process of mandatory enforcement of the current rules of law, rules, etc., in order to give preference to the parties concerned. business corruption arises when business and government interact. business corruption is, in essence, payment by entrepreneurs, businessmen in cash or material assets to civil servants in matters relating to their activities. corruption related to the pressure on the state (aggression, “capture”) serves as a kind of corruption, which in the world practice is considered as activities of individuals, groups or companies, both in the public and private sectors, in order to influence the formation of legislation and other instruments of state policy. political corruption is a special kind of corruption. political aspects of the phenomenon of corruption are extremely multifaceted and contradictory. one should agree with a. y. frantsuz and a. a. frantsuz that in this case, civil society is the most effective mechanism for preventing and combating corruption (frantsuz a. y., frantsuz a. a., 2013). at the same time, in addition to these negative facts of the impact of corruption on state-public relations, it is appropriate to draw attention to the opinion of i. p. holosnichenko, who notes that corruption acts negatively influence the rights and freedoms of man and citizen. public services are provided not according to their law but according to the rules of organized criminal activity (holosnichenko, 2001). 3. legal regulation of the prevention of corruption in ukraine corruption is one of the main factors of political and socio-economic instability in ukraine, which has been repeatedly mentioned in the speeches of deputies of the verkhovna rada of ukraine, the president of ukraine, and the heads of the government. the existence of the phenomenon of corruption among the representatives of the government and management apparatus poses a threat to the stable socio-economic development of the state. there is no need for additional evidence that corruption affects the system of public administration, its implementation principles, generates contempt for the civil service and mistrust of civil servants, and contributes to the decline of the authority of state power since corruption can exist only among people with authority. baltic journal of economic studies 298 vol. 4, no. 4, 2018 the state in the early 90s of the xx century voluntarily abandoned most of the control functions, which to some extent contributed to the emergence of a managerial vacuum in the economy and social sphere. as a consequence of this, it became obvious that the then “unregulated market economy” generated unprecedented levels of corruption, as a result of it state ownership virtually pricelessly turned into private hands. this was facilitated by the mass adoption of corruption laws and by-laws, which were lobbied by certain groups that penetrated the authorities. the systemic character of corruption in ukraine in addition to other reasons is determined by the nature of ukrainian legislation, which is marked by a controversial, multivariate interpretation of individual norms, conflicts, gaps, etc. the legal basis for combating corruption includes the international legal acts and legal acts of ukraine. the international mechanism for the prevention of corruption has a significant impact both on the development of international anti-corruption cooperation and on the development of national anticorruption legislation. the law of ukraine “on prevention of corruption” as of 14.10.2014 determined the legal and organizational principles of the functioning of corruption prevention system in ukraine, the content and procedure for the application of preventive anti-corruption mechanisms, rules for the elimination of the consequences of corruption offenses (on prevention of corruption, 2014). in addition to the said law, a number of other legislative acts have an anti-corruption direction, in particular: laws of ukraine “on national anti-corruption bureau” on 14.10.2014 (on national anti-corruption bureau, 2014), “on access to public information” on 13.01.2011 (on access to public information, 2011), “on appeal of citizens” on 02.10.1996 (on appeal of citizens, 1996), “on prevention and counteraction of legalization (laundering) of the proceeds from crime, terrorist financing, and the financing of proliferation of weapons of mass destruction” on 14.10.2014 (on prevention and counteraction of legalization (laundering) of the proceeds from crime, terrorist financing, and the financing of proliferation of weapons of mass destruction, 2014), and a number of others. at the same time, in order to increase public confidence in state institutions, faithful and effective performance by civil servants of their duties, the law of ukraine “on civil service” as of 10.12.2015 was adopted (on civil service, 2015). the decision of the national agency on corruption prevention “on commencement of work of the system for submission and public disclosure of declarations of persons authorized to perform functions of state or local self-government” on 10.06.2016 № 2 (on commencement of work of the system for submission and public disclosure of declarations of persons authorized to perform functions of state or local self-government, 2016) and the order of the ministry of justice of ukraine as of 23.06.2010 №1380/5 “on approval of methodology for anti-corruption expertise of drafts of regulatory legal acts” (on approval of methodology for anticorruption expertise of drafts of regulatory legal acts, 2010) are also of great importance for the process of preventing corruption in public authorities. 4. the anticorruption expertise of laws and regulations as a significant obstacle to corruption it is obvious that a qualitative statutory legal act can only be created as a result of the complex application of a diverse range of expert assessments, among which not only anti-corruption but also legal, independent, scientific, linguistic, financial feasibility, social, gender, etc. instead, anti-corruption expertise is aimed, firstly, at detecting corruption provisions, and secondly, at fulfilling a preventive role in relation to corruption manifestations. the purpose of anti-corruption expertise is to identify and eliminate the legal preconditions for corruption (corruption-causing factor), which in essence is identified by the elimination of defects of the legal provision, the legal formula (kudriavtsev, 2007). a corruptogenic provision generates or can lead to corruption offenses. such a provision does not correspond to the purpose and tasks of legal regulation since the ordinary legal provision is aimed at regulating the most important social relations, effective influence on them by means of coercive measures provided for by the law, intended for repeated implementation (observance, application, execution, use, implementation). the corruptogenic provision, formally having the same functional purpose of a legal provision, in practice reduces the effectiveness of influence on social relations. elimination of corruptogenic provisions is possible in the process of rule-making activity of the body that applies the act (rule-making body) or the implementation of law enforcement functions by authorized state bodies. in essence, the elimination of corruptogenic factors in legal provisions is aimed at increasing the effectiveness of legal influence on social relations and law enforcement (kudashkin, 2011). 5. conclusions summarizing the foregoing, we can state that corruption is a phenomenon that is constantly evolving, transforming, adapting to the conditions of development of legislation, society, and state, while its essence and negative influence remain unchanged. changing the types and forms of corruption offenses is carried out in order to prevent the impact of the existing baltic journal of economic studies 299 vol. 4, no. 4, 2018 anti-corruption measures aimed at counteracting these phenomena and their limitations. given the abovementioned, in our opinion, it is necessary to supplement existing anti-corruption legislation with definitions of possible forms of corruption behaviour, as well as adequate responsibility for such acts. in the context of our study, it should be noted that solving the problems of effective counteraction to corruption largely depends on how correctly and deeply its essence is understood. clarification of the essence of corruption is extremely important in the theoretical and practical terms. from the scientific point of view, the importance of this issue is determined by the fact that it is the key to any research of corruption in the field of jurisprudence, as well as in other branches of science, including sociology, political science, and economics. in addition, it is a derivative for scientific research: statement of the research problem, determination of its area, subject-matter, purpose and objectives, and methodology selection etc. depend on its solution. determining the essence of corruption eventually proves the reliability of the results of scientific research since this point in comparison with all other points of the problem of counteraction to corruption is a key, basic for all others. the importance of this issue for practical activity in the field of combating corruption lies in the fact that the formation of a strategy and such an activity, the formulation of its goals, the determination of the forces and means of their achievement, the content and level of statutory, material, financial, and other support depend directly on the correct understanding of the essence of corruption. references: the great explanatory dictionary of modern ukrainian language (as amended) (2005). compiled and edited by v. t. busel. k.; irpin: ptf “perun”, 1728 p. andrianov, v. d. 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(2007). anti-corruption expertise: issues of theory and methodology of the procedure. the anticorruption expertise of laws and regulations and their drafts. the expertise of regulatory legal acts and their drafts with a view to corruptogenicity: content, meaning , procedure: collection edited by o. s. kapinus and a. v. kudashkin. m., p. 6. kudashkin, a. v. (2011). problems of organization and conduct of anti-corruption expertise by prosecution agencies. journal of russian law, 2, 25-26. baltic journal of economic studies 182 vol. 5, no. 1, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: elenaanr@ukr.net orcid: https://orcid.org/0000-0002-8661-5561 2 kyiv national university of trade and economics, ukraine. e-mail: matusova.yelena@gmail.com orcid: https://orcid.org/0000-0001-7998-3289 3 kyiv national university of trade and economics, ukraine. e-mail: andreeva_vg@rambler.ru orcid: https://orcid.org/0000-0002-9529-0543 doi: https://doi.org/10.30525/2256-0742/2019-5-1-182-187 assessment of employees’ creative activity in modern conditions of intellectualization of the economy elena purdenko1, olena matusova2, viktoriya andryeyeva3 abstract. current trends in the world economy determined the innovative vector of its development on fundamentally new bases: information and intellectual technologies, knowledge, and creativity. in modern conditions, enterprises and countries can increase their level of competitiveness through implementation policies supporting the creative activity of employees. the purposes of the article are to investigate the essence of creativity, the theoretical foundation of employee’s creative activity, its relation to art and methodological bases of employee’s creative activity evaluation taking into consideration the level of world economic development. methodology. the theoretical and methodological frameworks of the study are research results of scientists in the field of employees’ creative activity investigation and own research proposals. in order to achieve the goal of the article, the following methods are used: generalization – in the critical analysis of scientific approaches to establishing the definition of employee’s creative activity; comparison – in the process of comparing creative activity and art; index method – to propose the methodology of employee’s creative activity assessment; systematization – to identify elements of the relative index of creative potential; cause and effect method – for obtaining final conclusions. results. the creative activity of employees is an external manifestation of intellectual and cognitive abilities of a person, aimed at the changes in tangible, intangible or managerial objects, which are expressed in the generation of new ideas and their implementation in a practical result. it also manifests in the creation and application of innovations for the purpose of obtaining an economic or social effect. it is closely related to high intelligence, art, self-evaluation and motivation of the employee. the study also determines two main indexes of evaluation of the creative activity of employee – index of creative activity and relative index of creative activity. the relative index of creative activity includes such elements as choice rationality of the sphere of creative energy manifestation, biosocial indicator of creative energy, index of employee’s health, index of socio-psychological state of an employee, professional experience of employee, level of employee’s intelligence, and index of compliance the workplace with the standards. practical implication. the proposed methodology of employee’s creative activity assessment can be applied at enterprises in order to evaluate its current level and to improve the efficiency of the remuneration system. it is also clarified that increasing the creative activity of employees will raise the efficiency of the system of enterprise’s creative management as a whole. value/originality. the investigation underlines the peculiarities of employee’s creative activity from the psychological and economic points of view and describes the methodology of employee’s creative activity assessment, as well as evaluation efficiency of the system of an enterprise’s creative management. further researches should be aimed at the improvement of motivation mechanism for employee’s creative activity encouraging as a tool for increasing competitiveness of enterprises. key words: creative activity, employee, art, economy, enterprise, creative component, index of creative activity, intelligence. jel classification: j24, m12, m54, o34 baltic journal of economic studies 183 vol. 5, no. 1, 2019 1. introduction world economic trends prove that the current model of economic development is formed on fundamentally new bases: information and intellectual technologies, knowledge, and creativity. they are radically modernizing traditional models and determine the future of economic development of a country. creative industries, innovations, and knowledge are gradually replacing the traditional spheres of the economy. the dynamic growth of creative activities and their profitability change approaches to the formation of strategic directions of economic development. in regard to this, issues of setting conditions for the generation of creative ideas and the formation of a special creative environment become highly relevant. in such a case, the creative environment emphasizes the disclosure and further development of the creative potential of employees. it also should be noted that employees’ creative activity is one of the most important elements of the resource potential of an enterprise and it results in more effective use of all other types of enterprise’s resources. great attention is paid to the matter of employees’ creative activity in scientific papers of such foreign scholars as g. hawkins, r . florida, e. hagen, j. o’connor, a. maslow, t. fleming, and others. issues related to the development of the creative economy and to the assessment of the creative potential of labour resources have been presented in some papers of ukrainian scientists: i. vakhovich, o. chul, s. kyryzyuk, v. lepsky, m. kovbatyuk, kh.  loshkovskaya, t. bozhydarnik, l. melnik, a. mikhno, o. yamstremskaya, o. bardadym, and others. the majority of investigations are focused on the key features of the transition to a creative economy. these are the ability to combine creative thinking, innovative ideas, culture and the advanced technologies, as well as to establish a new type of market relations in order improve the quality of life and to ensure dynamic socioeconomic development. therefore, the foundation of society’s development should set up favourable conditions for the development of the creative potential of an individual (vakhovich, 2014). according to the draft of “human development concept of ukraine” (up to 2020), intellect, education, professional experience, social mobility, and the ability to creative and innovative thinking in professional and social life are recognized as the main components of national wealth and the main resources of further development. despite the significant contribution of foreign and national scholars into the investigation of theoretical background and practical issues of creative economy, further research in the field of creative activity of employees is required. analysis of scientific researches shows lack of uniform approach to the substantiation methodology for evaluation of employees’ creative activity in terms of modern intellectualization of economy. the aims of the article are to investigate the essence of creativity, the theoretical foundation of employee’s creative activity, its relation to art and methodological bases of employee’s creative activity evaluation taking into consideration the current level of world economic development. for this purpose, the investigation underlines the peculiarities of employee’s creative activity from the psychological and economic points of view and describes the methodology of employee’s creative activity assessment, as well as evaluation efficiency of the system of enterprise’s creative management. 2. the concept of creative activity of employee and its main elements the growing need of the economy in employees who are capable of a creative approach to any tasks, of the nonconventional and qualitative solution to existing problems is caused by the acceleration of society’s development and the necessity to live and work in rapidly changing conditions (yastremskaya, 2013). creativity (from latin creo – to create) – the ability to create, which predetermines a new unusual vision of a problem or a situation. creativity and its importance for the country’s economic development are the subjects of many discussions and investigations. a. maslow (1954) divides creativity into three types: the first level is the result of the action of primary motives; complex mental processes of analysis, systematization, and comprehension are the second level; “integrated” creativity integrates two previous types. f. barron, d. harrington (1981) define creativity as a new approach and a result of emotional distortions that misrepresent the “normal” vision of the world or as the ability to bring something new to experience. alan iny (2014), senior specialist in creativity and scenario planning at boston consulting group and coauthor of the book “thinking in new boxes” (2013), emphasizes that creativity means changing the way of seeing the world and can give you the opportunity to see new products, rethink business processes or transform the entire industry. jordan ayan (2012), executive director of the international consulting company “create-it!”, an expert on creativity and the author of the book “10 ways to free your creative spirit and find your great ideas” (1996), underlines that creativity has become one of the most important personal and business strategies for prosperity and success. creativity is considered to be as a form of art, not a business tool. he thinks that creativity is as a source of starting companies’ profit growth. therefore, according to his opinion, creativity can be regarded as a powerful business tool which baltic journal of economic studies 184 vol. 5, no. 1, 2019 enables successful management of employees and the company as a whole. the natural creative component is laid down at the genetic level of each person and its nature differs in size and vector. thus, some employees have creative abilities in the non-productive sphere, the others – in the material transformation of the environment (the creation of material and economic products), some of them have an advanced vector, aimed at the spiritual transformation of the world (the creation of spiritual or economic-intellectual products). having a certain level of creative component, any person firstly reflects in his mind the investigated segment before performing the task. this segment can be changed or remains unchanged in the future. at this stage, there is a creative component that can potentially transform the surrounding world into a subject. this component depends on the level of creativity of any person and can be measured, for example, by the level and volume of knowledge of the surrounding world. the researches have shown that creativity is often identified as art. so, the process of art is a search for new or unknown things in the world. psychologists define art as an activity, which generates new material and spiritual values. it is noted that the distinguishing features of art activity are originality and socio-historical uniqueness. a deep personal vision expresses in the art work and, without it, the subject of creativity doesn’t practically exist. it reveals the need for personal self-expression, self-actualization, and expansion of creative abilities (tututshkina, 2009). the components of art activity are artistic expression, art position, and work. self-expression in art is manifested in what way a person responds to the environment, trying to express own attitude, motives, and feelings in the daily activities. art position means an open, flexible and independent way of responding to the environment. work of art is created as a new form. a person in art receives and conveys information, has an impartial position, possesses a positive interest and the ability to listen and especially important quality of such a person is the desire to improve own goals, views, and motivations. we agree with the conclusions of the psychologists but the above-mentioned qualities of the person in art do not adequately correspond to the essence of the intellectual and creative activity of the employees of an enterprise, which is the primary source for intellectualization of economy and is associated with advanced technologies and production of high-tech products. there is a significant correlation between creativity and intelligence. hence, an employee with an inadequate level of iq as the main intelligence tool may not be able to generate and implement creative ideas. at the same time, the maximum iq value does not guarantee the maximum creative potential of the employee. that is why it is not a sufficient condition for it. to sum the views on creativity up, we can distinguish three main approaches to determining the creativity of employees of an enterprise: – all employees can be creative (maslow, 1954; taylor, 1988; mikhno, 2017); – only persons with art skills are creative (bogoyavlenskaya, 2016; efroimson, 2002; tututshkina, 2009; melnyk, 2017); – creativity is inherent only to employees with high intelligence (spearman, 1927; terman, 1958; wechsler, 1958; bozidarnik, 2015). the growth of new knowledge is the primary source of future environmental transformation, which can be realized or not realized in practical activity in the future as a result of using the creative component in order to achieve set goals. this task is solved by the creative activity of an employee, which is aimed at the management of this process through the search for rational ways. the creativity of an employee as the ability to art is not a sufficient condition for his effective activity since the criterion is not only the generation of creative ideas but also the possibility of their implementation in order to obtain the appropriate effect. the considerations mentioned above require a generalization of the concept of creative activity. thus, the creative activity of employees is an external manifestation of intellectual and cognitive abilities of a person, aimed at the changes in tangible, intangible or managerial objects which are expressed in the generation of new ideas and their implementation in a practical result. it also manifests in the creation and application of innovations for the purpose of obtaining an economic or social effect. it is closely related to high intelligence, art, self-evaluation, and motivation of the employee. 3. methodological tools of employee’s creative activity assessment and enterprise’s creative management system evaluation “...there are a lot of people who create new things or defended the old ones...” (barron, 1981), therefore, changes as a result of creative activity are the subject of further economic operations. they can be expressed through the indicator kn. this indicator satisfies the needs of market subjects (bogoyavlenskaya, 2016). kn nn no= − , where: kn – an indicator of changes increment, which manifests in the new state of the object of creative activity (nn) in comparison with the existing state (no). we also propose the work of human intelligence, which is manifested through the generation of creative ideas, to be evaluated through the index of creative activity ka. baltic journal of economic studies 185 vol. 5, no. 1, 2019 ê ên t ênà �= ⋅ , where: t – time spent by an employee on implementing changes; кn – relative index of the creative potential of an employee. the economic indicator of the creative activity of an employee (ka) is expedient to express in the changes of products as a result of creative ideas to the duration of time spent on their implementation. then the economic indicator of the creative activity of an employee should tend to its maximum value (ka_max): ê max ênmax t min ê maxna_ � _ = ⋅ the degree of creative activity of an employee depends on a significant number of variable internal and external factors, which can minimize or maximize the creative potential of an employee. that is why we propose to take into account the influence of the relevant factors in calculating the relative index of creative potential as follows: ên ê ê ê ê ê ê ê ê m m= + + + + + + + … +1 2 3 4 5 6 7 where k1 – choice rationality of the sphere of creative energy manifestation; k2 – a biosocial indicator of creative energy; k3 – index of employee’s health; k4 – index of the socio-psychological state of an employee; k5 – professional experience of the employee; k6 – the level of employee’s intelligence; k7 – index of compliance the workplace with the standards; km – index represents the possibility to extend the number of factors; m – a number of factors. it should be noted that the level of changes in the indexes, which are included in the calculation of the relative index of employee’s creative potential, ranges from 0 to 1. thus, the relative index of employee’s creative potential (kn) depends on the choice rationality of the sphere of creative energy manifestation and is the correct place of creative activity. if a particular employee does not show creative abilities at a particular workplace, this indicator is 0. this situation may be due to the fact that he does not match his job as each type of intelligence has the proper types of tasks, which can be managed in accordance with his psychotype. otherwise, if an employee shows creative ideas, this indicates the correct choice of workplace and the index will be equal to 1. a biosocial indicator of creative energy is characterized by a number of abilities of an employee in spiritual (ks), material (kt), and managerial (ko) spheres and can be defined in relative units: к2 = кs+ кt + ко it should be noted that there are more than 2000 tests. they can be applied to assess the biosocial index: physiological tests, projective tests, personal questionnaires, and others. the biosocial factor of the creative activity of employees includes the genetic and social components, which explain the causes of the industrial revolution and it took place only over 200 years ago. the previous millennium was characterized by a certain technical “stagnation” because the biological or genetic component of the creative activity of certain prominent people was exploited for centuries. for a great number of years, the social component of creative activity (its level depends on the degree of social development of society) was formed not at a revolutionary pace, therefore, only some of the most gifted people advanced science, technology, art, etc. such individuals, due to their high natural creative potential, were able to create such objects and means of labour and changed social relations established over the centuries. this led to the organization of serial production and then of mass production of goods. objective preconditions for social activation of corporate creative activity arose and initiated the industrial, scientific and technical, sociotechnical, and economic revolutions. it significantly improved the quality of life of the population. index of employee’s health can be defined as the ratio of an actual number of working days to the maximum possible working days per year. index of socio-psychological state of an employee is determined on the basis of appropriate tests, taking into account the level of emotional intelligence. if the positive direction is defined – the indicator is equal to 1, if the direction is neutral – 0.5, and if the direction is negative – 0. the professional experience of an employee is determined on the basis of his compliance with the competencies, which define professional skills in consideration of basic education and work experience in the relevant field. to our opinion, the critical period from “absorption” of professional knowledge to it “useful effect” is the term over five years, which determines the value of the indicator from the minimum 0 to the maximum 1. the level of intelligence of an employee is assessed on the basis of determining the level of iq. taking into account the thoughts regarding the correlation of creativity and intelligence, the level of this indicator above 110 points can be considered as the sufficient factor for the development of creativity. at this level of iq, the value of this index will be the maximum, that is, equal to 1. it should be pointed out that the level of iq is determined in view of the following disadvantages in the testing of employees: a person who constantly works with psychological tests has a more advantageous position than a novice; baltic journal of economic studies 186 vol. 5, no. 1, 2019 time limits; the employee’s attitude to the procedure; the test results are determined by the author of the tests only, who is not always objective; only mentioned test decisions are taken into account. in addition, as ch. e. spearman points out, marks for knowledge tests are often unable to predict performance because they cannot measure how knowledge and skills will be used at work. firstly, many tests of knowledge measure mechanical memorization, while the ability to find information is really important. remembering specific facts is less important than knowing where to find them when it is necessary. secondly, knowledge tests measure the ability of a person to choose the right answer from several options, rather than the ability to act on the basis of his knowledge. finally, knowledge best predict what a person can do and not what he will do (spearman, p. 10). index of compliance the workplace with the standards is calculated as the ratio of actual instruments, sources, and methods for obtaining and transmitting information used for creativity to the required ones. management of working process is the prerogative of the administration of an enterprise that must ensure the formation of rational behaviour of employees to achieve their business goals. the purpose of this administration is to create the maximum interest of the staff in the working process. in this case, the goal will be achieved only with the maximum coincidence of mentioned above vectors and the deviation of these vectors should be minimal. in accordance with the specifics of an enterprise’s activity and the influence of the relevant factors, the list and the number of indexes included in the calculation of the relative index of creativity of an employee may vary. depending on the values of economic indicators of creativity, it is expedient to rank them from the maximum value to the minimum. the material incentives should be made for employees of an enterprise according to the rank. if an enterprise uses a grading system of remuneration, the inclusion of this indicator is mandatory. the growth of the social component of creative activity is expressed due to the increase of educational vectors of personality’s development. that is why the main aspect of state policy, firms, and corporations, including the development of high-tech industries, will be the task of developing programs in order to raise the level of education of employees. experience, skills, professional development, social stability, a healthy lifestyle can increase the level of “creative impact” of employees. increasing the creative activity of employees will raise the efficiency of the system of an enterprise’s creative management as a whole (table 1). the system of using creative activity, as well as socioeconomic systems, develops according to the law of the “spiral.” at each turn of the spiral development of society, the growth of the creative index is carried out. at the same time, the environment directly affects the creative activity of an employee. 4. conclusions the proclamation of entrepreneurship as the main driving force of economic development does not take into account the fact that it cannot be limited only to the initiative and level of creativity of entrepreneurs themselves. only the corporate creative component of all the subjects of market relations (both managers and executors of business projects) is able to solve the task of economic recovery. as long as the social state of society does not pass to an equilibrium state, the creative activity of those subjects, which must spend it on solving economic problems, will be spent on solving social issues. another important problem of the current state of development of the creative activity of employees is the decline in the level of common cultural and moral values. this is especially important for the mentality of our society. these categories were among the most important in the development of the country’s economic potential. for the recovery of the national economy, it is necessary not only to declare the importance of business development but also to develop and maintain the social significance of every citizen. a potential employee will improve the state of the economy of the country by all means. in this way, certain conditions will be created for the growth of the potential of creative activity not only in the field of advanced technologies but also in the field of production of consumer goods. it will result in balancing the competitiveness of domestic products with european counterparts. table 1 criteria of an efficient system of enterprise’s creative management criterion method of calculation index of realization of creative ideas the ratio of the number of realized creative ideas to the total number of promoted creative ideas index of the intensity of the process of making creative decisions the ratio of the number of creative decisions to the duration of the period during which creative decisions were developed index of the rationality of creative decisions the ratio of the number of creative decisions from which the expected effect was obtained to the total number of creative decisions index of economic efficiency of creative decisions the ratio of the effect of implementing creative decisions to the total costs of their implementation baltic journal of economic studies 187 vol. 5, no. 1, 2019 thus, in current conditions of the informative “boom” the need for a national economy in creative employees increases. such employees can apply accumulated previous knowledge, as well as create new products, services, technologies, which differ from similar by novelty approach and creative solutions. increasing the creativity of employees, as a process of finding and applying innovative solutions, becomes one of the main sources of creating added value and competitive advantages of a modern enterprise. the key to increasing the creative activity of employees is its effective motivation, which is based on the assessment of creativity in the overall results of an enterprise. types of such motivation and its general mechanism are the subject of further research. references: ayan, jordan. (2012). creativity on demand. retrieved from: http://www.managementconsultingnews.com/ interview-jordan-ayan barron, f., harrington, d. (1981). creativity, intelligence, and personality. ann. rew. psychol. bogoyavlenskaya, d. b. (2016). psyhologiya tvorcheskih sposobnostey [psychology of creative abilities]. moscow, ekonomika. (in russian) bozidarnik, t. (2015). formuvannia i rozvytok kreatyvnogo menegmentu na pidpriemstvi [formation and development of creative management on an enterprise]. economist, 3, 37-39. (in ukrainian) efroimson, v. p. (2002). genetika genialnosti [genetics of genius]. moscow. (in russian) iny, alan. (2014). yak pracyuye kreatuvnist u biznesi [how does creativity works in business]. retrieved from: http://management.com.ua/interview/int395.html (in ukrainian) kontsepsiya gumanitarnogo rozvytku ukrainy na period do 2020 roku [human development concept of ukraine (up to 2020)]. retrieved from: http://sp.niss.gov.ua/articles/983/ maslow, a. (1954). motivation and personality. harper & row publishers, inc. melnyk, l. (2017). model kreatuvnoi ludyny ta ii mentalitet v ekonomitsi znan [the model of creative person and his mentality in economics of knowledge]. social-labor relations: theory and practice, 1, 242-251. (in ukrainian) mikhno, a. (2017). rozvutok kreatyvnyh upravlinskyh kadriv na mistsevomu rivni [the development of managerial staff on the local level]. public administration and local government, 1, 123-127. (in ukrainian) rubinstein, moshe f. & firstenberg, iris. (1999). the minding organization: bring the future to the present and turn creative ideas into business solutions. new york, john wiley. spearman, c. (1927). the abilities of man. macmillan &. co., n.y. taylor, c. w. (1988). various approaches to definitions of creativity: in r . j. sternberg (ed.). the nature of creativity. new york, cambridge university press. terman, l. m. (1937). the measurement of intelligence. boston. tututshkina, m. k. (ed.). (2009). prakticheskaya psihologiya [practical psychology]. moscow, asb. (in russian) vakhovych, i. m. (2014). rozvytok kreatyvnykh industrii: regionalnyi vumir [the development of creative industries: regional aspect]. lutsk, veza-druk. (in ukrainian) wechsler, d. (1958). the measurement and appraisal of adult intelligence. baltimore, williams and wilkins. yastremskaya, o., bardadym o. (2013). motyvaziya kreatyvnosti novatoriv [motivation of innovators’ creativity]. kharkiv, khneu. (in ukrainian) baltic journal of economic studies 126 vol. 5, no. 1, 2019 corresponding author: 1 i.i. mechnikov odessa national university, ukraine. 2 lviv polytechnic national university, ukraine. 3 state higher educational institution “vadym hetman kyiv national university”, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-126-130 financial and economic bases of the functioning of state executive bodies: past, present and prospects of improvement oleksandr mykolenko1, iryna lychenko2, olena klymiuk3 abstract. the aim of the article is to analyse legal regulations and perspectives available in the specialized literature concerning financial and economic bases of the functioning of state executive bodies, which should be strengthened and formed according to one of the areas of administrative reform in ukraine. the subject of the study is financial and economic bases of the functioning of state executive bodies: past, present, and prospects of improvement. methodology. the study is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the historical and legal method enabled to analyse the legal regulations of administrative and financial law on past, present, and prospects of improvement of financial and economic bases of the functioning of state executive bodies. the comparative legal method was used to improve the system of executive bodies and their authorities’ exercise. the system-structural method enabled to consider and identify the most negative effects of the insufficient financing of executive branch activities and the exercise of their authorities. the methods of grouping and classifying were the basis for the author’s approach to the identification of forms of financing state executive bodies. the technical legal method enabled to interrogate the state of affairs in financial and economic bases of the functioning of state executive bodies. the results of the study enabled to highlight the drivers of the improvement of forms of financing state executive bodies. practical implications. in the study, scientific sources and legal regulations of administrative and financial law on past, present, and prospects of improvement of financial and economic bases of the functioning of state executive bodies are interrogated. the article highlights that strengthening and forming new financial and economic bases of the functioning of state executive bodies have been provided for by one of the areas of the concepts of administrative reform, which nowadays is implemented both at the legislative and law enforcement levels. it was concluded that the formation of new financial and economic bases of the functioning of state executive bodies failed. there is only modelling of certain forms of financing of state executive bodies, familiar to the history of the origin and development of these bodies. therefore, financial and economic bases of the functioning of state executive bodies should be interrogated by representatives of both administrative and financial law not only from a historical perspective or from a modern perspective but also with a view to the future. relevance/originality. the original author’s approach to the definition of financial and economic bases of the functioning of state executive bodies is the basis for developing the most promising areas of improvement of domestic legislation in this sphere. key words: administrative reform areas, state executive bodies, state budget, financial and economic bases of functioning of state executive bodies. jel classification: k23, h72 1. introduction ukraine is undergoing significant changes in all spheres of public life, mainly due to the transition from the post-soviet system of state administration (command-administrative system) to the system of public administration, effectively manifested in democratic countries of the world. ukraine is a democratic, social, and legal state; and human rights, freedoms, and their guarantees determine the content and targeting of public activities. however, in practice, these provisions of the constitution of ukraine cannot be implemented without changes in both the system of public administration and the tools used by public administrators to exercise their powers. to confirm acknowledgement of ukraine’s status as a legal democratic state, the state, represented by its bodies, baltic journal of economic studies 127 vol. 5, no. 1, 2019 should be responsible for asserting and ensuring human and civil rights and freedoms. this cannot be achieved without strengthening the financial and economic bases of the functioning of state executive bodies. state executive bodies have a significant influence on the development of social relations in political, socio-cultural, and economic spheres; therefore, they are an important element in the system of public authorities, regardless of checks and balances provided by national legislation in relations between the legislative, judicial, and executive bodies. initially during the administrative reform implementation, and then during the optimization of the state executive branch system, the key issues under consideration are: 1) construction of an effective system of state executive bodies with clear allocation of their authorities and responsibility; 2) creation of an effective mechanism for providing state executive bodies with professional personnel; 3) creation of effective forms of work with local self-government bodies, especially with regard to financing and implementation of authorities in the respective territory; 4) strengthening and formation of new financial and economic foundations for state executive bodies functioning. for the period of ukraine’s independence, all of the above-mentioned spheres have undergone changes, ambiguously evaluated in the specialized literature. for example, administrative procedures incorporated into the legislation, the establishment of an administrative service institution, the use of an administrative contract are considered as positive changes in the legal regulation of state executive bodies’ activities. the growth of corruption, sharp decline in public servants’ professionalism, and efficiency reduction in the law enforcement sphere are considered as negative changes that have taken place in the activities of state executive bodies. one of the major courses of stalling the reform of the state executive bodies is the lack of necessary economic and social conditions and underestimated importance of the financial factor in the executive branch development. due to financial, logistical support of state executive bodies, these bodies get the opportunity not only to comply with laws but also to formulate and implement state policy in certain spheres of public life. therefore, the financial and economic basis of state executive bodies’ functioning determines their effective performance. in view of this, it is important to track the development of scientific thought and current legislation regarding the financial and economic bases of the functioning of state executive bodies in ukraine. to some extent, the issues of financial and economic bases of the functioning of state executive bodies were studied by d. a. bekerska, o. a. bukhtiiarov, o. i. derevchuk, s. t. kadkalenko, o. ye. korystin, h. a. kravchuk, m. p. kucheriavenko, o. p. orliuk, p. s. patsurkivskyi, d. p. rotar, i. ye. rukolainina, l. a. savchenko, d. l. chernykov, a. h. chubenko and other domestic scientists. however, in specialized legal literature, works, which reveal the essence of financial and economic bases of the functioning of state executive bodies as one of the areas of their reformation, are rare. therefore, consideration of the doctrinal approaches to the financial and economic bases of the functioning of state executive bodies becomes relevant and constructs the aim of this article. for its successful achievement, the following tasks should be solved: first, to outline the key aspects of financial and economic bases of the functioning of state executive bodies; second, to analyse the perspectives available in the specialized literature in relation to financial and economic bases of the functioning of state executive bodies; third, to propose an author’s original approach to the improvement of financial and economic bases of the functioning of state executive bodies. 2. presentation of the main material initially, the concept of administrative reform in ukraine, approved by the decree of the president of ukraine of july 22, 1998 (the concept of administrative reform in ukraine), stated the necessity to develop and incorporate into the national legislation the new financial and economic foundations of the functioning of public administration. the key areas of such a reform were: creation of a new legal framework regulating state administration in ukraine; formation of new institutes, organizational structures and instruments of public administration; staffing of the new public administration system; scientific and informational support of the state administration system, formation of scientific and informational monitoring of its functioning; strengthening and shaping new financial and economic foundations for public administration functioning. over the last twenty years, firstly, the terminology has changed in the science of administrative law (instead of the term “state management,” the terms “public management” and “public administration” are used), and secondly, each of the above-mentioned areas have received the corresponding implementation both at the legislative and enforcement levels (for example, the laws “on central executive bodies,” “on administrative services,” “on public service,” the concept of the development of electronic governance in ukraine, etc. were adopted). however, along with a large number of proposals for improving the system of executive bodies and the exercise of their authorities, the concept of administrative reform (hereinafter – the concept) insufficiently revealed the content of an area of administrative reform such as strengthening and shaping new financial and economic foundations of the functioning of executive bodies. baltic journal of economic studies 128 vol. 5, no. 1, 2019 first, the concept noted that the cost of maintaining managerial staff (officials) would be adequate for the financial and economic conditions of the state. however, the analysis of state and local budget expenditures in the first half of 2014-2017, prepared by the financial and economic analysis office of the verkhovna rada of ukraine (analiz vydatkiv derzhavnoho ta mistsevykh biudzhetiv u i pivrichchi 2014-2017), demonstrates that this provision of the concept is ignored and not realized due to many subjective and objective reasons. for example, in comparison with january-june 2014, in januaryjune 2017 state budget, the share of expenditures on national functions increased from 21.7% to 28.2% due to the minimum wage increase, salaries of public servants, subsistence minimum, etc. w hile in 2014, the largest share was spent on social protection and social security, in 2017, it was expenditures on state functions. at the same time, it was noted that expenditures on social protection and social security decreased from 32.6% to 25.8%, on education, from 10.9% to 8.6%, and on health care, from 2.7% % to 1.8%. however, to advocate the current situation, the transfer of a part of financing social functions of state authorities, financing educational institutions and health care facilities to the local level is considered as an argument. second, in the concept, in the part concerning its financial and economic provision, it was noted that the practice of financing the executive bodies from the socalled additional mobilized and self-sustaining funds should be ceased (the concept of administrative reform in ukraine). for example, during the course of 1998, the cabinet of ministers of ukraine was empowered to take a decision on the allocation of funds for the payment of salaries, pensions, scholarships, and other social payments by mobilizing additional funds (pro mobilizatsiiu dodatkovykh koshtiv na finansuvannia sotsialnykh vyplat). however, the key elements that characterize state expenditures are: a certain complex of basic and working capital provided for the organization, its operational and economic independence, self-responsibility for all economic transactions and concern on their results. that is, the self-supporting relations are not inherent to budget organizations, and especially to executive bodies, because they have the right to spend only general and special funds of the state budget. the possibility for the executive bodies to create and dispose of extrabudgetary funds is mentioned in the scientific literature of the early 70s-90s of the last century. for example, d. a. bekerska defines “extrabudgetary funds”/own receipts as permits by the competent authorities to receive revenues from various enterprises, institutions, organizations for the execution of works, the provision of services, sales of products, sums with the right to their targeted use, as well as the sums received from interest deductions of individual departments for the execution of works of general-sector nature and centralized mechanisms (bekerskaia, 1973). however, budget code of ukraine of 2001 prohibited the creation of extrabudgetary funds by state authorities, authorities of the autonomous republic of crimea, local self-government bodies and other budget institutions (biudzhetnyi kodeks ukrainy). later, budget code of ukraine of 2010 reiterated this prohibition by providing for minor exceptions to the general rule concerning, first, the placement of temporarily free funds of a single treasury account and funds of foreign currency accounts of the state budget on deposits or through the purchase of government securities with the subsequent repay until the end of the current budget period (part 8, article 16), and second, the implementation of local budgets (part 2, article 78) (biudzhetnyi kodeks ukrainy). therefore, the adoption of the budget code of ukraine of 2001 initiated the distinction between the terms “special budget fund” and “extra-budgetary funds.” the current budget code of ukraine (2011) provides for that own receipts of budgetary institutions are received in addition to the general budget funds and are included in the special budget fund, which consists of: 1) targeted budget revenues (including own receipts of budgetary institutions); 2) budget expenditures from specific defined revenues of the special budget fund (including own revenues of budgetary institutions); 3) budget crediting (repayment of loans to the budget with the definition of the target and granting of credits from the budget, carried out from specific defined revenues of the special fund of the budget); 4) financing of the special fund of the budget. according to a. h. chubenko, these provisions of the code solve the problem of delineating state budget and extrabudgetary funds and fully comply with the principle of the budget system completeness (chubenko, 2012). third, the concept provided for that ministries, similar to most other central executive bodies, should be financed from the state budget, while a small group of central executive bodies (referred to in the concept as “executive bureaus”), created to implement registration and authorization functions in relation to individuals and legal entities (a paid basis included) may have mixed financing, that is, both from the budget and own income. it was noted that in national legislation, counter-commercialization mechanisms for such executive bodies should be provided for. according to the law of ukraine “on central executive bodies” (pro tsentralni orhany vykonavchoi vlady), the bodies authorized to provide administrative services are “public services.” however, no special provision in the law regulates baltic journal of economic studies 129 vol. 5, no. 1, 2019 the financial and economic foundations of the functioning of public services as central executive bodies. part 1 of article 25 of the law only states that financial and logistical support of the activities of ministries and other central executive bodies shall be from the state budget of ukraine, except in cases determined by law. that is, in each particular case, the legal regulation shall provide for the procedure for the creation, competence, and areas of executive body activities. for example, article 28 of the law of ukraine “on antimonopoly committee of ukraine” (pro antymonopolnyi komitet ukrainy) provides for specificities of financing a central executive body with a special status, the antimonopoly committee of ukraine. financing of the antimonopoly committee of ukraine and its territorial offices comes from the general and special funds of the state budget. the payment, charged to reimburse expenses on the examination of applications for concerted practice permit, the concentration of economic entities, etc., shall be credited to a special account of the special fund of the state budget. these incomes are not subject to withdrawal and are used for their targeted purpose to finance activities of the antimonopoly committee of ukraine and its territorial offices, in particular, for the logistical maintenance, including transport, creation and development of information and analytical base, publication of printed matters of the antimonopoly committee of ukraine, training, retraining, professional development and social and household support of employees of the antimonopoly committee of ukraine and its territorial offices. financing and logistical maintenance of the national police of ukraine, as the central executive body, is carried out from the state budget of ukraine, as well as other sources not prohibited by law (pro natsionalnu politsiiu). for example, the department of police security, as a structural unit of the national police, today provides services for the protection of entities and protection of individuals on a commercial basis. is this approach justified, especially in the context of the adoption of the law of ukraine “on security activity” in 2013 (pro okhoronnu diialnist), according to which, security activities are defined as a type of economic activity of the provision of services for the protection of property and citizens? for example, m. v. zavalnyi criticizes this approach and argues that the provision of security services by the security police on a commercial basis contradicts the main functions and tasks of the national police of ukraine (zavalnyi, 2018). n. a. bulychova considers the financing of state executive bodies, including the bodies of internal affairs, from another perspective. according to her, the increasing need to raise funds of budget institutions’ own revenues, along with the insufficient total financing from the general fund, indicates significant changes in the state of affairs in the national economy, such as unsatisfied demand for social services and other features, and determines the introduction of paid public services. in addition, the inclusion of special funds of state bodies in the budget provides an opportunity to realize both the public interests of the state itself and the interests of society (bulycheva, 2004). 3. conclusions and perspectives for further research the analysis of scientific sources and current legislation regarding financial and economic bases of the functioning of state executive bodies enables to conclude: 1. strengthening and creating new financial and economic bases of the functioning of state executive bodies is one of the areas of administrative reform in ukraine, which was officially originated in 1998, but is being implemented both at the legislative and enforcement levels. despite politicians’ refusal to use the term “administrative reform” discredited by the inconsistent performance of state authorities in implementing the basic provisions of the concept of administrative reform, reforming the state executive bodies on their democratization, optimization, decentralization, and financial and economic basis of functioning remains on the agenda. 2. the financial and economic basis for the functioning of state executive bodies is the subject of research in financial law, therefore, unfortunately, this aspect has not been comprehensively covered by studies of administrative law representatives, focused mainly on the problems of administrative and legal support of the executive bodies, optimization of their activities, improvement of public service, legal provision of relations between executive bodies and other entities, for example, natural and legal persons, local self-government bodies, etc. it is imperative to conduct further joint studies by representatives of administrative and financial law on financial and economic bases of the functioning of state executive bodies, not only in the historical aspect or from a modern perspective, but also with a look into the future. this is because to prevent corruption in executive bodies, the state has to increase gradually the cost of salary payments, implementation of the concept of e-governance, logistical support for executive bodies, while the economic situation in the country does not allow the state to finance fully all areas in this sphere. 3. the formation of new financial and economic bases of the functioning of state executive bodies, provided for in the concept of administrative reform, was not implemented. for now, previously existing forms of financing state executive bodies have only been modelled. baltic journal of economic studies 130 vol. 5, no. 1, 2019 references: the concept of administrative reform in ukraine (the decree of the president of ukraine no. 810/98 of july 22, 1998). retrieved from: http://zakon.rada.gov.ua/laws/show/810/98?find=1&text=%f4%b3%ed%e0%ed#w11 (in ukrainian) analiz vydatkiv derzhavnoho ta mistsevykh biudzhetiv u i pivrichchi 2014-2017 rr. [analysis of expenditures of state and local budgets in the first half of 2014-2017]. retrieved from: https://feao.org.ua/wp-content/uploads/ 2017/09/vud_gos_budg_ii_kv_2014_2017.pdf (in ukrainian) pro mobilizatsiiu dodatkovykh koshtiv na finansuvannia sotsialnykh vyplat [on mobilization of additional funds for the financing of social benefits] (decree of the president of ukraine of june 18, 1998 no. 654/98). retrieved from: http://zakon.rada.gov.ua/laws/show/654/98 (in ukrainian) bekerskaia, d. a. (1973). pravovoe rehulirovanie spetsialnykh (vnebiudzhetnykh) sredstv biudzhetnykh uchrezhdenii [legal regulation of special (extra budgetary) funds of budgetary institutions]. odessa. (in russian) biudzhetnyi kodeks ukrainy [the budget code of ukraine] (no. 2542-iii of june 21, 2001). vidomosti verkhovnoi rady ukrainy, 37-38, 189. (in ukrainian) biudzhetnyi kodeks ukrainy [the budget code of ukraine] (no. 2456-vi of june 21, 2001). vidomosti verkhovnoi rady ukrainy, 50-51, 572. (in ukrainian) chubenko, a. h. (2012). teoretyko-pravovi zasady finansuvannia systemy tsyvilnoho zakhystu [theoretical and legal bases of financing of the system of civil protection]. dissertation of doctor of judicial sciences in specialty 12.00.07. natsionalna akademiia vnutrishnikh sprav. kyiv. (in ukrainian) pro tsentralni orhany vykonavchoi vlady [on central executive bodies] (law of ukraine no. 3166-vi of march 17, 2011). vidomosti verkhovnoi rady ukrainy, 38, 385. (in ukrainian) pro antymonopolnyi komitet ukrainy [on the antimonopoly committee of ukraine] (law of ukraine no. 3659-xii of november 26, 1993). vidomosti verkhovnoi rady ukrainy, 50, art. 472. (in ukrainian) pro natsionalnu politsiiu [on national police] (law of ukraine no. 580-viii of july 2, 2015). vidomosti verkhovnoi rady ukrainy, 40-41, art. 379. (in ukrainian) pro okhoronnu diialnist [on protective activities] (law of ukraine no. 4616-vi of march 22, 2012). vidomosti verkhovnoi rady ukrainy, 2, art. 8. (in ukrainian) zavalnyi, m. v. (2018). administratyvno-pravovi zasady diialnosti ta vzaiemodii derzhavnykh ta nederzhavnykh subiektiv pravo okhorony v ukraini [administrative and legal principles of activity and interaction of public and non-public subjects of the law protection in ukraine]. dissertation abstract of doctor of juridical sciences in specialty 12.00.07. kharkiv national university of internal affairs. kharkiv. (in ukrainian) bulycheva, n. a. (2004). pravovi zasady pozabiudzhetnoi diialnosti orhaniv vnutrishnikh sprav [legal principles of extra budgetary activity of the law-enforcement bodies]. dissertation of phd in specialty 12.00.07. k. (in ukrainian) baltic journal of economic studies 40 vol. 4, no. 5, 2018 corresponding author: 1 research institute of public law, ukraine. e-mail: halunko@i.ua 2 kherson state university, ukraine. e-mail: vera.galunko.00@i.ua 3 research institute of public law, ukraine. e-mail: savyukmaryna@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-5-40-45 foreign experience for financing small and medium business valentyn halunko1, vira halunko2, мaryna savyuk3 abstract. the aim of the article is to study the peculiarities of the financial and credit mechanism of supporting small and medium enterprises in foreign countries with the purpose of identification of key areas for the development of financial and credit support for small and medium enterprises in ukraine. the subject of the study is the foreign experience of financing small and medium-sized businesses. methodology. the research is based on a comparison of financial and credit support of small and medium business in ukraine and in foreign countries. the advantages and disadvantages of different support systems for small and medium-sized enterprises are determined on the basis of an analysis of the specifics of financing small and medium-sized businesses in germany, the usa, the uk, italy, japan, and some other countries. the possibilities and limits of the application of positive foreign experience in this area are determined on the basis of a comparative legal study of certain provisions of ukrainian legislation. the results of the study showed that the peculiarities of the financial and credit mechanism for supporting small and mediumsized businesses in foreign countries, which were studied, are as follows: the predominance of indirect support methods, provision of state financial help only on a competitive, turnaround, and paid basis; effectively functioning system of state guarantee of loans, which were provided to small businesses by commercial banks (guarantee from 60 to 90% of the loan); creation of a network of special banks, which serve small businesses at different levels; strong financial stimulation for small businesses in their innovation activity; stimulating taxation system and special depreciation procedure; creation of conditions for equal access for all entrepreneurs to information and consulting services (especially on taxation, lending, and insurance issues). practical implications. the positive experience of financing small and medium business shows that the foreign practice of functioning of the financial and credit mechanism for supporting small business is not based on the fact that, on preferential terms, small enterprises can receive all the necessary financial and credit resources for their development and support small business at all costs. but this practice is aimed to create a favourable economic and legal climate that allows small businesses not only to survive but also to successfully develop. correlation/originality. a comparative analysis of small and medium business financing systems is the basis for developing the most promising directions for the development of domestic legislation in this field. key words: financial and credit mechanism, small and medium business, venture financing, preferential taxation. jel classification: o23, e52, h21 1. introduction small and medium-sized businesses traditionally play an important role in the functioning of the economy of any country. thus, the share of small and medium-sized businesses in developed economies usually exceeds 90% of the total number of operating companies. small and medium-sized businesses are the drivers for introducing innovations both in production and in the service sector. despite the highest technological flexibility, small and medium-sized businesses are more susceptible to market fluctuations and crises, with no stock strength that is typical of most large enterprises. the sme sector also has an important social function, providing jobs for about 75% of employees. against this background, it can be argued that small and medium-sized enterprises should develop and receive financial support from the state and credit institutions along with large enterprises. small and medium-sized businesses should not be opposed to large enterprises. but the small and medium-sized baltic journal of economic studies 41 vol. 4, no. 5, 2018 business in difficult times experienced by most large enterprises can be a reliable source of budget revenues and a means of reducing social tension by creating jobs. in developed countries, the share of small and medium-sized enterprises loans in gdp is 13%, while in developing countries only 3% (synoverskyi, 2016). since ukraine can be considered a country with a developing economy, it will be appropriate to compare its indicators of lending to the sme sector with indicators of countries close to ukraine in terms of economic development, such as bolivia, paraguay, uruguay, peru, colombia, etc. (cosme). as stated in the national program for the promotion of small business development in ukraine, the situation with the financing of small business requires the urgent construction of a non-bank financial and credit sector aimed exclusively at small businesses and selfemployment. consequently, the financial and lending support of small business aimed at should be aimed at: formation of a network of regional funds for supporting entrepreneurship and credit and guarantee institutions; development and introduction of effective credit and guarantee mechanisms of micro-crediting of small business entities; creation and support of financial institutions working for the development of small business (zakon ukrainy «pro natsionalnu prohramu spryiannia rozvytku maloho pidpryiemnytstva v ukraini»). this should also be facilitated by the strategy for the development of small and medium-sized enterprise in ukraine, which provides for the following steps in this direction: expansion of lending to small and medium-sized businesses by commercial banks; creation of conditions for the security of deposits; use of loan guarantee schemes; activation of the use of bills; activation of lending to non-bank financial institutions; reduction of informational asymmetry by conducting a register of credit histories; reduction of the financing gap for small and medium enterprises by providing leasing services; reduction of financing deficit of small and medium enterprises by providing factoring services; use of opportunities for venture capital, attracting funds from informal investors (business angels), voluntary pooling of resources for project financing (crowdfunding); expansion of sources of financing of subjects of innovative small and medium enterprises; export financing, insurance, guarantees; introduction of international standards of financial reporting for small and medium enterprises (rozporiadzhennia kabinetu ministriv ukrainy «pro skhvalennia stratehii rozvytku maloho i serednoho pidpryiemnytstva v ukraini na period do 2020 roku»). for the successful introduction of optimal directions of financial and credit support of small and medium enterprises in ukraine, a special attention is paid to the study of the features of the financial and credit mechanism in foreign countries, which determines the relevance of our research. problems of financing small and medium enterprises in the conditions of market transformation of the economy, determining its role in the economic development of the country were the subject of research by such scholars as a. basiluk, m. butko, z. varnalii, l. voronin, v. heyets, z. gerasimchuk, m. kozoriz, v. kredisov, a. maslak, a. melnyk, i. myssuk, g. reverchuk, a. filippchenko, a. chukhno, t. chernyak, and others. the purpose of the paper is to study the features of the financial and credit mechanism for supporting small and medium enterprises in foreign countries in order to identify key areas for the development of financial and credit support for small and medium businesses in ukraine. 2. presentation of the main material unlike ukraine, international financial institutions are of great importance in lending to small and mediumsized businesses in europe and in the world. so, the eu has a special program that provides for the distribution of financial assistance for small business lending through the european bank for reconstruction and development, other european financial institutions. in europe, the european charter for small enterprises adopted in 2000 is in force. the countries that joined this document consider small and mediumsized businesses as a key element of innovation and job creation. countries are also committed to focusing on the following areas: education and training; creation of concessional terms for a quick start of business; ensuring access of small and medium-sized businesses to up-to-date information and technologies; creation of an adequate legal and tax base that promotes the development of small and medium-sized businesses (pidtrymka rozrobky ta vprovadzhennia yevropeiskoi khartii dlia malykh pidpryiemstv v ukraini). the financing problem can be solved with the help of external sources, including through lending. however, there are also problems that hinder the development of lending to small and medium businesses in ukraine. to such problems include: high risk of non-repayment of loans by entrepreneurs; “shadow” activity of subjects of entrepreneurship; the high cost of loans; tight conditions for obtaining loans; insufficient economic and legal literacy of entrepreneurs; the short term of use of a loan; baltic journal of economic studies 42 vol. 4, no. 5, 2018 the possibility of increasing interest in using a loan in unstable economic conditions, etc.; lack of start-up capital from entrepreneurs; lack of quality business plans; lack of credit history for start-up entrepreneurs (startups); the inconsistency of the financial statements of the entrepreneurs who worked under the simplified tax system, requirements of banks (in this case, it is possible to provide a loan as an individual, on bail); insolvency of some entrepreneurs; legal uncertainty in the microfinance market (lomachynska, 2012). one of the organizations that provide centralized financial support for small businesses in the united states is the small business administration, which provides loans for the purchase of land, buildings, equipment, working capital, refinancing of existing debts and guarantees most of all long-term loans provided to small businesses programs in industry, wholesale and retail trade, services, construction, agriculture. in particular, it guarantees up to 90% of loans issued in excess of 155 thousand dollars and up to 85%, if the loan amount is not less than 750 thousand dollars. the term of a loan is usually 5-7 years if the loan is issued for working capital and up to 25 years if the loan is granted for the purchase of equipment or building. in order to create more accessible conditions, small businesses receive a loan of up to $25,000. small business administration is implementing microcredit programs. the forms of financial support for small and mediumsized businesses in the united states include the following: measures in the field of taxation, which include the gradual reduction of tax rates and the reduction of tax progressiveness with a narrow tax base and a wide range of tax exemptions to ensure the inflow of investments; participation in the capital of investment companies and guaranteeing securities issued by them; venture financing. small business development is facilitated by the innovative development program for small business, which involves allocating funds from the budget for research and development work to pay for contracts with small businesses. this program accounts for about 60% of the amount allocated by the state in the form of assistance to small businesses (iusupova, 2001). for small-business financial support, small business investment companies take the lead. small business investment companies provide capital in the form of ordinary shares and continue unsecured loans to small firms that meet the investment criteria of these investment companies. much attention is paid to the development of venture financing, as well as the development of franchising and leasing. the instrument of financial and credit support of small enterprises is microcredit, which is used for solving such tasks as replenishment of commodity stocks or stocks of raw materials, purchase of commercial and industrial equipment, repair of premises, purchase of real estate and vehicles. today, in foreign countries, small banks are involved in the financing of small businesses, which have significant advantages over large ones, because local conditions and local business are better known. small businesses prefer to take loans directly from them, because it is much more convenient, and the personal role and the status of the owner of a small business in the local community play an important role. the main priorities for supporting small and medium-sized businesses in the uk are helping startup businesses, facilitating access to financial resources, improving enterprise management practices, developing the labour market, improving production processes, supporting innovative developments to create new products and services, and also the development of export opportunities for the small business sector. the most important measures that ensure the achievement of the priority goals of small and mediumsized businesses include the following. 1. assistance to start-up companies that provide free support at difficult stages of survival and formation in the form of joint consultations and guidelines that facilitate successful start-ups and the beginning of their activities. 2. facilitating access to financial resources. a special place is the innovative financing program, which focuses on providing financial support to small and medium enterprises that are involved in the development and commercialization of new innovative ideas that promote production growth, environmental protection, reducing carbohydrate consumption, saving energy and improving the competitiveness of the country, and also meet regional or national priorities. assistance is provided to individual enterprises that are unable to meet the costs associated with the development of new products, services and technologies for: execution of research and development work, including protection of intellectual property rights, concept testing, marketing research, capital expenditures associated with the production of a prototype and a demonstration layout; involvement of partners, consultants, and patent attorneys who took part in research and development work; production of demonstration models of innovative developments with the use of new technologies; reduction of administrative costs when large companies implement innovative projects that bring great economic benefits and provide environmental protection. 3. measures to improve the methods of management of small and medium-sized businesses, the search for specialists and the development of the labour market baltic journal of economic studies 43 vol. 4, no. 5, 2018 are provided by the state program “professional development of employees”. since april 2009, the system of state financial compensation for the costs of small and medium enterprises and individual entrepreneurs for training and advanced training has entered into force. this involves compensating entrepreneurs for the cost of mediation services, recruitment agencies, employers, and potential entrepreneurs who need a flow of highly skilled workers. these measures should provide the uk with a leading position in terms of skills levels in all sectors of the economy by 2020. 4. improvement of production processes and an increase in their efficiency is one of the main tasks of the government in order to ensure further sustainable economic development of the country. in this regard, the government has developed a number of special programs for small and medium-sized businesses that provide grants and loans to small enterprises. 5. in order to develop and create new products and services that promote the competitiveness of small businesses and the national economy as a whole, the government has developed a number of programs to provide financial assistance for the development of cooperation in the innovation field. close cooperation in the implementation of research and development work between different enterprises and research institutes is the basis for the successful development of new technologies and products with their subsequent successful commercialization (lebedeva, 2001). the policy of supporting small business in germany is based on the following principles: the state does not assume the initiative of realization of concrete economic projects, as this is the task of entrepreneurs themselves; the state encourages creative search, willingness to take risks and adaptability; protection against monopolistic pressure; indirect financial support for small businesses. financial support is provided at all stages of the development of small business, has a clear target and targeted character, which is determined by macroeconomic and social priorities, as well as combining different sources and measures of support. investment support of small enterprises is carried out, first of all, to meet the needs of enterprises in information and technological resources. measures in this direction include economic and technical advice (financed from the state budget) both for start-ups and existing small enterprises, as well as measures for training and professional development of workers and managers of small enterprises. providing capital to enterprises and strengthening its economic power involves support of investments in the authorized capital (formation of initial capital at the creation of an enterprise), support of longterm investments in small business (in rationalization, modernization, expansion, transformation of production). credit support for newly created small businesses is carried out through the german compensation bank, which provides credit resources for investment purposes: for the creation or redemption of the enterprise (and related tasks during the first three years of the existence of a new firm), the redemption of an investment unit giving control over activity of the enterprise, formation of primary stocks, office equipment, etc. with the help of regional programs, lending to small enterprises focused on the production of goods and services of local importance is carried out. the development of credit-co-operative support for small enterprises in germany has been successfully developed. the financial basis of credit cooperatives is the own funds of small enterprises and savings of the population. support for small businesses through the mechanism of credit cooperation allows mobilizing additional funds that were not involved in economic activity (bryumer, 2001). as we see, the foreign practice of functioning of the financial and credit mechanism of supporting small business is not based on the fact that, under preferential conditions, small enterprises provide the necessary financial and credit resources for their development and support small business at any cost, but to create a favourable economic and legal climate that allows small businesses not only to survive but also to develop successfully. in world practice, the resources of various funds and grant funding organizations are a powerful source for the start-up and development of small and medium-sized businesses. an important condition is the fulfilment of the requirements of these institutions regarding the target direction and the use of funds received. accordingly, small and medium-sized businesses should work on projects that are profitable funds and to share or give the results of developments. in italy, concessional long-term loans are practiced, for example, at 3-5% per annum at a market interest rate of about 15%. enterprises can get an additional benefit of 20-30% of compensation for loan value when longterm loan repayment (kuznietsova, 2012). in the field of financial support, the example of the czech republic, which provides for the possibility of using for entrepreneurship several types of state subsidies, is indicative. first of all, these are direct grants and interest-free loans, as well as loans from commercial banks and tax incentives. financial assistance in the form of tax breaks is very limited and is provided only to specialized industries, such as those using unconventional energy resources. there are 4 small business promotion centres in japan: central government, local authorities, big business, and independent small business associations. small business support is provided at all stages of enterprise development: registration, formation, growth. to do this, use preferential loans and loans, various tax benefits, technical and advisory assistance, training, etc. baltic journal of economic studies 44 vol. 4, no. 5, 2018 the peculiarity of the japanese experience of financial support for small enterprises is the provision of irreversible financial assistance (subsidies) to scientific and technical programs (erohin, 2008). as the financial support of small businesses, the system of tax privileges is widely used: tax rates on small enterprises’ incomes make up about 27%, and for large enterprises – at least 37.3%. as in the united states, venture funds are operating in japan, with venture capital being directed to high-tech companies: microprocessors, software development, biotechnology, etc. by studying the foreign experience of supporting small business, china has formed its own system. the share of small enterprises in china’s gdp is about 60%. the chinese government is actively supporting the development of small businesses in accordance with the principle of “seizing for the big, supporting the small.” china’s peculiarity is the provision of differentiated tax privileges depending on the category of enterprises. in china, as in other foreign countries, there are state and commercial banks operating for financially-lending support of small enterprises with significant resources, minimizing and distributing risks through guaranteeing organizations. china also manages legal support for small businesses under the law “on stimulating the development of small and medium sized enterprises in china”. the main priority of the state in this area is the creation of favourable conditions for the activities of small enterprises if they meet the three criteria – meet public demand, increase employment, ensure the implementation of state sectoral policies (arustamov, 2012). the features of the financial and credit mechanism for supporting small and medium-sized businesses in the foreign countries considered are as follows: the predominance of indirect methods of support; providing state financial aid only on a competitive, turnaround, and paid basis; an effectively functioning system of a state guarantee of loans granted by commercial banks to small enterprises (guarantee from 60 to 90% of the loan); creation of a network of special banks serving small businesses at different levels; increased financial incentives for innovation of small businesses; incentive system of taxation and special depreciation procedure; creation of conditions for equal access for all entrepreneurs to information and consulting services (especially on taxation, lending, and insurance). 3. conclusions the analysis allows us to highlight the main features of the mechanism of support for small and medium enterprises. however, it should be noted that direct transfer to the domestic economy of the american, german or another foreign model of financial and credit support of small business is not entirely appropriate. the study of foreign experience allows us to identify the general features of financial and lending support mechanisms that should be taken into account in domestic practice, in particular: 1. availability of special legal acts defining the objectives of the state policy and regulating the entire complex of support issues for small and medium-sized enterprises, including the establishment of tasks and functions of management bodies and mechanisms for their implementation, as well as a combination of legislative and economic measures aimed at creating common favourable conditions for the development of entrepreneurial activity. 2. allocation of appropriations for the implementation of programs of support of small enterprises from the budget; use of stimulating tax instruments; creation of specialized financial, credit, insurance and investment institutes; application of various forms and methods of financing; promotion of loans and investments in the sphere of small business through state guarantees, insurance. 3. availability of a developed system of specialized institutions that ensure coordinated implementation of the entire complex of tasks in the field of entrepreneurship support, as well as the interaction of state authorities of various levels with business associations (unions, small business associations, chambers of commerce and industry, etc.) for the purpose of accounting their positions in making decisions. references: synoverskyi, r . l. (2016). kredytuvannia maloho ta serednoho biznesu: problemy ta perspektyvy [lending to small and medium business: problems and prospects]. ekonomika ta derzhava, 9, 72-76. cosme. europe's programme for small and medium-sized enterprises. retrieved from: http://ec.europa.eu/ growth/smes/cosme/indexen.htm zakon ukrainy «pro natsionalnu prohramu spryiannia rozvytku maloho pidpryiemnytstva v ukraini» vid 21.12.2000 r. [law of ukraine "on the national program for promotion of small business development in ukraine" dated 21.12.2000]. retrieved from: http://zakon.rada.gov.ua/laws/show/2157-14 rozporiadzhennia kabinetu ministriv ukrainy «pro skhvalennia stratehii rozvytku maloho i serednoho pidpryiemnytstva v ukraini na period do 2020 roku» vid 24 travnia 2017 r. № 504-r. 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(2001). podderzhka maloho predprynymatelstva v ssha [small business support in the usa]. myrovaia ekonomyka y mezhdunarodnuh otnoshenyiah, 5, 87-90. lebedeva, s. yu. (2001). regulirovanie i podderzhka malogo i srednego predprinimatelstva v es [regulation and support of small and medium enterprises in the eu]. menedzhment v rossii i za rubezhom, № 1, 90-96. bryumer, k. (2001). sistema podderzhki malogo predprinimatelstva v germanii [small business support system in germany]. dengi i kredit, № 7, 13-20. kuznietsova, l. v. (2012). vplyv bankivskoi systemy ukrainy na rozvytok maloho ta serednoho biznesu [inflating banking system of ukraine on small and medium business development]. visnyk sotsialno-ekonomichnykh doslidzhen, 2(45), 249-254. erohin, v. l. (2008). mezhdunarodnoe predprinimatelstvo: ucheb. posobie [international entrepreneurship: study guide]. moskva: finansyi i statistika. arustamov, e. a. (2012). organizatsiya predprinimatelskoy deyatelnosti: ucheb. posobie [organisation of entrepreneurship: study guide]. moskva: dashkov i k. baltic journal of economic studies 254 vol. 4, no. 3, 2018 corresponding author: 1 kharkiv national university of radio electronics. 2 kharkiv national university of internal affairs. 3 kharkiv research institute of forensic examinations. doi: https://doi.org/10.30525/2256-0742/2018-4-3-254-258 legal regulation issues of cryptocurrency circulation in ukraine vasyl rossikhin1 kharkiv national university of radio electronics, ukraine mykhailo burdin2 kharkiv national university of internal affairs, ukraine oleg mykhalskyi3 kharkiv research institute of forensic examinations, ukraine abstract. the aim of the article is a comparative legal study of laws and regulations that determine the legal principles for the regulation of cryptocurrency circulation in some foreign countries and in ukraine and, on this basis, a definition of ways to improve domestic legislation in this sphere. the subject of the study is an interrogation of legal regulation issues of cryptocurrency circulation in ukraine. methodology. the study is based on a legal comparison of the regulation of cryptocurrency circulation in ukraine and in foreign countries. based on a comparative legal study of certain provisions of ukrainian legislation, the possibilities and limits of implementation of positive foreign experience in this sphere are determined. the results of the study revealed that to implement foreign experience for the legal regulation of cryptocurrency circulation, it is necessary to postpone the final transition to a floating rate regime by reinforcing state interference. moreover, it is necessary to strengthen currency control not only for currency transactions with cryptocurrency but also for the activities of entities that determine the state policy on cryptocurrency regulation, as well as operate respectively using instruments provided for by the regulations of the current legislation. practical implications. the positive experience of the formation of the foreign exchange market in other countries demonstrates that the gradual transition to cryptocurrency circulation is the beginning of the natural market rate, the balance of payments and gradual liberation of the national economy from the pressure of administrative and corruption restrictions. relevance/originality. the legal analysis of the regulation of cryptocurrency circulation in ukraine and the definition of problems is the basis for developing the most promising directions for the development of domestic legislation in this sphere. key words: legal regulation, currency, cryptocurrency circulation. jel classification: g28, f31 1. problem statement the scientific and ideological basis of financial law application is a conceptual component of the financial and legal policy of the state and reflects the content and main forms of law-enforcement activity considering the specificities of financial and legal relations. m.d. hnatiuk emphasizes that implementation of the legal policy of the state is impossible without law enforcement. outside of law enforcement, the national policy on legal regulation could not achieve any state goal, which would remain only an intention for implementation (hnatiuk, 2007). considering the special role of the jurisdictional bodies in financial (tax) law enforcement, as well as the public nature of financial and legal relations, it should be noted that the latter have a close connection with the financial-legal (tax) policy of the state, its fiscal interests. taking into account the specificities of the current law system in the structure of legal policy, individual directions can be distinguished, such as constitutional, administrative, criminal, financial policy, etc. each of them has its special features, for example, the activities of special subjects, tasks, and objects of political and legal influence, specific measures of such influence, etc. 2. literature review a significant contribution to the study of the legal regulation of cryptocurrency circulation in ukraine baltic journal of economic studies 255 vol. 4, no. 3, 2018 was made by foreign and domestic scientists, such as e.m.  ashmaryna, o.l. valevskyi, m.d. hnatiuk, p.m.  godme, s.p. zakharchenkov, a.i. zemlyn, m.v. karaseva, a.n. kozyryn, v.m. oparin, v.m. fokin. the aim of the article is a comparative legal study of laws and regulations that determine the legal principles for the regulation of cryptocurrency circulation in some foreign countries and in ukraine and, on this basis, a definition of ways to improve domestic legislation in this sphere. 3. the main material it is common knowledge that financial law depends on policy and its significant manifestations. m.v. karaseva argues that financial law, like any other branch of law, is a political phenomenon. furthermore, she specifies that policy is obligatory for the formation of any regulations. law is the most effective guide to the policy. she argues that there are no apolitical branches of law from the perspective of forming regulations and implementing present policies. by nature, financial policy is a type of state policy (karaseva, 2002). o.m. ashmarina states that financial policy is an independent activity of the state in financial relations and differentiates a financial strategy (development of the main directions of the use of finance, forms and types of financial relations) and financial tactics (solving specific economic tasks of a certain stage of state development by applying the necessary means and forms of financial relations) (ashmarina, 2011). o. valevskyi notes that state policy is problem solutions by state authorities that contribute most effectively to the realization of the interests of society. he interprets state policy as an activity aimed at solving problems of social development. according to o. valevskyi, the main thing in policy implementation is the definition of the essence of the problem to be solved by the intervention of state authorities (valevskyi, 2001). therefore, social development is a key factor in forming a state policy. analysing the impact of policy on finance, p.m. godme states that this impact can be considered from two perspectives. on the one hand, the relationship between political forces and the political structure of a country largely determines the financial policy of this country. on the other hand, political events, especially a crisis, also affect public finances and set up a financial mechanism going (godme, 1978). according to v.m.  fokin, at the macroeconomic level, fiscal policy, which includes tax regulation, serves to manage demand and stabilize prices and industrial production (fokin, 2004). according to o. kozyrin, tax policy is a part of the general financial policy and is the subject of the study of economic science. the connection of tax policy with law manifests itself, first of all, in two directions: a) by tax policy the main objectives of taxation are implemented, therefore, its study explains better the subject of regulation by tax law; b) the tax policy provides for tax reforms that are executed by corresponding financial laws (kozyrin, 1993). o.i. zemlin argues that tax policy is the main instrument of state regulation of the economy, because of a financial influence on entrepreneurship. such an effect connotes the following objectives of the state: sustainable economic growth; the stability of prices for basic goods and services; full employment of the able-bodied population, the minimum level of incomes, etc. (zemlin, 2005). conceptual provisions, guidelines, forms, methods of enforcement are the basis of financial and legal policies. s. p. zakharchenkov states that public finance policy is an important and integral part of the economic policy of the state revealed in the laws regulating financial relations. specific laws reflect the abstract idea of how to distribute and redistribute financial resources to achieve the goal (zakharchenkov, 2008). the financial and legal policy includes the budget policy implementation in the state; moreover, some provisions are in monetary policy guidelines for the relevant year. they are official documents, approved by the resolutions of the verkhovna rada of ukraine and reflected in the law of ukraine “on the state budget of ukraine” for the relevant year. in addition, the financial and legal policy is implemented in tax policy consistent with the provisions of the verkhovna rada of ukraine “on tax policy in ukraine and measures to improve tax legislation” (verkhovna rada of ukraine, 1999), monetary policy (monetary policy guidelines for the current year), etc. according to economist v. oparin, financial policy is a complex of actions and measures carried out by the state within the limits of its functions and powers in financial activity of economic entities and financial institutions, citizens and the state to solve certain problems and achieve the goals set. in his opinion, the financial policy of the state includes a monetary (a set of actions and measures in the sphere of the money market) and fiscal policy. the latter is divided into tax (the state’s activities in the field of taxation, provision of types and the ratio of taxes, identification of payers and approaches to them (unified or differentiated), tax rate establishment, provision of tax benefits, etc.) and budget (formation of the state budget, its balancing, distribution of budget funds, etc.) (oparin, 2002). the existence and specificity of financial and legal policy, provided for in the rules of financial law and implemented in law enforcement actions, are caused by: the need for effective implementation of the will of the legislator considering actual problems of implementation of their tasks and functions by the state and local self-government bodies; interests of the state in rational development of applying financial law. financial and legal policy, as well as the entire state policy, is characterized by an administrative influence on social relations. its formation is the prerogative of the subjects of state power (the verkhovna rada of ukraine, the cabinet of ministers of ukraine, etc.). baltic journal of economic studies 256 vol. 4, no. 3, 2018 the quality of financial and legal policy implementation depends on the current system of tax administration provided for by the tax code of ukraine. to be precise, strong organizational structures, procedures, systems of relations should be formed so that payers of taxes and fees could execute their rights and obligations efficiently and competently. then it is possible to increase the effectiveness of tax policy. therefore, the content of financial and legal policy in the application of the rules of law should be considered in the following areas. first, the leading principles of financial and legal policy, implemented in law enforcement, are provided by the highest state authorities and must consider the situation and prospects of socio-economic, political development. it is well-known that changes in tax and budget laws are often the result of political debate and mass protests (for example, public demonstrations at the independence square regarding the procedure for tax control after the adoption of the tax code of ukraine). professor s.v.  kurylev formulates the dependence of law enforcement on the socio-political situation in the state from the perspective that enforcement, although determined by various factors, largely depends on the content of regulations. this study supports his position. moreover, the scientist expresses correctly and precisely, almost in aphoristic form, that economy defines the policy, policy defines legal consciousness, legal consciousness defines law, the content of law defines the activity of law enforcement bodies (kurylev, 1965). it should be noted that the need for legal enforcement is caused by the very nature of the state. law enforcement helps to implement the rules of law into life, set them going, and apply them to different life cases. the legal framework of financial and legal policy, implemented in law enforcement activities, is provided for, first of all, in the constitution of ukraine and laws adopted on its basis. the scientific and doctrinal component of financial policy, implemented in law enforcement activities, includes the scientific substantiation and legislative provision of the bases of applying financial law regulations, functioning in the system of measures for ensuring the interests of the state, defining legal grounds, forms of law enforcement activities considering the features of social relations, the system of subjects with operative and supervisory (regulatory) and jurisdictional authorities, their tasks, competencies, principles of interaction. financial and legal policy, provided for in regulations and implemented in lawenforcement activities, is the most important link between the practice of applying the financial law and law-making activity of the state ensuring their unity and interaction in legal regulation. it is important that, at the present stage, the level of qualification of potential subjects of law enforcement is problematic. it is well known that the ultimate result of financial and legal influence depends on the quality and correctness of enforcement. a law enforcer must have a high level of managerial culture, necessary and sufficient knowledge in law and other spheres of scientific knowledge. in applying the financial law, conflicts, inaccuracies, and difficulties arise often, therefore, law enforcers (other subjects) are involved in the interpretation of the rules of financial law, consequently, the authorized agents make corresponding decisions (law enforcement acts, court decisions, etc.). that is why, on the one hand, the priority tasks of financial and legal policy in this direction should be the principle of professionalism at all levels of the state apparatus, engaged in power realization of financial and legal regulations, increase of social status of subjects of law enforcement, socio-economic and political and legal guarantees of their activities. on the other hand, one of the areas of financial and legal policy should be an increase of the competence and responsibility of individuals in the legislative process concerning the requirements of law and order of law, the introduction of an effective system of operational consultations of state bodies, etc. nowadays, the cryptocurrency market in ukraine is in the so-called “grey zone,” because no regulation provides for the rules for its functioning, rights and obligations of participants in cryptocurrency transactions and tax rates. in 2014, the national bank of ukraine identified bitcoin as a money surrogate that had no real value and could not be used by individuals or legal entities as a means of payment. then there was a silence for three years. nevertheless, in 2017, the authorities had to return to this issue. after a series of publications in the mass media and an expanded discussion, the national bank of ukraine had to explain what kind of legal status bitcoin had in our country. however, this explanation was reduced to the acknowledgement of their uncertainty on the issue and obligation to determine it in the near future. the national bank of ukraine stated that at the moment bitcoin did not have a certain legal status in ukraine. the definition of such a status is complicated by the lack of a consolidated approach to the classification of bitcoin and the regulation of agreements with it in the world. two draft laws are being considered by the verkhovna rada of ukraine. the first and the main one is no. 7183 as of october 06, 2017, according to which the cryptocurrency is recognized as a program code (a set of symbols, numbers, and letters) that is the object of property rights, which can act as a means of exchange, the information about which is entered and stored in the blockchain system as the accounting units of the current block system in the form of data (program code). if this draft law is adopted, an individual engaged in “mining” will have to pay 18% tax on personal income and 1.5% of military gathering to the state. however, this document does not specify from what sum to calculate tax and at what rate to determine the tax base, because the quotes of cryptocurrency change every second. using common regulations of private property the subject of cryptocurrency transactions can carry out baltic journal of economic studies 257 vol. 4, no. 3, 2018 transactions for the exchange of one cryptocurrency for another, exchange for electronic money, currency values, securities, services and goods. it is also proposed to allow cryptocurrency exchange in ukraine. another draft law no. 7183-1 as of october 10, 2017, provides for the definition of cryptocurrency as a decentralized digital value measurement that can be denominated in numerical form and functions as a means of exchange, a store of value or a unit of account, which is based on mathematical calculations being their result and has cryptographic protection of accounting. the authors of the draft law no. 7183-1 on october 10, 2017, offer to consider cryptocurrency a financial asset for legal regulation. an alternative approach to regulation of cryptocurrency transactions is to recognize “mining” (creating cryptocurrency) as a business operation category, that is, an activity classified by nace-2010 class 63.11, namely, data processing, information placement on websites and related activities. the above will enable individuals involved in mining to engage legally in economic activity by the main activity class 63.11 qweal-2010, and the state – to receive income in the form of taxes from the operations of creation, sale, and purchase of cryptocurrency. in addition, according to the current tax legislation, when establishing a particular tax, it is mandatory to determine such elements as: taxpayers; the object of taxation; tax base; tax rate; tax calculation procedure; tax period; tax payment term and procedure; the term and procedure for reporting on the calculation and payment of tax. if for any reason, this or that item is not set, the tax is considered not to be set. therefore, first, the state must determine what cryptocurrency, in general, and bitcoin, in particular, are in ukraine, and second, indicate how to pay taxes on cryptocurrency transactions and necessarily define the elements of tax that will then be collected in the state. negative averment on cryptocurrency by financial regulators means that in case of virtual asset impairment, the state has no mechanisms for investors to compensate cash losses, as it happens with bank deposits or other financial instruments. according to the authorities, the risks of using cryptocurrency in ukraine may also be related to tax legislation and the lack of proper judicial protection of participant interests in cryptocurrency transactions the unregulated status of cryptocurrencies in ukraine does not allow legal entities to participate in transactions with them. accounting and tax compliance are impossible for such assets. for any accountant, this operation is extremely risky, because the lack of a normative definition of “cryptocurrency” leads to uncertainty of correct entering corresponding transactions into financial statements, and consequently, to errors in taxation and determination of tax liabilities. in the future, it may cause tax deductions and problems for the entity. 4. conclusions the absence of legal regulation on cryptocurrency complicates protecting the rights of cryptocurrency holders in the courts. according to some court decisions, bitcoin has not been recognized as goods or property rights to the entries in the open database of blockchain and determined as an object that cannot be subject to legal protection at all and cannot be claimed by enforcement. therefore, under current economic conditions in ukraine, it is urgent to legalize the circulation of cryptocurrencies in the domestic market and to create a legal framework for state regulation of economic relations on their basis, as well as entrepreneurial activity. references: hnatiuk m.d. (2007). pravozastosuvannia ta yoho mistse v protsesi realizatsii prava [law enforcement and its place in law realization] (dissertation of phd in specialty 12.00.01.), 211 p. (in ukrainian) karaseva m.v. (ed.) (2002). finansovoe pravo rossiiskoi federatsii: uchebnyk [financial law of the russian federation: a teaching manual]. m.: yurist, 576 p. (in russian) ashmarina e.m. (2011). nekotorye osobennosti predmeta, metoda pravovogo regulirovaniia y otdelnykh norm sovremennogo finansovogo prava [some features of the subject, the method of legal regulation and individual norms of modern financial law]. gosudarstvo i pravo [state and law], 3, 16-23. (in russian) valevskyi o.l. (2001). derzhavna polityka v ukraini: metodolohiia analizu, stratehiia, mekhanizmy vprovadzhennia [state policy in ukraine: methodology of analysis, strategy, implementation mechanisms] (monography). k.: nisr , 242 p. (in ukrainian) godme p.m. (1978). finansovoe pravo [financial law]. m.: progress, 428 p. (in russian) fokin v.m. (2004). nalogovoe regulirovanie: ucheb. posobie [tax regulation: a teaching manual]. s.g. pepeliaev (ed.). moscow: statut, 297 p. (in russian) kozyrin a.n. (1993). nalogovoe pravo zarubezhnykh stran: voprosy teorii y praktiki [tax law of foreign countries: issues of theory and practice]. m.: manuscript, 112 p. (in russian) baltic journal of economic studies 258 vol. 4, no. 3, 2018 zemlin a.i. (2005). nalogovoe pravo: uchebnik [tax law: a teaching manual]. m.: forum: infra-m, 304 p. (in russian) zakharchenkov s.p. (2008). finansy: ua [finances: ua] (2nd ed.). kh.: factor, 92 p. (in ukrainian) verkhovna rada of ukraine (1999). pro podatkovu polityku v ukraini ta zakhody shchodo udoskonalennia podatkovoho zakonodavstva [on tax policy in ukraine and measures to improve tax legislation] (resolution no. 641-хiv of may 12, 1999). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine], 27, 222. (in ukrainian) oparin v.m. (2002). finansy: (zagalna teoriia): navch. posib. [finances: (general theory): a teaching manual] (2nd ed.). k.: kneu, 240 p. (in ukrainian) kurylev s.v. (1965). sovershenstvovanie zakonodatelstva kak uslovie strogogo sobliudeniia printsipa sotsialisticheskoi zakonnosti [improving legislation as a condition for strict compliance with the principle of socialist legality]. izvestiia vysshikh uchebnykh zavedenii [bulletin of higher educational institutions], 4, 18. l.: publishing house of leningrad university. pravovedenie [ jurisprudence]. (in russian) baltic journal of economic studies 266 vol. 4, no. 5, 2018 corresponding author: 1 national academy of the security service of ukraine, ukraine. е-mail: ap0091994@gmail.com 2 national academy of the security service of ukraine, ukraine. е-mail: ap0091994@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-266-270 crime in foreign economic sphere in the post-soviet states yevhen hrechyn1, vasyl burba2 abstract. the purpose of the article is to reveal the content of organized crime in foreign economic sphere and the factors that determine the state and trends of its development. it is revealed the influence of corruption as a form of organized crime on foreign economic activity, which is illustrated by examples of illegal actions in this area. it is concluded that organized crime in foreign economic sphere essentially goes beyond the limits of the customs regime violations, evasion of customs duties and other payments and threatens the functioning of the whole sectors of post-soviet countries’ economies. methodology. the study is based on the economic and criminological approaches developed by j. knorih (knorich, 2004), as well as s. zedeg and n. gustavson (susanna thedeg, 2009; susanna thede, 2012). it should also be noted the studies conducted by experts from international organizations such as the world bank (s. j. hellman, 2000), transparency international (transparency and corruption, 2016) and the organization for economic cooperation and development (quantitative evidence on transparency in regional trade agreements, 2013). the consideration of issues related to the criminalization of foreign economic relations is based on the methods described in the works of j. cassar (cassara, 2015), k. nordstrom (nordstrom, 2007), m. naim (naim, 2006) and p. shadri (chaudhry, 2007), as well as in the author's works on countering corruption and organized crime (hrechyn, 2015). result of the study reveals the essence of crime in the foreign economic sphere as a form of corruption that poses threat to the economic security in post-soviet states. this will allow us to assess the scale of the problem and evaluate appropriate responses. key words: foreign economic sphere, corruption, legalization of illicit gains, organized crime. jel classification: a14, f20, h26, k42 1. introduction investigation of offenses in the sphere of foreign economic activity mainly focuses on the issues of the impact of corruption on customs authorities activities and the certain offences committing such as excisable goods smuggling, evasion of customs duties and payments. in our study, we aim to disclose the essence of this criminal activity in the context of economic security ensuring in former soviet republics. our developments point to the need to reveal the multilevel effects of corruption and foreign economic relations and, through it, on the economy of the state as a whole. studies conducted so far do not reveal this problem in its entirety. moreover, the conclusions drawn from the results of these studies give the impression that the decriminalization of foreign economic sphere is possible through the mere reduction of corruption in customs authorities, which, in our opinion, does not correspond to the reality and does not take into account the multilevel and multidisciplinary nature of this problem. international trade covers a wide range of relations, including the receipt and processing of raw materials, production of goods, various types of financial transactions that take place outside the customs border, affect the functioning of the economy as a whole and are vulnerable to corruption. thus, the definition of customs authorities corruption level will not provide a complete picture of the illegal activities in this area, and the reduction of corruption risks in the customs authorities will have only a limited result for foreign economic relations decriminalization. in the given study corruption is considered wider than the traditional approach that interprets it as a form of office abuse. we consider this phenomenon as a form of organized crime that covers a wide range of relations in the field of economy, politics and life of society as a whole, is connected with the criminality intended to influence the economy with the use of administrative power capabilities. we are talking about the integration of criminality, corrupt representatives of government and private sector, the aim of which is the use of illegal methods for personal enrichment. baltic journal of economic studies 267 vol. 4, no. 5, 2018 2. impact of corruption on in the foreign trade in post-soviet space, organized crime is an alliance of the state, market and criminality, i.e. the political, business and criminal entity (kupatadze, 2012). there is state seizure by organized crime, where the main players are oligarchs (iwasaki, 2007). in countries where such seizure is carried out by a political or business elite, it is formed the so-called "entrenched economy ", in which officials and politicians privately sell public goods and opportunities to receive rent for individual firms (hellman, 2000). in some cases, the relationships between criminality and officials are so tight that we can talk about "kleptocratic interdependence", which is a set of ties that operate at the national and international levels, motivated by material benefits and power. in itself, such relationships are not something new, but in the context of globalization they begin to influence a wide range of security issues in the field of politics and economics (greenhill). therefore, anti-corruption measures here should be aimed primarily at the destruction of systemic links between criminality and government, rather than at identifying and prosecuting certain corrupt officers. the spread of corruption in the foreign economic sphere forms a peculiar status of the country, which is taken into account by foreign actors when conducting business. as follows from the study by t. soureyd, regardless of the corruption level in the country of origin the company treats corruption in the host country as one of the game rules that allows it to participate in corruption transactions, when large firms more often face greater corruption and state seizure and smaller firms – administrative corruption. the interdependence between the size of firms and the type of corruption is determined by the value of contracts that are concluded by the firms and the ability of the latter to reach a certain level of problems solving that accompany the conclusion and execution of contracts (soreide, 2006). criminalization of the economy leads to a blurring of the boundary between legal and illegal, creating a situation in which illegal economy serves as a source of finance for a significant part of the population (development responses to organized crime, 2015). this, in turn, leads to a spread of criminal practices in all areas of public relations, distortion of the basic norms of the society. in the context of economic relations, transparency international proposes to consider corruption as a phenomenon that impedes trade and is a kind of illegal tariff (transparency and corruption, 2016). studies indicate that the level of transparency in regional trade agreements increases bilateral trade by 1% (iza lejárraga, 2013). according to the eu estimates the region's economic losses from corruption amounted to 120 billion euros per year, which is almost equal to the annual budget of the european union (eu anticorruption report, 2014). according to a study by the eu center for economic policy research (reducing transatlantic barriers to trade and investment, 2013), the potential benefits from the transatlantic free trade agreement conclusion will number a similar amount each year. that is, measures to ensure transparency and good governance in the field of business and international trade are just as important from an economic point of view as conclusion of large-scale trade agreements (transparency and corruption, 2016). on the other hand, conducted studies confirm that the liberalization of foreign trade can contribute to reducing the corruption level in post-soviet countries and improving the quality of governance in general (dutt, 2009). it is well-known that corruption is one of the factors that undermine free trade. studies indicate that the impact of corruption is stronger for exporting countries than for importers of certain goods or services. instead, corruption in the foreign economic sphere contributes to increasing imports to a corrupt country, creating shadow supply channels for this (eelke de jong, 2011). at the same time, the doing business study 2017 concludes that a high level of international trade is also directly related to the low level of corruption in the country (doing business 2017, 2017). foreign trade is extremely important for the economies of former soviet republics in general and ukraine in particular, the total import and export of which make up 108% of gdp (2017 index of economic freedom). at the same time, the level of foreign economic sector criminalization remains extremely high and corruption remains the main obstacle to business in the given states (the global competitiveness report 2016-2017, 2016). according to the world bank study, post-soviet states need to improve foreign economic sector by building more productive private sector and forming more complex export structure with a higher value added. in the experts opinion it is hampered by infrastructure weakness, market structure characterized by a high level of concentration and monopolization, as well as weak land management. infrastructure improving involves strengthening the opportunities for domestic investment and improving the management system and ensuring transparency (ukraine. systematic country diagnostic toward sustainable recovery and shared prosperity, 2017). there are a number of schemes that are used by the foreign economic activity subjects to avoid taxation. all of them include the involvement of corrupt state authorities’ representatives. for example, an exporter resident achieves a tacit agreement with a foreign company – the recipient of the goods for a contract at a pre-overstated price. in particular, the amount of advance payments is increased and fictitious prepayments for transactions are made. then the buyer pays half the difference between the contract price and the real value of the goods. the simplest shadow scheme is the registration of the inventory items acquisition from fictitious firms baltic journal of economic studies 268 vol. 4, no. 5, 2018 and their export to distant states and territories. in fact, the movement of such values, transportation and crossing the border do not occur, contractual and import relations with country’s residents do not exist. the calculations are simulated through commercial banks specializing in conversion services (using bill schemes, etc.). the role of intermediaries is given to enterprises in underdeveloped countries. the outlined mechanisms are primarily used by large enterprises, foreign economic activity subjects, especially those that constantly import goods, since these operations allow repayment of the obligation to pay "import" vat with a fictitious tax credit. it is also widespread the scheme of price increase at the expense of the cost of fictitious production (for example, receiving the components from fake companies), in which the producer enterprise is declared bankrupt and liquidated before the beginning of export operations. as a result, vat is refunded directly and the account is made through a tax bill when performing import operations. the scheme is implemented through the use of banking tools. the same bank serves all the basic calculations in the process of its implementation, allocates credit resources, emits securities (operations to provide and repay loans, in relation to bank securities is an integral part of the financial mechanism), provides currency calculations. only an insignificant part of the transaction volume, which is usually equal to the amount of illegal profits, is separated and passed through another bank institution – the partner of the main bank. the whole chain of financial calculations is realized within one day. the specified mechanism is controlled by one bank – the financial scheme operator. such activity is systematic and, in fact, is considered as a kind of banking service. when applying this scheme, the exported goods are subsequently returned to the territory of the particular country and sold at prices ten times lower than the export price. then the goods are legalized overpriced through fake and transit firms and used in the re-export scheme. criminally gained income is converted into cash and distributed among the participants of the scheme. the balance is transferred to the account of the goods importer, from where it is returned as the official revenues for the exported goods. according to another scheme, for example, nickel allegedly for processing was imported in the particular country as a toll-free raw material, which after was sold on the domestic market through a network of specially created fake companies. such import involved the receiving by the importer of a license for processing, which he really could not carry out due to lack of production capacity. since the raw material was imported as if it were exclusively for processing without realization on the territory of the country, the customs regime "import 54" was applied to it, in which the actual importer did not pay neither vat (20%) nor customs duties (13%). in fact, concerning this operation the customs regime "import 40" should be applied which provides for such payments. subsequently, according to the given scheme, nonferrous scrap metal was illegally collected, in which also fictitious firms without appropriate license were involved. the purchase of metal was carried out on a black market, while the requirements regarding the source of origin of this raw material for obvious reasons to sellers were not put forward. non-ferrous metals were being melted at the bastards, which were further exported under the guise of an imported nickel processing product. herewith the export fee also was not paid. thus, the state not only lost the money that would have been paid when importing the metal for its processing and sale in the domestic market of the country. but nickel was sold at a dumping price that undermined free competition and damaged the entire metal processing industry. non-ferrous metals necessary on the domestic market of the country were exported which also caused substantial damage to the state's economy. the black market of non-ferrous metals was strongly stimulated that contributed to their robbery and illicit circulation. as a result of this and similar actions, there is a threat not only to the foreign economic sphere of post-soviet states, but also to the economies of the states as a whole. smuggling is only one of the components of this scheme. the leadership of the highest public authorities usually is involved in conducting such fraudulent actions. instead, the role of corrupt customs officials is minimal and consists solely in assistance to accelerate import of nickel in the country, which does not have a critical importance for the implementation of this scheme. similar schemes are fixed not only in the metal processing, but also in the chemical industry and the agro-industrial sector. one of the crime manifestations, closely related to corruption in the foreign economic sphere, is the illegal use of citizens for testing drugs that do not have appropriate license. thus, in 2013, a scheme was discovered according to which new drugs being tested by the manufacturer on their efficacy and possible adverse effects were illegally imported into one of former soviet republics and subsequently tested on the patients who were not aware about the possible threat for their lives of receiving these drugs. the given operations provided for the existence of corrupt relations in the leadership of the state’s customs and health authorities who received bribes from corporations for the use of the citizens for the testing drugs. at the same time, neither the patients nor the state budget of the country received any funds for such tests. it should be noted that in some cases, such tests were also conducted on juvenile patients on baltic journal of economic studies 269 vol. 4, no. 5, 2018 nickel non-ferrous metal scrap non-ferrous metals import 51 customs 24-21 % of customs value non-ferrous metals export ek 10 w re-export – zero customs rate license of the ministry of economy of ukraine separate customs declarations ek 10 w vat domestic market customs the basis of pediatric medical centers. the aforesaid points out, that corruption in foreign economic sphere threatens not only the economic potential of any postsoviet state, but also poses a direct threat to the life and health of its citizens, the gene pool of the whole nation. 3. findings the magnitude and extent of corruption in post-soviet states have transformed this phenomenon into a major threat to their systems of national security. corruption in the field of foreign economic activity is a particular threat, undermining the country's fiscal policy, forming a negative investment climate, which makes it impossible for the state to carry out any effective economic and social policy, destroys the image of the state in international relations. the weak effectiveness of anti-corruption measures in general and in the foreign economic sphere, in particular, is generally recognized. to a large extent, this is due to not only weak effectiveness of law enforcement measures, but also to the corrupt components laid down in the construction of this activity at the national level, the weakness of the institutional system of the state as a whole, as well as the inadequacy of anti-corruption policy to the current state of affairs. such policy should take into account changes in the social nature of corruption crimes, the emergence of new corruption actors and the detection of previously unknown ways of committing them. systemic corruption in transitional former soviet countries is characterized by a combination of state seizure by a highly monopolized private sector or a strong bureaucracy, business seizure and administrative corruption. 4. conclusions the criminalization of the foreign economic sphere is caused by a wide range of factors, among which the internal ones prevail, which are connected with the institutionalization of corruption in the state authorities and administration. criminal activity in this area is carried out by powerful corrupt and criminal organized mafia-type structures that are capable of controlling the whole spheres of economic and political life of the country, which have sufficient resources to influence public consciousness through controlled media. as a result of their activities, the state loses at least 50% of income related to the taxation of this economic activity. conditions are created for smuggling of socially harmful goods, such as weapons, counterfeit medicines, drugs and psychotropic substances. such criminal activity has become systematic and one of the most acute threats to the national security of former soviet republics, undermining their economic development, depriving the budgets of funds necessary for the development of the states, the functioning of their institutions and social support of the population. taking into account the corruption risks existence and the degree of corruption threat for the economies, figure 1. smuggling scheme for the import of nickel and the export of non-ferrous metals baltic journal of economic studies 270 vol. 4, no. 5, 2018 ensuring transparency in the functioning of the foreign economic systems of post-soviet states should be considered as an absolute priority for anti-corruption measures. countering corruption should be aimed at destroying the systemic relations between criminality and authorities and not limited to identifying and prosecuting certain corrupt officials. this in turn includes the involvement of civil society and international experts in the implementation of programs to ensure integrity in this area. the dissemination of anti-corruption measures to institutions in both the public and private sectors is also important. references: knorich, jan (2004). international trade and corruption: the influence of trading partners – seton hall university dissertations and theses. retrieved from: http://scholarship.shu.edu/dissertations/682 international trade and the role of corruption. susanna thede, nils-åke gustafson – european trade study. retrieved from: www.etsg.org/etsg2009/papers/thede.pdf the multifaceted impact of corruption on international trade (2012). susanna thede, nils-åke gustafson. the world economy, 35(5), may 2012, 651-666. hellman, s. j., jones, g., kaufmann, d. (2000). seize the state, seize the day: state capture, corruption, and influence in transition. world bank publications. 2000. retrieved from: http://www.worldbank.icebox.ingenta.com/ content/wb/wps4301/2000/00000001/00000001/art02444 transparency and corruption: a role in mega trade deals (2016). transparency international. working paper. iza lejárraga, ben shepherd (2013). quantitative evidence on transparency in regional trade agreements. trade policy paper no. 153. paris: organisation for economic co-operation and development. cassara, j. a. (2015). trade-based money laundering: the next frontier in international money laundering enforcement – wiley. nordstrom, c. (2007). global outlaws: crime, money, and power in the contemporary world. university of california press. naim, m. (2006). illicit: how smugglers, traffickers, and copycats are hijacking the global economy. anchor. chaudhry, p. e. (2017). handbook of research on counterfeiting and illicit trade. edward elgar. hrechyn, ye. ye. (2015). customs component of the national security of ukraine: main factors and strategic priorities of development. scientific bulletin of the security service of ukraine, 54, 11-21. hrechyn, ye. ye. (2015). determination factors of corruption in customs bodies. collection of scientific works of the security service of ukraine, 54, 35-42. kupatadze, a. (2012). organized crime, political transitions and state formation in post-soviet eurasia. palgrave macmillan. iwasaki, i., suzuki, t. (2007). transition strategy, corporate exploitation, and state capture: an empirical analysis of the former soviet states. communist and post-communist studies, 40(4), 393-422. hellman, s. j., jones, g., kaufmann, d. (2000). seize the state, seize the day: state capture, corruption, and influence in transition. world bank publications. retrieved from: http://www.worldbank.icebox.ingenta.com/content/wb/ wps4301/2000/00000001/00000001/art02444 greenhill, k. m. kleptocratic interdependence: trafficking, corruption, and the marriage of politics and illicit profits. corruption, global security, and world order / edited by robert i. rotberg. washington, d. c.: brookings institution press. soreide, t. (2006). corruption in international business transactions: the perspective of norwegian firms. international handbook on the economics of corruption / edited by susan rose-ackerman. massachusetts: edward elgar publishing. development responses to organized crime: new agendas, new opportunities: a conference report. – geneva: global initiative against transnational organized crime. november 2015. eu anti-corruption report. report from the commission to the council and the european parliament com(2014) 38. – brussels: european commission, 2014. retrieved from: http://ec.europa.eu/dgs/home-affairs/e-library/ documents/policies/organized-crimeand-human-trafficking/corruption/docs/acr_2014_en.pdf reducing transatlantic barriers to trade and investment: an economic assessment. – london: centre for economic policy research, 2013. retrieved from: http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150737.pdf dutt, p. (2009). trade protection and bureaucratic corruption: an empirical investigation. canadian journal of economics, 42(1), 155-183. eelke de jong, christian bogmans (2011). does corruption discourage international trade? european journal of political economy, 27, 385-398. doing business 2017. equal opportunity for all. international bank for reconstruction and development. the world bank. terry miller, anthony b. kim (2017). index of economic freedom. washington, dc: the heritage foundation. klaus, schwab (2016). the global competitiveness report 2016-2017. world economic forum. ukraine (2017). systematic country diagnostic toward sustainable recovery and shared prosperity. world bank group, april 28. baltic journal of economic studies 24 vol. 4, no. 2, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-2-24-31 development of organic farmers’ cooperatives: the usa, the eu, and ukraine roman bezus1, ihor bilotkach2 dnipro state agrarian and economic university, ukraine abstract. the purpose of the paper is to formulate and to present recommendations on the development of organic cooperatives in ukraine based on the experience of successful cooperatives from the us and the eu. an overview of their formation and financing, implementation of projects in organic cooperatives in different countries provide a powerful basis to formulate recommendations on how to avoid errors and to choose the best solutions for organic cooperatives in ukraine. methodology. the research is based on a comparison of data, describing the creation and development of organic farmers’ cooperatives in the us and such eu countries as france, austria, and ireland. also, the actual characteristics of organic cooperatives in ukraine and marketing cooperatives will be given. according to the obtained comparisons, recommendations on the further development of ukrainian organic farmers’ cooperatives will be presented. results. as a result of research, a special set of recommendations was formed. notably, the following important conditions of successful activity of organic farmers’ cooperatives were indicated, as loyalty to the idea of producing organic products; optimal time planning for the project implementation; the importance of financial literacy training; the need to consider the views of all members of the cooperative; attracting scientists, managers and marketers to coop’s activities and so on. practical implications. the considered array of practices of organic farmers’ cooperatives in the us and the eu helped to form a special set of recommendations for ukrainian organic farmers and revealed that ideological factors have a powerful influence on the success of organic cooperatives. in particular, the loyalty to the idea of producing organic products and listening to the opinion of every cooperative’s member helps to overcome the crisis almost as well as additional funding. value/originality. the presented recommendations provide an opportunity to understand the ways of developing the organic farmers’ cooperative, help to avoid risks optimally and support organic farmers’ cooperative movement in ukraine. key words: farmer cooperatives, organic agriculture, marketing cooperatives, organic farmer cooperatives, us-eu cooperatives. jel classification: q13, q50 corresponding author: 1 department of marketing, dnipro state agrarian and economic university. e-mail: bezusrm@gmail.com 2 department of marketing, dnipro state agrarian and economic university. e-mail: bilotkach@ukr.net 1. introduction organic sector of agrarian business continues to expand worldwide. according to the study (lernoud, willer, 2018), in 2016 the world’s organic agricultural area increased by 7.5 million hectares, or by 15% compared to the previous year. the number of organic producers has grown to 2.7 million, and the global market of organic production has grown to $90 billion. organic food production and consumption have increased also in the usa and the eu. the countries with the largest markets of organic products are the united states ($38.9 billion), germany ($9.7 billion), and france ($6.7 billion). in 2018, ukrainian consumers also more often choose organic products than in previous years. in response to such interest, ukrainian farmers expanded the range of products produced according to organic standards. today the “organic basket” of ukraine consists of vegetables, fruits, juices, jams, meat, dairy, pasta, bread, herbal teas etc. in 2017, ukrainian organic market amounted to 21  million euros (trofimtseva, prokopchuk, 2018). at the same time, market conditions push ukrainian farmers, including those who work in organic farming, to start cooperatives. the most of ukrainian farmers are not able to purchase valuable organic fertilizers or equipment that is suitable for organic farming. the active organic farmers’ cooperative is a new phenomenon for ukraine, and in europe and the usa, there is already an experience of such agrarian associations. therefore, it is important to study the state of development of organic farmers’ cooperatives in the baltic journal of economic studies 25 vol. 4, no. 2, 2018 usa and the eu in order to develop recommendations for such cooperatives in ukraine. the purpose of the paper is to formulate and to present recommendations on the development of organic cooperatives in ukraine based on the experience of successful cooperatives from the us and the eu. an overview of their formation and financing, implementation of projects in organic cooperatives in different countries provide a powerful basis to formulate recommendations on how to avoid errors and to choose the best solutions for organic cooperatives in ukraine. to achieve the purpose of the paper, the data describing the creation and development of organic farmers’ and marketing cooperatives in the us and the eu will be gathered. also, the actual characteristics of organic cooperatives in ukraine will be given. 2. us organic farmers’ cooperatives us organic market shows strong growth in recent years. now it is the largest in the world and is 38.9 billion dollars, which is $3.1 billion more than in the previous year. and 5.3% of all products purchased in the us are produced according to organic standards (lernoud, willer, 2018). the dynamics of the size of organic agricultural land, the number of producers and the market of such products in the us during 2014– 2016 can be seen in table 1. table 1 us organic agricultural land, number of producers, and market of organic products in 2014–2016 indicator year 3 yrs growth, (%)2014 2015 2016 agricultural land, thousand ha 1554 2029 2031 +30 producers 12880 14871 14217 +10 market, $ billion 27,06 35,8 38,9 +44 source: (haumann b. 2016, 2017, 2018) as the table shows, in three years, us organic agricultural land increased by 30%, while the number of organic producers increased by 10%. the local organic market increased by 44% during the research period. that is, the development of the organic sector of agribusiness in the united states is gradually continuing, bringing benefits both to the producers of such production and to its consumers. the history of us cooperation has deep roots. the first us cooperative is an insurance cooperative founded by benjamin franklin in 1752, which is still operating (uw center for cooperatives, 2010). in 2016, there were 30000 cooperatives in the united states, uniting 350 million people. 3000 of them are farmers’ cooperatives, which provide more than 25  thousand jobs with a total salary of over $8 billion. almost all of the us farmers’ cooperatives produce few types of organic products (uw center for cooperatives, 2017). it is interesting that the demand for organic food after world war ii contributed to the development of agricultural cooperatives in the united states. in the 60s and 70s, a lot of such cooperatives were formed, most of which collapsed, but survivors now have a strong influence on the local and global organic markets (uw center for cooperatives, 2010). according to the сoop directory service listing, currently, there are 489 farmers’ cooperatives in the united states, the main profile of which is producing organic agricultural products. as an example of successful organic farmers’ cooperative can be named “organic valley” and “deep root organic cooperative” (coopdirectory, 2017). assessing the effectiveness of us cooperatives in 2016, it turned out that agricultural cooperatives earned 56% of the cooperatives’ profits. the share of cooperatives’ profits of other sectors of the economy can be seen in fig. 1. 56% 16% 9% 8% 6% 3% 2% agriculture grocery energy finance hardware healthcare other fig. 1. shares of coops’ revenue by sector source: (hadfield, 2017) economic activity of the us agricultural cooperatives is constantly examined by usda. the profit’s dynamics of five most successful conventional cooperatives and one organic agricultural cooperative during 2015–2016 can be seen in table 2. as can be seen from the table, four out of five most successful us farmers’ cooperatives in 2016 received a slightly lower profit than a year ago. this decrease can be explained by the expansion of cooperative’s products market and increasing competition. during the study period the most successful organic cooperative climbed 4 positions to 22 seats and unlike conventional cooperatives could increase revenue by 4%. baltic journal of economic studies 26 vol. 4, no. 2, 2018 the way of the largest and most successful organic cooperative “organic valley” began in 1988, when the united states had a crisis of agrarian sector and small farmers were not able to continue production. there was no special aid for organic farmers because all the funds went to industrial agriculture. the farm owners of the local community, where now the organic valley is, did not want to switch to agribusiness with chemical fertilizers, so it was decided to unite the community and to seek solutions together. the meeting decided to save the community’s environment and to continue producing organic products. the first coop’s products party that was able to compete with agrarian holdings’ one was a party of organic vegetables, and a year later the cooperative began to sell its own branded organic milk. consumers saw the difference between organic valley’s and other local producers’ products and have opted for cooperative’s organic products. after other farmers saw a strong demand for such products, they chose to join the cooperative. thus, for the members of this cooperative, the crisis has passed and they began to receive first profits. today the cooperative brings together more than 2000 farmers from the united states, which produce organic vegetables, milk, and dairy products, soybeans, and chicken eggs under their own brand name (organicvalley.coop, 2018). the key elements of this success of the farmers’ cooperative are: – the loyalty to the idea of production without adding chemicals, despite market pressure and other circumstances; – using simple practices and ingredients; – enabling farm animals to be just animals: all processes must be as natural as possible; – don’t be tempted with the idea of expansion to industrial scale; – electing only the local successful farmer as the head of the cooperative. these ideas are relevant for ukrainian organic farmers wishing to join a cooperative to grow their business (organicvalley.coop, 2018). deep root organic cooperative, the second-largest organic cooperative, has not entered the first hundred united states cooperatives, which annually explores the usda as a previous one but also has noticeable results. it was created in 1985, during the same crisis period for organic producers in the united states. it consisted of grain producers and faced the same problems as the previous cooperative. but there was the difference: the demand for organic crops was higher than for organic vegetables and milk. the following measures helped to pass the crisis for the newly created farmers’ cooperative: – to gather in cooperative only the true ideologues of organic grain production; – to employ a manager and a marketer who will promote products and distribute information about the cooperative; – to conduct trainings for updating knowledge about new organic technologies in grain production (deeprootorganic.coop, 2018). the us farmers’ experience revealed an important element of the success of organic cooperatives in critical periods: to be loyal to the idea of producing organic products and to use marketing instruments that may eventually lead to the significant success. 3. eu organic farmers’ cooperatives the eu is a powerful player in the world of organic agribusiness almost as big as the united states. the eu’s organic market in 2016 was the second largest in the world after the united states’ and accounted for 37% of the world organic market that year. its volume amounted to 30.7 billion euros, which is 11% more than in the previous year (willer, schaak, lernoud, 2018). the countries with the largest organic markets in the eu are germany, france, and italy. data on the dynamics of organic agricultural land, the number of producers and market volume in the eu during 2014– 2016 is summarized in table 3. for three years, the organic agricultural land of the eu has grown moderately – by 18%, and organic agricultural producers’ number has grown by 14.5%. however, the market for such products expanded by 28.5% over the same period. it can be concluded that the eu organic market is growing gradually, expanding table 2 us coops in 2015–2016 rank in 2016 name type of products revenue in $ billions 1 y growth, (%)2015 2016 1 chs inc. saint paul mixed (energy, supply, grain, food) 34,69 30,53 -12 2 dairy farmers of america kansas city dairy 13,90 13,62 -2 3 land o’lakes, inc. saint paul mixed (supply, dairy, food) 13,07 13,27 +2 4 growmark, inc. bloomington dairy 8,74 7,07 -19 5 ag processing inc. omaha dairy 4,45 3,41 -23 22 cooperative regions of organic producer pools (cropp)/organic valley dairy 1,01 1,05 +4 source: (usda , 2016) baltic journal of economic studies 27 vol. 4, no. 2, 2018 the offer of certified organic products and attracting more consumers each year. in the eu, organic farmers’ cooperative develops through the rural development program for 2014– 2020, which is held under the common agricultural policy (cap). the main objectives of this program are: • fostering knowledge transfer and innovation; • preserving and enhancing ecosystems; • promoting resource efficiency and acting on climate; • social inclusion and the economic development of rural economies (european commission, 2013). this program has a special measure 16 “cooperation” that supports the idea of combining agrarian producers and other agribusiness members to create innovative products or technologies. measure 16 “cooperation” in addition to organic production supports the development of agro-tourism, local farmers’ markets, farm diversification, increasing the total biomass for food and green energy. in addition to the main measure 16 “cooperation” of the rural development program for 2014–2020, there are other measures that support the development of advisory services, research, other knowledge sharing activities, investment projects, in particular, for cooperatives with an organic component (european commission, 2013). such support greatly facilitates the spread of cooperation ideas and the improvement of organic production methods in europe. the experience of each cooperative is unique; therefore, it is advisable for ukrainian farmers to consider examples of the development of organic cooperatives from different european countries with similar climatic or market conditions as in ukraine. a striking example of the powerful development of organic cooperative’s movement in the eu is the signing by all agricultural cooperatives of france a declaration on the support of the organic movement in 2017. signing this document means that all agricultural cooperatives pledged to support the development of organic production. at the beginning of 2017, there were 11545 agricultural cooperatives in france with an income of 86 billion euros. 550 cooperatives bring together farmers specializing in organic production. and in 2016, the french market of organic products grew by 20% compared to the 2015 year. organic agricultural cooperatives in this country produce almost 90% of organic pork, 78% of organic grain, 36% of organic milk, and 25% of organic vegetables and fruits (voinea, 2017; la cooperation agricole, 2017). a unique form of farming cooperation is uniting the efforts to meet demand in a particular product. in france, these kinds of products are legendary cheese and wine. the raw material for them should be of invariably high quality, so some french farmers and processors are united into cooperatives engaged in securing the production of only one specialized product that has been stable in high demand for centuries (erinyak, 2013). let’s consider the project of french organic cooperative, which specializes in services for producers of organic grains that also are actively cultivated in ukraine. organic grain cooperative “coopérative régionale d’agriculture biologique” was founded in france in 1998. at that time, france, germany, and the netherlands began to lead in consumption and production of organic products in the eu. the cooperative worked successfully and in 2011 the members of the cooperative had already grown 22 types of organic grains and had the opportunity to store more than 80% of the members’ products from the regions of poitou-charentes, limousin, pays-deloire, and aquitaine. such significant volumes of organic grains required appropriate storage and processing volumes that comply with eu and us organic standards (leriox, 2015). the funds for the construction of new storage facilities and reconstruction of old ones were obtained from 18 producers and 3 processors of organic products. thanks to the members of the cooperative, 65% of the required investment amount was collected, while the remaining 35% was provided by the local authorities and the ministry of agriculture of france. as a result of the project implementation, the storage, ventilation, and sorting facility for 5000 tons of organic grains was constructed. when using new warehouses, all farmers and processors noted the improvement of the stored grains’ quality. as was pointed by j. leriox, it is needed to understand the important aspects of making such a valuable cooperative project: – it takes a lot of time to reach agreements with all project participants, not just with the majority; – the cooperative board must openly meet all the ideas and discuss them in detail; – it is necessary to plan the project taking into account future modernization and attraction of innovations (leriox, 2015). in addition to organic grain growing, greenhouse crops growing is also popular in ukraine. this type of organic agribusiness is possible in those areas where table 3 eu organic agricultural land, number of producers, and market of organic products in 2014–2016 indicator year 3 yrs growth, (%) 2014 2015 2016 agricultural land, thousand ha 10,25 11,19 12,1 +18 producers 257525 269453 295123 +14,5 market, billion euro 23,9 27,1 30,7 +28,5 source: (willer, schaak, 2016; willer, schaak, lernoud, 2017, 2018) baltic journal of economic studies 28 vol. 4, no. 2, 2018 open land can’t be certified according to organic standards. however, such production usually needs a lot of energy for lighting and heating. organic greenhouse lettuce producers in austria faced the similar complex of issues. due to the harsh climatic conditions in this country, only a few local organic green crops are grown and a lot of them are imported. but the demand of local residents concentrated on local organic greens. therefore, there is a necessity of increasing the volume of local organic greenhouse green crops without adding pollution to the environment. to achieve this goal, the “winter crop” project was created, the essence of which was the innovative and technological support of farmers growing organic vegetable and green crops all year round. this project was implemented by the association of organic farmers “bio austria” and included activities for the exchange of information and experience between scientific institutions and interested farmers. the practical part of the project was implemented by 7 farmers, united in the cooperative, and 6 local scientific institutions. 70% of funding was provided by donors from the eu and the austrian government, 30% was paid by farmers and scientists provided free services (fertl, 2015). as a result of the project that lasted 1 year, about 120 varieties of cold-resistant organic salads were selected for farmers, individual crop rotation procedures were developed, as well as marketing activities were taken to promote salad selling. a year later, farmers noticed the growth of sales volumes to local consumers, chicory and radish were the most profitable ones. also, all farmers noted the importance and effectiveness of cooperative promoting and tasting events. it was noted that: – 1 year is an insufficient period of time to achieve significant success for all members of a small organic cooperative; it takes at least 2 years; – after the project is completed, resources are needed to support the obtained results and further development of farms, in particular, for information campaigns and marketing activities (fertl, 2015). the practice of running the organic dairy cooperative in europe is also interesting for ukrainian farmers. irish producers of organic milk faced the problem of the non-compliance of the high cost of organic milk with fixed purchase prices and the lack of european sales quotas. in addition, in recent years it has become difficult for single farmers to compete with big agrarian companies. therefore, having rallied, the farmers decided to try to increase purchasing prices for products and find ways to enter the european market (westbrook, 2015). after several meetings, 10 organic farmers founded the little milk company. in addition, they decided to cooperate with marketers to promote cooperative products, which have never been done by any of those farmers. cooperation helped to form the system of year-round production of organic milk by keeping different species and setting the graphs of kettle birth. farmers agreed with various local milk processors to make cheese under cooperative and personal brands, which allowed forming export parties of assorted cheeses. thus, the cooperative was able to enrich the product range, to earn additional income from exports and to protect their farms from market price fluctuations. the creation of the cooperative and all its initial activities was financed by the farmers and by the rural development fund. after the first big parties were launched, investments from local businesses began to emerge. as a result, farmers appreciated the value of active cooperative actions, which allowed increasing profitability, and found that cooperation is an effective way of competition for small producers of organic milk. important results of this project are: – understanding the value of financial literacy training for all farmers; – gaining experience of effective competition with large producers of organic milk; – understanding the role of cooperation in export operations; – understanding the importance of collaboration with professional technologists and marketers, despite the high cost of their services (westbrook, 2015). the practice of organic cooperatives in the eu demonstrates the proactive stance of their participants; in particular, it reveals the important role of scientists and marketers in the successful implementation of development projects, which is important to understand for ukrainian organic cooperative farmers. 4. development of organic farmers’ cooperatives in ukraine the organic agricultural market of ukraine has gained significant growth rates and in 2017 reached a volume of 21 million euros. since 2013, this indicator has increased by 110% (trofimtseva, prokopchuk, 2018). information on the volume of the national market of organic products, the number of its producers and certified organic agricultural land in ukraine in 2013– 2017 can be found in table 4. table 4 ukraine’s organic agricultural land, number of producers, and market of organic products in 2013–2017 indicator year 3 yrs growth, (%)2013 2015 2017 agricultural land, thousand ha 393,4 400,7 382 -2,9 producers 158 182 294 +86 market, billion euro 10 15 21 +110 source: (amelina, 2014; trofimtseva, prokopchuk, 2018) baltic journal of economic studies 29 vol. 4, no. 2, 2018 the number of ukrainian farmers who paid attention to the production of organic products for the study period increased by 86%. and the number of certified organic land in ukraine in 2017 decreased in comparison with both 2013 and 2015. this is explained by the complications of the political crisis in ukraine, which began at the end of 2013. the largest share of agricultural land in ukraine occupy organic crops – more than 48%, slightly less – organic oil crops – 16.2%, and legumes – 4.6%. the smallest territory occupied by organic fruits and vegetables – 2% and 0.6% respectively. ukrainian organic agricultural products have been successfully exported to the usa, canada, and the following eu countries: germany, austria, poland, france, etc. farmers export grain, oilseeds, and legumes as raw materials and jams, syrups and oils products of local ukrainian brands (trofimtseva, prokopchuk, 2018). ukrainian farmers are already familiar with the practice of agricultural cooperatives, but this potential is not fully used. in 2016 ukraine had 1026 agricultural service cooperatives (asc) (bezus, burtak, 2018). but the given number of registered cooperatives does not reflect the actual number of organizations that are fully consistent with the principles of cooperation. according to the research data of the dnipro state agrarian and economic university, there are 99 agricultural cooperatives in ukraine that actually operate. a significant number of associations registered as cooperatives are quasi-cooperatives, in particular, the following structures were found: – forced farmers’ association as a follower of the local collective farm; – accidental farmers’ association that has not fully understood the sense of cooperation; – farmers’ group gathered together to obtain state or international financing, etc. that is, to establish the actual state of the cooperative movement in ukraine, further research and their statistical and economic assessment are needed. there are also “real” cooperatives that truly adhere to the principles of cooperation, where farmers successfully grow and sell grain, vegetables and fruits, produce milk and cheeses and even export their products abroad. these farmers develop their own business and support the social development of local communities using the money raised. in ukraine, the experienced cooperation regions are transcarpathia and dnipropetrovsk region. a striking example of a successful cooperative of transcarpathia is farmers’ cooperative of the nyzhnie selyshche that is engaged in the production and export of milk and various cheeses. another example of a successful cooperative in dnipropetrovsk region is “grain cooperative”. it has the only one cooperative elevator in ukraine. having a positive experience in organic agribusiness and cooperatives, ukrainian farmers are still on the way to the development of the organic cooperative movement. today there are plans to create two organic cooperatives in ukraine: – a servicing cooperative that is planned to create by the agricultural group “arnika” in vinnytsia region. it will occupy an area of 11 thousand hectares, where organic grains, vegetables and berries will be grown. farmers estimate their possible additional income of $200-500 per ha. but first, the land should be certified as organic; – marketing (realization) cooperative will be created on the basis of the farm “vlt flora” with an area of 50 hectares in the kyiv region that grow organic raspberries, blueberries, and strawberries. the purpose of the creation of this cooperative is export of ukrainian organic berries to europe. currently, there is no official information on the progress of the implementation of these projects. the actual state of the ukrainian organic cooperative movement once again emphasizes the relevance of the current study and the recommendations on the development of organic cooperatives, extrapolating the experience of the usa and the eu. 5. marketing cooperatives in organic agribusiness the experience of successful cooperatives of the us and the eu points to the important role of marketing in cooperative organic agribusiness. actual problems of small organic agribusiness are the lack of financial, credit, and resource support. issues of products’ certification and standardization, the search for effective selling channels remain important. small agricultural producers are not able to overcome these challenges on their own. the real and urgent solution of these issues is the cooperation of farmers; it is very important in the current competition with agrarian holdings in the ukrainian villages (borschevskii, magas, 2014). a special type of cooperation is marketing cooperation that: – helps to increase the demand for cooperative products; – helps to improve the positioning of products, increase its competitiveness; – provides an opportunity for the effective control of marketing channels, promotion of goods (zinovchuk, 1996). cooperatives with the best marketing policy can prevent losses from negative price fluctuations or lack of active buyers in the market; providing services that farmers are not able to get otherwise and involve elements of innovative technologies to keep pace with the progress. marketing cooperatives can be classified according to their complexity and the number of functions: baltic journal of economic studies 30 vol. 4, no. 2, 2018 – local (small) marketing cooperatives that combine only individual farmers or family farms within a single territorial community and produce one or two types of products; – state (large) marketing cooperatives that unite individual farmers, family farms, and service cooperatives specializing in various types of agricultural products; – international marketing cooperatives that combine individual farmers, family farms, and service cooperatives that have a monoor mega-specialization and promote access of farm products to international markets. the phenomenon of marketing cooperatives is widespread in the united states: almost every state has such cooperative. the professional organization, which includes organic valley, also has such a cooperative. in organic cooperatives of the eu, the marketing function is mainly performed by hired marketers. in ukraine so far there is no trend of creating the marketing cooperatives in traditional or organic agribusiness. marketing functions are carried out mainly by the cooperative’s manager, but this position exists not in every cooperative. farmers can’t compete with powerful agrarian holdings because they don’t do professional market research. the benefits of marketing cooperative will help agricultural producers of organic products in ukraine to reduce risks significantly and to avoid additional costs in the value chain of production and sales (budnik, 2017). 6. conclusions exploring the international experience of organic farmers’ cooperatives, one can conclude that the path to success in this kind of agribusiness is not easy. there are a lot of risks, in particular: – the risk of dissatisfaction with the expectations of all members of the cooperative; – risk of non-optimal calculation of project implementation time; – the risk of failure to compete with large agricultural producers; – the risk of ruining the technology of organic growing and processing products in crisis periods and so on. according to the experience of organic farmers’ cooperatives of the us and the eu to minimize these risks and to promote the business ukrainian farmers should: – stay loyal to the idea of production without adding chemicals, despite market pressure and other circumstances; – use simple practices and ingredients; – enable farm animals to be just animals: all processes must be as natural as possible; – don’t be tempted with the idea of expansion to industrial scale; – elect only the local successful farmer as the head of the cooperative; – invite in cooperative only the true ideologues of organic grain production; – employ a manager and a marketer that will promote products and distribute information about the cooperative; – conduct trainings for updating knowledge about new organic technologies in grain production; – understand that it takes a lot of time to reach agreements with all project participants, not just with the majority; – understand that cooperative board must openly meet all the ideas and discuss them in detail; – plan the project taking into account future modernization and attraction of innovations; – take into account that 1 year is an insufficient period of time to achieve significant success for all members of a small organic cooperative, it takes at least 2 years; – know that after the project is completed, resources are needed to support the obtained results and further development of farms, in particular, for information campaigns and marketing activities; – consider the possibility of producing unique national products; – understand the value of financial literacy training for all farmers; – gain experience of effective competition with large producers of organic milk; – understand the role of cooperation in export operations; – understand the importance of collaboration with professional technologists and marketers, despite the high cost of their services. the presented recommendations provide an opportunity to understand the ways of developing the organic farmers’ cooperative, help to avoid risks optimally and support organic farmers’ cooperative movement in ukraine. further research will be directed to the collection of primary data on ukrainian agrarian cooperatives and to various measures to support the cooperative movement in ukraine. references: amelina y. (2014) model perehodu na organichne virobnitstvo ovochiv vidkritogo gruntu. [the model transferring to organic vegetable production in open ground] business inform, 5: 183-188. [in ukrainian]. bezus r ., & burtak s. (2018) chomu v ukraini pomiraut kooperativi? [why coops die in ukraine?] kurkul.com. retrieved from: https://kurkul.com/spetsproekty/248-chomu-v-ukrayini-pomirayut-kooperativi [in ukrainian]. borshchevskii v., & magas v. (2014) silskogospodarska kooperatsia: rinkovi mehanizmi rozvitku [agricultural cooperation: mechanisms of market development] economics of aic, no. 10: 3-5, [in ukrainian]. baltic journal of economic studies 31 vol. 4, no. 2, 2018 budnik o. (2017) rozvitok kooperativnogo marketingu v ukraini ta sviti [the development of cooperative marketing in ukraine and worldwide] agricultural and resource economics: international scientific, vol. 3, no.  1: 49-50 [in ukrainian]. coop directory service listing (2017) coopdirectory.org. retrieved from: http://coopdirectory.org/directory.htm deep root (2018) deeprootorganic.coop retrieved from: http://www.deeprootorganic.coop/deeproot/co-op-faq/ erinyak f. (2013) ukrainian agribusiness is a good school, after which you can work anywhere and not to be scared. latifundist.com. retrieved from: http://latifundist.com/interview/48-floran-erinyak-ukrainskij-agrobizneshoroshayashkola-posle-kotoroj-rabotat-nigde-ne-strashno european commission (2013). the eu’s rural development policy 2014-2020. agriculture and rural development. retrieved from: https://ec.europa.eu/agriculture/rural-development-2014-2020_en fertl. t. (2015) winter harvest: supporting the development of organic winter growing. organic cooperative approaches to rural development. ifoam eu group: 10-12. hadfield m. (2017) usa’s top 100 co-operatives of the year named by national cooperative bank. thenews.coop. retrieved from: https://www.thenews.coop/122959/sector/usas-top-100-co-operatives-year-named-nationalcooperative-bank/ haumann b. (2016) u.s. organic industry continues to grow. fibl & ifoam – organics international (2016): the world of organic agriculture. frick and bonn: 258-264. haumann b. (2017) organic continues to set records in the united states. the world of organic agriculture. statistics and emerging trends. fibl & ifoam – organics international (2017). frick and bonn: 258-264. haumann b. (2018) u.s. organic sales set new records. fibl & ifoam. organics international (2018): the world of organic agriculture. frick and bonn: 284-289. lernoud j., & willer h. (2016) current statistic on organic agriculture worldwide: area, operators, markets, and selected crops. fibl & ifoam – organics international (2016): the world of organic agriculture. frick and bonn: 34-114. lernoud j., & willer h. (2017) current statistic on organic agriculture worldwide: area, operators, and market. the world of organic agriculture. statistics and emerging trends. fibl & ifoam – organics international (2017). frick and bonn: 36-78. lernoud j., & willer h. (2018) current statistic on organic agriculture worldwide: area, operators, and market. fibl & ifoam. organics international (2018): the world of organic agriculture. frick and bonn: 32-122. leriox j. (2015) silo bio quest: a cooperative solution to ensure the quality of organic grain. organic cooperative approaches to rural development. ifoam eu group: 14-16. organic agriculture could represent 15% of the market in 2022 (2017). lacooperationagricole.coop retrieved from: https://www.lacooperationagricole.coop/agriculture-biologique/lagriculture-bio-pourrait-representer-15-dessurfaces-en-2022 research on the economic impact of cooperatives (2017) the university of wisconsin center for cooperatives. www.uwcc.wisc.edu. retrieved from: http://reic.uwcc.wisc.edu/summary/ the official website of organic valley coop (2018) organicvalley.coop. retrieved from: http://www.organicvalley.coop. trofimtseva o. & prokopchuk n. (2018) organics in ukraine. fibl & ifoam. organics international (2018): the world of organic agriculture. frick and bonn: 256-260. usda (2016) top 100 agriculture cooperatives, 2016 and 2015, by total gross business revenue (billion $). usda.gov. retrieved from: https://www.rd.usda.gov/files/usda2016newtop100agcoop.pdf voinea a. (2017) french agricultural co-operatives pledge to increase organic products. the coop news, no. 11. retrieved from: https://www.thenews.coop/120559/sector/french-agricultural-co-operatives-pledge-increaseorganic-products/ westbrook g. (2015) the little milk company: a group marketing initiative by organic dairy farmers. organic cooperative approaches to rural development. ifoam eu group: 16-18. what is coop? history (2010) the university of wisconsin center for cooperatives. www.uwcc.wisc.edu. retrieved from: http://www.uwcc.wisc.edu/whatisacoop/history/#post_world_war_ii willer h., & schaak d. (2016) organic farming and market development in europe. fibl & ifoam – organics international (2016): the world of organic agriculture. frick and bonn: 199-220. willer h., schaak d., & lernoud j. (2017) organic farming and market development in europe and the european union. the world of organic agriculture. statistics and emerging trends. fibl & ifoam – organics international (2017). frick and bonn: 207-245. willer h., schaak d., & lernoud j. (2018) organic farming and market development in europe and the european union. fibl & ifoam. organics international (2018): the world of organic agriculture. frick and bonn: 217-250. zinovchuk v. (1996) cooperation idea in agriculture of the us and the ukraine [kooperativna ideia v silskomu gospodarstvi ukraini i ssha], кyiv: logos [in ukrainian]. baltic journal of economic studies 375 vol. 4, no. 4, 2018 corresponding author: 1 lviv state university of internal affairs, ukraine. 2 state research institute of ministry of internal affairs of ukraine, ukraine. 3 national academy of internal affairs, ukraine. e-mail: anru200882@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-375-379 interaction of national police with other subjects of ensuring state financial security iryna shopina1, valeria riadinska2, anna pavlovska3 abstract. the aim of the article is to provide scientific substantiation of the theoretical bases of financial security of ukraine, to reveal the essence of its elements, principles, and functions, to determine the place of the national police of ukraine in this mechanism, to outline principles and the content of the interaction of the national police with other subjects of ensuring the financial security of the state, in particular, law enforcement bodies. the subject of the study is the interaction of the national police with other subjects of ensuring the financial security of the state. methodology. the study is based on the elucidation of the essence and specificities of the interaction of the national police with other subjects of ensuring the financial security of the state. the analysis of the specificities of the authorities of the subjects of ensuring the financial security of the state enabled to determine the areas of improvement of the interaction of state bodies in the sphere. relevance/originality. the study of the interaction of the national police with other subjects of ensuring the financial security of the state is the basis for developing the most promising areas for the improvement of domestic legislation in this sphere. key words: interaction, law enforcement bodies, national police, financial security. jel classification: p34, p43 1. the relevance of the topic the construction of an efficient and competitive national economy implies a systemic reform of public finance management as a part of the public administration system as a whole, the problems and inconsistencies of which constitute a serious risk to the restoration of economic growth. effective public finance management system is the basis for implementing state policy and achieving strategic development goals by ensuring a compliance with the general budget discipline, strategic allocation of budget funds and effective provision of public services (cabinet of ministers of ukraine. pro skhvalennia stratehii reformuvannia systemy upravlinnia derzhavnymy finansamy na 2017-2020 roky). the problem of organizational interaction of power structures and state institutions in various spheres of state-management activity is the subject of the analysis of many domestic scientists and practitioners. 2. literature review among the recent publications devoted to this topic, it is worth mentioning the developments of v. d. bakumenko, v. a. derets, m. m. izhi, t. i. pashova, ya. o. riznikova, v. s. shcherbin, and other researchers. in the mentioned publications, in particular, the essence, principles, and mechanisms of organizational interaction of the authorized authorities are clarified, provided that they have significant internal-functional and inter-level differentiation. 3. the main material however, procedures and rules for the interaction of state institutions are determined not only by the factors mentioned in them. important in this case are also legal rules that outline the competence of a particular authority and the specifics of the implementation of its managerial functions. this aspect of the analysis to ensure the coordination of efforts of various state structures, in essence, still remains poorly investigated in the national professional literature. the financial security of the state is a structural element of the economic security of the state, defined as the state of the financial system, which creates the necessary financial conditions for a stable socioeconomic development of the country, ensures its stability to the financial shocks of those imbalances, creates the conditions for preserving the integrity and unity of the financial system of the country. it consists of the following elements: banking security; security of the non-banking financial sector; debt security; baltic journal of economic studies 376 vol. 4, no. 4, 2018 fiscal security; currency security; monetary security (ministry of economic development and trade of ukraine). thus, financial security is directly related to the protection of the system of the main national and financial interests of the country. at each specific historical stage of its development, financial security requires the use of special methods and tools, the application of specific mechanisms, and the existence of a system of special state bodies. the state of national security in the financial sphere depends on the phenomena and factors of both the internal and external financial and credit policy of the state, the political situation in the state, the perfection of legislative provision of the functioning of the financial system, as well as the international obligations of the state (cabinet of ministers of ukraine. pro skhvalennia kontseptsii zabezpechennia natsionalnoi bezpeky u finansovii sferi). ensuring financial and economic security of the state is entrusted to a complex of subjects, including the law-enforcement system. the subjects that provide financial security include: president of ukraine, verkhovna rada of ukraine, cabinet of ministers of ukraine; national security and defence council of ukraine, ministries and other central executive authorities, national bank of ukraine, state fiscal service of ukraine, courts of general jurisdiction, prosecutor’s office of ukraine, local state administrations and local self-government bodies, security service of ukraine, state border guard service of ukraine, citizens of ukraine and their associations (bryhinets, 2016). administrative and criminal offenses in the sphere of finance constitute an actual threat to the financial security of the country, causing significant damage to the state, therefore, the struggle against them is carried out by various law enforcement agencies, including the national police, as well as other executive authorities. today, law enforcement agencies have a decisive influence on the policy-making of each state, in particular, ukraine and its financial and economic security. given the list of law enforcement agencies, enshrined in art. 2 of the law of ukraine “on state protection of court and law-enforcement bodies staff ”, it may be noted that the law-enforcement bodies as subjects of ensuring the financial and economic security of the state should include the organs of the national police of ukraine, the security service of ukraine, units of the tax police of the state fiscal service of ukraine and the national anti-corruption bureau of ukraine, as evidenced by their tasks and functions (rieznik, 2017). in resolving the task of ensuring the financial security of ukraine, protecting the economy and other vital security objects, the national police should not duplicate the activities of other structures of the country’s security system but act in the light of coordination and interaction. therefore, the effective and efficient activity of the police authorities in the implementation of administrative and legal control over the implementation of legislation in the field of finance is possible only if they are closely interacting with the executive authorities that have control and supervisory functions in this area. the interaction of police authorities with executive authorities is understood as regulated by law and by-laws of the joint concerted activity, based on the use of each of the parties inherent in it forms, methods, forces, and means of combating the offenses, participation in the development and implementation of comprehensive measures aimed at ensuring the implementation of the law and prevention of unlawful manifestations in this area. legal principles of interaction of state bodies in the process of securing financial security are enshrined in the constitution of ukraine. according to the norms of the last cabinet of ministers of ukraine, it ensures state sovereignty and economic independence of ukraine, ensures financial, pricing, investment, and tax policy, directs and coordinates the work of ministries and other bodies of executive power (konstytutsiia ukrainy). according to art. 5 of the law of ukraine “on national police”, the police, in the course of its activities, interacts with the law enforcement agencies and other state authorities, as well as local selfgovernment bodies in accordance with the law and other statutory legal acts (pro natsionalnu politsiiu). a similar provision contains the provisions on the national police, according to which the national police interacts with other state bodies, subsidiary bodies and services created by the president of ukraine, temporary consultative, advisory and other subsidiary bodies formed by the cabinet of ministers of ukraine, while exercising the tasks assigned to it by local selfgovernment, association of citizens, public unions, trade unions and employers’ organizations, relevant bodies of foreign states and international day-to-day organizations, as well as enterprises, institutions, and organizations (cabinet of ministers of ukraine. pro zatverdzhennia polozhennia pro natsionalnu politsiiu). the considerable amount of work of the national police together with other state bodies is carried out in the process of revealing and documenting administrative offenses in the field of trade, catering, services, in the field of finance and entrepreneurship, the responsibility for which is provided for in chapter 12 of the code of ukraine on administrative offenses. police have wide jurisdictional powers in this area. in particular, the police have the right to draw up protocols on the following administrative offenses: violation of the rules of trade and the provision of baltic journal of economic studies 377 vol. 4, no. 4, 2018 services by trade, catering and service providers, citizens engaged in entrepreneurial activity; buyer or customer fraud; violation of the rules of trade in beer, alcohol, low alcohol and tobacco products; violation of the legislation on the protection of consumer rights; violation of the established order of industrial processing, storage, transportation or destruction of confiscated alcohol, alcoholic beverages or tobacco products; violation of the rules of trade in the markets; handouts in unidentified places; violation of the rules on currency transactions; avoidance of the return of foreign currency earnings; illegal opening or use of foreign currency accounts outside ukraine; violation of rules for the delivery of precious metals and precious stones; violation of the order of economic activity; violation of the procedure for submitting a declaration of income and keeping records of incomes and expenses of violation of financial legislation; unfair competition; late delivery of revenue; storing or transporting alcoholic beverages or tobacco products that do not have a stamp of excise duty collection; demonstration and distribution of films without state certification for the right to distribute and display films; violation of the conditions for the distribution and demonstration of films provided for by the state license for the right to distribute and display films; nonobservance of the quota for displaying national films when using national screen time; illegal distribution of copies of audio-visual works, phonograms, videograms, computer programs, databases; violation of the legislation regulating the operation of scrap metal; violation of budget legislation; concealment of persistent financial insolvency; occupation of prohibited types of economic activity; violation of the legislation on the collection and registration of a single contribution to the compulsory state social insurance and compulsory state pension insurance; violation of the order of formation and application of prices and tariffs; non-compliance by a person with mandatory conditions for the privatization of state, communal property or enterprises and their subsequent use; illegal actions against privatization papers; illegal actions in case of bankruptcy; fictitious bankruptcy; forcing anticompetitive concerted action (kodeks ukrainy pro administratyvni pravoporushennia). at the same time, the competence of the bodies of the national police intersects with the competence of other law enforcement and controlling bodies – subjects of ensuring the financial security of ukraine. for example, authorized officers of the bodies and units of the national police who have special titles have the right to consider cases of illegal release or purchase of gasoline or other fuel and lubricants. at the same time, the police interact with the officials of the authorities that control the use of petroleum products in industry and agriculture, who have the right to draw up protocols on relevant administrative offenses. today, such a body is the ministry of energy and coal industry of ukraine, which is the main body in the system of central bodies of executive power, which ensures the formation and implementation of state policy in the electricity, nuclear, industrial, coalmining, peat, oil and gas and oil and gas processing complexes, and also ensures the formation of state policy in the field of supervision (control) in the fields of electricity and heat supply (cabinet of ministers of ukraine. pro zatverdzhennia polozhennia ministerstvo enerhetyky ta vuhilnoi promyslovosti ukrainy). the leading unit in the system of the national police of ukraine, which is called to provide financial security, is the department of economic protection. by the resolution of the cabinet of ministers of ukraine dated october 13, 2015, the department for the protection of the economy of the national police of ukraine was formed as an interregional territorial body of the verkhovna rada of the national police, which has the functions of combating crime in the economy. the main function of the department is to directly carry out operational and investigative measures regarding the documentation and disclosure of crimes in the economic sphere. for the effective counteraction to the offense in the field of financial security of the state, the following tasks are assigned to the economic protection units: participation in the formation and implementation of state policy in the field of combating crime, protection of the economy and objects of property rights; detection, prevention, and suppression of economic crimes, in particular, committed by socially dangerous organized groups and criminal organizations that affect the socio-economic and criminal situation in certain regions and the state as a whole; the fight against corruption and bribery in areas of strategic importance for the state’s economy, as well as officials of state authorities and self-government; counteracting corruption offenses and offenses related to corruption; establishing the causes and conditions for the commission of offenses in the field of economy, as well as taking measures to eliminate them (viazmikin, 2016). as already noted, in the process of ensuring the financial security of ukraine, the national police interacts with a wide range of subjects, which are not considered possible within the framework of specific scientific work. consider the features of interaction with some of them. for example, interaction with the accounting chamber. the annual report on the activities of the accounting chamber should contain information on its control measures with the obligatory indication of the measures taken to the law enforcement agencies, including the national police, on the revealed signs of criminal or administrative offenses and the measures baltic journal of economic studies 378 vol. 4, no. 4, 2018 taken by the law enforcement agencies to respond (pro rakhunkovu palatu). in cooperation with the security service of ukraine, the national police can be involved in conducting inspections, audits, and examinations initiated by the security service of ukraine (pro sluzhbu bezpeky ukrainy). certain features have interaction with the bodies of state financial control. in accordance with the law of ukraine “on the basic principles of the implementation of the state financial control in ukraine”, the state financial control authority coordinates its activities with local self-government bodies and executive authorities, financial bodies, revenue and fee bodies, other controlling bodies, prosecutor’s offices, the national police, security services (pro osnovni zasady zdiisnennia derzhavnoho finansovoho kontroliu v ukraini). in particular, in case of receipt of an order to carry out audits in the supervised institutions from the cabinet of ministers of ukraine, bodies of the public prosecutor’s office, revenue and assembly bodies, the national police, the security service of ukraine, the national anti-corruption bureau of ukraine, which contains evidence that violations of the laws of ukraine by the institutions, whose verification of compliance is legally attributed to the competence of the state financial control bodies, there is a basis for an unscheduled outbound audit. also, law enforcement officers are obligated to assist officials of the state financial control body in the performance of their duties. in case of preventing the employees of the state financial control body to the territory of the enterprise, institution, organization, refusals to submit documents for audit and any other illegal actions, the bodies of the national police shall, upon the request of these persons, immediately take appropriate measures to put an end to such an action, to ensure normal carrying out the audit, guarding the employees of the state financial control body, documents and materials that are being audited, as well as taking measures to bring the perpetrators to the established responsibility. to date, the state financial control body is the state audit office of ukraine, which takes measures in accordance with the established procedure to eliminate violations of legislation detected during the state financial control and prosecution of perpetrators, in particular, transfers, in accordance with established procedure, to law-enforcement bodies materials on the results of the state financial control in case of detection of violations of the law, for which criminal liability is provided or which contain signs of corruption actions (cabinet of ministers of ukraine. pro zatverdzhennia polozhennia pro derzhavnu audytorsku sluzhbu ukrainy). a significant amount of interaction is between the national police and the state financial monitoring service of ukraine. the state financial monitoring service of ukraine in the process of fulfilling the tasks assigned to it interacts in accordance with the established procedure with other executive authorities, subsidiary bodies and services formed by the president of ukraine, local self-government bodies, citizens associations, trade unions and employers’ organizations, relevant bodies of foreign states and international organizations, enterprises, institutions, organizations. the state financial monitoring ser vice of ukraine interacts with law enforcement agencies, including with the national police, in the following main areas: if there are sufficient grounds to believe that a financial transaction or a set of related financial transactions may be related to the legalization (laundering) of proceeds from crime or terrorist financing, it shall submit to the law enforcement authorities authorized to make a decision in a accordance with the criminal procedure law, corresponding generalized and additional materials and receives from them information about the course of their consideration; if there are sufficient grounds to suspect that a financial transaction or a client is connected with the commission of an act defined by the criminal code of ukraine, which is not related to the legalization (laundering) of the proceeds from crime or terrorist financing, shall submit information to the relevant law enforcement body in the form of generalized materials; develops regulatory legal acts in the field of prevention and counteraction to legalization (laundering) of proceeds from crime or terrorist financing on the procedure for notification of subjects of initial financial monitoring of the fact of opening of criminal proceedings (or the fact of closing criminal proceedings in the course of pre-trial investigation) by their reports and providing information on the decisions taken in such criminal cases to the subjects of financial monitoring; provides coordination of activities of state bodies in the field of prevention and counteraction to the legalization (laundering) of proceeds from crime and terrorist financing (president of ukraine. pro polozhennia pro derzhavnu sluzhbu finansovoho monitorynhu ukrainy). 4. conclusions the foregoing suggests that the process of securing ukraine’s financial security should be complex in view of the complexity and versatility of the relevant social relations, interests, and values. financial offenses such as non-payment of taxes, misuse of budget funds, legalization (laundering) of proceeds from crime, bank violations, etc., are closely linked and mutually determine each other. therefore, in our view, the goals, task, and order of interaction for all entities of financial security should be united and coordinated. baltic journal of economic studies 379 vol. 4, no. 4, 2018 references: cabinet of ministers of ukraine. pro skhvalennia stratehii reformuvannia systemy upravlinnia derzhavnymy finansamy na 2017-2020 roky [on approval of the strategy for reforming the public finances management system for 2017-2020] (order no. 142-r of february 8, 2017). retrieved from: http://zakon.rada.gov.ua/laws/show/ 142-2017-%d1%80 (in ukrainian) ministry of economic development and trade of ukraine. pro zatverdzhennia metodychnykh rekomendatsii shchodo rozrakhunku rivnia ekonomichnoi bezpeky ukrainy [on approval of methodological recommendations for calculating the level of economic security of ukraine] (order no. 1277 of october 29, 2013). retrieved from: http://www.me.gov.ua/documents/list?lang=uk-ua&tag=metodichnirekomendatsii (in ukrainian) cabinet of ministers of ukraine. pro skhvalennia kontseptsii zabezpechennia natsionalnoi bezpeky u finansovii sferi [on approval of the concept of ensuring national security in the financial sphere] (order no. 569-r of august 15, 2012). retrieved from: http://zakon.rada.gov.ua/laws/show/569-2012-%d1%80 (in ukrainian) bryhinets, o. o. 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monitorynhu ukrainy [on the regulations on the state financial monitoring service of ukraine] (decree no. 43 of april 13, 2011). retrieved from: http://zakon.rada.gov.ua/laws/show/466/2011 (in ukrainian) baltic journal of economic studies 159 vol. 4, no. 2, 2018 corresponding author: 1 department of international economics, natural resources and economic theory, zaporizhzhia national university. e-mail: pereverzeva@ukr.net 2 department of entrepreneurship, management of organizations and logistics, zaporizhzhia national university. e-mail: volkovvp49@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-159-168 impact of human resources’ “energy” on the development of business entities anna pereverzieva1, volodymyr volkov2 zaporizhzhia national university, ukraine abstract. the purpose of the paper is to define the impact of human resources’ “energy” on the development of business entities based on the physical concept of kinetic and potential energy. methodology. mathematical dependencies for determining kinetic and potential energy are applied in the study. the first step to identify the impact of human resources “energy” on communities’ performance and development is to sort them into four groups based on analytical tools. the next step in the process of community’s energy influence on its performance and development is the application of discriminant analysis. discriminant analysis is used to group and define the nature of the correlation between the number of human resources and business entity’s development rate. mathematical transformations of kinetic and potential energy formulas allowed defining the characteristics of correlation between the number of group members and the level of interactions: direct or inverse relationship. singling out and grouping allowed to establish the fact of the existence of the correlation between the rate of development and the number of human resources, as well as the nature of the relationship. four groups of communities were singled out on the basis of analytical tools and discriminant analysis application: with high kinetic energy rate and considerable number of community members; with low kinetic energy rate and inconsiderable number of community members; with low kinetic energy rate and considerable number of community; with high kinetic energy rate and inconsiderable number of community members. we proposed the approach to assess the potential energy rate. it can be used to quantify the “energy” of interactions, which is characterized by qualitative indicators. the data used in the study is the information of statistical databases illustrating business entities’ functioning. results of the survey showed a direct correlation between the kinetic and potential energy of human resources, that is, between business entity’s development and the level of its components’ interactions. practical implications. identification and quantitative assessment of business entities’ human resources “energy” require working out an effective mechanism for managing human resources’ “energy” to preserve and develop it in the future. this causes chain reaction, contribute to the achievement of high efficiency and effectiveness of their activities in the future. value/originality. while human resources are a concept that reflects the key wealth of any society, the ability to manage the collective mental energy embodied in human resources, is scarcely studied. it is a gap we strive to fill in this manuscript. key words: energy, human resources, impact, kinetic energy, potential energy, grouping. jel classification: d310, j210, o150 1. introduction functioning and development of business entities cannot be imagined without human resources. their significance is growing dynamically with the development of the economy and the complexity of interconnections between its components. people are the only “element” that can create value, whilst equipment, raw materials, and materials are only inert potentials, which by their nature do not create anything and cannot create until a person uses this potential, forcing it to work (fitz-еnz, 2006). each person has own abilities which determine potential opportunities used in everyday life in general and when working, in particular. although, a person can have a significant amount of knowledge and abilities, but does not put them into expected effect. after all, the maximum effect can only be achieved through the interactions of human resources. as a result, a certain amount of “energy” is being accumulated. this promotes the formation of a united team, based not only on the distribution of roles and places but on mutual support and assistance in baltic journal of economic studies 160 vol. 4, no. 2, 2018 achieving common goals. people do not differ so much in the amount of knowledge, but in their great potential to benefit from the knowledge of other people (hayek, 2006). to our knowledge, the study of human resources’ “energy” impact on the development of business entities is highly demanded. that is what will be conceptualized in this manuscript. the motivation for our work is the desire of business entities to improve the results of their activities by identifying latent opportunities, which, at the same time, do not require significant material costs. latent opportunity is the “energy” of human resources’ interactions in a certain team, which brings additional benefits because of skilful management. classification of human resources’ interactions and their impact assessment allow us to identify the set of tools and management methods that will differ and depend on the characteristics of a business entity. the objective of our study is to determine the impact of human resources’ “energy” on the development of business entities, which allows us to form a “portfolio” of tools and methods of human resource management. this article focuses on the definition of two types of human resources’ “energy”: kinetic, associated with the rate of development and potential, which determines the level of human resources’ interactions. besides, we determine the existence of interactions between these types of human resources’ “energy”. nowadays the processes of decentralization accompanied by the formation of communities take place in ukraine; the example of united territorial communities’ activities as business entities illustrates the influence of human resources’ “energy” on the development. the communities are considered a good example. they are formed both in accordance with certain objective criteria, determined at the legislative level, and voluntary. in our opinion, it is a difficult task for communities to combine and accumulate the “energy” of human resources as a whole, since territorial units, which have joined the community, used to function separately. physical concepts of these properties and their quantitative calculations are used to determine the kinetic and potential “energy” of human resources in the study. analytical dependencies, as well as discriminant analysis for the division of business entities into groups based on criterion features, like the detection of the business entities’ kinetic energy dependence rate (development rate) and the number of human resources, are used as analytical tools. based on the formulas of kinetic and potential energy analysis, as well as their mutual transformations, we determined the impact of human resources’ interactions “energy” on the rate of business entities’ development. as a result of our study, the impact of human resources “energy” on the development of a community as a business entity was proved. based on the study of 23 communities’ operation, direct dependency between the number of community members and development rate (56%) was identified. 8 communities (35% of the total number of studied communities) had high kinetic energy rate and significant number of community members; 6 communities (21% of the total number of studied communities) had a low kinetic energy rate and inconsiderable number of community members. the results of the study show that in 44% of cases the development rate depends to a small extent on the number of people. this is proved by the fact of another type of energy existence, which “guides” development. 7 communities (30% of the total number of studied communities) had low kinetic energy rate and a significant number of community members; 2 communities (4% of the total number of studied communities) had high kinetic energy rate and an inconsiderable number of community members. this is the potential energy, i.e. the energy of human resources’ interactions. the remainder of the article is organized as follows. our literature review encompasses separate sections to define the concepts of “energy”, “human resources”. we describe then the data and methods in detail prior to sharing our results. a discussion of those results, limitations, and future research avenues conclude the article. 2. the concept of “human resources” current reality reveals that most business entities are seeking to accumulate wealth in the form of financial capital. excessive focus on maintaining only financial capital, ignoring the importance of human and intellectual capital, can negatively affect the performance of a business entity (hughes-jr., james, 2007). schulz, t.w. and becker, g.s. in their studies regarded people and their skills as capital (becker, 2003, schulz, 1960). the scholars analysed human resources from the investment point of view. they distinguished two types of investments in people. general investments are investments in the development of knowledge and skills that increase the productivity of a worker who receives them, regardless of an organization in which a person works (training to operate a personal computer). special investments are funding for knowledge and skills that increase the future productivity of its recipient only in an organization where a person is taught (awareness of structure and internal routine of an enterprise). in our opinion, now the success of business entities depends on the ability to manage the collective mental energy embodied in human resources, which combines the roles of ideas generator, spiritual personality, producer, and consumer. there are different approaches to the definition of “human resources” concept in scientific literature. in a general sense, human resources are a concept that reflects the key wealth of any society whose prosperity is possible due to the created conditions for reproduction, use, and development of these resources, baltic journal of economic studies 161 vol. 4, no. 2, 2018 taking into account the interests of each person (great encyclopaedic dictionary). the microeconomic aspect of human resources was considered by e. flamholtz, who is the author of human resources’ accounting concept, and of three concepts of human resources assessing, namely by original or historical costs; replacement costs; opportunity costs. according to his studies, human resources are an asset on the basis of certain criteria, namely potential benefit; ownership or control rights of a business entity; monetary value (flamholtz, 1999). a foreign researcher j. fitz-enz argued the importance of human resources. the scholar noted that people are the only essential feature, which creates value, whereas equipment, raw materials, and energy are just inert potentials, which in their nature do not create anything and cannot create until people use this potential, forcing it to work (fitz-еnz, 2006). it is worth agreeing with the world bank researchers who consider human resources as the total value of labour resources and human capital (adapted version of the book “more than economic growth”). essential characteristics of human resources are in the definition of l. semiv. the scholar gives the following definition of human resources: a set of human qualities (socio-demographic, educational and professional, motivational, mental, intellectual, spiritual and informational, innovative, creative, cultural, ethnosocial, socialization, etc.), which determine the ability of a person to work, consume material and spiritual goods, self-development, generate innovations, multiply knowledge in all areas of life (semiv, 2004). considering the concept of human resources in terms of the innovation economy, they are defined as a category, which characterizes qualitative, content components of personnel or the entire staff of an enterprise, labour force or labour resources, industry, territory, region, country as a whole. along with the traditional features essential to staff, personnel, labour force, labour resources, the category “human resources” combines creative ability, determines the potential for the full development of workers, common culture and moral reliability, a certain effect of cooperation and self-organization, and foremost, collective forms of work organization and decisionmaking, “quality teams”, “team’s spirit”, as well as improvement of labour relations, self-motivation, ingenuity (dokashenko, bobrova, 2011). as international experts point out, it is important to realize when examining human resources that if people involved in the production process do not perceive their work as important and necessary activity, it is unlikely to achieve significant results. sharing common objective spurs the interest of participants (human resources in american management). according to g.v. shchokin, “human resources refer to quantitative, content component of personnel or the entire staff of an organization, the labour force or labour resources of an industry, region, country as a whole. along with traditional features inherent in the elements of the defined set (staff, personnel, labour force, labour resources), the concept of “human resources” integrates creative ability and prospect to reach workers’ full potential, common culture, moral, and psychological qualities, a certain impact of cooperation and selforganization (corporate identity, “team spirit”, collective forms of work organization, etc.) (shchokin, 2006). the literature review provides the theoretical definition of the “human resources” category, which indicates a significant influence of human abilities and qualities on a business entity’s performance by means of cooperation, self-organization, and team spirit. the result is an accumulation of collective energy of people and its concentration within a certain environment. 3. “energy” of human resources the word “energy” from greek means “action”. energetic people act energetic, carrying out a number of diverse activities. in everyday life, we can evaluate human energy mainly by the consequences of the activity. however, it should be noted that the energy of one person, even if it was maximized, would not give the same result as the use of the sum of people association’s energy potentials. as people association one can consider enterprise’s staff as a whole or its separate structural subdivision, as well as a community. there is the difference in enterprise’s staff formation on the basis of skills level, functional responsibilities, whereas communities are voluntary associations of people according to certain features. in this regard, human resources of enterprises, communities form their “energy”, which accumulation should be the impetus for their further development. k. jonassen ( jonassen, 1959) and j. hillery (hillery, 1955) emphasize the need for interactions within a community for its effective functioning. they define a territorial community as an association of people within a territory, with the division of labour into specialized and interrelated functions, with a common culture and social system, which organizes its activities, has members who are aware of their integrity, belonging to a community and act as one orderly. j. hillery (hillery, 1955) concluded that, though there are differences, most of them have the following key features: social interactions, territory, and general coherency. we propose the following hypotheses for testing: н1: human resources energy impacts business entity’s development; н2: there is a direct correlation between kinetic energy rate (development rate) of a business entity and amount of human resources н3: potential energy (coherence energy) impacts development rate of a business entity baltic journal of economic studies 162 vol. 4, no. 2, 2018 4. survey methodology we considered united territorial communities of zaporizhzhia region as business entities. the study of 23 united territorial communities was conducted by 2016, starting from the year of their foundation. to determine the impact of human resources “energy” on the development of business entities, which is the objective of the study, communities were divided initially into four groups on the basis of analytical tools and then discriminatory analysis, which confirmed the direct correlation between the community’s development rate and the amount of human resources. the conversion of kinetic and potential energy formulas showed the impact of community’s human resources interactions’ energy on its development rate. in the research when studying community’s human resources “energy” it was used physics’ energy classification – kinetic and potential. the kinetic energy (wk) means the energy of the mechanical motion of a particular system. the kinetic energy of a community as a system is the energy of this system`s motion. the efficiency of interactions between human resources influences the development of the system in the future. to calculate the kinetic energy of a community, we use the formula: w mv ê = 2 2 , (1) where: wk – community’s kinetic energy; m – the number of community members, persons; v – community’s development rate. to define a community’s development rate we use the formula: v s t = , (2) where: s – the level of community’s self-sufficiency; t – a period of community’s performance, starting from its foundation by the end of the analysed period, years; to define the level of self-sufficiency we use the formula: s r c own= , (3) where: table 1 indicators of human resources’ energy definition illustrated by the example of zaporizhzhia region’s communities community number of community members, persons level of selfsufficiency period of community’s performance, years community’s development rate kinetic energy m s t v w k 1 2 4 5 6 7 1 berestivska rural community 4751 1,0215 2,0 0,51 619,69 2 bilenkivska rural community 9226 0,3722 1,0 0,37 639,05 3 velykobilozerska rural community 7936 0,4003 0,5 0,80 2543,33 4 veselivska settlement community 10794 0,7912 2,0 0,40 844,63 5 vodyanska rural community 11309 0,5392 0,5 1,08 6575,88 6 voskresenska rural community 5695 0,3983 2,0 0,20 112,93 7 girsivska rural community 2587 0,5271 1,0 0,53 359,38 8 gulyajpilska urban community 16900 0,6828 0,5 1,37 15758,10 9 dolynska rural community 5800 0,6848 1,0 0,68 1359,96 10 kamjansko-dniprovska urban community 22273 0,5373 0,5 1,07 12860,04 11 komysh-zoryanska settlement 6466 0,3421 2,0 0,17 94,59 12 komyshuvaska settlement community 13157 0,1928 1,0 0,19 244,53 13 malotokmachanska rural community 3166 1,0570 1,0 1,06 1768,61 14 orihivska urban community 19648 0,9722 0,5 1,94 37141,51 15 osypenkivska rural community 7830 0,4976 1,0 0,50 969,38 16 ostrykivska rural community 2930 1,1443 1,0 1,14 1918,30 17 pavlivska rural community 3800 0,6094 0,5 1,22 2822,40 18 preobrazhenska rural community 5902 1,1236 2,0 0,56 931,39 19 prymorska urban community 14698 0,5283 1,0 0,53 2051,11 20 smyrnovska rural 3846 0,1919 2,0 0,10 17,70 21 tavrijska rural community 4494 0,3095 1,0 0,31 215,24 22 chernigivska settlement community 17100 0,5231 0,5 1,05 9358,27 23 shyrokivska rural community 11201 0,5469 0,5 1,09 6700,43 source: own calculations based on data from the [investment potential of zaporizhzhia region united territorial communities. ministry of regional development, construction, housing and communal services of ukraine. communities] baltic journal of economic studies 163 vol. 4, no. 2, 2018 s – the level of community’s self-sufficiency; rown – the volume of community’s own revenues, mln.hrn; с – the volume of community’s expenditures, mln.hrn. the results of calculations are shown in table 1. table 1 data show that communities with a substantial number of human resources have a considerable rate of kinetic energy. thus, according to the presented calculations, it can be concluded that the development – the motion forward – of a certain business entity (enterprise, community) depends on the level of human resources endowment. the kinetic energy of human resources is a quantitative indicator, associated with extensive development – the more human resources are used, the higher the level of community’s self-sufficiency is. to determine the correlation between the number of community members (m) and its kinetic energy rate, we apply analytical tools. we use the data in table 2 as statistics. to group communities according to the number of community members and kinetic energy rate we use mathematical relations, which allow distinguishing classification characteristics of communities’ division based on the kinetic energy rate analysis and the number of community members (table 3). table 3 community’s grouping criteria rate criterial value high rate x x1 1> , x x2 2> low rate x x1 1< , x x2 2< note: х1, х2 – kinetic energy rate and number of community members, accordingly; х1, х2 – average values of united territorial communities, accordingly. the average values of indicators are calculated as “geometric mean”, which allows harmonizing of the high and low values of the indicators: i n i n x = ∏ 1 , (4) where: xi – the value of i-index; n – a number of united territorial communities by the group. the average value by the kinetic energy rate õ1 1266= mln.hrn, by a number of community members õ 2 7599= persons. for comparison, we construct a matrix for the classification of united territorial communities based on correlations “the kinetic energy rate – the number of community members” (table 4). it should be summarized according to the abovementioned that 56% of communities are characterized by the direct correlation between the kinetic energy rate and the number of community members. for the further communities grouping, we use discriminatory analysis, which makes it possible to classify objects by a certain set of characteristics. in addition, this method allows identifying the differences between groups and provides the opportunity to classify new objects on the principle of maximum similarity. consider two groups of united territorial communities characterized by the direct correlation between the kinetic energy rate and the number of community members (table 5). according to the calculations, a vector of the discriminant function parameters was obtained: table 2 indicators to determine the correlation between the number of community members (m) and its kinetic energy rate by grouping community kinetic energy rate number of community members, persons х1 х2 1 berestivska rural community 37141,51 19648 2 bilenkivska rural community 12860,04 22273 3 velykobilozerska rural community 2543,33 7936 4 veselivska settlement community 15758,10 16900 5 vodyanska rural community 244,53 13157 6 voskresenska rural community 969,38 7830 7 girsivska rural community 844,63 10794 8 gulyajpilska urban community 17,70 3846 9 dolynska rural community 112,93 5695 10 kamjansko-dniprovska urban community 215,24 4494 11 komysh-zoryanska settlement community 1359,96 5800 12 komyshuvaska settlement community 6575,88 11309 13 malotokmachanska rural community 639,05 9226 14 orihivska urban community 1768,61 3166 15 osypenkivska rural community 9358,27 17100 16 ostrykivska rural community 359,38 2587 17 pavlivska rural community 2051,11 14698 18 preobrazhenska rural community 1918,30 2930 19 prymorska urban community 931,39 5902 20 smyrnovska rural community 619,69 4751 21 tavrijska rural community 2822,40 3800 22 chernigivska settlement community 6700,43 11201 23 shyrokivska rural community 94,59 6466 source: compiled by the author baltic journal of economic studies 164 vol. 4, no. 2, 2018 a s x x= −       = −1 1 2 31 29 5 3 10 2 8 10 , , ⋅ ⋅ , (5) the discriminant function testifies that the first factor is more significant than the second is, that is, the kinetic energy rate prevails over the number of community members in the group. the next step is to calculate average values of the discriminant function ( f f1 2, ) and meaning of discrimination constant (c): f 1 31 29 3511623 6 5 3 10 15133 2 8 10 6 2 10= − =, , , ,⋅ ⋅ ⋅ ⋅ ⋅ , (6) f 2 31 29 35966 1 5 3 10 5223 2 8 10 5 2 10= − =, , , ,⋅ ⋅ ⋅ ⋅ ⋅ , (7) c f f = + = + =1 2 35 34 35 2 6 2 10 5 2 10 2 3 4 10 , , , ⋅ ⋅ ⋅ , (8) we classify new objects, i.e. united territorial communities, included into the groups with the indirect correlation between the kinetic energy rate indicators and the number of community members. we put values of their characteristics in a discriminant function and compare them with discrimination constant. the results are presented in table 6. the table 6 data indicate that all examined communities attributed to groups with low kinetic energy rate and an inconsiderable number of community members. this confirms the h2 hypothesis of a direct correlation between the amount of human resources and kinetic energy rate. it should be noted the existence of the 4% group of communities with high kinetic energy rate and an table 4 the matrix of the united territorial communities’ classification based on correlations “the kinetic energy rate – the number of community members” n um be r o f c om m un ity m em be rs kinetic energy rate high rate low rate h ig h ra te berestivska rural community bilenkivska rural community velykobilozerska rural community veselivska settlement community komyshuvaska settlement community osypenkivska rural community pavlivska rural community chernigivska settlement community vodyanska rural community girsivska rural community gulyajpilska urban community dolynska rural community kamjansko-dniprovska urban community komysh-zoryanska settlement community malotokmachanska rural community l ow ra te orihivska urban community preobrazhenska rural community voskresenska rural community ostrykivska rural community prymorska urban community smyrnovska rural community tavrijska rural community shyrokivska rural community source: grouped by the author table 5 groups of united territorial communities group 1 – with high kinetic energy rate and a considerable number of community members community kinetic energy rate number of community members, persons berestivska rural community 37141,51 19648 bilenkivska rural community 12860,04 22273 velykobilozerska rural community 2543,33 7936 veselivska settlement community 15758,1 16900 komyshuvaska settlement community 6575,88 11309 osypenkivska rural community 9358,27 17100 pavlivska rural community 2051,11 14698 chernigivska settlement community 6700,43 11201 average value 11623,6 15133 group 2 – with low kinetic energy rate and an inconsiderable number of community members voskresenska rural community 244,53 13157 ostrykivska rural community 17,7 3846 prymorska urban community 112,93 5695 smyrnovska rural community 215,24 4494 tavrijska rural community 1359,96 5800 shyrokivska rural community 639,05 9226 average value 966,1 5223 source: grouped by the author baltic journal of economic studies 165 vol. 4, no. 2, 2018 inconsiderable number of community members. after all, it could be argued, that a significant development rate of these communities, which is determined by the kinetic energy rate, is achieved not by the number of people, but by the accumulation of another kind of energy. another kind of energy analysed in the study is a potential energy (wp), i.e. energy, which is determined by the relationship between people, the origin and strength of interactions between them. in our research (pereverzieva, 2018), to quantify the level of human resources interactions within a particular community, it was suggested to use the interactions coefficient (kint), which determines the strength and nature of these interactions. the coefficient kint takes into account community members’ interactions rate and acts simultaneously as a multiplier. the strength or quality of these interactions leads to synergistic effect. that is, the total “energy” of community’s human resources equals not just the sum of each person’s “energy”, but may either be increased (strengthened) through collective cooperation, or reduced (weakened), for example, by conflict environment. there are different methods to determine coefficient kint. we offer the following method. the list of n questions ( k n= 1, ) is determined. they characterize the quality of community members` interactions concerning different types of activities (work, research, creative work) and communication. the question should be formulated in such a way that the answer could be rated on a scale: 1 – if kint strengthens common qualities of a community, 0 – kint does not impact common qualities, -1 –if kint impacts weakening of community members’ cooperation common qualities. let the answer to each k question be assessed by value dk ∈ −{ }1 0 1, ,� . then the coefficient of interactions’ value kint will be determined by the formula: k d n int k n k = = ∑ 1 , (9) where: dk – assessment of each question’s k answer. we consider the example of the coefficient of interactions definition (table 7). thus, having determined the criteria, by which it is possible to estimate the coefficient of interactions, we calculate the coefficient of interactions of an ordinary community and an ideal one. the analysis of the mentioned above criteria produced the following results (table 8). the obtained results allow us to make conclusions about the need to improve certain indicators and to determine the deviation level of evaluated object’s parameters (a community) from the ideal value. thus, we have an opportunity to improve indicators with the lowest value, which in turn spurs united territorial communities’ management efficiency growth. based on the foregoing, we summarize that united territorial communities’ human resources are the table 6 classification of new objects – united territorial communities community kinetic energy rate number of community members, persons discriminant function’s value group vodyanska rural community 244,53 13157 1,65822e+34 2 girsivska rural community 844,63 10794 4,76119e+34 2 gulyajpilska urban community 17,7 3846 2,00735e+33 2 dolynska rural community 112,93 5695 7,55175e+33 2 kamjansko-dniprovska urban community 215,24 4494 1,26193e+34 2 komysh-zoryanska settlement community 1359,96 5800 7,34314e+34 2 malotokmachanska rural community 639,05 9226 3,63188e+34 2 orihivska urban community 1768,61 3166 9,42759e+34 2 preobrazhenska rural community 1918,3 2930 1,02115e+35 2 source: calculated by the author table 7 definition of the coefficient of interactions work activity dk research activity dk creative activity dk communication dk if a community member cannot be at work, which form of substitution is the most widespread: participation in research projects 1 joint creative projects and development 1 joint activities: participation in conferences 1 replacement and taking on duties 1 holidays 1 to take on someone’s duties partially 0 concerts 1 work is not fulfilled -1 -picnics 1 source: compiled by the author baltic journal of economic studies 166 vol. 4, no. 2, 2018 combination of human physical and mental abilities, described by personal qualities that lead to interactions between community members, creating a united group with a common objective. it is based not only on the division of roles and positions but on mutual support and assistance in the realization of common goals – the development of a territorial community for the sake of life standards’ improvement. in our opinion, it is relevant to determine the correlation between kinetic and potential energy: w mv ê = 2 2 , (10) m w v k= 2 2 , (11) w mghp = , (12) where: wp potential energy; m the number of community members, persons; g=1, it is a constant value (in physics formula); h coefficient, which characterizes interactions between community members. m w gh p= , (13) we obtain the following correlation between human resources’ kinetic and potential energy: w gh w v p k= 2 2 , (14) formula 14 shows a direct correlation between the coefficient of community interactions and its development rate, that is, the higher the level of interactions between human resources is, the faster the community develops. this confirms the hypothesis h3 concerning the impact of interactions on the community development rate. 5. findings to confirm the correlation between business entity’s development rate and amount of human resources, we used the analytical toolkit and methodical approach to grouping, which made it possible to identify four community groups: with high kinetic energy rate and a considerable number of community members; with low kinetic energy rate and an inconsiderable number of community members; with low kinetic energy rate and a considerable number of community members; with high kinetic energy rate and an inconsiderable number of community members. specification and grouping allowed us to prove the fact of correlation between the development rate and the amount of human resources, as well to determine the nature of the dependency. the study results presented in table 4 and illustrated by the example of 23 communities show the direct correlation between the number of community members and its development rate (56%): 8 communities (35% of the total number of studied communities) had high kinetic energy rate and significant number of community members; 6 communities (21% of the total number of studied communities) had low kinetic energy rate and a small number of community members. study findings show that for 44% of communities, the development rate slightly depends on the number of members. another type of energy, which “directs” development, proves the fact: 7 communities (30% of the total number of studied communities) had low kinetic energy rate and considerable amount of members; 2 communities (4% of the total number of studied communities) had high kinetic energy rate and inconsiderable number of members. this is the energy of human resources` interactions – potential energy. the discriminatory analysis was used as another tool for grouping to confirm the results. the toolkit allowed us to quantify the community as a group-member characterized by the direct correlation between the kinetic energy rate and the amount of human resources. we managed to find out not only the real dependency itself but also its nature. for convenience, we summarize the results of the hypotheses in the table below: table 9 summary of findings hypotheses: н1: human resources energy impacts business entity’s development is adopted н2: there is a direct correlation between business entity’s kinetic energy rate (development rate) and amount of human resources is adopted н3: potential energy (coherence energy) impacts business entity’s development rate is adopted source: own study 6. conclusions in the article, the impact of human resources’ “energy” on the development of a business entity was studied. we considered two types of human resources’ “energy”: table 8 calculation of the coefficient of interactions areas of activity evaluated object ordinary community (traditional calculation) ideal community (methodology) work activity 0 1 research activity 1 2 creative activity 1 1 mutual communication 2 3 coefficient of interactions 1,4 1,7 source: calculated by the author baltic journal of economic studies 167 vol. 4, no. 2, 2018 kinetic energy, which characterizes the development rate and potential energy, which is the energy of interactions between people. the last may affect the functioning of a business entity and determines the prospects for its further development. we considered the activities of united territorial communities as the example of business entities. although certain legally defined criteria exist, they are formed voluntary, which may be the prerequisite for the significant human resources’ “energy” rate at the start-up stage. it was proved by the table 1 data, which contains data and calculations of human resources and certain kinetic energy rate correlations, and illustrates that in spite of an insignificant period of a community’s existence, they have considerable development rate because of their human resources. to evaluate a potential energy rate, we proposed only a separate approach that can be used to quantify the coherence “energy”, which is characterized by qualitative indicators. it is difficult to define them quantitatively. we can only propose a certain approach, which was presented in tables 7-8. to define interactions between community’s development rate and human resources coherence, the logic transformation of kinetic and potential energy formulas was fulfilled. logic transformations illustrated a direct correlation between community’s coefficient of interactions and its development rate, as the higher rate of human resources’ interactions is, the quicker a community develops. our work is not without limitations. we propose only one approach, which allows calculating potential energy based on the coefficient of interactions. considerable time and financial resources are required for this approach’s implementation. therefore, our task for further research is to find an effective approach precisely for quantifying the level of human resources interactions. as our study shows, there is a direct correlation between the kinetic and potential energy of human resources, i.e. certain socio-economic system’s (enterprise, community) development rate and interactions of its components. identification and quantitative assessment also require planning of an effective mechanism aimed at human resources “energy” management to preserve and develop it in future. this causes chain reaction, contributes to the achievement of high efficiency and effectiveness of business entities. future work will grapple with some of these issues. references: adaptirovannaya versiya knigi «bolee chem ekonomicheskiy rost» [adapted version of the book «more than economic growth»]. retrieved from: www.worldbanc.org.ru (accessed 5 april 2018). becker g. s. 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(2004) rehionalna polityka rozvytku liudskykh resursiv v umovakh transformatsii ekonomiky ukrainy [regional policy of human resources development amid transformation of the economy of ukraine]. lviv: in-t rehionalnykh doslidzhen nan ukrainy (in ukrainian). shchokin h.v. (2006) upravlinnia liudskymy resursamy: poniatiino-terminolohichnyi slovnyk [human resources management: conceptual and terminology dictionary], kyiv: maup (in ukrainian). baltic journal of economic studies 326 vol. 4, no. 4, 2018 corresponding author: 1 national aviation university, ukraine. e-mail: s_f_smerichevsky@ukr.net 2 national aviation university, ukraine. e-mail: tatiana.kniazieva2017@gmail.com 3 international humanities university, ukraine. e-mail: mgu@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-326-333 assessment of marketing activity management in territorial units: theoretical-methodological approach serhii smerichevskyi1, tetiana kniazieva2, atia walid3 abstract. the subject of the study is a set of theoretical and methodological aspects of the development of organizational and economic relations that arise in the process of interaction of economic subjects while shaping the potential of territorial marketing as a factor of its socio-economic development. the purpose of the study is to substantiate the methodology for assessing the integral indicator of the territorial marketing functioning. the methodology of the presented study of marketing management in territorial units is based on the multivariate assessment of various economic entities that clearly shows the priorities and unevenness in the areas’ development. area economic entities themselves are interested in the area development and determine the direction of area development. economic entities’ direct residence and economic activity conducted by them in the area should be taken into account. this makes them serious experienced experts who are really interested in the effective and rapid development of their area. economic entities themselves determine the measurable criteria for assessing the directions that they were originally offered. the “brainstorming” is used where the experts in the area development are involved. there is a joint process aimed at obtaining the most concrete and measurable results that actual state is assessed from 0 to 10 by the process participants based on personal observations and statistics. the evaluation of marketing results is based on the multicriteria socio-economic approach. the evaluation criteria should include the economic mechanism formation. this mechanism provides an effective interaction of market institutions and business entities in the area; selection of wholesale and retail organizational and economic forms, financial and credit and business services, as well as organizational and legal forms of trade and economic interregional ties; the markets system creation that is based on the priority provision of consumers and small owners interest; the choice of the most effective channels for goods movement, transportation, warehousing, material, financial, and information flows rationalization. the methodology for estimating the integral indicator of territorial marketing functioning that is presented in the work is based on the next indicators: financial stability, business activity, profitability, technical and technological stability, social sustainability, environmental sustainability that allows monitoring the functioning of the territorial marketing system. this methodology is universal since it allows evaluating areas of different industrial orientations and comparing them in order to identify the greatest functioning stability. methodology for marketing research of areas potential is based on the system approach, complex consideration of conceptual principles of areas’ marketing potential formation and development; key features of territorial marketing allow carrying out purposeful actions for the sustainable development of area marketing potential, within the framework of which the conditions of its formation are determined, and their aggregate acts as a point of growth of market marketing component of the economic potential of the territory and is the basis for constructing the model of infrastructure of the marketing potential of the territory, used to make sound and balanced management decisions; developed a methodology for assessing the integral indicator of the functioning of territorial marketing. research conclusion: grounded methodology of research of territorial marketing potential that is based on the system approach, complex consideration of concepts of area marketing potential formation and development. the key features of territorial marketing are distinguished that allow carrying out purposeful actions for the stable development of the area marketing potential, within the framework of which the conditions for its forming are determined, and their complex serves as a point of growth of market marketing component of the area economic potential and is the baltic journal of economic studies 327 vol. 4, no. 4, 2018 basis for the creation of the infrastructure model for the area marketing potential that is used to make substantiated and balanced management decisions; a methodology for assessing the integral indicator of territorial marketing is developed. key words: territorial marketing, area marketing potential, regional policy, sustainable economic development, strategic planning of territorial marketing. jel classification: м31, о38, r58 1. introduction growing role of territorial marketing areas and changes in the strategies of territorial management are associated with a number of factors: change in the philosophy, principles, objectives of the area development, identification of the population as a real participant in the system of area planning, as well as change of the area authorities nature who become the main responsible persons for the area socio-economic development, including its improvement, safety and social protection of the population. the problems of territorial marketing are extremely relevant in ukraine as far as they relate to such important areas as state and local government, investment attractiveness, european integration, competitiveness and strategic development of regions. the implementation of a regional policy aimed at eliminating disproportions between regions and their integrated development is strategically important for ukraine. a progressive change in the socio-economic structure of the region that ensures the economical use of its resources and best satisfaction of area production needs means the development of the region. territorial marketing allows to look at the territorial unit from the point of view of its consumer value and, therefore, takes into account the needs and interests of the population. territorial marketing becomes an integral part of the expanded reproduction process of area economic entities that is related with the production, promotion, distribution, and sale of products produced within the economic, geographical, and natural specifics of certain territorial units. development of territorial marketing that is involved into the production process and goods and services circulation requires the study of the modern marketing theory, methodology and practice, as well as its consideration through the prism of economic entities’ interests which are an integral part of the algorithm of decision-making. all it allows to purposefully affect the consumers’ behaviour and stimulation mechanisms. among domestic researchers of this theme, a. anoshkin, l. grishina, r . kozhukhіvska, e. popkova and others should be called. many domestic works relate mainly to the role of marketing in increasing the investment attractiveness of regions, but more and more attention researchers pay to use of internet technologies in marketing. leading foreign specialists in territorial marketing are: f. bencherif, p. buonincontri, ph. kotler, s. anholt, z. megri, s. k . rainisto, and others. foreign researchers of territorial marketing pay the main attention in their works to the differentiated features of areas as a marketing object in comparison with goods and services, branding and the image of territories (countries, regions, cities), their impact to the socio-economic development, development strategies and tools of marketing of a particular area, global and local dimension of territorial marketing. almost all cases are considered by authors in the context of the strategic development of promoted city or region. practical recommendations for the planning and implementation of marketing campaigns are connected with the integrated approach to the management of the area and various aspects of its development. therefore, the goal of this article is to systematize domestic and foreign theoretical and methodological aspects of organizational and economic relations’ development that arise in the process of economic entities’ interaction while forming the area marketing potential as a factor for its socio-economic development and the methodology for assessing the integral indicator of territorial marketing functioning that is based on this justification. 2. theoretical and methodological principles of territorial marketing development the genesis of marketing is determined by the policy of the enterprises located on the territory, aimed at the sale of products manufactured with minimal costs. in the transition process from a deficient economy to the society of plenty, the need for a systematic search and development of new markets is growing. at the same time, marketing serves as a definite concept for the enterprise management and employees, the specific territorial unit authorities. first of all, territorial marketing assumes taking into account the area’s needs and interests in the pursued regional policy. in this case, it is a certain territory, designated by the territorial unit limits or entities that are a part of a single economic space. the unified economic space assumes goods, services, money free movement, as well as the free movement of labour within the boundaries of the territory; common language, land and capital that are necessary for a set of welfare production. baltic journal of economic studies 328 vol. 4, no. 4, 2018 territorial marketing significantly differs from enterprise marketing , namely: 1) there is a wider range of marketing technologies that are used as far as the content of territorial marketing is complex; 2) territorial marketing is carried out on the territory defined by the boundaries (administrative, geographical, economic, informational and other), within which there are enterprises and organizations. the totality and functioning of enterprises and organizations create a single economic space that requires appropriate economic and organizational interaction: socioeconomic integration, share co-financing, the creation of temporary creative groups or other forms of management; 3) enterprise marketing focuses on the choice of the optimal distribution channels, the main task of territorial marketing is to search, create, and advertise such advantages of a territory that could be interesting for the potential labour force, investors, shareholders; 4) on any local territory, there is the concentration and intersection of economic interests of area population and subjects that live outside the area while it is necessary to recognize the parity (equality) of the interests of all subjects – the carriers of economic interests. orientation to meet the needs of the indigenous population or those who permanently reside in the territory requires their interests to be prioritized that leads to inconsistency of interests and becomes the basis of the contradictions that require special measures for solving; 5) competitive advantages of the territory may not have value form that causes the diligence work to create the image of the territory as a special product. the elaboration of territorial marketing development strategy is based on a number of prerequisites (bagautdinova, 2012; chandler, 2015; isoraite, 2009; runielt, 2014): – firstly, it should be considered that the area has its own history and industrial structure including the industrial and social infrastructure that can and should be used for strategy development; – secondly, the trajectory of the area development must be taken into account both in the historical retrospective and in the planned perspective. it can be achieved through the definition of possible “growth zones”, which, in turn, assumes accelerated development of industries, sub-sectors or individual productions; determining the main directions for innovative development; reduction of the production of certain products, which may occur for various reasons (aging, resource base exhausting, etc.); accounting of direction of capital overflow and diversification, and so on; – thirdly, the work over complex and targeted regional development programs should be based on the monostructure of the industry of domestic cities (especially in the mining and heavy industry). in such conditions, the accelerated development of light industry and services, including business services will be the purpose of these programs. in this regard, special attention should be paid to supply management as the most important component of the market. consequently, the essence of territorial marketing is based on socio-economic, investment-innovation, organizational and economic, institutional relations that are dominant in society. certain requirements are putting forward to these relations: – socio-economic relations – property relations, labour relations, economic interests forming, income distribution, national relations forming, social services distribution; – organizational and economic relations – management and control, functions delegation, resources allocation, incentives, cooperation and specialization, regionalization; – institutional relations – legal, normalization, external effects, contract, transaction costs; – investment-innovation relations – between demand and supply, between investors and subjects of the territory, between households and the state, between the business and the state, between market availability and potential sellers. 3. area marketing potential and conditions for its forming forming the area as an independent socio-economic entity assumes the creation of the potential, which will effectively form, correct, and develop the economy of the area. the area potential, from the marketing point of view, is understood the system of interconnected, interdependent, and interacting factors that provide an effective and progressive area development both nowadays and in the future. the combination of factors that characterise the area potential can be divided by a number of features: – on a spatial basis, one distinguishes internal potential (that is, factors inherent in the region) and an external one (factors that operate in the region); – on a temporary basis, territorial marketing is divided into the existing potential (area’s resources) and possible (factors that can be used in the future or reserves); – by genesis, the area potential is divided into natural, economic, and social. effect of natural, economic and social factors on the regional development can be considered as one of the methods of conscious regulation of the regional reproduction territorial proportions in accordance with economic laws. the area potential has a complicated hierarchy structure. in the most general form, it can be divided into natural, economic, social, human, national. the potential forming is determined by the specific conditions, which together give impetus to the development of the marketing component of the areas’ potential, such as: raising the level of education and self-education, material incentives, personnel training, baltic journal of economic studies 329 vol. 4, no. 4, 2018 social benefits, moral stimulation, working conditions, income, unemployment cutting, raising life level and quality, ecology, economic indicators of households, etc. (systematized by (isoraite, 2009; simeon, buonincontri, 2011; chandler, 2015)). any territory existing in a competitive environment, regardless of its size, is forced to promote itself. the influence of various factors assists or does not the promotion in the local and foreign markets that form the marketing potential. despite the deep economic crisis, reforms and transformations that take place in the country ensure forming competitive environment. in this regard, the behaviour of all economic entities is largely conditioned by rigid competitive conditions, which are formed both at the level of the country as a whole and at the level of specific regions, and therefore, the marketing component comes to the fore, providing a systematic development of the region. as a result of all the above, it can be articulated that the area marketing potential is a set of natural, economic, social, national, human (labour, demographic) resources that ensure sustainable socio-economic development of the territory, its competitiveness and positioning in the domestic and world markets on the basis of expanded reproduction in accordance with economic laws. however, it should be noted that the promotion of the area under the absence of its potential, arrangement, without creating the appropriate investment and innovative climate, and a number of other prerequisites are an ineffective business. in other words, the arrangement of the territory, its compliance with the public level of needs satisfaction are important prerequisites for the area competitiveness, its potential forming and development, without which to go to the marketing research is at least irrational. in this case, achieving the desired effect is unlikely. all factors that may influence the formation and development of the marketing potential of the territories should be taken into account (figure 1). the presented groups of factors clearly reflect the peculiarities of the area marketing potential formation. therefore, external factors that shape the objective prerequisites for development must be taken into account, but the impact on them is difficult. at the same time, internal factors mainly related to general arrangement, controlled territories, and the possibility of their improvement and development are obvious, especially in the framework of the innovative process, an increase of investment attractiveness, the creation of competitive jobs, etc. 4. the infrastructure of areas marketing potential in order to make reasonable and balanced decisions, it is necessary to monitor the trends of transformational shifts in the form of market research, despite the recognized inertia of the area structure. in each specific territory, the infrastructure peculiarities form its marketing potential; it is just a reflection of such shifts. the infrastructure of the areas marketing potential consists of three blocks (bagautdinova, 2012; popkova, dubova, 2013; runielt, 2014): – block і – social infrastructure: population service, education infrastructure, health infrastructure, factors for forming the marketing potential of areas internal factors external factors level of education experience management style population income level labour motivation management the volume of investment in human capital development progressive forms of labour organization safety and labour protection state regional policy the system of personnel training and advanced training new jobs creation the demographic situation in the region social policy that provides social benefits state of the city and the countryside infrastructure quality of population life scientific and technological progress state of the labour market marketing potential of areas improving the quality of life of the population in territorial units figure 1. factors of areas marketing potential forming source: compiled by the authors (isoraite, 2009; simeon, buonincontri, 2011; anoshkin, 2014; popkova, dubova, 2013)) baltic journal of economic studies 330 vol. 4, no. 4, 2018 consumer services infrastructure, public transport infrastructure, culture, sport, and leisure facilities; – block іі – market institutional infrastructure: managing subsystem, organizational subsystem, material subsystem, information subsystem, credit and financial subsystem, personnel subsystem, regulatory subsystem, other (marketing organizations, leasing, innovations, etc.); – block ііі – industrial infrastructure: enterprisesproducers, all types of transport, reservoirs, water supply, electricity, gas supply, heat supply, inter-branch and city heat networks, product quality systems. the process of infrastructure formation and development is a combination of three blocks, each of which is necessary, important, and prone to changes. especially large number of transformations due to the objective factors and the flexibility of processes occur in market institutional infrastructure, where the largest number of factors and regular and objective shifts take place. the influence on these shifts of new and changed economic interests of various economic entities is definitive. in addition, the interests of international business influence the areas’ potential development, which is also facilitated by processes that have begun and entered into force over the years of economic transformation. these considerations allow making the following conclusions about territorial marketing: 1. the need to form the areas marketing potential and to usefully use its toolkit for diagnostic of the area state, the availability of competitive advantages and a generalization of the assessment of area economic policy. 2. the use of marketing tools and techniques that lies at the crossroads of regional economics and classical marketing cannot be considered a universal tool. if the area does not have, for example, transport infrastructure, marketing methods are very narrow. 3. diagnostics of the area state through the prism of territorial marketing allows deeply and comprehensively analysing the problems of the area or territorial unit, ranking the tasks, identifying the contradictions and ways (methods) for their solution that will increase the area marketing potential. in other words, the complex use of marketing methods assumes the creation of certain prerequisites for widespread use of marketing tools in shaping the area potential. each area has many organizational and legal forms, a diverse range of resources, markets, potentials, and a variety of tools and opportunities. the territorial marketing research allows seeing more clearly the features and possibilities of each territorial formation, outlining the future as a separate area, as well as the directions of its possible integration processes, including integration to the international sphere. the contradictions, which are the inconsistencies of interests at the regional level, are the most important prerequisite for developing the territorial marketing programs that shape its potential. it should be emphasized that territorial marketing contributes to the solution of emerging contradictions. it happens often indirectly due to the accounting of the most important affecting factors and scrupulous everyday work to establish the regional management mechanism. 5. methodology for the assessment of territorial marketing functioning in today’s economic conditions that are characterized by complete economic independence of areas and responsibility for their livelihoods, as well as the uncertainty of external environmental factors, the main condition for their survival is to increase the efficiency and sustainability of functioning. the mechanism of territorial marketing stable functioning should promote in the best way area’s autonomy and goals. in this regard, there is an objective need to develop tools for assessing the stability of the areas’ functioning, including the impact of the marketing system. this will provide an efficiency increase and functioning stability and justify the practical significance in modern conditions. the following basic indicators of the sustainable functioning of territorial marketing can be integrated into the system under their evaluation: – financial stability: equity, debt-to-assets, leverage, interest coverage, long-term investment security, capital, current assets to equity, current ratios, equity multiple; – business activity: ratios of capital turnover, inventory turnover, return on assets, sustainable growth, receivables turnover, finished goods turnover, working capital turnover, equity capital turnover borrowed capital turnover; – profitability: ratios of return on assets, equity, current expenses, borrowed capital, fixed assets turnover, profit margin; – technological stability: ratios of suitability, renewal, and growth of fixed assets; – social stability: ratios of staff stability, average wages in the enterprise to the average wages in the industry, the provision of normative working conditions; – ecological stability: ratios of warehousing, charges for air pollution by stationary objects, charges for air pollution by mobile objects, above-limit pollution payment. this system completely reflects mathematical processing of the results of the areas integrated stability. to achieve the ratios’ homogeneity, known method of normalizing the zero and negative values of the ratios is used. the method involves calculation of the normalized value of the negative ratio. the formula for determining the standardized value of each ratio looks like this: k k k n n= max , (1) where kn – standardized value of ratio that reflects the state of enterprises in the nth analysed area; kmax – the maximum value of ratio that is taken as standard; kn – value of the ratio of enterprises in the nth territory. baltic journal of economic studies 331 vol. 4, no. 4, 2018 after determining the standardized ratios included in the corresponding generalized index, in the frame of this methodology, all the above indicators are combined into a single integral indicator. this indicator allows making a conclusion about the possibilities of surveyed enterprises’ further development and is determined by using the expert evaluation method taking into account indicators heterogeneity: k a an n i aggint = × = ∑ 1 , (2) where k int – integral performance indicator; an – the weight of the nth generalized stability index in the integral one, determined by the expert evaluation method; aagg – nth aggregate indicator of financial stability, business activity, profitability, technological, organizational, social, and environmental sustainability; n – the number of generalized indicators that determine the integral functioning stability. the proposed methodology is universal since it allows evaluating the areas of different branch directions and comparing them with each other in order to identify the greatest functioning stability. it also gives an opportunity to determine the dynamics of area functioning stability and to identify separate reserves of its growth for determining its ability to adapt to environmental changes. the application of a flexible calculation algorithm allows concluding that the area potential is sufficient for the analysed period of time. in figure 2, the model of planning and management of territorial marketing is presented. when constructing the model, an attention is focused on the program-target approach and methods of system mission, strategic goals and objectives, the activity of area economic entities legal regulation and control system forming analysis of production and resource potential of area economic entities assessment of personnel potential of area economic entities, management formation swotand step-analysis of business processes of area economic entities conceptual aspects development for marketing activity development. objective: to determine directions of state policy in the field of economics and to identify and evaluate development trends in the markets of different levels creation of a unified commodity circulation system for the local area on the basis of long-term contracts and a flexible pricing system unification and standardization of production and business processes between suppliers and buyers internal organizational, trade and economic relations transformation on the basis of interest in achieving goals of area economic entities creation of unified information exchange system based on principles of algorithmization in marketing planning strategic marketing planning carrying out complex marketing research for area market forming and functioning by the segments of economic entities and consumers, commodity range, etc. creation of marketing plan implementation programme e s t i m a t e s o f a n o v e r a l l p e r f o r m a nc e i ndi c a t o r o f t e r r i t o r i a l m a r k e t i ng marketing plan adjustment for socio-economic development of territorial units s ystem analysis, control, evaluation of im plem entation effectiveness figure 2. model of territorial marketing planning and management system source: improved by the authors (grishina, yefimova, 2011; kozhukhіvska, parubok, petrenko, 2017; isoraite, 2009; megri, bencherif, 2014; venter, jansen van rensburg , 2014)) baltic journal of economic studies 332 vol. 4, no. 4, 2018 analysis. the complex nature of the model assumes the use of various tools and mathematical methods for representing marketing process objects. the developed model relates to the organizational-economic group of models. it allows optimizing the parameters of the measures in all phases of the marketing process in accordance with the given criteria, which contributes to solving the target task of marketing planning. taking into account the synergetic effect of marketing tools in the enterprises of the area and suggestions on the marketing planning system, it is offered to pay a particular attention to the complex use of marketing tools for planning the economic activity of the area subjects in goods and services design, production, and circulation, taking into account the peculiarities of existing and future state policy. 6. conclusions the theoretical comprehension of the socioeconomic foundations of territorial marketing allows making conclusions about the development of the general theory in the direction of its formation given the historical and practical preconditions regarding the area independent development within individual territorial formations, their associations, interconnected megapolis elements and interterritorial associations, the operation of territorial production complexes. in the article, territorial marketing means a set of territory (territorial unit) management principles in order to achieve sustainable economic development, complete realization of economic interests of its population and means or methods for creating opportunities and conditions for attracting potential and real participants of transactions, which are carried out in this area and by area subjects. the development of territorial marketing strategy is based on a number of prerequisites: history and industrial-production structure survey; definition of possible “growth areas”; increased attention to the offer management as the most important component of the market. territorial marketing is based on socio-economic, organizational and economic, and institutional and economic components of public relations and has its own requirements for these relations. there is the difference between enterprise marketing activity carried out in a certain area for the promotion of the company’s products and territorial marketing carried out in order to promote it within a single economic space, which includes not only the territory of the country but also the international aspects of the territory’s functioning. for this purpose, commercial and non-commercial marketing is used, as well as all its types and varieties, because the essence of territorial marketing is complex. in any limited area, there is an intersection, localization, and polarization of economic interests of both the population of this area and those who live outside it. this is an objective precondition for the inconsistency of interests, the emergence of contradictions, and the search for ways for their harmonization. the conditions for forming the area marketing potential, its essence, functions are explored and formulated; the infrastructure model is offered; features of forming the model in industrial, social, and marketinstitutional spheres are highlighted. the method of integral indicator estimation for territorial marketing stable functioning, where indicators of financial stability, business activity, profitability, technological, intellectual, social, and environmental sustainability are used, is proposed. references: anoshkin, a. (2014). marketing territorii v internet-prostranstve [marketing of territory in the internet-space]. problemy sovremennoi ekonomiki, 2, 273-275. bagautdinova, n. (2012). the regional development strategy based on territorial marketing (the case of russia). world applied sciences journal, 18(18), 179-184. bendle, n. t., & wang, x. s. (2017). marketing accounts. international journal of research in marketing, 34, 604-621. black, john, hashimzade nigar, & myles gareth (2009). a dictionary of economics. oxford university press. retrieved from: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref9780199237043 chandler, a. d. (2015). strategy and structure. cambridge mit press, 480 p. grishina, l. o., yefimova, g. v., grishina, n. v. (2011). assessment of the region economic potential while shaping its development strategy [otsinka ekonomichnoho potentsialu rehionu pry formuvanni stratehii yoho rozvytku]. scientific notes kirovohrad national technical university. economic sciences. retrieved from: http://nbuv.gov.ua/ ujrn/npkntu_e_2011_19_17 isoraite, m. (2009). theoretical aspects of marketing strategy. ekonomika ir vadyba: aktualijos ir perspektyvos, 1(14), 114-125. kozhukhіvska, r ., parubok, n., petrenko, n., podzihun, s. and udovenko, i. (2017). methods of assessment of efficiency of creating regional innovative clusters for dynamic development of economics. investment management and financial innovations, 14(3), 302-312. doi:10.21511/imfi.14(3-2).2017.01. megri, z., bencherif, f. (2014). the effect of territorial marketing on city image valuation: an exploratory study in algeria. international journal of marketing studies, 4(6), 145. baltic journal of economic studies 333 vol. 4, no. 4, 2018 popkova, e. g., dubova, ju. i. and romanova, m. k. (2013). designing the territorial marketing strategy on the principles of cluster policies. world applied sciences journal, 22(4), 571-576. runielt, r. p. (2014). strategy, structure, and economic performance. boston: harvard business school press, 462 p. simeon, m. i., buonincontri, p. (2011). cultural event as a territorial marketing tool: the case of the ravello festival on the italian amalfi coast. journal of hospitality marketing & management, 3-4(20), 385-406. schubert, t. (2010). marketing and organizational innovations in entrepreneurial innovation processes and their relation to market structure and firm characteristics. review of industrial organization, 2(36), 189-212. taraniuk, k. v. & taraniuk, l. m. (2016). methodological basis of risk management system with regard to industrial activities in the course of radical transformations. economic annals – ххі, 156(1-2), 67-70. venter, p. & jansen van rensburg, m. (2014). strategic marketing: theory and applications for competitive advantage. oxford university press. voynarenko, m. p., bohatchyk, l. a. (2014). cluster tools usage for subregional strategies development to improve the competitiveness of regional economy [vykorystannia klasternoho instrumentariyu pry rozrobtsi subrehionalnykh stratehiy pidvyshchennya konkurentospromozhnosti ekonomiky rehioniv]. aktualni problemy ekonomiky. retrieved from: http://nbuv.gov.ua/ujrn/ape_2014_8_22 baltic journal of economic studies 93 vol. 4, no. 4, 2018 corresponding author: 1 mykolayiv national agrarian university, ukraine. e-mail: honcharenko@mnau.edu.ua 2 mykolayiv national agrarian university, ukraine. e-mail: kozachenko15@ukr.net 3 mykolayiv national agrarian university, ukraine. e-mail: moroz@mnau.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-93-99 informational support of the rural areas’ development iryna honcharenko1, liliia kozachenko2, tetiana moroz3 abstract. the purpose of the article is to determine peculiarities of using modern communications and telecommunications, virtual space, assessing the availability of relevant information that reflects all aspects, processes which are taking place in the economic, social life, and ecology of rural areas. another purpose is the development of directions for solving existing problems. methodology. methods for theoretical synthesis, analysis, and comparison were used in the process of determination of features and substantiation of the basic concepts. results of the research. it was revealed that in the information provision of ukrainian rural areas functioning has accumulated a considerable potential. there are such crucial strengths as an existence of a developed infrastructure of state statistics, hierarchically structured organizational structures (centre, region, district) that can provide information collection and processing, as well as its distribution in the opposite direction. also, there are highly skilled it specialists and organizational opportunities for their training and retraining. among other points are the following: an existence of the databases, where scientific and technical information were accumulated; an existence of the databases of modern agricultural technologies; and there is also a developed research infrastructure. but today, the level of use of automation tools continues to remain extremely low in the rural management authorities in ukraine. the long-standing experience in using information technologies by enterprises and organizations is practically not used in the management of territories. full informational support of rural areas is possible in case of the organization of the qualitative monitoring of their development with simultaneous taking into account further forecasts for a set of most characteristic indicators for the territory in a certain period of time. a promising task is the integration of ukraine’s information systems into the international information space. this task involves synchronizing national standards, methodologies, and tools with international standards, as well as improving communication with international scientific and information centres. practical implications. the creation of an integrated information and communication system of rural areas will help to solve the tasks of effective territorial management. the main components of this system will be the following: the developed infrastructure for access to information; informational systems of local self-government bodies; informational monitoring systems; e-commerce and marketing systems; consulting electronic services; distance learning and retraining systems. within the enterprises, it is necessary to use information and computer technologies for the accumulation of data about the social, economic, and ecological activity. it is advisable to supplement the monitoring information regarding the development of rural areas by subjective assessments, results of sociological surveys. an improvement of the software system “household accounting for village councils” involves the use of clientserver technology with the combined use of telecommunication and print media. a promising area for research and management of rural areas on the basis of the spatial representation of processes is the use of geographic information systems and global positioning. value/originality. the integrated informational and communicational system of rural territories will ensure the efficiency and quality of their information support and will become the basis of effective management. key words: informational support, rural territories, development monitoring, geo-information systems, information and computer technologies. jel classification: c82, d80, p32 baltic journal of economic studies 94 vol. 4, no. 4, 2018 1. introduction an efficient development of rural areas is a prerequisite for sustainable development of the country. the issue of the formation and improvement of their infrastructure are the ones of particular relevance, the priority direction of this issue should be considered an information support. under the modern conditions of innovation development, with the active use of the latest means of communication and telecommunications, virtual space, there is an objective need of the availability of relevant information that reflects all aspects, processes, and their features, which take place in economic, social life, and ecological situation of the rural territories. in the general sense, an information provision is a set of methods and facilities for the placement and organization of information, the quality of which largely depends on the reliability and quality of the management decisions (oliynichenko, 2010). an informational support of the rural areas’ development is a link that integrates production, local government, community, and provides an opportunity to receive, group, and analyse distributed and centralized information resources. the main sources of information are state statistics bodies, profile ministries, regional and district administrations, and united territorial communities. also the results of a poll of representatives of rural areas, public opinion, expressed during scientific conferences, seminars of specialists, meetings of citizens are very important. the main problems of informational support of rural areas are: insufficient level of information flows for all key users; the usage of paper technologies in information gathering, processing, and analysing; lack of the statistical indicators at sectoral, regional, and state levels. 2. features of the monitoring of the rural areas’ development formation of the complete information base for the future trends in rural areas forecasting is possible by the organization of qualitative monitoring ( john c. allen, don a. dillman, 2018). under this term, we understand the system of observation, assessment, and forecast of their economic, social, and ecological status, which makes it possible to characterize all peculiarities of development of a certain rural territory, also taking into account the negative and positive economic, social and environmental transformations associated with the transition of the rural settlement from one state to another. one of the features of the monitoring of the development of rural areas is the continuous observation and assessment, with taking into account further forecasts for the set of indicators that are the most characteristic for the territory in a certain period of time. the main goal of the development of monitoring system’ functioning is the thorough study of the state and trends of rural areas and their separate components (christoforou, 2017). the main function to our opinion should be considered an informational one, which provides for users timely, reliable, complete, and systematic information about economic processes and trends of their development, social situation, and ecological status of rural areas, identification of problems and identification of ways to solve them. under such conditions, the scheme of the monitoring process of rural development should include the following steps (figure 1). the main object of the development of rural areas’ monitoring is the processes that occur within them (figure 2). an effective functioning of the system of monitoring and regulation of rural development must be ensured by the competent state authorities on the appropriate legal basis; co-ordinated work between the management bodies on the collection, transmission, and storage of primary information (agencies of statistics within the district), processing and systematization of received information, calculation of integral indicators (departments of economic management of the district state administrations), calculation of the index of economic, social, and ecological development of a certain rural territory and its monitoring (departments of regional development of rural areas of district state administrations), normative-legal forms of storage and protection of information, formation of territorial (district) information funds for monitoring and control of the development of rural areas, which will guarantee information security. 3. foreign experience in informational support of rural territories the european commission aims to create a comprehensive digital society that benefits from a single digital market. the digital society in europe is developing thanks to the benefits provided by the digital single market strategy. the european commission is taking concrete measures to promote cross-border digital public services and to ensure the use of digital tools and systems in order to provide better e-government for citizens and business. the european commission develops a policy aimed at rising european citizens’ digital skills with such initiatives as employment programs for europe. these measures will help europe to grow into a more digital society (creating a digital society, 2017). the european commission launches the “european cloud technology initiative – creating a competitive data and knowledge economy in europe” to take advantage of the data revolution. under this initiative, baltic journal of economic studies 95 vol. 4, no. 4, 2018 the european data infrastructure will combine supercomputer world-class capabilities with high-speed connectivity, advanced data and software for science, industry, and the public sector. it will stimulate open science and innovation by providing researchers with a wealth of scientific data (digital single market policy e-infrastructures, 2018). in canada, rural development and rural development issues are addressed by redi (rural economic development intergovernmental), which provides financial and technical resources for the development of existing ones and the creation of new types of economic activities, thus helping farmers increase the economic potential of their villages (cornelia butler flora, jan l. flora, stephen p. gasteyer, 2018). another positive experience is the activity of the governments of developed countries, which attract young people for the more effective development of rural areas. they develop special programs designed to support the younger generation in the development of entrepreneurship in the countryside and agricultural activities (brian mcgrath, 2017). one of the real examples of this is france, where a young person who presented his own real project for the development of a personal household has the opportunity to receive a state subsidy for development and settlement, the volume of which depends directly on the settlement area, the farther away from the city, the greater the amount and the long-term special loan with reduced interest (asimina christoforou, elena pisani, 2016). also, the state cares about raising the skills of young people at the expense of specially created funds. the canadian government has developed a state program “achievements of rural youth”, the main purpose of which is to improve the skills of rural youth (tony jackson, etienne nel, sean connelly, 2017). the implementation of the program provides organization and implementation of applied and theoretical training, which provide receiving of knowledge and skills for initiating and supporting the economic development of rural areas. 4. information support for the development of rural areas in ukraine the problem of informatisation of rural territorial entities requires a comprehensive solution. researches confirm that the information provision of functioning і stage іі stage ііі stage iv stage v stage vi stage vii stage monitoring of the social status demographic and migration processes monitoring; monitoring of the state of the social infrastructure; monitoring of the labour market. economic situation monitoring monitoring of the state and trends of agricultural development; monitoring of the income level of the rural population. formation of the monitoring tasks preparation of the information resources (construction of the dynamic series) analysis of the received information (formation of quantitative and qualitative indicators of the state and development of rural areas) short-term forecasting (revealing trends of the further development) evaluation and interpretation of the results conclusions monitoring of the ecological state monitoring of the natural lands, soils, water objects state; monitoring of fertilizer application technology. observation of the determined indicators figure 1. the main stages of the development process of rural areas’ monitoring baltic journal of economic studies 96 vol. 4, no. 4, 2018 of rural territories has accumulated considerable potential: there is a developed infrastructure of state statistics; hierarchically structured organizational structures (centre, region, district) are available and can provide information collection and processing, as well as its distribution in the opposite direction; there are highly skilled it specialists; available organizational opportunities for training and retraining of it specialists; scientific and technical information is accumulated and databases are created; there are databases on modern agricultural technologies; there is a developed research infrastructure. but today, the level of use of automation tools in the rural development authorities in ukraine remains extremely low. the long-standing experience in using information technologies in enterprises and organizations is practically not used in the management of territories. despite the local use of computer technology, it should be noted that the regional level management systems in ukraine today are based mainly on paper technology. the regulation mechanism objectives of monitoring of the development of rural areas t a s k implementati on toolkit organization of continuous observation and receiving timely, accurate, and complete information about social, economic, and environmental processes on a specific rural area; analysis and evaluation of the received information; providing users with the received information in accordance with the established procedure; preparation and implementation of the recommendations and measures for improving the socio-economic and ecological status of rural areas. selection of a specific research object (territory of a particular district, settlement council); formation of the information base; selection of the conducting methods; definition of the execution's terms. 1st stage gathering information 2nd stage data processing 3rd stage analysis and evaluation territorial statistics authorities; territorial institutions and organizations; territorial social insurance funds; analytical and information centres. departments of district state administrations; department of development of rural areas of the district and region. departments of regional development of the regional state administrations. economic policy support and development of the economy’s branches; stimulation and support of innovation and investment activity. social policy ensuring the decent living standards of the rural population, income level; lowering unemployment. environmental policy support and preservation of a sustainable ecological balance. database about the level of rural areas development receipt of reliable and complete information about the socio-economic situation of the village; an increase of the state authorities’ work efficiency in order to ensure sustainable development of rural territories; taking into account the positive and negative indicators of the country’s development that affect the development of villages; development of forecasts as the basis for further operational and strategic planning. d e v e l o p m e n t o f t h e r u r a l t e r r i t o r i e s figure 2. structural and functional scheme of the monitoring of rural development baltic journal of economic studies 97 vol. 4, no. 4, 2018 to the problems of existing information systems of rural areas should be attributed, first of all, the lack of efficiency and reliability of collection, systematization, processing, and dissemination of information because of the use of outdated technologies; the presence of a significant proportion of poor quality information; shortage and turnover of personnel; significant lack of financial resources; the implementation of narrowminded interests in the development of information projects, the lack of an integrated approach to the formation of information resources of the territory; the limited technical possibilities of access to national and world information resources for the inhabitants of rural areas. monitoring of transformational processes in the industrial and social spheres of rural areas is carried out according to the information contained in the passport of the rural settlement. it combines a set of indicators that characterize: socio-economic, demographic, ecological situation, employment of the population, material and technical support, availability and use of land resources, social infrastructure objects, engineering support, etc. (besdyshna, 2017). generalized information is the basis for programs of socio-economic development of territories at the local, district, oblast, and state levels developing and is used by managers and specialists of local, district, and regional levels, agricultural advisory services, scientists, teachers of higher and secondary specialized educational institutions who are involved into solving the problems of rural development and improving the living standards of the rural population. we consider that it is appropriate to supplement the monitoring information regarding the development of rural areas by subjective assessments and results of sociological surveys. such measures will further provide users with complete and realistic information about the economic, social, and environmental processes occurring on the territory of rural settlements. within the country, the program complex “household accounting in village councils of the district (the city)” functions as a continuation of the program complex “household accounting for village councils” which, in its turn, involves the formation of consolidated information of village councils. the information base of indicators is updated and stored. the complex is intended for monitoring the development of rural areas of the district (city) and could be used by managers and specialists of district level, agricultural advisory services, scientists. the current issue is the improvement of the software complex using client-server technology and the joint use of telecommunication and print media. a tool for the practical implementation of new approaches to research and management of rural areas based on the spatial representation of processes is geoinformation systems (kaganovich, s. prisyazhnyuk, a. prisyazhnyuk, 2017). land plots, agricultural land, industrial premises, reservoirs, forest areas, roads, residential buildings have certain space and size, so only spatial database technology can guarantee adequate digital representation, provide analysis of this information, and enable the development of forecasting options for development. for example, the current and retrospective monitoring of agro-ecological characteristics of soils, the relief of land areas, humidity, environmental pollution, distribution of nutrients in soils, monitoring of the crop cultivation, and the use of areas are the base for the geoinformation system of land use of rural settlements. on the basis of monitoring data and economic-mathematical modelling, it is possible to plan the use of land. analysis and processing of information provide a calculation of indicators of economic efficiency of planned and actual measures and possible agroecological consequences. at the first-level stage of gis, the receiving (input) and visualization of the data about the location of land plots and their characteristics (cadastral information, agro-technical groups of soils, their class quality, land reclamation, nutrient content, various background information) are made (zhanat amirzhanova, velta parsova, tlevhan ahmedzhanov, karlygash esimova, 2017). the gis of the agrarian enterprise should contain the following guides: the guide of coefficients of corrections for granulometric composition of the soil; the guide of the agro-technical groups of soils, which are characteristic for the corresponding zone of ukraine with marks of the crop yields; the guide of the nutritional value of forage in the southern steppe of ukraine; the guide of the norms of feeding animals (minimum and maximum permissible); the guide of the norms of crop nutrient requirements (npk) depending on the output. at the second analytical level – optimization of use and management of available resources is carried out on the basis of mathematical modelling by taking into account ecological and economic aspects of management. the criteria for the optimization and its purpose are determined. the visual distribution of cultures on land plots is issued. at the analytical level, such a system should support the decision-making process that means that in the dialogue mode, through the iteration process, the parameters are adjusted and the solution of the models is found. gis displays after each decision the received data set visually and indicates possible consequences or contradictions. after that, it is possible to adjust the data if the conclusions on these or those parameters are not acceptable, or on the basis of the decision, a managerial decision is made. the use of global positioning systems is also a promising direction for rural areas (gps – global positioning systems). such systems are already quite widespread. the simplest navigator is able to determine the speed, the direction of travel, and deduce it to the destination point. the accuracy of the location is baltic journal of economic studies 98 vol. 4, no. 4, 2018 approximately 15 meters. gps-navigators are capable of solving both simple navigation tasks (to reach the destination) and complex (choosing the most optimal route) (christopher j. hegarty, john m. foley, sai k. kalyanaraman, 2015). the use of the internet should be considered as a factor of the information society development and provision of the conditions for the socio-economic development of rural areas, in order to increase access of the rural population to infocommunication services. in this regard, state support should be provided for the development of the internet in rural areas of ukraine and the provision of such services as audio and video communication, e-education, electronic medicine, the creation of distributed scientific networks, e-government, e-commerce, etc. should be encouraged. a considerable attention should be paid to the development of all elements of the telecommunication infrastructure of the ukrainian segment of the internet, which will increase the range of services and reduce their value in different regions of ukraine. in our opinion, it is necessary to create an integrated information and communication system of rural territories, the main components of which will be: developed infrastructure for access to information; the information systems of local self-government bodies; the informational monitoring systems; e-commerce and marketing systems; the informational and consulting electronic services; distance learning and retraining systems. it should be also noted that the integration of ukrainian information systems into the international information space becomes especially relevant. this task involves synchronizing national standards, methodologies, and tools in accordance with international standards, as well as improving communication with international scientific and information centres. the development of informatisation and telecommunications of ukrainian rural areas will enable to achieve significant results in all other types of social and economic activity of society at the expense of a clearer organization, economical spending of all kinds of resources (material, energy, labour, financial, etc.), improvement of working conditions and life of the rural population. 5. conclusions monitoring is the main tool of information provision and the basis of a complete information base for forecasting further trends in rural areas. monitoring provides users with timely, reliable, complete, and systematic information about economic processes and trends of their development, social situation and ecological condition of rural territories, identification of problems and determination of ways of their solution. on the bases of departments of agriculture and food, it is worth to organize analytical and information centres, district information funds that will directly monitor the rural areas within the defined area at the district level. within the enterprises of rural areas, it is expedient to use informational and computer technologies for the accumulation of data about social and economic activity, ecological state. references: kaganovich, a. a., prisyazhnyuk, s. p., prisyazhnyuk, a. s. (2017). an object-oriented information model for territorial system management. geojournal. electronic resources. retrieved 14 december 2017 from: https://link.springer.com/article/10.1007/s10708-017-9838-z asimina christoforou, elena pisani (2016). social capital and rural development in southern european regions: the case of eu-funded leader projects. handbook of social capital and regional development. united states of america: edward elgar publishing limited, pp.391-150. besdyshna, y. s. (2017). informatsiyne zabezpechennya upravlinnya v ahrarnomu sektori ekonomiky: stan ta perspektyvy udoskonalennya [information provision of management in the agrarian sector of the economy: the state and prospects of improvement. oblik i finansi, vol. 78, pp. 6-12. brian mcgrath (2017). rural youth in local community development. young people in rural areas of europe. new york, london: routledge, pp. 127-151. christoforou, a. (2017). theory and empirics. social capital and local development in european rural areas. palgrave macmillan: cham, pp. 43-60. christopher j. hegarty, john m. foley, sai k. kalyanaraman (2015). global positioning system. digital avionics handbook, third edition. new york, london: crc press, pp. 36-42. cornelia butler flora, jan l. flora, stephen p. gasteyer (2018). community capitals and community development in a changing world. rural communities: legacy and change. new york, london: routledge, pp. 297-469. creating a digital society (2017). electronic resources. retrieved 17 august 2017 from: https://ec.europa.eu/ digital-single-market/en/policies/creating-digital-society digital single market policy e-infrastructures. (2018). electronic resources. retrieved 23 april 2018 from: https://ec.europa.eu/digital-single-market/en/policies/einfrastructure john c. allen, don a. dillman (2018). gaining perspective: a framework for analysis. against all odds rural community in the information age. new york, london: routledge, pp. 25-49. baltic journal of economic studies 99 vol. 4, no. 4, 2018 oliynichenko, o. m. (2010). informacijne zabezpechennja jak vazhlyva skladova procesu pidgotovky, pryjnjattja ta kontrolju realizacii upravlinskogo rishennja na pidpryjemstvi [information provision as an important component of the process of preparing, adopting and controlling the implementation of management decisions at the enterprise] ekonomika harchovoi promyslovosti, vol. 3, pp. 38-42. tony jackson, etienne nel, sean connelly (2017). a comparison of resource equalization processes for subnational rural governance and development: case studies of england, scotland, canada, australia, and new zealand. handbook of research on sub-national governance and development. united states of america: igi, pp. 117-150. zhanat amirzhanova, velta parsova, tlevhan ahmedzhanov, karlygash esimova (2017). improvement of geoinformation technologies on the basis of spatial data. journal baltic surveying, vol. 17, pp. 28-32. baltic journal of economic studies 209 vol. 4, no. 5, 2018 corresponding author: 1 institute for market problems and economic & ecological research of nas of ukraine, ukraine. е-mail: ksenkych@gmail.com orcid: http://orcid.org/0000-0002-7172-3551 2 institute for market problems and economic & ecological research of nas of ukraine, ukraine. е-mail: lana.bond@ukr.net orcid: http://orcid.org/0000-0002-1687-1172 3 international humanitarian university, ukraine. е-mail: sir79@ukr.net orcid: http://orcid.org/0000-0001-5148-4189 doi: https://doi.org/10.30525/2256-0742/2018-4-5-209-216 methodological provisions on the performance evaluation of agrarian producers and their cooperative associations in the production and supply chain oksana nikishyna1, svitlana bondarenko2, oksana zerkina3 abstract. the purpose of the article is to develop methodological provisions on performance evaluation of agrarian producers and their cooperative associations in production and supply chain on the basis of updated reproduction approach that is based on the use of net value added indicator. the research methodology is to conduct a critical analysis of existing scientific approaches to the assessment of value added; substantiate components of net value added; develop a structural scheme of methodological provisions in the duality of conceptual and methodological bases; substantiate a four-level system of estimating indicators using the net value added indicator; determine the possibilities and advantages of author’s methodological provisions. results. the authors prove the expediency of using the net value added indicator to assess the efficiency of both production and supply chains, as well as producers and their cooperative formations that are non-profit organizations. the components of net value added, which include wages, profit, and specific expenses of business entities in terms of the parts of the production and supply chain, are substantiated. the authors proposed a structural scheme of methodological provisions that united the conceptual and methodological bases, defined the main principles of evaluation: objectivity and accuracy, systemacity and complexity, efficiency, purposefulness, the priority of economic interests of the state (macrolevel). a four-level system of indicators is developed for estimating volumes and dynamics of net value added, reproductive product profitability, the structure of net value added, the efficiency of material and labour resources use. practical implications. methodological provisions can be used by commodity producers and their associations to assess the efficiency of operation in the production and supply chain, justifying the feasibility of establishing a cooperative in the region. also, the results of the analysis can be used by the state authorities during the definition of “gaps” in the chain and the justification of methods of selective regulation for its balanced development. value/originality. methodological provisions developed by the authors form the analytical foundation for making managerial decisions both at the micro level (producers, cooperatives) and meso and macro levels (regional and state authorities). key words: agrarian producers, cooperatives, production and supply chain, efficiency. jel classification: l10, l22, l50 1. introduction in a dynamic market, the realization of the potential of farms and private households that form the individual sector of the agrarian market, specialize in the production of low-income, labour-intensive but socially significant products, envisages the creation and development of cooperative production and supply chains (hereinafter – the psc). such chains combine commodity flows of agricultural cooperatives, allowing their members, including individual farms, to increase the value added of products, expanding their presence from one agrarian link to several links of the psc (storage, processing, sales of products), to reduce logistics costs, to increase the efficiency of small business entities. justification of the directions and mechanisms of state support for the creation and development of cooperative baltic journal of economic studies 210 vol. 4, no. 5, 2018 psc in ukraine necessitates the development of methodological support for assessing the performance of such chain organizations at the meso and macro levels. at the same time, it is important for members of agricultural cooperatives to evaluate the efficiency of the activity of a separate association (micro level). given its social orientation and non-profit status, the use of profit as the main performance indicator, unlike enterprises of other forms of management, is not feasible. thus, there is a need to change the main benchmark of the activity of cooperatives, which allows assessing the degree of realization of economic interests as of individual households – members of the cooperative, so of the state. in our view, such a benchmark is the value added indicator (hereinafter referred to as va), which is a universal criterion for evaluating the efficiency of systems functioning at micro, meso, and macro levels. 2. scientific approaches to the assessment of added value in economic theory, there are four scientific approaches to the interpretation of the essence, nature, and methods of calculating the value added: (1) reproductive; (2) statistical; (3) accounting; (4) logistics. the basis of the reproductive approach was developed by k. marx (marx, 1978). according to his theory, the newly created value added includes the amount of remuneration of workers who directly create a new value and the profit of enterprise owners. the statistical approach reflects the features of the macroeconomic accounting of the va based on the system of national accounts. the state statistics service of ukraine defines gross value added as the difference between the issue and intermediate consumption; by type of economic activity, gross value added is calculated as the sum of wages of hired workers, other taxes, except for other subsidies associated with production, and gross profit (mixed income). the term “gross” means that va includes the amount of fixed capital consumption (depreciation). in the interpretation of the “value added” and “intermediate consumption” indicators in the context of the classical economic theory, depreciation is an element of the latter (bratenkova, 2013). if by the statistical approach gross value added is identified with the income generated by a certain type of economic activity in the total gdp, then the added value by the accounting approach is estimated from the point of view of the material carrier of this quantity, that is, the concrete product. in the accounting, va of goods is calculated as the difference between the proceeds from the sale of the goods and the cost of the raw materials, supplies, and services purchased on the basis of the cost price of the products. in research, the methodology of accounting approach is used to analyse the va of certain goods. by the logistic approach, the added value serves as a measure of the process of forming value, which purpose is to offer the client tangible utility (hirna, hlynskyi, kobyliukh, 2012). 3. essence and components of net value added we suggest using an indicator of the added value of goods (services) for the analytical basis for constructing methodological provisions on the performance evaluation of agricultural producers and their cooperative associations in the psc. in economic theory, there is no single approach to the definition of content and components of value added. the modern encyclopaedia treats va (value added by processing) as the value of the sold product less the cost of materials purchased and used for its production. va equals revenues, including wages, lease payment, rent, bank interest, profits, and depreciation; in many developed countries, it serves as the basis for indirect taxation. another approach to the interpretation of the essence of value added is found in the economic dictionary: the value that is created in the production process at this enterprise and reflects its real contribution to the creation of the value of a specific product. in our view, this approach most deeply determines the nature of value added, hence it can be used for its interpretation at the chain level. thus, value added is the value created in the process of production of goods (provision of services) by economic entities of a certain level of the production and supply chain, which reflects the real contribution of this link in the formation of the value chain. va reflects the value added for the product when it passes through the chain from the original manufacturer to the end user. it is intended to measure the value created by economic entities on a certain link of the psc. total value added in the chain will include the sum of all newly created values of links; their number depends on the specifics of reproducing the product in certain geographical boundaries. in domestic and foreign science and practice, there is no single approach to the definition of resource components of va. in our opinion, in this aspect, two main approaches can be distinguished. the supporters of the first approach (hirna, hlynskyi, kobyliukh, 2012; ivanenko, 2012), along with the income and wages of employees, include the depreciation of non-current assets in value added. the supporters of the second approach (bulyga, kokhno, 2007; bratenkova, 2013) consider salaries and profits as the main components of va. in the classical economic theory, depreciation of non-current assets is a component of intermediate consumption. in terms of capital turnover, depreciation can be interpreted as consumption in a certain operating cycle of a part of the past materialised work (in the form of objects of fixed assets). in order to assess the enterprise’s results, the va indicator is more objective excluding the baltic journal of economic studies 211 vol. 4, no. 5, 2018 value of consumption of fixed capital. it is this indicator that reflects the real volume of the newly created value by the market participant, therefore, is more informative for analysis and management (bratenkova, 2013). we support the second approach and suggest using the net value added indicator in order to construct a system of indicators on its basis for assessing the performance of agricultural producers and their cooperative associations in the psc. the term “net” means that the va does not include depreciation of non-current assets. at the same time, its component is the specific costs that reflect the peculiarities of the reproduction processes of certain parts of the psc and are characteristic only for them. for example, for the breeding sector, it is expedient to include the costs of cleaning and sorting seeds for the specific costs, for agrarian one – the lease of land plots. thus, the formula for the calculation of net va in the links of the production and supply chain will have the following form: двч = зп + п + вс, (1) where двч – net value added, created by the psc link; п – a profit of business entities of a certain chain; зп – the wage of employees at enterprises of the link; вс – specific expenses of subjects of a certain chain link. 4. structural scheme of methodical provisions methodological provisions on the performance evaluation of agrarian producers and their cooperative associations in the production and supply chain, developed by the authors, combine the conceptual and methodological bases, the components of which are shown in fig. 1. the conceptual basis consists of theories of resources reproduction and the formation of a value c o n c e p t u a l b a s i s the theory of the reproduction of resources, the formation of a value chain the purpose of methodological provisions: multilevel assessment of the formation of net value added by the links of the production and supply chain as a methodical basis for making managerial decisions to ensure the balanced development of cooperative pscs tasks of methodological provisions: 1. analysis of the dynamics of changes in net value added and performance indicators in nominal and real terms; 2. analysis of the structure of net value added in the statics and dynamics behind chain links; 3. evaluating the effectiveness of using resources in the system; 4. determination of flow “gaps” in the psc according to the evaluation results; 5. qualitative assessment of the analysis results as the basis for making managerial decisions at micro and macro levels; 6. forecasting of development of processes and performance indicators of psc links’ subjects. principles of evaluating the performance of agricultural producers and their cooperative associations in the psc 1. objectivity and accuracy the information base for evaluation should be reliable, and its results should be based on accurate analytical calculations 2. systemic and complexity performance evaluation of the psc as a dynamic system is carried out taking into account all internal and external connections between the elements and their interdependence 3. efficiency the evaluation results should have an applied value, serve as a basis for taking measures for levelling (reducing) flow “gaps” in the chain 4. purposefulness target definition of flow “gaps” in the psc, which are a source of the disintegration of system elements 5. priority of economic interests of the state (macro level) performance evaluation of the psc is carried out not from the standpoint of economic interests of individual market players but the state as a carrier of the interests of society; this principle is also the key to making managerial decisions about the selective influence on the flow “gaps” in the chain m e t h o d o l o g i c a l b a s i s methodological provisions on the performance evaluation of agricultural producers and their associations in the psc. main stages of evaluation: 1. definition of the commodity, territorial, and time limits of the market for certain agricultural products. 2. performance evaluation of producers in the psc using a set of indicators: 2.1. estimation of volumes and dynamics of net value added 2.2. evaluation of reproductive product profitability 2.3. estimation of the structure of net value added 2.4. assessment of the efficiency of the use of material and labour resources (by net added value) 3. psc diagnosis, qualitative analysis of cause-and-effect relationships that determine flow processes in the chain; projected scenarios for the psc development. priorities of the national cooperative policy, strategic guidelines for the development of agrarian cooperation in an open economy methods of state regulation of the development of cooperative psc: 1. regulatory 3. administrative 2. financial and economic 4. organisational figure 1. structural scheme of methodical provisions on the performance evaluation of agrarian producers and their cooperative associations in the production and supply chain source: the author’s development baltic journal of economic studies 212 vol. 4, no. 5, 2018 chain. the main goal of the methodological provisions is the multilevel assessment of the formation of net value added by the links of the production and supply chain as a methodical basis for making management decisions in order to ensure the psc balanced development. it is about managerial decisions both at the micro level (economic entities and their associations) and at the macro level (state authorities). therefore, the main goal of the provisions organically combines the economic interests of agricultural producers and the state in the aspect of the psc balanced development, in particular, cooperative ones. the production and logistics chain has three fundamental properties: dynamism, proportionality, and stability. to reflect these properties, the psc analysis in general and its links in particular should be aimed at solving three conceptual tasks: (1) analysis of dynamic trends; (2) analysis of the proportionality of development; (3) stability and efficiency analysis. the assigned tasks of the methodical provisions are oriented on the assessment of the principle properties of the psc, as well as the definition of “gaps”, qualitative evaluation and forecasting of the development of the chain and its components (see figure 1). the methodical basis includes methodological provisions for assessing the performance of agricultural producers and their associations in the psc, diagnosing and forecasting the main parameters of the chain development as a basis for choosing the methods and measures of state regulation, coordinated with the priorities of national policy, in particular, cooperative (see figure 1). let us consider in more detail the estimated component of the methodological provisions, which involves the design of certain groups of analytical indicators. 5. the system of evaluation indicators since the basis of the functioning of the psc is the movement and transformation of the commodity flow, the first stage of the methodology is to determine the commodity, territorial, and time boundaries of the market for a certain agrarian product. the second stage involves the calculation of four groups of analytical indicators (see figure 1). characteristics of the developed four-level system of indicators for assessing the performance of agricultural producers and their cooperative associations in the psc and the formulas for calculating the indicators are given in table 1. the first level of the valuation system involves assessing volumes and dynamics of net value added in two dimensions: nominal and real. to switch from the nominal measurement of the indicator (in current prices) to the real one, it is necessary to recalculate its value in the dollar equivalent. use of real indicators in the estimation allows, firstly, increasing the objectivity of the analysis, neutralizing the effect of the price inflationary movement, and secondly, carrying out a comparative analysis of the growth rates of nominal and real values and determining the latent trends in the dynamics of their changes. it should be noted that real indicators can be used not only in the analysis of net va but also additional indicators, in particular, output and cost of production, profit, productivity, etc. (see table 1). the indicator of the share of net va in output, which is calculated both for the individual producer and the psc link, in the theory of integration analysis serves as one of the classic indicators for measuring and monitoring vertical integration at the level of economic entities. this index varies from 0 to 1, where 1 represents the maximum level of integration. the ratio of growth rates (indices) of net va and production output, developed by the author, characterizes in relative terms the dynamics of changes in the indicator of the share of the newly created value in the output and simultaneously determines the factors of its growth (see table 1). indicators of the share of net va in the output and the ratio of these values are among the indicators of the proportionality of the development of a particular system of micro or macro level. the share of proportion indicators, represented by ratios and shares of components of net value added, occupies a significant place in the developed evaluation system. their analysis in statics (during the reporting year) and in dynamics (for several years) will allow determining trends of dynamic changes, estimating structural shifts and regional differences in the shares of performance indicators. the second level of the valuation system is oriented towards assessing the reproductive profitability and classical profitability of products of business entities of a certain link of the psc, reflecting the resulting approach to the evaluation of the efficiency of microsystems. reproductive profitability determines the amount of net va per 1 uah of costs of products (services) of a certain chain link (see table 1). the level of reproductive profitability, as a rule, is higher than the traditional indicator of product profitability. in terms of loss-making nature of the production and the negative value of product profitability, the indicator of reproductive profitability is positive, reflecting the newly created value, represented, first of all, by social component – wage of employees. this indicator is a practical embodiment of the estimated function of added value, a measure of the degree of realization of the economic interests of workers, economic entities, and the state. changing the target orientation of microsystems (from the increase in profits to value added) allows hired employees to be regarded as the intellectual capital of enterprises which role in the era of intellectualization and innovation of business activity is increasing (hridchina, 2013). the second-level elements of the system include two coefficients of the ratio: (1) the growth rate of net va baltic journal of economic studies 213 vol. 4, no. 5, 2018 table 1 the system of indicators for evaluating the performance of agricultural producers and their cooperative associations in the production and supply chain* indicators characteristics formula of calculation normative value 1 2 3 4 1. estimation of volumes and dynamics of net value added 1.1. net value added (двч) displays the real contribution of the actors of a certain link in the creation of added value in the chain двч = зп + п + вс, where зп – the wage of employees of the link; п – a profit of business entities; вс – specific expenses of the subjects of a certain link growth in dynamics 1.2. share of net va in production output (чдвч) the share of net va in the output of the entities of a certain link of the psc чдвч= двч / в, where в – production output (in value terms) of the psc link growth in dynamics 1.3. ratio of the growth rate of двч and output (кв)** the ratio of the index of net va to the output index of the entities of a certain link of the psc кв = ідвч / ів, where ідвч – the growth rate of net va; ів – the growth rate of output (in value terms) in view of chain links more than 1 2. evaluation of reproductive product profitability 2.1. reproductive product profitability (рв) the volume of net va per 1 uah of costs of production of products (services) of a certain link of the psc рв = двч / в, where в – expenses for the production of products (services) of a certain link of the production and supply chain growth in dynamics 2.2. ratio of the growth rate of двч and the cost of production (кс)** the ratio of the net va index to the production cost index of the entities of a certain link of the psc кс = ідвч / іс, where іс – the growth rate of the cost of production in view of chain links more than 1 2.3. product profitability (рп) the volume of profit per 1 uah of costs of subjects of the psc link р = п / в, where п – a profit of the entities of a certain link growth in dynamics 2.4. ratio of growth rates of п and production cost (кп)** the ratio of the index of profit to the index of the production cost of entities of a certain link of the psc кп = іп / іс, where іп – the growth rate of profit of entities in view of chain links more than 1 3. estimation of the structure of net value added 3.1. share of wages (чзп) the amount of labour costs to create 1 uah of net va чзп = зп / двч optimization of shares of components of net va subject to the specificity of reproduction processes 3.2. share of profit (чп) the share of profit in net va created by the entities of a certain link of the psc чп = п / двч 3.3. share of specific expenses (чвс) the share of specific expenses in net va of the entities of the link чп = вс / двч 4. assessment of the efficiency of material and labour resources use (by net added value) 4.1. return on assets ratio (фв) value of net va created using 1 uah of fixed assets фв = двч / оз, where оз – the value of fixed assets of entities of a certain link of the psc growth in dynamics 4.2. material return (мв) autonomy of labour; value of net va per 1 uah of materialized labour мв = двч / мв, where мв – the value of material costs of subjects of a certain link of the psc growth in dynamics 4.3. ratio of growth rates of двч and material costs (км)** the ratio of the net va index to the material cost index of entities of a certain link of the psc км = ідвч / імв, where імв – the growth rate of material costs of entities in view of chain links more than 1 4.4. materials-output ratio (мє) dependence of the production process on external sources; the amount of the transferred value for the production of 1 uah of net va мє = мв / двч decrease in dynamics 4.4.1. raw materials output ratio (сє) 4.4.2. fuel output ratio (пє), 4.4.3. energy-output ratio (еє) expenditures of certain types of materials (raw materials, fuel, and electricity) per 1 uah of двч in view of chain links сє = св / двч; пє = пв / двч; еє = ев / двч, where св, пв, ев – the value of raw materials, fuel, and energy costs of entities of the psc links decrease in dynamics 4.5. labour productivity (пп) value of net va created by the employee during the production process пп = двч / ч, where ч – the number of employees of entities of a certain link growth in dynamics * developed by the authors using sources (ivanenko, 2012; savitskaya, 2002); ** indicator is proposed by the authors. baltic journal of economic studies 214 vol. 4, no. 5, 2018 and the cost of production, which allows determining the dynamics of reproductive product profitability and the factors of its changes; (2) the growth rate of profit and production cost to assess the dynamic changes of the traditional indicator of product profitability (see table 1). calculated ratios can be compared by different links of the psc. one should note the expediency of calculating indices of cost indicators (output, cost of production, profit) in nominal and real terms for their further comparison and analysis of the influence of the inflation factor on the profitability of agrarian producers and their cooperative associations. within the third level of the valuation system, an analysis of the component structure of net value added is provided (see table 1). the indicator of the wage share determines the amount of labour costs to create 1 uah of net va; in the theory of economic analysis, it is called the labour intensity of value added. an indicator of the share of profit determines the specific weight of operating profit in the value created by entities of a certain chain link. v. o. ivanenko calls this indicator as the profitability of added value (ivanenko, 2012). an indicator of the share of specific expenses characterizes, first of all, the size of land rent per 1 uah of newly created value by enterprises in the selection and agrarian link of the psc; this indicator may be absent in other chain links. the issue of the optimal structural relation of various resource components of net value added in economic theory is controversial. in general, the shares of the components are determined by the peculiarities of the reproduction process of a particular product. at the same time, the substantial dominance of certain components in the structure of the newly created value is evidence of structural imbalances and discrimination of economic interests of certain groups of participants in the reproduction process (enterprises, workers, consumers). a comparative analysis of the value added structure at micro, meso, and macro levels is intended to determine the unique proportions for economic systems of different hierarchical levels, common or different tendencies in their changes. the fourth level of the evaluation system focuses on the analysis of the efficiency of material and labour resources, reflecting the resource approach to the evaluation of the effectiveness of microsystems, which involves the rational use of resources. the basis for calculating the main indicators of the efficiency of resources use – return on assets ratio, material return, materials-output ratio, and its private indicators, labour productivity – instead of gross or commodity output indicators commonly used in the economic analysis, is the net value added. an indicator of return on assets ratio determines the amount of net va created using 1 uah of fixed assets of entities of a certain level of the psc (see table 1). an indicator of material return shows the value of net va per 1 uah of materialized (transferred) labour and characterizes the autonomy of labour. the dynamics of its changes and the effect of factors allow us to estimate the ratio of growth rates of net value added and material costs in view of links of the production and supply chain. materials-output ratio (dependency ratio), calculated as the ratio of the materialised labour on net va, characterizes the dependence of subjects of a certain link of the psc on the external environment. private indices of the materials-output ratio are raw materials, fuel, and energy output ratios (savitskaya, 2002); they can be used to assess the economic effect of dematerialization in terms of links of the production and supply chain, which determines their practical significance and the feasibility of inclusion in the system. an indicator of labour productivity characterizes the value of net added value created in the production process by one employee within the chain link. one should note the expediency of calculating this indicator in nominal and real terms in order to exclude the influence of the inflation factor and objective interpretation of the analysis results. in order to assess the resource use efficiency by links of the production and supply chain, dynamic and static coefficients of productivity of production factors are used. static coefficients represent the ratio of the volume of net va to the costs of certain types of production factors in the reported year. dynamic indices are obtained by dividing the static coefficient for the reporting period by a similar ratio of the previous period; at the same time, the resulting dimensionless indicator reflects the change in productivity over time. accordingly, the analysis of indicators of the fourth level of the system involves the calculation of both static and dynamic indicators in terms of links of the psc. the introduction of methodological provisions for evaluating the performance of agricultural producers and their cooperative associations in managerial practice requires the use of general and special methods. the general method of research is the dialectic method, which involves the study of all phenomena in interconnection and interdependence, as well as in the process of movement, change, and development. the special methods of studying the production and supply chain, given its complexity and versatility, include methods of economic analysis (statistical and economic-mathematical), economic-geographical, and sociological research. the applied implementation of the developed four-level system of indicators (see table 1) involves the use of methods of comparative analysis (horizontal, vertical, interregional), index and balance methods, methods of mathematical analysis, etc. of particular importance in the study process is the balance method, which involves the creation of inter-link balances of net value added, reproductive profitability, material return, labour productivity, and other performance indicators. with such inter-link baltic journal of economic studies 215 vol. 4, no. 5, 2018 balances, one can evaluate and justify the optimal ratio between the psc links, as well as determine the flow “gaps” in the chain. the balance method is appropriate to use on the third stage of evaluation during the diagnosis of the production and supply chain, qualitative analysis of causal relationships that determine the flow processes in the chain (see figure 1). the results of qualitative analysis form a multidimensional analytical basis for modelling the forecast scenarios for the development of individual agricultural producers and their cooperative associations, as well as the psc for a certain product. 6. possibilities and advantages of methodical provisions users of methodological provisions can be producers and their cooperative and other integrated associations, as well as state and regional authorities. the use of methodological provisions by small and medium agricultural producers, as potential members of cooperative associations, will allow determining the dynamics of changes in the main performance indicators of their activities before and after cooperation, calculating the predictive values of these indicators as a justification of the economic feasibility of forming an agricultural cooperative in the region. the results of quantitative and qualitative analysis form the analytical foundation for choosing certain methods of state regulation, coordinated with the priorities of national policy, in particular, cooperative, the implementation of which corresponds to the strategies for the development of agrarian cooperation in an open economy (see figure 1). the unconditional advantages of the developed methodological provisions for evaluating the performance of agricultural producers and their cooperative associations in the production and supply chain should include the following: 1) multilevel estimation of the dynamics and structure of net va by chain links, the formation of interlink balances of newly created value for analysis and substantiation of optimal proportions of the value chain; 2) the possibility of conducting a comparative analysis between different links of the psc, which allows identifying the flow “gaps” that are the object of selective management influence; 3) the calculation of the main performance indicators in real and nominal terms in order to exclude the influence of the price inflationary movement and increase the objectivity of analytical calculations; 4) multi-dimensional analysis of the proportionality of the chain development by calculating the parameters of the structure in statics and dynamics for the determination of structural imbalances and deformations that hamper the system development; 5) assessment of the efficiency of material and labour resources use in micro and macro systems with the help of indicators developed on the basis of net va, which allows ensuring the accuracy and reliability of the analysis; 6) high administrative capacity of the system of indicators, the possibility of their use as a scientific substantiation of managerial decisions; 7) the flexibility of the methodological provisions, their high adaptability to the new conditions of research, in particular, changes in the place of producers or their cooperative associations in the psc, the modification of strategic management tasks, etc. 7. conclusions in the course of the study, the authors substantiated the components of net value added, proved the feasibility of using this indicator to evaluate the performance of agricultural cooperatives, which are non-profit socioeconomic institutions, in the production and supply chain. a structural scheme of methodological provisions in the duality of conceptual and methodological bases is developed, the purpose, tasks, and principles of evaluation are substantiated including the following: objectivity and accuracy, systemacity and complexity, efficiency, purposefulness, the priority of economic interests of the state (macrolevel). a system of indicators developed by the authors includes four groups of indicators for estimating volumes and dynamics of net va, reproductive product profitability, the structure of net value added, the efficiency of material and labour resources use. the use of methodological provisions in comparative analysis of indicators of different links of the psc allows identifying the flow “gaps” which are the object of selective managerial influence. the scientific novelty of the research carried out is the improvement of the methodological provisions on the performance evaluation of agricultural producers and their cooperative associations in the production and supply chain, which in contrast to existing methodologies, are based on the four-level system of indicators constructed on the basis of the net value added index, provide for the calculation of performance indicators in nominal and real terms and ratios that allow determining the factors of influence on the dynamics of reproductive profitability indicators and material return. the theoretical significance of the research results is the development of methodological support for the performance evaluation of cooperative formations in the production and supply chain at micro and macro levels, and practical – in the possibility of using the author’s methodological provisions by state and regional authorities, producers and their cooperative associations as an analytical basis for making managerial decisions. further research prospects in this scientific direction are to expand the system of valuation indicators constructed on the basis of the net value added index, as well as to use methodological provisions developed by the authors to evaluate the performance of not only agricultural but also industrial enterprises in the production and supply chain. baltic journal of economic studies 216 vol. 4, no. 5, 2018 references: bratenkova, t. m. (2013). metodicheskie podkhody k opredeleniyu dobavlennoi stoimosti v aspekte izmereniya regionalnogo produkta [methodical approaches to the definition of value added in the aspect of measuring the regional product]. proceedings of the belarusian state technological university, 7, 13-15. (in russian) bulyga, r ., kokhno, p. (2007). dobavlennaya stoimost kak tselevoi kriterii [added value as a target criterion]. economist, 10, 68-76. (in russian) hirna, o. b., hlynskyi, n. yu., kobyliukh, o. ia. (2012). formuvannia dodanoi vartosti dlia kliienta v lantsiuhu postavok [formation of value added for the customer in the supply chain]. logistics: theory and practice, 1(2), 39-46. (in ukrainian) hridchina, m. v. (2013). pro dodanu vartist yak pokaznyk rezultativ diialnosti suchasnykh korporatsii [about value added as an indicator of performance of modern corporations]. scientific works of the interregional academy of personnel management, 1(36), 126-129. (in ukrainian) ivanenko, v. o. (2012). dodana vartist yak obiekt analizu statystychnoi zvitnosti promyslovykh pidpryiemstv z vyrobnytstva produktsii [added value as an object of analysis of statistical reporting of industrial enterprises of production]. problems of the theory and methodology of accounting , control and analysis, 1(22), 122-130. (in ukrainian) marx, k. (1978). kapital. kritika politicheskoi ekonomii. tom 1. [capital. criticism of political economy. volume 1]. (i. i. skvorcov – stepanov, trans). moskva: izdatelstvo politicheskoj literatury. (in russian) savitskaya, g. v. (2002). analiz khozyaistvennoi deyatelnosti predpriyatiya [analysis of the economic activity of the enterprise]. minsk: llc «novoe znanie». (in russian) baltic journal of economic studies 114 vol. 4, no. 2, 2018 corresponding author: 1 department of criminal law and justice, zaporizhzhia national university. е-mail: wlacademic@gmail.com 2 department of finances, odessa national economic university. е-mail: tereza.vaslud@gmail.com 3 department of criminal law and procedure, national aviation university. е-mail: dior-law@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-114-118 social discount rate: assessment methodology volodymyr lipkan1 zaporizhzhia national university, ukraine liudmyla vasiutynska2 odessa national economic university, ukraine ihor diorditsa3 national aviation university, ukraine abstract. the purpose of the paper is to investigate the assessment methods of social discount rate, to determine its calculation algorithm and to substantiate applied aspects relatively implementation of one or another method during cash flow discounting in social projects. methodology. the research used such methods as follows: method of comparative analysis was used to find out advantages and limitations of chosen assessment methodologies of the social discount rate; synthesis and generalization methods were used during investigation of the gathered experience concerning application of assessment methodology of social discount rate; logical method was used to substantiate made assumptions; formalization method was used to determine assessment parameters of social discount rate. results. to achieve the target goal, the following tasks were solved: theoretical studies on the assessment of social discount rate were systemized and the most adapted method for a practical implementation was determined; available pragmatic approaches to the determination of the parameters of social discount rate were investigated and the algorithm of its estimation is substantiated; evaluation of research results were tried out. practical implications. the article substantiates the necessity of application of social discount rate in the evaluation process of investment projects of the public sector. the theoretical approaches to the choice of the social discount rate were studied. the assessment methods developed and adapted for application in the world practice for discounting public projects were considered. the arguments concerning the expediency of application of the social rate of time preferences for the evaluation of public projects are considered. different approaches to the determination of the social rate of time preferences are analysed. value/originality. as a result of the research, parameters of the social rate of time preferences were determined. the application algorithm of the assessment methodology of the social rate of time preferences for public project discounting is indicated. the approbation of the assessment methodology of the social discount rate for discounting projects of the public sector in ukraine was carried out. key words: social rate of discount, social rate of time preferences, social opportunity cost of capital, public projects. jel classification: e00, e22, k00, k20 1. introduction efficiency estimation of public sector projects in the context of a limited budget fund is the main problem for the government of any country. the reason for the urgency of this problem lies in the social orientation of such projects, and the complexity of solution of social problems creates preconditions for the search for methods that would allow evaluating available alternatives and making sound management decisions regarding the choice of investment priorities for competing projects of the public sector. when it comes to investments, the key moment for efficiency assessment of any project is to determine a discount rate. internationally, there are different methodologies relatively parameter determination of the social discount rate, but the social opportunity cost of capital and the social rate of time preferences are the most adapted for the application. however, the current baltic journal of economic studies 115 vol. 4, no. 2, 2018 discussions concerning the choice of one or another assessing methodology for the social discount rate cover sufficiently large range of opinions that focus on the problem’s determination of the parameters of social discount rate. under existing perfect capital markets, rates, which are identified by the mentioned methodologies, will be identical to market interest. however, the reality differs. firstly, the reason lies in the market distortion, which leads to the fact that the rates do not match both with each other and with the market rate. thus, there is the issue of choice of an assessment methodology of the social discount rate, which is the most appropriate to the realities. secondly, if it is referred to assessment methods of the discount rate for public projects then it is necessary to take into account the social nature of these projects. it is necessary to take into consideration the fact that such projects should benefit not a particular person or organization but the society as a whole or certain social group. market interest rates cannot be applied for cash flow discounting in public projects. the reason is market failures. therefore, market prices do not reflect marginal benefits and costs for the society. in addition, the government action is especially important for those fields where the market failure exists. the rapid growth of public expenditures and, in particular, on the social sphere was the reason for the interest of different governments in the development of assessment methodologies of the social rate discount. consequently, the issue on efficiency improvement of management by limited public financial resources was on the front burner. the application of the discounting methodology for public projects solved a very important issue – the comparison of benefits and costs at different moments of time. if cash flows are not discounted, then the net present value of projects will increase, thus public funds will be used ineffectively. the public sector, in comparison with the private use of funds, is more regulated. the existence of an approved budget of a government or a territorial community and a set of social tasks that are being solved require considerable resources, but the budget is limited and administrators of budget funds need to make the right choices with regard to available alternatives. and this choice must be justified in terms of the benefits that society receives implementing a particular project. therefore, developments regarding the choice of the social discount rate are not only theoretical but also applied. 2. examination of methods of social discount rate the first discussions regarding the need to apply the social rate discount in the projects of the public sector were noted in the xix century. in the course of time, the issues of choice of assessment methodologies are in the centre of attention of all scholars around the world. today, among the basic modern methods, the most applied is the social opportunity cost of capital (soc) and social rate of time preferences (srtp). soc is acceptable when evaluation of public sector projects is performed using the comparison of the effectiveness of project execution through two alternative ways – a traditional public administrator or a private entrepreneur. the rate, which is determined according to soc, reflects the alternative costs of the best application of funds ether private or public sector. both the public and the private sectors compete for the same resources in the investment market. therefore, in order to justify the decision on a course of investment flows, it is necessary to compare the rate of return on public and private investments. in terms of this approach, the discount rate reflects the lost profits for the public from private sector investments (marglin, 1963; kohyama, 2006; lopez, 2008). followers of this method proceeded from the fact that state intervention in the economy would lead to the substitution of private investments by the state ones, if the social task can be solved as a result of the project implementation in the private sector, that is, this refers to the opportunity costs of projects investments carried out due to the state budget. consequently, the refusal of the alternative on the project implementation in the private sector leads to the loss of the benefits in this regard (kohyama h., 2006). based on the fact that, in the private sector, the rate of return on project implementation may cover higher risks than in the public one, to evaluate public sector projects that have private projects as an alternative, it is necessary to use soc methodology. thus, the social opportunity cost of capital is defined as the internal profitability of the best private sector project (mckean, 1958) or as the cost of the best alternative for the society (shukla, 1997). the social rate of time preferences reflects the willingness of the society to give up consumption at the present time in order to benefit from project implementation in the future. in other words, from the point of view of the social norm of time preferences, this assessment characterizes the compensation that is necessary in connection with the abandonment of the alternative of current consumption in favour of future consumption, that is, where the society has a lost profit too. it worth paying attention to the fact that social rate of time preferences does not reflect losses or raise of the real value of investments as the social impact is not formed in the realities of added value – it is rather an alternative to the latter. the social effect of the project is understood as the positive changes in living standards of a particular social group or society, which manifests itself in increasing consumption of goods and services, improving the quality of life through qualitatively new progressive alternatives in comparison with existing ones. however, the welfare improvement of individuals due to personal expenses should not be referred to baltic journal of economic studies 116 vol. 4, no. 2, 2018 the social impact; in other words, it arises only when achievements of the corresponding social indicators do not require cost compensation. therefore, when it comes to the rate of time preferences it means that a person has to solve the problem of whether to spend now and consume a real product, whether to keep capital or invest it to obtain something ephemeral in the future and, perhaps, not even for personal need but for future generations. there is the belief that society as a whole has positive time preferences. at the same time, the individual rate differs from the public as the social rate is lower than the individual one (marglin, 1963). the argument for such a conclusion is based on the statement that the risk of death of an individual is much higher than the risk of death of a society as a whole. in addition, the decision of a certain person at the present moment regarding the issue of saving or consuming will bring benefits in the future not only to a particular person but also to its generation. this is substantiated by the thesis that the social discount rate is lower than the discount rate for commercial projects discounting. in favour of the use of the srtp methodology, in comparison with the soc methodology, it should be included the availability of information support, that is, information that is mediated by macroeconomic indicators is free for any civilized country. another advantage is that it is possible to evaluate the srtp rate in the absence of long time series of statistics, which simplifies information collection. in addition, there is a sufficiently large accumulated experience in approbation of the srtp methodology, which makes it possible to compare and interpret the results. the soc methodology is more labour-intensive from the point of view of practical application. this method has more restrictions as a priori provides for the existence of competing projects in the private sector with the same risks as in the public sector. 3. parameters assessment of the social discount rate according to the method of social rate time preferences currently, developed countries have collected a certain practice and formed a sufficiently complete information base to assess parameters of the social rate of time preferences. the successful practice of developed countries regarding the application of this assessment method of the discount rate is quite convincing. however, to obtain adequate results, existing methods use long time series of statistical data (about fifty years, as in the usa and great britain, for example). for countries with a transition economy (for example, for ukraine) the possibility of forming such a powerful information base is limited. the main reason, in particular, is that the state is a sovereign during a short period of time, and its economic system is vulnerable to internal and external shocks. consequently, the assessment methodology of the social discount rate of public sector projects for countries with a stable economy cannot be fully adapted to implementation in countries with a transition economy. it is this aspect that must be taken into account when choosing assessment methods of the social discount rate. the basis for calculating the social rate of time preferences (srtp) is the maximization task of public utility functions. furthermore, it is assumed that the significance of the welfare of all individuals is the same for the society, that is, there is no need to introduce weighting coefficient to assess the significance of a particular individual. based on the studies of the world scientific community, it is expedient to use the function with constant elasticity of marginal utility in evaluating the social discount rate. the discount rate, according to srtp, is determined by the ramsey formula (ramsey, 1928): sdr = δ + l + μg (1) where g is accession rate of consumption per capita; l is a hazard to life; δ is the net rate of time preferences; μ is the elasticity of consumption marginal utility. the parameter (g) determines estimated figures of consumption growth rate per capita. the parameter (l) reflects hazard to life (newbery, 1992; pearce, ulph, 1995). the parameter (δ) is equal to zero, that is, there is the hypothesis that current generation does not reject its advantages in favour of future generations. some scholars consider that the parameter (μ) is unobservable. nevertheless, this parameter is taken into account in assessment methodologies of social discount rate. to find the parameter (μ) of the total utility function, it is necessary to assess the elasticity of consumption marginal utility (е), which is calculated as reciprocal of the parameter (μ), that is, е = -μ as due to the utility function, marginal utility is specified by: 1 1 11 (1 ) 1 u c c c c µ µ µµ µ − − − −∂ = ⋅ − ⋅ = = ∂ − , (2) subsequently: 1 celasticity c c µ µµ µ − − − = − ⋅ ⋅ = − (3) turning to the determination of the elasticity parameter of the marginal utility of public consumption, it should be noted that at present there are two ways to assess this parameter. the first is based on the idea that (е) is calculated based on observation over individual savings. in accordance with the second method, the monitoring of income transfer from more affluent members of the society to the less wealthy is carried out. just as the first one is successfully applied in researches. an overview of scientific sources made it possible to find out the advantage of the approach regarding the methodology of elasticity determination of the marginal utility of public consumption, which is based on the observation of population savings (stern, 1977; baltic journal of economic studies 117 vol. 4, no. 2, 2018 scott, 1976). for calculations, statistical indicators of population incomes were used: ( ) re s r y y y δ = − + , (4) where r is the opportunity cost of capital; δ is the net rate of time preferences; s/y is the average rate of savings; у is expected accession rate of population incomes. the aforementioned approach was implemented in determining the elasticity of marginal utility for the united kingdom. the elasticity of social utility (е) and function parameter of social utility elasticity μ is assessed as е = | μ |. 4. applied aspect of the implementation of srtp methodology having identified the assessment methodology of the social rate of time preferences, it can be tested. taking into account the location of the research, macroeconomic indicators of ukraine were used for the approbation. the assessment of the parameter (g) was calculated according to an indicator that reflects the actual final consumption of households per capita at comparable prices. based on the fact that by 2000 the ukrainian economy was subjected to quite frequent crises, which affected the dynamics of indicators of socio-economic development of the state, the year 2000 was identified as the initial period. the time series is limited by 2013 due to the political events in ukraine, which began in 2014. evaluating the parameter (l), the risk of insufficient future benefits for the society under the project was taken as a basis associated with the probability to die before its implementation. this parameter was calculated as the average value of the number of deceased persons in a particular year to the number of de facto population. assessment of the average rate of savings s/y was determined by analysing the structure of consumer spending, that is, this parameter was defined as the ratio of the funded part of the population income to the total income. to calculate (δ), it is accepted the statement that the present generation does not give up its advantages in favour of future generations. this idea is justified taking into account the instability of the economic and political situation in ukraine, that is, the assessment of the social discount rate for projects implementing in ukraine is determined for the short or medium term. therefore, δ = 0. as opportunity cost of capital (r), it is adopted the average weighted rate of interest on deposits of individuals (without demand deposits) in banking institutions. estimating real interest rate the fisher equation was used that describes the connection between inflation rate, nominal interest and real interest rate. the basis for calculating the social rate of time preferences is the frank ramsey formula (ramsey, 1928) which has a mathematical interpretation for the srtp methodology: srtp=(1+g)μ(1+ρ) (5) when calculating the elasticity (е), which is needed to calculate parameter (μ), the methodology for determining the elasticity of the marginal utility of public consumption by methodology (stern, 1977; scott, 1976) is adopted as the basis, formula (4). the results are presented in table 1. 5. conclusions the social discount rate is an instrument that allows conducting an evaluation of public sector projects taking into account changes in cash flows in time. the application of certain tools makes it possible to evaluate more accurately, comparing the benefits and costs in time. projects that provide a lower return than the social discount rate are not effective for investing. the systematization of theoretical researches and applied studies on the assessment of the social discount rate has made it possible to conclude that the most used method for practical implementation is the social rate of time preferences. its advantages can be explained by the substantial experience of approbation of this methodology and the availability of statistical information based on macroeconomic indicators. at the same time, in order to assess the social discount rate adequately, it is necessary to take into account time preferences of the society in terms of consumption, as well as an alternative opportunity for implementation of private sector projects. the analysis of available approaches to assessment of the social rate of time preferences allowed determining the algorithm of its determination for cash flows table 1 parameters’ estimation of the social rate of time preferences for ukraine parameters у r δ s/y μ l g srtp estimations 0,1099 0,01469 0 0,0962 0,1459 0,01586 0,1076 0,0311 note: y is expected accession rate of population incomes; r is opportunity cost of capital; δ is net rate of time preferences; s/y is average rate of savings; μ is elasticity of consumption marginal utility; l is hazard to life; g is accession rate of consumption per capita; sdr is social discount rate. according to the obtained calculations, the social rate of time preferences takes the value of 3.11%. interpreting its assessment, it can be noted that theoretically, the population can refuse the current benefits in favour of future generations. baltic journal of economic studies 118 vol. 4, no. 2, 2018 discounting of public projects taking into account the peculiarities of the development of countries with the transition economy. considering the peculiarities of economic development and the influence of political factors, as well as the limited information base, time frontiers regarding the application of the social rate of time preferences for the evaluation of public projects in ukraine have been identified. in particular, estimates for cash flows discounting can be applied in the short and medium term. at the same time, the social discount rate remains adapted only at the appropriate time interval. the further development of tools for assessment of the social discount rate in accordance with srtp and soc methodologies will allow solving the problem of choice of the optimal investment model during the implementation of public-private partnership projects. references: kohyama, h. (2006) selecting discount rates for budgetary purposes. harvard law school. federal budget policy seminar. briefing paper, no. 29. lopez, h. (2008) the social discount rate: estimates for nine latin american countries. the world bank. policy research working paper, no. 4639. mackean, r . (1958) efficiency in government through systems analysis. new york: john wiley and sons. marglin, s.a. (1963) the social rate of discount on the optimal rate of investment. quarterly journal of economics, vol.77, no. 1, pp. 95–111. newbery, d. (1992) the long term discount rates for the forest enterprise. department of applied economics, cambridge university, mimeo. pearce, d.w., ulph, d. (1995) a social discount rate for the united kingdom / cserge working paper 95-01. centre for social and economic research on the global environment. norwich: university of east anglia. ramsey, f.p. (1928) a mathematical theory of saving. economic journal, vol. 38, pp. 543–559. scott, m.f. (1976) investment and growth. oxford economic papers, vol. 28, no. 1, pp. 317–363. shukla, d.k. (1997) estimation of economic discount rate for project appraisal in india. project appraisal, vol. 12, no. 1, pp. 53–63. stern, n. (1977) the marginal valuation of income // m. artis and a. nobay (eds.). studies in modern economic analysis. oxford: basil blackwell. baltic journal of economic studies 184 vol. 4, no. 2, 2018 corresponding author: 1 department of management and law, vinnytsia national agrarian university. e-mail: pronkol@ukr.net 2 department of management and law, vinnytsia national agrarian university. e-mail: sergej.kolesnik@gmail.com 3 department of management and law, vinnytsia national agrarian university. e-mail: super_oksana30@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-184-190 activities of united territorial communities as a body of local government in the conditions of power decentralization in ukraine lyudmila pronko1, tatyana kolesnik2, oksana samborska3 vinnytsia national agrarian university, ukraine abstract. the purpose of the article is to study the system of united territorial communities (utc) formation and to conduct the analysis of their activities effectiveness, in the conditions of decentralization of power. methodology. the methodological basis for the study of decentralization and local government reforms, the strengthening of the political status of the local government body, and the decentralization of power are the constitution of ukraine, laws of ukraine, presidential decrees, as well as publications on these issues by domestic and foreign authors. results. it was established that, in accordance with article 140 of the constitution of ukraine, local government has the right of the territorial community to resolve issues of local importance independently. the decree of the president of ukraine “on priority measures for the development of local government in ukraine for 2017” identified the development of local government as one of the priority directions of the state’s development. in april 2017, the government adopted the order “on approval of the medium-term plan for priority actions of the government by 2020 and the government priority action plan for 2017”, which provides for the 100% consolidation of local councils at the baseline level in capable territorial communities by 2020. as a result, according to the law of ukraine “on voluntary association of territorial communities”, the voluntary association of territorial communities of villages, settlements, cities is carried out while subjected to ensuring the quality and availability of public services. state programs for supporting the development of the territorial community and building the infrastructure of the village (towns, cities) have been developed. practical implication. proposal reform on voluntary association of communities enables them to acquire the status of the capable local community, in which local sources of budget revenues, infrastructure, and human resources are sufficient to meet the interests of residents. the territorial community independently manages the property that is in communal ownership; establishes local taxes and fees in accordance with the law; ensures the holding of local referendums and the realization of their results; establish, reorganize, and liquidate communal enterprises, organizations, and institutions, and also controls their activities; decides other issues of local importance, assigned by law to their competence. value/originality. in carrying out any reforms, in terms of priority, systematic state intervention should be provided by legislative regulation and dissolution of the district councils in areas where all communities are united in utc. key words: united local communities, local authorities, local government, decentralization, public authorities’ reform, local community, public control of local governments. jel classification: r1, r5, p2, p25, d1 1. introduction the european charter of local government was adopted under the auspices of the congress of local and regional authorities of europe and came into force on september 1, 1988. the charter defines the basic principles and mechanisms of governing bodies’ activity by states – members of the council of europe. the decentralization of power, the application of the principle of subsidiarity (solving specific problems at the closest to everyday needs of people at the level of power) is the main idea of the charter. the charter obliges the state to consolidate its domestic law and apply in practice a set of legal rules guaranteeing the political, administrative, and financial baltic journal of economic studies 185 vol. 4, no. 2, 2018 independence of municipal entities. it also establishes the need for constitutional regulation of the autonomy of local government. ukraine ratified the charter on july 15, 1997. the constitution of ukraine of 1996 consolidated the basic legal principles of functioning of the mechanism of power organization, fixed in the charter. in 1997–99, the verkhovna rada of ukraine adopted the law on local state administrations, the law on the status of the capital of ukraine in kyiv, and the constitution of the autonomous republic of crimea. on may 28, 1998, congress of local and regional authorities of the council of europe adopted recommendations on local and regional democracy in ukraine (groisman, 2017). according to the article 5 of the constitution of ukraine, the bearer of sovereignty and the only source of power in ukraine are the people. the people exercise power directly and through state authorities and local government bodies. the right to define and change the constitutional system in ukraine belongs exclusively to the people and cannot be usurped by the state, its organs or officials. according to the article 140 of the constitution of ukraine, local government – is the right of the territorial community to independently resolve issues of local importance within the framework of the constitution and laws of ukraine (laws of ukraine, 1996). thus, local government is a real guaranteed ability of a territorial community to independently or under the responsibility of elected bodies and officials to resolve matters of local importance within the limits defined by the constitution and laws of ukraine. today, the development of local government in conditions of decentralization of power, good governance, and decision-making is an important factor in the development of a territorial community and a democratic society. therefore, the study of the decentralization power system, material and financial provision of the territorial community and their associations is a priority task nowadays. 2. reform of local government in decentralization conditions the reform of local government on a decentralized basis is one of the most effective reforms initiated by the government. the decentralization of power in ukraine is based on the introduction of european values on the development of local democracy, the empowerment of territorial communities, and the right to use resources, providing the population with high-quality administrative services, which will enable to form a modern system of local government, increase the level of economic and social development of the territory. by the decree of the president of ukraine “on priority measures of local self-government development in ukraine for 2017” (decree of the president, 2016), development of local government as one of the priority directions of the state’s development was determined. as a result, the cabinet of ministers of ukraine in september 2016 adopted a plan of measures to implement the concept of reforming local government and territorial organization of power in ukraine (order of the cabinet of ministers of ukraine, 2016). the main measures of the reform are: development of conceptual principles of reform in the spheres of education, healthcare, social protection, improvement of regulatory and legislative support for reform, strengthening of the level of responsibility of local government bodies for the decisions made, conducting explanatory work, providing advisory services to territorial communities. in april 2017, the government adopted the order “on approval of the medium-term plan for priority actions of the government by 2020 and the government priority action plan for 2017” (cabinet of ministers of ukraine, 2017), which provides for the 100% consolidation of local councils at the baseline level in capable territorial communities by 2020 (order of the cabinet of ministers of ukraine, 2016). the reform of decentralization has received a significant support from the ukrainian public, especially in the regions that are leaders in creating capable united territorial communities. according to the law on local government, the territorial community – is inhabited by permanent residents within a village, a settlement, a city that is an autonomous administrative-territorial unit, or a voluntary association of residents of several villages having a single administrative centre (laws of ukraine, 2016). its main features are: the common territory of existence, the presence of common interests of local importance, social interaction of community members in the process of ensuring these interests, psychological self-identification of each member with the community, common communal property, payment of utility taxes (moroz, 2008). all territorial communities of villages, settlements, districts of cities or cities of ukraine have the status of legal entities – owners, which, with the participation of most residents, hold general meetings for the adoption of the charter, fixing administrative boundaries, and determining the reporting procedure for the organs of the community and local government bodies. according to the law of ukraine “on voluntary association of territorial communities” (laws of ukraine, 2015), voluntary association of territorial communities of villages, settlements, cities is carried out while subjected to ensuring the quality and accessibility of public services provided in a united territorial community that cannot be lower than before the merger. that is, the association of communities should baltic journal of economic studies 186 vol. 4, no. 2, 2018 acquire the status of a capable territorial community, in which local sources of the budget, infrastructure, and human resources are sufficient to meet the interests of the community. 3. organization and activity of united territorial communities in ukraine the immediate process of organization of territorial communities started in june 2015 (fig. 1). by the end of 2015, 159 united communities were organized in ukraine. during 2015–2017, the number of united territorial communities increased by 526 units and counted 685. the dynamics of the last three years shows that in 2016, the number of united communities grew more than twice and reached 366 units, and in 2017, comparatively since 2016 the growth rate was equal to 87%. 0 200 400 600 800 159 366 685 2 015 2 016 2 017 fig. 1. the number of united territorial communities, units this change contributed to the increase in the number of territorial communities that were included in the utc (figure 2). 2 015 2 016 2 017 0 1000 2000 3000 4000 795 1739 3224 2 015 2 016 2 017 fig. 2. the number of territorial communities that formed the united territorial communities consequently, according to figure 2, we observe a progressive tendency to change the number of united territorial communities. in 2017, the number of such communities was 3224 units, which is 4 times over the value of 2015. such a positive dynamics of change contributes to the increase in the number of inhabitants in the united territorial communities, the restoration and expansion of village infrastructure, etc. (fig. 3). 2 015 2 016 2 017 0 1 2 3 4 5 6 1,4 3,1 5,7 fig. 3. the number of citizens in the united territorial communities, million people during the period from 2015 to 2017, the number of residents with united communities grew by 4.3 million and counted 5.7 million. an increase in the size of the community should require local governments to introduce a number of programs for the development of the utc infrastructure, environmental protection, and rational use of resources, which will increase the level of competition between communities. in terms of the regions of our country, the largest number of united communities in dnipro (56), zhytomyr (45), volyn (40), ternopil (40), poltava (39), and vinnytsia (34) regions (table 1). the largest number of previously united communities is observed in zhytomyr (328), khmelnytskyi (320), chernihiv (297), and ternopil (240). we see quite a difficult situation regarding the organization of united territorial communities in transcarpathian region (6), luhansk (8), donetsk (9), and kyiv regions (9). in 2017, the largest number of utc (more than 20) was organized in the volyn, dnipro, poltava, khmelnytskyi, and zaporizhzhia regions. consequently, the process of decentralization of power and reform of local government bodies has positive results, but a considerable attention should be paid to the development of state programs to support the development of the territorial community and infrastructure development. today, the level of state support has increased by 30 times (fig. 4). in 2017, the most priority areas of state support are: the subvention for social and economic development – almost 42% of all payments. about 33.5% is the proportion of subventions aimed at the development of medicine in rural areas, and 30% are payments from the state fund for regional development. the share of funds allocated by the eu in support of sectoral regional policy is 5.5%. territorial communities are already creating their own executive committees and self-defence bodies in accordance with the constitution of ukraine, article 143 of which states that territorial communities of villages, towns, cities, directly or through local governments that they have established, manage the property that is in communal ownership, establish local taxes and fees in accordance with the law; ensure the baltic journal of economic studies 187 vol. 4, no. 2, 2018 holding of local referendums and the implementation of their results; form, reorganize and liquidate communal enterprises, organizations, and institutions, as well as control their activities; solve other issues of local importance, assigned by law to their competence (laws of ukraine, 1996). for example, the work of territorial communities is carried out in the following areas: • conducting a joint communique with the community, building a cemetery fence. • prohibition of environmentally hazardous construction on its territory. • return rate, gardens owned by the community. • issue of the newsletter, initiation of the permanent reports of the rural chairman. • return the gardens on the territory of the abandoned military unit and the old palace in favour of the community. • recovery of the drainage system. • restoration of legality in the actions of the local militia. • stopping the illegal use of community land. as a result of such measures, the local citizens can defend themselves from various manifestations of table 1 the rating of regions in the formation of united territorial communities region number of united territorial communities number of united territorial communities in the region territorial communities, which were united 2015 2016 2017 total of utc total for 2015–2017 number of utc number of utc number of utc tc, which were united % vinnytsia 2 19 13 34 707 101 14,3 volyn 5 10 25 40 412 169 41,0 dnipropetrovsk 15 19 22 56 348 165 47,4 donetsk 3 3 3 9 386 50 13,0 zhytomyr 9 23 13 45 631 328 52,0 zakarpattia 2 1 3 6 337 19 5,6 zaporizhzhia 6 10 20 36 299 133 44,5 ivano-frankivsk 3 8 12 23 516 106 20,5 kyiv 1 1 7 9 659 49 7,4 kropyvnytskyi 2 3 8 13 415 37 8,9 luhansk 2 1 5 8 332 46 13,9 lviv 15 7 13 35 711 137 19,3 mykolaiv 1 19 9 28 313 103 32,9 odesa 8 3 14 25 490 108 22,0 poltava 12 6 21 39 503 145 28,8 rivne 5 13 7 25 365 93 25,5 sumy 1 13 14 28 419 131 31,3 ternopil 26 10 4 40 615 240 39,0 kharkiv 0 4 8 12 458 57 12,4 kherson 1 11 14 26 298 93 31,2 khmelnytskyi 22 4 13 39 605 320 52,9 cherkasy 3 3 20 26 556 97 17,4 chernivtsi 10 6 10 26 271 94 34,7 chernihiv 5 11 21 37 569 297 52,2 total 159 207 299 665 11215 3118 27,8 0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 0,90 1,00 2014 2015 2016 2017 0,5 0,8 3,3 5 2,9 3 3,5 1 1,5 4 0,8 0,7 subventions on social-economic development state fund for regional development subventions on the infrastructure of the combined territorial communities subventions for the development of medicine in rural areas the funds for the construction of football fields eu funds in support of sectoral regional policy fig. 4. dynamics of state support for community development and infrastructure development * the data is given in billion uah baltic journal of economic studies 188 vol. 4, no. 2, 2018 corruption of local officials: illegal land privatization, deforestation, environmentally hazardous shale gas production, pollution of stakes, the arbitrariness of officials and police, forced association with other territorial communities, etc. 4. state support and stimulation of the development of united territorial communities as it has been noted already, the reform of local government in our country is carried out with state support and stimulation, the main directions of which are: 1. provision of subventions to local budgets of cooperation subjects in the priority areas of state policy; 2. transfers of state-owned objects into communal ownership of objects of cooperation (unregulated); 3. methodological, organizational, and other support. funds are distributed according to the formula, which takes into account the population and the total area of the united community. and the more rural population and territory in it, the greater the subvention will be (fig. 5). the advantage is provided to the rural population to balance the disproportion in the development between the city and the countryside. after all, in villages, there are big problems with roads, with houses of culture, schools and kindergartens. infrastructure development includes road repairs, budget facilities, procurement and repair of vehicles and special equipment, construction of water pipes and much more. the total amount of the subvention is 1 billion hryvnia. 5. the effectiveness of utc activity in vinnytsia region an additional allocation of funds from the state budget is made to increase the level of security of citizens through the implementation of the program of security and law and order in the united territorial communities (fig. 6). in the united territorial communities, citizens’ security centres are created, which may include: a fire department, a police station, an ambulance. to create a centre, funds are allocated from the rural budget. in addition, the cpass (the centre for providing administrative services) are created and work is carried out on the improvement of the level of comfort for the life of inhabitants of the territorial community. here are some examples of disposals of local budgets in separate utcs of the vinnytsia region. zhdanivka united territorial community of khmilnyk district opened the first citizen safety centre in vinnytsia region. more than 2 million hryvnias were used to create a centre from the rural budget. yakushyntsi utc has opened a new fire and rescue unit on the basis of a special-purpose emergency rescue unit of the state dpsu of ukraine in vinnytsia region, which will allow servicing 7 villages. the total cost of construction and repair works of the unit was about 700 thousand uah, out of which 200 thousand uah was allocated by yakushyntsi utc. the technique was purchased at the expense of regional and city budgets, with a total cost of almost 5 million hryvnias. a municipal enterprise yakushyntsi utc “municipal police” was created. on the balance of communist party “municipal police,” the rural council transferred the car 1.0 billion uah scheduled for 2016 the distribution of subventions between local budgets is based on two parameters: the area of utc and the number of people living in utc area utc the number of citizens in utc the volume of subventions for utc the greater the number of villagers and the area of the territory, the greater the volume of subventions utc – 23 million uah – the largest subvention fig. 5. procedure for granting subventions from the state budget baltic journal of economic studies 189 vol. 4, no. 2, 2018 “vaz 2121 niva” for official use and prompt response to reports of residents of our settlements. the project “illintsi – a safe city” is aimed at creating comfortable conditions for the safe residence of residents and guests of illintsi city and prevention of violations in the city by establishing specialized video surveillance. 12 video surveillance cameras purchased. purchased a system of traffic light control. there are 2 transport and 2 pedestrian traffic lights installed on the pedestrian crossing in illintsi on the nezalezhnosti street near the secondary school №1. in raihorod and dashiv utcs of vinnitsa region, projects for the reconstruction of electric power lines for street lighting have been implemented at local budgets subventions for the formation of the infrastructure of the united territorial communities. the budget is 1.7 million uah. during 2017, major repairs of roads (sidewalks) are carried out in almost all utcs of the region at the expense of a subvention from the state budget to local budgets for the formation of infrastructure of the joint territorial communities, which is almost 60% (27.4  million uah) of the total amount foreseen for the region (45.7 million uah) for 2017. consequently, with the creation of united territorial communities, the share of state subsidies increases and local budgets increase their own revenues (fig. 7). for the period from 2014 to 2017, the amount of own income increased 2.5 times and amounted to about 171 billion uah. as a result, we have an increase in the share of local budgets in the general budget of ukraine to almost 50% (fig. 8). utc board executive committee rsa conclusion (5 days) utc board executive committee rsa conclusion to the project application financing council of utc approval of the project utc board executive committee project development interdepartmental commission ministry of region approval of the project application (5 days) effective use of financial support is possible only through well-established projects that should become the basis for the socio-economic development of united communities. fig. 6. scheme of the procedure for using subventions of the state budget fig. 7. the dynamics of changes in the size of local budgets' own revenues in ukraine, uah billions fig. 8. the share of local budgets (with transfers) in the consolidated budget of ukraine, % 0 20 40 60 80 100 120 140 160 180 68,6 98,2 146,6 170,7 2 014 2 015 2 016 2 017 43,00% 44,00% 45,00% 46,00% 47,00% 48,00% 49,00% 50,00% 45,60% 47,50% 49,30% 2 015 2 016 2 017 baltic journal of economic studies 190 vol. 4, no. 2, 2018 but one should keep in mind that the state can stimulate cooperation with territorial communities if: 1. the capacity of subjects of cooperation to ensure the implementation of powers determined by the law is strengthened. 2. the cooperation involves additional resources, including financial ones. 3. more than three subjects of cooperation carry out utc. 4. there is wide public participation in the implementation of utc. 5. implementation of investment programs and projects. 6. the methodology of research the methodological basis for the study of local government reforms in the context of decentralization of power is the constitution of ukraine, the laws of ukraine, the presidential decrees, as well as publications on these issues of domestic and foreign authors. in this direction, domestic scientists have taken a number of important steps, including the study of theoretical foundations of the government, the constitutional principles of its implementation, the history of power in ukraine, the features of modern national governments. the process of reforming local self-government in ukraine was studied by many ukrainian scientists in 2015, 2016, 2017. 7. findings with the creation of united territorial communities, the level of autonomy and financial independence increases, the share of state subsidies, which depends on the number of the territorial community, increases, and the size of own revenues of local budgets increases too. provision of state support is possible due to a compliance with the legislative framework, wide public participation in the implementation of the utc, and the implementation of investment programs and projects for the development of rural areas. 8. conclusions consequently, the creation of utc is a rather promising direction that ensures the development of local government in conditions of decentralization, which will enable communities, at their own discretion and in satisfaction of their own interests, to use property and income. but, along with the above-mentioned achievements and advantages in creating the united territorial communities, we certainly have a number of problems, the main ones of which, in our opinion, are: – duplication of powers of the district state administration and executive bodies of the councils of utc(provision of administrative, educational, medical services and even housing and communal services); – ineffective use of local and state budget funds (expenditures for the maintenance of the apparatus of executive bodies of the utc councils and the district administration in terms of implementation of duplication of powers); – reducing the quality of service provision in individual villages in connection with the reduction of raion budget financing (in terms of educational, medical subventions); – transfer of communal property from the district to the utc, etc. state interference will be solved by legislative regulation and early termination of powers of district councils in areas where all communities are united in the utc. references: cabinet of ministers of ukraine (2016) “some issues of implementation of the concept of reforming local selfgovernment and territorial organization of power in ukraine: order of the cabinet of ministers of ukraine dated september 22, 2016 no. 688-p”. retrieved from: http://www.kmu.gov.ua/control/ru/cardnpd?docid cabinet of ministers of ukraine (2017) “on approval of the medium-term plan of the government's priority actions by 2020 and the plan of priority actions for the year 2017: the order of the cabinet of ministers of ukraine dated april 3, 2017, no. 275-p”. retrieved from: http:// www.kmu.gov.ua/control/uk/cardnpd?docid groisman v. (2017) ukraynia-nini-blizka-do-vtilennya-khartiy-mistsevogo-samovryaduvannya. retrived from: http//www.unn.com.ua/uk/news/15100373 moroz o. (2008) territorial community: the essence, formation and modern ukrainian realities. naukovyi visnyk, 2. the verkhovna rada of ukraine (2014) “on approving the concept of reforming local self-government and territorial organization of power in ukraine: order of the cabinet of ministers of ukraine”. retrieved from: http://zakon.rada.gov.ua/laws/show/ the verkhovna rada of ukraine (2016) “on priority measures for the development of local self-government in ukraine for 2017: decree of the president of ukraine dated 07.12.2016 № 545”. retrieved from: http://zakon. rada.gov.ua/laws/show/ the verkhovna rada of ukraine (2016) “the law of ukraine "on local self-government in ukraine" no. 280/97вр, adopted on may 21, 1997, in the wording of september 22, 2016, which took into account 112 amendments introduced in 1998-2016 by the laws of the verkhovna rada and interpretations of the constitutional court. article 1”. retrieved from: http://zakon.rada.gov.ua/laws/show/ the verkhovna rada of ukraine (2015) the law of ukraine on voluntary association of territorial communities. bulletin of the verkhovna rada, 13, p. 91. the constitution of ukraine (1996) retrieved from: http://zakon.rada.gov.ua baltic journal of economic studies 142 vol. 4, no. 3, 2018 corresponding author: 1 national academy of the public prosecutor’s office of ukraine. e-mail: kvv@ukr.net 2 department of operative and search activity, national academy of internal affairs. e-mail: zlagoda@ukr.net 3 department of legal documentation, educational and scientific institute no. 1 of national academy of internal affairs. e-mail: haliy@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-142-146 institutional and legal principles of activity of state-owned enterprises in ukraine victor koshchynets1 national academy of the public prosecutor’s office of ukraine, ukraine olha zlahoda2 national academy of internal affairs, ukraine maryna haliy3 educational and scientific institute no. 1 of national academy of internal affairs, ukraine abstract. the aim of the article is theoretical and methodological research of legal and regulatory framework of activities of state-owned enterprises in ukraine. the subject of the study is the institutional and legal principles of the activities of state-owned enterprises in ukraine. methodology. the research is based on general scientific and special-scientific methods and techniques of scientific knowledge. analysis and synthesis were used to study the activities of state enterprises as a complex legal phenomenon, to determine their essence and distinguish them from related legal phenomena. the method of the system approach allowed revealing the institutional specificities of the legal framework for the main spheres of state-owned enterprises’ activities in ukraine. using the formal and legal method, the state of the legal and regulatory framework of the activities of state-owned enterprises in ukraine was comprehensively examined, as well as its shortcomings, gaps, contradictions, and miscalculations were identified, and recommendations aimed at their elimination were developed. the results of the study revealed that national legislation does not outline exactly the scope of legal activities of state-owned enterprises, but only provides for some of the most important conditions for their operation. in addition, it is scattered covering a considerable body of multi-sectoral legal acts, therefore, it should be optimized and unified, especially in terms of providing the list of general legislative acts on the activities of state-owned enterprises and their management in economic relations. practical implications. the article defined the correlation of general rules of civil circulation with the special legal acts that regulate the functioning of certain state-owned enterprises with the special purpose and nature of the activity. relevance/originality. the theoretical and legal study of the institutional and legal principles of the activities of state-owned enterprises in ukraine consisting of a range of individual normative structures and procedures provides a better understanding of the prospects for the development of national administrative legislation in this sphere. key words: state-owned enterprises, legal and regulatory framework, state management of economic activity. jel classification: l32, g32 1. problem statement first, it is necessary to consider the legal principles of the operation of state-owned enterprises, provided for in articles 64-71, 75, 77 of the civil code of ukraine and articles 92-95 of the central committee of ukraine. therefore, based on a joint analysis of these legislative definitions, other normative acts will be considered by dividing into blocks by the logic and general information content, namely: location, vested property, organizational structure, affiliates and representative office, labour collective, management of economic activity, economic relations with other enterprises, organizations, citizens, financial plan, foreign economic baltic journal of economic studies 143 vol. 4, no. 3, 2018 and other activities of state-owned enterprises, fiscal activity and public procurement. the location of state-owned enterprises is the actual place of their activities, management, and accounting. moreover, according to clause 5, part 1 of article 1 of the law of ukraine “on state registration of legal entities, individual entrepreneurs and public formations” (pro derzhavnu reiestratsiiu yurydychnykh osib, fizychnykh osib-pidpryiemtsiv ta hromadskykh formuvan), the location of a legal entity is the address of the body or persons that, compliant with the constituent documents of a legal entity or law, act on its behalf. the property of state-owned enterprises is in state ownership and enshrined to it on the right of economic management (state-owned commercial enterprise) or the right of operational management (public enterprise). in addition, the sources of such property are: state property, transferred to the company in accordance with the decision on its establishment; funds and other property earned from the sale of products (works, services) of the enterprise; target funds from the state budget of ukraine; bank loans; part of the enterprise’s income from economic activity, provided by the charter; other sources not prohibited by law. the general procedure for the management of state property, subjects of management, their rights and responsibilities, and other are provided for by the law of ukraine “on management of objects of state-owned property” (pro upravlinnia obiektamy derzhavnoi vlasnosti). because of independent defining of its organizational structure, a state enterprise can consist of production structural units (manufactories, shops, offices, sections, brigades, offices, laboratories, etc.), as well as functional structural units of the management apparatus (departments, divisions, offices, services, etc.). the specificities of adjusting the organizational structure of the enterprise are in legislative acts such as laws of ukraine “on economic entities,” “on holding companies in ukraine,” “on joint-stock companies,” and other. state-owned enterprises have the right to establish subsidiaries, representative offices, divisions, and other separate units. however, according to part 1 of the decree of the cabinet of ministers of ukraine no. 24-92 as of december 31, 1992, “on ordering of activities of business entities established with the participation of state-owned enterprises” (pro vporiadkuvannia diialnosti subiektiv pidpryiemnytskoi diialnosti, stvorenykh za uchastiu derzhavnykh pidpryiemstv), state-owned enterprises cannot be founders of enterprises of any organizational forms and types, business associations, cooperatives. 2. literature review the analysis of scientific literature on the issues of the institutional and legal support of foreign economic activity of industrial enterprises showed that a large number of scientific works by such scientists as o.  amosh, f. butynets, v. boiko, p. haidutskyi, v.  heiets, a. hradov, s. demianenko, a. kandyba, v. novytskyi, v. nyzhnyk, v. okrepilov, i. piddubnyi, s. sokolenko, yu. tokariev, r . fatkhutdinov studied the problem under consideration. the aim of the article is theoretical and methodological research of normative and legal regulation of activities of stateowned enterprises in ukraine. 3. the main material a state-owned enterprise is managed in accordance with its constituent documents based on combined rights of the state regarding the economic use of its property with the participation of the labour collective in the management. the head of an enterprise assumes direct management of economic activities. in the case of hiring, an agreement is concluded with the head of an enterprise. in addition, all economic entities employing hired labour must conclude an agreement between the owner or an authorized body and the labour collective or its authorized body. the content of an employment and collective agreement and their special conditions, etc. are provided for in article 21 of the labour code of ukraine (kodeks zakoniv pro pratsiu ukrainy). thus, an employment agreement is an agreement between the employee and the owner of the enterprise, on which the employee undertakes to perform work specified in this agreement, subject to internal labour regulations, and the owner of the enterprise, institution, organization or authorized by him/her body or individual undertakes to pay the employee wages and provide the working conditions necessary for the performance of work, provided for by labour legislation, collective agreement and agreement of the parties. moreover, the agreement is a special form of the employment agreement, in which terms, rights, duties, and responsibilities of the parties, the terms and conditions of material support and organization of work of the employee, termination of the contract, including pre-term, may be established by agreement between the parties. in each labour collective, trade unions can be formed in order to represent and protect labour, social, and economic rights and interests of union members (the law of ukraine “on trade unions, their rights and guarantees,” etc.). state ownership defines the following terms and conditions for the management of an enterprise: must accept and carry out state orders in accordance with the procedure established by the legislation, consider them when forming the production program, determining the prospects of its economic and social development and choosing counteragents; has no baltic journal of economic studies 144 vol. 4, no. 3, 2018 right to transfer its property to other legal entities or citizens free of charge, except in cases stipulated by law; the state property fund of ukraine is in charge of selling of real estate of an enterprise in accordance with the procedure established by the cabinet of ministers of ukraine (law of ukraine “on the state property fund of ukraine”; order of the state property fund of ukraine no. 1477 of july 30, 1999 “on approval of regulations on the procedure for alienation of fixed assets, which are state-owned property,” etc.) and others. it should be noted that, in addition to the general provisions of the economic legislation, the particulars of activities, especially public enterprises, can be found only in the “model statute for a public enterprise” (pro typovyi statut kazennoho pidpryiemstva). for example, the juridical status, the legal status of the property, principles of management, the procedure for reorganization and liquidation of an enterprise are defined here. the main planning document of a state-owned enterprise is the financial plan with approved by the central executive body on economic issues form and methodological recommendations for the development (order of the ministry of economy of ukraine no. 173 of 21.06.2005 “on approval of the procedure for the formulation, approval and monitoring of the implementation of financial plans for state-owned enterprises, joint-stock companies, holding companies and other economic entities with the statutory fund of more than 50 percent of stateowned shares, and their subsidiaries”; letter of the ministry of economy of ukraine no. 147-24 / 296 of 01.08.2006 “on filling out the form of the financial plan,” etc.). according to the financial plan, an enterprise earns income and undertakes expenditures, determines the volume and direction of funds to perform its functions during the year in accordance with the constituent documents. in addition, the amount of funds, transferred to the state as the owner, are approved and credited to the state budget of ukraine in the manner prescribed by the budget code of ukraine, etc. after paying mandatory payments, enterprises deduct from the profit remaining at their disposal for the technical re-equipment of production, development of new technologies, environmental protection measures, new construction and working capital (pro poriadok vykorystannia prybutku derzhavnykh pidpryiemstv, ustanov i orhanizatsii). state-owned enterprises carry out independently foreign economic activities, which are a part of the foreign economic activity of ukraine and can open their representative offices, subsidiaries, and production units outside ukraine. the principles of such activities are provided for in the law of ukraine “on foreign economic activity” (pro zovnishnoekonomichnu diialnist) and exactly article 4 specifies that the types of foreign economic activity of enterprises include: export and import of goods, capital and labour; international financial transactions and securities transactions; credit and settlement operations; joint business with foreign business entities; organization and implementation of wholesale, consignment and retail trade in ukraine for foreign currency; commodity exchange operations and other activities, based on forms of counter trade with foreign business entities, etc. state-owned enterprises pay taxes and state fees on general terms (the tax code of ukraine, customs code of ukraine, law of ukraine “on collection and accounting of single contribution to obligatory state social insurance”, etc.), except in cases stipulated by the legislation. state-owned economic entities must receive all goods (works, services) within public procurement for a calendar year, the procedure and conditions of which are provided for by the law of ukraine “on public procurement” (pro publichni zakupivli) under the monitoring of the ministry of economic development and trade of ukraine. moreover, since the activities of state-owned enterprises have a special purpose and nature of activities, they are also regulated with special normative legal acts in addition to general rules of civil circulation. thus, the latter will be analysed by blocks, classified according to the functioning of the enterprises. furthermore, state-owned economic entities have the right to manufacture, store, repair and sell firearms for military purposes, domestic devices for shooting ammunition equipped with rubber bullets and other special devices (law of ukraine “on licensing of types of economic activity” (pro litsenzuvannia vydiv hospodarskoi diialnosti); resolution of the cabinet of ministers ukraine “on approval of the regulation on permit system”, etc.). the law of ukraine “on state defence order” states that the state defence order is a means of state regulation in the field of scientific and logistical support for the needs of defence and national security of ukraine, which defines the interaction between ministries, other central and local executive authorities, state institutions, organizations and business entities during its formation, placement and execution, as well as provides measures for the implementation of international treaties of ukraine on military-technical cooperation. a state-owned company for the export and import of military and special-purpose products and services (ukrspecexport) acts as a monopolist in the abovementioned sphere. it is an authorized state mediator in the implementation of foreign economic activities in export and import of military and special-purpose products and services, as well as goods containing baltic journal of economic studies 145 vol. 4, no. 3, 2018 information constituting state secrets (resolution of the cabinet of ministers of ukraine “issues of the state company for the export and import of military and special-purpose products and services”, etc.). the law of ukraine “on licensing of types of economic activities” authorizes the enterprises in case of prior obtaining a license for the development, production, manufacture, storage, transportation, purchase, sale, import into ukraine, export from ukraine, use, destruction of narcotic drugs, psychotropic substances and precursors. the indicated actions are subject to strict state control and provide for legal liability (law of ukraine “on narcotic drugs, psychotropic substances and precursors” (pro narkotychni zasoby, psykhotropni rechovyny i prekursory), etc.). another specific sphere of state activity is the development of medicines. according to article 3 of the law of ukraine “on medicines” (pro likarski zasoby), the state policy in development, production, quality control, and sale of drug is aimed at supporting scientific research, development, and implementation of new technologies, as well as production of highly effective and safe medicines, providing the population with the required medicines of proper quality and in a required assortment. therefore, state-owned enterprises develop medicines following a number of requirements: a pre-clinical study of medicines; clinical trials of medicines; protection of rights of a patient (a volunteer); state registration of medicines. activities of state enterprises related to nuclear energy are licensed according to the rules provided for by the law of ukraine “on licensing activities in the sphere of nuclear energy use” (pro dozvilnu diialnist u sferi vykorystannia yadernoi enerhii). in nuclear domestic legislation, a fundamental act is the law of ukraine “on the use of nuclear energy and radiation safety,” which establishes the priority of human and environmental safety, rights and obligations of citizens in nuclear energy use, regulates activities related to the use of nuclear facilities and sources of ionizing radiation, also establishes the legal framework for ukraine’s international obligations regarding the use of nuclear energy. the law of ukraine “on oil and gas” (pro naftu i haz) stipulates the following directions of activity of state enterprises: defines the basic legal, economic, and organizational principles of activity of the oil and gas industry of ukraine; regulates relations concerning the specifics of the use of oil and gas minerals, extraction, transportation, storage and use of oil, gas and products of their processing to ensure ukraine's energy security; protects the rights of all subjects of relations arising from the geological study of oil and gas content of the mineral resources. moreover, article 1 of the law of ukraine “on gas (methane) of coal deposits” indicates one more activity in this sphere, that is, the extraction of gas (methane) of coal deposits, which is an economic activity, which includes a set of technical measures aimed at extracting gas (methane) of coal deposits from coal seams, enclosing rocks and underground cavities of operating mines and being prepared for exploitation, and coal deposits not industrially developed, regardless of their further use, as well as spent coal deposits, if the withdrawn gas (methane) is for further use as a material and/or energy resource. in practice, these regulatory acts are implemented mostly in the activities of the national joint-stock company “naftogaz of ukraine” (resolution of the cabinet of ministers of ukraine “on the establishment of the national joint-stock company ‘naftogaz of ukraine’” no. 747 of may 25, 1998). the state target scientific and technical space program of ukraine for 2008–2012 (pro zatverdzhennia zahalnoderzhavnoi tsilovoi naukovotekhnichnoi kosmichnoi prohramy ukrainy na 2008-2012 roky) is a conceptual document in the sphere of aviation and aerospace construction, under which, in the space sector, state enterprises should carry out: modernization of existing and development of perspective missile carriers, their systems, and also spacecraft; provision of advanced applications in rocket and space technology, devices, ground software and hardware complexes, information technologies; realization of the most relevant and prestigious international research projects and initiatives. the principles of state-owned enterprises, which carry out extraction and subsequent disposal of minerals, are in the mineral resources code of ukraine (kodeks ukrainy pro nadra), providing for the enterprises: the right to be mineral resources users; types and terms of use of mineral resources; list of rights and duties when using mineral resources; protection of the mineral resources; obligatory permits for the use of mineral resources; features of the design of mining facilities, as well as underground structures; obligatory preservation or liquidation of the enterprise after exhaustion of the mineral resources. 4. conclusions therefore, it should be noted that in no case abovementioned normative legal acts outline exactly the scope of legal activities of state-owned enterprises, but only provides for some of the important conditions for their functioning. in addition, it is important that current normative legislation concerning their activities is scattered, covering a considerable body of multi-sectoral legal acts. therefore, this situation should be optimized and unified, especially in terms of providing the list of general legislative acts on the activities of state-owned enterprises and their management in economic relations. baltic journal of economic studies 146 vol. 4, no. 3, 2018 references: pro derzhavnu reiestratsiiu yurydychnykh osib, fizychnykh osib-pidpryiemtsiv ta hromadskykh formuvan [on the state registration of legal entities, natural persons-entrepreneurs and public formations] (law of ukraine no. 755-iv of may 15, 2003). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (2003), 31-32, 263. (in ukrainian) pro upravlinnia obiektamy derzhavnoi vlasnosti [on the management of state-owned entities] (law of ukraine no. 185-v of september 21, 2006). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (2006), 46, 456. (in ukrainian) pro vporiadkuvannia diialnosti subiektiv pidpryiemnytskoi diialnosti, stvorenykh za uchastiu derzhavnykh pidpryiemstv [on the ordering of the activities of business entities established with the participation of stateowned enterprises] (decree of the cabinet of ministers of ukraine no. 24-92 of december 31, 1992). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (1993), no. 11, 94. (in ukrainian) kodeks zakoniv pro pratsiu ukrainy [the code of labour laws of ukraine] (december 10, 1971). vidomosti verkhovnoi rady ursr [bulletin of the verkhovna rada of ukraine the ussr], supplement to no. 50. (in ukrainian) pro typovyi statut kazennoho pidpryiemstva [on the model statute of a state-owned enterprise] (resolution of the cabinet of ministers of ukraine no. 914 of june 16, 1998). ofitsiynyi visnyk ukrainy [official bulletin of ukraine]. (1998), no. 24, 891. (in ukrainian) pro poriadok vykorystannia prybutku derzhavnykh pidpryiemstv, ustanov i orhanizatsii [on the procedure for using the profit of state-owned enterprises, institutions and organizations] (resolution of the cabinet of ministers of ukraine no. 48-93 of may 10, 1993). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (1993), no. 27, 290. (in ukrainian) pro zovnishnoekonomichnu diialnist [on foreign economic activity] (law of ukraine no. 959-xii of april 16, 1991). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (1991), no. 29, 377. (in ukrainian) pro publichni zakupivli [on public procurement] (law of ukraine no.922-viii of december 25, 2015). ofitsiynyi visnyk ukrainy [official bulletin of ukraine]. (2016), no. 15, 582. (in ukrainian) pro litsenzuvannia vydiv hospodarskoi diialnosti [on licensing of types of economic activities] (law of ukraine no. 222-viii of 02.03.2015). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (2015), no. 23, 158. (in ukrainian) pro narkotychni zasoby, psykhotropni rechovyny i prekursory[on narcotic drugs, psychotropic substances and precursors] (law of ukraine no. 60/95-bp of february 15, 1995). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (1995), 10, 60. (in ukrainian) pro likarski zasoby [on medicines] (law of ukraine no. 123/96-vr of 04.04.1996) vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (1996), 22, 86. (in ukrainian) pro dozvilnu diialnist u sferi vykorystannia yadernoi enerhii [on permissive activity in the field of nuclear energy use] (law of ukraine of january no. 1370-xiv 11, 2000). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (2000), 9, 68. (in ukrainian) pro naftu i haz [on oil and gas] (law of ukraine no. 2665-iii of 12.07.2001). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (2001), 50, 262. (in ukrainian) pro zatverdzhennia zahalnoderzhavnoi tsilovoi naukovo-tekhnichnoi kosmichnoi prohramy ukrainy na 2008-2012 roky [on the approval of the national state scientific and technical space program of ukraine for 2008-2012] (law of ukraine no. 608-vi of september 30, 2008). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (2009), 12, 148. (in ukrainian) kodeks ukrainy pro nadra [the mineral resources code of ukraine on]. ( july 27, 1994). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. (1994), 36, 340. (in ukrainian) baltic journal of economic studies 258 vol. 4, no. 4, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. e-mail: vovo4ka23@ukr.net orcid: http://orcid.org/0000-0002-6424-6419 2 lviv state university of internal affairs, ukraine. e-mail: yarunaan@hotmail.com orcid: http://orcid.org/0000-0003-1741-8625 3 lviv state university of internal affairs, ukraine. e-mail: oilyushyk@ukr.net orcid: http://orcid.org/0000-0002-4619-5785 doi: https://doi.org/10.30525/2256-0742/2018-4-4-258-264 macroeconomic risks: classified features, methods of measurement, mitigation pat terns yurii paida1, yaryna andrushko2, olena iliushyk3 abstract. the article deals with the essence, factors, and patterns of macroeconomic risks mitigation. the purpose of the paper is to summarize and present a classification of systemic risks, to analyse principles and methods of macroeconomic risks evaluation. the methodological basis of the study is general scientific and special methods of cognition. the most extended analysis of systemic risks not only from the perspective of geographical and historical aspects but also in the context of modern economic processes is carried out. results of the research prove that in the context of formation of a new economy of ukraine and approval of the practice of timely prevention and mitigation of macroeconomic risks in accordance with imperative of modern time, it is necessary to: 1) give real state priority to the most advanced educational technologies. while providing maximum broad and equal access of youth to education, we should have the program for search and practical support of national intelligence phenomena in place; 2) create conditions for rehabilitation and advanced development of innovative directions of applied and, first and utmost, polytechnic sciences. it is the task of the state to ensure their financial support and direct employment at enterprises. all-round support of introduction of high-yield venture developments into the production; 3) secure efficient state protection of intellectual property, create legislatively the conditions for commercial usage of innovative achievements within the country; 4) encourage with maximum efficiency return of high-level engineers and blue-collar workers to the technological area; breathe new life into the system of professional and technical schools where information and programming professions prevail and which graduators would be engaged with priority into operations in unique productions; 5) create modern information market, allround support of introduction of a unified information field. learning and striving to satisfy human needs without placing systemic risks on future generation being on the earth should become the core principle of a civilizational development. value/originality. we may lay down an essential principle of civilizational regulation of systemic risks when each state, specifically the international community, should set up (subject to all complexities of practical implementation) regulating constants, rules, and bans of such contents and in such direction to have business or entrepreneurial activities carried out ultimately in the risk-related mode, which would cause no detrimental effect on the economy as whole. key words: systemic risks, macroeconomic risks, risk monitoring, var-model. jel classification: a1, e00, e2, e37 1. introduction rising increment, ambiguity, and uncertainty around phenomena and totality of non-linear, unbalanced processes in economic, entrepreneurial, and business activities are more and more inherent for fundamental economic transformations when risky situations become their intrinsic feature. frequency and gravity of macro-risks effects on the global economic stability have ramped up dramatically whereas capabilities of existing systems for their mitigation and management, which would adequately and efficiently counteract potential adverse effects and threats, have shrunk markedly. though physical time flows as many thousand years ago, economic timing differs in its entirety; macroeconomic time runs faster increasingly than one hundred or ten years ago. therefore, content correctness baltic journal of economic studies 259 vol. 4, no. 4, 2018 requires the most extended analysis of systemic risks not only from the perspective of geographical and historical aspects but also in the context of modern economic processes. it is clear that risks of natural anomalies could cause (and have already caused) thumping damages to the economy. the above evidence explains why it is important to respond timely to potential and existing risks inherent for economic development of every country and especially ukraine. the purpose of the article is to summarize and present a classification of systemic risks, to analyse principles and methods of macroeconomic risks evaluation. 2. the essence of macroeconomic risks macroeconomic risk is rather a complex and multidimensional phenomenon that in turn determines the expediency of its analysis from various perspectives and hence the possibility of the existence of many definitions in sense of categories. double aspect of macroeconomic phenomena, i.e. competition and monopoly, innovation and conservatism, entrepreneurship and routine, professionalism and incompetence, greed for financial (and not only) gain with ignoring moral and ethical principles, leaves its stamp on the essence and occurrence of macroeconomic risks. special researches demonstrated that macro-risks themselves ranked fifth in the list of ten visualized uncertainties accompanying social being (bazilevich & ilin, 2010). herewith macroeconomic risks (their nature, essential features, factors of origin, volatility and permanency of demonstrations) remain the less explored. this obviousness also necessitates substantial intensification of scientific impact on the processes of exploration and analysis of macroeconomic risks. therefore, the subject-matter of our analysis is not segment-specific (currency, price, banking, deposit, credit, exchange, portfolio, index, tax etc.) risks but rather macroeconomic risks realizing in the economic policy and derivatively appearing in various segments. for this reason, the integrated approach makes it possible to understand the nature, content, and potential effects of macroeconomic risks. it is fair to say that each macroeconomic risk is systemic in terms of its essence and scope of influence, however not in every instance systemic risk is purely economic in its nature. several macro-risks come under the influence of endogenous factors (instability of legal and regularity support, volatile shifts in existing levels of competitiveness, permanent demand fluctuations etc.). conceptually inconsistent and erroneous economic theories contributing to mistakes of the institutional policy nationwide are one of core reasons for macroeconomic risks of systemic nature. for example, neoliberalism as a cult pillar of the economic policy and market orthodox ideology of past decades generated on permanent basis macroeconomic risks not only in the most important areas and segments of national economies, but in global terms as well. underestimation of importance of unbiased and systemic interpretation of macroeconomic risks in researches (in such context, it is not about journalism and newspaper publications) triggers situations when actual dependencies and relations are out of sight. thus, it is current practice to use by inertia “quotations-nomads”, true meaning of which is long forgotten or distorted. at the same time, the picture of pressing developments and processes is beclouded giving rise to threats of actual but not fancied risks. within the framework of fuzzy definition of risks and their potential types, the possibility of their mitigation, much less before-the-fact prevention, becomes increasingly conditional. if evolutionary transformations in the economy could be assessed in whole as positive, then rather endangering changes occur in ecosphere and natural environment. aggressive rich soil erosion, deforestation, large-scale depopulation of territories, pollution of rivers and lakes with freshwater becoming of absolute scarcity etc. appeared as undesirable effect of human management and being on the earth. nowadays such human activities predominate when ecological and technologyrelated risks correspond directly with economic ones making frequently their valuable details. therefore, state regulation of ecological and economic development is of high relevance today (biloskurskyi, 2017). we determine macroeconomic risk as a complex category reflecting such essential features as increment, volatility, conflict, multi-criticality, fuzziness, and uncertainty in economic relations. at the same time, existing macroeconomic relations often exclude adequate response of authorized administrative bodies and business entities concerned in order to make optimum choice from the number of alternative riskrelated options to obtain the most probabilistically desired ultimate result. intended probabilistic economic result is achieved (as it should be), on the one part, through the timely prevention or mitigation of possible detrimental effects on macroeconomic situation but, on the other part, provides for implementation in the national economy, first of all, effective management, i.e. flexible organizational and management activities. 3. principles and methods of macroeconomic risks transformation of scientific views and theoretical generalization on macroeconomic risks demonstrates bipolar views and positions. on the one part, we have scientific approach, which theoretical founders represent that the whole system of economic being is the result of intelligent design (reinert, 2011; calomiris & haber, 2017; sargent, 2008). such a position is observed in theoretical principles and trends of creationism asserting that extended tail of events and phenomena baltic journal of economic studies 260 vol. 4, no. 4, 2018 may be explained and should be perceived as the result of existing intelligent preconditions. meanwhile authors of the given theory acknowledge that economic future and, first, processes of macroeconomic development should be generated and regulated proactively (sargent, 2008). it is worth mentioning that one of the authors of the given theory thomas j. sargent obtained nobel prize in economics in 2011. it is quite enough to know and understand that macroeconomic systems are filled to the brim with systemic risks. at the same time, it is of high relevance to be equipped with top-quality theory, i.e. to know why one or another pain points (risks) appear and which methods may be used to mitigate their adverse effects (kovalchuk & kovalchuk, 2012). it is the analysis, assessment of outcomes and challenges of macroeconomic development and related risks, which are in special focus of highly respected public actors (gaidutskyi, 2017). for many decades, scientific analysis of macroeconomic risks, especially mechanisms and methods of their prevention and mitigation has drawn upon extremely formalized fundamentals. mathematical formalization of macroeconomic developments and processes provoking ultimately perceptible (negative in their nature) external effects became one of such movements. however as time passed, it became more apparent that mathematical econometric theory does not result in detection of universal macroeconomic behaviour. to the contrary, suggested economic and mathematical schemes frequently and successfully draw a veil over their essential amorphous state and predictable dysfunctionality. regular occurrence of crisis phenomena is not provided for in any mathematical models of “general equilibrium” and this challenges necessity of their further specification. macroeconomic world is in turbulent condition and attempts to set up mathematical doctrines of its equilibrium are doomed to fail. dynamism of social structure, financial markets, technologyrelated transformations prove that macroeconomic development is of non-linear nature, i.e. has much of uncertainty and expressed unbalance. at the same time, the main driving component of macroeconomy – “capital of spirit and will”, i.e. human activities, more and more requires intergovernmental (global) influence. it turned out that liberalism, as a foreign benchmark for institutional policy does not correlate to the ukrainian economic reality by any means. neoliberal economic theory did not withstand the test of time and practice since the implementation of its recommendations does not make conditions for sustainable economic development on global terms. if theory turns into doctrine, doctrine – into dogma, and dogma – into inadequate economic policy then it is macroeconomic practice, which pays the price. it appeared that market fundamentalism definitely provokes systemic risks demonstrating two phenomena in parallel, i.e. unregulated and, therefore, sizeable inflation of administrative and regulatory decisions and persistent slowdown of macroeconomic indicators. however, large-scale crisis evidences did not become actual warning for the ukrainian authorities. not least because of this fact, ukraine enjoys “the image” of the state locating in the centre of europe only territorially but not in terms of criteria of economic development, purity of financial and credit relations, legal culture etc. this macroeconomic situation is just an explicit demonstration of consequences of direct disregard of systemic risks (not least because of being brought from outside) interlaced into the ukrainian state policy. a causal contradiction between “grand theory” and practice of economic being is one of the factors of existing macroeconomic risks. therefore, we may say about two-in-one reason for existing macroeconomic risks, on the one part, wrong theoretical basis and orthodoxy of institutional policy pressed from outside, on the other part. in order to obtain desired funding from foreign organizations, canonical macroeconomists representing interests of imf and the world bank justify theoretically abstract models not associated with nuts-and-bolts realities overfilled with systemic risks. according to the nobel memorial prize winner mr. joseph stiglitz who used to hold the position of the first vice-president of the international bank for reconstruction and development (1997-2000), “our attention is drawn away from real-life problems and we move towards wrong decisions” (stiglitz, 2002). the scientist pointed out to disregarding in recommendations of representatives of the washington consensus of “systemic risks that to the great extent determined the transformation of young states to the wild world with non-controlled markets, dramatic gdp downturn and impoverishment of population” (stiglitz, 2014). the danger is also that wrong theoretical postulates underlying for current economic policy and taken for steadfast implementation in the form of laws and regulations carry the potential systemic risks. it is essential to realize that the key principle of civilizational regulation of systemic risks (prevention or mitigation of potential adverse effects) provides for that each economic system would strive to establish regulating constants, rules and prohibitions of such nature and in such direction to have business or entrepreneurial activities performed in the long run in the way that would give rise to and cause no detrimental impacts both locally and nationwide and internationally. however, unfortunately, the given important postulate is not always considered (calomiris & haber, 2017). while mitigating macroeconomic risks, collateral systems become more and more meaningful that represent themselves rules and procedure for selection, evaluation and monitoring, movement, and usage of allbaltic journal of economic studies 261 vol. 4, no. 4, 2018 kind assets in order to mitigate macroeconomic risks. implementation of the collateral system corresponds to the international standards and the world best practices because its formulae are adopted to the great extent from foreign legal systems; by this very process of increasing efficiency of the infrastructure of the corresponding segment at the financial market is inspired. the complexity of analysis of potential gains or threats associated with the timely and qualitative level of measuring and evaluating macroeconomic risks is explained largely by the fact that the risks cover the number of principal structural elements in key areas and segments of the national economy, as well as the banking system, securities market, stock market etc. these are exactly stock markets, which demonstrate the most visible volatility, i.e. the broad magnitude of variations of asset value, and hence the existence of socalled portfolio risks. 4. macroeconomic models of mitigating economic risks nobel memorial prize winner mr. william f. sharpe made a stand for the model of portfolio risks based on an evaluation of capital assets, which was criticized by practicing men. “some practicing men argue that сарм (capital asset pricing model) disannulled efficient-market hypothesis. capm is not the curiosity of theoretical studies with doubtful empirical confirmation. it became the component of complex strategies for institutional portfolio management” (uafr , 2011). mitigation of macroeconomic risks is provided to a great extent through the implementation of macroeconomic models. value-at-risk (vаr) model has been the most widely accepted methodology for market risks evaluation. var may be perceived literally as “risk value” or “risk measure”. var estimation model is used as the basis for reserve capital calculation. for this model, requirements to the volume and size of the reserve capital (v) were calculated as the maximum of two values: а) present value var (vart); b) average var for previous two months (60 days) multiplied by coefficient with the value from 3 to 4. a base formula for such calculations is as follows: herewith the value of λ factor depends on the accuracy of daily forecasting of the model for the previous periods. with the help of var-based modelling, it becomes possible to forecast and evaluate risks at least in 4 directions: first, “internal monitoring of market risks” may be carried out in several measurements: in terms of issuer’s reliability, class of financial assets, adequacy of aggregate portfolio and financial capacities of a contracting party etc.; secondly, vаr system enables “external monitoring” when a general investor may receive a forecast on quality of portfolio assets of external investors and thus estimate investment risk measure; thirdly, vаr may be used for the measurement of hedging efficiency, i.e. determine how activity of a particular hedge-fund achieves strategic goal – actually insures against financial risks; fourthly, with the help of vаr-modelling monitoring of expediency of respective agreements on potential transactions is carried out. duly modelled macroeconomic risk should be implemented in a corresponding economic strategy, which incorporated smoothly into the state economic policy that in such a manner creates objective necessity to identify, analyse, measure, and manage risk in activities of business entities (in particular, determination of required and sufficient conditions for care and restraint in relation to economic risk) and hence create favourable environment for mitigation of adverse effects both of local and macroeconomic nature. collateral systems act as a critical tool of mitigation of macroeconomic risks. collateral systems represent themselves rules and procedure for selection, evaluation and monitoring, movement and usage of all-kind assets in order to mitigate macroeconomic risks. understanding of collateral system correlates to the international standards and the world best practices because its formulae are adopted to the great extent from foreign anti-risk practice. experience has proven that various options of designing collateral systems are initiated and implemented most of all by central banks (chailloux, gray & mccaughrin, 2008). it is worth mentioning about those financial risks arisen while generation and placement of exchange reserves of our state. the huge risk is that the national bank of ukraine doesn’t hold exchange reserves in ukraine but place them in paper format within the usa. this model is the most efficient for financial beneficiaries, which put borrowed reserves into circulation for their own benefit. assuming randy factor (taken as the basis for calculation of the volume of accepted exchange reserves) half as large exchange reserves than we have today would be sufficient for ukraine. all attempts to criticize soundly and scientifically explicitly risky and misguided nbu policies on placement and usage of exchange reserves meet with their persistent neglect (economika ukrainy, 2014). macroeconomic risk of losing by dollar its exclusive role of global equivalent (world currency) in the international arena becomes absolute. proactive development of cryptocurrency market turns to be its precursor. at the same time, the idea of innovative modernization embedded into specific strategy could serve an alternative to seemingly desperate ukraine’s lagging behind in the world races for civilizational priorities. the state of ukraine and the national economy possess all prerequisites for the successful launch of baltic journal of economic studies 262 vol. 4, no. 4, 2018 the forward-thinking model, i.e. concentration of public potential, available economic and social resources in priority directions of high-technology development. just embodying in practical terms the idea of the random creation of innovative segments (islands-technopolises) of advanced development; we can build up the strategy of the national economy’s development, which would gain fundamental and qualitative differences as compared to the existing one. such financial tool as oversight may be sizeable in mitigating economic risks since it expresses the entirety of relations arising in relation to macroeconomic operational capabilities of payment and settlement systems serving the national economy and the block of international economic relations specified by the state. exercise of oversight is of paramount importance for the national economy because three interrelated macroeconomic sectors have already been formulated and developed nationwide: а) budget area which subjects and at the same time objects of payments and settlements are state authorities and institutions; b) corporate and so-called municipal area where subjects of payment and settlement relations and authorities of local self-government, municipal enterprises etc. play the role of subjects and participants of payments and settlements; c) households and all solvent population of the country which in some way or another are involved by the system of payments and settlements. while mitigating macroeconomic risks, collateral systems become more and more meaningful. these systems represent themselves rules and procedure for selection, evaluation and monitoring, movement and usage of all-kind assets in order to mitigate macroeconomic risks. since the implementation of the collateral system corresponds to the international standards and the world best practices because its formulae are adopted to the great extent from foreign legal systems, by this the level of credibility to corresponding financial and crediting tools is increased and the very process of efficiency upturn of the infrastructure of the national market is inspired. 5. strategic development of the national economy our scientific analysis confirmed the opinion of individual political leaders, who stand the ground of fundamental changes in the basic paradigm of the strategic development of the national economy. to start with, it relates to so-called catching-up modernization, which in fact has nothing to do with civilizational prospects. for this model out-of-date, over costly and environmentally unfriendly technologies prevail. under such circumstances, there exists a chronic and steady trend to lagging behind general civilizational standards. the policy of so-called catching-up modernization should be replaced with the strategy of advanced development. the risk of implementing this very strategy is that state regulatory agencies do not provide for and single out first and utmost in the economic strategy the directions of an innovative development containing blast effects. this concerns those industries and productions, which may generate innovative blasts for the national economy. for this purpose, it is necessary to introduce the practice of concentration of financial resources and organizational and management efforts exactly on innovative growth zones. major economic risks are produced in the area of shadowing and money laundering (kovalchuk, 2017). the most representative factors, which give rise to macroeconomic risks in the area of illegally-yearned income laundering are as follows: first, over-shadowing of economic relations in business and entrepreneurship sectors; secondly, spread of corruption and bribe-taking in the system of state, executive, law-enforcement, and judicial authorities; thirdly, inadequate activities of subjects of primary and state financial monitoring according to international standards for financial activity regulation; fourthly, low transparency of activities of regulatory and supervisory authorities. in addition to this, the accumulation of macroeconomic risks boosting the processes of illegally-yearned income laundering is more and more explained by usage of the latest information and communications technologies and internet-networks (gates, 2000). it is high time to start prompt implementation of nbic-convergence model, i.e. co-evolution of nano-, bio-, info-, and cognitive theories. however, the complexity is that a new generation of innovative technologies conveys a huge charge of various and practically unexplored risks, which prevention and mitigation require monumental financial expenditures. the first decades of xxi increasingly generate understanding that it is unpromising to stay in the routine inertia mode, i.e. while enjoying industrial epic of xx-century technological development undertake languid attempts to catch those who move away rapidly from the era passed and for the sake of advanced development make efforts focused on the latest and innovative achievements. today the common standard of reforms should be replaced with the concept of systemic rehabilitation and innovative development with bringing in parallels under it the essence and contents of the state economic policy. it is not a coincidence that systemic modernization is nowadays the most acceptable strategic aspect, which actually disowns discredited notion of reforms. innovative modernization should not be limited to technological borrowings but should be oriented on revolutionary institutional changes. radically new phenomenon emerging globally and called the knowledge-based economy is a strategical factor of declining detrimental effects of macroeconomic risks. origin and formation of a new economy, in addition to other advantages, ramp up possibilities of positive impacts of systemic risks on appropriate segments baltic journal of economic studies 263 vol. 4, no. 4, 2018 and areas of production relations. the notion of a new economy or economy of knowledge shall encompass key trends of changes in production, information and communications supplements to organizational and management systems, intensive generation of multiservice networks and the spread of internetnetworks. the sensible increase of knowledge-intensive, high-technological companies producing risk projects, as well as methods of mitigating adverse effects are features of a new economy. a new economy encapsulates three mutually intersecting areas – particularly education, science, and innovative technologies. transformation of knowledge, information, ideas, and symbolic images into dominant property item does not simply adjust but change radically the state of affairs, i.e. these property components may be reproduced endlessly; they may be used in the most remote areas simultaneously. these factors, instead of materialized property (as today), become determining feature of a new status of the real economy. moreover, owing the possibility to mitigate adverse signs of macroeconomic risks is intensified. in conclusion, we may lay down an essential principle of civilizational regulation of systemic risks when each state, specifically the international community, should set up (subject to all complexities of practical implementation) regulating constants, rules and bans of such contents and in such direction to have business or entrepreneurial activities carried out ultimately in the risk-related mode, which would cause no detrimental effect on the economy as a whole. 6. conclusions in the context of the formation of a new economy of ukraine and approval of the practice of timely prevention and mitigation of macroeconomic risks in accordance with the imperative of modern time, it is necessary to: 1) give real state priority to the most advanced educational technologies. while providing maximum broad and equal access of youth to education, we should have the program for search and practical support of national intelligence phenomena in place; 2) create conditions for rehabilitation and advanced development of innovative directions of applied and, first and utmost, polytechnic sciences. it is the task of the state to ensure their financial support and direct employment at enterprises. all-round support of introduction of high-yield venture developments into the production; 3) secure efficient state protection of intellectual property, create legislatively the conditions for commercial usage of innovative achievements within the country; 4) encourage with maximum efficiency return of high-level engineers and blue-collar workers to the technological area; breathe new life into the system of professional and technical schools where information and programming professions prevail and which graduators would be engaged with priority into operations in unique productions; 5) create a modern information market, all-round support of introduction of a unified information field. learning and striving to satisfy human needs without placing systemic risks on future generation being on the earth should become the core principle of a civilizational development. references: bazilevich, v., ilin, v. (2010). metaphizika economiki [metaphysics of economy]. 2-d ed., revised and corrected. kiev: znannia, 925 p. (in ukrainian) biloskurskyi, r . r . (2017). derzhavne reguliuvannia natsionalnogo ecologo-economichnogo rozvytku [state regulation of the national ecological and economic development] (thesis for academic degree of doctor of economics), kyiv: national academy of management, 41 p. chailloux, a., gray, s., mccaughrean, r . (2008). central bank collateral frameworks: principles and policies. imf working paper wp/08/222. september 2008. charles w. calomiris, stephen h. haber (2017). fragile by design: the political origins of banking crises and scarce credit. moscow: izd-vo instituta gaidara, 720 p. danylyshyn, b. m. (1999). investytsiynyi klimat v ukraini: factory regionalnykh ryzykiv [investment climate in ukraine: factors of regional risks]. kyiv: rvps ukraine, 192 p. 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(2011). finansovi ryzyky ta shliakhy ikh minimizatshii [financial risks and their mitigation methods]. kyiv: znannia, 319 p. (in ukrainian) baltic journal of economic studies 264 vol. 4, no. 4, 2018 kovanchuk, т., cherniak, v., shevchuk, v. (2009). aktualitety polityky rozvytku [actuality of the policy of development]. kyiv: znannia, 326 p. (in ukrainian) reinert, s. (2011). how rich countries got rich… and why poor countries stay poor: transl. from engl. moscow: gu vshe, 384 p. (in russian) sargent, t. j. (2008). evolution and intelligent design. american economic review, 98(1), 5-37. sos – v ukraini neokolonialna model valyutnoyi polityky (2014) [sos – neocolonial model of exchange policy in ukraine]. economika ukrainy, 10, 4-13. stiglitz, j. e. (2014). the innovation enigma project syndicate, march 9. retrieved from: https://www. projectsyndicate.org/commentary/ stiglitz joseph e. (2002). globalization and its discontents. new york, p. 12. vitlinskyi, v. v. (2008). ryzykologia v economitsi ta pidpryemnytstvi [riskology in economy and entrepreneurship]. kyiv: kneu, 480 p. (in ukrainian) vydatni finansysty ta suchasna praktyka (2011) [outstanding financial experts and modern practice]. encyclopaedical dictionary. kyiv: uafr , p. 270. (in ukrainian) yermoshenko, m. m. (2011). upravlinnia ryzykamy vzaemodii strakhovykh kompaniy z bankamy [management of risks of relations of insurance companies with banks]. aktualni problemy economiky, 6, 191-200. baltic journal of economic studies 15 vol. 5, no. 1, 2019 corresponding author: 1 vasyl stus donetsk national university, ukraine. e-mail: o.boienko@donnu.edu.ua 2 uzhhorod university of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: susidenko_av@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-15-20 market niche as a method of brand promotion olena boienko1, оleksii susidenko2 abstract. the purpose of the paper is to prove that market niche is one of the methods of brand promotion. methodology. to do research, we need to use theoretical and empirical methods. analysing the interbrand ranking, we used methods of comparison, concretization, and generalization. brand value trend was studied using the method of graphics modelling. to study the definition of “market niche,” there were used methods of comparison, generalization, and synthesis thanks to that we defined the special features of this concept. results. the brand is a relatively new concept, which was developed in the second part of the 20th century. according to the results of this ranking in 2016, the most successful brands were apple, google, and coca-cola. these brands have the long history and their own experience of doing business in the scale of the global market. one reason for their success is the right selection of a market niche. it was defined that the market niche might be characterized by the next features: highly individual needs and requirements for satisfying which it is necessary to have a range of complement goods and services; stable market potential; weak competitors. there were interviewed several chief-executives of big ukrainian companies and analysed the most successful and profitable market niches for today. these are: internet resources: big data; online courses; delivery service; wearable gadget; 3d-printing; robots; fuel cells and batteries; commercial property in regions; smart materials; auto components; health care; recycling; alternative energetics; space; escort of elderly people; franchising business; agriculture; geological prospecting and green projects. practical implementations. we defined that the brand needs to make six main steps for entering the new market. firstly, it is necessary to define own niche. next step is to analyse how external factors influence the brand, which operates in the chosen niche. after this business should analyse opportunities of the brand in this niche, later it is necessary to carry out a swot analysis of brand operating in this niche and make the prognosis of the brand operation in this niche and finally prepare the rating of chosen market niches. value/originality. the results of made investigation might be used by entrepreneurs who are going to set up business because according to the suggested analysis we can see the most profitable niches for coming 10 years. key words: market niche, non-material asset, brand, marketing tools, competitiveness, range of goods. jel classification: m31, m37, o34 1. introduction the modern market economy is characterized by the growing role of non-material assets in a business balance. in addition, a strategic success of the business is influenced by interrelation with customers, brand management, and marketing knowledge. a wide range of goods and services in modern markets causes the necessity of solving the problem of competitiveness. market conjuncture is characterized by markets fragmentation, high level of competitiveness, and constantly growing requirements of customers to goods quality today. in these conditions, business ought to change, offer new, high-quality goods and services by more beneficial price than competitors do. today practice shows that because of the high level of market fragmentation general marketing tools become less effective and cause growing competitiveness. it is necessary to suggest new ideas, which may make the higher profit compared with traditional marketing tools and approaches. analysis of modern marketing approaches shows that one of the ways to be ahead of competitors is to find new market niches. in this case, the market niche must be not only a new segment where the business operates, but it also ought to be the potential for growth, the suggestion of new ideas and knowledge that can stimulate demand due to which business enters the new markets, goes ahead of competitors and makes a higher profit. searching new market niches is important not only for the big business in general but for a brand too, which is the part of non-material assets of this business. baltic journal of economic studies 16 vol. 5, no. 1, 2019 2. investigation methodology and literature review in the last publications, we made the conclusion that the brand is a relatively new phenomenon. the brand concept was developed in the second part of the twentieth century. the huge interest for our investigation has publications of d. aaker, who is a marketing specialist with a focus on the brand strategy. the most interesting for us are these works: “building strong brands” (1996), “managing brand equity” (1991), “aaker on branding: 20 principles that drive success” (2014), “brand relevance: making competitors irrelevant” (2011). in addition, we analysed the works of j. liesio, p. mild, a. salo (2006) and a. hines (2008). exceptional interest works of a. laut (2011) and b. tokarev (2012) have because they are devoted to brand success in the frame of searching market niche. it was made the deep analysis of works mentioned above, although they do not give answers to some questions. they do not give practical bits of advice on how the brand enters the new market through a particular niche. this issue causes the aim of our paper. in our investigation, we are trying to prove that the market niche is one of the methods of brand promotion. thus, to do research we need to use theoretical and empirical methods. analysing the interbrand ranking, we used methods of comparison, concretization, and generalization. brand value trend was studied using the method of graphics modelling. to study the definition of “market niche,” there were used methods of comparison, generalization, and synthesis thanks to that we defined the special features of this concept. the most profitable market niches were defined by the method of a survey of chief executives of successful ukrainian enterprises what allowed us to predict the most profitable niches for coming 10 years. by the method of generalization, we defined factors which explain how the technology brand influences customers’ behaviour. 3. world-known and the most successful brands the history of the development of the modern global economy shows the examples of successful conquests of a market by brands, which are known now as famous global ones. according to the interbrand ranking 2016, the first position the apple brand occupies, google is the second, and coca-cola is the third one (table 1). these are the most powerful, famous brands, which have a long history of development and success, and their strategies for entering the new market niches. for our investigation, it is interesting to review the trend of these brands value (figure 1). given figure allows making such conclusions. brands value shows growth from 2010 to 2016. the sharpest positive dynamics characterises apple’s value. this indicator is continuously growing and in 2016 it riches almost 180 billion usd. as to google and coca-cola, table 1 the most successful brands in 2016 brand name description brand value, million usd growth rate, % apple technology brand that uses innovation in producing its gadgets and software platforms 178119 5 google technology brand organising the world’s information and making it globally accessible 133252 11 coca-cola beverage brand which has more than other 500 brands 73102 -7 source: developed by the author based on the best global brands 2016 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 2010 2011 2012 2013 2014 2015 2016 apple google coca-cola figure 1. brand value trend in 2010-2016, million usd source: developed by the author based on table 1 baltic journal of economic studies 17 vol. 5, no. 1, 2019 these brands represent positive dynamics too, but it is not so sharp, it is smoother, and in 2016, google’s value is about 130 billion usd and coca-cola’s is more than 70 billion usd. the experience of the given examples is significant. such success may be possible only if these brands use professional marketing tools, take into consideration customers’ demand and study new opportunities and market niches. it is necessary to note that there is no ideal marketing mix for all brands and companies. although, defining the own marketing niche is an essential step for entering the global market. 4. market niche: approaches to understanding the definition of “market niche” which is used in the modern economic literature varies significantly. in general, it means the position of the brand in a particular market. modern marketing does not give single-valued definition. for instance, m. vaigel (vaigel, 2004) defines the following variants of using this concept: identification of concepts of market niche and target market segment; definition of a small market part, which corresponds to the competitive advantages of the brand; identification of an unusual situation in the market when the brand satisfies a new requirement that had not been satisfied yet. when analysing scientific approaches to understanding the concept of a marketing niche, it is important to pay attention to philip kotler’s vision (kotler, 2014). in his opinion, the market niche is the sphere of customers’ needs thanks to satisfying which the company makes a profit. very often modern literature argues that the market niche is a target market, market segment, and marketing opportunity. in this investigation, it is used the definition of m. vaigel (vaigel, 2004), who argues that “market niche is free from intensive competition small part of the market which consists of consumers with similar needs which cannot be satisfied fully by existing market products and satisfaction of what can be possible with higher rate of return”. according to our analysis, several features characterise the market niche: highly individual needs and requirements, for satisfying which it is necessary to have a range of complement goods and services; stable market potential; weak competitors. the market niche is a result of the activity of players in the particular market. so, an appearance of the market niche can be caused by developing different situations in the market. here we are giving some examples. target marketing. it is the orientation on the small part of the market, which is not interesting for large companies (they do not want to satisfy needs of customers in this market), and there is a weak press of competitors on this market. the unique situation in the market. it is the particular case of special conditions and circumstances of activity (for example, the activity of public bodies that causes the appearance of unique needs of customers that can’t be satisfied thanks to existing goods and services. clustered marketing. it is the set of loyal customers (focus group) who are interested in receiving a wide range of products and services in a particular place (as an example, one producer, dealer, etc.). horizontal marketing. it is widening the range of goods and services oriented on one target segment. vertical marketing. it is searching ways of a particular product selling together with complementary products for different groups of customers (on several market segments in one time). before exploring the market niche, it is necessary to find a place in the market for your knowledge, skills, and competencies. many brands have success not thanks to new, innovative products but new ways of entering the market. today in modern marketing, it is important to use new technologies not only in producing goods but also in ways of cooperating with customers. that is why one of the ways of defining a market niche is innovation in the sphere of selling products and services. very often brands that have a small part of the market can be more profitable than the market on an average. the secret of the brand’s success, which operates in the market niche, is better concentration on the satisfaction of customers’ needs than competitors’. as a result, the company can set a premium price by providing higher compared with competitors’ value. according to the definition of market niche given by m. vaigel (vaigel, 2004) and analysed in this paper, we defined the next steps of entering the new market by the brand: 1. defining criteria for choosing a niche. 2. analysing the influence of the external environment on the brand operating in the particular niche. 3. examining opportunities for the brand in the niche. 4. a swot analysis of brand operating in the niche. 5. forecasting of the brand operation in the niche. 6. preparing the rating of chosen marketing niches. time is running, and the needs and requirements of customers are being changed. in these conditions, marketing strategies of brands are being changed too. we made an interview with several chief executives of big ukrainian companies and prepared the list of modern market niches, which will be profitable next ten years according to the results of the interview (table 2). according to the given list, technology market niches are the most popular today. they are the most profitable and perspective for investors. baltic journal of economic studies 18 vol. 5, no. 1, 2019 5. technology brands as examples of success according to the interbrand ranking 2016 (best global brands, 2016), 13 technology brands show more than 30% of total value, making technology sector the leader. modern technology brands have gone beyond launching a successful product or service – they have delivered on the true measure of innovation: the ability to change the perception of customers. capacity to influence behaviour relies not only on an innovative proposition but also on assessing the value or benefit of that switch to the market. here we give the list of factors that explain how technology brands influence customers’ behaviour. broad addressable markets. it is expected that more than 70% of the world’s population will have mobile phones by the end of 2018. thus, if you are a gadget producer, microchip maker or internet provider, the market size is enormous. in addition, there are many technology brands that get benefit from a low barrier to entry, especially in comparison with luxury and automotive spheres. the accessibility of technology brands on the consumer side stimulates the growth on the business side, as the number of connected users contributes to massive data pool and cloud. for instance, so famous technology brand like intel has kept well afloat in the face of waning pc sales across the industry by refocusing on innovation. the destination for intensive growth. technology brands do not only benefit from wide markets but an ability to develop more rapidly than others. innovations that the top technology brands have accumulated, along with the relative lack of manufacturer regulation give them an opportunity to reinvent their goods or services very easily. rearrangements to software can happen quickly, requiring minimal input from their customer bases, testing and iterating ideas is core to the vision of these brands. built-in flexibility gives technology brands the opportunity to turn into different goods or service categories as they evolve along with customers’ wishes and expectations. here we can provide an example like uber, which has evolved from a car app into a provider of some services. besides, these up-to-date technology brands are not just catering to customers’ needs but raising the bar for what’s possible, not just meeting but managing the speed of life. following the famous leaders. brands could follow the leaders by evolving marketing strategies. for example, adobe sees how people act at work and home, and it suggests an expanded service portfolio that creates the value chain in the business sector and gets closer to the customer through mobile applications. few have leveraged their platforms, like amazon. what was designed as a shopping platform now powers content and the lessons learned in building that platform gave way to a successful cloud service business. the success of these businesses and the strength of their brands have driven growth beyond the technology sphere. brands in all sectors in the modern economy are including technology brands as business partners or platforms. operating for prospects. the most famous technology brands have become perceptive of marketers by using table 2 the most profitable market niches today № market niche description 1 mobile payments technologies and applications for using a smartphone for payments 2 internet resources technologies that exclude the human participation in repeating operations 3 big data searching hide interrelations in information space 4 online courses education online 5 delivery service food sale online 6 wearable gadget smart watches, glasses, bracelets, etc. 7 3d-printing stereo lithography, layer-by-layer fusing, selective laser sintering, 3d printing 8 robots personal drone, industrial robots, appliances 9 fuel cells and batteries new, more powerful sources of power 10 commercial property in regions shopping centres, offices, stock in cities with population less than one million 11 smart materials fabrics, materials with unique features 12 auto components producing parts of cars 13 health care private clinics, treatment on the base of the human genome 14 recycling recycling management 15 alternative energetics refusal from network electronic energy in favour of small generation 16 space photos of space, satellites creation 17 escort of elderly people internet-projects, exoskeletons 18 franchising business restaurants “mafia”, good beer, everest mining company, indigo mental club, small fruit, etc. 19 agriculture feed producing, dairy cattle breeding 20 geological prospecting, green projects green-projects in the sphere of hydrocarbons and precious metals extracting source: developed by the author based on the results of survey baltic journal of economic studies 19 vol. 5, no. 1, 2019 the equity built into their brands to allude at what lies beyond their goods and services. many have seeded their next big bets, preparing customers for what may be next or positioning themselves as seers. as technology becomes more a mirror of the self, events will continue to develop around automation. for example, lenovo has moved beyond the ict world with a slew of new smart gadget, from watches to laptops, powered by the innovation cloud platform that the brand itself is helping to develop. information technologies extend to our thinking with advancements in human-made intelligence. the most famous technology brands use human-made intelligence to develop deeper interface dependencies, for instance, amazon with alexa, apple with siri, etc. nowadays, human-made intelligence is getting smarter, more cautionary, and anthropomorphic, with the ability to develop more close relationships with customers. human-made intelligence has the potential to not only enhance individuals’ lives but to advance the capabilities of business, as we have seen with the continued applications of ibm’s software. the concept of “privacy exchange”, trading personal information for perceived value – may also have a dividing effect on the amount of data people show, which will allow human-made intelligence to become more nuanced while putting pressure on more brands to develop human-made intelligence as a part of their ecosystems. after finding a business idea, it is important to define the market niche. as we discussed, the market niche very often is free of competitors and guarantees financial success. the idea may be brilliant, although if it does not correspond to the chosen market niche, the business might fail. we try to give an example. there is the idea to set up business related with growing and selling healthy food because the increasing income of population and a tendency to the healthy style of living causes the demand for these goods. however, if we choose the countryside as the market niche business would not be successful because population do not have high income and have own fruits and vegetables. in the modern conditions of competition, it is important to find the market niche, which is free from competitors. choosing the market niche, it is necessary to understand the prospects of market share development. it means that market niche must be in-demand not only today but also tomorrow and in the future. in other words, the particular business-idea must be unique for this market niche. in addition, it means that in this market niche there are no competitors who can satisfy the needs of customers and ways of satisfaction must correspond to their psychical, cultural, and economic features. it is necessary to add the importance of barriers to entering the market. here we define these market barriers, which prevent competitors from entering the market: exclusive contracts, licenses, patents, and knowhow. the brand can choose several market niches; however, for every niche, it has to prepare different strategies. experts of brand-management need to find the niche at which the brand would be oriented in the future. if the niche is interesting, business begins to give information about the brand to final customers. although, it is necessary to investigate whether the customers need it. such investigations provide an opportunity to find out strengths and weaknesses of the brand. 6. conclusions our investigation allows making such a conclusion. today’s economy is characterized by the increasing role of non-material assets in a balance of companies. additionally, the success of the company is caused by relations with customers and brand management. there were analysed several business strategies of famous brands and concluded that if you want to have success, you need to find the own market niches. in the article, we analysed the experience of apple, google, and coca-cola brands which were the most successful in 2016. the experience of these brands is significant. such success may be possible only if these brands use professional marketing tools and their niches. we analysed several approaches to understanding the definition of market niche and defined some variants of using this concept: identification of concepts of market niche and target market segment; definition of a small market part, which corresponds to competitive advantages of the brand; identification of a special situation in the market when the name satisfies a new requirement that had not been satisfied yet. according to made analysis, the market niche is characterised by these features: highly individual needs and demands for satisfying which it is necessary to have a range of complement goods and services; stable market potential; weak competitors. the appearance of the market niche is caused by developing different situations in the market: target marketing; the unusual situation in the market; clustered marketing; horizontal marketing and vertical marketing. there were defined the next steps of entering the new market by the brand: defining criteria for choosing a niche; analysing the influence of external environment on the brand operating in the particular niche; analysing opportunities of the brand in the niche; swot analysis of brand working in the niche; forecasting of the brand operation in the niche; preparing the rating of chosen marketing niches. we made a list of market niches, which will be successful in the coming ten years. these are: internet resources: big data; online courses; delivery service; baltic journal of economic studies 20 vol. 5, no. 1, 2019 wearable gadget; 3d-printing; robots; fuel cells and batteries; commercial property in regions; smart materials; auto components; health care; recycling; alternative energetics; space; escort of elderly people; franchising business; agriculture; geological prospecting and green projects. it was concluded that technology market niches are the most popular today. it is caused by the given factors: broad addressable markets; the destination for accelerated growth; following the famous leaders and operating for prospects. references: aaker, d. (1996). building strong brands. new york: the free press. (in english) aaker, d. (1991). managing brand equity: capitalizing on the value of a brand name. new york: the free press. (in english) aaker, d. (2014). aaker on branding: 20 principles that drive success. new york, ny: morgan james publishing. (in english) aaker, d. (2011). brand relevance: making competitors irrelevant. retrieved from: http://johniduh.yolasite.com/ resources/brandrelevancemakingcompetitorsirrelevant.pdf1759758197.pdf (in english) liesio, j., mild, p., salo a. (2006). preference programming for robust portfolio modelling and project selection. european journal of operating research, 181(3), 1488-1505. (in english) hines, a. (2008). thinking about the future: guidelines for strategic foresight. retrieved from: http://www.executiveforum.com/pdfs/ahinessynopsis.pdf (in english) laut, a. (2011). brendingovaya politika kak faktor pov shaniya konkurentosposobnosti organizatsii [branding politics as a factor of improving the competitiveness of an organization]. extended abstract of candidate's thesis. ekaterinburg. (in russian) tokarev, b. (2012). metodika vybora rynochnykh nish vysokotekhnologichnykh produktov [methodology of selection of market niches for high-tech products. sovremennye tekhnologii upravleniya. retrieved from: http://sovman.ru/article/1305/ (in russian) best global brands 2016 rankings. retrieved from: http://interbrand.com/best-brands/best-globalbrands/2016/ranking/ (in english) vaigel, m. (2004). poisk i osvoenie rynochnykh nish v marketingovoi deyatelnosti kommercheskikh organizatsiy [searching and developing market niches in the marketing of commercial organizations]. extended abstract of candidate’s thesis. moscow. (in russian) kotler, p. (2000). marketing, management, millennium edition. prentice-hall, inc. (in english) rynochnaya nisha i ee vybor [market niche and selection of it]. retrieved from: http://biznesklubonline.com/ stati/242-rynochnaya-nisha-i-ee-vybor/ (in russian) baltic journal of economic studies 145 vol. 4, no. 5, 2018 corresponding author: 1 uzhhorod national university, ukraine. 2 kyiv national university of technologies and design, ukraine. 3 kyiv national university of technologies and design, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-145-150 models of financing of higher education institutions in foreign countries lesia leshanych1, iryna miahkykh2, mariana shkoda3 abstract. the aim of the article is to study the problems of reforming the system of financing higher education in conditions of compliance with world quality standards of education. besides, another aim of the article is also to substantiate of the perspectives of their use in ukraine, on the basis of analysis of the main foreign models of higher education institutions financing. the subject of the study is the financing model of institutions of higher education in foreign countries. methodology. the research is based on a comparative analysis of funding systems for higher education institutions in ukraine and in foreign countries. the advantages and disadvantages of different systems of the financial provision of higher education are determined based on the analysis of the peculiarities of financing higher education institutions in germany, usa, uk, sweden, norway, and australia and in some other countries. on the basis of a comparative legal research of certain provisions of ukrainian legislation, the possibilities and limits of the application of positive foreign experience in this field are defined. the results of the study showed that the financing of higher education at the expense of state funds should be directed only to the needs of the state. and the state, in its turn, should provide graduates with jobs that will help reduce unemployment among them. currently, there is a partial improvement of diversification of funding sources in ukraine. we mean that the provision of the status of a non-profit organization will give the first impetus to the formation of contract relations between higher education institutions and private organizations and will improve their financial position. the implementation of the foreign experience will make financing more transparent and will give an opportunity to distribute it according to the quality criteria of providing educational services. practical impact. experience of the developed economies and the analysis of the existing condition of financing of educational institutions of ukraine allow defining the priority directions of improvement of a system of financing of the higher education. as the budget of ukraine is not able to compensate all needs for financial resources of higher educational institutions, it is necessary to encourage private investments into education, training, and high technologies more actively. besides, conducting researches, the international consultations, modelling and discussion of the schematic diagram and funding mechanism for the higher education in ukraine is also expedient. correlation/originality. conducting a comparative analysis of financing models of higher education institutions in ukraine and foreign countries is the basis for developing the most promising directions for the development of domestic legislation in this field. key words: institutions of higher education, autonomy, financing of education, foreign experience, financing models. jel classification: i22, i23 1. introduction the tasks of providing ukraine with professional personnel are in a number of strategic since the security and socio-economic progress of the country depend on their solution. state policy in the field of higher professional education, defining the directions of its development, creates the basis for the diversification of the composition of highly qualified specialists. by joining the bologna convention, ukraine has begun transforming the system of training highly qualified personnel to ensure its compliance with world quality standards of education, changing the composition and structure of higher education institutions, giving them the freedom to choose sources of finance, as well as the possibility of commercializing their core activities. in particular, it is determined that financing of state institutions of higher education is carried out at the expense of the state budget funds on the terms of a state order for payment for training services for specialists, scientific and pedagogical staff, and at the expense of other sources not prohibited by law, in compliance with the principles of targeted and efficient use of funds, publicity and transparency in decision making (zakon ukrainy «pro vyshchu osvitu»). baltic journal of economic studies 146 vol. 4, no. 5, 2018 there is a need to develop an effective system of financing higher education aimed at ensuring the proper training of specialists, which will provide: creation of a transparent market for educational services; the attraction of significant additional financial instruments, including credit resources, under state guarantees; the transition from the ideology of subsidies to the ideology of investing in education; stimulation of constant motivation of students to qualitative education; the attraction of funds from the banking sector to preferential student loans. the main instrument of the new model of financing higher education should be the creation of a personalized system of access to financial resources for the implementation of individual human educational development (postanova verkhovnoi rady ukrainy). the experience of the leading countries of the world shows that one of the most important levers of management of this process is the state financing mechanism of higher education. the foreign practice of financing educational institutions has a long history, is characterized by flexibility and market orientation in the selection of forms, methods, and tools. analysis and implementation of a positive foreign experience in this area will allow ukraine to continue its reforms in line with the strategic state priorities of financing ukrainian state educational institutions of higher education. the practice of state financing of education does not remain constant and unchanged, constantly changing internal and external conditions of functioning of the industry dictate the need to improve the entire financial mechanism: the tax base, the normative definition of funding, the system of intergovernmental fiscal relations. the urgent need is to create a transparent, targeted, stimulating nature of financing of budget spheres and education, including the strengthening of the elements of responsibility and the reduction of the influence of subjective factors (manual guidance) on the process of making financial decisions in the education system, which determines the relevance of our study. issues of education, sources of its funding and effectiveness have always been the focus of attention of scholars. the theory and practice of financial provision of higher education have been repeatedly investigated by such domestic scholars as v. andrushchenko, j. beskid, t. bogolib, e. boyko, v. bukovinsky, o. grishnov, i. kalenyuk, k. korsak, v. kutsenko, d. kucherenko, o. martynyuk, m. shavirin, l. shevchenko. also noteworthy is the research on the financing of the educational system of western economic schools, in particular, t. arnold, e. dinnson, t. moe, h. mayer, k. nordstrom, m. friedman, j. schumpeter et al. the works of these scholars form the basis for further developments and are the theoretical basis of the study. the purpose of the paper is to study the problems of reforming the system of financing higher education in conditions of achieving compliance with world standards of quality of education and on the basis of analysis of the main foreign models of financing higher education institutions substantiation of the prospects of their use in ukraine. 2. the main material the key problem in improving the financing of the education system (and not just it) is to increase the efficiency of public expenditures, which leads to the search for new approaches and mechanisms. it is obvious that this process must foresee, firstly, a clear idea of what and for what purposes the state funds come from. secondly, the methods and forms of allocation of funds. thirdly, the definition of the status of the institution receiving budget financing, which also covers issues of its authority and responsibility for the results of activities. it is the unclear understanding of these issues that is based not on inefficiency but rather on the lack of internal logic of directing the budget process towards transparency and efficiency (kaleniuk, 2017). in recent years, in world practice, there has been a change in the funding of public higher education systems and mechanisms for allocating budget funds between higher education institutions. this is due to the sharp increase in student contingents and the limited budget resources, which requires increased use of public funds and the involvement of various non-state sources. to a large extent, the transformation of the forms and mechanisms of financing is influenced by the change in the nature and content of higher education in connection with the need for the formation of individual educational programs of education, diversification of their content, terms and forms of delivery of educational services to the consumer. in world practice, funding for higher education is costly. in the united states, higher education is the fifth in the monetary calculation of the us economy’s export, which sometimes exceeds the amount of arms exports. in australia, the educational sector is the third largest source of budget revenues in the country’s economy. in 2014, the canadian government has recognized international education as a key factor in creating new jobs and improving welfare and plans to double the number of foreign students to 450,000 by 2022. this will increase the cost of foreign students in the country to $16.1 billion and will create in canada, at least, 86.5 thousand new jobs. according to the latest unesco data (2006–2012), the top 10 countries with the highest share of gdp spent on education are lesotho, cuba, timor-leste, denmark, moldova, djibouti, namibia, cyprus, botswana, and iceland (kharlamova, 2017). an analysis of foreign experience clearly shows that in most countries any serious reorganization in this area baltic journal of economic studies 147 vol. 4, no. 5, 2018 is preceded by a modernization of the current model of its management in the direction of strengthening the autonomy of universities in the issues of recruitment of students and the management of available resources. one of the most important directions is the strengthening of financial autonomy of higher education institutions both in attracting extrabudgetary funds and in using material and financial resources. the value of autonomy for universities is not “academic freedom” but the ability and the right to determine their own lines of action without undue interference by the state, although such autonomy is relative since it calls for increased attention from society and state control. however, autonomy should not be perceived as the complete independence of universities from the state. firstly, the provision of high financial and administrative autonomy to higher education is accompanied by an increase in the quality control of education. secondly, the state everywhere continues to finance at least 70% of the higher education budgets (laryonova, 2005). it should be noted that the autonomy of higher education is understood as increasing the financial and administrative independence of universities from the state, which manifests itself in increasing the autonomy of higher education in all spheres of management – from personnel and administrative-financial policy to student planning, the content and volume of training courses, and the identification of priority areas of scientific researches. the financial autonomy of universities is the main benchmark in the world practice of an educational organization, despite the fact that in many countries the state still has a dominant role in the financial provision of higher education. the increase of financial autonomy of higher educational institutions is indicated by a sharp reduction of the share of state financial participation. for example, in germany and the uk, the requirements of higher education institutions to expand their autonomy are linked to the state administration with a reduction of their funding from the state budget, stating that if they want more autonomy, then they have to learn how to make money. for example, in the united kingdom, the special education board for the financing of higher education institutions in the uk (hefce) calculates the volume of financial support for current activities on the basis of four groups of specialties: medical and veterinary specialties; exact and natural sciences, technological and engineering specialties; specialties requiring laboratory equipment; specialties that do not require laboratory equipment. in turn, in germany, each of the 16 länder of germany has its own ministry of education, which manages all institutions in its territory. in order to coordinate programs and curricula, national structures have been established, in particular since 1969, the federal ministry of education (hryshchenko, 2015). in the eu, university autonomy is one of the main issues. when establishing the european association of universities in 2001 autonomy with accountability was identified as the most important principle. subsequently, the four distinct types of autonomy were clearly identified in the 2007 lisbon declaration: academic (decision on educational activities), financial (financing receipt and distribution, decision to pay tuition, use of profits, etc.), organizational (determining university structure, contracting, rector’s election, etc. managers), and staffing (recruitment, remuneration, and personnel careers). for each type of autonomy, indicators are set according to which its level is determined. for example, for financial autonomy, the following indicators have been set: duration and type of financing, the possibility of profit, the ability to receive loans, the ability to own real estate, the ability to set the level of payment for local and foreign students. in other countries, including the united states, academic freedom is guaranteed by high financial autonomy, which forms its funds from various government (central, regional, and local) agencies and other sources. here is the so-called principle of budgeting, which allows you to focus on the result of activities within the framework of the state task and the state contract. an important experience for ukraine is the financial support of the highest university potential in the us through the mechanism of the endowment, which of the 22 us higher education institutions ranked 1st – the 30th place under the shanghai rating, in 2015 was 85% in 13 private establishments (savchenko, chumak, 2017). in the member countries of the organization for economic cooperation and development (oecр), where the state has traditionally controlled the financial provision of educational activities, it is now recognized the superiority of the market mechanism in comparison with the administrative regulation of supply and demand for different forms of training provided to different groups of consumers. in this regard, the state’s attention is focused on the reform aspects of governance, strategy and prioritization, while the operational activities of universities are paying less and less attention. in some countries, including in ukraine, this is reflected in the establishment of agencies to monitor the quality of teaching and research. thus, the law of ukraine “on higher education” provides for the creation and functioning in ukraine of an independent permanent collegial body authorized to implement state policy in the field of quality assurance in higher education, – the national agency for the quality assurance of higher education, whose members are elected by congresses of representatives of higher educational institutions of various forms of ownership, student self-government bodies of higher educational establishments, national and branch academies of sciences and employers. baltic journal of economic studies 148 vol. 4, no. 5, 2018 in particular, the national agency has the following powers: forms requirements for the system of quality assurance in higher education, develops the provisions on accreditation of educational programs, and submits it to the ministry of education for approval; analyses the quality of educational activities of higher educational institutions; conducts a licensing examination, prepares an expert opinion on the possibility of issuing a license for conducting educational activities in the field of higher education; coordinates the developed educational standards of educational activity and standards of higher education in each specialty; forms a single database of higher education institutions specializing in the training of higher education graduates at each level of higher education; decides on accreditation or refusal to accredit the relevant educational program; forms the criteria for assessing the quality of educational activities, in particular, scientific achievements, higher education institutions, which may include ratings of higher education institutions; submits proposals for granting the higher educational institution a national status in accordance with the procedure and according to the criteria established by the cabinet of ministers of ukraine; participates in the procedure established by law in the formation of indicators of a state order for the training of specialists with higher education at higher levels of higher education and specialties, taking into account the medium-term forecast of the needs of specialists in the labour market, etc. (postanova kabinetu ministriv ukrainy). in oecр member countries, central government usually controls certain points in the higher education system, including setting tuition fees or issuing permissions for tuition fees, giving universities a significant degree of freedom in shaping academic structures, curricula, and staffing. methods of financing universities have undergone significant changes. funds are provided to universities on a block grant basis, rather than through a detailed transfer of budget items. there is also a clear tendency to enter or increase the level of payment for tuition, budgeting, result-oriented, and targeted programs. these changes accompanied the strengthening of autonomy and simplification of reporting in the university administration. at the same time, the development of certain forms and methods of attracting funds from extrabudgetary sources depends on many circumstances that are dictated both by the possibilities of a particular higher education and by state policy. in conditions of higher education autonomy, the state stimulates the effective use of their financial resources and property, creates conditions for the distribution of income received for educational purposes. the basis of financial autonomy of universities in the leading countries of the world is the following principles: transition to flexible financing, payment for results (and other schemes); introduction of a more formalized system than before for scientific and educational activities; the distinction between permanent (guaranteed) and variables (on the efficiency of work) of government sources of financing. the guaranteed source of funding usually provides adequate provision (including pay) for the educational process, taking into account the medium-term, and sometimes the long-term perspective; distribution of funding flows for studies and research. in some countries, universities have the right to independently distribute received funds, while the funds for training are guaranteed, and for research – variable flow; diversification and fragmentation of funding for each individual university and even for individual departments, units, and laboratories; use of financial intermediaries, with the exception of the transfer of a guaranteed (permanent) part of state subsidies. financial autonomy and the status of a legal entity allow the university to obtain the right to create and operate other (except for property) funds, which are formed at the expense of money, other donations, shares, and other types of securities. in international practice, up to 4,000 funding schemes for universities are distinguished, differing in terms of the degree of state coverage of higher education costs; the mechanism of selection of potential students in high competition; inclusion in the system of financing along with state non-state universities; coverage of vouchers of the higher education system; the level of independence of universities in setting the price of education; priorities for children from disadvantaged or low-income families, etc. summarizing the foreign practice of financing higher education, we will try to identify the main models of financing higher education, the delimitation of which is conditional, as in most countries of the world are used combined options to provide higher education financial resources. model 1. includes two interconnected models: 1.1. the financing is focused on needs; 1.2. acquisition by the state of educational services for certain purposes. model 2: funding of higher education, based on the results of their work. model 3: financing, which is carried out directly by consumers of educational services and oriented to the demand and internal needs of the institution of higher education. baltic journal of economic studies 149 vol. 4, no. 5, 2018 models of the first type are free of state higher education. model 1.1 stipulates the obligation of higher education to train specialists with the qualifications necessary from a social point of view. in this case, the cost of training is set and agreed in advance; payment is made at the expense of the state budget. such a model is valid for the countries of southern, central and eastern europe (including ukraine), africa, and latin america. preference of model 1.1 is that simultaneously the efficiency of using budget funds is increased and the expenses of the state are minimized. however, the relevance of the planned training to the needs of the labour market depends on the accuracy of the relevant forecasts of the state. model 1.2 envisages the participation of universities in competitions for obtaining a state order for the training of specialists, which ensures an efficient allocation of state tasks and reduces state expenditures. the order is received by the higher educational institution, whose educational services correspond to the conditions of the competition as much as possible, and the expenses for training are optimal. in general, financing of the first type is characterized by a rather low degree of autonomy, as the use of financial resources is clearly controlled by public authorities. the second type financing model is focused on the status of higher education, involves the allocation of public funds, depending on the results of its activities. the amount of funding is determined by the number of graduates, students admitted to the first year, the results of controlling knowledge of students, the complexity of training courses, the number of defended dissertations, etc. such models are implemented in romania, denmark, and the united kingdom. in sweden and the netherlands, universities are funded on the basis of the awarded degrees and a positive assessment of their activities. the possibilities of using such a financing model for ukraine are also being actively discussed. the positive features of this model are the expansion of the authority of higher education in financial and administrative management. but the funding of higher education by “status” indicators provides the government with an effective management tool, while the ministry of education monitors the quality of education. the third type financing model is aimed at realizing labour market needs, provides for the payment of educational services by direct consumers, and focuses on the demand and internal needs of an educational institution. this model uses government commitments, which are transmitted in the form of coupons, certificates (vouchers) to direct consumers of educational services. the significant constraint for the learner – the validity of the voucher. in many countries, fees for higher education have been introduced by implementing a variety of third-party schemes (australia, austria, brazil, hungary, china, kenya, new zealand, tanzania, etc.). in some of them, the state allows higher education to count a certain percentage of students based on full tuition fees. in this case, it is enough to get the minimum number of points to start training. in australia, a fee is accepted for a fee of up to 25% of students from 1998, in china – since 1988, in hungary – since 1997. the benefits of financing education in this model are, firstly, in expanding autonomy in higher education enrolment courses, education planning and funding; and secondly, in conjunction with funding based on vouchers with payment by the students themselves. 3. conclusion as a result of the analysis of foreign experience in financing higher education, the following conclusions can be drawn: firstly, the cost of higher education should grow faster than the state funding that is provided to support it. secondly, universities need a wider set of financial security instruments in an autonomous environment. thirdly, corporate and private finance must be involved in the reimbursement of education costs. fourthly, universities should manage their finances and assets more effectively to ensure longterm financial sustainability. fifthly, the possibility of choosing different funding schemes allows the consumer of educational services to find the best option for providing financial investments in their own education, and higher – to provide additional cash inflows. in the ukrainian practice of financing education, it is advisable to combine different models of financial provision of higher education institutions since the advantages of each of the models considered are irrefutable in terms of their impact on the economy and the social sphere. the execution of a state order, financing higher than the performance indicators, the impact of the labour market – the actual tasks for the domestic high school. the need for a transition to flexible financing by the state is determined by the needs of the ukrainian labour market, which develops in accordance with global trends: the strengthening of migration processes and competition from foreign specialists. therefore, for ukraine, particular interest is the use of the model, oriented to the status of higher education, as it stimulates the educational institution to link its capabilities with the demands of employers. in connection with the transformation of state universities into autonomous institutions, the use of foreign experience in financing education in ukrainian practice will allow the more rational use of public funds allocated for the educational sphere and actively implementing innovative educational financing instruments. baltic journal of economic studies 150 vol. 4, no. 5, 2018 references: zakon ukrainy «pro vyshchu osvitu» vid 01.07.2014 [the law of ukraine "on higher education" of 01.07.2014]. url: http://zakon.rada.gov.ua/laws/show/1556-18 postanova verkhovnoi rady ukrainy «pro rekomendatsii parlamentskykh slukhan na temu: «pro stan ta problemy finansuvannia osvity i nauky v ukraini» vid 12 lypnia 2017 № 2133-viii [resolution of the verkhovna rada of ukraine "on recommendations of the parliamentary hearings on the theme "on the state and issues of financing education and science in ukraine "dated july 12, 2017 № 2133-viii]. url: http://zakon.rada.gov.ua/ laws/show/2133-19 kaleniuk, i. s. (2017). napriamy transformatsii mekhanizmiv finansuvannia osvity v suchasnomu sviti [directions of transformation of financing mechanisms of education in the modern world]. demohrafiia ta sotsialna ekonomika, 1(29), 24-36. kharlamova, h. (2017). brytanska model finansuvannia vyshchoi osvity: uroky dlia ukrainy [british higher education financing model: lessons for ukraine]. visnyk kyivskoho natsionalnoho universytetu imeni tarasa shevchenka. ekonomika, 5(194), 58-66. laryonova, m. v. (2005). aktualnue voprosu razvytyia obrazovanyia v stranakh oesr: ucheb. posobye [current issues of education development in oecd countries: studie book]. moskva: yzdat. dom hu vshe. hryshchenko, i. m. (2015). teoretyko-metodolohichne obgruntuvannia efektyvnykh finansovo-ekonomichnykh modelei rozvytku vyshchoi shkoly: monohrafiia [theoretical and methodological substantiation of effective financial and economic models of higher education development: monograph]. kyiv. savchenko, i. h., chumak, o. v. (2017). modernizatsiia derzhavnoho mekhanizmu finansuvannia vyshchoi osvity v umovakh yii reformuvannia [modernization of the state financing mechanism of higher education in conditions of its reformation]. teoriia ta praktyka derzhavnoho upravlinnia, (58), 1-6. postanova kabinetu ministriv ukrainy «pro utvorennia natsionalnoho ahentstva iz zabezpechennia yakosti vyshchoi osvity» vid 15 kvitnia 2015 r. № 244 [resolution of the cabinet of ministers of ukraine "on the establishment of the national agency for the quality assurance of higher education" dated april 15, 2015, no. 244]. url: http://zakon.rada.gov.ua/laws/show/244-2015-%d0%bf/paran15#n15 baltic journal of economic studies 268 vol. 4, no. 2, 2018 corresponding author: 1 educational and research institute №1, national academy of internal affairs. е-mail: dmitro@gmail.com 2 department of law, higher educational institution of ukoopspilka "poltava university of economics and trade". е-mail: ruslan1974@gmail.com 3 department of financial security and financial investigation, educational and research institute no. 1, national academy of internal affairs. е-mail: gavruha@ua.fm doi: https://doi.org/10.30525/2256-0742/2018-4-2-268-273 monetary allowance for law enforcement officials temporarily serving abroad: foreign experience dmytro andreiev1 national academy of internal affairs, ukraine ruslan bilokin2 higher educational institution of ukoopspilka "poltava university of economics and trade", ukraine elena tikhonova3 national academy of internal affairs, ukraine abstract. the aim of the article is to analyse foreign experience in regulating the monetary allowance for law enforcement officers temporarily serving abroad, distinguish features of setting the rates and types of the monetary allowance for this category of workers in some foreign countries, and ascertain the order of the monetary allowance for police officers, who are temporarily serving outside ukraine. the subject of the study is the foreign experience of the monetary allowance for law enforcement officers temporarily serving abroad. methodology. the research is based on a comparison of the monetary allowance of law enforcement officers temporarily serving abroad in ukraine and in foreign countries. based on the analysis of the monetary allowance features for this category of law enforcement officers in germany, france, spain, the united states, turkey, and in some other countries, the advantages and disadvantages of different conditions and procedure for the monetary allowance are determined. on the basis of a comparative legal study of certain provisions of ukrainian legislation, the possibilities and limits of applying positive foreign experience in this area are determined. the results of the study revealed that the international experience of the labour remuneration of law enforcement officers temporarily serving abroad, as a rule, provides for the monetary allowance for employees based on the features of state regulation in this sphere and varies according to the source of funding and the principles for determining the rate of salary and compensatory payments, payments for moving to a new place of service and the quality of life of the state of a temporary service. practical implications. the positive experience of the monetary allowance for law enforcement officers temporarily serving abroad proves that in order to increase the interest of law enforcement officials, including police officers temporarily serving outside ukraine, higher legal and social protection of these persons and their family members should be ensured, including gradual approximation of the level of the monetary remuneration for the performance of official duties to the level of similar payments in the states of central europe. relevance/originality. conducting a comparative analysis of the monetary allowance for law enforcement officials temporarily serving abroad is the basis for developing the most promising directions for the development of domestic legislation in this area. key words: law enforcement bodies, police, monetary allowance, service abroad. jel classification: k19, e42, e52 1. introduction over recent decades, there is a tendency in the world to intensify the interaction of police units of foreign countries at the international level. this issue was raised initially at the first international congress of judicial police, which took place at the initiative of prince albert i in monaco in 1914. already then, the head of the congress, professor a. larnie (france), said that direct contact between the courts and police of different countries became increasingly necessary every year. any baltic journal of economic studies 269 vol. 4, no. 2, 2018 delays in prosecuting and arresting criminals abroad must be eliminated (gordienko, 2007). nowadays, international police cooperation is carried out by international organizations, on a regional scale and between the police of several countries. it has an objective basis, close relationship, and sometimes the interdependence of states in the modern world, which, consequently, leads to the internationalization of crime. growth and qualitative changes in crime cause the interest of various national police systems to seek cooperatively the most effective ways, means, and methods to counteract criminal manifestations (gubanov, 2000). such an interaction is carried out in several key directions, which include: providing legal assistance in criminal cases; conclusion and implementation of agreements on combating transnational crime; execution of decisions of foreign law enforcement bodies in criminal cases; regulation of legal issues and human rights in enforcing law and order; exchange of information of mutual interest to law enforcement bodies; joint investigation of counteraction to crime issues; exchange of experience in law enforcement work; assistance in training of personnel for foreign law enforcement agencies; provision of logistical and consultative assistance; organization of representative offices of law enforcement bodies in foreign states. international police cooperation develops within these directions. it can be defined as combined efforts of the police of different countries to increase the effectiveness of the strategy and tactics assigned to its competence in the prevention, termination and investigation of offenses, as well as measures for the management of police forces, personnel, scientific and methodological and technical support for their work. therefore, the study of foreign experience in the monetary allowance for law enforcement officers temporarily serving abroad is becoming relevant and important since the financial support of the personnel, who performs such tasks, is not the last factor affecting the quality of law enforcement performance abroad, which determines the relevance of the chosen topic. a significant contribution to the study of the monetary allowance for law-enforcement bodies temporarily serving abroad was made by foreign and domestic scientists such as g.  vedel, v.  v.  hordienko, a. v. hubanov, v. h. hritsenko, r . drago, v.o. zarosylo, j.  insiardy, k.  kenny, k.  marfy, m.  v.  plugatyr, a.  i.  subbot, yu.  i.  rymarenko, v.  l.  filsthein, o. r . shevchuk, and others. the aim of the article is to analyse the foreign experience of regulating the monetary allowance for law-enforcement bodies temporarily serving abroad, single out the features of setting the rates and types of the monetary allowance for this category of workers in some foreign countries, and clarify the procedure for the monetary allowance for police officers temporarily serving outside ukraine. the main material. at the un general assembly in september 1991, it was noted that the increase in crime, combined with its acquisition of a transnational character, endangered the internal security of states, impinged on the freedom of a person to live without fear, and might undermine international relations. all of this requires the creation of effective international mechanisms and closer cooperation between states. as a rule, international police cooperation is carried out in the following forms: exchange of information about persons (suspects in the commission of crimes, wanted, their relations, addresses, etc.), the facts of crimes; verification of suspects’ testimonies; identification of persons or stolen objects by photo or description; conducting interrogations or polls of citizens; obtaining data from foreign organizations, institutions, trade and industrial enterprises; forwarding documents. some interagency agreements provide for the possibility of the presence of police officers of one state in another state in carrying out operational and investigative actions that are of interest to them, attracting foreign experts for conducting expert assessments and various types of strategic and tactical consultations. in order to ensure the efficiency of the departmental mutual assistance provision, some states include in their diplomatic and other representations abroad both individual police officers and entire units. for example, the fbi has its own official representatives in more than 30 countries, the office of national drug control policy in more than 40, and the secret service in almost 50 countries. in the uk, germany, france, this form of cooperation with foreign police bodies is widely used. established in the united kingdom in april 1992, the national criminal intelligence service had a branch office in 15  countries in a year, while personnel of the federal office of criminal police of germany worked in 1996 at 25 embassies in west germany. in the same year, french police had units in 20 states, the united states, canada, columbia, the netherlands, pakistan, thailand and others (gubanov, 2000). in addition, the activities of police officers of any state abroad should be clearly regulated by the legal acts of the host country. otherwise, an imminent threat or a real violation of the principle of state sovereignty occurs. in general, the activities of the above-mentioned foreign police missions are carried out between most countries on the basis of relevant international treaties. in the world practice, there are the following forms of temporary service abroad by law enforcement officers: – service at the embassy of the state, as a police representative; – protection of diplomatic missions; – service in the un peacekeeping contingent; – service within the framework of the interstate agreements on the assistance of the foreign police. baltic journal of economic studies 270 vol. 4, no. 2, 2018 a police officer, who serves at the embassy of the state embassy as a police representative of his state, acts as a liaison officer, “a police attaché.” each state sets legislative requirements for candidates for a position of a police representative abroad. the tasks of police attachés mainly include collecting, analysing, and transmitting the necessary information, preparing proposals for conducting joint operations and further coordinating with the law enforcement bodies of the host country, etc. (zimin, zubov, 1993). for example, in france, the international representation of law enforcement bodies is carried out in three directions: – the international police technical cooperation service (sctip) of the french ministry of interior; – attaché on internal security (asi); – agencies for external borders ес frontex (fronteks – yevropeiskoie agentstvo po upravleniiu operativnym sotrudnichestvom na vneshnikh granitsakh gosudarstv-chlenov yevropeiskogo soiuza). for the support of french police officers abroad, the budget provides 1.98 billion euros, which is 8% of the total budget of the police (24.2 billion euros). at the same time, the amount spent on the material provision of police officers increases each year. in the united states, for candidates for service in the police station abroad, there are several criteria: age (in most states, more than 20 years); education (education of a specialty in law-enforcement activity, criminology, and psychology) and health status (yak staty politseyskym atashe chy ofitserom zviazku). the remuneration of foreign police officers is mainly determined by funding from the ministries of foreign affairs of the state or similar bodies dealing with international cooperation. in the united states, the rate of the monetary allowance for a police representative abroad corresponds to the rate of his/her position in his home country. for example, the initial rate ranges from 25 to 33 thousand dollars per annum, while the average amount of the monetary allowance is 52 thousand dollars. the average salary of the fbi legal attaché is 38,271 dollars. the final rate of the salary of a police officer abroad depends largely on the country where the police officer is being sent (yak staty politseyskym atashe chy ofitserom zviazku). in israel, the monetary allowance of a police attaché is paid by the budget of neither the police nor the ministry of internal security, but the ministry of foreign affairs. the foreign ministry has a strict division into ranks and, therefore, the police attaché cannot receive the same salary as a professional diplomat of a higher rank. thus, according to israeli law, a police attaché in washington dc is provided for the salary of $27,800 per month regardless of the salary he/she has received in the israeli police station (general politsii predpochel vashingtonu iudeiu i samariiu). in spain, the police have representatives in 68 countries. the salary of police attachés depends on the remoteness, quality of life, and risk to the life of a police officer, which is determined by the analysis of the political, social, and economic situation in the state where the embassy is located. these criteria are fixed as modules, set by the ministry of economy and finance each year. of the 68 diplomatic missions, a service in 51 (including havana, yemen, islamabad, algeria, cairo, mauritania, istanbul, buenos aires, morocco, mexico, lima, caracas, etc.) is considered dangerous. for serving in the most dangerous country, the largest module is used, on which the basic salary for the police officers of spain is multiplied. for example, the average monetary allowance provided for a commissioner in spain is 3664 euros per month, while the representative of the diplomatic mission of the spanish ministry of internal affairs in iraq, with the module, is approximately 29,700 euros. the rate of the monetary allowance is lower for a representative in angola, the democratic republic of the congo, the republic of korea, hong kong, ukraine, japan, and norway (yak staty politseiskym atashe chy ofitserom zviazku). considering the service of police officers abroad, related to the protection of diplomatic missions, it should be noted that for these purposes employees are usually sent for 18 months. in the general procedure, as well as police attachés, mentioned persons receive the monetary allowance, which includes the salary and compensations related to travel expenses, the risk to life, etc. furthermore, the rate of the salary also depends on the position occupied by a police officer. for example, the spanish police inspector in iraq receives about 19,500 euros a month, in switzerland – about 7,900 euros, in turkey – 3,800 dollars. in addition, the salary calculation procedure is maintained depending on the country of service. contrasting service at embassies, the service within peacekeeping missions is funded by the united nations, the monetary fund of which is formed by contributions from participating countries. ukraine also does not stand aside this trend of international police cooperation. the peacekeeping activity is quite diverse, and over the last two decades, the deployment of peacekeeping forces has taken place within various configurations. at present, 17 un peacekeeping operations varying in size, composition and range of tasks are deployed on four continents, and in six of the operations, representatives of the ministry of internal affairs of ukraine attend. considering the prospects of developing cooperation with the un, in 2011, the leadership of the ministry of internal affairs of ukraine took the principled decision to open a permanent representative office of ukraine in the united nations in new york as a representative of the ministry of internal affairs of ukraine, which baltic journal of economic studies 271 vol. 4, no. 2, 2018 provided an additional impetus to cooperation of the ministry of internal affairs with the un secretariat (mizhnarodna myrotvorcha diialnist mvs ukrainy. perspektyvy rozvytku na 2015 rik). the financial support for peacekeeping personnel, a part of which is the ukrainian police, plays an important role in the efficient implementation of peacekeeping activities. the strategy of the international peacekeeping activity of ukraine provides for that in order to increase the interest of members of the armed forces, senior and ordinary staff of the internal affairs bodies and civilians in participating in international peacekeeping operations, a higher legal and social protection of participants in international peacekeeping operations and members of their families should be ensured, including a gradual approximation of the level of monetary remuneration for the performance of official duties in peacekeeping contingents or peacekeeping personnel to the level of similar payments in the states of central europe (pro rishennia rady natsionalnoi bezpeky i oborony ukrainy vid 24 kvitnia 2009 roku). in accordance with the law of ukraine “on participation in international peacekeeping and security operations,” financing of expenses related to ukraine’s participation in international peacekeeping operations can be: – either funded by the state budget provided the full or partial reimbursement of these expenses funded by funds allocated by the united nations, nato, the eu, the osce or other international organization for the financing of an international peacekeeping operation or within concluded international agreements of ukraine; – either funded by the state budget; – either funded by the funds allocated by the united nations, the osce or another international organization to finance an international peace-keeping and security operation (pro uchast ukrainy v mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: zakon ukrainy vid 23.04.1999 r.). according to the resolution of the cabinet of ministers of ukraine “on approval of the procedure for material and technical and financial support of the national contingent and national personnel of ukraine participating in international peacekeeping and security operations,” for persons, who are the part of the national contingent and national personnel of ukraine, during the performance of official duties outside ukraine, payments in national currency are kept in the amount of 100 percent of the official salary or average wage payment for the last place of service or work, salary for the military (special) rank, allowances for seniority, and other monthly supplemental allowances of a permanent nature. the expenses incurred in relocating of the national personnel of ukraine of the osce mission to the location of the osce secretariat and back to ukraine are funded by expenditures approved by the central government executive bodies that send this personnel to the osce mission under the relevant budget programs (pro zatverdzhennia poriadku materialnotekhnichnoho i finansovoho zabezpechennia natsionalnoho kontynhentu ta natsionalnoho personalu ukrainy, yakyi bere uchast u mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: postanova kabinetu ministriv ukrainy vid 11 lypnia 2002 r. № 963). the ministry of internal affairs of ukraine determines directly the procedure for providing the monetary allowance and monthly monetary compensation in foreign currency for police officers serving as a part of peacekeeping personnel. in particular, for social protection of the national personnel of the ministry of internal affairs of ukraine and members of their families during the stay in the international peacekeeping and security operation for the staff of the law enforcement bodies, the salary is maintained, and paid by the financial support and accounting department of the ministry of internal affairs at the submission of financial units, where an employee has served before a referral to participate in peacekeeping and security operations. the amount of employee’s monthly salary is credited to his bank account, which can then be obtained by authorized persons. the monthly monetary payment in foreign currency for the national personnel of the ministry of internal affairs of ukraine, which is a part of the special units and canine peacekeeping units of the ministry of internal affairs of ukraine, is paid by the budget program, which ensures the activities of the ministry of internal affairs of ukraine for the maintenance of peace and security, if specified by the memorandum between ukraine and the international organization that manages the mission. to provide immediate needs of national personnel of the ministry of internal affairs of ukraine, who is a part of special and canine units, an advance of usd 250 per person (at the request of a recipient), which is held during the calculation of the monthly monetary remuneration in a foreign currency for the current month, is paid one time before departure from ukraine (pro zatverdzhennia instruktsii shchodo orhanizatsii prokhodzhennia sluzhby pratsivnykamy orhaniv vnutrishnikh sprav, viiskovosluzhbovtsiamy vnutrishnikh viisk mvs ukrainy, yaki napravleni dlia uchasti v mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: nakaz mvs ukrainy vid 07.12.2003 № 1490). with regard to the rate of the monetary remuneration, they are set by the cabinet of ministers of ukraine. in particular, nowadays, the rate of the monthly monetary remuneration in foreign currency for the performance of official duties outside ukraine by a police officer, included in the national staff for participation in international peacekeeping and security operations, funded by the state budget, are in us dollars: baltic journal of economic studies 272 vol. 4, no. 2, 2018 – a unit commander – 1020; – a deputy commander of the unit, a deputy commander of the unit and the chief of staff, a chief of staff – 1000; – a company commander, a staff officer, a personnel officer, a technician and armament officer, an officer dealing with planning and combat and special training, dealing with mission-link relations, logistics and technical support – 980; – a deputy commander of the company, a platoon commander, an interpreter on duty, an interpreter; – a deputy commander of the platoon, a deputy commander of the platoon and an interpreter, a head of the department – 940; – a deputy chief of the department, a commander of the department (group) – 920; – a senior inspector, a senior engineer, a specialist, a doctor, a veterinarian, an accountant, a psychologist, a lawyer – 900; – a driver, a driver of the armoured personnel carrier, a technician driver, a cynologist, an instructor, an explosive engineer, an inspector, an engineer – 880; – a patrol, a cook, a nurse, a paramedic, a veterinary nurse – 860 (deiaki pytannia finansovoho zabezpechennia viiskovosluzhbovtsiv natsionalnoi hvardii ta politseiskykh, vkliuchenykh do skladu natsionalnoho personalu dlia uchasti v mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: postanova kabinetu ministriv ukrainy vid 22 travnia 2013 r. № 358). 2. conclusion therefore, the international experience of the remuneration of law enforcement officers, who temporarily serve outside the territory of the state, as a rule, provides for the monetary allowance of employees based on the features of state regulation of this sphere and varies according to the source of financing and principles for determining the amount of the remuneration and compensatory payments, payments in connection with moving to a new place of service and quality of life of the state of a temporary service location. references: gordienko, v. v. (2007). mezhdunarodnoie politseiskoie sotrudnichestvo v usloviiakh globalizatsii kriminalnykh protsessov [international police cooperation in the context of the globalization of criminal processes]. trudy akademii upravleniia mvd rossii [works of the academy of management of the russian ministry of internal affairs], 2, 8-12. (in russian) gubanov, a.v. (2000). politsiia zarubezhnykh stran. organizatsionno-pravovyie osnovy, strategiia i taktika deiatelnosti. [police of foreign countries. organizational and legal bases, strategy and tactics of activity]. moscow: maep, 288 p. (in russian) zimin, v., zubov, i. (1993). mezhdunarodnoie sotrudnichestvo v oblasti borby s prestupnostiu i okhrany obshchestvennogo poriadka [international cooperation in the field of combating crime and protecting public order]. moscow, 155 p. (in russian) fronteks – yevropeiskoie agentstvo po upravleniiu operativnym sotrudnichestvom na vneshnikh granitsakh gosudarstv-chlenov yevropeiskogo soiuza [frontex, the european agency for the management of operational cooperation on the external borders of the member states of the european union]. retrieved from http://soderkoping.org.ua/page19813.html. (in russian) yak staty politseyskym atashe chy ofitserom zviazku [how to become a police officer or a communications officer]. retrieved from http://innerbody.com/wordpress3/careers-in-criminal-justice/how-to-become-an-attache-orpolice-liaison-officer.html. (in ukrainian) general politsii predpochel vashingtonu iudeiu i samariiu [the general of the police preferred washington to judea and samaria]. retrieved from http://сursorinfo.co.il/news/novosti. 2007. 5 june. (in russian) yak staty politseiskym atashe chy ofitserom zviazku [how to become a police officer or a communications officer]. retrieved from http://еlconfidencial. 2010. 29 june. (in ukrainian) mizhnarodna myrotvorcha diialnist mvs ukrainy. perspektyvy rozvytku na 2015 rik [international peacekeeping activities of the ministry of internal affairs of ukraine. development prospects for 2015]. retrieved from http://www.naiau.kiev.ua/smc/images/stories/mmdu_2013.pdf. (in ukrainian) pro rishennia rady natsionalnoi bezpeky i oborony ukrainy vid 24 kvitnia 2009 roku ‘pro stratehiiu mizhnarodnoi myrotvorchoi diialnosti ukrainy’: ukaz prezydenta ukrainy vid 15.06.2009 №435/2009 [on the decision of the national security and defense council of ukraine dated april 24, 2009 ‘on the strategy of international peacekeeping activity of ukraine’: decree of the president of ukraine. ( june 15, 2009). no. 435/2009. (in ukrainian) retrieved from http://zakon5.rada.gov.ua/laws/show/435/2009. pro uchast ukrainy v mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: zakon ukrainy vid 23.04.1999 r. [on participation in international peacekeeping and security operations: the law of ukraine]. (april 23, 1999). retrieved from http://zakon3.rada.gov.ua/laws/show/613-14. (in ukrainian) pro zatverdzhennia poriadku materialno-tekhnichnoho i finansovoho zabezpechennia natsionalnoho kontynhentu ta natsionalnoho personalu ukrainy, yakyi bere uchast u mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: postanova kabinetu ministriv ukrainy vid 11 lypnia 2002 r. № 963 [on approval of the procedure for logistical and financial support of the national contingent and national personnel of ukraine participating baltic journal of economic studies 273 vol. 4, no. 2, 2018 in international peacekeeping operations: resolution of the cabinet of ministers of ukraine]. ( july 11, 2002). no. 963. retrieved from http://zakon2.rada.gov.ua/laws/show/963-2002-%d0%bf. (in ukrainian) pro zatverdzhennia instruktsii shchodo orhanizatsii prokhodzhennia sluzhby pratsivnykamy orhaniv vnutrishnikh sprav, viiskovosluzhbovtsiamy vnutrishnikh viisk mvs ukrainy, yaki napravleni dlia uchasti v mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: nakaz mvs ukrainy vid 07.12.2003 № 1490 [on approval of the instruction on the organization of service of the personnel of the internal affairs bodies, servicemen of internal troops of the ministry of internal affairs of ukraine, which are sent to participate in international peace and security operations: the order of the ministry of internal affairs of ukraine]. (december 07, 2003). no. 1490. retrieved from http://zakon5.rada.gov.ua/laws/show/z0280-04. (in ukrainian) deiaki pytannia finansovoho zabezpechennia viiskovosluzhbovtsiv natsionalnoi hvardii ta politseiskykh, vkliuchenykh do skladu natsionalnoho personalu dlia uchasti v mizhnarodnykh operatsiiakh z pidtrymannia myru i bezpeky: postanova kabinetu ministriv ukrainy vid 22 travnia 2013 r. № 358 [some issues of financial support for national guard soldiers and police officers included in national personnel for participation in international peace and security operations: resolution of the cabinet of ministers of ukraine]. (may 22, 2013). no. 358. retrieved from http://zakon3.rada.gov.ua/laws/show/358-2013-%d0%bf. (in ukrainian) baltic journal of economic studies 366 vol. 4, no. 3, 2018 corresponding author: 1 department of criminal law and criminology, kharkiv national university of internal affairs. e-mail: yurtayeva@gmail.com 2 scientific-research lab of crime enforcement, kharkiv national university of internal affairs. e-mail: jenyagladkova27@gmail.com 3 department of criminal legal disciplines, kharkiv national university of internal affairs. e-mail: shcherbakova07@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-366-371 role of mass media in combating drug-related crime kseniya yurtayeva1, yevhenia hladkova2, alona shcherbakova3 kharkiv national university of internal affairs, ukraine abstract. the purpose of the paper is to examine the role of mass media in combating drug addiction and drugrelated crime, together with the opportunities of cooperation between the police and the mass media in combating drug-related crime, and the main problems arising from such cooperation. results of the study allowed us to draw several conclusions. firstly, we underscore that there is a significant increase in drug consumption, especially among minors and youths. under these circumstances, a prevention-oriented approach to combating drug-related crime gains a special significance. secondly, the role of mass media in shaping public perceptions of certain issues, including drugs, makes them a necessary partner for the law enforcement agencies in deterring the spread of drug consumption. thirdly, there are significant problems arising from the fundamentally different interests of the mass media and the police, which require the latter to seek ways to align their activities. still, we see cooperation as the only way to succeed, as administrative measures, such as censorship, will be largely counterproductive in the age of high availability of the information. practical implications of the study lie in the recommendations for the activities of the police aimed at ensuring efficient cooperation with the mass media in organizing informational campaigns, promoting a healthy lifestyle, and discouraging drug consumption. we stress upon the necessity of the well-planned campaign, including not only the careful preparation of the information but also a selection of the most efficient channels of dissemination and setting up of the feedback in order to objectively appraise their results and to allow a certain level of flexibility in adapting and adjusting these campaigns to the circumstances. we also underscore the importance of careful selection of partners in mass media, so that both sides of the partnership have a deep understanding of the issue they are working with. lastly, we investigate the features of the information campaigns on the local level. value/originality. the paper provides practical recommendations for setting up an informational campaign aimed at promoting a healthy lifestyle and discouraging drug usage. additionally, it provides the basis for the further research of the issues of police-mass media cooperation, in counteracting drug-related crimes in particular and in the prevention of antisocial and criminal behaviour in general. key words: police, mass media, information campaigns, drug-related crime, drug consumption. jel classification: l65, k14 1. introduction practice indicates that cooperation between law enforcement agencies and mass media in most cases provides positive results. under contemporary conditions associated with deterioration of crime situation in society, cooperation between the police, other law enforcement agencies and the mass media requires urgent intensification. at the same time, such an activity requires concentrating efforts on the particularly acute problems using the most effective forms and methods of cooperation. without doubt, combating illegal drug consumption and trafficking in drugs and psychotropic substances must become one of the essential areas of cooperation between law enforcement agencies and the mass media. this derives primarily from the state and governmental policy documents: the strategy of state policy on drugs for the period up to 2020 and annual plans of their realization (strategy of state policy on drugs for the period up to 2020, 2015). mentioned above and other principle acts provide wide-ranging measures for protecting society from hazards caused by drug abuse and illicit drug trafficking. in view of a strictly professional aspect, the requirement of intensification of cooperation with the mass media intimately derives from provision of baltic journal of economic studies 367 vol. 4, no. 3, 2018 a number of laws of ukraine: “on state support of the mass media and social protection of journalists”, “on access to public information”, “on printed mass media (press) in ukraine”, “on informational agencies”, “on information”, “on national council of ukraine on television and radio broadcasting”, “on the policy on highlighting the activity of public agencies and local self-government bodies of ukraine in the mass media”, “on television and radio broadcasting”, “on telecommunication” etc. for instance, the law of ukraine “on the national police” [on the national police, 2015] explicitly provides that public opinion is the main criterion for assessing the efficiency of police performance. in that regard, the law establishes the following main tasks: efficiency of the activity of information and public relation units; outstripping in providing truthful and objective information on police performance; establishing efficient forms of cooperation with all types of the mass media. cited directives have been adopted by the authorities of the ministry of internal affairs and the national police on the ongoing basis. as emphasized above, building an effective and transparent cooperation between central and local anti-drug trafficking units of the police and the mass media is of paramount importance, since without taking urgent and efficient measures in this area, the situation may completely spin out of control and result in endangering physical and moral public health and lead to the degradation of society. although separate aspects of combating drugrelated crime have been well covered in the works of domestic and foreign researchers, the role of the mass media in this activity had not been adequately reflected. therefore, ascertaining the role of the mass media in combating drug-related crime from one side and defining modes of cooperation of law enforcement agencies, other public authorities with the mass media from the other obtain an ever-increasing relevance. the purpose of the paper is to examine the role of the mass media in combating drug addiction and drug-related crime, together with the opportunities of cooperation between the police and the mass media in combating drug-related crimes, and the main problems arising from such cooperation. the paper emphasizes the most hazardous problems of contemporary drug trafficking situation in ukraine, information on the foreign approaches to cooperation of the police units and the mass media, separate practical results of such cooperation, as well as analysis of spirits among mass media workers and especially domestic journalists and, finally, provides recommendations for ensuring efficient cooperation between the police and the mass media. 2. characteristic of drug trafficking situation in ukraine conducted field research and interviews of officers of anti-drug trafficking units clearly identified the tendency of blurring the differences between dimensions of drug-related crime in cities and rural areas, as well as among different regions of ukraine. drug traffickers use one very profitable method on the whole territory of ukraine – recruiting for drug trafficking (mainly selling drugs) representatives of the most vulnerable sectors of the population living in poverty, namely retired persons, unemployed, women, juveniles, and even children. such massive involvement of minor co-perpetrators to illicit drug trafficking have actually led to legalizing illicit drug trafficking sites, which encompass places of residence, education, youth entertainment, and areas of large civilian concentrations. in our research, we have identified one more peculiarity – in the desire to gain profit underclass drug traffickers act compulsively, aggressively, and practically forcibly induce children, minors, and youths to purchase illegal substances. such tendencies result in actual widerange involvement of population, especially youth, in compulsive drug consumption. it should be noted that the lower age limit for drug addiction decreased to 8-12 years. at the same time, we observe increasing feminization of drug addiction, ever-growing involving girls and women to drug consumption. not coincidentally, this problem is viewed as one of the genuine threats to the national security of the state (ukhal, sheremet, 2001). apparently, all possible measures including emulating foreign positive experience should be taken. moreover, the focus should be placed upon preventive, prophylactic measures, on actions that must obstruct the origin of expansion of negative phenomena and subsequently contribute to their minimization. obviously, the most efficient in this situation would be building close cooperation between the police and other law enforcement agencies from one side and the mass media from the other. 3. pros and cons of using the mass media in combating drug-related crime not coincidentally, the wide-range involvement of the mass media in combating crime, including illicit drug trafficking, is emphasized by experts of virtually all countries of the world and of the most authoritative international organizations, including the united nations (prokhorova, 20029). furthermore, foreign experts indicate that, at the present moment, the system of criminal justice may play only a limited role in crime prevention and, therefore, recognize priority role of the mass media, firstly, their educative potential in crime prevention. they explicitly emphasize that the role of baltic journal of economic studies 368 vol. 4, no. 3, 2018 the mass media is really essential for awareness-raising in combating drug-related crime (nehodchenko, 2003). at the same time, issues of the long-term impact of the mass media in such general questions as establishing standards of conduct, changing consumption preferences etc. are widely debated. some academics suggest that most people acknowledge such notions as deviations from standard patterns of conduct and control primary from television programmes. other researchers claim that journalists play a pivotal role in forming a perception of such notions as order, stability, and changes, and also influence the practice of self-control formed according to such perceptions (buhera, 2006). nowadays practically all recognize the leading role of the mass media by introducing the most significant factors to the general public, including the problem of legal and illegal drug consumption. the issue is how the mass media influence public opinion in the drug debate. we are certain that if all mass media would condemn drug addiction that might provoke an opposite counterproductive effect in society. that is why it is important to tell all the truth about drugs, including conflicting information. otherwise, the public will observe contradictions between real life and information transmitted through the mass media. we witness almost total inflexibility of official authorities that force journalists pursue a unilateral informational policy that, in our view, practically restrict freedom of thoughts. moreover, public authorities have prohibited a number of editions and video films concerning drug addiction, a popular song dealing with this issue etc. so, where should be drawn the threshold between on forewarning information and propaganda? we believe that there shouldn’t be any restrictions under the declared principle of freedom of information. the same situation has previously happened with the drug issue when domestic mass media under the pretext of protecting the right to freedom of information and democratic expression spoke out against reinforcing overall anti-drug measures and participation of the press in such an activity. nowadays an individual is not required any special skills to obtain information on drugs. mass media play a pivotal role among sources of the most accessible information on drug nomenclature, their procurement, manufacture, and consumption. obviously, the leading role takes the internet, followed by such communicative channels as television, radio broadcasting, video products, and the press. youths and students acquire information on narcotic substances from internet websites, some of them from computer games. in public places, educational institutions, on discotheques young people exchange addresses of informational resources, that is, share information. obviously, any administrative restriction on the channels described above is not technically possible due to their multiplicity and variability from one side and due to the lack of resources available for organizing such preventive measures from the other. this means that engaging any kind of governmental “censorship” mentioned above is contrived and, as stated before, is used clearly for malicious purposes. 4. recommendations for setting up awareness-raising anti-drug campaign the mass media taking into account their vast daily audience may contribute substantially to combating drug-related crime and preventing drug addiction. while establishing operational contacts with workers of television, radio, newspapers, magazines, internet editions, and providing them with necessary information on drug trafficking situation, it is essential to make sure that objectivity and not sensationalism will constitute the basis of the statement. it is highly probable that aspiration for sensation, readiness to challenge society, and the need to improve their rating explain the fact that some television companies, newspapers, internet portals dissimilate much greater amounts of information supporting amendments to drug legislature or even legalizing some types of drug than information reflecting the consequences of such policy and the related damage. taking advantage of the huge potential of the mass media public authorities should take preventive and awareness-raising measures (media alphabet, 2015), aimed at providing objective information to the vast sectors of population on the consequences of drugs consumption and drug abuse, that should contribute to forming a more rational approach to the drug debate and allow avoiding sensationalism. the tasks of the mass media in this area must be clearly defined:  in order to achieve positive results, a healthy lifestyle free of drugs must be presented in an attractive and positive spirit;  benefits of drug-free lifestyle must be emphasized, as well as harmful consequences of their consumption;  presented information must be objective, exact, and credible;  related information should be presented in such a way as to allow reinforcing it with other positive arguments in support of a healthy lifestyle. nevertheless, police officers should take into account that representatives of the mass media specializing on the issue of illicit drug trafficking must have a deep understanding of the issue they are working with. in this regard, the police should build a partnership relationship with:  the heads of the printed editions (newspapers, magazines etc.), internet-media, which contain regular columns dealing with the issue of illegal drug manufacture, drug trafficking, and drugs addiction; baltic journal of economic studies 369 vol. 4, no. 3, 2018  journalists and reporter specializing on this topic;  local public administration and bodies of local self-government putting forward a proposal to release a programme series on the dangers of drug abuse involving educators, psychologists, medical workers etc.;  public figures, actors, musical and sports activists exercising and promoting a healthy lifestyle. the tactic of engaging possibilities of the mass media constitutes only a part of the anti-drug trafficking strategy aimed at discouraging drug consumption. the world community in comprehensive multidisciplinary outline adopted by the international conference on drug abuse and illicit trafficking, held in 1987, set a number of recommendations to governmental and non-governmental agencies for preventing illicit drug trafficking (international conference on drug abuse and illicit trafficking, n.d.). on the national level agencies regulating television and radio broadcast, cinematography, and other mass media should take the following actions: ‒ issue instructions in the form of a code, voluntary adherent for the mass media in questions of presenting or depicting the cases of drug addiction; ensure respect of international instructions in this sphere; ‒ assign central and local drug-control agencies to appoint a person or a group of people in a certain territory or population centre responsible for keeping in touch with the mass media and provide them with information, and also consult them on drug addiction issues; ‒ promote cooperation between public authorities responsible for fulfilling anti-drug programmes and representatives of the mass media in the view of providing non-distorted by the press depiction of drug issues in films and the news; ‒ using their units and facilities engage the mass media into cooperation aimed at discouraging drug consumption. preparation materials for the ninth united nations congress on the prevention of crime and the treatment of offender (zharovska, 2016) suggest a wider engagement of the so-called “social marketing”, that is, to promote dissimilation of positive conduct models in line with the principle “say no to drugs” by distributing related materials and recommendations. the methodology employed (profession of journalism: newspaper and magazine, 2012) may be oriented at facilitating discussions, dissimilating information, exercising influence on the relationship, value system, and creating a favourable climate for overcoming addictions and illegal practices. “social marketing” must not necessarily lead to the change of operational model; it can change perception, attitude, and thoughts that also contribute to an anti-drug model of public policy, its strategy, and tactic. according to the documents of the ninth united nations congress on the prevention of crime and the treatment of offender, the police may play an important role in defining the character of information transmitted to the mass media. in many countries, representatives of the mass media request the police data on committed drug-related crimes. the form of providing related information by the police defines the manner of dissimilation such information in social and political circles and at the certain scale public reaction to a certain event or related circumstances. generally, the initial stage of the awareness-raising campaign is well-known to almost every official and lies in transmitting certain information in any form (oral, written, graphic, visual etc.) (limits of legal space for freedom of the press (russian debate with participation of the mass media in context of international practice), 2008). unfortunately, the campaign often is limited to this action; therefore, its efficiency commonly is very low or even equates to zero (in those instances when information remains concealed or does not obtain dissimilation). if the message has a sensational connotation, it can be echoed and dissimilated by the other entities, not directly connected to anti-drug campaign; some of them might comment, supplement or even distort initial material beyond recognition. the undertaking will start to develop spontaneously and may even lead to opposite unpredicted results (especially being transmitted by internet bots (viliam, 2006)). in order to achieve substantial (targeted) result, it is important to plan the campaign in advance and implement it according to a conceptualized framework that should take into consideration the following factor: time (start, development, termination of the campaign), place, the use of pauses, reinforcements, corrections etc. this requires the following essential elements:  information itself (initial, developing, reinforcing, finalizing);  mass media outlets that will take active participation in fulfilling the elaborated plan;  feedback (collection and analysis of data reflecting the impact of transmitted materials on the public, their further dissimilation among the public). it can be deduced from the above that an efficient awareness-raising anti-drug campaign requires thorough preparation, as well as qualified executors. these two requirements are interrelated and under responsible approach can be completed to the maximum extent. anti-drug actions are put into practice according to the requirements set out in the previous part of the paper and encompass only regional specificity. it should be noted that local television and radio broadcast play a specific role in small towns or in certain remote localities; in such locations, the internet has a weaker impact, printed editions are almost unavailable. at the field level, it is much more complicated than at the national level to acquire necessary information, baltic journal of economic studies 370 vol. 4, no. 3, 2018 select corresponding to the planned initiative mass media outlet and, most importantly, there might be no qualified staff members (podshivalkina, levinskiy, miroshnichenko, 2001). therefore, planning and implementation of the initiative in the certain region should be carried out with the participation of local experts and scientists (for instance, in the capacity of consultants using the telephone or another type of connection) (serdyuk, 2002). from the other side, implementing an anti-drug initiative at the regional level is not as complicated as at the national level. as the rule, authorities of law enforcement agencies and the press maintain close contacts and get along easier in a particular population centre. due to regular communication, they can negotiate public initiatives easier and adjust their practical implementation. it should be noted that in particular regions and localities the impact of the initiated events on the population may be more significant compared to the centralized initiatives because local mass media frequently have greater notice and trust of the local population. as for awareness-raising campaigns devoted to the harmful consequence of drug addiction on human health, they should be exercised permanently. increase or decrease of their intensity may only be connected with peculiarities of public perception, seasonal factors (for instance, summer vacation) and other aspects. such campaign should engage medical worker, scientists, educators, law enforcement and other public authorities, public organizations, popular artists and practically all types of the mass media (television, cinema, radio, computer networks, advertisement, visual agitation etc.), as well as editing (printed products). although such vast anti-drug campaigns go beyond direct police competence (nevertheless their implication is quite possible), let us review only specific possibilities in this area. awareness-raising anti-drug campaign (centralized, as well as at the field-level) should be started from the general problem statement. it is necessary to elaborate a detailed plan, which should encompass: approximate time of its implementation, available resources, field executors and authorities exercising general supervision. the plan should clearly define sources and time of the release of the input information, manner of information processing and its dosage, forms of its dissimilation, engaged mass media outlets, and the time of their mobilization. geographical scope, time of implementation of different stages, efficiency analysis of the achieved results, proper adjustments triggered by new circumstances (success, failure, obstacles, unexpected turnouts etc.) should also be provided. 5. conclusions summarizing, we would like to emphasize that a vast awareness-raising campaign should take into account a great number of factors, employ qualified experts and executors specifically trained for implementing such practices in their daily activities. the foregoing gives rise to the following conclusions: 1. drug trafficking situation has deteriorated significantly during the last years due to the involvement of minor co-perpetrators into illicit drug trafficking, which subsequently increased drug consumption, first and foremost among children and the youth. 2. in conditions of wide dissemination of drug consumption, a preventive-oriented approach obtains particular relevance. taking into account that in contemporary world the mass media have a substantial influence on public views and consciousness, ensuring close cooperation between law enforcement agencies and the mass media is one of the important preconditions of efficient prevention of further dissemination of drug consumption. it should be emphasized that we are talking about cooperation instead of control since administrative censorship of information will most likely lead to negative consequences due to free dissimilation of information in the contemporary world. 3. informational campaigns in the mass media must be directed to the provision of objective, complete, and truthful information on the consequences of drug consumption, and contribute to creating positive conduct models connected with rejecting drug consumption and value system focused at a healthy lifestyle. 4. preparation of informational campaigns should include not only the preparation of informational materials but also the selection of efficient dissimilation channels and ensuring efficient feedback. references: stratehiia derzhavnoi polityky shchodo narkotykiv na period do 2020 roku (2015). [strategy of state policy on drugs for the period up to 2020]. retrieved from: https://www.medsprava.com.ua/news/287moz-uspishno-vikonuye-plan-zakhodiv-z-realizatsiyi-strategiyi-derzhavnoyi-politiki-shhodo-narkotikiv (in ukrainian) pro natsionalnu politsiiu (2015). [on the national police]. zakon ukrainy: vidomosti verkhovnoi rady. 2015. № 40-41. st. 379 [law of ukraine: bulletin of verkhovna rada. 2015. № 40-41. art. 379]. (in ukrainian) ukhal a.m., sheremet a.p. (2001). narkomaniia: sut i borotba z neiu [drug addiction: essence and combating it]. navchalno-dovidkovyi posibnyk. uzhhorod: hosprozrakhunkovyi redaktsiino-vydavnychyi viddil upravlinnia u spravakh presy ta informatsii [educative and informational guide. uzhhorod: self-accounting editing unit of the office of press and information]. (in ukrainian) baltic journal of economic studies 371 vol. 4, no. 3, 2018 prokhorova m.l. (2002). narkotizm: ugolovno-pravovoe i kriminologicheskoe issledovanie [drug addiction: criminal-legal and criminological research]. spb.: yuridicheskiy tsentr press [st.-peterburg : legal centre the press] (in russian) nehodchenko o.v. (2003). orhanizatsiino-pravovi problemy zabezpechennia prav i svobod liudyny pid chas rozkryttia zlochyniv, poviazanykh z narkobiznesom [organizational and legal issues of ensuring rights and freedoms of a person during investigation of drug-related crimes]. naukovyi visnyk yurydychnoi akademii ministerstva vnutrishnikh sprav: zbirnyk naukovykh prats. spetsialnyi vypusk [scientific bulletin of legal academy of the ministry of internal affairs: collection of scientific works. special edition], 1(13): 5-11 (in ukrainian) buhera o.i. (2006). problemy vykorystannia zasobiv masovoi informatsii dlia zapobihannia zlochyniv sered nepovnolitnikh [problems of use of the mass media for preventing juvenile crime]: avtoref. dys. na zdobuttia nauk. stupenia kand. yuryd. nauk : 12.00.08 [abstract of doctoral thesis in specialty 12.00.08]. (in ukrainian) abetka media (2015). [media alphabet]. za zahal. red. v.f. ivanova; pereklad z nim. v. klymchenka [under the general editorship of v. f. ivanov; translation from german v. klimenko]. kyiv : akademiia ukrainskoi presy, tsentr vilnoi presy [kyiv: academy of ukrainian press, centre of free]. (in ukrainian) international conference on drug abuse and illicit trafficking. (n.d.) a/res/42/112. 93rd plenary meeting. 7 december 1987. retrieved from: https://www.unodc.org/unodc/en/resolutions/resolution_1987-12-07_2.html zharovska h.p. (2016). mizhnarodno-pravovi zasady borotby z transnatsionalnoiu zlochynnistiu: problemy y perspektyvy [international-legal basis of combating translational crime: issue and perspectives]. retrieved from: http://intlawalmanac.net/v6/13.pdf (in ukrainian) zhurnalistskyi fakh: hazetno-zhurnalne vyrobnytstvo (2012). [profession of journalism: newspaper and magazine]. za red. v.v. rizuna. kyiv: vydavnycho-polihrafichnyi tsentr «kyivskyi universytet» [kyiv: editing and polygraphist centre “kiev university”]. (in ukrainian) predelyi pravovogo prostranstva svobodyi pressyi (rossiyskie sporyi s uchastiem smi v kontekste mirovoy praktiki) (2008). [limits of legal space for freedom of the press (russian debate with participation of the mass media in context of international practice)] sbornik statey. yuristyi za konstitutsionnyie prava i svobodyi. moskva: novaya yustitsiya [collection of articles. layers standing for constitutional rights and freedoms. moscow. new jurisprudence]. (in russian) viliam f. (2006). merezhi i merezhevi viiny: maibutnie teroru, zlochynnosti ta boiovykh dii [networks and network wars: the future of terror, crime and military activities]. informatsiinyi biuleten mizhvidomchoho naukovodoslidnoho tsentru z problem borotby z orhanizovanoiu zlochynnistiu [informational bulletin of interdepartmental scientific research centre on combating organized], 5: 52-61. (in ukrainian) podshivalkina v.i., levinskiy m.v., miroshnichenko n.a. (2001). sotsiotehnologicheskie problemyi borbyi s narkomaniey [sociotechnological issues of combating drug abuse]. sotsialni tekhnolohii. kyiv [social technologies. kyiv], 11: 47-59. (in russian) serdyuk a.a. (2002). narkotizm i globalnaya set internet [drug addiction and global network internet]. pravo i bezpeka [law and safety], 3, 195-198. (in russian) baltic journal of economic studies 10 vol. 1, 2015 market analysis of hotel services in ukraine iryna antonova1, east european university of economics and management, ukraine abstract. the subject of this research is the market of hotel services in ukraine in recent years, since the market for the hotel services in ukraine emerged in the first half of the 2000s. initially, the focus of both local and foreign investors was on the development of the hotel market in kyiv. gradually, with the development of hotel business in ukraine, investors’ interest began to shift in the direction of populated cities, primarily large business centers of the country (with a population of about 1 million people) such as kharkiv, donetsk, dnipropetrovsk, lviv and in the direction of resort areas – crimea, carpathians, odessa. according to the world tourism organization during the past 24 years the income from international tourism has increased by 9%. the number of international tourists every year is growing at a rate of 4%. active development of hotel real estate segment was highly influenced by the european football championship held in 2011 due to the requirements of the cities-organizers which hosted matches (kyiv, kharkiv, donetsk, lviv) to have certain number of hotel rooms of different categories. purpose. the study is an analysis of the problems in the market of hotel services and prospects for their solution. hospitality industry in ukraine is one of the fastest growing sectors of the economy. it is pleasant to note that new hotels, rest houses and resorts are being opened while the existing hotels are being reconstructed to meet higher levels of services. unsaturated market of hotel services of different levels creates a great opportunity for international hotel operators to enter ukrainian market with confidence and expand its influence in the industry by the means of its internal policies. therefore, this study is very relevant in the modern realms. the methodological base of research were works of domestic and foreign authors dedicated to the problems of the hotel industry development. existing problems in the hospitality industry: 1. tendency toward market being filled with foreign companies 2. at the present stage of economic development in ukraine there are only two national hotel operator – premier hotels and resorts and reikartz hotels & resorts. 3. market of hotel services in ukraine is now approaching saturation in the sector of five-and four-star hotels. 4. the formation of situation explained above leads to the gradual saturation of high-end hotel market as well as increase in the number of foreign companies in the market. as a result some companies have to work together and develop a common business strategy. 5. sector of hotels of three stars and below remains unsaturated and represented mainly by the hotels with extremely low-maintenance and a small set of services. 6. there is no significant improvement in the activity level in the sector of hotel services in ukraine, with ukrainian companies delaying their market entrance. this can lead to the market being filled by the foreign hotel chains. at the same time western investors do not want to start their business in ukraine without active presence of ukrainian companies. 7. due to the nature of specific markets it is impossible to provide adequate assessment of the situation in the industry. it is necessary to view different sectors of hotel services separately. 8. the problem of effective management remains important to national hotels. the shift from administrative methods of management to market methods was not easy and oftentimes managerial team that was supposed to maintain high levels of performance works on development. this shortcoming has also to deal with the founders/ owners of the hotels. 9. the issues related to the interaction with the government still remain problematic for the national hotel chains. those issues include the process of hotel registration, plot allotment for the hotel construction, mandatory procedures in the fire and health departments, as well as obtaining of the necessary permits and certificates. 10. the issue of standardization is also problematic because of inconsistencies between ukrainian and european corresponding author 1 department of marketing, east european university of economics and management. e-mail: antonova_ira@ukr.net baltic journal of economic studies 11 vol. 1, 2015 systems of standardization of hotel services. it is estimated that 80% of hospitality real estate including hotels, in need of repair and reconstruction. these ambiguous situations complicate and slow down the activities of the companies in the hotel sphere. yet, national hotel operators have an advantage being aware of existence of such matters and having knowledge of national legislation. conclusion. despite the difficult political and economic conditions emergence of new national hotel operator in ukraine is not a utopia, moreover, such attempts are made today. in the sector of hotel services of the highest category national operators face stiff competition, not only price based but also competition based on quality. to win such competition while maintaining individual brand is possible only by maintaining faultless management and marketing. emergence of national hotel operator is most likely in the sector of middle-class hotel services because this segment is unsaturated and also very promising. hotel facilities in this case will be based mainly in the regional centers and will be unionized by the single concept. in any case, the development of ukrainian hotel operators will mean a transition to a new level in the framework of the global market of hotel services. if before ukraine was only described as undeveloped and unsaturated new market, the creation of a national network will create a new player in the global hotel market. key words: hotel, market, economics, marketing, market research, stardom, infrastructure, tourism. jel classification: l15, l21, l83, m10 1. introduction formation of the hotel services in ukraine began in the first half of the 2000s. initially, the focus of both local and foreign investors was on the development of the hotel market in kyiv. gradually, with the development of hotel business in ukraine, investors’ interest began to shift in the direction of regional cities, primarily large business centers of the country (with a population of about 1 million people) such as kharkiv, donetsk, dnipropetrovsk, kharkiv, lviv and resort areas such as crimea, carpathians, odessa. active development of hotel real estate segment was highly influenced by the european football championship held in 2011 due to the requirements of the citiesorganizers which hosted matches (kyiv, kharkiv, donetsk, lviv) to have certain number of hotel rooms of different categories. hotel services sector remains one of the most dynamic sectors of ukraine’s economy. unsaturated market of hotel services of different levels creates a great opportunity for international hotel operators to enter ukrainian market with confidence and expand its influence in the industry by the means of its internal policies. therefore, this study is very relevant in the modern realms. 2. problems market to problematic points in the functioning of the hotel services in ukraine include (gorin, 2009): 1. tendency toward market being filled with foreign companies. to answer with confidence whether this trend is confirmed in future and whether there is a potential for the development of national hotel operators in ukraine, one should conduct a thorough analysis of the market actions and situations that may lead to the development of national hotel chains. 2. at the present stage of economic development in ukraine there are two national hotel operators which are premier hotels and resorts and reikartz hotels & resorts. the first national network of premier hotels and resorts hotels includes seventeen 5 to 3 stars hotels, different on their own but equally welcoming and cozy. hotels were established not in accordance with conventional strategies, since they form a union of hotels with different concept strategies and range of services offered in major business and tourist centers of ukraine. due to the specifics of each individual hotel network does not have to solve the problems associated with the uniformity of the product. this kind of association allows you to double the competitive advantage associated with market positioning and brand awareness, as well as benefit from a single hotel reservation systems. it is difficult to identif y premierehotels hotel operator as one hotel network due to the hotels’ positioning in different segments and under different trademarks. hotels reikartz hotels & resorts are located in major cities and attractive resorts of ukraine. each hotel of the network is distinguished by the high level of comfort and service, strict compliance with european standards of service as well as warm and attentive treatment of the guests. the history of the reikartz company in ukraine began in 2003, when a group of belgian architects led by françois reikartz (francois ryckaerts) acquired an old mansion in the city center of lviv on drukarska street. partners noted that hotels of european level 3 and 4 stars were virtually absent in ukraine so they decided to create a ukrainian hotel chain under the brand reikartz hotels & resorts. françois reikartz attracted a group of investors to work on the project and joined the board of reikartz hotel management as the chief architect of the project. the first hotel, entitled «reikartz carpathians» was opened in zhdeniyevo in transcarpathia in december 2008. the resort was selected for the "debut" of the network reikartz hotels & resorts due to its location in one of the most picturesque regions. currently the network includes baltic journal of economic studies 12 vol. 1, 2015 17 hotels that are attracting its guests with high standards of quality and service. 3. market of hotel services in ukraine is now approaching saturation in the sector of five-and four-star hotels. 4. the formation of situation explained above leads to the gradual saturation of high-end hotel market as well as increase in the number of foreign companies in the market. as a result some companies have to work together and develop a common business strategy. 5. sector of hotels of three stars and below remains unsaturated and represented mainly by the hotels with extremely low-maintenance and a small set of services. 6. there is no significant improvement in the activity level in the sector of hotel services in ukraine, with ukrainian companies delaying their market entrance. this can lead to the market being filled by the foreign hotel chains. at the same time western investors do not want to start their business in ukraine without active presence of ukrainian companies. 7. due to the nature of specific markets it is impossible to provide adequate assessment of the situation in the industry. it is necessary to view different sectors of hotel services separately. 8. the problem of effective management remains important to national hotels. the shift from administrative methods of management to market methods was not easy and oftentimes managerial team that was supposed to maintain high levels of performance works on development. this shortcoming has also to deal with the founders/owners of the hotels. (shumilova, 2005) 9. the issues related to the interaction with the government still remain problematic for the national hotel chains. the most notable issues are: hotel project registration process; allotment of land for construction; passing the mandatory procedures in the fire and health departments; obtaining the necessary permits and certificates. 10. the issue of standardization is also problematic because of inconsistencies between ukrainian and european systems of standardization of hotel services. it is estimated that 80% of hospitality real estate including hotels, in need of repair and reconstruction. these ambiguous situations complicate and slow down the activities of the companies in the hotel sphere. yet, national hotel operators have an advantage being aware of existence of such matters and having knowledge of national legislation. 3. prospects of development as for promising areas and market trends of hotel services in ukraine, the gradual evolution is more logical option of the development and influence expansion for the existing companies. example of tendency toward national companies’ consolidation in the market of hotel services can be represented by the entrance of kiev hotel market by the operator that owns 5-star donbas palace in the city of donetsk. prospective points: 1. for the first time in the history of ukrainian hotel business hotel donbas palace was included in the association leading-hotels of the world. in november 2005, the hotel won a victory in the most prestigious competition in the tourism business which is world travel awards and was recognized as the leading hotel of ukraine. the same hotel was awarded in 2008. gorgeous, lush interior of donbas palace makes it a wonderful and hospitable place, created solely for the comfort and relaxation of its guests. each of the 124 rooms of the hotel donbas palace was carefully designed to maximize space in the rooms. staff wants to make guests feel comfortable and enjoy the comfort. refined materials skillfully produced furniture and lamps were chosen to create absolute comfort for each room. the interiors are perfectly combined with modern technologies as for example floor heating in the bathrooms. today the company is considering the construction of five-star hotels in major cities of ukraine under the brand "dp" (donbas palace). also, we cannot exclude the possibility of expanding the network of donbas palace beyond ukraine. 2. it should be noted that the sector of hotels "deluxe" sets and defines the high dynamics of the industry in ukraine. increased attention of the hotel business to a higher category hotels is rooted in the fact that the previous government of ukraine did not leave any hotels that could claim to be five star quality. yet demand for luxury hotels grew due to the processes of redistribution of capital in the country and significant increase in the number of foreign tourists. the most profitable segment of the market of luxurious hotels is close to saturation in the near future thus causing interest of many operators to market medium and small hotels with a moderate range of services provided. 3. the most adequate strategy of consolidation in the market of hotel services is based on the emergence of the hotels with 2-3 stars service levels. the targets of this business segment are representatives of domestic tourism. in the absence of the competition in this segment of the hotel industry the existing companies prefer to underestimate the needs of its customers and so provide services of lower quality. 4. creation of a single hotel chain with universalservice and high level of services through the purchase and renovation of the existing hotel stock of small and medium categories can benefit not only the status of the national operator, but create benefits associated with the dominance in the market. 5. regional markets of hotel services in ukraine are unsaturated, and have a slightly different performance demand. higher category hotels are demanded in cities and resort centers. in most cities though, consumers prefer midlevel hotels due to the income differences in the regions. 6. according to the analysts, in three to five years, foreign companies and international hotel operators will start offering their services for construction of various star hotels in major cities and resort areas of ukraine. baltic journal of economic studies 13 vol. 1, 2015 according to preliminary estimates of experts, and the fact that ukraine’s economy will grow steadily  – at 5-7% per year, the financial injection in the country’s hotel industry could reach hundreds of millions of dollars. 7. according to experts from radisson sas ukraine will soon need 40 different star hotels, including high quality  – 10-11 (four to five  – in kiev, four  – in the coastal zone, and two – in dnipropetrovsk). it is best, experts say, focusing on the reconstruction of already built and existing hotels, increasing their star. especially that silent upgrade of slavutych, turyst and bratyslava on the left bank of dnipro river is carried using the funds accumulated by the same hotels. 8. the austrian company " warimpex ag" and multinational hotel corporation "six continents" willing to invest 35 million dollars in the development of hotel business in ukraine. the government of ukraine is also interested in wider attraction of foreign direct investments in the development of hotel business. the government is ready to amend the laws of ukraine to improve the legal framework in the field of hospitality and tourism. the government of ukraine fights for the construction of hotels and roadside network of small hotels, which would provide comfort and tranquility to its customers. 9. there is annual investment of several hundred millions in the development of the hotel industry. to bring national tourism industry to the average (by european standards) level of comfort and quality of service vast cash inflows are necessary. currently the government of ukraine together with company representatives is working to make hotel chain marriot penetrate into the ukrainian market of hotel services. it will attract a large number of american businessmen and tourists, who prefer only five star hotels in the big cities. the government is also negotiating with baltic operator rival hotels to open the hotels of their chain in ukraine. according to the department of tourism, two small luxury hotels with 100-150 rooms will soon emerge in kyiv. beginning and end terms of the construction has not yet been disclosed. the amounts of possible investments range from 40 to 45 mln. usd (gorin, 2009). according to the experts from tourism department, ukraine urgently needs five or six middle-class hotels (two-and three-star), the cost of residence in which would not exceed 25-30 euro’s per day. there is also a plan to create a network of youth hotels, and according to the national tourist administration, trust funds for their development should be provided from the budget of the country. regarding comfortable hotel complexes, each city with a population of over a million people that expects substantial flows of foreign visitors must have at least a few four-star hotels. based on the problems and prospects mentioned above there is urgency in ukraine developing relevant priorities of the domestic hotel operator, first, in the process of spreading its influence in a particular market, the company, a potential hotel operator can select construction projects or acquire existing hotels with subsequent reconstruction. the way to increase the staff of the national hotel operator will depend on the circumstances; sometimes the reconstructions of the hotel and retraining of staff can be more expensive and timeconsuming than the full-scale construction project. secondly, for possible national hotel operators fundamental question will be regarding gaining dominance in the regions, which gained its recognition by holding the world cup in 2012. there were some changes in the legislation on the hotel market of ukraine. thus, in august 2010 adopted a law "on amendments to some laws of ukraine concerning the development and preparation of hotel infrastructure in ukraine for the finals of the 2012 european cup." according to this law hotels that were reconstructed, built and put into operation before september 1, 2012 are exempt from income tax for the next 10 years. thanks to euro 2012 53 facilities of the hotel industry were reconstructed and re-equipped in lviv, the reconstruction was worth 2.2 bn. uah. the hotel infrastructure in the region increased by 1,000 modern rooms of high service levels. four-star hotel nobilis equipped with 49 rooms opened up in lviv, the second phase is construction of hotel leopolis (33 rooms), vintag (17 rooms) and shveytsarskyi (18  numbers). sanatorium kashtan was reconstructed into the 4-star hotel with 140 rooms, apartment complex lisova pisnia with 114 rooms and royal hotel with 137 rooms that meet the highest european standards were built in truskavets city. the number of foreigners who want to visit kiev and kharkiv increased, however the need to meet quality tourist services is not yet obtained. among the economic and socio-political factors that hinder the development of tourism in ukraine in general next aspects can be highlighted: 1) insufficient development of tourism infrastructure, lack of tourist offices, indexes, travel guides and maps in foreign languages; 2) lack of advertising of ukraine abroad as a country interesting for tourists as well as individual advertising measures; 3) the decline in investment activity in 2014, caused by the unstable political and economic situation caused the clotting process in development plans in ukraine. in general terms the crisis affected the performance and appearance of new projects. in 2014 hotel market in ukraine was in a critical situation. customers number in the hotels in the capital has reached an absolute minimum – 28%. according to the company jll, the number of hotels in ukraine is growing, the market welcomes international companies, yet the returns on equity at these hotels remain low. 160 hotels with a total room availability equal to 11  thousand. rooms, including nine hotels (just over 2.1 ths. numbers) with brand names (hyatt, intercontinental, fairmont, two radisson, hilton, which opened in 2014, holiday inn, ramada and ibis) operate in kyiv. among the promising discoveries is hotel park inn (192 rooms), baltic journal of economic studies 14 vol. 1, 2015 aloft (310 rooms) and renaissance (173 rooms), that are expected to open in 2015. there is also announcement of the opening of three hotels under the brand ibis (233, 150 and 233 numbers), one of which also includes 100 rooms under the brand adagio. traditionally, most of demand for hotel services in kyiv is formed by the business segment (about 80% of which come from abroad, the remaining 20% from the regions of ukraine). share of business tourists comprises 65-80% on average, while the rest is formed by representatives of the group and individual tourism. now we can say the hotel business is experiencing hard times. the acute political and economic crisis led to a decline in tourist flow both from abroad and inside the country. hotel owners are forced to cut costs as it is almost impossible to impact the increase in the number of customers. the first half of 2014 was characterized by the hotel real estate market marking antirecord: unstable economic situation, armed conflicts in kiev and in the east, annexing the crimean peninsula, undeveloped tourist infrastructure in the capital and in ukraine in general led to a reduction in the number of tourists visiting ukraine. from the beginning of year the number of hotel visitors travelling both from abroad and regions of the country significantly decreased. also, the low occupancy of hotels can be explained not only by the unstable situation in the country but by the fact that for several years in ukraine market of shady services has been actively developing. the owners of apartments equip them for the reception of foreign tourists in the short term. generally, private owners provide guests with a full range of additional services to ensure quests’ transportation, interpreter (if necessary), meals and other services. with low fixed costs and, often without taxes payed, "shadow" businesses receive sufficient working capital to maintain service quality at a high level and expand business. moreover shady hotel business has the flexibility to fluctuate prices depending on season and demand, since it is outside the scope of government regulations it does not face additional costs. this year showed no improvement for the hotel market. hoteliers say that during this season when there is highest business activity (february-march) all business events and conferences were virtually eliminated, which adversely affected the market of hotel services. speaking about the prospects of increasing the flow of tourists, they are still vague, as it will depend on the "speed" with which the political and economic situation in the country will stabilize. following the 1st quarter of 2014 market operators point to a very significant negative impact of political changes in the country and the current unstable state. interest in ukraine as a tourist country and a potential business partner is greatly reduced considering military action and danger to health and life. thus, the occupancy rates of hotels in central kyiv were about 20% (the normal index of 50%). it is also worth noting that the number of trips, and accordingly tourists and businessmen not only from other countries but also within ukraine decreased. according to colliers international, the average price of the room "at the front desk" at the end of march 2014 decreased compared to the same period last year (in euro): by 10% in the hotels 5 * and was € 365, by 25% in the hotels of category 4 * and was € 133, and by 20% in hotels category 3 * and was € 77. however, the declared value of uah equivalent increased by 130% in 5 * hotels and totaled 5500 uah; by 110% 4 * – 1990 usd, and by 110% in 3 * – 1150 uah (data utg). growth rates are usually offset by significant discount. most of them are offered by the bookings of upper price segment and may be more than 50% of the requested amount at the front desk. with the emergence of new quality hotels of upper price range (hilton h-tower in kiev put into operation in late march) competition in the segment 4 * – 5 * among the capital’s hotels intensified, which could lead to lower prices by 10-15%. it is hard to create accurate forecasts, given the political and economic situation in the country, but it is difficult to expect good results. it should be noted that majority of new deals in kiev belong to the upper price and luxury segment, while the city needs more economic branded hotel segment. scheduled openings are delayed, investors "took a break" and wait for the change in the situation. in the current environment it is difficult to talk about the prospects for the hotel market and the investment appeal, but with the improvement in situation, investition interest will be directed to the same sectors as before the crisis. experts note that the most promising segment of the hotel market for kyiv and ukraine are quality 2 * – 3 * hotel. according to the company artbuild hotel group (abhg), the capital’s hospitality sector still lags quantitative and qualitative characteristics of markets in europe, asia and north america. for example, there is 0.54 room rate availability for 1000 tourists in kyiv. this figure is not only smaller than the rates of cities like warsaw, budapest, prague, berlin, vienna, but not higher than rates in lviv and odessa. to realize the touristic potential of ukraine fully, the state and the government should: provide visitors a comfortable and safe environment for arrival in ukraine; pursue effective policies of mass tourism, establish an appropriate concept; simplify and expedite visa obtaining process, abolish the visa regime for eu, usa, canada, and japan; reduce hotel fees; take measures to improve the condition of monuments and the creation of new facilities of mass tourism. amend the laws on land use, change the rules for issuing relevant permits for the organizations related to the tourism industries to attract investments in opening new centers of recreation; create opportunities for the construction and operation of small motels and hotels of family type, which will provide more jobs for the population and can be a source of foreign exchange earnings. this year the trend has improved slightly, the number of hotels in eastern europe is growing. by the end of 2015, baltic journal of economic studies 15 vol. 1, 2015 only ukraine, poland and russia plan to increase the number of hotel rooms by 18% each. according to the report published by the smith travel research, the three above-mentioned countries will increases the european hotel fund by 32 700 rooms. as of today, the biggest number of hotel rooms in eastern europe is in russia, where there are 103 000 rooms. second is bulgaria with 62 000 hotel numbers and third is czech republic with 58 000 rooms. not far behind poland, which as of june 2014 had 56 000 hotel rooms. by the end of 2015, russia plans to increase its hotel fund by 5519 rooms, 4355 out of those were opened in 2014. ukraine respectively, during this year hopes to open 1004 hotel rooms, poland – 817 (vahen, 2006). since 2008, russia with its 4.8% annual rate remains a leader among the countries of eastern europe by growing dynamics of hotel stock. it should be noted that such development was stimulated by 2014 winter olympic games held in sochi. thirdly, with the target of market segment being defined, potential national hotel operator may inevitably encounter problems of brand recognition and effective management. with sufficient funding and understanding of the need to attract professionals, these issues should be addressed by the consulting companies. in the case of limited funding, the company will have to address these issues by the means of their own efforts, giving them priority status. fourth, to maximize its efficiency the national operator needs to base management system for the hotel business on the strategic vision and foresight. based on this vision the policy of the company is being developed thus it represents the common goals and norms of relations and ensures viability and development structure. fifthly, to achieve the goals and objectives in the domestic hospitality industry, founders and owners of the company must first understand that their management should provide a clear organizational structure and the work within this structure should to be divided among all the employees on the basis of professionalism. it is also necessary to attract foreign professionals and companies to effectively transform the key functions of employees, to determine their accountability and whether there is appropriate effort from the staff and to establish strategy of network development (lesnik, 2003). 4. conclusion to sum up, we can conclude that the emergence of new national hotel operator in ukraine is not a utopia; moreover, such attempts are made today. in the sector of hotel services of the highest category national operators face harsh competition, not only based on price but also based on quality. to win such competition while maintaining individual brand is possible only by maintaining faultless management and marketing. emergence of national hotel operator is most likely to happen in the sector of middle-class hotel services because this segment is unsaturated and also very promising. hotel facilities in this case will be based mainly in the regional centers and will be unionized by the single concept. in any case, the development of ukrainian hotel operators will mean a transition to a new level in the framework of the global market of hotel services. if before ukraine was only described as undeveloped and unsaturated new market, the creation of a national network will create a new player in the global hotel market. references biryukov, e. (2002) tourism development in the world and its impact on the economy. moscow, economics, 168 p. gorin, g. (2009) features of the modern hotel industry of ukraine culture of black sea, № 171. – s. 117-120. vahen, l. (2006) hospitality: manual. – rostov-on-don: phoenix, 416 p. shumilova, a. (2005) hospitality moscow, publishing house of literature in construction, 213 p. gulyaev, v. (2000) organization of tourist activity: textbook. moscow, nolydzh, 312 p. lesnik, a. (2003) the practice of marketing in hotel and restaurant business. moscow: infra, 488 p. ирина антонова анализ рынка гостиничных услуг в украине аннотация. предметом исследования является рынок гостиничных услуг украины за последние годы, ведь формирование рынка гостиничных услуг в украине началось в первой половине 2000-х годов. первоначально основное внимание, как местных, так и иностранных инвесторов было направлено на освоение гостиничного рынка киева. постепенно, с развитием гостиничного бизнеса украины, интерес инвесторов начал смещаться и в сторону региональных городов, в первую очередь, крупных деловых центров страны (с населением около 1 млн. человек), таких как харьков, донецк, днепропетровск, запорожье, львов и другие, а также курортных зон украины – ар крым, карпаты, одесса. по данным всемирной туристической организации в течение последних 24 лет доход от международного туризма ежегодно растет на 9%. количество международных туристов ежегодно растет на 4%. значительно повлиял на активное развитие сегмента гостиничной недвижимости чемпионат европы по футболу 2012 года, по требованиям организаторов которого города, которые проводили данный чемпионат (киев, харьков, донецк, львов), должны были обеспечить определенное количество гостиничных номеров разных категорий. baltic journal of economic studies 16 vol. 1, 2015 целью исследования является анализ проблем на рынке гостиничных услуг и перспективы их решения. ведь индустрия гостеприимства в украине, является одной из наиболее динамично развивающихся отраслей экономики. приятно отметить, что во многих регионах открываются новые гостиницы, дома отдыха, санатории и пансионаты, реконструируются действующие, на качественно новый уровень выходит сервис, развивается инфраструктура. ненасыщенные рынки гостиничных услуг разного уровня является прекрасной возможностью для гостиничных операторов уверенно войти на украинский рынок и проводить политику расширения своего влияния в отрасли. поэтому данное исследование является весьма актуальным в настоящем. методологической базой исследования стали труды отечественных и зарубежных авторов, посвященных проблематике развития гостиничного хозяйства. на рынке гостиничных услуг есть определенные проблемы: 1. тенденция заполнения отечественных рыночных ниш иностранными операторами. 2. на современном этапе экономического развития в украине существует только два национальных гостиничных оператора – premier hotels and resorts и reikartz hotels & resorts. 3. украинский рынок гостиничных услуг сегодня близится к насыщению в секторе пятии четырехзвездочных отелей. 4. создание объединения вышеуказанного типа объясняется постепенным насыщением рынка гостиниц высшего класса и приходом титулованных иностранных операторов, создало условия, в которых отдельные предприятия вынуждены сотрудничать и вырабатывать единую бизнес-стратегию. 5. сектор гостиниц уровня трех звезд и ниже остается в украине незаполненным и представлен в основном отелями с крайне низким уровнем обслуживания и небольшим набором услуг. 6. на сегодняшний день активизации деятельности в гостиничном секторе украины почти не наблюдается, промедление национальных компаний может привести к наполнению рынка иностранными операторами. в свою очередь, западный инвестор не желает выходить на гостиничное поле украины без активного присутствия там украинских компаний. 7. в силу специфики конкретных рынков невозможно дать однозначную оценку конъюнктуре в отрасли  – необходимо детализировать ситуацию в отдельных секторах гостиничных услуг. 8. проблема эффективного менеджмента не нова для национальных гостиниц – переход от административных методов управления к рыночным оказался нелегким и чаще всего менеджмент, призванный обеспечивать качество обслуживания, занимается развитием. этот недостаток присущ не только менеджменту, но касается и учредителей (собственников) гостиниц. 9. непростыми для национальных гостиничных компаний остаются вопросы, связанные с взаимодействием с государственными структурами. это и процесс регистрации гостиничного объекта, и отвод земельного участка под строительство, прохождение обязательных процедур в ведомствах пожарной охраны и санэпидемиологического контроля, получения необходимых разрешений и сертификатов. 10. вопросы стандартизации услуг также проблематично вследствие несоответствия украинской и европейской систем стандартизации предоставления гостиничных услуг. по предварительным оценкам, 80% туристической инфраструктуры, включая отели, требуют ремонта и переоборудования. такие неоднозначные ситуации усложняют и замедляют деятельность предприятия гостиничной сферы, однако именно здесь национальные гостиничные операторы могут реализовать преимущество осведомленности в подобных вопросах и знания особенностей национального законодательства. результаты. но, несмотря на сложные политические и экономические условия появление нового национального гостиничного оператора в украине – не утопия, более того, подобные попытки предпринимаются уже сегодня. в секторе гостиничных услуг высшей категории национальному оператору придется столкнуться с жесткой конкуренцией, причем не, только ценовой, но и конкуренцией качества услуг. выиграть такое соперничество, сохраняя индивидуальную марку, можно только при условии безошибочного менеджмента и маркетинга. в секторе гостиничных услуг среднего класса появление национального гостиничного оператора наиболее вероятно, поскольку этот сегмент ненасыщенный и одновременно достаточно перспективный. гостиничные объекты в таком случае будут располагаться, преимущественно, в регионах и объединены единой концепцией. в любом случае развитие украинских гостиничных операторов будет означать переход на принципиально новый уровень в рамках участия на мировом рынке гостиничных услуг – если раньше украина представляла собой только новые емкие рынки, то создание национальной сети может обозначить нового равноправного участника рынка гостиничных услуг. baltic journal of economic studies 320 vol. 4, no. 5, 2018 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: yslobodyanik@ukr.net 2 kyiv national economic university named after vadym hetman, ukraine. 3 lviv state university of internal affairs, ukraine. e-mail: volodymyr.adam@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-320-331 compliance auditing in public administration: ukrainian perspectives yuliia slobodianyk1, svitlana shymon2, volodymyr adam3 abstract. purpose. in december 2016, the updated intosai standards for government auditing were enacted that provided a methodological basis for conducting various forms of public audit, in particular, public compliance auditing. the use of issais is aimed at maintaining high-quality control measures to ensure the public administration system accountability and transparency. the aim of the research is to consider the current state and prospects of introducing the public compliance auditing into the practice of the supreme audit institution in ukraine. design/ methodology/approach. the methodological basis of the study was to conduct the best practices comparative analysis in public auditing and to implement the desktop study of theoretical scientific researches, open analytical data produced by governmental and non-governmental bodies. findings. the analysis of the accounting chamber of ukraine’s reports proved that the control activities contained the compliance auditing elements. in this context, a proper legal framework for carrying out compliance auditing is not yet established and the appropriate methodological developments are not available. the author believes that implementing the issai standards for the public compliance auditing may be accelerated due to the step-by-step implementation of the activities proposed. practical implications. the specific recommendations on implementing the compliance auditing in accordance with the issai standards requirements are important to regulators. originality/value. the study can be the basis for further research in the field of the public compliance auditing theory and methodology, and the results may be useful for practitioners. key words: compliance auditing, regularity, propriety, transparency, public administration. jel classification: k20, p43 1. introduction over the last years, the role of supreme audit institutions (sais) in supporting the good governance in the public sector has been reconsidering. general assembly of the un in the resolutions 2011 (a/res/66/209) and 2014 (a/res/69/228) noted the critical role of sais in supporting the efficient, accountable, effective and transparent public administration that forms the basis for achieving the millennium development goals and the sustainable development goals (a/res/70/1). the activities of the international organization of supreme audit institutions (intosai), which consists today of 194 full members and 5 associated members, are directed to high standards of external independent audit support, sharing of the best practices in ensuring the efficient work of governments, their transparency, accountability, and effectiveness in the fight against corruption. at the last xxii intosai congress, which was held in the united arab emirates in december 2016, the abu dhabi declaration was adopted. the important issues that were discussed at the congress included the adoption of an intosai strategic plan for 2017–2022 and the revised version of individual issai’s professional standards. now the current issai standards secured three main forms of public audit – financial auditing, performance auditing, and compliance auditing. while the financial auditing and performance auditing have long been included in the sais’ activities of different countries, this is not true for the compliance auditing. nowadays many countries, particularly bulgaria, denmark, estonia, finland, germany, hungary, ireland, latvia, slovenia and the like conduct public compliance auditing. the positive experience of these countries in conducting the compliance auditing contributed to its generalization in the writing of issai standards, which allows extending it to other countries. at the same time, different types of sais, particularities of legislation and government control systems will influence the process of public compliance auditing. baltic journal of economic studies 321 vol. 4, no. 5, 2018 ukraine is in the process of reforming the public finance control system. the accounting chamber of ukraine as the supreme audit institution, was formed in 1996, is a member of intosai since 1998 and eurosai – since 1999. in 2015, the law of ukraine “on the accounting chamber” renewal took place, which established the requirement of applying the issai international standards. without dwelling on the advantages and disadvantages of the law adopted, which require a special study, we note that in the list of the accounting chamber’s powers the financial auditing and performance auditing are specified, but not the compliance auditing (law of ukraine on the accounting chamber 2015. s.4 (2)). this non-compliance with issai standards requirements resulted in investigating the prospects of the issai standards in ukraine in general and compliance auditing in particular. the logical structure of the research includes the consideration of the reasons for the emergence and development of the public compliance auditing as one of the main forms of the public audit, study of international best practice in this area, and the requirements of relevant issai standards to assess the possibility of their use in the ukrainian practice, analysis of the current situation, prospects of compliance auditing implementation in ukraine, and identifying the recommendations for this process acceleration. methodological basis of the research presented was to conduct a comparative analysis of best practices in public auditing and desktop study of the documents of the un, intosai, the verkhovna rada of ukraine, the accounting chamber of ukraine, theoretical scientific researches and open analytical data produced by governmental and non-governmental bodies. 2. compliance auditing in the public sector: literature review and prerequisites for securing the compliance audit in the issais the compliance auditing refers to the traditional forms of an audit that next to financial auditing has been known since ancient egypt and china. as dye and stapenhurst (1998) noted, in the public sector in europe the compliance auditing took on importance since the 18th century when the law compliance realization covered the financial accounts. at that time, the issues of public money receipt, saving and creation were of key importance (othman et al., 2013). the public audit took a new value – to raise awareness as to public finances administration and management. the conception of state auditors independence and selfdependence was firmly established, the consolidation of legal provisions in public finances auditing was founded, and the basic institutional patterns of the public auditing were grounded, namely auditing chambers headed by the auditor general (anglo-saxon tradition spread in great britain, denmark, sweden, finland and etc.) and judicial boards (french or latin tradition widespread in france, belgium, spain, italy etc.). after world war ii, there was a remarkable public audit expansion, new supreme audit institutions were formed whose self-sufficiency and independence were assured by the constitution of the country. the circle of bodies under control including not only the government institutions and enterprises but also private persons was widened. new methodologies of state earnings and losses auditing were created; the auditing was applied to not only the analysis of accounting legitimacy and accuracy and financial reporting reliability but to estimating the effective handling of public funds as well. international organizations uniting the supreme bodies of public finances control of different countries were established (intosai, eurosai etc.). the appearance of new public management in 1980th provoked the approaches changing in public sector accounting and auditing (hood, 1995; reichbornkjennerud, 2013). for example, mintzberg (1980), while describing different types of organizational structures, notes that many public institutions have a simple and sound organizational structure which he classifies as the machine bureaucracy. organizations that have such a structure are characterized by hierarchy and simple processes and operations, which repeat themselves, have the standardized form and are predictable. therefore, external control in such organizations is associated with determining compliance with regulations, standards, and procedures. that is why the machine bureaucracy is associated with external compliance auditing (mintzberg, 1980, p. 333). however, more complex organizational structures require different approaches in the field of control to assess not only compliance with regulated standards but also to determine their appropriateness, effectiveness, and efficiency. the added complexity of organizational structures and management development contributed to a significant spread of the performance auditing that has been used successfully by countries such as canada and sweden since the late 50s of the 20th century. sais began to conduct inspections of public expenditures not only in respect of their compliance with the law but also in the context of social benefit. at the end of the millennium, a number of scientific studies appeared in the field of public audit transformation in the direction of the performance audit development and its comparison with traditional forms of public audit, in particular with the compliance auditing (funnell, 1994; barzelay, 1997; dye and stapenhurst, 1998; pollit et al., 1999; jones and pendlebury, 2000; gomes, 2001 and others). studies from canada, sweden, uk, usa spread in europe, australia, new zealand, asia, and south africa. researchers have noted the need to develop an appropriate methodology baltic journal of economic studies 322 vol. 4, no. 5, 2018 of assessing the performance, which should include an assessment of the economy, efficiency and effectiveness, develop the evaluation criteria, auditing techniques, consider fundamental weaknesses in the public audit function (bowerman et al., 2003; pearson, 2014). at the same time, it should be noted that the compliance auditing does not become irrelevant and acquires further development, and the scientists such as barzelay (1997), pollit et al. (1999), gomes (2001), ruffner and sevilla (2004), mayne (2006) emphasize the necessity and importance of its conducting. also, the compliance auditing continues to be instrumental in sais endowed with their own jurisdiction, to support decisions with relevant evidence (reichbornkjennerud, 2013). gomes (2001) emphasizes the effectiveness of compliance auditing to evaluate the internal performance of the organization and its goal achieving. this idea was widely applied in practice, especially with the development of the institute of internal audit. in addition, adopted in the united states in 2002 the sarbanes‐oxley act and similar laws in other countries increased the development of internal control systems in organizations (hua‐wei, 2009) and has become a powerful impetus to research in this area (lenz and hahn, 2015). this legislation had an effect both on the private sector and public institutions and organizations. today, the internal compliance auditing in the public sector is aimed at the anti-money laundering procedures and financing of terrorism prevention, conflicts of interests, developing the policies and procedures aimed at the compliance of the organization’s activities with current legislation, information flows protection, fraud and corruption control, etc. in addition, the international standards, approved by the institute of internal auditors (iia) and committee of sponsoring organizations of the treadway commission (coso), contribute to further interrelation and development of internal and external public compliance audit, and securing the public compliance auditing in the issais confirms its importance and causes the necessity to make further investigations in the area. despite the long developmental history, in the last 200 years, the conception of the compliance auditing has not changed substantially. thus, o’regan (2004) defines compliance auditing as follows: “compliance audit – an audit of compliance with external regulations or internal control procedures”. however, he emphasises that “… the verification of compliance with external or internal requirements…” is the primary goal of the compliance auditing (o’regan, 2004, p. 70). arens et al. (2012, p. 14) offer the similar definition: “a compliance audit is conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority”. the authors also point out that governmental units due to substantial regulatory control require the compliance audit conducting. it should also be noted that in the international practice, the public compliance auditing is performed both by that name and as the “regularity audit”. in some countries, such as in the federal republic of germany, these names are used in parallel. along with this, different sais perceived the essence of the public compliance auditing as virtually the same and cover their contents on their own public resources, in particular: “…the essence of "compliance audit" is in assessing the extent to which laws and regulations (authorities) have been respected” (supreme audit institution of india, 2013); “…compliance audits are aimed at checking the compliance of the relevant transactions with the compliance requirements set forth in legislation and making recommendations in order to improve the functionality of the internal control system” (national audit office of estonia, 2014); “…the objective of a compliance audit is to examine whether legislation, lower-level regulations and guidelines issued by authorities have been complied with in an area that falls within the national audit office’s mandate. compliance audit also strives to determine whether activities have been arranged in accordance with the budget, the principles of good administration, policies (objectives) and financial or agreement conditions” (national audit office of finland, 2016); “…compliance audit shall mean the review of the financial management and control systems, including internal audit, and managerial decisions relating to the organisation, planning , management, reporting and control of budgetary and other public resources and activities within the audited organisation in respect of its adherence to requirements set out in statutory instruments, internal instruments and agreements” (bulgarian national audit office, 2017); “…the aim of a regulatory audit is to obtain assurance as to whether: transactions and operations of the audited entity comply with the requirements of laws and regulations; the design and application of the laws and regulations ensure transparency of the system. the regulatory audit includes a review of compliance of transactions and operations of the audited entity to the requirements of laws and regulations, as well as to the planned results” (state audit office of latvia, 2015); “… in its audit of regularity and compliance the bundesrechnungshof examines whether the laws, the budget and pertinent regulations, provisions, and rules have been observed” (bundesrechnungshof, 2016). so, except for the direct correspondence of objective problems to the requirements of statutory instruments in force, budget and contractual terms, some sais also concentrate on a more detailed study in compliance auditing management decisions and transparency of the existing system. the analysis of the terminology used shows that the concept of “regularity audit” is virtually put in the “compliance audit” because it includes the definition of baltic journal of economic studies 323 vol. 4, no. 5, 2018 statutory compliance in the executing some operations, programs, etc. regularity audit had earlier spread in the practice of the sais overseas, such as hungary, india, netherlands, pakistan, slovenia, tanzania, uganda and so on. thus, regularity audit is a constituent of compliance audit and one of its tasks, resulting in inappropriate singling out the regularity audit as the separate form of public audit. when new 3rd level issai standards were adopted in 2013, in particular, issai 400 “fundamental principles of compliance auditing”, in october 28-29, 2014, under the national audit office of lithuania guidance in vilnius (lithuania) the training seminar on “compliance audit: use of the compliance audit guidelines (issai 400 and 4000-4999) and best practice” was held. the seminar took place as a part of eurosai operational plans “professionals standards” and “knowledge sharing” involving the representatives of the intosai subcommittee on compliance audit aimed at discussing the key problems of issai standards implementation in compliance auditing and finding their solutions. key features of public audit, which were provided by the workshop participants having a positive experience of implementing the public compliance auditing in their sais’ activities, are as follows. under the regulatory compliance, the regulatory environment is supposed, to which public authorities and government officials must correspond in order to obtain public confidence. two compliance concepts are proposed to use: (1) regularity – activities, transactions and data reflected in the financial reports of the audited entity comply with the legislation, statutory instruments and instructional materials issued in accordance with the requirements of legislation in force and authorized in a proper manner, other agreements including budget laws; (2) propriety – includes general concepts both of due financial management in the public sector and company officials’ behaviour. the concept of propriety is more difficult to apply since it is based only on the auditor’s judgment and bears the mark of subjectivity. for example, the definition of the relevant correctness criteria is a challenging task as these criteria may be less formal and require considering public expectations regarding the public officials’ actions and behaviour. in foreign countries, when applying the propriety concept it is often assumed that the public auditor must find not only what is written in the laws, regulations and official records of parliament and government. special attention is paid to the ethical issues, despite the fact that legal is not always moral and vice versa. simultaneous compliance with the requirements of legitimacy and ethics is the basis for good governance. some countries conduct a compliance auditing (ca) on a regular basis, including it in work agendas for a year, others – 1-2 times a year on the basis of an important study object. thus, the bulgarian national audit office conducts dozens of cas over the year exploring the financial management of individual government agencies and organizations, agencies, offices, departments, etc. at the same time, the national audit office of finland performs two to four public compliance audits annually, choosing the significant subjects for study such as: funding for organizations and foundations to promote health and social welfare; central government transfers to local government for expenditure on basic social assistance; the payment of state matching funds to universities; energy subsidies; compensations; budget procedures, etc. this difference in approaches affects the sai’s planning process; however, it should not significantly impact the procedure of a compliance auditing. another feature of the compliance auditing organization and performance is the combination with other forms of public audit – financial auditing (fa) and performance auditing (pa). depending on the goals and tasks, different approaches to conduct compliance auditing are identified. sometimes ca is an independent task, but often it can act as a separate task when conducting comprehensive public auditing. in such cases, the combination of tasks and strategies of various public audits organizing and conducting is also of particular interest. various combinations of both financial auditing and compliance auditing tasks described by the seminar attendees are summarized in table 1. table 1 combinations of the public financial auditing and the public compliance auditing parameters options for combinations of the financial auditing and the compliance auditing full integration loose combination segregation basic methodology same basic methodology – an assertion based, test of internal control, substantive testing fa based on issai 1000, different methodology for ca fa based on issai 1000, ca based on specific subject matters according to issai 4000 series planning and execution full integration loose integration no integration assurance positive assurance on the financial statement and positive assurance on ca positive assurance on the financial statement, and negative assurance on ca positive assurance on the financial statement, positive assurance on each individual ca countries that apply the approach estonia latvia, canada, usa norway baltic journal of economic studies 324 vol. 4, no. 5, 2018 the combination of the compliance auditing with the performance auditing does not cause, in practice, special problems, because these two forms of the audit have nearly always associated issues. it should be noted that in different forms of public audit, critical attention is paid to the relationship between public auditors and the audited entity. establishing a mutual understanding contributes to the audit’s quality and efficiency, as well as to the increase in public confidence towards the audit results stated in the reports. thus, the report on the results of compliance auditing is important because it has to send the fullest, verifiable and understandable information to interested users. there are differences in the reports’ presentation based on the ca results, as well as in the language of their submission. in effect, there are two basic report formats: (1) the extended presentation of results with appropriate criteria-based evaluation resulting in its long form; (2) an auditor’s regular, often short, statement. in many instances, sais publish the reports in both formats on their public resources. at this, the extended (long) report is generally presented in a state language, and the short one – in english. in light of this, the suggestions of the national audit office of estonia regarding the preparation of a qualitative report on the compliance auditing results are useful. so, to shorten the report preparation time, a template can be developed. in order for a public auditor’s idea about the subject for an audit represented in summary to be clear, it must be highlighted what they were doing, for what purpose and what is found. the quality of data reporting that may be of interest to both parliament and the public also plays an important role. to improve the report’s informative value, all the important information about the deviations or recommendations should be structured and represented by tables or graphs, etc. to enhance the clarity of reports and conclusions based on the compliance auditing results and to improve their effectiveness, the supreme audit office of poland recommends: to write the report in simple language that conveys the meaning of work conducted clearly and accurately, makes it interesting for users; strongly emphasize the importance of the recommendations given; be fair and impartial while passing an opinion; describe only important issues which are of significance for the conclusion; provide convincing and well-founded conclusions which must contain specific and realistic recommendations to implement (sułkowska, 2014). in addition, the seminar covered the specific sais case studies of estonia, finland, hungary, latvia, lithuania, and turkey, the findings of which have enriched the experience of all parties concerned. thus, the best experience of sais in different countries regarding public compliance auditing was the basis for the issai standards. 3. analysis of the issai standards key requirements as to the public compliance auditing compliance auditing favours transparency by providing reliable information about how public resource management is effected and about the observance of citizens’ rights according to legislative requirements. it also contributes to responsibility for all the deviations and irregularities found in the government bodies activities, because in accordance with any findings the corrective measures are taken and those found responsible are made accountable. good governance support takes place by identifying weaknesses and deviations from laws, rules, and regulations with propriety assessment in cases when laws and other statutory instruments are not enough adequate. in addition, ca reduces the risk of fraud and corruption that hamper transparency, accountability, and good governance. taking into account the latest changes, the issai standards on the 3rd and 4th levels contain requirements for compliance auditing: issai 100 “fundamental principles of public-sector auditing”, issai 400 “fundamental principles of compliance auditing”, and issai 4000 “compliance audit standard”. key requirements for ca are contained in issai 400, which is based on issai 100 and concretizes it, in particular, regarding the purpose and justification for the issai standards use while conducting the compliance audit, ca fundamentals and different ways of its implementation, as well as elements and principles. to conclude, issai 300 gives the following ca definition: “compliance auditing is the independent assessment of whether a given subject matter is in compliance with applicable authorities identified as criteria. compliance audits are carried out by assessing whether activities, financial transactions and information comply, in all material respects, with the authorities which govern the audited entity” (issai 300, 2013). the issai standards provide a wide range of principles, standards, and guidelines to study the subject of the audit, applying certain methods and report formats. ca guidelines (issai 4000-4999), as noted above, are developed in line with the best practices, which allows them to be recommended to other sais. at the same time, there can be conditions which make impossible their use either in whole or in part. for example, this may occur in case of lack of basic administrative arrangements or if the legislation does not specify certain prerequisites for the ca conduct. in such cases, sais are free to determine the manner and the extent of the relevant issai standards application. the purpose of ca is to assess how the activities of public sector subjects correspond to their powers, which also includes reporting as to the audited item’s baltic journal of economic studies 325 vol. 4, no. 5, 2018 compliance level to the criteria specified. as noted above, ca can be associated with the definitions of regularity or propriety. despite the fact that the main focus of ca is the definition of regularity, propriety, however, is of great importance in the context of public expectations as to financial management and the officials’ activities in the public sector. the direction of establishing the propriety by public auditors as a result of ca depends on the sais’ powers. for example, in countries such as belgium, france, and italy, sai is authorized for jurisdictional function. for these sais, ca performance will have the features that make additional requirements for auditors, in particular, the judicial role. as sais with jurisdictional function are eligible to hold court and their decisions have greater consequences, the additional requirements regarding the auditing organization are laid down to them. as a result of the ca, such sais can exercise judgments and apply sanctions to the persons responsible for the public funds and other assets management. so, it may be suggested about the need to bring to responsibility for the lost revenues, illegal or inefficient public funds use, to impose sanctions and so on. some sais are required to pass the facts elicited to the judicial branch. such powers, of course, will affect the public compliance auditing preparation and conduct, including strategy and plan development, final documents regulation, etc. in addition, some sais, depending on their powers, can hold ca in such cases: (1) to determine the legality of certain activities, when there are suspicions of fraud and corruption; (2) to determine the number of persons who can be brought to responsibility, in particular, a criminal one, due to the discrepancy in their activities with the current legislative requirements; (3) to assess the reliability and completeness of data offered to the parliament by the government, etc. the authority designated will influence the determining objectives and strategies, planning and auditing procedures. general requirements to a public compliance auditing conduct are set out in the issai 4000 and relate to the following: objectivity and ethics, audit risk, the risk of fraud, selection of areas significant for the intended user(s), professional judgment and scepticism, quality control, documentation and communication. an important feature of the public compliance auditing is that according to the results, the auditor may express a reasonable or limited assurance. to formulate a reasonable assurance, the public auditors should perform advanced procedures with the aim to collect more evidence. the main stages of public compliance auditing are stated in the algorithm of conducting public compliance auditing (figure 1), which was developed based on the issai’s essence analysis. 4. prospects for the public compliance auditing implementation in the ukrainian practice first of all, it should be noted that the public compliance auditing implementation is directly related to the development of public audit in ukraine. in this context, an important factor is that the system of public finance control is in the process of harmonization with international standards and is directly dependent on the new institutions’ formation, supporting the transition toward a market economy. the remoteness of global processes in the area of control, which objectively existed prior to ukraine’s independence proclamation in 1991, has not allowed to adequately perceive the leading foreign experts’ achievements and to benefit from the experience of other countries in this area. the consequence was that the legislative practice outstripped ukrainian theoretical developments in the field of control and audit. research activities of the last decade are based on the usual for ukraine practice of strong government control, exaggerating its role and capabilities in providing independent and public control (bardash, 2010; sukhareva and fedchenko, 2013; mnichatall, 2015). this is also evidenced by both the legal regulations in this area and the results of the accounting chamber’ control capacity analysis, as well as its comparison with the government supervisory authorities, which have considerable advantages in terms of staff number, the territorial coverage of the ukrainian regions and the number of the control activities (khmelkov, 2016). it should be noted that in the ukrainian publications, the compliance auditing, unlike the financial auditing and the performance auditing, remains underexplored, which causes its character misunderstanding and sometimes – a mix of tasks of public audit’s different forms. for example, public compliance auditing is the same as the public financial auditing (dykan, 2011). the analysis of both scientific publications (bardash and osadcha, 2012; mnichatall, 2015; nevidomyi, 2016; pikhotskiy, 2016) and the current situation in ukraine in terms of public finance control system transformation enabled to define the main groups of problems (table 2). the development of public audit institution will contribute to the development of its individual forms, in particular, the public compliance auditing. to accelerate the issai standards implementation in the accounting chamber’s practice, it is necessary to use the best practices of the sais that have experience in this field. such an approach will also allow avoiding common errors and ensuring the compliance auditing performance. it should be noted that usually, the elements of compliance auditing are present in almost every control and expert-analytical event of the accounting chamber of ukraine, but separately, as a form of public auditing, the compliance auditing in baltic journal of economic studies 326 vol. 4, no. 5, 2018 fi preparation: gathering information relating to the compliance auditing (ca) relevance and viability taking a decision as to ca data: necessity to determine the legitimacy / propriety of business activity, identify a problematic situation in public interest areas, state authorities’ request, media reports, etc. conduct of a ca: auditing procedures performance, evidence gathering and evaluation, analysis of findings, preliminary formulation of potential conclusions auditor’s report and its disclosure control of carrying out of recommendations and proposals accomplishment determining and formulating the subject, powers and authority, responsible parties, foreseeable users, strategy for ca (ca or ca + fa or ca + pa). setting goals and tasks, determining an audit scope, lead time, criteria, methods, risks and assurance type. quality control of public compliance auditing performed conclusion preparation (processing): comparative assessment of what is actually determined and what needs to be, finding out the cause of deviations and gaps, a possible alternative course of events, recommendations and propositions identifying yes no і s ta ge pl an ni ng іі s ta ge b as ic іі і s ta ge r ep or tin g іv s ta ge e xe cu tio n co nt ro l figure 1. the algorithm of public compliance auditing conduct under the issai requirements ukraine has still not been considered. for clarity, let us analyse some of the accounting chamber of ukraine’s recent reports on the results of audits and other control activities that are published on the official chamber’s website (acu, 2017). thus, the analysis of various control measures key parameters proves that almost every one of them contains the compliance auditing elements. there is a clear connection between the objective, auditing criteria and methodological techniques of data collection, in which there are elements of regularity and propriety definitions. the elements of compliance auditing appear when combining with the financial audit and the performance audit (as provided for in the issai standards). table 3 presents some reports extracts to confirm this thesis. the report analysis presented by the accounting chamber of ukraine proves that in fact, the chamber carries out public compliance audit but it does not call them so. for example, while describing the audit criteria (control measure) the parameter “legality” is emphasized. information on this parameter is shown in table 3. baltic journal of economic studies 327 vol. 4, no. 5, 2018 table 2 key problems in public audit in ukraine at the present stage problems nature problems essence conceptual problems the lack of conventional concept used; the need to formulate the public audit principles in order to take them as a basis for public auditing development; the need to develop a sound scientific classification of the public audit’s types and forms; the need to define roles and tasks, subject and classification of public audited items; the need to develop criteria of the efficiency of the public audit with regard to its essence and functions methodological problems the need to implement the issai standards; the constrained use of specific advanced methods and procedures of public audit, as well as the methods of audit governance; the lack of sound approaches to defining the importance and risks in public audit; the need to develop and implement an effective system of public audit quality control (both internal and external quality control) organizational and legal problems the lack of theory, which should be the basis for the public finance control transformation and development; the status of the accounting chamber as the supreme audit institution is not enshrined in the constitution of ukraine; auditing of local budgets and other public resources is not included in the accounting chamber’s powers; the accounting chamber’s organizational structure underdevelopment; the lack of development of both internal and external public audit coordination model; underestimation of the engaging independent auditors to conduct public audits table 3 key parameters of an audit in the accounting chamber of ukraine’s reports name of the control measure goal legitimacy criteria data-collection methods audit of the tasks and actions implementation designed by the national target program "drinking water in ukraine" for 2011–2020 establishing the real situation as to planning and use of funds of the state budget of ukraine, prescribed in 2012–2015 to accomplish tasks of the national target program "drinking water in ukraine" for 2011–2020 correspondence of management decisions, departmental normative legal acts and executive directives of the audited items with the applicable law principles analysis of statutory instruments, policy acts and executive directives related to the audited subject analysis of the executing powers by the executive bodies as to the taxpayers’ registration completeness determining the actual implementing by the executive authorities their powers regarding the taxpayers’ registration completeness – legal entities and their separate subdivisions, and individuals compliance of managerial decisions and regulatory documents adopted by executive bodies to the requirements of current legislation in terms of taxpayers registration collection and processing of normative-legal acts, administrative, regulatory and other documents regulating the taxpayers’ registration procedure, as well as ensuring control over the taxpayers’ registration completeness audit of the efficient use of state budget funds allocated to the ministry of health of ukraine to give the ukrainians medical treatment abroad assessing the legality, timeliness, and completeness of management decision-making conformity of managerial decisions, executive directives of audited items regarding the planning and use of budget funds with the current legislation analysis of normative and legal, administrative, executive acts and documents regulating organizational and financial support of medical treatment for the ukrainians abroad analysis of using the international coordinated audit of the chornobyl shelter fund (“ukryttia” chornobyl fund) recommendations determining the actual situation as to implementing the projects (programs) associated with the taking chnpp out of service and with the transforming the shelter into an environmentally safe system; evaluating the legal and organizational support in executing the international coordinated audit of the chernobyl shelter fund’s recommendations completeness, timeliness, and consistency of implementing the recommendations, the extent to which the results obtained thanks to executing the recommendations correspond to the target monitoring of legal, regulatory and other documents regulating the use of international technical assistance and transfers from the state budget of ukraine aimed at implementing the measures for the taking chnpp out of service and for transforming the shelter into an environmentally safe system audit of financial and economic activities of the state territorial-sectoral association "south-west railway " evaluating the compliance with laws and decisions of authorized body of south-west railway’s property management, as well as of the regulatory body of the railway transport compliance of managerial decisions, regulatory and departmental normative legal acts of the audited items to the active legislation provisions, compliance with the legislation requirements, acts and decisions analysis of normative-legal, administrative acts related to the subject and the objects of the audit baltic journal of economic studies 328 vol. 4, no. 5, 2018 when comparing the information presented with the international episodes, it is possible to draw a conclusion about the full integration of the public compliance auditing with the public financial auditing in the accounting chamber of ukraine’s practice (table 1). in addition, there are also elements of assessing the accuracy when performing compliance auditing (for example, determining the compliance of managerial decisions to the criteria specified). thus, public compliance auditing is actually conducted by the accounting chamber; however, it requires to be allocated as a separate form of the public audit as required by the issai standards. as noted above, the latest version of the law of ukraine “on the accounting chamber” does not contain the concepts of compliance auditing. virtually the only ukrainian regulation, where compliance auditing is mentioned separately from other forms, is internal audit standards, developed by the ministry of finance of ukraine with the aim to use them in the ministries and other central executive bodies, their territorial bodies and budget institutions, etc. (mfu, 2011). thus, section iii, “standards of internal audit activities”, chapter 1, “directions of an internal audit”, item 1.1 specify: “the scope of internal audit covers the following activities: ...assessment of the institution’s activity in terms of compliance with the legislation, plans, procedures, contracts regarding the asset conservation, information and state property management (compliance auditing” (mfu, 2011). the internal audit standards do not specify the compliance auditing procedures as well. regulatory documents of the accounting chamber do not stipulate the public compliance auditing as a separate form of the public audit. thus, the methodology of the ca is not designed, which disallows for full use of this form of the public auditing. 5. proposals to ensure public compliance auditing implementation in ukraine this study allows formulating the recommendations for further public compliance auditing implementation in ukraine, which are as follows. (1) conceptual framework (definitions) used in public audit requires to be developed and specified. further investigation of public audit theory and methodology, in particular, the public compliance audit, as well as the best practices studying will achieve the conventionality of concepts applied that should be the basis for the relevant normative-legal acts. the terminology solidarity is essential to improve the coordination of internal and external public audit subsystems, as well as their interaction with other stakeholders. (2) supplementing the list of the accounting chamber of ukraine’s control measures with the public compliance auditing would be the next step. as it has been proven in the study, the public compliance auditing is a distinct form of the public audit with its own specifics of the organization and conduct. in addition, the specified adjustment will allow bringing the actual legislation into compliance with the issai standards. (3) to fully include public compliance audits to the supreme audit institution’s work requires defining the concept of compliance auditing. according to the current practice, compliance auditing is conducted on an ongoing basis including the plans for the year or based on choosing the essential subject for study (multiple audits). in our opinion, it is advisable to flexibly combine these two approaches in a flexible manner. taking into account the accounting chamber of ukraine’s current practice, it seems rational to define a list of public audit items, which requires a regulatory basis for periodic compliance auditing (for example, separate ministries and departments). along with this, resources to carry out compliance auditing on individual topical issues must be included into the chamber’s annual work. it is worthy of note that while planning the accounting chamber of ukraine’s activities the communication with the state audit service of ukraine (the main monitoring body of the government) regarding the internal compliance auditing execution plan will play a critical part. in this case, it is possible to avoid undesirable duplication of internal and external audit functions. (4) when the appropriate amendments in the law are introduced the developing separate standard (or methodical recommendations) on carrying out the public compliance audit by the accounting chamber of ukraine will be a logical step. the issai standards requirements must be the basis for this internal regulatory document. it is also advisable to use the best practices of other supreme audit institutions and to attract the scientists making investigations in this area. (5) full implementation of the public compliance auditing is only possible with trained professionals. on that basis, training and professional development of public auditors as to the public compliance audits methodology and organization are extremely important. (6) sharing experience with supreme audit institutions of foreign countries concerning the organization and conduct of public compliance audits in this context will help to implement compliance auditing. (7) the allocation of internal public compliance auditing in the state audit service of ukraine activities will allow normalizing the control subsystems of both external and internal public audits that will ensure their effectiveness and efficiency. creating a database for sharing results and coordination in the planning and conduct of internal and external public compliance audits should be an important step in this direction. modern technologies allow ensuring the proper functioning of such a database in compliance with the limited access requirements and information confidentiality. baltic journal of economic studies 329 vol. 4, no. 5, 2018 6. future research opportunities in sum, we note that the public compliance auditing is a promising direction of research in the public finances control area. at the same time, the results presented in the study can be the basis for further theoretical and practical developments, and taking the recommendations proposed into account will speed up the process of the issai standards implementation, improve the public audits quality and efficiency to ensure public confidence towards the supreme audit institution in ukraine. 7. discussion and conclusion the purpose of this study was to determine the prospects of implementing the public compliance audit in ukraine according to the issai standards requirements. for this purpose, the prerequisites for the development of public compliance auditing as one of the forms of the public audit were investigated based on the best international practice in this area. as a result, the following conclusions were drawn. first, the compliance auditing is known since ancient times and is widely used in the sais’ practice, but it sometimes has other names (regulatory, regularity). however, its main essential characteristics are preserved (essence, goal, realization conditions, presentation of results, etc.). in view of this, separating the regularity auditing as a certain form of public audit seems to be inappropriate. second, the longstanding applying the public audit by different sais confirmed the appropriateness of its carrying out as a separate form of the public audit that has highlighted the need to develop appropriate methodological support. the latter was confirmed by the professional community and implemented in the form of the 3rd and 4th level issai standards. the standards were adopted by the intosai congress in december 2016 and now they require to be implemented by all intosai-members. third, ukraine goes through the transformation process of the public finance control system and is an active international institutions participant, which implies the issai standards implementation. dealing with theoretical, methodological, and organizational and legal problems will speed up reforms in the sphere of external independent control. with the development of the public audit institution, the development of individual forms, in particular, the public compliance auditing, will take place. fourth, the analysis of reports based on the accounting chamber of ukraine’s performance has proved that almost every control measure produced by the chamber contains the compliance auditing elements. in this case, the proper legal basis for the ca as a separate form of the public audit has not yet been established and the relevant methodological developments are lacking. fifth, to accelerate the issai standards implementation in the accounting chamber’s practical activity, the specific recommendations are proposed, the implementation of which will contribute to reforming the control system in accordance with the international standards requirements and national needs for the improvement of public administration in ukraine. references: accounting chamber of ukraine (acu) (2016). annual reports of the accounting chamber. retrieved from: http://www.ac-rada.gov.ua/control/main/en/publish/category/32832 (accessed 23 may 2017). arens, a. a., elder, r . j., beasley, m. s. 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influence of businesses in grain production; analysis of constraints to improve production efficiency of grain; defined domestic (internal) needs of grain in ukraine; assessed the status and expediency transformation infrastructure of the grain market of ukraine; defined priority directions of development of the grain market in ukraine. as a result of the preparation of articles, it is obtained the following conclusions: ukraine is the world's largest producers and exporters of grain, the production of integrated agricultural units to a third of the total grain; technical condition of farm does not meet the needs of production; the domestic market is unable to provide the existing demand for grain production, contributing to export growth; ukraine has a number of problems due to increased grain production, namely the shortage of storage capacity for the storage of grain, limited performance transshipment of grain in port elevators and imperfection and depreciation of transport systems; solving the existing problems is possible through the implementation of state and regional programs, implementation of joint projects with partner companies and the purchase of equipment and facilities through leasing programs. as a result of the development of logistics infrastructure of grain market provides employment generation, value-added products that will increase revenues to the state and local budgets. besides ukraine reach the strategic goal of producing 80 mln. tons of grain and strengthen positions in the global agricultural market. key words: grain market, integrated agricultural farm, grain production, the world grain market. jel classification: q13, q12, q17 1. introduction topicality. grain production among the leading sectors of agriculture in ukraine. over the last decade ukraine significantly increased the production and export of grain. the country ranks ninth among world producers of wheat, fifth for the production of corn and barley. in general, ukraine is in third place in the world in terms of grain exports. growing crops involved in various forms of management, production scale, technical and staffing. however, the top spot on the production and export of grain owned integrated agrarian formation. the level of organization and resources affects the efficiency of management. the profitability of grain production in 2014 slightly above inflation. this situation hinders innovation in farm activities and further development of the industry. the purpose and objectives. the article aims to analyze the situation on the grain market in ukraine, defining the role of integrated agricultural formations in this market, improving the organizational and economic mechanism of its functioning, identify ways of improving the competitiveness of ukraine among world exporters of grain. to achieve this goal it is necessary to solve specific scientific problems, namely to consider the trends of grain market in ukraine; determine the impact of businesses on grain production; to analyze constraints to improve production efficiency of grain; define domestic needs of grain in ukraine; assess the state and prove the expediency of transforming the infrastructure of the grain market of ukraine; outline priority directions of the grain market in ukraine. methodology. the methodological basis of research defines complex analysis of economic processes in the baltic journal of economic studies 78 vol. 1, no. 2, 2015 grain market in ukraine and the world. systematization and comparison methods studied world trends and domestic grain market. assessment of the market of grain held statistical and economic, balance, constructive methods. in studying the infrastructure of the grain market in ukraine and to prepare proposals for its optimization techniques used induction and deduction, analogy and comparison. definition of priority directions of the grain market in ukraine was conducted using program budgeting. information base of research is scientific papers, theoretical and practical research set out in international and domestic literature, laws and regulations on the formation and functioning of the grain market. empirical research base materials constituted state statistics service of ukraine, the results of analytical studies of news agencies and ngos. 2. analysis of recent research and publications research on the development of the world economy and the domestic grain and grain market dedicated work of economists: v.g.  andriychuk, p.i.  haidutsky, v.m.  heyts, o.v.  zakharchuk, s.m.  kvasha, m.g.  lobas, b.y.  paskhaver, v.yu.  protasov, p.t.  sabluk, v.f.  saiko, v.p.  sytnyk, o.m.  shpychak and others. most studies concerning the beginning of market relations and do not cover the current organizational and economic mechanism of grain market in ukraine. at the same time the current level of domestic grain production capacity and necessitate scientific support continuous improvement strategies for the development of the grain market and in particular the integration processes. in turn, theoretical and methodological aspects of integration processes covered in papers of i. ansoff, m.  benoit, m. bradley, p. coulomby, karl marx and other scientists. significant contribution to the study of this issue did v.g. andriychuk, v.i. boyko, p.i. haidutsky, s.m. kvasha, p.k.  kaninsky, m.yu.  kodenska, i.h.  kyrylenko, m.f.  kropyvko, i.i.  lukinov, yu.o.  lupenko, m.y.  malik, p.m.  makarenko, v.y.  mesel-veselyak, yu.o.  nesterchuk, p.t.  sabluk, o.h.  shpykulyak, m.m.  fedorov and others. a significant contribution to the development of economic relations at the farm level, such ukrainian scientists as m.v. hladiy, o.v. krysalny, m.i. pugachov, h.m. pidlisetsky, v.p.  sytnyk a.m.  stelmashchuk, s.o.  yushin and others. theoretical and practical fundamentals of production management are reflected in the works of foreign scholars and practitioners of management such as d. macgregor, f. taylor, a. fayolle and others. accumulated theoretical and methodological material in the field of integration processes may serve as a basis for research in this area. however, the lack of stability of the agricultural sector, the need to introduce effective forms of production require in-depth study of specific units and integrated agricultural development of effective mechanisms to improve their activities. 3. production by results of 2014 the volume of gross output of agricultural sector amounted to 251.4 billion uah. (in  comparable prices of 2010), which is less than the previous year at 1.4 billion uah. the structure of the industry is dominated by crop production. moreover, in recent years the tendency to increase the share of crop production in gross production. if in 2010 it was 63.9% in 2014 it rose to 70.7 percent (table. 1) [agriculture in ukraine, 2015; adoption of social facilities and production capacities in ukraine 2014 (2015)]. the share of gross output of grain and leguminous crops in total gross plant production during the years 2010-2014 was located within 33-38% and in 2014 reached almost 27% of total gross agricultural production. these data confirm the importance of grain production in agricultural development. in 2014, agriculture in ukraine engaged nearly 53 thousand enterprises. 45,000 of these used agricultural land. the total area of land use in these companies was 22 million hectares. in addition, at the beginning of 2014 in ukraine operated 78 integrated formation with total agricultural land area of over 10 thousand hectares. in general, in their land-use were 5.85 million hectares, or nearly 28% of agricultural land in ukraine [the largest agricultural holdings in ukraine, 2014]. in 2014 ukraine produced 63.9 million tons of grain. output of food grain was 25.1 million tons (39% of the total), fodder 38.8 million tons (61%). compared to the year 2013, grain production increased by 2.5%. this figure was determined by excluding the temporarily occupied territory of the autonomous republic of crimea and the zone of the antiterrorist operation. this is a record for ukraine. per capita ukraine produced 1,485 kg of grain. table 1 gross agricultural production, bln. uah indicators years 2005 2010 2011 2012 2013 2014 gross production – total 179,6 194,9 233,7 223,3 252,9 251,4 сrop production 114,5 124,6 162,4 149,2 175,9 177,7 demsity of crop production, % 63,7 63,9 69,5 66,8 69,6 70,7 grain and leguminous crops 41,7 41,6 60,5 49,4 67,0 67,6 density of grain and leguminous crops , % 23,2 21,4 25,9 22,1 26,5 26,9 livestock production 65,1 70,3 71,3 74,0 77,0 73,7 density of livestock production, % 36,3 36,1 30,5 33,2 30,4 29,3 baltic journal of economic studies 79 vol. 1, no. 2, 2015 the increased production achieved mainly by improving productivity. total yield of grain in 2014 totaled 43.7 c / ha, up 3.1 centers from 1 hectare (or 7.6%) more than in 2013 year. sown area under grain crops was 14.8 million hectares, less than in the year 2013 by 5.6% (fig. 1) [harvesting of crops, fruits, berries and grapes in the regions of ukraine 2014 (2015)]. 24,5 38,0 39,3 56,7 46,2 62,3 63,9 12,6 14,6 14,6 15,3 14,8 15,3 14,6 19,4 26,0 26,9 37,0 31,2 40,6 43,7 0 10 20 30 40 50 60 70 80 90 2000 2005 2010 2011 2012 2013 2014 роки м лн г а/ м лн т он н 0 5 10 15 20 25 30 35 40 45 ц/ га area, mln he output, mln tones productivity, c/he fig. 1. dynamics of grain production in ukraine 4. investment need technical condition of farm does not meet the needs of production. machine and tractor fleet morally and technically worn out and provided only by 60-65% and technological needs. operation of outdated technology leads to frequent downtime because of maintenance and adjustment. consequently, the delay time seasonal field work, violated technological requirements of growing crops, which negatively affects the quality of the crop and increase its losses. according to the department of engineering support and agricultural machinery ministry of agrarian policy and food of ukraine minimal scientifically accurate annual update of tractor fleet to the technological needs estimated at 35 billion, including about 40 thousand units of tractors (15 billion uah) and nearly 7 thousand grain combines (10.5 bln. uah) (tab. 2). table 2 technological needs of agricultural enterprises in machinery to produce projections grain output name and type total quantity, un annual need, un grain harvesters 75000 7500 corn harvesters 9500 950 prefixes to grain harvester for corn harvesting 14600 1400 rolling harvester 36200 3600 sewing machine grain crops combined 102500 10000 sewing machine for corn 49100 4900 machines and devices for clearing 12000 1200 mechanical grain loaders 38400 3800 result of author’ research on the basis of nsc "institute of mechanization and electrification of agriculture" naas of ukraine grain production is one of the more attractive investment activities. as a result of questioning farm managers – its enough to invest in the beginning of activity in average of 1 to 2 thousand usd per 1 hectare with an average payback period of investment is 4-5 years. however, farmers produce some risks that hinder investment in growing crops. mostly it concerns possible government intervention in export control. doing so may lead to lower prices on the domestic market and hinder the realization of agricultural products. in addition, there are risks that depend on state regulation of land market in ukraine. although the moratorium on sale of agricultural land was extended to 2016, the lack of an effective legislative framework and coordinated actions sectoral institutions are perceived by investors as additional risks. when considering investment options more attractive are large companies, including integrated agricultural enterprises that will be able to further increase the capacity of businesses. in addition, an important factor in 2014 grains produced 34.4 thousand agricultural enterprises. their total production was up to 49.9 million tons. average grain production from 1 ha was 47.5 metric centers. thus, the productivity of large grain trade enterprises was higher than small businesses. enterprises of grain production over 5 thousand tones received 58.1 metric centers of grain per hectare. companies with grain production to 5 thousand tons 34.5 metric centers. in addition to agricultural enterprises, grain also producing by households. in 2014, they produced nearly 14 mln. tons of grain, which is 28% of total production. significant contributions to the development of grain farming in ukraine carry out integrated agricultural farm. in 2013, the area of cultivation of cereal crops in integrated agricultural formations totaled 3.27 million hectares, which is 3% more than the previous year. total grain production was 19 million tones, a third more than the previous year. the share of grain produced integrated agricultural units was 30% of total production in ukraine. the average yield of grain crops in integrated agricultural formations totaled 59.1 c / ha, which is 29% more than the previous year [the largest agricultural holdings in ukraine, 2014]. following the economic activity of agricultural enterprises in 2014 the profitability of crop production was up to 29.2%. this is more than in 2013 by 18.1%. the yield of grain increased from 1.5% in 2013 to 25.8% in 2014. one of the factors influencing the profitability of grain production increase was higher prices of products. average selling price for crop production increased compared 2013 to 29.2%, including grain went up by 38.9% [main economic indicators of agricultural production in the agricultural enterprises for 2014]. baltic journal of economic studies 80 vol. 1, no. 2, 2015 is the availability of facilities for storage and processing. this greatly reduces the risks that can arise from price fluctuations and increases the profitability of such activities. 5. impact of the global market in the 2015/16 marketing year (my) ukraine reduced production and domestic needs of grain. according to analysts, grain production will exceed 60 million tons, and consumption within the country will reach 26.9  million tones, 6.5% less than the previous season (27.3 million tons). this trend is observed due to a decrease of 10% compared to last season volumes of feed grains. at the same time, consumption of food grain will increase. if last year processed food targets 4.7 million tons in the current expected corresponding increase to 4.9 million tons. such expectations caused by the retention in the current season on a high level of sales of flour to foreign markets. accordingly, production and consumption of these products increase. however, grain exports will be top priority. according to the august report of the food and agriculture organization (fao), world production of grain in 2015 will amount to 2.5 billion tones, 13.8 million tones more than the previous month's estimates. increased production is expected to increase yields by forage crops, wheat and rice. this contributed to the improvement of weather conditions, growing corn in argentina, brazil and the usa. in turn, the information on the reduction of maize production in the eu due to hot weather conditions less influence on the world balance of this type of grain. forecast world wheat production in 2015 is more optimistic. its harvest will be 728 million tones, 5 million tones forecast to exceed previous periods. in australia, the eu, the russian federation and ukraine are expected to grow wheat. this effect expanding acreage and favorable weather conditions. so increase wheat yields of these countries with surplus compensates its decrease in canada, where the main production regions of the grain affected by drought. fao forecast of world stocks of grain on the end of season in 2016 increased to 643 million tones, almost 12  million tones more than in the previous forecast periods. ensuring global demand, growth stocks of grain affects the price situation. during august on the world grain market there was a decline in prices for basic grains. in addition to the growth of grain production in the countries of its main producers, the price reduction was also affected by the financial and economic crisis unfolding in china. therefore, the market experts have warned of a possible decline in the pace of global economic growth and reduce global demand for grain. following the august index of world prices for grains and oilseeds (goi) of the international council of grain (igc) dropped by 4.8%, while wheat price index fell by 4.3%, maize 1%, barley 4 2 per cent. however, due to the devaluation of the hryvna, lower world grain market prices are less noticeable in the domestic market of ukraine. despite the unfavorable economic and political conditions in the country and low prices on world markets, ukraine's agricultural sector continues to develop. its share in the gross domestic product of ukraine reaches 14 percent. agricultural production is the main source of foreign currency in ukraine. according to analysts of the domestic market this year with the possibility of ukraine grain exports stay within 33 million tons. this is lower than previous estimates due to lower production forecasts and external sales of corn. it is expected that the volume of new crop corn exports will be up 13 million tons. following the august-september this year, the rate of export of grain from ukraine is 24% higher than last year. as of september 10, exported nearly 7 million tones of grain, of which: wheat 3.4 million tons, corn 1.3 million tons, barley 2.2 million tons. the devaluation of the national currency has become a stimulus for the intensification of export trade of agricultural products. in ukraine actively conducting a search for new markets for grain and its products on all continents. the government hopes the end of 2015 every third dollar export will arrive in ukraine's economy from the agricultural sector. according to estimates of farmers in this period will provide income $ 4 billion foreign exchange earnings. that september-december is supposed to sell for export 20 million tons of grain throughputs at the logistics infrastructure of the internal market. thus the majority of the grains account for wheat and barley. consequently, in the 2015/16 marketing year despite the decline in grain production, ukraine will keep busy in previous years the position of leader of world grain exports. 6. problems the domestic market is unable to provide the existing demand for grain production, contributing to export growth. ukraine has officially defined strategic goal to bring grain production to 80 mln. tons. however, according to experts, the increase in grain production could lead to problems for market participants. firstly, ukraine does not have enough capacity to store grain. to cancel mandatory certification in ukraine table 3 power of commissioned facilities for storing grain, thousand tons of simultaneous storage object name 2013 2014 first half of 2015 2014 to 2013, % forage storage 76,2 141,2 9,0 in 1,9 times elevators 2001,6 833,1 298,2 41,6 granaries mechanized 217,2 709,7 45,2 in 3,3 times cleaning and grain cleaning and drying objects 3514,7 3868,3 642,5 110,1 baltic journal of economic studies 81 vol. 1, no. 2, 2015 operated about 790 "certified" grain storage capacity of about 33.5 million tons. other warehouses and grain elevators or provide quality services or do not have adequate technical equipment. that is, even when the grain harvests 60 mln. tones and oilseeds at 15 mln. tons shortage of quality warehousing capacities. following the 2014 totally was commissioned 92 grain storage facilities with total capacity of 5.6 mln. tons (tab. 3) [adoption of social facilities and production capacities in ukraine 2014 (2015)]. secondly, the ukrainian ports can restart within one month export 2,8-3,0 mln. tons of grain. therefore, with the increase in production should increase capacity of port elevators. however, most of the grain in ukraine transported by rail. over the past five years, the share of transport in total traffic is about 65 percent. in ukraine there are about 13.6 thousand of grain trucks, with an average age of 26 years. this normative service life is 30 years. therefore, the third problematic issue is the inadequacy and obsolescence first rail transport system. one of the main problems in the development of the logistics infrastructure of the agricultural sector is their limited financial resources activities. for most farmers the sources of the funds are proceeds from the sale of products and services, borrowing from banks, state support. during 2014-2015 years, farmers have increased their incomes, but also increased costs. during the same period inputs used in agriculture increased by 2 and sometimes 3 times. the prices sales increased on average by 1.5-2 times. it certainly marked on the availability of funds that can be spent on projects of infrastructure development companies. the possibility of raising funds is bank lending. however, credit conditions in the current period of economic and political instability in the country have few appealing. lending rates of banks related services in excess of 30% per annum. for comparison, the results in 2014 the profitability of farming farmers amounted to 26.4 percent. that is the involvement of bank loans will be an additional financial burden on farmers. more farmers have adopted for government programs targeted allocation of funds for the construction of logistics infrastructure and provide appropriate equipment. however, such programs in recent years or are not funded from the budget allocated funds are sufficient to meet the needs of businesses. 7. solutions the development of logistics infrastructure of grain market provides employment generation, value-added products, leading to increased revenues to the state and local budgets. therefore, the state should be interested in restoring funding programs of industrial and logistics infrastructure of agricultural enterprises. this state and regional funding program farmers can provide funding to the return or without their return, compensation for the use of bank long-term loans and so on. one of the sources of funds for the development of logistics infrastructure investment can be partner companies. thus the funds allocated to the development of agricultural enterprises on the rights of the equity release companies partners share in the ownership of such companies. renewal of warehousing equipment, purchase of vehicles can be carried out on lease through banking institutions collaborating with supplying machinery or equipment. the feature of such contracts is to use the necessary means of production to the date on which the final payment. 8. conclusions 1. ukraine is the world's largest producers and exporters of grain. the gross grain production in the country is growing. following the results of 2014 produced nearly 64  million tons of grain. this integrated agricultural produce to the formation thirds of total grain. 2. technical condition of farm does not meet the needs of production. however, when considering investment options more attractive large companies, including integrated agricultural farm. 3. the domestic market is unable to provide the existing demand for grain production, contributing to export growth. in the 2015/16 marketing year despite the decline in grain production, ukraine will keep busy in previous years the position of leader of world grain exports. 4. ukraine has a number of problems due to increased grain production, namely the shortage of storage capacity for the storage of grain, limited performance transshipment of port grain in elevators, as well as depreciation and imperfection of transport system. 5. solution of problems is possible through the implementation of state and regional programs, implementation of joint projects with partner companies and the purchase of equipment and facilities through leasing programs. as a result of the development of logistics infrastructure of grain market provides employment generation, valueadded products that will increase revenues to the state and local budgets. besides ukraine reach the strategic goal of producing 80 mln. tons of grain and strengthen positions in the global agricultural market. references agriculture in ukraine (2015). report. state statistics service of ukraine, 12 p. adoption of social facilities and production capacities in ukraine 2014 (2015). statistical bulletin. state statistics service of ukraine, 115 p. harvesting of crops, fruits, berries and grapes in the regions of ukraine 2014 (2015). statistical bulletin. state statistics service of ukraine, 52 p. baltic journal of economic studies 82 vol. 1, no. 2, 2015 main economic indicators of agricultural production in the agricultural enterprises for 2014 (2014). statistical bulletin. state statistics service of ukraine, 84 p. plant production in ukraine 2014 (2015). statistical yearbook. state statistics service of ukraine, 180 p. the largest agricultural holdings in ukraine (2014). research agency agrisurvey ukrainian club of agrarian business, 64 р. александр маслак, игорь куценко развитие рынка зерна в украине аннотация. предметом исследования является совокупность теоретических, методологических и практических основ организационно-экономического функционирования интегрированных аграрных формирований на рынке зерна украины. методологической основой исследований определено комплексный анализ хозяйственных процессов на рынке зерна в украине и мире. при проведении исследований использовались методы систематизации и сравнения, статистико-экономический, балансовый, расчетно-конструктивный, программно-целевой, а также методы индукции и дедукции, аналогии и сравнения. целью статьи было проведение анализа ситуации на рынке зерна в украине, определение роли интегрированных аграрных формирований на этом рынке, совершенствования организационно-экономического механизма его функционирования, определение путей повышения конкурентоспособности украины среди мировых экспортеров зерна. по результатам проведенных исследований рассмотрены тенденции развития рынка зерна в украине; определенное влияние субъектов хозяйствования на объемы производства зерна; проведен анализ сдерживающих факторов повышения эффективности производства зерна; определены внутренние потребности зерна в украине; оценены состояние и обоснована целесообразность трансформации инфраструктуры рынка зерна украины; очерченные приоритетные направления развития рынка зерна в украине. по результатам подготовки статьи были получены следующие выводы: украина входит в число крупнейших мировых производителей и экспортеров зерна, при производстве интегрированными аграрными формированиями до трети общего объема зерна; техническое состояние сельскохозяйственных предприятий не соответствует потребностям производства; внутренний рынок не в состоянии обеспечить спрос на существующие объемы производства зерна, что способствует росту экспорта; в украине существует ряд проблем из-за увеличения производства зерна, а именно дефицит складских мощностей по хранению зерна, ограниченность производительности по перегрузке зерна в припортовых элеваторах, а также изношенность и несовершенство железнодорожной системы; решения существующих проблем возможно через государственных и региональных программ, реализацию совместных проектов с компаниями партнерами а также приобретение оборудования и технических средств через программы лизинга. как результат развитие логистической инфраструктуры рынка зерна обеспечивает создание рабочих мест, добавленной стоимости продукции, что повлияет на увеличение поступлений в государственный и местные бюджеты. кроме этого украина достигнет стратегической цели по производству 80 млн. тонн зерна и укрепит позиции на мировом аграрном рынке. baltic journal of economic studies 38 vol. 5, no. 2, 2019 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: zhylinska@ukr.net orcid: http://orcid.org/0000-0001-8366-0474 2 taras shevchenko national university of kyiv, ukraine. e-mail: maksym.sitnicki@ukr.net orcid: http://orcid.org/0000-0002-0452-0404 3 taras shevchenko national university of kyiv, ukraine. e-mail: vikulova@knu.ua orcid: http://orcid.org/0000-0001-8506-0966 doi: https://doi.org/10.30525/2256-0742/2019-5-2-38-44 systematic assessment of the innovative potential of a research university* oksana zhylinska1, maksym sitnicki2, alona vikulova3 abstract. the purpose of the paper. this paper outlines a comprehensive study of the essence and the essential synthesis elements of a research university’s innovation capacity. the following tasks were set as the article’s objectives: 1) to analyse the development of scientific thought in the field of innovation potential; 2) to provide the author’s definition of the innovative potential of such a university; 3) to structure the system of evaluation of the university’s innovation potential. this study examines the new realities of needs for universities of the 21st century to improve their development management through a focus on the concept of “open” innovations. methodology. this research is based on a careful analysis of the innovation capacity by the evolution of scientific thought. scientific literature has expressed varying and opposing views as to the nature of the innovation capacity. however, very little has been identified to empirically judge the university’s innovation capacity. results. the present work suggested definitions of “research university’s innovation capacity” through the main component based on a novel integration approach. that approach includes the unity of the three types of economic activity. those three are the provision of educational services, the provision of high-tech business services (carrying out r&d on a commercial basis), and innovative activities through commercialization of intellectual property. that also encompasses the creation of start-ups or spin-off companies, producing high technology products. the paper provides an opportunity to focus on a systemic approach to assessing the university. proposed systematic evaluation of the university’s innovation potential through its internal and external components: organizational and managerial component; information and methodical component; the intellectual component; the research component; production and technological component; financial component; marketing component; global networks; research laboratories of tncs; scientific unions and organizations; international consortia. this approach to the assessment provides with a more extensive comprehension of the main fields of activities of the research university. the interaction of these components gives an opportunity to obtain a synergistic effect that will lead to their mutual reinforcement in the strategic perspective. practical implications. it can be used by experts to comprehensively assess the potential of a world-class university by training human resources, solving complicated scientific and technological issues in order to obtain the economic outputs. value. this research highlights the necessity to review the approaches to assessment of the innovative potential in the research university. the authors presented their own vision of the internal and external components of the innovative potential of the research university. key words: research university, innovative potential of research university, components of innovation potential of research university, evaluation mechanism. jel classification: i23, d20, d40, i21, i25 * this scientific paper published with support by the visegrad fund and in the framework of the research project of fundamental research of the department of management of innovation and investment activities of taras shevchenko national university of kyiv “innovative mechanisms to enhance the development of scientific and technological activities in ukraine.” baltic journal of economic studies 39 vol. 5, no. 2, 2019 1. introduction the requirement to research the scientific issues of formation and evaluation of the innovation potential of research universities was determined by the need to develop a new system of strategic management of their work. needless to say, it has to be accomplished in the “open innovation” environment of the information society. accordingly, as of today, for the preparation of competitive managers, it is an important task to develop the innovative capacities of individuals who can be able to think creatively by generating non-standard solutions. it’s intellectually alert person create the scientific elite of research universities and business corporations that change the world through the creation and implementation of innovations. the actualization of this need is subsequent to the shift in the university’s mission. this was the case in the era of the industrial economy with the dominant model of “closed innovation”. such universities were seen as an institution intended to generate public goods. that is, to develop new scientific and technical knowledge as the result of mainly fundamental research. its mission was also seen to be the preparation of a new generation of researchers; future creators of new knowledge that realized their intellectual potential. this was to be done mostly outside the university and primarily in the research labs of public science or business sectors. new realities and policies that encourage the activation of innovation between eu member states led to the adoption of the eu commission’s recommendations “governance of intellectual property rights and the code of practice for universities and other public research organizations” (european commission, 2008). this was done through the establishment of effective knowledge transfer channels and efficient management of intellectual property at the university level. under this recommendation, the transfer of knowledge is defined as a strategic task. at the university level, it is implemented in large-scale measures to raise awareness and skills of students in the field of science and technology, intellectual property, knowledge transfer, and innovative entrepreneurship. the newest realities of universities functioning in the twenty-first century make the need to improve the procedures objective for managing its development. this is all based on the concept of “open” innovations, using the tools of strategic management. the purpose of this article is to conduct a comprehensive study on the essence of the innovative potential of a research university. it will generalize the elements that act as the object of evaluation in the system of strategic management of the universities’ development. the following tasks were set as the article’s objectives: 1) to analyse the development of scientific thought in the field of innovation potential; 2) to provide the author’s definition of the innovative potential of such a university; 3) to structure the system of evaluation of the university’s innovation potential. 2. materials and methods the main research question is a comprehensive study of the essence of the university’s innovation potential and its components. this study then becomes one which forms the system and mechanism for this potential assessment. this requires a deductive approach, which is suitable for this type of conceptual study. the dominant research methods are: the critical analysis and synthesis, the generalization method and the logical methods, and the method of structured comparison based on the literature review with the interpretative approach. the literature review was conducted based on primary sources. it was also done on queries into journal databases such as scopus and the web of science. the wos is the best-known reference indexing of international databases with sources capturing large lists of titles. a supplemented data source covers papers available on google scholar dealing with innovation potential and research university as the keywords used in queries. this research is based on a careful analysis of the development of scientific thought in the field of innovation potential. it provided the author’s definition of the research potential of a university. this study was carried out through the conceptual apparatus of investigation and formulated conclusions of logical generalization and abstraction. the results of the study were visualized through a graphical method. it takes into account the multidimensionality of the analysis, the theoretical and empirical unity principle. 3. literature review in the information society, as harvard business school professor etzkowitz (2003) systematically disclosed in open innovations, universities as flagships of fundamental research should become partners of business structures (chesbrough, 2003). in turn, this will stimulate innovation processes through efficient exchange of intellectual property. the concept of the “triple spiral” described by etzkowitz caused a wide resonance in the professional circles of researchers and practitioners of many countries of the world. the concept provided justification for understanding a university as a new centre and a driving force behind the socio-economic dynamics of states. in his work “triple spiral” (etzkowitz, 2008), the author proposed the model of innovation development. this model states that in the xxi century, the development will mostly rely on the effective and close interaction of the following three subjects which are branches of the figurative spiral. those three are all civic authorities, baltic journal of economic studies 40 vol. 5, no. 2, 2019 business, and universities. the updated latter has a central role to play owing to the growing importance of information and knowledge in their broadest sense. the synergistic effect, resulting from the interaction of these institutions, creates a driving force behind the emergence of new points contributing to national wealth. some american researchers emphasized the need to attract research universities to implement the applied tasks of the regional economy (florida, 2000). the world bank expert, jamil salmi, in his work “creating world-class universities” (salmi, 2009; 2011), characterized research universities as facilities that play a crucial role in training professionals, top-level specialists, and researchers. it is assumed they would therefore be capable of generating new knowledge and creating national innovation systems. among the three complementary factors underlying the creation of world-class universities, the effective management of the university based on a strategic vision and flexibility, plays one of the most important roles. the three factors are the high concentration of talent (teachers and students), availability of resources ensuring conditions for learning and conducting breakthrough research. at the same time, the strategic vision of university development from the standpoint of deploying the model of “open innovation” should be based on a systematic assessment of its potential. in 2011, the scientific community summed up the results of the first century-long consideration of innovation issues. it was a tradition initiated by j. schumpeter, a prominent economist of the twentieth century, after the publication of his fundamental work “theory of economic development”. it should be noted that the publication of this work in ukrainian has become a landmark in ukrainian economic thought (shumpeter, 2011). since then, this tradition continues and innovation potential becomes one of the objects of scientific research. it was later introduced as an economic category by k. freeman and was used as a criterion to evaluate the source of system development based on innovations. it was mainly connected to the innovative potential of commercial structures with various activities aimed at maximizing profits in a competitive environment. in ukrainian scientific thought, the problem of innovation potential was actualized first and foremost at the macroeconomic level by (dobrov, 1989). a significant contribution to its development was made in the national report “innovative ukraine 2020” (heyets, 2015). foreign researchers also address the issue of innovation potential at the macro level. in this context, we highlight the works of (sternberg, 2000), (vedres, 2006), (wixted, 2009) and (nepelski, 2016). at the microeconomic level, the evaluation of innovation potential is the object of scientific research in the works of ukrainian researchers (chervanov, 2012), (stadnyk, 2009), (sitnicki, 2007), and others. it should be noted that modern scientific research of foreign researchers is mainly focused on the assessment of innovation potential at the level of an enterprise or organization. this is shown in particular by (barney, 1990), (dougherty, 1992), (zizlavsky, 2011), (saunila, 2012), etc. in some publications, the authors use the notion “innovative potential of the university,” as, for example, in the work (čorejová, rostášová i čorejová, 2017). the qualitative training of managers is essential in the development of innovative potential in them. this is shown in modern scientific publications (nowak and sitnicki, 2018), the authors emphasize the important role of strategic flexibility and leadership of a research university. it is leadership in research universities that is a powerful stimulus for the development of the innovative potential of persons with an innovative type of thinking. such activities of research universities are aimed at the development of innovations and give them the opportunity to consolidate the status of world-class universities. it is the strengthening of the innovative potential that research universities in the european union are in urgent need of nowadays. determining the priorities for the development of eu research universities based on the analysis of the world-class universities’ ranking indicators is done in work (sitnicki, 2018a). the author provided strategic recommendations for intensifying the innovative development of eu research universities. the question of refining the rating indicators for the implementation of the strategic analysis and evaluation of the effectiveness of the research university has been studied in detail (zhylinska and sitnitskiy, 2018). the authors emphasize the important role of innovative potential in the consolidated rating of the research university. the need for the development of innovative literacy in a digital university of the future and critical learning prospects are considered in fundamental work (goodfellow and lea, 2013). on the basis of this, a comprehensive model of digital research universities was developed (sitnicki, 2018b). the author put forward the hypothesis that the research university of the future will be based on the wide use of digital technologies and innovations. such an approach will provide them with world leadership. methodological aspects of the integrated development of research universities based on the world experience are shown in the scientific monograph (sitnicki, 2018с). at the same time, scientific literature lacks comprehensive research on the innovative potential of research universities. nowadays they have turned from the main subject of generating scientific and technical knowledge to the subject of its commercialization. to effectively implement the task of managing the development of a university, one should understand the components of its potential in order to have the possibility of performing an evaluation. baltic journal of economic studies 41 vol. 5, no. 2, 2019 4. results and extended opportunities for systematic assessment analysing the essence of the definition of a university, it should be noted that in ukrainian legislation, the term “research university” was defined (resolution of the cabinet of ministers of ukraine, 2010) as: a national higher educational institution that has significant scientific achievements, conducts research and innovation activities. it ensures integration of education and science into production, takes parts in the implementation of international projects and programs. the “research” status is given to an educational institution in order to enhance its importance as a centre of education and science that provides training of highly skilled scientific and pedagogical personnel. one that implements scientific achievements, technical and technological developments in practice, takes part in joint programs with other higher educational and scientific institutions joint programs. in the process, it prioritizes the directions of fundamental and applied scientific research to solve important socio-economic problems in various branches of econ. therefore, in ukraine, the status of a research university is an official status assigned to a certain number of higher education institutions that to be confirmed every seven years. in the united states, the content of a research university is not characterized by it carrying out a normative, but a descriptive function. it is a function which serves as a mark of a university’s compliance with certain educational, scientific and economic criteria. those criteria are a high proportion of funds received by a university for fundamental and applied research, typically 50% or more of the general budget. those funds are received exclusively on a competitive basis, not as privileges provided for special status recognition. it also has a diversity of disciplines being taught at the university. this will include a high proportion of doctoral recipients, as well as a significant number of teachers involved, including from abroad. it also supposes the availability of developed infrastructure. one with studies of both undergraduate and postgraduate students, as well as research and innovation infrastructure, including small and medium-sized enterprises operating in partnership with a relevant university to commercialize objects of industrial property. and finally it will have a high degree of academic and research autonomy, the existence of strong corporate ethics, which ensure a high level and continuity of scientific schools and substantial volumes of charitable donations from successful graduates (ishchenko, 2012). a contemporary discourse is with the consideration of research universities in the information society along with the deployment of an “open” innovations model which lies in the fact that they have transformed from being a sociocultural phenomenon into an economic phenomenon. at present, the revenues from licensing activities of leading research universities are compared with the income gained from the educational services they provide. a successful performance of these universities in the commercialization of scientific and technical knowledge generated by them can be compared with the research laboratories of some corporations. the difference lies in the fact that within the walls of these universities, the trainees acquire not only scientific and technical knowledge. they also receive thorough training that helps in generating economic information. this knowledge provides the opportunity to quickly commercialize their own intellectual property through the patenting mechanism and license agreements. another mechanism is the realization of intellectual property objects into innovative products. this is a practice implemented mainly by new companies, such as startups and spin-offs. as a rule, these companies founded by employees and graduates of universities commercialize and reify new knowledge using intellectual capital as the basis of their authorized capital. such highly educated and proactive individuals have the greatest competitive advantages in labour markets creating new niches, as well as gaining the highest public ratings. moreover, such practice offers greater opportunities as associations of such universities to allow students to enter professional circles of researchers and practitioners in the relevant discipline. this can be true even during their master’s studies, as demonstrated by the successful experience of ukrainian-polish cooperation of polytechnic universities (projekt polsko-ukraiński, 2015). according to the conclusion of a research group that developed the doctrine of sustainable development “ukraine 2030”, modern innovative development is based on the synergistic interaction between economy and culture. this has shortened the time frame between the formation of new ideas and their implementation. this related directly to the terms of the development of original artistic works, cultural products, innovative products and services based on scientific discoveries and technical inventions. in this respect, research universities play an important role of being centres that form clusters of a creative economy (ukraine 2030: doctrine of sustainable development, 2017). the specificity of a university’s research emphasizes its priority in such activities as searching for a scientific solution to the problems of humanity. this, in turn, leads to the implementation of innovative training programs for the scientific and pedagogical staff of universities, research institutions, and science-intensive industries. commercial effects resulting from these activities are not seen as dominant. at the same time, the distribution of students in the areas of training at the universities should meet the needs of the innovative development of the national economy. this all takes into account a priority for scientific-natural sciences and engineering specialties. therefore, we see the need to propose the author’s interpretation of such an economic category as being the “innovative potential of a research university”. baltic journal of economic studies 42 vol. 5, no. 2, 2019 innovative potential of a research university is a set of available and ready for use internal and external resources and opportunities of a world-class university that enable it to effectively carry out its mission. this mission would automatically be in the spheres of education, research, and innovation. this activity would lead to solutions to socially significant problems by scientific means thus achieving socio-economic effects. therefore, the innovation potential of such a university is a systemic concept that reflects the economic nature of its mission. this would be defined in the context of unity of three types of economic activity. those three types are: 1) a provision of educational services; 2) a provision of knowledge-intensive business services (carrying out research and development on a commercial basis); 3) developing innovation through the mechanisms of intellectual property commercialization or creation of a start-up or spin-off companies that produce science-intensive products. figure 1 shows the elements of a systematic assessment of the innovation potential of a research university. the peculiarity of the author’s approach is that it proposes to assess the level of the innovation potential of each university, weighing not only on the totality of its internal elements (1-7) but also considering external elements of the environment (8-11). the latter significantly expand the capabilities of the assessment of a university in accordance with the concept of “open” innovation. further, we will characterize the influence and interaction of the components of the innovative potential of each qualified university. 1. organizational and managerial component – this builds an effective structure for the purpose of creation, implementation of innovations, and commercialization of scientific and technical knowledge. it also establishes links between the university’s units for the implementation of its innovation strategy. it provides controls of the university’s management system over its managed subsystem. there is a timely adaptation of personnel in the development and commercialization of innovations. it additionally offers efficient planning and distribution of financial resources. and, lastly, it determines an operative study of the market and the development of effective marketing strategies. 2. information and methodical component – this includes the availability of the integrated automated system for managing university educational, scientific, and innovative activities. it likewise includes the availability of information on the developments in substantive areas of university research functionality. within this is an information base for the operations of the management structure, along with methodical materials to improve personnel qualification. importantly, there is a cost reduction in obtaining information, as well as an information base for marketing research. 3. the intellectual component – it is the presence of highly skilled personnel capable of developing and implementing new scientific developments, as well as managing them. it is equally the presence of an active mechanism for intellectual activity motivation and the association of an employee with his/her university figure 1. systematic evaluation of the university’s innovation potential through its internal and external components source: developed by the authors innovation potential of a research university 8. global innovation networks 9. research laboratories of tncs 10. academic unions and organizations 11. international consortia external 1. organizationalmanagerial 2. informational and methodical 3. intellectual 4. scientific research 5. production and technology 6. financial 7. marketing internal baltic journal of economic studies 43 vol. 5, no. 2, 2019 and its research. this potential is also measured by the existence of quantitative and qualitative parameters within the management structure. it denotes cost reduction on training or attracting highly skilled personnel and provides the conditions to create knowledge-intensive (high-tech) products. 4. the research component – is a portfolio of patents, licenses, know-how, and other intellectual property objects. it also includes material and technical support necessary for research and development (r&d) and the implementation of the educational process. all of this would be determined by the development of directions aimed to improve management structures, along with research of appropriate avenues of personnel development. it also means the provision of necessary technologies and thus high profits from the exclusive ownership status during a technological transfer. it, therefore, means the requirement of a competitive position in various markets: educational services, hightech (high-tech) products and other services. 5. production and technological component – it includes the availability of production and technological support necessary for the production of high-tech products and services (technology, equipment, equipment, tools, etc.). the quantitative and qualitative characteristics of this potential have a significant impact on the competitiveness of a research university as a whole. 6. financial component – a component which purports the availability of financial resources for the needs of effective innovation. it is realized through the financing of: 1) the costs needed for the formation and maintenance of innovation infrastructure. 2) the financing of the processes for the preparation and transfer of highly professional personnel. 3) financing needed to improve the production of hightech products and services. 4) the creation of a stabilization fund; financing marketing research in new markets. 7. marketing component – a key component that includes the availability of opportunities to apply effective marketing toolkit to implement and promote revolutionary new developments (high-tech marketing). this would be accomplished through: research results, development and adjustment of strategies, and an effective marketing campaign. 8. global networks – these are systemic organized groups that motivate their participants to innovate by achieving scientific results in jointly-defined long-term projects and areas. 9. research laboratories of tncs – this sets forth obtaining access to each of the universities’ achievements regarding corporate structures in the process of specific order execution for a corporation. in this case, a university receives access to the data and technology of the corporate structure in order to objectively set the technical task and increase the efficiency of its implementation. 10. scientific unions and organizations – these make it possible through a pooling of their efforts to solve the problems of industry. it allows them to have representation in the state authorities and international institutions in the area that deals with common problems faced by the university competitors for state financing increases. it helps to increase the growth rate of the scientifically intensive services market, which in turn leads to the emergence of new niches that increase the share of already existing innovative products. 11. international consortia – this provides for the availability of financial resources, equipment, unique specialists and technologies. it is realized through intergovernmental associations to solve global problems of mankind. 5. conclusions thus summing up the results of the research, we can determine that the main principles that the evaluation system of the innovation potential of a research university should be based on include: 1) the responsibility of experts for the level of reasonableness of decisions in the strategic management of a research university development; 2) scientific and systematic assessment of the innovation potential of a research university; 3) complex orientation of the evaluation mechanism that includes internal and external components along with the effective implementation which will result in the formation of new competitive advantages in the globalized markets of educational services and knowledge-intensive business services. the presented author’s view on the system of innovation evaluation will enable experts to comprehensively assess the main reserves that the world-class 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(2011). factors of an innovation potential development are known, but not always mastered. economics and management, 16. baltic journal of economic studies 87 vol. 4, no. 5, 2018 corresponding author: 1 odessa national polytechnic university, ukraine. e-mail: zhivets.alla@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-87-93 evolution of professional competencies of accountants of small enterprises in the digital economy of ukraine alla zhyvets1 abstract. at present, the accountant’s workplace is the most “digitized” at enterprises. it is equipped, on average, with five units of computer, office and communication equipment, and also, on average, seven software products for automation of accounting work are applied. however, university graduates state that their knowledge and skills correspond only to 45% of the requirements of the modern automated workplace of the accountant. higher education institutions have lagged far behind in the applied “digital” competence of accountants. the purpose of the article is to identify key directions for improving the professional “digital” training of accountants. research methods. the author carried out a questionnaire survey of 120 small and micro enterprises with coverage of the majority of operating sectors of the economy; carried out a questionnaire survey of it companies managers dealing with automation of managerial work at the enterprises; training plans for accountants auditors for availability and quality of digital technologies training were studied, foreign experience in training of accountants following the publications of research organizations: hitachi data systems, global education future, fujitsu, mckinsey global institute, pwc was studied. results. the researches of the evolution of the professional competencies of accountants carried out by the author show a lag in the content of their “digital” training from the real proficiency requirements for work at an automated workplace of the accountant of an enterprise. conclusions and offers. education of accountants and their further continuous professional training should focus on the development of digital technologies of the implementation of the entire economic block of enterprise managerial works on the basis of existing software and cloud services. the author developed proposals for improving the professional training of accountants of small enterprises. key words: evolution of qualification of accountant of small enterprise, development trends of accountant’s competencies, cognitive competencies, digital economy technologies in management. jel classification: a22, m41 1. introduction the main trend in the development of industry and national economies in the early 21st century is the introduction of digital technologies. these same technologies make it possible to increase labour productivity, significantly reduce the time for designing and developing new products, reduce the technological and financial cycles of products manufacture and realization, as well to enter global markets. at the present time, the economic bloc of work at enterprises is 2/3 based on the use of digital technologies. but with the current rapid development of it technologies at enterprises, the following problem arose: the digital competence of the staff is significantly behind the increased capabilities of it technologies in enterprise management. there are several reasons but the main one lies in the fact that educational institutions “lag behind” in teaching “digital” technologies. and this lag is typical not only for the taught vocational subjects but also for the applied teaching methods. the author’s research showed that 55% of accounting graduates are not ready to work for the aws of a chief accountant of the small and micro enterprises (se and me); 38% of the accounting graduates at the beginning of the working career were additionally trained in the courses “1c: accounting for ukraine”; 69% of the accounting graduates noted the inadequacy of applied digital training for specific work at the enterprise (zhyvets, 2017). the importance of the “digital” training of accountants is indicated by the recommendations of the international federation of accountants (ifac). so, in the standard (ies) 2 “content of the professional accounting education program” in the third block of education disciplines “information technology and authority” the following subjects (knowledge areas, competencies) are indicated: baltic journal of economic studies 88 vol. 4, no. 5, 2018 – general knowledge of information technology; – knowledge of control capabilities of information technology; – the range of information technology opportunities; – the ability to use information technology in work; – the presence of one or more qualifications: a manager, an expert or an information systems developer. it is noted that modern enterprises using “big data” technologies significantly increase the work quality level of accountants in terms of implementation of deeper economic analytics and high speed of providing managerial information. the author pays a particular attention to the introduction of digital technologies in the se and me, as they currently constitute 95% of the total number of enterprises in the ukrainian economy (state statistics service of ukraine, 2017). analysis of recent researches and publications. the problem of improving the training of accountants in universities is devoted to many works of both ukrainian and foreign scientists. particularly in detail this problem is studied by such scientists as t. p. alaverdova (2012), v. g. hetman (2010), s. ya. zubilevich (2015), o. v. kuklin (2011), v. a. lukin (2013) and many others. basically, in domestic and foreign scientific publications, the approach to the problem of improving the training of accountants is considered from the standpoint of the development of accounting science, which, according to the author, is only partially true, as the functions of the modern accountant have significantly expanded and evolved, especially in the se and me. the content of the work of the accountant of the se and me is constantly changing, some of his functions are integrated into various subsystems of enterprise management, as a result of which the accountant becomes a “co-manager” of the enterprise and his role in this process is constantly increasing. this is noted by all the researchers mentioned above. the author states that the management functions assigned to accountants can be redistributed between the officials of the management team of the enterprise and, as a result, the professions altered in content may appear. this applies especially to microenterprises numbering up to 10 people, where the division of managerial work is fundamentally different from the division of managerial work in large enterprises. therefore, in our “ukrainian economy”, where the se and me constitute 95%, and microenterprises – 85%, there is a situation with the division of labour of engineering staff workers that the integration of managerial functions is dominant in job creation, as well as in the formation of job descriptions and requirements to a set of competencies for hired workers. at present, multifunctionality is a worldwide trend in the evolution of managerial work within the conditions of the digital economy. the purpose of the article is to identify key directions for improving the professional “digital” training of accountants in higher education institutions on the basis of studying the world’s experience of introducing digital technologies into management practices. 2. results of the study of accountants competence to solve the set task, the author carried out the following research activities: 1) a questionnaire survey of accountants of 120 small and micro enterprises in the regions of southern ukraine was carried out covering the majority of the operating sectors of the economy; 2) a questionnaire survey of the heads of it companies involved in the automation of managerial works at enterprises in the regions of southern ukraine was carried out; 3) training plans for accountants auditors in universities of the regions of southern ukraine for the availability and quality of teaching digital technologies were studied; 4) foreign experience in training of accountants following the publications was studied: – international research organizations: hitachi data systems (2016), global education future (2016), fujitsu (2017), mckinsey global institute (2017), pwc (2016); – domestic research organizations: the national institute for strategic studies, state statistics service of ukraine. the first results of the questionnaire survey of the accountants of se and me show the following situation in the professional training of accountants (zhyvets, 2017): 1) in the majority of small and micro enterprises (88% of the enterprises surveyed), the accountant performs, in addition to exclusively accounting functions, also the functions of an economist, financier, business lawyer, human resources manager, an expert in company automated control system, etc.; 2) a graduate with a degree in accounting and audit comes to the enterprise with a store of theoretical knowledge only in accounting and auditing. therefore, graduates, now practicing accountants of small and micro enterprises, estimate the degree of their readiness to perform the work of the accountant of a small enterprise, in view of today’s requirements, only by 45% (according to the questionnaire of accountants of se and me in 2016-2017); 3) all interviewed accountants of the se and me note that their workplaces are equipped with pcs and other electronic office equipment and that their work is based on digital technologies; 59% of accountants note the critical importance of digital competence for working in a modern workplace of the accountant. baltic journal of economic studies 89 vol. 4, no. 5, 2018 according to foreign researchers, the change in the work of the accountant and auditor is fundamentally influenced by the introduction of digital technologies. acca research identifies the factors most influencing the methods of work of accountants (figure 1). the main conclusions made by the acca experts are as follows: – the greatest impact on the reengineering of accounting at enterprises in the next 10 years will be made by the development of intelligent automated accounting systems; – in a modern enterprise, the accountant is, first and foremost, a strategist, a professional capable of generating and implementing business development ideas and activities. 3. assessment of the “digital” competence of accountants it appears that the most objective assessment of the “digital” competence of accountants is the evaluation given by it specialists of companies implementing it-products at enterprises. such it-specialist not only installs the necessary software for automation of accounting and other office works but also provides training for customer-users to efficient use of the acquired software product. therefore, joint work with accountants allows you to objectively assess their willingness to work with digital technologies. the survey of leading specialists of it companies implementing it-technologies made it possible to determine the evaluation of the “digital” competence of accountants of the se and me (table 1). in the same survey, experts gave a verbal assessment of the “digital” competence of accountants: 1) young accountants (a group of up to 22 years old) easily perceive the automation of accounting work but do not have sufficient practical experience in organizing accounting and analysis at the enterprise and a clear understanding of the business mechanism of the enterprise, so the process of implementing intelligent automated accounting systems is associated with additional training of the accountant; 2) accountants in the age group of 22-40 years are the most prepared for the development of new accounting programs. they have experience with various simple office programs; 3) in the older age group of accountants there is conservatism and some “non-perception” of it technologies, which, according to experts, is a consequence of the insufficiency of it education (20-30 years ago); 4) accountants of the age group of 22-40 years absorb and apply analytical applications to the accounting automation programs at enterprises easier than other; 5) basically “digital” training of accounting graduates is assessed by experts as “below average”. interesting material for describing the digital content of the work of accountants of the se and me gives their answers to the question: “what programs for the pc do you use in your work?” here the answers of the respondents (working accountants) were distributed as follows (table 2). 39% 41% 42% 42% 55% 0% 10% 20% 30% 40% 50% 60% new efforts and expectations of coming generations implementation of cloud computing technology at the enterprise increasing harmonization of accounting standards and business operations rate of changes and economic instability development of intelligent automated accounting systems figure 1. external factors that have the most significant impact on the content of the work of an accountant source: the author’s survey on the basis of (acca , 2016) table 1 evaluation of the “digital” competence of accountants of the se and me index name overall assessment of the digital competence of accountants by age group 20-22 years 22-30 years 30-35 years 35-40 years 40-50 years 50 years “digital” competence of accountants (on a scale from one to ten) 5 7 8 6 5 3 sources: compiled by the author baltic journal of economic studies 90 vol. 4, no. 5, 2018 table 2 list of software tools used in the work of the accountant of se and me ser. no. name of programs, software packages, information systems used in the work of accountants number of respondents applying these programs, % 1 1с: accounting for ukraine 95 2 m.e.doc 81 3 sonata 2 4 payer account 5 5 ms word 100 6 online banking 14 7 email 100 8 sail 2 9 excel 100 10 bi-systems 5 source: compiled by the author the results of the questionnaire make it possible to conclude that a graduate of the university with a degree in “accounting and audit” must have, a priori, professional skills to work with the following accounting and office work applications (1c: accounting for ukraine, ms word, m.e.doc, excel), as well as skills in working with modern office equipment. such modern management tools as bi-systems, which effectively advance the promptness and quality of business operations, are not yet implemented in accounting departments in sufficient quantities. currently, these services and programs are still expensive for most me and a part of the se. a small list of programs used by respondents required additional study of the software market for the activities of the se and me in ukraine. the author’s research showed that in the market of software and information technologies in ukraine, the following groups of systems, programs and services are available (there are from 10 to 20 programs and services in each group): – accounting software and services for delivery of reports via the internet; – business management systems and programs for business intelligence; – systems bpm, erp, crm; – corporate program management systems; – online hrm systems for human resource management; – software for recruiting; – internet portals for collaboration and access to information; – postal services; – edm systems for workflow automation; – ecm systems for managing of corporate content; – electronic workflow operators for the exchange of electronic documents; – services for online seminars, conferences, online meetings; – virtual pbx – cloud services for communications and managing of incoming calls; – instant messengers for instant messaging; – wiki services and engines for organizing workspace for team-work and for file storage. these data show that there are a sufficiently large number of programs in the it-market of ukraine for solving a wide range of tasks for the management of se and me. all this complex of programs and services allows currently to support such modern trends in the development of management of se and me as: virtual enterprises, remote working, e-business, “lean production”, “virtual staff ”, effective use of global information systems etc. it also should be noted that currently in se and me environment distance employment is gaining wide development in ukraine: according to the research of the companies bitrix24 and gf k ukraine, 21% of the se and the me use distance employment to optimize their loading (2016). among them, 17% of accountants work in remote workplaces (usually at home). in the future, in 2020, 36% of accountants will work with partial and distance employment. all necessary software for the remote working of accountants in ukraine is already available. 4. determination of trends in the development of accountants’ competencies in the further study of the current day competencies of accountants, we suggested respondents cover the issue of their professional competence from different points of view. so, to the question, “what current basic professional knowledge and competencies should a graduate – the future accountant of se – have?” the following answers were received (table 3). the data of table 3 show that 67% of the currently required knowledge and skills of modern accountants are connected with digital competence. that is, a modern accountant can’t exist at all without “digital» competence. now the accountant is the most “digitized” specialist at the enterprise. further analysis of respondents' answers showed that nowadays the accountant of the se and the me performs by himself from 69% to 88% of all the works included in the “economic block” of enterprise management. the author draws a special attention to the fact that the list of areas of activity, as well as the required skills of the accountant of the se and me (table 3), is also a list of areas for improving the training of future accountants in the current conditions of the evolution of the national economy. the above results of the research of the “digital” competency of accountants objectively characterize the current state of their preparation. but for adjustment of the university training programs for the specialists of the 21st century, it is necessary to see and to understand the evolution and trends in the development of the competences of the engineering staff worker in the digital economy and the knowledge economy. baltic journal of economic studies 91 vol. 4, no. 5, 2018 such an international study was carried out by the it company “fujitsu” in 2017. having researched the trends and peculiarities of the development of the digital economy in a number of industrialized countries (1600 business leaders were interviewed), the experts of fujitsu not only identified the problems of the development of digital technologies but also presented their vision of the development of employees’ competencies in the 21st century (table 4). the data of table 4 show that with the growth of the level of industrial development of countries, as well as with the growth of the level of development of information and communication technologies, the “image” of a competent young specialist is evolving. for example, in spain (the level of development –industry 3.0), this “image” is characterized by the following set of four main competencies: – on the first place – high professional knowledge of business organization (i.e. emphasis on organization and finance); – on the second – use of digital technologies; – on the third – use of creative abilities and development of imagination; – on the fourth – ability to logical thinking and analysis. in germany (the level of development – industry 4.0), this “image” is characterized by the same set of four main competences, but with a different priority: – on the first place – use of creative abilities and development of imagination; – on the second – use of digital technologies; – on the third – the ability to logical thinking and analysis; – on the fourth – professional knowledge of the specifics of the business organization. in japan (the level of development – industry 5.0, society 5.0), this “image” is characterized by a different set of four main competencies and with their other priorities: – on the first place – use of high creative abilities and development of imagination (human activity becomes more intellectual); table 3 the list of knowledge and competencies of accountants demanded at the enterprises ser. no. name of demanded knowledge and competences the number of respondents who noted the importance of this position, % 1 national accounting standards (regulations) 57 2 international accounting standards 10 3 the content, structure and main regulations of the tax code of ukraine 67 4 practical skills of work with accounting programs: 1c: enterprise, 1c: accounting for ukraine 59 5 ability to work with programs: m.e.doc, excel 59 6 ability to work with reference and information systems: league: law, lawyer +, sites of gfs of ukraine, the ministry of finance of ukraine etc. 43 7 knowledge of the basics of economic law, an organization of contractual and claim work 60 8 knowledge of labour law, labour code of ukraine, staff records management 52 9 organization of workflow at the enterprise 33 10 fundamentals of enterprise budgeting 5 11 organization of management accounting 19 12 fast typing skills 29 13 skills of work with all office equipment 14 14 skills of documents’ capture for creating enterprise data banks 14 15 knowledge of foreign languages 10 source: compiled by the author table 4 the most important competencies of employees in the digital age ser. no. name of competences, knowledge specific value of competences, knowledge spain germany japan 1 professional knowledge of digital technologies 18,4 14,6 10,0 2 creative abilities and development of imagination 15,5 15,5 26,5 3 professional knowledge in a particular industry 7,8 9,7 10,4 4 professional knowledge of the specifics of the business organization 18,4 11,7 8,1 5 ability to logical thinking and analysis 11,7 12,6 7,8 6 knowledge in the field of special and human sciences 7,8 8,7 3,6 7 ability to decision-making 8,7 8,7 11,7 8 leadership qualities 6,8 9,7 6,5 9 sociability and empathy 2,9 5,8 11,0 10 professional excellence 1,0 1,0 2,3 source: the author’s review on the basis of (fujitsu, 2017) baltic journal of economic studies 92 vol. 4, no. 5, 2018 – on the second – ability to make independent decisions; – on the third – use of communication and empathy (in the conditions of collective creative activity); – on the fourth – use of professional knowledge in a specific field of production (this is an important trend for the development of education). we note that “digital” competence in highly developed countries is already perceived as a necessary basic level of education of a young specialist, as well as a certificate of employers’ confidence in the level of “digital” training in universities. generalization of the results of research of the company “fujitsu” on the evolution of the employees’ competencies in the group of developed countries shows that in the future digital society (the next 5 years) the following competencies will be particularly in demand: – creative abilities and development of imagination; – professional knowledge of digital technologies; – ability to logical thinking and analysis; – professional knowledge of the specifics of the business organization. when preparing accountants for small and microenterprises in our ukrainian reality, it is necessary to take into account all the 10 competencies listed in table 4. 5. conclusions our studies of the evolution of professional competencies of accountants in the conditions of the development of the digital economy of ukraine made it possible to draw the following conclusions: 1. the general trend of the development of the professional competences of accountants of the se and me is the learning of digital technologies for the implementation of the entire economic block of the company’s operations on the basis of existing software and cloud services. 2. the range of functional duties and tasks solved by the accountants of the se and me at their workplaces requires adjustment of the plans of study for their training in educational institutions. in the plans of study, the following blocks of disciplines should be strengthened: – management accounting; rationing, planning, accounting, and analysis of the use of material and energy resources; – organization of labour and wages, methods of stimulation of the labour of the staff; – staff records management, the labour code; – management of the enterprise economy; – business planning, organization and analysis of economic activities; – management of finances and other assets of the enterprise; – economic law, an organization of contractual and claim work. 3. it is necessary to introduce in the practice of the teaching of all special disciplines practical training with the use of progressive software of aws of the accountant. tasks and examples for all disciplines should be taken from the real economic practice of enterprises and deliberately oriented towards the application of specific software. a graduate should be 100% prepared for work at the aws of the company’s accountant. 4. to introduce in the universities the practice of attracting specialized training firms to automate accounting for internships and attestation of graduate accountants for mastering basic accounting and analytical programs (1c: accounting for ukraine, sail etc.). references: alaverdova, t. p. (2012). on the issue of basic professional education of accountants for small business. retrieved march, 2017 from: http://www.sworld.com.ua/index.php/uk/economy-412/accounting-andauditing-412/15774-412-0218 (in russian) fujitsu (2017). fujitsu technology and service vision. retrieved march, 2017 from: http://www.fujitsu.com/ global/microsite/vision/insightful-stories/survey1/ getman, v. g. (2010). modern approaches to university training of accountants and auditors. journal of accounting in publishing and printing, 11(251), 2-11. (in russian) hitachi data systems (2016). in the next two years the business is waiting for rapid digital changes. retrieved march, 2017 from: http://www.hitachivantara.com/ru-ru/news-resources/press-releases/2016/ru161129.html kuklin, o. v. (2011). modernization of higher education in ukraine: strategic principles, trends and directions of implementation. journal of scientific reporter of csiem, 4(12), 34-39. (in ukrainian) lukin, v. a. (2013). formation of accounting training programs in ukrainian universities. journal of business inform, 1, 252-257. (in ukrainian) gf k & bitrix 24 (2016). remote work in ukraine: statistics and forecasts from gf k and bitrix 24. retrieved march, 2017 from: http://www.hi-tech.ua/distantsionnaya-rabota-v-ukraine-statistika-i-prognozyi-ot-gfk-i bitrix-24/ global education future (2016). skills of the future and transformation of the global educational ecosystem. retrieved march, 2017 from: http://www.edu2035.org/ state statistics service of ukraine (2017). kyiv: informatsiino-analitychne ahentstvo. retrieved march, 2017 from http://www.ukrstat.gov.ua/ baltic journal of economic studies 93 vol. 4, no. 5, 2018 acca (2016). tomorrow's world: rethinking the role of the accountant. retrieved march, 2017 from: http://future.accaglobal.com/the-future-of-accountancy/insight-articles/tomorrows-world-rethinking-the-roleof-the-accountant mckinsey global institute (2017). what is the future of work? retrieved march, 2017 from: http://www.mckinsey.com/ global-themes/future-of-organizations-and-work/what-is-the-future-of-work pwc (2016). workforce of the future: the competing forces shaping 2030. retrieved march, 2017 from: http://www.pwc.com/gx/en/services/people-organisation/publications/workforce-of-the-future.html zhyvets, a. n. (2017). trends of professional competences development for small companies’ accountant in the 21st century. journal of actual problems of economics, 6, 204-213. (in ukrainian) zubilevych, s. ya. (2015). international standards for training professional accountants: "reboot". retrieved march, 2017 from: http://uabs.edu.ua/images/stories/docs/9956/zubilevich.pdf (in ukrainian) baltic journal of economic studies 45 vol. 4, no. 4, 2018 corresponding author: 1 university of the state fiscal service of ukraine, ukraine. e-mail: bvt05@ukr.net 2 state higher educational institution “uzhhorod national university”, ukraine. e-mail: mishat@i.ua 3 university of state fiscal service of ukraine, ukraine. e-mail: starodubddd@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-45-49 improvement of the procedure for providing administrative services to taxpayers in the context of public administration reform viktor bilous1, mykhailo ternushchak2, dmytro starodub3 abstract. the article studies the procedure of providing administrative services to taxpayers in fiscal service authorities of ukraine through the prism of public administration reform. problems of development of it systems, development and introduction of new it mechanisms in management systems in part of providing e-services, and the introduction of virtual offices of e-services are analysed. practices of improving the domestic system of providing administrative services on the example of the activity of taxpayer service centres are considered, statistical indicators of the existing centres of the provision of administrative services are given. provisions of the law “on administrative services” on the issue of mechanisms and ways of providing administrative services are analysed that allowed distinguishing typical stages and phases of administrative services’ provision. it is determined that the procedure of implementation of proceedings on the provision of administrative services in ukraine is statutory-regulated order (is regulated by industry-specific regulatory documents (flow charts)) of consistent implementation of procedural actions (stages) by officials (administrators (consultants, moderators)) of administrative service centres (asc) for the counselling of the subjects of appeal, registration of the application, referral of application to whom it may concern (to structural units) for processing and imposing a resolution at each stage, and making a final decision on satisfaction or denial in relation to the issuance of an individual certificate of permit, verificatory, registration, licensing, attestation types. the practical importance of research is to clarify the general procedure for the provision of administrative services by taxpayer service centres of the fiscal services of ukraine in terms of mechanisms, methods of providing administrative services, typical stages and phases of the provision of administrative services, which is extremely relevant in the phased introduction of the latest it mechanisms of providing e-services. at present, the process of providing administrative services by public administration authorities of ukraine is in a state of transformation and is being brought to the standards of the eu. in this sense, there is the theoretical and legal conditionality of applying to the practice of providing administrative services by fiscal authorities, such as those of the first in ukraine that initiated the activity of administrative service centres (ascs) and started to provide e-services. therefore, the analysis of the provision of administrative services to taxpayers as a part of the development of a general administrative procedure is important for further scientific substantiation of improving the scope of the provision of administrative services in other bodies of the public administration of ukraine in the context of public administration reform. methodology. the methodology of scientific research consists of a set of methods of scientific knowledge, in particular: system-structural, functional, modelling, and generalization, which made it possible to investigate the abovementioned problems in the area of improving the procedure for providing administrative services to taxpayers. key words: procedure, administrative services, e-service, public administration, administrative service centres, taxpayer service centres, fiscal service. jel classification: p43, h71, k34 baltic journal of economic studies 46 vol. 4, no. 4, 2018 1. introduction after the implementation of the association agreement with the eu and choice of the european vector of development, ukraine has explicitly taken on the responsibility to bring the existing system of administration (governance) to the eu standards. in paragraphs c) and e) of art. 4 of the eu-ukraine association agreements outlining the fundamental objectives of the dialogue, the need to reform the governance system in the context of good governance is directly conditioned in contexts: first, responding to global and regional challenges and major threats on the continent; secondly, the strengthening of respect for democratic principles, the rule of law, and other fundamental human rights and freedoms (association agreement between the european union and the european atomic energy community and their member states, of the one part, and ukraine, of the other part, 2014). in the developed western countries, especially the western front of the eu countries, the system of state administration is identified with the category of “public administration”, which essentially demonstrates, first of all, good (proper) mechanisms of governance to its own citizens through the prism of ensuring the implementation and protection of fundamental rights and freedoms of man. on the other hand, public administration establishes effective protectors, such as the clarity of the limits of the use of administrative coercion, the strict counteraction to economic offenses, especially in the field of taxation and activities in the field of prevention of corruption risks. at the present time, it is obvious that in the context of the global accelerated development of it systems, the development and introduction of new it mechanisms in the management system, for example, such as a mechanism for electronic document management, the provision of administrative e-services, the replacement of physical resources by technological in various market areas, ukraine considerably lags behind in comparison with western countries. the same applies to the state control system in ukraine, which urgently needs radical changes in the rethinking of goals and objectives in the spirit of promoting the constitutional rights and freedoms, as well as practical means and mechanisms of governance, vertical and horizontal coordination of the interaction of public administration bodies under continuous updating of e-services within the framework of it space. this is not so much about modern technological it innovations inherent in economically developed countries, where a stable financial system (for example, g7) but the banal borrowing of good governance practices that should simplify and facilitate access of citizens to the public service and the provision of administrative services. it should be noted that the current governance model formally corresponds to democratic standards and provisions regulated by the constitution but, in fact, the level of well-being of the population, financial and socioeconomic statistics show a significant dissonance with the eu countries, in so far as it concerns the countries of the eastern front of the eu, which at the time of obtaining ukraine’s independence were at the same level of development, and by individual indicators, even inferior. therefore, it is quite obvious that the current system of public administration is not effective and there is no ability of qualitative influence, coordination, and control over the individual spheres, especially the national economy and spheres of management. in turn, this indicates the ineffectiveness of the administrative mechanism, in particular, its implementation both in the vertical and horizontal planes. accordingly, this situation requires an urgent response on the part of the political leadership of the state and public institutions, the mutual consolidation of forces and resources aimed at improving the system of state administration in terms of providing administrative services on the example of public administration. 2. a general review of the provision of administrative services by public administration bodies note that in recent years ukraine has made significant efforts towards reforming and updating the public administration system. first of all, in the period from 2012 to 2018, the regulatory framework was systematically updated, in particular, with the adoption of laws “on administrative services”, “on civil service” “on voluntary association of territorial communities”, amendments to the laws of ukraine regulating the administrative and legal status of public administration bodies, law enforcement agencies, the judicial system and legal proceedings regarding bringing their activity to the eu standards, establishment of the system of anti-corruption agencies (nabu, sap, nacp), and the improvement of administrative procedures for administrative, civil, commercial, and criminal proceedings. thus, a largescale administrative reform, which continues to this day, has been launched, covering virtually all areas and spheres of public administration. a particular attention should be paid to the results of the administrative reform, which show and demonstrate real changes in various areas of public administration. a striking example, reflecting qualitative changes in governance mechanisms and principles, should be considered the introduction and further expansion of a network of administrative service centres. in this context, the bodies of revenues and fees (now the state fiscal service) were among the first public bodies that established the practice of creating and distributing profile centres for the provision of administrative services. starting from 2010, taxpayer service centres as baltic journal of economic studies 47 vol. 4, no. 4, 2018 centres where taxpayers receive tax services (e-services), which has facilitated and accelerated procedures for obtaining administrative services, began to function at the state tax inspectorates. therefore, we can state that the positive practice established by the bodies of incomes and fees for the establishment and operation of administrative service centres has spread in almost all spheres of public administration, in executive bodies and local selfgovernment. the reform is associated with the improvement of the procedure for providing administrative services, started in 2012 since the adoption of the law “on administrative services” (at the level of legislative regulation), actively implemented and realized in virtually all territorial executive authorities and local self-government bodies. typically, in the abovementioned bodies, administrative service centres, which activities are divided according to the principles of “front and back-office” and “single window”, operate as separate structural subdivisions or workplaces. on this occasion, proposals for the introduction of virtual offices of electronic services are welcome, as well as their advantages in the context of comparing the mechanisms for the provision of administrative services, in particular: introduction of new organizational and technological forms of providing administrative services to citizens, achieving maximum transparency, ensuring openness and equality of conditions when considering appeals, providing information and consulting services, ensuring the legal rights and interests of the subjects of appeal; organization of electronic document management between subjects of the provision of administrative services and asc in the process of service providing; provision of electronic services to subjects of appeal in the process of obtaining administrative services such as creating a profile in the user account, electronic consultation, a previous appointment to the administrator of the asc, review of information about the state of affairs, viewing of electronic messages (kalynets, 2015). in turn, specialists of the national institute for strategic studies consider the following priority directions to improve the procedure of administrative service provision: introduction of information technologies in the work of the asc (preliminary download of the application and scanned documents via the internet, the ability to track the status of queue at administrative service centres and its territorial units on the website of the centre, integration of information systems of state bodies and local self-government into the unified state portal for administrative services); improvement of the quality of the system of providing administrative services (mechanisms, control, monitoring, and feedback); improvement of the interaction of local selfgovernment bodies and central executive authorities (national institute for strategic studies). the procedure for the provision of administrative services is the order of providing administrative services fixed in the flow chart in order to realize the rights, freedoms, and legitimate interests of the subjects of appeal. according to the scholar, the procedure involves three stages: registration (execution) of the appeal of the subject of the appeal; processing of the application and registration (approval) of the result of the administrative service provision; issuance of the result of the administrative service provision and its registration (bukhanevych, 2015). from the position of the legislator (provisions of the law “on administrative services”), the procedure for providing the relevant service is regulated precisely in the flow chart of the administrative service, as it is an internal document that reflects: stages of appeal processing; structural divisions and officials responsible for the progress of the case (appeal) in stages; terms of execution of each stage; possible results and methods of obtaining an individual administrative act (in case of satisfaction of the application); in some cases (depending on the subject of the service provision (administrative body)), the scheme of the successive execution of stages of the administrative service provision is given. if we consider more widely the procedure for providing administrative services based on the provisions of the law, it is worth paying attention to: first, the delineation of mechanisms for the provision of administrative services through the administrative service centres and the unified state portal for administrative services. it should be noted that on the practical side most of the administrative services are provided in the ascs, which operate in the formats of the working body or structural subdivision of the local state administration or local government where the administrators (the officials of the body that created the asc who are responsible for the organization of administrative services’ provision) through the interaction with the subject of the provision of administrative services. the organization of the functioning of the asc can be conditionally divided into activities within the front office and back office, where the front office is the office space (premises), in which there are waiting room and workplaces of administrators of the asc, where the contact with the subject of appeal occurs; in turn, the back office is a set of structural units, jobs of officials responsible for the processing of the application and the adoption of interim and final decisions on the provision of administrative services. baltic journal of economic studies 48 vol. 4, no. 4, 2018 3. practice and procedure of providing administrative services to taxpayers the best example of the successful introduction, functioning, and further expansion of the network of administrative service centres is the activity of taxpayer service centres acting as an organization that provides comfortable conditions for receiving certain information by taxpayers regarding the receipt of statements, issuing administrative certificates, registration of necessary applications, for successful business and cooperation with revenue and fee bodies. the appropriate administrative service centre is the structural unit (establishment) of the tax inspectorates of the state fiscal service, the purpose of which is to provide administrative tax services through the implementation and observance of statutory procedures. the administrative service centre provides administrative tax services through the informing, counselling the payers, visitors of the centre, and performing the established actions by authorized employees of the tax inspectorates at the centres (acceptance, processing, service of documents, making a decision on the request, issuing an administrative act). at present, taxpayer service centres provide administrative services in the following areas: issuance of certificates and permit documents; reception of tax reporting and incoming correspondence; servicing of taxpayers; services related to customs operations; administration of a unified social tax. the legislator establishes the following procedure for the provision of administrative services, which provides for the use of the unified state portal for administrative services, including through integrated information systems of state bodies and local self-government authorities. the relevant portal acts as an informational advisory resource containing information on types of administrative services depending on the field of public administration (as well as services provided through the asc and e-services provided through accounts registered on web portals of public administration bodies), extracts from the provisions of the information card (legal basis, administrative fee, submission period, the result and method of obtaining the result, grounds for refusal, the order of appeal). the overall process of providing e-services is regulated by the procedure of integration of information systems of state and local governments into the unified state portal for administrative services, approved by the joint order of the ministry of economic development and trade of ukraine and the ministry of regional development, construction, housing and communal services of ukraine (procedure of integration of information systems of state and local governments into the unified state portal for administrative services, 2016). currently, in ukraine, electronic administrative services are provided by a limited number of actors, among which leaders are judicial authorities, the state fiscal service, and bodies of the national police. this is determined primarily by the fact that the process of providing electronic administrative services is in transformational state and depends on many factors, in particular, it awareness of the population, internet coverage, the effective development of the mechanism for the introduction of electronic signatures and the main uniform electronic signature for the provision of administrative services in any body of public administration. secondly, the analysis of the procedure for providing administrative services makes it possible to distinguish the typical stages and phases, namely, the phases and corresponding stages of the provision of administrative services, can be the following: the first phase, an appeal to the tsc (registration of the account on the web portal of the public administration body in order to receive e-services) for the provision of administrative services. the stages of the implementation of this phase should include: obtaining information on the conditions and procedures for the provision of administrative services (e-services) through an information card placed on the web portal of an administrative body or the unified state portal for administrative services; counselling by the administrator of the tsc on the conditions and procedures for the provision of administrative services; submitting an application or filling out an e-form taking into account the mechanism of the previously received electronic digital signature and, in cases provided by law, the necessary supporting documents (identification documents (which certify the citizenship of ukraine, the identity of a foreigner, a stateless person, or a separate status such as servicemen, internally displaced persons), military registration documents, certificates of registration of civil status acts, transport documents (confirming the granting of a special right to drive a vehicle of the relevant category that certifies the passage of the mandatory technical control of vehicles of the relevant category, the vehicle and its constituent parts, including registration documents), documents on labour activity, labour experience, and salary of a citizen, documents on education and/or professional qualification, scientific degree and academic rank, and documents related to studying provided by educational institutions, medical documents (certificates, conclusions of other documents, provided by healthcare institutions), and documents of medical and social examination, archival documents, court documents (decisions, sentences, decrees, judgements of courts), constituent documents of a legal entity, documents of bodies of trusteeship and guardianship (decisions, conclusions, permits), certificates and documents confirming the right of a citizen to obtain social assistance, documents on state and departmental awards, national awards, and honourable distinctions); baltic journal of economic studies 49 vol. 4, no. 4, 2018 the second phase, processing of an application for administrative services (e-services). stages of implementation of the appropriate phase are: registration of appeal (statement (e-form)) by the responsible structural subdivision; verification (processing) of data for compliance with the applicable law of documents, which have been added to the application (indicated in e-form of appeal); the third phase, making the decision to apply for or refuse to receive administrative services (e-services). if the documents meet the requirements of the current legislation: 1) preparation of the decision by passing the application (a package of documents) in the structural unit(s) for making the necessary resolutions; 2) approval of the final decision by the head of the body or another responsible person (mostly one of the deputy chiefs) for satisfaction of the application in the form of orders, decisions; 3) the issuance (receipt) of an individual act of administrative service (passport, certificate, license, testament, document, etc.) in a legally established manner; if the documents do not meet the requirements of the current legislation: 1) the preparation of the decision to refuse to issue an individual act of administrative service in connection with the non-compliance with the legislation of list of documents or established requirements; 2) the adoption of a decision to refuse an individual act of administrative service; 3) the issuance (receipt) of a decision to refuse to provide an administrative service. 4. conclusions thus, the procedure for the implementation of the proceedings for the provision of administrative services of the tsc is a regulatory procedure (regulated by industryspecific regulatory documents (flow charts)) of consistent execution of procedural actions (stages) by officials (administrators (consultants, moderators)) of the tsc regarding for the counselling of the subjects of appeal, registration of the application, referral of application to whom it may concern (to structural units) for processing and imposing a resolution at each stage, and making a final decision on satisfaction or denial in relation to the issuance of an individual certificate of permit, verificatory, registration, licensing, attestation types. the relevant procedure is carried out in three phases: appeal to the csp (registration of the account on the web portal of the public administration body in order to receive e-services) for the provision of administrative services, processing of applications for administrative services (e-services), decision-making on appeal for receiving or refusing to receive an administrative service (e-services). the procedure for providing tax administrative services is generally regulated by the rules of the law “on administrative services”, however, is endowed with its own peculiarities, which are regulated at the departmental level in flow charts and information cards of administrative services. an important factor that led to the improvement of the procedures for providing administrative services, in particular to taxpayers, was the process of creating a network of taxpayer service centres within the fiscal service structure. the activities of the relevant centres not only improved the convenience of obtaining tax services but also contributed to the reorientation of the model of the domestic governance system on the principles of good governance. references: association agreement between the european union and the european atomic energy community and their member states, of the one part, and ukraine, of the other part. retrieved from: http://zakon5.rada.gov.ua/laws/ show/984_011/page on the table – the introduction of a three-tier system of asc, hennadii zubko. retrieved from: https://www.kmu.gov.ua/ ua/news/na-chasi-vprovadzhennya-tririvnevoyi-sistemi-cnap-gennadij-zubko on administrative services: law of ukraine: on 06.09.2012 № 5203-17 (as amended) (2013). gazette of the verkhovna rada of ukraine, № 32, art. 409. kalynets, n. i. (2015). improving the mechanism for the provision of administrative services in the context of interaction between public authorities and the community. efficiency of public administration / academic papers collection, iss. 43, pp. 211-219. national institute for strategic studies “on the directions of improving the system of providing administrative services in ukraine”. analytical note. retrieved from: http://www.niss.gov.ua/articles/2591/ bukhanevych, o. m. (2015). the concept and essence of the procedure of providing administrative services. law and society, № 5, pp. 126-131. the procedure of integration of information systems of state and local governments into the unified state portal for administrative services: order of the ministry of economic development and trade of ukraine, ministry of regional development, construction, housing and communal services of ukraine: on 08.09.2016 – № 1501/248. baltic journal of economic studies 291 vol. 4, no. 4, 2018 corresponding author: 1 v.n. karazin kharkiv national university, ukraine. 2 kharkiv national university of internal affairs, ukraine. 3 kharkiv national university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-291-294 local taxes and charges in local budgets’ income generation halyna rossikhina1, yuliia svitlychna2, oksana brusakova3 abstract. the aim of the article is to determine the role of local taxes and charges in local budgets’ income generation, as well as to conduct a comparative legal study of regulatory legal acts that determine the legal basis for local budgets’ income generation by local taxes and charges. the subject of the study is local taxes and charges in local budgets’ income generation. methodology. the study is based on the dialectical method of scientific knowledge and corresponding general scientific methods, such as analysis, comparative, analogy, induction, and others. the results of the study revealed that to implement positive foreign experience in generating incomes of local budgets, a number of negative aspects should be restricted. unfortunately, the ratio of subventions and subsidies in the incomes of local budgets of ukraine demonstrate no positive trend. in ukraine, local bodies have very little and weak powers even for the use of funds distributed via the budgetary system. therefore, most of the funds transferred from the state budget of ukraine to local budgets, in reality, are only their imaginary income. practical implications. local taxes and fees in the context of their participation in local budgets’ income generation are under the study. negative tendencies of a significant proportion of inter-budgetary transfers in the financial provision of regions and territorial communities are identified. the author argues that the increase in revenues from local taxes and charges, accretion of local bodies’ tax powers is aimed at ensuring the independence of local budgets, reducing the burden on the state budget of ukraine. relevance/originality. a legal analysis of local taxes and charges in local budgets’ income generation and definition of problems in the budgetary sphere are the foundation for the development of the most promising spheres for domestic legislation improvement in respect of the aspect. key words: taxes and charges, local taxes and charges, budget, local budget, local budget incomes, inter-budget transfers. jel classification: н21, н24, н72 1. the relevance of the topic nowadays, the globalization of society contributes to the positive cross-cultural interaction, strengthening of the country’s potential through the accession to the best world intellectual achievements and study of historical experience in solving socially important issues (sevruk, pavlenko, 2015). therefore, over the past decade, the radical socio-economic transformations have resulted in both positive and negative changes in contemporary ukrainian society (pavlenko, sevruk, kobko, 2017). to a certain extent, it is expected that due to fixing at the local level important for the society functions, such as health care, education, social security, etc., the income generation of local budgets is ensured mostly by legislative consolidation and establishment of deductions from state tax payments. nationally important, both in the context of taxation objects and in terms of their fiscal capacity, the latter can provide with a stable financial support for local infrastructure, ensuring a state-guaranteed level of social security of the population, the performance of other local functions and tasks without any complicated reform of the fiscal system. however, it should be considered that total tax revenues to the local budgets from national taxes and charges push back to the second plan incomes from tax payments. objectively this poses serious threats of both the reduction of the importance of local taxes and charges in the financial security and economic development of the regions and the loss of interest of local representative bodies in their regulation and implementation within the limits of the granted powers. 2. literature review a significant contribution to the study of this problem was made by foreign and domestic scientists, such as p. m. borovyk, v. v. zubenko, m. p. kucheriavenko, т. в. lishchyna, o. marchuk, o. a. musyka, baltic journal of economic studies 292 vol. 4, no. 4, 2018 o. o. nepochatenko, v. a. nikolaev, s. o. pavlenko, l. v. pavlyichuk, v. pysmennyi, v. v. rudenko, a. yu.  rudyk, i. v. samchynska, v. g. sevruk, a. slobozhan, and others. the aim of the article is to define the role of local taxes and charges in local budgets’ income generation, as well as to conduct a comparative legal study of regulatory legal acts that determine the legal basis for local budgets’ income generation by local taxes and charges. 3. the main material russian scientist v. nikolaev argues that under these conditions, the interest of local bodies in an active economic policy, aimed at stimulating business activity, developing competition, and supporting local private entrepreneurship, is excluded (nikolaev, 2013). furthermore, objectively the tendency to minimize the scope of tax powers of local bodies leads to shifting responsibility for the economic development of state territorial units to the central government. thus, the preconditions for destabilization are rooted not only in the economic development of the state and its territories but also in the interests of all state administration. moreover, the shortcomings of excessive centralization of tax powers and insufficient consideration of economic interests of the regions may be less noticeable in short terms, under the veil of supposedly stable financial receipts from the centre, but amplified especially in the medium and long terms when macroeconomic indicators of the entire state are much weaker than in many developed countries of the world. these threats become even more urgent for our state under consideration of the formality of the majority of the tax powers of local self-government bodies in ukraine, as discussed above. in addition, according to the requirements of the provisions of articles 69 and 71 of the budget code of ukraine (biudzhetnyi kodeks ukrainy), both local taxes of the domestic tax system (unified tax and tax on immovable property other than the land plot) are assigned imperatively to a special fund of local budgets. moreover, a narrow target area of such fund expenditures leads to a limitation in the ability of local bodies to operate freely with local finances, determine independently their uses, and rely on local tax revenues in local issues. moreover, it is generally accepted that, in comparison with tax collections, more than two-thirds of incomes to the revenue side of the budget are provided by taxes (kucheriavenko, 2012). therefore, since domestic legislation provides for that the general revenue fund of local budgets comprises only the charge for certain types of entrepreneurial activity, the tax for vehicle parking places and tourist tax, even more prerequisites for minimizing the importance of tax payments in local finances and the formation of public monetary funds occur. in addition, the widespread use of inter-budgetary transfers (funds transferred free of charge and irrevocably from one budget to another) diminishes significantly the role of revenues from tax payments (kucheriavenko, 2012). the main types of inter-budgetary transfers in ukraine are the subsidy of equalization and subvention (muzyka, 2004), which by their legal nature organize a downward flow of secondary revenues of the state budget system filling the system of local budgets with the revenues of the state budget. in the mechanism of various incomes, inter-budgetary transfers become a powerful means of achieving the necessary level of financial security for regions and territorial communities. article 97 of the budget code of ukraine (biudzhetnyi kodeks ukrainy) details such inter-budgetary transfers additionally. according to its content, the state budget of ukraine can provide such transfers to local budgets: 1) equalization subsidy for the budget of the autonomous republic of crimea, regional budgets, district budgets, and budgets of the cities of the republic of the autonomous republic of crimea and regional significance, budgets of cities of kyiv and sevastopol, other budgets of local selfgovernment for which governmental inter-budgetary transfers are defined in the state budget; 2) additional equalization subsidy for the financial security of local budgets; 3) subventions for the implementation of state social protection programs; 4) additional subsidy for compensation of losses of local budget incomes due to the provision of benefits established by the state; 5) subvention for the construction, reconstruction, repair, and maintenance of streets and communal property roads in locality; 6) subvention for the implementation of investment programs; 7) other additional grants and other subventions. total subsidies and subventions are approved in the law on the state budget of ukraine for the corresponding year separately for each of the local budgets. thus, the legal regulation of inter-budgetary transfers is attributed to the powers of the highest state authorities. such centralization causes the loss of interest of local bodies in strengthening local finance by increasing primary incomes of local budgets. thus, the tax policy of local representative bodies is reduced to the unenterprising expectation of subsidies and subventions from the state budget. in these conditions, the independence of local budgets is significantly weakened, the burden on the state budget of the country is increasing, and the deficit of the latter is growing. this problem is rooted in at least the first half of the last century and the times of the collapse of the russian empire and creation of the former ussr . for example, in may 1918, v.i. lenin proclaimed theories of the uselessness of local self-government, need of the rigid centralization of financial management in general and taxation in particular, and abandonment of independent local budgets (pysmennyi, 2010). despite the intensive baltic journal of economic studies 293 vol. 4, no. 4, 2018 development of the institute of local finance over nep years, since 1929, the local budgets of the ussr were completely dependent on the state budget (pysmennyi, 2010); their management was generally controlled by the central authorities almost until the last years of the ussr . nevertheless, even after the collapse of the latter, with the beginning of ukraine’s independence, the issue of the independence of local finances was not solved finally. another factor is that incomes from local taxes and charges are obviously insufficient. the following statistical data are the evidence (zubenko, samchynska, rudyk et al., 2013). thus, during 1998-2008, the share of local taxes among local budget incomes decreased from barely noticeable 2.6 percent in 1998 to miserable 0.6 percent in 2008. in the structure of all tax incomes of local budgets, including incomes from fixed and regulating nationwide tax payments, the outcome of local taxes and charges in this period ranged from 1.1 to 3.4 percent. even the adoption of the tax code of ukraine did not change significantly the suppressed position of local finances: according to available data (cabinet of ministers of ukraine), the participation of local taxes and charges in financing local government expenditures from a catastrophic 0.5 percent in 2010 changed only to 2.5 percent in 2012. undoubtedly, this situation requires changes. according to o.a. musyka (muzyka, 2004), the independence of budgets is possible only in the presence of own sources of revenue. this is evidenced by the experience of many economically developed countries, where own income are about half (from 40-60 percent) of local budgets’ income. above all, these revenues should be incomes from local taxes and charges. at the same time, an increase in the financial potential of tax payments would be an important step to overcome the high subsidy percentage of local budgets. the latter, according to the concept of reforming local budgets, approved by the decree of the cabinet of ministers of ukraine no. 308-r of may 23, 2007 (nepochatenko, borovyk, pavliychuk, 2012), is determined as one of the main problems that make it necessitate the reform of local budgets. nevertheless, the concept has not solved this problem, but on the contrary, it becomes even more acute. according to statistics (slobozhan, november 22, 2013), since 2007, the share of inter-budgetary transfers in the total incomes of local budgets has been growing constantly in ukraine. for example, in 2007, interbudgetary transfers of all kinds were up to 43.3 percent of incomes of local budgets, in 2008, up to 44.5 percent, in 2009, up to 46.7 percent, in 2010, up to 49.1 percent. the entry into force of the new budget code of ukraine and the tax code of ukraine did not change this trend. moreover, in 2011, more than half of local budget revenues (up to 52.3 percent) was received out of inter-budgetary transfers, in 2012, up to 53.6 percent). according to the results of 2013 and current estimates, in ukraine, a nation-wide share of inter-budgetary transfers is expected up to 55-56 percent of local budgets’ incomes. in fact, by the level of transfers from the state budget to local budgets’ incomes, ukraine has almost caught up with the russian federation. for the same indicator, the latter is at 61.8 percent in 2012 (rudenko, lishchyna). while developed european states are half that level of subsidy of local budgets (rudenko, lishchyna). for example, local budgets of the kingdom of sweden receive only 34 percent of revenues from the central budget of the state. the federal republic of germany has achieved such a level of independence of local budgets that only 22 percent of their total incomes come from the state budget. this situation on the accumulation of funds in the local budgets of ukraine becomes very threatening for the entire public financial system of the state. in other words, in these circumstances, not only financial selfsufficiency and independence of local self-government decrease but also the situation with compiling and implementing the state budget of the country become more complicated. frequently, warnings (marchuk) are increased in connection of negative consequences of such a situation, since a significant part of state budget revenues is directed to the implementation of the budgetary regulation. therefore, in the context of the functional classification of expenditures and extending credit of the state budget of ukraine, the annual increase in the share of inter-budgetary transfers becomes clear (cabinet of ministers of ukraine). for example, while in 2010, state budget expenditures in the form of downward inter-budgetary transfers to local budgets were up to 25.6 percent or 77 766.2 million uah and in 2011, up to 28.4 percent or 94 875.0 million uah, in 2012, these indicators amounted up to 31.5 percent or 124 459.6 million uah, respectively. moreover, the evaluation of total subventions, that is, targeted inter-budgetary transfers to local budgets, which local authorities can direct only to a definite target, is no less important. according to domestic legislation [13], this target is determined by the body that has made the decision on subvention, i.e. central government bodies. therefore, the greater the proportion of subventions in the funds coming from the state budget, the more formal the nature of fiscal powers of local bodies. thus, the use of subvention proceeds becomes the most centralized form of various incomes. in fact, the next step of centralization can be only the liquidation of local finance and local selfgovernment as it has been done for most of the period of the former ussr . unfortunately, the ratio of subventions and subsidies in the incomes of local budgets of ukraine demonstrate no positive trend. for example, while in 2005, baltic journal of economic studies 294 vol. 4, no. 4, 2018 this indicator was as low as the value of subventions from the state budget (42.3 percent) (marchuk), in 2012, already up to 51.3 percent. moreover, over 2005-2012, in ukraine, on average, only 46 percent of inter-budgetary transfers to local budgets were equalization subsidies, which local governments can distribute and spend at own discretion. in most of the european countries, this proportion is much higher (rudenko, lishchyna): 62 percent in the republic of poland, 64 percent in the united kingdom of great britain and northern ireland, 75 percent in the kingdom of sweden, and 95 percent in the federal republic of germany. only in the russian federation, indicators are almost the same as current ones in ukraine, only 47 percent of subsidies among inter-budgetary transfers. 4. conclusions such data mean that most of the funds transferred from the state budget of ukraine to local budgets, actually, are only their imaginary income. local bodies list only technically most of the secondary revenues of local budgets to final recipients not being able to distribute them at own discretion. moreover, considering the above circumstances for the barely perceptible share of local taxes and charges, most of which should be credited to a special fund of local budgets, it should be concluded that in ukraine the mechanism of various incomes functions in one of the most unfavourable for local bodies regime. local bodies in ukraine have very small and weak powers, even using funds distributed via the budget system. references: sevruk, v. h., pavlenko, s. o. (2015). zakhody protydii transnatsionalnomu narkobiznesu, shcho vchyniaietsia predstavnykamy okremykh etnichnykh hrup [measures to counter transnational drug trafficking committed by representatives of certain ethnic groups]. yurydychnyi chasopys natsionalnoi akademii vnutrishnikh sprav, 2, 193-205. (in ukrainian) pavlenko, s., sevruk, v., kobko, ye. (2017). training police officers in the conditions of reforming the system of education of the ministry of internal affairs of ukraine in accordance with european standards. science and education, 6, 142-150. nikolaev, v. a. (2013). teoriia i praktika raspredeleniia nalogovykh polnomochiy v rossii [theory and practice of distribution of tax powers in russia] (monography). moscow: logos, 172 p. (in russian) biudzhetnyi kodeks ukrainy (no. 2456-vi of july 8, 2010). vidomosti verkhovnoi rady ukrainy, 50, 1778, art. 572. (in ukrainian) kucheriavenko, m. p. (2012). podatkove pravo ukrainy: pidruchnyk [tax law of ukraine: a teaching manual]. kh.: pravo, 528 p. (in ukrainian) muzyka, o. a. (2004). dokhody mistsevykh biudzhetiv za ukrainskym zakonodavstvom [incomes of local budgets in ukrainian legislation] (monography). k.: atika, 344 p. (in ukrainian) pysmennyi, v. (2010). podatkovyi aspekt zmitsnennia vlasnoi dokhidnoi bazy mistsevykh biudzhetiv ukrainy [tax aspect of strengthening own revenues base of local budgets of ukraine]. visnyk tneu [bulletin of tneu], 2, 61-70. (in ukrainian) zubenko, v. v., samchynska, i. v., rudyk, a. yu. et al. (2013). biudzhetnyi monitorynh: analiz vykonannia biudzhetu za 2012 rik. k.: ibsed, 52 p. (in ukrainian) cabinet of ministers of ukraine. (may 23, 2007). pro skhvalennia kontseptsii reformuvannia mistsevykh biudzhetiv [on approval of the concept of reforming local budgets] (order no.308-r). ofitsiynyi visnyk ukrainy, 38, 12. (in ukrainian) nepochatenko, o. o., borovyk, p. m., pavliychuk, l. v. (2012). mizhbiudzhetni transferty yak instrument vyrivniuvannia dokhodnoi spromozhnosti mistsevykh biudzhetiv [inter-budgetary transfers as a tool for equalization of local budget revenues]. stalyi rozvytok ekonomiky, 3, 287-290. (in ukrainian) slobozhan, a. (november 22, 2013). mestnoe samoupravlenie i evroperspektivy [local self-government and euro perspectives]. zerkalo nedely. ukrayna, 43. (in russian) rudenko, v. v., lishchyna, t. v. otsinka efektyvnosti transfertnoi polityky derzhavy [evaluation of the effectiveness of the state transfer policy]. retrieved from: www.rusnauka.com (in ukrainian) marchuk, o. napriamy vdoskonalennia systemy mizhbiudzhetnykh vidnosyn v ukraini [directions of improvement of the system of inter-budgetary fiscal relations in ukraine]. retrieved from http://naub.oa.edu.ua (in ukrainian) baltic journal of economic studies 88 vol. 4, no. 3, 2018 corresponding author: 1 department of management technology, lviv polytechnic national university. e-mail: pavlo.g.ilchuk@lpnu.ua 2 department of finance, lviv polytechnic national university, ukraine. e-mail: petro.i.viblyi@lpnu.ua 3 department of finance, lviv polytechnic national university, ukraine. e-mail: iryna.i.topii@lpnu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-88-93 theoretical and methodological aspects of the anti-crisis capacity of enterprises pavlo ilchuk1, petro viblyi2, iryna lashchyk3 lviv polytechnic national university, ukraine abstract. the main task of any economic entity in the context of crisis development is the timely development of anti-crisis measures, as well as the assessment of the ability to implement them in order to reduce the risk of bankruptcy and liquidation. an important place in the process of anti-crisis management in particular and the system of anti-crisis management in general is occupied by an anti-crisis capacity, the assessment of which allows determining the expediency of realization of anti-crisis measures and assessing their potential success. the problems of crisis development of enterprises and anti-crisis management are devoted to many scientific works of both domestic and foreign economists, among which the following should be noted: larionova k.l., ligonenko l.o., shankret a.m., suganiak m.v., kovalenko v.v., kamneva a.v., shershnyova z.e., kuzmin o.ye., melnyk o.g., alekseev i.v. among the works of the abovementioned domestic and foreign economists, practically no work is devoted to the anti-crisis capacity of the company, which underlies any anti-crisis plan, and the success of its implementation depends on the results of its evaluation. the subject of the research is a set of theoretical, methodological, and applied principles of the anti-crisis capacity of enterprises. methodology. in this research, the following general scientific methods have been used: systematization and generalization (in clarifying the essence of the concept of “anti-crisis capacity of the enterprise”); analogies, generalizations, and groupings (in the development of the classification of anti-crisis capacity of enterprises); economic-mathematical modelling (in forming the indicators’ system for assessing the anti-crisis capacity of the enterprise). the purpose of the article is to determinate the importance and necessity of assessing the anti-crisis capacity of the enterprise in terms of crisis development and anti-crisis management in general. results. in the article, the essence and significance of the anti-crisis capacity of enterprises have been defined as an integral part of the anti-crisis management. it was established at what stage of the anti-crisis management process, the enterprise’s anti-crisis capacity should be assessed. two types of the anticrisis capacity of the enterprise were singled out, for each of them the essence was determined and the estimation method was proposed. the importance and necessity of assessing the enterprise’s anti-crisis capacity in the context of anti-crisis management were substantiated in order to choose the optimal variant of anti-crisis measures and, accordingly, avoid bankruptcy and liquidation in the future. key words: crisis, anti-crisis management, anti-crisis capacity, nature, types, factors, evaluation method. jel classification: g01, с52 1. introduction negative trends in the indicators of domestic enterprises’ development and the national economy as a whole are a sign of imperfection and the absence of anti-crisis management mechanisms, which is the main component of the anticrisis management system of each economic entity. first of all, these trends become obvious in the inconsistency with the norms and the deterioration in the financial values and operating performance indicators, namely: a significant excess of the enterprise liabilities over its revenues, a mismatch in the norm and a deterioration in the profitability indicators, unprofitable activity, a decline in labour productivity, low level of product competitiveness, etc. (kovalenko, 2013). a consequence of the abovementioned problems in the activity of the enterprise is a crisis condition, which overcoming requires an immediate activation of the anti-crisis management process. at the same time, the possibility of implementation and success of the anti-crisis management process will depend on the anti-crisis capacity of the enterprise, which is studied in the article. baltic journal of economic studies 89 vol. 4, no. 3, 2018 the success of enterprise anti-crisis management, first of all, depends on the effectiveness and timeliness of the implementation of anti-crisis measures. evaluation of the anti-crisis capacity of the enterprise will allow choosing the best variant of anti-crisis measures and, accordingly, overcoming the crisis situation with the least time and resources. for today, the problem of anti-crisis management is sufficiently developed and studied by both foreign and domestic scientists. among economists, whose research is related to the theoretical aspects of the anticrisis management process, namely, its essence, features, tasks, functions, and principles, we should mention such as kovalenko v.v., suhaniaka m.v., fuchedzhy v.i., yepifanova i.yu., sytnyk l.s., vasylenko  v.o., larionova  k.l., lihonenko l.o., shtanhret a.m., esh s.m., zhurlov a.m., krush p.v., shershnova z.ye., ohloblina v.o., ramazanov s.v., utkin ye.a., blank o.i., and others. another part of the research is directly related to the methodological basis of anti-crisis management, in particular, the diagnosis of the crisis and bankruptcy of the enterprise. scientists have developed and improved a significant number of fundamental and express diagnostics, adapted to the activities of domestic enterprises. among the researchers of this problem should be mentioned such as kamneva a.v., nosan n.s., kuzmin o.ye., melnyk o.h., bondarchuk  m.k., kozyk v.v., bulieiev i.p., lysenko o.a., kyrychenko k.t., yershova n.yu., sytnyk  l.s., pererva  p.h., tereshchenko o.o., koval h.i., and many others. despite the excellence of the above-mentioned economists’ works in the field of anti-crisis management, the issues of the enterprise’s anti-crisis capacity remain unexplored, which determines the possibility and success of implementing the anti-crisis program and occupies one of the leading positions in the overall system of anti-crisis management of the enterprise. the article is aimed at determining the importance and necessity of assessing the anti-crisis ability of an enterprise in the conditions of crisis development and anti-crisis management in general. accordingly, the research objective is to substantiate the nature and characteristics of the enterprise’s anti-crisis capacity, as well as its types and methods of evaluation. 2. state and trends of domestic enterprises development as noted above, in recent years, domestic enterprises have been unstable under conditions of uncertainty and increased risk, which often results in their crisis, bankruptcy, and liquidation. at the same time, not only the indicators of their internal basic and financial activities deteriorate but also the external economic one (topiy, 2010). confirmation of this is the indicators of the state of domestic industrial enterprises development, which we divided into three groups, namely, external, internal, and legal (table 1). according to table 1, most of the external indicators of the development of industrial enterprises are deteriorating in the dynamics, which indicates a low level of competitiveness of domestic products and unsatisfactory market positions of its producers. no less negative tendencies are observed in relation to internal indicators of activity of industrial enterprises. by the end of 2017, the decline in the number of industrial enterprises was accompanied by an increase in losses by 5.7%, a decrease in sales volumes by 4.5% and, consequently, an increase in the loss-making rate by 9.8%. a number of legal indicators also testify to the deterioration of the activity of domestic industrial table 1 dynamics of external, internal, and legal indicators of domestic industrial enterprises development for the period of 2014-2017 indicators years deviations, % 2014 2015 2016 2017 2015/2014 2016/2015 2017/2016 external indicators industry index of production, % 102,8 103,7 100,8 99,9 0,8 -2,8 -0,9 exports of goods, billion usd 53,9 31,6 25,1 39,4 -41,3 -92,1 56,9 imports of goods, billion usd 54,4 31,2 31,2 44,6 -42,6 0 42,9 legal indicators number of initiated bankruptcy cases, units 3324 2406 2418 2423 -27,6 0,5 0,2 with the approval of the liquidation report, units 2989 2159 2122 2124 -27,7 -1,7 0,09 with the approval of the report on recognition of a bankrupt enterprise, units 2095 1799 1756 1770 -14,1 -2,4 0,8 internal indicators net loss, billion uah 590,1 373,5 367,1 388,2 -36,71 -1,71 5,75 volume of sales, billion uah 4170,7 4973,4 5159,1 4926,8 19,2 3,7 -4,5 losses of the main activity, % 14,1 7,5 7,1 7,8 -46,81 -5,33 9,86 source: created by the authors on the basis of (vyshnevska, 2016 – vyshnevska, 2017) baltic journal of economic studies 90 vol. 4, no. 3, 2018 enterprises. so, at the end of the analysed period, all the examined indicators increased, which indicates the imperfection of mechanisms of anti-crisis management, which should come into effect during the crisis development of enterprises, an integral part of which is their anti-crisis capacity. 3. the essence and significance of the enterprise’s anti-crisis capacity we offer to understand the anti-crisis capacity of the enterprise as the availability of resources (financial, material, labour, etc.) from the enterprise or possible sources of their attraction in volumes sufficient to implement anti-crisis measures and achieve the set goals. for a better understanding of the essence and significance of the enterprise's anti-crisis capacity, we should determine its place in the overall system of anticrisis management. the system of anti-crisis management of an enterprise is a set of clearly defined and interconnected elements, which purpose is to preserve the enterprise’s value of the unit in conditions of negative impact of internal and external environmental factors of functioning (topiy, 2010). the system of anti-crisis management of the enterprise is closely related to the endogenous and exogenous environment of the enterprise, which conditions and factors directly affect the features and sequence of implementation of the elements of the system. common elements of the enterprise anti-crisis management system are: resource support of the enterprise, principles which should be the basis of anticrisis management, subjects that will directly influence the objects and results of the anti-crisis management through the anti-crisis management process. components of the anti-crisis management process are: the technology of anti-crisis management; methods of anti-crisis management; anti-crisis management decisions. the technology of anti-crisis management assumes a consistent implementation of the functions of anti-crisis management, namely: planning, organization, motivation, control, and regulation. it is during the implementation of the planning function, which provides for the establishment of anticrisis management objectives and the development of anti-crisis measures that the anti-crisis capacity of the enterprise, that is, its ability to implement the developed measures, should be assessed. we propose to divide the anti-crisis capacity into resource and time ones. anti-crisis resource capacity can be financial, material, labour, and other. the evaluation of a particular anti-crisis capacity is determined by the nature of the crisis and the peculiarity of the enterprise’s activities. let’s consider the essence and methods of calculating each type of the anti-crisis capacity of the enterprise in more details. anti-crisis resource capacity is the capability of an enterprise to implement the developed anti-crisis measures within the limits of its own or attracted resources. the most common is the study of anti-crisis financial (the capability to implement developed anticrisis measures based on own or attracted financial resources), material (the capability to implement developed anti-crisis measures based on own or attracted material resources), labour (adequacy, capability, and readiness of enterprise employees to implement the developed anti-crisis measures) and information capacity (availability of information (information resources)), which volume and reliability is sufficient to implement the developed anti-crisis measures), as a composite anti-crisis resource capacity. anti-crisis time ability characterizes the enterprise’s capability to implement the developed anti-crisis measures for a clearly defined period. the methods of assessing each type of anti-crisis capacity are shown in table 2. 4. the practical significance of the enterprise’s anti-crisis capacity the methodology for interpreting the results of assessing the enterprise’s anti-crisis capacity is given in table 3. according to the results of the analysis of the financial condition of prat “lvivskyi instrumentalnyi zavod” for 2015–2017, all signs of a crisis situation were discovered. therefore, it was decided to approbate a methodology for assessing the level of anti-crisis capacity of an enterprise on the example of prat “lvivskyi instrumentalnyi zavod” (sait pat «lvivskyi instrumentalnyi zavod»). in order to assess the anti-crisis ability of the enterprise, let us consider the possibility of introducing two alternative anti-crisis measures: 1) implementation of an investment project to diversify activities by mastering new types of production (hereinafter referred to as the anti-crisis measure 1); 2) formation of its own distribution network (hereinafter referred to as the anti-crisis measure 2); 3) modernization of the main production line (hereinafter referred to as anti-crisis measure 3). the initial data and the results of the assessment of the general anti-crisis resource capacity of prat “lvivskyi instrumentalnyi zavod” of anti-crisis measures 1-3 are presented in table 4. based on the results of the evaluation of the anti-crisis resource capacity of measures, the anti-crisis measure 3 does not correspond to the necessary conditions, since the ratio of àc rgen <1, and therefore, the measure is not implemented and is rejected. while the other two anticrisis measures correspond to the necessary conditions for the implementation, and for them, the anti-crisis time capacity will be assessed. baltic journal of economic studies 91 vol. 4, no. 3, 2018 table 2 calculation formulas for assessing the anti-crisis capacity of an enterprise indexes formulas for calculations characteristic anti-crisis capacity of an enterprise à à àc c rgen c t= ×� àc rgen – an indicator of the general anti-crisis resource capacity of the enterprise, part of the unit; àc t – the indicator of anti-crisis time capacity of the enterprise, part of the unit. general anti-crisis resource capacity of an enterprise à àc rgen i n c ri n= = ∏� 1 àc ri – the anti-crisis capacity of the i-th type of resource, part of the unit; і – kind of resource used by the enterprise; n – the number of resources used by the enterprise. anti-crisis capacity of an i-th type of resource à r r r c ri av i at i am i = + � rav і – the amount of available in the enterprise i-th type of resource, necessary for the implementation of anti-crisis measures in natural or in monetary form; rat і – the volume of the i-th type of resource that an enterprise can attract for the implementation of an anti-crisis measure in the natural or monetary form; ram і – the volume of the i-th type of resource required for the implementation of an anti-crisis measure in the natural or monetary form; і – kind of resource (material, financial, labour, others); і=1, n; n – number of resources necessary for the implementation of the anti-crisis measure. anti-crisis time capacity а) à s s c t c am = � б) à t s c t b am = � або à s c t am = � 160 sc – speed of the problem situation development or the period allocated for the implementation of the anti-crisis measures, days; sam � – speed of the implementation of the anti-crisis measure or the period for which the enterprise can implement the anti-crisis measures and solve the problem situation, days; tb – the period remaining until the announcement of the enterprise bankrupt, days; 160 – number of days till the bankruptcy proceedings, if the day when the debtor fails to fulfil his obligations to the creditor is a starting point. source: created by the authors table 3 interpretation scale for the enterprise crisis assessment results scale reasoning necessary conditions for the anti-crisis capacity àc rgen ≥ 1 an enterprise is able to implement the developed anti-crisis measure within the limits of available and attracted resources, in the future it is necessary to evaluate the anti-crisis time capacity of the event àc rgen < 1 an enterprise is unable to implement the developed anti-crisis measure within the available and attracted resources, so the measure is rejected and to assess the anti-crisis time capacity of the event in the future is inappropriate sufficient conditions for the anti-crisis ability capacity àc t �≥ 1 an enterprise is able to implement the developed anti-crisis measure within the available time àc t �< 1 an enterprise is unable to implement the developed anti-crisis measure within the available time, so the measure is rejected since the bankruptcy will come earlier than the expected results of the implementation of the anti-crisis measure will be received choice of anti-crisis measure from the developed anti-crisis measures for implementation, the one with the àñ level in the maximum, that is, the function à maxñ �→ ; àñ > 0 is valid levels of the anti-crisis capacity àc > 2 high level of the anti-crisis capacity (an enterprise is capable, within the limits of available and/or attracted resources and time, of implementing the developed plan for anti-crisis measures, having considerable resources of resources and time, guarantees the implementation of the anti-crisis measure) 1 ≤ ас ≤ 2 the optimal level of anti-crisis ability (an enterprise is able to implement a developed plan of anti-recessionary measures, with available resources and time within the limits of available and/or attracted resources and time, significantly increases the probability of implementing an anti-crisis measure) 1 1 5≤ <àc , admissible level of anti-crisis ability (an enterprise is able to implement the developed plan of anti-crisis measures in case of attracting additional resources and deferring debts to creditors) àc < 1 unsatisfactory level of anti-crisis ability (an enterprise is not able to implement anti-crisis measures within available resources and time) source: created by the authors baltic journal of economic studies 92 vol. 4, no. 3, 2018 table 4 results of the assessment of the general anti-crisis resource capacity of prat “lvivskyi instrumentalnyi zavod” of planned anti-crisis measures types of resources rav і rat i ram i àc ri anti-crisis measure 1 material, thousand uah 620 320 931 1,01 labour, people 10 6 13 1,23 financial, thousand uah 108 500 451 1,35 intangible, thousand uah 0 30 25 1,20 information, thousand uah 3 2 3 1,67 total anti-crisis resource capacity of measure àc rgen 1,27 anti-crisis measure 2 material, thousand uah 310 120 372 1,16 labour, people 6 10 15 1,07 financial, thousand uah 81 96 176 1,01 intangible, thousand uah 1 19 20 1,00 information, thousand uah 3 1 3 1,33 total anti-crisis resource capacity of measure àc rgen 1,11 anti-crisis measure 3 material, thousand uah 465 200 651 1,02 labour, people 7 5 12 1,00 financial, thousand uah 125 100 361 0,62 intangible, thousand uah 1 8 14 0,64 information, thousand uah 3 1 3 1,33 total anti-crisis resource capacity of measure àc rgen 0,89 source: created by the authors on the basis of materials by prat “lvivskyi instrumentalnyi zavod” a separate stage in assessing the enterprise’s anti-crisis capacity is to determine the anti-crisis time capacity. the initial data and the results of the assessment of the anti-crisis time capacity prat “lvivskyi instrumentalnyi zavod” of anti-crisis measures 1 and 2 are presented in table 5. table 5 evaluation results of the anti-crisis time capacity of prat “lvivskyi instrumentalnyi zavod” of planned anti-crisis measures types of anti-crisis measures sc, days sam, days àc t anti-crisis measure 1 180 270 0,67 anti-crisis measure 2 180 120 1,50 source: created by the authors on the basis of materials by prat “lvivskyi instrumentalnyi zavod” based on evaluation results of the anti-crisis time capacity of measures, the anti-crisis measure 1 does not correspond to sufficient conditions since the ratio of àc t <1, and therefore, the measures are not implemented and are rejected. based on assessment results of the general anti-crisis resource capacity and the anti-crisis time capacity of prat “lvivskyi instrumentalnyi zavod”, data were obtained to assess the anti-crisis capacity of the enterprise and determine its level. the calculating results of the anti-crisis capacity level of prat “lvivskyi instrumentalnyi zavod” are presented in table 6. table 6 anti-crisis capacity level of prat “lvivskyi instrumentalnyi zavod” types of anti-crisis measures àc rgen àc t àc anti-crisis capacity level anti-crisis measure 2 1,11 1,50 1,66 optimal source: created by the authors on the basis of materials by prat “lvivskyi instrumentalnyi zavod” based on the assessment of the anti-crisis capacity of prat “lvivskyi instrumentalnyi zavod” of planned anti-crisis measures, it can be stated that the enterprise has an optimal level of anti-crisis capacity in order to implement the anti-crisis measure 2. thus, the only alternative of the anti-crisis measure considered for implementation by prat “lvivskyi instrumentalnyi zavod” in the future is the anti-crisis measure 2, which will ensure the overcoming of the crisis, because the enterprise is able to implement the developed anti-crisis measure 2 within existing and/or attracted resources and time, having a significant reserve of resources and time, significantly increases the likelihood of the implementation of such an event. it should be noted that for the effective operation of any business entity, the availability of material, financial, labour, and other resources is not sufficient, because it is necessary to own the technologies for their attraction and use. baltic journal of economic studies 93 vol. 4, no. 3, 2018 5. conclusions the results of the conducted researches showed that the anti-crisis capacity of an enterprise is an important component of the anti-crisis management process, which effectiveness and performance of the evaluation determines the success and prospects of the enterprise as an integrated business unit. it was determined that the anti-crisis capacity of the enterprise should be evaluated at the initial stages of anti-crisis management, in particular, at the stage of implementing the planning function. evaluation of the enterprise’s anti-crisis capacity allows making the right decision regarding the type and directions of anti-crisis actions and, accordingly, avoiding a number of risks that may become the reasons for its bankruptcy and liquidation in the future. a promising area for further research will be the identification of factors of anti-crisis capacity, the classification of their types and the degree of impact. references: kovalenko v.v., suganiaka m.v., fuchedzhi v.i. (2013). аntykryzove finansove upravlinnia v systemi subiektiv ekonomichnoi dialnosti [anticrisis finance management in system of subject of economic activity: methods and instrument of evaluation]. odesa. (in ukrainian) yepіfanova i.yu. (2015). sutnist antykryzovogo upravlinnia pidpruemstvom [the essence of the crisis management of the company]. economika i suspilstvo, № 1, pp. 265-269. retrieved from: http://economyandsociety.in.ua (in ukrainian) kamneva a.v. (2014). doslidzhennia isnuiuchykh instrumentiv ta modelei antykryzovogo upravlinnia na pidpryiemstvi [a study of existing tools and models of crisis management in the enterprise]. economika ta ypravlinnia pidpryemstvamy mashynobydivnoi haluzi, № 4, pp. 15-27. (in ukrainian) nosan n.s. (2016). adaptatsia yevropeiskoho dosvidu funktsionuvania mekhanizmu bankrutstva pidpryiemstv u vitchyznianii praktytsi [adaptation of the european experience of functioning of the mechanism of bankruptcy of enterprises in domestic practice]. investytsii: praktyka ta dosvid, № 18, pp. 52-56. (in ukrainian) topiy i.i. (2010). teoretyko-metodologichnyi pidkhid do pobudovy modeli protsesu antykryzovogo upravlinia mashynobudivnym pidpryiemstvom [theoretical and methodological approach to construction of the model of the crisis management system by the machine-building enterprise]. investytsii: praktyka ta dosvid, № 20, pp. 52-56. (in ukrainian) vyshnevska o.a. (eds.). (2016). statystychnyi biuleten: za sichen-serpen 2016 r. [statistical bulletin: januaryaugust 2016]. kyiv: derzhkomstat ukrainy. (in ukrainian) vyshnevska o.a. (eds.). (2017). statystychnyi biuleten: za sichen-serpen 2017 r. [statistical bulletin: januaryaugust 2017]. kyiv: derzhkomstat ukrainy. (in ukrainian) sait pat «lvivskyi instrumentalnyi zavod» [the site of pjsc «lviv instrumental zavod»]. retrieved from: http://liz.pat.ua/ (in ukrainian) baltic journal of economic studies 239 vol. 5, no. 1, 2019 corresponding author: 1 oles honchar dnipro national university, ukraine. e-mail: schuba@schuba-legal.de 2 chernivtsi institute of international humanitarian university, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-239-244 world experience in financing innovative small businesses borys shuba1, artur sotskyi2 abstract. the aim of the article is to study and generalize world experience in financing innovative small businesses to determine the areas of improvement of financing domestic small and medium innovative enterprises within the framework of state innovative policy. the subject of the study is the world experience in financing innovative small businesses. methodology. the study is based on the comparative analysis of the systems of financing innovative small businesses in ukraine and foreign countries. the analysis of specificities of financing innovative small businesses in germany, the united states, the united kingdom, china, japan, spain, belgium, and in some other countries enables to determine the advantages and disadvantages of different systems of financing innovations in small businesses. comparative legal study of certain provisions of ukrainian legislation enables to determine the potentials and application limits of positive foreign experience in the specified sphere. the results of the study revealed that the world economy has accumulated significant experience in the formation and development of a financial support system for innovation, which includes various levers to intensify intellectual creativity. the maximum effect from their use would be ensured by the systematic consideration of all financial instruments, integration with elements of other subsystems of the national innovation system. practical implications. the experience of developed economies and the analysis of the current state of financing innovation activity in ukraine suggest that to create a developed layer of industrial and innovative small businesses, which will become the main consumer and producer of innovations, ukraine should apply the entire complex of organizational, regulatory, financial, and other measures. while the whole complex of issues related to the development of innovation in ukraine is of great importance, the problem of forming an active demand for innovation should be put into the first place. relevance/originality. the analysis of the global experience of financing innovative small businesses is the basis for developing the most promising areas for the improvement of domestic legislation in this sphere. key words: small businesses, innovations, financing for innovation, investments, public support for innovations. jel classification: l21, h25, e22 1. introduction in order to stabilize and accelerate socio-economic development, ukraine focuses on the study and generalization of world experience in using the sources of economic growth. in a post-industrial society, the achievement of positive results largely depends on the approach to innovation. this ensures the maximum effect from its functioning and realization to full potential the modern purpose of innovation as a key factor in economic development. in ukraine, over the past 20 years, science and innovation have low competitiveness in the international market. for example, in 2015, about $530 million was spent on research. it is approximately 521 times less than in the united states, 32 times less than in germany, 24 times less than in england, 23 times less than in france. sweden, with a population of almost 5.5 times less than in ukraine, spends 26 times more money on science than ukraine. such state of affairs does not promise the increasing competitiveness of ukrainian goods in world markets, and even more, the creation of a special product that would provide the country with absolute advantages. the financial subsystem is an integral part of the national innovation system of the state. considering the global experience of financial support for innovation in the domestic management practice will contribute to achieving the goals of national socio-economic development, realizing and increasing competitive advantages, renewing gradually lost positions in the global innovation space, which determines the relevance of the study. from different perspectives, the issue of financial support for innovation development is considered in the works baltic journal of economic studies 240 vol. 5, no. 1, 2019 of domestic and foreign scientists, such as l. antoniuk, m. haman, v. heiets, n. ivanova, n. kazakova, b. kvasniuk, b. lundvall, r. nelson, a. poruchnyk, v. savchuk, v. seminozhenko, l. fedulova, k. freeman et al. the works of these scholars form the basis for further developments and the theoretical basis of the study. the aim of the article is to study and generalize world experience in financing innovative small businesses to determine the areas of improvement of financing domestic small and medium innovative enterprises within the framework of state innovative policy. 2. presentation of the main material innovation development today is recognized as the most promising way to create a highly efficient modern economy in the vast majority of countries in the world. many countries have already made positive progress by moving towards the creation of post-industrial economies. however, over the last two decades, ukraine has done little innovations. in ukraine, the innovation process is under construction and requires new approaches. some attempts to accelerate this process are not successful enough, although the state declares its intentions in legal regulation. in particular, the main principles of state innovation policy in ukraine are: an innovative model of ukrainian economy’s development; determination of state priorities of innovative development; formation of the regulatory framework for innovation activity; creation of conditions for preservation, development, and use of domestic scientific-technological and innovative potential; ensuring the interaction of science, education, production, finance and credit in the development of innovation activities; effective use of market mechanisms to promote innovation, support for entrepreneurship in science and technology; application of measures in support of international scientific and technological cooperation, technology transfer, protection of domestic products in the domestic market and its promotion to the foreign market; financial support, implementation of favourable credit, tax, and customs policy in innovation activity; assistance in the development of innovative infrastructure; informational support for subjects of innovative activity; training of personnel in innovation activity (on innovation activity). to ensure the development and effective functioning of the system of information and analytical support for the implementation of state innovation policy and monitoring of the state of innovation economic development, it is necessary: to improve the mechanism of monitoring the state of innovation development of the economy; to implement an analysis of the effective application of innovation public support and encouragement mechanisms, in particular, in comparison with similar mechanisms used in other countries; to ensure the dissemination of information on the state of innovation activity and promising domestic developments to attract potential investors and consumers; to intensify public discussion on the issues of the formation and implementation of state innovation policy, etc. (the cabinet of ministers of ukraine). without small innovation businesses, a market-driven, innovative economy cannot function and develop. in developed countries, small innovative businesses influence the growth rate of the economy, the structure and quality of the gross national product. the crisis of 2008-2009 has markedly influenced the development of innovative small business financing and the global economy, in general. worldwide banking systems have limited lending, consequently, because of credit risks the stimulation of small businesses has been reduced, as well as demand for them has been lost. therefore, having lost its influx of new investments and liquidity, small innovative businesses look for new sources of foreign and private capital investors and partners through various financial instruments. the small business support system in europe traces its origin from the 70s of the xx century. at that time, in order to eliminate administrative barriers, european countries introduced changes in value-added tax and adjustment of financing terms. moreover, the european charter for small enterprises was also developed; this document gave carte blanche for the implementation of small business support projects (yevropeiska khartiia malykh pidpryiemstv). to date, financing of activities aimed at supporting small business innovation comes from the eu structural funds, such as european regional development fund, european social fund, that greatly help small enterprises survive the stagnation phenomena of the post-crisis period. it is believed that the level of small business development determines the development of the economy in total. for example, there are at least 30 entrepreneurs per 1000 citizens in the eu member states. in the eu, small enterprises are up to 90% of the total number of enterprises (malyi biznes: kreditovaniye malogo biznesa). therefore, nowadays the most promising sphere of small businesses is innovation, which comprises the intellectual property market. the main condition for the successful functioning of this market is capitalization of intangible assets in the form of intellectual performance. baltic journal of economic studies 241 vol. 5, no. 1, 2019 various national experiences can demonstrate the conditions for the transition to an innovative economy through financing innovative small businesses. since the 1960s, japan has been the first to capitalize intangible assets of its enterprises through the intellectual property market, due to buying abroad the right to the results of intellectual property rights protected by patents and, following their re-evaluation, transforming them in intangible assets of greater value. in the 90s, having significantly improved japanese experience, the usa successfully applied it. currently, most countries plan capitalization of intangible assets, subject to depreciation. in the us, intangible assets are depreciated over a period of up to 40 years. china demonstrates effective business development based on the commercialization of intellectual property. for example, the industrial park (suzhou, prc), established in april 2000, occupies 61 hectares; more than 1 million square meters provide 10,000 people with jobs with an investment of over 4 billion yuan in this period. the secret of such success is in the state strategy “to the innovation economy through the market of intellectual property” in each concrete project. in this case, the main link between the university (the centre for generating ideas), production (where these ideas are being tested), and the management centre (where these developments are implemented on a commercial basis in the real economy) is a company that provides a range of services in intellectual property. as a result, one municipal city in the prc has about 25,000 patents, and one medium-sized chinese telecommunication firm has 60 patents and 1500 know-how, accounting for up to 40% of its annual revenue. the structure of public expenditures on transforming small business intelligence into an intangible asset, involved in the economy, finances, research and development in china, great britain, france, and other countries, is from 60 to 80%. in the usa, innovative small business financing is implemented effectively. for example, in the precrisis years (2008-2009), for direct and guaranteed loans, the us small business administration provided entrepreneurs for innovative projects with 550 thousand dollars in two stages for the development of risky projects, further involving private capital. today, 40% of the us economy is an innovative economy. in the united states, a federal agency, the us small business administration, operates with offices in all states. the agency facilitates lending with guarantees, as well as grants and loans to innovative small business entrepreneurs using own means through various public programs that allow financing the development of small businesses. under programs, such as small business investment company, secondary loan market, license development companies, granting of warranties and several other, the state provides small innovative enterprises with financial support in the form of share capital, loans, investment-grade bonds; enables small business lenders to improve capital liquidity through the sale some of their loans to investors; ensures their financing at fixed rates for scaling up and modernization; enables innovative small entities without collateral for a commercial bank to receive guarantees, warranties. in the united states, small businesses have begun to engage in state support earlier than in other countries through government contracts, sources of partial financing, low taxation, direct and guaranteed loans, and so on. in 2010, the united states allocated about $30 billion to provide targeted loans for small businesses, which created 1.5 million new jobs, including a quarter of all spending in support of innovation in small businesses. the us congress considers abolishment of all taxes on capital gains, levied on small enterprises, and controls the proportion, according to which small enterprises, including enterprises for the creation of intellectual property, should receive 23% of us public orders. small enterprises are subject to special tax privileges, for example, a “first-year bonus,” that is, the tax is paid not from the total but from half of the taxable base. under the program of financial and credit assistance, the small business administration guarantees repayment at a government expense of up to 90% of the value of loans and credits. for small business direct lending, the administration has the right to set their maturity up to 15 years. the experience of the us proves the effectiveness of support that enables to involve bank loans in innovative small businesses by guaranteeing lending. in contrast to the united states and other countries, china uses the generalized experience of integrating small businesses in the global community, but has programs for the country’s economic development, including the development of small innovative businesses by 2020, 2050 to restructure this sphere and involve new financial development mechanisms, successfully approbated in other countries of the world. the key to china’s small business development is to provide equal opportunities for all small enterprises in investing, lending, improving production, creating and commercializing intellectual property. china has established public funds to support and develop entrepreneurship, financed by public budget funds. the chinese centre for business cooperation and coordination is engaged in creating special conditions for the cooperation of chinese and foreign organizations for supporting small businesses, studying world experience. over the past eight years, china has rapidly increased the number of small enterprises, including innovation, which provided significant budget revenues to the state treasury. in china, in small businesses, 60% of the able-bodied population of the country work (razvitie ekonomiki kitaia). according to the similarity of the forms and financial mechanisms of small business development in china, the usa and other countries, in japan, the small and medium enterprise insurance corporation and credit guarantee association have been set up to facilitate baltic journal of economic studies 242 vol. 5, no. 1, 2019 procedures for obtaining loans for small innovation business entrepreneurs. japan’s financial policy provides for the status of small enterprises and provides them with the benefit rates, according to the type of activity, regulating the market value of products produced by restrictions on reduction/increase. in the case of overpricing or unjustified discounts, small business entities are deprived of the right to operate. in singapore, where offices of more than 3,000 companies in the world are located, financial innovation infrastructure for small businesses is well developed. innovative small businesses are subject to a preferential tax law that allows attracting foreign capital and investments into the country. there is also no duty on remittances, while investments in the economy are guaranteed, and a large number of credit programs for small businesses are implemented, including special loans, subsidies, and credit risks, while lending rates are constantly decreasing (ekonomika v singapure: znachenie i rol malogo predprinimatelstva). the singapore government, interested in supporting small innovative businesses to compete in the international market, has managed to create an innovative economy. the agency “spring,” organized in support of entrepreneurship, is engaged in the development and implementation of programs for promoting small businesses. in singapore, active financial support has contributed to the existence of about 140,000 small and medium enterprises, which cover almost 90% of all enterprises in the country. according to studies conducted by cnn time warner group, singapore ranks fifth in the world in the development of small businesses, has a branched innovation and actively integrates into other countries. in spain, the program for small business development, financing and technical support is based on european programs that have spread to european countries, including britain, germany, and france. in financial support, spain gives preference to innovative small enterprises involved in the country’s social policy, as well as the development of territories with low economic indicators (maloe predprinimatelstvo i biznes v ispanii). an interesting feature of small business development in spain is the fact that both spanish citizens and foreign citizens (non-residents) obtain a license and register their own businesses in less than 24 hours. various organizations and funds, such as associations for supporting small businesses in the european union, the state lending institution of the country and mutual funding societies, which invest, finance, and provide development subsidies, assist in the acquisition of startup capital. the european bank for reconstruction and development (ebrd), involving more than 60 country members, actively promotes innovative small businesses, strengthens financial institutions and financial systems, develops the infrastructure needed for small enterprises in the european union, central and eastern europe, non-european countries through its network of local offices. with a large set of financial instruments, the ebrd provides direct financing for small and mediumsized enterprises, including under bank credit risk. at the same time, the basis of the loans provided is the ability of the project to repay the loan within the agreed period. the ebrd helps innovative small businesses gain access to financing by providing guarantees, provides investment in the form of subscriptions to ordinary and preferred shares, quasi-investing from auxiliary loans, profitable promissory notes and bonds to preferred shares subject to redemption, and through other financial support tools. the european union also demonstrates support of small businesses in the innovation sector. it is an economic world community, which enables to form a single internal market and to support the monetary, economic, and political alliance of countries. all eu member states have a network of small business development organizations supported by public and private sectors. the joint activities of national and supranational bodies concerning the promotion of small and medium-sized business development in the eu include the financial encouragement of innovative small business development using the most appropriate sources and types of financing. with over one billion euros in funding, through financial instruments, using innovation programs, the eu expects to facilitate access to funding from 300 to 400,000 small and mediumsized enterprises (financing programmes for smes). in the eu, one of innovation development generators is germany, which has constructed a powerful national innovation system. thus, about 40% of the newly created value in the country falls on the innovation-intensive sectors of the economy, and 58.7% of enterprises implement product and technological innovations. germany is the third largest exporter of high-tech products in the world market. in the global markets for aerospace, instrumental, pharmaceutical products, its share is 14%, and the total turnover from trade in high-tech products is about $16 billion. germany is the fourth by innovation indicators and the total index of global competitiveness, the fifth by the number of patents, the eighth by gross research and development costs, in addition, plans to increase this figure up to $3350 billion by 2020. within the framework of the german innovation policy, the system of financial support for innovation was developed. one of their key implementation principles is the clear commitment to the objectives within the comprehensive national high tech strategy (hts), which operates until 2020, and integrates strategies for 17 future areas to implement successfully new technologies. in order to implement the provisions of the hts, state funding is used to support cluster projects, academic, university science, “main innovations.” for example, according to the results of baltic journal of economic studies 243 vol. 5, no. 1, 2019 the competition “germany’s leading-edge clusters – more innovation, more growth, more employment,” the 15 best clusters receive budget funding for up to 5 years of total 600 million euros. in accordance with the covenant of research and innovation support, 3% increase over the current funding of the largest academic research institutions is applied to improve the international competitiveness of german science and technology development from within existing capacities. for ten best universities with a developed system of scientific research, an additional annual budget financing of 21 million euros is conditioned by the prospective strategies for the development of university science. support for “key innovations,” that is targeted innovation projects, is carried out in those areas of strategic research, where serious scientific developments exist and can provide a quick practical impact in key sectors of the german economy, that is, accelerate their growth, strengthen their positions in existing markets and help them develop new ones effectively. now in germany, six “major innovations” are implemented: electronics (within the nanofab program) with state support of 323 million euros); automotive industry (the nanomobil program) with budget allocations of 37 million euros; optical industry (the nanolux program) with state participation in financing of 156 million euros; medicine and biotechnology (the nanoforlife program) with state support of about 24 million euros; chemistry (the nanochem program) with a state funding of 31 million euros; energy with the government financial participation in research of 20 million euros (kornilova, 2014). in france, in 1999, a law on innovation was enacted, providing for the participation of researchers on a competitive basis to start businesses. in order to promote projects in the country, there is a program for the development of incubators for small firms to get from two to three free of charge years for the use of premises, equipment, and other facilities. significant funds are allocated by the state for technology transfer. for the payment of specialists, loans are provided, up to 50% of which are irrevocable. the french innovation relay centre (irc france centr'est) operates in a regional environment where local authorities actively collaborate in promoting innovation among small and medium-sized enterprises. a basis for the marketing strategy is the centre’s own service proposal “global time technology proposal,” consisting of four main components: a package of technological proposals; a package of technological requests; short-, medium-, and long-term services; technology market research. this approach has proved its effectiveness in attracting clients, as evidenced by the following facts: 12 signed innovation contracts, the success of which has increased by 33% (doslidzhennia: obgruntuvannia napriamiv rozvytku innovatsiinoho pidpryiemnytstva z urakhuvanniam svitovoho dosvidu). in belgium, the innovation process is encouraged by the so-called cluster policy. according to federal law, tax liabilities for small enterprises involved in the innovation process can be reduced up to 100%. in flanders, an investment law provides for the budget for technology transfer available via universities and research institutes (tymoshenko, 2014). the portugal’s innovation relay centre (irc portugal (isq)) manages one of the two information centres in portugal and supports innovation in the framework of transnational cooperation on the transfer of technology to europe (chernenko, 2011). great britain has a significant experience in public guaranteeing of bank loans. the state guarantees a return of 70% of loans granted to venture capital firms, and reimburses up to 50% of all innovation costs and subsidizes small innovative firms. the uk has a welldeveloped network of over 325 business incubators, regulated by the office for business incubators. the uk business incubation provides a wide range of services from the creation of a company and its leasing transfer to consulting, financial, legal, employment services, etc. priorities of uk innovation involve medical technology, renewable energy, nanoelectronics, communications infrastructure protection, biotechnology, intelligent management system, environmental management. the country attaches great importance to the development and advancement of high-tech ecological services in the world market (yepifanova, 2013). in the netherlands, there is the mkbinnovatiestimulering regio en topsectoren (mit) program for stimulating innovation in small businesses in the regions and “top sectors.” according to this program, the netherlands ministry of economic affairs cooperates with local authorities to encourage innovation in small businesses. the “top” or key sectors in the netherlands include agro-industry, horticulture and seed production, high technology, energy, logistics, creative economy, health and life sciences, and the chemical industry. the government of the netherlands has determined these sectors as providing the country with competitive advantages in the global market and as priorities for development. the top consortia for knowledge and innovation (tkis) work in each sector, bringing together entrepreneurs and academics in a particular industry and partially funded by the government. the innovation promotion program contains the following instruments: consulting projects (obtaining consultations from a scientific institution or an independent consulting company); projects of technical and economic testing of innovative products (determination of technical and economic risks for the innovation proposed); baltic journal of economic studies 244 vol. 5, no. 1, 2019 collaboration in research and development (sharing knowledge with independent partners to implement innovation in products, processes or services); vouchers of knowledge (possibility of consulting in a scientific institution). top consortia also present two instruments, such as broker services for innovation and networking (kovalchuk, 2015). 3. conclusion therefore, the global financing of innovative small businesses has demonstrated that financial support of innovative small businesses is based on its targeting and has different sources of financing. moreover, the capitalization of small business intangible assets in the form of intellectual performance is a basic condition for the transition to a developed economy and provides a wide range of financial instrument applications in a market economy. capitalizing intangible assets for over half a century, the united states, japan, china, great britain, france, germany, the netherlands, and a number of other countries have managed to effectively implement the financial support of innovative small businesses, to maintain this process by state strategy, government orders, to involve private capital, to engage small business resources in market turnover and to build a powerful innovative economy. the economic world communities’ policy, focused on the primary financial encouragement of innovative small businesses, leading scientific research that creates intellectual property, contributed to this as well. references: on innovation activity (law of ukraine of july 04, 2002). retrieved from: http://zakon.rada.gov.ua/laws/ show/40-15 (in ukrainian) the cabinet of ministers of ukraine. pro zatverdzhennia derzhavnoi tsilovyi prohramy rozvytku systemy informatsiino-analitychnoho zabezpechennia realizatsii derzhavnoi innovatsiinoi polityky ta monitorynhu stanu innovatsiinoho rozvytku ekonomiky [on approval of the state target program for the development of the information and analytical support system for the implementation of the state innovation policy and monitoring the status of innovative economic development]. resolution no. 439 of may 7, 2008. retrieved from: http://zakon.rada.gov.ua/laws/show/439-2008-%d0%bf (in ukrainian) yevropeiska khartiia malykh pidpryiemstv [european charter for small enterprises]. retrieved from: http://zakon.rada.gov.ua/laws/show/994_860 (in ukrainian) malyi biznes: kreditovaniye malogo biznesa [small businesses: small business loans]. retrieved from: http://www.kreditbusiness.ru/foregnbusiness (in russian) razvitie ekonomiki kitaia: stanovlenie malogo predprinimatelstva [development of the chinese economy: small business development]. retrieved from: http://www.kreditbusiness.ru/foreignbusiness/71-razvitiejekonomikikitaja-stanovlenie-malogo.html (in russian) ekonomika v singapure: znachenie i rol malogo predprinimatelstva [singapore economy: importance and role of small businesses]. retrieved from: http://www.kreditbusiness.ru/foreignbusiness/72-jekonomika-v-singapureznachenie-i-rol-malogo.html (in russian) maloe predprinimatelstvo i biznes v ispanii [small enterprises and businesses in spain]. retrieved from: http://www.kreditbusiness.ru/foreignbusiness/30-maloe-predprinimatelstvoi-biznes-v-ispanii.html (in russian) financing programmes for smes. eubusiness – european union business news search and analysis. retrieved from: http://www.eubusiness.com/topics/euro/smes/?searchterm=financing%20 sme kornilova, i. (2014). svitovyi dosvid finansovoi pidtrymky innovatsiinoho rozvytku [world experience of financial support for innovation development]. visnyk kyiivskoho natsionalnoho universytetu imeni tarasa shevchenka, 8(161), 30-36. (in ukrainian) doslidzhennia: obgruntuvannia napriamiv rozvytku innovatsiinoho pidpryiemnytstva z urakhuvanniam svitovoho dosvidu [research: substantiation of areas of innovative business development taking into account world experience]. retrieved from: http://old.niss.gov.ua/monitor/september/10.htm (in ukrainian) tymoshenko, o. v. (2014). zakordonnyi dosvid derzhavnoho rehuliuvannia ta pidtrymky maloho ta serednoho pidpryiemnytstva [foreign experience of state regulation and support of small and medium entrepreneurship]. investytsii: praktyka ta dosvid, 13, 142-146. (in ukrainian) chernenko, s. m. (2011). zarubizhnyi dosvid rozvytku maloho pidpryiemnytstva v konteksti innovatsiinoho rozvytku ekonomiky [foreign experience of small business development in the context of innovative development of the economy]. ekonomichni innovatsii, 45, 243-252. (in ukrainian) yepifanova, i. yu. (2013). svitovyi dosvid finansuvannia innovatsiinoi diialnosti pidpryiemstv [world experience in financing innovation activity of enterprises]. visnyk natsionalnoho universytetu “lvivska politekhnika”, 776, 249-254. (in ukrainian) kovalchuk, a. (2015). instrumenty polityky shchodo maloho ta serednoho pidpryiemnytstva: mizhnarodnyi dosvid [small and medium enterprise policy tools: international experience]. kyiv: usaid «liderstvo v ekonomichnomu vriaduvanni». (in ukrainian) baltic journal of economic studies 188 vol. 5, no. 1, 2019 corresponding author: 1 vinnytsia education and research institute of economics, ternopil national economic university, ukraine. e-mail: innas1853@gmail.com orcid: https://orcid.org/0000-0003-0567-1658 2 vinnytsia education and research institute of economics, ternopil national economic university, ukraine. e-mail: kseniya_balazuk@ukr.net orcid: https://orcid.org/0000-0002-8673-0869 3 lviv polytechnic national university, ukraine. e-mail: lpylypenko@ukr.net orcid: https://orcid.org/0000-0003-4306-7531 doi: https://doi.org/10.30525/2256-0742/2019-5-1-188-193 modelling of enterprise’s accounting policy: theoretical aspect inna sysoieva1, oksana balaziuk2, liubomyr pylypenko3 abstract. the purpose of this article is to study the possibility of modelling accounting policies and accounting processes. since accounting processes don’t have defined parameters, to study them we can model their functional features and forecast the behaviour of the object in question in various situations. it is achieved by means of developing certain sign patterns: charts, schemes, unified forms and rules for filling them out. such modelling is called sign modelling. the most important type of sign modelling is logical-mathematic. in logical mathematic modelling, sign formations and their elements are considered in connection with certain transformations and operations with them. a logical mathematic model (lmm) is a basis (mathematic and linguistic provision) for creating algorithms for accounting processes and software development. since the accounting objects are rather diversified, the principles of processing corresponding information can also differ. for instance, the most efficient accounting methods and approaches for large enterprises and turn out to be irrational for small enterprises and even result in additional losses and unnecessary increase in the amount of differently detailed information. methods of the research: the statistical method of the questionnaire and generalization for studying the preconditions of accounting policy development at enterprises; the method of expert evaluation of strong and weak points of the analysed enterprises to define options and threats for their economic activity. practical results. the content of the conceptual apparatus “accounting policies” is considered. the expediency of application of mathematical modelling information of accounting policy of the enterprise for the choice of effective methods of conducting financial accounting is substantiated. elements of stages of the process of modelling accounting processes and accounting policy are studied and improved. when creating an accounting model, it is important to take into account which of the factors should be entered into the model. on the one hand, while using a model for forecasting, it is necessary to take into account as many factors as possible. on the other hand, gathering and processing large amounts of information are time-consuming, therefore, it is better to reduce the number of factors restricting by the most powerful ones. value/originality. the choice of accounting policy should be based on modelling, the central link of which is a system of accounting and analytical support. key words: economic-mathematical modelling, logic-mathematical model, accounting processes, accounting policy, forecasting. jel classification: e27, e37, o21, d40, c39 1. introduction the current stage of ukraine’s economic development is characterized by a change and realignment of business processes corresponding to the rapid market transformations. from the position of market relations, the system of management at the enterprise sets new requirements to accounting as an information basis for making decisions. modelling is a general scientific method of research, which plays an important role in the development of specific branches of scientific knowledge. accounting, as a science and practice, doesn’t stand aloof general baltic journal of economic studies 189 vol. 5, no. 1, 2019 development trends and actively uses the possibilities of the modelling method in shaping its theory and adapting it to changing conditions of accounting. thus, the application of mathematical modelling methods in accounting, in market conditions, becomes a prerequisite for its development in scientific and practical dimensions. problems of simulation of accounting are considered in the works by e. k. hilde, who developed the problem of modelling normative accounting in industrial enterprises. ya. v. sokolov researched both theoretical principles of modelling in accounting and problems of automation of the information environment using the model method. p. arkov, a. s. borodkin, l. a. gorshkova, v. ivashkevich, a. l. luzin, i. s. matskevichius, a. narinsky, r . s. rashitov, n. ubliev, a. a. shaposhnikov made an important contribution to the theory of accounting modelling. 2. modelling as a method of scientific knowledge the economic mathematic model is a description of an economic process or a phenomenon through mathematic expressions (equations, functions, inequalities, identities) that simulate the behaviour of a modelled object in given or possible conditions of its performance. any economic-mathematical model should be adequate to reality, reflect the essential aspects and connections of the object under study, have a simple form and structure. modelling is the only systematized way of seeing the options for the future and determining the potential effects of alternative solutions that enable their relevant comparison. yet, economic-mathematic modelling remains an auxiliary tool in the system of production and management. the results obtained with the help of models are mainly used as consulting means. it is the manager’s function to make final decisions. this is because of the complexity and insufficient knowledge of the economy complex and the drawbacks of modelling, the most typical of which are: – entering into the model indices and standards insufficient for problem-solving; – withdrawal from the model relevant to the given object features and variables; – inaccurate evaluation of the parameters of the modelled object; – drawbacks in the model structure, i.e. incorrect or inaccurate definition of functional dependence of the accepted criteria on the managed and linked variables; – excessive model simplicity that does not fully embrace the main parameters and variable objects in their dynamics; – excessive model complexity that hinders or complicates the analysis of the variables and is mostly timeand resource-consuming. decision-making employing economic mathematic models is based on the methods of simulation modelling, linear programming, probability modelling, operation study etc. the number of definite models is almost equal to the number of problems for which solving they were developed. let us consider the most common of them. the model of stock management is used to determine the time for allocating orders for the resources and their number, as well as the mass of ready-made products in warehouses. any enterprise should keep some goods or materials in stock to avoid production and sales delays. the goal of this model is to minimize the negative impact of stock accumulation expressed in certain losses. these losses come of three types: for orders allocation, storage or losses connected with a shortage of stock/purveyance. in this case, it is impossible to sell ready-made products or deliver services. the standstill of the production lines also causes losses linked with the labour payment, despite the fact that the workers are not working at this time. the maintenance of a high level of stock prevents the losses caused by their shortage. purveyance of materials in larger quantities necessary to accumulate stocks in many cases minimizes losses for orders allocation since the enterprise can get corresponding discounts and reduce the amount of “paperwork.” however, additional expenditures for storage, reloading, interest payment, insurance, goods decay, theft exceed these potential revenues. models of stock management are applied to define an optimal way of scarce resources allocation at available competitive needs. linear programming is normally used to solve production problems. typical applications of linear programming in production management are: – major production planning (compiling production charts minimizing general costs taking into account the costs related to change in the interest rate, given restrictions on labour resources and the stock levels); – ware assortment planning (defining an optimal products assortment, in which each its type is characterized by its costs and resource requirements); – item production routing (defining an optimal technological production route to pass through several processing centres, each of them having its peculiar costs and productivity); – managing the technological process (minimizing steel filings, leather or fabric scraps per roll or cloth); – stock management (defining an optimal correlation of the items in the warehouse); – calendar planning of production (calendar planning to minimize the expenditures for storing stock, overtime payment and odd orders); – planning products allocation (scheduling optimal uploading schedule taking into account goods distribution among the production enterprises and warehouses, as well as retail stores); baltic journal of economic studies 190 vol. 5, no. 1, 2019 – determining the optimal location of the new plant (defining the best location by estimating transport costs between the alternative locations of a new plant and the raw ware supplies and sale points of ready products); – calendar transport planning (minimizing the costs of truck supply during loading and cargo vessels to the piers); – labour force distribution (minimizing costs for distributing workers for lathes and working places); – shipping materials (minimizing expenditures for shipping raw ware, for instance, fork-lift trucks, trucks from the warehouse to the production departments). 3. stages of mathematical modelling in economics the modelling process involves three structural elements: – an object of the research; – a subject (researcher); – a model that mediates the relations between the subject and object. the modelling process can be presented in 6 stages (figure 1). 1. the analysis of theoretical regularities typical of the phenomenon or process in the study, and empirical data on its structure and features. such analysis serves for building models. 2. defining the methods to solve the tasks. 3. analysing obtained results and refinement (if necessary) of the form and structure of the model; returning to the first stage. the most important point of the first stage of the modelling is the clear definition of the ultimate goal of model designing, as well as the definition of a criterion to compare different solution options. not every economic problem requires an original model. some processes from the mathematical point of view are homogeneous and can be described by similar models. for instance, in linear programming, the theory of public service and others there are typical models to apply for solving a number of problems. the second stage in the modelling economic processes is the choice of the most rational mathematical method for solving problems. for example, for solving linear programming problems, many methods are applied: simplex method, the method of potentials and others. the best model is not the most complicated one and most similar to the real phenomenon but the one that enables to find a rational solution and obtain the most accurate economic evaluations. excessive details complicate model building and its extension results in losing important economic information and inadequate reflection of the real state of things. the third stage of modelling is a comprehensive analysis of the results obtained in the study of an economic phenomenon. the final criterion of the probability and the quality of the model is practice, the conformity of the obtained results and conclusions to the real conditions, as well as the economic significance of the obtained evaluations. if the results do not conform to the real conditions, it is necessary to analyse the causes of this discrepancy such as unreliable information, the model’s inconformity to the economic conditions etc. on the basis of this analysis, the economic mathematic model is corrected and the task is solved anew. at the first stage, it is necessary to formulate the nature of the problem, to define the preconditions and state the assumptions. it is necessary to distinguish the most important features of the object of modelling, study its structure and the links between its elements, pre-formulate hypotheses that explain the object’s stage 1. the analysis of theoretical regularities stage 2. defining the methods to solve the tasks stage 3. analysing obtained results and refinement (if necessary) of the form and structure of the model; returning to the first stage stage 4. preparing the source information stage 5. numerical modelling stage 6. analysing numerical results and their application figure 1. stages of mathematical modelling in economics source: own research baltic journal of economic studies 191 vol. 5, no. 1, 2019 behaviour and development (in the dynamics), clarify its connections with the environment etc. during this process, complex objects are divided into parts of separate study: to study the links and their logical correlations, their qualitative and quantitative features. all these actions refer to the stage of the system analysis of the problem to consider the object as a whole system. at the second stage, the economic model is formalized, i.e. expressed in clear mathematical correlations (functions, equations, inequalities, etc.). the process of model constructing has several stages. first, the type of economic-mathematical model is determined, the possibilities of its application in the particular case are studied, the list of variables and parameters is specified, as well as their correlation. complex models may require several multi-dimensional models. at the third stage, purely mathematical methods help investigate the general properties of models and solutions. however, previously conducted system analysis may have led to such a set of elements, properties, and correlations that are not solvable by the existing methods. in this case, we should return to the stage of system analysis. the next stage is to substantiate the solutions to the formulated problem. in the process of the analytic analysis, we define the number of solutions (singular or multiple), define the variable parameters that can relate to the solution, as well as the tendencies and limits of their variations. however, the models of complex economic objects are hardly ever possible to study analytically. in this case, it is better to refer to quantitative methods. as a rule, the problems occurring in the economic practice are fitted to the common models with developed methods and algorithms of solving. 4. preparing the source information. in economic problems, it is the most labour-consuming process of modelling since passive data accumulation is not enough. the quality of information plays a more important role in mathematical modelling. in the process of preparing information, methods of the theory of probability, mathematical statistics, as well as economic statistics are used for aggregation, data grouping, estimating the data reliability, etc. in the process of system economic-mathematical modelling, the results of the functioning of some models serve as the source information for others. 5. numerical modelling. this stage incorporates the development of algorithms of numerical problem solution, preparation of software and calculations. besides, the large size of economic problems brings about some difficulties in their solution. for large complex objects suffice it to make up a database and find the means to deal with it, as well as methods of data aggregation necessary for calculations. in the case with standard problems, suffice it to choose a suitable program package and database management system (dbms). numerical modelling substantially contributes to the results of analytical research. 6. analysing numerical results and their application. at this stage, above all is the correctness and completeness of the modelling results and the possibilities of their practical use, as well as possible ways of its further improvement. therefore, primarily, it is necessary to check the model correctness according to the most relevant features chosen. so, the model should be verified and validated since the modelling refers to solving practical problems (analysing economic objects, economic forecasting, making managerial decisions) (shyghun, 2010). 4. peculiarities of modelling accounting objects accounting processes having no physical parameters, their study can restrict to modelling functional characteristics, and also predicting the behaviour of the studied object in different settings. it is achieved by developing sign formations of a certain type: charts, schemes, unified forms and rules to fill them out. such modelling is called sign modelling (laux, stocken, 2018). the most important type of sign modelling is logicalmathematical. sign formations and their elements in logical-mathematic modelling are considered in relation to certain transformations and operations with them. an ideal logical-mathematical model is a basis (mathematical and linguistic support) for creating algorithms of accounting processes and developing software. hence, modelling in accounting is symbolic, logical, and mathematical and aims at creating schemes for processing, generalization, and grouping of accounting information. all mentioned above enables to state that the model for current accounting of economic processes should at least comprise the relevant elements: – unified forms of generalization and reporting accounting information; – unified methods of data grouping, their details, distribution for calculation and evaluation, and also the subsequent grouping according to other features to make up financial statements for submission to users; – rational methods and sequence of processing of accounting documentation. since the objects of accounting are quite diverse, the principles of related information processing can vary significantly. for example, the most effective accounting methods and techniques for large organizations may appear to be inefficient for small enterprises and lead to additional expenditures and unnecessary increase in volumes of detailed accounting information (ivakhnenkov, 2011). therefore, several equal in rights models of the current accounting of economic processes can operate simultaneously, and the economic agents must be able baltic journal of economic studies 192 vol. 5, no. 1, 2019 to choose among them according to the specifics of the production, volumes of the processed information and engaged users. the effectiveness of the organization’s accounting services, as well as the completeness and timeliness of providing the necessary information to all interested users, depends on how well the accounting model is chosen. the results of the analysis into the use of various mathematic models while developing accounting policies for the enterprise are shown in table 1. the abovementioned elements of the models for accounting processes in theory and practice of accounting are realized in the form of: – accounting rolls – special accounting forms to enter and group accounting data on the available inventory and its state, as well as operations with it; accounting rolls can be unified (obligatory within the state, branch or production type) or be developed within the enterprise that keeps accounts; – accounting forms (forms of calculations), that is, a combination of accounting rolls and ways of keeping records of economic operations; – accounting procedures – the order and sequence of actions while filling up certain accounting rolls. 5. conclusions as a conclusion, it should be noted that accounting information systems are critical to the production of quality accounting information on a timely basis and the communication of that information to the decision-makers. existing literature offers evidence of the relationship between these accounting information systems and organizational effectiveness; though it is important to highlight that an in-depth study is required to examine other factors that may influence this relationship. the information value generated by accounting information systems to shareholders and stakeholders in making investment decisions is invaluable. financial managers need the financial and accounting data provided by accounting information systems to evaluate the firm’s past performance and to map future plans. secondly, to choose the accounting policies of an enterprise, it is advisable to model future performance outcomes proceeding from past events and allowed alternative accounting methods. the choice of accounting policy should be based on modelling with the system of accounting and analytical support in the centre. finally, modelling the process of choosing an accounting policy incorporates accounting data, statistical data, and marketing information. this proves the indissoluble connection between accounting and managerial decision-making. hereby, the studied information is the subject of transformation through its analytical processing. modelling the choice of accounting policy implies the resources and methods of their use. table 1 the analysis of the use of various mathematic models in developing the enterprise’s accounting policy model types authors goal use in developing accounting policy lineal programming evdokimov v. v., lagovska o. a., samigulin a. a., yakubenko g. a. forming optimal production programs possible at the statement for calculating the prime cost of products stock management models selivanova y. v., sidyuk o. v. sukov g. s., ivakhnenkov s. v., maliuga n. m. costs optimization for purveyance, consumption, and keeping stock possible at defining the reserves to provide the subsequent expenditures and payments the model of optimal service money s. m., filonenko n. o., gerasimenko t. o. determining the optimal quantity of service channels possible at developing accounting apparatus correlation-regression models rashitov r . s., vaschenko l. o., luzin a. l., smachilo t. v. distinguishing between the production factors possible at defining the elements of accounting policy operational calendar planning models boyko s. v., bardul o. m., popova n. i., chizh v. i. making up optimal plans for performing and completing work possible at developing documents circulation game theory proskura k. p. the choice of an optimal strategy possible at the choice of accounting method source: own research references: durdica jurić (2014). effect of accounting policies on financial position of small and medium-sized enterprises. journal of accounting and management, 37, 43-59. ivakhnenkov, s. f. (2011). teoretychni aspekty modeljuvannja v analizi ta ghospodarsjkomu kontroli [theoretical aspects of modelling in analysis and economic control]. economic analysis, 9(1), 10-14. jevdokymov, v. v. (2003). zastosuvannja metodu modeljuvannja v bukhghaltersjkomu obliku [application of modelling in accounting]. journal of zhdtu. economic sciences, 4(26), 99-104. baltic journal of economic studies 193 vol. 5, no. 1, 2019 jevdokymov, v. v. (2004). modeljuvannja ghospodarsjkykh procesiv: oblikovo-upravlinsjkyj aspect [modelling of economic processes: accounting and management aspect]. journal of zhdtu. economic sciences, 4(30), 69-79. jevdokymov, v. v. (2005). modelyuvannya systemy bukhhalterskoho obliku: teoriya i praktyka zastosuvannya [modelling of accounting system: theory and practice of application] (phd thesis), kyiv: zhytomyr state technological university. kashuba, o. (2015). pidpryjemnyctvo v ukraini: problemy ta perspektyvy rozvytku [entrepreneurship in ukraine: problems and prospects of development]. economy and state, 6, 103-106. laux, v., stocken, p. c. (2018). accounting standards, regulatory enforcement, and innovation. journal of accounting and economics, 65, 221-236. shyghun, m. m. (2010). rozvytok modeljuvannja systemy bukhghaltersjkogho obliku: teorija i metodologhija [development modelling of the accounting system: theory and methodology]. zhytomyr: zhdtu. (in ukrainian) wang, j., wang, d. (2017). application of mathematical modeling in management accounting. italian journal of pure and applied mathematics, 38, 573-580. baltic journal of economic studies 302 vol. 4, no. 3, 2018 corresponding author: 1 department of administrative law and process and customs security, university of state fiscal service of ukraine. e-mail: o.v.tilchik@ukr.net 2 state research institute of the ministry of internal affairs of ukraine. e-mail: pluhatartetiana1976@gmail.com 3 department of civil law and procedure, lviv university of trade and economics. e-mail: kotuha1@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-302-308 determinants of shadowing of the economy: the genesis of economic and legal doctrines olha tylchyk1 university of state fiscal service of ukraine, ukraine tetiana pluhatar2 state research institute of the ministry of internal affairs of ukraine, ukraine oleksandr kotukha3 lviv university of trade and economics, ukraine abstract. the purpose of the article is to study the genesis of economic and legal doctrines, on the basis of which it seems possible to identify the main determinants of shadowing of the economy. analysis of problematic issues of establishing causes of existence and spread of the phenomenon of economic shadowing, which is mediated by the need for influence on them in order to neutralize, that is, the definition of the subject of administrative and legal support of counteraction is presented. it is noteworthy that neither legal nor economic science provides a single understanding of the causes of the occurrence and spread of the phenomenon of economic shadowing. taking into account the development of economic doctrines, it is established that the reasons reflect the main features of the concept of “shadowing of the economy”. in general, the issue of preconditions for the existence of a “shadow economy” and “shadowing” is manifested in the fact that the institutionalization of informal manifestations in the economy is the basis for their legal formulation and recognition by legal economic institutions, without realizing the need to characterize shadowing as a threat. along with this, it is necessary to recognize the starting positions and differences in the realities of modern ukraine and the characteristics of the object of experimental study, since there are “restrictive” and “expanding” interpretations of the shadow economy and the shadowing of the economy, which identify the analysed concepts. in “restrictive” interpretations, “shadow economy and economic shadowing” are interpreted as dysfunction, deviation, pathological deviation or as a separate feature of the economic life of underdeveloped countries. by “expanding” interpretation, manifestations of these phenomena can be found in developed economic systems as a dogmatic component at all stages of the development of the economic life of mankind. the main gaps are the following provisions of the analysed doctrines, according to which the administrative management of the economy is the reason for the spread of the analysed phenomena; as a result, the main ways of eliminating the determinants are to reform management system, strengthen institutional capacities of certain bodies of state power, and so on. at the same time, under such conditions, in opposition to the shadowing of the economy, the decisive place is devoted to administrative and legal provision. the practical significance of obtained results is to formulate a hypothesis that provides a comprehensive, systematic vision of the determinants of economic shadowing, and in particular, an approach to establishing a ratio of the shadow economy and the shadowing of the economy, which will enable to identify and systematize the determinants of shadowing. at the same time, the correlation of these phenomena with general criminality, including organized crime in the sphere of economy, corruption, and other offenses in the sphere of the economy should also be taken into account. having determined that all these phenomena are not some kind of “components”, “sources”, “sectors”, “types” of the shadow economy, namely, their commitment in the “plane” or “sphere” of the economy shadows it. specifying the types of determinants in accordance with the above list can be recognized as the task of the corresponding sciences baltic journal of economic studies 303 vol. 4, no. 3, 2018 and should be carried out within the limits of separate researches. methodology. the methodological basis of research is the use of the systemic method of scientific knowledge, which allowed forming an approach at which the meaning of the concepts of “shadow economy” and “economic shadowing” is formed in accordance with causes, conditions, and consequences (determinants), which respectively are a subsystem of national security. this conclusion is proved in the process of scientific research and forms the path of practical (praxeological) confirmation of the proposed hypothesis. key words: shadow economy, economic shadowing, national security, causes of economic shadowing, conditions of economic shadowing, economic crime. jel classification: o17, f52 1. introduction a significant number of monographic works are devoted to the study of the shadow economy; in fact, each publication in this direction primarily considers the issue of its causes, determinants. this is logical since the effectiveness of ensuring the impact on any phenomenon directly depends on the correctness of the determination of determinants, which lead both to its formation and to quantitative and qualitative changes. it is necessary to choose correct vectors of influence on these determinants. as in the case of studying the concept of the shadow economy and the shadowing of the economy, as well as studying the determinants of shadowing, there is no single vision of their system, even more likely, the impossibility of their unambiguous, exhaustive formulation is more clearly realized. actually, this is an issue of studying the general “causality” and “determination” of any complex phenomena, economic-social, legal, political, etc. however, this situation does not eliminate the need for a given stage of scientific research, taking into account and within the scope of a particular work. 2. the lexical essence and the general problematics of approaches to the causality of economic shadowing different terms are used in the professional literature to characterize the process of the origin and development of the phenomenon of shadowing and the functioning (existence) of the shadow economy itself. scientists investigate the causes, consequences, conditions, determinants, factors, risks, factors, which, in particular, are related to the lexical meanings of the above words, which are used in dictionary reference books as close by meaning. for example, determinant – any reason or such that precedes, a condition or means. in turn, condition – necessary circumstance that enables conducting, creating, forming anything or promotes something; circumstances, features of the reality, in which something happens, something is done; a set of specified provisions that underlie something. the reason is a phenomenon that causes or continues another phenomenon. the opposite is a consequence; the basis, a cause for any actions, goings. the difficulty in clearly demarcating the said words in their lexical meaning raises the problems of distinguishing the concepts, in which they are based. the similarity of the above concepts produces a variant reading in the formation of scientific terminology used in the study of processes and phenomena, the possibility of their use depending on the author’s approach, which is based on signs that are most significant within the framework of concrete work. therefore, it is still difficult to expect unambiguousness and clarity in the construction of a general conceptual framework that can describe and clearly distinguish between causes, conditions, factors, determinants, factors of the shadow economy or the economic shadowing. however, this does not mean that there is no need to strive for this. an example of solving the outlined problem is the method used in rulemaking in the early nineties of the last century when the first laws were adopted for the settlement of new economic and political relations. accordingly, during the formation of legal acts regulating various spheres of public relations, the requirement of a general policy of law-making activity aimed at the creation of reference books was respected. the research of the conditions (causes) of the emergence and development of the phenomenon of “shadowing of the economy” was paid attention by many scientists, among them – winners of the nobel prize. at the same time, their scientific search was aimed primarily at solving the issues of the development of the economy itself by identifying the conditions of the person’s inappropriate behaviour, the degree of state interference in the economy, the institutionalization of informal (not legalized) relations, neo-institutionalization, etc. 3. prerequisites for the formation of a deterministic complex of economic shadowing the diversity of approaches to determining the causes of economic shadowing can be traced in their range – sociological, legal, economic, psychological, political, etc.; from the allocation of “deep” reasons, consisting in an affirmative answer to the question “are they in the baltic journal of economic studies 304 vol. 4, no. 3, 2018 human nature, the interest of citizens to get profit and abnormal profit in any way?” (ispravnikov, kulikov, 1997) or the formulation of general phrases about “excessive regulation of the economy” and “pressure from the state on the economy – free by its nature, selfsufficient with regard to the possibilities of regulatory methods” to the focus on a complex of causes of different origins, of which there are those that are included in the subject of the author’s search, determined by the methodology of science, within which it is conducted. thus, as an object of scientific research, “shadow relations” in the economy are actively formed since 1970 based on studies of k. hart about the informal sector of the economy of ghana, namely, informal employment (hart, 1973). income classification proposed by the english sociologist has become the basis for the classification of shadow economic activity (or sources, types, sectors of the shadow economy, as some scholars point out) (popovych, 2001). at the same time, it should be noted that the scholar rethinks the state of employment of the population and the conditions that have led to such a state, named “underdevelopment of the economy of the third world countries.” as s.yu. borsukova specifies, k . hart, being the author of the concept of the informal economy, enlisted to it only unregulated self-employment, and later he recognized the evolution of this concept and pointed that the informal economy in modern conditions (2006 year) can be considered as a universal quality of industrial countries and includes the range from the domestic self-sufficiency to the criminalization of the economy (barsukova, 2008). accordingly, even the abovementioned provisions allow drawing a conclusion on the development of the scientific knowledge of such a phenomenon, which today belongs to the shadow economy, changes in the allocation of its obligatory features even by the same scholar, whose work is the basis for many modern studies. also, a change in the views of the scholar on the main cause of the economic shadowing is obvious, as the previously described “underdevelopment of the economy of the third world countries” is no longer possible to explain this phenomenon. the recognition of the existence of the shadow economy as a consequence of the deformation or underdevelopment of the legal economy not only in the economically backward countries but also in the highly developed countries such as the usa, is associated with the publications of the american economist p. gutmann (“the subterranean economy”, 1977) who drew attention to the need to calculate its scale in comparison with gross national product (gutmann, 1977). at the same time, the basis for the formation of the author’s approach to the concept of the shadow economy was the desire to correlate the official registered economic activity and real economic activity. this approach illustrates the attempt to determine the criterion for distinguishing between the shadow and the “real” economy and the ratio of state-regulated economic processes and processes that are not subject to such regulation. according to this approach, the reason for the existence of the shadow sector in the us economy was the lack of registration of certain types of activities, and the prerequisite was the need to assess the effectiveness of the national economy. american sociologist e. feig estimated the scale of the shadow economy in 1979 at the level of one third of the gross national product, pointed out that the shadow economy is all economic activity, which for whatever reason is not taken into account and does not fall into the gross national product (economic security, 2009). it should be noted that now the given approach with some clarifications is used to assess the share of the shadow sector in national economies of many countries. evaluating the achievements of the scholar, the collective of authors of the monograph “shadow economy: the essence, features, and ways of legalization” under the general editorship of z.s. varnalii points out that the basis of e. feig’s model is the assumption that the historical development of society is associated with the gradual increase of state regulation of economic life and, accordingly, the “expansion” of the economy as a reaction to the challenge of “apparatus of violence” by the state (shadow economy: the essence, features, and ways of legalization, 2006). the urgency of this approach is determined by the existence of certain stages of the evolution of our state as a legal one, in particular, the path of its development, which lies between unregulated market capitalism of the xix century – the early xx century and a totalitarian administrative model (avrutin, 2005). now in the conditions of a market economy, the qualitative result of economic modernization is a real reduction of economic and social gaps between ukraine and countries with developed market economies, and the indicator of the success of such a process is the reduction of ukraine’s lagging by gdp per capita from developed countries and increase in human development index (course of administrative law of ukraine, 2012). emphasizing the condition of the emergence of the phenomenon of “shadow economy” and the actual development of the phenomenon of “shadowing” as “the expansion of the sphere of state regulation” (in accordance with the above provisions of the doctrine of e. feig), it should be noted that such regulation should be recognized as a prerequisite precondition first of all with the elimination of the so-called root cause – the lack of legal norms’ ordering of economic relations (their part). consequently, the transition is actually made from the statement of the appearance of the phenomenon of “shadow economy” in connection with the presence of unregulated activity (the root cause identified by e. feig) to the formation of another root cause and, baltic journal of economic studies 305 vol. 4, no. 3, 2018 accordingly, the change of the first, the next reason for shadowing is excessive regulation, which is regarded as a pressure on economic entities. therefore, they say, trying to overcome one “evil”, one managed to form “another”. the above provides an opportunity to point out certain patterns of formation and interoperation of the determinants of the economic shadowing and indicates the relevance of conclusions about the impossibility of a priori statement of the problem of “elimination” of the causes of shadowing. a slightly different approach has been formed by peruvian economist h. de soto, who points out that the main reason for the expansion of the “urban” informal sector and the shadow economy is, in general, not the backwardness of migrants from rural areas, who seem to be unable to find their place in the legal sector, but bureaucratic excessive organization, which hinders the free development of competitive relations. an important conclusion of the scholar today is that the subjects of the shadow economy are establishing a genuine democratic economic order by organizing their private economy on the principles of free competition (latov, nestik, 2002). this conclusion once again confirms and clarifies the approach to the occurrence of the considered phenomena as a result of state regulation and dominance (primariness) of economic relations. one should agree that the institutionalization of informal manifestations in the economy (emergence of informal economic relations) is the basis for their legal registration and recognition by legal economic institutions. despite the great value of the provisions laid down by the scholars, it should be pointed out that taking into account the achievements of this research in the domestic legal field should occur with the awareness of its starting positions and differences in the realities of modern ukraine and the characteristics of the object of experimental study, on the basis of which the author’s conclusions were formulated. absolutisation of such conclusions, “pulling them out of the specified context” is inappropriate. it should be noted that the positive attitude to the shadow economy leads to the recognition of its right to exist and develop. as a result, there are “restrictive” and “expanding” interpretations of the shadow economy. in “restrictive” interpretations, the shadow economy is interpreted as dysfunction, deviation, pathological deviation, or as an isolated feature of the economic life. shadow economy is considered to be a phenomenon typical for the economies of the third world, respectively, the restriction and disappearance of the shadow economy is associated with overcoming the low level of development, poverty, lowering the level of state regulation of economic life (tiugashev, 2007). such provisions are unlikely to be consistent with the logic of the study of the abovementioned phenomenon, once again testifying to the problems in relation to the lack of separation of the phenomena of the shadow economy and shadowing. consequently, the conclusions are made that the reason for shadowing is the low level of development, poverty, and the reduction of the level of state regulation of economic life. in this case, it is more appropriate to say that the shadow economy is one of the factors that negatively influence the possibility of implementing a state policy on the reform of the administrative system, the civil service, and other processes (bytiak, 1999). in the “expansive” interpretation, manifestations of the shadow economy can be found both in developed economic systems and in the historical past. the shadow economy is interpreted as a kind of constant at all stages of the development of the economic life of mankind (tiugashev, 2007). criticizing this approach, first of all, it should be pointed out that “shadow economy” is identified with the causes of “economic shadowing” since the deviation from the generally accepted standard of behaviour is actually the cause, not the consequence or result. another renowned scholar, joseph e. stiglitz, points out that individuals and firms will better plan and implement their activities if they can accurately predict what the state (government) is going to do. one of the main uncertainties that business faces is the uncertainty associated with knowing the steps that the government will take. the state defines “rules of the game” and, at the same time, is obliged to control the implementation of these rules by all economic actors; it is actually a systemic function of the state. both business and the state are striving to maximize their revenues. theoretically, business does not need to “go into the shadow,” if there is no withdrawal from the state, and problems with the distribution of its income do not arise. however, uncertainty and risk are related not only to the incomprehensibility of the rates of business income distribution, which is set by the state. in the hypothetical absence of withdrawals, uncertainties and risks are rising in connection with the withdrawal of the state from the system of establishing “rules of the game” and statutory regulation of entrepreneurial activity (stiglitz, 1997). for the given interpretation of the reasons for the economic shadowing, it should be noted that the researcher emphasizes the mutual balance of formally regulated economic activity and informal one, however, this statement seems valuable and practically applicable in countries with already formed legal traditions and a high level of legal culture. at the same time, in these countries, economic relations are less formalized than in ukraine since competent entities in many cases can assess the level of economic and legal consciousness of a person (economic agent). some authors, in particular o.v. kostin, describing the criminal and unconsidered economic activity as sectors of the shadow economy, divide the reasons for its occurrence depending on the sector: in relation to the baltic journal of economic studies 306 vol. 4, no. 3, 2018 unconsidered economy – the reduction of tax burden and expenses for legalization, and for criminal economic activity – the avoidance of criminal punishment. the scholar also points out the common reasons that, in his words, are simultaneously factors of the shadow economy’s change: corruptions and bureaucracy, which hinder the implementation of legal actions (kostin, 2011). famous criminologist, professor v.v. luneev, describing the shadow economy, notes that it is available in all countries of the world only with its peculiarities of the scope, forms of implementation, and the level of social and legal control over it. in this case, the scientist notes the practical limitless forms of its implementation and calls the main reasons for its magnitude as the criminalization of privatization, which pushed a significant part of production into the shadow, and the lack of a basic legal order in the country’s economy. however, continuing, the scientist said about the expediency of characterization in the criminological purposes of its two features – destructiveness and wrongdoing (luneev, 2004). shadow economy as a prerequisite for economic crime is considered in the works of the group of criminologists, in particular, a.m. boiko calls the shadow economy an integral part of the determinating complex of economic crime (boiko, 2008), although the work of the latter does not consider criteria for the delimitation of these phenomena. in view of this, an attempt to investigate the cause-effect relationship between these autonomous phenomena seems somewhat questionable. in addition, the accumulation of “unaccounted capital” occurs as a result of the crime commission, and not vice versa. this reflects the sequence of such an approach, in which the shadow economy is considered as a consequence, the result of the shadowing process, that is, the activities in the economic sphere with a violation. as noted above, there are opposing views on the appropriateness of speaking about any offenses other than criminal ones, considering issues of the meaning of the concept of the shadow economy and its determinants. in addition, in the process of scientific inquiry, researchers are limited to indicating the relationship of offenses and the shadow economy, without defining the nature of such interconnection, individual scientists in general use within the same work different approaches to establishing the correlation of these phenomena. some characterize offenses (while limited to crimes only) in the field of the economy as a shadow economy. such discrepancies are associated with certain miscalculations due to the lack of a consistent approach to the definition of the shadow economy and the determinants of economic shadowing, as well as in connection with the attempt to compare the concepts and categories of different origins, artificially forming the signs for such a comparison. the complexity, the systemic nature of the phenomena the researchers are talking about is only stated in the works, which sometimes leads to unreadiness to argue the author’s conclusions about the significance of their characteristics. it should be noted that in the basis of these and other, so-called “criminological” approaches, are the scientific achievements of g.s. becker, who identified the main cause of shadowing strictly as the purpose of economic behaviour of a person, aimed at satisfying economic interest (benefits) (becker, 1968). the above gave an opportunity to consider the acquisitive crime as the reason for the shadow economy (existence or spreading, distribution). given the special social harm of crime, it is they that determine the level of threat to national interests. however, if criminal offenses fall under well-regulated national records, then other non-criminal (including partly administrative, characterized by a small degree of social harm) are not accounted for so carefully. there is no generalized data on these violations in the open access; they are conducted by individual entities according to their activities. at the same time, the reasons that are typical for the spread of crime, coincide with the causes of economic shadowing and are complemented by the peculiarities of determination peculiar for administrative delinquency (misconduct). to the established author’s approach, it should be noted that the reasons for the activity that shadows the economy are those that are related to the result – the emergence of a material result, which will have signs – violations of the legal norm (prescription) and the absence of reflection in the gross domestic product. the concept of a socially oriented market economy, which has gained practical implementation in most developed countries of europe, attracts attention and is of particular interest for the formation of the opinion of scholars today when economic systems of post-socialist countries are beginning to transform into market relations. in accordance with this concept, the main task of the state is to create normal conditions for the functioning of all business entities, taking into account that the basis of the economic phenomenon of entrepreneurship is the ability to create new opportunities out of the very fact of change. beyond the current state of the market development, the entrepreneur gets the chance to use this advantage in order to provide for a certain period of time profits as a result of the jump in production. this ability is characteristic only for the economically active population (liashenko, berezhnaia, 2009). an example is the spread of economic relationships in a relatively new way of calculating – with the help of cryptocurrency. at the same time, the development of the so-called “informal relations” now shadows a significant part of the world economy, exceeding the “income” from arms trafficking and drug trafficking. baltic journal of economic studies 307 vol. 4, no. 3, 2018 thus, in his speech, the head of the central bank of nigeria expressed legitimate concerns about the choice of an official position in relation to “digital currencies” since decentralized cryptocurrency, for example, bitcoin, at the moment provides for the possession of personal property that has no restrictions and cannot be confiscated. on this occasion, the official stressed the need to guide the regulatory policy in this direction (central bank of nigeria: cryptocurrency wave cannot be stopped, 2018). the given example gives an opportunity to talk about such ways of economic shadowing, which are actually not connected with violations of the established legal requirements of carrying out activities in the economic sphere but are determined by the absence of such legal regulation. accordingly, it is proposed to counteract shadowing by regulating these relationships. in this way, the leading countries of the world are already operating, while choosing whether to formulate rules of prohibition, recognizing such activity as illegal, or defining the concept of “cryptocurrency” and imposing requirements for its circulation at a level of another currency. 4. conclusions summing up the description of approaches to the allocation of determinants of economic shadowing, depending on the chosen approach to the definition of the concept or some features of the shadow economy, one can point out that they are logically based primarily on studies of foreign scholars. accordingly, they relate to certain conditions, in which they were carried out, and the time period, within which they were carried out and, therefore, were rethought by domestic scientists, mostly enlarged, supplemented. at the same time, unfortunately, it is sometimes possible to state that such an expansion occurred with losses in their system. realizing the need to move away from the vastness of introducing the causes and conditions of shadowing, the need to allocate them more specifically, in order to develop adequate measures of influence, scientists form the basic practices that are sometimes reflected in the regulatory acts, however, as a rule, subordinate. it is advisable to support a (broadside) approach to defining the concept of “shadow economy”, in which this is the activity in the economy aimed at obtaining a material result that is not reflected (not accounted for, not controlled) and is not included in gdp. important is the allocation during the formation of the determination complex of the following determinants that impede such a reflection (accounting, control) and inclusion in gdp. (or they lead to the fact that the activity in the economic field aimed at obtaining a material result is not reflected (not accounted, not controlled) and is not included in the gdp.) accordingly, in connection with the development of such determinants, economic shadowing is taking place – the process of transformation of the economy, in which the material results of activities in the economic field are not legal (that is, dynamics, while if legalized – statics). such a process, provided that it reaches a critical level, poses a threat to economic security. it is decisive that the transformation of the economy takes place by violating the requirements established by legal rules for activities in the field of economy, aimed at obtaining a material result. this approach deepens existing scientific approaches to the concepts of the shadow economy and the shadowing of the economy, reflects the dynamic nature of the processes associated with the economic shadowing. the scientific approaches that were considered envisaged the perception of the shadow economy mainly from the point of view of statics since the static perception of a certain legal phenomenon makes it possible to distinguish its structure. the domination of such an approach is related to the priority task of knowing this phenomenon in previous periods – the definition of the level of the shadow economy in relation to the economy – and the attempt to establish, at which level the threat to national security is formed. in this case, the role of the hypothesis is played by the assertion that economic science, despite the awareness of the need for the development of a dynamic theory, is predominantly static. this statement is still relevant to the established subject of the study. taking into account the dynamics of a certain phenomenon of social reality involves knowledge of the development of a definite structure in social existence. the holistic perception of any social phenomenon, the disclosure of its legal nature involves a logical-semantic connection between the statics and the dynamics of this phenomenon. the advantage of the formed author’s position is a combination of statics and dynamics, which made it possible to analyse the issue of administrative and legal support for counteracting the economic shadowing using the ordering potential of administrative law science and allows covering by scientific analysis social processes in a combination of their social content and legal form. the given approach to the establishment of the ratio of the shadow economy and the shadowing of the economy makes it possible to systematize the determinants of shadowing. at the same time, the correlation of these phenomena with general criminality, including organized one, another crime in the sphere of economy, corruption, and other offenses in the sphere of the economy should be taken into account. having determined that all these phenomena are not some kind of “components”, “sources”, “sectors”, “types” of the shadow economy, namely, their commission in the “plane” or “sphere” of the economy shadows it, it is possible to distinguish three main groups of determinants: 1) social; 2) economic; 3) legal. specifying the types of determinants in accordance with the above list can be recognized as the task of the corresponding sciences and should be carried out within the limits of separate researches. baltic journal of economic studies 308 vol. 4, no. 3, 2018 references: ispravnikov v.o., kulikov v.v. (1997). shadow economy in russia: a new way and a third force. m.: ekonomika, 192 p. hart k. (1973). informal income opportunities and urban employment in ghana. journal of modern african studies. vol. 11, pp. 61-90. popovych v.m. (2001). economic and criminological theory of unshadowing of the economy: monograph. irpin: national academy of sbgs of ukraine named after bohdan khmelnytskyi, 524 p. barsukova s.yu. (2008). talk about “shadow” without mudding the water. economic sociology. vol. 9. iss. 1, pp. 125-131. gutmann p. (1977). the subterranean economy. financial analysts journal. vol. 33, pp. 24-27. varnalii z.s. (2009). economic security: study guide. k.: znannia, 647 p. varnalii z.s. (2006). shadow economy: the essence, features, and ways of legalization. k.: niss, 576 p. avrutin m.yu. (2005). administrative and legal regulation in the electric power industry of the economy of the russian federation: thesis for cand. sc. ( jurisprudence). m., 239 p. kolpakov v.k., kuzmenko o.v., pastukh i.d., sushchenko v.d. et al. (2012). the course of administrative law of ukraine: textbook. k.: yurinkom inter, 808 p. latov yu.v., nestik t.a. (2002). “bad” laws or cultural traditions? social sciences and contemporary world. iss. 5, pp. 35-47. tiugashev e.a. (2007). the shadow economy and corruption: overcoming the axiological interpretations. state policy against corruption and the shadow economy in russia: materials of the all-russian scientific conference (moscow, 6 june 2007). m.: nauchnyi ekspert, pp. 382-393. bytiak yu.p. (1999). updating the essence of activities of executive bodies – the main objective of the administrative reform in ukraine. journal of the national academy of legal sciences of ukraine. iss. 4, pp. 10-19. stiglitz j.e. (1997). economics of the public sector; transl. from english. m.: msu press, infra-m, 720 p. kostin a.v. (2011). experience in measuring the shadow economy in western literature. vestnik of novosibirsk state university. vol. 11, pp. 33-43. luneev v.v. (2004). shadow economy: criminological aspect. society and economy. iss. 2, pp. 100-106. boiko a.m. (2008). organized economic crime during the transition of ukraine to a market economy. visnyk of the lviv university. series “law”. iss. 46, pp. 169-177. becker g.s. (1968). crime and punishment: an economic approach. journal of political economy. vol. 76, № 2, pp. 169-217. liashenko v.i., berezhnaia t.f. (2009). support for small business in countries of north america: study guide. luhansk: publishing house of luhansk taras shevchenko national university, 364 p. central bank of nigeria: cryptocurrency wave cannot be stopped. url: http://coinews.io/ua/category/ 1-kripto/article/892-central'nij-bank-nіgerії:-kriptovaljutnu-hvilju-zupiniti-nemozhlivo baltic journal of economic studies 379 vol. 4, no. 5, 2018 corresponding author: 1 national university “odessa law academy” e-mail: fedotov_ap@ukr.net 2 e-mail: lightstarpro@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-379-386 organizational and legal regulation of the financial sector of the economy amid european integration oleksii fedotov1, svetlana levchenko2 abstract. financial sector development depends on the efficiency of its regulatory mechanisms that should correspond to the directions of implementation of state financial policy, which is aimed at the support for economic stability, protection of interests of participants in financial markets, and provision of rational use of growing financial market potential. introduction of the mechanism of organisational and legal regulation is able to implement a complex approach to the application of various methods, means, other regulators on processes of effective formation and use of state financial resources in order to ensure their coordination and correspondence to strategic development priorities of the state. the purpose of the article is to substantiate features of organisational and legal regulation of the financial sector of the economy of eu countries and ukraine, identify the main directions for reformation and recommendations for its improvement in the context of european integration trends and the possibility of securing competitive positions of ukraine in the international market. the most widespread in the world are two models for regulating the financial sector’s activity – sectoral model and mega-regulator model. in the sectoral model, functions of public authorities are distributed according to three financial sectors (banking, insurance, stock). the model of mega-regulator determines the peculiarities of establishing a single authority endowed with functions of supervision and regulation of the financial sector. at the modern state of countries’ development, the main methods and forms of state regulation of the financial sector are determined by direct (development and adoption of laws and regulations, licensing of the activities, supervisory activities and implementation of measures of supervision of financial institutions) and indirect (changes in the volume of cash resources, securities issue, interest policy, provision of guarantees on fulfilment of obligations for securities of separate issuers, encouragement of foreign relations with international financial organisations) influence. financial sector regulation in the eu and ukraine is carried out according to the sectoral model where banking activities are subject to the central bank; activities in the market for securities are regulated by the national securities and stock market commission; activities of other financial intermediaries and financial companies are regulated by the national commission for state regulation of financial services markets. results of the research conducted allow determining the features of state regulation of the financial sector of the economy of ukraine: the lack of legislative environment for regulating the financial status at the macrolevel and microlevel; provisions of the existing regulatory framework are aimed at the regulation of economic security; the absence of strategic benchmarks fixed in long-term documents for ensuring financial development of the country and the economic development of financial institutions; the presence of several regulators of the state of the financial system that duplicates functions and causes inefficient work; information closeness of regulators of financial market and financial system regarding the results of their work on ensuring the financial stability of the state. in order to improve rating positions and competitive advantages of ukraine in global markets, it is necessary to develop additive legal framework and state support program for export-oriented enterprises for the promotion of export of finished products with high added value; start the policy of expansion on the basis of expansion of both geographical and commodity structure of exports. key words: financial sector, state regulation, state supervision, legal framework, financial institutions, competitiveness, european integration. jel classification: e44, e62, f36, k33 baltic journal of economic studies 380 vol. 4, no. 5, 2018 1. introduction in terms of dynamic changes in the world economy under the influence of crisis phenomena, the need arises to improve the activity of the financial sector that is one of the basic elements of the existence of each state. stable functioning of the financial sector is one of the factors stimulating the country’s dynamic development. financial sector development depends on the efficiency of its regulatory mechanisms that should correspond to the directions of implementation of state financial policy, which is aimed at the support for economic stability, protection of interests of participants in financial markets, and provision of rational use of growing financial market potential. in modern times, the development of the financial sector of the state depends on its institutional structure, and how clearly the tasks of organizational and legal regulation are defined. therefore, improving the mechanism of organizational and legal regulation of the financial sector should be system and based on the sustainable methodological basis of the institutional approach. introduction of the mechanism of organisational and legal regulation is able to implement a complex approach to the application of various methods, means, other regulators on processes of effective formation and use of state financial resources in order to ensure their coordination and correspondence to strategic development priorities of the state. one of the key strategic priorities of the state is to establish parity boundaries of competitiveness in the european market. given the fact that competitiveness of the economy is a multifaceted, complex, and systemic concept, it is common ground among scholars to distinguish two basic approaches to its interpretation. in the first case, competitiveness is understood as an ability of the state economic system in a free competitive environment to satisfy internal and external market needs and ensure long-term economic growth. within the second definition, competitive advantages of the national economy are manifested exclusively in international markets and to some extent provide the country’s leadership (skrypnyk, khyryuddinov, 2016). the purpose of the article is to substantiate features of the organisational and legal regulation of the financial sector of the economy of eu countries and ukraine, identify the main directions for reformation and recommendations for its improvement in the context of european integration trends and the possibility of securing competitive positions of ukraine in the international market. financial market development depends on the efficiency of relations in the system “state – financial market participants”. the realisation of such relations on the part of the state should be carried out through the organisational-institutional mechanism that is based on a combination of market laws and administrative foundations of state regulation in order to achieve a certain goal. 2. the methodology of research at the modern state of functioning of the economy of ukraine, development of the financial sector is determined by the perfection of its regulatory system. because, taking into account regulatory mechanisms of the state financial sector, regulators are created that should coordinate actions regarding the regulation and control of the activities of financial sector entities and the availability and compliance with international norms of other infrastructural elements (rekunenko, 2013). the experience of european countries in ensuring, in particular, public administration in the area of the formation of the eu stock market, is a particularly important factor in the progressive movement of the economy of any state. a conscious and consistent approximation to the eu legal acts regulating activities in the sphere of the formation of the eu stock market is a prerequisite for the countries on the way toward the european union. a large number of scientists considering issues of financial, legal, and regulatory control of the state focused their research on different directions. let us outline the main recent vectors of the scientific opinion regarding the consideration of the problems of regulation of the financial sector of the economy. a number of studies of the following authors are devoted to the analysis of mechanisms for the creation and development of the stock market, the principles of its functioning and organization. m. barnier, european commissioner for internal trade (the new european, 2017), r . healey, w. rhode, m. mizen studied the issue of derivative regulatory instruments in european markets (deriv alert, 2015); oslund a. considered the cause and consequences of financial market crises that arose in the usa; eteris y. u. considered the economiclegal patterns of development and functioning of the financial market in the baltic states (eteris, 2018). however, the dynamics of changes in the world and ukrainian economic, political, and legal space are so fast and multifaceted that it requires constant refinement, new research and new recommendations regarding the development and implementation of organizational and legal mechanisms for regulating the financial sector of the economy in the context of european integration. two models for regulating the financial sector’s activity remain the most widespread – sectoral model and mega-regulator model. in the sectoral model, functions of public authorities are distributed according to three financial sectors (banking, insurance, stock). mega-regulator model determines the peculiarities of establishing a single authority endowed with functions of supervision and regulation of the financial sector. the most perfect model is the british mega-regulator model, which combines the functions of supervision and control over investment, banking, mortgage, and baltic journal of economic studies 381 vol. 4, no. 5, 2018 insurance services. in france, banking supervision and supervision over non-bank financial institutions are divided between the bank of france and a specially created regulatory body. in germany, the regulatory model is similar to french, but there are banks in the regulatory area (bondarenko, 2018). at the modern stage, in the eu countries and most economically developed countries (canada, japan, great britain, france) and ukraine, the main methods and forms of state regulation of the financial sector are determined by direct (development and adoption of laws and regulations, licensing of the activities, supervisory activities, and implementation of measures of supervision of financial institutions) and indirect (changes in the volume of cash resources, securities issue, interest policy, provision of guarantees on fulfilment of obligations for securities of separate issuers, encouragement of foreign relations with international financial organisations) influence. financial sector regulation is carried out according to the sectoral model where banking activities are subject to the central bank; activities in the market for securities are regulated by the national securities and stock market commission; activities of other financial intermediaries and financial companies are regulated by the national commission for state regulation of financial services markets. the global financial crisis has proved the need to revise the peculiarities of the functioning of financial sector regulators since it has revealed their weakness in preventing crises in financial markets. meanwhile, the institutional features of the evolution and formation of the financial market determine the need for further study of the functions and role of organizational and legal regulation of the financial sector and the development of effective mechanisms for its implementation in the context of european integration tendencies. for studying the public administration system in the field of the formation of the stock market of the eu countries, there is a well-developed source base. it is a systematic array of relevant legislation of the european union. first of all – the treaty establishing the european community (1957) and the treaty on european union (maastricht, february 7, 1992), the next are – regulation (eu) no. 1095/2010 of the european parliament and of the council of 24 november 2010 establishing a european supervisory authority (regulation (eu), 2010), directive 2004/39/ec of the european parliament and of the council of 21 april 2004 on markets in financial instruments amending council directives 85/611/eec and 93/6/eec (directive 2004/39/ec), european parliament resolution of 9 october 2008 with recommendations to the commission on lamfalussy follow-up: future structure of supervision (2008/2148(ini)) (directive 2004/39/ec) and so on. mechanisms of organizational and legal regulation of the financial sector should concern not only the rational formation, distribution, and use of financial resources between its elements but also serve as a means of formation of the institutional and legal environment, which will promote consistent changes in the legislative framework, improvement of the legal framework, development of financial institutions. in ukraine, the period of the reform of institutional support and the formation of new effective mechanisms of functioning of the economy is ongoing. the existing organizational, legal, and economic institutions of market orientation are being developed and new ones are being created. the application of the institutional approach to regulating the financial sector of the economy makes it possible to comprehensively consider the possibility of its functioning, and organizational and institutional regulation can strengthen the ability of participants to fruitful interaction. the most important institutes forming the external institutional environment of the financial sector of the economy are (bondarenko, 2018): – institute of law regulating legal relations in sectors of the financial market; – the market institute that regulates the interactions that occur between participants in the process of buying and selling financial assets; – institute of taxes, which determines the economiclegal relationship between financial institutions and the state; – institute of public choice that regulates the process of making macroeconomic decisions in conditions of representative democracy; – institute of education, which forms the appropriate skill level of specialists for the modern financial market; – institute of foreign economic relations, which regulates the financial and legal processes of interaction of domestic institutions with the world financial system. the development and implementation of a comprehensive system of regulation of the financial sector of the economy, the use of micro-and macroprudential supervision as the sole mechanism for influencing the activities of financial institutions are designed to solve the problems of the financial system of the country (melykh, 2013). in the report “de lazorier’s report”, presented on february 25, 2009, the high level group (the group of highly qualified experts convened by the president of the european commission j. barroso in 2008) recommended strengthening the principles of financial system supervision in order to reduce the risks and burdens of future financial crises. in particular, it was recommended to reform the structure of supervision of the financial sector in the eu. the level of its development required a significant convergence between member states to develop common technical standards for market participants, as well as to establish a mechanism for coordinating national coordinators. the latter would baltic journal of economic studies 382 vol. 4, no. 5, 2018 make it possible to quickly apply the rules made by regulators at the national financial levels of all eu member states and significantly reduce the period of review in the european court, ensuring prompt response to adverse events in the market. the high level group has come to the conclusion that the european financial supervision system should be set up in three european supervisory bodies, one for each sector: banking, securities, insurance and professional sector of pensions. the creation of the european systemic risk board was also recommended. experts insisted that these reforms and actions are urgently needed. consequently, in the context of the global financial and economic crisis, the european union finally abandoned the liberalization of the free financial market in favour of strict control by regulators at both the state and pan-european level. since it is not possible to predict the end of the crisis, eu finance ministers considered it useful to follow the example of the usa: they allowed their banks to reclassif y assets in order to create equal conditions for european and american financial institutions. accordingly, at this time, the legal influence of europe on the part of the system of governing bodies was changed: there was a gradual transition from the dispositive method of legal regulation of this sphere of social relations to the imperative method. based on the report of the expert group, the european commission made proposals on creating a new system of control and supervision of the financial market in europe. in september 2010, the european parliament voted in favour of its implementation and created four new supranational regulators, which came into operation on january 1, 2011, – the european securities and markets authority, the european insurance and occupational pensions authority, the european banking authority; an advisory and analytical body was also created – the european systemic risk board. therefore, these four authorities constitute today the european system of financial supervision. based on members of these regulators, the joint committee is formed, which should meet at least every two months and produce a coordinated program of action and a common position on the regulation of the activities of financial conglomerates. for the harmonious integration of ukraine in the eu in the economic and legal framework, it is necessary to perform a number of commitments already declared by the country’s leadership. a list of eu directives to be implemented in ukraine over a period of 5 years relates to the development of banking, insurance, securities market, co-investment, market infrastructure, antimoney laundering measures, providing free movement of funds and capitals. so, from the whole list of regulatory acts in the banking sector that ukraine needs to implement in the coming years, one of the main documents is directive 2006/48/ec of the european parliament and of the council of 14 june 2006 relating to the taking up and the pursuit of the business of credit institutions. in the insurance sphere, it is needed to implement directive 2009/138/ec of the european parliament and of the council of 25 november 2009 on the taking-up and pursuit of the business of insurance and reinsurance. in the financial market – to implement directive 2004/39/ec of the european parliament and of the council of 21 april 2004 on markets in financial instruments, and in the market for joint investment – directive 2009/65/ec of the european parliament and of the council of 13 july 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (verkhovna rada, 2011). based on these provisions, the comprehensive program of ukrainian financial sector development until 2020 was adopted on 18.06.2015. it includes in the regulatory work plan with a list of activities planned to be implemented, a plan of action for achieving such goals, the time frame, and those responsible for implementing these provisions. in order to achieve its goal and objectives, it provides for implementing the cooperation program with such institutions as the eu, imf, world bank, ebrd, eib, bis, iosco, iais, and other international financial organisations, associations, and regulators in the sphere of financial markets and services. 3. results and discussion expected from 01.09.2017, the entry into force of the association agreement between ukraine and the eu stipulates the necessity of finding and agreeing with partners the next steps of ukraine on the way toward its further integration in the european union structures. it is not known at this time what form will get further integration (customs union, common market, full integration with the subsequent acquisition of membership or some combination of these options), however, this movement will obviously continue, which actualises the issue of analysis of potential risks occurring on the further way of ukraine toward the structures of the european union. thus, further deepening of the integration of ukraine and the eu, besides unconditional advantages and additional opportunities in the economic and financial fields, has a set of specific risks that can appear in middle-term perspective. these risks, in particular, are as follows. at the end of 2013, at the level of the european union, a banking union was established, which united 130 largest eurozone banks out of 6 thousand eurozone banks and 8 thousand eu banks under the unified supervision system and provides for three baltic journal of economic studies 383 vol. 4, no. 5, 2018 basic principles of functioning (sharov o.m, 2016): the single banking supervisory system controlled by the ecb; the single mechanism for regulating bank failures with a special new fund for the reimbursement of customer losses; the general system of insurance of private bank deposits at the level of up to 100 thousand euros. herewith, the rest of the smaller banks remain under control of national regulators. the banking system of ukraine pales in comparison to banking systems of eu countries because it is actually at the basel i level while european countries have long since moved to the basel iii level. for example, the current legislation in ukraine substantially restricts the movement of capital both for residents and non-residents. in particular, natural and legal persons-residents of ukraine cannot freely open accounts abroad, send significant sums of currency outside ukraine without “valid” reasons (treatment, education, etc.). for investment abroad, residents should obtain special licenses of the nbu. in order to withdraw capital abroad, unscrupulous resident legal entities use a variety of “schemes”, the most common of which are fictitious exports and imports. in the first case, the enterprise deliberately sends a certain product abroad, having agreed in advance with the counterparty not to receive payment in ukraine, which “settled” on the accounts of the enterprise or its actual owners abroad. in the second case, the enterprise makes advance payment for a certain product abroad, in advance agreeing with the business partner that the goods, in fact, will not arrive in ukraine. in the framework of combating the outflow of capital abroad in this way, the nbu requires from all banks the monthly statistical reporting in the form no. 531 “report on residents – subjects of foreign economic activity, who exceeded the time limits set by the legislation for payments for export operations” that includes comprehensive information on the legal entity (exporter or importer) in order to further impose penal sanctions thereto. it is obvious that further deepening of eu-ukraine integration encourages ukraine to gradually abandon the strict control of capital movements and the substantial liberalization of currency legislation, as the eu did; however, we believe that it can provoke a significant outflow of capital in the short term. in its turn, it can negatively influence the currency rate dynamics by growing demand in the interbank currency market on the part of foreign investors who will wish to “exit” from ukraine. studying the formation and development of financial and political system of various countries allowed drawing conclusions that ensuring the self-sufficiency of the national economy and strengthening the level of competitiveness of the national economy and the proper positioning of ukraine in the coordinates of the world financial and economic space should be based on the principles of strict protectionism and implementation of the policy of “import substitution”, expansion of production of domestic goods and services, limitation of the supply of imported goods by the public administration sector. thus, at the expense of protectionist measures, it is possible to restore “stagnant” productions, which in turn will lead to an increase in the number of jobs with an appropriate level of remuneration (timoshenko, 2016). this measure will have a positive effect on the cessation of the mass emigration of highly skilled labour to the european union member states, which is determined by the adoption of a visa-free regime. using protectionist measures, namely administrative levers, it is possible to ensure the social security of low-income sections of the population, free education, medicine, etc. the author fully understands that on a world scale, in the long run, levers and measures of protectionist policy can lead to the historical collapse of the national economy; nevertheless, in the new economic reality in ukraine, these measures are important and argued (irrational import structure, “import substitution” policy of the russian federation, military-political conflict of ukraine, loss of the mainland territory of ukraine, ineffective quota system for agricultural products set by the european community, etc.). moreover, it cannot be ignored that today the overwhelming majority of countries in the world are also defending the position of protectionism. the influence of globalisation on the economy and financial sector of ukraine can be traced through intergovernmental comparisons and dynamics of the country’s place in world economic ratings. so, the index of globalization is indicative, which is based on the assessment of the level of international relations of the country, its integration and independence by 24 indicators broken down into three categories: economic, social, and political globalization. ukraine ranks 47th out of 207 countries with a score of 67.78%, in particular, 64th place by the economic component (64.84 points), 69th – by the social component (57.78 points), 42nd – by the political component (86.07 points). the situation has somewhat changed over the previous three years when the country has been steadily at the 44th place (the position of ukraine in the world ranking according to the global competitiveness index 2016-2017). another important rating of the country’s place in universal space is the global competitiveness index that is calculated by the methodology of the world economic forum since 2004 based on 113 indicators combined in 12 groups (the position of ukraine in the world ranking according to the global competitiveness index 2016-2017). one of the most essential institutional constraints on the accelerated economic development of ukraine, in particular, baltic journal of economic studies 384 vol. 4, no. 5, 2018 its financial sector, is a consolidation of informal relations and various manifestations of the shadow economy in the economic system and society. among international ratings, the situation is best reflected by the corruption perceptions index (gdp. the world bank, 2018). studies have been conducted since 2005 by transparency international on the basis of independent surveys of financial experts and human rights defenders and the study of public opinion. according to the results of 2014, ukraine ranked 144th among 182 countries, which is comparable with a number of low-income african economies (cameroon, congo, central african republic, syria, bangladesh). as can be seen from the data presented in table 1, during the analysed period, such countries as finland, the usa, singapore, sweden, and the netherlands occupy the leading positions in the international rating system according to the global competitiveness index. assessing the main sub-indices of this index, it can be argued that these countries position themselves as the main exporters of high-tech equipment and innovative products (timoshenko, 2016; gdp. the world bank, 2018). this reaffirms the direct dependence of the level of competitiveness on the country’s ability to innovate, on the quality of research institutes, on the share of companies’ spending on research and development in their overall structure, on the number of scientists and researchers in the country (the main component subindices “innovations and factors of improvement”). regarding the rating position of ukraine, during 2000–2017, under the global competitiveness index, it demonstrated wavering dynamics with a significant lag behind highly developed countries with significant competitive advantages. so, according to the world economic forum in 2017, ukraine ranked 85th among the 138 countries that took part in the rating, losing 6 positions in comparison with 2015 and 16 positions in comparison with 2001. the main reasons that hamper ukraine’s economic growth and significantly affect the regression by the global competitiveness index are as follows: 1. waste of state funds, abuse of authority, its corruption, and absence of regulatory mechanisms for creating a security environment (as for example, by the “institutions” component, ukraine occupied the 130th place in 2015 and 129th in 2017). according to the given sub-indicator, in the rating of the global competitiveness index, the ukrainian economy, with full responsibility, can be characterized as kleptocratic, when corruption and abuse are the basis of society ’s life. 2. by the “macroeconomic environment” component, in 2017 ukraine occupied the 128th place, which is 23 positions lower than in 2015. of great concern is the decline in rating positions by the indicators “inflation” and “government debt”; ta bl e 1 in te rn at io na l r at in g of le ad in g co un tr ie s ac co rd in g to th e g lo ba l c om pe ti ti ve ne ss in de x fo r 20 00 -2 01 6 № 20 00 –2 00 1 20 04 –2 00 5 20 09 –2 01 0 20 14 –2 01 5 20 15 –2 01 6 20 16 –2 01 7 1 fi nl an d 6, 03 fi nl an d 5, 94 sw itz er la nd 5, 63 sw itz er la nd 5, 70 sw itz er la nd 5, 76 sw itz er la nd 5, 81 2 u sa 5, 95 u sa 5, 81 sw ed en 5, 56 si ng ap or e 5, 65 si ng ap or e 5, 68 si ng ap or e 5, 72 3 c an ad a 5, 87 sw ed en 5, 65 si ng ap or e 5, 48 u sa 5, 54 u sa 5, 61 u sa 5, 70 4 si ng ap or e 5, 84 d en m ar k 5, 65 u sa 5, 43 fi nl an d 5, 50 g er m an y 5, 53 n et he rla nd s 5, 57 5 a us tr al ia 5, 74 ta iw an 5, 58 g er m an y 5, 39 g er m an y 5, 49 n et he rla nd s 5, 50 g er m an y 5, 57 6 n or w ay 5, 64 si ng ap or e 5, 48 ja pa n 5, 37 ja pa n 5, 47 ja pa n 5, 47 sw ed en 5, 53 7 ta iw an 5, 59 is la nd 5, 48 fi nl an d 5, 37 h on g k on g 5, 46 h on g k on g 5, 46 h on g k on g 5, 46 8 n et he rla nd s 5, 56 sw itz er la nd 5, 46 n et he rla nd s 5, 33 n et he rla nd s 5, 45 fi nl an d 5, 45 fi nl an d 5, 45 9 sw ed en 5, 55 n or w ay 5, 40 d en m ar k 5, 32 g re at b ri ta in 5, 41 sw ed en 5, 43 sw ed en 5, 43 10 n ew z ea la nd 5, 53 a us tr al ia 5, 21 c an ad a 5, 30 sw ed en 5, 41 g re at b ri ta in 5, 43 g re at b ri ta in 5, 43 u kr ai ne 69 3, 26 u kr ai ne 84 3, 30 u kr ai ne 89 3, 90 u kr ai ne 76 4, 14 u kr ai ne 79 4, 03 u kr ai ne 85 4, 0 so ur ce : d ev el op ed b y th e a ut ho r b as ed o n so ur ce s ( g d p. th e w or ld b an k, 2 01 8) . baltic journal of economic studies 385 vol. 4, no. 5, 2018 positive growth was noted in the rating according to the indicators such as “government budget balance” and “gross national savings”. the reduction of the country’s credit rating by almost 2 times (from 66th place in the rating in 2015 to 113th in 2017) is caused by an increase in public debt – according to the ministry of finance, the state and state-guaranteed debt of ukraine in 2015 amounted to 65.5 billion usd, and as of december 31, 2016, it amounted to 1929.76 billion uah or 70.97 billion usd (statystyka, 2018). the average annual growth rate of inflation is fixed in the following sizes: in 2014 – 112.1%; in 2015 – 148.7%; in 2016 – 113.9% (summary table of inflation indexes, 2018). 3. ukraine occupies the last positions in the ranking by the index “goods market efficiency” (for example, in 2014 – 112th among 142 studied countries, in 2015 – 106th among 140 countries, in 2016 – 108 among 139 countries). despite the improvement of ukraine’s rating positions by this sub-indicator, the competitive environment in ukraine does not create incentives for entrepreneurial activity; there are no mechanisms for stimulating the development of small and medium-sized enterprises (the position of ukraine in the world ranking according to the global competitiveness index 2016-2017). 4. the deteriorating position in the development of the financial market (for 2014–2017, ukraine lost 23 rating positions and ranked 130th) due to inefficient monetary system, in particular, instability of the banking system (according to the nbu, there are more than 80 banks at the stage of liquidation, and payments from the deposit guarantee fund reached 9% of gdp); fairly low availability of financial services and lack of venture capital. at the same time, in 2017 compared with 2014, ukraine significantly improved its positions by the following indices: “higher education and training” by 7 positions, in particular, there were positive changes according to the following sub-indices: “quality of the education system”, “quality of math and science education”, “internet access in schools”; as for “labour market efficiency”, positive dynamics is marked by the following components: “flexibility of wage determination”, “effect of taxation on incentives to work”, “country capacity to retain talent”, “country capacity to attract talent”; “innovation”. 3. conclusions thus, state management of the development of accelerated integration into world markets and a high level of foreign economic openness are not a guarantee of accelerated economic development, an increase of the international competitiveness of the country. the prerequisites for sustainable longterm economic growth and social progress are issues of domestic economic policy and, in particular, of an institutional nature, which can stimulate selfsustaining development factors, are oriented towards the use of modern innovative technologies and highly skilled human potential. at the same time, the current state of financial and legal relations allows, in our opinion, noting a few significant problems in the financial services market of ukraine, namely: 1) insufficient size of own and regulatory capital of banks over the deterioration of the quality of loans and other assets and the creation of additional reserves for active operations; 2) a mass exit of large european players in the financial services market from ukraine; 3) decrease in the volume of trades on domestic exchanges; 4) low level of assets of the pension system; 5) insufficient level or complete absence of guarantees of rights to protect the interests of consumers of financial services (including borrowers) and creditors; 6) low-level standards of banking solvency and liquidity management; 7) lack of proper stock market infrastructure; 8) ineffective tax legislation regarding the taxation of investment income and financial services market participants; 9) the abuse of individual financial institutions in terms of loan agreements; 10) low financial literacy of the population; 11) low efficiency of supervision of banks and other financial institutions, which does not allow preventing the development of risks; 12) limited powers and independence of regulators to take measures of influence on participants in the financial sector. the liberalization of capital movements in ukraine has no alternative since article 145 of the association agreement between ukraine and the eu, ratified by the law of ukraine as of 16.09.2014 no. 1678-vii provides for harmonization of the legislation of ukraine with regard to ensuring the free movement of capital in accordance with european standards. in order to increase the level of competitiveness of the national economy, it is necessary to implement a complex of the following interconnected and consistent organizational and legal measures. in particular: 1) in order to improve rating positions and competitive advantages of ukraine in global markets, it is necessary to develop additive legal framework and state support program for exportoriented enterprises for the promotion of export of finished products with high added value; 2) determine the course of the policy of expansion on the basis of expanding both geographical and commodity structure of exports; 3) at the legislative level, support the course of development of the national economy on the basis of self-sufficiency and the policy of “protectionism”, which will create an opportunity to reduce the level of import of the country, increase the national economy and in general, will positively affect the economic competitiveness of ukraine. baltic journal of economic studies 386 vol. 4, no. 5, 2018 references: about the national anti-corruption bureau of ukraine. retrieved from: http://zakon0.rada.gov.ua/laws/ show/1698-18 bondarenko, o. s. 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[summary table of inflation indexes]. retrieved from: http://search.ligazakon.ua/l_doc2.nsf/link1/sh000042 baltic journal of economic studies 151 vol. 4, no. 4, 2018 corresponding author: 1 yuriy fedkovych chernivtsi national university, ukraine. e-mail: viktoriakyfyak@gmail.com 2 yuriy fedkovych chernivtsi national university, ukraine. e-mail: y.lopatynskyi@chnu.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-151-158 methodical approaches to business processes reengineering at modern enterprises viktoriia kyfyak1, yurii lopatynskyi2 abstract. the research task is the improvement of scientific principles and development of a methodical approach to the modelling of enterprises’ development scenarios that apply business process reengineering in order to increase the level of competitiveness. the urgency of the research. the relevance of further researches is determined by the fact that the practical implementation of scientific approaches in ukraine has not become popular, and the aspects of business process reengineering have been implemented only fragmentarily. target setting. the development and discussions of procedural, systemic, and synergetic approaches to enterprise development have determined the concept of business process reengineering. therefore, the further development of methodical principles for the realization of business process reengineering in the practice of business management is urgent and relevant. uninvestigated parts of general matters defining. the justification of the expediency of using the tools for business process reengineering through the modelling of the future results at ukrainian enterprises requires further scientific development. materials and methods. the historical-evolutionary method was used to investigate the essence and origin of the category of reengineering and to distinguish its main features. by means of analysis and synthesis, the conceptual bases of business processes reengineering are determined. implementation of complex, systemic, and synergetic approaches as a basis for application of business process reengineering allowed developing a modelling methodology for forecasting scenarios of the level of competitiveness of a business unit. the application of a systematic approach is reflected in the consideration of the impact of external and internal factors on the enterprise, complex factor – in combination of factors with the criteria of the enterprises managing that are able to compete in the world market, as well as the application of method at different levels – macro, meso, and micro. methods of economic modelling and forecasting were used for forming a model of forecasting of the level of enterprise competitiveness. results. the main features are segregated and a method for modelling of the results of its implementation is formulated. the algorithm of modelling of development scenario as a result of the application of reengineering is developed. a model for predicting of the level of competitiveness for the ukrainian economy is constructed as well. practical implications. the brilliant examples of corporations that received the “second breath” as a result of the introduction and reengineering of processes were general electric, toyota and chrysler, kodak, siemens nixdorf service, ibm credit. the proposed methodological approach can be applied by enterprises to predict the level of competitiveness of an enterprise as a result of the introduction of business process reengineering, depending on possible costs and target commodity output. value/originality. such a method of forecasting the competitiveness of an enterprise as a result of business process reengineering is important and can be used to predict the level of competitiveness at all levels of management. key words: business process reengineering, procedural approach, system approach, point of bifurcation, attractor, transurfing. jel classification: m21, l21, p2, l14 1. introduction the urgency of the research. the relevance of further researches is determined by the fact that the practical implementation of scientific approaches in ukraine has not become popular, and the aspects of business process reengineering have been implemented only fragmentarily. the experience of using ineffective methodical tools that improve only certain aspects of the management process has proved the necessity for a radical rethinking of the method of transformation and the process of making changes. baltic journal of economic studies 152 vol. 4, no. 4, 2018 the development and discussions of procedural, systemic, and synergetic approaches to enterprise development have determined the concept of business process reengineering. in modern conditions, business process reengineering is not one of the means of crisis management, but a requirement of time for the development of ukrainian enterprises. therefore, the further development of methodical principles for the realization of business process reengineering in the practice of business management is urgent and relevant. actual scientific researches and issues analysis. in studies of business process reengineering as a methodical approach to changing economic processes, we have to define the sequence of forming the doctrine of reengineering. the first stage of the development of the concept of business process reengineering was formed by m. hummer, j. champy (hammer, 2006), continuing to consider the conceptual provisions in the work of m. hammer and l. hershman (наmmer, 2015). a. morris, j. brandon (a. morris, 1993), h. harrington (harrington, 1995) conduct further investigation of business processes reengineering as a management system aimed at the consumer (consumer approach). the analysis of approaches and methods for the estimation of the effectiveness of business processes is carried out in the works (tiharieva, 2016; komelina, 2017). contribution to the development of the method of reengineering applying in the practice of management was carried out by o. vinogradova (vynohradova, 2005), l. taranyuk (taraniuk, 2008). methodical approaches to evaluation of the effectiveness of business process reengineering are considered in scientific work directed by n. abdikeev, which states that in the process of reengineering mainly four sets of tools should be used: process tools, information technology tools, staff tools, and organizational tools (abdykeev, 2007) and ang cheng leong (cheng, 2000), who notes that the basic indicators of both individual processes and the whole system are results, efficiency, and flexibility. the works of bradley p., browne j., jackson s., jagdev h. (bradley, 1995) are also devoted to the study of the essence, composition, and functions of business processes. however, the hierarchy of business processes by levels of management during reengineering is not fully explored. v. repin and v. eliferov in (repyn, 2004) investigated the practical aspects of introducing process approach for the enterprise, focused on modelling and automation of business processes. b. andersen (andersen, 2003) considered transformation through a systematic approach to the improvement of business processes and provided effective practical recommendations made by the author for the development of business processes reengineering of enterprises. the practice of business process reengineering. the main methodologies for managing and establishing business processes used by enterprises are: sadt methodology adapted to the idef0 methodology (cheng, 2000), iso 9000-2001 quality management systems, aris methodology, mrp (material resource planning for production) that became the result of the development of the idef methodology, and others. the brilliant examples of corporations that received the “second breath” as a result of the introduction and reengineering of processes were general electric, toyota and crysler, kodak, siemens nixdorf service, ibm credit. at the same time, the forecasting of the results of business process reengineering and modelling of enterprise development scenarios require further elaboration in the application of an integrated approach to business processes of enterprises. uninvestigated parts of general matters defining. taking into account the challenges of the turbulent environment of the integration market and the new civilization cycle, justification of the expediency of using the tools for business process reengineering at ukrainian enterprises requires further scientific development. the research task is to improve scientific principles and develop a methodical approach to the modelling of enterprises’ development scenarios that have applied business process reengineering in order to increase the level of competitiveness. materials and methods. the historical-evolutionary method was used to investigate the essence and origin of the category of reengineering and to distinguish its main features. by means of analysis and synthesis, the conceptual bases of business processes reengineering are determined. implementation of complex, systemic, and synergetic approaches as a basis for the application of business process reengineering allowed developing a modelling methodology for forecasting scenarios of the level of competitiveness of a business unit. the application of a systematic approach is reflected in the consideration of the impact on the enterprise of external and internal factors, complex factor – in combination of factors with the criteria of the enterprises managing that are able to compete in the world market, as well as the application of method at different levels – macro, meso, and micro. methods of economic modelling and forecasting were used for forming a model of forecasting of the level of enterprises competitiveness. 2. interconnection of approaches to business processes reengineering in order to outline the practical aspects of the use of business process reengineering, we need to study its in-depth basis. investigating the essence of the category of reengineering, we find a large number of approaches to its use, but the fundamental principles of its implementation remain unchanged. the scientific shoots of business process reengineering were formed by the representatives of the procedural approach to the management system (a. smith, f. taylor, h. fayol). the procedural baltic journal of economic studies 153 vol. 4, no. 4, 2018 approach in management is gaining in popularity; the main advantage of it is the direct orientation towards the customer of products or services. the impetus for the implementation of the procedural approach was a certain exhaustion of competition opportunities due to the reduction of production costs, the application of new production technologies and, therefore, the necessity to reduce the price of the product by reducing administrative costs (dzoban, 2011). the application of the procedural approach to the operation of enterprises allowed the formation of such a philosophy of economic management, which became the basis for determining the category of “reengineering”. taking into account that the non-equilibrium and the non-linear by nature of interaction processes become more important in the economy, the presence of positive feedback channels necessitates the introduction of new approaches that take into account such specific properties of a complex system as self-organization (self-reflection), heterarchy, emergency, openness, multilevelness, relativism, cyclic nature of development. in the concept of “business process reengineering”, the postulates of the procedural approach are filled with the content of the systematic approach, according to which the management process is considered as a system of business processes. moreover, the criterion for division into elements of the system are not the functions of management (as in the functional approach), but a set of relations about the achievement of a certain goal, which, by its turn, corresponds to the goal of the enterprise. i. blauberg and e. yudin make an argumentative reveal of the essence of the system approach (blauberg, 2007), and specify that the system approach is the direction of the methodology of special-scientific knowledge and social practice, which is based on the study of objects as systems. the system approach facilitates an adequate objective understanding of the problems and the development of an effective reengineering strategy. most of the proposed definitions of the category “system” are based on the interpretation proposed by the founder of the theory of systems l. bertalanffy. he defined the system as a complex of interacting elements (bertalanffy, 1962), which became the basis for the development of many methodological tools. another important aspect of the scientifically detailed justification of the concept “system” is that the elements, and now the subsystems, are in relationships and interconnection not only with each other (or one with some others) but also with the environment. this thesis mostly corresponds to the self-organizing systems, and hence to the requirements of the synergistic approach. n. grazhevska and l. tarasevich distinguish the functioning of the economic system as its existence and vital activity in a certain quasi-stationary condition from development as a process of dynamic change of quasistationary conditions (hrazhevska, 2008; tarasevych, 1999). the enterprise, according to a systematic approach, represents a holistic formation that includes economic, social, and organizational aspects of activity; a set of relationships in the middle of an enterprise and the relationship with the external environment in which it develops. the form of connections of these relationships is the structure of the enterprise. the enterprise consists of many homogeneous relationships, the aggregates of which are subsystems of the enterprise. at the same time, the enterprise is also a subsystem of a particular sector, and the sector is a subsystem of the national economy as a whole. hence, the criterion for the allocation of a certain set of elements of the object as a system from the totality of all relationships is important. thus, the enterprise is characterized by the economic, organizational, and social integrity of the relationship. in addition, all elements of the enterprise system are usually aimed at achieving one goal through a system of priorities. so for the interpretation of an enterprise as a system, the number of certain elements (subsystems) is not as important as the system-forming links between these elements that characterize an enterprise as a single economic mechanism. therefore, most scholars tend to think that an enterprise is a complex open dynamic system, which is characterized by instability, unbalance, irreversibility, resonance excitation. such characteristics of the enterprise require from the methods of economic activity the ability to take into account the nonlinearity and adaptability to the laws of forming of the dynamics of enterprise development, which are constantly changing in time, to new data, to market fluctuations (hizatulin, 2011), which is actual for ukrainian enterprises. the lifecycle of complex non-linear open systems, including the business itself and the enterprise as a mean of business implementation, is accompanied by a chain of crises that have a hierarchical structure. crises are unavoidable in the development of any socio-economic system. the emergence of a crisis signals that the system needs a sharp adjustment, qualitative leap as a necessary condition for further existence. the crucial and critical moment in the development of the economic system, in which it makes the choice of the path, is the point of bifurcation. bifurcation point is the stage in which there is a “catastrophe” – leaps of development. the higher the level of system organization, the more sensitive is this system to external factors and, therefore, the higher is its activity of influence on the external environment of the system. those ways or directions, for which the development of the system after the bifurcation point is possible, are different from other due to relative stability, in other words, are more real and are called attractors. an attractor is a relatively stable condition of the system, which attracts many of the lines of development possible after the point of bifurcation (sukharev, 2010). therefore, the bifurcation point can be considered as a reference point for implementing business process reengineering. baltic journal of economic studies 154 vol. 4, no. 4, 2018 bifurcations have a constructive nature of change. bifurcations allow making qualitative changes in the system. the catalyst for launching the process of qualitative transformation of the system is the influence of external or internal fluctuations (dzoban, 2011). therefore, the catalyst for the implementation of the attractor in the direction of the formation of an effective competitive enterprise is reengineering. so, understanding the underlying foundations of the systems transformation and the dynamism of the process of their functioning, we will define the objective emerging concept for the implementation of transformational changes – the business process reengineering. 3. the essence of the category of “business process reengineering” the fundamental ideas of the theory and practice of modern business reengineering are described in the work of m. hammer and j. champy “reengineering the corporation: a manifesto for business revolution”, in which a qualitatively new concept of the internal management of the firm is proposed (hammer, 2006). the sense of concept consists of a radical revision of the traditional foundations of companies building, their organizational structures, and radical redesign of business processes functioning. the authors in their basic work define reengineering in a concrete way as a fundamental rethinking and radical reorganization of business processes to achieve radical improvements in critically important performance indicators: cost, quality, service, and efficiency (hammer, 2006), which is of extremely importance to enterprises and organizations of the national economy in the context of providing the level and quality of life, technological security,, and competitiveness. k. lam in “a study of business process reengineering” emphasizes that reengineering is a direction that did not exist before, so it cannot be compared with all our well-known approaches to improving the organization’s operations. it is a process of fundamental rethinking and reconstruction of business, embodying new ways of doing things. this is not an “alignment of the organizational structure”, not a reorganization, since its object is, above all, processes, rather than organizational units, which are only a means of efficiently conducting these business processes to the ultimate goal. global automation of the company’s activities is not a reengineering as well, because it is one of the necessary prerequisites for the successful conduct of reengineering (lam, 2010). in this way, the principles of the reengineering philosophy and the principles of the method of change are laid down in the work. their point of view is correlated with the opinion of the researcher r . kimbie, who notes in his work “business process reengineering – when to use it?” that by its nature, reengineering is nothing more than a way to radically improve the company’s performance, significantly increase the level of economic potential, as well as an anti-crisis management tool (kimbie, 2011). essential is that this is not just one of the ways to successfully develop the entrepreneurial activity, it is a new way of thinking, a look at a company building as an engineering activity, a complete redesign, a fundamental change of the enterprise. r . kimbie concluded that reengineering is a set of business processes that are aimed at improving the company’s performance, which in its turn will lead to competitiveness increasing in a particular market (kimbie, 2011). we’ll agree with it. thus, “reengineering” as an economic category was determined by scientists depending on the scope of its application. the substantiated definition of the term “reengineering” was given in the work of l. shane “reengineering of business processes”. it means a decisive, rapid and deep “breakthrough” restructuring of the foundations of the firm’s internal organization and management. the specificity of reengineering lies in the fact that the existing narrow specialization and its multiple transfer of responsibility in production and management are reintegrated into through business processes. the responsibility for that processes from the beginning and to the end take on a team of like-minded people who are able to perform a wide range of works (sheyn, 2008), which outlines the need for effective staffing tools. thus, the concept of “reengineering” is based on the formation of a fundamentally new model of management. in addition, the transition to a new model of management is carried out not gradually, but systemic-simultaneously. in psychology, such an approach has been defined by v. zeland as “transurfing” in his work “transurfing of reality”. transurfing is a way of concentrating of all efforts on the manifestation of one or another variant of the development of events (zeland, 2008). actually, it is not a gradual change in the organizational and functional components of the business unit activity, but simultaneously changing the concept and principles of functioning in the direction of achieving goals. the combination of business process reengineering and transurfing of human resources management provides a systematic approach to making changes. through the prism of the system approach, both the process of reengineering implementation and the enterprise as the object of transformation are considered. from the analysis of approaches to the essence of reengineering, we see that its basis is the conceptual perception of the radical transformations of economic systems and the development of modern tools of research of the deep mechanisms of socio-economic transformations. therefore, it is important to highlight the methodological basis of business process reengineering, which will become a platform for the use of tools in business practice. baltic journal of economic studies 155 vol. 4, no. 4, 2018 business process reengineering as a lever of a systemic change in the functioning of a business unit is a synergy of various methodological approaches to transformations, which largely forms reengineering as a multilevel and multifaceted approach to the reformatting of the management process. summarizing the foundations of business process reengineering and theories that define different views on the provisions of its application, we may define the main characteristics: 1) analysis and change of the model of the business operation system. this feature involves the use of tools of economic analysis of business processes using a radically new approach to their implementation, ensuring optimal distribution of existing resources and targeting to the mobilization of new (potential) strategic resources of the company; identification and implementation of key competencies; attraction of investors’ capital; increasing of market value and profitability of the company; competitiveness increasing and ensuring the uniqueness of the company in the market, the use of management and implementation of each business process of innovation. 2) formation of a new model of interaction with the external environment – a strategic vision of the prospects of business development in the existing and prospective markets; the formation of each business process with customer orientation. 3) a clear modelling of the future condition of the enterprise – the definition of business efficiency indicators. such indicators are the marker of the level of an enterprise competitiveness that we can achieve. modelling the indicators of the future of business enables to develop and substantiate ways of reformatting the system, besides, is a criterion for the success of business reengineering processes. note that the values of the resulting indicators should be higher than the existing by 50-100%. 4. problems of modelling of business process reengineering taking into account the signs of business process reengineering and the main postulates of the transurfing of reality (the psychological aspect of changes), we note that it is particularly important to model the state of an enterprise competitiveness, as the one that all technological changes and efforts of an employee are oriented on. a. gizatulin, scientist of economics, in his paper regarding to the study of business process management in the process of reengineering and, in particular, to the question of business process modelling, argues that there are a number of methodological problems, such as scientific contradictions on the following issues (hizatulin, 2011): is it possible to describe the dynamics of subprocesses using linear models? is the dynamics of subprocesses a stochastic or deterministic process? is it possible to predict the dynamics of business processes, based only on internal or only on external factors? which theory more accurately describes the reaction of the enterprise to updating information: the theory of an efficient market or the theory of fractal market? is the enterprise an equilibrium and stable system? is the enterprise an open or closed system? what determines the development of an enterprise: internal contradictions, self-organization or organization through external influence, such as management. to solve the problems of the results of business process reengineering modelling will help to apply the triad of approaches: process, system, and synergetic. the disadvantage of previous research in the field of business process reengineering modelling was the incomplete application of the described triad of approaches, according to which the simulation of business process reengineering should be carried out in a combination of indicators of internal business processes (balanced system of indicators) and indicators of the environment (business environment ratings of international organizations). 5. an integrated approach to business process modelling we propose a method for forecasting the competitiveness level of an enterprise, which we can achieve through the use of reengineering techniques. for a good example, let us apply this methodology to the economic system of the country – the economy of ukraine (which concerns each of average ukrainian enterprises). we believe that the most complete combination of the processes of the internal and external environment of the economic system at the macro level is characterized by the global competitiveness index. it is an indicator that annually counts by the world economic forum in order to assess the competitiveness of 140 economies, providing an understanding of the factors of their productivity and prosperity. since the publication of the 2006/2007 report, the report measures competitiveness in 12 areas (quality of institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, product market efficiency, labour market efficiency, financial markets development, technological development, the size of the domestic market, the level of business development and innovation), summing them up into a single indicator, which reflects the processes of “enter” and “exit” (the global competitiveness report, 2016–2017), namely the environment for the implementation of business processes. for enterprises, the scope of assessment can be replaced by business baltic journal of economic studies 156 vol. 4, no. 4, 2018 processes that are necessary to achieve a specific goal of enterprise development. alternatively, you can easily create alternative indicators that will reflect the necessary indicators for the development of the business environment and the criteria for achieving key goals, both at the micro and macro levels. it is known that the global competitiveness index has a significant impact on the indicators of innovation and the main indicator of the efficiency of the business system at the macro level – gdp per capita, which is, in a way, an indicator of the efficiency of the economic system of the country. among the many factors influencing the global competitiveness index, we propose to investigate: 1) the impact of the cost factor on research and development (innovation) of the management system at the macro level; 2) influence of the macroeconomic parameter – gdp per capita. so, let’s evaluate the influence of the main indicators of these two factors on this index. the statistical data for constructing a model of the dependence of the global competitiveness index on these factors in ukraine are presented in table 1. table 1 statistical data for constructing a model year gci of ukraine* research and development costs (% of ukraine’s gdp)** gdp per capita in ukraine (us dollar according to course in a certain period)** 2005 84 1,03202 6452,096195 2006 78 0,94934 7184,203287 2007 73 0,85288 8005,69176 2008 72 0,84649 8395,812545 2009 82 0,85676 7239,624226 2010 87 0,83295 7666,219577 2011 82 0,7378 8281,867126 2012 73 0,75418 8475,471746 2013 84 0,75926 8629,676994 2014 76 0,64908 8683,640842 2015 79 0,61742 7948,142096 2016 81 0,816231151 8271,779979 * http://reports.weforum.org ** http://www.worldbank.org/uk/country/ukraine the performed calculations showed that given dependence the most appropriately describes the model of the form: gci in ypc= − −125 65 12 66 0 0046. . . , (1) where gci – the global competitiveness index, in – research and development costs (innovation) and ypc – gdp per capita. checking the model. an important point in the modelling process is the objective determination of the quality of the model. since model estimations are random variables, a set of statistical criteria is used to determine their quality. quite often, the quality of estimations of forecasts is determined only with the root mean square (rms) error. however, this value depends on the scale of the data, and therefore, this characteristic is not enough to analyse the quality of the forecast. in-depth evaluation of the quality of the model is achieved through the use of criteria that give relative quality assessments, for example, the theil index. the advantage of their use is that they do not depend on the scale of the data. the theil index is calculated by the expressions: , (2) where n – the horizon of the steps of forecasting; yi – actual data values; ŷi – estimations of forecasts. the theil index t is an important indicator of model quality and forecast. according to the definition, the theil index lies within 0 ≤ t ≤ 10. when t → 0 , these estimations of forecasts approach the actual values of the series and the model have a high degree of adequacy. so t makes it possible to establish the suitability of the model (method) for estimating the forecast as a basement. in many cases, better prediction results can be achieved by averaging (or combining by weighting coefficients) estimations of forecasts obtained by different methods. the theil index for the constructed model is 0.026, which confirms the adequacy of the model. consequently, the model can be used for further analysis. based on model (1), a sort of graphs of the global competitiveness index for the ukrainian economy can be built. to do this, we fix this index at the level 55, 50, 45, 40, 35, 30. the plural of curves will have the form (figure 1): y in if gci y in i pc pc = − = = − 70 65 12 66 0 0046 55 75 65 12 66 0 0046 . . . , , . . . , ff gci y in if gci y i pc pc = = − = = − 50 80 65 12 66 0 0046 45 85 65 12 66 , . . . , , . . nn if gci y in if gci y pc pc 0 0046 40 90 65 12 66 0 0046 35 95 . , , . . . , , . = = − = = 665 12 66 0 0046 30 − = . . , . in if gci the family of graphs of the global competitiveness index allows us to predict the level of competitiveness of the country’s economy, with a known amount of research and development costs (innovation) and gdp per capita. at the enterprise level, we can simulate the situation through a system of business process changes based on the known value of the cost of reengineering and the target value of gross output. baltic journal of economic studies 157 vol. 4, no. 4, 2018 we believe that such a method of forecasting of enterprise competitiveness as a result of business processes reengineering is important and can be used to predict the level of competitiveness at all levels of management. 6. conclusions 1. it has been determined that business process reengineering is a form of evolution of procedural, synergetic and systemic approaches taking into account some aspects of psychological transformation – transurfing. 2. the reengineering of business processes becomes of particular importance in the practical activity of enterprises in an unstable environment and under conditions of nonlinear development of the economic unit as a system. the bifurcation point for the business system is the best time to apply the business process reengineering approach. an attractor determines the priorities of transformation taking into account the methodological approaches of reengineering. 3. reengineering of business processes is a mechanism for organizational restructuring and technical reform of the company, for the maximum automation of business operations and radically different approaches to the organization of work, which leads to a significant increase in the competitiveness of the enterprise. 4. the process of reengineering must meet the following requirements: change the system of operation of the enterprise, the formation of a new model of interaction with the environment, a clear modelling of the future state of the enterprise. 5. using the integrated approach of the interaction of external and internal factors of the development of the enterprise, the method of forecasting of competitiveness level of the enterprise as a result of the application of business process reengineering is offered. the methodology has been tested for scenario modelling of the ukrainian economy’s competitiveness. in the methodology, it is suggested to use the estimation of 12 spheres (according to the method of calculation of the global competitiveness index) and the quality criteria of the obtained model (the theil model). developed approach to the modelling of the result of business process reengineering allowed taking into account the influence of external and internal factors. the proposed methodological approach can be applied by enterprises to predict the level of competitiveness of an enterprise as a result of the introduction of business process reengineering, depending on possible costs and target commodity output. figure 1. families of the graphs of the global competitiveness index of ukraine references: khammer, m., champi, dzh. 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(in ukrainian) baltic journal of economic studies 46 vol. 2, no. 1, 2016 corresponding author: 1 department of finances and credit, v.n. karazin kharkiv national university. e-mail: lnzhukova@mail.ru social policy as factor of state institutional status larysa zhukova1, v.n. karazin kharkiv national university, ukraine abstract. the purpose of the article is the research of theoretical and methodological aspects of social policy as the factor of institutional state statuses. methodology. the researching in institutional providing of state social policy which may be considered as the base for performance of correspond reforms which are directed to the life level increasing, is enough popular task in scientific, theoretical and practical aspects. the scientific search of social policy as the factor of institutional status of state is carried out at the base of classical, neoclassical and institutional methodology. at the base of classical methodology it were defined the general approaches with help of dialectical analysis tools and synthesis of social relations array as historical action. with the help of system, structurally-functional analysis of social policy tasks, it’s opened its internal nature and ways of institutional providing. institutional and neoclassical approaches allowed the specials analysing tools in modelling of dynamics and institute of social policy institute results in the conditions of market transformations. also in the research process it were used the economic articles about the question of analysis in state social policy and given the statistic data about the analytical report to the annual president’s of ukraine message to verkhovna rada of ukraine „about internal and external condition of ukraine in year 2015”. research results showed what in the conditions of socially-economic and political instability, the social sphere ukraine became the hostage of common crisis in economic, catastrophic decreasing of life level, increasing of social confrontation and rough system mistakes in the process of social institution formation. all of this neutralizes the methods efficiency about improvement of socially-economic condition of population and prevents to the implementation of necessary reforms. practical value lays in the clear definition of priorities and directions of social policy at the state level, outlining of the main efficient ways and forms for citizens problems solving, coordinating of different social institutions activity, considering of socially-economic state development features and appearing of conditions for life level increasing. by the striving for integration to european space and building of own development strategy has to clearly understand own possibilities and external factors of influence. by the choosing the possible alternatives, the main idea of social policy should stay the strive for social justice of society and providing of stable market which doesn’t make worse the conditions and possibilities of future generations. value/originality in the research process it’s proves that one of the primary task must be magnificent change of social policy vector and performance of urgent economic and social reforms. looking to this, social policy institute needs serious modernization, especially in its functional displays which could be more directed to the for state social development closing for european standards. closing of ukraine to the economic and social standards of developed countries needs the building of socially justice society, providing of suite life conditions for socially vulnerable levels of population and increasing in efficiency of human rights protection system. in this direction, the government has to decrease the social expenses to the budget by means of private investments, transmission targeted support needy. in conditions of budget means economy, it should be carried out the transmission from paternalism in the social sphere to partnership between state, business and citizens in all aspects of social support, the result of successful functioning of social policy functioning as factor of institutional state status must be general development of ukrainians life level. key words: state, social institute, social policy, institutional state status, institutional changes, social reforms. jel classification: a14, e02, i138 baltic journal of economic studies 47 vol. 2, no. 1, 2016 1. introduction deep social, political, economic and, as the result, ethically-psychological problems appear in the conditions of social economic formation, in every society. it causes the normal life infraction of the society majority, escalation the personal and social groups problematic and also the inability to independently solve some socializing tasks. as the result of this is the social deformation, values demolition, development of destabilizing processes development in all spheres of social life. at the modern stage of ukrainian development, as the result of certain objective and subjective consequences, it’s still didn’t form the civil democratic society. state must be responsible for citizen’s welfare as the social institute of social life organization. state must be a warrant of citizen’s assurance into the satisfaction in needs of social organization, provide the stability of communications and relations within this organization. in its turn, social state which functions as the macro-level social institute, forms its own structure and organizes the life-sustaining of all social spheres funding on the constitutional bases. notion „social” foresees that state will performance the social policy which is directed on the providing of needs and interests of all social classes, lawyers, separate groups and social members (kryvokon’, 2012). it’s a pity that today the transformational processes in our country are accompanied with negative results in all spheres of social life – politic, economic, social, etc. all of this causes the appearing of socially-politic contradictions, increasing of conflict level, growth of social constraint, distrust population to government. the main criterion for majority of citizen’s success is its ability to regulation problem which appears (lopushniak, 2011). that’s why the research of institutional providing in state social policy which may be considered as the base for correspond reforms performance which are directed to the increasing of life level which is enough actual task as in theoreticallyscientific as in practical aspect. the purpose of article is the research of theoretical and methodological aspects of social policy as the aspect of institutional state status. the scientific search of social policy as the aspect of institutional state status which is carried out at the base of classical, neoclassical and institutional methodology, at the basis of classical methodology it were defined the general theoretical approaches with the help of instruments dialect analysis and synthesis of social relations array as the historical action. with the help of structural and functional analysis in social policy tasks it’s opened the internal nature and ways of institutional providing of social policy. institutional and neoclassical approaches allowed analysing the specific modelling instruments and results of social policy institute in the condition of closing of ukraine to economic and social standards of developed countries. 2. institutional approach to the analysis of social state policy usage of constitutional theories for analyses of social problematic has its own history and repeated appealing to them by the most famous scientists include nobel laureates testifies about their scientific attraction. the works of h. spenser and e. durkheim became the theoretical basis of institutional approach to the analysis of state social policy as the social institute. in their interpretations, social institutes got the meaning key notions which explain the laws of social development at the basis of comparative and historical approach (voytovych, 1998). the institutional approach got the powerful development into the researches of modern theory of market balance and welfare creators – l. hicks and k. arrow (1972). socially-institutional direction as independent direction was outlined in the neoconstitutionalism by nobel laureates d.  buchanan (1986) and r . coase (1991) with the using of economic methods in researching of ecologic, politologic and sociologic processes. in 1992 g. becker got the nobel prize for development of statements about connection between human behaviour and their interaction. let’s note that questions of theoretical and methodological aspects of institutional regimentation of approaches about state social policy paid attention to the domestic and foreign scientist such as: t. veblen (research of society evolution as process in natural selection of social institutes), v. geyets (institutional and structural transformations of national economy in the context of effective model creation in state social policy), a. grytsenko (institutional very tectonics and alternatives of the institutional choice), a. inshakov (research of economic systems of development), a. kolot (institutional changes and justification of conceptual bases of the choice of model in global economic development), l. lysiak (social and economic development of the state in the context of modernization of national economy), d. nort (a role of economic institutes in selection and realization of alternatives of the state social policy), v. sadovaya (research of regional social policy in ukraine), v. savka (institutional ensuring development of social work in ukraine, in particular reforming of the social sphere), j. hodgson (the concept of formation and development of social and economic institutes), a. chukhno (transformation of economic systems in a section to questions of effective ways choice in institutional state policy development in the social and economic sphere), etc. but the questions which are connected with creation of the social policy institute in the context of economic development alternativeness are still insufficiently researched. 3. research of category „social policy” notion in connection with reformation of economic relations in the state, the implementation of market relations got the problem of social relation regulation which is solved in a way of correspond policy realization. that’s why the baltic journal of economic studies 48 vol. 2, no. 1, 2016 social policy today is one of the most important directions in internal policy. the general analysis of social policy testifies that essential problems appear in this sphere are born by the social uncertainty in the system of social institutes and needed the research in the context of constitutional changes in state administration. the polyaspectness of politic actions generally explains the fact of absence in one social policy definition. in spite of fact that definition of notion „social policy” is not given by philosophy, politological, sociological dictionaries, the especial attention to the theoretical and practical problems in social regulation, social sphere, social relations gives the possibility to generalize the question about essential definition social policy. in particular the reference book about social work (andrushchenko, astakhova, lukashevych, 2001) contains such interpretation of given category: „social policy – is the state activity and its institutes, agencies of local administration, domestic, foreign enterprises, institutions of all types of property, their communities and associations, domestic, foreign and foreign public and private funds, the public and religious organizations, citizens on development and management of the social sphere of society ". others authors (shevchuk, 2003) gives the follow definitions: „social policy – is a system of programs, services and events are directed to the social purposes achievement. social policy covers all spheres of human life activity such as – industrial, social, political, spiritual and regulates the relationship between the community group, community, entity in each of these areas and areas of interaction." as it’s seen from above said extracts, the main purpose of social policy is the creation of conditions for social needs and human interest’s satisfaction and also for support, protection and rehabilitation of separate citizens and social groups. one more important aspect of given category is discovered in notion which is offered by v.a. skuratskyi and o.m. paliy (skuratskyi, paliy, 2002). they define the social policy as „social phenomenon combines the polyfactual elements: constitutionally-legal, institutional, administrative regulatory and self-regulatory, global, national, state, supra, social, humanistic, praxeological (value), communication and so on”. researching the essence of social policy, specialists give it the space for social relations between state, market and citizens, space for relations functioning, executed as institutes and practices. social policy institute gets the special place even among the creational social institutes. exactly on its position in hierarchical system of such institutes we may judge about the achievements of human environment providing as the highest social value (skuratskyi, paliy, 2002). the alternative version lays in the fact that in spite of social polity human consideration (wide or narrow), it’s focused to the human interests, its health, honour and dignity, integrity and security. we note that in narrow understanding, social policy means the activity of its subjects by the formation of social security of person and society. in wide understanding, social policy – is the system of management, regulative, self-regulative and forms of subject’s activity, array of principles, decisions which are realized in the social programs and social practice with the goal of social needs satisfaction, balance in human interests, social groups, social goals, solving social problems forming social values. by this in wide understanding, social policy– is the system of not only institutional but also the above institutional (such which are in the competence of other social institutes), state and civil, social and personal, individual ways and forms of activity which are directed on the social development, creation of conditions for polydirectional self-realization of human potential and its essential powers (skurativskyi, troshchynskyi, 2010). so it’s necessary to admit that the common factor lays in the fact that social policy is appealed for relations regulation in the society in the interests of social groups and connected with the list of governmental events which are directed to the increasing of population welfare. 4. alternatives searching of state social development different states chose their own model of social policy but all of them foresee the creation of conditions for direct functioning providing of all socially-politic institutes system about regulation of social relations. the majority of scientists thinks that the object of the state social policy is the general in particular social relations, life social processes which directly or not influence to the formation of human social security, satisfaction of its personal needs and interests, studying and creation of social values. the important tasks of state social policy in the conditions of the establishing of the market relations by the mind of p.i. shevchuk is the gradual limitation in influences of factors which stops the social progress and the strengthening the factors of social progress, increasing f social and economic security of person. the features of modern social policy are its activity and efficiency (shevchuk, 2003). all these two characteristics well demonstrate the existing in the society tendencies about possibilities of personal problems solving by the ordinary citizens. it is going about conditions creation by the state for supporting of potentially active social members in a way of encouraging their social-economic activity. in the same time, the passive social policy is based on the welfare and retention principles. in the conditions of modern transformations in sociallypolitic regime, the clear definition in priorities and social policy directions at the state level, outlining the main efficient methods and forms of human social problems solving, activity coordination between activity of different social institutions, features consideration of social and economic state development and creation of conditions for high population life level. by the way, for successful social policy realization, it’s necessary to correctly formulate the baltic journal of economic studies 49 vol. 2, no. 1, 2016 content of its social programs. it’s referred to the necessity of system approach using by the development of and defining of social and political directions and projects. social policy of modern world can’t be considered in the isolation from the global changes and global challenges which influence to the general social interest and allhumanity security. global development problems which are connected with environmental deprivation deepening inequality, the persistence of significant risks of poverty and social exclusion, social and military conflicts, the spread of terrorism can’t be solved without united powers of all humanity. ukraine has to clearly realize its own possibilities and external factors of influence by the aspiring for integration with european space and building its own development strategy. chose of possible alternatives is too difficult task but the main idea of social policy should stays the aspiring for social justice and providing of stable development which doesn’t makes worse the conditions and possibilities for future generations. today ukraine is in the too difficult conditions (military actions of east, economic deprivation, social stress) which essentially complicated the possibilities of realization in social policy and form the branch of uncertainty (makarova, 2015). escalation of economic and socially-politic situation in ukraine not only moves away the domestic eurointegrational perspectives but also forms the risks which may soon cause the next social explosion and final of the national economy deprivation and loss of sovereignty. that’s why one of the most important tasks is magnificent change of social policy vector and performance of urgent economic and social reforms. objectively chosen by ukraine course which is oriented to the europe and determination to defend it by population testifies about the readiness of society to make difficult and long way of reforms for reaching the high level of welfare, correspond social security, full realizing of democratic principles, human rights and freedoms. but the requirements which given by european union and different international organizations need the performance of urgent and very unpopular methods in the field of budget and tax policy, social and retirement providing, housing and municipal management, education, medicine and also corruption liquidation and establishment of law supremacy. no doubt that they may be considered as the special challenges for our country. in the same time, by the conditions of existing challenges, social sphere of ukraine became the hostage of common crisis in economic, catastrophic decreasing of life level, increasing of social confrontation and rough system mistakes in the process of social institution formation. all of this neutralizes the methods efficiency about improvement of socially-economic condition of population and prevents to the implementation of necessary reforms (krupa, nesterovich, 2015). in connection with this, the especial actuality is got by the researches which are directed to the creation of scientific bases for development and realizing of efficient policy of social protection and population support. 5. reviewing methodology the performance of economic reforms may not be justification for poverty. reforms may be directed first of all to volumes decreasing and poverty level of working population in a way of increasing of wages and strengthening of social support for having many children, disabled people, pensioners. in year 2014 it was failed the try for stop the decreasing of population wages and as the result is the decreasing of real payment and volumes of social transfers. at the background of high inflation it causes the decreasing in the level of current consumption in ukrainian population. but the worst decreasing in life level was pointed in the poorest population which use the majority of wages for food. by the period from march, 2014 to march, 2015 the food prises increased to the point of 52,7%. according to the structure of general expenses, the part of food expenses increased (54,4% by the data of first half 2014 against 52,7% in the same period of 2013). in such conditions the increasing of life level is connected with the ability of population level for increasing the basic state standards and guaranties. in year 2015 they stayed at the level of year 2013 (the subsistence minimum for able-bodied persons and the minimum wage amounted to 1218 uah, the minimum pension – 949 uah) but in the prices of april, 2015 the real volume of subsistence minimum for ablebodied persons amounted to 2317 uah (with the amount of personal income – 2561 uah). it’s clearly that in conditions of social reforms and important expenses are connected with the state protection, the increasing of all social standards spectre is too difficult task but the correspond steps should be made by the appearing of minimal possibilities. state policy of social standards must be grounded on the objectiveness, honest diagnostic of life level condition, defining of terminal economic possibilities and orientation to the european standards, of state social development. another important aspect in state social policy is creation of balanced policy about housing and municipal services. during the period of 2014-2015 it’s increased the gas price in the 4,5-9 times, from april, 1, 2015 the prices for heating are increased in 73%, hot water – in 55-57%. the rapid price increasing in housing and municipal services is realized by citizens as one of the worst social problems. in such conditions the unrest causes the accumulation of debt population to pay housing and utility services consumed (during 2014 it increased to 2.736 billion uah (22.9%) and as of february, 1.2015 was 13.045 billion uah) (analytical report, 2015). in addition, the publicized by government system of compensational subsiding causes a lot of questions about the mechanisms of its realization and economic bases needs the large state expenses and may baltic journal of economic studies 50 vol. 2, no. 1, 2016 fully neutralize the results of tariff increasing. in addition the implementation of the subsiding system may cause the follow "shadowing" of salaries, fraud, corruption and considerable additional expenses on their administration by the way the offered subsiding mechanism will not encourage households to economical use of resources, but also will encourage the economic position of energy companies monopoly, which may further increase tariffs. in a way the inflation, the collapse of the hryvna, the rapid rise in unemployment and the rise in multiple utilities force the government to direct the large financial resources to the payment of social benefits, subsidies, wage indexation, support the banking system, the army, etc. last times inflation generally became the one of the largest internal risks to the social welfare. according to the social researches results, over 61% ukrainians admitted the decreasing of their wages by the last half of year 2015. 54% notes that only inflation is the negative factor influences their life. over 56% proved that they started food economy for keeping head above the water (samayeva, 2015). we admit that the main inflation hit is got by the poor population because their profits majority is connected with social standards – subsistence level and minimum wage. the last point is „frozen” by government but as the result of running inflation, they lost the possibility to provide the minimal life level. hryvna devaluation which is caused by the falling of competitiveness ability of ukrainian economy and transmission to the floating exchange and by the list of other factors increased the speed of inflation development. as the result of this the expenses for import and its finish value increased and the goods with minimal import element also rose in price. because the majority of consumer goods touched almost all branches of national economy and has generated very negative consumer expectations. thanks to the credits of ministry of finance, international organizations and strict monetary policy, the currency market is managed to stable. but so new credits increases the current budget expenses for servicing the public debt, and form "debt burden" for future generations which will inevitably cause the tax increasing and limitation of social transfers (krupa, nesterovych, 2015). one more risks group in the sphere of state social policy is connected with reformation performance in social security and retirements. today situation by the socials risks security in ukraine at the basis of generally obligatory social security is closely critical which doesn’t allow state to limit in a particular improvement. superannuation fund of ukraine for 2015 is approved with the deficit of 19 billion uah against 17,1 in year 2014. by this the ukraine's state budget subsidy for the payment of pensions, allowances and increases to pensions for different pension programs reached 61.7 billion usd against 64.6 billion usd in 2014 (analytical report, 2015). solidary superannuation system in ukraine got a failure and perspectives in superannuation fund balancing according to the today processes in economic, social. demographic and others spheres which is not foreseen even in middle time perspective. the catastrophic decreasing of gdp which in year 2014 became 6,8%, in year 2015 (according to calculations in ministry of economic development and trade of ukraine) – 10% which extremely negatively influenced to the number of labour places and wages level in our country and essentially made worse the migration processes. as the result of first half of year 2015 by the data in ministry of social policy, situation about the correspondence pensioners with legal working people became near 10 millions who work and pay the taxes for superannuation fund against 12 millions pensioners (tamkova, 2015). deficit of superannuation fund became 81 millions uah which must be covered with state budget. as the result when in year 2000 the part of gdp consisted 8% so in the year 2015 – 16 . such situation makes almost impossible the efficient performance of retirement reform. considering the above said it’s necessary to admit that powerful negative influence of economic depression caused to the escalation of chronic and institutional crisis for national ukrainian state and its widening form the economic to social and politic squares. in the reason of critical institutional crisis, it lost the value in purposes of state development and its functions performance. state is understood as the subject which is separated from society and oriented to the interests development of limited personal circle in society (zhalio, pokryshka, berezhnyi, 2011). there are formed the suite conditions for mass protest events. 6. conclusions the deep crisis of national economic model caused the critical level of system problems in social development which in its turn defined the inability of state social policy. social economy inability provided the high level of social intensity even on the background of stable increasing in budget extensions for social needs and periodical realization of additional social initiatives. the contrariety between officially declared in policy and consolidated in constitution of ukraine and in ratified in international agreements about social orientation and absence of real essential movements in social sphere and by the apparent strengthening of social stratification became the factor of decreasing in reliance to state policy and it agencies, increasing of social irritation. by the widening of depressive tendencies, it’s declined in real purchasing power of incomes and narrowing opportunities for informal (including shadow) income turned contradiction referred to the critical (zhalilo, 2014). that’s why in the conditions of socially-economic and politic state instability, state policy needs the institutional changes which are provided by the non-correspondence in structure and social institutes’s quality and requirements of civil system. they are usually accompanied with periodic baltic journal of economic studies 51 vol. 2, no. 1, 2016 instability when old institutes don't work anymore, and new don't work yet. in such conditions the role of interaction of state and social institutions by the questions of formation, admitting and adaptation of social institutes to the new conditions of social development. in a way, social policy in modern conditions is universal, necessary and functionally important sphere of social life. its objective character and realization proportions are defined with the high level of social differentiation and difficultness in social relations in society of modern type which need the non-stop their efforts towards the regulation as a factor of social development. according to this, social policy institute needs the serious modernization especially its functional manifestations that would more clearly direct to the closing for social development of ukraine to the european standards in the conditions of clear necessity in efficiency increasing of budget tools using in particular with the reason of contrariety to sparseness of state financing and its concentration to the using of the most important programs. ukrainian closing to the economic and social standards of developed countries needs the building of the social and justice state, providing of correspond life conditions for socially vulnerable population, efficient system in system of human rights protection. state development should be directed to the creation of correspond level and high life quality in free democratic social state which is the important background in society consolidation and economic development. in the same time in the conditions of economic development slowing and important crisis risks, the general priority of social policy must be moved to the side of budget expenses rationalization with the increasing of state social responsibility. government should decrease the social expenses load in a way of private investment encouraging, transmission to the targeted support needy. in conditions of budget means economy, it must be carried out the transmission form the paternalism in social sphere to partnership between state, business and citizens in all aspects of social support. in general, it may be spoken about success in social policy institute functioning as the regulator social sphere development and as the aspect of institutional state status only in case when the results of such functioning will got the normal state support not only those members of society who really need it, but also be able to achieve a substantial increase in real incomes of all workers and the general life quality of ukrainian citizens. references the analytical report to the president of ukraine annual message to the verkhovna rada of ukraine "on the internal and external situation of ukraine in 2015". (2015). – k., 684 p. andrushchenko, v.p. (2001). social work: a reader. book. – k., 396 p. voytovych, s.o. (1998). social institutions of society: family, power, property. – k., 170 p. state policy in the field of humanities: a textbook / [aut. count., v.a. skuratovskyi, v.p. troshchinsky, p.k. sitnik and others.]. – k., 284 p. kryvokon, n.i. (2012). problems of social work and social policy in ukraine. chernihiv, 320 p. rice, v.r . (2015). the social policy of ukraine at the present stage, external challenges and internal threats. materials of iv international scientific-practical conference "the structural transformation of national economies in the global dimension", 6 november, mykolaiv, p. 35-38. lopushnyak, g.s. (2011). institutional support for government social policy: theoretical and problematic aspects. actual problems of public administration, № 2, p. 31-38. makarov, o.v. (2015). social policy in ukraine: monograph, institute of demography and social studies. – k., 244 p. zhalilo j., tire d., belinska y., berezhnaya y. (2011). post-crisis development of economy of ukraine: principles of strategy of modernization. – k., p. 72. reform of social policy in ukraine: problems and prospects: teach science. kind. / [aut. count. , va skuratovskyi vp troshchinsky, pk sitnik and others.] for the society. ed. va skurativsky, vp troshchinsky. – k.; lviv: napa, 2012. – 368 p. samayeva, yu. (2015). tax on the poor. [electronic resource]. – retrieved from: http://gazeta.dt.ua. systemic crisis in ukraine: preconditions, risks and ways to overcome: analyte. ext. / zhalilo j.a., kononenko k.a, yablonsky v. [et al.] for the society. ed. ja spared. – k., niss, 2014, p. 132 skurativsky, v.a. (2002). fundamentals of social policy: teach. guidances. – k., 200 p. tamkova, a. (2015). work will soon no. express. number 9, october 15, p. 13. shevchuk, p.i. (2003). social policy. – lviv, 400 p. baltic journal of economic studies 52 vol. 2, no. 1, 2016 лариса жукова социальная политика как фактор институционального статуса государства аннотация. целью статьи является исследование теоретико-методологических аспектов социальной политики как фактора институционального статуса государства. методика. исследование институционального обеспечения государственной социальной политики, которое может рассматриваться как основа для проведения соответствующих реформ, направленных на повышение уровня жизни населения, является достаточно актуальным заданием и в научно-теоретическом, и в практическом аспектах. научный поиск исследования социальной политики как фактора институционального статуса государства осуществлялся на основе классической, неоклассической и институциональной методологии. на основе классической методологии были определены общие теоретические подходы при помощи инструментов диалектического анализа и синтеза совокупности социальных отношений как исторического явления. при помощи системного, структурно-функционального анализа заданий социальной политики раскрывается её внутренняя природа и пути институционального обеспечения. институциональный и неоклассический подходы позволили проанализировать специфические инструменты моделирования динамики и результаты института социальной политики в условиях рыночных преобразований. также в процессе исследования были использованы статьи экономического направления по вопросам анализа социальной политики государства и приведены статистические данные с аналитического доклада ежегодного обращения президента украины в верховную раду украины «о внутреннем и внешнем положении украины в 2015 году». результаты исследования показали, что в условиях социально-экономической и политической нестабильности, социальная сфера украины стала заложником общего кризиса в экономике, катастрофического падения уровня жизни населения, роста конфронтации общества и грубых системных ошибок в процессе формирования социальных институций. всё это нивелирует эффективность мероприятий по улучшению социально-экономического положения населения и препятствует внедрению необходимых реформ. практическое значение заключается в четком определении приоритетов и направлений социальной политики на государственном уровне, описании основных эффективных способов и форм разрешения социальных проблем граждан, согласовании деятельности различных социальных институций, учёте особенностей социально-экономического развития государства и создании условий для повышения жизненного уровня населения. украина, стремясь интегрироваться к европейскому пространству и строя собственную стратегию развития, должна чётко осознавать как свои возможности, так и внешние факторы влияния. при выборе возможных альтернатив ведущей идеей социальной политики должны оставаться стремление к социальной справедливости общества и обеспечение устойчивого развития, которое не должно отрицательно сказываться на достижениях будущих поколений. значение/оригинальность. в процессе исследования доказано, что одним из первоочередных заданий государства должно быть кардинальное изменение вектора социальной политики и проведение безотлагательных экономических и социальных реформ, учитывая, что институт социальной политики требует серьёзной модернизации, особенно в его функциональных проявлениях, которые должны занять позицию курса социального развития государства в направлении европейских стандартов. стремление украины к экономическим и социальным стандартам развитых стран нуждается в построении социально справедливого общества, обеспечении достойных условий жизни для социально незащищённых слоёв населения и повышении эффективности работы системы защиты прав человека. в этом направлении правительству необходимо снизить нагрузку социальных расходов на бюджет благодаря привлечению частных инвестиций и осуществить переход на адресную поддержку нуждающихся. в условиях экономии бюджетных средств должен быть осуществлён переход от патернализма в социальной сфере к партнёрству между государством, бизнесом и гражданами во всех аспектах социальной помощи. результатом успешного функционирования института социальной политики как фактора институционального статуса государства должно быть всеобщее улучшение качества жизни всех граждан украины. baltic journal of economic studies 59 vol. 5, no. 1, 2019 corresponding author: 1 petro mohyla black sea national university, ukraine. e-mail: volodymyr.yemelyanov@chmnu.edu.ua 2 petro mohyla black sea national university, ukraine. e-mail: d_idu@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-59-67 ways of confronting corruption and bribery in the bodies of the state authority volodymyr yemelyanov1, dmytro plekhanov2 abstract. the article outlines the problems of corruption and bribery in public authorities in ukraine. the destructive influence of corruption provokes and deepens the social crisis, undermines the image of the civil service of ukraine, and holds back the socio-economic development of the country. currently, corruption in ukraine is called one of the most significant threats to national security. the aim of this article is to substantiate main directions and means of confronting corruption and bribery in the system of state authorities in ukraine. the object of the research is the social relations that arise in the process of counteracting corruption and bribery. the methodology of the research is based on the fundamental provisions of the public administration theory, as well as on the concepts developed both by the ukrainian and foreign researchers and practitioners aimed at preventing and counteracting corruption. main theoretical provisions and conclusions of the article highlight effective measures of preventing and counteracting corruption in state authorities in ukraine. the results of the research can be useful for the public administration bodies when developing and implementing anti-corruption programs or laws and regulations on the issues of forming an anticorruption consciousness of citizens and state authority officials. value/originality. the article outlines the economic-mathematical model of “bribe maximization”, which takes into account the limitations of the possibility of offering and agreeing to receive a bribe. the model is the basis, which proves that the most effective way of fighting corruption is streamlining the efforts of the authorities on creating a competitive environment: “economic benefit – the risk of punishment”. these conditions decrease the officials’ interest to receive bribes since their size ceases to compensate for the risk of disclosure, detention, and punishment. meanwhile, the series of other practices are also important, namely: building a holistic legal system based on integrity; introduction of mechanisms of accountability and responsibility of officials; cooperation with civil society and the private sector; adaptation of international experience to national realities; identification of “high risk zones” for diverting there main efforts and resources. key words: bribery, corruption, manifestations of corruption, counteraction to corruption, responsibility, civil servants, state authorities. jel classification: e61, z18 1. introduction corruption as a social phenomenon has emerged a long time ago. it may seem that the birth of corruption was probably either simultaneous with the birth of the human race or happened at least right with the emergence of power and financial relations. today, some studies consider corruption as a necessary tool for “wheel lubrication”. from this perspective, corruption helps to overcome excessive bureaucratic constraints, ineffective provision of public services and tough laws, especially in the countries where there are weak and poorly functioning state institutions. on the other hand, corruption can lead to a significant reduction in economic performance. this is due to rent-seeking, increased transaction costs and uncertainty, inefficient investments and incorrect allocation of production factors (hanousek, 2015). the importance of studying corruption in the government bodies is necessitated by the vast amount of negative consequences that it is associated with. corruption provokes and increases social crisis and undermines the image of the civil service in ukraine. moreover, it hampers the development of ukraine, adversely affects the economic processes, prevents the establishment of a constructive dialogue between the authorities and the public, and destroys the foundations of building the rule of law in the country and civil society. it also violates the principles of the rule of law, justice baltic journal of economic studies 60 vol. 5, no. 1, 2019 and equality, responsibility for the committed acts and fair competition. transparency international, a global anticorruption organization, identifies a very high level of corruption in ukraine, which is the consequence of the country’s overall political, social, and economic problems. such negative phenomena are quite inherent for a country that is in a state of crisis. according to the corruption perceptions index, which has been developed by transparency international (2016), by the corruption index ukraine in 2016 was on the 131st place; in 2015 – 130th place; 2014 – 142nd place; 2013 and 2012 – 144th place. in 2011, the index dropped to the mark of 152. the situation was better in 2010 – 134th place; in 2009 – 146th; in 2008 – 134th; in 2007 – 118th; in 2006 – 99th place; in 2005 – 107th place; in 2004 – 122nd place; 2003 – 106th place; 2002 – 85th place; 2001 – 83rd place; 2000 – 87th place; 1999 – 75th place; 1998 – 69th place. among the european countries, ukraine has been recognized as the most corrupted state almost every year. so, the problems of preventing and counteracting corruption are among the most pressing problems for ukraine today. the scale of its spread constitutes a real threat to national security and democratic development. the fight against corruption is in the limelight of state institutions, nongovernmental organizations, the media and common citizens. the reforms, which are currently being implemented in ukraine (the judicial, tax, and administrative), all have an anticorruption bias. moreover, the criminal justice reform together with the improvement of the mechanisms of public access to information and obtaining legal aid are gradually forming a national anticorruption system, which will be more efficient and of higher quality. the need for scientific substantiation and the development of technologies for preventing and counteracting corruption in the bodies of state authorities of ukraine stress the importance of this research. this leads to the introduction of comprehensive measures in this sphere, namely: improvement of national legislation in the context of compliance with international anticorruption standards; increase in the effectiveness of the corruption prevention and counteraction system; reduction of corruption in the system of lawenforcement bodies, other bodies of state power and local governments; reduction of the shadow economy; development of an active public consciousness for the prevention and counteraction to corruption. 2. literature review many researchers have investigated the problem of corruption and the ways of counteracting it. the first research of corruption and the term “corruption” as a “disease” of a state organism at first appeared in the writings of n. machiavelli, c. montesquieu and j.-j. rousseau (ilienok, 2013). so, rose-ackerman, considering the existence of corruption in various spheres of public life, was the first to introduce the term anticorruption institutionalism (rose-ackerman, 2003, p. 77). melnyk (2004) defines the social nature of corruption, its developmental trends, and negative consequences. the author analyses the elemental content of the mechanism of corruption and characterizes corruption offenses. alforov (2011) focuses on the mechanisms of counteraction to corruption in the internal affairs bodies. kokhan (2013) identifies political corruption as a conflict phenomenon and examines its influence on the interaction of society and the state. charron, dahlström, & lapuente (2016) investigate corruption in the field of public service. flejchuk (2008) points out priority areas, sectors and the goal-oriented means to reduce the shadow economy and combat corruption in the system to strengthen the economic security of ukraine in the context of globalization. nevmerzhytskyj (2008) sees corruption as a complex socio-political phenomenon. he identified the causes and conditions that feed corruption, develops mechanisms and methods of limiting its manifestations. bratkovskyj (2010) has presented comprehensive conceptual foundations for the formation of the organizational and managerial mechanism of counteraction to corruption in ukraine as the main factor of increasing confidence in public authority. despite the fact that the phenomenon of corruption has been discussed in the works of many researchers, some areas remain not completely researched, namely: the specific nature of corruption in the system of government bodies, its disorganized and reorganized influence on the society, the role of civil society in counteracting the corrupt practices. the abovementioned draws the need to develop mechanisms for finding a way out of this catastrophic situation with the help of introducing effective measures for the prevention and counteraction to corruption in state authorities. the aim of this article is to study the main areas of fighting corruption and bribery in the system of state authorities in order to develop further constructive proposals for solving these problems in ukraine. 3. method of research the research process has entailed the use of a set of general and special methods which resonate with the purpose of the article, namely: induction, deduction, comparison, and systematization of the preconditions for the emergence of corruption. with the help of the logical-semantic method and the method of ascending from abstract to concrete, the authors developed the conceptual apparatus; the essence of the concept “corruption” received a comprehensive description. the structural-logical and system-functional analysis baltic journal of economic studies 61 vol. 5, no. 1, 2019 methods helped to identify the causes of corruption in ukraine, as well as to predict the consequences of the subsequent impact of corruption in ukraine. the creation of the economic-mathematical model entailed usage of a systematic approach, modelling and generalization. the model takes into account the limitations on the possibility of proposing and agreeing to receive a bribe, as well as a systematization of technologies for combating corruption and bribery in the system of ukrainian state authorities. 4. the theoretical basis of the fight against corruption as a source of destructive power the modern world perceives corruption as a destructive phenomenon, which is present in many fields, including politics and public administration. it is a destabilizing factor in public life, which threatens national security and impedes the development of democracy and growth of the population’s well-being. the impact of corruption on competition in commodity markets is directly related to economic security in major sectors of the economy, industry, including engineering (bublyk et. al., 2017). a characteristic feature of corruption is the conflict between the actions of an official, the interests of the employer and the interests of society. currently, corruption in ukraine can be described as a special kind of corruption – a crisis-type corruption. on the one hand, it is generated by the social crisis in ukraine, and on the other – it is the result of the crisis and, at the same time, it forms the basis (foundation) for deepening the crisis. this kind of corruption has the ability to stop any reforms in the country. moreover, it may cause alienation of ukraine in the world. effective counteraction to corruption will largely depend on how profoundly and comprehensively society will understand the philosophy of the corruption phenomenon. corruption is an ancient phenomenon. it manifests in all spheres of human life and depends on the level of society’s culture, national mentality, legal consciousness, religious, and ethnic traditions. corruption as a social phenomenon emerged with the creation of power relations between humans. in the age of tribes and tribal alliances and the formation of communities/first nations, leaders needed to negotiate with other unions, solve interethnic and intertribal conflicts, engage in various management activities, which reduced their personal contribution to the economic activity of the primitive (sub-state) society. thus, the changed form of participation in tribal life created the need for certain remuneration for the time spent on social affairs in the form of other benefits and certain results of work. as a consequence, the tribes that were a part of the union and received protection were obliged to make gifts. also in order to avoid armed attacks and looting, neighbouring tribes tended to establish contractual relations in the form of redemption from the conquest by other tribes. in such a way, the introduction of the tradition of “tribute – gift – bribe” arose almost with the birth of human race on earth and acquired signs of a systemic phenomenon with the separation of functions of management in social or economic activities. the essence of such a phenomenon as “tribute – gift – bribe” is the unity of the three elements: 1) appropriate favourable reaction of the person receiving the goods; 2) the reward for the desirable act of the “recipient”; 3) the withdrawal of income from the family/tribe/ individual. at every evolutionary stage of society’s development “a society without a state → a state-organized society”, a person organized one’s life in order to adapt oneself in the best possible manner to the changing conditions of life and satisfy one’s growing needs through the mechanism of redistribution of goods. such redistribution took place in accordance with the established norms of morality and customs. with the development of the exchange, this phenomenon diverged into two components: “gift” and “tribute – bribe”. the latter is now only given to persons who occupy a certain social position, which in legal science, as a rule, is called “post-government power” or in the economics – “discretionary”. it should be emphasized that at this stage, the concept “tribute – bribe” cannot be considered to be a harmful phenomenon. on the contrary, it plays a positive role since it frees persons who exercise control in a stateowned society from everyday household concerns. this is a pre-corrupt practice, which is encouraged by the norms of primitive morality. on the one hand, the “tribute – bribe” implies the reaction of someone who is bribed in a form of a favour for a certain person. on the other – the one who gives a “tribute” cannot expect full compliance and only can hope for it. the latter gave the impetus to the transformation of “tribute – bribe” into “official” (“service”, social) privileges, which according to the custom (tradition), should be granted to a person who occupies a certain social position in a sub-state society. this allows drawing several conclusions: a prerequisite for corruption is the possibility of obtaining benefits due to one’s social situation. the pre-corruption custom in the form of “tribute – gift – bribe” was not a socially harmful phenomenon, but on the contrary, was encouraged by the norms of morality, which stimulated further evolution of societies. in this regard, it was an element of the initial legal mechanism of redistribution of public goods; pre-corruption custom generates “official” (“formal”, social) privileges, which according to the custom (tradition) should be provided to a person who occupies a certain social position in a state-owned society. baltic journal of economic studies 62 vol. 5, no. 1, 2019 at present, such a complex phenomenon as corruption has transformed itself into a threat to political stability, sustainable development of the state and its national security. taking into account the existing views on “corruption”, we will try to consider a system of anti-corruption measures in public administration. it is difficult to define corruption as it manifests itself in various forms. thus, corruption (from the latin corrumpere – to spoil) in a more broad sense is an unlawful activity, which consists in the use by officials of their rights and official capacities for personal enrichment; graft and corruption of public and political figures. any person who has the authority to distribute certain resources not belonging to him personally, at his own discretion (official, deputy, judge, law enforcement officer, administrator, examiner, doctor etc.) may be subject to corruption actions. the main stimulus for corruption is the possibility of obtaining economic profit, and the main deterrent factor is the risk of disclosure and punishment. in accordance with the law of ukraine on prevention of corruption (law of ukraine on prevention of corruption, 2014), corruption should be understood as “the use by a person of a given authority or capabilities connected with it in order to obtain the improper advantage (benefit) or accept such a benefit or accept the promise/offer of such benefit for oneself or others or, accordingly, the promise/offer or provision of improper benefit to a person, or at his request to other natural or legal persons, in order to persuade the person to misuse his/her official powers or related capabilities.” according to the abovementioned definition, corruption in the narrow sense should be considered as any action aimed at achieving or obtaining any privileges or benefits through illegal conspiracies and bribes. corruption, therefore, is a negative phenomenon that poisons the social life of any state. the problem of corruption remains one of the most pressing for the system of state authorities. it hinders development, but at the same time, prevention and effective corruption counteraction measures are not usually based on an understanding of its origin. that is why it is necessary to develop specific technologies and methods that can reduce the manifestations of corruption and risks caused by its appearance. the literature reveals several channels, through which corruption affects the medium and long-term growth potential of the country, namely (terzi, 2015): 1. domestic investment. corruption not only reduces the return on investment but also creates uncertainty in the return on investments. 2. corruption directly reduces foreign direct investment. this is particularly problematic as these processes are connected with the international transfer of know-how technology and management, and hence the pace of technological progress, which is the main source of long-term growth. 3. competition. corruption can weaken antimonopoly regulation, create barriers for new “players” or create other barriers that keep the privileges of the established firms. the weaker competition will affect productivity and innovation. 4. entrepreneurship. as business reward diminishes, potential entrepreneurial talents can be targeted at alternative operators in the process of renting. the result will be a reduction in startups and innovations and, ultimately, a decrease in growth rates. 5. quality of public expenditures. corruption will affect the level and composition of public expenditures. first, it will increase the value of goods and services purchased by the public sector, reducing the funds needed for effective public use. secondly, this will affect the cost structure, as resources will be directed to those areas where corruption can be more easily hidden. counteracting corruption as a specific activity in the field of public administration includes a system of measures including: political, legal, organizational, managerial, ideological, socio-psychological, and others. the system of anti-corruption measures entails reducing the scale of corruption, changing the nature of its manifestations, and limiting its impact on social processes. this increases the risk for the corrupt officials. it also presupposes removing social preconditions for corruption, the causes and conditions of corruption; identifying, terminating, and investigating corruption; bringing to justice individuals who are guilty of committed corruption offenses; eliminating the consequences of corrupt acts. the rule of law and legitimacy, as well as comprehensive implementation of legal and informational measures with the priority on prevention, should be the cornerstone of activities on combating corruption. the prevention activities, in particular, should include such principles as the inevitability of responsibility for the corruption offense, openness and transparency of the activities of state authorities and local selfgovernment bodies. at present, the situation in the field of prevention and counteraction to corruption is characterized by several factors. on the one hand, there is a “new” agenda of state authorities against corruption, on the other – lack of concrete results. the problem is that the prevention process affects a fairly wide range of social relations, including the spheres of social life, where modern society does not have a direct influence. often, economic reasons cause “corrupt behaviour”. it is quite obvious that the state government can only partly affect economic processes in the country, especially in the context of the economic crisis. to a lesser degree, it is capable of influencing culture, the constituent part of which is the legal culture. thus, the low level of legal culture, and more precisely legal nihilism, is the direct and immediate cause of corrupt behaviour. baltic journal of economic studies 63 vol. 5, no. 1, 2019 according to macroeconomic and political economy studies, corruption is the biggest obstacle to economic growth and development, which can jeopardize any transformation. the main causes of corruption in ukraine are: • lack of political will to overcome corruption; • lack of moral standards in the population (and as a consequence of officials), indifference; • the imperfection of the judicial system; • lack of transparency and inadequate level of accountability of state bodies; • lack of effective punishment system for the bribes; • convenience for many entrepreneurs and ordinary citizens to solve their problems with officials using bribes. the consequences of the subsequent impact of corruption in ukraine may be the following: • the growth of socio-political tension (even the emergence of a revolutionary situation); • further criminalization and spread of the shadow economy; • disruption of the financial and economic system of the country; • devaluation of moral values of the society; • the decline in the positive international image of the country, deterioration of its political, economic, social, and legal positions on the world arena; • loss of opportunities for the country to enter prestigious international organizations; • international political and economic isolation etc. the future development of the country is connected with the need to counteract corruption. this question is also important for social progress, normal life, and prevention of other challenges and threats. ukraine’s powerful potential in the economic, political, legal, and social spheres allows relying on the effective implementation of anticorruption policies and the effectiveness of anticorruption programs. however, despite loud statements about the active counteraction to corruption, the bribery cases in the country are increasing. the average size of the bribe in 2016 was approximately 45,000 uah, in 2015 – 40,000 uah, in 2014 – 30,000 uah. the dollar rate increase is partly responsible for the increase in the sum (transparency international ukraine, 2016). thus, according to courts’ criminal proceedings on corruption charges and cases of administrative offenses, the following numbers are evident: 3261 people were prosecuted on charges associated with corrupt activities during 9 months of 2017. this number includes charges for corruption offenses – 788 people, and for the administrative offenses connected with corruption – 2473 persons. this is 40.2% of the total number of cases brought to court (8,109 cases) (verhovniy sud ukrajiny, 2017). this stipulates the necessity of introducing the most severe punishment and creating conditions for reducing the desire for taking bribes. for example, in a case of violation of the law on corruption, the guilty person should be deprived of the right to work in state institutions, lose all social privileges, including pension and social security, and pay large fines. in some countries, for example, bribery is equated with a violation of the constitution and is considered treason. international experience shows that all socioeconomic systems are not fully immune from corruption, only the amounts and manifestations change. thus, corruption cannot be eliminated in any particular state or at some stage of historical development. the reduction of the level and the localization of corruption may be among the maximum positive achievements in this sphere, including the decrease in the level of corruption risk manifestations and their impact on various social processes. in western countries, this process is called control over corruption (ilienok, 2013). eliminating bribery is absolutely impossible since the excessive implementation of control methods is very costly and countless efforts should be spent on complete elimination of corruption. in addition, hypertrophied strengthening of the fight against corruption deprives the administrative system of flexibility and the population – of civil liberties. comparing the losses from corruption with the costs of fighting corruption, one can strive to achieve a certain optimal level of corruption, which reflects the smallest aggregate losses. 5. economic and mathematical modelling of corruption situations and their susceptibility to countermeasures at the same time, the effectiveness and progress of the fight against corruption is assessed in reality considering efficient allocation of resources and taking into account economic efficiency; political priorities of the government; the effective work of the state authorities to achieve the intended results and the use of mechanisms that ensure responsibility for the achieved results. we believe that the most effective means of combating corruption is to create a competitive environment “economic benefits – the risk of punishment”. this should reduce the interest of officials in obtaining bribes since their size ceases to compensate for the risk of detention and disclosure. this can be proved using the economic-mathematical model of maximizing the bribe, which takes into account the limitations regarding the possibility of offering and agreeing to receive a bribe: g v p k= − − , (1) where v – is the size of a bribe that an official can receive, p – the expected amount of damage from the punishment of an official (for example, in the case of a court order to impose an arrest on property or impose a fine); k – the costs of control activities (for example, public control and internal audit). the size of a bribe v can be represented by formula (2): baltic journal of economic studies 64 vol. 5, no. 1, 2019 v v d= ⋅ ⋅γ , (2) where v – the size of the bribe (part of the revenue from the project, administrative service etc. which the official demands); d – revenue from the implementation of all projects, administrative services etc., which are coordinated by an official; v•d – potential bribe revenue of an official; γ = −v v v 0 0 – the probability of a person’s consent to give a bribe (0 < γ ≤ 1); v0 – the maximum amount of the bribe, which the person agrees to give (0 < v0 ≤ 1). by combining all variables, we receive the profit model of the corrupt official: g v d v v v p v k v= ⋅ ⋅ − − −0 0 ( ) ( ) (3) the extremum is used to determine the maximum possible profit of the official (the zero derivative gʹ = 0): ′ = ⋅ − − ′ − ′ =g d v v v p v k v0 0 2 ( ) ( ) 0 (4) in such a way, the function has an extremum when: v v p v k v d = − ′ + ′      0 2 1 ( ) ( ) (5) let’s consider possible cases: 1. if the fine for receiving a bribe and the cost of control actions does not depend on the size of the bribe (pʹ = 0, ′ =k 0), then the maximum income from bribes is received by an official on the following condition: v v max = 0 2 . (6) let’s check if it is a maximum or a minimum of the function by finding a second derivative: ′′ = ⋅ −      g d v 1 2 0 (7) if 0 10< ≤v , then ′′ <g 0, accordingly, this shows that we received the value of the part of the bribe when the function of income is maximized. the result can be interpreted as follows: an official will receive maximum bribe if it forces to give half of the maximum possible bribe size (“to share equally”). in this case, the maximum income of the official equals to (8): g v dmax = ⋅ 0 4 (8) trying to get a bigger amount of bribe will reduce the probability of the consent to a larger bribe, and if to take less – the total amount of the received bribes decreases. 2) the second case is more interesting and complicated. if the sum of the marginal expenses from the punishment (court orders based on the results of the revealed corruption manifestations by the controlling bodies) is potentially more possible than the bribe revenue from the project implementation, administrative service etc. received by an official, meaning pʹ + kʹ ≥ d, than it means that there is no such bribe amount that will allow an official to maximize one’s income. if ′ + ′ <p k d, then the maximum value of g (the revenue of the official) exists when the size of the bribe has certain value v v< 0 2 reduced to the multiplier 1 − ′ + ′      p k d . let’s check if it is a maximum or a minimum of the function. in order to do this, one can find a second derivative. ′′ = ⋅ −       − ′′ − ′′g d v p v k v1 2 0 ( ) ( ) (10) if 0 10< ≤v , then the first summand is negative. in this case, the form of the curves becomes important – p v( ) and k v( ). if ′′ >p 0 and ′′ >k 0, then ′′ <g 0, and the function of bribe income of an official have maximum (figure 1). p′, k′ <0 v p, k p′, k′ >0 p″, k″ >0 figure 1. dependence of the official’s losses on the size of bribe when ′′ >p 0 and ′′ >k 0 it should be noted that the value of marginal costs ′ <p 0 and ′ <k 0 can indicate that the expected amount of damage from the punishment of an official p and the cost of control actions k decrease with the increase in the size of the bribe, which should not have occurred in real life, although it is possible from a mathematical point of view. if ′′ <p 0 and ′′ <k 0, then ′′g can have both positive and negative values (figure 2). p′, k′ >0 p′, k′ <0 v p, k p″, k″ <0 figure 2. dependence of the official’s losses on the size of bribe providing that ′′ <p 0 and ′′ <k 0 if ′′ + ′′ > ⋅ −      p v k v d v ( ) ( ) 1 2 0 , then ′′ <g 0, and again there is an opportunity to maximize profits (figure 3). v v p k d = − ′ + ′      ≤ 0 2 1 0, (9) baltic journal of economic studies 65 vol. 5, no. 1, 2019 otherwise, if ′′ + ′′ < ⋅ −      p v k v d v ( ) ( ) 1 2 0 , then ′′ >g 0. it means that the function will have a minimum value, which indicates that it is impossible to maximize profits. gmax(v) k(v) v p, k p(v) figure 3. determination of the profit of an official gmax providing that ′ >p 0 and ′ >k 0 the analysis shows that the problem of corruption can be resolved only with the introduction of comprehensive administrative (coercive) measures, which often have restrictive and repressive character. in the first place, they provide for extremely stringent control over the actions and incomes of officials and a high degree of fines and penalties depending on the size of the bribe. this is quite evident from the geometric meaning of the derivative: the value of the derivative at the point is tangent to the angle of inclination of the tangent at this point. accordingly, the greater the value of the possible revenue from the implementation of projects (the provision of administrative services), the greater should be the value of the tangent, and even more so the angle of inclination (figure 4). p, k v α figure 4. the geometric sense of determining the size of loss of an official in addition to strengthening the control-regulatory function and “punitive” influence as an appropriate action of the state to the committed illegal actions by an official, political will of the authorities is required to fight corruption. the authorities should direct their efforts to the comprehensive implementation of the provisions of anti-corruption legislation and the practical application of technologies and methods of corruption counteraction and bribery. according to the world bank expert p. landellmills (2013), anti-corruption legislation is formed by laws on combating corruption, extortion, and bribery; on the financing of political parties, as well as laws aimed at curbing corruption, in particular: on conflict of interests; introduction of free access of citizens to public information; on guaranteeing the protection from criminal prosecution of people who report cases of corruption (landell-mills, 2013). the technologies of fighting corruption and bribery may be grouped in accordance with their spheres as follows: political technologies for combating corruption – aimed at ensuring transparency of the decision-making by state bodies of all levels and bodies of local selfgovernment; ideological technologies for combating corruption – aimed at legal education and awareness creation for the society to be aware of the damage resulted from corruption, the recognition by the state and society of the fact that corruption is a threat to national security; legal technologies for combating corruption – work with current legislation to bring it in line with the norms that form the anticorruption policy; organizational and technical technologies of combating corruption – aimed at improving the material provision of civil servants; implementation of systemic and well-considered personnel policy; institutional anti-corruption technologies – aimed at creating an effective institutional system for combating corruption and ensuring effective institutional counteraction, serving as the organizational basis for a holistic mechanism for ensuring economic law and order and maintaining economic and criminological security; socio-economic technologies of combating corruption – aimed at reducing cash circulation, expansion of modern electronic means of calculating the implementation of modern forms of reporting, which facilitate control over the movement of funds and complicate the possibility of giving bribes in cash; commercialization of a part of social (including communal) services; delegation of solving social tasks to civil society institutions; bringing together the real and official economy of various sectors and social institutions. thus, in order to overcome corruption, it is not enough to develop the economy and create anticorruption institutions. it is also necessary to promote the political will of the authorities, the efforts of which are aimed at the integrated implementation of technologies and methods of combating corruption and bribery. firstly, it is necessary to implement technological advances in order to reduce the number of personal contacts between citizens and government officials. baltic journal of economic studies 66 vol. 5, no. 1, 2019 this will help to increase transparency standards and simplify the task of ensuring effective monitoring of the quality of the provision of administrative services. it should be noted that the use of state-of-the-art technology for state anti-corruption policy will increase the overall efficiency of public administration. however, it should be borne in mind that technological development requires the involvement of more talented and competent performers, linking the use of technological advances with the involvement of new personnel (piketty, 2014). 6. discussion the literature shows two opposing views on the use of the methods of combating corruption. proponents of the first position (haraschuk, 2010; melnyk, 2004; nevmerzhytskyj, 2008) argue that the fight against corruption is necessary first and foremost through the implementation of economic and social reforms, that is to create conditions under which individuals who are potentially corrupt refrain from committing acts because they are more interested not to commit an illegal act than to commit it. the amount of the benefits they can receive as the result of the illegal activity is much less than they receive from a state for carrying out their assigned tasks. supporters of such opinion believe that main negative factors are the low standard of living of civil servants and persons who are authorized to perform state functions; high prices for goods and services; destructive tax policy of the state, which makes it easier for a manufacturer to “buy” a civil servant rather than pay taxes etc. a somewhat similar opinion is expressed by paskhaver (2014). he notes that the successful fight against systemic corruption in ukraine involves initiating the implementation of fundamental economic and political measures and then deploying the whole arsenal of anticorruption technical means. the reciprocal sequence of actions is not only ineffective but also socially and politically dangerous (paskhaver, 2014). however, it is highly necessary to stop further spread of corruption in the country as the degree of corruption of the state apparatus threatens the existence of a democratic system. therefore, the administrative methods should be used to detect bribery and ensure the inevitability of punishment for committing a corrupt act. this may stop the growth of corruption. 7. conclusions the systematization of corruption problems with state authorities and economic-mathematical modelling of the corruption situations proves the following: under the current conditions in ukraine, the most optimal means to combat corruption should have a focus on the formation of competition based approach “economic benefit – the risk of punishment”. it should contribute to reducing the interest of officials in obtaining a bribe and destroy the propensity to commit corruption. this, accordingly, stipulates an increase in the control-regulatory function and “punitive” influence as an appropriate action of the state and its bodies on committing unlawful actions by officials. however, “punitive” measures, even the hardest ones, do not affect the underlying causes of corruption as a negative social phenomenon which lie deep in the minds of ukrainians and in the behavioural stereotypes. therefore, one of the main goals in the fight against corruption should include the formation of an anticorruption model of behaviour in society, based on anticorruption legal awareness. repressive and preventive methods of fighting corruption should be well-balanced. ukrainian new national anti-corruption model includes an institution where preventive and repressive functions are combined. moreover, several specialized institutions that combine several preventive functions were created. however, there was no massive attack on corruption. the main reason for the ineffectiveness of these institutions, in most cases, might be their consulting and advisory nature, vagueness and duplication of powers, as well as the dependence of their work on the will of senior officials. among other reasons, there might be the unwillingness of the country’s leaders (the president, the head of the parliament, the prime minister) to overcome the oligarchic influence on the authorities. it is not an uncommon practice to use the quota principle and not the professional qualification while appointing to the executive positions in state bodies, law enforcement agencies, prosecutors’ and customs’ office. there is also a general unwillingness to check civil servants on “wealth-income” principle. taking into consideration current situation in state authorities and local self-governments in ukraine, despite the creation of numerous bodies to prevent corruption, it will be impossible to overcome systemic corruption in the near future without changing the political elite. references: alforov, s. m. (2011). administrative and legal activity on combating corruption in internal affairs bodies. kharkiv: zolota mylia. bratkovskyj, m. l. (2010). trust as a mechanism for the implementation of public authority. donetsk: “vik”. bublyk, m., koval, v., redkva, o. (2017). analysis impact of the structural competition preconditions for ensuring economic security of the machine building complex. marketing and management of innovations, 4, 229-240. doi: 10.21272/mmi.2017.4-20 charron, n., dahlström, c. & lapuente, v. (2016). measuring meritocracy in the public sector in europe: a new national and sub-national indicator. european journal on criminal policy and research, 22(3), 499-523. baltic journal of economic studies 67 vol. 5, no. 1, 2019 flejchuk, m. i. (2008). legalization of the economy and counteracting corruption in the system of economic security: theoretical foundations and strategic priorities in the conditions of globalization. lviv: ahill. haraschuk, v. m. (2010). actual problems of fighting corruption in ukraine. kharkiv: pravo. ilienok, t. v. (2013). fight with corruption: international experience. yurydychna nauka, 2, 71-77. kochanova, a. (2015). how does corruption affect economic growth? world economic forum. retrieved from: https://www.weforum.org/agenda/2015/05/how-does-corruption-affect-economic-growth/ kokhan, h. v. (2013). the phenomenon of political corruption: theoretical and methodological analysis. kharkiv: nisd. landell-mills, p. (2013). citizens against corruption. report from the front line. uk.: partnership for transparency funding. law of ukraine on prevention of corruption (2014). verhovna rada ukrajiny. retrieved from: http://zakon2.rada.gov.ua/laws/show/1700-18 melnyk, m. i. (2004). corruption – corrosion of power (social essence, tendencies and consequences, measures of counteraction). kyiv: yurydychna dumka. nevmerzhytskyj, ye. v. (2008). corruption in ukraine: causes, consequences, mechanisms of counteraction. kyiv: knt. paskhaver, a. y. (2014). whom to be. kyiv: fond poroshenka. piketty, t. (2014). capital in the twenty-first century. the belknap press of harvard university press. rose-ackerman, s. (2003). corruption and the state: causes, consequences, reforms. moscow: logos. serohin, s. s. (2009). the social nature of corruption in public authorities. derzhavne upravlinnia ta mistseve samovriaduvannia, 3(3), 202-207. terzi, a. (2015). why fighting corruption in italy matters for economic growth. world economic forum. retrieved from: https://agenda.weforum.org/2015/05/why-fighting-corruption-in-italy-matters-for-economic-growth/ transparency international ukraine (2016). fines for bribery are less than bribes themselves, and only one-fifth of the corruptionists are enjailed. retrieved from: https://ti-ukraine.org/infographics/shtrafy-za-habarnytstvomenshi-za-habari-a-za-gratamy-lyshe-p-yata-chastyna-koruptsioneriv verhovniy sud ukrajiny (2017). the situation with fighting corruption in ukraine during the first nine months of 2017. retrieved from: http://www.scourt.gov.ua/clients/vsu/vsu.nsf baltic journal of economic studies 271 vol. 4, no. 5, 2018 corresponding author: 1 uzhhorod national university, ukraine. 2 national academy of internal affairs, ukraine. 3 kharkiv national university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-271-275 financial and legal norms: legal means and mechanism of implementation mykhailo pitiulych1, anatolii poliakh2, mykola pakhnin3 abstract. the aim of the article is to disclose problematic issues, which are connected with financial and legal norms, as well as legal means and the mechanism for their implementation. the subject of the study is the financial and legal norms: legal means and the mechanism for their implementation. methodology. the study is based on the dialectical method of scientific knowledge and general scientific methods, which are based on it, such as: analysis, comparison, analogy, induction and others. results of the conducted study have shown the theoretical aspects of the implementation of financial and legal norms and their features. particular attention is paid to the implementation of the law, which takes one of the main places among the pressing problems of legal science, despite the fact that a special theoretical analysis of the implementation of financial law in the legal literature is quite rare. during the analysis of this issue in the presented study, the question about the content and number of legal means in the mechanism of financial and legal regulation is set in the first place. another problem, which is studied, is the impact of various determining factors on the procedure for the implementation of financial law. practical impact. the author analyses the features of the forms of implementation of financial and legal norms, the legal regulation of relations developing in connection with the observance, use, execution, and application of these norms on the bases of the general theoretical approaches of law. correlation/originality. after the legal analysis and analysis of the scientific literature, it was defined that the mechanism for the implementation of financial and legal norms today faces a number of unresolved problems in financial relations. key words: implementation of financial law, financial law, compliance, use, execution, application of financial law. jel classification: f36, f37 1. introduction today, the globalization of society contributes to the positive interpenetration of cultures, the strengthening of the country’s potential by joining the world’s best intellectual achievements, the study of historical experience in solving socially important issues (sevruk, pavlenko, 2015). therefore, the radical socio-economic transformations that have taken place over the past decade have led to both positive and negative changes in modern ukrainian society (pavlenko, sevruk, kobko, 2017). in today’s conditions of functioning of the world economy, each country is trying to achieve a high level of socio-economic development. as globalization processes generate growing demands on the parameters of the national economy, ukraine must develop a strategy for its development that can adequately reflect our state by means of macroeconomic indicators and the living standards of the population (chorna, chornyi, shandruk, 2018). at the present stage of the formation of ukraine as a european state, a complex of strategic measures aimed at the development of the economy in the conditions of european integration is being implemented. the influence of the main political, economic, social, and technological aspects of the external and internal environment on the ukrainian economy is determined. for ukraine, the eu is an important strategic partner, including in the investment and foreign trade spheres. therefore, the future of our country in the european space will be determined by signing the association agreement. it is proved that the eu as an integration association will have the status of a leader in international economic relations; therefore, for ukraine as a european state, it is an important step to form a new strategy for the economic development of the eu (yunin, sevruk, pavlenko, 2018). to date, ukraine has proclaimed euro-integration a key priority of economic policy. the need to develop the integration strategy of ukraine was caused by the desire of our state to meet the requirements of the modern world economic system, this is a way of modernizing the economy, overcoming technological backwardness, attracting foreign investment and the latest technologies, creating new jobs, increasing the baltic journal of economic studies 272 vol. 4, no. 5, 2018 competitiveness of domestic producers, and entering the world markets. as a result of the changes taking place in society, along with the positive ones, all of the individual negative tendencies appear, which greatly impede the development of statehood in ukraine (mohilevskyi, sevruk, pavlenko, 2017). a serious concern is caused by problems in the mechanism of financial and legal regulation, the influence on the order of implementation of the rules of financial law of various determinants, which determined the relevance of the topic. 2. analysis of recent research and publications it is common knowledge that the problem of implementing the rules of law and finance, in particular, is far from new. however, the complex analysis and study of the norms of financial (tax) law and their implementation (law enforcement) were developed very recently. however, despite this aspect, a wide range of issues in this area remains unresolved. representatives of both the theory of law and branch sciences were engaged in the development of this topic, for example, s. alekseev, p. nedbaylo, v. nersesiants, a. korenev, n. kucheryavenko, m. marchenko, i. mikhailovsky, g. tolstopyatenko, r . khalfina, l. yavych, and others. 3. main material in today’s theory of law, tradition has developed the idea that the realization of law is a definite process, the transformation of the requirements of legal norms into concrete actions of subjects. these prescriptions are made through lawful conduct, which does not go beyond the scope permitted by law (regulatory acts). such a vision of the problem focuses on the legitimacy of the activities of the subjects and on the standard of the said lawfulness – the norm, which is enshrined in the law (another act), while regardless of the understanding of the right of the researcher (narrow or broad). the norm acts as the main installation, which in a given situation will determine the behaviour of subjects of the application of normative provisions. the norms of financial law, as well as the norms of any branch of law, are a general rule, a certain scale of due or proper conduct established by the state and protected by special state methods. these norms fulfil the function of the regulator of social relations. financial and legal norms differ from the norms of other branches of law in that the subject of their regulation are the social relations that arise in the process of planned formation, distribution, and use of the state (local governments) of public money necessary for the state to carry out its tasks and functions. most scholars in the field of financial law point out that the rules of financial law are always linked with the regulation of relations in relation to the distribution, control and stimulating functions of the state in the process of financial activity of the state in the distribution of the social product and national income in cash (horbunova, hracheva, 2003). none of the financial-legal norms act in isolation, without interaction with the rest or with a group of other financial law. the indicated norms are in interaction and interconnection and form a single branch, namely: financial law. analysing the issues of implementing the rules of financial law, the author first of all, faces the problem of the implementation of the rules of law in general. at the present stage, there is a large amount of educational, scientific monographic literature devoted to the analysis of this issue. it is common knowledge that the rules of law require their embodiment in life, their realization, so as not to become dead, formally defined rules. m. marchenko rightly emphasizes the fact that the legal norm exists and makes it possible to know about itself only when it is not only formally adopted, compiling the content of a normative legal act, but also in reality, in the behaviour of people and their organization institutes, is carried out (marchenko, 2004). the famous scientist l. yavytch deliberately points to the special role of the realization of law and draws attention to the fact that the exercise of law has always been, and will always be, while it is in society, a special way of life of the legal form of social relations. in the opinion of the author, the exercise of the right is a way of its existence, action, fulfilment of its main social function. one cannot understand the right, if we distract from the mechanism of its realization in the life of society (yavych, 1976). it should be borne in mind that the provision of subjective rights to the participants in social relations, the assignment of legal obligations to them is related to the effect of legal norms. it is common knowledge that the law can act and be implemented in various forms, taking into account information psychological and instrumental aspects. at the present stage, the implementation of the norms of the financial (tax, budget) law can be considered rather weak in the whole legal chain, since the existing stereotypes of the act’s act, due to the fact of its adoption or legal disobedience of citizens, as before, are deformed by their legal consciousness and behaviour. the manifestations of legal nihilism remain stable enough. also, various financial and legal acts are being implemented improperly. the financial and legal norms are one of the levers, with the help of which the set goals are achieved. the content of these rules is entirely dependent on the goals that the legislator sets himself in developing these rules. the condition for the realization of the norm of financial law can be considered the achievement of its final result: ensuring the formation, distribution, and use of public funds of the state, the implementation of financial control, the attraction of violators of financial and legal norms for liability, etc. baltic journal of economic studies 273 vol. 4, no. 5, 2018 in the scientific legal literature, the following forms of the implementation of the rules of law are traditionally distinguished by the nature of righteous acts: (a) observance of prohibitions (involves passive behaviour of subjects, refraining from prohibited acts); (b) performance of duties (active behaviour of subjects in the execution of legal obligations of positive content); (c) the use of subjective law. some scholars sometimes distinguish the 4th stage – the application of law as an active-power activity of the competent authorities (sometimes individuals) by the decision within the framework of the legal rules of specific cases, the publication of special legal acts. in modern legal literature among scholars – legal scholars there is no unanimous opinion regarding the allocation and classification of forms of the realization of law. thus, v. s. nersesiants distinguishes: 1) from the point of view of the level (depth) of the implementation of the provisions contained in the regulations: the implementation of general provisions contained in the preamble of laws, articles, etc.; realization (outside of legal relations) of general norms establishing the legal status and competence; realization of specific legal relations of specific legal norms; 2) on the subject of realization of the right: individual and collective; 3) in the nature of righteous acts, due to the content of the legal norm: the observance, execution, use and application of law (nersesiantsa, 2006). on the contrary, l. yavich highlights several ways of exercising the right, namely: implementation of legal prohibitions, the use of legal rights and the fulfilment of legal obligations, the application of the rules of law, which involves state power interference in the process of implementing legal regulations (yavych, 1976). according to m. marchenko, for legal norms, there are specific methods for its implementation, the main forms of which are the use of the law, the fulfilment of obligations, the observance of prohibitions, the application of legal norms. the author rightly points out that there are two forms, namely: the use of law and the fulfilment of obligations, which represent the realization of legal relationships (marchenko, 2004). famous scholar s. alekseev highlights only three forms of realization of the law, namely: execution, use, observance. according to s. alekseev, the use of law is a special category occupying a special place. the application, in the opinion of the author, is not a stage of implementation. it characterizes not the outcome, but the process of implementation, participation in this process of the competent authorities, its provision and legal adjustment through the individual state and government activities of these bodies (alekseev, 2009). it should be noted that the implementation of financial and legal norms is carried out by the state as a whole, authorized by that state and local authorities and citizens. the implementation of the rules of financial law is carried out through a number of different methods, namely: 1) legal facts; 2) acts of application of the rules of financial law; 3) explanations and interpretations of financial and legal norms, etc. in our opinion, for the state, the purpose of realization of the financial-legal norm is its interest in the sphere of fiscal saturation, systematic distribution, effective use of public money funds, regulation of economic processes. traditionally, in the theory of law, there was an opinion that the implementation of the rules of law is possible exclusively through legal relationships or outside legal relationships. it should be noted that the rules of financial law are aimed at regulating actual social relations, but this process they carry out through financial legal relations, which play the role of an intermediate link between the financial-legal norm and public relations, allocated as an object of legal influence. the financial legal norm not only enshrines certain interests of the participants of the relationship and displays compromises in their collision but also objectively anticipates measures for their implementation. in realization of a specific norm of financial law, it is possible to define the subjects of legal relationship, the object of legal relationship, the complex of mutual rights and responsibilities, the responsibility of certain subjects. in our view, the implementation of the rules of financial law can be implemented in 4 forms, namely: compliance, execution, use, and application. let’s consider the most important features of them: 1. compliance with financial and legal norms of law is not a violation of the established prohibitions. in other words, compliance acts as such a form of implementation of financial and legal norms, in which subjects of financial law refrain from prohibited financial action. as a rule, compliance with prohibited norms is enforced. for example, the current financial legislation of ukraine contains a provision that subjects are prohibited from conducting currency transactions without acquiring licenses of the national bank of ukraine. the national bank of ukraine issues individual and general licenses for the execution of foreign exchange operations that fall under the licensing regime in accordance with the current legislation. in addition to this, the norm, which is contained in art. 44.1 of the tax code of ukraine (nalohovui kodeks ukrainy, 2011), which prohibits taxpayers from forming tax reporting, customs declarations based on data not verified by primary documents, registers of accounting, financial statements, other documents related to the calculation and payment of taxes and fees, which are provided for by law. 2. the implementation of financial and legal norms is the active observance of the requirements of these norms. as a rule, enforcement obeys the binding norms. in financial law, most norms are binding because there is an interest of the state in the financial provision of its activities. the essence of execution consists of conscious and active compliance with financial regulations. yes, the implementation of the norm of art. 64.5 of the tax code baltic journal of economic studies 274 vol. 4, no. 5, 2018 of ukraine, which obliges permanent representations of non-residents and separate divisions of foreign legal entities to apply within 10 calendar days from the date of their state registration (accreditation, legalization) in the established procedure or at the beginning of conducting business activity, if such registration is not obligatory in accordance with the legislation, to the bodies of the state tax service at their place of residence. the implementation of this norm consists of the active and purposeful actions of the obligated subject, who must apply to the tax authorities within the set deadlines with a statement on registration. the inactivity of the taxpayer qualifies as an offense that is, under the execution and compliance with the rules of financial law can be understood as the subordination of the subject of the right of financial and legal claims facing him. this is either the actions of the subjects of law for the implementation of obligations binding on them, authorizing financial-legal norms or refraining from actions prohibited by the rules of financial law. it is necessary to point out that actions aimed at compliance with the rules of financial law are rather different in their specific content since there is a certain difference between the specific content of the rules of financial law. and some of these actions are of a legal nature, while others do not have the same quality. as a rule, the implementation of binding and empowering norms is related to the need for legal action. for example, the implementation of the norm, which obliges to pay taxes in a timely manner and in full, provides for the implementation of legal actions (provision of documents on tax accounting and tax reporting). 3. the use of norms of financial law is realized at the discretion of the subject in the implementation of the requirements of financial and legal regulations. use means the exercise by subjects of financial law of the subjective rights granted to them in the form of permissions, powers. for example, the use is made of the norm set forth in article 17 of the tax code of ukraine, which enshrines the rights of taxpayers. thus, a taxpayer may represent his interests in the supervisory authorities on his own, through a tax agent or an authorized representative. 4. the application of the rules of financial law consists of a wide range of power actions of the bodies of financial activity in the manner established by law. one of the main forms of law enforcement is law enforcement. the law enforcement is carried out by the competent authorities of the state and local self-government and expressed in the form of a special decision, which establishes on the basis of financial and legal norms – the rights and obligations of the participants of a particular financial legal relationship. for example, the application implements the norm of art. 95 of the tax code of ukraine on the forced collection of tax at the expense of the property of the payer. thus, the body of the state tax service carries out, for a taxpayer and in favour of the state, an arrangement for repaying the tax debt of such a taxpayer by collecting funds that are in his ownership, and in case of their insufficiency, by selling the property of such a taxpayer who is in a tax pledge. the need for this form of implementation of financial law is due to the fact that the state plays a leading role in determining the circle and status of financial law subjects (rossykhyna, 2013). 3. conclusions before the young ukrainian state, there are very difficult and important tasks of the task in the sphere of the economy. our solution to our decision depends to a large extent on our progress towards integration into the european union. therefore, the realization of the economic program of the newest ukrainian state must become the blood of every citizen. therefore, ukraine first of all should pay attention to the issues of combating corruption and returning citizens confidence to the state authorities, to the judicial and law-enforcement system. until then, this is fraught with economic instability and the outflow of financial capital (yunin, sevruk, pavlenko, 2018). due to this implementation of financial-legal norms is accompanied by a huge number of legal conflicts caused by various reasons. at the same time, the process of improving the financial legal system cannot completely eliminate conflicts of legal norms or contradictions between individual legal acts. the desire of the state to increase the volume of public financial activities and regulating its legal acts will inevitably give rise to legal realization disputes constituting the concept of a legal conflict. it is possible to resolve disagreements or maximally neutralize their negative consequences through the use of a mechanism for resolving legal conflicts (krokhyna, 2008). the construction of a system of financial law on the basis of objectively existing financial relations allows the correct application of financial and legal norms and thus contributes to strengthening the legality and compliance with the financial law of regulatory and safeguarding functions. references: sevruk, v. h., pavlenko, s. o. (2015). zakhody protydii transnatsionalnomu narkobiznesu, shcho vchyniaietsia predstavnykamy okremykh etnichnykh hrup [measures to combat transnational drug trafficking committed by representatives of certain ethnic groups]. yurydychnyi chasopys natsionalnoi akademii vnutrishnikh sprav, 2, 193-205. pavlenko, s., sevruk, v., kobko, y. (2017). training police officers in the conditions of reforming the system of education of the ministry of internal affairs of ukraine in accordance with european standards. science and education, 6, 142-150. baltic journal of economic studies 275 vol. 4, no. 5, 2018 chorna, n. p., chornyi, r . s., shandruk, s. k. (2018). socio-economic development of ukraine: new challenges and threats. scientific bulletin of polissia, 1(13). pt. 1, 100-107. yunin, o., sevruk, v., pavlenko, s. 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(2009). obshchaia teoryia prava [general theory of law]. m.: prospekt. nalohovui kodeks ukrainy (2011) [tax code of ukraine]. vedomosty verkhovnoi radu ukrainy, 13, 112. rossykhyna, h. v. (2013). osnovnue formu realyzatsui norm fynansovoho prava. istorycheskye, fylosofskye, polytycheskye y yurydycheskye nauky, kulturolohyia y yskusstvovedenye. voprosu teorii i praktiki [the basic forms of realization of norms of financial law. historical, philosophical, political and legal sciences, culturology and art studies. questions of theory and practice]. tambov: hramota, 2(28), 172-175. krokhyna, yu. a. (2008). fynansovoe pravo rossyy [finance law of russia]. m.: norma. baltic journal of economic studies 100 vol. 4, no. 4, 2018 corresponding author: 1 bila tserkva national agrarian university, ukraine. e-mail: grynchuk1979@icloud.com 2 kharkiv petro vasylenko national technical university of agriculture, ukraine. e-mail: romaniuk.iryna@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-100-105 development of rural green tourism in the regions of ukraine on the basis of european integration julia grynchuk1, irуna romaniuk2 abstract. the objective of the article is to substantiate the forms, mechanisms, and directions of development of rural green tourism in the regions of ukraine as an important means of improving the sectoral structure and territorial organization of tourism activity on the basis of the use of natural tourism resources and the employment of large numbers of unemployed rural population. methodology. the methodological basis of the study is the dialectical method of cognition and the systematic approach to the study of phenomena and processes of the formation and development of rural green tourism in the regions of ukraine on the basis of the use of a favourable natural potential and an excess of labour resources. results. the article reveals the tendencies and possibilities of improving the structure and territorial organization of tourism activity on the basis of development of rural green tourism. first of all, the natural conditions and resources of the picturesque countryside, as well as the unoccupied rural population, are determined as its resources. the forms, sources, and mechanisms of the organization, proposals for granting and extending the nomenclature of services are substantiated. the prospects of using the eu experience and the advantages of european integration processes for ukraine are revealed. recommendations on the formation of clusters and other associations of tourist activities in the village have been developed. the field of application of results: carrying out of scientific researches in the field of development of the activity of agriculture, provision of services of rural green tourism, is one of directions of diversification and increase of incomes of rural population and improvement of its standard of living. solving the problems of employment, organizational and economic problems related to the reproduction of labour potential in the agrarian sector and the formation of new trends in the production and marketing of agricultural products. conclusions. the development of rural green tourism has a positive effect on solving socio-economic problems of the village, primarily in the direction of expanding the rural population’s employment. rural green tourism provides a rural population with additional income, expanding employment opportunities for rural owners, not only in the production sector but also in the service sector. with an increase in the number of vacationers, there is a need to meet their diverse needs and this, in turn, stimulates the development of services: excursions, communications, trade, life services, recreation and entertainment, and others. key words: tourism activity, natural and labour resources, abundance, rural green tourism, forms, mechanisms, clusters, branch structure, territorial organization, improvement. jel classification: z32, р28, j21, h62, e19 1. introduction the growing demand for various types of tourism, observed in recent years in ukraine and in the world, leads to the conviction that tourism activity can be the basis of the use of natural and human resources for the operation of agrarian enterprises and households for a certain organizational and economic mechanism and the direction of its implementation. traditionally, rural green tourism is grounded in this direction. the potential of development of tourist services of the mountain and seaside agrarian enterprises and agroholding of the country on the basis of the use of natural climatic and other socio-geographical conditions is not in doubt. therefore, consideration should be given to how and to what extent rural green tourism can become a function of socio-economic activity in traditional agrarian regions, both at the level of administrative regions and at the level of administrative districts or rural areas. overall tourism development of any territory, the formation of tourist destinations is a complex and important environmental, social, and economic problem. development and improvement of organizational and economic mechanism for the provision of tourism services in rural regions are feasible baltic journal of economic studies 101 vol. 4, no. 4, 2018 not only because of the continuous increase in demand for tourism of various types and trends but also because of the presence of the aggregate favourable features of rural areas: dry warm climate, prevailing bright sunny day in summer, spring and autumn; proximity to water, balneological resources; unique natural, historical, architectural, cultural and artistic and other values and tourist attractions; qualified and free labour resources; tolerant and friendly people. available and cheap quality organic food products should be added to this; therefore, interesting and cost-effective gastronomic tours may be arranged. 2. trends and opportunities for improving the structure and territorial organization of tourism activity on the basis of development of rural green tourism rural green tourism as an important direction of tourism activity is based on the use of traditional natural resource potential and rural lifestyles. however, for city dwellers, tourists from other countries, it as well as natural attractions can be perceived as unique or exotic. in any case, vacationers are attracted by nature, the ability to communicate with animals, participation in agriculture, etc. (vrakhovych, franchuk, 2013). taking into account the fact that objects that are often attractive to tourists are far beyond the boundaries of large cities, the efficient way in the organizational and economic mechanism of providing rural green tourism services to agrarian enterprises may be the creation of a network of clusters as systems and links of tourist facilities with small towns. they are economically feasible and beneficial for the short-term provision of services to small groups of vacationers (as a rule, family holidays on weekends and holidays). creation of a special service centre in such conditions is not feasible because its functions can be performed by a set of enterprises and organizations of a small town. placing small tourist objects of agroindustries in the vicinity of a small town allows them to connect to town infrastructure, use technical and utility facilities, and provide the necessary personnel. a small town can become the centre for rural green tourism and service tourism activities in general for the entire administrative district. in rural areas that do not have the conditions for the organization of special tourist facilities, tourist services can be provided in existing rural settlements. we are talking about agrarian tourism, which is understood as a recreational type of tourism, which involves staying of tourists in agrarian enterprises and rural households (ihnatenko, 2010). it involves the development of tourist routes and directions, places for recreation, agricultural and folk museums of local lore, as well as tourist centres with guides and tourists, etc. it should be noted that even at the launch stage, rural green tourism requires relatively small investments and is a sector where the creation of new jobs does not require special or additional professional knowledge and skills. the services of rural green tourism by agrarian enterprises can become a solution to problems for those representatives of the rural population who have lost their jobs or were forced to leave their work in agricultural production through its digitization and corporatization. in the long term, the organizational and economic provision of tourism development, the improvement of its structure and territorial organization on the basis of providing tourist services in the countryside, the following decisive feature of rural green tourism should be taken into account: it cannot be represented by a clearly defined standardized set of services and attractions (accommodation, food, excursions, hunting, participation in local ceremonies, acquaintance with crafts, etc.). the variety of their recruitment depends on the host party (owners of dwellings, farms, other agrarian or agro-industrial enterprises). however, it can be argued that the main product of rural green tourism is the hospitality service, i.e. the ability to organize tourists holiday in such a way that they would like to return to the owners more than once (marmul, pinchuk, 2009). in the employment system, rural green tourism occupies an intermediate position between the services of accommodation (mini-hotels in poland) and the use of their own homes for personal (family) needs only (in ukraine). given that the unemployment rate in the countryside is much higher than in urban areas, rural green tourism provides an opportunity for additional earnings, using the “abundance” of residential premises and other facilities adapted for the reception of tourists. however, in ukraine, the certification of housing on the level of comfort and other standards, although, has the proper theoretical and methodological justification, in practice, requires comprehensive implementation and confirmation. also, the development of rural green tourism services by agrarian enterprises in the country is mainly nonsystemic. by satisfying the growing demand for rest, hundreds of owners of farmhouses and farms try to develop this kind of business on their own, accompanied by a number of problems: lack of experience in organizing their own business; limited access to information (how to start a tourism activity, and on further advertising, customer search, etc.); limited material resources for creating or improving the conditions for servicing tourists, etc. (romaniuk, 2017). 3. prospects for using the eu experience and the advantages of european integration processes for ukraine the association of individual representatives of rural green tourism into unions, organizations of various levels allows coordinating the activities of participants baltic journal of economic studies 102 vol. 4, no. 4, 2018 in a certain direction, providing methodological, informational, and advisory assistance, promoting targeted funding in accordance with development programs, protecting interests in state and local government bodies. the research showed that the industry is paying much attention to the development of cooperation with the european union (eu) in view of the possibility of promoting a national tourism product in the european market, involvement in the information space, best practices in organizing tourism activities, and strengthening european integration processes in our country. in terms of its tourist potential, ukraine is best placed to become one of the leading european tourist countries. eu membership opens new perspectives for using the organizational and financial mechanisms of this body to increase the economic efficiency of the national tourism industry. taking into account this, through the special representation of ukraine to the eu, the tourist office of ukraine has applied for inclusion of the country in perspective programs of cooperation in the field of tourism, in particular, financial and technical assistance, as well as investment projects of the eu. this would have a qualitative effect on the development of the sectoral tourism activity of the country, would contribute to the socio-economic and cultural development of our country and regions (yermakov, 2008). it should be noted that the tourism sector of the national economy in terms of shifts in the organizational and economic mechanism of management was characterized by active privatization processes in the 1990s – early 2000s. during the last period, almost all state enterprises were privatized by corporatization and creation of joint-stock companies as a hotel and restaurant business, and in the resort and recreation sphere. there is a tendency to achieve 100.0% of the level of privatization. this, in turn, has created certain, for example, prerequisites for the development of small and medium-sized enterprises in the field of rural green tourism, taking into account the growth of the number of mini-hotels, mini-farms, and other organizational formations in the village that provide the relevant services, etc. the authorities are also interested in participating in the tacis national program for ukraine, which was set up to support small and medium-sized enterprises in order to ensure the effective functioning of the tourism infrastructure in the directions of international transport corridors. the country adopted the program for the development of tourism infrastructure in the directions of the national network of international transport corridors and main transport highways in 2004–2010. it was approved by the resolution of the cabinet of ministers of ukraine no. 612 as of may 12, 2004. the primary measures for the construction of transport corridors are the construction, reconstruction of roads, and the arrangement of the tourist infrastructure and other objects of service. the general objective of the program was to equip the national network of international transport corridors with modern tourist infrastructure, to promote the creation of a competitive national tourism product, and to ensure the sustainable development of the national network of international transport corridors (dvornyk, 2014). activation of privatization processes and an increase of citizens’ incomes have led to an increase in the amount of money spent on recreation, and as a consequence – an increase in the number of trips and improvement of travel and hotel infrastructure. it was also strongly encouraged by the european football championship euro-2012 and other european-level cultural, artistic, and sporting events. in our opinion, the basic principle of development of tourist activity in the village is the improvement of the existing organizational and economic model of its implementation. it is necessary to create such an organizational-management structure or network that would provide comprehensive not only productive and economic or resource support but also advisory and methodological assistance in the organization of rural green tourism. it should also distribute advertising and information on tourism opportunities in rural areas, assist in finding sources of financing and investing tourism objects, etc. when introducing a new model of rural green tourism, it is necessary to reconcile legal, organizational, and economic measures to achieve the main goal – effective socio-economic development of agrarian enterprises on the basis of diversification of their activities by providing tourist services. it should be borne in mind that the regulation of rural green tourism services is based on the current legal framework of the country: the constitution of ukraine, the civil code, the housing code, (laws of ukraine “on tourism”, 1995, “on private peasant economy”, 2003) and other. at the regional level, regulation is carried out on the basis of regulatory and program documents of local authorities and self-government, including tourism development programs, strategies of economic and social development of administrative regions for the period up to 2020. according to the draft (law of ukraine “on rural green tourism”, 2007), tour operators, travel agents, individuals who are not entrepreneurs and business entities providing temporary accommodation services (accommodation), catering, sightseeing, entertainment and other tourist services (including tourist support) act as the subjects in the field of its implementation. however, in our opinion, state and regional authorities, public organizations involved in regulation and popularization of tourism activity on the basis of agrarian enterprises, farms and agrohomes should be included in the organizational block. in the administrative areas of the country, the organizational and economic mechanism for the baltic journal of economic studies 103 vol. 4, no. 4, 2018 development of rural green tourism services in agrarian enterprises and agro-homes, in addition to these areas of improvement, requires appropriate measures at the level of local authorities in terms of using regulatory and support instruments. in modern conditions, the main functions, related to the regulation and development of this type of activity, are assigned to regional departments of physical culture, sports, and tourism. however, they are reduced, mainly, to the collection and recording of statistical information on tourism, including rural green (ivanova, 2014). in districts and cities, even in the centres of the overwhelming majority of administrative areas, profile state bodies function formally as passive observers. this does not correspond to the resolution of the cabinet of ministers of ukraine “on approval of model provisions on region, district departments (branches) on tourism and resorts...” among the public organizations involved in the development of mainly sports tourism are urban tourism and sports clubs, regional representative offices of the sports tourism federation, etc. based on the identified problems of tourism development in the rural areas, we have substantiated the model of its organization and management (figure 1). it is based on the creation of voluntary territorialsectoral integration of enterprises that work closely with scientific institutions and authorities to improve the competitiveness of services and economic growth. such an association is created and operates in the form of a public non-profit organization or cluster in accordance with the law of ukraine “on citizens’ associations” and the current legislative and regulatory framework. its purpose is to protect legal rights and interests, to coordinate the participation and cooperation of the participants of the association aimed at developing tourism activities in the region (illiashenko, iliashenko, shcherbachenko, 2013). the economic block of its organizational and economic mechanism should include: 1) the mechanism of pricing, taxation, marketing, standardization, etc. these issues are not yet regulated at the state level and are solved by the participants of rural green tourism; 2) the mechanism of functioning of the tourist’s integral structure itself. 4. recommendations for the creation of clusters and other associations of tourist activities in the rural areas starting financial and economic conditions of an association or cluster will be the following: a) expenses for creation and registration of the association; b) organizational and administrative expenses; c) cost of information provision for all interested parties; d) expenses for the creation (improvement) of conditions of reception of tourists (concerning place of living, various kinds of attractions). given that such an association is a public organization, sources of funding for these costs are: membership fees, sponsorship (charity) assistance, funds from grants and projects, funds for the implementation of relevant state and regional tourism development programs, poverty reduction in rural areas, housing construction, etc. at the initial stage of functioning of such integrated groups or clusters, it is expedient to establish cooperation with regional and district employment centres and the fund of compulsory state social insurance of ukraine in case of unemployment through: 1) conducting seminars for informing the population of regions about the essence of rural green tourism and opportunities and resources for participation in it; 2) provision of onetime assistance for the opening of their own business (for example, for the arrangement of comfortable conditions for the reception of tourists, their transfer, excursions or the creation of tourist agro-villages). unions of agrarian enterprises and agro-homes agrarian enterprises and households bodies of state administration and local self-government public and nongovernmental organizations organizations and institutions of infrastructure business associations, individual entrepreneurs figure 1. model of organization and management of integral formation (cluster) of agrarian and other enterprises, institutions, and organizations providing tourist services in rural areas baltic journal of economic studies 104 vol. 4, no. 4, 2018 the services of rural green tourism create jobs and bring certain incomes to rural people who find it difficult to make money in another way. the development of this type of tourism activity prompts improvement of the upgrading of rural and farm enterprises, agro-villages, streets, and villages in general; stimulates the placement of social infrastructure institutions. of course, the first time reception and service of vacationers are based on existing housing stock with the use of local tourist and infrastructural resources. but with gradual revenues and an increase in the cost of tourism, those who are engaged in it are beginning to make investments in improving the communal housing, street and service sectors. and this, at the same time, is a significant contribution to the development of rural areas. an example can be the creation of local branches of the union for the promotion of rural green tourism, district associations of citizens and/or institutions interested in infrastructure development for it. in our opinion, the main features of the implementation of rural green tourism services in agrarian formations, which must be taken into account as possible risks and which influence its development in the future, are as follows: regulatory and legislative acts and conditions for the development of rural green tourism services in agrarian enterprises and agro-villages are still not specified finally; most providers of such services work “in the shadow”, despite the favourable tax environment; full activity statistics are practically not required and not conducted, which complicates the monitoring of relevant markets, trends and forecasts; rural green tourism services are concentrated and implemented unevenly in spatial terms. as noted, the development of rural green tourism, in general, is now stimulated by state authorities, local authorities, rural communities, but not too systematically (kudinova, 2008). the agro-homes, which take tourists, are different – from the simplest, with minimal comfort and moderate prices to very expensive with a full set of services. this holds back the demand for their services because vacationers cannot always imagine them. the question is whether rural dwellings can be defined as agro-homes since these buildings do not quite match the criteria of classical agro-villages, which actively offer rural green tourism. it has up to five rooms; the owners are engaged in agricultural activities or work in the social sphere of the village. most of the abovementioned problems of rural green tourism services of agrarian enterprises of the country are characteristic for all regions. however, some regions have specific problems. among them the most significant are: insufficient number of enterprises of logistics, advertising, service and information infrastructure; limited availability of investment support for tourism activities in agrarian enterprises and agro-villages; lack of general plans for the development of tourist destinations; lack of funding support for the promotion of a regional rural tourism product in the domestic and international tourist services market; slow introduction of innovations in order to develop them. 5. conclusions the identification of problems and trends in tourism development in the rural areas allowed developing proposals for its improvement. important ways of developing rural green tourism for agrarian enterprises and households are improving the quality and competitiveness of tourist services; development of local standards for the assessment of places of recreation; certification of places of accommodation of tourists; conducting annual competitions for the title of “the best rural tourism enterprises and agro-homes”. it is also the detailing, growth, and disclosure of meaningful information on tourism potential; creation of music videos, popular science films about the most interesting regional attractions, access to them on the internet, on television channels of the states where potential tourists live; publication of literature of local lore, adapted to different categories of tourists; the introduction of tourist-linguistic disciplines in accordance with their placement: “ukrainian black sea region”, “tourist bukovyna”, “picturesque polissia”, “transcarpathia invites”, etc. it is advisable to issue booklets, newspapers, magazines on tourist topics for the distribution in transport, in service facilities, tourism. it is necessary to hold scientific conferences, workshops, tourist forums, fairs, roundtables, etc. in general, the development of rural green tourism will contribute to the rational use of natural potential and labour released from agricultural production in the rural regions of ukraine. references: vrachovich, i. m., franchuk, yu. o. (2013). mekhanizmy stymulyuvannya «zelenoho» investuvannya rehionalnoyi ekonomiky [mechanisms for stimulating the «green» investment of a regional economy]. economic forum, vol. 3, рр. 54-59. ihnatenko, m. m. (2010). sotsialno-ekonomichni aspekty aktyvizatsiyi ahroturystychnoyi diyalnosti [socioeconomic aspects of activization of agro-tourism activity]. proceedings of the participation of youth in the development of economy and society of ukraine (ukraine, kyiv, march 10, 2010), kyiv: nakkkim, pp. 243-246. marmul, l. o., pinchuk, t. a. (2009). orhanizatsiya ta rozvytok ahrarnoho turyzmu v rehioni [organization and development of agrarian tourism in the region]. kherson: aylant (in ukrainian). romanіuk, i. a. (2017). rozvytok silskoho zelenoho turyzmu v umovakh neobkhidnosti dyversyfikatsiyi silskoyi ekonomiky [development of rural green tourism in the conditions of necessity of diversification of rural economy]. baltic journal of economic studies 105 vol. 4, no. 4, 2018 stratehichni napryamy sotsialno-ekonomichnoho rozvytku ahrarnoho sektoru ekonomiky ukrayiny [strategic directions of socio-economic development of agrarian sector of economy of ukraine]. kherson: llc "vkf" star "ltd, рр. 299-307. ermakov, o. yu. (2008). rozvytok silskoho turyzmu yak vazhlyvyy napryam dyversyfikatsiyi ahrarnoyi ekonomiky [development of rural tourism as an important direction in the diversification of agrarian economics]. tavriysky scientific bulletin, vol. 58, рр. 153-156. dvornik, i. v. (2014). dyferentsiatsiya dokhodiv silskoho naselennya ukrayiny [differentiation of income of the rural population of ukraine]. economy of aic, vol. 11, рр. 101-106. the verkhovna rada of ukraine (1995). pro turyzm: zakon ukrayiny vid 15 veresnya 1995 roku № 324/95-vr [on tourism: law of ukraine dated september 15, 1995 no. 324/95-vr]. bulletin of the verkhovna rada of ukraine, vol. 31, art. 241. the verkhovna rada of ukraine (2003). pro osobyste selyanske hospodarstvo: zakon ukrayiny vid 15 travnya 2003 roku № 742-iv [about personal peasant economy: law of ukraine dated may 15, 2003 no. 742-iv]. bulletin of the verkhovna rada of ukraine, vol. 29. art. 232. pro silskyy zelenyy turyzm: proekt zakonu ukrayiny vid 12.04.2007 r. №346 [about rural green tourism: the draft law of ukraine dated april 12, 2007. no. 3467]. retrieved from: http://tourlib.net/zakon/pro_siltur.htm (accessed 23 june 2018) ivanova, v. v. (2014). lyudskyy kapital yak chynnyk zabezpechennya konkurentospromozhnosti pidpryyemstv turystychnoho biznesu [human capital as a factor for providing competitiveness of tourist business enterprises]. current problems of the economy, vol. 5, рр. 321-327. ilyashenko, s. м., ilyashenko, n. s., shcherbachenko, v. o. (2013). zelenyy turyzm yak odyn z napryamiv staloho rozvytku rehionu [green tourism as one of the directions of sustainable development of the region]. economy of ukraine, vol. 8, рр. 33-39. kudinova, i. p. (2008). zelenyy turyzm yak odyn iz napryamiv rozvytku pidpryyemnytstva v silskiy mistsevosti [green tourism as one of the areas of entrepreneurship development in rural areas]. scientific bulletin of the national agrarian university, vol. 124, рр. 91-96. baltic journal of economic studies 46 vol. 4, no. 5, 2018 corresponding author: 1 v.n. karazin kharkiv national university, ukraine. e-mail: golovkoom1967@ukr.net 2 v.n. karazin kharkiv national university, ukraine. e-mail: tekaganovskaya@gmail.com 3 v.n. karazin kharkiv national university, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-46-52 improving the mechanism of collecting certain taxes in ukraine as measures for the european modernization: legal aspect oleksandr holovko1, tetyana kaganovska2, galina rossіhіna3 abstract. the aim of the article is to study the methodological and theoretical principles of improving the legal regulation of the taxation system in ukraine in the european integration context. determination of the doctrinal basis for the implementation of the tax function of the state and its legal consolidation from the standpoint of the fundamental principles of the law allows carrying out a comparative legal analysis of taxation in the developed countries of europe and the world (particularly indirect one). methodology. the research is based on the theoretical and legal substantiation of the social content of tax activities in the state, and it is also based on the understanding of the dialectical relationship between tax processes and the functioning of social and legal systems in general. a systematic analysis of the tax activity of the state in the context of humanism, justice, freedom, equality, rule of law is carried out. on this basis, the legal nature of the regulation of the value-added tax is revealed. results. the basic theoretical and legal bases of measures on improvement of the taxation system are determined as a result of the study from the position of its legitimation among citizens and stimulation of their purchasing power and development of productive forces of the ukrainian economy. practical impact. the definition of directions for perfection and humanization of tax legislation in ukraine allows making a conclusion about the volume of the tax burden on the consumer and proposing optimal rates of value-added tax rates. key words: social nature and legal nature of taxation, equity of taxes, value added tax, tax pressure, optimization of tax rates. jel classification: h21, h24, h26, k34 1. introduction the existence of state and law as an unalienable, most important, universal social institution is impossible without the finances and implementation of the tax function. since the time of the emergence of state and law, society pays for its stability, and citizens pay for the security and non-conflict of their existence. with its development, the state began to accumulate funds not only for the maintenance of its apparatus and armed forces but also for social tasks. when the rationalist philosophical and legal reflection in ancient greek had appeared, then the question of the subordination of society and its members to the law and rules, but not to the arbitrariness of some individual rulers arose. plato’s statements about the rule of law, but not people are rather well-known, as well as aristotle’s statement regarding the subordination of citizens to laws as the main criterion of legitimacy (correctness) of the form of government (kovalchuk, 2011). aristotle paid a lot of attention to the question of the equitable distribution of social resources, which main way of accumulation and increase at all times was a fiscal source. after all, it is the financial issues and the taxation problem – that is the issues, on which the citizen constantly contacts the state, judges it, perceives or does not perceive its legitimacy and justice. problems of legal regulation of taxation and imposition of taxes were the driving force through the history of the state and the rights of developed european countries. so, the legality of the bases of the taxation, a guarantee from any increase in fiscal pressure became one of the main goals of the english revolution and civil war of the middle of the 17th century (the establishment of taxes by representatives of the legislature in the parliament, and not the king’s arbitrariness). one of the main reasons for the liberation war and the revolution of the second half of the eighteenth century in north america and the formation of the united states was an arbitrary baltic journal of economic studies 47 vol. 4, no. 5, 2018 increase and the imposition of taxes on the colonies by the english crown – stamp duty, the excise tax on tea and other goods. the so-called bourgeois revolutions over the next half-century, since the great french revolution, broke out as a result of the injustice of class feudal taxation. these revolutions had a protest against the injustice and the unlawful nature of taxation as one of the main factors. 2. the state of scientific research recognition and non-recognition of the state by citizens, its support or vice versa, protest movement, often are based on the effectiveness, social targeting of the tax policy of the state and its legal consolidation. moreover, the civilizational peculiarities of any society are based on the understanding and perception of legal personality, particularly, in the field of taxation. its extreme expressions are rooted in the history of the ancient eastern society, collective, communal personality, subordination to collective, caste-ridden, and state legal personality. this tradition has gone through our time through hinduism, confucianism, the ideology of the golden horde and other eastern despots. western tradition – is a developed individualism, individual legal personality, the value of a full personality, which is coming from the ancient world – that is full citizenship in the policies of ancient greece and the development of private property and related property relations in ancient rome (kalynovskyi, 2008). legal personality was historically formed not only in the field of state law and the existence of civil rights but also in the taxation field. western tradition is the personality of the subject of taxation, oriental is the collectivity, community. ukraine, after the annexation of its territory and the elimination of autonomy by the russian empire at the end of the eighteenth century, had differed by the prevalence of an inherited form of peasant land tenure with individual taxation. we mean that the western tradition of legal personality was more prominent. the subject of land use and, accordingly, taxation was the peasant community with its circular guarantee on the ethnic russian lands. that is, there were mostly manifestations of the eastern tradition (holovko, (2006). however, in the eastern part of the ukrainian lands in the russian empire, the land community as a land tenure subject also took place. the collapse of collective legal personality in the field of land management and taxation was the main goal of stolypin’s agrarian reforms of 1906-1911. 3. presentation of the main material so, at the beginning of the twentieth century, ukraine had a stable legal tradition in the field of taxation, which was really close to european ones. that is why even today, in the conditions of the decisive and responsible movement of ukraine towards european community, its society has historic law-conscious and mental orientations, which were formed for centuries. these orientations were directed to the western tradition of tax perception and the legal basis for their collection. at the same time, measures of integration and reformation in the fiscal sphere should take into account all the peculiarities of the transitional period (today ukraine can reasonably be considered as a social system of transitive states and rights (matvieieva, 2015)). it is also important to fulfil the financial sovereignty of ukraine in the context of improving its tax system and its legal basis (bytiak, yakoviuka, 2010). an intellectual and methodological discussion of the jusnaturalist and juspositivistic understanding of the law, including tax law, was taken place in western legal tradition. this discussion has reached such a level of scientific compromises for today when even a positivist understanding of the legal world admits the existence and necessity of morality (fuller, 1999), values in the law and the corresponding legal principles. taking into account the fact that the main source of formation of the revenue part of the state budget in ukraine is taxes, we can say that the issue of legal regulation of taxation is considered to be the most urgent question. that is why, at the present stage, tax reforms and transformations take a prominent place in the processes of improving market relations. the process of restructuring the tax system of ukraine, analysis of the peculiarities of legal regulation of taxes and fees gets a great importance. except for actually legal and technical moments and aspects, it is important to realize the most common general principles of law, which are recognized either in romano-germanic, or angloamerican type legal systems. in this article, we study the system of fundamental principles of law in terms of the concept of s. pogrebnyak (pohrebniak, 2008). today, in many studies of domestic legal science, we can observe certain remnants of the doctrinal legal understanding of the soviet era, when the principle of humanism was not so important. the volume and tasks of this article do not require a detailed analysis of this issue, but we consider it necessary to start with it. however, the traditional primacy of justice has an anthropological character in the list of principles. that is why, the implementation of the principle of humanism leads to the fairness of the system of tax deductions, benefits and tax exemptions – the fact that, in the case of abuse and noncompliance, leads to a decrease in the legitimate rationale of the state and its legal system. and in practice, it leads to a variety of corruption violations. traditionally, the principle of equity in tax law is expressed in proportional progressively proportional taxation and the establishment of taxes on luxury, and so on. equality is the principle and condition of taxation, which is enshrined in law. it is also connected with the fairness of taxes. the consistent implementation of baltic journal of economic studies 48 vol. 4, no. 5, 2018 this principle makes the payer morally disciplined and confident that law-making and law-enforcement practice do not make unlawful exceptions to this principle and they do not allow that among subjects, particularly, in economic management or business, equal to each other, there is someone “more equal” (using the famous phrase of g. orwell from animal farm). in our opinion, the principle of freedom is realized in tax law more indirectly. after all, paying a tax is a duty and not a right, and, at the same time, it is an important feature and characteristic of a free person, it is a manifestation of his freedom. however, on the one hand, it is the realization of freedom of social activity, primarily economic, that is, it is the implementation of social and economic rights and freedoms of man and citizen. besides, if the right is legalized and provides freedom, and the state is an instrument and mechanism for its achievement (at least when we are talking about the rule of law with a developed civil society), then collecting of taxes is a material factor in ensuring this freedom of man and citizen. a special attention is paid to the principle of the rule of law. a few of the general principles of law have received such varied, high-quality, and various scientific legal literature in recent decades. the ineffectiveness of determining its content in the formal-dogmatic field leads to a phenomenological characteristic, showing through manifestations and signs “an integral approach”, according to p. rabinovich (tatsii, sviatotskyi, maksymov, 2013). among the eight main features of the principle of the rule of law, which were formulated by m. kozyubrov, the establishment of a democratic, humane, fair system of taxation in any state that positions itself as a legal (in our case it concerns primarily ukraine) can be applied to all eight (tsvik, petryshyna, 2008). they have either a general theoretical or a special applied value. as for the last aspect, we will list a number of separate positions. first, this is a limitation of the discretionary powers of the authorized tax authorities. it should be one of the main directions of reforming the organizational and legal basis of taxation in ukraine. second, it is the application of the principle of certainty. since in most cases the taxation issues concern specific citizens or their associations, tax legislation should be as clear as possible in determining the grounds, objectives, and content of tax regulations. it should be also noted that as well as in other social spheres, judicial authorities should play a special role in the implementation of the principle of certainty in tax law. so, judicial reform and increasing the efficiency of the judiciary in ukraine have big importance for improving the tax system in the state. it is logical that the independence of the court and judges is also connected with it. the principle of proportionality is also connected with the previous ones, and it is extremely important for the fairness of taxation and its stable efficiency. this applies both to the definition of tax rates and the provision of mandatory taxes and levies, which are limited by law. directing of sanctions tendencies for tax offenses from the sphere of personal punishment (first of all imprisonment) to financial and property, reimbursement of losses to the budget, etc. correspond to the previous principle also. and do not forget such a component of the rule of law as a principle of legal security and protection of trust. the taxpayer must be confident in the stability of his legal position and in the fact that it will not deteriorate. essentially, it is also close to the principle of irreversibility of laws and other normative legal acts (article 58 of the constitution of ukraine). the mentioned principles are not only the general theoretical basis for the formation of the foundations of tax legislation and the development of the field of financial law in independent ukraine. their implementation in specific legal orders and acts of application of the law has direct practical value and is the only possible way of european integration in the field of taxation. taxes are not only the main source of budget revenues but also the regulator of public proportions; it is a guarantor of social protection of citizens and the creation of a modern material basis of state sovereignty (as well as the development and efficiency of local government). the world experience in the development of tax systems shows that its doctrinal substantiation has a real importance. the age of enlightenment gave the impetus for these research processes, as well as in other areas of knowledge. so, a. smith in his scientific work “an inquiry into the nature and causes of the wealth of nations” formulated the principles of taxation for the first time (one of them is the principle of justice). he also defined tax payments, their place in the financial system of the state, and also emphasized the fact that taxes for the payer were an indicator of freedom, but not slavery (smith, 2018). in the nineteenth century in europe, there was the establishment of scientific and theoretical views on the nature, problems and methods of taxation, and compliance with the legal form of implementation and enforcement. that is, the general, public interest in the necessity of collecting taxes was realized by the layers of the population. and the awareness of the state’s interests regarding the fiscal coverage of the revenue side of the budgets had led, in turn, to the conclusion that the legal regulation of relations in the field of taxation had become necessary. it is important to note that legal consciousness and legal culture are internal, intellectual settings that mainly affect the effectiveness of legal regulation, we mean achievement of the goals, which are pursued by the legislator by the publication of relevant norms. like other branches of law, a financial law is an embodiment in the form of regulatory regulations of the economy, particularly, the financial policy of the state. as p. gaudemet thinks, this process has two main baltic journal of economic studies 49 vol. 4, no. 5, 2018 aspects. on the one hand, the relationship between political forces and the political structure of a country largely determines the financial policy of this country. on the other hand, political events, especially if they take the form of a crisis, also affect public finances and result in a financial mechanism (gaudemet, 1978). the relationship between tax policy and tax law is expressed in two ways: a) through tax policy, the main objectives of taxation are implemented, that is why its research allows us to get a better idea of the subject of regulation of tax law; b) tax policy provides tax reforms, which are registered by the corresponding financial laws (kozyrin, 1993). the effectiveness of tax policy largely depends on what special (tax or tax law) principles the state puts in its bases, particularly: the ratio of direct and indirect taxes, the breadth of tax privileges, their nature and purpose, discreteness or continuity of taxation, etc. in its turn, the main concepts of tax policy are an effective tax burden, tax capitalization, optimal taxation, and tax pressure. for nowadays, according to the norms of the tax code of ukraine, the tax legislation of ukraine is based on the following special principles: the universality of taxation, social justice, fiscal sufficiency, stability, efficiency, and neutrality of taxation, etc. so, under the principle of social justice (as the embodiment of the fundamental principle of justice), the legislator understands the principle of setting taxes and fees in accordance with the paying capacity of taxpayers (podatkovyi kodeks ukrainy). as reasonably r . tsippelius states, the right has to regulate human behaviour in such a way that all benefits (values) and burdens (costs, liabilities) should be distributed fairly, and conflicting interests should be satisfied in accordance with their weight and significance; those who commit a punishable act should receive a proper remuneration for them. so, r . tsippelius insists that justice should prevail in resolving the conflicts, which may arise in society (tsyppelius, 2004). however, an estimate to a certain extent, sometimes subjective nature of understanding and perception of justice, the need to take into account a large number of individual circumstances that are difficult to take into account in the legislation (considering dynamism of constantly growing social processes) complicate its full achievement in various social spheres. this can also be applied to tax law (sotov, 1998). tax pressure is one of the main characteristics of tax policy. this concept characterizes the role of taxes in the life of society at the macroeconomic level. it can be defined as the ratio of the total amount of tax collections to the aggregate national product. if we are talking about a particular taxpayer, then tax pressure reflects the proportion of its total income deducted from the budget. in the tax doctrines of the west, an additional and sufficiently pronounced indicator of the effective tax rate is used to calculate the tax pressure. this is a fraction of the tax in the total taxable income of the payer. it should be mentioned that the tax pressure, which can be measured by the indicator of the full rate of taxation, is very high in ukraine compared to european countries. so, recently, legal regulation of the permanent increase of excise taxes, taxes on transport, property – are in the prerogatives of tax policy. the tax burden, taking into account social charges in ukraine for the poor, belongs to the highest in the world, with the simultaneous existence of a favourable tax regime for the rich part of the population. at the same time, obviously, the tactical fiscal task prevails over the strategy of stimulation of production and circulation, the growth of taxable income. thus, the law of ukraine as of december 7, 2017, “on the state budget of ukraine for 2018” establishes the minimum wage: in monthly amount from january 1 – 3723 uah; in hourly terms from january 1 is 22.41 uah, living wage for able-bodied persons: from january 1, 2018 – 1762 uah, from july 1 – 1841 uah, and from december 1 – 1921 uah (pro derzhavnyi biudzhet ukrainy na 2018 rik: zakon ukrainy). the tax social benefit is 881 uah for any payer in 2018. the maximum salary, to which the tax social benefit can be applied, is equal to 2470 uah in 2018. starting in 2016, the contribution from the salary of an employee is not carried out. for example, the employee was charged 3723 uah for the full working month – it is a minimum wage. the tax social privilege cannot be applied to it, as it exceeds the maximum amount of income that gives the right to a tax social benefit – it is 2470 uah. the tax on personal income will be 18% (670.14 uah), the military fee will be 1.5% (55.85 uah), the single contribution is 22% (819.06 uah). the maintenance will be equal to 725.99 uah, that is, the employee will receive only 2997.01 uah. taking into account the taxation of consumption with a value-added tax, the net income of the payer in ukraine is actually 2500 uah. and this is without taking into account the payment of excise taxes on fuel, alcohol, tobacco, taxation of land, real estate, etc. as a result, an average citizen pays at least 40% of the income received, and the wealthier strata – about 30% or even less. that means that taxes in ukraine are much higher than in europe for the poor and lower segment of the people than for the wealthy. in this case, in the developed social european states, socially unprotected citizens (whose annual income is less than 9000 euros) have a negative tax rate. that means that they have a net subsidy, which is received from the state in a larger amount than the taxes paid. ukraine has no such tax practice. thus, the concept of progressive scales of taxation as humane and just exists mainly on the doctrinal level of economic and legal research in ukraine. and the fiscal practice shows the opposite. at the beginning of the 2000s, the progressive scale of personal income tax (personal income tax) already existed in ukraine. its rate varied from 10 to 50%, depending on the level of income. however, in order to unshadow the economy in 2004, baltic journal of economic studies 50 vol. 4, no. 5, 2018 the legislator changed the basis of taxation of individuals’ incomes by introducing a flat scale. this measure did not give a proper financial effect. and since 2007 the volumes of withdrawal of capital abroad and, consequently, the concealment from taxation are increasing. keynesian approach lies at the heart of the progressive rate of income tax. in this approach, the main stimulus of economic activity is considered the expansion of solvent demand and stimulation of production. this approach operates in a number of highly developed countries, such as: the united states, great britain, france, denmark, as well as china. in the united kingdom, the income tax on individuals does not come from aggregate income, but from parts (schedules) depending on the source of income. each schedule is taxed in a special order. the personal discount today is 4615 pounds sterling. there are three rates of income tax (after taking into account all benefits): up to 1960 pounds – 10%, 1961-30500 – 22%, and higher – 40%. in china, there is a nine-level progressive tax rate from 5 to 45% (popova, drozhzhina, maslov, 2011). in the united states, taxes are also proportional to income with little progressiveness (approximately 25 to 50%) (popova, drozhzhina, maslov, 2011). at the same time, most of the tax pressure falls on the richest citizens. implementation of approaches by d. keynes in practice allows with the help of tax regulation to redistribute resources in the state (majburov, 2011). one of the main issues in the economic theory of taxation and the doctrine of tax law is the ratio of direct and indirect taxes. at the present stage of development of the tax system of ukraine, there is a sufficiently developed group of indirect taxes. they are taxes on consumption and they are implemented in goods prices. the terms of their realization and payment practically coincide. administration of direct taxes is more complex and more adequately reflects the development of productive forces. direct taxation is more in line with the principles of justice, humanity, and equality and has a higher ability to influence the economy and stimulate it. the legislation on direct taxes has to correspond to the conditions of social and economic development (zhvaliuk, 2001). the modern indirect taxation is based on the experience of the functioning of the previous forms, first of all, duties and excises. the emergence of a value-added tax is due to the corresponding stage of economic development. the countries of europe switched to this tax mainly in the period from 1967 to 1973, after prolonged existence of other (reversible) taxation. in western european states, it began to appear as a mechanism, which was aimed to slow down consumption, especially at a stage of significant growth in production. the french economist m. lauré (see in detail: 20) was first, who described the scheme of the value-added tax in 1954. this tax even now brings up to 45% of all tax revenues in france. the attitude towards value-added tax in different economically developed countries differs. in italy, it replaced the turnover tax (1973) and more than 20 excises and provides about two-thirds of tax revenues to the budget. however, the attitude towards this indirect tax is more moderate in leading european countries. in the uk, it was legally secured in 1973, instead of the wholesale tax. however, its implementation in this state has a rather complicated mechanism. in sweden, the value added tax is levied on the commercial sale of goods and services. in 1969, the tax on artificial sales was replaced by it. it accumulates up to 14% of tax revenues in sweden. at the present stage, the value-added tax is one of the most important components of the tax systems of 42 states (17 european ones). the share of this tax accounted for about 13.8% of tax revenues and 5.5% of gdp. along with this, there are countries, which are rather well developed in social and economic spheres, where the value-added tax has not taken a significant place in the tax system. direct taxes are dominant there. these are, in particular, the united states and japan. value added tax is one of the few in the tax system of ukraine, which fully goes to the state budget. it is important to determine its bid. in european countries, there are lower, higher, and standard rates. the first one is usually applied to food products and medical services, the latter to luxury items. there are also some cases when can be the complete exemption of certain goods and services from taxation by setting a zero rate or its absence. such methods eliminate the taxation at the sale of goods or service to the end user. in the eu countries, the zero rates are also set for export goods. eu unification implies the use of the standard valueadded tax rate of 18.6% and the reduced value of 5.5%. in ukraine, by the decree of the cabinet of ministers of ukraine “on value added tax” as of december 26, 1992, the rate was set at 20% (pro podatok na dobavlenu vartist, 1993). in 1993, the law of ukraine “on the state budget of ukraine for 1993” increased the tax rate to 28% (pro derzhavnyi biudzhet ukrainy na 1993 rik, 1993). in 1997, the law of ukraine “on value added tax” restored the rate of 20%, which was the main and was distributed by turnover, which was calculated at prices excluding value-added tax. if the prices and tariffs that included this tax were used, then the rate of 16.67% (pro podatok na dodanu vartist, 1997) was applied. today, the value-added tax rate in ukraine has three levels: the basic rate is 20%, preferential is 0% (as a rule, for goods oriented to export) and 7% (delivery in the customs territory of ukraine and import to the customs territory of ukraine of medicines, which are allowed for production and use in ukraine, and which are included in the state register of medicinal products. besides, delivery of medical products, which are included in the state register of medical equipment and medical devices or correspond to the requirements of the relevant technical regulations, which can be confirmed baltic journal of economic studies 51 vol. 4, no. 5, 2018 by the compliance document, and which are allowed for placing on the market or putting into operation and use in ukraine, etc.). a large number of scientists believe that the valueadded tax is regressive in its legal nature and very costly in management, it requires a large tax unit, significant overheads of business entities. it should be noted that in most countries 60-70% of revenues from this tax, they receive from 10-15% of payers – entrepreneurs. the worldwide experience of charging value added tax suggests that due to its administrative complexity and high fixed costs its optimal rate should be 15 or even 10%. the rate should be, if not the only, and then expediently (minimum) differentiated. this will simplify administration and reduce tax delinquency (avoidance of payment). such amount of tax is also due to the fact that the rate at the level of 20-28% has a negative effect on high-tech enterprises, as well as it stimulates inflationary processes in general. this is due to the fact that the value added tax is a tax on the final consumer and at its high rate, there is an increase in prices. the purchasing power of the population is decreasing. a high rate of value-added tax results in high spending on the end user – we mean broad segments of the low-income or unsecured population. besides, we need to mention that today ukraine has formed the proper organizational and legal preconditions for optimization and socialization of the value-added tax. the technical level of the taxpayer information database has increased; the material and technical base and personnel qualifications have improved, as well as the legal and regulatory framework of the state fiscal service, the state treasury service, and the financial monitoring service was also improved. 4. conclusions that is why, in our opinion, preconditions for harmonization of the legislation of ukraine, which regulates the tax system, have already emerged. the observance of the fundamental principles of law, as well as the basic principles of special tax law, will ensure the achievement of the following results: ensuring the unalienable rights, freedoms, and legitimate interests of the person; achievement of a fair distribution of the tax burden by determining its progressive-proportional size in the sphere of both direct and indirect taxation, its transfer from less socially well-founded on richer members of society; harmonization of direct and indirect, centralized and local taxation; using the experience of the most developed european countries in the field of legal regulation of taxation; the increase of legitimacy of the state in the eyes of its citizens – taxpayers, the consciousness of payment of taxes, understanding of the targeted direction of accumulation as a result of taxation of state resources; stimulation of the economic activity of business entities in ukraine, development of gdp, an increase in the index of the standard of living of a person, and consequently, an increase in absolute volumes of tax revenues with a decrease in their relative size, that is, tax rates. we propose to establish a unified two-tier approach to the determination of the rate by applying similar approaches to one of the most important components of the taxation system – the value-added tax: we mean, the general (base) rate in the amount of 15-17% and the preferential 5-7% (sale of medicines, baby food products, etc.). in case of harmonization of other types of tax revenues, ensuring an appropriate and necessary balance between the funds of the state and local budgets, a high legal technique for the implementation of relevant legislative and other regulatory legal acts – such an approach will positively affect the economic growth in ukraine, the standards of living of citizens and ensuring the social purpose of the state. references: kovalchuk, v. b. 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(2001). podatkovi orhany rosiiskoi imperii v ukraini u druhii polovyni khikh – na pochatku xx st.: orhanizatsiino-pravovi zasady diialnosti: monohrafiia [tax authorities of the russian empire in ukraine in the second half of the nineteenth and early twentieth centuries: organizational and legal principles of activity: monograph]. k.: atika. lauré, m. (1954). la politique fiscale. paris: presses universitaires de frances. pro podatok na dobavlenu vartist: dekret kabinetu ministriv ukrainy (1993) [about the value added tax: decree of the cabinet of ministers of ukraine]. vidomosti verkhovnoi rady ukrainy. № 10. st. 78. pro derzhavnyi biudzhet ukrainy na 1993 rik: zakon ukrainy (1993) [about the state budget of ukraine for 1993: law of ukraine]. vidomosti verkhovnoi rady ukrainy. № 20. st. 212. pro podatok na dodanu vartist: zakon ukrainy (1997) [about the value added tax: the law of ukraine]. vidomosti verkhovnoi rady ukrainy. № 21. st. 156. baltic journal of economic studies 222 vol. 4, no. 2, 2018 corresponding author: 1 department of finance, banking and insurance, mykolayiv national agrarian university. e-mail: sirenko@mnau.edu.ua 2 department of finance, banking and insurance, mykolayiv national agrarian university. e-mail: melnykolga19@gmail.com 3 department of finance, banking and insurance, mykolayiv national agrarian university. e-mail: shishpanova@mnau.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-2-222-228 prospects for implementing participatory budgeting as an effective instrument for implementing budgetary policy at the local level natalia sirenko1, olga melnyk2, nataliia shyshpanova3 mykolayiv national agrarian university, ukraine abstract. the purpose of the study is to determine the methodological principles for implementing participatory budgeting as an effective instrument of the budgetary policy at the local level, in particular, the analysis of the main risks and limitations of this process, the identification of its main stages and the features of the main types of activity, which includes each stage. methodological bases of the study consist of general scientific methods of obtaining knowledge of economic phenomena and processes. realization of study tasks requires the following methods: method of theoretical generalization – during the study of scientific works, regulatory legal acts; abstractlogical method – to generalize the theoretical and methodical provisions, as well as to determine the purpose of the study; method of a systematic approach – the definition of directions for improving the functioning of participatory budgeting as an effective instrument for implementing budgetary policy. results. the main components, which should include participatory budgeting process are proposed, the purpose of which is to facilitate the establishment of a social dialogue between local authorities and residents of the territorial community, and to create conditions for the participation of the residents of the territorial community in the budgetary processes to meet their needs. the analysis of the conducted studies made it possible to determine the main risks and limitations of participatory budgeting. practical implications. the main stages of the participatory budgeting process are outlined, in particular: the preparatory stage, the stage of budget formation and its approval, the main point of which is the establishment of a budget committee and the commencement of its work, the implementation stage, the stage of monitoring and evaluation of participatory budgeting. the main types of activity included in each stage have been studied. all of the above made it possible to develop a cycle of participatory budgeting as one of the directions of budgetary policy. we believe that the popularity of this process is determined by the benefits received by the residents, local authorities and the city in general. value/originality. formation and implementation of budgetary policy at the local level in the current conditions of decentralization of power with the help of the developed cycle of implementation of participatory budgeting will promote the establishment of a social dialogue between local authorities and residents of the territorial community, creating conditions for the participation of residents of the territorial community in a transparent budgetary process to meet their needs. key words: budgetary system, budget, budget of participation, fiscal policy. jel classification: g18, h61 1. introduction the budget is an inalienable attribute of each country and an important instrument for implementing the economic and social policies of the state. today, the problem of constructing a perfect and effective system for the formation of budgetary policy and ensuring transparency of the budgetary process is becoming especially topical. modern trends taking place in the budgetary system of ukraine in the conditions of decentralization of power determine the necessity of introducing new instruments of budgetary policy implementation. investigating modern changes and initiatives in the sphere of decentralization of power both in the world and in europe, one can notice a tendency of involving citizens in the process of direct impact on the functioning of those settlements, in which they baltic journal of economic studies 223 vol. 4, no. 2, 2018 work and live. citizens are given the opportunity to take a direct part in the distribution and use of budgetary funds. the problems of involving the public in the budgetary process and ensuring its transparency are to some extent considered in the works of domestic scientists, such as: i. lunina (2014), zh. belets (2016), o. demianchuk (2016), t. kravchenko (2015), n. buletsa (2016), and others. the aforementioned problems are actively studied in western scientific literature; in particular, the question of the functioning of participatory budgeting is studied in the writings of polish economists r . hurskyi, v. kenblovskyi, b. martel and other. however, without diminishing the importance of the results obtained, it should be noted that it is expedient to determine the methodological principles to implement participatory budgeting as an effective instrument of budgetary policy at the local level. 2. foreign experience in the implementation of participatory budgeting the concept of direct involvement of citizens in the budgetary process is relatively new in the world. for the first time, the practice of participatory budgeting was implemented in 1989 in the brazilian city of porto alegre (see belets zh., 2016). as a result of the implementation of participatory budgeting, civil activity has increased significantly, and the united nations human settlements programme (un-habitat), which seeks to promote sustainable urban development, has announced the experiment with the “public budget” as the best international practice (see lunina, 2014). it is important to note that in some countries, different names for participatory budgeting are used. so, in ukrainian practice, there are the notions of “participatory budgeting”, “participative budget”, and “budget for citizens”. we would like to emphasize the fact that the process deserves to be called the participatory budgeting determines the basic principle – real engagement of citizens in making budget decisions. domestic and foreign scientists highlight the most important principles of participatory budgeting (fig. 3). we believe that adherence to certain principles of participatory budgeting will make it possible to really involve citizens in making budget decisions. in 2010, the idea of implementing the first participatory budgeting appeared in poland within the framework of the sopot development initiative, an informal group operating in sopot, in order to fulfil the requirements of sustainable development and increase public participation. to date, more than 1500 cities in the world have implemented the mechanism of participatory budgeting. however, the amount of funds allocated for the distribution of citizens depends on the specifics of the established procedure of a particular country. in table 1, we provide data on the amount of funds allocated for distribution by citizens in some countries of the world. table 1 the amount of funds allocated for distribution by citizens in some countries of the world, 2017 city (country) year of program launch amount of funds allocated to participatory budgeting cologne (germany) 2007 100 thousand eur for each district chicago (usa) 2010 1.32 million usd for each district new-york (usa) 2011 40 million usd gdansk (poland) 2013 3 million eur paris (france) 2014 100 million eur source: prepared using information from the sites of the city councils and the internet platform of participatory budgeting thus, the positive experience of many countries in the world and the peculiar style for activating public participation make it possible to conclude that the idea of introducing “participatory budgeting” becomes a powerful instrument for implementing budgetary policy in conditions of territorial decentralization of power. principles of participatory budgeting obligatory character of execution cyclicity public discussion limited financial resources are the subject of discussion participation of all residents figure 3. principles of participatory budgeting realization source: prepared by the author based on (hrynchuk, 2016) baltic journal of economic studies 224 vol. 4, no. 2, 2018 3. positive results of implementation in 2015, three cities – cherkasy, chernihiv, and poltava – began to introduce the practice of participatory budgeting for the first time in ukraine (see electronic resource http://ngonetwork.org.ua). this was done, in particular, with the support of the polish-ukrainian cooperation foundation pauci and within the framework of the polish-canadian democracy support program. in chernihiv in 2015, 4.8 million uah were allocated, which during the year 2016 were allocated for the implementation of 17 projects. in cherkasy, in 2015, 54 projects were submitted, 6 of which were selected after consideration by the coordination council and to date, they are at the stage of implementation. in poltava, 0.1% of the total city budget is provided without taking into account transfers (in 2016 it is about 1.5  million uah), of which 50% is directed to city projects and 50% to regional ones (see electronic resource http://ngonetwork.org.ua). in general, participatory budgeting has been introduced or is planned to be implemented in more than 50 cities in ukraine today. in most cities, there is a division of projects into large and small ones. at the same time, on average 200250 thousand uah is allocated for one small project and from 250 thousand uah to 1 million uah – for large ones. the ratio of funding projects within one budget is 60% for small and 40% for large projects. it is worth noting that most cities have chosen a 16-year age requirement for project authors and voters and registration in the city where the campaign is being conducted. only in the 8 regional centres, the age limit is 18 years (odesa, dnipro, zhytomyr, ivano-frankivsk, lutsk, khmelnytskyi, kharkiv, and cherkasy). the youngest age requirement is in mykolaiv, where residents who have reached the age of 14 can take part in the participatory budgeting. we believe that low age requirement help to attract young people directly to take part in the life of the city (see electronic resource http://ngonetwork.org.ua). in table 2, we present the regional peculiarities of the implementation of participatory budgeting. having carried out a research on the results of the implementation of participatory budgeting in the cities of ukraine, we note the characteristic features of this process: creation of an effective mechanism of interaction between executive bodies and city residents in the budgetary process; increasing the level of transparency of the decisionmaking process by providing residents with the opportunity to directly influence budgetary policy; participatory budgeting constitutes a part of the city budget; projects must be implemented during the fiscal year and only in the territories that the city has the right to dispose of in accordance with the current legislation (kravchenko, 2015). next, we will analyse the amount of budgetary funds for financing the participatory budgeting projects (table 3). having analysed the data of table 3, it should be noted that the amount allocated for the implementation of participatory budgeting projects in the regional centres of ukraine ranges from 2.0 million uah in khmelnytskyi to 150 million uah in kyiv. it should also be noted that the largest number of submitted projects for the implementation in 2018 was registered in kyiv (809 projects) and in lviv (297 projects). it should be table 2 regional peculiarities of implementation of participatory budgeting in the cities of ukraine cities peculiarities selection requirement for participation dnipro participatory budgeting clause clearly identifies the areas in which projects may be submitted: security and public order, landscaping and infrastructure, energy conservation, culture and tourism, communal services, environment, education, healthcare, social protection, sports and telecommunications, communications and information technology. 18 years ivano-frankivsk at the beginning of the calendar year, it is mandatory to hold public debates on the priorities of the city development and identify problems – the themes of projects. 18 years mykolaiv residents of the city who due to physical peculiarities do not have an opportunity to fill out the voting form by themselves or personally vote at the polling stations, have the right to use the help of their relatives and other persons, instructing them to submit a completed voting form. 14 years odesa voting is conducted exclusively in electronic form, which significantly limits the range of potential participants to only active internet users. 18 years uzhhorod 16 years lutsk 18 years kharkiv the procedure is exceptionally electronic, but residents have a choice between voting through an electronic system or through a terminal in the centre for administrative services provision. 18 years source: prepared on the basis of data (electronic resource http://ngonetwork.org.ua) baltic journal of economic studies 225 vol. 4, no. 2, 2018 noted that kherson is the only regional centre, in which participatory budgeting has not been adopted. thus, the analysis showed that ukraine needs to increase opportunities for public participation in the budgeting process at the local and regional level, improving communication between citizens and local authorities in order to improve the efficiency of the process of allocating budgetary resources. 4. methodological principles of implementation of participatory budgeting we believe that a well-conducted process of implementing the participatory budgeting should, first of all, contribute to improving the quality of life of the whole city. in addition, participatory budgeting should be a part of the reform of local self-government, which provides for the possibility for citizens to dispose of a small part of public funds. thanks to the long-term model of participatory budgeting, cooperation and interest in public opinion, it is possible to achieve longterm results: rationalization of public expenditures, construction of public-private partnership, realization of citizens’ expectations. we have proposed a conceptual model of participatory budgeting (fig. 2). we believe that the main objective of participatory budgeting is to facilitate the establishment of a social dialogue between local authorities and residents of the territorial community and to create the conditions for the participation of the residents of the territorial community in the budgetary processes to meet their needs. however, as well as any process involving economic and social interference, participatory budgeting has its own limitations and risks. in our opinion, one of the main limitations is related to the specifics of social activity, when most citizens are table 3 the amount of budgetary funds for financing the participatory budgeting projects in the regional centres of ukraine for 2018 regional centres amount allocated to participatory budgeting, million uah number of submitted projects vinnytsia 7 39 lutsk 10 14 dnipro 16 271 zhytomyr 12.1 99 uzhhorod 10 79 zaporizhzhia 10 72 ivano-frankivsk, 2.5 0 kyiv 150 809 kropyvnytskyi 5 48 lviv 20 297 mykolaiv 10 117 odesa 100 141 poltava 5 81 rivne 10 86 sumy 9 66 ternopil 9 68 khmelnytskyi 2 82 cherkasy 10 109 chernivtsi 10 76 chernihiv 9.5 100 source: prepared on the basis of data (electronic resource https://www.voting.in.ua) international experience in enhancing community participation in decisionmaking participatory budgeting goal to facilitate the establishment of a social dialogue between local authorities and residents of the territorial community and to create the conditions for the participation of inhabitants of the territorial community in the budgetary processes to meet their needs. local authorities business environment public and nongovernmental organizations participants principles risks the law of ukraine “on local selfgovernment in ukraine” individual citizens limitations figure 2. a conceptual model of participatory budgeting source: prepared by the author baltic journal of economic studies 226 vol. 4, no. 2, 2018 less interested in studying the rights, fiscal responsibility of the government, etc. than in obtaining and developing a particular infrastructure project. another limitation is the dependence of citizens on the administration of the region since it is the local authorities that organize the meeting, provide information, provide meetings of officials with citizens and guarantee the implementation of a certain policy. in our opinion, the main risks of the implementation of participatory budgeting are: 1. expenditure limitation. for the implementation of participatory budgeting projects, only a certain part of local budget revenues is allocated. 2. the weakening of the law. in particular, the experience of brazil in the field of participatory budgeting suggests that the local authorities were weakened due to parallel participatory processes with the executive branch. 3. the escalation of conflicts related to the distribution of resources among the population involved in the implementation of participatory budgeting. interest groups can view this process as a place to compete for resources and participate in it for that purpose. 4. “usurpation” of participatory processes by the local elite. participation in the process of participatory budgeting, which is accompanied by decentralization, can give the local elite more opportunities to benefit from the budget, despite increasing public control. however, despite the risks and limitations, we believe that the popularity of this process is determined by the benefits received by the residents, local authorities, and the city in general. consequently, the participatory budgeting is the most effective decision-making instrument at the local level, because residents not only determine the investment priorities that will be implemented by local authorities but also actively participate in the management of budgetary resources. 4. stages of participatory budgeting implementation the preliminary analysis of the theory on participatory budgeting made it possible to determine the sequence of stages of its regulation (fig. 3), with the distinction of the main activity at each stage, which is mandatory for implementation. the following steps should be taken at the preparation stage. firstly: dissemination of information about the participatory budgeting; secondly: conducting a situational analysis and problem analysis; thirdly: carrying out activities to ensure that participants in the process understand the principles of decision-making throughout the whole process of budgetary regulation, as well as the real economic, political, and social situation in the region. in our opinion, the second stage involves the following measures: conducting negotiations between groups and participants in order to prioritize projects; establishment of the budget committee, whose function is to assess the efficiency of the allocation of resources priorities; as well as discussing and voting for the draft budget. the main objective of the third stage should be the preparation of technical plans and contracts by local authorities. at this stage, detailed planning, defining technical tasks, tender conditions, tendering procedures and selection of projects, the order of implementation of selected projects should be carried out. it is also worth noting that local authorities should provide periodic reports on the implementation of the community budget. these reports should include the status of implementation of projects and problems that occurred during their implementation. all of the above made it possible to develop a cycle of implementation of participatory budgeting as an element of decentralization of local budget expenditures, which is shown schematically in fig. 4. figure 3. stages of implementation of participatory budgeting source: prepared by the author stages of implementation of participatory budgeting іі. the stage of budget formation and its approval ііі. the stage of implementation of the participatory budgeting i. preparatory stage iv. the stage of monitoring and evaluation budget planning organizing projects according to the priority preparation of technical plans and contracts budget execution reporting baltic journal of economic studies 227 vol. 4, no. 2, 2018 5. conclusions summing up, it should be noted that for the effective implementation of participatory budgeting in ukraine, the following is necessary: firstly, the introduction and implementation of this instrument require regulatory support and support from state authorities, which will not block public initiatives and procedures and will be ready to refuse to exercise a part of its powers in favour of citizens. secondly, we believe that the mechanism of participatory budgeting can function effectively only in a civic, socially responsible society, which will want and have a real opportunity to participate in them. the last important element is the available financial resources for the implementation of planned projects, selected by the citizens. at the same time, the right of citizens to participate in the adoption of budget decisions can be fully realized when a certain amount of budgetary funds is allocated in the general budget of the administrative-territorial unit for the exclusive disposal of citizens. figure 4. the cycle of implementation of participatory budgeting source: prepared by the author information and training conducting workshops and meetings on the methodology for implementing the participatory budgeting consultations the general definition of development priorities of the city and its districts assessment of technical and financial capabilities for implementation of solutions to solve them establishment of a committee establishment of a coordination group of representatives of the public and city authorities participation in the drafting of the budget definition of directions of use of funds approval of draft participatory budgeting implementation of participatory budgeting details of investment plans preparation of technical plans and contracts introduction of participatory budgeting voting for the draft budget approval of participatory budgeting monitoring the performance of participatory budgeting next budget period current budget period references: lunina, i. (2014) budget decentralization: the goals and directions of reforms. ekonomika ukrainy (economic of ukraine), 11(636), 61-75 (in ukr.) belets zh.a. (2016) participatory budgeting as an innovative democratic instrument of citizen participation in the management of territorial communities, 1, [electronic resource]. retrieved from: http: //nbuv.gov.ua/ ujrn/ttpdu_2016_1_21 hrynchuk n. (2016) budgetary process at the local level in ukraine: legal regulation, powers of local authorities, public participation: 45. demianchuk o.i. (2016). innovative methods of management of local budgets of ukraine, 21(1): 190-194. baltic journal of economic studies 228 vol. 4, no. 2, 2018 kravchenko t. (2015). innovative tools for citizens to exercise their right to participate in local self-government in ukraine, 14 [electronic resource]. retrieved from: http://www. dridu.dp.ua/zbirnik/2015-02(14)/22.pdf. demianyshyn v. (2017). conceptual bases of the budgetary mechanism of socio-economic development of the state, 1: 77-88. participatory budgeting in the cities of ukraine: regional section [electronic resource]. retrieved from: http://ngonetwork.org.ua analysis of social voting [electronic resource]. retrieved from: https://www.voting.in.ua/votings/gromadskiybyudzhet-mista-kharkiv-na-2018-rik buletsa n.v. (2016) features of the process of participatory budgeting in ukraine, 6: 159-165. baltic journal of economic studies 334 vol. 4, no. 4, 2018 corresponding author: 1 borys grinchenko kyiv university, ukraine. e-mail: sosnovska.oo@gmail.com 2 university of the state fiscal service of ukraine, ukraine. e-mail: zhytarmaksym@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-334-340 financial architecture as the base of the financial safety of the enterprise olga sosnovska1, maksym zhytar2 abstract. in today’s economic realities, achieving the necessary level of financial security of enterprises is a prerequisite for ensuring their sustainable operation and the formation of competitive development parameters in the internal and external market environment. the effectiveness of this process depends on building a high-quality financial architecture as the basic structural element of the company’s financial security system. in this regard, the subject of the study is an analysis of existing theoretical approaches to the definition of financial architecture and its relationship with the financial security of the enterprise. the methodological basis of the research is the scientific development of domestic and foreign scientists, the fundamental theoretical positions of economic science in the field of financial architecture formation, financial risk management, and financial security of the enterprise. the purpose of the article is to study the essence of financial architecture in order to substantiate its determining influence on the financial security of the enterprise and ensure its sustainable functioning in an unstable development of economic processes. the article analyses the theoretical aspects of financial architecture and finds that the interpretation of this economic category is due to the existence of clear causal relationships between its constituent elements and their impact on the financial support. proceeding from this, the definition of financial architecture is drawn as a set of interconnected structural elements such as capital structure, ownership structure and quality of corporate governance, which accumulate and mobilize financial resources, increase control over the activity of the enterprise, solve conflicts of interest between owners and other stakeholders. it is determined that the choice of principles and methods for constructing financial architecture depends on such financial interests of economic entities as forming a flexible financial potential, optimizing the structure of capital, increasing investment attractiveness, maximizing profits, and increasing the market value of the enterprise. it is proved that the result of building a flexible financial architecture is to provide the appropriate level of financial security of an enterprise by identifying, quantifying, neutralizing, minimizing, and monitoring its financial risks. it is proposed to systematize indicators of financial security level assessment on the most typical of its functional components, among which investment, credit, emission, innovation, and currency can be distinguished. it has been established that ensuring the appropriate level of financial security will contribute to achieving financial sustainability, forming qualitative financial potential, providing competitive advantages, harmonizing interests of economic entities, and creating an effective system of economic security of the enterprise. it is concluded that the construction of high-quality financial architecture is the basis of financial security of an enterprise, the level of which depends on the proper management of financial risks and ensuring an adequate level of safety of all its functional components. as a criterion for the effectiveness of the process of ensuring the financial security of the company, sustainable development of the enterprise was determined in the conditions of an unstable economic environment. key words: financial architecture, financial security, capital structure, ownership structure, quality of corporate governance, risk management. jel classification: d04, a11, l22 1. introduction taking into account the current tendencies of dynamism and uncertainty of economic processes, the ability of enterprises to efficiently conduct the economic activity and stable development is determined by the level of their adaptation to internal and external parameters of functioning. under these circumstances, the most priority task is to create an effective system of economic security of the enterprise to protect the business entities from the threats of a dangerous baltic journal of economic studies 335 vol. 4, no. 4, 2018 economic environment. in this case, the main and decisive functional component of this system is financial security, as evidenced by a significant number of existing scientific research in this scientific direction. it should be noted that to the problems of providing financial security of enterprises, the works of such domestic and foreign scientists are devoted as j. c. van horne, t. allison, g. foster, j. schumpeter, l. i. abalkin, v. m. heiets, o. i. baranovskyi, i. o. blank, t. g. vasyltsiv, k. s. horiacheva, l. i. donets, z. s. varnalii, a. o. yepifanov, m. m. yermoshenko, s. m. illiashenko, h. v. kozachenko, and others. however, many issues are currently debatable and underdeveloped, requiring new scientific approaches to their solution. in this regard, the study of the essence of financial architecture as the basis of financial security of the enterprise is a topical issue. the purpose of the article is to study the essence of financial architecture in order to substantiate its determining influence on the financial security of the enterprise and ensure its sustainable functioning in an unstable development of economic processes. to achieve the goal, the following is a prerequisite: analysis of theoretical approaches to the definition of financial architecture and the identification of its constituent elements; identification of the methodological link between financial architecture, financial security, and financial risks of the enterprise; selection of stages of management of financial risks of the enterprise; systematization of indicators for assessing the level of financial security as indicators of financial sustainability of the enterprise. the scientific novelty of the research is the development of theoretical provisions for determining the methodological relationship between financial architecture and financial security, the achievement of which level depends on the process of management of financial risks of the enterprise to promote its sustainable functioning. theoretical and practical aspects of financial architecture of companies was studied by many foreign scientists, among which are: m. barclay, r. brealey, c. brigham, r. vyshnia, h. demsetz, t. dolhopiatova, r. entov, i. ivashkivska, r. kapeliushnykov m. kokoreva, b. kolass, r. la porta, f. lopez de silanes, s. myers, k. smith, a. stepanova, j. finnerty, j. van horne, a. shleifer, and others. among scientists who studied labour issues can be noted: n. bychkova, m. bilyk, i. blank, i. ziatkovskyi, v. melnyk, s. onishko, o. tereshchenko, a. poddierohin, v. fedosov, l. fedulova, s. yurii, and others. 2. definition of the essence of financial architecture in the most general form, “architecture” is an expression of the patterns of structure inherent in the system, the general plan or concept used to create it and, on the other hand, an abstract description of the system, its structure, components, and their interrelations (grigoriev). as for the term “financial architecture”, for the first time, this term was proposed in 1999 by s. myers (myers, 1999) who defines the financial architecture of companies as a set of financial indicators such as ownership, legal form of business organization, incentives, sources financing, and risk-sharing mechanisms. he notes that corporate financial theory and practice developed within certain financial architecture, public corporations in countries such as the us and the uk, namely, countries with well-developed and safe markets. the scientist stressed that the financial architecture depends on active and persistent risk markets, which in turn is also dependent on adequate information such as financial reports, basic investor protection, continuity of contracts and law and justice. in the continuation of s. myers’s works, foreign scholars m. barclay and k. smith in their work use the term “financial architecture” when considering corporate finance issues. they note that the financial architecture of enterprises is primarily determined by its investment opportunities (barclay, 1996). companies with a high ratio of market-to-book value to better use less borrowed capital compared to companies with low rates. in addition, the authors conclude that the size of the company has a systematic effect on its financial architecture, since large and small companies have different access to the market for debt capital, while small companies have access to short-term bank lending, while large have the opportunity to attract government loans and long-term debt. foreign scholars d. cassimon and p.-j. engelen argue that in addition to investment opportunities, there are also institutional barriers that influence the formation of an optimal financial architecture for firms in the “new economy” in developing countries. in the writings of the last ten years, the term “financial architecture” is often viewed in the macroeconomic sense of the world financial architecture, and the financial architecture at the micro level is insufficiently highlighted. yes, v. m. melnik, n. v. bychkova (melnik, bychkova, 2012) and a. m. stepanova (stepanova, 2009) continue to justify the development of the concept of s. myers and considers the financial architecture in terms of financial activity of business entities – from the point of view of the management of the structure of capital and its efficiency. in the dissertation research, n. v. bychkova argues that financial architecture is a set of interconnected components and structural characteristics of corporations such as organizational and legal form, capital structure, ownership structure, corporate governance, which determine the structure of the corporation’s finances and is a tool for improving the financial performance of the entity in the context of the development of an appropriate financial policy to baltic journal of economic studies 336 vol. 4, no. 4, 2018 achieve the strategic objectives of such activities, taking into account the combination of external and internal factors of the idea of corporation (bychkova, 2008). author s. v. klimchuk presents financial architecture as a system of tools and instruments for managing financial relations that form a financial institution and proposes the use of the term “architectonics of financial space” as a system of effective spatial functioning of a financial mechanism, which enables to qualitatively capture this area by means of functional dependence of structural elements and levers of the financial system (klimchuk, 2012). in this case, it is advisable to agree with the opinion of v. o. kozlova, who believes that this definition narrows its significance to the implementation of the financial mechanism. the financial architecture of the enterprise is determined due to the presence of clear causal relationships between its constituent elements and their impact on the financial support of its activities. therefore, it is appropriate for the enterprise to understand the combination of interconnected structural elements such as capital structure, ownership structure, and quality of corporate governance that accumulate and mobilize financial resources, strengthen control over the activities of the enterprise, resolve conflicts of interest between owners and other stakeholders, and are the basis of its financial security. 3. characteristics of elements of the financial architecture of the enterprise the decisive stage in the construction of the financial architecture of the enterprise is the definition of its basis – the financial interests of economic entities, whose implementation plan is closely linked with the provision of an adequate level of financial security of the enterprise. thus, in the conditions of financial and economic instability, the financial interests of economic entities will be directly related to the main objective of effective functioning of the enterprise, which in turn will have a significant methodological value for choosing the principles and mechanisms for building its financial architecture. the following models of the definition of the main goal of the enterprise are presented in the scientific literature: the model of profit maximization (based on the principles of the classical economic theory and the marginalist theory of the firm), the model of transaction cost minimization (based on theoretical principles of neo-institutionalism by r . coase), the model of maximization of sales, growth of the enterprise, model of provision of competitive advantages, model of value-added maximization, and model of maximizing the market value of the enterprise (blank, 2004). each of the existing models is independent and offers a specific purpose of the company’s operation, which may be a priority for a particular enterprise at different stages of its life cycle. at the same time, all target benchmarks are interconnected and each of them will influence the achievement of the main goal of effective operation of the enterprise and satisfaction of the financial interests of economic entities. determining the main goal of the operation of the enterprise is the basis for building its financial architecture. as the key elements of the financial architecture of the enterprise, it is appropriate to allocate: ownership structure, the capital structure of the enterprise, and the quality of corporate governance (figure 1). financial architecture of the enterprise the structure of ownership the capital structure the quality of corporate governance the theory of net operating income; traditional theory; the theory of hierarchy; the theory of agency costs; the theory of corporate control; the theory of risk tracking; method of maximizing financial risks through the use of financial leverage effect; method of minimizing the weighted average cost of capital; method of general leverage. figure 1. elements of the financial architecture of the enterprise source: developed by the authors baltic journal of economic studies 337 vol. 4, no. 4, 2018 it must be agreed with many scholars who believe that the ownership structure should be considered through the prism of agency conflicts between managers and shareholders, majority and minority shareholders, state and private owners. the optimal ownership structure should facilitate, on the one hand, the concentration of capital in the hands of an effective owner and, on the other hand, the matching of the capital structure with the strategic goal of the enterprise. the capital structure of an enterprise sets the risk distribution between investors, especially financial risks. market imperfections (taxes, transaction and agency costs) lead to a dependence of the efficiency of the structure of capital, which suggests a negative impact of debt load on strategic efficiency. in addition, the formation of a sound capital structure through the implementation of high-tech innovative projects involves solving a number of tasks related to the assessment of sources of funding, the form of attraction, the degree of accessibility, the time of disposal, the cost of attracting a certain type of financial resources, financial risk, and other conditions attracting a specific source of innovation financing. therefore, the key issue in the structure of capital is the assessment of the rationality of the ratio of individual groups of sources of financing for innovation and, first of all, own and borrowed capital, as well as substantiation of managerial decisions on the rational ratio of sources of funding for specific innovation projects. it should be noted that in ukraine at the present stage, it is rather difficult to assess the ownership structure of the enterprise since it is rather opaque. one of the main tasks of corporate governance is the minimization of transaction costs related to the delineation of rights and responsibilities of managers, as well as agency costs associated with the diverse interests of managers and the risk of shareholders. an assessment of the level of corporate governance is carried out to determine the appropriateness of management principles that are used in a particular enterprise – the generally accepted principles that underlie effective corporate governance and can be applied in a wide range of legal, economic, and political conditions. the final result of the assessment is the corporate governance rating that is assigned to the research object according to the national rating scale of corporate governance ratings by the rating agency of the agency as a result of the voting. this component of the financial architecture of the enterprise is difficult to analyse since a significant part of enterprises do not provide information on their official sites. 4. the methodological relationship between the financial architecture and financial security of the enterprise it should be noted that the process of forming the financial architecture of the enterprise occurs under the influence of a significant number of factors of the internal and external environment. among them, financial factors are important, which include the provision of financial stability of enterprises and the growth of the market value of business through the effective formation and allocation of financial flows, which in turn characterizes the financial potential of the enterprise and ensures its liquidity and synchronization of financial flows in time and for volumes. the result of these factors may be the emergence of financial risks, the realization of which directly affects the financial security of the enterprise and leads to the positive or negative consequences of its activities. it should be noted that in the vast majority of scientific studies, there is a correlation between the concepts of financial security and risk. we consider it the correct position because, in today’s knowledge, knowledge of the risk category can significantly improve the efficiency of financial security management of the enterprise. we agree that the financial risk category regarding the provision of financial security of an enterprise includes two main components: identification and evaluation of risk, which is largely expert and probabilistic, and financial risk management in order to ensure the financial security of an enterprise and prevent its market value from falling (yermoshenko, 2010). this is precisely the methodological link between financial architecture, financial security, and financial risk at the enterprise level. as is rightly noted by o. shishkina, there is the growing relevance of the problem of risk management in the world, as evidenced by the establishment of the institute of risk management (irm), the global association of risk professionals, the international the international risk governance council (irgc), the federation of european risk management standards. the urgency of the problems in the field of risk management has led to the creation of risk management standards, which resulted from the joint efforts of the institute of risk management (irm), the association of risk management and insurance (airmic), the national risk management forum in the public sector (shishkina, 2014). in this regard, the necessary condition for maintaining an adequate level of financial security is the formation of a flexible financial architecture of the enterprise through effective management of its financial risks (figure 2). 5. stages of management of financial risks of the enterprise in domestic science, the perception of the process of managing financial risk is based predominantly on foreign experience, which needs to be adapted to the current realities of the ukrainian economy. currently, financial risk management is a specific area of financial management, which in recent years has been treated as risk management in research. the process of financial risk management includes a defined sequence of management decisions, which in a systematic way baltic journal of economic studies 338 vol. 4, no. 4, 2018 fi gu re 2 . i nt er co nn ec ti on o f fi na nc ia l a rc hi te ct ur e an d el em en ts o f fi na nc ia l s ec ur it y of th e en te rp ri se so ur ce : d ev el op ed b y th e a ut ho rs f in an ci al in te re st s of e co no m ic e nt it ie s as th e ba si s fo r bu ild in g th e fi na nc ia l a rc hi te ct ur e of th e en te rp ri se f in a n c ia l a r c h it e c t u r e o f t h e e n t e r p r is e e ns ur in g fi na nc ia l se cu ri ty o f t he e nt er pr is e c re at io n of th e sy st em o f ec on om ic s ec ur ity o f t he en te rp ri se fo rm at io n of fl ex ib le fi na nc ia l p ot en tia l o pt im iz at io n of th e ca pi ta l st ru ct ur e of th e en te rp ri se in cr ea si ng in ve st m en t at tr ac tiv en es s m ax im iz in g th e pr of it of th e en te rp ri se g ro w th o f t he m ar ke t v al ue of th e en te rp ri se t he c ri te ri on o f e ff ic ie nc y is th e su st ai na bl e de ve lo pm en t o f an e nt er pr is e in a n un st ab le ec on om ic e nv ir on m en t. indicators forassessing the level ofthefinancial security of the enterprise by functional components in di ca to rs f or a ss es si ng th e le ve l o f in ve st m en t se cu ri ty o f th e en te rp ri se in di ca to rs fo ra ss es si ng th e le ve l o f cr ed it se cu ri ty o f th e en te rp ri se in di ca to rs f or a ss es si ng th e le ve l o f em is si on sa fe ty o f an e nt er pr is e in di ca to rs fo ra ss es si ng th e le ve l o f en te rp ri se ’s in no va tio n se cu ri ty in di ca to rs fo ra ss es si ng th e le ve l o f f or ei gn e xc ha ng e se cu ri ty o f t he e nt er pr is e management of financial risks of the enterprise id en tif ic at io n of th e fi na nc ia l r is k of th e en te rp ri se q ua nt if ic at io n of th e fi na nc ia l r is k of th e en te rp ri se n eu tr al iz at io n or m in im iz at io n of th e fi na nc ia l r is k of th e en te rp ri se m on ito ri ng o f en te rp ri se fi na nc ia l r is k baltic journal of economic studies 339 vol. 4, no. 4, 2018 can be represented by such interconnected stages as identification, quantification, neutralization or minimization, and risk monitoring. at the identification stage, a qualitative analysis of systematic and non-systematic financial risks of the enterprise is carried out by identifying internal and external risk factors and systematizing potential financial risks that are characteristic of the enterprise’s economic activity at the appropriate stage of its life cycle. the most responsible and methodically complex stage of financial risk management is its quantification, which involves a quantitative assessment of the possible magnitude of risk and the calculation of the probability of occurrence of a negative event, the duration of the period of exposure to risk and the size of possible financial losses. the formation of qualitative and quantitative data is the basis for the implementation of the phase of neutralization or minimization of risk through the use of known methods for avoiding, diversifying, hedging, distributing, limiting the concentration, insurance, and others. the final stage of risk monitoring involves comparing the planned and projected values of financial security indicators of an enterprise with their thresholds, beyond which there is a change in the status of financial security – from safe to dangerous. under these conditions, the financial architecture of the enterprise becomes more vulnerable and loses the ability to effectively adapt to the factors of a dynamic economic environment that results from a violation of the financial interests of economic entities. 6. systematization of indicators for assessing the level of financial security of enterprises taking into account the aforementioned, a quantitative assessment of the level of financial security of an enterprise is possible provided that its indicators are monitored, the timely conduct of which helps to identify, quantify, and implement the methods of optimizing financial risks. it should be noted that a thorough analysis of the methods of assessing the financial security of an enterprise leads to the conclusion that there are different approaches to the choice of indicators of this process – from generally accepted indicators of the financial state of the enterprise to grouping indicators to assess the level of its financial security in accordance with various criteria. we believe that the choice of indicators for assessing the level of financial security of an enterprise should be carried out on its functional components with the possibility of a further definition of the integral index (saati, 1993). the most typical elements of the functional structure of financial security, which can be allocated at the enterprise level, should include investment (capital investment in the development of the enterprise), credit (formation and use of debt capital), issue (securities transactions), innovative (takes into account purely financial innovations), currency (export-import operations) and others. certainly, the selected indicators of the level of financial security of an enterprise should be based on indicators characterizing the state of its financial activity. in addition, these indicators should meet the requirements of ease of calculation and comprehension, completeness and comprehensive coverage of the qualitative and quantitative state of financial security of the enterprise, the use of accounting and tax reporting for their calculation. 7. determination of the criterion of the financial safety of the enterprise ensuring an appropriate level of financial security will help protect against financial risks of an unfavourable internal and external environment, achieving financial sustainability, developing a qualitative financial potential, ensuring competitive advantages, and harmonizing the financial interests of the enterprise. achieving such results is the basis for creating an effective system of economic security of an enterprise, the optimal combination in the structure of which financial and other functional components, and their proper management will be the key to sustainable development of the enterprise in an unstable economic environment. it will be appropriate to emphasize the fact that in the theory of systems, constancy is one of the main concepts that is determined when considering the behaviour of the system and implies the ability of the system to maintain its operation within the specified limits. from the standpoint of a systematic approach, the constancy of the system is determined by the mechanism of homeostasis, which is a process by which the system saves its parameters (state), in spite of changes in the external environment and acts as the most perfect form of self-regulation with the use of feedback. violation of the system’s stability means that there are divergent processes in it, that is, bifurcations that are not manageable and can lead to the disintegration of the system and its destruction (wiener, 1951). 8. conclusions according to the results of the scientific research, the following conclusions can be drawn: 1. based on the analysis of theoretical approaches, the definition of the financial architecture of the enterprise as a set of interconnected structural elements such as capital structure, ownership structure and quality of corporate management, which accumulate and mobilize financial resources, increase control over the activities of the enterprise, solve conflicts of interest between owners and other stakeholders. 2. the structure of capital, ownership structure and quality of corporate governance as components of the financial architecture of the enterprise have baltic journal of economic studies 340 vol. 4, no. 4, 2018 been characterized, which has allowed elaborating the concept of its essence and structure. 3. the methodological link between financial architecture and financial security of the enterprise is found, which is based on the dependence of the appropriate level of financial security and flexible financial architecture of the enterprise through the management of its financial risks. 4. the financial risks management stages, which include their identification, quantification, minimization or neutralization and monitoring, the consistent implementation of which will contribute to maintaining an adequate level of financial security and ensuring financial sustainability of the enterprise, are proposed. 5. the indicators of assessing the level of financial security on the investment, credit, emission, innovation, and currency functional components are systematized; observance of normative values is an important condition for ensuring financial stability and sustainable operation of the enterprise in an unstable economic environment. prospects for further research are the development of methodological approaches to enterprise risk management, the implementation of which will contribute to improving the financial architecture of the enterprise and increase its financial security. references: grigoriev, l. corporate architecture and its components. innovative economy and organizational management. retrieved from: http://bigc.ru/theory/innovations/corp_arch.php myers, s. (1999). financial architecture. european financial management, 5, 139. barclay, m. (1996). on financial architecture: leverage, maturity, and priority. journal of applied corporate finance, 4, 4-17. legal and institutional barriers to optimal financial architecture for new economy firms in developing countries. retrieved from: http://www.wider.unu.edu/stc/repec/pdfs/rp2002/dp2002-90.pdf melnyk, v. & bychkova, n. (2012). financial architecture of national corporations and its influence on the efficiency of financial activities: monograph aston, 244 p. stepanova, a. (2009). influence of financial architecture of the company on its efficiency in conditions of growing capital markets: the author's abstract. ... cand. econ. sciences. moscow: state university higher school of economics. bychkova, n. (2008). the influence of financial architecture of national corporations on the effectiveness of financial activities: author's resume. dis for obtaining sciences. degree candidate econ sciences: "money, finance and credit". kyiv, 22 p. klimchuk, s. (2012). financial space and its integration priorities. the economist news of donbas, 2(28), 76-81. blank, i. (2004). financial management of the enterprise, 784 p. yermoshenko, m. (2010). financial component of economic security: state and enterprise: scientific monograph, national academy of management, 232 p. shishkina, o. (2014). identification and express assessment of financial risks of industrial enterprises. bulletin of the chernihiv state technological university. series: economic sciences, 4(76), 238-246. wiener, n. (1951). homeostasis in the individual and specialt. journal of the franklin (praline) institute, 251, 65-68. saati, t. (1993). decision-making. the method of analyzing the hierarchy. radio and communication, 278 p. zhytar, m. o. (2017). the financial architecture of the corporation: the essence and components. collection of scientific works of scientists and post-graduate students «economic herald of the university», 33/2, 370-374. sosnovskaya, o. (2018). concept of economic safety of enterprise in the context of different methodological approaches. business inform, 3, 443-447. baltic journal of economic studies 56 vol. 1, no. 2, 2015 corresponding author: 1 department finance and credit, kharkov national university of civil engineering and architecture. e-mail: koliedinakateryna@gmail.com research of the level of the innovative development of the machine building enterprises of ukraine in kharkov region kateryna koliedina1, kharkov national university of civil engineering and architecture, ukraine abstract. in today’s world of the science and new technologies development all the countries including ukraine are entrusted with a task of refocusing on the innovative way of evolution. the level of innovativeness of the country depends on the development of enterprises in this regard since exactly the industrial enterprises are able to induce the innovative process and be a multiplier of other economic sectors. thus it is expedient to re-equip the industry of the state and encourage exactly the high-tech branches thereof. in this regard the goal of this paper is to explore and assess the influence of the criteria of innovative activity of the industrial enterprises on the level of the innovative development thereof. to reach the mentioned goal the criteria of innovative activity of the leading machine building enterprises of ukraine in kharkov region are chosen as the object of research. the studied enterprises are innovatively active in kharkov region according to the criteria of the work thereof. the following criteria of innovative activity of the enterprises are chosen for analysis: the volume of the sold innovative products; the charges for innovation; the research intensity of the innovative products; the share of the studied enterprises in the total volume of the products sold in this region; the quantity of the new technological processes; the quantity of the new innovative kinds of products. the chosen criteria are important for enterprise in relation to the innovative activity and in case of changes have a substantial influence on its development and stability. methodology. to research the level of innovative development of the machine building enterprises of ukraine in kharkov region the author prop: 1) formation of the matrix of the basic data; 2) standardization of the basic data; 3) differentiation of the characteristics on inciters and disincentives; 4) construction of the etalon; 5) determination of the distance between the objects and etalon; 6) calculation of the criteria of the level of development; 7) preparation of the rating of the enterprises depending on the level of innovative development. results. according to the results of the conducted taxonomic analysis of the certain machine building enterprises of kharkov region (ukraine) the criteria of the level of development of the studied enterprises ranges from 0,524 to 0,878. the obtained result evidences that although the enterprises declare the orientation on the innovative development, actually not all of the studied enterprises are innovatively active at all the criteria. however the rate of the taxonomic criteria of the most of them is inclined to one, that confirms the orientation thereof on the innovative way of development. value/originality. the data obtained in result of the calculation and analysis encourages the better understanding of the synergies between the criteria of the innovative activity of the enterprises and the level of the innovative development thereof. this allows the enterprises to correct their innovative activity depending on the current situation and take the effective management decisions directed on the way of innovative development in future. key words: enterprise, innovation, innovative activity, innovative development, taxonomic analysis. jel classification: с15, d2, o31 baltic journal of economic studies 57 vol. 1, no. 2, 2015 1. introduction in today’s world of the science and new technologies development all the countries including ukraine are entrusted with a task of refocusing on the innovative way of evolution. the level of innovativeness of the country depends on the development of enterprises in this regard since exactly the industrial enterprises are able to induce the innovative process and be a multiplier of other economic sectors. thus it is expedient to re-equip the industry of the state and encourage exactly the high-tech branches thereof (senichkina, 2014, p. 71-76). in this regard research and assessment of the influence of the criteria of innovative activity of the industrial enterprises on the level of the innovative development thereof become more important. the works of famous foreign and domestic scientists are dedicated to the issue of the present condition of the innovative activity of ukraine and its enterprises, still these categories are not statical instead they constantly change causing the necessity of the regular analysis for revealing the main tendencies. in this regard the goal of this paper is research of the influence of the level of the machine building enterprises of kharkov region using the method of the taxonomic analysis. 2. algorithm of conducting the taxonomic analysis the present conditions demand the enterprises to form the effective strategy of the development which should be based on innovative integral part, still it is impossible without the assessment of the results of the enterprises’ activity. therefore the analysis of the innovative activity and the revelation of the reserves for elevation of the level of innovative development thereof become the toppriority question for the enterprises. to reach the mentioned goal we proposed to use the taxonomic method of the assessment of the influence of the criteria of innovative activity of the machine building enterprises on the criteria of innovative development thereof. this method of analysis foresees the existence of the etalon of reaching the indicator values and determination of the distance between the actual and etalon level, that results in composition of the taxonomic marker of the development (ponomarenko & malyarets, 2009, p. 432), the computation algorithm of the latter is presented at pic. 1. 3. choice of the criteria for formation of the matrix of the basic data on the first stage of analysis of the innovative development of enterprise it is necessary to form the matrix of the basic data which is as follows: x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 where n – the quantity of the objects which are used; m – the quantity of the features; xij – the value of indicator j for the object i. the following leading machine building enterprises of ukraine in kharkov region became the objects of research: state enterprise plant "electrotyazhmash", public joint stock company yuzhcable works, public joint-stock company "kharkov machine-building plant "svet shakhtyora", public joint-stock company "kharkov bearing plant", public joint-stock company "electromashina", "turboatom" public joint stock company, public joint-stock company "kharkov trac s. ordzhonikidze plant", state research and development enterprise "obiedinenie communar", public stock company frunze plant and state enterprise "kharkov machine building plant "fed". theses enterprises are innovatively active in kharkov region according to the criteria of the work thereof. we also note that the chosen criteria are important for the enterprise from the point of the innovative activity and in case of changes have substantial influence on the development and stability thereof. table 1 contains the values of the indicator values of the innovative activity of the number of the machinery enterprises of kharkov region which implement innovations (information of the report of the state statistics committee of ukraine, 2014). 1st stage formation of the matrix of the basic data 2nd stage standardization of the basic data 3rd stage differentiation of the characteristics on inciters and disincentives 4th stage construction of the etalon 5th stage determination of the distance between the objects and etalon 6th stage calculation of the criteria of the level of development 7th stage preparation of the rating of the enterprises depending on the level of innovative development pic. 1. algorithm of the determination of the indicator of the level of innovative development of the enterprise baltic journal of economic studies 58 vol. 1, no. 2, 2015 4. construction of the etalon point since the chosen indicators are non-uniform the further calculation requires the standardization procedure. this will allow all units of measurement to become the nondimensional values and thus to smooth the value of the characteristic. the following formula is used therefore: x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 (1) where zi – standard value of j-th indicator for i-th object; xi – arithmetical average of i-th characteristic. the results of the standardization of the basic data are presented in table 2. table 2 matrix of the standardize data х1 х2 х3 х4 х5 х6 0,163432 0,012018 0,027822 0,163432 0,192308 0,571429 3,419413 1,080871 0,000118 3,419413 0,769231 3,428571 0,271474 5,299793 8,694921 0,271474 0,384615 0,571429 0,115282 0,379945 0,051139 0,115282 0,576923 0,285714 0,327161 0,5119 6,84642 0,327161 0,192308 0,285714 1,12525 0,173717 0,106495 1,12525 0,192308 0,285714 4,224231 0,425882 0,039927 4,224231 0,961538 1,142857 0,065297 1,910122 1,001641 0,065297 4,807692 2,285714 0,271036 0,095251 0,077766 0,271036 0,384615 0,857143 0,017423 0,110501 0,000103 0,017423 1,538462 0,285714 the following step is differentiation of all the variables on inciters and disincentives. characteristics which positively influence on the innovative development belong to the inciters, characteristics hindering the development belong to the disincentives. xoi=maxxij – inciter xoi=minxij – disincentive in our case all the indicators (volume of the sold innovative products, expenses for innovation, knowledge content of the innovative products, percent of the studied enterprises in the total volume of the products sold in the region, quantity of the new technical processes and the new innovative kinds of products) are inciters since no one of them hinders the innovative development of the enterprise, and instead, optimizes it. therefore for construction of the etalon value we choose xoi=maxxij for all the indicators. according to table 3 vector-etalon for the innovatively active enterprises of the machine building sector of kharkov region has the following coordinates: ро = (4,224231; 5,299793; 8,694921; 4,224231; 4,807692; 3,428571) 5. calculation of the criteria of innovative development of the enterprises on the fifth stage of taxonomic analysis the calculation of the distance between the separate indicators characterizing the level of the innovative development of enterprise and the etalon point is conducted. euclidean distance is determined according to the following formula: table 1 criteria of innovative activity of the enterprises of the machine building industry of kharkov region in year 2014 enterprise х1 х2 х3 х4 х5 х6 public joint-stock company "kharkov machine-building plant "svet shakhtyora 28829,2 206,7 0,00352 0,97 1 2 state enterprise plant "electrotyazhmash" 603180,5 18590,8 0,00001 20,29 4 12 public joint stock company yuzhcable works 47887,7 91155,6 1,10031 1,61 2 2 public joint-stock company "electromashina" 20335,6 6535,0 0,00647 0,68 3 1 public stock company frunze plant 57710,9 8804,6 0,00001 1,94 1 1 public joint-stock company "kharkov trac s. ordzhonikidze plant" 198492,8 2987,9 0,01348 6,68 1 1 "turboatom" public joint stock company 745149,5 7325,1 0,00505 25,07 5 4 public joint-stock company "kharkov bearing plant" 11518,4 32853,8 0,12675 0,39 25 8 state research and development enterprise "obiedinenie communar" 47810,4 1638,3 0,00984 1,61 2 3 state enterprise "kharkov machine building plant "fed" 3073,4 1900,6 0,00001 0,10 8 1 where х1 – volume of the sold innovative products, thousand, hryvnias; х2 – expenses for innovation, thousand, hryvnias; х3 – knowledge content of the innovative products, hryvnias/hryvnias; х4 – percent of the studied enterprises in the total volume of the products sold in the region, %; х5 – quantity of the new technical processes, items; х6 – quantity of the new innovative kinds of products, names. table 3 value of the etalon point х1 х2 х3 х4 х5 х6 etalon point 4,224231 5,299793 8,694921 4,224231 4,807692 3,428571 baltic journal of economic studies 59 vol. 1, no. 2, 2015 x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 (2) where zij – standardize value of j-th indicator for i-th object; zoj – standardize value of j-th indicator for the etalon the results of calculation of euclidean distance for the enterprises are presented in table 4. table 4 euclidean distance enterprise indicator public joint-stock company "kharkov machine-building plant "svet shakhtyora 12,86562901 state enterprise plant "electrotyazhmash" 10,53582229 public joint stock company yuzhcable works 7,679547844 public joint-stock company "electromashina" 12,66742943 public stock company frunze plant 12,65219426 public joint-stock company "kharkov trac s. ordzhonikidze plant" 12,26476324 "turboatom" public joint stock company 10,89409639 public joint-stock company "kharkov bearing plant" 10,32356567 state research and development enterprise "obiedinenie communar" 12,6005553 state enterprise "kharkov machine building plant "fed" 12,58922216 the following step is determination of the value of the taxonomic indicator of development which is calculated according to the formula (litvinova 2012): x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 (3) where ki∈[0.1] x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 (4) x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 (5) x = � 𝑥𝑥11 … 𝑥𝑥1𝑚𝑚 … … … 𝑥𝑥𝑛𝑛1 … 𝑥𝑥𝑛𝑛𝑚𝑚 � 𝑧𝑧𝑖𝑖= 𝑥𝑥𝑖𝑖 �̅�𝑥 𝑥𝑥𝑜𝑜𝑖𝑖 = max 𝑥𝑥𝑖𝑖𝑖𝑖 𝑥𝑥𝑜𝑜𝑖𝑖 = min 𝑥𝑥𝑖𝑖𝑖𝑖 𝐶𝐶𝑜𝑜𝑖𝑖 = �∑ (𝑧𝑧𝑖𝑖𝑖𝑖 − 𝑧𝑧𝑜𝑜𝑖𝑖𝑚𝑚𝑖𝑖=1 ) 2 𝐾𝐾𝑖𝑖 = 1 − 𝑑𝑑𝑖𝑖 𝑑𝑑𝑖𝑖 = 𝐶𝐶𝑖𝑖𝑜𝑜 𝐶𝐶𝑜𝑜 𝐶𝐶𝑜𝑜 = 𝐶𝐶𝑜𝑜��� + 2𝑆𝑆𝑜𝑜 𝑆𝑆𝑜𝑜 = � 1 𝑚𝑚 �(𝐶𝐶𝑖𝑖𝑜𝑜 − 𝐶𝐶𝑜𝑜��� )2 (6) the obtained results of calculation are presented in table 5. consequently according to the data of the conducted analysis it may be concluded that public joint-stock company "kharkov machine-building plant "svet shakhtyora" is the enterprise with the high level of criteria of innovative activity since the value of the taxonomic indicator thereof is 0,878 that is close to 1. this also evidences that among the studied enterprises the most active researches of the innovative products are conducted on this plant as well as the innovative technologies are applied and the substantial costs are expended for the research scientific and the experimental development works. public joint stock company yuzhcable works has the lowest value of the criteria of innovative development of 0,524 that confirms the lack of the innovative activity level of the enterprise and necessity of amelioration thereof. the appliance of the new technologies is the necessary condition for amelioration of the value of the taxonomic indicator. on the basis of the obtained estimation the studied enterprises are ranged depending on the level of innovative development and the results are presented in table 6. table 6 rating of the enterprises of the machine building industry of kharkov region according to the indicator of the level of innovative development enterprise indicator of the level of innovative development rating position public joint-stock company "kharkov machine-building plant "svet shakhtyora 0,878 1 public joint-stock company "electromashina" 0,864 2 public stock company frunze plant 0,863 3 state research and development enterprise "obiedinenie communar" 0,860 4 state enterprise "kharkov machine building plant "fed" 0,859 5 public joint-stock company "kharkov trac s. ordzhonikidze plant" 0,837 6 "turboatom" public joint stock company 0,743 7 state enterprise plant "electrotyazhmash" 0,719 8 public joint-stock company "kharkov bearing plant" 0,704 9 public joint stock company yuzhcable works 0,524 10 according to the data of table 6 all the studied objects are sorted into the rate scale depending on the level of innovative development. thus the first three positions are occupied by the following enterprises: public joint-stock company table 5 value of the criteria of the level of development enterprise value of the criteria public joint-stock company "kharkov machine-building plant "svet shakhtyora 0,878 state enterprise plant "electrotyazhmash" 0,719 public joint stock company yuzhcable works 0,524 public joint-stock company "electromashina" 0,864 public stock company frunze plant 0,863 public joint-stock company "kharkov trac s. ordzhonikidze plant" 0,837 "turboatom" public joint stock company 0,743 public joint-stock company "kharkov bearing plant" 0,704 state research and development enterprise "obiedinenie communar" 0,860 state enterprise "kharkov machine building plant "fed" 0,859 baltic journal of economic studies 60 vol. 1, no. 2, 2015 "kharkov machine-building plant "svet shakhtyora, public joint-stock company "electromashina" and public stock company frunze plant having the taxonomic indicators 0,878; 0,864 and 0,863 correspondingly. the last three positions with the results of 0,719; 0,704 and 0,524 are occupied by the following enterprises: state enterprise plant "electrotyazhmash", public joint-stock company "kharkov bearing plant" and public joint stock company yuzhcable works. still it should be noted that despite the rating positions of the studied enterprises nine of ten among them have the taxonomic indicator close to 1 that evidences the innovative activity thereof and drive to innovative development. 6. conclusion on the basis of the aforementioned it may be concluded that the guarantee of the welfare of any country is innovative way of the development implementation of which depends directly on research, creation and appliance of the innovations on the industrial enterprises. therefore it is expedient to research the status and the tendencies of the development of innovative activity of the industrial enterprises and to explore the reserves of amelioration of the level of innovative development thereof. the results of the conducted taxonomic analysis of the certain enterprises of the machinery of ukraine in kharkov region show that the criteria of the level of innovative development thereof ranges from 0,524 to 0,878. this evidences that nevertheless the enterprises declare the orientation on innovative development in fact not all of the studied enterprises are innovatively active on all criteria. however the most of them have the value of the taxonomic indicator close to one that confirms the orientation on the way of innovative development thereof. references the state statistics service of ukraine (2014). reading allowed: annual review and summary of statistics data of ukraine 2014. retrieved from: http://www.ukrstat.gov.ua litvinova, v. (2012). taxonomic analysis as a method of estimating the competitiveness of products. electronic scientific specialized journal “economic. management. innovations”. [electronic resource]. – retrieved from: http://nbuv.gov.ua/j-pdf/eui_2012_1_29.pdf ponomarenko, v.s. and maliarets, l.m. (2009). the analysis of data in studies of socio-economic systems: monograph kharkiv, ukraine, inzhek publishing house, 432 p. senichkina, o.e. (2014). detection of effectiveness factors impact on innovative activity of industrial enterprises. scientific and production journal “innovative economy», vol. 51 issue 2, p. 71-76. екатерина коледина исследование уровня инновационного развития машиностроительных предприятий украины в харьковской области аннотация. в современном мире развития науки и новых технологий перед всеми странами, включая украину, стоит задача переориентации на инновационный путь развития. уровень инновационности государства зависит от развития предприятий в этом направлении, поскольку именно промышленные предприятия способны стимулировать инновационный прогресс и выступают мультипликатором других отраслей. поэтому целесообразным является техническое перевооружение промышленности страны и поддержка именно наукоемких отраслей производства. в связи с этим цель данной работы заключается в исследовании и оценке влияния показателей инновационной деятельности промышленных предприятий на уровень их инновационного развития. для достижения поставленной цели объектами исследования стали показатели инновационной деятельности ведущих машиностроительных предприятий украины в харьковской области. данные предприятия являются инновационно активными в харьковском регионе по показателям своей деятельности. для анализа были выбраны следующие показатели инновационной деятельности предприятий: объем реализованной инновационной продукции; расходы на инновации; наукоемкость инновационной продукции; доля исследуемых предприятий в общем объеме реализованной продукции по области; количество новых технологических процессов; количество новых инновационных видов продукции. избранные показатели являются важными для предприятия с точки зрения инновационной деятельности и при изменении оказывают существенное влияние на его развитие и стабильность. методика. для исследования уровня инновационного развития машиностроительных предприятий украины в харьковской области нами было предложено метод таксономического анализа, алгоритм которого состоит из следующих семи этапов: 1) формирование матрицы исходных данных; 2) стандартизация исходных данных; 3) дифференциация признаков на стимуляторы и дестимуляторы; baltic journal of economic studies 61 vol. 1, no. 2, 2015 4) построение эталона; 5) определение расстояния между объектами и эталоном; 6) расчет показателя уровня развития; 7) составление рейтинга предприятий по уровню инновационного развития. результаты. результаты проведенного таксономического анализа отдельных предприятий машиностроения харьковской области (украина) показали, что показатель уровня развития на исследуемых предприятиях колеблется в пределах 0,524-0,878. полученный результат свидетельствует о том, что хотя предприятия и декларируют ориентацию на инновационное развитие, не все из ряда рассмотренных предприятий действительно являются инновационно активными по всем показателям. однако большинство из них все же имеeт значение таксономического показателя, близкого к единице, что говорит об их ориентации на путь инновационного развития. значение/оригинальность. полученные в результате расчета и анализа данные способствуют улучшению понимания взаимосвязи между показателями инновационной деятельности предприятий и уровнем их инновационного развития. это позволит предприятиям в дальнейшем корректировать свою инновационную деятельность в зависимости от сложившейся ситуации и принимать эффективные управленческие решения, ориентированные на путь инновационного развития. baltic journal of economic studies 203 vol. 4, no. 3, 2018 corresponding author: 1 department of innovative entrepreneurship and investment activity, zhytomyr national agroecological university. e-mail: mfplotnikova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-203-210 green tourism development in smart communities maria plotnikova1 zhytomyr national agroecological university, ukraine abstract. the purpose of the study is to substantiate factors and mechanisms of development of green tourism and its consequences. methodology. the methodological basis of the study is the systematic synergistic approach to the study of socio-economic phenomena in rural areas under the influence of macroeconomic factors and local initiatives to increase their socio-economic potential through the practice of green tourism. the research used such methods as analysis and synthesis, comparison, and generalization. historical and logical methods of scientific knowledge, expert evaluations, graphic, and averages are used. the abstract-logical method of research allowed, through theoretical generalizations, to determine the research tasks, to formulate the working hypothesis and conclusions. a survey was conducted on 800 rural residents aged 18-72, of which 56% were women and 44% were men from 6 regions of ukraine, among which 20% were inhabitants of ecological and tribal settlements. the participants in the survey were persons under 35 years of age (26% of their total number), persons 35 to 55 years old (accounted for 47%), and 55 years and older (27%). respondents having higher education were 28%, incomplete higher – 6%, secondary special – 30%, secondary – 33%, others – 3%. respondents in the social sphere accounted for 30%, agriculture – 26%, pensioners – 23%, forestry – 3%, unemployed persons – 18%, which ensured the representativeness of the sample. the study period covered the years of 2013–2017. results. as a result of the study, it was established that the development of green tourism is the basis of rational nature management and increasing the competitiveness of the regions through the formation of their investment and socio-environmental attractiveness. the subject of the study is a set of institutional, theoretical-methodological, methodological, and applied problems of the development of green tourism. the conditions and retrospective of tourism development are outlined, among which the priority is to increase the socio-economic activity of the territories with minimal investments of budgets of all levels and a high level of return on investments. the basic problems of the establishment of green (ecological tourism) are identified. the basic ones are the inadequacy of the quality and range of services provided at their prices, as well as the low level of professionalism of the persons providing tourist services. the factors that determine the activation of green tourism in ukraine are determined. of these, the development of generic settlements as catalysts of social change in the territory is decisive. public organizations as institutions of social importance are the triggers of the activity. practical implications. the practical significance of the research is to deliver a strategy for the development of green tourism in the united territorial communities. they will be able to make proposals for the legislative regulation of the of urban youth transfer to rural areas. youth that will invest in rural areas and is ready to start their business. value/originality. the uniqueness of the study is to present the experience of rural areas through the mechanism of family homestead, which provides for the provision of legislative rights to every citizen of ukraine, if they wish to receive 1 hectare of land for the construction of a family homestead for lifetime use, free of charge, without the right to sell, with the right to transfer only by inheritance. key words: green tourism, family homestead, rural development, smart-community, united territorial communities. jel classification: d83, o10, r28, q01, q18 1. introduction the dynamic nature of the global socio-economic system, the globalization of phenomena and processes of the world community, and the decentralization of power in ukraine dictate fundamentally new qualitative requirements for the development of territorial communities, in particular, in rural areas. tourist activity is an area that reveals significant opportunities for taking into account the unique characteristics of the territory with minimal budget financing compared to other sectors of the economy. the purpose of the study is to substantiate the factors, mechanisms of development of green tourism, and baltic journal of economic studies 204 vol. 4, no. 3, 2018 its consequences for the development of rural areas. in connection with the chosen purpose, the following tasks are defined: 1) to study the historical and cultural background of the development of green tourism; 2) to substantiate the principles of management of green tourism in the conditions of the united territorial communities; 3) simulate the prospects for the development of green tourism in rural areas. the lobbying of own interests from the side of big business, including in the tourism sector at the legislative level, from the point of view of organizing and stimulating activities, etc., reduces the possibilities of meeting the needs of the inhabitants of the territorial communities, increases asymmetries and disproportions to the development of society, is one of the reasons for the migration from rural areas of ukraine. “establishment” of a person in the territory in the case with housing, employment (self-employment), cultural and spiritual development, access to natural resources in the unlimited long-term perspective at places of residence is the basis of society’s development. creative approaches allow developing the local economy, taking into account the unique resources of each territory. an important role, in this case, belongs to green tourism, which combines the practice of children’s, family, cultural-cognitive, health-improving, sport, rural, adventure, amateur, volunteer tourism. the authors consider green tourism and its organization as a mechanism for rational use of ecosystems and increase the competitiveness of regions by ensuring their attractiveness, providing recreational, recreational and tourist services (zinchenko, 2016). a similar position is observed by m. benner (benner, 2017), ch. machado, l. esther (machado, 2017). researchers focus their attention on hierarchy, selfdevelopment of social, the causes of their emergence and management (beck, 1995; lalu, 2016). ethnic, national, regional features of tourism and sustainable development are an active subject of research (nizic, 2017; lupu, 2016). a special place is occupied by resource-saving technologies, waste-free livelihoods as the basis for well-being both locally and nationally ( jaszczak, 2017). tourism as an industry determines not only the economic component but also the socio-cultural, educational, and ideological components of development, and implements the multiplier effect in related industries (dafuleya, 2017; reyes, 2017) has a great potential in the domestic market of ukraine. inconsistency in prices, infrastructure development, low quality and a small range of tourist services, insufficient level of staff, excessive man-made load, insufficient level of culture of visitors to tourist facilities (bednarska, 2017; leonidova, 2017) limits the ability to ensure the efficient development of the industry. the results of the research are used in the educational process of the zhytomyr national agroecological university and in the practice of management of territorial communities. 2. the theoretical basis of green tourism the need to intensify domestic tourism through the formation of demand for hotel and restaurant services, taking into account local specifics and the development of family business, is the basis of the local economy, which contributes to the restoration of infrastructure, is wide in price range (from low-budget to elite class), diverse in its specialization and business direction, inclusive in its essence, is a mechanism for popularizing the country on the world stage. the ability to combine social entrepreneurship with volunteering, recreation, education, health improvement, and other activities expands the potential range of services. this is most fully expressed in the practice of green rural tourism (table 1). according to the world tourism organization, green tourism accounts for 7-20% of the total tourist services. the largest are revenues from the tourism industry of the united states, france, spain, the united kingdom, table 1 the spectrum of related activities and alternative services in green tourism scope of action activity ag ri cu ltu ra l a nd n on -a gr ic ul tu ra l pr od uc tio n 1) production of agricultural products as a final product and raw materials for other types of production – growing vegetables, fruits, berries, herbs, spices, nuts, mushrooms, medicinal and tea plants, sugar substitutes, cereals, ornamental plants, seeds and seedlings, including rare plant species; greenhouse economy, including for year-round growing of vegetables, greens, flowers; production of biohumus, worms, biocompost, soil mixtures, peat and other elements for the rebirth and growth of soil fertility; cultivation of microalgae (spirulina, chlorella); growing and keeping domestic and wildlife, including for the purpose of obtaining food (milk, eggs, wool, honey and other bee products), for the purpose of pollination as a means of transport, the protection of areas, the control of pests and diseases of plants, animals, humans, as decorative, recreational and health (apitherapy, hippotherapy, etc.) appointment, extension cooperation with reserves, preserves, zoos, including fish farming, breeding of crayfish, beekeeping, breeding of osmium, bumblebee (pollination of plants in greenhouses); 2) harvesting wild cherries, including medicinal plants, mushrooms, berries, nuts, moss, maple and birch sap, etc.; 3) the collection of valuable minerals, healing clays, mud, sapropel; 4) breeding elite breeds of horses, dogs, cats and other animals, growing hedgehogs, bats; 5) growing and harvesting of forests. baltic journal of economic studies 205 vol. 4, no. 3, 2018 ha nd ic ra ft, c ra fts , w or k, se rv ic es , w hi ch a re re al iz ed th ro ug h pr im ar y ac tiv ity (c ol le ct io n an d pr od uc tio n fr om d ire ct u se o f n at ur al re so ur ce s) 1) sphere of services (gardening and gardening, educational and consulting activities in this area, trade); 2) production from natural raw materials (development of folk crafts and crafts, including courses, master classes, outdoors lessons from warping, carving on wood, bones, pottery art, tailoring, costumes, art painting, joinery and carpentry, blacksmithing , chasing, casting, stone processing, weaving, publishing books, magazines, newspapers); 3) the production of flour, oils, the sale of environmental products and rare products; 4) prophylactic and regenerative medicine, naturopathy, including the departure to health centres, practice of teaching (phytotherapy, bioenergetics, yogic practices, self-improvement practices, naturopathy, valeology, recreational rest, therapeutic exercises, usually healing baths, mud, water, clay, quenching, sweating, massages, psychotherapy, restoration of vision, restoration of health in general, elimination of dependencies, fears, treatment of insects – bees, etc.); 5) organization of sports activities, competitions, sports tourism (sports sections, schools, swimming pools, courts, sports grounds, equestrian sport, cycling, climbing, kayaking and canoeing, skiing grounds, skating rink, martial arts club, including the savior and battle hawk, hiking, flight clubs, fitness centres, sports bars, children’s camps). hi gh v al ue -a dd ed a ct iv iti es primary: 1) production of food from agricultural raw materials of vegetable origin (processing, preservation, drying, freezing and preserving of food products, making juices or compotes or fruit drinks, kvass and other non-alcoholic and low alcohol drinks, baking of other products, in particular, cookies, making of natural sweets , macaroni products, production of various types of cold-pressed oil, essential oils of nuts and seeds, natural flavours, perfumes, flavours, production of dried fruits, making of dry breakfasts, walnut mixes, mussels, snacks and semi-finished products, in particular, soup mixes, dumplings, etc., tea production, medical fees, production of products based on sprouted seeds, etc.); 2) growing plants and making them of threads and tissues (nettles, flax, cotton); 3) production of food from agricultural raw materials of animal origin (production of milk and lactic acid products, including hard and soft cheeses, sour cream, whey, vitamin mixtures, medicinal preparations, bee products); 4) manufacturing of products from raw material of animal origin (wool collection and manufacture of knitted and woven products); 5) manufacture of cosmetic and medicinal preparations from valuable minerals, medical clay, mud, sapropel; 6) harvesting of clean water, air from natural sources. secondary: 1) activities in the field of green tourism, hotel and restaurant industry, catering (dining, dining, food, mill, tea, etc.), medicine (in particular, activities in the field of recovery, prevention and health care); 2) the production of agricultural equipment and repairs, including horns varra and logs, household items and interior (utensils, furniture, linen, clothes, decoration items); 3) activities in the field of information technology (programmers, system administrators, the creation of games, educational programs video clips, films and cartoons, musical works, translation of technical texts, books in foreign languages, the creation of electronic versions of libraries, poetry and art collections, freelance – remote work on the internet, development and promotion of sites, 3d-modelling, video graphics, photo-video processing, management of inter-shop); 4) activities in the field of creative technologies (designers, pr-technologies, art and design works, including architectural, design furniture, houses, cars, etc.); creation of training courses; 5) installation of alternative energy sources, in particular, solar power plants; 6) creative and intellectual activity (creative activity of artists, musicians, poets, artists, writers, philosophers, organization of outdoor concerts, corporate events, holidays, organization of creative workshops, studios, festivals, theatres). so ci al e nt re pr en eu rs hi p social entrepreneurship includes the organization of small industries (in particular, the manufacture of building materials, woodworking, including the manufacture of joiner’s products, furniture, etc., the manufacture of solar, wind turbine bioreactors and other power plants, their installation, adjustment and on-site launch, the production of tools and products of restored land use , production of soap, detergents, toothpaste, cosmetics on the basis of natural ingredients, microorganisms, manufacture of boats, natural fabrics, garment production, knitting tapestries, carpets, blankets, electronic products manufacturing, automatics for ecological houses, greenhouses, cellars, warehouses, development and maintenance of environmentally friendly modes of transport, collection of bicycles, electric cars, trailers , environmental auto washing, ceramic production, small flour production, cereals, oils, semi-finished products, bakery, processing of agricultural products, manufacturing of environmental packaging, 3d-internet production, collection of light aircraft, manufacturing of sport inventory, environmental paints, protective coatings from wax, resins, natural minerals, biocomponents, production of medical products – resinous oils, oils, herbs, bee products, needles, fuel briquettes, pellets, peat, straw and other products from organic, glass blowing, glass production, production of utensils, ceramic goods from clay, stone, production of natural wallpaper, parquet, boards, furniture, mattresses, pillows of vegetable and animal raw materials, sewing of the author g clothes made of natural fabrics, manufacturing of sports and tourist equipment, goods for recreation and rest, manufacturing of doors, windows, greenhouses, masonry stoves, fireplaces, assembly of electrical products, production of building materials, blocks, mixes, roofing materials, decorative stone, tiles, waste processing). the most common works and services are: 1) education and upbringing, including foster children (shchetinin schools, elite schools, family schools, noosphere schools, schools of creativity, technical education colleges, universities of distant higher education, small private universities); 2) scientific activities, including scientific research in the field of agriculture, nature, ecology, in the field of biotechnology development, environmentally friendly technologies, development of alternative energy sources, dissemination of special knowledge, consultations, lectures; 3) the organization and training of construction, as well as the type of green tourism (development and erection of houses, facilities and infrastructure, including wells, wells, ponds, fences, communications, lounges, arbors, etc.); 4) organization of tourism activities (green tourism, health tourism, organization of recreation, festivals, take-offs, sports tourism – horseback riding, kayaking, bicycles, scuba diving, hang gliding, gliding, parachute jumping, kiteging, snowboarding, skiing, etc.); 5) transportation (transportation of residents and guests of ecological settlements both in the middle and outside of the settlement, cargo transportation, special transport services for land, construction works, clearing of roads from snow, courier services, etc.); 6) consumer co-operation (joint purchases of products, materials, goods, services from producers or wholesalers). end of table 1 baltic journal of economic studies 206 vol. 4, no. 3, 2018 and china. ukraine occupies 69th in this ranking (at the moment, the potential of ukraine is 150 thousand participants, although cultural figures have been used since ancient times) (bukowska, 2017). rural tourism in europe began to develop from the middle of the nineteenth century and, according to the estimates of the european federation of farmer and rural tourism (euro gites), there are currently 2 million beds. the french government was the first in the eu to initiate the development of green tourism in the early 1950s as a mechanism for alternative employment for farmers traveling to the cities. at present, the industry brings 1 billion usd to the country’s budget and 3 billion usd – to the budgets of the regions. the activities of public organizations registered in the territory can become a catalyst for change and an activation component that involves external investment, which, unlike grant assistance, does not terminate its activities upon completion of funding. the priority character of the development of the services sector due to their high level of profitability and a quick payback level allows confirming the need for their activation in rural areas. the low level of budget expenditures, the organizational and legal format for providing activities, the possibility of introducing innovative and creative technologies in life and management, and a variety of conditions within the regions create a prospective basis for the spread of practice in all the communities of the country. green ecological tourism as a mechanism of socio-economic activation of rural development is approved on the part of governmental structures, public organizations and the world community, while the population of rural areas of ukraine mainly treats it with disbelief due to unresolved issues on the side of the current legislation and the absence of an appropriate culture on the part of the territorial community as socio-economic unit that accepts tourists as a hub. taking into account the experience of the usa (in 1982, the law on development of agrarian, farmer and ecological tourism was adopted), the eu (multifaceted nature of rural tourism and the principles of developing tourist clusters as a set of micro-businesses), the republic of belarus (since 2006, the presidential decree “on measures on the development of agroecotourism in the republic of belarus” and state development programs of agroholding), it is advisable for ukraine to form a favourable legal field for tourism through the definition of its nature, types, range of services, their status, and professional training. in ukraine, rural tourism as a form of recreation in rural areas is regulated by the laws of ukraine “on tourism” (on tourism, 1995), “on personal peasant economy” (on personal, 2003). amendments to the last, adopted in may 2017, green tourism is understood as recreation in the area that is attractive for its integrity, and for the provision of services, registration of a business entity is not required for the provision of services to no more than 10 persons who were not provided with special services (article 1 of the law of ukraine “on personal peasant economy”). as rural tourism, we have in mind paid or free services for accommodation (accommodation), food and leisure, and activities related to the use of property, familiarity with local customs and traditions, hospitality. farm tourism, in this case, includes the obligatory hiring of housing and monitoring of the work of farms for the production of plant growing and livestock for possible participation in these processes, which provides an active form of rest. energy-information exchange of the territory with the guests allows preserving the existing historical and cultural heritage and multiplying the potential of the territory through various forms of communication. the attractiveness of the natural environment, the ability to interact with it is particularly popular among the inhabitants of the metropolis. this format of leisure time is favoured by 35% of eu residents, of which 20% combine it with traveling (bukowska, 2017). from the position of management of such activities within the administrative-territorial formation are as follows (figure 1). the development of rural areas in the world for a long time is focused on the production of agricultural products, intensive use of land. the most common approaches to the interpretation of the concept of “rural development” are reflected in the table. their domination became the basis of agrarian policy. the search for mechanisms for the revival of rural areas on the basis of harmonious sustainable development, selfsufficiency of socio-economic and ecological activities is currently relevant within the global system of human development (nitsenko, 2017). at present, family homesteads as a local format of green tourism development were visited by tourists from the usa, canada, poland, lithuania, estonia, the czech republic, the netherlands, sweden, turkey, georgia, belarus, and all parts of ukraine (table 2). table 2 the dynamics of income from family homesteads as a result of the practice of green tourism and investment activities in the territories indicators 2015 2016 2017 number of foreign investors, persons 1 3 14 amount of revenues from tourism activity and investments, thousand usd 6 20,2 90,5 family homesteads are a place of residence of the family, the main component of society. such a site implies the presence of a lovingly built house, planted gentwood, forest, garden city, a hedge of forest crops, arranged pond. the small homeland, the eternal roots that bind the earth, helps to feel connected with everything in the universe: with god, nature, planets and stars, ancestors, and other people. thanks to these baltic journal of economic studies 207 vol. 4, no. 3, 2018 connections, a person is happy, healthy, holistic, receives support, realizes his purpose. a land plot with objects on it is indivisible and is provided to adult citizens of ukraine free of charge, in lifetime inherited use and possession without the right to sell, with the right to transfer only to inheritance. 3. modelling of green tourism processes in rural areas the tourist does not visit just one home or one family. he/her may meet the whole community, use the infrastructure, taste local good, feel the neighbourly relations, use related services, etc. settlement as a holistic system-synergy complex creates a multiplier effect from integration and cooperation, creating an appropriate environment (knowledge economy, economics of emotions, etc.), which, unlike competitive conditions, ensures sustainable development as a result of “powerbusiness-community” cooperation, which can join science and education in virtue of the multidimensional nature of development (figure 2). the determination of the magnitude of the synergistic effect from the implementation of the multifunctional approach is proposed to be evaluated depending on the rate of change and the consequences (1): ( ) ( )[ ] ( ) ( ) ( )[ ]tptbtstkk t tk iii ++=∂ ∂ max (1) si(t) – social effect (level of employment and social security) at the time t; bi(t) – ecological effect (level of environmental safety) at the time t; pi(t) – economic effect (level of profitability) at the time t; kmax – maximum capacity of the environment; k(t) – the degree of influence on the size of the potential of the medium (has a negative value in the case of a decrease, positive – increase) (plotnikova, 2017). there are more than 100 family homesteads established in ukraine. all of them are at different stages of formation. their inhabitants are mostly young people with higher education, who provide themselves with clean food, lead a healthy lifestyle, reveal their creative potential. the average age of settlers is 35 ± 5 years (meulen, 2013; vasiliev, 2017; vidickiene, 2013). the synergistic effect is achieved as a result of the interaction of “environmental resources – personal skills – infrastructure support” in harmony with the laws of the universe without additional funding from the side of the state (christian, 2003; gilman, 2013). the main type of income is the practice of multifunctional green tourism. investments in rural areas of individuals through the family homestead mechanism are a way of investing in the revival of territories when the investor does not demand the return of deposits and receives income and profits on them. the inclusion of each member of the community and society activates and multiplies the natural resource potential. the management of family settlements is carried out on the principles of participatory management. an example of practical implementation of the approach is the experience of the nesolon village council of novohrad-volynskyi district of zhytomyr region. the realization of functions of its activity is through the creation of self-sufficient and self-restoring ecological system, educational and cultural activity, development of personal characteristics of a person, provision of food, energy, cultural, economic security. principles of management of green tourism in the conditions of a territorial community subsidiarity – the mechanism of governance is formed from the bottom up: all problems that can be effectively resolved locally are within the competence of the municipal authorities as the closest to the population. fundraising – the process of attracting funds and other resources necessary for the implementation of a particular project or its activities, in particular, human, material, informational, which structure, for example, a united territorial community cannot provide by itself. outsourcing – the transfer by the administration some of its functions to meet the needs of the population to the other party, in particular, through the creation of interterritorial or inter-farm education serving the cooperative. lean management, re-engineering, management by goals, management by results, project management, e-governance, benchmarking. figure 1. principles of management of green tourism in the conditions of a united territorial community source: formed on the basis of (fedorchuk, 2012) baltic journal of economic studies 208 vol. 4, no. 3, 2018 the means of ensuring the development of settlers is artisanal, recreational, educational, cultural, recreational, research and development activities. there is a positive tendency to increase the number of settlers, their desire to give birth to children and find multifunctional solutions to the challenges of rural development and national renaissance. the current practice in ukraine has shown that the arrangement of family homesteads and providing everything necessary for normal life involves investing not less than 300 thousand uah for 10 years, planting green fences, non-fruit trees of at least 30% of the area, as well as creating a self-sufficient and harmonious ecosystem, requiring minimal human intervention for its functioning. if you accept the average area of the village 250 hectares allocated for the family homestead, then for 10 years the investments of private individuals in the family homestead will amount to 75 million uah, ecologically clean products will be grown to the amount of 2.5 million uah (table 3). the revival of 600 settlements removed from the map of ukraine during the years of independence, and 600 villages that are on the brink of extinction, will provide employment for 100 thousand middle-aged workers, the arrival of private investment in the amount of 9 billion uah, the production of environmentally friendly products in the amount of 3 billion uah. in these settlements, 100-150 thousand hectares of forest plantations will be planted and 3 billion uah saved budget allocations for soil protection measures (vasiliev, 2014). rural employment growth will cause growth in the service sector, the establishment of service cooperatives, new productions, including high-tech, preservation and restoration of the functioning of cultural institutions, kindergartens and other social and industrial facilities. the measures described will promote the development of the economy of family budgets, physical health of the people, reducing the burden on the infrastructure of cities, the development of new settlements and the creation of new jobs. adoption and implementation of the provisions of the law of ukraine “on family estates and settlements” will ensure the irreversible development of the ukrainian family at a qualitatively new moral and psychological level that will have strategic positive consequences. the prerogative of the ex pe ri en ce , i nf or m at io n, o pp or tu ni tie s, re so ur ce s, te ch no lo gy d ev el op m en t, re so ur ce a va ila bi lit y of s ub je ct s, op tim iz at io n of re gu la to ry a nd le ga l re gu la tio n timeevolution downturn evolution figure 2. development of the socio-economic system of the united territorial community as a result of green tourism in family homesteads source: formed on the basis of (prysiazhniuk, 2018) table 3 estimation of annual results of the development of local settlements through the implementation of the idea of family homestead indicators as per 1 kindergarten, thousand uah together, billion uah 1) investments of individuals in the arrangement of tribal estates 30 9 2) production of clean agricultural products 25 7,5 3) savings of budget funds for amelioration works 20 3 4) provision of employment, including persons involved, thousand persons 100 baltic journal of economic studies 209 vol. 4, no. 3, 2018 countryside is realized in family estates: preservation of family values, development of national culture, history, traditions, revival and multiplication of natural resource potential of the territory. the settlers conduct joint work on separate garbage collection, an increase of soil fertility, purification of water and air; the introduction of noosphere education on the principle of “health of the earth is human health.” the successful practice of green tourism in rural areas through the practice of implementing the idea of a family homestead involves the formation of a strategy and program for the development of the tourism industry in the united territorial community, which includes the following provisions: 1) statutory and legal definition of nature of the family homestead as an independent subject of economic activity and life, among its elements is forest with berries and mushrooms, crater garden, pondaquarium, beekeeping, active use of renewable energy sources, practice of recreation and healing, including at the expense of techniques of aromatherapy, apitherapy, hippotherapy and other elements that are harmoniously incorporated into the natural environment of the area; 2) creation of “tourist chains” – interconnected – routes and systems between separate farmsteads of a settlement with sufficiently developed infrastructure, in particular, road economy. 4. conclusions 1. the existing problems in the development of rural areas identified the need to seek innovative approaches to ensure their socio-environmental sustainability and economic development. the practice of green tourism allows providing food and economic safety of the village family, solving the housing and demographic problem in the state through the implementation of the idea of family homestead without additional funding from the budgets of all levels. given the rapid return on investments and the wide range of services that can be provided, the development of green tourism has prospects for its development throughout ukraine. 2. the multifunctional nature of the development of rural areas through the family homestead mechanism allows the development of both agricultural and nonagricultural activities expanding the tools and practices of green and rural tourism, including through volunteer and environmental protection activities, educational and production practices, to which are actively involved by foreign citizens. 3. the development of green tourism and tribal settlements on a country scale will allow employment of 100 thousand people annually, will increase the level of food and economic security of households, and will promote the revival of the network of settlements in rural areas. the prospects for further research are aimed at developing mechanisms for ensuring multi-functional rural development practices and corresponding planning of rural areas through the family homestead mechanism. references: beck d.e., cowan ch.c. 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(in ukrainian) baltic journal of economic studies 380 vol. 4, no. 4, 2018 corresponding author: 1 ural state university of economics, russian federation. e-mail: jadransky@yandex.ru 2 v.i. vernadsky crimean federal university, russian federation. e-mail: sociochigrin@mail.ru 3 ural state university of economics, russian federation. e-mail: lena22021977@yandex.ru doi: https://doi.org/10.30525/2256-0742/2018-4-4-380-386 the economic, social, and spiritual efficiency of the economic system: approaches to assessment dmitrii yadranskii1, viktor chigrin2, elena chumak3 abstract. the article considers the categories of social, economic, and spiritual efficiency. the emphasis is made on the crisis of modern economic processes. the subject of the article is the contradictions arising in the process of increasing economic efficiency. existing methodological approaches to the study of these categories are critically reviewed. the main goal of the article is to create the author’s concept of overcoming the contradictions between the growth of economic and social efficiency in the conditions of modern economic organizations. the concept is based on the conflict paradigm. the methodological basis of the study consists of the concepts of foreign and domestic researchers dealing with the effectiveness of social reproduction. the main theoretical concept is neo-marxism. the purpose of the article is to determine the methodology for reconciling contradictions arising in the process of managing the economic efficiency of an economic system. the thesis of p. drucker on the inevitability of aggravating the economic crisis is considered as the cause of the conflict. in combination with the totality of such general scientific and special methods of cognition as dialectic, systemic, descriptive, theoretical modelling, the article reveals the main contradictions in the assessment of the growth of the economic and social efficiency of the economic system. the main conclusion of the article is the need to abandon the use of singlefactor methods for evaluating the effectiveness of the functioning of economic systems. the main problem is the fact that the growth of economic efficiency most often has a non-linear effect on the change in social and spiritual efficiency. therefore, it is necessary to use at the same time changes in all three specified directions of efficiency, so one can determine the general vector of changes in the economic system. as a final conclusion, it was proposed to apply the efficiency rule proposed by pareto to this assessment, according to which the system state is optimal when the value of each particular criterion describing the system state cannot be changed without deteriorating other system indicators. the article presents a table, in which the contradictory changes that are the result of a number of managerial influences are demonstrated for economic and social efficiency. a logical formula for determining the effectiveness of changes in the efficiency of the economic system, based on the indices of changes in individual quantitative indicators, is proposed. criteria are defined that make it possible to quantify each of the blocks determining efficiency: economic, social, and spiritual. an assessment of possible indicators at the macroeconomic and microeconomic level is given. the article formulates a model for establishing the balance (optimum) of individual indicators of the total efficiency of the economic system. this model is based on the balance of economic interests of employers (owners) and social interests of workers, coordinated through culture, which is defined as one of the priorities of spirituality. a formula is proposed that enables the analytical establishment of the optimal (balance) state of the efficiency of the economic system. on the basis of the conducted research, it becomes possible to talk about a fair (reasonable) distribution of value added. in fact, at the theoretical level, an economic model for managing the socio-economic efficiency of the economic system is proposed, which creates the prerequisites for the effective management of the socioeconomic development of an organization in a permanent crisis environment. key words: efficiency, factor, productivity, economic, social, balance of interests, contradictions. jel classification: р47, с52 baltic journal of economic studies 381 vol. 4, no. 4, 2018 1. introduction the process of development of social reproduction at the present stage is constantly confronted with inextricably linked and, at the same time, contradictory processes. on the one hand, there is the need to constantly increase labour productivity and, on the other, the need to stimulate consumption. the relevance of the topic is related to the fact that despite the existing research results, the majority of business systems consider economic efficiency as the main indicator of the effectiveness of an economic entity. such an approach in modern conditions invariably leads to a violation of either the social efficiency of the system itself (for example, a decrease in the social wellbeing of workers), or a decrease in the social efficiency of systems of another level (the release of workers leads to an increase in unemployment, a decrease in aggregate demand, etc.). this said, the growth of economic efficiency is a task related to the goals of social development, which is why it is the most important task of any economic system. the aforesaid, in our opinion, gives rise to a scientific problem to be grasped. the novelty of the topic is that in the conditions of the current crisis economy, the categories “economic”, “social”, and “spiritual efficiency” were not considered in unity. at the beginning of theorizing, we suggest specifying a thesaurus. in particular, efficiency is one of the basic characteristics of the economy and an indicator of its success. starting with the works of k. marx, “the degree of wealth is not measured by the absolute value of the product but by the relative value of the surplus product” (marx, 1973). in other words, efficiency is the ratio of results to costs incurred to achieve them (gavrilishin, 2000). at the same time, modern economics often uses the term productivity as a final indicator of system efficiency. in accordance with the definition of the modern economic dictionary, productivity is a quantity that characterizes the amount of a useful product obtained from a certain source (rajzberg, 2006). however, in relation to economic systems, these concepts, in our opinion, are almost identical. thus, the great soviet encyclopaedia, speaking of economic efficiency, examines the relationship between the results of production – production and material services, on the one hand, and labour costs and means of production – on the other (bolshaja sovetskaja entsiklopedija, 1969). it should be noted that in most modern economic sources, the subject of obtaining an increase in productivity is not specified. considering this process on the example of the transformation of marxism, it can be stated that k. marx noted: “the value of labourpower is determined by the value of the necessaries of life habitually required by the average labourer. the quantity of these necessaries is known at any given epoch of a given society, and can therefore be treated as a constant magnitude” (marx, 1973). in other words, an increase in employee income due to an increase in his productivity was not considered. the representative of neo-marxism, jürgen habermas, has already seen this problem somewhat differently. in his opinion: “the role of employee loses its debilitating proletarian features with the continuous rise in the standard of living, however differentiated by stratification” (habermas, 1985). considering this phrase in the context of his article, it can be stated that it is about the fact that part of the increase in living standards occurs due to an increase in the part of the value added in the employee’s wages. this very situation is often associated with an increase in social efficiency (in relation to an employee). at the same time, with respect to social efficiency in relation to the organization as a whole, the growth of employee income is rarely considered. however, the relevance of p. drucker’s thesis in 2002 did not diminish in 16 years: “it is futile, for instance, to try to ignore the changes and to pretend that tomorrow will be like yesterday, only more so. this, however, is the position that existing institutions tend to adopt in such a period – businesses as well as nonbusinesses” (drucker, 2000). 2. the problem statement of research the above processes form a special relevance of conducting such a study for the purpose of clarifying the nature of the relationship between social, economic, and spiritual efficiency. achieving the purpose requires the simultaneous implementation of a number of tasks, in particular: study the transformation of scientific ideas about the category of “efficiency” in the modern economy; analyse the relationship of social and economic effect; formulate a mechanism for determining the equilibrium parameters of economic and social efficiency. in this regard, we consider it expedient to get ahead of the logical mechanism for reconciling the contradictions between the growth of economic productivity and changes in social and spiritual efficiency in relation to the labour process, taking into account the predicted permanent economic crisis. 3. social and economic effect: unity and contradictions developing the idea of the permanence of the economic crisis, a modern worker, acting as a reproductive resource, also acts as an object of the economy. in the course of such activities, the economic effect is directly opposed to the social effect. at the same time, the russian author l. isaeva considers the social effect as a function of using the economic effect. according to her, “the increase in the economic effect directly depends on the social effect” (isaeva, 2012). thus, we come to the idea of the mutual transition of baltic journal of economic studies 382 vol. 4, no. 4, 2018 the economic effect into the social one and vice versa. herewith, in the first approximation, cooperation (readiness for cooperation) can be considered a sign of a social effect, while the conflict is a sign of an economic effect (as a factor in the aggravation of contradictions). nevertheless, as practice shows, these categories in relation to the labour process are also capable of mutual transformation. considering the relations arising in the labour process, b. genkin identifies two main types of human interaction: competition and cooperation (genkin, 2003). at the same time, these relations can be modified depending on the situation. in particular, in a normal production process, the relationship between workers is of cooperation nature, and in the process of production changes (increased productivity, reduction) is transformed into the competition. under the conditions of replacing manual labour with an automated one, on the one hand, the amount of manual labour of workers decreases (cooperation with the administration), which transforms into competition not only among workers, but also between workers and equipment (the cost of human labour versus depreciation costs). in the context of interaction between the employee and the employer (shareholder), in accordance with the theory of conflict of k. marx, the relationship is based on conflict (value added distribution), but in a crisis, cooperation may arise in the process of preserving jobs (business). in our opinion, the relationship between economic and social efficiency is objective, however, its character depends on the vector of the proposed changes and on the state of spirituality in a particular society. so, as a result of a unilateral increase in economic efficiency, the social effect of labour activity will worsen in two cases: the employee acts as an object of immediate savings (he/she is laid off or his/her wages are reduced, his/ her productivity is increased while the level of income remains the same), living labour acts as an alternative to material resources (the use of which may be more economically viable). herewith, such an activity worsens both the social condition (well-being) of a particular subject of labour relations and the macro-social parameters of social reproduction (total employment, use of labour resources, etc.). in this context, the idea of b. salikhov looks interesting. he notes that the core of the modern socio-economic theory is property theory, and the theory of property transformation, which studies the laws of appropriation, serves as a tool for resolving contradictions between the ethics of a competitive market and the ethics of society (salikhov, 2006). in this vein, we are talking about the possibility of establishing the relationship between economic and social efficiency, based on the laws of appropriation. speaking about efficiency (both social and economic), we should recall the rule of efficiency proposed by v. pareto. according to this rule, the optimal state of the system is that the value of each particular criterion describing the state of the system cannot be improved without deteriorating the position of other elements (blyumin, 1962). consequently, based on the logic of optimal equilibria, we can assume the possibility of describing an equilibriumoptimal model of social and economic efficiency based on modern appropriation laws. since social efficiency is the correspondence of the results of economic activities to the basic social needs of society (pokropivnii, 2001), it is possible to ascertain the effect of this balance on the efficiency of the entire social system. approaching the definition of the logic of equilibrium (balance) of antagonistic indicators characterizing the labour process, it is advisable to dwell on the essence of contradictions, which are displayed in table 1. consequently, any measures aimed at organizational changes in order to increase labour productivity cannot be considered as such unequivocally. we associate the latter with the fact that their social consequences may have a demotivating (or directly opposite) effect. thus, the growth of productivity, leading to an increase in value added, while worsening the social parameters of the organization does not lead to a general increase in the efficiency of the economic system. such a situation can be also considered in a macroeconomic context. thus, the introduction of new technology in production processes, being a significant factor in increasing productivity, which leads to a reduction in the production cycle. consequently, the intensity of labour increases, as well as, as a rule, there is an improvement in working conditions. however, on the one hand, there is a release of individual workers, and on the other, responsibility increases (the psychological burden of the operator). in other words: productive employment decreases at the macroeconomic level, and mental stress increases at the level of the worker. all of the above suggests that the overall efficiency of the economic system can be represented by the expression (1) ýô ýê ñîö äóõýô ýô ýô⇔ + + ≤ 1 (1) at the same time, it should be noted that for practical use of such logic, it is necessary to solve the problem of quantitative measurement of the proposed indicators. as parameters, we propose to use the indicators given in table 2. it is proposed to determine their quantitative value in the form of coefficients of the ratio of the base period of analysis to the actual one. in table 2, we selected indicators that, in our opinion, can have a quantitative expression, and accordingly presented in an index form can characterize the changes taking place. on this basis, we assume that in the case of a general increase in efficiency, the value of эф (1) should exceed 1. other indicators can also be used as alternative indicators while having an unambiguous quantitative assessment. baltic journal of economic studies 383 vol. 4, no. 4, 2018 table 1 the contradictory achievement of social and economic effect economic act economic effect social effect positive negative positive negative improving the level of education of workers the possibility of increasing labour productivity in the future; improving the quality of work; reducing the loss of working time (with the expansion of areas of responsibility). cost increase; loss of working time over the diversion of workers to education; weak predictability of the result. improving the image of the enterprise; increasing employee loyalty; improving the competitiveness of the organization. increasing the competitiveness of workers in the labour market; the growth of social expectations of the employee; the possibility of disclosure of trade secrets as a result of step out. reducing physical stress on workers salary reduction; staff reduction; labour productivity growth. costs for production modernization; the need to reassign (dismiss) workers; increase in depreciation costs. reducing risks associated with staff; the growth of internal competition of personnel; reducing employee fatigue. the growth of social tension in the team; the possibility of disclosure of trade secrets; the growth of the psychological burden on staff. improving the environmental situation reduction in the tax burden (fines); reduction in environmental restoration costs reduction in employee benefits for working conditions; possible expansion of the range due to recycled products. the cost of equipment and training of personnel; increase in production costs; the cost of staff development; organization of sales of by-products. reduction in the man-made burden on workers and residents; improving the image of the enterprise; improving the health of workers and the public. possible change in requirements for staff; possible increase in social tension due to changes in staff structure. improving working conditions reduction in the cost of social insurance (disability payments); reduction in the cost of compensation to staff; tax (fines) cuts. costs associated with changes in working conditions; costs of staff development; costs for maintaining improved working conditions. improving employee health; improving the image of the enterprise; reducing physical requirements for employees. decreased loyalty as a result of reduced social benefits; lower wages over the improved working conditions. organization of rest (food) of workers reducing disability benefits (gastrointestinal problems); reduction in the loss of working time (due to the precise regulation of time for rest and personal needs); increasing productivity. cost increase; the distraction of leadership to perform secondary tasks; organization and maintenance of the service system. improving the image of the enterprise; increase in employee loyalty; improving employee health; income growth is possible as a result of increased productivity. increased fatigue due to greater productivity; reducing loyalty due to a lack of understanding of advantages; decreased loyalty over the impression of increased control. rise of income increased productivity as a result of reduced staff turnover; growing purchasing power; possible increase in labour activity (innovations, etc.). cost increase; change in cost structure. increased employee interest; the influx of the most qualified and productive workers; improving the image of the organization. reduction in the motivational effect of the additional amount of money; increasing competition; the deterioration of the social environment as a result of possible reductions (caused by productivity growth); restrictionism is possible. increase in salary differentiation the growth of motivation and productivity; improving the efficiency of the use of payroll budget; possible savings on payments to unproductive workers. possible cost increase; there may be problems with trade unions (employees, including the judicial ones); possible increase in staff turnover. increased employee interest; the influx of the most payoriented workers; reducing the value component in the internal relations. increased number of conflicts in the staff; increased emotional stress; possible deterioration of the image of the organization. changing the social structure of the staff. increase in social satisfaction increase productivity by changing attitudes to work. increase in expenses; increasing complexity of the forms and methods of working with staff. image enhancement; increased staff loyalty; improving the social climate in the organization. lack of desire (mood) for change; increasing social demands and social expectations. baltic journal of economic studies 384 vol. 4, no. 4, 2018 according to the results of the theoretical analysis, it can be stated that social and economic effects have not only contradictions among themselves but also internal ambivalence. because of this, conducting a parametric (quantitative) analysis of these indicators is an important task of economics. 4. equilibrium parameters of economic and social efficiency since the quantitative measurement of indicators of economic efficiency in modern literature is sufficiently developed, it is advisable to pay attention to the identification of possible indicators of social efficiency. in this case, indicators that give an idea of the quantitative side of achieved social goals (social results) can serve as criteria. in this case, these indicators should be considered at two levels: micro and macro. at the micro level, such indicators can be the saving of working time (provided that employment and income security are preserved), improvement of working and living conditions, provision of additional social services, housing. at the macro level, social indicators include changes in the consumer price index, improvement of the environment, increased general safety of life, reducing unemployment, an increase in the birth rate, and an increase in the index of social well-being. we attribute the change in the level of income of workers to economic efficiency indicators. speaking about economic efficiency, it is necessary to pay attention to the principles of efficiency formulated by harrington emerson: precisely set goals; common sense; competent counsel; discipline; fair deal with staff; fast, reliable, complete, accurate, and constant accounting; despatching; standards and schedules; standardized conditions; standardized operations; standard instructions; efficiency reward (emerson, 1992). almost all of the above principles are related to the activities of the staff, their competence, common sense, remuneration (that is, the categories disclosed in the framework of assessing social and spiritual effectiveness). we consider possible to use the principles proposed by h. emerson for reconciling contradictions within the establishment of social and economic efficiency. “spiritual efficiency, being inextricably linked with the material basis and steadily expanding it, nevertheless, manifests its true essence in the area of the spirit, ..., and not in the material wealth surrounding it, although one does not deny the other, and the first is impossible without the second” (bokachev, 2000). in our opinion, the culture will occupy a special place in the system of spiritual efficiency. therefore, it can be assumed that contradictions in the system of social efficiency and economic productivity can be resolved in the process of cultural evolution, provided that they meet the criteria of spiritual efficiency. thus, we consider possible to formulate a model to establish a balance (optimum) for individual indicators of aggregate efficiency. the principal model of achieving a balance in the productivity of the production system aimed at maximizing profits and social efficiency criteria is shown in figure 1. in our opinion, the main limitation of achieving a balance of economic and social efficiency will be the fact that each specific subject of interaction, seeking to maximize its own interests, is not interested in maintaining the principles of balance. this rule is valid under the condition of ignoring the criteria of spiritual efficiency (first of all, culture). in this context, attention should be paid to the principle of establishing quantitative indicators of the optimum, which characterizes the optimal (equilibrium) state of the system being analysed. in our opinion, the basis of this balance may be the expression (2). ∆ ∆ ∆ ∆ c t r t ≡ , (2) where с – capitalized social effect; r – resulting indicator of economic activity; t – time during which this result was obtained. according to the results of the analysis, it is possible to formulate the main task of the analysis – to identify changes associated with the violation of the state of optimal balance (equilibrium) between the parameters of economic and social efficiency. moreover, such a deviation, in our opinion, is undesirable to any of the parties since this, in any case, will adversely affect the parameters of aggregate efficiency. table 2 indicators for quantitative estimation of the change in productivity № з/п economic effect social effect spiritual effect 1 return on investment working conditions labour discipline 2 labour intensity number of sick lists satisfaction with the organization 3 labour productivity professional development of employees (advancement) the number of undesirable actions of employees (by type of action) 4 gross income accident frequency rate opportunities for personal growth (number of participants in non-production activities and competitions) 5 production (labour) cycle duration continuity of personnel the number of decisions made based on employees’ recommendations baltic journal of economic studies 385 vol. 4, no. 4, 2018 5. conclusions thus, after evaluating the change in efficiency and determining the optimality level of these changes, it becomes possible to talk about a fair (reasonable) distribution of value added. in a down economy, it is possible to change the parameters of social and economic efficiency in a balanced manner without compromising the interests of one of the groups of participants in the reproduction process. in the framework of this paper, the logic for assessing the total efficiency of the economic system is proposed. the possibility of determining the balance of interests of subjects interested in increasing labour productivity and subjects focused on increasing its social efficiency is also considered. at the same time, any model should be based on the principle of evaluating a modern economic system by the criterion of aggregate efficiency gains. the use of separate criteria for solving these goals, in our opinion, not only does not correspond to the logic of efficiency but can also lead to violations of the principles of optimality of the entire managerial impact. the resolution of these contradictions is based on the principles of the preservation of spirituality (spiritual efficiency). such an approach, in our view, is an important way of the entire crisis management system, which has yet to be built under a permanent economic crisis. as specific management indicators, it is possible to use a parametric deviation of an indicator that reveals the economic interests of employers (owners) and social interests of employees. parameters of culture (personal, corporate) are an integral element in achieving such a balance. thus, work in the direction of enhancing the spiritual efficiency of activity is also seen by us as an important managerial task. as the main applied result, we consider the formulation of an empirical basis for obtaining quantitative data on efficiency parameters. the study contains a formula enabling the analytical determination of the optimal (equilibrium) state of the efficiency parameters of the economic system. it is the monitoring of this indicator that we consider necessary to ensure a fair (reasonable) distribution of value added. the main scientific result of this study is the economic model of monitoring the socio-economic efficiency of the economic system. the formulated model creates the prerequisites for improving (maintaining) the effectiveness of managing the socio-economic development of an organization in terms of permanent economic crisis. maximizing social performance (interests of employers) maximizing profit (interests of employers) further training (education) reducing the burden on the employee reduction of working time full employment (no unemployment) labour quality improvement labour intensity increase reduced resource costs selection of alternative resources changes in the economic system efficiency manpower culture corporate culture figure 1. the model of balance (optimality) of interests within the economic system references: marx, k. 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(in russian) baltic journal of economic studies 96 vol. 5, no. 2, 2019 corresponding author: 1 chernivtsi law institute, national university “odessa law academy”, ukraine. 2 chernivtsi law institute, national university “odessa law academy”, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-2-96-103 problems and prospects of deepening eu-ukrainian relations pavlo latkovskyi1, anna marushchak2 abstract. three countries: georgia, moldova, and ukraine have concluded european union association agreements, under similar terms and conditions of european partnership. analytical review allowed determining that in their political integrative development, they have similar problems and ways to overcome them. they are distinguished by a relatively high level of democratic freedoms and political pluralism; however, none of them can be considered as a consolidated democracy, these countries have hybrid political regimes. among the main obstacles occurring on the way of their integration processes, one can distinguish problems associated with ethical, regional, and cultural conflicts; specific features of the formation of constitutional systems; features of the formation of pr technologies of government and society; deep-rooted corruption and influence of oligarchs in party systems and, as a consequence, propensity to use non-constitutional means of political struggle and economic development. despite these structural problems, favouring european values and norms demonstrated by societies of the three countries holds the promise of consolidating democratic institutions and overcoming problems. the purpose of the article is to determine problems and prospects of deepening relations of the eu with three countries: ukraine, moldova, and georgia, and to substantiate theses stating that consistent and reinforced integration of the european union in this region is crucial for further success and development of all actors of this process. georgia, moldova, and ukraine do not compose a single region (both in a geographical and economic context); however, since 2014 they are developing according to the same scenarios. their aspiration to integration has provoked problems in relations with russia and intensified opposition to the policy of europeanisation within the countries. in ukraine, the most difficult and severe events took place: it passed through government overthrow, loss of territory, and military actions in donbas caused by russia, which continue to this day. for moldova and georgia, the choice of democratic imperatives also had grave consequences. in georgia, they were identified as two long-term wars for the separation in abkhazia and south ossetia; ended with the defeat of central authorities and creation of two unrecognized states. moldova has faced a similar problem in transnistria in 1992. in all countries, russian armed forces were important actors who played an important role in determining the results of these conflicts. according to the democracy index, moldova is evaluated as “imperfect democracy”; georgia – as “hybrid regime”; ukraine has moved below, from the category of “imperfect democracy” to the lowest “hybrid regime”. over the political pressure of russia, the eu and ukraine postpone the provisional application of the dcfta (deep and comprehensive free trade area) to january 1, 2019. there are marked positive consequences of ukrainian export to the eu, which volume has increased by 30% in 2017. the structure of exports to the eu has shifted towards machines and equipment, fats and oils of vegetable or animal origin, ready-made meals, and products of animal origin. the eu share in ukrainian exports and imports has also increased due to a significant reduction in trade with russia. the application of the eu tariff quotas for agricultural production has increased over the 2014–2017 years because ukrainian producers have gradually overcome the problems with food safety and weak demand for their production. european choice is an extremely important factor for continuous democratization of all these three countries. in spite of competition among european and eurasian identities, each of them considers itself a european country. the choice to continue the path of association with europe, made by these countries, despite obvious political risks (especially severe for ukraine), is the best evidence of their real adherence to european development path. key words: european studies, democracy index, dcfta, ukrainian import, ukrainian export, tariff quota, democratic choice. jel classification: o19, f15, f42, r38, r50 baltic journal of economic studies 97 vol. 5, no. 2, 2019 1. introduction georgia, moldova, and ukraine are three countries that decided to conclude association agreements with the european union, under the terms and conditions of the european partnership. in our opinion, they are quite similar according to the conditions of democratic development and strategy of political progression of events, so we will try to consider key events, bifurcation points, and possible ways of their further development in the context of comparative european regionalistics. in the post-soviet space, they are distinguished by a relatively high level of democratic freedoms and political pluralism; however, none of them can be considered as a consolidated democracy, and the majority of analysts describe these countries as ambiguous or hybrid political regimes, which combine features of autocracy and democracy. among the main obstacles occurring on the way of their integration processes, one can distinguish problems associated with ethical, regional, and cultural conflicts; specific features of the formation of constitutional systems; peculiarities of the formation of pr technologies of government and society (including control over the most influential media organizations); deep-rooted corruption and influence of oligarchs; corrupt system of building political parties and party systems; scant confidence to institutions of electoral democracy and, as a consequence, propensity to use non-constitutional means of political struggle. despite these structural problems, favouring european values and norms demonstrated by societies of the three countries bring hope that they will finally manage to consolidate their democratic institutions. the purpose of the article is to determine problems and prospect of deepening relations of the eu with such countries as ukraine, moldova, and georgia, and to substantiate theses stating that consistent and reinforced integration of the european union in this region is crucial for further success and development of all actors of this process. 2. the methodology of research georgia, moldova, and ukraine do not compose a single region (both in a geographical and economic context); however, since 2014 they are developing according to the same scenarios. in 2015, all three countries have signed association agreements with the european union, which came into force in july 2016 for georgia and moldova and in september 2017 – for ukraine. this choice has appeared a lot more complicated than the majority of europeans believe (emerson, movchan, 2017; expert-group, 2017; institute for public policy, 2018). in ukraine, the most difficult and severe events took place: it passed through government overthrow, loss of territory, and military actions in the donbas caused by russia, which continue to this day. for moldova and georgia, the choice of such form of european integration also provoked problems in relations with russia and intensified opposition to the policy of europeanisation within the countries. political scenarios in the countries, development of democratic imperatives, and the european choice distinguish these three countries among others in the eu partnership, as well as in the post-soviet space. it should be noted that the choice was made when the wave of euroscepticism within the eu and russia’s aggressive attempts to undermine the eu from outside revealed vulnerable spots. therefore, perhaps, it is sound to mark georgia, moldova, and ukraine as “a region of association agreements” in the east of europe (cenușă, denis, 2018; european parliament, 2017). whereas georgia, moldova, and ukraine demonstrated their “european choice” by singing association agreements with the eu, some of their neighbours, in particular, belarus and armenia, made an opposite choice and joined the eurasian economic union headed by russia. in the mid-1990s, georgia, moldova, and ukraine adopted their first post-communist constitutions: moldova – in 1994, georgia – in 1995, and ukraine – in 1996. this was preceded by long-term debates among various political forces. those forces advocating stability usually insisted upon strong presidential rule, greater centralization, and plurality voting systems, while reformatory forces usually (but not always consistently) called for strengthening parliaments, greater decentralization, and proportional representation elections. moreover, first constitutions had to take into account real and potential ethnoterritorial conflicts threating three newly created states. the results were based on a certain compromise between different political forces and were different in different countries. political systems also face a painful choice between efficiency and pluralism, peculiar to countries with weak democratic traditions. the period from 2004 to 2013 years in georgia could be the single case in all three countries when formal constitutional provisions clearly provided for an excessive concentration of power in the executive branch. however, in this very period (especially in the first half ), georgia implemented the most successful public policy reforms when the level of corruption declined significantly and the government’s ability to produce public goods (as well as the quality of these public goods) increased significantly. the same system created a real threat of autocratic consolidation of power. on the other hand, the constitutional environment that provides for a greater pluralism also can weaken the government’s ability to implement necessary public policy reforms, which allows powerful plutocratic actors to manipulate the system. societies of countries entered into association agreement with the eu believe that the association baltic journal of economic studies 98 vol. 5, no. 2, 2019 agreement should not be the ultimate point in relations with the eu. these countries insist on their european vocation and believe that it should be finally recognized by offering them the path to eu membership. also, there is no consensus among the eu member states in relation to issues of countries integration, though, the number of votes in favour of the european vocation of georgia, moldova, and ukraine is constantly increasing. however, it is also clear that both the association with the eu and the hope for future membership are closely linked to the acquisition of european values, norms, institutions, and practices. values of liberal democracy are paramount. the selection of criteria for evaluating these three countries with which the association agreements have been concluded is an important scientific and applied problem. except for the baltics, they are the most democratic in comparison with other post-soviet countries. nevertheless, it is impossible to definitely determine them as a consolidated democratic state and they do not fully comply with the eu requirements (cenușă, denis, 2017). firstly, political and liberal requirements, weak political institutions, which are vulnerable to the capture by autocratic leaders, have a low level of confidence among the population. at the same time, they also have active political competition, are experiencing constant power shifts (sometimes constitutional, sometimes revolutionary), have relatively active independent media and civil society, as well as the majority of citizens who support democratic values. nevertheless, political systems are threatened from the inside and open to external influences. however, two assumptions can be made: all three countries have a great chance of success and successful cooperation with the european union can be a key factor of collaboration success (european parliament, 2017; emerson, movchan, 2017). in the article, we will consider democratic reforms, conflicts, and distinctions in their european values (in the context of regional, ethnic, and cultural contradictions), as well as mechanisms for forming foreign trade policy. 3. results and discussion. politological aspect despite multidimensional differences between internal political strategy and development pathways of three countries with which the association agreements have been concluded, they also have common features. this is confirmed by international evaluations of democracy levels in different countries that politologists use for comparisons. freedom house in research called freedom in the world assigns them from 3 to 4 points (1 is for the most “free” or democratic countries, and 7 – for the most “non-liberal” or autocratic ones). this means that they are considered to be only “partially free” but they are also quite close to “free” – a rating of 2.5 points enables to achieve this. in fact, their indicators have been slowly improving over the last three years, the time when the association with europe was an important point in their political programs (this does not mean that such relative progress will be sustainable in the coming years). table 1 the democracy index according to freedom house’s freedom in the world, 1996–2016 country for 1996–2014 for 2014–2016 georgia 3,52 3 moldova 3,26 3 ukraine 2,36 3 source: compiled by the author based on cenușă, denis, 2018; analytical note, 2015; emerson, movchan, 2017; iri poll, 2017; institute for public policy, 2018 the democracy index of the analytical section of the economist, which uses a somewhat different methodology and terminology, gives the same countries higher or lower than 6 points, 8 – this is the distribution line between “hybrid regimes” and “imperfect democracies.” however, it also identified greater differences between these countries: since 2007, when the democracy index began to gather data, it evaluates moldova as “imperfect democracy” (even more imperfect than most others); georgia – as a “hybrid regime” (although it has been considered one of the most democratic “hybrid regimes” over the past four years); and ukraine moved below from the category of “imperfect democracy” (2007–2010) to the “hybrid regime” (2011–2016) (institute for public policy, 2018; emerson, movchan, 2017; institute for public policy, 2018). ethno-territorial problems also distinguish these three countries into one analytical cluster. they appeared as for “objective” reasons (some ethnic minorities were not ready to accept new national states), so over mistakes made by nationalistic elites, and also russia’s readiness to manipulate internal problems of the newly formed countries. events in georgia were also very complex, they were determined by two long wars for the separation in abkhazia and south ossetia. they ended in the defeat of central authorities and the creation of two unrecognized states. moldova has faced a similar problem in transnistria in 1992, although the scale of violence was much lower. in both countries, russian armed forces were important actors who played an important role in determining the results of these conflicts. in ukraine, there is the largest “hybrid war”, provoked by ethnoterritorial problems, which lasts more than 4 years in the east of ukraine and in the crimea (analytical note, 2015; european parliament, 2009; smagliy, 2017; corboy denis, and kenneth yalowitz, 2012). despite the fact that the stability was supported after the period of turbulence, in practice, it was achieved baltic journal of economic studies 99 vol. 5, no. 2, 2019 at the expense of high level of corruption, the capture of the state by oligarchic groups, the ineffectiveness of the government in terms of its ability to meet public interests, and slow economic development. all three countries faced a contradiction between the officially proclaimed principles of constitutional democracy, transparency, and meritocracy, as reflected in constitutions and legislation (which could have been developed in cooperation with consultants from western democracies), and the reality of neo-patrimonial, informal clan management. this undermined the legitimacy of the entrenched elites (which originated from the former nomenclature, but “enriched” by new economic and political entrepreneurs), therefore, the demand for radical changes appeared. this manifested in “colour revolutions” in georgia and ukraine in 2003 and 2004. in moldova, resistance to communist rule under the leadership of a chaotic coalition of pro-european political forces did not acquire such a dramatic form, but in 2009, they also managed to come to power after the april youth riots and subsequent political upheavals that took place that same year. such evaluations do not necessarily imply the similarity of the typology of problems or achievements between the three countries, which we will try to demonstrate below. results of government activity were a problem for all three countries, although the level of complexity of problems and its development dynamics differ. in the 1990s, it was georgia that has suffered the country’s greatest collapse, caused both by protracted ethnoterritorial conflicts and by the crisis of legitimacy caused by the violent change of the first democratically elected government. meanwhile, georgia was a canonical example of an incapable state, where armed militiamen competed for control, lost by the government. although the basic order was restored by the mid-1990s, the state was still very weak and corrupt, unable to collect taxes, pay salaries to civil servants, take care of public infrastructure, and so on. in 2003, this country occupied the 124-128th place among 133 countries according to the corruption perceptions index (transparency international, 2016). confidence to almost all state authorities was less than 20%. this general failure of the government has created a precedent for the emergence of the rose revolution in november 2003. georgia is also a country, which has achieved the best success in reforming the government after the rose revolution. up to 2012, it has achieved the 51st place among 174 countries (transparency international, 2016). it has also achieved a notable advance in the spheres of fiscal policy, provision of public services to citizens, and development of public infrastructure etc. although this breakthrough was made during the tenure of the power of the unm, the reforms were generally stable, even when the power changed: for example, by 2016, georgia’s position in the corruption perceptions index has further improved, with the country ranked 44th among 176 countries, outrunning many countries of the european union, including italy, greece, the czech republic, slovakia, hungary, and croatia (transparency international, 2016). table 2 corruption level indicators georgia moldova ukraine 2002 24 21 24 2009 41 33 22 2016 67 30 29 source: compiled by the author based on: corruption perception index, transparency international: https://www.transparency.org/research/cpi/ today, 100 points are given to the least corrupt, and the result of 1 point – to the most corrupt countries. however, until 2012 transparency international used a system according to which the least corrupt country receives 10 instead of 100 points. for example, in 2006, georgia’s rate was expressed as 4.1 instead of 41, but for better visibility, we translated the old estimates into a new format. however, this doesn’t mean much trust from a large part of citizens. in the period from april 2015 to june 2016, the number of georgians who believed that the country moves in the right direction ranged within 20-30%, and up to april 2017 this indicator reached 33% (31% believed that georgia moves in the wrong direction; another 31% believed that the situation did not change at all). when it came to the activities of the institutes, from 30% to 55% assessed the activity of civil servants, the army, and the police as “good” or “very good”, while the positive ratings of the prosecutor’s office, courts, and parliament were 10-13%. this does not mean that people are completely dissatisfied: from 40% to 50% evaluate the effectiveness of institutes as “average”. all three countries have long experienced two types of external influences: european and russian ones. this means not only the general geopolitical competition but also the influence of domestic political institutions on the development trajectory. the usa is also a powerful player, however, its general policy with regard to this region, including efforts to promote democracy, does not differ from the eu position, and countries of regional influence often bring them together in a general vision. nevertheless, the institutional framework of the eastern partnership of the eu and association agreements make it the main propagandist of democracy in these countries (cenușă, denis, 2017; emerson, movchan, 2017; linz, stepan, 1996). 4. financial and economic aspect expected from 01.09.2017 the entry into force of the association agreement between ukraine and the eu stipulates the need to search and agree with partners the next steps of ukraine towards its further integration baltic journal of economic studies 100 vol. 5, no. 2, 2019 into the structures of the european union. w hat form further integration (customs union, common market, full integration with the subsequent acquisition of membership or some combination of options) will get is unknown at this time, but the movement in this direction will obviously continue, which actualizes the issue of analysis of potential risks that will arise on the further way of ukraine to the structures of the european union. therefore, further deepening integration of ukraine and the eu, in addition to unconditional advantages and additional opportunities in economic and financial spheres, has a set of specific risks that can become apparent in the midterm. the russo-georgian war in 2008 and russia’s hostile actions against ukraine in 2014–2017 after the revolution of dignity were the next steps by which russia punished georgia for attempting to join nato and ukraine for its choice to join europe. trade sanctions applied to georgia, moldova, and ukraine in response to the signing and ratification of association agreements/ dcfta (deep and comprehensive free trade areas) by these countries are also a mild form of punishments (transparency international, 2016; analytical note, 2015; expert-group, 2017; iri poll, 2017). provisional application of the dcfta (deep and comprehensive free trade areas) was initiated on january 1, 2016. however, even before this, in april 2014, the eu introduced autonomous trade preferences for ukraine in order to support its economy during the crisis. application of autonomous trade preferences provided for the eu’s reducing the level of tariff shelter to the dcfta first-year level and provision of certain tariff quotas to ukrainian exporters. since the start of the provisional application of the dcfta (deep and comprehensive free trade areas), ukraine has also begun to lower its duties for eu goods and has introduced certain tariff quotas. in addition to trade regime of the dcfta, ukrainian exporters have also obtained a possibility to sell goods in the eu within the framework of the generalized system of preferences (gsp) for two more years (analytical note, 2015; cenușă, denis, 2018). according to data of the ministry of economic development and trade of ukraine, gsp provided additional liberalization of access to the market for 547 ukrainian goods in 2016 and 424 goods in 2017. in 2017, trade with the eu returned to the level of 2014 after it suffered over the economic and political crises in the country in 2014–2015. although import growth recovered already in 2016 as a result of an increase in domestic investment demand, the resumption of exports was initially slower. but, in 2017, ukrainian export to the eu considerably increased by 30%, from 13,5 billion to 17,5 billion dollars, which is the highest indicators since 2012 (see table 3). as a result of this acceleration of growth of exports to the eu, it was twice as big as exports to the rest of world countries. moreover, it was mainly due to “real” expansion of export volume but not a price increase. imports from the eu increased by 21% in 2017 and this is a bit less than the total import volume. the eu share was 42% of the total import volume in ukraine and remains within the range of 39-44% after ukraine switched to gas supplies from the eu in 2014. in comparison with 2013, the eu role as a trade partner of ukraine considerably increased, and the share of eu goods in ukrainian exports grew by 14% as reflected by a decrease in the export share of russia and other cis countries. structure of ukrainian trade with various countries and regions is studied in table 4. in imports, the eu share grew slower – by 7%. structure of trade also changed as comparing 2013 and 2017. the export structure has shifted from mineral commodities and non-ferrous metals towards machinery and equipment, fats and oils of vegetable or animal origin, ready-made food products, and products of animal origin. table 3 trade in commodities between ukraine and the eu, 2010–2017, billion usd indicators 2010 2011 2012 2013 2014 2015 2016 2017 total volume 112,1 151,0 153,5 140,3 108,3 75,5 75,5 92,9 volume of trade with the eu 32,2 43,8 43,4 43,8 38,1 28,3 30,6 38,3 share in total volume (%) 29 29 28 31 35 37 41 41 growth rate, % 29 36 -1 1 -13 -26 8 25 total export volume 51,4 68,4 68,8 63,3 53,9 38,1 36,4 43,3 export to the eu 13,0 18,0 17,1 16,8 17,0 13,0 13,5 17,5 share in total volume (%) 25 26 25 26 32 34 37 41 growth rate, % 38 38 -5 -2 1 -23 4 30 total import volume 60,7 82,6 84,7 77,0 54,4 37,5 39,2 49,6 import from the eu 19,2 25,8 26,2 27,0 21,1 15,3 17,1 20,8 share in total volume (%) 32 31 31 35 39 41 44 42 growth rate, % 24 35 2 3 -22 -27 12 21 balance of trade with the eu -6,1 -7,8 -9,1 -10,3 -4,1 -2,3 -3,6 -3,3 source: compiled by the author based on data from the state statistics service of ukraine baltic journal of economic studies 101 vol. 5, no. 2, 2019 the structure of imports from the eu was stable with a certain shift to mineral commodities, machinery and equipment at the expense of agricultural products, chemical industry production, and also cellulose and paper, see table 5. the experience of ukraine in using tariff quotas during 2014–2017 indicates that although the country still has not been able to fully utilize their potential, the use of tariff quotas has increased significantly. in 2014, ukraine used only six of the 36 (natural honey, cereals, processed tomatoes, grape and apple juice, wheat, corn), while 12 other tariff quotas were used only partially. in 2017, the number of fully used quotas increased to 10 out of 36 (to the quotas that were fully used in 2014, quotas for butter, sugar, poultry, and wheat and barley flour and granules were added), while the number of quotas used partially increased to 16, and only 10 tariff quotas remained unused. in 2017, ukraine completed ratification procedures for joining the regional convention on pan-euromediterranean preferential rules of origin (pem convention). as the convention is established on the basis of a network of free trade areas with common rules for determining the origin of goods, accession to the convention allows its parties to apply the principle table 4 trade export-import structure of ukraine (2013 and 2017) 2013 2017 export (million usd) export (%) import (million usd) import (%) export (million usd) export (%) import (million usd) import (%) eu 16758 26,5 27046 35,1 17535 40,5 20796 41,9 russia 15065 23,8 23234 30,2 3937 9,1 7202 14,5 other cis countries 6998 11,1 4697 6,1 2974 7,8 2988 8,0 other european countries 467 0,7 1582 2,1 446 1,0 2139 4,3 usa 888 1,4 2759 3,6 828 1,9 2525 5,1 china 2726 4,3 7900 10,3 2039 4,7 5647 11,4 other world countries 20407 32,2 9743 12,7 15508 35,8 7035 14,2 total 63312 100,0 76964 100,0 43267 100,0 49599 100,0 source: compiled by the author according to data from the state statistics service of ukraine table 5 commodity structure of ukrainian trade with the eu (2013, 2017) 2013 2017 export (%) import (%) export (%) import (%) total: 100 100 100 100 products of animal origin 0,3 2,5 1,6 1,6 products of vegetable origin 18,8 3,3 17,3 2,3 fats and oils 3,0 0,4 8,4 0,3 ready-made meals 4,7 5,3 4,9 5,6 mineral commodities 17,5 11,5 13,0 15,0 chemical industry production 4,1 18,4 2,5 17,2 plastic products, rubber 0,6 7,9 0,8 7,5 fur and skins 0,8 0,4 0,8 0,7 wood 3,7 1,1 4,8 0,6 cellulose, paper 0,5 4,6 0,6 3,0 textile products 3,3 2,6 3,5 3,4 shoes, hats 0,8 0,2 0,8 0,2 works of stonemasonry 0,4 1,9 0,9 1,2 precious gemstones and metals 0,2 0,9 0,1 0,1 non-precious metals 27,3 5,9 21,4 5,0 mechanical equipment, machines and mechanisms 11,5 19,7 14,2 21,8 vehicles 1,1 10,7 0,9 10,8 devices and apparatus 0,3 1,6 0,2 1,7 various goods and wares 1,2 1,1 3,1 1,3 other goods 0,0 0,1 0,1 0,6 source: compiled by the author based on data from the state statistics of ukraine baltic journal of economic studies 102 vol. 5, no. 2, 2019 of diagonal cumulation in determining the country of origin of goods. today, the parties of the convention are: the eu, the efta states, moldova, georgia, ukraine, the participants in the barcelona process (algeria, egypt, israel, jordan, lebanon, morocco, palestine, syria, tunisia and turkey), as well as the participants in the eu’s stabilisation and association process (albania, bosnia and herzegovina, the republic of north macedonia, montenegro, serbia, and kosovo). among all members of the pem convention, ukraine has free trade agreements with 36 countries – the eu, the efta states, macedonia, montenegro, georgia, and moldova – and is negotiating with turkey and israel. however, further development of pan-euro-med requires changing the protocols governing the rules of origin in each country. 5. conclusions summing up the above, it can be determined that despite the fact that there is a request for democracy in all three countries, there are differences in the formation of the political elite, the course of political reforms, and scenarios of the future. in all these three countries, political parties are one of the political institutions with the slightest confidence. there were several power shifts by revolutionary or constitutional means (each time they gave hope for a real democratic breakthrough), though they ended with the disappointment of both citizens and the political institutions themselves. on the other hand, the countries were supported by relatively dynamic and competitive political landscapes, open space for political debates, and a healthy level of social activity. ukraine is also a multinational and multiconfessional country but all its differences in identity are obscured by the split of its south-eastern part. however, although this split was strongly expressed in voting models when the east voted for candidates considered to be “pro-russian” while in the west those forces were supported aimed at independence and european choice, ukraine had long been able to avoid political confrontation through the cultural identity. it seemed that the creation of an autonomous region in the crimea (the most pro-russian region in ukraine) in 1991 have eliminated the danger of such territorial conflict as in georgia and moldova. nevertheless, in 2014, russia used the occasion of the change of the ukrainian government to join the crimea and stir up separatist rebellions in the south-eastern regions. this rebellion ended with the creation of two unrecognized “states” in the donbas. after eight months of the hot war of 2014–2015, the front stabilized and slowly turned into a quasiborder with the separatist region. as a consequence, the situation in ukraine became similar to the situation in georgia and moldova: russia annexed the crimea, and the donbas turned into a region of “semi-frozen conflict”. summing up, official constitutions of all the three countries, as a rule, favour a competitive political process that envisages the creation of a responsible government. they also include all the basic guarantees of the protection of human rights and political freedoms (paweł dziekański, 2017). this does not mean that there is no room for improvement of official constitutional systems (for example, strengthening local self-government) but these disadvantages do not prevent these countries from consolidating their democratic political systems. in practice, however, these systems are vulnerable to the negative impact of non-constitutional factors such as charming personalities and parties headed by them, which are focused on the leader’s personality, as well as business structures and oligarchs. all the three countries still have to find a proper balance between a strong and effective state, on the one hand, and strong democratic institutions capable of ensuring the true responsibility of their rulers, on the other. they also have to recognize that only inclusive constitutional process that is based on consensus will lead to the adoption of legal, working, formal constitutional rules but not non-constitutional powers that direct the behaviour of political players. over the political pressure of russia, the eu and ukraine postpone the provisional application of the dcfta (deep and comprehensive free trade area) to januar y 1, 2019. there are marked positive consequences of ukrainian exports to the eu, which volume has increased by 30% in 2017. the structure of exports to the eu has shifted towards machines and equipment, fats and oils of vegetable or animal origin, ready-made meals, and products of animal origin. the eu share in ukrainian exports and imports has also increased due to a significant reduction in trade with russia. the application of the eu tariff quotas for agricultural production has increased over the 2014–2017 years because ukrainian producers have gradually overcome the problems with food safety and weak demand for their production. in 2017, ukraine completed procedures for joining the pan-euro-mediterranean system of rules of origin, which allows for diagonal cumulation. european choice is an extremely important factor for continuous democratization of all these three countries. in spite of competition among european and eurasian identities, each of them considers itself a european country. the choice to continue the path of association with europe, made by these countries, despite obvious political risks (especially severe for ukraine), is the best evidence of their real adherence to european development path. baltic journal of economic studies 103 vol. 5, no. 2, 2019 references: analytical note (2015). the verkhovna rada 06/2015, berlin/kyiv, june. retrieved from: www.beratergruppe-ukraine.de/ wordpress/wp-content/uploads/2014/06 pb_06_2015_en.pdf cenușă, denis (2018). geopolitical games expected ahead of moldova’s 2018 elections, 10 october. retrieved from: https://www.fpri.org/article/2017/10/geopolitical-games-expected-ahead-moldovas-2018-elections cenușă, denis (2017). european values versus traditional values and geopolitical subtext in moldova. ipn, 29 may. retrieved from: http://www.ipn.md/en/integrare-europeana/84125# corboy denis, william courtney and kenneth yalowitz (2012). justice or vengeance? international herald tribune, 26 november. paweł dziekański (2017). diversification synthetic indicator for evaluating the financial capacity of local government. the case of polish voivodeships. acta universitatis agriculturae et silviculturae mendelianae brunensis. retrieved from: https://doi.org/10.11118/actaun201765020611 state statistics service of ukraine. retrieved from: https://ukrstat.org/uk/operativ/oper_new.html emerson, m., movchan, v. (2017). deepening eu-ukrainian relations: what, why and how? retrieved from: http://www.3dcftas.eu/uk/publications/key/ european parliament (2009). resolution of the european parliament of 30 april 2009 regarding the situation in moldova. retrieved from: http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep// text+motion+b6-2009-0264+0+doc+xml+v0//en&language=en european parliament (2017). recommendation of 15 november 2017 to the council, the commission and the eeas on the eastern partnership, in the run-up to the november 2017 summit. retrieved from: http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep//text+ta+p8-ta-2017-0440+0+doc+ xml+v0//en&language=en) expert-group (2017). state of the country report 2017. retrieved from: http://expert-grup.org/en/biblioteca/ item/1482-raport-de-stare-a-tarii-2017 goble, paul (2017). ukrainian legislation about religion will finalize divorce between kyiv and moscow. euromaidan press, 19 may 2017. retrieved from: http://euromaidanpress.com/2017/05/19/ukrainianlegislation-about-religion-will-finalize-divorce-between-kyiv-and-moscow-euromaidan-press/ hanf, theodor and ghia nodia (2000). lurching to democracy. from agnostic tolerance to pious jacobinism: societal change and people’s reactions, baden-baden: nomos verlagsgesellschaft. institute for public policy (2018). barometer of public opinion, april. retrieved from: http://www.ipp.md iri poll (2017). social and political moods of ukrainians, 8 june 2017. retrieved from: http://ratinggroup.ua/en/ research/ukraine/poll_iri_dinamika_obschestvenno-politicheskih_vzglyadov_v_ukraine.html kiev international institute of sociology (2016). trust to social institutions. retrieved from: https://www.transparency.org/news/feature/corruption_perceptions_index_2016 konończuk, wojciech, denis cenușă and kornely kakachia (2017). oligarchs in ukraine, moldova and georgia as key obstacles to reforms, june. retrieved from: http://3dcftas.eu/publications/other/oligarchs-ukraine-moldovaand-georgia-key-obstacles-reforms levitsky, s. and way, l. (2015). the myth of democratic recession. journal of democracy, vol. 26, no 1, january. linz, j. j. and stepan, a. (1996). problems of democratic transition and consolidation: southern europe, latin america and post-communist europe, baltimore: johns hopkins university press. razumkov center (2017). stavlennia hromadyan ukrainy do suspilnykh instytutiv, elektoralni orientatsii. 11 october. retrieved from: http://razumkov.org.ua/uploads/socio/press1017.pdf smagliy, k. (2017). a wake up call for ukraine’s civil society. kennan cable, no. 25. retrieved from: https://www.wilsoncenter.org/publication/kennan-cable-no25-wake-call-for-ukraines-civil-society transparency international (2016). corruption perception index 2016. retrieved from: https://www.transparency.org/ news/feature/corruption_perceptions_index_2016 baltic journal of economic studies 28 vol. 4, no. 3, 2018 corresponding author: 1 department of psychology, zaporizhzhia national technical university. e-mail: vitalik.psyhol@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-28-32 economics socialization as a new paradigm of social development vitalii bocheliuk1 zaporizhzhia national technical university, ukraine abstract. the article analyses economics socialization of the country. the purpose of the article is to study the essence and peculiarities of economics socialization and the formation of conceptual foundations for its development. the subject of the study is theoretical and practical aspects of economics socialization in the formation of the system of economic relations in the country. in course of the study, the following methods were used: system analysis, graphical analysis, a logical generalization of results. the transformation of social and economic relations of ukraine requires the search for new ways, their rationalization that justifies the necessity of economic socialization. in addition, modern type of society is characterized by the transition to a new level of social development, characterized by the introduction of innovations in the field of material and human capital resources. due to this, a person is not only an important factor of economics but also an engine for development of social and economic systems of the society, which requires, in its turn, the formation of conditions for a harmonious and comprehensive development of personality as a carrier of human capital and a creator of new knowledge. in order to justify the directions of the country’s socially oriented economic development as one of the important indicators of economic growth, a conceptual scheme is proposed that includes: development of human capital, formation of innovative economics, increasing the use of a country’s resource potential, implementation of social policy aimed at improving life quality of the population. based on the analysis of indicators of a country’s social and economic development, the characteristics of their impact on the level of economics socialization are given. key words: economics socialization, development, society, country. jel classification: a13, a14, f43 1. introduction economics socialization manifests itself in the social reorientation of production, labour, and people’s lives, mitigation of social differentiation and increasing the importance of social sphere. currently, it can be affirmed that social orientation permeates all spheres of developed countries’ economics and the centre of social and economic development is a human personality with his/her diverse needs. the purpose of the article is to study the essence and peculiarities of economics socialization and the formation of conceptual foundations for its development. the subject of the study is theoretical and practical aspects of economics socialization in the formation of the system of economic relations in the country. the research methods are: systematic analysis – to reveal trends and schools in the economic theory in order to identify the essence of economics socialization; graphical analysis – for a schematic representation of practical aspects of the study; logical generalization of the research results – to substantiate and determine the recommendations for the formation of social development of the country’s economics. 2. analysis of the latest research and publications world economic science pays much attention to the study of social aspects of economic development, as one of the natural factors of social and economic development of the country. the problem of the economics socialization in the development of society is highlighted in works of foreign scholars: m. weber, t. veblen, d. north, t. parsons, e. toffler, j. hodgson, j. a. schumpeter, and others. among the domestic scholars and researchers that study the aspects of economics socialization development, one should note: o. beliaiev, a. bebel, a. galchynsky, v. geits, y. zaitsev, v. lagutin, a. kolot, h. pylypenko, v. tarasevych. investigating the problems of socialization economics and its methodological principles, prominent scholars propose to derive the criteria of economics socialization baltic journal of economic studies 29 vol. 4, no. 3, 2018 from analysing the subject of socialization itself – people with their respective needs and interests. however, paying tribute to the results achieved, one can identify a number of underdeveloped issues of economic socialization as a strategic factor in the development of the country and society as a whole. 3. the essence and structure of economics socialization prominent american scientist r . heilbroner under socialization means the introduction of the economic entity into various formal and informal relations through the assimilation and acceptance of universally accepted norms in society, the submission to the institutions, with the help of which a certain group of people can impose their will on other groups and classes of society. r . heilbroner notes: “...the economics is only a hidden form of socialization or subordination” (1999, p. 33). another famous scientist j. m. keynes proves the need for a sufficiently broad investments socialization in order to achieve a full-time economics under the condition of compatibility of private and public interests, and he did not identify the process of socialization with the process of state regulation (1993, p. 531). n.m. dieieva considers the economics socialization as a process of “ensuring a good living standard, activity, and a comprehensive development of people community in general and each person in particular”, proposing its implementation through the formation and maintaining the “potential of society socialization” (2005, p. 83). in our opinion, economics socialization should be considered as a balancing act of various social groups’ interests in the process of formation and implementation of economic policy, and its content should reflect qualitative changes in the structure of demand and consumption, living standards, conditions of comprehensive human development. it should be noted that the level of economics socialization of our country is low. among the problems of the social sphere, which impede the development of human capital, the following ones are worth mentioning: the social basis of population capital evolution is weak (middle class) because people that get average incomes and opportunities by their number make up the majority of this society. in the economically developed countries, the middle class with a middle level of income is the largest part of a society, and the percentage of the poor and the oligarchs are too small. it should be noticed that the level of population development in our country is much lower than in developed countries by living standard and education level. according to credit suisse, in order to belong to the middle class in switzerland, it is necessary to have at least 73 thousand dollars of income per year, in the usa – 50 thousand dollars, in china and brazil – 28 thousand dollars, in poland and mexico – about 25 thousand dollars, in russia and thailand – 18 thousand dollars, in india – 13.7 thousand dollars, and in ukraine – 11.25 thousand dollars. (credit suisse – global wealth report is released by credit suisse); currently, the quality level of social services is decreasing, namely: education, social support and security, and healthcare. ukraine is at the lowest level among the european countries, as healthcare costs are $77 per head. each year, the amount of education for budget funds is being reduced. it is unlikely that much of the population will be able to study on payment basis. if in 2016 the scholarship was received by 75% of students, in 2017 it was already 45%, and in 2018 it is 25%. at the same time, many countries offer ukrainians free accommodation and free study, which will also cause a massive outflow of talented young people from ukraine. analysis of the main indicators of social and economic development of ukraine in recent years suggests negative significant changes in the society (table 1). analysing the main indicators of social and economic development of ukraine for 2010–2016, one can note the negative trend – a decrease in the number of births in 2016 compared to 2010 by 101 thousand of people. in 2016, compared to 2012, the number of deaths decreased by 114.6 thousand people. natural population growth was negative in 2016 – 186.6 thousand people, indicating an excess of deaths over births. it is worth noting that the minimum salary and minimum subsistence rates were not always revised due to increase in the consumer price index, that is, the level of inflation was not taken into account in its calculations. according to the law of ukraine “on subsistence minimum”, sets of foodstuffs must be reviewed at least once every five years, but still, in calculating the subsistence minimum, they consider methods and the minimum set of food, non-food products and services approved in 2000 (zakon ukrajiny “pro prozhytkovyj minimum”). that is, if ukrainians spent 454 uah for about the same minimum set of products in early 2013, now they spend 1026 uah (oficijnyj sajt derzhavnoji sluzhby statystyky ukrajiny). at the same time, the average salary was 3000 uah, but today it is 7360 uah. it should be noted that at the pace of small business development, ukraine is significantly behind the leading world countries, which stimulate and support small and medium entrepreneurship, that promotes their innovative development, improving the quality and competitiveness of manufactured products, and raising social living standards. thus, the number of small enterprises decreased in 2016 compared with 2010 by 66087 units or by 18% (oficijnyj sajt derzhavnoji sluzhby statystyky ukrajiny). as it can be seen from the table, there is a persistent ambiguous tendency in the sphere of employment, after 2010 the unemployment rate was reduced to 2013, and in the period from 2014 to 2016, it gradually began baltic journal of economic studies 30 vol. 4, no. 3, 2018 to grow. during the occupation of the donbas and crimea territories, ukraine lost more than 3 million workspaces. one should note that in order to reduce the unemployment rate in the state, the state should find ways to implement an economic development strategy geared towards reducing poverty and unemployment. also, the obstacles to the social and economic development of the country are the insufficient growth of gross domestic product (gdp) and high inflation because of the lack of integrated directions for ensuring a stable growth of the national economics (figure 1) (oficijnyj sajt derzhavnoji sluzhby statystyky ukrajiny). according to statistics, the gross domestic product per head in 2016 amounted to 55899 uah, which exceeded this index in 2013 by 21934 uah, or 64.5% (oficijnyj sajt derzhavnoji sluzhby statystyky ukrajiny). at first glance, it is positive, but the citizens’ number of our state has decreased, in particular, because of fighting in the east of the country, which led to increase in gdp per capita. also, the positive growth rate is due to: the export of goods, the share of agriculture and construction. the real wage index in 2016 has significantly increased compared with 2014 by 20%. consequently, an important indicator of the country’s economic prosperity and development is gdp, without which it is impossible to increase incomes and ensure social standards. it should also be noted that ukraine has improved the indicators of population life quality and ranked 63rd place among the countries with social development table 1 the main indicators of social and economic development of ukraine indexes 2010 2011 2012 2013 2014 2015 2016 living wage per person per month, uah 843,2 914,1 1042,4 1113,7 1176 1227,3 1388,1 percentage of population with per head equivalent income per month, lower legal subsistence minimum, %: monetary 15,6 13,7 14,1 13,4 14,3 11,1 10,2 general 8,8 7,8 9,1 8,4 8,6 6,4 3,8 unemployment rate, % 8,1 7,9 7,5 7,2 9,3 9,1 9,3 small enterprises per 10000 of available population, units 78 77 76 82 75 76 68 number of small enterprises, units 357241 354283 344048 373809 324598 327814 291154 number of people graduated from universities, thousand people 654,7 626,5 612,9 576,3 484,5 447,4 386,7 number of births, thousand people 497,7 502,6 520,7 503,7 465,9 411,8 397,0 number of deaths, thousand people 698,2 664,6 663,1 662,4 632,3 594,8 583,6 gdp per head, uah 24798 29980 32480 33965 36904 46413 55899 * from 2014, excluding the temporarily occupied territory of the autonomous republic of crimea and the city of sevastopol and a part of the zone of the anti-terrorist operation 33 96 5 36 90 4 46 41 3 5 58 99 62% 62% 63% 64% 106,80% 86,50% 90,10% 106,50% 0% 20% 40% 60% 80% 100% 120% 0 10000 20000 30000 40000 50000 60000 2013 2014 2015 2016 gdp per head, uan social development index, % the real wage index, % figure 1. indicators dynamics of social development of ukraine baltic journal of economic studies 31 vol. 4, no. 3, 2018 level below the average, as evidenced by the data of the social development index (2016). a high index of higher education is observed, which is at 31st place. our country occupies a higher position on this indicator than countries with a similar level of gdp per head. negative dynamics is observed in such indicators as corruption, crime rate, affordability of housing, environmental conditions, healthcare and longevity, choice freedom of life path. therefore, taking into account all of the above mentioned, it should be emphasized the need to form a conceptual model for the development of socially oriented economics, as one of the prerequisites for ensuring the economic and social development of the country. in addition, the definition and further implementation of strategic directions of support and development of a socially oriented economy will contribute to the achievement of ukraine’s european integration goals, increase of its investment attractiveness, and the fullest usage of the whole range formation of goals and assessments of a country’s economic social development designing a strategy for the development of a socially oriented economy human capital development formation of an innovative economy implementation of social policy aimed at improving life quality increasing the efficiency of resource potential usage structuring possible directions of the country’s socially oriented economic development determining the priorities of increasing the socialization of the country’s economy of resource components of country’s sustainable economic growth (figure 2). 4. conclusions thus, the economics socialization influences the following processes: provision of social support and protection of the population; promotion of small business as a basis for a good living standard; developing personal aspirations and motivation of population income growth, strengthening of social partnership. in order to strengthen economics socialization, it is necessary to take a number of measures to improve the institution of social policy in the field of organization and system of remuneration, taxation of income, social protection and insurance. solving the problems of developing a socially oriented economy is possible only on the basis of teamwork and consolidated actions of the state, representatives of large and small businesses, structured civil society. figure 2. conceptual scheme of developing the socially-oriented economy of the country references: credit suisse – global wealth report is released by credit suisse. retrieved from: https://www.credit0suisse.com/ citizenship/en/banking/ csri/index.jsp djejeva n.m. (2005). ocinka metodologho-reghuljatyvnykh pidkhodiv do socializaciji ekonomiky v konteksti rozbudovy socialjnoji derzhavy [assessment of methodological and regulatory approaches to the socialization of the economy in the context of building a social state]. economics: the problems of theory and practice: coll. sciences.: dny, т. 3, vol. 203, pp. 801-806. hodgson g.m. (2002). darwinism in economics: from analogy to ontology. journal of evolutionary economics, vol. 12, no. 3.7. irtyshheva i.o., krupica i.v. (2014). upravlinnja instytucijnymy zminamy v umovakh socializaciji nacionaljnoji ekonomiky [management of institutional changes in the conditions of the socialization of the national economy]. nikolayev: nus (in ukrainian). baltic journal of economic studies 32 vol. 4, no. 3, 2018 ivashyna o.f., ivashyna s.ju. (2014). socializacija ekonomiky v konteksti postindustrialjnykh tendencij [socialization of the economy in the context of post-industrial tendencies]. business inform, vol. 6, рp. 8-12. heilbroner r . (1999). ekonomicheskaya teoriya kak universalniya teoriya [economic theory as a universal theory]. thesis, vol. 1, p. 44. keynes j.m. (1993). izbrannye proizvedeniya. [selected works]. moscow: economics, 543 p. oficijnyj sajt derzhavnoji sluzhby statystyky ukrajiny [official site of the state statistics service of ukraine]. retrieved from: http://www.ukrstat.gov.ua/ michael e. porter, scott stern, michael green (2016). social progress index. washington. retrieved from: http://www.socialprogressimperative.org zaitsev yu.k. (2002). sotsializatsiia ekonomiky ukrainy ta systemna transformatsiia suspilstva: metodolohiia i praktyka [socialization of economy of ukraine and systemic transformation of society: methodology and practice]. kyiv: kneu. zakonu ukrajiny “pro prozhytkovyj minimum” [the law of ukraine “on the producer’s minimum”]. retrieved from: http://zakon2.rada.gov.ua/laws/show/966-14 baltic journal of economic studies 217 vol. 4, no. 5, 2018 corresponding author: 1 odessa national academy of food technologies, ukraine. e-mail: 9701080@ukr.net 2 odessa national polytechnic university, ukraine. e-mail: l.a.voloschuk@gmail.com 3 odesa i.i. mechnikov national university, ukraine. e-mail: stepanovatv@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-217-227 formation of innovation-investment integration strategy for industry development under globalization conditions yurii melnyk1, lidiia voloshchuk2, tetiana stepanova3 abstract. the main conditions of industry sustainable development in the globalization conditions include macroeconomic stability in the national space, competitiveness and the internal and external environment efficiency. solving the strategic tasks that will ensure the industrial complex development, especially in the global macroeconomic space, essentially depends to a large extent on innovation, investment, and integration activities, representing the priority directions in the international environment transformation context. scientific engineering and technological progress is the driving force enabling the industry development in the national macroeconomic environment. in this aspect of the globalization transformations context, a particularly important role is given to innovation, investment, and integration processes. the purpose of this article is justification of theoretic and methodical bases of forming of innovative-investment integrated strategy for ukrainian economy’s industrial sector development under globalization conditions, aimed at supporting the priority achievement of the strategic orientations of the national economy in the context of the european vector of development, taking into account the influence of the factors of the internal and external macroeconomic environment. methodology. materials of periodicals, analytical reviews, statistical data, resources of the internet are the informational and methodological basis of the investigation. the research is based on general scientific and special methods, such as: monographic investigation, generalization, systematization, decomposition, factor analysis, economic-statistical analysis, logical-meaningful modelling. these allowed outlining the basic features and principles of the native industrial economy sector innovative-investment integrated strategy forming under the globalization conditions. the results. innovation-investment integration strategy is a strategic document for the priority development of the industrial sector of the national economy. this is the source of the accumulation of strategic information and management methods for the future sustainable position of the industrial sector of the country. the developed methodical principles of forming an innovation-investment integration strategy for industry development under globalization conditions provide a phased decomposition of the strategic purpose, which provides an opportunity to determine the most effective directions of industry development, taking into account the input and output parameters of the strategy. the strategy allows assessing the export potential of the national economy’s industrial sector, to form export-import orientations and an adequate mechanism of foreign economic activity under conditions of the free trade zone development with the european union countries and other international environment countries. practical implications. the process of forming an innovation-investment integration strategy in the national economy industrial segment will enable the development of appropriate elements of the macroeconomic environment under globalization conditions. value/originality. the strategy elaborates on how strategic management of innovation and investment integration processes in the industry will take place to ensure its effective functioning. innovationinvestment integration strategy allows assessing the export potential of the national economy’s industrial sector, forming an export-import strategy and an adequate mechanism of foreign economic activity under the free trade zone development with the european union countries and other countries of the international environment. key words: innovation process, investment process, integration process, strategy, industry. jel classification: f15, f36, l69, m11, o29, o33 baltic journal of economic studies 218 vol. 4, no. 5, 2018 1. introduction the innovation process embodies a complex set of scientific and technical, technological and structural transformations running in the innovation process; it is a process of thinking product gradual transformation into the research development result (grigoriev, 2017). the innovation process basic characteristic, therefore, shall be the scientific, technical or technological novelty, which will provide the national macroeconomic environment subjects’ modern needs. the investment process is a purposeful systemic process of attracting and using all types of property, financial and intellectual resources that are transferred to the national economic complex’s relevant objects in order to create added value and meet the society’s social and economic needs. the integration process represents a purposeful convergence or system interaction between macroeconomic environment’s economic units in order to achieve quantitative and qualitative assessment of their activities. modern integration processes inherent to the international macroeconomic environment have replaced the disintegration processes that negatively influenced the social development. in the context of strengthening globalization processes, significantly updated are the issues of national high-tech industry sector development investments-and-innovation support with the effective use of material, financial, and intellectual resources. the national economy main advantages are: natural and labour resources availability, a favourable territorial location, considerable research potential, the presence and successful development of industrial segments potential, etc. in today’s conditions, the national environment is the one enabling both domestic and international investors. these recent years, the national macroeconomic environment provides economic growth (gross domestic product is 3.8%), the national economy subjects’ effective demand is growing, the domestic consumer market increases, the banking system is stable and developing, the prognosticated national currency rate and inflation index are also increasing. capital investments show growth of more than 26% in 2018. according to the state statistics service of ukraine, analytical indicators, which characterize the industrial products’ manufacturing by main industrial groups for the period of 2014-2018, got values shown in table 1. these indicators (determined without taking into account the temporarily occupied territory of the autonomous republic of crimea, the sevastopol city, and temporarily occupied territories in the donetsk and luhansk regions) do testify the positive results of transformational changes in the national macroeconomic environment. in order to prioritize the vector orientation strategic benchmarks achievement, the national macroeconomic environment requires the innovation-investment integration strategy formation for the industrial development in a globalizing environment. 2. conceptualization of the relationships in the innovation-investment integration strategy the innovation-investment integration process embodies a complex combination of innovations and investments with the purposeful interaction between the macroeconomic environment’s economic units. the regulatory and legal framework for the innovationinvestment integration strategy formation to enable the industry’s development in the globalization conditions is based on the laws of ukraine “on innovation activity” (on innovation activity, 2012) and “on investment activity” (on investment activity, 2017). the law of ukraine “on investment activity” defines the investment activity general legal, economic, and social conditions on the territory of ukraine. the law is aimed at ensuring equal protection of the rights, interests, and property of investment activity subjects, regardless of ownership type, as well as the effective investments into the national economy, the development of international economic cooperation and integration (on investment activity, 2017). the investment activity is an objective process, bearing its own purpose and logic, and developing in the corresponding regularity; thus it plays a significant table 1 industrial product manufacture indexes by the main industrial groups, % indicator years 2014 2015 2016 2017 januaryseptember 2018 1 2 3 4 5 6 industry 89,9 87,0 102,8 100,4 101,8 average consumption period products 91,6 90,6 102,7 100,2 101,8 investment products 79,7 85,3 101,7 110,6 106,0 short-term consumptions products 101,7 89,0 104,4 104,0 98,5 long-term consumptions products 88,7 80,8 99,7 113,9 100,0 energy 85,5 81,8 102,4 92,3 102,3 source: formed on the basis (official site of the state statistics service of ukraine) baltic journal of economic studies 219 vol. 4, no. 5, 2018 role in the economic units’ activity. by its economic component, the investment embodies the shifting from current date material, financial, and intellectual resources consumption for the purpose of obtaining income in future periods. the law of ukraine “on innovation activity” defines the legal, economic, and organizational foundations of innovation activity state regulation in ukraine, establishes the innovation processes stimulation by the state and aims at supporting the ukrainian economy development in an innovative way. under this law, the state support is provided to business entities of ownership forms implementing innovative projects in ukraine and enterprises of all ownership forms that have the status of innovative ones (on innovation activity, 2012). thus, the innovation-investment process begins with the formation of an innovation-investment strategy. the formation of an innovation-investment integration strategy for the development of industry in a globalized environment depends on: political, legal, financial and economic and infrastructure conditions. in figure 1 we defined the conditions for the formation of innovation and investment integration strategy for the development of industry in a globalizing environment. the innovation-investment integration strategy is understood as a complex of long-term strategic goals and the choice of the most effective ways to achieve them with respect to the influence of internal and external macroeconomic environmental factors. the innovation and investment integration strategy formation for the industry’s development in a globalized environment is a complex management process based on the prediction of certain conditions for the innovation and investment activities’ implementation both as to the market environment as a whole and in the context of its individual segments, taking into account the integration orientation. innovationinvestment integration strategy is always formed within the framework of the industry development general strategy, well-agreed with its implementation principles, goals, stages, and timing. in the global international macroeconomic space, there exists a large number of innovation and investment integration processes’ management forms at the appropriate levels of entity management taking into account the segment component. the management is carried out starting from structural subdivisions of economic units to the state as a whole, and the state carries out the targeted regulatory policy under the influence of relevant internal and external factors. the targeted state regulatory policy basic task is to support innovation and investment integration activity in the country’s scientific and technical potential development taking into account the current international situation. figure 1. conditions to form an innovation-investment integration strategy for the industry’s development in a globalizing environment innovation-investment integration strategy of industry development under globalization process political and legal preconditions financial and economic preconditions infrastructure-related preconditions ensuring territorial integrity and creating an adequate system of national security provision with normative and legal acts and the formation of effective tools for their observance unconditional implementation of international obligations, the introduction of conditions for enhanced economic and trade relations development of modern information and communication systems with their inclusion to international systems estimating the economic potential and directions of structural adjustment quantitative and qualitative guidelines for the formation of resource support estimation of export potential, the formation of export-import strategy and its adequate regulatory mechanism transport communications development development of the finished goods market baltic journal of economic studies 220 vol. 4, no. 5, 2018 3. decomposition of the purpose of innovation and investment integration strategy for the industry the innovation and investment integration strategy’s main objective at the industry is to develop its potential. the strategy’s main purpose is subdivided into levels and presented in figure 2. the decomposition is a process of some research object logical partitioning that allows us to consider any systems consisting of separate interconnected subsystems. subsystems can also be disassembled into even smaller segments. in theoretical and practical studies, such systems include: concept, principles, tasks, processes, phenomena, etc. the decomposition provides a detailed study of the research object thus representing a system analysis tool used to structure the defined goals, objectives, contradictions, problem issues, relevant decisions, priority development strategies, and other aspects of the functional and structural approach to the existing systems’ research analysis or the modern systems synthesis. the outer shape of the decomposition has a schematic look. the main approaches to the decomposition of innovation and investment integration strategy goal in the industry are: aggregated, differentiated, targeted, detailed, and integration approaches. the aggregated approach defines the indicators to be achieved as a result of the development of innovation and investment integration strategy implementation. indicators are aggregated when they are grouped, synthetic, generalized and characterize the industry structural units’ development. aggregated elements in one or another unit may be the following: overall efficiency of asset utilization; fixed assets use intensification and indicators; indicators of working resources use efficiency; indicators of finished products volume increase or decrease and product trading; reserves of production capacities for innovative products development; increasing the finished products competitiveness; indicators and assessment tools as to labour productivity, its reserves, and increasing factors; structure of the industrial products prime cost; indicators of the industrial production profitability; increase in the management system efficiency at all levels; other indicators. the differentiated approach reveals data per every functional unit: provision process functional-structural model; production process functional-structural model; trading process functional-structural model. the target approach specifies for each segment the relevant functional and structural models’ elements, for example, the production process segments are: the main, auxiliary, and service processes. the detailed approach reveals the indicators for each part of the relevant segment and evolves the specific information, for example, the finished product quality at all lifecycle stages. it should be noted that the industrial products quality is formed at four stages of its lifecycle: study, design, production, and consumption and, in the first two stages, the highest percentage of the industrial product quality level is formed. the integration approach ensures the interconnection between the management system individual differentiated elements and functions in the industry. integration is one of the important efficiency factors as to our country’s industry functioning, including figure 2. decomposing the innovation-investment integration strategy goal in industry innovations & investments integration strategy goal structure unit 1 aggregated approach provision differentiated approach detailed approach targeted approach structure unit 2 structure unit 3 structure unit n production trading segment 1 segment 2 segment 3 segment n part 1 part 2 part 3 part n integration approach baltic journal of economic studies 221 vol. 4, no. 5, 2018 its ability to rapid innovations implementation that will ensure the industry innovation and investment integration strategy goal achievement. the proposed decomposition allows linking the goals and their implementation tools for each structural unit while taking into account the entity’s strategic development priority level due to the by goals achieving tools coordination by relevant resources type. it should be noted that the formation of an innovation-investment integration strategy for industry development under globalization conditions requires appropriate support at the state institutions level, namely: fundamental and applied researches qualitytargeting development; a new scientific formation industry specialists training providing; support to strategic innovation and investment projects; support to national and international scientific, technical and technological specialization and cooperation; comprehensive support in the innovative-investment industrial objects (business incubators, technoparks, technopolises, innovation centres)creation and functioning; using financial and economic instruments, creation of a favourable macroeconomic environment that provides innovation and investment activity of the national economy’s industrial complex. in the global scientific environment, the innovationinvestment areas’ state regulation and support measures are determined by the direct and indirect action influences. the ratio of state regulation direct or indirect institutional influence is determined by the national macroeconomic environment’s state and conceptual foundations based on market principles. decision-making in the national economy industrial sector as to the innovation and investment activity relies on the issues related to the choice of alternative options for the industrial enterprises’ development in a competitive environment influenced by the relevant factors (political, legal, financial, economic, social etc.). in the industrial enterprises’ innovation and investment integration strategic development study, the mechanism of innovation-investment sphere state regulation with the macroeconomic environment subjects’ engagement to the country’s economic innovation and investment potential increase is of prime importance. the need for state influence on innovation and investment activity under current conditions is due to factors not inherent to a market situation environment but having an objective significance. figure 3 below shows schematically the financial and economic consequences of an innovation and investment integration strategy selection by the national economy’s industrial sector. it should be noted that the innovation and investment activity lack in future periods involves a reduction in income due to non-current assets moral and physical depreciation, deterioration in the process of provision, production, and sale that ultimately calls into question the future functioning of such national economy’s industrial sector economic unit. an active innovation and investment integration strategy provides a gradual increase in revenues to the inter-sectoral investments level, involves the formation and implementation of various innovationinvestment projects or programs. an active innovation and investment integration strategy involves the active behaviour of the national economy’s industrial sector subjects in the domestic and foreign markets. a passive innovation-investment integration strategy involves maintaining the industrial enterprises’ strategic development unchanged level and thus leads to a lagging behind the inter-sectoral level, in the future periods will have the same consequences. an efficient innovation and investment integration strategy is associated with the scientific, technical and technological process, implementing fundamentally new technological solutions and creating an innovative income period passive active efficient figure 3. influence of innovation and investment integration strategy on the national economy’s industrial sector incomes baltic journal of economic studies 222 vol. 4, no. 5, 2018 product. the innovation and investment integration strategy elements can be: intangible products; industrial production equipment and processes; industrial infrastructure; modern organizational, technical and technological landmarks of any character; logistic components; innovative product and so on. an efficient strategy involves the effective behaviour of the national economy’s industrial sector subjects in the domestic and foreign markets, which will provide the most effective, quantitative and qualitative orientation. important and interconnected conditions for innovation and investment activities’ implementation by the national economy industrial sector subjects in the market environment should be: availability of free capital or resources from a potential innovator or investor, desire to place free resources on acceptable conditions in the national economy industrial sector; political stability in the country and an adequate national security system; legal security and safety that promote the efficient allocation and movement of capital in all areas. the innovation and investment activity stages are provided by: industrial enterprises, innovators, investors, subjects of innovation infrastructure, state institutions, regional and local structures. the identified actors operate at different stages of the innovation and investment process, their activities’ purpose and tasks varying. they reflect their own specific interest that causes a lot of innovation and investment integration strategy dimensionality. but the main driving motive of these entities’ whole activity as involved in the innovation and investment process is the possibility of increasing value-added and obtaining, on this basis, entrepreneurial results in their specific application areas of activity taking into account the respective risks. in the innovation-investment integration strategy, the involved subjects’ interest coordination requires the identification of conflicting interests’ carriers. the scientific research interested subject is the national economy’s industrial segment. the capital owner has own special interests that not always coincide with the general motives of the national economy’s industrial sector. intermediate positions between innovators, investors, and industry are occupied by actors of innovation infrastructure, state institutions, regional and local structures. 4. an innovative-investment integrated strategy for industry’s development: key features and stages of forming the innovation and investment integration strategy is formed in the sector of mutual interests’ crossing-over between the industrial enterprises and all this process participants. the ability to form a strategy depends on the priority of the partners’ mutual interests coordination, the ability to see the innovation-investment object from the strategic position and, first of all, ability to assess the investment attractiveness. the variety of approaches to the investment and innovation strategy interpretation, as well as the nature of their interconnections, only emphasizes the versatility of the investment-innovation strategy definition (khustova, 2015). an innovation-investment strategy is a specific tool for providing a strategy for the national economy’s industrial sector growth or stabilization by investing capital in the economic industrial units’ effective development, expanded reproduction of non-current assets, the creation of innovations, which in future periods will ensure the competitive advantages formation in the country’s industrial sector. it is underlined that the innovation and investment integration strategy is developed at different levels and takes into account the various components; therefore the following classification of the national economy industrial sector investment-innovation integration strategy is proposed: local integration strategy: at the regional level; at the industry level; at the enterprise level; national integration strategy: at the inter-sectoral level; at the interregional level; at the industrial subjects’ level; global integration strategy: at the national level; at the inter-sectoral level; t the interregional level; at the level of industrial enterprises. it is well-known that macroeconomic growth in the national environment is based on a combination of economic units’ performance extensive and intensive indicators. the national economy’s industrial sector is of a vectorial importance for the country’s sustainable development. the industry represents a priority vector for the value-added creation, thus involved into sectoral and inter-sectoral interconnections, has a significant impact on the activity of the national economy’s individual economic units. in the international macroeconomic environment, the possibility of increasing the industrial products manufactured volume at the extensive factor expense is limited; therefore, priority strategic guidelines for the economy industrial sector effective development acquire modern intensive components: improving quality and productivity. the intensive components also include the innovative activities results that increase the return on fixed assets and working capital and provide priority opportunities for the strategic high-quality growth of the country’s industrial sector results. in ukraine, the industrial sector accounts for about 31% of gdp, over 19% of the working population in the country are employed in the industry, thus a significant share in its branches structure belongs to the metallurgical segment, machine building, electricity and instrument manufacture. in 2015-2018, observed is a tendency to increase the national economy’s industrial sector share in the country’s gross domestic product. baltic journal of economic studies 223 vol. 4, no. 5, 2018 dynamic analysis of the industrial sector innovative activity financing sources and structure in the national economy of ukraine in 2000-2017 (table 2) reflects the minimum share of the state in those finances. the given data by indicators are presented without taking into account the temporarily occupied territory of the autonomous republic of crimea, sevastopol city, and temporarily occupied territories in the donetsk and luhansk regions of ukraine. according to the state statistical service of ukraine data analytical indicators show that the essential innovative activity financing source in the national economy’s industrial sector during 2000-2017 is the industrial activity subjects own resources, which accounts for more than 2/3 of the total volume of expenditures on innovation. the table data indicate that other financing sources do not have a significant impact on the industrial enterprises innovative activity. foreign investments amount is almost equal to budget financing. the initiation of any activity kind in the national economy industrial sector is associated with significant capital expenditures in the form of financial, material, and intangible assets necessary for: analytical study of the future economic activity conditions; designing the national economy’s industrial segment activity provision process economic cycle; designing the production process economic cycle; designing the commodity products’ marketing economic cycle; formation of a management system, i.e. creation of all services at an economic entity, all subsystems and communications between them, including processes that ensure its functioning; formation of a monitoring and control system in order to get and transmit true, unbiased, and complete information to those who finance innovation and investment integration strategy. reliable information provides an opportunity to evaluate past, current, and future events, allowing their strategic assessment. achieving the goal of the national economy’s industrial sector sustainable development depends in many respects on the integration strategy of the country’s macroeconomic development. after all, the industrial sector, on the one hand, creates the society life material basis, and on the other, the parameters of economic influence on the internal consumer environment are laid, therefore. the processes of intra-industry and inter-sectoral integration confirm virtually all the country’s economy segments. the integration processes at the sectoral level are carried out in both vertical and horizontal direction. vertical integration in the industrial sector determines certain economic processes centralization mechanisms in its subjects’ activities. but the vertical integration is based on the economic processes’ productiontechnological indivisibility in the industrial sector of the economy. integration processes at the sectoral level are among the most important factors of the efficient functioning of the country’s industry economic units. table 2 sources and structure of the national economy’s industrial sector innovative activity financing period total expenses amount, mln uah including financing sources own state budget foreign investors other sources mln uah % mln uah % mln uah % mln uah % 1 2 3 4 5 6 7 8 9 10 2000 1757,1 1399,3 79,64 7,7 0,44 133,1 7,57 217 12,35 2001 1971,4 1654 83,90 55,8 2,83 58,5 2,97 203,1 10,30 2002 3013,8 2141,8 71,07 45,5 1,51 264,1 8,76 562,4 18,66 2003 3059,8 2148,4 70,21 93 3,04 130 4,25 688,4 22,50 2004 4534,6 3501,5 77,22 63,4 1,40 112,4 2,48 857,3 18,91 2005 5751,6 5045,4 87,72 28,1 0,49 157,9 2,75 520,2 9,04 2006 6160 5211,4 84,60 114,4 1,86 176,2 2,86 658 10,68 2007 10821 7969,7 73,65 144,8 1,34 321,8 2,97 2384,7 22,04 2008 11994,2 7264 60,56 336,9 2,81 115,4 0,96 4277,9 35,67 2009 7949,2 5169,4 65,03 127 1,60 1512,9 19,03 1140,6 14,35 2010 8045,5 4775,2 59,35 87 1,08 2411,4 29,97 771,9 9,59 2011 14333,9 7585,6 52,92 149,2 1,04 56,9 0,40 6542,2 45,64 2012 11480,6 7335,9 63,90 224,3 1,95 994,8 8,67 2925,6 25,48 2013 9562,6 6973,4 72,92 24,7 0,26 1253,2 13,11 1311,3 13,71 2014 7695,9 6540,3 84,98 344,1 4,47 138,7 1,80 672,8 8,74 2015 13813,7 13427 97,20 55,1 0,40 58,6 0,42 273 1,98 2016 23229,5 22036,0 94,86 179,0 0,77 23,4 0,10 991,1 4,27 2017 9117,5 7704,1 84,5 227,3 2,49 107,8 1,18 1078,3 11,83 source: formed on the basis (official site of the state statistics service of ukraine) baltic journal of economic studies 224 vol. 4, no. 5, 2018 in the conditions of international competition intensification, intra-industry integration provides the opportunity to manoeuvre the entities’ assets in order to effectively use them. the integration aspects of innovation and investment strategy are characterized by the following: joint research and applied research; ability to create or improve competitive industrial technologies, commodity products, etc.; most rational use of scientific and technical cooperation results; efficient allocation of resource support used in industrial activities; high adaptability and flexibility at changing conditions in the internal and external environment; quantitative and qualitative orientation on the national economy’s industrial sector segments activity results; sharing and commercialization of applied research and development results; implementation of innovation and investment activity priority directions; joint creation of innovation and investment infrastructure; mutual support in the financial and material relations between economic units in the industry. the integration processes’ positive influence on the national economy’s industrial segment development lies in the fact that the subjects do provide the innovation-investment component application in their economic activity that ultimately positively affects the effective functioning of the country’s macroeconomic environment. in today’s transformational and aggressive conditions, the innovation and investment technologies development and implementation, the creation of appropriate facilities and equipment are associated with significant costs, excessive for most of the national economy’s industrial segment subjects. sources of innovation and investment integration strategy financing are defined in figure 4. the usual practice in implementing innovationinvestment industrial projects is to attract external national and international capital in any form. in accordance with the current legislation, the financing sources for the innovation and investment integration strategies’ implementation may be: enterprise’s own or borrowed resources; funds of individuals and legal entities; resources from the state budget of ukraine and local territorial communities budgets; resources of specialized state and municipal innovative financial and credit institutions and other sources. the attracted resources use efficiency at the innovation and investment integration strategy objects in the national economy’s industrial segment is confirmed by the results of industry economic activity, which ultimately integrate into the financial, economic, social, and environmental effects. in practice, the innovation and investment integration strategies funding sources are closely interconnected and used in a complex while resource mobilization process to form a common strategy for the national industrial entity’s development. the strategy innovationinvestment regulation, rational by the results and balanced by the flexibility degree is impossible without regulatory and normative support. legal regulation as to the innovation and investment activity is carried out, firstly, by general civil and economic legislation and, secondly, by special laws regulating innovation and investment activity. the process of forming the national economy’s industrial segment innovation and investment integration strategy embodies a series of interconnected stages, which are presented in figure 5. the formation of innovation and investment activity strategic goals in the national economy’s industrial sector is carried out at the innovation and investment integration innovation-investment integration strategy subject innovation-investment integration strategy object financial effect economic effect social effect ecological effect internal sources external sources figure 4. innovation-investment integration strategy financing sources baltic journal of economic studies 225 vol. 4, no. 5, 2018 strategy elaboration first stage and should proceed, first of all, from the economic subject development strategy goals system: providing the own capital growth; increase in the level of income from innovation and investment integration activities; changes in proportions between real and financial investment in industry; change in capital investments’ technological and reproductive structure; change in the intra-industry and branch orientation of innovation-investment programs; society socio-economic needs satisfaction. the second stage defines the general period of innovation and investment integration strategy formation, which depends on the following conditions: predictability of the national economy’s development as a whole and innovation and investment environment particularly; the safe orientation of innovative, investment, and integration processes; development strategy period and its duration; economic entity sectoral affiliation and its size. this strategy development stage involves establishing the sequence and timing to achieve individual goals and to address identified strategic objectives. in the innovation-investment integration strategy targeted formulation process, the internal and external synchronization of actions in time is provided. the strategy internal synchronization involves coordinating in time the implementation of certain areas of innovation, investment, and integration processes, as well as the necessary support creation. the strategy’s external synchronization involves coordinating in time the innovation-investment integration strategy implementation with the industrial entity development strategy, as well as with predicted changes in the macroeconomic environment. at the third stage, the logic-mathematical apparatus is used that characterizes the industrial development innovation-investment integration strategy input and output parameters. at the following two stages, the development of the most effective ways to implement the innovation and investment integration activities’ strategic objectives takes place. the innovation and investment integration activity strategic directions development is based on the specified activity goals system. in the development process, the following issues are consistently addressed: identification of a priority innovative project; determination of the ratio for any investment forms in the developed strategy period; definition of horizontal or vertical orientation integration paths; substantiation of innovation and investment integration activity sectoral branch orientation; definition of innovation and investment integration activity national and international aspects. it should be noted that all directions and forms of innovation and investment integration activity in the 1 stage 2 stage 3 stage 4 stage 5 stage 6 stage 7 stage innovations-investment integration strategy forming stages assessing the elaborated strategy efficiency strategy implementation period determining input parameters function development substitution to the model parameters calculation output parameters development strategic goals forming strategy most efficient implementation ways elaboration internal sources external sources financing strategy elaboration strategy’s opportunities and threats searching figure 5. forming the national economy’s industrial segment innovation and investment integration strategy: process stages baltic journal of economic studies 226 vol. 4, no. 5, 2018 national economy industrial segment are implemented via the intermediary of the appropriate resource provision. resource provision strategy is an essential element not only in innovation and investment strategy but also in financial one. this strategy formation is intended to ensure uninterrupted innovation and investment integration activities in the foreseen parameters, financial resources efficient use, and maintaining the industry entities’ financial stability in future periods. resource support is carried out in the following sequence: forecasting needs in the total amount of resource support; search for internal financing sources; search for external financing sources; substantiation of methods for financing innovative and investment projects; resource structure optimization; creating a resource support model. the developed innovation and investment integration strategy effectiveness assessment is carried out at the sixth stage. the assessment is based on the following basic criteria: innovation and investment integration strategy consistency with the national economy industrial sector subject development strategy, consistency and correlation of goals, objectives, principles, directions, and stages of implementation between the identified strategies; innovation and investment integration strategy internal balance, to determine how consistently the strategic goals and directions of innovation and investment integration activities are mutually agreed; the sequence of innovation and investment integration strategy tasks; consistency with the innovation and investment integration strategy external environment estimated as far as it is in line with the predicted changes in economic development, investment climate in the national and international macroeconomic environment; the coherence of the innovations and investments market conditions; strategy application taking into account the available resources potential, assessment of potential opportunities for the industry as to resources formation at the expense of own sources; innovation and investment integration strategy effectiveness is based on determining its application effectiveness, taking into account financial, economic, social, and environmental outcomes. it should be noted that evaluation requires appropriate methodological support. in today’s conditions, it is possible to apply here the strategic assessment methodology at both micro and macro levels. at the last stage, research is being carried out on the innovation and investment integration strategy opportunities and threats. for a successful implementation of the strategy, the national economy industrial sector subjects should be able to predict the difficulties that may arise while its implementation in subsequent periods, therefore, it is necessary to focus on the threats and opportunities identification. instrumental support at this stage is such: swot analysis, bcg matrix, ansoff product matrix, space analysis, ge/mckinsey matrix, national products, technologies, organization lifecycle diagrams, porter’s graph “profitability – market share”, curve experience, value chain, etc. according to the study results, the innovation-investment integration strategy strengths and weaknesses are determined in real time. the innovation and investment integration strategy strengths and weaknesses to the same extent as threats and opportunities determine the real conditions for its implementation. thus, the national economy industrial sector cannot operate effectively under political instability conditions, in the absence of an adequate security system, at the market environment instability and the lack of welldeveloped innovation and investment integration strategy in the context of the national macroeconomic environmental development european vector. the strategy elaborates on how strategic management of innovation and investment integration processes in the industry will take place to ensure its effective functioning. innovation-investment integration strategy allows assessing the national economy’s industrial sector export potential and forming an export-import strategy, as well as an adequate foreign economic activity mechanism in the context of developing a free trade zone with the european union countries and other countries of the international environment. 5. conclusions constant transformational changes in the macroeconomic environment where the industry operates encourage the use of special mechanisms for the innovation and investment integration strategy implementation. the lack of a well-thought-out strategy, periodically adjusted to the changing internal and external environment is a significant disadvantage, which reflects the overall industrial development strategy weakness, which in turn complicates the use of modern advanced competitive technologies, innovative products manufacturing, adopting administrative, industrial, and commercial organizational and technological solutions, which significantly improve the economic activity structure and quality. the innovation-investment integration strategy is a strategic document for the national economy’s industrial sector priority development. this is the source of the strategic information and management methods accumulation for the future sustainable position of the national industrial sector. the methodical principles on elaborating an innovationinvestment integration strategy for the industry’s baltic journal of economic studies 227 vol. 4, no. 5, 2018 development in a globalizing environment include a phased decomposition of the strategic goal, using aggregated, differentiated, targeted, and detailed approaches, which provides the opportunity to determine the most effective directions of industry development, taking into account the strategy input and output parameters. the strategy allows assessing the national economy industrial sector export potential, forming exportimport orientations and an adequate mechanism of foreign economic activity when establishing and developing a free trade zone with the european union and other countries of the international environment. references: grigoriev, g. s. (2017). theoretical and methodological principles of state regulation of financial and economic processes in the conditions of globalization: monograph. kherson: oldi plus. khustova, k. m. (2015). investment-innovative strategy of the enterprise and approaches to its classification. financial space, 4(20), 183-187. retrieved from: https://fp.cibs.ubs.edu.ua/files/1504/15hkmdjk.pdf oficijnyj sajt derzhavnoji sluzhby statystyky ukrajiny [official site of the state statistics service of ukraine]. retrieved from: http://www.ukrstat.gov.ua/ on innovation activity (2012). law of ukraine dated 04.07.2002, no 40-iv. updated: 12/05/2012. retrieved from: http://zakon.rada.gov.ua/laws/show/40-15 (application date 15.01.2018) on investment activity (2017). law of ukraine dated 18.09.1991 no. 1560-xii. updated: 12/18/2017. retrieved from: http://zakon.rada.gov.ua/laws/show/1560-12 (application date 15.01.2018) baltic journal of economic studies 169 vol. 4, no. 2, 2018 corresponding author: 1 faculty of economics, taras shevchenko national university of kyiv. e-mail: pikusruslana3@gmail.com 2 department of insurance, banking and risk management, taras shevchenko national university of kyiv. e-mail: pnvuniv15@ukr.net 3 faculty of economics, taras shevchenko national university of kyiv. e-mail: natakudryavskaya@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-169-177 prospects of development of insurance mediation in ukraine ruslana pikus1, nataliia prykaziuk2, nataliia kudryavska3 taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to explore prospects for the development of insurance mediation in ukraine in line with the key vectors of the dynamics of the insurance mediation institute in europe. the objectives of the article are determined by the need to analyse: the new eu directive no. 97, the provisions of the new draft law of ukraine “on insurance”, and the mechanisms for introducing certification of insurance mediators in ukraine. methodology. general scientific and specific research methods were used for the present research. in particular, the method of synthesis and analysis was used in determining the modern approaches to addressing the key trends and prospects for the development of ukrainian insurance mediation; comparative method was used for a comparative analysis of the specifics of the european and ukrainian intermediary market; the method of ascending from abstract to specific was used when investigating the mechanisms of certification of insurance mediation. results. the prospects of development of insurance mediation in ukraine are investigated in the article. the new eu directive no 97 and the ways of modernizing the national mediation for the latter are analysed. mechanisms for improving the ukrainian institute of mediation according to the european document are identified. the new draft law of ukraine “on insurance” is studied taking into account the modern trends of the insurance mediation development. the necessity of adaptation of the drafted law according to demands of the new directive is emphasized. the necessity of introduction of certification for insurance mediators is justified; the benefits of implementation of this process in practice are pointed out. practical implications. the paper identifies the key practical issues and activities on an adaptation of ukrainian legislation to the european regulation under the european integration processes. first of all, in the legislation of ukraine, it is necessary to determine the individual distributors (insurance mediators) and the conditions of their registration. at the same time, the provisions on limiting the volume of insurance premiums, a list of insurance risks, regulation of insurance agents and insurance (reinsurance) brokers are the eligible issues for ukraine nowadays. notably, the development of mechanisms to control the efficiency, assessing the knowledge, professional training of insurance (reinsurance) mediators, and employees of insurance (reinsurance) companies is highly relevant for ukraine. under the condition of legislative consolidation in the insurance market of ukraine, it is possible to establish a requirement for insurance (reinsurance) mediators, entities, for which the consignment of insurance products is not the main activity, to have an insurance policy of professional liability. conditionally, the code of professional ethics for insurance brokers, acting in ukraine, is a response to the theses of the directive on fair, just, professional actions, and their compliance with the client’s interests. the question remains open on regulating the following issues at the legislative level: remuneration of insurance distributors, requirements for the compulsory conclusion of a contract on providing consumers with information on the status of the seller of the insurance product, the type of its remuneration and cross-selling. value/originality. the paper proves a highly relevant issue for ukraine – the implementation of the registration process for all categories of insurance mediators and the keeping track on statistics of their activities. it will justify the process of adaptation of ukrainian legislation to the eu standards. the research results prove the great significance of the adoption of the new law of ukraine “on insurance”, which will allow the introduction of a new procedure for legislative regulation of insurance (reinsurance) mediation in the field of insurance; improve the system of legal support for the development of insurance mediation, its state regulation, monitoring the activities of insurers and insurance mediators. the analysis of the existing draft of the law justifies taking into account the basic recommendations of directive 2009/138/eu baltic journal of economic studies 170 vol. 4, no. 2, 2018 1. introduction formulation of the problem. the dynamic development of modern ukrainian insurance mediation in ukraine requires a scientific understanding of its prospects, analysis and definition of effective ways of improving its functioning, mechanisms of adaptation to progressive european standards. the current scientific problem in this context is to the ways of improvement of the regulatory framework for the activities of insurance mediators because they determine the new promising ways of the evolution of national mediation considering the challenges and needs of the modern world. in view of the above, there is a need to analyse the provisions of the new eu directive no. 97 in the context of improving the regulatory framework of ukrainian insurance mediation, the draft of the law of ukraine “on insurance”, prospects for certification of insurance mediators. analysis of recent research and publications. the analysis of present scientific problem has been provided in a number of scientific works. in particular, in these scientific works, an attention is paid to the study of mechanisms for implementing changes in the state regulation of the insurance brokerage institution in order to improve its activities (gabidulin, 2012), the analysis of international experience of insurance mediators in projection on the ways to improve their activities in ukraine, international practices of assessing the reliability of insurance companies and their representatives (pikus, 2009), a comparative analysis of the regulation of the activities of insurance mediators in the world in view of the prospects of ukrainian mediators, features of state regulation of the insurance sector of ukraine, its trends and prospects, specifics of the activity of insurance brokers (prykaziuk, 2010, 2013 a, 2013 b), problems of certification of insurance mediators (prykaziuk, gubankova, 2013), ukrainian intermediary services in insurance, in particular, mechanisms of their adaptation to european ones (rasshyalov, 2008), the analysis of mechanisms of regulation of insurance mediation on the territory of ukraine in the conditions of european integration processes (sholoyko, 2016). previously unsettled parts of the general problem. existing scientific papers highlight certain aspects of the given scientific problem. instead, there is no comprehensive research devoted to the analysis of the key prospective vectors of the insurance mediation development in ukraine. in particular, there is no systematic study of the mechanisms of adaptation of the ukrainian mediation institution to the provisions of the new eu directive. the theses of the drafted law of ukraine “on insurance” need scientific comments in relation to insurance mediators. the study of certification of insurance mediators, its mechanisms and possible positive effects is relevant. the purpose of the paper is to explore prospects for the development of insurance mediation in ukraine in accordance with the defining vectors of the dynamics of the insurance mediation institute in europe. the objectives of the paper are determined by the need to analyse: the new eu directive no. 97, provisions of the new drafted law of ukraine “on insurance”, mechanisms for introducing certification of insurance mediators in ukraine. 2. comparative analysis of legislative provisions the strategic perspective of the development of ukrainian insurance mediation is to bring the basis of its activities to the developed european standards. adaptation of ukrainian regulatory legislation to european principles requires consideration of the provisions of the new eu directive no. 97, in particular, the maximum approximation of the work of insurance mediators to the stated requirements. ukraine’s european integration aspirations are stated in the association agreement between ukraine and the european union, the european atomic energy community and their member states (association agreement, 2014). the new eu directive no. 2016/97/eu on insurance distribution (idd) has of 2009 that is why it is necessary to align its provisions with the new directive no. 97. the paper suggests that certification of insurance agents includes the establishment of the level of education, training, professional skills, knowledge, the experience of a professional to confirm compliance with standards, requirements as to the conduct of insurance actions. national certification conditions must be in line with eu laws. it is proved that introduction of certification of insurance agents: increases the authority of professionals in the insurance market, payment for their labour; promotes the development of the insurance market; certifies the professionalism of insurance mediators; raises trust; meets the requirements of international insurance markets and labour markets; allows assessing the quality of mediator training; provides quality services to the insured; protects against fraud by insurance mediators, insurers or insurers. key words: insurance mediation, insurance agent, insurance broker, new eu directive, draft law of ukraine “on insurance”, certification of insurance mediators. jel classification: g10, g22 baltic journal of economic studies 171 vol. 4, no. 2, 2018 abolished the provisions of the directive 2002/92/ eu on insurance mediation. member states should implement its theses up to 23.02.2018 (idd. bipar , 2016). there are significant legislative changes among the conditions of the european document. article 3 of appendix xvii to the association agreement provides an explanation of ukraine’s actions in this situation. adaptation to european requirements in the field of regulation of insurance mediation, strengthening of the brokerage institution, in particular, is important for the sustainability of the ukrainian insurance market. in ukraine, in 2006–2017, the share of insurance premiums collected by insurance brokers in general insurance premiums ranges from 0.1% to 0.4%. this is a very low indicator. on average, there are about six insurance companies per one insurance broker currently. instead, it’s the other way round in the highly developed countries of the world (national commission, 2017). the reasons for the adoption of the new directive are clearly stated, in particular, the aim is to extend its effect to entities whose activities are to provide third parties with services for the sale of insurance and reinsurance products, that is, insurance mediators (sholoyko, 2016). the consignment of insurance products “implies the activity of consulting, offering or undertaking other work in preparation for the conclusion of insurance contracts, the conclusion of such contracts, or the provision of assistance in the administration and execution of such contracts, in particular, in the event of losses” (idd. bipar , 2016). an insurance intermediary is an “individual or legal person other than the insurance or reinsurance company or its employees and any intermediary, for whom the consignment of insurance products is an additional form of activity, which initiates or carries out activity on consignment of insurance products against commission” (idd. bipar , 2016). the new directive provides regulation of activities of insurance and reinsurance mediators, as well as insurance distributors in general. these include the full range of entities that sell insurance products, including direct sales through insurance (reinsurance) companies, sites, price comparison sites, and other information resources. it is necessary to clearly list the entities who are distributors and insurance mediators in ukrainian regulatory legislation. the document defines the conditions for registration of insurance distributors. it is noted that “insurance, reinsurance mediators, and intermediaries, whose additional activity is the consignment of insurance products, must be registered with the competent authority of the country of their registration” (idd. bipar , 2016). the new directive specifies the need to establish restrictions on the volume of insurance premiums, the list of insurance risks. the provisions do not apply to entities that sell insurance products, not as a primary activity. it regulates the activities of insurance agents, insurance and reinsurance brokers. in ukraine, there are a significant number of actors involved in the consignment of insurance services. therefore, we consider it necessary to expand the object and limits of regulation of insurance mediation, to establish restrictions on entities, for which the consignment of insurance products is the main type of activity. the new eu directive defines the criteria for qualification requirements and certification of insurance mediators. it is emphasized that there is a need to establish the continuous vocational training covering at least 15 hours per year. the particularity depends on the type of insurance distributor, the nature of the products it sells. the result of the successful training must be a certificate obtained by the insurance mediator. for ukraine, the implementation of these requirements is quite possible that involves development and introduction of mechanisms for setting up the training process, evaluation criteria, and certification conditions. the important point is the requirement of the directive to insurance (reinsurance) mediators, entities for which the consignment of insurance products is not the main activity, in possession of the policy of professional insurance liability. it is noted that “insurance and reinsurance mediators should have insurance coverage of the third-party professional liability” (idd. bipar , 2016). in ukraine, this point is envisaged in the new drafted law of ukraine “on insurance” and will come into force upon its adoption. the directive contains a list of qualifying requirements for insurance agents, which they need to conduct intermediary activities with the mandatory insurance of civil liability of motor vehicle owners (miclmvo). taking into account the development and variability of the insurance market, the directive focuses on the need for continuous improvement of the skills and level of knowledge of insurance distribution companies; the regulation of compulsory insurance of professional liability of individuals whose work may be harmful to third parties. in ukraine, this list should be determined by the government. among the requirements for an insurance distributor, the need for honest, fair, professional actions, their compliance with the interests of the client is emphasized. the code of professional ethics of insurance mediators in force in ukraine correlates with this provision. the new directive sets out the principles for remuneration of insurance distributors, specifies the requirement for the mandatory signing of a contract on providing information to consumers about the status of the provider of the insurance product, the nature of its remuneration. this provision in ukraine is virtually unregulated at the legislative level, remaining on the agenda as a priority for implementation. the new directive contains a cross-selling clause if the insurance product is an addition to a product or service. in this case, the insurance distributor is required to inform clients of the possibility to buy different components baltic journal of economic studies 172 vol. 4, no. 2, 2018 of a particular product separately. this should be accompanied by the necessary description of the various components in the contract. this issue remains unregulated in ukraine at the legislative level. currently, different types of individuals and institutions, including agents, brokers, bank insurance operators, insurance companies, travel agencies, car rental companies are entitled to distribute insurance products. in order to ensure uniform standards of service and consumer rights protection by operators, it is necessary for all these entities and institutions to be subject to the new directive. in contemporary insurance market, there are significant national norms, in particular, ukrainian ones, which create certain obstacles for the activity on consignment of insurance (reinsurance) products in the domestic market. therefore, the strengthening of the insurance market of ukraine is relevant. the introduction of the provisions of the new directive will improve the state regulation of the insurance market and maximize the scope of insurance services, primarily through the development of insurance mediation. protecting the interests and positions of national insurers requires giving them greater rights and opportunities to combine the high level of requirements for them, as well as increasing their personal responsibility for insurance contracts. the need for the adoption of the new law of ukraine “on insurance” (draft law of ukraine, 2012) is determined primarily by the outdated legislative field. the current law of ukraine “on insurance” was adopted in 1996. in 2012, the new drafted law was considered and adopted by the verkhovna rada of ukraine of vіі convocation in the 2nd reading. but the powers of this convocation were terminated ahead of schedule, and the final consideration of the new law was slowed down. the length of time has aggravated the urgency and the need for its adoption. the explanatory note to the drafted law states that “an active participation of domestic insurers in international insurance relations, as evidenced by the opening and further liberalization of the ukrainian financial market under the accession to the world trade organization (wto) and the association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other hand, require the unification of standards of state insurance supervision and regulation in ukraine, putting them in line with the provisions established by the international association of insurance supervisors (iais), and directives of the european union” (draft law of ukraine, 2012). adoption of the new wording of the law will allow introducing a new procedure for the legislative regulation of insurance (reinsurance) and mediation in the field of insurance. this applies to residents and nonresidents on the territory of ukraine. the system of legal support for the development of insurance mediation, its state regulation will be improved. the necessity of a new bill is conditioned by the fact that public trust in the activities of insurers and reinsurance mediators is low in ukraine. thus, about 30% of net insurance premiums come from insured individuals (draft law of ukraine, 2012). among the key goals and objectives of the draft law, there are the adaptation of the ukrainian legislation in the field of insurance mediation to the european one and the improvement of the monitoring of activities of insurers and insurance mediators by state regulation. however, the existing drafted law takes into account the basic recommendations of directive 2009/138/eu of 2009. therefore, it is necessary to align its provisions with the theses of the new directive no. 97 of 2016. the existing drafted law suggests determining the procedure for regulating mediation in ukraine in accordance with eu legislation; determining the legal status of actuaries and auditors in the field of insurance. the drafted law provides general and specific requirements for the activities of insurance brokers and insurance agencies in accordance with international principles and standards. the eu proposals on the availability of two separate accounts for brokers and insurance agencies for their own organizational and economic activity, transfer of insurance payments and insurance payments, as well as the duty of a broker or insurance agency to insure their professional liability with not less than 5 million uah for each insured event are taken into account (draft law of ukraine, 2012). a new law will substantially strengthen principles of activities of participants in the insurance market, in particular, those of agents and brokers. here the principles of mediation in insurance, the peculiarities of state regulation and supervision are determined. intermediary activities in insurance are defined as “activities for the remuneration for consulting, offering, preparing, arranging, and maintaining insurance (reinsurance) contracts, as well as other actions aimed at the conclusion, execution, and payment of such contracts, including the determination of the degree of insurance risk, its evaluation and analysis, registration of documents and participation in accruals on payments of insurance (reinsurance) premium and/or insurance (reinsurance) remuneration” (draft law of ukraine, 2012). an insurance agent is defined as “a person, who carries out mediator insurance activities for remuneration and acts on behalf of or in the interests of the insurer or insurance agency and does not participate in the calculation of insurance payment” (draft law of ukraine, 2012). an insurance broker is an individual entrepreneur, a legal entity, or a permanent representation of an insurance and/or reinsurance broker, a non-resident, which carries out mediator activities in the field of insurance (reinsurance) for remuneration and whose information is included in the state register of insurance brokers” (draft law of ukraine, 2012). insurance mediators include insurance brokers and insurance agents. section vii is devoted to the definition of the framework of their baltic journal of economic studies 173 vol. 4, no. 2, 2018 activities. mediator insurance activities can be carried out by insurance agents; insurance agencies included in the state register of insurance mediators; insurance brokers included in the state register of insurance mediators; insurance and/or reinsurance brokers (non-residents who, in accordance with the established procedure, have indicated their intention to engage in activities in ukraine). the drafted law suggests, in accordance with european standards, such a definition of the functions of insurance intermediaries  – “to provide consultations, perform other preparatory work for the conclusion of insurance and/or reinsurance contracts, or concluding such agreements and assistance in the administration and execution of such contracts, in particular, participation in the investigation in the case of an insured event and the settlement of a loss performed by the insurer or employees of the insurer, is not considered as a mediation” (draft law of ukraine, 2012). it is emphasized on the necessity to carry out mediator activities in accordance with the terms of the agreement between the insurance mediator and the insurer; it is suggested to create the conditions for the maximum availability of information concerning nonresident brokers, in particular, to make it public on the official website of the authorized agency. article 80 describes the requirements for an insurance broker and an insurance agency. in particular, the head of an insurance broker, insurance agent, insurance broker (individual entrepreneur) must meet the following requirements: legally competent, higher education or experience in the field of insurance (reinsurance) of at least 2 years; the absence of a conviction non-cancelled or not taken off in the manner established by law for the intentional crimes in the field of economic and service activities; during the last 5 years, can not to be the head, head accountant of legal entities recognized as bankrupt or subjected to the procedure of forced liquidation during the period of their stay in such positions (draft law of ukraine, 2012) (see figure 1). the principles of inclusion in the state register of insurance mediators are set out in article 81. the positive aspect of the drafted law is the means of regulating the activities of insurance mediators, their accountability (article 83). article 85 describes the fig. 1. requirements for an insurance broker and insurance agent for performing their intermediary activities source: compiled by authors according to (draft law of ukraine, 2012) for an insurance broker, insurance agent to perform their mediator activities requirements be legally competent; have higher education or experience in the field of insurance (reinsurance) of at least 2 years; have a conviction non-cancelled or not taken off in the manner established by law for the intentional crimes in the field of economic and service activities; during the last 5 years, can not be the head head accountant of legal entities recognized a bankrupt or subjected to the procedure o forced liquidation during the period of the stay in such positions. have the information necessary for the conclusion of an insurance (reinsurance) contract, including on the availability of necessary licenses, the size of insurance rates and terms of insurance (reinsurance), which are offered inform the client about the insurers, from which the insurance broker, the insurance agent receives remuneration in the case if the insurance broker offers the services of such insurers; within a month from the date of change of location, inform the insured (reinsured) regarding the relevant changes have a valid insurance contract of professional liability of insurance broker, insurance agent for an insurance amount of at least 5 million uah in respect of each insured event or 10 million uah in respect of all events baltic journal of economic studies 174 vol. 4, no. 2, 2018 requirements for the procedure for the mediator activity of an insurance broker and insurance agency. article 86 describes the requirements for the procedure of mediator activities of insurance agents, in particular, the obligation of the insurer to conclude an agreement with his insurance agent, which specifies the scope of the activity of the insurance agent, classes of insurance; the size of the maximum insured amount; agent’s authority. article 102 defines the fundamentals of state supervision of insurance brokerage activities, in particular, revisions (inspections) of insurers, insurance brokers by representatives of the authorized authority or auditors. consequently, the new drafted law of ukraine “on insurance” advances the activities of ukrainian insurance mediators to european regulations and standards. nevertheless, it is necessary to harmonize its provisions with the theses of the new eu directive no. 97. the key differences that exist in the new eu directive, the drafted law of ukraine “on insurance” and the current national insurance mediator legislation are summarized in table 1. 3. the issue of the insurance mediators’ certification their certification is relevant in the context of prospects for the development of ukrainian insurance mediation. state registration is mandatory for insurance brokers of ukraine, which concerns legal entitiesentrepreneurs, citizens-entrepreneurs, who are officially registered in the state register of insurance brokers of ukraine; representative offices of foreign insurance brokers registered in ukraine as taxpayers, and in the state register of insurance brokers. as for insurance agents, they are not required to register. this applies to legal entities-entrepreneurs, for whom mediation in the insurance market is an exclusive type of activity (insurance agencies); legal entities – subjects of entrepreneurial activity, for which mediator activity in the insurance market is not an exclusive type of activity (travel agencies, consulting firms, transport and shipping organizations, law offices, etc.); citizen entrepreneurs who work with the insurance company on the basis of an agency agreement; individuals who carry out their activities as insurance agents under a contract with an insurance company; insurance companies-residents who implement insurance services of foreign insurers under the terms of an agency agreement; specialized associations of insurers with the right to implement insurance services of members of the association; representative offices of foreign insurance agents – legal entities registered in ukraine as taxpayers; representatives of foreign insurance agents of individualsentrepreneurs (prykaziuk, gubankova 2013). certification has a positive effect on the development of insurance mediation and the insurance market in general. researchers highlight the following advantages in introducing certification of insurance agents: “1) increased demand and “value” of professionals in the labour market, 2) development of a positive image in the insurance market, 3) demonstration of the qualification reliability of insurance mediators; 4) compliance with table 1 comparative analysis of the regulation of insurance mediation under the new eu directive, the drafted law of ukraine “on insurance”, and the current legislation eu directive drafted law of ukraine “on insurance” current legislation on insurance mediation 1. distribution in insurance; 1. mediation in insurance; 1. mediation in insurance; 2. necessity of registration of insurance distributors with the competent authority; 2. existing provision for compulsory registration of insurance agents and insurance brokers with the competent authority; 2. mandatory registration only for insurance brokers with the competent authority; 3. established criteria for the qualification requirements and certification of insurance mediators; 3. established quality requirements for agents and brokers; 3. there are no clear requirements regarding the qualifications of agents and brokers; 4. the norm on continuous professional training; 4. introduces the provision on compulsory professional training; 4. there is no compulsory professional training; 5. obligatory professional liability insurance policy; 5. introduces a clause on an obligatory policy of insurance of professional liability of intermediaries; 5. there is no obligatory policy of insurance professional liability; 6. requirement of fair, just, professional actions in accordance with the interests of the client; 6. requirements to insurance intermediaries contain provisions regarding the correspondence of their professional activities to the interests of clients; 6. code of professional ethics of insurance intermediaries is in force; 7. compulsory conclusion of a contract on the provision of consumers with information regarding the status of the seller of the insurance product, the type of its remuneration. 7. provision is made for the mandatory conclusion of such an agreement. 7. there are no provisions on the mandatory conclusion of such an agreement source: compiled by the authors according to (draft law of ukraine, 2012; idd. bipar , 2016) baltic journal of economic studies 175 vol. 4, no. 2, 2018 the requirements of international labour markets; 5) opportunity to obtain an independent assessment of the quality of mediator training; 6) provision of quality services to the policyholder; 7) protection against fraud by insurance mediators, insuring party or insurers” (prykaziuk, gubankova, 2013). regarding the prospects of certification of insurance intermediaries as an important requirement for ensuring the efficiency and qualification of their activities, we see the following ways and mechanisms for its implementation. first: the creation of a working group that includes representatives of the ministry of finance, the national financial services commission, associations of insurance mediators and insurers, independent experts. the purpose of the activity is to develop the concept of a state program for the development of insurance mediation in ukraine, the certification of insurance intermediaries, in particular. second: the introduction of registration of all categories of insurance mediators. third: a systematic publication of insurance brokers’ statistics; activation of publications devoted to issues of insurance mediation in the media. the experience of other countries with a highly developed insurance market with certification of insurance agents will be useful, namely, establishing the full compliance of the qualitative characteristics of the insurance mediator (its level of education and professionalism) with the latest world requirements and standards. we believe that the certification of insurance agents is not a competency test, the purpose of which is to determine the professionalism of the agent in accordance with the position that he occupies. in our opinion, the task and purpose of certification are to establish the level of education, training, professional skills, knowledge, the experience of a professional to confirm his compliance with certain standards, requirements for the conduct of the insurance operations. if the competency test of insurance agents is carried out by the employer, then their certification must be carried out by the relevant certification body (third party) (certification association “russian registry”, 2015). different provisions regarding the certification of insurance mediators are typical for world practice. there are several ways to certify insurance mediators that are carried out in different places: the school of insurance mediators; association of entities of insurance activity; certification body for insurance mediators; state supervisory authority. legislation of the eu states has clear requirements for certain insurance agents to undergo special training. each country has specific features related to the certification of insurance mediators, which are determined by the type of insurance. types of certification of insurance mediators in the usa are particularly common, where they are certified for life insurance, accident, health; property and liability; car rental; real estate insurance; bail; one type of insurance; insurance of individuals. the certification process has a positive effect on the development of insurance mediation (prykaziuk, gubankova 2013). consequently, the introduction of certification of insurance mediators enables them to increase their credibility in the market and trust them from the side of clients; increase the payment of their labour; promotes the development of the insurance market; certifies the professionalism of insurance mediators; meets the requirements of international insurance markets and labour markets; gives an opportunity to independently evaluate the quality of mediator training; provides quality services to the insured; protects against fraud by insurance mediators, insuring party or insurers (prykaziuk, gubankova 2013). after the adoption of the new tax code of ukraine on 01.01.2012, the status of insurance agents has changed. from now on, they must be full-time employees of insurance companies or work under a simplified taxation system, according to which the payment of 5% of the commission fee is obligatory (tax code of ukraine: law of ukraine, 2010). in essence, the first option for the entry of insurance agents to the staffing of insurance companies did not work. this leads to an additional payment of contributions to state funds by the insurers, which is 36.76% and cannot be profitable for insurance companies. regarding the second option, it complicates the activities of insurance agents, which should be registered as subjects of entrepreneurial activity. the latter leads to the mandatory monthly payment of contributions and independent accounting. given this, as well as the specifics of the national insurance market, such steps will lead to the fact that insurance agents will receive significantly lower insurance premiums. the development of agent activities is a relevant problem. after all, many insurance agents also perform the functions of the broker, working with several insurance companies; insurance agents are not always responsible to the insured; there is no training of insurance agents aimed at the professional consignment of insurance products. the need for certification of insurance agents for all types of insurance is growing. this will enable raising the culture of the insurance market in general and solve many problems. by this time, the ukrainian insurance market has a low level of public confidence in insurance agents and their activities. this problem can also be solved by the introduction of certification of insurance agents in ukraine. 4. findings it is important to approve the certification procedure for insurance agents and implement it in practice. this is a lengthy process that can be implemented in several stages. we see such mechanisms and prospects for implementing this process in practice. first: baltic journal of economic studies 176 vol. 4, no. 2, 2018 the development of a comprehensive training and testing program for insurance agents, which would include their general training and training in majors. the association of insurance industry participants is to be among the developers of such a program, in particular, the league of insurance organizations of ukraine, the ukrainian federation of security, the federation of insurance mediators of ukraine, the motor (transport) insurance bureau of ukraine, the national commission for state regulation in the financial services markets, and others. second: on the basis of the law of poland “on insurance mediation”, taking into account its achievements and taking into account the ukrainian insurance market, the adoption of the law of ukraine “on insurance mediation”. third: adding the relevant section to the drafted law “on insurance”. this can be done by the federation of insurance mediators of ukraine, the national financial services commission, and the verkhovna rada of ukraine. fourth: disclosure of the requirements for a training program for insurance agents on the website of the national financial services commission. fifth: for the ukrainian insurance market, it is expedient for insurers to train their agents independently. sixth: public discussion of the issues of certification of insurance agents in ukraine, involving representatives of various insurance companies, authorities, associations of insurance activity entities, mass-media, etc. seventh: the creation of a single electronic registry of insurance mediators in ukraine. here the ministry of justice of ukraine is the authorized body. eighth: it is advisable to test insurance agents throughout the territory, submit the results to the supervisor. ninth: based on the results of testing, the national financial services commission, being the authorized body, enters the data on insurance agents into a single state register. in general, the process of introducing certification will be long and eventful. it should be accompanied by the development of certification requirements for insurance agents. it is necessary to take into account the insurance agent’s passing of the training course in the insurance company by specialization; applying for examinations and its payment (for example, it is 150 zloty in poland, and up to 60$ in the usa , successful completion of the exam, verification by the authorized body within 30 days of all documents and placing/or not placing of the insurance agent in a single register of insurance intermediaries. after ward, the agent can carry out his insurance activity, already being present in the database. it is necessary to create a register of insurance agents, which will certif y the level of their development in ukraine. introduction of certification of insurance agents requires the amendment of the current normative legal acts, their coordination with the provisions of european regulations. 5. conclusions the europeanization of the domestic regulatory mechanism needs to take into account the provisions of the new eu directive no. 97, which regulates the activities of insurance (reinsurance) mediators and distributors. it is necessary to determine the individualsdistributors (insurance mediators) and the conditions of their registration in the regulatory legislation of ukraine. provisions on limiting the volume of insurance premiums, a list of insurance risks, regulation of insurance agents, insurance (reinsurance) brokers are eligible for ukraine. the issues of development of mechanisms of efficiency control, assessment of knowledge, professional training of insurance (reinsurance) mediators, and employees of insurance (reinsurance) companies are relevant for ukraine. under the condition of legislative consolidation in the insurance market of ukraine, it is possible to establish a requirement for insurance (reinsurance) mediators, entities for which the consignment of insurance products is not the main activity, to have a policy of professional liability insurance. the code of professional ethics for insurance brokers, acting in ukraine, is a response to the thesis of the directive on fair, just, professional actions and their compliance with the client’s interests. it is necessary to regulate at the legislative level the issues of remuneration of insurance distributors, the requirements for the mandatory conclusion of an agreement to provide consumers with information on the status of the seller of the insurance product, the type of remuneration; cross-selling. these are the main directions of adaptation of ukrainian legislation to the european one in the context of european integration processes. the adoption of the new law of ukraine “on insurance” is of great significance that will allow introducing a new procedure for legislative regulation of insurance (reinsurance) mediation in the field of insurance; improving the system of legal support for the development of insurance mediation, its state regulation, monitoring the activities of insurers and insurance mediators. the existing drafted law takes into account the basic recommendations of directive 2009/138/ eu of 2009, so it is necessary to align its provisions with the new directive no. 97. the definition of the requirements for an insurance broker and insurance agency is of european nature that takes into account their professional level, training, work experience, and requirements for mediation by the insurance broker and insurance agency. the implementation of the registration process for all categories of insurance mediators and the keeping track of statistics of their activities is relevant for ukraine. this will evidence the adaptation to eu norms. certification of insurance agents is the establishment of a level of education, training, professional skills, baltic journal of economic studies 177 vol. 4, no. 2, 2018 knowledge, the experience of a professional to confirm compliance with standards, requirements for the conduct of insurance activities. national certification conditions must be in line with eu laws. introduction of certification of insurance agents increases the authority of professionals in the insurance market, payment for their labour; promotes the development of the insurance market; certifies the professionalism of insurance mediators; raises trust in them; meets the requirements of international insurance markets and labour markets; allows assessing the quality of mediator training; provides quality services to the insured; protects against fraud by insurance mediators, insuring parties or insurers. references: certification association “russian registry” (2015) retrieved from: http://www.rusregister.ru/services/ staffcertification gabidulin i. (2012) chto nuzhno izmenit v gosudarstvennom regulirovanii, chtoby institut strahovogo brokerazha razvivalsya v ukraine [what needs to be changed in the state regulation so that the insurance brokerage institution can be developed in ukraine]. retrieved from: http://dedal.ua/dbm.php/pablications national commission for the regulation of state financial services markets (2006-2017) ohliad strakhovoho rynku [overview of the insurance market]. retrieved from: http://nfp.gov.ua/content/strahoviy-rinok.html pikus r . (2009) mizhnarodnyi dosvid strakhovykh poserednykiv [international experience of insurance mediators]. bulletin of the taras shevchenko national university of kyiv, series: economics, no. 107/108, pp. 20-23. tax code of ukraine: law of ukraine (2010) no. 2755, vi of 02.12.2010. retrieved from: http://www.rada.gov.ua prykaziuk n.v. (2013 a) komparatyvnyi analiz rehuliuvannia diialnosti strakhovykh poserednykiv u sviti [comparative analysis of regulating the activity of insurance mediators in the world]. formation of market relations in ukraine, no. 4 (143), pp. 143-149. prykaziuk n.v. (2010) derzhavne rehuliuvannia strakhovoho sektoru ukrainy: tendentsii ta perspektyvy rozvytku [state regulation of the insurance sector of ukraine: trends and prospects of development]. finance of ukraine, no. 7 (176), pp. 101-108. prykaziuk n.v. (2013 b) diialnist strakhovykh brokeriv v ukraini ta yii rehuliuvannia [the activity of insurance brokers in ukraine and its regulation] effective economy. electronic professional edition, no. 2. retrieved from: http://www.economy.nayka.com.ua/?op=1&z=1780 prykaziuk n.v., gubankova o.o. (2013) sertyfikatsiia strakhovykh ahentiv ta perspektyvy yii vprovadzhennia v ukraini [certification of insurance agents and prospects for its implementation in ukraine]. investments: practice and experience, no.7, pp. 73-76. retrieved from: http://nbuv.gov.ua/ujrn/ipd_2013_7_19 draft law of ukraine (2012) “pro strahyvannia” [“on insurance”]. retrieved from: http://w1.c1.rada.gov.ua/pls/ zweb2/webproc4_2?pf3516=1797-1&skl=9 rasshyalov d. (2008) poserednytski posluhy u strakhuvanni [intermediary services in insurance]. bulletin of taras shevchenko national university of kyiv, series: economics, no. 106, pp. 35-37. association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other hand from june 27, 2014 (2014). verkhovna rada of ukraine. retrieved from: http://zakon5.rada.gov.ua/laws/show/984_011 the civil code of ukraine: law of ukraine no 435 iv of 16.01.2003 (2003). retrieved from: http://www.rada.gov.ua sholoyko a. (2016) rehuliuvannia strakhovoho poserednytstva v umovakh yevrointehratsiinykh protsesiv ukrainy [regulation of insurance mediation in the conditions of european integration processes of ukraine], bulletin of taras shevchenko national university of kyiv, series: economics, no. 3 (180), pp. 32-36. idd. bipar (2016) retrieved from: http://www.bipar.eu/en/key-issues-positions/from-imd-i-to-imd-ii baltic journal of economic studies 94 vol. 4, no. 5, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. e-mail: stanislavivanov713@gmail.com 2 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. e-mail: gromenko.u@gmail.com 3 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. e-mail: rodinavaleriaviktorovna@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-94-99 problems of banking legal relationships stanislav ivanov1, yuliia hromenko2, valeriia rodina3 abstract. in modern conditions of management, the aspects of ensuring the stability of banks and the development of the banking system of ukraine are of particular importance. during 2014-2017 in our country, 88 banks were recognized as insolvent, almost all of them – commercial. this tendency is disappointing. most scholars assert that the turnaround of the banking system is possible only through the improvement of deposit, credit, and settlement operations. this statement is undoubtedly true, but these scholars forget about the importance of regulating the legal relationships that arise in the banking sector and establishing the interaction between the entities of such legal relationships. the purpose of the research is to determine the essence of banking legal relationships in ukraine based on the existing scientific approaches, the current legislation of ukraine and the practice of its implementation, as well as the specific and problematic aspects of harmonizing the interests of the entities of the relevant legal relations. for this purpose, the essence and structure of banking legal relationships are considered. it is determined that the main structural elements of these legal relationships are: 1) objects, 2) the content of banking legal relationships, 3) the basis of banking legal relationships – legal norms and legal facts, 4) entities (participants) – the direct participants in banking relationships, the bearers of mutual rights and obligations. the conclusions of the article state that ukrainian banking legislation requires a serious revision concerning the coordination of the interests of the entities of banking legal relationships. the key task is to eliminate unnecessary and outdated normative and legal acts that could cause legal confusion or impose excessive burdens on entities of banking legal relationships. in developing the modern regulatory framework for the interaction of entities of banking relationships, a new rapid spread of cyber-risks, compliance risks and financial crime risks, which significantly affects the state of the banking system and is not reflected in the current banking legislation of ukraine, should be taken into consideration. banks as the main entities of banking relationships should assume risks and financial responsibility. it will contribute to the stabilization of the banking system of ukraine and the economic development of the national economy. key words: bank, banking service, entity, legal relationships, banking system, interests. jel classification: g21, k30 1. introduction today, ukraine faces an important task, which is to ensure the active development of the economy, to strengthen the democratic principles of our state, and to raise the living standards of the population. it is impossible to achieve this without the effective functioning of the credit and financial mechanism, the component of which is the banking system. the banking system is a connecting link between the subjects of microeconomics and macroeconomic processes and it substantially affects the success or failure of any economic reforms in our country. unfortunately, nowadays the statistics affirm that the banking system of ukraine is not in the best state. thus, according to the data of the national bank of ukraine (nbu), since the beginning of 2017, financial institutions have closed 26% of their subsidiary offices. a part of the branches was closed due to the insolvency of banks. for the period of 2014-2017, the nbu declared 88 banks insolvent, and 27 of them were withdrawn from the market. other banks spare: reduce old offices in order to open offices of a new type or invest in the development of remote service channels. deposit, credit, and settlement operations play a key role in the activities of banks. however, it is also important how each separate bank will build legal relationships with other entities of the banking system. that is why every year the necessity of solving theoretical and practical problems concerning the enforcement of optimal relations between the interested parties of banking legal relationships is baltic journal of economic studies 95 vol. 4, no. 5, 2018 becoming increasingly important, but the system approach to solving these problems has not yet been formed. intensification of globalization and integration processes in the global economy requires the banking system of ukraine to enter the international markets. ukraine should become a full member of the international banking system. according to the law of ukraine “on banks and banking”, the banking system of ukraine consists of the national bank of ukraine and other banks, as well as branches of foreign banks, which have been established and operate in the territory of ukraine in compliance with the present law provisions and other laws of ukraine. a bank is a legal entity that has an exclusive right, under the nbu license, to render the banking services and is included in the state register of banks. due to the existence of banks, there is a constant circulation and accumulation of capital. banks are in a state of constant search and struggle in new and upgraded segments of the markets, as well as the entities of the real economy sector. globalization and intensification of the competition stimulate banks to in-depth study of the banking segment of the financial market of the country; understanding and taking into account the requests of existing and potential clients, the needs of their business; development and introduction of new financial services and their promotion on the market; the use of elastic and differentiated pricing methods; formation and strengthening of the client base (vasylieva, 2014). the banking system of ukraine has a permanent evolutionary development, which also confirms the relevance of scientific research. a set of interrelated and complementary general scientific and special methods aimed at obtaining objective results was used to realize a goal of the research process. thus, the method of historical and logical analysis of literary sources was applied to study the level of problem development in the domestic and foreign scientific literature. method of functional and structural analysis involves the study of state regulation of entities relations. the statistical method is used for the analysis of facts and phenomena, their synthesis for research. system and complex methods ensured the integrity of the study. the method of generalization was used to formulate conclusions, recommendations of ways to improve the relevant legal relationships. 2. scientific approaches to the problem of banking legal relationships the problem of banking legal relationships is not new; a number of foreign and domestic scholars paid attention to it in their scientific works. v. nahrebelnyi (2010), investigating the public and legal principles of regulation of the banking system, stated that the characteristic feature of the legal relationships formed in the banking system is their mediation of relations concerning the permanent or perpetual movement of foreign funds between their members, based on a certain level of trust between them. the higher the level of trust between the participants of these relations, the more stable and dynamic the financial and economic relationships, and as a result, this will benefit the country’s economic system as a whole. a. slavko (2016), studying the peculiarities of regulation of banking relationships under the conditions of the regime of the occupied territory and the regime of the anti-terrorist operation, noted that the public and legal regulation of banking relations in the occupied territories and zone of ato actually reduces to the prohibition of the activities of banking institutions and to the termination of the implementation of any financial operations until the possibility of restoring the nbu’s ability to conduct banking supervision. another scientist m. kuntsevych (2016) devoted his scientific research to clarify the features of the subjective composition of banking relationships related to banking secrecy. s. kurovskyi (2014) considered the features of banking relationships as an object of financial and legal regulation, determining the features of these legal relations and their characteristics. in addition, the author analysed the peculiarities of the objective regulation of banking law and banking legislation. d. hetmantsev and n. shuklina (2007) devoted their textbook “banking law of ukraine” to a separate issue to clarify the essence of the concept of “banking relationships”. in addition, scientists gave a rather exhaustive list of peculiarities of banking legal relationships, which many other scholars used as a basis for their studies. v. vashchenko in the textbook “banking law” (2006) allocated a separate chapter, in which he considered the concept, composition, types, and features of banking legal relationships. the author emphasized that banking relationships can be administrative, financial, civil or economic by their legal nature. taking into account the heterogeneity of banking relationships, v. vashchenko distinguished both common and distinctive features of banking relationships. a. kovalenko (2016), considering the public and legal regulation of banking activity in ukraine in the context of european integration, devoted a separate unit to clarify the essence of the concept of “banking relationships”. the scholar stressed the need to distinguish between public and private relations in the field of banking, based on the public functions of the bank. in addition, the author determined the entities of banking relationships and provided a detailed description of their activities. the question of subjects of law and entities of legal relations was considered in the general theory of law and the theory of administrative law in the works of s. alekseiev (1982), r . khalfina (1974) and ts. yampolskaya (1958). in the scientific article, t. chernadchuk (2013) considered the theoretical issues of determining the entity of information and banking legal relationships. the scientist concluded that the entities of information banking legal relationships baltic journal of economic studies 96 vol. 4, no. 5, 2018 are individualized or specific subjects of information law, which realize their legal personality in legal relationships, acting as “implementers” of information objective rights and obligations in the banking sector. thus, banking relationships were the subject of scientific researches, in which scholars considered this problem in different ways. however, the analysis of their works proves that almost no attention was paid to the problems of determining the legal mechanisms for the coordination of the interests of the entities of banking legal relationships, as well as the protection of their financial interests. 3. banking services today, the ukrainian government is actively reforming the banking activities. the principles, methods, and instruments of banking relations are changing, as well as the regulatory framework is being improved. the subject of banking law is the social relations arising in the banking activities, in particular, relations that govern the process of building, functioning, and development of both the banking system and a separate bank, the implementation of banking services by banks, the regulation of the banking system by state bodies in the interests of citizens, organizations and the state, etc. (kostiuchenko, 2003). banks in ukraine are entitled to engage in banking activities based on a banking license by means of rendering banking services. most scholars believe that banking operations or services consist of satisfying the needs of individuals and legal entities in bank servicing. in accordance with the current legislation, only banks are entitled to render banking services. the banking services market acts as the foundation for ukraine’s economic development. according to o. vovchak (2008), banking services are actions of the bank aimed at increasing its profitability, or various types of banking activities that accompany and optimize banking transactions. the banking service can be regarded as the transfer of banking information. the peculiarities of banking services are: 1) as a rule, additional resources are not required for rendering services to banks; 2) banks receive the largest part of the income from rendering services in the form of a commission; 3) within rendering services, the activities of banks aimed at committing legal and actual actions, which are not directly related to the financial consequences. in accordance with the law of ukraine no. 2121ііі “on banks and banking” as of december 7, 2000, banking services include: 1) accepting deposits in currency and investment metals from an unlimited number of legal entities and individuals; 2) opening and maintaining customers’ current (correspondent) accounts, including those in investment metals, and escrow accounts; 3) placing the currency and investment metals accepted as deposits (including the balances on the current accounts) on the bank’s own behalf and for its own account. in addition to rendering the financial services, any bank is entitled to be engaged in the activities related to: investments; issue of its own securities; lottery tickets issue and distribution, holding lottery draws; custody of valuables and leasing of individual bank safes; cash collection and cash in transit services; maintenance of registers of registered securities holders (except own shares); consulting and information services with regard to the banking and other financial services. a bank may render banking and other financial services in domestic currency and, subject to a separate license from the nbu, in a foreign currency. 4. the structure of banking relationships in the process of meeting the need for banking services, economic entities enter into certain economic and legal relations with banks. yu. vashchenko (2006) considers banking relationships as relations regulated by the law in the field of banking, namely in the process of managing the banking system, implementing such operations as accepting deposits from legal entities and individuals, opening and maintaining current accounts of customers and correspondent banks, including the transfer of funds from these accounts using payment instruments and passing them into accounts, placing borrowed funds on their own behalf, on their own terms, and at their own risk, as well as performing other operations on the basis of a license issued by the national bank of ukraine or a separate permit. the structure of banking relationships consists of the following elements: – objects – banking activity and relations arising in the course of rendering banking services (property (money, securities and metals), non-property (bank secrecy and reputation) and organizational (corporate responsibility, internal structure, banking supervision)); – the content of banking legal relationships – implementation of subjective legal rights and fulfilment of legal obligations; – the basis of banking legal relationships – legal norms and legal facts; – entities (participants) of banking relationships – the state, legal entities, and natural persons. the entities of banking relationships are the direct participants in banking relationships; they are the bearers of mutual rights and obligations. they must actively interact with each other in order to exercise their rights and obligations fully, and the state must create all the necessary conditions for the implementation of such interaction, in which the interests of any participant will not be violated. in the process of interaction between the entities of banking legal relationships (figure 1), they are guided by the constitution of ukraine, baltic journal of economic studies 97 vol. 4, no. 5, 2018 decrees of the president of ukraine, resolutions of the verkhovna rada of ukraine, general laws; special laws; normative acts of the national bank of ukraine; internal organizational standards; international legal acts. experts point out that reforms harmonizing the interests of the entities of banking legal relationships as to de-offshorization are still being slowed down. thus, within the framework of the rules of transfer pricing (the law of ukraine no. 408-vii as of july 04, 2013) the concept of “controlled operation” is introduced, as well as a list of “low tax” specializations, with which transactions are recognized as controlled. however, today there is no practice of applying these rules, and they are quite easy to avoid. the duty to disclose the ownership structure and the final beneficiary (the law of ukraine no. 1701-vii as of october 14, 2014) also has weaknesses. the head of a company must provide the state registrar with information about the ultimate beneficial owner (controller) of the company, including the ultimate beneficiary of its founder (if the founder is a legal entity). he is also obliged to provide information about the ownership structure of founders – legal entities, which allows identifying individuals as owners of substantial participation in these legal entities. failure to provide such information entails imposing an administrative fine of up to 8,500 uah on the manager. however, this is not such a large pay for business security. moreover, the provision of inaccurate or incomplete information does not involve liability, which makes these requirements declarative (busol, 2017). meanwhile, a new capital order is being created in the world. the domestic banking system should implement modern fundamental initiatives for the reform of some aspects of basel iii, which are developing into the socalled capital regime of basel iv. the above changes are numerous and affect a wide range of capital calculations for banks. at the same time, it simplifies and complicates the banking system, as well as provides an additional level of conservative capital. increasing the size of conservative capital will facilitate the process of reconciling the interests of the entities of banking legal relationships. new standards and proposals are aimed at ensuring that banks have capital that is appropriate for their risks. 5. risks in banking activities many risks affect the interaction of entities of banking legal relationships and the coordination of interests between them in a negative way. compliance risks are the risks of legal penalties, financial losses or loss of reputation due to failure to comply with legislative acts, market standards, as well as standards and internal documents of the bank, including procedures. risks in banking activities stem from the specifics of banking services that are carried out in a market environment and mean the probability of receiving less income than expected, lowering the value of assets. increased banking risks lead to significant losses and, as a consequence, bankruptcy of banks. entities of banking relationships are interested in reducing the riskiness of banking activities. the cabinet of ministers of ukraine the deposit guarantee fund the verkhovna rada of ukraine bodies of state authority bodies of local authority the national bank of ukraine banking unions (groups, associations, holdings) non-banking financial institutions bank clients figure 1. interconnection of entities of banking legal relationships in ukraine baltic journal of economic studies 98 vol. 4, no. 5, 2018 taking into account the principle of independence of entities of banking relationships for the assessment of strategic risk (methodological guidelines for the inspection of banks “risk assessment system” no. 104 as of march 15, 2004), the department of banking regulation and supervision must take into consideration the following factors: – mission, goals, corporate culture and values, risk tolerance; – management practice to bring to the implementation and modification of strategic plans; – the state of implementation of strategic plans, frequency and magnitude of changes in a bank attitude towards risk (risk tolerance); – available information systems of management and supervision means for monitoring business decisions; – impact of the bank strategic positioning on the public image and good name of the bank regarding its technologies, products, and competitors; – plans and possibilities for the bank structural reorganization (for example, merger or accession); – compatibility of strategic initiatives with existing or planned resources; – bank market position, including market penetration at the geographical and product level; – bank diversification concerning products, geography and clientele; – results of the bank plans to introduce new products or services. according to the law of ukraine “on the system of guaranteeing deposits of natural persons” and the decree of the president of ukraine no. 996/98 “on measures for protection of rights of natural persons – depositors of commercial banks of ukraine” as of september 10, 1998, the national bank of ukraine and the cabinet of ministers of ukraine elaborated and approved “principles of functioning of the fund for guaranteeing deposits of natural persons, the procedure for compensating deposits to the depositors of banks” to provide the interests of clients (natural persons) as entities of banking legal relationships. the fund was created with the purpose of protecting the interests of natural persons-depositors of commercial banks, creating financial possibilities for reimbursing them in case of impossibility of banks to fulfil the requirements of depositors for the return of funds. however, in ukraine, the applicable legal and regulatory basis for guaranteeing the return of deposits of legal entities has not yet been formed. 6. conclusions and practical recommendations in article 58 “economic ratios” of the law of ukraine “on the national bank of ukraine”, we propose to establish new indicators of banking activity, that is, the standard of compliance control, indicators of clients' rights protection. in the current banking legislation (the law of ukraine no. 2121 “on banks and banking” as of december 7, 2000), we propose to introduce ratios of basel iv on banking supervision. banks as the main entities of banking relationships should assume risks and financial responsibility. it will contribute to the stabilization of the banking system of ukraine and the economic development of the national economy. references: alekseev, s. s. 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(in russian) baltic journal of economic studies 94 vol. 4, no. 3, 2018 corresponding author: 1 department of finance, uzhhorod institute of trade and economics, kyiv national university of trade and economics. e-mail: katya8515@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-94-98 the role and place of financial resources for the development of regions kateryna indus1 uzhhorod institute of trade and economics, kyiv national university of trade and economics, ukraine abstract. the subject of the study. financial support for the competitive development of the country’s economy is gaining important meaning nowadays. there is determined the necessity of adapting the country’s financial system to the european integration priorities of the development and solving the problem issues in the field of attracting financial resources by combining sources of their inflow to improve the efficiency of financial potential management of the country and its regions. the differentiation of regional development is the basis for monitoring the components of sustainable development, including the financial component, in order to further take into account territorial features in the process of the formation of financial resources of the regions. methodology. in the course of the research, based on the synthesis of scientific approaches, an actual vision of the treatment of financial potential is formulated, determined by the aggregate of resource support, in particular, the real and potentially available financial resources, as well as the capabilities of the country, including organizational, managerial, functional, infrastructural, and adaptive for the accumulation of financial resources, their transformation into productive financial capital, its redistribution between economic entities and its use of capital to provide the sustainable development of the country and its regions. aim. it is to explore the structure of the financial potential of the country and its regions, under the influence of transformational changes in the economy, where new elements appear. to generalize the development of foreign economic activity, which makes it possible to include in the composition of possible financial resources of the state and its separate regions a whole group of financial resources that are of external origin, in particular, loans from the international monetary fund, the european bank for reconstruction and development, investments in free economic zones and territories priority development, borrowing from international financial markets, technical assistance from foreign non-government financial institutions. conclusions of the study. it should be noted that nowadays, when the financial potential of the regions of the country is formed not only at the expense of budgetary funds, together with the state both the private sector and the population appear as business entities. it is emphasized that the priority in determining the sources that form the financial potential is their territorial membership, within which there are cash accumulation of incomes, economic entities and the population as a result of their production and economic activity, and attracted funds from the side that are concentrated in the respective funds for ensuring the continuity of extended reproduction and satisfying other social needs. a prerequisite for ensuring balanced development of the country and its regions is the sufficiency of financial resources in order to fulfil the functions entrusted to state authorities and local self-government bodies. at the same time, the management of the economic development of the country will take a qualitatively new innovative level, where each member of the territorial community will become a full and active participant in economic relations based on the principles of participation and solidarity in the region, as well as in the country as a whole. key words: financial potential, formation of financial resources of regions, financial provision, conceptual approaches, competitive development. jel classification: p25, p43, r51 baltic journal of economic studies 95 vol. 4, no. 3, 2018 1. introduction nowadays, in the conditions of the transformational changes of the ukrainian economy, the financial support of its competitive development becomes of great significance. the necessity of adapting the financial system of the country to the european integration requirements of the formation of a favourable environment for the purpose of economic growth is determined. at the same time, there is a need to resolve the problem issues in the field of attracting financial resources by combining sources of their income in order to increase the efficiency of management of financial potential within the framework of the implementation of the financial policy of the state. the actualization of the development of an effective mechanism for the formation and use of financial potential, the study of its impact on ensuring balanced development of the regional economic system, requires scientific substantiation and outline of theoretical and practical approaches to its implementation. theoretical and methodological substantiation of the economic essence of financial potential and its management, mainly for the purpose of innovation growth of the country and its regions, has been carried out by scientists, in particular: a. danilenko, b. boronis, o. kovalyuk, m. kozoriz, n. krasnokutska, m. krupka, v.  mamonova, m. skrypnichenko, a.  sokolov, s.  shumska, and others. regional peculiarities of the formation and use of financial potential have been investigated by m. kovalenko, t. matseevich, g. polevik, n. radvanska, and others. despite the significant contributions of domestic and foreign scholars in the area of financial resources of the regions, some aspects of the formation of these resources in the context of transformational changes in the economic system of the country and its regions demand further investigation. 2. the basic research material the differentiation of regional development is the basis for monitoring the components of sustainable development, including the financial component, in order to further take into account territorial features in the process of the formation of financial resources of the regions. at the same time, the task is to promote the state in the direction of convergence of the socio-economic development of regions through the formation of an effective policy. it should be noted that the finances of the region are an integral part of the state finances. the basis for the formation of financial potential is the incomes and profits of enterprises and population that are located and reside in the region. in the scientific literature, there are a significant number of definitions of the concept of financial resources of the regions. thus, the researchers m. kovalenko, t.  matseevich, g. polevik, and n.  radvanska investigated the finances of the region, substantiating them as a sphere of mutual relations concerning the circulation of financial resources, where their mobilization, distribution and organization of rational use are carried out. at the same time, according to m. kovalenko, they are formed at the expense of such elements as: own funds of economic entities, whose commercial activity is carried out in the productive and non-productive sectors; funds of the credit and financial institutions of the region, their district affiliates, as well as branches of credit and financial institutions of other regions operating in this region; funds of public organizations, non-profit funds; funds of the population, in particular, current cash receipts and savings in various forms; funds of regional authorities (regional budget), budgets of cities, towns, and districts. at the macro level, the financial potential of the enterprise is considered by o. sokolov (sokolov, 2007), reducing it to the availability of financial opportunities for the purpose of investing funds in current activities, prospective development and increase of its production potential, but without pointing to the sources of such opportunities. because of the high level of shadowing of the national economy, as noted by v. boronos (boronos, 2011), it is necessary to include shadow capital in the financial resources of the region and their account in the formation of its financial potential, since these funds really exist and can be used to restructure the economy, develop the social sphere of the region, but do not really participate in such processes, therefore, can be considered as potential investment resources. along with the financial resources in circulation of enterprises, organizations, population, the financial potential of regions of the country includes the money that can be attracted by the credit and financial system in the process of economic growth, as well as investment resources, which are formed as a result of acceleration of the reproduction process (mamonova, 2012). the generalization of scientific approaches to outlining the economic essence of financial potential makes it possible to form its own vision of this interpretation, which is determined by the aggregate of resource provision (real and potentially available financial resources), as well as the country’s capabilities (organizational, managerial, functional, infrastructural, and adaptive) for the accumulation of financial resources, their transformation into productive financial capital, its redistribution among economic actors, as well as the use of this capital to ensure balanced development of the country and its regions. this also makes it possible to substantiate that: the financial system of any state is formed on the basis of a set of parts of the finance regions, which, in general, constitute the national economy. at the same time, the functionality of financial relations manifests itself both within one country and outside its borders in relations with other countries of the globalization economy; baltic journal of economic studies 96 vol. 4, no. 3, 2018 there is a close interaction between the categories of financial potential of the region and international financial and intermediary finances; the financial potential is determined by a coherent structure consisting of public finances, local government finances, financial enterprises and the finances of the population. thus, the financial potential of the country depends directly on the capabilities of each of its components. it should be noted that in aggregate, they constitute the resource base for the formation of the country’s financial potential while preserving the specific features of their filling, based on the current legislation of ukraine on the issues of the formation, distribution, and redistribution of financial resources of the state. considering that each participant of the process of forming financial resources is simultaneously a participant in financial relations beyond its limits, it should be assumed that only a part of their own financial resources they will direct to ensure the socio-economic development of the region. the abovementioned fact determines the necessity of studying the resource capabilities of each of the sources of filling the financial potential, based on the following starting positions, in particular: belonging to the country’s economy, that is, all actors involved in the creation of the financial potential of the country must be registered, located or residing in its territory; structure-forming elements of the grouping of sources of the formation of the financial potential of the country adopted common legal requirements for them in relation to the formation and distribution of financial resources; the financial strength of the country depends on the effectiveness of financial and economic activities of the participants in the process of forming financial potential. at the same time, the capacity of economic entities depends to a large extent on the financial strength of the country. nowadays, when the financial potential of the regions of the country is formed not only at the expense of budget funds, together with the state, private business and the population appears to be business entities. in addition, a significant number of sources for the formation of financial resources, their relative separation, the chaos of movement and interaction, predetermine the diverse nature of market economy subjects. thus, the research confirms that the static concept of “financial resources” is gradually transformed into a dynamic concept “financial potential”, for the formation and rational use of which it is expedient to plan the movement of financial resources, regardless their origin, including private owners, who also seek to receive the largest profit with the lowest risk. in a generalized form, the financial potential of a country (region) by sources of its origin is divided into the financial potential of external and internal origin. thus, the financial potential of external origin includes subventions and subsidies from the state budget, funds that were attracted or borrowed by economic entities and people from sources external to the region, assistance from foreign sources. the financial potential of internal origin is formed primarily through the funds of local budgets, non-budget funds, enterprises and organizations of the region of all forms of ownership and of various spheres of activity, as well as money of the population, that is, the funds that are domestic for this region. priority in determining sources that form the financial potential is their territorial affiliation, within which money accumulation of revenues is created, as we have already noticed, business entities and the population as a result of their production and economic activity, and attracted funds from the parties focusing on appropriate funds to ensure the continuity of extended reproduction and satisfaction of other social needs (figure 1). in calculating financial potential, the following two approaches can be applied: differentiating, which involves determining the financial potential of the main sources of its creation, namely, financial resources of each region of the country; integral, determining the overall financial capacity of the country in the implementation of goals of the socio-economic development. however, issues remain related to the assessment of the effectiveness of the use of financial resources in a particular region. the research revealed that, with the identical structure of the sources of formation of regional financial resources, there are significant differences in the indicators characterizing the results of their management, in particular, by the volume of the gross regional product per farm, the average wage per employee, etc. in the structure of the financial potential of the country and its regions, under the influence of transformational changes in the economy, new elements appear. thus, the development of foreign economic activity makes it possible to include into a composition of possible financial resources of the state and its separate regions a whole group of financial resources that are of an external origin, in particular, loans from the international monetary fund, the european bank for reconstruction and development, investments in free economic zones and territories priority development, borrowing from international financial markets, technical assistance from foreign non-governmental financial institutions. means from the listed sources may be provided to economic entities of the region, as well as to local governments with a view to solving various socioeconomic programmes of territorial development. a significant role in the investment potential of a particular region, due to the presence of sufficient unused financial resources, belongs to the credit potential of the local banking system since the borrowing capital of the banking system determines the amount of funds, by which the system of commercial banks can increase the mass of money in circulation by providing new baltic journal of economic studies 97 vol. 4, no. 3, 2018 loans to citizens and firms. however, if the borrower’s loan is not matched by adequate property or other collateral, the funds of the credit and financial system, in particular, the banking institutions of the region, will remain a potential source of financial resources, or will be withdrawn by this system outside the region. business practice shows that at the present stage of the transformational changes in the economic system, funds are separate sources of financial potential of regions of the country: mainly money from local budgets, state and communal enterprises from property privatization or lease, joint-stock companies for the management of corporate rights of local authorities. one of the main prerequisites for ensuring balanced development of the country and its regions is the sufficiency of financial resources in order to carry out functions assigned to public authorities and local selfgovernment bodies. for this reason, one of the priority vectors of the regional budget policy is the formation of financially self-sufficient territorial communities, each member of which is interested in building up financial capacity, finding ways to transform potentially available financial resources into real, efficient use of available cash to finance important socio-economic programmes, control by the territorial community of the efficiency of spending budget funds and the correspondence of the amount of taxes paid to the size of public goods that must be received by the subjects of economic relations. consequently, the management of the economic development of the country will take a qualitatively new level, where each member of the territorial community will become a full and active participant in economic relations in the country (region) that will be formed on the principles of participation and solidarity. 3. conclusions the research shows that the best option for a complex reflection of the structure of financial potential is a combination of the abovementioned approaches, where the structural basis is made up of actors such as the state, enterprises, credit and financial organizations, households and external organizations that enter into functional relationships (budget, investment, savings) that manifest themselves and are implemented through the use of various funds and sources of financial resources. thus, the financial self-sufficiency of the country depends on the availability of financial resources, stable financial capacity, and the ensuring of balanced socioeconomic development of the regional economic system to a large extent depends on the effective management of these resources. enterprises of different forms of ownership and organizational-legal form, registered and operating on a certain territory households of the population financial sector of the economy budget sector of the economy innovative sector of the economy internal extrabudgetary funds, external investment receipts revenues of large companies that are foreign residents internal external sources of formation figure 1. sources of the formation of financial potential source: the author’s development reference: boronos v.h. (2011). analiz ekonomichnoho zmistu finansovoho potentsialu rehionu [analysis of the economic content of the financial potential of the region]. skhid, vol. 1(108), p. 32-36. boronos v.h. (2011). metodolohichni zasady upravlinnia finansovym potentsialom terytorii [methodological principles of management of the financial potential of the territory]. sumy: sumskyi derzhavnyi universytet. (in ukrainian) danylenko a.i. (2013). udoskonalennia modeli upravlinnia ekonomikoiu ta finansovi mekhanizmy yii realizatsii [improvement of the model of economic management and financial mechanisms of its implementation]. ekonomika ukrainy, vol. 5(618), p. 5-21. baltic journal of economic studies 98 vol. 4, no. 3, 2018 kovalenko m.a., matsiievych t.o., polevyk h.m., radvanska n.v. (2010). finansy rehionu [finances of the region] kherson: kherson nats. tekhn. un-t. (in ukrainian). kovaliuk o.m. (2002). finansovyi mekhanizm orhanizatsii ekonomiky ukrainy (problemy teorii ta praktyky): monohrafiia [financial mechanism of organization of economy of ukraine (problems of theory and practice): monograph]. lviv: vyd. tsentr lviv. nats. un-tu im. i. franka. (in ukrainian) kozoriz m.a. (ed.) (2012). finansovyi potentsial rehionu: mekhanizmy formuvannia ta vykorystannia: monohrafiia [financial potential of the region: mechanisms of formation and use: monograph]. lviv: instytut rehionalnykh doslidzhen nan ukrainy. (in ukrainian) krasnokutska n.s. (2005). potentsial pidpryiemstva: formuvannia ta otsinka: navch. posib [potential of the enterprise: formation and evaluation: teaching manual]. kyiv: tsul. (in ukrainian) krupka m.i. (2001). finansovo-kredytnyi mekhanizm innovatsiinoho rozvytku ekonomiky ukrainy: monohrafiia [financial-credit mechanism of innovation development of the ukrainian economy: monograph]. lviv: vydav. tsentr lviv. nats. un-tu im. i. franka. (in ukrainian) mamonova v.v. (2012). upravlinnia mistsevym biudzhetom ta finansamy [management of local budget and finances]. kharkiv: vyd-vo kharri nadu «mahistr». (in ukrainian) shumska s.s. (2007). finansovyi potentsial ukrainy: metodolohiia vyznachennia ta otsinky [financial potential of ukraine: methodology for determination and evaluation] finansy ukrainy, vol. 5, p. 55-65. skrypnychenko m.i., prykhodko t.i., sidenko v.r . (2010). potentsial endohennoho zrostannia ekonomiky ukrainy: monohrafiia [the potential of the endogenous growth of the ukrainian economy: a monograph]. kyiv: in-t ekonomiky ta prohnozuvannia nan ukrainy. (in ukrainian) sokolov a.v. (2007). potentcial promyshlennogo predpriiatiia: otcenka i upravlenie s sistemnykh pozitcii [potential of an industrial enterprise: assessment and management from systematic positions]: (phd thesis), kemerovo. (in ukrainian) baltic journal of economic studies 332 vol. 4, no. 5, 2018 corresponding author: 1 lviv polytechnic national university, ukraine. 2 volodymyr the great educational and scientific institute of law interregional academy of personnel management, ukraine. 3 kyiv national university of technologies and design, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-332-337 international franchise agreement bohdan stetsiuk1, yurii miroshnychenko2, pavlo dudko3 abstract. the purpose of the article is to study the legal nature of the international franchise agreement, its types, essential conditions and peculiarities of its conclusion. the subject of the study is the international franchise agreement. research methodology. the research is based on the use of general scientific and special-scientific methods and methods of scientific knowledge. the dialectical method allowed investigating the definition of the international franchise agreement and its essential conditions. the comparative legal method was used to compare doctrinal approaches to this issue. interpretation of the content of international legal acts governing issues related to the conclusion of the international franchise agreement was realized with the help of the normative-dogmatic method. the system-structural method is used to study the international franchise agreement as a single whole (system) with the coordinated functioning of all its elements. the methods of grouping and classifying formed the basis for separating the list of conditions, which are necessary for the conclusion of this contract, as well as the provisions that should be included in the content of the agreement. methods of analysis and synthesis helped to study some parts of this agreement to formulate further conclusions. practical implication. the analysed recommendations of scientists and lawyers, as well as the provisions of international regulations, can be used when concluding an international franchise contract. correlation/originality. the scientific novelty of the work consists of an integrated approach to the study of theoretical and practical issues related to the international franchise agreement. key words: international franchising, international franchise agreement, franchise, essential conditions, international organizations, model contracts, general recommendations. jel classification: f13, f16 1. introduction international franchising becomes very important under present-day conditions. over the last decade, it has become a popular format for doing business in various sectors of the economy, and small and medium enterprises have been using it to expand their business for over 100 years. at present, a large number of successful companies create franchising companies in other countries. franchising has been a driving force for economic development, one of the main channels for sale of goods and services in many states, and its prevalence in a wide variety of industries clearly demonstrates the high degree of its efficiency. the system of international franchising creates favourable conditions for companies to enter the domestic markets of other countries and stimulates the rapid development of entrepreneurial activity. the research on the development of franchising as a form of international business was conducted by such native scientists as t. m. hryhorenko, o. ye. kuzmin, a. m. mahomedova, v. ye. sakharov, t. m. tsyhankova, a. v. tsyrat, i. m. shkola. among the foreign scientists, special attention to this issue paid by v. v. bezbakh, k. m. bielikova, v. a. bielov, n. h. vilkova, t. m. hryhorenko, zh. deltei, i. s. zykin, v. b. korzun, p. kotler, m. mendelson, a. panfilova t. v. syniavska, d. p. stryhunova, ya. i. funk. in this scientific work, we will consider the definition of the international franchise agreement, as well as its types, clarify the legal nature of this contract and establish its essential conditions. in addition, we will study the international legal acts regulating this issue, the views of scientists and lawyers on the issue of regulation of the international franchise agreement, and analyse the main recommendations of lawyers for the conclusion of this agreement. 2. statement of the baseline some scholars affirm that franchising originated in the middle ages (nykoliuk, 2009), however, it is well-known that the first franchise of the model which is currently in use appeared at the beginning of the 20th century. this format of this franchise was developed by singer sewing machine company in the usa, which established a network of servicing for its sewing machines. baltic journal of economic studies 333 vol. 4, no. 5, 2018 in the 1950s, the interest in franchising was growing significantly; its concept was taken over by an increasing number of enterprises in various sectors of the economy. in 1960, the international franchising association (ifa) was established in washington (usa) to protect and promote the interests of the franchising industry. in 1972, the european franchise federation (eff) was founded to regulate issues related to franchising in europe. in 1990, this federation made the european code of ethics for franchising, on which the regulation of franchising relations in each european state is based. in the xxi century, we are witnessing a further increase in the number of franchise business owners who are looking for new territories and opportunities to promote their networks. the access to international markets allows the franchisor to set up their businesses in other countries. such a model of entrepreneurial activity helps to establish relations between states, as well as contributes to the development of the economy. therefore, there is a rapid growth of international franchising not only in europe but also in cis countries. international franchising has a number of significant advantages such as: 1) an exploitation of local management personnel may help to overcome the problem of foreign language and culture; 2) on account of impossibility or high value of proper control at a distance, business supervision is entrusted to a local specialist; 3) the necessary legal procedures are implemented by local lawyers, what allows the lawful sale of goods in the target country without any liability under its legislation; 4) the possibility of avoiding laws of certain countries which prohibit or control the income of foreign direct investment; 5) the ability to overcome political difficulties, such as, for example, the possibility of expropriation of foreign direct investment. the franchisee, as a rule, is a resident of the target country, and therefore, the risk of such a problem is significantly reduced. in any case, even if the property is expropriated, the franchisee will suffer losses, not the franchisor; 6) one of the biggest advantages of international franchising is the possibility of avoiding tariff imposts, which, in spite of a large number of international agreements, still hamper the development of the world trade (warren pengilley). the essence of international franchising is that the franchisor (the franchise owner) gives the franchisee (the franchise buyer) the right to represent its own brand on the international market. in this, the franchisee can use the trademark, as well as know-how, technology and business model as a whole. all rights and obligations of the parties are registered in the relevant contract – the international franchise agreement. as evidenced by the foregoing, the question of legal regulation of this agreement becomes more and more relevant because, despite the fact that it is used in more than 80 countries of the world, the unification of this institute has never happened in the international legal scene. as it was correctly noted in the scientific work by h. braun, “... only since world war ii and increasingly in the past ten years has franchising achieved recognition as a distinct method of marketing ... [but] ... there is no generally accepted definition of franchising in court decisions, regulation or legislation. further, any definition would fail to include the many functions inherent in the system, as well as its potential for abuse...” (вrown, 1972). consequently, as it was already mentioned, at present there is no generally accepted definition of an international franchise agreement. from the standpoint of private law, a franchise agreement is international if it is concerned with law and order of two or more states, that is, in cases when the parties to the contract – the franchisor and the franchisee – have their principal places of business (commercial enterprises) in territories of different countries. a franchise agreement, including an international one, is a kind of commercial agreement since its parties are legal entities engaged in entrepreneurial activity (stryhunova, 2014). in the specialized literature, one can find the following definition of the international franchise agreement: 1) it is a special type of license agreement on the transfer of intellectual property rights. in accordance with this agreement, the licensor (franchisor) issues a license to a foreign licensee (franchisee) to conduct certain business operations under the name of the licensor. under the conditions of a franchise agreement, licenses for the use of such subjects of industrial property as methods of entrepreneurial activity (know-how), trademarks (service marks) of the franchisor are often transferred to the franchisee, as well as technical and commercial assistance is provided. a franchise license is often issued in exchange for direct (royalty) or indirect financial compensation (counter service, etc.), and usually provides for the franchisor to receive remuneration during the term of the contract. as a rule, under a franchise contract, the licensor has the right to exercise strict control over the franchisee’s authorized activity during the term of the license (mezhdunarodnye franchaizynhovye kontrakty). 2) it also defined as a contract whereby the franchisor grants the franchisee (based in another country), in exchange for direct or indirect financial compensation, the right to exploit a package of industrial or intellectual property rights relating mainly to know-how and commercial symbols, and to receive continuing commercial or technical assistance for the duration of the contract. international franchise agreements may regard distribution of goods or supply of services. in distribution franchise agreements, the franchisee is granted the right to market the products manufactured or supplied by the franchisor or by a supplier designated by the franchisor, under the franchisor’s trademark according to the franchisor’s commercial know-how and with its commercial assistance. in service franchise baltic journal of economic studies 334 vol. 4, no. 5, 2018 agreements, the franchisee is granted the right to provide services (e.g. restaurants, hotels etc.) developed by the franchisor, under the franchisor’s trademark according to the franchisor’s commercial know-how and with its commercial assistance (llamazares). in addition, the following types of international franchise agreements are also distinguished depending on the type of activity: • manufacturing franchise agreement: according to this agreement know-how in the form of manufacturing technique and technical experience of the franchisor is transferred. a franchisee can make products of the same quality and characteristic as the franchisor in his production area. the agreement allows the franchisee to put on a trademark owned by the franchisor on the manufactured goods, as well as to sell the manufactured products; • business-format franchise agreement: the franchisee receives not only the right to sell goods/services and the methodology of sales or services provision (as it is provided for product distribution franchising) but also the whole business concept starting from the sales outlet design, staff uniform, customer service, personnel training to recommendations on promotion and marketing); • mixed franchise agreement is based on a combination of the main types of franchise agreements: product, service and manufacturing. under this contract, the franchisor producers and the franchisee sells these goods through its franchise point and at the same time provides services related to the use of these products; • product distribution franchise agreement – under this contract the franchisee has the right to sell the range of goods or to provide a list of services under the franchisor’s trademark (vydy franchaizynha). the main sources of legal regulation of the international franchise agreement are a national law and so-called “lex mercatoria”. national law applies to an international franchise agreement by virtue of the autonomy of will of the parties or by virtue of the law applicable in the absence of an agreement between the parties on applicable law. lex mercatoria is an autonomous legal order, which is formed voluntarily by the parties involved in international economic relations and which exists independently of national legal systems. this set of rules is used as an alternative to the national law applicable in a particular case. such influential international organizations as the international institute for the unification of private law (unidroit), the world intellectual property organization (wipo), the international chamber of commerce (icc) have repeatedly tried to define the franchise agreement in general and the international franchise agreement in particular, as well as to establish common rules for its regulation. thus, in 2007, the unidroit issued the 2nd  edition of the guide to international master franchise agreements (unidroit). it provides a comprehensive examination of the whole life of this type of arrangement, from the negotiation and drafting of the master franchise agreement and other associated agreements to the end of the relationship. it deals principally with the positions of the parties directly involved, i.e. the franchisor and the sub-franchisor but, in instances where it is considered to be of particular importance, the positions of others affected, such as sub-franchisees, are covered. in 1994, the wipo published the franchising guide (world intellectual property organization). paragraph 4 of this handbook states that “from a legal standpoint, franchising relies on contract law and, therefore, does not necessarily require any special regulatory or legislative structure in order to function and develop. it is, therefore, appropriate to stress at the outset that no specific regulation of franchising has been or would be necessary for franchises to thrive in any economy. however, some governments have nevertheless chosen to adopt legislation to regulate franchising. overregulation could, however, have the effect of discouraging investment in this area”. nevertheless, section v of the guide is devoted to the typical terms of a franchise agreement, such as: rights and obligations of the franchisor and the franchisee, payment arrangements, compliance with quality control requirements; provisions on breach of contract; renewal of contract, etc., and appendix ii to the guide provides an overview of the intellectual property rights typically included in franchise agreement. in 2000, the icc developed the model contract for international franchising (the icc model international franchise contract, 2000, the publication of icc № 557). it is the typical contract aimed at promoting goods, which contains uniform rules, recommended by the icc to the participants in these legal relations. when creating a model contract, the drafters intended to foresee the fundamental rights and obligations of the parties and to avoid application of the national law of any country. the main reason for this contract is the lack of international unification of franchising and the necessity to appeal to domestic law, what would involve disadvantages, as the law of individual states does not take into account the needs and specifics of international trade, and its regulations vary considerably in individual countries. the rules agreed at the international level (first of all in the eu), mainly affect the antitrust aspects of the contract (for example, the effect of certain restrictive provisions on the exclusivity of the territory) and do not regulate the civil matters of the parties to the franchise agreement (vylkova, 2002). in 2011, the icc model international franchise contract № 557 was reviewed and completed to provide users with updated information on issues related to antitrust laws and regulations governing franchising relationships. the 2nd edition of the icc model contract baltic journal of economic studies 335 vol. 4, no. 5, 2018 (icc publication № 712 e) (international chamber of commerce) offers franchisors and franchisees flexible formulations of solutions that accurately meet business needs, for legal certainty and compliance general application practice. in order to ensure clarity and use facility, an explanatory comment has been added to the contract, which provides alternative drafting options and hints for identifying potential legal traps. however, as indicates v. a. bielov, typical or, in other words, model icc contracts can hardly be called the acts of international private unification in the literal sense of the word. despite their name “typical”, they are purely advisory, and the practice of their application is based solely on the professional authority of the developer. since they are made not in relation to some particular cases of foreign trade operations, but in general, typical contracts have such content, which is called “balanced” and free from the conjuncture. balance means an equal degree of concern for the interests of both parties, and freedom from the conjuncture is an assessment of these interests from the point of view of a competent, intelligent, fair and impartial observer. in this respect, they are similar to the acts of private unification. at the same time, it is obvious that the texts of typical contracts cannot in any way become texts of specific contracts without at least minimal adaptation to the features of particular situations and conditions of these agreements. in other words, the norms contained in model contracts are not figured for general application, whatever it would be executed – directly or through the implementation of their provisions to national legislation. this is the main content difference between the icc model contacts and the acts of private legal international unification (belov, 2014). the same opinion is followed by k. e. zwisler. the main problem associated with the model franchise contract, according to the scientist, is its goal – an attempt to provide a single solution to all issues, although sometimes alternative provision is offered. it is designed to meet the needs of all franchise operations in all cases. however, the desire to work out a single solution for most of the issues that arise when concluding an international franchise agreement is not a realistic goal, as the author considers. that decision may cause the model to be more of a problem than a blessing for new international franchisors and international franchise lawyers. anyone who has got experience in this field knows that a good franchise agreement must reflect scores of business and legal decisions that make each franchise unique. those lawyers who regularly advise international franchisors know that typical contracts are only an imperfect starting point when concluding franchise agreements for new clients. dozens of hours of work are usually required to adapt these model contracts to the needs of each individual franchisor client (carl e. zwisler). however, lawyers with many years of experience in this field have made general recommendations for the conclusion of an international franchise agreement, by which one should be guided. so let’s consider some of them. consequently, the most important point of negotiation in international franchise agreements is the negotiation of the initial document, which is usually a master franchise agreement. as it was already mentioned, this issue is comprehensively regulated by the guide to international master franchise arrangements (unidroit). in accordance with clause 1 of this guide in master franchise agreements, the franchisor grants another person, the sub-franchisor, the right, which in most cases will be exclusive, to grant franchises to sub-franchisees within a certain territory (such as a country) and/or to open franchise outlets itself. the sub-franchisor, in other words, acts as a franchisor in the foreign country. the sub-franchisor pays the franchisor financial compensation for this right. this compensation often takes the form of an initial fee, which may take any one of a variety of different forms, and/or royalties constituting a percentage of the income the subfranchisor receives from the sub-franchised outlets. in master franchise arrangements, essentially two agreements are involved: an international agreement between the franchisor and the sub-franchisor (the master franchise agreement), and a domestic franchise agreement between the sub-franchisor and each of the sub-franchisees (the sub-franchise agreement). there are other types of initial international franchise agreements, depending on the way of organizing the trading network. thus, international franchising can be done through: direct (unit) franchise; branch office or subsidiary; area representative; joint venture. let’s briefly consider each of them: a) direct (unit) franchising. this is a cooperation agreement between two legally independent parties (franchisor and franchisee) located in different countries. the franchisor provides the franchisee with the exclusive right to distribute its products or services in establishments, which are equivalently equipped and furnished, as well as the right to use intellectual property rights (commercial signs, brands, trademarks etc.). it also provides the know-how (franchise handbook), and the technical and commercial support for distribution to be carried out correctly. since the expenses for international network supervision from a single centre could be very significant, it is recommended to conclude direct franchise agreements only if the target country is geographically, culturally, linguistically and/or legally similar to the franchisor’s country; b) establishment of a branch office or a subsidiary in the target country. the advantage of this type of franchise is that the franchisor can directly control the franchisee in the target country. a disadvantage is the possibility of losing the benefits of the franchising concept by having to establish subsidiaries in a wide variety of foreign countries. as an alternative, a joint venture may be established between the franchisor and the local enterprise; c) a joint venture baltic journal of economic studies 336 vol. 4, no. 5, 2018 agreement. the decision on a joint venture necessarily involves the physical presence of the franchisor in the target country. the main advantage of a joint venture is that the financial risk of the parties is shared. however, not infrequently equal representation on boards and equal shareholdings may lead to the emergence of corporate problems, as well as problems with the foreign investment if there are relevant restrictive laws in the target country. in addition, the joint venture involves very active and continuous participation of the franchisor in the project. joint ventures and subsidiaries are the forms of international franchising commonly used by many fast food companies; d) under area representation agreement. area representative acts as a mediator between the franchisor and the franchisee. unlike the master franchisor, the area representative does not act on his own behalf, but on behalf of and for the benefit of the franchisor. the main responsibilities of the area representative are the selection of potential candidates for the franchisor, their evaluation and communication with them, as well as providing certain services to unit franchisees within its designated territory, such as training, site selection, grand opening assistance and on-going support. however, if the representative is not able to cope with the obligations imposed on him, the negative result of this will affect all departments in the territory committed to him. another possible problem is the tendency that has arisen among regional representatives, to hire salaried managers for each separate branch (warren pengilley; llamazares). after the master franchise agreement (or other primary agreement) has been negotiated, the basic rules for parties are established. further agreements will depend upon the initial document. if it is not properly negotiated, there for sure will be considerable problems with the conclusion of following agreements. thus, the primary contract is the most important because of its influence on subsequent agreements. it is necessary to take into account even the smallest details and to pay special attention to seemingly insignificant issues, because, as a rule, over their imperfect study there might be significant gaps in the content of the contract. when concluding an international franchise agreement, the parties need to consider a number of issues that will help them to establish effective cooperation. the main issues are the following: 1) what is being franchised? 2) what are the franchisor’s obligations? 3) what are the franchisee’s obligations? 4) what marks, including logos and patents, are involved and what is their legal status? 5) what is the length of the franchise? 6) what exclusivity provisions (product, territorial, or customer) are applicable? 7) what are to be the payment arrangements? is payment: • “up front”, based upon a royalty, or a combination of both? • subject to minimum royalties? • to be made in the franchisor’s currency, the franchisee’s currency, or a third currency? • to be subject to agreed limitations on exchange rate variations? • to be made exclusive, inclusive or otherwise of certain taxes and the impost of the target country? • to be made monthly, quarterly, semi-annually, or at other designated times? 8) are there minimum performance provisions? 9) what competition restraints (during the agreement and after termination) will exist? 10) are there to be any “buy out” or “buy back” options? 11) what provisions apply relating to choice of law? (warren pengilley). the key elements of the international franchise agreement vary for each of its parties. thus, for franchisor they are as follows: a) the licensing of knowhow embodied in operational manuals and continuously updated, with a training support system; b) the licensing of trademarks and symbols; c) the provision of assistance regarding distribution and management. for a franchisee: a) the franchisor’s exercise of reasonable quality controls over the franchisee to protect its intellectual property rights; b) the payment of initial and ongoing fees in exchange for the right to use these intangible assets; c) the participation in training courses organized by the franchisor; d) the use of franchisor’s trademarks and symbols; e) the strict compliance with the franchisor’s commercial standards; f ) the information given to the franchisor concerning any difficulty which may appear or improvements which may seem suitable. for both parties: a system to resolve disputes, including the service of notice of defaults and opportunities to cure (llamazares). consequently, based on the aforesaid, we can conclude that the essential conditions of the international franchise agreement are: 1) know-how, which includes any confidential, valuable information that is the property of the firm, experience and methods of work of the franchisor, which enable the franchisee to repeat his success. it also includes the commercial and technical support of the franchisor and trainings he organizes for the franchisee. in exchange, the franchisee obliges not to violate the franchisor’s intellectual property rights and to take all possible measures to protect confidential data; 2) commercial name, trademarks and patents. recognition of customers and their confidence in products and services are usually associated with a trademark, which is one of the key elements of the success of the franchise network. franchisee agrees that the franchisor is entitled to all intellectual property rights, and the franchisor, in turn, has the right to control the quality of the goods (services) produced (provided) by the franchisee; 3) products and territory. a clear definition of products and distribution areas are very important for achieving quality standards and for providing the franchisee with the ability to maintain a stock of goods in order to meet the needs of customers and comply with sales or sales requirements in an exclusive area where it is a separate and independent entity; 4) payment of fees and royalties. the parties must determine precisely the method and time of baltic journal of economic studies 337 vol. 4, no. 5, 2018 payment, taking into account the fact that there are many options for calculating royalties. non-payment of royalties may be considered as a violation of the contract and lead to the emergence of the right to terminate the contract; 5) the term of validity and renew of the contract. the parties may conclude a contract for a definite or indefinite period. one should carefully consider the conditions, under which the contract may be prolonged, renewed or terminated, as well as the consequences of such actions. 3. conclusion so, as a summary, it should be noted that, because of significant development of franchising in the international arena, the issue of regulation of an international franchise agreement is becoming increasingly relevant. at present, there is no standardized definition of the international franchise agreement, as well as a legal framework for its regulation, therefore, national law and the norms of the so-called “lex mercatoria” are responsible for its legal adjustment. experienced international lawyers, as well as by such wellknown and authoritative organizations as unidroit, wipo, icc have made attempts to define the international franchise agreement and to settle this institution. the icc model international franchise contract, which was made by icc members and is currently widely used in international practice, offers franchisors and franchisees flexible formulations of solutions that precisely meet business needs. however, many scholars believe that the norms contained in model contracts are not designed for a common, uniform application without at least minimal adaptation to the features of particular situations and conditions of these agreements. therefore, specialists in the field of international franchising have developed general recommendations that could be used for the conclusion of this agreement. among other things, they provide pieces of advice concerning the determination of the legal nature of the franchise agreement, the key points that are worth to be noticed, the essential conditions that must be foreseen, and the ways to avoid possible legal traps. when negotiating on the conclusion of an international franchise agreement, it is proposed to involve a specialist who has a long experience in this field and who will be able to choose the type of contract that meets all the requirements of the client and to adapt the provisions of the future agreement to its needs. references: nykoliuk, v. v. (2009). pravovoe rehulyrovanye dohovora mezhdunarodnoho franchaizynha: ucheb. posobye [legal regulation of international franchise agreement: study guide]. omsk: omskaia akademyia mvd rossyy. warren pengilley. international franchising arrangements and problems in their negotiation. northwestern journal of international law & business, 7(2), 185-207. вrown, h. (1972). franchising remedies and realities. url: https://scholarlycommons.law.northwestern.edu/ cgi/viewcontent.cgi?article=1196&context=njilb stryhunova, d. p. (2014). dohovor mezhdunarodnoho franchaizynha [international franchise agreement]. sovremennoe pravo, 12, 135-142. url: https://www.sovremennoepravo.ru/m/articles mezhdunarodnye franchaizynhovye kontrakty [international franchise contracts]. international franchise agreements. url: https://www.miripravo.ru/contract/intellect/franchising/index.htm llamazares, o. international franchise agreement: key elements and types. international contracts comments. url: https://www.globalnegotiator.com/blog_en/international-franchise-agreement-template-model/ vydy franchaizynha [types of franchising]. url: http://franchisinginfo.ru/franchayzing/4/vidy-franchayzinga unidroit. guide to international master franchise arrangements (second edition). international institute for the unification of private law (unidroit). rome, 2007. url: https://www.unidroit.org/english/ guides/2007franchising/franchising2007-guide-2nd-e.pdf world intellectual property organization (wipo). franchising guide. international bureau of wipo. geneva, 1994. url: ftp://ftp.wipo.int/pub/library/ebooks/wipopublications/wipo_pub_480(e).pdf vylkova, n. h. (2002). dohovornoe pravo v mezhdunarodnom oborote [contract law in international circulation]. m.: statut. international chamber of commerce. icc model international franchising contract. icc publication № 712e. url: http://store.iccwbo.org/content/uploaded/pdf/icc-model-international-franchising-contract.pdf belov, v. a. (2014). mezhdunarodnoe torhovoe pravo y pravo vto. poniatye y ystochnyky. obychay. mezhdunarodnye dohovory: uchebnyk [international contract law and wto law. concept and sources. practice. international agreements: textbook]. m.: yzdatelstvo yurait. carl e. zwisler. amended icc model international franchise contract is problematic for franchising. franchising world, 2011. url: https://www.franchise.org/amended-icc-model-international-franchise-contractis-problematic-for-franchising baltic journal of economic studies 151 vol. 4, no. 5, 2018 corresponding author: 1 vasyl stus donetsk national university, ukraine. e-mail: limval555555@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-151-157 bio-oriented agrarian economy investment prognosis in the eu countries valeriia lymar1 abstract. the purpose of the investigation is making a prognosis of bio-oriented agrarian economy investment in the eu countries and preparing a set of steps how to attract investment in the bio-oriented agrarian economy sectors. nowadays investment is one of the critical factors of bio-oriented agrarian economy development. it was set as one of the priories in the european strategy 2020, where they defined the bio-oriented economy as the main engine for smart and innovation growth in europe. methodology. to make a prognosis, it was used bp stat program, namely brown’s, holt’s, box–jenkins, and olympus’ methods. results. in the third millennium, the global community faced many objective problems, which need cooperation and relations between nations to solve them. there were defined such challenges: climate changes, the growth of the global population, exhaustion of limited resources and others. to meet these challenges, the european commission proposed the bio-oriented agrarian economy concept, which is an interdisciplinary phenomenon and combines elements of several fields of science: economy, management, chemistry, biology, pharmacy, physics, and mathematics. in accordance with the ec classification, there are such bio-oriented economy sectors: food, agriculture, paper/pulp, forestry/wood industry, fisheries and aquaculture, bio-chemicals. the main aim of the bio-oriented agrarian economy is a smart use of biological resources to produce healthy food and feed and minimizing the use of limited resources. during the investigation, there were given arguments and explained the necessity of bio-oriented agrarian economy development both on the eu and national levels. it was proved that without investment, it is impossible to develop such a concept. practical implementations. obtained prognosis allows to predict the dynamic of bio-oriented agrarian economy investment in europe and develop a set of steps how to attract investment in this sphere, namely to invest in research and innovation sectors; support commercialization of knowledge and innovation; promote entrepreneurship in the sectors of bio-oriented agrarian economy; develop an innovation-friendly regulatory framework and support creating new jobs in the bio-oriented agrarian economy sectors. value/originality. results of the investigation help to improve the theoretical base of bio-oriented agrarian economy concept development and show the importance of investment of bio-economy sectors as on the national levels and on the european one. key words: investment policy, investment in agriculture, bio-oriented agrarian economy, biotechnologies, food and feed, bio-based products, green growth. jel classification: o13, q14, q16 1. introduction the third-millennium economy is characterized by innovation and use of r&d in all spheres: from production to prediction of customers’ needs and wishes and providing services. in addition, it is necessary to pay attention to the interdisciplinary phenomenon, biooriented agrarian economy, which integrates results of different fields of science, production, agriculture, and management. the bio-oriented agrarian economy is the innovative challenge today. it has supporters and opponents. such interdisciplinary phenomenon causes many questions and cannot exist without interest of those, who are interested in modern scientific tides and understand the necessity of finding answers on global challenges, which society face with nowadays. modern marketing economy is the complex organizational mechanism with a big number of horizontal and vertical relations, which uses different resources and depends on the complex of selfgovernance instruments and methods of influence. the result of the activity of such a mechanism is the profitability and the effectiveness of business agents. the effectiveness of the bio-oriented agrarian economy in the modern difficult conditions of the market conjunction needs fast decisions and nonstandardized approaches to the production organization, development of relations with business partners, as well baltic journal of economic studies 152 vol. 4, no. 5, 2018 as the new economic vision of agricultural products producers. changes that nowadays take place in the system of economic relations, in particular, in the sphere of government regulation must be based as well as on the general regularities of market mechanisms and on the priorities of national development and functioning features and development of national agrarian economy in the context of its integration into the global economy. the bio-oriented agrarian economy is aimed at the investigation of methods of optimization of the use of limited resources for production, processing, selling, and consumption of food. it is necessary to note that in agriculture, which is the main sector of the bio-oriented agrarian economy, the main economic laws act. last two decades, biotechnology has become an important factor for stable producing and development of neoteric products and services. the economical application of biotechnologies has to cause the bio-oriented agrarian economy growth and development, where a real share of outcomes depends on the application of biological and raw materials. the commercial and environmental advantages of biotechnologies have made an interest in the bio-oriented agrarian economy in many countries. although, for the bio-oriented agrarian economy to grow, it is necessary to analyse its investment support and offer the plan of actions on how to attract the attention of investors to the bio-oriented economy sectors. 2. literature review before analysing and making a prognosis of biooriented agrarian economy investment, we are going to highlight scientific works of some prominent native scholars. for ukrainian scientists, it is relatively new and we are sure that it has not been studied very deeply yet. although there are papers of ukrainian scientists that deserve attention, in particular, we highlight papers of baidala v. (2016); volivach v., kozlovska m., kravchenko o. (2016), matyushenko i. (2015), selinnyi m. (2014), pogrishchyuk b., martusenko i. (2016), butenko v. (2016), proshchalkina a. (2016) and gerasimchuk n. (2013), talavyria m., lymar  v., baidala v. (2015), kozlovskyi s., grynyuk r ., baltremus  o., ivashchenko a. (2017), kozlovskyi s., khadzhynov i., vlasenko i., marynchak l. (2017). above-mentioned investigations are devoted to working out theoretical basis of formation and development of bio-oriented agrarian economy in ukraine, namely, to the directions of bio-oriented economy’s development, investigation of the bio-economic factors of the region’s agriculture development, concept of the resource-saving in the bioeconomy system and defining prospects of this concept development in the future. investigations of ukrainian scientists play a significant role in the development of the bio-oriented agrarian concept, but it is necessary to highlight the contribution of european colleagues. the most interesting for our investigation are papers of maciejczak m. (2015), carrez d. (2008), carlson r . (2008), birch k., tyfield d. (2012), goven j., pavone v. (2014). especial interest for the investigation has works of the european commission experts, in particular, devoted to the knowledge bio-based economy – kbbe (the knowledge based bio-economy (kbbe) in europe: achievements and challenges, 2010), sustainable growth and global challenges (delivering sustainable growth by addressing the grand societal challenges, 2014), prospects of bio-economy development to 2030 (the bioeconomy to 2030. designing a policy agenda. main findings and policy conclusions, 2009), importance of private and financial investors for the bio-economy (importance of private and financial investors for the bioeconomy. current situation in europe and recommendations, 2014), innovations for sustainable growth (innovating for sustainable growth: a bioeconomy for europe, 2012). 3. methods during the investigation, there were used such scientific methods: analysis (analysing approaches to the bio-oriented agrarian economy definition); synthesis (defining difference between traditional and agrarian economy); comparison (comparing investment of biooriented agrarian economy in the eu countries and ukraine); abstraction, concretization, summarizing, formalization, induction, deduction, and analogy (defining the specific features of the bio-oriented agrarian economy in ukraine and its sectors). in addition, we used bp stat programming for developing a prognosis of the bio-oriented economy investment in the eu counties. 4. results to manage the global population, increasing environmental population and changes of climate, there is the necessity of changes of approach to the production, consumption, processing, storage, recycling of bioresources. the europe strategy 2020 calls for the biooriented agrarian economy as the key element for the smart and green growth in europe. achievements in the bio-oriented agrarian economy r&d uptake will convince europe to develop the management of its renewable bio-resources and to open new markets of bio-based products. developing the bio-oriented agrarian economy in europe has a great potential: it can cause economic growth and jobs in rural territories, reduce fossil fuel dependence and improve the economic sustainability of primary production and processing industries. the biooriented agrarian economy contributes to the purposes of the europe 2020 flagship initiatives “innovation union” and “resource efficient europe”. baltic journal of economic studies 153 vol. 4, no. 5, 2018 the new eu research and innovation program “horizon 2020” which has a budget of 70 billion euro defines the importance of bio-oriented agrarian economy development for reduction of dependence on non-renewable and limited resources, adaptation to changes of climate, smart use of natural resources, food security, economic growth, creating new jobs and nations competitiveness in general. thus, according to the “horizon 2020” “knowledgebased bioeconomy” – kbbe program was established. today it is the part of the ec strategy “innovating for sustainable growth: a bioeconomy for europe”. it is necessary to highlight programs “sustainable food security” with the budget of 138 million euro and “blue growth” with the budget of 100 million euro. budgets of these programs are directed to the bio-oriented agrarian economy in europe, where finland, ireland, swiss, and norway have already affirmed strategies of bio-oriented agrarian economy development on their national levels. in accordance with the results of the made investigation before 2005 bio-oriented agrarian economy concept in documents of the european commission was used for branches, which introduced and used biotechnologies very actively. nevertheless, later the ec defined this concept as the production of renewable biological resources and their processing into food and feed, other biological products and bioenergy (innovating for sustainable growth: a bioeconomy for europe, 2012). talavyria m, lymar v., baidala v. (2015) argue that biooriented agrarian economy creates the basis for renewable biological resources use and conversion of them into high value added goods, such as food and biofuels. its sectors have powerful innovation potential thanks using technologies and tacit and explicit knowledge. maciejczak m. (2015) argues that from the view of systematic approach bio-oriented agrarian economy is a phenomenon, which has a positive impact on the environment, society, and the economy as a whole by application of innovative technologies in traditional branches, for example, in food production. in addition, this scientist (maciejczak, 2015) considers that for retention of utilization, use, and investment the bio-based agrarian economy under the influence of dynamics and stable changes have to create added value on the base of raw materials, which in the future form basis for ecological products. classical and neoclassical economic theories define three main production factors: labour, land, and capital. some scientists add to this list entrepreneurship and knowledge. at the time when these factors are actively discussed in the scientific literature, in the new concept like the bio-oriented economy they are not actual ones. therefore, it is necessary to focus on basic economic assumptions like production functions with the aim to fill the lack in the modern bio-oriented economy understanding to identify the main factors that cause its development. the bio-oriented agrarian economy has already made huge contributions to stable development and the contribution will grow in the future: higher quality, renewable, natural raw materials will be produced sustainably; food security and a healthy environment will continue to be assured. conversion to a wider range of final products, whether food, feed, fuel or another healthcare or industrial products, is also sustainable, being efficient, producing little or no waste, and using biological processing. developing all sectors of the biooriented agrarian economy will promote global food and feed security, improve nutrition and public health, make industrial processing cleaner and more efficient, and make a significant contribution to the effort to minimize climate change. the integrated bio-oriented agrarian economy is not simply only about science but is rather an integration of science with business and community. on one side, the bio-oriented agrarian economy is a new phenomenon because it studies the economic use and application of renewable biological resources, on the other side, it is an old, maybe in some cases ancient concept because its roots go down deep in the history of food production. it is very simple to prove it because our ancestors used technologies of conservation and utilization of agricultural residues. as a separate field, the bio-oriented agrarian economy is being studied relatively not long ago, approximately from the last two decades of 20th century. some scientists consider that it is a cross-scientific phenomenon because it connects knowledge of biology, chemistry, gene engineering, economy, and others (birch, tyfield, 2012) (figure 1). lymar v., tsaruk n. (2015) consider that the biooriented agrarian economy encompasses the sustainable production of renewable biological resources and their conversion and that of waste streams into food, bio-based products such as bioplastics, biofuels, and bioenergy. it includes agriculture, forestry, fisheries, food and paper production, as well as parts of chemical, biotechnological, and energy industries. its sectors have a strong innovation potential due to their use of a wide range of sciences (life sciences, agronomy, ecology, food science, and social sciences), enabling industrial technologies (biotechnology, nanotechnology, information and communication technologies (ict), and engineering), as well as local and tacit knowledge. in previous papers, we analysed the knowledge-based bio-economy (kbbe), what has a pretty interest in this investigation too. we defined that the knowledge-based bio-economy is the transformation of life sciences into new, stable, ecological, and competitive products. from the point of view of effectiveness, the knowledge-based bio-economy is the stable management, production, and use of renewable biological resources on the basis of life sciences and biotechnologies. the knowledge-based bio-economy is based on the next biotechnologies: baltic journal of economic studies 154 vol. 4, no. 5, 2018 bi o lo g ic a l re so u rc es pl an ts pr oc es si ng a nd p ro du ci ng in no va tio ns fo r v al ue c re at in g ch ai ns h ea lth y an d us ef ul fo od m ic ro or ga ni sm s re ne w ab le r es ou rc es in in du st ry bi om as s fo r e ne rg y pr od uc tio n po o li n g o f ef fo rt s g lo ba l f oo d se cu ri ty su st ai na bl e ag ri cu ltu ra l p ro du ct io n a ni m al s fi gu re 1 . b io -o ri en te d ag ra ri an e co no m y co nc ep t v is io n so ur ce : d ev el op ed b y th e a ut ho r baltic journal of economic studies 155 vol. 4, no. 5, 2018 red biotechnologies – production of medical equipment (development of new types of diagnostics and therapy) on the basis of the use of results of genomics and proteomics; green biotechnologies – implementation agricultural biotechnologies, including renewable energy, produced from remains agricultural products; white biotechnologies – implementation of biological processes into biochemistry, biopharmaceuticals production, food ingredients production with the aim to make the industry more ecological and less harmful for the environment; blue biotechnologies – use of aquaculture products for ecological goods. knowledge-based bio-economy is the interdisciplinary phenomenon and it includes elements of many sciences, namely chemistry, biology, mathematics, physics, computer sciences, and economics. according to the ec, the bio-oriented agrarian economy consists of the next branches (table 1). table 1 bio-oriented agrarian economy sectors according to the european commission classification sector annual turnover, billion euro employment, thousands food 965 4400 agriculture 381 12000 paper/pulp 375 1800 forestry/wood industry 269 3000 fisheries and aquaculture 32 500 biochemicals and plastics 50 150 enzymes 0,8 5 biofuels 6 150 total 2078 22005 according to this table, agriculture occupies the second position with the annual turnover of 381 billion euro in the eu. therefore, it allows us to presume that for ukrainian bio-oriented agrarian economy, the gross output of agricultural products is a very significant factor for development. given data show the fluctuation of the gross output of agricultural products in ukraine. the lowest level of the indicator was in 2003, approximately 150 billion hryvnias, the highest one – in 2016 (about 254 billion hryvnias). in 2017, we see a dramatic fall to 150 billion. surely, the effectiveness of agriculture is caused by many factors and characterized by instability and dependence on natural factors. although, government support and investment are defined as very important factors for agriculture and bio-oriented agrarian economy in general. bio-oriented agrarian economy ought to be supported by private and public investment what will improve coherence between national, european, and global research and innovation. thereby we decided to make a prognosis of the bio-oriented agrarian economy investment in the eu countries and compare indicators with ukrainian one. given analysis is prepared due to the bp stat program. there were used the next methods: brown’s, holt’s, box– jenkins, and olympus. according to our results, the olympus method is the best one because determination coefficient is 1,000 and approximation error is 0,001. we are not going to show all the steps of calculation because it is not the subject of our investigation. as we can see, the bio-oriented agrarian economy investment shows the positive dynamics from 2011 to 2025. in 2008, it is seen a dramatic fall from 1656 to figure 2. the dynamics of the gross output of agricultural products in ukraine, 2003–2017, billion hryvnias source: own calculation based on data from ukrstat.gov.ua 0 50 100 150 200 250 300 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 baltic journal of economic studies 156 vol. 4, no. 5, 2018 435 billion euro. this situation can be caused by the global financial crisis because in this period, all spheres suffered from a lack of finance. from 2011 we can see an increase in investment and hopefully in 2025 it is going to reach 1650 million euro. there were proposed some recommendations to improve the bio-oriented agrarian economy investment in the eu: to increase the eu public investments in r&d related to the bio-oriented agrarian economy, with special efforts on food security, sustainable and green growth, smart use of limited resources; to promote sufficient national public spending on biooriented agrarian economy research and development; to strengthen synergies between the eu and national programs that support r&d relevant to the biooriented agrarian economy, through specific privatepublic partnering initiatives; to boost the bio-sciences knowledge base, related emerging technologies and biological research infrastructures, through relevant activities followed by horizon 2020 “excellent science base”; to cooperate in the area of the bio-oriented agrarian economy, including entrepreneurship promotion activities; to establish close interactions between the relevant parts in horizon 2020 and other eu programs in areas such as education, science, technology, and knowledge transfer; outline the main research and innovation concepts and priorities for bio-oriented agrarian economy sectors under horizon 2020. as we can see, the bio-oriented agrarian economy investment is strongly supported on the eu level. national governments cooperate in spheres of knowledge and technologies transfer, holding common 0 200 400 600 800 1000 1200 1400 1600 1800 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 figure 3. prognosis model of bio-oriented agrarian economy investment in the eu countries to 2025, billion euro source: calculated by the author r&d, creating start-ups, spin-offs etc. investment support has the strict vertical from the eu level to university’s one. the bio-oriented agrarian economy is one of the most promising in the coming future and its start-ups can be very profitable. 5. conclusion during our investigation, we got such conclusions. today in the 21st century, society faced many problems that have global character; among them are climate changes, food and feed security, air pollution and exhaustion of natural resources. the eu countries reacted very quickly and developed research and innovation program “horizon 2020” to meet these challenges. in accordance with this program, some european countries developed their own strategies for the development of the bio-oriented agrarian economy. as we defined, the bio-oriented agrarian economy is not a new phenomenon but rapid development it got after 2005 when it began to be used in the ec documents for sectors, which introduced and used biotechnologies very actively. there were defined bio-oriented agrarian economy sectors according to the european commission classification: food, agriculture, paper/pulp, forestry/ wood industry, fisheries and aquaculture bio-chemicals and plastics, enzymes and biofuels. it was developed the prognosis model of bio-oriented agrarian economy investment in the eu countries to 2025, which shows the positive dynamics from 2011 to 2025. in our opinion, the successful bio-oriented agrarian economy needs an integrated policy direction with the next key areas: baltic journal of economic studies 157 vol. 4, no. 5, 2018 investing the relevant research fields, both within each of the sectors and by encouraging inter-disciplinary investigations; encouraging innovation to be sure that more of the knowledge developments can reach the commercialization stage; making entrepreneurship within the bio-oriented agrarian economy a promising career option; providing a skilled workforce by making the different sectors of the bio-oriented agrarian economy attractive career options through secondary and tertiary education; developing an innovation-friendly regulatory framework, which balances both risks and advantages; providing high-quality communication with the public embedded in r&d and innovation projects to ensure societal appreciation of research and innovation. references: baidala, v. 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(2014). the bioeconomy as political project. a polanyan analysis. retrieved from: http://sth.sagepub.com/content/early/2014/10/01/0162243914552133 the knowledge based bio-economy (kbbe) in europe: achievements and challenges (2010). retrieved from: http://www.bio-economy.net/reports/files/kbbe_2020_be_presidency.pdf delivering sustainable growth by addressing the grand societal challenges (2014). retrieved from: http://www.epsoweb.org/file/560 the bioeconomy to 2030. designing a policy agenda. main findings and policy conclusions (2009). retrieved from: http://www.oecd.org/futures/long-termtechnologicalsocietalchallenges/42837897.pdf importance of private and financial investors for the bioeconomy. current situation in europe and recommendations (2014). retrieved from http://bioeconomy.miur.it/wp-content/uploads/2014/11/festel.pdf innovating for sustainable growth: a bioeconomy for europe (2012). retrieved from: http://ec.europa.eu/ research/bioeconomy/pdf/201202_innovating_sustainable_growth_en.pdf lymar, v. (2017). investment support of bio-oriented economy development. svishtov. lymar, v., tsaruk, n. (2015). bio-economy: modern global challenges and development supporting policy. scientific letters of academie of michal baludansky, 3, 160-163. official website of the state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/ official website of the institute of agrarian economy of ukraine. retrieved from: http://www.iae.org.ua/ baltic journal of economic studies 50 vol. 4, no. 4, 2018 corresponding author: 1 academician stepan demianchuk international university of economics and humanities, ukraine. e-mail: vib@ukr.net 2 academician stepan demianchuk international university of economics and humanities, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-50-55 failures of the ukrainian economy and using the experience of the european integration of neighbouring countries to overcome them volodymyr boreiko1, olha mitchuk2 abstract. introduction. the most important task of every state is ensuring of citizens’ welfare continuous growth. for centuries, the most famous economists of the world devoted their researches to this issue; they have substantiated the theoretical aspects and have given the practical recommendations for the effective management of national economies. however, using these recommendations, one should be aware that during the last two centuries in the organization and operation of complex economic systems, which are national economies, the significant changes associated with globalization and monopolization of markets, and strengthening the role of the state took place. purpose of the study. in the article, the reasons that led to the deepening of the gap between ukraine and mature economies over the last twenty-five years are researched, and it was proposed to use the experience of the european integration of neighbouring countries to overcome them. results. it is substantiated that the cause of periodic recession of the ukrainian economy in the nineties of the xx and early xxi century is neglecting of changes that have occurred in the laws of complex economic systems development in the xx century, the loss of state control over social and economic processes in the country, insufficient financing of scientific researches, and implementation of new technologies. it is shown the discrepancy in actions of the national bank of ukraine, the ukrainian government and demands of the national economy for loans. conclusion. in order to eliminate these causes and providing dynamic development of ukraine, it is suggested to use the experience of the european integration of neighbouring countries, to create a favourable legal and tax climate to attract foreign and domestic investment, strengthen law enforcement activities for the unshadowing of the national economy, provide structural transformation of cost-inefficient and unprofitable industries, improve the system of taxation entities and persons incomes, ensure equitable distribution of incomes in the country. it is recommended to increase spending on state funding for science and innovation, and implement a set of measures in order to make loans available to local manufacturers and consumers. key words: ukrainian economy, recession, european integration, tax burden, innovation, credit resources. jel classification: e12, e52, o32 1. introduction the most important task of each state is to ensure the continued growth of the well-being of its citizens. therefore, for many centuries, the most well-known economists of the world devoted their research to this issue, which substantiated the theoretical aspects and provided practical recommendations for the effective management of the economies of the countries, minimization of the consequences of possible crises, overcoming the recession and restoring economic growth. however, today, when using these recommendations, it must be taken into account that during the past two centuries, the organization and operation of complex economic systems, which are the economies of the countries, have undergone significant changes associated with globalization and monopolization of markets, as well as the strengthening of the role of the state. however, as evidenced the consequences of the management of the national economy of ukraine over the past two and a half decades, the inconsistency of the actions of domestic government to the recommendations of scientists who have positively proven themselves in other countries, caused a long-term crisis. thus, the purpose of the article is to reveal the reasons for the failures of the ukrainian economy during the period of independence and to substantiate the recommendations for ensuring its dynamic development. baltic journal of economic studies 51 vol. 4, no. 4, 2018 2. lagging of ukraine in economic development from neighbouring countries ukraine which has significant scientific, economic, natural, and employment potential, remained behind the european economy over the past twenty-six years. in 1990 ukraine left behind its western neighbours bulgaria and romania according to the production of the gross domestic product (gdp) per capita respectively by 7.6 and 4.4% and was inferior to poland by 0.9%. in 2016, it was already behind them respectively by 1.23, 1.45 and 1.51 times (state statistics service ukraine, 2016). at the same time during the past twenty-six years, the lag of ukraine according to the economic indexes increased from the baltic countries which were a part of the soviet union until the nineties of the twentieth century. in 1990, the production of gdp per capita in lithuania, latvia, and estonia left behind ukraine respectively by 49.5, 51.4 and 18.8% and in 2016 the gap increased to 1.6–1.8 times. the abovementioned information proves the correctness of the european integration path chosen by the following countries: western (poland, bulgaria, romania, etc.) and northwest (latvia, lithuania, and estonia) neighbours of ukraine, and global mistakes prevented by the ukrainian government in determining and implementing the strategic direction of its development. 3. causes of failure of the ukrainian economy in 2014, ukraine ratified the agreement on the association with the european union with the aim to expand the target market for its products and to get rid of all economic problems. however, the country does very little those who create the wealth of the country could have good conditions for free entrepreneurship, reliable and equitable contractual protection, and have the deserving conditions for work and rest. so, it is necessary to analyse the reasons that led to the failure of the national economy in the past two decades and to propose a conceptual approach to the formulation and implementation of the strategic directions of development of ukraine in the future. thus, our country’s joining to the european values should be considered as a goal but not as means of overcoming the results of the mistakes that caused a long-term recession. eastern europe countries after refusing the command and administrative methods of management followed the way of creating a favourable environment for national companies business and attracting foreign investors for the successful development of their economies. to do this, they had to do a lot of work: rapid privatization of state assets, including its returning to “old” owners; liberalization of relations between state institutions and commercial firms; the adoption of clear, stable, and with optimal load tax laws, and laws that ensure the minimization of corruption schemes. ukraine had another situation after it had got the independence. in the early nineties, in the conditions of the economic downturn, the native legislators and officials had the only way to increase the revenue to the state budget and output of the economy from the crisis. it was the increasing of the tax load on the taxpayers. in some years (1994–1996), the tax load on business in our country reached 50% or was higher than the same indexes in other countries during the stable periods of their economies by 2–3 times. the wage bill had especially high load – more than 40%. thus, ukraine, determining the strategy of its development after having got the independence, did not take into consideration the experience of other countries, which for various reasons faced complex economic problems that prompted them to seek optimal ways of development. the situation that took place in ukraine at the end of the last century was typical for economically developed countries during the great depression in the 20–30 years of the twentieth century, and for western europe and japan in the post-war period. at that time, the tax load on businesses in those countries was much lower. thus, in 1937 the ratio of tax revenues of the economically developed countries of europe to the national gdp averaged 16.5%, and in some countries much less: switzerland – 6.0, sweden – 8.5, norway – 10.9%. in 1965, the tax load on businesses in the world increased significantly: the average tax load in the industrialized countries of europe was 28.6%, and of other continents – 23.2%. however, in that year in japan, which had just renewed its economy, this index was 18.3%, and in the united states that spend huge funds on the militarization of the country, this index was 25.0% (amosha, vyshnevskyy, 2002). thus, the legislators of the western countries made it possible to “stand up” to domestic producers and only then by the way of gradually increasing the tax load provide a high level of social security. of course, ukrainian legislators and government officials can be understood. during the break of the ties between the former republics of the soviet union and the collapse of the national economy, they had a difficult choice: on the one hand, it was necessary to reduce the tax load on manufacturers to promote their recovery, on the other hand, the social programmes and the need of the maintenance of the budgetary institutions required the increasing amounts of funds. under these conditions, the native leaders considered relying on the idea of those classics of market economic theory who believed that the market was able to stabilize itself. although in 1936, the world-famous economist john maynard keynes concluded that the state should pursue the stabilization policies in order to prevent the economic crisis or to avoid its developing (keynes, 2007). one of the key principles of a market economy that is built by ukraine from the time of having got the independence baltic journal of economic studies 52 vol. 4, no. 4, 2018 is to create the conditions for the free initiative expression at all the levels of the economy. the talent, initiative, and dedication are the determinant factors that should ensure a decent level of income for each person if they are the quality of the individual, the company, and the region led by leaders with these qualities. that is why in order to encourage initiative, dedication, and talent which are the basis of the dynamic growth of any country, it is necessary to create the conditions, under which everyone regardless of his/her status could realize their potential and fulfils their dreams. adam smith in his fundamental work “an inquiry into the nature and causes of the wealth of nations” grounded that a man is driven by the inclination for self-enrichment. but every person who is guided by selfish motives and cares only about his/her interests actually helps everyone and thus increases the “wealth of nations” (smith, 1962). so, according to these political economy classic’s conclusions, to ensure the dynamic development of the national economy, ukraine had to create the conditions for displaying private initiative and free competition of producers and consumers, that is, to liberalize the economic relations in the country and to ensure their legal protection. actually, this way was followed by ukraine in the early nineties of the last century. however, the cataclysmic decline in production of goods and services caused by rupture of long-term relationships, while increasing the tax load and the devaluation of the national currency, created a favourable environment for corruption and shadowing of a large part of the domestic economy, the destruction of one and enrich of the other part of the population. at the same time, uncertainty about the future and the thirst for profit made even the successful businessmen think about the present delaying the upgrades of companies in the future. this led to a loss of competitiveness of ukrainian products and the displacement of it from ukrainian and international markets by foreign competitors. so, first of the reasons that caused the current failure of ukrainian economy is the ignoring by the native leaders the changes that took place in the laws of economic systems within more than two hundred years after the first works of adam smith. adam smith pointed out those external influences, when they become powerful, can disrupt this wonderful market property (to self-control – author). it should be noted that many economists (the most prominent was john maynard keynes) grounded that the totally free competition cannot exist in nature (keynes, 1999) as the market is constantly influenced by a lot of things: monopoly (natural or artificial), public administration (increased spending on social programmes and government spending), other countries (protectionist measures to protect their own producers), the uneven distribution of mineral resources and varying soil fertility, transport spending and others, that even through a comparative advantages in other sectors of the economy do not allow the country to balance its import and export and to provide the same cost of domestic product with other countries because of the monopoly of trade union actions, the capitalists’ rush for excess profits, because of the corruption in public administration and regulation, and the shadowing of part of the economy that avoiding from taxes gets an advantage over its “honest” colleagues, because of the lack of true freedom for “economic” person (access to knowledge, jobs, credits, etc.), and war and political conflicts. in fact, ukraine had nearly all of the abovementioned problems in the early nineties of the twentieth century: the newly created monopolies began to dictate the price of imported oil, petroleum products, and natural gas. ukraine could provide itself with this domestic production only by 15-20% that caused the adverse balance of foreign trade; the share of public expenditure on social protection and social security of the population increased; russia began the program for the replacement of most products, which had been produced in ukraine; mass social movements caused not always thought-out closing of environmentally dangerous enterprises; there were a lot of strikes caused by delay of salaries; new businessmen in the rush for excess profits stopped at nothing, even at illegal methods and infringement; corruption and the shadow economy acquired the unprecedented sizes; the credit resources became inaccessible to most enterprises due to the devaluation of the currency and financial instability; the level of higher education levelled and the best scientific personnel left the country; ukraine suffered from the constant political pressure from its northern neighbour. under these conditions, ukraine defining the strategies of its development had to take into account the changes that had occurred in the world economy in the twentieth century. for example, that the modern economies are much more export-import dependent on the external environment that leads to fast (in recent years lightning) transfer of economic crisis from one country to another (it was the most typical during the economic crisis of 1998). that is why ukraine, which, on the one hand, suffered from russia’s pressure and, on the other hand, was unable to penetrate with their products to western markets along with the liberalization of economic relations in the country and creating a favourable business environment, had to strengthen the role of state institutions in order to concentrate the efforts of the whole society to update products and to prevent monopolization and the shadowing of the national economy, the corruption wide-spreading, and massive impoverishment of the population. the second reason, which follows from the first one and which greatly extended the structural and economic crisis in ukraine in the nineties of the twentieth century, is the loss of real control over economic processes in the country by state institutions. baltic journal of economic studies 53 vol. 4, no. 4, 2018 under such conditions, the following things happened: a rapid separation of income across the population, moving abroad of the most active part of ukrainian society, rising of unemployment and loss of motivation for effective work for those who worked at domestic enterprises. however, the state expenditures were directed mainly not to the innovation of products, and to support the material and energy-intensive industries. at the same time, the costs of maintaining the growing number of ineffective public administration and members of law enforcement agencies. as a result of this economic policy from 1990 to 1997, the percentage of newly formed engineering products in ukraine, which conformed to the native and international analogues, decreased by 23.9 points from 88.9% to 65.0% while the rate of the products, which is lower than the existing analogues or is not defined, increased from 7.2% in 1990 to 33.3% in 1997 or by 4.6 times (state statistics service ukraine, 2016). that is why the lack of radical reforms, for example, the substantial decrease of the tax load on businesses and priority funding of the high-tech industries prevented the ukrainian economy even during the five-year 6-10% gdp growth in 2000-2007 to provide product updating and significant improvement of the living standards. during this period, the gdp growth of ukraine was held mainly by material and energy-intensive often subsidized industries that delayed the funds that could be spent on the financing of the sectors, which created the latest technology, machines and equipment, and which could ensure the sustainable development of the economy in the future. however, the raw material intensive products “rescued” ukraine while the european economy was developing dynamically. but it caused the sharp drop under the condition of the world financial recession because of the low competitiveness in the international markets. the thesis that only the level of product innovation determines the ability of any country to develop successfully is not objectionable in world economics. the american economist with ukrainian origin s.-s. kuznets thinks that “the epochal innovation that characterizes the current economic era is the extended application of science to solve the problems of economic production” (kuznets, 1966). that is why the world’s leading countries give priority to the science funding. however, the statistics show that in 2016 the spending of ukraine on finance of scientific and technological projects at current prices increased by 16 times but their specific gravity in the gross domestic product during this period decreased to 0.66% (state statistics service ukraine, 2016). during 2000–2016, the specific gravity of ukrainian enterprises spending on researches in the total financing of the innovative activity was 9-16% while decreased from 15% in 2000 to 10% in 2016. thus, during these years, the companies spent only 3-5% of their research costs to buy new technologies. at the same time, 55-70% of the annual financial investment in innovative activity was directed to buy the machinery, equipment, and facilities connected with the innovations introduction. so, the innovative means were spent not on national science development finance but on the support of foreign companies (state statistics service ukraine, 2016). the third reason, which slows down the current economic development in ukraine and makes the domestic products uncompetitive in the domestic and international markets, is the lack of state funding by the state and ukrainian companies during the last twenty years of researches and innovative projects implementation. the fourth reason is the non-conformity of the actions of the national bank of ukraine (nbu) and the ukrainian government to the demands of the national economy. in the second part of 2008, the global financial crisis spread across ukraine. it caused a reduction in the rate of growth of gross domestic product (gdp) from 107.9% in 2007 to 102.3% in 2008. in august of the same year, the fall of production of industrial products happened. for example, in august 2008, the index of the volume of industrial products to the corresponding period of the previous year was 97.0, in september – 94.8, in october – 80.1, in november – 69.0, in december – 72.0%. in 2009, the crisis extended that caused the decline of gdp by 14.8%. the decline of the volume of produced industrial production was even greater – by 21.9%. in 2010, ukraine’s gdp grew in comparison with the previous year by 104.1% and in 2011 – by 105.2%. that would indicate a stabilization of the national economy and its gradual recovery from the crisis. however, in 2012 this index increased only by 0.2%, in 2013 – 0%. in 2014, the dropping of ukraine’s gdp by 6.8% in comparison with the same period of last year was recorded. this indicates the entry of our country into the next phase of the financial crisis (state statistics service ukraine, 2016). it should be noted that in 2008-2009, most european countries came across a decrease in the rate of production of national gdp. however, to reduce the depth of the recession, they developed and implemented the measures to support domestic producers and consumers, which rely on the keynesian theory. 4. proposals to mitigate the effects of the economic crisis after the crisis of 1929-1933, j. m. keynes determined measures to be followed by countries to mitigate the effects of the economic crisis. the scientist considers that demand plays a key role in increasing of employment and production development and provides the increment baltic journal of economic studies 54 vol. 4, no. 4, 2018 of the revenue: “when employment increases, a real aggregate income increases too. the lack of effective demand will prevent the growth of production” and, to promote the economic development of the country, it is necessary to find levers that will increase the effective demand for consumer goods and investment demand, which are the components of the general public demand (keynes, 1999). so, the state by adjusting the total social demand may limit the uncontrolled growth of the national economy in a phase of growth and reduce its fall in the phase of recession. john maynard keynes suggested his own mechanisms of ensuring the growth of effective demand as a determinant factor for employment increasing and growth in the national economy. they are: – state regulation of the interest rate. to stimulate the manufacturers’ interest in increasing the production, it is offered to lower interest rate on loans that will help to increase the gap between the expected profitability of the investment and the value of the loans or, in other words, the profits that remain in the company; – the increase of state spending, investment, goods purchase and reduction of the tax load on businesses. the increase in the expenditure side of the budget should be offset by new tax revenues generated by increasing production and employment creation; – increasing with the help of subsidies, grants, benefits, loans, the income of social groups, which are the largest group of consumers of products have the lowest rate; – increasing with the help of state-funded public works facilities, stimulation to create new jobs by the employers, employment, and prevention of substantial unemployment. these mechanisms were successfully used by many countries in the thirties of the twentieth century and are in use today and while they are criticized by the other economic concepts, better measures to reduce the negative effects of the recession are not proposed. however, analysis of the actions of national institutions, which are responsible for the development of the national economy during the crisis, shows that they ignored the recommendations of john maynard keynes working contrary to his offerings. it should be noted that 2008 was characterized more than 20 percent inflation for ukraine. that is why to decrease it the nbu and the cabinet of ministers of ukraine began to restrict the money supply in circulation actively and raise interest rates even during the crisis. during the pre-crisis period, the money supply increased annually by 40-50% but in 2008 – 30%, and in 2009 in order to reduce the inflation, the money supply was reduced by 5.5% by the nbu. however, the nbu discount rate was increased from 8% in 2007 to 12% in 2008. thus, instead of reducing the mass of cash in circulation and increasing the interest rate in the period of economic growth, the nbu was following the actions during the recession, which were against the recommendations of keynes, because it reduces the consumer demand and makes the credit facilities inapproachable for subjects of management. as a result, the outflow of foreign financial resources to countries-residents increased by the reduction of the money supply and the volume of loans granted by domestic banks for residents. as a result, the credit supply of ukrainian banks in 2009 dropped by 1.5% while domestic enterprises almost lost the opportunity to receive credit resources, the rate of which increased to 25-30%. as a result, the national economy during 2010-2015 is in stagnation and recession. the well-known ukrainian economist a. chukhno says: “the crisis is one of the forms of economic development, during which outdated equipment and technology, production and labour are eliminated, space for the growth and consolidation of the new things is opened” (chukhno, 2010). thus, the scientists consider that the recession prompts the company to find ways to overcome the crisis, while stagnation “preserves” the problem. 5. conclusions and suggestions thus, summarizing the abovementioned, we can draw a conclusion that the basis of past and present social and economic failures of ukraine is the following: domestic officials’ ignoring the changes that happened in the rules of development of economies in the twentieth century that are associated with the globalization and the monopolization of the global economy; the state’s loss of the control over real economic processes in the country that led to shadowing of a large part of the national economy, deep stratification of the income of the population and active population outflow to other countries; insufficient funding of basic research and implementation of innovative projects by ukraine and national enterprises; discrepancy of actions of the national bank of ukraine and the ukrainian government to modern needs of the national economy. the abovementioned points are strengthened by the distrust of domestic entrepreneurs and people to ukrainian government activities and the ukrainian legal system. so, even the reduction of the tax load on taxpayers that takes place in ukraine from 2011 after the new tax code adoption did not allow reviving the business activity in the country. thus, in order to ensure the rapid overcoming of the consequences of the recession and the rapid development of the national economy in order to bring it up to european standards and increase the standard of living of the population, ukraine needs to take advantage of the experience of european integration of neighbouring countries and: – to create a favourable legal and tax environment to attract foreign and domestic investment, to display the baltic journal of economic studies 55 vol. 4, no. 4, 2018 entrepreneurial initiatives, to update the product and share the newly created revenue between state and objects of management, and various segments of the population equitably; – to strengthen the law enforcing bodies activities in unshadowing of the national economy, limiting the output of domestic financial capital to offshore zone, monopoly and corruption in government; – to provide the structural transformation of the costly and unprofitable industries, small and medium-sized businesses development and government support for start-ups; – to reduce the social load on the payroll, to implement moderately progressive scale of enterprise income and personal income tax, and to monitor the wages of senior executives and everyone who receives it from the state and local budgets and expenditures for their maintenance closely; – to increase state expenditures for the funding of basic and applied science, advanced equipment manufacturing and implementation of innovative projects; – to realize a range of measures in order to make credit facilities available to producers and consumer. during a recession, it is necessary to lower the discount rate of the national bank of ukraine to zero, to increase the money supply in circulation, to provide a floating exchange rate of the national currency to convertible currencies and, as keynes recommended, to maintain the inflation at 3-5% level. references: amosha, o., vyshnevskyy, v. (2002). do pytannya pro otsinku rivnya podatkiv v ukrayini [on the issue of assessing the level of taxes in ukraine]. economy of ukraine, no. 8, pp. 11-19. (in ukrainian) chukhno, a. (2010). suchasna finansovo-ekonomichna kryza: pryroda, shlyakhy i metody yiyi podolannya [modern financial and economic crisis: nature, ways and methods of overcoming it]. economy of ukraine, no. 1, pp. 4-18. (in ukrainian) keynes, j. m. (2007). obschaya teoriya zanyatosti, protsenta i deneg. izbrannoe [the general theory of employment, interest and money. favourites]. moscow: eksmo. (in russian) keynes, j. m. (1999). traktat pro hroshovu reformu. zahalna teoriya zaynyatosti, protsenta ta hroshey [a tract on monetary reform. general theory of employment, interest and money]. kyiv: aub. (in ukrainian) kuznets, s. (1966). modern economic growth: rate, structure and spread. new heaven. smith, a. (1962). issledovanie o prirode i prichinah bogatstva narodov [a study on the nature and causes of the wealth of peoples]. moscow: sotsekgiz. (in russian) the site of the state statistics service ukraine (2016). retrieved from: http://www.ukrstat.gov.ua baltic journal of economic studies 21 vol. 5, no. 1, 2019 corresponding author: 1 national academy of public administration under the president of ukraine, ukraine. e-mail: vmvakulenko@gmail.com 2 national academy of public administration under the president of ukraine, ukraine. e-mail: v_koltun@yahoo.com doi: https://doi.org/10.30525/2256-0742/2019-5-1-21-26 antientropic tools for providing sustainable balanced regional development volodymyr vakulenko1, viktoriia koltun2 abstract. the purpose of the paper is to substantiate antientropic tools for managing processes of balanced sustainable development of regions. it is shown that one of the most complicated and important contradictions in the system of territorial administration is the contradiction between the development and sustainability of such a complex multidimensional system as a region. and, obviously, relevant scientific task arises as regards to the development of modern approaches to the justification of instruments of dialectical “removal” of the specified contradiction. it is revealed that an optimal methodological step will be the introduction of antientropic approach in the processes of realization of balanced sustainable regional development. methodology. the survey is based on the actual methodological complex that is characterised by integrity and, including classical postulates which provide its verification, it has innovative aspects. the mentioned approach is based on systems theory that is characterised today by worldwide-recognized universal cognitive tools and antientropic approach, which is in focus of contemporary interdisciplinary studies. results. modern approaches to phenomena of entropy are generalized; antientropic paradigm of management of processes of introducing modern model of balanced development at the regional level are substantiated; on the basis of antientropic paradigm, there is proposed a set of approaches to managing organizational processes in the system of local self-government, which provides for permanent dynamic multi-vector interaction of systems (organizations) of different levels and different environments, also it is used for ensuring coherent dissipative activity. based on the concept of adaptive management, a complex of tools for managing organizational processes in the system of subjects of providing sustainable balanced regional development is elaborated. practical implications. proposals on the application of antientropic tools for providing sustainable balanced development of regions can be used by executive authorities and local self-government bodies in the process of formation and implementation of state regional policy, first of all, the ministry of regional development, construction, housing and communal services of ukraine during the formation of the state sustainable development strategy and action plan for its implementation, as well as regional administration bodies when designing regional development strategies and implementing appropriate measures, selecting programs (projects) of regional development. key scientific achievements of this paper also can be used in the process of drafting legal acts, elaborating the administrative reform concept, and implementing other state program documents. value/originality. tools that are proposed in this research for introducing the model of balanced sustainable regional development on the basis of antientropic paradigm include the following: maintenance of an open state of the system; use of the principle of feed-forward control; realization of the principle of diversity. the presented complex of approaches ensures continuous dynamic multi-vector interaction of systems (organizations) of different levels and different environments. key words: investments, financing, public administration. jel classification: d78, h70, r58 1. introduction as it is noted in a number of documents determining vectors of state regional policy, the current state of regional development is characterised, in particular, by the following: “long-lasting formation of inefficient system of public administration of regional development and nontransparent financing mechanism of regional development, lack of clearly defined state policy in the sphere of regional development…” (postanova kmu, 2014). reflected in modern publications imperatives of research on the management of sustainable development of regions allow arguing that one of the most complicated baltic journal of economic studies 22 vol. 5, no. 1, 2019 and important contradictions in the administrative system is the contradiction between development and sustainability of such a complex multidimensional system as a region. and, obviously, relevant scientific task arises as regards to the development of modern approaches to the justification of instruments of dialectical “removal” of the specified contradiction. therefore, it seems relevant to develop a methodological complex that would be characterised by integrity and, including classical postulates which provide its verification, would have innovative aspects. in our deep conviction, the mentioned approach should be based on systems theory, which is characterised today by worldwide-recognized universal cognitive tools, and antientropic approach, which is in focus of contemporary interdisciplinary studies. the purpose of the article is to substantiate antientropic tools for managing processes of balanced sustainable development of regions. it is shown that one of the most complicated and important contradictions in the system of territorial administration is the contradiction between the development and sustainability of such a complex multidimensional system as a region. and, obviously, relevant scientific task arises as regards to the development of modern approaches to the justification of instruments of dialectical “removal” of the specified contradiction. it is revealed that an optimal methodological step will be the introduction of antientropic approach in the processes of realization of balanced sustainable regional development. 2. balancing dynamic and static characteristics of the development of a multidimensional system – region the issue of trends and prospective directions of regional development has recently shown increased interest but this problem is not deeply studied in the scientific literature. a. kilienene, i. macherinskene, v. navitskas and zh. simanavichene define tactical actions to strengthen the region through sustainability, namely: “reliance on local resources, increased internal regional turnover, confidence-building among key social groups in the region” (kilienene, macherinskene, navitskas, simanavichene, 2006). all that they mentioned is reflected today in trends of regional development and ukraine: the preconditions are formed for the reliance on local resources and increase in the domestic regional turnover, which is manifested in import substitution, strengthening of trust among the key social groups in the region, which involves coordination of actions of the authorities and society. at the same time, given the ambiguity of interpretations of “sustainability” and “stability” as properties of development, the need arises to solve the problem of balancing dynamic and static characteristics of the development of a multidimensional system – region. therefore, it is extremely relevant to develop new and improve existing methodological approaches aimed at bringing the system of management of regional development to the required optimal state, that is, to substantiate antientropic paradigm of management of processes of introducing a model of balanced sustainable development. the problems of entropy and anti-entropy of social systems, in particular, management organizations, were addressed by domestic and foreign specialists. among the most famous works that determined the vector of this study, it is worthwhile to indicate the works (mylner, 2000; luniachek, 2011). they give a thorough vision of phenomena of entropy and anti-entropy using a powerful physical and mathematical apparatus. however, the issues of management of antientropic tools for balanced sustainable development of regions were not studied. therefore, the modern state of theory and practice of public administration predetermined the choice of the direction of this study. the search for a given methodological approach in related sciences seems obvious. ya. vykliuk writes: “today, more and more scientific papers are devoted to the application of physical laws for the modelling of economic and social systems… the application of laws of thermodynamics for studying ecosystems and socioeconomic systems allowed showing that these systems should be understood as thermodynamically open. the use of methods of physico-mathematical modelling allowed defining entropy and assessing risks of the functioning of the socio-economic system. note that the application of thermodynamic laws also indicated a high level of their adequacy in models of urban management” (vykliuk, 2010). l. m. gumilev writes about the dynamic system: “…the system should permanently remove the accumulated entropy by interchanging energy and entropy with the environment. such an exchange is regulated by management systems…” (gumilev, 2008). therefore, we consider appropriate to search for energy and entropy exchange mechanisms of the system, which is a region, with the external environment. entropy for the region as a system can be considered processes/ phenomena, which are not immanently inherent in the specified system, are not its essential, determining features. manifestations of entropy were mentioned above when characterizing the current state of state regional policy in ukraine. crises of the last decade forced to draw a number of conclusions, given which we consider it appropriate to identify leading trends and prospective directions of regional development to be given close attention: 1) development of import-substituting productions; 2) diversification of the economy; 3) reduction in the relative share of employed in material production and increase of employed in non-material one; 4) development of production of highly processed baltic journal of economic studies 23 vol. 5, no. 1, 2019 products; 5) increase in labour efficiency, value added, growing intellectual component, innovative development; 6) development of industries with the highest multiplicative effect; 7) coordination of actions of the authorities and society; 8) development of collective forms of ownership (cooperatives); 9) clustering; 10) creation of technology and industrial parks; 11) public-private partnership; 12) taking spatial advantages in the placement of productive forces. such classical characteristics of the region as “structuredness” and “multidimensionality” define the region as a set of subsystems in the territorial space that necessitates complex development in the territorial aspect. territorial constraints limit the flow of some developmental factors from the environment in the spatial, economic, and organizational coordinate system. in other words, such regional characteristic as “partial openness” that manifests among other things in certain closeness by territorial and, in particular, economic and organizational features and, as a consequence, in the lack of possibility to attract factors of development from the environment, it requires maximum use of geographical space and land resources through complex spatial development. as we see, characteristic of the state of regional development, which was given at the beginning of the article, is completely within the scope of the modern definition of entropy. therefore, it seems relevant to substantiate antientropic paradigm of management of processes of introducing a modern vision of balanced sustainable regional development, which is interpreted through a balance of sustainability and development. 3. management imperatives of balanced sustainable regional development it should be noted that the modern variety of methodological approaches used in the science of “public administration” gives quite an ambiguous definition of the phenomenon of “entropy”. an attempt to combine interpretations of entropy led to the following. modern understanding of entropy provides for the growth of variability, multivectorness in the system, polyvariety etc. for the xx century, more characteristic is the description of entropy processes through the concepts of “damping”, “hindering”, “reducing integrity” of the system, “the gap between its connections.” polar, at first sight, approaches describe different stages of “evolutionary function” of entropy: at the expense of multi-vector and polyvariant nature of development, the total energy of the system is divided, broken down, resulting in the inhibition of its “direct” movement. the emergence of additional, alternative capabilities “litters” the system, creating a polyvariety of movement for a single period of time. in the context of the system of management of regional development, anti-entropy can be interpreted as a purposeful activity for bringing the system to the state that more closely meets the requirements of evolution, for a shorter period of physical time than the complete cycle of “natural” evolution demands. it is obvious that the region, representing a complex multidimensional system, involves principles of effective development inherent in such formations. so, the principle of integrity is reflected in the complex territorial development, the smoothing of territorial disproportions. the principle of optimality finds its expression in optimal development and location of industries in the region. problems of optimization are considered in papers of many scholars, among which we should mention: w. lassmann, h. schilar, k. schwarz, s. brentjes (lassmann, schilar, schwarz, brentjes, 1990). at the same time, despite characteristics of growth points described in the works of the cited authors, in practice, we face with the latter, which are not onedimensional (industry, region) but multidimensional, when simultaneously determining the leading, priority branch in the association with a certain territory. in this regard, it is more appropriate to talk about the instrument – the territorial-industrial formation (cluster, industrial park, technopark etc.) – as an effective regional locomotive of growth. let us consider regional development trends existing at the current development stage of ukraine by the following directions: 1) sustainable development; 2) innovative-modernization; 3) those having both innovative-modernization and sustainability components. the first block is represented by the following trends: diversification of the economy; development of import-substituting productions; production of highly processed products; reduction in the relative share of employed in material production and increase of employed in non-material one; coordination of actions of the authorities and society; development of collective forms of ownership (cooperatives). their realization allows region to pass through crisis phenomena with the slightest downturn in development, because they are oriented either on less dependence on external factors (import substitution, high degree of processing), or on the minimization of adjacent production dependence (diversification), or on the levelling of intra-regional social disturbances (coordination of actions of the authorities and society), or on the stabilization of labour market situation due to increase in employment (creation of cooperatives). the trend to reduce employed in material production and increase of employed in non-material ones, which comes from innovative-modernization block as a consequence of the increase in labour efficiency and labour saving, relates to a stable block of regional development areas. this is predetermined by a number of factors, in particular, firstly, market supply and demand for non-material works and services are relatively stable since they are less imported from the baltic journal of economic studies 24 vol. 5, no. 1, 2019 external environment and are poorly exported to the external environment; secondly, demand for services is mostly not elastic in price due to the impossibility of denial of services, even in a crisis (utility services, hairdressing, funeral services), they are refused in the last turn; thirdly, expenditures on consumption of products of the non-material sector, for the most part, occupy an insignificant share in aggregate expenditures. the global crisis of 2008–2010 has clearly demonstrated that monoindustrial regional systems, whose functioning is too dependent on external factors, have faced much more significant socio-economic problems in comparison with regions oriented on domestic demand, where the production of essential commodities is developed, as well as in comparison with regions where production is diversified. the second block represented by the following prospective areas and tools of regional development – increase in labour efficiency, value added, growing intellectual component, growth in the share of innovative products; clustering; creation of technology and industrial parks; taking spatial advantages; development of public-private partnership – has a pronounced innovative character and thus determines modernization direction of regional development, especially relevant in recent times. the third block, which is a symbiosis of two previous ones, is represented by one perspective area – development of industries with the highest multiplicative effect. synthesis of the abovementioned blocks in relation to this area, which envisages realized specifics of antientropic approach, has led to the following conclusions: 1) sustainability is inherent in those industries that operate stably, for example, where products are manufactured, the demand for which is little elastic in price, and which operate stably in the event of a crisis, ensuring the continuity of related industries; 2) modernization-innovative direction finds its expression in the following – in the conditions of crisis recovery, the construction, tourism and other industries are the “locomotives” of regional growth, their development and investment in them give the greatest economic effect. along with that, in the acute phase of the crisis, the production of products and services in these industries is decreasing, taking also related industries, which does not allow us to consider this promising area as classically sustainable. in such a way, sustainable block is represented by trends within the already known principles “optimality”, “balance” and “coordination”: diversification of the economy; development of import-substituting productions; production of highly processed products; reduction in the relative share of employed in material production and increase of employed in non-material one; coordination of actions of the authorities and society; development of collective forms of ownership (cooperatives). modernization-innovative block is represented by perspective areas and tools within the principles of “complexity”, “optimality” and “balance”: increase in labour efficiency, value added, growing intellectual component, growth in the share of innovative products; clustering; creation of technology and industrial parks; taking spatial advantages; development of public-private partnership. the symbiosis of sustainability and modernizationinnovative directions is represented by the area of regional development within the principle of optimality: development of industries with the highest multiplicative effect. we consider understanding and taking into account the whole aggregate of abovementioned perspective areas as imperative in the realization of the management mechanism of balanced sustainable regional development. 4. research methodology the next stage of realization of the set goal envisages the development of tools capable of providing adequate realization and implementation of the outlined approaches. modern professional literature substantiates possibilities of the application of synergetic-evolutionary-information approaches to the management. the most famous papers are written by c. meyer, s. davis. they describe the theory of adaptive systems, according to which “interaction of selforganization, recombination, selection, and collective evolution lead to the emergence of a new quality of the system” (meyer, davis, 2007), which evolved, that is, adapted to the changing environment and meets its requirements. modern science and practice of public administration are characterised by attracting managerial principles typical for the commercial sector to public administration tools. “in business, growth serves as a reasonable criterion for the viability of the company” (meyer, davis, 2007). the criterion of the viability of a certain organizational structure of public administration authorities at the regional level is the ability to ensure the exercise of powers at the expense of internal for the territory resources, and subsequently – to act as a donor region. for this purpose, it is worth using a new paradigm of management that is “to create a system of views of management focused not on engineering and efficiency but evolution and adaptability” (meyer, davis, 2007). sharing the opinion of researchers, we should specify that the efficiency of management does not cease to be important both the purpose and the characteristic of the required type of management. however, given the constant acceleration of all processes and sides of management (development of subject and object of management, a complex of their environments etc.), it seems appropriate to use the principle of advance. baltic journal of economic studies 25 vol. 5, no. 1, 2019 adam smith also argued that “individual intelligence and individual actions – the only way to create opportunities for adaptation (smith, 1962). system anti-entropy increases with the increase in the share of “individual” actions, decisions etc. in the organization. therefore, the circle of people who make managerial decisions in the lpaa, in particular, lga, needs to be expanded, while increasing individual responsibility and providing decent professional training. human resource management is an established requirement for the functioning of the organization. a. toffler proposed an approach that is partly reflected in the current version of the law of ukraine “on civil service”. so, a. toffler noted: “the work of most people must be diverse, it should not be repeated and should be based on personal responsibility, demand from the person the ability to distinguish, evaluate, and judge” (toffler, 1984). if entropy is interpreted as an increase in the spectrum of probable opportunities, the choice of the wrong way option at the point of bifurcation can lead to irreversible deterioration of the situation. it seems necessary to determine an optimal way of regional development among all possible options based on computer modelling. so, sociologists joshua epstein and robert axtell developed a universal computer model of society “sugarscape”. the program creates models on the basis of elements of adaptive systems: agents (freely operating units), rules, and the environment. the experience described in the professional literature indicates the efficiency of applying this model when making managerial decisions not only within the organization but also within the industrial sector of the state (epstein joshua m., robert axtell, 1996). given the fact that the model is in open internet access, it is expedient to propose local public administration authorities to use it when determining an optimal variant of problemsolving. described in foreign professional sources (höpner, 2005) management methods applied for the commercial sector can be partially adapted to domestic realia of public administration at the regional level. it is, in particular, about the method of “localized innovation” – in the abovementioned source, “all franchises should share new knowledge with other franchises. we create knowledge community.” the key is the requirement for obligatory notification to colleagues/organizations – other bodies of local selfgovernment or local executive authorities – about successful innovations in management. it is possible to implement it through the creation of a single information portal, the attraction of leading associations of local self-government bodies. mandatory requirement for ensuring the effectiveness of this portal is the involvement of experts-analysts, who must provide high-quality scientific support of the disaggregated data provided, by means of generalization; selection of those with a relatively universal character; formulation of proposals for the dissemination and introduction into the legislative practice of the state. such an approach to the organization of the functioning of portal corresponds to the principle of adaptive management “to create, connect, develop,” at which “evolution as such is incorporated not only in production” of this organization “but also in its strategy and management” (smith, 1962). on the basis of analysis carried out, in the context of the development of the domestic legislative field, it seems appropriate to amend the law of ukraine “on associations of local self-government bodies” by provisions on functions in the sphere of determination and dissemination of advanced managerial methods, including at the level of supranational associations of local self-government bodies. one of the resources for antientropic management on the basis of the adaptive approach requiring the realization of the principle of diversity is multidisciplinary teams. in the context of the problems under study, the realization of this postulate provides for the formation of a body of local self-government officials with diverse professional training, which will allow attracting the full range of modern methodologies of various sciences and wide own managerial experience of officials to solving the problems associated with the introduction of the proposed model of sustainable development. at the same time, all of them should have the necessary training in the field of public management and administration, which will ensure a shared vision of the goal. features of adaptive organization (i.e. one that successfully applies antientropic tools) are predetermined by corresponding managerial methods: maximizing the diversity of ideas; ensuring their ability to contact and interact with each other; increase the number of such contacts (meyer, 2007). in the context of studying processes of the introduction of a model of sustainable development of the region on the basis of antientropic paradigm, this thesis acquires the following interpretation. increase in the number of variants for interpreting certain entropic crisis situation, the growth of quantitative indicators of “visions” of the exit from it will lead to the transition to the next qualitative state. the number of contacts among carriers of such approaches will increase them exponentially that will cause inevitability of qualitative leap. therefore, in order to more effectively use the potential of recombination, it seems appropriate to conduct competitions of “best practices” not only among local self-government bodies of a certain level but to extend the circle of their participants to all elements of the system of local self-government (including village, settlement, city mayors, chiefs, bodies of self-organization of the population) and local executive authorities, providing at the legislative level, the possibility of transferring certain elements from one branch of public administration to another. baltic journal of economic studies 26 vol. 5, no. 1, 2019 interpreted in such a context, “collective evolution” of local self-government bodies and local executive authorities will be realized, probably, by the following ways: through certain competition in the exercise of powers (in the introduction of competition system of their distribution, at which the performer is guaranteed to receive funds for their execution, having previously proved his ability through a special procedure); through cooperation in the exercise of those powers that it is expedient to realize by joint efforts; through the implementation of joint innovations in managerial activity. on the basis of analysis carried out, in the context of the development of the domestic legislative field of local self-government, it seems appropriate to amend the law of ukraine “on associations of local selfgovernment bodies” by provisions on functions in the sphere of determination and dissemination of advanced managerial methods. in the given context, it seems possible to analyse the organization of activities of supranational associations of local selfgovernment bodies from the viewpoint of management of antientropic processes, which serve as a meaningful pillar of the introduction of the green economy, which is a circle of further promising research. 5. conclusions it should be emphasized that the listed tools should be used as a single set, providing a synergetic effect in adaptive management of organizational processes associated with the introduction of the modern model of sustainable development. summing up, let us note the following. in this study, modern approaches to phenomena of entropy are generalised; antientropic paradigm of management of processes of introducing modern model of balanced development at the regional level are substantiated; on the basis of antientropic paradigm, there is proposed a set of approaches to managing organizational processes in the system of local self-government, which provides permanent dynamic multi-vector interaction of systems (organizations) of different levels and different environments, also it is used for ensuring coherent dissipative activity. based on the concept of adaptive management, a complex of tools for managing organizational processes in the system of subjects of providing sustainable balanced regional development is elaborated. in view of this, future research prospects are associated with deepening the study of processes and forms of antientropic management of regional development through the introduction of a model of the green economy. tools that are proposed in this research for introducing the model of balanced sustainable regional development on the basis of antientropic paradigm include the following: maintenance of an open state of the system; use of the principle of feed-forward control; realization of the principle of diversity. the presented complex of approaches ensures continuous dynamic multi-vector interaction of systems (organizations) of different levels and different environments. references: epstein, m. joshua, axtell, l. robert. (1996). growing artificial societies: social science from the bottom up. london, england: mit press. höpner, m. (2005). what connects industrial relations and corporate governance? explaining institutional complementarity. socio-economic review, 3(2), 331-358. gumilev, l. n. (2008). etnohenez y byosfera zemly. moscow, russia: ajrys-press. kantorovych, l. v., lassmann, w., schilar, h., schwarz, k., brentjes, s. (1990). ekonomyka i optymyzatsyia. moscow, russia: nauka. kylyenene, a., macherynskene, y., navytskas, v., symanavychene, zh. (2006, august). sotsyalno-ekolohycheskoe razvytye rehyonov es. sotsiologicheskie issledovaniy, 8, 48-56. luniachek, v. e. (2011) entropiia upravlinska. entsyklopediia derzhavnoho upravlinnia: u 8 t. (vol. ii). kyiv, ukraine: nadu. meyer, c. (2007). zhyvaia orhanyzatsyia: per. s anhl. moscow, russia: dobraia knyha. mylner, b. z. (2000). teoryia orhanyzatsyy: ucheb. moscow, russia: ynfra-m. retrieved from: http://www.vuzlib.su/beta3/html/1/4344/4360/ pro zatverdzhennia derzhavnoi stratehii rehionalnoho rozvytku na period do 2020 roku: postanova kabinetu ministriv ukrainy vid 06.08.2014 № 385 (2014, august, 06). retrieved from: https://zakon.rada.gov.ua/laws/ show/385-2014-%d0%bf smith, a. (1962). yssledovanye o pryrode y prychynakh bohatstva narodov. moscow, russia: yzdatelstvo sotsyalno-ekonomycheskoj lyteratury. toffler, a. (1985). the adaptive corporation. london: pan books. vykliuk, ya. (2010). modeliuvannia sotsialno-ekonomichnykh system i rozrakhunok ikh dynamichnykh pokaznykiv na osnovi analohij. fizyko-matematychne modeliuvannia ta informatsijni tekhnolohii, 11, 24-36. baltic journal of economic studies 372 vol. 4, no. 3, 2018 corresponding author: 1 department of economics of enterprise and entrepreneurship, odessa national economic university. e-mail: yankovoy_@ukr.net 2 department of sea transport economics and management, national university “odessa maritime academy”. e-mail: terra.scor@yandex.ua 3 department of economics of enterprise and corporate management, o.s. popov odessa national academy of telecommunications. e-mail: pangelina@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-372-378 determination of optimum of capital-labour ratio within t wo-factor production functions with non-zero substitution by the principle of equal margin oleksandr yankovyi1 odessa national economic university, ukraine lydmila sotnychenko2 national university “odessa maritime academy”, ukraine angelina petrashevska3 o.s. popov odessa national academy of telecommunications, ukraine abstract. theoretical and applying aspects of using the principle of equal margin in microeconomics for the determination of the optimal capital-labour ratio within two-factor production functions with non-zero substitution are discussed. the use of the proposed algorithm is carried out on the example of such production functions as cobb-douglas function, linear, leontief function, which are generalized by a function with constant elasticity of the substitution of factors. the purpose of this article is to offer a fairly simple opportunity for the economicmathematical determination of optimal capital-labour ratio within two-factor production functions with the non-zero substitution of resources on the basis of the principle of equal margin. justified the principle of equal margin for the determination of optimal capital-labour ratio within two-factor production functions with nonzero substitution. the results of the study show that there are possibilities of the proposed approach to the analysis of extreme interconnections between production and aggregate factors of production. practical recommendations on the application of these production functions in the process of econometric modelling and forecasting are given. key words: principle of equal margin, production function, substitution of factors, optimal capital-labour ratio. jel classification: c61, c65, d20, d24 1. introduction the main purpose of the enterprise in modern economic science and practice is the maximization of profit. however, different enterprises can set different goals, which depend on the interests of their economic agents: owners of enterprises, managers, shareholders, etc. for example, managers of large enterprises may care, first of all, about strengthening their own position. they may have goals to increase production (works, services) or increase the value of the enterprise because the owners of the enterprises will judge about the effectiveness of managers’ activities based on these indicators. the main goal of the company in the wellknown japanese model is the growth of added value. at the present time, world economic thought has developed various theories of optimization of the enterprise. in these models, the maximization of the efficiency of management activity, the prestige of the enterprise, the conquest and maintenance of a certain market share, the development of new markets, etc., is put forward to maximizing profits. thus, in microeconomics, there is a well-known approach to the optimization of the enterprise in the case of two aggregated production factors: fixed assets (k) and labour (l). the essence of this approach is to determine a point with coordinates k1, l1, which maximizes output y1 with given general capital costs c1 = k1 + l1 (minimizes overall costs c1 for a certain output y1). the main approach to the solution of this problem is the apparatus of production functions (pf), in particular, their geometric interpretation in the form of isoquants, isocosts, and the like. thus, it is possible to specify at least four two-factor pfs that are most popular baltic journal of economic studies 373 vol. 4, no. 3, 2018 in economic of resources or the ces-function; 2) cobbdouglas pf; 3) linear pf; 4) leontief function. this raises the following problem: how to determine the optimal combination of production factors in each specific case of the adequate application of a certain pf among the above four functions. 2. analysis of recent research and publications some aspects of the considered problem are found in (pindyke et al., 2002; halperin, 2004; perloff, 2014) among the authors, who have recently been using the pf, generalized by the ces-function. for example, (debertin, 2012) considers the algebraic conditions for maximizing neoclassical pfs based on the analysis of the signs of the first and second derivatives of additive and multiplicative models of agricultural production. he also gives a geometric interpretation of the presence of local extrema and a global maximum based on the saddle points of the surface of the pf. at the same time, debertin does not link the problem of maximizing output with the determination of the level of the optimal capital-labour ratio in the studied pf. it is necessary to note the works of (borovsky, 2008; kazakova, 2013; podladchikov, 2012; cherevko, 2007; shumska, 2007) publications. however, there is no systematic approach to the solution of the discussed problem in the modern economic literature. so far, there has not been a comprehensive study of existing approaches to the determination of optimal capital-labour ratio k1/l1 for any pf, in particular, for econometric models, generalized by the ces-function. it means that there are a general understanding and geometric interpretation of this problem, but there is no universal methodological tool for its solution. 3. setting targets the purpose of the paper is to offer a fairly simple opportunity for the economic-mathematical determination of optimal capital-labour ratio k1/l1 within two-factor pf with the non-zero substitution of resources on the basis of the principle of equal margin, which is well-known in the microeconomics. 4. formulation of the problem in graphical form the graphic definition of the optimum of the capitallabour ratio of the enterprise is as follows. effective ways of obtaining a given volume of output are determined by the corresponding isoquant of pf or the map of isoquants, which represents the multiplicity of the choice of output volumes if it is possible. the economic opportunities of the enterprise are set by isocost of pf or the map of isocosts, which is the variation of the budget allocated for the obtaining of production factors if it is possible. the optimal combination of resources is graphically depicted in fig. 1, which shows the isoquants and isocosts of the neoclassical pf. combinations of production factors k and l, marked by the points a, b, f, lie on the isocost c1 and on two isoquants y1, y2 in fig. 1. but the best of them is a combination at point b because it provides the largest output of products y2. consequently, a combination of production factors that maximizes output is the point of touch of isocost and the highest of possible isoquants. combinations of factors k and l, marked with points d, b, e in fig. 1, lie on one isoquant and on two isocosts c1, c2. all of them are effective, but the best from an economic point of view is a combination at point b because it needs the smallest amount of cost c1. consequently, y2 y3 d a φ с1 bk1 0 l k l1 y1 e с2 f figure 1. determination of the optimal point on the map of isoquants and isocosts of the neoclassical pf (y3 > y2 > y1; c2 > c1) source: built by the authors baltic journal of economic studies 374 vol. 4, no. 3, 2018 a combination of production factors minimizing costs is the point of contact of isoquant to the lowest possible isocost. thus, in figure 1 at point b with the coordinates k1, l1, there is an optimal capital-labour ratio of the enterprise, which ensures the maximization of output at given total costs (minimization of the total costs for the given production output). 5. the microeconomic principle of equal margin we propose a fairly simple possibility of econometricmathematical determination of optimal capital-labour ratio k1/l1 within two-factor pfs based on the principle of equal margin, which is known in the microeconomics. let us briefly consider its essence. let the production resources be to some extent interchangeable, which means that a certain volume of one production factor can be compensated by the corresponding volume of another. this property is called the hypothesis of the interchangeability of factors, or the assumption of their non-zero substitution. in other words, for the two-factor pf y = f (k , l) is performed equality f (k + ∆k, l) = f (k, l + ∆l) ≠ 0. (1) mathematically, this means that the marginal products of capital mpk and labour mpl within this pf are different from zero, and the marginal rate of replacement of production factors of mrslk exists in the form of a certain real number. from the course of geometry, it is known, that if the line is tangent to some curve, then at the point of contact the angles of inclination of these lines coincide. the inclination of the isoquant is the marginal rate of replacement of production factors mrskl, which depends on the specifics of the production process at the enterprise. it is determined by the ratio of the marginal products of capital mpk and labour mpl: − = = − ∆ ∆ ê l mrs ìð ìð lê k l . (2) the minus sign in formula (2) indicates that one production factor increases, while another decreases with a fixed volume of output. the inclination of isocost is a market rate of replacement of production factors, equal to the ratio of their prices pk, pl: − = = − ∆ ∆ ê l tg p p kφ l , (3) where φ is the angle of inclination of the isocost to the abscissa 0l in fig. 1 it is clear that at the point of the optimal combination of production factors, the inclination of isoquant and isocost coincide, that is, the equality is fulfilled mrs p p lê k= − l . (4) hence, two equivalent conditions characterizing the optimum of the enterprise as a commodity producer are deduced in the microeconomics. condition 1. the ratio of marginal products of production factors is equal to the ratio of their prices: mp mp p p ê l ê= l . (5) condition 2. marginal products of production factors belong to 1 monetary unit must be the same: mp p mp p k k l= l . (6) the second condition is often called the l principle of equal margin, which implies that the price-weighted products of the factors of production must be aligned. realizing these conditions, an enterprise achieves the condition of inner balance, that is, the best combination of resources. obviously, in the case of measuring all variables y, k, l in monetary units, the marginal products of production factors are also in value terms. therefore, formula (6) can be represented as follows: мр δ k = мр δ l, (7) where мр*k, мр*l are marginal products of capital and labour, expressed in terms of their value in a natural dimension. consequently, the essence of the principle of equal margin is the equality of the marginal products of production factors in conditions of thre optimal capitallabour ratio of the enterprise. for example, if pk is the price of one machine-hour of the work of the technological equipment in uah and pl is the tariff of one man-hour of labour in uah, then for the enterprise at point b in fig. 1 the following interrelation is performed. the marginal product of assets, expressed in terms of machine-hours of operation of technological equipment, is equal to the marginal product of labour, expressed in terms of man-hours of work of production personnel. 6. the mathematical derivation of formulas for the optimal capital-labour ratio for pfs, generalized by ces-function from formula (7) it follows that at the point of the optimal capital-labour ratio at the enterprise the marginal rate of replacement of production factors becomes the form mrs ìð ìð lê k= ∗ ∗ = l 1, (8) that is equal to one. it is easy to prove the validity and the inverse statement. if the condition (8) is fulfilled for the marginal norm of substitution of production factors, then the enterprise as a commodity producer is at the point of optimal capital-labour ratio. taking into account the obtained theoretical results, we come to the following conclusion. it is enough to find the expression of margin norm of substitution of resources and equate it to one for any two-factor baltic journal of economic studies 375 vol. 4, no. 3, 2018 production function with the non-zero substitution of production factors using the principle of equal margin to determine the coordinates of the optimal capitallabour ratio. it is assumed that the marginal products of the production factors are expressed in natural units. in general terms, this rule is formulated by follows. the principle of equal margin to determine the optimal capital-labour ratio of any two-factor production function with non-zero substitution is to fulfil the condition mrs y k y l f ê l f k l lê k l = ∂ ∂ ∂ ∂ = ′ ′ =: ( , ) ( , ) .1 (9) from formula (9), the determination of optimal capital-labour ratio k1/l1 is quite simple. let us illustrate this by the example of the most popular in economic research cobb-douglas pf: y àk l= α β , (10) where a – coefficient of the scale (0 < a); α, β – parameters that determine elasticity of product output by individual factors (0 < α < 1, 0 < β < 1). pf (10) relates to neoclassical functions (see fig. 1) when performing restrictions on unknown parameters specified in brackets. its elasticity of the substitution of the factors σkl is constant and is equal to one. the first partial derivatives of the cobb-douglas pf expressed on k and l are: ∂ ∂ = − y k a k lα α β1 ; ∂ ∂ = − y l a k lβ α β 1. (11) for pf (10), we write the condition (9): mrs y k y l a ê l a k l lê = ∂ ∂ ∂ ∂ = = − − : . α β α β α β 1 1 1 (12) hence, the optimal capital-labour ratio k1/l1 is defined as follows: ê l 1 1 = α β , (13) which means that the investment of funds in production funds and labour will be optimal in the proportion of the elasticity of output on the basis of certain factors if the econometric model based on the pf (10) is adequate. let us verify the validity of the obtained formula (13) using a mathematical analysis of the cobb-douglas pf in order to determine the optimal capital-labour ratio according to the criterion of “maximum output”. we find l1 from the equation of interaction l1 = c1 – k1, substitute it into formula (10) and look for its maximum to solve this problem. y = akα (с1 – к1)β → max. (14) we find ∂ ∂ y k – the first partial derivative of the function (14) by k on the segment [0; c] and define the critical points, in which it is equal to 0 or ∞. as a result of elementary transformations, we obtain: ∂ ∂ y k = ak1α-1(с1 – к1)β-1[a(c1 – k1) – βk1]. (15) it is obvious that ∂ ∂ y k = 0 when one of the summands of formula (15) is equal to 0. taking into account neoclassical conditions a > 0, k > 0, l > 0 expression (15) is equal to zero for a(c1 – k1) – βk1 = 0. it follows that the point ê ñ1 1= + α α β (16) is critical. from formula (16) and the ratio l1 = c1 – k1 follows l ñ1 1= + β α β . (17) we obtain the desired optimal capital-labour ratio k1/l1 by dividing the expression (16) into (17), which completely coincides with the formula (13). we find the maximum of output in terms of optimal capital-labour ratio and the adequacy of the cobbdouglas pf of the researching economic phenomenon by having expressed k1 from the formula (13) and substituting it into (10): k l y lmax1 1 1= =       +α β α β α α β; . (18) let us consider the implementation of the principle of equal margin in determining the optimal capital-labour ratio for the ces-function y k l= + −− − − à à àð ð ð0 1 11[ ( ) ] , γ (19) where a0 is the coefficient of the scale (0 < a0); a1 – coefficient of weight of the production factor (0 < a1 < 1); p is the substitution parameter (-1 < p); γ is the degree of homogeneity (0 < γ). pf (19) also applies to neoclassical functions (see fig. 1) when it is performing restrictions on unknown parameters specified in brackets. its elasticity of the replacement of the factors σkl is also constant but it may acquire any value. the first partial derivatives of the ces-functions on k and l are: ∂ ∂ =       + y k à à y kð ð 1 0 1 1 ; ∂ ∂ = −       + y l à à y lð ð 1 1 0 1 1 . (20) then condition (9) for pf (19) is written as follows: mrs y k y l a a l k lê p = ∂ ∂ ∂ ∂ = −       = + : .1 1 1 1 1 1 1 (21) hence, the optimal capital-labour ratio k1/l1 is defined as follows: ê l a a ð 1 1 1 1 1 1 1 = −       + . (22) maximum production output in conditions of optimum capital-labour ratio and adequacy of ces-function of the studied economic phenomenon is equal to: k l a a y a l a c ð max ð ð 1 1 1 1 1 1 0 1 1 1 1 1= −       = − + +       − ; [( ) ] . γ γ γ (23) the verification of the validity of the obtained formula (22) by using the mathematical analysis of the cesfunction and allen function on the basis of the criterion baltic journal of economic studies 376 vol. 4, no. 3, 2018 of “maximum output” is given in works (yankovyi, 2017; koval, slobodianiuk, yankovyi, 2018). let us discuss determining the optimal capital-labour ratio by the principle of equal margin for the linear pf: y – a2 = a3k +a4l, (24) where a2 is a free member; a3, a4 – parameters of the linear function, expressing the marginal products of production factors “fixed assets” and “labour”. a linear function does not belong to a neoclassical because the conditions k > 0, l > 0 are not met for it. however, its substitution of factors is nonzero (σlk = + ∞), therefore, the isocosts of the pf (24) are straight lines, which are crossing the coordinate axis (fig. 2). the first partial derivatives of expression (24) in k and l are a3, a4. therefore, the optimal capital-labour ratio does not depend on the specific values of k, l, however, according to condition (9), the equality a3 = a4 must be satisfied. this means that the set of points of isocost ab in fig. 2, which corresponds to the aggregate costs c1 = k1 + l1 and coincides with the isoquant y2 – a2 = a3с1 (25) provides the optimal capital-labour ratio. the maximum of products in value terms is ymax = a3с1 + a2. let us consider the implementation of the principle of equal margin in determining the optimal capital-labour ratio within leontief function: y k c l c =      min ; , 1 2 (26) where c1 – the capacity of the production unit (0 < c1); c2 – the complexity of the production unit (0 < c2). pf (26) also does not belong to the neoclassical because it is not twice differentiated. moreover, it is a function with zero substitution of factors (σlk = 0), and its isoquants are perpendicular beams (fig. 3). consequently, the principle of equal margin of determining the optimal capital-labour ratio within the leontief pf does not work since for it the marginal products of the factors k, l are zero and the marginal rate of substitution is the uncertainty of type 0/0. meanwhile, by performing a mathematical analysis of leontief pf on the criterion of “maximum output” it is easy to show that its optimal capital stock is on the beam 0e (fig. 3): k l c c 1 1 1 2 = . (27) the maximum output at given costs c1 at this point is ymax = c1/(c1 + c2). k l c c = 1 2 7. practical application of the obtained theoretical results approval of the obtained theoretical results can be carried out according to the data of machine building of ukraine for 2007–2015 (table 1). as a productive variable, y was considered the realized production of the industry, and as production factors: k – the residual value (without depreciation) of the main productive assets, l – labour costs, t is the factor of time. in modelling the indices of the engineering industry, a dynamized linear function (24) was used, but its accuracy (r2 = 0.480) was not the highest. the parameters of the dynamized ces function (19) found at the third iteration were in general contradictory to the economic content. it turned out that the dynamized cobb-douglas production function (the figure 2. determination of the set of optimal points on the isoquant and isocost map for a linear two-factor pf with infinite substitution (y3 > y2 > y1) source: built by the authors a k y3 y2 y1 lb0 baltic journal of economic studies 377 vol. 4, no. 3, 2018 so-called cobb-douglas-tinbergen function) provides the most accurate results of approximating the initial information (r2 = 0.524). thus, by logging the data of table 1 and using the standard excel regression program, the following equation was obtained: y e k lt= −0 4978 0 046 0 1115 1 1802, ., , , (28) model (28) relatively accurately describes the dynamics of the industry’s products sold during the period under study: the determination coefficient indicates that more than 52% of the variation of y is due to three factors of the cobb-douglas-tinbergen function. the average absolute error of the equation is 0.138 million uah. the elasticity coefficients α and β of the model (28) show that in 2007–2015, the increase in capital expenditure on basic production assets by 1% entailed an increase in the volume of sales for the year by an average of only 0.1%, while an increase in labour costs by 1% caused an increase in sales by almost 1.2%. this indicates a certain relative redundancy of the resource k in comparison with the resource l. the negative growth rate of the neutral scientific and technical progress indicates that in the engineering industry of ukraine in the period under review, the realization decreased on average by 4.6% during the year under the influence of all factors except changes in the costs of fixed assets and labour. based on the data of table 1, there was calculated the marginal rate of replacement of mrslk in the industry for each year of the period under study (table 2), taking into account the fact that for the cobb-douglas-tinbergen production function it is determined by the formula (29) as it was shown earlier, under the conditions of optimal stock-endowment, the marginal rate of substitution of mrslk for any substitutional production function is equal to one. let the actual marginal rate of substitution of the production function of machine building differ from unity, and then two cases are possible: 1) mrslk> 1; 2) mrslk < 1. table 1 initial data for modelling the dependence of the sales of machine-building products of ukraine on the main production factors years y (mln. uah.) k, (mln. uah) l, (mln. uah t k/l (uah/ uah.) 2007 98339,9 27854 11834,3 1 2,354 2008 121780,4 33489 14748,5 2 2,271 2009 85833,0 33475 11874,1 3 2,819 2010 97056,9 36075 15689,2 4 2,299 2011 130847,9 40417 15196,1 5 2,660 2012 140539,3 43642 17025,2 6 2,563 2013 113926,6 47268 17242,9 7 2,741 2014 101924,7 45894 16092,9 8 2,852 2015 115261,7 84052 17484,1 9 4,807 source: compiled by the authors by state statistics service of ukraine figure 3. determination of the optimal point on the isoquant and isocost map for a two-factor leontief pf with a zero substitution (y3 > y2 > y1). source: built by the authors 2 1 c c l k = 0 lf y3y1 y2 d e k baltic journal of economic studies 378 vol. 4, no. 3, 2018 table 2 the marginal rate of substitution in mechanical engineering in ukraine years k/l mrslk 2007 2,354 24,907 2008 2,271 24,029 2009 2,819 29,828 2010 2,299 24,325 2011 2,660 28,145 2012 2,563 27,119 2013 2,741 29,002 2014 2,852 30,177 2015 4,807 50,862 source: compiled by the authors on the basis of the parameters of the model (28), we calculate the index of the average optimal capital-labour ratio in the industry for 2007–2015 by the formula (13): k l 1 1 0 1115 1 1802 0 0945= = = α β , , , . (30) it is clear that these calculations have an approximate, evaluation character. they will acquire greater validity in the case of increasing the accuracy of the reference model (28), that is, as the condition r2 → 1 is satisfied. 8. conclusion the development of ideas of the principle of equal margin from the theory of microeconomics and examples of determining the optimal capital-labour ratio for the pf, generalized by the ces-function, shows the simplicity and effectiveness of the proposed approach to the analysis of extreme interrelations between output and aggregate production factors. an exception is a zerosubstitution pf, for example, the leontief function. the use of the proposed procedure for determining the optimal capital-labour ratio is performed using the example of the cobb-douglas-tinbergen production function, the dynamized ces function, and the linear function. for them, formulas are given for the optimal fund-raising ratio with an indication of the extreme values of output and total capital expenditure on basic production assets and labour remuneration. the obtained theoretical results are tested on the data of machine building of ukraine for 2007–2015. the built econometric model allowed coming to a conclusion about the non-optimal funds-in-use in terms of sales volumes of industrial products. it turns out that during the analysed period of time, the basic production assets were relatively abundant in comparison with the wages of workers in machine building. obviously, in the ukrainian engineering industry, it is necessary to reduce excess technological equipment or to increase pay by attracting additional workers, enhancing their material incentives. this will allow reversing the negative trend in the dynamics of the industry’s assets-endowment, lead to a certain reduction in it and a gradual approach to the optimal value. references: pyndaik r . & rabynfeld d. (2002). microeconomics. spb.: piter. (in russian) galperin v.m. & ignatev s.m. (2004). microeconomics. spb. (in russian) perloff j.m. (2014). microeconomics. chapter 7: costs. retrieved from: http://wps.aw.com debertin d.l. (2012). agricultural production economics. amazon createspace. borovskoj d.n. (2008). production functions and the problem of choosing the economic-mathematical model of the active element. radіoelektronnі і kompjuternі sistemi, 1(28), 172-177. (in russian) kazakova m.v. (2013). analysis of the properties of production functions used in the decomposition of economic growth. retrieved from: ftp://ftp.repec.org/opt/redif/repec/rnp/wpaper/31.pdf (in russian) podladchikov v.n. (2012). microeconomics. production functions. retrieved from: http://i.kpi.ua/ podladchikov/-menu=micro-firm-2-.htm (in russian) cherevko j.v. (2007). optimal capital stock and initial capital. visnyk socialjno-ekonomichnykh doslidzhenj, 26, 359-365 (in ukrainian) shumsjka, s. s. (2007). production function in economic analysis: theory and practice of use. ekonomika proghnozuvannja, 2, 138-153 (in ukrainian) yankovyi v.a. (2017). the application of the ces function and associated production functions in economic research. naukovyj visnyk mizhnarodnogho ghumanitarnogho universytetu, 23 (2), 156-159. (in russian) koval v., slobodianiuk o., yankovyi v. (2018). production forecasting and evaluation of investments using allen two-factor production function. baltic journal of economic studies vol. 4, no. 1: 219-226. doi: https://doi.org/10.30525/2256-0742/2018-4-1-219-226 state statistics service of ukraine (2018). retrieved from: http://www.ukrstat.gov.ua/ baltic journal of economic studies 202 vol. 4, no. 4, 2018 corresponding author: 1 mukachevo state university, ukraine. e-mail: stegneym@gmail.com 2 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com 3 v.o. sukhomlynskyi national university of mykolaiv, ukraine. e-mail: gurina@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-202-208 financial mechanism of the socio-oriented economic development of the black sea region marianna stehnei1, inna irtysheva2, olena gurina3 abstract. the aim of the article is to study the current state of financial provision of the social sphere of the black sea region and to develop practical recommendations for its optimization in conditions of decentralization processes. methodology. we have made a generalization of the theoretical provisions of the financial mechanism of the social sphere of the region. we propose to investigate the financial mechanism of the social sphere of the black sea region by means of analysis of indicators of income and expenditure parts of the budget of regions of the black sea region. at the present stage of the gradual transformation of the socio-economic development of the regions and in the context of the implementation of the budget decentralization reform, a number of acute problems from the financial support of social development, the guarantee of social standards for the population, and the improvement of the quality of social services arose. the solution of these problems needs a substantial research in the direction of developing the best models for financing social development of the regions, which will promote the achievement of decent social standards and stimulate economic growth. the financial mechanism for providing social development of the black sea region is analysed, the current state of the regional budget in terms and trends in financing social expenditures of the region is identified. it is determined that despite the increase in tax revenues, local authorities still do not have sufficient financial resources to perform their functions and tasks. it adversely affects the development of social infrastructure, provision of social services, and does not contribute to the effective human development, which serves not only as the main goal but also as a key determinant of the economic development of the region. it is substantiated that in order to improve the situation in the social sphere of the region, it is necessary to improve the financial mechanism of social security. on the basis of the investigated scientific approaches, the concept of “mechanism of the financial provision of socially-oriented regional development” is clarified, directions of budget and extrabudgetary financing of social expenditures are substantiated, and proposals on the improvement of financial management of social sphere in the conditions of decentralization are developed. results. to improve the system of financial provision of social development of the region, it was proposed to establish clear and transparent financial relations in the areas of income generation and distribution of regional budget expenditures at all levels, to create conditions for additional attraction of financial resources from extrabudgetary sources aimed at the implementation of regional social programs, and to form an effective system control over the functioning of the financial mechanism, primarily on the part of the territorial communities. value/originality. the concept of the mechanism of the financial provision of socially-oriented regional development is generalized. an estimation of the social sphere of the black sea region is carried out on the basis of the analysis of indicators of income and expenditure parts of budgets of regions of the black sea region, the use of which allows determining the perspective directions of the social sphere of the black sea region. key words: social sphere, financial support mechanism, regional budget, social expenditures, extra budgetary sources, decentralization. jel classification: н53, н61 baltic journal of economic studies 203 vol. 4, no. 4, 2018 1. introduction at the present stage of the gradual transformation of the socio-economic development of regions and in the context of the implementation of the budget decentralization reform, there are a number of acute problems associated with the financial support of social development, guaranteeing social standards for the population, and improving the quality of social services. the problems are also aggravated by the general economic crisis, military actions in the east, and considerable political turbulence, which led to chronic budget deficits, underfunding of social programs, and aggravation of social crises. the solution of these problems requires substantial research in the direction of developing the best models for financing the social development of regions, which will promote the achievement of decent social standards and stimulate economic growth. problems of financing the social sphere of ukrainian regions in modern conditions are the subject of research by many ukrainian scholars, among them are o. l. shcherbakova, o. v. stepanova, n. pihul, o. liuta, a. boiko, o. zhuk, ya. honcharuk, t. bashynskyi. a special attention of researchers is focused on the formation of effective mechanisms for the financial provision of social development of regions in the context of the implementation of the budget decentralization reform. scholars have developed a number of mechanisms for optimizing budget financing of social development, substantiated alternative sources of financial support for the implementation of individual social programs. today, the basic preconditions for financial and administrative decentralization of the regions of ukraine are laid down, which, with proper implementation of the initiated reforms, will contribute to the development of the social sphere. at the same time, the current state of the social sphere of the black sea region requires indepth research in the direction of optimizing the financial mechanism of socially-oriented development, which defines the purpose, objective, and subject of our study. 2. problems and disadvantages of the social development financing system at the present stage of the gradual transformation of the socio-economic development of regions and in the context of the implementation of the budget decentralization reform, there are a number of acute problems related to the financial support of social development, guaranteeing social standards for the population, and improving the quality of social services. the problems are also aggravated by the general economic crisis, military actions in the east, and considerable political turbulence, which led to chronic budget deficits, under-funding of social programs, and aggravation of social crises. in this context, appropriate is the opinion of o. v. stepanova that “the modern branch of social protection enters into a new social reality with a distorted mechanism of decentralized management and financing, which is not ensured by a real increase in the financial capacity of communities and the introduction of the necessary new tools. in the extreme contradiction, there are approaches to financing the provision of social assistance and support, based on the needs and belonging to a certain vulnerable category of population. the reason for this problem situation is the discrepancy of the current model of financing the social protection system of the population to the modern socio-economic context” (stepanova, 2016). the current state of social security and the permanent exacerbation of financial problems of social development point to the imperfection of the existing system of administrative and territorial organization and functioning of local self-government bodies, the ineffectiveness of the distribution of powers between the state and regions, and the imperfect mechanism for the formation and distribution of financial resources. today, regional authorities and local governments are in a situation where simultaneously it is necessary to create conditions for the balanced economic development of territories under significant market turbulence and unpredictability and independently solve most of the acute social problems. an effective factor in stabilizing the situation at the local level should be the effective formation of local budgets, which can make local communities financially independent and capable of solving emerging socioeconomic problems at their own expense. to date, local authorities do not have sufficient financial resources to manage the economy and social sphere at their own level. ya. hocharuk and o. kushlak consider the main reasons for such a situation are the following: – high level of concentration of financial resources in the state budget of the country, which prevents regional and local budgets from solving vital issues for the population; – regulated incomes play a dominant role in the structure of revenues to regional and local budgets, while the share of own and assigned to the areas tax payments remains low; – the absence of significant income sources in the composition of incomes not taken into account in the calculation of transfers (honcharuk & kushlak, 2012). 3. reform of decentralization in the social sphere reform in the sphere of decentralization is an important factor in promoting the social and economic development of regions and, in particular, extends the powers of regional management in the field of social security and the development of appropriate social policy. according to the cabinet of ministers of baltic journal of economic studies 204 vol. 4, no. 4, 2018 ukraine, the basic package of new legislation has already been formed and is in operation, and priority legislative initiatives are being implemented in the direction of implementation of the reform, including: laws on amendments to the tax and budget codes of ukraine. due to these changes, financial decentralization began. in particular, local budgets for the period of 2014-2017 grew by 2.7 times (by 123.4 billion uah), while the share of local budgets in the consolidated budget of ukraine – by 5.6% from 45.6% in 2014 to 51.2% by the end of 2017. the law “on voluntary association of territorial communities” has created favourable conditions for the formation of a capable basic level of local self-government. as of 2018, 753 united territorial communities, consisting of 3492 former local councils have already been created. now more than 6.5 million people live in united territorial communities; the law “on cooperation of territorial communities” regulates the mechanism of solving common problems of communities, including the development of social infrastructure, waste recycling and disposal, the use of water resources, etc. the mechanism created was already used by 861 communities and 199 agreements were signed. the law “on fundamentals of state regional policy” broadens the rights of regional authorities in the area of the planning of socio-economic development, diversification of financing sources for regional programs, interregional and international cooperation. since the beginning of the reform, the volume of state support for regional development and community infrastructure development has increased 39 times (0.5 billion in 2014 to 19.37 billion uah in 2018). law “on amendments to certain legislative acts of ukraine on the decentralization of authority in the field of architectural and construction control and improvement of urban planning legislation”. 100 cities, including 11 utcs, were vested with the new urban planning authority. array of laws to extend the powers of local selfgovernment bodies and optimize the provision of administrative services allowed to delegate to the bodies of local self-government the appropriate level of authority to provide basic administrative services: registration of a place of residence, issuance of passport documents, state registration of legal and natural persons, entrepreneurs, registration of acts of civil status, property rights, land issues, etc. (kabinet ministriv ukrayiny, 2017). thus, one of the most important components of the regional policy in the field of social security and public protection is the financial mechanism for the implementation of the respective powers. in the economic literature, there is no consensus on the economic essence and components of the financial mechanism of social security in the region. 4. financial mechanism of social protection o. b. zhuk proposes to understand the financial mechanism of social protection of the population as the totality of methods, tools, and levers of accumulation, redistribution, and use of financial resources, specially developed, legally established, and defined by socio-economic policy, with the corresponding organizational and legal support in order to improve the general welfare of the population (zhuk, 2017). the author also considered in detail the sources of financing of social protection in ukraine, among which the main ones are: the state budget, budgets of administrative-territorial units, specialized funds, non-budgetary funds, donations and charitable contributions. similar positions are taken by the authors n. pihul, o. liuta, and a. boiko, who consider financial mechanisms of securing the social sphere as an integral system of organization of financial relations, which include appropriate forms, methods, and instruments for their implementation, in the process of mobilizing and distributing financial resources for the purpose of creating conditions for the effective functioning of the social sphere in ukraine on the basis of solving the corresponding tasks caused by the social functions of the state (pihul & boiko, 2015). the most developed, in our opinion, is the definition of financial support for the social development of the region by o. shcherbakova, which the author suggests to understand “a set of measures aimed at mobilizing existing and identifying and attracting potential financial resources of development management entities of a certain administrative-territorial unit, as well as resources of external investors, and the formation, by means of their consolidation, of a financial basis for the implementation of economic processes in the respective territory, the implementation of the planned social programs, projects, supporting the stable functioning of the infrastructure, and improving the regional living environment” (shcherbakova, 2012). researchers also substantiate the potential opportunities for financial support for social development by expanding sources of extrabudgetary financing, among which the most promising ones are self-financing, lending, targeted investment, and other forms of financial security. on the basis of the generalization of the conducted researches, we will further understand the mechanism of financial provision of socially-oriented regional development as a complex system of horizontal and vertical financial relations, which contributes to the formation of optimally combined and economically balanced sources and directions of financing of social needs of the population in accordance with state standards and socio-economic development goals of the region. baltic journal of economic studies 205 vol. 4, no. 4, 2018 5. analysis of indicators of financial support for social development in the context of the implementation of the decentralization reform, the reallocation of revenues and expenditures between the state and local budgets is gradually being conducted with the corresponding transfer of responsibility for the financing of the social sphere to the local level. in particular, during 2015-2017, the government has consistently transferred to the local level the administration of the following types of taxes: personal income tax (75%), land tax (100%), single tax (100%), excise tax (5%), real estate tax (100%), income tax (10%), state duty (10%), 100% fee for the provision of administrative services, 80% of the environmental tax. this led to a corresponding increase in the revenue side of local budgets. only in the period of 2015-2016, tax revenues to regional budgets increased by an average of 50%. table 1 shows the volume of tax revenues to local budgets by regions of the black sea region. for the period of 2016-2017, growth was slightly lower, in particular, in the mykolaiv (+23%), odesa (+29%), and kherson region (+10.2%). the main source of the revenue part of the regional budgets is still the personal income tax, which is distributed in such proportions: 60% – city (village), 15% – the regional level, and 25% – the state budget. the tax on personal income is still the largest source of city and regional budgets. in 2016, the overall share of tax revenues in the regional budgets of the black sea region amounted to an average of 81%. at the same time, the main source of their filling was the personal income tax (61% on average in the region). along with this, problematic issues of administering the income tax at the regional level remain a significant shadowing of real incomes of individuals and the unregulated issue of regional binding of incomes of citizens of the region and social costs. that is, the tax on personal income is paid by the citizen at the place of work, and citizens receive local budget expenditures at their place of residence, which in some way contributes to the imbalance of income and expenditure. exit from the situation at the level of territorial communities is seen only by increasing the number of jobs in the territory. the analysis of budget revenues by the regions of the black sea region showed that there is a problem of significant differentiation of tax revenues and other revenues of local budgets (without intergovernmental transfers) per capita of the existing population (table 2). in 2016, the overall gap between the revenues of local budgets per capita in terms of regions of the black sea region amounted to an average of 30%. the highest revenues of the budget are characteristic for the odesa region, where the volume of income (including transfers) per capita amounted to 11920 uah, and the lowest is in kherson region – 8270 uah. in the structure of incomes, about 40% are tax revenues, in which the share of local table 1 own revenues of local budgets in terms of regions of the black sea region, thousand uah regions 2015 2016 gain, % 2017 gain, % mykolaiv region 2942972,50 4338753,00 47,42758 5354247 23,41 odesa region 6939798,25 10763161,00 55,09328 13966161,00 29,76 kherson region 2273071,50 3300013,80 45,17862 4036509,9 22,20 source: according to data of odesa, mykolaiv, and kherson regional councils table 2 separate indicators of the revenue part of budgets in terms of regions of the black sea region per capita of the existing population, uah indicator mykolaiv region gain, % odesa region gain, % kherson region gain, % 2014 2016 2014 2016 2014 2016 1. local taxes 165,67 927,91 460 212,9 1271,5 497 149,50 851,69 470 % in the structure 3,7 9,5 6 4,2 10,7 6 4,1 10,3 6 2. tax revenues 1838,12 3284,13 79 1957,6 3844,5 96 1372,9 2607,5 90 % in the structure 40,9 33,64 -7 38,5 32,3 -6 38,0 31,5 -7 3. subvention from the state budget 3,12 76,65 2357 3,99 69,76 1648 4,62 61,49 1231 % in the structure 0,07 0,79 0,7 0,08 0,59 1 0,13 0,74 1 4. single tax 152,75 408,13 167 192,3 462,10 140 134,8 409,91 204 % in the structure 3,4 4,2 0,8 3,7 3,9 0 3,7 5 1 5. revenues without transfers 2074,44 3779,24 82 2339,9 4513,4 93 1711,2 3130,9 83 % in the structure 46,2 38,7 -8 46,1 37,9 -8 47,4 37,9 -10 6. own non-tax revenues 257,42 1285,6 399 374,43 1758,8 370 235,37 1209,3 414 % in the structure 5,7 13,2 7 7,4 14,8 7 6,5 14,6 8 total income per capita 4491,5 9761,7 117 5081,2 11920 135 3608,4 8270,8 129 source: calculated by the authors based on the data of the state treasury service baltic journal of economic studies 206 vol. 4, no. 4, 2018 taxes increased by an average of 7%. for the period of 2014-2016, the amount of subventions from the state budget per capita in the region increased by a thousand times from 2357% (odesa region) to 1231% (kherson region). a significant increase in the amount of subventions from the state budget for fulfilling social obligations is primarily associated with the growth of the minimum wage almost 2 times and higher prices for housing and communal services. among the positive trends, we can note the growth of own non-tax revenues in the studied regions and the increase in tax revenues from local taxes. despite the increase in tax revenues, local authorities still have insufficient financial resources to fulfil their functions and tasks. in addition, in 2017 there was a reduction in the financing of certain social expenditures for education from the central budget (the financing of salaries remains the responsibility of the state budget, and a part of vocational education institutions transferred entirely to the balance of regional budgets and budgets of territorial communities), health care (the state budget guaranteed salaries of medical personnel, provision of medical products and equipment according to the list, and financing of general government programs). aligning the financial capacity of local budgets to guarantee the provision of social benefits and assistance in the regions is carried out through targeted subsidies (kabinet ministriv ukrayiny, 2017). of course, the general concept of budget support for local self-government is logical and appropriate. however, the permanent increase in energy prices against the background of the transfer of responsibility in the area of financing public utilities and energy sources of social institutions to the local level leads to the reduction of such institutions at the local level, the reduction of social services, the violation of training schedules over the significant increase in vacations, stop or significant reduction in the number of culture and sport facilities. in addition, a significant reduction of staff in social institutions, the introduction of paid services, etc. also have negative social consequences. in these conditions, of course, the dependence of the social sphere of the region on its economic independence and economic development increases due to the additional filling of local budgets, a part of which is directed towards the implementation of social programs. an important principle of the social policy of the state is the convergence of the main indicators of social security of the regions of ukraine with the aim of equal access of all citizens to the provision of social services of guaranteed social security and raising of living standards. at the same time, in terms of decentralization, different regions have different opportunities for implementing social policy measures and different priorities for the role of social development in the regional strategy. thus, the mechanism of financing of the regional economic development in the conditions of socialization involves the full and balanced use of direct and indirect methods of ensuring social development. first of all, direct methods include: financing of guaranteed social benefits and expenditures through budgets of all levels and separate target funds; mixed financing of social programs of the region; direct investment in human capital development and social infrastructure development. first of all, indirect methods include stimulating the development of the region’s economy and job creation, stimulating the social consciousness of business leaders, expanding public-private partnership, providing comprehensive support to innovation and science development in the region, introducing actual social innovations, and unshadowing of the regional economy. results of analysing the structure of the expenditure part of the regional budget in the social sphere confirm the general tendencies of recent years in ukraine, namely: a gradual reduction in the structure of expenditures on education (on average by 4.5% in the region) and expenditures on health care (2.5%) and growth of expenditures on social protection and social security from 4.7% in the odesa region to 7.4% in the kherson region. at the same time, in the mykolaiv region, some reduction in the expenditure structure of local budgets is observed for expenditures on social protection and social security (-1.6%) and a significant increase in capital investment (10%), which indirectly means an improvement in the economic situation in the region. thus, the urgent tasks of financing the social development of the region are: determination of the main sources of financial support for social development, forecast of own revenues and expenditures; determination of additional sources of financing of the social sphere; outline of the priority directions of financing of social development and concentration of financial resources in these directions; definition of the most effective methods of financial security; formation of the system of financial relations. the main basis of financing social guarantees of the population remains the regional budget, from which the funds are allocated for the provision of social benefits in protected articles. in this aspect, the leading factor in the effectiveness of the functioning of the regional social system is ensuring the efficiency and transparency of intergovernmental relations and the effective implementation of delegated powers in this area. however, the scarcity of budget funds does not allow solving the entire complex of specific social development problems facing each region. therefore, an important task of regional authorities and local selfgovernment bodies is the search for additional sources of financing of the social sphere and the formation of mutually beneficial financial relations with potential “donors”, as well as the development of alternative forms of provision of social assistance and social services. baltic journal of economic studies 207 vol. 4, no. 4, 2018 table 3 separate indicators of budget expenditures by regions of the black sea region per capita of the existing population, uah indicator mykolaiv region gain, % odesa region gain, % kherson region gain, % 2014 2016 2014 2016 2014 2016 expenditures on capital investments 22,6 102,8 356 163 952 484 80,1 85,1 6,2 % in the structure 0,5 1,5 1,0 3,8 13,9 10,1 1,7 1,3 -0,5 expenditures on education 1795,9 2507,2 39,6 1509,8 2026,3 34,2 1857,0 2463,6 32,7 % in the structure 39,8 35,4 -4,3 35,0 29,6 -5,4 40,2 36,3 -4,0 expenditures on healthcare 1049,7 1474,3 40,4 973,6 1331,5 36,8 1086,2 1457,1 34,1 % in the structure 23,2 20,8 -2,4 22,6 19,5 -3,1 23,5 21,4 -2,1 expenditure on social protection and social security 1397,6 2519,7 80,3 1326,4 1990,3 50,1 1361,9 2509,2 84,2 % in the structure 30,9 35,6 4,7 30,8 29,1 -1,6 29,5 36,9 7,4 expenditures on housing and public utilities 250,8 471,4 88,0 339,8 536,6 57,9 232,4 281,1 20,9 % in the structure 5,6 6,7 1,1 7,9 7,8 0,0 5,0 4,1 -0,9 total expenditures, uah 4516,6 7075,4 56,7 4312,7 6836,4 58,5 4617,6 6796,1 47,2 source: calculated by the authors based on the data of the state treasury service the main sources of extrabudgetary financing of the social sphere in the region, according to r . o. maslyk, include: funds from non-governmental organizations and international target funds that operate for a certain purpose and perform certain social functions (protection of women, children, provision of certain rights and freedoms, development of creative potential, etc.). in our opinion, regional authorities and local self-government bodies should stimulate the opening of representative offices of such organizations in the region, which would contribute to solving a certain range of specific problems; charitable and volunteer organizations; stimulation of social entrepreneurship (maslyk, 2014). according to bashynskyi, important areas for mobilizing financial resources and their distribution to improve the social situation in the region are: use of banking potential in the field of lending of priority social projects and participation in social programs of the region; regional support for the establishment of social enterprises and the organization of relevant social work; use of the social potential of business based on the conclusion of relevant agreements; organization of public funding of individual social projects and programs (bashynskyi, 2016). improving the financial mechanism of the socialization of the development of regions, in addition to finding additional sources of financing for the social sphere, also provides for the efficient allocation of financial resources, which will ensure balanced development of the social sphere of the region and promote active human development. increasing the efficiency of the distribution of budgetary and extrabudgetary finance for the development of the social sphere requires the identification of their priority and an appropriate link to certain types of income. thus, protected items of income are tied to revenues of the state budget and specialized funds (social insurance fund and pension fund). priority areas for financing from local budgets are also the maintenance of social infrastructure, health and education facilities. together with this, the creation of regional programs is the tool for regulation and activation of social development of territories, as well as solving current social problems. in particular, it was investigated in the article that the main problems of the social development of the black sea region today are: worsening of demographic processes, increase of the incidence of the population, insufficient provision of conditions for the development of science and introduction of innovations, the gradual weakening of small business. accordingly, regional programs are necessary that will facilitate the correction of these processes. at the same time, social projects and programs of national importance or with specific direction should be financed by a variety of extrabudgetary sources. to this end, it is important to create appropriate conditions and formulate appropriate financial relationships based on: activation of informational and propaganda work in the field of social development: meetings and roundtables with employers of the region, forums for potential investors; formation of the institute of regional guarantees for the development of social business and assistance in the creation of crowdfunding funds; expansion of opportunities for public discussion of acute social problems of territorial communities on the rights of participatory governance; creation of conditions for the development of nonprofit organizations and related funds; involvement of the scientific potential of the region in solving social and economic problems. these measures require appropriate organizational and legal registration and reform of the system of regional management of the social sphere. baltic journal of economic studies 208 vol. 4, no. 4, 2018 6. conclusions and perspectives of further research the stable development of the social sphere of the black sea region requires such a level of financial support that would enable the social sphere to become one of the important factors in the transition to sustainable development of the economy as a whole. characteristic feature of the social black sea region in recent years is the lack of both budget and extrabudgetary funding, which in turn negatively affects the development of financial infrastructure, low-quality provision of social services, and does not contribute to effective human development, which is not only the main goal but also the key determinant of the economic development of the region. taking into account the current state and trends of socio-economic development of ukraine, increasing the volume of budget financing in the near future is problematic, and in this connection, it is necessary to focus on finding additional sources and directions of extrabudgetary financing of social programs. in turn, for social institutions financed mainly at the expense of local budgets of different levels, it is expedient to expand autonomy in the field of attracting and using financial resources. this will allow not only attracting additional financial resources on their own but also spending them on the basis of their own needs and priorities of local importance. thus, the improvement of the financial mechanism of the socially-oriented model of development requires comprehensive justification and establishment of clear and transparent financial relations in the areas of income generation and distribution of expenditures of regional budgets at all levels, creation of conditions for additional attraction of financial resources from extrabudgetary sources aimed at the realization of regional social programs, and creation of an effective system for monitoring the functioning of the financial mechanism, primarily on the part of territorial communities. references: bashynskyi, t. v. (2016). mekhanizmy realizatsiyi sotsialnoyi polityky v systemi alternatyv finansovoho zabezpechennya [mechanisms for implementing social policy in the system of alternatives to financial security] (phd thesis), khmelnytskyy natsionalnyy universytet. honcharuk, y., kushlak, a. (2012). problematyka finansovoho zabezpechennya orhaniv mistsevoho samovryaduvannya [problems of financial provision of local self-government bodies]. ekonomichnyy analiz, 10(2), 206-209. zhuk, o. b. (2017). finansovyy mekhanizm systemy sotsialnoho zakhystu naselennya ukrayiny [financial mechanism of the system of social protection of the population of ukraine]. svit finansiv, 2(51), 62-71. kabinet ministriv ukrayiny (2017). pro reformu tsentralizatsiyi [about the decentralization reform]. retrieved from: http://decentralization.gov.ua/about (accessed 19 june 2018) maslyk, r . o. (2014). finansovyy stan sotsialnykh prohram yak instrumentiv zdiysnennya sotsialnoho zakhystu naselennya ukrayiny [financial state of social programs as tools of social protection of population of ukraine]. tekhnolohycheskyy audyt y rezervy proyzvodstva, 5/3(19), 56-59. mykolayivska oblasna rada. retrieved from: https://www.mk-oblrada.gov.ua/document-list.php?group_id=184 (accessed 19 june 2018) odeska oblasna rada. retrieved from: http://oblrada.odessa.gov.ua/odeska-oblast/byudzhet-odeskoyi-oblasti (accessed 19 june 2018) ofitsiynyy sayt derzhavnoyi kaznacheyskoyi sluzhby ukrayiny. retrieved from: http://www.treasury.gov.ua/ main/uk/index (accessed 19 june 2018) pihul, n., boiko, a. (2015). finansove zabezpechennya sotsialnoyi sfery v ukrayini [financial support to the social sphere in ukraine]. visnyk natsionalnoho banku ukrayiny, 1, 30-35. stepanova, o. v. (2016). finansuvannya sotsialnoho zakhystu v umovakh detsentralizatsiyi: zarubizhnyy dosvid ta natsionalni realiyi [financing social protection in conditions of decentralization: foreign experience and national realities]. investytsiyi: praktyka ta dosvid, 22, 73-79. khersonska oblasna rada. retrieved from: http://khor.gov.ua/hersonshhina/oblasniy-byudzhet-na-2017-rik/ (accessed 19 june 2018) shcherbakova, o. l. (2012). finansove zabezpechennya sotsialno-ekonomichnoho rozvytku monofunktsionalnoho mista [financial support of socio-economic development of a monofunctional city] (phd thesis), zaporizhzhya. irtyscheva, i. a., khvesyk, j. м., stehnei, m. i. (2015). detsentralizatsiia systemy upravlinnia v zabezpechenni staloho rozvytku silskykh terytorii [decentralization of management system in ensuring sustainable development of rural territories]. ekonomika apk, 4, 64-70. baltic journal of economic studies 131 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-131-136 the adaptive management system of marketing commodity policy* alona natorina1 abstract. the purpose of the article is to substantiate theoretical and methodological fundamentals of the formation of adaptive system for managing the marketing commodity policy through the example of online retailers, as well as to analyse results of approbation of conceptual model of adaptive management system of marketing commodity policy in practical activities of ukrainian online retailers in various market segments. methodology. within the research, activities of ukrainian online retailers were considered and analysed depending on their sphere and specialisation. methodological basis of the study is comprised of the system of general scientific and special methods, namely: dialectical method of scientific cognition; methods of system analysis; methods of causeand-effect analysis; methods of comparative analysis; multidimensional statistical methods. based on the results of the research conducted, the author has developed a conceptual model of adaptive system of management of marketing commodity policy of online retailers, the main goal of which is to form adaptive management system of marketing commodity policy of online retailers as a central reference point in the identification of marketing commodity strategy needed to be implemented, which mostly influences long-term sustainable functioning of online retailers in the market by means of the fullest satisfaction of typical demands, needs, and preferences of the target audience and occasional online buyers along with irrational online orders. list of components of the marketing environment, which have quantitative and qualitative character and different degree of impact on the activities of online retailers depending on their belonging to a certain market segment, is determined. mechanism of adaptive management of marketing commodity policy of online retailers is proposed that is oriented to revealing the integrity of the process in the context of permanent changes in the market situation; is directed to providing a high-quality level of management of online activity of retailers. practical importance. based on the results of the approbation of conceptual model of adaptive management system of marketing commodity policy of ukrainian online retailers in different segments, it is determined that its implementation in online activity of retailers contributes to their effective functioning and sustainable long-term development, in particular, by means of adjusting reference points of management of marketing commodity policy, and results into improving the process of making rational strategic decisions and substantiating tactical measures of implementation. practical application of the mechanism of adaptive management of marketing commodity policy of online retailers promotes the implementation of a sound variant of achievement of their strategic goals. value/originality. implementation of the developed adaptive management system of marketing commodity policy may ensure effective performance and sustainable development of online retailers in the future, in particular, by means of relevant changes in the management of marketing commodity policy. key words: marketing commodity policy, adaptive management system of marketing commodity policy, adaptive management mechanism, online retail. jel classification: m16, m31, l81 corresponding author: 1 ssi “institute of educational analytics”, ukraine. e-mail: a.natorina@iea.gov.ua orcid: https://orcid.org/0000-0001-6367-879x 1. introduction today, despite the presence of bifurcations in the transformational economy and the permanent changes in the marketing environment, it is possible to state the high online activity of enterprises both at the international and national levels, in particular, on the territory of ukraine, as a result of the introduction of innovative methods of doing business, application * the publication contains the results of studies conducted by the grant of the president of ukraine for competitive projects f75 of the state fund for fundamental research baltic journal of economic studies 132 vol. 5, no. 1, 2019 of benchmarking, and implementation of active marketing policy to attract new market segments to online purchasing of goods, as well as implementation of a set of measures to expand the existing target audience. in the conditions of a market economy, the priority tasks of enterprises operating in the internet space are the rational organization and conduct of online trade, which is relevant to the requirements and demands of consumers, ensuring of stable competitive advantages of enterprises in the internet space by an instantaneous adequate response to market changes and the simultaneous formation of key factors of success in the industry, the expansion of the market niche due to the constant adjustment of marketing commodity policy. that is why marketing commodity policy is a key element in promoting the commercial success of online activities of enterprises in the short and long term, given the intensity of competition and the constant change in consumer preferences in the market. the issue of the identification of an adequate marketing commodity policy for internet businesses, its change in accordance with the specifics of online business activities and implementation are important for the online activities of the enterprise and are solved according to the results of monitoring and evaluation of the effectiveness of the management system of marketing commodity policy of enterprises. the complication and high dynamism of factors of the marketing environment predetermine the need to develop an adaptive system for managing the marketing commodity policy of enterprises, which is one of the determining factors of competitiveness in the internet space. therefore, the purpose of the article is to substantiate theoretical and methodological fundamentals of the formation of adaptive system for managing the marketing commodity policy through the example of online retailers, as well as to analyse results of approbation of conceptual model of adaptive management system of marketing commodity policy in practical activities of ukrainian online retailers in various market segments. 2. the current state of the issue works of foreign scientists and economists are devoted to the study of the specifics of online retailers’ activities, among them are: s. brown and d. roth (brown, roth, 2017), guinn j. (guinn, 2017), masayuki a. and hitoshi  s. (masayuki, hitoshi, 2014). well-known scholars and economists were involved in the research of the marketing commodity policy management system of online retailers, including: lambin j-j. and schuiling  i. (lambin, schuiling, 2012), lehmann d. and winer r . (lehmann, winer, 2010), porter m. (porter, 2008). however, given the rapid growth of ukrainian retail and the need to find ways to optimize the management process of online retailers’ marketing commodity policy, it still remains relevant. managing the marketing commodity policy of online retailers should be mainly focused not on solving existing problems but on the use of existing opportunities and strengths, that is, should be based on the adaptive approach, which involves the use of organizational changes of the existing potential of the online retailer and the identification of its reserves as the basis, which led to increased attention to economic and mathematical methods and models in the analysis of marketing activities of the enterprise. after all, the very use of mathematical models gives better and more reliable results than matrix ones. the application of economic and mathematical methods and models in marketing is considered in the works of foreign and domestic scientists, such as davnis v. and tiniakova v. (davnis, tiniakova, 2006), danko t. and skorobohatykh i. (danko, skorobogatykh, 2005), lepa m. (lepa, 2002). the solution to the problem of multidimensionality and ambiguity of economic processes and phenomena is the methods of multidimensional analysis. the study of the issue of applying methods of multidimensional analysis to substantiate economic phenomena was undertaken by researchers such as aivazian s., bezhaeva z. and staroverov o. (aivazian, bezhaeva, staroverov, 1974), kozhushko o. (kozhushko, 2010), sablina n. and telychko v. (sablina, telychko, 2009). without reducing the importance of the research in the given direction, it should be noted that the issue of the formation of an adaptive management system of marketing commodity policy currently requires a theoretical and methodological solution. to substantiate theoretical and methodical principles of the formation of an adaptive management system for marketing commodity policy, the activities of ukrainian online retailers were investigated depending on their field of activity and specialisation. as a methodological basis for the formation of an adaptive system for managing the marketing commodity policy of online retailers, a system of general scientific and special methods was used, namely: dialectical method of scientific cognition – to study fundamental principles of defining the guidelines for marketing commodity policy of online retailers; methods of system analysis – to establish structural relationships between the effectiveness of the marketing product strategy of online retailers at the functional level and the chosen marketing product strategy; methods of cause-andeffect analysis – to identify the place and role of adaptive system for managing the marketing commodity policy of online retailers; methods of comparative analysis – to compare performance indicators of the online retailers under study; multidimensional statistical methods – to determine the root causes of the formation of a management system for marketing commodity policy. the information-factual basis of the study was the works of domestic and foreign specialists baltic journal of economic studies 133 vol. 5, no. 1, 2019 in the field of marketing, as well as original materials of marketing researches worked out and summarized by the author in person. 3. principles of formation of an adaptive management system for marketing commodity policy feature of adaptive system for managing the marketing commodity policy of online retailers is the possibility of changing its constitutive attributes through the expansion or abandonment of a certain list of factors of marketing environment that directly or indirectly influence the marketing commodity policy of online retailers and, as a consequence, predetermine the review of the expediency of continuing to follow the current strategy in accordance with specific market conditions of operation. adaptive system for managing the marketing commodity policy of online retailers provides for the implementation of flexible marketing policy in internet space given the inversion of macroeconomic processes in the modern changing business environment due to monitoring and analysis of the degree of influence of the factors on online activities of retailers for their further adjustment. according to the results of research of international and domestic experience of functioning of online retailers under the active digitalisation, the article substantiates a conceptual model of adaptive system for managing the marketing commodity policy of online retailers, the implementation of which will contribute to improving their performance and guarantee the stability of operation in internet space (figure 1). as figure 1 shows, a conceptual model of the adaptive system for managing the marketing commodity policy of online retailers includes three structural blocks, namely: theoretical provision, information-analytical and organisational support, practical implementation. theoretical provision forms a foundation of a conceptual model of the adaptive system for managing the marketing commodity policy of online retailers. components of this block of conceptual model are in close cooperation with the block of information-analytical and organisational support and vice versa. informationanalytical support includes two components – analysis and collection of information, which in turn provides for conducting a number of interrelated actions, including: collection and preparation of necessary data; identification of analysis methods for understanding of data, formation and test of hypotheses; analysis of a way of making a sound decision on the formation of adaptive system for managing the marketing commodity policy of online retailers. therefore, information-analytical support requires the use of analytical data for increasing the solution accuracy. due to the use of analytical information, it becomes possible to ensure information richness of decisions. the actual use of analytical data, which consider market and economic uncertainty, allows online retailers to make timely and sound decisions. analysis of decisions is agreed upon by permanent check and further improvement of decision-making efficiency. implemented decisions require constant monitoring of their efficiency. within the organisational support, two components can be distinguished – processing and evaluation. the first component is a set of means needed for effective transformation of analytical information. it may include typical computer application program packs, typical structures of online retail management. evaluation, which is the second component, is carried out according to the results of internal and external information analysis. the main purpose of the conceptual model provides for compliance with certain criteria: 1. flexibility. the criterion reflects how fast online retailers can change their online activity, which will ensure the implementation of an updated marketing commodity strategy. flexibility influences the degree of the strategy’s reflection in the actions of online retailers. without flexibility, online retailers are not able to consistently implement a new strategy without a long-term transition period. actually, online retailers risk never achieving a strategic goal, if changes in the strategy take place faster than online retailers can respond. in order to minimise the value of lost opportunities and maximise the flexibility of online activities as a whole, the decision must change. the flexibility of this decision – both the speed of identifying opportunities for improvement and the readiness with which they can be changed – is provided by its marketing commodity strategy. 2. speed. making an optimal decision on the formation of an adaptive system for managing the marketing commodity policy of online retailers and determination of the direction of marketing commodity policy is possible at a certain time. 3. efficiency. proper determination of the state of the adaptive system for managing the marketing commodity policy of online retailers will allow avoiding heavy marketing costs, as well as improving the productivity of their online activity. digitalisation forces online retailers to more optimise making sound decisions at different stages of hierarchical levels of management. they are obliged to qualify these decisions as corporate assets. so, the concentration of online retailers’ efforts on making sound decisions on the formation of an adaptive system for managing the marketing commodity policy envisages its consideration as corporate assets, which means the following characteristics: 1. strategic importance. corporate assets are strategic. recognition of the process of making a sound decision of the functional level as important for activities of online retailers is a guarantee that the formation of an adaptive system for managing the marketing commodity policy is of strategic importance. baltic journal of economic studies 134 vol. 5, no. 1, 2019 2. variability. making a sound decision on the formation of an adaptive system for managing the marketing commodity policy is based on the consideration of several scenarios of online retailers’ activities in the implementation of the appropriate marketing commodity strategy, taking into account changes in the business-building environment. 3. accessibility. corporate assets must be accessible if its correct use is planned. online retailers should realize that corporate assets are a tool of competitive struggle and subject-matter of reporting and analysis. provision of accessibility of making a sound decision provides for the management of decision-making systems in the same way as the management of other elements of the enterprise infrastructure, preservation of information about the decision by using special technologies, and ensuring standard use of these technologies and helper methods in online retail. і. theoretical provision complex, structural, system, process, logical adaptive system for managing the marketing commodity policy of online retailers as a set of interrelated and interdependent constitutive attributes, which is one of the key factors that increase the level of competitiveness of online retailers in the internet space goal flexibility, speed, effectiveness dialectical method of scientific cognition; methods of system analysis; methods of cause-and-effect analysis; methods of comparative analysis; methods of analysis and synthesis; expert evaluation methods; multidimensional statistical methods; mathematical modelling in economics adequacy, determinancy, manageability, integrity, synergism, relevance to marketing environment, ontogenesis, holism, equifinality іі. information-analytical and organisational support object subjectmatter criteria ііі. practical support collection processing analysis evaluation mechanism of adaptive management of marketing commodity policy of online retailers that gives a complex presentation of the condition of the system for managing the marketing commodity policy and allows developing a set of successive actions and measures for the further successful operation of online retailers in the internet space strategic importance, variability, accessibility, dynamism, integratedness formation of adaptive system for managing the marketing commodity policy of online retailers as a central guideline in the identification of marketing commodity strategy needed to be implemented, which mostly influences long-term sustainable functioning of online retailers in the market by means of the fullest satisfaction of typical demands, needs, and preferences of the target audience and occasional online buyers along with irrational online orders subject approac hes principles methods characte ristics internal users figure 1. a conceptual model of the adaptive system for managing the marketing commodity policy of online retailers baltic journal of economic studies 135 vol. 5, no. 1, 2019 4. dynamism. adaptive system for managing the marketing commodity policy of online retailers provides for the monitoring and review of factors influencing it, which is preceded by a number of facts: market, demands, needs, preferences of online purchasers, actions of competitors in the internet space are not static; a decision is not endlessly optimal in the changing marketing environment; internal changes in the activity of online retailers are constant. 5. integratedness. data integration results into making weighted decisions. the sense of a conceptual model of the adaptive system for managing the marketing commodity policy of online retailers is to identify the relationship between factors influencing it and define possible positive and negative changes caused by these factors. it is important to note that within the conceptual model of adaptive system for managing the marketing commodity policy of online retailers, the author has developed a mechanism of adaptive management of marketing commodity policy of online retailers that gives a complex presentation of condition of the system for managing the marketing commodity policy and allows developing a set of successive actions and measures for further successful operation of online retailers in the internet space. this mechanism provides for the process of decomposition of decision-making in the process of formation of an adaptive system for managing the marketing commodity policy of online retailers, namely – the division of the process into subsequent stages, the condition of each of which is the consideration of all factors of influence on the activity of online retailers. 4. findings according to the results of the approbation of a conceptual model of the adaptive management system of marketing commodity policy of online retailers, it is determined: 1. list of components of the marketing environment, which have quantitative and qualitative character and different degree of impact on the activity of online retailers depending on their market segment (figure 2). according to fig. 2, сqt and сql ∈ со, where: сq = {c1, c2, c3, c4, c5, c6, c7}; (1) сql = {с1, с2, с3, с4, с5, с6, с7, с8, с9, с10, с11, с12}. (2) 2. the developed conceptual model of the adaptive management system of marketing commodity policy of online retailers provides for dynamic and quick components of influence on the system of management of marketing commodity policy of online retailers (со) figure 2. components of influence on the system of management of marketing commodity policy of online retailers notes: со – components of influence on the system of management of marketing commodity policy of online retailers; сqt – components of quantitative measurement: c1 – site rating in ukraine, с2 – bounce rate, с3 – daily page views per visitor, с4 –visitors’ daily time spent on site, с5 – range width, с6 – range depth, с7 – availability of obsolete goods in the total number of varieties of goods; сql – components of qualitative measurement: с1 – customer orientation, с2 – integration with the category management system of goods and their development strategy, с3 – balance of realization of goods, с4 – product rationalization, с5 – product mix stability, с6 – assortment renewal level, с7 – product mix consistency, с8 – product mix policy consistency, с9 – availability of regular customers, с10 – use of marketing elements in the product mix formation, с11 – product mix positioning level, с12 – strategic attractiveness of product portfolio of the enterprise. baltic journal of economic studies 136 vol. 5, no. 1, 2019 response of online retailers in various segments to changes in demands, needs, and preferences of the target audience and occasional online buyers along with irrational online orders, actions of priority competitors, and continuous transformation economic processes. 3. the proposed mechanism of adaptive management of marketing commodity policy of online retailers is oriented to revealing the integrity of the process in the context of permanent changes in the market situation; is directed to providing a high-quality level of management of online activity of retailers. practical application of the mechanism of adaptive management of marketing commodity policy of online retailers promotes the implementation of a sound variant of achievement of their strategic goals. 5. conclusions a conceptual model of the adaptive system for managing the marketing commodity policy of online retailers is developed; it includes three structural blocks – theoretical provision, information-analytical and organisational support, practical implementation. the main goal of the conceptual model is to form adaptive management system of marketing commodity policy of online retailers as a central reference point in the identification of marketing commodity strategy needed to be implemented, which mostly influences long-term sustainable functioning of online retailers in the market by means of the fullest satisfaction of typical demands, needs, and preferences of the target audience and occasional online purchasers along with irrational online orders. based on the results of approbation of conceptual model of adaptive management system of marketing commodity policy of ukrainian online retailers in different segments, it is determined that its implementation in online activity of retailers contributes to their effective functioning and sustainable long-term development, in particular, by means of adjusting reference points of management of marketing commodity policy, and results into improving the process of making rational strategic decisions and substantiating tactical measures of implementation. further research will be aimed at developing econometric model of adaptive management system of marketing commodity policy of online retailers, which will take into account components of marketing environment, identified in this study, that have quantitative and qualitative character of measurement, and the use of which will result in the formation of product portfolio of online retailers that corresponds to demands, needs, and preferences of online buyers to the fullest extent. references: aivazian, s., bezhaeva, z., staroverov, o. (1974). klassifikacija mnogomernyh nabljudenij [the classification of multidimensional observations], statistika, moscow, russia. brown, s. & roth, d. (2017). the second era of digital retail. a vision for the future of shopping and the smart shelf. report. retrieved from: https://www.intel.com/content/dam/www/public/us/en/documents/reports/ futurecasting-report-june-4.pdf danko, t., skorobogatykh, i. (2005). kolichestvennyye metody analiza v marketinge: monografiya [quantitative methods of analysis in marketing: monograph]. piter. davnis, v., tiniakova, v. (2006). sovremennyye metody analiza i prognozirovaniya v zadachakh obosnovaniya marketingovykh resheniy [modern methods of analysis and forecasting in the problems of justifying marketing decisions]. marketing v rossii i za rubezhom, 2, 17-26. guinn, j. (2017). retailers are turning to digitalization. retrieved from: https://www.softwareadvice.com/ resources/what-is-retail-management/ kozhushko, o. (2010). using taxonomies to assess the level of protection of intellectual capital industry. ekonomichnyi analiz, 7, 286-289. lambin, j-j., schuiling, i. (2012). market-driven management: strategic and operational marketing, palgrave macmillan, 3 edition. lehmann, d., winer, r . (2010). analysis for marketing planning, irwin, mcgraw-hill, 4 ed. lepa, m. (2002). metody i modeli strategicheskogo upravleniya predpriyatiyem [methods and models of strategic enterprise management]. yugo-vostok ltd. masayuki, a., hitoshi, s. (2014). shifting from consumption to experience. winning in the omni-channel retailing. retrieved from: http://www.ey.com/publication/vwluassets/ey-shifting-from-consumer-toexperience/$file/ey-shifting-from-consumer-to-experience.pdf porter, m. (2008). the five competitive forces that shape strategy, harvard business review. sablina, n., telychko, v. (2009). using the taxonomy method for the analysis of internal resources. biznes-inform, 3, 78-82. baltic journal of economic studies 245 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-245-249 methods of financial control of the state financial inspection of ukraine anatolii shulha1, iryna zharovska2 abstract. the aim of the article is to determine the methods of financial control of the state financial inspection of ukraine. the subject of the study is the methods of financial control of the state financial inspection of ukraine. methodology. the study is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the logic-semantic method was used to determine the content of the notions of “method”, “form”, and “concept”. the comparative legal method enabled to compare doctrinal approaches to this issue. the normative-dogmatic method enabled to interpret the content of legal regulations of the domestic legislation on the issue of determination of financial control methods of the state financial inspection of ukraine. the systemstructural method enabled to analyse the most common methods of financial control. methods of analysis and synthesis helped study certain methods of financial control to formulate further conclusions regarding the most optimal functioning of the state financial inspection of ukraine. practical implications. the determination of the methods of financial control of the state financial inspection of ukraine enabled to make recommendations for improving the procedure of financial control of the state financial inspection of ukraine, as well as identify problematic issues that require further consideration and research. relevance/originality. the methods of financial control are defined and classified. the absence of a check without linkage to the subject (public procurements) among the forms of control of the sfi of ukraine is revealed so that independent coexistence of such a form of control as “public procurement check,” which methods are documentary and/or factual examination, can be asserted. key words: control, method, financial control, state financial inspection, check, scanning. jel classification: p43, m42 corresponding author: 1 kharkiv national university of internal affairs, ukraine. 2 lviv polytechnic national university, ukraine. 1. introduction control is an eclectic phenomenon, widely used, therefore, it may be characterized differently, for example, considering it as one of the main principles of management, as a stage of management process (cycle), the method of management as a mode of activity and the possibility of influencing on the behaviour of the relevant object, a function of public administration, an integral part of adoption and implementation of managerial decisions, which is continuously involved in this process from its beginning to its completion (kocherin, 1982). for today, the system of state financial control in ukraine is at the stage of formation and development. from the aim of state financial control up to certain powers of officials implementing the control bodies’ competence, all components of the system are reformed on the basis of changes in the legal regulation of individual control issues. at the same time, one of the problematic issues is the definition of methods of financial control, in particular, used by the state financial inspection of ukraine. some of the problematic aspects of the activities of the state financial inspection of ukraine were considered in scientific works of: v. b. averianov, o. f. andriiko, h. v. atamanchuk, a. m. bandurka, d. n. bakhrakh, l. p. bila, yu. p. bytiak, v. m. harashchuk, o. v. zaichuk, s. v. kivalov, z. r . kisil, r . v. kisil, v. v. kopeichykov, a. m. kolodii, v. k. kolpakov, yu. m. kozlov, o. m. kurakin, a. f. melnyk, v. v. novikov, o. p. orliuk, o. a. pavliukh, o. f. skakun, yu. m. starilov and many others. however, in the legal literature, a considerable number of interrogations does not involve a comprehensive study of the issue of financial control methods of the state financial inspection of ukraine. therefore, the aim of the article is to determine and consider the methods of financial control of the state financial inspection of ukraine. 2. presentation of the main material the method is usually considered as the technique or means to achieve the goal and objectives (osnovin, 1971). the method is a set of practices or operations of practical and theoretical development of reality baltic journal of economic studies 246 vol. 5, no. 1, 2019 (prokhorova, 1998). therefore, the methods of control are a set of ways and techniques of its implementation, according to v. m. oparin (oparin, 2002). while strongly supporting the scholar regarding the interpretation of control methods, the means as an integral part of the methods should be clarified. indeed, without the means of electronic computer technology, means of measurement, weighing, audiovisual, electronic, and other technical means, means of communication, etc., not a single control procedure can be carried out. for example, the control measurement is carried out with the obligatory use of means enabling to rate and weight the monitored parameters. alternatively, when exercising control over the accounting of payroll, the controller usually uses a calculator or other means of electronic computing for the speed and accuracy of the results obtained. therefore, it would be considered more accurate to define methods of control as techniques, ways, and means to determine compliance of controlled objects with given parameters. the above definition of the method of control reveals that it is impossible to agree in general with l. m. kapaieva and m. s. liakh that the methods of financial control are ways, techniques of its implementation that make observations (general review of the state of the object’s financial activity), check (carried out on-site using balance, reporting, expense documents), examination (carried out on individual aspects of financial activity and based on a wide range of indicators), analysis (conducted on the basis of current or annual reporting and is characterized by the use of analytical techniques), revision (method of documentary control of an enterprise, institution, organization, compliance with financial legislation, technique of documentary detection of financial abuses) (kapaieva, liakh, 2004). similarly, l. k. voronov’s perspective cannot be supported, because the main methods of financial control are observation, examination, accounting, analysis, check and revision (voronova, 2009). the determination of methods of financial control, such as revision; check; inspection; examination; observation; analysis; listening, as the most frequently used is analogically inaccurate (nahrebelnyi, chernadchuk, sukhonos, 2003). therefore, the absence of a legislative definition of the criteria enabling to delimitate and interpret concepts of the form and method of control leads to the inconsistency in the interpretation of their content. however, it is indisputable that concepts are an important component of theory and practice that comprise the scientific knowledge about the nature and essence of the phenomenon, and reflect the characteristic patterns and connections. a concept is a form of scientific thinking, a form of knowledge of reality as it is. (kolesnyk, 2014). the system of concepts reveals the content of the theory. without clear, scientifically substantiated concepts, there can be no scientific theory. in this system, categories are wide-ranging fundamental concepts that concentrate knowledge about the most important aspects and characteristics of the object under the study, its regular connections and relations (kolesnyk, 2014). once more this proves that the law of ukraine “on the basic principles of the implementation of the state financial control in ukraine” no. 2939-xii as of january 26, 1993, should provide for the legislative definition of the concepts, which are relevant for the implementation of corresponding activities, including the concept of forms of control and its methods. nowadays, a number of authors understand the forms of control as the ways of expressing its content (nahrebelnyi, chernadchuk, sukhonos, 2003). the authors of this article argue that methods, not the forms, characterize the techniques, ways, and means of conducting control actions by the subject. moreover, for the legal regulation of state financial control by the sfi bodies of ukraine, this argument is reflected in the legislation. therefore, observation, examination, and analysis should be included in the list of methods of control. the revision and check of public procurement are the forms of control of the sfi of ukraine, according to provisions of the regulation on the sfi of ukraine, the law of ukraine “on the basic principles of the implementation of the state financial control in ukraine” no. 2939-xii as of january 26, 1993. thus, the revision should not be among the methods of financial control, as the legislation clearly defines it as the form of control of sfi of ukraine. considering the check, in particular, the public procurement check, this construction clearly defines the form of control of the sfi of ukraine, regulated according to the law of ukraine “on the basic principles of the implementation of the state financial control in ukraine” no. 2939-xii as of january 26, 1993, the regulation on the sfi of ukraine, the procedure for carrying out inspections of public procurement by the state financial inspection and its local bodies, approved by the resolution of the cabinet of ministers of ukraine no. 631 as of august 1, 2013, and other legal regulations of the legislation of ukraine. the analysis of these regulations shows that a form of control such as a check without linkage to the subject (public procurements) is not defined among the forms of control of the sfi of ukraine. therefore, considering the check as such, this category can be understood as the method of control. the above is proved by clause 16 of the procedure for carrying out public procurement inspections of the sfi of ukraine no. 631: “during the public procurement check, a documentary and/or factual examination of the issues of the program for the public procurement check is conducted.” however, considering the use of the same term for the form and method of control, it is necessary to be accurate using baltic journal of economic studies 247 vol. 5, no. 1, 2019 the term “check” when identifying the methods and forms of the sfi of ukraine. in other words, it should be clarified whether the form or method is meant. to eliminate this problem, it is possible to change the terminology of financial control to use different terms for the form and method of control. for example, o. b. morhulets suggests a successful classification of methods. accordingly, the methods of control are classified into the following groups: factual (laboratory analysis, control acquisition, control measurement of completed building, assembling, repair works, time and motion study, inventory, examination, control (trial) provision of a new service in quality and quantity, normative check, experiment, etc.); calculating and analytical (technical and economic calculations, analytical estimation, arithmetic checking, dynamicalstatistical estimation); documentary (study of the essence and content of the documents reflected in operations, logical check, accounting correspondence check, counter-verification of documents, etc.) (morhulets, 2012). this classification is consistent with the objective to implement the functions of financial control by the use of specific methods of financial control, which reflect the principles of a general approach to the object of control. these principles are based on a combination of general scientific and methodological techniques of knowledge, which enables to interrogate the legality, reliability, feasibility, and economic efficiency of financial transactions and processes based on the use of accounting, reporting, regulatory and other information in combination with the examination of the actual state of affairs of the object of control (nahrebelnyi, chernadchuk, sukhonos, 2003). concerning the specific methods of state control carried out by sfi of ukraine, their list is very diverse. for example, a. f. andriiko argues that the function of control in public administration consists in analysing and comparing the actual state of affairs in one or another sphere with what is required of them, the deviations in the task performance and the causes of these deviations, as well as the activity assessment and the expediency of this way (averianova, 2003). while fully supporting the scientist in relation to the distinguished methods of state control, the restriction of the content of this phenomenon is arguable. to be precise, the list of methods that can be used by the controller is broader and encompasses such methods as observation, analysis of the activities of the relevant authorities and their officials concerning the tasks assigned to them, compliance with the rules, norms, and standards established by the state (voronova, 2006); listening, contrast, comparing and other general and special techniques, ways and means of achieving the purpose of the control activity. the list of methods of financial control is not clearly defined within the framework of a separate article of the law or regulation, but a significant amount of such methods is defined in the content of the act. for example, article 3 of the law of ukraine “on the basic principles of the implementation of the state financial control in ukraine” no. 2939-xii as of january 26, 1993, provides for that “public financial audit shall be a type of the public financial control and shall consist in examination and analysis of the actual state of affairs...” from this definition, the following methods of the public audit are identified as examination and analysis. article 4 of the same law provides for that “inspection shall be carried out by the body of state financial control in a form of revision and shall consist in documentary and factual examination...” therefore, the types of examination, such as factual and documentary, are selected. therefore, the most widely used methods of financial control of the sfi of ukraine should be considered. inventory, survey, and control measurement of material assets, works, and services are all classified to the methods of factual examination. when they are used, the object of control provides access to warehouses, storage facilities, production facilities, and other premises owned or used by the object of control. in addition, the officials of the controlling body have the right to demand from the head of the object under control or his deputy to create the appropriate conditions for carrying out the factual examination with the participation of materially responsible persons of the object under control and, in the case of verification of the scope of work performed, representatives of the business entity, that is, a performer (clause 18 of the procedure for carrying out public procurement inspections of the sfi of ukraine no. 631 (the cabinet of ministers of ukraine)). during the factual examination, specific methods may be an opinion poll and questionnaire survey. in the course of the inspection, in case of some negative results, the control body makes a decision on conducting a check or revision (voronova, 2006). in contrast to the factual examination as a method of control, a documentary examination is carried out using methods of financial state diagnosis, reporting examination, primary analysis of compliance with financial legislation, assessing the compliance of activities with statutory documents (voronova, 2009). therefore, the documentary examination involves control by examining documents of the object of control. to date, some of them are stored and processed on electronic media. therefore, in case of document circulation with the use of electronic storage and processing of information, the law provides for that, upon the request of an official of the controlling body, the head of the object under control shall ensure provision of corresponding documents in hard copy and in the required number of copies, as well as unimpeded access to electronic documents (clause 17 of the procedure for carrying out public procurement inspections of the sfi of ukraine no. 631 (the cabinet of ministers of ukraine)). a mechanical precision check is a type baltic journal of economic studies 248 vol. 5, no. 1, 2019 of documentary examination that involves checking again calculations and transmission of information (nemchenko, redko, 2012). observation (monitoring) is the general monitoring of the financial activity of the entity under control (nahrebelnyi, chernadchuk, sukhonos, 2003). scanning is a continuous, elemental review of information (for example, a review of primary documents on cash flow in the cash register in order to establish an unusual fact) (nemchenko, redko, 2012). accounting is a very specific financial-control method, which is used only by the control bodies in the registration of entities (for example, taxpayers) or in other cases, determined by the current legislation. accounting is not limited to registration work, but also provides for analytics and the creation of an information base (voronova, 2009). the analysis is carried out according to the reporting data (current or for a certain period), using such special statistical methods as an index, a method of average and relative values. the main financial and economic characteristics of the object under control are analysed to identify implicit violations of financial discipline and their causes. in this case, a financial-economic method of comparison is especially effective (voronova, 2006). analytical tests are methods of comparison, both in absolute units and in relative ones (indexes, coefficients, percentages) (nemchenko, redko, 2012). hearing of reports, information of officials on financial activities at meetings of some state executive bodies or their joint meetings with representatives of the public, other elements of the mechanism of the state in the form of conferences, round tables, etc., is a separate control method (nahrebelnyi, chernadchuk, sukhonos, 2003). confirmation involves a written response from the client or third parties in order to confirm the accuracy of information (for example, confirmation of receivables) of income (nemchenko, redko, 2012). confirmation as a control method of the sfi of ukraine may be a kind of “counter” verification, that is, the primary documents or reporting data are compared with similar or interrelated data of the counterparty (voronova, 2006). the factual examination should be understood as the quantitative and qualitative status check of the objects by examination, review, measurement, recalculation, weighing, laboratory analysis, and other methods for checking the actual state of assets. the documentary examination is a check of documents and records, which can be technical, arithmetic, and substantive. the technical examination consists of visual checking of the correctness of all requisite records, the identification of groundless corrections, erasures, adscript in text and figures, and the authenticity check of signatures of officials and materially responsible persons. an arithmetic check of documents is the check of calculation correctness in documents, account registers, and reporting forms. a substantive check of documents enables to verify the legality and feasibility of economic transactions, the correctness of transactions on accounts and inclusion in the items of expenditure and gross revenue (nemchenko, redko, 2012). 3. conclusion therefore, it should be noted that the methods of financial control of the sfi of ukraine represent a set of techniques, ways, and means that allow the bodies of the system to achieve their goals. the choice of control methods depends primarily on the scope of work and tasks. for this purpose, the main criteria are the minimization of duty hours for control works and the effectiveness of the chosen method of control. in addition, the 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(in ukrainian) baltic journal of economic studies 265 vol. 4, no. 4, 2018 corresponding author: 1 ternopil ivan puliui national technical university, ukraine. e-mail: oksanaredkva@ukr.net 2 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: olgast@bigmir.net 3 khmelnytskyi national university, ukraine. e-mail: olgprystupala@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-265-273 determinants of state regulation of the competitiveness of modern national economies oksana redkva1, olha haran2, liudmyla prystupa3 abstract. the purpose of the article is to develop and systematize the theoretical foundations of state regulation of economic competition in ukraine and to identify the priority vectors for the implementation of the national competition policy. methodology. in the given work, the questions of the state regulation of economic competition in the national economy of ukraine are considered through the prism of the indication of the purpose and role of state regulation in this area; through the definition of the system of participants in the competitive environment; through the factors that focused the competitive struggle between domestic producers are noted. results. our analysis allows us to assert that the leading role in the functioning of a healthy competitive environment belongs to a state that is able to create all the necessary preconditions for its proper development of competition in a rational economy and to ensure stable positions of economic entities by its economic and legal instruments. the development and improvement of the institutional and legal framework for the regulation of competition increase the competitiveness of the national economy. practical implications. in the case, when the competition, regulated by law, achieves a balance between supply and demand, and ultimately between social needs and production. its role is to provide an optimal balance of interests, prevent the acquisition of super-profits by business entities and ensure the standard level of goods’ quality and the necessary volumes of commodity content of the market. under such conditions, the competitive activity of state bodies is aimed to create and develop a competitive environment, protecting competition, antimonopoly regulation in order to increase the competitiveness of economic entities, stimulating the efficiency of production, better meeting the needs of the consumer. value/originality. the obtained theoretical and practical results illustrate the state of state regulation of economic competition in ukraine, which allows predicting the main directions of improvement of mechanisms of influence on the competitive environment of the national economy. key words: economic competition, state regulation, economy, competitive environment. jel classification: d19, d41 1. introduction the competitive environment is a prerequisite for the existence of the economy, and the creation of a competitive mechanism for the functioning of the economic system is a priority task of reforms that will facilitate the creation of conditions for the implementation of progressive market transformations. therefore, without a doubt, competition research is relevant. economic and political realities, as well as a weak movement with reform in ukraine, reinforce the urgency of the study. for example, according to the state statistics service of ukraine, the consumer inflation rate in 2017 increased and amounted to 13.7%. the current state of the national economy requires continuous improvement of the forms and means of the state regulatory influence on the relations of competition, the search for criteria to establish the boundaries of state-legal interference in the sphere of competition. although the economic situation in the country remains complicated, and post-crisis stabilization is occurring too slowly, however, in 2015-2017, the first signs of restoration of economic activity in the domestic markets of ukraine appeared. thus, it is necessary to understand the role of the state in the processes of ensuring the formation of a competitive environment, the content of state regulation of competition relations and, most importantly, to solve the key issue of the development of domestic competition law, which is related to the definition of competition as a whole or as a means of baltic journal of economic studies 266 vol. 4, no. 4, 2018 building a highly efficient economy. the need to resolve the issue is compounded by the fact that the necessary investments, but a pathetic situation has been created. on the one hand, low labour costs in ukraine, and therefore, the possibility of obtaining a cheaper product to generate more profits in the future, but the realities of today are unsafe business, since the rules of the game for business are not very transparent, given the high level of corruption and weak protection of private property, reduce the volume of investment activity. it is obligatory to take into account the state of regulation of economic competition: the labour crisis in ukraine that is due to certain factors, which include labour migration abroad for skilled workers; emigration of ukrainians who go abroad for study, etc. for example, according to a study by expat insider, at the end of 2017, about 1.2 million ukrainians already work in poland, but according to domestic demographers, this figure is at least half a million; the share of the export sector remains insignificant. for example, in 2017, exports from ukraine to the eu grew by 27%, while import volumes from the eu to ukraine increased by 22%, with total trade increased by 24%. in 2018, the volume of trade between the eu and ukraine continues to grow; national households provide up to 68% of gdp (gross domestic product) of a country; insufficiency of investment resources. for example, in 2016, ukraine’s rating for the “innovation” group improved to 52nd place versus 54th in 2015, and in 2017 – it fell in the ranking of 61st place (report micu). also, the necessity of rethinking the influence of state regulation on economic competition was influenced by the law of ukraine “on government aid to business entities” dated july 1, 2014, № 1555-vii, which entered into force in full as of august 2, 2017. the law of ukraine № 1555-vii introduced new mechanisms that have a significant impact on competition, a new type of relationship between the state and business entities. 2. analysis of recent research and publications various issues of economic competition as a socioeconomic phenomenon are investigated in the works of g. azoyev (1996). a. smith and d. ricardo noted that competition is a contest for profit (smith, 2001). in the scientific works of i. ansoff and m. porter (1993), the theoretical basis for understanding the concepts of “competition”, “competitiveness”, “competitive advantages”, their interconnection and influence on the processes of planning and strategic management of the enterprise are laid. m. porter’s works detail the international competition as an economic category, its forms and ways of improvement (porter, 1993). j. schumpeter (1982), having determined that perfect competition for society is an incentive for minimizing costs and maximum approximation of wages to its marginal productivity, carried out judicial contribution to the development of the theory of competition. effective competition, according to schumpeter, is possible only under conditions of economic dynamics. this condition is ensured by a qualitatively new level of production, based on the continuous introduction of innovations, innovation at all levels of technology, management and organization of production, product quality, development of new markets, raw materials. that is, effective competition is a new type of competition, built on innovation (schumpeter, 1982). a remarkable event on this issue was the publication of n. korchak’s monograph that describes the economic and legal aspects of state regulation of competition in ukraine and states that the laws of the market mechanism create an objective boundary for the state’s intervention in the economy as a whole (korchak, 2014). yu. rosetska investigated the state of the competitive environment in ukraine. the author outlines the main institutional barriers hindering the free movement of capital in the interbranch and intersectors. the ways of overcoming the institutional constraints of competition in the ukrainian economy, taking into account the trajectory of the previous development, existing multigeneration, the realization of the interests of the groups of institutional innovators, the reform of the system of branch, regional and horizontal state aid to the branches of industry (rosetska, 2008), are outlined. o. maslak (2014) investigated the essence and competitions’ forms and formulated an author’s view of its role in the modern economic system. the author highlighted the most characteristic features of modern globalization processes and grounded the need for the development of methodological provisions and practical recommendations for the formation of a mechanism for increasing the competitive opportunities and advantages of industry in the domestic and foreign markets (maslak, kvyatkovskaya & kulinichev, 2014). but, despite a large number of scientific studies in this area, the issue of state regulation of competition in the national economy does not lose its relevance and, therefore, needs further research taking into account the present realities. the purpose of the study is to develop and systematize the theoretical foundations of state regulation of economic competition in ukraine and to determine the priority vectors of the implementation of competition policy in ukraine. 3. analysis of the general theoretical principles of state regulation in the field of economic competition in ukraine in modern conditions, the value of competition is increasing, due to its role in the economy as the main “engine” of the functioning of the market mechanism. competition is one of the economic means of struggle for the consumer and the emergence of an effective baltic journal of economic studies 267 vol. 4, no. 4, 2018 owner is the subject of management. competitive struggle between domestic producers is intensified under the influence of such factors as: reduction of domestic solvent demand due to lower real incomes; difficult business conditions, due to the rupture of trade relations with partners, the increase in production costs through devaluation processes etc., remain constraining factors for increasing competitive advantages. thus, sometimes contributes to the use of unfair methods of competitive struggle. moreover, in such periods of crisis economic recovery, the role of the antimonopoly committee of ukraine as a guarantor of the protection of fair competition increases. therefore, the implementation of state regulation in the field of economic competition is due to the need to balance the interests of business entities and consumers. from the point of view of harmonization of the opposing interests of commodity producers during the competitive struggle, the internal forces of the progressive vector of development accumulate among the participants of the competitive environment. a dynamic character characterizes competitive relations. they are transformed under the influence of changes associated with globalization, uneven development, and the intensification of competition between countries, regions, and market participants. therefore, the state in the process of competition should ensure the efficiency of business entities by creating conditions for such activities and protect the interests of consumers from violations of rules and other unlawful actions of business entities aimed at unlawful redistribution of material goods from consumers and conscientious subjects to unscrupulous. given the need for the state to coordinate the interests of all participants in economic relations, there is a need to clearly determine their composition. participants in relations in the field of economic competition may include: a) producers of products, goods, works, services; b) consumers of products, goods, works, services; c) persons regulating the relations in the field of competition. when the question of the right regulation of economic competition is investigated, it is impossible to ignore the attention of those who regulate relations in the field of competition. these individuals, depending on what interests they are meeting, can be divided into two large groups: a) persons acting in order to maintain a competitive environment prevent and non-admittance of negative manifestations of competition and monopoly. as a rule, these are authorized state bodies, which have the appropriate competence in the field of economic competition. such persons, in most cases, act in the interests of the state and society. b) persons who, by virtue of certain circumstances, have the opportunity to influence other market participants and consumers by establishing their conditions of access to the market of products, goods, services, works or their implementation. this group of individual acts in their own interests, harming other participants, therefore, they are subject to certain restrictions to reduce the level of harm. the need to focus on individual who regulate relations in the field of competition has not only scientific interest but also a practical one. thus, the group of persons acting in order to maintain a competitive environment, the prevention and non-admittance of negative manifestations of competition and monopoly are regulators, controlling the authorities and acting in the manner prescribed by law and within its competence, that is, as a rule, authorized bodies or authorities to which powers are delegated. the bright representatives of this group are the antimonopoly committee (hereinafter – amcu), the ministry of energy and coal industry of ukraine, and others. the second group is individuals who, due to certain circumstances, have the opportunity to influence other market participants and consumers by establishing their access conditions to the market of products, goods, services, works or their implementation. representatives of this group are potential (or real) violators of competition law. this group may include natural monopolies, “major players” in a particular market. for example, the largest importers of liquefied petroleum gas in 2017 were, in particular, llc glusco ukraine, llc avantazh 7, opc “okko naftoprodukt”, llc “import trans service”. llc “factoring group”, llc “az supply”, llc “nadezhda”, tov “gaztron trade”, llc “propan trade”, llc “svg plus”, eurostandart-avtohaz tov (annual report of the antimonopoly committee for 2017, 2018). state represented by authorized bodies ensures the creation of a competitive environment and the maintenance of a certain economic order, protects of economic competition through the performance of control functions in the field of regulatory and legal support and the economy when the perpetrators to violate the rules of economic competition to responsibility are made responsible. state regulation of economic competition is provided through a system of measures carried out by the competent authorities aimed at preventing unfair competition and monopolistic abuses, their elimination and application of measures of liability to violators established by the state rules in the field of economic competition. the legal basis of competition as an object of state regulation is characterized not only by legal instruments but also by analysis of regulatory policies and organizational and economic means. legal means include the adoption of regulatory acts on the rules of conduct of management bodies and economic entities in the economic sphere. one of the main tasks of state regulation is the development of competition, but not its inhibition. baltic journal of economic studies 268 vol. 4, no. 4, 2018 the reason for state regulation of competition is the presence of state failures, monopolies, and other signs that require the state to intervene in supporting a significant level of competitiveness and protect the legitimate interests of all sectors. that is, the general goal of state regulation is the creation of effective competitive relations through the implementation in practice of the desired behaviour’s model of the participants in these relations through the means of state influence. the definition of a behavioural pattern is primarily due to the state regulation of economic competition, which is to ensure the functioning of the economy through the development of competitive relations and the introduction of integrity in competition. this goal is realized through the tasks that determine the vectors of state influence on the economic environment. in addition, thus, the main directions of the implementation of state regulation in the field of economic competition are: protection of consumers’ rights, which in most cases are more economically weak in comparison with other participants in market relations; stimulation of the competition development between commodity producers for consumers and, as a result, improvement of production and sale of goods, services, works; expansion of their assortment; improvement of quality; price optimization, etc. in other words, ensuring freedom of competition. state regulation of economic processes is an important sphere for the domestic economy, and raising its competitiveness is one of the ways of ukraine’s exit on the trajectory of sustainable development (shishka, & dzhumageldiev, 2015). therefore, due to legal instruments of influence on economic competition, as well as the structure, functions of legal principles of state regulation of economic competition, their interaction, and interconnectivity lead not only to protect economic competition but also contribute to the functioning of a modern market economy. 4. analysis of the problems of understanding and using the category of “economic competition” as an object of state regulation the objectivity of competitive relations is caused by: firstly, the plurality of various forms and types of property, presented at a certain period of time in a given society; secondly, objectively existing competitive environment, which ideally creates a situation on the market of a certain product, when none of the participants can influence the decision of others; thirdly, the diverse interests of the entities of existing forms and types of property. considering that competition is an indispensable component of the market system and the main driving force for its effective development. the scientific understanding of these categories is extremely important in the context of the need to find new effective measures, tools, and methods that can be used by the state to regulate competitive relations. indeed, competition can stimulate the manufacturer and direct its economic interest in optimizing costs; a search of new markets for goods, services, works; the application of the latest technologies; improving the quality of goods, services, works, etc., in order to profit. economic competition reflects the relationship between business entities that manifest themselves in the struggle for the most favourable conditions for capital investment, resulting in the formation of different market models, and meet the needs of both society and individual consumers. in modern conditions, experts perform different approaches to the definition of competition. analysing the scientific literature and legislation of ukraine, it is possible to state that there is no single point of view regarding the understanding of the concept of “economic competition”. this polemic has not only theoretical but also practical value. the research of scientific views on the concept and essence of competition testifies to their multidimensionality and scope. in each case, many factors contribute to the content of this category and the formation of the concept, in particular, the historical use of the term tasks affected by the state of the economy and the determined vector of its development, etc. however, all researchers point out unanimously, although there are no coordinated approaches to understanding the essence of economic competition, which is a necessary factor in the dynamic development of society since it forms economic freedom. the scientific certainty of the category “economic competition” will contribute to the reappraisal and improvement of approaches to performing business, to intensify and revitalize the private initiative, to stimulate the development of production and the efficient use of scarce resources, to promote the competitiveness of the national economy and achieve high rates of economic growth. consequently, competition dictates technological discipline, requires high-quality products, modern design, the ability to anticipate prospective needs, and not just trade that is produced and is still in demand. economic competition as an object of state regulation is a complex phenomenon, which is constantly changing under the influence of many factors, including globalization processes. today’s requirements are taken into account when forming the concept of “economic competition” there is the need for a harmonious combination of social, natural, and the economic priorities’ development of subjects of the globalized space. through the combination of social and market objectives, the situation is ensured when social baltic journal of economic studies 269 vol. 4, no. 4, 2018 indicators are achieved at the expense of the economy and vice versa, revealing the essence of socially oriented competitive relationships (osinskaya, 2009). the issue of social responsibility is closely linked to the concept of sustainable economic development, which depends on the level of innovation in economic activity, creates the prerequisites for environmental protection and the effective use of natural resource potential, that is, contributes to solving socio-economic problems of society. an important factor that influences the definition of the essence of the category “economic competition” is the understanding that this economic phenomenon has a dualistic character. a clear understanding of the concept of “economic competition” allows more efficiently carrying out state regulation of competitive relations, taking into account the peculiarities of the participants in these relations, defining the factors of competition while developing new methods and strategies for its conduct. it is necessary to emphasize the fact that in recent times, the urgent need to change the conceptual approach to understanding the state influence on competitive relations; this is due to the transformation of the competitive environment in the context of the development of globalization processes. 5. analysis of state regulation of economic competition in ukraine state regulation is ensured through a system of measures that are used by a person authorized by the state to create an effective competitive environment. the system of state regulation of economic competition in ukraine includes four main components. among them, there are legal regulation; granting of permits for economic competition and concerted actions; control over the state of the competitive environment; application to violators of sanctions. the first part of the state regulatory system of the competitive environment is an arrangement of legal regulation; it creates the basis for the implementation of other state regulations’ components and defines the “rules of the game” in a competitive environment. for example, the current legislation amended the order of control over concentrations and settlement actions. the purpose of these changes is to prevent the granting of permits for the concentration of economic entities with the participation of persons subject to sanctions at different stages of consideration of applications and concentration cases in order to prevent the actual legitimization of acquisitions and mergers. mentioned actions are performed with the participation of subowners in the law of ukraine “on amendments to some laws of ukraine on protection of economic competition and improvement of control procedures for concentration of economic entities” dated on 21.09.2017, № 2195-viii, amendments to the law of ukraine “on protection of economic competition” and the law of ukraine “on sanctions”. according to the law of ukraine no. 2195-viii as of 09.11.2017, the concentration permit is not granted if the actions for which such an authorization is required by the bodies of the antimonopoly committee of ukraine are subject to special economic and other restrictive measures (sanctions) provided in part 1 of article 4 of the law of ukraine “on the number of applications for granting authorization for the concentration of entities considered by the antimonopoly committee of ukraine”. the second important element of the system of economic competition’s state regulation is the granting of permits for economic competition and concerted actions, approval of documents and agreements that mediate these relations. for example, the most popular market among the amcus is the market for agricultural products, which is 25.7% (155 permits) of the total share of granted permits, as well as machinery and instrumentation markets, which is 14.6% (88 permits) and construction, real estate and construction materials markets, which is 13.3% (52 permits) (annual report, 2017). a special place among the system of permits is occupied by permits for the concentration of economic entities, such as the purchase of shares (parts) – 81.4% of the total; permits to acquire control in other forms – 14%, and permits to jointly create a business entity – 3.3%. control over the state of the market and compliance of its members with the established rules for ensuring economic competition in order to prevent offenses – the third important element of the system of economic competition’s state regulation. for example, in 2017, the amcu suspended 256 violations of the law of ukraine “on protection against unfair competition”. of these, there are 81 violations in the form of unfair competition, in respect of which the committee made a decision on imposition of penalties, and 175 are actions containing signs of such violations, which were terminated in accordance with the recommendations provided by the bodies of the committee to the subjects of management. the fourth element of the system of state regulation of economic competition is the application to violators of sanctions. the system of such sanctions are penalties; asset blocking; prohibition of participation in privatization, lease of state property by residents of a foreign state and persons who are directly or indirectly controlled by the residents of a foreign state or act in their interests; a total or partial prohibition on the implementation of transactions in securities issued by persons who are subject to sanctions under the law of ukraine “on sanctions” dated august 14, 2014, no. 1644-vii. the imposition of certain sanctions, in accordance with the legislation on the protection of economic baltic journal of economic studies 270 vol. 4, no. 4, 2018 competition, is fixed on the website of the antimonopoly committee in the section “monitoring of concentrations and concerted actions” and increases control over the concentration of economic entities with the participation of persons subject to sanctions and others. the application of a sanction involves obtaining a certain result. thus, the size of the economic effect as a result of taking measures to terminate violations of the legislation on the protection of economic competition, in particular, the prevention of unlawful losses and expenses of legal entities and individuals, in 2017 amounted to 2 561.0 million uah, which is almost 1.8 times (by 79.1%) more than in 2016 (1 425.1 million uah). in addition, the total amount of penalties imposed in 2017 amounted to 1 803.2 million uah (annual report, 2017). the composition of the basic offenses in the competitive environment has the following form: violation in the form of abuse of a monopoly position; violation in the form of anticompetitive concerted actions of business entities; violation in the form of unfair competition; violation of other species (table 1). the largest share in the imposed sanctions is taken by violations in the form of anticompetitive concerted actions of business entities – more than 1 684.6 million uah. table 1 the structure of offenses and the size of sanctions imposed on them in 2017 in ukraine type of offense the size of the sanctions violation in the form of abuse of a monopoly position almost 41.0 million uah violation in the form of anticompetitive concerted actions of business entities 1 684.6 million uah violation of unfair competition almost 50.5 million uah violation of other types almost 27.2 million uah the ratio of the price index of natural monopolies and telecommunications to the general price index indicators of differences in prices (tariffs) for the corresponding goods (services) between different regions of ukraine the system of relevant indicators characterizing the state, development trends, and efficiency of economic competition at the national, sectoral, and regional levels indicators of the efficiency of improvement of state regulation of monopolized commodity markets indicators of development of an effective competitive environment in commodity markets indicators of effectiveness of state policy in the field of protection of economic competition the size of the returned losses of individuals caused by the monopolization of commodity markets, violations of the legislation on the protection of economic competition the dynamics of volumes of goods sold in markets with a competitive structure and in markets in which there are no structural preconditions for competition the dynamics of indicators of concentration in the most important industries the size of the prevented losses of individuals caused by the monopolization of commodity markets, violations of the legislation on the protection of economic competition the dynamics of the number of economic entities entering into commodity markets and their consolidation in these markets figure 1. the system of indicators characterizing the state, development trends, and efficiency of economic competition at different levels baltic journal of economic studies 271 vol. 4, no. 4, 2018 the amcu has formed a clear position, which is steadily adhering that the fine for anticompetitive violations must exceed the illegally obtained profit and have a deterrent effect, while not removing the business entity from the market or depriving it of the ability to compete. characterized by economic competition, certain indicators are shown in figure 1. in the context of various industries in 2017, the high level of internal competition have enterprises financial and insurance activities – 72.7%; business entities in the field of trade – 61%; enterprises of the manufacturing industry – 58.5%; agro-industrial complex – 47.8%; enterprises of construction activity – 41.7% (annual report, 2018). figure 2 illustrates the distribution of highly competitive markets in the national economy in 2017. thus, highly competitive national markets are markets for financial and insurance services, trade, enterprises producing goods, agricultural products, construction works. by the enterprises of foreign countries in 2017, the highest level of competition is inherent in enterprises: mechanical engineering – 85.7%; financial and insurance activities – 42.9%; mining and metallurgical complex (mmc) and transport – 33.3%. figure 3 illustrates the level of competition from overseas companies. so, highly competitive are machine building, financial and insurance markets, mmc and transport (bublyk, koval, & redkva, 2017). the analysis of the main results of the influence of state regulation in the field of economic competition in 2017 will make it possible to distinguish the main tendencies in the development of the competitive environment and to take into account them when forming the strategy of economic development of ukraine. the following features are characteristic of ukraine’s competitive relations at this stage of economic development: decrease in the total number of respondents in ukraine experiencing competition from domestic enterprises; tangible structural changes in the distribution of the competitive environment; slowing down the development of inflationary processes; gradual restoration of economic activity; aggravation of the struggle for the consumer; revival of internal competition (koval, 2017). therefore, nowadays in ukraine, the tasks connected with the increase of efficiency of activity of state authorities in the sphere of protection and competition development in the domestic commodity markets are becoming more and more important, which resulted in the approval by the cabinet of ministers of ukraine of the concept of the national competition program for 2014-2024. there are three possible options for solving enterprises of construction activity 41.7% agro-industrial complex 47.8% enterprises of the manufacturing industry 58.5% business entities in the field of trade 61% enterprises that conduct financial and insurance activities 72.7% figure 2. areas of the national economy with high levels of internal competition mechanical engineering 85.7% financial and insurance activities 42.9% mining and metallurgical complex) and transport 33.3%. figure 3. the level of competition in the national economy from foreign companies baltic journal of economic studies 272 vol. 4, no. 4, 2018 the problem of improving the efficiency of public authorities in the field of protection and development of competition. the first option involves structural demonopolization, in particular, associated with changing ownership relations. for ukraine, such an option is unlikely because 90 per cent of enterprises in the state have private ownership and grinding enterprises can lead to a decrease in their competitiveness in the foreign market. the second option involves further liberalization of access of foreign business entities to the domestic market. however, with limited resources from domestic commodity producers, the emergence of an even greater number of foreign business entities will lead to negative consequences for the domestic economy, the social sphere, and national security. the third option involves the state, represented by the authorized bodies of a complex of measures aimed at the development of competition, its protection, and restriction of monopoly. this option is the most suitable for ukraine. considering that the association agreement between ukraine, on the one hand, and the european union, the european atomic energy community and their member states, on the other hand, as of 27.06.2014, has launched the alignment of the ukrainian legislation with the eu legal acts. this agreement allows ukrainian enterprises to receive stable and predictable privileged access to the largest single market in the world with more than 500 million consumers, while eu companies can benefit from easy access to the ukrainian market and establish new relationships with suppliers and partners. there are certain economic assessments on the formation of a competitive environment reform in ukraine (on a scale from zero to 100, where 100 is the optimal situation). thus, the assessment of the goods market in ukraine, according to the global competitiveness report 2018, is 55.3 points, the best is 73 (singapore); the assessment of the labour market in ukraine is 59.5, the best is 66 (usa); estimation of the dynamics of business activity in ukraine is 55.3 and the best is 86 (usa); the assessment of ukraine’s innovative capacity is 39.0, and the best is 58 (germany) (global competitiveness report, 2018). therefore, the priority directions of the implementation of competition policy in ukraine are: harmonization of industrial, structural, innovation, investment, consumer protection policy with competitive state policy, promotion of effective competition on the basis of innovation model of economic development; increasing the competitiveness of the national economy in the domestic and foreign markets; reduction of administrative barriers to entering and leaving the commodity market; equal access of all business entities to all types of resources and information; formation of an atmosphere of mutual trust between state institutions and economic entities; development of the infrastructure of commodity markets and the application of modern instruments for regulating the activities of natural monopolies; taking into account the praxis factor in optimizing the activities of executive bodies and local self-government bodies; strengthening the role of monitoring on the state of economic competition at the national, sectoral and regional levels; harmonization of legislation on the protection of economic competition with european legislation in the relevant field. 6. conclusion the analysis of the general theoretical and real state of government regulation of economic competition in ukraine shows that the national economy needs continuous improvement of the forms and means of state regulatory influence on the competition relations. also, it needs the search for criteria for establishing the boundaries of state-legal interference in the sphere of competition and solving the key issue of development of the domestic competition law, which is associated with the definition of competition as a means of building a highly efficient economy. state regulation of the competitive environment is a necessary tool for achieving a balance between public and private interests. the main components of the state regulation of economic competition are legal regulation; granting of permits for economic competition and concerted actions; control over the state of the competitive environment; application to violators of sanctions. these components make it possible to create a certain mechanism for regulating economic competition in ukraine. the state mechanism of regulation of economic competition is a combination of legal and economic, organizational, within the limits of the law, the state’s influence on the structure of the market and the economic behaviour of its entities, which enable an efficient allocation of resources (both public and private) and, as a consequence, the maximization of national well-being. prospects for further research are related to the definition of factors that influence the transformation of mechanisms of state influence on the competitive environment. in addition, they are based on the analysis of the main results of the influence of state regulation in the field of economic competition in 2017 and to consider them when forming the strategy of economic development of ukraine. the diversity and ambiguity of approaches to economic competition in modern conditions create the need to deepen theoretical research of competition as a necessary and important element of the modern economy. baltic journal of economic studies 273 vol. 4, no. 4, 2018 references: annual report (2018). antimonopoly committee. retrieved from: http://www.amc.gov.ua ansoff, i. 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(2009). theoretical concepts of social market economy. scientific bulletin of unfu, 19(7), 186-192. (in ukrainian) porter, m. (1993). international competition. moscow: international relationship. (in russian) rosetska, yu. b. (2008). institutional principles of development of competitive relations in the economy of ukraine. odessa: odeu. (in ukrainian) schumpeter, j. a. (1982). theory of economic development: an investigation of enterprise profit, capital, credit, percent and the cycle of conjuncture. moscow: progress. (in russian) shishka, r . b. & dzhumageldiev, g. d. (2015). state regulatory influence on the competition relations in ukraine. legal bulletin. air and space law, 1, 181-183. (in ukrainian) smith, a. (2001). goodwill of nations. research on the nature and causes of the welfare of nations. kiev: pоrt-royal. (in ukrainian) the order of the cabinet of ministers of ukraine on approving the concept of a nationwide program for the development of competition for 2014-2024 № 690-p (2012). retrieved from: http://zakon.rada.gov.ua/laws/ show/690-2012-р (in ukrainian) baltic journal of economic studies 259 vol. 4, no. 3, 2018 corresponding author: 1 department of law faculty, v.n. karazin kharkiv national university. 2 department of constitutional law and human rights, national academy of internal affairs. 3 department of administrative activity, national academy of internal affairs. e-mail: innashrub@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-259-263 constitutional principles of taxation: doctrinal approaches to typology halyna rossikhina1 v.n. karazin kharkiv national university, ukraine mikhailo hultai2, inna shrub3 national academy of internal affairs, ukraine abstract. the aim of the article is the study of theoretical and methodological, and doctrinal approaches to the typology of the constitutional principles of taxation and, on this basis, a definition of ways to improve domestic legislation in this sphere. the subject of the study is the constitutional principles of taxation. methodology. the research is based on general scientific and special-scientific methods and techniques of scientific knowledge. the historical and legal method enabled to determine the preconditions for the origin of taxes as the main source of filling the state budget revenues in ukraine and in the world, as well as the formation of scientific and theoretical views on the nature, problems and methods of taxation. the comparative legal method was used to compare doctrinal approaches to the differentiation of tax principles. the systematic and structural method contributed to the recognition of the tax system as a special institutional and functional form of tax relations. the methods of grouping and classification formed the basis of the original approach to the differentiation of constitutional principles of taxation by the most important and significant in practice criteria. the formal and legal method enabled to investigate thoroughly the state of legal regulation of the domestic taxation system, to identify its shortcomings, gaps, contradictions and miscalculations, as well as to develop recommendations aimed at their elimination. the results of the study revealed that the constitutional principles of taxation should be regarded as synthesizing principles, unifying links, the realistic basis for the origin, formation, and functioning of relations arising in the collection of taxes and fees. they define law-making, law-executing, and law-enforcement activities, coordinate the functioning of financial and legal regulation. practical implications. in the research, firstly, the key aspects of the genesis of the constitutional principles of taxation are outlined; secondly, scientific approaches to their classification are analysed and compared with existing ones in the special literature; thirdly, the original opinion on their differentiation is substantiated. relevance/originality. the proposed original approach to the differentiation of the constitutional principles of taxation is the basis for improving the most promising directions of development of domestic legislation in this area. key words: taxes, principles, principles of taxation, constitutional principles of taxation, types of constitutional principles of taxation. jel classification: h23, d01, h21 1. problem statement for the reason that the financial system includes relations regarding the accumulation and use of the state’s financial resources, it requires the improvement of its most important components related to the formation of the budget and extra-budgetary funds. the issue of legal regulation of taxation remains significant because the main source of revenue generation in ukraine is taxes. therefore, at the present stage, tax transformations are important in the development of market relations. in view of this, the transformation of the ukrainian tax system, financial and legal regulation of taxes and fees is of key importance. an efficient tax system is an integral part of any modern state. taxes are not only the main source of budget revenues but also a powerful means of public balance, a guarantor of social protection of citizens and formation of a modern material basis of state and local self-government sovereignty (bekh, 2001). baltic journal of economic studies 260 vol. 4, no. 3, 2018 2. literature review in legal science, the nature of constitutional principles was developed by domestic and foreign scientists such as n.v. zaiats, b.v. kalynovskyi, v.v.  kravchenko, a.m.  kolodii, v.f. pohorilko, o.v.  sovhyria, v.l.  fedorenko, o.f.  frytskyi, and others. in their scientific works, a.i. berlach, ya.v. hretsa, v.v. kostytskyi, m.p. kucheryavenko, a.m. novytskyi, n.yu. pryshva, o.b. chornomaz and others study the essence and types of the principles of tax law. however, the issue of constitutional principles of taxation is not considered enough, which, in turn, indicates the relevance and importance of the chosen topic of the scientific article. the aims of the article. consequently, it is relevant to consider the doctrinal approaches to the typology of the constitutional principles of taxation that constitutes the aim of the article. to implement it successfully, the following tasks should be resolved: firstly, to outline the key aspects of the genesis of the constitutional principles of taxation; secondly, to analyse existing scientific approaches to the types of the taxation principles in the specialized literature; thirdly, the original opinion on their differentiation is substantiated. 3. the main material taxes are the main source of revenue for the budget, that is, they perform a fiscal function. they are conditioned by the emergence of the state and formation of a material component of its functioning. the wider the powers of the state, the more important taxes, fees, and mandatory payments. thus, one of the constitutional duties of a citizen is the obligation to pay taxes and fees in the procedure and amount established by law (konstytutsiia ukrainy), while tax legal capacity of ukraine arises from the very origin. any tax, levied in the country, is compulsory and supposed to take away a part of the funds of individuals and legal entities. that is, paying taxes are viewed negatively by citizens, besides high rates of some taxes lead to the indignation of certain segments of the population. it should be noted that the origin of taxes usually refers to the period of formation of the first states. a state and its institutions needed to be kept, and the population was forced to choose whether to feed soldiers and officials of their ruler or to feed conquerors. up to the seventeenth century, tax systems were disorganized and poorly developed. later, states of europe contributed to the development of an ideology aimed at developing the theoretical foundations of taxation. for example, a. smith in an inquiry into the nature and causes of the wealth of nations formulates for the first time the principles of taxation (only four), defines tax payments, their place in the financial system of the state, and emphasizes that taxes for a payer are an indicator of freedom, not slavery. in the nineteenth century, scientific and theoretical views on the nature, problems, and methods of taxation, compliance with the legal form of their introduction and collection were formed. in other words, various strata of the population realized the general (public) interest in the necessity of paying taxes, as well as the legal regulation of taxation relations because of understanding the state’s interest in fiscal coverage of the budget revenues (rossikhina). therefore, on the one hand, the constitutional regulation of taxes and duties constructs the material basis for ensuring the effectiveness of the state functioning, and on the other, prevents state tyranny. this approach is embodied above all in the constitutional principles of taxation. according to v.f. pohorilko, the principles of the constitutional law of ukraine are the guiding principles, ideas that determine the essence, content, directions, and forms of constitutional and legal regulation (pohorilko, 2008). in turn, g.a. gadzhiev emphasizes that constitutional principles are the guiding principles that express the essence of the legal system, constitute its content and possess the highest legal imperative (gadzhiev, 2006). o.v. demin argues that the basic essence of any principle, including a constitutional group, is in establishing the legal basis of a special group of norms remaining independent from them in the contest (demin, 1998). according to a.o. khrabrov, the principles of law are its supporting structures, a bridgehead for understanding norms, institutions, branches, and the whole system of law, which are a clear benchmark for law-making, law-executing, and law-enforcement activities of the state (khrabrov, 2012). v.i. gureev argues that constitutional principles form the basis of legal regulation of the tax system in general and the whole value chain in tax law. from this perspective, it should be emphasized that the vital system of guarantees and qualities inherent in the tax system of any legal, democratic and social state is determined precisely by the constitutional principles of tax policy (gureev, 1997). according to paragraph 4.1 of the decision of the constitutional court of ukraine on the compliance of the constitution of ukraine (constitutionality) with the provisions of article 69 of the criminal code of ukraine (case on imposition of a more lenient punishment by the court) no. 15-rp / 2004 of november 2, 2004, the rule of law is domination of law in society. the rule of law requires that the state implements it in law-making and law-enforcement activities, in particular, in laws, which, by their content, must be permeated with ideas of social justice, freedom, equality, etc. the rule of law is manifested in the law, which is not limited only by the legislation as one of its forms but also includes other social regulators, such as norms of morality, traditions, customs, etc., legitimized by society and conditioned by the historically achieved cultural level of society. all these elements of the law are united by a quality that corresponds to the ideology of justice, the idea of law, baltic journal of economic studies 261 vol. 4, no. 3, 2018 which has largely been reflected in the constitution of ukraine (rishennia konstytutsiinoho sudu ukrainy). as noted above, a. smith was first to develop and argue the well-known four principles that should be implemented in the tax system of any modern state, namely: the certainty of taxes (the rate, terms and procedure of payment), convenience (favourable conditions for the taxpayer), equity (payers must pay an equal share of their income), as well as efficiency (the use of efficient and cheap tax administration measures). the majority of modern states apply these principles in tax policy. however, nowadays scientists review the doctrinal list of the principles of taxation. for example, m. p. kucheriavenko differentiates the following types of groups of principles of legal regulation: the principles of taxation, the principles of tax law, the principles of the tax system, the tax principles, the principles of tax legislation (bekh, dmytryk, kobylnik, 2003). t.m. zatulina adds to the constitutional principles of regulating tax relations the following: the rule of law and legality; the principle of publicity and social orientation; the principle of universality and equality; the principle of state protection of the payer; the principle of tax system development in compliance with on the form of government; the principle of tax autonomy of local self-government (zatulina, 2008). according to a.o.  khrabrov, in taxation regulations, the principles, provided for in the constitution, should be detailed, as well as the list of general and specific principles of tax law, their legal content and classification should be recognized by the legislation (khrabrov, 2012). moreover, a.v. bryzgalin emphasizes the need to differentiate all principles of taxation by economic, legal, and organizational (bernik, bryzgalin, golovkin et al., 1997). o.v. demin divides the principles of taxation into general (for example, publicity, the unity of the tax system, equity, single taxation, etc.) and special (demin, 1998). in addition, foreign legal literature proposes other approaches to the classification of tax principles with three separate groups, each of which includes a certain set of mechanisms for the implementation of significant constitutional and legal institutions in taxation, namely: а) principles that ensure the implementation and observance of the foundations of the constitutional system; b) principles that ensure the implementation and observance of the fundamental rights and freedoms of taxpayers; c) principles that ensure the implementation and observance of the doctrines of federalism. therefore, there are quite different classifications of the constitutional principles of taxation, each of which reveals the main aspects of financial and tax policy uniquely. analysing financial and legal regulation, it should be noted that the basic principles of financial and legal regulation are general principles of legal regulation, such as: 1) objectivity (the effectiveness of financial and legal regulation depends on consistency of the rules of financial law with the laws of social and economic development); 2) democracy, humanism, professionalism; 3) scientific character; 4) the unity of equal rights and equal responsibilities; 5) reasonability (provides the right financial and legal qualification, choice of a relevant norm and its dissemination to assessing the behaviour of the addressee of the enforcement of law); 6) legality (the need to adhere strictly to the requirements of the financial and legal norm by all participants in the financial legal relationship, the established by law procedure for the application of these norms, the provision of strict liability for violations of legal requirements, financial discipline; legislative regulation of the most important relations in financial activity; technical excellence of acts, etc.) (rossikhina). however, l.v. melekh emphasizes that, by following the principle of legality, the state strives for a clear and steady implementation of the existing legal norms using various methods and means, including state coercion. as a result, the legality is not only a principle, but also a method of activity of not only state bodies and their officials, but also other participants in social relations (melekh, 2009). the general theory of law puts forward general requirements (principles of law enforcement) to all stages of law enforcement activities, such as reasonability, expediency, and justice of enforcement, ensuring its legality. it should be emphasized that the principle of legality is fundamental to the implementation of the rules of financial law. in the context of this, p.m. rabinovich notes the lawful guarantees of legality, such as: 1) rules of law, precisely aimed at the maintenance and protection of the law; 2) activities of certain entities regarding the enforcement of these norms; 3) enforcement acts (documents that record the results of these activities) (rabynovich, 1979). the principle of legality is key because it requires the steadily and strict financial law compliance by all addressees. in addition, it provides for a compliance with all procedural requirements in qualifying the circumstances of the case, the choice and application of rules of law. moreover, overcoming the consequences of the global financial crisis, arrangement of a stable financial and economic existence of the state lead to growing influence and authority of financial (tax) laws, their strict compliance and implementation by all subjects of relations in financial activity of the state. all these circumstances contribute to the enhancement of legality in the financial and tax area, obligatory financial (tax) discipline, strict implementation of the rule of law in financial and tax law (kucheriavenko, bilinskyi, holovashevych et al., 2010). according to p.o. nedbailo, the principle of legality in the relations of state bodies with the population is combined with the proper competence of the state bodies and their officials, as well as with the clarity and certainty of the rights and obligations of citizens. under the rule of law, the rights and freedoms of a citizen baltic journal of economic studies 262 vol. 4, no. 3, 2018 are steady and inviolable. the principle of legality is the basis of compliance with all procedural aspects in qualifying the circumstances of the case, choice, and use of law (nedbailo, 1960). implemented and reflected in the acts of law, the principle of equity means that the decision does not contradict to the needs and interests of enterprises, institutions, and corresponds to the moral traditions of both society as a whole and individual citizens in particular. this principle is a philosophical category, a certain criterion. that is why in judging any offense, its causes, as well as the personality of the offender should be considered. according to r . tsyppelius, the right should regulate human behaviour to distribute fairly the benefits (values, advantages) and burdens (costs, liabilities); to satisfy conflicting interests in accordance with their weight and significance; to punish offenders adequately, in other words, to resolve the conflicts that arise in society justly (tsyppelius, 2004). the principle of expediency involves evaluating specific law enforcement on certain grounds. for example, whether the application of the law is needed at all and what individual characteristics should be considered by the subject of enforcement. the principle of reasonability ensures proper qualification, choice of a relevant norm and its dissemination to assessing the behaviour of the addressee of the enforcement of the law. other principles are also applied considering the principle of democracy, which is the basis for all activities of state and public organizations in ukraine. from the perspective of this scientific research, the principles of taxation are interdependent and interconnected, each of them is polysemic, selfcontained, complex, and each encompasses several constitutional and legal institutions. thus, the constitutional principles of taxation include: 1. the principle of territorial conditionality, which reveals the essence of decentralization within taxation of a unitary state. decentralization contributes to financial independence and budget autonomy of local budgets, provides an opportunity to regulate taxation of territorial communities independently, without the interference of central bodies in the activities of local self-government bodies in resolving issues that fall within their competence. articles 7, 140, 142 of the constitution of ukraine as of june 28, 1996, provide for that local self-government, the material and financial basis of which is both community property and local budget revenues, including income from local taxes and fees, is recognized and guaranteed in ukraine. in addition, in the whole state, uniform bases of taxation are established providing an opportunity to balance all rights and obligations of the subjects of financial and economic relations, as well as national taxes (konstytutsiia ukrainy). according to paragraph 4.4 of article 4 of the tax code of ukraine on december 2, 2010, the establishment and abolition of taxes and duties, as well as privileges of their payers, are carried out consistent with the norms of this code by the verkhovna rada of ukraine, as well as the verkhovna rada of the autonomous republic of crimea, rural, rural settlement, city councils within the limits of their authorities, defined by the constitution of ukraine and laws of ukraine. an important characteristic of the degree of decentralization in the country is the ratio of tax powers of the centre and regional budgets. financial decentralization enables the long-awaited freedom of the regions, as well as profit on their own (revenues from certain taxes are directed to local budgets, as well as local councils have the right to set rates and provide privileges) (podatkovyi kodeks ukrainy). 2. the principle of equity means that taxpayers are obliged to pay taxes and fees according to their real incomes. in general, the principle of recognizing the true citizen-taxpayer’s ability to pay when collecting taxes and fees should be used. paragraph 4.1.6 of article 4 of the tax code of ukraine states clearly and fairly that social equity in tax relations is the establishment of taxes and fees in accordance with taxpayers’ ability to pay. this principle is supported by the principle of equality, disclosed in the current tax law. article 4 of the tax code of ukraine provides for that equality of all payers before the law, prevention of any manifestations of tax discrimination ensure the same approach to all taxpayers, regardless of social, racial, national, religious affiliation, form of ownership of a legal entity, citizenship of an individual, place the origin of capital (podatkovyi kodeks ukrainy). 3. the principle of legality implements the general concept of the division of power. part 2 of article 92 of the constitution of ukraine stipulates that the system of taxation, taxes and fees are based on laws exclusively (konstytutsiia ukrainy). in addition, paragraph 4.2 of article 4 of the tax code of ukraine provides for that national, local taxes and fees, the collection of which is not provided for by this code, shall not be subject to payment. in addition, paragraph 7.3 of article 7 of the tax code of ukraine emphasizes that any taxation issues are regulated by this code and cannot be established or amended by other laws of ukraine, except for laws that contain exclusively provisions for amendments to this code and/or provisions establishing liability for violations of norms tax legislation (podatkovyi kodeks ukrainy). 4. the principle of the public purpose of establishing and collecting taxes and fees. according to the basic law in force, ukraine is a sovereign and independent, democratic, social, and legal state. this principle involves the interaction of public (state) interests and private legal interests of taxpayers, based on real incomes. it is aimed at realizing the very social essence of the state, which should be oriented towards ensuring a decent life of people. baltic journal of economic studies 263 vol. 4, no. 3, 2018 4. conclusions therefore, the constitutional principles of taxation are synthesizing principles, unifying links, the realistic basis for the origin, formation, and functioning of relations arising in the collection of taxes and fees. they define lawmaking, law-executing, and law-enforcement activities, coordinate the functioning of financial and legal regulation. the principles of constitutional taxation include the principle of territorial conditionality, the principle of equity, the principle of legality, the principle of the public purpose of establishing and collecting taxes and fees. the proposed list of principles of constitutional taxation enables to balance the constitutional values of a democratic, social, and legal state within the framework of tax legal relations. references: bekh h.v. (2001). pravove rehuliuvannia nepriamykh podatkiv v ukraini [legal regulation of indirect taxes in ukraine] (dissertation of phd in specialty 12.00.07). kharkiv, 207 p. (in ukrainian) konstytutsiia ukrainy [the constitution of ukraine]. no. 254k / 96-vr of 28 june 1996. retrieved from: http://zakon5.rada.gov.ua/laws/ show/254к/96-вр (in ukrainian) rossikhina h.v. rol finansovo-pravovykh norm u mekhanizmi finansovo-pravovoho rehuliuvannia [the role of financial and legal norms in the mechanism of financial and legal regulation]. retrieved from: http://www.pravoznavec.com.ua/period/article/2849/%c3#chapter (in ukrainian) pohorilko p.f. (2008). konstitutsiine pravo ukrainy: navchalnyi posibnyk [constitutional law of ukraine: a teaching manual]. k.: yurydychna dumka, 308 p. (in ukrainian) gadzhiev g.a. (2006). konstitutsionnye osnovy sovremennogo prava sobstvennosti [constitutional bases of modern property right]. zhurnal rossiyskogo prava [ journal of russian law], 12, 30-41. (in russian) demin a.v. (1998). obshchie printsipy nalogooblozheniia (analiz sudebno-arbitrazhnoi praktiki) [general principles of taxation (analysis of forensic arbitration practice)]. khoziaistvo i pravo [economics and law], 2, 95-100. (in russian) khrabrov a.o. (2012). konstytutsiini normy-pryntsypy yak zahalnopravovi pryntsypy podatkovoho prava [constitutional norms-principles as general legal principles of tax law]. uchenye zapysky tavrycheskoho natsyonalnoho unyversyteta im. v.i. vernandskoho. seryia «yurydycheskie nauki» [scientific notes of v.i. vernandskii tavrycheskii national university]. (vol. 25 (64)), 1, 129-133. (in ukrainian) gureev v.i. (1997). rossiiskoe nalohovoe pravo: ucheb [russian tax law: a teaching manual]. m.: ekonomika, 383 p. rishennia konstytutsiinoho sudu ukrainy: v 3 t. [decision of the constitutional court of ukraine: in 3 volumes]. (2010). (vol. 1). s.a. kuzmin (ed.). k.: palivoda a.v, 496 p. (in ukrainian) bekh h.v., dmytryk o.o., kobylnik d.a. (2003). podatkove pravo: navchalnyi posibnyk [tax law: a teaching manual]. m.p. kucheriavenko (ed.). k.: yurinkom inter, 400 p. (in ukrainian) zatulina t.m. (2008). konstitutsionno-pravovye osnovy regulirovaniia nalogovykh otnoshenii v rossiiskoi federatsii [constitutional and legal bases of regulation of tax relations in the russian federation] (dissertation abstract of phd in specialty 12.00.02 constitutional law; municipal law). moscow, 21 p. (in russian) bernik v.r ., bryzgalin a.v., golovkin a.n., et al. (1997). nalogi i nalogovoye pravo: ucheb. posob. [taxes and tax law: a teaching manual] a.v. bryzgalin (ed.). m.: analitika-press, 608 p. (in russian) melekh l.v. (2009). zakonnist u pravozastosovnii diialnosti [lawfulness in law-enforcement activity] (dissertation of phd in specialty 25.00.01). l., 185 p. (in ukrainian) rabynovich p.m. (1979). problemy teorii zakonnosty razvitoho sotsializma [problems of the theory of the legality of developed socialism]. l.: publishing house of the lviv university, 203 p. (in russian) kucheriavenko m.p., bilinskyi d.o., holovashevych o.o. et al. (2010). aktualni pytannia nauky finansovoho prava: [topical issues of financial law science] (monograph). m. p. kucheriavenko (ed.). kh.: pravo, 464 p. (in ukrainian) nedbailo p.e. (1960). primenenie sovetskykh pravovykh norm [the application of soviet legal standards]. m.: state-publishing house of juridical literature, 512 p. (in russian) tsyppelius r . (2004). yurydychna metodolohiia [legal methodology]. translated, adopted and applied of ukrainian law). k.: referat, 176 p. (in ukrainian) podatkovyi kodeks ukrainy [the tax code of ukraine]. no. 2755-vi of december 2, 2010. retrieved from: http://zakon3.rada.gov.ua/laws/show/2755-17 baltic journal of economic studies 274 vol. 4, no. 2, 2018 corresponding author: 1 department of research work organization, national academy of internal affairs. е-mail: alex0674682444@gmail.com 2 department of civil law and procedure, national academy of internal affairs. е-mail: basay_ov@gmail.com 3 department of civil law and procedure, national academy of internal affairs. е-mail: alex0674682444@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-274-281 the specificities of using cryptocurrency in purchase and sale contracts oleksii drozd1, oleg basai2, hanna churpita3 national academy of internal affairs, ukraine abstract. the aim of the article is to study the theoretical and legal possibilities of using cryptocurrency in purchase and sale contracts, to determine the specificities of such a phenomenon as cryptocurrency (bitcoin) from the perspective of jurisprudence, and to draw attention of legal scholars primarily to possible further scientific researches on the introduction of this phenomenon in the modern civilian legislation of ukraine. the subject of the study is the specificities of using cryptocurrency in contracts of purchase and sale. methodology. the research is based on an analysis of legal acts on the legal regulation of cryptocurrency in ukraine. by means of the comparative legal method of investigation of certain provisions of ukrainian legislation, the possibilities and limits of the use of cryptocurrency in contractual relations, in particular, contracts of purchase and sale are determined. the results of the study revealed that the cryptocurrency regime in ukraine and in many countries is in a legal vacuum. such a conclusion is based on the lack of clear legal clarification and consolidation of the concept and types of cryptocurrency in the relevant rules of the tax, banking, civil, and commercial law. in case of eliminating this gap, it is advisable to review the state policy on bitcoin and its analogues. practical implications. it is necessary and appropriate to introduce a corresponding license for cryptocurrency activities that can minimize the laundering of proceeds from crime or terrorism financing. it is suggested that eventually the relations concerning the digital currency will be regulated in ukraine, but most likely, it will copy the experience of another state, which may have negative consequences. relevance/originality. analysis of a possible use of cryptocurrency in contracts of purchase and sale can become the basis for the development of the most promising directions of domestic civil law in contractual relations. key words: cryptocurrency, purchase and sale, transaction, licensing, bitcoin, cryptoexchange, cryptomarket. jel classification: e42, e44, f63 1. problem statement the world is changing: former unusual dreams and ideas gradually become reality, many new and varied phenomena and processes arise. people of nowadays are faced with the requirement to adapt quickly and effectively to innovations. this is especially true in settlements and payments, as they are often used and directly related to the development of the economy, the state and well-being of the population. the circulation and creation of cryptocurrency require considering the issue of its legal regulation at the national and international levels. many obstacles occur and need to be overcome in the future. obviously, many people do not know and do not conceive the possible existence of cryptocurrencies. the next dilemma is the lack of discussion and elaboration of the essence of bitcoin and its analogues by the state authorities when adopting laws or other normative acts. the specific nature of cryptocurrency leads to the fact that the relevant issue is not a priority for resolution. nevertheless, now the world tendencies and realities force to change the attitude to this problem (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). the more popularity bitcoin gains, the more necessity to discuss it at the international level occurs, moreover, the governments of individual countries have to reckon with it. some countries have even recognized bitcoin as currency. for example, in switzerland since 2013, bitcoin is considered a foreign currency. however, the majority tends to recognize bitcoin as a property asset, operations with which must be taxed (bitkoin, blokchein i maininh. komu potribna kryptovaliuta i yak baltic journal of economic studies 275 vol. 4, no. 2, 2018 derzhavy ii kontroliuiut). the united states, germany, japan, france, finland, and other countries have not only allowed the circulation of the currency but also legislated or backed up the legal regime, clarified the notion of bitcoin and analogues and formed the relevant judicial practice (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). literature review. the study of the phenomenon of cryptocurrency (bitcoin) is under consideration in the works of scientists such as aiganym y. seitim, o.s. badzym, yu.v. hava, b.v. derevianko, a.r. drevush, i.m. doronin, o.o. loviak., l.l. neskorodzhena, o.o. poplavskyi, n. pantielieieva. obviously, most of the researches of this issue are related to the scientific works of specialists in economics, although recently the attention of lawyers is also drawn to it. the aim of the article. to consider the theoretical and legal possibilities of using cryptocurrency in the contracts of purchase and sale. to determine the specificities of such a phenomenon as cryptocurrency (bitcoin) from the perspective of jurisprudence and draw the attention of legal scholars primarily to possible further scientific researches on the introduction of this phenomenon in the modern legislation of ukraine. the main material. the main problem faced by international financial organizations and the leadership of certain countries is the control over the circulation of cryptocurrency since uncontrolled it creates a large space for the development of the shadow economy (bitkoin, blokchein i maininh. komu potribna kryptovaliuta i yak derzhavy ii kontroliuiut). in addition, the unregulated sphere of cryptocurrency provides fraudsters with great opportunities, because intruders’ actions cannot be classified and, therefore, punished if relevant legislation is absent in the country. for example, if you bought a product for bitcoin and you did not get it, then you came with it to law enforcement agencies, but neither the police nor the court would manage your case (bitkoin, blokchein i maininh. komu potribna kryptovaliuta i yak derzhavy ii kontroliuiut). however, according to an expert, the founder of the first bitcoin agency in ukraine, mykhailo chobanian, in ukraine bitcoin still does not have a definite legal status (shcho take elektronna valiuta ‘bitkoin’?). chobanian notes that there are only a few countries in the world where the status is defined, the last country where the status has become a noteworthy case is the united states, where it is recognized as a commodity, financial instrument, it is now a full-value instrument in the financial market (shcho take elektronna valiuta ‘bitkoin’?). in ukraine, the problem of legal regulation of cryptocurrency is ambiguous regulation of cryptocurrency in the world. countries with a strong economy and currency introduce cryptocurrency as a means of payment or financial asset. countries with a weak economy and an unstable monetary unit are trying to support the national currency by restricting cryptocurrency as a means of payment but allowing cryptocurrency as a means of exchange (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). for example, in some states of the usa, cryptocurrency is the subject of money transfers in the payment system. in germany, bitcoin is recognized as a unit of account. in japan, cryptocurrency is recognized as legal tender. in europe, cryptocurrency is generally equated with electronic money but is not considered legal tender and is a means of exchange. in china, transactions with bitcoin are prohibited for banks but allowed for individuals. in canada, bitcoin is a means of account. in spain, the bitcoin system is recognized as an official payment system. direct bans on cryptocurrency usage exist in bolivia, ecuador, thailand, and vietnam (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). thus, the ambiguous approach to cryptocurrency in different countries of the world creates additional problems for determining the legal status of cryptocurrency. this means that ukraine needs to develop its own approach to the legal regulation of cryptocurrencies, giving them a special legal status, based on the current state of law and economic development of the country (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). according to statistics, in 2016, the conversion of cryptocurrency into the national currency amounted to 775.2 million uah, while the introduction of the national currency on the stock exchange of cryptocurrency was 856.8 million uah. in 2016 only, the demand for cryptocurrency in ukraine grew by 5 times, and by the number, for example, of bitcoin-wallets, ukraine is among the top 5 world leaders. (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). therefore, the special regime for bitcoin in ukraine is not established, because the aforementioned question on cryptocurrency has not been aroused when discussing and adopting laws. according to the explanation in a letter from the nbu of december 8, 2014, defines bitcoin as a “money surrogate” that has no real value and cannot be used by individuals and legal entities in ukraine as a means of payment since it contradicts to the norms of ukrainian legislation (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). to find out the legal nature of bitcoin it is important to note that the law “on the national bank of ukraine” states that the money surrogate is any documents in the form of banknotes that are different from the monetary unit of ukraine issued in circulation not by the nbu and made for payments in economic circulation. meanwhile, specificities of cryptocurrency are not covered by the term “electronic document” since the latter refers to a document, which records information in the form of electronic data, taking into account the required details baltic journal of economic studies 276 vol. 4, no. 2, 2018 of the document. thus, a money surrogate does not consider the concept of cryptocurrency. on the one hand, bitcoin can be seen as a set of information. it is based on a blockchain-encrypted array of data about all operations that have been conducted in a distributed network during its entire existence. on the other hand, bitcoin is close to the product, because the national legislation does not provide for a clear definition of the product as such, but denotes only a part of this concept for specific legal relationships. another positive aspect is that cryptocurrency is a subject to barter (commodity exchange) transactions as perceived by the tax, civil, and commercial codes of ukraine. nevertheless, judicial practice goes the opposite way. for example, in the decision of the darnytskyi district court of kyiv no. 753/599/16-ts, bitcoin was not recognized as a commodity (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). therefore, it is the most expedient to find out the essence of cryptocurrency, discuss it and receive relevant explanations from the state body before making appropriate changes to ukrainian legislation (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). obviously, nowadays, the main problem of regulating legal relations with cryptocurrency is the lack of relevant legislative rules that can be applied to cryptocurrency. another problem of cryptocurrency legal regulation in ukraine is ambiguous regulation of cryptocurrency in the world. countries with a strong economy and currency unit introduce cryptocurrency as a means of payment or as a financial asset. countries with a weak economy and an unstable monetary unit try to support the national currency by restricting cryptocurrency as a means of payment, but allow cryptocurrency as a means of exchange. for example, nowadays, the eu legislation categorizes bitcoin as a digital representation of value, not confirmed by a central bank or government body and not attached to legally established exchange rates, and can be used as a means of exchange for the purchase of goods and services, their transfer and storage, and can be acquired electronically. moreover, the exchange of traditional currencies per bitcoin unit is exempt from paying valueadded tax. in israel, bitcoin is not provided for with the legal definition of currency, either as a financial security or as a taxable asset. each time bitcoin is sold, the seller must pay a capital gains tax. the people’s bank of china considers bitcoin to be a virtual commodity, not currency, and its sale may be subject to vat. its sales are taxed by the japanese vat counterpart. in australia, bitcoin is considered a property, and transactions with it are barter. in canada, bitcoin is generally defined as an intangible asset, and transactions with it are also barter. thus, in different countries, bitcoin is classified differently, for example, as virtual currency, money surrogate, intangible value, virtual goods, etc. for its part, the national bank of ukraine currently officially does not support any of the abovementioned definitions (komentar zastupnyka holovy nbu oleha churiia shchodo statusu bitcoin v ukraini). thus, an ambiguous approach to cryptocurrency in different countries of the world creates additional problems for determining the legal status of cryptocurrency. consequently, ukraine needs to develop its own approach to the legal regulation of cryptocurrency, providing it a special legal status, based on the current state of legislation and economic development of the country. according to statistics, in 2016, the withdrawal of cryptocurrency into the national currency amounted to 775.2 million uah, while the introduction of the national currency on the stock exchange of cryptocurrency was 856.8 million uah. in 2016 only, the demand for cryptocurrency in ukraine grew by 5 times, and by the number, for example, of bitcoin-wallets, ukraine is among the top 5 world leaders (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). it is roughly estimated that today there are more than 2,000 types of cryptocurrencies, the most popular is bitcoin. the total market capitalization of the bitcoin market is estimated at 130 billion us dollars, and the aggregate volume of trading in such digital assets reaches 2.6 billion us dollars. thus, it seems rather strange that cryptocurrency has become an indispensable part of social relations, financial instruments, business, but under no legal regulation. considering the world practice, cryptocurrency is gaining popularity all over the world, its development is impossible to prohibit technically, moreover, it is economically inexpedient, and therefore, the legal regulation of cryptocurrency is now only a matter of time (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). in the decision of october 22, 2015, the european court determined that bitcoin should be considered a currency (means of payment), and not a commodity. the rationale for this was some difficulties with the taxation of cryptocurrency. the corresponding decision established that all transactions related to bitcoin exchange would be taxed in the same way as transactions with traditional currencies. actually, european jurisprudence has equated cryptocurrency with legal means of payment, and the exchange of funds with “a currency exchange transaction.” nevertheless, according to the current legislation of the eu, digital currency is considered to be a commodity and is regulated by the civil law and the eu directive on the pit as a commodity, and the contract of purchase and sale of cryptocurrency is a contract of purchase and sale of goods (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). in the trial of antonio murdjio of coin.mx, judge alison natean claimed that dictionaries, courts, as well as legal history, confirmed that bitcoin is money. this baltic journal of economic studies 277 vol. 4, no. 2, 2018 point of view of american judges was confirmed by the department dealing with financial and criminal offenses, which in 2013 categorized bitcoin as “a form of money.” however, another influential american tax authority (internal revenue service (irs)) emphasized that for the purposes of federal taxation, cryptocurrency should be interpreted not as “a form of money” but as a property (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). in ukraine, some favourable for bitcoin judicial practice is being formed. for example, the decision of october 13, 2016, by the kharkiv administrative court of appeal equated all transactions conducted in e-dinar coin with ordinary money transactions (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). in ukraine, cryptocurrency transactions are subject to standard taxation. the question of the value added tax is rather controversial because cryptocurrency is not defined as goods at the legislative level (kryptovaliuta: ii pravovyi rezhym, problemy zastosuvannia). therefore, cryptocurrency as an object of civil legal relations can be considered: article 177 of the civil code classifies types of civil rights objects, indicating that they include: • things, including money and securities (according to article 179 of the central committee, a thing is an object of the material world, in relation to which civil rights and obligations may arise); • other property (according to article 190 of the central committee, a property as a special object is a separate thing, a set of things, as well as property rights and obligations; property rights are non-consumable; property rights are recognized as real rights); • the results of work (chapter 61, 63 of the central committee); • services (chapter 63 of the central committee); • the results of intellectual, creative activity (according to article 199 of the civil code, the results of intellectual, creative activity and other objects of intellectual property rights create civil rights and obligations in accordance with book iv of the central committee (intellectual property right). • information (according to part 1 of article 200 of the central committee, the information is any facts and/or data that can be stored on tangible media or displayed electronically. the legal status of information is determined by special laws, in particular, the law of ukraine “on information” no. 2657-xii of october 2, 1992); • other tangible and intangible benefits (such as personal intangible goods protected by civil law. in particular, according to part 1 of article 201 of the civil code, such are life and health, honour, dignity and business reputation, the name (denomination), authorship, freedom of literary, artistic, scientific and technical creativity, as well as other goods protected by civil law). therefore, cryptocurrency is difficult to attribute to any type of objects of civil and legal relations, and consequently, such a situation means a gap in the law: to the legal relationship with cryptocurrency, it is impossible to apply directly this or that rule of the current legislation. thus, in current conditions, the only way to apply the analogy of law or analogy of legality is as follows: if civil relations are not regulated by this code, other acts of civil law or the contract, they are governed by the legal rules of this code, other acts of civil law governing civil relations of similar content (analogy of law). in case of impossibility to use the analogy of law for regulating civil relations, they are regulated in accordance with the general principles of civil law (analogy of legality) (article 8 of the civil code). however, it is still unresolved, what kind of legal relations can be applied by analogy to cryptocurrency? nowadays, according to part 1 of article 99 of the constitution of ukraine, the monetary unit of ukraine is hryvnia. according to clause 3.3 of article 3 of the law of ukraine of april 5, 2001 no. 2346-iii “on payment systems and transfer of funds in ukraine,” part 1 of article 3 of the decree of the cabinet of ministers of ukraine “on the system of currency regulation and currency control” no. 15-93 of february 19, 1993, hryvnia as the monetary unit of ukraine (the national currency) is the only legal means of payment in ukraine accepted by all individuals and legal entities without any restrictions on the entire territory of ukraine for transfers. according to clause 14.1.93 of the tax code of ukraine, funds mean hryvnia or foreign currency. according to part 1 of article 2 of the above-mentioned decree of the cabinet of ministers of ukraine “on system of currency regulation and currency control,” residents and non-residents have the right to be owners of currency values located on the territory of ukraine. residents also have the right to be owners of currency values outside ukraine, except for cases provided for by the legislative acts of ukraine. the list of currency values is indicated in article 1 of the abovementioned decree, including the currency of ukraine, payment documents and other securities, denominated in the currency of ukraine; foreign currency, payment documents and other securities denominated in foreign currency or banking metals; banking metals. therefore, cryptocurrency according to ukrainian legislation cannot be equated with either a means of payment or currency value. in this regard, the national bank noted that the issuance of the virtual currency bitcoin has neither security nor legal binds on individuals, is not controlled by the state authorities of any country. thus, bitcoin is a money surrogate that does not provide real value (the letter of the national bank “on the assignment of operations with virtual currency/cryptocurrency bitcoin to foreign exchange transactions, as well as the availability of grounds for enrolment on a current baltic journal of economic studies 278 vol. 4, no. 2, 2018 account in foreign currency of a physical person foreign currency received from the sale of bitcoin” no. 29-208/72889 december 8, 2014). in addition, in another letter, the nbu emphasized that the issue and circulation of other monetary units in the territory of ukraine and the use of money surrogates as a means of payment are prohibited (part 2 of article 32 of the law of ukraine “on the national bank of ukraine”). taking into account the above, the national bank of ukraine considers virtual currency/ cryptocurrency bitcoin as a money surrogate, which has no real value and cannot be used by individuals and legal entities in the territory of ukraine as a means of payment, because this contradicts to the rules of ukrainian legislation. moreover, currency/cryptocurrency bitcoin usage is accompanied with a high risk factor in this service, transaction or delivery channel, such as the anonymity of transactions (which may include cash), decentralization of operations (clarification of the national bank of ukraine “clarification on the legality of the use of virtual currency/cryptocurrency bitcoin in ukraine” of november 10, 2014). furthermore, the nbu claimed that the sale of bitcoin for us dollars or other foreign currency has signs of the functioning of the so-called “financial pyramids” and may indicate potential involvement in the implementation of dubious transactions in accordance with the legislation on counteraction to legalization (laundering) of proceeds obtained from crime and terrorism financing (the letter of the national bank “on the assignment of operations with virtual currency/cryptocurrency bitcoin to foreign exchange transactions, as well as the availability of grounds for enrolment on a current account in foreign currency of a physical person foreign currency received from the sale of bitcoin” no. 29-208/72889 on december 8, 2014). perhaps, cryptocurrency is electronic money? in article 15 of the law of ukraine of april 5, 2001 no. 2346-iii “on payment systems and transfer of funds in ukraine,” electronic money is defined as units of value stored on an electronic device, accepted as a means of payment by other persons than the person issuing them, and monetary obligation of this person, executed in cash or in non-cash form. the issue of electronic money can be carried out exclusively by the bank. the bank issuing electronic money undertakes the obligation to repay it (also regulated by the regulation on electronic money in ukraine, approved by the resolution of the board of the national bank of ukraine on november 4, 2010, no. 481 “on amendments to certain regulatory and legal acts of the national bank of ukraine on regulation of issuance and circulation of electronic money”). the main differences between cryptocurrency and electronic money are: • cryptocurrency does not mean the debt obligations of its holder, owner or issuer (as noted above, the issuer of cryptocurrency does not exist at all); • in the system of cryptocurrency, there is no single emission centre or central administrator; • payments within the system of certain cryptocurrency can be carried out absolutely anonymously, so taxpayers and recipients of cryptocurrency are not controlled completely by any third parties, including state bodies (because the electronic keys used when identifying the parties to settlements with cryptocurrency do not contain any personal data of such participants of settlements and, therefore, it is impossible to define and identify such parties of settlements); • the process of creation of new types of cryptocurrency or increase of the volume of cryptocurrency within a single cryptocurrency system (the process of mining) is possible, therefore, the number of units of cryptocurrency may increase exorbitantly without additional binding to any liability for such cryptocurrency, and may be carried out based on mathematical algorithms using computational power of computers belonging to individuals who extract (mine) additional cryptocurrency units. accordingly, the lower rate of generation of new cryptocurrency units, the higher total mass of cryptocurrency is, along with the generation of additional cryptocurrency units, in case of reaching a certain total number of units, will become technically impossible (for example, in case of reaching 21 million bitcoin units); • electronic money has an obligatory attaching to a certain national currency and the issuer, while cryptocurrency cannot be equated with any currency of the world, being a kind of independent currency. therefore, cryptocurrency is not electronic money and cannot be equated with it yet (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). let us equate cryptocurrency with a financial asset or a financial service object: according to article 1 of the law of ukraine “on financial services and state regulation of financial services markets” no. 2664-iii of july 12, 2001, financial services are defined as transactions with financial assets carried out in the interests of third parties at their own expense or at the expense of those persons, and in cases provided by law, due to borrowed from other persons financial assets, in order to profit or maintain the real value of financial assets. in this case, financial assets are means, securities, debentures and debt claims that are not attributed to securities. the list of financial services is defined in article 4 of the abovementioned law (the subject of financial services must necessarily be a financial asset). each type of financial assets is regulated by the general and special legislation. with regard to the legal regulation of cryptocurrency as money (means of payment) or currency values, this is already discussed above. regarding the legal regime of securities, the legal circulation of securities and their exhaustive list is baltic journal of economic studies 279 vol. 4, no. 2, 2018 established by articles 194-198 of the civil code, as well as by the special law of ukraine “on securities and the stock market” no. 3480-iv of february 23, 2006. the obligatory feature of a security is the presence of the issuer of the security (issuing person) and the certificate of monetary or other property rights between the person having the rights to the security and its issuer. therefore, based on the specificities of the functioning and issuance of cryptocurrency, in particular, the lack of an issuer, as well as the absence of debt obligations for the cryptocurrency, as noted above, the legal regime of securities and debt obligations for cryptocurrency cannot be applied (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). is cryptocurrency a program code and an object of intellectual property rights? cryptocurrency is a set of program code, the accounting and operation of which are based on the encryption and application of various cryptographic methods of protection, so the rights to such program code are often equated with the rights to software with the appropriate legal regulation. however, the main problem with this approach is the absence of the author of such a code since the issue of cryptocurrency is decentralized and automated, the single issuer of cryptocurrency is absent. thus, it is not correct to assert that cryptocurrency is a software or object of intellectual property rights (for example, the according to articles 418, 420, 421 of the civil code, articles 1, 8, 11, 18 of the law of ukraine “on copyright and related rights”). accordingly, over the lack of an author on such a program code, it will be impossible to regulate cryptocurrency as an object of intellectual property rights (in particular, as a program), and therefore, the legislation on the transfer of rights to intellectual property rights cannot be applied to cryptocurrency rights transfer operations (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). currently, two draft laws are registered in the verkhovna rada concerning the legal status and circulation of cryptocurrency: • the draft law of ukraine on october 10, 2017 no. 7133-1 “on stimulation of the market for cryptocurrency and their derivatives in ukraine" (author of the legislative initiative s. rybalka); • the draft law of ukraine on october 10, 2017 №7133 “on circulation of cryptocurrency in ukraine” (authors of the legislative initiative: i. efremov, l. denisov, i. kotvitskyi, i. rybak, and s. voitsekhovska). the draft law of ukraine on october 10, 2017 no. 7133-1 “on stimulation of the market for cryptocurrency and their derivatives in ukraine” defines cryptocurrency as a decentralized digital value measurement that can be denominated in numerical form and functions as a means of exchange, a store of value or a unit of account, based on mathematical calculations being their result and has cryptographic protection of accounting. for legal regulation, cryptocurrency is considered a financial asset. the draft provides for the introduction of a 2% tax for compulsory state pension insurance for each crypto-exchange transaction, which will result in additional revenues to the state budget of ukraine (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). the draft law no. 7133 “on circulation of cryptocurrency in ukraine” provides for that cryptocurrency is a program code (a set of characters, numbers, and letters) that is the subject of a property right that may act as a means of exchange, the information of which are entered and stored in the blockchain system as accounting units of the current block system as data (program code). moreover, the draft states that the general rules, provided for to private ownership, can be applied to cryptocurrency, while to cryptocurrency transactions the general provisions of the contract of exchange are applied in accordance with the legislation of ukraine. in addition, the draft provides for the distribution of tax legal relations to operations on mining and exchange of cryptocurrency, in accordance with the current legislation of ukraine (i.e. cryptocurrency will be the subject of taxation) (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). both draft laws need to be further elaborated, first of all, in view of the necessity to amend the other legislative acts regulating the related legal relations (in particular, the civil code of ukraine) in parallel, by providing the definition and legal status of cryptocurrency as a special object of civil law relationships. moreover, at the state level, it is necessary to develop programs for the introduction of special software, which will allow the circulation of cryptocurrency, for example, as a subject of exchange. in addition, definitely, cryptocurrencies should be subject to taxation, which will create additional revenues for the state budget of ukraine (kryptovaliuty v ukraini. problemy ta perspektyvy pravovoho rehuliuvannia). however, the regulator, the national securities and stock market commission refused to support these draft laws in their initially filed form. the commission draws attention to the inadmissibility of the use of the term “cryptocurrency” since in essence this concept is the result of financial engineering, not “currency” (bitcoin v ukraini: nbu ta inshi rehuliatory vyznachylysia zi statusom kryptovaliut). according to the state agency for e-government, in ukraine, for the first time in the world, an electronic transatlantic exchange agreement was signed in cryptocurrency ethereum with the use of the ethereum blockchain smart contract. eizvestia. com informs that the amount of the transaction is equated with usd 60,000. apartment owner mark ginzburg (lives in new york) sold an apartment in kyiv through his representative. the propy startup in the silicon valley became the platform for the transaction. baltic journal of economic studies 280 vol. 4, no. 2, 2018 according to the wall street journal, the buyer was michael arrington, a founder of techcrunch (and also an advisor at propy) (vpershe v ukraini ofitsiino prodaly kvartyru za kryptovaliutu). before concluding a deal through blockchain, the parties signed a smart contract. the address of the smart contract is shown in the contract, which is submitted directly to the property register and in the blockchain etherеum (vpershe v ukraini ofitsiino prodaly kvartyru za kryptovaliutu). on the propy platform, the seller and the buyer have contracted intention, on the basis of which cryptocurrency was transferred into a deposit. subsequently, the lawyers prepared the necessary documents for the transaction of sale and purchase, property valuation acts were ordered, power of attorney was issued to the parties, and also a notarial agreement was made. after entering changes of rights of the ownership to the register, an extract from it was received. in turn, the extract was immersed in the system, which enabled to unlock the smart contract and remit the required amount to the seller (vpershe v ukraini ofitsiino prodaly kvartyru za kryptovaliutu). 2. conclusions to sum up, it should be emphasized that the regime of cryptocurrency in ukraine and in many countries is in a legal vacuum. consequently, every consumer and legislator should have had open information about the issuer, the order of issue and cryptocurrency transactions. then reviewing of the state policy on bitcoin and analogues would be possible. in addition, a question of legislative clarification and consolidation of this concept through the adoption of relevant rules in tax, banking, civil and commercial law occurs. moreover, it is necessary and expedient to introduce the appropriate license for cryptocurrency activities that would minimize money laundering or terrorism financing. someday, relations with respect to the digital currency will be resolved, but most likely it will be an inappropriate and unjustified copying of the experience of another state, which may have negative consequences. that is why it should be considered that the legal regime of cryptocurrency ought to be adapted to the actual world events and the real situation in the state (lozova, loviak, 2018; dudko, loviak, 2017; motyl, loviak, 2018). further scientific research: the possibility of the occurrence and implementation of material liability. labour relations develop quite quickly; possibly, in the future, freelance workers will receive wages in cryptocurrency or compensate for damage to the enterprise, taking into account the cost of bitcoin. by no means, reflections, presented in the article, put the end in the study of problems of cryptocurrency relations. the problems outlined need further study, while scientific achievements should be implemented in the social 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(october 06, 2017) retrieved from http://w1.c1.rada.gov.ua/pls/zweb/ webproc4_1?pf3511=62684 komentar zastupnyka holovy nbu oleha churiia shchodo statusu bitcoin v ukraini [commentary of the deputy chairman of the national bank of ukraine oleg churii on the status of bitcoin in ukraine]. retrieved from https://bank.gov.ua/control/uk/publish/article?art_id=53411806&cat_id=55838 bitcoin v ukraini: nbu ta inshi rehuliatory vyznachylysia zi statusom kryptovaliut [bitcoin in ukraine: the nbu and other regulators have defined the status of cryptocurrency]. retrieved from http://biz.nv.ua/ukr/finance/ bitcoin-v-ukrajini-nbu-i-inshi-reguljatori-viznachilisja-zi-statusom-kriptovaljuta-2293048.html lozova, t.i., loviak, o.o. (february, 2018). okremi aspekty obihu kryptovaliuty v ukraini (tsyvilno-pravovyi aspekt) [some aspects of the cryptocurrency circulation in ukraine (civil and legal aspect)]. jurnalul juridic național: teorie și practică [national legal journal: theory and practice]. (moldova), 1(1), 104-108. dudko, a.h., loviak, o.o. (2017). bitcoin – obiekt tsyvilnykh prav chy innovatsiina posluha u sferi rozrakhunkiv (tsyvilno-pravove ese) [bitcoin is an object of civil rights or an innovative service in the field of settlements (civil law essay)] naukovyi visnyk publichnoho ta pryvatnoho prava: zbirnyk naukovykh prats [scientific bulletin of public and private law: collection of scientific papers], 5(1). k.: naukovo-doslidnyi instytut publichnoho prava [research institute of public law], 97-101. motyl, v.i., loviak o.o. (2018). okremyi pohliad na pravovyi rezhym kryptovaliuty v ukraini a point of view on the legal regime of cryptocurrency in ukraine in s.v. hubariev, i.s. timush (eds.), suchasni pohliady na aktualni pytannia pravovykh nauk: materialy mizhnarodnoi naukovo-praktychnoi konferentsii (23 lyutoho 2018 r.) [current views on topical issues in the legal sciences: materials of the international scientific and practical conference (february 23, 2018)]. k: fop kandyba, 20-26. baltic journal of economic studies 147 vol. 4, no. 3, 2018 corresponding author: 1 department of administrative and customs law, faculty of law, university of customs and finance. e-mail: legeza@email.ua 2 department of civil law and the process of the faculty of specialist training for the criminal police departments, dnipropetrovsk state university of internal affairs. e-mail: savielieva@i.ua 3 department of police administrative activities, kharkiv national university of internal affairs. e-mail: olenadzhafarova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-147-157 structural and legal analysis of scientific activity regulation in developed countries yevgeny leheza1 university of customs and finance, ukraine maryna savielieva2 dnipropetrovsk state university of internal affairs, ukraine olena dzhafarova3 kharkiv national university of internal affairs, ukraine abstract. experience of developed countries makes the case that it is possible to achieve a high level of competitiveness in the globalized market solely by using achievements of scientific-and-technological advance. national policy and effectiveness of means of scientific sector support used in the country are essential to it. the purpose of the article is an effort to perform the structural analysis of support, regulation, and financing of scientific activity in world’s major economies, having determined central institutes of financial means command for the investment into innovative and scientific activity in the countries. to perform a functional analysis of the funded status of ukrainian scientific and technological and educational activity from the standpoint of its public regulation. based on the studied funding model of scientific activity in developed countries, to propose the model of optimization of scientific activity financing that will become the innovative activator of support and development of ukrainian science. analysing public policy of developed countries related to the support of scientific, educational, and innovative activity according to the degree of state regulation, it is possible to identify two poles. the first pole can be notionally named as english-american model where the state does very little to interfere with the activity of scientific and innovative sector. it is characterized by the fullest autonomy of entrepreneurship in the innovative and scientific and educational sphere. with the use of such model, it is assumed that market mechanisms facilitate acceleration of scientific and innovative processes of country development by them. the second pole, a franco-japanese model of public regulation, is characterized by the substantial impact of the state on scientific and educational processes, in particular, by non-market financing methods. with the use of this model, the governments determine priority guidelines of innovative and technological development supported by the government substantially; such countries to some extent include: france, sweden, and japan. most of the developed european countries (germany, poland, italy) and canada are found in between specified poles of scientific and innovative policy while developing a national business environment and using direct state support of innovative activity. the increase in expenses of the private sector for research and development activities appears in all countries. public authorities support scientific studies, innovative activity and development of small and medium-sized businesses in a scientific and technological sphere; they cooperate actively during the development and implementation of national programs. moreover, other concerned parties – industrial companies, representatives of the academic community, non-governmental non-profit organizations – are involved more actively in the decision-making process. max planck society in germany can become the experimental model of regulation and financing of scientific, educational, and innovative activity of institutions. implementation of a new economic model in ukraine is possible upon the condition of creation and adjustment of the functioning of two closed and baltic journal of economic studies 148 vol. 4, no. 3, 2018 related engineering processes: innovative and productive: education-science-production-market; investment. the following may be classified as top priorities of development of scientific and technological activity in ukraine: prevention of arrival of earlier and inefficient technologies; facilitation of application of state-of-the-art highly efficient technologies, development of scientific potential and human resourcing; arrangement of conditions for extension and expansion in the number of innovative structures (technology parks, technopolis, business incubators, innovation centres, innovative exchange markets). key words: regulation of scientific activity, funding model, english-american model, franco-japanese model, canadian model, r&d of ukraine, science financing, max planck society. jel classification: h52, h60, i20, i28, k10 1. introduction current stage of world economy’s development is characterized by accelerated paces of scientific-andtechnological advance and increasing intellectualization of prime production factors. under these circumstances, the development of productive forces is carried out upon the condition of close cooperation of science and up-to-date technologies; creation and implementation of innovations is prime success factor of state in presentday conditions. experience of developed countries makes the case that it is possible to achieve a high level of competitiveness in the globalized market solely by using achievements of scientific-and-technological advance. national policy and effectiveness of means of scientific sector support used in the country are essential to it. the efficiency of implementation of innovative changes in ukraine depends directly on an understanding of market laws, the highest consistency of economic mechanisms of effective use of innovative capacity. scientific sphere reform provides a range of structural transformations of the system of science organization and functioning in ukraine relating to academic and branch scientific institutions and higher education establishments. the state can influence on social and economic and other processes in the society, to regulate social and economic relations by means of scientific activity management. 2. recent research and publications analysis problems of public regulation of scientific and scientific and technological activity and mechanisms of science financing were reviewed in papers of scientists and experts, in particular: e. brooking, m.p. butko, o.b. butnik-siverskyi, v.m. heiets, j. galbraith, d.  duffy, a.o. diehtiar, l. edvinsson, a.h. zharinova, s.m. illiashenko, v.l. inozemtsev, b.b. leoniev, l.  malone, l.h. melnyk, v.p. semynozhenko, t. stuart, a.  toffler, a.a. chukhno, s.m. shkarlet. scientists made a significant contribution to the study and analysis of theoretical and practical aspects of scientific and scientific and technological activity. the attention in published papers is given to developments of the concept of scientific and technological policy, forms and methods of science financing, state of the art and main trends in the future; certain papers cover the experience of foreign countries in the formation of the funding model. 3. identification of unresolved issues being the part of the general problem however, the issue of international scientific and scientific and technological cooperation is at the level of discussions and search for ways of its activation. opportunities for use of existing foreign models are considered in a generalized sense, without regard to modern trends of development, global and ukrainian scientific potential. moreover, the financing of scientific and technological and educational activity is considered from the standpoint of general obtained results, i.e. science is perceived as the business activity, without regard to problems and opportunities of development of that particular potential of the innovative integrator of country development. 4. structural analysis of scientific activity funding models in developed countries analysing public policy of developed countries related to support of scientific, educational and innovative activity according to the degree of state regulation, it is possible to identify two poles. one pole includes the usa and england where the state does very little to interfere with the economy, in particular, the scientific and innovative activity; the other pole includes france and japan where the scientific and innovative processes are actively supported by the state. the first pole can be notionally named as englishamerican model. it is characterized by the fullest autonomy of entrepreneurship in the innovative and scientific and educational sphere. with the use of such a model, it is assumed that market mechanisms facilitate acceleration of scientific and innovative processes of country development by them. the main emphasis is placed on the creation of favourable conditions for the conduct of business in general, thus providing for the creation of satisfactory conditions for implementation of innovative products in the branch of national economy. baltic journal of economic studies 149 vol. 4, no. 3, 2018 the second pole, a franco-japanese model of public regulation, is characterized by the substantial impact of the state on scientific and educational processes, in particular, by non-market financing methods, by means of direct government grants and subsidies of enterprises carrying out the innovative activity. with the use of this model, the governments determine priority guidelines of innovative and technological development supported by the government substantially; such countries to some extent include: france, sweden, and japan. most of the developed european countries (germany, poland, italy) and canada are found in between specified poles of scientific and innovative policy while developing a national business environment and using direct state support of innovative activity. the increase in expenses of the private sector for research and development activities appears in all countries. public authorities support scientific studies, innovative activity and development of small and medium-sized businesses in a scientific and technological sphere; they cooperate actively during development and implementation of national programs. moreover, other concerned parties – industrial companies, representatives of the academic community, non-governmental non-profit organizations – are involved more actively in the decision-making process. the extent of management centralization may be different, but there is always interdepartmental regulation organized in a certain way (continuous or periodic arising by reason of the necessity of solution of specific problems). 5. countries with the decentralized type of scientific activity regulation great britain, the usa, and germany belong to european countries that have strong scientific potential and where the management of the scientific industry is considered to be the most efficient. scientific and technological potential of great britain was developed on the basis of conducting research and development in three sectors: public sector, the institutions of which pursue the researches of the fundamental and applied nature; higher education sector providing fundamental researches; scientific and technological units of private companies where the applied researches and developments, implementation of new technologies and its commercial realization are concentrated. distribution by sectors of research and development conducting is approximately the following: government laboratories – 15.3%; higher school – 13.75; private companies, research public corporations and laboratories, investigatory associations – 84.35; other organizations – 3.75 (danylova, 2014). government funding is focused on science support, updating of technical and scientific basis, maintenance of the position of great britain as one of the global scientific leaders, maximization of application of research results in the sector of the economy, and promotion of innovations in social and other spheres. the government supports small-scale profitable projects, provides the technical basis for researches and finances engagement of leading scientists and researchers into the scientific sector of great britain. cooperation between universities is of prime importance so as the critical amount of scientific researches could appear that will become a basis for important scientific achievements. therefore, work in great britain is offered to leading scientists from other countries of the world, in particular, eastern europe. scientific and technological potential characterizes only potential opportunities of achievement of effect from the scientific and technological activity. the level of a country’s industrial development depends significantly on social and economic content, objects and forms of scientific and technological policy. public scientific and technological policy is based particularly on the priorities of general economic policy and includes the following courses: the creation of institutional basis of r&d regulation; direct financing of r&d and education; provision of incentives for r&d with the use of tax and depreciation policy; development of scientific and technological infrastructure. generally scientific and technological policy of great britain consists of two basic elements: financing and management, where management acts as synthesizing element of all components of research and manufacturing complex “research – developments – production – consumption”; it forms connection between scientific studies and applied developments with economy in whole (danylova, 2014). decentralized type is the most evident in the usa where the majority of ministries and agencies are involved in the processes of regulation and financing of scientific and innovation policy. however, the extent of involvement of the executive authorities is unequal: more than 90% of the federal budget for r&d is allocated through six ministries and agencies: department of defence, department of health, department of energy, department of agriculture, national science foundation, national aerospace agency (danylova, 2014; bolohib, 2005). the main regulatory authority of scientific sphere of the usa is federal legislation and “federal programs” in the branch of scientific-and-technological advance. they form the special unit of public and legal regulation intended for development and scientific and technological capacity-building and implementation of strategic and tactical tasks of public scientific and technological and military-technical policy. they are updated from time to time according to state needs or the requirements of the scientific and technological policy of the federal agencies. these laws – programs usually carry out the national-level and interdepartmental baltic journal of economic studies 150 vol. 4, no. 3, 2018 coordination of scientific and technological, industrial and military-technical policy, its relation to the domestic or foreign policy of the usa. a key aspect of the american education system is its full integratedness into practical issues of the corporate sector. the education system and corporate sector of the usa are integrated into entire institutional formation dealing with general issues. universities always have the lead in this system, warning corporations of potential problems with their studies, and train specialists able to solve these problems. it is exactly that particular approach to the arrangement of scientific and educational activity that makes the american system the most powerful and efficient in the world (lutsenko, 2015). improvement of procedures and mechanisms of the assessment of the efficiency of implementation of measures of science policy becomes the important course of development of public regulation of scientific sphere in the usa. high priority is assigned to such forms of assessment as international comparisons, pilot studies, and expert review. the exercise of consultations with interested participants of the innovative system is integrated into the mechanism of assessment for the purpose of consensus-building on the issues of science policy. assessment can be carried out prior to the start of measures implementation, during the process, as well as upon completion of the governmental initiative. assessment of measures of science policy in the usa is implemented for the purpose of determination of the level of achievement of the desired objective, as well as for the provision of strict control over budget expenditures (lutsenko, 2015). in other countries where the assessment is carried out on a regular basis, it focuses mainly on substantiation of budget expenditures for research, development, and formation of a general assessment of the efficiency of the whole system of scientific management. in such a case, the objects of assessment may vary, for example, programs, certain technologies, management arrangement, international aspects of the scientific activity, relations between scientific institutions and companies, operational conditions of scientific institutions etc. series of modernization of the sphere of researches and developments are implemented in the developed countries. countries of european community trying to eliminate the available technological inferiority in comparison with the usa work the most actively towards it. 6. countries with the centralized type of scientific activity regulation france, sweden, and japan may serve as the examples of the centralized model of scientific and innovation activity regulation and financing. french national centre for scientific research (centre national de la recherche scientifique – cnrs) is a leading public institution of the fundamental studies. cnrs is included into the ministry of scientific studies and technologies, has its own staff of scientists and self-financing; it also has 18 representative offices within the territory of the country and more than ten representative offices abroad. cnrs has its own research laboratories and project groups, two institutes – national institute for earth sciences and astronomy (institut national des sciences de l’univers) and the national institute of nuclear and particle physics (institut national de physique nucléaire et de physique des particules). cnrs has a certain priority while allocating public scientific subsidies; 25% from all funds allocated for non-military research needs are accounted for by it (yadranska, 2007). so, the system of public administration of science is implemented in france. however, rather a low percent of administrative expenses should be noted. the second special aspect of the fundamental science functioning in france consists of the fact that the laboratories rather than the institute (cnrs includes only two institutes) are the basic structural units. in addition, the absolute majority of laboratories have dual subordination (mostly, in cooperation with universities). however, the single policy established by cnrs is implemented in all laboratories; uniform rules of creation, control and dissolution, coordination of the activity are in force. leading scientific institution of italy is cnr (consiglio nazionale delle ricerche) – national research council. it is the public organisation the mission of which consists in carrying out, dissemination, transfer, and improvement of exploratory activity in basic sectors of knowledge growth and application of this knowledge for the purpose of scientific, technological, economic, and social development of the country. the primary source of cnr financing is a state, but the market also contributes its share: to the tune of 30% of cnr profits are gained from the works on external orders and in agreement with the companies, contracts with the european union and international organizations. the share of cnr administrative expenses – 9% – is the highest among the studied countries. sweden is the next country with centralized management having substantial scientific and technological potential. sweden is eager to take a position among leading countries in the branch of research and development where research scientific works are characterized by width and specialization. swedish scientific and research developments receive funding mainly (for 75%) from the business sector. the state is the primary source of scientific work financing in universities and other higher educational institutions. funds for these purposes are allocated in the form of direct government subsidies and grants from various scientific councils and other government agencies and establishments (yadranska, 2007, danylova, 2014). four public institutions deal directly with the financing of scientific studies and developments: baltic journal of economic studies 151 vol. 4, no. 3, 2018 1. swedish research council (vetenskapsrådet) financed the research (ca. 4 bln krona) in the branch of natural sciences, technology, medicine, human and social sciences in 2016. 2. swedish research council for environment, agricultural sciences and spatial planning (formas) allocated ca. 850 bln krona in 2015. 3. swedish council for working life and social research (fas) allocated for the study of problems of the labour market, job arrangement, occupational diseases, medicare, well-being, social service ca. 400 bln krona in 2015–2016. 4. sweden’s innovation agency (vinnova) financed the research in the branch of technologies, transport, communications and labour relations in 2016. approximate amount of 1.5 bln krona was allocated (martynyuk, 2014). there are also non-profit foundations in the civilian sector being the important supplement to government financing of science. however, they take the second place. creation of a centralized model of regulation and financing of scientific activity in japan was launched in 1949 when japan science council was established as a special agency headed by the prime minister of the country for the purpose of science promotion in the government, industry, and in social life. council obligations include approval of decisions on the important scientific problems and ensuring of the efficient exchange of knowledge between the scientists for the purpose of the provision of scientific studies productivization. 210 members of science council are elected from ca. 760 scientists throughout the country. japanese society for the promotion of science ( jsps) is an independent administrative institute established for the purpose of facilitation of promotion of science in all spheres – natural, social, and humanitarian. jsps is essential to the management of a wide range of japanese academic and scientific programs. jsps was established in 1932 as the non-profit organization with the use of contributions made by the emperor. since october 1, 2003, jsps entered into a new stage of its development due to the fact that it was transformed into an independent administrative institute for the purpose of optimization of the management efficiency, improvement of the quality of services proposes by jsps to the universities and research institutes (bolohib, 2005). jsps activity is supported mainly by annual subsidies from the government of japan. jsps established the research centre of scientific paradigms in 2003 in order to carry out consultations on the important issues of jsps program, in particular, related to allocation of grants, estimation criteria, register of candidates list, as well as recommendations on the new formats and grant systems. despite the fact that the universities receive much funding from the industry, the grants remain the primary source of the academic activity funding, in particular, the projects initiated by the researchers themselves. 7. countries with mixed type of scientific activity regulation the continental model – the combined system of the arrangement, management, and financing of the fundamental studies joining state and private sector financing – is characterized for leading countries of european community. the share of state (budgetary) financing of researches and developments is the biggest; the system is also determined by the availability of big scientific institutes involved into management and financing of the fundamental science. in addition, it is recognized at the domestic level that the continental model is excessively bureaucratized and does not comply with present-day challenges and needs, so it needs reformation, and it is determined by each country according to its own scenario. the following hazards of european scientific and educational economy sector are identified: the ageing of scientists and researchers staff; complicatedness of the administrative system; inflexibility of scientific studies system – regional misbalance; concentration of scientific potential in metropolitan areas; poor attraction of academic career; low level of science internationalization. latest researches confirm the efficiency of the increase in sources of funding for scientific studies and developments from the private sector. germany has its special federal system of scientific studies arrangement, with the assignment of responsibilities between federal and local government. it is divided into higher education sector and scientific studies sector. state financing of various aspects of researches is arranged in three ways: from federal budget; from local budgets (for example, higher educational institution, research and development establishment); in cooperation from federal and local budgets. state-financed nationally significant research establishments are co-financed from federal and local budgets; they are combined into four big networks. financial support for the pursuance of scientific studies and developments is obtained from three sources. the first source is state budget covering one-third of german expenditures for science. the second source is private companies. a few percent in the financing of research scientific work and experimental and design work is accounted for by funds and private non-profit organizations. during the past decade, the extended assessment of higher education institutions and scientific and research sector was carried out for the purpose of the most efficient reformation. canada also formed its unique model of scientific activity financing over the course of the past century (pysmennyy, pysmennyy, 2013). canada national research council (nrc) is the main governmental organization on scientific and technological researches established in 1916. council consists of more than 20 institutes and national programs baltic journal of economic studies 152 vol. 4, no. 3, 2018 covering the wide range of academic disciplines. institutes and programs are arranged into three big groups: physical and technical; life and information technologies sciences; technologies and commercial developments. national research council is the governmental agency of canada reporting with the aid of the minister of industry and supervised by 22 elected representatives of the scientific community. goals and tasks of nrc are the following (kuzhelyev, 2015): – pursuance and support of scientific studies and commercial developments essential to canada; – arrangement, management, and maintenance of national scholarly library; – publishing and sale (or other dissemination) of scientific and technical information; – development of assessment criteria; – development of standards and certification of canadian industry; – management of astronomical observatories established or financed by the government of canada; – management of scientific research including grants and contributions for the purpose of support of nrc international activity; – provision of research and industrial community with state-of-the-art scientific and technological support. 8. results and discussion according to art. 48 of the law of ukraine “on science and scientific and technological activity” dd. november 26, 2015, no. 848-viii, the budgetary financing of science and (or) scientific and technical activity using the funds of common fund of state budget is allocated for the provision of: 1) primary activity of state scientific institutions funded through the budget and scientific studies of universities, academies, institutes; 2) implementation of certain scientific and scientific and technical programs, projects and assignment of grants (pro vnutrishnye ta zovnishnye stanovyshche ukrayiny v 2016 rotsi (2017). the supplement no. 3 “allocation of costs of state budget of ukraine for 2016” to the law of ukraine “on state budget for 2016” provides the volume of costs for the financing of the office of the ministry of education and science of ukraine in the amount of 14.581 mln uah; the amount equal to 85.43 bln uah was allocated in 2017; the amount equal to 95.47 bln uah was allocated in 2018. the amount of nationallevel expenses and crediting of the educational system was equal to 63.69 bln uah from this sum. in 2018, the amount equal to 23.29 bln uah was allocated for training of personnel at higher educational institutions and provision of operation of their practice basis; the amount equal to 3.16 bln uah was allocated for payment of academic scholarships to students; the amount equal to 1.35 bln uah was allocated for training of personnel at taras shevchenko national university of kyiv (pro derzhavnyy byudzhet na 2018). methodological and material support of the activity of educational institutions in 2018 will be financed in the amount of 990.6 mln uah; the amount of financing of researches, science and scientific and technical developments is equal to 929.4 mln uah. in addition, the amount of 347.7 mln uah will be allocated for the purpose of fulfilment of ukrainian obligations in framework eu research and innovation program “horizon 2020”; the amount of 233 mln uah will be allocated for the external assessment and education quality monitoring by the ukrainian centre of education quality assessment; the amount of 208.9 mln uah will be allocated for training of regular labour forces at the vocational-technical schools. the law “on state budget for 2018” came into effect on january 01, 2018. revenues are provided in the amount of 917.88 bln uah; expenses are provided in the amount of 991.7 bln uah. the economic basis of the activity of the national academy of sciences of ukraine is formed by basic funds, current assets, and intangible assets, including the expenditures from the state budget of ukraine, allocated for the provision of statutory activity of the national academy of sciences of ukraine. numerousness of personnel engaged in the scientific sphere is considered to be the important resource factor. a number of employees engaged in r&d were equal to 97.9 thousand of employees in 2016 (with due regard to part-time employees and persons working according to independent contractor agreements) where 65.1% are researchers, 10.2% are technicians, 24.7% are support staff. the proportion of dr.sc. and ph.d. (candidates of sciences) among r&d performers was equal to 27.9%; among researchers, this number was equal to 42.6%. the share of women in the total quantity of researchers was equal to 45.0% where 6.6% had the academic degree of dr.sc. and 33.0% had the academic degree of ph.d. (candidate of sciences) (shevchenko, shadura, 2017). declining number of scientists (r&d performers) remains the serious problem. it is caused by the low prestige of scientific work and social protection of scientists resulting in an outflow of young, talented scientists into other spheres of economic activity or their emigration abroad. scientific and scientific and technical work reflects the total economic status of the state in general. ukraine is represented in the global market mainly by the products of the defence-industrial sector and airplane industry. the analysis of statistical data on the sources of funding of scientific and scientific and technical activity shows that science works mainly using budget and customers’ funds. the proportion of r&d performers in ukraine (researchers, technicians and support staff ) in 2016 in the total quality of working population was equal to 0.60% where the proportion baltic journal of economic studies 153 vol. 4, no. 3, 2018 of researchers was equal to 0.39%. according to data of eurostat, in 2014 these proportions were the highest in denmark (3.07% and 2.09%), in finland (2.95% and 2.12%) and in norway (2.73%/1.90%). however, they were the lowest in romania (0.48%/0.31%), in cyprus (0.69%/0.50%), in turkey (0.76%/0.65%) (stan rozvytku nauky i tekhniky, 2017). science in ukraine is financed from various sources but the biggest cost loading is imposed to the state budget, further, the funds of enterprises, institutions fig. 1. number of the population in developed countries engaged in scientific research (as of 2014) expenditures for r&d in gdp % fig. 2. distribution of countries according to the amount of r&d financing in % from gdp in terms of 1 million of citizens in 2016 country expenditures for r&d in % from gdp number of scientific professionals per 1 million of citizens country expenditures for r&d in % from gdp number of scientific professionals per 1 million of citizens israel 4,5 1900 qatar 2,7 800 japan 4 6000 france 2,5 4000 sweden 3,7 5000 canada 2 5000 finland 3,6 7500 great britain 2 4500 the usa 3,5 7000 spain 1,5 3500 germany 3 4500 ukraine 0,7 1800 baltic journal of economic studies 154 vol. 4, no. 3, 2018 and organizations, grants and financial resources of national and foreign customers and self-financing are used in various rations. the situation in ukraine turns out to be in a manner that either the private sector or other organizations are not interested in science support due to the fact that they do not receive support from the state. today we can speak about paltry international support of science financing in ukraine, for example, implementation of program “horizon 2020” where ukrainian scientific professionals cooperating actively with leading foreign universities and research institutes in various fields of sciences as a part of bilateral and european program; they arrange collaborative seminars and workshops (forsayt ekonomiky ukrayiny: (2015-2020). as is seen from fig. 3, 48% of expenditures are accounted for by scientific and technological developments; ca. 25% are allocated to the performance of the fundamental researches; 18% are allocated to the performance of applied researches; 9% are allocated for the provision of scientific and technical services. financing of the fundamental researches contains 95% funds of state and local budgets; financing of applied researches contains 75% funds of state and local budget; 30% of scientific and technological developments financing are accounted for by the budget; 46% – by the funds of foreign companies and 24% – by the funds of national business sector. firstly, the material support of scientific research requiring considerable financial resources for the purposes of an upgrade of machinery and equipment remains a serious problem. secondly, the academic staff remains vulnerable. level of the salary of scientists remains the key problem in this category. so, the occupational prestige decreases sharply. a number of scientists who emigrated abroad decreased over the last years. however, this problem continues to be extremely relevant by this day. the analysis of outflow of academic staff points to the fact that it is those scientists who emigrate abroad who may offer new knowledge that has no future perspectives for development or application in our country. in addition, the multinational mobility of academic staff becomes rather a topical problem. many domestic scientists go to foreign scientific centres (for the purposes of on-the-job training or occasional employment) according to international treaties on cooperation. displacement of centres of scientific and technological activity occurs in doing so. the fact that most of the scientists who stay in ukraine deal with parallel kinds of activity (politics, entrepreneurship) also continues to be the topical issue. given this, the process of the efficient scientific activity decreases and sometimes becomes impossible. the national scientific potential does not fulfil the economic function under these circumstances, and it has long been emphasized by leading domestic scientists that the financial support problem may be solved according to the situation, that state support of science is such that the science may fulfil exclusively social and cultural function (martynyuk, 2014). governmental grant for social and economic development of certain territories in the amount of 6.2 bln uah was provided in the state budget in 2017. this grant was allocated between local budgets for the purposes of implementation of 10569 development project on the basis of ordinances of the cabinet of ministers of ukraine. out of the total number of r&d deliverables (12425 units) produced in 2016 at the cost of common fund, 76.3% of r&d deliverables was produced at the cost of 4 key spending units: ministry of education and science (29.4%), national academy of sciences (19.4%), national academy of educational sciences of ukraine (17.3%), the national academy of agrarian sciences of ukraine (10.2%). fig. 3. financing of developmental works according to fields of science (2016) (stan rozvytku nauky i tekhniky, 2017) baltic journal of economic studies 155 vol. 4, no. 3, 2018 the quantity of implemented r&d deliverables is one of the most important indicators of the efficiency of use of budgetary funds allocated for r&d financing. 63.5% (7896 units of r&d deliverables) was implemented from 12425 units of r&d deliverables produced at the cost of common fund in 2016. the biggest proportion of produced r&d deliverables – 62.0% (6797 units) is accounted for by the priority area “fundamental scientific researches”. level of r&d deliverables implementation according to this priority area is equal to 55.2%. r&d deliverables produced according to priority area “life sciences, new technologies of prevention and treatment of the most common diseases” have the highest level of implementation (92.4%) (stan rozvytku nauky i tekhniky, 2017). max planck society in germany combining ca. 100 scientific establishments (some equivalent of the national academy of sciences of ukraine) can become the experimental model of regulation and financing of scientific, educational, and innovative activity of institutions. society is sensitive to economic social challenges, so it changes the range of research trends, a number of institutions and establishments and amounts of financing dynamically according to demand and economic realities. researches conducted under the scope of the project have both fundamental and applied nature. the max planck society is known by the developments of innovative materials and technologies. fundamental principles of activity of institutes of the max planck society are the following (max planck innovation, 2018): institutes may be legal entities; they are independent and autonomous in the arrangement of their researches; institutes have own budgets administered by the employees; considerable budgetary financing is combined with grant financing and funds for commercial jobs; new topics are opened on the competitive basis with the involvement of external expertise; close cooperation between institutes and interdisciplinary nature of researches is in common practice. such a system enables to use both short-term and long-term projects addressing needs of innovative development. a considerable attention is given to commercialization of scientific developments. the innovation centre “max-planck innovation gmbh” was established under the society. the centre helps scientists to estimate the inventions, to patent them, to establish a start-up company, to bring technologies to the market. the activity of the max planck society is a successful example of cooperation between science and production, the transformation of key findings into products facilitating economic and social progress (max planck innovation, 2018). scientists from max planck society are closely related to german universities, 80% of dr. hab. are actively involved in the educational process. high level of the fundamental science enables to maintain a very high level of teaching at the leading universities. high priority is assigned to work with gifted youngsters, search for talented scientists. establishment of 63 international research schools for phd training in cooperation with the universities and worldwide scientific centres is the important factor of the society activity. the system of research groups financing functions in research schools. structures providing involvement of masters into the processes of the scientific cycle have the added advantage in scientific competition. specified structures not only provide training of top-qualification staff in the field of science but also provide constant cooperation between international academic elite and talented youth (shevchenko, shadura, 2017). so, the efficient model of the max planck society activity may become a certain example, according to which the reformed national scientific sphere will function. implementation of the new economic model in ukraine is possible upon the condition of creation and adjustment of the functioning of two closed and related engineering processes: innovative and productive: education-science-production-market; investment. table 1 analysis of produced r&d deliverables according to results of developmental works in 2016 kind of r&d deliverables produced r&d deliverables, total quantity of units including at the cost of common fund special fund units proportion from total volume (%) units proportion from total volume (%) kinds of r&d deliverables 910 417 45,8 493 54,2 including machinery 528 282 53,4 246 46,6 technologies 1337 880 65,8 457 34,2 materials 742 457 63,1 267 36,9 cultivars of plants and breeds of animals 226 22 98,2 4 1,8 methods, theories 5025 4124 82,1 901 17,9 other 9541 6325 66,3 3216 33,7 total 17663 12425 69,9 5338 30,1 source: made by the author on the basis of (stan rozvytku nauky i tekhniky, 2017) baltic journal of economic studies 156 vol. 4, no. 3, 2018 9. conclusions the structural analysis of regulation and financing of scientific, educational, and innovative activity of developed countries enabled to come to the following conclusions: 1. scientific activity is carried out by state research establishments, higher educational institutions, as well as scientific units of privately owned enterprises, including big companies and corporations. 2. governments of scientifically developed countries of the world carry out the regulation of scientific activity at the state level, using absolutely financial mechanisms for this purpose. state regulation of scientific activity is performed by direct (split-level budgetary financing, grants, subsidies, governmental grants, interest-free loans etc.) and indirect (preference schemes, tax discount, tax holidays etc.) financial support. funds of private companies, non-profit organizations and foundations are used for the purpose of scientific activity financing. such financing proportion increases constantly year by year. 3. methods of work of institutions carrying out the scientific activity are based on constancy, independence, self-sufficiency, autonomy, openness, and high scientific standards. global trends of scientific activity reformation are focused on the considerable extension of rights of scientific institutions in the allocation of budgetary financing, facilitation of administrative and bureaucratic procedures, expansion of independence of academic specialists, a decrease of a share of administrative expenses. 4. creation of big research and production associations (technological, scientific parks, technopolis) is a common global trend of scientific-and-technological advance. 5. the system of assessment of the efficiency of state policy implementation in the field of science carried out for the purpose of determination of the level of performed works and provision of control over spent funds is the important element of scientific activity regulation. taking into account the current state of scientific activity financing, we developed the following proposals. 1. in order to achieve considerable positive changes in the organizational and economic direction, it is necessary: to improve the institutional fundamentals of state scientific and technological and innovative policy; to overcome the disunity and isolation among educational and scientific institutions; to form the national-level system of computer-assisted retrieval, collection, accumulation, analytical processing and storage, dissemination and provision of information in the field of scientific and technological and innovative development; to provide the creation of uniform technological and information infrastructure for science and innovative ventures in ukraine; to create institutional fundamentals of market stimulation of innovative development; to improve the system of state financing of innovative processes, mechanisms of government orders in scientific and technological spheres, as well as the monitoring of the efficiency of the financing and implementation of scientific and innovative projects; to improve the efficiency of the functioning of special economic areas, to extend the network of innovative centres, technology parks, and other innovative structures. 2. the necessity of provision of continuity of increase in the investments into researches in various years, in particular, crisis, needs the adjustment of state financing of researches towards its increase. countries of the european community established a goal come to the level of the financing of science averagely to the extents corresponding to 3% gdp (and some of them exceed this indicator of r&d/gdp intensity yet today) for the purpose of acceleration of innovative development of the economy by 2020. however, this indicator decreases more and more in ukraine. currently, it is equal to 0.2% gdp. summarizing all above-mentioned information, it should be pointed out that common concept of development of scientific and technological activity should be based on the provision of proper institutional transformations and use of series of economic incentives of all participants of scientific and technological activity. the following may be classified as top priorities of development of scientific and technological activity in ukraine: prevention of arrival of earlier and inefficient technologies; facilitation of application of state-ofthe-art highly efficient technologies, development of scientific potential and human resourcing; arrangement of conditions for extension and expansion in the number of innovative structures (technology parks, technopolis, business incubators, innovation centres, innovative exchange markets). references: bolohib t.m. 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(in ukrainian) max planck innovation (2018). retrieved from: http://www.max-planck-innovation.de/en baltic journal of economic studies 194 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-194-200 legal component of the concept of provision of public services eleonora skyba1, maryna polishchuk2 abstract. the paper defines the main theoretical aspects of the concept of public services in ukraine. it is substantiated the expediency of the development of a unified concept of public services as a basic document for the modern domestic rule-making process aimed at developing modern legislation on public services, which is perfect in content and effective in application, and also for the elaboration of its scientific basis – the provisions of modern national administrative-legal science. it is developed a version of the concept of public services, its content is covered. the proposed version contains three sections: section i “general provisions” defines the main conceptual framework, raises problems, establishes purpose, tasks, terms of implementation of the concept of public services; section ii “ways and methods of problems solving, terms of implementation of the concept of public services in ukraine” specifies particular measures that must be taken to achieve the goal and solve the problems. these measures are conditionally divided into three groups: educational measures (the process of preparation of the standards for legal education), scientific measures (research), law-making measures (statutory acts regulating the activities of actors, procedures, guarantees). section iii “expected results of the implementation of the concept of public services in ukraine” proposes the main results predicted to be achieved by virtue of three abovementioned directions (groups of measures) for the implementation of the concept’s provisions. key words: responsibility, electronic public service, control, public services, provision of public services, public services system, appeals against decisions, acts or inactivity of public authorities for provision of public services. jel classification: e44, h10, k10, k13 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. e-mail: skyba_eleonora@i.ua 2 dnipropetrovsk state university of internal affairs, ukraine. e-mail: miraslava13.07@gmail.com 1. introduction the problem statement is to build a democratic ukraine of european standard and it should not be based solely on discussing the problems but it requires radical changes in the legal field, where a person, his/her rights and freedoms must become a priority. adoption of the concept of public services in ukraine should contribute to the formation, improvement and further development of the system of provision of public services on the basis of clearly defined legal principles. it will enable to meet the needs of citizens-consumers of public services and will ensure the protection of their rights and interests, which are guaranteed by the constitution of ukraine and other regulatory acts. the current state of the provision of public services in ukraine is characterized by a large number of shortcomings and problems despite the fact that the state must guarantee the right of every consumer to an impartial and fair decision concerning a case solution within a reasonable time. now, issues of public services in ukraine require thorough research. so, feedback is important – thoughts, reactions, assessments of citizens about the essence of reforms and, in particular, their effectiveness. analysis of the latest researches and papers on a research topic. the issues of legal regulation of services as a legal category are the focus of scholars, and their various aspects were studied in scientific papers of such scholars as v. b. averianov, k . k . afanasiev, v. t. bilous, i. p. holosnichenko, n. l. huberska, s. l. dembitska, s. v. kivalov, i. v. kovbas, i. b. koliushko, t. o. kolomoiets (kolomoiets, pyrizhkova, armash etc., 2009; kolomoiets, 2002), v. k . kolpakov, a. t. komziuk, s. f. konstantinov, r . s. melnyk, s. h. stetsenko, v. p. tymoshchuk (tymoshchuk, 2003), and others. it also should be noted that for the first time, only thesis research of o. m. bukhanevych is defended at the level of doctoral dissertation “theoretical and legal and praxeological principles of provision of administrative services in ukraine” (bukhanevych, 2016), in which the theoretical foundations and practice of legal regulation of administrative services provision in ukraine are comprehensively disclosed. baltic journal of economic studies 195 vol. 5, no. 1, 2019 the purpose of the paper is to propose the concept of the provision of public services in ukraine on the basis of a comprehensive analysis of available scientific and regulatory sources. 2. results of sociological research (residents of dnipropetrovsk, zaporizhzhia, kyiv, lviv, odesa, and kharkiv region) presentation of the main material. the study of citizens’ opinion concerning this issue was carried out by the method of questionnaire survey by applying a nonrandom method of respondents’ selection (residents of dnipropetrovsk, zaporizhzhia, kyiv, lviv, odesa, and kharkiv region) – a sample of the population of 18 years old is available. in total, 450 respondents were interviewed. the list of the main shortcomings in the system of provision of public services was sufficiently detailed. in the opinion of the respondents, the main problem is in obliging citizens to collect certificates and other documents – more than half of respondents expressed this opinion – 44.7%. the list of problems also involves (in descending degree) the attitude to citizens as to requesters, disrespect for them – 34.2%; burdensome bureaucratic procedure for obtaining public services – 32.9%; demand of certificates and other documents from citizens, submission of which is not required by the legislation – 31.3%; unreasonably long or even indefinite term of provision of certain services – 27.7%; unreasonable requirement for citizens to receive related paid services – 25.8%; unjustified partition (cutting) of one service for several paid services and improper professional training of officers providing services, especially it touches psychological aspects of communication with citizens – 23.1%. these are the eight main complaints of citizens against the system of public services. attention is also paid to the imperfection of the current legislation, which not only complicates control over the system but also improperly regulates the procedure for the provision of services. citizens negatively responded about the necessity to appeal to several bodies for resolving issues. it should be noted that there were also such respondents who pointed to the territorial “dispersion” of different authorities and their units, and it creates additional difficulties in finding the necessary structure and promotes the unjustified introduction of new types of services. regarding the types of feedback that must be used by the authorities in order to improve the quality of public services, the largest number of responses was in favour of the book of complaints and proposals, which should be placed in an accessible place for visitors – 44.7% of respondents (as it was in soviet times), or the use of hotline – 44% of respondents consider this type of communication as one of the most successful and effective, while 25.8% think that, if it is necessary, citizens can appeal to the public reception office as a body that will provide feedback. the role of modern information channels in establishing feedback, as well as the role of the mass media, is small (it was noted by almost 22%), but it still needs attention. the aspect as a reduction of the number of documents required for the reception of a service occupies a significant place among the measures for improving the quality of public services – 80.4% of respondents emphasize the need to solve this problem as the system of providing services in our country, especially in respect of the execution of any document, is characterized by excessive bureaucratization. in this context, the process of using electronic document circulation and its establishing into the work of the authorities under the principle of “one-stop shop” plays an important role – almost half of the respondents (44%) pay attention to the necessity of introducing such forms of work. emphasis is also placed on the introduction of new modern forms of work through the internet – 32.9%; an increase of responsibility of civil servants for poorquality of service provision – 28.7%; improvement of the technical quality during providing services – 27.7%. among 63.9% of respondents who needed certain services, 17.3% were dealing with registration, 14.9% were receiving permits, and 10.9% were receiving licenses and other services. also, 49.6% of respondents answered the open question regarding names of institutions, which were being visited by citizens during the year. the units subordinated to the ministry of justice of ukraine (state registrars, notaries) are leaders in terms of appeals – 2.8% indicated this structure; the same number of visitors was recorded in the housing and municipal bodies. city councils and district executive committees are second in terms of visitors – 2.1%, land resources management services are third – 1.8%. those respondents who have applied for public services but have not indicated the name of a structure may not remember it or, which is most likely, do not want or are afraid to indicate it. it should be noted that some of the interviewees pointed agencies that are not related to the procedure of providing public services, such as city hospitals, public educational institutions, etc. thus, there is a problem as the lack of the necessary amount of information about the structures, which provide public services, and which provide services. it can be assumed that those respondents who answered that they absolutely know nothing about providing the population with public services for by executive authorities and local self-government bodies gave such answers to the questions. we even indicate that at the front of a questionnaire, there was information note, which stated that public services did not include control activities (controlling, auditing, inspections, etc.), economic, educational, and medical services. the frequency of appeals of citizens to the authorities varies from 2 to 4 times – 34.9%, that is, a one-time visit baltic journal of economic studies 196 vol. 5, no. 1, 2019 to the government does not mean that an issue will be solved, and most likely, problems may be settled only through a long-term visiting of agencies. herewith, 18.7% were able to resolve their issues by visiting the necessary agency at once. also, 4.3% indicated that they appealed to the necessary bodies 5-10 times, but these were the respondents who pointed to several authorities. those 63.9% of respondents, who were appealing to the authorities during the year, assessed some of the components of the work of executive bodies’ representatives. thus, the respondents showed the highest level of satisfaction with the availability of paper documents and forms – 16.4%; the competence of employees – 14.2% and the schedule of the authority – 10.9%. respondents who are partially satisfied with the competence of employees – 28.7%; general condition of the premises – 24%; informative content of boards at the entrance to the premises and the presence of other indicators – 21.3%; affability and kindness of the workers – 20.9%. moreover, 21.8% of respondents are dissatisfied with the conditions for access and movement of handicapped persons, the arrangement of places for waiting and filling of documents – 21.8%, informative content of boards at the entrance to the premises and availability of other indicators – 21.6%, convenience of services payment – 17.6%. if we use the data that represents the sum of the indicators of the scale “satisfied”, “partially satisfied”, “partially dissatisfied”, and “dissatisfied”, the leaders of high appraisal are such indicators as competence of workers – 42.9%, the availability of paper documents and forms – 36.2%, informative content of boards at the entrance to the premises – 27.7%; the leaders of the negative assessment are the conditions for access and movement of handicapped persons – 46.2%, convenience of services payment – 29.8%; the speed of service delivery – 22.9%; arrangement of places for waiting and filling of documents – 22.2%. respondents were not satisfied with the quality of providing public service – 51.5% were partially satisfied for various reasons: additional payments were made (18.2%), additional documents were required (17.3%), the term of services provision was violated (16%). rather more than a tenth of the respondents (11.8%) indicated that they were quite satisfied, as they received a qualitative service on time. among the difficulties, which were faced by citizens when applying for a public service, the following is dominated: long queues to the authorities – 36.2%; time expenditures – 32.7%; non-awareness about the required list of documents – 22.7%; the presence of a large number of agencies that must be visited to receive a service – 20.9%; inconvenient premises in which citizens wait for a personal reception – 22.0%; inquiry telephone wasn’t answering a call for a long time during the working day or the connection was missing and the uncomfortable reception schedules of citizens gave the same number – 20.7%. these are the seven main comments of respondents, which need to be resolved by the authorities at both the state and local levels. among 61.6% of public services receivers, 12.2% of the respondents did not need additional resources and additional actions in solving a problem. among those who were forced to take other opportunities for a positive solution for their case, 27.1% incurred unjustified additional financial expenses, 23.1% engaged influential connections, 22.7% of respondents claimed that they solved the issue with the help of a bribe, 20.4% used additional information. when asked about possible solutions to problems which were faced by citizens during receiving public services, 23.1% answered that they were using influential connections, 18.9% complained to higher authorities, and 34% solved problems with the help of bribe (where 22.4% – in cash equivalent or in the form of gifts, and 11.6% – in the form of certain services). those 18.9% of citizens who complained to the highest authorities show that not always complaints help to solve problems. thus, 9.3% of the respondents indicated that their complaint was rather satisfied, 2.1% rather were not satisfied with the complaint, and 4.9% of the citizens were not satisfied with the complaint at all. only 2.6% of the respondents were satisfied. consequently, all above-mentioned allows us to make the main conclusion. the quality of public services is a set of characteristics of a public service that determines its ability to meet established or expected customer’s needs. unfortunately, the ukrainian system of public services has significant disadvantages. first, the population does not have the necessary, reliable and, in general, complete information about this process (procedure). second, citizens do not use all possibilities to receive services in case of such need (for example, all possibilities of the internet – from a search of the necessary information on the website to online consulting and answers receipt to e-mail). communication is carried out according to old methods, through personal contacts at the reception, less often – through telephone counselling, via the internet. hence, a large number of citizens’ complaints, time expenditure, rudeness, and disrespect. the problem of burdensome bureaucratic order of reception of public services, extortion of certificates and other documents from citizens play not the last role. in this area, such type of activity as document circulation will significantly improve the quality of provision of public services. it will, first of all, save time on receiving a service, allow avoiding excessive bureaucracy, and solve the problem of material costs both on the part of the ordinary citizen and the state. meanwhile, those respondents, who were receiving public services during the year, remain dissatisfied with the quality of this process and try to solve their issues not only by lawful methods but also with the use of additional options – from ties to bribes. baltic journal of economic studies 197 vol. 5, no. 1, 2019 so, highlighted the results of the sociological research on the provision of public services, we will outline the main theoretical provisions of the concept of public services in ukraine. operation of this concept covers public relations related to the provision of public services in ukraine. the terms that are used in this concept have such definition as follows: a public service is an activity of the public administration bodies, which is regulated by public-law rules relatively satisfaction of the public interest in considering the application of a natural or legal person for the issuance of an administrative act (decision, permission, license, certificate, act, authorization document, registration, etc.), aimed at ensuring his/her rights and legal interests and/or performing statutory obligations by a person through financing with the use of public funds; the system of public services is a set of elements and the connection between them, which is regulated by publiclaw norms in the activities of public administration bodies in relation to the satisfaction of the public interest in considering the application of a natural or legal person for the issuance of an administrative act (decision, permit, license, certificate, act, certificate, registration, etc.), aimed at ensuring his/her rights and legitimate interests and/or performing statutory obligations by a person through financing with the use of public funds; a procedure for the provision of public services is the procedure of the activities of public administration, which is regulated by administrative and legal norms, in considering the application of a natural or legal person regarding the implementation of a decision of the authorized body aimed at ensuring its rights and legitimate interests and/or the fulfilment of person’s duties specified by the law; unified state portal of public services is a nationwide automated information system that enables the subjects of the application to receive public services virtually (in electronic form); electronic public service is a governmental activity of an entity of public administration that is authorized to provide public services, which is implemented through information and communication technologies using an electronic digital signature without direct interaction with the subject of appeal (individual or legal entity) aimed at the acquisition, change or termination of the rights, duties and/or the satisfaction of the legitimate interests of natural or legal persons in accordance with the law, which leads to a certain result that manifests itself in the form of issuance of an administrative act (permission, license, certificate, registration, etc.); the control of the provision of public services is a form of guarantee of ensuring the legality of public services in ukraine, which is regulated by the legislation implementing in the activities of subjects of administrative law, including citizens or their associations in relation to the control over the realization of the provisions of regulatory acts, powers and observance of rights, freedoms, and legitimate interests of the subjects of application (natural or legal person) by the subjects of public administration; appeal against decisions, actions or inaction of the public administration bodies of public services provision is a form of guarantee of assurance of the legality of public services in ukraine, which is implemented through a normatively regulated procedure for the execution of procedural actions that ensure legal and objective consideration of cases in administrative and/or judicial procedures on appeal against decisions, actions or inactivity of executive bodies and local selfgovernment bodies, their officials and officers regarding the consideration of an application of a natural or legal person on issuance of an administrative act (decision, act or decree on reception of permission, license, registration certificate, identification document, certificate, etc.); the responsibility of public servants for the provision of public services is a form of guarantee of security of the legality of public services in ukraine, which is regulated by the legislation, implemented in the activities of the relevant subjects of public administration or court in relation to prosecution for not providing public services or failure to perform the relevant duties by employees/officials of public administration; the subject of the application is an individual, a legal entity that applies for public services; the subject of the provision of public service is an executive body, another state body, the authority of the autonomous republic of crimea, a local selfgovernment body, and its officials authorized to provide public services in accordance with regulatory acts; centre for public services provision is an ongoing subdivision of a local state administration or a local self-government body, which provides public services by virtue of an administrator through the interaction with various entities of the public administration for the provision of public services; quality of the provision of public services is a degree of compliance with the criteria that should be approved at the level of the legislative body in the form of standards for the provision of public services, and violation of which should lead to legal liability of employees of public administration body; availability of public services is a guarantee of equal conditions for all subjects of appeals (physical or legal person) to receive public service in a specified manner; standards for the provision of public services by public administration bodies are general rules on order of procedure for the acceptance, registration, consideration of applications for public services, rendering of decisions during public administration, deadlines for proceedings, as well as the procedure for charging fees and grounds for liability of authorities, etc. baltic journal of economic studies 198 vol. 5, no. 1, 2019 3. ways and methods of problems solution, implementation terms of the concept of the provision of public services in ukraine. problems, which are covered by the concept of public services in ukraine an effective, well-organized institute of public services is a key factor in the development of civil society in democratically developed countries. for this reason, the eu way which was chosen by ukraine requires pivotal changes and reform of the existing system for the provision of public services. after the issue of decree of the president of ukraine “on measures for the implementation of administrative reform concept in ukraine” dated june 22, 1998, no. 810/98, the building of a service, democratic state is the main task, which involves meeting the needs of natural and legal entities, promoting and ensuring the realization of their rights, freedoms, and legitimate interests. one of the state “tools” in this activity is public services, which take one of the main positions in activities of public administration entities. the basic doctrine of public services is the concept of the state’s service to a man and citizen. now public management of this sphere of social relations creates the necessity to elaborate an effective system for the provision of public services, which will guarantee law enforcement for needs’ satisfaction of subjects of appeals (natural or legal person) for certain services with compliance of quality standards and principles of public services performance. despite some improvements in the provision of certain types of public services over recent years, it should be noted that the modern mechanism of public services’ provision by public administration subjects has significant shortages that shows a clear need for its refinement, that is, the development of new approaches, their approbation in both lawmaking and law-enforcement activities of relevant subjects. an available system of provision of public systems in ukraine is characterized by the ambiguity as at legislative as sub-legislative levels, non-transparency, and lack of proper regulation, closed nature for consumers (natural or legal persons), so it needs immediate reforming. for this reason, it is necessary to adopt the concept of public services provision in ukraine. to provide public services, it is essential to resolve problems as follows: the lack of legislative consolidation of the concept of public services, the system of public services, types of public services, the mechanism of providing public services; the lack of register of public services at the legislative level, which would indicate all types of public services; the lack of definition of the concept and types of administrative charge for public services at the legislative level; the problem of decentralization of the provision of public services; the uncertainty of mechanism for procedure regulation of the provision of public services; the problem of legal regulation of public relations in terms of providing public services in an appropriate electronic form; the lack of proper regulation of the issue of fee/free-ofcharge basis for public services; the problem of legislative definition of the powers of the subjects providing public services, which manifests itself in duplication of functions of executive authorities and local self-government; the lack of proper regulation of guarantees types for law enforcement of public services in ukraine in regulatory legal acts; insufficient legislative consolidation of the concept and types of control in the sphere of public services provision; the lack of resolution of the issue regarding the procedure for the formation, distribution, and use of budget funds by various entities of public administration on the provision of public services at the legislative level; the problem of elaborating the issues on criteria and standards for the provision of public services at the legislative level; the problem of creation of appropriate material, financial and organizational conditions for the provision of public services by subjects of public administration. purpose and tasks of the concept of public services in ukraine. the purpose of the concept is to organize purposeful activities of subjects of public administration in order to elaborate an effective system and mechanism for public services’ provision in ukraine. the task of the concept is to define doctrinal directions for the further development of the system of public services provision. ways and methods of problems’ solution, implementation terms of the concept of public services in ukraine. in order to achieve the goal and solve the tasks envisaged by this concept, it is necessary to ensure the implementation of complex measures regarding: 1) adoption of the laws as follows: administrative and procedure code of ukraine, “on public services”; “on list of public services and payment (administrative fee) for their provision”; “on electronic trust services”; “on local self-government bodies in ukraine”; “on public control” etc. 2) creation of the list of public services provided by the subjects of public administration through developing clear criteria for their grouping (by subject, type, fee, etc.); 3) functional extension of local self-government bodies on the provision of public services with the purpose of decentralization process for the latter; baltic journal of economic studies 199 vol. 5, no. 1, 2019 4) introduction of public services provision under the principle of “single window system”, “single office” for entities of appeal (consumers) in order to visit only one body where the majority of public services would be provided and, consequently, the introduction of an effective mechanism for the protection of human and civil rights and freedoms in practice; 5) development and implementation of criteria for quality assessment of providing public services in the activities of public administration entities; 6) delineation of the powers of entities of public administration for the provision of public services to improve the quality of public services provision; elimination of duplication of functions, corresponding collisions in law enforcement activities, etc.; 7) provision of public administration entities with highly qualified specialists, who are called to implement state policy in public services in order to exercise the rights, freedoms, and legitimate interests of individuals and legal entities (consumers), taking into account modern approaches and models of human resources management; 8) establishment of centres for public services’ provision by delegating the functions of public administration subjects for the purpose of providing the most popular public services (registration of real estate; drawing-up and issuance or exchange of ukrainian passport for travelling abroad, etc.) only in these centres; 9) termination of the law-enforcement activities of intermediary subjects in providing public services; 10) examination of an issue and decision on a possibility to delegate certain functions of subjects of public administration on public services’ provision to private economic entities; 11) creation of appropriate material, financial, and organizational conditions for the provision of public services by entities of public administration; 12) elaboration of an effective guarantees system for ensuring lawfulness of public services in ukraine regarding the provision of public services (control over the provision of public services; appeals against decisions, actions or inactivity of public administration bodies on public services, the liability of public servants for the provision of public services); 13) development of specific measures for the introduction of electronic document flow, electronic signature, protection of communication channels for the provision of public services; 14) creation of a unified electronic database (“public services register”) regarding the provision of public services by competent authorities. to resolve the problems impeding the development of public services in electronic forms, it is necessary: 1. to integrate official websites of public administration bodies, allied services with information systems of public services entities providing a single authorization and use of a personal account for users of public services; 2. to approve a list of public services in electronic form, focusing on the services that are typically used by consumers (natural or legal persons), by virtue of statistical data and sociological research, which is a prerequisite for a successful service and democratic state; 3. to develop a unified state portal of public services at the legislative level as a single mechanism for providing public services in the electronic form and eliminate other websites, which render services; 4. to ensure the availability and openness of public services in electronic form, in particular: to provide public services using mobile means and services; to inform citizens about the benefits and procedure for the provision of public services in electronic form in public places; to perform a periodic tv and radio broadcasting of short information programmes towards the provision of public services in electronic form; 5. to develop and adopt regulatory legal acts which will improve the regulation mechanism of public services in electronic form. concept execution deadline: 2017-2020. expected results of the concept of public services provision in ukraine. the concept implementation will permit to achieve the following results in the future: 1) to create favourable conditions for the provision of public services to appeal entities; 2) to improve the level of legal consciousness of consumers during public services receiving; 3) to provide information openness and activity transparency of entities of public services administration; 4) to reduce the level of corruption risks in the process of providing public services; 5) to improve the quality of providing public services; 6) to reduce the financial and time expenses of entities of appeals when receiving public services; 7) to improve the level of consumers awareness (individuals or legal entities) of public services; 8) to ensure the effectiveness of guarantees implementation for ensuring the lawfulness of public services in the activities of public administration entities in providing public services; 9) to advance the efficiency of public administration as a result of procedures simplification, reduction of administrative expenditure, application of modern methods for public administration in public services provision etc. 4. conclusions it was elaborated the concept of public services in ukraine, which consists of three main sections (section i “general provisions”, section ii “ways and methods of problems solution, implementation terms of the concept of public services provision in ukraine”, section iii “expected results of the concept of provision of baltic journal of economic studies 200 vol. 5, no. 1, 2019 public services in ukraine”); three main priorities of its implementation are identified – doctrinal, educational, and normative, the practical implementation of which will contribute to the formation of a new modern scientific basis for rulemaking and law enforcement regarding the maximum use of public services resource. it was proposed the directions for improvement of the provision of public services:  reconsideration and reduction of public services in a single register, which would contain the name of public service, the subject of public administration that provides a public service, the regulatory framework for the provision of a particular type of service, a list of documents for receiving a service, a form of payment, etc.;  the provision of public services complex to individuals and legal entities in the so-called “single offices” for the purpose of constructing a service state, that is, providing quality services to particular consumers with the minimum percent of attendance of the subject of public administration;  balanced division of powers of public administration entities in the provision of public services taking into account the principle of legality, the rule of law, etc., upon the condition of simultaneous adherence to quality criteria for the provision of public services;  decentralization of the provision of public services, which envisages that the majority of the abovementioned services should be performed at the level of local selfgovernment bodies and responsible “single centres”, “single offices”;  the development, adoption, and implementation of the criteria for quality assessment of public services in the law-enforcement activity of public administration subjects;  provision of public administration entities and established public service centres, such as centres for provision of administrative services, with highly skilled experts, whose aim is to implement public policy in providing public services in order to realize the rights, freedoms, and legitimate interests of entities of appeal taking into account modern approaches and models of public administration;  examination and adoption of a decision on the possibility to delegate certain functions of public administration subjects on public services’ provision to certain private economic entities in order to ensure competitiveness and improve the quality of services;  creation of a control mechanism in providing public services as one of the guarantees of ensuring legality in the process of protecting the rights and freedoms of man and citizen;  draft and adoption of regulatory and legal acts on the mechanism for interaction and coordination of public administration subject in the process of providing public services. the implementation of the above directions will promote the creation of an effective system of public services that will guarantee the protection of human and citizen rights and freedoms, which in turn will contribute to the formation of a service-oriented, democratic state. references: bukhanevych, o. m. (2016). teoretyko-pravovi ta prakseolohichni zasady nadannia administratyvnykh posluh v ukraini [theoretical-legal and praxeological principles for the provision of administrative services in ukraine] (phd thesis), kyiv: instytut zakonodavstva verkhovnoi rady ukrainy. tymoshchuk, v. p. (2003). administratyvna protsedura ta administratyvni posluhy: zarubizhnyi dosvid i propozytsii dlia ukrainy [administrative procedure and administrative services: foreign experience and proposals for ukraine]. kyiv: fakt. (in ukrainian) kolomoiets, t. o., pyrizhkova, yu. v., armash, n. o. etc. (2009). administratyvne pravo ukrainy: pidruchnyk [administrative law of ukraine: textbook]. kyiv: istyna. (in ukrainian) kolomoiets, t. o. (2002). upravlinski posluhy v konteksti vzaiemovidnosyn osoby y orhaniv mistsevoi vlady v ukraini: kontseptualnyi i normatyvnyi aspekty [management services in the context of relations of a person and local self-government bodies in ukraine: conceptual and normative aspects]. aktualni problemy derzhavnoho upravlinnia, 7, 178-182. prezydent ukrainy (1998). pro zakhody shchodo vprovadzhennia kontseptsii administratyvnoi reformy v ukraini: ukaz prezydenta ukrainy vid 22 lypnia 1998 r. № 810/98 [on measures to implement the concept of administrative reform in ukraine: decree of the president of ukraine dated july 22, 1998 no. 810/98]. retrieved from: http://zakon4.rada.gov.ua/laws/show/810/98 kabinet ministriv ukrainy (2006). pro skhvalennia kontseptsii rozvytku systemy nadannia administratyvnykh posluh orhanamy vykonavchoi vlady: rozporiadzhennia kabinetu ministriv ukrainy vid 15 liutoho 2006 r. № 90 [on approval of the concept for development of the system of administrative services provision by the executive bodies: order of the cabinet of ministers of ukraine dated february 15, 2006 no. 90]. retrieved from: http://zakon4.rada.gov.ua/laws/show/90-2006-r leheza, ye. o. (2018). administrative and legal component of the concept of provision of public services in ukraine (according to the results of sociological survey). administrative law and administrative-procedural law: origins, achievements and prospects of development: collective monograph. riga: izdevnieciba «baltija publishing». (in english) leheza, ye., dzhafarova, o., savielieva, m. (2018). structural and legal analysis of scientific activity regulation in developed countries. baltic journal of economic studies, 4(3), 147-157. doi: 10.30525/2256-0742/2018-4-3-147-157 baltic journal of economic studies 387 vol. 4, no. 5, 2018 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: gfiluk@ukr.net 2 taras shevchenko national university of kyiv, ukraine. e-mail: ekaterina.akulenko@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-387-395 methodological principles of evaluation of investment at tractiveness of the enterprise halyna fyliuk1, kateryna akulenko2 abstract. the purpose of the research is a complex of theoretical and applied provisions on the formation, evaluation, and improvement of the methodology of evaluation of the investment attractiveness of enterprises. methodology. in the process of research, the following methods were used: methods of comparison, analysis and synthesis is used in determining the features of conceptual approaches to the concept of investment attractiveness of an enterprise and the formation of the author’s definition of this category; method of diagnostic evaluation is used in the evaluation of existing models for analysing the investment attractiveness of enterprises; method of expert evaluation is used for the building of flexible limits of levels of investment attractiveness of the enterprise; methods of system and structural analysis is used for developing the basic elements and the general structure of the model of interpretation of the method of graphical integration; the method of graphic integration is used within the construction of graphs of investment attractiveness of enterprises a and b. the aim of the study is to justify of the approach to create a model that can justify of the feasibility of investing and determine the factors and conditions of investment attractiveness of the enterprise for different participants of the investment process. the findings of the study. the results of the research suggested an improved definition of the concept of investment attractiveness of the enterprise, which took into account the following disadvantages of existing approaches to the present essence of the concept: the investment attractiveness of the enterprise is often associated with the system of financial and economic indicators of the activity of enterprise, while not taking into account also an important social and psychological factor, since the very name of the term “investment attractiveness of the enterprise” includes the social-psychological element in the form of the concept of “attractiveness”, which is widely used in economic literature; the subjective view of the potential investor on the fact that the object being considered for investing to satisfy the investor’s expectations regarding the economic or social effect is significant. this aspect is key in determining of concept of investment attractiveness of the enterprise, when choosing an investor of an enterprise to invest its capital for the purpose of investing; it is necessary to achieve consistency and symbiosis between the evaluation of financial and economic, socio-psychological, industrial, innovative, environmental and other factors, which in the complex form the investment attractiveness of the enterprise; using the expression “high level of profitability on investment with minimal risks” is partially incorrect in some definitions of the investment attractiveness of the enterprise since obtaining high profits involves a certain level of risk and each investor knows about this; the importance of increasing the investment attractiveness of the enterprise has the level of involvement of innovation in the activities of the enterprise in the frames of use of investment capital; the targeting of almost all definitions only on high financial and economic indicators, which, depending on the situation, are not always correct. a complex system of indicators for evaluation of the investment attractiveness of an enterprise is proposed, consisting of six groups of indicators (market position, property complex, profitability, financial stability, risks, innovative potential), each of which includes six coefficients determining the level of investment attractiveness for this group. the features and advantages of this system of indicators are: complexity and complementary to standard methods with indicators of the level of investment risk and innovative potential of enterprises; standardization of indicators; unidirectionality of indicators; flexibility of the recommended limits for each coefficient. the method of graphical integration of the investment attractiveness of the enterprise, which has several advantages over other methods, proposed in the scientific literature, is offered because: it is a combination that includes the advantages of an integral method, as well as a market, and partially matrix method; it allows quantifying various aspects of economic activity of the enterprise by the elementary calculation of a certain number baltic journal of economic studies 388 vol. 4, no. 5, 2018 of coefficients; it does not require significant time to spend on the evaluation; it has a mathematical justification since the final indicators for comparing the investment attractiveness of several enterprises are calculated using the numerical integration method; it has the flexibility of determining the level of investment attractiveness of an enterprise by incorporating into the methodology in accordance with the socio-psychological component of the concept of investment attractiveness and the interests of the investor; gives a visual interpretation of the results of investment attractiveness assessment. key words: investments, investment attractiveness of enterprise, complex evaluation of investment attractiveness, method of graphic integration, coefficients of investment attractiveness, profitability, financial stability, investment risk. jel classification: d24, d25, с02, с18 1. introduction in order to attract investment resources effectively, every economic entity has to have an investment attractiveness, which enables it to realize its competitive potential completely, to expand and improve production activity, to implement innovations and results of research & development (r&d) in its activity, to have a positive impact on the growth of the attractiveness of the country’s investment environment. in this regard, the first step in solving this task for the enterprise should be to determine the necessary parameters of the existing level of its investment attractiveness in the framework of one or another methodology. that is, there is a need for a qualitative and skilled integrated evaluation of the investment attractiveness of the enterprise in terms of a large number of parameters and components, which determine the level of investor interest in investing. despite the rather deep research of the mentioned problem, some of its aspects, in particular, those relating to the development of an effective methodology for assessing the investment attractiveness of an enterprise, have not yet been resolved, remain controversial and require further research. in particular, a new aspect of the research of this topic is the innovative approach for evaluating of the investment attractiveness of enterprises, which involves using the model of interpretation of the method of graphical integration of the investment attractiveness of an enterprise to analyse the efficiency of investments. in addition, the complex system of indicators of investment attractiveness of the enterprise, which according to the proposed structure includes analysis of the market position, property complex, profitability, financial stability, riskiness and investment potential of the enterprise, has been improved and brought to a new level. also, the approach to the concept of investment attractiveness of the enterprise was improved, which took into account the influence of modern concepts on the structure of this definition, in particular: the concept of integral assessment of enterprise indicators the concept of economic and psychological satisfaction of the investor, the concept of the complex of conditions and characteristics of the enterprise, the concept of the prospects of development of the enterprise, the concept of factor analysis, the efficiency of investment. the methodological basis of the research is a complex of general scientific and special principles, provisions and methods of scientific research, the use of which is due to the goals and objectives, in particular, the methods of comparison, analysis and synthesis, the method of diagnostic evaluation, the method of expert evaluations, and the method of graphical integration. given the foregoing, the purpose of the study is to justify the approach to create a model that can justify the feasibility of investing and determine the factors and conditions of investment attractiveness of the enterprise for different participants in the investment process. this approach involves performing the following tasks: definition of the essence and features of the concept of investment attractiveness of the enterprise in accordance with modern conceptual approaches; formation of a clear system of indicators for choosing the most effective directions for the investor from the point of view of external and internal conditions of investment; development of an effective methodology for complex analysis of investment attractiveness of the enterprise, which would combine the advantages of existing techniques, to be representative and practical for use in enterprises of any branch. 2. definition of investment attractiveness of the enterprise after reviewing and analysing existing approaches in science, and also having considered the definition of investment attractiveness of the enterprise considering the features of the identified concepts, we came to the following interpretation. we believe that the investment attractiveness of an enterprise should be interpreted as a complex indicator of the existing and potentially possible level of enterprise development, which is expressed in a set of conditions and characteristics of the enterprise’s activities and in the system of integrated values that are reflecting the financial-economic, production, social, innovative, environmental, and legal aspects of the enterprise’s activities and provide the investor’s personal interest in investment in order to increase this investment or to obtain a social effect. baltic journal of economic studies 389 vol. 4, no. 5, 2018 the advantages of proposed definition are, firstly, the complexity of this determination and the consideration in its structure of all elements of the concepts found in the scientific literature, from the integral assessment and factor analysis, the conditions of the enterprise, to perspective approach and obligatory inclusion in the definition a socio-psychological component; secondly, the proposed definition takes into account not only the economic benefits of investment but also the social component, a high level of it can in some situations exceed several times the commercial effect. 3. methodology algorithm of evaluation of the investment attractiveness of the enterprise the theme of choosing the most effective method of evaluation of the investment attractiveness of an enterprise is still debatable for today. since there is a large number of evaluation techniques of the investment attractiveness that can be divided into the following groups: evaluation of investment attractiveness of the enterprise on the basis of integral indicators of its financial condition; analysis of external information about the company through the use of a market approach; evaluation of internal and external characteristics of the enterprise through the use of a combined approach; evaluation based on an analysis of the uncertainty about future outcomes and opportunities and the expectations of these results presented by the strategic approach. all of these approaches do not exclude each other, so they can be combined in various interpretations, which help to expand the possibilities of evaluation of the enterprise in the framework of the analysis. based on the study of approaches, we propose a comprehensive methodology for evaluating the investment attractiveness of the enterprise. it includes elements of both integral, market, and combination approaches, each of it clearly shows the evaluation of the main results of the company’s activities in the market. the basis of evaluation is the method of graphical integration that is a developed methodology that combines in the final version elements of matrix, graphics and mathematical analysis, which is its advantage. complex evaluation of investment attractiveness of the enterprise using method of graphics integration is shown below. 1. selection of data for the analysis of the investigated enterprises by a complex system of indicators of investment attractiveness of the enterprise and carrying out of corresponding calculations. indicators for analysis and the peculiarities of their application are considered within our research below. 2. determination of boundaries for high and low investment attractiveness of enterprises by expert evaluation and considering recommended values of indicators. as well as determining the weight of each of the proposed six groups of indicators in accordance with the objectives of the investment project. 3. construction of the model of investment attractiveness by bring in on the area high, medium, and low investment attractiveness levels and graphs of comparable enterprises in accordance with the 36 values of the calculated indicators and their analysis according to the received graphs (in what area of attractiveness is there for the most part a schedule for which groups of indicators the enterprise has weak or strong sides, etc.). this stage also includes the ability to build charts of the same company in a dynamic for several years to determine not only the current state of indicators but also their trends. 4. the final stage of evaluation of investment attractiveness involves determining the level of quantification using summary measure. that is an integral factor of the investment attractiveness of the enterprise, which is calculated by the method of numerical integration, and in particular, by the method of medium rectangles. this method implements the replacement of an integral by an integral sum that uses the value of a function in the middle points of elementary segments: y f x dx h f x h y y y a b n i n = ( ) ≈ × ( ) ≈ + + +∫ ∑ = −( ) 1 1 1 2 3 2 1 2 1 2 [ ... ], (1) x a i h h i = + × − 2 , (2) where, h – the weight of the coefficient, and in the graphical interpretation – the value of the step. the integration is performed using piecewise constant interpolation, each elementary interval to interval [a, b] the function f (x) approaches a function that takes constant values. in other words, there is a summation of elementary squares of rectangles under the integral function curve. 4. a complex system of indicators of investment attractiveness of the enterprise a complex system of indicators for the evaluation of investment attractiveness of the enterprise consists of six groups of indicators is offered. these groups are market position, property complex, profitability, financial stability, risks, innovative potential. each of these groups includes six coefficients that determine the level of investment attractiveness according to this group (table 1). the peculiarities and advantages of this system of indicators in comparison with other options for evaluation techniques, found in the scientific literature, are: complexity, which allows not analysing just individual elements of the efficiency of the company’s operation, but obtaining a complete and general interpretation of all indicators that are important when making an investor decision; baltic journal of economic studies 390 vol. 4, no. 5, 2018 supplementation of standard methods by indicators of the level of investment risk and innovative potential of enterprises; all indicators of the enterprise are standardized and suitable for the analysis of the activity of the enterprise of any branch and legal form at the expense of using the method of determining the relative coefficients; that the interpretation of the results was correct in the system of indicators eliminated the possibility of their “versatility” by calculating the disintegrators as an inverse value; for each coefficient, there are two variants of limits: mathematical and recommended, in which the recommended limits are partially determined by the expert method for each individual project since the only recommended limit for these indicators does not exist. the closer or higher the coefficient to 1, so is much better. this is due to the economic content of these indicators. if their value is high and the resources are fully involved, then is better the financial performance and greater the investment attractiveness of the enterprise. table 1 a complex system of indicators of investment attractiveness of an enterprise symbol indicators for evaluation of the investment attractiveness of an enterprise formula the essence of the symbols in the formula limits, recommended limits 1. market position х1 the coefficient of market activity in the industry vpe ÷ vi vpe – the volume of production of the enterprise, units; vi – the volume of industry, units. [0;1], expert evaluation х2 the coefficient of market power of the enterprise (lerner) pg meg pg − pg – the price of goods, money units; meg – the marginal costs of goods produced, money units; (0;∞], expert evaluation х3 the attractiveness of the product for the consumer d ÷ s d – demand for products of a certain type, units; s – supply of similar products on the market, units. [0;∞], expert evaluation х4 the ratio of the market and book value of the enterprise mve ÷ e mve – market value (capitalization) of enterprise, money units; e – equity, money units. (0;∞], (1;∞] х5 the coefficient of growth of the value of the enterprise mve iar ri rr e * *( p )+ −1 mve – market value (capitalization) of the enterprise, money units; iar – investment attractiveness of the region; ri – return on investment, money units; rr – the rate of return of capital, money units; pe – the proportion of land in the total object cost, money units. (0;∞], (1;∞] х6 equity ratio msp ÷ ps msp – market share price, money units; ps – proceeds per share, money units. (0;∞], (1;∞] 2. property complex х7 the ratio of potential gross income from real estate and land apl rsq all rha aid * *+ apl – area of premises leased sq.m.; all – land area, leased, ha; rsq – rental rate for 1 sq.m. money units; rha – rent per 1 ha, money units; aid – accrued interest on the deposit amount invested in the bank, money units. (0;∞], expert evaluation х8 fixed asset refresh rate iv ÷ ic iv – the initial value of fixed assets received during the reporting period, money units; ic – the initial cost of fixed assets on the balance sheet of the enterprise at the end of the period, money units. (0;∞], expert evaluation х9 fixed assets ratio 1 – noe ÷ tne noe – the number of outdated equipment, machinery and equipment, units; tne – total number of equipment, machinery and equipment, units. [0;1], [0,5;1] х10 the factor of production potential vf vc bc + vf – the value of fixed assets, money units; vc – the value of current assets, money units; bc – balance currency, money units. (0;1], expert evaluation baltic journal of economic studies 391 vol. 4, no. 5, 2018 х11 constant asset ratio nac ÷ e nac – non-current assets, money units; e – equity, money units. (0;1], expert evaluation х12 the coefficient of territorial attractiveness 1 − ÷( )dc tc dc -distribution costs, money units; tc – total costs, money units [0;1], [0,5;1] 3. profitability х13 total profitability ratio si ÷ pcs si – sales income (works, services), money units; pcs – production costs for sales (its production cost), money units. х ∈ ∞, (0;∞] х14 rate of return si aaf aac+ si – sales income (works, services), money units; aaf, aac – average annual cost respectively of fixed and current assets, money units х ∈ ∞, (0;∞] х15 return on financial investments np ÷ fi np – net profit (loss), money units; fi – financial investments, money units. х ∈ ∞, [0;∞] х16 return on equity ratio np ÷ e np – net profit (loss), money units; e – equity, money units. х ∈ ∞, (0;∞] х17 return on assets ratio np ÷ bc np – net profit (loss), money units; bc – balance currency, money units. х ∈ ∞, (0;∞] х18 rate of return on business np ÷ ni np – net profit (loss), money units; ni – net income from sales of products (goods, works, services), money units. х ∈ ∞, (0;∞] 4. financial stability х19 the coefficient of financial stability e ÷ dep e – equity, money units; dep – debt capital, money units. (0;∞], expert evaluation х20 financial stability ratio e ltl bc + e – equity, money units; ltl – long-term liabilities, money units; bc – balance currency, money units. (0;1], [0,5;0,9] х21 the coefficient of maintenance of own working capital ca cl ca − ca – current assets, money units; cl – current liabilities, money units. (0;1], [0,5;0,9] х22 equity to total assets ratio e ÷ bc e – equity, money units; bc – balance currency, money units. (0;1], [0,5;1] х23 the coefficient of investment of own and long-term borrowings nac ÷ mlt nac – non-current assets, money units; mlt – means of long-term use, money units. (0;1], [0,4; 0,9] x24 current assets to equity ratio owe ÷ e owe – own working capital, money units; e – equity, money units. (0;1], [0,25;0,9] 5. risks х25 bankruptcy probability factor (taffler) 0 53 1 0 13 2 0 18 3 0 16 4 , * , * , * , * y y y y + + + y1 – profitability; y2 – working capital adequacy; y3 – financial risk; y4 – liquidity of the enterprise; х ∈ ∞, (0,3;∞] х26 absolute liquidity ratio c cl fin+ c – cash and cash equivalents, money units; cl – current liabilities, money units. fin – future income, money units. [0;∞], (0,2;0,5] х27 country risk index icr ÷ 100 icr – country risk index icrg the general index, determined on a 100-point scale based on 22 components of risk, approaching 100 is the lowest risk. [0;1], expert evaluation х28 financial transparency and disclosure avr ÷ s max avr – average arithmetic mean of the points made by experts for the transparency of disclosure; smax – maximum score on which the scale of the phenomenon is estimated (10 points) [0;1], expert evaluation х29 the coefficient of diversification of activities of the enterprise 1 2 1 100 1− −( ) =∑i n sa sn % sa – the share of thec i-th type of activity in the structure of commodity products of the enterprise, %; sn – serial number of the type of activity by the volume of commodity products in the ranked row, constructed according to the downward principle. (0;1), expert evaluation х30 ratio of enterprise compliance market needs vs ÷ ts vs – the volume of sales of products that was renewed or improved, unit; ts – total sales on the market, money units. [0;1], expert evaluation (continuation of table 1) baltic journal of economic studies 392 vol. 4, no. 5, 2018 6. innovative potential х31 employment rate by innovative staffing ne ÷ emav ne – the number of employees employed in the innovation sector, people; emav – average number of employees of the enterprise, people. [0;1], expert evaluation х32 the coefficient of product update pn ÷ ot pn – the volume of production of new products; ot – total volume of output, units. [0;1], expert evaluation х33 the ratio of investing in innovation fia ÷ ti fia – the amount of funds allocated for innovation activity, money units; ti – total investment, money units. [0;1], expert evaluation х34 the coefficient of innovation degree ir ÷ it ir – the number of innovations, brought to the realization (innovations), pcs; it – the total number of innovations, pcs. [0;1], expert evaluation х35 the coefficient of innovation product sales pin ÷ pcom pin – the volume of innovative products, units; pcom – the volume of commodity products, units. [0;1], expert evaluation х36 the ratio of research and development costs erd ÷ eia erd – the amount of research and development expenses, money units; eia – the amount of expenses for innovation activity, money units. [0;1], expert evaluation source: developed by the author using sources (arancii, 2011; budnikova, 2012; davidenko, buryak, demyanenko, 2018; kaji, edelman, khan, 2018; kakhovska, 2018; marhaichuk, 2012; rzayeva, 2016; skaluk, 2016; tkachenko, 2013; umerev. 2013; volkova, 2016) (end of table 1) the practical value of the proposed integrated system of investment attractiveness indicators for the enterprise is due to the fact that the data regarding the level of investment attractiveness are the basis for assessing the necessary types and volumes of resources and determining the directions of further development of the enterprise. 5. interpretation of the method of graphic integration of the investment attractiveness of the enterprise for practical interpretation of the results using the proposed model, compare the investment attractiveness of enterprises a and b. the initial conditions for construction are the distribution of levels of investment attractiveness in accordance with the standard recommended limits of indicators and average market values. an important moment in constructing this model and calculating the results by the formula for numerical integration is the use of a constant step hі=h=const, (і=1, 2…36). that is, the investor, in this case, gives equal importance to all indicators that characterize the investment attractiveness of the enterprise (figure 1). as can be seen from figure 1, the investment attractiveness of enterprise b is significantly higher, compared with the enterprise a. it shows the graph curve, which predominantly lies in the medium and high investment attractiveness, while the location of curve a prevails in the area of low investment attractiveness, and only the indicators of profitability and low risk of investing may be of interest to the investor. in this case, it is clear that, according to the calculation results, the integral coefficient of enterprise a will be lower than the integral coefficient of enterprise b, since graphically the results of calculating the integrals are equal to the area below the graphs figures under investment attractiveness of enterprises a and b. in this case, there is no doubt that the area of the figure under the schedule of enterprise b is greater than under the schedule of enterprise a. the accuracy of using the formula of the middle rectangles reflects the area filled with rectangles under the schedule of the enterprise a. miscalculation, which is determined by the calculations of the integral shows the fraction of non-consideration of those parts of the rectangles that are above the schedule of enterprise a. thus, according to the results of the comparison of the enterprises, the investor will give advantage to the project b. 6. advantages of the method of graphics integration of investment attractiveness of the enterprise the main advantages of the method of graphic integration of the investment attractiveness of the enterprise to other methods proposed in the scientific literature are that: 1. this method is combined, it includes the advantages of an integral method, as well as a market and partially matrix method, by splitting the plane of construction of investment attractiveness graphs into separate quantitatively defined zones. 2. it allows quantitatively evaluating various aspects of the economic activity of the enterprise by the elementary calculation of a certain number of coefficients that most completely characterize the current state of the investment object. the system of coefficients, which is the basis of the calculation of the resulting integral coefficient, does not contain specific parameters, which makes it possible to compare enterprises of different industries. baltic journal of economic studies 393 vol. 4, no. 5, 2018 3. this method does not require significant time to spend on the evaluation, in addition, the calculation of parameters and construction of the model interpretation method can be automated at each enterprise by using a package of standard computer programs. 4. it has a mathematical justification, the final indicators for comparing the investment attractiveness of several enterprises are calculated by numerical integration method, namely, the method of rectangles and are quantified and compared. in addition, for the interpreted results a mathematical tolerance is determined. of course, to avoid completely the approximate estimates (namely, expert evaluations of markets comparison) in the methodology is not possible, in particular, because the term “investment attractiveness” itself is not frustrated of subjectivism. however, these methods are used exclusively to determine the limits of distribution of low, medium, and high investment attractiveness zones, which for each investor, depending on the investment objectives, environmental conditions and other factors, are different. 5. the flexibility of determining the level of investment attractiveness of an enterprise by incorporating into the methodology, in accordance with the sociopsychological component of the concept of investment attractiveness, the interests of the investor, in particular the possibility of adjusting the limits between the levels of investment attractiveness of an enterprise, and the importance of groups of coefficients, depending on the direction and purpose of investment. so, in our opinion, the use of strict frameworks, as it normally used in most of the matrix approach by analysis of investment attractiveness, is not correct since the division of the scale on the three, for example (low, medium, and high level) are clear equidistant from the maximum and minimum quadrant, and it is not a justification for concluding that for example, an enterprise is not attractive to investors. after all, in the vast majority of techniques, the influence figure 1. model of interpretation of the method of graphical integration of investment attractiveness of the enterprise source: developed by the author baltic journal of economic studies 394 vol. 4, no. 5, 2018 of external factors, the specifics of the industry is not taken into account, and therefore, the actual values of the indicators may be far from standardized reference, however, subject to modifications to the specifics of the environment or investment objectives, acceptable to the investor. thus, if the investor’s purpose is the presence of a large area of land, buildings and structures, in particular plants and large industrial premises, for the enterprises investment project implementation, which is the prerogative of investment, the profitability indicators of the enterprise practically will not matter, even on the contrary, investing in an unprofitable enterprise may even be on more favourable terms for the investor. 6. a clear interpretation of the results of an investment attractiveness evaluation, which is a significant advantage, since this model is based on the principle of simple use, the availability of the interpretation of results, and does not require specific economic knowledge to understand the result of research, which at times raises its practical significance for use at domestic enterprises of all spheres and branches of activity. in addition, the use of this graphical model allows not only comparing several enterprises on a plane and determining the best option for investment but also following changes in the schedule of investment attractiveness of the enterprise in the dynamics, which will allow identifying the weaknesses of the economic activity of the enterprise more quickly. 7. in order to provide a more comprehensive analysis, it was taken into account additionally to the most frequently used indicators for evaluation the investment attractiveness of the company, as profitability, financial status of the company and market indicators, such important determinants as investment risk and innovative potential of the enterprise and a system of coefficients for their evaluation was developed. the practical value of the proposed methodological toolkit for the enterprise is due to the fact that the data regarding the investment attractiveness of the enterprise are the basis for evaluating the necessary types and volumes of resources that the investor must own in order to implement his investment project and ensure the strategic level of enterprise development. in general, the use of this model for evaluation the investment attractiveness of an enterprise allows providing an objective description of the financial and economic processes and capabilities of the enterprise, determining trends and dynamics of its development, establishing ways to improve the efficiency of the enterprise taking into account a certain divergence of objectives of the investor and the enterprise as a whole; identifying and liquidating factors that reduce the investment attractiveness of domestic enterprises and, as a result, the investment attractiveness of industries, regions and the country as a whole; on the basis of the obtained results of investment attractiveness evaluation to determine the main directions for investment of funds in order to improve the economic activity of the enterprise, increase its efficiency and competitiveness on the market. 7. conclusions the need for continuous development requires from enterprises a large number of regular investments, both in fixed assets and on r&d, also on other goals aimed at achieving the most positive result. the ability to attract an investment directly depends on the level of investment attractiveness of the enterprise. based on the extremely high significance of this process for the development of the enterprise, the determination of its investment attractiveness should be directed towards the formation of objective, purposeful, and comprehensive information for acceptance an investment decision. therefore, during considering the investment attractiveness of the enterprise, it is expedient to use the complex definition proposed by us since its components completely reflect the activity of the evaluated enterprise, take into account the socio-psychological factors and interests of all subjects of the investment process, while not depriving elements of financial and perspective analysis. based on the specifics of the definition and the results of comparing different methods of evaluation of the investment attractiveness of the enterprise in the scientific literature, we have proposed a method of graphical integration of investment attractiveness of the enterprise, which has a number of advantages over existing methods: complexity and combination, simplicity and insignificant expenses of time for calculations and model construction, mathematical substantiation, visual interpretation of evaluation results, flexibility of the limits of determining the level of investment attractiveness by taking into account the interests of the investor and the influence of external factors, completing the method of estimation of investment risk and the level of innovation potential of the enterprise. the practical value of the graphical integration method of investment attractiveness for an enterprise is that on the basis of the obtained evaluation results it becomes possible to separate the main directions for investment of funds with the purpose of the most effective realization of the investment project, improvement of economic activity of the enterprise, increase of its efficiency and competitiveness on the market. prospects for further research are the development and improvement of the methodology by taking into account the more fully factors of the influence of the environment and the specifics of the region and industry in particular, through qualitative and quantitative evaluation, and the inclusion in the model of the possibility of calculating forecast indicators under the terms of investing a certain amount of investment in one or another sphere of activity of enterprise. baltic journal of economic studies 395 vol. 4, no. 5, 2018 references: aranchy, d. s., goncharenko, s. a. (2011). investment attractiveness of enterprises: the essence, factors of influence and evaluation of existing methods of analysis. scientific works of the poltava state agrarian academy, 3(2), 59-64. budnikova, u. v. (2012). methodology for assessing the investment attractiveness of enterprises. economic analysis, 11(2), 67-70. davydenko, n., buriak, a., demyanenko, i. (2018). investment attraction of the agricultural sector of the ukrainian region in the contemporary conditions of socio-economic development. baltic journal of economic studies, 4(1), 106-110. doi: 10.30525/2256-0742/2018-4-1-106-110 kaji, j., edelman, k., khan a. et al. (eds). (2018). growth of the social enterprise 2018 deloitte global human capital trends. deloitte development llc. retrieved from: https://www2.deloitte.com kakhovskaya, e., lositskaya, t., kolesnikova, k. (2018). economic efficiency of investment in development of enterprises staff. baltic journal of economic studies, 3(4), 115-122. marhaichuk, m. m. (2012). analysis of investment attractiveness assessment methods in the context of innovative enterprise development. marketing and innovation management, 4, 330-336. rzayeva, t. g., gritsyuk, m. v. (2016). indicators of estimation and analysis of investment attractiveness of the enterprise in the context of existing methods. economic sciences. bulletin of the khmelnytsky national university, 3(1), 94-102. skaluk, r . v., loic, o. i. (2016). evaluation of investment attractiveness. economic sciences. bulletin of the khmelnytsky national university, 1, 115-122. tkachenko, a. m., kushnir, o. v. (2013). economic assessment of the investment attractiveness of the enterprise. bulletin of the zaporizhzhya state engineering academy, 5, 154-161. umeerov, r . e. (2013). formation of investment attractiveness of small and medium-sized enterprises in conditions of uncertainty of the competitive environment. actual problems of the economy, 11, 90-94. volkova, n. a. (2016). determination of criteria for assessing the investment attractiveness of agribusiness enterprises. economic analysis: collection of scientific works of the ternopil national economic university, 2(23), 22-26. baltic journal of economic studies 341 vol. 4, no. 4, 2018 corresponding author: 1 university of the state fiscal service of ukraine, ukraine. e-mail: o.v.tilchik@ukr.net 2 department of prosecution and representation of citizens and state in courts, ukraine. e-mail: dragan_ov@ukr.net 3 donetsk law institute of mia of ukraine, ukraine. e-mail: nazymkoov@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-341-345 establishing the ratio of concepts of counteraction to legalization (laundering) of illegally-obtained income and counteraction to the shadow economy: the importance for determining performance indicators of the european integration processes olha tylchyk1, olena dragan2, olena nazymko3 abstract. the vast majority of reports from governments of the european union member states and applicants for such membership contain a separate provision on ensuring their effectiveness in the system of combating money laundering and terrorist financing, adherence to the requirements of leading international groups and organizations for such measures. in particular, the assessment of compliance with the 40 recommendations of the financial action task force (fatf) on combating money laundering and counteraction to terrorist financing, conducted in ukraine in 2017 and ended with the relevant report of the committee of experts of the council of europe moneyval (report, 2018), is systematically evaluated. the mentioned monitoring body of the council of europe assesses, in particular, compliance with the main international standards of organizational, technical, and legal provision of counteraction actors in the respective country, making emphasis on the fact that corruption and illegal (shadow) economic activity (and, according to a well-founded author’s approach – “shadowing of the economy” – tylchyk, 2017) are the main threats (risks) of money laundering (report, 2018). today it is possible to state the awareness of the need to introduce generally accepted standards into the practice of special subjects of providing economic security, although in the absence of a single vision of their place in the overall system of subjects of national security. at the same time, there is a significant complication regarding the gradual, system, and systematic nature of this activity, which is determined by the aggravation of social tension in society, external aggression, features of the formation of domestic doctrine and legislation traditionally oriented towards the application of the maximally defined concepts, at the same time, to date contain ambiguous provisions as to the content, in particular, the concept of illegally-obtained income, which does not coincide with that specified in the mentioned standards and other international documents. the above stipulates the urgency to search for optimal ways to eliminate these inconsistencies, which lead to real hampering activities related to providing a counteraction to the legalization (laundering) of illegally-obtained income, in order to secure not only the national interests of ukraine but also of the entire world. methodology. the solution of the set purpose is realized using the cognitive potential of the system of philosophical, general scientific, and special methods. analysis and synthesis allowed identifying the signs of illegally-obtained income, shadow economy, fight against the shadowing of the economy, and forming the latter concept. methods of grammatical review and interpretation of legal rules helped to identify gaps and other shortcomings of legislation on problems of providing counteraction to the legalization (laundering) of illegally-obtained income, to develop proposals for its improvement, in particular regarding the features of defining the meaning of the concept of “illegally-obtained income” in domestic law field, the correlation of this concept and other economic and legal concepts. the comparative legal method allowed determining the development directions for domestic statutory acts in order to bring them in line with the generally accepted european standards. practical implications. the level of shadowing of the ukrainian economy, as well as many other countries of the world, requires the introduction of effective, timely, and consistent measures, in particular, to ensure control over the mentioned processes and create conditions for minimizing the possibilities of legalization baltic journal of economic studies 342 vol. 4, no. 4, 2018 (laundering) of illegally-obtained income by the efforts of the system of subjects of providing national (including economic) security to counteract the shadowing of the economy, for which it is necessary to formulate uniform unambiguous basic concepts that are “legalization (laundering) of illegally-obtained income”, “counteraction to the economic shadowing”, which determine the actual direction of the activities of these subjects and correlate the use of appropriate complex measures and facilities. key words: socio-economic security, state security, legal regulation, shadowing of economy, counteraction of corruption, legalization (laundering) of illegally-obtained income. jel classification: f52, g1, h2 1. introduction the last decade was marked by the intensification of the search for means of ensuring the economic security of the highly developed countries of europe, which requires the consolidation of the efforts of the scientific community in such basic directions as: unification of terminology, in particular, concerning the subject-matter and the content of counteraction to the legalization of illegally-obtained income, the financing of terrorism, the correlation of such concepts with other related concepts. today, the legalization of the economy, capitals is perceived simultaneously as a positive activity, an active policy of the government in order to maximally effectively manage the ukrainian economy, which is an important component of accelerating the economic growth of its withdrawal from the “shadow” relations: in fact, the way of “unshadowing of the economy” through “legalization of the economy” is indicated. in the basic law of ukraine “on prevention and counteraction of the legalization (laundering) of the proceeds from crime, terrorist financing and the financing of the proliferation of weapons of mass destruction” (law, 2014), “legalization” is used in the opposite sense and is defined as any action associated with the commission of a financial transaction or a transaction with assets obtained as a result of crime (law, 2014). from this thesis, it is clear that in ukraine, the legalization of only those assets is counteracted that are obtained through the commission of crimes (which must be confirmed in accordance with the procedure established by the criminal procedure code of ukraine), and in relation to other offenses, the issue is open. 2. definition of concepts “legalization of income” and “shadow economy” in national legislation it should be noted that the content and essence of the concept of “shadow economy”, “shadowing” are debatable; some scholars-economists call them “purely economic”, the concept of “legalization” – by the content and essence is just legal. an analysis of laws and regulations that define certain measures to counteract the legalization (laundering) of proceeds from crime allows us to conclude that they actually emphasize the fact that this phenomenon and the shadow economy, the shadowing of the economy are not identical, at the same time, the relation between these concepts and phenomena marked by them are not revealed. in addition, it is noted in separate publications that the sign of the shadow economy is the illegality of the origin of the sums, including in its mathematical indicators. consequently, according to the authors of such approaches, the way to reduce the shadowing of the economy is the legalization of “shadow capital”. the legalization of shadow capitals is a process of introducing shadow capitals into the legal sphere of economic activity for the purpose of their legitimate accumulation, that is, receiving “purified income” or “reproduced-additional fictitious income” (popovych, 2001). the above gives an opportunity to summarize the use of the same concept of “legalization of capitals” as both positive and negative for society. the occurrence of the situation, which leads to significant terminological confusion, is obvious. the need for eliminating such a double understanding is realized, and an example of specifying what this is about is the phrase in the title of the law of ukraine “on prevention and counteraction to legalization (laundering) of the proceeds from crime, terrorist financing and the financing of proliferation of weapons of mass destruction”. that is, illegal is the legalization activity in the sense of “money laundering”. the stated approach to clarifying the content of the established legal concept through the introduction of another one is quite doubtful. moreover, in the specified legal act in article 1, which is devoted to the definition of terms used in the law, the term “legalization (laundering)” is not disclosed, and this can be regarded as the fact that there is its fixed definition that is inadvisable to be given; along with this, article 4 of the law states that legalization (laundering) of proceeds from crime includes any actions related to the commission of a financial transaction or a transaction with assets obtained as a result of the commission of a crime, as well as the commission of actions aimed at concealing or disguising the illegal origin of such assets or possession of them, rights to such assets, sources of their origin, location, movement, change of their form (transformation), as well as the self-acquiring, possession or use of assets obtained as a result of the commission of a crime (law, 2014). that is, as in the case of the baltic journal of economic studies 343 vol. 4, no. 4, 2018 definition of the concept of “shadow economy”, without the possibility to provide a common definition, the authors characterise a certain activity, calling its features, aimed at distinguishing such an activity from the activity of other types, in essence, from crimes of other types. another legal term to be distinguished from the “legalization” of capital is “legitimization”, in particular, of entrepreneurial activity. it is understood as one of the measures of public regulation of economic activity in ukraine aimed at confirming the legality of the entry of its subjects in economic circulation and may include state registration, licensing, patenting, quota arrangement. at the same time, if the first element of legitimization is mandatory for those who seek to become entrepreneurs, then the latter are optional and depend on the specific type of economic activity the entrepreneur wants to engage in. the relations of legitimization of economic activity are bilateral. on the one side is their initiator – a business entity (natural or legal person), on the other – an authorized body, which can be a public authority or local self-government bodies (public administration). at different stages of legitimization, the quality of the composition of such entities may vary. thus, during state registration of entrepreneurs, on the one hand, the subject of legitimate relations is a state registrar, and on the other – the founder of a legal entity or an individual who wishes to become an entrepreneur. in the further relations of legitimization, the latter party acts already as a registered partnership or individual entrepreneur. therefore, legitimization is a consistent implementation of certain actions, the execution of which is ensured by public administration bodies (kovalenko, 2011). legitimacy is a mandatory sign of the legitimate power of the state, which means recognition of it both within the country and in the international arena. scholars caution that this concept should not be confused with the concept of legality as a legal characteristic. since any authority, if it issues laws and enforces them, is legal. at the same time, it can remain unrecognized by people, that is, to be illegitimate. however, for example, not only legitimate but also illegal power – the power of “shadow merchants”, mafia structures, can operate in a society (shemshuchenko, 2007). 3. the concept of “counteraction” in the domestic legal doctrine it is necessary to clarify and disclose the content of the concept of “counteraction”, which is currently the most used to refer to activities directed against various types of offenses (in particular, corruption and related to corruption, legalization (laundering) of proceeds from crime, etc.), and therefore, the most acceptable to denote activity against the shadowing of the economy. the term “counteraction” is of foreign origin, translated as “an act that serves as an obstacle to the emergence or development of another action, resistance”, “opposition” or “active opposition” – from english counteraction; “resistance to someone, something” – entgegenwirken (german). the given english variant has a consonant analogue in ukrainian – “контракція”, which means counteraction (“контр” – counter, “акція” – action). the german version is also almost literal: “entgegen” – “counter”, “wirkung” – “action, influence” (vyshnevetskyi, trofymenko, 2013). the issue of defining the concept of counteraction and its essence in more detail was considered within the criminal law sciences in connection with the definition of activities directed against crime. so, v. v. kovalenko, distinguishing the shadow sector of the economy, concludes that the latter exists as a structure, which purpose is to use for mercenary purposes the shortcomings of the state regulation of social relations in the field of the economy, public administration of the economy, etc., and includes a set of conscious measures to counteract the processes of qualitative development of the economic sphere of the country (kovalenko, 2004). o. m. bandurka and o. m. lytvynov define counteraction to crime as a special integrated, multilevel object of social management, which is a diverse by forms activity of the relevant actors (state, non-state bodies and institutions, public formations, and individuals) that interact in the form of a system of heterogeneous measures aimed at the search for ways, means, and other possibilities of effective influence on crime in order to reduce the intensity of determination of crime at all levels, neutralization of its causes and conditions for the restriction of the number of criminal manifestations to a socially tolerant level (bandurka, lytvynov, 2011). in general, supporting this definition, it should be pointed out that in this work and in many other criminological studies, first of all, the difficulty of establishing clear boundaries between the terms used to refer to the whole range of methods of influencing crime – counteraction and fight – is noted. in this regard, it is proposed to use them as synonymous (bandurka, lytvynov, 2011). on this issue, a. i. dolhova points out that the most accurately the content of such an activity is reflected in the concept of “fight against crime” because it covers the impact on the causes of crime and the crime itself, shows the complex, voluminous nature of such influence; and emphasizes the active moment of an attack on crime during its counteraction (criminology: dolhova, 2012). with this argument, the scholar actually states that the fight is only one of the components of the counteraction, its active moment. this is an extension of the content of the term “counteraction”, including the term “fight” to it, as other scholars suppose. however, such an approach to defining the purpose of counteraction – directing it to the fight – is rather doubtful. the inexpediency of spreading this approach regarding the definition of the impact on such a threat as the shadowing of the economy is indicated in the previous author’s publication (tylchyk, 2017). baltic journal of economic studies 344 vol. 4, no. 4, 2018 recognizing the need to take into account the achievements of the criminal law sciences on the problems of counteraction, it should be emphasized that today it is precisely in administrative-legal rules that the principles of ensuring counteraction to threats to national security, in particular, partly in the sphere of the economy, that is, the shadowing of the economy, are revealed. in addition, a large array of administrative and legal means and measures aimed at ensuring the legality of the economy, as well as the procedure and conditions for the activity of the subjects of providing who are the subjects of administrative law, is being developed. therefore, it is expedient to study the issue of counteraction in the administrative-legal aspect. proceeding from the etymological essence of the term “counteraction”, it is quite logical to define its content as an activity directed against a negative action – “antiaction and/or anti-activity”, completing the phrase by an adjective which denotes a negative phenomenon (for example, anti-extremist activity). the above will emphasize the nature of the term “counteraction”. however, the use of the aforementioned, namely theoretical, phrase (anti-activity) in relation to other negative manifestations, in addition to the antiterrorist activities perceived in scientific circles, should be taken with caution, as it may bring into the use (science) concepts that will replace the established scientific terminology and cause confusion during practical activity. the “counteraction” vector will be determined by the nature of the latent behaviour of the subjects, which directly or indirectly affects the vital legitimate interests and rights of individuals and will be characterized as a threat. this is evidenced by the doctrinal work of the considered issue, in particular, when forming elements of the state counteraction policy, which should include issues that reflect problems of the organization and implementation of counteraction, which is accompanied with identifying vital interests in various spheres of state and social life, revealing real and potential threats, forecasting probable changes in the assessment of interests and threats and, in this regard, the general state of security, and determining specific countermeasures adequate to the threats and sufficient to overcome them (tylchyk, 2016). counteraction, implying the influence on social relations, does not level out the individuality of its implementation. therefore, the allocation of the concept of “individual counteraction” or “narrowly directed” will substantially limit its subject and will not be scientifically and practically valuable. taking into account the above, the characteristic of administrative-legal counteraction as an active activity, the purpose of which is to ensure the passive behaviour of the subject of administrative legal relations, prevent violations of administrative-legal rules, appears to be objective. that is, activities aimed at providing one of the forms of implementation of rules of administrative law – observance. it is entirely logical to conclude that the provision of such a form of implementation as observance has a coercive character, which is understood as the compulsion of a person to consciously carry out certain actions or to refrain from them, obey contrary to their will. recently, the discussion on the problem of the definition of counteraction to various social negative phenomena as objects of administrative-legal regulation revived. at the same time, the authors mainly indicate that such a counteraction is a complex of measures of influence carried out by the subjects of public administration, who are responsible for identifying the causes and conditions that contributed to certain violations of legal prescriptions, preventive measures, prevention of such violations, termination of such violations, elimination of their consequences, and bringing the perpetrators to responsibility, which is provided on the basis of the rules of administrative law, aimed at regulating social relations in order to ensure the constitutional rights and legitimate interests of man and citizen. pointing to the circle of subjects of counteracting the shadowing of the economy, it should be taken into account that in the sphere of the economy, both citizens and representatives of public administration perform activities, in particular, in the process of managing objects of state ownership form. most clearly this can be demonstrated by the example of managing the production complex of the criminal-executive system. therefore, we consider definitely incomplete the statement that counteraction is a complex of measures aimed at regulating social relations in order to ensure the constitutional rights and legitimate interests of man and citizen. it is quite important to supplement it with the need to provide public administration actors with effective means of influence, including administrative coercion, in order to exercise their powers strictly in accordance with legal instructions. 4. conclusions defining the concept of counteraction to the shadowing of the economy, it is expedient to clarify that the activities of subjects are ensured on the basis of rules of not only administrative law but also other branches of law, for example, criminal – in relation to determining the grounds for bringing people to criminal liability for crimes in the economy (including money laundering, terrorism financing), etc. counteraction to the shadowing of the economy – a complex of measures of influence of subjects with the appropriate legal status for identifying the causes and conditions that contribute to violation of the requirements established by the legal rules for activities in the field of economy, preventive measures, prevention, termination of such violations, elimination of their consequences, and bringing the perpetrators to responsibility in order to prevent the negative transformation of the economy baltic journal of economic studies 345 vol. 4, no. 4, 2018 (which will lead to a material result that is not reflected in gdp) and preventing the formation of threats to economic security. such a counteraction can be effective in the case of its complex nature in relation to the said offenses, which may include certain corruption offenses, offenses related to corruption if they lead to the formation of corresponding material results (income – for a broad understanding of this concept). today, the key is that it is precisely within the framework of counteraction to the shadowing of the economy that the counteraction to the money laundering is provided. this very thesis should define the conceptual foundations and find a reflection in domestic legislation and in the legislation of other countries, which seek to form an effective system of economic security. references: the fifth round mutual evaluation report on ukraine regarding anti-money laundering and counter-terrorist financing measures (30 january 2018). the moneyval committee. retrieved from: https://rm.coe.int/ fifth-round-mutual-evaluation-report-on-ukraine/1680782396 tylchyk, o. (2017). administrative and legal provision of counteraction to shadow economy: the monograph. publishing house “helvetica”, kyiv, 378 p. on prevention and counteraction of legalization (laundering) of the proceeds from crime, terrorist financing, and the financing of proliferation of weapons of mass destruction: law of ukraine (2014) on 14 october 2014 № 1702-vii. retrieved from: http://zakon.rada.gov.ua/laws/show/1702-18 popovych, v. m. (2001). the theory and practice of the unshadowing of the economy: monograph. irpin: national academy of sbgs of ukraine, 546 p. international police encyclopaedia (2011). ed. by: v. v. kovalenko, yu. i. rymarenko, v. ya. tatsii, yu. s. shemshuchenko. k.: atika, vol. 7: administrative-legal provision of police activities, 1120 p. great encyclopaedic dictionary of law (2007). ed. by yu. s. shemshuchenko. k.: yurydychna dumka, 421 p. vyshnevetskii, k. v., trofimenko, s. v. (2013). on terms “fight” and “counteraction” in criminal legal vocabulary. retrieved from: http://teoriaractica.ru/rus/files/arhiv_zhurnala/2013/3/yurisprudentsiya/vishnevetskiytrofimenko.pdf. tylchyk, v. v. (2016). determination of the concept of “administrative and legal counteraction”. visegrad journal on human rights, 5(1), 164. kovalenko, v. v. (2004). organization of prevention of economic crimes in ukraine: extended thesis abstract for dr. sc. ( jurisprudence). kh., p. 32. bandurka, o. m., lytvynov, o. m. (2011). counteraction to crimes and crime prevention: monograph. kh.: khnuia, p. 44. criminology: textbook (2012). edited by a. i. dolhova. 4th edition, revised and expanded. m.: norma – infra-m, 1008 p. baltic journal of economic studies 159 vol. 4, no. 4, 2018 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: ljudmila.kozarezenko@gmail.com 2 sese “the academy of financial management”, ukraine. e-mail: tochilinaivgs@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-159-165 tax advantages of local budgets as an instrument of financial capacity of territorial communities liudmyla kozarezenko1, iryna tochylina2 abstract. purpose. the article is devoted to the study of the structure of tax revenues of local budgets as an instrument of socio-economic development, analysis of the provision of local budgets by their own sources of income, revealing and substantiating directions for increasing the financial capacity of territorial communities. methodology. recommended by the committee of ministers to member states indicators of financial autonomy of local authorities are calculated and analysed for ukraine in comparison with some european countries. a retrospective analysis of revenues of local budgets in ukraine and the world in 2013-2017 was conducted. the tax base for property different from the land plot in 15 regions of ukraine in 2013-2017 is investigated. results. the significant predominance of transfers over tax revenues in the structure of local budget revenues was revealed. it is substantiated that the growth of own tax revenues of local budgets is directly related to the increase in the volume of income taxes on the property. it is proved that one of the most powerful instruments of the socioeconomic development of regions is projects taking into account the growth of taxes. it was revealed that the unwillingness to massive use of the latest financial instruments of economic development does not contribute to the dissemination of positive global experience in the development of regional infrastructure and expansion of the tax base. in ukraine, the tax base of property tax is not related to the value of the property but depends on its size and area, which significantly differentiates the approach in other countries of the world. in view of this, local authorities, while ensuring the development of local infrastructure, should be interested in creating a new housing stock, timely putting it into operation, having in its structure a certain share of dwellings with large areas (which will increase the tax base) and business property. practical implications. potential property tax can be enhanced through the use of the method of tax increment financing that will enable finance local infrastructure by future revenues from this tax. value/originality. according to the fact that ukraine has no clear relationship between the level of development of local infrastructure and property tax revenues, but mainly evident dependence on the quantity and quality of housing and business development, job creation in the territory, it is advisable (during the preparation of institutional environment to attract financial and legal instruments for territorial development), methodologically we feel being right to satisfy not only gains tax revenues and property tax revenues and increased tax revenues per natural persons (due to the increase in the number of jobs) and a single tax (due to an increase in entrepreneurial activity in the region). the further use of this method of financing infrastructure projects and the possibility of its impact on regional tax base in ukraine will require the development of guidance and methodological framework for the implementation of this method, including mechanisms for providing and transferring funds, method of calculation of future tax revenue guarantees for such projects to all interested stakeholders, treasury services for such projects, etc. key words: tax revenues, local budget, financial decentralization, property tax, financial capacity of local communities, tax increment financing. jel classification: h71, o23 1. introduction ukraine’s implementation of the european integration course requires the reform of governance at the local level and the territorial organization of the government in accordance with the basic provisions of the european charter of local self-government. and the main task is to create an appropriate institutional environment for providing the local and delegated baltic journal of economic studies 160 vol. 4, no. 4, 2018 authority to complete all the tasks. the expenditures of local budgets are the main source of financing for regional development and the factor of self-sufficiency of territories, and effective formation of own revenues of local budgets is one of the main preconditions for the socio-economic development of regions. recent changes to the budget and tax code of ukraine are aimed at empowering local self-government bodies and giving them a greater autonomy in making decisions on budget revenues and expenditures. also, these changes envisage the expansion of the revenue base of local budgets by consolidating them with stable tax revenues and encouraging communities to unify through the transition to direct intergovernmental fiscal relations with the state budget. in practice, the abovementioned transformations were implemented only partially, and the additional tax powers of local councils are limited to the present and are realized solely through the right to independently determine (with the limits) certain taxes and benefits from their payment. 2. the assessment of fiscal decentralization level in countries with a transformational economy in the world practice, subsidizing local governments to the central government with a view to financial equalization is a prerequisite for fiscal decentralization and the creation of strong local self-government, as they are intended to contribute to economic stability and to ensure sustainable development. for example, in greece, the netherlands, the uk, the low level of tax revenues is usually offset by transfers, which amount to 5-8 times the amount of tax revenues. in france, finland, sweden, on the contrary – tax revenues significantly exceed the amount of subsidies (table 1). in accordance with the european union recommendations on local taxation, financial equalization and subsidies to local authorities, the financial autonomy of local authorities is determined primarily by the availability of their own financial resources in those amounts that are sufficient to fulfil their obligations. the most important personal financial resources are tax revenues, which are subject to fiscal decentralization. in order to assess its level in the european union, it is recommended to use the following indicators: the ratio between the local authorities’ tax revenue level and the total tax revenue for the country; the ratio between the local tax revenue and the total local revenue; the weight of tax revenue compared to the weight of grants (both general and specific) from the state and other public authorities. in the abovementioned recommendations, the eu does not specify, which values of the abovementioned indicators characterize an adequate level of fiscal decentralization. however, if it still turns out to be low, governments are encouraged, together with local authorities, to develop measures that will enable them to increase their own share and distribution of tax revenues from local budgets without increasing the overall tax burden. for eu countries with a unitary state system, the values of these indicators are diverse, because they are largely dependent on the traditions of local self-government. 3. features of the reform of fiscal decentralization in ukraine the analysis of fiscal decentralization level in ukraine has allowed identifying trends that are opposite to the declared decentralization rate. the predominance of transfers over the volume of tax revenues of local budgets (almost halving in 2015) indicates a low level of provision of local communities with their own financial resources. the share of tax revenues of local budgets was reduced by 2016. the ratio of tax revenues of local budgets to gdp in 2016 amounted to 6.2% (against 5% in 2015 and 5.5% in 2014). in the conditions of decentralization, this dynamics indicates a gradual strengthening of the tax base of local self-government bodies, but we believe that this is not enough to increase the financial autonomy of local budgets. despite the financial decentralization that started and that involves the transfer of a part of tax revenues, transfers remain the largest source of local table 1 indicators of fiscal decentralization level in some european countries in 2012 country the ratio between the local authorities’ tax revenue and the total tax revenue for the country, % the ratio between the local tax revenue and the total local revenue, % the weight of tax revenue compared to the weight of grants, % greece 6,85 61,72 0,11 the netherlands 9,42 70,59 0,13 great britain 13,4 71,04 0,19 ireland 18,41 48,91 0,38 hungary 25,1 52,82 0,48 luxembourg 28,17 51,71 0,54 denmark 33,79 58,68 0,58 poland 31,69 48,53 0,65 portugal 33,27 29,89 1,11 slovenia 42,48 37,86 1,12 czech republic 47,34 33,81 1,40 finland 45,35 30,73 1,48 france 48,03 28,4 1,69 sweden 60,89 28,2 2,16 source: oecd fiscal decentralization database baltic journal of economic studies 161 vol. 4, no. 4, 2018 budget revenues from the state budget. and their share in total local budget revenues grew to the end of 2015 and already in the year 2016 amounted to 58% (figure 1). tax revenues are the second largest source of local budget revenues (33-43%), the dynamics of which was negative for a long time. at the same time, the reduction of the share of trust funds and income from operations with capital testifies to the low economic activity of local selfgovernment bodies. in general, for the period from 2012 to 2016, the share of transfers increased by 23%, while the share of tax revenues decreased by 1.7%. this tendency does not correlate with the general purpose and basic principles of decentralization reform and points to the high dependence of local authorities on the government. a high proportion of intergovernmental transfers in the context of a significant increase in nominal volumes of tax revenues can be partly explained by the targeted deductions from the state budget in support of the development of territorial communities, which is the consequence of decentralization reform. it is anticipated that after the transition period is completed, local communities will be able to secure their financial obligations on their own (due to their own tax and non-tax revenues, attraction of credit funds under their guarantee, funds of special funds, etc.) and the need for additional grants from the central budget is minimized. the structure of tax revenues of local budgets has undergone significant changes during the reform period. thus, in comparison with 2013, the share of own tax revenues increased by 18%, mainly due to the growth of income tax revenues (due to transfer to the local level of land tax and commercial property) and a single tax. the main budget-forming local tax is the personal income tax, which accounted for 79 billion uah in local budgets (up to 64.5 billion uah in 2013, before the introduction of the new rules for the distribution of personal income tax between state and local budgets, 2014 – 62.5 billion, 2015 – 55 billion uah) in 2016. with the introduction of such rules, it might seem that due to the transfer to the state budget of a large share of table 2 dynamics of indicators of fiscal decentralization in ukraine in 2012-2017 indicators 2012 2013 2014 2015 2016 2017 the ratio between the local authorities’ tax revenue and the total tax revenue for the country, % 23,81 25,76 23,76 19,35 22,57 24,27 the ratio between the local tax revenue and the total local revenue, % 38,11 41,26 37,69 33,36 40,12 40,03 the weight of tax revenue compared to the weight of grants, % 0,69 0,79 0,67 0,56 0,75 0,74 source: calculated according to the data of the treasury of ukraine figure 1. structure of local budget revenues in ukraine in 2012-2017 source: official site of the treasury of ukraine 38,11 41,26 37,69 33,36 40,12 40,03 5,61 5,49 5,29 6,84 5,97 5,17 1,03 0,84 0,65 0,69 0,52 0,50 55,34 52,42 56,37 59,12 53,39 54,30 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2012 2013 2014 2015 2016 2017 tax revenue non-tax revenue baltic journal of economic studies 162 vol. 4, no. 4, 2018 the personal income tax, local budgets suffer more losses than received additional resources. however, it should not be forgotten that after the formation of the united territorial communities, 60% of the personal income tax will be credited to their budgets, and 159 communities have already taken advantage of such a right in 2016. this fact, we believe, contributed to a substantial increase in the amount of income of this tax to local budgets. a new source of local revenues is the excise tax on the retail sale of excisable goods, and its share is 8% of tax revenues. in 2016 due to this tax received 11.6 billion uah – 51.3% more than in 2015. however, its share increased only in economically active regions where there is a significant turnover of excisable goods. the ecological tax in the structure of tax revenues of local budgets, as well as on rent, accounts for about 1.5%. these payments are aimed at regulating the use of natural resources and the ecological state of the territories and have a little fiscal significance. however, taking into account that in the oecd countries environmental taxes make up about 5% of total tax revenues, it can be argued that in ukraine, the fiscal potential of environmental taxation is not fully realized today. despite the crisis in the economy, the volume of single tax receipts for small businesses continues to grow. in 2016, it was the second in terms of tax revenues and replenished local budgets by 17.2 billion uah, which is 56% more than in 2015. therefore, local authorities should be interested in creating conditions for the development of the entrepreneurial sector of the economy (including agricultural producers), which ensures the accumulation of the specified tax. by 2015, the volume of revenues of the single tax prevailed in the structure of revenues of local budgets, and since 2016, the tax was deducted on the property, the terms of which have undergone significant changes to local budgets during the reform period. the general title “property tax” now combines payments that previously came to the state budget, namely: property tax, transport tax, and land payment. in general, an increase in the share of local taxes in the tax revenues of local budgets is directly related to the increase in income tax revenues, including the land payments addition that accounts for the largest share of property tax receipts. thus, the share of property tax in 2016 amounted to almost 17% of tax revenues of local budgets, while by 2015 it was approaching zero. 4. international experience of strengthening the financial capacity of territorial communities in the developed and transition economies, the property tax is used primarily to promote the economic development of territories through the targeted financing of the construction of local strategic objects (for example metro, redevelopment or rehabilitation of abandoned infrastructure or municipal objects). first of all, in these countries, the base of taxation of property tax depends on the value of the objects and the increase in its value leads to an increase in revenues to the corresponding budgets. thus, the development of a settlement or district by improving infrastructure increases the attractiveness of this territory in terms of residence and business that contributes to the increase in the value of the property and, accordingly, the growth of tax revenues. nevertheless, the development of urban infrastructure requires investment. financing of infrastructure projects approved within a certain territorial community may be due to the future increase in property tax (as compared to the baseline, prior to the project implementation) and is called tax increment financing (tif) (dye, merriman, 2006). thus, funds for covering the expenses necessary for the implementation of the project are covered from the local budget gradually (over 15-20 years) due to the growth of property tax revenues. in world practice, tif projects are one of the most powerful socio-economic development tools available to local governments. this method is created for financial assistance to underdeveloped areas of settlements, which in other circumstances have no prospects for development. tif projects can be initiated by local governments, local businesses or non-governmental organizations. investors can act as private entities and in partnership with local authorities. funds for the implementation of projects may be allocated in various proportions from the central budget (in the form of transfers or targeted grants), from the local budget, development funds, through the issuance of government debt obligations, from private sources or in the form of loans. typically, local governments take on an administrative role by deciding how and where this financial instrument will be used. thus, there is an opportunity to finance public or private projects, the guarantee of which is the future increase in revenues from property tax. the functioning mechanism of tif projects has its own peculiarities, but in general, it can be described as follows. for the territory within which the implementation of a particular infrastructure investment project is envisaged, the current (basic) amount of income from the property tax is determined. at the same time, it is assumed that improvements in infrastructure and external amenities will increase the revenue from property tax in the region. “increase of taxes” will be considered only receipts from property tax exceeding the established basic amount. the growth of revenues from other taxes (value added tax/sales tax, income taxes due to the creation of additional jobs) is not taken into account in the calculations. during the project implementation period, the entire “tax increase” is directed to financing project costs or covering baltic journal of economic studies 163 vol. 4, no. 4, 2018 costs already incurred by the investor. an additional condition for financing the costs of implementing tif projects may be the use of the matching funds (dye, merriman, 2006), according to which funding for the project is allocated after coordination between the central and local government (or between local government and business) and it is anticipated that when one party invests money, the other party allocates the same amount. the use of this method of financing, like other types of borrowing, is associated with certain risks (halvin, 2013; stephens, kille, 2015) and does not always produce the expected results. implementation of such state support programs is associated with certain general risks. these include the following: firstly, the cost of the projects is transferred to the investor and taxpayers in the long run, and some of the future tax revenues are spent on repayment of interest on loans, becoming tax expense; secondly, in case of freezing the basic amount of income from property tax and directing its increase to the repayment of obligations under the development project, ignoring the fact of expanding the boundaries or increasing the population in the region, which entails an increasing need for public services financed from the budget; thirdly, the correct definition of project boundaries and the assessment of future tax increases some requires, for example, to take into account the inflationary increase in property prices, which would be a part of budget revenues even without project financing (hardy, lousyd, tompagenet, 2016); fourthly, the increased attention of local authorities to areas where the implementation of development projects can disproportionate to the development of the region as a whole, contribute to the relative deterioration of the ration of conditions of the development of neighbouring regions, distortion of competitive conditions, the emergence of lobbying interests and risks of corruption abuses, etc. 5. sources of strengthening the financial capacity of territorial communities in ukraine the property tax in ukraine has a high potential because it takes into account both fiscal and social factors. but the problem is the inaccuracy of the data of the state cadastre of property (in particular, for individuals), which complicates the identification of the tax base and the collection of this tax in full. therefore, without solving these problems, the property tax will continue to be symbolic in nature. although the nominal value of property tax from individuals increased substantially (from 0.09 billion uah in 2012 to 97.43 billion uah in 2017), it still accounts for less than 0.1% of local budget revenues, which not significantly affects the financial capacity of the regions. in addition, during the period of this tax operation, its tax base has significantly expanded due to raising the marginal rate of tax for property to 1.5% of the minimum wage per 1 sq. m of the total area of the residential and non-residential property, as well as an additional tax rate of 25 thousand uah for apartments with an area of more than 300 sq. m and houses – more than 500 sq. m. starting from 2015, the tax base of the property tax is extended by including in commercial (non-residential) property taxes before taxation. the distribution of income taxes on property shows that the lion’s share of payments is provided by legal entities, although the income from individuals also gradually increases. for 2015-2017, the volumes and structure of income from property taxes have changed significantly but the analysis of data in the dynamics shows that the main attention should be paid to the potential of property taxes in the segment of individuals, as well as to improve the methodological basis for their calculation and collection, the formation of a single information base regarding the available housing stock for tax purposes. in favour of the fact that local governments are not always able to determine what level of consolidation of the tax to local budgets can be, that is shown by the results of our sample survey. the local councils of 20 small towns of ukraine sent inquiries about the volume and distribution of housing stock. only individual city councils were able to provide an exhaustive answer; six city councils directly indicated that they had no data on available housing stock in the city. as a rule, information is available on the total area and number of apartments in multi-apartment buildings that are in communal ownership. information on private sector housing stock is largely absent or incomplete. since property tax rates are determined by the decision of a village, settlement or city council, in the event that such a decision is not adopted, taxes are subject to the application of minimum rates. thus, if the village, town or city council has not determined the rates of property tax, the minimum rate of such a tax is 0%. in many regions of ukraine, state programs for mobilizing local resources and attracting additional funds for the improvement, social infrastructure creation, etc. are implemented and actively used. involving communities in solving regional problems contributes to the revitalization of business investment interests in the implementation of decentralization reforms. however, the immaturity of local selfgovernment and the unwillingness to make massive use of the latest financial instruments of economic development, including public-private partnerships, co-financing instruments, do not contribute to the spread of positive global experience in developing the regional infrastructure and expanding the tax base in the respective communities. the main issues facing the territorial communities of ukraine today are depreciation of infrastructure baltic journal of economic studies 164 vol. 4, no. 4, 2018 and the need to repair and reconstruct the premises of the socio-cultural sphere, to equip recreation and leisure, sports grounds, to organize cemeteries, to organize water supply, to improve the improvement of villages by improving the culture of domestic waste management, implementation of energy efficiency measures, access to the internet. however, there are few active self-government bodies that are ready to engage in business to implement social projects. an example is the zdolbunivsky district state administration, which for the improvement of the territories accountable to it during 2011-2015 provided 200 thousand uah from the rayon budget on terms of co-financing in equal parts by the relevant territorial community, where the maximum amount of the project is set at 15 thousand uah. selection of projects for financing initiated by local residents and businesses was conducted on a competitive basis. in 2016, it was foreseen to allocate 300 thousand uah from the rayon budget, provided that at least 30% of the cost of the project (determined by the winner of the competition) was co-financed by the territorial community. taking into account the abovementioned, tax increment financing in ukraine, in order to solve the problems of the development of territorial communities and the implementation of local initiatives, is a promising instrument. self-governing bodies, acting as project initiators, will be able to attract additional financial resources from the central budget or from private investors to the development and improvement of their territory, having adopted for the financial base the income from the tax on property. however, in ukraine, the basis for paying property taxes is not related to the value of the property but depends on its physical size and area, which uniquely differentiates the approach with the experience of the countries described above. local governments, ensuring the development of local infrastructure, are interested in creating a new housing stock, timely putting it into the ration, having in its structure a certain share of dwellings with large areas (which will increase the tax base) and business property. however, given that in ukraine, there is no clear correlation between the level of development of local infrastructure and the volume of income tax revenues, more dependence on the quantity and quality of residential and business development, creation of new workplaces on the territory is appropriate (in preparing the institutional environment for engagement financial and legal instruments for the development of territories), it is methodologically counted not only to the tax on the property but also to the increase of taxes on the income of the physical axes to the increase of taxes (because of more jobs) and single tax (due to increased business activity in the region). further use in ukraine of this method of financing infrastructure projects and the possibility of its impact on regional tax base will require the development of guidance and methodological framework for the implementation of this method, including mechanisms for providing and transfer of funds, method of calculation of future tax revenue guarantees for such projects to all stakeholders, treasury services for such projects, etc. these aspects will be the subject of our further research on the impact of tax revenues on the financial capacity of territorial communities. 6. conclusions the most important self-financing resource of local authorities should be tax revenues in order to ensure that fiscal decentralization is sufficient. an intermediate result of the reform of the financial provision of local self-government is the structural change in tax revenues of local budgets. the main budget-forming tax in local budgets remains the income tax of individuals, and the transition to direct intergovernmental relations with the central budget of the combined territorial communities allows them to keep them at the disposal of 60% of the personal income tax, which will help to strengthen its own financial base exactly the administrative-territorial unit where the tax is charged and paid. for a long time, budget-forming local tax remained a single tax for small businesses, whose revenues depend on the level of development of the business sector in a particular region. therefore, this tax is an incentive for local governments to provide better conditions for living and doing business on the basis of economic and tax competition and, at the same time, a financial basis for the development of territorial communities. analysis of the structure of income tax revenues in the structure of tax revenues of local budgets shows that a large share of payments is provided by legal entities. we believe that in order to increase the share of tax revenues from individuals (the potential of this segment is still unrealized), an attention should be focused on improving the methodological basis for the calculation and collection of property taxes. although the structure of local budget revenues has undergone some changes, it did not contribute to a substantial strengthening of the material and financial base of local self-government bodies, the indicators of financial autonomy remain low and tax powers are insignificant. a promising method of state support for the development of territories is the tax increment financing, which will enable the region to attract capital and financial investments on a long-term basis. this will create the preconditions for creating a favourable investment climate, increasing the investment potential of territorial units in connection with the inflow of foreign and domestic investments, strengthening its own financial base of territorial communities, and will stimulate the effective use of internal social and economic potential. baltic journal of economic studies 165 vol. 4, no. 4, 2018 references: on the strategy of sustainable development "ukraine-2020": decree dated january 12, 2015 № 5/2015. url: http://zakon5.rada.gov.ua/laws/show/5/2015 about the principles of state regional policy: law of ukraine from 05.02.2015 № 156-viii. url: http://zakon3.rada.gov.ua/laws/show/156-19 on voluntary association of territorial communities: law of ukraine from 05.02.2015 № 157-viii. url: http://zakon2.rada.gov.ua/laws/show/157-19 on approval of the concept of reforming local self-government and territorial organization of power in ukraine: the government of ukraine, april 1, 2014 no. 333-р. url: 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(2004). financial paradigm of local self-government. the world of finance, 1, 6-14. on amendments to the tax code of ukraine and certain laws of ukraine on tax reform: law of ukraine, december 28, 2014 no. 71-viii. url: http://zakon2.rada.gov.ua/laws/show/71-19 recommendation rec (2000). 14 of the committee of ministers to member states on local taxation, financial equalisation and grants to local authorities. url: https://localgovernment.gov.mt/en/dlg/legislation/ documents/legislation/r(2000)14.pdf decentralization. local budgets of 159 territorial communities for 2016 year. (2016). analytical materials. the government of ukraine. url: http://www.minregion.gov.ua/wp-content/uploads/2017/04/ de-centr_297x210_april-2017.pdf oecd (2011). environmental taxation. a guide for policy makers. url: https://www.oecd.org/env/toolsevaluation/48164926.pdf tax code of ukraine (2010). url: http://zakon3.rada.gov.ua/laws/show/2755-17 dye, r . & merriman, d. (2006). tax increment financing. tool for local economic development. url: http://www.lincolninst.edu/publications/articles/tax-increment-financing halvin, m. (2013). maine voices: tif helps communities that don’t need it: state economic development support should go to towns that can't now take advantage of complex property tax schemes. hampton, maine: portland press herald. url: http://www.pressherald.com/2013/05/26/tif-helps-communities-that-dont-need-it_2013-05-26/ stephens, r . & kille, l. w. ( january 29, 2015). urban regeneration: what recent research says about best practices. harvard kennedy school's shorenstein center and the carnegie-knight initiative. journalists resource. url: https://journalistsresource.org/studies/government/municipal/legacy-cities-challenges-opportunitiesurban-regeneration hardy, m., lousyd, tompagenet and others (2016). tax increment financing. url: https://www.coalitionforalivablecityvt.org/wp-content/uploads/2016/10/tax-increment-financing.pdf self-organization of the population – the way to the development of territorial communities. zdolbuniv government (2016). official portal. url: http://zdolbun.gov.ua/samoorganizatsiya-naselennya-shlyah-do-ro/ oecd fiscal decentralization database. url: http://www.oecd.org/tax/federalism/fiscal-decentralizationdatabase.htm official site of the treasury of ukraine. budget implementation. url: http://www.treasury.gov.ua/main/uk/ doccatalog/list?currdir=146477 baltic journal of economic studies 211 vol. 4, no. 3, 2018 corresponding author: 1 department of administrative law and process, national academy of internal affairs. e-mail: mx01@ukr.net 2 department of criminalistics and forensic medicine, national academy of internal affairs. 3 educational and scientific institute no. 1, national academy of internal affairs. e-mail: coolss777@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-211-215 the economy of ukraine: directions of development, negative and positive trends maksym pluhatyr1, lesia patyk2 national academy of internal affairs, ukraine maryna kulyk3 educational and scientific institute no. 1, national academy of internal affairs, ukraine abstract. the aim of the article is the analysis of the current state of ukraine’s economy, consideration of positive and negative trends and the main factors for further economic growth, as well as the definition of an effective strategy for the development of the ukrainian economy on this basis. the subject of the study is the consideration and analysis of positive and negative trends of the ukrainian economic development. methodology. the research is based on the dialectical method of scientific knowledge and general scientific methods: analysis, analogy, induction, and others. at the preliminary stage of this research, scientific methods of research, such as historicallegal, logical, system-structural, comparative-legal, statistical, and others, were used. the comparative legal study of european legislation enabled to identify ways of introducing a positive foreign experience in the economic sphere. the results of the study revealed that implementing foreign experience in the national economy would be helpful in some key economic problems hindering the national economy’s development. however, to integrate into the eu, ukraine tries to overcome the negative trends of the economic crisis through reforms and adopting appropriate strategies. the main positive stages of the economic development in ukraine over the last five years were identified. to increase the share of high-tech and innovation sector, the necessity of a current complex structural transformation of the economy was proved. practical implications. the main principles to form and implement the economic development strategy based on the coordination of strategic priorities and strategic objectives of the eu, as well as the necessity of reforming the economic sector to develop perspective spheres of the ukrainian economy, were determined. relevance/originality. the coherence of strategic priorities and strategic goals to enhance the validity and effectiveness of the economic development strategy of ukraine was proved. key words: economy, strategy, development, foreign experience, factors, innovation development. jel classification: q43, q56, f63 1. problem statement the public awareness of the value of human life, importance of the full and harmonious development of each individual, his/her physical, moral, and spiritual abilities, as well as the need to create conditions for the self-realization of human potential, require of the science and executive authorities to determine the main strategies and priorities of social development of ukraine objectively and timely. during a long period of transformation with contradictions and problems, the deep socio-economic crisis has been overcome; foundations of the market economy have been formed with the corresponding principles of social development, oriented to the principles of democracy, social and political stability in society. at the current stage of the state, ukraine’s integration into the european union is an essential part of the further democratization of our country, the formation of civil society (medvedev, 2014). therefore, over the last decade, radical socio-economic transformations have caused both positive and negative changes in modern ukrainian society (pavlenko, sevruk, kobko, 2017). an independent state is impossible without a highly effective national economy. when the independence was proclaimed, ukraine was economically backward, characterized by a rapid decline in production and an baltic journal of economic studies 212 vol. 4, no. 3, 2018 economic crisis (levytska, 2011). after regaining its independence in 1991, ukraine implemented reforms aimed at an efficient market economy, but they often were inconsistent (ekonomichnyi rozvytok). over 27 years of ukraine’s independence, many reforms were carried out, which in most cases were ineffective and unproductive. therefore, under current conditions, it is necessary to approach state economic growth more clearly and diplomatically, to consider past mistakes, to make a step forward in the innovation and introduction of ukraine’s economic potential in the light of the foreign experience of stabilizing the economy. 2. literature review the research of theoretical and practical aspects of the contemporary economic development of ukraine is studied in the scientific works of m.i. andriichuk, z.s.  varnalii, a.a. hretchenko, v.  daskovskyi, m.i.  zvieriakov, h. kalachova, t.m. kirian, v.  kysylev, e. kyian, m. kondratenko, n.m. levytska, s.m. makukha, yu.l. medvedev, t.i. pavliuk, e.s. rainert, v.v. ruden, r. hainberg, m.s. shapoval. the aim of the article is the analysis of the current state of ukraine’s economy, consideration of positive and negative trends and the main factors for further economic growth and definition of an effective strategy for the development of the ukrainian economy on this basis. 3. the main material the performance of the ukrainian economy, transformations, and processes of the past, and especially recent years affirm that the solution of problems of socioeconomic development has become strategic, global and the most important in the state. the phenomena of crisis overcoming, consequences of the global financial crisis, transition to sustainable economic growth require further elaboration of economic regulation both at the state and regional level (ruden). at the modern stage, a distinctive feature of the economic development is a rapid change that is characteristic of all aspects of people’s life and activities. the cause of global transformations is the global economy’s development under information technology development and globalization, which resulted in a new quality of the world economic space. first, this is manifested in the transformation of the world economy into a coherent global economic system because of a significant reduction in international barriers. due to different circumstances, the rapid development and spread of innovation are the most important reason for radical changes in the global economic system. the ongoing changes cause the transformation of the goals and objectives of economic development of both developed and underdeveloped states. what the priority goals of economic development for ukraine should be under these conditions? (makukha, 2015). in recent years, the ukrainian economic development demonstrates unsustainable dynamics that confirms that its industries are at the various levels of adaptation to the challenges of the present that results in lower investment, innovation activity, and competitiveness. in addition, ukraine is notorious as one of the most corrupt countries (kondratenko). ukraine wants to become an associate member of the european union. accordingly, an appropriate document had been prepared for ratification at the end of november 2013 in vilnius, but this did not happen. the ratification is postponed for an indefinite period due to the negative performance of the economy. up to this time, the entire legislation of ukraine has been undertaking adjustments to meet the standards of the eu member countries. ukrainians also want to live according to these social standards, such as wages, pensions, social benefits (kirian, shapoval, 2014). the globalization of society contributes to the positive interexchange of cultures, strengthening of the country’s potential through adherence to the best world intellectual achievements, the study of historical experience in solving socially important issues (sevruk, pavlenko, 2015). it should be noted that a country that specializes in the supply of raw materials, according to the international division of labour, would inevitably come to the fact that the more it increases production, the higher the cost of production of each new unit of production (reinert, 2011). the global economy can be perceived as a pyramid, a hierarchy of knowledge, in which those who constantly invest in innovation remain at the peak of prosperity (reinert, 2011). therefore, the state policy in economic development implies the set of system measures, actions, and procedures carried out by central and local authorities to ensure effective economic reforms, aimed at improving the economic indicators and accordingly the level of social security of the population of the state. such a policy should be implemented by certain measures, which should be carried out as a single set by state authorities. over the past year, the most significant positive trends achieved in ukraine’s economic development are: 1) obtaining the fourth tranche of the imf for $1 billion at the beginning of april 2017. ukraine made the necessary reforms and could replenish its gold and foreign exchange reserves, which enabled to delay the default, stabilize the macroeconomic situation and increase the trust of partners, investors, and donors in the country. 2) eurobond placement. due to entering the external borrowing market in september, ukraine for the first time since 2015 has raised $3 billion. this operation will reduce the pressure on the state budget on repayment of government debt in the coming years. this fact also indicates a partial restoration of confidence of foreign investors in ukraine (kyian). 3) the diversification of exports by the government to reduce the dependence of exporters on the volatility of baltic journal of economic studies 213 vol. 4, no. 3, 2018 traditional markets and ensure a steady flow of currency to the country. the adoption of the export strategy of ukraine: road map for strategic trade development for 2017–2021 at the end of march 2017, the full entry into force of the association agreement between the european union and ukraine from the beginning of september 2017, the regional convention on pan-euro-mediterranean preferential rules of origin, development of trade relations with canada facilitate this trend. negotiations on free trade agreements with israel and turkey are underway. 4) relative business deregulation in 2017, especially in the construction industry, and optimization of fiscal policy, along with improvement of service of taxpayers, in particular, by the introduction of an electronic vat refund system, significantly increased the tax base providing a surplus of state and local budgets, and contributed to a decrease in the share of shadow economy. therefore, these improvements have had a positive influence on the investment climate and raised ukraine up to the 76th position in the doing business-2018 ranking (kyian). it is also necessary to note the negative trends in the ukrainian economy’s development, such as: 1) economic blockade of the ordlo. the result was growing dependence of ukraine on imports of energy resources, primarily coal, and a change in the ratio of capacities of various types of power plants, which excessively exceeded the permissible loads for some of them. in addition, this state of affairs influenced significantly the economic situation of enterprises that had established industrial ties with the region. at different estimates, ukraine loses about 1% of gdp due to the economic blockade of the ordlo. 2) negative trade balance. asymmetries in foreign trade, insufficient lobbying of national interests and challenges in product certification require further reforms and capacity building to ensure ukraine’s sustainable growth (kyian). 3) undeveloped banking sector. in 2017, the tendency towards a reduction in the number of banks continued, which resulted in an additional burden on the deposit guarantee fund, an increase in non-performing loans. in addition, access to financial resources was still limited. 4) growing inflation. by the end of 2017, the inflation rate, according to the government’s forecast, was expected to be 11.2%. the reasons were the abolition of state regulation of food prices, increase of minimum wages and pensions without adequate economic growth, tendencies in household tariff increases, which led to an increase in users of subsidies by 60%, a delayed decision of the nbu to raise the discount rate from 12.5% to 13.5% (kyian). now ukrainians hope to have the same level of life as people in the eu in the nearest future. but when? here is a simple answer to this question. the analysis of the average data of gdp growth rates and average monthly wages in dollar terms in ukraine, russia, poland, germany, and the usa in the pre-crisis period of 2000–2008 can assist. evaluations (daskovskii, 2013) showed that with average gdp growth of 6.91% in 2000-2008, ukraine could reach the current level of wages of the russian federation almost in 10 years, poland’s – in 25 years later, germany’s – in 44 years, the usa’s – in 48 years (kirian, shapoval, 2014). considering such disappointing forecasts of wages, it is necessary to take radical economic decisions, first, to construct a program of socio-economic development for the medium and long-term prospects. these programs should clearly identify the priorities of economic development, year by year identifying what ukraine will build, reconstruct, technically re-equip, and expand. such a measure will require changes in other areas, in particular, in training professional staff with higher and secondary technical education to meet the requirements of the labour market, etc. (kirian, shapoval, 2014). special mention should go to predictive scenarios for the development of the ukrainian economy and the macroeconomic guidelines to calculate the state budget for the next year. the first scenario involves reforms and preservation of favourable conditions in world markets. the scenario implies a moderate reaction of the economy to reforms. according to this scenario, gdp growth will be 3% in 2019, 3.8% in 2020, 4.1% in 2021. this scenario coincides with the forecasts of the imf and, on the basis of this forecast, the ministry of economic development and trade proposes to calculate the budget for the next year (kalachova, 2007). the second scenario involves the implementation of complex reforms, such as land and tax reforms on taxation of corporate profits (introduction of the tax on withdrawn capital). the external environment will be favourable. according to this scenario, in 2019, gdp growth will be 4.1%, 5% in 2020, and 5.4% in 2021 (kalachova, 2007). the third scenario is pessimistic. it expects that negative trends in the external environment will weaken implementation of reforms, first, in the financial sector. the slowing of economic development and the loss of confidence of foreign investors will exacerbate ukraine’s payment for its debt obligations. according to this scenario, in 2019, gdp growth will be 1.1%, 1.6 % in 2020, and 2.1% in 2021 (kalachova, 2007). the economic course of state policy is carried out in the following spheres: – the tax and budgetary sphere, their interconnection and interdependence, planning, forecasting, and programming of the development of the state and regions; – the investment sphere in improving the investment climate in the state and promoting attraction of capital investments from abroad; – effective allocation of productive forces at the national and regional levels; – development of some components of the national economic complex of ukraine (construction, transport, agro-industrial, etc.); – development of infrastructure of the economy’s sectors. baltic journal of economic studies 214 vol. 4, no. 3, 2018 the state economic policy is implemented by such economic regulators: 1) tax policy (local taxes’ assessment, rates, privileges, and objects of taxation); 2) price policy (ensuring free pricing in market conditions and its regulation for state-defined groups of goods); 3) establishment of quotas and licensing (implementation of restrictive measures to regulate the economic activities of entities); 4) allocation of subsidies and subventions and implementation of intergovernmental transfers to balance the financial provision of the regions; 5) implementation of state procurement to standardize production activities of certain groups of economic entities and provide consumers with necessary goods (derzhavna rehionalna polityka ukrainy: osoblyvosti ta stratehichni priorytety). innovations as an important factor in improving the economic development of ukraine and the target of the economic system of the state should be highlighted. without innovation activation by both the state and economic entities, it is impossible to achieve domestic economic growth as a source for the welfare of the population. however, currently, the country is in dire need of innovative development, because up to now no proper conditions have been created to finance the development of science and the implementation of its achievements in production. according to article 34 of the law of ukraine “on science and scientific-technical activity,” the state provides scientific and scientifictechnical activities (except for defence expenditures) with the budgetary financing of at least 1.7% of ukraine’s gdp, but in fact, it is only 0.4% of gdp (pavliuk, 2012). moreover, to ensure sustainable economic growth and to enter the trajectory of innovation development, ukraine should additionally consider three main factors of further economic growth of any country in the world (heinberg, 2013): depletion of essential resources, including fossil fuels and mineral resources; expansion of the negative impact on the environment because of both the extraction and use of resources, which leads to increased costs and complicates the efforts to counteract the negative effects; financial recession due to the inability (in the context of economic contraction) of the existing money, banking, and investment systems to serve the huge government and non-government debts accumulated over the past two decades. under current conditions of economic transition to newer technological patterns, competition in the market is complicated intensively and manifested through more complex forms. the interdependence inherent in the modern structure of “monopoly – market power – oligarchy” in the ukrainian economy should transform into a new one, “competition – innovation – competitiveness – stability,” which will allow determining specific fundamental changes in market-competitive relations (andriichuk, 2018). the series of economic crises moving one to the other forced market participants and the state to develop measures not only to ensure economic development but also to prevent a decline. it should be recognized that while the innovative tools of financial and economic growth in a stable economy are of universal (international) nature, in the context of the crisis, “recipes” of effective innovation activities are mainly individual in nature due to objective external factors and subjective internal conditions, including private features and problems (gretchenko, 2014). therefore, the most important task of economic development of our country for the next years should be a decisive complex structural transformation of the economy to increase the proportion of high-tech, innovation sector. ensuring sustainable and long-term economic development requires initially forming the sector of innovative technologies, and only then integrating economically. moreover, such integration should be with equal economies, and not with those whose level of development is much higher. in addition, the goals of economic development of ukraine at the present stage require a mandatory state intervention to ensure domination of the industrial, science-intensive, and not the raw material and food sector (makukha, 2015). 4. conclusions under current conditions, the goals and objectives of ukraine’s economic development are transformed significantly, while the main problem (the task of creating an economy of catching-up modernization) not only remains but even more complicates previously unresolved socio-economic issues. comparing the average gdp growth rates of ukraine and the neighbouring countries (poland, romania, turkey) for 2011–2014, this indicator is two-time lower in our country. to catch up with neighbours by 2030, ukraine, according to expert estimates, should demonstrate gdp growth rates, on average, at 7% per year throughout the period. under the current socio-economic conditions, this is unlikely (zvieriakov, 2015). during the years of independence, the economy has been changing its structure spontaneously in favour of the raw materials industries, primary production of intermediates, and processing of materials. these industries had absorbed most of the investment, for example, metallurgy or agriculture (including grain) had a high level of liquidity in foreign markets. so gradually for ukraine, its “resource curse” has formed (zvieriakov, 2015). therefore, the basis of the economic strategy of ukraine for “european choice” is the effective realization of deep economic, social, and political reforms, consolidation of democracy and principles of civil society (pavlenko, sevruk, kobko, 2017). consequently, to achieve high social standards, the baltic journal of economic studies 215 vol. 4, no. 3, 2018 ukrainian economy needs some changes. the economic policy of ukraine should be aimed at economic growth, an increase of incomes 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(in ukrainian) baltic journal of economic studies 229 vol. 4, no. 2, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-2-229-234 economic consequences of financial stability violation of world automotive corporations sergyi smerichevskyi1 national aviation university, ukraine ihor kryvoviaziuk2 lutsk national technical university, ukraine larysa raicheva3 international humanitarian university, ukraine abstract. the purpose of the paper is to determine the state of automotive corporations’ financial stability and to generalize the consequences of its violation for their activity and the global economy as a whole. methods. the theoretical and methodological basis of the research is the scientific works in the field of corporate finance management and strategic development that studied analysing and evaluating the financial stability of corporate companies, maintaining their financial stability in the medium and long term, official statistics data of united nations conference on trade and development, financial statements of corporations toyota motor corporation (japan), mercedes-benz (germany), and tesla motors (usa), own research results. the methodological basis of the study is a set of general scientific and special methods used to achieve the research goal: theoretical generalization, analysis and synthesis  – in studying the content of scientific works on the research of financial stability of corporate companies and maintaining their financial stability; observation  – to obtain primary information about the state of the world automotive market; the method of coefficient analysis and typing the situations  – to assess the financial stability of automotive corporations; analytical  – in determining the economic consequences of financial stability violation of automotive corporations; causation  – to obtain final conclusions. results. this article deals with the development of automotive industry in the world. the financial stability of leading automotive corporations is evaluated. the economic consequences of financial stability violation of automotive corporations are summarized. financial strategies to improve the financial stability of automotive corporations are proposed. practical value. the results of the study may be useful to the united nations conference on trade and development, the financial management of toyota motor corporation, mercedes-benz and tesla motors. value/originality – the state of financial stability of automotive corporations is determined and the consequences of its violation for their activity and the world economy as a whole are generalized. further research should be directed towards the development of project measures to improve the financial stability of automotive corporations in the world. key words: financial stability, evaluating, automotive development, corporation, economic consequences, financial strategy. jel classification: с13, g32, l62 corresponding author: 1 department of marketing, national aviation university. e-mail: s_f_smerichevsky@ukr.net 2 department of entrepreneurship, trade and stock exchange activity, lutsk national technical university. e-mail: krivovyazuk-igor73@ukr.net 3 department of business administration and corporate security, international humanitarian university. e-mail: larisa_1991@ukr.net 1. introduction global changes in the economic situation encourage modern corporations to find ways to increase their financial stability. it becomes possible by studying the state of their operational and financial activities, identifying problems and exploring opportunities that can optimize the financial position. the activity of automotive corporations has a significant impact on the stability of the global economic situation, the financial stability violation of which may lead to negative fluctuations in baltic journal of economic studies 230 vol. 4, no. 2, 2018 the world’s securities trading centres, and may lead to a crisis situation in the automotive market. that is why the study of the economic consequences of financial stability violation of the world automotive corporations is an important and current topic of the present. the purpose of the research is to determine the state of automotive corporations’ financial stability and to generalize the consequences of its violation for their activity and the global economy as a whole. 2. literature review the issue of financial stability research in the works of contemporary scholars is rather multifaceted and is often identified with the study of issues of maintaining financial stability. one of the reasons that lead to instability of the best corporations functioning is the rapid pace of economic growth of industrialized countries in the world. the reason is in the fact that economic growth is more closely connected with the rise of new corporations than with the prosperity of already existing large firms (fogel, morck, yeung, 2003). this situation, as is stated in the paper (güngör, sümer, özbekler, 2017), leads to increasing in debt to non-financial companies, increasing risk and increasing attention to the financial stability of the companies. among the innovations recommended for use in the study of the corporate companies’ financial stability is the development of a jt index, which is based on a financial model that can explain the causes of a crash on a one-year plan horizon. such a method is useful in making decisions based on the results of assessing the financial stability of the economy ( jakubík, teplý, 2011). the analysing latvian companies experience showed that not only internal but also external factors have a significant impact on the dynamics of their financial stability. in particular, it is important to take into account the impact of changes in legislation, information, the role of intellectual capital, the impact of outsourcing on the company stability (koleda, lāce, 2008). also, for studying the state of the enterprise financial equilibrium, it is proposed to use a correlationregression analysis based on the construction of an economic and mathematical model and, as its components, we should choose the coefficient of equity capital mobility, the ratio of absolute liquidity, the ratio of cash and non-cash assets, the ratio of liabilities to own capital (gudz, 2017). the effect of the financial leverage can also be used to assess the financial stability of corporations, which use credit resources (grennan, michaely, vincent, 2017). the use of discriminatory models for analysing financial situation of manufacturing companies is important for predicting the threat of bankruptcy (hur-yagba, okeji, ayuba, 2015). in addition, it is expedient to use a normative approach to forecast changes in financial indicators (fedorova, timofeev, 2015). in order to maintain financial stability in the medium and long term, the need to analyse the financial position of the company through working capital, namely, through the study of changes in the indicator “flowing capital” is emphasized (lăpădă şi, căruntu, 2012). in a number of studies, to ensure the companies’ financial stability, the expediency of using integrated risk management through the use of risk maps is substantiated and it ensures the elimination of development imbalances based on financial consulting (vovchenko, holina, orobinskiy, sichev, 2017). at the same time, the activity of multinational corporations, which include world automotive corporations, must be in line with state policy and must be implemented within a coordinated system of metamanagement (backer, 2010). 3. development of automotive industry in the world automotive industry among different spheres of activity is considered as a “locomotive”, which successful and economically stable activity determines the efficiency of related complexes and industries functioning. at the same time, it is one of the most important and dynamic sectors of the world economy. volumes of automotive products make up one-third of the world production. among the world leaders in the automotive industry are china, japan, korea, germany, and the united states. however, production is concentrated in many countries. table 1 summarizes table 1 dynamics of automotive products sales in the world in 2012–2016* indicators 2012 2013 2014 2015 2016 sales volume of automotive products in the world, mln. usd, incl.: 1245533,3 1290175,4 1336153,0 1268729,0 1300794,7 developing countries 310770,7 330446,6 346057,3 336423,9 329969,8 countries with transition economies 8812,0 10030,2 8793,0 6019,9 6221,2 highly developed countries 925950,6 949968,5 981302,7 926285,2 964603,6 annual growth of sales volume of automotive products in the world, mln. usd 44642,1 45977,7 -67424,0 32065,7 annual rate of change in the sales volume of automotive products in the world, % 103,58 103,56 94,95 102,53 *generalized according to the data of united nations conference on trade and development (2017) baltic journal of economic studies 231 vol. 4, no. 2, 2018 data on the volumes of sales of automotive products worldwide in 2012–2016. the results of the study showed that the total sales volume of automotive products during 2012–2014 increased, due to increased demand for automotive products, as well as the development of production. the negative situation in 2015 is connected with the global engineering crisis in the world. the largest share in the total sales volume of automotive products belongs to highly developed countries. the smallest share falls on the countries with a transition economy, where the development of production is at the stage of formation. in 2015–2016, there is an increase in sales volumes of the products of the automotive complex. the leading corporations in the global automotive market, whose sales exceeds a million cars, are the volkswagen group, toyota motor corporation, general motors, renault nissan, hyundai motors, mercedes-benz, ford motor company, tesla motors, fiat auto, honda, daimler ag, psa peugeot citroen, bmw, suzuki motor corporation, tata motors. dynamics of sales volumes of cars by leading world corporations in 2015–2016 is presented in figure 1. in 2016, global sales of gm cars in the us reached 10  million cars. over the past decade, china has become one of the main growth markets in the global automotive industry, with sales of about 24.4 million cars in 2016. among automotive corporations, it is appropriate to mention toyota motor co. ( japan), mercedesbenz (germany), and tesla motors (usa). these corporations occupy 32.4% of the world automobile market, constantly innovate, increase their own capital, and take care of improving their financial position. the net sales revenue in 2016 was: toyota motor corporation  – $233979 million, mercedes-benz  – $180434 million, tesla motors  – $7000.1 million. net profit for the same period was: toyota motor corporation  – $21798.88 million, mercedes-benz  – $10555.73 million, tesla motors  – (-773.1) million dollars. 4. assessment of leading automotive corporations’ financial stability the assessment of the financial stability of a corporation is based on the general characteristics obtained during diagnosis of automotive corporations’ financial condition in the world. the main requirements for assessing financial stability are: adherence to the principle of dynamism  – determining a range of fluctuations of the evaluation index, relevant specified types of the economic system stability. the interpretation of assessment values suggests a grouping the enterprises according to the following situations: absolute financial stability, insignificant financial stability violation, significant financial stability violation, absolute financial instability; compliance with the principle of unity and integrity  – the financial indicators should be reduced to a single indicator covering the main characteristics: available financial assets at disposal and liabilities of the corporation; following the principle of synergy  – suggests, on the one hand, assessing zones of the optimal choice of sustainable development financing strategy, and on the other – its efficiency and risk. to determine the indicator of the automotive corporation financial stability, we suggest using the following model: fig. 1. sales volumes by leading world automobile manufacturers in 2015–2016, million cars (statista, 2017) baltic journal of economic studies 232 vol. 4, no. 2, 2018 i fa glfs = , (1) where ifs is an indicator of financial stability; fa – financial assets of the corporation; gl – general liabilities of the corporation. table 2 proposes the main indicators of the components of automotive corporations’ financial stability index. results of the study showed that the change of the financial stability indicator in toyota motor corporation has the best dynamics; worse results are in tesla motors, whose financial stability index significantly reduced in 2017, the worst situation is in the mercedes-benz corporation, which during all the investigated period did not reach a significant increase in financial stability. we interpret the value of financial stability indicator to determine the type of situation in the corporations and the degree of compliance with its thresholds, using data in table 3. comparing the results with the recommended limits of a particular type of financial situation, we can state that for toyota motor corporation during 2014–2017, a slight violation of the corporation financial stability and the reason is a sufficiently large share of long-term liabilities; for tesla motors corporation, according to the analysis, it was found that the financial situation is very volatile and during the investigated period was within the “insignificant  – significant” violation of financial stability; for the well-known german corporation mercedes-benz, the value of financial stability index was 0.532-0.565, which corresponds to the state of absolute instability. so, it can be said that there are significant violations of the financial stability of automotive corporations in the world. 5. consequences of financial stability violation of automotive corporations the activity of the world automotive corporations has a significant impact on the development of economic processes. therefore, financial stability violation of automotive corporations can have economic consequences both for themselves and for the world economy: table 2 dynamics of indicators of automotive corporations’ financial stability * components of integral indicator value in the study period 2014 2015 2016 2017 toyota motor corporation 1. financial assets, ¥ million 25693881 29231580 29044233 29540855 2. general liabilities, ¥ million 26218486 30082501 29339411 30081233 financial stability indicator 0,980 0,972 0,990 0,982 mercedes-benz 1. financial assets, € million 77145 91847 102052 106735 2. general liabilities, € million 145051 162542 183855 190291 financial stability indicator 0,532 0,565 0,555 0,561 tesla motors 1. financial assets, $ million 4020,24 4689,13 16304,97 18266,35 2. general liabilities, $ million 4860,76 6961,47 16750,17 23022,98 financial stability indicator 0,827 0,674 0,973 0,793 * calculated by the author according to financial reporting data (toyota motor corporation, mercedes-benz, tesla motors, 2014–2017). table 3 interpretation of indicator values of corporations financial stability* type of situation integral indicator value magnitude of negative deviation from optimum value degree of compliance of financial stability characteristics with the threshold value absolute financial stability > 1,000 available financial assets are fully sufficient to repay the general liabilities of the corporation (both current and long-term). insignificant violation of financial stability 0,850‒1,000 15% available financial assets are sufficient to repay current liabilities, and partly to repay long-term liabilities. significant violation of financial stability 0,650‒0,850 15-35% available financial assets are fully sufficient to repay only current liabilities. absolute financial instability 0‒0,649 above 35% available financial assets are not enough to repay the general liabilities of the corporation (both current and long-term). *the author’s development baltic journal of economic studies 233 vol. 4, no. 2, 2018 1. economic impacts for automotive corporations: – decrease in activity profitability; – deterioration of corporations solvency; – lack of funds for business diversification; – deterioration of the ability to counteract the threats of the internal and external environment; – falling ratings and deterioration of the companies’ image; – in future, reducing opportunities to obtain the required amount of investment for activity development; – falling corporate securities rates and increasing the number of speculative transactions with them. 2. economic consequences for the world economy: – the negative fluctuations in the world trading centres of securities caused by changes in the rates of securities and a decrease in their profitability; – causing a crisis situation in the automotive market; – aggravation of global competition in the automotive market. improving the financial stability of automotive corporations in the world is possible only by adjusting the financial development strategy. analysing the financial stability of toyota motor corporation, we see that this corporation has a steady dynamic during the period of 2014–2017, indicating an effective implementation of the financial strategy, but with minor miscalculations. for the corporation, the implementation of the financial stabilization strategy by strengthening the competitive position and increasing the market share should be recommended. the financial situation in mercedes-benz is characterized by catastrophic instability. therefore, for it, we recommend the implementation of financial development strategy by investing in reproductive processes. concerning tesla motors corporation, its indicators show the steady instability of the financial system. for american corporation, we recommend the implementation of the financial development strategy by forming potential competitiveness. 6. conclusions this research is devoted to solving an important task – determining the state of financial stability of automotive corporations and generalizing the consequences of its violation for their activities and the global economy as a whole. a detailed study of the content of scientific publications by modern scholars made it possible to establish that the fall in the economy is more closely connected with the operation of already existing large companies than newcomers. at the same time, their financial state depends on the timely detection of financial stability violation, and for this, a variety of methods and models are used, as well as for its preservation in the medium and long term. analysis of the automotive industry development in the world during 2012–2016 showed the preservation of the annual growth of the industry by 2.53-3.58%, except for 2015, when the indicator reduced by 5.05%. the largest share in the total volume of sales of automotive products belongs to highly developed countries. among the leading corporations are toyota motor co. ( japan), mercedes-benz (germany), and tesla motors (usa), with a market share of 32.4%. assessing these corporations financial stability during 2014– 2017 by the method of coefficient analysis and further typification of the situations gave the following results: for toyota motor corporation, there is a slight violation of financial stability; tesla motors is characterized by a lack of financial stability within the limits of “insignificant  – significant”; for mercedes-benz, the value of the financial stability index corresponds to a state of absolute instability. financial stability violation of automotive corporations can lead to an aggregate of economic consequences: falling their solvency and profitability, falling ratings and deterioration of the image, instability of the securities exchange rate. in the world economy, it can lead to an aggravation of global competition, changes in prices for products of the automotive industry, negative fluctuations in securities exchange rates on the global stock market, crisis situations. to improve the financial stability of automotive corporations, it is recommended to upgrade their financial strategies: for toyota motor corporation  – by a method of strengthening the competitive position and increasing market share, for mercedesbenz  – by investing into reproduction processes and for tesla motors  – by a method of forming potential competitiveness. further research should be directed towards the development of project measures to improve the financial stability of automotive corporations in the world. references: backer, l.c. 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(2017). ensuring financial stability of companies on the basis of international experience in construction of risks maps, internal control and audit. european research studies, volume xx, issue 1, 350-368. baltic journal of economic studies 45 vol. 5, no. 2, 2019 corresponding author: 1 cherkasy national university named after bogdan khmelnytsky, ukraine. e-mail: natazachosova@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-45-56 innovative approach in the estimatology of financial institutions economic security: possibilities of use in management and regulatory activity within the means of provision of the state financial security nataliia zachosova1 abstract. ukraine’s integration into the european economic space requires the conformity of many segments of the domestic economic system to the standards, norms and traditions of the eu. the financial market and its participants form the financial basis for economic development, mediate the capital movement, make it possible to form a powerful investment resource and provide financial cooperation at the supranational level. however, domestic financial services markets are now destabilized; the volumes of assets used by their professional participants are significantly lower than the financial potential of the financial institutions of the european union markets, to the convergence with which the ukrainian financial sector terribly seeks. in addition to the capacity dimension, a large number of destabilizing factors that have been contributing to its development in recent years remain a problematic aspect of the domestic financial market evolution. the purpose of this study is to develop an innovative approach to assessing the level of financial institutions’ economic security, as well as substantiate its use in a management activity of company management to ensure a high level of profitability and in the regulatory activity of state authorities in order to guarantee the financial security of the state. methodology. the methods of research will be: methods of induction and deduction, scientific abstraction and generalization, a method of organizing, expert method, graphical method for the identification of intermediate and final results of the study, as well as a generalization method for formulating conclusions and proposals at the end of the conducted scientific research. results of the survey. the author’s methodical approach to assessing the level of financial institutions economic security is offered. the possibility of using the results of assessing the level of financial institutions economic security by the top management of professional participants in the financial market has been established. the directions of its application by the national regulators of the financial market for the purpose of ensuring the financial security of the state through the mechanism of monitoring and control of the results of activities of financial intermediaries are determined. practical implications. the proposed innovative approach in the estimatology of financial institutions economic security should be used by the state regulators of the financial market, in particular, by the national bank of ukraine and the national commission, which performs state regulation in the field of financial services markets, to monitor the activities of professional financial market participants in order to conduct advisory and consultative work with their owners and managers, as well as for the development of strategic guidelines for the provision of the state financial security. value/originality. methodological approaches to assessing the economic security level of financial institutions in the process of managing their activities should be the basis of documentary support for security management of the system of economic security, and their reuse after the introduction or modernization of the mechanism of economic security system management of financial institutions will allow diagnosing the level of its effectiveness and, if necessary, to change the target guidelines for managing the economic security system to ensure maximum levels of the protection for the economic interests of companies and their clients from threats, as well as to ensure a high level of financial security of the state. key words: economic security, financial institution, financial security, management, level of economic security, management decisions, regulation, evaluation. jel classification: e44, g10, g18, о16 baltic journal of economic studies 46 vol. 5, no. 2, 2019 1. introduction the urgency of the research. financial security occupies an important place in the system of economic security of any state, and the financial system and financial markets are the sources of a large number of threats to the normal functioning of both financial institutions and manufacturing and trading enterprises, whose costeffective activity, in turn, is the basis for normal state of financial security of all countries without exception. thus, a stable, continuous, and productive activity of professional financial intermediaries is a prerequisite for improving the financial and, hence, economic situation at the macro level in the future. consequently, the methodical task of assessing the economic security level, which was attained by the implementers of financial products and services, becomes relevant, since maintaining the normal functional state of the largest participants in the financial market becomes subject of national importance according to manifestations of economic imbalances and the effects of a political crisis. target setting. in the methodological plane, tools for assessing the economic security level of the certain types of financial institutions such as banks and insurance companies have been developed. however, at the application level, its use has not become widespread. for a number of financial intermediaries, for example, credit unions, investment and leasing companies, pawnshops, etc., there are no methodological tools for assessing the level of economic security. thus, there is a need to identify the shortcomings of the existing methodological tools for diagnosing the financial institutions’ economic security level and to make proposals for the development of a comprehensive methodology for diagnosing the economic security state, suitable for use by different types of professional participants in the financial market. actual scientific researches and issues analysis. awareness of the problem of the need to ensure economic security at the macro level has a significant impact on the development of economic policies, both individual states and around the world, given the steady trend towards economic convergence and the economic system globalization. the fundamentals of security-oriented economic development were laid in the “new course” of the evolution of the us economy (roosevelt, n.d.). the issue of economic security continues to be relevant, and in its context, awareness of the role of the financial market and its financial stability is emerging to solve the problem of securing the country’s economic system from various financial threats, as evidenced by the work of the nobel prize winner 2001 (stiglitz, 2002). r. creamer notes that “the domination of the financial sector has become a mortal danger to our economic security” (creamer, 2011). the state of macro markets was attributed to a level of financial security (athanasoulis, schiller, van wincoop, 1999). in the modern conditions of national and supranational economic systems and their financial segments development, the problem of security was disseminated in the scientific discussions of scholars of the whole world (osberg, sharpe, 2008; ioan-franc, diamescu, 2010; schimmel, liu, nicholls, nechval, yi-lin forrest, 2017). in the quest to provide recommendations for improving the level of economic security of the country, to the problems of the financial market and its professional participants functioning apply a lot of eminent scientists (kopp, kaffenberger, wilson, 2017; elliott, 2017; matanda, 2015, piotrovska, 2017). a comprehensive study of the issues of economic and financial security has revealed weaknesses in the mechanisms for diagnosing its current state. some aspects of financial and economic security state analysis are studied in the publications of polish scientists (kosny, piotrovska, n.d.) and researchers from moldova (perciun, stratan, timush, 2014). americans suggest using the economic security index as a new measure for research and policy analysis (hacker, huber, nichols, rehm, schlesinger, valletta, craig, 2012). ukraine also faces difficulties in establishing an assessment of the state of the national, economic, financial, and other components of the country security (dyakonova, nikitina, sukhonos, zhuravka, 2018; momot, ovchelupova, solovyova, 2015; shtefan, 2017; kozachenko, 2016). uninvestigated parts of general matters defining. without prejudice to the role of scientific developments aimed at studying the theory and practice of assessing the level of economic security of certain types of financial institutions, in particular, banks and insurance companies, further research and development of methodological approaches to the diagnosis of the state of economic security of professional participants in the financial market are necessary, given the importance of their effective activities to ensure the financial security of the state. the analysis of the results of researches of foreign and domestic scientists made it possible to conclude that the existing methodological approaches to assessing the level of economic security of the state as a whole, as well as of certain types of economic entities, are currently obsolete. they do not take into account a number of important micro and macroeconomic indicators of economic development, and some of the indicators that continue to be calculated are excessively difficult to calculate, while others have lost their relevance. during the calculations, analysts find it difficult to find an information resource of the proper quality; most indicators are based on statistic data that is released too late for the timely identification of threats to individual components of economic security and their avoidance. however, the most significant disadvantage of traditional approaches to assessing the level of economic security of the state is the lack of indicator among the groups of indicators that would reflect the state of economic security of economic entities – the main producers, sellers and consumers of the national product, the resource base of the modern market economy, to which baltic journal of economic studies 47 vol. 5, no. 2, 2019 financial market professional members also belong. as an efficiently organized financial sector is the basis for the formation of a modern architecture of a viable economic system, and the qualitative evolution of the financial market is the basis for the development of the country’s economy, within this study, it is worthwhile to focus on the issue of assessing the level of economic security of financial institutions as the main actors to ensure the functioning of financial services markets. the research objective is to develop an innovative approach to assessing the level of financial institutions economic security, as well as substantiate its use in a management activity of company management to ensure a high level of profitability and in the regulatory activity of state authorities in order to guarantee the financial security of the state. methodology. the author’s approach to the methodology for assessing the level of economic security of financial institutions is proposed. this approach involves an analysis of the values of quantitative indicators and characteristics of qualitative signs of the state of the functional components of the system of economic security, the assignment of ball assessments, finding the sum of points weighted by weight factors, and calculating on this basis the values of indices of the state of each functional component of economic security system. the sum of these values allows us to determine which level of economic security – critical, minimum, satisfactory, high or maximum – has provided the financial institution with the process of managing the system of own economic security. the logic of material presentation. at the first stage of scientific work, the author offered the representation of the approach to the staged development of a methodology for assessing the financial institutions’ economic security level. at the next stage of the study, the author proposed indicators for assessing the level of economic security of financial institutions. the methodological approach to assessing the level of economic security of financial institutions was described. the study ends with the list of possibilities of using the results of assessing economic security level in management and regulatory activity. 2. representation of the approach to the staged development of a methodology for assessing the financial institutions’ economic security level the author’s approach to assessing the level of financial institutions’ economic security is based on several assumptions. firstly, the diagnosis of the economic security of financial market professional participants should be conducted using the expert method. experts should be the representatives of financial intermediaries’ top management. such a choice of the method of evaluation was made due to the specificity of the economic security state indicators, which should be taken into account and which cannot be mathematically calculated. secondly, a list of indices for obtaining a reliable estimate of the economic security level should be formed using the principle of consistency – to take into account the characteristics of the state of various functional components of the economic security system. however, the proposed indicators should be easy to calculate or determine, since the assessment of economic security should be not only accurate but also timely. thirdly, in order to ensure universality and understanding of the significance of each calculated indicator, positive or negative for the state of economic security, a final evaluation of their values is proposed based on the scorecard model. three variants of the possible score are presented – 1, 2 and 3 points. fourth, in order for the results of the analytical work to be used as an informative basis for making managerial decisions, it is advisable to transform quantitative assessment of economic security level into a qualitative characteristic of its state. fifth, it is necessary to take into account the specific characteristics of each type of financial institution in the process of analytical work. given this, using a universal approach to assessing the level of economic security of financial institutions, the mechanism for its diagnosis should include the possibility of taking into account the particularities of a specific type of financial intermediary, which serves as an object of analysis. a schematic picture of the approach to staged development of a methodology for assessing the level of economic security of financial institutions is shown in figure 1. consequently, the development of a methodology for assessing the level of economic security of financial institution was carried out in several stages. at the first stage, a list of intermediate indices for evaluation was defined, the significance of which allowed to characterize the state of functional components of the universal comprehensive system of economic security of a professional participant in the financial market. at the second stage, a list of specific indicators was formed, on which the estimation of each intermediate indice was formed. these indicators reflect the effects of the institution’s activities on the state of one or another component of the economic security system. at the third stage, the methods, ways, and procedures for calculating the proposed indicators were determined and their normative, threshold, and oriented values were established. at the fourth stage, information sources were searched for the information and data needed to calculate the indicators within each intermediate indice. given the periodicity of updating information on the status of financial institutions in generally available resource bases, it is proposed to conduct an assessment of the economic security level once a year. in the internal management structure of the financial institution, carrying out the diagnostics of the level of economic baltic journal of economic studies 48 vol. 5, no. 2, 2019 security, it is advisable to entrust the specialists of the economic security service, and in case of its absence, an outsider person or organization may be involved in the outsourcing process for the professional performance of this task. at the fifth stage, a final integrated indice of the economic security level was developed, which was determined taking into account the specific weight of each indice of the state of the functional components of the economic security system of financial institutions. it was at this stage that it was possible to ensure that the specifics of the functioning of each type of financial institution were taken into account in the process of assessing the level of their economic security. at the sixth stage, a mechanism for transforming the value of the integral indice into a qualitative characteristic of the state of economic security of a financial institution was proposed, and a scale for the qualitative assessment of the key importance of the financial security level of the financial intermediary was formed. in the long run, it can be recommended the form of the economic security level report, which will be one of the sources of information and analytical support for the process of financial institutions economic security system management for their top management needs. also, such a report can be recognized at the level of state regulators of financial services markets as a mandatory form for providing information on the status of financial intermediaries. in this case, the assessment of the level of economic security will become an additional norm for the regulation of the activities of financial institutions, the observance of which will improve the level of financial security of the state. 3. indicators for assessing the level of economic security of financial institutions a set of indicators for assessing the financial institutions’ economic security is contained in table 1. thus, taking into account the sources of threats to the economic security of financial institutions, it is proposed to allocate eight of its functional subsystems, the state of which must be assessed in the diagnostic process: financial, intellectual and personnel, property (material), physical (power), information and analytical, technological, legal, market (external). accordingly, the value of the final (integral) indice of the economic security level will be based on the estimates of the eight intermediate indices of the state of each of the subsystems of the economic security system of financial institutions. i stage formation of a list of intermediate indices the functional components of the financial institution economic security system are determined; for each of them assigned an index, the assessment of which will reflect the state of the subsystem of economic security іі stage matching the indicators list for intermediate indices to calculate the value of indices, a specific list of indicators is determined to diagnose its compliance with norms or benchmarks ііі stage the choice of methods and techniques for measuring methodical approaches to calculating the values of indicators for estimating each intermediate index are offered; their normative, recommended or oriented values are set a scale is created for interpreting the score for the final integrated index in a qualitative assessment of the level of economic security of the financial institution. the characteristics of each qualitative level of economic security are determined vі stage final stage v stage determining the mechanism for calculating the final integrated index of economic security іv stage selection of resources for the information provision of the evaluation procedure a set of information resources is defined for obtaining information about the values of indicators that do not require mathematical calculations and data sources for calculating the remaining indicators a formula is developed to calculate the value of the final integrated index based on the estimates of all intermediate indices and taking into account the specifics of the economic security of certain types of financial institutions figure 1. schematic representation of the approach to the staged development of a methodology for assessing the financial institutions economic security level source: made by the authors baltic journal of economic studies 49 vol. 5, no. 2, 2019 table 1 proposed indicators for assessing the level of economic security of financial institutions intermediate indexes indicators for indexes oriented (normative, threshold) values of indicators low value (1 point) satisfactory value (2 points) optimal value (3 points) 1 2 3 4 5 1. financial security index the result of economic activity loss profitability growth of profitability in dynamics financial independence (coefficient) less than 0.5 more than 0.5 1 liquidity level lower than normal corresponds to the norm higher than normal compliance with economic norms (prudential norms, regulatory requirements) does not meet them corresponds to 90%, discrepancies are eliminated fully responsible estimation of financial services consumers economic security level no conducted for individual clients conducted for all clients 2. intellectual and personnel security index the higher education level of the staff up to 80% 81-90% more than 91% personnel work experience in financial institutions up to 2 years 2-5 years old more than 5 years the period of work in this institution up to 1 year 1-2 years more than 2 years % of people with economic education up to 30% 31-60% more than 61% % of temporarily employed persons more than 20% 1-10% 0% 3. property (material) security index the volume of assets (in comparison with average market value) less at the level more depreciation of fixed assets more than 50% 30-50% up to 30% branch network only 1 office up to 10 offices 10 or more outlets ownership of premises where offices are located short term rentals long term lease ownership of the institution frequency of audit less than once a year or at the request of the regulator once a year more than once a year (at the initiative of the management) 4. physical (power) security index presence of guards no yes, 1 person yes, 2 or more people use of lattices, armoured areas no in the premises where the financial assets are kept yes, in all rooms services of professional security firms not used used as needed service agreements are concluded access control systems for resources none separate elements full access control cases of signalling during the last year 3 or more cases (or no signalling or cases are not fixed) 1-2 times (incl. accidentally) there was no case of a crash 5. information and analytical security index analytical department in the organizational structure no one person operates constantly cases of information loss during the last year more than 2 cases 1-2 minor cases not recorded access to the internet (for personnel) full access limited access access only to sites that are required for work transparency level of activity up to 70% 71-90% 91-100% sufficient information to make managerial decisions information is missing information is missing, but it can be obtained full information 6. technological security index % use of licensed software up to 80% 80-90% more than 90% the frequency of software update not done monthly constantly depreciation of equipment more than 51% 30-50% up to 30% it department in the organizational structure no one person operates constantly speed recovery of equipment after failures more than a day during the day a few hours 7. legal security index legal department in the organizational structure no one person operates constantly number of appeals to court (per year) more than 2 1-2 appeals no appeal % of won cases up to 80% 81-99% 100% or not baltic journal of economic studies 50 vol. 5, no. 2, 2019 4. a methodological approach to assessing the level of economic security of financial institutions the maximum score for each intermediate indice is 15 points, and the minimum score is 5 points. in order to obtain a reliable and objective assessment of the economic security level, each indicator for indice should have its own relative weight, given its significance for the status of the functional component of the financial institutions’ economic security system. this specific weight, as well as the specific weight of the intermediate indices in the final, integral indice, is determined using the fishburne formula. for the indicators of the components of the financial institution economic security, xi (i = (1, �n)) – for this case n = 5 for the group of indicators of one indice and n = 40 for the whole system of indices – within each indicator is evaluated its significance. then the system of weights is constructed, so that: i n i i a a i n = ∑ = ≥ =      1 1 0 1 , , ,� � (1) where ai is the weight of indicator, and i – the number of the current indicator, n – the number of indicators. indicators are ranked within each intermediate indice for assessing the economic security level in the order of decreasing their significance, that is, x1> x2> x3> ......> x> ......> xn. the scientific and methodological basis of using the fishburne scale is as follows: the scale of the fishburne is rational fractions whose denominator contains the sum of the arithmetic progression n of the first members of the natural series in step 1, and in the numerator, the elements of the natural series from n to 1, decreasing continuously by 1 (for example, 3/6, 2/6, 1/6 – in total we get 1). that is, the preference or significance of a given fishburne index will be expressed in a reduction in the weight ratio (index) of a rational fraction of the numerator with a lower level of significance (weaker alternative). the decision to use this method to identify weigh of indicators and indices for assessing the level of economic security of financial institutions for the needs of the study is due to the benefits of the fishburne’s approach, in particular: no not need to spend resources on the development of questionnaires, conduct expert surveys and initiate the processing of the data – experts immediately put out specific and fair, in their view, assessments; for the use of this method, there are no restrictions that will not allow using the author’s methodical approach to assessing the level of economic security of financial institutions even in the case of changing the basic conditions for the functioning of their economic security system; the method allows to take into account additional information on the state of indices and indicators, which appears in the process of assessing the level of economic security of professional participants in the financial market, and to make adjustments to the calculations on the basis of additional information; there is no need to implement the realization of calculations by a complex mathematical algorithm. consequently, we will determine the weighting factors of indicators in the intermediate indices for assessing the level of economic security using the fishburne scale (formula 2). a n i n n i = ⋅ − +( ) ⋅ +( ) � 2 1 1 (2) in the proposed methodological approach to assessing the level of economic security of financial institutions, 8 groups of indicators (for the diagnosis of the status of intermediate indices) were formed, 5 in each group. so, for each indicator we have: a1 2 5 5 6 1 3 0 3333= ⋅ ⋅ = =� , a2 2 4 5 6 4 15 0 2667= ⋅ ⋅ = =� , 1 2 3 4 5 7. legal security index number of raider attacks (for the whole period of work) several attacks one, there was no significant loss no attack % of claims that ended for the institution with resources lost more than 10% 1-10% 0% 8. market (external) security index an institution in rating charts not included in ratings included in the top 20 institutions included in 10 top institutions period of work in the market up to 2 years 2-5 years more than 5 years number of competitors more than 300 institutions 100-300 institutions up to 100 institutions force majeure circumstances yes, present now yes, but do not exert direct influence no the political situation in the country tense stable favourable for the financial market development (end of table 1) baltic journal of economic studies 51 vol. 5, no. 2, 2019 a3 2 3 5 6 1 5 0 2= ⋅ ⋅ = =� , a4 2 2 5 6 2 15 0 1333= ⋅ ⋅ = =� , a5 2 1 5 6 1 15 0 0667= ⋅ ⋅ = =� , so we get the weight of each indicator within the evaluation of a specific intermediate indice. next, it was necessary to determine how indicators within each group are ranked by their values for the level of economic security of the financial institution. to solve the task, five experts were interviewed for each of the 8 groups of indicators. the resulting weighting factor is calculated as the arithmetic mean of the scales proposed by the experts. for example, the indicator of the level of financial independence of the institution in the financial security indicators group was placed by the first and second experts in the third place in importance, and the third expert put it on the fourth place. therefore, for it, the weight factor will be: a à à à 3 3 3 4 3 0 2 0 2 0 1333 3 0 1777= + + = + + =� , , , , where à3 – the arithmetic mean of the i-th indicator. such calculations were made for each indicator of the level of economic security of the financial institution within each intermediate indice. thus, the experts – specialists in certain areas of financial institutions activity – established the importance of the author’s set of indicators for diagnosing the state of economic security of professional participants in financial services markets. table 2 summarizes the results of an expert assessment of the weight factors for indicators of the financial institutions’ financial security level. consequently, the general formula for calculating the financial security indice of a financial institution is: іnf = 0,2667 i1+0,1333 i2+0,1867 i3+0,32 i4+0,0934 i5, (3) where іnf – financial security indice, i1 – i5 – indicators from table 2. table 3 depicts the results of an expert assessment of weighting factors for indicators of the level of intellectual and personnel security. the general formula for calculating the intelligence and personnel security indice of a financial institution is: іnip = 0,1467 i1+0,2933 i2+0,3067 i3+0,1733 i4+0,08 i5, (4) where іnip – intelligence and personnel security indice, i1 – i5 – indicators from table 3. table 4 shows the results of expert evaluation of the values of weight factors for indicators of property (material) security. consequently, the formula for calculating the property (material) security indice has the following form: іnpm = 0,2800 i1+0,2 i2+0,2533 i3+0,16 i4+0,1067 i5, (5) where іnpm – property (material) security indice, i1 – i5 – indicators from table 4. table 2 estimation of the weight factors of indicators of financial security level expert indicators of financial security the result of economic activity financial independence (coefficient) liquidity level compliance with economic norms (prudential norms, regulatory requirements) estimation of financial services consumers economic security level i1 i2 i3 i4 i5 first 0,2667 0,2 0,1333 0,3333 0,0667 second 0,2667 0,1333 0,2 0,3333 0,0667 third 0,3333 0,1333 0,2 0,2667 0,0667 fourth 0,2667 0,0667 0,1333 0,3333 0,2 fifth 0,2 0,1333 0,2667 0,3333 0,0667 weight factor (average) 0,2667 0,1333 0,1867 0,3200 0,0934 table 3 estimation of weight factors of indicators of intellectual and personnel security level expert indicators of intellectual and personnel security higher education level of the staff personnel work experience in financial institutions the period of work in this institution % of people with economic education % of temporarily employed persons i1 i2 i3 i4 i5 first 0,1333 0,3333 0,2667 0,2 0,0667 second 0,2 0,2667 0,3333 0,1333 0,0667 third 0,1333 0,2667 0,3333 0,2 0,0667 fourth 0,0667 0,2667 0,3333 0,2 0,1333 fifth 0,2 0,3333 0,2667 0,1333 0,0667 weight factor (average) 0,1467 0,2933 0,3067 0,1733 0,0800 baltic journal of economic studies 52 vol. 5, no. 2, 2019 table 5 presents the results of an expert assessment of the values of the weight factors of physical (power) security indicators. the formula for calculating the indice of physical (power) security has the form: іnpp = 0,28 i1+0,16 i2+0,24 i3+0,24 i4+0,08 i5, (6) where іnpp – physical (power) security indice, п1 – п5 – indicators from table 5. table 6 outlines the results of the expert evaluation of weighting factors for indicators of informationanalytical security of financial institutions. the formula for calculating the indice of information and analytic security has the form: іnia = 0,2533 i1+0,2267 i2+0,08 i3+0,1467 i4+0,2933 i5, (7) where іnia – information and analytical security indice, i1 – i5 – indicators from table 6. table 7 summarizes the results of the expert evaluation of weighting factors for indicators of the level of technological security of financial institutions. the formula for calculating the technological security indice is: іnt = 0,2267 i1+0,1333 i2+0,1867 i3+0,24 i4+0,2133 i5, (8) where іnt – technological security indice, i1 – i5 – indicators from table 7. table 8 presents the results of an expert assessment of weighting factors for indicators of the legal security level of financial institutions. the formula for calculating the legal indice is as follows: іnl = 0,24 i1+0,1067 i2+0,1733 i3+0,2267 i4+0,2533 i5, (9) where іnl – legal security indice, i1 – i5 – indicators from table 8. table 4 estimation of weight factors of indicators of property (material) security level expert indicators of property (material) security volume of assets (in comparison with average market value) depreciation of fixed assets branch network ownership of premises where offices are located frequency of audit i1 i2 i3 i4 i5 first 0,3333 0,20 0,2667 0,1333 0,0667 second 0,2667 0,1333 0,3333 0,2 0,0667 third 0,2667 0,1333 0,3333 0,0667 0,2 fourth 0,3333 0,2667 0,2 0,0667 0,1333 fifth 0,2 0,2667 0,1333 0,3333 0,0667 weight factor (average) 0,2800 0,2000 0,2533 0,1600 0,1067 table 5 estimation of weight factors of indicators of physical (power) security level expert indicators of physical (power) security presence of guards use of lattices, armoured areas services of professional security firms access control systems for resources cases of signalling during the last year i1 i2 i3 i4 i5 first 0,3333 0,1333 0,2667 0,2 0,0667 second 0,3333 0,2667 0,2 0,1333 0,0667 third 0,3333 0,2 0,1333 0,2667 0,0667 fourth 0,2 0,1333 0,2667 0,3333 0,0667 fifth 0,2 0,0667 0,3333 0,2667 0,1333 weight factor (average) 0,2800 0,1600 0,2400 0,2400 0,0800 table 6 estimation of weight factors of indicators of information and analytical security level expert indicators of information and analytical security analytical department in the organizational structure cases of information loss during the last year access to the internet (for personnel) transparency level of activity sufficient information to make managerial decisions i1 i2 i3 i4 i5 first 0,3333 0,1333 0,0667 0,2 0,2667 second 0,1333 0,2667 0,0667 0,2 0,3333 third 0,2 0,3333 0,0667 0,1333 0,2667 fourth 0,2667 0,2 0,1333 0,0667 0,3333 fifth 0,3333 0,2 0,0667 0,1333 0,2667 weight factor (average) 0,2533 0,2267 0,0800 0,1467 0,2933 baltic journal of economic studies 53 vol. 5, no. 2, 2019 table 9 shows the results of an expert assessment of the weight factors of indicators of the level of market (external) security of financial institutions. the general formula for calculating the indice of the market (external) security is: іnme = 0,2667 i1+0,2933 i2+0,16 i3+0,1733 i4+0,1067 i5, (10) where іnme – market (external) security indice, i1 – i5 – indicators from table 9. to determine the weights of the intermediate indices of economic security in the final (integral) indice, we apply the fishburne formula again: a1 2 8 8 9 2 9 0 2222= ⋅ ⋅ = =� , a2 2 7 8 9 7 36 0 1944= ⋅ ⋅ = =� , a3 2 6 8 9 1 6 0 1667= ⋅ ⋅ = =� , a4 2 5 8 9 5 36 0 1389= ⋅ ⋅ = =� , a5 2 4 8 9 1 9 0 1111= ⋅ ⋅ = =� , a6 2 3 8 9 1 12 0 0833= ⋅ ⋅ = =� , a7 2 2 8 9 1 18 0 0556= ⋅ ⋅ = =� , a8 2 1 8 9 1 36 0 0278= ⋅ ⋅ = =� , table 10 presents the results of an expert evaluation of the weighting factors of all intermediate indices table 7 estimation of weight factors of indicators of technological security level expert indicators of technological security % use of licensed software frequency of software update depreciation of equipment it department in the organizational structure speed recovery of equipment after failures i1 i2 i3 i4 i5 first 0,2667 0,0667 0,2 0,3333 0,1333 second 0,2667 0,1333 0,0667 0,3333 0,2 third 0,2 0,0667 0,3333 0,1333 0,2667 fourth 0,1333 0,0667 0,2 0,3333 0,2667 fifth 0,2667 0,3333 0,1333 0,0667 0,2 weight factor (average) 0,2267 0,1333 0,1867 0,2400 0,2133 table 8 estimation of the weight factors of indicators of legal security level expert indicators of legal security legal department in the organizational structure number of appeals to court (per year) % of won cases number of raider attacks (for the whole period of work) % of claims that ended for the institution with resources lost i1 i2 i3 i4 i5 first 0,2667 0,0667 0,1333 0,3333 0,2 second 0,3333 0,0667 0,1333 0,2 0,2667 third 0,2667 0,0667 0,1333 0,2 0,3333 fourth 0,2667 0,1333 0,3333 0,0667 0,2 fifth 0,0667 0,2 0,1333 0,3333 0,2667 weight factor (average) 0,2400 0,1067 0,1733 0,2267 0,2533 table 9 estimation of weight factors of indicators of market (external) security level expert indicators of market (external) security institution in rating charts period of work in the market number of competitors force majeure circumstances political situation in the country i1 i2 i3 i4 i5 first 0,3333 0,2667 0,1333 0,2 0,0667 second 0,2667 0,3333 0,2 0,0667 0,1333 third 0,2 0,3333 0,2667 0,0667 0,1333 fourth 0,2667 0,2 0,0667 0,3333 0,1333 fifth 0,2667 0,3333 0,1333 0,2 0,0667 weight factor (average) 0,2667 0,2933 0,1600 0,1733 0,1067 baltic journal of economic studies 54 vol. 5, no. 2, 2019 of financial institutions economic security level. the evaluation was carried out according to an algorithm analogous to the estimation of the weighting factors of indicators of each intermediate indice, therefore in table 10, only the final result of an expert evaluation is presented. note that for different types of financial institutions, different weights were determined for adjusting the values of the same indices. this is explained by the specifics of the functioning of the different types of financial institutions and the peculiarities of the construction of internal mechanisms for the protection of their resources within the framework of ensuring economic security. the data obtained from experts and processed by means of mathematical calculations provide an opportunity to propose formulas for assessing the level of economic security for various types of financial institutions: table 10 expert assessment of the weight factors of intermediate indices depending on the type of financial institution in the integral indice of economic security level type of financial institution weight of indices in economic security level in di ce o f fi na nc ia l se cu ri ty in di ce o f in te lle ct ua l a nd pe rs on ne l s ec ur ity in di ce o f p ro pe rt y (m at er ia l) se cu ri ty in di ce o f p hy si ca l (p ow er ) se cu ri ty in di ce o f in fo rm at io n an d an al yt ic al se cu ri ty in di ce o f te ch no lo gi ca l se cu ri ty in di ce o f l eg al se cu ri ty in di ce o f m ar ke t (e xt er na l) se cu ri ty banks 0,2111 0,1833 0,1611 0,1000 0,1389 0,0556 0,1056 0,0445 insurance companies 0,2111 0,1445 0,2055 0,0667 0,1167 0,0334 0,1445 0,0778 credit unions and other institutions of the sector of credit co-operation 0,15 0,0556 0,2 0,1056 0,1333 0,0833 0,1389 0,1333 investment companies (asset management companies, non-state pension funds, etc.) 0,2166 0,1556 0,0722 0,0889 0,2 0,15 0,0278 0,0889 financial companies 0,2111 0,0778 0,1555 0,05 0,1278 0,1 0,1333 0,1444 іs (bank) = 0,2111 іnf + 0,1833 іnip + 0,1611 іnpm + 0,1 іnpp + 0,1389 іnia + 0,0556 іnt + 0,1056 іnl + + 0,0445 іnme; (11) іs (insurance company) = 0,2111 іnf + 0,1445 іnip + 0,2055 іnpm + 0,0667 іnpp + 0,1167 іnia + 0,0334 іnt + + 0,1445 іnl + 0,0778 іnme; (12) іs (credit union) = 0,15 іnf + 0,556 іnip + 0,2 іnpm + 0,1056 іnpp + 0,1333 іnia + 0,0833 іnt + 0,1389 іnl + + 0,1333 іnme; (13) іs (investment company) = 0,2166 іnf + 0,1556 іnip + 0,0722 іnpm + 0,0889 іnpp + 0,2 іnia + 0,15 іnt + +0,0278 іnl + 0,0889 іnme; (14) іs (financial company) = 0,2111 іnf + 0,0778 іnip + 0,1555 іnpm + 0,05 іnpp + 0,1278 іnia + 0,1 іnt + +0,1333 іnl + 0,1444 іnme; (15) where іs – the level of economic security. since, according to the proposed methodological approach, the maximum score of each intermediate indice is 15 points (if all five its indicators are estimated at 3 points), and the minimum is 5 points (if all five its indicators are estimated at 1 point), then after adjusting the estimates of indicators and indices for the above weighting factors, it is necessary to determine the quantitative limits of possible qualitative characteristics of the levels of economic security of financial institutions using equal intervals of probable values: critical level of economic security – 5 ≤ іs <7; minimum level of economic security – 7 ≤ іs <9; satisfactory level of economic security – 9 ≤ іs <11; high level of economic security – 11 ≤ іs <13; maximum level of economic security – 13 ≤ іs ≤15. 5. possibilities of using the results of assessing economic security level in management and regulatory activity with actual and reliable information on the level of economic security of a financial institution, its owners and top management will be able to make right management decisions regarding the strategic orientations of the economic development of the institution and tactical measures of its economic activity. regulators of financial services markets based on the data of economic security state of their professional participants will be able to timely identify financial intermediaries who are in danger of bankruptcy and liquidation, and whose subsequent activities, without proper control and support, can have fatal consequences for the welfare of their clients. possibilities for using the results of assessing the level of economic security in management and regulatory activities are summarized in table 11. 6. conclusions the possibility of using the results of the assessment of the level of economic security of financial institutions by the top-management of professional participants in the financial market has been established. at a critical level of economic security, the heads of institutions are baltic journal of economic studies 55 vol. 5, no. 2, 2019 table 11 possibilities of using the results of assessing economic security level in management and regulatory activity the level of security options for managerial decisions for top management options for regulators of financial services markets in order to ensure the financial security of the state critical optimization of the organizational structure with the allocation of the economic security subdivision; external specialists involvement for the formation of mechanisms for protecting the institution from all kinds of threats; attraction of funding sources for security measures; start of preventive risk management; development of documentation support for the economic security system functioning conduct a monitoring of the institution’s activities in retrospect; investigation of the circumstances that caused the economic danger; consideration of the possibility of a financial intermediary leaving the market and taking measures to secure the financial interests of its clients; introduction of a temporary administration; for systemic financial institution – consideration of the possibility of their nationalization minimum development of the concept and strategy of ensuring economic security; organization of training of personnel involved in the problematic subsystems of economic security process; increasing the frequency of inspections of the state of security; increasing the budget of financing security measures; establishing a clear list of tasks for those involved in the development of threats response strengthening oversight of the institution’s activities; taking control of its operations and processes for the implementation of financial products and services; advising on improving security; sending experts, consultants and supervisors to restore economic security; carrying out a re-examination and assessment of the level of economic security in six months satisfactory aiming temporarily free financial resources for security measures; increase staffing in security departments; invitation of consultants from specialized firms to optimize the architecture of the economic security system; the introduction of security-oriented management providing recommendations and consultations on raising the level of economic security; control over the activity of the institution in the usual mode; consideration of the possibility of state support to the institution in the future; conduct a re-examination and assessment of the level of security high increasing the level of transparency of the institution; formation of the image of a financial intermediary capable of protecting the assets of clients; introduction of the practice of customer service taking into account the level of their economic security; re-assessing the level of economic security in six months involvement the top-management of the institution to form groups of experts for consultations of raising the level of economic security for other market participants; minimal control and supervision for the institution; allocation of high ranking positions in national ratings maximum expansion and diversification of financial activities in order to increase profitability; search for competitive advantages; taking measures to maintain the achieved level of economic security work with the management of financial institution on the advisory and consultative basis; provision of state guarantees in case of necessity of expansion of activity; use of financial intermediation services of an institution for work with state financial resources invited to optimize the organizational structure with the allocation of the economic security unit, to seek the help of specialists, to develop preventive measures against the internal and external threats. at a minimum level of economic security, it is expedient to develop or update the conceptual framework for the functioning of the economic security system and pay attention to its development strategy. at a satisfactory level of economic security, it is recommended that a human resources policy be launched to establish securityoriented management of the financial institution. at a high level of economic security, efforts should be made to publicize this fact by extending the transparency of the financial institution’s activities. this will promote a positive image of the company in the financial market and attract new customers. at the maximum level of economic security, managerial decisions of top management should be aimed at achieving a balance between its maintenance and the allocation of resources for the development of the institution and expansion of its activities. the expediency of using by the state financial regulators the information obtained in the process of assessing the level of economic security of financial institutions for the purpose of realization of the goal of ensuring the financial security of the state through the mechanism of monitoring and control of the results of activities of financial intermediaries has been substantiated. references: (n.d.) american history: roosevelt aims for economic security with «second new deal». retrieved from: 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(2018). methodological bases of estimating the efficiency of economic security management of the enterprises in the global environment. investment management and financial innovations, 15(2), 145–153. baranovskyy, o. i. (2006). bankivska bezpeka: problema vymiru [banking security: the measurement problem]. ekonomika i prohnozuvannya, 1, 7–25. momot, t. v., ovchelupova, o. m., solovyova, k. s. (2015). otsinka rivnya finansovo-ekonomichnoyi bezpeky bankivskykh ustanov v umovakh kryzy [assessment of the level of financial and economic security of banking institutions in a crisis]. komunalne hospodarstvo mist, 125, 32–36. shtefan, l. b. (2017). problemy formuvannya universalnoyi systemy otsinyuvannya finansovoyi bezpeky banku ta bankivskoyi systemy [problems of forming a universal system for assessing the financial safety of the bank and the banking system]. ekonomika i suspilstvo, 9, 1100–1106. kozachenko, h. v. (2016). estymetolohichnyy aspekt v ekonomichniy bezpekolohiyi [the estimetological aspect in economic securityology]. problemy ekonomiky, 1, 167–173. baltic journal of economic studies 68 vol. 5, no. 1, 2019 corresponding author: 1 odesa national polytechnic university, ukraine. e-mail: zam.agrariy@gmail.com 2 classic private university, ukraine. e-mail: zcci@i.ua 3 zhytomyr state technological university, ukraine. e-mail: d-38-053-03@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-68-74 a conceptual framework to apply financial engineering at the enterprise viktor zamlynskyi1, anastasiia zerkal2, andrii antonov3 abstract. the development and continuous complication of financial instruments through the integration of technology and management methods lead to an increasing role of financial engineering to ensure the efficient activity of enterprises. the use of financial engineering at the present stage allows business entities to comprehensively solve the most pressing problems, from the liquidity crisis and to the lack of resources to implement long-term goals. in view of the fact, this direction of research has not yet received wide distribution in the domestic scientific literature. thus, the definition of the conceptual foundations for the functioning of the financial engineering system in combination with the refinement of its essential characteristics is an urgent scientific task. the purpose of the article. the article aims to justify the conceptual provisions of financial engineering as an independent scientific and practical direction of economic research. methodology. methodological principles on which the study is based contain the application of a set of universal scientific methods and specific methods of scientific knowledge, including: the method of scientific abstraction in determining the characteristics of the innovative component of financial engineering; the method of system-structural analysis in justifying the diagnostic functions of the financial engineering of an enterprise, and the method of analysing time series when assessing the development of the options market in ukraine. value/originality. the article describes the essence of financial engineering. it is substantiated that financial engineering is to create innovations in the form of financial products, processes, technologies, and institutions in order to obtain financial benefits from their practical use in the activities of the enterprise. the fundamental difference between the concepts of “financial management” and “financial engineering” is disclosed. the characteristics and theoretical significance of financial engineering as independent scientific and practical areas of economic research are analysed. modern approaches to the definition of objects, methods, information base, and the results of financial engineering are systematized. financial engineering is considered as the process of designing, developing, and implementing innovative financial instruments. the characteristic of using financial engineering is given on the example of options trading. the features of the development of the options market in ukraine are analysed. it was determined that the development of the domestic options market requires first of all the formation of practical skills in the use of derivative financial instruments by financial engineering methods. key words: management, financial system, financial engineering, diagnostics, organizational changes, improvement, liquidity. jel classification: g11, g29, g39, н19 1. introduction in modern conditions, the main purpose of financial management is to maximize the market value of the enterprise. from the point of view of the income approach to business valuation, the market value is formed as a set of discounted cash flows calculated by intervals of the forecast period. these streams are formed as a result of the current investment and financial activity of the enterprise. in this regard, the enterprise has the task of managing financial resources, including the management of cash flows. to solve this problem, financial engineering is used, which combines a set of methods and technologies that allow you to effectively manage finances in order to increase the value of the enterprise. technologies that are used in the framework of financial engineering combine the financial subsystem of an enterprise and the financial instruments of the capital market. this allows the baltic journal of economic studies 69 vol. 5, no. 1, 2019 company to solve a number of financial problems: from a liquidity crisis (lack of working capital) to an investment crisis (lack of financial resources for the implementation of long-term development programs). one of the elements of the redistribution of risks, profitability, liquidity is financial engineering. it allows enterprises to get a number of advantages when correctly applied: increase the value of the company, increase profits, ensure financial stability, balance cash flows, and the like. for the national economy, financial engineering is a new element that economic entities rarely use in their activities. positive foreign experience of its use requires from state authorities, domestic enterprises, and financial intermediaries to more actively master the tools of financial engineering, which will stimulate the development of the ukrainian economy in general and economic entities in particular. in the european union, the basic rules for the implementation of financial engineering are governed by the articles of regulation (ec) no. 1083/2006, no. 1080/2006, no. 1081/2006, and no. 1828/2006 (as amended by commission regulation (eu) no. 1236/2011), which induces financial engineering tools for enterprises (venture capital funds, guarantee funds and credit funds etc.). in ukraine, the process of organizing the market for financial instruments is still ongoing and, unfortunately, there is an incomplete legislative base of regulation implementation of financial engineering, as in leading countries of the world. currently, the implementation of financial engineering is regulated by the tax code of ukraine, the civil code of ukraine, the law of ukraine “on securities and stock market”, the law of ukraine “on state regulation of the securities market in ukraine” and other regulatory documents. 2. analysis of recent research and publications the scientific works are devoted to the study of the features of the financial engineering system, including the goals, subjects, object, principles, and tools of financial engineering. the research of individual elements of financial engineering by scientists (kim, 1993; marshal, bansal, 1998; kraskevich., selivanova, 2016; mashliy, laba, 2016) analysed the concept of “financial engineering” using a structural approach, which gave it the opportunity to come to the conclusion that modern scientific literature does not contain a complete definition of this concept, especially in defining the purpose and methodology of introducing financial engineering in the financial activities of economic systems. in this regard, the definition of the conceptual foundations of the functioning of the financial engineering system in combination with the refinement of its essential characteristics is an urgent scientific task. hammer m. and champy j. (hammer, champy, 1993) believe that the key question of reengineering consists of four key elements: 1. a focus on fundamentals. addressing the issue of precisely what the corporation does, why is it done in a present way, and what are the tacit rules and assumptions embedded in present practices. reengineering ignores “what is” and concentrates on “what should be.” 2. a radical redesign element. reengineering is about reinventing the business – not making superficial changes or marginal enhancements to the old ways of doing things. 3. the potential for dramatic results. reengineering leads to quantum leaps in performance – not incremental improvements. 4. a business process orientation. reengineering evolves around business processes – not tasks, job descriptions, people or structures. a business process takes an input or inputs and generates an output which is of value to the customer. a business process only works if it generates added value, not an internal activity. fortunately, innovations in telecommunications, information technology, and financial engineering offer the practical prospect for multiple channels for the financing of economic growth. multiple channels for capital raising are a good idea in terms of greater assurance of supply at competitive prices. they also offer the prospective benefits of competition to be the best one in a given environment at a given point in time (merton, bodie, 2005). the purpose of the article is to substantiate the conceptual foundations of financial engineering as an independent scientific and practical direction of economic research. 3. conceptual foundations of financial engineering financial engineering should be considered as a set of economic relations that have monetary characteristics and provide functional actions for making, implementing, and optimizing financial and organizational decisions in the course of reforming, current functioning, and development of an enterprise based on innovative elements. it seems appropriate to analyse the relationship between financial engineering and financial management since innovative development is one of the goals of financial management, with the result that financial management methods can be used as financial engineering methods. for a clearer definition of the relationship and fundamental differences between financial management and financial engineering, a comparative description of their components and elements should be made. both concepts involve the use of an object management system. the objectives of financial management are divided into tactical and strategic. the objectives of financial engineering can be formulated in a similar way since they are considered depending on the result baltic journal of economic studies 70 vol. 5, no. 1, 2019 to which the application of financial engineering is directed (kraskevich, selivanova, 2016). differences in financial engineering and financial management are manifested in the fact that financial management is essentially a continuous process, the goals of which are interconnected and are adjusted to reflect the situation and the result obtained earlier. the goals of financial engineering are final, clearly defined, and may not be related. in this case, the whole process is aimed at achieving one goal, as a result of which the need for financial engineering, as in a particular product, ends. as a result, such phenomena as risks and profitability cannot be an object of financial engineering since they are manageable and integral components of the enterprise’s activity. it is financial management that should be focused on these factors, which can be transformed according to their qualitative characteristics using the tools of financial engineering. consequently, scientific and practical interest represents the main fundamental positions inherent in financial engineering. consideration of the principles of construction and operation of financial engineering involves consideration of the leading provisions of its operation. the construction of financial engineering on the basic provisions of finance makes it possible to apply the scientific approach of transforming the functional positions of finance in the fundamental provisions of financial engineering. the relevance of the application of financial engineering is manifested in the scientific and practical terms, in the sectoral and subjective scale. the functional purpose of finance in the formation of monetary funds is becoming a fundamental position of financial engineering as a technologically instrumental basis for making financial decisions in the field of providing the means of the operation and development of an enterprise. the theoretical significance of financial engineering is implemented through its isolation as an independent scientific and practical research direction. this requires the formulation of the goal of financial engineering as a complex criterion for making financial decisions of an enterprise. the goal of financial engineering is to see the integration of the enterprise’s activities, aimed at improving the quality of strategic and tactical financial decisions in all areas of business, is achieved by concentrating efforts on the priority areas of the company’s activities. this target emphasizes the longterm period of the enterprise, points to ways to increase financial results, takes into account the interests of the owners. this takes into account the aspect of uncertainty and risk (probability of loss) when making and implementing financial decisions. information base of financial engineering should be updated financial and management reporting of the enterprise. sectoral and regional analytical materials can be used. reliability must unambiguously be ensured. however, the relative indicators of the financial condition of the company cannot be the result of financial engineering since they are calculated and their value depends on a number of factors (kraskevich, selivanova, 2016). thus, the engineering process should be directed to influence precisely these initial factors, and the efficiency of engineering use, in turn, can be measured using the values of these relative indicators. in addition, it should also be noted that the reasoning of economists as a starting point is the driving force for changes in the direction that is determined by the financial decision. the financial decision in financial engineering acts as a result of the economic actions of managers and specialists of the enterprise on the basis of a sample of several options. it should be borne in mind that the above-mentioned persons should be guided by the principles of expediency and rationality, take into account the available funds, internal and external factors affecting the operation of a particular company. in the course of the formation and implementation of a financial decision in financial engineering, it goes through several stages. first, there is an operational or problem situation that requires a financial decision. then the database is collected and processed for the next stage – the preparation and development of a financial solution. preparatory work determines the financial goal. a program of measures to implement a financial decision is consistently drawn up, a selection of financial instruments, levers, and management techniques is carried out. mainly, scientists identify the methods of financial engineering as the creation of a fundamentally new method or a combination of existing methods to obtain new properties. however, creation and combination are only the names of the processes that are achieved with the help of certain tools and are based on the use of a number of mathematical, statistical, and computational methods. given this, it is advisable to distinguish the following groups of financial engineering methods in accordance with the expected result: mathematical, statistical and other quantitative methods: in the design, development, distribution, association – to achieve a fundamentally new financial situation; when modified, combined – to change certain features of the initial financial situation of the enterprise; financial management methods – to reduce risk and achieve a certain level of enterprise profits (kraskevich, selivanova, 2016). an important step in financial engineering is also determining the result of its use. to do this, it is advisable to divide the expected result from the application of financial engineering into two main parts: a fundamentally new, innovative financial situation or product that is qualitatively different from the initial one and before which certain tools were applied; a financial situation or a product that does not have essential differences from the original, but some properties of which are more favourable for the subject of the application of financial engineering. baltic journal of economic studies 71 vol. 5, no. 1, 2019 from the point of view of the economic content of the result, it is possible to single out the following elements: an innovative product, a new organizational structure for financial management, relative indicators of the financial condition of an enterprise (profitability, liquidity etc.). thus, the product of (financial) engineering is innovation. innovation is “investment in innovations” in the form of the achieved results from the development of a new process, product or service in practice. innovation is some kind of innovation that has not been encountered before: a new industrial design, an intellectual discovery, an invention, a method for meeting the needs of society, and that sort of thing. however, innovation should be viewed as the ultimate achievement of innovation, which is embodied in a new or improved product, has become competitive in the market; in a new or improved technical and technological process, found practical use in the economic activity. in summary, conceptually financial engineering can be defined as the process of creating innovations in the field of finance. however, this characteristic of financial engineering does not fully reflect its content but gives only a general idea of its essence. therefore, special attention should be paid to the analysis of the works of domestic and foreign authors on this topic to summarize the existing conceptual approaches to the functioning of the financial engineering system. in our opinion, one of the most complete interpretations of financial engineering is the definition, which includes projection, the development and introduction of innovations or the search and application of new approaches to solving financial problems using already known innovative financial instruments and technologies in order to achieve specific financial goals by enterprises. on the other hand, a number of researchers emphasize the practical side of financial engineering as an activity. they reveal the mechanism for creating financial innovations, which is presented either in the form of combining and decomposing existing financial instruments or in the form of modifying the inherent characteristics of existing financial instruments (marshal, bansal, 1998). expanding the scope of application of financial engineering, kim t. (1993) defines it as “unpredictable changes in the form of a new financial product, payment system or organizational structure for the provision of new financial services.” thus, changes can be expressed in the form of a new financial product, payment system or organizational structure. at the same time, it is very important to point out their diversity and originality, which determines their innovative nature (hammer, champy, 1993). this allows us to talk about innovations not only in the field of financial instruments but also about institutional innovations in the financial market. this view reflects the current level of development of financial engineering and its scope the most. at the same time, an alternative approach to interpreting the conceptual foundations of financial engineering is extremely common. it is based on the assumption that financial engineering is closely related to risk management. this position is quite reasonable, especially given the fact that the rapid growth of risks in the implementation of the activities of companies has become one of the key factors for the emergence and development of financial engineering. at the same time, risk management, including their minimization, is one of the possible ultimate goals of developing and implementing financial innovations, which is not the only one and not always the main target, which, however, does not detract from its significance. it is widely known that risk is a payoff rate. this statement can be formulated differently: the corresponding return is the reward of the investor for taking the appropriate level of risk. thus, it can be argued that risk management involves the search for optimal ratios in the “risk – return” plane (gerasimovich, 2017). the above makes financial engineering a leading mechanism for financial diagnostics at the current stage because financial engineering is the desire to reduce risk and develop new technology to get more profit. therefore, risk reduction is either an intermediate goal or a tool for making more profit. 4. financial engineering and innovative financial instruments – the potential for solving modern financial problems the result of reducing the level of risk due to the diagnosis of the financial state of engineering methods is the most stable operational and financial activity of the company, which in the long run uniquely increases the income received. the above clearly reflects the purpose of financial engineering as a type of activity and indicates the innovative nature of this activity. separately, domestic scientists cite warnings about the use of engineering as a mechanism for diagnosing future threats to companies since financial instruments developed artificially, thanks to their design by financial engineering methods, have already become one of the significant factors that provoked the global financial and economic crisis of 2008-2009. therefore, it should be remembered that financial engineering is not a panacea in this area, and ensuring financial security from threats associated with the proliferation of financial engineering products should be based on a system of preventive diagnostics of threats and risks of the latest financial instruments. the following common approach to determining the conceptual foundations of financial engineering is focused on solving certain financial problems. it proceeds from the ambivalent understanding of financial engineering, the use of investment technology to solve financial problems, as well as the use of financial baltic journal of economic studies 72 vol. 5, no. 1, 2019 instruments to transform the existing financial situation into another that has more preferable features. such an interpretation of financial engineering focuses on its innovative nature. solving financial problems and transforming the existing financial situation into another one, which is desirable, speaks of obtaining certain benefits from the implementation of this process. this is an extremely important feature that is rarely reflected in the analysis of financial engineering. it is the achievement of the situation with more desirable properties than the existing ones that, in our opinion, is the main goal of financial engineering. otherwise, innovation itself loses its expediency. thus, the use of financial engineering has the potential to ensure the emergence and rapid development of a number of financial instruments that have not yet been properly disseminated and used by enterprises in developing countries. for example, let us take the ukrainian market of such derivative financial instruments as options, which are widely used in the global financial markets when carrying out investment operations, but still have a tiny share in the domestic stock market (table 1). during 2014-2018, the most valuable options’ issue volumes on the ukrainian stock market were observed in 2016 when they reached 198,900,000 uah. however, even their share in the total volume of securities did not exceed 0.09%. the largest share of options is observed in january-october 2018 and accounts for 0.12%, although its level is primarily due to the rapid decline in the stock market of ukraine as a whole. during the aforementioned period, only one issue of option certificates worth 55.0 million uah was made, whereas the total issue of securities amounted to 448 billion uah (analytical data on stock market development, 2018). to exit the options market of ukraine from a rudimentary state, along with an increase in the investment attractiveness of the economy and raising capital, sufficiently deep knowledge and skills in the use of derivative financial instruments are needed (mashliy, laba, 2016). therefore, financial engineering as a mechanism for optimizing option contracts is of particular importance for the wide distribution of this financial instrument in the investment activities of domestic enterprises. from the position of financial engineering, enterprises should take into account the relationship of investment options for the acquisition of financial assets investor’s assumption when entering into an option contract the price of shares will increase over time, so they need to be purchased now, albeit at an overestimated but fixed price. the price of shares will eventually fall, so they must be sold now, albeit at a low but fixed price. call option put option investor а obtains from investor в during м months n shares of the company к at a price с1>c0, where с0 – current market price, and still pays to investor в option premium in the amount of сcall investor а sells to investor в during м months n shares of the company к at a price с1<c0, where с0 – current market price, and still pays to investor в option premium in the amount of сput approx. content of the contract figure. 1. conceptual content of call and put options source: built by the authors table 1 dynamics of the volume of registered issues of options in ukraine in 2014-2018 indicators 2014 2015 2016 2017 januaryoctober 2018 options, million uah 1,3 0,2 198,9 32,5 55,0 issued option certificates, pieces 17 16 9 2 1 total securities, billion uah 217,3 155,8 221,2 353,7 44,8 option share, % 0,0006 0,0001 0,0899 0,0092 0,1228 source: compiled by the authors according to the national securities and stock market commission baltic journal of economic studies 73 vol. 5, no. 1, 2019 and the stages of the lifecycle of an enterprise since the actual formation of financial resources is possible at the stage of stability but, for the purpose of investment, is carried out at all stages of the enterprise lifecycle (koval, prymush, popova, 2017). consider the technology of financial transactions using options to buy and sell company shares. figure 1 presents a conceptual model of put options and a call option. suppose that at the moment (the sq situation, meaning “status quo”), shares of company k are being sold $40 for each. investor a wants to acquire 100 shares of company k since it assumes that shares will grow over time. however, potential investor a currently has not $4,000 to buy these shares on the exchange, so he wants to offer investor b an agreement: agree to sell him 100 shares of company k for $45 (which now cost only $40), but in any time point within 3 months. in order to fulfil his intention, investor a needs to interest investor b, therefore, he suggests buying a call option from him and for this, he appoints the latter an option premium of $2 per share, that is, $200. investor a can borrow this amount. investor b does not consider that the shares for the period indicated by investor a will rise in price above $40, but there is a similar risk. therefore, if investor b agrees to the risk of a reward of $200 offered to him, then potential investor a will buy a contract with an option call at $200, for which he is guaranteed to be able to purchase the 100 shares he needs from investor b for 3 months for $4,500. let us consider the possible outcomes of a contract with a call option. for example, the shares of company k in three months began to be sold at a price of $50 per share. this means direct losses in the price of $500 for side b since the investor will have to buy 100 shares of company k in the market at the current price of $50, paying $5,000 for them, and sell them to investor a at the price of $45. that is, he will receive from the investor only $4,500 for them. however, shares may fall in price in three months and cost, for example, $35 per share. in this case, investor a will have to execute the contract on unfavourable conditions and pay $4,500 to investor b for purchasing 100 shares of company k from him (although he could pay for them only $3,500 in the market). thus, a contract with a call option costs money for investor a, that is, it has a price (in our case, $ 200). the price of the option depends on the level of uncertainty of the current situation in relation to the future. however, the significant impact on the size of the option premium has also how the participants of this risky agreement with the securities estimate the prospect themselves. because of this feature of options, the importance of using financial engineering as a mechanism to ensure an optimal balance between risk and profitability increases. in particular, in order to mitigate the consequences of an option agreement, the parties often specifically make it possible to liquidate a contract before it expires or to freely resell its part of the contract to third parties. 5. application of financial engineering using option contracts example let us consider in more detail the mechanism of financial engineering under the condition that when making the option, the parties have provided the opportunity to refuse contractual obligations in favour of the third parties. let, for example, a month after the conclusion of a contract, the situation changed (we denote it as sq1), the market price increased by $10 and, as a result, amounted to c1 = $50. if current information is refined, investor b can decide based on two possible alternatives. the first alternative is to buy out a contract from investor a at this price and close this contract. suppose investor b offered, and investor a accepted the offer to close the contract, provided that he received from investor b at $5 per share. if the parties agree, the results of such an operation will be: yа = -200 + 500 = 300; y = 200-500 = -300. the second alternative to investor b is to transfer positions on the contract to a third party, paying it for taking on all the obligations. in this case, investor b acts as the “first” seller of the option, therefore in this alternative, it is more convenient to call him b1, and the third person as the “second” seller b2. suppose that investor b2 agrees to repurchase the call option from investor b1 if he pays him $5 per share, that is, $500. in this case, the contract will be supplemented by the condition that investor b2 becomes the seller of the option, and the results of these financial operations will be: ya = -200; yb1 = 200-500 = -300; yb2= 500. however, investor a may also refuse to execute the contract with the option number over time. to do this, he needs to find the “second” potential buyer of shares a2, who wants for some fee, for example, $6 per share, that is, for $600, to buy a contract of “first” potential buyer, a1. in this case, the contract will be supplemented by the condition that the buyer of the option becomes investor a2, and the results of the financial transaction will be: ya1 = -200 + 600 = 400; ya2 = -600; yb1 = 200. finally, each of the participants in the option contract can find a third person for himself. in this case, both “first” investors will be excluded from the contract, and their places will be “second”. as a result, buying and selling options for them under the above-mentioned conditions of sale will lead to the following results ya2 = -600; yb2 = 500. table 2 presents the results of the application of financial engineering while implementing an option contract for different scenarios. summarizing the conceptual foundations and practical mechanisms for the application of financial engineering presented in the article using the example of option contracts, we note that financial engineering is largely a creative process of creating financial innovations in the form of financial products, processes, technologies, and institutions in order to obtain financial baltic journal of economic studies 74 vol. 5, no. 1, 2019 benefits from their practical use in the activities of the enterprise. a deeper understanding of the content of financial engineering requires an analysis of the causes of its appearance and development factors, which leads to the prospect of further research in this direction. 6. conclusions the result of financial engineering is financial innovation in the form of a new financial product, new technology or process, new financial institutions. financial products should be understood as both financial instruments and services in the field of finance. the key task of financial engineering is to transform the existing financial enterprise situation into another, more desirable for it. in other words, its main goal is to obtain financial benefits, primarily due to the reduction of risk and the achievement of a certain level of enterprise profitability. in the process of financial engineering, there is a problem situation, data are being collected and processed, a program of relevant measures is being consistently put together and implemented. the theoretical significance of financial engineering is realized through its allocation as an independent scientific and practical direction of research with its own purpose, target directions and methods of realization of financial decisions. an important stage in the application of financial engineering in the enterprise’s activity is to determine the expected result of its application, which acquires forms of innovative products in the form of new organizational structures of financial management, system approaches to the calculation of indicators of the financial state of the enterprise etc. an alternative approach to defining the conceptual foundations of financial engineering is to focus on solving certain financial problems. this approach proceeds from the ambivalent understanding of financial engineering, the use of investment technology to solve financial problems, as well as the use of financial instruments to transform the existing financial situation into another, a more favourable one. this is an extremely important property that is rarely reflected in the analysis of financial engineering because achieving a situation with more desirable properties than the existing ones is the main goal of financial engineering, without which any innovation activity loses its feasibility. analysis of the development of the domestic options market showed that financial engineering as a mechanism for optimizing option contracts is of particular importance for the wide distribution of this financial instrument in the investment activities of economic entities of ukraine. the parties’ use of option contracts of various financial engineering strategies makes it possible to optimize the risks of options transactions, ensuring the optimal ratio between the levels of their riskiness and profitability. table 2 impact of financial engineering on the results of the implementation of the option contract strategies of investors а and в continuation of the execution of the contract transfer of your positions on the contract to investor b2 continuation of the execution of the contract ya1 = -200; yb1 = 200 ya1 = -200; yb1 = -300; yb2 = 500; transfer of your positions on the contract to investor a2 ya1 = 400; ya2 = -600; yb1 = 200 ya2 = -600; yb2 = 500 source: built by the authors references: analytical data on stock market development (2018). national securities and stock market commission. retrieved from: http://www.ssmsc.gov.ua/fund/analytics gerasimovich, i. a. (2017). mechanisms and tools of accounting and financial engineering in the management of the enterprise. accounting and finance, 1(75), 26-32. (in ukrainian) hammer, m., champy, j. (1993). reengineering the corporation: a manifesto for business revolution. new york: harper collins. kim, t. (1993). international money and banking. washington: routledge. koval, v., prymush, y., popova, v. (2017). the influence of the enterprise life cycle on the efficiency of investment. baltic journal of economic studies, 3(5), 183-187. doi: 10.30525/2256-0742/2017-3-5-183-187. kraskevich, v. ye., selivanova a. v. (2016). financial engineering as an innovation tool in investment projects. mathematical machines and systems, 1, 71-78. (in ukrainian) marshal, j. f., bansal, v. k. (1998). financial engineering : a complete guide to financial innovation. new-york institute of finance. mashliy, g. b., laba, i. z. (2016). status and prospects of the options market in ukraine. proceedings of the xiх international scientific-practical conference: socio-economic development in the conditions of globalization. kiev: scientific-publishing center "laboratory of thought". (in ukrainian) merton, r ., bodie, z. (2005). design of financial systems: towards s synthesis of function and structure. journal of investment management, 3(1), 1-23. baltic journal of economic studies 178 vol. 4, no. 2, 2018 corresponding author: 1 department of economic and management, odesa i.i. mechnikov national university. e-mail: olga-poberezhec@ukr.net 2 department of accounting, analysis and audit, odessa national polytechnic university. e-mail: kovalova.helen@gmail.com 3 department of financial management and stock market, odessa national economic university. e-mail: iorgachova@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-2-178-183 transformation processes of the ipo market: ukrainian and world experience olga poberezhets1 odesa i.i. mechnikov national university, ukraine olena kovalova2 odessa national polytechnic university, ukraine maria iorgachova3 odessa national economic university, ukraine abstract. the study of ipo as a source of financial resources meets the current needs of the corporate sector in conditions of disintermediation and securitization trends of the financial market. in developed economies, there is a process of shifting the emphasis in the direction of capital attraction precisely on the stock market segment of the financial market, which has a number of advantages over the banking system that are also connected with the innovation and investment development of the national economy. the formation of the proper basis for the development of ipo market determines the timeliness of the consideration of this issue because it didn’t obtain a sufficient spread. the emergence of new instruments is the feature that characterizes the modern stage of the development of the ukrainian and world economy. their application is a condition for the further development and use of the potential opportunities for the improvement of economic systems. enterprises are able to meet current market needs and challenges due to orientation to modern trends and timely reaction to the latest achievements. one of them is the ipo (initial public offering), which is the primary public offering of shares. participants of the ukrainian market face a number of obstacles during ipo on the domestic and foreign stock exchanges. it necessitates a comprehensive review of this issue for a further developing of this method of accumulating financial resources. the purpose of this article is to identify the ipo market as a system of interrelated components that form its essence, and on the basis of a generalization of the constraining factors of development – providing recommendations on the perspective lines of improving the ipo market, taking into consideration the peculiarities of the ukrainian and world stock market. methodology. analytical market reviews, materials of periodicals, resources of the internet are the informational and methodological basis of the investigation. to achieve the goal set, the following general scientific and special methods were used: economic and mathematical methods, structural-logical analysis, analogy, synthesis, comparison and integration, factor analysis. results. the factors that should be taken into account by the issuer for the success of the ipo procedure are justified. problematic aspects and directions of their elimination are determined for every concrete stage of the ipo. the model for the domestic companies to enter the ipo market is proposed that has a special significance in the context of increasing the volume of financing innovative activity. directions for reforming the regulatory and legislative framework are considered. practical implications. directions for improving the process of passing through the ipo stages can be applied by issuers, taking into account the peculiarities of the domestic and world stock market. value/originality. the biggest part of the scientific works is devoted to the theoretical aspects of ipo, clarifying the essence of this process, structuring its participants, the advantages of carrying out. at the same time, a part of the works is devoted to the consideration of ipo as an instrument for attracting financial resources by corporations. the authors reviewed ipo in a system that combines the above aspects with its procedure stages and propositions to cancel out constraining factors that have a place on each step of ipo. the presented integrated approach will allow expanding the use of the ipo in the financial market as a source of financial resources for the corporative sector. it is also important to consider the impact of the planned baltic journal of economic studies 179 vol. 4, no. 2, 2018 1. introduction innovative development of the corporative sector is based on the capital raising on the stock market in the developed economic systems. realization of the ipo didn’t have widespread use in the modern economic situation in ukraine that causes an actuality of its basis formation. interest in the emission of shares as a source of capital raising is gradually growing after the crisis of 2013–2014, which differed in the absence of the ipo of ukrainian issuers. the definition of ways how to eliminate the factors constraining the implementation of the ipo requires a detailed consideration. theoretical basis and practical aspects of ipo market development were reflected in the scientific works of v. kublikov, m. sokolov, m. stefanishin, j. lerner. j. lerner and m. stefanishin paid attention to the ipo main stages in their works. such researchers as v. kublikov and m. sokolov focused on the main trends in the development of the ipo market and peculiarities of privatization of state enterprises with the help of the ipo financial instruments. the development of an integrated approach to reforming the ipo market, which is based on the interaction of all its structural elements, the specifics of the procedure on stock exchanges, remains an insufficiently developed scientific question. 2. factors of successful initial public offering (ipo) based on the pluralism of the scientific approaches, the world exchange practice and the domestic regulatory and legislative framework, ipo should be viewed as a procedure of obtaining public status by a company that includes operations of organizational, legal, financial character involving both professional and collateral participants of the stock market and groups of interested investors who are not known in advance according to the announcement of stock trading in the mass media. the choice of a professional trade organizer is one of the key decisions that the issuer must take in the process of attracting financial resources within the ipo. it is based on the factors that should be taken into account for the success of the securities placement: – issuing volumes according to the ipo prospectus should correspond with the stock market capacity. – an effective demand and correspondence of the issuer’s goals and the investor for searching for strategic or portfolio investors. – transparency and availability of information for investors, counterparties and its comparison possibility in the question of concrete issuers on the stock exchange. peculiar features of sector profile of issuers that are represented on the determined stock exchange. – listing criteria of the stock exchange. – evaluation of compliance with the declared free-float level by the stock exchange in order to ensure favourable conditions for the secondary securities market. – the similarity of the legal environment of the national stock market and the foreign trading platform that is chosen for ipo in order to enhance the issuer’s image and to attract capital cross out of the national borders. – determination of the prestige of the ipo on a concrete stock exchange. – the presence of “lock-up” limits, which are a preventive tool to protect the issue price from fluctuations and sometimes are an indispensable condition that can be put forward by the underwriter in accordance with the practice of security issue on a certain stock exchange. – compliance with the principles of liberalization and the availability of the characteristics of an integrated financial market to overcome regulatory and legal restrictions for foreign direct market participants. – features of trading operations on the stock exchange. – the period, during which the company acquires the status of the public. – the cost of services of professional and collateral participants of the stock market. stock exchanges charge listing fees using a variety of methods: volume of shares offered, value of shares offered, market capitalization or flat fee. – the need to present the financial statements of the issuer in accordance with the accounting standards that are fixed in the legal environment of the functioning of the stock exchange (ifrs, us gaap, hkfrs, prc gaap). – the tax burden on the issuer. 3. comparative analysis of listing standards and fees estimation of the company’s potential compliance with the listing criteria set by the stock exchange is one of the key factors that should be taken into account in the process of ipo (table 1). the table shows the main requirements for issuers within the listing procedure on the main stock exchanges that were the largest financial centres for ipo in the first three quarters of 2017: 105 successful placements were made on the hong kong legislative reforms on the development of the ipo market in ukraine. taking into account all the components of the ipo market and existing features of the ipo within the framework of the national financial market and world stock exchanges will highlight directions of the ipo market spread. key words: ipo, emission, securities, stock exchange, listing, innovation activity. jel classification: g15, o16 baltic journal of economic studies 180 vol. 4, no. 2, 2018 stock exchange and gem (9.1% of global ipos), the national stock exchange of australia – 61 (5.3%), the london stock exchange – 50 (4.3%), the new york stock exchange – 52 (4.5%), and the nasdaq – 59 (5.1%). asia-pacific exchanges continued to dominate the global ipo markets in q3 2017, accounting for 65% of ipos globally and 43% of global capital raised. ipo activity of the americas region and the region of europe, middle east, india, and africa (emeia) was approximately on the same level according to proceeds – 28% and 29% (global ipo trends q3, 2017). as a rule, the higher listing criteria for the issuer’s company mean the longest period, during which the company is transforming into a public one: 12-24  months for an ipo in the americas region, an average of 12 months for ipo in the emeia region, asia-pacific region – 6-12 months. the mentioned ipo timelines should be considered for informational and comparative purposes only. the actual ipo process and timeline can vary with the specific circumstances of an individual company. comparing the listing requirements of international stock exchanges with the ukrainian stock market practice, we should note positive changes towards the transformation of domestic legislation in accordance with the world realities of doing business and compliance with the principles introduced by iosco. in particular, it concerns bill no. 5592-d of 03.10.2017 on simplifying doing business and attracting investments by securities issuers. this law should become an innovation of the national commission on securities and stock that will introduce compulsory passing of listing procedure by public corporations. as a result, the market will obtain the higher quality of securities of the ukrainian stock exchanges, the transparency of operations and be the basis for the inflow of new investments. this reform will increase the productivity of postprivatization development of companies in the financial market of ukraine. the maximum approximation of the second level listing requirements of ukrainian companies to the modern practice of stock exchanges in the emeia region is proved by comparing such stock market listing standards as the timeline of going public (3 years), freefloat level (10-25%). 4. problematic aspects and directions for improving ipo market an interest to the ipo of shares and eurobonds as sources of attracting capital is gradually growing after the crisis of 2013–2014 that is characterized by the absence of initial public offerings of shares of the ukrainian corporate sector on national and international stock exchanges. the factors that hinder the development of the ipo market by the ukrainian corporate sector are systematized in the pwc study. table 1 comparing stock market listing standards and fees: a regional aspect of ipo (created by the authors considering (ey global, 2012) exchange listing standards americas region emeia region asia-pacific region new-york (nyse) nasdaq (global select market) london stock exchange (main market) warsaw stock exchange hong kong stock exchange national stock exchange of australia time line of going public 3 years 2 years 3 years 3 years 3 years 2 years income, revenue and profits revenues (most recent fiscal year) us $75 million revenue >= us $110 million (previous fiscal year) aggregate profit of at least hk $50 million in the last three financial years positive financial result in the last two financial years market capitalization revenues (most recent fiscal year) us $75 million revenue >= us $110 million (previous fiscal year) us$1.2 million (gbp700,000) us$10 million us$25 million aud $0.5 million number of float shares 5,000 shareholders for foreign issuers 1.25 million shares 25% 5-10% 25% 25% equity market listing fees us $ per share: 0.001-0.005 us $125,000-225,000 gbp 6,389369,689 pln 8,000 -96,000 from hk$ 150,000 to hk$ 650,000 us $0.08 per share annual exchange fees us $ 0.001 per share, minimum us $ 38,000 us $35,000-99,500 gbp 4,200 41,400 pln 9,000-pln 70,000 from hk $145,000 to hk $1,188,000 from us $8,000 baltic journal of economic studies 181 vol. 4, no. 2, 2018 the results of the investigation can be schematically represented (fig. 1) (pwc. capital markets in 2025: future of financial markets, 2011). it is advisable to solve indicated problems with the participation of regulatory agencies, self-regulating organizations, and all interested participants of the stock market in accordance with the successful passage of the ipo stages (fig. 2) (created by the authors). the existing culture of corporate governance, the high level of information protection on domestic enterprises in the issues of financial disclosure and an inefficient tax system are complementary to the above factors. fig. 1. the results of a survey of corporate sector respondents about the factors that hinder the development of the ipo market on stock exchanges of developing countries fig. 2. problem aspects and directions for improving the process of passing through the ipo stages 32% 29% 13% 7% 4% 15% 0% 10% 20% 30% 40% regulatory framework political uncertainty low economic growth rates investment risks rising inflation pessimistic expectations of market participants share in the structure of the answers baltic journal of economic studies 182 vol. 4, no. 2, 2018 but, nevertheless, the main problem is to transform the regulatory framework, which must meet the current needs of direct participants on the stock market. 5. ipo as an innovative component of the economy’s real sector development it should be noted that ukrainian financial market lacks a properly formed segment of institutional investors. the result is the absence of “long” liabilities at the disposal of pension and investment funds, insurance companies. the problem of improving the ipo market is especially acute because the accumulation of resources through the initial placement of securities is one of the effective ways of financing an innovative activity (fig. 3) (built on the basis of data of the official site of the state statistics service of ukraine and national securities and stock market commission, 2018). the analysis proves that there is a close direct link between the number of ipos and the source of financing an innovative activity that is called by the state statistics service of ukraine as “other sources of financing.” the results demonstrate that the ipo is one of the sources of financing an innovative activity of ukraine. it should also be noted that most of the domestic companies that had an experience in holding ipos used to issue corporate bonds earlier due to the peculiarity of the domestic corporate governance model, which has features of a debt nature that must be taken into account in the proposed model for the domestic companies entering the ipo market (fig. 4) (created by the authors). issue of bonds private joint stock companies public joint stock companies internal ipo ipo taking into account the obstacles to overcoming fig. 4. model of entering the ipo market by ukrainian companies 6. aspects of reforming ipo regulatory framework certain measures are taken to reform the regulatory and legislative framework for the development of the ipo market: – implementation and monitoring of the adaptation of iosco principles that are related to the activities of issuers in the direction of full, trustworthy, and timely disclosure of information, the equal rightness of investors, and raising accounting standards (national securities and stock market commission). – the enactment of the bill 5592-d by the verkhovna rada of ukraine, which opens new perspectives and peculiarities of the recognition of the publicity of jointstock companies, which should promote the expansion of the exchange register and become an investment incentive for domestic and foreign investors. – the implementation of pension reform, which promotes the increase of the volume of assets at the disposal of institutional investors and is the basis for the formation an effective demand on the certain financial instruments on the stock market. – realization of the complex program of the development of the financial sector of ukraine until 2020 in the sphere of modernization protection of consumer and investor rights, as well as creating conditions for free capital flow (resolution of the board of the national bank of ukraine, 2015). but, further improvement requires, firstly, mechanisms of protection the financial and economic security of the issuer in the process of acquiring public status by the company; secondly, further transformation of the listing criteria in order to approximate the current paradigm of estimating issuers in ukraine to international practice, to promote the increase in the number of ipos and the volume of attracted resources; thirdly, the approaches to the procedures “due diligence” and “roadshow ” in order to establish a weighted issue price for ipos. y = 0,0009x 0,1645 r2 = 0,8145 0 1 2 3 4 5 6 7 0 1000 2000 3000 4000 5000 6000 7000 sour ces of f inancing of innovat ion act ivit y at t he expens e of ot her s our ces , m ln.uah. n u m b er o f ip o s, p cs . fig. 3. graphical representation of the results of the analysis of the relationship between the number of ipos and other sources of financing an innovative activity baltic journal of economic studies 183 vol. 4, no. 2, 2018 7. conclusions the results of the study indicate that ipo is a source of financing the investment and innovative activity of enterprises that has special features of realization at different world financial centres. the model of entering the ipo market by ukrainian companies should be modernized to overcome the identified factors that are specific on each stage of its implementation, taking into account the peculiarities of the ukrainian market and focus on the leading trends. reforming and implementation of innovations of the regulatory framework is the priority task for the modernization of the ipo market that is also the basis for protection of the interests of stock market participants. references: ey global (2017) reading allowed: global ipo trends q3 (2017). retrieved from: http://www.ey.com/publication/ vwluassets/ey-global-ipo-trends-q3-2017/$file/ ey-global-ipo-trends-q3-2017.pdf ey global (2012) reading allowed: comparing global stock exchanges stock market listing standards and fees. retrieved from: http://www.ey.com/publication/vwluassets/comparing-global-stock-exchanges-eng/$file/ comparing-global-stock-exchanges-eng.pdf national securities and stock market commission (2018) electronic resources. retrieved february 16, 2018 from: http://www.nssmc.gov.ua/ pwc (2011) reading allowed: capital markets in 2025: future of financial markets. retrieved from: https://www.pwc.ru/en/capital-markets/publications/assets/capital_markets_in_2025_rus.pdf resolution of the board of the national bank of ukraine (2015) reading allowed: complex program of development of the financial sector of ukraine till 2020. retrieved from: https://bank.gov.ua/doccatalog /document?id=18563297 state statistics service of ukraine (2018) electronic resources. retrieved february 16, 2018 from: http://www.ukrstat.gov.ua/ baltic journal of economic studies 53 vol. 4, no. 5, 2018 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. 2 dnipropetrovsk state university of internal affairs, ukraine. e-mail: junin@ukr.net 3 uzhhorod national university, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-53-58 special approaches to allocation of types of servitudes from the accounting positions iryna hrytsai1, oleksandr yunin2, antonina matsola3 abstract. articulation of issues. a number of bases, positions, which previously were recognized as the only correct and irrefutable, served as the foundation of legal regulation of civil relations. but now they do not fully correspond to modern tendencies in the development of civil law science. that is why, today, it should be mentioned about the formation of a new doctrine, which can meet the requirements of the formation and development of the rule-of-law state. in such conditions, it is obvious that the scientific and theoretical study of individual approaches to the allocation of types of servitudes from the standpoint of accounting will contribute to the improvement of civil-law relations, to the formation of a clear and coherent system. at the same time, the variety of scientific views about types of way-leaves constantly encourages the implementation and improvement of scientific research in the field of property rights for someone else’s property. in this context, the issue of the implementation of contractual, inheritance, and land relations for servitudes becomes very important and necessary. also, another important question is: are specific legislative approaches to allocation of servitudes on the basis of specific features fixed in legislation or not? has the legislator stopped only on land and personal servitude? the aim of the article is to study the theoretical and legal possibilities and approaches to the allocation of way-leaves on the basis of specific features from the standpoint of accounting and jurisprudence. also, another aim is to attract the attention of legal scholars to possible further scientific researches on the introduction of this phenomenon in modern civil legislation of ukraine. the subject of the study is the individual approaches to the allocation of types of servitudes from the standpoint of accounting. methodology. the research is based on the analysis of legal acts, which are connected with legal regulation of way-leave relations in ukraine. on the basis of the comparative legal method of investigation of certain provisions of ukrainian legislation, the possibilities and limits of the use of types of servitudes in contractual hereditary and land relations are determined. results of this study have shown that special approaches to the allocation of way-leaves on the basis of specific features in ukraine are in a real legal vacuum. such a conclusion is based on the lack of legislative clarification and consolidation of other types of servitudes, which are not connected with the material component. thus, property rights under the tax code of ukraine are intangible assets, and the provisions of the civil code of ukraine consolidate the material constituent of real rights to someone else’s property. from the standpoint of accounting, we can talk about the presence of intangible servitudes that are associated with the recognition and accounting of intangible assets. if this gap will be solved, then we can talk about the revision of the characteristics of way-leaves, relying on the positions of other branches of law. practical impact. the idea that certain positions of intangible servitude are contained in national law is rather necessary and expedient. so, we can talk about corporate rights as a person’s rights, the share of which is determined in the statutory fund (property) of a business organization. these rights include the competence to participate in the management of a business entity, obtaining a certain percentage of profits (dividends) of this organization and assets in case of liquidation of it in accordance with the law, as well as other powers provided by law and statutory documents and, for example, the rights to use websites, or aspects of commercial secrecy. correlation/originality. an analysis of the possible use of other types of way-leaves than those, which are enshrined in civil law in contractual, inheritance, land relations can become the basis for developing the most promising directions for the development of domestic civil law in this area and improving the civil law doctrine. key words: way-leave (servitude), accounting, civil law, real rights to someone else’s property, licensing, contractual relations, inheritance, land relations. jel classification: m41, j41, k12 baltic journal of economic studies 54 vol. 4, no. 5, 2018 1. introduction a number of the principles and positions which were recognized only as correct and incontestable earlier served as the base of legal regulation of the civil relations. but now these principles don’t correspond to current tendencies of development of the science of civil law in a full way. therefore, today, it should be stated about the formation of a new doctrine, which, as objectively as possible, can meet the requirements of the formation and development of a law-governed state. in such conditions, it is obvious that the scientific and theoretical study of separate approaches to the allocation of types of way-leaves from the standpoint of accounting will contribute to the improvement of civil-law relations, the formation of a clear and coherent system. at the same time, the variety of scientific views on the types of servitude constantly encourages the implementation and improvement of scientific research in the field of property rights for someone else’s property. in this context, the issue of the implementation of contractual, inheritance, land relations for way-leaves becomes really important. also, another important question is: are specific legislative approaches to allocation of way-leaves on the basis of specific features fixed in legislation or not? has the legislator stopped only on land and personal servitude? such famous scientists studied these issues as: yu. o. zaika, o. o. loviak, ye. a. sukhanov, h. v. sosnina, a. a. biriukov, o. v. bilotskyi, m. b. honcharenko, i. e. kosariev, t. v. predchuk, o. v. rozghon, i. f. sevriukov, o. o. tomyn, v. v. tsiura, o. yu. tsybulska, o. o. shchypanova and many others. 2. statement of the basic material proceeding from the provisions of clause 4 of article 403 of the civil code of ukraine (tsyvilnyi kodeks ukrainy, 2003), which states that servitude is not a subject to alienation, we can state that the application of certain contractual constructions (purchase and sale, donation) cannot be applied to servitude legal relations. accordingly, can we argue that there are no other means of transferring the rights and obligations of way-leaves to another person? probably no. a huge attention in this context should be paid to the inherited legal relationships, as well as ambiguous positions of regulation of servitude legal relationships with other branches of law, particularly, land. so, according to part 1 of art. 101 of the land code (zemelnyi kodeks ukrainy, 2002), the effect of land way-leaves is remained in case of transferring rights to a land plot, concerning which it was established, to the other person. that is why the land code of ukraine establishes the right to inherit the servitude as a substantive right. in turn, the civil code of ukraine confirms the position that the inheritance includes all rights and obligations belonging to the ancestor at the time of the opening of the inheritance and did not cease as a result of his death (art. 1218). also, according to art. 1219 of the civil code of ukraine, such rights and obligations are not part of inheritance, which are inextricably connected with the person of the ancestor, particularly: 1) personal nonproperty rights; 2) the right to participate in associations and the right to join associations, unless otherwise provided by law or their constituent documents; 3) the right to compensation for damage caused by injury or other damage to health; 4) the right to alimony, pensions, benefits or other payments established by law; 5) the rights and obligations of a person as a creditor or a debtor, which are provided in article 608 of the civil code of ukraine (tsyvilnyi kodeks ukrainy, 2003). there is no way-leave in this list, and accordingly, it can be the object and basis of hereditary legal relationships. but the diversity of way-leaves by specific features does not allow us to say that in each case, the established way-leave will pass to the heirs, and also whether it will be the subject of contractual relations or not. let’s consider the theoretical and practical grounds for the specific characteristics of servitudes of the modern legal field of ukraine with the determination of the possibility of further implementation of the inheritance rights and duties of heritors in servitude. if we analyse the provisions of the civil code of ukraine and the criminal code of ukraine, we can distinguish two types of way-leaves at the level of law – they are land way-leave and personal way-leave. first of all, it should be noted that the servitude, enshrined in the land code, by its nature differs from that one, which is contained in civil law. in the science of civil law, according to the roman legal tradition, servitudes are subdivided into the land (praedial) and personal (personal). the differences between them are determined not by the object of servitude law, but solely by the way of establishing the subject of the latter, that is, that authorized person, who owns the right to restrict the use of another’s thing. as it was already mentioned, servitudes are established in the interests of certain persons. this right belongs to a particular person and it is confirmed by its name, or it is associated with the existence of any other right (including property rights). therefore, servitude belongs to a person (personal servitude) or it belongs to a person as the owner (possessioner) of a particular real estate (praedial servitude) (pravo zemelnoho servitutu). at the level of the law, we can also speak of forest servitude. the concept of forest way-leave reveals art. 23 of the forest code of ukraine. it is stated there that the forest servitude is a right to a limited paid or free use of another’s land plot (lisovyi kodeks ukrainy). as the result of the analysis of law enforcement practice, we can see that the user of the objects of the animal world and the forest user, the owner of the territory, water areas, on which the creatures of the baltic journal of economic studies 55 vol. 4, no. 5, 2018 animal world live, they are usually different persons. in this case, the person who owns or uses the necessary territory, water area, may create obstacles to the implementation of the right of users of hunting areas for the use of objects of the animal world (tomyn, 2013). the legislator in art. 24 of the law of ukraine “on hunting sector and hunting”, in order to prevent abuse of the law, he provided a guarantee for users of hunting areas in the form of a contract with the owner or permanent user of land plots, on which these hunting areas are located. the size and procedure of payment for the use of hunting areas are determined in this law (pro myslyvske hospodarstvo ta poliuvannia). in such conditions, we can talk about the presence of faunal servitude (tomyn, 2013). some scholars use such term as “floristic servitude” (sokolova, 2005). again, based on the enforcement practice of implementation of the provisions of the water code of ukraine (vodnyi kodeks ukrainy, 1995), the code of ukraine on subsoil (kodeks ukrainy pro nadra, 1994), we can talk about the presence of water and subsoil servitudes. so, art. 23 of the code of ukraine on subsoil gives to landowners and land users within the boundaries of the land parcels, which are granted to them, the right without special permits and mining claim to extract locally produced minerals. besides, they can extract peat with a total depth of development of up to two meters, as well as underground water (other than mineral) for all needs, except for the production of packaged drinking water, in case that the volume of underground water extraction from each of the water intakes does not exceed 300 cubic meters per day (kodeks ukrainy pro nadra, 1994). accordingly, the prohibition of servitude on such a law code does not establish. therefore, the code does not establish the prohibition of servitude on this right. in this way, the national legislation somewhat relates the types of servitudes with the peculiarities of the legal nature of natural objects. n. g. yurchichin states exactly about it (yurchishin, 2015). it is possible to allocate urgent, termless, and single servitude according to the validity period. if we talk about one-time servitudes, they are servitudes set by the territorial authorities, for example, in order to celebrate certain events (the feast of wine, honey, etc.) (polozhennia «pro servitutne vykorystannia zemel komunalnoi vlasnosti terytorialnoi hromady m. mukachevo»). servitudes can be divided into those, which are established by the contract, law, will or a court decision according to the grounds of the establishment (article 402 of the civil code of ukraine) (tsyvilnyi kodeks ukrainy, 2003). if we talk about the possibility of charging – there are paid and free servitudes. in our opinion, the distinction of the specific features of way-leaves is not possible without the analysis of the regulatory framework of other branches of law, particularly, the economic and legal direction. m. p. gorodysky proposed some positions regarding types of servitudes (horodyskyi, 2012). he distinguishes material and non-material servitudes. regarding the availability of material servitudes, the positions of the civil code of ukraine indicate that the servitude is established in relation to the objects of the material world (land, building, construction, etc.). from the accounting standpoint, we can speak of the presence of non-material servitudes that are associated with the recognition and accounting of intangible assets. intangible asset – is a non-monetary asset, it is nonmaterial and can be identified. acquired or received intangible asset is defined, if there is a possibility of receiving future economic benefits by the subject, which are connected with its use, and its cost can be reliably determined (polozhennia (standart) bukhhalterskoho obliku). an asset is identified if it: a) can be separated. that means that it can be separated from the enterprise and it can be sold, it can be transferred, licensed, rent or exchanged individually or together with a contract, which is connected with it, with identified asset or liability, regardless of whether the entity intends to do so, or b) arises from contractual or other legal rights, regardless of whether they can be transmitted or separated from the entity or from other rights and obligations (polozhennia (standart) bukhhalterskoho obliku). assets are not recognized as intangible assets but they should be reflected as a part of the expense of the reporting period, in which there are expenses for: research, training and retraining of personnel, advertising and promotion of products on the market, creation, reorganization and relocation of the enterprise or its part, increase of business reputation of the enterprise, the cost of publications and the cost of creating trademarks (commercial label). acquired (created) intangible assets are counted to the balance of the enterprise at their initial cost. the initial cost of the acquired intangible asset consists of the price (cost) of the acquisition, duties, indirect taxes which aren’t subject to compensation and other expenses, which are directly related to its acquisition and bringing it to a condition, which is suitable for use. the initial cost of intangible assets is increased by the amount of costs, which is connected with the improvement of these intangible assets and the enhancement of their capabilities and terms of use. all these will contribute to an increase in the initially expected future economic benefits (polozhennia (standart) bukhhalterskoho obliku). according to the standards, the accounting of intangible assets is conducted for each object in the following groups: 1. rights to use natural resources (the right to use subsoil or other resources of the natural environment, geological, and other information on the natural environment, etc.). 2. rights to use property (the right to use the land plot in accordance with the land legislation, the right to use the building, the right to lease premises, etc.). baltic journal of economic studies 56 vol. 4, no. 5, 2018 3. rights to commercial designations (rights to trademarks (marks for goods and services), commercial (firm) name, etc.), except for those whose acquisition costs are recognized as royalties. 4. rights to industrial property objects (right to inventions, utility models, industrial designs, plant varieties, breeds of animals, layout (topography) of integrated circuits, commercial secrets, including knowhow, protection against unfair competition, etc.), except for those, whose acquisition costs are recognized as royalties. 5. copyright and its related rights (right to literary, artistic, musical works, computer programs, programs for electronic computers, compilation of data (databases), performances, phonograms, videograms, broadcasts (programs) of broadcasting organizations, etc.), except for those, whose acquisition costs are recognized as royalties. 6. other intangible assets (the right to conduct activities, use of economic and other privileges, etc.) (polozhennia (standart) bukhhalterskoho obliku). paragraph 14.1.120 of the tax code establishes the provision that intangible assets can be ownership of the results of intellectual activity, including industrial property, as well as other similar rights recognized as the object of property rights (intellectual property), the right to use the property and property rights of the taxpayer in accordance with the procedure established by law, including the rights of use of natural resources, property and property rights, which are acquired in the order established by the legislation (podatkovyi kodeks ukrainy, 2011). the order of the ministry of finance no. 242 of 18.10.99 “on approval of the regulation (standard) of accounting”, paragraph 6 fixes the position that the acquired or received intangible asset is reflected in the balance sheet, if there is a probability of obtaining future economic benefits, which are connected with its use, and its cost can be authentically determined (nakaz ministerstva finansiv). that means that property rights are intangible assets according to the tax code of ukraine. in this case, the civil code fixes real confusion. property law is an independent category and it cannot be defined through other concepts. property rights cannot be identified with the thing. that is why their determination through the non-consumable thing, as it is stated in art. 190 of the civil code of ukraine, is incorrect. the civil code repeatedly differentiates things as a type of property and property rights. as an example, we can use the norms of art. 656 of the civil code of ukraine, which state that the subject of a contract of sale may be a product in the sense of materially existing thing (part 1 of article 656) and property rights (part 2 of this article). a similar approach is reflected in art. 718 of the civil code of ukraine. this article defines the subject of a gift contract. bringing together property rights with the material rights, as it is shown in the norms of art. 190 of the civil code of ukraine, is incorrect (iavorska, 2011). also, the existence of non-property rights in the legislation and their use may indicate the presence of intangible servitude. so, in art. 21 of the law of ukraine “on copyright and related rights” it is possible freely use of quotations, even without the consent of the author. the quote is a relatively short excerpt from a literary, scientific or any other published work, which can be used only with the obligatory reference to its author and sources of quotation, by another person in his work in order to make his statements more understandable. the quotes are also used for reference to the views of another author in an authentic formulation (pro avtorske pravo i sumizhni prava, 1994). for example, under the law of france and switzerland, objects of property rights can be both material and intangible things, particularly, rights (mozolyna, kulahyna, 1980). according to art. 529 of the civil code of france, movable are obligations and lawsuits (by definition of the law), whose subject of the requirement are sums of money or personal estate, actions or shares in the financial, trade or industrial organizations (frantsuzskyi hrazhdanskyi kodeks: ucheb.-praktych. kommentaryi, 2008). we think national legislation contains certain positions of the immaterial servitude. again, here we can talk about corporate rights as the rights of a person, whose share is determined in the statutory fund (property) of a business organization. these corporate rights include the power to participate in the management of a business organization, a right to receive a certain share of profit (dividends) of the organization and assets in case of liquidation of the latter in accordance with the law, as well as other powers provided by law and statutory documents (podatkovyi kodeks ukrainy, 2011) and, for example, the rights to use websites or aspects of commercial secrecy. it is important that the object of intangible assets, which was received for use, is considered by the public sector entity (the licensee) on the off-balance sheet account in the valuation, which is determined on the basis of the amount of remuneration established in the contract. in this case, payments for the given right of use of intellectual property objects are included in the expenses of the reporting period by the licensee. these payments are in the form of periodic payments and they are calculated in order and terms established by the agreement. also, some of the positions of well-known, civilized scientists suggest the presence of servitudes for movable things. for example, o. a. podoprigora notes that the object of servitude may be movable property: animals, vehicles, equipment, household goods, etc. (tsyvilnyi kodeks ukrainy, 2004). ch. azimov emphasizes that the subject of servitude can be either immovable (land, buildings, apartments, houses, etc.), or movable property (raw materials, goods, etc.) (azimov). although these theoretical approaches were not clearly fixed in the legislation, were only mentioned during the drafting of the civil code of ukraine. therefore, servitude on the baltic journal of economic studies 57 vol. 4, no. 5, 2018 movable property can exist, for example, for a thing, which is defined by individual characteristics (perhaps the loan features some peculiarities of servitude on a movable thing). in this context, in our opinion, t. v. predchuk has a successful scientific position about the types of way-leaves according to the classification criteria, which are in some way enshrined in national legislation. firstly, by the way of establishing: servitude can be according to the property of things – servitude on a stationary and moving thing. secondly, according to the need of satisfaction of desires of other persons which can’t be satisfied in a different way – there are land, natural resources, personal. thirdly, according to the peculiarities of the legal nature of natural objects – there are forest, faunistic, floral, aquatic, inferior. fourthly, according to the terms, we can allocate the term, termless, and one-time servitudes. fifthly, by the possibility of charging, we can allocate paid and free of charge servitude. sixthly, according to the accounting standards – there are tangible and intangible servitudes. seventhly, according to the property of things – servitude can be on a stationary and movable thing (predchuk, 2016). of course, we do not reject other criteria for the classification of servitudes, but their full definition is impossible within one article. finally, we want to note that, in accordance with the civil code of ukraine, the testator has the right to make a will with the establishment of servitude. as well as the testamentary refusal, establishments of the servitude are burdening of a hereditary part of the successor under the will. the testator has the right to establish a way-leave on the land plot in the will, other natural resources or another real estate to satisfy people’s needs. the servitude determines the volume of the rights concerning the use of someone else’s property by a person. the servitude is not subject to alienation: it cannot be sold, given or exchanged. land servitudes, which are established in the will, the heir accepts the inheritance, in the future may also be passed on to inheritance. they can be alienated only with the land plot. personal servitude is established in the interests of a particular heir, and only this person has the right to use it. personal servitude is not subject to alienation and it cannot be inherited. it is terminated in case of the death of the heir, in whose favour it was established (posvidchennia zapovitiv). so, the current civil code of ukraine on species characteristics allows the inheritance of land and personal servitudes with certain peculiarities. there is no one single answer regarding the non-traditional types of servitudes outlined in our article, which of them can be passed on to inheritance or which may be the subject of the contract on the establishment of servitude. 3. conclusion so, there are so many scientific views on the types of servitude constantly encourages the implementation and improvement of scientific research in the field of property rights for someone else’s property. servitude is not an exception. our research leads us to believe that from the standpoint of accounting, we can speak of the presence of intangible servitudes, which are connected with the recognition and accounting of intangible assets. the law on accounting determines the economic benefits that are the criterion for recognizing any asset as a potential opportunity for an enterprise to obtain funds from the use of assets. however, the receipt of funds does not necessarily have to be direct, that is, from the use of the asset as a commodity, or as a tool for obtaining cash income. some objects are used to receive income indirectly, that is, in the economic system, which is the enterprise. this may not only be an input financial stream (revenue) but also a reduction in outflows (savings). consequently, if the use of an object at the enterprise can potentially positively affect the overall performance of this system (lead to income generation) and if an object can be alienated with the receipt of certain funds – these both cases can prove about the existence of an asset recognition criterion. and hence we can talk about the possibility of using contractual constructions to establish servitude as a regulatory component that combines economic and civil-law components. that is why; taking into account the specific features of servitude, our future scientific questions may be the clarification of the issues about which type of servitude may be subject to contractual or inheritance legal relationships and what encumbrances it contains, concerning the object in private-law or economic legal relations. references: tsyvilnyi kodeks ukrainy vid 16.01.2003 № 435-iv (2003) [civil code of ukraine of 16.01.2003 № 435-iv] vidomosti verkhovnoi rady ukrainy. № 40-44. st. 356. zemelnyi kodeks ukrainy vid 25.10.2001 № 2768-iii (2002) [land code of ukraine of 25.10.2001 № 2768-ііі] vidomosti verkhovnoi rady ukrainy. № 3-4. st. 27. pravo zemelnoho servitutu [the right of the earth's servitude]. url: http://shevchenkove.org.ua/.../pravo%20 zemelnoho%20se-zekranu lisovyi kodeks ukrainy vid 21 sichnia 1994 roku zi zmin. i dop. stanom na 28 hrudnia 2015 roku [forestry code of ukraine of january 21, 1994 with amendments. and add as of december 28, 2015] ofitsiinyi sait verkhovnoi rady ukrainy. url: http://www.rada.gov.ua baltic journal of economic studies 58 vol. 4, no. 5, 2018 tomyn, o. o. (2013). osoblyvosti pravovoho rehuliuvannia faunistychnykh servitutiv v ukraini [features of legal regulation of faunal servitude in ukraine]. prykarpatskyi yurydychnyi visnyk, 1(3), 204. pro myslyvske hospodarstvo ta poliuvannia: zakon ukrainy vid 22.02.2000 № 1478-iii [about hunting economy and hunting: law of ukraine dated 22.02.2000 № 1478-iii]. url: http://zakon.rada.gov.ua/go/1478-14 sokolova, a. k. (2005). florystychni servituty [floralist servitude]. problemy zakonnosti, 75, 99-107. vodnyi kodeks ukrainy (1995) [water code of ukraine]. vidomosti verkhovnoi rady ukrainy. № 24. st. 189. kodeks ukrainy pro nadra (1994) [code of ukraine on mineral resources]. vidomosti verkhovnoi rady ukrainy. № 36. st. 340. yurchishin, n. g. (2015). legal nature of forest servitude [legal nature of forest servitude]. precarpathian legal gazette, 2(8), 78. polozhennia «pro servitutne vykorystannia zemel komunalnoi vlasnosti terytorialnoi hromady m. mukachevo» [regulation "on the servitude use of communal land ownership of the territorial community of mukachevo"]. url: http://mukachevo-rada.gov.ua/prozatverdzhenniapolozhenniaproser vitutnevykorystanniazemelkomunalnoivlasnostiterytorialnoihromadymmukachevo horodyskyi, m. p. (2012). teoretychni zasady bukhhalterskoho obliku operatsii za dohovoramy pidriadu: napriamy transformatsii [theoretical principles of accounting of operations under contract work: directions of transformation]. visnyk zhytomyrskoho derzhavnoho tekhnolohichnoho universytetu. seriia: ekonomichni nauky, 4(62), 66. polozhennia (standart) bukhhalterskoho obliku 8 «nematerialni aktyvy», zatverdzhene nakazom ministerstva finansiv ukrainy vid 18.10.99 № 242 [regulation (standard) of accounting 8 "intangible assets", approved by the order of the ministry of finance of ukraine dated 18.10.99 № 242]. podatkovyi kodeks ukrainy (2011) [tax code of ukraine]. vidomosti verkhovnoi rady ukrainy. № 13-14, № 15-16, № 17. st. 112. nakaz ministerstva finansiv № 242 vid 18.10.99 roku «pro zatverdzhennia polozhennia (standartu) bukhhalterskoho obliku» [order of the ministry of finance no. 242 of 18.10.99 "on approval of the accounting regulations (standard)"]. url: http://zakon2.rada.gov.ua/laws/show/z0750 iavorska, o. (2011). mainovi prava yak obiekty tsyvilnoho oborotu [property rights as objects of civilian turnover]. visnyk lvivskoho un-tu, seriia yuryd., 53, 225-231. pro avtorske pravo i sumizhni prava (1994) [about copyright and related rights]. vidomosti verkhovnoi rady ukrainy. № 13. st. 64. mozolyna, v. p., kulahyna, m. y. (1980). hrazhdanskoe y torhovoe pravo kapytalystycheskykh hosudarstv [civil and commercial law of capitalist states]. m. frantsuzskyi hrazhdanskyi kodeks: ucheb.-praktych. kommentaryi (2008). [french civil code: practical training. commentary]. m.: prospekt. tsyvilnyi kodeks ukrainy: naukovo-praktychnyi komentar (2004) [the civil code of ukraine: scientific and practical commentary]. k.: istyna. url: http://uristinfo.net/2010-12-27-04-58-59/76-komentar-tsivilnijkodeks-ukrayini. azimov, ch. servituty v tsyvilnomu pravi ukrainy [servitudes in civil law of ukraine]. url: http://dspace.nulau.edu.ua/ bitstream/123456789/4792/1/azimov_107.pdf predchuk, t. v. (2016). vydy servitutiv u konteksti zdiisnennia tsyvilnykh pravovidnosyn [types of servitudes in the context of the implementation of civil legal relations]. naukovyi visnyk publichnoho ta pryvatnoho prava, 1, 134-140. posvidchennia zapovitiv [the verification of wills]. url: http://old.minjust.gov.ua/30749 baltic journal of economic studies 1 vol. 4, no. 5, 2018 corresponding author: 1 kyiv national university of technologies and design, ukraine. e-mail: kasich.alla@gmail.com 2 kyiv national university of technologies and design, ukraine. e-mail: breus.svitlana@gmail.com 3 kyiv national university of technologies and design, ukraine. e-mail: g.haystova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-1-9 the economic security of higher education institutions from the perspective of international competition alla kasych1, svitlana breus2, yevheniia khaustova3 abstract. the purpose of the article is to develop a methodological approach towards assessing the economic security of institutions of higher education. methodology. there has been generalized the experience of foreign universities in terms of providing high standards of educational and research process in the context of ensuring their economic security in modern conditions. the study has been conducted on the comparison of aggregate indicators of the economic security of heis based on the results of factor analysis (the method of the main components). the output data are formed taking into account the main approaches to constructing a balanced system of indicators based on the results of cluster analysis. the integral indicators of economic security of heis and integral indicators of economic security in general have been calculated based on the values of factor loadings and weighting coefficients of indicators for each group. results. the system of performance indicators of the world leading universities has been formed and the key factors of economic security of foreign universities have been identified taking into account the generalized experience of foreign universities. the developed methodological approach to the assessment is universal and provides opportunities for developing measures to improve the level of economic security of institutions of higher education. studies have shown that the economic security of economic entities is not least determined by the management efficiency of intellectual resources. practical implications. the calculated level of hei economic security is an indicator not only for protecting it from threats but also for the causal link between socio-economic development of the state, its economic potential and the level of higher education. value/originality. the holistic scientific and practical study has been carried out in the article taking into account the interconnection of higher education and economic security of institutions of higher education and a methodical approach to the evaluation of the economic security of heis has been developed. the above stipulates the necessity of developing a methodological approach to assessing the risks to the economic security of institutions of higher education on the basis of possible threats to their activities. key words: balanced indicators system, development and personnel training indicators, factor analysis, aggregate indicators, economic security of institutions of higher education. jel classification: c38, c43, i25 1. introduction institutions of higher education play a leading role in training highly skilled professionals to meet the labour market needs, which is actualized in the context of globalization and the transition to an economy of knowledge. at the same time, ensuring their economic security plays an important role both in the development of the state and society as a whole because the economic security of institutions of higher education is the heis protection from the negative influence of a number of factors from the external and internal environment in terms of efficiency of resources available to protect against their activities’ threats. thus, the level of economic security of institutions of higher education is an indicator not only of protecting them from threats but also of the causal link between socio-economic development of the state, its economic potential, and the level of higher education. universities in developed countries are not just educational institutions but are at the forefront of the society, science and culture development, and therefore, their development forms not only their security but also baltic journal of economic studies 2 vol. 4, no. 5, 2018 is the basis of the whole country economic security. that is why, in the process of university development strategy, there are consultations with the community, which allow taking into account the requirements of the public, local authorities, strategic guidelines for the state development. for example, the university of washington mission is to create a unique community of teachers and students who are capable of large-scale research and seek to improve the lives and livelihoods of students in the region, the country and the world (washington university consolidated financial statements). an even more ambitious mission is the one of cambridge university, which is to contribute to the development of society through the achievement of teaching, learning, and research at the highest international level (university of cambridge annual report, 2016). leading universities in the educational services market clearly understand that their credibility and future economic security depend on the educational process quality and scientific achievements level. accordingly, one should dwell on the foreign universities experience generalization in terms of ensuring the high standards of educational and research process. the main indicators characterizing the world leading universities activities are presented in table 1. key factors of the economic security of foreign universities are the following: personnel, material and technical base, financial capabilities, organizational innovations, etc. personnel, its reputation, qualification, initiative, ability to apply innovative approaches in professional activity determine the quality of teaching. the effectiveness of scientific research is determined not only by the university’s revenues from commercialization but also by the number of firms founded on the basis of university scientists’ intellectual property. publications by lecturers and university students and their presentation in scopus and thomsonreuters bases are important. the hirsch teacher’s index is used not only in making managerial decisions about career growth but also in making agreements. material and technical base. only a high-quality material and technical base will enable the university to achieve excellence in teaching, research and support of the world image in the future. this is the main approach when determining the amount of funding for these goals. most of the leading universities have their own campuses. accordingly, universities develop a campus development program that seeks to improve not only the learning process conditions but also conditions for the comprehensive development of students and their living conditions through the transport systems and infrastructure upgrading. creating, for example, nanoscale hubs, business schools, incubators – all these investments in the development of the material and technical base are the ability of students to become active participants in the already innovative processes, which significantly increases the image of the university and, therefore, its economic security. financial capabilities. “if you see any economy that is not doing well, find out what is spent on education” (ola, 1998; omotor, 2004). the basis of universities economic security in modern conditions is their financial capabilities, which have significant differences in different countries. so, leading universities have annual revenues of $2-9 billion (table 1) against the background of total annual education expenditure in ukraine, which is about 6% of gdp and does not exceed $6 billion. table 1 world leading universities activities indicators indicators oxford stanford harvard charles university in prague 2015 2016 2015 2016 2015 2016 2016 1. number of students, bachelors, masters, phd 22348 11703 10645 22602 11603 10999 16190 6994 9196 16336 7032 9304 21430 7240 14190 21790 7330 14460 51438 18896 32542 2. number of teaching staff, professors, researchers 1680 4501 1747 4634 2153 2180 1514 1631 4653 3. revenues, us dollars, millions 1982 1718 9051 9797 4525 4776 393 4. expenditures, us dollars, millions 1714 1737 8351 9307 4463 4700 391 5. net profit, us dollars, millions 268 -19 700 490 62 76 2 6. net assets, us dollars, millions 3692 3913 30434 31719 45402 43397 601 (assets) 7. fixed assets, us dollars, millions 1640 1728 7797 9000 6184 6529 8. average cost of a bachelor’s degree, us dollars 44184 45729 source: facts and figures charles university, financial report harvard university 2016, stanford university annual report 2016, the university of oxford financial statements 2015/16 baltic journal of economic studies 3 vol. 4, no. 5, 2018 supporting financial sufficiency for the university means the ability to continue to attract and retain the best staff, as well as provide research and teaching materials that are consistent with the world’s leading universities positions. taking into account all the above, it should be noted that one of the major threats to higher education in ukraine is, among other things, the spread of globalization processes in the educational sector and the expansion of the international education market. the experience of foreign universities, in particular in the context of improving the educational service quality, is outlined in works (banjong & olson, 2016; ding, 2016; nicholls, 2018). the generalization of the results of the international education market study, conducted on the basis of various statistical information, suggests that the market of international education is rather dynamic and opens opportunities for competitive educational systems. in total, over the past 20 years, the number of mobile foreign students has increased by almost 3 times from 1.7 million in 1996 to 4.7 million in 2017. experts predict that the number of students to study abroad should reach 8 million in 2025 (figure 1). according to the experts (global: international students: a $100 billion business? 2009) who have tried to assess this global market segment, the potential value will already be $100 billion in the near future. this suggests that education is turning into a business, which, in the case of international attractiveness, provides significant financial resources to the country’s economy. accordingly, the provision of qualitative educational services allows the country to attract sufficient financial resources to the economy. for example, in 2014, international students have invested in the us economy nearly $27 billion (banjong & olson, 2016). taking into account the foregoing it should be noted that in modern conditions, the relationship between higher education and economic security is observed. the study of the economic security level has been conducted on the basis of data from the ukrainian heis, which are typical representatives of the educational services market. the destructive processes in the ukrainian economy are reflected in the activities of higher education institutions (hei) as elements of the social and economic system. the negative trends from the demographic crisis and external migration were accompanied by social and economic consequences of external aggression, which did not go beyond higher education. moving education institutions from the temporarily occupied territories was an objectively necessary measure, which had significant negative consequences: total loss and the need to restore the material and technical base, reduction of a half of academic staff (as) and students, as well as the loss of partially recovering intellectual resources (methodological support of education processes, software products, information bases, image and business relations), etc. taking into account the importance of heis for the development of the country’s social and economic system, determining their economic security, it is expedient to consider the possibility of reproducing their intellectual potential of the nation, which has a positive impact on the economic security of the state as a whole. it is important to further develop universal methodological approaches to assessing the economic security of the hei, in particular, those moved from temporarily occupied territories. 2. literature review scientists also consider the role of education in the formation of national innovation systems (kasych & vochozka, 2017), and foreign experience, in particular, as for the sources of funding hei activities (kasych & tsygan, 2013) has been studied in a certain way. the relationship between education and economic security and the ability of education to influence the economic vulnerability level of any country are highlighted in the figure 1. the number of students studying abroad source: compiled according to the data (number of international students) 0,8 1,1 1,7 3 4,3 8 0 1 2 3 4 5 6 7 8 9 1975 1985 1995 2005 2011 2025 (forecast) baltic journal of economic studies 4 vol. 4, no. 5, 2018 work (munteanu & munteanu, 2015). the research (kendiukhov, 2008) shows that the economic security of an economic entity today is largely determined by the efficiency of intellectual capital management. therefore, the strengthening of the intellectual component in the activities of educational institutions of ukraine (illiashenko, 2011, sardak, 2016, kasych & vochozka, 2017) requires an appropriate addition and systematization of factors that should be taken into account in the formation of indicators for estimating economic security. despite the consideration of issues related to the estimation of the economic security of higher education institutions, it is necessary to expand the database of empirical studies, in particular, taking into account the results of relevant studies on the institutions’ economic security in the condition of external aggression. the research on the comparison of aggregate indicators of economic security of higher education institutions (moved from temporarily occupied territories) based on the results of factor analysis (by principal component method). 3. purpose and methodology of the article the purpose of the article is to develop a methodological approach to assessing the economic security of institutions of higher education. conducting research on the comparison of aggregate indicators of heis economic security based on the results of factor analysis (by principal components method). the output data have been formed on a balanced system of indicators by the results of cluster analysis. based on the values of factor loadings and weight coefficients of indicators for each group, integral indicators of individual universities economic security have been calculated. in order to systematize the estimation indicators for hei economic security, there have been taken into account the balanced indicator system (the balanced scorecard – bsc) (kaplan & norton, 2005) adapted to the needs of institutions of higher education (breus, khaustova & denysenko, 2017; breus, 2018). the output data (indicators) of hei have been formed according to the following groups: “finance”, “students”, “internal processes”, “academic staff development and training” subdividing them into stimulant indicators and disincentive indicators. at the same time, stimulant indicators (contributing to raising the level of economic security) include the following: the group “finance”: the correlation between the licensed volume of acceptance to studies and the volume of the public procurement for the 1st year of studying according to the training programs of bachelors and masters; the average number of academic staff per one economic contract and scientific research, financed by budget funds; the group “students”: the correlation between the number of students and the number of academic staff, the correlation between the number of acceptance to studies to the 1st year of full-time education and the number of titles of accredited specialties for bachelor’s and master’s programs; the group “internal processes”: percentage of fulltime academic staff having a doctor’s degree/degree of candidate of sciences and the total number of full-time academic staff, the correlation between the total book funds and the number of students; the group “academic staff development and training”: the level of academic staff creative and innovative performance, the coefficient of academic staff scientific recognition. the disincentive indicators (contributing to lowering the level of economic security) include the following indicators; the group “finance”: the correlation between the licensed volume of acceptance to studies and the volume of the public procurement for the 1st year of studying according to the training programs of bachelors and masters; the group “students”: the correlation between the licensed volume of acceptance to studies and the number of applicants to the 1st year of full-time study programs of bachelors and masters, the correlation between the number of students in full-time and parttime studies; the group “internal processes”: the correlation between the number of titles of accredited specialties to the programs of bachelor/masters training and the number of departments; the group “academic staff development and training”: the coefficient of the necessity of computing technology and access to network resources. using the statistic software statistica and factor analysis (method of the principal components), out of the output data of every hei there have been outlined principal components (factor 1 and factor 2), at the same time: for all institutions, the indicators of the “internal processes” group are merged only into factor 1, which indicates the expediency of reducing their number, in particular, by introducing a common indicator – percentage of full-time academic staff having a doctor’s degree/degree of candidate of sciences or being a professor or associate professor and the total number of full-time academic staff; for all institutions, the indicators of the “students” group immediately form factors 1 and 2, except for the correlation between the number of students in full-time and part-time studies, which is included only in factor 1. it indicates the relative continuity of this correlation and the possibility of using it as a universal indicator in assessing the economic security of education institutions; baltic journal of economic studies 5 vol. 4, no. 5, 2018 the indicator of the “finance” group – the correlation between the licensed volume of acceptance to studies and the volume of the public procurement for the 1st year of studying has a negative value of factor loadings. it corresponds to the essence of this indicator, that is, an increase in the level of budget financing against the background of reducing the number of educational contracts and is a negative factor in ensuring the economic security of the educational institution. according to the factor analysis results of the input data, there were determined factor loadings, on the basis of which coefficients of each indicator for each group of each higher institution were calculated (the product of the maximum loading for each indicator and the share of the total dispersion is calculated, multiplied by the total sum of the outputs of indicators for each group, and then the weighting factor of each indicator for each group for each grade is calculated as the ratio of the product for each indicator and the total amount of products) using the recommendations of national institute for strategic studies (2013), ministry of economic development and trade of ukraine (2013), state statistics committee of ukraine (2003). normalized values of the stimulant indicators and destimulant indicators, as well as their weighting factors, become the basis for calculating integral indicators of economic security for each group of a separate high institution and an integral indicator of economic safety with the use of additive convolution (ministry of economic development and trade of ukraine (2013), state statistics committee of ukraine (2003) (formula 1). і d ym i n i i= × = ∑ 1 , (1) where іm is an aggregate indicator (integral indicator for the group of indicators) / sub-index of the mth group of indicators of hei economic security, m = (1, 2, 3, 4); di is the weight of the indicator, which determines the degree of contribution of the ith indicator to the integral index of the component (groups of indicators) of hei economic security; yi is a normalized value of the ith indicator; n is the number of indicators used to evaluate the ith indicator in the aggregated indicator (integral indicator in the group of indicators) / sub-index of the mth group of indicators of hei economic security; σdi = 1; 0 ≤ di; yi ≤ 1. the information about an integral indicator of economic security in general for each higher institution with the use of additive convolution (ministry of economic development and trade of ukraine (2013), state statistics committee of ukraine (2003) has been carried out by the formula 2. іі d iås m m mhei = ×∑ , (2) where ііåshei is an integral indicator of hei economic security; dm is weight coefficient, which determines the degree of contribution of the index/subindex of the mth group of economic security to the integral index of economic security of institutions of higher education: σdm = 1; 0 ≤ dm; im is an aggregate index/subindex of the mth group of economic security, where m = (1, 2, 3, 4). 4. the main material of the research clustering heis according to the indices of the domestic ranking in order to study the dynamics of indicators of economic security, there has been carried out a selection of heis from those moved from temporarily occupied territories of ukraine. it has been based on the assumption that institutions with better rating positions have a performance dynamics that reflects more fully the general tendencies in changes in the economic security of all heis moved from temporarily occupied territories. the cluster analysis of heis has been conducted using the software statistica and the k-medium method. after normalizing the initial data (indexes of the integral indicator in the ranking of heis “top-200 ukraine”), heis were assigned to clusters at a minimum euclidean distance to the centre of gravity of such a cluster. the configuration of the obtained clusters and distances to the centre of gravity are given in table 2. according to the received data, the first cluster includes heis that either have relatively retained their positions in the rating and continue to occupy higher positions in comparison with other heis displaced from temporarily occupied territories, such as: donetsk national technical university (donntu); vasyl stus donetsk national university (vasyl stus donnu); volodymyr dahl east ukrainian national university (v. dahl eunu); luhansk taras shevchenko national university (t. shevchenko lnu). the second cluster includes only one hei, which has the growth of the academic potential index, at the same time the decrease of innovative activity index and international recognition index; as a result, this university has considerably worsened its rating positions. the third cluster includes such heis that show a decrease in all indices and they occupy lower-ranking positions compared with heis in the clusters 1 and 2. results of the integrated assessment of the safety level of heis the results of calculating aggregated economic security indicators by groups are presented in table 3. according to table 3, a factor analysis of integral indicators by groups (by principal component method) was conducted, which resulted in factor loadings before and after the rotation procedure (quartimax normalized) for each group for a specific hie (the value of the most significant indicators is highlighted) (table 4). baltic journal of economic studies 6 vol. 4, no. 5, 2018 table 2 the configuration of each cluster and the distance to the centre of gravity cluster, distance observations (institution of higher education) cluster 1 c_1 donetsk national technical university (donntu) c_2 vasyl stus donetsk national university (vasyl stus donnu) c_3 volodymyr dahl east ukrainian national university (v. dahl eunu) c_4 luhansk taras shevchenko national university (t. shevchenko lnu) distance 0.479480 0.386527 0.606224 1.004392 cluster 2 с_6 (donetsk national medical university) donnmu distance 0.000000 cluster 3 c_5 donetsk national university of economics and trade named after mykhailo tugan-baranovsky (donnuet named after m. tuganbaranovsky) c_7 (donetsk state university of management) dsum c_8 v.i. vernadsky taurida national university (v.i. vernadsky tnu) c_9 donbas state technical university (donstu) c_10 luhansk state medical university (si lsmu) c_11 luhansk national agrarian university (lnau) c_12 donbas national academy of civil engineering and architecture (donnacea) distance 0.596213 0.366310 0.286135 0.206771 0.482595 0.365469 0.563731 table 3 integral indicators (aggregated indicators) of economic security by groups years groups “finance” “students” “internal processes” “development and training of academic staff ” donntu 2014 0,9925 0,6853 0,0 0,5038 2015 0,5339 0,4151 0,4703 0,3082 2016 0,0326 0,3534 1,0 0,5219 vasyl stus donnu 2014 0,8344 0,2910 0,6467 0,7077 2015 0,0 0,2554 1,0 0,3131 2016 0,5475 1,0 0,1805 0,4227 v. dahl eunu 2014 0,6659 0,9565 0,2498 0,0621 2015 0,3261 0,3820 0,4071 0,3928 2016 0,4690 0,2015 0,7502 1,0 t. shevchenko lnu 2014 0,3351 0,8475 0,4821 0,0080 2015 0,1202 0,1615 0,3965 0,9341 2016 0,8802 0,3475 0,7244 0,5102 based on formula 2 and according to tables 2 and 3, there have been done the calculations of the integral indicator of hei economic security by years (table 5). the range of inherent values of hei economic security levels is enshrined in the guidelines of ministry of economic development and trade of ukraine (2013), according to which the level is equal to 0 is absolutely dangerous; the level in the range from 0 to 0.2 is critical; from 0.2 to 0.4 is dangerous; from 0.4 to 0.6 is unsatisfactory; from 0.6 to 0.8 is satisfactory; from 0.8 to 1 is optimal. the data in table 5 show the increase of the level of economic security for v. dahl eunu and t. shevchenko lnu to the satisfactory level during 2014-2016. the level of economic security of donntu during 2014-2016 has remained at the unsatisfactory level, while the level of economic security of vasyl stus donnu has declined from satisfactory to unsatisfactory level. the deterioration of their economic security is explained by the fact that after having lost a significant part of its potential, these heis as the most powerful does not have enough resources for its relatively quick recovery, baltic journal of economic studies 7 vol. 4, no. 5, 2018 as opposed to v. dahl eunu and t. shevchenko lnu. the latter, despite the lowest level of economic security in 2014, partially offset their losses due to the relative improvement of the intellectual component and the increase in the share of non-budget financing. 5. conclusions the study of foreign experience in ensuring the development of leading universities allowed, among other things, to highlight the importance of ensuring effective staff management through the selection of hei scientists and university entrants; development of material and technical base; the expansion of financial capacity, the promotion of professional growth by teachers and students, etc. taking into account the generalized experience of foreign universities, a system of performance indicators of the world leading universities has been formed and the key factors of economic security of foreign universities are highlighted. assessing the economic security of heis as elements of the social and economic system, it is expedient to consider the intellectual component. studies have shown that the economic security of economic entities is not least determined by the management efficiency of intellectual resources. in this regard, it is important to pay attention to the opinion of leading scientists on the hei management on the expediency of expanding factors in the formation of indicators for estimating their economic security. table 4 factor loadings before and after rotation groups factor loadings (before rotation) factor loadings (after rotation) factor 1 factor 2 factor 1 factor 2 donntu “finance” -0,9918 -0,1278 0,9943 -0,1064 “students” -0,9700 0,2430 0,9646 0,2638 “internal processes” 0,9907 0,1363 -0,9934 0,1150 “development and training of academic staff ” -0,0260 0,9997 0,0045 1,0 total dispersion 2,9067 1,0933 2,9059 1,0941 the share of total dispersion 0,7267 0,2733 0,7265 0,2735 vasyl stus donnu “finance” 0,8862 0,4633 -0,3161 -0,9487 “students” 0,6462 -0,7632 -0,9949 0,1006 “internal processes” -0,8932 0,4497 0,9550 0,2965 “development and training of academic staff ” 0,6127 0,7903 0,1078 -0,9942 total dispersion 2,3760 1,6240 2,0135 1,9865 the share of total dispersion 0,5940 0,4060 0,5034 0,4966 v. dahl eunu “finance” 0,6962 -0,7179 -0,4041 0,9147 “students” 0,9905 -0,1373 -0,8815 0,4721 “internal processes” -0,9337 -0,3580 0,9999 0,0121 “development and training of academic staff ” -0,9481 -0,3179 0,9995 -0,0304 total dispersion 3,2366 0,7634 2,9394 1,0606 the share of total dispersion 0,8091 0,1909 0,7348 0,2652 t. shevchenko lnu “finance” -0,7843 0,6204 0,9979 0,0654 “students” -0,6355 -0,7721 -0,0459 0,9989 “internal processes” -0,7695 0,6386 0,9991 0,042 “development and training of academic staff» 0,7823 0,6230 -0,1629 -0,9866 total dispersion 2,2231 1,7769 2,0226 1,9774 the share of total dispersion 0,5558 0,4442 0,5057 0,4943 table 5 the value of integral indicators of institutions’ economic security and over the years (ranking of institutions of higher education “top-200 ukraine”) years donntu vasyl stus donnu v. dahl eunu t. shevchenko lnu 2014 0,5520 (20) 0,6161 (25) 0,4282 (34) 0,4193 (33) 2015 0,4867 (23) 0,3921 (32) 0,3874 (37) 0,3999 (49) 2016 0,4696 (25) 0,5416 (27) 0,6484 (41) 0,6180 (64) baltic journal of economic studies 8 vol. 4, no. 5, 2018 taking into account the mentioned above, it should be noted that the developed methodological approach can be universal and widespread among all heis. its results can become the basis for the development of targeted measures and for the increase of the economic security level of institutions of higher education. on this ground, the more vulnerable from the point of view of economic security are institutions whose educational and scientific activities require a strong technical basis (laboratories, productions, etc.) with a relatively high level of budget financing. the implementation of this will facilitate the enterprises needs securement to qualified specialists. this in its turn, in the long run, will contribute to raising the level of ukraine’s economic development on the innovation basis, its competitiveness and ensuring the economic security both of heis and of the state and national security in general. empirical studies concerning the hei economic security assessment require the development of measures, the realization of which will help to alleviate the negative trends that have accumulated during education in recent years. this can be achieved by increasing the international competitiveness of ukrainian universities, which requires: to develop and implement a strategy for attracting foreign students to study in ukraine through the improvement of the material and technical base, the provision of competitive educational programs, and teachers’ skills improvement; to conduct real research on foreign students’ needs in different countries and ways to meet them; to study foreign universities experience in offering high-quality educational services in the international market. the mentioned above stipulates the necessity of developing a methodological approach to assessing the risks to the economic security of institutions of higher education on the basis of possible threats to their activities. references: washington university consolidated financial statements. retrieved from: https://wustl.edu/about/missionstatement/ (in english) university of cambridge annual report 2016. retrieved from: https://www.cam.ac.uk/annual-report (in english) facts and figures charles university. retrieved from: 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baltic journal of economic studies 338 vol. 4, no. 5, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 lviv polytechnic national university, ukraine. 3 national academy of internal affairs, ukraine. e-mail: strel1977@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-338-342 doctrinal characteristic of public procurement of medicines as a fundamental element of state financial guarantees for the pharmaceutical sphere oksana strelchenko1, iryna lychenko2, liubov shevchenko3 abstract. the aim of the article is to study theoretical, methodological, and doctrinal approaches to public procurement of medicines and on this basis to determine ways to improve domestic legislation in this sphere. the subject of the study is public procurement of medicines. methodology. the study is based on general scientific and special-scientific methods and techniques of scientific knowledge. the historical and legal method enabled to determine the preconditions for public procurement of medicines as a fundamental element of state financial guarantees for the pharmaceutical sphere in ukraine and in the world, as well as the development of scientific and theoretical views on the nature, problems, and methods of public procurement of medications. the comparative legal method enabled to compare doctrinal approaches to public procurement of medicinal products. the systemstructural method contributed to the consideration of public procurement of medications as a fundamental institutional and functional element of state financial guarantees for the pharmaceutical sector. the methods of grouping and classifying were the basis for the author’s approach to public procurement of medicines for the most important and practically significant criteria. the technical legal method enabled to interrogate the state of affairs in the statutory and legal regulation of the national system of public procurement of medications, to identify its disadvantages, gaps, contradictions and miscalculations, as well as to develop recommendations aimed at their elimination. the results of the study revealed that public procurement of medicines should be considered as an activity of a public administration or specialized agencies authorized by it, aimed at purchasing medicinal products by the procurer funded from taxpayer’s money and preserving the health of citizens via a transparent control by the state (via the prozoro system). practical implications. in the study: first, the key aspects of the genesis of public procurement of medicines are outlined; second, scientific approaches to their characteristics, available in the special literature, are analysed and compared; third, the author’s original perspective concerning legislative regulation and consolidation in the current legal regulations is substantiated. relevance/originality. the original author’s approach to the doctrinal principles of public procurement of medications is the basis for developing the most promising areas of improvement of domestic legislation in this sphere. key words: medicines, financing, pharmaceutical industry, tenders, state budget. jel classification: i13, h61 1. introduction in modern circulation of medicines and pharmaceutical services for the population of ukraine, one of the most important problems is the efficient use of state financial resources to provide health care institutions with medicinal products and medical devices fully. state regulation of health care includes the public procurement system. public procurements are a promising and important macroeconomic regulator forming a fully-fledged competitive environment in health services, and implementing stabilization policy in this sphere (dolinovskyi). however, under strict financial constraints, a new qualitative medical provision for the population is impossible without the efficient use of resources aimed at public procurement of medicines, medical equipment and modern conditions for medical institutions. first, the question arises about the timely provision of patients with the necessary medicines that enter the ukrainian market through the appropriate public procurement procedure. in ukraine, the state of affairs in public procurement of medicines is of concern to not only representatives of law enforcement bodies, business organizations and the ukrainian public, but baltic journal of economic studies 339 vol. 4, no. 5, 2018 also representatives of international organizations and funds (dolinovskyi). the improvement of the pharmaceutical industry in the area of development and implementation of the most effective and safe medications is a priority for many leading countries of the world and the most famous pharmacological companies. this is because of the social significance of the products of the industry, changes in the demographic situation in all countries of the world due to the aging of the population, increase in the incidence among people, especially the elderly. according to the un, in countries of the organization for economic cooperation and development (oecd), which includes 34 countries (mainly from europe and north america), the population aged 65 and over is more than 17% of the total, and by 2019, according to the forecast, will increase by 20%. the share of the young and able-bodied population is decreasing. in 2020, about 9.4% of the populations (719.4 million people) will be people aged 65 and over, compared with 7.3% (477.4 million) in 2015 (human development report, 2009; franklin, andrews, 2013). in legal science, the issues of procurement of medicines were studied by domestic and foreign scientists, such as n. o. vetiutneva, s. h. ubohov, o. v. kuzmenko, v. k. kolpakov, h. h. pylypenko, a. p. radchenko, m. v. rymar, o. h. strelchenko, l. o. fedorova and others. however, public procurement of medicines is not considered enough, consequently, the chosen topic of the scientific article is of timeliness and importance. therefore, understanding the doctrinal approaches to public procurement of medicines becomes relevant and constructs the aim of this article. for its successful achievement, the following tasks should be solved: first, to outline the key aspects of the genesis of public procurement of medicines; second, to analyse the perspectives available in the special literature in relation to public procurement of medicines; third, to propose an author’s original approach to public procurement of medicines. 2. main material in ukraine, the current state of affairs of public procurement of medicinal products and medical devices in the healthcare sector poses a threat to the timely provision of patients with quality, safe, and effective medicinal products and medical devices, which leads to a deterioration in public health and an increase in mortality rates. in ukraine, public procurement of medicinal products and medical devices is a complex procedure with many components and is regulated by legal regulations, in particular the law of ukraine “on public procurement,” in which medicinal products and medical devices are considered as any other goods, by other laws and subsidiary laws in the health care. this is unacceptable in relation to medicinal products and medical devices. therefore, to interrogate public procurement in medication circulation, the genesis of determinants of “medicines”, “public procurement” and “public procurement of medicines” should be studied. for example, medicines are one of the most economically attractive products. however, it should be considered that medicines are not an ordinary commodity but an important means of ensuring constitutional human rights to health and life. it is important to explore the term “medicines” to assure the quality, safety, and efficiency of medication circulation. article 2 of the law of ukraine “on medicines” defines a “medicinal product” as any substance or a combination of substances (one or more api and excipients) having properties for treating or preventing diseases in human beings, or any substance or a combination of substances (one or more api and excipients) that may be used to prevent pregnancy, restore, correct or modify physiological functions of human beings by pharmacological, immunological or metabolic action or to make medical diagnosis (pro likarski zasoby). the free encyclopaedia wikipedia interprets the term “medication” (also referred to as “medicine,” “pharmaceutical drug”) as substances or a combination of substances used for preventing, diagnosing, treating diseases, preventing pregnancy, eliminating pain; derived from blood, blood plasma, organs and tissues of human beings or animals, plants, minerals, chemical synthesis (pharmaceuticals, drugs or medicines) or with the use of biotechnologies (vaccines). the pharmaceutical encyclopaedia defines a “medicinal product” as a product of pharmaceutical activity having a certain composition, a certain dosage form, packaging, expiration date. it is assigned to a sick person with a view to diagnosing, treating or relieving the symptoms of the disease or changing the condition of organism’s physiological functions, as well as preventing, for example, contraceptives, stress drugs, etc. for medicinal products, strict requirements are put forward (therapeutic efficacy, safety, the accuracy of dosing active substances, stability, etc.), and their usage in medical practice is allowed only after state registration (farmakolohichna entsyklopediia). therefore, in this interpretation, the main feature is the action, composition, form, packaging and expiration date, which, in our opinion, do not convey a significant meaning. moreover, the definition of the origin and quality of the pharmaceutical product would be more appropriate. scientists-pharmacologists suggest a more formalized and legitimated definition of a medication. medicinal product is a pharmacological agent of natural, synthetic or semi-synthetic origin having properties to prevent pathological process or to cause a therapeutic effect on diseases and is officially authorized for treating patients by the official body of baltic journal of economic studies 340 vol. 4, no. 5, 2018 the state (chekman, horchakova, kazak, 2011). in this interpretation, therapeutic properties are recognized as a special feature of medicinal products, moreover, the official authorization by the state body, that is, the registration of the medication and its origin, is underlined as another important feature. according to m. i. yabluchanskyi and v. m. savchenko, a “medicinal product” is a pharmacological agent that, in the prescribed manner, is authorized by the authorized body for treating, preventing or diagnosing pathological conditions (diseases and clinical syndromes) in medical and veterinary practice (abduieva, bychkova, bondarenko, 2011). this definition emphasizes that medications should be legally permissible (in our case, be included in the state register of medicinal products) for the corresponding purposes, but does not describe real therapeutic properties for medical use. it should be noted that the proposed restriction of certain medicines with the introduction into the state register of medicinal products constrains business entities engaged in pharmaceutical activities. this affects the development of new medications and persons promoting a new, modern medicine in the medication market because the subject of their activities is not clarified. the medicinal product should be opposed to non-medicinal to solve this problem of pharmacists. in various works, it is called a pharmacological preparation, a medicinal substance, a medicinal compound, a pharmacological agent, a clinical sample, etc. the main difference from the medicinal product is that it is not included in the state register of medicinal products, and therefore, it is not permitted for use in ukraine. the pharmacological (non-medicinal) agents are medicines that are under development, inspection and testing, foreign medicines not authorized in ukraine, medicines authorized to use in ukraine earlier, but now authorization is absent (cancelled or expired), etc. (zyma, 2015). according to h. r . dzvoniv, n. i. makhonko, medicinal products are substances used for preventing, diagnosing, treating the disease, preventing pregnancy, derived from blood, blood plasma, as well as organs, tissues of human beings or animals, plants, minerals by synthesis or biological techniques (dzvoniv, makhonko). the identified determinants reveal that the lexeme “medicinal products” needs to be clarified because of its significant overload. therefore, the authors suggest an original determinant of a “medicinal product” as a substance or a combination of substances of organic (e.g. chloroform, ethyl chloride) and inorganic (e.g. oxygen and odrogen) origin with the corresponding pharmacological action, which are used for the prevention, diagnosis, treatment of diseases and prevention of unwanted pregnancy. the next research category is the determinant of “public procurement.” therefore, “public procurements” are procurements of goods, works, and services by the customer from public funds or on behalf of a public institution. the category “public procurement” can be also interpreted as: procurement carried out by the state or its separate subdivision; funded by the state; carried out in the interests of the state and the procuring body; the state controls the procurement (shcho take derzhavni/publichni zakupivli?). other interpretations of “public procurement” follow. public procurements include the following aspects: procurement is carried out by the public administration; the purchase of goods and services is funded from taxpayers’ money; procurement is carried out in the interests of citizens for the provision of quality services by a public administration or a state-owned enterprise; citizens can participate in controlling public procurement (shcho take derzhavni/publichni zakupivli?). hereinafter, the term “public procurement” means purchases carried out in ukraine before today’s reform. at the same time, “public procurement” means open and public tenders, which should become a reality of modern health care reform in general (shcho take derzhavni/publichni zakupivli?). therefore, the authors suggest an original definition of the determinant of “public procurement” as the activities of the public administration or its authorized structural units, aimed at procurement of goods, works, and services by the customer funded from the taxpayers’ money and carried out in the interests of citizens via a transparent state control (via the prozoro system). in the study, doctrinal characteristics of the category “public procurement of medicinal products” should be made because it is not studied by scientists and is not defined by the legislation. therefore, “public procurement of medicinal products” should be understood as the activities of the public administration or specialized agencies authorized by it, aimed at procurement of medicinal products by the customer funded from the taxpayers’ money and carried out in the interests of preserving the health of citizens via a transparent state control (via the prozoro system). however, it should be noted that the underlying and well-known problems in public procurement of medicinal products and medical devices are corruption and limited competition leading to public procurement of medicinal products and medical devices at inflated prices. over the last few years, many issues have been accumulated at different decision-making levels leading to a violation of the principle of equality of access to medicines and medical devices, and a state of affairs baltic journal of economic studies 341 vol. 4, no. 5, 2018 when patients remain without proper treatment and epidemics occur though they can be prevented by vaccination. measures have been taken to introduce best practices from other countries (for example, the use of a reference price pool, piloting of reimbursement), but these initiatives have been discontinued. as the problems in public procurement of medicinal products and medical devices constitute life-threatening situation, the existing system of public procurement of medicinal products and medical devices is inadmissible to maintain. considering that the proper implementation of any public procurement reform takes time, and provision of the population with the necessary medicinal products and medical devices should be permanent and continuous, the verkhovna rada of ukraine adopted a decision on the temporary, until march 31, 2019, transfer of public procurement of medicinal products and medical devices from the ministry of health of ukraine to specialized procurement organizations, by adopting the laws of ukraine no. 269-viii as of march 19, 2015, “on amendments to some laws of ukraine on ensuring timely patient access to appropriate medicinal products and medical devices through the implementation of public procurement with the involvement of specialized organizations carrying out procurement” and no. 332-viii as of april 9, 2015, “on amendments to the tax code of ukraine regarding the exemption from taxation of certain medicinal products and medical devices.” in addition, in the implementation of this procurement mechanism, a number of other legal regulations were adopted and/or amendments were made to the relevant legal regulations. therefore, on march 31, 2018, the countdown of the last year of procurement of medicinal products and medical devices with the involvement of specialized procurement organizations started. the date of march 31, 2019, is determined by legislation as the deadline for such procurement. the development of public procurement of medicines reveals that in 2014 the association agreement between ukraine, on the one part, and the european union, the european atomic energy community and their member states, on the other part, provides for the creation of a deep and comprehensive free trade area. to carry out the above-mentioned agreement, in the part of public procurement reform, the cabinet of ministers of ukraine approved the strategy for reforming the public procurement system (cabinet of ministers of ukraine) (“roadmap”). according to these documents, one of the most important and promising areas for reforming the public procurement system is the introduction of eu experience in centralizing procurement through the creation of a centralized procuring organization in ukraine (cabinet of ministers of ukraine). public procurement of medicinal products and medical devices in ukraine is carried out through centralized and decentralized systems. the decentralized system provides with the opportunity to take into account the needs of territorial communities of end users of goods and services procured. however, such a system is rather ineffective since it limits the possibilities for obtaining such benefits as saving through the combination of total procurements and time expenditures. moreover, such a system is not effective due to a significant number of low-paid workers, for whom procurement procedures are additional burdens that are above main occupational responsibilities, which leads to risks of corruption. numerous decisions of the antimonopoly committee on complaints about public procurement procedures of medicinal products and medical devices in the health care, with the statement of discriminatory conditions, indicate a potential customer engagement due to low motivation and/or insufficient qualification of specialists who formulate technical tasks and conduct procurement procedures. the central procurement system of the moh and decentralized procurement at the regional level has been ineffective for many years (unacceptably high prices, delay in tendering, the reluctance of companies to bid, which led to a reduction in competition, lack of medicines, etc.). furthermore, the problem of corruption is well known. the problem of the public procurement system in the health sector is multifaceted. the problems arise at stages of: a) the formation of a sectoral standard in the health care; b) the formation of a list of medicinal products and medical devices to be procured; c) the selection of medicinal products and medical devices for procurement; d) the formation of information on the subject of procurement and tender documentation, which may contain discriminatory conditions indicating that the documentation is being prepared for a particular participant; e) the activities of the tender committee, authorized to make changes to the information on the subject of procurement; g) public procurement of medicinal products and medical devices. at the same time, considering the importance of reforming the stage of preparation for procurement, this concept aims at solving problems that arise at the stage of public procurement of medicinal products and medical devices. to ensure transparency and explicability of costs during public procurement of medicinal products and medical devices, it is necessary to eliminate the shortcomings of legislative regulation at the specified stages of procurement, which can be used by unscrupulous customers and participants in procurement for corruption purposes and predation. however, the problem of underfunding, a significant effect of the exchange rate fluctuations on total public procurement of medicinal products and medical devices of foreign production and the lack of longterm multi-year planning of such procurements is well known. baltic journal of economic studies 342 vol. 4, no. 5, 2018 3. conclusions therefore, currently, public procurements of medicinal products are performed on a general basis only according to the law of ukraine “on public procurement”, where medicinal products are defined as “any other goods”. in this case, the provisions and requirements of the laws of ukraine “on medicines,” “on amendments to some laws of ukraine on ensuring timely patient access to appropriate medicinal products and medical devices through the implementation of public procurement with the involvement of specialized organizations carrying out procurement,” “on amendments to the tax code of ukraine regarding the exemption from taxation of certain medicinal products and medical devices” and corresponding resolutions of the cabinet of ministers of ukraine, orders of the ministry of health of ukraine, which determine the special requirements for their procurement, etc. must also be considered. moreover, first, the law of ukraine “on public procurement” should be supplemented by the author’s determinant of “medicinal products” that are the subject of public procurement, to substitute attribution to “any other goods” by identification; second, article 1 of the law of ukraine “on medicines” should be supplemented by the author’s category “public procurement of medicinal products.” references: dolinovskyi, yu. s. osoblyvosti provedennia publichnykh zakupivel tovariv, robit i posluh u sferi okhorony zdorovia [features of public procurement of goods, works and services in the healthcare]. lviv polytechnic national university institutional repository. retrieved from: http://ena.lp.edu.uac/501 (in ukrainian) human development report 2009. retrieved from: http://www.hdr.undp.org franklin, d., andrews, j. (eds.). (2013). myr v 2050 godu [the world in 2050]. m.: mann, ivanov and ferber, exmo. (in russian) pro likarski zasoby [on medicines] (law of ukraine no. 123/96-vr of april 04, 1996) (zi zminamy ta dopovnenniamy, vnesenymy zakonom ukrainy vid 31 trav. 2016 r. № 1396-vii) (amended and supplemented by the law of ukraine no. 1396-vii of may 31, 2016). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine], 22, art. 86. (in ukrainian) farmakolohichna entsyklopediia [pharmacological encyclopedia]. retrieved from: https://www.pharmencyclopedia.com.ua/ article/3096/obig-likarskix-preparativ (in ukrainian) chekman, i. s., horchakova, n. o., kazak, l. i. et al. (2011). farmakolohiia: pidruchnyk dlia studentiv medychnykh fakultetiv [pharmacology: teaching manual for students of medical faculties]. vinnytsia: nova knyha. (in ukrainian) abduieva, f. m., bychkova, o. yu., bondarenko, i. o. et al. (2011). klinichna farmakolohiia: pidruchnyk dlia studentiv i likariv [clinical pharmacology: textbook for students and doctors]. m. i. yabluchanskyi, v. m. savchenko (eds.). kh.: v. n. karazin khnu. (in ukrainian) zyma, o. t. (2015). likarski zasoby yak predmet pravovykh vidnosyn [medicines as a subject of legal relations]. porivnialno-analitychne parvo, 4, 232-234. (in ukrainian) dzvoniv, h. r ., makhonko, n. i. medychne pravo: navchalnyi posibnyk [medical law: teaching manual]. retrieved from: http://yport.inf.ua/meditsinskoe-pravo-uchebnoe.htm (in ukrainian) shcho take derzhavni/publichni zakupivli? [what are public/public procurement?]. retrieved from: http://prava-lyudyny.org/shho-take-derzhavni-publichni-zakupivli/ (in ukrainian) cabinet of ministers of ukraine. stratehiia reformuvannia systemy publichnykh zakupivel [the strategy for reforming the public procurement system] (order no. 175 of february 24, 2016). ofitsiynyi visnyk ukrainy, 23, 920. (in ukrainian) baltic journal of economic studies 100 vol. 4, no. 5, 2018 corresponding author: 1 judge of supreme court of ukraine, ukraine. e-mail: nv417170@gmail.com 2 judge of supreme court of ukraine, ukraine. e-mail: bernaziuk1979@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-100-104 topical issues of financing electronic legal proceedings in ukraine nataliia kovalenko1, ian bernaziuk2 abstract. the aim of the article is to interrogate and reveal the current issues of financing electronic legal proceedings in ukraine. the subject of the study is the financing of electronic legal proceedings in ukraine. methodology. the study is based on general scientific and special-scientific methods and techniques of scientific knowledge. the historical and legal method enabled to examine the current state of affairs in introducing the system of e-justice, to reveal the concept of e-court. the comparative legal method enabled to compare the doctrinal approaches to the functioning of the ordinary system of courts and the system of e-justice. the system-structural method contributed to the consideration and identification of the most negative consequences of the delayed implementation of the e-justice system in ukraine. the methods of grouping and classification were the basis for the author’s approach to the identification of possible sources of funding for the e-justice system. the technical legal method enabled to interrogate the state of affairs in electronic legal proceedings in ukraine and highlight the problematic issues of the practical implementation of this institute, as well as emphasize the need to increase funding for the e-justice system in ukraine. the results of the study enabled to distinguish problematic issues and ways of their solution in relation to the financing of the e-justice system in ukraine. practical implications. in the study, first, the key aspects of introducing the e-justice system in ukraine are outlined; second, the problems of the practical implementation of the system of e-courts in ukraine are highlighted; third, the author’s perspective for possible ways of functioning of the e-court system in ukraine is substantiated. relevance/originality. the original author’s approach to the current state of affairs in electronic legal proceedings in ukraine and the practical problems of implementing this institute is the basis for developing the most promising areas for the improvement of domestic legislation in this sphere. key words: e-justice, court, administrative court, financing, mechanism of financing electronic legal proceedings. jel classification: d73, k23, k41 1. introduction the information and technology revolution is fundamentally changing the nature and methods of doing business. using the opportunities of technical exchange makes it easier and faster to create and sell the necessary information, to solve the tasks of financial and operational management, and most importantly, to spend less time on these processes. definitely, the advantages of the latest information and telecommunication technologies are efficiency, completeness, and reliability of the information necessary to make the decisions that are vital for each of us. therefore, the study of the topicality of law issues regarding the e-court and the relevance of its development in ukraine has a significant role not only for employees in jurisprudence but also for ordinary citizens. nowadays, the issue of e-justice is given due consideration in the scientific literature. this issue is studied by a. v. anisimov, o. r. arsirii, h. v. atamanchuk, i. l. bachylo, v. v. bilous, o. h. danylian, v. o. yeltsov, o. ye. simson, o. o. denysova, r. a. kaliuzhnyi, n. v. kushakova-kostytska, a. i. marushchak, m. ya. sehai, v. p. kolisnyk, v. s. tsymbaliuk, v. h. pylypchuk, m. ya. shvets, v. h. chorna, m. m. yasynok and others. electronic legal proceedings, in particular, were of interest to many domestic scientists, such as v. v. bilous, m. v. bondarenko, i. v. bulhakova, o. v. holovchenko, a. yu. kalamaiko, n. i. lohinova, a. l. paskar, l. r . serdiuk, o. s. fonova. however, it should be noted that the introduction of information technology resource is studied in its problematic aspects mainly. therefore, the integrated approach to the introduction of electronic information technology in judicial activities is incomplete. therefore, consideration of the doctrinal approaches to the introduction of e-justice in ukraine becomes relevant and constructs the aim of this article. for its successful achievement, the following tasks should baltic journal of economic studies 101 vol. 4, no. 5, 2018 be solved: first, to outline the key aspects of financing the system of e-justice in ukraine; second, to analyse the perspectives available in the specialized literature in relation to the sources of financing e-court; third, to identify problems of financing electronic judicial proceeding and to propose their potential solutions. 2. main material electronic justice is not a phenomenon in world practice. the idea of electronic information traces its origin to the late 80s of the last century when it became popular and began to operate in countries such as italy, canada, the usa, australia, switzerland, and many others. thus, from the very beginnings of e-justice (that is, the 80s of the last century), the uk government gradually introduced some elements of e-justice, which allowed citizens to become accustomed and to adapt to innovations that were supportive for society because of great facilitation. next, the uk carried out the digital strategy in 2016; it enables defendants and victims to participate in meetings remotely through online communication. this reformation step has allowed victims and witnesses to take part in court hearings on video communications. according to experts, such simplification helps avoid psychological trauma and allows victims better to recollect the circumstances of the events under consideration. it is obvious that the novelty needs a legislative basis to regulate relations. therefore, on december 12, 2003, the un declaration “building the information society: a global challenge in the new millennium” was adopted. the declaration proclaims important principles of building the information society such as the rule of law; transparency policy; favourable competition, based on the principle of technological neutrality, which is provided for by the political and regulatory framework; takes into account the national specificities necessary for the creation of a people-centred information society; information and communication technology application and interpretation that should create benefits in all aspects of life; applications, developed on the basis of information and communication technologies, that are significant for public administration bodies’ activities and provision of services (building the information society). indicative recommendations for the implementation of democracy in e-justice are set out in recommendation cm/rec(2009)1 of the committee of ministers to member states of 18 february 2009 (recommendation cm/rec, 2009). recommendation rec(2001)3 of the of the committee of ministers to the member states on the delivery of court and other legal services to the citizens through the use of new technologies indicates the need to ensure the possibility of: initiating proceedings by electronic means; obtaining information about the state of the proceedings by having access to a court information system; taking further action in the proceedings within an electronic work-flow environment; obtaining the results of the proceedings in electronic form (clause 3) (recommendation rec, 2001). the german expert, dory reiling, offered an apt fourstage model for benchmarking of electronic interaction between citizens and government: 1) stage one: information online about public services; 2) stage two: communication/one-way interaction: downloading of forms; 3) stage three: communication/two-way interaction: processing of forms (procedural actions in digital form); 4) stage four: transaction: case handling, decision and delivery (payment) (reiling). evidently, in the xxi century, electronic information resources have become an integral part of human life, therefore, there is a need to adapt to innovative ideas and step up with the technology. ukraine is not an exception, because every year hundreds, and even thousands, of cases in various spheres of justice are considered in our state. therefore, the e-justice system is an element of e-government, considered today as a way of organizing state power through information networks (fylonenko, chorna). so what are the advantages of the e-justice system? first, the e-court will increase the percentage of public trust in the justice system. second, it will facilitate the functioning of public authorities and promote the regime of “time saving”, simplifying judicial procedures, reducing the term for judicial proceedings and a significant saving of costs. the e-court is an online implementation of a number of functions, such as filing a lawsuit, appending it and providing feedback on lawsuits electronically, accessing legal acts, providing “electronic” evidence, reviewing cases online, circulation of information on the current case, functioning of court sites with information on a particular case to the process participants through the internet or sms (kushakova-kostytska, 2013). in his monography studying electronic evidence, a. yu. kalamaiko highlights that the inadequacy of scientific research of e-justice issues impedes the development of domestic legislation in the area. consequently, it causes the inconsistency of the current normative framework with the high demands of society, based on the current progress of information and communication technologies. the latter is far ahead of the legislation stage of development. such a dissonance is one of the factors behind the growth of society’s dissatisfaction with the quality of public administration and the quality of the judicial system functioning (kalamaiko). the analysis of the approaches conveyed in the scientific literature and the experience of applying the current norms of procedural law of ukraine testify to the relevance of the study in the area of scientific development of elements of e-justice, such as: baltic journal of economic studies 102 vol. 4, no. 5, 2018 1) recognition of the full spectrum of existing electronic information resources as valid and completely admissible evidence in the judicial process; 2) the possibility of full two-way communication between the court, the participants in the court process and all other parties concerned through modern electronic information and communication technologies; 3) the possibility of conducting all procedural actions in consideration of any court cases electronically (kovtun, 2015). evidently, information technologies make life easier, open new opportunities. therefore, justice reforms should not be an exception. despite the undeniable advantages of introducing the e-justice institute in ukraine, the practical implementation of this institute is acutely problematic. indeed, insufficient financial support impedes the practical implementation of the system. the consultative council of european judges recognized that the funding of courts is linked to the issue of judges’ independence since it determines the conditions in which the courts perform their functions. moreover, the funding is connected with the administration of the courts, on the one hand, and the principles of the european convention on human rights, on the other hand: access to justice and the right to a fair trial are not properly provided if the case is not considered within a reasonable time by a court, which has the necessary funding and resources to carry out its duties effectively. all general principles and standards of the council of europe regarding the funding and management of courts oblige the states to provide financial resources that meet the needs of various judicial systems. funding of courts is a part of the state budget, submitted to the parliament by the ministry of finance; such funding should not depend on political instability. although the funding of the courts, which the state can afford, depends on the political decision, in a system based on the distribution of power, it is also necessary to ensure that neither the executive authorities nor the legislature can bring pressure on the judiciary in determining a budget. decisions on the allocation of funds for courts should be taken with strict adherence to judicial independence. in addition to the above-mentioned features of court financing, the issue of financing electronic judicial proceedings includes the costs of implementing an effective and uninterrupted electronic communications system both simple for filing an electronic administrative claim, its directing under the jurisdiction, and for maintaining relevant registries and the open access to them. however, these provisions are complicated and difficult to implement. the implementation of a large-scale project, “e-court,” enables to solve existing problems in the judicial procedure, such as: 1) ensuring access to justice, since participants of legal proceedings will be able to exchange electronic documents; 2) reducing the costs of issuing paper documents, as well as their mailing to the required court; 3) speeding up the exchange of judicial documents between courts and so on. electronic justice is key to improving the performance of courts, ensuring transparency and access to court justice and saving public funds (lohinova). ukraine has already tried to introduce the e-court system in ukraine in accordance with the order of the state judicial administration of ukraine no. 72 as of may 31, 2013 “on implementation of the project on electronic documents exchange between the court and participants in the trial”, as amended (on the implementation of the project on the exchange of electronic documents between the court and participants in the trial) by the order of the sja of ukraine no. 81 as of june 14, 2013, which determine the procedure for submitting documents to court in electronic form, as well as sending all procedural documents to the participants in the trial electronically (in parallel with the paper documents). to do this, one should register in the system of exchange of electronic documents between the court and the participants in the process, print the application for obtaining procedural documents in the case electronically, and submit it to the court. this is carried out in civil and criminal cases providing for that a summons letter can be sent through e-mail, fax or telephone or through other means of communication ensuring the fixation of a call. recently, on october 3, 2017, the verkhovna rada adopted a draft law no. 6232 “on amendments to the commercial procedural code, the civil procedural code, the code of administrative justice of ukraine and other legal regulations”, according to which a single judicial information and telecommunication system was introduced in ukraine enabling exchange of electronic documents between all parties to the proceedings and the court, as well as video-streaming of the hearings and participation through a video conference. especially, the new regulations consider the modernization of legal proceedings, its electronization and the creation of electronic registries, through which both the court and participants in court proceedings will be able to access information and evidence necessary for the consideration of cases, which should significantly accelerate the resolution of disputes by the court. it should be noted that the evaluation of the adequacy of funding courts does not always depend on formal procedures for consulting or submitting judgments by the judiciary. direct involvement of courts has always been an important necessity though. it should be noted that the answers to the questionnaire repeatedly revealed many shortcomings: from the lack of necessary material resources (premises, furniture, office equipment, computer equipment, etc.) to the complete lack of assistance needed by judges to ensure baltic journal of economic studies 103 vol. 4, no. 5, 2018 the modern judicial functioning (qualified staff, special assistants, access to computerized documentation sources, etc.). it should be noted that in ukraine, the general lack of budget funds for e-government has led to a decrease in the number of meeting rooms, offices, it and/or staff (the latter means that judges sometimes have to perform non-judicial functions). one of the problems of financing e-justice is that the judiciary, not always considered as a separate branch of government in the country, has specific needs for fulfilling its tasks and maintaining its independence. in accordance with the current legal regulations, the centralized procedure for the financing of courts has been established in the state budget of ukraine for the current year. analysing the budget for 2017, financing of courts increased by 40%. this is a positive change. according to 2017 reform, financing of the courts shall be agreed with the high council of justice, which has not been formed yet. meanwhile, the high council of justice will carry out its duties at least until 2019, according to experts’ forecasts. to date, the constitutional court of ukraine, the supreme court of ukraine, the highest specialized courts, and the state judicial administration administer state funds for the maintenance of courts. a practical scheme was also implemented to follow the mechanism of the future judicial telecommunication system. in accordance with the order of the state judicial administration no. 367 as of march 23, 2017, since april 01, 2017, in seven pilot ukrainian courts, the temporary regulation of electronic documents exchange has been introduced. for example, along with the positive practice of introducing e-justice, the zhovtnevyi district court of odesa and vinnytsia district administrative courts may already indicate shortages and necessary revisions of the e-court regulatory framework. the pilot project “e-court in the kyiv district court of odesa” can be an example. the first steps of electronic interaction were made between the two institutions, the kyiv district court of odesa and the odesa research institute for forensic examination of the mju. initially, it was the sending of applications electronically, followed by an additional corresponding paper copy that allowed saving 3-4 days on the exchange of documents and laid the foundation for establishing a dialogue. the abovementioned process enabled to avoid sending paper copies of documents, consequently, to save both time and budget funds (no need to spend money on resending the letter, going to post offices, and waiting in meter queues). therefore, the initial stage of the interaction between the institutions achieved significant results: the reduction of the forensic examination period, the improvement of efficiency of interaction between the institutions, and faster resolving of the court proceedings of participants’ disputes (chvankin). it is difficult to overestimate the prospects for the further development of judicial institutions. evidently, through electronic communications, it will be possible to send requests, answers, advisory materials, materials of cases for conducting expert research in the shortest period. the final and transitional provisions of the draft law no. 6232 “on amendments to the commercial procedural code, the civil procedural code, the code of administrative legal proceedings of ukraine and other legislative acts” provide for that the transfer of proceedings to the e-court will occur gradually. cases initiated by materials in paper form prior to the operation of the single judicial information and telecommunication system and not yet completed should be considered in paper form. the participants in the proceedings still have the right to submit paper documents to the court after the introduction of the e-court system. the novelty is the introduction of electronic evidence, that is, electronic (digital) information that contains circumstances relevant to the case, including electronic documents (text files, graphic images, photographs, video and audio), the websites (pages), text, multimedia, and voice messages. they can be stored in backup systems, other places of electronic data storage, including internet resources. electronic evidence is filed in the original or in electronic copy, certified by an electronic digital signature. the draft law also contains innovations regarding the registration and issuance of executive documents: they are represented in electronic form using the single judicial information and telecommunication system and are signed by an electronic digital signature of the judge. within 5 days after the court judgment is enforced, the enforcement document is submitted to the unified state register of executive documents, and its copy is sent to the payee at its official e-mail address, or by a registered or certified letter (hrishyna). the reform is inspired by the state intention to build a people-centred, open, and aimed at the development information society, which provides everyone with free access to the use and exchange of information by exercising their right to free access to information and raising the quality of life (pro osnovni zasady rozvytku informatsiynoho suspilstva v ukraini, 2017). however, effective functioning of the system provided by the law no. 6232 needs interrelation of the proper economic and financial support of the e-court and the human factor. considering in total, the e-court is an undeniably qualitatively new and promising process. nevertheless, some questions exist. in kyiv and other regional centres, technological innovation problems should not arise. what about small towns and villages? there the courts lack the human resources to ensure quality and fast legal proceedings in paper form, process participants cannot receive court decisions for months, so prospects for e-justice seem out of reach. baltic journal of economic studies 104 vol. 4, no. 5, 2018 along with the advantages regarding the introduction of the e-court and the reduction in the corruption component by removing direct contacts between the court process participants, third-party interference with the e-justice system is possible. in the era of information technology, the access of key process participants (judges) to e-justice must be protected from the influence of third parties at the highest level. moreover, uninterrupted access of all process participants to the e-court should be ensured so that such key principles of justice as publicity and openness of the trial are in no way impaired due to technical malfunctions of the system (roik). 3. conclusions therefore, e-justice as one of the sectors of e-government is a safe area of development on the way of forming a new information society (roik). with conviction, e-court has many advantages. first, it can save time considerably. the exchange of documents is more reliable and operative. second, it provides operational access to the materials of the case. some situations require receiving or transmitting urgently a certain document that the materials of the case contain. for now, an appropriate application should be written, which often takes weeks. third, there is no need for certifying copies of documents. electronic legal proceedings enable to avoid the time costs of producing paper copies of documents, and the recipient of such a document will always receive an exact copy, the validity of which can be verified through the data of the telecommunication system. therefore, the ukrainian judicial system is ready to introduce a meaningful e-court. however, the introduction of such technologies should be backed up by the relevant legal regulations in the legal sphere. at the same time, it should be emphasized that the management of budget funds allocated to courts for the implementation of the e-justice system implies more and more responsibility and needs a professional approach. the systems controlled by judicial authorities or by persons or by a body accountable to the judiciary or an independent body with the necessary administrative support differ noticeably from the systems, in which the government unit or service is fully responsible for management. the state should review existing procedures for the financing and management of electronic legal proceedings. in particular, the necessary resources should be provided to the e-court system in order to enable it to function in accordance with national and international standards. references: building the information society: a global challenge in the new millennium (declaration). retrieved from: http://zakon5.rada.gov.ua/laws/show/995_c57 recommendation cm/rec (2009). committee of ministers to member states. retrieved from: http://www.coe.int/ t/dgap/ recommendation rec (2001). committee of ministers to the member states on the delivery of court and other legal services to the citizens through the use of new technologies. retrieved from: http://sc.gov.ua/uploads/tinymce/files/ reiling, d. informatsionnye tekhnologii v sudakh yevropy: mneniia, praktika i innovatsii [information technology in european courts: opinions, practices and innovations]. retrieved from: http://home.hccnet.nl/a.d.reiling/ html/information kushakova-kostytska, n. v. (2013). rozvytok elektronnoho sudochynstva v ukraini: problemni pytannia [development of e-justice in ukraine: problematic issues]. naukovo-informatsiinyi visnyk. pravo, 7, 139. (in ukrainian) kalamaiko, a. yu. elektronni zasoby dokazuvannia v tsyvilnomu protsesi [electronic means of proof in the civil process]. retrieved from: http://nauka.nlu.edu.ua/download/diss/kalamaiko/d_kalamaiko.pdf (in ukrainian) kovtun, m. (2015). elektronnyy sud: pryzvychaimosia do novatsii [e-court: let's get started with innovations]. visnyk natsionalnoi asotsiatsii advokativ ukrainy, 5, 51. (in ukrainian) lohinova, n. i. uprovadzhennia elektronnoho pravosuddia v systemu sudochynstva [implementation of e-justice in the system of legal proceedings]. retrieved from: http://www.apdp.in.ua/v72/61 on the implementation of the project on the exchange of electronic documents between the court and participants in the trial. retrieved from: http://zib.com.ua/ua/21310-nakaz_dsa_ukraini_72_vid_31052013r.html chvankin, s. a. pro elektronnyi sud [on e-court]. retrieved from: http://zib.com.ua hrishyna, n. «elektronnyy sud» – sproshchennia dostupu do pravosuddia ["electronic court": simplification of access to justice]. yurydychna hazeta. retrieved from: http://yur-gazeta.com/publications/actual/elektronniysud--sproshchennya-dostupu-do-pravosuddya.html (in ukrainian) pro osnovni zasady rozvytku informatsiynoho suspilstva v ukraini (2017). [on the basic principles of the development of the information society in ukraine] (law of ukraine). vidomosti verkhovnoi rady ukrainy, 12, 102. (in ukrainian) roik, o. ukrainska pravda [ukrainian truth]. retrieved from: http://yur-gazeta.com/.html (in ukrainian) bilous, v. v. innovatsiini napriamky informatyzatsii sudochynstva [innovative areas of informatization of legal proceedings]. retrieved from: http://www.nbuv.gov.ua/ (in ukrainian) fylonenko, v. v., chorna, v. h. perevahy zaprovadzhennia elektronnoho sudochynstva v ukraini [advantages of introducing e-justice in ukraine]. retrieved from: https://www.naiau.kiev.ua/files/kafedru/app/ks_2018.pdf#page=90 baltic journal of economic studies 309 vol. 4, no. 3, 2018 corresponding author: 1 department of accounting and analytical knowledge bases, university of the state fiscal service of ukraine. e-mail: tytenkolv@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-309-318 economic security as an element of strategic management system: accounting and analytical aspect larysa tytenko1 university of the state fiscal service of ukraine, ukraine abstract. the purpose of the paper is to implement the strategic management system at an enterprise, many information resources are required. being at the crossroads of accounting, analysis, control, and coordination, the accounting and analytical support plays a special role in the enterprise’s strategic management – it connects, integrates, and coordinates all these functions, transferring the enterprise management to a qualitatively new level. methodology. the accounting and analytical support serves as a self-regulation mechanism at the enterprise providing feedback in the management system. the effectiveness of strategic management is measured by the enterprise response to changes in the environment, by time limits of data flow. the data flow speed is determined by the maximum amount of information received for the shortest period of time and indicates the economic system efficiency, ability to respond flexibly, timely, and adequately to changes in the external and internal environment. the enterprise management effectiveness depends on the enterprise managers’ knowledge of the market, the conditions of its operation, the number of competitors, similar goods, development dynamics, etc. the purpose of the article is to justify expediency of the logistic approach applied to the organization of the enterprise’s accounting and analytical support, harmonization of principles of its development, determination of an element for analysis of the necessary information about the enterprise resources, competition, and changes in the internal and external environment. results. to achieve this goal, an issue of an integrated approach to the creation of the accounting and analytical support as a key tool for the formation of a data flow in the enterprise’s strategic development system was considered. theoretical approaches to the definition of “accounting and analytical support” are generalized and the main directions of the accounting and analytical support development, which can be used at modern enterprises, are described herein. the accounting and analytical support is proved to be a continuous data flow aimed at a single goal – to provide complete, reliable, relevant information on all levels of management in different activities. specific characteristics of data flows (purposefulness, speed, discreteness, intensity, capacity, multifunctionality) are proved to increase the accounting and analytical support efficiency. practical implications. all flow processes at an enterprise form an information system, consisting of: 1) information infrastructure (information and technology); 2) information support (means of information collection, processing, storage and transmission – information and communication resources). the data flow is believed to be one of the elements in the information space, which is considered from different aspects. for this purpose, the accounting and analytical support was offered to form on the principles of the logistic approach. elements of the accounting and analytical support system are proposed to harmonize on modern principles, grouped in three directions: from general scientific principles of development strategy formation to development of requirements for the information support quality. also, a key component is revealed to be required to coordinate and assess the entire system efficiency. value/originality. the economic security system was proposed as this component, and the directions for the accounting and analytical support for economic security under strategic development were explored. the sequence of information formation and control measures in the economic security system is determined herein. key words: strategic management, accounting and analytical system, economic security, principles, methods, analysis, information, control, information flow, information flow management. jel classification: m10, m41, p5 baltic journal of economic studies 310 vol. 4, no. 3, 2018 1. introduction significant changes in the environment and quickly growing information volume, which should be considered when making management decisions, result in the continuous development of the theory and practice of enterprise management. currently, information became one of the valuable resources along with traditional material ones, so its processing and the transformation can be accepted as one of the modern technologies like transformation of material resources. the processing information scope, methods, and means reached a level when information became a product and one of the most important strategic resources of the enterprise. an assessment and analysis of information about the enterprise’s external and internal environment, opportunities and competitive advantages, are considered to be a basis not only for the approval of individual management decisions but also for the creation of conditions for systematic management of the enterprise’s production and economic activities, and the enterprise’s development rate and efficiency directly depend on its ability to process ever-increasing amount of information flows. today, the strategic management concept seems to be very popular, aimed at ensuring development, increasing the enterprise’s cost and competitiveness in a changing environment, considering the time factor. by its nature, strategic management is aimed at predicting global changes in the enterprise’s external and internal environment and the search for strategies to ensure long-term and effective development in the future. however, the strategic management effectiveness directly depends on the compliance of the enterprise’s information support with the modern management information needs. the accounting system is traditionally considered to be the most developed information subsystem of the enterprise. so, according to kuzhelny m.v. and linnyk v.g. (2001), accounting is the basis of information support –up to 80% of the total volume of information is formed up in its system. however, today it is impossible to meet users’ needs only basing on retrospective information obtained through the continuous recording of business transactions in the accounting system. this is due to several significant reasons: accounting does not involve non-financial information and information on the environmental impact on accounting objects; accounting does not include information about the market value of assets and liabilities. thus, in order to implement the strategic management process, the enterprise’s information support should be definitely improved to create economically favourable conditions for long-term operation of the enterprise, with the possibility to minimize threatening effects of the external environment and to form significant competitive advantages. that is, to create long-term economically safe operating conditions. thus, the issues of improving the information basis for making strategic decisions and, first of all, one of its key elements – accounting and analytical support, are considered to be urgent. the purpose of this paper is to justify application of the logistic approach to the organization of the enterprise’s accounting and analytical support, determination of principles of its development, determination of an element allowing the necessary information about the enterprise’s resources, competitive position, and changes in the internal and external environment. 2. results and discussions the dialectic method and systematic approach to the concept analysis are used during the studying; systematic, comparative method of observation, graphical method – to study principles of interaction between the elements of the accounting and analytical support system and the economic security system. strategic development is quite a wide concept, disclosed differently for each enterprise, depending on activity, sectoral features, etc. however, always strategic development is provided by combining management efforts in different areas, such as management competitiveness, resource and cost management, research and development, pricing management, etc. but in any case, the necessity to form and maintain an information system able to provide fast adaptation of the business entity to changing conditions of the economic environment is considered to be an integral part of the strategic management implementation into the enterprise’s activities. at the same time, the information system should contain a subsystem to guarantee, first of all, the strategic development security. therefore, such an integral part of the information system as accounting and analytical support is essential for the effective functioning of the management mechanism. according to many scientists, the “information support” concept is broader comparing to the “accounting and analytical support” concept because it includes all the information used in the management system, and information technologies, hardware and software, while accounting and analytical support is the accounting and analysis system, designed to systematize information, to coordinate enterprise development directions, to assess the effectiveness of management decisions. many views on the interpretation of the “accounting and analytical support” term have been formed in the current economic literature (table 1). summing up the scientists’ opinions, we can note that in most cases accounting and analytical support is considered as a system (holova s.f., shtanhret a.m., napadovska  l.v., hudzynsky o.d., titarenko h. and korinko m., melnik  yu.v.), as a process (pilipenko a.a., kasich a.o., tsygan r.m., karban o.i.), as a complex baltic journal of economic studies 311 vol. 4, no. 3, 2018 table 1 definition of the “accounting and analytical support” concept author definition shtanhret a.m., karaim m.m. (2017) accounting and analytical support is a qualitative informational service of security objects by creating a dynamic system for the collection of proper, qualitative and relevant data as required in the external and internal environment, their generalization, systematization, analysis and verification, storage and effective use for making of relevant managerial decisions. napadovska l.v., dobiya m., sander sh., matezych r . (2008) the authors consider the system of accounting and analytical support for a business entity as the summary information on the state and results of its activity, concentrated in various forms of financial and managerial (internal economic) accounting. hudzynsky o.d. (2008) the accounting and analytical system is an integrated system of methods of accounting and analytical support for management through the specific internal system and system-wide functions. titarenko h., korinko m. (2010) accounting and analytical systems as systems based on accounting data, including operational data and using statistical, production, reference and other types of information for economic analysis. the accounting and analytical system is considered to be the collection, processing, and evaluation of all types of information used for managerial decisions at macro and macro levels. yuzva r .p. (2011) accounting and analytical support is a set of accounting and analytical processes, united in the accounting and analytical system and aimed at satisfying users’ information needs by transforming primary information into generalized in accordance with the set purposes, as well as regulatory, methodological, organizational, programmatic, mathematical, technical, and ergonomic support. parkhomenko o.v. (2006) informational and analytical support for the management system is a combination of all information used, specific means and methods of its analytical processing, and specialists’ activity for its effective improvement and use. bezrodna t.m. (2010) accounting and analytical support is a process of preparation of accounting and analytical information, providing its quantity and quality. the term “support” means execution, ensuring the supplying of accounting and analytical information for the management system. this concept should include measures on the preparation of accounting and analytical information, that is, its preparation process. volska v.v. (2012) accounting and analytical support is the process of collection, preparation, and registration of the enterprises’ accounting information depending on the legal accounting system, and the deep information-based analysis with certain methods and techniques. ratushina a.p. (2012) the system consists of three consecutive stages to be passed by the information intended for management personnel: recording of operations, information verification and data analysis. kaminska t. (2002) the concept is the system of collection, processing, generalization, presentation and analysis of financial information, provision of its quantity and quality for the enterprise’s activity, in particular, its management. holova s.f. (2003) accounting and analytical support is a system of collection, processing, generalization, presentation, and analysis of financial information, provision of its quantity and quality for the enterprise’s activity, in particular, its management. hylmiyarova m.r . (2012) accounting and analytical support is a conceptual model consisting of interrelated accounting and analytical procedures and used to provide the corporation’s management with the necessary information. pilipenko a.a. (2007) accounting and analytical support is a process of creating information conditions for the system functioning, providing the necessary information, including in the searching system, receiving, storing, transmitting, processing information, database organization. melnik yu.v. (2011) the accounting and analytical system is determined as: “the accounting and analytical system is a system of accounting of assets, liabilities, capital and business transactions... preparation of data on the relevant areas of the accounting process to keep financial, tax, statistical accounting; the use of information technologies in the enterprise’s accounting and analytical activity” [4]. resler m.v. (2012) “accounting and analytical support is a component of the management system. it combines accounting and analytical transactions into one process, allows for operational analysis, continuous process and using these results when formulating recommendations for making managerial decisions” [13]. zahorodniy a.h. (2010) the system of accounting and analytical support for the enterprise is a form of organization of all types of accounting and analysis, which purpose is to provide the enterprise managers with information for current and strategic management decisions and control their implementation. hurenko t.o., derevyanko s.i., lipova a.с. (2013) accounting and analytical support should be considered as a process of preparation of accounting and analytical information, ensuring its quantity and quality. the concept of accounting and analytical support appears in two ways: 1) actions related to collection, registration, generalization, preservation, transfer, and analytical processing of information; 2) providing the management system with the required quantity of the necessary qualitative information. runcheva n.v. (2010) “accounting and analytical support is a process of preparation of accounting and analytical information on the enterprise’s activities, providing its quantity and quality.” kasich a.o., tsygan r .m., karban o.i. (2013) “accounting and analytical support is a process of preparation of accounting and analytical information, providing its quantity and quality.” voloshchuk l.o. (2011) the “informational-analytical” concept is wider than the “accounting and analytical support” concept. in the accounting and analytical context, “support” should be considered as a “guarantee of timely formation and transfer of high-quality accounting and analytical information.” accounting and analytical support system is a sequence of information transfer from one subsystem to another, and the result is transferred to decision-making [16]. haluzina s. m.(2006) the concept of accounting and analytical information should be considered focusing on an “analytical” component. the scientist believes that it has two main meanings: on the one hand, analytical information is a part of the accounting information complex, which is characterized by appropriate analytically since analytical accounting is a subset of the set of accounting indicators. on the other hand, analytical information is a kind of economic information obtained from the accounting system as a result of the analytical management function. baltic journal of economic studies 312 vol. 4, no. 3, 2018 of accounting and analytical processes (volska v.v., yuzva r.p., parkhomenko  o.v.) as a conceptual model (hylmiyarova m.r.) or a sequence of information transfer (ratushina a.p., kuzmich i.r.). but most approaches consider accounting and analytical support to be quite isolated from other information resources of the enterprise: • either as a complex of individual elements (mostly accounting and analysis) that completely provide different levels of information management; • or as a complex of elements to provide certain activity aspects with information (accounting and economic management of competitiveness, economic security, accounting and economic provision of personnel management or accounting and economic provision of innovation process management, etc.). but, in our opinion, the aas should be a continuous flow of information aimed at achieving a common purpose – to provide all management levels with complete, reliable, relevant information on various aspects of the activity. this is because countering threats and challenges is possible in today’s world provided that they have the most complete, reliable, and accurate information to make effective current decisions and predict their impact on the enterprise’s activities in the future. in our opinion, strategic management may be considered as a streaming process in space and time. this perception requires new approaches to information management because the modern strategic management system should be organized by logistics principles. the logistic approach applied to the aas provides an optimal sequence of information functions, streamline information flows and operational monitoring and analysis of development indicators. many methodological and theoretical approaches to formation and use of information flows at the company are described in the economic literature. the complex of information flow processes at the enterprise forms the information system consisting of: 1) information infrastructure (information and technology); 2) information support (means of information collection, processing, storage, and transmission – information and communication resources). an information flow represents one element of the information space, considered from different sides. for example, oliynychenko o.m. (2012) notes that “the information flow is the circulation of information at the enterprise necessary to develop and implement management decisions.” vasenev k.a. (2003) notes that “information flows make a complex of messages objectively reflecting the development in business processes.” pisarenko t. (2010) states that the information flow is “a complex of circulating systems between them and relation with the environment needed for the enterprise management and control.” according to verba v.a. (2009), the main components of the information space include information resources, software and hardware, and organizational legal documents and information infrastructure. the traditional system of the accounting and analytical support combines methods, technologies, and tools of accounting and analysis for management decisions. the aas structure is built in accordance with one of the two approaches. the first approach involves “bottom-up” organization; its elements of individual objects of the accounting and analysis are combined in the system by communication. the second one involves “top-down” formation of the accounting and analytical system: composition, elements, and communication link accounting and analysis system are determined by the company’s ultimate goal (the resulting indicator or indicators). in our opinion, “top-down” building of the accounting and analytical systems is quite effective and convenient, but in addition to communication and information functions, the aas system should ensure continuity and comprehensiveness of information preparation and analysis in space and time, and provide current, retrospective, and preventive control. that is, various kinds of “input” information should be converted into the enterprise’s information system for management decisions but in compliance with new quality requirements for the information support of enterprises required in the modern economic system. accordingly, in our opinion, the accounting and analytic support for the enterprise should be considered as a tool for a through polythematic information flow in all management levels, creating links between the elements and providing the information movement from user to user. the information flow, unlike some structural or functional parts of the analytical support for the enterprise, is broader by its purpose and provides not only formation and regulation, but through the law of synergy and systemology concept enhances the overall performance of the enterprise. due to the high organization and implementation of key indicators of information flows – direction, structure, operation term – the contours of the aas structure and relationships can be clearly formed and outlined. specific features of the enterprise’s information flows – speed, discretion, intensity, capacity, density, versatility – improve the quality of information fullness and the aas effectiveness. in contrast to the amount of certain structural parts of the enterprise’s information support, an information flow is a systemology concept and, according to the law of synergy, is a testament to the high level of organization and, therefore, enhances the overall performance of the company. but at the same time, the information flow distribution into separate information components can detect possible quantitative and qualitative changes in information and the degree of interaction and relationship of the information components. so, the information flow distribution into separate components (of information) reveals probable qualitative and quantitative changes in information, the degree of correlation of information components. baltic journal of economic studies 313 vol. 4, no. 3, 2018 thus, the information flow is a managed subsystem that exists in the space of four variables: time, space, quantity, and quality. the information flow operation time is defined by the period from the start of the information flow to receive by a person (or top-management), who created an information request. the information flow direction from the formation source to the consumer is regulated by time, determined by the management plan terms, current technological standards, need of timely reports and management decisions. the quality of information flows depends on the information quality. thus, information flows ensure the enterprise’s economic efficiency while providing qualitative characteristics of information – reliability, accuracy, objectivity, relevance, usefulness, relevance, etc. the effectiveness of strategic management is measured by the reaction to changes in the environment, it means by appropriate time limits of information movement. the information flow speed is determined by the maximum amount of information received for the minimum time period and demonstrates the economic system efficiency and its ability to flexibly, promptly, and adequately respond to changing the internal and external environment. at the same time, the fast information flows are a prerequisite for significant competitive advantages due to fast implementation of innovative ideas. effective management of the enterprise depends on how the company managers handle information about the market, conditions for its functioning, the number of competitors, goods – analogues, development dynamics and more. the difficulty is that only limited information sources and amount are available in real time. consequently, there is always an information asymmetry even in the enterprise – a condition when one of the links has the necessary management information, and the other – does not or not enough. so there is no significant amount of credible analytical information flows. this approach makes it possible to avoid information isolation of each individual link management, data backup, “overproduction” of information, prevents conflicting distorted data in the enterprise’s information space, and this, in turn, will reduce the risk of the business. in our opinion, accounting and analytical support for the enterprise should be: strategy-oriented, it means using the approach to information data preparation considering the long-term impact on the enterprise; holistic, it means in spite of three management levels and many functional components, the aas is organized under the logistic principle to create an opportunity for proper communication between all information elements; organizationally and methodically uniform, it means allowing to apply common principles, instruments, a methodology for information preparation to avoid dual interpretation or significant contradictions of the same data processed by different approaches. thus, accounting and analytical support should become one of the key tools to create and maintain the enterprise’s information flow while ensuring common processes, methods, and operation principles. the aas structure and organization are defined by information types already circulating in the enterprise’s system and ultimately required for the formation and implementation of its strategy. the aas system components should be ordered based on certain principles, which we summarized in table 2. the aas principles, as a part of the information flow, are grouped in an integrated manner by three areas defining the sequence of the aas construction from the activity strategy formation to the formulation of requirements for information support quality. however, in the process of the enterprise’s strategic management, which does not exclude permanent coordinated tactical and operational management, the key element should be used to provide coordination and evaluation of the efficiency of the entire economic system. in our opinion, the component of the aas economic security (aases) has to be such an element. the aases system is capable of providing real-time information support for the monitoring of security aspects in compliance with strategic decisions in terms of the enterprise’s economic security. analysing the current economic researches, the conclusion can be made that often issues related to the enterprise’s economic security were in the scientists’ focus, although the “economic security” (es) concept is quite new to our economic community. existing approaches to the term determination may be grouped in several areas: 1) economic security is understood as protection against economic crimes (theft, fraud, falsification, industrial espionage, etc.); 2) economic security is understood as security against internal and external threats; 3) economic security is understood as a state of effective use of resources or capacity. the approach, trying to avoid the use of the threat concept in determining the ees, is based on the economic terms of achieving the enterprise’s goal, that is, a resource and functional approach; 4) economic security is understood as the availability of competitive advantages. the approach, which supporters believe that competitive advantages resulting from compliance with material, financial, human, technical, and technological capabilities and the enterprise’s organizational structure with its strategic goals and objectives provide a certain level of economic security. but advantages and potential do not guarantee economic security to the company without their use and implementation; 5) economic security is understood as realization and protection of economic interests from internal and external threats, its protection of the enterprise: human resources and intellectual potential, information, technology, capital, and profits. baltic journal of economic studies 314 vol. 4, no. 3, 2018 so, these definitions demonstrate that economic security is believed to be an integral part of strategic management. strategic management, in spite of a wider range of tasks and functions, is focused to achieve positive results in the long-term stable performance, which to some extent is the purpose of the system of the enterprise’s economic security. therefore, an effective combination of all components and expanded tasks and functions in one aas will improve management efficiency. traditionally, the main purpose of accounting and analytical support for economic security is the most complete creation of timely and accurate information for management decisions to prevent (or minimize) external and internal threats. the system of the enterprise’s economic security traditionally includes the following components: a) intellectual and human resources; b) information; c) technical and technological; d) financial; e) legal and political and environmental; f ) force. the paper states that “the main purpose of its (es system) operation is to provide accurate and relevant information for the enterprise’s economic management while selecting areas to maintain its security and sustainable development.” the effectiveness of the enterprise’s economic security depends mainly on consistency and perfect functioning of management decisions, which implementation is based on external and internal information, developed plans and forecasts for the enterprise. creation of the sustainable flow of accounting and analytical information in the economic security system is based on certain principles as follows: revealing information needs and the most effective ways to meet them; an objective reflection of the financial and economic activity; unity of information from different sources; timely information; increased reliability coefficient. however, in our opinion, the analytical and accounting support for economic security for the purpose of strategic management should be considered as a part of the information flow but rather focus on the fact that this element in modern conditions should create conditions for criteria evaluation of management decisions. so, this requires broadening and deepening of the aas functions and requirements. thus, the traditional functions of accounting and analytical support for the enterprise’s economic security might define the following: 1) information function that provides information on the level of economic security, the impact of key threats and risks of internal and external security subjects; 2) accounting function that involves recording all the facts of economic activity; 3) control function that allows checking the primary account information, monitor the effectiveness of security subjects; 4) analytical function that allows a retrospective, current, and strategic analysis based on primary accounting information. however, in our opinion, traditional functions should be supplemented by estimation and control functions to provide the ability to monitor management decisions for compliance with its terms of economic security. table 2 principles of accounting and analytical support general scientific principles special principles of construction and management of the aas system principles of information formation, disclosure, and analysis principles: complexity caution consistency integration compatibility standardization and harmonization development -priority phased balance consistency sequence flexibility continuity hierarchy information completeness transparency form and content availability simplicity and reliability timeliness rationality differentiation stability substance over form prevalence unity economy principles of operation: self-regulation reasonableness consistency reliability unity accessibility relevance efficiency materiality scientific nature consistency complexity specificity unity and consistency of analytical procedures objectivity and accuracy sufficient information information reliability and comparability source: summarized by the author baltic journal of economic studies 315 vol. 4, no. 3, 2018 so, from the standpoint of strategic management, the aases system should include information on prediction of consequences of management decisions and provide current, retrospective, and preventive control. this approach requires the main areas of the aases application to be expanded. 1) monitoring of the current and forecasting of the future economic security in general for the company and in terms of the main functional components; 2) analysis, search, and provision of more effective ways to use existing resources; 3) meet the information requests from internal and external security subjects; 4) creation of conditions to account a security aspect while making and implementing management decisions on operational, tactical, and strategic levels; 5) analysis and study of changes in the level of economic security under the influence of challenges, risks, and threats; 6) coordination of internal capabilities, the enterprise’s interests and the environment’s requirements and challenges in order to create conditions for sustainable enterprise development. thus, the economic security system as a key aas element aimed at evaluation and control of the decisions from the view of economic security provides for the following algorithm of actions: 1) development of the necessary and sufficient list of indicators and criteria of the enterprise’s economic security, depending on the industry, financial state, and strategic objectives of the enterprise; 2) retrospective analysis of the results and effectiveness of the strategic, tactical and operational decisions within the accounting and analysis subsystem to develop the full information about the degree of effectiveness of the selected actions; 3) formation of control and corrective measures, it means implementation of current and preventive control (figure 1). 3. findings the resulting analytical information for the next phase allows comparing and evaluating the planned and forecast indicators of economic security at every figure 1. mechanism of the formation of evaluation and control of the accounting and analytical support for economic security source: compiled by the authors strategic level tactic level operation level in fo rm at io n fl ow evaluation and control over made strategic decisions evaluation and control over made tactic decisions evaluation and control over made operation decisions accounting and analytical support for economic security e va lu at io n an d co nt ro l ov er m ad e su bs ys te m a na ly si s su bs ys te m a cc ou nt s ub sy st em fo rm at io n of re le va nt in fo rm at io n d ev el op m en t o f e va lu at io n cr ite ri a d ev el op m en t o f c on tr ol a nd c or re ct iv e m ea su re s baltic journal of economic studies 316 vol. 4, no. 3, 2018 management level. the assessment and monitoring in real time allow the creation of a stable basis for making reasonable decisions. issues of theoretical development of the entities’ economic security and the characteristic of its individual components are described in many works by such scientists as kasich a.o. (2013), zahorodniy a.h. (2010), melnik  yu.m. (2015), zhukova d.a. (2015). however, analysis of the scientific publications reveals that certain aspects of the modern development of the theory and methodology to ensure the function of the system of the enterprises’ economic security require further consideration. the issue of accounting and analytical support for enterprise management was studied by kirsanova v.v., faschenko m.o. (2014), shtanhret a.m. (2017), kuzhelny m.v., linnyk v.g. (2001) et al. 4. conclusions the management system directly depends on the information scope, quality, and intended use. traditional methods and tools of information preparation do not adequately meet the requirements of modern management, and hence qualitatively and quantitatively new scope of information is required, as well as their structuring considering the influence of risks and uncertainties of the market environment. creation of the through-flow system of accounting and analytical support as a key component to ensure financial stability and economic security has to be the key to long-term effective strategic development and management of the company. the effectiveness of the company’s strategic management is a complex task mainly dependent on consistency and perfect functioning of the mechanism of collection, accumulation, processing, storage, analysis, and transfer of information and the subsequent mechanism of management decision approval. currently, many scientific approaches to building the accounting and analytical system are developed and there are many developments related to its component structure, principles, and relationships. however, the main drawback of the existing approaches to forming the system of accounting and analytical support is that mostly the system outline, components, specific methods, and approaches to accounting and analysis are determined, but the system is not seen as a whole dynamic tool to provide a focused development tool (transfer of the enterprise as a control object from one state to another) in a certain time period. therefore, one of the priorities in development of the enterprise’s accounting and analytical system is its construction under the principles and approaches of logistics management, allowing to form the necessary data information array in a single space, providing a unified approach to information preparation and, at the same time, to avoid information isolation of individual management units, duplication and “overproduction,” and data misrepresentation. in addition, each system requires formation of feedback provided to some extent by management control functions. in this regard, accounting and analytical support for economic security was proposed to be used as a system to provide assessment and control of the enterprise’s strategic development. due to economic security tools, retrospective, current, and preventive control of decisions should be achieved. issues on detailed development of indicators and criteria of economic security require for further fundamental studies for the purpose of effective analysis and control. references: bezrodna t.n. 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(2010). otsinyuvannya efektyvnosti systemy oblikovo-analitychnoho zabezpechennya menedzhmentu pidpryyemstva [evaluation of effectiveness of accounting and analytical support for the enterprise’s management] proceedings of the international scientific conference ["state and prospects of the accounting and information system in ukraine"] (ternopil, 23-24 april 2010) / ministry of education and science of ukraine. ternopil: tneu. t. 31-32. zhukova d.a. (2015). metodychnyy pidkhid do vyznachennya yakosti informatsiynykh potokiv na pidpryyemstvi [methodical approach to determination of the information flow quality at the enterprise]. university’s scientific notes, no 2, pp. 308-315. baltic journal of economic studies 119 vol. 4, no. 2, 2018 corresponding author: 1 department of international economic relations, lutsk national technical university. e-mail: olenalutak@gmail.com 2 department of tourism and hotel and restaurant business, cherkasy state technological university. e-mail: licorn1963@gmail.com 3 department of marketing, lutsk national technical university. e-mail: gnidawa@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-119-125 features of institutional change in the context of accounting standardization and universalization of the regulatory mechanism for international tourist activities olena liutak1 lutsk national technical university, ukraine hanna chepurda2 cherkasy state technological university, ukraine serhii voitovych3 lutsk national technical university, ukraine abstract. theoretical and applied principles of implementation of uniform requirements on all stages of the creation and implementation of tourist services, as guaranteed by international regulation and development of universal mechanisms to guarantee appropriate standards are considered in the article. a special attention is focused on the analysis of different approaches defining the quality of tourist services, information saturation and support. it is determined that an important aspect of institutional change is the improvement of the base, the supporting organization of the tourism market development, maintaining market equilibrium, the penetration of the national market to the international market of tourist services, the distribution of income between sectors of the economy, the mechanism of prevention of crisis phenomena. the result of these transformations will be the creation of a legal framework to increase the dynamics of tourism development, organization of cooperation strategies between consumers of tourism services, travel companies and agencies, balanced utilization of tourism services and tourism products, regulation of development and differentiation of income to balance the economic potential, given the internal and external risks in the formation and implementation of tourism services. the aim of this work is the study of institutional transformations in the sphere of international tourism activity based on the use of approaches for standardization and universalization of the tourist services, the use of information support of the tourism industry. diversification of tourism services requires from international institutions development, implementation and maintenance of a safety management system. methodology. the study is based on the assessment of international practice, which showed the development of various approaches to the standardization of tourist services, reference tools online that provide information about the property, infrastructure, scores of consumers. the key objectives of the institutional changes lie in the interaction between the various subject-object items, as consumers, tour operators and an outlined range of institutions are subjects of the international tourist market. a dualistic approach to their cooperation can be based on the transformation of institutions and the unity and integrity of the system are based on the differentiation of tools and tasks of market development of tourist services. another vector of the transformation of the global crises and threats and internal risks, as the presence of certain institutions to monitor these crises and accounting indicators when coordinating the development of a strategy for the balanced development of the national market of tourist services is an important element of transformational change. the results have identified that a high level of standardization and unification of services in the field of international tourism and ensure consumers a unified approach to the formation of the qualitative characteristics of the services, regardless of the country of consumption is the basis of modern globalization processes of institutionalization of this sphere. key words: international tourism, standardization, licensing, institutional change, regulatory mechanisms, information security, legal basis. jel classification: f53, f55, l15, l83 baltic journal of economic studies 120 vol. 4, no. 2, 2018 1. introduction analysing current trends in tourism development, namely, the deepening of diversification of tourism services, the rapid growth of global demand that have led to a significant complication of the system of customer service, we should determine the lagging of the current institutional system of the tourism industry from the needs, which determines the objective necessity to upgrade its quality on the basis of, on the one hand, clear delineation of functions of existing institutions and the allocation of risks between them, and on the other hand supplement of the existing competencies of the institutions of qualitatively new functions that relate to security and protection of personal data, institutional support for related industries, the regulation of tourism business processes and ensuring the relevant standards. the impact of the global tourism market to domestic producers is by a standardization and unification of services, using a common methodology to pricing, the content of the tourism product, opportunities of access to foreign markets and practical implementation of the internationalization of economic activities. it is important to note that the defining element of the global institutionalization of the tourism business activities as a process of becoming sustainable institutions on the production and implementation at the international level is the presence of regulatory mechanism and its institutional support. in the context of the deepening universalization of approaches to the standardization of tourist services in the private sphere consists of those components of the tourist product, as the requirements for accommodation, food, transport, and insurance components. theoretical basis for planning and organization of tourism on the procedural and structural approaches have identified the leading international c. costa, e.  panyik, d. buhalis (costa, panyik, buhalis, 2013) and domestic p. stoliarchuk, v. dominiuk tourism research in the context of the analysis of the main trends of european planning and organization of tourism and standardization. the main purpose of the article is the study of institutional transformations in the sphere of international tourism activity based on the use of approaches for standardization and universalization of the tourist services, the use of information support the tourism industry. 2. presentation of the basic material a high level of standardization and unification of services provided in the field of international tourism ensure consumers a unified approach to the formation of the qualitative characteristics of the services, regardless of the country of consumption, is the basis of modern globalization processes of institutionalization of this sphere. the main tools that implement this direction are the introduction of uniform requirements for all stages of the creation and implementation of tourist services, as guaranteed by international regulation and development of universal mechanisms to guarantee appropriate standards. in the context of the implementation of the business activities in the field of international tourism, compliance with international standards and requirements for tourist accommodation is the core competitiveness of enterprises at the level of both the state and global corporations. it should be noted that depending on the specifics of the impact on the composition of tourist product, universal regulators of tourism activity are generated on the basis of practical demands and needs of tourists, which in the period of formation of mass tourism have received the final regulatory framework, have been issued in legislative initiatives supported by international organizations and other subjects of the market. to summarize existing in international practice base standards for tourism activities and justification of directions of improvement of the regulatory institutions in the context of the expansion of functions of institutions that exist, it is necessary to group travel services by type and specificity of the regulatory mechanism at the international, national, transboundary, and regional levels. in contrast to the requirements for food or insurance, which have become active in recent years, the problem of developing a standard approach to the classification of hotels, apartments and campsites arose in the mid-50s. institutional capacity of the world tourism organization and international hotel association could not carry out a clear regulation on criteria and classification criteria, and some of the participants opposed the introduction of a unified approach. at that time, some countries lacked a national system of categorization of accommodation facilities, which significantly complicates the situation for the accommodation of tourists and the increasing use of tourism potential. the lack of a global vision and subsequent discussions have failed to address this issue, which was transferred to the regional enterprises wishing to use a single system to unify the services provided and the further development of world tourism. for a long time, a system regarding the development of common international standards has evolved but still depends on regional trends and national initiatives. it is transformed into such assessment of the quality of hotel services, as the french national classification, the indian system based on points (stars), american (diamonds), system v&v (crown) in respect of accommodation, michelin star in the restaurant business. despite regional vector, a number of proposals could have global importance because, for a long time, europe remains the leading tourist flows and revenue. exploring the regulatory tools for the development of tourism in various countries, worked out by stoliarchuk  p., dominic  v. (stoliarchuk, dominic, 2010), we formed a system of national standards for tourism services. baltic journal of economic studies 121 vol. 4, no. 2, 2018 among the most common national standards is the requirement for services of hotels, campgrounds, recreation centres, hostels, bed and breakfasts, residences in schools. in particular, the sector of tourism standards generally specifies national standards in countries such as botswana, canada, germany, and france; the usa, the uk, spain, the netherlands, there are specific national standards regulating the market of tourist services (iso 18513:2003 – tourism. services – hotels and other types of tourism accommodation – terminology; bsr / nsf 166200x – hotels: public health; bs en iso 18513:2003 – tourism services. hotels and other types of tourist accommodation. terminology; bs en 13809:2003  – tourism services. travel agencies and tour operators. terminology; une 150101:2001. ex environmental management system. guidelines for the implementation of the environmental management system in accordance with une-en iso 14001 in hotels and other tourist accommodation; the availability of une 41512:2001 and the surrounding beaches; pne 150104 ems. a guide to implementing an environmental management system in accordance with une-en iso 14001 beaches; nen-en 13809:2003  – tourism services  – travel agencies and tour operators  – terminology). in several other countries (ireland, republic of korea, lebanon, lithuania, singapore, turkey, etc.) certain is shared sector standards of tourism: compulsory registration the system standards for accommodation (self-catering); voluntary, widely used system of classification of hotels and guest houses; standards for outbound tourism; standards for hotels and furnished apartments; rating for hotels; the law on tourism in lithuania requires the certification of all hotels, motels and camps that will be classified; the board of singapore is working on nsrs professional standards for hotels, travel and tourism, nsrs will cover all sectors of tourism; standards according to the rules for tourist services. today, the standardization of tourism services has new potential initiatives, in particular, the european commission (dgenterprise) requested the european committee for standardization (cen) to develop a basis for the standardization of services, whose purpose will be to research and explore possible areas of standardization of services. modern current standard, which was last revised and affirmed in 2014 have iso 18513: 2003 (tourism services – hotels, 2003), which defines the terms commonly used in the tourism industry, to facilitate understanding between users and providers of tourist services. assisting customers in the informed selection of tourist service has the potential to increase the likelihood of satisfaction of the expectations and enhance the enjoyment, that is, the tourism industry will also benefit from more informed consumers. in our view, the wording of the standard tourism definitions is a difficult task, not least because of cultural differences and translation difficulties, as result was prepared an application that serves as a dictionary with the equivalence between english, french, german and spanish. in accordance with the internal rules of cen/cenelec national standards organizations of the following countries are bound to implement this european standard: austria, belgium, czech republic, denmark, finland, france, germany, greece, hungary, iceland, ireland, italy, luxembourg, malta, the netherlands, norway, portugal, slovakia, spain, sweden, switzerland, and the united kingdom. the iso committee on conformity assessment (casco) has developed international standards, which set out requirements for the criteria of compliance with international standards in the field of tourism, including certification of the areas of products, services, personnel, management systems, international standards of self-declaration of conformity, peer review and accreditation (table 1). table 1 characteristics of international standards in the field of tourism name of the standard sphere of influence iso/tc 228 tourism and related services standardization of terminology and specifications of services provided by tourism organizations, including related activities, touristic destinations and the requirements of facilities and equipment that are used to provide tourism buyers, providers, and consumers with criteria for making informed decisions. iso 21101:2014(en) adventure tourism – safety management system–requirements to increase the level of security, meeting the expectations of participants and staff safety, demonstrating safe practices, support compliance with applicable legal requirements iso 18513: 2003 tourism services – hotel and other types of tourism accommodation – terminology defined terms commonly used in the tourism industry to facilitate understanding between users and providers of tourist services iso 13009, tourism and related services requirements and recommendations for beach operation emphasize the importance of access to beaches with facilities such as toilets, showers or sink for the feet, as well as the point for drinking water, adapted for people with special needs. iso 14785, tourist information offices information about tourism and services – demand that offers a number of recommendations to make the tourist information office (tio) available to everybody. tio should consider the aspects related to mobility (entrance, car parking and premises without barriers) baltic journal of economic studies 122 vol. 4, no. 2, 2018 it should be noted that diversification of tourist services requires that international institutions develop, implement and maintain a safety management system. to help providers of adventure tourism in this issue, a new tutorial was published which gives simple stepby-step instructions and is fully consistent with the requirements of iso 21101 for safety management of adventure tourism. whether it is trekking, diving, rafting, canyons, jumping, or any other exciting activity in the fresh air, keeping participants safe is a priority of the tour operator, which uses this system of standardization. as noted by frederick s., 2010, long-term proposals for ensuring growth after the crisis in the global networks for the countries that are developing are based on the possibility of using international and regional certificates. in this coordinate system, in our opinion, it is necessary to encourage and assist entities of business activities, product standards and technologies that are required by international buyers, such as iso 9000 and 14000, to diversify buyers, products, and end markets on the basis of the requirements to qualitative characteristics of the travel services and its components. the most favourable and easiest form of state regulation of activities of market entities in the field of tourism is licensing, as compared to the certificate, such permission is obtained much easier. many countries have introduced institutional regulation of such a tool, but remain specific features of this activity, in particular, state regulation of the tourism industry in france by the ministry of economy, industry and employment. it defines the main priorities for the development of tourism in this state (the third model) and on the basis established in 2009 agency of tourist development of france “atoutfrance” performs the functions of licensing in the sphere of tourism and management of the unified register of travel agencies. we can say that in fact, the state took over the function of story regulatory oversight and statistical monitoring of business activity in the sphere of international tourism. state policy on tourism in turkey is implemented by the ministry of culture and tourism, which is responsible for the promotion of tourism products on the international markets, organizing promotional events and companies in different regions of the world and forms the main directions of development of the tourism sector; this is inherent in the second model, state intervention in the regulation of the tourism industry. licensing is required to perform activities associated with tourism and is divided into subtypes depending on the volume of provided services. in particular, there is a license for companies providing complex tourist product with the set of all services from transportation, accommodation, food, leisure (license a) the license granted to market actors that sell tickets for excursions and transport links and license for agencies that provide services only domestic tourists. group of enterprises, which obtained licenses types (b) and (c) may also provide the services assigned to them by travel agencies of the group (a) on the implementation of rounds (galasiuk, 2010). as an important element of the regulatory mechanism in this country, we need to determine the close cooperation of state bodies with the business sector: the license is issued only after registration of the tour company in association of turkish travel agencies “türsab”. in malaysia, the tourism policy of the state determines the specially created ministry of tourism, under the jurisdiction of which is the national licensing division (first model). it should be noted that in comparison with other countries, the licensing authority in malaysia has too broad powers, up to the optimal number of businesses that operate in tourism, which indicates the establishment of a rigid command and administrative methods of state control over the activities of licensees in the field of tourism (honzharevska, 2006). similar documents are used for certification of tourist services and accommodation facilities, which creates further restrictions for entry into this sector as local stakeholders for business activities and global tncs. the practice of carrying out tourist activity in the uk indicates an optional licensing of companies that carry out service of incoming tourist flow. in fact, the responsibility for compliance totally assumes domestic legislation, if a business entity is involved in the organization of trips of not only english tourists, it must have permission from several regulatory bodies (iata, atol, ed) and make about 40-80 thousand dollars cash collateral, which will be used for the protection of british tourists abroad in case of force-majeure circumstances endangering the life or health of a citizen. in our opinion, this approach defined high standards for the protection of national citizens, significant insurance pay-outs in the event of accidents and close interaction between insurance institutions with travel agencies. as one of the key components of the institutional mechanism to ensure the process of licensing tourist activities in italy are carried out by local executive bodies with specific competence and relevant experience, although licensing and main types of a single license are the same for the whole country: international tour operator activities, domestic and travel agency activities. as noted by v. senin, there may exist and additional financial mechanism-guarantee. in particular, some regions of italy have laws providing for the deposit upon receipt of the license (the amount of the deposit for license type a is 40-200 thousand dollars, as for getting the license type b  – 10-40 thousand dollars) (senin, 2016). the analysis enables us to determine the harmonization of national institutional structures with a global, in particular, the competencies regarding the compliance with international requirements are duplicated, but the determining factor remains the existence of individual approach of each country to the baltic journal of economic studies 123 vol. 4, no. 2, 2018 formation of the regulatory mechanism of the tourist activities and the prioritization of certain principles. improvement of regulatory institutions in the context of the expansion of functions of existing institutions takes place according to needs and opportunities of the creation of new global institutions with new competencies and functional powers adequate to the scale of the globalization of the tourism industry. an important basis in this context is information support of the industry because in modern conditions the international tourism takes the next place after it on the level of use of information in production, realization, and consumption of the tourism product. it should be noted that the international tourism market is a complex field of intangible resources from the perspective of the consumer and the provider. this service is information-intensive and requires the use of information technology more than any other sphere of activity. established trends of post-industrial national economies have transformed information technology into a system of organized methods and means of collecting, recording, transmission, storage, search, processing, and protection of information based on application software development, telecommunications, hardware (technical) means. the use of different systems for quick information search, processing, evaluation, presentation to a consumer becomes the key to the successful functioning of the entities providing tourist services, and development of the international market as a whole. now there is a clear distinction of integrated information technology systems used in tourism, requiring a computer system that integrates the different components of international tourist industry, starting with reserving hotel rooms, rental cars, special tourist equipment, electronic boards, airlines, ensuring uninterrupted system of money transfers between counterparties and business entities, the organisation of support of business travel that requires conference calls. proof of the integration of this system is the influence of the level of use, speed, the reliability of data transmission to all subjects involved in the creation and implementation of tourist product. the essence of information technologies, which are used in the international market of tourism services, constitutes the methods and means of the development and support of information flows in control systems by any objects, including the hospitality industry. supporting the opinion of foreign researchers d.  buhalis (buhalis, 2016), h. werthner, a. alzuasorzabal, l. cantoni (werthner, alzua-sorzabal, cantoni, 2015; pego, 2015), who note that information technology and tourism were the main catalysts for the development of the world economy in the last 40 years, it should be noted a direct impact of computerization on tourism industry. the tourism industry in the last two or three decades has undergone enormous influence of scientific and technical progress, the consequence of which was that small travel agents and tour operators use computer technology to automate both core and support functions and major global tourist circuits formed specialized institutions regarding the use of information systems in the promotion of the tourist product within the country and abroad. tourism is ideally suited for the introduction of modern information technologies, since it is needed for systems that in the shortest period provide information about the availability of vehicles and the possibilities of the inventory, provide fast backup, adjustments, release of funds and the automation of support tasks in the provision of tourism services; the parallel formation documents such as tickets, bills and guides, providing the calculated and reference information. world practice has shown the development of various reference tools on the net that provides information about the property, infrastructure, consumer perceptions, help to create own routes, namely: tripadvisor tripsay, tripwolf, doppler, wikitravel. the process of further development and improvement of institutional change in the context of sustainable dynamics of relations, the definition of basic trends of the formation and evolution of the structure of the world market of tourist services should be pursued on the basis of the fact that the international regulation of tourist activities is carried out by international organizations on the basis of realization of complex of measures with the aim of balanced development of world tourism, compliance with relevant standards and enabling effective control of all components sectors, involved in creating the tourism product. international organizations established on the base of state agencies and non-governmental entities implement multilateral regulation of the tourism industry. however, their heterogeneous nature should be noted and different levels of competence depending on the general and sectorial nature, legal status and representation of the countries. among international organizations with a high level of competence of a general nature, we should highlight the world council for travel and tourism, international association for excursions and tours, international tourism alliance, the international union of official tourist organizations. continuing studies of v. kiptenko (kiptenko, 2011), who has separated international intergovernmental and non-governmental organizations associated with tourism, we should implement the functionality of specialized organizations related to tourism (institutions connected with the tourist exchange; organizations dealing with leisure and recreation, institutions related to the youth and student tourism), transport institutions, organizations implementing professional training and research activities in the tourism sector, the institutions that ensure the cooperation information, professional and public institutions in the field of tourism, organization of various fields of tourism. the baltic journal of economic studies 124 vol. 4, no. 2, 2018 key objectives of the institutional changes lie in the interaction between the various subject-object items, as consumers, tour operators and outlined a range of institutions are subjects of the international tourist market. a dualistic approach to their cooperation can be based on the transformation of institutions and the unity and integrity of the system are based on the differentiation of tools and tasks of market development of tourist services. another vector of the transformation of the global crises and threats and internal risks, as the presence of certain institutions to monitor these crises and accounting indicators when coordinating the development of a strategy for the balanced development of the national market of tourist services is an important element of transformational change. concerning the mentioned above, we can create a system of institutional change from the position of strategic objectives (table 2). as noted before, the interaction between different subjects of the market is the basis for the formation of a new policy of development of the tourist market in the conditions of globalization. in the market of tourist services, there are confirmed the principal theoretical concepts of the influence of postmodern trends on the evolution of the system of social values that are reflected in the change of attitude of man to work and, as a consequence  – to the rest, and determines the transformation of tourism demand. 3. conclusions and prospects for further research modern transformation of social institutions is based on the new trends in the field of tourism. a high level of standardization and unification of services in the field of international tourism ensure consumers a unified approach to the formation of the qualitative characteristics of the services, regardless of the country of consumption. it is the basis of modern globalization processes of institutionalization of this sphere. the main tools of implementing this direction are the introduction of uniform requirements for all stages of the creation and implementation of tourist services, as guaranteed by international regulation and development of universal mechanisms to guarantee appropriate standards. in the context of the implementation of the business activities in the field of international tourism, compliance with international standards and requirements for tourist accommodation is the core competitiveness of enterprises both at the level of state and global corporations. that is why the main proposals for change in the institutional environment of international markets of tourist services are the creation of special bodies for the promotion and development of tourist centres in countries that are developing, using the experience and potential of already established markets of tourist services. table 2 the system of institutional changes tasks content model of institutional mechanism improvement base formation of legal framework structural and functional interaction an organization supports the development of the tourist market, maintaining market equilibrium develops cooperation strategies between consumers of tourism services, travel companies and agencies, balanced utilization of tourism services and tourist product subject and object interaction the penetration of the national market to the international market of tourist services, the distribution of income between sectors of the economy regulation of development and differentiation of income to balance the economic potential integration and differentiation the mechanism of prevention of crisis phenomena consideration of internal and external risks monitoring and adjustment of institutional requirements references: buhalis d. e. (2003) tourism: information technology for strategic tourism management (electronic resource). retrieved from: https://books.google.com.ua/ books?hl=uk&lr=&id=sv0tsr5pbg8c&oi=fnd&pg=pr15&ots= qbolyxjtsd&sig=kng jfhcfa6jlei2qtea0hmou-70&redir_esc=y#v=onepage&q&f=false halasiuk s. s. (2010) osoblyvosti vedennja turystychnogho biznesu v ukrajini ta turechchyni [features of tourist business in ukraine and turkey]. hospitality industry in europe: materials of international scientific and practical conference (electronic resource). retrieved from: http://infotour.in.ua/galasjuk13.htm (in ukrainian) honzharevska l. і. (2006) zovnishnoekonomichna diyalnist turystychnykh pidpryyemstv ukrayiny [foreign economic activity of the tourist enterprises of ukraine] (phd thesis), kyiv. (in ukrainian) costa c., panyik e., buhalis d. (2013) trends in european tourism planning and organisation: channel view publications. pearson : england, 400 p. frederick s., gereffi g. (2010) the global apparel value chain, trade and the crisis: challenges and opportunities for developing countries. global value chains in a postcrisis world: a development perspective. washington, dc : the world bank, pp. 157–208. baltic journal of economic studies 125 vol. 4, no. 2, 2018 kiptenko v. k., hlazunova т. v. (2011) informatsiyne zabezpechennya turyzmu : rol' sotsial'nykh media internetu [information support of tourism: the role of social media of the internet]. geography and tourism. issue. 15, pp. 28–32. (in ukrainian) liutak o. (2016) tendentsiyi suchasnoyi transnatsionalizatsiyi turystychnoyi industriyi v umovakh hlobalizatsiyi [current trends of tourism industry transnationalization in the context of globalization]. actual problems of economics, no. 10(184), pp. 8–16. (in ukrainian) senin v. s. (2003) orhanizatsiya mizhnarodnoho turyzmu [organization of international tourism]. moscow: finansy ta statystyka. (in ukrainian) stoliarchuk p., dominiuk v. (2010). mizhnarodna standartyzatsiya turystychnykh posluh [international standardization of tourism services standardization]. certification. quality, no. 4, pp. 14–18. (in ukrainian) pego a., bernardo o. (2015). o impacto dos sistemas e tecnologias de informação no turismo em espaço rural na região do algarve. dos algarves: a multidisciplinary e-journal, p. 41–59. werthner h., alzua-sorzabal a., cantoni l. (2015). future research issues in it and tourism. retrieved from: http://s3.amazonaws.com/academia.edu.documents/37012535/werthner_et_al_2015.pdf ?awsaccesskeyid= akiaj56tqjrtwsmtnpea&expires=1480945653&signature=eqoh1stdm%2foa%2f5sokhu8% 2fcx ggua%3d&responsecontentdisposition=inline%3b%20filename%3dfuture_research_issues_in_it_and_ tourism.pdf (last access: 15.11.2016). iso 18513:2003. tourism services – hotels and other types of tourism accommodation – terminology. retrieved from: http://www.ag-nbi.de/archiv/www.xml-clearinghouse.de/reports/tourism%20standards.pdf (last access: 06.02.2016). baltic journal of economic studies 83 vol. 1, no. 2, 2015 economic essence and components of financial support of agricultural sector volodymyr matskiv1, vasyl stefanyk precarpathian national university, ukraine abstract. the purpose of the paper is scientific grounding of theoretical and methodological approaches to the fundamental principles of the functioning of the existing system of financial support of the agrarian sector in ukraine and its potential areas of its improvement through the construction of new effective financing mechanisms. methodology. in the study the following methods are used: a comparative and morphological methods – to reveal the content and development of scientific thoughts about the interpretation of the concept of «financial support»; methods of systematization and generalization – to determine the functionality of the agricultural sector and the need of its financial support and to reveal the features of its functioning; systemic method – to construct a model of the implementation of agricultural sector financial support; logical method – for a consistent generalization of theoretical and practical scientific research statements. results. investigation of formation and development of the doctrine of financial support and systematization of scientific thoughts about its essence gives the opportunity to consider the content of the studied category in terms of the functional approach. interpretation of the term “financial support” comes down to the statement that the formation of the theoretical foundations of the essence and the economic nature of financial support is a result of the achievements of several generations of scientists, each of whom invested a significant contribution to the development of the theory of the studied concept. this allowed us to analyze the term «financial providing» and to summarize the existing approaches in the light of the activities of the agricultural sector. in terms of functionality we found that financial support as a phenomenon can be seen in the context of its unique significance in the development of the economy. practical implications. it was determined that the problems of financial support of the agricultural sector in ukraine have a complex nature and relate to the economic, social and political spheres of its operation. the most important obstacles in the financial and credit sphere were and remain as follows: lack of adequate financial infrastructure to facilitate its development; lack of property that can be taken as sufficiently liquid collateral to guarantee repayment of the loan; complicated procedure for obtaining a bank loan and the length of the decision-making on the provision of concessional loans; lack of common rules for access of entities to the sources of financial resources; systematic need for funds for working capital; need for financial resources for the operation etc. in the article it is concretized and enhanced the concept of «financial security» as a system, which is characterized by a set of elements (tools, forms, methods of financing, leverages of the financial impact) and the relationship between them, the proper organization of which should focus on the effective development of the agricultural sector, and the fulfillment of its functions and the ability to show the closeness of the relationship between all the structural elements of the system in the process providing of agrarian business by financial resources. value/originality. such interpretation of the essence of «financial support» allows making justification of funds of financial support of the agricultural sector of ukraine. key words: financial support, financial mechanism, agricultural sector, financial provision, funding sources. jel classification: g10, g28, q10 corresponding author: 1 department of finance, vasyl stefanyk precarpathian national university. e-mail: gy40k@mail.ru 1. introduction during the period of overcoming the crisis trends in national economy development, the threat of loss of various types of economic security increases. among them food safety plays a special role, a key component of which is the production of basic food products in required quantities in the country. it requires providing the domestic agribusiness primarily with financial resources. an important task at this stage is to create the conditions for economic stabilization and further development of agricultural production, strengthening the role of the financial mechanism witch best meets the conditions of business environment and management and allows us to redirect the system of state support to increasing the efficiency of agriculture. baltic journal of economic studies 84 vol. 1, no. 2, 2015 under the conditions of market reforms and economic stabilization in ukraine one of the basic tools of revitalization of the agricultural sector is to create a proper financial support for its development, which caused by the determining role of the studied subjects in social and economic recovery of the country. the experience of highly developed countries in formation and development of agricultural business shows that its effective functioning occurs in a complex of financial support conditions and establishment of mutually beneficial partnerships between business entities, state, and active subjects of the financial infrastructure. formation of the system of financial support of the agricultural sector in ukraine is still going on. however, in the context of budgetary constraints, the instability of the state policy in the field of financial support for agricultural producers and encouraging alternative forms of funding, lack of effective mechanisms of financial and credit support is accompanied by a high level of financial risks. that is why tangible positive results have not been achieved. likewise socioeconomic status of studied subjects has not been transformed neither in the direction of serious quantitative increase of their activity efficiency, nor in terms of quality parameters of development. 2. the interpretation of the essence of «financial security» the term «support» refers to «a set of measures and tools, creation of conditions that promote the implementation of plans, programs, projects and maintenance of stable system operation». therefore, the object of financial support of the enterprise is the processes of simple and expanded reproduction. modern interpretation treats «support» in the diverse value (kuznetsov, 1998). it is identified several important scientific economic research provisions. the considered concept is presented as a combination of cash or tangible assets. these elements are supporting the existence of economic and social actors. as support a number of actions can be considered, such as holding a set of actions or the adoption of the list of measures (bodi, 2013). the essence of financial support as a financial category should be based on the economic substance of finance and its functions. finance performs not only distribution and control functions, but also a function of generating cash income. this allows logical assuming the mandatory signification of these functions in the process of financial support. indeed, a support function is shown, for example, in the financing of infrastructure in the process of funds formation for financing the implementation of infrastructure projects. however, it is not enough for clarification of the financial support essence. financial support is closely connected with forms and methods of such a support. this relationship has stable and systematic character. therefore, financial support represents a system of comprehensive selection of the most appropriate and sufficient sources of funds and institutional forms of financial control of their attraction for development of the agricultural sector. s. v. barulin presents financial support as a twoway process (barulin, 2010). ambiguity considers the sub-process of formation of financial resources and, accordingly, their use. it is noted the importance of each of the sub-processes and their direct dependence and interdependence. the author maintains the processing contents of financial support. moreover, providing support for real production and social sector is realized through the financial support in the aspect of social reproduction and fulfilling needs of citizens. financial support is also treated as a capital management. in the extended aspect financial support is presented as efforts of attracting, usage and allocation of capital. a  positive side of considered approach is processing contents of financial support and need for sound management decisions. in economic literature there are various options for determining the term «financial support». i. v. zyatkovskyy gives the interpretation of the term «financial support» as follows: «financial support is a system of sources and forms of financing the development of the economic and social spheres of society». one may agree with his opinion that it is carried out in three forms: self-financing, loans, budget allocations (zyatkovskyy, 2000). according to t. v. sokolska, agriculture is a unique industry in ukraine, one of the few which recently demonstrates growth in the current economic conditions of the optimum financial security, which is understood as providing business entities with fixed and circulating assets, own and borrowed financial resources, sufficient for the release of the planned volume of production. financial support provides the continuity of the production and sale of agricultural products and minimizes costs. however, current government policy in this regard is haphazard, inefficient and unable to meet the needs of the subjects of agricultural production (sokolsky, 2014). in general, the term «financial support of the agriculture materialtechnical base reproduction» should be understood as a set of methods, techniques and tools of economic influence, which is held by public authorities and market structures, aimed at reproductive processes in the agricultural sector, including the renewal of the material technical resources. the whole range of funding sources for fix assets renewal in agricultural sector can be conditionally divided into three groups: 1) funds generated by enterprises on their own on the basis of productive work; 2) funds received by farmers from the outside. analysis and systematization of the positions of the various authors allows us to single out two basic approaches to understanding the essence of financial support. some economists such as n. l. kardanskaya (kardanskaya, 1999), a. m. babich (babich, pavlova, 1999), and others treat it as a capital management process. while others, baltic journal of economic studies 85 vol. 1, no. 2, 2015 such as n. f. samsonov (samsonov, 2001), s. v. bolshakov (bolshakov, 2006), and others define it as the process of support the enterprise with financial resources. given that the formation and flows of capital are implemented by attracting and allocating financial resources, we believe that the concept of financial support may be reduced to financial management. this is supported also by the fact that the movement of financial resources may be significantly wider than movement of capital, for instance, when temporarily free funds are used in the financial market or provided in the form of loans to other economic operators. l. n. pavlova interprets financial support as a set of forms and methods, principles and terms of financing businesses.. financial support for entrepreneurship is a capital management, activities of its attraction, development and use (pavlova, 2003). organizational and economic mechanism of agricultural enterprises financial support is a system of elements of organization, search and mobilization of financial resources and corresponding economic instruments, that can help to achieve the main goal – revenue of necessary financial resources for the agricultural production providing (andriichuk, 2004). t. v. shablovskaya defines financial support as a process of formation, distribution (placement) and further use of the part of financial resources such as entity capital, aimed at achieving the goal, which is the subject of financial management and controlled by the elements of the financial mechanism (shablovskaya, 2007). p. a. stetsiuk ascertained that the problem of financial support at the micro level is not in a lack of financial resources in general, but in access to them of a particular company and in forms and methods of their distribution between economic sectors and economic entities (stetsiuk, 2005). v. m. oparin, says: «... financial support is realized on the basis of an appropriate system of financing, which may be carried out in three forms: self-financing, loans, external funding. various forms of financial support are used in practice simultaneously through the establishment of the optimal relationship between them for a given stage of development of society... » (oparin, 2001). after all, as l. v. dikan and yu. holub say: «... the meaning of the term «financial support of the enterprise activity» in a broader sense summarizes a set of measures and conditions that promote sustainable development of the enterprise through covering the costs by financial resources depending on the size of production and financial situation ...» (dikan, holub, 2007). that means the first place in this definition is taken by a set of events and conditions that make possible to ensure the financial activities of the company. a. e. hutz is considering financial support as a possibility of economic entity to provide its own activities by necessary financial resources (hutz, 2007). v. m. rodionova determines the financial support of the reproduction process as a «covering of reproduction costs by financial resources accumulated by business entities and state» (rodionova, 1994). thus, according to supporters of this approach, financial support is the process of attracting and accumulating financial resources by business entities and the state for their further use in order to cover costs and targeted funding. in most scientific sources, financial support is offered to assume as part of the financial management system, aimed at transformation of financial resources into capital in monetary form by attracting funds and their use for certain activity purposes, which is based on such a financial method as financing, and operation regulatorelements of the financial mechanism. generalization of theoretical bases of financial support shows the relationship between the overall economic approaches to the process of ensure and basic principles of finance category. in terms of economic activities and legislative definition it is determined a direct relationship between financial support and cash flow. in the scale of the system in the agricultural sector it has being established the interaction between the process of funds formation and use and progress of the state guarantees execution in the process of determining the composition, structure and amount of funding. 3. objectives and mechanisms of financial support of agricultural sector financial support of production processes in the agricultural sector, which is one of the important channels of cash flows, characterizes the ability of the financial system to generate such economic relations between the subjects of the reproduction process about the movement of financial resources which will provide the economic development that is needed for national economic security, performing the country’s role as one of the global leaders in food production, and meeting the needs in the bioenergy resources and the socio-economic needs of society. there are two main goals of financial support: 1. coverage of current needs. 2. implementation of capital costs. effective formation and implementation of the financial support system is only possible if it will be build a rational system of its organizational support. the organizational mechanism component of financial resources formation in agricultural sector is formed by relevant actors of state financial system. agriculture in ukraine is a sector of the national economy, which brings together different types of economic activities in the production of agricultural products, food products, as well as their delivery to the final consumer. in the agricultural sector it is generated about 17% of gdp. it is one of the main budget making and export oriented sectors of national economy, which determines the practical importance and relevance of investigation of financial support problems of the enterprises (goncharov, ivanyuk, 2012). under such conditions, it becomes apparent that the further development of the sector requires qualitative transformations, capable to increase the competitiveness of agricultural production and food security of the state, the economic development of the agricultural sector. baltic journal of economic studies 86 vol. 1, no. 2, 2015 as international experience shows, the government should create effective ways to solve the problem of full financial support to agriculture by setting clear strategic orientations of its development, according to which state policy will be carried out in the directions of legal, financial and other economic regulation of the industry (lupenko, mesel veseliak, 2012). the financial support effectiveness of the financial agroindustrial complex functioning is primarily determined by the optimal structure and content of the financial mechanism of the agricultural sector, which has significant industry specificity, which is typical only to this sector of the economy. to assess the quality of agricultural enterprises financial support in relation to the financial mechanism of the agricultural sector in the first place should be allocated four of its main elements that are the most adapted for use in agriculture: 1) financial planning, made by using program-oriented method, project method, and the method of expert evaluations; 2) financial support, carried out by buying, financing, lending and investing; 3) regulation, realized by the tax and customs policy, licensing, quotas and certification; 4) financial control, carried out within the framework of audit, inspection, evaluation, monitoring and analysis. 4. results the mechanism of financial support of business processes is understood as a specific set of resources, states and processes which determine the procedure for approval of the financial, economic and institutional relations on the formation and use of financial resources in order to achieve continuous production cycles, through the formation of a balanced system meet the capital needs of active economic systems. the structure of the financial mechanism of the production process contains two databases: functional, the system of financing productive activities, reflecting the contour and of financial resources flow shape (accumulation and distribution) in the process of meeting the needs of business entities the capital – financing in the narrow sense; institutional, revealing the movement patterns of financial and resource flows – financing system of business activity as a set of mediating financing of productions relations processes and institutions in the economy, the leading of which is the state that regulates the formation and use of investment resources, forming the regulatory, legal, information and analytical support – capital funding in the broad sense. the level of organization efficiency of agrarian sector financial support is mainly determined by the effective state financial policy. in turn, the prudent state financial policy determines the success of subsequent economic transformations in the agricultural sector, creating conditions for attracting foreign and domestic sources of financing. in the conditions of deepening the market and structural reorganization of the agricultural sector financial resources formation and use in agricultural enterprises are affected by a variety of factors, primarily which include: − seasonality of production and demand for agricultural products, and the related volume fluctuations of cash flow and solvency of enterprises; − dependence of the enterprises operation results and sources of funding from the influence of climatic conditions; − adverse weather conditions, environmental degradation, especially for plant growing and related processing industries; − the main means of agricultural production is land, which is not amortized, and therefore does not participate in the formation of the cost of production. at the same time, different levels of land natural fertility and location contributes to the formation differentiated income (rents) of producers; − significant specificity of this sector is self-reproduction. a significant part of the resulting products are not sold, and remains for the enterprise in the form of young stock, feed, fertilizers for the fields. therefore, it is not included in the commodity production and does not take the form of money, but it is involved in on-farm turnover. − state regulation of agricultural market, in particular by restricting or establishing a certain level of prices and tariffs, adoption of new standards for food, etc. these factors lead to specific forms of this sphere entities finance organization. due to these specifics, the market mechanisms of management in agriculture cannot be implemented with the same completeness and efficiency in other sectors. therefore, agricultural food production requires the use of specific mechanisms of financial support, which is a system of financing sources and forms of agricultural production development and expanded reproduction. it manifests itself in five forms: self-financing (internal self-financing), lending, financing from the budget (state support), equity financing and mixed risk financing (innovation funds) (sokolska, 2014). according to a. r . zhydyak, searching the ways to improve the model of rational organizational economic mechanism of agricultural enterprises financial support one should take into account different principles: decentralization, compactness, intensity, reducing intermediate links, dialectical interaction between self-regulation and state regulation, flexibility, openness, adequate social-economic situation, etc. (zhydyak, 2013). further development of agriculture requires financial resources. demand of the agricultural producers has been already formed, as in the fierce market competition; the progressive entities left, technology vendors require significant financial investments (levchenko, 2008). based on the above, the mechanism of financial support for agribusiness sustainable development in the region must include: measures of fiscal, credit, tax support and insurance coverage of agricultural producers. it should be promotional in nature and directed at support of baltic journal of economic studies 87 vol. 1, no. 2, 2015 agricultural industries susceptibility to the development of production innovation and formation of civilized market relations. it must also include the use of subsidies for purchase and introduction of modern technology and scientific and technical products; reduction in the tax base of land tax with the amount of own funds, which will be spent on improving soil fertility, expansion and development of cleaner production; financing of capital investments in the development of science, technology and innovation projects, etc. problems of effective management of the agrarian sector enterprises activity financial support requires a constant search for the optimal forms, methods and tools that meet the needs of the enterprises themselves, the priorities of the economic policy and the formation of the prerequisites for economic growth. 5. conclusion in the article it is concretized the content of such concepts as «financial support» and «mechanism of financial support». it was found that the main directions of improving the effectiveness of the financial mechanism of the agricultural sector of ukraine’s economy is the creation of a favorable environment for opening and maintaining the agricultural business and ensuring effective public financial support for its development at the beginning of activities. the consequences of the financial mechanism effective implementation are achieving a strong consumer, investment, innovation, institutional and social effects in rural areas. current economic conditions need the implementation of new requirements for the creation of a favorable business environment and adequate methods of its regulation. dynamic transformation as a necessary prerequisite for the development of national economy, the objective transformational changes in the structure of its branches in favor of further qualitative development of the agrarian sector of ukraine’s economy require functioning of the mechanisms, functional load of which is an account of positive influence of external and internal factors, preventing the negative impact of hazards or threats of continuity of the subjects of financial relations activity and stimulation the efficiency of their management with describing the strategic priorities of sustainable growth through the implementation of new innovative approaches, measures and methods of formation and use of financial resources. at the same time, thanks to the development and operation of the financial mechanism it becomes possible to support the full development of agriculture. thanks to it, it is provided balancing of cash flows in favor of expanded reproduction based on the successful combination of the laws of the market economy and state regulation of its development. it helps to avoid distortions and imbalances in the distribution and redistribution of financial resources in agriculture. however, the process of raising funds in the agricultural sector of ukraine has been significantly slowed down with the influence of political and economic crises of recent years. as a result inflationary pressures intensified, investment potential of the state budget decreased, the financial condition of agricultural enterprises has worsened the outflow of bank deposits is increased, number of lossmaking financial institutions is increased, the volume of bank lending to businesses was reduced, investment activity of foreign investors decreased. the deceleration of this process in ukraine was caused by corruption in the government, powerful tax burden and an imperfect legal framework, especially in the sphere of protection of owners and investors e rights. references andriichuk, v.h. 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(2005). formation of financial resources of agricultural enterprises. economy aic, issue 11, p. 111-116. zhydyak, o.r . (2013). the problem of improving the mechanism of funding businesses agricultural areas. businessinform, issue 2, p. 139-141. zyatkovskyy, i.v. (2000). the financial support of business – ternopol, economic thought, 215 p. владимир мацкив экономическая сущность и составляющие финансового обеспечения аграрного сектора аннотация. целью исследования является научное обоснование теоретико-методических подходов к основным принципам функционирования существующей системы финансового обеспечения аграрного сектора украины и потенциальных направлений ее совершенствования путем построения новых действенных механизмов развития финансирования. методика. в исследовании использовались следующие методы: морфологический и компаративный – для раскрытия содержания и развития научной мысли в трактовке понятия «финансовое обеспечение»; систематизации и обобщения – для определения функционального назначения аграрного сектора, необходимости его финансового обеспечения и раскрытие особенностей его функционирования; системный – для построения модели реализации системы финансового обеспечения развития аграрного сектора; логический – для последовательного обобщения теоретических и практических положений научного исследования. результаты. исследование становления и развития учения о финансовом обеспечении и систематизация научной мысли относительно его сути, дали возможность рассмотреть содержание исследуемой категории с точки зрения функционального подхода. трактовка финансовое обеспечение сводится к тому, что формирование теоретических основ сущности и экономической природы финансового обеспечения является результатом достижений ученых не одного поколения, каждый из которых вложил свой весомый вклад в развитие теории изучаемого понятия. это позволило провести анализ трактовки дефиниции «финансовое обеспечение» и обобщение сложившихся подходов через призму деятельности аграрного сектора. с точки зрения функционального назначения установлено, что финансовое обеспечение, как явление, можно рассматривать в контексте его уникальной значимости в развитии экономики. практическое значение. определено, что проблемы финансового обеспечения развития аграрного сектора в украине свидетельствуют комплексный характер и касаются экономической, социальной и политической сфер их функционирования. важнейшими препятствиями в финансово-кредитной сфере были и остаются: отсутствие должной финансовой инфраструктуры содействия ее развитию; недостаток имущества, которое может быть принято как достаточно ликвидный залог для обеспечения гарантий возврата кредита; сложная процедура получения банковского кредита и продолжительность принятия решений о предоставлении льготных кредитов; неосведомлённость и отсутствие единых правил доступа субъектов хозяйствования к источникам финансовых ресурсов; регулярная потребность в средствах для пополнения оборотных средств; потребность в финансовых ресурсах для функционирования и тому подобное. конкретизировано и улучшено содержание понятия «финансовое обеспечение» как системы, для которой характерна совокупность элементов (инструменты, формы, методы финансирования, рычаги финансового влияния) и взаимосвязь между ними, надлежащая организация которой должна быть направлена на эффективное развитие аграрного сектора, выполнение возложенных на него функций и способность отображать тесноту взаимосвязи между всеми структурными элементами системы в процессе обеспечения аграрного бизнеса финансовыми ресурсами. значение/оригинальность. такая трактовка содержательной сущности позволяет осуществить обоснование средств финансового обеспечения развития аграрного сектора украины. baltic journal of economic studies 42 vol. 4, no. 3, 2018 corresponding author: 1 department of international law and comparative law, international humanitarian university. e-mail: gromovenkovikkos@gmail.com 2 department of theory and history of state and law, international humanitarian university. e-mail: yana1maslova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-42-50 forming the development strategy of modern hei kostiantyn hromovenko1, yana tytska2 international humanitarian university, ukraine abstract. the article analyses modern trends in supporting the development of financing of higher education in the european union, namely: the evolution of financing strategies for higher education in 2010-2016, the change in the volume of financing of various systems for this period, and the criteria for the allocation of public funds in higher educational institutions. it is shown that countries, members of the eu, use different strategies for financing higher education but do not have a universal mechanism. based on the analysis of european scholars’ research, various mechanisms for financing higher education are presented, their tendencies are determined. models of adaptive transition of heis to modern conditions of functioning, using accessible tools and methods were considered. the proposed three scenarios for funding universities show that the strategy for financing heis in the current dynamic development conditions should shift from a traditional model of public financing (supply-side) through the transformation to financing on the basis of socio-economic mechanisms (demand-side) using different tools. the eu countries use different financing strategies for heis and do not have a universal mechanism. the amount of funding for higher education institutions depends both on quantitative (number of students) and qualitative (number of credits, diplomas) indicators. there is a tendency to allocate public funds to heis on the basis of learning outcomes, as well as the tendency of combining different financing instruments in the context of a particular country, including the emergence of demand-side socio-economic financing mechanisms. socio-economic financing on the basis of demand has several potential advantages. firstly, students and firms, “consumers” of educational services, are key figures. these mechanisms can stimulate universities to be more efficient economically, and students – to improve academic results and increase internal efficiency. secondly, the demand scenario mechanisms can be used regardless of the source of financing. they can be applied equally for the allocation of public resources and private financing of employers or students and their families. the main disadvantage of the mechanisms for financing heis is that they are not interested in using funding for social and public programs and research with low economic efficiency. to apply one of the scenarios in a particular country, it is important to take into account not only national characteristics but also international trends. competitiveness of international students, the emergence of the territory of a multinational educational platform and international ratings – all this play a significant role in the formation of strategic decisions for the heis’ development. an effective process of resource management of hei should be based on strategic and financial benchmarks that provide for the development and implementation of a number of activities for the current activities of heis aimed at achieving the normal sustainability of the funding system and enhancing the university’s competitive advantages. for this purpose, a scheme for shaping the development strategy of the hei was developed and a methodology was proposed for calculating the scientific and educational effectiveness of the university’s activity, which includes three fundamental categories: the quality of the university’s growth; the demand for scientific activity; scale, sustainability of scientific activity. key words: higher education, experience of eu countries, hei financing strategies, financing conditions, financing mechanisms, hei development scenarios, financing instruments, strategy scheme, hei efficiency rating. jel classification: i20, i21, i23, b25 1. introduction the qualitative system of higher education, being an indicator of the country’s development, becomes the leading sphere of the social and economic policy of any state, reflecting the level of the state and development of society. the growing role of higher education is manifested in the solution of socio-economic, scientific and technological, socio-cultural, and spiritual and moral baltic journal of economic studies 43 vol. 4, no. 3, 2018 problems and consists in preserving national traditions, and in the progressive impact on the development of the state’s potential of the country. the economic nature of higher education is understood as an investment in human capital. education is considered along with healthcare, culture, art, and science in the third sector of social production, in which human capital is formed, and the intellectual values of society are created. it is important that the development of the education system depends solely on sufficient financial support, which allows updating and multiplying the intellectual potential of the educational institution, its scientific, material, and methodological base. issues of studying the essence of educational institutions and the mechanism of their financing are reflected in the works of many economists, including russian (avetisyan, 2007; belyakova, 2003; gurov, sigova, 2006; vossenshteyn, 2003; and others), as well as ukrainian (volynchuk, 2009; kalynyuk, 2011; tymoshenko, 2008; vaniyeva, 2006; and others). at the same time, there was a need for a comprehensive study of the specifics of the formation of the financial mechanism of higher education and its main components in relation to the process of universities’ transformation. today, the regulatory and legal framework for education has been formed, the autonomy of higher education institutions has increased, new educational standards have been introduced. however, there are problems of management and financial support of higher education institutions, an optimal combination of budgetary and extra-budgetary sources of financing, and the development of an effective model for their use. in this regard, the study of issues of the formation and effective use of financial resources by higher education institutions is particularly relevant. in ukraine, after the adoption of the new law “on higher education” in july 2014, higher education institutions received autonomy, which “is based on the idea of university autonomy, which means greater autonomy of universities in the financial, economic, and organizational spheres of activity.” it is the issue of forming a strategy for the development and financing of higher education in ukraine under conditions of european integration that is of considerable interest to all stakeholders (suppliers and consumers of educational services). in this context, it is important to study the experience of the european union on this issue (mospan, 2016). an analysis of the studies conducted by the eua public funding observatory (2014), as well as the studies of ben jongbloed, jamil salmi, stéphan vincentlancrin, and others, can help to determine the current trends in the development of higher education financing. the purpose of the article is to study the evolution of the formation of the university development strategy and models of higher education financing on the basis of eu experience and current social and economic trends. 2. the methodology of research it should be noted that researchers identify two main sources of funding for higher education – public funding and private funding as an alternative to public funding ( jongbloed, 2010; eua public funding observatory, 2014; vincent-lancrin, 2009). the sustainability of the functioning and development of higher education and the improvement of the quality of the training of highly qualified specialists directly depend on sufficient provision of financial resources. therefore, the formation of a financial mechanism in the overall development strategy plays an important role in the management system of hei. today, higher education in many eu countries is mainly financed from the state budget. public funding reflects the traditional financing model, which has the goal of ensuring equal access to education. the advantages of this model are the active and diversified participation of the university in the strategic policy of the state (salmi, 2009; jongbloed, 2010). in the context of current trends that directly affect the additional funding needs, namely, changing the demographic structure, the growth in demand for higher education, especially in developing countries, the transition to lifelong learning and the growth of higher education costs, researchers observe the transformation of government funding strategies for hei for the period of 2010–2016, when for some eu countries the situation improved (eua public funding observatory, 2014; vincent-lancrin, 2009). analysis of table 1 shows that the increase in public funding for higher education occurs in the most table 1 transformation of the strategy of public financing of higher education for the period of 2010-2016 eu countries increased funding for higher education decreased funding for higher education germany, norway, sweden within 20%-40% austria, belgium, france within 10%-20% poland within 5%-10% iceland, the netherlands, portugal up to 5% croatia, slovenia within 5%-10% spain, czech republic, serbia within 10%-20% ireland, lithuania, italy, great britain within 20%-40% greece, hungary more than 40% baltic journal of economic studies 44 vol. 4, no. 3, 2018 developed countries and the percentage of increased funding depends on the level of economic development of the country and vice versa, therefore greece and hungary show low rates. changes in the funding strategy for higher education have had a different impact on the activities of universities in europe. reducing the funding of research (research funding) was conducted in slovenia (more than 10%), spain, greece, and ireland. in particular, in ireland, the reduction in research funding has had a negative impact on the ability of heis to attract and retain the best researchers and scientists. at the same time, public authorities of norway provided additional funding for research aimed at increasing the number of doctoral students. by teaching funding, the united kingdom plans to reduce teaching grants from the share of overall higher education funding from 64% in 2011-2012 to the projected 17% in 2017-2018, with transferring the cost of training to students. note also that students in england and the eu have access to government-backed student loans, which are repaid on the income-contingent basis ( jongbloed, 2010; eua public funding observatory, 2014; mospan, 2016). such loans are regularly subsidized since interest rates are associated with inflation, and the loan itself is repaid after a long period of time. it is assumed that in the future, 45% of government-backed student loans will not be reimbursed by the government (eua public funding observatory, 2014). the eu countries use different strategies for public funding of universities and do not have a universal mechanism. j. salmi (salmi, 2009), who studies the development of the strategy for the development of universities and their financial mechanisms, is convinced that it is the lack of a unified model for higher education funding that causes conflicts between eu member states. b. jongbloed ( jongbloed, 2010), points out the existence of a certain formula for funding the heis. he argues that most countries in europe use financing formulas to determine the size of government grants for training and research. the basis for this formula is the criteria for funding heis, listed in table 2. according to the analysis of table 2, the amount of state funding for heis depends on both quantitative (number of students) and qualitative (number of credits, diplomas), although qualitative indicators prevail. this trend in the further development of the hei strategy is confirmed by the existing mechanism for financing universities based on the results of education (performance-based funding). b. jongbloed notes that in the dutch funding system, the distribution of funds in heis by 50% depends on the number of degrees awarded, and it is the number of graduates that affects the amount of funding for universities in the future ( jongbloed, 2010). in the research budget, such elements as master’s degrees and doctorate degrees partially affect the distribution of funds to heis. the norwegian funding system allocates funds according to a formula based on a combination of a fixed component (60%) and components that depend on educational outcomes (25% – based on student credits (ects) and the number of graduates) and research (15% – based on a set of such indicators as: the number of doctoral degrees, the amount of funds received from sponsors, the number of patented studies, and the number of publications) (eua public funding observatory, 2014; mospan, 2016). hei funding teaching funding teaching grant performance-based funding governmentbacked student loans research funding block grants figure 1. mechanisms for forming higher education financing in the eu however, the forms of financing of heis in different countries vary depending on the economic, social and table 2 conditions of financing of european higher education systems eu country grounds of public funding of the university sweden number of students and credits (ects) denmark number of credits credited to students (ects) belgium number of new students and credits to students (ects), number of diplomas awarded (ba, ma, phd) germany budget places for last year; number of students awarded by the state great britain (england) number of students in the hei finland number of diplomas awarded (ba, ma, phd) france general criteria of the hei (number of students and staff ) spain the share of students who study on a contract basis, who received prestigious work the netherlands number of new students; number of diplomas awarded (ba, ma, phd) baltic journal of economic studies 45 vol. 4, no. 3, 2018 cultural conditions, political conditions, and strategic vision of the role of higher education in the state development. in modern financing systems, mechanisms for allocating block grant funding are increasingly being developed. a block grant is understood as a grant to a local government body with the right to independently manage the grant funds. in most countries, block grant funding includes separate training and research components, calculated on the basis of various criteria (although universities have economic freedom with respect to this grant). block grant funding for scientific research is transformed from a strategy for funding universities to performance-based funding (based on the quality of education) (eua public funding observatory, 2014). despite the different strategies for financing higher education that are used by eu countries, there are trends in their evolution. firstly, this is an increase in the direction of the distribution of costs; secondly, an increase in the correlation between the effectiveness of the hei and the methods of financing; thirdly, active processes of a combination of different financing instruments in the context of a particular country, including the emergence of demand-based financing mechanisms. based on the study of the current trends in the formulation of higher education and hei development strategies and the formation of mechanisms for their financing, three scenarios for the development of university financing can be distinguished: supplyside financing scenario, transformation scenario, and demand-side financing scenario (figure 2) (salmi, 2009). the supply-side financing scenario reflects a traditional financing model that aims to support public funding for higher education and to provide equal access to it. according to this model, heis are mainly financed directly from the state budget (salmi, 2009). such a scenario has a negative impact on the quality of education and the fairness of its distribution, especially in less developed countries. in the future, countries with predominantly public funding will be able to feel the rapid growth of secondary schools and the limitations of budgetary resources. such states will be able to avoid the degradation of higher education only if they manage to regulate equitable access to education and evenly distribute expenditures. otherwise, they will have unstable growth, deterioration in the quality of education, and high unemployment level among graduates over a slowdown in the creation of jobs. the transformation scenario is observed in countries in transition in eastern europe and post-socialist countries (vietnam, russia, poland, armenia, azerbaijan, ukraine). the universities introduced a tuition fee on a selective basis, thus creating a two-channel system. the specificity of this scenario is that success at competitive entrance exams at state universities determines who should pay, and who is granted privileges. among the possible risks of this model, the risk of inequality in access to higher education and the risk associated with less interest of contract students in the results and fewer achievements in training can be called. reform, in this case, will be a transition to universal tuition, additional help to students, the introduction of exemption programs, scholarships and loans for students who need it and show great success (salmi, 2009; jongbloed, 2010; mospan, 2016). supply-side financing the consequences and various conditions for the continuation of traditional state financing are studied transformation financing applied in countries that refuse traditional public funding demand-side financing bold reforms are envisaged that allow the university to independently use financial resources figure 2. scenarios for the development of the university’s financial strategy baltic journal of economic studies 46 vol. 4, no. 3, 2018 the transformation scenario will be adopted by a growing number of countries due to the need to adjust strategies for attracting and allocating resources to the university in the face of deteriorating economic and social conditions. a demand-based financing scenario provides for financing the higher education system mainly on the basis of market mechanisms, through which public resources are directed to support students rather than directly transferred to the hei, as is now happening in almost all countries of the world. also, in the long run, the schedule of state funding will change, it will not be applied only to students and graduates of educational institutions; it will also be available to older people participating in retraining or in continuing education programs throughout their working life. so far, there have been no precedents for applying such a scenario in any country, but more developed countries are moving in this direction, increasingly using these approaches and tools. modern tools of demand-side financing include: – scholarships and grants. most countries and universities offer gratuitous financial assistance, taking into account the needs, or a scholarship for academic achievement; – student loans. they exist in different forms in more than 60 countries. a large number of hei organize and finance student loans; – human capital contracts are proposed by private firms and differ from student loans. the student-participant agrees with the repayment of a part of its expenses by the investor, through the transfer of the share of the student’s equity capital after graduation. human capital contracts exist on a pilot basis in chile, colombia, germany, and the usa (mospan, 2016); – vouchers. six countries in the world, including bulgaria and hungary, have introduced the form of vouchers into the system of higher education. students get the right to study at the university at their choice; – education savings accounts. education savings accounts (sometimes called “individual learning accounts”) are aimed at encouraging families or individuals to save on education. the state (in belgium, the netherlands, spain, sweden, scotland, and wales) encourages families to contribute money to their children’s savings accounts, offering either tax incentives or related donations. such accounts are used for professional training purposes; employees and employers are invited to open accounts and use the money for further training. 3. results and discussion we believe that the financial mechanism of higher education, as a part of the overall financial mechanism of the country, is an element of the implementation of the state policy in the field of higher education. we propose a comprehensive strategy for the formation of the financial mechanism of the hei consisting of a set of independent but interrelated forms, methods, instruments, and levers of state influence that ensure the creation and use of financial resources for the effective implementation of the educational, research, reproduction, and educational functions of the higher education system. an important feature of such a strategy for funding a university in modern conditions is the problems of university interaction with the state. the economic relations that develop between the state and heis include a certain set of relationships related to property, management, the degree of universities’ autonomy, financing mechanisms, etc. therefore, for the effective functioning of such a strategy, a state program (strategy) for the development of higher education should be developed, which would provide strategic priorities in the financing of heis (shevchenko, 2011). in our opinion, the state policy in the field of higher education should include: – the transition from the principle of maintaining higher education institutions at the expense of the state budget to state support in terms of virtually possible amounts, the development of a system of state orders for the training of personnel, but without limiting their number; – improving and deepening the autonomy of educational institutions, especially in the field of finance; – the transfer of a number of research institutions to the leading universities. this will improve the material and technical base of the academic, scientific, and postgraduate processes, increase the level of the teaching staff, make better use of the material, financial, and human resources of higher education; – expansion of independence in the disposal of resources, including funds from the budget, the implementation of various activities that generate income; – expenditure of budgetary funds should be carried out by educational institutions independently, excluding the needs of the educational process in accordance with the articles of budget classification. this can be the basis for the financial part of the university’s educational strategy (mayorova, maydan, 2013). the current legislation of different countries, including ukraine, grants to the heis the right to use the funds allocated for the implementation of the educational process. however, modern approaches to financing significantly restrict the rights of educational institutions and, in a certain way, contradict the current legislation on education. elimination of such a contradiction is possible with further improvement of the financing system by: – establishment for hei of the amount of budgetary financing on the basis of a budget program or programtarget method; – providing educational institutions with the opportunity to independently plan and manage baltic journal of economic studies 47 vol. 4, no. 3, 2018 the budget process for a medium-term (3-5 years) perspective (rosentsvag, 2008). another direction for improving the strategy for the development of heis is to stimulate their participation in the formation of the national innovation policy through the transformation of heis into research centres. in our opinion, the revenues from innovation activities of universities (the implementation of their own scientific research, including abroad) can become an important additional source of funding for higher education institutions. first of all, it concerns classical universities that have all the opportunities to interact with other sectors, combining fundamental research with sectoral research (in cooperation with departmental research institutions) and self-supporting research (on demand of business entities) (arsenev, 2008). we propose a methodology for calculating the rating of the scientific and educational effectiveness of the hei, which will help both the university and its related structures to determine the effectiveness of the operation and further development prospects. development of a strategy for the development of higher education formation of the mechanism for implementing the strategy of hei legal regulation of development of hei forming the management system forming the system of audit and monitoring of hei activities methods of regulation strategic forecasting tactical planning methods of financing forms of financing sources of financing costing performance financial based on the cost of studying one student financial based on services provided budget contractual loan mixed funds of state and local budgets extrabudgetary public funds funds of sponsors of legal entities funds of sponsors of individuals loans grants educational product (diploma) scientific-research product (postgraduate education, doctoral studies, publications) figure 3. the scheme for forming the strategy for the development of higher education baltic journal of economic studies 48 vol. 4, no. 3, 2018 table 3 methodology for calculating the rating of the scientific and educational effectiveness of the hei indicator calculation methodology weight of indicator, % quality of university growth 33,3 number of students indexes of students’ dynamics for the last 5 years. in absolute and relative terms (including by the number of diplomas (ba, ma, phd) and credits (ects) 11,1 number of citations the share of third-party quotations in the total volume of quotations of the university articles is used: number of citations without self-citations/total number of citations х 100% if the indicator ranges from 63 to 100%, then the final score = 100 from 34 to 63 = from 0 to 100 less than 34 = 0 points 11,1 concentration of articles the calculation methodology for all subjects (except for the economics, humanities, and social sciences) takes into account the number of journals in each subject area: where qi – the number of university articles in the journal, q – the number of university articles in the subject area, n – the number of journals, in which university articles are published. for the economics, humanities, and social sciences: the index of concentration of publications in journals σω, where ω — share of university articles published in the journal i, in the total volume of articles in this subject area) with new boundaries: if the indicator is less than 1700, then the final score = 100 from 1700 to 4000 = from 0 to 100 more than 4000 = 0 points 11,1 the demand for scientific activity 33,3 field-weighted citation impact (fwci) the number of citations of university publications relative to the average number of citations received by such publications 11,1 average snip of journals the indicator is calculated as the average snip of journals, in which the university publishes its articles. snip – source normalized impact per paper – the average number of citations per article in the journal, normalized by the differences in quoting between subject areas. consider publications for five years 11,1 average number of citations per article an average number of citations per article received for articles published over five years 11,1 the scale, stability of scientific activity 33,3 hirsch index the university has an index h if h from its np articles is cited at least h times each, while the remaining (np – h) articles are cited no more than h times each. articles published during the last 5 years are considered 11,1 scientific collective i-index the university has an index h if h of its np scientists has a hirsch index of at least h, while the remaining (np – h) scientists have a hirsch index of not more than h. scientists who have publications in the subject matter under consideration during the last five years are considered. in this case, their hirsch index is calculated for the entire period 11,1 share of publications the share of publications of the university in the subject area 11,1 when preparing the rating of scientific productivity, several categories of the most significant for the existence and development of the university are considered. when calculating the total score in the rating, an evaluation of the university’s indicators is conducted in such categories (with equal shares of 33.3%): 1. quality of university growth. 2. the demand for scientific activity. 3. the scale, stability of scientific activity. categories have the same weight when calculating the final result (mayorova, maydan, 2013). in such a rating, significant places are occupied by universities, which for the past four years accounted for at least 0.5% of the total number of published scientific baltic journal of economic studies 49 vol. 4, no. 3, 2018 articles during this period. in the calculation, articles in journals indexed by the international scientific citation database scopus and wos for the last 5 years should be taken into account. 4. conclusions based on the analysis of the wholesale state support and higher education financing, models of the adaptive transition of heis to modern conditions of functioning were considered, using all available tools and methods. the proposed three scenarios for funding universities show that the strategy for financing heis in the current dynamic development environment should shift from a traditional model of public financing (supply-side) through a transformation to financing on the basis of socio-economic mechanisms (demand-side) using different tools. the analysis of trends in financing universities in the eu allows drawing a number of conclusions. the eu countries use different strategies for financing universities and do not have a universal mechanism. the amount of funding for heis depends on both quantitative (number of students) and qualitative (number of credits, diplomas) indicators. there is a tendency to allocate public funds to heis on the basis of learning outcomes, as well as the tendency of combining different financing instruments in the context of a particular country, including the emergence of demandside socio-economic financing mechanisms. socio-economic demand-side financing has several potential advantages. first, students and firms, “consumers” of educational services, are key figures. these mechanisms can stimulate universities to be more efficient economically, and students – to improve academic results and increase internal efficiency. secondly, the demand scenario mechanisms can be used regardless of the source of financing. they can be applied equally for the allocation of public resources and private financing of employers or students and their families. the main disadvantage of demand-side financing mechanisms for heis is that they cannot be used to finance university programs that serve a public purpose. universities compete for students and offer courses directly related to the professional interests of most students. they do not have the incentive to spend resources on general social programs with low market value or to fund research. financing under this scenario can only develop in countries with mixed systems of funding for heis (public and private heis), in which the transfer of public resources to private institutions is socially and politically acceptable. in an attempt to assess the likelihood of these scenarios based on the example of a specific country, it is important to take into account not only these characteristics within national borders but also a number of international phenomena that increasingly affect national education systems. the competitiveness of international students, the presence of cross-border higher education, the emergence of the territory of the multinational educational platform and international ratings – all this plays a significant role in shaping strategic decisions regarding the future development of the hei. an effective process of resource management of a hei should be based on strategic and financial benchmarks that provide for the development and implementation of a number of measures for the current activities of heis aimed at achieving the normal sustainability of the funding system and enhancing the university’s competitive advantages. for this purpose, a methodology was proposed for calculating the scientific and educational effectiveness of the hei. the main directions of the strategic development of higher education in ukraine should be the following areas. organizational: expansion of the autonomy of universities; government intervention in the activities of educational institutions should be limited to control over the use of budget funds allocated for the preparation of students on the state order, and compliance with state standards of higher education; diversification of educational services of heis in the vertical and horizontal direction; providing a full innovative-organizational cycle for applied scientific developments; activation of marketing activities of heis; timely update of the assets of universities (at least 1 time in 3-5 years). financial: distribution of budgetary funds not on the basis of standards, but on the results of activities, which stimulates the responsibility of heads of educational institutions for achieving the established standards of quality of education; economical use of financial resources; optimization of receivables and organizational structure of heis; application of leasing and credit instruments in financial support; change in the pricing policy for educational services; formation of stocks of financial resources; financial support for the best students of the contract form of education; application of the system of material incentives for employees for successful projects of attracting additional financial resources, etc. state stimulation of extra-budgetary funding for education: by insuring risks associated with nonrepayment of loans provided by private companies and enterprises to citizens for education; by transferring state educational institutions to non-governmental advisory firms, companies, and attracting the private sector as an equal participant in the educational process; by creating regional co-financing programs for education by the state, the public sector, and municipal authorities; by introducing corporate communication between educational institutions and employers on the basis of bilateral agreements; by forming a system of multi-level tax payments that provide each education management baltic journal of economic studies 50 vol. 4, no. 3, 2018 body with certain funds necessary for the development of territorial educational complexes in accordance with the standards established by the state. the conclusions made can serve as an example of the application of various approaches to the solution of issues of financing of the system of higher education in ukraine. prospects for further research in this area are seen in the study of the strategy for financing higher education in ukraine under conditions of european integration. references: avetisyan i.a. (2007). finansirovaniye raskhodov na vyssheye obrazovaniye v rossiyskoy federatsii i napravleniya yego sovershenstvovaniya [financing of expenses for higher education in the russian federation and directions for its improvement]. problems of territory development. vol. 39, no 4, pp. 12-27. belyakova s.a. (2003). sistema finansirovaniya obrazovaniya: analiz effektivnosti [educational financing system: performance analysis]. moscow: techno-printing. modeli finansirovaniya vuzov: analiz i otsenka (2005). [models for financing universities: analysis and evaluation]. moscow: techno-printing. gurov v.a., sigova s.v. (2006). o finansirovanii obrazovaniya [on the financing of education]. finansy. № 8, pp. 49-52. vossenshteyn kh. (2003). finansovoye napryazheniye: tendentsii finansirovaniya vysshego obrazovaniya i politicheskiy kurs v situatsii ogranichennykh sredstv [financial strains: trends in financing higher education and the political course in a situation of limited means]. universitetskoye upravleniye: praktika i analiz [university management: practice and analysis]. № 3(26), pp. 51-60. boholib t.m. (2007). rynkova model vnz: monohrafiya [market model of higher education: monograph]. kiev: millennium. vaniyeva m. (2006). ob ekonomicheskoy effektivnosti finansirovaniya obrazovaniya v ukraine [about the economic efficiency of financing education in ukraine]. ekonomika: problemy teorii i praktiki: sb. nauchn. trudov. dnepropetrovsk. volynchuk yu.v. (2009). metodychni pidkhody do doslidzhennya ta zabezpechennya stiykosti systemy finansuvannya vnz [methodical approaches to research and ensuring the sustainability of the system of financing universities]. kalynyuk i. (2011). suchasni tendentsiyi rozvytku osvity u hlobalnomu seredovyshchi [modern trends in the development of education in the global environment]. universytetska osvita, № 1, pp. 20-26. tymoshenko o.v. (2008). finansovi aspekty konkurentospromozhnosti vyshchoyi osvity v ukrayini: monohrafiya [financial aspects of higher education competitiveness in ukraine: monograph]. dnipropetrovsk: dnipropetrovskyy natsionalnyy universytet imeni olesya honchara. mayorova t.v., maydan t.n. (2013). puti sovershenstvovaniya finansovogo mekhanizma vysshego obrazovaniya [the ways of improving the financial mechanism of higher education]. sovremennyye tekhnologii upravleniya. retrieved from: https://sovman.ru/article/3103/ mospan n.v. (2016). tendentsiyi rozvytku mekhanizmiv finansuvannya vyshchoyi osvity v yevropeyskomu soyuzi [trends in the development of funding mechanisms for higher education in the european union]. retrieved from: https://www.narodnaosvita.kiev.ua/?page_id=2644 jongbloed b. (2010). funding higher education: a view across europe. – the university of twente, the netherlands. retrieved from: http://www.utwente.nl/bms/cheps/publications/publications%202010/modern_funding_ report.pdf eua public funding observatory (2014). retrieved from: http://www.eua.be/libraries/governance_ autonomy_funding/pfo_analysis_2014_final.sflb.ashx salmi j. (2009). scenarios for financial sustainability of tertiary education. higher education to 2030. – volume 2: globalisation. – oecd. retrieved from: http://www.mfdps.si/files/knjiznica/higher%20 educational%202030%20oecd.pdf vincent-lancrin st. (2009). finance and provision in higher education: a shift from public to private? higher education to 2030. – volume 2: globalisation. – oecd. retrieved from: http://www.mfdps.si/files/knjiznica/ higher%20educational%202030%20oecd.pdf arsenev d.g. (2008). international marketing of the universities educational program. (in russian) rosentsvag a. (2008). about innovations in the educational system. high school in russia, no. 8, pp. 88-92. (in russian) sagonova o.v. (2011). educational services marketing. retrieved from: http://www.mcpg.ru/cgi-bin/rus/tour/ article.cgi?art=1010403 (in russian) shevchenko d.a. (2011). educational services marketing university strategy. retrieved from: http://shevm.blogspot.ru/2011/04/blog-post_252.html (in russian) baltic journal of economic studies 106 vol. 4, no. 4, 2018 corresponding author: 1 bohdan khmelnytsky national university of cherkasy, ukraine. e-mail: natazachosova@gmail.com 2 kyiv national university of technologies and design, ukraine. e-mail: babinaamilo@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-106-115 diagnostics by financial regulators of financial institutions preparedness to the implementation of economic security management nataliia zachosova1, nataliia babina2 abstract. in the conditions of the financial system destabilization in ukraine, caused by such negative phenomena as military actions in the east, the economic downturn, political and financial crises, population disappointment in the institution of power and loss of the people’s confidence in power structures and so on, market mechanisms are not able to ensure the restoration of the national financial market and to encourage its professional participants to use mechanisms of protection their own assets and the assets of their clients from external and internal threats actively. state interference in the functioning of financial institutions is necessary, especially for those of their types, whose bankruptcy may have fatal consequences for the welfare of the population and cause the liquidation of economic entities of the domestic economy. among them are: banks, insurance companies, credit unions, and other institutions of credit co-operation, investment companies, in particular, joint investment institutions (unit and corporate investment funds), non-state pension funds, leasing, factoring, and other financial companies, pawns, etc. therefore, it is expedient to consider the possibility of the influence of state regulators in financial services markets on the state of their participants’ economic security. however, the study of the realities of the financial market of ukraine development has made it possible to assert that for a number of financial institutions, the concept of economic security is something abstract, and the understanding by their top management the importance of economic security management, taking into account the negative market trends, is completely absent. so, the purpose of this study is to diagnose the level of financial institutions preparedness for the implementation of economic security management into their common system of management. the high level of financial market participants’ readiness for safe-oriented management will allow regulators to rapidly implement in their practice a list of recommendations that will minimize the threat of bankruptcy and liquidation of domestic financial institutions. methodology. in the process of preparing a scientific article, a great number of literary sources was considered. some of them were developed using the method of theoretical generalization and the monographic method. the theoretical results presented in the research materials were obtained on the basis of the study of works of such scientists as amadae s. m., baily m. n., elliott d. j., ismail z., johnson k. n., mirtchev a., nelson j. a., raczkowski k., schneider f., sidek z. m., ula m., whalen c. j., wierzbicka e., yong j. to confirm the reliability of the scientific results presented in the article, the authors used the delphi method and expert evaluation. the list of indicators for assessing the level of financial institutions readiness for the implementation of a mechanism for managing economic security in the following five areas is formed. these areas are: the availability and condition of the economic security system, the state of information and analytical support for the adoption of management decisions in the field of economic security, the state of intellectual and personnel management provision of economic security, reserves of financial support of economic security, the level of external influence on the state of economic security (state regulation and supervision). in may 2018, representatives of the top management of various types of financial institutions, scientists, researchers, and analysts who were interested in the issues of economic security management of the financial sector were interviewed. their answers were analysed and the level of readiness for managing the economic security of the most common types of financial institutions in the financial market of ukraine was determined. using the graphical method, the obtained scientific results are presented in a convenient and understandable form for the perception of all interested persons. results of the survey. the necessity of carrying out diagnostics of the readiness to manage economic security at the level of state regulatory bodies and at the level of top management of financial institutions in the near future is substantiated. a large-scale analytical baltic journal of economic studies 107 vol. 4, no. 4, 2018 work was carried out on determining the parameters of financial institutions readiness for the continuous and professional economic security management, which should be carried out with the use of a systematic approach. based on expert opinions, a preliminary assessment of the various types of financial intermediaries’ readiness to integrate security-oriented management into the financial institutions’ common management system was made. practical implications. the proposed methodological approach for assessing the level of financial institutions readiness to manage their own economic security should be used by the state regulators of the financial market, in particular, by the national bank of ukraine and the national commission, which performs state regulation in the field of financial services markets, to monitor the activities of professional financial market participants in order to conduct advisory and consultative work with their owners and managers, as well as for the development of strategic guidelines for the provision of the state financial security. it is desirable to implement into the practical activities of financial intermediaries our proposals for increasing the readiness for implementation of the economic security management mechanism in the existing systems of management. value/originality. for the first time, a scoring methodology was prepared for assessing the level of financial institutions readiness for the implementation of economic security management as an independent direction of management, and not as one of the tasks of other types of their management activity. at the theoretical level, the substantive interpretation of the notion of the readiness of financial institutions to manage their own economic security is proposed. the reasons for the impossibility of the modern financial institutions to manage their own economic security effectively are identified, and a few suggestions to minimize their number in the near future were made. key words: management, economic security, financial institutions, regulation, financial market, economic security management. jel classification: e44, g10, g18, о16 1. introduction the urgency of the research. the level of the national financial market development, stable and cost-effective work of its professional participants is a prerequisite for ensuring the financial security of the state. that is why the financial services markets are under constant control and supervised by state regulators who, in modern non-trivial economic and political circumstances, need a lot of new tools for diagnosing the functional characteristics of financial institutions in order to determine which of them cannot effectively perform their tasks and, consequently, posing a threat to the financial interests of clients, partners, and all other categories of stakeholders. most financial intermediaries, who seek to continue their work in the period of post-crisis recovery of the domestic financial system, have realized the need to maintain an adequate level of their own economic security and the importance of building its integrated system. already we can observe the development of separate functional components of the economic security system – personnel, informational, financial – in banks, and rarely – in insurance companies. however, for other types of financial institutions, keeping of economic security remains, at best, like one of the strategic goals that has no tactical manifestation and resource support. in practice, the mechanism of economic security management, even if its system is formed in the common economic entities systems of management, is absent. its tasks are performed within the framework of risk management or crisis management. the reason for this is probably of financial institutions top-management unreadiness – material, financial, organizational, etc. to the implementation of such a mechanism at the application level. however, this assumption requires empirical evidence. target setting. the purpose of the study is to substantiate the need of the implementation by financial institutions of a mechanism for the continuous economic security management in order to timely counter current threats to their activities in the financial market. in order to achieve this goal, it is necessary to conduct a diagnosis of the level of professional financial intermediaries’ preparedness for implementing such a type of management as an independent direction of economic entities management. taking into account the lack of tools for valuation for state regulators and top management of financial companies, the priority task of the study is to develop a methodical approach to analysing the state of preparedness of various types of domestic financial institutions for the implementation of economic security management as an independent vector of financial and economic activity management. the results of its approbation will become an important information resource for financial services markets’ state regulators, owners of financial institutions and their stakeholders in the process of adopting by them various management decisions. actual scientific researches and issues analysis. in may 2009, the problems of supporting the economic security of financial market participants and their clients were recognized by the scientific community and discussed in london on the conference on financial institutions and economic security, where their vision of how to baltic journal of economic studies 108 vol. 4, no. 4, 2018 solve these problems presented the scientists from the open university, uk, university of cambridge, uk, santanna school of advanced studies, italy, polytechnic university of marche, italy, economics institute, czech republic, university of bordeaux, france, university of sussex, uk . some aspects of the raised issues were found in scientific publications and analytical studies of the recent years. the great part of publications considering this topic appeared within during the period of deployment and completion of financial crises. due to their devastating influence on the global economic system, the role and significance of the country’s financial security for ensuring its national security was realized (yong, 2009) and the need to ensure financial stability to guarantee the steady development of the economy became obvious (w halen, 2011; baily & elliott, 2013). the number of threats to the financial institutions’ economic security increases from year to year; their new, non-traditional forms and types that require the development of innovative approaches to counteract them appear ( johnson, 2015; amadae, 2017; nelson, 2007). to prevent some of them, financial institutions needed to take comprehensive measures and to create security systems, for example, an information security system (bank of japan, 2000, ula, ismail, & sidek, 2011). however, the protective effect would be more prominent in the context of creating a comprehensive economic security system of the financial institution, while one of those components would become the subsystem of information security. such a system would preserve the integrity of not only the financial assets of the institutions themselves but also guarantee the financial safety of their clients’ financial assets (wierzbicka, 2017) and the realization of their financial interests. so far, while such a system has not been created, it is expedient for financial institutions to implement a mechanism for professional and continuous management of at least those its elements that were formed under the influence of the risks for the domestic financial market functioning. uninvestigated parts of general matters defining. in the modern scientific literature, it is seldom possible to find the attempts to link the problem of ensuring the economic security of the business structure with the possibilities of organizations system of management (raczkowski & schneider, 2013). there is also no consensus on whether state regulation contributes for establishing the state of economic security in the financial sector or, on the contrary, it hinders financial institutions in the process of their economic security self-regulation (mirtchev, 2012). thus, actual and timely considering in the economic realities of financial institutions professional activity in ukraine will be a study of their readiness to start work towards the implementation of management mechanisms aimed at ensuring and maintaining an appropriate state of economic security that can be used on both micro and macro levels. the research objective is to provide financial regulators with tools for diagnosing the financial institutions’ readiness to implement economic security management and to assess its level by the end of the first half of 2018. methodolog y. the level of financial institutions readiness to implement integrated economic security management was impossible to assess only with the help of mathematical methods because this required the availability of a significant amount of information resources and specific data that financial market participants do not disclose and categorize as commercial secrets. therefore, one of the most authoritative expert evaluation methods was used to conduct the research – the delfi method. in 2015, a questionnaire for an expert survey was developed, and pilot results were obtained in 2016. in 2017, the list of questions in the questionnaire has been modified in accordance with the instructions and wishes of experts. among them were the persons directly working in financial institutions in positions that provide them with access to comprehensive information about the state of economic security. their authoritative opinion was taken into account when forming the second version of the questionnaire, which was used to obtain the results within the scope of this study. in 2018, a list of research objects was made for diagnosis. the experts were selected for questioning – they were the representatives of financial institutions topmanagement and their main types of stakeholders. at the end of the first half of 2018, the initiators of the survey conducted an expert survey to diagnose the level of domestic financial institutions readiness to implement economic security management and to control its status by financial market regulators, the results of which are presented in this scientific article. the logic of material presentation. at the first stage of scientific work, the authors identified the types of financial institutions that carry out professional activities in the financial market of ukraine and sell financial products and services to people and business. the arguments for justifying the need for managing the economic security of professional participants in the financial market are given in view according to the non-trivial and risky conditions of their current activity. the methodical peculiarities of assessing the level of financial institutions’ readiness for the implementation in the practice of their economic security management are described. at the next stage of the study, the authors presented the results of assessing the level of financial institutions’ readiness for managing their economic security. the study ends with the authorship proposals for improving the level of financial institutions’ readiness for the professional economic security management of their own. baltic journal of economic studies 109 vol. 4, no. 4, 2018 2. types of financial institutions and justification of the need for managing their economic security the ukrainian financial market is constantly evolving; its participants are trying to follow the tendencies of the european and world financial services markets. one of them is the constant increase in the species diversity of financial institutions, the diversification of financial products and services. the analysis of the reports of the state regulators of the financial market made it possible to identify those types of financial intermediaries, which are the most widespread in ukraine and through which the market architecture of the domestic financial system is formed. the largest number of participants in the financial market at the beginning of 2018 is comprised of financial companies, which include both credit institutions and legal entities of public law, which changed the type of financial institution to a “financial company”; managers of real estate funds and construction financing funds, as well as administrators of financial assets for purchasing goods in groups. the second place on a quantitative basis for four years was occupied by credit unions, but at the end of 2017, this position was taken by pawnshops. corporate and unit investment funds constitute an investment segment of the financial market, however, since they are managed by special companies – asset management companies (amc), amc were chosen by us for consideration within the framework of this study. the results of a retrospective analysis of the number of major types of financial institutions in the domestic market are presented in figure 1. figure 1. a number of financial institutions in the financial market of ukraine source: made by the authors using data from government regulators baltic journal of economic studies 110 vol. 4, no. 4, 2018 there is a tendency for reducing the number of professional participants in the financial market in ukraine. this indicates that the state of their economic security is unsatisfactory and it leads to their bankruptcy and liquidation. in banking institutions, the economic security systems have been formed, however, the dynamics of the number of banks is also negative. with this in mind, we can talk about the low efficiency of economic security systems management where the backgrounds for it are formed, and the inability to manage economic security system individual elements, where such a formation is only at the beginning stage. taking into account the destructive tendencies of the domestic financial market functioning, state regulators should be forced to introduce rules and norms for the economic security management. however, such actions in the conditions of low readiness of financial institutions to a new wave of regulatory requirements can further destabilize the financial market and its participants. therefore, the authors of the article had the idea to pre-evaluate the level of financial institutions readiness to start the practice of professional economic security management and to identify the circumstances of their current state, which contribute or hinder the active implementation of this type of management in the management architecture of economic entities. 3. methodical peculiarities of assessing the level of financial institutions readiness to implement the practice of economic security management with the financial institutions readiness to implement economic security management within the scope of this study, we will understand the level of awareness and ability to guarantee the necessary management process resource provision by the part of financial institutions assets that are designed to form and operate an economic security system at all stages of its formation and development, and also the presence in the institutions’ top-management of sufficient level of knowledge and skills in order to organize in the system of management a new direction of management activities aimed at protecting the institutions and their clients assets. in order to assess the level of financial institutions’ readiness for the professional economic security management and to the state regulation of this process, it is proposed to use the delphi method. methodological approaches to the application and aspects of the use of the delphi method are described in scientific papers (gorbatenko & petrenko, 2008; pankratova & malafeeva, 2012), the recommendations of which have been applied with the use of this method in the framework of this study. the delphi method was chosen because of its features, such as precision (the ability to work with an expert and collect data remotely) and anonymity (the possibility for the expert to not specify the institution, in which he or she works, which provides a higher level of objectivity of the assessment). in addition, to ensure the objectivity of diagnostic procedures, experts were selected among the unknown persons without direct subordination to each other. the survey was conducted extraterritorially to avoid contact between experts and to prevent the possibility of their communication. at the first stage of the diagnosis of financial institutions’ readiness for the economic security management implementation, 60 experts (of which 10 specialize in the functioning of specific types of financial intermediaries) were selected from among financial companies’ managers (top management). at the second stage of the diagnosis, a questionnaire with a focused list of issues related to the processes of formation and functioning of the economic security system of financial institutions was sent to experts. at the third stage, experts corrected questionnaires in accordance with their own vision of the list of indicators for assessing the level of financial institutions readiness for the implementation of economic security management. the final version of the 2017 – sample questionnaire contained 10 questions to evaluate each of the 5 final selected groups of indicators. at the fourth stage, the experts received the final form of the questionnaire. to assess the proposed indicators, a scoring system with a 10-point scale (10 points – the best score) was offered. in case of impossibility to estimate the indicator, the expert was rated the indicator with 0 points. at the fifth stage, the processing of expertcompleted final questionnaires took place. 4. results of assessing the financial institutions’ readiness for managing economic security the assessment of financial institutions’ readiness for managing economic security was carried out with the 5 groups of indicators. they are: group 1. presence and state of the economic security system. group 2. the state of informational and analytical support for making managerial decisions in the field of economic security. group 3. status of intellectual and personnel provision of economic security management. group 4. provisions for economic security financing. group 5. level of external influence on the economic security state (state regulation and supervision). as already noted, each group included 10 indicators, which, according to the authors of the article, as well as experts from the world of finance, can diagnose the level of financial institutions’ readiness for the implementation of economic security management into their common activity. in table 1, indicators are grouped according to vectors of financial institutions assessing the level of their readiness for implementing economic security management. baltic journal of economic studies 111 vol. 4, no. 4, 2018 table 1 indicators for assessing the level of financial institutions’ readiness for the implementation of economic security management g ro up s 1 2 3 4 5 presence and state of the economic security system state of informational and analytical support for making managerial decisions in the field of economic security status of intellectual and personnel provision of economic security management provisions for economic security financing level of external influence on the economic security state (state regulation and supervision) in di ca to rs documents that declare the provision of economic security quality of the economic security concept correspondence of education of people engaged in the provision of economic security to the needs of this area of work formation of the budget for financing the economic security needs effectiveness of the state regulator of the financial market availability of the economic security subdivision quality of the economic security strategy level of education of the staff of the institution level of the salary of persons involved in providing economic security established norms of economic security frequency of economic security state monitoring completeness of the job descriptions of persons engaged in the economic security provision completeness of the department of economic security with the staff sufficiency of financing measures for ensuring economic security quality of information interaction with the regulator systemicity in providing economic security level of information support department organization level of qualification of persons involved in the process of ensuring economic security financing of the institution financial audit effectiveness of state supervision over the activities of the institution level of counteraction to external threats level of the institution’s activities transparency level of the use of non-formal education by the staff for its own development size of the sources of financing the sudden costs of economic security measures rationality of economic requirements for the institution level of counteraction to internal threats level of paper form information security availability of a personnel reserve for the formation of a staff of experts to ensure economic security size of the reserve fund effectiveness of institutions’ state inspections speed of response to threats level of electronic information security level of engagement in the process of ensuring the economic security of persons with education in this kind of specialty level of material support of the economic security subdivision normative provision of the economic security system formation use of external experts for ensuring economic security level of information security in the process of its use level of loyalty of the personnel involved in the process of economic security provision dependence of the level of financing security measures on the level of institution profitability regulators information support on economic security issues institution financial performance completeness of information for assessing the institutions level of economic security personnel fluidity in the institution existence of a compensation fund for covering losses from the threats to the institution financial state preparation of financial institutions ratings (including the parameter of economic security) level of economic security of the institution number of sources for obtaining data to organize the institutions’ resource protection persons involved in the process of economic security provision working experience precisely in this area availability of financial guarantees for institution clients state audit of economic security baltic journal of economic studies 112 vol. 4, no. 4, 2018 in table 2, the average values of experts’ point scores obtained as a result of the diagnosis of the financial institutions’ readiness for the implementation of the economic security management process are presented. as an integral indicator of the level of financial institutions’ readiness for the implementation of economic security management as a separate management direction, it is proposed to apply the relative area of the radar (sr) constructed in the middle of the circle for several indicators (formula 1): sr sp s = (1) where sp – radar area, cm2; s – the total area of the estimated circle, is equal to π • r2; r – arbitrary radius of the estimated circle, cm. in order to obtain more accurate data for indicators based on the results of the study, the radar is built on the basis of the following assumptions: – all indicators have the same weight; the circle is divided into 5 equal sectors, the angle between which is 72°; – indicators are stimulants (increasing their values positively affects the state of financial institutions readiness to implement the economic security management), therefore, as they move away from the centre of the circle, their values are improved. the radar area sr is determined by the formula: sr n= ⋅ + ⋅ + ⋅1 2 1 2 2 3 1/ sin ( )α α α α α α α� � (2) where α α α1 2; ;� � n – values of the indicators translated into centimetres (we accept 1 point = 1 cm); α – the angle between the nearest indicators, we accept α=72°. based on the given data, we will determine the level of financial institutions’ readiness for the implementation of economic security management: table 2 results of assessing the state of financial institutions’ readiness for the implementation of economic security management type of financial institution average score presence and state of the economic security system the state of informational and analytical support for making managerial decisions in the field of economic security status of the intellectual and personnel provision of economic security management provisions for economic security financing level of external influence on the economic security state (state regulation and supervision) banks 7 8 8 8 9 insurance companies 5 5 6 7 8 credit unions 3 3 5 3 7 investment companies (npf and amc) 6 5 5 5 7 pawns 5 4 2 2 6 financial companies 6 4 4 5 7 banks: sr1 1 2 72 7 8 8 8 8 8 8 9 9 7 1 2 0 951 319 151= ° ⋅ + ⋅ + ⋅ + ⋅ + ⋅ = ⋅ ⋅ =/ sin ( ) / ,� � �� � � ,,68 � cm2 insurance companies: sr2 1 2 72 5 5 5 6 6 7 7 8 8 5 1 2 0 951 193 91= ° ⋅ + ⋅ + ⋅ + ⋅ + ⋅ = ⋅ ⋅ =/ sin ( ) / , ,� � �� � � 777 � cm2 credit unions: sr3 1 2 72 3 3 3 5 5 3 3 7 7 3 1 2 0 951 81 38 5= ° ⋅ + ⋅ + ⋅ + ⋅ + ⋅ = ⋅ ⋅ =/ sin ( ) / , ,� � �� � � 22 � см2 investment companies (npf and amc): sr4 1 2 72 6 5 5 5 5 5 5 7 7 6 1 2 0 951 157 74= ° ⋅ + ⋅ + ⋅ + ⋅ + ⋅ = ⋅ ⋅ =/ sin ( ) / , ,� � �� � � 665 � cm2 pawns: sr5 1 2 72 5 4 4 2 2 2 2 6 6 5 1 2 0 951 74 35 1= ° ⋅ + ⋅ + ⋅ + ⋅ + ⋅ = ⋅ ⋅ =/ sin ( ) / , ,� � �� � � 99 � cm2 financial companies: sr6 1 2 72 6 4 4 4 4 5 5 7 7 6 1 2 0 951 137 65= ° ⋅ + ⋅ + ⋅ + ⋅ + ⋅ = ⋅ ⋅ =/ sin ( ) / , ,� � �� � � 114 � cm2 integral indicator (i) for estimation the level of financial institutions’ readiness to implement the economic security system management is: for banks: і1 = 151,68/(3,14 х 102) = 0,483. for insurance companies: і2 = 91,77/(3,14 х 102) = 0,292. for credit unions: і3 = 38,52/(3,14 х 102) = 0,123. for investment companies (npf and amc): і4 = 74,65/(3,14 х 102) = 0,238. for pawns: і5 = 35,19/(3,14 х 102) = 0,112. for financial companies: і6 = 65,14/(3,14 х 102) = 0,207. the value of integral indicators of financial institution readiness for the implementation of economic security management is shown in figure 2. according to the calculations carried out, we conclude that the pawnshops are the least ready to implement economic security management in their common management system. a slightly better state of the readiness is in credit unions. however, both these types baltic journal of economic studies 113 vol. 4, no. 4, 2018 of financial institutions are not, at the moment, able to allocate an adequate amount of resources for managing economic security system, which, in addition, is in the embryonic state of formation. thus, the activity of pawnshops and credit unions requires the more active interference of state regulators since independently these financial institutions are not able to provide their own economic security and are not able to guarantee the realization of financial interests for their clients. 5. reasons for the low level of financial institutions’ readiness for the economic security professional management realization as a result of the research and development of filled by experts questionnaires, surveys, and analysis of the current state of the financial market, we were able to identify the reasons for the low level of financial institutions readiness for the professional management of their economic security. for banks, the level of informational, analytical, intellectual, and personnel support of this process remains the problematic aspects of the readiness for implementation of the economic security management. during the expert evaluation, the lowest points in the diagnosis of these indicators were assigned in the information plane – for the state of the economic security concept and strategy formation. based on data obtained from experts, it can be concluded that these two documents are not currently available in banks, or their development has just begun. as for the intellectual and personnel security, the lowest estimates of experts were obtained due to the need to attract external specialists to protect the resources of the institution, which, however, 50% of banks do not consider seriously, and also because of the lack of practice of raising the level of skills of staff involved in ensuring economic security. for insurance companies, the state of their economic security systems, the level of informational, analytical, intellectual, and human resources provision of economic security remain problematic aspects. expert opinions suggest that 40% of insurance companies have not completely formed economic security system, whose functional level would allow the implementation of a mechanism for their economic security management. the reasons for this is the low level of the department of economic security organization (or the absence of such a unit) and the lack of economic security level monitoring (the mechanisms for economic security state monitoring, that was achieved by insurance companies in the process of their functioning). the indicator of the state of insurance companies preparedness for the implementation of the economic security management is substantially lower, as is the case with the banks, the economic security concept and strategy are absent, as well as the unsatisfactory level of departments of information provision staffing with the specialists of proper qualification is present. in addition, insurance companies, according to experts, feel the lack of methodological approaches and information resources for assessing the level of economic security. the negative assessment was received because of the rare facts of the participation of persons engaged in the provision of economic security in seminars and trainings. that does not contribute to raising their level of knowledge, skills, and competencies, as well as the level of involvement into the organization of institutions resources protection only a few persons with academic degrees. the lowest assessments of the credit unions readiness to manage economic security were put by experts because of the lack of strategic and tactical planning of protective measures; information gaps in the job figure 2. integral indicators of financial institutions readiness for the economic security management implementation of mid-2018 baltic journal of economic studies 114 vol. 4, no. 4, 2018 descriptions of persons involved in the provision of economic security; insufficient level of staffing of the departments of information support, lack of sources of information provision of management decisions in the area of economic security. also, there is a low frequency of people involved in the provision of economic security participation in seminars and trainings. it should be noted that the state of preparedness of investment institutions for the implementation of economic security management is better than the state of credit unions, however, comparing to banks and insurance companies, investment companies are lagging behind. the reasons for reducing their readiness assessment are the same as that of banks and insurers – the lack of conceptual and strategic principles for ensuring economic security, the lack of a documentary basis for assessing the level of economic security of the institution. companies need to attract external specialists to protect the resources of the institution because their own personnel potential is not enough for that. there are problems in the level of state regulation of the state of economic security of investment companies. thus, experts note the fact that the instructions on ensuring economic security and even some of its parameters are not elaborated. there is a lack of state audit mechanisms for the economic security level checking. pawnshops are the outsiders among financial institutions in terms of readiness for the economic security management implementation. typical problems noted by experts in the process of assessing pawnshops are: the complete absence of documentary evidence of the economic security system functioning, the low level of the institutions’ transparency, the absence of the budget to ensure economic security. parameters that received a low rating when assessing the level of readiness of other types of financial institutions, in particular, within the framework of informational, analytical, intellectual, and personnel provision of the economic security system, are also characteristic for pawnshops. 6. proposals for improving the state of financial institutions readiness for professional economic security management thus, there is an urgent need to find reserves for improving the readiness of financial institutions’ of all segments of the financial market – in the banking sector, in the insurance sector, in the sector of investment institutions, in the sector of credit co-operation, and in the sector of financial companies – for the implementation of the economic security management as an independent direction of the company management by: development and use of methodological tools for assessing the financial institutions’ economic security level in order to obtain relevant information resources for decisions in the field of economic security management; establishment of standards of economic security by the state regulator and permanent monitoring of the level of their compliance with financial institutions activities; formation of special funds for financing measures to counter threats to the financial institutions’ economic security; conduction of an explanatory work about the principles and tasks of economic security providing; establishment of units for ensuring economic security or appointment of persons responsible for the economic security state in the staff structure of financial institutions, etc. we believe that in the short term, increasing the readiness of financial institutions for the implementation of economic security management is possible by defining strategic and tactical priorities for making managerial decisions regarding the protection of financial institutions and their clients’ assets from external and internal threats impact. taking into account the financial market development trends, in which domestic financial institutions operate, the following list of tactical priorities for managing their economic security can be proposed in order to increase their readiness to implement a holistic mechanism for such management: the election as the priority the state of financial and information security, the transfer of available free financial resources for their protection; for certain types of financial institutions such as credit unions and pawnshops, it is expedient to transfer the function of economic security management to external companies that specialize in organizing the protection of company assets against all kinds of threats; the rejection of the practice of compensating losses from the threats to the economic security of financial institutions, accept the model of preventing them; the organization of close cooperation both between financial institutions of one type and between professional participants of different segments of the financial market and representatives of state regulators of financial services markets for the purpose of forming a single database of clients who have committed fraudulent actions to financial institutions, as well as a single database of employees who mistreated their obligations that have damaged the financial status of the institution or its business reputation; the development of documentation that would regulate the relations between the entities providing economic security of financial institutions, both external and internal; would clearly outline the purpose, tasks, and directions of maintaining an adequate level of economic security and would establish liability for noncompliance with its norms; the start of periodic monitoring of the level of financial institutions economic security by their top management, owners and other categories of stakeholders. baltic journal of economic studies 115 vol. 4, no. 4, 2018 thus, the emphasis in the economic security management of financial institutions on concrete and achievable goals will ensure a high level of readiness of financial institutions for the professional and permanent implementation of this area of management activities into the overall system of business entity management. 7. conclusions the results of the study show that financial institutions’ top-management does not pay enough attention to ensuring the economic security of both companies and their clients’ assets. the reason for this is the lack of financial resources for the organization of proper protection, lack of documentation for coordinating actions on ensuring economic security, low level of staff training for security-oriented management, etc. in view of this, we consider that it is necessary to establish, at the state level, mandatory standards of economic security, the observance of which in financial institutions should be controlled by financial market regulators. their introduction will automatically force financial market participants to begin the process of economic security management, looking for reserves to optimize its position, which will positively affect the development of the domestic financial market and the level of financial security of the state. the value of the research is in the possibility of using its results as an information resource for the adoption by government agencies, owners, and managers of financial institutions’ different types of management decisions. the methodological approach proposed in the article can be used as one of the tools for diagnosing the state of the domestic financial market and its participants of readiness to convergence with the markets of financial services of european states. references: (2000) the importance of information security for financial institutions and proposed countermeasures. bank of japan, april 18, 23 p. amadae, s. m. (2017). perpetual anarchy: from economic security to financial insecurity. finance and society, no. 3(2), pp. 188-196. baily, m. n. & elliott, d. j. (2013). the role of finance in the economy: implications for structural reform of the financial sector. the brookings institution, july 11, 34 p. gorbatenko, v. & petrenko, i. (2008). metod «delfi» ta spetsyfika yoho zastosuvannya u prohnoznykh rozrobkakh [the «delphi» method and the specifics of its application in forecast developments] political management, no. 6, pp. 174-182. johnson, k. n. (2015). cyber risks: emerging risk management concerns for financial institutions. georgia law review, vol. 50:131, pp. 132-142. mirtchev, a. (2012). will financial regulation trash global economic security? investing. retrieved from: https://www.forbes.com/sites/investor/2012/03/29/w ill-financial-regulation-trash-global-economicsecurity/2/# (accessed 25 june 2018) nelson, j. a. (2007). information security risk in financial institutions. international journal of economics and management engineering , vol. 1, no. 10, pp. 528-530. pankratova, n. d. & malafeeva, l. yu. (2012). formalyzatsyya sohlasovanyya ekspertnykh otsenok pry realyzatsyy metoda delfy [formalization of the coordination of expert assessments in the implementation of the delfi method] cybernetics and system analysis, no. 5, t. 48, pp. 82-94. raczkowski, k. & schneider, f. (2013). the economic security of business transactions: management in business, oxford, chartridge books oxford, 448 p. ula, m., ismail, z. bt & sidek, z. m. (2011). a framework for the governance of information security in banking system. journal of information assurance & cybersecurity, vol. 2011, article id 726196, 12 p. whalen, c. j. (2011). financial instability and economic security after the great recession, edward elgar publishing limited, uk , 223 p. wierzbicka, e. (2017). dilemmas of financial consumer security. journal of insurance, financial markets and consumer protection, no. 26 (4/2017), pp. 31-46. yong, j. (2009). financial security is at the heart of national economic security. english edition of qiushi journal, vol. 1, no 1. retrieved from: http://english.qstheory.cn/magazine/200901/201109/t20110919_111216.htm (accessed 25 june 2018) natsionalna komisiya, shcho zdiysnyuye derzhavne rehulyuvannya u sferi rynkiv finansovykh posluh (2017). richni zvity natskomfinposluh [annual reports of the national financial services commission]. retrieved from: https://www.nfp.gov.ua/ua/richni-zvity-natskomfinposluh.html (accessed 25 june 2018) natsionalnyy bank ukrayiny (2018). pokaznyky bankivskoyi systemy [indicators of the banking system]. retrieved from: https://bank.gov.ua/control/uk/publish/article?art_id=34661442&cat_id=34798593 (accessed 27 april 2018) ukrayinska asotsiatsiya investytsiynoho biznesu (2018). osnovni tsyfry [basic figures]. retrieved from: http://www.uaib.com.ua (accessed 25 june 2018) baltic journal of economic studies 11 vol. 2, no. 1, 2016 investment policy of ukraine in the agricultural sector iryna bezpyata1, mykolaiv national agrarian university, ukraine abstract. the aim of this article is a study of features of investment politics of the state in the agrarian sector of economy, determination of basic problems of bringing in of investments and grant of suggestions how to form the investment politics in the agrarian sector of economy in ukraine. one of the issues in agrarian sector of economy development in ukraine is providing of agriculture necessary financial and material resources the basic source of that are investments. presently ukraine is in an investment crisis that is characterized by the decline of investment activity of management subjects because of the low level of investor’s activity. reason of that is an unfavourable investment climate in a country that was appeared because of unstable position of country and risky economic position. agriculture is a food industry of national economy her state depends on the facilities inlaid in her development, namely – from intensity of investment activity. exactly active government investment activity in an agrarian sector is the mortgage of his stable development and effectiveness. research methodology consists, that the reason of agricultural production crisis, foremost, because of government control and agroindustrial complex support weakened role. in the developed countries, vice versa, the value of state support of agroindustrial complex increases. charges on agrarian politics realization as a line and indirect support grow constantly, as it demonstrates the hands-on experience in eu. the general chart of government control of investing terms levers in the agrarian sector of economy is certain by us. the results of research is showing that an important condition necessary for private capital investments (both foreign and domestic) is a permanent and well-known set of the norms and rules, set in the way that potential investors could understand and foresee that these rules will be used to their activity. practical value is certain by success of investment projects that depend on the openness of government and local self-government bodies, from a dialogue with public and productive sphere (agribusiness). a value/originality. research results allow defining basic obstacles in bringing in of investments in the agrarian sector of economy in ukraine. showing up: the high risks, related to the specific of agriculture (climatic terms, duration of productive process), ecological aspect and economic situation in a country on the whole; subzero investment attractiveness of industry and agrarian enterprises, undeveloped infrastructure; high level of lending rates of commercial banks; unwithstand politics of state interference and adjusting, does not add the confidence for potential investors. key words: investments, investing, investment policy, state regulation, agricultural sector. jel classification: q14, e22, f21 1. introduction one of issues of agrarian sector economy development in ukraine in modern terms is providing of agriculture by necessary financial and material resources the basic source of that are investments. nowadays, ukraine is in an investment crisis that is characterized by the decline of menage subject’s investment activity because of investors activity low level. by reason of that is unfavourable investment climate in a country that in turn arose up through unstable and too risky economic position of country. in agrarian sector economy of ukraine in the conditions of investment resources deficit and limit possibilities of state support of investing and presence of high risks level for realization of investment activity, investment politics of the state must be sent to introduction of effective mechanisms of bringing in of home and foreign capital stimulation and creation of effective control system by investment processes in the agrarian sector of economy. many scientists-economists devoted the researches to the studies of investing in agriculture questions, among them mark labours of such scientists as: m.v. bryk, h.yepavlova, a.a. peresada, p.i.  hajduts'kyj, h.b.  ivanyts'ka, v.i.  kasianiuk, m.i. kysil', m.yu.  kodens'ka, h.m.  pidlisets'kyj, m.p. soroka et al. but realities of present time need permanent corections and input of new corresponding author: 1 department of economy enterprises, mykolaiv national agrarian university. e-mail: bezpyata@gmail.com baltic journal of economic studies 12 vol. 2, no. 1, 2016 methods in relation to the features of public investment policy in the agrarian sector of economy. the aim of this article is a study of investment politics features in the agrarian sector of economy, determination of basic problems of investments bringing in and grant of suggestions in relation to form investment politics in the agrarian sector of economy in ukraine. methodological basis and informative base of publication are materials of magazines, labour of scientistseconomists, internetresources, normatively-legal acts. during the research realization were used the systems analysis, synthesis and generalization methods. 2. economic crisis effects on consumer behaviour one of issues of agrarian sector economy development in modern ukraine is providing of agriculture by necessary financial and material resources the basic source of that are investments. in nowadays, ukraine is in an investment crisis that is characterized by the decline of menage subject’s investment activity because of investors activity low level. by reason of that is unfavourable investment climate in a country, that in turn arose up through unstable and too risky economic position of country. in agrarian sector economy of ukraine in the conditions of investment resources deficit and limit possibilities of state support of investing and presence of high risks level for realization of investment activity, investment politics of the state must be sent to introduction of effective mechanisms of bringing in of home and foreign capital stimulation and creation of effective control system by investment processes in the agrarian sector of economy. agriculture is that food industry of national economy, the state of that in direct ratio depends on the money inlaid in her development, namely – from intensity of investment activity. exactly active government investment activity in an agrarian sector is the mortgage of him stable development and effectiveness. in scientific literature considerable attention is spared to different approaches of investment politics forming. however almost everybody agree, that complete abandonment from the state investment providing of agricultural commodity producer is not possible through his branch features. at the same time there are different points of view on the level of agrarian sector investment support from the state, when the question is about his basic constituents, their dependence and priority of development on every stage. a main function of the state in a market economy is not realization of capital investments in a production (except the industries related to national safety or with the consequences of crisis), but conditioning for bringing in of investments, role implementation as guarantor of investments and profits receipt stability. the state must regulate an investment process on legal framework. a  public policy must become one of decision factors of the economic adjusting of investment activity in agrarian sector. for the macroeconomic assistance of investment activity the system of government, at disposal of that there are levers of direct action as the centralized state capital forms of government control of investing terms in the agrarian sector economy tax law (fixed agricultural tax, vat and others like that) price politics of food market adjusting (mortgage, intervention operations and others like that) legislative providing of investors rights (insurance, guarantees of government) monetary policy (favourable shortly and long-term crediting) depreciation politics (methods and rates of depreciation) fiscal policy, that includes grants, subsidies, special purpose charges and credits from the state and local budgets (indemnifications for sowing, plant-breeding charges, cheaper of agricultural technique cost, financial leasing and others like that) antimonopoly politics (establishment of parity relations is between the spheres of agp, indicative prices on the commodities of material-purveying character) pic. 1. levers of government control of investing terms in agrarian sector economy baltic journal of economic studies 13 vol. 2, no. 1, 2016 investments in the objects of national value, development of public sector of economy, authorities is responsible, so indirect facilities of adjusting of investment environment due to a monetary, budgetary (financing of the separate national programs of strategic character, grant, subsidy and others like that), antimonopoly and depreciation policy (lanchenko, 2005). as principal reason of agricultural production crisis many economists name, foremost, weakening of government control and support of agroindustrial complex role. in developed countries, opposite, the value of state support of agroindustrial complex increases. charges on realization of agrarian politics as a line and indirect support grow constantly, as it asserts the practical worker of eu countries. the general chart of government investing terms control levers in the agrarian sector of economy is presented on picture 1. the monetary state policy influences on investment terms, regulating turnover and work of the banking system, that, essentially, carries out the increase of money in the economic system not always on equivalent basis in relation to agricultural industry. to the basic instruments of monetary accommodation it follows to take: • the norms of insurance backlogs, that have to belong to commercial banks and to distract certain part of the facilities from the active use for crediting and investing; • registration rate of the national bank, where it sells credit resources to the commercial banks, increasing or diminishing the volumes of credit sources for financing of investments; • operations with state securities at the open market. setting advantageous terms (as a price or dividends) for securities, the state stimulates their purchase legal and natural persons and diminishes the amount of free money that can be used for financing of investments through the banking system (kasych, 2008). it should be noted that the features of current unstable (crisis) economic situation limit the scales of commercial banks participation in investment activity. on this process the row of factors influences: contradiction between the rates of percent and risks of loans grant, absence of sufficient backlogs under growing credit risks. in world practice long-term credits, as most reliable, the more subzero have rates of percent, and in ukraine they behave to the most risk. banks have a high-profitable alternative of investments in state short-term bonds, and also possibility of the use of them in other profitable short-term operations. the market of corporate ukraine securities is not enough developed, and equity investment and bond of joint-stock companies in particular agricultural, on the present stage of development of economy are considered banks non-liquid. thus, in relation to the mechanism of increase of the long-term part crediting it is expedient to accept the row of measures: to decrease income taxes from long-term credits that is directed in an agrarian sector; to set that banks in that part of these investment credits exceeds a certain limit, get additional tax deductions and others like that. in other words it is necessary not to declare economic reforms in a bank sphere, agrarian sphere, but provide their realization (nepochatenko, 2008). 3. stimulation of the bank’s investment activity for stimulation of banks investment activity is expedient to apply the leasing charts of crediting that in turn solve problem largely aging materially of technical base and mortgage of enterprises property, that especially topically in an agrarian sector. taking into account experience of different countries in relation to organization of agricultural commodity producers crediting, we consider that credit politics for the enterprises of this sphere must include: • the favourable crediting of agricultural producers, that envisages the increase of long-term credits part, decline of interest rates, development of mortgage operations, as one of forms of the state favourable crediting; • development of agrarian credit after such directions, as: crediting of producers directly from state sources through the mechanism of mortgage operations; • development of the mortgage crediting in the commercial system of banks: creation of peasant co-operative credit establishments, integrated structures. one of directions to activate the investment activity in developed countries agriculture there is a stimulant mechanism of taxation, that includes income taxes (net profit) corporations; real estate, in particular earth; capital that is invested, or capital additions; valueadded; social security of labour employed and excises. not having regard to such wide list, totally these taxes make from 2,5 to 6%% all farmer charges from that an about half is on two taxes: from an income and on the real estate. much in why explained to the grants of tax deductions, due to that the fiscal functions of taxes are erected to the minimum. realizations of reforms of the tax system, that envisage privileges in the developed countries, assist active tax stimulation of development of scientific and technical progress that requires additional capital investments. budgetary levers are the system of different taxes types, privileges, that create such redistribution system of enterprises and citizens profits in a country that the state considers optimal for forming of sinkhead budget and maintenance at enterprises and businessmen of market stimuli to work and receipt of incomes practically, set by the state. charges and charges of budget, and also budgetary credits are the ponderable means of the combined demand forming, and through him is stimulation of investments in general and the inter-branch structure. even the system of the social budgetary programs (not to mention about direct budgetary investments in a public sector) influences on the pattern of demand, because social payments from a budget are got by people that must expend them in the baltic journal of economic studies 14 vol. 2, no. 1, 2016 basic problems of investments attraction in the agrarian sector of economy absence of clear regional investment politics state level imperfection of the tax system shadow economy and corruption subzero quality and insufficient competitiveness of agricultural produce physically threadbare and morally the material antiquated technical base of enterprises features of agriculture specialization at regional level regional level risks, that connected with productive cycle of agrarian goods productions lack of operative market information imperfection of normatively-legal base agrarian enterprises level local-authority has absence of stimuli and mechanisms for bringing in of investments inflation imperfect market infrastructure instability of political situation absence of informative accompaniment of investments attraction imperfection of the informativelyconsultative providing at regional level market of consumer goods, and it in turn stimulates a production, trade and corresponding investments for this purpose (plekhanov, 2010). a large value is acquired by realization of antimonopoly politics, what expedient not only in industries that are natural monopolies, and also in relation to branch and local monopolists, that supply with products for agricultural enterprises and those that buy for them. to our opinion, in the conditions of ukraine antimonopoly politics must prevent further monopolization in contiguous with an agrarian production industries. in this situation expedient tactical measures are on the real limitation of profitability of enterprisesmonopolists (in particular, raw material and purveying character) through establishment by them just maximal vacations and minimum purchase prices. here, certainly, it follows to work out the criteria of intermediary taking and processing enterprises to the category of monopolists, and also to expect a reasonable betweenness by purchase and vacation prices in every special case (plekhanov, 2010). important role in the system of investment processes government control in agriculture must play the mechanism of the minimum assured prices establishment, state mortgage and intervention operations at the food market. as known, practice shows imperfection to the mechanism of pricing in an agrarian sector. a price, as an important element of economic mechanism, performs the duty of financial regulator and must provide the equivalence of exchange between agrarian and by other sectors of economy. it is therefore necessary to support prices at the level of lower limit middle market prices vibrations with the aim of market defence from the envisaged conjuncture price vibrations. thus, in basis of investment politics of the state in the agrarian sector of economy must be fixed principles of the actively-passive government control shown mainly in state sponsorship of agriculture enterprises and engineer for an agrarian sector, price, antimonopoly, depreciation politics, development of agrarian market infrastructure, becoming of mortgage relations and others like that. thus, the fixed principles of the actively-passive government control must be put in the basis of investment policy of the state in the agrarian sector of economy. the control is shown mainly in state sponsorship of enterprises of agriculture and engineer for an agrarian sector, price, pic. 2. basic problems of investments attraction in the agrarian sector of economy baltic journal of economic studies 15 vol. 2, no. 1, 2016 antimonopoly, depreciation policies, development of agrarian market infrastructure, becoming of mortgage relations, etc. 4. the basic problems of investments attraction in the agrarian sector however, there is a tendency of reduction of volumes of financial resources in an agroindustrial production now. but, on this time there is a tendency of financial resources volumes reduction in an agroindustrial production. most agricultural enterprises appeared before the problem of own stock accumulation for realization or modernisation of production. resource potential is hereupon formed before with every year closes. the actual terms of exploitation of the most fixed assets in times exceed normative. the processes of recreation and updating of material and technical base almost ceased in a village. now in agriculture, a generous amount mainly functions investment small attractive, out-of-date production capacities unable to produce high-quality foods in accordance with the requirements of international standards. therefore problem of the investment providing of agrarian production as never acquires actuality, especially on this stage of the state economy development. the basic problems of investments attraction in the agrarian sector of economy can be distinguished on state, regional levels and at the level of separate agrarian enterprises (picture 2). to the basic problems at state level it is possible to take: • imperfection of normatively-legal base; • instability of political situation; • shadow economy and corruption; • imperfection of the tax system; • an imperfect market infrastructure; • inflation; • absence of informative accompaniment of bringing in of investments. in nowadays, investors that dare to invest in agrarian sector require legislative guarantees, large corporations and investment companies require governmental guarantees and privileges. however the mechanism of legal guarantees realization hasn't exhausted enough yet. sufficient judicial facilities are besides absent for providing of legal rights observance for investors and spores settlement. an important condition necessary for private capital investments (both foreign and domestic) is a permanent and well-known set of norms and rules set forth thus, that potential investors could understand and provide, that these rules will be used to their activity. in ukraine that is in the state of continuous reformation of power, legal mode inconstant. laws and rules that often conflict with each other operate on the different levels of power. the additional source of instability is a grant to the laws and instructions of reverse force. such practice disturbs foreign investors in earnest, especially when legislation touches already existent capital investments. also a substantial obstacle on a way for attraction and effective using of investments in an agrarian sector is an imperfect infrastructure. the insufficient amount of corresponding experts, public accountants, consultants restrains the increase of receivables of foreign capital in the agrarian sector of economy. for correction such position, it follows to create the network of the special establishments – both state and non-state, – that will engage in preparation of such specialists for ukraine, will prepare corresponding investment projects on international standards. today here and there our businessmen, and especially farmers even cannot clearly set forth the requirements in investing, correctly to lay down a project or request on the receipt of foreign help. 5. the basic problems of investments attraction in the agrarian sector at regional level in addition, for today there is a row of other negative moments: bureaucratic barriers, absence of the legal providing of crediting, insurance of risks, low level of business and professional qualification, lack of the attractive investment programs and projects, hard tax system. the operating tax system must be corrected after such principal items: regulation of mutual relations between the state and taxpayers; stability of the tax system during a fiscal year, her simplicity and availability; responsibility is for ignoring of tax law; reduction of taxes amount and substantial of simplification procedure of their collection; common decline of tax load and defence of home producers; strengthening of stimulation of capital investments, reformation of depreciation politics; increase of property role and landed taxation, resource payments; reformation of the profits system distribution ; reduction of privileges. the basic problems at regional level are: • features of specialization of agriculture at regional level; • absence of clear regional investment politics; • absence of stimuli and mechanisms at local-authority for bringing in of investments; • imperfection of the informatively-consultative providing at regional level. obviously, that a subzero investment attractiveness of agriculture is in the regions of ukraine, unwillingness to inlay money in his development, except especially economic reasons, predefined by incuriosity or indifference of local-authority to the problem of investments attraction. the investment rating of regions of ukraine testifies to the low professional level of local officials that is responsible for creation of investment climate, leads to subzero efficiency of local-authority efforts for the increase of territories investment attractiveness. further stratification of regions after the level of investment activity becomes a barrier on the way of single economic space forming in the agrarian sector of country 's economy, strengthening of economic connections, baltic journal of economic studies 16 vol. 2, no. 1, 2016 becoming of regions as subjects of international investment activity. weak investment positions of separate regions do not give an opportunity to extend an agricultural production, a social sphere does not develop accordingly. regions become dependants in relation to the state and do not have economic stimuli to develop the agroindustrial complex. without regard to the accepted legislative acts, the system does not have a normatively-legal base that regulates the processes of investment activity. her main defect is absence of legislative acts that clearly would prescribe the role of central and local executive and organs of local selfgovernment bodies in the process of investments attraction. such plenary powers are washed out and determined in different legislative acts, that diminishes efficiency of their implementation. success of investment projects in a great deal depends on the government and local self-government bodies’ openness to the dialogue with public and productive sphere (by an agribusiness). leading role in the process of attractiveness agrarian sector investment increasing in the regions of ukraine it must belong to the state that owns for this purpose necessary money of budget and off-budget funds and able in the scales of entire country to define perspective directions and objects of investing. at the same time, organs of local self-government and local executive bodies must develop basic directions of investment politics on territory of region in relation to attract money of under perspective investment projects, to promote in determination of basic priorities of investing of region, coordinate investment projects, control the rational use of the got financial resources. for activation of investment activity investment politics is needed with the clear mechanisms of realization on state and regional levels. necessary general strategy of investment development of regions, that would determine priorities of investing on the basis of taking into account of them economic effect, but not today 's and non-permanent, but perspective and stable. to the basic problems at the level of separate agrarian enterprises is: • risks, that the productions of agrarian goods related to the productive cycle; • physically threadbare and morally the antiquated material and technical base of enterprises; • subzero quality and insufficient competitiveness of agricultural produce; • lack of operative market information. agriculture presents by a soba industry with an unfavourable investment climate. the not high investment attractiveness of agrarian enterprises is explained by the specific of agriculture: by the high capacity of capital and comparatively low return of funds, by seasonality of production and considerable duration of productive cycle, by dependence on natural and climatic terms, high risks, slow money returning, low level of technological equipped and profitability. modern agrarian enterprises require considerable capital investments. the questions of search and attraction their economic complex of financially-material resources acquire the special actuality, as a result of updating necessity of operating production capacities and capital assets, decision of newest technologies introduction tasks, mastering of new competitive products types, increase of potential and creation of new workplaces. also is an obstacle on the way of both foreign and domestic investing in the economy of ukraine shortage of commercial information about the market of ukraine, her regions and concrete agrarian enterprises, transport and telecommunication systems, legal base. especially it touches small and middle foreign companies and firms. foreign investors are naturally interested in the new place of arms for the receipt of income due to the large internal market of ukraine, her natural riches, skilled and cheap labour force, achievements of home scitech. 6. conclusions thus, basic obstacles in investments attraction in the agrarian sector of country economy are: the high risks, related to the specific of agriculture (climatic terms, duration of productive process), ecological aspect and economic situation in a country on the whole; subzero investment attractiveness of industry and agrarian enterprises, undeveloped infrastructure; high level of commercial banks lending rates; unwithstand politics of state interference and adjusting, that does not add to the confidence to the potential investors. the lineation of basic problems of investing agrarian to the sector grounds for the search of these problems decision that will assist the increase of the inlaid investments efficiency in development of agriculture. references halushko, v.p. (2008). metodolohichni ta praktychni aspekty rivnia derzhavnoi pidtrymky sil's'kohospodars'kykh tovarovyrobnykiv. ekonomika apk. 3: p. 3-11. kasych, a.o. (2008). vplyv biudzhetno-podatkovoi polityky na investytsijno-innovatsijnu aktyvnist' pidpryiemstv. aktual'ni problemy ekonomiky. 11: p. 144–152. lanchenko, ye.o. (2005). formuvannia i realizatsiia investytsijnoi polityky v ahrarnomu sektori ekonomiky ukrainy. ahroinkom. 11-12: p. 59-64. martsyn, v. (2007). udoskonalennia derzhavnoho rehuliuvannia investytsijnoi diial'nosti v ekonomitsi ukrainy. aktual'ni problemy ekonomiky. 5 (71): p. 52-53. baltic journal of economic studies 17 vol. 2, no. 1, 2016 nepochatenko, o.o. (2008). derzhavna pidtrymka pidpryiemstv apk cherez udoskonalennia systemy kredytuvannia. ekonomika apk. 8: p. 95-100. plekhanov, d.o. (2010). naukove zabezpechennia derzhavnoho upravlinnia ahropromyslovym vyrobnytstvom v ukraini: dys. doktora ekon. nauk: 25.00.02. – k., 475 p. ирина безпьята инвестиционная политика украины в аграрном секторе аннотация. целью данной статьи является изучение особенностей инвестиционной политики государства в аграрном секторе экономики, определение основных проблем привлечения инвестиций и предоставления предложений по формированию инвестиционной политики в аграрном секторе экономики украины. одной из актуальных проблем развития аграрного сектора экономики украины в современных условиях является обеспечение сельского хозяйства необходимыми финансовыми и материальными ресурсами, основным источником которых являются инвестиции. в настоящее время украина находится в инвестиционном кризисе, который характеризуется снижением инвестиционной деятельности субъектов хозяйствования из-за низкого уровня активности инвесторов. причиной этого является неблагоприятный инвестиционный климат в стране, что в свою очередь возник из-за нестабильного положение страны и рискованного экономического положения. сельское хозяйство является той продовольственной отраслью национальной экономики, состояние которой прямо пропорционально зависит от средств, вложенных в ее развитие, а именно – от интенсивности инвестиционной деятельности. именно активная государственная инвестиционная деятельность в аграрном секторе является залогом его стабильного развития и результативности. методика исследования заключается в том, что основной причиной кризиса сельскохозяйственного производства многие экономисты называют, прежде всего, ослаблением роли государственного регулирования и поддержки агропромышленного комплекса. в развитых странах, наоборот, усиливается значение государственной поддержки агропромышленного комплекса. расходы на реализацию аграрной политики в виде прямой и косвенной поддержки постоянно растут, как это демонстрирует практика стран-ес. нами определено общую схему рычагов государственного регулирования условий инвестирования в аграрном секторе экономики. результаты исследования показывают, что важное условие, необходимое для частных капиталовложений (как иностранных, так и отечественных), – постоянный и общеизвестный набор норм и правил, сформулированных таким образом, чтобы потенциальные инвесторы могли понимать и предвидеть, что эти правила будут применяться к их деятельности. практическое значение – определено успешностью инвестиционных проектов, которые во многом зависят от открытости органов власти и местного самоуправления, от диалога с общественностью и производственной сферой (агробизнесом). значение/оригинальность. результаты исследования позволяют определить основные препятствия в привлечении инвестиций в аграрный сектор экономики страны. проявляются: высокие риски, связанные со спецификой сельского хозяйства (климатические условия, длительность производственного процесса), экологическим аспектом и экономической ситуацией в стране в целом; низкая инвестиционная привлекательность отрасли и аграрных предприятий, неразвитая инфраструктура; высокий уровень кредитных ставок коммерческих банков; неустоявшимся политика государственного вмешательства и регулирования, не добавляет уверенности потенциальным инвесторам. baltic journal of economic studies 107 vol. 1, no. 2, 2015 the peculiarities of calculation and recording in accounting assistance of temporary disability during 2015 and the prospect of further reforming social security in ukraine yanina nikitina1, ivan franko state university of lviv, ukraine abstract. the aim is to investigate the influence of legislative changes on the process of calculation of temporary disability and reflection of such transactions on accounts of bookkeeping with the aim to predict future directions of development and formation the system of social insurance for temporary disability in ukraine. the method of data analysis on the amount of financial support when there is the temporary disability with regard to various legal conditions made it possible to research the consequences of the implementation of certain regulations. methodology of the research is made through comparison of the size of financial compensation when the insurance case happen in three different legally controlled conditions that varied in ukraine during the current 2015. the results are represented with linear schedule. results of the research show the reasons and economic consequences of implementation of existing legislation of july 4, 2015 and enable to predict future changes on the way of establishing the uniform rules of social insurance for temporary disability and implementing health insurance in ukraine. the main directions of possible reforms in refund of lost earnings were also considered. in particular, there is an example of reflection of insurance case and the loss of efficiency calculation aid through case study. today the social insurance system in ukraine undergoes significant changes with the aim to improve and adapt to global trends. implementation of accounting various areas and spheres undergoes constant change towards optimization ensuring compliance with the basic principles of accounting, better reflection and recording accounting events, consistency and clarity of registration credentials, transparency and simplification of calculation and charging of various accounting indicators. the practical significance of the research is the detailed description of the process of calculating financial aid from the temporary disability depending on length of service employee, and display of the received sums of money on accounts in different periods in 2015. value/originality. the results of this research allow to structure accounting information according to the process of calculating monetary aid on disability and create a basis for further researches and prolonging reforms of social security in ukraine, according to proposed directions. key words: accounting of financial support, average wage, charges aid, insured person, the normative legal regulation, social insurance. jel classification: м41, h55, к3 corresponding author: 1 department of accounting and audit, ivan franko state university lviv. e-mail: janochka7@gmail.com 1. введение с 1 января 2015 были внесены изменения в закон украины «об общеобязательном государственном социальном страховании» № 1105 (далее – закон № 1105), на основании которых утратил силу закон украины «об общеобязательном государственном социальном страховании в связи с временной потерей трудоспособности и расходами, обусловленными погребением» № 2240 (далее – закон № 2240). с 26 июня 2015 был принят в новой редакции, адаптированный с законом № 1105, порядок оплаты первых пяти дней временной нетрудоспособности вследствие заболевания или травмы, не связанной с несчастным случаем на производстве, за счет средств работодателя № 440 (далее – порядок № 440). а с 04.07.2015 вступило в силу постановление кабинета министров украины от 26.06.2015 № 439, согласно которому были внесены изменения в постановление кабинета министров украины об исчислении средней заработной платы (дохода, денежного обеспечения) для расчета выплат по общеобязательному государственному социальному страхованию № 1266 от 26.09.2001 (далее – постановление № 1266), в результате чего был изменен порядок начисления больничных и декретных выплат работникам. baltic journal of economic studies 108 vol. 1, no. 2, 2015 реформирование системы социального страхования в украине продолжается. целью данного исследования является анализ текущих изменений процесса учета и прогноз будущих нововведений. основными научно-исследовательскими задачами является расчет размера пособия в связи с наступлением страхового случая для работника, если листок нетрудоспособности был выдан до 01.01.2015 года; расчет материального обеспечения для страхового случая, наступившего после 01.01.2015, а также после 04.07.2015; отображение описанных бухгалтерских операций на счетах учёта; анализ размера полученного материального обеспечения и отображения полученных данных с помощью графика; описание, начисление и учет наступления страхового случая во время следующих этапов реформирования системы социального страхования в украине. 2. анализ нормативно-правового регулирования социального страхования в украине в связи с изменением нормативно-правовых актов по урегулированию сферы социального страхования, возник ряд особенностей по исчислению пособия по временной нетрудоспособности. статьей 24 закона № 1105 с 1 января 2015 изменен размер пособия по временной нетрудоспособности в зависимости от страхового стажа. пособие по временной нетрудоспособности выплачивается застрахованным лицам в зависимости от страхового стажа в следующих размерах: 1) 50 процентов средней заработной платы (дохода) – застрахованным лицам, имеющим страховой стаж до трех лет; 2) 60 процентов средней заработной платы (дохода) – застрахованным лицам, имеющим страховой стаж от трех до пяти лет; 3) 70 процентов средней заработной платы (дохода) – застрахованным лицам, имеющим страховой стаж от пяти до восьми лет; 4) 100 процентов средней заработной платы (дохода) – застрахованным лицам, имеющим страховой стаж более восьми лет (закон № 1105). таблица 1 зависимость пособия по временной нетрудоспособности от величины страхового стажа № для страхового случая предвидится правовыми актами оплачивает стаж до 3 лет 3-5 лет 5-8 лет больше 8 лет 1. до 01.01.2015 закон 2240 постановление 439 порядок 1266 работодатель 60% 60% 80% 100% фонд социального страхования с временной нетрудоспособности 60% 60% 80% 100% 2. от 01.01.2015 до 26.06.2015 закон 1105 постановление 439 порядок 1266 работодатель 60% 60% 80% 100% фонд социального страхования 50% 60% 70% 100% 3. от 26.06.2015 закон 1105 постановление 440 порядок 1266 работодатель 50% 60% 70% 100% фонд социального страхования 50% 60% 70% 100% 0 2 4 6 8 10 12 от 0 до 3 лет от 3 до 5 лет от 5 до 8 лет больше 8 лет согласно законодательству до 01.01.2015 согласно законодательству после 01.01.2015 оплата первых пяти дней временной нетрудоспособности вследствие заболевания или травмы, не связанной с несчастным случаем на производстве, осуществлялась за счет средств работодателя в соответствии с постановлением № 439. то есть до 26 июня 2015 принимали во внимание размер рассчитанной суммы в соответствии со страховым стажем в размере 60% (до 5  лет), 80% (от 5 до 8 лет) или 100% (более 8 лет). 26  июня 2015 было принято постановление 440, в соответствии с которым расчет первых 5 дней нетрудоспособности за счёт средств работодателя, осуществляется с учетом процентов страхового стажа в соответствии с порядком № 1266. сравнение предыдущего и нового порядка учета величины стажа при расчете материального обеспечения по временной нетрудоспособности отразим с помощью таблицы 1 «зависимость пособия по временной нетрудоспособности от величины страхового стажа». на рисунке 1 «сравнение зависимости размера материального обеспечения от величины страхового стажа до и после 01.01.2015» видно, что внедрение закона № 1105 предусматривает также сокращение расходов фонда на финансирование пособий по временной нетрудоспособности. рис. 1. сравнение зависимости размера материального обеспечения от величины страхового стажа до и после 01.01.2015 baltic journal of economic studies 109 vol. 1, no. 2, 2015 3. процесс начисления и учета материального обеспечения до 04.07.2015 года рассмотрим, как меняется размер пособия по временной нетрудоспособности в связи с изменениями законодательных норм. рассмотрим эти изменения на примере. предположим, что при прочих равных условиях работник отдела сбыта в организации получает ежемесячно 2500 грн. в течение последних 12 месяцев. период отпуска был в августе 2014 года. работник заболел и обратился в местную поликлинику. ему выдали листок нетрудоспособности на период с 02 июля по 15 июля. рассчитаем размер пособия, причитающегося работнику за такой период нетрудоспособности. 1. рассчитаем размер среднедневного пособия для такого работника: для этого сумму заработной платы за последние полные 6 месяцев поделим на количество отработанных дней в периоде. расчет представим с помощью таблицы 2 «расчет среднедневной заработной платы для работника». таблица 2 расчет среднедневной заработной платы для работника месяц оклад (согласно отработанному времени), грн. количество рабочих дней количество отработанных рабочих дней в месяце июнь 2 500 20 20 май 2 500 18 18 апрель 2 500 21 21 март 2 500 21 21 февраль 2 500 20 20 январь 2 500 20 20 сумма 15 000 х 120 рассчитываем среднедневную заработную плату: 15 000/120 = 125 грн. 2. теперь определим размер помощи за весь период нетрудоспособности. для этого нужно размер среднедневной зарплаты умножить на количество рабочих дней в периоде нетрудоспособности. рабочие дни с пяти первых календарных оплачиваются за счет средств предприятия (организации, учреждения), остальные дни нетрудоспособности в пределах 4 месяцев оплачивает фонд социального страхования (до 01.01.2015 – фонд социального страхования по временной потере трудоспособности). размер помощи за весь период нетрудоспособности составит: 125 грн. * 10 рабочих дней = 1250 грн. если стаж работника составляет более 8 лет, начисляем 100% от исчисленной суммы. 3. таким образом, 3 рабочих дня оплачиваются за счетов средств предприятия и 7 за счет фонда. это составляет 375 грн. и 875 грн. соответственно. отразим эти операции на счетах бухгалтерского учета – таблица 3 «корреспонденция счетов по начислению пособия по временной нетрудоспособности». таблица 3 корреспонденция счетов по начислению пособия по временной нетрудоспособности № бухгалтерская операция дт кт сумма 1. начисление: пособие за счёт работодателя 93 663 375,00 пособие за счёт фонда социального страхования 378 663 875,00 2. удержаний единственный взнос: с пособия за счёт работодателя (2%) 663 651 7,50 с пособия за счёт фонда социального страхования (2%) 663 651 17,50 3. удержанный налог с дохода: с пособия за счёт работодателя (15%) 663 641 55,13 с пособия за счёт фонда социального страхования (15%) 663 641 128,63 4. удержанный взнос на оборону: с пособия за счёт работодателя (1,5%) 663 641 5,63 с пособия за счёт фонда социального страхования (1,5%) 663 641 13,13 5. выплачено с кассы пособие за счёт работодателя 301 663 306,74 6. на отдельный банковский счёт пришло пособие от фонда социального страхования 311 301 875,00 7. пособие за счет фонда социального страхования выплачено работнику 663 378 715,74 если стаж работника составит от 5 до 8 лет, то размер пособия по временной потере трудоспособности составит 70% от начисленной суммы (до 01.01.2015  года  – 80%), а именно: 375 грн. * 0,7 = 262,50 грн. (до 01.01.2015 года: 375 грн. * 0,8 = 300 грн.) за счет предприятия (организации, учреждения); 875 грн. * 0,7 = 612,50 грн. (до 01.01.2015 года: 875  грн. * 0,8 = 700 грн.) за счет фонда социального страхования; 1250 грн. * 0,7 = 875 грн. (до 01.01.2015 года: 1250 грн. * 0,8 = 1000 грн.) составит общая сумма возмещений по временной потере трудоспособности для работника. если стаж работника составит от 3 до 5 лет, то размер пособия по временной потере трудоспособности составит 60% от начисленной суммы (до 01.01.2015  года – также 60%), а именно: 375 грн. * 0,6 = 225 грн. (до 01.01.2015 года – также 225 грн.) за счет предприятия (организации, учреждения); 875 грн. * 0,6 = 525 грн. (до 01.01.2015 года – также 525 грн.) за счет фонда социального страхования; 1250 грн. * 0,6 = 750 грн. (до 01.01.2015 года – также 750 грн.) составит общая сумма возмещений по временной потере трудоспособности для работника. если стаж работника составит менее 3 лет, то размер пособия baltic journal of economic studies 110 vol. 1, no. 2, 2015 по временной потере трудоспособности составит 50% от начисленной суммы (до 01.01.2015 года – 60%), а именно: 375 грн. * 0,5 = 187,50 грн. (до 01.01.2015 года: 375 грн. * 0,6 = 225 грн.) за счет предприятия (организации, учреждения); 875 грн. * 0,5 = 437,50 грн. (до 01.01.2015 года: 875  грн. * 0,6 = 525 грн.) за счет фонда социального страхования; 1250 грн. * 0,5 = 625 грн. (до 01.01.2015 года: 1250  грн. * 0,6 = 750 грн.) составит общая сумма возмещений по временной потере трудоспособности для работника. 4. процесс начисления и учета материального обеспечения после 04.07.2015 года с 4 июля 2015 вступил в силу порядок № 1266 в новой редакции, который регулирует процесс начисления и учета пособий по временной нетрудоспособности. все первичные листки нетрудоспособности, период нетрудоспособности по которым начинается после 4 июля 2015, представленные для расчёта в бухгалтерию, следует рассчитывать в соответствии с новой редакцией порядка 1266. рассмотрим алгоритм расчета материального пособия с помощью ситуативного примера. предположим, что при прочих равных условиях работник организации получает ежемесячно 2500 грн. в течение последних 12 месяцев. период отпуска был в августе 2014 года. работник заболел и обратился в местную поликлинику. ему выдали листок нетрудоспособности на период с 02 сентября по 15 сентября. рассчитаем размер пособия, причитающегося работнику за такой период нетрудоспособности. размер среднедневной заработной платы исчисляется путем деления совокупной заработной платы за последние полные 12 месяцев, с учетом отпускных, исключая суммы пособия по временной потере трудоспособности, если такие были в расчётном периоде, на количество календарных дней в расчетном периоде, включая все выходные и праздничные, без учета дней нетрудоспособности и неотработанных по уважительным причинам (постановление № 1266). 1. рассчитаем размер пособия по временной потере трудоспособности для работника, сгруппировав данные в таблице 4 «расчет среднедневной заработной платы для работника». рассчитываем среднедневную заработную плату 30 000/365 = 82,19 грн. 2. теперь определим размер помощи за весь период нетрудоспособности. для этого нужно размер среднедневной зарплаты умножить на количество календарных дней в периоде нетрудоспособности. первые пять календарных дней оплачиваются за счет средств предприятия (организации, учреждения), остальные дни нетрудоспособности в пределах 4 месяцев оплачивает фонд социального страхования. таблица 5 корреспонденция счетов по начислению пособия по временной нетрудоспособности № бухгалтерская операция дт кт сумма 1. начисление: пособие за счёт работодателя 93 663 410,95 пособие за счёт фонда социального страхования 378 663 739,71 2. удержаний единственный взнос: с пособия за счёт работодателя (2%) 663 651 8,22 с пособия за счёт фонда социального страхования (2%) 663 651 14,79 3. удержанный налог с дохода: с пособия за счёт работодателя (15%) 663 641 60,41 с пособия за счёт фонда социального страхования (15%) 663 641 108,74 4. удержанный взнос на оборону: с пособия за счёт работодателя (1,5%) 663 641 6,16 с пособия за счёт фонда социального страхования (1,5%) 663 641 11,10 5. выплачено с кассы пособие за счёт работодателя 301 663 336,16 6. на отдельный банковский счёт пришло пособие от фонда социального страхования 311 301 739,71 7. пособие за счет фонда социального страхования выплачено работнику 663 378 605,08 таблица 4 расчет среднедневной заработной платы для работника месяц оклад (согласно отработанному времени), грн. количество календарных дней август 2 500 31 июль 2 500 31 июнь 2 500 30 май 2 500 31 апрель 2 500 30 март 2 500 31 февраль 2 500 28 январь 2 500 31 декабрь 2 500 31 ноябрь 2 500 30 октябрь 2 500 31 сентябрь 2 500 30 підсумок 30 000 365 baltic journal of economic studies 111 vol. 1, no. 2, 2015 размер помощи за весь период нетрудоспособности составит (если страховой стаж более 8 лет): 82,19 грн. * 14 календарных дней = 1 150,66 грн. из них 410,95 грн. за 5 первых календарных дней оплачивает предприятие (организация, учреждение), а остальные 9 календарных дней – 739,71 грн. – фонд социального страхования. отразим эти операции на счетах бухгалтерского учета – таблица 5 «корреспонденция счетов по начислению пособия по временной нетрудоспособности». если стаж работника составит от 5 до 8 лет, то размер пособия по временной потере трудоспособности составит 70% от начисленной суммы, а именно: 410,95 грн. * 0,7 = 287,67 грн. за счет предприятия (организации, учреждения); 739,71 грн. * 0,7 = 517,80 грн. за счет фонда социального страхования; 1 150,66 грн. * 0,7 = 805,46 грн. составит общая сумма возмещений по временной потере трудоспособности для работника. если стаж работника составит от 3 до 3 лет, то размер пособия по временной потере трудоспособности составит 60% от начисленной суммы, а именно: 410,95 грн. * 0,6 = 246,57 грн. за счет предприятия (организации, учреждения); 739,71 грн. * 0,6 = 443,83 грн. за счет фонда социального страхования; 1 150,66 грн. * 0,6 = 690,40 грн. составит общая сумма возмещений по временной потере трудоспособности для работника. если стаж работника составит до 3 лет, то размер пособия по временной потере трудоспособности составит 50% от начисленной суммы, а именно: 410,95 грн. * 0,5 = 205,48 грн. за счет предприятия (организации, учреждения); 739,71 грн. * 0,5 = 399,86 грн. за счет фонда социального страхования; 1 150,66 грн. * 0,5 = 575,33 грн. составит общая сумма возмещений по временной потере трудоспособности для работника. 5. сравнение динамики размера пособия по временной нетрудоспособности до и после изменений от 04.07.2015 результаты нашего исследования отобразим в таблице  6 «анализ размера пособия по временной нетрудоспособности». отобразим наши расчеты схематично с помощью графика, изображена на рисунке 2 «анализ динамики размера пособия по временной нетрудоспособности в течение 2015 года». 6. анализ причин и последствий изменений законодательства по социальному страхованию из графика видно, что уровень пособия по временной нетрудоспособности при расчете по новым законодательным нормам уменьшится. можно выделить несколько причин внедрения таких законодательных норм: 1. приближение к полному реформированию системы социального страхования по предоставлению материального обеспечения. 2. упрощение процедуры расчета пособия по временной нетрудоспособности. 3. уменьшение ошибок при начислении социальных выплат. 4. прозрачность и понятность начисления пособия для застрахованных лиц. 5. большая правдивость отображения информации в бухгалтерском учете. 6. экономия средств фонда. 7. переход к европейским стандартам. таблица 6 анализ размера пособия по временной нетрудоспособности периоды стаж о пл ач ив ае т ра бо то да те ль о пл ач ив ае т ф он д со ци ал ьн ог о ст ра хо ва ни я с у м м а до 01.01.2015 до 3 лет 225 525 750 от 3 до 5 лет 225 525 750 от 5 до лет 300 700 1000 больше 8 лет 375 875 1250 от 01.01.2015 до 26.06.2015 до 3 лет 225 438 663 от 3 до 5 лет 225 525 750 от 5 до лет 300 613 913 больше 8 лет 375 875 1250 от 26.06.2015 до04.07.2015 до 3 лет 188 438 626 от 3 до 5 лет 225 525 750 от 5 до лет 263 613 876 больше 8 лет 375 875 1250 от 04.07.2015 до 3 лет 206 370 576 от 3 до 5 лет 247 444 691 от 5 до лет 288 518 806 больше 8 лет 411 740 1151 0 200 400 600 800 1000 1200 1400 до 01.01.2015 от 01.01.2015 до 26.06.2015 от 26.06.2015 до 04.07.2015 после 04.07.2015 до 3 лет от 3 до 5 лет от 5 до 8 лет больше 8 лет рис. 2. анализ динамики размера пособия по временной нетрудоспособности в течение 2015 года baltic journal of economic studies 112 vol. 1, no. 2, 2015 относительно дальнейших изменений системы социального страхования, то есть два возможных направления развития. с одной стороны планируется перевести обязанности по расчету и начислению единого социального взноса на фонд социального страхования. однако, процедура осуществления финансирования выглядит довольно сложно. фонд социального страхования, осуществляя обмен данными с пенсионным фондом и имея доступ к единой базе листков нетрудоспособности, мог бы постепенно финансировать каждый случай нетрудоспособности по мере его наступления. средства в таком случае следовало бы перечислить на карточные счета работников по представлению работодателей при составлении персонифицированной отчетности в органы пенсионного фонда украины. однако такая система могла бы иметь большое количество злоупотреблений и требует достаточно большого штата работников социального страхования, на содержание которого значительно возрастут расходы фонда. есть проблемы с учетом стажа работников, с актуальностью счетов личных карт, а также с урегулированием оплаты первых 5 дней нетрудоспособности. с другой стороны осуществлять регистрацию и оплату больничных листов можно в электронном виде по представлению организаций. в сегодняшних условиях это было бы самым простым и самым оптимальным решением. однако, существует проблема с обратной связью со страхователями, с большим количеством ошибок, которые работники бухгалтерии часто допускают при начисления материального обеспечения по временной потере трудоспособности. также речь идет о уменьшение функций фонда социального страхования и внедрение страховой медицины. оплата первых 12 календарных дней будет осуществляться за счет организации, а в последующие дни нетрудоспособности (при необходимости), – за счет перехода на страховую медицину. тем самым удержания единого взноса и налогов с заработной платы или пособия по временной нетрудоспособности, будет отменен. работодатели будут платить только начисления на фонд оплаты труда и больничных выплат. четких шагов по широкому внедрению страховой медицины в сферу социального страхования в украине еще нет, а основные моменты функционирования такой системы потребует исследования и разработки. 7. вероятный путь дальнейшего реформирования системы социального страхования в украине сейчас предлагается реформирования системы социального страхования путем увеличения обязанностей работодателя по обеспечению оплаты временной нетрудоспособности. основными моментами такого подхода являются: 1. уменьшение функций фонда социального страхования (что позволит значительно снизить затраты средств государственного бюджета). 2. 12 календарных дней нетрудоспособности финансирует работодатель. 3. неработоспособность более 12 дней – средства, накопленные на личном счете застрахованного лица, которые можно использовать только в целях улучшения здоровья. 4. листья нетрудоспособности – бланк строгой отчетности, как основание для выплаты помощи. 5. невыясненными остаются вопросы удержания единого взноса, налога с дохода физических лиц, начисления на фонд оплаты труда, вопросы учета стажа при определении размера помощи. рассмотрим возможный процесс начисления материального обеспечения с учетом описанных изменений по реформированию системы социального страхования. сотрудник организации получает ежемесячно 2500  грн. в течение последних 12 месяцев. период отпуска был в июле 2015 года. работник отсутствовал на рабочем месте в связи с болезнью с 10 по 20 августа. с  работником произошел страховой случай 10 октября. ему выдали листок нетрудоспособности сроком на 15 дней – с 10 по 25 октября. 27 октября он обратился с листком нетрудоспособности в бухгалтерию. рассчитаем размер пособия, причитающегося работнику за такой период нетрудоспособности. 1. первые 12 дней нетрудоспособности работнику оплатит работодатель. в таблице 7 «расчет среднедневной заработной платы для работника» приведем данные для расчета среднедневной заработной платы за календарные дни. таблица 7 расчет среднедневной заработной платы для работника месяц оклад (согласно отработанному времени), грн. количество календарных дней август 2 500 30 июль 1 693,55 21 июнь 2 500 31 май 2 500 30 апрель 2 500 31 март 2 500 30 февраль 2 500 31 январь 2 500 28 декабрь 2 500 31 ноябрь 2 500 31 октябрь 2 500 30 сентябрь 2 500 31 сумма 29 193,55 355 рассчитываем среднедневная заработная плата: 29 193,55 / 355 = 82,24 2. теперь определим размер помощи за весь период нетрудоспособности. для этого нужно размер среднедневной зарплаты умножить на количество календарных дней в периоде нетрудоспособности. первые 12 каленbaltic journal of economic studies 113 vol. 1, no. 2, 2015 дарных дней оплачиваются за счет средств предприятия (организации, учреждения). размер помощи за весь период нетрудоспособности составит: 82,24 грн. * 12 календарных дня = 986,88 предположим, что коэффициент стажа на время расчета размера материального обеспечения составляет 100%; работник отработал более 8 лет или коэффициент стажа больше не применяется. отразим эти операции на счетах бухгалтерского учета – таблица 8 «корреспонденция счетов по начислению пособия по временной нетрудоспособности». таблица 8 корреспонденция счетов по начислению пособия по временной нетрудоспособности № бухгалтерская операция дт кт сумма 1. начисление пособия за счёт работодателя 93 663 986,88 2. начисление единого социального взноса (20%) 663 651 197,38 3. начисление налога с дохода (20%) 663 651 197,38 4. выплачено с кассы пособие за счёт работодателя 301 663 986,88 8. выводы из проведенного исследования таким образом, исследования влияния законодательных изменений на процесс расчета пособия по временной потере трудоспособности с помощью детального рассмотрения процесса расчета, начисления и отражения таких бухгалтерских операций в учете позволило провести анализ влияния изменений законодательных актов в сфере социального страхования на размер возмещенного материальной помощи. уменьшение процентов выплаты материальной помощи в зависимости от страхового стажа обусловило уменьшение сумм, подлежащих возмещению наемным работникам за счет фонда социального страхования, а позже – и за счет работодателя. введение процесса начисления материальной помощи в календарных днях обусловило облегчения процесса расчета суммы пособия по временной потере трудоспособности, уменьшение расходов средств фонда. реформирование системы социального страхования в украине продолжается. в ближайшее время будут введены новые изменения к становлению целостности и оптимальности процессов социального страхования в украине. исследования в этой области были и остаются актуальными и необходимыми. references law of ukraine „about educational state social security” from 23 september. 1999 №439; [electronic source] – access mode: http://www.zakon.rada.gov.ua according to cabinet of ministers of ukraine enactment from 26.06.2015 №439 it were made alteration in cabinet of ministers of ukraine enactment „about calculation of average wages (profit, cash security) for enumeration of average paid to educational state social security. № 1266 from 26.09.2001; [electronic source] – access mode: http://www.zakon.rada.gov.ua янина никитина особенности начисления и отражения в учёте пособия по временной потере трудоспособности в 2015 году и перспективы дальнейшего реформирования сферы социального страхования в украине аннотация. цель работы заключается в том, чтобы исследовать влияние законодательных изменений на процесс расчета пособия по временной потере трудоспособности и отражения таких операций на счетах бухгалтерского учета, с целью прогнозирования будущих направлений развития и становления системы социального страхования по временной потере трудоспособности в украине. метод анализа данных о размере материального обеспечения при временной потере трудоспособности с учетом влияния различных законодательных условий позволил исследовать последствия введения тех или иных нормативных актов. методика исследования осуществляется путем сравнения размера материального возмещения при наступлении страхового случая в трех различных законодательно контролируемых условиях, которые менялись в украине в текущем 2015 году. полученные результаты представлены с помощью линейного графика. проанализирована динамика уровня материального обеспечения по временной потере трудоспособности, в связи с изменением порядка расчета такой помощи для каждого отдельного работника. государственное регулирование пытается минимизировать собственные расходы и в соответствии с этим реформирует учет в социальной сфере. результаты исследования показывают причины и экономические последствия введения действующих законодательных норм от 04 июля 2015 года и дают возможность спрогнозировать будущие изменения на пути к установлению единых правил реализации социального страхования по временной потере трудоспособности и внедрения медицинского страхования в украине. также рассмотрены основные направления возможных реформ в сфере возмещения утраченного заработка. в частности приведен baltic journal of economic studies 114 vol. 1, no. 2, 2015 пример отражения факта наступления страхового случая и начисления пособия по временной потере трудоспособности с помощью ситуативного примеру. система социального страхования в украине сегодня испытывает значительные преобразования с целью ее совершенствования и адаптации к мировым тенденциям. осуществление бухгалтерского учета различных участков и сфер деятельности претерпевает постоянные изменения на пути к оптимизации, обеспечения соответствия основным принципам бухгалтерского учета, более полного отражения и фиксирования бухгалтерских событий, системности и понятности регистрации учётных данных, прозрачности и упрощения вычислений и начисления различных бухгалтерских показателей. практическое значение проведенного исследования заключается в детальном описании процесса начисления материальной помощи по временной потере трудоспособности для застрахованных лиц, в зависимости от стажа наемного работника, и отображения полученных сумм денежных средств на счетах бухгалтерского учета в различных периодах 2015 года. значение/оригинальность. полученные результаты данного исследования позволяют структурировать бухгалтерскую информацию относительно процесса начисления пособия по временной потере трудоспособности и создать основу для дальнейших исследований и продолжение реформирования сферы социального страхования в украине, в соответствии с предложенными направлениями. baltic journal of economic studies 27 vol. 5, no. 1, 2019 corresponding author: 1 yuriy fedkovych chernivtsi national university, ukraine. 2 international police cooperation department of the national police of ukraine, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-27-32 franchise agreement in romania as a form to provide economic efficiency of business activity vitalii vdovichen1, oleksandr voroniatnikov2 abstract. the purpose of the article is to study the economic and legal nature of the franchise agreement in romania. franchising has become one of the most effective tools for economic activity and profiting in this country, and the franchising agreement is a form, in which all aspects of this activity are reflected: the rights and obligations of the parties, the price of the franchise, the duration of the franchise relations, transactions between the franchisor and the franchisee, the prohibition of competitive actions, etc. the subject of the study is the franchise agreement in romania. research methodology. the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method allowed us to investigate the definition of a franchise agreement in romania and its key terms. the comparative legal method was used to compare doctrinal approaches to this issue. the statistical method was used to establish data that reflects the effectiveness of franchising activities. the method of system analysis helped to find out, in which areas of economic activity franchising is most demanded. interpretation of the content of romanian legal acts governing issues related to the conclusion of a franchise agreement in this country was realized with the help of the normative-dogmatic method. the system-structural method was used to study the franchise agreement in romania as a single entity (system) with the coordinated functioning of all its elements. the methods of grouping and classifying formed the basis for separating the list of conditions, which are necessary for concluding a franchise agreement in romania, as well as provisions that should be included in the content of this agreement. methods of analysis and synthesis helped to study some parts of this agreement to formulate further conclusions. practical application. the positive experience of romania in regulating issues related to the conclusion of a franchise contract can be used for making appropriate changes to the ukrainian legislation. thus, in romania, a special regulatory act (ordinance 52/1997), which regulates the procedure for concluding this agreement, defines the rights and obligations of the parties and establishes the essential terms of the contract and the principles for its implementation, was adopted. issues which are not regulated by the ordinance are subject to the civil and the commercial codes of the country, as well as european legislation, which sets out requirements for the prohibition of competition. correlation/originality. this scientific work is the first research in ukraine devoted not only to general issues of regulation of franchising activity in europe but specifically to the franchise agreement in a separate country (in romania) and its legal and economic peculiarities. key words: franchising, franchise contract, franchisor, franchisee, disclose, contract terms, anti-competitive action, resale price. jel classification: k12, f55 1. introduction franchising is an important part of the economy and the central phenomenon in entrepreneurship. in the current context, it is used as an effective tool for establishing and expanding entrepreneurial activity. in the last decade, franchising has played a key role in the development of small and medium-sized businesses; large companies use it to expand their activities, and individual entrepreneurs – to open their own business. moreover, franchising is recommended as an active accumulation of resources for the rapid creation of large networks. in addition, it is a guarantee that entrepreneurs adhere to high standards of doing business for its successful development. franchising is a mutually beneficial form of cooperation both for the franchisor and for the franchisee. the franchisee receives the right to sell goods or services under the trademark and using the business experience of the latter. the franchisor, in turn, receives remuneration in the form of initial and current payments. because of it, the economic significance of franchising attracted the attention of a wide range of researchers. in each scientific area, it received its separate definition. from the perspective of entrepreneurship, franchising is a vehicle for entering business ownership, from the perspective of marketing, franchising is an important baltic journal of economic studies 28 vol. 5, no. 1, 2019 distribution channel, from the perspective of economics, franchising is a leading venue for understanding the structure of contracts and from the perspective of strategic management, franchising is an important organizational form. franchising is a business relationship, in which the franchisor (the owner of the enterprise providing the product or service) transfers an independent person (franchisee) the right to sell and distribute franchising goods, as well as to use the business name for a fixed period of time. the international franchise association defines franchising as a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing training, merchandising and management in return for consideration from the franchisee (tripa). the study of franchising as a type of international business was undertaken by n. v. bezrukova, l. v. voroniak, t. m. hryhorenko, n. m. hrushchynska, o. m. kolodiziev, o. ye. kuzmin, a. m. mahomedova, v. ye. sakharov, v. s. tatarinov, t. m. tsyhankova, a. v. tsyrat, i. m. shkola and others. however, this would be the first study in ukraine devoted to franchising in romania, and in particular, the economic and legal characteristics of the franchise agreement in this country. in connection with the course of ukraine on european integration, it is reasonable to study the positive experience of leading european countries for its further application to the legislation of our state. therefore, the purpose of this article is to study economic and legal characteristics of the franchise agreement in romania, which was one of the first countries in its geographic region to adopt special legislation in the field of franchising. 2. statement of the baseline franchising is a relatively new phenomenon in the economic sphere of romania. until 1989, it simply did not exist in the domestic market of the country. this issue was discussed solely by the economiststheoreticians, and only in terms of commercial franchise concept and exclusively with reference to the realities of other countries. only with the adoption of the law № 31/1990 on commercial companies, the development of entrepreneurship became an important component of economic restructuring. the rapid and major extension of such an economic phenomenon as franchising began in romania. a few years later thanks to franchising, large companies of the western world came into the country and began to set up their offices in the most varied fields of activity. the first forms of contracts, similar to the franchise agreement (distribution or affiliation), came into being after 1990. the first classical franchise company entering into romania was mcdonald’s (1995) (adriana florina popa, andreea gabriela ponorîcă). the franchise market in romania has undergone many changes over the last decade due to the global economic crisis that began in 2008. after 2008, there was a decrease in the number of franchises available in the market; however, since that time franchising development has generally begun. the tendency of the international franchises access to the local market continues. in 2015, the romanian franchise market had an overall turnover of €1.9 billion ($2.09 billion). there are 345 active concepts, according to inventure franchise consulting, 11% more than in 2014. 25% of concepts have 10 outlets or more and 50% have at least three. while the market is dominated by international franchises, future growth is expected to be fuelled primarily by domestic concepts, which currently account for one-third of the brands. most foreign concepts originate in the united states and european countries, such as great britain, france, italy, poland, spain, and germany (romania country commercial guide). over the past ten months, the romanian market has seen a significant increase in franchises in the retail sector (including clothing and footwear, it and consumer electronics products) and the food and beverage sector. a report published in october 2018 by a well-known financial newspaper (ziarul financiar) states that that franchises, comprising over 400 business concepts, feature prominently in romanian commerce, with cumulative revenues in of eur 3 billion in 2017, and are experiencing a period of sustained growth. according to the romanian association of franchising in romania, there are more than 438 franchises in various business areas. the analysis of 2633 franchise units operating in romania determined its high popularity in such spheres as: personal services – 30.54%; retail trade – 28.29%; fast food establishments – 25.07%; service enterprises – 6.57%; interior arrangements – 2.66%; clothing and accessories – 2.47%; food – 1.63%; real estate – 1.06%; construction – 0.65%; restaurants and cafes – 0.65%; hotels – 0.42% (tripa). along with international brands, there are a number of local franchise companies acting on the romanian market such as jolidon, mexton, id sarrieri, tina r , and others. in 2006, because of the expansion of the franchise business and for the maintenance of european standards in this area, the romanian association of franchising was created – a non-governmental, apolitical, non-profit organization. the goal of the organization is to identify and to solve specific franchising issues, to promote franchising as a way of doing business on the romanian market, initiating action against illegal franchises, to combat counterfeiting and theft of know-how (tripa). the romanian association of franchising has adopted its own code of ethics for franchising in accordance with the european code of ethics for franchising and the provisions of the franchising law. the functions of the association include the verification of pre-contract disclose documents and franchise agreements. baltic journal of economic studies 29 vol. 5, no. 1, 2019 membership in the association is not mandatory, but it is recommended. the association guarantees certain benefits to its members, for example, they can use the services provided by the mediation committee consisting of international experts. the latter are trying to resolve peacefully any disputes that arise between franchisors and franchisees, and they are entitled to punish them for violating the code of ethics for franchising. another advantage is providing essential information by the association. a company that wants to become a member must pay an entrance fee, as well as annual membership fees. concerning the existence of legal acts regulating franchise activity and conclusion of franchise agreements, it should be noted that romania was one of the first countries in its geographic region to adopt special legislation in the field of franchising. on august  28, 1997, the romanian government adopted the ordinance 52/1997 about the legal regime applicable to franchising (law on franchising) (ordonanta no 52 din 28 august 1997). in accordance with this statutory act, a franchise is “a trading system based on the constant cooperation between individuals or legal entities, each of which is financially independent of the other, by which a person, called the franchisor, gives another person called the franchisee the right to work in the network or develop business, product, technology or service.” the key concept of the franchise system is the franchise network, that is, the contractual relationship established between the franchisor and one or more franchisees, which purpose is to promote technology, product or service, as well as to develop their production and distribution. the ordinance 52/1997 explicitly provides for the obligation of pre-contractual disclosure. according to clause 2 of the law on franchising, at the stage of negotiations, the franchisor must provide the potential franchisee with the relevant data reflected in the so-called disclose document. the purpose of such disclosure is to enable the franchisee to evaluate probable prospects and make an appropriate decision since even if a potential franchisee has experience in the field of franchising it could be insufficient, as each franchise network has its own characteristics because it is based on the franchisor’s know-how. in addition, according to romanian law, the franchisee has no legal obligation to carry out an inspection independently before concluding a franchise agreement. the legislator does not set any requirements for the form of the disclosure document. however, clause 2, paragraph 3 of the ordinance 52/1997 states, which information should be included in the contents of this document: 1) the experience gained by the franchisor in the proposed business; 2) data on the financial component of the franchise agreement, such as a down payment or entry fee, periodic payments, advertising fees, tariffs for services, products, and technology, in case of stipulation on contractual obligations of their acquisition; 3) data allowing the franchisee to calculate potential profit and make a financial plan; 4) the purpose and scope of the exclusive right; 5) information on the duration, terms of renewal, settlement of disputes, and termination of the franchise agreement. all of the above is only the minimum information that must be disclosed by the franchisor. at the request of the franchisee, the latter must provide other information, but only to the extent it is of interest to the franchisee. disclosure should be made in due time before the conclusion of the franchise agreement. the ordinance 52/1997 does not directly state what the “proper term” is. as a general rule, a disclosure document must be provided before the franchisee enters into any legal obligations regarding possible cooperation. it should be noted that there is no statutory requirement for the franchisor in romania to disclose relevant information at the pre-contractual stage. however, in accordance with the general principle of civil law, the contracting parties must act in good faith towards each other. thus, the franchisor’s pre-contractual disclosure obligation must be interpreted both from a general contractual perspective and taking into consideration the objective and scope of the pre-contractual disclosure phase (mihai guia, cosmina raic). it is mainly up to the franchisor to decide what amount of pre-contractual information must be provided, but the latter should always note that in case of a dispute between the parties, it will have to prove that the disclosure before the contract was sufficient enough to allow the franchisee to make a reasonable decision concerning its joining to the franchise network. the same principle can be applied to the franchisor’s obligation to provide the franchisee with technical/ commercial assistance, as well as information on any new events or facts that may significantly affect the preconditioned terms of the franchise agreement. the law does not provide for any special sanctions in case of refusal to disclose information. however, in case of non-compliance by the franchisor with the obligation to pre-contractual disclosure information or failure to provide information about new events or facts that may significantly affect the original agreement between the parties, the franchisee has the right to file a lawsuit against the franchisor for damages caused as an effect of such non-disclosure or incomplete disclosure. the burden of proof of the existence of any damage is on the franchisee. in addition, the franchisee may require the amendment of the franchise agreement and even reduction of its financial obligations. theoretically, criminal liability for misrepresentation is also possible (cristina tararache). the franchisee, in turn, is responsible for disclosing confidential information. clause 1184 of the romanian civil code (noul cod civil) stipulates that when baltic journal of economic studies 30 vol. 5, no. 1, 2019 confidential information is communicated by one party to another during negotiations, the other party must not disclose it or use it for themselves, whether or not they enter into a contractual relationship. breach of this obligation causes damages, which is proportional to the damages suffered by the franchisor. clause 5 of the ordinance 52/1997 provides for the points of the future agreement, which must necessarily be recorded in its content. they are: 1) the subject of the contract; 2) rights and obligations of the parties; 3) financial liabilities; 4) the term of the contract; 5) the terms for alteration, renewal, and termination of the contract. the franchise agreement must reflect the interests of the franchise network members; protect the franchisor’s rights to industrial or intellectual property by remaining general identity and reputation of the franchise network. when concluding and executing a franchising agreement, the parties must adhere to the following principles: a) the term should be established in such a way that the franchisee could amortize the investments related to the franchise; b) the franchisor must notify the franchisee with a prior notice of his intention not to renew the contract after the expiration of its term or not to sign a new agreement; c) the circumstances, which may serve as grounds for termination of the contract without notice, should be clearly stipulated in clauses on the termination of the contract; d) the conditions under which the assignment of rights arising from the contract may be carried out should be clearly specified in the contract (in particular, the conditions for the appointment of the successor); e) preferential right should be granted if the interest in maintaining or developing a franchise network requires recognition of this right; f ) non-competition clauses should be included in the contract to protect the knowhow; g) the financial obligations of the franchisee must be clearly defined and introduced in such a way as to contribute to the achievement of general aims. with the help of the franchise agreement, the franchisor monitors compliance with all the components of the brand’s image. the franchisor’s trademark, a symbol of identity and reputation of the franchising network are the guarantee of the quality of the product/service/ technology provided to the consumer. this guarantee is ensured by the transfer and supervising the conformity of know-how, by providing with a homogeneous range of products and/or services and/or technologies. the franchisor guarantees that the franchisee is a financially independent person in relation to the franchisor or other persons. getting a set of relevant rights from the franchisor obliges the franchisee to pay fee in exchange for using the trademark of the products and/or services and/or technologies, know-how or other special knowledge associated with the franchise, as well as any other intellectual property rights or industrial property, as appropriate, the continued use of commercial and/or technical assistance provided by the franchisor during the whole term of the franchise agreement. the ordinance 52/1997 also specifies certain requirements for the behaviour of parties to the franchising agreement (clause 4). in particular, the franchisor must: 1) own and manage its own business for a certain period before founding a franchise network (without specifying during which period of time this activity should be carried out); 2) hold intellectual property rights or industrial design rights and transfer to the franchisee the right to exploit the trade mark, knowhow and other iprs regarding the franchised product or service; 3) provide the initial training of the franchisee, as well as provide further technical and commercial support during the term of the franchise agreement; 4) advertise the franchised product or service. in turn, the franchisee is obliged: 1) to develop the franchise network, as well as to maintain its general identity and reputation; 2) to provide the franchisor with any information meant to facilitate the analysis of the franchisee’s performance and accurate financial situation; 3) not disclose to third parties the data concerning know-how both during the term of the franchise agreement and after its termination; 4) not to compete with the franchisor; 5) duly to pay the royalties and other taxes owed. one can conclude that the requirements, which the ordinance 52/1997 sets for the franchisor and the franchisee, aimed primarily at protecting their mutual rights and interests. thus, the franchisor is under an obligation to prove the effectiveness of his business concept by providing data on the duration of its operation, as well as confirming the possession of intellectual property rights or industrial designs rights. in addition, it must provide initial training for the franchisee, as well as ensure its further training and technical support. in turn, the franchisee must provide the franchisor with any data necessary to improve the franchise network activity. it also has the duty not to disclose the content of know-how, which is the subject of a franchise agreement. all these measures are necessary to protect the commercial secrets of the franchisor, as well as its other intellectual property rights. when concluding a franchise agreement in romania, the parties, in addition to the ordinance 52/1997, must also comply with the requirements of european legislation on anti-competitive practices (article 101 of the treaty on the functioning of the european union) and the national competition law № 21/2996 further amended. franchise relations should also comply with commission regulation № 330/2010 on the application of article 101 (3) of the treaty on the functioning of the european union regarding the categories of vertical agreements and concerted practices, which provides the conditions under which vertical restraints are exempted from the prohibition on anti-competitive agreements. baltic journal of economic studies 31 vol. 5, no. 1, 2019 after concluding a franchise agreement, the franchisee usually pays an initial royalty or network entry fee. during the term of the agreement, the parties may also agree on: periodic royalties; advertising fees; exclusivity fees; other tariffs for services, products and technology that the franchisee must acquire from the franchisor under the franchising agreement. the parties can charge interest on overdue payments either: 1) at a rate agreed by them contractually; 2) in the absence of an agreement, at a rate calculated by reference to the legal interest rate. romanian law provides that the legal interest rate for overdue payments is 8% over the interest rate of the national bank of romania (which is published in the official gazette of romania each time it is amended). the legal interest rate is of 6% per year for contracts with a foreign/external element (for example, when the franchisor is a foreign entity) that are governed by romanian law and for which payment was agreed to be made in foreign currency (mihai guia, cosmina raic). the franchisor’s fixing of minimum resale prices on the franchisee, whether direct or indirect, is prohibited under both european and national legislation. this is considered to be a strict restriction; in case of noncompliance, the franchisor must pay a fine of up to 10% of the registered turnover of the company until the year when it was authorized. however, maximal or nonbinding prices may be specified. there are also some exceptions to the prohibition on setting/maintaining resale prices. according to the european block exemption regulation, fixing resale prices in short marketing actions shall not be subject to the restriction (comission regulation). the duration of the franchise agreement in romania is not legally determined. the parties to the agreement can define it independently and fix it in the relevant provision of the treaty. however, the minimum period of validity of the agreement, as it was stated above, must be sufficient to allow the franchisee to amortize investments related to the franchise. as a rule, a franchise agreement in romania is concluded for a period of five to ten years. the ordinance 52/1997 does not contain any specific provisions on the franchisor’s right to terminate the agreement before its expiration. thus, general rules of the romanian contract law applied, under which the contract can be terminated in the following cases: 1) for default, that is, in case of serious breach of the contract by the other party; 2) for convenience, subject to certain conditions and formalities (for example, fixedterm contracts can be terminated for convenience if the contract specifically allows it); 3) by mutual agreement of the parties (mihai guia, cosmina raic). the franchisor must inform the franchisee of any breach of the contractual obligations and give it a reasonable period to rectify this violation. if there is no agreement on the other, the contract, as a rule, is terminated by the court. thus, the non-defaulting party has the right to request termination before the court. the court analyses the claim and decides whether the breach was serious enough to terminate the contract or if other remedies are better suited to provide compensation to the injured party. however, the parties should stipulate the provision of the contract that provides for the possibility to terminate the agreement without applying to the court and the circumstances which may be grounds for termination of the contract. the franchisor should not pay the compensation to the franchisee for termination of the contract, but for this, the franchisor must perform its contractual rights in good faith and within the limits of its rights. in other words, the franchisor must use its right to terminate the contract in a way that must not be deemed to be abusive by reference to normal and fair market standards (mihai guia, cosmina raic). after termination of the agreement, post-contract relations are based on the rules of loyal competition. the franchisor can oblige ex-franchisee not to disclose information on know-how to competing franchise network, thereby securing the confidentiality of the business (clause 8 of the ordinance 52/1997). as we see, the provisions of the clause 8 are not obliging, that’s why the franchisor must protect its rights by securing the provision on non-compete and confidentiality, preventing the transferred know-how alienation during the validity of the agreement. the law on franchising does not provide for a period for anticompetitive actions and confidentiality, therefore, it is necessary to determine it during negotiations. the franchise agreement can be renewed by the mutual consent of the parties; this consent must be represented in the corresponding provision of the contract. if the franchisor refuses to continue cooperation, the franchisee does not obtain the right to compensation if such a right is not stipulated in the contract itself. 3. conclusion franchising in romania, as in many other countries, is an effective business concept that “penetrated” to all areas of entrepreneurship, as a result of appropriate economic environment and adoption of relevant regulatory acts. until 1989, only academic economists spoke on franchising; in practice, it did not exist in romania because of ideological reasons. in the 1990s, fist international franchise companies arose on the territory of this country, and since the 2000s, there has been a rapid development of local franchise companies. legal relations between the franchisor and the franchisee are regulated by the franchise agreement, which reflects the interests of the franchise network members and protects franchisor’s intellectual property rights or industrial property rights while maintaining the general identity and reputation of the franchise network. baltic journal of economic studies 32 vol. 5, no. 1, 2019 the issue of concluding a franchise agreement is regulated by the ordinance № 52, which was adopted in 1997. the civil code and the commercial code of romania will be applied where matters are not covered in the franchise law. the procedural aspects of entering into a franchise agreement are regulated by the franchise law and the romanian civil procedure code (nicholas hammond, sebastian simon). the parties to the agreement are free to negotiate all its provisions as long as they comply with the provisions of the ordinance 52/1997 and the aforementioned codes. references: tripa, s. franchising as a growth strategy. evidence from romania. annals of the university of oradea fascicle of textiles, leatherwork. url: http://textile.webhost.uoradea.ro/annals/vol%20xv-no%20ii/art.%20nr.%2069,%20 pag%20183-188.pdf adriana florina popa, andreea gabriela ponorîcă. franchising contract – a modern juridical and economic instrument for business expansion. url: http://oaji.net/articles/2017/5275-1511862451.pdf romania country commercial guide. romania – franchising. url: https://www.export.gov/article?id= romania-franchising ziarul financiar. piaţa din românia a atras aproape 400 de concepte de franciză cu afaceri cumulate de 3 mld. euro anul trecut (5 oct. 2018). url: https://www.zf.ro/imm/piata-din-romania-a-atras-aproape-400-de-concepte-defranciza-cu-afaceri-cumulate-de-3-mld-euro-anul-trecut-17544763 ordonanta no 52 din 28 august 1997 privind regimul juridic al francizei: textul actului republicat în monitorul oficial nr. 180/14 mai. 1998. url: http://www.cdep.ro/pls/legis/legis_pck.htp_act_text?idt=17678 mihai guia, cosmina raic. domestic and international franchising, master franchising, and regulation of franchise agreements in romania: overview. thomson reuters. practical law. url: https://uk.practicallaw.thomsonreuters.com/ 9-632-4918?bhcp=1&transitiontype=default&contextdata=(sc.default)&firstpage=true&comp=pluk cristina tararache. franchise 2019. romania. international comparative legal guides. url: https://iclg.com/ practice-areas/franchise-laws-and-regulations/romania noul cod civil (legea 287/2009), actualizat 2018, republicat în monitorul oficial nr. 505/2011, aplicabil din 1 octombrie 2011. url: http://www.imliasi.ro/noul-cod-civil.pdf comission regulation (eu) no 330/2010 of 20 april 2010 on the application of article 101 (3) of the treaty on the functioning of the european union to the vertical agreements and concerted practices categories. url: https://eur-lex.europa.eu/legal-content/en/all/?uri=celex%3a32010r0330 nicholas hammond, sebastian simon. franchising in romania. hammond bogaru and associates. bucharest – romania. november, 2011. url: http://www.bbnalaw.com/files/articles/franchise_in_romania_en.pdf baltic journal of economic studies 264 vol. 4, no. 3, 2018 corresponding author: 1 department of economics, kherson branch admiral makarov national university of shipbuilding. e-mail: rusnak_av@meta.ua orcid: http://orcid.org/0000-0002-3198-2866 2 department of finance, accounting and taxation, private higher educational institution “international university of business and law”. e-mail: lana_audit7@ukr.net orcid: http://orcid.org/0000-0003-1487-2291 doi: https://doi.org/10.30525/2256-0742/2018-4-3-264-270 innovative capacity of ukraine’s economy in the international context alla rusnak1 kherson branch admiral makarov national university of shipbuilding, ukraine svitlana prokhorchuk2 private higher educational institution “international university of business and law”, ukraine abstract. the purpose of the article consists in the determination of the level of innovation capacity of ukraine in the international context based on the rating. the method of integrated research allows assessing the innovation of the country’s economy and developing recommendations for its improvement. methodology. the research is based on a systematic approach to determining the innovation capacity of the ukrainian economy by international ratings that assess innovation potential, technological and innovation competitiveness. determination of the innovation potential and innovation capacity of ukraine’s economy was carried out based on the global innovation index, the bloomberg innovation index, the global competitiveness index, the innovation union scoreboard, and the global talent competitiveness index. innovation is a defining characteristic of modern scientific and technical, industrial, socioeconomic, and other social processes. effective innovation potential is not only a way of dynamic development but also a means of ensuring the country’s security and sovereignty, its competitiveness in the modern world. results of the research indicate that the formation and implementation of innovation potential and the introduction of innovations in ukraine is characterized by low indexes. such preconditions for innovative development as human capital, education, and science receive relatively higher ratings (although there are problems in these areas that need to be addressed). stable lower ratings (which stipulate the overall rating of the country) have political factors, the state of the regulatory environment and institutional preconditions for the transition to an innovative way of development. practical implications. in order to increase the innovation capacity of the country’s economy and within the framework of the european integration processes in the field of innovation policy of ukraine, the following measures are proposed: to improve the framework conditions for innovation activity; to implement innovative partnerships; to strengthen tools to support innovations and simplify administrative procedures to facilitate access to financing, especially for small business entities; to stimulate the formation of partnerships and links between education, business, science, and innovation and to stimulate entrepreneurship by supporting young innovative companies. proportion/originality. the results of the research made it possible to propose specific initiatives, the implementation of which will have a positive impact on the national innovation system and increase the innovative capacity of the ukrainian economy, in particular: to accelerate the development and implementation of “innovation laws”; to review the list and content of the existing scientific and technical programs with the purpose of more consideration of the world tendencies and their adaptation to the needs of the national economy; to develop an innovation monitoring system, which would be based on the use of indexes of the european innovation scoreboard. key words: innovations, innovation potential, innovation development, competitiveness, institutions. jel classification: о31, е02 baltic journal of economic studies 265 vol. 4, no. 3, 2018 1. introduction sustainable development of the ukrainian economy is impossible without activating innovation activity. the country’s innovation system allows us to combine economic and social relations, knowledge, and technological innovations. innovation is a defining characteristic of modern scientific and technical, industrial, socioeconomic, and other social processes. effective innovation potential is not only a way of dynamic development but also a means of ensuring the country’s security and sovereignty, its competitiveness in the modern world. the novelty of the research consists in improving the directions of raising the innovative capacity of the country’s economy, in particular, within the framework of the european integration processes in the field of innovation policy of ukraine. the purpose of the paper consists in the determination of the level of innovation capacity of ukraine in the international context based on the rating. the research is based on a systematic approach to determining the innovative capacity of the ukrainian economy according to the international ratings that assess innovation potential, technological and innovation competitiveness. the main task is to determine the innovative potential and innovative capacity of the ukrainian economy based on the global innovation index, the bloomberg index of innovation development, the global competitiveness index, and the innovation union scoreboard, the global talent competitiveness index, and the development of proposals for improving the country’s innovative potential. 2. ukraine’s rating by the global innovation index according to the global innovation index 2017 report prepared jointly by cornell university, insead the business school for the world, and the world intellectual property organization, the global innovation index in 2017 covers 127 world economies and uses 82 indicators in a number of areas. in 2017, switzerland and sweden have leading positions in the ranking as in 2016. the netherlands take the third position, having improved their index by six positions. also, the ten most innovative countries include: the usa, great britain, denmark, singapore, finland, germany, and ireland (dutta, lanvin, wunschvincent, 2017). in 2017, ukraine occupied the highest position in the last 7 years – 50th place (table 1). and in the group with an income below the average, ukraine took 2nd place after vietnam, outranking mongolia, moldova, armenia, and india. compared to 2016, ukraine has risen by 6 points, which is due to a high coefficient of innovative efficiency, that is, the ratio of the obtained result to innovative resources (6). the basis of ukrainian innovation competitiveness is human capital. its effective implementation is the main competitive advantage. compared to 2016, this indicator has decreased due to the reduction of government expenditures for education (18th place in 2016, 22nd place in 2017) and science. in 2017, in the sub-index “human capital” ukraine takes 41st position versus 40th in 2016 (fig. 1). a factor inhibiting innovative development is the low level of r&d expenditures (54th place in 2017), which causes the search for other sources of financing and the migration of scientists beyond the boundaries of ukraine. in 2017, ukraine occupies the 101st place by the sub-index “institutions”, as in 2016, including by the indicators as follows: political situation – 122nd  place (123rd place in 2016), regulatory environment – 82 (84th place in 2016), situation of business environment – 78 (79th place in 2016). in terms of infrastructure development, ukraine takes 90th place in the ranking against 99th in 2016. the market indexes of ukraine are estimated at 43,2 points, which corresponds to the 81st position (by loans – 71st, by the level of trade and competition – 48th, by investments – 107th). by the “business experience” sub-index, ukraine rose to 22nd position and took 51st place (by the number of mental workers – 41st place, by innovation links – 72nd, by the perception of knowledge – 63rd). according to the results of scientific researches, ukraine is on 32nd position in the ranking in 2017 against 33rd in 2016, including by the indicators of knowledge creation – 16th place, by the influence of knowledge – 77th, by the distribution of knowledge – 54th. by the sub-index “creativity” the country has improved its position, moving from 58th places to 49th, table 1 the ranking of countries of the world in terms of innovative potential and indicators of economic competitiveness in 2016-2017 countries the global innovation index the global competitiveness index 2016 2017 2016 2017 switzerland 1 1 1 1 sweden 2 2 6 7 great britain 3 5 7 8 usa 4 4 3 2 the netherlands 9 3 4 4 germany 10 9 5 5 china 25 22 28 27 poland 39 38 36 39 russian federation 43 45 43 38 ukraine 56 50 85 81 kazakhstan 75 78 53 57 baltic journal of economic studies 266 vol. 4, no. 3, 2018 including by the index of intangibles it takes 26th place, by creative products and services – 92nd, by online creativity – 47th (figure 1). in addition to the global innovation index, the ranking of countries by the innovation efficiency index is determined, which is calculated on the basis of the same indicators and sub-indices as the global innovation index, by ranking the ratio of the innovation output index to the innovation input index. by this indicator, ukraine is in 11th place in 2017, which is one position higher than in 2016. this indicates an increase in the efficiency of innovation activity in the country. 3. ukraine’s rating by the bloomberg innovation index the methodology used by bloomberg in defining the bloomberg innovation index involves analysis of seven factors: r&d expenditure in relation to gdp; technological opportunities; labour productivity; the number of high-tech enterprises; efficiency of higher education and the percentage of graduates; concentration of researchers; patent activity. according to the rating provided by bloomberg in 2018, ukraine lost 4 positions during the year, which corresponds to the 46th place in the ranking (47,28 points) among 50 studied countries. ukraine proved to be the worst in terms of labour productivity (50th place) and fell into the top three outsiders by technological opportunities (48th place) (figure 2). at the same time, ukraine retains a high 21st place in the efficiency of higher education, which is calculated based on the share of employees with diplomas of higher education institutions and the number of graduates with engineering and technical higher education. at the same time, it should be noted that compared to the rating in 2017, ukraine lost 17 positions in terms of higher education. according to patent activity, ukraine occupies a rather high position – 27th place (pidbereznyi, 2018). 4. assessment of ukraine’s competitiveness by the global competitiveness index according to the latest global competitiveness report for 2017–2018 published by the world economic forum, ukraine raised 4 positions above in the ranking and ranked 81st place among 137 studied countries. bhutan took one position below and ranked 82nd place, while brazil moved to 80th place. kazakhstan and poland have worsened their positions in terms of competitiveness and ranked 57th and 39th place respectively in the general rating this year. moldova, on the contrary, significantly improved its position and moved from 100th places to 89th place (schwab, 2017). the authors of the rating note that ukraine still holds quite high positions in terms of market capacity (47th place), healthcare, basic education – 53rd place. ukraine has the highest rating in “higher, secondary, and vocational education” – 35th place, but it is 2 positions worse than in 2016. ukraine’s position deteriorated in 4 out of 12 criteria: infrastructure – 78th place versus 75th place in 2016; labour market efficiency – 86th place versus 73rd in 2016; innovations – 61st place versus 52nd in 2016; higher, secondary, and vocational education – 35th place versus 33rd in 2016. ukraine’s ranking by the innovation sub-index in report 2017–2018 corresponds to 61st place, i.e. the falling makes 9 positions. ukraine has worsened its position in the ranking by all indicators of the sub-index. by the indicator “innovation”, in addition to “availability of scientists and engineers”, ukraine takes 25th place versus 29th in 2016 (figure 3). 101 40 99 75 73 33 58 101 41 90 81 51 32 49 0 20 40 60 80 100 120 institutuins human capital infrastructure market indicators business experience results of scientific researches creativity 2017 2016 figure 1. dynamics of the sub-indexes of the global innovation index for ukraine in 2016-2017 baltic journal of economic studies 267 vol. 4, no. 3, 2018 the largest falling was noted by the criteria as follows: “state purchases of the latest technologies and products” – from 82nd to 96th position of the rating, “relationship of universities with industry in the field of r&d” – from 57th to 73rd position. by the sub-index “technological readiness”, ukraine ranked 81st place in the ranking versus 85th place in 2016. ukraine has improved its position in “use of broadband internet service/100 persons” – the 63rd place versus 64th in 2016 by one indicator of the sub-index only. by four indicators of the sub-index “technological readiness”, ukraine has worsened its position in the rating. the most rapid falling is noted by the indicator “availability of the latest technologies”, according to which ukraine lost 14 positions in the rating. in addition, the most problematic indicator is “foreign investment and technology transfer” – 118th place (schwab, 2017). 5. ukraine’s rating by the european innovation scoreboard the innovation index of the european innovation scoreboard reflects the main indicators for assessing the performance of the national innovation system of the eu countries. all countries included in the scoreboard are divided into four groups depending on the values of the generalized index: “innovation leaders”, “strong innovators”, “moderate innovators”, and “slow innovators”. figure 2. dynamics of the indicators of the global innovation index for ukraine in 2016-2017 44 47 50 34 4 44 27 42 47 48 50 32 21 46 27 46 0 10 20 30 40 50 60 r & d expenditures in relation to gdp technological opportunities labor productivity number of high-tech enterprises efficiency of higher education concentration of researchers patent activity overall index of innovation development 2017 2016 29 82 57 68 50 49 52 25 96 73 76 60 51 61 0 20 40 60 80 100 120 availability of scientists and engineers public purchases of high-tech products cooperation of universities and industry in research and development expenditures of companies for research and development quality of research institutes innovation capability overall index of innovations 2017 2016 figure 3. ukraine’s ranking by the indicator “innovations” of the global competitiveness index in 2016-2017 baltic journal of economic studies 268 vol. 4, no. 3, 2018 the value of the indicator for ukraine in 2016 amounted to 28.9%, which indicates a 4.2% falling compared to 2010. ukraine belongs to the group of “slow innovators”. ukraine falls behind in all indicators, except for the indicators of coverage by higher education. relative strengths of the ukrainian innovation system are human resources and company investments. the weaknesses are relations and entrepreneurship, the attractiveness of research systems, innovators (figure 4). according to the report in 2017, significant differences of ukraine are the decline in gdp per capita, lower and negative gdp growth rates, lower and negative population growth rates and lower population density. among the indicators with positive dynamics, the number of industrial designs, the volume of exports of knowledge-intensive services, and the growth of the number of international joint publications can be distinguished. 6. assessment of economy’s innovation by the global talent competitiveness index the global talent competitiveness index is an annual study prepared by insead the business school for the world in partnership with the adecco group and the institute for human capital leadership institute (hcli) in singapore. this study examines the impact of technological changes on the competitiveness of talents, and it is confirmed that, despite the tendency of displacement of jobs by machines at all levels, technologies also create new opportunities. basic skills, that are crucial for success, are the ability to work with new technologies and people, flexibility, and collaboration. the total index is calculated on the basis of the arithmetic mean of six criteria: market and regulatory conditions on the labour market; chances of career growth; employers’ ability to attract talents from around the world (talent attraction index); ability to hold qualified staff; industrial skills and global knowledge. according to the global talent competitiveness index in 2017, switzerland and singapore take leading positions, great britain and the united states take the third and fourth place respectively, while the nordic countries (sweden, denmark, finland, and norway) rank among top 10. ukraine took 69th place in the overall ranking among 118 studied countries (in 2016 – 66th place), including by the talent attraction index – an improvement of the position by 3 points (figure 5) (badre, 2017). ukraine is characterized by good indicators of compulsory education (35th place), high-level skills (30th place), employment (27th place). but the main problem continues to remain market and regulatory conditions in the labour market (103rd place). this indicator can be raised by improving the regulatory environment (115th place), the business environment and the labour market (87th place). as to the indicators characterizing the technological level of ukraine, they are included in the criterion “global knowledge”, which includes high-level skills and the impact of talent. by the indicator “high-level skills”, ukraine has rather high positions: by the number of researchers – 45th place, the quality of scientific institutes – 41st place, the number of articles in scientific journals – 46th place. and within the framework of the indicator “impact of talent”, ukraine takes 45th place by the indicator “innovation activity” and 86th – by “hightech export”. 0 29 24 46 23 8 67 34 16 24 5 47 19 5 66 29 0 10 20 30 40 50 60 70 80 innovators intelligent assets relations and entrepreneurship company investments financing and support attractiveness of research systems human resources overall innovation index 2017 2016 figure 4. dynamics of the indicators of the innovation index according to the european innovation scoreboard for ukraine in 2016-2017 baltic journal of economic studies 269 vol. 4, no. 3, 2018 thus, the analysis of the five ratings that assess (or take into account in the process of defining integral assessments) the innovation of the economies of individual countries of the world shows that the formation and implementation of innovative potential and the implementation of innovations in ukraine are characterized by low indicators. as a rule, such prerequisites for innovation development as human capital, education, and science are assessed relatively high (although there are problematic aspects in these areas over which one must work hard). stable low assessments (which stipulate the overall rating of the country) have political factors, the state of the regulatory environment and institutional preconditions for the transition to an innovative way of development. 6. conclusions in order to increase the innovative capacity of the country’s economy and within the framework of european integration processes in the field of innovation policy, ukraine needs to engage in major initiatives, which are implemented in the eu countries by 2020, namely (2): improvement of the framework conditions for innovation activity (accelerating the development of new standards for new products, application of demandoriented policies, etc.); implementation of innovative partnerships, for example, related to the development of bioeconomics, developing future-oriented technologies, etc., in order to reduce fragmentation of the efforts between stakeholders at european, national, regional levels and the private sector in overcoming public problems; strengthening the means to support innovations (engagement in more active use of structural funds, 66 61 40 56 72 97 91 69 53 66 54 64 94 103 0 20 40 60 80 100 120 global competitiveness index of talents global knowledge industrial skills of employees ttalent holding index chances for career growth talent attraction index market and regulatory conditions on the labor market 2017 2016 figure 5. dynamics of the basic criteria of the global talent competitiveness index for ukraine in 2016-2017 rural development programs, research framework program, strategic plan for energy technologies, etc.) and simplification of the administrative procedures to facilitate access to financing, especially for small business entities, and implementation of the incentive mechanisms for carbon market-related innovations; stimulation of the formation of partnerships and links between education, business, science, and innovations and stimulation of entrepreneurship by supporting young innovative companies. in ukraine, these tasks should be transformed into concrete initiatives, in particular: acceleration of development and implementation of “innovation laws”, in particular, the updated versions of the laws “on innovation activity”, “on technology transfer”, etc., which should provide for simplified procedures for creation of innovative start-ups, distribution of revenues from the sale of innovative products and introduction of a system of public procurement of innovation products. in ukraine, the volume of public procurement varies quite strongly, when it was about 250 billion uah in 2014, in 2015 it made only 112 billion uah. in 2016, the volumes amounted again to over 250 billion uah. thus, when establishing 2% of the level of procurement “innovation” – in addition to the scientific-technical and innovation sphere, it is possible to direct at least 2 to 5 billion uah. review of the list and contents of the existing scientific and technical programs for deeper consideration of the world tendencies and their adaptation to the needs of the national economy; development of a monitoring system for innovation activity, which would be based on the use of indicators of the european innovation scoreboard. the first successful settlement attempt was made in 2016, but the indicators of baltic journal of economic studies 270 vol. 4, no. 3, 2018 the scoreboard change periodically requiring appropriate changes in domestic statistics. furthermore, additional indicators should be introduced for monitoring, in particular, the level of use of iso standards by domestic companies. standards open access to external markets, the indicator is a circumstantial evidence of the level of conformity of products manufactured in ukraine, the needs of international markets. at present, ukraine has very limited opportunities to join the funds of the eu structural funds. this applies only to cross-border cooperation. it is necessary to start negotiations with the eu on a wider access to such funds, possibly in the context of expanding the eu’s eastern partnership activities. for participation of ukrainian organizations in joint research programs, there continue to be artificial restrictions on the use of foreign exchange funds, which in fact make it impossible to participate in such projects as a coordinator. the implementation of financial incentives for the development of innovation should be careful. on the one hand, the association agreement encourages the development of free competition without providing special preferences to national companies. on the other hand, according to the dynamics of implementation of such incentives in the countries of the organization for economic cooperation and development, their range and scope are constantly increasing: if only 17 countries out of 34 had implemented them ten years ago, in 2016 the number of countries was 27. in the field of research and development (as a part of innovation activity), the opportunities for implementation of the incentives remain significant (there are no contradictions with eu legislation). as to innovative products, it is necessary to introduce pilot projects that will answer the question of how these initiatives will “fit” into the country’s legislative system and interact with other legislative and regulatory acts including international ones. references: badré s. 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(2018). ukraina za rik vtratyla chotyry pozytsii v hlobalnomu innovatsiinomu reitynhu bloomberg [ukraine lost four positions in the global innovation rating of bloomberg fund media in a single year]. fund media (electronic journal). retrieved from: https://kfund-media.com/ukrayina-za-rik-vtratyla-chotyry-pozytsiyi-vglobalnomu-innovatsijnomu-rejtyngu-bloomberg/ (accessed 04 july 2018) pozytsiia ukrainy v reitynhu krain svitu za indeksom hlobalnoi konkurentospromozhnosti 2017-2018 (2017). [position of ukraine in the world ranking according to the global competitiveness index 2017-2018]. ekonomichnyi dyskusiinyi klub. retrieved from: http://edclub.com.ua/analityka/pozyciya-ukrayiny-v-reytyngu-krayin-svitu-zaindeksom-globalnoyi-konkurentospromozhnosti-2 (accessed 10 may 2018) schwab к. (2017). the global competitiveness report 2017-2018. 380 р. retrieved from: http://www3.weforum.org/docs/gcr2017-2018/05fullreport/theglobalcompetitivenessreport2017-2018.pdf (accessed 11 july 2018) baltic journal of economic studies 137 vol. 5, no. 1, 2019 corresponding author: 1 uzhhorod national university, ukraine. 2 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-137-142 economic and legal aspects of the franchise agreement in poland petro nemesh1, vitalii kadala2 abstract. the purpose of the article is to study the economic and legal nature of the franchise agreement in poland. since franchising in this country has become the most common way of establishing a business, it is advisable to identify the key economic and legal features of the franchise agreement in which the parties specify their rights and obligations, the franchise price, the duration of the franchise relations, the procedure for performing calculations, etc. the subject of the study is a franchise agreement in poland. research methodology. the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method allowed us to investigate the definition of a franchise agreement in poland and its key terms. the comparative legal method was used to compare doctrinal approaches to this issue. the statistical method was used to establish data that reflects the effectiveness of franchising activities. the method of system analysis helped to find out in which areas of economic activity franchising is most demanded. interpretation of the content of polish legal acts governing issues related to the conclusion of a franchise agreement in this country was realized with the help of the normative-dogmatic method. the system-structural method was used to study the franchise agreement in poland as a single entity (system) with the coordinated functioning of all its elements. the methods of grouping and classifying formed the basis for separating the list of conditions, which are necessary for concluding a franchise agreement in poland, as well as provisions that should be included in the content of this agreement. methods of analysis and synthesis helped to study some parts of this agreement to formulate further conclusions. practical application. the positive experience of poland in regulating issues related to the conclusion of a franchise agreement can be used for making appropriate changes to the ukrainian legislation. although there is no special legislation in poland, which regulates the issues connected with this kind of contract, the adoption of a number of progressive economic measures, as well as complement existing regulations with the provisions on franchising, allowed poland to become one of the most attractive countries for foreign entrepreneurs. correlation/originality. this scientific work is the first research in ukraine devoted not only to general issues of regulation of franchising activity in europe but specifically to the franchise agreement in a separate country (in poland) and its legal and economic peculiarities. key words: franchising, franchise contract, franchisor, franchisee, disclose, contract terms, antitrust agreements, safe harbour. jel classification: k12, f55 1. introduction franchising is a form of entrepreneurial activity that is constantly growing and has become increasingly widespread and effective in recent years. big companies are increasingly using the franchising system to expand their network, which has proven its suitability worldwide. franchising is applied in almost all areas of business – from fast food restaurants to gas stations. franchising is a widespread way of opening a business in poland. over the past 15 years, this country has achieved significant economic success by modernizing the economy and stabilizing it. poland is one of the fastest developing countries in europe. this fact is confirmed by various market indicators, such as gross domestic product (gdp), consumer price index, labour market structure, competitive wages and dynamic foreign trade turnover. with gdp growth of 4.6% in 2017, poland remains among the leaders of european countries. in the same year, the eurozone has been growing by 2.5% and the whole eu – by 2.5% (polish franchise organization). costs of conducting business in poland are significantly lower than in western europe. moderate labour value is also an attractive factor for foreign investors. although the economy of this state is not yet in line with the economies of other european countries, baltic journal of economic studies 138 vol. 5, no. 1, 2019 eu membership has played an important role in its strengthening. in recent years, more and more foreign entrepreneurs (including from neighbouring ukraine and cis countries) invest money into a stable economy of a rapidly expanding polish state. foreign franchises are developing successfully in the polish market. according to expert appraisement, more than 10,000 franchise companies are launched annually in poland. polish businessmen perceive franchising as a safe business concept. the number of “multifunctional franchisees” (entrepreneurs who own more than one branch) is growing, which is evidence of a high level of confidence in the franchising system. most entrepreneurs prefer to develop their business in already proven and demanded industries. in this regard, a large part of the franchises polish market is occupied by grocery stores. high growth rates are also observed in the service sector. especially popular are franchises related to providing professional advice and legal support. national franchises occupy more than 85% of the market in poland. polish franchises are also successful in other countries, for example, in ukraine, russia, the czech republic, as well as in other countries of central and eastern europe. the study of franchising as a type of international business was undertaken by n. v. bezrukova, l. v. voroniak, t. m. hryhorenko, n. m. hrushchynska, o. m. kolodiziev, o. ye. kuzmin, a. m. mahomedova, v. ye. sakharov, v. s. tatarinov, t. m. tsyhankova, a. v. tsyrat, i. m. shkola and others. however, this would be the first study in ukraine devoted to franchising in poland, and in particular, the economic and legal characteristics of the franchise agreement in this country. in connection with the course of ukraine on european integration, it is reasonable to study the positive experience of leading european countries for its further application to the legislation of our state. therefore, the purpose of this article is to study economic and legal characteristics of the franchise agreement in poland – the state with a fully-developed franchising market which is constantly growing, and that has been achieved only in the last 15 years. 2. statement of the baseline the polish franchising market is mature but is steadily growing. local entrepreneurs are aware of many potential alternatives that allow them to decide on future prospects for franchising. according to the private franchising consulting company profit system, in 2017 the polish franchise sector covered 1,220 independent franchise networks and more than 71,400 franchise stores and service sectors. franchising is one of the fastest growing options for small private firms. according to the data, the average franchise “employs” 5-6 people, and this sector as a whole provides 460 000 jobs in poland. the average investment in a franchise in 2017 amounted to usd 40,000. most of the franchise networks – 85% – originated in poland. the largest franchising sector with 204 brands is gastronomy. the leading brands are kfc, starbucks, pizza hut, dunkin’ donuts, subway, and mcdonald’s. it is followed by retailing with 156 retail brands and 36,000 licensed locations (poland country commercial guide). the largest polish players on the franchising market are wholesale company eurocash group, convenience stores chain zabka, spirits stores chain al capone, boutiques of women’s underwear esotiq, getin bank and bph bank, the largest network of payment agencies monetia, retail store lpp group, retail cosmetics sales company inglot, courier service pl, street food network kołacz, the first network of training centres lauren peso polska sa, petrol stations network lotos, and restaurant chain sphinx (maciej gawroński, 2015). one of the fastest growing trends is online sales, especially in the food and retail sectors. online ordering of products is becoming popular in poland nowadays. for example, uber eats is available in poland as well. local catering companies such as blue apron also appear. companies, which are members of polish franchise organization (pfo) use the european code of ethics for franchising (hereinafter – the code of ethics), adopted by the european federation of franchising, which member poland is. membership in the pfo is not mandatory, but it is recommended. the advantages of membership in the pfo are, among other things, quick and more favourable opportunities for cooperation with reliable franchisees. members of the pfo also enjoy a better reputation among franchisees since they receive a certificate of trust when joining the organization, which is a confirmation of the quality of the networks and their compliance with the requirements of the code of ethics. there are no clearly defined rules and regulations, which regulate franchising activities in polish law. this also applies to franchise agreements, which are mostly concluded in accordance with the provisions of the contract law. the rules governing franchising activities are contained, among others, in: the civil code; the consumer protection law; the competition law; general data protection regulation; the labour code; unfair trading practices. in addition, polish courts establish certain legal features for regulating the relationship between the franchisor and the franchisee in their decisions. thus, the supreme court of poland in the case № i csk 348/06 as of 07 july 2007, has decided (in accordance with previous decisions of the civil court, administrative court and competition court) that the essence of the franchising method of cooperation is to contractual obligation of baltic journal of economic studies 139 vol. 5, no. 1, 2019 the franchisor to allow the franchisee to use the mark, emblem, symbols, patents of the company, as well as technical and organizational know-how (concept), while the franchisee obliges to perform the specified entrepreneurial activity using the right of obtaining new customers (to open new outlets), which was provided to him by the franchisor. the supreme court also found that one of the main goals of franchising is to gather information about the market where the franchisee will develop franchising business and optimize sales processes. in addition, the decision stated that during the term of the franchise agreement, the franchisee operates and concludes contracts sui juris with new partners and also acquires new retail outlets. finally, the supreme court confirmed that the franchise agreement is a longterm and reciprocal agreement, according to which the franchisor’s mutual obligation cannot be assessed in terms of equivalence (franchise, 2019). there is no legal definition of the franchise agreement in poland, that is, it belongs to unnamed contracts. it is subject to the general principles for the conclusion of contracts, which are prescribed in the civil code of poland (hereinafter – the civil code) (ustava z dnia 23 kwietnia 1964). for example, section 7 of this normative legal act consolidates the principle of integrity, which is presumed. the principle of freedom of contract is prescribed in section 351-1. according to this principle, the contracting parties may establish legal relations at their own discretion, if the content or purpose of the agreement does not contradict the rules of the statutory law or the basic principles of community life. the principle of community life (zasady współżycia społecznego) is reflected in section 5 of the civil code. on the basis of this principle, any legal act may be declared void if it does not meet the minimum standards of generally accepted notions of honesty and correctness in relations with individuals and legal entities (that is, if it is substantially unjust). concerning the relations between entrepreneurs, the principle of community life should be understood as the principle of “fair treatment” (zasady uczciwego obrotu), reliability, decency, trust and loyalty to the contractor. each entrepreneur should refrain from any action, which would be a sign of a lack of respect to their contractors’ interests and/or would cause injury in their interests (franchise, 2019). the franchise agreement contains the features of various types of contracts, such as: purchase, sale, supply, licensing, lease, commission, agency, and labour. in the scientific literature, when conducting the characteristics of the subject of the franchise contract, the specified contracts are often mentioned. such comparisons with other agreements that are similar in structural or functional terms are due to the lack of special regulation in polish law. the franchise agreement must be concluded in accordance with the norms of the national legislation, the laws of the european community and the requirements of the code of ethics. it is important that it reflects the interests of all members of the franchise network. it concerns both the protection of the franchisor’s industrial and intellectual property and the preservation of the image and reputation of the franchise network (anna stronczek). m. gawroński defines the franchise agreement as an agreement between independent entities, under which the franchisee is directly or indirectly obliged to resell goods that have been bought from the franchisor and to use intellectual property rights and know-how that have been licensed from the franchisor. however, as the author notes it by herself since this definition is too broad, it is better to apply a narrower definition given by the european federation of franchising (maciej gawroński, 2015). in practice, the definition given in paragraph 1 of the code of ethics (european code of ethics for franchising) adopted by the european federation of franchising is used. according to this definition, franchising is a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent undertakings, the franchisor and its individual franchisees, whereby the franchisor grants its individual franchisee the right, and imposes the obligation, to conduct a business in accordance with the franchisor’s concept. the right entitles and compels the individual franchisee, in exchange for a direct or indirect financial consideration, to use the franchisor’s trade name, and/or trade mark and/or service mark, know-how, business and technical methods, procedural system, and other industrial and/ or intellectual property rights, supported by continuing provision of commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between parties for this purpose. the law does not impose any restrictions on the franchisor’s organizational form, but the most widespread organizational form in poland is a limited liability company. other popular forms of entrepreneurial activity are: general partnership, joint-stock company, the limited partnership and the limited joint-stock partnership. over the past few years, there has been a significant increase in the number of limited liability companies. this is due to the convenient system of taxation since only the income of the members of the company is subject to taxation, and not the income of the company itself. many individuals in poland choose an individual entrepreneurial activity. their part accounts for 73% of the total number of entrepreneurs in the private sector. foreign investors open branch offices in poland, through the intermediary of which they conduct their business in poland in the same way as they do in their home countries. since more than 85% of franchise networks in poland are local, the most popular is that type of franchising which does not require a significant initial investment. baltic journal of economic studies 140 vol. 5, no. 1, 2019 the civil code does not stipulate for the binding obligation to disclose information before concluding a franchise agreement, as it is provided in most other european countries. in practice, many franchisors do not disclose information or disclose it in very limited terms. it is the potential franchisee who can demand, request, and investigate certain information from relevant sources and evaluate it in terms of equivalence. however, it is allowed to provide directly in the provisions of the franchise agreement that nonperformance of certain actions (for example, disclosure obligations) gives a franchisee the right to cancel the contract and/or demand damages. otherwise, the general rules of the civil law for compensation are applied, and a franchisee will be obliged to prove the existence of damages in order to claim compensation. also, according to the general principles of contractual law, one party has the right to rescind a reciprocal contract (for example, a franchise agreement) if the other party fails to fulfil its obligations (section 492 of the civil code), or demand that the obligation be performed and that any damage resulting from the default be remedied (section 491, paragraph 1 of the civil code). since there is no statutory disclosure obligation in poland, the standard franchise agreement does not usually include any provision for data disclosure. however, the contract, as a rule, contains the provision about the refusal to provide such data, which is an effective means to protect franchisee’s rights. so, in the case of non-disclosure of important information or providing false data, which is necessary for the effective business process, the franchisee will have a legitimate reason to rescind the franchising agreement. the franchisee may rescind the contract, even if the information hidden by the franchisor is not substantial. the franchise agreement can be terminated within a year from the detection of the false nature of the information provided. there is a prescription for the protection of confidential information that may be provided during negotiations in section 72-1 of the civil code. so, if, during negotiations, a party makes information available with a stipulation of confidentiality, the other party cannot disclose or submit the same to other persons or use the same for its own purposes unless the parties agree otherwise. in case of non-performance or improper performance of this obligation, the entitled party may demand that the other party remedy any damage or hand over any benefits, which it has obtained. the civil law of poland does not provide for essential terms of the franchise agreement. according to section 72 the civil code, if the parties hold negotiations in order to execute a specific contract, the contract is executed when the parties reach an agreement on all the provisions, which were the subject of the negotiations, that is, the parties determine the terms of the future contract at their own discretion. nevertheless, paragraph 5.4 of the code of ethics contains a list of conditions that is advisable to include in the content of a franchise agreement. the validity of the franchising agreement is not legally binding, as the parties, as it was already noted, are free to agree on the terms of the contract. the maximum permitted duration of the agreement will depend on whether it contains any provisions restricting competition (for example, the provisions on territorial exclusivity). moreover, the maximum allowed validity of such clauses (if any) will depend on whether the block exemption automatically applies in accordance with the block exemption regulation (ber), adopted in accordance with section 101, paragraph 3 of the treaty on the functioning of the european union (commission regulation). thus, if the franchise agreement contains restrictive provisions, it may be exempted from the prohibition of the conclusion of antitrust agreements if the total market share of competitors in the relevant market does not exceed 5 per cent, or the market share of each non-competing entity in the relevant market does not exceed 10 per cent. this provision is called the de minimis principle, but it does not generally apply to franchise agreements, as they usually include provisions aimed at market sharing between the parties. if the de minimis principle cannot be applied, the franchise agreement may be exempted from the prohibition in accordance with the ber , which apply only to contracts that do not contain certain types of severe restrictions of competition, and the market share of the franchisor and franchisee in the relevant market does not exceed 30 percent (clause 8 of the ber). if market shares of the parties to the agreement in the relevant market exceed, or if the franchise agreement contains hard-core restrictions, such an agreement falls under the ber regulation. however, the parties are entitled to apply for an individual exemption if they prove that their franchising network is more profitable than the effect of anticompetitive rules in the relevant market. in this case, the burden of proof lies on the entities (maciej gawroński, 2015). if the agreement contains a clause requiring the franchisee to acquire at least 80% of the corresponding product from the franchisor or its assigned supplier or other terms restricting competition, then the maximum term of such conditions is established within the limits of “safe harbour” of the relevant clause on block exemptions applied. the clause on the automatic application of a “safe harbour” for non-competition clauses (e.g. exclusive supply provisions) may be provided by the parties in the content of the franchise agreement if they hold a market share of no more than 30% in the relevant market. the term of such an agreement is five years or is equal to the duration of the franchisee’s rent of premises, which is the property of the franchisor. baltic journal of economic studies 141 vol. 5, no. 1, 2019 in order to protect the franchisor’s know-how, the parties may put in the contract the clause on noncompetition, the validity of which cannot be more than one year after the termination of the agreement. during this period, the franchisee obliges not to conduct any transactions with goods which are similar to that provided by the franchisee in the premises where the franchisee worked during the term of the contract. if the franchisor transfers to the franchisee know-how, which is not a public domain, then the parties may stipulate for the clause on non-competition for a longer period (franchise, 2019). a franchise agreement is a long-term contract, which is concluded for a limited period (from five to twenty years). the civil law provides for two options to terminate the agreement before its expiration: termination upon notice and rescission. thus, it may be stipulated that one or both parties will have the right to rescind the contract during a specified period. this right is exercised by a declaration being made to the other party (section 395, paragraph 1 of the civil code). if the right to rescind is exercised, a contract is deemed not to have been executed. w hatever the parties have already provided is returned unchanged unless the change was necessary as a part of ordinary management. the other party is entitled to appropriate remuneration for the services provided and for using a thing (section 395, paragraph 2 of the civil code). termination upon notice is applied for termination of contracts concluded for an indefinite period. a contract can be terminated only upon notice ex nunc, which means that the notice is valid only for the future and not the past. as a rule, termination upon notice applies only to the relation expended in time. generally, there is a notice period after which the agreement terminates (it might be a contractual, statutory or a customary term period). if such period is not stipulated, the contract is considered to be terminated immediately on receipt of the notice (maciej gawroński, 2015). rescission is the means to protect parties’ interests from the breach of contract terms. thus, if one of the parties defaults in the performance of an obligation under a reciprocal contract, the other party may set an additional period for its performance with the sanction that if the specified period passes to no effect, it will be entitled to rescind the contract. if the right to rescind a reciprocal contract is stipulated for non-performance of an obligation within a strictly specified period, the entitled party may, if the other party defaults, rescind the contract without setting an additional period. the same applies where the performance of an obligation by one of the parties after the period set would be meaningless to the other party due to the nature of the obligation or due to the purpose of the contract intended by it and known to the defaulting party. that’s why it is recommended to include the provisions on the conditions of franchise agreement termination to avoid the risk of a dispute between the parties. 3. conclusion based on the foregoing, we can conclude that there has been a rapid development of franchising activities in poland in recent years and its popularity is constantly increasing. most franchise networks (about 85%) are polish, but foreign franchises are also developing successfully in the market of this country. almost 100 new franchising networks and several thousands of licensed companies are founded every year. foreign investors are attracted by a stable economic situation and lower, compared with other european countries, labour costs and modest business expenses. relations between the franchisor and franchisee are regulated by a franchise agreement, which in poland belongs to unnamed treaties, that is, those which are not provided for in the civil code of the state. therefore, a franchise agreement is concluded in accordance with the norms of the national legislation, the laws of the european community, and the requirements of the code of ethics. there is no legally binding obligation to disclose information before concluding a franchise agreement in the civil code, as it is imposed in the legislation of most european countries, but such an obligation could be stipulated in the provisions of the treaty itself. this is an effective means of protecting the rights of the franchisee in the case of non-disclose of the important information or providing false data by the franchisor. polish civil law does not also provide for essential terms and conditions of a franchise agreement, so the parties determine them at their own discretion in accordance with the recommendations provided in the code of ethics. the validity of the franchise agreement is not legally determined; however, the maximum allowed duration of the contract will depend on whether it contains any provisions restricting competition. a franchise agreement is a long-term contract, which is concluded for a limited period, or for an indefinite period. the civil law provides for two options to terminate an agreement before its expiration: termination upon notice and rescission. it is recommended to include in the contract the provision on the conditions of franchise agreement termination. the franchise agreement can be renewed by the mutual consent of the parties. in the case of franchisor’s refusal to continue cooperation, a franchisee does not have the right to demand compensation. theoretically, a franchisee could potentially claim unjust enrichment or breach of principles of community life, but practically it would be very difficult to prove (franchise, 2019). baltic journal of economic studies 142 vol. 5, no. 1, 2019 references: polish franchise organization. poland – country of chance. url: http://franchise.org.pl/poland-country-ofchance2 poland country commercial guide. poland – franchising. url: https://www.export.gov/article?id=polandfranchising maciej gawroński (2015). poland. the franchise law review. edition 2. law business research ltd, london. franchise 2019. poland. url: https://iclg.com/practice-areas/franchise-laws-and-regulations/poland ustava z dnia 23 kwietnia 1964 r. kodeks cywilny (dz.u. 1964 nr 16 poz. 93). url: http://isap.sejm.gov.pl/ detailsservlet?id=wdu19640160093%20-%d1%81%d0%b0%d0%b9%d1%82 anna stronczek. insights into franchising in poland: a review of empirical and theoretical perspectives. url: https://www.researchgate.net/publication/316879162_insights_into_franchising_in_poland_a_review_ of_empirical_and_theoretical_perspectives european code of ethics for franchising. url: http://www.eff-franchise.com/data/eff%20code%20of%20 ethics%20for%20franchising%20-%20final%2007122016.pdf commission regulation (eu) no 330/2010 of 20 april 2010 on the application of article 101(3) of the treaty on the functioning of the european union to the vertical agreements and concerted practices categories. url: https://eur-lex.europa.eu/legal-content/en/all/?uri=celex%3a32010r0330 baltic journal of economic studies 56 vol. 4, no. 4, 2018 corresponding author: 1 odessa i.i. mechnikov national university, ukraine. e-mail: viktoriyaborshch@gmail.com orcid: https://orcid.org/0000-0001-9106-9078 2 vasyl stefanyk precarpathian national university, ukraine. e-mail: romanwur@ukr.net orcid: https://orcid.org/0000-0001-9945-3939 3 odesa i.i. mechnikov national university, ukraine. e-mail: anyuta@te.net.ua orcid: https://orcid.org/0000-0001-9983-8943 doi: https://doi.org/10.30525/2256-0742/2018-4-4-56-61 motivation and stimulation mechanism of medical staff in developing countries: main challenges and ways of its improving in ukraine viktoriia borshch1, roman shchur2, oleg chuvakov3 abstract. the main purpose of the article is to propose the effective instruments of motivation and stimulation of the medical staff within the modern healthcare reform in ukraine. in the article, the main problems and challenges of the stimulation and motivation process of the medical personnel in ukraine are viewed. the theoretical basis of the motivation process is considered. this article analyses the approach of the differentiation of the “stimulation” and “motivation” categories. the point is stressed that motivation’s main goal is a state change in the medical organization from the point of view of personnel management, and the stimulation is directed to confirming this state. so these two processes are the part of one strategic mechanism of the personnel management and should complement each other. the current situation in the labour market of the healthcare sector is examined. the main issues of this market are defined. and on the basis of the specified problems, the instruments and methods of stimulation of medical staff are proposed by the author. the system of grids as the part of the financial and monetary incentives at the medical establishment is offered with the purpose of its medical staff ’s activity improvement. the practical importance of the scientific research results lies in detailing the motivation and stimulation process and its detailed analysis from the point of view of the healthcare sector, which is important for the further development of the healthcare sphere in ukraine. methodology. the methodological basis of the article is the complex of methods, including methods of scientific cognition, analysis and synthesis, systematization and scientific abstraction. the informational basis of the conducted research is the scientific works of the domestic and foreign scientists in the sphere of management and organization of health care, the statistical data of the state statistics service of ukraine, legal and regulatory documents of the ministry of health of ukraine. results. the proposed mechanism of medical staff ’s motivation and stimulation allows solving the problems related to the shortage of the medical staff, the quality of their activity and their performance improvement etc. further research directions are aimed at the study of all aspects of managerial capital formation and improvement in the healthcare field. key words: stimulation, motivation, medical staff, remuneration of medical staff, system of grids, health care system, medical reform. jel classification: j33, i18 1. introduction the reformation of the healthcare sector has been taking place in ukraine for more than 20 years. in the beginning, this reform was based on the implementation of a new economic mechanism, based on the model of insurance medicine. unfortunately, one of the main goals of medical reform – economic interests of the medical staff for the results of their activity – still has not be realized fully. and without a solution to this problem, even while using the goal-based method of planning and sufficient healthcare funding, it is impossible to reach the target figures of effectiveness and performance of the sector. since the mid of 2017 the medical reform has got the new vector, consisted in the implementation of the medical institutions’ autonomization and “money goes for the patient” principles. such principles should finally decide the problem of the physicians’ remuneration but not all the staff of the medical institution. baltic journal of economic studies 57 vol. 4, no. 4, 2018 medical staff and, first of all, physicians, is the main resource of the health facility. it is they who provide the performance of the medical institutions’ activity. however, it is possible only in the conditions of the evidence-based system of labour stimulation and motivation, which has very low development level in ukraine. unfortunately, the modern medical reform still has not proposed the adequate mechanism of payroll formation and has not recommended the instruments of the optimal motivation and stimulation of the medical staff ’s activity. in that regard, study of the motivation instruments, identification of the motivational factors, formation of the effective model of stimulation, analysis of working conditions of physicians, and search for the best methods of motivation in the system of remuneration is the most actual while studying the issues of improving the provision of health care to the community. the goal of this article is to propose effective motivation and stimulation instruments of the medical personnel taking into account the current reformation of the healthcare sector. methodology. such scientific methods, as analysis, synthesis, compilation, and scientific evidence, were used during the research. the scientific works of domestic and foreign scientists in the sphere of healthcare management and organization, statistical data of the state statistics service of ukraine, legal and regulatory documents of ministry of health of ukraine were used as the informational basis for the conducted research. 2. the main challenges of the personnel management of health care system in ukraine current situation of the personnel management of the healthcare sector in ukraine is characterized by two significant problems: i. the remuneration of the social workers in ukraine, including the medical staff, is low. positive variation in wages has not been seen in recent years. the revised salary scale in the healthcare segment resulting from the survey is 60-70% lower than industrial one, and as of june 2018, the average wage in the healthcare sector is 3,720 uah or $142 (in comparison with the average wage of physicians in the usa, which is about $150,000 per year or $12,500 per month, or with the average wage of physicians in the eu, which is about 80,000 euro per year). such a situation exists because underfunding of payroll amounting to 16,000 million uah takes place in ukraine. as the source (“zаrplаty likariv”, 2018) has claimed, the budget for the healthcare sector in ukraine in general is about 113,923,655,500 uah (3,5% of gdp of ukraine), but in doing so the national system of health care should have the budget not less than 5% of gdp for the proper functioning, on the recommendations of who. thus, the wish of the medical staff to receive additional income from the patients could not disappear since there is not an adequate system of stimulation and motivation of their labour. experience has shown that informal remuneration in ukraine, into the hands of the medical staff, is widely disseminated in ukrainian healthcare sector. not only does this undermine physicians’ image but, more ominously, it hurts household budgets. the main reason for such informal payments’ existence in the healthcare sector is the low level of remuneration of medical staff. in public health institutions in the sphere of medical services, there are not full economic relations. this led to that the domestic health administration was built and continues to be managed on the principles of the administrative model. healthcare field’s funding and the activity of the health treatment facilities are carried out on the basis of standards, which are defined for each medical institution by public administration bodies. in such conditions, there is no system of appraisement of labour results, motivation, and economic incentives. the health care system works on the principles of hourly wage, which has several substantive shortcomings. the remuneration of the medical institutions is based on the single wage grid taking into account all copayments. such a wage system is fixed, does not depends on the volume and quality of conducted activities. in accordance with an hourly wage, to the medical staff must be paid the wage, even if they have not carried out the certain scope of work. imagine the situation. two physicians with the same experience and qualification work in the same conditions. one physician is highly qualified, to whom there are about 30-30 appointments of the patients per day. and the other one does not work hard, he has about 10-15 patients per day. in accordance with the single wage grid, both of them receive the same wage. eventually, the first physician will rebuild new behaviour that it is not necessary to overstress at work because it won’t change his remuneration. that is, in the above-shown situation one of the most important functions of remuneration system – stimulation – does not work, so the employer does not have the possibility either to encourage or to sanction his/her employees. consequently, the quality of the medical assistance declines because the wish to give greater efforts to the treatment process disappears. ii. there is the significant shortage of specialists at the primary, secondary, and tertiary levels of the healthcare sector. in this, the specialists staffing is disproportionate at the rural and urban districts. thus, in the regional centres, where is the medical high schools, the rate of the staff capacity and staffing rate accounts for about 90-100%. in the cities, where there is no medical school, the rate of medical specialists in the central district hospitals, accounts for about 70-90%. however, the stuffing problem is solved there by the way of the holding by specialists of several positions. the shortage baltic journal of economic studies 58 vol. 4, no. 4, 2018 of endocrinologists, anaesthetists, paediatricians, radiologists, infectious disease specialists, tuberculosis specialists, pathologists, ophthalmologists, urologists, and other physicians is the common situation for the regions, where there are no medical schools. in rural areas, the stuffing problem is more sufficient. the rate of medical specialists of general practice and other specialists is less than 70%. generally in ukraine at the secondary level, there is the lack of medical personnel of about 10% of specialists of different directions; at the primary level, the lack is about 30% of general specialists. in this, there is the significant share of medical staff, namely physicians, of retirement age. in some regions of ukraine, their rate accounts about 40% of total staff. for example, according to the approximate calculations, in vinnytsia region, there are 28% of the physicians of retirement age at the primary level, 23% on the secondary level, and 19% at the tertiary level. and most of the staff is the people more than 65. such a process of ageing of the staff influences the quality and speed of the medical services provision that is characterized by the use of the outdated methodology, algorithms of medical services provision and technologies, lack of the interest to get new knowledge and to develop, so on. the main reasons for the shortage of specialists in the healthcare sector are the following: 1) disproportionality and inadequacy of the medical staff ’s wage level in comparison with the volume and quality of provided medical assistance, on the one hand, and on the other, in accordance with the specialists from the industrial and other spheres of the economy; 2) the lack of state support for young specialists in the healthcare sphere; 3) insufficient financial support for rural health care; 4) low level of the material and technical and regulatory bases of the medical institutions; 5) undeveloped infrastructure generally all over the country; 6) bad social and living conditions of the medical staff (for example, lack of accommodation) and lack of state interventions for their improvement; 7) problems with the professional development of the medical staff; 8) ageing of the medical staff, i.e. the specialists of retirement age hold the posts, which could get the young physicians; 9) travel abroad of the specialists for work (the most intensive dynamics is directly after the graduation from the higher education institution). so we see that the problem of staffing of medical institutions, the formation of adequate payroll and effective system of the motivation and stimulation of medical personnel are the thorny issue. and the medical reform, conducted nowadays in ukraine, confirms inability of the system to move to the european standards of medical assistance providing and healthcare administration, and even the problem of the shortage of the personnel worsen while this reform has been conducted. before the beginning of the reformation, staffing of the medical institutions was bloated, because stuffing structure was regulated by the norms in accordance with the number of population. as provided for by the current reform, from 2020 the secondary and tertiary levels of healthcare will be financed according to the volume of actually provided medical services. that’s why it’s highly probable that the staff of medical institutions of these levels will be significantly reduced because the transition to the market relationships will lead to the specialists’ cuts or their reassignment. problems mentioned above are very painful for the ukrainian healthcare system and, first of all, are caused by the lack of adequate personnel policy in the healthcare field. that’s why it’s quite natural that the stagnation of this economic field and social welfare area is going on. the medical establishment, like any other enterprise, could bear significant losses because of inefficient wage bill administration, and labour productivity could reduce because of the unfair or non-transparent system of compensations and incentives. thus, all abovementioned problems cause the necessity of implementation of mechanisms of medical staff ’s motivation and stimulation. 3. the theoretical basis for the effective mechanism of motivation and stimulation of medical staff creation formation of the effective mechanism of staff ’s motivation and stimulation is one of the main functions of any manager since it influences the organization’s personnel in order to increase their activity, effectiveness, and productivity. it is important to define correctly categories of motivation and stimulation since these categories are interchangeable, but vice versa, they complement each other. in the scientific literature, motivation is defined as a process of deliberate choice by a person of a certain type of behaviour, which is defined by the influence of the external (incentive) and internal (motive) factors. in the course of employment, motivation allows the employees to meet their basic needs by means of completing their working duties. motivation process is presented schematically in figure 1. from the model, presented in figure 1, we can see that the motivation of the labour activity is conducted on the basis of the needs. thus, taking into account the needs of their subordinates, managers have to encourage them to the actions in order to achieve the goals. in this, individual and corporate goals must be subordinated. baltic journal of economic studies 59 vol. 4, no. 4, 2018 so, in accordance with generally accepted in management theory and practice model of motivation, the workflow and the motivation mechanism must be built individually for each employee, taking into account the true motives of employees’ behaviour. motivation process must be supported by the instruments of stimulation (remuneration). motivation and stimulation should be always in a buddle to create the inefficient mechanism of motivation and stimulation. in the scientific literature, stimulation is defined as the external encouragement to the actions that are rooted in the interest (material; moral, emotional, individual or group). internal remuneration (by which is meant motivation) is given by the work. it could be the feeling of satisfaction by the results, content or importance of the work, selfrespect, and so on. thus, the easiest way of providing internal remuneration is to create appropriate work conditions and correct formulation of objectives. at the medical establishment, the example of such instruments is the creation of appropriate working conditions due to ensuring the material and technical equipment (i.e., in accordance with indicative sheet of material and technical equipment of medical establishments, the order of ministry of health of ukraine № 148 dated 26th of january 2018), computerization, adequate vocational education and development of the medical staff, rotation, etc. inner remuneration appears not from the work but is given by the organization. from the motivation point of view, it could be defined as work stimulation and is directed to the full realization of the existing labour potential. thus, on the basis of aforesaid, motivation and stimulation translate the strategy and tactics of personnel management. motivation is the strategic line, directed on the achieving global goals, set before the employees and are coupled with corporate goals. for example, a physician seeking to rotation or enhancement of vocational knowledge by at the cost of the medical establishment, in which he works, contributes to its development due to received knowledge and skills. stimulation is the tactics in the motivation mechanism, which meets certain motives of employees (mostly, material) and allows increasing the labour productivity (i.e., encouragement by awards, premiums, bonuses, thirteenth-month bonus, bonus for overtime, flexible schedule and so on. thus, we see that motivation and stimulation are opposite in their directions: motivation is aimed at changing the current state at the organization, and stimulation is directed to its confirming, however, they complement each other. thus, for example, two medical institutions with similar working conditions use only one abovementioned instrument: the first one uses just the motivation mechanism (ensuring the required material and technical facilities, computer software of the working process, flexible work schedule, preventive medical examination of the staff, and the assessment of the workplaces), and the other one uses only stimulation (salary increases for the hard labour conditions, bonuses for overtime work, payments for the health resort at the costs of medical establishment). in the first case, measures that are used by the medical establishment are directed to improve working conditions and contribute to creating new working conditions. in the second case, the measures entrench the current situation in the medical establishment by detention personnel in it by means of material encouragement. but nevertheless, at any time in the same conditions the high staff turnover could appear in these health institutions since such processes do not take into account the interests of all categories of the personnel, they represent the separate elements of the motivation process. and for the solution of the problem of improvement of the medical services’ quality and the effectiveness of their providing, it is necessary to use an integrated approach, which considers the existence of the following types of employees: 1) employees who are focused on the content and social importance of the work; 2) employees who are focused on the labour remuneration and other material assets; 3) employees who have the balance of different values. need (lack of something) incitement (motive) behaviour (action) result (goal) full satisfaction partial satisfaction absence of satisfaction figure 1. a simple model of the motivation process source: (mescon, albert, khedouri, 1998) baltic journal of economic studies 60 vol. 4, no. 4, 2018 4. the system of grades in the healthcare sector we have to propose the system of grades as the most optimal system of remuneration. its goal is the integration of the level of responsibility, the uniqueness of the experience, knowledge and skills, results of activity of each representative of the medical staff. such a remuneration system allows unifying appropriately the motivation and stimulation instruments and building the universal job hierarchy, based on flexible levels of salaries in accordance with the volume of conducted works and provided services by the medical staff, with their internal needs, skills, and knowledge. thus, grading is a grouping of the positions for specific principles with a purpose of work standardization in the organization. the main idea of this method is the creation of the basis for the effective managerial decision-making process concerning: (1) the employees’ salaries; (2) employment benefits; (3) bonuses and extra-payments. in this, the main advantages of this method’s implementation are the principle of transparency of prospects for the medical establishment’s employees: the employee understands, what he/she must do, over what period, that his/her salary will increase (“zarplaty v medychnii haluzi”, 2014). so, the grading allows the employees to overview the possibility of changes in the salaries’ level while different career moves. for the governing body of the medical enterprise, it helps to decide about wage indexation and defining of the level of the extra-payments for new positions. for the personnel service of the medical establishment, it allows simplifying the administration of the system of the financial incentives. such a remuneration method allows encouraging the employees to the highly productive work. grading system evaluates the activities, which are conducted at each position in the establishment, on the basis of three groups of factors: 1) knowledge, qualification, and experience, which is necessary for the works execution (i.e., practical procedures, use of up-to-date algorithms, technologies and protocols of medical assistance provision, special methods and approaches, vocational knowledge, communicational skills); 2) skills, which are necessary for the problems’ solution in the medical sphere and related to the ability for the analytical and critical thinking and implementation of the innovative technologies of medical assistance provision, the complexity of the provided medical services; 3) the level of responsibility, which includes the borders, within which medical staff at this position is able to make decisions individually, frameworks of activities and the level of the individual input into the outcomes of the medical establishments’ activity and the quality of work. simplified grading methodology is the following: the position receives from the expert a certain amount of points by each factor, which is considered as the important and actual for the medical establishment. multi-hazard assessment of the activity reflects the relative weight of each position. in accordance with a received point, the job positions are counted towards a certain grade, which guarantees the certain wages or employment benefits (“zarplaty v medychnii haluzi”, 2014). it means that employees, who hold the same position, can receive the different salary. depending on the grade, more will earn that physician, who has a particular experience, has attended the upgrading courses, got particular medical categories, abides the principle of patient-oriented activity, is able to work in the team, has a significant number of patients’ appointments, and the quality of his medical services is high. the employees with the same grade (and the same salary) can occupy different positions, for example, cardiologist and the head of the department. so, the situation is possible, when the subordinate is at the same high grade, as the chief, and consequently, he will get the higher salary. it means that he is a unique specialist, who is valuable for the medical establishment. the algorithm of the grading system implementation consists of the following stages: 1. training of the working group. 2. documentation maintainer (concept, standards, etc.). 3. analysis of the activities’ context. 4. assessment of the positions (questionnaire, interviewing, etc.). 5. definition of requirements for the positions and the clarification of the factors. 6. definition of the weight of the reference works with the use of the certain method of assessment of the works’ complexity. 7. allocation of the factors by the levels (ranking). 8. assessment of each level. 9. assessment of the weight of each factor. 10. calculation of the number of points for each position. 11. allocation points by the grades. 12. definition of salaries and calculation system of remuneration. 13. analysis of the results and correction of the inconsistency. such a system explains the hierarchy of positions by the context of the activities. each position of the structure defines the requirements for each position and allows the employees to define their subordination, the degree of responsibility, the need of development (“zarplaty v medychnii haluzi”, 2014). implementation of the grading system is necessary for the big and medium-sized medical institutions and organizations since it addresses shortcomings of the previous remuneration system of the single wage grid, baltic journal of economic studies 61 vol. 4, no. 4, 2018 such as bureaucracy, non-transparency of the inner logic of tariffs and grids construction, the rigidity of the hierarchical structure. grading allows building flexibly the structure of the positions in the organization, taking into account not only the qualification and experience but also other very important factors, i.e. level of responsibility, level of works’ complexity, quality of the conducted medical services, patients’ satisfaction, etc. and for the medical staff, it gives the opportunity to understand, how their salary is formed, how can they change their salary, and what their career development will be. 5. conclusions from all of the foregoing, it is clear that there is a need for great changes in the process of the wage bill and motivation mechanism formation at the medical establishments. in our opinion, it is necessary partially to learn from the foreign experience of the developed healthcare systems, taking into account our realities and opportunities (financial, human, innovative, etc.). thus, the essential are the following measures: 1) implementation of the measures to curb corruption at all level; 2) implementation of the system of the quality appraisement of the medical services provision and creation of the special service, which goal is to implement in good faith assessment and analysis of the effectiveness and quality of conducted medical services; 3) constant and continuous development of the medical staff on the transparent and rating conditions; 4) creation of the conditions for organization and implementation of incentives and motives for the medical staff ’s encouragement, whereby the salary of medical staff must depend on the level of qualification, their input into the outcomes of medical establishment, quality of the medical services, patients’ satisfaction by the conducted medical services and medical aid; 5) increasing of the wage bill; 6) implementation of the wild system of the extrapayments and premiums (benefits for obtaining accommodation, free vacation, free upgrading. etc.); 7) improvement of the material and technical basis of the medical establishment, purchase of the modern equipment and innovative technologies with the purpose of the specialists’ motivation; 8) formation of the system of financial and social support of young specialists. the measures proposed below are not finite and it is not a panacea but, nevertheless, they must become a part of the state and local system of motivation with a purpose of the ukrainian healthcare system development. references: bіdiuk, о. о. (2009). systema hreidiv yak innovatsiina forma oplaty pratsi [a grid system as the innovative form of remuneration]. retrieved from: http://www.rusnauka.com/8_dni_2009/economics/43228.doc.htm (in ukrainian) medprosvita (2018). zаrplаty likariv, medsester ta sanitariv u 2018 rotsi nе zmіniat [salaries of the physicians, nurses and orderlies won’t be changed]. retrieved from: https://medprosvita.com.ua/zarplati-likariv-medsester-tasanitariv-u-2018-rotsi-ne/ (in ukrainian) каmskа, о., berezkina, o. & shutkevytch, o. (2018). yak utrymuvaty “kadrovyi holod”? [how “personnel shortage” must be hold?]. vashe zdorovya – your health, № 17-18 (1457-1458), pp. 16-19. (in ukrainian) mescon, m. h., albert, m. & khedouri, f. (1998). osnovyi menedzhmenta [fundamentals of management]. moscow: case. (in russian) ministry of health of ukraine (2014). zarplaty v medychnii haluzi na 60-70% nyzhchi, nizh v promyslovosti [salaries in the medical sphere is by 60-70% lower, than in productive sphere]. retrieved from: http://www.moz.gov.ua/ua/ portal/pre_20141017_g.html (in ukrainian) baltic journal of economic studies 209 vol. 4, no. 4, 2018 corresponding author: 1 kherson state agrarian university, ukraine. e-mail: marmul61@ukr.net 2 kherson state agrarian university, ukraine. e-mail: marina0108@meta.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-209-216 certification of agrarian enterprises-producers of organic products in order to enter european markets larisa marmul1, elena krukovskaya2 abstract. the objective of the article is to consider the actual issues of institutional support for the development of agrarian enterprises producing organic products in ukraine, as well as the definition of formal and informal institutions for the regulation of organic products market. methodology. while the study, the following methods were used: analytical method – to identify the basic rules and procedures for the development of organic production and the structuring of its institutional environment; synthesis method – to assess the state of development of institutes and infrastructure of the industry; abstracting and logical modelling of the system of interconnections and regulating and stimulating influences of environmental elements on the development of organic production. results. the article deals with topical issues of institutional support for the development of agrarian enterprises producing organic products in ukraine. there were established formal and informal institutions for regulating the organic products market. the features of placement and specialization of agrarian enterprises for the production of organic products are revealed. certain institutions of certification of production and products are described as separate institutions. the further prospects of development of agrarian enterprises producing organic products on the basis of improvement of institutional regulation and certification are substantiated. practical importance. the results of the study can be taken into account and used for the development of state and industry programs for the development of organic production. scientific novelty. the systematic vision of the development environment of organic production in ukraine is substantiated, which, in contrast to the existing views, is interpreted as an interconnected and interdependent set of elements regulated by managerial influences of the state and industry levels. key words: organic production, agrarian enterprises, institutional regulation, certification, market, development, improvement. jel classification: p42, d02, q13, f63 1. introduction objectively, the formation of the system of institutional provision for the sustainable development of organic production in ukraine cannot take place apart from a solution of ecological problems caused by the whole agricultural sector. the necessity of solution motivates state authorities to participate in and sign the numerous nature-protecting conventions since any subject of economic management performs in a certain institutional environment directly interacting with and effecting upon it. this is why the institutional environment formed in agrarian sector of the country in the process of transformational changes in economics and other spheres of human life activity is characterized by the influence of formal and informal institutions on the efficiency of performance of the subjects of economic management inclusive of those active in the production of organic agrarian commodities. such an influence provides for the balance of agro-landscapes and warrants for sustainable development of ecological, social, and production-economic spheres of rural territories. in our opinion, the preservation of natural resources in the process of economic management should be considered in conjunction with the necessity of promotion of resource-preserving ecologically safe technologies. the task is expected to be favoured by way of introduction of the institutions of the owners and users’ social and economic-legal responsibility for the provision of reproduction of agricultural lands fertility. as well, it is referred to the organizationaleconomic mechanism of organic agricultural baltic journal of economic studies 210 vol. 4, no. 4, 2018 production, optimization of the lands’ phytosanitary state and improvement of agro-technologies. it is due to these reasons that further economic activity in organic management is possible only within respective institutional limits. 2. current issues of institutional support for the development of agrarian enterprises with organic production in ukraine development of agrarian enterprises with organic economic management would solve problems related to the saving of natural resources, the establishment of harmless and non-waste technologies, and environmental ecological “turnover”. it must be emphasized that once there appeared an increasing demand for it, ukraine possesses great potential for the production of organic commodities, their export and domestic consumption (marmul, novak, 2016). since capable of helping to improve the financial-economic, social, and ecological state of commodity producers, organic production would add to the complex development of the agrarian sector and improvement of public health. however, the concept of “organic production” is not yet clearly defined and it is still difficult to give a clear definition of it, for, at all stages of its production, the end product does not have to change its properties and should maximally present its natural qualities to the consumer. institutional provision for the development of production of organic agricultural commodities represents a fundamental basis of agrarian nature use. it effects on interrelations between subjects of economic management and the environment and determines the nature of institutional changes in the sphere of natural resource use. institutional changes are the driving transformational-modifying processes that provide for qualitative changes within the system of agrarian resource use, as well as for the modelling of vectors of organic production development. formation and further improvement of the institutional environment for the development of organic agricultural production should rest on the social-economic and ecological interests of economic entities. it is necessary to take into account the market position in the sector and the degree of infrastructure development; legal support and protection of subjects of the organic economy; their (subjects’) provision with financial-investment and other resources; population’s demand for organic food commodities and industrial demand for organic agricultural raw materials; ways of use of and capacity to reproduce nature-resource potential; and environmental monitoring efficiency. it seems reasonable that economic entities were stimulated to implement in organic agricultural production the resource-saving and eco-safe technologies. thus, the formation of the system of institutional provision for the development of organic agriculture presupposes availability of harmonized formal and informal institutions that would determine and regulate its territorial, social, production-economic, ecological, legal, and organizational-managerial parameters. realization of organic production in ukraine shall become a success only with visible shifts in the system of fundamental moral-ethic principles, restrictions and rules, values and interests that predefine economic interaction and social responsibility of the subjects of economic management, consumers, state institutions, big agro-holdings, etc. (ihnatenko, 2015). the components of the institutional environment for organic production establish the “rules of the game” within a threefold system of social-economic, legal or political institutions of formal content and informal ideological institutions (table 1). table 1 institutions of organic economy management that provide for integration of agricultural production and nature-resource sphere institutions institutions of organic economy management formal organic standardization and certification licensing ecological audit and monitoring subsidization and penal sanctions crediting and taxation insurance and compensations legal responsibility and power informal public control education and upbringing ecological self-awareness professional self-awareness ethics and morals cultural values formal institutions contour directions of organic farming and specificities of organic production, as well as form conditions for the creation of its market. informal institutions, though represented as being an important component of the institutional environment, are poorly assessable with respect to their real influence on the development of organic production. it is in the first place connected with the fact that the period of the rise of organic farming essentially affected the agrarians and rural people’s psychology, made them change their way of thinking and mode of life, and recollect traditions of husbandry management. active representatives of rural community and entrepreneurs have become initiators of ideological and cultural changes in the process of transition to the organic type of agricultural management, and of the denial of present-day sometimes excessively intense methods of agricultural production. the consumers’ stereotypes were also broken, as well as their behaviour changed due to newly opened opportunities of leading a healthy life and eating safe food. baltic journal of economic studies 211 vol. 4, no. 4, 2018 institutional environment of organic production in ukraine is represented by such of its components as institutions called to facilitate production development and adapt it to international standards. among these, the most influential and organic-oriented institutions are as follows: “biolan ukraine”, an international public association of bio-production participants, and “naturprodukt”, an association of organic agricultural production participants. besides, the federation of organic movements in ukraine is an active participant for the improvement of the institutional environment. the latter was founded for activation of organic production in the context of consolidation of efforts by scientific and business structures interested in production and spreading of ecologically safe products cultivated and processed with a caring attitude towards the environment (chudovska, 2012). in practice, the caring attitude is expressed through the performance as follows: preservation and reproduction of the environment due to the introduction of organic technologies; assistance in the development of systems of organic and bio-dynamic agriculture for agro-producers with the use of the best national and world scientific and practical experience, and propagation of respective programs; assistance in the development of reference documents in the sphere of organic education, writing and publication of scientific-methodical literature, manuals, guidebooks, periodical editions; assistance in the formation in all regions of ukraine of the network of producers and processors of organic production who would not only develop its export but form the domestic organic market. the shaping factor of organic production’s institutional environment, taking into account its specificity, shall be represented by a system of guarantee with all totality of standards and institutions that specialize in inspection and certification of organic enterprises and their products. the organic standard is a leading institution of certification in ukraine, a state body accredited by the international federation of organic agriculture movements (ifoam). it performs inspection and certification of the processes of production, processing and marketing of organic agricultural commodities. this element of the institutional structure of organic movement development certifies organic enterprises and their production on the basis of major international standards. it should be remembered that the product is recognized as organic only when certified according to established procedure, found to comply with established standards and correspondingly marked. the product’s assessment takes place with the consideration of national and international standards that verify its conformity within all chains of the production from the point of view of its influence on the environment (andreyeva, kharichkov, 2010). there are 19 organizations in ukraine accredited to certify agricultural enterprises according to the eu legislation, and national organic producers can, therefore, export their certified commodities to the european union with no additional import approvals. however, strange as it is, such enterprises cannot be officially recognized as organic producers in ukraine since legal framework in this country is not yet modified to conform with european requirements, and no legal instruments are yet developed to establish the procedure of economic performance. institutional-legal problems encountered in the process of introduction of organic farming in ukraine require their urgent solutions and represent as follows: 1) absence of a respective legal framework, in the first place, fundamental law that would meet the requirements of international legislation with respect to the regulation of organic production and its certification; 2) absence of an efficient national system of certification and control of organic economies and their products; 3) absence of respective domestic infrastructure (associations/unions/centres of organic commodity producers); 4) necessity of integration into world structures (eu, ifoam) and getting access to world markets for organic production; 5) necessity in due informational support (popularization of organic farming technologies, ecological education of population and agricultural producers, producers’ consultative support, special trainings for managers and employees). integration of ukraine into world economics, namely, the country’s intention to join the european union, the eu-ukraine association agreement, the wto membership, the country’s activity in other world organizations and associations in conditions of intense globalization leads to increased competition in domestic and world markets. this, in its turn, necessitates the production of highly qualitative and competitive agricultural commodities, which, in the first place, are represented by the organic (ecological) products. 3. features of placement and specialization of agrarian enterprises for the production of organic products the organic trend in ukrainian agriculture is now gaining the ground and it is, therefore, essentially important that a legal framework was instilled with it. for example, the organic agricultural commodity and raw material production and turnover act that came into effect in 2014 is called to strengthen responsibility of all producers in the agrarian market since this instrument presupposes implementation of the system of control over all steps of organic commodity production (law “organic agricultural commodity and raw material production and turnover”, 2014). the act baltic journal of economic studies 212 vol. 4, no. 4, 2018 also establishes procedures of production/processing inspection and certification on the level of operators. the organic operator can be defined as a physical person or legal entity, irrespective of ownership, an organizational/legal form of activity who, keeping to provisions of ukrainian law in effect, undertakes production, processing, storage, and realization of organic commodities. we have carried out the institutional distribution of organic operators within national market according to such differential attributes as territorial belonging; organizational/legal forms of performance; field of activity; certification bodies functioning in the country; certification standards and certification status. information based on the data available from the organic market development in ukraine, a swissukrainian project. thus, as of 31 december 2015, there were 208 organic operators in ukraine, inclusive of 127 producers and 81 other operators. operators perform in ukrainian administrative region as presented in table 2. it should be noted that some operators do not give their consent for publication of their data, thus complicating analysis efforts. table 2 organic producers and operators in ukraine no. regions number of producers number of organic operators in the region (inclusive of producers) 1 vinnytsia 7 11 2 volyn 2 6 3 dnipropetrovsk 3 6 4 donetsk 2 3 5 zhytomyr 8 9 6 zakarpattia 8 12 7 zaporizhzhia 3 8 8 ivano-frankivsk 0 1 9 kyiv 16 35 10 kirovohrad 4 4 11 luhansk 0 0 12 lviv 6 11 13 mykolaiv 4 4 14 odesa 4 13 15 poltava 4 5 16 rivne 2 6 17 sumy 0 1 18 ternopil 3 3 19 kharkiv 9 10 20 kherson 19 25 21 khmelnytskyi 2 2 22 cherkasy 1 3 23 chernihiv 7 8 24 chernivtsi 1 2 25 autonomous republic of crimea 12 20 total: 127 208 source: (ukrainian organic production business reference book, 2014) as appears from table 2, organic operators are predominantly concentrated in the kyiv region (35, or 16.82% out of their total number in ukraine). among other regions-leaders in availability of organic operators we can mention kherson region with 25 operators (12.01 %), odesa – 13 (6.25%), zakarpattia – 12 (5.8%), lviv – 11 (5.29%), vinnytsia regions – 11 (5.29%), and the republic of crimea – 20 operators (9.62%). it is almost in the half of ukrainian regions, namely, ivano-frankivsk, chernivtsi, ternopil, khmelnytskyi, sumy, poltava, cherkasy, kirovohrad, donetsk, and mykolaiv regions, the number of organic operators is insignificant and varies from 1 to 5. it is only the luhansk region that features none organic operators, though the region is characteristic for great natural perspectives for the successful development of organic production due to the huge agricultural background. among organic operators, the biggest share belongs to producers of organic production whose territorial distribution is close to the same of organic operators on the whole. thus, the biggest number of organic producers is concentrated in the kherson (19, or 14.96% out of their totality) and kyiv regions (16, or 12.6%). if the organizational/legal form of economic activity is considered (fig. 1), organic operators predominantly perform as business partnerships (57.10%), and private enterprises (23.60%) where the farming economies take over the half (56.76%). operators of organic production work in different agricultural branches. some subjects of economic management are issued certificates where only one type of activity is indicated, some other were permitted to perform in two or more types of certified activity. the latter prevail since one and the same operator is capable of growing organic production, processing it, and sale in the national market or conducting export/import operations, etc. major types of certified activity are as follows: crop farming (inclusive of wild crop farming), cattle-breeding (inclusive of bee farming), processing, trade, export and import, etc. table 3 represents the territorial distribution of organic commodity producers by major branches of agricultural production. regarding the structure of the market in the aspect of the production of different organic commodities, it should be noted that organic cereals, beans, and sunflower are the most developed markets that represent major export commodity groups predominantly realized in the european market. asian countries are insufficiently represented in the export structure, though egypt and turkey, besides the eu, are the biggest importers of organic soy. world demand for the most popular groups of products predefines the formation of ukrainian organic operators’ assortment policy since up to 70% of produced organic commodities are exported (sava, sydoruk, oliynyk, dovgan, 2014), and only 30% are consumed by the domestic market. the subjects of economic management should have focused on baltic journal of economic studies 213 vol. 4, no. 4, 2018 national consumers since the national demand for organic production also increases. however, spreading of organic production in ukraine still encounters serious obstacles, which are poor assortment of presented production, insufficiently branched sales channels, the population’s low awareness, etc. thus, it is a crop farming primary production that prevails in the structure of export. further perspectives on national crop farming producers are focused on organic fruits and vegetables, these markets actively expand. on the contrary, the share of organic cattle-breeding products is rather insignificant due to inharmonious technical figure 1. organizational-legal structure of organic operators source: ukrainian organic production business reference book, 2014 table 3 territorial distribution of organic producers by major branches of agricultural production no regions n um be r o f pr od uc er s crop farming cattle breeding c er ea l c ro ps b ea n cu ltu re s ve ge ta bl es fr ui ts a nd be rr ie s technical cultures w ild c ro ps pi g fa rm in g a ni m al hu sb an dr y sh ee p br ee di ng po ul tr y hu sb an dr y b ee fa rm in g fi br ill os e su nfl ow er su ga ry 1 vinnytsia 7 + + + + + + + + 2 volyn 2 + + 3 dnipropetrovsk 3 + 4 donetsk 2 + + + 5 zhytomyr 8 + + + + + + + 6 zakarpattia 8 + + + + 7 zaporizhzhia 3 + 8 ivano-frankivsk 0 9 kyiv 16 + + + + + + + + + 10 kirovohrad 4 + + 11 luhansk 0 12 lviv 6 + + + + + 13 mykolaiv 4 + + 14 odesa 4 + + + + 15 poltava 4 + 16 rivne 2 + + + + + 17 sumy 0 18 ternopil 3 + + + 19 kharkiv 9 + + + + 20 kherson 19 + + + 21 khmelnytskyi 2 + 22 cherkasy 1 + 23 chernihiv 7 + + + + + 24 chernivtsi 1 + 25 autonomous republic of crimea 12 + + + + total: 127 source: ukrainian organic production business reference book, 2014 baltic journal of economic studies 214 vol. 4, no. 4, 2018 regulations and standards, which prevent national agricultural production from being competitive in the european market at the expense of its quality. the ministry of agrarian policy and food, ukraine, seeks for harmonization of all legal and normative parameters with respect to perspectives of organic livestock. that would allow for the export of processed products and live weight with corresponding quality confirmation. organic cattle-breeding in ukraine is represented by horned cattle, pigs, sheep, goats, and poultry. the most dynamic figures of development are featured with organic milk from horned cattle where the raw material is processed for the subsequent production of milk products. organic poultry rising is also regarded to have good perspectives in ukraine (hen, duck, goose) (klitna, bryzhan, 2013). it is also interesting to trace the institutional distribution of organic operators by certifying bodies accredited to perform in ukraine. loosely, they can be divided into two groups: those included in the official list approved by the commission of the european union (resolution (ec) no. 1235/2008 as of 08 december 2008, as revisited on 01 july 2013), and those that were not (table 4). thus, the first group performing in the national organic market includes 14 foreign certifying bodies from such countries as austria, italy, the netherlands, germany, turkey, france, and switzerland, and the only one certifying body from ukraine – the organic standard, recognized in the european union and switzerland. the second group is made up of one certifying body which is the biokontroll hungária inspection and certification nonprofit ltd. (hungary). table 4 represents how organic operators are distributed between certifying bodies. distribution refers to only 170 national operators since there is no respective official statistics with regard to ukraine. the data were taken from the open lists of organic operators available on sites of certifying bodies, and from the ukrainian organic production business reference book. it is the available information on the activity of 170 organic operators that was taken as a basis for the present study. as appears from table 4, ukrainian organic operators are predominantly certified by the organic standard ltd, a national certifying body, while the ekolojik tarim kontrol organizasyonu (etko) from turkey takes the second place. the leadership of the aforesaid certifying bodies in ukrainian organic market is explained by the fact that, according to appendix iv of resolution no. 1627/2011 as of 6 december 2011, these two companies were officially recognized by the european union and included into a list of controlling bodies that perform outside the eu borders. the situation actually allowed the organic standard ltd and ekolojik tarim kontrol organizasyonu (etko) to monopolize the market for certification of organic commodities made by producers who undertake their export to europe. the matter is that, according to new provisions of the resolution no. 1627/2011 as of 6 december 2011, the commodities that have been certified by the controlling body listed hereinabove are allowed for the export in european countries with no additional import approvals. such a procedure, in the first turn, essentially stimulates organic producers’ export activity. secondly, it aims at the enhancement of consumer’s trust in the quality of products certified by the aforesaid controlling bodies. the clients of other certifying companies active in ukraine within the studied period underwent the legislatively different procedure of export of organic production to the eu countries from third countries (novak, 2016). for example, the enterprise had to be certified by a controlling body internationally accredited according to a standard of organic production recognized by the european commission as equal to the eu standard. after the contract is signed, the importer should receive the import approval from the state competent body of his native country. according to the procedure, it should take up to 4 weeks, though, practically, it may last for 2 months. each batch of organic produce to be shipped is accompanied with the export certificate issued by exporter’s controlling body thus allowing for goods’ customs clearance as organic production. 4. further perspectives of development of agrarian enterprises with organic production on the basis of improvement of institutional regulation and certification hence, little wonder that national organic operators’ decision to cooperate with the above-stated certifying companies came from the opportunity of making use of a simplified export regime to the countries of the european union. beside operators’ differentiation by the organic product’s certifying bodies, there is no less important differentiation by the standards according to which operator’s activity itself is certified. the basic regulatory standards and rules are as follows: the eu standards – council regulation (ec) 834/2007, commission regulation (eс) 889/2008, commission regulation (eс) 1235/2008; us department of agriculture (usda), national organic program (nop); japanese agricultural standard ( jas), a japanese law concerning standardization and correct marking of agricultural and forestry products with respective provisions for organic production; and the swiss organic regulation. certification under the standard that is equivalent to the council regulation (ec) 834/2007 and the commission regulation (ec) 889/2008 is widely popular with ukrainian organic operators (over 90%). certified according to european standards, a significant number of the economic entities in the market for organic agricultural production (30%) have made additional use of the american usda national baltic journal of economic studies 215 vol. 4, no. 4, 2018 table 4 structural distribution of organic operators by certifying bodies performing in ukraine no certifying body body’s country of registration certifying body’s code certification directions number of organic operators a b c d e f according to official list approved by the commission of the european union (resolution (ec) no. 1235/2008 as of 08 december 2008, as revisited on 01 july 2013) 1 organic standard ukraine ua-bio-108 + + – + – – 95 2 institute for marketecology (imo) switzerland ua-bio-143 + + – + – + 15 3 ecocert sa france ua-bio-154 + – – – – – 0 4 austria bio garantie gmbh austria ua-bio-131 + + – – + + 3 5 sgs austria controll-co.gmbh austria ua-bio-159 + – – + – – 1 6 control union certifications netherlands ua-bio-149 + – – + – – 2 7 ekolojik tarim kontrol organizasyonu turkey ua-bio-109 + – – + – – 34 8 ceres certification of environmental standards gmbh germany ua-bio-140 + + – + – – 2 9 abcert ag germany ua-bio-137 + – – + – – 8 10 lacon gmbh germany ua-bio-134 + – – – – – 0 11 qc&i gmbh germany ua-bio-153 + – – + – – 0 12 bcs oko-garantie gmbh germany ua-bio-141 + – – + + – 0 13 bioagricert s.r.l. italy ua-bio-132 + – – + – – 0 14 icea italy ua-bio-115 + – – + – – 1 15 suolo e salute srl italy ua-bio-150 + – – – – – 2 not included to official list approved by the commission of the european union (resolution (ec) no. 1235/2008 as of 08 december 2008, as revisited on 01 july 2013) 16 biokontroll hungаria inspection and certification non-profit ltd hungary hu-öko-01 + – – – – – 7 total: 170 notes: directions of certification: а – non-processed plant products. в – living animals or non-processed animal products. с – products of aquaculture and weed. d – derived products of agricultural origin to be consumed as food. е – derived products of agricultural origin to be consumed as forage. f – planting stock and seeds. organic program (nop) and swiss organic regulation (nearly 4%) (nykytiuk, 2009). it should be noted that, according to organic agricultural commodity and raw material production and turnover act, ukraine, adopted on 3 september 2013, no. 425-vii, not all active operators of organic market have the right to mark their products with the standard-form state logo composed of the inscription “organic product” and respective graphical image. art. 29 of the said law (general requirements to marking of organic production (raw materials)) provides that the use of the standard-form state logo and marking of organic production (raw materials) is only allowed if product’s respective certificate is available. marking of products at the stage of transition to organic production is done with the use of state logo where the same words, “product at the stage of transition to organic production,” are inscribed. thus, according to certification status, 140 ukrainian organic operators (82.35% of the excerption) mark their commodities as “organic product”, 11 operators (6.47%) – as “product at the stage of transition to organic production”. and, finally, 19 operators of organic market (11.18%) feature products with no conformity to marking requirements suggested in the organic agricultural commodity and raw material production and turnover act, ukraine, and therefore, have no appropriate status. as provided by ukrainian effective laws, such commodities should be marked as common traditional products since their operators live their first year of certification. 5. conclusions the components of the institutional environment of organic production in ukraine exert somewhat multivector but predominantly restraining effect on the development of its market. among negative effects, we should mention immaturity of legal framework, in particular, that of the state system of certification, stimulation and regulation of performance of organic enterprises; poor infrastructural provision for the inspection and certification of organic production, in particular, that of scientific-research establishments that could confirm organic products’ quality and conformity to standards; poor infrastructure of organic market, in particular, with respect to its informational and marketing components. development of organic production presents itself as a counterbalance to processes of agricultural baltic journal of economic studies 216 vol. 4, no. 4, 2018 intensification; usefulness and safety of organic food is a precondition for the increase of the consumer demand, and its production is expected to become an impulse towards eco-saving attitude to the environment. ukraine has chosen the way of sustainable development where organic production serves as some alternative to traditional agriculture. to understand the specificities of the formation of a national organic production market, one should consider the question of institutional distribution of organic operators. the structure of the market for organic production to a great extent depends on the world’s organic development trends, whereas domestic operators in the market are motivated by the chance to develop its new segments, the advantages of orientation towards european standards, and the world consumer demands. besides, the popularization of organic agricultural food products within the domestic market gradually forms balanced demand and offer to be observed within the nearest future. references: marmul, l. o., novak, n. p. (2016). rozvytok orhanichnoho vyrobnytstva v ukrayini [development of organic production in ukraine]. economics of agro-production complex, vol. 9, рр. 26-32. ignatenko, m. m. (2015). stratehiyi ta mekhanizmy upravlinnya rozvytkom sotsialnoyi vidpovidalnosti subyektiv hospodaryuvannya ahrarnoyi sfery ekonomiky [strategies and mechanisms to manage development of social responsibility in subjects of economy of the agrarian sector of economics]. kherson: ailant (in ukrainian). chudovska, v. a. (2012). harmonizatsiya formalnykh ta neformalnykh instytutiv orhanichnoho vyrobnytstva [harmonization of formal and informal institutions of organic production]. balanced nature use, vol. 2, рр. 93-98. andreyeva, n. m., kharichkov, s. k. (2010). ekolohichno chyste vyrobnytstvo: instytutsiyni peredumovy, shlyakhy ta mekhanizmy yikh aktyvizatsiyi na ukrayini [ecologically clear production: institutional preconditions, ways and mechanisms of activation in ukraine]. economist, vol. 10, рр. 25-29. pro vyrobnytstvo ta obih orhanichnoyi silskohospodarskoyi produktsiyi ta syrovyny: zakon ukrayiny [organic agricultural commodity and raw material production and turnover: act ukraine]. retrieved from: http://zakon4.rada.gov.ua/laws/show/425-18 (accessed 24 june 2018) prokopchuk, n., zigg, t., vlasiuk, yu. (ed.) (2014). orhanik biznes-dovidnyk ukrayiny [ukrainian organic production business reference]. retrieved from: http://www.ukraine.fibl.org/index.php?id=ua-publications (accessed 24 june 2018) sava, a. p., sydoruk, b. o., oliynyk, o. r ., dovgan, s. v. (2014). orhanizatsiyno-ekonomichnyy mekhanizm zabezpechennya vyrobnytstva ekobezpechnoyi silskohospodarskoyi produktsiyi [organizational economic mechanism to provide for production of eco-safe agricultural production]. ternopil: krok. (in ukrainian) klitna, m. r ., bryzhan, i. a. (2013). stan i rozvytok orhanichnoho vyrobnytstva ta rynku orhanichnoyi produktsiyi v ukrayini [situation with and development of organic production and organic market in ukraine]. effective economics, vol. 10. retrieved from: http://www.m.nayka.com.ua/?op=1&j=efektyvnaekonomika&s=ua&z=2525 (accessed 24 june 2018) novak, n. p. (2016). orhanizatsiyno-ekonomichni zasady rozvytku vyrobnytstva orhanichnoyi produktsiyi v ahrarnykh pidpryyemstvakh [organizational economic bases for development of organic production in agrarian enterprises]. kherson: aуlant. (in ukrainian) nykytiuk, o. a. (2009). sertyfikatsiya i standartyzatsiya produktsiyi orhanichnoho zemlerobstva [certification and standardization of organic farming production]. agroecological journal, vol. 2, рр. 26-27. baltic journal of economic studies 282 vol. 4, no. 2, 2018 corresponding author: 1 transcarpathian qualification and disciplinary commission of the bar (qdcb). 2 uzhhorod national university. 3 department of civil law and process, uzhhorod national university. doi: https://doi.org/10.30525/2256-0742/2018-4-2-282-287 damage compensation as the way of protection of authors’ property rights: the economic and legal aspect petro nemesh1 transcarpathian qualification and disciplinary commission of the bar (qdcb), ukraine evgeniy leyba2, vasil fennych3 uzhhorod national university, ukraine abstract. the objective of the article is to determine the economic and legal aspects of compensation for damages caused by the violation of the authors’ property rights in conformity with the national evaluation standards in the field of intellectual property, the legislation of ukraine and its application. the subject of the study is the domestic experience of property reimbursement to authors in case of violation of their property rights to works. methodology. the study is based on the analysis of ukrainian legislation on ways to reimburse authors for property rights for works, including compensation for damages, and determination of their advantages and disadvantages. the peculiarity of three economic approaches – cost, comparative and profit, as well as their use in a certain situation for determination of the amount of damage inflicted to the author, is defined on the basis of economic analysis. the results of the study point out that the reimbursement of damages is the main way of property compensation for violation of property rights of the author. and in comparison with other methods, the reimbursement of real losses and lost profits is designed to a greater extent to protect the property interests of the author. it is concluded that over the weak development of the intellectual property market in ukraine, commercial secret under contract terms in the field of intellectual property, a clear advantage is given to the profit approach. the approach, by means of various methods, will enable the most reasonable determination of the amount of damage. practical implications. the development of reimbursement for the caused losses as a means to protect the property interests of authors in ukraine demonstrates that the intellectual property market should be properly developed in line with european standards. this will allow authors to effectively use other methods of property compensation for violating property interests. in turn, this will allow choosing new methods of economic calculation of property compensation for a committed offense in the sphere of copyright. originality. the comparative analysis of the ways of property compensation for the violation of authors’ property rights is the basis for domestic legislation development in the field of intellectual property in accordance with european standards. key words: copyright, damages reimbursement, approaches and methods of calculating, amount of losses. jel classification: p26 exposition of the problem and its connection with important scientific and practical tasks. the development of civilization implies not only the recognition of certain subjects’ civil rights but also the provision of their proper legal protection and, therefore, the problem of the protection of civil rights becomes extremely relevant. taking into account the importance of this problem, legislation of ukraine (in the constitutional norm) provides everybody with a right of any not forbidden by a law facility to protect the rights and freedoms from violations and wrongful encroachments (part 4 of article 55 of the constitution of ukraine) (prytyka, 2004).today when it comes to property rights for copyright objects, this problem is of particular relevance. the significance of the protection of rights is established in the constitution of ukraine: every citizen has a right to the results of the intellectual, creative activity; nobody can use or diffuse them without his consent, after the exceptions set by a law (article 54 of the constitution of ukraine) (the constitution of ukraine: law of ukraine № 254k-96/vr from june 28, 1996). baltic journal of economic studies 283 vol. 4, no. 2, 2018 ukraine ratified the association agreement between ukraine and the european union and its member states in september 2014, from now on, all the authorities with powers in the field of european integration must ensure the effective implementation of the international legal obligations (hnydiuk, pavliuk, 2016). one of the realms of european integration of ukraine is the creation of an effective mechanism for the protection of property rights of authors and other right holders in accordance with the standards of the european union (hereinafter – the eu) from offenses. that is why the analysis of domestic legislation that regulates the protection of property rights of authors by means of reimbursement of damages will be relevant. however, since their extent is determined by economic approaches and methods, it will be important to analyse the economic aspect of the application of damages as means of protecting the authors’ property rights. analysis of the latest research and publications. the issues of protecting the authors’ property rights by way of reimbursement of losses incurred from a legal and economic point of view were the subject of a scientific study by such scholars as o. butnik-siversjkyj, k.  kovtunenko, o.i.  kosarenko, i.ju.  polishhuk, ju.d. prytyka, l. shackova, and many others. statement of the article’s task. the objective of the article is to determine the economic and legal aspects of compensation for damages caused by the violation of the authors’ property rights in conformity with the national evaluation standards in the field of intellectual property, the legislation of ukraine and its application. presentation of the main research material with a new substantiation of the scientific results obtained. upon creating a work, the author has two distinct goals: satisfying the intellectual needs and satisfying the material interests. this precisely causes the origin of non-property rights and proprietary rights regarding the created work. legal competences of property character, which form the property right of the author allow him to carry out economic exploitation, usage of his work or give permission for usage to third parties, obtaining a monetary reward for it. according to part 3 of article 15 of the law of ukraine “on copyright and related rights” the exclusive right of an author (or another copyright holder) to allow or prohibit the use of a work by other persons shall entitle him to allow or prohibit: 1) reproduction of works; 2)  public performance and broadcast of works; 3)  public demonstration and public display of works; 4) any repeated promulgation of works, if carried out by an organization other than the one that carried out the first promulgation; 5) translations of works; 6) versions, adaptations, arrangements, and other similar alterations to works; 7) inclusion of works as components into collections, databases, anthologies, encyclopaedias, etc.; 8) distribution of originals of works and their specimens by first sale or alienation by another method or by transferring for property lease or rental, and by other transfer prior to the first sale of specimens of a work; 9)  general notification of the public of his works in such a manner that its representatives can access the works at any place and at any time at their own discretion; 10)  transfer for property lease and (or) commercial rental after the first sale, alienation by another method of the original or specimens of audiovisual works, computer software, databases, musical works as sheet music, as well as of works fixed on a phonogram or videogram or in a computer-readable form; 11) import of specimens of a work. thus, the list of property rights of the author is not exhaustive but they all point to the possibility of commercialization of works, the purpose of which is to generate profits. this opportunity exclusively serves as the main reason for the unauthorized use of works. general ways of protecting property rights of individuals and legal entities, including in the field of copyright, are defined in article 16 of the civil code of ukraine, the second part gives the method of compensation of damages and other methods of compensation for property damage (paragraph 8) (civil code of ukraine: law of ukraine № 435iv of january 16, 2003). however, the legal status of intellectual property objects is determined not only by general but by special legislation of ukraine. regarding copyright objects, there is a number of laws of ukraine, in particular, “on copyright and related rights” (on copyright and related rights: law of ukraine № 3792-xii from december 23, 1993), “on distribution of copies of audiovisual works, phonograms, videograms, computer programs, databases” (on distribution of copies of audiovisual works, phonograms, videograms, computer programs, databases: law of ukraine № 1587-ііі of march 23, 2000), “on publishing” (on the publishing business: law of ukraine №318 / 97-vr of june 5, 1997), “on cinematography” (on cinematography: law of ukraine № 9/98-vr of january 13, 1998) etc. according to article 52 of the law of ukraine “on copyright and related rights” methods of protection author’s property rights may be used on the basis of violation by any person the copyright, non-observance of the conditions for using works stipulated by contract, the use of works in circumvention of technical means of protection or by the forging of rights-management information and (or) documents, or for the creation of a threat of unlawful use of objects of copyright, and for other infringements of proprietary rights of the persons holding copyright. in this case, persons holding copyright have the right: a) to require the recognition and renewal of their rights; b) to lodge claims with a court of law requiring renewal of the infringed rights and (or) the termination of actions infringing copyright or posing a threat of their violation; baltic journal of economic studies 284 vol. 4, no. 2, 2018 c) to lodge claims requiring reimbursement of moral (non-proprietary) losses; d) to lodge claims requiring reimbursement of losses (material damage), including lost profit, or collection of the income derived by the infringer as a result of his violation of copyright and (or) related rights, or payment of compensation; e) to require the termination of preparations for an infringement of copyright, including the suspension of customs procedures, if there is a suspicion that counterfeit specimens of works, phonograms, videograms or means of circumvention might be allowed into or from the customs territory of ukraine, in compliance with the procedure stipulated in the customs code of ukraine; f ) to participate in the inspection of the production premises, storage facilities, technological processes and business operations relating to the production of specimens of works, phonograms and videograms with respect to which there are grounds to suspect violation or threat of violation of copyright, in compliance with the procedure established by the cabinet of ministers of ukraine; g) to require, including by court procedure, the publication in the mass media of information about infringements of copyright rights and of court judgments with respect to infringements; h) to require the provision, by the persons infringing the claimant’s copyright of information about third parties involved in the manufacture and distribution of counterfeit specimens of works and objects of related rights or means of circumvention, and the relevant distribution channels; i) to require other measures envisioned by legislation, concerning the protection of copyright; j)  to protect the copyright in the prescribed by article 52¹ way of the law of ukraine “on copyright and related rights” (in the commission of offenses through the internet – added by author). so, reimbursement in violation of the property rights of the author, including loss of profits, is one of the ways of protection in the result of property damage. however, the court of law may use such means of protection as the payment of compensation, to be prescribed by the court, in an amount from 10 to 50,000 minimum salaries (part 2, article 52 of the law of ukraine “on copyright right and related rights”). hence, the payment of compensation is used here in lieu of damage reimbursement or income collection. each means of property compensation, which the author or another copyright holder will choose, has its certain peculiarity. reimbursement is the easiest way of property compensation if the person wants promptly stop the illegal use of the work. according to paragraph 42 of the resolution of the plenum of the supreme court of ukraine “on application of legislation in the case of protection of copyright and related rights,” compensation is payable in the event of proving the violation of the property rights of the subject of copyright and (or) related rights, and not the amount of the damages caused (on application of the norms of legislation in cases on the protection of copyright and related rights: resolution of the plenum of the supreme court of ukraine № 5 from june 4, 2010). in this case, the minimum monetary compensation in the amount of 10 minimum wages is paid to the plaintiff and the activity violating his rights terminates. however, if a person wants to receive substantial monetary compensation (up to 50 thousand minimum wages, that is 186 million 150 thousand ukrainian hryvnias (as of 2018)), the plaintiff will have to prove much more evidence of the circumstances of the case. in particular, the kind of violation of property rights was allowed; objective criteria that can approximately specify amount of damage (not precise – added by author) caused by the wrongful use of individual object of copyright; the duration and extent of violations (one-time or multiple use of disputed objects); the amount of income received as a result of the offense; number of persons whose right is violated; the intentions of the defendant; the restoration possibility of the previous state and the efforts necessary for this purpose, etc. (paragraph 42 of the resolution of the plenum of the supreme court of ukraine “on application of legislation in the case of protection of copyright and related rights”). consequently, a clear algorithm of calculation with the help of such a method of property compensation as reimbursement is not established. litigation proves the difficulty of achievement of the monetary compensation with help of such a method of protection. as in one of the economic cases, the plaintiff demanded the maximum amount of compensation for unauthorized use collections of the assignments. the court of the first instance has satisfied the claim partially (in the amount of 555 thousand hryvnias), on the basis of the circulation of collections, where controversial assignments were published (300  thousand copies). however, the court of appeal ceded the case for a reconsideration, stating that “the amount of compensation should not exactly correspond to the amount of damage that has been incurred but must correlate to it in a certain way,” and the court of first instance did not investigate by means of evidence “the possible remuneration for similar use on the terms of the license agreement, which is either established by this right holder under previous agreements, or is an established practice in this field; profit from the sale of copies of the collection of assignments, which was predicted, but was not realized due to the spread of counterfeit products” (resolution of the high economic court of ukraine in the economic affairs № 16 / 430-03 from july 18, 2006). reimbursement from the copyright infringer of income derived from the violation of property rights of the authors also serves a fairly simple way of property compensation. on the other hand, the amount of such a penalty will not always satisfy the plaintiff since the income already received is unlikely to correspond to baltic journal of economic studies 285 vol. 4, no. 2, 2018 the damage actually caused by violation of the author's rights or may be caused in the future (kosarenko, 2011). therefore, while causing damage to property rights of authors, plaintiffs often turn to such a method of protection as reimbursement. loss compensation is the main way of reimbursing property damage inflicted on the author. but, according to part 2 of article 22 of the civil code, the damage is the loss suffered by a person in connection with the destruction or damage to the thing, as well as the expenses that the person should do to restore his violated right (actual losses) and the income that a person could actually receive under normal circumstances, when his/her right was not violated (lost profit). in accordance with part 2 of article 52 of the law of ukraine “on copyright and related rights” in determining the amount of damages to be reimbursed to a person whose rights have been violated, the court must proceed from the merits of the violation, property damage inflicted on the person having the copyright, as well as from the possible the income that a person could receive. the amount of damages inflicted on a person whose rights have been violated may additionally include court costs incurred by this person, as well as expenses related to the payment of a lawyer’s assistance. as practitioners point out, the actual damages caused by copyright infringement is rarely used in practice since this type of damage is difficult to prove. it is much easier to prove in the court the lost profits, that is, revenues that the author could obtain from the offender for the legitimate use of his work. however, in a well-established business based on commercialized products, it is possible to claim reimbursement of both real losses and lost profits (novytskyi). and this is where the economic aspect of property compensation occurs: the right choice of approaches and methods for calculating the amount of the damage. as soon as occurs the possibility of practical use of protected results of creative activity in the economic sphere, that is, their commercialization, immediately arises the problem of estimating the value of objects of intellectual property, including works. the complexity of works’ evaluation is due to the fact that it is fundamentally impossible to develop its unique universal methodology. not only every work is original (by definition) but also the conditions for the practical use of the results of creative activity at different enterprises, too, usually, differ significantly from each other. almost in each individual case while refinement of the purpose of assessments an individual methodology for calculations for each particular object is developed. that would the most fully allow taking into account all pricing factors that affect its market value. this methodology may take into account past costs for the creation and acquisition of an object, market conditions and, moreover, may be based on the ability of the intellectual property to bring additional revenue to the enterprise (husakovska, 2014). to assess the value of works and, consequently, the losses caused by their illegal use, three basic approaches were used: cost, comparative, and profit (udovychenko, trusevych, 2007). the cost approach is most often used to measure intangible assets that do not participate in generating hereafter earnings and do not bring profits at this time. for example, when intangible assets are rated to be socially significant or participate in defence programs of state or regional security. this approach to the calculation of value suits to the buyer because he/she can documentary track the costs of creating an intellectual property object and, therefore, make sure that this value is justified. but it is not profitable for the seller since he/she will receive an amount equal only to the incurred costs of creating an object of intellectual property, that is, without profit (kovtunenko, shatskova, 2012). the cost approach involves the use of various techniques: direct playback method, the replacement cost method, initial cost method. however, since a cost approach involves evaluation of works based on costing associated with their creation or acquisition, it accurately reflects the cost of the work prior to its commercialization (for example, the budget of a blockbuster movie before it’s rolled out). obviously, this approach cannot be used to compensate for the damage caused to the author’s property rights, since it does not apply when the business with the object of copyright begins. that is why it is proposed to use an alternative approach – comparative. comparative approach is a comparison of the object being evaluated with a similar type, sphere (scope) of application, sale time, suitability for commercial use, the existence of exclusive rights, similarity of markets and other functional or economic characteristics (paragraph 22 of the national standard no. 4 “evaluation of intellectual property proprietary rights”) (on approval of the national standard № 4 "appraisal of intellectual property rights": resolution of the cabinet of ministers of ukraine №. 1185 october 3, 2007). this approach requires the use of a sales comparison method. in order to apply a comparative approach, one must have information on treaties that sold property rights to similar products. the market price of a product, more precisely, generated by it the property rights, formed by economic indicators, will give an idea of the market value of the estimated work. it is possible to take into consideration the prices of already concluded contracts or the price of works that are only offered for sale. a comparative approach requires careful application, as far as its incorrect application during transferring the parameters of one object to another may give false results. appraisers, who are invited to carry out in court cases assess of the value of damages caused by violation baltic journal of economic studies 286 vol. 4, no. 2, 2018 of property rights to works, use comparative method extremely rarely. the fact is that in ukraine, due to the weak development of the intellectual property market, commercial secret under intellectual property contract terms, comparative approach can be used effectively, only for the assessment of the violation of property rights to computer programs (due to their rapid aging) and a number of other objects of copyright, the study of which is freely possible in the market. if a person does not have the information about the price of selling such a product or has some doubts about it, this fact should be reflected to what extent this has influenced the authenticity of the conclusion about the market value of the object of valuation (paragraph 16 of national standard no. 1 “general principles of valuation of property and property rights”) (on approval of the national steel works № 1 "general principles of valuation of property and property rights": resolution of the cabinet of ministers of ukraine № 1440 september 10, 2003). in addition, the person that will assess the damage caused is required to initially perform interim calculations, which then will be adjusted, taking into account the notable features of the sales object, which may affect the reliability of the results. that is why the advantage in determining the amount of damages in violation of property rights to the work is given to the profit approach. the profit approach is the main approach when evaluating intellectual property objects. it assumes that nobody will invest its capital in the acquisition of an immaterial object, if the same income can be obtained in another way, in the same predicted period of time. benefits from the use of evaluated intellectual property are determined on the basis of direct comparison of the magnitude, risk and time of obtaining money flow from the use of intellectual property. forecast of hereafter money flows is based primarily on the actual funds received, that is, based on the money flows of the year preceding the valuation date. the main drawback of the profit approach is the complexity of obtaining the necessary initial information for calculations. in conditions of an unstable economy, the accurate prediction of hereafter income, costs, and risks is a complex task that requires high qualifications of appraisers (husakovska, 2014). the versatility of the profit approach makes it attractive because it allows seeing the value of an intangible asset that should have been shown by the appropriate type of licensing agreement for the legal sale of property rights to works. the national standard no. 4 “evaluation of intellectual property proprietary rights” also recommends using this approach indicating that this approach should be chosen if “it is possible to determine the amount of income received or may be received by a legal or natural person who owns such rights” (paragraph 9). moreover, an attention is drawn to such basic methods of income approach as a method of indirect capitalization (discounting of money flow) and the method of direct capitalization of income. the application of indirect capitalization methods (discounting of money flow) and direct capitalization methods of income to assess the proprietary rights of intellectual property implies the determination of the size of the part of the income received as result with the presence of such rights in a legal or natural person (paragraph 11 of the national standard no. 4 “evaluation of intellectual property proprietary rights”). hence, the methods of income approach will most effectively be able to determine the size of losses from the presence of counterfeit products. conclusions of the study and prospects for further exploration in this direction. the reimbursement of damages is the main way of property compensation for violation of property rights of the author. and in comparison with other methods, the reimbursement of real losses and lost profits is designed to a greater extent to protect the property interests of the author. taking into account the intangible nature of works, determination of the damage amount is not associated with traditional approaches. this transforms the issue of the value of compensation into a complex problem, both theoretical and practical. there is a variety of approaches and methods for assessing damages connected to the violation of property rights to works, where a clear advantage is given to the income approach. the approach, by means of various methods, will enable the most reasonable determination of the amount of the damage caused. however, the approaches and methods above described by the author are not unique in the determination of the amount of damages for violation of property rights to works. their description and comparison with the basic approaches and methods may be the subject of independent scientific research. references: prytyka ju.d. (2004). ponjattja i dyferenciacija sposobiv zakhystu cyviljnykh prav ta interesiv. visnyk kyjivsjkogho nacionaljnogho universytetu imeni tarasa shevchenka. jurydychni nauky. vyp. 60-62. p. 16-19. the constitution of ukraine: law of ukraine № 254k-96/vr from june 28, 1996. vidomosti verkhovnoji rady ukrajiny. 1996. №30. art. 141. hnydiuk n., pavliuk s. (2016). nablyzhennia zakonodavstva ukrainy do prava yes vidpovidno do uhody pro asotsiatsiiu: mizh pravovymy zoboviazanniamy ta analizom polityky? kyiv, 40 p. civil code of ukraine: law of ukraine № 435-iv of january 16, 2003. vidomosti verkhovnoji rady ukrajiny. 2003. №40-44. art. 356. on copyright and related rights: law of ukraine № 3792-xii from december 23, 1993. vidomosti verkhovnoji rady ukrajiny. 1994. №13. art. 64 baltic journal of economic studies 287 vol. 4, no. 2, 2018 on distribution of copies of audiovisual works, phonograms, videograms, computer programs, databases: law of ukraine № 1587-ііі of march 23, 2000. vidomosti verkhovnoji rady ukrajiny. 2000. №24. art. 183 on the publishing business: law of ukraine №318 / 97-vr of june 5, 1997. vidomosti verkhovnoji rady ukrajiny. 1997. №32. art. 206 on cinematography: law of ukraine № 9/98-vr of january 13, 1998 vidomosti verkhovnoji rady ukrajiny. 1998. №22. art. 114 on application of the norms of legislation in cases on the protection of copyright and related rights: resolution of the plenum of the supreme court of ukraine № 5 from june 4, 2010. url: http://zakon2.rada.gov.ua/laws/ show/v0005700-10 /print1509742376245137 (date: 15/06/2018) resolution of the high economic court of ukraine in the economic affairs № 16 / 430-03 from july 18, 2006. url: http://vgsu.arbitr.gov.ua/docs/28_1304232.html (date: 15/06/2018) kosarenko o.i. (2011). problema vyznachennia rozmiru zbytkiv v spravakh pro porushennia avtorskykh prav. chasopys akademii advokatury ukrainy. №3(12). tom 4. url: http://e-pub.aau.edu.ua/index.php/chasopys/ article/view/438/459 (datе: 15/06/2018) novytskyi o. vidshkoduvannia zbytkiv vs kompensatsiia. zakhyst avtorskykh prav. url: http://blog.liga.net/ user/onovinskiy/article/21822 (datе: 15/06/2018) husakovska t.o. (2014). pidkhody do vyznachennia rozmiru zbytkiv vid nepravomirnoho vykorystannia obiektiv intelektualnoi vlasnosti. naukovyi visnyk poltavskoho universytetu ekonomiky i torhivli. №3 (65). p. 86-91. udovychenko s., trusevych v. (2007). osoblyvosti litsenzuvannia prav na obiekty intelektualnoi vlasnosti. ekonomika ukrainy. №5. p. 60-66. kovtunenko k., shatskova l. (2012). osoblyvosti otsinky vartosti obiektiv intelektualnoi vlasnosti v ukraini. ekonomichnyi analiz. vyp. 10. сhastyna 2. p. 270-273. on approval of the national standard № 4 "appraisal of intellectual property rights": resolution of the cabinet of ministers of ukraine №. 1185 october 3, 2007. url: http://zakon3.rada.gov.ua/laws/show/1185-2007%d0%bf (datе: 15/06/2018) on approval of the national steel works № 1 "general principles of valuation of property and property rights": resolution of the cabinet of ministers of ukraine № 1440 september 10, 2003. url: http://zakon3.rada.gov.ua/ laws/show/1440-2003-%d0%bf (datе: 15/06/2018) baltic journal of economic studies 135 vol. 1, no. 2, 2015 phenomenon of tax losses of state budgetary resources larysa sidelnykova1, kherson national technical university, ukraine abstract. the aim of this work is structuring categorical-conceptual apparatus of the of the tax losses phenomenon in the state budgetary resources, namely clarification of the concepts of “tax gap”, “tax expenditures”, “tax losses”, as well as the quantification of tax losses of the consolidated budget of ukraine. methodology. most modern scholars interpret the tax gaps as the amount of taxes that were not received with the budget as a result of shadow economy, tax evasion and the existence of tax debt. however, considerable asymmetry of the tax component of the state budgetary resources also arises due to budget losses of all levels as a result of providing tax exemptions. in modern economic literature such losses are considered as tax expenditures. we consider tax losses a generalizing concept including potential amounts of tax revenues that the state and local budgets have not received as a result of the existence of the phenomenon of “tax gaps” and “tax expenditures”, and the amount of losses of the state budgetary resources in terms of their tax component is equal to the sum total of tax exemptions provided, unsettled tax debt of economic agents and the loss of tax revenue due to the operation of shadow economy. the study is based on the analysis of tax losses of budgetary resources of ukraine during the period of time from 2004 to 2014. the results of the study showed enormous losses of budgetary resources in ukraine due to the imperfection of the tax system, spread of undisclosed operations, tax evasion, and inefficient fiscal policy implementation. the consolidated budget loses the amounts of monetary funds, equal to an average of 53.30% of actual revenue over the period studied. total tax losses of the state budgetary resources in 2014 are equivalent to the total actual expenditures of the consolidated budget of ukraine on social protection and social security, defense, public order, security and judicial authorities. even taking into account the point of view of foreign economists that only 1/3 of the tax gap can be converted into actual tax revenues in case of implementing measures of legalization of the economy, additional budgetary resources of the consolidated budget of ukraine obtained due to the elimination of tax gaps would be significant. it was determined that the effective management of tax gaps and tax expenditures and, consequently, a decrease in tax losses of budgetary resources will ensure the correction of fiscal asymmetries and imbalances, will contribute to achieving fiscal equilibrium, will cause a synchronization of fiscal and monetary policy, and as a result, will reduce the need of ukraine in loan financing and its debt bondage. practical implications. justification of the conclusion that the major reserves to increase the tax component of budgetary resources of the state with preventing tax losses lie exactly in the plane of fiscal policy optimization and legalization of assets of business entities, allows to develop areas of improvement tax forms of financing public spending. value/originality. the data obtained are able to provide a better understanding of the causes of public finances imbalances in ukraine and ways of their stabilization. key words: tax gaps, tax expenditures, tax losses, state budgetary resources, shadow economy, tax debt, tax exemptions. jel classification: н26, н30, н69 corresponding author: 1 department of fiscal and budgetary policy, kherson national technical university. e-mail: 1907@i.ua 1. introduction at the present stage of development of society taxation is a factor determining economic policies of the state as a whole, as well as of separate administrative-territorial units and citizens in particular. taxation is a significant component of the budgetary resources of the state and a powerful regulator of social and economic processes in the society. at the same time, the most challenging issue in ukraine nowadays is a problem of tax losses growth in budgets of all levels, closely linked to the issues of ensuring the effective implementation of state fiscal policy and directly affecting its institutions. therefore, in the context of creating the conditions for sustainable development of ukraine the most important role is played with the research of theoretical bases of forming institutional environment countering tax losses and with the development of practical recommendations on how to baltic journal of economic studies 136 vol. 1, no. 2, 2015 reduce the amounts of tax revenue short received with the state due to the inefficiency of fiscal policy implementation and violations of tax laws with economic entities. thus, there is a clear need of improving fiscal policy of ukraine requiring the elaboration of theoretically and practically balanced tax losses minimizing system, which would be able to provide resources accumulation of budgets of all levels recognizing the realities of modern life and not contradicting to the criteria of fiscal sufficiency. 2. theoretical bases of tax losses of budgetary resources the research of multifactor decomposition of tax losses of budgetary resources of the state should start with structuring categorical-conceptual apparatus of this phenomenon, namely with the clarification of the concepts of “tax gap”, “tax expenditures”, “tax losses”. according to international standards, the tax gap is the difference between the amount of tax payments, which is to be received with the budget if all taxpayers declare their income and pay taxes voluntarily, correctly, timely and fully on the one hand and the amount of taxes actually paid – on the other [monitoring taxpayers’ compliance, 2008]. this definition is widely used by foreign scientists and experts. thus, the american economist e. toder considers the tax gap as the difference between the liability of taxpayers regarding payment of fees according to the legislation and the amount of taxes actually paid voluntarily and on time. the scientist identifies three components of the tax gap: unregistered activities, understatement of tax payments and non-payment of taxes and duties [toder]. australian scientists j. mcmanus and h. warren characterize the tax gap as the difference between the theoretical tax liability under the law and actually collected revenues. “sources of tax gaps, – the scientists underline – are diverse and complex, they may include: shadow economy, illegal activities, bad tax debts, unintentional errors. dissatisfaction with the government and its spending, the complexity of tax laws, apathy and corruption are the reasons for non-payers of default on obligations and lead to tax gaps” [mcmanus, warren, 2006]. british her majesty’s revenue and customs (hmrc) proposes the following definition: “the tax gap is measured by the amount of taxes that were not ultimately collected or with the sum total of uncorrected violations of law” [measuring tax gaps, 2010]. us internal revenue service understands tax gaps as the sum total of taxes and duties established under the law, but not paid on time and in full [internal revenue service, 2004]. the independent international association “tax justice network” (tjn) focuses on the characteristics of tax gaps as a complex phenomenon, which greatly affects the stability of the state’s income, standards of living, social justice, corporate responsibility [mind the tax gap. the tax justice network. january, 2006]. thus, most scientists interpret the tax gaps as the amount of taxes that were not received with the budget as a result of shadow economy, tax evasion and tax debts. however, considerable asymmetry of the tax component of the state budgetary resources also arises due to budget losses of all levels as a result of providing tax exemptions. in modern economic literature such losses are considered as tax expenditures. thus, the authors of the study “tax expenditures in oecd countries” note that tax expenditures are the provisions of tax laws, regulations or practices that make it possible to reduce or defer paying taxes for a certain part of the population or taxpayers, due to deviation from the benchmark of tax structure [tax expenditures in oecd countries, 2011]. therefore, tax expenditures for a state mean decreasing its budgetary resources and for taxpayers they mean a reduction in tax liability. in this research the amount of tax expenditures is calculated with the method of lost income as the amount of taxes that would have been paid in the absence of tax exemptions. n. leheida includes in tax expenditures all kinds of fiscal policies that lead to the loss of budget revenue, including tax exemptions, free economic zones, tax credits, taxes payable, deferred taxes for various types of economic activity [leheida, 2001]. m. filo has a similar vision interpreting tax expenditures as losses of state due to providing tax exemptions, writing-off and reducing tax liabilities, deferring tax payments [filo, 2012]. i. maiburov considers tax expenditures as lost tax revenues of budget system connected with the use of various deviations from the normative tax structure by the legislature, which thus provide any benefits to certain types of activities or groups of taxpayers [malynyna, 2010]. according to t. malynyna, tax expenditures arise from the established tax exemptions and exemptions regarding the fundamental (regulatory) tax structure [malynyna, 2010]. d. serebryansky summarizes: “generally speaking, tax expenditures are actually tax exemptions» [maiburov, ivanov, taranhul, 2013]. we consider tax losses a generalizing concept including potential amounts of tax revenues that the state and local budgets have not received as a result of the existence of the phenomenon of “tax gaps” and “tax expenditures”, and the amount of losses of the state budgetary resources in terms of their tax component is equal to the sum total of tax exemptions provided, unsettled tax debt and the loss of tax revenue due to the operation of shadow economy. we call your attention to the fact that not only definitions are important. in fact, the point is not in abstract concepts, but in the phenomena and processes that are directly and immediately related to the optimization of the formation of state budget resources in conditions of deepening imbalances in public finance and increasing debt risks. effective management of tax gaps and tax expenditures and, consequently, a decrease in tax losses of budgetary resources will ensure the correction of fiscal asymmetries and imbalances, will contribute to achieving fiscal equilibrium, will cause a synchronization of fiscal and monetary policy, and as a result, will reduce the need of ukraine in loan financing and its debt bondage. baltic journal of economic studies 137 vol. 1, no. 2, 2015 3. tax gaps caused with shadow economy the most essential losses of state budgetary resources are caused with shadow economy. undisclosed operations are inherent in almost all countries of the world, in fact  – according to the world economic forum (wef) it is found that the major global risks over the next decade are spreading of undisclosed operations along with macroeconomic imbalances against the background of limited resources. in ukraine the main types of undisclosed activities are: conducting cash transactions without accounting; concealment of income or overstatement of expenditures; illegal payment of wages; underpricing company shares (in the process of sale of a majority stake in the company); illegal gratifications, “kickbacks”; money laundering; clandestine manufacture; illegal economic activities; fraud; “black markets” (illegal markets). the basis of the domestic shadow sector are operations in legal types of businesses that are conducted without full payment of all taxes or out of governmental control, for example, “grey” imports and envelopes wages. income and earnings are hidden from the state not only by legal entities but also by individuals – for example, by farmers who sell their products in markets without reporting to the tax authorities. according to generalizing calculations of the ministry of economic development and trade of ukraine, shadow economy in ukraine during last 11 years is in the range of 28.8% to 41.0% of gdp (fig. 1). 30,7 30,3 29,8 28,8 31,1 39,0 38,2 34,1 34,0 35,0 41,0 0,0 10,0 20,0 30,0 40,0 50,0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 fig. 1. integrated index of shadow economy in ukraine, % of official gdp note: developed by the author of this article based on the data given in [12] as shown in fig. 1, the official amount of shadow economy in ukraine (% of gdp), is almost twice as the corresponding average in europe. obviously, such a powerful shadow sector adjusts the performance of national fiscal policy towards its deterioration. using the integrated index of shadow economy, calculated by the ministry of economic development and trade of ukraine and the level of tax index we are able to determine the amount of “shadow” tax gaps in ukraine (table 1). as shown in table 1, from 2004 to 2014 losses of budgets of all levels in ukraine due to the shadow sector functioning increased 7.8 (!) times and reached the value of 150.7 billion uah in 2014. by comparison, the same year ukraine’s budget expenditures on social protection and social security amounted to 138.0 billion uah, on education – 100.1 billion uah, on healthcare – 57.2 billion uah, on defense – 27,4 billion uah. note, however, that a complete return of the funds lost due to the existence of shadow sector to budget is impossible. thus, according to the foreign researchers, introducing measures “closing” the tax gaps of a certain size does not necessarily lead to an increase in tax revenue by the same amount – “only about 1/3 of the shadow economy activity level will continue to exist in formal economy”, thus, “it is assumed that only 1/3 of the tax gap in each member state can be converted into actual tax revenue” [muller, 2013]. 4. tax debt another important component of tax losses of the state budget resources are losses caused by inefficient management of tax debt, which is the result of taxpayers’ neglecting their constitutional duty to pay taxes. in accordance with paragraph 175 sub-paragraph 1, article 14 of the tax code of ukraine tax debt is a sum of agreed money obligation (including penalties, if any) not paid by a taxpayer in terms established by the tax code of ukraine as well as penalty charged on the sum of the money obligation [the tax code of ukraine]. таble 1 tax gaps caused by shadow economy in ukraine indicators 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 gdp, billion. uah. 345,1 441,5 544,2 720,7 948,1 913,3 1082,6 1316,6 1408,9 1454,9 1566,7 level of shadow economy, % 30,7 30,3 29,8 28,8 31,1 39,0 38,2 34,1 34,0 35,0 41,0 shadow economy size, billion. uah. 105,9 133,8 162,2 207,6 294,9 356,2 413,6 449,0 479,0 509,2 642,3 tax revenues of the consolidated budget of ukraine, billion. uah. 63,2 98,1 125,7 161,3 227,2 208,1 234,4 334,7 360,6 354 367,5 budget tax index,% 18,31 22,22 23,10 22,38 23,96 22,79 21,65 25,42 25,59 24,33 23,46 the amount of tax gaps caused by shadow economy, billion. uah. 19,4 29,7 37,5 46,5 70,7 81,2 89,5 114,1 122,6 123,9 150,7 note: developed by the author of this article based on the data given in [12; 13; 14] baltic journal of economic studies 138 vol. 1, no. 2, 2015 o. desiatniuk and t. marshal stress that tax debt arises as a result of errors committed in socio-economic policy of the state and attend to the inconsistent relations of regulatory authorities with legal entities and individuals in the formation of the tax component of the state budget revenue [desiatniuk, 2013]. the accumulation of significant amounts of tax debt of economic agents is a significant factor in reducing fiscal efficiency of tax sources of budgetary resources of the state. let us consider the dynamics of tax debt in ukraine during the period of 2004-2014 (fig. 2). fig. 2. dynamics of tax debt in ukraine, bln. uah note: developed by the author of this article based on the data given in [18] therefore, we observe the rapid growth of tax debt (excluding bankrupts) during the global financial crisis (from 9.1 bln. uah. in 2008 to 16.2 bln. uah. in 2010, i.e. 1.8 times ). over the period 2011-2014 the amount of tax debt declined slightly. extremely complicated economic situation in 2014 caused double tax debt growth compared with the year earlier and it grew 3.3 times compared with the value of 2004, the economic agents’ debt reached a critical peak – 28,8 bln. uah. one of the substantial reasons that cause the untimely fulfillment of tax liabilities is taxpayers’ waiting (large ones in particular) for writing-off or restructuring of the tax debt. this not only affects negatively the quality of the formation of the state budget resources but also has an unfavorable impact on the basic principles that constitute a guarantee of taxation effectiveness. the principles of fairness and uniformity are violated, and as a result, law-abiding taxpayers come off losers. in addition, endorsing views of v. melnyk we state that restructuring tax debts, in fact, is lending through the budget [melnyk, 2006]. naturally, its beneficiaries have a direct interest in continuing this practice. as a result, these factors produce further accumulation of tax debt of business entities. however, the management of tax debt by supervisory authorities remains ineffective, and tax management techniques in the field of repayment are still imperfect. this in turn leads to an increase in tax debt, the emergence of significant losses of budgetary resources and, as a result, tends to reduce potential influence of the state on ensuring the continuity of expanded reproduction and meeting other social needs. 5. tax exemptions another significant factor in producing tax losses of budgetary resources of the state are tax exemptions and privileges that are a priori intended to stimulate the development of certain activities, industries and individual businesses and regions; state regulation of prices; ensuring the competitiveness of strategically important goods in terms of state in comparison with cheap imports. “using certain tax exemptions, the state regulates economic proportions in the economic framework of production and exchange, the proportions in the development of the productive forces,” – emphasizes a. krysovatyi [krysovatyi, 2005]. world theory and practice of preferential taxation shows that tax exemptions have a two-stage set of consequences: first a tax incentive reduces the amount of tax revenue, that is, reduces the fiscal effectiveness of taxes, but then, provided a balanced approach to its provision, tax revenues may, if not increase, at least return to the previous level due to the favorable impact of tax exemptions and preferences on the financial and economic situation of the payer. however, the situation in ukraine is not as ambiguous: exemptions are provided to taxpayers in large amounts, but they do not always give the expected result. major part of the tax preferences is aimed at meeting the needs of particular businesses or representatives of government and is subject to lobbying interests. the absence of an effective system of таble 2 tax losses of budgetary resources of ukraine caused by tax exemptions year total, thousand uah state budget losses local budget losses thousand uah ratio, % thousand uah ratio, % 2004 12 550 461 12 311 551 98,10 238 910 1,90 2005 12 338 011 12 076 553 97,88 261 457 2,12 2006 13 502 686 13 275 093 98,31 227 593 1,69 2007 17 472 201 17 021 536 97,42 450 665 2,58 2008 22 845 418 22 262 299 97,45 583 120 2,55 2009 28 207 620 27 507 998 97,52 699 622 2,48 2010 37 127 375 36 133 031 97,32 994 343 2,68 2011 59 166 617 58 832 522 99,44 334 095 0,56 2012 48 659 120 48 108 083 98,87 551 037 1,13 2013 35 630 853 34 765 047 97,57 865 806 2,43 2014 33 213 316 32 521 465 97,92 691 851 2,08 note: calculated by the author of this article based on the data given in [18] baltic journal of economic studies 139 vol. 1, no. 2, 2015 controlling the use of tax exemptions, their ungrounded extension, on the one hand, leads to significant losses of state budget resources; on the other hand it unfairly shifts the tax burden on efficient enterprises that do not benefit from tax preferences. thus, due to the inversion of social logic providing tax exemptions in ukraine produces a significant increase in tax losses of the state budget resources, violates the principle of neutrality and has a destructive impact on the macroeconomic and fiscal stability. “the existing system of tax exemptions – states ts. ogon  – leads to permanent loss of budget revenue and slows down business development in ukraine” [ohon, 2003]. analysis of the data provided by the state fiscal service of ukraine allows distinguishing between tax losses of state and local budgets due to the current system of preferential taxation (table 2). during 2004-2014 a steady growth trend in tax losses of state budget resources is observed caused with providing tax exemptions, during this period they increased more than 2.5 times (maximum value – 59.2 bln. uah was observed in 2011). the dominant budgetary losses caused with preferential tax are the state budget losses. we emphasize that this calculation does not include tax exemptions provided by the customs authorities, in 2008 – 11.7 bln. uah, in 2009 – 12.4 bln. uah, in 2010 – 22.1 bln. uah, in 2011 – 44.0 bln. uah, in 2012 – 42.9  bln. uah, in 2013 – 44.1 billion. uah, in 2014 – 32.2 bln. uah. moreover, the tax authorities keep records of tax exemptions only according to the following taxes: corporate income tax, land tax, vat, excise tax, fee for parking vehicles, tourist tax, public due. so, presented amounts of tax losses of the consolidated budget of ukraine caused by tax exemptions are not exhaustive and do not fully reflect the real situation. 6. tax losses of budgetary resources of ukraine let us generalize calculated values of tax losses of state budget resources caused by the existence of the phenomena of “tax gaps” and “tax expenditures” in table 3. the table shows enormous losses of budgetary resources in ukraine due to the imperfection of the tax system, spread of undisclosed operations, tax evasion, and inefficient fiscal policy implementation. the consolidated budget loses the amounts of monetary funds, equal to an average of 53.30% of actual revenue over the period studied. total tax losses of the state budgetary resources in 2014 are equivalent to the total actual expenditures of the consolidated budget of ukraine on social protection and social security, defense, public order, security and judicial authorities. 7. conclusions with regard to the prospects for the mobilization to the budget of taxes and duties lost due to the functioning of the shadow sector in the state, we note that even taking into account the point of view of foreign economists that only 1/3 of the tax gap can be converted into actual tax revenues in case of implementing measures of legalization of the economy, additional budgetary resources of the consolidated budget of ukraine obtained due to the elimination of tax gaps would be significant. we emphasize that no less important factor in overcoming the imbalances of public finances and stabilizing the domestic fiscal space is directing additional tax revenues use grounded on social intuition and economic expediency. mobilized resources can be directed to: reducing the budget deficit – in this case, taxpayers who operate in the legalized economy do not receive any benefits from the elimination of the tax gap; таble 3 tax losses of budgetary resources of ukraine, bln. uah. indicators 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 gdp 345,1 441,5 544,2 720,7 948,1 913,3 1082,6 1316,6 1408,9 1454,9 1566,7 revenues of the consolidated budget of ukraine 91,5 134,2 171,8 219,9 297,9 273,0 314,5 398,6 445,5 442,8 456,1 tax revenues of the consolidated budget of ukraine 63,2 98,1 125,7 161,3 227,2 208,1 234,4 334,7 360,6 354 367,5 tax expenditures and gaps: tax exemptions 12,6 12,3 13,5 17,5 22,8 28,2 37,1 59,2 48,7 35,6 33,2 unsettled tax debt 8,8 9,4 7,8 6,3 9,1 11,9 16,2 15,0 13,9 14,4 28,8 tax losses caused by shadow economy 19,4 29,7 37,5 46,5 70,7 81,2 89,5 114,1 122,6 123,9 150,7 tax expenditures and gaps, total: bln. uah 40,8 51,4 58,8 70,3 102,6 121,3 142,8 188,3 185,2 173,9 212,7 % of gdp 11,82 11,64 10,80 9,75 10,82 13,28 13,19 14,30 13,15 11,95 13,58 % of revenues of the consolidated budget 44,59 38,30 34,23 31,97 34,44 44,43 45,41 47,24 41,57 39,27 46,63 % of tax revenues of the consolidated budget 64,56 52,40 46,78 43,58 45,16 58,29 60,92 56,26 51,36 49,12 57,88 note: calculated by the author of this article based on the data given in [13; 14; 18] baltic journal of economic studies 140 vol. 1, no. 2, 2015 reducing the tax burden of taxpayers who conduct business activity in the legalized economy; an increase in ex penditures in an equivalent amount; a combination of reducing the tax burden on taxpayers who work in the legalized economy, increasing budget expenditures and reducing the budget deficit, which is the best option, aimed at reaching a constructive compromise of the interests of the state and economic agents as the main producers of tax revenues to the consolidated budget of ukraine. thus, the major reserves to increase the tax component of budgetary resources of the state with preventing tax losses lie exactly in the plane of fiscal policy optimization and legalization of assets of business entities. changing priorities of fiscal mechanisms existing in ukraine towards establishing parity relations between tax authorities and taxpayers will create a favorable climate for their joint activities which is an objective social basis for ensuring completeness and stability of tax sources of budgetary resources as the financial background in achieving a common goal: building economically developed democratic state. references monitoring 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(2003). budget revenues in ukraine: theory and practice. monograph. – к.: kyiv national economical and trade university, 580 p. baltic journal of economic studies 141 vol. 1, no. 2, 2015 лариса сидельникова феномен налоговых потерь бюджетных ресурсов государства аннотация. целью работы является структуризация категориально-понятийного аппарата феномена налоговых потерь бюджетных ресурсов государства, а именно: уточнение понятий «налоговый разрыв», «налоговые расходы», «налоговые потери», а также определение объемов налоговых потерь сводного бюджета украины. методика. большинство современных исследователей трактуют налоговые разрывы как сумму налогов, которые не поступили в бюджет в результате теневой экономики, уклонения от уплаты налогов и наличия налогового долга. в то же время, значительные асимметрии налоговой компоненты бюджетных ресурсов государства возникают и в результате потерь бюджетов всех уровней от предоставления налоговых льгот. в современной экономической литературе такие потери принято трактовать как налоговые расходы. считаем, что понятие «налоговые потери» обобщает и включает в себя потенциально возможные объемы налоговых поступлений, которые государственный и местные бюджеты не получили в результате существования феноменов «налоговые разрывы» и «налоговые расходы», а объем потерь бюджетных ресурсов государства в части их налоговой составляющей равняется сумме предоставленных налоговых льгот, непогашенного налогового долга субъектов хозяйствования и потерь налоговых поступлений в результате функционирования теневой экономики. исследование основывается на анализе налоговых потерь бюджетных ресурсов украины в период 2004-2014 годов. результаты исследования засвидетельствовали колоссальные потери бюджетных ресурсов в украине в результате несовершенства налоговой системы, распространения теневых операций, уклонения от налогообложения, неэффективной реализации налоговой политики. сводный бюджет теряет объемы денежных средств, равных в среднем 53,30% фактических налоговых поступлений на протяжении исследуемого периода. сумма налоговых потерь бюджетных ресурсов государства в 2014 году эквивалентна суммарным фактическим расходам сводного бюджета украины на социальную защиту и социальное обеспечение, оборону, общественный порядок, безопасность и судебную власть. даже с учетом позиции зарубежных экономистов, что лишь 1/3 налогового разрыва при внедрении мероприятий по детенизации экономики может быть переведена в фактические налоговые поступления, дополнительные ресурсы сводного бюджета украины от ликвидации налоговых разрывов будут весомыми. определено, что эффективное управление налоговыми разрывами и налоговыми расходами, а, следовательно, снижение объемов налоговых потерь бюджетных ресурсов обеспечит коррекцию фискальных асимметрий и дисбалансов, будет способствовать достижению фискального равновесия государства, обусловит синхронизацию фискальной и монетарной политики, и в итоге, позволит сократить потребности украины в долговом финансировании и снизить ее долговую зависимость. практическое значение. обоснование выводов, что основные резервы увеличения налоговой компоненты бюджетных ресурсов государства путем предотвращения налоговых потерь кроются именно в плоскости оптимизации налоговой политики и выведения активов субъектов хозяйствования из «тени», позволяет разработать направления совершенствования налоговых форм финансирования общественных расходов. значение/оригинальность. полученные данные способны обеспечить лучшее понимание причин дисбалансов государственных финансов украины и путей их стабилизации. baltic journal of economic studies 158 vol. 4, no. 3, 2018 corresponding author: 1 department of accounting and audit, zhytomyr state technological university. e-mail: legenchyk2014@gmail.com 2 department of accounting and audit, petro mohyla black sea state university. e-mail: melek2405@bigmir.net 3 department of accounting and audit, petro mohyla black sea state university. e-mail: melek2405@bigmir.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-158-164 development of variability concept in accounting: ukrainian context serhii lehenchuk1 zhytomyr state technological university, ukraine yurii velykyi2, svitlana belinska3 petro mohyla black sea state university, ukraine abstract. the purpose of the article is to develop theoretical fundamentals of the concept of variability in accounting taking into account development features of nas under the influence of trends of accounting harmonization and standardization. the need to regulate the accounting system arose due to the current imperfection of financial markets and incomplete information about the activities of enterprises, which is provided to participants in such markets for decision-making. accounting is a means to eliminate various negative phenomena that accompany the functioning of financial markets (incomplete information, information noise, information asymmetry). in order to improve the efficiency of accounting as a separate socio-economic institute that solves market imperfections, there is a need for its regulation based on the application of different kinds and types of models. one of the obligatory conditions for an efficient market operation is the availability of an ideal and complete market for accounting information, when all actors know the real financial situation and the results of each enterprise’s financial statements, have an equal access to market information that may be used both for making economic decisions, and for carrying out accounting choice. methodology. the theoretical and methodological basis of the paper is a complex and systematic approach in the study of the development of the variance concept in accounting. the methodology of accounting is an important tool for regulating the economy at all levels. the modern methodological situation in the ukrainian economy is characterized by the transition from a unified, government-controlled methodology to a variety of methodological foundations. the absence of research on issues of improving the methodology of accounting did not allow providing the appropriate methodological orientation to measures for regulation and development of accounting in ukraine. in this regard, the article studies the development of the concept of variability in accounting. results. the following types of variability in accounting are highlighted: complete univariability; extended univariability; limited multivariability; partially limited multivariability; full unlimited multivariability. the structural model of the accounting system, based on the concept of limited multivariability, is proposed. practical implications. development features of the accounting system in countries with the developed market economy and post-soviet countries are substantiated. a hierarchical structure of the accounting methodology is developed. in order to form theoretical aspects of the concept of the methodology of variability in accounting, its main concepts (imperative behaviour, accounting choice) are substantiated. value/originality. considered issues of the relationship of accounting choice with the concept of variability in the light of the positive theory of accounting revolutionize the views of researchers-accountants on the issue of accounting choice. in particular, this also applies to representatives of the domestic scientific community, which consider the accounting choice in the context of the concept of accounting policy of the enterprise. on the other hand, the positive theory of accounting proposes its way of the influence of the scientific community on developers of accounting standards. the methodology for explaining the reasons for making accounting choices by managers and foreseeing the actions of users of accounting information in the market, which, in turn, is a reaction to the disclosure of financial statements and the actions of managers, is a sufficient ground for understanding the implications of accounting decisions. key words: accounting system, accounting imperatives, accounting alternatives, variability, concepts, accounting policy. jel classification: l84, м40, о12 baltic journal of economic studies 159 vol. 4, no. 3, 2018 1. introduction the need to regulate the accounting system arose as a result of the current imperfection of financial markets and incomplete information about the activities of enterprises, which is provided to their participants for decision-making. accounting is a means to eliminate various negative phenomena that accompany the functioning of financial markets (incomplete information, information noise, information asymmetry). in order to improve the efficiency of accounting as a separate socioeconomic institute that solves market imperfections, there is a need for its regulation based on the application of different kinds and types of models. the introduction of a multivariate accounting model in ias/ifrs and gaap us systems, although it is a significant step forward in improving the efficiency of their regulation, in itself this process does not eliminate all the disadvantages inherent in accounting systems built on the basis of a consistent accounting methodology. one of the ways to solve such problems is to develop a concept of variability in accounting, which allows the formation of further directions for the development of the regulation of the national accounting system (hereinafter – nas), taking into account the advantages and disadvantages of various forms of methodological variability and accounting choice, which the agents of accounting organization in the enterprise have the right to make. the issue of multivariability in accounting in the context of the application of enterprises’ accounting policy was given attention by the following domestic scientists: t.v. baranovska, m.i. bondar, b.i. valuiev, s.f. holov, v.v.  yevdokymov, p.ye. zhytnyi, v.m.  zhuk, r.v. kostyrko, r.v. kuzina, n.o. lokhanova, a.v. ozeran, o.m. petruk, i.v. suprunova, l.v. chyzhevska. 2. analysis of the historical development of accounting each nas can be considered in the light of the concept of the variability of accounting methodology, which allows analysing it at an angle of availability/ absence of accounting choices in the process of accounting in the enterprise. an analysis of the historical development of accounting in the tsarist russia, the ussr , ukraine, and the usa (until 1934 and after), the peculiarities of the development of the system of ifrs allowed to identify that there are different types of concepts of variability, on the basis of which nas can be constructed (table 1). the basic concepts that are used in any of the variants of the concept of variability in accounting are imperatives, alternatives, imperative behaviour, and accounting choice, the relationship between which is presented in figure 1. means of accounting regulation accounting rules (imperatives) accounting alternatives mechanisms for the implementation of accounting control tools imperative behaviour accounting choice figure 1. the interconnection between the basic concepts of the concept of variability in accounting table 1 types and characteristics of variability concepts in accounting concept type characteristics complete univariability (only imperatives) extended univariability (imperatives, sometimes alternatives, from which the relevant authorities of a higher level than the enterprise choose) limited multivariability (imperatives and limited alternatives (by qualitative characteristics or principles)) partially limited multivariability (only alternatives limited by principles) full unlimited multivariability (only alternatives) concept formula і і, аорг і, оа оа а a form of implementation of the concept at the level of the accounting system regulations, guidelines for accounting regulations, guidelines for accounting, the accounting policy of bodies higher in relation to the enterprise accounting standards, accounting policy of the enterprise accounting policy of the enterprise accounting policy of the enterprise an example of a concept implementation – the accounting system in the ussr after the 1930s. national p(s)a, ias/ifrs, gaap uk, gaap us l. pacioli’s system of accounting the accounting system that existed before the emergence of principles nas in the usa until 1934 “theory of multipurpose accounting” notes: і – imperatives; а – alternatives; аорг – alternatives, from which the relevant body of higher level than the enterprise chooses; оа – alternatives, the process of selection among which has certain restrictions. baltic journal of economic studies 160 vol. 4, no. 3, 2018 accounting rules (imperatives) are such means of its regulation, which clearly and unambiguously establish an exhaustive list of the accounting reflection of consequences of business operation items of the enterprise and do not allow any deviations. the implementation of actions clearly defined in the accounting regulation documents by the accounting entity is called imperative behaviour. accounting alternatives are a set of (two or more) equivalent accounting imperatives, the availability of which implies that for the accounting reflection of consequences of business operation items, it is necessary to choose one of them. the choice by the subject of accounting of one of the alternatives presented is called the accounting choice. 3. the essence of each type of variability concept the concept of complete univariability suggests that accounting is governed by regulatory documents, in which there are no alternative options for accounting. the accountant must strictly observe the requirements stated in the documents (regulations, instructions) of the imperatives during the accounting reflection of the consequences of business operation items. we cannot give examples of the application of this concept today, but its allocation has important economic value, similar to robinson crusoe’s economic model, which allows representing the economy of one agent. so the concept of complete univariability allows theoretically considering the existence of an accounting system, in which there are only imperatives and there is no possibility of an accounting choice both at the enterprise level and at the level of bodies of higher than the enterprise level. the concept of extended univariability envisages that in the vast majority of cases, accounting is governed by the establishment of clear rules of conduct, but in some cases, the relevant documents provide for alternative versions of the accounting reflection of business operation items. the choice of alternatives presented in the documents is carried out by the appropriate authorities of higher than the enterprise level. the right to make a choice from the submitted alternatives entrusted to the subject of accounting. a typical example of this concept’s practical implementation is the system of accounting in the ussr after the 1930s and before its collapse, the basis of which was built on the need to ensure the uniformity of accounting indicators to the indicators of the plan, which led to the elimination of most accounting alternatives used in the soviet accounting methodology during the nep. today, for example, the construction of a model of accounting regulation based on the concept of extended univariability, according to c. sottoriva et al. (sottoriva, 2013) is the development of a system of iranian rulebased accounting standards based on the instructions and take into account the specific conditions of the political and economic structure of iran. the concept of limited multivariability is based on a mixed approach to nas regulation, which involves the simultaneous application of accounting imperatives and a set of alternatives to the accounting of the consequences of business operation items. in comparison with two previous concepts, it provides a greater flexibility for subjects when choosing accounting methods. the form of implementation of the concept at the level of accounting system is often the accounting standards. the right to choose alternatives presented in standards is entrusted to the entity of accounting or management of the enterprise. when making accounting choices, a set of restrictions (principles or qualitative characteristics of accounting (financial) information) must be taken into account, which is recorded in the reference document of accounting standards (law or conceptual basis). to date, the concept of limited multivariability is realized in the vast majority of national and international accounting systems. the concept of partially unlimited multivariability implies that accounting is governed only by the use of sets of alternative variants of accounting for the consequences of business operation items. when an accounting entity conducts accounting choice, which involves the choice of one appropriate alternative from each set, limitations in the form of accounting principles are taken into account. an example of implementing this concept in practice is the accounting system described by l. pacioli or the accounting system in the usa, which existed before its reform in 1934 as a result of aggravation of crisis phenomena in the field of corporate governance and economics, one of the reasons for which was the imperfect regulation of the accounting system. the concept of full unlimited multivariability assumes that accounting is regulated only through the use of sets of alternative variants of accounting reflection of the consequences of business operation items, in the choice of which there are no restrictions. that is, accounting choice by accounting subjects is carried out without taking into account any formal (normative) and informal (historically formed principles or postulates of accounting) recommendations. an example of the implementation of such a concept is the accounting systems that existed prior to the emergence of principles or postulates in them or do not foresee the need for their allocation. each enterprise has its micro and macro external environment, which, even at the level of theoretical developments, are not yet fully included in the objects of accounting monitoring. as enterprises are different, they also have different external environments, which is explained by the impact of different economic realities on their operation. the existence of these differences leads to the use of accounting entities different methods of accounting for the same objects. baltic journal of economic studies 161 vol. 4, no. 3, 2018 in addition, the information needs of internal and external users in relation to the same objects of accounting can vary considerably, which also affects the choice of different accounting methods. thus, for all enterprises, it is rather difficult to choose the only best method. it is also impossible to do even for a particular type of operations, not to mention all the objects of accounting monitoring. at each enterprise, the entity that implements accounting policies chooses those accounting methods that are most useful for decisionmaking by users of accounting information and in most relevant and adequate manner reflect the information about the enterprise and the external environment, in which it operates. professor d. solomons highlights four arguments against the complete freedom to choose accounting methods: – the market cannot be dependent on the decisions of corporations regarding how and what they should report; – the need to ensure the comparability of information disclosed by enterprises; – the user of the accounting information must have the ability to understand and use it; – increasing public confidence in financial reporting (solomons, 1983). the above arguments convincingly indicate the need to move from the concept of partially unlimited variability to the concept of limited variability regarding the application of accounting methods, which was implemented in practice in the usa by creating a system of gaap us standards. the freedom to choose accounting methods for researchers-accountants from english-speaking countries actually reduces to the question of the need for accounting regulation through its standardization. apart from the fact that accounting standards restrict the freedom to choose accounting methods and ensure better comparability of reporting indicators, which has become very relevant in the context of globalization of economic systems and relations, there are other reasons for their application, which in general justify the need for accounting regulation. one of the main reasons for the application of accounting standards is the cost savings for the development of individual accounting rules for each enterprise. this reason justifies the expediency of using accounting standards even for those enterprises that are not participants in international capital markets. 4. practical implementation of accounting standardization despite the worldwide standardization of accounting under the slogan of international harmonization of accounting systems, some researchers oppose the regulation of accounting by standardizing it (hendriksen e.s., & m.f. van breda, 2000; sunder sh., 2005; watts r ., 2008). the existence of such views confirms the thesis that the practical implementation of accounting standardization generates a significant number of problems related to the process of developing the standards themselves, the imperfection of their theoretical basis, the obsolete methodology used in scientific research, the effectiveness of their implementation as a means of regulating the accounting system. in order to improve the overall efficiency of accounting standardization, these problems require the fastest solution. however, in the vast majority of cases, the above problems are not related to the reduced freedom to choose accounting methods, which was one of the main tasks, assigned to the relevant accounting standards development agencies in the usa. currently, the choice of accounting methods presented in the accounting standards, along with strictly prescribed univariable rules, is an integral part of modern national and international accounting systems (e.g., nas, gaap us, ias/ifrs), whose structural model is presented in figure 2. the presented model (see figure 2) shows that the accounting system, in particular, in the part of its methodological apparatus, acts as a means of transforming the data on the effects of business operation items on the accounting information, which is the basis for making management decisions by users. a part of transformation means are fixed in the standards (imperatives), and other means of transformation accounting methodology consequenc es of boi accounting information rules of accounting (imperatives), prescribed in standards accounting alternatives, prescribed in standards observance of imperative behaviour the need to make accounting choices figure 2. the structural model of the accounting system based on the concept of limited variability baltic journal of economic studies 162 vol. 4, no. 3, 2018 (alternatives) are chosen by the subject of accounting under the mechanism established in the higher that standards accounting documents (laws, conceptual foundations, etc.). it should be considered that the movement towards such a model of the accounting system in the developed capitalist and post-soviet countries took place in different ways, which can be represented as follows (figure 3). the transition to the concept of limited multivariability in the post-soviet countries was carried out with the implementation of accounting harmonization with the requirements of ifrs through the introduction of national standards. in most post-soviet countries, these processes began in the second half of the 1990s and continue to this day. in the developed capitalist countries, the transition to the concept of limited multivariability began somewhat earlier – in the 70s and 80s of the xx century, along with the process of developing national and international accounting standards (for example, the united kingdom – 1971, the usa – 1974, the ifrs – 1975, australia – 1984, etc.) and the development of conceptual foundations to standards that revealed the limitations that should have been taken into account when making accounting choices. taking into account the fact that capitalist and post-soviet countries have come to the use of the concept of limited multivariability in the accounting system (see fig. 3) in other ways, one can explain some misunderstandings that arise among scholarsaccountants during scholarly disputes and discussions about accounting standardization issues. in particular, the fact that improving the quality of accounting information can be achieved by expanding the number of options for accounting display in the documents that govern the accounting process. so, according to prof. ya.v. sokolov and m.l. piatov, refusal from excessive imperative statutory regulation of the accounting system makes it possible to expand the limits of the truthfulness of financial reporting (as it smooths the issue of financial statements’ compliance with the regulatory requirements for its formation) and, accordingly, to increase its realism (since it creates conditions for ensuring compliance with the actual state of affairs in the organization) (sokolov & piatov, 2007). in addition, the distinction found in the development of post-soviet and capitalist accounting systems makes it possible to explain the views incomprehensible for some scholars of the soviet school, in particular, similar to the thesis of s.a. nikolaieva that professional judgment of the accountant in terms of developed market relations is a means of ensuring the reliability of information (nikolaieva, 2000) that coincides with the general thesis about the need for accounting standardization. from the standpoint of anglo-american scholars, accounting standardization ensures a better comparability of financial reporting indicators, as capitalist countries have switched to the concept of limited multivariability from the concept of partially unlimited multivariability. in this case, when disclosing arguments in favour of standards, their advantages are given in relation to the situation when there are no rules for the regulation of accounting. however, in this case, the advantages of accounting standardization are not considered in comparison with their complete monotonous regulation, when accounting is fully unified. at the same time, this thesis is unacceptable for representatives of the soviet accounting school, as they compare the concept of limited multivariability to the concept of extended univariability, which was used in the soviet accounting system. the soviet system of accounting, in turn, was focused on ensuring maximum approximation to univariable accounting methodology in order to implement a planned approach to economic management. therefore, from the point of view of the representatives of the soviet school, the standardization of the accounting system and the ability to make accounting choices based on the alternatives presented in the standards does not improve but worsens the comparability of financial reporting indicators and does not ensure the reliability of accounting information. 6. the hierarchical structure of accounting methodology figure 4 presents the hierarchical structure of accounting methodology in terms of reducing the number of alternatives to accounting. each of the highlighted zones (zone 1 and zone 2) includes all possible options for an accounting of zones of the lower levels. r . watts and j. zimmermann call concept of extended univariability concept of limited multivariability concept of partially unlimited multivariability post-soviet countries countries that participate in international harmonization of accounting systems developed capitalist countries figure 3. accounting system development in capitalist and post-soviet countries baltic journal of economic studies 163 vol. 4, no. 3, 2018 zone 2 “permissible set”, that is, a set of accounting procedures, when choosing from which managers have the freedom to act (watts r .l., 1990). proceeding from the theory of agency relations, this set of procedures (methods) is voluntarily determined by contract parties. considering zone 2 from the position of the nas structure, it can be established that its boundaries are determined by the national regulator of the accounting system of the country, in which the enterprise or the international regulator (iasb) operates. it should be noted that there is a different degree of influence of zones on each other. the emergence of new accounting variants in zone 1 may remain unobserved by regulators (such as r . chambers’s continuously contemporary accounting (cocoa) or t. limperg’s deprival value), which, as a result, will never be included in the accounting standards. this is associated both with the lack of a global “chart of accounting information models,” as well as to the monopoly of regulators for the inclusion of new accounting methods in the system of accounting standards, which in most countries is conducted under the close supervision of ideologues and developers of gaap us and ias/ifrs. the emergence of new accounting variants in zone 2 expands the space for variation in accounting methods at the enterprise. and the exclusion of existing accounting variants in zone 2 (for example, lifo) is a direct indication of the need to change the accounting methodology of the enterprise (zone 1). taking into account the proposed hierarchical structure of accounting methodology, it is possible to present the following changes in the structure of accounting methodology at the enterprise in different reporting periods (figure 5). such changes take place subject to changes in the order of the accounting policy of the enterprise in terms of accounting methods and the invariability of the set of alternatives in the national accounting standards. when changing the latter, the structure of accounting methodology involves making changes not only in zone 3 but also in zone 2. the presented hierarchical structure (fig. 5) illustrates two basic provisions of the modern model of the accounting system, built on the basis of the concept of limited multivariability: the methodology chosen and consolidated in the accounting standards (zone 2) is only a certain set of alternatives that are chosen by the regulator from all possible options (zone 1) and among which the accountants or managers of the enterprise can choose; the accounting methodology, which is chosen by the enterprise, is fixed by the order on the accounting policy (zone 3), is only one of the possible variants of accounting, accepted at the enterprise. 6. conclusions in order to form theoretical aspects of the concept of the variability of the accounting methodology, its basic concepts – imperative behaviour and accounting choice are substantiated. the following types of variability in accounting are distinguished: complete univariability; zone 3. the accounting methodology chosen by the enterprise for a certain reporting period zone 1. the set of all possible variants of accounting zone 2. the set of all possible accounting variants presented in the accounting standards figure 4. the hierarchical structure of accounting methodology note: м1, м2 … мn – the methodology of enterprise accounting in the 1st, 2nd, and n-th reporting periods figure 5. change in the structure of accounting methodology at the enterprise in different reporting periods м1 м2 мn… baltic journal of economic studies 164 vol. 4, no. 3, 2018 extended univariability; limited multivariability; partially limited multivariability; full unlimited multivariability. after analysing the basic provisions of the concept of accounting variability, we believe that further development of the nas should be considered in the context of the following aspects: 1. at the enterprise level, there is the choice of accounting alternatives presented in the accounting standards of alternatives to accounting, which takes place under the influence of a significant number of objective and subjective factors. the existence of the ability to make accounting choices is associated with the use of a multivariable model as the basis of the nas. in the light of this, one of the most relevant areas of accounting research is the theoretical justification of the place and role of accounting choice in the functioning of the accounting system, the search for analytical models that would allow users to take into account the possibility of influence of accounting choices on financial reporting indicators, the development of recommendations for improving the procedure for making accounting choices with the aim of eliminating abuses from the side of subjects of its implementation and increasing the relevance and fair presentation of financial statements. of particular relevance this area of research is in terms of the hybrid war, when there is a gap between the owners of enterprises and their management, as a result of which the subjects of accounting organization can carry out opportunistic behaviour regarding the enterprise performance in order to achieve their own selfish interests that conflict with interests of owners. 2. the imperatives and alternatives to accounting presented in ifrs and in national p(s)a are not certain theoretical dogmas that cannot be changed or improved but are fixed in the standards by the accounting information models chosen by the regulator (the developer of accounting standards) from the set of the most common world accounting practices and at the present time meet the needs of users of accounting information. further development of accounting methodology necessitates the improvement of accepted imperatives and alternatives (zone 2) by excluding certain components from them (for example, as happened with the lifo method) in case of changing the needs of users of accounting information, or vice versa – by expanding them, through the inclusion of new components from zone 3. one of the present-day examples that confirms this thesis is the request made in early 2018 by the european commission of high-level expert group on sustainable finance to enable eu representatives to make changes to ifrs before they are introduced (gaap.ru, 2018) because, in their present form, they do not always ensure that sustainability and objectives of long-term investments are taken into account. references: gaap.ru. (2018). ifrs. the european commission asks for permission to modify. electronic resource. retrieved from: https://gaap.ru/news/155419 nikolaieva s.a. (2000). professional judgment in the regulatory accounting system. 12, 50-55. sokolov ya.v. & piatov m.l. (2007). a credible and conscientious view of accounting information. accounting. 5, 52-56. hendriksen e.s. & m.f. van breda. (2000). edited by sokolov ya.v. the theory of accounting. 576. solomons d. (1983). the political implications of accounting and accounting standard setting. david solomons. accounting and business research. 107-118. sottoriva c. (2013). regards and views to accounting standards-setting. international journal of economics, business and finance. 4, 71-79. sunder sh. (2005). minding our manners: accounting as social norms. yale international center for finance working paper. 05(18), 36. watts r . (2008). accounting is exciting. mit sloan school of management. 25. watts r .l. (1990). positive accounting theory: a ten year perspective. the accounting review. 65(1), 131-156. baltic journal of economic studies 158 vol. 4, no. 5, 2018 corresponding author: 1 sumy national agrarian university, ukraine. e-mail: lm_1980@ukr.net orcid: http://orcid.org/0000-0002-6321-5178 2 sumy national agrarian university, ukraine. e-mail: tanya_ustik@ukr.net 3 oleksandr dovzhenko hlukhiv national pedagogical university, ukraine. e-mail: bojarinova.ira13@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-158-166 transformation of methodical marketing approaches to the investigation of the problem of farming agricultural enterprises in the grain market in globalization challenges margarita lyshenko1, tatiana ustik2, irina thermosa3 abstract. the purpose of writing the article is to justify the methodological principles and recommendations for the functioning of agricultural enterprises-producers of grain in the target markets for its sale under the conditions of globalization challenges. the production and sale of grain traditionally remains the main focus of the specialization of domestic agricultural enterprises, the source of more than a significant share of their income, the formation and implementation of export potential of the agrarian sector of the national economy, the solution of a number of problematic issues of food security and ensuring the stable development of the subjects of the sphere of production of various sectoral belonging and orientation. at the same time, raising the economic efficiency of the main activities of agricultural enterprises remains a central problem, which in fact produces a complex, multi-faceted, and multi-level problem of the formation and functioning of mechanisms for the effective functioning of agricultural enterprises in the grain market. research methodology. the theoretical and methodological basis of the research is the classical positions of economic theory, fundamental works, and scientific developments of domestic and foreign scientists on the effective functioning of agricultural enterprises in the grain market, the dialectic method of cognition, and the systematic approach to the study of social phenomena and processes that occur in the process of carrying out the main activity enterprises producing grain. in accordance with the goals and objectives of the article, such general scientific and special methods of economic research as monographic (in-depth study of the set tasks), abstract-logical (a theoretical generalization of the research results and formulation of conclusions and proposals) were used. taken together, these methods form the methodological basis of the study. results. after conducting the research, we decided that the study of the problem of the functioning of agricultural enterprises in the grain market is the study of methodological approaches to the evaluation of structural and dynamic trends of development and the state of the situation of target markets for the production of agricultural enterprises-producers of grain in the context of establishing systems supporting strategic and tactical and operational decisions in the production and commercial planes based on the system of integral indicators and individual indicators of the state of the targets. practical use. the results of the research can be used at the state and regional levels of management in forecasting the change and the state of market equilibrium in the agrarian market of ukraine and the conjuncture of the world and regional markets for agricultural products and food. key words: grain market, agricultural enterprises, globalization, indicators of grain market conditions, components of marketing mechanism in grain market, market capacity. jel classification: j43, q13 1. introduction the grain market is a unique complex economic system that covers the totality of economic relations between market players. according to objective laws, the economic mechanism of the market supports the rotation of capital, in turn organizational – carries out the regulation of production. objects of the grain market are commodity, money and information flows, which connect market actors through market infrastructure. interaction of grain baltic journal of economic studies 159 vol. 4, no. 5, 2018 market subjects among themselves and with subjects of other agrarian markets form a cyclic circular rotation of the market and ensure the production of grain products. the main subjects of the grain market are producers and consumers of grain resources. the main principle of the formation and development of the grain market is the adaptation of the content, form, and structure of the grain market system, tools and mechanisms of the market and state regulation to the conditions of the global environment. violations and ignoring of the links between both functional and organizational, levelling the laws of the system’s development will lead to the crisis state of the industry, and in the future to the collapse of the entire agrarian sector. the most important contradictions of the grain market are: market requirements and grain production opportunities, the structure of the commodity supply of grain and the range of demand for grain products, the cost of grain products and the price of grain sales, etc. the grain market situation is a complex of certain factors of social, economic, globalization, and other characters that have a significant impact on the supply and demand of grain sales and its transition from the sphere of production to the sphere of sales and consumption of grain products and products of its processing. globalization is a comprehensive process that deals with the economy of each individual country in its direct connection with the world economy. in the modern world, an international agrarian food system or international agribusiness system has been formed, which is a diversified and multifunctional global complex that combines the production, storage, transportation, and distribution of food products on a global scale. economic relations in this complex are formed on the basis of international division of labour and globalization of regional agrarian food markets. 2. globalization factors for the formation of market conditions the main globalization factors shaping the grain market situation are: the driving factors of globalization: natural and climatic and economic-geographical differences, which predetermine the specialization of countries and cause development and deepening of interconnections between them; development of logistics systems; an increase in the openness of markets and international relations; acceleration of the pace of technological innovations and the invention of the market; inhibiting factors of globalization: state interference in the economy and protectionist policies; exchange rate fluctuations; political conflicts; religious restrictions; key factors of globalization: internationalization; ethics; entrepreneurship; business communication. a comprehensive study of the grain market involves the collection, analysis, evaluation, and interpretation of data on the state, trends, and prospects of the development of the market as a whole and its individual elements, in particular, including its state of affairs. the market-oriented market analysis gives a general qualitative characteristic of its condition and determines the quantitative parameters of its demand and supply. in addition, a comprehensive study includes an analysis of the competitive environment, market infrastructure, and institutional structure of the market, an assessment of the optimal territorial placement of market actors, inter-industry and inter-territorial exchanges, as well as an assessment of the effectiveness of managerial decisions of the authorities in relation to the development of this market. the research of scientific views has shown that there is no consensus on the group of indicators of the market situation. this situation complicates the analysis and forecasting of the market situation. after all, these factors in the calculation are conditional and relative under the influence of market conditions of the factors. we consider it expedient to allocate the following groups of volumetric economic indicators that characterize the market conditions of the grain: supply on the market; demand; the ratio of demand and supply, market conditions, business activity indicators, commercial market risks. it is these indicators that are important in determining the prospects of research and market development. transformation of the world community into a general, comprehensive system of socio-economic, financial, political, technological, cultural, and social ties and relationships leads to the emergence of new approaches to the economic foundations of the formation and functioning of product markets. the rapid pace of the development of such a transformation requires immediate reaction, as changes in world economic relations undeniably affect the development of the economy of an individual country. of particular importance are the issues of adaptation of existing economic provisions in the formation and functioning of the grain market to the conditions of global integration since the importance of such strategic products cannot be overestimated. the population of the world is constantly growing; the problems of providing food are becoming priorities in conditions of uneven structure of productive forces and the social division of labour. therefore, the scientific approach to solving these problems in the part of the study of the economic foundations of the formation and functioning of the grain market in the conditions of globalization is particularly relevant. when studying the formation and functioning of the grain market, it should be noted that many scientists, agrarians, and economists have been studying it since ukraine has been granted market economy status in view of the country’s integration into the world trading baltic journal of economic studies 160 vol. 4, no. 5, 2018 system and accession to the world trade organization. it is clear that such steps have changed the basis of the economy of grain production. the key, baseline criteria and indicators, of course, remain unchanged. however, they have undergone some transformation in connection with changes in the conditions of functioning and marketing policy of commodity producers, new approaches to the interpretation of the concept of the grain market and the foundations of its formation and development. indicators of market conditions are universal for the market of any product and they can be systematized depending on the level of research. table 1 shows the main indicators of market conjuncture. the legal basis of the formation and regulation of the grain market is based on the law of ukraine “on grain and grain market in ukraine”, which defines the state policy on the development of the grain market as a priority sector of the economy of the agro-industrial complex of ukraine and in accordance with art. 1 p. 23 “the grain market is a system of commodity monetary relations that arises between its actors in the process of production, storage, trade, and use of grain on the basis of free competition, free choice of grain sales and price determination, as well as state control over its quality and storage” (law of ukraine “on grain and grain market in ukraine”, 2002). this law determines the priority of the grain market by the state, and also section iii defines the directions of state regulation of the grain market. in accordance with the law of ukraine “on protection of economic competition”, the market of goods (commodity market) is a sphere of turnover of goods (interchangeable goods), for which there are demand and supply within a certain time period and within a certain territory (law of ukraine “on protection of economic competition”, 2001). the basis of the modern grain market is its production in such quantities that would ensure the food security of the state and the economic safety of commodity producers. this issue was especially important in the context of globalization changes and world economic relations of our country. integration into the world economy, development of foreign economic relations and functioning in the conditions of the world trade organization require an in-depth study of the problems of the functioning of grain producers as an open system in the external environment (sakovska, 2011). due to the rapid pace of integration and globalization economic processes, the formation of the basis for the functioning of the grain market should outstrip the pace of emergence of threats and dangers associated with the entry into foreign markets (kvitinska, 2008). the ministry of agrarian policy and food of ukraine, together with the national academy of agrarian sciences of ukraine, developed the grain ukraine-2015 program, which outlines ways to increase grain production and outlines the technological, economic, and regulatory framework for solving the grain problem. solving the tasks identified by the program contributed to increasing the role of our state in ensuring world food security and will outline the activities of grain producers, search for ways to ensure economic security in the conditions of globalization and expansion of world economic relations. the program outlines the agrarian policy regarding the development of the grain market, price policy, risk insurance, systems and mechanisms for regulating the incomes of commodity producers, export and import policy, and ensuring food security, measures to prevent the economic danger of commodity producers from the external and internal threats of the national market. fortunately, in our opinion, the threats and the chain dependence of the processes of market reproduction have been formed, nikishina o.v. (table 2). the new conditions of world economic relations and the functioning of world markets dictated the need for the formation of the national grain market to focus exclusively on the informational and informational table 1 indicators of market conjuncture macroeconomic microeconomic gross domestic product indicators of production gross national product transition stocks of products indices of production by industry investment level the state of the labour market sales volumes the state of capital investments export volumes price level and consumer demand volume of domestic consumption internal turnover capacity external commodity circulation price dynamics currency indicators of economic efficiency of production capital turnover (money supply, exchange rates, interest) the dynamics of taxation the dynamics of the debt level inflation rate source: compiled by the author on the basis of the generalization of literary sources (korzhivska, 2014) baltic journal of economic studies 161 vol. 4, no. 5, 2018 analytical provision of economic security of grain producers. in turn, they are the basis of the proposal in the formation of the market, and the model of the functioning and development of producers directly determines the socio-economic status at the micro, meso, and macro levels. information and analytical support, impartiality and reliability of information help to avoid criminal, illegal actions, to prevent risks of external and internal threats and loss of competitive positions due to the lack of timely information, to prepare and conduct measures in order to prevent possible negative influences. in order to strengthen the use of the necessary information, accounting and analytical materials, it is expedient to use the benefits of the work of management accounting specialists who, in the field of agrarian formations, should participate in solving the tasks of strategic and tactical management. efficient use of computer technology for management accounting should be considered as an integral part of the overall problem of improving the enterprise management process and ensuring its economic security. an effective combination of accounting and analytical information and the newest models of its processing and use in the management system will significantly increase the overall level of decisions and will allow to adjust the production processes and allow the functioning of agricultural enterprises with powerful results, which will allow entering new markets. therefore, in order to evaluate and apply business processes to grain producers, it is expedient to use reengineering as a process of modelling activities for maximizing profits by improving the quality of services, motivating staff, reducing costs through the introduction of information technology and the complete satisfaction of information users. reengineering, as a process of modelling activities to maximize profits by improving service quality, motivating staff, reducing costs through the introduction of information technology and the complete satisfaction of user information requests. 3. indicators of the efficiency of economic relations in the grain market the structure and efficiency of economic relations in the grain product subcomplex also have a decisive influence on the formation and functioning of the grain market. it includes primary and secondary processing technology, as opposed to other types of agricultural products, grain has better storage and transportation opportunities. major commodity producers of grain are large agricultural enterprises, but in modern conditions, their internal structure is constantly changing. associations arise and operate, cooperatives are created, which in turn is an impetus for the development of industrial and social infrastructure, the mechanisms of preserving the labour potential of the village. taking into account the influence of transformational changes, this direction of development has extremely high priority. cereal subcomplex allows the development of related industries involved in the storage, transportation, processing of products. the established cooperation of all units (provision, production, service), the possibility of producing enterprises of different forms of ownership, assistance from the state, the functioning of the national grain market can improve the efficiency of the grain industry and strengthen the position of commodity producers in the direction of strengthening their economic security. one of the fundamentals of grain market functioning in the conditions of expansion of world economic relations is the scientific and technical development in the direction of breeding and seed production, organic grain production, biotechnology using the raw material base of cereals, improvement of animal feeding rations in the direction of optimizing the use of the grain group in order to promote livestock development. in this direction, the actual improvement of the structure of fodder grain by production and regional direction remains. the priority direction of the development of table 2 influence of external threats on the reproduction processes of the grain market of ukraine uncontrolled growth of exports of environmentally friendly ukrainian grain crops 1. mono production of export-oriented crops. 2. the inadequacy of its own raw material base for enterprises in the processing industry. 3. imports of raw materials (cereals and seeds) and finished products (pasta, groats, etc.). 4. increasing the cost of processing products, reducing its competitiveness, strengthening the import dependence of the state. the dominance of foreign tnc among exporters of ukrainian grain 1. strengthening the price dependence of the agrarian sector on the grain export policy of the exporters, who realize the interests of their states. 2. uneven export and world prices of ukrainian grain. 3. prevailing investments in the development of the port infrastructure, the decline of the grain processing sub-complex, soil degradation. the inefficiency of state support under wto restrictions 1. the ineffective activity of the agrarian fund in the grain market. 3. the inappropriateness of the existing methodological principles of state regulation to the principles of the wto. 2. incorrect selection of priorities within the framework of financing the “yellow box” measures, lack of financing of “green” programs. source: compiled by the author on the basis of the generalization of literary sources (nikishina, 2011) baltic journal of economic studies 162 vol. 4, no. 5, 2018 the grain economy is the restoration of production on irrigated lands and investments and state projects in this direction. the generalization of the conducted research gives grounds to draw conclusions on the definition of the theoretical foundations for the formation and functioning of the grain market and an analysis of the understanding of its essence in view of globalization changes and world economic relations of ukraine. with the onset of the market transformation of the agrarian sector in the system of economic relations, there have been tangible structural changes. constant price change, not matching market conditions, allows us to assert that there is no market mechanism for price regulation. such processes negatively affect the activities of commodity producers, the definition of the market and social infrastructure, and also the formation of the purchasing power of the population. the basis of the formation and functioning of the modern grain market is its production in such quantities that would ensure the food security of the state and the economic safety of commodity producers. organizational directions for the regulation of the grain market should be the creation and development of its infrastructure, the formation of the regulatory and legal framework and information and analytical support. activation of the reproductive function of the grain market in the conditions of transformational changes in the economy and market globalization necessitates the reform of the existing regulatory mechanism in accordance with the priorities of the national grain policy. the main ones are support for the production of added value of goods, stimulation of export of finished products of processing of grain raw materials while simultaneously reducing the import of individual crops, maintaining the balance of cross-sectoral commodity and financial balances of the market, directing scientific developments in the direction of biotechnology development, increasing the area of irrigated agriculture, which is relevant in conditions of global warming and changes in climatic conditions, as well as the promotion of organic crop production (lyshenko, 2018). 4. indicators of the communication and marketing structural component of the marketing mechanism of the grain market the evaluation of the communication and marketing structural component of the marketing mechanism of the grain market is carried out using the following formulas: 1) the share of marketing expenses in the gross sales of grain products (sms),%, is expressed in terms of the ratio of gross sales of grain products to marketing costs and multiplied by 100%: sms = ( )r mc * %100 1� � (1) where sms – share of marketing in gross sales, r – the amount of gross sales of grain products; mc – the amount of marketing expenses; 2) marketing capacity of costs smc is expressed in terms of the ratio of marketing costs to the amount of gross sales of grain products: sms = ( )mc r * %100 2� � (2) 3) marketing capacity of expenses in gross expenditures ms is expressed in terms of the ratio of the amount of marketing expenses to gross expenditures: mcmc = ( )mc dc � � � �,% 3 (3) where dc – gross expenditures; 4) the profitability of marketing and marketing costs of grain products (rms) is expressed through the ratio of profit to the amount of marketing costs: rms = ( )p mc � � � �,% 4 (4) where р – profit (financial result) from the sale of grain products; 5) marketing capacity of net profit: rms = ( )1 5 rms ,%� � � (5) 6) the rate of increase in revenues from additional invested marketing costs (grims) is expressed by the ratio of interest rate dynamics of income growth to the percentage dynamics of marketing costs and is calculated by the formula: grims = ( )∆ ∆ � � � � in% mc% 6 (6) where ∆in% – percentage of income growth; ∆mc% – percentage of marketing costs; 7) the coefficient of growth of the increase in the volume of sales of grain products from increased costs (∆mc%) is expressed by the ratio of the growth rate of sales to the growth rate of marketing costs: ∆ ∆ ∆ mc% = ( )� � � s% mc% 7 (7) where ∆s% – the growth rate of sales; ∆mc% – the growth rate of marketing expenses; 8) the return on investment (roi) is calculated by the formula: roi = − ( )s mi mi � � � �,% 8 (8) where s – volumes of sales, the income of the agricultural enterprise, мі – marketing investments; 9) profitability of marketing investments (romi) is expressed through the ratio of income received as a result of marketing actions, to marketing investments: romi = ( )sm mi � � � �,% 9 (9) where sm – revenue generated as a result of marketing actions, мі – marketing investments; the communication priority coefficient (kpi) helps identify trends that are least developed and at baltic journal of economic studies 163 vol. 4, no. 5, 2018 the same time most relevant, that is, those areas of communication activity that should be mentioned as a priority, for which the agricultural enterprise must first direct marketing efforts: kpi = ( )ofi obi � � � �* %100 10 (10) where оfі – actual evaluation of marketing efforts in the i-m direction, scores; obі – desirable (necessary) evaluation of marketing efforts in the i-m direction, points. if kpi > 100%, this means that marketing efforts in this direction should be weakened because the relevance is directly less than its activity. if kpi = 100% is an ideal ratio, which indicates that the marketing efforts of the enterprise fully meet the need for them. if kpi < 100%, this means that the direction needs to be intensified marketing efforts, that is, the actual direction is given insufficient attention to its use by the enterprise. the evaluation of the effectiveness of the marketing management system, as a structural component of the marketing mechanism for the development of the agricultural enterprise of the grain sector, will be expressed by three main indicators: 1) the ratio of revenues from the sale of the i-th event to the expenses for the implementation of i-th measure: ri = ( )di mci � � �, 11 (11) where di – income from the realization of the i-th event, mci – expenses for the implementation of the i-th event; 2) the ratio of the absolute growth rate of income from the realization of the i-th event to the growth rate of expenditures for the implementation of the i-th measure: ∆ ∆ ∆ ri = ( )di mci � � �, 12 (12) 3) the ratio of relative growth rates of income from the implementation of the i-th event to the growth rates of expenditure for the implementation of the i-th event: ∆ ∆ ∆ ri � � � � � �% ,= ( )di% mci% 13 (13) getting the most accurate data when evaluating the effectiveness of structural components of the marketing mechanism for the development of agricultural enterprises is possible only with attention to the synthesis of methods of qualitative and quantitative analysis. to this end, the study used integrated methods that allow a profound and qualitative assessment of the effectiveness of the marketing mechanism, identify the potential for improvement of certain indicators, which will help to adjust the activities of the agricultural enterprise in the context of strategic development. one of the key characteristics of the grain market and an integral part of the analysis of the marketing activity of the enterprise is the capacity of the market. this economic indicator allows you to analyse the actions of all market players (sellers and buyers) in a certain time period and formulate a program of actions for the future. in particular, the study of the capacity of the grain market of food resources is used in determining the level of food security of the state. the assessment of the capacity of the grain market is an important stage in the compilation of actual and forecast balances of demand and supply of agricultural products and food markets. this indicator is widely used in the development of marketing strategy for agricultural and processing enterprises. in addition, it is used for an objective assessment of the situation and dynamics of changes in the market and, accordingly, the adoption of the only effective management decisions that will further affect the viability of a single product or enterprise and the country as a whole (shpichak, lupenko, zhuk, 2013). in the theory of question, in principle, there was a certain consensus on the definition of the basic categories underlying our research, such as: “market capacity” and “entrepreneurial motivation” (see table 3). however, according to our belief, the institutional, which will give them the colour of interdisciplinarity, is definitely an aspect of novelty to a purely economic positioning. we agree with the research of pehov v. a. in part of the theoretical positions for the basic institutional constructs of theoretical and practical recognition of its content characteristics should be considered “capacity of the market” and “motivation of entrepreneurial activity”. their ratio indicates their interdependence because the capacity of the market is actually the actual or potential volume of the sale of the goods, and the economic interest is the motivation of entrepreneurial acts (production, sales, etc.), in this case, in the grain market. this is a somewhat simplistic approach to the definition, but the logic of connections is precisely this, but their basis is the conjuncture – the balance of supply and demand. the process of forming the motivation of entrepreneurship in the production of grain by agricultural enterprises, as well as other participants in the market of the same name (households, farms) is regulated by the institutional factors of the subjective (employee, entrepreneur) and objective (market, market law) order. however, they are all one way or another mediated by cost, its objective law, so in this case, we consider motivation through the prism of the cost and price as the all-embracing quintessential of imitation of motivations in the market system. among the empirical indicators – the definitions of the state of the grain market and the motivation of entrepreneurship, we selected the indicators of production, sales, costs, prices, incomes of consumers, which, in the relevant estimates, constitute a general picture of the national scale, outlining the foundations for proposals for the elimination of deficiencies. baltic journal of economic studies 164 vol. 4, no. 5, 2018 we will note earlier, confirming the above-mentioned thesis that the issue of market capacity and the formation of the motivation of entrepreneurship in the production of grain in its practical implementation has a special institutional nature, since the question is not purely economic benefit, because grain is a social product – its presence is of globally-security nature. therefore, the size of production is actually stable, especially for ukraine. we believe that the formation of market capacity and the motivation of entrepreneurship in grain production empirically position the trends-role parameters of its significance for the national economy since the grain economy initially defined both general and, to a large extent, the general economic effects of profitability, food security, etc. grain production is a top priority because due to the institutional conditions that have developed today (population growth in the world, energy problems), grain demand is increasing and reserves for increasing its production in ukraine are significant. according to the calculations of scientists of the national research centre “institute of agrarian economics”, the share of grain and leguminous crops in the structure of gross agricultural output of ukraine is increasing. thus, their share in 1990 was 18.9% (53.3 billion uah), in 2000 – 18.0% (27.2 billion uah), and in 2010 – 21.4% (41.6 billion uah), in 2011 – 25.9% (60.5 billion uah), in 2012 – 22.1% (49.4 billion uah). this analyst indicates a fairly high capacity of the market and, in particular, a steadily growing motivation for entrepreneurs to produce grain. the production of grain is extremely important for the domestic agro-economic complex of the industry, which has historically developed, due to the natural-economic, national-identical, and institutional conditions. ukraine grows in the countryside, and the countryside has always produced grain because it is the main “currency of success”, the product of agricultural labour – the most liquid in the territory of our state and beyond. the question is not simply the expediency of producing grain products but in the most effective economic order, which will provide growing effects. the study of the problem of market capacity and the formation of entrepreneurial activity in the production of grain has established that these institutional studies are special in essence, significance, and positioning, they should be considered in the context of interdependence, but national identical attributes of economic existence (traditions of consumption, efficiency, desire to produce grain products etc.) show a number of differences, which are often difficult to adjust to the logic of the functioning of the market mechanism. here we mainly draw attention to the traditions, because the ukrainian peasant is an original bread-grower, for him the production of grain is an effect irrespective of the market situation. concretely, we will also make proposals in solving existing problems, we believe that entrepreneurs are motivated in advance to develop this type of economic activity, and the market capacity can still be balanced by a broad state campaign for the promotion of grain products to the external market (lyshenko, 2015). according to the scheme of forecasting balances, which is presented in the methodology for compiling forecast balances of demand and supply of food resources approved by the ministry of economy of ukraine (retrieved from: http://me.kmu.gov.ua/uk/ publish, 2009), the assessment of the capacity of the grain market is carried out according to the following formula: capacity = change in stocks + production + + imports exports (14) table 3 substantive characteristics of the conceptual apparatus of scientific institutionalization of market capacity content author or source the possible volume of sales of goods (works, services) at a certain level of prices is calculated in quantitative (quantity of goods sold) and monetary value (the amount of money for the sold goods) shpichak o. m., lupenko yu. o., zhuk v. m. etc. (2013). capacity of the internal consumer market for agricultural products and food: monograph. k.: nsc iae, 186 p. shchich o. m., bodnar o. v. (2013). problems of the capacity of the internal consumer market for agricultural products and food in ukraine in the context of the purchasing power of the population. economy of the agroindustrial complex. № 6. pp. 5-13. quantitative estimation of market volume in natural or cost indicators kobuta i. v. (2006). features of agrarian policy of the european union in the grain market. economy of agroindustrial complex. № 5. pp. 110-118. the potentially possible volume of sales of a particular product on the market during a specified period, which depends on demand for goods (work or service), price level, general market conditions, incomes, business activity novoselskaya l. i., tsigush yu. yu. (2009). international experience in calculating the subsistence minimum. scientific bulletin of nltu of ukraine. vip. 19.4. pp. 198-200. the institutionalized balance of demand for goods, which, within the limits of certain market conditions and consumer incomes, provides the corresponding potential (volume) of realization pehov v. a. formation of market capacity and motivation of entrepreneurship in grain production: theoretical and methodological aspects of essence. effective economy. mode of access: http://www.m.nayka.com.ua/?op=1&j=efektyvnaekonomika&s=ua&z=4338 baltic journal of economic studies 165 vol. 4, no. 5, 2018 paskhaver b. y., in his research (paskhaver, shubravska, moldova, 2009), notes that the capacity of the grain market is shaped by the influence of such macroeconomic factors as the solvency of the population, the state of development of the agrarian sector, and the rationality of foreign economic activity. depending on the subject of the analysis, the author believes that it is necessary to determine the capacity of the market for individual products. the capacity of the market for a single product is determined by the formula: мрі = сі ×ці ×н, (15) where: mri – the capacity of the market of the i-th product, uah; ci – the consumption of the i-th product per person per year, kg; these are the average annual consumer price of 1 kg of product, uah; h – the number of population, persons the normative capacity of the internal grain market is defined as the sum of the products of the rate of consumption of the population of a certain type of food and the average consumer price for this type of food. the calculation is made on the entire population of the country. erp hcn cpn h= ∑( ) ( )* * ,� � �16 (16) where: erp – the capacity of the internal market of food, uah; нсn – the rate of consumption of the n-th type of food per capita, kg; сpn – consumer price of the n-th type of food, uah; h – average annual population, persons; n – the kind of food resources that form the capacity of the internal food market; c – the number of types of food resources that form the capacity of the internal food market. if consumer prices for foodstuffs are used to calculate the normative volume of the food market, the range is specified in the set of approved by the cabinet of ministers of ukraine decree no. 656 “on approval of nutrition sets, sets of non-food products and service sets for major social and demographic groups” (retrieved from: http://zakon1.rada.gov.ua/cgi-bin/ laws/main.cgi?nreg=656-2000-%ef., 2000 ), in this case, the general formula of the market capacity will look like erp pxn cck h= ∑( ) ( )* * ,� � 17 (17) where: pхк – the volume of the k-th food product by one person of a certain sociodemographic group in a year, kg; cck – average consumer price of the k-th food product, indicated in the set, uah; h – average annual population, persons; k – kind of food resources that form the capacity of the internal food market; d – the number of types of food resources that form the capacity of the internal food market. the normative capacity of domestic agricultural markets is determined in the natural indices for each type of production. in particular, the capacity of the internal grain market is determined by the formula: er grains = (ns prz + ns fz) / 1000 × n + + fn + fpp + vtr, (18) where: ns prz – the standard of consumption of food grain per one person, kg; ns fz – norm of consumption of fodder grain per one person, kg; h – average annual population, thousand persons; fn – normative volume of the seed fund, thousand tons; fpp – the amount of grain used for processing of products for non-food purposes, thousand tons; vtr – the amount of grain losses, thousand tons (paskhaver, shubravska, moldova, 2009). 7. conclusions it is expedient to show the methodology of managing the efficiency of the activity of commodity producers in the grain market from three perspectives: through the clarification of the regularities and objective processes taking place in the grain market, consideration of these features within certain scientific concepts and methods, the creation of a rational model of the grain market; due to the identification of probable conflicts and risks for grain market players, giving priority to economic feasibility and increasing the efficiency of using market principles in view of compliance with legal norms and changes in the organizational and legal basis of the activities of enterprises participating in commercial processes in the market; because of the consideration of the results of the production activity of agricultural enterprises as a material and objective basis of the market, an organic combination of marketing research with the monitoring of the production and commercial potential of commodity producers. it was established that the main globalization factors shaping the market situation of the domestic grain market are: driving factors of globalization (natural and climatic and economic-geographical differences, which predetermine the specialization of countries and cause development and deepening of interrelations between them, development of logistics systems, growth openness of markets and international relations, acceleration of technological innovations and withdrawal of inventions in the market); inhibiting factors of globalization (state interference in the economy and protection policies; fluctuations in exchange rates; political conflicts; religious restrictions; key factors of globalization: internationalization; ethics; entrepreneurship; business communications). baltic journal of economic studies 166 vol. 4, no. 5, 2018 references: korzhenivska, n. l. (2014). ekonomični osnovy formuvannja j funkcionuvannja rynku zerna v umovakh hlobalizaciji svitohospodarskykh zvjazkiv ukrajiny [economic principles of the formation and functioning of the grain market in the conditions of the globalization of world economic relations of ukraine]. current problems of development economy of the region, 10(1), 17-24. pro zerno ta rynok zerna v ukrajini (2002). [about grain and grain market in ukraine]: law of ukraine dated july 4, № 37 / іv. bulletin of the verkhovna rada of ukraine, № 35, p. 258 (with changes). pro zakhyst ekonomichnoji konkurenciji (2001). [on protection of economic competition]: law of ukraine dated january 11, no. 2210-ііі. bulletin of the verkhovna rada of ukraine, № 12. art. 64 (with changes). sakovskaya, о. (2011). ekonomichni zasady orghanizaciji ta funkcionuvannja reghionaljnogho rynku zerna [economic principles of the organization and functioning of the regional grain market]. retrieved from: http//sophus.at.ua/publ/2011_11_15_16_kampodilsk/section_5_2011_11_15_16/ekonomichni_zasadi_ organizacij_ta_funkcionuvannja_regionalnogo_ri nku_zerna/7-1-0-163 kvitinska, u. i. (2008). formuvannja zovnishnjotorghiveljnykh vidosyn na rynku zerna v ukrajini [formation of foreign trade outlets on the grain market in ukraine]. economics. retrieved from: http://www.rusnauka.com/ 33_niek_2008/economics/37199.doc.htm nikishina, o. v. (2011). strateghija rozvytku derzhavnogho rynku zerna v umovakh ghlobalizacijnykh vyklykiv [strategy for the development of the state grain market in the context of globalization challenges]. problems of the formation of a new economy in the 21st century (dnipropetrovsk, december 22-23, 2011), at 8t. t. 2. dnipropetrovsk: bila k. o. lyshenko, m. o. (2018). efektyvnistj funkcionuvannja siljsjkoghospodarsjkykh pidpryjemstv na rynku zerna: naukovi osnovy, stan, perspektyvy [efficiency of functioning of agricultural enterprises in the grain market: scientific fundamentals, state, prospects]. monograph. burin: pe "burinsky district printing house". shpichak, o. m., lupenko, yu. a., zhuk, v. m. (2013). jemnistj vnutrishnjogho spozhyvchogho rynku siljsjkoghospodarsjkoji produkciji ta prodovoljstva [capacity of the internal consumer market for agricultural products and food]. monograph. k.: nsc "iae". pro zatverdzhennja metodychnykh rekomendacij skladannja proghnoznykh balansiv popytu i propozyciji prodovoljchykh resursiv [on approving the methodological recommendations for the preparation of forecast balances of demand and supply of food resources]. order of the ministry of economy of ukraine dated december 18, 2009, no. 1426. retrieved from: http://me.kmu.gov.ua/uk/publish paskhaver, b. y., shubravska, o. v., moldavan, l. v. (2009). vyklyky i shljakhy aghroprodovoljchogho rozvytku [challenges and ways of agri-food development]. national academy of sciences of ukraine; institute of economics and forecasting. k. pro zatverdzhennja naboriv produktiv kharchuvannja, naboriv neprodovoljchykh tovariv ta naboriv poslugh dlja osnovnykh socialjnykh i demoghrafichnykh ghrup naselennja [on approving sets of food products, sets of non-food products and sets of services for major social and demographic groups] : resolution of the cabinet of ministers of ukraine dated april 14, 2000, no. 656. retrieved from: http://zakon1.rada.gov.ua/cgi-bin/laws/ main.cgi?nreg=656-2000-%ef lyshenko, m. o. (2015). osnovni problemy rozvytku rynku zerna ta metody pidvyshchennia efektyvnosti yoho vyrobnytstva [basic problems of the development of grain market and the methods of improving the efficiency of its production]. bulletin of sumy national agrarian university. scientific journal. series “economics and management”, no. 5(64), pp. 37-45. lyshenko, m. o., makarenko, n. o., makarova, v. v., mushtay, v. a. (2018). orhanizatsiyne ta ekonomichne rehulyuvannya rynku zerna v umovakh staloho rozvytku [organizational and economic regulation of the grain market in conditions of sustainable development]. journal of environmental management and tourism. spring. volume ix. issue 1(25). рp. 95-104. mushtai, v., lyshenko, m., makarenko, n. (2018). zabezpechennya vyrobnytstva zerna v umovakh staloho rozvytku. [provision of grain production in conditions of sustainable development]. monograph. lap lambert academic publiching. pilarczyk, b., nesterowcz, r . (2010). marketing ekologicznych produktów żywnósciowych. warszawa: wydawnictwo oficyna a wołters kluwer business. pilarski, s., grzybowska, m., brzeziński, m. (2003). rynek zywności ekologicznej. seria: monografie i rozprawy. łomża: wydawnictwo wyżsej skoly agrobiznecu w łomży. baltic journal of economic studies 53 vol. 2, no. 1, 2016 corresponding author: 1 department of economic theory, lviv national agrarian university. e-mail: ivan_korchynskyy@mail.ru methodological aspects of rational design formation of infrastructure of agrarian sector of ukraine ivan korchynskyy1, lviv national agrarian university, ukraine abstract. methodological aspects of formation of rational design of infrastructure of agrarian sector of ukraine on the basis of the institutional approach and laws of architectonics are examined. it is shown that the agrarian sector of ukraine is a complex socio-economic system, the formation and development of which is in the process of market transformation what is caused by institutional influences. in general the process of relations institutionalization imply their formalization and standardization, in other case the subject of public life could not predict the actions of other entities associated with him and ensure their cooperation. one of the specific characteristic of human society is formed institutional system that regulates behaviour. in the article the factors of influence on the conduct of being in charge subjects are considered in the conditions of development of market economy. the special attention is spared the institutional factors of the economy growing. methodology. the meaning of “agricultural field” and “infrastructure” and their mutual consistency is classified. as the scientific method, the institutional approach of principles of architectonics has been used, which allowed to justify the creation of a rational approach to the design of infrastructure in agrarian sector as a whole on the basis, relation and interdependence of its elements, based on the fundamental laws of architectonics (law of equilibrium, law of the golden mean structuring). the article demonstrates a necessary of the choice of a theory of institutionalism as the main methodological basis for the study of the process of innovation development of economic system of ukraine. it is determined that the inefficient activities of institutions in ukraine are the main cause of the low level of innovation, which has a negative impact on the development of the economy as a whole. results. research points on new aspects of infrastructure as a part of the entire socio-economic system that implements the functions in the agricultural sector and significant effect on the effective functioning of the system. value/originality. the different organizational and functional classifications of institutions that proposed by well-known western and natives authors are analyzed in this article. also the basic prerequisites of forming institutions are considered here. according to the famous western approaches to the institutional effectiveness the author tried to analyses main social, economical and political factors that influence the institutional building. key words: agriculture, infrastructure, architectonics, characteristic of human society significant effect institutional effectiveness. jel classification: o01, o04, q13, b15, a11, a14 1. introduction the agricultural sector of ukraine is a complex social and economic system. in the process of market transformation the formation and development it is influenced by the institutional factors. in most cases these factors were not the consequence of advanced scientific researches and deliberate actions and but the result of random and unsystematic decisions of the governing bodies which they carry out by realizing their mercantile business or lobbying interests. in developed countries the agricultural sector as the system evolved in an evolutionary way. that is why, it is a product of a market system, where all the interests are sufficiently balanced and harmonized because this process has been taking for a long time. current ukrainian economic system is the result of transformation process, where balance and harmony as qualitative characteristics of the system at an early stage of their development. in this regard, institutional, organizational and legal framework of agricultural sector infrastructure as part of the economic system of the state still has imperfect design and lack of action effectiveness. it creates problems for all infrastructure functioning and distorts its impact on effectiveness of the agricultural sphere in general. architectonics of infrastructure significantly affects the level of transaction costs of the economic system, which was formed in the sphere of agriculture. this is necessary baltic journal of economic studies 54 vol. 2, no. 1, 2016 to take into account while reasoning of the economic system strategy development. it outlines the content of the complex scientific and economic problem which needs to be deeply investigated by theoretical and applied researches (ostrom, 2012). 2. analysis of recent researches and publications institutional aspects of economic systems formation and development, including agriculture, have been attracting much attention from scientists and government lately. it is worth mentioning the results of research and publications of a. gritsenko, b. valentine, m. malik, y. lopatinskii (lopatinskii, 2006), p. sabluk, a. nord, v.  yurchishin, v.  yakubenko and scientific developments of other scientists based on institutional theory in its various directions and trends, mainly covered in by d. north, w. williamson (williamson, 2002), r . coase and others. a significant contribution to the development of these theoretical approaches concerning transformation economies has been made by russian scientists such as v. kapelyushnikov, s. nureyev, s. kirdina and others. however, sectoral aspects of the implementation and application of those theoretical achievements in agriculture are insufficiently investigated. this situation takes place because problems of formation of the institutional framework of agrarian economy is extremely complex both in theoretical and applied value. today ukrainian agricultural sciences have practically no deep researches concerning the process of the institutions formation which analyze agricultural infrastructure. as a rule, in ukraine, these researches are limited to analysis of problems which take place in some markets (commodity, financial, consumer), and their infrastructure is seen as a separate element of these markets. also, there is no approach in which infrastructure is perceived as an integrated shell of all socio-economic system, which includes agricultural sector as a whole, including its social manifestations (pavlov, 2012). 3. setting objectives it is necessary to investigate the methodological aspects of infrastructure formation of ukrainian agricultural sector, justifying the feasibility of institutional approach and its organic combination with the basic principles of architectonics as the scientific method. this will give an opportunity to justify a creation of a rational construction of agricultural sphere infrastructure as a whole, which is based on the principles of structuring, communication and interdependence of its elements. a small number of publications on the above mentioned topic cannot recreate a full, sufficient and an objective picture of current scientific knowledge about the actual problems and that fact predetermined of the article writing (kostyrko, 2014). 4. presenting the main material in order to outline clearly the object of scientific research, it is necessary to determine the content of individual concepts namely to specify understanding of concepts –“agricultural sphere” and “infrastructure”, and their mutual consistency. without going into the debate on the content, in our research agricultural sector is seen as comprehensive concept that incorporates all processes of human activity in rural area – as agroindustrial and social, across the breadth of its manifestation. in the context of this, agriculture economy is the primary concept, which expanded by servicing and processing industries to the agricultural sector of the economy. agricultural sector together with the social infrastructure of the rural areas forms agricultural sphere. this approach is logically justified by v.i. kurylo (kurylo, 2014), and we accepted it as a basis in the process of investigation of infrastructure architectonics problems of a country’s agricultural sector. as to the concept of infrastructure, for research purposes we interpret its meaning as a whole set of institutes and institutions that form the perfect structure, which provides operating conditions of all subjects of the economic relations within the agricultural sphere and outside it, creating such level of transaction costs within the economic system, in which economic mechanism operates effectively. in some publications we covered problems of market infrastructure formation in the agricultural sphere. but there are questions that were not answered (berezivskyj, 2011, ostashko, 2004). for example, very important practical problem is dominance of the intermediaries on the market, whose incomes are unreasonably high. the banking sector concentrates its resources on large producers, limiting access to loans to other entities, farmers and small agribusiness. state regulation, tax and budget systems create such a redistribution mechanism of national income in which agricultural sector as an integrated socio-economic system is developing with significant deformations. the manifestation of such deformations is the growth of monopolization and concentration of all resources in large agricultural farms as well as continued growth of poverty of peasants and rural areas decline. there are also contradictions between the rates of individual components of all economic system, which was formed in the agricultural sector. the manufacturing sector is evolving with noticeable success, especially in the horticulture (the forefront of grain exports, sunflower). as for livestock, we can see that poultry is practically restored, pig farming is in line, a modern organizational structure is forming. in general, production efficiency is increasing and financial results are improving. however, the development of infrastructure significantly has been slowed, and this fact distorts all economic mechanism of agricultural sphere and creates imbalances in system of industry’s revenues distribution. this indicates that the economic system, which was formed in the agricultural sector needs to move baltic journal of economic studies 55 vol. 2, no. 1, 2016 to a different trajectory of development which will based on a better overall balance and coherence between different its links in order to achieve such equilibrium state in which the interests of all economic process actors would be provided with income adequate to their place and role in this system. new challenges require new scientific researches, including theoretical and methodological approaches to their implementation. the end of 90s in xx century, the interest in institutionalism as the direction of modern economic thought and methodological basis for scientific research sharply increased. among the authors of such researches the following authors are worth to be mentioned: arhiyereyev s.i., v.v.  dementev, g.v.  zadorozhnyy, a.v.  nosova (nosova, 2011) r .f.  pustoviyt, a.a. tkach, a.a. chukhno, o.l. jaremenko and etc. in ukraine the publication of a number of fundamental works, including collective monograph “institutional architectonics and dynamics of economic transformation” became a notable scientific event. this monograph was a result of team work of the institute of economics and forecasting of nasu scientists, who started a new scientific direction – institutional architectonics (grytsenko, 2004). architectonics (from the greek. άρχιτεκτονικη (τέχνη)  – construction, construction) – is a concept which is used for expression of construction laws which are inherent for a constructive system of building; it is the basic principle of building design as a whole, integral relationship of its main parts, composition. in a broader sense architectonics is the basic principle of structuring, communication and interdependence of the elements. in economic theory architectonics combines knowledge of the deep institutional structure, building skills and general construction plan for an integrated system of institutions that form the new framework (architecture/ architectonics) of socio-economic systems and policy, particularly in agriculture. analysis of market reforms practice clearly indicates that institutional approaches to solving urgent theoretical and practical issues are used not enough in the state. within this new research direction and on its methodological basis it is necessary to investigate and to solve a number of theoretical and practical problems that occur in the process of formation and operation of infrastructure as a separate component of the overall socio-economic system of the agricultural sphere. methodological basis of the research is based on the integrated application of the substantive provisions of institutional theory that are used as a scientific environment where architectonics laws are employed as a method of designing of an economic system with elements, which are harmoniously combined, creating an effective construction. quality parameters of this construction allow achieving a better and more just social product distribution through equal effects that the separate elements of infrastructure and institutions of agricultural sphere receive. architectonics basic laws (the law of equilibrium, the law of the golden mean and law of structuring) are acting in all integral systems: natural, technological, biological and social. the essence of the law of equilibrium, in particular, lies in the fact that all elements of the integrated system are moving toward peace regarding other elements or they are in this state. it means that all elements of agricultural sphere infrastructure should be changed and improved so that to approximate the entire system to the point of equilibrium for which it will function effectively, ensuring consistency of economic the interests of all the elements that constitute it. the law of the golden mean provides dimentional and quantitative description of the agricultural sphere infrastructure through the interaction of its uniform elements as an integrated system that is in the constant table 1 institutional factors affecting economic growth terms сircumstances and the main actors (factors) general • dominant idea or thought in society • historical development of society social and psychological characteristics • relatively stable society that change through evolution • psychological traits of people living in the community • special role of national culture, mentality, ethnic types of behavior political сonstitution • quality and methods of cooperation between the state, business, political culture and informal rules and traditions economic • clear «rules» that define effective and-effect activities • clearly defined property rights. • social functions and trading rules • efficiency of the banking and financial systems • appropriate methods of risk management and insurance system • common tax system • decentralized economic system • formal economic institutions that have a positive impact on long-term growth source: piech,k. (ed.), economic policy and growth of central and east european countries. london,university college london, 2003, р. 8 baltic journal of economic studies 56 vol. 2, no. 1, 2016 motion and integrate action of all items in the characteristic, which reproduces the integrity of the system relative to other systems through some average meaning. this law allows you to evaluate, for example, the average return (yield) of the individual segments of infrastructure and track its changes in space and time, which is important for analyzing the effectiveness of institutional changes in agricultural sphere. the law of structuring describes the relationship of elements that have internal factors of and are able to unite in some holistic formation and to structure within the broader integrity, which is also important in the study of areas of agricultural sector infrastructure development and institutional design institutional changes process. investigation process of the formation and operation of agricultural sphere infrastructure is considered as an integral part (element) of all the socio-economic system of the state, which is considered from the standpoint of institutional theory. it is combined with approaches based on architectonics laws and enables deeper insight into the nature and character of the process as well as creates new criteria for its course. a new development for the agricultural sector of ukraine has an innovative infrastructure as a lot of companies and organizations, institutions, their associations, associations that provide services to ensure the innovation (finance, consulting, marketing, communicative information, legal, education and etc.). as you know, one hundred novice business success in business reach just twelve. the realities of the ukrainian agrarian the percentage is much lower. the instability of the political environment, crisis expectations for the economy in general, and particularly in the agricultural sector, the unpredictability of market conditions – all this hinders agricultural output ukrainian sector of the protracted crisis. in this regard, it is important touse the method to survive from 30  to 80% businessmen-beginners (zheleny, 2004). this component of the innovation infrastructure – business incubators, which began to be created in ukraine in 1997, but now considered a classic, only one – in the white church. firstbusiness incubator (the word "incubator" means "growing"), appeared in late 50-ies in the united states. united under one the roof of the company shared experiences in dealing with similar problems, consult a lawyer and an economist, and thus significantly quickly overcome bureaucratic obstacles. within a few years30% of these beginners business moved from small business to the middle (zheleny, 2004). since then, the local us authority’s began to sponsor the development of a business incubator that brought considerable benefitsfor power (new jobs, more taxes). creating a network of business centres and business incubators in the agrarian sector of ukraine since the regional centres, enabling the provision of services such as secretarial, providing office equipment, teaching computer skills. it will give the possibility of obtaining preferential loans, business training planning, and so on. all of this is one of the most important aspects building infrastructure for the creation and development of small and mediumsized entrepreneurship in rural areas, and thus can play an important role in the revival of agricultural production in ukraine. it is precisely in this economic and social context that the modern problems of economic development must be considered. the fundamental issue can be stated succinctly. successful development policy entails an understanding of the dynamics of economic change if the policies pursued are to have the desired consequences. and a dynamic model of economic change entails as an integral part of that model analysis of the polity since it is the polity that specifies and enforces the formal rules. we are still some distance from having such a model but the structure that is evolving in the new institutional economics, even though incomplete, suggests radically different development policies than those of either traditional development economists or orthodox neoclassic economists. development economists have typically treated the state as either exogenous or as a benign actor in the development process. neoclassical economists have implicitly assumed that institutions (economic as well as political) don't matter and that the static analysis embodied in allocative-efficiency models should be the guide to policy; that is "getting the prices right" by eliminating exchange and price controls. in fact the state can never be treated as an exogenous actor in development policy and getting the prices right only has the desired consequences when you already have in place a set of property rights and enforcement that will then produce the competitive market conditions. before going further it is essential to distinguish clearly institutions from organizations. institutions are the rules of the game of a society or more formally are the humanly-devised constraints that structure human interaction. they are composed of formal rules (statute law, common law, regulations), informal constraints (conventions, norms of behaviour, and self imposed codes of conduct), and the enforcement characteristics of both. organizations are the players: groups of individuals bound by a common purpose to achieve objectives. they include: – political bodies (political parties, the senate, a city council, a regulatory agency); – economic bodies (firms, trade unions, family farms, cooperatives); – social bodies (churches, clubs, athletic associations); – educational bodies (schools, colleges, vocational training centres). these definitions under-gird five propositions that define the essential characteristics of institutional change: 1. the continuous interaction of institutions and organizations in the economic setting of scarcity and hence competition is the key to institutional change. 2. competition forces organizations to continually invest in skills and knowledge to survive. the kinds of skills and knowledge individuals and their organizations acquire will baltic journal of economic studies 57 vol. 2, no. 1, 2016 shape evolving perceptions about opportunities and hence choices that will incrementally alter institutions. 3. the institutional framework dictates the kinds of skills and knowledge perceived to have the maximum pay-off. 4. perceptions are derived from the mental constructs of the players. 5. the economies of scope, complementaries, and network externalities of an institutional matrix make institutional change overwhelmingly incremental and path dependent. elaborate on these propositions. economic change is a ubiquitous, ongoing, incremental process that is a consequence of the choices individuals and entrepreneurs of organizations are making every day. while the vast majority of these decisions are routine (nelson and winter, 1982) some involve altering existing "contracts" between individuals and organizations. sometimes that recontracting can be accomplished within the existing structure of property rights and political rules; but sometimes new contracting forms require an alteration in the rules. usually existing informal norms of behavior will guide exchanges, but sometime such norms will gradually be modified or wither away. in both instances institutions are gradually being modified. modifications occur because individuals perceive that they could do better by restructuring exchanges (political or economic). the source of the changed perceptions may be exogenous to the economy-for instance a change in the price or quality of a competitive product in another economy that alters the perceptions of entrepreneurs in the given economy about profitable opportunities. but the fundamental source of change is learning by entrepreneurs of organizations. while some learning is a result of idle curiosity, the rate of learning will reflect the intensity of competition amongst organizations. competition is a ubiquitous consequence of scarcity and hence organizations in an economy will engage in learning to survive. but the degree can and does vary. if competition is muted as a result of monopoly power the incentive to learn will be reduced. the rate of learning determines the speed of economic change, the kind of learning determines the direction of economic change. the kind of learning is a function of the expected pay-offs of different kinds of knowledge and therefore will reflect the mental models of the players and most immediately at the margin, the incentive structure embodied in the institutional matrix. as noted earlier if the institutional matrix rewards piracy (or more generally redistributive activities) more than productive activity then learning will take the form of learning to be better pirates. change is typically incremental, reflecting ongoing ubiquitous evolving perceptions of the entrepreneurs of organizations in the context of an institutional matrix that is characterized by network externalities, complementaries and economies of scope among the existing organizations. moreover since the organizations owe their existence to the institutional matrix, they will be an ongoing interest group to assure the perpetuation of that institutional structure thus assuring path dependence. revolutions do occur, 7 however, when organizations with different interests emerge (typically as a result of dissatisfaction with the performance of existing organizations) and the fundamental conflict between organizations over institutional change cannot be mediated within the existing institutional framework. it is one thing to describe the characteristics of economic change; it is something else to prescribe the correct medicine to improve the performance of economies. we simply don't know how to transform ailing economies into successful ones but some fundamental characteristics of institutions suggest some clues. 1. institutions are made up of formal rules, informal norms and the enforcement characteristics of both and it is the admixture of rules, norms, and enforcement characteristics that determines economic performance. while the formal rules can be changed overnight, the informal norms change only gradually. since it is the norms that provide the essential "legitimacy " to any set of formal rules, revolutionary change is never as revolutionary as its supporters desire and performance will be different than anticipated. more than that societies that adopt the formal rules of another society (such as latin american countries' adoption of constitutions like that of the united states) will have very different performance characteristics than the original country because both the informal norms and the enforcement characteristics will be different. the implication is that transferring the formal political and economic rules of successful western market economies to third world and eastern european economies is not a sufficient condition for good economic performance. privatization is not a panacea for solving poor economic performance. 2. it is polities that shape economic performance because they define and enforce the economic rules of the game. therefore the heart of development policy must be the creation of polities that will create and enforce efficient property rights. unfortunately, however, research in the new political economy (the new institutional economics applied to polities) has been largely focused on the united states and other developed countries. while we know a lot about the characteristics of the polities of third world countries we have very little theory about such polities. we know even less about the consequences of radically altering the institutional framework of central and eastern european societies. however, the characteristics of institutions described in the foregoing sections of this paper suggest some implications: • political institutions will be stable only if they are supported by organizations with an interest in their perpetuation. therefore an essential part of political/ economic reform is the creation of such organizations. • it is essential to change both the institutions and the belief systems for successful reform since it is the mental models of the actors that will shape choices. baltic journal of economic studies 58 vol. 2, no. 1, 2016 • evolving norms of behaviour that will support and legitimize new rules is a lengthy process and in the absence of such reinforcing norms polities will tend to be unstable. • while economic growth can occur in the short run with autocratic regimes, long run economic growth entails the development of the rule of law and the protection of civil and political freedoms. • informal constraints-norms of behaviour, conventions, and codes of conduct-are a necessary (but not sufficient) condition for good economic performance. societies with norms favourable to economic growth can sometimes prosper even with unstable or adverse political rules. the key is the degree to which there is enforcement of the adverse political rules. we know very little about the evolution of belief systems and consequent informal constraints although religions have clearly been a basic component of belief systems. 3. it is adaptive rather than allocative efficiency which should be the guide to policy. allocative efficiency is a static concept with a given set of institutions; the key to continuing good economic performance is a flexible institutional matrix that will adjust in the context of evolving technological and demographic changes as well as shocks to the system. it is the creation of a stable polity with complementary norms that is the essential characteristic. successful political/economic systems have evolved such characteristics over long periods of time. we know very little about how to create such systems in the short run or indeed, whether it is even possible to create them in short periods of time. however it is doubtful if the policies that will produce allocative efficiency are always the proper medicine for ailing economies. efficient policies that are perceived to be inequitable will engender political reactions which can stall or reverse effective reforms. there is no greater challenge facing today 's social scientist than the development of a dynamic theory of social change that will fill in many of the gaps in the foregoing analysis and give us an understanding of adaptive efficiency. 5. conclusions and future prospects of the scientific research the infrastructure of agrarian sphere as an object of research is complex, comprehensive and system identity that is in a state of development through constant change and improvement. during these changes architectonic infrastructure developing and improving the laws,are not known fully. insufficient understanding of these laws not only due to the lack of deep scientific analysis of the process of formation and development of infrastructure,and proper scientific substantiation methodology of the process of learning it as an object. the study of this process from the standpoint of institutional theory combined with approaches based on the laws of architectonics, let you discover new aspects of infrastructure as part of the entire socio-economic system that realizes its functions in agriculture and significant impaction the efficiency of the system. therefore scientific research in this area is important both from positions of economic theory and application considerations. references elinor ostrom (2012). managingshared. theevolutionofinstitutions of collective action. – kyiv. – p. 398. lopatynskyi, u.m. (2006). institutionalization of transitive economy. nauch. trudy donntu, 103-1. – pp. 229-232. wiliamson, o.e., vinter, s.d. (2002). nature of the firm: origins, evolution and development. kyiv: a.s.k, 336 p. pavlov, o.i., khvesyk, m.a., yurchyshyn, v.v. (2012). sustainable development and security agro sector of ukraine in the conditions of globalization challenges. odesa, astroprynt, 760 p. kostyrko, i.g. (2014). gaps in institutional infrastructure and its evaluation: theoretical aspect. kyiv, ekonomika apk, № 2, pp. 81-86. kurylo, i. v. (2014). the content and value of some agricultural definitions. kyiv, ekonomy ack, № 2, p. 87-92. berezivskyj, p.s. (2011). organizational-economic mechanism of improving the socio-economic efficiency of agribusiness in western ukraine. lviv, 688 p. ostashko, t.o. (2004) market transformation of the agricultural sector. kyiv, feniks, 280 p. nosov, s.s. infrastructure: the definition and specific features. [electronic resource]. – retrieved from: http:// uchebnikbesplatno.com/teoria ekonomicheskaya/ekonomicheskaya-teoria-nosova.html grytsenko, a.a. (2008). institutional architectonic and dynamics of economic transformation. kharkiv, fort, 928 p. иван корчинский методологические аспекты формирования рационального дизайна в инфраструктуре аграрного сектора украины аннотация. целью работы является исследование методологических аспектов процесса формирования рациональной конструкции инфраструктуры аграрной сферы украины на основе институционального подхода и законов архитектоники. показано, что аграрная сфера украины является сложной социально-экономической системой, формирование и развитие которой в процессе рыночных трансформаций происходит под институциональным влиянием. в статье рассмотрены факторы влияния на поведение хозяйствующих baltic journal of economic studies 59 vol. 2, no. 1, 2016 субъектов в условиях развития рыночной экономики. особое внимание уделяется институциональным факторам экономического роста. методика. уточнено содержание понятий “аграрная сфера” и “инфраструктура” и их взаимной согласованности. доказана целесообразность применения институционального подхода в органической совокупности с основными принципами архитектоники, что позволяет обосновать подход к созданию рациональной конструкции инфраструктуры аграрной сферы как одного целого на основе принципов структурирования, связи и взаимообусловленности ее элементов, исходя из основных законов архитектоники (закон равновесия, закон золотой середины и закон структуризации). в статье доказывается необходимость выбора теории институционализма как основной методологической базы при исследовании процесса инновационного развития экономической системы украины. определено, что неэффективная деятельность институтов в украине является основной причиной низкого уровня внедрения инноваций, что негативно влияет на развитие экономики в целом. результаты. исследования показали новые аспекты функционирования инфраструктуры как части всей общественно-экономической системы, которая реализует свои функции в аграрной сфере и существенно влияет на эффективность функционирования этой системы. в целом процесс институализации отношений предполагает их формализацию и стандартизацию, иначе субъект общественной жизни не смог бы предсказать действия других субъектов, связанных с ним, и обеспечить их взаимодействие. одной из специфических характеристик человеческого общества является именно сформированная институциональная система, которая регулирует поведение людей. в статье предпринята попытка комплексно классифицировать институты по разным организационными и функциональными признаками, предложенными авторитетными западными и отечественными учеными, а также рассмотреть принципы формирования различных институциональных категорий. значение/оригинальность. автором освещены подходы к трактовке эффективности институтов, а также проанализированы факторы, формирующие основные институциональные социально-экономические и политические различия. baltic journal of economic studies 216 vol. 4, no. 3, 2018 corresponding author: 1 department of economic and management, odesa i.i. mechnikov national university. e-mail: olga-poberezhec@ukr.net 2 department of administrative and commercial law, odesa i.i. mechnikov national university. e-mail: stepanovatv@ukr.net 3 department of finance, vasyl stefanyk precarpathian national university. e-mail: romanwur@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-216-221 ways to overcome the crisis condition of the ukrainian insurance market: the economic and legal aspect olga poberezhets1, tetiana stepanova2 odesa i.i. mechnikov national university, ukraine roman shchur3 vasyl stefanyk precarpathian national university, ukraine abstract. trends of the integration of the insurance market on european and world scale make it necessary to examine the insurance sector of the economy. as a result of the financial and economic crisis, all financial and economic instruments of states covered negative phenomena. the current stage of development of the national and world economy is described by the uneven overcoming of the crisis in different sectors of the economy that negatively affects integration processes. as in ukraine the insurance sphere has not received due attention and support from the state, the formation of an appropriate basis for overcoming the crisis phenomena in the insurance sector of the economy, the application of which is a condition for further development and use of potential opportunities for improving economic systems, determines the timeliness of consideration of this issue. in the course of overcoming the crisis phenomena in the insurance sphere, a critical combination of deterrents arises, the systematization and research of which helps in developing actions to overcome the crisis in the insurance sector of the economy, which determines a necessity of complex examination of this problem with the goal of an early exit from the crisis and further integration of insurance markets. the purpose of the article is to consider internal and external factors that delay the way out of the crisis of the insurance market, and on the basis of generalizing the deterrents of development – providing recommendations of the systematization of actions to overcome the crisis of the insurance sector, taking into account features of the national and global insurance market. methodology. analytical market reviews, materials of periodicals, resources of the internet are the informational and methodological basis of the investigation. to achieve the goal set, the following general scientific and special methods were used: economic and mathematical methods, structural-logical analysis, analogy, synthesis, comparison and integration, factor analysis. results. the system of actions of economic and legal nature that should be taken into account for successfully overcoming the crisis of the insurance sphere is substantiated. problem aspects of external and internal nature and directions of their elimination are determined. the proposed model for overcoming the crisis of the insurance sphere takes on special significance in the context of the supranational task of developing actions to minimize and eliminate the consequences of the global economic crisis. directions for reforming the regulatory and legislative basis are considered. practical implications. the system of economic and legal actions and their separate types can be applied for the successful overcoming of the crisis in the insurance sector, taking into account the specifics of economic development and the condition of the insurance sector of the economy in other countries. value/originality. most of the scientific studies are devoted to the theoretical aspects of the economic crisis, namely, the more precise definition of the essence of this process as a form of modern financial and economic dynamics. a part of the studies is devoted to the consideration of common features and national features of the economic crisis in individual countries and regions. the authors considered the issues of developing actions to overcome the crisis in the insurance sphere in a system combining the abovementioned aspects with the specifics of development and overcoming the crisis moments of the insurance sector of the economy. it is also important to take into account the influence of planned legislative reforms on the development of the insurance market in ukraine. accounting for all components of the insurance market, existing features within the confines of the national economy has allowed us to work out directions for further development of the insurance market. key words: insurance, insurance market, crisis condition, economic development, economic and legal regulation, risk. jel classification: g22, k22 baltic journal of economic studies 217 vol. 4, no. 3, 2018 1. introduction the political redistribution of spheres of influence on the world map and the clash of interests of superpowers inevitably led to economic cataclysms on an international scale. ukraine experienced several “waves” of financial and economic crisis, particularly in 2008 and 2014. however, in the insurance sector, crisis phenomena appear much longer than, for example, in the banking sector. the problem of the economic crisis has ceased to be a problem of individual states and has become a global problem; therefore, the development of actions to minimize and eliminate the consequences of the global economic crisis has become a supranational task. restructuring of the ukrainian economy resulted in an exacerbation of the risk situation with a simultaneous lack of conditions for the development of demand for insurance coverage. there are a number of grounds for that. first of all, unfortunately, today the demographic situation in ukraine and the low level of the population’s insurance culture significantly hamper the development of the insurance sector of the economy. secondly, the lack of socialization of capital has changed the insurance programs, transferring them mainly to the rank of tax minimization tools. finally, participation in the globalization and integration of the insurance market is not always effective and safe for insurance operators, although in the final version it will ensure the formation of a global insurance space. so, there are several areas of the insurance sector of the economy naturally appeared, requiring immediate and in-depth research and development of a system of anti-crisis measures. theoretical foundations and practical issues of the development and systematization of actions to overcome the crisis of the insurance sector are considered in the works of many native and foreign authors, including recently raised the problem in their works by g.  cherednichenko, a. chukhno, a.  gritsenko, a.  zadoya, i. maliy, t. mironov, and others. however, it should be noted that to date, there has not been a unified approach to solving this problem. 2. insurance as an important component of the development of the real sector of the economy in the world rating “doing business 2017” (doing business, 2017) rightly noted that “trade processes involve not only government authorities and private firms but also customs brokers, commercial banks, vendors, insurance companies, and freight forwarders.” over the past year, many players left the ukrainian insurance market: in the second quarter of 2017, 307 companies had licenses for insurance activities, a year earlier – 356, and two years ago – more than 400. as of december 31, 2017, according to data of the national commission implementing state regulation in the sphere of financial services markets, which is the state regulator of insurance services in ukraine, there were also registered 64 non-state pension funds, 56 insurance and reinsurance brokers, 50 actuaries with corresponding certificates, 304 emergency commissioners (forinsurer, 2018). the structure of the ukrainian insurance market differs from the european one: in the eu countries, for example, life insurance is 50-70% of all premiums, and in ukraine, it varies at the level of 6-8% of the total volume of the insurance services market. risk insurance directly depends on the general economic situation in the country. by the results of the first half of 2017 for insurance of corporate clients following the growth is minimal – 5.9%: the volumes of insurance of cargo luggage, property against fire risks, agrarian risks, minimal growth in mtpl (motor third party liability) insurance, property insurance – decreased (delo.ua, 2018). total assets of insurers grew by 2.3% to 57.4 billion uah. as of december 31, 2017, insurance reserves increased by 9.2% (forinsurer, 2018). thus, we can conclude that the insurance market is gradually increasing, albeit with minimal showings. at the same time, insurance is traditionally like an “airbag” for the population and business entities, while providing jobs and expanding and strengthening the real sector of the ukrainian economy, helps to overcome the crisis phenomena that occurred in ukraine. 3. factors of the development of the insurance market managing the process of overcoming the crisis should combine an organic combination of economic growth and financial stabilization with an active social policy that seeks to raise the standards of living of the population and its effective demand. thus, development factors of the insurance market in ukraine include: the level of material security of the population (the average level of wages, pensions, benefits, scholarships, and other payments); the development of competition and the abandonment of the market monopoly; introduction of new technologies; entry into international insurance markets; the level of the crime situation in the country; development and improvement of the domestic legislation of ukraine and its adaptation to the legislation of the european union and the world community; financial and economic stability of the country; high insurance culture of the population, restoration of confidence in the insurance industry; the existence of a targeted state policy for the development of insurance; a clear system of state control over the financial reliability of insurers; presence of investment in entrepreneurial activity. among the factors in the development of the insurance market, an increase in the equity capital of insurance companies and an increase in the volume of insurance payments for the year should also be noticed. analysis of the top-20 rating of insurance companies in terms of equity capital for 2017 (table 1) compared baltic journal of economic studies 218 vol. 4, no. 3, 2018 with 2016 shows that only 9 of them had a positive growth rate, and in the bulk – a small (1.9-16.24%), with the exception of ic credo (no. 11 rating), which had a positive growth rate of 142, 69%. if we analyse the top-20 rating of insurance companies by the size of insurance payments for 2017 (table 2), we will see that in comparison with 2016 they all give a positive trend, but their distribution in the rating is significantly different. thus, ic “kremen”, which occupies a leading position in the rating of insurance companies by the size of its equity capital, takes only 13th place in the rating of table 1 rating of insurance companies by the size of equity capital for 2017 № insurance companies equity capital 2017, thousand uah equity capital 2017, thousand uah rate, % 1 kremen 1 999 491,8 2 010 012,9 -0,52 2 alliance 1 317 786,0 1 323 583,0 -0,44 3 ingo ukraine 640 996,4 612 897,9 4,58 4 omega 497 199,4 608 386,4 -18,28 5 аха insurance 488 402,0 608 453,0 -19,73 6 таs ig 450 208,1 387 297,1 16,24 7 uniqa 415 530,0 404 098,0 2,83 8 ukrainian insurance group 291 571,6 265 142,4 9,97 9 providna 281 298,0 465 949,0 -39,63 10 arsenal insurance 273 904,0 257 464,0 6,39 11 credo 273 443,0 112 674,0 142,69 12 universal 272 161,0 267 095,0 1,90 13 pzu ukraine 265 452,0 238 795,0 11,16 14 upsk 261 731,3 282 097,0 -7,22 15 оranta 253 030,3 261 970,1 -3,41 16 zahid-rezerv 246 785,0 365 906,0 -32,56 17 motor-garant 240 640,0 375 357,0 -35,89 18 tecom 232 916,0 227 867,0 2,22 19 mega-garant 201 868,2 208 383,2 -3,13 20 prosto-insurance 191 691,0 182 780,0 4,88 source: systematized by the authors (forinsurer, 2018) table 2 rating of insurance companies by the size of insurance payments for 2017 № insurance companies payments 2017, thousand uah payments 2016, thousand uah 1 аха insurance 817 672,0 601 896,0 2 uniqa 617 101,0 482 183,0 3 ingo ukraine 549 711,5 368 356,6 4 providna 484 330,5 387 692,9 5 pzu ukraine 453 769,7 314 406,0 6 ukrainian insurance group 385 143,0 321 085,4 7 таs ig 371 336,8 262 223,6 8 arsenal insurance 323 475,0 243 454,2 9 knyazha 243 398,1 185 766,5 10 oranta 195 469,1 149 940,3 11 аska 188 366,0 92 791,0 12 neftegazstrah 185 927,0 163 904,1 13 kremen 171 082,9 42 531,8 14 vuso 158 823,0 104 052,6 15 kraina 156 702,0 115 752,0 16 alfa insurance 151 713,4 120 237,0 17 credo 151 641,0 65 618,0 18 universalnaya 147 760,0 128 272,9 19 persha 138 641,0 116 885,0 20 upsk 118 901,7 134 185,6 source: systematized by the authors (forinsurer, 2018) baltic journal of economic studies 219 vol. 4, no. 3, 2018 payments. ic axa insurance, which occupies only the fifth place in the first rating with a 19.73% decrease in equity, nevertheless took the first position in the rating of insurance companies by the size of insurance payments. it should be noted that ic “credo”, which ranked 11th in the first rating, with an increase in equity by 142.69%, and in the rating of payments it took only 17th place, while almost 3 times increased the amount of insurance payments compared to 2016. thus, it can be concluded that there is no direct relationship between the increase in equity of the insurance company and the increase in the amount of insurance payments. in some studies of the period from 2002 to 2015, to calculate the forecast of changes in the dynamics of insurance payments, the value of the indicator of the average annual growth rate showed that on average for each year of the study period, the growth rate of insurance payments for life insurance increased by 49.23% (for life insurance); by 19.51% (for personal insurance); by 23.27% (for property insurance); by 18.83% (for liability insurance); and by 27.3% (for compulsory insurance). based on these studies, the forecast for insurance payments by types of insurance was calculated. according to the obtained results, the dynamics of insurance payments for life insurance and liability insurance have similar fluctuations to growth, the dynamics of insurance payments for personal insurance and property insurance also have a similar stable growth tendency, and the forecast of the dynamics of insurance payments for compulsory insurance shows a tendency to decrease (ivanchenko, 2017). 4. problem aspects and directions for improving the insurance market problems of overcoming the crisis in the insurance sector of ukraine can be divided into external and internal ones. the first should include the high degree of dependence of the ukrainian economy on the macroeconomic situation and the liquidity crisis of the banking system. according to the report of the reinsurance company swiss re “global insurance review and outlook for 2017/2018”, the us economic growth is projected at just over 2%, taking into account inflation (in real terms) annually during 2017–2018. growth in europe, according to forecasts, – will be about 1%, in japan – less than 1%, and in china is expected to be about 6.5% (swiss re, 2016). as the economy of ukraine mainly depends on the development of the economies of europe and the us, the long-term forecast cannot reveal high growth rates at the moment. some authors note that in addition to the destabilizing factors inherent in the cyclical and transformational crises, additional destabilizing factors act in the ukrainian economy: 1) the annexation of crimea and military actions in the donbas, which caused people death, the refugee problem, the loss of a significant part of the country’s production potential, and property of entrepreneurs and the population; 2) economic sanctions of russia that had a negative influence on domestic exports and imports; 3) the inadequacy or absence of analysis by the government of the interaction of actions of different types of economic policies that have a stimulating (anti-crisis) or deterrent orientation, as well as economic policy mistakes that had negative economic consequences and social tension as a result; 4) the deficit of social capital in our society, increasing with the growth of distrust of the government (cherednichenko, 2015). simultaneous action of these three groups of factors that destabilize the domestic economy, in the fair opinion of g.a cherednichenko, causes a negative synergistic effect – their joint impact on social and economic processes in the country is more intense and destructive than it could be under the action of one of the groups factors (cherednichenko, 2015). on the one hand, the crisis of many economic institutions (taxation, insurance, banking sector) was the result of the one-sided increase in developing in one direction, without taking into account the delay in increasing and active development in other areas of the economy. indeed, with the well-functioning economic system, the network of banks is always serviced by numerous legal, accounting, insurance, and consulting companies. and the effectiveness of this interaction is greatly enhanced with the simultaneous improvement of all elements of the system. on the other hand, the acceleration and delay in development can also be explained by the correct or wrong (incorrect) use of certain economic institutions. for example, using of law companies seems to be ineffective for delaying the resolution of a conflict with the help of legal institutions (seizure of property, maximum increase of the statutory period for consideration of the case, establishment of obstacles in the enforcement of judgments), and accounting and consulting companies for attempts to evade taxes. therefore, the solution of the problem of overcoming the crisis should be examined and solved simultaneously from various angles: the systematic development of all economic institutions and in-depth reforming at all levels of individual institutions. internal problems of overcoming the crisis of the insurance market include: 1) low level of capitalization of insurers and low quality of assets, which does not allow to ensure responsibility for large insured risks, which leads to reinsurance of their part abroad with an outflow of capital from ukraine (discovered, 2017); 2) lack of support of the insurance sector by the state during the crisis (in contrast to banking) and, in principle, the lack of the well-functioning planning baltic journal of economic studies 220 vol. 4, no. 3, 2018 mechanism in the practice of state regulation of the insurance sector of the economy; 3) lack of adequate formation of reserves of insurance companies and rules for calculating insurance reserves for controlling insurance risks; 4) lack of well-ordered statistics, which is necessary for actuarial calculations and actualization of the product supply; 5) unprofessional management of insurance companies; as the management of the majority of ukrainian insurers is not able to timely and adequately respond to current and strategic challenges and risks; 6) insufficient using of investment opportunities by insurance companies over the lack of investment reliability. for example, in ukraine, the level of coverage of potential risks is about 10%, while in most developed countries this index is 90-95%. today in ukraine, to overcome these factors, they practice the absorption and capitalization of undeveloped and low-income insurance companies to reduce the amount of risk portfolios in the insurance market, as well as increase growth rates of certain types of insurance, improve the quality of services, and introduce new products (discovered, 2017). however, these actions seem insufficient and do not solve the problem of overcoming the crisis as a whole. 5. aspects of reforming the regulatory basis of the insurance sector of the economy the presence of positive shifts in the development of the ukrainian insurance market should be noted. in particular, since december 2016, 18 ukrainian insurers offer the possibility of a direct settlement of mtpl (motor third party liability) contracts. if a car insured in one of these companies is damaged due to another member of the movement, its owner will be able to apply for payment to its insurer and not to the company of the culprit of the accident (if the culprit insurer participates in the direct settlement project). now in ukraine, the average repayment period for a direct settlement is 24 days, for the mtpl (motor third party liability) market as a whole – more than 100 (delo.ua, 2018) (according to ukrainian legislation – not more than 90 days). however, to date, not all companies that offer mtpl (motor third party liability) contracts in ukraine participate in this project, and this disadvantage is sensible to eliminate in the near future. in addition, on 02/02/2017, the national commission, which implemented state regulation in the sphere of financial services markets, adopted an order that allows the conclusion of mtpl electronic contracts. it seems to be promising to extend this order to other types of insurance. this will cut down expenses for the conclusion of the agreement because the client will be able to track the appearance of his contract in the insurance company’s database and minimize the cases of abuse by the client in cases where the client conceal information about similar insurance contracts that he signed with other insurance companies. some promising perspective for ukraine types of insurance require an early detailed and clear normative regulation, among which can be named: insurance of agricultural producers, since the production of agricultural products at the moment in ukraine is the most payback type of business activity; insurance of liability of small boats; in ukraine, the quantity of large vessels is insignificant, however, there are a lot of yachts, boats, and other small vessels, whose owners are interested in developing of this type of insurance; insurance of cyber-risks, because it-technologies in recent years have penetrated into all spheres of activity of the population and business entities. 6. conclusions overcoming the crisis of the insurance sector of ukraine requires the development of measures of economic and legal nature. in particular, the state should develop a clear and legible mechanism for planning the insurance sector of the economy, including the creation of well-ordered statistics, which is necessary for actuarial calculations and actualization of the goods supply, clear normative regulation of the most promising types of insurance for ukraine. in addition, the implementation of some actions depends directly on the activity of insurance companies. it is necessary to increase the level of capitalization of insurers, to develop rules for calculating insurance reserves for their adequate formation, to increase the professionalism of management of insurance companies, to use investment opportunities more actively. since the development of actions to minimize and eliminate the consequences of the global economic crisis has become a supranational task, the proposals mentioned above can be used with taking into account the specifics of economic development and the condition of the insurance sector of the economy also in other states. references: delo.ua. (2018). chto proiskhodit na strakhovom rynke ukrainy [what is it all about the insurance market of ukraine] (unpublished). retrieved from: https://delo.ua/econonomyandpoliticsinukraine/chto-proishodit-nastrahovom-rynke-ukrainy-338019/ (in russian) doing business (2017). retrieved from: http://doingbusiness.org baltic journal of economic studies 221 vol. 4, no. 3, 2018 forinsurer. (2018). reyting strakhovykh kompaniy ukrainy [the rating of insurance companies in ukraine] (unpublished). retrieved from: https://forinsurer.com/ratings/nonlife (in russian) forinsurer. (2018). reyting strakhovykh kompaniy po razmeru sobstvennogo kapitala za 2017 god [the rating of insurance companies by the amount of the ownership capital for 2017] (unpublished). retrieved from: https://forinsurer.com/ratings/nonlife/17/12/2 (in russian) ivanchenko o. (2017). statystychnyj analiz strakhovogho rynku ta vyplat za vydamy strakhuvannja v ukrajini za 2002-2015 roky [the statistical analysis of insurance market and insurance benefits by the insurance classes in ukraine for 2002-2015]. retrieved from: http://phm.kspu.kr.ua/images/konf_ftn/ 2017/s8/%d0%86%d0%b2%d0%b0%d0%bd%d1%87%d0%b5%d0%bd%d0%ba%d0%be_%d0%9e.pdf (in ukrainian) swiss re. (2016). global insurance review and outlook for 2017/2018. retrieved from: https://forinsurer.com/ files/file00596.pdf cherednichenko g.a. (2015). gosudarstvennoe antikrizisnoe regulirovanie ekonomiki i ego sovremennye tendentsii [the state anti-recessionary regulation of economy and its modern trends]. institutional framework for the functioning of the economy in the context of transformation: collection of scientific articles. canada: publishing house «breeze», vol. 1, pp. 79-86. (in russian) discovered (2017). osnovnye problemy strakhovogo rynka ukrainy [the key problems of the insurance market of ukraine] (unpublished). retrieved from: http://discovered.com.ua/insurance/osnovnye-problemy-straxovogorynka-ukrainy/ (in russian) baltic journal of economic studies 1 vol. 5, no. 2, 2019 corresponding author: 1 odessa state academy of civil engineering and architecture, ukraine. e-mail: ag_irisya@ukr.net orcid: https://orcid.org/0000-0002-0245-1652 2 odessa state academy of civil engineering and architecture, ukraine. e-mail: diadema@ukr.net orcid: https://orcid.org/0000-0001-9172-9304 doi: https://doi.org/10.30525/2256-0742/2019-5-2-1-9 development of construction investment in the rural area iryna azhaman1, nataliya petryshchenko2 abstract. the research purpose is to formulate proposals for investment development in the construction of industrial and civilian objects in the countryside of ukraine, taking into account the experience of rural area development in the eu. theoretical and methodological basis of the research is the dialectical method of cognition of socio-economic phenomena in their interconnection, basic provisions of economic theory, scientific developments of domestic and foreign scientists on investment development in rural area construction. the following methods were used in the work: theoretical synthesis, analysis and synthesis, historical, abstract-logical method, dialectic – in the study of theoretical foundations of the problem under study and in the formulation of conclusions and proposals. the subject of the study is a set of theoretical, methodological, and applied provisions in the field of investment development in construction in rural areas of ukraine. practical implications. when investing in countryside construction development, it is proposed to adhere to the following principles: investor’s free choice of directions and investment volumes; voluntary investment; purposefulness of investments; transparency of the process of using investments in the implementation of construction projects; informative value; independence and responsibility. taking into account main directions of village social sphere development defined by the state and the current state of investing in rural area civil construction, it is proposed to increase the rights and responsibilities of local authorities and self-government. in order to intensify housing construction in the countryside, individual developers and business entities are encouraged to create mutual funds for financing construction and housing in rural areas. it has been established that during the period of research, investing in industrial and civil construction is distinguished by unevenness and is marked by a significant dependence on the general state of the country’s economy. to enhance investment in industrial and civil construction in the countryside as a factor of increasing socio-economic and environmental impact of the agrarian sector, it is advisable to use different sources of capital investment and increase their number. an attractive investment environment for industrial and civil construction in the countryside is formed at the expense of: the sustainable economy and society development; encouragement of entrepreneurial activity of the population; encouraging enterprises and organizations to carry out expanded reproduction; competent banking and financial and credit policy of the state and local self-government bodies. key words: investments, rural area, world experience, development programs, grants, investment sources, industrial construction, civil construction. jel classification: g11, r11, r33 1. introduction rural area development involves the balanced construction of facilities for industrial, residential, and infrastructure-serving purposes. this requires the formation of an effective mechanism for attracting, distributing, and using investment funds. after all, the financial component largely determines the reality, volume, structure, timing, and quality of construction project implementation. the complexity of investment in the construction is caused by the fact that construction of industrial and civilian objects requires a long period of time. volumes of investments depend on the scale and methods of construction and installation work, modern construction technologies and materials use level, which ultimately significantly influences the cost of construction. construction of agricultural sector objects may be delayed due to various reasons, which baltic journal of economic studies 2 vol. 5, no. 2, 2019 is reflected in costs that are formed by periods in actual prices. the choice of object construction method affects its terms and, accordingly, the schemes and terms of investment. intensification of investment in the construction of industrial and civilian objects in a rural area will contribute to the comprehensive development of regions and the country as a whole. issues of investment development in industrial and civil construction were analysed in scientific works of leading domestic researchers. thus o. v. vasiliev (2010) defines modern forms of investment in housing construction. y. m. safonov and v. g. yevteyeva (2013) consider attracting mechanisms and financing sources for investment in construction. in the works of a. i. rybak and i.b. azarova, results of the study of construction project financing mechanisms in the field of construction, as well as market financing mechanisms (2014), are presented. r. kamiński, chuan chen, yibin ao, yan wang, jiayue li consider investment in social infrastructure in rural areas (2017, 2018). d. yongheng and w. jing researched investing in green building (2014). however, the results of research do not adequately cover peculiarities and perspective directions of investment development in countryside construction. based on the above, the research purpose is to formulate proposals for investment development in the construction of industrial and civilian objects in the countryside of ukraine, taking into account the experience of rural area development in the eu. theoretical and methodological basis of the research is the dialectical method of cognition of socio-economic phenomena in their interconnection, basic provisions of economic theory, scientific developments of domestic and foreign scientists on investment development in the rural area construction. the following methods were used in the work: theoretical synthesis, analysis and synthesis, historical, abstract-logical method, dialectic – in the study of theoretical foundations of the problem under study and in the formulation of conclusions and proposals. the main objectives of the study were: to work out the theoretical foundations of the development of investment in construction in rural areas, in particular, to determine the essence and main classification criteria for investing in construction in the countryside; to explore the world practice of promoting rural development and construction; to explore the domestic practice of investing in construction in rural areas; to formulate proposals for the further development of investment in construction in the countryside of ukraine, which can also be used in the practice of other countries. 2. essence and main classification criteria for investing in construction in rural areas financing of construction in rural areas reflects investment in tangible assets. according to a classification given in the order of state statistics service of ukraine, their list of construction activities includes investments in existing buildings and structures, residential buildings, non-residential buildings, structures. taking into account the variety of types of construction objects and forms of construction activity (new construction, reconstruction, etc.), the following classification of investments in construction development in rural areas is proposed (order of the state statistics committee of ukraine, 2009; azhaman, 2014): investments in reconstruction, modernization of existing objects of residential, socio-cultural, industrial, engineering, and other purposes with the goal of ensuring their compliance with modern requirements of users. the need for such investments is conditioned by the objective need to rehabilitate existing facilities in order to reduce their energy, water consumption, maintenance and service costs, greater convenience of use, etc. this type of investment is also proposed to include investment in overhaul, as well as maintenance; investments in the construction of residential properties – include investments in the construction of residential buildings in rural areas. such investment may be directed to the implementation of construction projects for both construction of new objects and objects of incomplete construction; investments in the construction of production, service and auxiliary facilities – provide for the construction of facilities that will be used in the process of the economic activity. these may be facilities that belong to both legal entities and individuals; investing in objects of socio-cultural, medical-health, educational purposes; investment in objects of engineering and technical purposes, in particular, construction of highways, power lines, gas and water pipelines, etc.; investing in other buildings. the specified types of investments are different in terms of volumes, their development, sources of attraction, the ultimate effect of use, and provide for the satisfaction of individual needs of individuals, rural businesses, rural communities, etc. investing in countryside construction is defined as a process of investing property and intellectual property in the development of building construction in rural areas (azhaman, 2014). it has a long-term character and a certain purpose. the general objective of investing in construction development in rural areas is to obtain an effect – economic, social, and environmental or a combination of them. the economic effect of investing is possible from investing in construction projects for the construction of facilities for production, auxiliary, and serving purposes. also, this effect can be obtained by constructing and reconstructing engineering and technical objects, in particular, roads – decreasing product losses during transportation, reducing product delivery time to consumers; reclamation systems – increase and guarantee yields of agricultural crops, etc. baltic journal of economic studies 3 vol. 5, no. 2, 2019 construction of social and cultural objects, education, and health will provide a long-term social impact. the ecological effect is determined by the use of natural materials, resource-saving (energy, water-saving) technologies, which reduce the negative impact on the environment, construction of modern treatment systems, etc. however, investing in construction projects that involve the use of modern building technologies and the use of advanced materials can provide a comprehensive effect. entrepreneurial construction of residential buildings in the countryside has a social effect – living conditions of inhabitants are improving, an economic one – it is an integral part of employees’ motivation system, and ecological – on condition of observance of technologies and requirements of sanitary-hygienic, ecological, architectural norms reduces the negative impact on the environment. in addition, investing in construction solves the problem of ensuring even countryside development. objects of investment activity are projects for construction of facilities for production, auxiliary and service, socio-cultural, medical and recreational, educational and other purposes, as well as residential buildings. according to the current legislation, it is prohibited to devote money, i.e. to invest, only in objects, the creation and use of which do not meet the requirements of sanitary, radiation, environmental, architectural, and other norms provided by the legislation of ukraine, and also violate the rights and interests of citizens, legal entities, and state protected by law. investments in countryside construction development may be money, property and property rights, and others. 3. world practice of promoting rural development and construction in the world practice, different approaches to the socio-economic development of rural areas and, in particular, construction, have been formed. thus, according to the european information and research center studies, the european rural development policy aims at helping the eu’s rural areas address economic, social, and environmental issues. this assistance is funded by the european agricultural fund for rural development (eafrd), which has allocated €99.6 billion for 2014–2020. eu countries have developed rural development programs – table 1. note that all these programs are developed at the state level and are financed at the expense of funds: the eu, the european agricultural fund for rural development, and national budgets. table 1 analysis of rural development programs of eu countries for 2014–2020 country program main directions of financing kingdom of belgium flanders rural development program walloon rural development program preservation of environment increasing rural sector competitiveness support for young farmers improving the quality and viability of rural areas bulgaria national rural area development program increasing competitiveness and balanced development of the country’s agriculture and forestry guard and balanced management of ecosystems socio-economic development of rural areas hungary national rural area development program restoration, conservation and strengthening of ecosystems promoting social inclusion, poverty reduction, and rural economic development modernization and competitiveness of farm enterprises slovak republic national rural area development program increasing agriculture and forestry competitiveness through investments protection and support of biodiversity, soil, water resources improving the economic and social conditions of the rural population by investing in a new infrastructure network, creating new jobs romania national rural area development program increasing competitiveness and restructuring the agricultural sector. environmental protection and climate change economic development, creating new jobs and improving life quality in romanian villages federal republic of germany 13 regional rural development programs, of which 2 are common to all regions promoting agriculture, forestry, and food industry competitiveness ensuring sustainable management of natural resources and climate protection balanced territorial development of agriculture and rural areas. republic of poland national rural area development program development of farms investing in knowledge and innovation, agricultural advisory balanced management of natural resources creation of new jobs, improvement of living conditions in rural areas, balanced territorial development of rural areas baltic journal of economic studies 4 vol. 5, no. 2, 2019 4. the experience of ukraine in investing in construction in the countryside taking into account that investment in construction development in the countryside of regions of ukraine is an integral part of total construction investment, it is expedient to analyse sources of investment in capital investments for 2009–2015. researches show their growth by 41.6%, including at the expense of: funds from local budgets, own funds of enterprises and organizations, as well as public funds for housing construction. during 2009–2015, the volume of investments at the expense of own funds of enterprises increased by 44%, and funds of local budgets by 2.4 times. the growth of private investment weight is also noted in the report on investment policy in agriculture: ukraine (website of the embassy of japan in ukraine) project results. the report states that investment in recent years is mostly private. so, under the condition that most grain storage facilities are state-owned (owned by the state food and corn corporation of ukraine, etc.) in 2014–2015, warehouse capacities were built by foreign companies archer daniels midland co., cargill, and louis dreyfus commodities group. among domestic companies, the activity of agribusiness nibulon, which invested in storage facilities in ports, was marked. capital investment is carried out in tangible and intangible assets. the total amount of investments for 2009–2015 has increased by 41.6%, including the increase by 36.2, in tangible assets and by 3.1 times in intangible ones. the share of investments in tangible assets in 2015 was 93.3%. investments in tangible assets are injected in residential, non-residential buildings and structures, machinery and equipment, vehicles, etc. summarizing the study of capital investment directions, the leading place of investment in tangible assets, in particular, non-residential buildings and structures, as well as development of housing construction, has been identified. such tendencies are characteristic for the country as a whole and can also be observed for the countryside. accordingly, there are grounds to assert intensification of housing construction at the expense of population and industrial sector – mainly for own funds of enterprises and organizations, whose share tends to increase. when investing in the countryside construction development, it is proposed to adhere to the following principles: investor’s free choice of directions and investment volumes; voluntary investment; purposefulness of investments; transparency of the process of using investments in the implementation of construction projects; informative value; independence and responsibility. the country regulatory framework in force defines main provisions for investment activities. however, taking into account the diversity of construction activities, in which there is a need for rural development, it is necessary to identify features and mechanisms for investing in such key areas as housing objects construction; construction of social sphere objects; construction of production purpose objects and those that create conditions for the efficient production and commercial activities of economic entities. investments in housing construction are carried out through construction financing funds, real estate funds, joint investment institutions, as well as by issuing targeted bonds, fulfilling obligations that are secured by the unit of such real estate, in accordance with the legislation. however, such a form of investment is inappropriate in rural areas, as housing construction is carried out mainly from own or borrowed funds of individual developers or at the expense of village business entities who are interested in decent working conditions for their employees. the following benefits are provided for individual housing construction within villages and settlements, as well as outside them in isolated farmsteads: provision of preferential terms for building materials and equipment provision; provision of concessional longterm government loans; compensation of 25% of the preferential long-term state credit amount to developers in 5 years after introduction of buildings into operation, provided that they constantly work in agricultural production, processing and serving industries of agriculture, are located in rural areas, social sphere of the village, and local village self-government bodies; individual developers who did not use privileged state loans are given an opportunity to receive compensation in the amount of 35% of the built constructions and structures cost. it should be noted that the implementation of such measures to promote the development of village housing construction is hampered by limited budget funds, which in practice prevents the provision of privileges and compensations to rural individual developers. thus, in the state budget of ukraine from 2011, a negative trend has emerged regarding the state preferential lending to individual rural developers for construction (reconstruction) and purchase of housing. in relative terms, the share of government privilege in general budget expenditures decreased from 0.0175 to 0.0065%. stimulation of village housing construction at the regional level was realized by the odesa regional council through the adopted decision “on approval of a regional program to support individual village housing construction ‘own home’ for 2012–2016.” such a program also operated in odesa region earlier – in the period of 2006–2010. long-term preferential loans to individual rural developers in the amount of 21.1 million uah were provided, including social workers – 1.7; agroindustrial complex – 10.9 million uah. to implement the program, funds were sent baltic journal of economic studies 5 vol. 5, no. 2, 2019 from the state and local budgets, bank loans, voluntary contributions from legal entities and individuals. the program was aimed at ensuring affordability of housing, increasing its construction, improving living conditions in rural areas. during 2011–2015, expenditures on construction development in the country have been reduced. implementation of measures to promote countryside housing construction development is also hampered by the complexity of the process of collecting and submitting documentation for benefits and compensations for housing construction in rural areas (website: territorial cooperation of the eastern partnership countries). investing in countryside social objects has a number of features, among which the main ones should be highlighted: as a result of such investments, mainly a social effect is received, and therefore, most potential private investors (rural residents, rural businesses) are not interested in such investments because of the lack of personal income or long payback periods; the village social sphere is low-liquid; construction of social and cultural objects, in particular, clubs, stadiums, health facilities and the like, is largely characterized by long terms of project implementation and their high cost, which is connected not only to the need to build objects but also to their installation and putting into operation; state funding for the construction development of social facilities in rural areas is limited and decreases annually. thus, the state budget of ukraine for 2011– 2015 provided for expenditures, the amount of which varied from 7761.5 thousand uah in 2011 to 1785 thousand uah in 2014, in the future, expenditures from the state budget for reforming communal services in rural areas of ukraine were not foreseen. such features of investment activity in the countryside social sphere explain insignificant volumes of construction and putting into operation of such objects. however, along with this, there are a number of regulatory acts in the state that are aimed at developing the construction of social facilities in the rural area. thus, in the law of ukraine “on priority of village and agro-industrial complex social development in the national economy,” the priority of village social development is provided, among other things, by the state through a series of organizational, economic, and legal measures. construction of socio-cultural sphere objects and facilities of engineering and technical purposes in rural areas is carried out at the expense of state and local budgets. of great importance is the issue of social protection of rural residents. in particular, it is noted that peasants are given preference over city residents for assistance in the construction of housing, social services, and cultural services. 5. proposals for the further development of investment in the construction of industrial and civilian objects in rural areas taking into account main directions of village social sphere development, defined by the state, and the current state of investing in civil construction in rural areas, it is proposed to increase rights and responsibilities of local authorities and self-government. the latter provides for the right to determine priority directions for the development of construction of countryside social facilities, fund allocation for implementation of such projects, control over their use and quality of work performance. for this, it is proposed to leave at the disposal of local budgets up to 3 (but not less than 1) percent of the regional gross domestic product value for the development of construction and strengthening of material and technical base of the village social sphere. the final funding percentage for the development of construction of rural area social facilities will be determined by local authorities, taking into account the state of population provision with such objects, the dynamics of funds receipt by the local budget, and the level of social protection of peasants in a certain rural territory. thus, decentralization in the field of financing village construction development will make it possible first of all to implement priority social construction projects for this area and increase the interdependence level between the amount of financial revenues from economic activity in the region and the state of social provision of its inhabitants. according to the said, the main sources of development investment in the village social sphere construction will be as follows: deductions from local budgets for the realization of programs and projects of village social sphere development; investments of business entities in the countryside; funds of organizations, associations, societies and other unions of legal entities and individuals interested in countryside social sphere development; investments from other sources that do not contradict current legislation. another direction of investment development of village construction is an investment in new construction, reconstruction of industrial facilities, in particular production, service, and auxiliary purposes. investments in construction development of rural area production facilities are carried out in accordance with the laws of ukraine: “on investment activity,” “on priority of village and agro-industrial complex social development in the national economy,” “on state support of agriculture in ukraine,” etc. the state budget of ukraine analysis has shown that in the part of expenditures, a separate line does not allocate funds for the construction development of rural area production facilities. however, there are a number baltic journal of economic studies 6 vol. 5, no. 2, 2019 of support programs for the development of the crop, livestock, and formation of a network of wholesale markets. such programs can potentially be considered as a source of funding for the construction of industrial objects necessary for their realization in the village. however, in 2015, funding in this direction has not been carried out. in 2011, 10 million uah was allocated in the state budget for the creation of a network of wholesale markets, and in 2012 – 200 million uah. in subsequent years, funding for this item of expenditure was not carried out. such amounts of state support do not correspond to those specified in the cabinet of ministers of ukraine decree “on approval of the state target program for establishment of wholesale markets of agricultural products,” which stipulated sources and amounts of financing. construction of production facilities for the agrarian sector is carried out using the following sources: own or attracted funds of agricultural enterprises, financing of state and local budgets under programs of support of plant growing, livestock breeding, other sources which do not contradict current legislation. according to survey results, the total value of agriculture investments amounted to 6.5-10.7% of the total amount of the national economy’s capital investments. state budget investments are not the main source of capital investment financing. thus, in the structure of agriculture investments, the state share accounted for 2.3% of their total amount. at the same time, the capital investment share has a steady tendency to decrease – in 2015 – 0.1%. consequently, in the current normative-legal field, basic principles and approaches to the countryside industrial construction development have been formed. however, the procedure is not clearly defined and the peculiarities of investment in construction development of such objects are not taken into account. prospects for increasing crop and livestock production rate, among other things, are determined by the state financial policy in support of agricultural producers. such support is targeted. taking into account the state of investing in rural construction development and state support dynamics, it is proposed to focus on finding ways to attract investment from such sources: own resources of rural residents, countryside business entities; funds of unions, associations, societies, public and religious organizations; funds of legal entities interested in countryside construction development of the region; funds of state and local programs for the promotion of rural development, intended for housing, social-cultural and other types of construction; cash back and other investment funds; bank loans; foreign investments in the form of “donor assistance” for the development of rural areas, industrial sector, etc.; international technical assistance; other sources of investment in development of countryside industrial and civil construction. to do this, it is suggested to use the following levers: tax – a reduction of the tax burden for village economic entities that carry out the construction of industrial and civilian facilities with their own or attracted funds; information – familiarization of rural area business entities with existing programs supporting construction development of countryside industrial objects; conducting seminars and consultations on the use of modern approaches of enterprise employee motivation and stimulation on the basis of construction development of socio-cultural and residential objects; marketing – use of social advertising and other marketing tools to create a positive image of the countryside as an attractive place of employment and residence; political and legal – strengthening activities of state and local authorities in the direction of ensuring social protection of rural population and supporting priority sector of the country’s economy – the agrarian sector. in order to stimulate the development of rural areas and, in particular, construction in the countryside, it is proposed to invest in such activities with the assistance of grants. there are a number of programs and funds in ukraine that finance development of the state, its regions, individual economic entities. the list of proposed programs (funds) is presented in table 2. from the above-mentioned funds and programs list for the development of village socio-cultural objects construction, including hospitals, health centres, educational establishments, cultural and sports institutions are invited to participate in regional grants competitions for: “kusanone” program ( japan), projects of the u.s. ambassadors fund for cultural preservation and international renaissance foundation and others. the possibility of obtaining such grants is confirmed by the example of biliaivka united community of the odesa region, which received a grant from the international renaissance foundation for the “biliaivka united community – integrated development” project, which carried out: an analysis of the resource base of biliaivka united community development, drafting of community passport, development and lobbying of long-term community development strategies, community social and economic development plan for 2016–2017. under this initiative, funding was received in the amount of 330 thousand uah. grant aid for investing in rural development may be involved at both regional and individual community levels. thus, the u.s. ambassadors fund for cultural preservation is simultaneously implementing the small grants program and the large grants program. it is proposed to pay attention to the possibility of financing projects involving funds from the monsanto foundation, the eastern partnership territorial cooperation (eaptc), the european bank for reconstruction and development (ebrd), the ukraine-habitat fund, etc., for development of rural area industrial facilities construction in ukraine. baltic journal of economic studies 7 vol. 5, no. 2, 2019 grant assistance for civil and industrial construction projects is an effective alternative to public financing, which also helps identify the most competitive, socially significant and cost-effective projects. it is proposed to amend the law of ukraine “on investment activity” regarding clarification of investing in social-cultural and industrial facilities procedure (including production, service, auxiliary) in rural areas. investments are offered through construction financing funds, real estate funds, joint investment institutions, and bond issues. the use of such methods of funding these objects will enable control over construction process and targeted use of funds; provide a guarantee of investors’ rights to receive the planned effect of investments; will have other advantages depending on the chosen mechanism. also, within the framework of the legislation and regulations on investing in the development of rural area housing construction and in order to intensify countryside housing construction as individual developers and business entities, it is proposed to create mutual funds for financing of housing construction and its arrangement in the countryside. such funds are expedient to form at the expense of voluntary contributions of their participants – individual developers within one or several (nearby) rural settlements. management of such a fund is proposed to be put on authorized members elected at the general meeting of participants. at the expense of regular contributions and fund investment activity, the amount of financial resources will be formed, which will subsequently be issued to its participants for the construction of residential objects, economic structures, their repair, reconstruction, arrangement, etc. if the developer – fund participant needs an amount of funds exceeding his contributions, then at the expense of accumulated funds he will be able to receive the required amount. subsequently, such a developer will have to return the “surplus” of funds in the term provided by the contract. it is proposed to allow members of the fund receive funds for construction on a non-interest basis, which is one of the main advantages of such a fund in comparison with bank loans. it is assumed that such a fund will help individual developers obtain government grants, compensation for loans, defined by the law of ukraine “on priority of village and agro-industrial complex social development in national economy.” such assistance table 2 proposals for funds and programs providing grants for construction development in the countryside of ukraine fund/program direction description “kusanone” program ( japan) assistance in development project implementation has been operating in ukraine since 2002. financial assistance to nongovernmental organizations, hospitals, primary schools, research institutes, and other non-profit organizations to implement development projects. us embassy’s fund for cultural heritage preservation small grants program preservation of cultural monuments, museum collections, and traditional art forms. the great project preservation of prominent archaeological sites, historic buildings, monuments and museum collections of exceptional value as an inheritance of a country or a region. international renaissance foundation support of public initiative implementation founded in 1990. funding and organizational support for the establishment of a democratic, open society in ukraine by supporting initiatives important for its development. monsanto foundation small business development project in rural communities of ukraine enhancing entrepreneurial and leadership potential among rural communities. social investment program “ukraine – resident of the future” grants for the implementation of programs on sustainable environment development, development of social entrepreneurship. eastern partnership territorial cooperation (eaptc) program of border region sustainable cooperation promotion of socio-economic development. focused on: improving living conditions of local communities in target transboundary regions through joint projects of socio-economic development; development and implementation of common solutions to common problems relevant to neighbouring regions. european bank for reconstruction and development financial support for agribusiness financing, including long-term loans, replenishment of working capital, financing of multi-project facilities to meet the changing needs of agribusiness enterprises. ukraine-habitat foundation promotion of small and medium business development development of regions through the small and medium-sized business development by the implementation of local investment programs under the guaranty of local authorities. eastern europe foundation social and economic development programs advancement of corporate social responsibility, local economic development, municipal partnerships, business and economic education baltic journal of economic studies 8 vol. 5, no. 2, 2019 will be provided in the form of legal and advisory assistance in the preparation and submission of the necessary documentation to the appropriate authorities for obtaining appropriate benefits and loans. in order to perform such functions, it is proposed to involve a lawyer who will provide relevant services as a part of the fund, as well as take part in drawing up contracts on issuing funds for construction to participants – figure 1. another measure to promote the development of housing construction in rural areas is the financing of funds by enterprises as an element of motivation and stimulation of labour for repair, reconstruction of residential buildings and household facilities. this form of provision of targeted funds will enable workers of enterprises living in rural areas to work on improving their living conditions, housing facilities. for enterprises, this form of motivation will have a longterm effect, ensuring the formation of a positive attitude of employees to the company and increasing the degree of their residence in the area. modern economic, legal, and political conditions in the state create opportunities for the formation of such a financing source for housing construction as preferential loans, targeted financing from local budgets. to accomplish this, decentralization of power is important, which will enable to accumulate funds for the implementation of rural areas’ balanced development programs on the ground, the creation of proper living conditions in the countryside. 6. conclusions investigating the formation and development of investment sources for industrial and civil construction, the following generalizations are made. during research period, investment in industrial and civil engineering is uneven and marked by a significant dependence on the general state of the economy. in the general reduction of industrial and civil construction capital investment in the context of the absolute majority of investment sources, there are some structural changes. they manifest themselves in an increase in absolute and relative values of funds invested for housing construction and an increase in enterprises’ own funds share in the total cost of capital investment. at the same time, in absolute and relative terms, capital investments are reduced, the sources of which are: state and local budgets, bank loans, funds from foreign investors and other sources of financing. the increase in absolute and relative values a mutual assistance fund for housing development in the countryside legislative and regulatory support general outturn of participants public authorities l on gte rm g ov er nm en t l oa ns , c om pe ns at io ns banking institutions securities market investment projects in co m e on fu nd in ve st m en t audit commission board of directors financial specialist lawyer accountant representation in the authorities funds for construction information services legal advice contributions individual developers in the village – members of the fund figure 1. the operation mechanism of mutual assistance fund of housing development in rural ukraine baltic journal of economic studies 9 vol. 5, no. 2, 2019 of funds invested for housing construction and increase in own funds share of enterprises and organizations in the total value of capital investments is the result of an objective process of establishing market principles in the country’s economy, according to which business entities in their production and economic and market activity should rely primarily on their own resource potential and profitability. to increase investment in countryside industrial and civil construction as a factor in increasing socio-economic and environmental impact of the agrarian sector, it is advisable to use different sources of capital investment and increase their number. an attractive investment environment for countryside industrial and civil construction is formed at the expense of: sustainable development of economy and society; encouragement of entrepreneurial activity of population; encouraging enterprises and organizations to carry out expanded reproduction; competent banking and financial and credit policy of the state and local self-government bodies. further research will be directed towards the formation of proposals on improving state regulation mechanisms of construction development in the northern territories of ukraine. references: vasyliev, o. v. (2010). modern forms of investment in housing construction. communal economy of cities: scientific and technical collection, 92, 75–79. safonov, yu. m., yevtieieva, v. h. (2013). about mechanisms of attraction and sources of financing of investments in housing construction in ukraine. investments: practice and experience, 16, 18–21. rybak, a. i., azarova, i. b. (2014). analysis of the mechanisms of financing construction projects in the field of housing construction. market mechanism of financing. management of complex systems development, 18, 88–97. kamiński, r . (2017). investment in social infrastructure in rural areas – does it support the development of social capital? retrieved from: https://ageconsearch.umn.edu/record/139080/files/vol.%207_6.pdf ?version=1 chen, c., ao, y., wang, y., li, j. (2018). performance appraisal method for rural infrastructure construction based on public satisfaction. plos one 13(10): e0204563. retrieved from: https://doi.org/10.1371/journal. pone.0204563 order of the state statistics committee of ukraine «on approval of the methodology for calculating the index of capital investments». (n.d.). retrieved from: http://www.uapravo.net/akty/law–osnovni/akt5duoy2u.htm yongheng, d., jing, w. (2014). economic returns to residential green building investment: the developers' perspective. regional science and urban economics, 47, 35–44. azhaman, i. a. (2014). investing in the development of industrial construction in rural ukraine. agrosvit, 16, 23–27. azhaman, i. a. (2014). investment provision of housing development in rural areas. investments: practice and experience, 16, 28–33. website of the european information and research center: european experience of legislative regulation of state support and development of rural settlements. retrieved from: http://euinfocenter.rada.gov.ua/uploads/ documents/28937.pdf website of the embassy of japan in ukraine: "the kusanone program". retrieved from: http://www.ua.emb-japan.go.jp/ jpn/bi_ua/oda/humansec/info_r.pdf website: territorial cooperation of the eastern partnership countries (eaptc). retrieved from: http://eaptc.eu/ ru/eaptc-program.html report on the results of the project "investment policy in agriculture: ukraine". retrieved from: http://www.oecd.org/ globalrelations/agricultural_investment_policies_ukraine_ukr .pdf decree of the cabinet of ministers of ukraine «on approval of the rules for the provision of long-term loans to individual developers of housing in the village». (n.d.). retrieved from: http://zakon2.rada.gov.ua/laws/ show/1597–98–p baltic journal of economic studies 59 vol. 4, no. 5, 2018 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: gubanof@ukr.net 2 education and research university of modern knowledge, ukraine. e-mail: 40533@ukr.net 3 education and research university of modern knowledge, ukraine. e-mail: melnychuk_op@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-59-62 transformational dimensions of science under globalization challenges oleh hubanov1, serhii mosondz2, oleh melnychuk3 abstract. the precise and correct understanding of the transformational changes in the field of science, which are constantly kept under public review, is vitally important for civilizational development of the ukrainian state. problem statement. although some specific and significant aspects of science are highlighted and respective innovations are suggested, very often there is a lack of methodological reasoning and non-systemic of recommendations. the abovementioned stipulates the need to formulate a complete and perfect vision of the science transformation at the present stage of the ukrainian society’s development. the purpose of this paper is to formulate the author’s conception of the necessity of science transformation in ukraine by analysing global challenges and critical study of modern scientists’ works. the achievement of the formulated aim is carried out by the means of the complex and consistent application of the corresponding scientific tool presented by such methods of scientific knowledge as: logical-semantic, systematic, structural-logical, methods of grouping, deduction, induction, analysis and synthesis etc. results. in the article, the author establishes and explains the reasons for the transformational changes in the field of science, which are reduced to the following: global character of human development; an advanced approach to the interaction of theory and practice in the context of the implementation of scientific activities; development of modern information technologies; insufficient support by the state and society of science and scholars; absence of an integrated approach, focused on the fundamental integrity and complexity of the system “science – education – production”; aggravation of social and economic problems; integration of the innovative type of civilization. to sum up, the author concludes that civilizational society has dramatically influenced the development of science, significantly accelerating the processes of its development. modern science, as well as scientists’ activity, is impossible without the use of the latest technologies. this activity, in turn, promotes the development of newer technologies. the speed of these processes is constantly increasing and the transformation of science in one sphere instantly causes transformation in another. such changes lead to the emergence of an incredibly large number of scientific knowledge that needs to be perceived and embodied in practice. key words: science, transformation, globalization, conceptual approaches, foundations, civilization, development, efficiency, intensity. jel classification: a11, e00, i25 1. introduction to date, ukraine is at the beginning of the great path to civilized integration into the global and european scientific area. our state will remain the country, which provides the intellectual potential for scientifically advanced countries until it acquires the recognized status of a subject enjoying equal rights in the sphere of foreign scientific cooperation. further success of economic transformations, continuous economic growth will depend on the reform of the national scientific system, which should be based on the principles of innovation through the use of modern information and communication technologies. research works by famous researchers, such as yu. anisimov, b. arutiunov, a . berdashevich, d. bernal, v. vernadskyi, f. brokgauz, p. haidenko, v. danylevskyi, h. dobrov, ye. zolotukhin, i. yefron, o. krasovska, j. condorcet, v. kokhanovskyi, l. kosarieva, th. kuhn, b. kuznietsov, o. lietov, b. malitskyi, l. markova, o. popovych, k . popper, m. rozov, b. starostin, v. stopin, and others, contain different substantiations and conditions for reorientation of science. baltic journal of economic studies 60 vol. 4, no. 5, 2018 nowadays the issue of transformation of changes in the field of science is constantly in the power of public opinion. some important aspects of science are highlighted, relevant innovations are offered, but methodological weakness, unsystematic suggestions are often perceived. therefore, the purpose of this paper is to highlight the general vision of the transformation of science under the intensification of globalization processes. 2. grounds for the need for transformational changes in the field of science for the ukrainian state the transformation of science at the present stage of the development both of the world community and ukrainian society is justified and obvious. herewith the logical question dealing with the need for transformational changes in the field of science for the ukrainian state arises. let’s try to answer it by defining the grounds for these changes. firstly, the development of mankind has become global, which makes competitive only the person and the state capable of living and acting in such a space. the issue of globalization relates to global conflict because it raises the most important question of mankind dealing with the prospect of the world system. it is difficult to form effective mechanisms for the interaction of societies in the global civilization progress without an equal dialogue of cultures, without taking into account the scientific potential and prospects for the development of each civilization. therefore, it is no coincidence that the main emphases relating to the comprehension of the possible globalization consequences are put on the need to refer to science, culture, where spirituality as an expression of moral principles of social life and moral rules of human behaviour in society prevails. it is obvious that the scientific potential of the nation in the 21st century will be almost the main productive force while choosing geo-economic and geo-political models of the future and forming a new paradigm of civilization development. consequently, preservation of the national essence, national identity, cultural and scientific uniqueness is an essential part of the state policy as a whole and the policy of the scientific and humanitarian development of society in particular. secondly, modern civilization has substantially expanded the approach to the interaction of theory and practice in the context of performing research activity. that is, today the relationship between knowledge and practice is not limited to the division into fundamental and applied one when fundamental knowledge is understood as theoretical one but applied knowledge as the one that can be used in practice of production or as the one that can arise from it. modern knowledge results from more complex relationships between such research ideas that can be determined as theoretical and practical ones. it’s about researching as practising, getting fundamental knowledge while practising. for instance, in the field of modern biotechnology research, the concept of practice is used quite organically and innovative biotechnological practices are being studied as emerging in the field of fundamental research (nikolaienko, 2009). therefore, modern science shall take into account situations where diverse and rather complicated research practices begin to precede theories. as sociologist l. bevzenko notes, the theory as a scientific, philosophical, and practical reality becomes only a practical guide to certain, rather narrow spheres of human life. in this case, more powerful semantic type of constellation helps to perceive different kinds of practices as its individual manifestations, and scientific, philosophical, and practical ones turn out to be only similar to a number of other similar manifestations (bevzenko, 2008). knowledge as practising foresees the moment of design, projection, and technological capability. thirdly, the modern world has set the science other tasks and has created new opportunities for it. first and foremost, these are up-to-date information technologies, nanotechnologies, robotics, which provide at least two functions, namely computer literacy, as well as individualization and intensification of the research process. while stating this ground, it is necessary to focus on the fact that at the present stage of the development of the world community, a person exists in a world where human factors are almost absorbed by technological ones. thus, the issue of human freedom arises as one of the principal metaphysical issues of the 21st century. the book “polysubstantial homo: philosophic and artistic thought in search of non-euclidean reflectivity” by v. tabachkovskyi emphasizes that, unlike modernity based on the unlimited concept of freedom, first of all, postmodernity is based on the idea of freedom as a personal choice, the decision is related to the subjective world of personalities existing between the universality of human nature and the peculiarity of individuality (tabachkovskyi, 2005). it previously seemed that the most favourable situation for a person was widening of the possibilities of simultaneous choice but nowadays it became clear that the connection of such a choice with the perception of personal identity is more important. therefore, it is better for mankind and strictly for a personality, so that such an identity could be found also in a special, individually unique area, and not just in an identical one. fourthly, insufficient support of science and scholars by the state and society, which does not allow carrying out ripe transformations opportunely and to a due extent. fundamental and applied researches were separated from real economic needs, and the research system in general and individual research groups in particular lost the ability to baltic journal of economic studies 61 vol. 4, no. 5, 2018 objective self-assessment. this resulted in a decrease in the competitive level of products and undoubtedly influenced the level of competitiveness of ukrainian output. fifthly, experience confirms that issues of scientific advancement, implementation of inventions, organization and stimulation of technical progress in enterprises, training of research personnel cannot be isolated from each other. one cannot expect a significant success by solving each of them separately. an integrated approach focused on the fundamental integrity and complexity of the system “science – education – production” is essential here. a narrow, simplified approach to implementation of inventions is incompatible with the current scale and pace of scientific and technological progress. the scientific and industrial cycle is a national economic cycle of new knowledge covering fundamental research, applied products and material output. the emergence of the scientific and production cycle reflects the integration processes that have arisen in the field of science and production in the first quarter of the 20th century and intensified after the second world war. now they are crucial for implementing an innovation development model. nowadays both in ukraine and in other post-soviet republics, one can observe violation of the conditions for the organization and functioning of the cyclical paradigm: “science – education – production” and its centric stages (fundamental research, scientific and applied products, research and design work, projection, technological preparation for manufacture, implementation of innovations, extensive prevalence of innovations to full market saturation). this, in particular, discourages foreign investors from investing capital in our economy. due to partial closing of research institutes, a significant deterioration of the conditions for sectoral and intersectoral applied products also provokes concerns. this problem is mostly related to the incomprehension of the fact that science can be efficient only when it organically joins the sphere of the research and production cycle thorough educated experts. sixthly, aggravation of socio-economic problems caused by objective difficulties of the transition period, as well as by serious errors in the definition of the model of transformation processes, gradually eliminated science from a number of state priorities, which resulted both in multiple reductions in investment in scientific and technological development and in loss of innovation activity of the economy. and, seventhly, nowadays ukraine has entered the new type of civilization, namely innovation one. its feature is constant changeability, the dynamism of change. changes in knowledge, technology, information, circumstances of life etc. occur, and these changes are much faster than the change of generation of people. the knowledge gained becomes outdated, a need for new knowledge arises. in our opinion, the last factor in the transformation of science is fundamental and requires detailed concretization in light of globalization processes taking place in the world community. 3. efficient use of science-based potential, its restructuring and the formation of a national innovation system the nature of economic growth, the competitiveness of the country in the world market, its national security are determined not by the volume of physical resources, but they depend on how society can create and effectively use the scientific factor, develop innovative activities and innovation processes at all levels of government. in modern ukraine, the solution of key socio-economic problems is also impossible without efficient use of science-based potential, its restructuring, and the formation of a national innovation system. the practice of reforming the national economy has shown that the market is not able to solve all the problems of overcoming the degradation of the technological base of production and the formation of new technological regimes to the extent necessary to ensure sustainable economic growth in our country and its regions. the problem determines the need to strengthen the role of the state in the scientific support of innovation processes and in the regulation of the innovation sphere in general. the importance of the early formation of an effective state policy in the field of science and, in particular, its component such as an innovative policy is growing. today the need for innovative development of ukraine is the need to keep pace with time in accordance with current realities, to be up to standards of the developed countries of the world. a political prerequisite for the innovative development of ukraine is the need to win a worthy place in the international community of civilized peoples. the latter respect the states that offer innovative ideas and models of development, show examples of success in one or another sphere of public life. therefore, an accelerated entry into the civilization process on the basis of innovative strategies is one of the basic political tasks of ukrainian state building and strengthening of ukraine’s competitiveness in europe and in the world. science is considered as the most important source, rather, as the sphere of birth of innovations, because this area of activity concentrates the main resources and the most favourable conditions for a special intellectual work, which generates innovations. in the scientific sphere, knowledge is mostly transformed into basic, systemic innovations that have the greatest updating capabilities. but these innovations, as a rule, are always capital-intensive and do not always have the opportunity of commercialization. therefore, their creation requires powerful state support. in turn, innovation technology offers the scientific community the radical innovations that, being a part of baltic journal of economic studies 62 vol. 4, no. 5, 2018 the research, lead to profound changes – and not only positive – in the organization of research activity and to the transformation of science in general. at the present stage of the development of the international community, the system of scientific knowledge is international, which, at first sight, makes science more prone to international integration. however, in fact, here there are problems relating to the fact that science is not only a cognitive institution, but it is also a social one. the most serious difficulties arise at the junction of new technological opportunities and old political purposes. innovations have created a global opportunity for genuine scientific cooperation limited neither by distances nor by state borders and easily carried out in real time. but in reality, if one does not consider science as a system of knowledge, but as a sphere of activity, global science does not exist because it is organized under the national principle and in the national framework, it is also divided by departmental barriers. of course, science must be open, that is, scientific knowledge must be accessible to all. but the one who spends his/her money on it naturally wants to have some benefits. the democratic idea of open science, that is, the international use of fundamental scientific knowledge, encounters the reality of the national costs of obtaining new knowledge and its keeping. international scientific projects must overcome the differences, sometimes very substantial, of the national interests of their participants. however, since these antinomies exist in light of the apparent tendency of the globalization of the world economy, it is obvious that the transformation of science in the same direction is also inevitable in the future. 4. conclusions civilization society has fundamentally influenced the development of science, greatly accelerating the processes of its development. it is impossible to imagine modern science and activity of researches without the use of innovative technologies. this activity favours the development of newer technologies. the speed of these processes is constantly increasing and the transformation of science in one sphere instantly causes the transformation in another one. such changes result in the emergence of an incredibly large number of scientific knowledge that needs to be perceived and put into practice. references: nikolaienko, n. v. (2009). biotekhnolohichni praktyky v konteksti synerhetychnoi metodolohii [biotechnological practices in the context of synergetic methodology]. praktychna filosofiia, 4(34), 10-15. bevzenko, l. d. (2008). postneklassichekie praktiki v logike gabitualnykh transformatsiy [postnonclassical practices in the logic of habitual transformations]. proceedings of the postneklassichekie praktiki: opredelenie prdmetnykh oblastey: materialy mezhdunarodnogo mezhdistsiplinarnogo seminara (eds. astaf 'eva o. n.), moscow: maks press. tabachkovskyi, v. h. (2005). polisutnisne homo: filosofsko-mystetska dumka v poshukakh «neevklidovoi reflektyvnosti» [poliessental homo: philosophical and artistic thought in the search for «non-euclidean reflectivity»]. kyiv: parapan. baltic journal of economic studies 346 vol. 4, no. 4, 2018 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. 2 university of modern knowledge, ukraine. 3 national academy of internal affairs, ukraine. e-mail: zarybey@bigmir.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-346-350 status of the taxpayer in a tax legal mechanism volodymyr uvarov1, dmytro mirkovets2, viktoriia zarubei3 abstract. the aim of the article. the theoretical and legal bases of a taxpayer in the tax legal mechanism are considered. a comparative legal study of legal regulations that determine the place of the taxpayer in the tax legal mechanism is conducted, and on this basis, ways to improve domestic legislation in this sphere are determined. the subject of the study is the status of the taxpayer in the tax legal mechanism. methodology. the research is based on the analysis of legal regulatory acts concerning the tax legal regulation in ukraine. based on the comparative legal method of research of certain provisions of ukrainian legislation, the place of a taxpayer in the tax legal mechanism, as well as the application of positive foreign experience in this field, are determined. the results of the study revealed the need for a detailed study of defining taxpayers, taxable persons. practical implications. the taxpayer is considered as the most significant element for the existence and development of tax relations. moreover, the formation and development of compulsory tax payments, the integration of such payments into the tax systems of countries are analysed, which indicates the paramount importance of the taxpayer among any other elements of the tax legal mechanism. relevance/originality. a comparative analysis of the taxpayer in the tax legal mechanism in foreign countries is the foundation for the improvement of most promising ways for the development of domestic legislation in this sphere. key words: tax legal mechanism, tax legal relations, subject of tax legal relations, taxpayer. jel classification: h21, h26 1. the relevance of the topic in the legal mechanism of any tax, both among its main and additional elements, the subject or the taxpayer is the most crucial element for the existence and development of tax legal relations. being an obliged subject of the tax legal relationship, the taxpayer is the only participant in tax and legal relations, which is fixed in the legal mechanism for compulsory tax payments. in addition, the taxpayer actually transfers aspects of will expression, consciousness, and activity (qualities that he/she receives as a subject of tax legal relations) to the legal mechanism. the conscious will, active performance of the taxpayer, his/her lawful behaviour, aimed at creating the relevant juridical facts, will further determine the implementation of other elements of the tax legal mechanism or fees in specific tax legal relations. this specificity and influence on other elements of the tax legal mechanism must be considered by the legislator in the legislative establishment of any taxes and fees. therefore, an important role of the taxpayer in securing the legal mechanism of one or another compulsory tax payment becomes evident. 2. literature review a significant contribution to the study of the taxpayer in the tax legal mechanism was made by foreign and domestic scientists, such as l. v. avramenko, s. i. ilovaiskyi, a. a. isaiev, i. i. kucherov, n. p. kucheriavenko, i. kh.  ozerov, o. v. petrishin, n. yu. pryshva, k. d.-g. rau, i. t. tarasov, n. v. tsvik. the aim of the article is to consider the theoretical and legal bases of the taxpayer in the tax legal mechanism. a comparative legal study of legal regulations that determine the place of a taxpayer in the tax legal mechanism is conducted, and on this basis, ways to improve domestic legislation in this sphere are determined. 3. the main material the historical aspect of the introduction of compulsory tax payments, their integration in the taxation systems of countries demonstrate the paramount importance of the taxpayer among any other elements of the tax legal mechanism. therefore, the specific nature of the relationship between the state and potential taxpayers becomes the foundation and supporting structure for baltic journal of economic studies 347 vol. 4, no. 4, 2018 the introduction and development of taxation, the legal justification of its grounds, and therefore, the possibility and admissibility of establishing compulsory tax payments. n. prishva argues (pryshva, 2004) that the admissibility of introducing taxes, recognizing the state’s tax sovereignty is associated with a special qualitative order of the state power that should not only be legitimate but also strong to ensure payment of taxes as free payments. at the same time, potential taxpayers should be aware of the need to establish their tax duty for the common good and possibility of realizing and protecting their own interests in the territory covered by the tax sovereignty of the state or other territorial formation. it is known (pryshva, 2004), for example, that in ancient greece and ancient rome, free population of these countries did not presume the possibility of recognizing themselves as taxpayers, except for special and extraordinary circumstances, which could be martial law and the need to protect the integrity of the state territory; but usually the tax and tax duty were supposed as the state’s burden on the subdue and other citizens not possessing full rights. only with the advent of the enlightenment, the beginning of a broad social life under the formula “if you possess property, you should allocate its part in favour of the state and under the protection of the latter easy use the rest of the property,” the final understanding of the acceptability of tax establishment came. therefore, not only the possibility of introducing taxes and fees but also the modern role of compulsory tax payments in general as one of the main public legal sources of state revenues directly depended on the realization that all persons who in one way or another take part in public life and take advantage of it should be recognized as potential taxpayers. the generally recognized classics of financial and legal science assume the primary place and importance of taxpayers for establishing mandatory tax payments. for example, a well-known german specialist in the middle of the xxi century professor k. d-g. rau wrote that in order to require tax, first, it is necessary to determine those numerical data, according to which it is easy to evaluate the tax duty of each person. this includes: a) definition of the subject, which should be the measure of tax duty, for example, a certain part of the property, income, expenses, etc.; b) establishment of a tax rate, that is, the rate at which a known amount of tax is determined from a known item; c) determination of the number of items to be taxed that each person is obliged to pay (rau, 1867). pre-revolutionary russian jurist i. t. tarasov pointed out that by establishing the tax, the law must define with precision the payer, the object, that is, the taxable object, the taxable action, upon which the tax is to be paid, the forms of calculation, orders and receipts, tax control, repayment, penalty, exclusion and management (tarasov, 2004). therefore, in all these cases, in establishing mandatory tax payments, scientists emphasized the taxpayer and then around this category they completed the tax legal mechanism or other payment of a tax nature. the issue of assigning tax duties to certain persons, the definition of taxpayers has maintained its relevance over time and confirmed its significance. i. i. kucherov argues that the question of taxable persons is one of the main in the theory of taxes and fees. in modern life, the need for everyone to participate in the formation of public finance is no longer questioned; the principle of universal taxation is firmly established in the minds of people acquiring legal significance and legislative consolidation (kucherov, 2009). generally, under present conditions, any physical individual or legal entity should take part in the formation of public revenues of state and local budgets, at the expense of his/her property, be involved in financing public expenditures. therefore, the most common definitions of the payer (subject) of the tax are based on this. for example, representatives of russian pre-revolutionary financial thought i. kh. ozerov and a. o. isaev defined the taxpayer as any person, who is legally charged (ozerov, 1908), concretizing, however, that taxable persons can be both physical individuals and legal entities, corporations, societies, unions, both nationals and foreigners (isaev, 1887). however, in this definition, neither formal nor substantive aspects of taxpaying are disclosed in detail. therefore, in an attempt to explain the formal aspect of bearing the tax by the person, i. i. kucherov interpreted the taxpayer as an eligible person, who in accordance with the legislation is charged with the duty to pay tax independently and at the expense of own funds (kucherov, 2009). however, in our opinion, several remarks need to be made to this definition. first, it is hardly worthwhile to focus separately on the issue of taxpayer legal capacity. each individual possesses legal capacity (has an abstract ability as a subject of law to acquire subjective legal rights and bear subjective legal obligations) from birth to death. the legal capacity of a legal entity arises from the moment of its state registration, in some cases, the receipt of a license for specially defined activities and terminates with the liquidation of a legal entity. legal capacity is inherent in all participants of legal relations (tsvik, petryshyn, avramenko et al., 2011). therefore, the legal personality of the taxpayer would be more appropriate. secondly, it should be emphasized that legislation is referred to in a broad sense, that is, not only the actual system of existing laws but also other legal regulations. for example, decisions of local representative bodies on the introduction of local taxes and fees can provide for the tax obligations of the person. for example, in 1992-1993, the powers of the parliament were delegated to the government and the decrees of the cabinet of ministers of ukraine were given the force of law. finally, international treaties can also be a source of tax laws that affect the content of tax liability in the case of elimination of double taxation. baltic journal of economic studies 348 vol. 4, no. 4, 2018 thirdly, the independence of the payer’s duty to pay taxes should not be absolutized necessarily. moreover, under the appropriate instruction or by virtue of law, both the representative of the taxpayer and his/her tax agent can pay money into budget accounts. in addition, in cases of consolidation of the tax obligation, the transfer of the payer’s money to the budget is physically performed by another payer of the tax. after all, the tax can be paid from borrowed not only from own funds. while defining the taxpayer, a combination of the formal and substantial side of the mechanism for a tax duty seems to be more correct. from this perspective, m. p. kucheriavenko argues that taxpayers are persons who have, receive (transfer) objects of taxation or carry out activities subject to taxation and are entrusted with a tax obligation in accordance with the current tax legislation (kucheriavenko, 2005). moreover, the person’s possession or entry into the object of taxation or the performance of taxable activities are expressed through a cross-cutting legal category of a juridical fact, therefore, the definition of a taxpayer can be reduced to the formula “a taxpayer is a person with the tax duty imposed by tax laws on juridical facts indicating his/her possession of taxable object”. therefore, the abovementioned achievements of the legal science determine the definition of a legal taxpayer in the domestic legislation. according to the provision of clause 15.1 of article 15 of the tax code of ukraine, taxpayers are individuals (residents and non-residents of ukraine), legal entities (residents and non-residents of ukraine), and their separate subdivisions that have, receive (transfer) tax objects or carry out activities (operations) that are subject to taxation under this code or tax laws, and that are charged for paying taxes and fees under this code (podatkovyi kodeks ukrainy, item 15.1, art. 15). this taxpayer definition is generic. it provides for the general understanding of the taxpayer, which would be suitable for application in any abstractly conceivable tax legal relations. moreover, as a phenomenon of legal and social reality, taxation relations consist of the establishment and collection of specific, not imaginary, mandatory tax payments. furthermore, the latter, as one of the means of achieving public interest, do not exist autonomously and separately from other factors that unite society and form the focus of public relations in general. therefore, specific persons, on whom the main tax liability is imposed, depend on many aspects, in particular: the specifics of the legal system of the state, in which a specific tax or fee is established, the characteristics of economic, political, social, ideological, and other types of social relations, nature of dominant public interest, etc. to be sure, the compulsory tax payment itself, the main general goal of its establishment, accentuation on the fiscal or on regulatory functions of the tax determine the composition and features of the obligated persons (subjects of tax legal relations). for example, for the successful implementation of the fiscal function of a compulsory tax payment, the payer of such a tax should be as universal as possible, involving the absolute majority of both individuals and legal entities, regardless of their citizenship, place of registration and other characteristics. the rules of formal logic prove it, according to the law of the inverse relationship of the scope and content of the concept, the more an additional number of attributes assigned to the prospective taxpayer, the less number of persons taxed. therefore, the introduction of the regulatory function of the tax would often be impossible without the differentiation of taxpayers according to certain criteria important for the state to redistribute optimally tax pressure in the state, regulate such basic economic indicators as production, consumption, exports, imports of goods and services, braking negative trends emerging in various spheres of social relations, and promote desired social processes. i. i. kucherov emphasizes (kucherov, 2009) that the direct definition of potential taxable persons is a matter of special importance since it is equated with the definition of objects of taxes and fees forming actually the basis of taxation. at the same time, the obliged subjects of tax legal relations differ from state to state, including different categories, vary by many features, in particular, social, economic, and others. one of the most important criteria for differentiating persons subject to taxation in case of legal imposition of a compulsory tax payment is their personification by types, such as individuals or legal entities. contrasting the above generic definition of taxpayers and tax collections enabling to understand a general nature of the person with the status of an obligated subject of tax legal relations, this distribution of taxpayers is most convenient for the legislator when establishing a direct legal regime for charging a specific tax or levy. under the direct establishment of tax obligations of legal entities and individuals, in fact, two types of taxpayers are consolidated legislatively. according to m. p. kucheriavenko, exactly on the basis of the concept of a legal entity and an individual, the tax status of all types and their manifestations is formed (kucheriavenko, 2005). for example, in the regime of tax duties and rights of legal entities, the specificities of involving branches, representative offices, and separate subdivisions of these persons into tax legal relations are determined, and their own legal status of obligated participants in tax legal relations is created. it is also possible to consider separately tax and legal statuses of various categories of individuals-taxpayers, in particular, on the basis of their tax residency or engagement in business activities. therefore, due to the differentiation of specific tax and legal statuses of taxpayers, the state receives sufficiently flexible and acceptable means for the society to regulate tax relations. furthermore, a number of fundamental principles of tax and legal regulation are being implemented. for example, the principles that are provided for in domestic tax legislation by article 4 of baltic journal of economic studies 349 vol. 4, no. 4, 2018 the tax code of ukraine (podatkovyi kodeks ukrainy, p. 4.1 art. 4). first, this is the principle of equality of all payers before the law, preventing any tax discrimination, that is, to ensure the same approach to all taxpayers, regardless of social, racial, national, religious affiliation, legal entity’s form of ownership, citizenship of the individual, place of origin of capital. second, this is the principle of social justice, according to which the establishment of taxes and fees should consider the solvency of taxpayers. third, this is the principle of neutrality of taxation, that is, the establishment of taxes and fees in a way that will not affect the increase or decrease in the competitiveness of taxpayers. the typology of taxpayers is embodied in the legal regulation of taxation relations while fixing the list of compulsory tax payments that make up the tax system of the state. therefore, the whole set of established taxes and tax collections, according to the taxpayer criteria, can be divided into: a) collected only from individuals; b) collected exclusively from legal entities; c) collected both from physical individuals and legal entities. a canonical example of tax with an individual as its only payer is the personal income tax (podatkovyi kodeks ukrainy, р. iv). in contrast, the corporate income tax is only for legal entities as taxpayers (podatkovyi kodeks ukrainy, p. iii). accordingly, such a differentiation of the taxpayer enables to establish an exclusive tax and legal regime for each of these taxes. in each case, the regime should facilitate the implementation of the basic functions of the mandatory tax payment, that is, fiscal and regulatory. specificity of the legal regimes of these taxes is manifested at many levels, such as at fixing a special list of tax benefits, aimed at the maximum adaptation to the specificities of individuals and legal entities, stimulation of their socially useful activities considering their available opportunities. furthermore, on the basis of such opportunities, as a rule, individuals are limited in performed tax obligations shifting part of them to other obligated participants in tax legal relations such as tax agents. it should be noted that the current tax legislation of ukraine (podatkovyi kodeks ukrainy, art. 18) defines tax agents as persons on whom the tax code of ukraine imposes an obligation to calculate, withhold from the income accrued (paid) to the payer, and transfer taxes in the appropriate budget on behalf of and at the expense of the taxpayer’s funds. moreover, it is indicated that tax agents are equal to taxpayers, have the rights and fulfil the duties established by the tax code of ukraine for taxpayers. indeed, tax agents are to fulfil a part of the duties of taxpayers, for which, by law, such a shift is provided. meanwhile, it is necessary to clarify the issue of their “equalization with taxpayers.” the point is that the unconditional feature, the fundamental principle of the legal status of tax agents is the derivativeness of their duties and rights from the basic legal status of taxpayers with assigned tax agents. this basic legal status of taxpayers is established primarily on the constitutional provision on the generally binding character of the obligation to pay taxes and fees (konstytutsiia ukrainy, art. 67). then this legal status of the taxpayer is detailed by general tax and legal regulations on the duties and rights of taxpayers (podatkovyi kodeks ukrainy, art. 16, 17, 36). accordingly, the legal status of taxpayers is initial in comparison with the legal status of their tax agents. moreover, according to m. p. kucheriavenko (podatkovyi kodeks ukrainy: postateinyi komentar, p. 263), it is important to consider that the duties of the tax agent arise upon availability to withhold and transfer the tax of the taxpayer, that is, upon availability of a corresponding source in the form of money of the taxpayer at his/her disposal. the situation when the tax agent transfers the tax of the taxpayer at own expense is excluded. therefore, it should be emphasized that tax duties and the rights of tax agents are always derived from tax obligations and the rights of taxpayers. furthermore, tax agents together with taxpayers can coalesce into categories of taxable persons, subjects of tax legal relations, in a broad sense. this is due to assigning tax duties and tax rights to tax agents by tax legal regulations. i. kucherov argues that taxable persons in taxation are physical individuals and legal entities, charged with calculating and paying or withholding and transferring taxes and fees to the budgets, in accordance with tax legislation. moreover, the scientist observes that the direct content of these duties determines these individuals’ legal status of taxpayers, payers of fees, or tax agents (kucherov, 2009). moreover, two interrelated remarks must be made to this thesis. 4. conclusion such remarks rely on the fact that in some cases taxpayers’ representatives can also enter tax relations as obliged persons. in accordance with the provisions of article 19 of the tax code of ukraine, the taxpayer manages the affairs related to the payment of taxes personally or through his/her representative (podatkovyi kodeks ukrainy, art. 19). personal participation of the taxpayer in tax relations does not deprive him of the right to have his/her representative, as well as the participation of the tax representative does not deprive the taxpayer of the right to personal participation in such relations. representatives of a taxpayer are persons who can represent legitimate interests and manage the affairs related to the payment of taxes on grounds of law or a power of attorney. the power of attorney issued by a taxpayer (an individual) to represent his/her interests and manage the affairs related to the payment of taxes, must be certified in accordance with applicable law. thus, a representative of a taxpayer exercises the rights provided for by this code for taxpayers. therefore, while considering taxable persons, payers of taxes and levies, their tax agents, and representatives of payers of taxes and levies should be specified. baltic journal of economic studies 350 vol. 4, no. 4, 2018 references: pryshva, n. yu. (2004). pravovi problemy reguliuvannia obovviazkovykh platezhív [legal problems of regulation of obligatory payments] (dissertation of doctor of law in specialty 12.00.07). k. (in ukrainian) ilovaiskii, s. i. (1904). uchebnik finansovogo prava [the textbook of financial law]. odessa. (in russian) rau, k. d.-g. (1867). osnovnye nachala finansovoi nauki [the main principles of financial science] (trans. from 5th german ed.). (vols. 1-2). a. korsak, v. lebedev (eds.). spb.: typography maikov. (in russian) tarasov, i. t. (2004). finansy i nalogi: ocherki teorii i politiki [finance and taxes: essays on theory and politics]. in series zolotye stranitsy finansovogo prava rossii [golden pages of the financial law of russia]. m.: statut, 618 p. kucherov, i. i. (2009). teoriia nalogov i sborov [theory of taxes and fees] (monography). m.: zao yurinfor , 473 p. (in russian) ozerov, i. kh. (1908). osnovy finansovoi nauki [fundamentals of financial science]. m.: typ. assos. i. d. sytina, 530 p. (in ukrainian) isaev, a. a. (1887). vremennik demidovskogo yuridicheskogo litseia [chronicale of the demidov legal lyceum]. (vol. 40). yaroslavl. (in russian) tsvik, m. v., petryshyn, o. v., avramenko, l. v. et al. (2011). zahalna teoriia derzhavy i prava [general theory of state and law]. m. v. tsvik, o. v. petryshyn (eds.). kh.: pravo. (in ukrainian) kucheriavenko, n. p. (2005). uchenie o naloge [the doctrine of the tax]. in 6 vols. kurs nalohovogo prava [course of tax law]. (vol. 3). kh.: legas; pravo, 600 p. (in russian) podatkovyi kodeks ukrainy [the tax code of ukraine] (2010). no. 2755-vi of december 2, 2010. holos ukrainy, 229-230. (in ukrainian) konstytutsiia ukrainy [the constitution of ukraine]. (1996). no. 254k / 96-vr of 28 june 1996. vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine]. 30 p. (in ukrainian) podatkovyi kodeks ukrainy: postateinyi komentar [the tax code of ukraine: itemized comment]. 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(in ukrainian) baltic journal of economic studies 166 vol. 4, no. 4, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-4-166-172 the innovative infrastructure of economic development in the framework of international digital transformation sergii kolodynskyi1, tetiana drakokhrust2, maryna bashynska3 abstract. the development of the innovative digital system, as an important part of the market infrastructure, partly reflects the overall economic level of the country, but its further positive dynamics with the growth of the national economy determines the progress of society as a whole. methodology. the article provides basis for propositions, aimed at the improvements of development of innovative infrastructure of ukrainian national economy in the framework of international digital transformation with definition and systematization of all factors that have an impact on the formation of innovation potential and the justification of strategic directions of the development of the infocommunication sphere as a component of the national innovation infrastructure. the development of infocommunication technologies has become an impetus for the formation of the innovation infrastructure of the national economy. the purpose of the article is to study the formation and development of the innovation infrastructure of the digital system in the transitive economy of ukraine through the reduction of the level of technological development and productivity of production, which requires the stimulation of business entities to innovate. dependence of the effectiveness of state regulation of the innovation development of infocommunications and the growth of the competitiveness of the national economy is crucial for maximizing the effect of infocommunication thanks to a favourable state policy and an adaptive regulatory framework, taking into account technological changes. value/originality. the principles of ensuring the development of innovation infrastructure, the effective activity of which guarantees the interaction of subjects and objects of innovation activity, as well as access to various information resources, which, in turn, will increase the efficiency of using the country’s innovative potential in the transition period, which is caused by market changes, technological breakthroughs and shifts in the regulatory sphere of ukraine. the strategic tasks of creating a modern innovation system, including technological and scientific parks, venture funds, technology transfer networks, etc., are grounded. it requires the introduction of mechanisms of public-private partnership in the innovation sphere. key words: development, digital system, market, innovation infrastructure, information resources, infocommunication technologies, potential, national economy. jel classification: e10, f20, h54, o11, o32 corresponding author: 1 odessa academy of construction and architecture, ukraine. e-mail: kolodi@ukr.net 2 ternopil national economic university, ukraine. e-mail: tanya.drakohrust@gmail.com 3 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: olimpiya@ukr.net 1. introduction the competitiveness of the national economy is achieved in the current conditions of globalization, based on the strengthening of innovation potential and development, based on information technologies and knowledge that contribute to economic growth. confirmation is the dependence of a significant part of research and innovation using the technologies of infocommunications and electronic communications that are related to the digital ecosystem of the national economy. the digital ecosystem, which is based on infocommunications, gradually combines information technologies, electronic communications, and mass media. the national strategy for sustainable development “ukraine 2020” clearly sets itself the task of raising the level of competitiveness of the economy, strengthening the national security of the state, and the development of small and medium-sized businesses and infocommunications are indispensable for this purpose, since the importance of the field of infocommunication is at the crossroads of several national priorities of the economy. in light of the foregoing, the study of baltic journal of economic studies 167 vol. 4, no. 4, 2018 innovations in the field of infocommunications is gaining weight and needs a strategy of implementation in day-to-day management practices at all levels of the national economy. the declared measures of the state sustainable development strategy till 2020 envisage ensuring stable dynamics of economic growth on the basis of structural reforms under the vector of the program for the development of innovations in order to strengthen the institutional capacity of the innovation infrastructure, the main basis of which is the sphere of infocommunications (nccir , 2017). that is why an important issue is the definition and systematization of all factors that have an impact on the formation of innovation potential and the justification of strategic directions of the development of the infocommunication sphere as a component of the national innovation infrastructure. 2. analysis of recent researches and publications the research questions of the development of digital ecosystems and infocommunications were studied by martin (2009), which revealed the basis for the formation of a digital ecosystem; fodor (2008), which substantiates the factors of value creation and value theory in the digital ecosystem; blijleven, van angeren, jansen & brinkkemper (2013), which revealed an evolutionary economic approach to the dynamics of ecosystems. the strategy for the development of the digital ecosystem was considered by oughton (2018), whose work focuses on policies that should create market conditions and stimulate the emergence of new competitors with innovative thinking; paulusrohmer, schatton, & bauernhansl (2016) reviewed the directions of adaptation of the strategy after analysing its position in the surrounding ecosystem in terms of informatisation, as well as the relationship of the ecosystem, strategy and business model. on the other hand, the field of infocommunication is also constantly guided by technological, organizational or business innovation, which is evidenced in the emergence of many new types of electronic services or services. the duality of innovation in the development of infocommunications manifests itself in improving the quality of service provision, on the one hand, and on the other – the development of infrastructure sectors, service sectors, improvement of public administration, and the growth of the competitiveness of the national economy. it is the last dependence of the effectiveness of state regulation of the innovation development of infocommunications and the growth of the competitiveness of the national economy is crucial for maximizing the effect of infocommunication thanks to a favourable state policy and an adaptive regulatory framework, taking into account technological changes. the purpose of the article is to study the formation and development of the innovation infrastructure of the digital ecosystem in the transitive economy of ukraine. 3. interpretation and value of development of infocommunications for the economy despite the largely autonomous development of infocommunications as a component of the digital ecosystem, which is determined by market conditions, in order to ensure balanced development, the state must take measures to maintain such a balance and minimize any failures. government regulation is aimed at developing the field of infocommunication on the basis of, for example, promoting free and fair competition on various technological platforms (neutral regulation), while increasing access to markets and the rapid introduction of innovative services (bublyk, koval, & redkva, 2017). in addition to socio-economic development, the maintenance of a widespread innovation infrastructure, which is actively used for the implementation of innovations and contributes to scientific and technological innovation development, is of great importance. according to the legislation of ukraine, the main element of innovation infrastructure is the subjects of the informational sphere of any form of ownership, which provide infocommunication services for the provision of innovation activities. the field of infocommunication acts as one of the priority and important areas of the ukrainian economy, which creates an innovative component in the socioeconomic development of the state, ensuring increased competitiveness of the economy and integration of ukraine into the global information society, expanding access to national and world information resources (nccir , 2017). that is why an important issue is the definition and systematization of all factors that have an impact on the formation of innovation potential and the justification of strategic directions of the development of the infocommunication sphere as a component of the national innovation infrastructure. in today’s conditions, the tendency of the growing lag of the national economy from the economy of the developed countries of the world to the level of technological development and productivity of production has been formed, including due to the low efficiency of the mechanism of stimulation of business entities to innovate (oughton, 2018). as a result, there is a significant risk of underdevelopment of innovation infrastructure, which causes a decline in the rate of innovation development, high resource intensity of the national economy, low quality of products and services, and the lack of competitiveness of domestic enterprises (pukala, sira, vavrek, 2018). baltic journal of economic studies 168 vol. 4, no. 4, 2018 the basis for the formation of innovation infrastructure, which consists of industrial-technological, financial, infocommunication, and other components (technopolises, technological parks, innovation centres, etc.) (innovation index, 2017), was the dynamic development of the sphere of infocommunication, the volume of which in the structure of gross domestic product (gdp) of developed countries can reach up to 7-10%. in ukraine, gdp produced in the field of infocommunication for 2015 amounted to 3.2% of ukraine’s gdp, in 2016 – 3.4% and in 2017 – 3.6% (nccir , 2017). the modern character of the development of the sphere of infocommunication of ukraine is marked by the growing dynamics of the average annual growth rate of the main segment – the domestic telecommunication market, which was 6.4% in 2017, and the growth of the volume of services implemented in the field of informatisation – 24.6% compared to the previous year (nccir , 2017). in the world economy, according to the world economic forum, ukraine has improved its position by some indices and in 2016 took the 64th place, and in january 2015 it was 71. 4. approaches to the formation of innovative activity in the conditions of formation and development of digital ecosystems the creation and functioning of a single information space, which allows the rapid implementation of innovations by enterprises (production, organizational structure, marketing, etc.), are fundamental to the sustainable development of the field of infocommunications. in the organization of industrial and economic activity of enterprises, the use of infocommunication technologies increases their innovative potential, the assessment of which can be carried out through the costs of infocommunication technologies, which provides an opportunity to identify the influence of the sphere of infocommunication on the main results of the development of the national economy. it should be noted that in 2012-2015 almost 80% of the total amount of innovative expenses of the company was directed to the purchase of machines, equipment, and software that characterize the phase of growth of the fifth technological structure, and the average share of enterprises having access to the internet is 95% (nccir , 2017). the positive impact of high level of access to the internet of enterprises and the development of other markets in the field of infocommunications contribute to a structural shift in the economy based on productivity growth and competitiveness, which is especially relevant in the context of globalization. it is the potential contribution of infocommunication technologies as an innovative factor of economic development that shows the greatest effect of growth in their use as the productivity of enterprises in their business model and national economy on the basis of the emergence of new (innovative) products or new markets (sectors). given the rather comprehensive tendency to spread infocommunication technologies in all areas with low activation of the development of innovation infrastructure, there is no increase in the rates of economic growth, which is due to the need to implement structural and institutional reforms, including in improving the effectiveness of the state policy on the formation and development of innovation infrastructure due to its unsystematic nature, inadequate reasonableness, and the absence of inter-branch and interregional links. therefore, it is necessary to strengthen the active position of the state in conducting a policy to create conditions for the development of innovation infrastructure on the basis of mechanisms for the implementation of processes in the field of infocommunications, which will contribute to the formation of an innovative model for the development of the national economy. the low level of development of national innovation infrastructure is found in a small number of developed networks of innovation infrastructure, which produced a reduction in the use of the innovative potential of enterprises in the field of infocommunications. the products and services in the field of infocommunications serve as the defining characteristics of “service” of innovation activity, and enterprises of the sphere of infocommunication act as subjects of innovation infrastructure, the main purpose of which is to increase innovation activity. therefore, it is worth considering information technology as an innovative tool that promotes the development of innovations and their commercialization, as well as the formation of innovations in the middle of the field of infocommunication, which influences the development of innovation infrastructure of the national economy within the framework of forming a single information space. however, today, in comparison with international practices, it is insufficient and requires solving strategic tasks of the development of the field of infocommunications as a component of the innovation infrastructure of the national economy in the following areas (koval, 2013): 1. socio-cultural, which, within the framework of the implementation of the national strategy for the further development of the information society in ukraine, as an innovative society, includes: raising the level of computer literacy of the population and introducing and using ict opportunities in the socio-cultural sphere and other sectors of the economy through the development and implementation of relevant sectoral and cross-sectoral programs; baltic journal of economic studies 169 vol. 4, no. 4, 2018 overcoming of digital inequality in the access of ukrainian citizens to electronic communications and information resources, both “first level” (access of new users) and “second level” (access of existing users), which is related to the social-age gap due to low incomes, especially for certain categories of citizens, and the geographical and cultural gap, which requires the implementation of a compensatory mechanism (subsidies) for operators to connect at affordable prices, taking into account the level of income of the population, etc. 2. institutional and technological, aimed at creating a coherent legal system concerning: obligations (regulatory) for the provision of universal services to the operator of telecommunications with a significant market advantage not only in the area of fixed communications, mobile communication, and broadband internet access (including through the improvement of the creation of a universal service fund) taking into account the principle of “technological neutrality”; introduction of mechanisms for the development of the industrial internet market based on the development of industry standards with the aim of accelerating the harmonization of national legislation with the norms of the legislation of the european union; improvement of the mechanisms of protection of the rights of consumers of telecommunication services in case of termination of the activity of operators, telecommunication providers. 3. administrative-economic, which within the framework of the creation of national electronic information resources provides: reduction of entry barriers due to the burdensome procedures for entering the telecommunications market on the basis of improved licensing in the field of telecommunications; improvement of surveillance (control) mechanisms in the field of telecommunications, aimed at preventing violations and reducing potentially possible pressure on business entities; strengthening of information security and cyber security based on doctrines and international certificates in the field of information security management; development of e-government on the basis of the program on the provision of electronic administrative services. 5. transformation of modern business models and strategy of innovative development of the digital ecosystem: international dimension it is expedient to formulate the strategy of innovation development of infocommunication on the basis of balanced development of the information society by means of cooperation of the population, business, and the state, which simultaneously promote the creation of a network infrastructure that can increase the bandwidth through the permanent increase of users and intensify the use of their infocommunication services, as well as the expansion and acquisition of digital competencies, necessary for the use of the latest technology that will stimulate the development of the digital economy. in this regard, the task is to increase the research and innovation activity of participants in the field of infocommunications, taking into account also the needs of other sectors of the national economy. the largest barriers to the national market for infocommunications on the demand side were low computerization, compared to the world average, as well as the lag in internet penetration, including the mobile internet, and the use of online services for most age groups. the key goal of infocommunication is the use of infocommunications for research, innovation development, and the provision of high-quality electronic services. however, ukraine’s innovation activity remains at a rather low level and does not correspond to the average level in the european union. according to the analytical data of national innovation systems and the comparative analysis of the efficiency of innovations in the eu and ukraine, it can be stated in the classification of countries in four categories (low level of innovation, moderate level of innovation, innovators, and innovation leaders) ukraine was classified as a low level of innovation with the lowest indicator. table 1 innovation index in the eu and ukraine 2017/2016 2016/2015 2015/2014 2014/2013 european union 102,0 100,7 99,2 100,3 belgium 120,9 118,3 118,2 117,9 bulgaria 47,5 46,0 45,2 45,2 czech republic 84,4 85,3 83,4 85,3 denmark 136,7 140,1 143,5 145,6 germany 123,4 125,0 124,5 128,9 estonia 79,8 91,2 86,6 91,3 luxembourg 121,4 124,8 124,8 129,9 finland 130,9 130,8 130,1 133,9 sweden 143,6 142,6 141,5 145,1 uk 125,3 118,1 115,5 112,8 iceland 121,7 124,5 126,1 126,2 norway 115,8 101,1 100,0 102,2 serbia 64,2 62,8 62,2 60,7 switzerland 164,6 161,8 158,3 158,1 ukraine 28,9 31,3 32,2 31,1 turkey 59,7 60,9 59,3 46,9 source: european innovation scoreboard 2017. access mode: http://ec.europa.eu/ baltic journal of economic studies 170 vol. 4, no. 4, 2018 one of the sub-indicators of the innovation index is activities in the field of infocommunications, which provide services directly to consumers and contribute to the innovation activities of other firms and in general sectors of the economy. according to this indicator, ukraine has positive values that are close to the average level in the eu countries. table 2 sub indicators of the innovation index of the eu and ukraine in 2017 competencies eu ukraine innovative environment 1.3.1 broadband access 13,0 11 1.3.2. business opportunities 3,1 n/a economic effects 4.2.1 export of medium and high-tech goods 56,2 28,3 4.2.2 export of services requiring knowledge 69,3 51,0 4.2.3. sales of the latest market and latest innovations 13,37 3,30 source: european innovation scoreboard 2017. access mode: http://ec.europa.eu/ the above data shows the factors that influence the aggregate indicator of innovation development, where the sub-indicators of exports of services requiring knowledge, as well as the business of innovative products, are a positive trend. however, when analysing the noted results, it is advisable to substantiate the duality of their origin, since in ukraine mainly foreign companies are integrated which are integrated into international trade as a part of innovation networks and are weakly related to the national innovation system, while businesses are characterized by a rather low efficiency and innovations. for this purpose, we will conduct a swot-analysis of innovative development of infocommunications. table 3 swot-analysis of innovation development of the sphere of infocommunications strengths weakness significant demand for innovative ict-based products. high level of broadband access. low participation in international research projects. low culture of cooperation. a small number of it clusters. opportunities threats high level of export of services requiring knowledge. the ability of ict enterprises to attract venture capital low cooperation of innovative smes with international companies. using the internet in the countryside there is no intellectual property market modern services without limitations become available in the internet environment, which creates demand for the development of infocommunication infrastructure; which require the creation of opportunities for investment in infocommunication networks, which, in turn, contribute to the further development of innovative services. therefore, for the development of innovative activities in the field of infocommunications, the state must provide financial support to small and mediumsized enterprises in order to provide the capital for their development, necessary for innovation. innovation potential in the field of infocommunication relates to research activities as a key factor in economic growth and increasing the competitiveness of ict products (koval, 2013). the innovative infrastructure of infocommunication, which promotes the development of innovations of ict actors, promotes the expansion of innovation potential and other sectors, as well as the competitive advantage in the international market. taking into account the above mentioned, in our opinion, the key elements of innovation development of the sphere of infocommunication are: 1. state regulation of competition, aimed at stimulating an increase in the number of participants in the innovation activity in the market. one of the key areas of strategic development of the field of infocommunication is the support and stimulation by the state of competition that will stimulate innovation and investment in new network technologies. given the low level of competition, there is a risk that existing operators will operate with a relatively small number of innovations and new investments in their own infrastructure. therefore, in order to stimulate competition that minimizes the risk of reducing innovation and investment, an attention should be paid to creating an environment in which existing operators are interested in introducing new services and providing access to their infrastructure for new service providers on mutually beneficial terms. however, the presence of competition is a necessary but not sufficient condition for the strategic development of the field of infocommunication, which promotes a healthy investment climate. in view of this, in our opinion, it would be advisable to take measures to promote competition in the provision of access to convergence networks and services in relation to: amendments to the current legislation on telecommunications with the establishment of a sectoral legal framework to stimulate and control competition in the field of infocommunications; reorganization of the regulator’s policy in the field of infocommunication in accordance with the principles and policies embodied in the directives of the european union; baltic journal of economic studies 171 vol. 4, no. 4, 2018 minimizing the political component of decision-making by the regulator in the field of infocommunications that is based not on political or other forms of compromise between interest groups but on the appropriate qualifications of managers, requiring their development of competences; the pricing of services offered by operators with substantial market gains on a fair and transparent basis. 2. supporting the scientific and human resources and educational potential and the association of educational institutions for the training of it professionals and business for r&d cooperation and help in advancing innovations in the business environment and the creation and development of techno parks in the field of it. the achievement of this goal is due to the need to develop a “knowledge triangle”: higher education, research and innovation, and most importantly, the interaction between them, which will enhance competitiveness within the global knowledge economy, as growing global competition and the emerging demographic situation in ukraine through the emigration to developed countries, only increase the dependence of economic growth on innovations, but if ukraine abandons talented young people as future innovators. the domestic strategy for the development of the field of infocommunication should be aimed at strengthening the role of higher education institutions as drivers of innovation, as future innovators must acquire the necessary competencies and knowledge to promote innovation. in addition, the constraining factor is only a small experience in the formation of an entrepreneurial culture, which will depend on the proposal for certain types of innovation, which means that such entrepreneurial culture will promote the value of domestic research and innovation, namely within the “knowledge triangle” and in the future will create jobs and new enterprises the strategic orientation of the “knowledge triangle” involves the integration of universities, research centres, companies on a long-term basis around specific social issues with common strategic goals. 3. state regulation of the capital market and the development of venture financing to secure equity financing of start-ups at the initial stage of enterprise formation. prospects for innovation development depend not only on the state of scientific and human potential but also on the willingness to perceive relevant innovations and their financing. an important role in the implementation of the above elements of innovation development of the field of infocommunication is to state support, which is aimed at coordinating projects of research work on the creation of innovative products. as a result of state policy measures aimed at the development of innovative development of the field of infocommunication, the investment activity of both existing and new participants in the market will be intensified. this requires a significant improvement in the conditions for the creation of start-ups, the expansion of financial support for innovative projects at an early stage, including and at the expense of venture capital investment. extension of innovation support tools is especially important for small and medium-sized enterprises through co-financing of enterprise costs, for example, for the registration of intellectual property rights, and most importantly, more flexible procedures for obtaining them. 4. improving the legislative framework in the field of telecommunications and information. since the current requirements of the law of ukraine “on telecommunications” need to be changed through the harmonization of rules for investment in infrastructure, for example, through foreseeable conditions or licensing. integration of eu recommendations into national legislation should help minimize the timing of the procedure, streamline licensing conditions. in addition, modern policy and regulatory framework should be aimed at the creation of e-business (e-commerce) and the consumer environment to promote the growth and growth of infocommunications, as well as to ensure the protection of consumers’ interests. 5. expansion of infocommunication infrastructure on the basis of the interconnection of various broadband networks and digital platforms. areas of development of the innovation infrastructure of the national economy: 1. stable financing conditions with the improvement of financial support mechanisms for innovative projects, including: creation of an ict (sectoral) fund of direct investment in innovative projects of the field of infocommunications with the participation of the state innovation finance and credit institution for enhancing intra-sectoral coordination and risk sharing with co-financing of projects; an increase in the share of expenditures from the state budget to provide preferential lending for the implementation of innovative projects, especially hightech subjects in the field of infocommunications. 2. institutional provision of development of innovation activity of subjects of the sphere of infocommunication, which includes: stable regulatory environment and compliance of the current legislation (educational, budget) with progressive requirements for commercialization of developments and dynamics of innovative development of subjects of the sphere of infocommunications; improvement of mechanisms of legal protection of intellectual property in ukraine with harmonization with the legislation of the european union. baltic journal of economic studies 172 vol. 4, no. 4, 2018 3. improvement of mechanisms of support of innovative projects in foreign markets. 4. development of innovation activity at the regional level, which includes: promotion of intellectual specialization in the regions; development of regional programs and strategies for innovation development involving private investment and at the expense of the budget for development of local budgets; development of broadband infrastructure in rural areas. in our opinion, the strategic tasks of creating a modern innovation system, including technological and scientific parks, venture funds, technology transfer networks, etc., will require the introduction of mechanisms of public-private partnership in the innovation sector and should be aimed at legislative setting stimulating features for new productions and a start-up in the field of infocommunications (pukala, sira, vavrek, 2018). for example, through the introduction of effective incentives for the development of the field of infocommunications and enhancement of its competitiveness on the world market with a view to the transition to an innovative way of development of the country and ensuring the transformation of the state innovation policy by accelerating the introduction of infocommunication technologies and the development of national information resources. 6. conclusions the analysis makes it possible to note that solving strategic tasks of the development of the sphere of infocommunications is central to the development of the country’s innovation infrastructure. since research and innovation are possible through the use of infocommunication and electronic communications technologies that relate to the digital ecosystem of the national economy based on infocommunications, it gradually combines information technology, electronic communications, and mass media. the need for the development of the field of infocommunication is one of the priorities in ensuring the development of innovative infrastructure, the effective operation of which guarantees the interaction of subjects and objects of innovation activity, as well as access to various information resources, which, in turn, will increase the efficiency of the use of innovative potential countries. functioning of the field of infocommunications and innovative processes that support it takes place in a transitional period, which is caused by market changes, technological breakthroughs and shifts in the regulatory sphere of ukraine. promising for innovative development of the sphere of infocommunication are: regulation of competition, aimed at stimulating an increase in the number of participants in the innovation activity in the market; support of the scientificpersonnel and educational potential and the association of educational institutions for the training of it specialists and business; regulation of the capital market and development of venture financing; improving the legislative framework in the field of telecommunications and information; expansion of infocommunication infrastructure on the basis of the interconnection of various broadband networks and digital platforms. it is proposed to strengthen the active position of the state in conducting a policy to create conditions for the development of innovation infrastructure on the basis of mechanisms for implementation of processes in the field of infocommunications, which will contribute to the formation of an innovative model for the development of the national economy. references: blijleven, vincent & van angeren, joey & jansen, slinger & brinkkemper, sjaak (2013). an evolutionary economics approach to ecosystem dynamics. 19-24. doi: 10.1109/dest.2013.6611323. bublyk, m., koval, v., redkva, o. (2017). analysis impact of the structural competition preconditions for ensuring economic security of the machine building complex. marketing and management of innovations, vol. 4, 229-240. doi: 10.21272/mmi.2017.4-20. fodor, george. (2008). the value of information as a theoretical foundation for digital ecosystems. 26-29. doi: 10.1109/dest.2008.4635097. innovation index (2017). web index. retrieved from: http://thewebindex.org/data koval, v. (2013). integration processes in the telecommunication sector in europe. současná evropa, 2, 129-141. martin, florin (2009). the digital ecosystem related with the development of smes. 16th international economic conference – iecs 2009, 129-132. nccir (2017). annual report in 2017. retrieved from: http://www.nkrzi.gov.ua oughton, edward. (2018). the strategic national infrastructure assessment of digital communications. doi: 10.17863/cam.23343. paulus-rohmer, dominik & schatton, heike & bauernhansl, thomas. (2016). ecosystems, strategy and business models in the age of digitization – how the manufacturing industry is going to change its logic. procedia cirp, 57, 8-13. doi: 10.1016/j.procir.2016.11.003. pukala, r ., sira, e., vavrek, r . (2018). risk management and financing among start-ups. marketing and management of innovations, 3, 153-161. baltic journal of economic studies 104 vol. 5, no. 2, 2019 corresponding author: 1 admiral makarov national university of shipbuilding, kherson branch, ukraine. e-mail: lavloe@gmail.com 2 admiral makarov national university of shipbuilding, kherson branch, ukraine. e-mail: alvirginis@gmail.com 3 admiral makarov national university of shipbuilding, kherson branch, ukraine. e-mail: nira@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-2-104-116 socio-economic and institutional preconditions for the formation of the educational services market in higher education of ukraine anatolii lomonosov1, oksana lomonosova2, iryna nadtochii3 abstract. when considering the problems of the educational services market formation and functioning in higher education, most authors attribute the emergence of this market to fundamental political and economic changes in ukraine in the early 1990s and its transition to a market economy. this approach is limited as the market for educational services has existed before. in the process of market expansion into public spheres in ukraine in the last decade of the 20th century, it got a generally completed form, although its formation has not yet ended and continues to transform. over the past hundred and fifty years, the socio-economic system in ukraine has changed three times: the second half of the 19th century – the transition from feudalism to capitalism, the beginning of the 20th century – the transition from capitalism to socialism, the beginning of the 21st century – the reverse transition from socialism to capitalism. the educational services market is one of the components of a market system of the country as a whole. the nature of socio-economic relations, of course, influenced the formation and functioning of the educational services market in higher education, which was under various factors affecting it in different socio-economic and institutional conditions. therefore, this study considers three main historical stages of the formation of this market, each corresponding to a certain socio-economic system: development of the educational services market in higher education of ukraine in the late 19th-early 20th centuries at the stage of formation and rise of capitalism; functioning of the deformed educational services market in higher education of the ukrainian ssr after the victory of the socialist revolution and in the soviet union era; widescale introduction of market relations in higher education of modern ukraine during the period of democratic transformations, changes in the socio-economic and political system, the abandonment of socialism and the return to the capitalist system. this approach, unlike most of those presented in modern ukrainian economic literature, covers the entire historical period, in which there was a market for educational services in ukraine’s higher education. to ascertain the peculiarities and the characteristics of the market, at each stage the presence and development of its main elements should be determined. those elements, as a rule, include goods, demand, supply, competition, and prices for goods or services. at all stages, the principal stimulator for the formation of the educational services market in higher education in ukraine was the chronic underfunding of state higher education institutions. the dissatisfied demand of the population for higher education was also a significant factor in the formation and development of the educational services market. the market for educational services in higher education became developed after ukraine had gained independence. commercialization of educational services in higher education, the creation of private higher education institutions, the corresponding institutional transformations, and the legislative framework formation were typical for this stage. as a general scientific basis of the research, a dialectical method of analysis of socio-economic processes was applied. for the theoretical part of the study, historical-logical and abstract-logical methods were used, which allowed determining the key factors that caused the emergence of the educational services market in higher education of ukraine, as well as to study the evolution of ideas about it. as the information base of the study, a set of legislative and normative acts of ukraine and the ministry of education and science of ukraine, as well as some research works of domestic and foreign scientists concerning various aspects of the formation of the educational services market in higher education were used. for quantitative assessment of the market relations spread in higher education, statistical baltic journal of economic studies 105 vol. 5, no. 2, 2019 methods were used to process both complete and selective information. the basis of our research was the data of the state statistics service of ukraine (from 1991 to 2017). key words: higher education, problems in higher education, educational services market development, educational services market in higher education in ukraine, educational services market formation in higher education, commercialization of higher education. jel classification: j40, l10, i25, n34, o15, p36 1. introduction formation of a market for paid services in higher education should be considered one of the most significant events in higher education of the postsoviet ukraine. this market is an integral part of the market economy and its emergence leads to the gradual transformation of social and economic relations in higher education. in the circumstances of the transitional economy and due to lack of information on the future need for specialists, it creates the basis for the transition from the strict centralized management to a flexible market regulation in higher education, combined with its state regulation. the educational services market in higher education with the elements of self-regulation serves as a connecting link between production and consumption of educational services provides communication between the higher education institutions (hei), consumers of educational services and employers. this market significantly enhances the population’s access to higher education, promotes increased operational efficiency and effectiveness of higher education institutions, and increases competition among them. currently, the development of the educational services market in ukraine takes place simultaneously with the complex political and economic processes in conditions of economic, social, political, and demographic instability. in its modern shape, the educational services market has been formed over a relatively short period and socio-economic relations in the sphere of educational services cannot be considered well-developed. the regulatory support of the hei performance in the market conditions needs significant improvement. it is necessary to note the inadequate elaboration of theoretical and methodological principles for the functioning of the educational services market, the fragmentary study of its problems, which does not correspond to the role of higher education in society, which is now on the path to its post-industrial phase. the immaturity of economic relations on the educational services market has aggravated the socioeconomic problems in higher education, some of which were inherent in higher education of ukraine before it has become an independent state. some of these problems have become chronic. among them one should note: reduction in state funding for higher education and the complexity of funding sources diversification for heis as a result of the difficult situation at the vast majority of enterprises; the unclaimed results of scientific research by production sphere and low solvency of the population; imbalance of demand and supply in the educational services market and inconsistency of the educational services market and the labour market; the negative demographic situation, which causes a reduction in demand for higher education; the outflow of the most talented youth from the regions to study at the universities of large cities of ukraine and even in other countries from where they, as a rule, do not return after studying; poorly developed theoretical and methodological pricing principles for paid services in higher education; the decline in the quality of education; low competitiveness of higher education system and insufficient volume of export of educational services; increase in educational services volume mainly due to the rise of training costs; the absence of reliable regional monitoring of the educational services market; insufficient state regulation of the educational services market, especially in the regions, etc. to comprehend these problems, as well as their significance and better solutions to them, a further research on the educational services market in higher education of ukraine seems to be necessary to determine the peculiarities of the educational services market formation and the study of its characteristic features that, in the conditions of transformation of the economic system, become of the utmost importance. 2. literature review there is much prior research in the ukrainian contemporary economic literature on the problems of the educational services market in higher education of ukraine. the general problems of the formation of this market in ukraine are discussed in (yeliseyeva at all, 2012; karpyuk, 2009; podzigun, 2014; chekalovska, 2012). great attention is paid to the statistical analysis of the development of this market in ukraine, mainly the dynamics of its quantitative indicators (karpyuk, 2009; milevsky, milevskaya, 2014; malyukina, 2014; chernysh, 2016). the educational services markets of the certain regions in ukraine are investigated (shender, 2013; yurchuk, 2013), the ways to improve the state baltic journal of economic studies 106 vol. 5, no. 2, 2019 management of the development of these markets are determined by (ambrazhey, 2011; voyna, 2013). in some cases, despite the fact that the ascertaining of the essence and trends of the educational services market development was proclaimed as a research aim, the authors most carefully considered the educational services themselves (yashchuk, 2013). at the same time, in the overwhelming majority of research papers, the authors avoid the analysis of the preconditions and the time of the emergence of the educational services market in ukraine. often its emergence is associated with the time when ukraine proclaimed its independence (yevmenkova, 2011; yashchuk, 2013; podzigun, 2014; chekalovska, 2012; karpyuk, 2009; babiy, 2013; malyukina, 2014; chernysh, 2016; petrenko, 2010, etc.). sometimes, even in the research works, focused on the analysis of the educational services market emergence and development, this issue is not considered (poyta, 2011). in our opinion, to determine the availability of the educational services market in higher education of ukraine in different periods of its existence and the characteristics of the main stages of its formation, a more thorough scientific justification is needed. detection and correct interpretation of trends and prospects for the development of this market involves an analysis of the conditions of its formation, as well as the allocation of separate characteristic stages of its development and identification of their peculiarities. the aim of this paper is to identify the complex of socio-economic and institutional preconditions and peculiarities of the educational services market formation in higher education of ukraine. 3. results 3.1. the main approaches to determining the preconditions for the formation of the educational services market in higher education of ukraine the formation of the educational services market in higher education of ukraine is often associated with the fundamental changes in society that took place in the 1990s during the transition to a market economy. various authors refer to commercial relations in higher education, paid education and the emergence of private heis as the main factors (or evidence) shaping this market. the most widespread opinion regarding the emergence of the educational services market in higher education of ukraine is that it appeared only due to the formation of a market economy in the early 1990s. according to k. m. yevmenkova, “market transformations in post-socialist countries and in ukraine, in particular, have led to the formation of the educational services market” (yevmenkova, 2011). similarly, t. a. yashchuk believes that “market relations in the education of our country arose with the beginning of market reforms in the economy” (yashchuk, 2013). a similar opinion is maintained by s. m. podzigun (2014), g. s. chekalovska (2012), and others. but, as mentioned below, part of market relations and some features of the educational services market in higher education of ukraine existed in pre-revolutionary (before 1917), soviet, and preperestroika periods. the transition to a market economy has only created opportunities for its development. o. a. karpyuk, r . p. babiy, a. o. malyukina and a. v. chernysh, also tie up the educational services market with the 1990s and assert that its formation was caused by “the emergence of commercial relations in education, the formation of a network of private education institutions” (karpyuk, 2009; babiy, 2013; malyukina, 2014; chernysh, 2016). but the emergence of commercial relations and the formation of a network of private heis are not equivalent. commercial relations are the root cause here, while the formation of a network of private heis is its consequence. moreover, paid education in ukraine existed almost all the time, since the end of the 19th century. l. m. petrenko believes that the presence of the educational services market is evidenced by the fact that “educational services in the field of training the personnel for production, services, construction, etc. are provided by various organizations and institutions.” furthermore, in her opinion, “the emergence and steady growth of the share of paid services in the modern state sector of education indicate the existence of market relations in the field of vocational education and training” (petrenko, 2010). paid services and competition evidence market relations. but the fact that different organizations and institutions take part in the training of personnel is not a sign of the market. the market can function when only one manufacturer is present. it should be emphasized that the complete denial of market relations in higher education in the times of the soviet union is erroneous. it is necessary to agree with the authors, who assert the earlier emergence of the educational services market. for example, a. m. osmanov and a. m. yesetova state that “the educational services market existed in the pre-perestroika period. but it was poorly developed, or rather, it was a state monopoly, and it significantly differed from its present state” (osmanov, yesetova, 2012). indeed, the system of higher education was under pressure from the command-administrative system for many years; its activities, core indicators, and resource allocation were tightly planned and controlled. y. b. rubin, noting the absence of a legal competitive market in the ussr , calls the soviet order in the educational services market irrational and characterizes the market itself as a quasi-market (rubin, 2011). at the same time, he points out the presence of the so-called “black market of near-educational services,” which baltic journal of economic studies 107 vol. 5, no. 2, 2019 “permeated the activities of prestigious universities and faculties, despite periodic campaigns to combat bribes” (rubin, 2011). emphasizing the lack of competition in higher education, except for competition among the illegal operators of educational, as well as other services (coaches, corrupt officials, etc.), the author draws attention to the total nature of consumer competition for access to educational services and conditions of inequality for consumers depending on their nationality, party membership or belonging to “the chosen few.” it should be noted here that there was a certain competition for consumers among higher education institutions. this is especially true of the 1980s. higher education institutions received an admission plan and had to fulfil it at any cost, so they conducted active career guidance work among young people, which in fact was an advertising campaign to attract university entrants. the modern economic literature describes the emergence of a network of private heis (karpyuk, 2009; babiy, 2013; malyukina, 2014 et al.) and the presence of tuition fees (petrenko, 2010) as the main reasons for the formation of the educational services market and the evidence of its existence. but it should be emphasized that these phenomena existed before in ukraine when it was part of the russian empire, as well as during the soviet union time. in the russian empire, tuition fees were introduced at state universities in 1817 for the first time, and then, when in the second half of the 19th century there appeared non-government higher education institutions – they were introduced in them too (derevyanko, 2013). 3.2. development of the educational services market in higher education of ukraine at the end of the 19th and beginning of the 20th centuries at the turn of the 19th and 20th centuries, rapid industrial development and general economic growth in the russian empire, whose part ukraine was then, led to a significant increase in the demand of employers for postgraduates, on the one hand, and the demand of the population for higher education on the other. it was the time when kharkiv institute of technology, kyiv polytechnic institute, ekaterinoslav mining college, kyiv and kharkiv commercial institutes were established. in kharkiv, agricultural institute evacuated from nova alexandria began its work (derevyanko, 2013). institutes of the russian empire, including ukraine, were unevenly filled up. for example, st. petersburg and kyiv universities were extremely crowded and had a lot of students, while the provincial universities, especially their historical-philological faculties, had few or no students at all (ivanov, 1991). ukrainian heis, as well as other educational institutions of the russian empire, were funded by the state but these funds were never enough to ensure their normal operation. at the beginning of the 20th century, “the most important item of financial revenues after the state allocations was the tuition fees, which formed ‘special funds’ for higher education. students covered the largest expenditures, which were not provided with budgetary allocations. the growth of the number of students led to a significant replenishment of these funds, which helped the educational institutions” (ivanov, 1991). special funds also included interest on universities’ capital, income from specially created enterprises, income from the property sale, etc. (belyakov, 2007), that is, income from entrepreneurship. in the soviet union, special funds became known as extra-budgetary ones. in case of insufficient funding, heis usually solved their financial problems by raising tuition fees. the size of tuition fees was set by the institutions themselves. thus, at st. vladimir kiev imperial university in the 1880s, in addition to tuition fees, students also paid fees to lecturers whose classes they attended (mohylnyi, 2014). as at that time, in the conditions of the development of capitalism, the state did not meet the growing needs for specialists, non-governmental (free) higher education institutions appeared. it was not subsidized by the state and was represented by two types of heis. the first type included the universities, which were created on an “ideological basis” at the initiative and expense of the bourgeois intellectuals as educational institutions. funds from non-governmental organizations and philanthropists covered the universities costs and development, as well as material assistance to students. the second type included heis, which were organized on a commercial basis and had the aim of providing the founders with income in the form of interest on invested capital (ivanov, 1991). non-governmental higher education institutions quickly adapted to changing conditions, organizing training new commercial and technical specialities, thereby increasing the supply of educational services. as a result of the growth of economic and social needs, at the end of 1916, there were 20 non-state higher education institutions operating in ukraine (33.9% of the total number of non-governmental heis in russia as a whole) (prokopenko, 2013). non-governmental heis, the first of which originated in the 1860s-1870s, were not supported by the state. thus, at the turn of the 19th and 20th centuries, only in ukraine the tsarist regime refused to establish agricultural institutes in poltava, simferopol, kamianka, polytechnic institutes in mykolaiv, sevastopol, simferopol, and veterinary institute in kamianets-podilskyi (prokopenko, 2013). as a result of restrictions, non-state universities were established only in large cities. and only at the end of 1905 that it was officially allowed to open private “courses with a curriculum higher than average” (ivanov, 1991). baltic journal of economic studies 108 vol. 5, no. 2, 2019 not all private universities could successfully compete with government ones. that led to a “lack of people,” and consequently, the financial non-viability of a certain part of them (ivanov, 1991). 3.3. the market elements in the ukrainian ssr in the pre-perestroika period. paid education the next year after the 1917 revolution paid education was abolished. the non-state universities ceased to exist. but the catastrophic shortage of funds for the universities’ maintenance led to the reinstatement of tuition fees, which resulted in the fact that in 1922 in ukraine almost 80% of students paid tuition fees. the students of medical and socio-economic heis paid the highest tuition fees (kravchuk, 2011). different aspects of the tuition fees collection at educational institutions, including higher educational establishments, were regulated by a number of decrees of the aucec and the spc of the rsfsr , which were adopted in 1923, 1924, and 1927, and by the decision of the spc of the ussr in 1940. at the same time, various privileges for the military, the disabled, educators, etc. were established. higher education in ukraine in the post-revolutionary period was characterized by the main elements of the educational services market. there were supply and demand for higher education. at the same time, demand was unregulated while supply was strictly regulated by the state in the soviet union. almost all the time since the end of the 19th century, students paid full or partial tuition fees. there wasn’t a free price setting during the soviet era. pricing was the exclusive sphere of the state, not the heis. ultimately, tuition fees at the universities of the soviet union were cancelled only in 1956. as it was mentioned above, there was competition among the heis for consumers. admission to universities was carried out on a competitive basis. that is, there was simultaneous competition between providers and consumers of educational services. students did not cover the full cost of their studies. the maximum tuition fees were limited by the state, though students who had good results could receive a scholarship. due to the limited size, the fees only partially covered the costs of the university operation, supplementing government allocations. it is interesting to mention that the specialists’ training for business entities could be carried out on the basis of agreements between the heis and these entities when the latter paid for specialists’ training, though both the heis and business entities were state-owned. (derevyanko, 2013). in the soviet union, apart from tuition fees, universities could have other extra-budgetary funds. extra-budgetary funds included rent of university buildings and hostels (these funds were used for their maintenance, equipment, and repair), revenues from transport (intended for its maintenance, repair, and replenishment), revenues from production activities of auxiliary enterprises and farms (spent on their organization, current maintenance, and expansion), etc. planning and control over extra-budgetary expenditures were the same as over budget ones. the largest income source was self-supporting research work on orders of enterprises and industry research organizations. thus, one should recognize that there was the educational services market in the ukrainian ssr , though it was limited, undeveloped, deformed, and strictly regulated by the state. 3.4. the educational services market in higher education of modern ukraine 3.4.1. market relations in higher education the idea of the need for a broad introduction of market relations in higher education, according to authors of the monograph edited by o. tikhonov, was disseminated in the 90s of the last century (tikhonov, 1998). on this occasion, in 1990, guy neave, a world-famous specialist in higher education policy in europe and in european integration, who then was director of research for the international association of universities (iau) in paris, describing the tendencies in higher education of western europe in 1988–1990, points out that “market should be considered the main element underlying the european policy in higher education” (neave, 1990). this is also true for north american universities (buchbinder, newson, 1991). a well-known british economist, a former adviser to m. thatcher, douglas hague claimed in 1991, that under present conditions, “liberal universities” should be replaced by universities which “operate as a business in the field of science” (hague, 1991). the concept of entrepreneurial university appeared in the mid-1990s. according to burton r. clark, such a university is focused on innovation, knowledge commercialization, diversifying of funding base, close connection with the environment (clark, 1998). today, the signs of the entrepreneurial university include entrepreneurship in research, educational, and other activities, obtaining a financial result from these activities, competitiveness in the markets of research, vocational educational services, labour, finance and commodities (bunyak, 2016). in the soviet union, including ukraine, the transformation of the economic system and its transition to market relations took place in the second half of the 1980s and the beginning of the 1990s. these changes spread to the entire society. higher education was not spared by them either. thus, the expansion of the market into all spheres of public life in ukraine coincided with the introduction of market relations in higher education in western europe and north america. the main factors in the development of market relations in education, according to the authors (tikhonov, 1998) are the following: baltic journal of economic studies 109 vol. 5, no. 2, 2019 the acquisition the status of fixed capital by knowledge in society and funding sources diversification in education; changing the role of the state in education; spread of neo-conservative ideology; development of new information technologies. 3.4.2. financial problems of higher education institutions as the factor that accelerated the formation of the educational services market at the end of the 20th century a number of socio-economic preconditions necessary for the formation of the educational services market were present in the pre-perestroika period in ukraine. they are: division of labour and specialization; the relative economic isolation of universities, which acted as business entities and offered training in their specialities (as well as in certain new ones); the presence of steady demand for higher education; freedom and independence for consumers to choose universities and specialities (this demand was unregulated, although the state regulated the number of places in each speciality); certain competition among consumers and among the majority of universities. but there was no academic, financial, and organizational autonomy, pedagogical freedom of educators, freedom of research, learning, etc. economic, financial, organizational decisions, decisions on educational and research programs, the forms of studies, and other matters were necessarily consistent with the higher institutional level organization. the state regulated the size of the tuition fees. all this made the education services market undeveloped, inferior but, albeit in a deformed state, it still existed. as already noted, during the soviet era, in addition to budget allocations, universities could have extra-budgetary funds, which they received mainly as a result of selfsupporting research work on orders of enterprises and industry research organizations. thus, the total income of the hei consisted of two parts: budget allocations and extra-budgetary funds. in the first half of the 1960s, the share of the latter was more than 20%. in the future, the share of extra-budgetary funds in the total proceeds steadily increased, reaching almost 50% in the late 1980s (table 1). in the second half of the 1980s, in the era of perestroika, together with economic reform and accelerating socioeconomic development of the country, there was a transition of enterprises to self-financing. similarly, an attempt was made to transfer higher education to the new conditions of management because the overwhelming part of them was experiencing difficulties. to stimulate the growth of selfsupporting research work and attract additional revenues to finance their activities, since 1987, they were allowed to form an accumulation fund in the amount of 20% of selfsupporting funds. they could also manufacture products, provide organizations and people with paid services in the field of culture, passenger transportation, health resort services, physical culture and sports, housing, etc. that is, they got the opportunity to provide a large range of paid services. moreover, they even had pre-planned tasks for paid services development. but since these plans were not carried out (butenko, 1990), self-supporting research was the main source of extra-budgetary funds. as it was mentioned above, in the soviet union enterprises, institutions, collective farms, etc. could fund hei’s activities to some extent. for example, the kherson branch of the mykolaiv shipbuilding institute (now national university of shipbuilding), founded in 1967, for more than thirty years was financed from the budget, and funds allocated by the kherson shipyard. at the same time, in the total amount of heis’ financing, the share of enterprises in comparison with the volumes of state budget revenues, if any, was negligible. most often those enterprises gave outdated equipment, devices and materials, etc. for free. thus, heis got funding from several sources. but the main source was funding from the state budget, and they used it for direct student training. the economic and social processes that took place in the soviet economy in the second half of the 1980s did not allow universities to increase the volume of work, services, etc. for enterprises and population, as the financial situation of universities and the state committee on science and education authorities required. moreover, there appeared some new problems. many enterprises were on the verge of bankruptcy as a result of the rupture of economic ties among them, a drop in effective demand, inflation, etc. the situation became more complicated because the enterprises of the military-industrial complex always had priority development. the conversion of the military-industrial complex broke traditional ties among businesses and industries. instead of high-tech production, enterprises were forced to produce simpler and cheaper goods, but which in conditions of inflation were in demand. the difficult financial situation of enterprises and their refusal to produce and develop table 1 the ratio between funding sources for higher education in the ukrainian ssr in 1961-1988 sources of funding source share on average over the period 1961-1965 1966-1970 1971-1975 1976-1980 1981-1985 1986-1988 budget allocations 77,5 74,4 66,4 61,8 56,2 51,5 extra-budgetary funds 22,5 25,6 33,6 38,2 43,8 48,6 source: compiled by the authors according to (chugaev, 1990) baltic journal of economic studies 110 vol. 5, no. 2, 2019 new complex, high-tech products led to the curtailment of research, in which heis were involved. the crisis situation at the enterprises led not only to the mass termination of their interaction with universities in the field of research but also to a significant reduction in the need for young professionals. at that time, production did not require a large number of new professionals because of its significant reduction, a decrease in its technical level, and lack of financial resources even to stay viable. thus, there was a reduction of the budget financing and a simultaneous decrease, or the complete disappearance of opportunities for higher education institutions to receive extra-budgetary funds. it should be emphasized that the higher education of the soviet union was in a difficult situation not only because of the financial problems and enterprises’ degradation in the 1980s. insufficient funding of higher education for many years influenced the ways and dynamics of its development, its content, and quality. all this, together with other factors that negatively affected higher education led to the fact that in the late 1980s the condition of higher education in the ussr was recognized as a crisis one. for example, in (gausner et all., 1992), the authors directly point out the crisis of the system for staff training and retraining. they give three main reasons for that. the first one is a sharp decrease in the financing of education from the state budget. the second one is the reduction of funds allocated by enterprises for training and retraining of staff. the third reason is the lack of demand for professional knowledge of an increasing number of professionals as a result of the falling demand for high-tech products. new socio-economic problems, generated by the transition from the command-and-control economy to a market one, aggravated the old unresolved financial problems in ukraine’s education in the 1990s. denationalization, democratization, and liberalization led to the emergence of complex and controversial processes, as well as significant economic, political, and social changes in society. in the early 1990s, there was a sharp increase in energy prices (gas prices increased 100 times, oil prices 300 times in 1992), in production cost prices, and a significant drop in industrial and agricultural production. even a simple reproduction of fixed assets became impossible. there was inflation and then hyperinflation in 1992–1995. at the same time, the economic potential of the country decreased almost twice, as well as its scientific and technical potential, the structure of social production deteriorated, unemployment and social insecurity increased, there was a significant differentiation in people’s incomes (chumachenko, 2000). the deepening of the crisis was facilitated by such factors as: the deformed structure of the national economy of ukraine, which once was the part of the soviet one, focused primarily on the military-industrial complex needs; backward agriculture; poor control of all transformational processes at the macro level; the presence of a significant number of environmentally hazardous and power-consuming enterprises. it is natural that under such conditions, there was a further reduction of the state budget of ukraine, and funding of education significantly deteriorated. starting from 1994 and almost to the beginning of the 2000s, budget funds were allocated, as a rule, only to salaries and scholarships, but they were not enough for these purposes, they were received and paid with considerable delay. the state wage arrears in heis were eliminated only in the late 1990s. many of the educational institutions were on the verge of survival. the funding cuts and difficult situation in the country forced heis to adhere to austerity measures, even to the detriment of the quality of training. therefore, heis, along with the introduction of a strict economy, constantly sought out additional sources of funding. the only way out of the situation could be to provide higher education institutions with the opportunity to get additional funds. the law of ukraine “on education”, adopted by the verkhovna rada of the ukrainian ssr in 1991, in addition to funding public education institutions at the expense of the corresponding budgets, funds of the sectors of the national economy, state enterprises and organizations, provided additional sources of funding. universities got permission to receive funds for training and retraining according to the concluded contracts; to provide additional educational services; to perform scientific research and other types of work. unlike the soviet period, universities now could independently set the size of tuition fees, decide on the size of contract prices for performing various work. the financial capabilities of the majority of enterprises and organizations led almost to a complete reduction of research work, and other activities (manufacturing and repairing of machines, appliances, inventory, etc., providing transport services, leasing premises and equipment, etc.) allowed getting only insignificant additional revenues. in this regard, the main source of income for public universities, in addition to budget financing, was the tuition fees, due to which they received 70-95% of the proceeds to the special fund in this period. getting additional funds from the paid students’ training is the most simple for heis since it allows them to concentrate primarily on their core activities (educational and research ones). the organization of paid training provides for the availability of appropriate demand from enterprises and the public. as a result of the unsatisfied effective demand for higher education in the first years of ukraine’s independence, there was a rapid increase in the number of those who paid tuition fees at the heis. in 2006, the number of students enrolled in state and municipal higher education institutions for studying for the funds of individuals and legal entities reached its maximum baltic journal of economic studies 111 vol. 5, no. 2, 2019 value – 246.8 thousand people (figure 1). it also was facilitated by an increase in the number of secondary school leavers. the gradual decrease in the number of students who paid tuition fees began after 2005. their minimum value after the maximum of 2006 was in 2015 when 104.7 thousand people were enrolled. one should take in account that in ukraine at the beginning of the 2016–2017 academic year, there were only 13 municipal heis, making up 4.5% of the total number of heis (main indicators, 2017). 1.8% of students study there. that is, figure 1 practically illustrates the dynamics of students’ admission to state higher education institutions. the rapid increase in the admission of students to study for the funds of individuals and legal entities led to the fact that their number in 1999 reached, and during 2000–2007, as well as in 2010, exceeded the number of students who got the state-supported places. in 2016, the proportion of students who entered the state and municipal higher education institutions for studying at the state budget funds amounted to 54% of the total number of students enrolled that year. 3.4.3. the emergence and development of a non-state sector of higher education in independent ukraine the formation of the educational services market was also facilitated by the emergence and development of the non-state education sector. there is a widespread belief that the first non-state higher education institutions appeared after the law of the ukrainian ssr “on education” was adopted in 1991, which legally established the equal rights of all education institutions, including higher education, regardless of the form of ownership (zerkal, siryi, 2016). but the emergence of non-state education is related to the restructuring, which began in the second half of the 1980s, the democratization of society, the formation of market relations in the economy, the recognition of private property. the significant role here played the desire of creative personalities to free themselves from strict regulations, as well as their disappointment with their financial situation, which did not match their qualifications, erudition, creativity, pedagogical and organizational skills. the first non-state universities in ukraine appeared in the mainstream of the slogan “what is not forbidden is allowed” in the late 1980s, which corresponds to the liberal-democratic principle: “everything that is not forbidden is allowed.” these non-state higher education institutions were of various organizational and legal forms. it was especially true for universities that were created prior to the adoption of legislative norms that regulated the heis establishment and activities in the new socio-economic conditions. for example, the well-known interregional academy of personnel management was founded in kyiv in 1989 as a cooperative “kyiv research and implementation centre ‘kadry’” with the right to conduct educational, methodological and publishing activities. cooperatives at that time were the most widespread organizational and legal form of entrepreneurship, which was in line with the rapid development of the cooperative movement. figure 1. students’ enrolment at state and municipal higher education institutions by the sources of funding 19 3, 5 20 5, 0 2 43 ,2 26 3, 0 27 2, 7 31 4, 5 34 4, 8 35 9, 5 37 3, 9 39 8, 3 42 2, 7 43 0, 9 42 0, 1 37 1, 0 33 4, 9 35 7, 2 28 6, 7 31 6, 9 32 2, 6 26 8, 0 24 0, 0 24 1, 8 17 5, 5 17 4, 1 17 0, 1 15 0, 1 13 7, 1 12 9, 6 15 3, 4 14 1, 4 13 5, 7 13 5, 9 13 6, 5 13 5, 5 14 0, 4 19 0, 5 16 9, 5 14 8, 9 18 8, 8 18 4, 9 17 5, 9 16 6, 0 15 6, 2 14 9, 7 40 ,1 63 ,6 1 07 ,5 12 7, 1 13 6, 2 17 8, 9 20 4, 4 20 9, 9 21 7, 7 23 2, 3 24 6, 8 24 6, 1 23 1, 3 18 0, 5 16 5, 5 10 4, 7 11 0, 4 11 7, 91 52 ,5 14 2, 8 13 7, 7 18 1, 7 0 50 100 150 200 250 300 350 400 450 500 19 95 -1 99 6 19 96 -1 99 7 19 97 -1 99 8 19 98 -1 99 9 19 99 -2 00 0 20 00 -2 00 1 20 01 -2 00 2 20 02 -2 00 3 20 03 -2 00 4 20 04 -2 00 5 20 05 -2 00 6 20 06 -2 00 7 20 07 -2 00 8 20 08 -2 00 9 20 09 -2 01 0 20 10 -2 01 1 20 11 -2 01 2 20 12 -2 01 3 20 13 -2 01 4 20 14 -2 01 5 20 15 -2 01 6 20 16 -2 01 7 аcademic years in th ou s. p er so ns total including: at the expense of the state and local budget at the expense of state entities, individuals and legal entities baltic journal of economic studies 112 vol. 5, no. 2, 2019 the private hei “international management institute” was created as a joint venture organized by the swiss international management institute and the institute of economics of the academy of sciences of the ukrssr in 1989. kharkiv institute of social progress was founded in 1990, before the formation of a modern legislative framework for education. in 1991, the laws “on enterprise in the ukrainian ssr”, “on entrepreneurship in the ukrainian ssr” and “on education” formed new institutional preconditions for the further development of higher education in ukraine. in particular, they officially eliminated the state monopoly on providing paid services in education, recognized the possibility of establishing heis of the non-state form of ownership, and equated them to state universities. the law of the ukrainian ssr “on education” stipulated that “the activities related to the provision of services for education and training of specialists of different levels of qualification” only begin when a license is available. but “at the same time, the licensing and accreditation system was merely declarative” (horpynych, salov, 2012). since 1996, the procedure has got its modern form, and “normalization, systematic character, and orderliness appeared in licensing and accreditation work” (horpynych, salov, 2012). newly established non-state heis actively filled vacant niches in the higher education services market. it was, first of all, training of students in economic, managerial, legal, and other specialities that were in demand by the population, and which state universities were not able to satisfy at that time. besides, training in these specialities did not require laboratory facilities and equipment, which made it possible to start the educational process rather quickly. starting in 1993, the process of active emergence of new non-state higher education institutions began. it continued until 2007 when the number of heis reached its maximum (115 heis). after that, their number declined to 78 in 2016 (figure 2). it is noteworthy that the dynamics of changes in the number of state and non-state heis from 1996 to 2016 was identical. therefore, the share of non-state universities in this period fluctuated within rather narrow limits – from 27.2% to 32.4%. the main reasons for reducing the number of universities, including non-state ones, is a significant decrease in secondary school graduates, as well as increased control over the quality of training from the state. at the same time, entrants in ukraine continue to prefer state higher education institutions. thus, between 1995 and 2016, the number of students enrolled at state higher education institutions was much higher each year than the number of those who entered private heis (figure 3). since 1995, the number of students enrolled at universities of all forms of ownership has been steadily increasing and in 2006 reached its maximum value (507.7 thousand people). in the same year, the number of students enrolled at the state and municipal higher education institutions was the largest one (430.9 thousand people). the maximum number of those enrolled at non-state higher education institutions was in 2005 (80.3 thousand). after that, the number of entrants began to decrease, and in 2017 this figure reached its minimum. 264.4 thousand people were enrolled at all universities figure 2. dynamics of the number of state, communal and non-state higher education institutions in ukraine in 1991–2016 20 9 20 8 19 7 22 9 15 6 15 7 1 90 19 1 19 9 20 2 20 6 22 0 22 3 22 5 23 2 23 5 23 3 23 2 23 6 23 6 24 0 24 2 24 3 23 8 23 1 15 4 788 080 96 2 2 2 42 64 75 78 92 9 3 92 9 3 9 8 10 4 11 4 11 3 11 4 11 5 11 3 10 8 10 6 10 7 10 3 0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 19 91 -1 99 2 19 92 -1 99 3 19 93 -1 99 4 19 94 -1 99 5 19 95 -1 99 6 19 96 -1 99 7 19 97 -1 99 8 19 98 -1 99 9 19 99 -2 00 0 20 00 -2 00 1 20 01 -2 00 2 20 02 -2 00 3 20 03 -2 00 4 20 04 -2 00 5 20 05 -2 00 6 20 06 -2 00 7 20 07 -2 00 8 20 08 -2 00 9 20 09 -2 01 0 20 10 -2 01 1 20 11 -2 01 2 20 12 -2 01 3 20 13 -2 01 4 20 14 -2 01 5 20 15 -2 01 6 20 16 -2 01 7 academic years in t ho us . p er so ns state and communal heis non-state heis baltic journal of economic studies 113 vol. 5, no. 2, 2019 of ukraine, that is, twice less than in 2006. at that, 248.2 thousand people enrolled at state and municipal heis, which is 57.6% of the same indicator in 2006. only 16,200 persons entered non-state heis in 2017, which practically corresponded to the level of 1995 (13,300 people). the proportion of students enrolled in non-state heis during the whole period under consideration is insignificant. it ranged from 16.0% (in 2005) to 6.5% (in 2017). moreover, during the fourteen years (from 1995 to 2000 and from 2009 to 2016) the value of this indicator did not exceed 10%. entrants enrolled at heis for paid training also prefer state universities. it is evidenced by the admission results of those enrolled for paid training, in state and communal as well as non-state universities in ukraine in 1995–2016 (figure 4). the proportion of the number of figure 3. enrolment at heis of ukraine by forms of ownership figure 4. enrolment at heis of ukraine by forms of ownership, at the expense of state entities, individuals, and legal entities (paid education) 25 9, 9 25 3, 2 29 1, 6 34 8, 1 34 1, 3 31 4, 538 1, 4 37 0, 54 25 ,249 1, 2 50 7, 7 50 3, 0 47 5, 2 43 2, 5 40 8, 6 38 7, 1 34 6, 4 30 0, 4 29 0, 1 26 4, 7 22 1, 5 20 6, 8 24 1, 8 24 0, 0 26 8, 032 2, 6 31 6, 9 28 6, 73 57 ,2 33 4, 9 37 1, 042 0, 1 43 0, 9 42 2, 7 39 8, 3 37 3, 9 35 9, 5 34 4, 8 31 4, 5 27 2, 7 26 3, 0 24 3, 2 20 5, 0 19 3, 5 13 ,2 18 ,1 23 ,6 25 ,4 24 ,4 27 ,9 34 ,8 35 ,67 1, 1 76 ,7 80 ,3 69 ,4 58 ,5 49 ,1 42 ,3 31 ,9 27 ,7 27 ,1 21 ,6 16 ,5 13 ,3 54 ,3 0 100 200 300 400 500 600 19 95 -1 99 6 19 96 -1 99 7 19 97 -1 99 8 19 98 -1 99 9 19 99 -2 00 0 20 00 -2 00 1 20 01 -2 00 2 20 02 -2 00 3 20 03 -2 00 4 20 04 -2 00 5 20 05 -2 00 6 20 06 -2 00 7 20 07 -2 00 8 20 08 -2 00 9 20 09 -2 01 0 20 10 -2 01 1 20 11 -2 01 2 20 12 -2 01 3 20 13 -2 01 4 20 14 -2 01 5 20 15 -2 01 6 20 16 -2 01 7 academic years in t ho us . p er so ns total state and communal heis non-state heis 327,1 301,7 322,8 302,4 234,8 201,1 213,2 165,6 122,8 167,2 177,9 141,5 123,6 276,3 259,0 246,7 210,8 164,0 154,2 129,0 80,1 53,4 142,8137,7 181,7 165,5 180,5 231,3 246,1246,8 232,3 217,7 209,9204,4 178,9 136,2127,1 107,5 63,6 40,1 104,7110,4 117,9 152,5 18,1 13,223,6 25,424,427,9 34,835,6 54,3 71,176,7 80,3 69,458,5 49,142,331,927,727,1 21,616,5 13,3 0 50 100 150 200 250 300 350 19 95 -1 99 6 19 96 -1 99 7 19 97 -1 99 8 19 98 -1 99 9 19 99 -2 00 0 20 00 -2 00 1 20 01 -2 00 2 20 02 -2 00 3 20 03 -2 00 4 20 04 -2 00 5 20 05 -2 00 6 20 06 -2 00 7 20 07 -2 00 8 20 08 -2 00 9 20 09 -2 01 0 20 10 -2 01 1 20 11 -2 01 2 20 12 -2 01 3 20 13 -2 01 4 20 14 -2 01 5 20 15 -2 01 6 20 16 -2 01 7 academic years in th ou s. p er so ns total state and communal heis non-state heis baltic journal of economic studies 114 vol. 5, no. 2, 2019 students admitted at non-state heis in the total number of students enrolled for paid training at state and nonstate heis in the period under consideration ranged from 24.9% (in 1995) to 14.3% (in 2013). this figure reached its minimum value in 2016 when it was 10.7%. for comparison, we should note that in the world, the proportion of students whose training was financed by private sources during 2011–2015 amounted to about 27%. accordingly, public funding provided 73% of students (businessstat). the given information testifies to the minor role of non-state heis, which they play in the modern educational services market of ukraine. although in the early 1990s it was thought that they would create significant competition with state universities. applicants attempting to enter state hei for public procurement, in the event of failure, go to the same university for paid training. sometimes consumers have a certain degree of distrust to the quality educational services at non-state universities. there are grounds for this since a significant part of their scientific and pedagogical staff is full-time teachers of state universities and at non-state ones, they work on a part-time basis, which often affects their attitude to their duties. a characteristic feature of the third stage of the educational services market development in higher education is the competition among heis for students. at this stage, unlike the first two (the end of the 19th – the beginning of the 20th centuries and the soviet period), it has become significant. institutions of higher education tried to increase the admissions of students for paid training. it allowed state institutions to receive funds to compensate for state underfunding and to ensure development, while for private ones it was the primary source of funding. a particular intensification of competition took place, starting in mid-2006 when there was a decline in the number of applicants due to the decrease of secondary school graduates. in these circumstances, it is very important for state heis to prevent reduction of the number of students, as it influences the number of academic staff positions. (lomonosov, lomonosova, 2007). 4. conclusions there are three stages of the formation and distribution of the higher education services market in ukraine. each of them has led to obvious qualitative changes in the state of the educational services market and corresponds to the socio-economic system that existed in ukraine during a certain period of history. the first stage – the end of the 19th century – the beginning of the 20th century coincides with the emergence of capitalism. the main factors of the emergence of market relations in higher education were the rapid growth of employers’ demand for professionals with a university degree, simultaneously increased demand of the population for it, as well as insufficient funding of state universities, which led to the distribution of paid training. there appeared two types of non-state universities. the first ones were founded on the “ideological basis” for educational purpose; the others, based on commercial principles, were intended to generate profit. one of the features of the second stage in the ukrainian ssr period was fee-paying education, which took place in state universities (non-state ones were abolished). the size of tuition fees was regulated by the state, though they did not cover all expenses of the university. there were various benefits for some categories of students. tuition fee system at soviet universities existed until 1956. there was some competition present among the heis for consumers, although that was the situation that strictly regulated supply. demand for higher education was unregulated and dissatisfied. in addition to budgetary allocations as the primary funding source, universities had some extra-budgetary funds. the most money came from enterprises and industry research organizations as the fees for research and development. all this testified to the presence of a market in the ukrainian ssr , although it was underdeveloped, deformed, imperfect, and controlled by the state. the third stage is related to the liberalization of the economy and market transformations in ukraine. it began in the second half of the 1980s when ukraine was part of the ussr and practically coincided with the dissemination of entrepreneurial university ideas in the world. the radical changes in society that took place in the 1990s spurred the development of the educational services market in higher education. after ukraine gained independence in 1991, this stage of the educational services market formation in higher education is the most important, essential, and completed. it is characterized by the commercialization of educational services in higher education. in contrast to the first stage (the end of the 19th and the beginning of the 20th centuries), the creation of private heis was not limited and had a clear legal framework. in the period of the ussr , there were no private universities at all. the activating means for the development of the educational services market in higher education at all stages of its formation and distribution was insufficient funding. chronic underfunding of state heis made them actively seek out additional sources of funding, and even before ukraine became independent, formed powerful motives at universities to provide paid services to enterprises, institutions, and the population. thus, the higher education of ukraine, since the end of the 19th century, has been characterized by the main elements of the educational services market: supply and demand for higher education, competition among higher education institutions for consumers and competition among consumers for places in heis, tuition fees (full or partial). baltic journal of economic studies 115 vol. 5, no. 2, 2019 references: ambrazhey, o. a. 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(2016). periodization of the history of higher education in ukraine and the practice of subsidiaries activities in the period of ukraine's independence. scientific works of the petro mohyla chornomorsky state university of the kyiv-mohyla academy complex. series: history, 274(262), 7–11. baltic journal of economic studies 75 vol. 5, no. 1, 2019 corresponding author: 1 national aviation university, ukraine. e-mail: ons@ua.fm 2 national aviation university, ukraine. e-mail: ryazanovskaya@ukr.net 3 national aviation university, ukraine. e-mail: novakv.nau@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-1-75-80 strategic airline alliances as a special form of company integration oksana kyrylenko1, viktoria riazanovska2, valentina novak3 abstract. the purpose of the article is to analyse the world practice of organization and functioning of strategic alliances as one of the forms of integration of companies and consider the peculiarities of their functioning, including in aviation. initially, their creation was aimed at achieving comparatively simple goals such as regional or global coordination of sales or distribution of innovations and new proprietary technologies in related industries. economic motivation was to reduce the cost of global marketing or the spread of technology, as well as to increase sales through stable partnerships or cooperative ties. subsequently, international strategic alliances have continued. the methodology of the research is the position on the theory of enterprise management, as well as the methods of differentiated and component analysis for the scientific definition of the term “strategic analysis.” it also describes the differences in strategic alliances from other organizational forms of company integration. the results prove that global competition is not the only reason for the creation of international strategic alliances. the market conditions and technological factors of development, which are derived from the determination and properties of alliances themselves, are determined, but at the same time, they have their own peculiarities, which are dictated by the state of economic life. the emergence of alliances was the result of increased global competition, and especially non-price. however, global competition is not the only reason for the creation of international strategic alliances. in addition, it is also useful to refer to market conditions and technological development factors that derive from the definition and properties of the alliances themselves, but at the same time, they have their own peculiarities that are dictated by the state of the economy. it is practically grounded that one of the motives for the creation and effective development of strategic alliances in the aviation sector is the possibility of improving the level of service. the main problems of creating alliances, regularities of successful functioning, and the main causes of the collapse of alliances are described. value/originality. based on the analysis of the problems that arise in the functioning of alliances, the authors proposed some ways to solve these problems and, accordingly, overcome the causes of the collapse of international strategic alliances. key words: strategic alliance, airline alliance, international strategic alliances, transport, management. jel classification: a19, b41 1. introduction in world practice, different types of integration of firms have developed, which differ depending on the objectives of cooperation, the nature of economic relations between their participants, the degree of independence of enterprises incorporated in the association. these are strategic alliances, consortia, cartels, syndicates, bullets, associations, conglomerates, trusts, concerns, industrial holdings, financial and industrial groups, etc. organizational forms of corporate associations that differ significantly in terms of the degree of integration of their participants are historically developed from concerns and family groups to strategic alliances, and so on. at the same time, the organizational forms that arise do not supplant the previous types of integration of companies but complement them. there is an expansion of forms. the nature of the interconnections, especially in aviation branch, between companies becomes more complex and rather subtle, given also the possibility of cooperation of integrated structures. the purpose of this article is to analyse the world practice of organization including companies in aviation branch and operation of strategic alliances as one of the forms of company integration, analysis of their characteristics, features and differences from other baltic journal of economic studies 76 vol. 5, no. 1, 2019 forms of integration; the study of problems that arise in the functioning of alliances, the identification and coverage of the main causes of failure and the collapse of strategic airline alliances, as well as consideration of some ways to solve these problems and, accordingly, overcome the causes of the collapse. 2. analysis of recent research and publications modern world integration processes, the forms in which they occur, in particular, strategic alliances, are the subject of research by many economists. among them are such scholars as: (bobina, grachev, 2006), (dagaev, 2001), (karapukhina, 2004), (yolles, 2005), and others. the boundaries between the forms of company integration are often blurred. therefore, different specialists (both theoreticians and practitioners) are sometimes interpreted ambiguously. for example, there are two opinions about the relationship between strategic alliances and consortia (baum, rowley, shipilov, 2004), (novak, 2012). one of them is that the consortium is not a strategic alliance; however, it is often more of a prevailing point of view that consortia are among the types of strategic alliances. however, due to the importance of the research, there is a need for further research development of the perspective of the future functioning of international strategic alliances in ukraine. the incompleteness of scientific developments in this area and the essential practical significance of this problem for ukrainian enterprises in the conditions of globalization of the economy emphasize the objective nature of the relevance of the research topic. 3. strategic alliance and forms of company integration creation of various international associations of companies at the present stage becomes an objective necessity and a habitual phenomenon. one of the many forms of manifestation of these processes is the creation of international strategic alliances. international strategic alliances are developing in many spheres of the world economy, first of all – in telecommunications, computer science, air transportation, services, etc. (dagaev, 2001), (harrigan, 2002), (novak, 2009). the strategic alliance, according to the authors, is such an organizational form of economic cooperation between two or more independent enterprises for achieving certain commercial goals, obtaining synergy from the combined and complementary strategic resources of companies, in which each of the parties concerned is interested in mutually beneficial cooperation and tries to implement it, moreover, acts as an equal partner and makes a concrete contribution to the achievement of the overall result, while preserving its independence. from the creation of strategic alliances, the company receives significant competitive advantages, so the desire for such integration and its causes are quite understandable. strategic alliances are the most promising form of company integration and one of the most important means of competition. their creation is one of the fastest and cheapest ways to implement a global strategy. strategic alliances have certain features, namely generalized by (bobina, 2006), (dagaev, 2001), (kyrylenko, 2011), (yolles, 2005), (novak, 2009): • the alliance, as a rule, is not an independent legal entity; • companies may be members of many strategic alliances; • this form of economic association is based on the conclusion of medium-term or long-term, bilateral or multilateral agreements; • strategic alliances are created on the basis of horizontal inter-firm cooperation, as well as between companies engaged in related fields of business and possess complementary technologies and experience; • strategic alliances are flexible enough, free for partners, more focused on the future, reduce uncertainty in partner relationships, increase stability in resource provision and product and service distribution; • alliances are created for a certain period of time, they collapse when the need for association disappears; • in the strategic alliance, not only suppliers and customers can enter, but also competitors; • alliances have an impact on competition: united companies focus more on joint ventures than one against each other; • within strategic alliances, the joint coordination of strategic planning and management of participants is carried out, which allows them to coordinate their long-term partnerships with the benefit of each participant; • this is an agreement on cooperation between firms that goes beyond ordinary commercial transactions but does not bring the case to the merger of companies. • there are significant differences between strategic alliances based on long-term partner relationships and contract-based partnerships since the latter type of cooperation exists for a limited time and is used for specific projects or purposes. conventional contractual relations, as a rule, do not foresee the development of relations in the future; • to date, these are the least restrictive methods of penetration of the market by the legislation. strategic alliances are a relatively new formation in the global economy. initially, their creation was aimed at achieving relatively simple goals such as regional or global sales coordination or the spread of innovations and new patented technologies in related industries. economic motivation was to reduce the baltic journal of economic studies 77 vol. 5, no. 1, 2019 cost of global marketing or the spread of technology, as well as increased sales through stable partnerships or cooperative ties. subsequently, international strategic alliances became long-lasting. they are complex in nature because they are formed for the realization of strategic goals – creation and spread of new technologies and products, the cooperation of production, joint provision of services, etc. differences of strategic alliances from other organizational forms of integration of companies are presented in figure 1, where their comparative characteristics are shown. the emergence of alliances was the result of increased global competition, and especially non-price. however, global competition is not the only reason for the creation of international strategic alliances. in addition, it is also useful to refer to market conditions and technological and technological factors of development, which follow from the definition and properties of the alliances themselves, but at the same time, have their own characteristics, which are dictated by the state of economic life. (completed on the basis of (litvinenko, 2014), (bamford, gomes-casseres, robinson, 2002), (bleeke, ernst, 2001)) strategic alliance strategic alliance the legal independence of merging companies loss ability to save such losses preservation degree of association of economic activity combining individual parties the union of most parties trust conglomerat e concern consortium cartel syndicate pool association cartel syndicate pool association consortiu trust concern strategic alliance concern trust the production community of merging companies availability not necessarily absence conglomerate consortium pool association cartel syndicate 1 figure 1. common features and differences between the main organizational forms of company integration baltic journal of economic studies 78 vol. 5, no. 1, 2019 these factors include the following: further globalization of markets, expansion of the spectrum of geopolitical tasks of development; technological universalization of economic activity of entrepreneurial structures; fluctuations in the ratio of the exchange rates of individual national currency units; objective needs for manoeuvre in investment policy; possibility to provide additional transaction savings, to save on expenses; an opportunity to increase the profitability of assets, which is provided by deepening of specialization and organizational and managerial optimization; further technological progress, which leads to inexpediency, and sometimes entrepreneurial impossibility to follow parallel courses of development of scientific and technological progress. the goals for which the companies enter strategic alliances are significantly different. however, the undeniable conditions for the effective functioning of the strategic alliance are long-term planning, policy coordination that strengthens the trust of partners and the desire for cooperation between higher and middle management of allied companies. there are four types of strategic alliances: • alliances with joint stock companies in existing enterprises; • strategic alliances with the creation of new companies (joint ventures); • consortia for the implementation of investment projects; • alliances with weak cooperation (dagaev, 2001). however, it should be noted that strategic alliances are not devoid of risks, which often lead to failures and collapse of alliances. that is why it becomes necessary to identify not only the basic patterns of successful development but also the reasons for the collapse of international strategic alliances. creation and development of international strategic alliances are aimed at the use and creation of certain competitive advantages. through the use of competitive advantages, the results of alliances are much more significant. as a rule, this is achieved through the possibility of manoeuvring productive resources and individual components of production potential, accelerated implementation of the achievements of ntps, increasing the efficiency of all marketing activities and economies of scale. it should be noted that in addition to competitive advantages, alliances are also based on the mutual coherence of the long-term strategic plans of the partners and the main objectives of their activities (for example, increase in the cost of productive efficiency, increase of innovations and knowledge, flexibility and scale of activity, preservation and strengthening of competitive advantages. 4. a strategic alliance in the aviation sector one of the motives for the creation and effective development of strategic alliances in the aviation sector is the possibility of increasing the level of service, which is their significant competitive advantage. of course, the service is provided by other companies. therefore, strategic airline alliances make a joint purchase of aircraft, reducing the cost of leasing, since the aircraft are operated more. airlines that are a part of strategic airline alliances distribute operating costs, that is, the costs of corporations in terms of the number of places that the company has. due to such alliances, the company gains new regions or distributes flights that are in less demand. airlines take part in regular consumer programs. permanent consumers are individuals who regularly use the services of companies that are a part of the alliance. airlines participation in consumer programs provides benefits to consumers as opportunities are available: simultaneous purchasing of tickets on a global scale and at low prices; the introduction of additional requirements for hotel services, car rentals, communications, etc.; replacement of tickets between airlines; the implementation of the most convenient flights on a global scale. thus, the strategic nature of global alliances is determined by the fact that their members are direct or indirect global competitors or partners in related fields of activity. the development of strategic alliances leads to the distribution of costs and profits, mutual ownership of shares. an analysis of the global experience of the creation and operation of strategic alliances proves an interesting phenomenon: companies that are not a part of strategic alliances are significantly more likely to fail than the components of the system. of course, strategic alliances are not completely stable, because firms are changing: some disappear, others appear. however, the position of alliances is much stronger than companies not incorporated into alliances. despite the rather high stability of alliances, their creation does not always give the expected effect and brings the desired result. statistics show that about 60% of alliances collapse without overcoming the fouryear threshold from the moment of their creation, and ten-year cooperation is rarer (karapukhina, 2004), (kyrylenko, 2011). the reasons may be different: insufficiently accurate calculations of the profitability of a joint project, different views on management and marketing, etc. the study of strategic alliance activities revealed four main problems of creating alliances or four reasons for the collapse of alliances. namely: • inconsistency in the size of alliances to the needs and goals; baltic journal of economic studies 79 vol. 5, no. 1, 2019 • insufficient quality of alliance members; • internal competition in the alliance; • problems of managing the alliance system (novak, 2009). an analysis of the activities of international alliances shows that for the division of risk or strengthening the position of the market the best possible number of partners. however, if the main motive for creating a strategic alliance is technological cooperation, the quality factor of the partners becomes the determining factor. it is also dangerous to take several companies at once to a strategic alliance. as the world practice shows, it is expedient to expand the alliance gradually. this is the best and most consistent mechanism for creating a trusted alliance. that is why, in order to avoid failure, the creation of a strategic alliance should be aimed not at the size of the alliance as much as possible, but in the compliance of the alliance with the needs and objectives of the participating companies. the leading factor in the success of alliances is the quality of its participants. the imperfection of this factor can lead to ineffective and inefficient functioning of the strategic alliance, and as a result – to the failure and collapse of the alliance. alliance partners should best complement each other’s capabilities. for the most accurate identification of potential partners, the company must identify a list of its capabilities, as well as a list of its weaknesses, that is, what it lacks for its successful operation. then you should follow the partners who will fill these weaknesses. the result of well-chosen members of the alliance is the unification of several successful developments. one company, for example, offers technology, another – resources, the next – a design, one more provides its trading network, customer base, etc. internal competition in the alliance is a significant factor that can be broken by any international strategic alliance. but, provided the alliance is properly formed, it should not arise – the participants should complement each other, rather than compete. for example, if one of the participants shares knowledge and experience with the alliance partners on the production process, market and sales, while others will only try to take this experience and use the knowledge gained for their own purposes, this will inevitably lead to the collapse of such a strategic alliance. avoid the occurrence of such a problem due to a properly agreed and documented warranty contract. another problem may arise on the basis of coincidence of strategic intentions. this usually happens when a strategic alliance includes both small companies and powerful ones. smaller companies can win significantly more from this alliance. after all, they are involved in the strategic planning, technology, experience, and knowledge of large and smaller turnaround companies. and if they can translate all this much faster than powerful companies, then this will give them the opportunity to first capture new market segments. working on the same products, you can avoid such problems by focusing on different levels of product value creation. one firm member of a strategic alliance, for example, can conduct basic research, and the other one can engage in marketing activities and sales. yes, they cannot exist without one. the problem of managing the alliance system is quite serious. management structure dictates the management process. one of the management systems is used when there are many partners and nobody dominates. its drawback is the slowness of today ’s market. if a strategic alliance includes many similar partners with similar interests, then they will be constantly and futilely competing. the structure of the centre and the periphery, which includes one or more closely interconnected members of the nucleus and smaller partners that rotate around the centre, is more effective. the problem with such a management system can be only a significant increase in the network. another, equally effective management system can be based on the leadership of one company. this is the situation of the dominant company. for example, boeing. instead of three firms, one boeing solves all disputes, takes responsibility and disciplines. in this case, the leader must necessarily be a large and authoritative company. in order for the positive effect of the company’s entry into a strategic alliance prevailing over the negative, in our opinion, it is necessary to take into account the following: • strategic alliance partner must be compatible with this company; • one should not expect an immediate return on the alliance, largely depending on the trust that exists between companies; • a strategic alliance should be considered as a temporary agreement between partners, if it becomes disadvantageous, it is expedient to immediately break it. • the most successful alliances are characterized by the fact that products and positions on the partner market complement the products and positions of the company, and do not compete with them; • as a part of a strategic alliance, it is dangerous to pass on to the partner information that may appear in a competitive situation; • when creating a strategic alliance, it is recommended that you quickly and comprehensively familiarize yourself with the main ideas and practices of a technology and management partner and introduce the most rational of this in your activity. baltic journal of economic studies 80 vol. 5, no. 1, 2019 5. conclusions we consider it expedient to attribute strategic alliances to the so-called soft forms of company integration. these forms of integration are especially popular for international associations, as they allow for joint activities while maintaining the legal and economic independence of the participants. within the framework of strategic alliances, the opportunity to mobilize the benefits of a strong corporate structure with the preservation of the national secrecy of its members. indeed, sometimes the state power and public opinion of the countries for certain reasons, and above all, political, are not attentive to such forms of integration of companies, which lead to the loss of independence. from the creation of international strategic alliances, the company gains significant competitive advantages, so the desire for such integration and its causes are quite understandable. according to the authors, the creation and further development of strategic aviation alliances of the airline are pushed by various factors and motives. the most significant of these is that the company in this case receives a significant gain, which is the following: in raising the level of service in the implementation of air transportation; in the formation of a customer supply network, which stabilizes the demand for services; reduction of fixed and operating expenses; in achieving economies of scale – the distribution of fixed costs for another volume of sales; in creating new types of income; access to foreign markets with minimum costs without additional costs for equipment, purchase of a license for flights; in creating competitive advantages over other companies; in improving the safety of air transportation. references: bobina, m. a., grachev, m. v. (2006). mezhdunarodniy bisness. strategiya alyancov [international business. alliances strategy]. moscow: izdatelstvo dello. (in russian) dagaev, a. a. (2001). mezhdunarodnyie strategicheskie tehnologicheskie alyansyi rossiyskih predpriyatiy v oblasti telekommunikatsiy. [international strategic technologic alliances of russian enterprises in the field of telecommunications]. moscow: menedzhment v rossii i za rubezhom. (in russian) karapukhina, e. a. (2004). mezhdunarodnyie strategicheskie alyansyi. opyt issledovania [international strategically alliances. research experience]. moscow: delo i service. (in russian) litvinenko, l. l. (2014). upravlinnya potencialom integratsiii aviakompanii v umovah mizhnarodnogo konkurentnoho seredobyscha [management of aircompany integration potential in the conditions of international competitive environment]. phormyvannia rynkovyh vidnosyn v ukraini: zb. nauk. prats, 11(162), 134-138. novak, v. o., gordienko, i. v., katerna, o. k., matveev, v. v., ilienko, o. v. (2012). vzaemodiya aeroportu z transportnymy pidpryemstvamy: oranizatsiya ta upravlinnya: [cooperation of airport with transport enterprises: organization and management]. kyiv: kondor. (in ukrainian) bamford, gomes-casseres robinson (2002). mastering alliance strategy: a comprehensive guide to design, management, and organization. jossey-bass. baum, rowley, shipilov (2004). competing in groups. journal of managerial and decision economics [special issue]. bleeke j., ernst, d. (2001). “is your strategic alliance really a sale?” harvard business review. harrigan, k. r . (2002). “strategic alliances and partner asymmetries”, cooperative strategies in international business. lexington: lexington books. kyrylenko, o. m., shchelkunov, v. i. and oth. (2011). fundamentals of transport economics: tutorial. kyiv: condor. novak, v., symonenko, y., lytvynenko, l. (2009). peculiarities of international strategic alliances activity. international scientific journal. air transport, 13, 100-107. yolles, p. (2005). strategicheskie alyances v bisnesse [strategically alliances on business]. moscow: dobraya kniga. baltic journal of economic studies 57 vol. 5, no. 2, 2019 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 kharkiv national agrarian university named after v.v. dokuchaev, ukraine. e-mail: univerms@ukr.net 3 kharkiv national agrarian university named after v.v. dokuchaev, ukraine. e-mail: lapo4kamari@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-57-64 conceptual fundamentals of development of the food security system inna irtyshcheva1, maryna ponomarova2, iryna dolzhykova3 abstract. the paper highlights the system of food security of the state. the purpose of the article is to study food security of ukraine and identify preconditions for forming the system of its provision. the subject-matter of the study is the theoretical and practical aspects of providing food security in the country. in the process of the study, the following methods were used: dialectical – to reveal regularities and factors of the food security system, system analysis – to identify the essence of food security of the country, graphical analysis – for a schematic representation of generalized theoretical and practical results of the research, logical generalization of the results – to substantiate the basic preconditions for forming a system for ensuring food security of the country. the stable system of ensuring food security of the population, the development of the agro-industrial complex and the food industry are important factors in improving the country’s economic welfare. key problems in ensuring the food security of ukraine are analysed, among them are: low level of real incomes of the majority of the population; reduction in the share of small and medium businesses; low competitiveness of agriculture and food industry; insufficiently developed infrastructure of the food market; rising unemployment; increase in grain export volumes; deterioration of agricultural land quality; environmental pollution; the level of urbanization of the population. main preconditions for forming the food security system are identified and substantiated: creation of favourable institutional environment that requires completion of the land reform in ukraine; increasing the efficiency of agricultural land use; expanding the tools of state support for agricultural production; stimulating the development of crop and livestock industry; expansion of integration and technological links between agricultural producers and food industry enterprises. based on the results obtained, the author determined the factors and conditions of the food security system. key words: food security, development, food security system. jel classification: b22, l52, q18 1. introduction the stable and complete food supply to the population, the development of the agro-industrial complex and the food industry are important factors in improving the country’s economic welfare and strengthening its national security. according to realities, the internal and external position of ukraine in 2017 is determined by a complex set of factors that bear the threat and risks of deepening crisis phenomena and also the possibility to enter the main path of national development. among the main risks to the food security of ukraine remain: insufficient state support for the agro-industrial complex, low technical and technological level of national production of food products in comparison with leading world exporters, weakening of participation of small and medium business in agricultural and food production, etc. moreover, the low profitability of agro-industrial enterprises makes them unattractive for investors, who could contribute to raising the material and technical base and productivity of agricultural production in general. in such conditions, an undoubtedly important task is to further study food security problems and substantiate the basic prerequisites, factors of its provision, which determined the relevance of the above topic and its practical importance. in the period of transformation of the economy of ukraine based on market relations, considerable attention was paid to research on food security issues in the country as a whole. issues of food security were studied in works by foreign scientists such as v. ahaiev, l. abalkin, i. bohdanov, a. bohomolov, z. ilina, b. kumakhov, m. mazoyer, w. liefert, m. tracy, baltic journal of economic studies 58 vol. 5, no. 2, 2019 e. reinert and others. a wide range of domestic scientists is engaged in covering issues of ensuring food security of ukraine, among them should be noted: p. borshchevskyi, o. hudzynskyi, o. hoichuk, b. danylyshyn, m. dolishnii, s. dorohuntsov, r . ivanukh, a. lysetskyi, i. lukinov, m. palamarchuk, m. pistun, d. preiher, p. sabluk, m. khorunzhyi, o. shpychak, l. cherniuk, m. chumachenko, v. yurchyshyn, and others. in their works, they studied theoretical and methodological aspects of ensuring food security and its assessment. however, appreciating the results achieved, a number of underdeveloped issues regarding the preconditions and factors for ensuring food security in ukraine can be distinguished. the concept of food security, which closely correlates with the welfare of the population, logically requires a permanent study of key components. solving the global food supply problem requires local approaches taking into account the regional peculiarities of economic development. in the context of european integration processes of ukraine, the need arises to adapt national standards of food and food security to the european union’s standards and also to coordinate organizational processes of agricultural production within the economic development of regions. 2. essence and features of food security one of the main areas for ensuring national security of the country, a means of preserving its sovereignty and independence, the essential condition for the implementation of strategic national priorities for guaranteeing high living standards is the country’s food security. food security is an important component of the national security of the country and as an economic category is characterized by the level of guaranteed constant access of the population to food to an extent that would ensure the reproduction and development of vital needs of individuals. according to the draft law of ukraine “on food security of ukraine”, food security is such socio-economic and environmental condition in the state, in which all its citizens are stably and guaranteedly provided with food in the volume necessary and sufficient for physical and social development of the person, health of the population of ukraine (postanova verkhovnoji rady ukrajiny pro pryjnjattja za osnovu proektu zakonu ukrajiny pro prodovoljchu bezpeku ukrajiny). herewith, food security indicators are: quantitative and qualitative characteristics of the state, dynamics, and perspectives of physical and economic availability of foods for all social and demographical groups of the population, level and structure of their consumption, quality and safety of food, stability and degree of independence of the internal food market, development level of the agricultural sector and related industries of the economy, as well as the efficiency of the use of agricultural natural resource potential, etc. (postanova verkhovnoji rady ukrajiny pro pryjnjattja za osnovu proektu zakonu ukrajiny pro prodovoljchu bezpeku ukrajiny). in the opinion of the scientist o. m. chechel, “food security” can be defined as a state of protection of the food interests of a person, society, state from external and internal threats, which allows ensuring the functioning of people, economy, and industry, providing all sectors of the population with sufficient quality products, and controlling crisis situations (2000, p. 74). prominent domestic scientists p. t. sabluk (2009, p. 5) and o. v. paskhaver (2014, p. 9) noted that ensuring food security depends on the ability to food self-production and, therefore, the most informative is the indicator of the share of own food production in consumption, the limit value of which should be 75–80%. it should be pointed out that for an individual, food security is one of the guarantees of the real right to life, and not only declared in the constitution of ukraine and other laws and regulations. and for society, food security is the most important guarantee of the sociopolitical stability of the harmonious development of all its strata. the functioning of any country considers food security as a general economic indicator, which value increases along with the deepening crisis of government and economy. therefore, food security is one of the acutest problems of national security. therefore, according to the author, the concept of “food security” has three essential aspects: economic, political, and environmental. food security as an economic category determines target parameters of functioning and sustainable development of the economic system and characterizes food sovereignty, guaranteed product availability for the population, quality and environmental cleanliness of food products. it should be noted that food security factors play both positive and negative roles for ensuring the country’s food security; let us distinguish main groups of these factors: economic, political, environmental, and also natural and climatic (figure 1). negative influence is assessed by natural disasters, military actions, and environmental pollution. among the characteristic main factors of ensuring food security are the following: investment support for the agro-industrial complex by the state and business, state support and development of transport and logistics, economic welfare of the population, the legal and legislative framework of ukraine. these factors are complementary and interdependent in the country’s food security. since food resources are formed in the process of agro-industrial production, this very sector of the national economy serves as a basis for ensuring food security of the country. at present, ukraine has the agricultural sector development strategy (for the period up to 2020) but the corresponding program for baltic journal of economic studies 59 vol. 5, no. 2, 2019 its implementation has not been developed. moreover, the work of the agro-industrial complex is greatly complicated by the impossibility of a stable economic activity in the occupied territories of the donbas and in the autonomous republic of crimea, the loss of control over land users’ compliance with the requirements for the land protection and rational use on agricultural lands. so as a result of hostilities, the planted area for agricultural crops has decreased significantly. in particular, in the donetsk region in 2016, 989.5 thousand hectares were allocated for basic crops, which is 30.9% less than in 2013 (1 431.8 thousand hectares) (derzhavna sluzhba statystyky ukrainy). in the luhansk region in 2016, the planted area for agricultural crops has reduced by 23.7% (from 1 030.4 thousand hectares to 786.3 thousand hectares, respectively) compared to 2013. only at the initial stage of the ato, the estimated losses of the agrarian sector in the donetsk region amounted to 0.5 billion uah, luhansk – 1.2 billion uah (chorna knygha kremlja. vijna rosiji proty ukrajiny, 2015). deterioration of the quality of agricultural lands also should be noted. the absence of clear prospects for the development of agriculture in the territories adjacent to the conflict zone demotivates the intensification of agricultural production, inducing economic entities to use only natural soil fertility. if on average in ukraine 96 kg of factors and spheres of food security economic the economic welfare of the population; national agricultural production; tax incentives for investments in agriculture; investment support for the agro-industrial complex by the state and business; state support and development of transport and logistics complex; money income per capita; living wage per person; the unemployment rate of the population; food import. political the political situation in the country; state regulation of foreign economic activity; legal and legislative framework. sphere of production sphere of provision sphere of consumption environmental and naturalclimatic natural disasters; degree of environmentalization of the country and its regions; land resources protection; the state of environmental pollution; climatic conditions and their fluctuations; environmentally safe food products. ensuring food security figure 1. influence of factors on the food security system baltic journal of economic studies 60 vol. 5, no. 2, 2019 mineral fertilizers was added per 1 hectare of sown area, farms of donetsk and luhansk regions in 2016, 62 and 56 kg (in nutrients) of mineral fertilizers were introduced per 1 hectare of sown area, which are the lowest indicators in ukraine (derzhavna sluzhba statystyky ukrainy). studies show that despite the incompleteness of the land reform, permanent changes in public regulation of the agricultural business, which predetermine maintaining the raw material orientation of agricultural production, the agricultural sector of the economy has strong growth potential. the main tasks of the state development policy in the agricultural sector as an important precondition for ensuring the country’s food security should become the following: create favourable institutional environment that requires the completion of the land reform in ukraine; legislative regulation of the issue of agricultural land circulation, requiring the completion of public discussion and submission to the verkhovna rada of ukraine of the draft law of ukraine “on market turnover of agricultural land”; ordering the land cadastre of ukraine; increase the efficiency of agricultural land use that requires the creation of a stable market mechanism for land relations’ regulation, improvement of economic and legal relations of land ownership; provision of conservation of degraded and low-yield land; extension of the list of tools for fiscal stimulation of land users to increase the area of pasture and hayfields; provision of modernization, reconstruction, and technical re-equipment of reclamation systems; expand tools of state support for agricultural production and liberalize conditions for its obtaining, which requires: development of new instruments of subsidization and compensatory payments for the production of plant and livestock products, which does not contradict the requirements of the world trade organization; simplifying the conditions for agricultural producers for obtaining preferential credit resources and ensuring transparency in tender commissions’ decisionmaking; improvement of the distribution of household allowances in support of the agricultural sector; stimulating the development of crop and livestock industry by encouraging agricultural producers to use intensive technologies in crop production; the expansion of integration and technological links among agricultural producers and food industry enterprises to create clusters of food products with a high degree of preparedness; stimulating the modernization of the fisheries industry in order to reduce the import dependence of ukraine on this type of food products. consequently, promoting the growth of performance indicators of the agro-sector through the production and sale of products with a greater share of added value, increasing the efficiency of using the resources involved in production, especially land, introducing effective mechanisms for supporting agribusiness with simultaneous large-scale deregulation and abolition of bureaucratic restrictions will contribute to ensuring an adequate level of food security of ukraine. in the current economic conditions, a crisis in food and processing industry of many enterprises is observed, which is determined by: depreciation of basic production assets, low level of food production technology. therefore, issues of innovative development of the food industry as a part of the agro-industrial sector are important and relevant in overcoming the negative outcomes of the crisis (teorija i praktyka dijaljnosti pidpryjemstv: monoghrafija. innovacijyj rozvytok pidpryjemstv kharchovoji sfery ekonomiky reghionu, 2017). equally important is to create conditions for the renewal and modernization of food and processing industry enterprises through the technical re-equipment on the basis of resource-saving technologies. today, there is a low level of food security of the population in ukraine. it is worth noting that an important aspect of solving this problem is the need of food quality control, the absence of which should be considered the main reason for the deterioration of indicators of life of the population. among the problems facing ukraine on the way towards forming a system of food security are the following: low level of real incomes of the majority of the population; reduction in the share of small and medium businesses; low competitiveness of agriculture and food industry; the market is provided mainly by imported products; insufficiently developed infrastructure of the food market; rising unemployment; increase in grain export volumes; state of the infrastructure of agriculture; deterioration of agricultural land quality; environmental pollution; the level of urbanization of the population. an important factor of the food security system of ukraine is export of agricultural raw materials and food resources, as the formation of export potential simultaneously contributes to the increase of the efficiency of use of the agrarian sector as a whole. also, a necessary component for today is the introduction and development of scientifically grounded food export strategy. it should be noted that such a strategy should be aimed at supporting the development of export competitive industries in accordance with international standards, which involve the use of a large list of support instruments such as direct and indirect subsidizing of exporters, lending. in 2016, there was an increase in the volumes of harvesting main crops due to the increase in agricultural crop yield. as a result, ukraine, in the marketing year of 2015/16, ranked 7th in the world in terms of wheat yield. production increase in agricultural crops for grain and oilseeds groups has allowed a significant increase in the shipment of agricultural products for export, which in baltic journal of economic studies 61 vol. 5, no. 2, 2019 2016 amounted to 15.2 billion usd, which is 0.7 billion usd more than in 2015 (analitychna dopovidj do shhorichnogho poslannja prezydenta ukrajiny do verkhovnoji rady ukrajiny “pro vnutrishnje ta zovnishnje stanovyshhe ukrajiny v 2017 roci”). 3. global food security index starting from 2012, at the level of the economy of the world countries, the global food security index (hereinafter – gfsi) is determined that defines the financial and physical availability of food for the population of an individual country, taking into account the qualitative characteristics of food products and their safety for human health. the methodology for determining the gfsi was proposed by a group of british researchers, the economist intelligence unit, of the economist, with the support and cooperation with the american multinational company dupont. the global food security index, developed by the economist intelligence unit, explores key aspects of financial and physical availability of food, as well as food quality and safety in 109 countries. this index takes into account more than 28 food safety characteristics, which make up three main groups of factors: 1. affordability. 2. availability. 3. quality and safety (ghlobaljnyj indeks prodovoljchoji bezpeky). an analysis of the global food security index makes it possible to identify trends in the gradual decline in food availability indicators (figure 2). according to this index, food security is assessed as a condition in which the population has such access as physical, social, and economic to food (in sufficient quantity and sufficient nutritional value) that meets the needs of their diet for a healthy livelihood. the main purpose of the study is to identify the most and least vulnerable countries in terms of food security by such categories as financial and physical affordability, as well as the quality and safety of food products (ghlobaljnyj indeks prodovoljchoji bezpeky). as can be seen from fig. 2, every year the food security index of ukraine is deteriorating. in 2017, the country ranked 63rd out of 113 countries, gaining 54.1 points, compared with 2014 decreased in the ranking by 10 positions. such changes are caused by the facts: high corruption level, gross domestic product per capita, an insufficient amount of financing of scientific researches and new developments in the agrarian sector and risks of political instability, entrepreneurs who are engaged in agriculture are not provided with cheap loans, political instability in the country. in 2017, the three groups of gfsi factors are complemented by a fourth, reflecting the state of natural resources and their resilience (natural resources & resilience). on the basis of the numerical values of the global food security index, a ranking of countries around the world is formed by the level of food security (table 1). among the 113 countries included in the food security ranking in 2016, ukraine ranked 59th with a food security index of 56.1. in 2012, ukraine ranked 46th with a food security index of 57.8. thus, despite the increase in the rating of ukraine, it is possible to state that the index of food security is falling. comparing the components of the global food security index for ukraine and, on average, for all other countries (figure 3), one can state that ukraine lags behind according to the component of the assessment of the availability of food products. figure 2. ukrainian food security index baltic journal of economic studies 62 vol. 5, no. 2, 2019 the dynamics of the components of the food security index of ukraine shows that from 2013 ukraine lags behind the average for the second component of the gfsi as regards to estimating the availability of food products. estimates of the components of gfsi are presented in table 2. at the beginning of 2017, ukraine lags behind the average for the first two components of the gfsi: affordability (-1.6); availability of food products (-3,2). that causes a significant lagging of ukraine in the rating of food security. in 2017, ukraine moves in the ranking of food security to four positions down. the deterioration of the food security situation in ukraine takes place over an increase in the share of households’ expenditures on food, supply problems, and significant food losses. the state of natural resources of ukraine and their level of resilience (natural resources & resilience) also affect the level of food security. the assessment of the fourth component of gfsi for ukraine (figure 4) shows significant deviations from the mean values. from the viewpoint of sustainable development paradigm, the state of the water and land resources and the demographic situation in ukraine need special attention to ensure food security of ukraine. after all, the food industry is inextricably linked with agricultural table 1 the ranking of countries by the level of food security (global food security index) for 2016 ranking country gfsi ranking country gfsi 1. usa 89.0 31 hungary 71.4 2. singapore 88.2 32 slovakia 70.7 3. ireland 85.4 33 uruguay 69.4 4. austria 85.1 34 malaysia 69.0 5. netherlands 85.0 35 mexico 68.7 6. switzerland 84.4 36 brazil 67.4 7. canada 84.2 37 argentina 67.1 8. germany 83.9 38 costa rica 66.9 9. australia 83.8 39 turkey 66.0 10. france 83.8 40 panama 65.4 11. norway 83.8 41 south africa 64.5 12. sweden 82.9 42 china 64.2 13. new zealand 82.8 43 russia 63.8 14. denmark 82.6 44 belarus 63.5 15. united kingdom 81,6 45 romania 63.3 16. portugal 80.5 46 botswana 63.1 17. finland 79.9 47 egypt 61.8 18. belgium 79.5 48 venezuela 61.7 19. israel 78.9 49 serbia 61.5 20. spain 78.9 50 bulgaria 61.0 21. japan 77.4 51 tunisia 60.1 22. italy 77.0 52 thailand 60.0 23. united arab emirates 75.6 53 colombia 59.6 24. kuwait 75.5 54 peru 58.6 25. czech republic 74.9 55 jordan 58.5 26. south korea 74.8 56 dominican republic 56.8 27. chile 74.3 57 kazakhstan 56.8 28. poland 74.2 58 azerbaijan 56.6 29. greece 73.5 59 ukraine 56.1 30. saudi arabia 72.8 60 ecuador 56.0 source: ghlobaljnyj indeks prodovoljchoji bezpeky figure 3. estimation of ukrainian food security index components for the first half of 2017 source: ghlobaljnyj indeks prodovoljchoji bezpeky baltic journal of economic studies 63 vol. 5, no. 2, 2019 production, which involves the use of water and land resources. and without the use of human capital, it is impossible to develop any kind of activity. the threat to ukraine’s food security is the state of environmental pollution caused by significant volumes of industrial emissions and discharges, which adversely affects the state of soils, reservoirs, and airspace. in addition, attention needs to be paid to preserving forests, which play a very important role in improving the environmental situation. in order to solve ukraine’s food security issue, it is also necessary to draw attention to a considerable level of population urbanization. the outflow of the rural population affects the insufficient level of labour supply of agricultural production, which in turn affects the work of the food industry. 4. conclusions problems of food security are a part of the system of socio-economic development of the country, which involves the search for directions and mechanisms for resolving conflicts and contradictions, disproportions and imbalances that have global, national-state character. in the current economic conditions, solving the tasks of ensuring food security at the international or national level is possible only on the basis of determining the table 2 comparative estimation of component values of ukrainian gfsi with average values for the first half of 2017 characteristics score δ rank average score (all countries) overall 54,1 -2,1 63 57,3 1) affordability 55,7 -1,6 59 54,8 2) availability 50,2 -3,2 =78 59,0 3) quality and safety 61,0 0,0 51 58,7 1.1) food consumption as a share of household expenditure 42,5 -7,2 80 58,6 1.2). proportion of population under global poverty line 99,9 0,0 32 73,0 1.3) gross domestic product per capita (us$ ppp) 5,3 +0,1 68 14,5 1.4) agricultural import tariffs 86,4 0,0 17 76,4 1.5) presence of food safety net programmes 75,0 0,0 44 65,5 1.6) access to financing for farmers 50,0 0,0 59 61,3 2.1) sufficiency of supply 51,2 -26,2 58 56,5 2.2) public expenditure on agricultural r&d 12,5 +12,5 32 15,0 2.3) agricultural infrastructure 50,9 0,0 =62 57,6 2.4) volatility of agricultural production 83,6 +5,7 81 86,2 2.5) political stability risk 23,5 +1,3 93 46,8 2.6) corruption 0,0 0,0 90 37,4 2.7) urban absorption capacity 57,7 +12,4 100 66,6 2.8) food loss 90,4 -1,8 45 84,9 3.1) diet diversification 67,9 0,0 40 56,4 3.2) nutritional standards 34,6 0,0 =101 79,1 3.3) micronutrient availability 52,0 0,0 46 43,9 3.4) protein quality 54,1 0,0 47 49,4 3.5) food safety 96,8 0,0 51 80,5 source: ghlobaljnyj indeks prodovoljchoji bezpeky figure 4. estimation of natural resources of ukraine and their level of resilience in the food security index of ukraine for the first half of 2017 source: ghlobaljnyj indeks prodovoljchoji bezpeky effective directions. providing food to the population is a basic element of the economic, social, and political security of the state. based on the results obtained, the author concluded that in order to increase the level of food security of the state, it is necessary to develop its own food base, protect domestic enterprises of the agricultural sector, change baltic journal of economic studies 64 vol. 5, no. 2, 2019 the structure of agricultural production in accordance with market demand, and improve the quality of products of the agro-industrial complex. all this can be achieved only by combining the system of state measures using the internal reserves of the agro-industrial complex on the basis of its adaptation to the market business environment. in order to solve these problems, it is necessary: to improve the development of the import substitution system; intensify the widespread use of new technologies; promote a rational combination of large, medium, and small businesses; increase the effective interaction of the state, business, and science. therefore, ensuring the country’s food security is the most important condition for the sovereignty, national security, social stability of the state, and its independence in international relations. references: analitychna dopovidj do shhorichnogho poslannja prezydenta ukrajiny do verkhovnoji rady ukrajiny «pro vnutrishnje ta zovnishnje stanovyshhe ukrajiny v 2017 roci» (2017). [analytical report to the annual address of the president of ukraine to the verkhovna rada of ukraine "on the internal and external situation ukraine in 2017]. kyiv: nisd. chechel, o. m. (2000). derzhavne reghuljuvannja zabezpechennja prodovoljchoji bezpeky [state regulation of food security]. economy of agroindustrial complex, 8, 73–76. chorna knygha kremlja. vijna rosiji proty ukrajiny (2015) [the black book of the kremlin. russia's war against ukraine] information based on data of central executive authorities of ukraine. retrieved from: http://www.ucc.ca/ wp-content/uploads/2015/02/blackbook.pdf derzhavna sluzhba statystyky ukrainy [state statistics service of ukraine]. retrieved from: http://www.ukrstat.gov.ua/ ghlobaljnyj indeks prodovoljchoji bezpeky [global food security index]. retrieved from: http://foodsecurityindex.eiu.com/ postanova verkhovnoji rady ukrajiny pro pryjnjattja za osnovu proektu zakonu ukrajiny pro prodovoljchu bezpeku ukrajiny [resolution of the verkhovna rada of ukraine on the adoption of the draft law of ukraine on food safety of ukraine]. retrieved from: http://zakon.rada.gov.ua/laws/show/3498-17 sabluk, p. t., bilorus, o. gh., vlasov, v. i. (2009). prodovoljcha bezpeka ukrajiny [food safety of ukraine]. economy of agroindustrial complex, 10, 3–7. paskhaver, b. j. (2014). suchasnyj stan prodovoljchoji bezpeky [the current state of food security]. economy of agroindustrial complex, 4, 5–12. teorija i praktyka dijaljnosti pidpryjemstv: monoghrafija. innovacijyj rozvytok pidpryjemstv kharchovoji sfery ekonomiky reghionu (2017). [theory and practice of enterprises: monograph. innovative development of enterprises in the food industry economy region]. national metallurgist. academy of ukraine; per community ed. l. m. savchuk, l. m. bandorina. dnipro: pyrogi. irtyscheva, i. a., khvesyk, j. м., stehnei, m. i. (2015). detsentralizatsiia systemy upravlinnia v zabezpechenni staloho rozvytku silskykh terytorii [decentralization of management system in ensuring sustainable development of rural territories]. ekonomika apk, 4, 64–70. h. rowe, r . mason and k. dickel (1982). strategic management and business policy: a methodological approach. reading, massachusetts: addison wesley publishing co. inc. fao (1996). rome declaration on world food security and world food summit plan of action. world food summit 13-17. november. rome. baltic journal of economic studies 319 vol. 4, no. 3, 2018 corresponding author: 1 department of general law disciplines, dnipro humanitarian university. e-mail: torikv66@gmail.com 2 department of economics and tourism management, dnipro humanitarian university. e-mail: dzhindzhojan@gmail.com 3 vocational guidance and external relations, dnipro humanitarian university. e-mail: ev.namliev@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-319-324 competitiveness of ukrainian export-oriented fields volodymyr toryanyk1, vladimir dzhyndzhoian2, yevhen namliyev3 dnipro humanitarian university, ukraine abstract. the article presents the results of the study of the current state of competitiveness of the export-oriented industries of the ukrainian economy. it shows that the level of engagement in international trade determines the international competitiveness of the national economy, its readiness and the ability to create developed competitive advantages. it is proved that in ukraine today just a small number of branches of the economy are competitive in foreign markets as they offer raw materials or products with a low level of positive value to the countries abroad. taking it into account, this research goal is to determine, which export-oriented industries deserve state support and which tools and methods should be used for this purpose. the methodological basis of the research was the general scientific methods of dialectics, observation, measurement and formalization; methods of the system, statistical and graphical analysis. in particular, to identify the export-oriented industries of the domestic economy, the methodology for calculating the index of identified competitive advantages was used. it is determined that the export-oriented branches of the domestic economy include: extractive industry, metallurgy, agriculture, food industry, and chemical industry. the calculations showed that among the 223 items, which were under the analysis, only for 47 of them these figures are greater than 1. this high indicator is mainly featured for commodity products. it is concluded that without reforming the structure of the domestic economy, there will be no significant changes in the national economy since the main items of export will continue to remain the raw materials and semi-finished products in terms of the unchanging nature of the specialization of the domestic business. it is substantiated that one of the directions of increasing the competitiveness of the domestic business is increasing both the production of the added value of high-tech industries (such as the chemical industry) and the export of intermediate and end products, in which it is embodied. it has been determined that changes in the sectoral structure are needed to increase non-raw added value created in the areas of the added value. further research will be aimed at improving the mechanism of state support for export-oriented industries of ukraine. key words: international trade, competitiveness, export-oriented industries, production with high added value. jel classification: f40, l16, l60, p45 1. introduction an important place in the economic development of any country is taken by the international trade, which overcomes the limited resources and the narrowness of the domestic regional and national market, creates the possibility of mass production, increases the degree of equipment loading, increases the efficiency of the introduction of new technology, enlarges the accumulation, the pace of economic growth, and more rational use of resources of countries. the development of international trade relations connects all countries of the world in one production chain, the operation of which causes the synchronization of economic cycles of all economies in the world. the level of engagement in international trade determines the international competitiveness of the national economy, its readiness and the ability to create developed competitive advantages (duginets, 2017). according to the results of the preliminary analysis, it should be noted that in ukraine today only a small number of branches of the economy are competitive in foreign markets, and those industries that are exportoriented offer foreign raw materials or products with low added value. such a commodity structure of exports makes the country vulnerable to external changes and calls into question the possibility of strengthening the competitive position in international markets, even if there are preferential agreements. all the above mentioned makes the chosen topic of the study relevant. baltic journal of economic studies 320 vol. 4, no. 3, 2018 2. review of theory and literature the analysis of recent studies suggests that the issue of international competitiveness of industries is a matter of exploration for a wide range of scholars (for example, haldar, rao, momaya, 2016, and juan, su, 2014). in ukraine, the works of andryeyeva n., zinkovska  d. (2016), byba v. (2017), goryanska t. (2012), duginets g. (2017), and mazaraki a. (2016) are devoted to the determination of directions of increasing competitiveness of export-oriented industries in modern conditions. in addition, the relevance of the research problem is confirmed by numerous attempts to hold public hearings and meetings with the aim of identifying further joint actions of the authorities and business towards the implementation of eu requirements in order to increase the competitiveness of ukrainian industries in the european market, as well as the work of scientific and non-governmental organizations. despite the numerous scientific works devoted to the chosen research direction, the theoretical foundations and practical aspects of the given problem still need to be improved, especially taking into account the transformations of international trade. thus, the purpose of the study is to determine which exportoriented industries deserve state support and which tools and methods should be used for this purpose. 3. data collection the theoretical and methodological basis of the research was the scientific works of leading ukrainian and foreign scientists in the domains of international trade, enhancement of international competitiveness, as well as state regulation of these processes. as a result of the research, the general scientific methods of dialectics, observation, measurement, and formalization were used, as well as methods of the system and statistical analysis. in particular, to identify the export-oriented industries of the domestic economy, the methodology for calculating the index of identified competitive advantages was used. the analytical data of the united nations conference on trade and development (unctad) and the state statistics committee of ukraine became the information base for the approbation of the proposed approach. 4. the theoretical and methodological basis of research an important place in the economic development of any country is taken by international trade, which overcomes the limited resources and the narrowness of the domestic regional and national market, creates the possibility of mass production, increases the degree of loading equipment, increases the efficiency of the introduction of new technology, enlarges the accumulation, the pace of economic growth, more rational use of countries’ resources. the development of international trade relations connects all countries of the world in one production chain, the functioning of which causes the synchronization of economic cycles of all economies of the world. the assessment of the competitiveness of economic entities of open economic systems is a complex multifactorial task, which comes to the interpretation and evaluation of a set of indicators characterizing various aspects of the enterprise activities that shape its competitiveness (yokhna, 2017). today, many indicators have been developed that reflect the effects of using the factors of production of a particular industry in the defined period, forming its competitive advantages. these effects are determined by many factors that indicate the competitiveness of the industry, in particular, the volume and efficiency of labour, the volume and efficiency of real (property) capital, as well as the level and efficiency of the knowledge usage. the use of such indicators allows us to assess the economic situation of a specific branch of the economy. the most commonly used tool for empirical analysis of the country’s foreign trade specialization and the assessment of advantages is the revealed comparative advantage index, which is called the balassa index (1965; 1987): b x x x x ij rj is rs = / (1) where xij – the volume of export of goods (or commodity group) і of the country j; хrj – total export of the country j; хis – volumes of export of goods (or commodity group) i by all countries of the world; хrs – total world export. this index indicates what is the ratio of the export share of the investigated industry in the total export of the analysed country to the share of industry’s exports in the total volume of world exports (or in the union of countries, for example, the eu, cis, etc.). if the index value is greater than 1, the comparative advantage is considered to be detected, that is, the sector or industry as a whole is relatively more specialized in terms of exports. studies show that according to the balassa index, the country’s comparative advantage can be divided into a certain product (a group of goods) into four types (table 1) (balassa, 1965). a relative comparative advantage can be defined both at the global level and at the regional or subregional levels or can be limited to analysing the trade between two countries. 5. the approbation of the proposed approach the results of the analysis of foreign trade activity of ukraine in 2012–2017 show that over the past two years exports have increased by 16.0%, and imports – by 23.3%. but in the wake of 2017, a negative balance of foreign trade balance was formed (-2625.4 million dollars) (table 2). baltic journal of economic studies 321 vol. 4, no. 3, 2018 so, as it can be seen from the above data, in spite of certain difficulties and a significant drop in volumes of trade, in the last two years, there is a positive trend of development. it should also be noted that according to the state statistics service in the past two years, the largest volumes of exports are raw materials, and imports are high-tech goods and complex chemical compounds (table 3). such a commodity structure of export-import operations is an indicator of the dependence of the foreign trade sphere of ukraine on changes in the external environment. the complex socio-political conditions over the last 4 years have led to deformation in the characteristics of concentration and diversification of the ukrainian exports. so, for a long time, import remains much more advanced and wider than the ukrainian export. the transformation of the geographic structure of exports from the cis to the eu has led to a reduction in the market for high value-added products and an increase in the supply of raw materials and low-grade products. the above makes it possible to state that for ukraine the issue of increasing the competitiveness of export-oriented industries is a strategically important task. in order to identify the export-oriented industries of the domestic economy, we have calculated the index of the identified competitive advantages of ukraine. the calculations carried out according to unctad (2017) showed that among 223 items for which the calculations were made, for only 47 this figure is greater than 1. this high indicator is mainly presented for raw materials (primary ingots from iron – 68.4, barley – 43.28, corn feed – 42.84, eggs – 13.52, vegetable fats – 41.4), while for finished products the coefficient still remains low (fruit juices – 5.02, chocolate and sweets – 3.04, tobacco products – 3.9) (table 4). this situation indicates that without reforming the structure of the domestic economy, there will be no significant changes in the national economy, as under the non-change of the specialization of domestic business, the main items of export will continue to remain the raw materials and semi-finished products. according to the results of the calculations, the export-oriented industries of the domestic economy include: extractive industry, metallurgy, agriculture, food industry, and chemical industry (see table 4). table 1 interpretation of comparative advantage of the country in the products of the industry using the balassa index index value content of index limits 0 < в ≤ 1 lack of relative superiority in the export of industry’s products 1 < в ≤ 2 the weak comparative advantage in the export of industry’s products 2 < в ≤ 4 the significant comparative advantage in the export of industry’s products 4 < в a strong comparative advantage in the export of industry’s products table 2 geographical structure of foreign trade in goods and services of ukraine in 2012–2017, million usd countries/year 2012 2013 2014 2015 2016 2017 total export 80895,8 74832,3 64106,8 46804,2 45112,7 52329,6 goods 67779,8 62305,9 53901,7 38127,1 36362,8 43266,6 cis countries 24911,3 21672,1 14882,3 7806,1 6030,5 6917,5 other countries 25930,6 24060,3 22016,5 17305,8 16834,6 18814,6 eu countries (28) 16937,9 16573,5 17002,9 13015,2 13497,7 17534,5 services 13116 14233,2 11520,8 9736,6 9631,4 10446,6 cis countries 5811,1 5814,9 4034,3 3544,8 3642,1 3737,7 eu countries (28) 3750,2 4195,7 3991,6 2927,9 2950,9 3379,3 other countries 3554,7 4222,6 3494,9 3263,9 3038,4 3329,6 total import 89774,6 83346,5 60750,6 42976,0 44571,1 54955,0 goods 83135,4 75834,6 54428,7 37516,4 39248,6 49598,5 cis countries 34317,9 27741,5 17276,9 10485,5 8563,8 11475,6 eu countries (28) 26033,9 26766,9 21069,1 15330,2 17138,2 17321,1 other countries 22783,6 21326,2 16082,7 11700,7 13546,6 20795,8 services 6639,2 7523 6373,1 5523 5304,7 5359,2 cis countries 1238,2 1466,5 1204 839,6 824,5 639,4 eu countries (28) 3641,2 4212 3148,8 2750,1 2336,7 2503,0 other countries 1759,8 1844,5 2020,3 1933,3 2143,5 2216,8 *to avoid double counting, the total volume of goods and services is calculated according to the formula: total (goods and services) = goods + services – the cost of services for the processing of goods for the purpose of selling abroad source: compiled by the authors according to the state statistics service of ukraine baltic journal of economic studies 322 vol. 4, no. 3, 2018 table 3 the main commodity groups of ukrainian exports and imports to ukraine in 2016-2017* code and name of the goods according to uktzed us thousand dollars in % to the total volume us thousand dollars in % to the total volume 20 16 ii. products of vegetable origin 8093693,7 22,3 1284816,5 3,3 iii. fats and oils of animal or vegetable origin 3962975,8 10,9 245957,3 0,6 v. mineral products 2728764,8 7,5 8495024,4 21,6 vi. production of chemical and related industries 1558173,2 4,3 5619505,4 14,3 xv. non-precious metals and goods made of them 8338854,6 22,9 2306476,1 5,9 xvi. machines, equipment and mechanisms; electrical equipment 3637946 10 7889365,2 20,1 total 36361711,2 100 39249797,2 100 20 17 ii. products of vegetable origin 9215790,5 21,3 1388759,3 2,8 iii. fats and oils of animal or vegetable origin 4586261,9 10,6 247992,7 0,5 v. mineral products 3937262,6 9,1 12498833,5 25,2 vi. production of chemical and related industries 1644131,6 3,8 6547008,0 13,2 xv. non-precious metals and goods made of them 10124389,6 23,4 3025511,2 6,1 xvi. machines, equipment and mechanisms; electrical equipment 4283395,6 9,9 9919709,1 20,0 total 43266622,3 100 49598545,6 100 * data for 2016-2017 are given without taking into account the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol, and parts of the zone of the anti-terrorist operation. source: compiled by the authors according to the state statistics service of ukraine table 4 competitive advantages of export-oriented industries of the ukrainian economy industry (share in exports, %) index of comparative advantages over major export items competitiveness factors mining industry (4.7) stone, gravel, sand – 4.66, iron ore and concentrates – 11.43, aluminium ore – 5.98 availability of natural resources. metallurgy industry (27.8) ingots, primary forms of iron or steel; semifinished products – 68.4 availability of natural resources. due to inefficient modernization, production is energy-intensive. the vast majority of enterprises produce products with a small degree of processing. agriculture (19.7) butter and other fats derived from milk – 1.42, eggs – 13.52, wheat – 22.15, barley – 43.28, corn – 42.84, other cereals – 6.78, tobacco products – 3.9, animal feeds – 5.14, oil seeds – 2.85, vegetable oils and oils purified – 41.4 availability of natural resources, as well as long traditions of agriculture; a large part of the population lives in the countryside, is engaged in agriculture and is the supplier of agricultural raw materials for large agricultural enterprises. food industry (5.1) fruit juices – 5.02, chocolate and confectionery – 3.04 availability of the raw material base, sufficiently high quality, high internal competitiveness, which allows enterprises to accumulate resources for development. chemical industry (7) inorganic chemical elements – 3.53 the presence of skilled personnel, as well as research institutes and enterprises. source: calculated according to unctad (2017) at the same time, the main factors affecting the export position of these industries are the availability of natural resources in the country, which allows for producing products of high quality at lower prices than competitors. competitiveness of goods and services traditionally consists of two components: qualitative and price. in fact, the success of the competition is achieved by those enterprises that are able to offer consumers baltic journal of economic studies 323 vol. 4, no. 3, 2018 products that fully meet the requirements for a reasonable price, which, in turn, should provide the company with income sufficient to cover its costs and invest in further development. as it can be seen from the table presented, for most of the export-oriented industries, ukraine today mainly has price competitive advantages that arise as a result of the country’s resource and geographical preconditions for production. however, the potential of these industries is not fully exploited. for example, in ukraine, there are all conditions for ensuring organic food production with high-quality, environmentally friendly raw materials at the expense of existing balanced and organic agriculture, which is characterized by low levels of pesticides and chemical fertilizers, a sufficient number of small farms and skilled labour. one of the reasons for the relatively low competitiveness of exports is that ukraine is at a lower level of technological development than developed countries. that can be confirmed by the growing dependence of ukrainian machine building on the import of high-tech products – both end-use and component products used in the compilation of machines of well-known foreign brands. overcoming technological backwardness will help to create, with the obligatory support of the state, innovation parks and clusters. that, in turn, will allow us to reach the new level of ukrainian exports – the export of goods with high added value. it is also theoretically possible to transfer some european productions to ukraine because of the relatively low cost of labour. however, in practice, this is almost non-existent due to the risks of non-return of investments, taking into account the current state of affairs in the ukrainian economy. an alternative to attracting fdi may be a strategy of supporting the domestic business by creating conditions for withdrawal from the “shadow ” of the equity of ukrainian enterprises. one more problem of low competitiveness is the orientation of those producers who offer high-quality raw materials for export. as a result, domestic finished products are produced using imported raw materials that are not always high quality, given that ukrainian producers are trying to find the cheapest sources of supply, while high-quality raw materials that could be used to produce one hundred percent domestic products are exported abroad. in general, the problems that are currently faced by the export-oriented industries of ukraine are systemic. their core cause is the lack of reforms that would allow the industrial complex of the country to develop in accordance with the requirements of the modern market. the existing state competition policy is fragmented, the priorities of state support and the ways of its provision are not defined. lending resources received abroad are used to finance social needs rather than for economic development, which is reflected in low competitiveness indices of domestic industries. thus, given the weak support of the government and the lack of initiative of the business, one can expect only a deterioration of the situation for domestic producers, since the abolition of import duties for european goods will give the foreign supplier the opportunity to increase the price competitiveness component in the ukrainian market, which is one of the factors of the growth of imports in recent years. 6. conclusions to sum it up, it should be noted that today the most competitive domestic products in foreign markets are products of the raw materials sectors of the economy, which indicates significant disparities in the domestic economy compared with countries that are world technological and economic leaders. the analysis made it possible to find that the main problems of low competitiveness are energy dependence, underdevelopment of infrastructure, and the lack of a well-balanced state policy to support export-oriented industries. at the same time, it is necessary to take into account that actions of the state alone cannot provide a positive influence on the competitive position of the domestic business. enterprises, acting as the main subjects of international relations, should be actively involved in the process, searching for foreign partners and adapting products to the requirements of international markets. therefore, among the main directions of increasing the competitiveness of enterprises of export-oriented industries, we note: the development of vertical integration associations that will give manufacturers such competitive advantages as minimizing the dependence on suppliers, eliminating fluctuations in prices for raw materials. the closed cycle of production of these structures includes the cultivation, storage, and processing of raw materials for the production and sale of finished products. thus, there is cost savings, efficient management of resources and information flows. an increase both in the production of added value in high-tech sectors and in the export of intermediate and final goods, in which it is embodied. it is primarily about the need to increase non-raw added value, that is, the added value of high-tech industries such as the chemical industry. this is due to both the need to change the sectoral structure of the economy and the change in the structure created in the areas of the added value. given that the full participation of ukrainian producers in international competition is still far away, at this stage, an important task is to maintain existing positions in the international market, which, under the current conditions of development of the country, may be in jeopardy. therefore, further research will be aimed at improving the mechanism of state support for export-oriented industries of ukraine. baltic journal of economic studies 324 vol. 4, no. 3, 2018 references: andryeyeva n., zinkovska d. (2016). implementing the eu norms and standards in the agricultural industry ukraine in the increase its international competitiveness. naukovyy visnyk odeskoho natsionalnoho ekonomichnoho universytetu [scientific herald of the odessa national economic university]. 3(235), 5-22. byba v. (2017). competitiveness of ukrainian agricultural enterprises on the international markets. ekonomika i rehion: naukovyy visnyk poltntu im. yuriya kondratyuka [economics and region: scientific journal poltntu them. yuri kondratyuk]. 1(62), 95. balassa b. (1965). trade liberalization and ‘revealed comparative advantage. the manchester school. no. 33, 99-123. balassa b., bauwens l. (1987) intra-industry specialisation in a multi-country and multi-industry framework. economic journal. vol. 97, 923-939. duginets g. (2017). transformation of ukrainian foreign trade flows in the context of ukraine-eu association. zhurnal ievropejskoi ekonomiky [ journal of the european economy], 16(3), 317-329. goryanska t. (2012). competitive positions of the export-oriented sectors of the ukrainian economy. economy of industry, (1-2), 57-58. retrieved from: http://nbuv.gov.ua/j-pdf/econpr_2012_1-2_19.pdf haldar a., rao s.n., momaya k.s. (2016). can flexibility in corporate governance enhance international competitiveness? evidence from knowledge-based industries in india. global journal of flexible systems management, 17(4), 389-402. mazaraki a. (2016). foreign trade of ukraine: xxi century: monograph. kyiv: knteu. (in ukrainian) juan h., su l. (2014). the comparative research on international competitiveness of service industry between mainland china and taiwan. taiwan research journal, 2, 010. state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/ (in ukrainian) yokhna м. (2017). conceptual model of business entities evolution in competition environment. visnyk khmelnytskoho natsionalnoho universytetu. ekonomichni nauky [bulletin of the khmelnytsky national university. economic sciences]. 2(2), 7-11. unctad (2017). unctadstat. retrieved from: http://unctadstat.unctad.org baltic journal of economic studies 116 vol. 4, no. 4, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 national academy of internal affairs, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-116-119 foreign experience of social security systems for law enforcement personnel nataliia zolotarova1, hennadii shevchuk2, andrii shevarikhin3 abstract. the aim of the article is to analyse the foreign experience of the social security system of law enforcement personnel, to distinguish the features of establishing the rates and types of remuneration for law enforcement personnel in foreign countries, to determine the interrelation between the standard of social security and work experience and professional competencies. the subject of the study is the foreign experience of the social security system for law enforcement officials. methodology. the study is based on a comparison of the social security system for law enforcement officials in ukraine and in foreign countries. the analysis of the features of social security for law enforcement officers enabled to determine the advantages and disadvantages of different social security systems. a comparative legal study of certain provisions of ukrainian legislation enabled to reveal the possibilities and limits of the application of positive foreign experience in this sphere. the results of the study revealed that in ukraine the solution of problems on the performance improvement of law enforcement is interrelated with the issues of social security for personnel at work. therefore, nowadays one of the main objectives is the development of a clear system of social security for law enforcement officers, including police officers, formation of an effective system of remuneration, based on performance indicators. practical implications. in developed countries, the practice of social policy has formed several areas of its implementation. these include wage policy, social insurance, including medical, pension insurance, housing policy, as well as allowances and social benefits. some aspects of social security for employees should be studied as a positive example for ukraine in the course of social reforms. however, the application of foreign experience does not mean a mechanical transfer of certain forms of social security of foreign countries to ukrainian reality. it should be considered that some aspects of reforming social security for law enforcement officers are universal; other aspects can be applied only under certain conditions related to the political situation in the country, the level of economic development, traditions, as well as the level of crime and criminalization of society. relevance/originality. a comparative analysis of the ratio of social security systems for law enforcement officers is the basis for developing the most promising areas of domestic legislation in this sphere. key words: law enforcement bodies, police, social security, pay system. jel classification: h53, i38 1. introduction one of the main tasks of the state is to ensure a decent standard of living for citizens. the high level of welfare, achieved due to high salaries and professional incentives for employees, enables to increase the efficiency of labour. this concerns the problems of performance improvement of law enforcement. the development of effective mechanisms to raise the material well-being of employees and satisfy their needs in decent housing, quality education, high-tech medical care, recreation are of great importance in solving these issues. the foreign experience of developing pay and compensation systems, as well as social security for public officials and law enforcement personnel, can serve as a positive example for ukrainian public administration bodies in the course of social reform. in 2015, under the large-scale reform of the law enforcement bodies, the enactment of a package of social security documents was only the first step towards improving the system of social security for police personnel. these documents include the law of ukraine “on the national police” (pro natsionalnu politsiiu), the law of ukraine “on pension provision of persons discharged from military service and some other persons” (pro pensiine zabezpechennia osib, zvilnenykh z viiskovoi sluzhby, ta deiakykh inshykh osib), the resolution of the cabinet of ministers of ukraine “on approval of the regulation on the national police” baltic journal of economic studies 117 vol. 4, no. 4, 2018 (pro zatverdzhennia polozhennia pro natsionalnu politsiiu), the resolution of the cabinet of ministers of ukraine “on the remuneration of police officers of the national police” (pro hroshove zabezpechennia politseyskykh natsionalnoi politsii), the resolution of the cabinet of ministers of ukraine “on procedure of computation of the length of service, assignment and payment of pensions and allowances for officers, warrant officers, sub-officers, extended military servicemen and enlisted by contract, persons of senior commanders and junior enlisted of the internal affairs bodies, and police officers as well as members of their families” (the cabinet of ministers of ukraine, 1992), the order of the ministry of internal affairs of ukraine “on approval of the procedure and conditions for payment of remuneration for police officers of the national police and cadets of higher educational institutions of the ministry of internal affairs with specific learning conditions” (the ministry of internal affairs of ukraine, 2016) etc. nevertheless, there is still much work to be done for improving the system of social security for police officers in ukraine, which determines the relevance of the chosen topic. the aim of the article is to analyse the foreign experience of a social security system for law enforcement personnel, to distinguish the features of establishing the rates and types of remuneration for law enforcement personnel in foreign countries, to determine the interrelation between the standard of social security and work experience and professional competencies. 2. the main material foreign experience in social security for civil servants demonstrates that pay and social security systems differ from each other. it depends on many factors, including historical experience, legal and economic system of the country, traditions. in some developed countries, the salary of civil servants of the “middle level” is based on the rate of remuneration of the “middle class” in the country in general. in addition, in these countries, the state provides civil servants with a high standard of social guarantees. for example, japan ranks first in the world by salary rates of the middleand upper-level civil servants. it is legally established that remuneration of officials should correspond to the general position in society. in the performance of certain duties, employees of state bodies, as well as employees of the private sector of the economy, should receive appropriate remuneration for their work, knowledge, and skills. therefore, salaries in the public and private sectors should be maintained at the same rate. to resolve this problem, recommendations are made to amend the law on salaries of civil servants, which consider a salary research in the private and public sectors, as well as the wishes and opinions of ministries and departments. in addition, civil servants, including law enforcement officials in japan, are provided with a “social package” that includes treatment, leave, child retention, transport and regional assistance (andriichuk, 2016). in other foreign countries, such as the united kingdom, germany, remuneration of civil servants and law enforcement officers is lower than of similar positions in the private sector. however, the state tries to ensure financial and social independence and a decent standard of living for employees, adequate to the standard of living in the country and corresponding to their social status. in some foreign countries, traditionally salaries are increased annually; for example, for law enforcement officials in austria, pay growth depends partly on seniority, professional experience, capabilities of an employee, and special working conditions. some foreign countries pay great attention to social security for public officials. for example, in finland, the right to social security is one of the fundamental rights of any citizen. the system of social security in finland is based on the so-called “scandinavian model” of a social state. the main characteristics of this model are the principle of universality, financing via high taxation, equal treatment of all people, and a high level of social benefits. in italy and spain, the system of social security for law enforcement personnel also plays an important role. the basic salary is only 40% of the total employee income. additional social benefits of up to 50% of the salary depend on the official’s place of residence, his family status, professional experience, and other factors. the remaining 10% is due to special conditions of service or specialty. systems of remuneration, material incentives, and social security for civil servants of foreign countries also vary due to the model of civil service accepted in the country, such as the career or position model. in countries with the career system, civil service is based on traditional principles of management, that is, the state undertakes to provide its employees with the social and financial provision. for example, in germany, the constitutional basis for remuneration of officials is the “content principle”, which is one of the basic legal principles regarding the status of civil servants. the rate of a civil servant’s salary depends significantly on his/her education, professional qualifications, skills and abilities in this type of activity. at the same time, the rate of remuneration of civil servants should be adequate to the social status of an employee, so that he/she would be able to maintain an appropriate lifestyle. however, the salaries of civil servants are lower than those of private sector employees. baltic journal of economic studies 118 vol. 4, no. 4, 2018 nevertheless, this difference is compensated by social guarantees and social security provided to civil servants (shymanovska, 2009). in contrast to countries with the career system of public service (uniform salaries are provided for by the legislation), in countries with the position system, salaries are determined by different departments considering the budget funds, allocated to them, in accordance with collective agreements concluded between the relevant government body and trade unions as representatives of civil servants. in the united states, canada, the united kingdom, france, countries with the position system of civil service, more individual and flexible forms and systems of remuneration of employees prevail in comparison with the countries with the career civil service system that are close to the private sector of the economy. moreover, a number of countries consider improving the efficiency of human resources in state regulation and protection of the law. evidently, each state forms and develops its systems of efficiency grading and the forms of incentive for law enforcement personnel based on their experience, political, social, and economic situation in the country. for example, the basis of the us civil service is the merit system, when any employee should receive fair treatment (recruitment, promotion, lowering the position, etc.) due to his/her abilities and personal qualities. the united states police payroll scale is a table where the levels of pay are determined vertically, while the length of service of an employee is indicated horizontally. therefore, the salary rate increases diagonally. the united states also has a well-developed system of social security for civil servants, including a system of benefits. for example, the “social package” of the us police officer is very high. police officers are very interested in it and consequently, it encourages effective performance and eagerness to stay at police service as long as the retirement age (driakhlov, kupriianov, 2012). in france, one of the main rights of civil ser vants is the right to remuneration, which consists of three parts, such as basic salar y, additional remuneration, and social benefits and preferences. moreover, the basic salar y is paid according to a rigid system. at the beginning of a career, employees receive, as a rule, less than employees of state-owned enterprises or commercial organizations do. nevertheless, during the ser vice, the salar y of a civil ser vant increases and at the end of the ser vice, he/she usually receives more. this ensures the stability of the socioeconomic status of employees and their confidence in the future. basic salar y is a guaranteed remuneration. however, often it is insufficient. therefore, the legislation provides for additional allowances and payments. in addition, in france, each department has the right to reduce expenses on infrastructure (office transport, business trips, maintenance costs), and create fiscal space for an increase in employee salaries (diadechko, 2010). pay and incentive systems of foreign countries differ from each other also by interrelation between salaries and professional performance. for example, the salary of most canadian civil servants is not linked to professional performance. only 3-4% of civil servants receive salaries, which depend on professional performance. the remaining 96% are paid according to a fixed wage scale. there are about 50 professional categories in canada. inside each category, there is an additional scale for determining the level of work complexity. the united kingdom exemplifies a contrasting approach to such a system; in 1984, the system of remuneration for civil servants, based on the assessment of the efficiency of performance on the results of the performance certification, was introduced. at present, one of the most important principles of the system of financial provision for civil servants in the uk is the necessity of incentives. the direct interdependence of the rate of remuneration on the achievements of professional performance is among such incentives. the only exception is senior executives because their salary rate is established individually considering the degree of responsibility, performance efficiency, professional experience and qualifications. 3. conclusion therefore, it should be noted that in some foreign countries, the system of financial provision for civil servants and law enforcement officials is based on the salary rates of employees of the commercial sector of the economy. in other countries, the remuneration of civil servants is much lower than that of private sector employees. however, these states pay much attention to the social security of civil servants to ensure a decent standard of their living, adequate to living standards in the country and the corresponding socio-economic status of civil servants. in some foreign countries, the pay and incentive system is based on the professional performance of civil servants; in other countries, salaries of civil servants practically do not depend on the results of their work. in a number of foreign countries, the flexible system of financial incentives for civil servants exists; in other countries, the rigid system of remuneration and social security measures prevails. moreover, in most civilized countries, civil service and law enforcement are one of the most prestigious employments. it is believed that a person on a civil service position is a representative of the state and society, a defender of their rights and legitimate interests. baltic journal of economic studies 119 vol. 4, no. 4, 2018 references: pro natsionalnu politsiiu [on national police]. law of ukraine of july 2, 2015. retrieved from: http://zakon2.rada.gov.ua/laws/show/580-19 (in ukrainian) pro pensiine zabezpechennia osib, zvilnenykh z viiskovoi sluzhby, ta deiakykh inshykh osib [on pension provision of persons discharged from military service and some other persons]. law of ukraine of april 9, 1992. retrieved from: http://zakon5.rada.gov.ua/laws/show/2262-12 (in ukrainian) the cabinet of ministers of ukraine (2015). pro zatverdzhennia polozhennia pro natsionalnu politsiiu [on approval of the regulation on the national police]. resolution no. 877 of october 28, 2015. retrieved from: http://zakon3.rada.gov.ua/laws/show/877-2015-%d0%bf/paran9#n9 (in ukrainian) the cabinet of ministers of ukraine (2015). pro hroshove zabezpechennia politseyskykh natsionalnoi politsii [on the remuneration of police officers of the national police]. resolution no. 988 of november 11, 2015. retrieved from: https://www.kmu.gov.ua/ua/npas/248668490 (in ukrainian) the cabinet of ministers of ukraine (1992). pro poriadok obchyslennia vysluhy rokiv, pryznachennia ta vyplaty pensii i hroshovoi dopomohy osobam ofitserskoho skladu, praporshchykam, michmanam, viiskovosluzhbovtsiam nadstrokovoi sluzhby ta viiskovoi sluzhby za kontraktom, osobam nachalnytskoho i riadovoho skladu orhaniv vnutrishnikh sprav, politseyskym ta chlenam yikhnikh simey [on procedure of computation of length of service, assignment and payment of pensions and allowances for officers, warrant officers, sub-officers, extended military servicemen and enlisted by contract, persons of senior commanders and junior enlisted of the internal affairs bodies, and police officers as well as members of their families]. resolution no. 393 of july 17, 1992. retrieved from: http://zakon5.rada.gov.ua/laws/show/393-92-%d0%bf (in ukrainian) the ministry of internal affairs of ukraine (2016) pro zatverdzhennia poriadku ta umov vyplaty hroshvoho zabezpechennia politseyskym natsionalnoi politsii ta kursantam vyshchykh navchalnykh zakladiv mvs iz spetsyfichnymy umovamy navchannia [on approval of the procedure and conditions for payment of remuneration for police officers of the national police and cadets of higher educational institutions of the ministry of internal affairs with specific learning conditions]. order no. 260 of april 06, 2016. retrieved from: http://zakon5.rada.gov.ua/ laws/show/z0669-16 (in ukrainian) andriichuk, yu. a. (2016). zarubizhnyi dosvid motyvatsii personalu v rozrizi yaponskoi modeli [foreign experience of personnel motivation in the japanese model]. visnyk natsionalnoho universytetu "lvivska politekhnika". lohistyka, 846, 11-15. (in ukrainian) shymanovska, r . (2009). zarubizhnyi dosvid derzhavnoho rehuliuvannia zarobitnoi platy. [the foreign experience of state regulation of salaries]. zbirnyk naukovykh prats natsionalnoi akademii derzhavnoho upravlinnia pry prezydentovi ukrainy, 1, 117-126. (in ukrainian) driakhlov, n., kupriianov, e. (2012). sistemy motivatsii personala v zapadnoi yevrope i ssha [personnel motivation systems in western europe and the usa]. problemy teorii i praktiki upravleniia, 2, 83-88. (in russian) diadechko, l. p. (2010). motyvatsiia personalu v systemi efektyvnoho funktsionuvannia transnatsionalnykh korporatsii [personnel motivation in the system of efficient functioning of transnational corporations]. ekonomicheskie nauki, 8, 5-6. (in ukrainian) baltic journal of economic studies 99 vol. 4, no. 3, 2018 corresponding author: 1 law faculty, v. karazin kharkiv national university. e-mail: tekaganovskaya@gmail.com 2 legal disciplines department, law faculty, v. karazin kharkiv national university. e-mail: golovkoом1967@ukr.net 3 legal disciplines department, law faculty, v. karazin kharkiv national university. e-mail: crime_science@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-99-103 interaction in the course of economic crime investigation: theoretical background tetyana kaganovska1, oleksandr holovko2, maksym danshyn3 v. karazin kharkiv national university, ukraine abstract. the aim of this article is to define the factors, its peculiarities and determinant connection related to the efficient interaction of operative units with other structures in the course of economic crime investigation. research subject – theoretical background of interaction in the course of the economic crime. methodological research is based on the dialectical method of scientific cognition and derived general methods: analysis, analogy, induction etc. research results demonstrated that specific factors of fact-finding procedure in the course of the pre-trial investigation and peculiarities of criminological characteristics of economic crimes considerably affect the nature and areas of law enforcement agencies interaction within the pre-trial investigation of economic crimes as they determine the specific tasks and methodology of its accomplishment. practical value. many recent papers have been dedicated to further elaboration of the abovementioned concepts with consideration of large-scale transformations taking place in the criminal process. separate features of the fact-finding process in the course of crime investigation are noted along with typical counteracting measures used to condition (with the aim to neutralize) the application of chosen criminalistic methods and operative-search activities, relevant forms of investigative process organization etc. value/originality. features and peculiarities of investigation as a fact-finding practical activity are identified, which is crucial for understanding the roles of different subjects in this process who apply numerous cognitive methods in the course of the economic crimes investigation. key words: interaction, investigation, economic crimes, factors. jel classification: c31, e71 1. problem statement criminalistic research conducted in eastern europe currently tends to focus steadily on ensuring the efficient interaction between operative units and other structures in the course of crime investigation. still, very little attention is paid to factors conditioning the necessity of such interaction. of the utmost importance is to conduct a thorough study of the abovementioned process in the area of economic crimes – a lot of issues are still defined as controversial. at the same time, criminalistic research carried out by ukrainian experts allowed to accumulate considerable theoretical blocks with the opportunity to determine the factors which directly influence the process of selecting optimal formats of interaction between the abovementioned structures in the course of economic crimes investigation. 2. analysis of the latest publications a valuable contribution to the research of the stated phenomenon has been made by ukrainian and foreign scholars including а. volobuiev, о. holovko, м. danshyn, о. zayets, а. ishchenko, т. kaganovska, о.  korystin, і. luzgin, v. maliarova, h. matusovskyi, s. pavlenko, м. pohoretskyi, v. sevruk, r . stepaniuk, о. tsilmak, s. cherniavskyi. the aim of this article is to define the factors, its peculiarities and determinant connection related to the efficient interaction of operative units with other structures in the course of economic crime investigation. 3. the main material at the current stage of its evolution, human civilization is affected deeply with global integration processes, which trigger the transformations of economic, social, cultural, informational interaction mechanisms – it inevitably stimulates the reforming dynamics in all areas (pavlenko, 2017). seemingly, the factors which condition the involvement and interaction of different units of law baltic journal of economic studies 100 vol. 4, no. 3, 2018 enforcement agencies and other bodies in the course of crime investigation already emerge in the fact-finding process itself. one of the first researchers who analysed the features of the fact-finding process within the pretrial investigation of crimes which influence the selection and application of cognitive methods was i. luzgin. thus, he distinguished the following specific features of investigation as a fact-finding practical activity: 1) dependence of investigator’s cognitive activity from its subject presented as a crime – socially dangerous act (stipulates the application of coercive measures to prevent any impediments of obstructions for the investigation, establishing favourable conditions for its completion); 2) as any crime is committed by human, psychological factors are defined as primary in the investigative process – psychological peculiarities of a criminal (on the basis of this factor, investigative tactical techniques are developed along with scientifically-grounded recommendations for the investigator concerning his/her correct behaviour and response in multiple situations, study of cognitive capacity etc.); 3) crime as intentional act characterizing the person’s behaviour in the surrounding environment marks it with certain “traces” not only by affecting other persons conscience but also transforming the material objects (the nature of these traces requires special equipment and techniques to be applied during the investigation with reference to specified scientific data); 4) fact-finding activity as a part of investigation is tightly connected with the proving (fixation of accumulated information according to applicable procedures with the aim to ensure that this information will be thoroughly studied and evaluated by all the parties to the criminal process and the court), but its subject is still an extended notion as it comprises apart from the fact in proof also the circumstances, which do not constitute its elements including the operative data of tactical significance (luzgin, 1969). provisions on the fact-finding process peculiarities, elaborated by i. luzgin, are important for the understanding of the role of different subjects in this process (subjects who apply different cognitive methods). the author interprets these methods as a certain set of interrelated and mutually conditioned practical cognitive operations, which are tightly connected with cognitive means (tools). it is underlined that the specificity of cognitive methods in the course of an investigation is defined, firstly, with the influence of standards and requirements set by criminal legislation and relevant by-laws regulating the procedure of investigation conduct. secondly, the nature of investigative means and techniques is considerably affected by the subject of the fact-finding process itself presented in the form of the criminal act. thirdly, cognitive methods are influenced by the nature of the fact-finding practical activity – investigative, operativesearch, judicial (luzgin, 1969). the author is pointing out how important is the use of studied methods and formulation of certain conclusions in criminal cases. in this context, for example, experts consider the classification of versions as investigative, operativesearch, expert, judicial (luzgin, 1969). current scientific papers elaborate on the abovementioned provisions with due consideration of conceptual transformations taking place in the criminal process. thus, the following peculiarities of the factfinding process in the course of crime investigation are: 1. a past event is an object of the cognitive process. crime as a fact is referred to events that have already happened (past event) and it is possible to identify the circumstances of required legal value only if certain traces are present. it means that there is always a certain time gap between the commission of the crime and its investigation. if we interpret the definition of crime traces in a more extended format, it will define any reflection of crime committed (material or ideal) in the surrounding environment. traces are understood as all modifications, which are detected in the surrounding environment as a result of a socially dangerous act performed by the individual. but, as a rule, the crime is not fully reflected in the traces – only partially, which substantially impedes the fact-finding process. 2. crime traces may resemble the traces of non-criminal act. it results in certain doubts and difficulties related to the identification of detected traces as criminal because any event – prior or after the crime commission – may be characterized with certain traces left. moreover, in some cases, it is very hard to evaluate traces with consideration of possible event nature. 3. crime investigation is always carried out in a specific environment (with existing or potential resistance). crime is a socially dangerous act, the commission of which is subject to criminal liability (punishment). criminals tend to avoid the prosecution in any possible way, using certain techniques and means to conceal it, obstructing the process of investigation. one of the most widely used ways is to destroy the traces, create an artificial environment after committing the crime, and falsify selected traces which leads to many problems for further evaluation. 4. the fact-finding process itself is presented in the form of proving. crime investigation is carried out with the use of methods and means aimed at proof obtaining according to criminal procedure legislation (searchoperative activity). laws regulate the procedure for its application, establish fixed terms of criminal proceedings. requirements and instructions contained in criminal legislation limit the investigation period within a certain timeframe and set standard decisionmaking forms, which substantially affect the fact-finding process (volobuiev, danshyn, ishchenko, etc. 2017). textbooks and reference materials have recently been focusing on differentiation of methods used to baltic journal of economic studies 101 vol. 4, no. 3, 2018 investigate criminal offenses. in particular, among the methods that are being developed or adapted in theoretical aspect, certain methods are presented, which are used directly by the investigator during the performance of investigative activities and methods, which in the course of investigation are used with involvement of specialist or expert (use of special knowledge – methods “borrowed” from other scientific branches). separate group is composed of methods of operative-search activity which, if combined with criminalistic methods, are intended to eliminate all difficulties related to investigation, prevent any potential attempts to impede the investigation, identify all circumstances of the criminal offence, and collect relevant evidence (volobuiev, danshyn, ishchenko, etc., 2017; tsilmak, korystin, zayets, etc., 2017). while investigating the economic crimes, which are presented as the object of the fact-finding process, investigative activities and relevant fact-finding methodology are considerably influenced by the peculiarities of these crimes reflected in its criminalistic characteristics. first of all, we should note that the definition of the economic crime itself contains different aspects – criminal-legal, criminological, criminalistic (volobuiev, 2003). if interpreted through criminalistic aspect, economic crimes are characterized as an illegal lucrative activity performed by individuals with the use of legitimate business activity forms or relevant authorities on the abovementioned activity control (matusovskyi, 1999). their determining peculiarities are revealed in the following elements of criminalistic characteristics: the object of criminal intention, the identity of the perpetrator, traces – evidence sources, means of crime commission, techniques and methods of crime prevention. 4. features of economic crime subject economic crime subject takes an important place in the system of its criminalistic characteristics as it substantially affects the means of crime commission and concealment (cherniavskyi, 2009). the object of criminal intention in the area of business activity is often presented by financial assets in national or foreign currency (cashless form), securities, sometimes material values. cashless financial assets (“bank money”) are in fact data on available bank account assets. according to legislative acts adopted by the national bank of ukraine (nbu) cashless financial assets may be kept at current or deposit account. securities (equities, bonds, bills etc.) are used as financial tools, which validate the fact of certain right accrual. its attractiveness as the objects of criminal intention is conditioned with the accrual of relevant ownership right which, in its turn, validates the obtaining of property or financial assets. also, securities may be sold – therefore, it also is granted with the status of value measure. its circulation is regulated by specialized legislation and by-laws. material values are usually chosen as the direct object of criminal intention in business activity in the form of certain commodity batches, which are illegally occupied by the fraudulent entrepreneur (fraudster) upon certain agreement, misleading the partner. traces of these actions are foremost left in numerous accounting documents. therefore, the conditions related to the object of criminal intention (economic crimes) and its reflection are crucial for the application of specific methods with the aim to detect these crimes and collect evidence. features of economic crime subjects. during the detection and investigation of economic crimes, it is necessary to take into account the typical features of its subjects. scholars’ analysis and criminal case materials prove that individuals from the mentioned category, as a rule, belong to upper middle class (so-called “white collars”): individual entrepreneur (natural person, performs activity without establishing the entity); founder (shareholder) of the entity; hired worker (manager) of the entity; hired expert (economist, accountant, engineerelectrician etc.); public official granted with control and regulatory authorities (volobuiev, 2000). in current conditions, shaped by a number of economic and political controversies, the voice of ethnic minorities is strengthening while some of them are involved in illegal economic activity (sevruk, 2016). the abovementioned individuals also involve qualified experts and specialists in their illegal activity if the latter possess considerable financial assets and certain social connections, which may potentially be used to obstruct the investigation. the typical feature of a criminal group organized by them – use of criminal “expertise” along with official position privileges and professional skills. the abovementioned features of economic crime subjects require application by law enforcement of such crime detection methods, which would allow not only detecting the crime itself but also preventing possible resistance from the mentioned individuals to neutralize it sufficiently. 5. features of traces – evidence source economic crimes are reflected (through traces left) in different objects. according to the statement expressed by s. cherniavskyi, the list of objects, which maintain certain data related to the fact of crime, is relatively composed of six categories: 1) documents (written, graphic, photo-, video-, audio-, and electronic files); 2) items (stamps, clichés, blank templates, payment cards, equipment used to produce the means of access to bank accounts); 3) premises (warehouses, baltic journal of economic studies 102 vol. 4, no. 3, 2018 offices, residential space etc.); 4) material values and commodities (movable and immovable property) and financial assets (cash and cashless forms including electronic bank transactions); 5) electronic media (system units, magnetic and laser disks etc.); 6) individuals’ memory (cherniavskyi, 2010). economic crimes are reflected first of all in accounting documents and records, registration books and regulatory acts related to business entity activity, bank documents etc. that is why all documents connected with economic crimes must be taken into consideration as one of the categories of criminalistic trace theory. individual memory is also of high significance but in many cases only if collected jointly with documents. it is much harder to detect economic crimes with the use of solely the individual memory as the features of these crimes are very similar to typical “business issues”. and even the victim may not always be completely sure if he/she has suffered from the fraudsters’ manipulations or just fell under unfavourable market conditions or his/her own inappropriate behaviour. use of data fixed in documents to detect economic crimes, identify the circumstances leading to its commission with relevant proving significance is an important element of specific investigative techniques (danshyn, 2005; danshyn, pavlov, 2011; danshyn, pohoretskyi, 2004). accordingly, accounting, bank, and other documents don’t contain any external features of crime commission fact but they do fix performance of certain business and financial activities, which are circumstances leading to the abovementioned crime commission – therefore, these operations are subject to thorough study by the experts. that is why the importance of documents as traces of economic crimes conditions the use of relevant methods in the course of the investigation – due detection, preserving and examination of documents with the use of operativesearch units’ methodology, accounting procedures, economic analysis. it requires proper organization and coordination of interaction between investigators, operative staff, and regulatory agencies specialists. 6. features of economic crime commission investigation obstructing means this element of criminalistic characteristics is important for identification of methods, which are applied during the investigation of economic crimes by the units of law enforcement structures and regulatory agencies. there are numerous ways to commit the economic crimes – its selection depends strongly on the type of business activity and means applied. but there is one “typical” method related to economic crimes (taking into account its nature and use of business activity subjects) – application of payment transaction mechanism (appropriation of financial assets own by other persons and “transfer” of stolen money via bank accounts of enterprises under cover of sham contracts. criminalistic sources present several classifications of typical actions taken by the perpetrators who intend to steal one’s property. but in our opinion, the most informative is the approach, which is based on use of payment transaction mechanism peculiarities: 1) use of computers and other electronic devices to complete sham electronic transactions; 2) conclusion of sham contract under the condition of advance payment with the following appropriation of partner’s financial assets; 3) establishment of investment enterprise (accredited enterprise, pension fund, insurance company etc.) with the following appropriation of depositors’ financial assets; 4) launching and use of sham cashless payment means in the course of business activity; 5) fraudulent scheme for obtaining and appropriation of credit (volobuiev, 2000). the abovementioned ways of economic crime commission always relate to specific traces – that is why its detection requires the use of methods based on special knowledge (economy, accounting, banking procedures, it etc.) obtained by experts and specialists of state regulatory agencies. but detection of traces (features) characterizing certain ways also requires consideration of potential resistance and obstructing the law enforcement and regulatory agencies activities. analysis of specialized literature dedicated to problems of investigation obstructing and its elimination allows distinguishing the following typical ways of obstructing, which condition use of certain methods including operative-search activity to neutralize it including the relevant forms of investigation organization: 1) methods of investigation obstructing aimed at destruction, concealment or falsification of data: concealment, falsification, destruction of the document; witness manipulation; individuals cover-up in the course of the investigation; evasion from the testimony submission (false testimony); the murder of key parties to the criminal proceeding. 2) methods of investigation obstructing aimed at the establishment of unfavourable external conditions: disseminating negative information in the community related to crime investigation process; interference in crime investigation process by corrupted officials. 3) methods of investigation obstructing aimed at the establishment of unfavourable internal conditions: obstructing the investigation by untimely organization of investigative-operative groups (iog), regular and unjustified rotation of its members; disclosure of confidential data of the criminal case to third parties; direct interference into the investigative process by giving instructions, bringing certain proposals etc.; suspension of the most qualified, active, and impartial employees from the process. 4) methods of investigation obstructing aimed directly at investigator (members of investigative-operative groups): baltic journal of economic studies 103 vol. 4, no. 3, 2018 bribery, threats (destruction of property, bodily injury, murder) and actual demonstration of mentioned threats. 7. conclusions to conclude the abovementioned, we should note that specific factors of fact-finding procedure in the course of pre-trial investigation and peculiarities of economic crime criminalistic characteristics substantially affect the nature and areas of law enforcement bodies’ interaction during the pre-trial investigation of economic crimes as they determine specific tasks and methods of its accomplishment. still, it must be stressed that criminalistic analysis of the aforesaid processes directly relates to more important issues – strengthening the potential of our country as a democratic state with the tight connection of its economic interests efficient protection and rule of law prioritization in all (golovko, kahanovska, 2017). references: pavlenko s. (2017). training for police staff in the course of mia of ukraine system reforming in line with eu standards. molodyi vchenyi, № 4, pp. 331-336. luzgin i. (1969). investigation as a fact-finding process: textbook. м.: higher school of mia of ussr , 178 p. volobuiev а., danshyn м., ishchenko а. etc. (2017). forensic science: textbook: in 2 vol. vol. 1; edited by а. volobuiev, r . stepaniuk, v. maliarova; mia of ukraine, kharkiv, national university of internal affairs. kharkiv, 384 p. tsilmak о., korystin о., zayets о. etc. (2017). modern methodology of pre-trial investigation (criminal offences): textbook / edited by о. tsilmak. оdesa, phoenix, 352 p. volobuiev a. (2003). economic crimes: definitions and problems of investigation methodology. current problems of state and law. collection of scientific papers. оdesa: yurydychna literatura, pp. 35-39. matusovskyi h. (1999). economic crimes: criminalistic analysis. kharkiv: коnsum, 480 p. cherniavskyi s. (2009). subject of crimes related to business activity. journal of national university of state tax service of ukraine. № 4, pp. 258-266. volobuiev a. (2000). problematic issues of methodology of investigating property embezzlement in business area: [monograph]. kharkiv, 335 p. sevruk v. (2016). organized groups and criminal organizations formed on basis of ethnic origin: current problems. counteracting terrorism, separatism, extremism and illegal migration in current conditions: international scientificpractical conference. dnipro : dnipropetrovsk state university of internal affairs, pp. 135-136. cherniavskyi s. (2010). economic fraud: methodological background of investigation: [monograph]. “high-tech press”, 624 p. danshyn m. (2005). criminalistic characteristics of office abuse in economic area: means of concealment. prevention of office abuse in economic area: international scientific-practical conference. кyiv, yurinkom inter, pp. 174-177. danshyn m., pavlov o. (2011). current issues of criminal assets legalization (money laundering): israeli experience. latest achievements in science and education: materials of v international conference (september 27 – october 4, 2011, netanya, israel). khmelnytskyi, khmelnytskyi national university, vol. 2, pp. 163-166. danshyn m., pohoretskyi m. (2004). detection of specific features of smuggled goods concealment: criminalistic and operative aspects. journal of zaporizhia institute of mia of ukraine, № 1, pp. 189-195. golovko o., kahanovska t. (2017). reformation ideas, state and law. journal of v. karazin kharkiv national university, section “law”, vol. № 24, pp. 6-11. baltic journal of economic studies 396 vol. 4, no. 5, 2018 corresponding author: 1 national university of state fiscal service of ukraine, ukraine. e-mail: kontanta08@ukr.net 2 national university of state fiscal service of ukraine, ukraine. e-mail: revyuk@ukr.net 3 national university of state fiscal service of ukraine, ukraine. e-mail: tanyshabilous@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-396-404 the classification of sources of reproduction of shadow relations in the sphere of production and realization of housing and communal services iryna chekhovska1, natalia nykytchenko2, tetiana bilous3 abstract. the purpose of this article is to analyse the sources of shadow relations in the sphere of production and realization of housing and communal services (technologies and causes of their occurrence, subjects’ complex, level of danger, etc.); the classification of these sources of shadow relations, the definition of priorities in the development of state measures on the localization of certain sources of shadow relations in the field of production and implementation of housing and communal services, depending on the trend of their development, the level of danger to society. methodology. the methodological foundations of research the sources of shadow relations in the field of production and realization of housing and communal services are determined by a set of methods of scientific knowledge, which allow considering the studied topics as a multidimensional, interdisciplinary phenomenon. in the course of scientific research, the following methods were used: scientific abstraction and systemic were used to generalize the current state of the production and realization of housing and communal services, to define a system of administrative measures in order to distinguish its shadow aspects; systematic structural and formaldogmatic methods allowed exploring and classifying the sources of shadow relations; formal-legal was used to study the regulatory framework governing the relations in the field of study. the paper also uses methods of statistical, comparative analysis, dialectic, extrapolation, etc. results. the classification of sources of shadow relations will allow monitoring of financial and economic capital and document circulation in the sphere of production and realization of housing and communal services in order to determine the whole spectrum of sources of shadow relations – from socially neutral, socially positive, socially-changing (disappearing) sources of the informal sector shadow economy, to socially-variable (newly created), socially negative and antisocial sources of the underground sector of the shadow economy. the isolation of the most dangerous sources of shadow relations, producing a significant illegal potential in the field of production and implementation of housing and communal services will enable the development of a causal rather than a consequential problem and a way to combat the most dangerous acts that are reproducing-progressing sources of the shadow economy in this area of research. key words: shadow economy, shadow relations, sources of shadow relations, housing and communal services. jel classification: o17, o18 1. introduction as a public phenomenon, the “shadow economy” is inherent in all countries regardless of the model and level of their socio-economic development. however, in domestic and foreign literature, there is no generally accepted definition of this phenomenon, which scientists and practitioners called “shadow economy”. first of all, attention is drawn to the existing variety of terms used to define the concept of “shadow economic activity”. from the western literature to our domestic use, a lot of them were used: shadow economy, informal economy, hidden economy, non-official economy, secondary economy, black economy, secret economy, underground economy, illegal economy, black market, etc. (mandybura, 2001). such a numerical set of terms is not accidental and reflects not only the lack of unity to the conceptual understanding of this phenomenon but the various aspects and structural components of the “shadow economy” and also emphasizes the internal qualitative complexity of this phenomenon. it was studied by domestic and foreign scholars such as g. becker, baltic journal of economic studies 397 vol. 4, no. 5, 2018 a. baseluk, o. bandurka, v. blades, z. varnalius, v. heiets, d. gershuni, p. gutman, j. zhalilo, n. kauffmann, f. keygan, t. korjagina, i. mazur, n. matzievsky, v. mamutov, o. mandybura, g. myrdal, i. puzanov, v. popovych, v. rutgaiser, k. svenson, o. tylchyk, o. turchynov, i. turkevych, o. hihins, e. feig, h. hermann, k. hart, a. shokhin, and others. so, among ukrainian scholarly publications on the problems of shadowing of the economy, the views on shadow processes in ukraine are most fully reflected in the work of o.v. turchynova “shadow economy: theoretical foundations of research” (turchynov, 1995). the author distinguishes four components of the shadow economy: unconcealed from state bodies the economic activity, but because of objective and subjective reasons are not taken into account, uncontrollable and tax exempt by the state; legal economic activities in the process of which there is a complete or partial evasion of taxes, fees, fines and other mandatory payments, as well as violations of its state regulation (the subject of shadow economic activity receives additional income by violating the current tax and other legislation, which regulates economic activity); illegal economic activity deliberately concealed from the state bodies; the activity aimed at obtaining income by committing or facilitating the commission of crimes which entail criminal responsibility. according to turchynov’s definition, the shadow economy is an economic activity that is not taken into account, is not controlled and is not taxed by the state and (or) aimed at obtaining income by violating the current legislation (turchynov, 1995). a more detailed analysis of the basic provisions on the definition of the concept, structure, and methods of assessing the shadow economy is given in the writings of ukrainian scientists, presented in his monograph (popovych, 2001). in the opinion of the researcher, the definition of the concept of “shadow economy” is repeated in one or another interpretation in the works of most scholars, but it only reflects the upper, general cut of the shadow economy, is not sufficient for the objective representation of the technological structure of the object, subjective and causal composition of the shadow relationships. in his work, the scientist gives his own definition of the concept of “shadow economy”. thus, the shadow economy is a collection of socially-neutral or socially-positive, non-taxable sources of income of citizens received from unreported and non-taxable state types of economic activity, as well as a conglomeration of socially-negative sources of shadow revenues and anti-social sources of shadow capital received through the commission of unlawful but non-criminal shadow acts in those or other segments of socio-economic, financial, civil-legal relations or relations in the field of civil circulation of things, rights, actions of the country as a whole (turchynov, 1995). therefore, sources of shadow revenues as elements of the shadow economy component may be any segment of relations that constitutes the movement of goods, rights, actions in the field of civilian turnover of the country. according to the same author, the constituent elements of the shadow economy are the sources, types, and subspecies of sources of the shadow economy. the sources of the shadow economy by logicalstructural form are the constituent elements of a particular shadow economy sector. according to the content, this is a hand-crafted production economic activity, not taken into account by the state for reasons of exemption from taxes, occasional, insignificant volumes of service income in the “informal sector” of the shadow economy, as well as sources of the “underground sector”. shadow economy – socially negative and antisocial criminalized or non-criminalized acts, illegal or pseudo-legal financial-economic or civil-law operations aimed at the accumulation, reproduction, laundering or legalization of capital illegal origin in the civil circulation of things, rights, actions. thus, in the form and content, the source of the shadow economy v. popovych divides into two types: the sources of the informal and the source of the underground sectors of the shadow economy, as to the structure the author singles out – on the various levels, diverse species or subspecies of sources. taking advantage of the theory of the shadowing of the economy by the classifier-matrix of species, subspecies of multilevel, single-profile, and diverse sources of the underground sector of the shadow economy and the general structure of the constituent elements of the shadow economy, yu. groshovyk and n. drugval conducted an investigation of sources of shadow relations in the field of the circulation of intellectual property objects (groshovyk, 2003) and in the field of foreign economic activity (drugval, 2004) through the developed conceptual apparatus. the experiments developed by these researchers allowed them to more fully define, on the productive systemmethodological level, the existing “single-profile”, “diversified” and “multi-level” sources of shadowing of social and economic relations in the sphere of production and realization of housing and communal services; to predict the origin of those sources that for certain reasons may appear in the future and to realize the technology and the causal composition of the occurrence of certain sources of shadow economy, their subject complexes, the level of danger, the power of each of these sources or their structural segments, and set priorities in the development of state measures to localize certain sources of shadow relations in the field of production and implementation of housing and communal services, depending on the tendency of their development, the level of danger to society. this, in turn, baltic journal of economic studies 398 vol. 4, no. 5, 2018 will allow for the development of a causal rather than a consequent problem and a way of combating the most dangerous acts that are reproductive and progressive sources of the shadow economy in this area of research, which, unfortunately (and this will be shown below), is not given proper attention warning. 2. characteristics of the current state of the sphere of production and realization of housing and communal services in ukraine to characterize the current state of affairs, it is enough to give concrete facts. according to the results of work in 2016, losses of housing and communal services enterprises of ukraine amounted to 5.4 billion hryvnias. of this amount, the losses of district heating company were 4.1 billion hryvnias. at the same time, debtor indebtedness amounted to 13.3 billion hryvnias in 2016, accounts due from customers 28.0 billion hryvnias (news online, 2018). in 2017, the losses of housing and communal services enterprises of ukraine already amounted to 6.1 billion hryvnias, respectively, the debt of district heating company went up to 4.3 billion hryvnias, while the indebtedness of the population for consumed housing and communal services amounted to 5.7 billion hryvnias (a briefing note, 2018). as a consequence, there is an inadequate level of technical state of the industry: the share of district heating companies (almost 25%), water supply networks (almost 40%), sewage networks (almost 41%) has considerably increased; nearly twice the loss of thermal energy has increased, water losses have exceeded 50% of the total volume allowed to consumers. due to unsatisfactory sanitary and technical condition of water supply and sewage facilities and networks, the quality of drinking water deteriorated. thus, monitoring of water quality in surface water bodies used as sources of centralized water supply of the population showed that the proportion of investigated water samples that did not meet the sanitary and bacteriological standards in 2017 increased by 5% compared to 2015 and amounted to almost a quarter to verified. consequently, the use of poor-quality drinking water caused an increase in infectious diseases in the population (auditor services site, 2018). it should be noted that heat supply in the centralized system during the heating period is served at minimum parameters or switched off at all, the schedule of the beginning and end of the heating season is violated. in a number of cities, there is no centralized hot water supply at all. the list can be continued, but it is already enough to conclude that the housing and communal sector is in critical condition. the reason for this is to a large extent the shadow manifestations. the above mentioned points to the urgent need for targeted and systematic measures aimed at reducing the economic relations in the sphere of production and realization of housing and communal services: for consideration and analysis not only of the governing bodies directly implementing the state policy in this sphere, but also bodies of public administration, creation of favourable economic, organizational and legal conditions for the transfer of shadow economic activity to the legal side. but to do this without defining a concept that would help to identify the sources and methods of organized manifestations of the shadow economy in the area of housing and communal services will be impossible. it is necessary to develop such a concept on the basis of extrapolation of concepts and methodologies developed in the general part of “the theory of unshadowing economy” (popovych, 2001). at the same time, it is necessary to take into account the specifics of the relations that have developed in the field of production and implementation of housing and communal services. thus, shadow relations in the sphere of production and realization of housing and communal services are state-management, economic, and legal relations that arise as a result of deviant behaviour of the subjects of production and sale of housing and communal services or officials of the state, public administration and local self-government in the performance of regulatory, registration, licensing and control functions. taking into account the notion of shadow relations in the sphere of production and realization of housing and communal services, it can be concluded that due to its social nature and the level of social danger, the sources of shadow manifestations in the sphere of housing and communal services are socially variable, newly formed socio-negative and antisocial sources of the underground sector of the shadow economy. based on a certain notion, we classify the main groups of sources of shadow relations that take place in the field of production and sale of housing and communal services on the following grounds: a group of sources of shadow relations in the field of production and implementation of housing and communal services of a state-management nature; a group of sources of shadow relations in the field of production and implementation of housing and communal services of an economic nature. 3. the group of sources of shadow relations in the field of production and sale of housing and communal services of a state-management nature this category of shadow relations includes those that arose as a result of the use of imperfect mechanisms for carrying out socio-economic reforms and, consequently, errors in the management of socio-economic processes by the state. as a result, the following points became possible: the development of shadow privatization baltic journal of economic studies 399 vol. 4, no. 5, 2018 of housing and communal services; abuse of official position in making managerial decisions regarding housing and communal services; violation of legal rights and interests of citizens, due to abuse of official position in solving social protection issues of low-income citizens-consumers of housing and communal services; committing others, including financial and economic offenses in the investigated sphere. it should be noted that the issue of the operational solution of problems in housing and communal services reform and the development of legislative and other normative legal acts regulating the relations in this area was entrusted in 1999 to the interdepartmental commission on implementation of the housing and communal services reform. however, this commission has never conducted a meeting. there is no single state regulator of the municipal services market, and the functions on implementation of state policy in this area have been scattered among different central executive authorities (ministry of housing and communal services of ukraine, state housing and municipal inspection of ukraine, state inspection on control at prices, the national electricity regulatory commission of ukraine, the antimonopoly committee of ukraine). as a result, there was no single approach to the formation of tariffs on the utility market and the settlement of such services. in practice, this has led to large differences between the levels of tariffs for housing and communal services (housing and communal services certificate, 2016). in all civilized countries, natural monopolies, such as communal enterprises, are the object of regulation of the state whose main task is to maximally protect the interests of the consumer by creating such legislative conditions for the work of these enterprises, which would maximally bring them closer to work in a competitive environment. otherwise, the situation will be the same: at first, everything is plundering, and then the tariffs are raised to put everything in order. and since there are no conditions that would make it more effective to use investment resources, some of them are plundering again. this process tends to be infinite. utility tariffs are rising almost every year inappropriately to the level of inflationary costs. let’s consider this question in more detail. i. the group of sources of shadow relations in the sphere of production and sale of housing and communal services of a state-management nature: 1) the sources of shadow relations are associated with ineffective management of economic processes by public authorities. the ways of such shadow manifestations are reflected in the adoption of organizational and legal decisions regarding the market transformation of socio-economic relations without the necessary adaptation to the economic and legal environment of the country and, as a result, produce negative shadow processes at the level of self-regulatory reproduction. the situation is aggravated by the lack of integrated control-information systems and the system of organizational, managerial, accounting, technological and legal institutions adapted to market relations. in order to establish concrete methods and technology of shadow manifestations, it is enough to analyse the adopted regulatory legal acts regulating relations in the sphere of production and realization of housing and communal services, for their conformity to the economic and legal environment of the country, for this purpose it is necessary to conduct their economic legal examination and to use the classifier-matrix of economic and criminological monitoring of relations in the field of financial and economic turnover of things, rights, actions (popovych, 2001). subjects of this category of shadow manifestations can be officials of legislative and executive power. this category of methods of shadow manifestations is one of the most dangerous categories, because it causes the economic crisis, undermines the economic stability of the state, forms a negative attitude of the population towards the government and the state as a whole. 2) the sources of shadow relations are associated with ineffective administrative and municipal reforms, the incompleteness of the distribution of state and communal ownership, privatization processes in the communal sphere. as a result of the reform of state power, according to the law of ukraine “on local self-government in ukraine” (1997) there is the creation of: systems of local self-government as public authorities of territorial communities and systems of bodies of state executive power submitted by local state administrations in accordance with the law of ukraine “on local state administrations” (1999). however, the unclear legislative separation of their functions and powers, including in the sphere of production and sale of housing and communal services, became one of the sources of production of shadow relations in the investigated sphere. thus, because of the blurring of the delineation of powers and the different understanding of the limits of their own competence, is not clearly defined by the laws, separate bodies, as the practice of law enforcement shows, often conflict with each other. particularly “problematic” is the relationship between regional state administrations and local self-government bodies at the level of villages, towns, and cities of district subordination and district councils, as well as between regional state administrations and local governments of cities of regional subordination and regional councils (komziuk, 2002). this is especially noticeable in branch laws, where the competence of local bodies of executive power and local self-government is often identical or defined in one and the same article. for example, according to the law of ukraine “on housing and communal services” (the law of ukraine on housing and communal services, 2004), local baltic journal of economic studies 400 vol. 4, no. 5, 2018 self-government bodies have the right to set prices/ tariffs, approve consumption and quality standards for housing and communal services, manage objects in the housing and communal services sector, located in the communal property of the respective territorial communities, etc., while in the article 28 of the law of ukraine “on local self-government in ukraine” (1997) the powers of the executive self-regulatory bodies of village, town, and city councils include the establishment of tariffs for the payment of domestic, communal, transport and other services provided by enterprises and organizations of communal property of the certain territorial community; approval in the established order of these issues with enterprises, institutions and organizations that do not belong to communal property. in accordance with article 18 of the law of ukraine “on local state administrations” (1999), the authority to regulate prices and tariffs for the implementation of works and provision of housing and communal services by enterprises, as well as the definition and establishment of norms for their consumption, the exercise of control over their compliance, are owned by local state authorities. such legislative uncertainty and fuzziness have become a powerful source of shadow relations in the field of production and implementation of housing and communal services. as it enables the representatives of the above-mentioned bodies to influence the processes of shadow objects privatization of housing and communal services and makes it possible to use money from the privatization of communal objects improperly. 3) a group of sources related to ineffective control by the activity of producers and providers of housing and communal services. regarding control and oversight functions, which should be carried out by public organizations, they are still in declarative form in the sphere of production and sale of housing and communal services since no normative act has given them control and oversight functions in relation to quality control, quantity, prices/ tariffs for housing and communal services, did not establish an effective mechanism of their interaction with other bodies that have the rights to exercise control and supervision functions in the housing and communal sphere, subjects of management in the investigated sphere. such legislative misregulation is also one of the sources of shadow relations in the housing and communal sector, as it promotes the shadowing of this segment of public relations. 4) the sources of shadow relations arising from offenses related to state registration, licensing and control functions of officials of state administration and local self-government bodies. such relations are the result of uncontrollability, irresponsibility of officials, cases of violations of the procedure for distributing budget funds, grants, licenses, etc., established by the current legislation, and the lack of reasonableness of organizational and legal decisions that led to the reverse effect, that is, the deepening of shadow relations and the creation of a new victimization, as an example to monitor the decision to replace the privileges for targeted subsidies for the payment of housing services. 5) a group of sources of shadow relations arising from administrative delinquencies. this category of sources of shadow relations stems from administrative delicts and may not always have signs of economic activity. these are various administrative violations in the sphere of production and sale of housing and communal services, such as “violation of the rules for the improvement of the territories of cities and other settlements” (article 152 of code of ukraine on administrative offenses; “violation of the legislation on protection consumer rights” (article 156-1 code of ukraine on administrative offenses); “violation of the order of formation and application of prices and tariffs” (article 165-2 code of ukraine on administrative offenses); “abuse of monopoly position in the market” (article 166-1 code of ukraine on administrative offenses); “issue and sales of products that do not meet the requirement standards” (article 167 code of ukraine on administrative offenses); “execution of works, providing services to citizens-consumers that do not meet the standard requirements, norms and rules” (article 168-1 code of ukraine on administrative offenses), etc. ii. the group of sources of shadow relations in the sphere of production and sale of housing and communal services of an economic nature: 1) the sources of shadow relations arising from financial and economic violations in the sphere of production and sale of housing and communal services. this category includes: 1. the sources of shadow relations arising from non-compliance with the methodology of reformed accounting, in accordance with the law of ukraine “on accounting and financial reporting in ukraine” (1999), accounting falsification. 2. the sources of shadow relations that arise as a result of the absence of legislative limitations on the marginal level of individual resource costs, technological costs and losses of water, heat at utility enterprises. 3. the sources of shadow relations that arise as a result of violation of tax laws. the scheme of evasion from taxes is given in figure 1. № 1, 2 – teploficator tov purchased 2 bills with a discount of 50%, the nominal value of bills – 12 million hryvnias; № 3 – supply of heating was carried out by prydniprovska tpp for the sum of 12 million hryvnias, including vat – 2 million hryvnias; № 4 – tov “teploficator”, payments made for electricity received from prydniprovska tpp are promissory notes baltic journal of economic studies 401 vol. 4, no. 5, 2018 with a nominal value of 12 million hryvnias. including the tax credit is 2 million hryvnias; № 5 – tov “teploficator” supplies heating energy to consumers for a total cost of 6 million hryvnias, including vat – 1 million hryvnias; № 6 – consumers made calculations in cash. as a result of the transaction with the use of bills of exchange, the tax liability of tov “teploficator” calculated in the amount of 1 million hryvnias, tax credit – 2 million hryvnias. the negative balance for reimbursement from the budget is 1 million hryvnias. gross expenses amounted to 10 million hryvnias, gross income was 5 million hryvnias, and the loss from the transaction was 5 million hryvnias. 4. the sources of shadow relations that arise as a result of overstatement of material costs during business operations and partial understatement of profits. 5. the sources of shadow relations that arise as a result of the use of the cash method of tax payment for housing and communal services enterprises. there are no precise data for assessing the corresponding loss of enterprises with penalty tax and fines. the most typical ways of shadow manifestations arising from financial and economic violations in the sphere of production and realization of housing and communal services are the following: failure by business entities to meet the requirements for the accounting of fixed assets, inventories, accounts receivable, liabilities, income, expenses, the formation of the production cost of utility services, income tax, etc.; non-disclosure in the orders of the accounting policy of the housing and communal enterprise manufacturers working accounts in accordance with the orders of the ministry of finance of ukraine, guidelines for the application of the plan of accounting for assets, capital, liabilities and business operations of enterprises and organizations (1999), provisions on documentary records in accounting (1995), methodical recommendations on the application of accounting registers (1998), the lack of principles and schemes for the production cost of services, the cost of production spine sales of services, operating expenses, income and financial operations, write-off inventory methods, procedures depreciation on fixed assets, the accounting features and low-value items, of primary documents and quality control of primary documents; absence of revolving balance sheets for reporting periods; maintaining the main book without decoding debit accounts (only the numbers of log-orders are indicated); the inclusion into the structure of tariffs for housing and communal services amounts of bad debts and deductions to the reserve of doubtful debts, recognized fines, penalty taxes, expenses for the maintenance of objects of socio-cultural purposes, recreation centres, payment of travel vouchers, as well as related costs with financial results and source of payments for which there may be profit (bonuses by results of work for the whole year, material benefits for improvement); the lack of a clear distinction between financial and tax accounting; not creating and not charging a reserve of doubtful debts with significant amounts of current receivables and low solvency of consumers of public utilities; incorrect determination and display of the amount of deferred tax assets or liabilities in the balance sheet; unjustified overstatement or understatement of the currency of the balance sheet; incorrect accounting and writing-off expenses of accessary and assistant productions for the maintenance, operation and repair of fixed assets, for the performance of other services; the lack of managerial accounting and calculation of the cost of housing and communal services; the formation of tariffs is not based on technical and economic calculations, but by the cost method, that is, on the basis of actual expenses of past periods, the size of which is not sufficiently substantiated; abusive use of cash payments for subsidies for housing and communal services; overstatement of material expenses during business operations and partial understatement of received profit; 5 6 65 4 3 21 bank teploficator tov prydniprovska tpp consumers of heating energy consumers of heating energy figure 1. the scheme of tax evasion tov spbp “teploficator” when calculating with the use of promissory notes baltic journal of economic studies 402 vol. 4, no. 5, 2018 unjustified increase in tax credit; concealment of objects of taxation; understatement of taxation base. 2) the sources of shadow relations arising from the legitimate types of financial and economic activity of housing and communal enterprises related to pseudo-legal capital and document circulation. this group includes sources of shadow relations, which stem from the legitimate types of financial and economic activity of housing and communal enterprises related to pseudo-legal capital and document circulation of housing and communal services producers. pseudo-legal civil turnover of housing and communal services producers is a set of economic operations of housing and communal services producers using legitimate civil and financial and economic instruments, but from unlawful motives, completely or partially unrecognized in the balance of business entities (for the purpose of theft, evasion from paying taxes, etc.) or fully accounted for, and inherently unlawful (pseudo-legal) shadow transactions. the sources of shadow relations in this category include: operations for the sale of housing and communal services, within which the real price for housing and communal services may be overestimated or underestimated; operations for the sale of housing and communal services, within which a normative or over-the-year change in the quantity and quality of services may be issued (in the absence of a real decrease in real volumes or a decrease in the quality of products); operations for the sale of housing and communal services, within which separate services may not be delimited in the accounting of expenses not related to the ongoing repairs, the preparation of housing stock for work in winter, and the servicing of indoor water supply and sewerage networks. the sale of housing and communal services is an independent and rather powerful source of shadow relations because in the absence of metering and regulating water and heat consumption, the producers of housing and communal services may establish overestimated consumption rates. for example, in sumy and kyiv, the daily rate of water consumption per capita is 300 litres. and nobody does not bother that an average person is physically unable to use such amount of water. another example: the rate of gas consumption in kyiv is almost 5 times higher than in riga (semchuk, 2016). this category of shadow manifestations include: reduction in the quantity and quality of services provided when calculating tariffs according to full regulatory and over-regulatory indicators; the increase of own expenses due to inclusion in the cost of expenses on unscheduled repairs, excessive losses, unjustified transport losses, etc.; registration of only the size of the monthly fee for services without a list of services included in the tariff/ price and should be provided for the maintenance of houses and the total living space of the apartment. by the way, the composition of expenditures of housing enterprises, approved by the cabinet of ministers of ukraine (resolution of the cabinet of ministers of ukraine, 1998), applies to residential premises and is taken into account in the calculation of rent, and a normative act that would determine the composition of expenses for the maintenance of non-residential premises is still absent, which also allows the providers services to resort to offenses, unjustifiably overestimate the price/tariff for services. 3) the sources of shadow relations arising from the production and sale of certain housing and communal services, for which the relevant organizational and legal requirements are established. this group of sources of shadow relations should include those that are associated with failure of business entities to rules and regulations governing the process of production and implementation of housing and communal services. the procedure for providing housing and communal services is regulated by the decree of the cabinet of ministers of ukraine “on approval of the rules for the provision of services for centralized heating, supply of cold and hot water and drainage, and a standard contract for the provision of district heating services, supply of cold and hot water and drainage” (2005). this resolution deals with the procedure for providing services, their qualitative and quantitative indicators, which must meet the following criteria: cold water – sanitary and hygienic requirements regarding the quality of supplied water, as well as estimated water consumption at the point of disassembly (in an apartment or private house of the consumer); hot water supply – sanitary and hygienic requirements regarding the quality and temperature of the heated water supplied, as well as the estimated flow of water at the point of disassembly (in an apartment or private home of the consumer); the heat supply (central heating) – the standard air temperature in the occupational environment of residential buildings in accordance with sanitary norms and rules provided that consumers take measures for their insulation and providers of housing maintenance services; drainage – sewage discharges with the observance of the sanitary-and-hygienic conditions of residential premises, basements of a residential building and adjoining territory. failure to comply with the abovementioned requirements in the housing and communal services sector and ineffective control by the authoritiessubjects of management in the housing and communal sphere makes it possible to violate the organizational and legal requirements that the production and baltic journal of economic studies 403 vol. 4, no. 5, 2018 implementation of housing and communal services should comply with. it should also be noted that the requirements for quantitative and qualitative indicators of services should be determined by an agreement that should protect consumers from the arbitrariness of service providers, however, in most cases, it only contains the obligation of the residential utilities payment for consumers. the proposed model agreement on provision of water, heat supply and wastewater services to the population (1996) remained a declarative request of the cabinet of ministers of ukraine since it was not taken as the basis by the service providers, and subsequently lost its validity (2005). such legal misregulation is a powerful source of shadow relations in the housing and utility sphere. to this group of sources of shadow relations should be added also those that arise as a result of violations: – regulation on the system of maintenance, repair and reconstruction of residential buildings in the cities and villages of ukraine (state document, 2004), which establishes terms, periodicity, norms for the implementation of current and capital repairs of residential buildings, as well as stipulates the implementation of works on technical maintenance and repair of the internal building sewer system; – typical rules of time and standards of service for workers and production personnel involved in the maintenance of housing stock (state document, 2004), which establishes the frequency and standards for cleaning the entrance of a residential building and adjoining territory; – dbn 360-92 “planning and development of urban and rural settlements”, which defines the terms, periodicity and certain norms for the implementation of landscaping of the adjoining territory (arrangement of flower beds, planting trees, etc.) (state document, 2004); – the procedure for calculation of housing organizations and enterprises of the ministry of energy for the servicing of internal-building power supply systems (law of ukraine, 2001); – licensing conditions for conducting economic activities for centralized water supply and drainage (resolution of the national commission, 2017). 5. conclusions the conducted study allowed us to formulate the author’s definition of the concept of “shadow relations in the field of production and implementation of housing and communal services”, carried out with the help of the developed in the theory of the de-shadowing of the economy (popovych, 2001) methodology, generalized classification of sources of shadow relations in the field of production and implementation of housing and communal services, depending on the power of shadow capital turnover and public danger regarding the reproduction of shadow relations in this area. such a classification is necessary for monitoring the financial and economic capital and document circulation in the sphere of production and realization of housing and communal services in order to determine the whole spectrum of sources of shadow relations – from socially neutral, socially positive, socially variable (disappearing) sources of the shadow economy informal sector, to socially-variable (newly formed), socially-negative and antisocial sources of the underground sector of the shadow economy. thus, socially-variable, newly formed sources of shadow relations should include groups of shadow relations defined in the second category – in paragraph 1, paragraphs 2; 4; 6; to socially-negative sources of shadow relations should include groups of shadow relations, defined in the first category – points 1; 4, and in the second category – point 1 of subparagraphs 1; 2; and paragraph 2 of sub-paragraph 2; to anti-social, we can include groups of sources of shadow relations, defined in the first category – paragraphs 2; 3; 5 and in the second category – points 2; 3. the following groups of sources of shadow relations produce significant unlawful potential both in the sphere of production and realization of housing and communal services, as well as in the whole state regulation of financial and economic activity. due to the carried out research, it is possible 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(accessed 14.08.2018) pro zminu rozmiriv vidshkoduvannja naselennjam vartosti zhytlovo-komunaljnykh poslugh: postanova kabinetu ministriv ukrajiny vid 10 sichnja 1996 roku № 39. retrieved from: http://zakon.rada.dov.ua/cgi-bin/laws/main/ cgi (accessed 14.08.2018) pro vyznannja takymy, shho vtratyly chynnistj, dejakykh postanov kabinetu ministriv ukrajiny: postanova kabinetu ministriv ukrajiny vid 13.04.2005 № 290. retrieved from: http://zakon5.rada.gov.ua/laws/show/ 290-2005-%d0%bf (accessed 14.08.2018) lyst vid 13 ljutogho 2004 r. # 4/1-159 derzhavnogho komitetu ukrajiny z pytanj zhytlovo-komunaljnogho ghospodarstva. retrieved from: http://zakon.rada.dov.ua/cgi-bin /laws main/cgi (accessed 14.08.2018) pro orghany samoorghanizaciji naselennja: zakon ukrajiny vid 11 lypnja 2001 roku № 2625-iii. vidomosti verkhovnoji rady ukrajiny. 2001. № 48. st. 254. pro zatverdzhennja licenzijnykh umov provadzhennja ghospodarsjkoji dijaljnosti z centralizovanogho vodopostachannja ta vodovidvedennja: postanova nacionaljnoji komisiji, shho zdijsnjuje derzhavne reghuljuvannja u sferakh energhetyky ta komunaljnykh poslugh vid 22.03.2017 № 307. retrieved from: http://zakon5.rada.gov.ua/ laws/show/v0307874-17 (accessed 14.08.2018) baltic journal of economic studies 10 vol. 4, no. 5, 2018 corresponding author: 1 institute of industrial economics of the national academy of sciences of ukraine, ukraine. e-mail: korytko@nas.gov.ua 2 institute of industrial economics of the national academy of sciences of ukraine, ukraine. e-mail: bogutsk.ol@gmail.com 3 national aviation university, ukraine. e-mail: 0508486185@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-10-17 formation of an organizational and economic mechanism for encouraging investment activity of enterprises tetyana korytko1, olga bogutska2, samira pіletska3 abstract. aggravation of crisis processes in the economy impedes trends in technology improvement, which leads to a certain lag behind the current needs of social reproduction and the need to increase the investment activity of enterprises. encouraging enterprises’ investment activity is carried out through a mechanism in which there are legal, economic, and financial relations between the subjects of investment activity on the attraction of investments predominantly in the priority directions and branches. the research purpose is to determine the essence and provide the author’s interpretation of concept “organizational and economic mechanism for encouraging investment activities of enterprises” and to develop its structure. the research subject is the development of the structure of the organizational and economic mechanism for promoting investment activity of enterprises and substantiation of its main elements. methodology. the methodological basis of the research is a combination of theoretical and scientific methods: analysis, synthesis, systematization and comparison, theoretical and logical generalization. in particular, the following methods are used: analysis and synthesis – when studying the investment activity of the enterprise; systematisation and comparison – to identify the elements that determine the structure of the organizational and economic mechanism for promoting investment activities of enterprises; scientific abstraction – for the formation of theoretical generalization and conclusions. the paper considers different interpretations of the concept “organizational and economic mechanism for encouraging investment activities of enterprises”. according to the authors, the organizational and economic mechanism for encouraging investment activities of enterprises is a multi-level hierarchical system of the main interconnected elements and their typical groups (subjects, objects, principles, methods, and tools), during and under the influence of which economic relations between all elements of the system are harmonized. results. as a result of the analysis of the structure of the organizational and economic mechanism, the authors came to the conclusion that any mechanism is a complex structure of interconnected and interacting economic elements, processes, and phenomena that ensure achievement of the set goal. the proposed organizational and economic mechanism for promoting investment activity of enterprises allows investors to minimize investment costs, reduce risks when entering into an investment agreement, or more accurately estimate future revenues from project implementation. further research directions are deepening of the interrelation of specific features of investment processes in ukraine with its institutional environment, determination of features of economic relations as the structure of institutes that provide an overflow of investment resources from financial to real sectors of the economy. practical implications. the practical significance is manifested in the possibility of using the proposed organizational and economic mechanism to encourage investment activities of enterprises, which ensures the effectiveness of managerial influences while promoting investment activity to achieve a specific goal in the external and internal environment of the enterprise. value/originality. the originality is the substantiation of structural elements of the organizational and economic mechanism for promoting investment activity of enterprises that influence and determine the directions of encouragement of investment activities of enterprises, which allows combining the study of active business processes, financial support, and creation of information support. key words: investment activity, promotion, mechanism, organizational and economic mechanism, investment activities. jel classification: g31, g11, r11, e22, o14 baltic journal of economic studies 11 vol. 4, no. 5, 2018 1. introduction in order to keep their positions and increase their competitiveness, enterprises need to constantly develop, master new technologies, expand their activities. currently, one of the main problems of the development of enterprises in ukraine is an unsatisfactory age structure of fixed assets, their considerable depreciation and obsolescence. the volume of investments aimed at the implementation of the policy of renewal of fixed assets is insufficient; the problem is complicated by the low level of the financial stability of enterprises, which repel potential investors from investing in their activities. thus, the acceleration of the rate of decline in capital investments as a result of the impact of the global financial crisis observed in ukraine, as in all emerging markets since 2009, has been aggravated by the economic downturn as a result of the conflict in the east of ukraine after 2014, when an increase in the rate of decline capital investment ranged from 7 to 51%, and some recovery, beginning in 2015, still did not allow reaching the pre-crisis level of 2004-2007, when the increase in the growth rate of capital investment amounted to about 10-15% annually compared with the same period. the foregoing stipulated the necessity of developing measures to promote the intensification of investment activities of enterprises. encouraging enterprises’ investment activity is carried out through a mechanism in which there are legal, economic, and financial relations between the subjects of investment activity on the attraction of investments predominantly in the priority directions and branches. therefore, for making sound managerial decisions in the field of investment activities, it is necessary to form a complex effective organizational and economic mechanism for promoting investment activities. such scholars as o. i. amosha (2005), i. p. buleev (2006), o. s. khryniuk & m. o. derhaliuk (2017), o. v. savchenko & v. p. soloviov (2013), i. v. bryl (2015), s. t. piletska (2016), a. h. honcharuk (2009) and others devoted their works to issues of the essence of “mechanism” and “organizational and economic mechanism” concepts. however, despite a large number of publications confirming the relevance of this study, the essence of the concept of “organizational and economic mechanism” is still controversial, which, in turn, creates difficulties in developing effective tools for its implementation. the purpose of the article is to determine the essence and provide the author’s interpretation of concept “organizational and economic mechanism for encouraging investment activities of enterprises” and to develop its structure. 2. the essence of the concept of “organizational and economic mechanism for encouraging investment activities of enterprises” there is a great deal of thought about the nature of these concepts, but so far there is no clear terminological definition. in order to understand the essence of the concept of a mechanism for promoting investment activity, it should be noted what is included in the content of the concept of “mechanism”. the term “mechanism” (from the greek: mechane – machine) means a device that transmits or converts motion, internal structure, the system of something; a set of states and processes that make up a certain phenomenon (bucel, 2003; kalashnik, 2002). analysis of scientific works gives grounds to distinguish two main approaches to the consideration of the essence of the concept of “organizational and economic mechanism” (table 1). within the first approach, the organizational and economic mechanism is considered as a set of forms, methods, tools, and levers of influence on the activity of objects in order to achieve a certain effect. among the supporters of this approach are o. s. khryniuk, m. o. derhaliuk (2017), a. h. honcharuk (2009), i. v. chukina (2014), and others. the definition according to the first approach is quite universal and reflects the elements of actions of the management system on the managed one. it is necessary to agree with the authors’ opinion regarding such an interpretation of this concept, but one important issue remains unanswered about the need for constant monitoring of such a mechanism. the organizational and economic mechanism should use market levers and natural connections between elements of the system, supplemented by organizational instruments of influence. within the second approach supported by o. v. savchenko, v. p. soloviov (2013), s. s. savina (2012) and others, the organizational and economic mechanism is considered as a system that defines the order of a certain type of activity that has a complex, organized structure. this approach does not contradict the very essence of the mechanism itself since the need to achieve the goal is stimulated by the development from initial economic phenomena to final ones without additional impulses. the concept “investment activity” was studied by such domestic scholars as n. yе. bryukhovetska, t. yu. korytko, i. v. bryl (2016), n. yе. bryukhovetska, l. v. ivanenko (2017), v. ye. budyakov (2008), t. z. charhaziya (2014), v. m. butyrina, t. z. charhaziya (2012), o. a. bohutska, ia. s. bryukhovetskyi. based on the above definitions, one can conclude that, on the one hand, the concept of “investment activity” is defined as a synonym for “investment activities”, which covers the style and nature of the actions of actors in the investment market and in the extended investment process, on the other – as its directed baltic journal of economic studies 12 vol. 4, no. 5, 2018 general characteristics, tendencies of investment change, as an indicator of the efficiency of investment resources use or the result of investment decisions. consequently, investment activity reflects quantitative and qualitative aspects of investment activities. thus, the organizational and economic mechanism for encouraging investment activity of enterprises should be understood a multilevel hierarchical system of the basic interconnected elements and their typical groups (subjects, objects, principles, methods, and tools), during and under the influence of which economic relations between all elements of the system are harmonized. since any mechanism is a complex structure of interconnected and interacting economic elements, processes, and phenomena that ensure the process of achieving the goal, it is necessary to determine its clear structure that will realize functions determined by the mechanism. 3. the structure of the organizational and economic mechanism for encouraging investment activity of enterprises organizational and economic mechanism changes depending on the field of application; however, there are common elements that determine its composition and structure. determining the structure of the organizational and economic mechanism, most authors such as i. p. buleev, i. d. paderin (2006), o. s. khryniuk, m. o. derhaliuk (2017) take into account such components as goals, principles, and tasks of management, methods, levers and instruments, areas and functions of management, organizational, institutional, legal, informational, financial, and other support. in studies by s. s. savina (2012), a. sokolova (2009), three systems are combined in the organizational and economic mechanism: a support system, functional system, and target system. the generalization of the main approaches allowed forming the structure of the organizational and economic mechanism for promoting investment activity of the enterprise (figure 1). the purpose of the organizational and economic mechanism for encouraging investment activity of enterprises is the economic incentive to intensify investment activities of enterprises through direct and indirect methods and instruments of influence. the object of the organizational and economic mechanism for encouraging investment activity of enterprises is the process of ensuring the effective performance of the enterprise on the basis of increasing investment activity. table 1 definition of the concept “organizational and economic mechanism” author essence o. s. khryniuk, m. o. derhaliuk (2017) a certain system of elements of the organizational and economic nature (objects, subjects, goals, tasks, methods of interaction, methods, levers, tools, etc.), interconnected and interacting with each other with moving internal and external connections at the macro, meso, micro levels of the economy, its inter-branch complexes, branches, primary links, etc., the effectiveness of its implementation depends on the ability to create connections, elements, incentives, etc., which are absent at a particular moment a. h. honcharuk (2009) a system of methods, operations, levers, organizational structures and their interconnections, which determine the content of the management process o. p. khaietska (2016) a system of organizational and economic levers, instruments, factors influencing the economic activity of enterprises, industries, product subcomplexes, aimed at increasing its efficiency o. v. savchenko, v. p. soloviov (2013) a part of the system of management in a specific period of development of the national economy of any country, representing a combination of two heterogeneous but interrelated components – the organizational component and economic component i. v. chukina (2014) a set of organizational and economic levers operating on the organizational and economic parameters of the management system and promoting the acquisition of competitive advantages, the formation and strengthening of organizational and economic potential and the efficiency of the enterprise as a whole a. v. cherep, d. v. krylov (2014) process of planning, organization, regulation, control over the economic, industrial, social development of industrial enterprises, the level of investment potential, investment activity through the observance of legal, economic, organizational levers and through the implementation of methods, functions, principles, ways of attracting investment resources, accumulation of savings, rational use of resources, taking into account the threats of the investment market in order to minimize risks and develop investment projects h. v. kozachenko (2003) a management tool, which is a set of management elements and methods of their organizational, informational, motivational, and legal support, through the use of which, taking into account the specific features of the enterprise, achieving a certain goal is provided s. s. savina (2012) a complex system that includes subsystems of forecasting and planning of development, motivation, organization, information provision o. m. shkilniuk a system of organizational, economic, legal, managerial, and regulatory actions, methods, and tools that shape and influence the order of its implementation for achieving the expected socio-economic and other results a. sokolova (2009) purposeful and managed open system of organizational, economic, legal, managerial, and regulatory actions, methods, and processes that shape and influence the order of activity in the ukrainian economy that will contribute to the achievement of the expected economic, social, environmental, and other results. baltic journal of economic studies 13 vol. 4, no. 5, 2018 the totality of subjects of the organizational and economic mechanism is determined by sources of financing of investment attraction, among which state, private, and mixed are traditionally distinguished. the subjects of the organizational and economic mechanism for promoting investment activity of enterprises are the state, enterprise owners, its management, and investors. the basis of the organizational and economic mechanism for encouraging investment activity of enterprises is its principles. based on the analysis of works by v. i. meyta (2014), ye. o. holyshcheva (2012), o. i. vyshnytska (2011), the authors identified the following principles of an organizational and economic mechanism for promoting investment activity of enterprises: – the principle of information provision characterizes the formation and use of information base. the result of the analysis of investment activity is the preparation of an analytical conclusion on the current and future financial position of the company and the reasonableness of the planned activities; – the principle of adaptability is to provide the flexibility of the mechanism created in accordance with the dynamics of the internal and external environment of the enterprise; – the principle of systemacity determines that the mechanism should be considered in a single set of object and subject; – the principle of hierarchy means that the structure should have several management levels, that is, for the division of decision-making powers; factors of external environment functions of promoting investment activity of enterprises information analytical forecasting control purpose: to encourage investment activities of enterprises factors of internal environment the organizational and economic mechanism for encouraging investment activity of enterprises object subject adaptability principles of encouraging investment activity of enterprises hierarchy efficiency systematicity information provision organizational component economic component tools: concessionary financing, lending, taxation; advisory support of investors; laws; public control institutions, etc. methods: program-target; organizational and legal; administrative; financial and economic; institutional. regulatory and legal support information support staffing institutional support figure 1. the organizational and economic mechanism for encouraging investment activity of enterprises baltic journal of economic studies 14 vol. 4, no. 5, 2018 – the principle of efficiency, that is, the choice of methods, means of influence, which lead to the achievement of objectives set by the authorities, as well as the coordination of objectives of the subject and object of management. besides the principles, a basic component of the organizational and economic mechanism for encouraging investment activity of enterprises is its functions. o. v. savchenko, v. p. soloviov (2013), s. s. savina (2012), o. o. seleznova (2012), and others give a full list of functions that are key and will help to solve problems related to stimulating enterprise investment activity. given the results of the analysis of the mentioned authors on the definition of functions of the organizational and economic mechanism, taking into account the peculiarities of promoting the enterprise investment activity, we distinguish the main functions: information one provides with all necessary information (collection, processing, grouping, and transfer of accounting data by appointment) in order to encourage investment activity of the enterprise; analytical allows revealing the influence of investment activity of the enterprise on its operating performance by conducting an estimation of the investment activity of the enterprise and determination of factors influencing its dynamics; forecasting creates the basis for the formation of current and perspective forecasts and contributes to the effective use of financial and economic tools to encourage the investment activity of the enterprise; control creates preconditions for preventing and overcoming crisis situations by assessing investment activities from the point of view of legality and expediency, observance of resource expenditure rates; the use of operational, tactical, and strategic measures, associated with the occurrence of deviations in the activities of subdivisions, etc. ensuring investment activity of enterprises and increasing the efficiency of its promotion processes is ensured by program-target, organizational-legal, administrative, financial-economic, and institutional methods. each method requires the use of appropriate tools. traditionally, all methods and, accordingly, promotion tools that underlie any organizational and economic mechanism are divided into direct and indirect (voloshin, shekhlovich, 2014; tarakanov, 2016). in the mechanism for encouraging investment activity of enterprises, the state plays a leading role through the forms of direct and indirect influence on the investment attraction by enterprises, each of which is realized by means of specific methods and instruments. direct ones include program-target methods and their corresponding tools, by which investment resources are allocated to the execution of a specific program or project. indirect methods that promote the creation of favourable conditions for attracting investment and releasing financial resources for investment needs should include financial, economic, and institutional methods and tools. the authors propose to associate administrative and organizational-legal methods based on their implementation tools and application specifics with mixed methods of promoting investment activity of enterprises. as a component of the organizational and economic mechanism for encouraging the investment activity of the enterprise, particular attention is required for: program-target methods, which include: budget financing of priority investment projects determined by the state; state risk insurance of enterprises investing in priority sectors for the development of high-tech industries; government procurement of products of innovatively active enterprises investing resources in upgrading and modernizing the priority industries (tools – investment out of budget funds, subsidies, subventions, grants, government procurement, etc.); organizational and legal methods are, first of all, legislative and statutory provision that guarantees the legal protection of investors’ interests, ensuring the transparency and efficiency of the judicial system (tools – target investment programs, laws, regulations, and documents, which clearly define the guarantees of investor rights, precedents for settlement of investment disputes, competition laws); administrative methods include the development of an effective investment development strategy of the country and its individual regions aimed at creating favourable conditions for investment activities and support of investors, the formation of an appropriate investment policy (tools – advisory support of investors, patent and licensing policy, etc.); financial and economic methods include the formation of differentiated tax and flexible depreciation policies, creation of conditions for attracting non-traditional investment sources (leasing, crowdfunding, forms of venture financing, etc.), financial and credit methods of promoting investment activity of enterprises, simplif ying access of enterprises to credit resources (tools – concessionary financing, lending and taxation; simplification of the procedure for attracting investment resources in the financial market; creation of development banks; and also prices, bonuses, rates, subsidies, tariffs, etc.); institutional methods provide an opportunity for more intensive promotion of investment resources through the simplification of the interaction of formal and informal institutes and institutions – statuses, constraints, sustainable way of thinking, contracts, patterns of behaviour and decision-making, legal norms, rules, regulations, rights of individual social strata and groups, and other systems of ties between baltic journal of economic studies 15 vol. 4, no. 5, 2018 subjects of investment relations (tools – facilitating the development of institutions of public control over the activity of state authorities in the investment sphere; transformation of the mental stereotypes of the conduct of economic relations). the regulator y support for the organizational and economic mechanism for promoting investment activity of enterprises is the regulatory framework, determines the position of the subject of investment activity, establishes legal responsibility, and exercises control over the relations between the participants and the state. the regulatory support in the sphere of investment activity includes the law of ukraine “on investment activity ” that is aimed at ensuring equal protection of the rights, interests, and property of the subjects of investment activity, regardless of ownership, as well as effective investment of the ukrainian economy, development of international economic cooperation and integration. the law of ukraine “on protection of foreign investments in ukraine” aims to protect investments, profits, legal rights and interests of foreign investors on the territory of ukraine. the features of the regime of foreign investment in ukraine were established by the law of ukraine “on the regime of foreign investment”. the law of ukraine “on special regime of investment and innovative activities of technological parks” defines the legal and economic bases for the introduction and functioning of the special regime of investment and innovation activities of technological parks and other legislative acts. the peculiarity of domestic investment legislation is that certain aspects in the investment sphere, in addition to the above-mentioned regulatory acts, are also regulated by the provisions of the commercial and tax codes and other legislative acts aimed at supporting the increase of investment activity of the ukrainian economy. information support of organizational and economic mechanism for promoting investment activity of enterprises is a process of continuous targeted selection of relevant information indicators for internal and external users of the enterprise for analysis, planning of control, and preparation of effective management decisions in all aspects of investment activities. information support is aimed at providing the necessary information to management personnel, owners of the enterprise, as well as interested users. formation of information provision of organizational and economic mechanism for encouraging investment activity of enterprises, definition of content and composition of management information are carried out by means of detection and use of dependencies and regularities of behaviour of subjects and objects of investment processes; construction of information models, the basis of which is structural-functional analysis, forecasting, and dynamic situational modelling. staffing of organizational and economic mechanism for promoting investment activity of enterprises is the training of staff in accordance with the needs of investment processes in the economy, as well as the continuous staff development in connection with the development and implementation of investment projects in the enterprise. institutional support of the organizational and economic mechanism for promoting investment activity of enterprises is a special kind of incentive of economic entities to manifest investment activity, which is formed through the establishment of certain rules (institutions) that allow regulating the economic behaviour of enterprises, as well as a set of certain alternatives, of which indicated actors make their choice. the subjects of institutional support are state authorities of investment activity management, which perform functions of promotion and regulation with the help of institutional methods and tools, and using the system of ensuring the activities of various institutions affect the object of institutional encouragement – the investment activities of enterprises through the formation of a favourable institutional environment. state regulatory and administrative authorities of different levels define and form priorities, directions, goals, and tasks of investment development of the economy as a whole, its individual spheres and sectors. this is reflected in legislative, regulatory, and program documents (formal institutes). 4. conclusions thus, encouragement of investment activity of enterprises is carried out through the organizational and economic mechanism, which is a system of relations arising from the attraction of investments, the main elements of which are the subjects of investment activity, their purpose, a set of methods and tools, staffing, regulatory, informational, and institutional support on the basis of the principles of promoting investment activity in order to achieve a certain goal in the conditions of external and internal environment of the enterprise. the determined organizational and economic mechanism for stimulating investment activity is based on the application of program-target, organizationallegal, administrative, financial-economic, and institutional methods and corresponding tools in resources allocation, which ensures target allocation of resources and maximum efficiency of investments. it allows investors to minimize investment costs, reduce risks when entering into an investment agreement, or more accurately estimate future revenues from project implementation. baltic journal of economic studies 16 vol. 4, no. 5, 2018 references: amosha, o. i. 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(2014). instytutsiyni mekhanizmy ta instrumenty upravlinnya innovatsiynoyi bezpeky ukrayiny [institutional mechanisms and tools for managing innovation security in ukraine]. actual problems of international relations, 122, 109-116. baltic journal of economic studies 271 vol. 4, no. 3, 2018 corresponding author: 1 department of audit and economic analysis, national university of state fiscal service of ukraine. e-mail: ansavchenko@ukr.net 2 department of audit and economic analysis, national university of state fiscal service of ukraine. e-mail: mihesha2006@ukr.net 3 department of state and law theory, lviv university of trade and economics. e-mail: holynska_m@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-271-275 analysis and audit of key economic indicators of economic entities (a case study of the dairy industry) alla savchenko1, kateryna saliamon-mikhieieva2 national university of state fiscal service of ukraine, ukraine marianna holynska3 lviv university of trade and economics, ukraine abstract. instability of the environment and the lack of state support require economic entities to react instantly to its changes, only under such conditions the company will be able to survive and successfully operate in market relations. economic and mathematical methods are an important tool for conducting qualitative analysis and audit, which enables to make well-grounded decisions. the purpose of the article is to study interrelation between the enterprise performance indicators, which are reflected in the enterprise financial statement, and factors of influence on the income from sales of products. the subject of the research is the theoretical and methodological basis of the use of mathematical modelling methods for the analysis and audit of key economic indicators of business entities on the example of the dairy industry. methodology. to achieve this purpose, a system of general scientific and special methods is used. the research is carried out with the help of regression analysis, namely, the ridge regression, which distinguishes the influence of each factor in multicollinearity. research results showed that among all factors, the greatest positive impact on the amount of revenue from sales belongs to the cost of production, indicating the rational use of resources, its increase leads to an increase in volumes of finished products, on which sales the company receives income. in the second place – the residual value of fixed assets, which characterizes their effective use in production activities. the third position is occupied by material costs. practical implications. accounts receivable has a negative impact and needs to be reviewed for its elimination and reduction. the volume of accounts receivable must correspond to the contractual discipline within the legal terms of the limitation period; only at such requirements, a positive effect on the financial status of the enterprise is possible. the problematic issue in the control over accounts receivable is the inability to receive transparent, relevant, and complete information about a business partner, which will be sufficient for conducting a qualitative analysis of settlements with debtors. this makes it impossible to predict the probability of the advent of the payment crisis of business entities, its prevention and elimination. value/originality. the analysis and ranking of buyers, depending on the volume of purchases, the history of credit relations, and the proposed payment terms will increase the level of financial security of the enterprise; this measure will reduce the volume of bad debts. when entering into contracts of the purchase and sale of goods, works, and services, take into account the forecasts of cash receipts from debtors and prescribe penalties for considering the inflation component and taking into account the value of money in time. an increase in the number of customers of the enterprise products will reduce the risk of non-payment by one or more large customers. consequently, the enterprise needs to update fixed assets and work to eliminate accounts receivable. current liabilities have a negative impact, but their influence is negligible. key words: analysis, audit, accounts receivable, financial statement of enterprise, regression model. jel classification: p51, m42, c24 baltic journal of economic studies 272 vol. 4, no. 3, 2018 1. introduction the current development stage of the dairy industry in ukraine is characterized by ambiguous production rates and the constant search for effective management options. the use of results of economic and mathematical modelling in the analysis and audit allows making managerial decisions reasonably, measuring the influence of the external and internal environment on the economic entity, evaluating risks of these decisions, and predicting their consequences. the main problems in the market for milk and dairy products are: a low level of equipment with modern machinery; decrease in purchasing power of the population; unfavourable financial-credit and tax policy of the government; high labour and energy intensity of production and rapid product damage. economic entities should look for internal reserves at the enterprise, use their strengths, and expand opportunities. modelling is an effective means of solving these tasks and provides an important information base for conducting analytical research and audit examinations. 2. analysis of recent research and publications the use of regression analysis in the methodology of conducting an audit of financial and economic activity of the enterprise has already been considered in detail by paianok t.m. who analysed the dynamics of the use of inventories and determined the factors of influence on their formation (paianok, 2017). rishchuk l.i. and pobihun s.a. investigated the main risk-generating factors in the activity of oil refining enterprises, assessed the level of their impact on the profit of enterprises by using regression analysis (rishchuk, pobihun 2010). stryhul l.s. defined and evaluated the investment attractiveness of the machine-building enterprise (stryhul, 2012). on the basis of statistica, tarasevych a.p. investigated the economic state of confectionery enterprises in ukraine (tarasevych, 2004). chukurna o.p. analysed the effect on the final price of the structure of costs of production and sales of machine-building products with the help of correlationregression analysis (chukurna, 2016). 3. the purpose and objectives of the research the main purpose of the study is to assess the impact of financial reporting articles of the enterprise on the income from the sale of products of the dairy enterprise by applying economic and mathematical methods. the stated purpose forms the objectives: the disclosure of the main problems of agents of the dairy industry, the construction of a regressive model for evaluating each factor on the amount of income of the enterprise, identifying problem items of financial reporting, developing recommendations for reducing the negative impact of factors on the enterprise operation. the information base is the statistical data of financial statements. using the statgraphics centurion program, the direction and the strength of the interrelation between statement items are investigated and a regression analysis is carried out. 4. presentation of the main research material private households have a lion’s share in providing the raw material base for dairy enterprises. the low solvency of economic entities as a result of the devaluation of the hryvnia leads to a decrease in purchasing prices for milk, on the one hand. on the other, the lack of motivation prompts the population to sell the livestock for meat. hence, the milk market has a shortage of quality raw materials. state support, without which the economic development of the ukrainian dairy industry is impossible, could change the situation. under these conditions, enterprises can rely only on their own capabilities; therefore, in order to increase the solvency of an entity, a special attention should be paid to its internal reserves. in addition to a detailed economic analysis, it is necessary to conduct a factor analysis that will reveal their impact on the enterprise’s income. getting the enterprise’s maximum income is limited to the production costs, which are the main factors affecting its activities. according to the statistical data of financial statements of pjsc “zhytomyr butter plant” for a period of fifteen years, a regression analysis of its activity was carried out, where the performance characteristic is the product sales income (y) thousand uah, and the factor characteristics are: fixed assets (residual value) (x1); production cost (x2); receivables for goods, works, services: net realizable value (x3); other current receivables (x4); current liabilities (x5); material costs (x6); labour costs (x7), all indicators in thousand uah. according to the results of the correlation matrix constructed, it is possible to determine which factors have the greatest influence on the income from sales of products (table 1). the correlation coefficient for other receivables has a negative sign indicating a reverse strong correlation, that is, the growth of this indicator negatively affects the revenue from the sale. there is a close linear relationship between the model factors, which indicates the presence of multicollinearity. for confirmation, parameters of vif (variance inflation factor) are calculated, the values of which by factors should be less than the limit (vif=10, at р=0,01) (table 2) (dudko, 2010). almost all calculated vif estimates are bigger than the limit, the model has multicollinearity. for building a qualitative model, ridge regression is used as a possible means to eliminate multicollinearity and to determine the level of influence on the endogenous variable of each factor characteristic. the vif parameter will have meaningful values for the ridge parameter = 0,02 (table 3). baltic journal of economic studies 273 vol. 4, no. 3, 2018 the constructed model has a high coefficient of multiple correlation (r = 0,9955), which indicates a close linear relationship between the factors. revenue from product sales by 99.097% depends on model factors and only by 0.9036% on other factors, including the stochastic variable (r2 = 0,99097). the estimated value of the durbin-watson statistic – 1,28 that indicates the absence of auto-correlation (dl=0,230 du=1,015). the calculated fisher criterion – 335,7 with a significance of 2,25е-06 indicates the adequacy of the model (fтабл. = 4,88, for α = 0,05). the regression equation will appear as follows: y = 39554,2 + 1,4159х1 + 0,5050х2 – 0,6319х3 – – 21,3685х4 – 0,0421х5 + 0,5205х6 + 1,9501х7. (1) a negative sign for parameters β of accounts receivable for goods, work, services (x3), other current receivables (x4) and current liabilities (x5) indicates the negative impact of these factors on sales revenue. the calculated standardized coefficients (beta coefficients) make it possible to compare the effect of the explanatory variables on the volume of production stocks (table 4). at the enterprise, production cost has the greatest impact on the income from sales of products. on the second place – material costs, which is quite justified from an economic point of view. with a small gap, in the third place, there is the residual value of fixed assets. labour costs occupy the fourth position. accounts receivable for goods, works, services, other current receivables, and current liabilities have a negative impact on sales revenue and occupy positions 5, 6, and 7, respectively. a detailed step-by-step analysis of accounts receivable is required [8]. the elasticity coefficient is calculated: table 1 matrix of pair correlation coefficients indicator y x1 x2 x3 x4 x5 x6 x7 product sales income (y) 1 0,9443 0,9868 0,8017 -0,7638 0,8760 0,9906 0,9660 fixed assets (residual value) (x1) 0,9443 1 0,8868 0,7406 -0,7131 0,9132 0,9091 0,9241 production cost (x2) 0,9868 0,8868 1 0,8285 -0,7404 0,8382 0,9955 0,9481 receivables for goods, works, services (x3) 0,8017 0,7406 0,8285 1 -0,5546 0,8784 0,8347 0,8240 other current receivables (x4) -0,7638 -0,7131 -0,7404 -0,5546 1 -0,7189 -0,7350 -0,7683 current liabilities (x5) 0,8760 0,9132 0,8382 0,8784 -0,7189 1 0,8592 0,9053 material costs (x6) 0,9906 0,9091 0,9955 0,8347 -0,7350 0,8592 1 0,9557 labour costs (x7) 0,9660 0,9241 0,9481 0,8240 -0,7683 0,9053 0,9557 1 source: built by the authors according to the data (paianok, 2017) table 2 vif parameter calculation model parameters vif fixed assets (residual value) (x1) 20,6094 production cost (x2) 160,394 receivables for goods, works, services (x3) 12,4715 other current receivables (x4) 3,50567 current liabilities (x5) 25,8943 material costs (x6) 190,651 labour costs (x7) 18,5949 source: calculated by the authors according to (chukurna, 2016) table 3 ridge regression of the dependence of income on sales and selected factors for the ridge parameter of 0.02 parameter estimate vif constant 39554,2 – fixed assets (residual value) (x1) 1,4159 6,2428 production cost (x2) 0,5050 4,8740 receivables for goods, works, services (x3) -0,6319 4,3178 other current receivables (x4) -21,3685 2,3549 current liabilities (x5) -0,0421 6,8402 material costs (x6) 0,5205 4,8498 labour costs (x7) 1,9501 8,7336 source: calculated by the authors according to the official site of smida (2018) baltic journal of economic studies 274 vol. 4, no. 3, 2018 å õ ó ó õ і і і/ = β ; (2) where β – regression equation parameters. it allows more accurately measuring the effect of each factor on the endogenous variable (figure 1). growth of the residual value of fixed assets by 1% leads to an increase in sales revenue by 27.3% (with a constant value of other factors), an increase by 1%: production cost will increase the endogenous variable by 34.9%, material costs – by 26.2%, labour costs – by 12.5%. an increase in accounts receivable for goods, works, services, other current receivables, and current liabilities by 1% will result in a decrease in revenues by 4.1; 2.0; and 0.4%, respectively. 5. conclusions therefore, among all factors, the cost of production has the greatest positive impact on the amount of revenue from sales, indicating the rational use of resources, its increase leads to an increase in volumes of finished products, on which sales the company receives income. on the second place is the residual value of fixed assets, which characterizes their effective use in production activities. the third position is occupied by material costs. labour remuneration occupies the fourth position – there is a system of stimulation at the enterprise, but its impact on sales revenue is insignificant (the average number of employees for this period did not change significantly). under these circumstances, an increase in fixed assets is optimal for the enterprise. accounts receivable has a negative impact and needs to be reviewed for its elimination and reduction. the volume of accounts receivable must correspond to the contractual discipline within the legal terms of the limitation period; only at such requirements, a positive effect on the financial status of the enterprise is possible. the turnover rate of accounts receivable reduces balances on receivables for each date and vice versa. the problematic issue in the control over accounts receivable is the inability to receive transparent, relevant, and complete information about a business partner, which will be sufficient for conducting a qualitative analysis of settlements with debtors. this makes it impossible to predict the probability of the advent of the payment crisis of business entities, its prevention and elimination. the analysis and ranking of buyers, depending on the volume of purchases, the history of credit relations, table 4 standardized regression coefficients ridge parameter x1 x2 x3 x4 x5 x6 x7 0,0 0,2747 0,6584 -0,0734 -0,0163 0,0187 0,0577 0,0638 0,005 0,2579 0,4693 -0,0639 -0,0246 0,0047 0,2421 0,0804 0,01 0,2536 0,4202 -0,0571 -0,0282 -0,0005 0,2777 0,0927 0,015 0,2506 0,3949 -0,0516 -0,0309 -0,0027 0,2900 0,1025 0,02 0,2480 0,3784 -0,0470 -0,03306 -0,0034 0,2948 0,1105 0,025 0,2455 0,3662 -0,0429 -0,0350 -0,0033 0,2964 0,1172 place 3 1 5 6 7 2 4 source: calculated by the authors according to the official site of smida (2018) figure 1. the elasticity of exogenous variables of the regression model source: calculated by the authors according to the official site of smida (2018) baltic journal of economic studies 275 vol. 4, no. 3, 2018 references: dudko v.s., krasnova t.d., lahovskyi v.v. (2010). mathematical modelling in economics: study guide for students of hei: in 2 parts. irpin: nudpsu, p. 1: econometric models, 448 p. smida official site (2018). databases. public joint-stock company “zhytomyr butter plant”. retrieved from: http://smida.gov.ua paianok t.m., savchenko a.m. (2017). analysis of accounts receivable of the enterprise using economic and mathematical methods. the economist. № 3, pp. 27-32. paianok t.m. (2017). regression analysis in the audit. herald of knute, № 1, pp. 117–126. rishchuk l.i., pobihun s.a. (2010). estimation of the influence of factors on the activity of oil refineries. herald of khmelnytskyi national university. economic sciences. khmelnytskyi, №5, vol. 1, pp. 195-199. stryhul l.s. (2012). areas of application of correlation-regression analysis and coefficient method of financial analysis for estimation of investment attractiveness of an enterprise. innovative economy. № 12(38), pp. 258-264. tarasevych a.p. (2016). economic condition monitoring system of the enterprise: extended thesis abstract for cand. sc. (economics) : 08.00.04 / tarasevych anna petrivna ; odessa national economic university, 20 p. chukurna o.p. (2016). improvement of marketing pricing methods of machine-building enterprises. economic bulletin of national technical university of ukraine “kyiv polytechnic institute”. № 13, pp. 424-430. and the proposed payment terms will increase the level of financial security of the enterprise; this measure will reduce the volume of bad debts. when entering into contracts of the purchase and sale of goods, works, and services, take into account the forecasts of cash receipts from debtors and prescribe penalties for considering the inflation component and taking into account the value of money in time. an increase in the number of customers of the enterprise products will reduce the risk of non-payment by one or more large customers. consequently, the enterprise needs to update fixed assets and work to eliminate accounts receivable. current liabilities have a negative impact, but their influence is negligible. baltic journal of economic studies 228 vol. 4, no. 5, 2018 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. 2 national university “odessa law academy”, ukraine. 3 national university of life and environmental sciences of ukraine, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-228-232 remuneration of public servants in the federal republic of germany larysa nalyvaiko1, galiya chanysheva2, serhii kozin3 abstract. the aim of the article is to determine the specificities of the remuneration of civil servants in the federal republic of germany. the subject of the study is the remuneration of civil servants in the federal republic of germany. methodology. the study is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method enabled to interrogate the development of the institution of the remuneration of civil servants in the federal republic of germany. the comparative legal method enabled to compare doctrinal approaches to this issue. the system-structural method enabled to determine the elements of the remuneration of civil servants of the federal republic of germany. methods of analysis and synthesis helped study certain parts of this institute to formulate further conclusions about its most optimal functioning. the logicsemantic method was used to determine the content of the principles of “ensuring a decent standard of living for a public servant,” “equality of public service actors” and “allowance/supplies”. the normative-dogmatic method enabled to analyse the content of legal regulations of the domestic legislation and the legislation of the federal republic of germany on the issue. practical implications. the determination of the specificities of the remuneration of public servants in the federal republic of germany enabled to make recommendations for improving the remuneration system of this category of employees in ukraine, as well as identify problematic issues that require further consideration and research. relevance/originality. the author’s definition of the concept of “remuneration of public servants” is proposed and the specific features of this institute, insufficiently studied before, are analysed. the article analyses the specificities of the remuneration of public servants. their list is determined and the content of each of them is disclosed. the specificities of the remuneration of public servants are substantiated in comparison with other categories of employees. the study of the positive experience of germany enabled to suggest: to adopt a special legal regulation on the remuneration of public servants in ukraine, that is, the law of ukraine “on remuneration of public servants”; to provide in the norms of the law of ukraine “on public service” the allowances for the professionalism of a public servant; to provide public servants with the opportunity to carry out another paid activity subject to the special permission of the head of a state body. key words: remuneration, labour, public servant, germany, labour legislation. jel classification: j32, r23 1. introduction since the proclamation of ukraine’s independence, the state policy on legal regulation of the activities of public servants has been focused on active transformations and the formation of fundamentally new mechanisms, different from those inherent in the soviet system. the regulatory framework has been undergoing constant formation and improvement, the special legislation in this area has been adopted and repeatedly amended, the implementation of the relevant legal relationships by subjects involved has been regulated, modernization of mechanisms has been implemented, etc. in most developed countries, the public service was radically reformed in the 70-80s of the last century, and today they built a professional and high-quality public service that is an example for ukraine. therefore, in order to implement further reform of the public service in our state, it is important to analyse the positive foreign experience and establish areas for its use in domestic conditions. one of these areas should be the remuneration of public servants. in the context of european integration processes in our state, the involvement of high-skilled personnel in the public service is complicated by the insufficient level of financial maintenance for public servants. the inability to compete with the private sector of the economy in terms of employment leads to demotivation on the part of the population in baltic journal of economic studies 229 vol. 4, no. 5, 2018 employment in public administration. today, ukraine has a number of social, economic, and political problems. therefore, the use of purely economic instruments to address the existing problems of the remuneration of public servants is not enough at present, as a radical increase in salaries is impossible in this area. at the same time, it would be expedient to develop the remuneration system based on foreign experience, on the one hand, to satisfy the interests of employees, and on the other hand, to be within the capabilities of the state. therefore, the scientific analysis of other countries’ experience in providing the remuneration of public servants will contribute to the formation of a public service policy in ukraine that will maximize the effectiveness of protecting the rights and interests of all working citizens of this category. the relevance of the study on this issue is verified by the current improvement of legal regulation in many spheres of domestic social life following the model of more developed countries. therefore, it would be advisable to further reform the remuneration of public servants of ukraine on the basis of the positive experience of other states due to the evident interrelation between the remuneration of public servants and the public service efficiency, because the latter depends on the quality of staffing of the institute. 2. literature review the topic of public service functioning in foreign countries is regularly discussed by domestic experts. it should be noted that certain issues of foreign experience of legal regulation of civil servants’ performance were analysed by such scholars as: v. b. averianov, v. d. bakumenko, yu. p. bytiak, n. o. bohdanova, v. d. bondar, a. o. holovachova, t. o. horetska, s. d. dubenko, m. i. inshyn, yu. yu. kizilov, a. v. kirmach, yu. v. kovbasiuk, l. m. kornuta, i. p. lopushynskyi, v. ya. malynovskyi, o. yu. obolenskyi, v. p. tymoshchuk and others. however, in the legal doctrine of our state, most works devoted to the experience of other states are purely informative. meanwhile, tangible proposals for the implementation of foreign experience in domestic conditions are mostly not provided, which determines the expediency of such a study. 3. main material further development of the remuneration of public servants and its meeting the european standards of legal regulation is impossible without studying and considering the experience of foreign countries. in our study, the experience of european states is highlighted that is important in the context of ukraine’s european integration. analysing european states’ experience, which is under consideration in many works of domestic scientists, the legal regulation of the remuneration of civil servants in the federal republic of germany should come first. the relevance of analysing the experience of this particular state is due to the following factors: 1) as noted in scientific works, in prussia, the professional state service was one of the first in europe (lopushynskyi, 2011), and hence, today it is one of the most developed; 2) the federal republic of germany is one of the leading countries of the european union, and therefore, in the context of the european integration course of ukraine, the experience of such states is one of the top priorities for the study; 3) legal regulation of public service in the federal republic of germany is widely considered in the domestic scientific literature; however, tangible proposals to improve the remuneration of public servants on the basis of german experience are absent; 4) the federal republic of germany has an extensive system of legal regulations on this issue. in germany, since the post-war period, there is no concept of “state service” (staatdienst), because the term “public service” (offentliches dienst) is in practical and scientific use (lopushynskyi, 2011). the issue of legal regulation of the activities of civil servants in the federal republic of germany is provided for by several laws, but the main ones are the german constitution of may 23, 1949 (osnovnoi zakon federatyvnoi respubliki germanii), federal law “on officials (public servants)” as of february 27, 1985 (pro chynovnykiv (sluzhbovtsiv)) and the special federal law “on official salaries of public servants” as of may 23, 1975 (bundesbesoldungsgesetz. ausfertigungsdatum). t.o. horetska argues that particularly, the role of the latter should be considered because the public service system in the federal republic of germany is formed on the main principle to ensure an appropriate standard of living for a civil servant (horetska, 2009). considering this principle is important, because in the current law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu), this principle is absent. in the context of the issue under the study, in the constitution of the frg of may 23, 1949 (osnovnoi zakon federatyvnoi respubliki germanii), article 33 provides for the principle of equal access to any public office. it proclaims that no one may be prejudiced because of his adherence or non-adherence to a confession, ideology or affiliation with political parties, besides managerial structures of sectors, where women are inadequately represented, give priority to equally qualified female candidates. in comparison with the provisions of the constitution of ukraine (konstytutsiia ukrainy), it should be noted that: first, in the basic law of our state, issues related to the public servant professional performance are regulated concerning all employees without exception, not separately; and second, the regulation of certain issues, which domestic baltic journal of economic studies 230 vol. 4, no. 5, 2018 scientists consider to refer to “european standards” (gender issues and issues of religion), are ensured. therefore, in the remuneration of public servants, this principle manifests itself in establishing equal pay for all public servants, regardless of gender, religious beliefs, outlook or affiliation with political parties. at the same time, the salaries of civil servants in the federal republic of germany are influenced by other factors identified by the legal regulations previously listed. in addition, in the federal republic of germany, the constitutional basis for employee remuneration is the principle of maintenance: one of the basic principles of the official status while in office (konstytutsiia ukrainy). in fact, the state pays not for individual employee’s work done but compensates for their service as a whole. remuneration necessarily corresponds to the occupied position of the person and it ensures that civil servants are able to devote themselves entirely to their duties since only a financially independent official can selflessly work for the state (lopushynskyi, 2011). salaries of officials are calculated, depending on the office and on the length of time spent in the office, taking into account their age and peculiarities of the work performed, however, such issues are not regulated by the basic law of the federal republic of germany, but by acts of special legislation. in germany, similarly to ukraine, a special sectoral legal act, the federal law “on officials (civil servants)” as of february 27, 1985 (pro chynovnykiv (sluzhbovtsiv)), was adopted to regulate the labour rights of civil servants. in the federal republic of germany, in the context of the remuneration of civil servants, the first notable feature is their possible division into two types: those who receive salaries and those who do not receive. according to i. p. lopushynskyi, the latter include “honorary officials” who predominantly have a civilian profession and who are assigned to special positions without pay or the right to claim special social welfare provisions. honorary officials include jurors, elected consuls, etc. (lopushynskyi, 2011). the specificities of the calculation and determination of the rate of the remuneration of civil servants in the federal republic of germany are provided for in regulations of another legal act adopted on this issue. therefore, primarily, the law of the federal republic of germany “the civil servants’ remuneration act” as of may 23, 1975 (bundesbesoldungsgesetz. ausfertigungsdatum) provides for the right of civil servants to a salary. the remuneration of officials consists of the basic salary, local supplements, office allowances, as well as other additional payments that are provided for quite a lot (for example, child allowance, performance bonuses and performance allowances, special supplementary payments depending on the conditions of the labour market). all salary related issues are governed by a common legal framework and are valid for federal, county, and community officials. according to t. o. horetska, in the federal republic of germany, on the basis of this legal act, there are four pay scales of remuneration applicable to various professional groups of civil servants: 1) civil servants pay scales a and b govern the remuneration of civil servants, who are members of the government, and for military personnel; 2) pay scale w is for professors at higher education institutions; 3) pay scale r is for judges and public prosecutors (horetska, 2009). moreover, the pay scale a assigns 16 grades, b contains 11, w includes 3, r has 10 grades and so on. in other words, in the federal republic of germany, various factors influence calculating the rate of official salaries. to compare, it should be considered that part 2 of article 50 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu), determines that the salary of a public servant in ukraine consists of: 1) a salary; 2) allowances for the length of time spent in office; 3) an allowance for the grade of a public servant; 4) recompense for additional workload due to the performance of duties of a temporarily absent public servant in the amount of 50 percent of the official salary of a temporarily absent public servant; 5) recompense for additional workload in connection with the performance of vacant position duties of public service at the expense of saving the salary fund for the corresponding position; 6) bonuses (in case of assigning). in ukraine, the resolution of the cabinet of ministers of ukraine “issues of remuneration of employees of state bodies” no. 15 as of january 18, 2017, was adopted (the cabinet of ministers of ukraine). nevertheless, it provides for the main criterion for the differentiation of the remuneration of public servants such as the “salary group”, which depends on the position of the public service (head, deputy head, expert, specialist, etc.). therefore, legal regulation of calculating remuneration is much more detailed in the federal republic of germany. considering allowances stipulated by the german federal law “on salaries of civil servants” as of may 23, 1975 (bundesbesoldungsgesetz. ausfertigungsdatum), the family allowance should be reflected. thus, the specified legal act establishes two levels of additional payments, which depend on the family status of civil servants. the first level is for married, widowed, divorced civil servants, who have a duty of maintenance to ex-husband/wife. the second level is for civil servants entitled to the general statutory child benefit. other allowances related to the family status of civil servants depend directly on the number of children in the family. t. o. horetzka has carefully considered allowances of civil servants. the scientist highlights that after 15 years in the public service, the official salary of a civil servant ceases to increase, which prompts civil servants, who have reached the age limit for the length baltic journal of economic studies 231 vol. 4, no. 5, 2018 of time spent in the office, to retire or seek employment in the private sector. in this case, the amount of the bonus depends on the performance and is evaluated according to the following criteria: 1) performance (quality and usefulness, timeliness of orders execution, load, efficiency); 2) expert knowledge; 3) methods of work (level of autonomy during performance, initiative, ability to express in writing and verbally their thoughts, competencies demonstrated, orientation to the provision of services); 4) social qualities (responsibility, reliability, ability to work in a team, conflict resolution); 5) leadership (ability to organize work, instruct and coordinate, delegate authority, motivate and maintain) (horetska, 2009). therefore, not only subjective but also professional qualities affect the amount of the remuneration of civil servants in the federal republic of germany. in this aspect, the system of bonuses in a given state is similar to ukrainian but is considerably detailed and includes more criteria. however, i. p. lopushynskyi argues that in the context of the remuneration of civil servants, the most specific feature of german legislation is a secured right of civil servants to another paid activity, for example, for activities in associations, institutions, enterprises with public-owned capital, or activity in international associations. this right implementation is subject to the special permission of the head of a state body (lopushynskyi, 2011). however, this provision seems ambiguous. on the one hand, a civil servant does not focus entirely on his direct duties and objectively cannot perform them flawlessly. on the other hand, the right to additional legal earnings removes a part of the responsibility from the state for the maintenance of public servants. that is, under the economic crisis in ukraine, our state can allow public servants to keep themselves and their family members at their own expense. this may cause a conflict of interest between a public authority or a local government, in which a public servant’ office is, and his/her other place of employment. however, in this context, it should be emphasized that in the federal republic of germany a special permit from the head of a state body is necessary. that is, the law provides for control preventing intersection of the position in associations, institutions or enterprises, in which the civil servant works concurrently, with the functions of the relevant state body. therefore, in such cases, the possibility of using the official position is minimized. therefore, based on the study carried out, the potential areas of using the positive experience of the federal republic of germany in domestic law regarding the remuneration of public servants can be suggested: 1. on the example of the experience of the federal republic of germany, it is appropriate to adopt a special legal regulation on the remuneration of public servants: the law of ukraine “on remuneration of public servants.” this will provide a much more detailed regulation to the relevant legal relationships. regarding the structure of this legal regulation, based on the law of the federal republic of germany “on salaries of civil servants” as of may 23, 1975 (bundesbesoldungsgesetz. ausfertigungsdatum), it will include the following sections: “general provisions”, which will determine the structure of remuneration, the basic terminology in this sphere, the principles of remuneration, etc.; each subsequent section should be devoted to the specifics of remuneration of each category of public servants in accordance with the provisions of paragraph 2, article 3 of the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu). the regulation of specific allowances should be under special legislative consideration. in particular, based on the experience of germany, such allowances can be family ones, depending on the marital status or the number of children. the rate of official salaries is expedient to regulate by law because they are constantly changing due to an unstable national economy. 2. to provide for in the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu), public servant performance bonuses. in order to implement this, part 2 of article 50 of this legal regulation should be amended by adding another sub-clause: “the salary of a public servant consists of: … 7) performance bonuses.” moreover, in this context, article 52 should be added with another part of the following content: “…the performance bonus is established by the head of a public service to public servant upon the submission of his/her direct supervisor according to the following criteria: professional performance; expert knowledge; methods of work; social quality; leadership.” 3. since the economic situation in ukraine is unsatisfactory today, in the law of ukraine “on public service” no. 889-viii as of december 10, 2015 (pro derzhavnu sluzhbu), it is quite reasonable to provide public servants with the possibility to carry out another paid activity subject to the special permission of the head of a state body. for this, section ii “legal status of a public servant” of this legal regulation should be added with the article “the right to another paid activity” as follows: “article ... the right to another paid activity. 1. a public servant has the right to another paid activity that will not have a negative impact on the image of the state body and trust in the authorities and will not endanger the constitutional order, territorial integrity and national security, for the health and rights and freedoms of other people. 2. permission for another paid activity is provided for by the head of the public service by issuing an order”. baltic journal of economic studies 232 vol. 4, no. 5, 2018 4. conclusions therefore, the model of the remuneration of civil servants in the federal republic of germany is similar to the ukrainian one. significant differences involve much more perfect regulation of issues related to salaries of civil servants, a much more developed system of allowances to the basic salary, as well as the adoption of a special legal act devoted exclusively to the issue of the remuneration of civil servants. therefore, in general, the domestic institution of the remuneration of public servants is currently regulated at a fairly decent level, and potential ways of improvement should be focused on the detailing of existing provisions. the following features of the remuneration of civil servants in the federal republic of germany should be distinguished: 1) the adoption of a special legal act, the federal law “on salaries of civil servants” as of may 23, 1975; 2) a special category of civil servants who do not receive salaries at all; 3) the ability of civil servants to carry out another paid activity; 4) the right of civil servants to more allowances to the basic salary. references: lopushynskyi, i. p. (2011). publichna sluzhba nimechchyny: dosvid dlia ukrayiny [public service of germany: experience for ukraine]. derzhavna sluzhba, 4, 48-54. (in ukrainian) osnovnoi zakon federatyvnoi respubliki germanii [the basic law of the federal republic of germany] (may 23, 1949). retrieved from: https://yurist-online.org/laws/foreign/const_germany/_doc.pdf pro chynovnykiv (sluzhbovtsiv) [on officials (civil servants)] (federal law of february 27, 1985). retrieved from: http://www.bundestag.de/ bundesbesoldungsgesetz. ausfertigungsdatum: 23.05.1975 [the federal pay act of may 23, 1975]. retrieved from: https://www.gesetze-im-internet.de/bbesg/bjnr011740975.html horetska, t. (2009). systema oplaty pratsi derzhavnykh sluzhbovtsiv u yevropeiskykh krainakh [the system of remuneration of civil servants in european countries]. zbirnyk naukovykh prats natsionalnoi akademii derzhavnoho upravlinnia pry prezydentovi ukrainy, 1, 43-51. (in ukrainian) pro derzhavnu sluzhbu [on public service] (the law of ukraine no. 889-viii of december 10, 2015). vidomosti verkhovnoi rady ukrainy, 4, art. 43. (2016). (in ukrainian) konstytutsiia ukrainy [the constitution of ukraine] (law of ukraine no. 254k / 96-vr of 28 june 1996). vidomosti verkhovnoi rady ukrainy, 30, art. 141. (2016). (in ukrainian) the cabinet of ministers of ukraine. pytannia oplaty pratsi pratsivnykiv derzhavnykh orhaniv [issues of remuneration of employees of state bodies]. (resolution no. 15 of january 18, 2017). retrieved from: https://www.kmu.gov.ua/ua/npas/249668347 (in ukrainian) baltic journal of economic studies 1 vol. 4, no. 4, 2018 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: tuv@email.ua 2 vinnytsia national agrarian university, ukraine. e-mail: fedorishina@i.ua 3 vinnytsia national agrarian university, ukraine. e-mail: natkov@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-1-5 features of loan security for the reproduction of fixed assets for agricultural purposes yuliia aleskerova1, lidiia fedoryshyna2, natalia koval3 abstract. the purpose of the article is to justify features of credit support for reproduction of basic agricultural products. it is shown that the modern financial system of ukraine is in a state of prolonged decline, the output of which depends on the innovation activity of all subjects of the financial system, on the effective reproduction of fixed assets and the adequate financial and credit mechanism of its provision for agricultural enterprises. methodology. there are several stages of reproduction of fixed assets of agricultural enterprises. at the first stage, there is a productive use of fixed assets. at this stage, they wear out and, accordingly, the amount of wear is calculated. it is the basis for the cancellation of the amount of depreciation deductions for costs after the completion of the production process. at the first stage of the turnover of fixed assets, the lost value of means of labour is lost. it is carried over to the cost of finished products. at the second stage, the transformation of the worn out of fixed assets, which were in a productive form, into cash, is taking place. on the third stage, in the process of production, there is an update of the consumption value of the fixed assets. this update is carried out by replacing the worn core production assets with new ones due to the accumulated depreciation of fixed assets. results. thus, it is established that the process of reproduction of fixed assets of agricultural enterprises is characterized by a number of features. the main ones are: a gradual write-off of cost to production costs; partial reproduction of the value in the finished product and its accumulation in cash; a long-time interval required for the renewal of fixed assets in a naturally real form; the need to attract significant one-time cash expenditures. practical implications. thus, the peculiarities of credit support for the reproduction of fixed assets of agricultural enterprises are: the objective necessity of its implementation due to the unprofitableness of the industry and the impossibility for a large part of agricultural enterprises, from their own sources, to provide a simple and extended reproduction of fixed assets; seasonal production; necessity of state support of the crediting process of reproduction of fixed assets. value/originality. thus, credit support for the reproduction of fixed assets of agricultural enterprises is the obligation of an agrarian enterprise to a credit institution, which must be paid out over a period of more than one year from the date of drawing up the balance sheet, as well as the prolongation of short-term loans used by the enterprise solely for the purpose of reproduction of fixed assets. key words: credit, reproduction, fixed assets, agricultural enterprises, seasonality, banking practice, leasing. jel classification: f65, g21, p34, q12 1. introduction at the present stage of the market relations, agricultural enterprises are faced with the difficulties of reproduction of production potential. they have to reduce their production, which reflects on the level of profits and consolidation in the society the idea of the futility of investing funds in this area of the economy. agricultural business requires significant support for the process of reproduction of resource potential. among the most important factors of economic growth, the main place belongs to the state of resources of enterprises, in particular, fixed assets. most of the sources of their reproduction are important loan security. objective necessity of application of a loan to reproduce the main means is due to specifics of the reproduction process in a sector that has a seasonal nature. at present, under low profitability levels of agricultural enterprises and investment attractiveness of the agrarian sector, credit support for the reproduction of fixed assets is a significant source of formation of the resource base of agricultural production. problematic baltic journal of economic studies 2 vol. 4, no. 4, 2018 aspects of lending of agricultural enterprises is increased by the fact that the vast majority of them are characterized by low levels of liquidity, a significant increase in the depreciation period over norms and high levels of the depreciation of fixed assets and, in addition, the lack of necessary deficits of own funds to finance reproduction processes. this leads to a rapid increase in the significance of the disclosure of fundamental characteristics and theoretical elaboration of effective guidelines for improving credit support for the restoration of basic agricultural production enterprises. in order to overcome such negative trends as one of the main directions, it is necessary to restore the material and technical base of agriculture. this is due to the fact that “the process of social production of material goods is objectively closely related to the functioning of two main factors – the labour force and means of production” (aleskerova, 2008) and also that “the content of market transformations in the transformational economy allows us to assert that their basis is the change in the economic form of material factors of production, namely, their capitalization as a process of transforming production into real market goods” (koval, 2011). 2. economic crisis effects on consumer behaviour the cost of fixed assets of one of the leading sectors of the national economic complex of ukraine – agriculture – at the beginning of 2006 was 47.13 billion uah, while in 2000 – 88.76 billion uah, and in 1996 – 121.33 billion uah. that is, the cost of fixed assets for agricultural purpose is reduced annually. the main reason for this is the insignificant volumes of their updating. depreciation of fixed assets exceeds their renewal by more than 10 times. in domestic agriculture, according to the majority of researchers, the possibilities of simple reproduction of material and technical base are lost; there is an intensive process of industrial deindustrialization, structural imbalance, and the shortage of certain types of resources, which affects the effectiveness of their use (aleskerova, 2008). at the same time, the reproduction of agricultural production is largely due to ensuring the effective use and renovation of production potential. the need to identify the trends, problems, and peculiarities of reproduction of fixed assets and their investment, as well as the development of recommendations for improving the investment security of the reproduction process in agriculture, determines the topicality of research relating to the loan security for the reproduction of basic agricultural products. such a study will make it possible to define clearly the structure of economic relations, which are formed in the process of loan security for the reproduction of fixed assets of agricultural enterprises: to reveal more fully the specifics of the relationship of elements and forms of loan security; to identify their fundamental features as sources of innovation activity, affecting the state of the field of agriculture. in this connection, in market conditions of management, a fundamentally new approach to the organization of loan security is required to restore the basic assets of the agrarian sector of the economy, its improvement through active measures at the level of agricultural enterprises themselves, as well as state administration, the creation of new financial and credit structures. all this proves once again the necessity to study the financial support of the reproductive process in agriculture and to justify new approaches to their solution, in particular, to develop an effective and efficient mechanism of loan security. especially acute the problem of reproduction of fixed assets, as a component of innovation, appears on the transitional stages of economic development and during the periods of economic crises. the modern domestic economy is in a state of prolonged decline, getting out of which depends on the innovation activity of all subjects of the economic system, on the effective reproduction of fixed assets and the adequate financial and credit mechanism for its providing. the development of agriculture is constrained by a number of reasons. the main one is the lack of resources to finance the development. the increase in the size of production assets is possible only due to additional investments of financial and material resources, aimed at supporting and expanding the production potential of agriculture. since the possibilities of reproduction of fixed assets at the expense of profits and depreciation fund are rather limited, agricultural enterprises require the attraction of credit resources. the composition of fixed assets of agricultural enterprises is quite different and can be classified according to various features. means and objects of labour in commodity production acquire the value through the market. they transfer it during the production process to the produced product. by the way of participation in the production and transfer of its value to the newly created product, the means of labour are divided into basic and reversible. so, the essence of the category of “fixed assets” is rather ambiguous. without going into the discussion, we note that the categories of “fixed funds”, “fixed assets”, and “fixed capital” provide the agricultural enterprises with the means and objects of labour, and exactly their structure and proportions make it possible to improve the mechanism of reproduction of fixed assets. the main feature of agricultural enterprises is their organic composition, species characteristics, functional purpose. it is important to participate in technological processes and to maintain certain proportionality in their composition. in particular, this proportionality refers to the ratio between power machines: tractors, combines, cars, and the amount of land cultivated, tractors and agricultural machines, the area of industrial premises and livestock or facilities, etc. baltic journal of economic studies 3 vol. 4, no. 4, 2018 the main productive assets are reproduced through capital investments, the sources of which are the own funds (deductions from profits and depreciation deductions), as well as involved ones. features of reproduction of various parts of the means of production determine the difference in their loan security. in particular, reversible assets should be reproduced in one production cycle, and the main ones – during their complete wear and tear. at the same time, the wear period depends on the composition of the means of production and the accepted form of the accounting for their wear. the reproduction of basic productive assets is a process of the continuous renewal. by the volume, the following forms of reproduction are distinguished: simple, extended, and narrowed. a simple reproduction of fixed assets is carried out in the same amount, that is, when the replacement of certain worn parts of fixed assets occurs, or the replacement of old equipment with a similar one, that is, when the previous production capacity is constantly restored. the extended reproduction involves the quantitative and qualitative increase of the existing fixed assets or the purchase of new ones that provide a higher level of equipment productivity. with reduced reproduction, there is a decrease in the amount of used means of production in each successive cycle. the process of reproduction of fixed assets has a number of distinctive features, in particular: 1) they gradually transfer their value to the manufactured products; 2) in the process of their reproduction, the movement of their consumer value and cost takes place simultaneously; 3) accrual of amortization deductions is carried out by accumulation in the monetary form of the transferred cost of the main production facilities for finished products; 4) fixed assets are renewed in kind for a long time, which makes it possible to manoeuvre the funds of the depreciation fund. in the process of economic activity, the circulation of fixed assets passes three stages. at the first stage, the productive use of fixed assets takes place. it is the basis for the cancellation of the amount of depreciation deductions for the cost after the end of the production process. at the first stage of the circulation of fixed assets, the exchange cost of labour is lost. it is transferred to the cost of finished products. at the second stage, the transformation of the worn part of fixed assets, which were in a productive form into cash, takes place. at the third stage in the process of production, there is a renewal of the consumer value of the part of fixed assets. this renewal is carried out by replacing worn core production assets with new ones due to the accumulated wear of fixed assets todosіychuk yu. v. (2007). the features of the reproduction of the main assets of the branch under study are that agriculture is connected with many other industries – forming an agro-industrial complex, the main task of it is to secure the country’s food supply and agricultural raw materials. unlike other sectors of the national economy, the production there is carried out in large territories with different relief, climate, and soils. in agriculture, many production processes are seasonal in nature, connected with natural conditions of plant growth and animal development. 3. differences in consumer spending behaviour among age groups the land is the basis of farming – a non-renewable unique natural resource. thus, it has been established that the process of reproduction of fixed assets of agricultural enterprises is characterized by a number of features. the main ones are:  gradual writing-off the value on production costs;  partial reproduction of the value in the finished product and its accumulation in cash;  a long time interval required for the renewal of fixed assets in a naturally real form;  the need to attract significant one-time cash expenses. v. s. shebanin notes that from 1990 to 2000, the investments in agriculture decreased by 24 times, while in the industry – only by 3.4 times. the level of investment in 2006 was only 60% of the 1990 level. consequently, “even for the account of all sources of financing, now the investment process does not provide not only extended but even a simple reproduction of fixed assets, consumed in the process of production activity” (aleskerova, 2008). the ensuring of agricultural production by fixed assets only by 60% led to gross violations and untimely implementation of certain technological operations. the losses of agriculture, associated with lack and low technical condition of machines, make up more than 30% for the lack of the harvest, about 15% for overfill fuel. the specific weight of unprofitable farms in the agrarian sector reached 85% of their total quantity, while the total debt of agricultural enterprises approached 15.2 billion uah (aleskerova, 2008). the difference in the composition of fixed assets and the target nature of lending require an object-oriented approach to the formation of the sources involved in the funding of these activities. so, the objects of lending are specific elements of fixed assets or their aggregates, such as buildings, machinery, and equipment serving a separate production process. such loans can be provided to agricultural enterprises for capital investments related to the reconstruction of the enterprise, its technical re-equipment, the introduction of new technology, the improvement of production technology. baltic journal of economic studies 4 vol. 4, no. 4, 2018 4. survey methodology on the other hand, different parts of fixed assets have a different period of turnover. taking into account that the term of their use exceeds a year, medium and long-term credits are the main types of loan security for their renewal. at the same time, as the analysis of the structure of fixed assets shows, most of them have a term of use for more than five years. so, the main type of loan security for their reproduction is long-term loans. banks issue loans for capital investments, if the calculations of economic efficiency show that for one or another period after the object introduction into operation, the company will have additional financial resources in the form of profit that can be used to repay the loan and interest for its use. unfortunately, the inflation rate in ukraine in recent years and the practice of forming the value of loans by creditors virtually nullified the issue of long-term loans to enterprises for the reproduction of fixed assets. by the level of bank rate that is demanded by the banks, it is often impossible to achieve the payback of costs on the capital investment. for a comparison, in the period of 1970–1990 in the total volume of financing, from 17 to 40% of the credit resources, directed into agriculture, was allocated for the purchase of technology. at the same time, “the structure of long-term loans in the total volume of agricultural production was 70-73%”. characteristic was the gradual reduction of the share of capital investment in construction from 26% in 1976–1980 to 7% in 1986–1990 and its increase in the purchase of tractors, vehicles, agricultural machinery, implements and equipment, the level of which for 1986–1990 increased by 46%, for 1981–1985 by 76-80%. at the present stage of the relationship in the mechanism of loan security, it is about the establishment of low-interest rates on long-term loans, not higher than 10%. it is advisable to start the repayment of such loans for the third or fourth year of their use. agro-industrial enterprises in ukraine have the right to receive loans in foreign banks (in foreign currency). such a company’s right is obtained by getting from the national bank of ukraine special registration certificates for obtaining a loan from a foreign bank. the ukrainian company-borrower must receive such a registration certificate after signing a loan agreement with a foreign bank, but before the actual receipt of credit funds. thus, in the agrarian sphere of transition, a special credit system should be formed, for the development of which infrastructure special methods of state regulation should be applied. the latter should include the provision of favourable economic conditions by the state, legal support, the promotion of the establishment and development of market institutions and the direct participation in some of them (koval, 2011). financial leasing is a complex of relations providing technical re-equipment of enterprises and accelerating scientific and technological progress by selling means of production with deferred payment and provision. unlike a commercial loan, a financial leasing operation includes the provision of other services to the borrower (maintenance, etc.). the subjects of credit relations here are the lessor as a creditor and the lessee as a borrower (koval, 2011). the object of the leasing may be any real estate that can be attributed to fixed assets, which is not prohibited for free circulation in the market and for which there are no restrictions on the transfer in the leasing. leasing objects include: machinery and equipment, means of computer facilities, vehicles, industrial buildings and structures, other fixed assets. financial provision of leasing operations is more reliable than ordinary lending since the allocated funds are used to purchase certain property that guarantees repayment of the debt. however, in this situation, there is a risk associated with ownership. that’s why some leasing companies require a pledge or a bank guarantee. the advantage of leasing in the field of the agroindustrial complex is that it excludes other forms of state regulation, for example, tax and credit privileges, and expands the access to expensive cars, provides services to the maintaining of the own car park, especially seasonal use, and the support by brand service. the negative side of leasing is that much equipment received under leasing agreements is of poor quality and its technical condition does not meet the needs, and also the high cost of leasing operations. but these disadvantages are eliminated by the opportunity to attract additional financial resources to reproduce fixed assets when bank loans are not available. 5. findings besides the considered peculiarities of reproduction of fixed assets at the expense of different types of loan security, the terms for which the loan is issued are important. in particular, according to the majority of researchers, the classification of the loan security for the reproduction of fixed assets is made depending on their term:  short-term loans up to 1 year;  prolonged short-term loans;  long-term loans over 12 months;  long-term loans up to 36 months;  long-term loans over 36 months. thus, the peculiarities of loan security for the reproduction of fixed assets of agricultural enterprises are: 1. the objective necessity of its realization due to the unprofitableness of industry and the impossibility for a large part of agricultural enterprises, to provide a simple and extended reproduction of fixed assets from their own sources. baltic journal of economic studies 5 vol. 4, no. 4, 2018 2. seasonal production of agricultural enterprises and various force majeure circumstances require a significant withdrawal of working capital from turnover, which does not contribute to the accumulation of funds, even at the level of depreciation deductions for the reproduction process. 3. the need for the state support of the crediting process of reproduction of fixed assets as, at present, there is no real source of collateral for commercial loans because the agricultural land is not a commodity, therefore, it cannot be a pledge, when granting a loan to an agricultural enterprise for the reproduction of fixed assets. in addition, the high inflation rate does not make it possible to pay off in due time for the provided loan. 4. difficulties in obtaining a lease loan, as most banks operate indirectly through leasing for agricultural enterprises. based on the peculiarities of reproduction of fixed assets and considered above scheme of classification of loan security for the participants of the credit process, it can be concluded that for the reproduction of fixed assets, it is possible to use all the forms, types, and varieties of loans. herewith, depending on the purpose, not only medium and long-term loans, which are determined by the term of the use of fixed assets but also short-term ones can be used, if it is connected with the introduction of new technologies based on new techniques. effective use of new equipment in the formation of new production, as well as in the renovation and reconstruction of existing production requires some current costs. such loans are necessary in order to return long and mediumterm loans in a timely manner and in full. 6. conclusions the conducted research allows to formulate the following definition that loan security for the reproduction of fixed assets of agricultural enterprises is an obligation of an agrarian enterprise to a credit institution, which must be repaid within a period exceeding one year from the date of drawing up the balance sheet, as well as the extension of short-term loans used by the enterprise exclusively for the purpose of reproduction of fixed assets. thus, the features of loan security for the reproduction of fixed assets, considered by us, are to take into account the industry specifics and the structure of fixed assets and determining the types of loan, that can be involved by agricultural enterprises for the formation of resources. the conducted research indicates that the relations of crediting for the reproduction of fixed assets are at the initial stage of their development. this is confirmed by the non-proliferation or insufficient use in banking practice of the types of loans, necessary for agricultural commodity producers, which are common in other sectors of the economy. references: aleskerova, yu., mulyk, t., fedoryshyna, l. (2018). improving credit protection analysis methods reports of main agricultural enterprises. baltic journal of economic studies, 4(2), 1-7. aleskerova, yu., fedoryshyna, l. (2018). analysis of investment activities of enterprises of ukraine. economic system development trends: the experience of countries of eastern europe and prospects of ukraine. aleskerova, yu. v. (2008). analіz stanu ta efektivnostі kreditnogo zabezpechennya vіdtvorennya osnovnikh zasobіv sіlskogospodarskikh pіdpriemstv [analysis of the status and effectiveness of credit support for reproduction of fixed assets of agricultural enterprises]. oblіk і fіnansi apk, 3, 125-129. koval, n. i. (2011). oblіk fіnansovoi dіyalnostі agrarnikh pіdpriemstv na vimogi fіnansovogo menedzhmentu [accounting of financial activity of agrarian enterprises for the requirements of financial management]. all-ukrainian scientific and production magazine «innovative economy». ternopil institute of agricultural production, 7(26), 26, 132-136. todosіychuk, yu. v. (2007). vidi ta formi kreditіv u zabezpechennі vіdtvorennya osnovnikh zasobіv [types and forms of loans to ensure the reproduction of fixed assets]. ekonomіka apk, 12, 98-101. baltic journal of economic studies 126 vol. 4, no. 2, 2018 corresponding author: 1 department of agricultural management, vinnytsia national agrarian university. e-mail: bondarenkovalm@gmail.com. 2 department of marketing and advertising, vinnytsia institute of trade and economics, kyiv national university of trade and economics. e-mail: bondarenkovm@vtei.com.ua. 3 department of management of foreign economic activity, hotel and catering industry and tourism, vinnytsia national agrarian university. e-mail: bondarenkovm@vtei.com.ua. doi: https://doi.org/10.30525/2256-0742/2018-4-2-126-133 organizational reformation of agribusiness entities in ukraine anatolii mazur1 vinnytsia national agrarian university, ukraine valerii bondarenko2 vinnytsia institute of trade and economics, kyiv national university of trade and economics, ukraine serhii mazur3 vinnytsia national agrarian university, ukraine abstract. the article considers urgent issues of organizational reformation of economic entities of the aic with a view to their optimization to requirements of an advanced development model of the agrarian economy. the importance of mentioned topics is determined by the content and themes of conducted system transformations in the agricultural sector of the agrarian economy towards the formation of a competitive and economically attractive system of management. research object is subjects of various organizational forms of management in the agrarian sector of the economy in the process of their structural reforming. the purpose of the research is to substantiate development processes of aic enterprises in a transition economy through the organizational modelling of production organization forms in terms of formation of an advanced model of a reproduction of the agrarian economy. the methodology of the research in this article is formed on the compliance with the economic development demands through the relevant laws. their requirement is realized through the compliance with the requirements of scientific principles as guiding ideas for the implementation of business practices. the interrelation of management functions and scientific principles allows determining a set of research methods for the stated issue. it should be stressed that scientific methodology of this research also includes the use of factors of placement of agrarian enterprises in space and a set of factors of the external and internal influence that make a direct impact on the efficiency of functioning, in particular, small business forms. as a research result, the paper highlights a bipolar structure of the agrarian sector where powerful agrarian-industrial formations and small agricultural enterprises and households of the population coexist in parallel. it quite clearly distinguishes creation of cooperatives, which are considered a basis and effective form of business in rural areas that ensures rural development. in the authors’ opinion, among the presented business forms in rural areas, which operate in parallel, family farming enterprises can become the most perspective in the future. today, agricultural enterprises, which, on the basis of mergers or acquisitions, were included in the composition of agricultural holdings, generally do not know their status, and hence they actually lose their economic independence. the practical importance of this publication is the possibility of allocating economically feasible forms of organizational development of the aic and, on this basis, development and introduction of effective mechanisms for managing their support from the hierarchical authorities. key words: agroholdings, state enterprises, farming enterprises, households, cooperation, family farming enterprise. jel classification: q13, q18 baltic journal of economic studies 127 vol. 4, no. 2, 2018 1. introduction integration of the agrarian economy of ukraine in pan-european and global economic space objectively requires determination and consideration of the main priorities, existent trends, and determinant features of the modern agrarian development. in this view, important is the issue of formation of institutional mechanisms and infrastructure of the agrarian economy at the state level and at the level of aic enterprises. an important essence of these processes is a structural reformation of enterprises of agrarian direction towards the minimization of load on natural resources, reducing the cost of maintaining infrastructure and planning a possible extended economic reproduction on an innovative basis. scientific and practical importance of solving these issues determined the relevance of the chosen research topic. the purpose of the research is to substantiate development processes of aic enterprises in a transition economy through the organizational modelling of production organization forms in terms of formation of an advanced model of a reproduction of the agrarian economy. the methodological basis of the research consists of fundamental provisions of modern theory, scholarly works of foreign and domestic scientists, which reveal processes of reformation of agrarian economic systems and substantiate specifics of modern structural transformations. practical solution of the tasks set in the article was carried out from the standpoint of the system approach and the use of the following research methods: monographic – to study and generalize theoretical and methodological foundations of the conceptual content of the restructuring of agrarian enterprises; statistical – to characterize evolution and structural shifts of agrarian formations; organizational modelling  – to substantiate rational structures of organization of agricultural production. works of famous ukrainian scientists-agrarians are devoted to solving the specified issues of organizational reformation of aic enterprises: borodina o. m. (formation of scientific and organizational fundamentals of rural development); bondarenko v. m. (dairy farming development); hubeni yu. ye. (development of rural areas); zhyhadlo o. a. (efficiency of the sectoral structure of enterprises of different business legal structures); zbarskyi v. k. (private peasant farms in the formation of small forms of management); mazur a. h. (relevant issues of development of agroindustrial production in terms of system transformation changes); malik m. y. (enterprise and development of rural areas); kyrylenko  h. m. (structural reforms in the countryside and world experience, ukrainian realities); riabokon  v.  p. (development of social infrastructure of rural areas); svynous i. v. (economic aspects of operation of private peasant farms); lopatynskyi yu. m. (transformation of the agrarian sector: institutional foundations); mesel-veseliak v. ya. (agrarian reform and organizational and economic transformations in agriculture); mochernyi s. v. (models of transformational processes of the economy: theoretical and methodological aspects), as well as famous foreign scientists: c. r . mcconnell (economics: principles, problems, and policies); h. simon (organizations); h. koontz (management: a systems and contingency analysis of managerial functions); m. mescon (management), and others. however, the issues of organization of reformation of agribusiness entities in ukraine remain insufficiently studied and require further elaboration. 2. development of organizational forms of management in the aic the evolution of organizational forms of management in the aic is fairly associated with the onset of largescale transformations in the national economy. in this case, researchers distinguish three stages of agrarian transformations: the first  – (1991–1999), the second (2000–2004), and the third one – since 2004 (fig. 1). during the first stage, preconditions for denationalization and privatization of land and other property of collective and state agricultural enterprises and their reorganization were created. kolkhozes and sovkhozes were reformed into collective agricultural enterprises (cae), which unsolder their land and property among their members (buriak, 2001). the inconsistent and self-flowing nature of the transformation processes at the first stage of reform has led to a sharp decline in agricultural production. in 1999, gross agricultural products in all categories of farms accounted for 49% of the level of 1990, including 28% for agricultural enterprises. in the households, the volume of production remained almost at the level of 1990 (98%). enterprises with private property and a collective form of production organization in 2000, the second stage of agrarian transformation began, which is associated with the december (1999) decree of the president of ukraine “on urgent measures to accelerate reform of the agrarian sector of the economy”. in accordance with this decree, land shares were transformed into private land plots that had specifically defined physical boundaries. at the same time, a part of the peasants seized their plots for selfmanagement. collective enterprises were liquidated and new productive formations were created on their production assets and private land plots: limited liability companies, farms, agricultural production cooperatives, public and private joint-stock companies, private peasant farms. organizational changes in production were accompanied by the liberalization of trade in the agricultural market, the reduction of state interference in baltic journal of economic studies 128 vol. 4, no. 2, 2018 the organization of production of material and technical resources, and the positive changes in agricultural price indices relative to the prices of material and technical resources (andriichuk, 2012; kovalenko, 2012; holyshev, 2000; kulyniak, 210; pylypenko, 2008). since 2004, in the agrarian sector of the economy, there are processes that characterize the third stage of transformation changes – the intensification of agrarian production based on the concentration of agricultural land and property. if the first stage was associated with the transformation of kolkhozes into collective agricultural enterprises (caes), the second – with the transformation of caes into new private organizational forms of management, and these two stages were initiated “from upstairs” and carried out imperatively on the basis of relevant state decisions, then the third stage of the restructuring came from “grassroots”, spontaneously, and is carried out in an evolutionary way, even without the formally proclaimed appropriate legal support. these processes are the result of the incompleteness of institutional transformations, which opened the possibility of establishing shadow control over the distribution of the property of former collective farms and agricultural land and the formation of a shadow land market. concentration processes through land lease and its sale-purchase develop spontaneously by consolidating large amounts of agricultural land in the hands of individual legal entities and individuals. on controlled lands, through the involvement of industrial and commercial and financial capital, horizontally and vertically integrated export-oriented structures are formed, sometimes by type of land latifundia engaged in multi-profile operations (often from the supply of primary production resources  – to processing and exports) on tens and hundreds of thousands of hectares of leased lands (buriak, 2001). 3. the role of large agroformations in agribusiness the concentration of land resources has led to the formation of new forms of management in agrarian production, that is, the outline of the main ones (fig. 2). as it is shown in fig. 2, economic and social differentiation of agricultural producers has led to the formation of a bipolar structure of agricultural sector in many regions of ukraine, where powerful agrarianindustrial formations and small agricultural enterprises and households of the population coexist in parallel. at fig. 1. evolution of forms of ownership in the aic source: the author’s development pr iv at e en te rp ri se l ea se d en te rp ri se l im ite d lia bi lit y co m pa ny fu ll pa rt ne rs hi p a gr oh ol di ng s, c on ce rn s, co m pa ni es a gr ic ul tu ra l c oo pe ra tiv es jo in tst oc k co m pa ni es a gr of ir m s enterprises with private property and a collective form of production organization large enterprises with leased shares restructurisation of kolkhozes and sovkhozes rural (farming) enterprises collective agricultural enterprises (cae) kolkhozes and sovkhozes reformation of cae and sovkhozes rural (farming) enterprises formation of new organizational forms baltic journal of economic studies 129 vol. 4, no. 2, 2018 the same time, the basis of economic growth is provided by large integrated structures, the organizational forms of which are: concerns, companies, agriholdings, and financial industrial groups. so, pat “concern khlibprom” unites 14 enterprises of lviv, vinnytsia, ivano-frankivsk, rivne, and cherkasy regions of ukraine and is among the leaders of domestic producers of bread and bakery products (ukrainian market share is 7.5%). agro-industrial group pat “mironivsky hliboproduct” specializes in the production of poultry meat, integrating the entire production chain. an important influence on the development of the economy of ukraine, in whole, and agrarian one, in particular, is made by se uvc “nemiroff ”. in 2002, this company realized 8.3 million dal of vodka products in the amount of 480 million usd in the domestic and foreign markets. in recent years, integrated structures based on agroholdings have become widespread. to date, there are more than 50 agroholdings in ukraine. the biggest of them are: tov “ukrainian agrarian investments” (330 thousand hectares), pat “illich steel and iron works” (225 thousand hectares), se “narkom-ahro” (200 thousand hectares), pat “mironivsky hliboproduct” (180 thousand hectares), pat “rise-maksymko” (160 thousand hectares), mriya agro holding (158 thousand hectares), pat “privat-ahroholding” (150 thousand hectares), agroton (150 thousand hectares), loture agro (150 thousand hectares), rise-agro (130 thousand hectares), dakor agroholding (106  thousand hectares), ukrros (105 thousand hectares), ukrzernoprom-agro (100 thousand hectares), aic “shakhtar”, zasyadko mine (100 thousand hectares), and others. in general, agroholdings control about 5 million hectares or almost 15% of the arable land in ukraine (andriichuk, 2012). it should be also emphasized that agroholdings in ukraine are purely business projects, the main purpose of which is to generate profits and increase the capital of their founders. support and development of rural infrastructure have never been a function of agroholdings since the founders or owners of agroholdings, as a rule, do not live in places of agribusiness and they do not have the need to use rural infrastructure. indicators of the effectiveness of agroholdings are presented in table 1. the main form of the founding of agroholdings is the lease of land plots. according to the state committee of ukraine for land resources, the owners of the rights to land parcels (shares), certified by a certificate of ownership, or certificate of title under the land transfer act, have already concluded 4614 thousand lease agreements, which is 67% of the received certificates. by the duration, the agreements are concluded for: 1-3  years  – 490 thousand (10%); 4-5 years  – 2258  thousand (48.9%); 6-10 years  – 1414 thousand (30.6%); 10 years and more  – 489 thousand (10.3%) (kyrylenko, 2016). thus, agroholdings are not interested in long-term capital investments in the development of agricultural infrastructure even in those cases when such investments can significantly improve the efficiency of agricultural production as the holding does not have sufficiently reliable guarantees of the use of leased land plots. the development of multi-unit agricultural enterprises dates back to the 90s when they were 34. they are now also present in the agrarian market, in particular, the research and production multi-unit agricultural enterprise “pushcha-vodytsia”, the multiunit agricultural enterprise “kometa” of brovary district of kyiv region, the multi-unit agricultural enterprise “vynohradnyi” of simferopol region of ar of crimea, and others. as one of the forms of inter-farm cooperation, multi-unit agricultural enterprises lost fig. 2. forms of management in agribusiness agrarian holdings large-scale production medium-scale production farming enterprises households personal peasant farms organizational forms baltic journal of economic studies 130 vol. 4, no. 2, 2018 their significance in the process of combining agriculture with other branches of the aic, in other words, they were transformed into more progressive integration structures. the reason for this is the reduction of state support for their existence on the basis of administrative management methods. middle agricultural enterprises are also characterized by organizational processes. this, first of all, concerns farming enterprises. an official definition of a farming enterprise as a new organizational structure of the aic was given by the state agro-industrial committee of the ukrainian ssr with the formulation that “a farming enterprise is an integrated formation, which is created on the basis of one kolkhoz or sovkhoz with high level of development of agricultural production and a wide network of subsidiary enterprises and industries, including the processing of products, trade with the preservation of economic independence” (state industrial committee, 1988). the emergence of farming enterprises occurs in 1991 when 87 agro-industrial enterprises were operating in the aic of ukraine, of which 54 were formed on the basis of kolkhozes, 14 – on the basis of sovkhozes, and 19 – by combining several agricultural, processing, and other enterprises and organizations. in 1992, there were already more than 100 farming enterprises in ukraine, and in 1996  – 240. the trend of agribusiness growth is also observed today. according to the scientific publications, their total number is about 300. the emergence of a farming enterprise as a subject of agrarian business is dictated by the desire of agricultural producers to have their own trading network, independently determine the scope of production activity, freely dispose of products and funds, and enter the food market independently (parsiak, 2004). 4. development of small forms of management in the countryside the dynamics of the structure of gross agricultural output, more than 60% of which is produced in households, prompts the question of the appropriateness of attracting such households to the processes of agrarianindustrial integration. these small-scale producers, vulnerable to the dynamic influences of environmental factors (scientific and technological advance, availability of sources of financing, demand in local markets, etc.) and any manifestations of stagnation, the loss of operational communications with the environment is one of the first steps towards regression. stability of the positions of such small agricultural enterprises is always relative and in order to preserve their viability, they must, with an appropriate periodicity, adapt their size and internal configuration to new challenges and threats. the generalization of research into the development of agricultural production in rural households allows suggesting that this sector of the economy has practically reached its growth by mobilizing the domestic resources of rural families and cooperation with agricultural enterprises. households are forced to deal with selfexploitation and illegal forms of resource conservation, mainly at the expense of agricultural enterprises, causing material damage to enterprises, where they themselves work, often causing territorial conflicts at the level of the rural community. a detachment of households from markets deprives their owners of incentives for the development of commodity production, forcing them to lead semi-subsistence farming. not being competitors for large agricultural enterprises due to the difference in the sectoral structure and specialization, households are increasing the production of these products, which is decreasing in large and medium agrarian enterprises (bohotov, 2008). table 1 the largest agricultural producers in ukraine for 2016 place in rating company revenue, million uah growth rate of income, % profits margin, % 2011 2016 8. kerneе 15816.8 22040.6 135.2 7.2 15. ukrland farminq 10740 16250 144.5 28.5 23. mironivsky hliboproduct 9820.2 11250.3 114.6 22.1 25. nibulon 4585 10740 234.2 0.0 29. bunge ukraine 5056.4 9620 190.2 0.5 35. rochen 7681.6 8120 105.7 16.8 36. carqil ukraine 6416.2 8114,9 126.5 5.9 52. serna 4706.3 6135.1 130.4 ¬-0.9 58. kreatin 3100 5460 176.1 11.0 118. oliyar 1543.8 2598.5 168.3 0.2 149. ahromars 1668.6 1895.7 113.6 9.8 178. delta wilmar cis 1866 8478.4 79.2 -2.0 189. ukrainian agrarian investments 1165.6 1320 113.2 11.0 source: forbes ukraine. access mode: forbes nef.ua baltic journal of economic studies 131 vol. 4, no. 2, 2018 it is from these positions that they become the object of the economic interest of processing enterprises that restore their own raw material base. owners of personal processing enterprises are interested in agro-industrial integration, which involves a transparent and efficient distribution of the final management results. at the same time, integrational links of households with public production should foresee: – organizational and economic principles for ensuring the material conditions of production in households; – economic incentives for the development of agricultural production in households, taking into account objective differences in the conditions of operation; – assessment and distribution of the results of enterprises of this category both in terms of production volumes in them, and of their state and role in the reimbursement of production costs of households by the public economy. this is ensured by the development of the cooperative movement in the countryside, in particular, the creation of production and service cooperatives. creation of cooperatives should be considered the basis and effective form of management in rural areas that ensures rural development. only in vinnytsia region today there are 83 agricultural cooperatives, of which 43 are dairy, 2 – meat, 5 – fruit and vegetable, 9 – land cultivation, and others  – 25. the biggest number of agricultural service cooperatives is established in khmelnytskyi (21), zhmerynka (18), vinnytsia (7), and nemyriv districts (5). in 2017, these cooperatives provided services to rural residents for 15.3 million uah and paid to the state 342 thousand uah of taxes. the department of agricultural development of the vinnytsia regional state administration has developed optimistic forecasts for the development of cooperatives in the region until 2020. in addition to existing ones, it is expected to create another 52 cooperatives. in addition to cooperating and diversifying production, households have another way of “survival”; it is an opportunity to create on their basis family farms with the status of a certified agricultural producer. this is promoted by the law of ukraine “on amendments to the law of ukraine “on farming” on the promotion of establishment and activity of family farming enterprises”, adopted on march 31, 2016, № 1067-vііі. the law stresses that farming enterprise can be established on the basis of business activity of all family members who carry out business activities and, therefore, it is a family farming enterprise. this form of management is subject to state registration as a legal entity – an entrepreneur. family farming enterprise without a legal entity status is organized by a sole proprietor independently or jointly with members of his or her family on the basis of an agreement on the establishment of a family farming enterprise. in the name of the family farmer without the status of a legal entity, the chairman of this household has the right to speak, or one of the members of the household authorized by him. the very process of creating a family farming enterprise provides conditions for an agreement on its identification in order to enter such a household and exit from it. in our view, the reformatting of households in rural farms is a rational solution to the problems of their implantation into the agrarian model of the development of the national economy. thus, today, the following forms of management in rural areas operate in parallel in ukraine (fig. 3). among the declared forms of economic management in the countryside, in our opinion, a family farming enterprise will be the most perspective in the future (fig. 4). the status of a certified agricultural producer of such a farm opens the way for direct financial assistance from the state and the civilized markets for food products (law of ukraine “on amendments to the law of ukraine “on farming””, 2016). in addition, there is an opportunity to get rid of the participation of intermediaries who buy up a lion’s share of food from the population at a non-interest rate and resell it more expensive: vegetables – in four times, milk and meat of chickens  – 2.5 times (kyrylenko, 2016). one should also note that in the case of the creation of familyowned households on the basis of households, they receive special tax regimes, stimulate vat, and then return themselves. the possibility of creating family farms will take place voluntarily with the status of a legal entity, or on a contractual basis. in this situation, experts suggest, perhaps, for the need to determine the level of state support, to recognize the three-tier level of the active actors of production: family farms, farms, forms of management in rural economy households and private peasant households in their composition production cooperatives different forms of association of households with farming enterprises family farming enterprise fig. 3. small forms of management in the aic baltic journal of economic studies 132 vol. 4, no. 2, 2018 and large farms. the limit of sizes of family farming enterprises is proposed to be determined in 20 hectares of land use, farms  – up to 10 thousand hectares, and large farms  – starting with the area of 10 thousand hectares (kyrylenko, 2016). it should be stressed that the fact of the organization of agricultural production on a family basis somehow goes around the ukrainian legislation. this is not the case in the laws of ukraine “on farming” and “on personal peasant economy”. in our opinion, the laws of ukraine “on agriculture” or “on agricultural (agrarian) system” should fill this gap, in which organizational principles of functioning of agricultural production should be written in a new way. the urgency of such a rule-making act is explained by the need to regulate agribusiness entities for their registration and exchange. currently, the existing organizational structure in agrarian production, in general, does not adequately reflect the place of the agrarian market actors in the existing economic system. thus, agricultural enterprises, which, on the basis of mergers or acquisitions, were included in the composition of agroholdings, do not know at all their status, and hence, in fact, lose their economic independence. the situation of uncertainty is also present in the system of households of the population when part of the personal peasant households that are included in them are actually engaged in the full-fledged commercial activity. at the same time, there is a reality of non-interception of family-type households to the existing system of functioning of the agrarian economy. therefore, the priority rules of the above laws should be: formalization of modern farming enterprises as a form of organization of agricultural production; separation from the households of the population of private peasant farms engaged in commodity production, with their registration as subjects of economic practice and gradation on volumes of land ownership and production to justify the size of state support according to their size. as an additional rule-making measure, the personification of employment should be carried out and an effective social security mechanism for persons employed in these small-commodity entities should be introduced. 5. conclusions discussions about the priority of certain organizational forms of management today are both about the expediency of creating large agrarian companies in the form of holdings, and the need to preserve small business forms in the aic (farming enterprises, production cooperatives, private peasant farms). at the same time, the controversy on this issue is not completed. governmental structures and the government in every way support large-scale production as more effective in relation to other organizational forms. at the same time, there is an opinion in society on the need to preserve small business forms of agrarian production in the future, since they are focused on the range of products that holdings do not deal with. moreover, small business forms serve as “locomotives” of development of the rural economy, employment of population, and human development in the countryside. under such conditions, legal and material support as a means of supporting economic practice in the countryside and the introduction of an effective state mechanism for stimulating industrial and economic practices in rural areas remain a relevant issue of the development of agrarian production. the multivariance of organizational forms of agricultural production should provide for the possibility of transition from one to another, more appropriate form, which will prove its viability and efficiency in the process of the business activity. it is from this point of view that the development of organizational forms of economic management in the aic should be considered. fig. 4. fragmentation of content and features of family farming enterprises source: the author’s development a meaningful description of peasant farms special order of entry and exit from this household a voluntary organization with the status of a legal entity, or on a contractual basis special mode of taxation on the incentive and refunded vat possibility to get rid of intermediaries when selling products access to civilized agrarian markets direct support of farms by organization levels: family farms, farms and large farms maintaining the status of an official producer in the agrarian economy baltic journal of economic studies 133 vol. 4, no. 2, 2018 133 references: andriichuk, v. h. (2012) ahropromyslovi formuvannia novoho typu v konteksti stratehii rozvytku vitchyznianoho silskoho hospodarstva [agroindustrial formation of a new type in the context of the strategy of development of domestic agriculture]. journal of economy of agroindustrial complex, no. 1, pp. 3-15. bohotov, kh. (2008) yntehratsyia – harant uspeshnoho funktsyonyrovanyia khoziaistv naselenyia y upravlenyia [integration is the guarantor of the successful functioning of households and the management]. vol. 11, pp. 36-39. buriak, p. yu. (2007) intehrovani pidpryiemnytski struktury: formuvannia, efektyvnist, potentsial. [integrated entrepreneurial structures: formation, efficiency, potential], lviv: logos (in ukrainian). holyshev, m. (2000) ahropromyshlennaia yntehratsyia v uslovyiakh mnohoukladnoi ekonomyky apk: ekonomyka y upravlenye [agroindustrial integration in conditions of multistructure economy of agrarian and industrial complex: economy and management], vol. 4, pp. 51-56. tekst dlya gosudarstvennyiy agropromyishlennyiy komitet (1998) novyie promyishlennyie formirovaniya ussr perekladu [new industrial formations of the ussr]. kyiv, pp. 61 (in russian). verkhovna rada ukrainy (2016) «pro vnesennia zmin do zakonu ukrainy «pro fermerske hospodarstvo»» shchodo stymuliuvannia stvorennia ta diialnosti fermerskykh hospodarstv» ["on amendments to the law of ukraine “on farming” concerning the promotion of the establishment and operation of farms"] zakon ukrainy vid 31.03.2016, no. 1067-viii. kyrylenko, i. h. (2016) strukturni reformy na seli: svitovyi dosvid, ukrainski realii [structural reforms in the countryside: world experience, ukrainian realities] journal of economy of agroindustrial complex, vol. 2, pp. 5-11. kovalenko, v. l. (2012) rozvytok intehratsiinykh protsesiv u sferi apk vinnychchyny [development of integration processes in the field of agroindustrial complex vinnytsya] bulletin of chernihiv state technological university, vol. 2 (58), pp. 187-191. kulyniak, i. a. (2010) kharakterystyka orhanizatsiino-pravovykh norm obiednan pidpryiemstv [characteristics of organizational and legal forms of business associations] scientific bulletin of the national academy of sciences of ukraine, vol. 20, pp. 199-204. parsiak, v. a. (2004) polityka zrostannia ta rozvytku malykh ahropromyslovykh pidpryiemstv [the policy of growth and development of small agroindustrial enterprises] journal of economy of agroindustrial complex, vol. 10, pp. 56-63. pylypenko, a. a. (2008) stratehichna intehratsiia pidpryiemstv: mekhanizm upravlinnia ta modeliuvannia rozvytku [strategic integration of enterprises: management mechanism and modeling of development]. charkiv: vdunzhek, (in ukrainian). iurkevych, yu. m. (2011) hospodarski obiednannia: poniattia, vydy ta orhanizatsiino-pravovi formy [economic associations: concepts, types and organizational and legal forms]. scientific herald of lviv state university of internal affairs, vol. 2, pp. 140-147. baltic journal of economic studies 191 vol. 4, no. 2, 2018 corresponding author: 1 department of management foreign economic activity of enterprises, national aviation university. е-mail: krazum@ukr.net 2 department of management foreign economic activity of enterprises, national aviation university. е-mail: oks.ilenko7@gmail.com 3 department of management, national transport university. е-mail: nikushek@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-191-197 implementation of the economic and mathematical model for the development of the complex of services for passengers in the railway sector ekaterina razumova1, oksana ilienko2 national aviation university, ukraine viktoriia ihnatiuk3 national transport university, ukraine abstract. the purpose of the paper is to create an economic and mathematical model for identifying the main areas of service development in the implementation of passenger transportation by railway transport. methodology. the survey is based on a comparison of data from two sets of respondents surveyed in 2016– 2017, using the same questionnaire. passengers were asked to fill in questionnaires by themselves. in total, more than 100 passengers were interviewed. the paper also is based on special railway ticket desks reporting forms of 2016–2017. practical applications. it is proposed the model of serving passengers in the part of the formation of food sets that are offered. results. it is proved that it is based on the model development of the total value of the passenger’s dietary structure and allows them to meet their nutritional needs with minimum cost. scientifically-based is that the solution to this problem is possible through the formation of a balanced package of services for potential rail passengers of ukraine, which allows increasing the efficiency of passenger service. to develop the growing passenger traffic, the railways try to increase the capacity of trains by including in the scheme of formation of the most capacious types of cars, which causes a decrease in the quality of passenger service, and sometimes – the population of trains. in order to solve the problems of such a class, the article proposes to establish links between demand, price, and level of purchasing power of transport services consumers, and also it is possible to use methods of correlation analysis and multiple regression. analysis of results of the study of passenger traffic in some areas of the railway network showed that the replacement of the required type of carriages by others leads to the refusal of a certain number of passengers from the trip. obviously, the change in the schemes of formation of passenger trains, without taking into account the demand of the population for places by types of cars, can lead to serious losses of profits of passenger railways and an increase in dissatisfaction with the demand of passengers. taking into account the need of passengers and the requirements of rail transport, the task of choosing rational schemes for the formation of passenger trains can be formulated in the following form. a special place in the service of passengers during the trip is catering. the organization of catering for passengers in trains is one of the most profitable accompanying services and the biological necessity of a person. in the railway transport, a comprehensive system for providing and organizing the feeding of passengers in trains should be developed, based on modern and advanced technologies that provide for certain dietary standards, depending on the duration of the trip and the timetable of trains, and take into account the specifics of the consumption of food for a particular category of passengers. key words: service, rail sector, passenger, economic and mathematical model. jel classification: м10, r40, r49, r42 baltic journal of economic studies 192 vol. 4, no. 2, 2018 1. introduction one of the most important components of ensuring the efficiency of the operation of passenger transport is service. because of a systematic analysis, it has been established that the service involves not only a general but also an individual approach to passenger service, the performance of individual services and operations that often require additional costs from time, energy, resources and, as a rule, without an additional increase in value serviced facility. as aksenov i.m. notes, to ensure a high level of service in the transportation of passengers, comfortable high-speed wagons of the european model, appropriate technical and technological support and infrastructure are needed. without this, it is impossible to compete with other modes of transport (shchelkunov, 2011). passenger transportation service is considered not as an activity of complementing the consumer value of the main service – transportation, but as a system of security that allows improving the conditions for passenger transportation by rail, increasing its competitiveness in the transport market. a wide range of tasks of transport service requires constant scientific and engineering calculations, improvement of existing and development of new methods, systems, technologies, and techniques for the implementation of passenger transportation. this will move passenger transportation to a higher level of development compared with competitors and reduce the cost of maintenance services. 2. survey methodology the survey is based on a comparison of data from the two sets of respondents surveyed in 2016–2017, using the same questionnaire. passengers were asked to fill in questionnaires by themselves. in total, more than 100 passengers were interviewed. the paper also is based on special railway ticket desks reporting forms of 2016–2017. the specifics of transport services reside in a set of different types of service: transport, meals, accommodation, excursions, etc. formation and production of goods for the transport market require a systematic and regular study of the needs, wishes and demands of the population in passenger transportation. in the servicing, the beginning of working with a passenger on a railway transport should be considered not the moment of purchase of a ticket, and the moment of appearance of a potential passenger need to travel. study of the need for transport services is the beginning of work with the population (aksonov, 2012). this requires conducting appropriate research and development in the field of studying and defining the characteristics of such basic concepts as the need, desire, and demand of the population for transportation in the present and in the future. the purpose of the article is the development of an economic and mathematical model for identifying the main areas of service development in the implementation of passenger transportation by railway transport. 3. passenger transportation and its service maintenance when planning passenger transportation and their service maintenance, it is necessary, first, to take into account not only the demand and the frequency of travel, but also the biological needs of the population in food, water, light, clean air, temperature mode in train cars, mobility and a number of other factors. in rail transport, unlike in the car and air transportation, a number of these needs of passengers remain without much attention. for all flights, for example, apart from of the duration of the flight, passengers are offered refrigeration drinks. most airlines follow the following scheme: when flying with a running time of 2-2.5 hours cold appetizers are offered, from 2.5 to 6 hours  – hot dishes and for more than 6 hours  – 2 hot dishes, and for long-haul flights (more than 12 hours) – two hot dishes and cold snacks or steak. recently, “special diet” is practiced depending on the state of health, habits or nationality of passengers. at the high level, the internal environmental parameters on board aircraft are also supported. sanitary and hygienic needs of passengers hold the unique position in consumer services. children and adult passengers with different psycho-physiological features and biological needs experience great inconveniences when traveling in electric trains over time for more than one hour, as well as in long-haul trains when toilets are closed when traveling in ecologically sanitary zones and at long-haul parking. recently, information need shave grown for the population. these are, first, periodicals, internet, e-mail, radio, satellite and cable television, mobile telephone communications, etc. when going on a long-haul trip, the passenger receives, at best, individual periodicals and radio services. he is isolated from his work, family, and the outside world, he experiences discomfort, and the trip becomes unbearably tedious. the share of passengers who wish to buy periodicals, information services and services of various types of communication is more than 60%. a key aspect of the needs of passengers is personal safety. this is due not only to the technical operation of the rolling stock, but also to the criminal status, drug addiction, and other factors. passengers who travel by train in the evening and night for long distances, as well as passengers who are involved in their work with business, feel the need for security and protection. the needs of passengers in the main service  – transportation, and in additional services are the basis of the development of marketing programs for transport baltic journal of economic studies 193 vol. 4, no. 2, 2018 services of the population, which should be developed by passenger house holdings at least twice a year, along with the introduction of a new schedule of trains. no less important is the issue of updating the car park for the future. on the basis of requirements for new types of cars, their internal facility and equipment must be human desires and needs, which in recent decades have changed significantly (kyrylenko, 2014). when creating new rail services, passenger railways should be able to satisfy the needs of passengers in transport services to the maximum, considering their needs and financial capabilities. such an approach to the consumer service will allow, in market conditions, not only to retain existing ones but also to attract new passengers. 4. transportation fare one of the specific features of the organization of passenger transportation is the lack of a solid base of initial data for their planning. the minimum price for the main service – transportation – must cover the cost of rail transport for passengers and the training of trains on the trip, and the price of additional services – to cover the costs of their production, transportation, salaries of staff, premises rent, lighting, heating, advertising, etc. the pricing system in market conditions begins with an analysis of the needs and level of incomes of the segment of the passenger market, which determines the dynamics of its mobility. there is no universal model for determination of population mobility (novak, 2006). the connection between the size of the traffic flow, the population of the correspondent points, and the distance between them, according to the authors, can be determined by a “gravitational model”. as razumova k.m. notes (razumova, 2014), it can be based on the assertion that there is a transport “attraction” between two large settlements, directly proportional to the product of the population of these points and inversely proportional to the distance between them (formula 1): ï p p ä ij ij i j ij = ⋅ γ β , (1) where: ïij  – the flow from the path i to the destination j; pi, pj – population, respectively, in points i and j; äij β  – the distance between settlements; γ ij   – coefficient of proportionality; β  – constant value. the frequency of passenger travelling depends on many factors, and the main of them is the level of purchasing power of the transport service, which are (razumova, 2014): ó å t å t c t ïñ t çï ïê á = −( ) ( ) ( ) , (2) where: ó ïñ t  – the level of purchasing power of the transport service at time t; å tçï( )   – average monthly salary of the passenger traffic segment in the region for the period of time t; å tïê( )   – consumer basket at time t; ñ tá( )  – fare. the probability of the demand for a trip in a given type of car at time t can be determined by formula 3: p t n ó ï ô ïñ t ij ( ) ,= (3) where: n óô ïñ t( )   – the actual number of passengers who made a trip to the specified types of car at an appropriate level of purchasing power ó ïñ / at time t. in order to identify the connections between demand, price, and purchasing power of transport users, in our opinion, it is expedient to apply methods of correlation analysis and multiple regression. with linear dependence and available statistical data, a sufficiently reliable dependence of demand for services on their prices can be obtained by using the linear equation of pair regression, as shown in formula 4: u b b xci n = + ⋅0 1 , (4) where: x  – the factor on which predictive value depends (in this case, the price of the service); b0, b1   – unknown coefficients determined by the method of least squares. equation 1 will best approximate statistical data if the sum of squares of deviations of empirical values from the values calculated by equation 4 will be minimal (formula 5): s u u u b b xci ý ci ï ci ý i n i n = − = − − ⋅ = == ∑∑( ) ( ) min,2 0 1 12 11 (5) where:uci ý   – the statistical value of the value of passenger demand for services that was observed at time t; uci ï  – forecast term of the value of passenger demand for services, calculated by the regression equation; n  – the number of observations – sales of services. the minimum condition for s(b0, b1) is the following equations: ds db0 0= ; ds db1 0= ; or u b b x u x b b x x ci ý i n i n ci ý i i i n i − + ⋅ = ⋅ − − ⋅ ⋅ = = = == ∑∑ ∑ ( ) ( ) . 0 1 1 1 1 0 1 1 1 0 0 11 n ∑         (6) calculating this system of equations with respect to b0 and b1, we obtain (razumova, 2014): b u x x xu n x x ci ý i i n i i n ci ý i n i n i i i n i 0 1 2 1 111 2 1 = ⋅ − ⋅ ⋅ − = === == ∑ ∑∑∑ ∑( ) 11 n ∑ , (7) b n xu x u n x x i ci ý i i n i n ci ý i n i i n i i n1 11 1 2 1 1 = ⋅ − ⋅ ⋅ − == = = = ∑∑ ∑ ∑ ∑( ) . (8) baltic journal of economic studies 194 vol. 4, no. 2, 2018 for estimating the linear force, the sample correlation coefficient is calculated (formula 9): r x x u u x x u u i ci ý i n i ci ý i n = − ⋅ − − ⋅ − = = ∑ ∑ ( ) ( ) ( ) ( ) . 2 1 2 2 1 (9) depending on the correlation coefficient, the following conclusions are usually made: 0 0 2 r ,  – between the forecast value of demand and the factor that determines it, there is no relationship; 0 2 0 5, , r  – tenuous relationship; 0 5 0 75, , r  – average relationship; 0 75 0 95, , r   – strong relationship; 0 95 1,  r  – functional relationship. for prestigious services, such as the sale of seats in elevated carriages, a significant increase in prices affects insignificantly the volume of demand; however, if prices rise quite high, demand levels will be lower thanuc1 , as a result of the curvature curve to the side. in this case, passengers will buy tickets to other types of cars, comparing the price and quality of the services offered, or use of the services of other modes of transport. the resulting amount of demand for transport services, in this case, is formed under the influence of not one, but several key factors. to study their effect on demand, we consider it expedient to use the method of multiple regression, which reflects the statistical relationship of the value of the service with a group of other factors, on which it depends. in general, this dependence is described by the equation 10: u x x x xc n= ∫( , , ,..., ),1 2 3 (10) where: x x x xn1 2 3, , ,...,   – the factors on which the forecast value of demand depends. in most practical calculations, models are used to establish multivariate dependencies: linear (multifactorial): u a bxc i i i n = + = ∑ ; 1 (11) degree u x x x xc b b b n bn= ⋅ ⋅ ⋅1 2 3 1 2 3 ... ; non-linear: u a b x b x b x b x b x x b x x b x c n n n n = + + + + + + + + + + 1 1 2 2 11 1 2 12 1 2 1 1 22 2 2 ... ... bb x x b x x b x b x x b n n n n n n n n n 23 2 3 2 2 1 1 1 2 1 1 + + + + + + + +− − − − − ... ... ..., , nn nx 2, (12) where: bi – beta coefficients; a – bias; xi – a factor that creates the demand. dependence of demand and price, in this case, is determined by the mathematical methods. the establishment of interconnections between transport services and demand allows the passenger to assess the effectiveness of the relevant set of services, provide break-even work, and establish a sustainable strategy for operation in the transport market. the choice of a passenger car category depends on its cultural level, the cost of tickets for wagesci, purchasing power ó ïñ 1 at time t and other factors. passengers with low wages and low purchasing power, basically, buy tickets for seats in the couchette cars and general wagons, and with high ó ïñ 1   – in seats in the compartments and cars “sс”. in the general case, each passenger with a specified ó ïñ 1 one may, with a certain probability( , , , )p p p pi y i z i k і x can buy tickets for seats in the cars “sc” (x), compartment (y), couchette car (z), and general (k) wagons. all predicted passenger flow ас on a specific destination of a train can be divided into passengers who want to go in the car “sc” ( ac x ), compartment ( ac y ), economy class ( ac z ), and general ( ac k ) types of trains, that is: a a a a ac k c x c y c z c k= + + +( ). (13) given the probability of passenger demand for seats in cars of different categories of trains, the values of the corresponding clauses can be represented as follows: a p ó a ó p ó a ó p c x x ïñ t c ïñ t x ïñ t c ïñ t m x = ⋅ + ⋅ + + 1 1 1 1 2 2 2 2( ) ( ) ( ) ( ) ... ... (( ) ( ), ( ) ( ) ( ) ó a ó a ð ó a ó p ó a ïñì t ñò ïñì t c ó ó ïñ t c ïñ t ó ïñ t ⋅ = ⋅ + ⋅1 1 1 1 2 2 cc ïñ t ò ó ïñì t cò ïñì t ó p ó a ó 2 2( ) ... ... ( ) ( ), .................. + + ⋅ .......................................................................... ( ) ( ) ( ) (a p ó a ó p ó a óc k k ïñ t c ïñ t k ïñ t c= ⋅ + ⋅1 1 1 1 2 2 2 ïïñ t m k ïñì t cm ïñì tp ó a ó 2) ... ... ( ) ( ), + + ⋅ (14) where: p óx ïñ t 1 1( ) , p ó ó ïñ t 1 1( ) , … , p ó k ïñ t 1 1( )   – the probability of passenger demand for seats in cars of the corresponding category with purchasing poweró ïñ t 1 at time t; a óx ïñ t 1 1( )   – a total number of passengers with purchasing power ó ïñ t 1 at the time t. moreover, the following condition must be observed (formula 15): a a óc ci t ïñ t= ∑ ( ),1 p ó p ó p ói x ïñi t i ó ïñi t i k ïñi t( ) ( ) ... ( ) .+ + + = 1 (15) with a sufficient number of passenger wagons of each category in the passenger railroad reserve, to ensure the demand of passengers for the intended pattern of formation of a train, it is possible to determine (kyrylenko, 2014; razumova, 2014): x a p ó a ó p ó a ó p c x x ïñ t c ïñ t x ïñ t c ïñ t m x = = ⋅ + ⋅ + +1 1 1 1 2 2 2 2( ) ( ) ( ) ( ) ... (óó a ó a ïñì t cn ïñì t x x ) ( ) , min ⋅ β ó a p ó a ó p ó a ó p c ó ó ïñ t c ïñ t ó ïñ t c ïñ t m ó = = ⋅ + ⋅ + +1 1 1 1 2 2 2 2( ) ( ) ( ) ( ) ... (óó a ó a ïñì t cn ïñì t ó ó ) ( ) , min ⋅ β (16) k a p ó a ó p ó a ó p c k k ïñ t c ïñ t k ïñ t c ïñ t m k = = ⋅ + ⋅ + +1 1 1 1 2 2 2 2( ) ( ) ( ) ( ) ... (óó a ó a ïñì t cn ïñì t k k ) ( ) . min ⋅ β where: ах, ау, …, аk  – replacement of the car of the relevant category; βx xa min , βó óa min , βk ka min   – the minimum permissible level of population, respectively, compartment, economy class, and general types of cars, in which the passenger service is advantageous to include them in the composition of the train on a given destination. baltic journal of economic studies 195 vol. 4, no. 2, 2018 each train is limited to the length of passenger platforms at start-stop and intermediate stations where there is a stop. typically, this restriction is set by the number of cars included in the train: x ó k mc+ + + ≤... . (17) lowering the purchasing power level of the time period t t+ ∆ due to the increasing consumer prices without raising wages, consumers’ demand for transport services is changing a óci ïñi t( ) on the value a óîòi t t ïñi t t+ +∆ ∆( ) : a ó a ó a óci t t ïñii t t ci t ïñi t oti t t ïñi t t+ + + += ⋅ −∆ ∆ ∆ ∆( ) ( ) ( ( )),1 (18) where: a óîòi t t ïñi t t+ +∆ ∆( )   – the probability of refusal to travel passengers with purchasing power ó ïñ1 at the time t t+ ∆ . for the development of the growing passenger traffic, the railways try to increase the capacity of trains by including in the scheme of formation of the most capacious types of cars, which leads to a decrease in the quality of passenger service, and sometimes  – the population of trains. an analysis of results of the study of passenger traffic in some areas of the rail network showed that the replacement of the required type of carriages by others leads to the refusal of a certain number of passengers from the trip. obviously, the change in the schemes of formation of passenger trains, without considering the demand of the population for places by types of cars, can lead to serious losses of profits of passenger railways and an increase in dissatisfaction with the demand of passengers. considering the need of passengers and the requirements of rail transport, the task of choosing rational schemes for the formation of passenger trains can be formulated in the following form. from the car park, which is available, to determine such a scheme for the formation of passenger trains, which would ensure the transportation of the planned number of passengers, would as much as possible satisfy the demand of the population for places by types of cars and was profitable for rail transport. let’s represent the problem in mathematical form. for each specific attraction, the satisfaction of the demand of the population to the place may occur at the expense of free places and other types of cars, that is, if the demand for one of the types of cars dissatisfies, some of the passengers buy tickets for vacancies in other types, and part refuses to travel in general. mathematically, this can be represented as a system of equations 19 (razumova, 2014): a a x a à ó à a z a a k a à ó à à c x x ó õ ó z x z k x k c ó ó õ ó õ ≤ + − + − + − ≤ + − ( ) ( ) ( ) ; ( ) 1 1 1 1 õõ à a z a à k a a x a a x a a ó z ó z k ó k c z x x z x ó z ó + − + − ≤ + − + − + − ( ) ( ) ; ( ) ( ) ( 1 1 1 1 1 àà a k a a k a a x a a ó à a z k z k c k k x k x ó k ó z k z ) ; ( ) ( ) ( ) ,≤ + − + − + −        1 1 1 (19) where: ac x, ac ó, ac z, ac k   – population demand for seats, respectively, in “sc”, compartment, couchette car, and general wagons; x, y, z, k  – unknown value, respectively, of soft, compartment, economy class, and common rail cars; ax ó, az ó, ak ó   – the probability of a passenger’s refusal from a trip in case of dissatisfaction with the demand for a place in a compartment carriage and the presentation of a place in the carriages of “sc”, on the economy class, and on the general carriages; ax z, az z, ak z   – the probability of a passenger’s refusal from a trip in case of dissatisfaction with the demand for a place in the placard carriage and the presentation of the place in the carriages of “sc”, compartment, and general wagons; ax k, az k, ak k   – the probability of a passenger’s refusal from a trip if dissatisfied with the demand for a place in the general carriage and the presentation of the place, respectively, in the “sc” cars, compartment, and general wagons. when choosing schemes for the formation of passenger trains to provide transportation of the population of the planned passenger flow, an opportunity to make a trip, expressed in the ratio (formula 20), should be presented: a a x a ó à z a kn x ó z k≤ + + + . (20) for a passenger economy, it is necessary to ensure the profitability of passenger transportation. this condition for each type of train included in the train can be written in the following form (razumova, 2014):                              ≥−−−−−−+ +−−−−−−−+ +−−−−−+ +−−−−− ≥−−−−−+ +−−−−−−+ +−−−−−+ +−−−−− ≥−−−−−+ +−−−−−+ +−−−−−−+ +−−−−− ≥−−−−−+ +−−−−−+ +−−−−−+ +−−−−−− .)1()1()1( )1()1()1( )1()1( )1()1( ,)1()1( )1()1()1( )1()1( )1()1( ,)1()1( )1()1( )1()1()1( )1()1( ,)1()1( )1()1( )1()1( )1()1()1( min min min min kazaayaaxaaa kaayaaxaazaa zaaxaayaa zaayaaxaa zayaaxaakaa kaayaaxaaa kaaxaayaa kaayaaxaa yazaaxaakaa kaaxaazaa kaazaaxaaa kaazaaxaa xazaayaakaa kaayaazaa kaazaayaa kaazaayaaa kkz k zy k yx k x k c k z ky z yx z xz z c z y zx y xy y c z x zy x yx x c zzy k yx k xk k c k z ky z yx z x z c k y kx y xy y c k x ky x yx x c yyz k zx k xk k c k z kx z xz z c k y kz y zx y x y c k x kz x zx x c xxz k zy k yk k c k z kx z yz z c k y kz y zy y c k x kz x zy y x x c β β β β (21) however, the number of cars of each type should not exceed the existing reserve of passenger cars, i.e.: t õ â ò ó â ò z â t k â îá õ îá ó îá z îá k ″ ″ ″ ″ , , , , (22) where: вх, ву, вz, bk – the existing park in accordance with “sc” carriages, compartment, couchette car, and general passenger cars; baltic journal of economic studies 196 vol. 4, no. 2, 2018 тоб – the time of traction on a given route. a rational scheme for the formation of a passenger train composition will be that which ensures the minimum number of refusals of passengers from the trip. that is, to solve the problem, it is necessary to minimize the function (formula 23) using the complex method of linear programming, on the constraints in the systems of equations 21 and 22: f a a y a a z a a k a a x a a z a a k a a x a a y y x y z x z k x k x y x z y z k y k x z x y z y = + + + + + + + + ++ + + + →a a k a a x a a y a a zk z k x k x y k y z k z min. (23) calculations of the schemes for the formation of passenger trains made according to this method allow improving the quality of passenger traffic and the efficiency of the use of the car park. 5. catering costs a special place in the service of passengers during the trip is catering. the organization of catering for passengers in trains is one of the most profitable accompanying services and the biological necessity of a person. in the railway transport, a comprehensive system for providing and organizing the feeding of passengers in trains should be developed, based on modern and advanced technologies that provide for certain dietary standards, depending on the duration of the trip and the timetable of trains, and take into account the specifics of the consumption of food for a particular category of passengers. finding passengers on the way up to 3 hours already needs to provide him, at least, drinks to choose from: juice, water of different kinds, tea, coffee, milk and, if desired, yogurt or ice cream. with a trip duration of 3 to 5 hours, it is advisable for passengers, along with drinks, to offer light meals: cold snacks, sandwiches, pastries and other products and confectionery products formed in “lunchboxes”. for a longer trip, passengers need hot meals. it is also impossible to disregard the inhomogeneity of passenger traffic in rail transport by nationalities, religious beliefs, ethnic groups, and physical health. the passenger should always have the choice of the offered dishes. let there be a set of products (meat, fish, milk, butter, cheese, cereals, bread, etc.) at a price c c c cj n1 2, ,..., ,..., . respectively. moreover, the stocks of these products are limited in terms of delivery, preservation: a a a aj n1 2, ,..., ,..., . the content of the nutrients (proteins, fats, carbohydrates, mineral salts) in 100 g of each product are known and are respectively: ρij i j( , , ....; , , ....)= =1 2 3 1 2 3 . in addition, the norms of daily human need in every nutrient are known: b b b bj n1 2, ,..., ,..., . it is necessary to determine the number of sets of procured products x x x xj n1 2, ,..., ,..., , which will provide the need for nutrients of each species and will have a minimal cost. since the nutrient content in the diet should be at least b bm1,..., , we obtain a system of linear restrictions (24): + + + + + + + ρ ρ ρ ρ ρ ρ 11 1 12 2 1 1 21 1 22 2 2 2 x x x b x x x b n n n n ...... , ...... , .   ..................................................................... ...... , .................... ρ ρ ρj j m n ix x x b1 1 2 2+ + +  ................................................. ρ ρm mx1 1 2+ xx x bmn n m2 + +           ..... .ρ  (24) in addition, the quantity of each product in the diet of each passenger cannot be negative, and the size of procurement is limited to stocks: 0 0 0 01 1 2 2       x a x a x a x aj j n n, ,...., ,..., . (25) the total value of the diet will be recorded as a linear target function: f x c x c x c xn n( ) ... .= ⋅ + ⋅ + + ⋅1 1 2 2 (26) thus, solving the problem of linear programming in known ways, you can get a balanced daily diet of a passenger.. 6. conclusions so, it was proved that passengers on the way up to 3 hours already need to be provided at least with drinks to choose from: juice, water of different kinds, tea, coffee, milk, and others. with a trip duration of 3 to 5 hours, passengers, along with drinks, should be offered with light meals: cold snacks, sandwiches, sandwiches, pastries and other products and confectionery products formed in “lunch boxes”. for a longer trip, passengers need hot meals. the article proposes the model of service development for passengers, which is based on the development of the model of the total cost of the passenger’s diet and allows them to meet their nutritional needs with minimal costs. the task of rational nutrition is solved in the conditions of a limited range of commodity stocks, costs, daily human consumption standards of consumer substances and their content in products and beverages. in any case, from all possible options, you need to choose the most economical ones. also, this model is based on modern and advanced technologies, which provides for certain dietary standards, depending on the trip duration and schedule of trains, and takes into account the specifics of the consumption of food for a particular category of passengers. baltic journal of economic studies 197 vol. 4, no. 2, 2018 references: shchelkunov v., kyrylenko o. and oth. (2011) osnovy ekonomiki transportu. [basis of transport economics]. kyiv: condor. (in ukrainian) novak v., makarenko l., lutskyy m. (2006) informatsiyne zabezpechennya menedzhmentu. [information support of management]. kyiv: kondor. (in ukrainian) aksonov i.m., haba v.v., sherepa k.m. (2012) transportna logistyka [transport logistics: a tutorial]. kiev: detut. in ukrainian) kyrylenko o.n. (2014) ekonomicheskaya effektivnost metoda ekspluatatsii nizkoskorostnykh liniy. [the economic efficiency of the method of operation of low-traffic lines]. economy of railways. moskow, vol. 8, pp. 79-85. razumova k.n. (2014) ocinka konkurentnykh pozycij pidpryyemstv pasazhyrskogo transportu z urakhuvannyam loyalnosti strategichnykh partneriv [assessment of competitive positions of the enterprises of passenger transport, taking into account loyalty strategic partners]. problems of system approach in economics, vol. 50, pp. 79-82. baltic journal of economic studies 235 vol. 4, no. 2, 2018 corresponding author: 1 department of economics, kyiv national university of culture and arts. e-mail: tttt66t@ukr.net 2 department of economics, kyiv national university of culture and arts. e-mail: kovalova1503@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-235-244 the research of methodological ways for increasing the efficiency of use of the innovative potential of regional social and economic systems dmytro solokha1, mariia kovalоva2 kyiv national university of culture and arts, ukraine abstract. modern conditions of the economic development based on market principles require significant changes in the system of economic governance both at national and regional levels, including in the management of inter-industry complexes, one of the most effective tools of which is the state governance. investment and innovation policy is one of the most influential government economic methods of management of backbone enterprises in the region. the aim of state investment and innovation policy is primarily the creation of competitive environment and provision of structural changes and economic growth by improving the investment climate in the country, the development and intensification of the investment process, targeting investments in the priority sectors and programs. the importance of innovation potential in the socio-economic development of the country and regions is due primarily to the fact that the current conditions of industrial development and, as a result, the state’s and region’s economy, need a manufacturing application of innovative technologies as an indispensable condition to improve the competitiveness of the country and inter-industry complexes, among others. providing the implementation of innovative technologies in production processes is one of the main duties of the state in the implementation of innovation policy. thus, public authorities, both at national and regional levels, should create conditions for incentives of innovative activity, facilitating the rapid implementation of innovations in the production of specific products. the success of such processes is possible only by joint industrial, commercial, and banking capital into structures that are able to produce high-tech products, such as technopolis, technology parks, technological clusters, etc. investments are the material basis of innovative processes. activisation of investment activity, increased investments from all sources, and their effective use in innovation activities is a prerequisite for the sustainable economic development of ukraine. the multidisciplinary nature of the economy indicates the need to use the relative interchangeability of the main types of productive resources in order to manage them most effectively within the enterprise, industry, and region. the quantitative measure of interchangeability of resources can be determined by establishing the functional dependence of their influence on the efficiency of production. mathematical apparatus for the translation of multi-dimensional quantities in a comparable view is developed on the basis of existing modifications of production functions. it is determined that effective management of the development of the innovative potential of regional ses is carried out with the help of information support, which helps to obtain the synergy effect taking into account the following features: the complexity of the use of resources; complementarity of resources; interchangeability of resources. in connection with this, an interchangeability of resources has been proposed, which allows determining the variants of potential levels in the production of a certain volume of production in order to manoeuvre the resources in regional ses, which will ensure effective management of potential in general and innovative potential in particular. key words: efficiency, development, potential, region, socio-economic system, management, innovation, investment. jel classification: b40, b55, c01, d26, h00, l38, l51 baltic journal of economic studies 236 vol. 4, no. 2, 2018 1. introduction the successful development of the country’s economy depends largely on the successful development of its individual regions, whose development, in turn, depends on the system of economic governance both at the national and regional levels, which in turn is provided with the available potential and efficiency of its use. the system of economic governance is a set of interrelated and coordinated means and methods of economic management that are used by state and regional governments and by appropriate management apparatus (economic encyclopedia, 2000), but the current state of development of the economic system of ukraine requires the search for fundamentally new approaches to the methodological bases for increasing the efficiency of using the potential of socioeconomic systems at the regional level as the basic component of the national economy, therefore, the topic of this work is timely and relevant. the purpose of this work is to investigate methodological approaches to ensure and increase the effectiveness of using the potential of socioeconomic systems at the regional level in order to determine the most probable for the national economic system of ukraine. the methodological basis of the research that was conducted is scientific works on the identified issues of both domestic and foreign scientists, in particular (economic encyclopedia, 2000; matrosova, 2009; solokha, 2011). this research was conducted within the framework of research work of the department of economics of the kyiv national university of culture and arts on the topic: reasons for imperatives of innovative providing of the region. 2. characteristics of the system of state development management. many researchers of the present day (balabanov, 2000; goncharov, 2009; denysenko, 2008; zaharchenko, 2012; kovalova, 2014; solokha, 2007) devoted their research to the problems of providing effective system management for the development of socioeconomic systems in the long run, however, due to its multidirectional and versatile nature, it remains still not fully resolved. l.i. skibitska emphasizes that system of management is a form of real implementation of management relationships, and administrative activity, in turn, represents management system functioning. s.v. kivalov notes that management is a purposeful influence of the complicated system; the thoughts of these scientists are reflected in the work (kovalova, 2014). in support of this idea, in the monograph (kovalova, 2014) provides a well-known expression a famous saying the classic of management a. fayolle from his work “general and industrial management”. he characterizes management as follows: “to manage – means to lead the organization to its goal, extracting the maximum opportunities from all its available resources.” in our opinion, the enterprise management system should be understood as a set of purposeful, coordinated, interrelated, and complementary management actions concerning the company in order to achieve the highest possible economic result of their management, which will lead to the effectiveness of management at the regional and national levels. coordination of regional and state authority’s actions concerning the management of the development of system creating enterprises of the region is a necessary condition for their successful and effective development, the result of which should be increase output volumes and the competitiveness level both finished products and regions and accordingly the state at the global level (kovalova, 2014). modern conditions of the economic development based on market principles require significant changes in the system of economic governance both at national and regional levels, including in the management of interindustry complexes, one of the most effective tools of which is the state governance. o.p. kopylenko, as noted by the author (kovalova, 2014), gives the following definition of the state governance: “this is subordinate, legally and power, organizing activity of specific subjects, which consists in practical implementation of laws in the daily management of the economy, socio-cultural, administrative, and political development.” according to o.y. vysotsky, o.e. vysotsky, o.p. sharov, the state governance is one of the kinds of state activity for the implementation of management organizing influence by using powers of executive authority through organization of implementation of laws, implementation of management functions for the purpose of complex socio-economic and cultural development of the state and its individual territories, and implementation of national policy in relevant spheres of social life, creation conditions for the realization by citizens of their rights and freedoms, proved in the monograph (kovalova, 2014). v.b. averyanov distinguishes broad and narrow interpretation of the term “state governance”. in his opinion, a broad interpretation of the state governance as the totality of all activities of the state (i.e., all forms of implementation of state power as a whole) is legitimate at the level of analysis in general the system of social (public) administration, the selection its relatively independent subsystems, proved by the author (kovalova, 2014). it should be noted that, at the same time, public and private structures are separate that have a different degree of management influence on society. in a narrow sense, the state governance is meant as a special and baltic journal of economic studies 237 vol. 4, no. 2, 2018 independent kind of activity of the state, carried out by a separate system of specialized government agencies and individual public authorities, including regional. namely, as the author emphasizes, the state governance is an activity of a special kind, the content of which is to implement laws and other acts of state power through different forms of organizing influence on social phenomena and processes. so, the state governance characterized by a deliberate action on the corresponding object of management, in this case, interbranch complex, moreover in a broad sense, the impact can be performed by both public authorities and non-governmental organizations that have this authority. the impact on management object occurs through a number of methods determined by the leading scientists and is revealed in the monograph (kovalova, 2014). s.m. alferov, s.v. vashenko, m.m. dolgopolova, a.p. kupin distinguish the following methods of the state governance: 1. persuasion – campaigning, explanation, education, and so on. 2. administrative, the essence of which is the adoption of administrative decisions, failure to comply of which by the object of control can cause a specific, according to law, administrative liability. 3. economic – the creation of such economic conditions, in which the object of management implements tasks most effectively. these include: credit policy, price regulation, competition policy, transfers, and so on. 4. compulsion – formation of the behaviour of control object against its will, while the control subject can forcibly affect the moral, financial, organizational, physical, psychological scope of control object with the aim of regulation. 5. psychological – regulation of human relations. not all of the scientists distinguish separately psychological methods of state governance. in particular, the classification proposed does not contain them. in our opinion, this is due primarily to the fact that psychological management methods are more effective at the enterprise level, so in state government uses a combination of the first four management methods. 3. the system of development management on a branch basis there are such types of the state governance: sectoral and intersectoral governance. l.g. shmorgun determines sectoral governance as “a type of state management activity, which consists in the management of the similar enterprises’ system from the authorized central body of executive authority that manages these companies, which create a branch in a social and economic complex of the state”. v.k . kolpakov and o.v. kuzmenko are giving the same definition of the sectoral governance, investigated (kovalova, 2014). y.p.  bytyak notes that the essence of sectoral management consists in the organization of the effective functioning of sub-systems. accordingly, the intersectoral governance consists in the state administrative activities of interbranch complexes development. sectoral management is carried out by the relevant ministries at the state level and by the regional authorities at the regional levels. an important feature of sectoral management is a vertical relationship between subject and object of management. in this case, the governing bodies are the subject of management and objects are their managing objects. sectoral governance has a direct relationship of subordination. in its activity, sectoral governance bodies are governed by the relevant regulatory and legislative documents relating both directly to the specific industry and public administration in general. the competence of such governing bodies includes strategy development of a particular industry development and intersectoral systems and creating appropriate conditions for its implementation. sectoral management objects, in this case, are the entities of the industry, and the form of ownership does not matter. also, sectoral and intersectoral objects of management can be different structural units of a particular industry (economic, cultural, medical) in certain administrative and territorial units, subordinated to relevant ministries. thus, the essence of sectoral governance consists in system organization of the effective functioning of the industry and the aggregate of all forms of management activities of the authorities that are competent in such management. the sectoral management system is formed within the specific economic sectors and within definite legal provisions, which are determined by special regulations for each branch. based on the foregoing, we can conclude the following: sectoral governance is defined as the authorized state bodies’ management within their competence with respect to several business sectors. note that in this case, intersectoral management body has certain powers, including governmental, for those companies or institutions that it can’t subordinate organizationally. so, the main function of sectoral governance is the organization of effective functioning of inter-industry complexes and coordinated actions of all enterprises included in its composition. based on the foregoing can be singled out the following functions of intersectoral authorities: – definition and rationale of directions of intersectoral complexes; – ensuring appropriate normative and legal support for the activities of interbranch complexes; – solution of interbranch complex problems considering the national and regional interests. baltic journal of economic studies 238 vol. 4, no. 2, 2018 intersectoral governance, unlike sectoral, is characterized by horizontal relationship, i.e. subjects and objects of this type of management are not subordinated organizationally. intersectoral executive and administrative activities lay mainly on state committees, services, administration, and inspection of ukraine, in some cases to ministries. these authorities carry out interdepartmental coordination on issues within their competence and functional regulation in a specific area of activity. the main purpose of interbranch management is to ensure coordinated functioning and development of all sectors and parts of the socio-economic complex through the constant and purposeful work to resolve inter-ministerial problems. the field of activity of intersectoral authorities is broader than the field of sectoral management because their activity is distributed into several branches at once. it should be noted that boundaries of the field of activity of intersectoral authorities are constantly expanding that is explained first of all by that modern conditions of economic development require coordinated actions of sectoral bodies and overall coordination. as a result, entities of management of intersectoral complexes are endowed with the regulatory and coordinating functions. so, sectoral governance gradually fades into the background, giving way to intersectoral governance. the regulatory functions of interbranch management acquire relevance too. thus, the essence of government regulation is to guarantee coordinated actions of all administrative bodies and the interbranch government is to coordinate the actions of enterprises, institutions, and organizations irrespective of their subordination. such a coordination turns out (or intersectoral management) in the implementation by the competent authorities of one or more functions of the state in all sectors. investment and innovation policy is one of the most influential government economic methods of management of backbone enterprises in the region. the aim of state investment and innovation policy is primarily the creation of competitive environment and provision of structural changes and economic growth by improving the investment climate in the country, the development and intensification of the investment process, targeting investments in the priority sectors and programs (zaharchenko, 2012). 4. investment fundamentals of innovation potential management innovation potential management is one of the decisive factors of development, and therefore, an important part of the management of inter-industry complexes. v.i. zakharchenko defines innovation potential as one of the three components of the innovation space, which includes personal and business qualities of managers, professional and economic training, professional achievements, logistical and financial support, etc. (zaharchenko, 2012; zaharchenko, 2004). i.t. balabanov gives the following definition of innovation potential: “... a combination of different resources, including physical, financial, intellectual, information and other resources that are necessary for the implementation of innovation” (balabanov, 2000). the importance of innovation potential in the socioeconomic development of the country and regions is due primarily to the fact that the current conditions of industrial development and, as a result, the state’s and region’s economy, need a manufacturing application of innovative technologies as an indispensable condition to improve the competitiveness of the country and interindustry complexes, among others. s. ischuk’s works that are analysed in the monograph (kovalova, 2014) prove that the leading innovations in the industry are: 1) the creation of new equipment and new substances and materials, which help to reduce the production costs, improve quality, reduce the cost of natural, human, and financial resources, reorganization and modernization of industrial enterprises; 2) attracting investments in the development of new technologies; 3) improving the innovation systems by optimizing the production cycle using innovative approaches. the successful implementation of the abovementioned trends is possible only if innovative and accordingly the scientific potential of individual regions and the country as a whole will develop. so, scientific and innovation potential concerning the development of certain interbranch complex defines: 1) the degree of implementation of innovations in production – reducing the number of morally and physically obsolete equipment, the use of low-waste, energy-saving technologies; 2) the development of high-tech activities; 3) a compliance with international standards of the technical and technological base of the interbranch complex; 4) improving the labour productivity and, as a result, the profitability of production; 5) growth rates of capital-labour ratio and capital productivity; 6) increasing the share of inter-industry complexes in the export of the country and achieving a high-level competitiveness in the global market. the outcome of scientific and innovation potential action on the functioning of the inter-branch complex should be: the improvement of technical and technological parameters of both large and small enterprises of the interbranch complex; increasing role of inter-industry complexes that are actively used in the manufacture innovation and form the so-called “innovation economics framework”; baltic journal of economic studies 239 vol. 4, no. 2, 2018 changes in the competition nature – development of new technologies and services is at the forefront; predictability of innovations market; growth in the interdependence of the national economy and intersectoral systems; creation of a new type of enterprise that requires minor raw materials and human resources, however, due to an innovative vector of its activities has the high rates of profit and profitability. having a direct impact on the national economy and its individual regions, scientific and innovation potential may have a different impact on the development of separate inter-industry complexes. this is explained by varying degrees of industries willingness to accept the innovative technologies because of the uneven development of the industry. emphasize on the impossibility of successful innovation activity without systematic and consistent public administration, whose functions include the creation of the legal framework, the choice of priorities of innovation activity, financial support, the establishment of appropriate infrastructure. providing the implementation of innovative technologies in production processes is one of the main duties of the state in the implementation of innovation policy. thus, public authorities, both at national and regional levels, should create conditions for incentives of innovative activity, facilitating the rapid implementation of innovations in the production of specific products. the success of such processes is possible only by joint industrial, commercial, and banking capital into structures that are able to produce the high-tech products, such as technopolis, technology parks, technological clusters, etc. (kovalova, 2014). investments are the material basis of innovative processes. activisation of investment activity, increased investments from all sources, and their effective use in innovation activities is a prerequisite for the sustainable economic development of ukraine. a.f. melnyk notes that the state investment policy for the development of inter-industry complexes, as noted in the work (kovalova, 2014), provides the following: creating a favourable investment climate through the development of a system of long-term investment credit; introduction of economic mechanisms for attracting investments in the competitive industries; directing the public investment resources purely on the development of priority sectors; optimization of amortization policy; implementation of tax policy that encourages the investment and innovation activity; improving the economic, legal, and institutional investors operating conditions; development of insurance business; strengthening the role of institutional investors (pension funds, investment funds, and insurance funds); creating a sovereign investment fund of industry; implementation of the joint (government and business) large-scale investment projects. foreign experience demonstrates the success of the so-called coordination management system, which provides coordination between all participants of investment activity in the region (kovalova, 2014; solokha, 2011). the functional responsibilities of relevant government authorities also include the development of actions on the implementation of investment and innovation policy. that includes: implementation of statutory and legal regulations and proper support for contractual relationships with regional authorities or agencies who have certain powers; providing appropriate conditions for the effective cooperation between financial institutions and manufacturing companies by providing preferential loans, reducing utility tariffs etc. identifying forms of local authorities’ responsibility for implementing measures within the investment policy and the possible negative consequences (violation of an environmental protection, land planning zone, etc.); providing communication with the public through the media to the general demonstration of realized investment policy in the region in order to attract public organizations and the public to participate in deciding on the advisability and directions of its further development. overseas the investment policy in the region is a factor of stabilization of the economy, where the number and depth of the economic and social problems are so great that need its own solution that the only possible way to achieve goals that set by reforms is gradual and systematic movement towards building a new investment mechanism in the development of market relations. the investment is one of the most important instruments of state policy in the sphere of the economy. world experience shows that one of the main factors that determine the need to attract investments is the lack of national financial resources for the development of a particular sector, the result of which is the reduction of production. one of the main problems that arise in the implementation of public investment policy, there is lack of coordination between public authorities at regional and national levels (solokha, 2011). one of the main tasks of authorities at the regional level is the assistance for companies that are interested in investing their money in the economy of a particular region. however, the investment process at the regional level has certain features that are mainly associated with specific sources of investment and limited stage of reproduction that occur in regional structures. foreign experience demonstrates the effectiveness of such instruments for attracting investments as tax credits, reduced rates for transport and energy, preferential baltic journal of economic studies 240 vol. 4, no. 2, 2018 loans and so on. planning and creating separate objects of social value, as well as the development of small urban and rural settlements, is now the prerogative of local government, the object of work during formation of investment policy in the region. it should be noted that in these cases, a mechanism of the public and private partnership is widely used. special plots are provided by the regional authorities that ultimately contribute to solving the urgent tasks of areas’ development by construction and reconstruction, upgrading existing infrastructure in the region. so in the process of development of backbone enterprises at the regional level, for their successful development, it is important to use the totality of management practices at the state level too. it is necessary to emphasize the importance of investment and innovation policy, the successful implementation of which is possible only by joint efforts of state authorities at all levels and representatives of companies belonging to the interbranch complex. sustainable economic development of the regions and country as a whole and thus increase in the level of the country’s competitiveness globally is possible only on condition of the effective management system of interbranch development at the regional level. 5. investigation of the management system of the resource potential of innovations first of all, development of regional ses is determined by the application of progressive forms of management that provide effective potential management in accordance with the specific needs of production. various statistical information is required for the effective management, which reflects all the peculiarities of the development of the potential of the ses of the regional level. improving the quality of management of ses potential is the main condition for the quality functioning of the system and the achievement of a synergistic effect. the effectiveness of the synergistic effect depends on the structure and reliability of the information. in the case of unbelievable information, potential development will lead to a variety of conflicting management requirements, which will result in inefficient use of ses resources and put at risk the outcome. in addition to the synergistic effect, information resources provide reliability of the functioning of the potential of regional ses and its flexibility relative to the environment. thus, efficient management of the innovative potential of the ses at the regional level is carried out with the help of information support, which helps to obtain the synergy effect, taking into account the following features: the complexity of the use of resources; complementarity of resources; interchangeability of resources. the concept of the complexity of the use of resources means multipurpose processing and ensures maximum use of their consumer properties, providing diverse technological processes with raw materials. the property of complexity is especially relevant in the conditions of modern requirements for production when on the agenda was the task of transition to an innovative model of management and implementation of resource-saving technologies. for example, increasing the complexity of using resources makes it possible to relatively reduce the amount of ore extraction by increasing the depth of processing and extraction of related utility elements. complementarity of resources is expressed in the necessity of observing certain volumetric proportions of specific types of resources with the given production technology and the current type of consumption. the most characteristic complementarity for productive material resources, but it also manifests itself in the structure of the workforce, which can affect the shortage of workers of a certain qualification and specialty. interchangeability of resources is related to their multifunctionality and assumes the possibility of replacing one resource with another in the technological process, practically without affecting the volume and quality of the final product, that is, the same resource can be used for the satisfaction of different functional needs, and each need can be provided with different sets of resources. each new type of combination of potential components modifies the old one and causes the new content of the form of interchangeability. existing limitations of the ses resources are not an insurmountable obstacle to implementing the principle of their interchangeability. rather, the possibility of replacing resources expands the boundaries of further development of the potential of the socio-economic system. it is noted that the limitation of resources at the moment do not contradict the objective possibility of their increase in the future or the expansion of interchangeability of resources in meeting those or other needs (goncharov, 2009; zaharchenko, 2012; kovaleva, 2014; matrosova, 2009; solokha, 2011). in our opinion, the solution to the problem should be sought in a skilful combination of cost and natural indicators of evaluation, creating a reliable mechanism of influence at the ses regional level in order to increase the efficiency of the use of production resources. the multidisciplinary nature of the economy indicates the need to use the relative interchangeability of the main types of productive resources in order to manage them most effectively within the enterprise, industry, and region. the quantitative measure of interchangeability of resources can be determined by establishing the functional dependence of their influence on the efficiency of production. mathematical apparatus for baltic journal of economic studies 241 vol. 4, no. 2, 2018 the translation of multi-dimensional quantities in a comparable view is developed on the basis of existing modifications of production functions. the estimation of interchangeability of resources is carried out using a system of indicators, each of which has a double positive load in analytical comparisons. while indicators with the stand-alone mode of operation contain features that reflect the essence of a particular problem, from the positions of complex analysis they are simultaneously subordinate and applicable to determine the level of comparability of ses resources. the duality of the load inherent in this system of indicators is to use functional properties of the potential both for the selfassessment of the determined and for the quantification of the substitution of resources. 6. modelling of the control system of the potential of the ses of the region the principle of interchangeability of the components of the aggregate potential of ses involves the ability to achieve a balanced equilibrium of potentials for resource sources ( xi ) (solokha, 2011). the principle of interchangeability of the components of the aggregate potential of ses involves the ability to achieve a balanced equilibrium of potential for resource sources (xi ) (solokha, 2011). this means that with growth, for example x1 , by reducing x2 , interchangeability will be optimal in the case when the production process uses more efficient ones. another feature of interchangeability �xi is inductance, which is manifested in the fact that the replacement of one element in many cases creates the possibility for a number of other substitutions, or even makes them necessary. the determination of the interchangeability of potentials by resource sources is based on the ideas of boundary analysis. consider the production function y f x x= ( )1 2,, , where – y the volume of production of ses, which in some way depends on the potential for two sources of resources x1 and �x2 . (denysenko, 2008). this approach allows, on the one hand, constructing the curves of the interchangeability of potentials by resource sources, and on the other hand, organizing and ranking the levels of use xi for their advantage in terms of maximizing production volumes. partial derivative functions f on xi are called the marginal profitability of potentials by resource sources and determined by: f f x f f x 1 1 2 2 = ∂ ∂ = ∂ ∂ . (1) at the same time, the direct quantitative description of proportions of the replacement of a limited volume of potentials gives the marginal rate of their substitution: q x x f f = ∂ ∂ =2 1 1 2 . (2) in many practical cases, the productivity of differently effective potentials, drawn in a consistent manner in the production process for its additional release, decreases. in this regard, there is a tendency to increase the marginal rate of interchange, which means that with the growth of the level of one resource source x1 compared with the x2 replacement of a unit x2 requires a larger size of x1 . the production of products with the presence of interchangeable potentials for resource sources is characterized by a function that models production as a surplus of degrees of spending resources of the і kind in the volume xi : y a xi ai= ∏ , (3) where а and ai – function parameters. in ensuring the production of products requires the mandatory participation of the totality of xi, that is y>0, will only in the case if xi > 0 for all i=1.2….. thus if ai i n = ∑ < 1 1 then y characterized as decaying efficiency of production with increasing the level of use of x i, but if ai i n = ∑ = 1 1 then the efficiency remains constant, and ai i n = ∑ > 1 1 corresponds to increasing efficiency of successive costs. the production of products is often characterized by the impossibility of replacing of x1 with x2 through the valuation of resources, legal restrictions, etc. for example, in excess of the fleet of cars and the shortage of worker-drivers, there is no possibility of replacing a part of the machines with the corresponding wage fund and material incentives. therefore, production is carried out in two ways: zero replacement elasticity of xi ; with non-zero replacement elasticity of xi . provided the zero replacement elasticity of xi let the production is determined by the potential of the ses in accordance with the production function of the type “cost-issue”, so if the potential of the ses is defined as x x xn= ( )1,..., then can be produced y x a x a n n =      min ,..., 1 1 units of products. if the volume of production can only be discrete, then y e x a e x a n n =      min ,..., 1 1 where e x( ) – the whole part of x. determination of ses potential unit (r), as a set of minimum quantities of individual potentials for resource sources, which allows getting a unit of production, in this case, is especially simple r r r a an n= ( ) = ( )1 1,..., ,..., . at the same time, r corresponds to such many separate ones xi , for which ∀ =i n1,..., x ai i= . if ∃i , that is x ai i> and ∃ j , that is x ai i= , then as before, only one unit of output will be produced, and the potential baltic journal of economic studies 242 vol. 4, no. 2, 2018 will not be isolated at the same time. in this case, it will contain an incomplete part that cannot be used directly to achieve the purpose of the system. and in the general case, with the impossibility of replacement, the potential ses r can always be represented, in the form: r nr r= + ∆ (4) where n – number of units of ses potential; ∆r – incomplete part of the potential of ses. investigate the situation when the production function of the system f x( ) is characterized by a nonzero elasticity of substitution and homogeneity of the first order. to illustrate, we use the cobb-douglas function and the production function with “constant elasticity of the substitution.” in this case, each point of the surface f x xn1 1,...,( ) = is minimal in pareto and, therefore, can be taken as a unit of ses potential. to select any one point and to compare different sets of xi , the additional criteria and restrictions must be used. 1. often, technological constraints on the replacement of types of resources dictate the relation between the elements of the ses potential. these relations give us no limits to select a single point on the surface f x xn1 1,...,( ) = . let the relationships look like this: x x x k k kn n1 2 1 2÷ ÷ ÷ = ÷ ÷ ÷... ... , (5) where k k kn1 2, ,..., – the indicated values. modify these relationships in the form of (n – 1) equations and attach to them the equation of the surface: x x k k x x k k x x k k f x x n n n n n n n n n 1 1 2 2 1 1 1 1 = = = ( ) =           − − ... ,...,      (6) so, f x k k x k k x k kn n n n n n n 1 1 1 1 1, ..., ,− −       = . let us use now homogeneity (in this case, the first order) of the function f x( ) , then we get x k f k k kn n n1 2 1, ,...,( ) = ; (7) from here x r k f k k x r k f k kn n n n n 1 1 1 1 1 = = ( ) = = ( ),.., ,..., ,.., . (8) 2. if any restrictions on the values of elements of the unit of potential of the ses of the resource are not specified at all or if the restrictions are given but do not emit a single point on the surface f x( ) = 1 , then there is a need to formulate some optimality criterion and, in accordance with it, make a choice, for example, the minimum size xi of the total unit cost of ses potential. the simplest task of determining xi the unit of ses potential of the minimum cost can be written as follows: c x c x c xn n1 1 2 2+ + + →... min (9) provided that f x xn1 1,...,( ) = . (10) the requirement of nonconformity xi is not obligatory, because on a single surface, only points with positive coordinates lie. the optimal set is the solution of the system of equations: ∀ = ∂ ∂ = = ∑ i n f x c c xi i k k k n 1 1 ,..., . (11) let us give concrete examples of solutions of this system (table 1). suppose we have some set of potentials for resource sources r r rn= ( )1,..., , and the production function of the system has the form y f x xn= ( )1,..., , then in order to determine the number of units of available ses potential, it is necessary to find f r( ) . if f r n( ) = then the value n will give (if not a whole issue) the number of units of ses potential and its unit can be represented as: r n r r n r n n= =       1 1 ,..., . (12) table 1 determination of components of the unit potential of the ses functions criteria and restrictions decision cobb-douglas function f x a xi a i n i( ) = = ∏0 1 ∀ = ≥ = = ∑ i n i i i n 1 1 1 1 ,..., , α α x r c f c c i i i i n n = = ( ) α α α1 1,..., function with “constant elasticity of replacement” f x x an a xi i i n 1 0 1 21,...,( ) = − = ∑       − α a i n ai 0 0 1 0 1 ≥ ∀ = ≥ > − , ,..., , , α x r a c f a c a c i i i i n n = = ( ) ( ) ( )       + + + 1 1 1 1 1 1 1 1 α α α ,..., i n= 1,..., baltic journal of economic studies 243 vol. 4, no. 2, 2018 in turn, f r n ( ) = 1 , f r( ) = 1 . in determining the number of units of socio-economic system potential, two cases are admissible: 1) the number of units can only be integral, and the production function involves the replacement. in this case, actually produced e n( ) units of production per unit of ses potential can be selected: r k r= 1 , (13) where n k n 2 < > . in this case, f r k ( ) = 1 , f r n k ( ) = , and e n k       = 1 , with mandatory condition 1 2≤ <n k . this suggests that the choice of any value of k only one product unit will be produced. 2) per unit of potential сес r r rn= ( )1,..., selected single (for example, the least cost) set of potentials by the resource sources represented by the dot of the surface of a single issue. let us have a set of potentials for resource sources r r rn= ( )1,..., , moreover, f r n( ) = . then the point 1 n r will lie on the surface of a single issue and formally meet all the requirements for the unit of ses potential. if c c cn= ( )1,..., – the vector of prices of units of each type of potentials by resource sources, then from the optimality of the set r the solution of the problem is the existence of a vector x x xn= ( )1,..., , which is the solution to the problem f x( ) → max provided c x c x n c r c rn n n n1 1 1 1 1 + + = + +( )... ... that it can be achieved release f x( ) 1 , if ∃i , that is r n ri i↑ 1 . this means that at the same price can be acquired a set of potentials from resource sources, which provides a larger amount of output than the given set. the considered case shows that if the level of r r rn= ( ,..., )1 such that f r n( ) = and, in addition, ∃i , r n ri i= 1 , then in the set r contains more than n of ses potential units (optimal by value or by any other criterion). thus, the proposed approach of interchangeability of resources made it possible to determine the variants of potential levels in the production of a certain amount of production, in order to manoeuvre the resources in the ses, which will ensure effective management of the potential in general. 7. conclusions it is determined that the methodology of modelling the resource provision of efficient management of the innovative potential of the ses of the regional level is the methods of system analysis and forecasting, the possibility of representing all processes occurring in the industrial sphere as a subsystem of economic development. this became possible due to the improvement of the apparatus of economicmathematical modelling and its use in the modelling of complex ses. it is proved that each ses in the course of its development can increase the production of the corresponding products in two ways – either by increasing the quantitative indicators of its potential (extensive way of development) or increasing the level of potential at the expense of qualitative indicators (an intensive way of development). existing general definitions of the level of development of ses cannot be used to control the development of systems since they only capture the actual state of their development. in modern conditions, such a calculation model is needed that would allow determining the levels of development of the corresponding systems at any given time. the proposed economic-mathematical toolkit, which will determine the significance of the development of the innovative potential of the ses at the regional level at any given time, which, in turn, can be used to increase the effectiveness of planning and management of the socio-economic development of the region. it is determined that effective management of the development of the innovative potential of regional ses is carried out with the help of information support, which helps to obtain the synergy effect taking into account the following features: the complexity of the use of resources; complementarity of resources; interchangeability of resources. in connection with this, an interchangeability of resources has been proposed, which allows determining the variants of potential levels in the production of a certain volume of production in order to manoeuvre the resources in regional ses, which will ensure effective management of potential, in general, and innovative potential, in particular. further research should focus primarily on the approbation of the proposed mathematical toolkit as a methodological basis for improving the management efficiency of the innovative potential of the ses of the region on specific statistical data and actual results of management. secondly, on the construction of an economics and mathematical multivariate model, with which one can assess the level of efficiency of the existing ses potential of the region at each specific moment of time, identify reserves and replace certain components of the resource potential in order to provide innovative development of the regions in the long-term perspective. baltic journal of economic studies 244 vol. 4, no. 2, 2018 references: balabanov, i.t. (2000). innovation management. st.petersburg. russia: piter [in russian] butnyk, o.o. (2011). foreign experience of formation and development the state investment policy at the regional level. kyiv.ukraine [in ukrainian] goncharov, v.m., derechynskiy, u.n. … bieliakova, o.v. (2009). formation of organizational mechanism of the system of innovative development of enterprises of the region. donetsk. ukraine: kupriianov [in ukrainian]. denysenko, m.p., myhailova, l.i. … grechan, a.p. (2008). investment and innovation activity: theory, practice, experience. sumy. ukraine: university book [in ukrainian] economic encyclopedia. (2000). (vols.1-3). kyiv.ukraine. zaharchenko, v.i. (2012). innovation management: theory and practice in conditions of economy transformation. kyiv. ukraine: center for educational literature [in ukrainian] zaharchenko, v.i. (2004). transformation processes in industrial territorial systems of ukraine. vinnytsia. ukraine: gipanis [in ukrainian] zang, v.b. (1999). synergetic economy. time and changes in nonlinear economic theory. moscow. russia: world [in russian] kovalova, m.l. (2014). territorial organization of the forest industry of ukraine: regional aspect. donetsk. ukraine: dmytrenko [in ukrainian] kovalova, m.l. & batchenko, l.v. (2011). furniture market in ukraine and its interaction with the world market. donetsk. ukraine: donsum [in ukrainian] matrosova, l.v., ovechkina, o.a., ivanova, k.v., solokha, d.v. (2009). management of the development of innovative potential of regions in the transitional economy of ukraine. donetsk. ukraine: donbass [in ukrainian] solokha, d.v., bandyra, m.v., savchenko, m.v., moreva, v.v.(2011). methodological bases of management of sustainable innovation development of potential of socio-economic systems of the region. donetsk. ukraine: noulidzh [in ukrainian] solokha, d.v. (2007). innovative development as a guarantee of economic growth. donetsk. ukraine [in ukrainian] baltic journal of economic studies 217 vol. 4, no. 4, 2018 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: melnikknteu998@gmail.com 2 kyiv national university of trade and economics, ukraine. e-mail: kalujnaya.natalya@gmail.com 3 kyiv national university of trade and economics, ukraine. e-mail: kpugachevska@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-217-222 a gravity model of trade turnover bet ween ukraine and the eu tetyana melnyk1, nataliya kalyuzhna2, kateryna pugachevska3 abstract. determining the conditions for further liberalization and the reality of long-term and effective trade and economic cooperation of ukraine with the eu countries requires assessing the strength and probability of the influence of institutional factors. the possibility of taking into account the significance of institutional factors in the development of foreign trade relations creates a gravity modelling. determination of gravitational principles of foreign trade actualizes the problem of developing the gravity model, which takes into account impact of institutional factors, contains the necessary and sufficient number of factors, and may be tested for adequacy based on statistical data. the purpose of the paper is to construct the gravity model taking into account the institutional conditions of trade and its empirical verification on the example of trade turnover between ukraine and the eu. methodology. methods of statistical analysis and econometric modelling were used for constructing the gravity model, estimating its statistical significance and predictive ability. in the article, the necessity of taking into account the influence of institutional factors on the formation of the competitive status of the country in the sphere of international trade is substantiated. it is proved that, in conditions of increasing the contradictory nature of trade relations, the role of institutional gravity factors in foreign trade between states increases. the result of the article is the gravity model with such explanatory factors, as the gross domestic product of trade partners in purchasing power parity and the complex characteristic of “trade distance” between countries as an indicator of the influence of institutional factors on foreign trade relations. as a conclusion, it may be noted that the model is statistically significant, adequately describes the input data. the proposed model takes into account the presence of institutional factors of foreign trade, whose influence on the interstate trade and economic cooperation conditions is constantly increasing. value/originality. the proposed results can be used for modelling and forecasting of foreign trade between trading partners, taking into account the impact of specific institutional factors on their foreign trade relations. key words: foreign trade, liberalization, european union, institutional factors, gravity model, export promotion. jel classification: f12, f41, f47 1. introduction an important aspect of the present is to determine the integration vector of ukraine’s development, taking into account the peculiarities of the national economy and the possibilities of realizing its potential as a part of modern integration associations. currently, the problems of developing the ukrainian economy in the framework of european integration processes are at the centre of attention of many domestic scholars. ukraine’s progress on the path to european integration was affected by the implementation of the association agreement and, consequently, the liberalization of the trade regime with the eu in terms of administering the origin of goods and tariff regulators. at the same time, an attention should be paid to the presence of restraining institutional factors of bilateral foreign trade, which have been caused by rapid geopolitical transformations in the european and post-soviet space. under current conditions, the liberalization of foreign trade is increasingly determined not by economic expediency but by institutional factors for the development of bilateral relations between the countries. the determination of the possibilities, conditions, and reality of long-term and effective trade and economic cooperation of ukraine with the eu countries requires assessing the strength and probability of the influence of institutional factors on the course of foreign trade processes. the possibility of taking into account the significance of institutional factors in the development of foreign baltic journal of economic studies 218 vol. 4, no. 4, 2018 trade relations creates a gravity modelling. forming an adequate gravity model contributes to understanding the mechanisms and restrictions on foreign trade between partner countries, identifying factors that affect the volume and direction of trade flows. the increasing importance of institutional factors in the development of foreign trade makes it necessary to consider them in the construction of the gravity model. at the same time, it is important not overburdening the model by a large number of factors, which usually leads to its statistical insignificance. thus, there is a problem of constructing the gravity model, which takes into account the impact of institutional factors on foreign trade relations and contains the necessary and sufficient number of factors. 2. determinants of constructing gravitational models of external trade first gravity equation of foreign trade was formalized and empirically confirmed by j. tinbergen (tinbergen, 1966). since then, a large number of gravity model specifications have been proposed. these specifications differ by a set of qualitative and quantitative factors of influence on foreign trade that should be taken into consideration. the most widely used gravity model specifications belong to h. linnemann (linnemann, 1967), j. mccallum (mccallum, 1995), s. baier & j. bergstrand (baier & bergstrand, 2009). these models were further developed and nowadays serve as the basis for the formation by many domestic researchers of their own gravitational equations, as well as for testing hypotheses as for the prospects of mutual trade between certain countries (konchyn et al, 2012; nasadiuk, 2012; poliakova & shlykova, 2014). in order to form their own gravity models, authors either follow the classic model shapes with a minimal number of gravity variables (korovaichenko & shevchenko, 2015) including 1-3 dummies (nasadiuk, 2012) or tend to maximize the number of factors in equations (konchyn et al, 2012). the sharp increase in the significance of institutional factors in the development of the world economic system leads to the fact that researchers are trying to take into account the impact on foreign trade flows of various qualitative parameters. essentially, the authors adhere primarily not to inductive but to deductive research methods. that is, there is a search with result known in advance, which later gets the econometric rationale, and expands understanding of the sources, perspectives, and limitations of foreign trade between countries. the logic of building a gravity model of foreign trade is based on the idea of newtonian gravity. namely, the force of attraction between the objects is directly proportional to their masses and inversely proportional to the square of the distance between them. in the context of describing the interaction of economic agents (in particular, their bilateral trade), this idea is transformed into the following: the force of interaction between economic subjects (integration entities, countries, regions, etc.) is directly proportional to the product of their importance indicators (economic potential) and inversely proportional to their mutual remoteness. a gravity model of foreign trade traditionally is presented in a multiplicative form. transformation of the model from multiplicative to log-linear form makes possible to apply multiple regression analysis methods. standard gravity explanatory variables, such as the economic significance of the objects and the distance between them, are presented both in classic and modern specifications of the gravity model. usually, the gross domestic product (gdp) indicator measures the significance of objects in the gravity model. the approach to using gdp as a basic gravitation variable is followed by a majority of both foreign (tinbergen, 1966; linnemann, 1967; mccallum, 1995; baier & bergstrand, 2009) and domestic (nasadiuk, 2012; poliakova & shlykova, 2014; podorozhnii et al, 2018) researchers. it is also possible to include other factors that determine economic strength of countries into gravity model, such as gross income (mccallum, 1995), population (tinbergen, 1966), or modifications of gross domestic product by calculation method gdp per capita (konchyn et al, 2012), gdp calculated in international dollars (korovaichenko & shevchenko, 2015). in our opinion, it is reasonable to use the gross domestic product based on purchasing-power-parity (ppp) as a basic gravitational explanatory variable. this macroeconomic indicator calculated in international dollars reflects differences in costs of living in different countries and, therefore, is quite an accurate description of the economic development and economic growth of a particular country. the distance between partners, usually interpreted as a geographical remoteness of their main economic centres (capitals), is another classic explanatory variable in gravity models of foreign trade. clearly, transport costs affect foreign trade between partner countries, increasing or decreasing (depending on distance) their mutual turnover. in our view, it is reasonable to separate transportation costs arising from the geographical remoteness and those associated with other factors: the presence of trade barriers, bureaucratic obstacles, lack of adequate commercial infrastructure, high-risk economic activity, changes in the foreign policy of countries, etc. the impact of these indirect factors on bilateral trade in some cases can exceed the importance of geographical distance. in particular, the current state of ukrainian-russian trade relations confirms that under actual geopolitical conditions, the geographical proximity is not a premise for a large volume of bilateral trade. conversely, a beneficial foreign economic cooperation with geographically distant countries that are members of baltic journal of economic studies 219 vol. 4, no. 4, 2018 international integration entities with common political and security and/or economic goals (eu, cis, nato, brics, etc.) may be expected. in this connection, it should also be pointed out that the tendency of protectionism and antiglobalism in the foreign policy of the world leaders is spreading nowadays. the active applying of economic pressure methods in international trade suggests that the intensity of the tension in foreign trade relations between the states-leaders of the world will tend to increase from contradictory situations in bilateral trade to the stage of trade and economic wars. under such conditions, the priority in the formation of bilateral foreign trade relations between the states will be institutional factors, which confirms the necessity to consider them when constructing gravity models of foreign trade. 3. survey methodology it seems appropriate to define as a basic gravitational variable the complex characteristic of “trade distance” between partner countries with an expected significant negative coefficient. it is reasonable to use the yearly average oil price as a quantitative equivalent of “trade distance”. the appropriate approach is realized, particularly by korovaichenko, n. & shevchenko, l. (korovaichenko & shevchenko, 2015) in modelling bilateral trade between germany and ukraine assuming that transport costs depend on fluctuations in oil prices. we think that the explanatory potential of the idea of using yearly oil prices as an indicator of “trade distance” between countries is much broader. indeed, fluctuations in oil prices obviously affect the cost of international transporting. in this sense, oil price is a factor of direct impact on the value of “trade-distance”. first, transport costs are proportionate to geographical remoteness of partner countries (static component), and secondly, the cost of traffic changes due to fluctuations in oil prices (dynamic component). on the other hand, the oil price can be considered as the factor of indirect impact on trade relations between partner countries, to be exact – an indicator of dynamics of institutional conditions of international and bilateral trade. based on the above, it is possible to offer the gravity model equation for foreign trade in goods between the two countries as follows: e y y dij i j ij ij= α η α α α 0 1 2 3 , (1) where e – bilateral turnover between countries; y1, y2 – gross domestic products of countries in purchasing power parity (gdp in ppp); d – a complex characteristic of “trade distance” between countries, which quantitatively is equalled to yearly average oil price; α α α α0 1 2 3, , , – estimated model parameters; η – the random term of the equation. the gravity model of trade turnover between ukraine and the eu may be suggested based on proposed factors. the source data for the multiple regression model are as follows: gross domestic product of partners in purchasing power parity (international monetary fund, 2017), mutual trade turnover between the partners (state statistics service of ukraine, 2017), and yearly average price for brent crude (indexmundi, 2017) in the 1996-2017 period. the multiple regression equation can be constructed using logarithmic variables: ln ln ln ln ln lne y y d= + + + +α α α α η0 1 1 2 2 3 (2) the following notations are proposed: y e x y x y x d= = = =ln , ln , ln , ln1 1 2 2 3 (3) in order to assess the validity of including the factors in the gravity model, it is necessary to determine a correlation between them (table 1). table 1 the matrix of intercorrelations for the model x1 x2 x3 y x1 1 0,936 0,944 0,988 x2 0,936 1 0,852 0,923 x3 0,944 0,852 1 0,953 y 0,988 0,923 0,953 1 there is a strong positive correlation both between factors and result, as well as between factors, as shown in table 1. there are standard approaches to overcome correlations between factors, such as exclusion from the model of one or more factors; transition to combined regression equations that take into account intercorrelations; a combination of both aforementioned approaches. typically, several statistically significant models can be built based on input data. the process of selecting the optimal model can be formalized using information criteria. the most popular information criteria are the akaike criterion (aic) and the schwartz criterion (bic), defined as: aic l p bic l n p = − + = − + 2 2 2 ln ln ln ( ) ( ) ( ) (4) where ln (l) – log-likelihood function value; p – the number of assessed model parameters, including estimated variance; n – the number of observations. the information criteria value decrease with increasing likelihood function value and increase with increasing number of model factors. the model with lower criteria value is considered as preferable, i.e. the one with higher likelihood function value and lower number of model factors. the introduction of new model factors is justified if it leads to a marked increase in the likelihood function value. the criteria aic and bic differ only way to take into account a complexity of the model (the second term on the right of expression (4)). usually log(n)>2, meaning the criterion bic selects a simpler (more economical) model. aic l p bic l n p = − + = − + 2 2 2 ln ln ln ( ) ( ) ( ) baltic journal of economic studies 220 vol. 4, no. 4, 2018 the coefficients of determination and information criteria for 64 models that take into account all the possible interactions between factors x1, x2, x3 were calculated. the expediency of calculating the adjusted coefficient of determination occurs due to comparability of the number of factors in the model and number of observations (n = 22). table 2 presents the results of calculating the coefficients of determination for models with the highest values of the criteria aic and bic. the minimum value both information criteria take for a set of factors {x3, x1x3}, as shown in the table. at the same time, the values of coefficients of determination for the first six models are nearly identical and high enough. so the model with a set of factors {x3, x1x3} should be considered as optimal one. this model takes into account the effect of the first order interaction between factors x1 and x3 and may be presented in a general form: y c c x c x x= + +0 1 3 2 1 3 (5) the chosen model is consistent with the principle of efficiency, contains minimum sufficient number of factors, and does not include factor x2 in the pure form. as shown in table 1, there is a strong correlation between model factors. therefore, the influence of factor x2 on the target is taken into account through intercorrelations. the model parameters can be determined using the least square method. the combined regression equation is: y x x x= − +2 84607 3 27341 0 5833 1 3. . . (6) we estimate the statistical significance of regression equation parameters using the student’s t-test. in table 3, p-value is the probability that the t-statistic is higher than the resulting value. if p value−  0 05. , the hypothesis about statistical insignificance of regression equation parameter can be discarded. as one can see, this requirement is satisfied for all the three parameters, which means they are significantly different from zero. the statistical significance of the multiple regression equation generally is measured using the fisher test. in table 4, p-value is the probability that the f-statistic is higher than the resulting value. if p value−  0 05. , the hypothesis concerning statistical insignificance regression equation can be discarded. a low p-value indicates a statistically significant model. 4. findings figure 1 plots the visual confirmation of the statistical significance of the regression equation comparing the output data with model predictions. as shown in figure 1, the actual values of mutual trade turnover between ukraine and the eu for the 1996-2017 are sufficiently consistent with the model predictions in the respective years. thus, we can conclude that the proposed specification of gravity equation of foreign trade between ukraine and the eu is statistically significant, adequately describes the source data, and can be used for modelling and forecasting of foreign relations between partners. table 2 results of calculating the coefficients of determination and information criteria for selected models model coefficient of determination adjusted coefficient of determination aic criterion bic criterion {x3, x1x3} 0,988505 0,987295 -47,0553 -42,6911 {x1, x2, x3, x2x3} 0,990532 0,988304 -47,3227 -40,7765 {x3, x1x3, x2x3} 0,989062 0,987239 -46,1485 -40,6933 {x3, x1х2, x1x3} 0,989017 0,987187 -46,0584 -40,6032 {x2, x3, x1x3} 0,988970 0,987131 -45,9631 -40,5079 {x1, x3, x1x3} 0,988643 0,986751 -45,3219 -39,8667 table 3 statistical estimation of significance of parameter regression equation parameter parameter estimation standard error t-statistics probability level p-value с0 2,84607 0,301144 9,45086 1,2969x10-8 с1 -3,27341 0,363694 -9,00046 2,79055x10-8 с2 0,583399 0,050393 11,577 4,73833x10-10 table 4 variance table for the multiple regression equation variance number of freedom degrees sum of squares of deviations sum of the squares of deviations per one degree of freedom f-statistic probability level p-value factorial 2 9,06952 4,53476 816,934 3,75749x10-19 residual 19 0,105468 0,00555095 total 21 9,17499 baltic journal of economic studies 221 vol. 4, no. 4, 2018 in order to test the predictive power of the model, we forecast trade turnover between ukraine and the eu in 2018, which can reach $34.4 billion provided that the trend of the first quarter continues. according to the international monetary fund [9], the predictive value of ukraine’s gdp in ppp in 2018 is $386.393 billion; the average brent oil price for the year is expected near $68.3 per barrel. according to the proposed gravity model, the point forecast turnover between ukraine and the eu in 2018 is equal to $40.4 billion, which is 5.37% higher than its actual value in 2017. note that the point forecast of trade turnover is probabilistic; its value will be corrected in accordance with the final results of 2018. an interval forecast provides a more complete picture about predictive ability of the model, according to which the trade turnover between ukraine and the eu in 2018 will be in the range from $34.2 to $47.8 billion with a probability of 95%, and will be in the range from $37.3 to $43.7 billion with a probability of 67% (standard error). figure 2 presents the actual trade turnover between ukraine and the eu and its interval forecast for the 2018 year with a probability of 67%. obviously, the predictive ability of the model is at the appropriate level, and the expected value of trade between ukraine and the eu in 2018 ($40.4 billion) belongs to the calculated confidence interval. 5. conclusions summarizing the experience of gravity modelling of trade relations allowed proposing the gravity model of foreign trade with such basic explanatory variables: the gross domestic product of the trade partners in purchasing power parity with expected positive significant impact; the complex characteristic of “trade distance” between the countries, which quantitatively is equalled to yearly average oil price. the proposed model takes into account the presence of institutional factors of foreign trade, whose influence on the interstate trade and economic cooperation conditions is constantly increasing. based on proposed factors, the gravity model of trade turnover between ukraine and the eu has been built. the specification of gravity model has been realized using information criteria. it has been confirmed that the model is statistically significant, adequately describes the input data, and can be used for modelling and forecasting of foreign trade between other partners, taking into account the impact of specific institutional factors on their foreign trade relations. t ur no ve r, $ bi lli on years t ur no ve r, $ bi lli on years figure 1. comparison of actual turnover between ukraine and the eu with model predictions figure 2. actual trade turnover between ukraine and the eu and interval forecast for 2018 (with a probability of 67%) references: baier, s., & bergstrand, j. (2009). bonus vetus ols: a simple method for approximating international trade-cost effects. journal of international economics, 77(1), 77-85. (in english) international monetary fund. (n.d.) imf.org. retrieved from: http://www.imf.org/external/index.htm (in english) indexmundi. (n.d.) indexmundi.com. retrieved from: http://www.indexmundi.com/commodities/?commodity= crude-oil-brent (in english) konchyn, v., lozhachevska, a. (2012). zony vilnoi torhivli ta multyhravitatsiina rehionalna torhovelna model ukrainy: perspektyvy rozvytku [free trade and ukraine’s multi gravity regional trade model: development prospects]. stratehiia rozvytku ukrainy, 2, 85-106. (in ukrainian) korovaichenko, n., shevchenko, l. (2015). vplyv vnutrishnikh ta zovnishnikh shokiv na rozvytok torhivli ukrainy z frn [the impact of domestic and external shocks on trade between ukraine and germany]. zovnishnia torhivlia: ekonomika, finansy, pravo, 3(80), 81-89. (in ukrainian) linnemann, н. 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(2014). modeliuvannia zmin zovnishnotorhovelnykh zviazkiv u konteksti rozshyrennia yevropeiskoho soiuzu [simulation changes of trade relations in the context of eu enlargement]. problemy ekonomiky, 1, 330-336 (in ukrainian) podorozhnii, y., boldizhar, s. & sofilkanuch, o. (2018). formation of european integration development strategy of ukraine, baltic journal of economic studies, 4(1), 283-292. (in english) pryhodko, i. (2017). theories of spatial economics in terms of economic integration, baltic journal of economic studies, 3(5), 376-382. (in english) tinbergen, j. (1966). shaping the world economy: suggestions for an international economic policy. the economic journal, 76(301), 92-95. retrieved from: http://www.jstor.org/stable/2229041 (in english) baltic journal of economic studies 105 vol. 4, no. 5, 2018 corresponding author: 1 odesa institute of trade and economics of kyiv national university of trade and economics, ukraine e-mail: victor-koval@ukr.net 2 zaporizhzhia national technical university, ukraine e-mail: yuriy.brikrio@gmail.com 3 zaporizhzhia national technical university, ukraine e-mail: bezkhlibna22@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-105-113 communicative competences in enhancing of regional competitiveness in the labour market viktor koval1, yuriy polyezhayev2, anastasiia bezkhlibna3 abstract. the characteristic of the regional labour market requires the usage of modern aspects for the key factors’ analysis of labour cost increase. the high rate of migration, covering ukraine in recent years, is influencing negatively on the labour market structure. it is necessary to remark among positive features that the demand increasing for highly intellectual staff, skilful in communication in foreign languages and building up social relations is of great importance. the subject of scientific research defines communicative competences as the key factors of human capital, which promotes the increase in competitiveness of an individual in the labour market and, as a result, an increase of the regional competitiveness. the aim of the research is to establish the dependency between the level of communicative competence and competitiveness in the labour market studying communicative competence factors in terms of the theory of human capital, the determination of the conformity between the requirements to human capital and the conformity of the investigated factors to these requirements. communicative competencies are a set of skills, which allows labour market entity distinctly expressing and applying the business format of communication. the practical use of oratory allows negotiating with foreign counterparties, putting into practice the etiquette of business communication, and competently solving the complicated situations. the research of existing requirements to communicative competence defined the levels of qualification, which ensure the development of new kinds of activities. it defined the position of ukraine in professional communicative competence in the world rating. the research was to carry out of rating assessment of the economic situation in regions according to economic indicators, which can be changed under the influence of a factor of the communicative contractors’ competence (average monthly-paid salary per an employee, export, and import of goods in the region, turnover of retail trade). the methodology of the research is based on the research of the role of human capital factors in increasing the cost of labour on the basis of the statistical method and analysing data of the labour market economic indicators, and in substantiating the relationship between the level of professional communicative competence in the country and its social and economic indicators. value/originality. the methods of analysis and synthesis allowed revealing regularities and formulating recommendations for improving the competitiveness of the regional labour market by inducing the development of communicative competences and raising the index of human capital of the country in a whole. positive dynamics of import and export, business activity, direct foreign investment and overall trade turnover indicators will be immediately reflected in a whole at the regional level and at the level of the country. life expectancy of the population, the level of education and culture, the criminal situation decreasing will be approved by the social indicators. key words: european integration, foreign language, human capital, rating, international trade, export, import. jel classification: f02, f15, i25, o11, o25 1. introduction currently, the importance of the research of communicative competencies is gaining significant relevance under the conditions of transnational corporation activities. most of the foreign researches about the influence of individuals’ communicative competencies on the country’s economy involve economic and social integration of immigrants. hence, in accordance with the same principle, it is possible to characterize the positive influence of salary increase among the citizen of the state in the national and regional market. any profession imposes its baltic journal of economic studies 106 vol. 4, no. 5, 2018 requirements on a specialist, especially if it concerns highly professions. one of such requirements is the ability to solve the professional tasks with the help of correct, competent, and skilful speech. characteristics of the labour market of eastern european countries including ukrainian, considering the influence of the communicative skill’s factor on the cost of labour, is of considerable interest from the point of view as an employer and as an applicant. on one hand, it effects on the competitiveness of an individual in the labour market, judging from the point of an applicant, and on the other hand, it has an influence on the competitiveness of the labour market institutions in the struggle for welleducated and skilful labour resources, judging from the position of the employer. considering the phenomenon of competitiveness, it must be noted that this category must be accepted through the prism of the factors, which determine it. during the decades, ukrainian and foreign scientists have developed methods, which are based on different approaches in order to identify key factors of competitiveness. interdisciplinary research is now becoming increasingly relevant; it is characterized by a symbiosis of economics and philology, studying the communicative competencies of individuals (chiswick, 2008). implementation of the theoretical substantiation empirically allowed establishing a direct relationship between the growth of communicative competences of individuals and economic indicators of economic development. indeed, the ability to be skilful in communicative competencies is considered as an independent form of human capital by foreign scientists. therefore, it is an asset that requires investments and is embodied in a man and it will increase the productivity of the labour market in a whole (chiswick, miller, 1995, 2007; chiswick, 2008). the financial state of living standard of the population has a direct imprint on its quality of life and well-being (evans et. al., 2010). obviously, the low income of the family also restricts the educational rate of investments (nkecchi, 2008). therefore, the development of the communicative competencies, as the impetus for human being development, is limited by the financial budget of the family. therefore, in this situation, it is necessary to mention the role of the state and the local authorities as the “investors” of the economic development via the population gaining of the necessary communicative competencies, language awareness, and educational programs. concomitant empirical researches show that highly educated individuals are more likely to emigrate and choose countries with higher pay per hour (nkechi, 2008; grogger, hanson, 2011). so the creation of conditions for personal development and provision of a competitive labour market are the most important conditions, which the implementation will reduce migration processes in ukrainian society. meanwhile, the development of communicative competencies increases the efficiency in the labour market and, on the other hand, proficiency in a large number of foreign languages make people more “efficient in the consumption of goods and services” (barry, chiswick, miller, 2014) (in this case, the term is the purchase of goods or services of higher quality at lower prices). the popularization of internet commerce, the use of digital marketing, of course, is impossible without the development of communicative competences. the development of the innovative potential of the region is achieved by the concentration of the educated population as a driving force for the economic development of the region. therefore, the proposed assessment of intangible assets in the region through a methodology based on the assessment of human potential creativity (florida, 2005) suggests that the most competitive regions are those, which population is dominated in specialists with advanced communicative competencies. it is due to some factors. firstly, the dependence of the value of the labour market on the quality of competencies requires further research. secondly, significant immigration processes in eastern european countries relate to highly skilled personnel. thirdly, the european integration processes of the countries of the eastern partnership with an increase in the rate of trade with the countries of the european union and foreign direct investment also depend on these factors. the purpose of the article is to research the influence of the study on the development of communicative competences and on increasing the regional competitiveness of the labour market in the context of european integration processes. 2. the development of communicative competences as a factor of human capital communicative competencies meet three requirements to human capital. firstly, they have features of efficiency. secondly, they are expensive to acquire. thirdly, they are embodied in human activity (schultz, 1962). the indicated properties at the macro level are directly related to the formation of the phenomenon of human capital (figure 1). when considering investments into other forms of human capital, such education and training are likely to be more productive, if they are acquired by communicating in the language of the dissemination of relevant knowledge in the labour market (barry, chiswick, miller, 2014). the presence of the individual communicative competences is one of the hallmarks of his professionalism and the ability to solve his professional tasks. acquiring communicative skills takes place in the individual during his training, gaining his first professional experience. baltic journal of economic studies 107 vol. 4, no. 5, 2018 the demand for highly skilled personnel in the labour market forms the following requirements for the applicants: 1. high level of education (higher education, master’s degree, postgraduate study, doctorate). 2. profession related to the scientific and technical sphere, creativity, art. 3. foreign languages awareness. 4. cultural leisure during non-working hours and at weekends. 5. social and public activity. in its turn, the material stimulation of communicative skills in the population creates the necessity of introducing new wage systems that take into account the knowledge and competencies of the worker and motivate the worker to further acquisition of these skills, so as the popularity of the remuneration system, which is so-called “payment for knowledge”, becomes widespread. according to the principle of employee remuneration for the acquisition of additional skills or knowledge is the fundamental principle of such systems, but it is not definitely the number of hours spent working in order to achieve the goals of the enterprise (the basic principle of the traditional system of remuneration). in this case, it is important for the company’s managers to identify a set of competencies, qualifications, skills that employees will be rewarded for. it must be mention that a set of this knowledge should be changed when the strategic objectives of the enterprise are to be changed too. a person must demonstrate some competencies to be granted by reward. advantages of payment systems for knowledge and competence are likely to orient the workers to acquire new skills, professions, knowledge and they provide an increase in the quality of human resources in the organization, which contributes to its competitiveness increasing. the disadvantages of payment systems for knowledge and competence include the following: they can cause conflicts in the team and besides this; they reward potential but not the result of labour. in addition, the organization’s salary costs become constant and do not depend on the volume of sales. finally, it is a complex and not always an objective process to define employees’ knowledge and competence (gibson, ivancevich, donnelly, 2000). nowadays at large western european enterprises, there is a system of investment into workers in order to acquire communicative skills and knowledge of workers in term of the instruments of individual incentives. in this case, there is a link between the received monetary incentive in the form of wages and the qualifications of the employee, but not the results of labour. this form of individual incentives more often gets the form of non-payment tuition, but a loan that will be cancelled, if after training an employee does not work in a firm for a certain period of time (gibson, ivancevich, donnelly, 2000). the evaluation of the factor of the development of communicative competences at the macro level at the same time gives the opportunity to form a state policy of employment and professional orientation to the state, which the level of education and literacy of the population depends on. wage rates in the labour performance factor in labour market in everyday life and in consumption during travelling migration a wide range of communication in social networks cost of acquiring language skills, the ratio of time/money attendance of educational establishments language courses, language examinations purchasing of books and audio courses time spent by relatives, educators and friends has have alternative economical cost manifestation in person language skills are inseparable from a person and become an intangible asset that provides benefits c om m un ic at iv e co m pe te nc ie s as fa ct or o f h um an ca pi ta l figure 1. clarification of the requirements, which the communicative competences of the human capital factor correspond to source: developed by the authors based on (barry, chiswick, miller, 2014) baltic journal of economic studies 108 vol. 4, no. 5, 2018 market, migration processes, the state of export/ import of goods and services, cultural development, and even demographic situation are given by it. the key factors of the human capital concept are the impact of learning on personal development and career promotion, healthcare, and the discovery of a new factor of production, which called information (schultz, 1962). it should be added that advanced linguistic competences have a positive impact on communication with foreign private and state counterparts, assisting to overcome linguistic, cultural, and psychological barriers in communication. the go global international initiative receives support from the national reform council in studying a foreign language by students and additionally with the direct participation of volunteers from different countries. the development of communicative competences in childhood allows you to teach a leader’s psycho type, to develop critical thinking, to acquire education and experience, and to get rid of linguistic and cultural barriers in communication. 3. analysis of the influence of communicative competences on the level of development of the region and the labour market in general according to the ef efi (education first english proficiency index, 2018) at the beginning of 2018 ukraine ranked the 47th position in the global ranking of foreign language proficiency out of 80 surveyed countries (or 25th out of 27 european countries) in comparison with a low level of ef efi 50, 91. it is ahead of cuba and inferior to bangladesh (the dynamics are reflected in table 1). according to the ef efi study conducted in 70 countries of the world in 2015 (table 2), there is a direct relationship between the levels of english language proficiency. life expectancy, number of researchers per one million permanent residents and % (percentage) of gdp expenditures spent on researches. so the higher the level of knowledge of english language, the higher general social and economic indicators of the country, such as life expectancy, the annual income per capita (i.e. gdp in general), the number of researchers in the country, and the level of spending on researches in the structure of gdp. we also carried out a regression analysis of the dependence of the ef epi (2017) index on the nominal gross domestic product, calculated according to the methodology of the international monetary fund. the linear dependence (figure 1) is defined, which is described by the formula: y = 9,11x + 99,126. thus, we received a positive correlation between the ef epi index and the nominal gdp of the 85 reviewed countries. r2 is equal to 0.2% variation of the dependent variable. although the model depicts a slight positive increase, nevertheless it exists and defines the necessity table 2 dependence between the level of knowledge of english language and individual social and economic indicators, 2015 level of english language proficiency life expectancy, years amount of annual income per capita, usd number of researchers per million people expenditure of gdp allocated to research, % very high (netherlands, sweden, denmark, norway, singapore, finland, luxembourg, south africa) 80 31335 4930 2,3 high (germany, austria, poland, belgium, malaysia, switzerland, philippines, serbia, romania, portugal, hungary, czech republic, slovakia) 78 18318 3047 1,7 middle (bulgaria, greece, lithuania, argentina, dominican republic, india, spain, hong kong, south korea, nigeria, france, italy, vietnam, costa rica) 77 11302 2724 1,4 low (china, japan, russia, indonesia, taiwan, brazil, macao, uruguay, mexico, chile, bangladesh, ukraine, cuba, panama, peru, colombia, pakistan, thailand, guatemala, ecuador, tunisia, united arab emirates) 76 7518 972 0,7 very low (syria, qatar, morocco, sri lanka, turkey, jordan, azerbaijan, iran, egypt, kazakhstan, venezuela, el salvador, oman, mongolia, saudi arabia, angola, kuwait, cameroon, libya, iraq, laos) 73 2646 450 0,3 source: compiled by the author based on data (education first english proficiency index, 2018) table 1 ukraine in the global rating of english language proficiency year place in the rankings among the countries surveyed level of english language proficiency in the country 2013 27 from 60 middle 2014 44 from 63 low 2015 34 from 70 middle 2016 41 from 72 low 2017 47 from 80 low source: compiled by the author based on data (education first english proficiency index, 2018) baltic journal of economic studies 109 vol. 4, no. 5, 2018 for further deeper investigation of the development of communicative skills of the population. if all variables in the model are equal to “0”, the value of the coefficient y = 99,126. that is, the gdp value is influenced by other factors not described in the model (except for the communicative competences of the population). the values of coefficients 9, 11 indicate that the index of knowledge of foreign language has an effect on gdp. the results of indian scientists’ researches (azam, chin, prakash, 2013) show that increasing communicative skills of the population, especially in terms of proficiency in the foreign language (in english), leads to an increase in profits by 45%. as far as turkey is concerned, it has been established (paolo, 2013) that skills in foreign language and the improvement of the communicational skills among citizens of turkey lead to approximately 37% of the “remuneration” of ordinary earnings. these studies were conducted using the statistical method of processing personal data. it should be noted that those, who can speak two foreign languages, communicate a generalized cognitive advantage over monolinguals in the so-called executive functions, associated with the psychological characteristics of the individual: the ability to control attention and task switching, creativity and originality in solving problems (leikin, 2012). communication skills are also heavily related to r&d in business and in the academic world (fidrmuc, 2011). the command staff of scientific centres, speaking foreign languages, can follow new scientific and technical developments, as well as interact with international researchers and institutions in the process of creating new products, methods, and tools. thus, improving knowledge of foreign languages increases the country’s scientific potential, leading to innovations and investments that can contribute to economic growth in the short-term perspective (segerstrom, 2000) and long-term perspective (howitt, 1999). however, the cost of research in ukraine is too low (less than 1% of gdp according to 2017) comparing with developed countries (from 2 to 5% of gdp), which results in a low level of return on assets and productivity (koval, slobodianiuk, yankovyi, 2018). thus, communicative competences can increase individual profits by increasing their own personal productivity via their direct influence. this influence may also be mediated, because communicative competences will open up individuals to access more paid professions, to increase their skills and cognitive skills, and potential performance (paolo, 2013). regarding macroeconomic factors, it is known from the theory of international trade that the general language of communication increases trade flows by about 40% (otten, 2013). in the course of the survey, according to the statistics, a regional rating of ukraine in 2017 was carried out on the basis of indicators of the average monthly-paid wage per employee, export and import of goods, and retail trade turnover. the abovementioned indicators are selected out of all indicators of the social and economic status of the region. in our opinion, they mostly depend on the level of knowledge of foreign languages, spoken by residents of the region. so kyiv, dnipropetrovsk, lviv, donetsk, kharkiv, odesa regions are the most developed regions according to the indicators of average monthly-paid wage, export and import of goods, and retail trade turnover, indicated in statistical data of 2017. these are regions with developed international relations, the highest population density and developed industry. y = 9,11x + 99,12 r² = 0,002 0,00 2000,00 4000,00 6000,00 8000,00 10000,00 12000,00 14000,00 0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00 80,00 china japan india france brazil saudi arabia libya netherlands sweden italy spain germany figure 2. dependence of nominal gdp of countries of the world on the index of ef epi score, 2017 baltic journal of economic studies 110 vol. 4, no. 5, 2018 we also conducted a hierarchical classification method and the k-means data on the number of unemployed, demanded in the labour market; the number of vacancies, supplied in the labour market, and the labour cost based on english language skills, taking into account the allowance for communicative competences, among kinds of economic activity with the help of cluster analysis with application of the software package statistica. the main source data used to calculate statistica with the application of software is shown in table 3. the data, brought to the standardized form, form a hierarchical classification in the euclidean dimension according to the results of the study (figure 3). the fullband method determines the distance between clusters as the largest distance between two different objects in different clusters. according to the results of the hierarchical classification, it is found that for further investigation of the k-means method, it is expedient to use the assertion that this data array forms 4 clusters (four areas are identified, which “touch each other” more closely). the k-means method determines which of clusters types of economic activity are enlisted according to the calculations (table 4). these clusters form similar types of economic activity, in which the professions have similarity in terms of demand, supply, and value of labour in the labour market. in each of the clusters, there are objects with similar influence. the results for cluster characteristics are shown in table 5. table 3 main indicators of the labour market in ukraine, 2017 number of unemployed ‘000 people vacancy rate ї‘000 people salary with a bonus for foreign language competence, uah agriculture 92,1 2,2 15921 industry 53,9 92,4 14314 building 7,8 2,2 14314 wholesale and retail trade; wheeled transport and motorbikes maintenance 48,1 107,6 10576 transport, storage facility, mail service and express delivery service 13,7 5,4 9726 hospitality industry and catering service 6,8 1,4 9861 it and telecommunications industry 4,1 0,4 23673 finance and insurance business 9,1 0,5 12927 real estate services 2,7 0,7 9426 research, academic, and technical activities 6 1,1 11355 activities in the sphere of executive and supportive services 6,4 2 9426 public administration and military defence; compulsory social insurance services 37,1 4,2 29357 education 7,2 2,7 11355 healthcare and social service 10 3,4 16485 art, sport, entertainment and recreation services 1,6 0,5 11797 source: compiled by the author based on data (state statistics service of ukraine, 2018) table 4 distribution of activities by clusters type of economic activity cluster agriculture 1 industry, wholesale and retail trade; wheeled transport and motorbikes maintenance 2 it and telecommunications industry, public administration and military defence; compulsory social insurance services 3 building, transport, storage facility, mail service and express delivery service, hospitality industry and catering service, finance and insurance business, real estate services, research, academic, and technical activities, activities in the sphere of executive and supportive services, education, healthcare and social service, art, sport, entertainment and recreation services 4 for 4 clusters received, standard deviations were calculated for the three indicators used in the study. in figure 4, the average and confidence intervals for the variables in each cluster are graphically depicted. thus, the use of mathematical modelling methods to confirm the hypothesis about the influence of communicative competences on the country’s economy has allowed identifying trends regarding the direct influence of the development of communicative competences on nominal gdp and structuring the labour market into clusters by types of economic activity, identifying 4 clusters using the hierarchical method and k-means method. baltic journal of economic studies 111 vol. 4, no. 5, 2018 figure 3. the result of the hierarchical classification table 5 summary of characteristics of clusters in the labour market in ukraine, 2017 type of economic activity number of unemployed ‘000 people vacancy rate ‘000 people salary with bonuses for foreign language competence in uah case cluster distance agriculture 2,75910344 -0,373075989 0,3333893 1 1 0,00 industry 1,28830032 2,23287039 0,0494394351 2 2 0,24 building -0,486674121 -0,373075989 0,0494394351 3 4 0,27 wholesale and retail trade; wheeled transport and motorbikes maintenance 1,06498467 2,67200991 -0,611048801 4 2 0,24 transport, storage facility, mail service and express delivery service -0,259508194 -0,280625564 -0,76124008 5 4 0,25 hospitality industry and catering service -0,52517682 -0,396188596 -0,737386171 6 4 0,18 it and telecommunications -0,629134109 -0,425079354 1,70313376 7 3 0,47 finance and insurance business -0,436620612 -0,422190278 -0,195637393 8 4 0,14 real estate services -0,683037888 -0,416412127 -0,814248767 9 4 0,25 research, academic, and technical activities -0,55597898 -0,404855823 -0,473402911 10 4 0,04 activities in the sphere of executive and supportive services -0,5405779 -0,378854141 -0,814248767 11 4 0,23 public administration and military defence 0,641454973 -0,315294473 2,70747168 12 3 0,47 education -0,509775741 -0,35863061 -0,473402911 13 4 0,03 healthcare and social service -0,401968182 -0,33840708 0,433045631 14 4 0,50 art, sport, entertainment and recreation services -0,725390857 -0,422190278 -0,395303446 15 4 0,13 source: built by statistica baltic journal of economic studies 112 vol. 4, no. 5, 2018 4. conclusions communicative competences are the factor of human capital, which leads to productivity and competitiveness increasing at micro and macro levels and it ultimately increases the efficiency of an economic entity’s activity at any level, having a synergistic effect of action, it improves the social and economic status of the identity, stimulating the development of professional skills and competencies. it should become one of the main prerogatives of public administration. on the other hand, according to the results of researches of domestic and foreign scientists, it has been established that the acquisition and improvement of communicative competences, especially a combination of them with foreign languages, the applicant increases the cost of his labour in the market and receives more benefits in acquiring professions, which can be embodied in raising earnings in cash equivalents, opportunities for further intellectual development and improvement of personal and professional skills, the possibility of combining several positions and faster career promotion. under the present economic situation, the creation of conditions for the development of professional skills and competencies are of great importance, but also the application of policy, restrictive methods. migration processes that have become active in eastern europe have a negative impact on the formation of a nation’s intellectual fund. one of the reasons for this process is the extremely low labour costs in the labour market comparing to european ones. government and business must work together in order to develop communicative skills of the population, taking into account international experience. their development has a direct impact on the prosperity of the state and its role on the international scene. to do this, it is necessary to develop a strategy for enhancing communicative skills and developing new approaches to linguistic education policy. enterprises should be encouraged to invest into the development of communicative competences of workers through incentive methods, including financial incentives. on the part of educational institutions, schools, and centres, they should plan to use a range of free resources to support the development of communication skills that are accessible locally, through the internet, international cultural centres and institutes, charitable foundations and organizations for international exchange and education. the financial factor is the most important one. therefore, dissemination of the promotion of the necessity to develop professional skills and competencies and to provide the conditions for knowledge acquisition among the poorest layers of the population will allow correct social policy and increase the index of human capital of the country in a whole. at the moment, the development of internet technologies, the process of acquiring knowledge is becoming simpler. creating a methodological basis and a bank of free internet services will give an impetus to non-teaching time education for all segments of the population. further studies in the field of knowledge economy require the development of methodological tools for the formation of remuneration systems of enterprises based on the assessment of the communicative competences of workers. figure 4. graph of average and confidence intervals for variables in each cluster baltic journal of economic studies 113 vol. 4, no. 5, 2018 references: azam, m., chin, a., prakash, n. (2013). the returns to english-language skills in india. economic development and cultural change, 61(2), 335-367. chiswick, b. r ., miller, p. w. (2014). international migration and the economics of language. iza discussion paper series 7880. chiswick, b. r . (2008). the economics of language: an introduction and overview. institute for the study of labour (iza) discussion paper no 3568. chiswick, b. r ., miller, p. w. (1995). the endogeneity between language and earnings: international analyses. journal of labour economics, 13(2), 246-88. chiswick, b. r ., miller, p. w. (2007). the economics of the language: international analyses. london: routledge. di paolo, antonio, aysit tansel (2013). returns to foreign language skills in a developing country: the case of turkey. iza discussion paper series, 7724. education first english proficiency index (2017). level of english. retrieved from: https://www.ef.com/wwru/epi evans, m. d. r ., kelly, j., sikora, j., treiman, d. j. (2010). family scholarly culture and educational success: books and schooling in 27 nations. research in social stratification and mobility, 28, 171-197. fidrmuc, j. (2011). the economics of multilingualism in the eu. in t. eger & h. b. schäfer (eds.), research handbook on the economics of european union law (pp. 331-354). cheltenham: edward elgar. florida, r . (2005). the flight of the creative class: the new global competition for talent. new york: harperbusiness. gibson, j. l., ivancevich, j. m., donnelly, j. h. (2000). organizations: behavior, structure, processes, 10th ed., irwin/mcgraw-hill, boston. gomez-mejia. goglobal (2018). about the project. retrieved from: https://goglobal.com.ua grogger, j., hanson, g. h. (2011). income maximization and the sorting of international migrants. journal of development economics, 95, 42-57. howitt, p. (1999). steady endogenous growth with population and r&d inputs growing. journal of political economy, 07, 715-730. koval, v., slobodianiuk, o., yankovyi, v. (2018). production forecasting and evaluation of investments using allen two-factor production function. baltic journal of economic studies, 4(1), 219-226. doi: 10.30525/2256-0742/20184-1-219-226 language and cultural barriers in international factor movements (2013). sebastian otten1,2 1ruhr university bochum 2rwi essen. leikin, m. (2012). the effect of bilingualism on creativity: developmental and educational perspectives. international journal of bilingualism, 10(10), 1-17. ministry of education and science of ukraine (2017). on approval of some normative legal acts on admission to study at higher education institutions. order 1378. ministry of education and science of ukraine (2017). on approval of the procedure for assigning scientific rankings to scientific and research workers order 174. nkechi, m. (2008). social and educational impact of language assessment in nigeria. nordic journal of african studies, 17(3), 198-210. schultz, t. w. (1962). investment in human beings. special supplement to journal of political economy, 70(5), 1-157. segerstrom, p. (2000). the long-run growth effects of r&d subsidies. journal of economic growth, 5, 277-305. state statistics service of ukraine (2018). retrieved from: http://www.ukrstat.gov.ua baltic journal of economic studies 51 vol. 4, no. 3, 2018 corresponding author: 1 department of finance and innovation management, vinnytsia national technical university. e-mail: djedjulavv@gmail.com 2 department of finance and innovation management, vinnytsia national technical university. e-mail: epifanovairene@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-51-59 methodological bases of concept formation and choice of innovative business strategies vyacheslav dzhedzhula1, iryna yepifanova2 vinnytsia national technical university, ukraine abstract. modern economic world tendencies and practice of the developed countries testify that in the conditions of the high level of financial risks and influence of various crisis factors, one of the main problems of operation of enterprises is to ensure sustainable development. in such conditions, the innovative activity is the basis for ensuring the competitiveness of domestic enterprises and provision of sustainable development. effective implementation of innovation activities involves the introduction of strategic management. an enterprise, which is a part of the external environment, must be able to adapt to existing and possible changes in the external environment to ensure effective activity. success can be achieved not by those enterprises that are capable of forming a successful strategy, but those capable of adapting it in time to changes. in this regard, the issues of strategic management of innovation activity are very relevant for domestic enterprises. the question of the analysis of strategic management effectiveness is presented by i. ansoff, michael e. porter, by robert s. kaplan, by david p. norton. issues related to the strategic management of innovation activities are studied by such scholars as s.m. ilyashenko, n.m. poliova, v.o. shpyliova, i.l. fedulova, t.m. yankovets and others. the aim of the work is to improve the methodological bases for the formation of concepts and choice of innovative business strategies. methodology. on the basis of the retrospective analysis, synthesis, and generalization, the existing methodological bases of the formation of concepts and choice of innovative strategies of enterprises are systematized and improved. the results of the study show that the innovative strategy is a certain interrelated sequence of actions to ensure the effective innovation of the enterprise in the light of the general strategy in the conditions of resource limitation and the impact of the external environment. it is established that the perspective direction of activation of the innovative strategy is the introduction of strategic maps and the system of balanced indicators. the practical implementation. it is reasonable to introduce one of the stages of the formation of an innovative strategy for drawing up a strategic map that will take into account different variants of the course of innovation activity and can serve as a basis for the formation and adjustment of the following innovative strategies of industrial enterprises. value/originality. the inclusion of the strategic map to the stages of formation of innovative strategy will increase the efficiency of the financial support of innovation activity, as the management of the enterprise will work out a plan of action under different conditions of the course of innovation activity. in addition, an innovative strategy, especially in terms of financial support for innovation, must be integrated into a system of balanced scorecard of the enterprise. key words: strategic map, innovative strategy, strategy, innovation activity, balanced scorecard. jel classification: о12, o32, b40 1. introduction effective implementation of innovation activities involves the introduction of strategic management, which, in the opinion of several scientists, is an activity to achieve the important long-term goals of the system in the environment that is constantly changing, by changing the state of the system itself (ansoff, 1979). the enterprise and the external environment are the main elements of strategic management. an enterprise, which is a part of the external environment, should be able to adapt to existing and possible changes in the external environment to ensure effective activity. the external environment, which is a dynamic system, is characterized by constant changes. an enterprise as a component of this system must always respond promptly to such changes. that is why not companies that are able to form a successful strategy, but those that can adapt it in time to change, can succeed. in this baltic journal of economic studies 52 vol. 4, no. 3, 2018 regard, the issues of strategic management of innovation activity are very relevant for domestic enterprises. the question of the analysis of the effectiveness of strategic management has been presented by i. ansoff (1979), michael e. porter (2008), robert s. kaplan and david p. norton (1992). issues related to the strategic management of innovation activities are addressed by such scholars as s.m. ilyashenko (2010), i.l. fedulova (2008), t.m. yankovets (2010) and others. the aim of the work is to improve the methodological foundations for the formation of concepts and the choice of innovative business strategies. 2. the essence of the innovation strategy over the past 50 years of the twentieth century, there is a process of evolution of approaches to management and planning as one of its elements: 50s – purely management decisions, 60s – long-term internal corporate planning, 70s – strategic planning, 80s – strategic management, 90s – research of strategic processes (ilyashenko, 2010). the classical approach to the choice of strategies is presented in the works of i. ansoff (1979), according to whom the strategy is a set of rules for decision-making, which the organization guides in its activities. according to michael e. porter (2008), the strategy is a creation of a unique and beneficial position that involves a certain set of activities. if there was only one perfect position, there would be no need for a strategy. this set provides a detailed analysis of conditions of the enterprise management taking into account the external environment. it is precisely the view of d.e. korzenkov (2011), who states that strategic management involves the feedback between its stages for possible refinement, the modifying of the results of the previous stages; not only the process of developing, adapting, and implementing a strategy but also the processes of evolution and transformation of strategies depending on the change of the environment are especially important for success. lack of feedback can lead to a negative progression of the most successful strategy. this is due to the fact that the environment, in which the enterprises operate, is quite variable and quite often any strategy involves making a number of adjustments. approaches to management have undergone a certain evolution and, in modern conditions, they are characterized by the following features (ilyashenko, 2010): enterprises must constantly modify their competitive advantage if they seek to retain the position of a market leader; it is necessary to deviate from logically rational trivial decisions, as they are easily predicted by competitors, non-traditional decisions are necessary; the strategy, in principle, should be short-term, as the conditions of management are changing rapidly and these trends are increasing, requiring a constant review of strategic decisions. robert s. kaplan and david p. norton (2004) point out that in 70% of the enterprise there are problems that are not associated with a bad strategy, but with a failure to implement it. that is why not only the formation process but also the management of the strategy implementation, is very important. of particular importance is strategic management for innovation, which determines the formation of an innovation strategy, which is a part of the general strategy of the enterprise. there are different approaches to determining the essence of innovation strategy. according to i.v. fedulova (2008), the innovation strategy is a systemic concept that links and directs the development of the innovation activity of the subject of the economy with the system of long-term goals of innovation activity, as well as the method (choice of the most effective ways) for achieving and implementing the target innovative level of development, which includes the nature of resource allocation between alternative paths of innovation development and a type of behaviour. innovation strategy is also considered as the leading functional strategy of a high-tech industrial enterprise, which involves the formation of a complex of measures for technological improvement of production, changes in the organizational structure of the enterprise, the introduction of modern management technologies (poreckova, 2013). according to t.m. yankovets (2010), an innovative strategy is any new means of achieving the strategic goal of the enterprise, whereas according to s. m. iliashenko (2010), it is as an interconnected set of actions for ensuring the conditions of long-term survival and development of the enterprise in the market on the basis of creation and introduction of innovations. a similar view is maintained by n.m. poliova and v.o. shpyliova (2009), who believe that the strategy of innovation activity in the enterprise includes a number of interrelated elements and procedures: the definition of goals and objectives, the formation of priorities of innovation and the development of an optimal portfolio of innovations that are of paramount importance for successful business activity, as well as the assessment and analysis of the impact of innovations on the prospects for enterprise development. antonyuk l.l., poruchnik a.m., savchuk v.s. (2003) determine the innovation strategy as a complex of actions. in terms of a systematic approach, the innovation strategy is considered as one of the components of an economic strategy, defined as a set of rules, methods, and tools for finding the best prospective organizations for the development of scientific and technical research, resource policy (makedon, rubec, 2013; vergal, 2011). therefore, in general, an innovative strategy has a certain interrelated sequence of actions to ensure the effective innovation of the enterprise in the light of the general strategy in the conditions of resource limitation and the impact of the environment. baltic journal of economic studies 53 vol. 4, no. 3, 2018 strategies of the enterprise can be numerous but all of them are based on strategic alternatives (makedon, rubec, 2013; vergal, 2011): the limited growth of the enterprise; growth; reduction. it is clear that the strategy of innovation can be based only on the first two alternatives. in general, the innovation strategy is quite similar to the general strategy of the enterprise and involves either strengthening the position of the company in the selected segment of the market in a particular industry or active diversification of activities. the fundamental difference between general and innovative strategies is that the innovation strategy has an element of novelty as a compulsory element. 3. types of innovative strategies different numbers of innovative strategies are distinguished in the literature (figure 1). classically innovative strategies of the enterprise are divided into active (offensive, expansive) and passive (protective, defensive) (twiss, 1992; michael e. porter, 2008; antonyuk, poruchnik, savchuk, 2003). among management levels, certain authors (santo, 1990) distinguish passive, offensive and stagnant innovative strategies. according to t.m. yankovets (2012), it is reasonable to allocate six types of innovative strategies: traditional, opportunistic (“niche” strategy), simulative, defensive (protective), dependent, offensive. l. vodachek and o.  vodachkova (1989) provide a similar classification of strategies. they distinguish four main types of innovative strategy: actively offensive, moderately offensive, protective, and residual. a.i. bogdanov (1991) considers intensely offensive, moderately offensive, protective and licensing (absorbing) strategies of innovation activity. a.m. batkovsky and a.p. merzlyakova (2011) distinguish three main groups of innovation strategies: strategies for the implementation of research and development, introduction of innovations and strategy of mass production of previously created innovation products. thus, the authors share strategies depending on the product lifecycle and the state of the enterprise. this is due to the fact that at various stages of development and for different financial status, enterprises pursue different strategic goals. in general, most classical innovation strategies are similar, but they have different names from different authors. depending on the type of innovation, a.y. yudanov (1998) divides innovative strategies into violent (force), patient (niche), commutant (adaptation strategy) and exploratory (pioneer). the violent strategy is a strategy of competition, which is based on a reduction in production costs, which is achieved through the mass production of relatively inexpensive but quite good products. the patient strategy is to produce a limited number of highly specialized high-quality products with its ability to win more powerful competitors not by the force but by the ability of the firm. commutant strategy involves the most flexible satisfaction of small (local) market needs, and exploratory strategy is focused on radical innovations. certain authors categorize innovative strategies depending on the level at which they are planned. in particular, a. thompson and a. strickland (1993) distinguish four levels of strategy for diverse organizations: corporate, business strategy, functional and operational strategies, and for single-profile companies – business strategy, functional and operational strategies. ellen chaffee (1985) identifies three distinct strategy models depending on the level and goals of the management: linear, adaptive, and interpretive. in the author’s view, the linear strategy, according to a linear model, which is directly focused on planning, is based on the fact that all enterprises have certain goals that must be achieved at the appropriate levels of management over a certain period of time. this strategy is based on the assumption that future operating conditions will be fairly stable or predictable. the adaptive strategy, which is based on an adaptive model, implies that an enterprise should adapt to the identified changes in the process of evaluating the external and internal environment. in this case, the strategy means the development of opportunities and resources that allow the use of potential opportunities. the interpretive strategy is based on an interpretive model that sees the strategy as something that emerges from a continuous dialogue between different perspectives outside the organization, which is a symbolic expression of a culture of an organization that depends on internal and external relations. this strategy is based on the formation of a potential positive attitude towards the company’s activities and involves increasing the positive image. to the main tasks of the innovation strategy, s.m. iliashenko (2010) includes: efficient allocation and use of available resources and opportunities for development based on innovation and innovation activity (innovative development potential); adaptation to changes of conditions of the external environment by finding new ways and areas of implementation of the company’s potential, bringing the internal development opportunities into external, generated by the market. i. ansoff (1979) distinguishes four groups of rules, which define directions for action when defining a strategy: 1) the rules that are used to assess the firm’s performance now and in the future; 2) the rules, under which the firm’s relations with its environment are formed. they determine which types of products and technologies the firm will develop, how baltic journal of economic studies 54 vol. 4, no. 3, 2018 innovative strategy depending on the product lifecycle depending on the state and lifecycle of the product depending on the level of management depending on the level of planning depending on the organizational structure and management goals depending on the type of innovations imitation protectiveoffensive combined implementation of research and development introduction of innovations mass production of previously created innovation products passive offensive stagnant corporate business functional operational linear adaptive interpretive violent patient commutant explerent figure 1. systematized types of innovation strategies of enterprises they will outperform their competitors. these rules are called product-market strategies; 3) the rules, according to which the relations and procedures within the firm are established; 4) the rules, by which the firm carries out operational activities. 4. features of strategic management of innovation activities in order to manage effectively the innovation activity of the enterprise, a staged approach is offered in the literature (poliova, shpyliova, 2009). at the same time, depending on the production conditions and baltic journal of economic studies 55 vol. 4, no. 3, 2018 the peculiarities of a particular economic situation, the stages are proposed by the authors as separate, and in different combinations. by systematizing existing approaches to the stages of implementing an innovative strategy, the following (figure 2) can be distinguished: formation of goals and tasks of innovation activity; analysis of internal and external environment; formation of an innovative strategy of the enterprise; long-term innovative forecasting on the basis of roadmapping; determination of the necessary amount of resources for the innovative activity of the enterprise; control over the implementation of the innovative strategy and its adjustment if necessary; definition of the influence of the innovative strategy on the economic development of the enterprise. n. poliova, v.a. shpyliova (2009) complete strategic planning stages with the development of strategic plans, but in our opinion, taking into account the importance of the direct process of implementation of the innovation strategy, it is more expedient to include such a stage as the monitoring of the implementation of the innovation strategy and adjustment if it is necessary. the primary task in the process of forming an innovation strategy is to determine the goals and tasks of innovation activity. for each enterprise, it is necessary to formulate an individual strategy. the choice of strategy depends first and foremost on the level of product innovation, on the kind of innovation that the enterprise introduces. at the same time, regardless of the level of innovation of products, enterprises should strive for further development, because “...the company achieves competitive advantages thanks to the innovation, it can only keep them with constant improvements. competitors will immediately and necessarily overtake any company that will stop the improvement and implementation of innovations” (michael e. porter, 2008). the factor such as the company’s position with respect to the leading enterprises in a particular industry is also quite important. it is these parameters that will determine the goals and objectives of the enterprise’s innovation activities. a rather important stage in the formation of an innovative strategy is the analysis of environmental factors and the analysis of internal potential and threats that affect the implementation of the innovative strategy and activities of the enterprise as a whole. in general, the choice of innovative strategies is carried out taking into account different methods, which in general form has matrices, indices, diagrams, polygons. the matrices of ansoff, boston consulting group, mckinsey general electric, swot analysis, and balanced scorecard are the main criteria for choosing business development strategies today. at the same time, the model of swot analysis is the most widely used, the benefits of the application of which are simultaneous consideration of external and internal factors of development. in addition, the model allows, based on the study of the enterprise’s strengths and weaknesses, taking into account the influence of the environment, to determine the strategic directions for further development, as well as possible threats. 5. strategic maps in innovation activities the us companies at the present stage of development are actively using such a method of planning and forecasting activities as strategic maps or roadmapping, which in translation from english means traffic on the roadmap. roadmapping involves the construction of so-called “roadmapping”, i.e. the routes of the company’s future development in the main areas of activity, such as market, products, technologies, competitors, raw materials, etc. in this case, its main dominant is the introduction of innovations, innovative technologies (dissel, 2010). today, in the literature, you can find the concept of “roadmap”, “strategic map” and roadmapping, which in essence are synonymous. according to robert s. kaplan and david p. norton (2004), a strategic map is an applied image of a strategy that, on one sheet of paper, tells how integrated and combined enterprises are transformed into a single strategy and contain the indicators, by which it can be implemented. consequently, this definition is entirely consistent with the understanding of the roadmap in (dissel м., 2010; phaal r ., 2010; alan f. blackwell, rob phaal, martin eppler, nathan crilly, 2008). roadmapping technology was developed by motorola in the 1970s to maintain improved alignment between technology and the development of a new product, providing a structured visual description of the strategy (phaal r ., 2010). however, a study by alan f. blackwell, r . phaal, martin eppler, nathan crilly (2008) has shown that since the result of the roadmap is the presentation of the strategy as a schematic appendix, today there is a significant number of options for constructing roadmaps, that is, there are no coherent sets of visual customs and rules. the authors propose different templates of roadmaps and for innovation activity, the templates, which contain various components: market, product, technology, and results or innovation, personnel, technology. the stages of building a strategic map correspond to the corresponding stages of the strategy and are closely interlinked, that is why it is reasonable to integrate them into the stages of formation of an innovative strategy to avoid duplication of action. the peculiarity and benefit of a strategic map is the use of a framework that is structured in time (and often graphic) for the design, presentation, and transfer of strategic plans in terms of the evolution and development of technology, products, and markets. baltic journal of economic studies 56 vol. 4, no. 3, 2018 no 1. f or m at io n of g oa ls a nd ta sk s of in no va tio n ac tiv ity 2. a na ly si s of in te rn al a nd ex te rn al en vi ro nm en t 3. f or m at io n of in no va tiv e st ra te gy of th e en te rp ri se 4. l on gte rm in no va tiv e fo re ca st in g ba se d on th e st ra te gi c m ap pi ng 5. d et er m in in g th e re qu ir ed a m ou nt o f re so ur ce s fo r in no va tio n ac tiv iti es 6. c on tr ol o ve r th e im pl em en ta tio n of in no va tiv e st ra te gy a nd ad ju st m en t i f n ec es sa ry 7. d et er m in at io n of th e in flu en ce of in no va tiv e st ra te gy o n th e ec on om ic de ve lo pm en t o f t he en te rp ri se yes no yes no yes no no definition of the type of innovation; innovation level; the position of the enterprise with respect to the enterprises-leaders ansoff matrix; boston consulting group matrix; mckinsey / general electric matrix, swot-analysis taking into account: production lifecycle; enterprise lifecycle; levels of management and planning; the type of innovation; goals of leadership and organizational culture visualization of strategy description by the following components: market, innovation staff, technology result yes determining the optimal structure of financial resources in terms of own, long-term and short-term borrowed funds monitoring and removal (if detected) of threats occurring during the implementation of the innovative strategy that may affect the economic development of the enterprise yes yes no using controlling tools; comparison of actually received indicators with planned ones: operational response to changes in the external environment figure 2. stages of implementing an innovative strategy in this regard, roadmapping technology is also closely related to other graphical planning approaches such as pert (program evaluation and review technique) and gantt planning tools (robert phaal, clare j.p. farrukh, david r . probert, 2004). one of the greatest benefits of this method is communication through functional and organizational boundaries. the process of developing strategic maps brings together and coordinates the various key stakeholders and perspectives. in addition, a wellbaltic journal of economic studies 57 vol. 4, no. 3, 2018 developed roadmap can further expand and serve as a basis for further action. that is why it is very important to include an innovative strategy in the process of forming. the integral structure of the strategic map is directly related to the fundamental issues that appear in any strategic context: where do we want to go? where are we now? how can we get there? why should we act? what should we do? how should we do it? when? in general, strategic maps are classified according to three criteria: purpose, format, and type ((dissel м., 2010: phaal r ., 2010; alan f. blackwell, rob phaal, martin eppler, nathan crilly, 2008; robert phaal, clare j.p. farrukh, david r . probert, 2004) (table 1). the essence of the model of strategic maps is to organize the control over the implementation of the established indicators and adjust the dynamics of the most significant for the implementation of the strategy of them. at the present stage, the formation of strategic maps is associated with a system of balanced indicators. accordingly, strategic maps for innovation activities include the use of a system of indicators, which should be coordinated with the stages of innovation activities, sources of funding. the study of works related to the formation of a system of balanced scorecard has shown that the peculiarities of their use are: the use of non-financial indicators along with financial ones; the balanced scorecard, which is carried out in four groups: finance, clients, internal processes, training, and development; this balanced scorecard provides an assessment of the effectiveness of the enterprise in the past and in the future; there is a connection between the indicators in the system, which is reflected in the strategic maps; table 1 classification of strategic maps name essence 1. depending on the goal of creation product planning the most common type of planning related to product technology. service/planning capability the roadmap that focuses on organizational capacity as a bridge between technology and business. it is used by service providers. strategic planning the roadmap that focuses on developing a vision for a future business from the point of view of markets, businesses, products, technologies, skills, culture, etc. long-term planning this type is used to maintain long-term planning, extending the planning horizon. planning an intellectual asset (personnel) this type aligns the management of intellectual assets and knowledge management initiatives with business objectives. program planning this type of strategy focuses on the implementation of the strategy and relates primarily to the planning of the project (for example, r & d programs). process planning planning a specific component of the process (for example, developing a new product). integrated planning this type focuses on integrating and/or evolving technology from the point of view of how different technologies are integrated into products and systems or from the point of view of the formation of new technologies. 2. depending on the type industry formation of the strategy for the development of a particular industry, market, part of the industry. corporate formation of development strategy at macro levels (individual corporate structures). product formulation of the product development strategy (product line) in time through market analysis, product evaluation, and technology learning. technological formation of technology development strategy, including high technology sector. scientific, research formation of a development strategy based on the selection of emerging technologies, taking into account the increased attention to competences and research program formation of the development strategy at micro, macro, and meso levels to identify the impact of possible problems on the development of programs and strategies. 3. depending on the graphics format multilevel the most common format that includes several levels (and sublevels) such as technology, product, and market. column a roadmap in the form of a number of columns for each level or sub-level that simplifies and integrates the necessary conclusions, simplifies the transfer, integration of roadmaps. tables a roadmap or its certain levels in the form of tables (time in comparison with performance or requirements). it is especially suitable for situations where performance can be quantified. charts a roadmap is expressed as a simple graph or the graph, usually one for each sublevel, which is closely related to the technological s-curves. graphic representations some roadmaps use more creative graphical representations of transfer of technological integration and plans. flow-charts a certain type of graphical representation is a flowchart that is used to link goals, actions, and results. mono level a roadmap that focuses on a single level roadmap. the disadvantage of this type is that there is usually no link between levels. baltic journal of economic studies 58 vol. 4, no. 3, 2018 the system of balanced scorecard is implemented from the top to the bottom, through the whole enterprise; for each unit, a certain set of balanced indicators is formed; the system of balanced scorecard usually contains no more than 20-25 indicators per enterprise, for a unit of about 7-10, for one employee no more than 5. since innovation activity is subordinate to the operational one, it is very important to determine the impact of the innovative strategy on the economic development of the enterprise and, if necessary, to adjust a certain stage of the innovative strategy. it would be very useful for domestic enterprises to introduce this approach in their economic activity since it creates opportunities for forming various directions of development of innovation activity, depending on the course of circumstances. financial managers of an enterprise must always have several options for implementing an innovation strategy – from the most optimistic to the pessimistic and timely adjust its implementation in accordance with external conditions. today in ukraine, there is a rather low share of innovative enterprises, and the proportion of those actively using strategic innovation planning is even less. thus, the introduction of a roadmap to the process of forming an innovation strategy will help increase its flexibility and ability to respond more quickly to changes in the external and internal environment of the enterprise. at the same time, it is inappropriate for enterprises to use the benchmarking method, which promotes universalization, and not individuality. this is the opinion of michael e. porter (2008), who points out that the more companies engage in benchmarking, the more similar they become, and the competition becomes a competition of identical ways, and none of the enterprises is capable of defeating. the formation of strategy and the development of strategic maps, the system of balanced indicators allows determining the necessary amount of resources for the innovative activity of the enterprise. at the same time, the company can form several options for funding innovative activities in terms of economic development options and the type of projected innovations. the process of monitoring the implementation of the innovation strategy and adjusting as necessary is no less important. 5. conclusions consequently, on the basis of systematization of modern approaches to the essence of innovation strategy, it has been determined that it has a certain interrelated sequence of actions to ensure the effective innovation of the enterprise in the light of the general strategy in the conditions of resource limitation and the impact of the external environment. it has been established that the perspective direction of activation of the innovation strategy is the introduction of strategic maps and a system of balanced indicators. in this regard, one of the stages of the formation of an innovative strategy is the drawing up of a strategic map that takes into account different variants of the course of innovation activity and can serve as a basis for the formation and adjustment of the following innovative strategies of industrial enterprises. the inclusion of this component in the stages of the formation of an innovation strategy will increase the efficiency of using the financial support of innovation activity, as the enterprise management will form a plan of action under different conditions of the course of innovation activity. in addition, an innovative strategy, especially in terms of financial support for innovation, must be integrated into a system of balanced indicators of the enterprise. references: ansoff i. 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(in russian) baltic journal of economic studies 33 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-33-38 topical issues of economic crime investigation: european vector olena volobuieva1, tetiana shevchenko2 abstract. the aim of the article is to analyse topical issues arising during the investigation of economic crimes in ukraine and abroad, as well as to develop concrete suggestions to optimize the investigation of such crimes. the subject of the study is the topical issues of the investigation of economic crimes: the european vector. methodology. the analysis of legal regulations of ukraine and scientific literature enabled to study the current state of combating organized groups committing economic crimes and to determine the strategic priorities and objectives of counteraction to this socio-negative phenomenon in ukraine, as well as dialectical method, scientific abstraction, methods of system analysis, were used. the results of the study revealed that the authors proposed the perspective concerning a strategy, ways, and mechanisms for overcoming economic crime in ukraine through the introduction of advanced european experience. practical implications. the study and adoption of positive foreign experience in countering organized crime in the economic sectors, individual elements and introducing them into the law enforcement bodies’ practice in ukraine would enable to improve performance during the investigation of economic crimes. relevance/originality. a comparative analysis of the investigation of economic crimes in foreign countries enabled to develop the most promising areas to improve domestic legislation in this sphere. key words: economy, economic crime, investigation, euro-integration, strategy. jel classification: k13, f36, c41 corresponding author: 1 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. 2 national academy of internal affairs of ukraine, ukraine. 1. introduction the relevance of the study of economic crime features and the analysis of their commitment is exacerbated by the economic instability in the state and the struggle for economic power. any crime is always predetermined by a certain factor or condition. the variety of ways to commit crimes in the economic sectors, criminals’ use of various technologies and operations, and other factors contributing to the commission of unlawful acts in the economic sectors lead to significant difficulties in their investigation. in the context of this issue, it should be noted that the features of the crime are characterized by different aspects and phenomena that they reflect, therefore, their identification and specification is a priority task in the detection and investigation of economic crimes. with the advent of new economic conditions, new ways of economic criminal act mechanisms have emerged (skakun, 2018). to counteract effectively the threats to the state financial security, in particular, corruption and depletion of the state financial resources require continuous operation of the system of timely identifying and addressing systemic risks in public finance, preventing their occurrence in the future (ukrainskyi olaf). at the present stage of the formation of ukraine as a european state, a complex of strategic measures aimed at the development of the economy in the conditions of european integration is in progress (yunin, sevruk, pavlenko, 2018). xxi century is an era of globalization, which is realized in the objective reality as a multifactorial and poly-functional phenomenon with both positive and negative impacts on the development of society. therefore, modern political and legal literature fairly argues that globalization is “not absolute evil and not absolute good” (ebzeev, aibazov, krasnoriadtsev, 2006; tatsii, 2008; sevruk, 2018). therefore, nowadays ukraine has declared euro-integration as a key priority of economic policy. the need to develop the integration strategy of ukraine has been caused by the strive of our state to meet the requirements of the modern world economic system; it is the way of modernizing the economy, overcoming technological backwardness, involving foreign investments and the latest technologies, creating new jobs, increasing the competitiveness of the domestic commodity producer, and entering the world markets. therefore, consideration of this issue reveals that in the case of detecting unlawful acts of economic crime, representatives of law enforcement bodies encounter some difficulties. investigation materials may be quite large, while they may not contain the necessary facts. in addition, the analysis of such materials requires baltic journal of economic studies 34 vol. 5, no. 1, 2019 specific knowledge. evidently, to concentrate efforts to complete the investigation of a major economic crime is hard work, because current cases also require engaging a police officer or an investigator (kravchuk, 2009). over recent years, in ukraine, under economic transformation, the most vulnerable economic crimes are detected, such as non-disclosure of the revenue position and, consequently, non-payment of taxes; fraud with financial resources, determined by the plans of private banks to obtain mega-profits by manipulating imperfect legal provisions of the state; in the foreign exchange market, concealing and reducing the sale of foreign currency in order to increase sharply the foreign currency rate, but consequences are evident; artificial increase and maintenance of high prices for goods, medicines and services and poor quality production, harmful to health of consumers, repeatedly reported in the media (mochkosh, 2012). therefore, it should be noted that this state of affairs is related to crime adjustment to the transformations of the socio-economic structure of society and dynamic reactions to social and legal control in order to avoid it (sevruk, 2017). a significant contribution to the study of economic crimes investigation has been made by foreign and domestic scientists such as l. h. androsovich, o. m. dzhuzha, s. b. yehorycheva, o. h. kalman, s. y. kravchuk, i. e. lapinskyi, ya. v. mochkosh, v. i. muntiian, v. ortynskyi, s. v. onishchenko, yu. yu. orlov, s. o. pavlenko, o. v. pchelina, v. v. ruden, v. h. sevruk, t. o. skakun, v. ya. tatsii, d. m. kharko, o. shostko. the aim of the article is to analyse topical issues arising during the investigation of economic crimes in ukraine and abroad, as well as to develop concrete proposals to optimize the investigation of such crimes. 2. presentation of the main material crime in economic relations continues to have a negative impact on the development of the state. modern economic crimes are characterized by complex and sophisticated ways and methods of their commission; therefore, one of the main problems is the increase in the professionalism and authority of investigating units. its solution is to provide investigative units with highly skilled personnel who shall meet current requirements and be able to investigate crimes professionally to protect the economy from criminal encroachments (ortynskyi, 2017). ukraine has declared its willingness to enter the european commonwealth of developed democracies that have high standards of safety, well-being and living of people, as well as the priority of human rights, the rule of law, and ensuring the inevitability of punishment for those who committed a crime. strengthening of democratic institutions is impossible without reducing the negative effects of corruption and organized crime, which in our country remain one of the greatest threats of these days (yevropeyskyi dosvid zapobihannia orhanizovanii zlochynnosti: teoretychni pytannia). nowadays, the state of affairs in the ukrainian economy, transformations and processes that have taken place in the past, and especially over recent years, convincingly testify that the solution of socio-economic development problems has become strategic, global, and one of the most important in the state. the overcoming of crisis phenomena, struggle with the consequences of the global financial crisis, transition to sustainable economic growth require further elaboration of the mechanisms of the economic regulation both at the state and at the regional level (ruden, 2014). therefore, the current system of measures of countering organized crime in the financial system is based on the basic principles, such as: – the lower limit for a financial transaction shall be imposed, above which all transactions of a certain type are subject to registration by the institutions and persons specified by the law for the purpose of possible further verification – as a rule, this is from 10 thousand us dollars; – the list of features shall be developed and introduced to determine whether a financial transaction can be classified as money laundering or terrorist financing; – the designated entities, through which or with which help financial transactions are carried out, shall be responsible for informing law enforcement or supervisory bodies regarding suspicious transactions; – the governments of the countries provide one of the executive authorities with the right to coordinate the activities of all law enforcement and supervisory bodies in combating the legalization of proceeds and terrorist financing, which acquires the status of the financial intelligence unit (yehorycheva, 2014). scientific interest in the problem of economic crime and the complexity of overcoming it is due to a differentiated approach to the definition of economic crimes in the domestic literature. variety of these phenomenon interpretations is found in the works of many scholars, defining, for example, “crimes in the economic sectors”, “economic crimes”, “shadow economy”, “criminal economy”, “economic crime” and others. these concepts are often considered equivalent, but there are attempts to prove the different nature of these phenomena. according to o. yakovliev, an economic crime as a property and mercenary crime, as well as a crime in the economic sphere, the author argues that economic crime is characterized by a combination of mercenary offences against property, the order of management of the national economy, committed by persons who are on certain social positions in the economic structure. according to s. kravchuk, all these concepts have a different spectrum of committing unlawful acts. for example, crimes in the economic baltic journal of economic studies 35 vol. 5, no. 1, 2019 sectors, according to the author, are mainly economic crimes committed in various spheres; economic crime involves committing crimes in the economic activity, including using the official position. s. kravchuk classifies acts related to the material damage or profits as crimes of an economic nature (kravchuk, 2009). according to o. h. kalman, the main features of crime in the economic sectors are: 1) they are committed in the legal and illegal economic activity; 2) the subjects of these crimes can be entrepreneurs and other persons, who facilitate economic activity implementation; 3) they cause economic, political, moral harm to society and the state; 4) they are aimed at obtaining economic benefits; 5) they are committed only intentionally; 6) they can be committed by various means provided by the current criminal legislation (kalman, 2004). s. kravchuk argues that economic crime is crimes committed in the economic sectors with the use of legitimate technical and accounting, financial and accounting, supervisory and managerial rights and powers. the scientist identifies eight essential features inherent in economic crime: a continuing nature; high latency; set up by the criminal acts of business entities; offence against the order of economic management; committed by individuals (because, according to criminal law, the subject of a crime can be only an individual); a close connection with organized crime, corruption and shadow economic activity; formation of semi-criminal mentality among citizens of the state; significant damage to the state, society or individual citizens (kravchuk, 2009). crimes in economic sectors are mostly latent requiring the use of operational unit capabilities such as their forces, tools, and methods (orlov, 2006). in his work, “criminological problems in determining the concept and features of modern economic crime as a factor of shadow economy of ukraine,” d. m. kharko highlights the features of economic crime, such as: it is a type of crime, which is applied mainly in mass, correspondingly, causing massive harm; it covers various abuse of economic power; it is committed in the course of the professional activity of the manager’s authority; it has a plurality of episodes of committing a crime; it is committed both by individuals and legal entities; it is a more complex socio-economic phenomenon than traditional crime; it is of a latent nature; it causes significant economic damage to the interests of the state (kharko). according to s. s. cherniavskyi, measures for the investigation of economic crime should be aimed at: using operational unit data, the study of review acts, audits, etc., obtaining information from law enforcement and supervisory bodies (departments of the state fiscal service of ukraine, the state financial inspection of ukraine, the national bank of ukraine, the state customs service of ukraine, etc.) (kovalenko, moisieiev, tatsii, shemshuchenko, 2010). the special danger of such acts is due to the possibility to use the technology for their implementation in any branch of public economy or business. moreover, such acts are not only a source of accumulation of capital of illegal origin but also a means of their laundering. such unlawful economic acts include: – formation and issue of false money in non-cash payment circulation, which leads to illegal emission; – forgery, use and transfer to the circulation of a fraudulent document by a public official both in own interests and in the interests of third parties; – using funds obtained illegally in the official business activity; – fraudulent entrepreneurship; – wilful violation of the proper accounting; – fraudulent bankruptcy of a business entity; – using budget funds in the interests of individual private entities or entrepreneurs; – theft of funds through breaking into electronic banking networks; – economic espionage (kravchuk, 2009). in the course of the study, the questioning of the bodies of the national police of ukraine established that in 91% of cases, our state should consider foreign experience in countering organized crime in the economic sectors. it should be noted that primary, one of the most effective instruments of anti-shadowing in many countries of the world is the systems and mechanisms for financial control over illegal proceeds. for example: a) in italy, a government decree bans cash payments for large sums; b) in germany, settlements with nonresidents requires declaration; c) in japan, obligatory financial monitoring exists (financial institutions are obliged to report on major financial transactions to authorized public authorities). meanwhile, in germany, not only banks and financial institutions but also lawyers, auditors should report suspicious transactions to financial monitoring bodies in germany (muntiian, 1999; europe: hidden economy, 2011; european security, 1995; onyshchenko, lapinskyi, 2013). therefore, v.h. sevruk argues that the system should have interstate status and concentrate information of all law enforcement agencies and special international law enforcement structures (interpol, europol, bcfoc, eurojust, fatf, egmont group, moneyval, the eurasian group on combating money laundering and financing of terrorism (eag), the basel committee on banking supervision, the wolfsberg group, the international monetary fund, the world bank, the european bank for reconstruction and development). such a system enables to overcome this phenomenon on a global scale, and for those who counter organized crime in the financial system, creates preconditions for international cooperation on countering the problem in general (sevruk, 2017). in recent years, control over organized crime in economic activity has become part of international baltic journal of economic studies 36 vol. 5, no. 1, 2019 policy: according to the european security strategy (adopted on december 12, 2003), the organized crime, along with terrorism and regional conflicts, is considered as one of the main threats to european countries; the eu member countries, in 2004, signed the pre-accession pact on the development of joint measures for organized crime, and the european commission has proposed the creation of the european forum for the prevention of organized crime in the economy and finances; in 2004, the council of europe approved the hague program for the establishment of the area of freedom, security and justice for 2005-2010 to shift from a reactive approach to a proactive (preventive) one to combat organized crime; at the council of europe meeting of june 12-13, 2007, the report “assessment of organized crime threats” was heard and conclusions were made on the need for joint measures to combat organized crime in the eu, in accordance with the convention of 12 july 2000 on mutual legal assistance in civil and criminal matters (shostko, 2008). criminalistics literature identifies a number of unlawful acts that constitute economic crimes. these include: violation of anti-dumping legislation (indicating offenses related to violation of the rules of free competition); fraud, production of bad products (offenses that violate consumers' rights); fraud with securities, accounting documentation, fraudulent bankruptcy, use of fraudulent bank documents (crimes based on abuse of investments, deposit capital, which cause significant losses to shareholders, creditors, etc.) (kharko). economic crimes have an extremely complicated mechanism of implementation, and therefore, a complicated mechanism for their detection and investigation. the mechanism of crime is the system of interaction of all crime participants between themselves and the environment, which leads to the formation of forensically relevant information about the crime, its participants, and results. the mechanism of a crime contains information on how this or that crime has been committed in the economic sectors. the specificity of committing an economic crime is the subject matter of such an illegal act, that is, property as a capital, therefore, an increased organization and use of specific manners occur. another feature of committing economic crimes is criminal act commitment under the guise of various types of civil law agreements, therefore, they look like quite legitimate economic and financial transactions (pchelina, 2009). the leaders of organized crime groups focus on the search and establishment of corruption relations with public officials, responsible for law enforcement and regulatory activities in the economic sectors, judges, heads of local authorities and other officials whose competence includes the adoption of important decision for organized criminal groups. this contributes to the increase in the number of corrupt officials who hold responsible positions. it should also be considered that corruption is characterized by a high level of latency (dzhuzha, 2007; pavlenko, 2013). it should be emphasized that in recent years, the development of the ukrainian economy demonstrates unsustainable dynamics, which confirms the different adaptations of its branches to the challenges of our time, and results in lower investment and innovation activity and competitiveness. in addition, ukraine steadily holds “honourable” places among the most corrupted countries (kondratenko, 2018). it should be noted that ukraine has developed a strategy for introducing european standards of living in ukraine and entering leading positions in the world. for this, the steps will be taken in such vectors:  the vector of development is the provision of sustainable development of the state, implementation of structural reforms and, consequently, improvement of living standards. ukraine should become a state with a strong economy with advanced innovations. to do this, primary, it is necessary to restore macroeconomic stability, to ensure sustainable growth of the economy in an environmentally sound way, to create favourable conditions for conducting the economic activity and a transparent tax system;  the vector of security is the provision of security guarantees for the state, businesses and citizens, the protection of investments and private property. ukraine shall become a state capable of protecting its borders and ensuring peace not only in its territory but also in the european region. the defining basis for security should also be the provision of fair and impartial justice, urgent lustration of authorities at all levels, and ensuring the implementation of effective anti-corruption mechanisms. nowadays, europol coordinates the work of the police services of all 28 european union member states. in contrast to national police forces, europol does not have its own investigative authorities. europol works closely with law enforcement agencies in 28 eu member states and other partner states and non-eu countries such as australia, canada, the united states and norway (yevropol). furthermore, europol has relationships with the eu member states and organizations that interact with europol according to cooperation agreements: albania, australia, canada, colombia, iceland, norway, switzerland, interpol, and us law enforcement agencies: the bureau of alcohol, tobacco, firearms and explosives (atf), the drug enforcement administration (dea), the secret service (usss); the federal bureau of investigation (fbi) the immigration and customs enforcement (ice) and the internal revenue service (irs). this network has secured communication channels provided by europol. in addition, europol baltic journal of economic studies 37 vol. 5, no. 1, 2019 has two liaison officers deployed to washington dc (usa) and the interpol headquarters in lyon, france (yevropol). currently, a number of issues should be considered in the practice of this area. therefore, taking into account the survey results, it has been determined that scientific development of countering organized crime in the financial sphere needs to be improved through the definition of the concept-categorical apparatus of organized crime in the financial sphere (72%), the study of organized crime in the financial sphere as a criminological phenomenon (68 %), others (63%). in this context, for ukraine, precisely the study of the foreign experience of foreign countries, which have succeeded in this area, is considered as a determining factor by 87% of respondents (androsovych, 2018). therefore, s. o. pavlenko highlights that a society brought up in a low morale environment cannot effectively counteract organized crime in the financial system. for that reason, priority measures of state policy should be moral upbringing of the personality (pavlenko, 2015). indubitably, under the current economic situation in ukraine, not all the positive foreign experience in countering organized crime in the financial system can be introduced, but studying its individual elements and implementing them into the practice of ukrainian law enforcement bodies will improve performance in countering organized crime in the economic sectors. 3. conclusion therefore, the question of the need to create an effective system of countering organized crime in the economic sectors in ukraine arises. for that reason, the use of foreign experience of public mechanisms for preventing and countering organized crime in the economic sectors enables to formulate a set of effective national levers of public regulatory influence in counteracting this type of crime. the specificity of economic crimes prevents law enforcement bodies from responding promptly to their commission. certainly, the state reacts to these crimes and tries to prevent them. for example, the national anticorruption bureau of ukraine is created, the department for investigation of cases of particular importance in the economic sectors functions, public procurement site prozorro is created, and many other steps in this area are taken. however, the practice shows that all actions of the authorities to prevent economic crimes are accompanied by the emergence of more innovative mechanisms for committing economic crimes. therefore, this topic is extremely important and it will be relevant for research for a long time (skakun, 2018). the issue of organized crime in the economic sectors has become international recently. moreover, the world community recognizes that organized crime in the financial system has become a global threat to economic security; 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(in ukrainian) baltic journal of economic studies 115 vol. 1, no. 2, 2015 banking business models in ukrainian banking system yuliya onyshchenko1, odessa national economic university, ukraine abstract. the purpose of the paper is to work out and characterize bank business models that are formed in ukraine. methodology. our research we will spend among banks that are functioning on the ukrainian financial market and are not on the stage of liquidation, so the sample under study in our work is comprised of 131 banks which are different in their ownership structure and size. the core of the methodology is a statistical clustering algorithm that allows identifying the groups of banks (clusters) with similar business models as banks with similar business model strategies have made similar choices regarding the composition of their assets and liabilities. the cluster analyses were taken on the base of seven chosen indicators: bank loans, bank liabilities, enterprise loans, enterprise liabilities, household loans, household liabilities and trading assets. results. the traditional business model of bank is worked out. the bank business models that are functioning in ukraine are identified on the base of cluster analyses using balance sheet characteristics of 131 ukrainian banks. we find that in ukraine were formed three types of bank business models: “focused retail”, “diversified retail” and “corporative retail”. the description of each model is given. practical implications. more detailed research of distinguished models allows not only to find out the main advantages and disadvantages of each bank model, but also the main problems that follow the development of ukrainian banking sector. identifying of bank models and their studying simplifies searching and elaboration of regulatory instruments as there is a two-way causation between regulation and bank business models. this implies a symbiotic relationship between regulation and bank business models: business models respond to regulation which in turn responds to the evolution of new business models. value/originality. such survey is conducted at the first time among ukrainian banks. the main differences which are between european and ukrainian bank business models are marked out. recommendations concerning improving of bank business models in ukraine are given. key words: bank, bank business models, traditional bank business model, banking activity, central bank, financial regulation. jel classification: g20, g21, l21, l25 1. introduction today, ukrainian banking system is on the new stage of its development that is connected with overcoming of negative influence of the world financial crises and reforming of banking sector with the aim of providing stable and effective banking activity in ukraine. this process is complicated with instable internal political and economic environment. but successful banking sector reforming depends on the accounting of all its features such as the structural evolution of the financial system and financial markets; the macroeconomic environment in which banks and their customers operate; the decisive impact of eu and national regulation; the competitive environment in banking markets; the existing banking business models. the defining of banking business models contributes to a better understanding of financial and economic performance, risk behavior, and governance at a system level. it also serves to monitor banks’ behaviors and their contribution to systemic risk, which can be useful for its regulation. the current paper aims to identify business models of ukrainian banks. the article is organized in five sections. in the second section, we characterize the traditional banking business model. in the third section, we work out the system of indicators which lets us to classify banks. in the fourth section, we form clusters of banks and characterize them defying business models and highlighting systematic differences in the performance of banks in different groups. in the last section, we look into differences between bank business models that are formed in europe and ukraine. 2. traditional banking model banks according to their market strategy and balance sheet structure choose to be different from one another. in a competitive pursuit of growth opportunities, banks choose a business model to leverage the strengths of their organization. so bank business models are not static and evolve over time and under the influence of financial market development. corresponding author: 1 department of banking, odessa national economic university. e-mail: yulia_pere@rambler.ru baltic journal of economic studies 116 vol. 1, no. 2, 2015 before finding out the main banking models that are formed in ukrainian banking system it is natural to begin with a review of the traditional model of the banking firm that was the dominant model for decades and formed the basis of standard text-book analyses of the banking firm (see llewellyn, 1999). in this traditional model, financial intermediation is the dominant business of banks which lies in accepting deposits and utilizing their comparative advantages to transform deposits into loans. a bank is “an institution whose current operations consist in granting loans and receiving deposits from the public” ( x. freixas and j. c. rochet, 1997) this definition underlines that the bank main activity is acceptance of deposits and offering of loans, which distinguishes them from other financial intermediaries. however, banks typically conduct a broader range of activities, which can be subsumed under the following three functions (x. freixas and j. c. rochet, 1997): banks provide the public with liquidity (money) and payment services through their deposit-taking business; banks transform assets in terms of denomination, quality and maturity, as well as manage the associated risks; banks process information and monitor borrowers using specialized technologies. this activity lets them often establish long-term relationships with their clients, which may further mitigate the negative impacts of adverse selection and moral hazard on the resource allocation process. so, in the basis of bank activity organization lays a traditional business model that can change in time under the pressure of different factors. on our opinion, to understand the traditional business model of a bank is easier with help of using the business model canvas (alexander osterwalder, 2004). the traditional bank business model is represented in table 1. so, as we can see from the table 1, the banks are an intermediary between the depositor and the borrower. the traditional business model of a bank is very simple: offer lower interest rate to the depositor and higher interest rate to the borrower. it is important to underline that all depositors and borrowers can be segmented into retail customers, corporate enterprises (small companies, mid-size enterprises and large corporations) and financial intermediaries (often another banks). also bank can invest its funds into the different types of securities, so the issuers of securities can be referred to the customer segment. banks offer different value propositions such as passive banking operations (sourcing of funds, property and legal affairs and maturity), active banking operations (short-and long-term active jobs), neutral banking business (banking transactions and intermediary commission of banking transactions) and its own banking operations (shortterm and long-term banking business) that reach different customer segments in the form of deposit and loan products, investments into the profitable projects, and, of course, trust management. banks use multiple channels to reach out to their customers such as opening bank branches and establishing atms at convenient locations, providing call center, internet and mobile banking. today, with development of it technologies and in order to reduce their channel costs and operational risk banks are interested in automation. electronic banking (e-banking) is a contemporary form of banking that involves the use of modern information and telecommunication technologies in carrying out banking transactions from home, the office, or from business trip, 24 hours a day, 365 days in a year (cirovic m., 2001). banks developed new business models and moved away from the traditional model. several trends in bank business models emerged in the recent years (david t. llewellyn, richard reid, 2012): – banks increasingly diversified into more lines of business activity some of which had previously been inhibited with regulation; – bank assets expanded at a substantially faster rate than that of retail deposits creating an ever-widening ‘funding gap’; – the rise in bank loans substantially exceeded the rise in banks’ risk-weighted assets held on the balance sheet; table 1 the traditional business model of the bank (using business model convas) 8. key partners investment partners technology vendors central bank regulatory agencies credit agency rating agencies 7. key activities department operations branch operations bookkeeping call center operations it operations 2. value propositions deposit products (lower interest rates) loan products (higher interest rates) investment (higher interest rates) trust management (commission) 4. relationships personal assistance automation (where possible) 1. customer segments depositors: -retail customers -corporate enterprises -financial intermediaries borrowers: -retail customers -corporate enterprisers -financial intermediaries issuers of securities 6. key resources physical and it infrastructure loan assets 3. channels branches atms call centers internet mobile devices 9. cost structure interest expences channel costs 5. revenue streams interest income fee income baltic journal of economic studies 117 vol. 1, no. 2, 2015 – securitisation of loans became a central business strategy for many banks; – investment and trading activity increased sharply, and the proportion of traded assets in the total balance sheet rose substantially in many cases; – banks reduced their holdings of liquid assets as they developed greater access to wholesale funding markets; – the extent of maturity transformation also increased sharply as increasing use was made of short-maturity money market funding sources; – an increased dependency on wholesale and money market funding; – a powerful trend emerged towards using credit derivatives as a means of supposedly shifting credit risk. so the development of financial system leads to the appearing of different banking models from the traditional one that mainly depends on the banking activity direction in customer service on the financial market. 3. classifying banks: the database and the methodology our research we will spend among banks that are function on the ukrainian financial market. on the first of january, 2015 there was registered 163 banks in the banking system of ukraine. but we have to underline that 32 banks are on the stage of liquidation what is connected as with economic and political crises in ukraine, so with central bank policy. so the sample under study in our work is comprised of 131 banks which are different in their ownership structure and size. the core of the methodology is a statistical clustering algorithm. to our mind, the use of cluster analysis allows to identify the groups of banks (clusters) with similar business models. the idea is that banks with similar business model strategies have made similar choices regarding the composition of their assets and liabilities. cluster analysis is the task of grouping a set of objects in such a way that objects in the same group (called a cluster) are more similar (in some sense or another) to each other than to those in other groups (clusters). cluster analysis itself is not one specific algorithm, but the general task to be solved. it can be achieved with various algorithms that differ significantly in their notion of what constitutes a cluster and how to efficiently find them. popular notions of clusters include groups with small distances among the cluster members, dense areas of the data space, intervals or particular statistical distributions. among the methods of cluster analysis the most distribution got the method of k-means clustering. in centroid-based clustering, clusters are represented with a central vector, which may not necessarily be a member of the data set. when the number of clusters is fixed to k, k-means clustering gives a formal definition as an optimization problem: find the k-cluster centers and assign the objects to the nearest cluster center, such that the squared distances from the cluster are minimized. most k-means-type algorithms require the number of clusters – k – to be specified in advance, which is considered to be one of the biggest drawbacks of these algorithms. we make no a priori decisions as to which choice variables are more important in defining business models or as to the general profile of these models. assuming that a business model is an "abstract representation of an organization, be it conceptual, textual, and/or graphical, of all core interrelated architectural, co-operational, and financial arrangements designed and developed with an organization presently and in the future, as well as all core products and/or services the organization offers, or will offer, based on these arrangements that are needed to achieve its strategic goals and objectives" (al-debei, m. m., el-haddadeh, r ., & avison, d., 2008) and accounting the traditional bank business model that was worked out earlier, we decided that bank business model depends, first of all, on the customer segments. only with defining customer segment bank starts to work out its further business model. to account for these factors collectively seven instruments were used to form the clusters. these were: bank loans (as % of assets). the indicator measures the scale of wholesale and interbank activities, which proxy for exposures to risks arising from interconnectedness in the banking sector. bank liabilities (as % of assets). this indicator identifies the share of liabilities of other banks, including deposits, issued debt, and funds obtained from central banks. banks with greater interbank funding requirements, often due to an excessive reliance on short-term funding, faced severe problems in the earlier phases of the crisis. enterprise loans (as % of assets). this indicator identifies the share of loans to enterprise and shows what part of credit resources directed to supporting and providing of economic branches development. enterprise liabilities (as % of assets). this indicator identifies the share of deposits from enterprises, in the total balance sheet, indicating a reliance on more traditional funding sources and preference of corporate segment. household loans (as % of assets). this indicator identifies the share of loans to households and shows what part of credit resources directed to retail market. household liabilities (as % of assets). this indicator identifies the share of deposits from households in the total balance sheet, indicating a reliance on more traditional funding sources. trading assets (as % of assets). these are defined as non-cash assets other than loans; a greater value would indicate the prevalence of investment activities that are prone to market and liquidity risks. the procedure of objects clustering on the base of k-means method is realized in a calculable application package “statistica” in the module "cluster analysis". cluster analysis was carried out on the base of activity indicators of 131 ukrainian banks on january, 1, 2015. it is important to highlight that cluster analysis is an inexact science. the assignment of individual banks to a baltic journal of economic studies 118 vol. 1, no. 2, 2015 specific cluster, or model, depends crucially on the choice of instruments and procedures, such as the proximity metric, procedures for forming clusters and the stopping rules used. 4. bank business models in ukraine: results of clustering the clustering analysis identified four models as the most distinct form of clustering. table 2 gives the descriptive statistics for the four models resulting from the cluster analysis based on the seven selected balance sheet indicators. next, an overview of the main structural attributes of the clusters is provided. it is important to highlight once again that the instruments used in the clustering are a subset of the entire set of variables in the sample. comparison of clusters is given on figure 1. the first business model group was named “focused retail”, and it is characterized with a high share of enterprise loans on the balance sheet and high reliance on stable funding sources including deposits. in fact, customer (enterprise and household) deposits are about two thirds of the overall liabilities of the average bank in this group. this is the largest group in our research with 74 banks. so this group of banks, in practice, realizes the main task of banking system: transformation of household savings in credit resources for the enterprises that can provide economy growth in future. 0 20 40 60 80 bank loans bank liabilities enterprise loans enterprise liabilities household loans household liabilities trading assets focused retail diversified retail corporative retail fig. 1. comparison of clusters (values of ratios to total assets in per cent) sources: authors’ calculation the second business model group was labeled as “diversified retail”. the banks in this group can be described as universal banks, so they don’t have prefers in the one direction of banking activity. they function on the financial market using all channels of attraction and placing resources. this group counts 39 banks. the third business model group we labeled “corporative retail” as primarily banks of this group serve enterprises attracting financial resources, giving loans and even making investments. this group counts only 18 banks. table 3 characterizes the three business model profiles depending on all seven chosen variables. there is specified the average ratio of all variables for all banks that were classified in the corresponding business model (columns). table 3 business models profiles (average value of ratios to total assets, %) chosen variebles focused retail diversified retail corporative retail bank loans 3,21 7,39 2,62 bank liabilities 14,21 13,75 8,63 enterprise loans 62,22 33,46 55,75 enterprise liabilities 25,11 20,63 38,75 household loans 4,79 14,51 4,29 household liabilities 28,68 25,31 20,89 trading assets 7,15 9,60 11,42 sources: authors’ calculation as we can see from the table, the “focused retail” model includes banks with the next average structure of their balance sheet: enterprise loans are on the level of 62.22% and prevail in structure of assets; enterprise and household liabilities are practically on the same level of 25.11% and 28.68% respectively. the “diversified retail” group is characterized with almost uniform structure, so bank liabilities are on the level of 13.75%, enterprise loans – 33.46%, enterprise liabilities – 20.63%, household loans – 14.51%, household liabilities – 28.68%. the third business model “corporative retail” comprises banks whose main clients are enterprises that are confirmed with the value of variables which characterize the average bank table 2 descriptive statistics for each cluster types of model bank loans (% assets) bank liabilities (% assets) enterprise loans (% assets) enterprise liabilities (% assets) household loans (% assets) household liabilities (% assets) trading assets (% assets) model 1 – focused retail (74 obs.) mean 3,51 13,15 70,14 22,97 3,66 29,76 4,69 st.dev. 5,016 15,330 12,419 10,461 4,181 18,134 6,583 var 25,16 235,01 154,23 109,43 17,48 328,83 43,34 model 2 – diversified retail (39 obs.) mean 6,84 18,40 24,99 15,75 15,97 26,24 10,30 st.dev. 13,838 18,318 16,995 12,569 18,724 23,320 13,725 var 191,50 335,56 288,84 157,97 350,57 543,84 188,37 model 3 – corporative retail (18 obs.) mean 1,66 3,08 42,37 56,83 5,43 14,37 19,94 st.dev. 3,201 3,840 19,019 14,130 8,502 12,356 23,760 var 10,25 14,75 361,74 199,66 72,29 152,68 564,56 baltic journal of economic studies 119 vol. 1, no. 2, 2015 of the group. so, enterprise loans and liabilities constitute 55.75% and 38.75% accordingly. we don’t give out bank loans and trading assets as they are on the lower point in the structure of balance sheet of all banks despite the group that is concern with the economic situation and with practically absence of stock market in our country. 5. comparison with another researches in this sphere during 2014 there were taken two researches among european banks in this sphere. ayadi and de groen (2014) classify european banks into four business models, which they named as investment banks, wholesale banks, diversified retail and focused retail. rungporn roengpitya, nikola tarashev and kostas tsatsaronis (2014) identify three business models which they labeled as “retailfunded”, “wholesale-funded” and trading. we must underline that in this researches the investment bank model corresponds to trading model that includes banks that have substantial trading activities and in funding are focused on less stable and less traditional sources, such as debt, liabilities and, more importantly, repurchase agreements. the two wholesale models correspond to each other and characterize banks of this group as banks with a heavy reliance on interbank funding and lending which are also very active in non-traditional uses of these funds, including trading assets (i.e. all assets excluding cash, loans and intangible assets. and at least, the diversified and focused retail models in the first research together correspond to retail-funded model in the second one. so retail-oriented banks used relatively non-traditional funding sources and continued to expand during the crisis, implying that the reliance on multiple sources of financing has reinforced the group’s growth prospects. the main difference between the diversified and focused retail models is that while the diversified retail model banks have a greater reliance on debt markets, focused retail model banks rely primarily on customer deposits. our research in the ukrainian banking system shows that on the financial market of ukraine are absent banks with investment and wholesale business models. identified business models (“focused retail”, “diversified retail” and “corporative retail”) of ukrainian banks relate to the retail-oriented banks. let’s study this problem deeper. the absence of investment bank is connected with weakly developed stock market in ukraine. thus, as to the legislation in ukraine all banks can be only created in the form of joint-stock company and their shares must be in free float on the stock market. but last one don’t become more developed and its capitalization is on the low level in comparison with world stock markets (look figure 2) figure 2 shows the world according to free-float equity market capitalization and we can’t even see ukraine on it, that confirm that market capitalization of our country is very low on the level of nearly 4 $bn. ukrainian banks can’t also make their investments on the world financial markets according to the foreign exchange control that is provided by central bank of ukraine. if someone wants to make their investments abroad, he must receive the individual license for the certain term depends on the goal of investment. connected to the wholesale banks, they can be defined as those one who provide services to other banks or large corporations. the absence of this type banks in ukraine can be explained with two main reasons. firstly, the banks in the ukrainian banking system are two small in relation to the world banks. the assets of all ukrainian banks are lower than the assets of the largest world banks (look table 4). fig. 2. the world according to free-float equity market capitalization ($bn) sources: bank of america, 2015 baltic journal of economic studies 120 vol. 1, no. 2, 2015 table 4 the main indicators of the largest world banks on january, 2015, $bn bank name country assets capital industrial&commercial bank of china limited china 3320,9 62,5 china construction bank corporation china 2697,9 40,3 agricultural bank of china limited china 2573,9 58,8 bnp paribas sa france 2513,6 32,6 bank of china limited china 2457,4 58,1 banking system ukraine 1316,9 148,0 sources: bank ranking (2015), key performance indicators of banks in ukraine as we can see, assets of ukrainian banking system are on the level of 1316.9 $bn. whereas assets of the biggest world bank – industrial & commercial bank of china limited are 3320.9 $bn. that is in 3 times more. secondly, the high cost of financial resources on the ukrainian financial market doesn’t make interbank funding and lending attractive to the banks as constant type of banking activity, but this channel can be used as tool to maintain liquidity. the decision of these two problems in ukraine leads to the development of banking system that has to play the main role in economic growth of the country. to achieve this goal it is necessary to combine efforts of banking system, under the control of the national bank, government, parliament and president, that must be sent to realization of general task 6. conclusions the traditional business model of bank on the base of business model convas was worked out. banks developed new business models and moved away from the traditional model. the trends in bank business model development had been found. the bank business models that were formed in ukraine had been identified on the base of cluster analyses using balance sheet characteristics of 131 ukrainian banks. the cluster analyses were taken on the base of seven chosen indicators: bank loans, bank liabilities, enterprise loans, enterprise liabilities, household loans, household liabilities and trading assets. we found that in ukraine there were formed three types of bank business models: “focused retail”, “diversified retail” and “corporative retail”. the description of each model was given according to the variance value in each cluster. it was established that bank business models that functioned in ukraine differed from those that characterize european banks. the main reasons of absence such bank business models as investment and wholesale were analyzed. references al-debei, m. m., el-haddadeh, r ., & avison, d. (2008). "defining the business model in the new world of digital business." in proceedings of the americas conference on information systems (amcis), vol. 2008, pp. 1-11. alexander osterwalder (2004). the business model ontology – a proposition in a design science approach. phd thesis university of lausanne. [electronic resource]. – retrieved from: http://www.hec.unil.ch/aosterwa/ phd/osterwalder_phd_bm_ontology.pdf ayadi, r and w de groen (2014): banking business models monitor 2014 – europe, centre for european policy studies and international observatory on financial services cooperatives. [electronic resource]. – retrieved from: https://www.ceps.eu/system/files/banking%20business%20models %202014.pdf bank of america, merrill lynch (2015). lbofaml’s transforming world atlas, 04 august 2015 [electronic resource]. – retrieved from: http://www.bofaml.com/content/dam/boamlimages/documents/pdfs/ bofamlatwatlas.pdf bank ranking (2015) – top banks in the world. 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[electronic resource]. – retrieved from: http://www.bank.gov.ua/ control/en/publish/article?art_id=37942&cat_id=37937 rungporn, roengpitya, nikola tarashev, kostas tsatsaronis (2014). bank business models bis quarterly review, december 2014. [electronic resource]. – retrieved from: http://www.bis.org/publ/qtrpdf/r_qt1412g.htm freixas, x. and rochet, j. c. (1997). the microeconomics of banking, mit press. [electronic resource]. – retrieved from: https://mitpress.mit.edu/sites/default/files/titles/content/9780262062701_sch_0001.pdf baltic journal of economic studies 121 vol. 1, no. 2, 2015 юлия онищенко бизнес модели банков в банковской системе украины аннотация. целью работы является выделение и характеристика бизнес моделей банков, которые сформировались в украине. методика. наше исследование мы проводили среди банков, которые функционируют на украинском финансовом рынке и не находятся в стадии ликвидации. таким образом, выборка в нашей работе охватывает 131 банк, которые отличаются по структуре собственников и размеру. основой исследования стал статистический кластерный алгоритм, который позволил определить группы банков (кластеры) с похожими бизнес моделями. отметим, что банки с похожими бизнес моделями принимают практически одинаковые решения при пересмотре и формировании своих активов и обязательств. кластерный анализ проводился на базе семи показателей: кредиты банкам, средства банков, кредиты юридическим лицам, средства юридических лиц, кредиты физических лиц, средства физических лиц, инвестиционный портфель. результаты. традиционная бизнес модель банка была разработана. бизнес модели банков, которые функционируют в украине, были определены на базе кластерного анализа с использованием балансовых показателей 131 банка в украине. было выделено три модели банков, которые сформировались в украине. описание каждой модели было проведено. практическое значение. более подробное исследование выделенных бизнес моделей банков в будущем позволит определить основные преимущества и недостатки каждой модели, а также выявить основные проблемы, которые сопровождают развитие отечественной банковской системы. определение бизнес моделей банков и их изучение позволит упростить исследование и выбор инструментов регулирования для каждой банковской бизнес модели, так как между ними существует двухстороння связь. значение/оригинальность. подобное исследование среди украинских банков проводилось впервые. основные различия между европейскими и украинскими бизнес моделями банков были выделены. рекомендации относительно улучшения бизнес моделей банков украины были разработаны. baltic journal of economic studies 222 vol. 4, no. 3, 2018 corresponding author: 1 department of public administration and land use, classical private university. e-mail: victor30077788@gmail.com 2 department of public administration and land use, classic private university. e-mail: pokataeva.olga1978@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-222-227 development vector of informatisation of society pavlo pokataiev1, oleg matviichuk2 classic private university, ukraine abstract. the purpose of the paper is to cover the main moments of the state program of informatisation of society and on the basis of the sources used to propose a strategic vision of the further development of the information society in the context of its financing. methodology. the survey is based on the analysis of the development of information society in ukraine taking into account features of state policy in the field of informatisation. laws and regulations that influence the national program of informatisation are outlined. the scientific material, which describes the processes of financing and implementation of the informatisation program, of domestic scientists is indicated. the direction of financing of the state program of informatisation of society in the context of integration into world processes is highlighted. the formation of conclusions and schemes of the vector of development of the information society is based on the research of scientific works and on the basis of our considerations in the context of the use of the intellectual potential of the citizens of the country. results. the positive directions of foreign investments for funding the state program of informatisation of society, such as competition, innovations, accumulation of capital are outlined. on the example of one of the regions of ukraine, the main problems are identified, which prevent to more quickly implement the national program of informatisation. the way of ensuring national competitiveness and investment attractiveness is proposed, as a result of solving certain problem issues. the algorithm of actions in the form of a vector for the development of the information society, for the improvement of the sustainable development of the information society, is formed. practical implications. proposals for developing the information society can be implemented in the state policy of informatisation of state authorities and the country as a whole. the main scientific achievements of this article can be used in the national program of informatisation, which determines the short, medium, and longterm development of the information society in the context of the transformation of social, economic, ecological, scientific and technical, defence, and cultural activities in society at the national level. it is also possible to propose the main content of this scientific material to be used in the future addition of the concept of the national program of informatisation, regional, sectoral programs of informatisation in the context of the management of the implementation of information technologies and programs and projects aimed at improving the infrastructure of the territorial community. value/originality. positive and negative tendencies of informatisation of society against the background of the active introduction of the state program of informatisation of society are presented; a scheme is proposed that represents the vector of the development of the information society. the main components of the interaction and growth of the information society are as follows: the negative factors, on the basis of which there is formed the further policy of public administration, tools that can be used in solving current and possible future problem issues, directions of infrastructure development for the implementation of opportunities of the information society, the division of responsibilities between the authorities depending on their resource capacity and maximum capacity to meet the needs of citizens. key words: investments, financing, public administration. jel classification: e22, f65, h83 1. introduction at the moment, the formation of the information society and the effective use of information and communication technologies have become a permanent part of the further evolution of society. the programs of the informatisation of society are the main priority of increasing social standards in the countries of the world. however, despite the great potential of information baltic journal of economic studies 223 vol. 4, no. 3, 2018 technology, their implementation, unfortunately, is in the plane of uncertainty over the lack of all available instruments provided by the regulatory framework of countries in the transformation period. although the implementation of information and communication technology is increasing, relative to global trends, the state of the information society in developing countries is in its early stages. attracting investments in relation to the program of informatisation was formed on the basis of scientific researches by such scientists as: l.m. borshch, a.p. haidutskyi, b.v. hubskyi, l.l. antoniuk, a.f. boiko, v.m. hrynova, and others. based on the research of m.f. tarasenko, n. wiener, o.m. riakin, b.v. biriukov, the essence of information for the society was specified, however, further strategic vision against the background of the introduction of the state program of informatisation and its financing require further research. the purpose of the paper is to cover the main moments of the state program of informatisation of society and on the basis of the sources used to propose a strategic vision of the further development of the information society in the context of its financing. 2. national program of informatisation the introduction of a national program of informatisation defines a strategy for the development of society, which will affect the social, economic, ecological scientific and technical, defence, national-cultural, and other activities in society at the national level. the national program of informatisation should include the following regulatory documents – the concept of the national program of informatisation; a set of state programs on informatisation; branch programs and informatisation projects; regional programs and projects of informatisation; programs and projects of informatisation of local self-government bodies. to accelerate the financing of the national program of informatisation of society, it is necessary to identify the main vectors in which the state authorities will create a favourable environment for the growth of financial revenues in projects that will implement the national program of informatisation of society. when financing the informatisation, an attention should be paid to measures aimed at implementing a full range of reliable, timely analysis of all types of human activities that require a general and narrow informatisation of processes. thus, informatisation and its financial support can be realized only if the intellectual potential of society is actively used and information technology is actively implemented in scientific and industrial activities (kozak, 2017). an important role in the national program of informatisation is played by approaches to financing long-term priorities of socio-economic, scientifictechnical, national-cultural development of the country and active involvement in the international information space both of ukraine and most countries of the world. the program of national informatisation itself is a complex system with a project of informatisation of the specialization of the state policy and priority directions of the development of information infrastructure (zakon ukrainy, 2016). thus, since 1999, the implementation of programs “eeurope”, “eeurope 2002”, and “eeurope 2005” has started in the countries of the european union. according to it, the introduction of e-services was envisaged, such as: e-learning; ehealth; e-government. it was planned to create a dynamic (competitive) environment for e-business and secure information infrastructure (hurkovskyi, 2010). the government of the republic of italy, in developing the main provisions of information policy, among the main priorities, identified the transformation of government bodies based on ict, the essence of which was the creation of free online access for citizens and entrepreneurs, the implementation of the computerization program and e-learning for civil servants, the transparency of the state document circulation using the internet, providing quality information products and services. the fulfilment of the set goals is controlled by the national centre for informatics under the state administration (centro nazionale per l’informatica nella pubblica amministrazione, cnipa) (riabokon, 2016). the implementation of state policy in the field of informatisation of society should have a vector of rational use of industrial and scientific and technical potential of material and technical and financial resources for the creation of the modern informational infrastructure for solving issues of economies of the countries of europe and the world. the use of public funds in the context of the development of the information society, namely, the financial component of processes of implementation of information technologies, should be based on the following: the creation of a national information and telecommunication system; development of the system of national information resources; informatisation of strategic directions of development of the state economy, its security and defence, social sphere (zakon ukrainy, 2013). 3. financing and implementation of the state program of informatisation of society in order to provide funding for the state program of informatisation of society, the national economy should be integrated into world processes, based on internal and external preconditions of the information society’s requests. therefore, the financial component of the information society should balance between the investor’s point of view, which may affect the growth of financial resources, the direction of information and baltic journal of economic studies 224 vol. 4, no. 3, 2018 society, and respond to the economic feasibility of the use of a particular information project and its social component. the attraction of foreign investments to finance state programs is, firstly, the step of creating a project on an international scale and attracting international experience. also, it should be noted that foreign investment can be the source of new technologies, management skills, and marketing systems in the field of information society. the attraction of foreign investments to finance the state program of informatisation of society can stimulate competition, innovations, accumulation of capital for the further development of information technologies in all aspects of public administration and state development. the most positive aspects of attracting foreign investment will be the following: 1) modernization of the infrastructure – the active use of international models of production technology and labour organization; 2) increase of production volumes with the help of new information technologies that can optimize approaches to expenses of resources in production; 3) balance of payments; 4) increasing competitiveness. another important feature of foreign investment is the investment of finance already in the existing infrastructure, which significantly solves the transformational processes of informatisation of society (zakon ukrainy, 2013). the main problems of the development and implementation of the state program of informatisation of society and its financing are: 1) the development of society – the presence of a digital imbalance in access of citizens to the internet. unfortunately, the level of computer literacy of the population is slowly growing, as well as signs of low level of implementation and use of information and communication technologies in the social spheres of society; 2) e-government – the presence of problematic issues concerning the development of information society within the framework of communication with state authorities, namely, inter-compatibility (interoperability) of various information systems created at different times, according to different principles, on different technological platforms; 3) development of public administration – low level of cooperation between state authorities and local self-government bodies providing socio-economic and socio-political relations within the framework of informatisation of society (honcharenko, 2017). also, one of the components of the influence on the development of financing the state program of informatisation of society is a number of international assistance programs for the development of small and medium-sized enterprises, which, in turn, affects the active involvement of society in transformational processes through information technologies (table 1). on the example of ukraine, let us consider the introduction of the program of the informatisation of the society. when reviewing the approved electronic information program “electronic lviv region” for 2018–2020, one should note the state and problems of informatisation of the region in the context of financial support of the national program of informatisation of society in ukraine. during 2014–2016, ukraine made significant progress – from the 77th to 32nd place, in particular, this progress was represented and actively used in the areas of electronic consultations and electronic decisions. a striking example of electronic solutions in ukraine that influences the provision of the information society program is the development and implementation of the prozzoro online platform for public procurement, the adoption of laws and regulations in the field of open data, the creation of a state portal of open data, the introduction of e-declaration for public officials’ income and property. on the example of the lviv region, one can identify the main problems that hinder to introduce more quickly the national program of informatisation of society, namely: – the absence of a single regional information and telecommunication infrastructure of state authorities; – a large number of outdated computer equipment at various levels of state authorities, which does not allow operating in accordance with modern demands of society; table 1 sme development programs (honcharenko, 2017) initiator description canada canada-ukraine trade and investment support (cutis) project; partnership for local economic development and democratic governance (pleddg) usa leadership in economic governance (leg/lev) usaid usaid ukraine trade policy project (utpp) (usaid / international development group (idg)); action plan for reforming the customs system (usaid / ibi international); creating better business environment program (forbiz project within eu4business) (international technical assistance, ebrd, eib) switzerland strengthening small and medium enterprises business membership organizations project (switzerland’s government (seco) – united nations development programme (undp)) sweden promoting ukrainian smes in the fruit and vegetable sector in the output on global and domestic markets and creating added value (the swedish government / itc) eu sme flagship initiative within the framework of the deep and comprehensive free trade areas baltic journal of economic studies 225 vol. 4, no. 3, 2018 – low pace of implementation of new information and communication technologies in all spheres of social life, including open source software; – lack of automated systems at the level of regional authorities, which prevents communication between regional authorities and society; – lack of subdivisions ensuring the implementation of informatisation at the regional level (prohramy informatyzatsii. “elektronna lvivshchyna”, 2017). in order to increase the possibilities of informatisation of society, the government of the state actively uses political tools of the attraction of investment resources without paying attention to the rationality of distribution of public funds. according to recent research by unctad on investment promotion, the main purpose of investment resources is the creation of new jobs, then technology transfer and export promotion, the main sectors in ukraine are the information technology and business services sector, then agriculture and tourism. an important factor in the growth of investment revenues, through which it is possible to increase the national program of informatisation of society, is an increase of national investment security. for ukraine, in order to successfully implement the national program of informatisation, a broad and narrow analysis of all directions and areas where consumers are ordinary citizens of ukraine should be conducted (motuzka, 2016). today, in order to carry out and ensure national competitiveness and increase investment attractiveness to carry out a wide informatisation of society, the following problems should be solved: high level of corruption; the emergence of collisions in the field of informatisation as a result of gaps in the legislative framework; insufficient state financing of domestic scientific institutions; imperfect methodological provision of investment project preparation; shortage of experienced and skilled specialists in project management; lack of practical experience and poorly developed infrastructure of venture capital investments, and so on (dyskina, krasnenska, 2017). however, it should be noted that the process of informatisation of society has certain problem issues, which is manifested in the threat of using advances in the information sphere. in defining the speed of development of this area, unlike the legal organizational and technological sphere, information one is the least protected element of the state mechanism. implementation of the national program of informatisation of society in the context of its financing – the process of implementation of the program should be based only on the internal resources of the state, in order not to depend on external factors, as well as other states. the development of an information society supported by the state should have preconditions for sociocultural involvement when all goals are relevant to the possibilities of society. financing of the national program of informatisation of society can be fully ensured in conditions of active cooperation between the state and society because most of the financial resources belong to the population of ukraine. 4. the vector of development of informatisation of society positive and negative trends in the informatisation of society against the background of the active introduction of the state program of information society should be noted: – electronization of socio-economic and socio-political relations aimed at influencing the engineering and technical process, design, production, distribution of electronic technologies, which are integrated into production, used in scientific research, household appliances, transport, communication facilities, etc.; – computerization of society – as a process that takes place on the basis of the active growth of the role of information technologies in all spheres of society’s life; – mediatization of society – a process determined in the creation and distribution of the latest systems of collective communication (kyvliuk, 2011). the proposed scheme (figure 1) is a vector of information society development and has the key components that form a system that can be used in the development of long-term plans. the key components of the presented scheme are the following: directions for infrastructure development, negative factors, security tools, and positive effect. negative factors in the direction of the informatisation of society determine the main reasons why it is impossible to further develop a society in the context of infrastructure development for the formation of the information society. the directions of infrastructure development are possible elements, which should first of all be formed in the state strategy of informatisation and have a common vector of development and management. the security tools represent measures in the process of informatisation of society in various spheres of life of society and the state, namely: – infrastructure development on the internet; – introduction of integrated information and telecommunication systems in different sectors of economies of the world countries; – formation in all government bodies of the structural units responsible for information and computer resources support; – ensuring the protection of information, both confidential and public at the level of the legislative field of countries; – creation of expanded information on the use of various electronic services that will be implemented and available for each citizen of the state. baltic journal of economic studies 226 vol. 4, no. 3, 2018 one of the tools to ensure the fulfilment of the task of the informatisation of society is the division of powers in the hierarchy of state authorities, both at the level of central and local authorities. the final component is the positive effects of the implementation of all the measures, factors, and directions mentioned above. 5. conclusions based on the foregoing, it should be noted that the information society is a prism of the functioning of democratic institutions and an important test for society itself in the context of the implementation of the state program of informatisation of society and its financial support of informatisation of society positive effect managerial experience advanced technology improvement of qualification improving communication negative factors low level of development lack of capacity lack of state policy insufficient government funding infrastructure development directions integration of ukraine in the world information space formation and support of the market for information products and services national network of information support it application and development national system of information analysis support tools connecting to the internet integrated information and telecommunication systems structural units of information and computer resources support providing information security normalization of information relations distribution by level of responsibility local self-government authorities executive authorities municipal authorities and their structural subdivisions territorial departments of central authorities councils of united territorial communities figure 1. development vector of informatisation of society source: the scheme is formed based on all sources used baltic journal of economic studies 227 vol. 4, no. 3, 2018 financing. important prerequisites for financing the program of informatisation are the factors contributing to the expansion of the system of representative democracy and the active involvement of society. implementation of information technologies in society is important, namely, provides access to information and data protection for every person in the community, establishes communication between state authorities and society, reduces the costs of cooperation between different representatives of the third sector, private business, and state authorities. thus, the state program of informatisation of society provides the opportunity to form public institutions as one of the important elements of statehood and attracting investments in order to develop and implement the realities of the demands of society in various spheres of life. references: pro natsionalnu prohramu informatyzatsii [about the national program of informatization] zakon ukrainy, 2016. retrieved from: http://zakon5.rada.gov.ua/laws/show/74/98-%d0%b2%d1%80 pro kontseptsiiu natsionalnoi prohramy informatyzatsii [about the concept of the national program of informatization] zakon ukrainy, 2013. retrieved from: http://zakon2.rada.gov.ua/laws/show/75/ 98-%d0%b2%d1%80 kozak l.s. (2017). inozemni investytsii v ekonomitsi ukrainy [foreign investments in the economy of ukraine] ekonomika ta upravlinnia na transporti, vyp. 4, pp. 109-115. honcharenko o.v. (2017). stymuliuvannia rozvytku it-sektoru: svitovyi dosvid ta ukrainski realii [stimulating the it sector development: world experience and ukrainian realities]. retrieved from: http://eztuir.ztu.edu.ua/ handle/123456789/7024. prohramy informatyzatsii. “elektronna lvivshchyna” (2017). [informatization programs. "electronic lviv region"]. retrieved from: http://www.oblrada.lviv.ua/userfiles/image/docs/proekt/2017/proekt_840.pdf motuzka o.m. (2016). perspektyvy rozvytku sfery priamoho mizhnarodnoho investuvannia [perspectives for the development of direct international investment]. retrieved from: http://194.44.12.92:8080/jspui/ bitstream/123456789/2392/1/%d0%9c%d0%be%d1%82%d1%83%d0%b7%d0%ba%d0%b0.pdf dyskina a.a., krasnenska o.b. (2017). problemy zaluchennia inozemnykh investytsii v ekonomiku ukrainy [problems of attracting foreign investments into the economy of ukraine]. retrieved from: https://economics.opu.ua/files/ science/form_ek_rozv/2017/30.pdf kyvliuk o.p. (2011). informatyzatsiia ta informatsiina tsyvilizatsiia: sotsialno-filosofskyi aspekt [informatization and informational civilization: socio-philosophical aspect]. retrieved from: http://enpuir.npu.edu.ua/ bitstream/123456789/14418/1/kyvluk.pdf hurkovskyi v.i. (2010). zarubizhnyi dosvid formuvannia informatsiinoho suspilstva: perspektyvy adaptatsii v ukraini [foreign experience in the formation of information society: perspectives of adaptation in ukraine] publichne upravlinnia: teoriia ta praktyka, № 2, pp. 51-57. riabokon o. (2016). derzhavna informatsiina polityka formuvannia informatsiinoho suspilstva: zarubizhnyi dosvid [state information policy for the formation of information society: foreign experience] nauk. pr. nats. b-ky ukrainy im. v.i. vernadskoho : zb. nauk. pr., vyp. 43, pp. 97-114. baltic journal of economic studies 63 vol. 4, no. 5, 2018 corresponding author: 1 lviv polytechnic national university, ukraine. 2 national academy of internal affairs, ukraine. e-mail: zarybey@bigmir.net 3 national academy of internal affairs, ukraine. e-mail: olgarum@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-63-66 concerning the need for improvement of the methodology of investigating frauds and development of methods of investigation of its individual types oleksiy humin1, viktoriia zarubei2, olha rymarchuk3 abstract. nowadays in a difficult economic situation, frauds have become widespread in ukraine in various spheres of human life. increase in the number and quality of such crimes leads to significant losses of financial resources not only of citizens but of the state as a whole. therefore, an important issue for our nowadays is the study of the mechanism of rapid, complete, and effective investigation and prevention of such crimes. in ukraine, there is an active awareness of the population about the ways of committing such crimes and creating measures to protect confidential information. however, official statistics show a significant amount of fraud and an insufficient level of their disclosure. one of the reasons is the obsolete methods of investigating fraud and the lack of methods for investigating certain types of it. the aim of the article is to analyse scientific research in order to establish a level of methodological support for law enforcement agencies in investigating fraud. due to the fact that methodological provision of practical divisions plays the leading role in the fast, full, and effective investigation of frauds, therefore, the studied question deserves a special attention. methodology. the author substantiates the need to improve the existing methodological recommendations because since over time they lose their content. besides, there is the necessity to create new techniques that are not reflected in the writings of scientists in investigating various types of fraud. based on the analysis of forensic literature, we can make a conclusion that most of the scientific works are devoted to the investigation of fraud with financial resources. therefore, the author proposes to pay attention to other types of fraud and to formulate methodological recommendations for practical units to young and experienced scientists on the basis of their own research. results. the concepts and types of fraud are defined in the article. besides, the works of criminologists, which are devoted to the peculiarities of investigating such types of crimes, are analysed. the official statistics, which impresses with data on undisclosed fraud, are presented here. this once again confirms the necessity for scientific development of the mentioned problem. a particular attention is paid to the lack of proper methodological support for practical units during the investigation of such types of crimes. in this regard, the author provides corresponding suggestions that will help to improve the investigation. practical impact. since the fraud investigation technique helps to the most successful achievement of the objectives of criminal justice, then in order to reduce the number of undisclosed crimes, it is necessary to develop and provide practical guidance to the methodical recommendations in a timely manner. correlation/originality. the urgent issue of nowadays is a complete, effective investigation of criminal offenses, and fraud is no exception. the improvement of the methodology for fraud investigations and the development of methods for investigating certain types of fraud is a necessary step for it. key words: fraud, deception, abuse of trust, fraud investigation technique, thesis researches, methodology for investigating certain types of fraud. jel classification: k39, k49 baltic journal of economic studies 64 vol. 4, no. 5, 2018 1. introduction recently, fraud in ukraine has become widespread and can be characterized by a change in forms, types, and methods. the penetration of fraud in the sphere of entrepreneurial activity, particularly, investment, trust, insurance, banking is connected with economic transformations in the country, and the development of market relations (shepitko, 1998; piaskovskyi, chornous, ishchenko, alieksieiev, 2015). thus, according to statistics of the prosecutor general’s office of ukraine for 2016, 45,764 fraud cases were registered – of which only 7844 persons were notified of suspicion and 783 with a statement of indictment; for 2017, there were 36,650 such crimes – of which only 10147 persons were notified of suspicion and 8567 with a criminal record. and during 9 months of 2018, there were 28,194 fraud cases – of which only 6964 were notified of suspicion and 5558 were with a criminal record (statystychni dani heneralnoi prokuratury). the effectiveness of the investigation of such types of crimes is affected by many factors of subjective and objective nature; and one of which is the degree of development of criminalistics techniques. the purpose of the last one is assistance to the most successful achievement of problems of criminal proceedings. in order to talk about the state of scientific development of this issue, we should analyse all existing techniques and scientific developments of criminologists. 2. statement of the basic material according to art. 190 of the criminal code of ukraine, fraud is the taking possession of someone else’s property or the acquisition of the right to property by deception or breach of confidence. the existence of deception or breach of confidence is the main point here. and information, which was published by participating firms of the pwc network, which conducted the ninth global economic crime and fraud survey, is rather interesting. such information is based on responses received from more than 7,000 respondents from 123 countries of the world. thus, according to a 2018 survey, 48% of ukrainian organizations suffered from economic crime and fraud over the past two years, compared with 43% in 2016. corruption remains one of the main types of economic crimes, the negative impact of which is experienced by ukrainian organizations. it is interesting that 73% of respondents answered that their organizations have been victims of corruption over the past two years. the most common five forms of economic crime and fraud also include: misappropriation of property, fraud in the field of procurement, fraud in the field of personnel management and cybercrime (vsesvitnie doslidzhennia ekonomichnykh zlochyniv ta shakhraistva 2018 roku). in general, in the science of criminal law, a fairly significant number of methods of fraud are identified. analysis of criminal science literature (shepitko, 1998; shulha, plakhotina, balaniuk, 2013) made it possible to distinguish the following types: 1) depending on the direction of the fraudulent encroachment: in order to seize state or collective property (by obtaining this property with the help of fake documents at the bases, warehouses, and other objects using the omissions of the corresponding officials; by illegal receiving the state pensions or other payments from social security authorities by means of counterfeit documents on work experience, or salary or any other data, which are necessary for receiving pensions; by purchasing certain goods in credit for counterfeit documents and avoiding payment of the remaining amount; assignment of the property which is mistakenly released in a large number or the best quality; receiving an advance on a promise to perform certain work or for the supply of goods with subsequent evasion from the fulfilment of obligations under the contract; supply of goods in a smaller quantity and of lower quality than stipulated by the contract); supply of goods in a smaller quantity and of lower quality than stipulated by the contract); in order to seize the individual property of citizens (substitution of items of sale, exchange and money, which should be in order to pass to the counterparty, the sale of products that are of lower quality than it is written in the agreement, carrying out lotteries, divination or empiricism as a form of lending, borrowing money without the intention to return a debt, marital fraud, collection of “donations”, sale of inalienable property, fraud with payment cards, etc.); 2) depending on the sphere of social and economic activity: social assistance, domestic services, insurance, tourism, removal of workforce abroad, etc.; 3) depending on the nature of “relationships” that arise between enterprises or economic partnerships: fictitious representation, fictitious mediation, borrowing under fictitious projects. the mentioned number of methods of fraud is simply impressive and they are not exhaustive. any sphere of human life connected with the circulation of finance can serve as a field for fraudulent actions. despite a variety of ways of fraud, investigation of such crimes has its peculiarities. for example, the algorithm of actions at an initial stage of investigation of fictitious business will differ from the algorithm of actions at the investigation of marriage fraud and so on. therefore, the development of separate investigative techniques is required. as s. s. cherniavskyi states, for the investigation of financial fraud, it is necessary to develop a complex methodology that will have two components: general provisions (foundations) that will reveal criminalistics characteristics of various fraud and special (separate) investigative techniques, which will be distributed according to different criminological significant features (for example, in the field of financial activity, depending on the specifics of individual operations, etc.). baltic journal of economic studies 65 vol. 4, no. 5, 2018 the reason for developing a comprehensive methodology for investigating financial fraud is the need for law enforcement practice since the individual features of these crimes are closely connected with the process of proof, which determines the specifics of nomination and verification of versions, planning of the investigation, conducting investigatory (search) operations, operational search activities, their complexes, etc. (cherniavskyi, 2009). considering all the mentioned above, it is necessary to study and analyse the state of scientific development of techniques for investigating various types of fraud. also, it is necessary to evaluate the possibility and effectiveness of providing them with practical units for the prompt, complete, comprehensive disclosure and investigation of such crimes. the conducted monitoring made it possible to form a candidate’s dissertation research in chronological order, which was conducted and passed its ph.d. defence in ukraine and devoted to the problems of investigation of fraud. particularly, we are talking about such theses as: kurman o. v. methods of investigation of fraud with financial resources (kharkiv, 2002); musienko o. l. theoretical principles of investigation of fraud in modern conditions (kharkiv, 2007); pazinich t. a. forensic characteristics of fraud and main provisions of their investigation (kharkiv, 2007); golovkin s. v. forensic characteristic of fraud against the property of the person and its use at the initial stage of the investigation (odesa, 2008); anapolska  a. i. investigation of fraud and related crimes committed in the field of electronic payments (kharkiv, 2010); ishchuk i. v. initial stage of investigation of fraud in motor vehicle insurance (kyiv, 2010); dekhtiarov ye. v. peculiarities of investigation of fraud committed in the field of performance of economic and contractual obligations (kyiv, 2011); okhrimchuk t. v. forensic characteristics of fraud with financial resources and main directions of investigation (kyiv, 2011); popova i. m. investigation of fraud involving the attraction of citizens’ funds for housing construction (kyiv, 2011); teriokhin d. g. the initial stage of the investigation of fraud committed through the illicit obtainment of a targeted consumer loan (kyiv, 2011); knyazev s. m. investigation of fraud committed by a financial pyramid (kyiv, 2012); kruzhevskyi a. v. forensic characteristics of fraud in the field of mobile communications (kyiv, 2012); andriiv  d. m. investigation of crimes aimed at taking possession of housing (kyiv, 2012); kurulenko n. yu. methods of investigation of fraud in the sphere of household relations (odesa, 2013); mudriak t. o. the criminal investigation of fraud with financial resources (irpin, 2013). along with this, we should also mention the thesis for a doctor’s degree – theoretical and practical principles of the methodology for investigating financial fraud (kyiv, 2010) by cherniavskui s. с. as can be seen from the mentioned above, many types of frauds were not at all a subject of scientific research, and this greatly affects the process of their investigation. we can state that most of these studies are devoted to the investigation of fraud with financial resources but, unfortunately, other types of committing frauds remain rather unexplored. as a positive moment, we can highlight that along with the dissertation research, there are also monographs devoted to the investigation of fraud. particularly, we should mention the monograph of n. v. pavlova. investigation of fraud during signing civillaw agreements on alienation of housing, 2007. in this research, a forensic description of fraud in the housing sector and the algorithms of investigator’s actions in typical investigative situations for the investigation of such crimes are given. besides, the features and tactical methods of conducting separate investigative actions during the investigation of the mentioned frauds (pavlova, 2007) are described. in 2009, s. s. chernyavskyi in his monograph conducted a comprehensive analysis of the phenomenon of financial fraud and its manifestations in ukraine. the author examines the basics of the methodology for investigating such frauds: in the sphere of distribution and use of budgetary funds, in the credit and banking sphere, in the field of insurance, in the sphere of activity of non-bank financial and credit institutions, in the sphere of securities circulation and in the stock market, in the sphere of using computer networks. the scientific and practical principles of forming a complex method of investigation are defined there as well (cherniavskyi, 2009). in the same year, under the editorship of professor v. yu. shepitka, o. l. musienko also publishes a monograph “theoretical principles of investigation of fraud in modern conditions”. in this work, he describes either the theoretical basis of fraud (the concept, the psychological mechanism for the implementation of a criminal act (activities), types and forms of fraud) or the content of forensic characteristics of fraud and the actual issues of the investigation. particularly, the types and methods of commissioning were determined, the investigation situations and the main directions of the investigation were typified, the investigative versions were proposed, features of the tactics of conducting investigative actions and operational-search measures were considered (musiienko, 2009) in this monograph. for the practice of investigating such crimes, it is necessary to provide methodological support. these recommendations contain a clear algorithm for an investigator regarding the initial and subsequent stages of the investigation of various types of fraud. but for today we have found only a small number of them. so, in 2010, the methodical recommendations “features of the investigation of fraud committed in the field of electronic payments” were published. they are devoted to the issues of disclosure and investigation of baltic journal of economic studies 66 vol. 4, no. 5, 2018 such a fraud. particularly, typical investigative situations of the initial stage of investigation of such types of fraud, planning and organizing the interaction of participants in the investigation and the peculiarities of the preparation and conduction of separate investigative actions (interrogation, review of the scene, search, examination) (anapolska, kovalenko, koriakin, sumtsov, 2010) are given there. in 2011 o. v. pchelina and v. v. kornienko published methodological recommendations “peculiarities of investigation of crimes caused by credit and financial operations”. there you can find a forensic description of crimes committed through credit and financial transactions, practical advice on their effective disclosure and investigation. especially, the features of the initial stage of the investigation, typical investigative situations and their respective tactical tasks of investigation, especially the conduct of individual investigative actions and tactical operations, the features of the investigating and operational group operations in the premises of the commercial bank, as well as the interaction of the investigator with state supervisors and supervisors are defined in this research (pchelina, korniienko, 2011). 3. conclusion as can we can see from the information above, today there is a significant number of scientific works devoted to the investigation of certain types of fraud, which are obsolete and need to be improved over time. it is positive that they are still able to fulfil the methodical recommendations on investigating such crimes in a certain way and with necessary information. at the same time, most types of fraud still remain methodically not developed and require some scientific attention, and the practice of investigating such types of crime nevertheless requires methodological support based on scientific developments. unfortunately, the quantity of the last mentioned is small, and this is one of the reasons for the amount of undisclosed fraud at the beginning of the article. therefore, there is a need for the creation of new techniques that have not been reflected in the writings of scientists regarding the investigation of various types of fraud. it is offered young and experienced scientists to pay attention to other types of fraud and to formulate on the basis of their own research methodical recommendations for practical units. references: shepitko, v. yu. (1998). kryminalistychna taktyka i metodyka rozsliduvannia zlochyniv [forensic tactics and methods for investigating crimes]. kh. (in ukrainian) piaskovskyi, v. v., chornous, yu. m., ishchenko, a. v., alieksieiev, o. o. ta in. (2015). kryminalistyka: pidruchnyk [science of criminal law: a textbook]. k.: «tsentr uchbovoi literatury» (in ukrainian) statystychni dani heneralnoi prokuratury [statistics of the general prosecutor's office]. url: https://www.gp.gov.ua/ ua/stst2011.html?dir_id=113651&libid=100820# (in ukrainian) vsesvitnie doslidzhennia ekonomichnykh zlochyniv ta shakhraistva 2018 roku: rezultaty opytuvannia ukrainskykh orhanizatsii vyvedennia shakhraistva z tini [worldwide survey of economic crimes and fraud in 2018: results of a survey of ukrainian organizations fraudulent shadow detection]. pwc. url: https://www.pwc.com/ ua/uk/survey/2018/pwc-gecs-2018-ukr.pdf (in ukrainian) shulha, m. m., plakhotina, v. m., balaniuk, o. v. (2013). kryminalistyka: navch.-metod. posibnyk [science of criminal law: a studybook]. odesa: feniks (in ukrainian) cherniavskyi, s. s. (2009). finansove shakhraistvo: metodolohichni zasady rozsliduvannia: monohrafiia [financial fraud: methodological principles of investigation: monograph]. k.: «khai-tek pres» (in ukrainian) pavlova, n. v. (2007). rozsliduvannia shakhraistva pry ukladanni tsyvilno-pravovykh uhod shchodo vidchuzhennia zhytla: monohrafiia [investigation of fraud in concluding civil-law agreements on the alienation of housing: a monograph]. d.: dnipr. un-t vnutr. sprav (in ukrainian) musiienko, o. l. (2009). teoretychni zasady rozsliduvannia shakhraistva v suchasnykh umovakh: monohrafiia [theoretical bases of fraud investigation in modern conditions: monograph]. kh.: pravo (in ukrainian) anapolska, a. i., kovalenko, v. v., koriakin, r . v., sumtsov, o. i. (2010). osoblyvosti rozsliduvannia shakhraistv, uchynenykh u sferi funktsionuvannia elektronnykh rozrakhunkiv: metodychni rekomendatsii [features of the investigation of fraud committed in the field of electronic calculations: methodical recommendations]. luhan. derzh. un-t. vn. sprav im. o. ye. didorenka. luhansk: rvv lduvs im o. ye. didorenka (in ukrainian) pchelina, o. v., korniienko, v. v. (2011). osoblyvosti rozsliduvannia zlochyniv, vchynenykh shliakhom kredytnofinansovykh operatsii: metodychni rekomendatsii [features of investigation of crimes committed through credit and financial transactions: methodical recommendations]. kh.: kharkivskii nats. un-t vnutr. sprav (in ukrainian) baltic journal of economic studies 165 vol. 4, no. 3, 2018 corresponding author: 1 department of foreign trade and customs, lviv polytechnic national university. e-mail: olia_melnyk@ukr.net 2 department of foreign trade and customs, lviv polytechnic national university. e-mail: a.todoshchuk@gmail.com 3 department of foreign trade and customs, lviv polytechnic national university. e-mail: marta_adamiv@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-165-171 the role of socio-economic diagnostics in an enterprise management system olga melnyk1, andrii todoshchuk2, marta adamiv3 lviv polytechnic national university, ukraine abstract. the purpose of the article is to justify the role of socio-economic diagnostics of the enterprise as an information base for managerial decision-making in the conditions of integration and globalization processes. the subject of the study is the theoretical and applied principles of socio-economic diagnostics of the enterprise’s activity at the national and international levels. the methodology of the research is to identify the key priority accents of the socio-economic diagnostics of the enterprise’s activity, taking into account the integration and globalization challenges. on the example of ukraine as a country on the path of european integration, the problems in the field of socio-economic diagnostics of enterprise’s activity are investigated and identified, which are connected with the existence of discrepancies with recognized international diagnostic experience. the necessity of unification of diagnostic procedures is proved in order to establish, deepen, and expand the effective cooperation of domestic enterprises with foreign partners, which will facilitate the activation of the european integration process. it is established that leading players of international markets make decisions about the cooperation establishment on the basis of diagnostic conclusions, which are formed by such known international credit rating agencies as moody’s, standard & poor’s, fitch. thus, the best international diagnostic experience has been researched and analysed on the example of the recognized international credit rating agencies moody’s, standard & poor’s, fitch. it is determined that at the present stage the diagnostics of the financial status of the enterprise is the priority kind of socio-economic diagnostics within the different complex diagnostic objectives. the results of the study were the development and substantiation of a unified methodology for diagnosing the financial status of the enterprise, which can be used by subjects from different countries. the proposed methodology is based on the consideration of the classical diagnostic technology, the adequate composing the national and international diagnostic experience, taking into account the integration and globalization conditions, the use of internationally recognized diagnostic terminology. in particular, within the framework of the developed methodology of diagnostics of financial status of the enterprise, it is proposed to calculate four groups of financial indicators: profitability, liquidity, financial independence and business activity. by comparison of obtained actual values of indicators with the adequate criteria, an identification database for diagnostics of types of financial status of the enterprise was developed, including risk-free status, destabilization status, pre-crisis status, the status of technical defaults, and the status of actual default. the practical value of the obtained results of the study is to enable the business structures of different countries to implement the unified diagnostic procedures and thus operate a single information base during managerial decision-making about establishing or expanding cooperation. this prevents misunderstandings during cooperation, gives an opportunity to receive the same diagnostic results and unifies their interpretation. the novelty of the results of the study is to improve and standardize the methodological, indicative, identification, and interpretive provision of the diagnostics of the financial status of the enterprise, based on taking into account the best recognized international diagnostic experience, as well as integration and globalization conditions and challenges. key words: socio-economic diagnostics, indicators, financial status, foreign economic activity, management decisions jel classification: g32, g33, f10, m10 baltic journal of economic studies 166 vol. 4, no. 3, 2018 1. introduction in the conditions of intensification of integration and globalization processes in the world, the importance of socio-economic diagnostics at all levels of the national and international economies is significantly growing. the successful establishment and further development of relations between domestic and foreign partners at different levels (state and local authorities, rating agencies, financial and credit institutions, consulting and audit organizations, investors, intermediaries, business structures) require a complex, representative, relevant, and objective information base that is the result of targeted diagnostic procedures. at the present stage in the international space, there is the activation of foreign trade cooperation between economic entities of different countries of the world. on the example of ukraine in the context of european integration, we can observe the intensification of cooperation with the european union, which today is ukraine’s largest trade partner with a share of 44.4% in total export of goods. in particular, in the first quarter of 2018, the export of goods from ukraine to the european union was $11.4 billion and increased by 10.3% compared with the first quarter of 2017. the number of ukrainian exporting enterprises to european markets in the first quarter of 2018 was 8,624 companies, which is 526 enterprises more than in the first quarter of 2017 (mykolska, 2018). in the context of countries that are on the path to european integration, including ukraine, socioeconomic diagnostics is a powerful information tool of grounded decision-making for entering european markets, establishing cooperation with foreign partners, increasing competitiveness, investment attractiveness, and ensuring progressive development. the result of the implementation of targeted diagnostic procedures is not only the quantitative data, but also the qualitative information that interprets the current and retrospective status of the diagnosed object, prospective opportunities and threats of its development, and also reflects the detailed recommendations for further vectors of functioning. it should be noted that in modern conditions of integration and globalization, socio-economic diagnostics should be based on a unified methodological, indicator, criterion, identification, and interpretation basis, which will be unified during using by business entities from different countries in order to establish and expand their cooperation. considering the national and best international recognized practices of socioeconomic diagnostics of enterprises according to different parameters, it should be noted that there are significant differences in the diagnostic technologies and tools used by domestic and foreign subjects, as well as groundlessness, non-harmony, and non-adaptation to international standards of domestic diagnostic techniques. it causes a lot of problems connected with the formation of different diagnostic conclusions, interpretation of diagnostic results and, as a result, the emergence of misunderstandings between different partners, which complicates and impedes effective cooperation, reduces the interest of counteragents in interaction, etc. all of above-mentioned determines the purpose of the research that is related to the substantiation of the role of socio-economic diagnostics in enterprise management system at the present stage of the active promotion of integration and globalization processes in the world. the purpose of the research has identified the key research objectives that will be pursued in the following research methodology: substantiation of the essence of socio-economic diagnostics of the enterprise as an information base for managerial decisionmaking, identification of the priority accents of socioeconomic diagnostics taking into account integration and globalization conditions and challenges, studying the best international experience of the priority kind of diagnostics – diagnostics of financial status of the enterprise, development of an unified methodology for diagnosing the financial status of an enterprise on the basis of recognized international diagnostic standards. 2. essence and accents of socio-economic diagnostics in the conditions of the active spread of european integration and globalization processes in the international space, there is a shift in the accents of the priority and scale of the diagnostics from the closed evaluation of all functioning areas of micro-level object (enterprise) without taking into account the diagnostic results at higher levels to its target complex consideration of its priority parameters in correlation with macroand meso-economic objects. it reflects the socio-economic character of the diagnostics, which is represented by a thorough study of the most relevant parameters, vectors and spheres of the functioning of representatives of the micro-level, taking into account diagnostic results at higher levels in accordance with recognized international standards and rules. socio-economic diagnostics is an integral attribute of a management system at any level because it is aimed at providing information support for the making and adoption of managerial decisions in the priority areas of the macro-, meso-, and micro-environment. information purpose of socio-economic diagnostics consists of the preparation of reliable, objective, representative, relevant, complex, and substantiated information provision of the management process at different levels of the national and international economy. thus, socioeconomic diagnostics forms an informational basis for establishing, providing and expanding the relationships between different subjects of the macro-, mesoand micro-environment at the national and international baltic journal of economic studies 167 vol. 4, no. 3, 2018 levels, first of all, in the context of the intensification of european integration processes in ukraine. the key idea of socio-economic diagnostics in the context of european integration is to assess the retrospective, current, prospective status, and trends in the development of the most relevant areas and parameters of the functioning of representatives of the micro-economic level, taking into account the corresponding recognized and widely used in the international space results of diagnostics of macroand meso-economic character, which are formed by the authoritative international and european organizations. based on consideration of the realities of national economic development and modern problems of domestic business structures, as well as perspective opportunities of european integration for ukraine, it was found that the most priority areas of socioeconomic diagnostics in the national space are the financial status of enterprises, their insolvency, and the threat of bankruptcy, creditworthiness, and investment attractiveness. this choice is not random but objectively caused by the current problems of the national economy and the necessity of their constructive solution via the opportunities of european integration. today the massive tightening of payments crisis on different types of liabilities of national enterprises, many stops and liquidations of businesses due to their bankruptcy, lack of sufficient own funds to support the needs of production and economic activity, investment unattractiveness and uncompetitiveness, etc. are not the news. the effective and well-grounded socio-economic diagnostics by the priority spheres will enable to restore the activity of insolvent, but economically viable business structures, to avoid their irreversible liquidation in the structure of the national economy, to expand the access of business entities to domestic and foreign credit resources, to interest national and foreign investors in the development of ukrainian business, etc. all abovementioned will ensure the formation and strengthening the competitiveness of domestic business and national economy in general, will improve the country’s image in the eyes of the european community and, as a result, successful european integration of ukraine. socio-economic diagnostics is characterized by poly-address appointment, because its results can be successfully used by the state and local authorities during making decisions of international, national, and local character, aimed at the development of the national economy and its business in particular, as well as the intensification of international relations; potential investors during selecting the attractive objects of investments; financial and credit institutions during making decisions about lending of borrowers; consulting and audit agencies during formulating complex or partial conclusions about the status of diagnosed objects; contracting parties during choosing new partners or expanding cooperation with existing counterparties; business entities in the process of their current activities to solve different problems and ensure the effective functioning in the market. 3. international experience of diagnostics of the financial status of the enterprise in the conditions of frequent occurrence of various crisis phenomena at the national and international levels, the diagnostics of the financial status of the enterprise takes place as one of the key types of diagnostics. the financial diagnostic is an integral part of the different complex diagnostic objectives associated with the assessment of the bankruptcy threat, insolvency, creditworthiness, investment attractiveness, enterprise’s development. that is why today there are many publications that reveal different aspects of diagnosing the financial status of the enterprise. the overwhelming majority of scholars bhatia (2012), böninghausen b. and zabel m. (2015), elkhoury (2008), estrella (2000), galil (2003), matthies (2013) mostly analyse the best international diagnostic practice, not revealing own views on unified methodological, indicative, criterion, identification, and interpretive provision of diagnostics of the financial status of the enterprise. the results of the study of foreign diagnostic practice show that the leading players of international markets during the establishing cooperation mainly focus on the diagnostic results of recognized international credit rating agencies, such as moody’s, standard & poor’s, fitch. these agencies permanently form credit ratings for different organizations from around the world, which are mostly used by investors, financial intermediaries, issuers, companies, and financial institutions. below, consider in more detail the financial component that is evaluated by credit rating agencies in forming the credit ratings of enterprises. on the basis of thorough study of different methods of rating diagnostics of business representatives from different sectors of the economy, the key factors that specialists of moody’s corporation assign credit ratings to companies, are determined: the size (volume of income) of the enterprise; business profile of the enterprise activity; profitability of the enterprise activity; solvency of the enterprise; financial policy of enterprise’s management (moody’s, 2009). as we can see, more than half of the factors relate to the financial activity of the enterprise. thus, the profitability factor is estimated through the definition of indicators such as the profitability of product sales, the standard deviation of the profitability of product sales in five years, the return on assets. the solvency factor of a business entity is formed from indicators characterizing the structure of capital (the ratio of the company’s debt to the currency balance), the level of debt coverage (the ratio of the debt to the profit ebitda), the level of coverage of interest expense baltic journal of economic studies 168 vol. 4, no. 3, 2018 (the ratio of the profit ebit to the interest expense), cash flow (the ratio of cash flow excluding dividends to the net debt). the factor of the financial policy assesses the level of stability and conservatism of financial management and risk management, stability of the dynamics of enterprise’s indicators in the conditions of different external (first of all, economic) factors, protection of the rights of creditors and owners, credit history, etc. (moody’s, 2009). in general, the standard & poor’s credit rating methodology includes assessing the profile of business risks and financial risks, as well as other parameters of the enterprise’s activity. the business risk profile is determined on the basis of the estimation of the correlation of potential risks and opportunities of profit receiving for the particular business entity in the market conditions, taking into account the sectoral and public risks, as well as competitive advantages and weaknesses of the enterprise. the profile of financial risks is assessed by the quality of managerial decisions that managers make in the context of the business risk profile of the entity and financial risk tolerance, including management decisions regarding the sources of funding and the structure of the balance sheet, as well as the cash flows generated by the company in relation to financial liabilities. as we can see, the financial component takes the lion’s share within standard & poor’s diagnostic methodology. the key financial indicators within such diagnostics are the ratio of cash flow and debt load, capital structure, financial policy, liquidity (standard & poor’s, 2014). diagnostic methodology of fitch’s credit rating agency is based on taking into account key rating factors such as industry risk, operating environment, company profile, management strategy and corporate management, company group structure (for multinational companies), financial profile (cash flows and income, capital structure, financial flexibility) (fitch, 2015). regarding the financial profile of the business structure, cash flows are measured on basis of taking into account cash flow, income, and solvency. the capital structure of an enterprise is determined by the level of financial dependence on external financing sources. the financial flexibility of the company is measured by its ability to repay its debt obligations and manage periods of volatility without deteriorating credit quality. in addition, financial flexibility is determined by such factors as the level of relationship with banks, the ability to redistribute assets and coordinate capital spending plans, the access to credit and equity markets, etc. (fitch, 2015). thus, based on the study of diagnostic methodologies of the leading credit rating agencies moody’s, standard & poor’s, fitch, it can be concluded that the financial component is the most priority for different users of diagnostic results for various diagnostic objectives. 4. harmonization of diagnostics of the financial status of the enterprise in today’s crisis conditions of domestic enterprises’ operation, diagnostics of their financial status has an increasing importance, which forms a well-grounded information base about the strengths and weaknesses of financial activity, the threat of its deterioration or prospects for improvement. the management of business structures is extremely interested in obtaining and managing grounded and structured results of financial diagnostics, because on their basis it is possible to make competent management decisions in order to avoid a crisis or overcome it, maintain financial stability, increase profitability, liquidity, business activity, etc. figure 1 shows a unified methodology for diagnosing the financial status of the enterprise. as we know, at the present stage, the indicator base for diagnosing the financial status of business structures is quite broad and has several hundreds of financial indicators from highly specialized to integral. at the same time, the four groups of indicators are most fully characterized the financial status of the enterprise, in particular: profitability, liquidity, financial independence, and business activity. in particular, the indicator base for diagnosing the financial status of the enterprise consists of: indicators of profitability (coefficients of return on capital (assets), own capital, sales of products); liquidity indicators (coefficients of general liquidity, rapid liquidity, absolute liquidity); indicators of financial independence (coefficients of autonomy, financial leverage, and the system of w. beaver’s indicators); indicators of business activity (coefficients of turnover of assets, turnover of accounts payable, termination of accounts payable, turnover of accounts receivable, termination of accounts receivable, the ratio of receivables and payables, turnover of inventories, turnover of own capital, turnover of fixed assets, as well as average terms of repayment of accounts payable and receivable, turnover of inventories). it should be noted that only by calculating the representative indicators from all four of these financial areas, comparing the actual obtained values with the adequate criteria and competent aggregation into a single integrated indicator can make a complex conclusion about the financial status of the enterprise. along with the use of the indicator-criterion base, the competent identification of a concrete financial status of the enterprise and its further interpretation with substantiated recommendations for improving or strengthening become important. on the basis of the study of the international and national experience of financial diagnostics in the theoretical, practical, and regulatory aspects, it is proposed to distinguish the following types of financial status of economic entities: risk-free status, the status of baltic journal of economic studies 169 vol. 4, no. 3, 2018 destabilization, pre-crisis status, the status of technical default, the status of actual default. below, briefly describe each of the identified types of financial status of the enterprise on the basis of identifying the most representative trends that characterize it, and providing clear, well-grounded recommendations for solving problems or strengthening strengths in the financial area. thus, the risk-free status, in general, demonstrates positive parameters in profitability, liquidity, financial independence of the enterprise, which testifies the absence of any signs of the threat of bankruptcy in the near future. the reason for the diagnosing the insolvency of the entity is the slight deviation in the sphere of general liquidity and business activity, which at this stage do not adversely affect the financial parameters of enterprise’s activity and its financial stability. the status of destabilization reflects the first weak signals of the potential insolvency of the enterprise, which is confirmed by certain negative tendencies in some spheres of financial status; in particular, it concerns either financial performance or the decline of business activity or minor deviations in the general liquidity. the pre-crisis status represents significant problems in the spheres of financial performance, independence, business activity, and the existence of negative trends in the dynamics, there is a partial deterioration of liquidity, indicating that the company goes to bankruptcy. the status of technical default reflects the decline or lack of financial performance, deterioration of liquidity, the formation of financial dependence and inappropriate business activity, indicating the existence of obvious “technical” features of bankruptcy. however, at the same time, it is possible to leave the enterprise with such a situation on the basis of realization of a set of well-grounded sanitization measures of financialeconomic, production-technical, organizational and social character aimed at restoring solvency, profitability, structural equilibrium of capital and competitiveness. figure 1. the unified methodology of diagnostics of the financial status of the enterprise 1. information support for diagnostics of the financial status of the enterprise 2. determination of objectives of diagnostics of the enterprise financial status 3. selection of methods of diagnostics of the financial status of the enterprise 4. formation of a system of financial indicators of the enterprise indicators of profitability indicators of liquidity indicators of financial independence indicators of business activity 5. selection of criteria for financial indicators of the enterprise 6. calculation of financial indicators of the enterprise and comparison of their actual values with criteria 7. interpretation of obtained comparative results by the binomial approach 8. identification of the concrete financial status of the enterprise 9. formation of structured diagnostic conclusion about the financial status of the enterprise, problems and prospects of its improvement risk-free status status of destabilization pre-crisis status status of technical default status of actual default baltic journal of economic studies 170 vol. 4, no. 3, 2018 the status of actual default indicates the actual bankruptcy of the enterprise because it is characterized by insolvency, broken structure of capital, lack or insufficient level of financial performance, economic inactivity. this is, as a rule, the voluntary or forced liquidation of an enterprise, recognition of bankruptcy, or reorganization under the influence of external entities in accordance with the current legislation. it should be noted that the developed identification and interpretation base is complex as it enables to characterize the financial status of the entity in four key spheres of profitability, liquidity, financial independence, and business activity and thus provides an integrated conclusion about the financial position of the enterprise. in addition, the proposed identification and interpretation base is harmonized with the best international diagnostic practice, because it is based on the study of foreign theoretical, regulatory and practical experience in this field with the use of international diagnostic terminology. it will provide a complex, structured, unified, and unambiguous interpretation of the financial status of the diagnosed object by domestic and international subjects. 5. conclusions in modern conditions of active expansion of integration and globalization processes in the world, international cooperation, including between economic entities, is important for any country. the establishment of effective relations with foreign counterparties is based, first of all, on the unified, objective, and harmonized with international standards information base, which is the result of targeted diagnostics. in today’s conditions of crisis phenomena, integration and globalization processes, there is a significant shift of accents in the target priority and the scale of the diagnostics of enterprises. it is about, in particular, the updating of the evaluation of the most important parameters and areas of functioning of business structures, where the significant problems of their activities are traced, as well as the perspective development opportunities, are emerging from the preferences of integration and globalization. such target diagnostic reality is represented by key parameters of the functioning of domestic enterprises, in particular, financial status, solvency, bankruptcy threats, creditworthiness and investment attractiveness. based on the study of the best international diagnostic experience, it has been established that the financial component is a priority and accompanies most of the complex diagnostic objectives related to solvency assessment, bankruptcy threats, creditworthiness, investment attractiveness, competitiveness, and enterprise development. on the example of the diagnostic experience of ukraine as a country on the path of european integration, there are many problems that reflect the discrepancy with recognized international diagnostic standards. thus, a unified methodology for diagnosing the financial status of the enterprise for the representatives of different countries was developed. in particular, within the framework of the developed methodology of diagnostics of the financial status of the enterprise, it is proposed to calculate four groups of financial indicators: profitability, liquidity, financial independence and business activity. by comparison of obtained actual values of indicators with the appropriate criteria, an identification database for diagnostics of types of enterprise’s financial status was developed, including risk-free status, destabilization status, pre-crisis status, the status of technical defaults, and the status of actual default. the developed methodology is based on taking into account the best international diagnostic practice, diagnostic problems of developing countries and their national conditions of functioning, integration and globalization trends and challenges, which will ensure the unification of diagnostic procedures for making managerial decisions by the subjects from different countries. references: bhatia a.v. (2012). sovereign credit ratings methodology: an evaluation. imf working paper, october. international monetary fund. retrieved from: https://www.imf.org/external/pubs/ft/wp/2002/wp02170.pdf (accessed 19 may 2018). böninghausen b. and zabel m. (2015). credit ratings and cross-border bond market spillovers. working paper series of european central bank, 1831. european central bank. retrieved from: https://www.ecb.europa.eu/pub/ pdf/scpwps/ecbwp1831.en.pdf ?9d0f2bcd6cf9f7aae9af834eb451e29f (accessed 18 may 2018). galil k. (2003). the quality of corporate credit rating: an empirical investigation. (part of phd thesis). berglas school of economics, tel-aviv university center for financial studies, goethe university of frankfurt. retrieved from: http://www.mathematik.uni-ulm.de/carfi/vortraege/downloads/credit_ratings.pdf (accessed 18 may 2018) elkhoury m. (2008). credit rating agencies and their potential impact on developing countries. discussion papers of united nations conference on trade and development, 186. united nations. retrieved from: http://unctad.org/ en/docs/osgdp20081_en.pdf (accessed 17 may 2018) estrella a. (2000). credit ratings and complementary sources of credit quality information. working papers of basel committee on banking supervision, 3. basel: bank for international settlements. retrieved from: http://www.bis.org/publ/bcbs_wp3.pdf (accessed 19 may 2018) matthies a.b. (2013). empirical research on corporate credit-ratings: a literature review. discussion paper 2013-003. sfb-649 economic risk. berlin. retrieved from: http://sfb649.wiwi.hu-berlin.de/papers/pdf/ sfb649dp2013-003.pdf (accessed 19 may 2018) baltic journal of economic studies 171 vol. 4, no. 3, 2018 mykolska n. (2018). tsikavi fakty pro torhivliu z yes za i kvartal 2018 roku [interesting facts about trade with eu in the first quarter 2018]. issuu (electronic site). retrieved from: https://issuu.com/nataliyamykolska/ docs/ukraine_eu_facts (accessed 19 may 2018) fitch ratings (2015). opredelenija rejtingov i drugih vidov rejtingovyh mnenij fitch ratings: perevod s anglijskogo [definitions of ratings and other rating views of fitch ratings: translation from english]. fitch (official electronic site). retrieved from: https://www.fitchratings.ru/ru/regulatory/ratings-definitions.html (accessed 18 may 2018) (in russian) moody’s (2009). simvoly i opredelenija rejtingovogo agentstva moody’s: perevod s anglijskogo [moody’s rating symbols & definitions: translation from english]. moody’s (official electronic site). retrieved from: https://www.moodys.com/sites/products/productattachments/2007100000528403.pdf (accessed 18 may 2018) (in russian) standard & poor’s rating services (2014). vse, chto nuzhno znat o kreditnyh rejtingah [all you need to know about credit ratings]. standard & poor’s (official electronic site). retrieved from: https://www.standardandpoors.com/ ru_ru/delegate/getpdf?articleid=1498030&type=comments&subtype=rating%20definition (accessed 18 may 2018) (in russian) baltic journal of economic studies 343 vol. 4, no. 5, 2018 corresponding author: 1 national university of the state fiscal service of ukraine, ukraine. e-mail: o.v.tilchik@ukr.net 2 national university of the state fiscal service of ukraine, ukraine. e-mail: 0971713748@ukr.net 3 national university of the state fiscal service of ukraine, ukraine. e-mail: 797oliv@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-343-351 management (administrative) activity of the controlling authorities in the area of taxation: essence and types olha tylchyk1, yurii riabchenko2, oleksandr popivniak3 abstract. the innovation of conceptual provisions of the administrative law doctrine that are based on the priority of rights, freedoms, legitimate interests of an individual, service orientation of the public administration authorities’ performance affects the essence of the controlling authorities’ management (administrative) activity in the area of taxation and requires its fundamental upgrade. drafting of theoretical provisions as to the essence and the types of the controlling authorities’ management (administrative) activity in the area of taxation should be based on a profound theoretical and legal analysis of the existing concepts and doctrines and their comparison with the current developments in the public administration authorities’ performance that carry out similar activities. in addition, it’s reasonable to highlight the issues of legal regulation of the relations with respect to the controlling authorities’ management (administrative) activity carried out in the area of taxation. the research objective is to substantiate the theoretical background of the controlling authorities’ management (administrative) activity in the area of taxation set out in the form of a list of the substantive characteristics of such activity, the provisions that reflect its peculiarities, as well as the systematization of the lines and types of such activity. the object of the research is the social relations of a public-law nature, related to the activities of the controlling authorities in the area of taxation. the contemporary concepts and doctrines developed by the scientists through critical thinking constitute the theoretical basis of the scientific analysis. this article explores the scientific papers related to the issues of public administration, administrative law, and administrative activity. system-based approach constitutes the methodology of the scientific analysis which made it possible to single out the elements of the administrative activity system, to reveal their content and to take into account their specific features when determining the nature of the controlling authorities’ management (administrative) activity in the area of taxation. the result of this research is the theory that reveals the current essence of the specified activity and its lines. this article places emphasis on the existence of public and service component of the specified activity. key words: management activity, administrative activity, controlling authorities, taxation, lines of activity. jel classification: k34, h71 1. introduction the relevance of the problem as to determining the essence of the administrative activity of the controlling authorities in the area of taxation is driven by fundamental innovation of the administrative law doctrine, rethinking of their tasks from the viewpoint of compliance with the tasks of the service that performs a service function. this problem is directly related to the appropriate implementation of the provision of article 1 of the constitution of ukraine which codifies that ukraine is a sovereign and independent, democratic, social and rule-of-law state (constitution of ukraine as of the 28th of june 1996) (konstytutsiia ukrainy vid 28.06.1996 – in ukrainian). the specified constitutional legal provision stipulates for all government authorities performance effectiveness, and especially those targeted at ensuring national financial security, generation of the revenue part of the national budget and the budgets at all levels, raising money for the state special-purpose funds as the essentials for further social and economic growth of ukraine. in applicable legislation, terms “revenue and duties authorities”, “fiscal service”, “controlling authority” are applied to indicate the subject of the state control in baltic journal of economic studies 344 vol. 4, no. 5, 2018 the area of taxation. thus, article 283 of the code of administrative court procedure (hereinafter referred to as the cacp) determines the peculiarities of the proceedings on the cases if they are brought before the court by the revenue and duties authorities (on making amendments in the code of commercial procedure of ukraine, the civil procedure code of ukraine, the code of administrative court procedure of ukraine and in the other legislative acts: law of ukraine as of the 13th of march 2012) (pro vnesenniazmin do hospodarskoho protsesualnoho kodeksu ukrainy, tsyvilnoho protsesualnoho kodeksu ukrainy, kodeksu administrativnoho sudochynstva ukrainy ta inshykh zakonodavchykh aktiv: zakon ukrainy vid 03.10. 2017 – in ukrainian). term “revenue and duties authority” is applied in the customs code of ukraine (mytnyi kodeks ukrainy vid 13.03.2012 – in ukrainian). term “controlling authority” has been applied in the tax code of ukraine (podatkovyi kodeks ukrainy (red. 01/01/2017): zakon ukrainy vid, 02.12.2010 – in ukrainian), and term “fiscal service” has been applied in resolution of the cabinet of ministers of ukraine as of the 21st of may 2014 ref. no. 236 “on the state fiscal service of ukraine” (pro derzhavnu fiskalnu sluzhbu ukrainy: postanova kabinetu ministriv ukrainy vid 05/21/2014 – in ukrainian). the stated above indicates a need to unify the terms that are used in the applicable law and specify the subject authorized to exercise the state control in the area of taxation. taking into account the indicated above, application of the term “controlling authority in the area of taxation” does not contravene the allocable law but allows to define the subject of the state control in the specified area and its place within the system of the government authorities, in particular, belonging to the structure of the state fiscal service of ukraine (hereinafter – the sfs). in the course of the sfs offices’ tasks performance the management (administrative) activity holds a special place. the activity above seeks to solve not just managerial tasks. it is also related to the implementation of the law-enforcement function of the state. at the same time, administrative legal proceedings perform a dual function: on the one hand, it serves as a legal institution intended to protect violated rights, freedoms, legal interests of individuals and legal entities-taxpayers from offences against law by the sfs offices (sfs offices’ employees) when implementing the administrative activity and on the other hand, a form for implementation of the government task by the sfs offices as to protection of the interests of the state through filing a petition in the administrative court in the cases set forth in article 283, part 1, the cacp. 2. theoretical basis in the scientific research of administrative law and process, the issue related to the essence of the controlling authorities’ administrative activities in the area of taxation has not yet been the subject of a separate scientific inquiry. the researchers at the level of the thesis for a doctor’s degree analysed the issues related to the state tax service management (bandurka, 2005), administrative and legal status of the head within the state tax service offices (holovach, 2011), the issues of taxation system establishment, administration and reform (uhrovetskyi, 2009). in the context of the topic, which is being researched, the monograph by v. v. konopliov attracts interest with a focus on management decisions within the internal affairs offices (konoplyov, 2006). among the scientific research, we should indicate the presence of such direction of theoretical analysis as a problem of tax disputes settlement (y. a. usenko (usenko, 2011), v. v. tylchyk (tylchyk, 2011) and others). many scientific papers are dedicated to research of the separate aspects as to definition and implementation of the legal status by the revenue and duties authorities (o. p. dzisiak (dzisiak, 2002), a. m. kulish (kulish, 2003) and others). recently the research direction of the essence of information relations (i. v. aristova, k. i. bieliakov (bieliakov,2008), a. m. novytskyi (novytskyi, 2012) and others) have been developing dynamically. notice that, in fact, the term “administrative activity” in modern administrative legal science hasn’t been used extensively enough in view of the following: first, use of other more fixed terms such as “public administration”, “executive and administrative activity”, “administrativelegal influence”; second, lack of clear approaches to definition of the executive authority’s administrative activity, its tasks, principles, difference from the other types of activities; third, different understanding of the balance of such categories as “function of the executive authority”, “executive authority’s line of activity”, “executive authority’s type of activity”; fourth, absence of direct legislative framework for administrative activity as an independent line of the activity conducted by the executive authorities (redkous, 2008). according to the concept of public administration reform in ukraine, codified in decree of the president of ukraine “on the measures to implement the concept of public administration reform in ukraine” (pro zakhody shchodo vprovadzhennia kontseptsii administrativnoi reformy v ukraini: ukaz prezydenta ukrainy vid 22.07.1998 – in ukrainian), its implementation is underway in several lines. by v. v. halunkonotes, these are such lines as: drafting of a new legal framework to regulate public administration in ukraine, including information provision of this activity; establishment of the institutes of new organizational structures and instruments to carry out public administration; staffing of a new public administration system; strengthening and setting up of a new financial and economic framework for public administration baltic journal of economic studies 345 vol. 4, no. 5, 2018 functioning, including administrative activity in the area of tax collection; scientific and information support of public administration system, development of the mechanisms for scientific and information monitoring of its functioning (halunko, 2011). nevertheless, such important regulatory legal acts to regulate the administrative activity as administrative procedural code of ukraine, information code of ukraine, and a number of other regulations haven’t been adopted yet. their effect should be aimed at optimization of the administrative authorities’ operation procedures at regional and local levels, avoidance of overlaps of the functions between the regional offices of central executive authorities and local executive authorities, as well as improvement of public administration institutions interaction with the citizens. such foreign and domestic scientists focused their attention on the issue of the government authorities’ administrative activity in the area of theory of state and law, the theory of public administration, administrative law and process: v. b. averianov (administrative activity) (administratyvna diialnist: m. v. kovaliv, s. r . kisil, d. p. kataianovtain, 2009 – in ukrainian), o. o. bandurka (bandurka, 2004), d. m. bakhrakh (bakhrakh, 2000), i. l. bachylo (bachylo, 2001), y. p. bytiak (bytiak, 1999), i. p. holosnichenko, y. y. kondratiev (holosnichenko ta in., 2005), l. v. koval (koval, 1998), a. p. korenev (internal affairs offices’ administrative activity) (admynystratyvnaia deiatelnost orhanov vnutrennykh del. chast obshchaia. pod red. a. p. koreneva, 2003 – in russian), v. y. malynovskyi (malynovskyi, 2005), y. m. moiseiev, v. i. olefir, y. i. rymarenko (internal affairs offices’ administrative (law enforcement) activity) (administratyvna (politseiska) diialnist orhaniv vnutrishnikh sprav (zahalna chastyna): yu. i. rymarenko, ye. m. moiseiev, v. i. olefir, 2008 – in ukrainian), v. d. pryimachenko (pryimachenko, 2007), y. a. tykhomyrov (teremetskyi, 2012) and others. 3. results within the scope of the subject presented, it is reasonable to analyse, in the first instance, the essence of administrative activity and the approaches to its definition. by administrative activity l. v. koval (koval, 1998) means publication of regulatory and individual acts. i. p. holosnichenko, y. y. kondratiev define administrative activity as the activity of government executive authorities aimed at ensuring the protection of civil rights, public safety, detection, suspension, and prevention of offenses (holosnichenko ta in., 2005). a. p. korenev (internal affairs offices’ administrative activity) (admynystratyvnaia deiatelnost orhanov vnutrennykh del. chast obshchaia. pod red, a. p. koreneva, 2003 – in russian) characterizes administrative activity as the implementation of functions as to practical ensuring of personal safety of citizens, protection of public order and public security. y. a. tikhomirov (tykhomyrov, 2005) holds a different view and gives the following definition of administrative activity: it is public administration in the narrow sense, that is, the activity of government authorities, executiveadministrative authorities of the state as to exercise of executive power at its different levels. the scientists in their scientific research define the essence of administrative activity mainly in logical and conceptual connection with the subject of its implementation, i.e. by the state penitentiary service of ukraine (r. v. aliiev (aliiev, 2009)), the internal affairs offices (d. v. holoborodko (holoborodko, 2009), s. m. husarov (husarov, 2009), v. o. zarosylo (zarosylo, 2002)), the state border guard service of ukraine (b. m. marchenko (marchenko, 2009), l. v. servatiuk (servatiuk, 2008)), the ukraine’s state tax service offices (t. o. mazelyk (matselyk, 2005)), the customs authorities (d. v. pryimachenko (pryimachenko, 2007)). according to the subject of research, it is reasonable to point out the scientific paper of v. b. marchenko, dedicated to the administrative and legal regulation in the area of tax collection (marchenko, 2009.) a number of scientists used to analyse administrative activity in the context of police law (y. i. rymarenko, y. m. moiseiev, v. i. olefir and others (internal affairs offices’ administrative (law enforcement) activity) (administratyvna (politseiska) diialnist orhaniv vnutrishnikh sprav (zahalna chastyna): yu. i. rymarenko, ye. m. moiseiev, v. i. olefir, 2008 – in ukrainian)). the concept of administrative activity is considered both in general and applied aspect. the most common definition of the executive authority’s administrative activity was formulated by d. n. bakhrach: “administrative activity is a systematic, continuous organization seeking to preserve the social system, its strengthening and development” (bakhrakh, 2000). it is appropriate to agree with the viewpoint of n. i. zolotariova who used to recognize a broader meaning of “government authority’s administrative activity” concept of as compared to executive power the concept. thus, administrative activity by the subject of its implementation does not coincide with executive power, which is exercised only by the authorities of this branch of the government and special institutions delegated with powers to perform the functions of the executive authorities. administrative activity as a management activity, regulated by the administrative law provisions, is carried out not just by the executive authorities. organizational legal relations govern the norms of the administrative law and exist within the scope of the activities performed by the courts, the prosecutor’s office, the secretariat of the parliament of ukraine (the verkhovna rada of ukraine) or the presidential administration, where administrative functions are performed (zolotariova, 2011). baltic journal of economic studies 346 vol. 4, no. 5, 2018 nevertheless, the specific character of the subject of administrative activity affects its features, determined by the legal status of the corresponding subjects, the tasks and the functions they perform. this raises the question of clarification of the essence of the controlling authorities’ administrative activity in the area of taxation. public administration science defines administrative activity as the executive and administrative activity of public authorities governed by the norms of administrative law and aimed at the implementation of rights and freedoms of citizens in management (hrobova, 2010). in this definition, due regard has already been paid to the main purpose of public administration authorities’ administrative activity, which is the implementation and protection of rights and freedoms of citizens. however, controlling authorities in the area of taxation, in particular, the sfs offices that are vested with greater part of supervisory powers, as compared to other government authorities, in the course of their dayto-day operations, perform a number of specific actions that determine the essence and the scope of their administrative activity and map into the corresponding attributes (features). as a critical provision, it’s worthwhile to note the viewpoint of t. o. mazelyk who used to point out controlling authorities as the subjects of administrative law participate in the following types of administrative legal relations: public administration; relations of administrative services; relations of public administration responsibility for unlawful actions or failure to act; relations of responsibility of the subjects of the society (individual and collective) for violation of the rules and the procedures established by public administration (matselyk, 2010). those particular groups of relations will characterize the types of the sfs offices’ administrative activity as controlling authorities in the area of taxation. the scientists did not address the issue of distinguishing the features of sfs offices’ administrative activity of (just as the features of ukraine’s state tax service offices’ and revenue and duties offices’ administrative activity) and, therefore, we should turn to the existing finalization dedicated to administrative activity. thus, when mapping out the features of internal affairs offices’ administrative activity, the researchers used to call their attention not only to public and authoritative character, regulatedness by the norms of administrative law, etc., but also due account for the peculiarities of operational situation, the possibilities of causing legal consequences or without causing such (v. v. konopliov (konopliov, 2006). from d. v. pryimachenko’s perspective, the characteristic features of the customs authorities’ administrative activity include, in addition to those indicated above, such features as public character(carried out not for satisfaction of private, personal needs of those who are entrusted with it but for the benefit of “one” and “all”), inclusion of both law-making and law-enforcement activity, regularity, continuity, planning, reasonable combination of centralized management with direct (operational) management, subordination and controllability of administrative activity to the corresponding state institutions; professionalism, preventive character (pryimachenko, 2007). the researchers of the problem as to selecting of the administrative activity features of the certain executive authority used to point out its definiteness according to competence, normative due process, regulatory character, internal organizational and external orientation, etc. the characteristic features defined by v. v. konopliov and d. v. pryimachenko can be taken as a basis for determination of the sfs offices’ administrative activity features. in this context, we should highlight such main (leading) features as regulatedness by the norms of administrative law and state power. however, to get a complete picture of the sfs offices’ administrative activity bodies, its components should be considered. in public administration literature, administrative activity is presented as a system composed of the following elements: planning, organization, hr management, management, coordination, reporting, budgeting (public administration: glossary, bakumenko v. d., beznosenko d. o., varzar i. m., under the editorship of v. m. kniazieva, v. d. bakumenko, 2002) (derzhavne upravlinnia: slovnyk-dovidnyk, bakumenko v. d., beznosenko d. o., varzar i. m. ta in., red. v. m. kniazieva, v. d. bakumenko, 2002 – in ukrainian). however, some scholars object to this approach because it combines different levels of the public administration function generalization with the specific stages of its implementation. thus, in the opinion of s. kyrii, the following subsystems should be identified within the administrative activity system: institutional, institutionary, function-based, organizational, communication and hr-related (kyrii, 2009). institutional subsystem is a set of public administration authorities and officials formalized on the basis of the laws of ukraine, decrees of the president of ukraine, resolutions of the cabinet of ministers of ukraine and administrations of the corresponding levels of the government that carry out organizational and administrative functions of the state (kyrii, 2009). institutional system of the sfs offices’ administrative activity is manifested in the levels of building up a management system to control the said offices. institutionary subsystem is a set of formal and informal rules that facilitate administrative activity or on the basis of which this activity is carried out. they can include regulated and informal interaction rules between subject and objects of public administration (kyrii, 2009). such rules for the sfs offices’ administrative and other activities implementation are fixed by the regulation baltic journal of economic studies 347 vol. 4, no. 5, 2018 which establishes this authority’s status and by other acts of the applicable law, governing the specific features for the implementation of the competence to exercise state control in the area of taxation. among the rules above, we should highlight, in particular, implementation of the measures to prevent corruption and control over their implementation within the sfs headquarters, its territorial offices; implementation of hr related function, arrangement of planning and financing work and accounting; provision of methodological support; public relations; arrangement of work related to staffing, storage, record keeping and use of archive documents; arrangement of informational and analysis support of the sfs and its activities automation; documentation management (pro derzhavnu fiskalnu sluzhbu ukrainy: postanova kabinetu ministriv ukrainy vid 05/21/2014 – in ukrainian) (on the state fiscal service of ukraine: resolution of the cabinet of ministers of ukraine as of the 21st of may 2014). in addition, article 20 of the tax code of ukraine (hereinafter – the tc of ukraine) stipulates the rights of controlling authorities in their relations with taxpayers and government authorities and article 21 stipulates obligations and responsibilities. analysing the orders of the applicable law as to the rights of controlling authorities in the area of taxation (in particular, the sfs offices), it may be noted that the ukraine sfs offices perform not just administrative activity but also financial and legal activities in the area of taxation. what is more, the latter is performed through enforcement, in particular, measures of financial and legal enforcement. the function-based subsystem is a set of functions performed by the subjects of public administration in the process of administrative activity implementation. it includes main functions of public administration: planning, motivations, organization, control (kyrii, 2009). such functions of the dfs offices (controlling authorities) are set forth in article 19-1 of the tc of ukraine and they include: control over compliance with tax legislation, accuracy of accrual and duly payment of taxes and duties (obligatory payments) to the budgets, special-purpose funds, as well as non-tax revenues established by law; formation and maintenance of the state register of individual taxpayers and other obligatory payments and the uniform individual taxpayers and legal entities data bank; awarenessraising work among the taxpayers about the tax legislation; prevention of crimes and other offenses that fall within the authority of tax police in accordance with the legislation; their disclosure, suspension, investigation and legal proceedings on administrative violations, implementation of national tax policy, as well as the policy in the area of control over production and turnover of alcohol, alcoholic beverages and tobacco and a set of others functions provided for by the tc of ukraine (podatkovyi kodeks ukrainy (red 01/01/2017): zakon ukrainy vid 02.12.201 – in ukrainian) (tax code of ukraine as amended on the 1st of january 2017: law of ukraine as of the 2nd of december 2010). in view of the above functions performed by the sfs, it can be concluded that the administrative activity of the authorities indicated above is not just of human rights practices nature but also of law enforcement nature. the organizational subsystem includes mechanisms for organization and implementation of administrative activities (kyrii, 2009). as a part of administrative activity, section ii of the tc of ukraine is dedicated to the administration of taxes and payments, which regulates the procedure with respect to the following: provision of tax advice (chapter 3); ways of tax control implementation and tax control authorities (chapter 5); taxpayer registration (chapter 6); audits and types of audits (chapter 8); taxpayers’ tax debt repayment procedures (chapter 9); types and procedures for application of sanctions for violation of tax legislation are fixed (chapter 11). in addition, the procedure for imposition of administrative sanctions for violation of tax legislation is regulated by the code of ukraine on administrative offenses (hereinafter cuoao) (kodeks ukrainy pro administrativni pravoporushennia: zakon ukrainy, 1984 in ukrainian). specific types of administrative activity are also regulated by the laws of ukraine “on use of cash registers in trade, catering and services” (pro zastosuvannia reiestratoriv rozrakhunkovykh operatsii u sferi torhivli, hromadskoho kharchuvannia ta posluh: zakon ukrainy vid 06.07.1995), “on state regulation of production and turnover of ethyl alcohol, cognac and fruit spirits, alcoholic beverages and tobacco” (pro derzhavne rehuliuvannia vyrobnytstva i obihu spyrtu etylovoho, koniachnoho i plodovoho, alkoholnykh napoiv ta tiutiunovykh vyrobiv: zakon ukrainy vid 19.12.1995 – in ukrainian) and other regulatory acts. at the same time, it should be noted that there are the scientific researches dedicated to financial and control law (savchenko, 2017) that clarify specifically the nature of public financial control as a function of financial activity management and a final stage of the management process. communication subsystem is connected with the methods of information collection, analysis and processing in course of administrative activity implementation (kyrii, 2009). thus, section ii of the tc of ukraine establishes the tax reporting filing procedure and the persons responsible for this filing (chapter 2), the information and analysis support procedure for controlling authorities activities (chapter 7). the hr-related subsystem is connected with a selection of highly-qualified personnel, work with personnel, with the establishment of the appropriate conditions for administrative activities (kyrii, 2009). the fundamental principles of the sfs offices’ employees are established in section xviii-1 of the tc of ukraine baltic journal of economic studies 348 vol. 4, no. 5, 2018 (podatkovyi kodeks ukrainy (red 01/01/2017): zakon ukrainy vid 02.12.2010 – in ukrainian) (tax code of ukraine, as amended on the 1st of january 2017; law of ukraine as of the 2nd of december 2010). the sfs offices’ procedure for service accession, career, service termination is established by the law of ukraine “on public service” (pro derzhavnu sluzhbu: zakon ukrainy vid 10.12.2015 – in ukrainian) in general, all components of the administrative activity in the course of its implementation are interrelated and interdependent and, in their entirety, they form an integral dynamic system (kyrii, 2009). 4. conclusion conducted research allows drafting the following conclusions. the essence of the sfs offices’ administrative activity stems from the history of tax service establishment and it covers control, registration and law enforcement activities aimed at the implementation of national tax policy, fight against offenses in the area of taxation by the measures of administrative legal nature. on a large scale, this is of executive and administrative nature and under its specific lines, only the legislation provides for application of conciliatory, explanatory, contract procedures. it is for this reason that we can refer to the appropriateness of laying the emphasis on the public and service component of ukraine’s sfs offices administrative activity as the controlling authorities in the area of taxation. 5. discussion existing theoretical insights dedicated to the issue of determining the essence of administrative activity, its types and lines come from its public and legal nature, executive and administrative nature, law enforcement nature (i. p golosnichenko, y. y. kondratiev, a. p. koreniev, y. m. moiseiev, v. i. olefir, y. i. rymarenko and others), and occasionally they are limited to its perceptions from the viewpoint of view of exercise of executive power (y. o. tikhomirov). additionally, there are scientific papers that recognize the organizational nature of the administrative activity, which becomes apparent in the certain functions of government authorities (n. i. zolotariova). as compared to the existing scientific papers, when determining the essence of administrative activity, it is proposed to take into account logical and semantic connection between the activity indicated above and the tasks and the functions performed by a subject of public relations according to its administrative-legal status. the indicated above is directly concerned with the controlling authorities in the area of taxation, in particular, ukraine’s state fiscal service offices that in comparison with other controlling authorities have a wider range of powers to control that perform specific tasks and functions determining the specific nature of their management (administrative) activity. this approach does not conflict with the characteristic of administrative activity from the standpoint of structural and functional component of public administration (s. l. kyrii) that allowed to agree with existence of the elements of dynamic administrative activity system and extrapolate (expand) this approach to definition of the essence of the controlling authorities’ management (administrative) activity in the area of taxation. 2. the article defines that the sfs offices’ administrative activity is carried out in the following lines: a) depending on the type of administrative legal relations involving the sfs office or its officer: public administration (establishment, reorganization, liquidation of the sfs regional offices, issuance of management legislative acts of regulatory nature, etc.); relations of administrative services (taxpayer registration, accountants of settlement operations, cash registers, issuance of licenses, patents, certificates, provision of tax advice, etc.); relations of responsibility of public administration for unlawful actions or inaction (appeal of the sfs offices’ decisions, actions or inaction by administrative or judicial procedure; taking disciplinary action against the sfs offices’ employees); relations of the taxpayers’ liability for violation of the rules and the procedures established by public administration (bringing administrative action against them, application of administrative enforcement measures); b) depending on the type of the procedure being performed: non-jurisdictional (issuance of regulatory and individual management acts, registration, licensing, patenting, issuance of certificates, provision of tax advice, processing of the citizens’ applications and proposals, recruitment to the sfs offices, encouragement of the sfs offices’ employees, etc.) and jurisdictional (processing of the citizens’ complaints, taking disciplinary actions, instituting administrative actions, auditing, administrative enforcement measures). however, the most common will be consideration of the sfs offices’ administrative activities implementation in the following lines: external administrative (external) and internal organizational (internal). externaladministrative (external) line of the sfs offices activity is connected with the performance of their state functions on the basis of administrative regulations. internal organizational (internal) line is connected with the organization of the sfs offices’ system functioning. 3. performed analysis of the specific features as to legal regulation of the sfs offices’ activity and the scholars’ achievements, proved advisability of presenting the controlling authorities’ administrative activity concept in the tax area of taxation as regulatory, governmental activity related to implementation of controlling, registration, law enforcement actions, as well as internal baltic journal of economic studies 349 vol. 4, no. 5, 2018 organization activities, that are regulated by the norms of administrative law and aimed at implementation of the national tax policy, the citizens’ rights and their protection, fight against offences in the area of taxation and organization of the sfs offices functioning. this activity is largely of executive-administrative and public nature, and in its specific lines, the law provides for application of conciliatory, explanatory and contract 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(in ukrainian) baltic journal of economic studies 143 vol. 5, no. 1, 2019 corresponding author: 1 state educational-scientific establishment “academy of financial management”, ukraine. orcid: http://orcid.org/0000-0002-6650-6181 e-mail: odnorog_btnau@ukr.net 2 borys grinchenko kyiv university, ukraine. orcid: http://orcid.org/0000-0001-8610-3980 e-mail: k2205n@ukr.net 3 national university of life and environmental sciences of ukraine, ukraine. orcid: http://orcid.org/0000-0002-5407-8466 e-mail: zagurskiy_oleg@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-143-149 institutional support for at tracting investments in the agrarian sector of the economy in the conditions of innovative development maksym odnorog1, nataliia kraus2, oleg zagurskіy3 abstract. institutional dynamics refers to understudied processes both in economic theory and in economic practice. there is a lack of systematic knowledge on the composition, structure, and functioning of the basic socioeconomic institutions exactly of the investment process, therefore, the purpose of the paper lies in the study of institutional support for attracting investments in the agrarian sector of the economy. methodology. the theoretical and methodological basis of research is the dialectical method of cognition and systematic approach through which there are theoretical and methodological foundations of strategic innovation institutes of the agricultural market. the results showed that the institutional environment of investment provision of the agrarian sector of the economy includes, on the one hand, agricultural producers with relevant on-farm structural units, managers, professionals, organizers of production and economic processes; in rural areas; local authorities and government; and on the other, a set of functionally competent institutions (legal, scientific, educational, informational, financial, controlling, deliberative, etc.). each of these institutions has a corresponding purpose, socio-economic relevance, and is an integral part of this system. practical implications. the studied institutions create incentives for the development of science and education, encourage the mobility of production factors, facilitate the transfer of scientific and technical information and the introduction of new technologies, promoting entrepreneurship and innovation. conversely, inefficient institutions reduce the potential level of well-being, reduced reliability assurance of property rights and enforce contracts. value/originality. the increasing importance of the institutional environment of investment provision of the agrarian sector of the economy gives an opportunity to define the latter as an important intangible factor in the development of agriculture and society as a whole, which creates the necessary conditions for transformation and development of the agrarian sector. the formation of a modern institutional environment should include a system of regulators, which would provide favourable conditions for attracting domestic and foreign investment, further structuring of the economic complex of the agrarian sector, the reduction of regional asymmetries of socio-economic development. how full the institutional environment of individual units of the investment will be depends on the realization of economic and social development priorities of the ukrainian village. key words: institutional support, institutions, investing, investment, agrarian economy, agriculture. jel classification: e11, g23, o17, g20, p33, e22, n50, o13, q10, q12, q19 1. introduction with the rapid development of socio-economic relations in the country, an indispensable condition for increasing production efficiency, including in agriculture, is its institutional support, which mainly determines the performance of economic entities that operate in the economy. therefore, the analysis of the status and the dynamics of institutional support becomes an integral part of economic systems management, including acquisition and management of investments. the acute need for such investments to guide them in the agrarian sector of ukraine is caused baltic journal of economic studies 144 vol. 5, no. 1, 2019 by the shortage of own financial resources. investment policy and effective investment management are an important prerequisite, which can solve many problems in ukraine. this issue becomes relevant due to the high importance of the institutional environment for the development of the provision of investment resources for agricultural producers. currently, in agricultural production, there is a tendency of reduction in volumes of financial resources. most agricultural enterprises were faced with the problem of the accumulation of private capital for the implementation or modernization. the actual life of most fixed assets significantly exceeds the standard. the processes of reproduction and renewal of the material-technical base in the village almost stopped. now in agriculture, there mainly operates a large number of investments that are little attractive, have outdated production capacity, able to produce highquality products in accordance with the requirements of international standards. in market conditions, one of the main problems of the agricultural sector of ukraine is to attract investment resources needed to modernise the sector and ensure on this basis production of competitive products. however, due to the significant number of unprofitable enterprises and low level of rate of profit of agricultural production compared to other sectors of the economy, the slow turnover of productive capital, due to the disproportion between production time and working period, insufficient protection of investor rights is low level of investments in the agrarian sector of the economy, which hinders the process of modernization and increase of production volumes of agricultural products. in these circumstances, the need arises to justify targeted public policy measures aimed at the intensification of investment processes in the industry, which will create conditions for the formation of food security of the state. attracting investment in the agricultural sector can be stimulated or constrained by the institutional environment that has formed, and a system of institutions, which develops in it. analysis of recent researches and publications shows that problems of the institutional environment are considered in the works of many well-known domestic and foreign scholars, namely, (veblen, 1984), (north, 1997, 2000), (shpykuliak, 2012), (shebanin, shebanina, 2011) and others. however, a lot of questions on the institutional environment of investment support for agriculture, in particular, the influence of formal and informal institutional factors on the development of investment in the agricultural sector of the economy are studied. therefore, the scientific search and study of the mechanisms of changes to existing and the introduction of new formal and informal institutions of investment, developed over a long historical period, are ongoing challenges for science. the goal of the article lies in the study of institutional support for attracting investments in the agrarian sector of the economy. theoretical and methodological basis of research is the dialectical method of cognition and systematic approach through which there are theoretical and methodological foundations of strategic innovation institutes of the agricultural market. 2. institutional component of agricultural policy in the agricultural sector attracting investment is the most important factor of economic growth of any country and improving the welfare of the population. in the agricultural sector of ukraine for the development of agricultural production, investment activity is a means of ensuring food security of the state, a guarantee of industry development and ecological environmental protection. active measures at the state level should provide financial protection for agricultural production. at the heart of this must be the state financial protection and supporting agricultural producers with the use of various forms of state influence on the development of the agricultural sector. in modern conditions, theoretical developments that allow taking into account changes in the institutional structure of the economy with the aim of increasing its effectiveness acquire a priority. the necessity of taking into account institutional factors is that they determine the level and additional opportunities to accelerate socio-economic development. the institutional component is included into a number of the basic preconditions for the formation and development of investment policy in the agricultural sector of the economy. and this is logical, because the applied nature of attracting investment is manifested through the interaction of very specific objects of the institutions, which are, on the one hand, agricultural producers – agricultural enterprises, farms, private farms, agricultural firms, agricultural holdings, etc., and other state institutions, organizations, research and educational institutions, banks, financial and commercial structures, etc. the relationship between them in the process of implementing investment activities develops under the influence of economic, organizational, legal, and other factors in the macro environment, and directs the progress of activities carried out, occurs through the implementation of economic relations between stakeholders in the context of society’s traditions, rules, norms, laws, mentality and worldview of the people. in scientific literature, the term “institutional support” is interpreted in two aspects. on the one hand, as “institutions” – that take into account the customs, traditions, norms of behaviour, which are accepted in society, on the other hand as “institutions” – play laws, legal norms, social organizations, and the like. baltic journal of economic studies 145 vol. 5, no. 1, 2019 institutes and institutions are phenomena that invariably accompany the development of economic systems. their existence is a consequence of bounded rationality of man, which, a priori, has no opportunities and time for full, comprehensive analysis and justification of possible strategies. the emergence of institutes (institutions) is due to the attempt to save efforts on the acquisition and processing of information. the terms “institute,” “institution” come from the latin words institutum (installation, implementation) and institutio, institutionеs. in latin, there is clearly discernible kind of semantic boundaries between these cognate concepts. further terms and institutum, institutio were perceived by many languages but researchers have begun to pay special attention to this notion only in the early nineteenth century. justifying the essence of institutions, the scientists determined the scope of their competence in general and political institutions in particular. they focused on the fact that political institutions serve such a fundamental life needs, like security and social order. it is the goal of survival of the society in terms of its evolution gave rise, according to herbert spencer, the necessity of formation of the conciliation and coordinating a social subsystem – features regulatory institute, which was experiencing a political institution. contemporary works of western authors clearly differentiated institution and institute and, although complete agreement on the definition of the essence of the “institute” and “institution” among them does not exist. institutions are given the importance of symbolic, conventional, semiotic values and practices, strengthening and playback with the help of such social organizations as institutions (particularly political). d. north also clearly delineates the concept of institutions and organizations (institutions): “in this study, introduced a significant difference between institutions and organizations... conceptually, what must be clearly differentiated are the rules from the players” (north, 2000). institutions according to d. north, are “the structures of the human brain” (north, 2000), “institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. in consequence they structure incentives in human exchange, whether political, social, or economic” (north, 2000), “range ban individuals something to do and the conditions under which they sometimes are permitted to engage in certain activities... consist of formal written rules as well, of course, unwritten codes of conduct that underlie and supplement formal rules” (north, 2000). d. north divides institutions into official (formal) and unofficial (informal). the first is legislation of a particular country; it enshrines the rules and regulations. informal institutions are the customs, moral norms, and other unwritten rules of conduct. a different situation is observed in post-soviet countries. for example, in the sociological and economic traditions of russia, there has established a kind of unity of these key concepts institutional analysis “institute” and “institution.” institutions are a phenomenon of both economic and non-economic order – the state, law, social organization and structure, customs, family and the like. as the researchers note, was the actual loss of a specific category, which is “institute.” but in the studies on the institutional sphere, there is a semantic ambiguity of the concept of the institution as a norm and the institute as an organization. the reason for the reduction of categorical apparatus of institutionalism in the russian language researchers believe the consolidation of the term “institute” (instead of “organization”) in the process of erroneous translation of fundamental t. veblen’s theory of the leisure class in its subtitle said it was about the institution (an economic study of institution) and not institutions, as it was translated (veblen, 1984). the tradition of ignoring the term “institution” or its inadequate use during the translation from english or russian language is also common in ukraine. although the title of the book of the founder of neo-institutionalism, d. north, which is printed in ukrainian, it sounds clear: “institutions, institutional change and economic performance” (north, 2000). without knowing it, most of the domestic authors copy references to the russian edition of this book entitled “institutes, institutional change and economic performance.” the curvature of the methodological apparatus greatly simplifies the process of presenting results of such studies, because all phenomena are simply combined under a single notion of “institution” without a thorough theoretical analysis of their essence. clearly distinguishing between the concepts of institutions (rules of the game in society) and institutes, researchers in the latter are political bodies (state authorities and local self-government, political parties, etc.), economic bodies (firms, households, unions and the like), public, educational, religious organizations and the like. according to v. s. shebanin, institutional education is divided into production (the company), regulatory (enterprises, government, education), and regulatoryrestrictive (legal acts) (shebanin, shebanina, 2011). the conviction o. g. shpykuliak, economic institutes and institutions should be considered as formed by society and the state the relevant rules, norms, traditions, institutions; education, such as property, national economic mentality, as well as the legal structure, institutions, organizations – institutions that consolidate and direct human interaction in the economy (shpykuliak, 2012). institutions are positioned as rules of the game or “regulators” and the market actors determine their level baltic journal of economic studies 146 vol. 5, no. 1, 2019 of adequacy of processes, which are subject to regulation. economic institute is an organization, institution, enterprise, the rule or standard of behaviour, operated and control system, the agreement and contract and the like. based on well-known scientific tenets and practical life principles, it’s safe to say that every type of socioeconomic system in its development managed by the relevant institutions (rules and norms) and institutions (structures that emulate them), including economic. for example, the market and the command economy functioned under the influence of the radically different institutional formations, especially in the formation of the motivational field of activity of economic agents. this belief shaped by history and nature of the consequences of institutional interactions. the model of the institutional system, forms and methods of management of the economy determines the behaviour of its participants, and thus forms the perspectives of effects on all levels of social life (shpykuliak, 2012). 3. impact of the real economy on the institutional environment the real economy is developing not just under the influence of a particular set of institutions or through the functioning of particular institutions and within their specific structured set, which is determined by the specifics of the country. institutions and institutions shape the institutional environment of the economy, which is characterized by a certain institutional structure. the latter links the various elements and subsystems, determines the nature of their interaction and thus lays the foundation for the “solidarity” of functioning and development. in the agricultural sector, there is the need to create an institutional structure that will provide exactly the competitive rules of the game, the regularity of transactions, the objectivity of economic laws, and the elimination of the dysfunctional market (shebanin, shebanina, 2011). in economics, the institutional environment is considered as a set of fundamental political, social, legal, and economic rules that determine the scope of human behaviour and form the basis for production, exchange, and distribution. thus, the institutional environment is clear, an ordered set of institutions that determine the framework conditions of functioning and development of economic entities (shebanin, shebanina, 2011). the main precondition for the effectiveness of the institutional environment have effective institutions as the totality of political and socio-economic institutions determines the guarantee of fulfilment of contractual obligations by all economic agents and promotes the full utilisation of productivity of production factors underlying economic growth. these effective institutions ensure easy adaptability of the political-economic system to new conditions and opportunities that arise due to scientific and technical progress. flexible institutions create incentives for the development of science and education, encourage the mobility of production factors, facilitate the transfer of scientific and technical information and the introduction of new technologies, promoting entrepreneurship and innovation. conversely, inefficient institutions reduce the potential level of well-being, reduced reliability assurance of property rights and enforce contracts. the necessity of activation of investment activity is that agrarian sphere of the economy of ukraine is unable to develop without the involvement and effective use of investment. accumulating entrepreneurial, public, and mixed capital, providing access to modern technology and management, investments do not only contribute to the formation of national investment markets but also enliven the markets for goods and services. successful investment activity is possible under the condition of the creation of a favourable institutional environment, in which investment processes are forming the set of all macroand micro factors that affect the decision of investors to invest. the aggravation of problems in the agrarian sector of the economy is largely due to the lack of investment support for modernization, reconstruction and technical re-equipment of agricultural enterprises, as well as the reproduction of their resource potential. this is due to the fact that it was too different and narrowed the range of sources of investment of large and small agricultural producers. improving the institutional environment of investment provision of the agrarian sector of the economy and diversifying sources of investments of agricultural enterprises require new methodological approaches in view of the increased european integration vector of development of our country and worsening of a range of economic and environmental problems of economic development of the resource potential of the agrarian sector of the economy. institutional analysis of investment activity in the agrarian sector of the economy involves the description of institutions and their interaction as a system and evaluates the system. by the main components of the institutional environment of investment provision of the agrarian sector of the economy (figure 1), we can distinguish three main groups of institutions. 4. the methodology of research of institutes the scientific literature recognizes the importance of institutions and the complexity of the methodology of their study. in the opinion of o. m. moroz, identification of the presence, nature, and role of any institution should cover the subjective and objective description of the phenomena that are investigated. each institution can be characterized by a spectrum of such features (moroz, 2006): baltic journal of economic studies 147 vol. 5, no. 1, 2019 1. the name of the institute, the scope of activities of the facility, which deals with the institution, a general description of the nature of the institute. 2. the essence of the basic norms of the institute. 3. real actors subject to the institutional norm. 4. the potential subjects, which may introduce an institutional norm. 5. the temporary identity of the institute, the time and conditions of occurrence, validity period. 6. the degree of formalization of the institute (formal or informal), consolidation and compliance with the legislative and regulatory base. 7. the mechanism for monitoring compliance with the institutional norms; 8. the level of activity of the institute (macro-, meso-, microlevel). 9. the level of regulativity, that is, how institutional norms are based on mechanisms regulation of such actions. 10. the level of constructiveness, that is, how these institutional norms contribute to the development, improvement, modernization. 11. the system of cooperation with other institutions. 12. the capacity of the institute, availability of mechanisms for the support of the institute (level of public perception and support). 13. the list of (simulation) of possible situations or phenomena that can be explained according to the institute. 14. mathematical or another device that can be used as tools of analysis. 15. evaluation of expediency/efficiency of the institution (moroz, 2006). in more detail, the main institutions of the institutional environment of investment provision of the agrarian sector of the economy are represented in figure 2. 5. findings the institutional environment of investment provision of the agrarian sector of the economy includes, on the one hand, agricultural producers with relevant on-farm structural units, managers, professionals, organizers of production and business processes; rural; local authorities and self-government; and on the other, a set of functionally competent institutions (legal, scientific, educational, informational, financial, controlling, deliberative, etc.). each of these institutions has a corresponding purpose, socio-economic relevance, and is an integral part of this system. 6. conclusions thus, the increasing importance of the institutional environment of investment provision of the agrarian sector of the economy gives an opportunity to define the latter as an important intangible factor in the development of agriculture and society as a whole, which creates the necessary conditions for transformation and development of the agrarian sector. the formation of a modern institutional environment should include a system of regulators, which would provide favourable conditions for attracting domestic and foreign investment, further structuring of the economic complex of the agrarian sector, the reduction of regional asymmetries of socio-economic development. how full the institutional environment of individual units of the investment will be depends on the realization of economic and social development priorities of the ukrainian village. intensification of investment activity is not only the main condition for the withdrawal of the agricultural sector from the deep crisis but becomes the most important determining factor of its further development. it requires not only reforming the social order in the village by institutional changes that had priority in the initial period of agrarian reform, and investment security of the agrarian sector of the economy state institutions applied institutes and corporate structures scientific and advisory institutions figure 1. the main components of the institutional environment of investment provision of the agrarian sector of the economy source: developed by the author baltic journal of economic studies 148 vol. 5, no. 1, 2019 t he b as ic c om po ne nt s of in st itu tio na l e nv ir on m en t i ns tit ut io na l s up po rt to th e ag ri cu ltu ra l s ec to r o f t he e co no m y in st itu te tr ad iti on s, c us to m s, th e w or ld v ie w o f p eo pl e in re la tio n to th e in ve st m en t in st itu te o f o rg an iz at io n of p ro du ct io n in st itu te o f e du ca tio n in st itu te o f i nf or m at io n in st itu te o f p ub lic in fl ue nc e a pp lie d in st itu te s an d co rp or at e st ru ct ur es sc ie nt if ic a nd a dv is or y in st itu tio ns st at e in st itu tio ns institutions of legal support of the investment policy of the state institutions of state regulation to attract investment in the agricultural sector institutions of government and control the country’s investment climate state cooperation with the institutions of international investment activity research institutes institutions information-consulting support of investment activities institutes of education the collective, cooperative and private farming institutes of corporate management institutions of public opinion regarding the investment process international projects and contracts investment in infrastructure development institutions of the consumption of agricultural products fi gu re 2 . th e in st it ut io na l e nv ir on m en t o f i nv es tm en t p ro vi si on o f t he a gr ar ia n se ct or o f t he e co no m y so ur ce : d ev el op ed b y th e a ut ho r baltic journal of economic studies 149 vol. 5, no. 1, 2019 the involvement in the agricultural sector large-scale investment. creating prerequisites for mass investment in the agricultural sector should be the most important element of the strategy of state agrarian policy at the present stage. first of all, it is necessary to provide at the state level creating a favourable, cost equivalent market environment, in which the economy becomes receptive to investment, and entities appear and expand investment opportunities for renewal of fixed capital and its increase at the expense of own and attracted means, including foreign capital. in our country, much is now being done in order to significantly intensify the process of attracting investments, more needs to be done in the future; however, investors are well aware that the creation of an attractive investment climate with a stable, consistent, and transparent legal framework takes time. many potential investors are ready to strengthen its presence and activities in ukraine if the reform processes dynamically continue and it is seen that the state, represented by central and local executive authorities is promptly and purposefully working to address these deficiencies. references: moroz, o. o. (2006). instytucionalni osnovy rozvytku agrarnoi ekonomiky [the institutional framework for the development of the agrarian economy]. avtoref. dys. … d.e.n.: spec. 08.07.02. north, d. (1997). ynstytucyonalnyуe yzmenenyja: ramka analyza [institutional changes: framework of analysis]. voprosy ekonomiky, 3, 6-17. north, d. (2000). instytucii, instytucijna zmina ta funkcionuvannja ekonomiky [institutions, institutional change and economic performance]. osnovy. shebanin, v. s., shebanina, o. v. (2011). znachennja instytucij v zabezpechenni efektyvnogo rozvytku apk [the importance of institutions in ensuring the effective development of the agroindustrial complex]. visnyk agrarnoi nauky prychornomorja, 3(60), 3-9. shpykuliak, o. g. (2012). konceptualni aspekty pozycionuvannja rolovyh harakterystyk ekonomichnyh instytucij ta instytutiv v metodologii naukovogo dyskursu [conceptual aspects of the positioning of the role performance of economic institutions and institutions in the methodology of scientific discourse]. zbirnyk naukovyh prac vnau, 1(56), 12-20. veblen, t. (1984). teorija prazdnogo klassa [the theory of idle class]. progress. baltic journal of economic studies 167 vol. 4, no. 5, 2018 corresponding author: 1 odessa i.i. mechnikov national university, ukraine. e-mail: i.lomachynska@onu.edu.ua orcid: https://orcid.org/0000-0002-6112-6884 2 odessa i .i. mechnikov national university, ukraine. e-mail: syakubovskiy@onu.edu.ua orcid: https://orcid.org/0000-0002-1193-0241 3 vasyl stefanyk precarpathian national university, ukraine. e-mail: ivanplets86@ukr.net orcid: https://orcid.org/0000-0002-9649-6770 doi: https://doi.org/10.30525/2256-0742/2018-4-5-167-174 dynamics of austrian foreign direct investment and their influence on the national economy iryna lomachynska1, serhii yakubovskiy2, ivan plets3 abstract. the purpose of the paper is to analyse the dynamics of austrian foreign direct investments (fdi) and its role in the development of the national economy. the subject of research is the main components of austrian foreign direct investments 2005–2017 and their impact on the national economic development. methodology. methods of comparative and statistical analysis were used to study the dynamics, structure, and economic impact of austria’s fdi. special attention was given to the dynamics of fdi inflows and outflows, accumulated investments, cross-border mergers and acquisitions, “greenfield investments”, the impact of fdi on the balance of payments and international investment position of austria. the method of mathematical modelling in economics, in particular, regression analysis, based on annual data for the period from 2005 to 2015, was applied to assess the relationship between the main components of foreign direct investments and the indicator of the country’s economic growth – the gross domestic product (gdp) per capita. the following indicators were selected as independent variables: fdi liabilities, assets of fdi funds, as well as the balance of primary incomes. the dependent variable was the gdp per capita. it should be noted that such indicators as fdi assets and liabilities of fdi funds were not represented in the final model because of the high correlation between independent variables, and the relationship between gdp per capita and net foreign assets was insignificant. the assets of foreign direct investment funds have the greatest impact on the economy of the country, and the relationship between these indicators is direct. a slightly weaker relationship is observed between the balance of primary incomes and gdp per capita. the relationship between them is also direct. liabilities of fdi have the least impact on the dependent variable in comparison with the other two. findings. the growth of foreign direct investments of austria, as a result of liberalization of the world and european economy, as a whole has a positive impact on its gdp. thus, activities that are aimed at stimulating investments are fully justified and understandable. the paper determines important factors of austria’s investment activity and attractiveness, as well as the main factors that influence the dynamics of fdi. the most important among them are: the level of education, the internal coefficient of investment, political stability, the terms of trade, the state of the financial sector. the results of the analysis show that austria has a high level of business activity; the government conducts activities to stimulate investment in r&d and in high-tech enterprises, to create new jobs, to protect the environment etc. the results of the study allow forecasting a gradual improvement in the balance of the country’s primary incomes, which will contribute to the further growth of the current account surplus and will strengthen the positive influence of austria on the development of the european and global financial systems. practical implications. the results of the study will help to increase: the effectiveness of the investment policy of austria to stimulate the country’s economic growth; the international competitiveness of national companies on european and world markets; the level of stability of austria’s financial system to external shocks. key words: foreign direct investments (fdi), components of fdi, investment policy, balance of payments, development of national economy, austria. jel classification: e22, e27, f21, g18 baltic journal of economic studies 168 vol. 4, no. 5, 2018 1. introduction austria is a highly developed industrial country. its geopolitical position between western europe (industrialized countries) and burgeoning markets of central, eastern, and south east europe (cesee) has provided a high degree of economic, social, political integration with eu countries and other countries cesee, which are not eu members. due to the external market access in central and eastern europe, the enlargement of the eu in 2004 and 2007 has consolidated austria’s investment attractiveness. however, the enlargement of the eu has also strengthened investment positions of austria’s competitors. as a result, nowadays, budapest, prague, and bratislava compete with vienna for foreign investors. nowadays, austria has created special favourable conditions to attract foreign investors. the priority sectors for investment in austria are high-tech and innovative industries. there are four major types of incentives for investment projects of companies registered in austria: regional incentives, incentives for small and medium-sized enterprises, technology incentives, and environmental incentives. the government of the country provides assistance as subsidies to entrepreneurs, who operate investment projects targeted at supporting the creation of new jobs. the most common way to support foreign investment is to ensure the bank’s guarantee for the preferential loan, provided for the implementation of investment projects. in case of implementing high risky or very large investment projects, conditions for participation in the distribution of a company’s profit or additional non-risky rewards can be discussed. along with the supportive programs, a very important role for austria’s investment attractiveness play political stability and administrative transparency, rule of law, business environment, tax legislation, the protection of investors’ rights, the stability of legislation and etc. bilateral agreements, mainly with less-developed countries, have also a great influence on investments attraction in austria (u.s. state department, 2015). austrian business agency is a special structure for enterprises and investments attraction, which organizes contacts with potential investors and informs the business environment about austria as a business platform. in general, since the foundation of the agency in 1982, nearly 49.803 new jobs have been created and investments in the amount of almost €7.25 bn have been attracted (austrian business agency, 2018). in addition to this agency, austrian economic chambers (wko), whose membership is compulsory for all austrian companies, also helps austrian companies in investing abroad. there is a government structure “austrian business agency”, as well as similar departments in each of the nine federal constituencies (counties) which provide an informative business support and offer different stimulating measures. meanwhile, foreign investors should take into account that austria saves the essential features of the national economic model, established after the second world war. for many years, the state played a major role in the country’s economy. however, the state’s role has significantly reduced as a result of structural adjustment policies and the large-scale privatization of the state holding company österreichische industrieholding (öiag). 2. literature review foreign direct investments play an important role in the development of national economies. therefore, different aspects of fdi movement are investigated by both academics and international and national specialized institutions (imf, unctad, ecb, eba, oecd, etc.). most of the modern applied and theoretical researches of the fdi movement are dedicated to developing countries. however, the proper attention is not paid to the analysis of the dynamics and structure of fdi in developed countries, including austria. authors focus their attention on the impact of fdi on employment, remuneration in the context of globalization (onaran ozlem, 2008), european economic integration (beer et al., 2017) and disintegration processes (sydorova, yakubovskiy, 2017), role of fdi in austria’s innovation potential (lomachynska, podgorna, 2018), assess the impact of fdi from austria on the development of the economies of the recipient countries (petrakos et al., 2000; kurtovic et al., 2016; yakubovskiy et al., 2018), analyse the impact of the global financial crisis on the dynamics of gdp and fdi (simionescu, 2016). based on these studies, it can be summarized that the growth of austria’s fdi as a result of the liberalization of the world and the european economy had a positive impact on its gdp; had a positive influence on the development of the service sector, but did not have a significant impact on the export-oriented trades of the real sector; had a negative impact on wages and employment in austria; contributed to the growth of transitive economies and their effectiveness. the global financial crisis, the decline in gdp growth and fdi in the cesee countries negatively affected the investment activity and profitability of austria. at the same time, the changes in the dynamics of the inflow and outflow of austrian fdi in modern conditions, as well as their factors, are insufficiently covered. the paper’s aim is to investigate the dynamics of the main components of austria’s fdi in 2005-2015. 3. dynamics of austria’s fdi and their main components the data of austria’s volume of foreign direct investment show a declining tendency for the last years. figure 1 demonstrates the dynamics of inward and baltic journal of economic studies 169 vol. 4, no. 5, 2018 outward of fdi in 2005-2015. during the pre-crisis period 2005-2007 inward of fdi increases and reaches $13.7 bn in 2007, while the outward reaches $19.7 bn. in the post-crisis period, fdi flows are rapidly declining and the minimal values are seen in 2010: the inward of fdi is $2.6 bn, the outward is $9.6 bn. in spite of investment attractiveness, the dynamics of fdi in general shows that austria is more a donor, rather than a recipient of foreign direct capital. sharp changes in the dynamic of fdi can be observed only in 2014 when its outward has decreased by about three times, while the inward has gone up by more than 1,5 times. these changes can be explained by austria’s victory of “eurovision” song contest in 2014. in terms of this contest, austria as a winner held up this event in vienna in 2015. the organization of such a type of event requires a large-scale preparation of the accompanying infrastructure, as well as a large capital investment on the eve (in 2014). in 2015, austria’s flows of fid have returned to its usual ratio, when the inflow is less than the outflow. nevertheless, the inflow of fdi reduced to $3.8 bn, outflow increased by $12.4 bn. comparing with 2013, both indicators have declined by nearly $2 bn. this situation can be explained by european migration crisis at the beginning of 2015, which arose as a result of the rapid increase in the flow of refugees and illegal migrants to the european union from north africa and the middle east. political and economic instability in ukraine, low growth prospects in the countries of southeast asia had also a negative impact on the dynamics of austrian fdi in 2013-2014. considering the changes of the fdi stocks of austria (fig. 2), first of all, it should be noted that despite of their small volume compared to developed countries of western europe, such as germany and great britain, their role in austria’s economic and their ratio to country’s gdp are no less important. for the period from 1995 to 2015, the inward fdi stocks of austria raised up by nearly 9 times (from $19 bn to $164 bn), while austria’s foreign investments stocks in other countries almost by 20 times (from $114 bn to $208.3 bn). this also confirms that austria is gradually strengthening the position of the investor country. there is also the increase in the share of the fdi stocks of austria in gdp. if in 1995 the volume of fdi stocks in austria in its gdp was 85%, then from 2012 it exceeded by 40% and austria’s fdi stocks in other countries was 5% and 50% accordingly. this allows to state that the modern development of the austrian economy largely depends on the movement of foreign direct investment. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 inward 10,8 4,8 25,5 7,2 9,3 2,6 10,6 4,0 5,7 9,3 3,8 outward 11,1 12,0 35,8 28,7 11,0 9,6 21,9 13,1 15,6 5,1 12,4 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 u sd b n year figure 1. fdi flows of austria source: compiled according to data (imf, 2017) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 inward 82,6 109,1 159,6 145,8 169,1 160,6 152,8 164,7 178,8 176,6 164,8 outward 71,8 105,1 150,3 148,2 170,0 181,6 193,1 209,6 231,8 216,6 208,3 50,0 100,0 150,0 200,0 250,0 u sd b n year figure 2. fdi stocks of austria source: compiled according to data (imf, 2017) baltic journal of economic studies 170 vol. 4, no. 5, 2018 due to the territorial proximity, the absence of language, german companies are the leading investors of austria’s economy. as a result of the deepening of european integration in the last fifteen years, a significant share of investment is provided by the eu countries, primarily by germany. although, if earlier germany accounted for more than 40% of fdi in austria, nowadays the share of german investors does not reach even 25%. the netherlands, italy, luxembourg, and russia are also the leaders of investing in austria. the dynamics of cross-border mergers and acquisitions of companies (m&a) in austria from 2005 to 2007 shows that m&a transactions have been conducted in the amount of $3.9 bn, which is 11 times less than in germany and 39 times that in the uk. there is a sharp increase in this indicator in 2014: the volume of the sales of austrian companies in m&a amounted to $3.07 bn, which corresponds to the trends of 2005–2007. in 2015, the volume of the sales of austrian companies in m&a fell by 3, 5 times and reached only $849 m. in the years of 2005–2015, the volume of the purchasing of austrian companies in m&a is slightly higher than the amount of sales. this indicates the high activity of austrian multinational companies. for three years from 2005 to 2007, the total value of transactions in m&a amounted to $5.6 bn. in 2013, this indicator has increased significantly – up to $10.7 bn. this also confirms that, unlike many other participants in the euro area, austria quickly and successfully coped with the consequences of the global financial and economic crisis of 2008. however, in 2014 the amount of purchase transactions for mergers and acquisitions of companies decreased to $345 m. despite this sharp decline, the indicator began to recover in the next year and till the end of 2015, there were merger and acquisition transactions of companies amounting to $4.8 bn. the dynamics of greenfield investments (investments in the “empty lot”), investments, which aimed at the creation of a new enterprise, demonstrate high activity in austria during 2005–2015. from 2005 to 2007, $12.5 bn was invested in the “empty lot” projects by austrian investors and a high figure has been maintained for the past three years. in 2013, $6.2 bn, $5.1 bn in 2014, and $5.7 bn in 2015 were invested in similar projects. however, foreign investments in the “empty lot” projects in austria for the whole analysed period is significantly less than in similar projects, which are invested by austrian entrepreneurs. for the whole period of 2005-2007, only $2.8 bn was invested in the “empty lot” projects. at the same time, for the last 3 years, this indicator has not changed significantly and remains at the level of $1.1-$1.8 bn. for the growth of the “greenfield investment” in austria, the government of the country offers foreign companies additional investment incentives, primarily within the framework of regional and innovation policies. growing competition of the central and eastern europe compels the austrian government to reduce the tax burden for enterprises (imf, 2017). the corporate tax rate is 25%, and by the estimation, it does not hinder to the development of foreign companies in austria. in accordance with the law on the promotion of the establishment of new firms (neugruendungsfoerderungsgesetz), new companies are exempted from paying taxes when buying a land plot, a court fee for the registration of a firm in the commercial register and the land registry, and other fees. in addition, there is a federal agency for investment promotion “austrian business agency” (bellak ch., 2010; austrian business agency, 2018), as well as similar agencies in each of the nine subjects of the federation (lands) that provide business information support and offer other incentive measures. analysing the balance of payments in austria, first of all, the main attention should be paid to the current account of austria (see figure 3). during the period of 2005-2015, the balance of the current account is positive and has a fluctuant dynamics. if in 2005 it was $6.2 bn, then in 2008 the maximum value was reached at $19.3 bn. however, as a consequence of the global financial and economic crisis, at the beginning of 2009, the current account balance is rapidly decreasing – almost twice and equals $10.2 bn. the next recession is observed in 2011–2012, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ca 6,2 11 14,8 19,3 10,3 11,5 6,8 6,1 8,4 10,2 7 0 5 10 15 20 u sd b n figure 3. the net current account of austria source: compiled according to data (imf, 2017) baltic journal of economic studies 171 vol. 4, no. 5, 2018 which can be explained by the european debt crisis and, as a consequence, the decline in business activity of austria. however, in general, the balance of current operations of austria for the whole analysed period has a positive value. one of the most significant components of austria’s current account is the trade balance (figure 4). the austrian economy highly depends on the foreign trade and is closely connected to the economy of other eu countries, especially germany (33% of the trade turnover in 2015), italy (6.2%), the usa (5.4%), switzerland (5.5%). the volume of foreign trade in austria in 2015 reached $232 bn, which is 2.6% more than in the previous year. the main export goods in austria are chemical products (primarily pharmaceuticals), cars and their components, equipment and paper products. austria mainly imports machinery and equipment, automobiles, chemicals, metal products, oil and oil products, food products. a slight increase in exports in 2015 is ensured by the countries of northern and southern europe, asia. during the whole analysed period, the trade balance has both a negative and a positive value. a close correlation of the trade balance with the current account can be noted. the trade deficit in austria can be explained by the consequences of the global financial and economic crisis, the debt crisis and uncertainty in the eu. the balance of primary and secondary income has also a big impact on the austrian balance of payments (see figure 5). the primary income account reflects the amount of investment income that must be paid and received for the temporary use of labour, financial resources or non-tangible non-financial assets (income from the use of natural resources by non-residents, etc.). these include: wages, income, taxes on production, income from property (interest, dividends, rent), etc. the balance of primary income has unstable dynamics, changing several times from a negative value to a positive one. in 2007, the value of primary income was negative (-$315 m), due to the growth in the number of labour migrants as a result of the eu enlargement, and, as a result, an increase in the austrian economy’s wages to non-resident employees. it is interesting that the high value of the indicator can be seen in 2008 while the balance of primary income increased from -$315 m to $3.4 bn. these changes are explained by the dynamics of income from investments, including receipts from financial assets owned by residents of austria located abroad. from 2011 to 2013, the balance of primary income remains positive, and then in early 2015, it rapidly has a negative value. such a situation is a result of an austrian long-term policy aimed at attracting investments. however, due to the negative impact of the european debt crisis, austria’s long-term stability rating was downgraded from aaa to aa+ by the european financial stability facility, which directly influenced austria’s investment attractiveness. the balance of secondary income, as a balance of current transfers between residents and non-residents of austria, throughout the whole period from 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 tb 1,0 3,2 5,3 2,6 -0,7 -1,8 -5,0 -4,1 -1,3 1,3 1,7 -5,0 -3,0 -1,0 1,0 3,0 5,0 7,0 u sd b n year figure 4. net trade balance of austria, usd billion source: compiled according to data (imf, 2017) figure 5. primary and secondary income of austria, usd billion source: compiled according to data (imf, 2017) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 primary -2,00 0,9 -0,3 3,4 0,09 3,3 1,3 0,5 1,4 0,7 -2,0 secondary -1,8 -3,4 -3,7 -4,5 -3,8 -4,0 -4,2 -4,1 -5,2 -4,4 -3,8 -5,50 -3,50 -1,50 0,50 2,50 4,50 u sd b n year baltic journal of economic studies 172 vol. 4, no. 5, 2018 2005 to 2015 demonstrates a negative value and varies from -$1.8 bn to -$5.2 bn. however, in the last 2013– 2015, there is an increase in the secondary income indicator, which is a consequence of the reduction in the employment of foreign residents in the country. the financial account is also a very important component of austria’s balance of payments (figure 6). during the period of 2006-2009, the financial account of austria had a stable position and fluctuated within the limits of $13.7-$15.5 bn. in 2010, this indicator went down by more than 4 times and reached $3.3 bn, after which it gradually grew at $5.44 bn in 2012. in 2013, there was a sharp increase by 2.5 times to $13.9 bn.; in 2014 there was a rapid reduction by 28 times. however, in early 2015, this indicator rose again to $6.2 bn. austria’s international investment position demonstrates the volume of external financial assets and liabilities of the economy at a certain period in time, which is formed as a result of external transactions estimated at current market value (at current market prices and exchange rates), as well as under the influence of other factors. the international investment position of austria is shown in figure 7. figure 7 presents financial assets belonging to austrians abroad (assets) and non-residents in austria (liabilities). from 2005 to 2012, the net international investment position of austria was negative (liabilities exceeded assets with a difference of $10 m to $60 m), which indicates that austria is a net debtor. from 2005 to 2007, both assets and liabilities increased by almost two: assets from $651 m to $1.136 m, and liabilities from $714 m to $1.176 m. from 2008 and by 2013, the volume of assets, both for austrians abroad and for non-residents in austria, remained within $1-$1.2 bn. in spite of the global financial and economic crisis and the european debt crisis, austria’s investment activity (both donor and recipient) is stable. from 2013 to 2015, austria’s assets began to exceed liabilities and the balance increased from $5.8 m in 2013 up to $8.9 m in 2014 and $10.8 m in 2015. at the same time, the total volumes of both assets and liabilities decreased. assets have decreased from $1.2 bn to $970.7 m, liabilities from $ 1.2 bn to $960 m. thus, the net investment position indicates that austria is a net creditor and confidently reinforces this position. 4. influence of the main components of foreign direct investments on austria’s gross domestic product per capita in order to determine the impact of the growth of austria’s fdi on the economy as a whole, it is possible to construct a model describing the relationship between the main components of foreign direct investments and the indicator of the country’s economic growth – the gross domestic product. the following indicators were selected as independent variables: fdi liabilities, assets of fdi funds, as well as the balance of primary incomes. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 fa 0,9 15,5 14,3 15,8 13,7 3,3 5,1 5,4 13,9 0,5 6,2 0,0 5,0 10,0 15,0 20,0 u sd b n figure 6. net financial account of austria source: compiled according to data (imf, 2017) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 assets 651,0 893,4 1 136,3 1 090,8 1 147,7 1 078,5 1 087,9 1 138,6 1 186,0 1 075,0 970,7 liabilities 714,1 938,8 1 176,9 1 131,7 1 168,6 1 098,9 1 095,6 1 152,0 1 180,3 1 066,0 959,9 -150,0 50,0 250,0 450,0 650,0 850,0 1 050,0 1 250,0 u sd m ill io n figure 7. international investment position of austria source: compiled according to data (imf, 2017) baltic journal of economic studies 173 vol. 4, no. 5, 2018 the dependent variable is gdp per capita. it should be noted that indicators such as fdi assets and liabilities of fdi funds were not represented in the model because of the high correlation between independent variables, and the relationship between gdp per capita and net foreign assets was insignificant. thus, the imaginary model has the following form: gdp=β1*fdii+ β2*fdiso+ β3*pib, where gdp – gross domestic product per capita, usd, fdii – fdi liabilities, usd, bn., fdiso – assets of fdi funds, usd, bn., pib – primary income balance, usd, bn. the model was estimated on the basis of statistical data for 2000-2017, the indicators were obtained from the unctad statistical database (unctad, 2018). gdp= 0,372*fdii + 0,755*fdiso + 0,493*pib (2,335**) (4,706***) (3,271***) r²=0,823, f=12,405. this regression model indicates the existence of a significant relationship between the dependent and the variables. the greatest influence on the economy of the country is provided by the assets of foreign direct investment funds, and the connection is direct, i.e. with an increase in this indicator by 1 standard deviation, gdp per capita will increase by 0.755 standard deviations. this dependence is understandable because the economic development of austria depends very much on the movement of foreign direct investment, namely the country is more a donor, rather than a recipient of fdi. and the existence of direct dependence is explained by the receipt of the benefits of the investing country as a result of reducing costs, obtaining tax benefits and subsidies, and a number of other advantages. a slightly weaker relationship is observed between the balance of primary incomes and gdp per capita. with the growth of the independent variable by 1 st.d., the gdp per capita grows by 0.493 st.d. there is also a direct dependence. the balance of primary incomes itself has unstable dynamics, changing several times from a negative value to a positive one. and volatility is observed both in terms of income for wages and for investment. in general, the most frequent manifestation is the surplus of the balance of primary incomes, where investment income predominates. the last indicator – liabilities of fdi – had the least impact on the dependent variable in comparison with the other two. growth in fdi liabilities leads to an increase in gdp per capita by 0.372 standard deviations. an explanation why in this case the relationship is much weaker in comparison with assets is statistics. for the analysed period, the inward fdi stocks of austria raised by almost 9 times, while austria’s foreign investments in other countries – almost by 20 times. the second proof of this is the dynamics of greenfield investments: the value of foreign investments in the “empty lot” projects in austria for the whole of the analysed period was four times less than was invested abroad by austrian investors. the following reasoning is an explanation of the existence of a direct relationship between variables. as it is known, in theory, the influence of fdi on the recipient country may be ambiguous or even negative. a number of factors that the country must have for a positive effect are connected with this. among them: the level of education, the internal coefficient of investment, political stability, the terms of trade, the state of the financial sector. thus, the country under consideration is characterized by administrative transparency, rule of law, business environment, tax legislation, the protection of the inventor’s rights, the stability of legislation, political stability. it should be noted that at the moment the government has taken a course to attract foreign direct investments. for this, supportive programs, regional incentives, incentives for small and medium-sized enterprises, technology incentives and environmental incentives are created. this policy is right for today for the further economic growth of austria. proof of this can be an analysis of the dynamics of the balance of payments. so, throughout the considered time the current account of the austrian economy is in surplus, the financial account is also observed positive. hence it follows that in order to maintain the surplus and the balance of payments itself, the balance of current operations over the financial balance must prevail. however, in practice, austria’s balance of payments indicator is volatile, in the last 2 years, there has been a deficit caused by the predominance of the financial account. in order to eliminate the deficit, an additional inflow of capital will be required. so, after carrying out the research it can be found out that the growth of foreign direct investment of austria as a result of liberalization of the world and european economy as a whole had a positive impact on its gdp. activities that are aimed at stimulating investment, is fully justified and understandable. 5. conclusions foreign direct investment plays an important role in the development of the national economy of austria. due to its geopolitical position, austria for a long period of time had a high investment yield because of the activity in central, eastern, and south-eastern europe (cesse). despite this, austria has a high level of business activity; the government conducts activities to stimulate investment in r&d and high-tech enterprises, creating jobs, protecting the environment and etc. the strengths of austria remain political and macroeconomic stability, a developed financial system, attractive corporate taxation, baltic journal of economic studies 174 vol. 4, no. 5, 2018 developed infrastructure, highly skilled labour, high productivity and international competitiveness, high quality of life, etc. at this stage, it’s important to boost the efficiency of direct investment within the country, their positive impact on the dynamics of the real economy and gdp. the paper proves the increase of stability of austria’s financial system to external shocks. the main factor is a significant improvement in the country’s international investment position, which since 2013 has become positive. thereby, it is possible to forecast a gradual improvement in the balance of the country’s primary incomes, which will contribute to the further growth of the current and financial account surplus and will strengthen austria’s influence on the development of the european and global financial systems. references: austrian business agency (2018). 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(in ukrainian) baltic journal of economic studies 10 vol. 5, no. 2, 2019 corresponding author: 1 o.s. popov odesa national academy of telecommunication, ukraine. e-mail: bondarenkoo@ukr.net 2 odessa national economic university, ukraine. e-mail: ok_5@ukr.net 3 zhytomyr state technological university, ukraine. e-mail: d-38-053-03@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-2-10-17 the possibilities of using investment tools based on cryptocurrency in the development of the national economy olena bondarenko1, oksana kichuk2, andrii antonov3 abstract. the international experience of various countries of the world in the implementation, usage, and economic and legal status of cryptocurrency is compared in this research. the advantages and disadvantages of using cryptocurrency at the present stage of economic and scientific-technical development of ukraine are considered. the results of the research of the awareness of market participants regarding the advantages and disadvantages of cryptocurrency and the presence of interest in the usage of cryptocurrency are given. the aim of this article is to study the possibilities of using cryptocurrency for economic development. the object of the research is the process of using cryptocurrency in the market in ukraine, taking into account world experience. practical implications. the results of a study of the demand for cryptocurrency in ukraine. the research was conducted with the help of a questionnaire, as a result of which it was found out: the level of awareness of cryptocurrency; subjective perception of cryptocurrency; sources of awareness of cryptocurrency; the presence of the potential interest of ukrainians in the acquisition of cryptocurrency. it was found what exactly ukrainians consider the main advantages and disadvantages of cryptocurrency. value/originality. cryptocurrency as a means of payment and a type of electronic money is found in the most countries of the world in the “grey” zone, and regulators, if not prohibit, then at least do not recommend citizens to invest in such assets. however, the state of science and technology development of blockchain technologies, which are the basis of cryptocurrency, and the state of demand for cryptocurrency in the ukrainian market are ready to use cryptocurrency. for the effective implementation of cryptocurrency, ukraine lacks only the normative framework. developing a regulatory framework in this area will help to bring cryptocurrency markets to stability. the introduction of international experience in the usage of cryptocurrency in ukraine, the creation of own model of behaviour will be the first step towards building a transparent and understandable cryptocurrency market, which will lead to the development of the economy as a whole. key words: cryptocurrency, bitcoin, demand for cryptocurrency, digital money. jel classification: е40, e42 1. introduction the digital space of today is constantly changing, every second it becomes more complicated and has no boundaries. digital technologies are the main trend of the present. interest is growing, both in the digital technologies themselves and in their products. one of these digital goods is digital money (electronic money/ digital currency). currently, electronic money has become particularly popular, despite the fact that they appeared relatively recently. this is facilitated by such factors as the convenience of paying for goods in online stores, high speed of transactions, and the use of modern technologies to ensure the security of transactions. one of the most promising types of electronic money is cryptocurrency. cryptocurrency is a type of digital money, protected from counterfeiting, which can be stored in electronic wallets, and also transferred from one purse to another. the difference between cryptocurrency and electronic money is that in order to conduct operations with electronic money, money must first be deposited into an account using a payment terminal or a bank. electronic money is simply a form of presenting the money we use in everyday life. cryptocurrency is created and produced via the internet, while it is not associated with any of the usual currencies and is not ensured by something, but baltic journal of economic studies 11 vol. 5, no. 2, 2019 it has its own market and supporters. discussions that are being conducted about cryptocurrency, both in the central banks and the governments of many countries and in the business environment, unanimously require a scientific and economic approach. so, the problems of implementation, research, possibilities of usage, regulation, circulation, and control of cryptocurrency are relevant issues for all countries of the world at present. many domestic and foreign authors (amarnath, 2018; higbee, 2018; ibrahim, 2018; swammy et al., 2018; thapar, chandel, 2018; orme, 2019) were engaged in the study of this problem, but still didn’t find a common solution, which led to the choice of the theme of this research. the aim of this article is to study the possibilities of using cryptocurrency for economic development. 2. the concept of cryptocurrency in the modern world, computerization and internetization of almost all spheres of human life are proceeding at an enormous pace. these processes could not but affect the financial system of society. in recent years, both banks and other financial institutions have penetrated the worldwide network, smartphones, and computers. but it was a process of adapting the existing functions of the system to the modern consumer of financial services, taking into account developing technologies. instant payments, online account access, and the ability to instant contactless payment for goods have changed the financial relations vision (swammy, 2018). in 2008, a unique inherently experiment began. satoshi nakamoto presented to the world an alternative financial system and bitcoin cryptocurrency. after three years of development by enthusiasts and cyber anarchists, in 2012 the system began to gain popularity and they started talking about cryptocurrency at the level of states and international organizations (shipra, 2017). bitcoin e-currency was launched in 2009. this is the first fully decentralized electronic monetary unit in the world, in which there is no single emission centre at all, operations within which are built on peer-to-peer information exchange technologies. cryptocurrency is the so-called currency of a new generation, the software for which is distributed on the principles of open access, all payments in which are completely anonymous and are not controlled by anyone and cannot be controlled technically, even with a strong desire, and the work of cryptocurrency can be neither stopped nor blocked. for any transaction within the system (in both directions) 0% is taken, in this respect, it is a unique, completely free payment system (sreedharan, 2019). the question “is cryptocurrency money?” is still open in most countries of the world. it exists only in the virtual space, which means that it does not have a physical counterpart. the cryptocurrency is based on computer code, that is, it itself is only encrypted data that cannot be copied, which means that such a unit of currency is relatively protected from falsification. at the moment, there are more than 2000 different types of virtual money. the popularization of virtual money is growing every year, as it is shown in table 1. table 1 the release of cryptocurrency in 2009–2017 cryptocurrency start of exploitation upper bottom line bitcoin 2009 year 21 million litecoin 2011 year 84 million peercoin 2012 year upper bottom line is absent nxt 2013 year 1 billion 42coin 2014 year 21 million ethereum 2015 year upper bottom line is absent zcash 2016 year 21 million deeponion 2017 year 25 million at the moment, the most popular are bitcoin, ethereum, and ripple (table 2). essentially, these are all different types of cryptocurrency. bitcoin is based on blockchain technology. ripple has its own system. ethereum is a multifunctional platform based on blockchain technology. as of november 29, 2018, the market capitalization of cryptocurrency in the world amounted to $ 9,184,235,808,826, while 75% of this amount falls on the top 10 leaders in the rating of digital currencies. according to the world economic forum in davos, ukraine entered the top 14 of the leading countries of the blockchain (manufacturing techniques and cryptocurrency transactions). table 2 top-5 leaders of the rating of cryptocurrency in 2018 № currency price capitalization changes (24 h.) 1 bitcoin 4250,1$ 73 946 584 628$ +5.9756% 2 ripple 0.3865$ 38 646 850 331$ +3.3146% 3 ethereum 121.36$ 12 559 784 724$ +6.2325% 4 bitcoin cash / bcc 211.74$ 3 684 013 134$ +3.2475% 5 eos 3.16$ 3 231 818 774$ +0.9585% the development of cryptocurrency has led to the fact that it has become a profitable object for investing funds. so, new methods and ways of investing appear on the market, which causes the interest of many investors and is connected with the lifecycle of cryptocurrency as an investment (koval et al., 2018). the main ways to invest in cryptocurrency: a) speculation on the course – the purchase of a cryptocurrency and its further sale; b) mining – the use of powerful computing, “farm”, in solving complex mathematical problems to create cryptocurrency; c) cloud mining – the purchase of computing power for rent; d) ico – release of a cryptocurrency, during which you can raise funds for the development of an investment project. baltic journal of economic studies 12 vol. 5, no. 2, 2019 the most profitable but at the same time risky way of investing is ico, relatively safe and less profitable – mining. in comparison, the available method is speculation on the course. but, to identify the prospects and risks of using cryptocurrency as an investment tool, it is necessary to consider the main advantages and disadvantages of a cryptocurrency. 3. advantages and disadvantages of cryptocurrency the cryptocurrency inventors assert that the usage of their product is reliable and effective, as evidenced by the presence of a number of advantages, which are given in table 3, but there are also disadvantages (amarnath, 2018). some features inherent in cryptocurrency are considered ambiguous. these include decentralization and anonymity. the problem of decentralization lies in the lack of control and tracking of the release and movement of virtual money by users or government bodies since these operations are a programmed process embedded in the algorithm (parashar, 2018). anonymity is another controversial issue, which, on the one hand, increases the attractiveness of the use of cryptocurrency by ordinary people since it is not taxed by the state, and on the other, it provides wide opportunities for the implementation of criminal activity (thapar, 2018). the analysis of disadvantages and ambiguous moments makes it clear that the reverse side of the coin outweighs the benefits of this currency unit because it not only provides an opportunity to simplify the conduct of financial transactions but also provokes the growth of internet fraud (sigler, 2018). recently, we have witnessed a sharp increase in the number of attacks on cryptocurrency using the capabilities of victims’ computers for cryptocurrency mining. and alternative currencies also play an important role in extortion attacks, being the best way of payment (higbee, 2018). however, the demand for cryptocurrency necessitates the development of methods for combating cybercrime in general and crypto fraudsters in particular. thus, researchers from the university of cambridge (orme, 2019) are investigating methods for combating cybercrime on the basis of biometric technologies. however, there are also significant advantages to which, moreover, is added the possibility of using cryptocurrency as an investment instrument (ibrahim, 2018). 4. world experience of using cryptocurrency on october 22, 2015, the european court ruled that bitcoin should be considered a currency, not a commodity, at least in terms of taxation. it should be noted that the decision of the european court allows for a divergence of opinion in the eu states on the essence and regulation of the cryptocurrency. each country can have its own opinion on what bitcoin is – a currency or а commodity. in february 2018, the german finance ministry signed a decree according to which bitcoin is a means of payment. cryptocurrency purchases will be subject to value-added tax. however, the sale of bitcoin will not be subject to capital gains tax. germany now officially defines bitcoin as a currency – as stated in the decree of the ministry of finance, cryptocurrency becomes the equivalent of legal means of payment, as they are used by transaction participants as an alternative contractual and immediate method of payment. the manual, published by the agency on 02/27/2018, distinguishes germany from the united states, where bitcoin is considered the property for tax purposes. that is, if an american buys something with the help of bitcoin, then technically it is considered as a sale of property and is subjected to capital gains tax. in percentage terms, turkey ranks first in the world in the number of private owners of digital currencies. according to statistics, 18% of the population (more than 14 million people) have certain virtual assets. the government plans to create a national cryptocurrency. saudi arabia has banned the trade of cryptocurrency. the government is working on establishing its own cryptocurrency. they also have a positive attitude to the blockchain. the islamic development bank uses financial platforms based on this technology. table 3 advantages and disadvantages of cryptocurrency advantages disadvantages ambiguous features availability of money at any time; the cryptocurrency cannot be removed, it does not disappear after a period of time and always remains with the owner until the owner uses it; lack of commission; the emission is realized strictly according to the given algorithm; cryptocurrency is independent of the influence of the central bank and the government; cryptocurrency is not subject to inflation. the impossibility of monitoring and tracking the movement of internet currency; the impossibility of withdrawal of payment; the absence of a single, coordinating trade organizer; doubtful reliability and security of storage and money transfer operations; constant rate fluctuations; exchange of virtual currency for real money. decentralization; anonymity. source: based on (higbee, 2018; ibrahim, 2018; orme, 2019; sigler, 2018) baltic journal of economic studies 13 vol. 5, no. 2, 2019 at the same time, china banned mining and all operations with cryptocurrency and announced the closure of the exchanges. actually, china quickly found how to circumvent the taboos on the ico and continued to mine and sell cryptocurrency, but through the hong kong markets where this law does not apply. the most publicity cryptocurrency received in japan. by march 2014, the bank of japan did not have any plans to regulate bitcoin turnover. however, after the collapse of mt.gox, based in tokyo, the japanese authorities announced the need to control this market. starting from march 2016, bitcoin received legal tender status in japan. this was the catalyst for the development of cryptocurrency and the japanese increased their activity in the bitcoin market. everything can be bought for the cryptocurrency, and they gradually refuse from real money. now with the help of bitcoin, you can pay in the largest trade networks and supermarkets. some firms have promised to pay employees a bitcoin salary. the government says that it is important for a transparent economy, and besides, it is a component of reducing the negative impact on the environment due to saving natural resources and reducing waste in the production of banknotes. indeed, when calculating cryptocurrency, it is much more difficult to carry out fraud. so, regulators in different countries have not yet found a consensus in determining the legal status of virtual currency (ulyanava, 2018). in different countries, cryptocurrency is considered as various objects, as it is shown in table 4. so, in the majority of states, there is no appropriate regulation, therefore, the legal regime of cryptocurrency is not fully defined, and transactions with it are in the “grey” zone. in ukraine, the attitude towards cryptocurrency is ambiguous. on october 6, the draft law of ukraine no. 7183 “on the circulation of cryptocurrency in ukraine” was provided. but it was not accepted and handed over for revision, motivating this by the fact that today the international community has not defined unique approaches to regulating the circulation of cryptocurrency. also, according to article 99 of the constitution of ukraine, the hryvnia is the monetary unit of ukraine. also in part 1 of article 192 of the civil code of ukraine, it is established that the legal unit of payment obligatory for acceptance at face value throughout the territory of ukraine is the currency of ukraine – the hryvnia. this is also highlighted by article 3 of the law of ukraine “on payment systems and transfer of funds in ukraine” (law of ukraine 2473-viii, 2001). at the same time, the draft law states that it is possible to exchange cryptocurrency not only for money but also for securities, services, goods, and so on. this actually equates the program code, which determines the cryptocurrency in the draft law, to money. indeed, in this case, the software code will be provided with such functions of money as a means of payment, preservation of value and accumulation. so, currently in ukraine, there is not a single law or a sublegal regulatory act that would regulate cryptocurrency transactions. now two bills have been registered in the verkhovna rada of ukraine, which are designed to resolve this issue: draft law no. 7183 dated october 6, 2017 “on the circulation of cryptocurrency in ukraine” (law of ukraine 7183-1, 2017), draft law no. 7183-1 as of 10/10/2017 “on stimulating the market of cryptocurrencies and their derivatives in ukraine” (law of ukraine 7183, 2017). both bills table 4 worldwide experience in determining the legal status of cryptocurrency country definition of the legal status of virtual currency tax regulation usa property the property, is taxed in accordance with the rules that apply to property taxation and capital gains tax. china forbidden japan means of payment not taxable bulgaria financial asset cryptocurrency is exempt from vat in accordance with what currency it is. france financial asset cryptocurrency revenues are classified as industrial and commercial profits or non-commercial profits, with the result that the capital gains tax is 19% in addition to the generalized social contribution (csg) – 17.2%. canada property right the property, is taxed in accordance with the rules that apply to property taxation. great britain foreign currency tax rules for foreign currency transactions. switzerland valuable property the fact of possession of cryptocurrency should be reflected in the tax declaration, and property tax is to be paid from its value. australia assets the mining and exchange of cryptocurrency for commercial purposes in australia is considered exchange trading and is subject to applicable taxes. however, for individuals, there are cases of exemption from taxation of transactions, if cryptocurrency is used as a payment for goods or services for personal use only. russia highly speculative investment the system of regulation and taxation of cryptocurrencies is not developed. source: based on (duchenko, 2018; higbee, 2018; ibrahim, 2018; orme, 2019) baltic journal of economic studies 14 vol. 5, no. 2, 2019 determine the need for public administration in the field of cryptocurrency circulation, the authority of the regulator to determine the order of creation and activity of cryptocurrency exchanges, monitor cryptocurrency transactions, and identify subjects of cryptocurrency operations (duchenko, 2018). based on the fact that the national bank of ukraine implements monetary policy in the state, one also needs to obtain an expert opinion from the national bank of ukraine regarding the project. therefore, while in ukraine, bitcoin and other cryptocurrencies have not been banned, but they have not been recognized with money. at the same time, in ukraine, many online stores and regular shopping centres accept cryptocurrency. in kyiv, for the first time in the world, they sold an apartment for the cryptocurrency. according to the interchange agreement, the property was exchanged for the ethereum cryptocurrency. one can also pay in a cafe using bitcoin not only in the usa , germany or japan but in several dozens of countries – estonia, denmark, sweden, croatia, belarus. 5. research of demand for cryptocurrency in ukraine despite the imperfection of the legal framework, the cryptocurrency market is constantly developing and spreading. in order to determine the level of readiness of the ukrainian market for the introduction of cryptocurrency and the demand for it, on the basis of the educational and scientific institute of economics and management of the odessa national academy of telecommunications named after o. s. popov conducted a study on the knowledge of ukrainians in cryptocurrency, their attitude to the advantages and disadvantages of cryptocurrency, as well as the desire to join the use of cryptocurrency. the study was conducted using the questionnaire method. respondents were asked to fill out questionnaires in google form, in electronic form. the survey included 450 respondents aged from 17 to 70 years. among them: from 17 to 25 years – 334 respondents, which amounted to 74.2%; from 26 to 45 years old – 107 respondents, which amounted to 23.8%; from 46 to 70 years and older – 9 respondents, which amounted to 2%. to the question “do you know what cryptocurrency is?” 450 respondents answered that makes up 100%, 2% – 9 respondents did not answer. of these, 441 respondents were aware of what cryptocurrency is, accounting for 98%. they did not know what cryptocurrency is – 9 respondents (2%). these respondents did not answer the questionnaire further. to the next question: “what is cryptocurrency for you?” (figure 1), 441 respondents answered, that makes up 98%, of which 204 (45.3%) of respondents consider cryptocurrency primarily as a means of payment (money); 173 (38.4%) respondents consider cryptocurrency as a means of accumulation. in general, 48 ukrainians surveyed (10.7%) perceive cryptocurrency as a means of speculation. interestingly, only 16 respondents (3.6%) perceive cryptocurrency as “all of the above”, as well, understand its diversity and versatility. to the question “how did you know about cryptocurrency?” (figure 2) 441 respondents answered that makes up 98%. according to the survey, the majority of respondents, namely 186, which is 41.3%, learned about cryptocurrency in the educational institution where they study. from our point of view, these are positive trends, since it is in educational institutions that complete, comprehensive, and most importantly, high-quality knowledge is obtained (stankevych, 2015). a rather large percentage of respondents – 89 (19.8%) – derive information about cryptocurrency from the media/ internet and as much from friends. 77 respondents (17.1%) learned about cryptocurrency, purposefully pursuing their own self-development and self-education. unfortunately, not a single respondent indicated that figure 1. subjective perception of cryptocurrency by ukrainians source: the author’s calculations 45,30% 10,70% 38,40% 3,60% 2% means of payment(money) means of speculation means of accumulation all of the above didn’t answer baltic journal of economic studies 15 vol. 5, no. 2, 2019 the source of its awareness about cryptocurrency is the company where the respondent works. however, this is a natural consequence of the lack of a legislative framework governing cryptocurrency issues. to the question “do you use (use) you a cryptocurrency?” 441 respondents answered that makes up 98%, of which 45 ukrainians (10%) that they have already used or used before cryptocurrency; 76 respondents (16.9%) are going to use cryptocurrency. this indicates the interest and commitment of potential cryptocurrency consumers. however, a large number, 320 respondents, accounting for 71.1%, did not use, do not use and, so far, do not plan to use cryptocurrency. to the question “ w hat are the drawbacks of cr yptocurrency, in your opinion, that are significant?” (figure 3) 441 respondents answered that makes up 98%. ukrainians consider the possibility of fraudulent schemes to be the biggest disadvantage of cryptocurrency; this is exactly the answer given by 248 respondents, accounting for 55.1%. at the same time, no respondent noticed anonymity as a lack or threat of a cryptocurrency, despite the fact that most fraudulent schemes are possible, precisely because of the anonymity of the cryptocurrency (orme, 2019; sigler, 2018; thapar, chandel, 2018). also, many respondents – 202 ukrainians (44.9%) consider the lack of a legislative base for cryptocurrency to be a significant disadvantage. a few respondents, namely 124 (27.6%), consider cryptocurrency exchange rate fluctuations to be a significant drawback, and 108 respondents (24%) attribute lack of demand for cryptocurrency to disadvantages. to the question “which of the advantages of cryptocurrency, in your opinion, are essential?” (figure 4) 441 respondents answered – that is 98%. the most important advantage of cryptocurrency, the majority of polled ukrainians, 273 people, which is 60.7%, considers its independence from political events in the state. 209 respondents, 46.4%, believe that the advantage of a cryptocurrency is the ability to use it as a reliable means of payment. 113 respondents, 25% of respondents, consider cryptocurrency anonymity to be the advantage. 96 respondents (21.4%) believe that cryptocurrency has a fairly high level of security. the smallest number of 64 respondents, accounting for 14.3%, considers that the advantage is fluctuations in the cryptocurrency rate. 19,80% 19,80% 0,00% 17,10% 41,30% 2% mass media/ internet friends, relatives, acquaintances cryptocurrency is used at the enterprise where i work self-development and self-education educational institution where i study did not answer figure 2. sources of information on cryptocurrency of ukrainians source: the author’s calculations 55,10% 0 24,00% 44,90% 27,60% 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% the possibility of fraudulent schemes anonymity insufficient demand lack of a legislative base exchange rate fluctuations figure 3. the most important, according to ukrainians’ point of view, disadvantages of the cryptocurrency source: processed by the authors baltic journal of economic studies 16 vol. 5, no. 2, 2019 6. conclusions the position of the cryptocurrency in the world is ambiguous. many large countries still recognize it, if not a means of payment, then a kind of electronic money. at the same time, many countries are in no hurry to make conclusions and want to better explore the market of cryptocurrency and the possibility of its regulation. at the same time, cryptocurrency is located in the “grey” zone in the most countries of the world, and regulators, if not prohibit, at least do not recommend citizens to invest in such assets. the research showed that 21.4% of the polled ukrainians consider the cryptocurrency anonymity to be its advantage and no one considers this a disadvantage. at the same time, the majority of respondents, 55.1%, see the main disadvantage of the cryptocurrency – the possibility of fraudulent schemes, without at all associating it with the anonymity of cryptocurrency. despite this, a large number of respondents (46.4%) consider cryptocurrency a reliable means of payment and (21.4%) savings with a high level of security. the opinion of the respondents towards the fluctuations of the cryptocurrency rate is unanimous. thus, rate fluctuations as an advantage are considered by 14.3% of respondents, and as a disadvantage by 27.6%. however, the majority of ukrainians consider themselves aware of cryptocurrency (98%) and ready 25,00% 21,40% 14,30% 60,70% 46,40% 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% anonymity high security preservation exchange rate fluctuations independence from political events in the state reliable payment method figure 4. significant, according to the ukrainians’ point of view advantages of a cryptocurrency source: processed by the authors for its use (45 ukrainians, (10%) have already used or used cryptocurrency, and 76 respondents (16.9%) are going to use it). so, the state of scientific and technological development of blockchain technologies, which are the basis of cryptocurrency and the state of demand for cryptocurrency in the ukrainian market, are ready for the use of cryptocurrency. for the productive implementation of cryptocurrency, ukraine lacks only the regulatory framework. despite the different attitudes towards cryptocurrency, the volume of transactions with cryptocurrency and its capitalization is constantly increasing. therefore, state financial institutions all around the world cannot continue to ignore the existence of this global phenomenon; this is not only economically wasteful but also dangerous for the country’s economic system. the timeliness of the project is important for its success, regardless of the readiness of the legislative base to adopt it. the fate of cryptocurrency and blockchain technology should be decided by market needs. experts believe that the development of a regulatory framework in this area will help bring cryptocurrency markets to stability. the introduction of international experience in using cryptocurrency in ukraine, creating its own model of behaviour that is the most appropriate for our country will be the first step towards building a transparent and understandable cryptocurrency market that will lead to the development of the economy as a whole. references: amarnath dg, a. 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(2018). crypto currency: the birth of an ico. crypto uncovered, 85–131. doi: 10.1007/978-3-030-00135-3_6 thapar, g., chandel, p. (2018). bitcoin: the crypto currency and the dark web. international journal of computer science and engineering, 5(8), 6–7. doi: 10.14445/23488387/ijcse-v5i8p102 ulyanava, k. (2018). legal regulation of the crypto-currency taxation. open journal for legal studies, 1(1), 1–8. doi: 10.32591/coas.ojls.0101.01001u baltic journal of economic studies 201 vol. 5, no. 1, 2019 corresponding author: 1 university of the state fiscal service of ukraine, ukraine. e-mail: maryna_sk@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-201-206 theoretical aspects of the transformation of the institute of corruption in eastern europe maryna skoryk1 abstract. the purpose of the article is to substantiate the essence and structure of corruption as a separate institution in an institutional environment that has a deviant, anti-social orientation. to describe the influence of informal institutions on corruption in ukraine. to propose constructive proposals for the use in domestic practice regarding the mechanism of overcoming corruption, which in the future will bring ukraine to sustainable economic development. methodology. the study we conducted is based on a systematic method that considers all elements of corruption in unity and development. the research used the following general scientific methods of scientific knowledge, namely: the method of analysis (means of combating corruption); synthesis (generalization of the main causes of corruption in ukraine); method of induction (the impact of corruption on society); the method of hypotheses (when building a mechanism for overcoming corruption); and empirical method (own observations of the author on the situation in the state). results. corruption in eastern europe is a consequence of the spiritual, economic, and political crisis of society. corruption demoralizes citizens and destroys their trust in the state. the mechanism of overcoming corruption is considered from the standpoint of neo-institutionalism. the author stresses that corruption is an informal institution. the system will start to change after the state’s economic development, and the main condition is the promotion of culture, which makes it impossible for an institution to be corrupt. to act and start such propaganda should be the education of future generations. investing in education will raise its level, give a new class of professionals who will go to work in private business and government. worthy wages will make you think about the desire for easy profit. the author conducts a qualitative analysis of corruption through methodological tools of neo-institutionalism. it is proved that the fight against corruption at all levels exists as a complex hybrid of institutional mechanisms of regulation, the impact of which primarily affects informal institutions, and then formal ones. for example, the purpose of a bribe is to obtain a profitable contract. a bribe is an informal institution that is an agreement between an official and a citizen. but a contract signed with a bribe is a formal document (legal). as a result of such corruption actions, formal institutions are not violated but act as a means of implementing informal arrangements. practical implications. taking into account the historical, economic, and mental component of eastern european countries, analysing the foreign experience of the countries, the formation of a national idea in the subconscious of the society, which will be aimed at building the state, should come to the fore. it is necessary to break down stereotypes, raise confidence in power and law. such measures are possible only through the reform of education, the upbringing of young people in the personal negative attitudes to corruption. an active civil society that supports various strategies aimed at reducing corruption. sanctions are important, so punishing corrupt officials is an important part of any effective anti-corruption effort. therefore, the criminal code of the country should clearly indicate the responsibility for any manifestation of corruption. the mass media must conduct a serious information company: report on detention and investigation and display social advertising (not as a part of a political advertisement). value/originality. the influence of informal institutes on corruption in the eastern part of europe is substantiated and the mechanism of its overcoming is proposed, the use of which will ensure the gradual economic development of the state. key words: corruption, shadow economy, neo-institutionalism, deformation, formal institute, informal rules. jel classification: а13, b52, н70, е60, e71, і28 baltic journal of economic studies 202 vol. 5, no. 1, 2019 1. introduction the scale of corruption is striking. corruption in the eastern part of europe has already reached its peak, along with ordinary goods and services the population already sells everything that, in the sense of europeans living in the western part of europe, cannot be sold at all. that is, in the countries of eastern europe, it is easy to buy a post, a diploma of higher education, a reward, honour, a human body, a state secret, etc. in real life, corruption is manifested through various kinds of bribes such as: “extortion,” “gifts,” “hospitality,” “kickback.” and they are guilty of a situation that has developed, such as the one who takes, and the one who gives. corruption is truly a global problem, in his essay on the fight against corruption in estonia, mart laar claims that corruption has been so rooted that it has become a way of life. he writes: “we did not even realize that this is not normal” (mart laar, 2016). such a characteristic clearly corresponds to the situation in ukraine. that is, corruption has already gone beyond understanding it as a part of a “shadow economy” and an economic phenomenon. for example, according to the corruption perceptions index in 2017, ukraine has improved its situation in the provinces by 2012 in four positions and has 30 points out of 100 (ofitsiinyi sait transparency international, 2018). that is, ukraine is on the right track. however, corruption in ukraine is already a universally accepted norm of the behaviour of a society that has its institutional structure, which is why it does not cause social protest. d. north is a classic who first isolated informal institutes in the general system of institutions. his noninstitutional theory demonstrates the overcoming of the limitations of the classical institutional approach, and the study of informal, “shadow” illegal institutions that significantly affect the stability of the entire institutional system (kushnarov, 2017) is included in the institutional analysis. v. o. mandibura explores the institutional essence and mechanism for overcoming corruption, e. v. nevmerizhitsky regards corruption as a socio-political phenomenon. instead, other scholars will discuss this topic in the context of general research on manifestations and the fight against corruption. thus, from the point of view of neo-institutionalism, scholars have conducted a non-complete study of corruption as an informal institution. this fact confirms the relevance of our research. 2. methodological approaches to the study of corruption as an institution of anti-social conjecture for a clear mechanism of corruption overcoming, it should be clearly defined, taking into account a wide range of factors of influence on its occurrence. the studies we conducted confirmed the fact that today scientists have not yet formed the general definition of “corruption.” in the process of research, scholars focus on the scale of corruption, on improving law enforcement, on improving penalties for committing corruption. however, they do not pay attention to the motivating motives, to the very desire for profit with the use of their official powers. according to v. mandybura, “corruption is a complex systemic institute with an exclusively anti-social orientation” (mandybura, 2017). the generally recognized definition of corruption belongs to professor c. friedrich: “corruption is a behaviour associated with a certain motivation, in particular, with the personal gain on a public account” (revak, 2011). “corruption is not only certain acts but also a system of negative attitudes, beliefs, guides, a way of thinking” (nevmerzhitsky, 1999), that is, corruption is also a psychological and moral phenomenon. it cannot exist without people. corruption has an impact on the economy, politics, the ideology of the nation, and so on. in confirmation of the use of the methodology of neo-institutionalism for the analysis of corruption as an institution, it is necessary to give a description of the very notion of “institution,” from the informal point of view. according to d. north, “the institution is the rules of the game, consisting of official written rules, as well as, usually, unwritten codes of conduct that go beyond the formal rules and complement them” (north, 2000). that is, corruption acts as an institution in the institutional environment and is influenced by formal (written “rules of the game”: laws, constitution) and informal rules (“unwritten rules of the game”: customs, traditions). d. north’s neo-institutional theory changes the classical institutional approach and adds to the institutional analysis the study of informal institutions that, in one way or another, have a significant influence on the functioning of the institutional environment. g. helmke and s. levitsky point out that “informal institutions are social rules commonly written, created and executed outside officially authorized channels” (helmke, levitsky, 2007). that is, corruption can be considered one of the varieties of the informal institution. changes in informal institutions are relatively slow. o. stoiko stressed that “informal institutions should not be considered as a threat to democratization,” the scientist substantiates his position that “informal institutions change, weaken, and ruin the rules underlying formal institutions” (stoiko, 2016). we distinguish the main approaches to the concept of “corruption as an informal institution”: scientifictheoretical, practical-applied, ethical, neo-institutional, and integrated. we believe that from the point of view of the scientific and theoretical approach, corruption as an baltic journal of economic studies 203 vol. 5, no. 1, 2019 informal institution should be considered as a social phenomenon that reflects the real situation in the state. that is, to conduct research on the influence of informal rules of conduct on the formal. with regard to the practical application, the developed mechanism to overcome corruption should be respected. scientists should work to improve and eliminate contradictions in legislation. transparency international’s organization in the corruption investigation also uses the “ethical approach” with which one cannot but agree. in society, ethical rules of conduct must act. from the point of view of the neo-institutional approach, corruption can be considered a kind of informal institute as acting contrary to the public interest in order to secure its own. an integrated approach means that this problem has an interdisciplinary character. the author’s position is that the main attention of researchers should be focused on what prompts a person to commit such actions. the institute of corruption as a specific institution with an absolute anti-social orientation has already gone far beyond the boundaries of the interaction of common market institutions. it is constantly parasitizing in the system of providing public services, and also present at the redistribution of public goods. 3. the reasons for the increase in corruption in the eastern part of europe according to the author, the main reasons for the high level of corruption in the eastern part of europe: the lack of trust in public institutions in the people. on the one hand, we are paternalistic enough (we expect the state to solve our problems), but when it comes to the state, we do not trust it. mentality “displays the historical process in the public consciousness, preserves the genetic code of the people, gives a sense of identity that determines a certain political and everyday behaviour. a significant part of the researchers almost unanimously gives some basic interrelated features of the traditional political mentality of in the eastern part of europe society, namely: existential individualism, self-centeredness, introversiveness (the orientation of the psyche to the inner world), conservatism, social egalitarianism (aspiration for social equality), escapism (striving for illusory dreams), community-centeredness, provinciality, anarchy, general apoliticality. for example, ukrainians are individualists, egoists. what does folklore say: “i have my hut at the end of the village, i do not know anything.” historically, ukrainians belong to introverts, which are oppositional to any government. (mykhnenko, 2013). the absence of a national idea, ideology. we live in difficult times, in times of violent reform and military action. the population does not feel confident in the future. citizens should find something common, common principles of life, economic attitudes, social, political and spiritual principles of cooperation of each with all for the sake of overall progress. a key element of the ideological system is the national idea; indifference to society. this problem can be solved by patriotism (an integral part of the consciousness of each citizen). before you blame the state for all your sins, you should think about what you have done in order to have a better life in our country? but on patriotism only you will not live, you need a material incentive to action; business-political relations (lobbying of own interests in legislative documents); ineffectiveness of the principles of the rule of law (impunity of illegal actions of officials), delaying the reform of the judicial system, analysts called the system of justice in ukraine “rotten to the core” and complained about the political pressure on the judges (the bleyzer foundation 2016), ignorance and misunderstanding of the laws by the population; excessive tax and customs pressure on enterprises; partial transparency of operations and management decisions occurring within institutions and departments; confusion and incomprehensibility of the legislation in the slavic countries of eastern europe; low wages and a correspondingly low standard of living of persons authorized to vest the functions of the state; high prices for goods and services. according to the mentioned problems, three levels of corruption have already been clearly defined in eastern europe: political (distorting state decisions, leading to bad laws and distrusting people to the state), corruption is widespread in the interaction between business and government (market mechanisms do not function properly, no fair competition and lack of consumer protection); daily bribes are a common occurrence (they often facilitate daily operations, for example, when a bribe helps to get certain goods or services cheaper or faster. in other cases, they take the form of extortion, for example, by the local business administrations (the bleyzer foundation, 2016). according to the above reasons of corruption, it becomes clear that in the countries of eastern europe, and especially in the slavic part of it, the action of informal institutions has a significant influence over formal. and with the aim of building an economically developed state, this should be taken into account in the first place. 4. the mechanism of overcoming corruption on the example of one of the countries of eastern europe ukraine is now on the path of reform, so we consider it expedient to study the mechanism of combating corruption on its example. in turn, the country’s leadership rapidly implemented complex organization – baltic journal of economic studies 204 vol. 5, no. 1, 2019 legal measures (adopted in 2014 the law of ukraine “on prevention of corruption” in 2018 the cabinet of ministers of ukraine introduced to the verkhovna rada of ukraine the law of ukraine “on anti-corruption strategy for 2018-2020”). to date, the following institutions have been operating in ukraine to fight corruption: the national agency for the prevention of corruption (monitoring life of civil servants on the basis of their declarations); national anti-corruption bureau of ukraine (prepares cases for investigation of corruption crimes but does not deal with administrative offenses); national agency of ukraine for detection, investigation and asset management of corruption and other crimes, specialized anticorruption prosecutor’s office. at the legislative level, issues of coordination of activities and interaction of the entire system of state anti-corruption bodies are still not coordinated. according to the author, in the fight against corruption, various mechanisms can be used. however, administrative and non-punitive actions should play a leading role. the focus should be on economic, legal, financial, organizational measures that will allow the state to prevent and eradicate corruption. aspects of influence (social: poverty, migration, economic: shadow economy, power: the influence of the rich population on the formation of government, political: legal reprisal against political opponents, international: negative impact on the international image of the country and loss of investment) have directly proportional effect on the institutional maintenance of the mechanism of the internal institutional environment, directly affect the components of the subsystem, whose activities are carried out both in accordance with formal rules and informal. the study of the actions of informal rules is the cornerstone of the fight against corruption. the institutional environment of corruption is the place where corruption is taking place. the mechanism of overcoming corruption will be effective in combining the challenges of society and the intentions of the state authorities to satisfy the desire of society. the author shares the opinion of v. mandybura that: “the state must abandon a purely forceful approach and unjustified cruelty of punishment since historical experience has shown that unlawful strengthening of punishment for bribery can only increase the ‘quality’ of corruption conspiracy and scale up bribes” (mandybura, 2017). according to the author, we will not be able to eradicate corruption quickly. the state is people. it is necessary to change the views of society towards the problem, and mental differences and morality add to their peculiarity. given our historical roots, mentality, we should begin with the formation of a new elite, that is, to introduce harsh measures in education. educational reform will give us young, intelligent, creative people who will not allow corruption to develop. the next step should be to maximize the simplification of the current legislation, filling the existing gaps in it. it is also necessary to eliminate unnecessary supervisory authorities and licensing procedures (to make everything as transparent as possible). salaries for civil servants should be raised to such an extent that workers are afraid of losing their jobs (one of the c or ru pt io n (i ns ti tu te ) informal rules formal rules sanctions for violation of the law determine the priorities of socioeconomic development of the state economic rules defining the development and implementation of state programs for the prevention and development of corruption laws and regulations judiciary institutional provision of the m echanism the internal institutional environment of corruption aspects of influence: social, economic, power, political, international figure 1. the system of the internal institutional environment of the mechanism of overcoming corruption baltic journal of economic studies 205 vol. 5, no. 1, 2019 most important factors preventing the spread of corruption in finland is the high material and social security of officials (official web corrupt.ua, 2018)). in addition to raising wages, ensure a high level of responsibility. to overcome political corruption – the abolition of parliamentary immunity is required. the government must adhere to the anti-corruption strategy of the state, and state anti-corruption authorities must clearly delineate their functions and powers, remove duplication. an independent anticorruption court must act in ukraine. as an example of the fight against corruption in georgia, one should conduct anticorruption propaganda (creative advertising in the media, showing arrests), this move will add a positive image to law enforcement. 5. conclusions summing up the above, we can conclude that in the economic conditions in which a part of eastern europe finds itself today, the interaction of institutional mechanisms to combat corruption in the transition towards intensification of informal rules. informal institutes compete with the formal, displacing the latter. in our opinion, precisely neo-institutionalism is the best methodology for analysing corruption in the state. the current analysis of corruption should start from the middle of the institute because corruption occurs precisely in the institutional environment. corruption in the country can be overcome but a prerequisite for this is the political will and support. first of all, it is necessary to intensify all efforts to form a national idea and popularize it among society, stereotypes must be broken. society must have faith in a safe future. according to the author, priority steps in the fight against corruption are: reform of education, i.e. education of a new elite (formation of a general negative attitude and personal rejection of corruption, an increase of wages both for employees of secondary and higher schools); civil service reform (high and clearly regulated wages, without the use of manipulations with bonuses); clear regulation according to the criminal code of responsibility for every kind of corrupt acts and judicial penalties (dismissal, fines, deprivation of liberty, deprivation of payment of a state pension); annual control of property, assets and debts, the disclosure of declarations of subjects of power authorities, civil servants, etc.; the ban on financing election campaigns, political parties and other political organizations of oligarchs (strict order of financial statements); holding information companies on a permanent basis to eliminate tolerant attitude towards corruption, namely: firstly, popularization of the fight against corruptors (involving specialists in the spheres of jurisprudence, pedagogy, psychology, pr-technologies), and secondly, social advertising (public awareness of detection of corruption and discussion of consequences – punishment for corruption actions). these actions will contribute to the formation of corruption awareness about the dangerous impact of corruption on the development of society. thirdly, the mandatory investigation of each media report on corruption cases and the corresponding invoice notification of the investigation authorities about the results of the investigation. the development of a network of centres for free legal anticorruption assistance, the creation of anticorruption receptions and direct telephones of trust, wide involvement of internet resources where everyone will be able to offer their own vision of anti-corruption measures in state institutions (on the example of the public organization of the all-ukrainian centre for combating corruption and assistance to law enforcement agencies); complete informatisation of public life, namely: firstly, in the free access information, for registered citizens on the site, about tax revenues, the receipt of funds from international organizations, and where these funds have been distributed, etc., and secondly, electronic queues and applications for state certificates, licenses, visits to family doctors, etc. (transparency principle). for running the reforms, they need more reformers to change all spheres of public life (in the first place, education). perhaps, to achieve this goal, one should abandon the democratic principles of the exercise of power and use the authority of the leader. references: mart laar (2016). the cancer of the modern world – a european perspective. against corruption: a collection of essays. retrieved from: https://www.gov.uk/government/publications/against-corruption-a-collection-ofessays/against-corruption-a-collection-of-essays (accessed 02 august 2018) transparency international (2018). corruption perceptions index. retrieved from: https://www.transparency.org/ news/feature/corruption_perceptions_index_2017 (accessed 02 august 2018) kushnarov, i. v. (2017). neoinstytutsionalizm yak metodolohichna pidvalyna vyvchennia neformalnykh instytutiv: pryklad politychnoi koruptsii [neo-institutionalism as a methodological basis for the study of informal institutions: an example of political corruption]. scientific journal «politick», 5 16-20. mandybura, v. o. (2017). koruptsiia: instytutsiina sutnist ta mekhanizm podolania [corruption: the institutional essence and the mechanism of overcoming]. economic theory, 1, 59-76. baltic journal of economic studies 206 vol. 5, no. 1, 2019 revak, о. і. (2011). koruptsiia: teoretyko-metodolohichni zasady doslidzhennia [corruption: theoretical and methodological principles of the research]. lviv: lvvduvs. (in ukrainian) nevmerzhytskiy, ye. v. (1999). koruptsiia yak sotsialno-politychne yavyshche: osoblyvosti proiaviv i mekhanizmy podolannia v suchasnii ukraini [corruption as a socio-political phenomenon: peculiarities of manifestations and mechanisms of overcoming in modern ukraine]. dissertation ... candidate of political science. kyiv, institute of state and law of ukraine of the national academy of sciences of ukraine. north, d. (2000). instytutsii, instytutsiina zmina ta funktsionuvannia ekonomiky [institutions, institutional change and functioning of the economy]. kiev: fundamentals. (in ukrainian) helmke, g., levitsky, s. (2007). neformalye instituty i sravnitelnaia politika osnovnye napravleniia issledovanii [informal institutions and comparative politics: major research areas]. forecast, 2, 188-211. stoiko, o. m. (2016). transformatsiia politychnykh instytutiv u suchasnykh perekhidnykh suspilstvakh [transformation of political institutions in modern transitional societies]. kyiv: logos. (in ukrainian) myhnenko, a. m. (2013). zapobihannia ta protydiia koruptsii [prevention and counteraction of corruption]. kyiv: dnnu academy of financial management. (in ukrainian) the bleyzer foundation (2016). corruption in ukraine and recommendations. retrieved from: http://www.bleyzerfoundation.org/files/tbf_reports/corruption%20in%20ukraine%202016.pdf (accessed 01 august 2018) corrupt.ua (2018). piat krain, shcho pryborkaly koruptsiiu [five countries that have curbed corruption]. retrieved from: http://corruptua.org/2013/04/p-yat-krayin-shho-priborkali-koruptsiyu/ (accessed 03 august 2018) baltic journal of economic studies 117 vol. 5, no. 2, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: agment@vsau.vin.ua orcid: https://orcid.org/0000-0001-6385-3877 2 vinnytsia national agrarian university, ukraine. e-mail: оksanakubai11@gmail.com orcid: https://orcid.org/0000-0001-5099-489x doi: https://doi.org/10.30525/2256-0742/2019-5-2-117-123 scientific-methodological and practical principles of regional economic systems integration anatolii mazur1, oksana kubai2 abstract. the purpose of this study is to identify and describe the trans-boundary economic interactions and crossborder development of the regions in various organizational forms of cooperation as a direction of globalization of the regional economic systems. study of transformational processes in the national economy from the perspective of regionalization of social development opens up a list of scientific problems that are already urgent today and in the future will require new or additional justification. first and foremost, they include justification of the content and essence of economic regions, which operate outside the common market of the state and which are open for other national systems of the world economy within the framework of the interregional cooperation. practice shows that territorial and economic systems are not limited to political and administrative boundaries but are able to function beyond their borders. this tendency needs scientific and theoretical justification in the meaning of a new paradigm of regional development. methodology. the methodological basis for the study of theoretical and practical aspects of the functioning and development of regional economic systems in the conditions of interregional cooperation is the modern theories and concepts of regional development, including transborder cooperation. practical implications. modern publications do not adequately and deeply consider the issues of the nature of emergence and organization of regional communities’ international interactions, peculiarities of the forms of organization and economic feasibility of their existence. the essence of the research lies in justification of the scientific concept of development of the regions’ cross-border interaction as the objective tendency synthesis of the state and regions in the implementation of the extended economic reproduction. the article deals with the theoretical and practical issues of the regional economic communities’ development in the trans-boundary space of ukraine. the terminological concepts “national economy” and “economy of ukraine” are distinguished. and the necessity of promoting for euroregions creation, expansion of cross-border cooperation was established. value/ originality. it is established that the modern development of the world economy is based on the interaction of the border regions, which in total provide the cross-border movement of goods and services in the globalized economy. key words: integration, regions, processes, systems, development, regionalization, globalization. jel classification: r58, b41, p43 1. introduction the problem of reducing the “capacity” of the national governments in solving the economic problems in the conditions of globalization and regionalization of social development remains urgent during the last twenty years. there are objective reasons for this. first, the autonomy of the entities that develop the economic policies at the level of the national economic complex is narrowing. secondly, the circle of the economic and political market players, which influence the government decisions, is expanding. thirdly, there is a new subject of economic interests – the international regional association. the process of regionalization initiated the emergence of two trends that affect the mechanism of the public administration: 1) activation of the foreign economic activity of the internal regions of the country and their desire to gain greater independence in making strategic decisions; 2) dependence of transnational cooperation of the country on the achieved arrangements and agreements within the framework of the international regional associations. all these points put the science before the difficult task of theoretical rethinking of the role and importance of the state in regulating the social relations and design of regionalism as a science and practice of the economic transformation both within the state and abroad. baltic journal of economic studies 118 vol. 5, no. 2, 2019 transformation processes in the national economy inevitably lead to the transformation of the state governance mechanisms, which manifests itself in the growing importance of the interregional market for goods and services, which leads to the weakening of the state’s position, the existing mechanisms in the field of the economic policy also substantially change. if in the 50s and the 60s the main influence on the decision making was made by the factors of the national level, at present the world economic system should be considered as a complex three-level combination of the national, regional, and international markets as such, whose subjects interacting with each other, determine the effective vector of the economic policy of national states and supranational economic institutions. the design of the updated regionalism for the business practice forms the vector of regionalism as a new paradigm of the social development, in which the regional economies act as a “generator” of the economic reproduction. changing the paradigm offers a variety of new research challenges, which it can deliver, as well as the usefulness of the practical measures it can encourage. the aforementioned aspects only reveal a list of problems that in the future will require new or additional research. the urgency of the identified topics and the lack of the generally accepted vision of the interregional ties and intergovernmental economic development on their basis dictates the need for a deeper consideration of the essence of the regions integration as the economic category of describing the peculiarities of their formation and defining the prospects for the growth of the national economies through the contribution of regional economic systems. 2. fragmentation of the common market of the regions of ukraine the reality of the present is that the central government structures and their governing bodies in the regions and at the local level believe that they have the power for the subordinate and politically defined economy, although in practice they are not able to determine the real economic area of influence. as a result, certain territorial units subordinate to other management structures and regions, and within the boundaries of the country – to other states. the state controls the entire economy and regions, the state administrations – the administrative areas subordinated to them, as if they are the economic structures, and the local governments develop economic growth strategies in the subordinate territories, considering that their sphere of influence extends within the specified boundaries. these durability and vitality of the central trend of management are clear – it serves as a platform for defining and implementing the course of the state economic policy. the government must objectively see the whole economy, the local governments also believe in their holistic vision of the economic reality, and the regions consider the economy as an existing state system. to a large extent, such a perception of the economic realities is a distortion of the economic reality and simplification of the real political economy. the situation is radically changing when considering the national economy from the perspective of the regional paradigm of development (figure 1). economic region joint market of ukraine economic system national political jurisdiction e d с б a a a figure 1. system of the economic regions in this case, the aggregate of the economic regions (fig. 1) forms the national economy. however, if the national economy lies within the borders of the state’s national boundaries, the boundaries of the economic regional communities are defined by the sphere of influence of these economies on the economic space. it is clear that this discrepancy is not in favour of the economic region joint market of ukraine economic system national political jurisdiction e d с б a a a figure 2. the common market of ukraine baltic journal of economic studies 119 vol. 5, no. 2, 2019 national government since it loses its influence on economic activity, which is beyond its jurisdiction. the situation becomes clear when the aim is to define the territory of influence of the central governmental bodies. obviously, this will be a common market (figure 2). so, as can be seen from fig. 2, the geographical boundaries of the common market serve as the jurisdiction of the national government, but this is not the entire national economy. part of the economic space goes beyond the common market and does not subordinate to the national government, being within the national boundaries of the country. in practice, these territories are the objects of the various forms of cross-border cooperation. this reality brings us to the specification of economic terminology. obviously, the term “national economy”, in our understanding, means the boundaries of the economic regions within the jurisdictions of the national government and, accordingly, the common market. the “economy of ukraine” is a broader term in the content; it denotes the entire national economic system, including that part that extends beyond the national boundaries (mazur, 2007). 3. enhancement of regional influence on economic development the last decade of the twentieth century and the beginning of the twenty-first century fully testify to the fact that the global economic processes are becoming increasingly dominant, pushing the national economies in the background and as if dissolving them in a giant economic mechanism. during this transformation, one of the most important turning points in the history of the world society occurs, yet not enough understood by the theoretical science and practice – the devaluation of the states, which for many decades have been the systemforming organizational structures. the boundaries of the national states have become tight for the productive forces, which have begun to evolve at a rapid pace, and as a result, the generated market structures have gone well beyond the national boundaries and economies. the national states have faced a fundamentally new situation: they lose the opportunity to effectively use such levers of the traditional macroeconomic regulation as import barriers and export subsidies, the national currency rate, and the refinancing rate of the central national bank. with the expansion of globalization processes, the increasing part of the state sovereignty is distributed between the regional and global regulatory institutions (kuhn, 1970). at the same time, in the governmental structures, the international trade is interpreted on the basis of the national understanding, defining the state borders of ukraine as the border between “our” and “their” economies. beginning of the radical economic reforms in the state has become even more accompanied by a shift in emphasis from the trade with the cis countries to the ties with other countries of the world. in the developed countries of the world, about one-fifth of the domestic products produced within the country are sold on the external market. thus, the export quota of gdp of the large european countries ranges within 21-24%, and only in the small western european countries, it makes up about 40% (horovyi, 2002). 4. directions of the development of regional economic systems the mentioned information emphasizes a new direction in the development of the regional economic systems, which needs theoretical understanding. recently, more and more researches are concentrated on the components of the economic activity at the border of the administrative boundaries of ukraine and other foreign countries. this makes us take a new look at the modern economy in general and at ukrainian one, in particular. of course, the deep meaning is often lost in the scientific discussions, where each scientist defends his ideas, but such activities substantially enrich the original hypotheses. the opposite approach characterizes the economic world as a set of the independent productions and workers who solve their production and sales, as well as personal problems in chaotic conditions of the political economy (barnes, ledebur, 2003). the thesis and antithesis, in this case, should not be interpreted as politics and economics that cannot be understood, but on the contrary – as an opportunity of politics and economics to create a new vision of the political economy. in other words, it is necessary to find a consensus between politics and economy, in order to successfully and on a scientific basis solve urgent problems of the present both from the part of the national governments and subjects of the regional economic relations. hence the basis of the positive promotion of reality on the part of both participants is proposed: the national economy is a set of the regional economies, that’s why the boundaries of the government influence on their activities are determined only by the common market; the nonmatching of the administrative boundaries of the country with the economic space, which subordinate to specific regions, creates preconditions for the interpenetration of the economic relations beyond the borders between the neighbouring states (figure 3) (mazur, 2007). economic region joint market of ukraine economic system national political jurisdiction e d с б a a a figure 3. global economic interdependence baltic journal of economic studies 120 vol. 5, no. 2, 2019 for example, a is a system of the regional economies of ukraine, and b – surrounding economic regions of the neighbouring countries. in this case, most of the economic regions of ukraine (system a) border and have common boundaries with the economic regions of other economic systems (russia, moldova, romania, poland, and hungary). in reality, the intensity of interdependence of the regions can become more complex. fig. 3 gives the opportunity to see the dependence under the influence of the market of two economic regions of different economic systems (for example, the baltic states – c, switzerland – d, vinnytsia region – a, of the economic system a of ukraine) in implementation of the integration economic processes. 5. the essence and content of interregional integration we emphasize that the category “economic integration” should have at least two meanings. the first one is based on an understanding of the interdependence of the industrial sectors in the economy and the vertical and horizontal integration of industries. the second one we interpret as an association of the economic activity, especially the trade of several countries, for example, through creating free trade zones, customs unions, common markets, and economic unions (storonianska, 2004). in accordance with the second meaning, we observe the integration of the regional economies and economic systems when one or more economic regions become an integral part of two different economic systems, with certain local economies becoming parts of each of them managed jointly. for example, the transcarpathian region as a region is the part of two economic systems – ukraine and hungary; lviv region of three ones – krakow voivodeship (poland), tiumen region (russia), transdnistria (moldavia), etc. logics of the integration processes become clear when imposing the state boundaries on the global network of economic systems and their economic regions (figure 4). economic region joint market of ukraine economic system national political jurisdiction e d с б a a a figure 4. global economy (rhombi a-g – regional economies) the data of figure 4 allow making at least two intermediate judgments: 1) the economic systems go beyond the national political jurisdiction; 2) they are subject to the jurisdiction of other countries. accordingly, for those regions beyond the national boundaries and under the integration, the growth will depend on the successful functioning of these economic systems and decisions of the external and internal order of these states. 6. forms of interregional cooperation the regional activity of the countries is manifested in their participation in the international agreements (wto secretariat regional trade integration under transformation (2002). the seminar is regionalism and the wto, geneva). moreover, the latest trend identified by wto is increase in the number of countries that choose the trade integration agreements as a prerequisite for implementing an expanded scheme of deeper integration within the region. formation of the regional unions is considered as: а) the method of the rapid transformation of the economic complexes on the basis of the advantages of international cooperation; b) the form of the regional association to confront the stronger entities of the world economy and minimize the negative effects of globalization; c) the possibility of integration within the region for the formation of the additional competitive advantages, as well as common mechanisms for agreement and harmonization of interests of the countries (petrenko, 2003). the presented theoretical aspects of the essence and reasons for the economic integration of the regions are confirmed in practice. in the boundary belt of ukraine in 1993, the international association “carpathian region” was created which included 5 regions of hungary, 3 neighbouring voivodeships of poland, 6 regions of slovakia and transcarpathian, lviv, ivano-frankivsk, and chernivtsi regions of ukraine. the purpose for the creation of this association is to organize and coordinate the joint activities, promote the economic, scientific, environmental, cultural, sporting, educational cooperation, as well as support for individual projects for development of the border infrastructure of the neighbouring territories, promote the contacts and cooperation of the international organizations (petrenko, 2003). in september 1995, the agreement on the creation of euroregion bug between biała podlaska, chełm, and lublin voivodeships of poland, volyn region of ukraine, and brest region of belarus was signed. later, lviv region joined the agreement. the main task of the euroregion bug activity is: design of the strategy for development of the euroregion; creation of the information base; organization of the advertising campaign of the euroregion and attraction of the foreign investments; baltic journal of economic studies 121 vol. 5, no. 2, 2019 development of the communication infrastructure projects; development and implementation of the environmental projects, including “clean bug”; organization of joint trade, cultural and sports events (bielienkii, 1996). the priority for the creation of euroregions at the western borders of ukraine does not exclude the possibility of creating them on the borders with russia, which has many positive points – both for ukraine and for russia. in 2003, the euroregion dnipro (chernihiv region of ukraine, briansk region of the russian federation, gomel region of the republic of belarus) was created on the eastern border of ukraine. at present, the corresponding work on the formation of the euroregions yaroslavna (sumy region of ukraine and kursk region of the russian federation), dniester (vinnytsia, odesa regions of ukraine and border counties of the republic of moldova) is carried out. the prospect of creating the euroregions slobozhanshchyna is quite realistic, which on the basis of kharkiv and belgorod regions can later include other neighbouring regions – sumy, poltava, and luhansk – on the part of ukraine and kursk and voronezh – on the part of russia. the issue of developing the project of euroregions sian (lviv region of ukraine and podkarpackie voivodeship of the republic of poland) is under consideration. there are negotiations on the entry of the mykolaiv region of ukraine into the euroregion pomerania (mikula, 2003). in 2005, a new step in ukraine-eu relationship within the framework of the “ wider europe” initiative was taken, which was supported by the last stage of eu extension. the european neighbourhood policy proposed the instruments, which should provide the new impulse to cross-border cooperation: moreover, in the long run, this instrument can be extended to all regions of ukraine, which will stimulate the interregional cooperation as a whole, and the “neighbourhood programs” themselves have the potential to become such an instrument. today, ukraine is offered four such programs: “poland – ukraine – belarus” (with the indicative tacis funding budget of € 8 million for the whole period), hungary – slovakia – ukraine (with the indicative tacis funding budget of € 4 million for the whole period), romania-ukraine (with the indicative tacis funding budget of € 6,5 million for the whole period), and the transnational program (cadses initiative (with the indicative tacis funding budget of € 5 million for the whole period for ukraine and moldova)) (voloshko, 2005). in 2012, on the initiative of vinnytsia region, the transnational formation of the euroregion dniester was founded. it comprised of vinnytsia region and six administrative districts of the republic of moldova. the aim of the association is the implementation of the integrated and harmonious development of the territories adjacent to river dniester. realization of this goal involves the following: 1) organization, coordination, and deepening of relations in the economy, trade, science, education, culture, tourism; 2) implementation of the common cross-border investment projects; 3) implementation of the regional projects on the reduction of unemployment among the population of the border regions by increasing the economic potential; 4) organization of contacts with the relevant international organizations, foundations, institutes, agencies, and other organizations. the main promising projects include: 1. the bridge across the river dniester in yampil, vinnytsia region (the estimated cost is € 9 million). 2. construction of sewage treatment in settlements of vinnytsia region and moldova along the river dniester (the estimated cost of works is € 5 million. 3. construction of the international vinnytsia) airport. 4. construction of roads to bronnytsia-ungur crossing point (the estimated cost is € 3 million). the experience of the functioning of euroregions is currently considered to be the most efficient organization of cross-border cooperation. under conditions of overcoming the problematic moments in organization and activity of the existing euroregions and in attracting other border areas of ukraine to the process of integration in the form of euroregions, the most effective use of the potential of the border areas of the country is possible, which, firstly, will provide the greater independence in the development of these regions, and secondly, will fully stimulate the process of integration of the country into the world values by joining the european economic space. there are examples of less fortunate and formalized participation of border countries in the form of combinations of transnational alliances, such as the berentz-european council, council of the baltic states, etc. (euro (1999) “severnoe syianye” v polytyke evropeiskoho soiuza [“northern light” in the policy of the european union], moscow: euro). they are experimental in the sense that the composition of their participants testifies to the desire to establish horizontal cooperation between nato member states, neutral states, and post-soviet republics. 7. reserves of interregional cooperation the analysis of the cross-border cooperation with the participation of ukrainian regions gives grounds for talking about the existence of a number of obstacles and problems of development, which should include the following: baltic journal of economic studies 122 vol. 5, no. 2, 2019 1. lack of effective regional policy of cross-border cooperation, which is associated primarily with the crisis social and economic situation of ukraine as a whole. 2. existence of the significant differences in administrative and territorial arrangements and patterns of territories division in accordance with eu standards. this can include the differences in the current legislation in relation to the “field of the economic activity” (customs, tax, banking, and insurance regulation). 3. differences in the development of the adjacent border regions, in particular, limitation of the financial security, which restrains participation of the local authorities in the international development projects. 4. limitation of powers and rights in accordance with the current legislation of the local self-government bodies regarding participation in the international associations, establishment of the foreign economic relations, etc. 5. low awareness of the feasibility and possible results of euroregional associations’ activity with participation of the border regions of ukraine and lack of a clear position on the legitimacy of this activity. at the same time, the perspective of this direction of economic development is obvious. the border area of ukraine covers 96 administrative districts and 5 areas of city councils; 19 out of 25 regions of the state are border ones. the natural and resource potential of these territories makes up 18.5% of the potential of ukraine, and the population – 21.8%. the industry of the border territories employs 22.8% of the production and industrial potential of the country; and almost 19% of the industrial products of ukraine are manufactured (pila, chmir, 2003). the concrete proposals on the main directions of ukraine’s adaptation to the world market should come from the already adopted course on multi-vector, development of relations with cis countries, and especially with russia, and with the need to expand the economic ties with eu countries. since it is difficult to build one’s own economy and relations with other countries alone, participation in the regional organizations is a perspective for ukraine. uno, as already noted, recognizes the importance of the regional groupings to accelerate the process of globalization and facilitate the participation of national governments in them (klochko, 2001). 8. directions for improving the regulatory influence on the nature of interregional integration processes inclusion of ukraine in the globalization processes mostly depends on the formation of a new mechanism of the foreign economic activity, based on the principles of ensuring the continuous nature of the economic ties, a gradual transition from the administrative to self-regulating system, demonopolization, deideologization, compliance with the criteria of the economic cooperation, guaranteeing the country’s security. in our opinion, formation of the basics of such mechanism (legal bases, organizational forms, economic upsurges) will go towards unification with the world structures, creation of the real incentives for foreign investors, consistent implementation of the economic reform in this field, reduction of the exaggerated dependence of ukraine on the external revenues, products of fuel and energy complex, grounded protectionism, promotion of new equipment and technologies attraction. 9. conclusions conducted researches of the theory and practice of the integration processes of the regional economies allow making some important generalizations: the global economy is a system of interconnected economic systems and their components – regional economies; government structures and economies do not coincide in the global economy; therefore, nations are economically interdependent and have common elements of the economic systems within the common markets; the states, which possess the parts of the economic system, located within their national boundaries, are interested in the effective operation of the whole economic system, which is proved by the practical examples of cooperation; the policy directed only to the economy within the borders of the national boundaries to ensure the growth of the competitive advantage of one of the countries will necessarily have a retroactive effect on the activity of each of the economic systems. the trends in the world economic development in the most concrete form affect the specifics of the border areas management, namely: such regions legally ensure the cross-border movement of goods in the conditions of trade liberalization; the border regions carry out contact and barrier functions under the pressure of the dynamic growing trans-border movement of the population in the form of the international migration of labour resources, tourism, business and educational trips, which is a manifestation of globalization of the world intereconomic relations; the regional integration associations are formed in the event of backward or repressiveness of the border areas due to their peripheral positions; the general educational trend includes strengthening the rights and empowering the local authorities, in particular, in the area of cooperation with the relevant authorities of the neighbouring territories of foreign countries. baltic journal of economic studies 123 vol. 5, no. 2, 2019 references: kuhn, t. s. (1970). the structure of scientific revolution 1970. chicago: university of chicago press. retrieved from: https://projektintegracija.pravo.hr/_download/repository/kuhn_structure_of_scientific_revolutions.pdf horovyi, v. p. (2002). stanovlennia zovnishnoekonomichnykh zviazkiv u period hlobalizatsii ekonomiky [the formation of foreign economic relations in the period of globalization of the economy]. journal of economy of agroindustrial complex, 5, 20–26. (in ukrainian) barnes, v., ledebur, l. (2003). novi rehionalni ekonomiky [new regional economies], lviv: chronicles. (in ukrainian) storonianska, i. (2004). chynnyky dezintehratsii rehioniv ukrainy ta shliakhy formuvannia modeli vnutrishnoderzhavnoi mizhrehionalnoi intehratsii [factors of disintegration of regions of ukraine and ways of forming a model of interstate interregional integration]. journal of regional economy, 2, 79–86. (in ukrainian) wto secretariat regional trade integration under transformation. the seminar is regionalism and the wto. (2002). geneva 26, april. retrieved from: http://www.wto.org/english/tratop_e/region_e/sem_april02_e/ sem_april02_e.htm/ petrenko, z. (2003). prykordonni rehiony yak nova forma mizhnarodnoi intehratsii [border regions as a new form of international integration]. journal of economy of agroindustrial complex, 12, 18–26. (in ukrainian) bielienkii, p. iu. (1996). transkordonne spivrobitnytstvo: problemy i perspektyvy [trans-border cooperation: problems and perspectives]. lviv: yuryst. (in ukrainian) mikula, n. (2003). yevrorehiony: dosvid ta perspektyvy [euroregions: experience and perspectives]. lviv: national academy of sciences of ukraine. (in ukrainian) voloshko, v. (2005). realii ta perspektyvy transkordonnoho spivrobitnytstva [realities and prospects of cross-border cooperation of ukraine], journal of regional economy, 4, 10–17. (in ukrainian) “severnoe syianye” v polytyke evropeiskoho soiuza [“northern light” in the policy of the european union]. (1999). moscow: euro, 1, 21–28. (in russian) pila, v. i., chmir, o. s. (2003). mekhanizm upravlinnia mizhterytorialnym i prykordonnym spivrobitnytstvom [mechanism of management of interterritorial and border cooperation]. journal of scientific herald of chernivtsi university, 4, 31–38. (in ukrainian) klochko, v. (2001). hlobalizatsiia ta yii vplyv na krainy z perekhidnoiu ekonomikoiu [globalization and its impact on transition economies]. journal of ukraine economy, 10, 18–24. (in ukrainian) mazur, а. (2007). rehionalna paradyhma suspilnoho rozvytku [regional paradigm of social development]. vinnytsia: knyha-veha. (in ukrainian) baltic journal of economic studies 142 vol. 1, no. 2, 2015 analysis of solidarity pension system of ukraine: problems and main ways of reforming oleksandra starosta1, uzhhorod national university, ukraine annotation. the aim of this work is to analyze the pension system of ukraine, determine its main problems, and define all necessary steps for further reforming of the system taking into consideration reforms which have been carried out recently. methodology. the research is based on statistical factors, analysis of demographic rate, level of shadow economy, fiscal burden in the country. budget index of the pension fund of ukraine and level of income and expenditure of pensioners been examined too. the results of the research have shown that modern pension system requires reforming because it is characterized with a growing number of pensioners, a decrease in their material status together with annual deficit increase in the pension fund of ukraine, amount of tax burden and level of shadow of economy. practical use. since the number of pensioners is increasing and the number of payers is decreasing, the sum of accumulated income for pensions is decreasing too, which leads to the pension system crash or failure of its main function – to protect unemployable stratum of population. that is why it is necessary to carry out a further reforming to decrease the deficit, improve living standards of pensioners, implement and develop compulsory and optional insurance. value/originality. the above mentioned ways of reforming the pension system allow to improve the functionality of the pension scheme and material status of current and future pensioners, implement accumulation component which will benefit the development of economy and the country in general. key words: pension payment, budget of pension fund of ukraine, shadow economy, living standards of pensioners, pension reform in ukraine. jel classification: е26, н55, е62 1. introductory paragraph pension coverage is one of types of social assistance for incapacitated persons of ukraine. it is an important sector of state`s social policy, as long as pension expenses is the only source of income for many millions of people. pension coverage has a lot of problems that are connected with stress load on budget and working people, because in our country the amount of holders of pension is increasing annually, but the amount of taxpayers is decreasing. on top of that, considerable part of holders of pension are drawing a pension that cannot supply the needs of pensioners. object of an article is the case study of modern solidary system of pensions, analysis of actualization of reforms in the current term and suggestions of further actions. 2. ukrainian pension system: the present day pension system`s functioning mechanism is being implemented through reallocation between generations of financial resources. participants of this system are workers and employers that are paying unified social tax, pensioners that receive pension payment with reallocation of money funds owned by the state, that allots donations in the event of money deficiency in pension found for pension funding. under the existing laws structure of pension insurance system in ukraine, it includes three levels and is formed at the expense of state`s obligatory pension insurance and voluntary additional pension insurance. three-level pension system must allocate all risks connected with negative demographic trends in society, economical fluctuations and financial market fluctuations between its three constituents. according to expert opinion, this distribution of risks suffers to do pension system more financially sound and balanced that is going to insure workers from general loss of income after retirement and that is why is really important and profitable for them. (pishchulina, 2012). in current conditions in ukraine only first and third level of pension system are functioning, second is not implemented one yet. as non-state pension coverage is unessential and is not developed enough in our country, substantially, pension payments for pensioners are realized from solidary pension system. enhancement of social standards for retirement age citizens leads to increase in pension expenses and intensification of cost loading on the first level of national pension system. there are some problems in solidary system that we are going to look at in future. corresponding author: 1 department of economics of enterprise, uzhhorod national university. e-mail: starosta.89@mail.ru baltic journal of economic studies 143 vol. 1, no. 2, 2015 3. challenging demographic situation in ukraine pension coverage system is subjected to demographic risks inside the state. occupation level of citizens, amount of tax payers and pensioners operates upon modern day pension coverage system and the birth rate and migration can have an effect in the future. for current demographic situation in ukraine typical are drastic fall of birth rate, elevation of death rate, lack of population growth, tax overloading of employable population, reduction in life expectancy of men and women, nation`s health deterioration, intensification of migration processes and its impact is often on demographic and social and economic readings are often divergent or even negative. over past two decades demographical situation in our country is shoving fixed readings of human population reduction. origin of that have historical roots and were accumulated through the long time. for past two decades population of our country is decreasing step-by-step. in 1990 population numbered 51.8 million and as of 1 january 2015 – only 42.9 million, population decreased over 8.9 million or 20% of inhabitants. problem of recovery rate of inhabitants and their quality is one of key indicators of each country`s development. from the date of ukrainian independence development downfall of had begun and lasted for a decade, from 1991 to 2001, number of newborn children for women of childbearing potential over this period decreased over two times, from the number of 1844 babies per 1000 women to 1085. in 2014 birth rate showings increased rolled over to 1498 babies per 1000 women. establishment of high scales of aid aborning a child and their differentiation depending on priority of new-born child state is stimulation families for having two or more children born. but, experience has proven that, monetary incentives for birth rate are inconclusive and achievements are apart from expectations (svenchicki, tkachenko, & chapko, 2010). as of death rate in ukraine, over the 1991 to 2014 period it fall within the standard limits 12.1-16.6 for 1 thousand residents. during the last few years general showing for 1000 residents. (state statistics service of ukraine, 2015). demographic situation in ukraine is not only characterized be depopulation it has grown into demographic crisis essential features of which are adverse movements in amount and in population`s health. according to statistic data’s, more than quarter of men, that are going abroad at the age of 16, are dying shy of 60, and that fact shows real actuality of problem of untimely death in employable age. we can see huge number of death accidents because of infections and parasitic diseases (tuberculosis and aids), heart attacks and blood-strokes. (kolesnikova, 2014). all in all in this situation, natural population increase being the difference between the number of new-borne people deceased has a negative number. average showings are signalizing about decreasing number of people, about 5.2 people per 1000 inhabitants yearly. death rate is higher than the birth rate, on an average in ukraine from 1991 till 2014 only 9.9 people are born for 1000 of inhabitants, but the death rate is about 15.0 people per 1 thousand of inhabitants. the analysis result shows that there is no natural population increase, 1/3 times more people are dying in our country than being born (svechnicki, tkachenko, chapko, 2010). distinctive feature of demographic situation in ukraine are incising amount of senior citizens with the simultaneous decreasing number employable population. for pension system it means that amount of tax payers is decreasing and amount of pensioners and pension payments are growing. analyzing demographical processes we need to pay our attention on such problem as population greying. age structure of ukraine from 1990 till 2014 number of elders is increasing step by step and amount of children is decreasing. as for 1990, people under 14 reached 21.4%, in 2014 – 15%, in other words recession reached over 6.4%. number of people at the age of 65 and older had grown to 3.1: in 1990 it was about 12.1% and in 2014 – 15.0%. on the top of that, according to demographic greying scale zh. bozhe-garnye e. rozzeta ukraine belongs to countries with very high level of demographical greying because number of people at the age older than 60 is makes more than 18 percent in states population structure (svechnicki, tkachenko, chapko, 2010). 4. high pension system financial expenses particularity of budget system of ukraine and governmental finances in general constitutes the fact that vast majority of expenses on social sphere and this dynamic is growing every year and that is a negative signal and it calls for measures for expansion reduction on social sphere. pension system of ukraine has a very high price for society. when we talk about pension systems that are operated by the state, often we forget that pension expenses are financing by enjoyable people. but in the addition to financing social needs state makes working class to make money transfers for unemployed (ponomarenko, 2013). till 2004 level of pension expenses was less than 9-10% of gdp, after reform this reference gown up to 13-15%. in 2007 pension expenses were 13.3, in 2008 -15,6 of gdp. in such case there are no steps made for increasing income of states pension system, except incising pension tax for recruiters and few affords to make business people – natural persons to pay minimal pension tax. in 2009 balance of expenses of pension system of ukraine and gdp capacity reached the scale of 18% in 2010-17.7% even after pension system reform in 2011 expenses on pension provision stay high in comparison with gdp: 2011 – 16%, 2012  – 16.6%m 2013 17,3%, 2014 – 16% (pension fund of ukraine, 2015). analyzing all expenses on pension coverage, we must admit, that with every new year we pay more budget and baltic journal of economic studies 144 vol. 1, no. 2, 2015 gdp accumulated money on social needs of the state. expenses on pension coverage are overstepping economic growth rate in the state that is caused with the big number of pensioners and decreasing number of tax payers, employed people, and imperfect system of money accumulation and financial crisis is a signal for negative tendencies to appear and develop in the nearest future (svechnicki, tkachenko, chapko, 2010). increasing of expanses on the pension coverage is clearly seen through with the help of financial showings analysis of budget of pension fund of ukraine for some years. pension fund of ukraine is a central executive body that is in charge of states solidary system of obligatory pension insurance, that fundraises and accumulates all insurance payments, gives pensions and gets the documents ready for payoffs, provides in and on time payments and their funding income generation of pension fund of ukraine is accounted for own incomings (insurance contributions for compulsory pension insurance of the country), money from unemployment fund and occupational injury and disease insurance fund and state budget of ukraine. pension fund budget revenues of ukraine (in consideration of money left at the beginning of the year) reached: 2010 – 193672 mil. uah, 2011-212109 mil. uah, 2012-224027 mil. uah, 2013-252755 mil. uah, 2014-245246 mil. uah. main part of revenues are citizens own incomings: 2010  – 139156.0 mil. uah., 2011 139056. mil. uah, 2012 – 157980.0 mil. uah., 2013 – 166864.0 mil. uah., 2014 – 163813.8 mil. uah. the peculiarity of the budget of the pension fund of ukraine is the fact that the big item of income is are money from budget and their amount is serious. as they made in 2010 – 64087 mil. uah., 2011 – 58317,0 mil. uah., 2012  – 64494.0 mil. uah., 2013 – 83233.6 mil. uah., 2014 – mil. uah., ( pesion fund of ukraine). unfortunately, for the moment the process of achieving of balance pension budget fund is slow and contradictory. at the period from 1991 budget of the pension fund was deficit-free only from 2002 till 2004 and in 2007, 2008. in 2005 deficit of the budget was 16.3 mil. uah., 2006 – 7.3 mil. uah.,2009 -13.1 mil. uah.,2009 – 13.1 mil. uah., 2010 26.6 mil. uah., 2011-17.8 mil. uah., 2012 – 15,3  mil. uah., 2013 – 21.8 mil. uah., 201414.7 mil. uah. one of reasons of this negative developments is a misbalance in relations between participants in pension system with the context of revenue and spending of the budget of the pension fund and that is the main reason (ponomarenko, 2013). 5. shadow economy in ukraine with the problem of shadow economy existence all of the world countries come in the contact with. according to the first source it`s capacity is at the level that doesn`t make serious impact on economy and in other sources there is is an evidence of existence of reproduced system of shadow economic relations. to the second category, unfortunately, ukraine refers to, capacity of shadow economy that according to different sources is fixed at the level of 20-50% of gdp. presence of the big capacity of shadow economy signalizes about big amount of short payments of pension fund and it impacts negatively at the functioning of the pension system and prosperity of pensioners. national statistical reporting service during last years determines capacity of shadow economy at the average from 15% to 18% of gdp. we must admit that those data’s differ from data’s from other intelligence agencies and scientists. according to calculations of ministry of economic development and trade of ukraine, capacity of shadow economy in ukraine for last 5 years reaches from 28% to 39% of gdp. this shoving calls of with different methods that take into account difference between income and expenditures, cash dynamics in circulation in overall production and using of electricity for production and dynamics of prices for end product and production profitability (bochiy, povoroznik, 2014). according to data from fiscal services in 2012 general amount of shadow sector of ukrainian economy was at least 350 bln.uah per year, herewith, 170 bln/uah of backdoor salary, 100 bln/uah – non-cash money transferred in cash or foreign currency account in foreign banks, 35 bln.uah – unofficial payments, 45 bln/uah permanent assets, material resources and shadow sector services. (bochiy, povoroznik, 2014) in 2013 there were about 250 bln.uah of ukrainian tax payers, 41% of state purchases and public organizations were held without tenders (shapoval, & kiryan, 2015). so far almost third part of employable people is getting income in the sector of unregistered employment. one of reasons of hiding wages, according to tax payers opinion, are high stakes of payments to the pension fund, that in that case excludes big income of their organization. second reason of spreading of the shadow economy is tendency of employers to decrease amount of and to hide income from taxes. in particular at legal companies salary is not payed in time according with current plan of salary payments. third reason of being in shade economy sector is depreciation of pension as a stimulus, because half of ukrainian pensioners are on the breadline. 6. serious fiscal overloading of the economy excessive pension insurance stressing on economy are narrowing down potentialities of payment base and sources of pension inpayments. the best part of natural and legal persons are not paying pension fee. in-depth and lengthy economical crisis of the financial base of pension system. world most developed countries that are members of organisation for economic co-operation and development, oecd and differ with high level of human baltic journal of economic studies 145 vol. 1, no. 2, 2015 services have an average showing of salary fund stressing only 23.3% whereas ukraine – 43.3%. (pishulina, 2013). today in ukraine charges for employers on unified social tax range from 36.76% to 49.7%. minimal sum of ust as of 01.01.2014 – 422.65 uah. maximum sum of ust in 2014 is 7184,98 uah, that is from salary that is more than 20106 uah. sum of ust in comparison with minimal salary is serious, level of salary, anyway, is low enough in comparison with european countries. all in all when citizen that gets minimal salary pays ust and receives in the end 795.35 uah and that sum is lover then the living wage. and when we add to ut for employers allocation of ust from the salary of worker amount of which is 3.6% and income tax amount of which is 15% – we will get different numbers. when organization gets 100uah on outpayments connected with salary payments – worker gets in the end only 59.5 uah (volchanski, 2011). in 2014 number of taxes and other charges was higher then 40% of ukrainian gdp. we are able to understand states aspiration to get as much money to budget as they can, nevertheless taxes shouldn`t be higher the level in which amount of incomings is going to decrease. 7. low level of pension of the most of pensioners up to 01.01.2015 number of pensioners in ukraine was 12147.2 thousands, middle amount of pension is 1581.54  uah. minimal pension is the same as minimum wage and is equal to 494 uah (42.3$ at the exchange rate of national bank of ukraine as of 09.09.2015). particularity of pension system of ukraine is a low level of pension coverage and serious amount of pensioners. relative share of poor people in ukraine are pensioners. according to world bank standards serious amount of pensioners are under the bread line. low-income poverty threshold is existence on 1.25$ per day. in 2015 number of poor people only increased and that is connected with difficult economic status and with the apparition of new group of poor people – frontiers man from crimea and donbass. number of frontiers is close to 500 thousands and that is only according to official statistics in 2014. unofficial number probably is much higher. (pension fund of ukraine). vast majority of income pensioners are spending on food, medicines and housing rent. furthermore, if on the average spending on food and housing rent in households of unemployed pensioners are much lower than in other types of households but pensioners spend money on medicines more than everyone. this situation shows pricing misbalance and bleakness of medical services, (libanova, 2012). in this regard we are going to examine composition of food basket for disabled people upon which the sum of living wage is calculated and the sum of minimal pension. in keeping with food basket composition, upon which the sum of living wage is calculated, ukrainian should eat per day 270gr of bread, 5 gr of bread, 250gr of potatoes, 50gr of cucumbers and tomatoes, half of an egg, one and a half glasses of milk, 25 gr of sausage, 61 gr of sugar and 18 gr of butter, 6 gr of rice 11 gr of sour cream. basis of the food basket are bread, potatoes and milk. bacon, if we into account daily scale of 5 g, is enlisted as dainty. fried fish and herring only on holidays (200 grams per month), and meat two or three times a month. cheese, juice, mineral water or even filtrated fresh water were not taken into account at all. minimal comfort kit is three times lover then the one that is recommended by the institute for scientific research nutrition of ministry of health of ukraine. we must admit that the size of living wage for unemployable people (pensioners) intended lover (cheaper) compositions and consumption criteria of food and wardrobe items. in the same time necessity for medical supplies and goods , that they must to buy for their own money was not taken into consideration (chronical illnesses drugs, glasses and so on), and also payments for health care or surgery operations) (tkachenko, 2012). in the view of hard financial status big amount of pensioners are continuing to work. according to official data from the statistic agency, 63.2% of people at the age of 50-59 and 15.5% people at the age of 60-70. but those are official data, serious number of pensioners work in informal sectors of economy. dissatisfaction of senior citizens in ukraine is caused with low pensions and absence of privileges on medical services and growing charges on housing and utility services. 8. reforms of pension system in 2015 solidary system of pension coverage up to this day is in crisis condition and it is caused by growing number of pensioners, and decreasing number of tax payers, growth of expenses for financing of the pension system and that is going to drive to failure of pension system. in way of stabilization and further improvement of current situation we need to take measures to decrease expenses on financing pension system and to increase number of tax incomes into the pension system and to make pensioners life better, from the beginning of 2015 number of steps were made to reform the solidary system, that will decrease spending on the pension coverage: offsetting of the pension solidary system and reduction of pension rights, received in advance. we are referring to reduction of things to make order in mechanism of pension awards, pensionable service and unitizing of pensions for deputies, judges and procurators and clerks. since 02.03.2015 verkhovna rada of ukraine passed the law «about introduction of alterations into some legislative acts of ukraine concerning changes in pension coverage» 14 pension laws that specify that during working period clerks, deputies, procurators, judges pension are not payed until they retire, were modified. in same way one should not take into the consideration pension type baltic journal of economic studies 146 vol. 1, no. 2, 2015 and law according to which it was assigned. modifications listed above are going to bear on 11 thousands of people that are working on special posts. while working, other categories of pensioners, pension are payed in the sum of 85% of assigned pension. this rate bears on those pensioners whose salary is not higher than 1.5 times from the living wage for people who lost employability. also when the new tax code is entering into the force on 01.01.2015, a tax form private person is taken (15% of basis of assessment) and military tax (1.5 basis of assessment) from pension including their indexation, that was charged in accordance with the law or monthly monetary payments if their pension is not higher than three sizes of minimal pension (per month), set up on 1 january of fiscal year. since 01.06.2015 a single principle of pension was instituted, essence of this novation is in transition of all types of pensions under the single law, and canceling of special pensions, except pensions for military people. pensions for state clerks, taxmen, customs officers, judges and procurators and other scientific workers (pension fund of ukraine). consumed efforts that were made to decrease expenses on pension coverage, including cancelling special pensions and increasing demands for term of service and age of retiring for some categories of people is a positive signal of pension system reform. most complicated initiatives from the social view are tax on pension and limitations for working pensioners are valid till 31.12.2015. depending on economy, acts mentioned above are going to be cancelled or prolonged. hereafter we suggest to deal with ways of reforming the pension system of ukraine. 9. decrease in deficit of pension fund of ukraine decrease in deficit of pension fund of ukraine is possible if we make next steps: • to make pension insurance system free from unusual expenses : financing from national budget extra payments for living wages for minimal government pension at the level made for people that lost their employability (macktaggart, horyuk&sigerl, 2014). • assigned to pension fund of ukraine source of income, except insurance, that is not connected with fiscal pressure. for example increasing of other types of taxes: excise taxes and vat. thanks to absence of pressure on the fund employers will not be motivated to be in shadow economy. • changes in proportion vat redistribution, to increase share of salary in the end product and european level services (pischulina, 2013). 10. shadow salary legalization one of main tusk of economic reforms in ukraine should be legalization of shadow sector of economy and overcoming of corruption. main forces for legalization of shadow economy should be appointed on: • strengthening of governmental control and discipline • creation of additional legal workspaces and special programs for unemployed • strengthening of forex control and overcoming outflow of currency • following at macro level dynamics of tax coefficient (correlation of taxes and all social obligatory payments) • access for small and medium practices • penal duties for persons working not legal • creation of special service for straggle with illegal employment • expansion of system of cashless transfers that could have been main form of transfers (shapoval and kiryan, 2015) 11. existence of mechanism of payment of unified social tax as an alternative we can decrease on employers in the way of redistribution of unified social tax that is payed to pension fund of ukraine, between a worker and employer, until we get a proportion of 50/50, without a payroll. accurately calculated scenario simultaneous increasing of a workers deposit to 6% (sanded to pension system), and gradual increase of workers deposit (2% a year) until they get unified social tax o worker and employer at the number of 18.8%/18.8%. during process we can reach the deficitfree budget of the pension fund of ukraine from 2016 that is being kept until 2047 (macktaggart, horyuk&sigerl, 2014). 12. establishment of second and third level of pension coverage in ukraine establishment of obligatory accumulative pension insurance and development of non-state pension insurance in ukraine, that make serious social and economic impact on state and people. smart and well-minded investment in future pension deposits are going to make a serious push for economy. getting of the cheap and a long investment resources to the real sector is able to provide a rapid and steady growth of the domestic high-tech production with high added value. this automatically leads to the increase in the number of jobs, reducing unemployment and increasing salary. the consequence will be an increase in domestic demand, which, in turn, with the respective cash resources will lead to further expansion of production and so on. in addition, the introduction of the accumulative component will allow to receive a pension from several sources, are going to improve the financial position of future pensioners (pishchulina, 2013; petrun 2012). 13. conclusion the pension system of ukraine, up to this date, is in a difficult situation due to demographic and financial problems, poor living standards of pensioners. to overcoming the crisis we need to reform the pension system, assigned to the budget of the pension fund of baltic journal of economic studies 147 vol. 1, no. 2, 2015 independent sources of income, release the budget from fifth wheel functions, legalization of wages and changes in the mechanism of paying a single social contribution, those are the steps that will increase revenues to the pension system and reduce its expenses. in addition, an important step is the introduction and development of compulsory and voluntary pension savings insurance,that will increase the living standards of pensioners in the future and contributes to the development of the economy and the country in general. references bochij, a., povoroznik, v. (2014). shadow economy in ukraine: causes and ways of overcoming international centre for policy studies. source icps.com.ua volchanskij, a. (2011, 23 of fabruary). heaven and hell of the pension system. economic truth. source http://www.epravda.com.ua state statistics committee of ukraine (2015). statistical information. source 5 of september, 2015, http:// www.ukrstat.gov.ua kolesnikova, k. (2014). save and multiply. bulletin of the pension fund of ukraine. 7, p. 28-31. libanova, e. m. (2006). a comprehensive demographic forecast of ukraine for the period up to 2050 moscow city. ukrainian center for social reforms. libanova, e. (2012). a well minded balance of generation is needed. bulletin of the pension fund of ukraine. 11, p. 24-27 mctaggart, g., horruc, h. & sigerl, ch. (2014). recommendations for further reform of the pension system in ukraine with the aim of its financial stability. source december, 2014, http://finrep.kiev.ua/ melnichenko, a. a. (2011). problems and prospects of improving pension provision coverage of ukrainian people. actual problems of governance. 1, p. 134-142. source http://www.kbuapa.kharkov.ua pension fund of ukraine (2015). pension fund datas. source 5 september 2015, http://www.pfu.gov.ua/ petrun, a. (2012). young investment. bulletin of the pension fund of ukraine. 7, p. 17-19. pischulina, s. (2013). according to the principle of personal responsibility. bulletin of the pension fund of ukraine. 2, p. 30-32. ponomarenko, i. v. (2013). investigation of the effect of population aging on the size and structure of the economically active population in ukraine and europe. effective economy. 2. source http:// www.economy.nayka.com.ua svenchicki, m., tkachenko, l. & chapko, i. (2010). demographic and financial conditions of the pension reform in ukraine: forecast – 2050 moscow. analytical consulting center blue ribbon. tkachenko, l. (2012). the consumer basket for the pensioner. bulletin of the pension fund of ukraine. 4, p. 14-15. shapoval m., & kirjan t. (2015). the main factors that slow down reforms in ukraine. bulletin of the pension fund of ukraine. 4, p. 16-21. shevchuk, p. i. (2013). problems of balancing budget of the pension fund of ukraine. university research notes. 2, р. 315-321. source http://nbuv.gov.ua/j-pdf/unzap_2013_2_50.pdf александра староста анализ солидарной пенсионной системы украины: проблемы и основные направления реформирования аннотация. целью работы является анализ пенсионной системы украины, определение ее основных проблемных направлений, определение необходимых шагов дальнейшего реформирования системы с учетом проводимых реформ в текущем периоде. методика. исследование осуществлено на основе статистических показателей, анализа демографических показателей, уровня теневой экономики, фискальной нагрузки в стране. рассмотрены показатели бюджет пенсионного фонда украины, а также уровень доходов и расходов пенсионеров. практическое значение. поскольку количество пенсионеров растет, а количество плательщиков уменьшается соответствующая уменьшается сумма аккумулированных средств для пенсионных выплат, ведет к краху пенсионной системы или невыполнения ею основной функции – защиты нетрудоспособных слоев населения, поэтому необходимо осуществить дальнейшее реформирование системы с целью уменьшения дефицита, улучшение уровня жизни пенсионеров, внедрения и развития обязательного и добровольного пенсионного страхования. значение/оригинальность. указанные направления реформирования пенсионной системы позволяют улучшить функционирование пенсионной системы, улучшить финансовое положение сегодняшних и будущих пенсионеров, введение же накопительной составляющей способствует развитию экономики и страны в целом. baltic journal of economic studies 120 vol. 4, no. 4, 2018 corresponding author: 1 odessa national economic university, ukraine. e-mail: iorgachova@i.ua orcid: https://orcid.org/0000-0003-1933-6447 2 odessa national polytechnic university, ukraine. e-mail: kovalova.helen@gmail.com orcid: https://orcid.org/0000-0002-2080-1150 3 vasyl stefanyk precarpathian national university, ukraine. e-mail: ivanplets86@ukr.net orcid: https://orcid.org/0000-0002-9649-6770 doi: https://doi.org/10.30525/2256-0742/2018-4-4-120-125 financial engineering as a tool for the development of corporate bond market in eastern europe on the example of ukraine maria iorgachova1, olena kovalova2, ivan plets3 abstract. in the context of the gap between the financial and real sectors of the ukrainian economy, there is a problem of the absence of financial instruments able to solve the issue of financing the development of the national economic system on a long-term basis. at the current stage of the stock market development, financial engineering has a significant potential for the effective application since it can become an instrument that meets the current needs of the market. the purpose of this article is to study the current dynamics of development and features of the corporate bond market in ukraine, as well as to develop the parameters of the new profit-bonds with the help of financial engineering, which takes into account investors’ inquiries in the formation of an investment portfolio and supposed to be a profitable form of attracting financial resources for issuers. methodology. materials of periodicals, analytical market reviews, resources of the internet are the informational and methodological basis of the investigation. the research is based on general scientific and special methods, such as: comparison, systematic approach factor analysis, economic and mathematical methods. a comparative analysis of the parameters of financial instruments has been carried out that allowed determining the investors’ inquiries, investment trends and features of the choice of financial instruments by investors and accordingly to offer competitive debt securities according to the parameters of payment, maturity, security, repayment order, issue of currency. the results of the study indicate that there is the necessity of reformation of the stock market in terms of expanding the range of financial instruments based on financial engineering. the introduction of profit-bonds will allow offering participants of the ukrainian market competitive conditions for the issue of securities, which are based on the modelled parameters of bonds. a schematic algorithm for the implementation of profit bonds is developed; it joins a complex of interrelated stages of implementation, which are sensitive to internal and external factors of influence. practical implications. directions for improving financial instruments on the basis of financial engineering can be applied by the participants of the stock market that will increase the general level of economic activity in the national economy and permit to accumulate financial resources on the profitable terms. value/originality. the article reveals the development of the domestic market for corporate bonds as an important segment of the stock market through the application of financial engineering and the use of new financial products created to address the issue of attracting the necessary financial resources to the real sector. the introduction of financial engineering as a tool for the development of ukrainian corporate bond market and its schematic algorithm of the implementation will allow an investor to react in time to the market changes. the creation of the state fund for the guaranteeing of income of the investors market act, which is formed at the state level by analogy with the existing guarantee fund for individual deposits, will allow the fulfilment of the security parameter that will classify profit bonds as long-term debt instruments with a high credit rating. key words: bond, financial engineering, stock market, issuer, investor. jel classіfіcatіon: е44, g11, g39 baltic journal of economic studies 121 vol. 4, no. 4, 2018 1. introduction at the present stage of its development, the domestic financial market is closely connected with financial engineering. this linkage is especially clear in such an important segment of the financial market as the domestic stock market. the prerequisites for this connection and its strengthening in the future are the following: − the prevalence of private placement of securities in the domestic stock market, which is marked by limited access to information about securities’ transactions; − existing financial instruments that are rotated on the domestic stock market are not capable of securing the goals and interests of some stock market participants, as there is a need for other financial instruments that have certain unique parameters and meet specific investors’ interests; − existing financial products already created, as a result of financial engineering, do not solve the problem of the gap between the financial sector and the corporate (real) sector of the country’s economy; − distrust of investors (both domestic and foreign) to ukrainian issuers-borrowers and unsettled conflicts between stock market participants, as well as the ineffectiveness and imperfection of legislative regulation in this area. all these preconditions lead to the fact that financial engineering can become a direction that will give extra opportunities to the further development of the domestic stock market. consequently, it is necessary to analyse definite possible directions of implementation of products of financial engineering to the stock market and one must always take into account that if there is no connection with the real sector of the economy, any recommendations will have no real effect. the work of such national scientists as o. kuzmin and o. sitnik are devoted to the study of theoretical and practical aspects of financial engineering, which reviewed the foreign experience of engineering activities. r . isaev, s. naumenkova, o. paobov devoted their works to the application of financial engineering in the development of certain financial instruments in the stock market. a. batorshina and v. kravchenko considered the prospects of financial engineering development in ukraine and in the world in general. other foreign scholars such as j. finneret and r . kosowski investigated the theoretical and practical aspects of financial engineering. in general, one can note the lack of studying the use of financial engineering tools. the issues of resolving the gap between the application of financial engineering in the stock market and its simultaneous connection with the real sector of the economy remain unresolved. consequently, the use of financial engineering in the context of creating new financial products in the securities market is a promising way of financing the real sector of the economy. 2. conceptualization of the correlation between the real and financial sectors of the economy the unstable socio-economic and political situation sharply raises the question of financing operational activities and implementing investment projects to the real sector of the economy. at the same time, individual and institutional investors are looking for financial instruments that meet the criteria of profitability and reliability. the current market conditions within the framework of the economic system, which is in the phase of its establishment, does not correspond to the requests of financial market participants in view of the uncertainty of investor protection issues, legislative and regulatory gaps and, accordingly, the narrow range of financial instruments available for investment. the experience of developed economic systems indicates the possibility of a revival of the market situation due to financial engineering. according to the author, financial engineering in the corporate bond market is an instrument for the development of a new type of corporate bonds that simultaneously meet the needs of financial and real sector representatives and address the gap between these sectors and the increasing dominance of the financial sector. when creating a financial product in the form of a new type of corporate bonds, it is necessary to determine the relationship between the number of bonds issued by enterprises in the market and the share of profitable enterprises. to do this, we will take advantage of the capabilities of the ms excel software and visualize the results of the analysis based on data for the period of 2009-1 quarter of 2017 (figure 1) each point in this graph is a combination of the number of corporate bonds issues and the percentage of profitable enterprises for the same period of the respective year. the line in the graph has a negative slope, indicating the existence of an indirect (reverse) connection between the number of lucrative enterprises and the number of bonds issued by enterprises. the relationship between the number of bonds issued by enterprises and the share of profitable enterprises can be expressed in the following equation: y = –20.435x + 1638.1 (1) where y − the number of bonds issued by enterprises; x − the share of profitable enterprises. the abovementioned equation is a mathematical one-factor model for determining the number of bonds issued by enterprises from the share of profitable enterprises for the same period. from the equation, one can see that the zero factor is 1638.1 for the period that is the number of bond issues of enterprises expected if the share of profitable enterprises is zero. the sensitivity of the number of bonds issued by enterprises to the share of profitable enterprises is − baltic journal of economic studies 122 vol. 4, no. 4, 2018 20.435. this value indicates that the higher share of profitable enterprises is associated with fewer issues of corporate bonds. on the other hand, the smaller the share of profitable enterprises, the greater the issue of corporate bonds. consequently, the results of the analysis confirm that corporate bonds are a possible financial instrument necessary to be used for the enterprises of the real sector in order to attract the necessary financial resources in the period of their shortage. they have great potential for their development, but now they are used in the domestic stock market not sufficiently. enterprises of the real sector of the economy, when they attract extra financial resources, tend to turn to the money market rather than to the stock market segment of the financial market. this is confirmed by the data of the state statistics service of ukraine: only 7.1% of capital investments of enterprises are financed by bank loans, at the expense of other sources of financing − 2.3%, that also include the attraction of resources in the securities market (state statistics service of ukraine, 2018). the statistics presented are due to the insufficient distribution of the corporate bonds market in ukraine − in 2016 its share in gdp was 0.4% against 8.86% of the market share of government bonds to gdp. let’s note the downward dynamics of these indicators compared to 2014: the share of corporate bonds to gdp – 2.16%, the share of government bonds to gdp – 35.32% (nssmc, 2018). consequently, summarizing all the above said, we can make the following conclusion: firstly, there is a strong ineffectiveness of the offered debt securities offered to the corporate sector in the corporate sector, which causes the insignificant demand of these financial instruments, and secondly, there is a strong ineffectiveness of the state reform of the stock market in terms of promoting the development of the securities market, which is declared in the strategic plan. 3. investments in financial market: characteristics of the current proposition the attractiveness of corporate bonds as a tool for investors to place free financial resources proves a comparative analysis of the main parameters of the most widely used financial instruments when diversifying the investment portfolio (table 1). the analysis of the peculiarities of issue of corporate bonds was carried out on the basis of construction industry enterprises since it was precisely in this area of the national economy as far as it was the largest market with the largest volume of securities issued for the 3rd quarter of 2016 in order to attract financial resources for certain projects, which is confirmed by data analysis of the industry structure of the largest bond issues (figure 2). one can see the current situation due to the fact that the bonds of these enterprises are granted, and it allows investors to be sure in the safety of their investments. in accordance with the terms of the prospectus for the issue of targeted bonds, the investor, upon payment, receives the corresponding living space by transferring the object (a part of the object) to the ownership of the investor. the active borrowers on the basis of debt securities were also enterprises operating in the field of supply of electricity, gas, steam and air-conditioned air, as well as companies of the agrarian sector. the identified structure of the largest bond issues reflects the peculiarities of the creation of the value added to the national economy, mainly in the third and fourth technological arrangements. according to the ncssmf during january-december 2016, the financial sector companies did not issue any bonds; this indicates a decline in their economic activity. the opposite situation developed on the world stock market, where long-term bond funds typically choose for investments corporate bonds of companies, which operate in such sectors as the financial sector, telecommunication sector, and it technologies. y = -20.435x + 1638.1 r² = 0.943 0 50 100 150 200 250 300 350 64 66 68 70 72 74 76th e nu m be r of b on ds is su ed b y en te rp ri se s, p cs . the s har e of pr ofitable enter pr ises,% trend line figure 1. graphic representation of the results of the analysis of the relationship between the number of bonds issued by enterprises and the share of profitable enterprises source: built by the authors (the state statistics service of ukraine and national securities and stock market commission, 2018) baltic journal of economic studies 123 vol. 4, no. 4, 2018 for example, long-term bond etf holds the debt securities of british telecommunications plc, jpmorgan chase & co, united technologies corp., goldman sachs group inc., verizon communications inc., apple inc., and microsoft corp. (database etf, 2017). 3. algorithm for developing profit bonds the introduction of profit bonds will allow the participants of the ukrainian financial market to compete with the issuance of securities based on simulated bonds, unlike deposits from commercial banks, where the terms of the contracts are fixed. by the criterion of payment, profit bonds can be characterized by a floating coupon rate that allows taking into account cash flows of the issuer − the subject of management. it is advisable to apply a collar option on coupon bonds to minimize the risks of the issuer, which will include a base interest rate as the lower limit of coupon payment, and the upper limit is fixed in the prospectus at a certain level. it is proposed to link the base rate for the profit bond to the average market yield of bonds of a specific sector of the national economy, in which the issuer of securities operates financially and economically. thus, the conjuncture factor and the inflationary effect will be taken into account. unfortunately, the indexation of the exchange rate of yield is inaccessible for corporate issuers because of a list of reasons: firstly, in this case, they can carry unpredictable currency risks, and secondly, there is a methodological uncertainty about the choice of an indicator or an index of producer prices or the consumer index prices, and thirdly, the instruments of influence on inflation are at the disposal of the relevant state authorities, which allows only the public sector to issue bonds with indexation to the rate of inflation. as the pfts stock exchange is the leader of bonds trading of enterprises on the basis of stock trading of 2016, according to the information of the nssmc (it took table 1 comparative characteristics of investment instruments by the end of the 1st quarter of 2017 indicators domestic state bonds (based on the example of ua4000196562) corporate sector bonds (based on the example of ua4000197230) corporate sector bonds (based on the example of ua4000196018) deposits to legal entities in the national currency profitability, % 15.50% depends on the state of the real estate market 14% 13.69% period medium-term securities 2 years medium-term securities 4 years medium-term securities years 12 months long-term securities number of payments per year 2 times a year 1 time a year 12 times a year 12 times a year nominal value 1000 uah 315 uah 100 uah 100 000 uah listing level 1 level 0 level 0 level – issuer ministry of finance of ukraine pjsc “zozniakizhil-bud” llc “mortgage company ‘arkada-fund’” average annual data on nbu statistics kind of financial instrument coupon bond target bond coupon bond timely deposit source: built by the authors (national bank of ukraine and first stock trading system, 2017) 57.9 % 32.9 % 9.2 % building of residential and non-residential buildings supply of electricity, gas, steam and air conditioning agriculture, hunting and related services figure 2. branch structure of the largest bond issues in january-september 2016, % source: built by the authors (national rating agency “rurik”, 2018) baltic journal of economic studies 124 vol. 4, no. 4, 2018 58.9% in the trading structure of bonds of enterprises as trade organizers) (national securities and stock market commission, 2018), it is expedient to calculate the yield of corporate bonds of each particular sector of the economy based on this stock market. it is inappropriate to determine the weighted average yield for all trade organizers since, at the moment, each stock exchange uses its own approaches to the calculation of indices. according to the criterion of the issuance currency, it should be possible to issue two-digit profit bonds, which should attract attention to the issuers of export-import companies and provide investors with an additional opportunity to reinvest profits for speculative purposes. in connection with a significant reduction in exports of goods by 1.7 times, imports – 2 times during the period of 2014-2016, according to the nbu (national bank of ukraine, 2017), the two-digit profit bonds will take into account the interests of both issuers and investors operating in the indicated sphere, financing of projects and diversification of investments. consequently, corporate profit bonds will be distinguished by the fact that the possible systematic risks will be divided equally between the issuer and the investor, in turn, the methodical principles of most of the already established financial engineering products, shift and transfer potential risks to the investor. the parameter of the payment of profit bonds it is appropriate, in our opinion, to determine coupons issued 2 times a year based on the generally accepted in the stock market terms of payment, which will allow enough flexible approach to the question of formation of the income base and planning of financial and economic activity. in accordance with the procedure for repayment of principal debt, profit bonds may be characterized by the depreciation of the principal amount of debt. the presented parameter has advantages for the implementation from the point of view of investors in the conditions of socioeconomic instability, devaluation of the national currency, and is an actual proposal considering the long-term nature of the trading of profit bonds. the reduction of the base of the coupon payment will be offset by the floating coupon rate, as well as the possibility of reinvestment of the received coupon payments and parts of the principal amount of the debt in the derivative financial instruments. in our opinion, it is a positive feature that allows an investor to react in time to the market changes and use the achievements of dynamic stock market development based on new financial engineering products. in terms of security, the existing portfolio of assets in accordance with the law should guarantee the issue of profit bonds. currently, a timely development of the stock market in ukraine is the creation of the state fund for the guaranteeing of income of the investors market act, which is formed at the state level by analogy with the existing guarantee fund for individual deposits. the fulfilment of the security parameter will allow profit bonds to be classified as long-term debt instruments with a high credit rating. according to the nra “rurik” (national rating agency “rurik”, 2018), today in ukraine debt instruments with a credit rating prevail, which defines a sufficient level of creditworthiness of the borrower. these are bonds of companies the branch affiliation of which provides the following activities in accordance with cred: business advisory and management consultancy, building construction, accounting and auditing activities, brokering activities in the wide range of trade in goods, non-specialized wholesale trade, other auxiliary activities in insurance and pensions. however, it should be noted that on the one hand, the bonds were assigned the bbb rating, and on the other hand, a number of them are unsecured in accordance with the prospectus (avtofinanceservice ltd, modern financial service llc, business innovation company ltd.). thus, one can observe the absence of a direct link between security and a credit rating of the security. according to an analysis conducted by the rurik nra, in the debt securities market, the largest share of issuers is sensitive to unfavourable commercial, financial, and economic conditions in line with long-term borrowing ratings (national rating agency “rurik”, 2018). thus, as of july 6, 2017, in the structure of the pfts stock exchange, there are no corporate debt securities of level 1 of the listing. up to 2 levels of listing include bonds of the largest enterprises in its industry, namely ukrtelecom pjsc, egres-agro tov, se “nnegc ‘energoatom’”, energorynok, ukrzaliznytsia pjsc, progress plus. in addition to the parameters of the new financial product, it is also advisable to find out the algorithm of its development, which consists of five stages (figure 3). these phases are interrelated and take into account factors of environmental impact and are sensitive to changes in the motives of investor acquisition of securities. a particular attention should be paid to the fifth stage, because even if all the previous stages were successfully implemented and the financial instrument was introduced to the stock market, the modification of the parameters and characteristics of the new financial instrument, which will be reflected in the next issue of securities of the respective issuers, is possible. 4. conclusions the conducted analysis of the debt securities market pointed to the peculiarities of its development and identified the following weaknesses: 1. the problem of non-compliance of the existing parameters of financial instruments with the needs of the subjects of the investment market and the lack of a unified scientific and methodical approach to the processes of constructing their new parameters. baltic journal of economic studies 125 vol. 4, no. 4, 2018 1. selection of specific features of a new type of corporate bonds that would address existing problems and satisfy the needs of a particular group of consumers-investors 2. development of parameters for a new type of corporate bonds (profit-bonds) 3. checking and testing a new financial instrument among the focus group of people interested in this direction 4. implementation of a new type of corporate bonds on the domestic stock market 5. modification of the created product depending on changes in the market environment figure 3. algorithm for developing a new type of corporate bonds (profit bonds) source: built by the authors 2. the share of corporate bonds in the stock exchange structure is insignificant compared to other financial instruments, which prevent them from acting as a central component of the stock market, which can become a prerequisite for the development of the national economy. 3. absence at the state level of the mechanism of protection of investors’ assets, which explains the necessity for creating the state fund of guaranteed income of subjects of the investment market. financial engineering should become the basis for the formation of corporate bonds in an affordable source of accumulation of financial resources by the real sector of the economy due to the implementation of its tools and, accordingly, modelling the parameters of new types of debt securities, among which the emphasis should be placed on the constructed profit bonds research, having a series of advantages and correspond to the actual market needs. the prospect of further research is the analysis of foreign experience as for the use of financial engineering tools and the substantiation of the mechanism for the creation and introduction into the domestic market of the state fund for the guaranteeing of revenues of the investors market investors, which will facilitate the resolution of issues related to the development of the financial market. references: database etf (2017). retrieved december 16, 2017 from: http://etfdb.com/ national bank of ukraine (2017). retrieved december 16, 2017 from: http://www.bank.gov.ua/ national rating agency “rurik” (2018). retrieved may 16, 2018 from: http://rurik.com.ua/ national securities and stock market commission (2018). retrieved february 10, 2018 from: http://www.nssmc.gov.ua/ state statistics service of ukraine (2018). retrieved may 16, 2018 from: http://www.ukrstat.gov.ua/ the first stock trading system (2017). retrieved december 16, 2017 from: http://www.pfts.ua/ baltic journal of economic studies 274 vol. 4, no. 4, 2018 corresponding author: 1 institute of international relations, taras shevchenko national university of kyiv, ukraine. e-mail: reznikovanataliia@gmail.com 2 mariupol state university, ukraine. e-mail: crossroads077@gmail.com 3 mariupol state university, ukraine. e-mail: olena_bulatova@yahoo.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-274-281 the policy of economic nationalism: from origins to new variations of economic patriotism nataliia reznikova1, volodymyr panchenko2, olena bulatova3 abstract. the purpose of the paper is to analyse the fundamental principles of the policy of economic nationalism and economic patriotism, its origins, intentions and mechanisms of implementation. the analysis of selected theories allowed for outlining the most essential characteristics, along with identifying the ones laying the fundament for economic nationalism. the main purposes of the policy of economic nationalism and economic patriotism have a similarity: in spite of the common adjective “economic”, they have always gone beyond the boundaries of economic regulation, being a response on “political order” of the time. 21 century offers a lot of evidence to confirm the above thesis. elements of the economic nationalism in the economic patriotism policy have been demanded by state power officials as a kind of response on the awareness of market failure in striking a new balance in the conditions of the imbalanced global economy, with the growing competition and the shrinking global trade. methodology. there is a need to reconsider the origins of economic nationalism by making an analysis of the concepts of nationalism, represented by four paradigms: modernism, primordialism, constructivism and perennialism. results. use of the term “economic patriotism”, contrary to “economic nationalism” or “neo-mercantilism”, gives vivid evidence of different sources for patriotic intervention in the economy. while the instruments of conservative economic patriotism include classical protectionist measures (in full conformity with the ideology of economic nationalism) aimed at domestic protection for further expansion, and the capacities of protective regionalism are used (when it is pursued by regional associations that have a supranational regulatory body), liberal economic patriotism is implemented by the use of neo-protectionism instruments that are not confined to regulation of foreign trade, but focused on stimulation of economic activities by the use of capacities of internal demand and stimuli to supranational industry (which should not be confused with the industrial sector). practical implications. the analysis of the essential meaning of the concepts of “economic nationalism” and “economic patriotism” by many classification criteria enables to argue that these categories have a high potential of solidarity. the analysis gives grounds for practical conclusion that economic nationalism meant to form a powerful state that sets up economic priorities and pursues the respective economic policy. according to economic nationalism, the market cannot be self-regulated; moreover, because powerful economies “regulate” the global market for their own advantage, a national state needs to correct market relations. value/originality. therefore, economic nationalism can be understood not only in its essential meaning but in its political context as well. independence as a political goal needs to be distinguished from self-sufficiency as a by-product of policy focused on other objectives. thus, tariff protection for some industries, introduced to hide political intentions to cut high competitive imports from a country of their origin, will enhance the country’ independence in a direct way. but autarchy is not a direct goal of the tariff protection policy. we determined that liberal economic patriotism is a response to deformation of the classical credo of liberalism “laissez-faire”. key words: economic nationalism, economic patriotism, protectionism, neo-protectionism, economic policy. jel classification: f5, f52 baltic journal of economic studies 275 vol. 4, no. 4, 2018 1. introduction in fact, economic patriotism is not a recent invention; it is rooted in the antiquity, the medieval times, and the modernity. its feature is “realism” or “common sense”, which can also be its other denotation. the principles of this paradigm were already elaborated by mercantilism when there were no economic theories, but the only practical effort of the state and business leaders focused on the development of domestic economies. however, quite many scientists question the ability of nationalism to encourage democracy and modernism. the functions of nationalism in the process of social modernization, highlighted in scientific literature are as follows: the leading role in consolidating citizens, to implement national development objectives; modernization in its broader sense; compensation of losses suffered by a nation from the past experiences, and from inevitable problems faced by a nation in course of modernization. these conclusions are relevant mainly for post-colonial countries where nationalism has to face external influences and domestic patriarchal tribalism at the same time. it follows that nationalism is a leading social idea, by use of which the state has to adopt novel civilization principles. it should be noted that we firmly believe that a nation state is no longer valid in the globalization era, being a hostage of transnational capital. methodologically the capitalism fails to assess the global situation from real perspective, because it has to be replaced by methodological cosmopolitism, which subject is the global community, but not its selected clusters located within the boundaries of “nation states” that are no longer national, being transformed into temporary “gateways” for transnational corporations. we are going to make an analysis of the concepts of nationalism, represented by four paradigms: modernism, primordialism, constructivism, and perennialism. the theory of modernization offers the extensive and comprehensive review of nationalism and democracy as political trends in the global socio-political process, and of the controversies in their interactions. it is argued that nationalism as an ideology encourages the creation of a nation-state that would subsequently undergo modernization. advocates of this opinion believe that nationalism will appear as an anti-modernistic and promodernistic phenomenon at the same time if addressed in the indissoluble unity with its social carriers acting in specific historical processes. at early phases, primordialism developed as a part of the anthropological school. primordialists believe that nations existed throughout the whole historic period. in their arguments, they rely upon a lot of evidence to the existence of “pre-modern” nations. yet, it is not quite capable to explain the historic phases when national feelings were compromised to religious regional factors. according to primordialism, nationalism is conditional on certain mystic stances that are not always rational, rather than on the functional needs of a society. according to constructivist beliefs, nationalism is objectively determined by economic realities and by the system of ideas born in 19 century. modernism exists in two forms: chronological and sociological. according to the first one, nationalism as an ideology, a movement, and a symbol is a relatively new phenomenon; according to the second one, nationalism is also a radically new phenomenon. according to the second form, nationalism is a novelty, but not a modernized species of something old. nothing like this had ever existed. because it is not a routine issue of the continual movement of history, it is a phenomenon born by an ultimately new era and new conditions. nationalism is a product of modernity. this argument per se means the real modernism. yet, not only nationalism per se is modern, but also nations, national states, national identity, and the whole “international” society. they all, according to a modernist, are new not only chronologically, but brand new. from 19 century till the 1940s, many scientists were adherers of one or another version of perennialism. it was partly due to the popular equalization of “race” and “nation”, with the term “race” denoting a cultural group of autonomous origin rather than inherited and invariable biological features and genes (i.e. what can be replaced today by the term “ethnical belonging”). perennialism was also inspired by the idea of society’s development, with its emphasis on gradualism, staging of progress, social and cultural accumulation. the vision of nations as collective examples revealing genuine signs of gradualism, development, and accumulation was a simple and even natural matter, especially for ones fond of organic analogy. however, it should not be overlooked that, first, the above functions cannot be realized without essential deviations from already established perceptions of democratic norms and procedures; second, when nationalism relies on nation-specific traditions, they will come contrary to objectives of modernization. some researchers add “democracy”. we are convinced that at the early phase of the post-colonial country’s development the problem of modernization and democracy cannot be dealt with, especially when a country, such as ukraine, has internal and external military conflict (panchenko & reznikova, 2017). the situation in ukraine is a vivid case of the gap between fundamental principles of freedom of speech, mass media standards, freedom of political opinion, on the one hand, and real social practices established in the conditions of confrontation. 2. analysis of recent research and publications practices of nationalism are considered in scientific literature in the latter half of 20 century as an attempt to explain nationalism by its impact on the development of baltic journal of economic studies 276 vol. 4, no. 4, 2018 society and its institutes. earlier, the prevailing opinion was that nationalism had spread in 19 and 20 century as a result of the coming industrial era triggering dissemination of ideologies and knowledge meant to substantiate theoretically the new social system (cohen & zysman, 1987). the concept of economic nationalism, formulated at the intersection of several intellectual schools, became rather a tool for interpretation than a full-fledged theory. as some theories of nationalism overlook economic grounds for state building, and others are not confined to the economy, it is too difficult to distinguish ones that could be classified as theories of economic nationalism. yet, analysis of their essential characteristics shows that the paradigms of perennialism and constructivism attempted to define the vector of the economy’s impact on societies and vice versa. w hile advocates of perennialism were defending the idea that economic development was conditional on the social development, and insisted that only a developed society could give impulse to economic development, adepts of constructivism, on the contrary, argued that economic ideas (development, fighting inequality, expansion) laid the fundament for renaissance of the national idea. however, once the objective is set to define the outstanding features of these theories, the most representative arguments should be analysed, articulated by t. nairn (nairn, 1997) and e. gellner (gellner, 2006), because in their works the economic dominant of nationalism is irrefutable. for t. nairn, the mainstream factor behind economic nationalism is uneven development. w hen referring to it, the author approaches the structuralist interpretation of “dependence” as a lack of “true” independence from the impact of other countries, caused by a number of internal and external factors. these factors are often referred to as “structural deformations”, in view of the impact of the international capitalist system on local economies and, through them, on the distribution of commodities, services, and wealth. therefore, the principal objective of economic nationalism, according to t. nairn, is to discover and stimulate internal drivers for economic development, not conditional on the impact of external factors and capable of causing gradual convergence of incomes with rich countries. е. gellner (who was a political economist) builds up his theoretical construct on the assumption that industrialism can have the determinant role in the economic development. it is true that industrialism per se is important for him in view of the enhanced conditions for development and homogenization of culture, because the industrial society, being mobile by origin, forms the demand and robust functional requirements for culture. so, economic nationalism, according to е. gellner, is dictated by the need to secure the required conditions for building the state into the global coexistence so that the state can acquire the attributes of an actor in international relations. in е. gellner’s interpretation, nationalism acts as a political principle that calls for the coincidence of the national unity and the state. е. gellner considered nationalism as an ideology caused by the society’s transition from agricultural mode to an industrial one. at the same time, nationalism is a movement towards unification of education systems, to introduce industrial standardization (workforce included) and build up the integrated area of education and science. it should be noted that his work “nations and nationalism” was severely criticized by modernists (heilperin, 1980). in the article “homogenisation, nationalism and war: should we still read ernest gellner?” d. conversi (conversi, 2007) criticizes the author for overlooking nationalism as a militarist ideology. he highlights the link between nationalism and the growing aggressiveness of a state. other researchers argue that nationalism permeates all the walk of public life, strengthening it in a way in policy, economic and security terms, and associate it with the instrument for achieving the goal, formulated by the state’s elite (crane, 1998). the goal can be individual and group interest (attaining the power by social groups or redistribution of resources) or social interest (development, strengthening of the state). it should also be remembered that nationalism, like any other ideology, provokes a society for narrow discourses, limiting the broader social discourse. it can be born in mind that for nationalism, a society can exist only in form of the nation state; nationalism forms the methodology for social studies and stimulates competition between nation states as comparable formations. l. greenfield (greenfield, 2001) argues that nationalism has laid the background for economic growth, forced governments to compete in order to assure welfare growth of their nations. in the work “the spirit of capitalism: nationalism and economic growth”, she outlines two issues concerned with the immediate reason for the rise of the modern economy with orientation on growth, and factors that put the economy in focus of the modern ideology. l. greenfield distinguishes between the types of nationalism with various economic performances. as the principles are radically different, forms of socio-political organization of the state are different, too. as a nation is interpreted as a consolidated or unitary community, criteria of nationality can be civil or ethnic. these variables (theoretically, they can exist in four combinations) create three types of nationalism with the respective forms of nations and national identities: individualistic civil, collectivist civil, and collectivist ethnic. these types had different impacts on the development of nations-states. baltic journal of economic studies 277 vol. 4, no. 4, 2018 3. the purpose and methodology of research as can be seen from the above analysis, according to the methodology of economic nationalism, the state is the central agent of a nation, the carrier of its interests, and the source of means for their implementation. this conclusion enables for setting the ambitious task, to rediscover the features of economic nationalism in economic theories (mercantilism, keynesianism, classical school) and economic policies, which, once implemented in practice by outstanding policy men, will enrich the terminology by new concepts synonymic to the concept “economic nationalism”. yet, our objective is to find out, if “nationalism” in the policy of economic nationalism has the same essential features as “nationalism” in the paradigm of nationalism. what kind of actions taken by politicians or government officials can be interpreted as ones that are ideologically close to economic nationalism? has the concept of “nationalism” in our days the same colouring as it had hundreds of years ago? the analysis of selected theories will allow for outlining the most essential characteristics, along with identifying the ones laying the fundament for economic nationalism. 4. economic nationalism vs economic patriotism new economic nationalism of the middle of 20 century has several sources: one of them is obviously mercantilism; another one is the teaching about “national isolation”, which, if the ideas of aristotle are put aside, originated from johann gottlieb fichte. the mercantilist tradition includes elements that can hardly be rediscovered in the primary form in the contemporary world (such as colonialism), but regulation of payment balances and seeking for total employment is the reality of our days. economic nationalism was a product of its era, as it provided the states implementing it with an effective tool for achieving economic growth and, most importantly, for strengthening the global position. built on ideological grounds, economic nationalism featured the expansion dominant determining the means to achieve the objectives (reich, 1991). although it was erroneously considered by some researchers as the supreme form of protectionism mainly due to the prevalence of tariff instruments for the regulation of foreign trade, it was not confined by the impact on foreign trade and became the backbone for development strategies aimed at achieving economic security (bhagwati, 1988). the liberal background of globalization did not so much deform the existing capacities of economic nationalism and the specifics of its implementation, as it determined the gradual transformation of its essential forms. the movement towards integrative interactions at the global and regional level, accompanied by the liberalization of flows of goods, capital and workforce, the increasing demand for coordinating policy of governments and pressures from regulatory carcasses of supranational institutions are factors that raise the importance of finding versions of national selfaffirmation, an alternative to economic nationalism. innumerable numbers of interpretations and definitions of priority sectors and their conscious development by way of dichotomies “stimulation – expansion” or “protectionism – free market” appear with time. economic patriotism has become a new version of economic nationalism, as it replaced protectionism as a principal instrument of foreign economic policy by a broader instrument of influence, neo-protectionism. economic nationalism and economic patriotism have a similarity: in spite of the common adjective “economic”, they have always gone beyond the boundaries of economic regulation, being a response on “political order” of the time. 21 century offers a lot of evidence to confirm the above thesis. elements of the economic nationalism policy have been demanded by state power officials as a kind of response on the awareness of market failure in striking a new balance in the conditions of the imbalanced global economy, with the growing competition and the shrinking global trade. economic patriotism is considered not a frenchspecific phenomenon, but a broader tendency of modern developed economies. economic patriotism goes far beyond the boundaries of “industrial patriotism” (which at the time was widely used in u.s. and france), and it has a broader political and economic significance in the current economic policy of developed countries due to persistent contradictions occurring in capitalism of 21 century. the brightest example of a carrier of ideology alternative to the universalist “free trade” is donald trump, whose protectionist rhetoric in course of the election campaign, although being his personal “trump card”, was nevertheless perceived by the global economic elite as a troublesome attempt to get attention. however, this frank position calling for support to domestic market capacities given the shrinking total demand does lay a powerful trend in international economic relations in the forthcoming decade. the trump’s hoodoo does not matter here, because waves of protectionism and liberalism have alternated for centuries, signalling the cyclic recurrence in the economy. economic patriotism is based on the opinion that interests of the home country have a higher weight than individual interests of corporate and political elites or mythic objective of the global economy’s development, which makes it more similar to economic nationalism. although economic patriotism in its original french use is labelled as “loud political initiatives designed to shake public opinion”, it can also be accompanied by political debate, which demonstrates its veiled and semi-opened nature, because it falls under classical manifestations of protectionism, fixed in wto documents and coloured in baltic journal of economic studies 278 vol. 4, no. 4, 2018 negative tones. european investment in r&d associated with strategic industries was considered as a driver for r&d performance and strengthening, in order to build new “european champions” in the industry (artificial priority setting with the respective stimuli, to cultivate potential “champions”, is, perhaps, the greatest heresy in the free market world). in response, the european commission blamed french policy men for their failure to promote the european neo-colbertism in spite of blowing up neo-mercantilist themes in mass media. 5. alternative forms of economic patriotism to eliminate the risks of terminological confusion, in table 1, we are going to give the essential meaning of alternative concepts “authoritarian patriotism” and “democratic patriotism”, which are not a background for economic patriotism. economic interventionism has never disappeared, even in countries stubbornly supporting market liberalization. in 2005, dominique de villepin, the then french prime minister, called the right of national governments to defend own interests in integrated markets “economic patriotism”. economic patriotism, originating from f. list’s economic nationalism (list, 1909), argues that economic choice should be based on the interests of each country. the renewed attention to this concept in the lexicon of political elites before “great recession” of 2008 shows in-depth and obvious contradictions between the objectives occurring in course of increasingly stronger integration of international markets, on the one hand, and of local governments’ capacities to propose their solutions, on the other (henderson, 1983). in the world with a wide range of economic management regimes, politicians encounter what is aptly called by colin crouch “paradox of neo-liberal democracy”. the objective of politicians as national leaders is to secure political and economic interests of their citizens in the conditions of complex relationships between economy, law, and regulation when the lion share of economic management is no longer a subject to their exclusive control. this raises the importance of finding alternative strategies of economic policy. b. clift and c. woll (clift and woll, 2012) examine economic patriotism through the prism of searching for compromise approaches to finding consensus between abstract global economic objectives and political commitments of governments on each territory. it allows for interpreting economic patriotism as the one with positive effects for social groups, companies, and sectors which, in the opinion of local politicians, can be referred to as so-called “insiders” due to their location (in the u.s. this approach is articulated by the slogan “buy american”, in u.k. – “british jobs to the british”, in germany – “priority to german investors”). economic patriotism takes forms of economic partiality: the desired market is the one built in a way to secure a privileged position for certain actors. contrary to economic nationalism, economic patriotism does not confine economic entities to ones with domestic residence (domestic business), because privileges cover both supranational and sub-national levels of economic agents. b. clift and c. woll outline two features of economic patriotism. first, economic patriotism, like economic nationalism, is based on connection to a territory in building up political and economic area, and not to a specific political context. although table 1 the essential meaning of alternative forms of patriotism authoritarian patriotism democratic patriotism ideology – the belief that one country is better than the rest of the countries; – blind loyalty to the land and citizenship by the fact of birth; – blind acceptance of the government’s actions; – reflex adherence to leaders and their blind support; – conscious ignoring of drawbacks in the social system and social confrontation in a country; – conformism: – dissidence is considered as a threat with destabilizing effects. – the belief that the ideals of one country are worth to be taken with enthusiasm and respect; – blind commitment to principles underlying democracy; – questioning of decisions, critical view of things, and relative loyalty; – respect and care of people in the society based on certain principles (such as freedom or justice); – sincere condemnation of drawbacks existing in the national economic system; – respect for alternative opinions and encouragement of dissidence. slogan this is my country, good or bad. america: love it or leave it. defiance is unpatriotic. you have the right to speak out. historic cases the era of senator mccartney voting in chamber of representative. sessions of the house un-american activities committee, which strengthened opinion that to have anti-american stance means to be unpatriotic. powerful arguments of paul robinson, pete seeger and others at sessions of the house un-american activities committee, who scorned the committee members for the outward propagation of american stance. contemporary cases equalization of opposing views of the war in iraq and hatred to america or support of terrorism. strengthening of american principles of equality, justice, tolerance or civil freedoms. source: clift, b. and woll, c. (2012). economic patriotism: reinventing control over open markets. journal of european public policy, 19(3), pp. 307-323 baltic journal of economic studies 279 vol. 4, no. 4, 2018 liberals have long associated economic patriotism with “irritant” and “violator” of economic rights and competition, considering economic patriotism as a concept synonymic to protectionism, this approach is not adequate, because it overlooks importance and multifaceted meaning of this phenomenon, which features are largely conditional on country or region. moreover, it does not allow for adequate analysis of cases when officials use liberal economic policies to pursue selective strategies, in order to support interests of the so-called market insiders. second, although economic nationalism exists so long as the national state, we can observe the occurrence of its new features along with the transformation of national sovereignty, which is accompanied by erosion of the state and its institutes. economic patriotism contributes to reconfigurations of global management and interdependence of markets, required as a result of the crisis caused by 30 years long massive economic liberalization after the fall of bretton wood system in 1978, deepening of european integration in the 1980s and the collapse of communism in 1989. the use of the term “economic patriotism, contrary to “economic nationalism” or “neo-mercantilism”, gives vivid evidence of different sources for patriotic intervention in the economy. economic patriotism had the implicitly protectionist character in the era of its initial heyday, seeking to protect “young” (as f. list puts it) sectors of the economy by tariff policy and shield them from the pressures of foreign competition (levi-faur, 1997). economic patriotism takes on to care about the economic sectors which, if stimulated and supported, would be capable of generating impulses for economic growth across the national economy, but it uses hybrid regulatory instruments adaptable to the liberal conditions dominating in the global economy. however, instruments of any approach when used in their pure form (mercantilist, or listian, or keynesian) will be incompatible with the conditions of countries’ coexistence, generated by the contemporary phase of international economic relations. the increasing shares of manufacturing industries (by keynesian and mercantilist approaches), protection of new industries and enterprises, their support in enhancing export capacities and encouragement of industrialization process (listianists), implementation of policies focused on stimulating total demand with consideration to its ecological effects (keynesians) can well be fitted into the realities of our days and reflects ideological principles of economic policies in oecd countries (see table 2). the analysis of selected theories allows for outlining the most essential characteristics, along with identifying the ones laying the fundament for economic nationalism (see table 3). a classification attempt to synthesize various approaches and reflect volatile tendencies more often will be subject to critique. however, types, forms of manifestation, and levels of implementation of economic patriotism underline dynamic rather than the static character of this concept (see table 4). 6. conclusions while the instruments of conservative economic patriotism include classical protectionist measures (in full conformity with the ideology of economic nationalism) aimed at domestic protection for further expansion, and the capacities of protective regionalism are used (when it is pursued by regional associations table 2 theoretical background of economic patriotism as economic nationalism of 21 century mercantilists: – growth in the shares of manufacturing industries listianists: – protection of new industries and enterprises that are weak in the competitive environment; – stimuli to the industrialization process; – the reasonable intervention of the state, capable of coordinating the required processes and set up the required rules of the game, etc. keynesians: – setting up redistribution policies, policies for support of demand, consideration for ecological aspect. source: compiled by the authors table 3 essential characteristics of economic nationalism from economic theories perspective mercantilists listianists, the teaching of f. list keynesians – strong and independent industry; – development of factories; – increase in the share of manufacturing industries; – financing of enterprises from the public budget; – production regulation (creating public enterprises) – protection of new industries and enterprises that are weak in the conditions of competition; – importance of collective ownership; – the functional role of the state as “energy catalyst” (government intervention is required in course of industrialization, to coordinate the involved process, set up the rules of domestic game etc.) – autonomy of national economic policy; – priority of national finance; – the coherence of social justice and economic efficiency; – setting up of redistribution policy, demand support policy, consideration for ecological aspect). source: compiled by the authors baltic journal of economic studies 280 vol. 4, no. 4, 2018 that have a supranational regulatory body), liberal economic patriotism is implemented by the use of neoprotectionism instruments that are not confined to regulation of foreign trade but focused on stimulation of economic activities by the use of capacities of internal demand and stimuli to supranational industry (which should not be confused with the industrial sector). liberal economic patriotism is a response on deformation of the classical credo of liberalism “laissezfaire”. it should be emphasized that the principle of government’s non-intervention used to apply to economic relations only, to set up the internal and external balance. in times of classical liberalism (17 to 19 centuries), the social sphere was out of the regulatory focus or was essentially limited. in the contemporary, “etatism”, a form of liberalism, the idea of regulation of the social sphere becomes dominant, and its “laissezfaire” form of 21 century (the end of 19 till the beginning of 21 century) helps rethink the role of the state, with regulation becoming socially oriented. however, it should be born in mind that the contemporary liberalism has spread “liberal credo” far beyond the boundaries of economic freedom. furthermore, while conservative economic patriotism had a protective character by origin, liberal economic patriotism has acquired expansionist features through the ramified instruments of neo-protectionism, which modify the ideology of economic nationalism by enlarging its scales. it allows regional associations to move toward extensive forms of integration and encourage the creation of national tnc for conquering markets. it is a supranational level where the reference can be made to distinctions between protection of existing advantages from domestic production and creation of local advantages when integrating into various markets, by creating tnc in particular. can stimuli to create domestic tnc be a manifestation of economic patriotism? it is a contentious issue. we are, however, convinced that in this context stimuli to create national giants with transnational power, controlling the lion share of global markets, should better be diagnosed through the prism of economic nationalism as an ideology acceptable for leading countries of the world. the unbiased analysis of table 4 shows that the classification is based on the character of the so-called government interventions, varying by adopted policy and by the instrument for its implementation (support for domestic economy or expansion). in other words, while in conservative economic patriotism the state acts as an entity that has to face the challenges originated from outside, in liberal economic patriotism the state, apart from being positioned as an entity reflecting the existing realities of interstate dialogs in its policy or responding on the conditions of supranational regulation, is an active actor in priority setting. the policy of liberal economic patriotism can well be fitted into the landscape of market fundamentalism because it does not go contrary to its founding principles in seeking to eliminate market imperfections (failures). it needs to be admitted that liberalism in foreign trade policy is a result of, but neither a reason for the effective internal economic policy of the state nor the main alternative of protectionism. these conclusions are fully confirmed by eu practices: although national forms of protectionism are not welcome by the single european market, government intervention can be considered as an ancillary instrument of liberal economic patriotism and liberalism in the economy (especially in the context of the proclaimed policy of re-industrialization or “new industrial policy of eu”). the legacy of mercantilism, which was naturally “blended” into ideological principles of economic nationalism, encompasses: (1) cautious planning of payment balance instead of allowing it to be balanced by its own. (2) the increase in domestic employment by limiting imports and stimulating exports. (3) cautious regulation of structure and scopes of exports and imports (and financial operations that had a minor role just before 19 century). (4) various practices of protectionism and visible scraps of the idea that it is better for a country to export than to import. (5) the opinion that it is better to buy from one who consumes his goods had rather small significance in the mercantilism doctrine, but today it has broadened and turned into “principle of bilateral relations.” (6) the thesis that foreign economic relations need to rely upon political necessity rather than individual decision. table 4 types and economic patriotism and its implementation methods at supranational and national level types of economic patriotism liberal economic patriotism conservative economic patriotism l ev el s of im pl em en ti ng ec on om ic pa tr io ti sm supranational economic patriotism strategic regional integration protective regionalism form s of m anifestation local economic patriotism implementation of liberal policies promoting the formation of supranational companies protection of national producer source: compiled by volodymyr panchenko on the basis of: clift, b. and woll, c. (2012). economic patriotism: reinventing control over open markets. journal of european public policy, 19(3), pp. 307-323 baltic journal of economic studies 281 vol. 4, no. 4, 2018 the analysis gives grounds for the conclusion that economic nationalism meant to form a powerful state that sets up economic priorities and pursues the respective economic policy. according to economic nationalism, the market cannot be self-regulated; moreover, because powerful economies “regulate” the global market for their own advantage, a national state needs to correct market relations. therefore, economic nationalism can be understood not only in its essential meaning but in its political context as well. independence as a political goal needs to be distinguished from self-sufficiency as a by-product of policy focused on other objectives. thus, tariff protection for some industries, introduced to hide political intentions to cut high competitive imports from a country of their origin, will enhance the country’s independence in a direct way. but autarchy is not a direct goal of the tariff protection policy. the retrospective analysis allows stating that the implementation of economic nationalism policy was backed by the following arguments: (i) seeking for as much independence as possible, from the resources that are out of the country’s control, in order to be strong in a potential war. for a major part of governments considering the feasibility of aggressive military actions, autarchy was a prelude for the conquest. (ii) seeking for higher product diversification and a more balanced national economy. the diversification was considered as a means to enhance the national welloff and the national power. yet, although such policy was often seen by its advocates as a temporary one, it might be lasting. (iii) seeking to plan domestic economy as independently as possible in the global economic conditions. here autarchy turns to policy, either of economic isolation or, at least, of economic isolationism. yet, the three outlined intentions in implementing economic nationalism have obviously been obsolete and they cannot be relevant for today. for a better understanding of the modern interpretation of “economic nationalism”, it should be born in mind that in the world divided into a number of independent countries, policy per se is always national. it is national not only because it is pursued independently from policies of other countries but also because the national policy of various countries (some countries or all countries) is coordinated and harmonized with each other. it may seem obvious but it must be realized because the policy is national policy if even it is a product of international agreement. references: abdelal, r . (2001). national purpose in the world economy. ithaca: cornell university press. bhagwati, j. (1988). protectionism: the ohlin lectures. cambridge ma: mit press. cohen, s. s. (1991). crossing frontiers: explorations in international political economy. boulder, co: westview press. cohen, s.s., zysman, j. (1987). manufacturing matters: the myth of the post-industrial economy. new york: basic books. conversi, d. (2007). homogenisation, nationalism and war: should we still read ernest gellner? nations and nationalism, 13(3), 371-563. clift, b., woll, c. (2012). economic patriotism: reinventing control over open markets. journal of european public policy, 19(3), 307-323. crane, g. (1998). economic nationalism: bringing the nation back in. millennium, 27(1): 55-76. gellner, e. (2006). nations and nationalism. oxford: blackwell publishing ltd. gilpin, r . (1987). political economy of international relation. princeton: princeton university press. gilpin, r . (2001). global political economy. princeton: princeton university press. greenfield, l. (2001). the spirit of capitalism: nationalism and economic growth. cambridge, massachusetts and london: harvard university press. heilperin, m. (1980). studies in economic nationalism – geneva: publications de l'institut universitaire de hautes etudes internationales. henderson, w. (1983). friedrich list: economist and visionary 1789-1846. london: routledge. levi-faur, d. (1997). friedrich list and political economy of the nation-state. review of international political economy, 4(1), 154-178. list, f. (1909). the national system of political economy. london: longmans, green, and co. nairn, t. (1997). faces of nationalism. london and new york: verso. reich, r . b. (1991). the work of nations: preparing ourselves for 2lst-century capitalism. new york: knopf. baltic journal of economic studies 173 vol. 4, no. 4, 2018 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: t_deputy@ukr.net 2 national pedagogical dragomanov university, ukraine. 3 zaporizhzhia national university, ukraine. e-mail: prorektor.znu@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-173-180 bonus for a public servant – is it scheduled raise to official salary or effective method for motivation? there should be regulatory “filters” for its use tetiana kolomoets1, valentyna stetsenko2, serhii kushnir3 abstract. the purpose of the paper. search for the best motivation means for fruitful, efficient, and high-quality service activities of public servants requires in-depth study of those resources which are traditionally “associated” with public service. traditionally, bonus for public servants still remains one of these kinds of means which is linked with the “distinguished”, “over-productive” official activities. methodology. comparative and legal analysis of “bonus” laws of countries across the world shows the difference in consideration of the role and purpose of an award in the modern public service, which contributes to the defeat of its real resource, false identification with the “scheduled”, “regular” pay for labour, along with other components of the latter, which does not depend on “achievements” in the official activities. results. the author, on the basis of comparative legal research, substantiates the need to model the results of “bonus” rulemaking and enforcement of unified “rule-making filters” in different countries of the world for the targeted use of reward as a means to encourage public servants for the effective, efficient, and high-quality official activities, which is the purpose of the article. it is expedient: a) to define a bonus at the regulatory level as a means of encouragement and harmonization of related subject-matter legal terms; b) to differentiate two types of bonuses for public servants – according to the results of annual efficiency rating of person’s official activities (“effective”, “valuation”) and the bonus as a type of encouragement as a whole (“general”, “common”); c) “standardization” of the bonus amount for public servants, namely: “valuation” (“effective”) should be in percentage (twenty percent is proposed) to the annual salary of a person who received an excellent grade on the basis of annual evaluation, “general” (“common”) as a means of encouragement related to “achievements” of a public servant in official activity, “within rate” (from minimum to maximum) with “binding” to the official salary (it is proposed from one to two) of a public servant; d) to introduce regulatory “filters” of bonus frequency towards “common” (“general”) type due to the mandatory adherence to requirements for the application of encouragement means for a public servant in accordance with their consolidation in a unified list, which makes his “constant” bonus awarding impossible; e) intensification of the principles of transparency, publicity, openness, control over “bonus procedure”, elimination of the prerequisites for a broad manifestation of the discretion of subject who makes a final decision (with the introduction of principles for the division of powers on initiation and final decision, the approval of a draft decision with the public, etc.) on the bonus reward for a public servant. practical applications. under the conditions of practical application of the abovementioned recommendations, it is quite possible to use bonuses as means for stimulation, encouragement to fruitful, effective, and qualitative official activity of public servants, a real means to improve public service in general. key words: public service, public servant, bonus, salary, encouragement, “regulatory filter”, legislation, assessment, bonus pay, achievement. jel classification: d31, e24, j31, k00 1. introduction under conditions of the search for the best means of influencing public servants in order to increase the effectiveness, efficiency, and quality of their activities, which in the aggregate will contribute to modernization of the public service as a whole, the attention of the interested community focuses on those resources, which despite their close connection with public service, over baltic journal of economic studies 174 vol. 4, no. 4, 2018 the lack of unified regulatory standards, are used in different ways and sometimes in diametrically opposite manner. among such means, it is quite possible to distinguish a bonus, the use of which can be traced in “reference” to public service since ancient times. a bonus has been “accompanying” public service for a long time, so it is hard to imagine that this kind of means for stimulation of official activity will not exist in future. indeed, the bonus is traditionally considered as a motivation means for effective, efficient, highquality official activities of individuals as a means of encouragement for special achievements in the process of official powers’ performance by these subjects as a “basic form of additional remuneration” for these individuals, taking into account a small amount (and sometimes even scanty one) of position salaries, which forms the salaries of public servants. all of this indicates that the resource of bonus in public service is used in its entirety, and priorities of the development of public service as a whole and in particular predetermine regulatory consolidation and principles of bonus pay in different countries, which in turn contributes to the variety of legal background and practice of its application to types diversity, grounds, bonus rates for public servants, bonus procedures. consequently, in different countries bonuses for public servants can be used not only and not much as means of stimulation for their official activities but as means of enrichment, as “scheduled pay-outs” to a salary rate, which wind down the essence and purpose of a bonus in public service. the analysis of legislation of different countries shows that, unfortunately, there are no unified legal standards on bonuses use in public service, which leads to the emergence of numerous cases of bonuses award to public servants exceeding amount of collective (full, annual) position salary of public servants of the whole structural unit of a relevant body and the whole body several times (and more) that cannot serve as the basis for adequate response from the community, the appearance of resonant public investigations, and so on. at the same time, there are prerequisites for a subjective discretion of the person who decides to award public servants, as well as who of them receives a bonus, its amount, and how often public servants can receive different types of bonuses. this contributes to the fact that a bonus in the public service can be used not only as a means of reward for special achievements in the official activities, as a result of high efficiency and quality of activity, which is confirmed in the course of annual assessment of a person’s official activity, but also as a means of “scheduled supplement” to the position salary of a person regardless of the results of his activity and even as a means of his enrichment. this state of affairs necessitates an analysis of the legal frameworks of bonus use in public service in different countries. and according to the determination of priorities, the formation of unified “regulatory filters” for their implementation in national legislation to ensure bonus use in the public service solely as a means for the stimulation of a fruitful, effective, and qualitative service activity, which eventually will promote improvement of the public service as a whole. this is the article’s purpose. the range of problems of bonus-resource use in the public service attracts attention as representatives of the academic community (for example, consideration of this issue in terms of salary of public servants in general (rudenko, 2011); (ahentaieva, 2011), annual efficiency rating of persons and the search for adequate responses (danylenko, 2011); (bozhia-volia, 2009); (kononov, 2011), encouragement in civil service law (korovaiko, 2013); (seletskyi, 2013); (kolomoiets, tytarenko) 2018), etc.), as well as subjects of lawenforcement activity (for example, consideration of the problem in the context of unification of legal positions regarding bonus award in the public service (khokhlov, 2018); (sheshuliak, 2017); (petrovets, 2017). the interest is caused by the fact that there are sources whose provisions are devoted either to the analysis of experience in solving this issue in one individual state (vorobiova, panyna, 2014); (bekkuzhyn, ybraeva, 2015) or in several states (horetska, 2009); (iuzhanov, dobroliubova, tatarynova, shchukyna, 2015). at the same time, unfortunately, there are no papers that cover a generalized analysis of statutory regulation and practice of application of legislation on bonuses in the public service with the formulation of proposals for the unification of “filtration” for the bonus use in public relations that actualizes article’s topic, its scientific and practical significance. the use of the comparative-legal method of research facilitates to identify the specific character of bonus use in public service of different states with the normative consolidation of its principles, which, in turn, permits to highlight disadvantages and advantages of the latter. and with the help of synthesis and modelling as scientific research methods, it is possible to formulate proposals for the unification of “regulatory filters”; their implementation in national legislation ensures the use of bonus resource in public service as a means for stimulation of the activities of public servants and the elimination of any other manifestations of such use. 2. the statutory definition of the term “bonus” in the regulation of public service relations first of all, it is necessary to begin with the point, what exactly the legislator understands when uses the term “bonus” during formulating regulatory provisions for the regulation of public service relations. the analysis of available regulatory sources shows that, generally, the legislator uses several terms for its notion: “award”, “bonus”, “pay”, and “payment”. thus, in particular, the “award” (премія) is quite widespread in the legislation of ukraine, the russian federation, the republic of belarus, the republic of lithuania, the republic of estonia, the hellenic republic, new zealand, etc. baltic journal of economic studies 175 vol. 4, no. 4, 2018 “bonuses”, in turn, are traditional for the laws of the united kingdom of great britain, northern ireland, the republic of france, the kingdom of the netherlands, the republic of singapore, the republic of south africa, etc. somewhat generalized terms “payout”, “payment”, “single cash payment” can be found in the legislation of many states, the analysis of their provisions indicates that these terms are used in some cases as synonyms for “awards”, “bonuses” (for example, the hellenic republic, the republic of france, or as general terms for any cash payments to public servants, including both encouragement, and as an additional payment to the official salary, and as an allowance for performance of additional tasks. indeed, the use of the term “payout” (“payment”) for denotation of the award is not justified, as it does not permit to distinguish its specific character among all the diversity of “cash receipts” for a public servant, it contributes to their erroneous identification with extra pay, increments and other components of salaries (however, there are papers, which consider them as components of payment for labour, and it is proposed a clear differentiation between the use of terms “salary” and more general “payment for labour” as well as towards the public sector of official legal relations) of a public servant who, in their turn, do not provide for a direct connection with “unique features” of the official activity of a person, which serve as the basis for making a decision on the reward. a reward should be directly associated with a person’s “service achievement” in order to respond adequately to it and motivate the person, as well as by virtue of his example and other public servants, to the same “excessive”, “unique” future service. moreover, the “achievement in official activity” determines the reward amount to ensure an adequate reaction to “resource expenses” of a public servant, while additional payments and salary increment, as a rule, are generally standardized without taking into account “personal attitude”, their amounts are clearly defined and do not depend on the special aspects of the external forms of manifestation of the official activities of public servants who, according to the law, have the right to establish such additional bonuses and increments. for most of the states, it is typical to use the terms “reward”, “bonus” in the legislation (in some cases, it is even possible to find simultaneous use of “reward (bonus)”, “bonus payment (reward)”), the analysis of the provisions, in which they are fixed shows that, despite their external difference, these terms are used as synonyms, which is due both to the specificity of the etymological, content-related meaning and the particularity of the linguistic denotation of one and the same phenomenon (for example, english – bonus, prize, ukrainian – премія, russia – премия, german – prise). using the appropriate terms, a legislator of different states denotes through them “the main form of additional remuneration of public servants”, “a kind of reward based on the results of a public servant’s excellent grade in the annual assessment of his official activities”, “a means for the stimulation of initiative, effective, official activities”, “incentive for special achievements in the official activity”, “incentive for long-term flawless official activity”, etc. consequently, it is possible to distinguish conditionally several priorities of the prize use in the public service with the normative consolidation of the relevant principles as follows: a) as a kind of encouragement with the consolidation of a bonus in the general list of incentives in a special legislative (including unified) act on public service and possible specification of the relevant provisions in acts defining a specific nature of incentives for different types of public service (for example, the experience of some baltic states); b) as a type of remuneration for public servants (as a rule as an additional variety, which is proved by the use of the phrase “in case of establishment”) with the consolidation of normative principles both in a special act on public service and in legislation on labour remuneration and labour law in general, specification of the relevant provisions in by-laws on bonus issues, including the division of various types of bonuses (for example, the experience of ukraine, the russian federation, etc.); c) as a means of stimulation of the activity of persons (“mixed approach”) with simultaneous consolidation of the principles of bonus use in the various regulatory legal acts both as an additional form of remuneration for public servants and as an incentive means for achievements in their service activities, with specification of these provisions in acts that determine specific nature of different types of public service, the use of various means of encouragement, salaries for military personnel, civil servants, municipal officials, etc. as a result, there are a large number of regulatory legal acts, the provisions of which are distinct in different, and sometimes contradictory, opposite content, which complicates the administration of law, including towards resolving conflicts between the provisions of service and labour law when dealing with issues of bonus payment for public servants. under these conditions, the boundary between incentives and remuneration of labour is lost, and the preconditions for an excessive use of reward in the public service as “scheduled payment”, “regular payment”, which will be always regardless of the effectiveness, efficiency, and quality of the official activity of the person who, in his turn, reduces the importance of the bonus in public service as a whole. although this kind of practice of normative consolidation of the principles of bonus use in public service is the most widespread in the world, however, it should be given up and it is necessary to unify the regulation of the principles of bonus award as a kind of incentive procedure in the public service and the use of the prize as a means of encouragement providing the basis for the uniqueness of responding to effective, efficient, and high-quality public service activities, manifestation of initiative, creativity, and achievements of public servants. baltic journal of economic studies 176 vol. 4, no. 4, 2018 3. available types of bonuses for public servants the variety of approaches to the bonus use in foreign countries predetermines the existence of a large number of its types, which permits to increase the number of decisions on bonuses awarding to one and the same public servant for a long time that leads to the depreciation of bonus role for a public servant. thus, the analysis of the legislation of different countries makes it possible to distinguish the following types of bonuses for public servants: a) on the basis of annual evaluation of the results of person’s activities (sometimes it is called “end-of-year”, “effective”), which, in turn, is divided into individual (for example, in the republic of france, ukraine, the kingdom of belgium, etc.) and collective or group, team (for example, in the united states, the united kingdom of great britain and northern ireland, the federal republic of germany, etc.). however, in the case of collective reward based on the assessment of official activities of all servants, body as a whole and bonus amount for every person is determined depending on individual contribution to the achievement of overall results. in this case, it is important that the criteria for determination of such contribution be adjusted, otherwise there are grounds for a broad manifestation of the subjective discretion of the subject of the award, as well as bias, partiality towards the decision to fix a reward for each public servant in the format of a team bonus; b) a monthly or quarterly bonus (sometimes it is called “current”, “regular”) for the personal contribution of a public servant to achievement of a collective result, resolution of a particular public task. this type of bonus is quite common in different countries but it causes problems of law enforcement as the determination of its amount depends on clarification of the contribution of each public servant in the collective service activity in solving a specific task. it is important to understand clearly what kind of contribution was made by a particular employee in order to assess it adequately and determine the amount of his award. moreover, the difficulties may be due to the fact that some public servants can be involved in different groups (working, expert, advisory and other groups, commissions, committees) within one body or their complex for solving various tasks. the significance of their participation in such teams may differ (including relative and absolute indexes of participation, the efficiency of participation, direct and indirect participation and suchlike). an analysis of the legislation of different countries on this issue indicates that the receiver of this type of bonus is empowered with quite wide authority in determining the contribution of each public servant and hence the amount of such bonus and frequency of its award. it serves as a precondition for the wide manifestation of subjective discretion in resolving this very important issue. in order to eliminate such preconditions, it is expedient to standardize the procedure for determining the personal contribution of a public servant to solution of a collective task with the establishment of criteria and indicators for such participation, observance of legislation connected with them should be obligatory when deciding on the appropriate type of bonus reward for public servants. the role and significance of this type of bonus should be gradually reduced by increasing the amount of official salary in the structure of a salary (it is preferable not less than seventy percent) of the public servant and eliminating the preconditions for the reconsideration of a bonus as “scheduled remuneration of labour”. in this case, the reward does not play a role of “bonus for excessive activity” and due to the payment stability, there are signs of “scheduled” remuneration of the labour of public servants, which depends on the discretion of the subject to award a bonus. under such conditions, the bonus can be considered as a means of influence on a public servant by the subject of decision-making on its fixation and as a means of enriching public servants without manifestation of excessive efforts on the part of the latter; c) a prize as an independent type of encouragement that is considered as a reaction to “impeccable performance of official duties” (for example, art. 27 of the law of the republic of lithuania “on public service”), “long service, model performance of official duties or public duties” (for example, art. 79 of the law of the republic of estonia “on public service”), “...a long-term and conscientious service, performance of a task of particular complexity and importance” (for example, art. 74 of the law of the republic of georgia “on public service”), “for outstanding achievements during execution of official tasks” as the basis for obtaining “a call premium” by employees working under contract (for example, art. 76 of the austrian federal law of 1948 on service law and wages of employees working under the contract of the federation), which is manifested in “performance of duties with extraordinary quality and responsibility; display of initiative, communicative, and organizational skills; realization of tasks in difficult conditions and in shortened timelines; mentoring of young colleagues; a positive completion of a large-scale project, etc.” (kolomoiets, kolpakov, 2017), in new zealand, the bonus payment is exclusively a means of encouragement provided for “outstanding results of work and over-performance of efficiency indicators” (vorobiova, panyna, 2014). in the usa, there is the possibility for top-rank civil servants with a long-term successful career for “distinguished service” to be appointed to the “presidential award for civil servants” (kolomoiets, kolpakov, 2017), and there is “achievement award to civil servants” for high efficiency of official activity (kolomoiets, kolpakov, 2017); d) a bonus as an element of “complicated” (“complex”) encouragement, when actually the bonus “supplements” another kind of encouragement and together they form a single “complicated” (“complex”) encouragement for a public baltic journal of economic studies 177 vol. 4, no. 4, 2018 servant. for example, in the usa, there is the possibility to award civil servants with titles “honoured” and “outstanding” for a term of one year with the simultaneous payment of a single bonus in an amount of ten thousand dollars and twenty-five thousand dollars respectively (kolomoyets, kolpakov, 2017). payment of such a prize without awarding an honorary title, as well as on the contrary, is impossible. only in combination, they form a means of encouragement of civil servants. the use of this type of bonus is quite feasible and expedient to ensure an adequate response to various manifestations of the achievements of public servants, however, upon condition of the principles regulation of such use; e) “additional awards” as follows: holiday bonuses, in connection with “important events” in the lives of public servants, “new year’s” (for example, in the federal republic of germany), “for a healthy lifestyles” of public servants (for example, in arkansas (the usa)) there is a bonus payment to those civil servants who “keep a healthy lifestyle” (kolomoiets, kolpakov, 2017), “ministerial” (for example, it works in the federal republic of germany for employees whose activities are directly related to these bodies, although in some scientific sources they are called “ministerial supplements”, which, in turn, is due to the accuracy of the translation of regulatory acts’ provisions), etc. in contrast to other varieties, this type of bonus is less common in different countries, reference to which can be found in the overwhelming majority of certain by-laws on the specifics of a particular kind of public service or on the encouragement of public servants to effective, efficient, and high-quality service activities, acts of local action. this type of bonus for public servants is rather specific, as it is not always directly related to public service. it is entirely justified to consider it as “additional” or “nonbinding”, which depends on the local statutory regulation of its foundations and the availability of sources for payment (alternative or in the case of saving of the salary fund) and has a particularly exceptional nature. 4. necessary regulatory “filters” for the targeted use of bonus in public service thus, all abovementioned shows that the diversity of the format of the bonus use in public service and its legal framework creates the preconditions for a misunderstanding of its role and purpose in the mentioned sphere of public relations, deprivation of its uniqueness as a means for stimulation of effectiveness, efficiency and quality of official activities of public servants and improvement of the public service as a whole, its direct connection with achievements in the activities of public servants, which, in turn, requires taking actions oriented towards eliminating existing shortcomings, rulemaking and law enforcement relatively bonus award for public servants means, and above all, the determination and standardization of “filters” in national legislation for intended use of award in public service. first, it is expedient to consolidate regulatory provision that a bonus for public servants is a kind of means of encouragement for “achievements in their service activities” with the unification of the relevant provisions of national labour and service legislation. a specific nature of the bonus features does not permit to consider it as a kind of “regular”, “current”, “scheduled” remuneration of labour of public servants, and distinguishes it as a means of response to “positive official activity ”, “activities aimed at the effectiveness, efficiency, and quality of public service in general”, “activities related to excessive use of resources of public servants in the course of their activities”, that is, there should be a motivation for public servants for “excessive”, “distinguished” activities as prerequisites for the award. under such conditions, it is expedient to “include” a bonus in the general list of incentives in public service and to consider it as an element of the relevant institution of civil service law and legislation. possible objections to this with the indication that under such conditions, the amount of monthly salary of public servants will be substantially reduced is not justified, as the corresponding gap in the structure of salaries should be renovated by increasing the role and significance of the salary of a public servant in the corresponding structure. its amount should be of such sort that forms at least seventy percent of the salary of public servants (in some countries, its amount is equal to seventy-five percent), the rest of it is formed by different types of wage premium and additional payouts (for rank, for employment period, for the use of foreign language in official activity, for a scientific degree, academic rank, etc.). due to the fact that both the amount of official salary and the amount of all types of bonuses and additional payouts are clearly regulated, there are no grounds for a subjective manifestation on the part of leadership in solving the issue of salary and its use as a “means of influence” on a public servant and his “improper enrichment”. this, in turn, greatly enhances the role and significance of the prize as a means of response to a “distinguished”, “excessive in terms of using a public servant’s resources”, “particularly productive, efficient and qualitative official activities” of a public servant. second, it is worth dividing the bonus as a result of an excellent grade on the basis of the annual assessment of civil servant’s performance and the bonus as a means of encouragement related to the official activity of a particular person in general. indeed, these two types of awards are means of encouragement in the public service, only the first one is a specified, directly related to the mandatory annual procedure, the basis of which is detailed in the national service law and the reason for which is person’s excellent assessment based on the results of his annual activities. the second one is a generalized, endowed with features of encouragement, baltic journal of economic studies 178 vol. 4, no. 4, 2018 as well as the rests which are provided in standardized list of incentives in the public service, for the use of which it is mandatory to adhere to the requirements of the incentive procedure as a whole (grounds, initiation, frequency, consistency, execution, etc.). it is logical to keep the practice, which currently exists in many countries around the world in terms of detailed normative consolidation of the principles of so-called “annual evaluation bonus award” in an individual subordinate legal act with its indication in the general basic legislative act on public service. however, the effectiveness of using this type of bonus will depend on the quality of normative consolidation of its foundations, and above all, it refers to criteria and indicators of service activity, the assessment of which leads to person’s excellent grade. the complexity of the situation is that in the legislation of some countries of the world (for example, in ukraine), unfortunately, there are no clear borders for determination of an excellent and positive evaluation on the basis of the annual assessment of results of official activities, which creates the preconditions for possible different manifestations of discretion on the part of evaluation subject. a clear regulation of the criteria and indicators for the determination of an excellent estimate makes it impossible to manifest this kind of discretion. at the same time, the principles of use of the second type of award as a means of encouraging public servants logically should be consolidated in the general basic legal act on public service, located them in a subsection that is directly devoted to encouragement in public service (“to include” in the list of incentives, to adjust the principles of bonus award as a kind of incentive procedure). third, to regulate the “filter” towards the determination of award amount for a public servant specifying its minimum and maximum, hence to establish the “boundaries” in a normative manner which should be a guide for a subject of bonus appointment eliminating the grounds for “meager” and “sky-high” awards. regarding the rate of “annual evaluation bonus”, it is quite logical to consolidate a provision at the legislative level that it must be equal to twenty percent of the annual rate of salary of a particular public servant taking into account that this bonus is paid only once a year and when the person has received an excellent assessment on the basis of the annual evaluation of his office activity for the year which, in turn, requires concentration of excessive effort and use of the full potential of this person (for example, to date, such norm is consolidated in the legislation of the french republic, in new zealand the amount of such bonus is fifteen percent, in the federal republic of austria – at least ten and not more than fifty percent and in the people’s republic of china – from half to two monthly official salaries). there is no doubt that another percentage of such a prize can be offered (depending on the amount salary rate, general economic situation in the state, etc.), however, the amount of this type of bonus should be clearly defined and regulated, which will eliminate any manifestations of a different kind of bonus reward of persons who have received an excellent grade on the basis of the annual evaluation of the results of his business activities. the main thesis is to standardize the bonus reward to a person, who has received an excellent grade on the basis of the annual evaluation of his business activities at a clearly fixed amount, which is fully coherent with his “achievements” for annual official activities. regarding another type of bonus, it is expedient to regulate its minimum and maximum amounts to ensure “adequate” response to the achievements of public servants (for example, from one to two salaries). regulatory “filtration” of the bonus amount will permit to avoid the use of “excessive” (“sky-high”) bonuses and at the same time to ensure the “predictability” of award amount as a means of encouragement, as it cannot be smaller or more than statutory “limits of bonus award”. why a reference to salary position is offered? would it be possible to offer the consolidation of this type of award in a “fixed” amount? moreover, there are examples that have had a positive reputation for a long time (for example, the “presidential awards” in the usa have already been mentioned). the proposal to determine the amount of this type of bonus in the “reference” to the salary rate of a public servant is conditioned by the desire to model a regulatory provision of universal content that would be acceptable to most countries of the world and would not require improvement taking into account socio-economic, political changes both in a particular country and in the world as a whole. fourth, there is the regulation of “frequency filter” of the use of the award. it should be noted that the award as a result of excellent grade on the basis of annual evaluation of the results of official activity is directly related to the results of the evaluation, consequently, it is illogical to apply “frequency filter” to this type of awards. its introduction can be even considered as a limitation of the right of a public servant to receive a bonus on the basis of annual evaluation of his official activity. it is a different story when it comes to the second kind of award that is a means of encouragement of public servants, for the use of which the implementation of “filter of frequency” is quite logical. as this kind of bonus is an element of the entire system of incentives for public servants, for which, inter alia, the sequence of the use of encouragement of different types is also distinctive. it is logical that the bonus cannot be used to encourage a particular public servant until others means are not applied to him, which “occupy seats” before the award in the statutory consolidated list. this, in turn, makes it impossible to use the bonus resource in a voluntary manner causing its significance to the entire system of incentives for public servants. consequently, normative consolidation of the list of incentives that can be applied to public servants, as well as the provisions baltic journal of economic studies 179 vol. 4, no. 4, 2018 on the mandatory adherence to the requirement of sequence of their application for each particular public servant played the role of “frequency filter” of award use ensuring the preservation of its uniqueness as means of encouragement in the public service. fifthly, the “bonus procedure” needs a certain attention the in the aspect of normative consolidation of the principles of publicity, transparency, openness, elimination of prerequisites for the discretion of the subject decision-making on the bonus award, etc. in this regard, it is quite logical to consolidate the provisions on compulsory public discussion of draft decisions on bonus award, cover the stages (steps) of the award procedure on official sites of public bodies, divide powers towards initiation and adoption of a final decision on bonus award between different entities of public administration (for example, in the usa there is a procedure for approval of the relevant acts with an independent body of public administration, and in canada, such issues are resolved by a special subject (bozhia-volia, 2009), manifestation of the final decisions for the public. all these things as a single set contribute to the clearness of the normative principles of the award procedure, as well as its control, minimization of grounds for the demonstration of any subjective discretion in the use of bonus recourse as a means of encouragement in the public service. 5. conclusions the desire to ensure the effectiveness, efficiency, and quality of public service necessitates a concentration of attention on in-depth research and the use of all means, without exception, that would contribute to this. among such means, the award for a public servant has occupied a tribute place. unfortunately, the analysis of the use of its resource shows the diversity of its understanding and normative consolidation of its principles in the legislation of different countries of the world. this, in turn, updates the issue of its real resource, role and importance for public service. despite a quiet active use of the award in public service relations in different countries of the world, unfortunately there is a rather stable tendency to apply it as a means to influence the official activity of the person, including encouragement for illegal actions, as well as a means of enrichment of public servants by awarding them “regular” bonuses in “excessive” amounts. all these things are predetermined, first of all, by the specifics of the statutory regulation of the resource of bonus use in the national legislation of different states (as regards the use of the term for its fix, diversity, and the principles of award procedure), which together wind down the real role and purpose of the prize in public service. for the effective use of the prize in public service as a means of encouragement of public servants for effective, efficient, high-quality activity, and at the same time to make it impossible to consider it as a “regular”, “scheduled” labour remuneration which does not require “excessive efforts” for “honoured work, it is expedient to introduce a number of “filters” in the national “bonus legislation” that would ensure the unified target use of the prize in public service. in particular, the following are fully justified: the normative definition of a bonus for public servants exclusively as encouragement means with ordering of the use of appropriate terminology; the distinction of the prize as the result of excellent grade on the basis of the annual results evaluation of the civil servant’s performance and the prize as a means of encouragement in general; standardization of the exact amount of the bonus (for a bonus based on the results of the annual assessment as a percentage of the annual rate of salary, for a bonus of another type – the minimum and maximum amount in the “reference” to the official salary); obligatory compliance with the requirements for the sequence of the use of incentives, including towards the prize; improvement of the principles of public transparency, openness, and control of the award procedure, which will facilitate the regulation of the targeted use of the prize in public service as a whole, as well as increase of the effectiveness, efficiency, and quality of public service. references: ahentaieva, v. v. 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(2016). metody otsiniuvannia rezultativ sluzhbovoi diialnosti derzhavnykh sluzhbovtsiv [methods of assessment of official activity of public servants]. naukovyi visnyk khersonskoho derzhavnoho universytetu. seriia: yurydychni nauky, iss. 6, vol. 2, pp. 68-71. horetska, t. (2009). systema oplaty pratsi derzhavnykh sluzhbovtsiv u yevropeiskykh krainakh [remuneration system for civil servants in european countries.]. zbirnyk naukovykh prats ukrainskoi akademii derzhavnoho upravlinnia pry prezydentovi ukrainy, no. 1, pp. 40-48. baltic journal of economic studies 180 vol. 4, no. 4, 2018 khokhlov, v. (2018). otsiniuvannia derzhsluzhbovtsiv: yak ne prypustytysia pomylok? [assessment of civil servants: how to avoid mistakes?]. yurydychnyi visnyk ukrainy, no. 14(1187), p. 9. kolomoiets, t. o., kolpakov, v. k. (ed.) (2017). zaokhochennia u sluzhbovomu pravi: navch. posibnyk [incentives in civil service law: textbook]. kyiv: in yure. (in ukrainian) kolomoiets, t. o., tytarenko, m. v. 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(in russian) baltic journal of economic studies 134 vol. 4, no. 2, 2018 corresponding author: 1 training and methods centre; methods department, national academy of the national guard of ukraine. e-mail: medvidmm@ukr.net 2 department of military-special branches of sciences, kyiv faculty of the national academy of the national guard of ukraine. e-mail: tsp1dduvs@gmail.com 3 department of administrative and legal disciplines, donetsk law institute ministry of internal affairs of ukraine. e-mail: olga.merdova@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-134-140 review of the tasks of formation and progress of human resources in the sustainable development strategy of ukraine in the light of central place theory mykhailo medvid1 national academy of the national guard of ukraine, ukraine oleksander komisarov2 kyiv faculty of the national academy of the national guard of ukraine, ukraine olga merdova3 donetsk law institute ministry of internal affairs of ukraine, ukraine abstract. the purpose of the article is to describe an economic background of the formation of the strategy of sustainable development by means of central place theory, in particular, a target of the progress of human resources. in this article, there were considered the elements of swot-analysis in the strategy of sustainable development of ukraine, and by this consequence, a strong side through such a positive influence of an internal environment as the population of the country was determined. only the population is available to resist the main negative influence of inner and outside surroundings on ukraine: to form necessary and replace an existing management; to shift intercivilisational direction towards the border of ukraine. there was also made a statistical analysis of result of process of forming and development of human resources in ukraine (the dynamics of population size, its natural movement, and the level of unemployment) and, as a sequence, we can argue the absence of accordance of real conditions of the socialeconomic conditions by those people who are available to certain types of works, necessary expert knowledge and its improvement and use of acquired capability of human resources during the creation of welfare in considering of standing changes during the activities. it leads to migration, and that’s why there is a risk for sustainable development. and it leads to losses of active-age population, facilitates the reduction of births. by the statistics of migration processes and processes of forming of run and supplies of educational services by the countries, we validate the hypothesis about central place theory, which is reasonable to use in practice not only in regard to inhabited localities and also in regard to countries. practical importance of the scientific research results lies in reconsideration of the tasks of forming and developing of human resources in strategy of sustainable development of ukraine in the light of central place theory, which is important for successful social-economic development of the state and concurs to screen out the factors, which prevent a social-economic development, facilitates the development and following improvement of regulatory framework. in view of the stated above, the scientific researchers in this area are relevant and timely within the period of search for the priorities of national economic policy. methodology. methodological backgrounds of research formation of standing development of ukraine are scaled by means of complex scientific knowledge, which let to consider this problem as a complicated phenomenon. on the background of studying about internal and outside surroundings of the country (swot-analysis), central place theory, and others scientific approaches, an idea of standing development of ukraine is a complicated systematic category. key words: sustainable development strategy, formation and progress of human resources, migration, demand and supply of educational services, central place theory. jel classification: j4, j6 baltic journal of economic studies 135 vol. 4, no. 2, 2018 1. introduction the united nations millennium declaration, approved in 2000 by 189 countries on the millennium summit of uno, determined the millennium development goals, all-embracing frames of values, principles, and key factors of development to 2015. after elaborating all-round frames of mdgs in many countries, mdgs were brought to effect in accordance with national situations. ukraine joined the millennium declaration and pledged itself to achieve mdgs to 2015. in september 2015 during the 70th session of the general assembly took place the summit of uno about sustainable development and reception of the post-2015 development agenda, where were ratified new guideline of development. the main document of the summit was “transforming our world: the 2030 agenda for sustainable development” in which 17 goals of development and 169 tasks were confirmed. ukraine as a member of the un joined to a global process of constant development. for establishing strategic frames of national development of ukraine to 2030 in accordance with the principle “none can be left aside” was initiated an exclusive process of adaptation to mdgs. every global aim was considered in accordance with the specificity of national development (sustainable development goals of ukraine). on 15 september 2017, the government of ukraine presented the national report “sustainable development goals: ukraine”. on minds of authors, some goals (in particular, 10 – reduction of inequality inside the countries and among them) cannot be achieved. their contents contradict to central place theory, which is used in practice not only to inhabited localities and also to countries. a  special attention needs reconsideration of tasks such as formation and progress of human resources. in view of the noted above, the purpose of this publication is the reconsideration of tasks of formation and progress of human resources in accordance with sustainable development of ukraine through the prism of central place theory, especially tasks with goals 8 “gradual, all-side comprehensive and sustainable economic growth, full and productive employment for everyone” and 4 “providing an all-side fair qualitative education and supporting a possibility for studying during the whole life for everybody”, that would be aimed at the prevention of devastating development of the threats to national security. 2. elements of swot-analysis according to a strategy of development of ukraine the sustainable development is a general conception concerning the necessity of balance to satisfy human needs and protect interests of future generations and to take into account their need of safe and healthy environment. the brundtland commission formed a determination of sustainable development in its report; this is a development which satisfies the needs of today’s generation without damage for future generations to satisfy their own needs (butlin, 1989). the strategy of sustainable development determines a goal, direction, road map, basic priorities and indicators of conditions of development and formation of ukraine such as defence, social-economic, political-lawful. for its development, there should be implemented a detailed analysis of inside and outside environment of the state (swot-analysis). it was partly displayed in a previous study (medvid & zvieriev, 2017). but it should be started with the fundamental negative influence (table 1). table 1 the fundamental negative influence of inside and outside environment in ukraine positive influence negative influence inside environment strengths … weaknesses 1. the absence of necessary management … outside environment opportunities … threats 1. intercivilisational guideline … ukraine is the intercivilisational guideline and it’s the main threat to its development. guideline “frontier” (border) is the territory between two societies. it’s a transitional zone as a rule which is weakly integrated into state structures and has a dynamic coordination as often hostile cultures. in this case, it means european and russian, islamic civilizations ( juricek, 1966). the vulnerable side of ukraine is the absence of strong management. the untimely decision about the integration into one or another system of community defence was a mistake for ukraine, which led to the annexation of the crimea and war on the eastern of the country (figure 1). despite that ukraine has already determined its course of integration into the system of cs of nato accordingly to existing measures, the annexation of the crimea and the war on east of the country don’t allow making a decision. the main threat of development of ukraine may be partially neutralized by moving it away to its eastern or western border. despite trying to fulfil the first scenario via inadequate abilities (swot-analysis), which are formed by means of outside environment, can be changed to the contrary. here should be considered the possibilities of mentioned civilizations, which goals are the contrary. the strong side is a positive influence of inside surrounding and this is its population. only the population can counteract the main fundamental negative influence of inside and outside surrounding baltic journal of economic studies 136 vol. 4, no. 2, 2018 on ukraine: to form a strong and replace an existing management; to move intercivilisational frontier to its border. that’s why in the strategy of social development, it is necessary to review the tasks of formation and progress of human resources. 3. statistical analysis of findings of formation and progress of human resources in ukraine the formation and progress of human resources, its supplying real social-economic conditions of formation by people who are able to a certain work and competencies for its improvement and use of acquired capabilities of human resources to create a welfare by taking into account constantly changes during their activity (medvid, 2015). on the 1st of january 2018, the number of population was 42,22 million. for 15 years, it was descended on 5,62  million. by taking into consideration such a tendency, we may prognosticate that on 1st of january 2023 it will calculate 40,83 million (figure 2). what can characterize such a dynamic of a decrease in the population of ukraine? it may happen by natural decreasing of the population (figure 3), which number was 3,13 million during the researches. following the prognosis, if the number of births and a number of deaths will stay invariably natural decreasing of ukrainians will change on the natural increase in 2027. the next factor is a migration movement of population. during the research, the number of migrants was more than a number of immigrants on 2,13 million people. to the migrants that can be enlisted the people from crimea, the city of sevastopol and a number of people from the zone of ato. following the prognosis coefficients of births, length of life and migration stay invariable so in 2050 the population of ukraine will be 32 million citizens. labour migration is influenced by the level of unemployment, which comes up to a mark of 10% (figure 4). this point is liminal, which may have unexpected consequences for society and needs the acceptance of special programs to provide an employment of population. decreasing demands on educational services among ukrainians in ukraine but growths among foreigners are a result of such dynamics. for 15 years, the number of foreign students has tripled. 66 310 foreign students study at ukrainian educational establishments from 147 countries around the world (16.4% – from india, 11.3% – from azerbaijan, 8.8% – morocco, 6.7% – from turkmenistan), (ukrainian state centre for international education, 2018). before the crisis, figure 1. ukraine between systems of collective security (cs) nato union of south american nations the shanghai cooperation organization, the collective security treaty organization african union baltic journal of economic studies 137 vol. 4, no. 2, 2018 figure 2. the number of population of ukraine, million figure 3. the natural movement of population of ukraine, million annotation: the pictures were designed by using findings of official website of state statistics service of ukraine http://ukrstat.gov.ua. figure 4. the unemployment rate of able-bodied population, % annotation: the pictures were designed by using findings of official website of state statistics service of ukraine http://ukrstat.gov.ua. baltic journal of economic studies 138 vol. 4, no. 2, 2018 the number of foreign students grew up stably and in 2013 reached almost 70 thousand. the most popular are medical and pharmacological kinds of education. almost all foreign students are citizens of cis-member countries. however, because of war on the east of ukraine, the arrival of educational migrants began to decrease (migration in ukraine, facts and figures, 2016). following the unesco records, during the period 2000–2012 the number of ukrainian students who study abroad increased in more than 4 times and sums 37 thousand. especially their number was high in countries connected with labour migration. following the researches of annual monitoring the number of ukrainian citizens who study at foreign universities on daily form based on findings of the analytic centre cedos (includes 34 countries around the world), during 2013/2014 academic year, 47 724 ukrainians were studying abroad. the largest number of students studied in poland (15 ths), germany (9 ths), russia (6  ths), canada (2 ths), czech republic (2ths), italy (1,9 ths), the usa (1,5 ths), spain (1,4 ths), france (1,3  ths), great britain (1 ths) (migration in ukraine: facts and figures, 2016). therefore, following the results of statistical analysis by means of findings of process of progress and formation of human resources in ukraine, we may affirm the absence of accordance between reality to socio-economic conditions of forming the necessary competencies and their improvement and using all necessary human resources during the process of creation of welfares in accordance with changes during the activities by people who are able to work. it leads to migration and has a risk for a constant development. the losses of able-bodied people and decreasing of births are the result of migration. 4. formation and progress of human resources and central place theory a central place theory is an aggregate of main statements, which explain a number, size, and location of inhabited localities of the city system. the theory was created in 1933 by german geographer walter christaller who affirmed that inhabited localities function as central places that provide services in adjoined districts (christaller, 1967). the central places are economic centres, which serve themselves and supply goods and services to its districts, form the net of inhabited localities with free access to the objects of human services and moving between them. hierarchy is a system among inhabited localities, which allows determining an inhabited locality (with increasing of the hierarchy) and supplies more services to localities, which are under them in table. a theory of central places may be used not only for inhabited localities and also to countries. we may check up this hypothesis on world’s map with social progress index of countries (social progress index, 2017). a social index progress is a general index of social and ecologic indicators, which shows three aspects of social progress: the main needs of humans, backgrounds of wealth, and possibilities. figure 4 shows graphically a theoretical formation of basic migration route of ukrainians to european countries by means of their social progress. the central place for ukraine takes germany. it consists of czech republic, slovakia, poland and others, which make a similar net with free access to human services and moving inside the net. in a given example the hierarchy concurs with the classification of groups of indexes of social process in countries: it’s very high, high, upper, upper-intermediate. in this hierarchy, we’ll study the process of formation and progress of human resources, which is characterized on basic migration route and a way of supplying of educational services (figure 5, 6). the number of ukrainians who live in the eu growths up constantly. in 2015, there was 905,2 ths. it was 6% of backward countries on the territory of eu. the largest number of ukrainians were in italy (238 ths.), poland (336 ths), germany (112 ths), czech republic (113  ths) and spain (84 ths). in 2015 ukrainians got 493 official remittances for living in eu-countries that was 1,5 times higher than in 2014. the vast majority was given in poland (87%). practically all of them were short-dated (3-12 months) and were registered for season work. a work activity was the main purpose of the arrival of ukrainians to the eu. there were registered 76% of permits to work; it was the third part of all backward countries. following the researches made by mom in 2014-2015, there were approximately 700 thousand ukrainians abroad (migration in ukraine, 2016). statistics about migration processes, the formation of processes of demand and propositions of educational services by countries may confirm the hypothesis that the central places applied in practice in relation to settlements and countries. 5. review of tasks formation and progress of human resources in the strategy of development of ukraine through the prism of central place theory let us consider strategies development of ukraine, their content 4 – “providing comprehensive, qualitative education and encouraging learning opportunities throughout life for all”, 8 – “assistance to economic growth, full and productive employment, worthy work for all” (sustainable development goals: ukraine). goal 4 – “providing comprehensive qualitative education and encourage learning opportunities throughout life for all”. about higher education, it is mentioned only in one task  4.4 – “to increase the quality of higher education baltic journal of economic studies 139 vol. 4, no. 2, 2018 30 32 64 22 37 13 14 95,3 77,5 66,5 24 13 95,3 15 1,9 2 9 15 – basic migration route of ukrainians – index of the country according to social progress – countries with long-term labour migrant permits for ukrainians and their number figure 5. a theoretic formation of migration route of ukrainians to european countries by means of their social process annotation: the figure was made by using statistic records of social progress index https://www.socialprogressindex.com – the main route of supplying educational services – the main countries which propose successfully educational services for ukrainians and the number of students, ths. figure 6. formation of proposals of educational services by educational establishment of european countries for ukraine baltic journal of economic studies 140 vol. 4, no. 2, 2018 and provide its communication with science, promote the formation in country cities of education and science.” about promoting the formation of cities of education and science in the country, it is not correct, considering the above analysis. the ukrainian population is turning to the formation of demand for educational services in those in which they will be able to continue to work in the future. considering an increase in the level of unemployment in ukraine, mentioned tendency will become stronger. unemployed will become also scientific workers with scientific grades because of decreasing of demands on educational services in ukraine. it’s a pity that in national report of 2017, there is no explanation about the necessity for increasing the number of university cities from 7 to 14. goal 8 – “assistance for economic growth, full and productive employment, worthy work for all.” an interesting task is 8.4 “reduce the share of young people who do not work, do not study, and do not acquire professional skills” and an appropriate indicator of change in education from 17.7 to 15.5%. there is no need to try here, due to migration indicator value to the 2030 year may be smaller. you must agree with an indicator of realization of goal 8.1.4 “ukraine’s place in the rating by the innovation index.” in the national report of 2017, the change in its value is projected from 64 to 40 in 2013. however, if such a situation does not change the position of poland, czech republic, italy, then the situation in ukraine will not be much better. all tasks and indicators of this goal are correct, however, as well. returning to the elements of swot, in our opinion, one of the positive effects of the internal environment is higher education institutions, scientific and pedagogical workers of ukraine, and the environment is in demand of citizen of the countries with an index of social progress is lower than in ukraine for educational services in ukraine. developing this direction can increase revenues of ukraine, save the scientific potential of the state. 6. conclusions the scientific novelty of research is an approach in the formation of development in ukraine through the prism of central place theory. it’s proved that a theory of central places may be used in practice not only regarding inhabited localities and also concerning to countries. the striking example of it is a process of creation of human resources. by possessing a results of statistical analysis of mentioned process in ukraine (the dynamics of population size, its natural movement, and the level of unemployment), we made a conclusion that there is no suitability among a real life and equal socialeconomic conditions of forming by able-bodied people all necessary competencies and their improvement and also the using of acquired human capabilities by process of creation of welfare, which threats sustainable development. it’s offered to 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(1967) central places in southern germany / translated by c.w. baskin. – ny: englewood cliffs. – 230 p. social progress index (2018) retrieved, march, 2018, from: https://www.socialprogressindex.com baltic journal of economic studies 87 vol. 5, no. 1, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: koval4uk@vsau.vin.ua orcid: https://orcid.org/0000-0001-7590-4467 2 vinnytsia national agrarian university, ukraine. e-mail: mel@vsau.vin.ua orcid: https://orcid.org/0000-0002-6160-3767 doi: https://doi.org/10.30525/2256-0742/2019-5-1-87-95 the impact of global challenges on “green” transformations of the agrarian sector of the eastern partnership countries svetlana kovalchuk1, alina kravchuk2 abstract. the restructuring of the economy of countries of the eastern partnership with the eu requires new ways of implementation, which are based on the principles of ecologization, with due consideration of integrated indicators of strategic environmental assessment and balanced resource-efficient, environmentally-friendly production. subjectmatter: theoretical and practical principles of “green transformations” as a modern direction of the world economy, based on the harmonious use of innovative technologies and the natural environment. purpose. the main purpose of the publication is to assess how the “green” growth strategy is implemented in the development of the agrarian sector, the demonstration of the importance and efficiency of green growth indicators and their practical application. the realization of the purpose led to solving the research tasks: to substantiate the necessity of forming a change in the agrarian paradigm in the countries of eastern europe, to analyse trends of the introduction of green growth, to prove the importance of the efficiency of using the green growth indicators. methodology. the basis of the research methodology is the dialectical method, which involves the connection theory and practice, the principles of knowledge of the real world, the determinancy of phenomena and interaction processes of external and internal. in order to achieve the purpose and solve the tasks, the following methods were used: system-structural – in the study of the sustainable development of the agrarian sector; abstract-logical – when forming, generalizing, and analysing tendencies of adaptation of the eastern partnership countries to the green growth concept; comparative – for comparing the factual data with the theoretical ones and characteristics of changes in time of indicators. as well as the methods of description and comparison were used to determine the vectors for the introduction of green growth in the countries of the eastern partnership. results. new challenges for the world economy make it necessary to modernize the economy solely for ensuring sustainable development through green growth. according to the results of the analysis, the essence of “green” transformations of the agrarian sector was established, which proves the regularity of the inclusion of the ecological factor in the system of basic socio-economic indicators of the development of eastern european countries. at the same time, on the basis of the generalization of the theoretical provisions, it was found that green growth stimulates competitive, innovative, investment activities, which can lead to new sources of economic growth. for the qualitative expression of the indicators of green growth, the dynamics of gdp of the countries of the eastern partnership with the eu and indicators of rational use of natural resources were analysed and summarized. conclusions. given the above, the necessity to use indicators of green growth in statistical information is proved, which allows reducing risks of economic growth; reducing the risk of conflicts caused by lack of resources; balancing the ecological imbalance of rural areas. the practical significance of the results obtained is the possibility of their use in the formation of statistical information, and the indicator of the efficiency of agricultural land use makes it possible to trace environmental and resource productivity, multi-factor productivity, dynamics of land use, life expectancy. the research results can be used as an analytical and informational basis for further scientific developments in the field of research on the impact of green transformations on the sustainable development of the agrarian sector. key words: natural capital, environmentally-friendly growth, green growth indicators, green growth strategies, sustainable agriculture, green growth monitoring. jel classification: f43, о13, q29 baltic journal of economic studies 88 vol. 5, no. 1, 2019 1. introduction the transformational processes of the agrarian sector are characterized by significant changes, which meant the change of the agrarian paradigm and the formation of a new agroecological policy. the result of this theory is recognition of a market model for the development of the agrarian sector, its competitiveness, and the recognition of the industry as the most sensitive structural element of the economy, which instantly responds to fluctuations of external factors. modern models of the development of the world economy cannot take into account the results of complex causal relationships between economic assets and natural capital while ensuring their effective use and reproduction. along with that, modern business models are putting society at high risk of growth inhibition. the emergence of risks increases with the wasteful use of natural capital, which results in the destruction of a whole sector of economically important agroecosystem infrastructure. the limitation or apathy of the implementation of measures aimed at preserving this capital will inevitably lead to an increase in the cost of its replacement (kurinets, kharichkov, 2007). the transition to environmentally-friendly growth increases the economic benefits and revenues from the use of natural capital. at the same time, current revenues from this capital should be used with considerable caution so that their use encourages the growth of other forms of capital (primarily human and productive ones) (ecologization of the economy in the eu eastern neighbourhood countries). in fact, this proves that the determining factor in the transformational processes of the world economy is the introduction of the principles of a green economy and green growth (kvasha, 2015). even given all the importance of economic growth, its ultimate goal is to ensure the improvement of the living conditions of every person today and in the future. an objective need keeps up to date to study the impact of green transformations on the development of the agricultural sector of the countries of the eastern partnership with the eu. the scientific novelty consists in substantiation of the expediency of application of green growth indicators at the formation of the statistical information, in particular, the indicator of agricultural land use efficiency, which allows tracing ecological and resource productivity, is proposed. the analysis of existing issues on green growth problems is the subject of numerous scientific studies; however, the issue of green growth in agricultural development is not sufficiently highlighted. it is worth looking at the study of this problem by the following scholars: bukrynskyi b. v., halushkina t. p., heiets v. m., kvasha t. k., kurinets l. ye., musina l. a., zegar j. s. and others. 2. external factors of influence on green growth the decisive problem of economic growth is increasingly dependent on the formation of international decisions in the field of ecology, on the conditions of integration of countries into the international economic space, and the reaction of national economies to integration processes. the integration processes contribute to the manifestations of the national specificity, stimulate its development, determine the place of the country in the international division of labour, the level of competitiveness of products, and providing opportunities for meeting the needs of society. in its turn, interdependent links between countries are formed, which creates a significant sectoral impact on the structure of production within the country, taking into account its specificity. according to scientists-economists, in order to achieve sustainable development goals, in the transformational conditions of the world economy, a new approach must be applied that takes into account compromises and synergistic interaction between sectors and components of sustainability (ecologization of the economy in the eu eastern neighbourhood countries). that is why, in order to determine the influence of external factors on the formation of the green growth strategies of the eastern partnership countries, we use a pestel analysis. with the help of which we will identify the political, economic, social, technological, legal, and environmental factors that underlie the formation of the green growth strategies of the eastern partnership countries (table 1). note that the positions discussed in the table characterize the structure of the economy of eastern european countries, which is distinguished by asymmetric development towards the branches of agriculture, which is most sensitive to external factors. eastern european countries have favourable natural conditions for the functioning of natural capital, as a rule, they export raw materials and agricultural products. the raw material export-oriented direction is marked by low value-added, which is an indisputable fact of the need to find new ways to generate income other than the export of raw materials. taking into account the experience of oecd member countries, modernizing the economy, the main vector of which is green growth, has a positive effect of growth as evidenced by improved welfare in the countries (ecologization of the economy in the eu eastern neighbourhood countries). the green growth policy in eastern european countries is closely linked to the actual development goals of the countries’ economies, in particular, the diversification of the economy, the increase of production efficiency, which affects competitiveness in international markets. in addition, environmentalization affects the export potential of the country and the creation of new jobs. baltic journal of economic studies 89 vol. 5, no. 1, 2019 3. sustainable development of agriculture recently, fao has developed elements of a common scheme and an approach that allows a more efficient and comprehensive solution to the problems of sustainable agricultural development. this approach helps to support the efforts already undertaken in the field of agricultural development, which has led to a significant increase in productivity, making possible the provision of food for the ever-growing population of the planet, with a relatively limited increase in agricultural land. however, transformational processes in different countries are distinct, they are often accompanied by social or environmental costs that prevent the achievement of a positive effect and endanger the very sustainability. further transformation processes in the agrarian sector will continue to be based on increased productivity but particular attention is paid to the economic and environmental aspects of sustainability (food and agricultural organization of the united nationals, 2016). it is worth noting that the concept of sustainable agriculture arose later, probably because of its specificity. the impetus for the development of this concept was the brundtland report (1987) and the united nations conference on environment and development in rio de janeiro in 1992 (raman, 2006; zegar, 2005) and rio+20. the concept of sustainable development in agriculture has its peculiarities since it is the most widespread and most important area of human activity, because: production is aimed at the satisfaction of the basic human needs; is the main user of rural areas; naturally and significantly affects the environment; takes the main place in the civilization development of interaction with the environment; performs complex functions: produces both food and industrial products, protects the environment and landscape, is the basic factor of the viability of the rural area, etc. the complex nature of the concept depends on the numerous local natural conditions, on the system of soil cultivation, and other factors. according to faber (faber, 2010), these features can be generalized in the following short definition: “sustainable agriculture provides an opportunity for simultaneous and harmonious achievement of economic, ecological, and social goals of agrarian production.” table 1 pestel analysis of the influence of external factors on the formation of the green growth strategies of the eastern partnership countries political p economic e integration changes in country policies; accession to the wto has not created the desired favourable conditions for economic growth; fixing the international image of countries that adopt the rules and principles of international trade; eastern european countries are considered key components of geostrategy of western europe; lack of sufficient experience in the development of the economy, which is not ready for a liberal and cruel regulation of the conditions of world trade. the sharp decline in commodity prices in countries of western europe; countries have adopted wto strict tariffs for agricultural products; no transition to a post-industrial development model has been made; replacement of protectionist measures by subsidizing, which may lead to deformations in the agrarian sector; the slowdown in the rate of foreign direct investment; with higher taxation, the emergence of the shadow sector and, as a consequence, the growing prices for production; reduced competitiveness of processing agricultural enterprises. social s technological t integration into world markets, preserving national interests; low living standards in the post-industrial period; the necessity of training of skilled personnel, in combination with pilot projects of sea; harmonization of production and trading activities with the opportunities of the environment in the public interest. high degree of depreciation of fixed capital assets, the need to accelerate their upgrade; structural crises in the production process; high level of monopolization of production of similar goods; the transition of countries to the international standards system; the emergence of new business opportunities that eliminate the problem of technological “deadlock.” legal l environmental e agenda 21, 1992, rio de janeiro; the decision of the world summit on sustainable development in johannesburg (south africa), 2002; the decision of the un conference on sustainable development “rio+20” 2012, rio de janeiro; organic 3.0; consideration of controversial issues based on the operating principles of the functioning of the international trading system; establishment of the institutional environment necessary to achieve the goals of green growth. implementation of the eap green project; implementation of the oecd provisions for measuring green growth; process monitoring and evaluation with regard to green growth; requirements for increasing carbon and energy efficiency; increasing the efficiency of using materials while simultaneously saving natural assets and improving the living standards; ecologization of small and medium business. baltic journal of economic studies 90 vol. 5, no. 1, 2019 along with that, the transition to a “green” way of development requires special attention to the infrastructure of rural areas. considering the longevity of the infrastructure, it is extremely important that the decision on its development is not focused on the use of technologies that are based on the intensive use of resources and cause the most severe pollution. adequate infrastructure plays a providing role for other sectors of development, also affects the reduction of regional differences. at the same time, the ukraine–eu and moldova– eu association agreements define the main tasks for improving the quality of life in rural areas in the direction of green growth, which is to increase the skills of peasants in maximizing the benefits of diversification of the rural economy, their understanding and involvement in processes of local development. the complex of measures to fulfil these tasks includes: stimulating the development of non-agricultural economic activity of rural communities; raising the level of knowledge and practical skills of rural residents in order to enable them to initiate and carry out certain activities; support for the development of local infrastructure, which provides the general conditions for the functioning of a diversified rural economy and increasing the level of access of the population to basic services (heiets, 2016). consequently, given the fact that the course of green growth has the potential to support economic and social development and can provide conditions, under which natural assets can continue to provide material goods and services, on which the economy and the welfare of people depend to a large extent, it is the main goal of the green transformation of agricultural production. moreover, “green” restructuring can bring a lot of positive results, which may be an impetus for the growth of the economy, in particular, the emergence of new sources of economic growth, increased productivity and innovation level, the creation of new jobs, and access to foreign markets, as well as new budget revenues. it is important to note that the concept of green growth does not replace the concept of sustainable development but serves as a practical tool for achieving the goals of sustainable development. both concepts are based on the principles of interaction between society and nature and are aimed at meeting the needs of not only modern but also future generations. the generalization of the above allows highlighting the peculiarities of the concept and strategy of the green growth of the oecd: natural capital is considered as a factor of production, as productive capital, the restoration and expansion of which require investment; environmental policy is considered as an investment policy aimed at increasing the efficiency of the use of natural resources through the development and use of the up-to-date resourceand energy-efficient lowcarbon technologies; “green” activities and environmental innovations are designed to promote structural restructuring, increase productivity, capital, resources use, and support the transition to the technology of a new wave and infrastructure modernization; the close relationship between economic and environmental policies is ensured through the use of instruments such as fair pricing and taxation in order to stimulate resource conservation, introduce more rigorous but stimulating environmental standards and technical regulations, reform the system of farm subsidies, introduce an expanded system of indicators for assessing performance in indicated areas (official site of the ministry of economic development and trade of ukraine, 2016). 4. foundations for the transition to green growth the prerequisite for integration processes in eastern european countries is to take into account the ecological importance of capital and implement basic and sectoral development goals through the prism of green growth. the analysis of the regulatory framework for the transition to green growth (see table 2) of the agrarian sector, in fact, indicates the need to use sufficiently differentiated instruments and their flexible application. despite the fact that all the countries of the eastern partnership with the eu support the transition to a green economy, at the national level, the green economy and sustainable development are enshrined as “fundamental principles” in a number of national development strategies, the interest in the principles of green economy in each country has its own priorities (see table 3). the strategic environmental assessment (sea) and environmental impact assessments (eia) are procedural tools that help target indicators in relation to green economy and other sustainable development issues to be integrated into strategic decision-making processes, in particular, at project level, thus so that the environmental and public health consequences are taken into account when making decisions. the sea is conducted in relation to government policy plans, programs, and documents in accordance with the requirements of the unece protocol on strategic environmental assessment to the espoo convention (sea protocol) and the european sea directive (ecologization of the economy in the eu eastern neighbourhood countries). indicators of strategic environmental assessment and environmental impact assessments allow determining the degree to which the state protects its natural environment. each country, depending on the conditions in which it exists, has to prepare its coordinate system, which will help to monitor this work at the national level (strategic protocol environmental assessment). baltic journal of economic studies 91 vol. 5, no. 1, 2019 table 2 adaptation directions of statutory regulation in eastern european countries for the transition to green growth country elements of internal support a rm en ia the concept of sustainable development has been taken into account in the program of strategic development of the republic of armenia for 2014–2025. the objectives of green growth are enshrined in a number of documents regulating sectoral policies, such as the national water program and energy development strategies aimed at diversifying energy resources. a ze rb ai ja n “azerbaijan – 2020: look into the future” includes environmental tasks. action plan for improving the ecological situation and efficient use of natural resources for the period of 2015–2020. in 2016, the ministry of economy presented the details of a strategic “roadmap” aimed at diversifying the economy through the development of agriculture, small and medium-sized enterprises. draft laws on strategic environmental assessment (sea) and environmental impact assessment (eia). b el ar us the national strategy for sustainable socio-economic development for the period up to 2030 sets the goals of sustainable development, envisages the introduction of a green economy. the strategy for environmental protection of the republic of belarus for the period up to 2025. the national action plan for the development of the green economy – the reorientation of consumer behaviour towards more sustainable consumption patterns; development of environmentally sound physical capital for sustainable production patterns, promotion of fair and green trade; promoting awareness of the benefits of sustainable development. a new law on environmental expertise, sea and eia has been adopted, as well as bylaws on sea and eia. g eo rg ia the eu–georgia association agreement was signed in 2014, which came into force in 2016. the agreement covers the objectives in relation to sustainable development and the environment and introduces a special trade regime through the agreement on deep and comprehensive free trade area. the national environmental action plan for the period of 2012– 2016. in 2014, the government approved the georgia-2020 development strategy, one of the most important goals of which is to promote green growth. the code on environmental assessment is submitted to the parliament. m ol do va association agreement and the agreement on deep and comprehensive free trade area with the eu (2014), which entered into force in 2016. moldova committed itself to actively pursue structural reforms and harmonize its legislation with the eu acquis communautaire, the moldova-2020 national development strategy, moldova environmental strategy for 2013–2023, the national strategy for sustainable development of agriculture for 2008–2015, which include goals of the green economy. in 2015, the development of “roadmap” for the transition to a green economy and sustainable development. first and second amendments to the espoo convention have been adopted. u kr ai ne the principles of sustainable development and the green economy are reflected in the action plan on implementation of the eu–ukraine association agreement and the eu free trade agreement and the ukraine-2020 sustainable development strategy (integrated package of tasks aimed at the green transformation of the economy). parliament of ukraine adopted the law “on strategic environmental assessment”. table 3 the main vectors of the implementation of green growth in the eastern partnership countries country measures armenia, georgia, azerbaijan, moldova, belarus, and ukraine reform of sea (strategic environmental assessment) and eia (environmental impact assessment) legal and institutional frameworks; development of national green economy strategy; expansion of trade opportunities in international markets for organic agricultural products; increasing access to funding sources for green investment; improvement of market incentives to environmentalize goods; environmentalization of small and medium-sized enterprises through the strategy for the development of small and medium-sized enterprises. belarus, moldova, ukraine quantitative industry analysis has been carried out demonstrating the environmental, economic, and social benefits of the transition to a green economy. belarus, moldova, georgia the development of national strategies or action plans for the green economy has begun. armenia, azerbaijan, moldova, and ukraine development of green growth indicators. moldova і ukraine enforcing in the environmental legislation, prepared on the basis of the analysis, recommendations on reforming taxes on products. armenia, georgia, moldova, and ukraine policies and regulatory instruments aimed at environmentalizing small and medium-sized enterprises have begun, and the results of the analysis of increasing the environmental efficiency of small and medium-sized enterprises have been introduced into the development strategies of small and medium-sized enterprises. baltic journal of economic studies 92 vol. 5, no. 1, 2019 the experience of realization of a roadmap to a resource-efficient, competitive green economy in the european union countries shows the real possibilities of resource saving, increase of business competitiveness, attraction of additional sources of economic growth, and creation of jobs. thus, the results of surveys of business companies in the eu show that measures for increasing resource efficiency at all links of the value chain can reduce the european union’s need for raw materials by 17-24% by 2030 compared to 2013 and increase eu countries’ gdp by about 3.9% due to the creation of new markets and products (european commission, 2014). however, the typical disadvantages of modernity include the absolutisation of economic growth and its traditional indicators. it seems logical to evaluate the problem in another aspect. in these statements, economic growth is usually identified with gdp growth, profit maximization, financial flows, and other financial indicators, and the quality of growth and its costs (environmental and social) are usually ignored. it is widely recognized in the world that gdp is an inadequate indicator to reflect many important aspects of socio-economic development, including social and environmental factors. an important feature of all six countries of the eastern partnership with the eu is that since the 2000s, gdp has grown, albeit to different degrees (figure 1). despite the fact that all countries suffered significantly from the economic crisis of 2008-2009, most of them were able to recover, integrate into the global economy, and establish strong trade relations with the european union. the growth of the service sector has led to a reduction in the burden on the environment. assessing the situation in figures, despite the fact that, in general, the share of agriculture in the economy has declined (see table 4), it continues to play an important role in the structure of gdp and employment in some countries, thus making a significant impact on land and water resources (greening the economy in the eu eastern neighbourhood countries). table 4 structure of gdp of the eastern partnership countries by economic sectors (2015) country agriculture industry services sector armenia 19 29 52 azerbaijan 7 37 56 belarus 8 40 52 georgia 9 25 66 moldova 14 18 68 ukraine 24 26 60 if the gross domestic product (gdp) took into account the depletion of natural capital, the net gdp figures in the countries would be much lower. permanent degradation of the environment, high levels of emissions leading to climate change, inefficient use of energy, outdated and non-economic production technologies, rising losses and water scarcity, especially in agriculture, as well as costs associated with the listed problems, point to the need to intensify actions in the field of integrating environmental objectives into the sectoral economy (organization for economic cooperation and development). 5. importance of the monitoring of the green growth process the oecd approach to assessing the progress of green growth was presented in the 2011 report “towards green growth: monitoring progress” (oecd, 2014). it describes the conceptual measurement methodology, figure 1. changes in the real gdp of the eastern european countries (in percent compared to 2000) baltic journal of economic studies 93 vol. 5, no. 1, 2019 which combines the main parameters of green growth with the basic principles of accounting and the model “pressure – state – reaction”, which is used in environmental reporting and expertise (eap green, 2016). in addition, particular attention should be paid to the basic oecd green growth dominants, in particular: strategic policy planning, green growth indicators, environmentally harmful subsidies, market incentives for organic products, sustainable government procurement, access to green investment financing, and the greening of small and medium-sized businesses. to monitor the green growth process, the oecd proposes to use five groups of indicators, four of which cover different sectors of the green economy, and the fifth – macroeconomic indicators of national development: the ecological and resource efficiency of the economy; a base of natural assets; environmental aspects of life quality; economic opportunities and answers of the policy; socio-economic context and characteristics of economic growth. indicators of environmental and resource productivity describe key aspects of the transition to a low-carbon and resource-efficient economy. in countries rich in natural resources, their quantitative assessment is not given enough attention. however, in these countries, the results of economic development and the quality of growth are increasingly dependent on the natural environment, which simultaneously is a provider of raw resources (energy, water, materials) and an absorber of pollution and waste. efficient use of primary resources, minimization of waste, their processing and transformation into a resource increase the profitability of business (upon condition that resource prices do not distort competition) and slow down the depletion of the base of natural assets. to ensure the long-term stability of the country’s development, it is necessary that the natural assets base fulfils not only resource but also absorption, service functions (biodiversity), and the load on the natural environment does not exceed its capacity. for this purpose, indicators of actual reserves and flows of renewable (water, forest) and non-renewable resources (mineral resources) are monitored. there is a direct link between the state of the environment and the quality of human life. it should be monitored by using indicators of the environmental quality of life that reflect the health and safety risks, the availability of amenities and eco-system services. indicators of economic opportunities and policy measures assess the performance of the state in support of green growth: investment in green activities and technology development, stimulating eco-innovation and green procurement, reforming subsidies and prices. indicators relating to the socio-economic context and characteristics of economic growth are used to reflect the results of the green transformation at the macro level, including the attraction of additional sources of growth, changes in the economic structure, employment and labour markets, increased incomes, and the competitiveness of business and the economy as a whole (ministry of economic development and trade of ukraine, 2016). the achievements of the eastern partnership countries on the way of green growth are determined on the basis of the environmental performance index (the environmental performance index, 2018) (table 5), which characterizes their place in the field of management of natural resources and their rational use. in general, in 2018, switzerland is recognized as the leader in terms of environmental efficiency. table 5 environmental performance index of eastern european countries for 2018 country rating environmental performance index changes over 10 years, % armenia 63 62,07 + 13,19 azerbaijan 59 62,33 +18,10 belarus 44 64,98 +3,77 georgia 94 55,69 +11,77 moldova 112 51,97 +9,09 ukraine 109 52,87 +25,38 the list of the main (in agriculture) green growth indicators (the oecd offers 60 indicators in total), which are in line with the declared objectives of the development of the eastern partnership countries and can be used to assess the effectiveness of the green growth policy. on an ongoing basis, it is especially important to monitor environmental and resource productivity, multi-factor productivity, land use dynamics, life expectancy, financing of r&d important for reducing energy and resource consumption, waste and emissions, and also the structure of energy, materials, water consumption; co2 emissions in terms of types of economic activity. the analysis carried out makes it possible to argue that the green transformations of the agrarian industry make it necessary to include the environmental factor in the system of basic socio-economic development indicators. failure to take into account the environmental factor in the approval of development strategies is largely related to the lack of country development, cost reflection of natural capital, and environmental degradation in traditional indicators. existing traditional macroeconomic indicators (gdp, income per capita, budget indicators etc.) ignore environmental degradation. the growth of these indicators in countries today is based on technogenic natural resource-intensive development. therefore, this creates the possibility of a sharp deterioration of economic indicators in the future in the case of depletion of natural resources and environmental pollution. among recent works in the area of developing new approaches to measuring baltic journal of economic studies 94 vol. 5, no. 1, 2019 development, the measurement of economic performance and social progress by j. stiglitz and a. sen should be noted (stiglitz, 2009). in particular, this report notes that the modern system of measuring socioeconomic processes is imperfect. gdp is not an ideal indicator for measuring welfare since it does not cover various social processes, changes in the environment, some of the phenomena that are commonly referred to as “sustainability” of development. a characteristic feature in this regard is the report of the european environment agency (2007), which widely uses indicators for the analysis and forecast of the environmental situation in europe (european environment agency, 2007). the key point in these approaches is an attempt to take into account the damage from environmental pollution and the depletion of natural resources at the macroeconomic level, to adjust ecologically the basic economic indicators of development. however, besides, indicators of accumulated damage (pollution and waste), resource depletion (which in the long run is not compensated for by the exploration of new reserves), the impact of environmental pollution on human health, landscape degradation, assessment of ecosystem services (forest, water) are necessary. 6. conclusions the use of own and accumulated experience of other countries in the direction of using levers to stimulate green growth allows drawing certain conclusions regarding the response of the agrarian sector of economies of the eastern partnership countries. the starting point of such a forecast is the general assessment of the state of the macroeconomic system and hierarchical levels of its structure, in which the usual parameters of functioning are transformed. the rapid growth of international commodity exchange is accompanied by increased control over the state of the environment and the prevention of possible damage from uncontrolled interference. limits and barriers to developing green growth indices and indicators are largely determined by the lack of necessary economic, social, and environmental information. nowadays there is a paradoxical situation in countries where many key indicators of green growth are included in the most important documents of the country’s development but they are not published in official statistical reference books, which complicates their use in decision-making processes at all levels and information of the public. for widespread use of green growth indicators at all levels, it is necessary to include these and similar indicators in state statistics of the countries and broad social circulation as soon as possible. among these indicators, the following are proposed: – the number of people living in contaminated territories (cities); – different indicators of natural resources intensity and pollution intensity; – indicators of soil degradation in agriculture (growth of eroded lands, imbalance of soil organic matter); – the number of people using drinking water that does not comply with hygiene standards (million people); – agricultural land use efficiency indicator (ecological and resource productivity, multi-factor productivity, land use dynamics). the passive position of countries in relation to the use of green growth indicators can forever form the raw material orientation of the economy. however, using an expanded system of green growth indicators or a system of core/key indicators will allow assessing progress towards sustainable development according to several key indicators in strategic planning. the practical application of green growth indicators in statistical 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(2005). koncepcja badań nad rolnictwem społecznie zrównoważonym [the concept of research on socially sustainable agriculture]. warszaw: ierigż. baltic journal of economic studies 18 vol. 2, no. 1, 2016 modelling of the possible integration consequences of the economy of ukraine into the economies of the european union or russia lesya buyak1, ternopil national economic university, ukraine mariya hryhorkiv2, yuriy fedkovych chernivtsi national university, ukraine abstract. the purpose of the paper is to mathematically reproduce the process of economic partnership between the two countries and its qualitative analysis, which include the following goals: to identify feasible outcomes, to formulate requirements for the selection of control parameters and coefficients, to give economic reasoning of the results of modelling and to provide alternative scenario of economic cooperation. methodology. a method of mathematical modelling has been applied to investigate the possible socio-economic impact of integration of ukraine into the eu economy. we are describing the basic mathematical model of the economy of ukraine and two mathematical models of the possible convergence with the economies of the european union or russia. the results of modelling are reflected by the capacity of relevant dynamic systems and the quantitative distribution of savings. results. on the basis of economic analysis of mathematical dependence, the conclusions on the possible economic consequences of integration of ukraine into the economy of the european union or russia have been established. practical implications. it has been found that a step towards the european union (eu) requires the alteration of principles of economic management, timely government control. this should be done in the process of restructuring of social standards and commercial activity in terms of traditional forms of management of enterprises with low financial capacities. the process of convergence with the economy of russia leads to conservation of the modern type of economy with many disadvantages of commercial management and government control as well as limitation of economic and political freedoms and growth of political instability in the country. value/originality. the got results extend modern economic and mathematical tool for research of integration processes and acceptance of the proper economic decisions. formalization of models of economy taking into account influence of the economic structured society on economic development allows at model level to probe difficult dynamic processes and possible consequences of integration of economy of ukraine in the economy of european union or russia. key words: economic partnership, economic modelling, mathematical model, economic dynamics, economic structure of a society. jel classification: f02, f42, c32, e25 corresponding author: 1 department of economic cybernetics and informatics, ternopil national economic university. e-mail: lesyabuyak@ukr.net 2 department of economic modeling and business informatics, yuriy fedkovych chernivtsi national university. e-mail: gmvmarichka@gmail.com 1. introduction since the establishment of independence ukraine is deeply integrated into the global economy, however remains one of the few major countries in europe that have not been included in integration associations. the strategic objective of ukrainian foreign policy is its active involvement in the european integration process. relations between the eu and ukraine are characterized by a wide range of links. they provide trade and investment, regional cooperation and technical assistance. a characteristic feature of the modern global development of the countries is stirring up of the development of integration processes in the whole world and europe in particular. however, even those countries that are not part of the integration associations inevitably feel the impact of the processes. they are themselves very complex, so it is necessary to understand what we need for effective entry into the eu area and what problems may ukraine face on its way. regarding macroeconomic stability when joining the eu, ukraine should boost its baltic journal of economic studies 19 vol. 2, no. 1, 2016 economic performance up to european standards, create a fairly developed market, consolidate the trend towards economic growth. ukraine will also benefit from the introduction of the single currency when entering the eu. as to additional investments in the economy of ukraine, the european market is a large market for products sale and source for meeting the needs. however, structural defects of foreign trade cooperation have become apparent. they lead to the rapid growth of negative trade balance. economic disadvantages stipulate loss of competitiveness of certain sectors, the complexity of transition to european level of prices, allocation of quotas of certain products. the transfer of potentially hazardous industries to ukraine, purely raw-exports role of our country, low-paid manpower, growth of demographic cut and illegal migration, all of them are threatening to ukraine. ukraine is interested in strengthening of economic cooperation with the customs union countries, since a basis of interest in cooperation with members of the customs union is a strategic economic interests of ukraine. that is the creation of a favourable and predictable business environment in their mutual relations; promotion for the restructuring and modernization of the national economy, with a significant increase of mutual turnover of high-technology products and services; coordination in the markets of third countries; increasing the share of the real sector of economy and strategic industries through industrial and technological cooperation among the enterprises of ukraine and russia in the fields of high technology sector, energy sector, mechanical engineering, space, electronics, shipbuilding and aerospace, energy, transport and agricultural engineering, chemical, light and food industries, agriculture and others. the structure of foreign trade of ukraine displays its simultaneous orientation towards both integration associations. therefore, the objectives of creating the conditions for sustainable economic development requires adequate foreign economic strategy that would give answers to issues related to the development of appropriate positioning of the state in the international division of labour. in particular, the issue of benefits and risks ukraine might face by implementing alternative scenarios of co-operation with the customs union is becoming of utmost importance. the concerns of bilateral relations between ukraine and russia are reflected in numerous works of local scientists v.s. budkin, v.m. heyets, l.i. fedulova, v.k. khaustova, l.v. shynkaruk. for example, a recent scientific report of experts from the institute of economics and forecasting nasu (national academy of sciences of ukraine) has results of studies on the possible effects of trade conflicts between ukraine and russia, and ways of cooperation with the russian side in various sectors of engineering. at the same time, an attempt to predict the ukrainian-russian cooperation, considering modern realities of international economic relations in the post-soviet areas, was made by russian scientists, such as o.a. bazaluk, n.n. bondariova, n.i. komkov, v.v. kotilko and others. full description of research results follow in (buyak & pauchok, (2012). some of the features of modern ukrainian economic relations are covered in the conceptual framework of this research in (buyak & pauchok, (2013). certain issues of potential economic interaction of ukraine with eu countries have been taken as the research material from works in (buyak, (2013). in has beed emphasized that introduction of commercial practices and social standards of the european union (toshkov, (2011) in our country, will lead to rapid transition of socio-economic processes (which require appropriate regulation) and the convergence of low-production economy of our country with highly productive economies in the eu without giving up modern principles of economic management in ukraine. it will also stipulate simplification of the economic structure of society in ukraine. modelling the quantitative characteristics of the possible integration of ukraine into the customs union (cu) was carried out regarding the existence and dynamics of the analysis of cu before and after its foundation. the analysis of the results of quantitative assessments of changes in terms of trade and their impact on individual members of the integration bloc has also been factored in. the experience of forecasting the results of ukraine’s accession to the wto and the actual performance of export-import activities over the next three years have been analysed. however, these studies have not examined the possible effects of alternative convergence of ukraine’s economy with the economies of the european union or russia. these processes can be possibly predicted in the light of synergy. first of all, it is necessary to analyse the existing system, develop a list of factors that negatively impact its self-organization and determine the critical moment of bifurcation. today social model of ukraine has no balance, along with this, full of aspirations for drastic changes towards existing european standards. the european social model is a balance between economic prosperity and social justice. it provides full employment, quality jobs, equality of chances, social protection. this is one of the facets that distinguishes europe, where social progress in the postwar years, followed closely by the economic growth from the american model, where a small group of individuals gained an advantage due to the greater number of people (malkov, malinetskiy & kurdyumov, (2002). the level of welfare of ukrainians is considerably lower than the european standards. its increase is solely possible after fair redistribution of income which is received from the business between owners and employees, overcoming of tax minimization schemes and shadow economy. the solution is to develop new scientific projects, it technologies, further upgrading of all levels of society and production (toshkov, (2011). the objective of the article is to mathematically reproduce the process of economic partnership between the two countries and its qualitative analysis, which include the following goals: to identify feasible outcomes, baltic journal of economic studies 20 vol. 2, no. 1, 2016 formulate requirements for the selection of control parameters and coefficients, to give economic reasoning of the results of modelling and provide alternative scenario of economic cooperation. 2. conceptual fundamentals of the modelling let us consider the conceptual framework of model of economy of ukraine and take two groups of participants – workers (their number is n1) and business owners (their number is n2). their amount of savings corresponds to u1, u2. part α1 (i=1,2) of savings they spend on private consumption, part β1 (i=1,2) – for industrial consumption (α1=1 2 2( / )f u pβ ; β1=0; 2 2 1α β+ = ). business owners produce one type of aggregate product for the price p. amount of product belonging to business owner is described by the production function 2 2( / )f u pβ , depending on capital provision 2 2 /u pβ . amount of consumed product is described by the function of consumption ( / )i iq u pα depending on the purchasing power /i iu pα (i=1,2). this function is piecewise convex. it has a curve in the area between purchasing power at the level of consumption of daily goods and durable goods (chernavskiy, starkov & shcherbakov, (2002). workers earn salary s1 and pay income tax κ1. business owners pay tax on payroll budget χ2 and income tax κ2 and incur production expenses λ2. let us work out an equation of the model of economy of ukraine (without external influences). the rate of savings change u1 of workers is proportional to difference between their income (salary s1), minus tax κ1 and spending for personal consumption: ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + , (1) where ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + is a random function with zero expectation that simulates random revenues and expenditures of workers. the rate of savings of business owners is proportional to difference between their profit on sales and expenditures on salary for workers and on production needs as well as personal consumption: ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + (2) where ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + – is a random function with zero expectation that simulates random revenues and expenditures of owners. the rate of price change p of goods depends on the difference between the actual consumption by workers ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + and a part of «market basket» q0 which is subjectively planned by monopoly market: ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + , (3) where θ is inertia parameter, ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + is a random function with zero expectation that simulates random deviations price. equation (3) corresponds to a closed economy in which most citizens can not achieve consumption level higher than daily living needs. the solutions of equations (1) and (2) are random values that are describing the statistical distributions 1( )r u , 2 ( )r u , indicating the number of participants in the economy that have savings [ , ]u u du+ . since equation (1), (2) are of langevin type, in the stationary case their solutions are describing well known distributions (tikhonov, (1982)): ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + , ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + , where r10, r20 are normalization coefficients and g1, g2 are the parameters dependent on functions ξ1, ξ2. parameters v1, v2 are describing the effective demand: ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + , ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + . since, ξ1, ξ2 functions are statistically independent, the potential of the dynamic system (1), (2) eaquals the sum of potentials ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + . potential 1 2( , )v u u is describing a surface in the range of values 1 2,u u . let us select the savings of workers * 1 1u u const= = which are close to their actual value. omit the suffix number in the savings of business owners. the function ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + . (4) is describing potential of business owners for the value 1u const= of the workers’ savings and determines the effective demand of producers as well as consumers at the same time. the appropriate distribution of business owners’ savings (g2 is replaced with g): ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + . (5) the graphics of functions ( ), ( )v u r u are shown in figure 1. 3. mathematic model of economic convergence with the economy of european union let us consider how the model will change (1)-(3) if implementation of reforms, which meet legal standards and practice of economic management in the eu, comes possible. some features of the implementation of this practice were provided by draft treaty of eu (hnativ, kostrobiy & tokarchuk, (2011)). after the possible entry of ukraine into the eu, business owners receive income from exports of goods to the eu at price in the amounts of ( )q t : ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + , (2e) where μ is customs tariff, 2 ( )tξ is a random function that simulates deflection of entrepreneurs’ savings. baltic journal of economic studies 21 vol. 2, no. 1, 2016 under the terms of compliance with the european practice of economic management, pricing will depend not on the subjective planning (3), but on the difference between the demand for the product and its supply ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + . (3e) dynamic system (2e) is described by a potential of: ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + . if we take ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − + ( ) ( ) 2 2 2 2 12 1 i i i i du n pq u p pq u p dt n α α = = − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( )1 1 0 ( )p dp q u p q t dt θ α ξ= − +   ( )21 1 10 1 1 1( ) exp 2 ( )r u r v u g= − , ( )22 2 20 2 2 2( ) exp 2 ( )r u r v u g= − ( )11 1 1 1 1 1 10( ) (1 ) u v u s pq u p duκ α= − −  ∫ ( )( ) ( )2 12 1 2 1 2 1 1 2 1 2 2 2 2 20( , ) (1 ) ( ) u v u u n n pq u p s pf u p duα χ λ κ β− = − + − + ∫ 1 2 1 1 2 1 2( , ) ( ) ( , )v u u v u v u u= + * 1( ) ( , )v u v u u=  ( )220( ) exp 2 ( )r u r v u g= − ( ) ( ) 2 2 1 2 2 12 1 ( )(1 )i i i du n pq u p pq t pq u p dt n α µ α = = + − − −∑ ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s pf u p t n χ λ κ β ξ− + − + + ( ) ( ) 2 2 2 2 1 i i i i dp n q u p n f u p dt θ α β =   = −    ∑ ( )( )2 12 1 2 2 1 1 1 2 10( , ) (1 ) ( )(1 ) u ev u u n n pq u p s pq tα χ µ −= − + + − −∫ ( )2 2 2 2 2( ) pf u p duλ κ β− +  . 1 2 1 1 2 1 2( , ) ( ) ( , )e ev u u v u v u u= + into account, with *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< we will get *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< . (4е) appropriate distribution of business owners’ savings: *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< . (5e) the graphics of functions ( ), ( )e ev u r u (formula (4e), (5e) and (4), (5) similar) are shown in figure 1. equation (1), (2e), (3e) and functions ( ), ( )e ev u r u are describing the possible impact of the european practice of management on the economy of ukraine. let us consider the economic conclusions arising from the mathematical properties of functions ( ), ( )v u r u , ( ), ( )e ev u r u . the properties of these functions regarding the economy of ukraine have been deeply studied. the potential of our economy has two minima that meet steady states of low-production and high-performance are described in fig. 1 (they are indicated as u1, u2). at points of the minimum ( )v u distribution ( )r u has got maxima which are describing the main economic groups of the participants of economy. the majority of producers in ukraine have low financial capacity that corresponds to the maximum ( )r u at the u1 point. under the model (1), (2e), (3e) convergence of low-production ukrainian economy with highly productive economies in the eu leads to increased financial capacity of participants on the left maximum u1 distribution r(u). in particular, this is predetermined by the demand for their products in other countries. consequently, the extremums of ve(u) potential and re(u) distribution are shifting to the right: 1 1eu u> . this successful management of the economy at the macro level is the result of growing financial capacity of workers and economic activity of business owners to the left maximum of r(u) distribution. extremum u2 meets the high-performance economic status. principles of management of ukrainian and european business owners with u>u2 savings are significantly different. a unique respect for the economic participants with weaker financial capacity is dominating in western countries. this majority of the economies of the west refer to the right maximum of distribution and axis of coordinate of this maximum is shifting to the right. participants of ukraine’s economy from the principles of behaviour u>u2 area, especially those from the right end of the distribution r(u) maintain the behaviour 2 0du dt > (where private savings are not reduced) 1 0( / )q u p q< (with restriction of citizens’ income) which are being implemented by economic methods (privatization, displacement of competition, monopolization of markets and pricing), and by means of government management (complication of the legal framework of economy management, restriction of licensing, financial requirement, etc.). as a result, ukraine’s economy is operating as «maxwell demon» which is «sorting» the participants of the economy according to their financial capacity and makes it impossible to «mixing them». this leads to shifting of the right maximum number of savings participants 2 2eu u< to the left side in the model, and reduction of the space under the graph re(u) on the max eu u> field. the described change of management principles of business owners with high income u>u2 is not beneficial for them in terms of short-term economic assessments. authorities in ukraine are not ready to abandon adopted “oligarch” principles of economy. that is why there is natural resistance to the possible convergence of ukraine’s economy with the european union (buyak, (2013). fig. 1b with shaded area shows how the economic structure of society after the beginning of convergence of ukraine’s economy with the economy of the european union will change. shaded area above the line r(u) is describing the number of owners who have improved financial capacity by increasing the purchasing power of citizens with permanent income and as a result of changes fig. 1. illustration of the change in the economic structure of society during the convergence of ukrainian and the eu economies baltic journal of economic studies 22 vol. 2, no. 1, 2016 in the structure of expenditures of producers with a high income. the latter reduces the cost of private consumption, together with the volume of deposits and investments in other countries and therefore increase investment flow in the domestic economy. fig. 1b has a dotted line that shows the change in the economic structure of society as a result of investing in production by business owners with high incomes. there fore it is necessary to produce raw materials with high level of processing and provide effective sales techniques etc. introduction of «social standards» is also associated with the convergence with the economies of the european union. according to european standards of economic management (to prevent social tensions) it is commonly accepted to limit the number of people with a very high income maxeu u> (see segment d). to do this, a method of progressive taxation and antitrust regulation are being implemented. restructuring of society is marked by arrows on fig. 1b (transition from areas a and d to c) is good for society because it leads to the creation of single modal distribution of the number of people according to their income. first of all, the restructuring is favourable for business owners with average income from area c and skilled workers (who receive large salaries). social eu standards differ from the social structure of ukrainian society. in particular, conventional boundaries of «middle class» min max[ , ]e eu u does not equal to conventional boundaries of the distribution maximum re(u). these differences lead to rapid transients (buyak & pauchok, (2013)), which will require appropriate regulation. distribution re(u) in the area b is diminishing: bigger financial capacity is resulting in decreasing number of enterprises with low productivity technologies. a fragment of the distribution is indicated by a dotted line. however, according to eu standards in the field b the distribution has to increase re(u) (number of workers is proportional to their skills area b). the corresponding line graph is indicated by a bar-dotted line. this discrepancy is connected with the activities of companies with low financial capacity, particularly small farms. this contradiction is between national economic culture of the ukrainian and eu standards need to be addressed without breaking the development of economic and cultural processes typical for ukraine and preventing russian propaganda in the matter. in particular, it is important to improve the technical equipment of individual agricultural and other farms. the economic structure of ukraine’s economy is undergoing simplification unless you take care of the elements of social structures that are illustrated by the fragment of distribution re(u) ùù kre eù ∈ . so, from the above mentioned the following conclusions occur. during the convergence of the economy of ukraine with the eu economy social and economic interests of the three participants of the economy become apparent: eu citizens, citizens of ukraine with small and medium income (see areas a, b, c), citizens of ukraine with high income (see area d). the introduction of european standards requires regulatory protection of small businesses with low financial capacity, especially in traditional forms of management. 4. mathematical model of economic convergence with russia let us consider the features of convergence of ukraine’s economy with the economy of russia. modern russian authorities are linking the economy with politics and it is the foundation of power and military doctrine of russia, after all it is a common practice of commercial activities. the impact of policies on the economy can be noticed the fact that prices, tariffs, foreign exchange rates, volume of deliveries (and other items of trade relations) are set up on the basis of two factors: market value, and the «political distance» between russia and the commercial contractor. for example, the price of gas determines the «geographical and political» space between russia and the importer of gas. another feature of the russian economy is a frequent significant change in the scope of supply (imports, exports) as well as voluntary options parameters of commoditybased economy (prices, tariffs, rates) influenced by «change of real or imaginary political environment». cooperative relations between russian and ukrainian enterprises are being ceased by russian side, referring to certain political motives. instead of increasing access of ukrainian producers to the russian market (according to preliminary political agreements) russia is terminating exports of ukrainian confectionery dairy and meat products, causing major losses to producers. in addition, local market research shows that in some regions russian non-residents support the activities of privatized enterprises, while others cease their activities. it shows that the russian policy of «intermittent strong alteration of parameter in economic relations» has a temporal and spatial aspects. finally, it affects the financial position of business owners and workers. so, regardless of the circumstances, commercial and political propaganda, russia is trying to influence the economic conditions of enterprises of ukraine through intermittent changes in activity in economic relations. from a mathematical point of view this means that the parameters of corresponding mathematical models are random values with significant variance. dynamics of savings of workers depends on the ratio of supply and demand and random function *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< : *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< . (1r) variance *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< is bigger than the variance *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< . typical duration of the change *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< is the length of one quarter. for a possible convergence between ukraine’s economy with the economy of russia, the dynamics of the savings of business owners also depends on the difference between income from sales and expenditures on consumption and production needs: baltic journal of economic studies 23 vol. 2, no. 1, 2016 *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< , (2r) where ( )p t is a random price of imports to russia, ( )tµ is a random function describing the customs tariff; ( )q t is a random volume of exports to russia; 2 ( )tλ is a random change of production expenses caused by the change of russian certification requirements for imports from ukraine; 2 ( )tξ is a random function with zero mathematical consumption that simulates deviation of expenditure and income owners. random functions in equation (2r) contain two additive components: deterministic trends that describe the impact of commercial circumstances and random function with zero mean, which reflects politically motivated plan: *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< ; *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< . substituting these functions in equation (2r), and writing separately deterministic and random summands, we will get the following equation *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< , (3r) where *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< is the amount of random summands which are grouped during conversion of equation (2r) into (3r). dynamical systems (1r), (3r) and have the potential 1 1( )v u and *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< , *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< , that is *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< or *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< with *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< . (4r) appropriate distribution of savings for business owners is the following: *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< , (5r) where 20r is a coefficient of normalization, g is a parameter depending on the function 2 ( )tξ . the schemes of functions graphics ( ), ( )r rv u r u , those are functions (4r), (5r), shown in fig. 2. the function 2 ( )tξ simulates discrete economic relations with russia, which are politically motivated by russian authorities. therefore, the average position of balance 1 2,r ru u lies to the right of the relevant provisions of balance 1 2,u u . that is how a group of participants of economy (workers and business owners) appear. they are economically dependent on faltering exports to russia. dotted arrows in fig. 2.b mark shifting of participants of the economy from the group of producers for the domestic market to a group of importers in russia. the area of shaded elements in this figure indicates the number of participants of the economy that support economic policy of russia. the second maximum ( )r u lies to the right of the second maximum ( )r u . variance 2 ( )tξ is bigger than the variance 2 ( )tξ . this suggests that the distance between the balance position in lowand high-performance conditions described by potential (4), is bigger than that distance to the system described by potential (4r): *1 1u u const= = we will * 1( ) ( , )e ev u v u u=  ( )220( ) exp 2 ( )e er u r v u g= − ( )1 1 1 1 1 1(1 ) ( ) du s pq u p t dt κ α ξ= − − +  ( ) [ ] ( ) 2 2 1 2 2 12 1 ( ) ( ) 1 ( )i i i du n pq u p p t q t t pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ) ( ), n s t pf u p t n χ λ κ β ξ− + − + +  ( ) ( )pp t p tξ= +   ; ( ) ( )t tµµ µ ξ= +   ( ) ( )qq t q tξ= +    ; 2 2( ) ( )t tλλ λ ξ= +    ( ) [ ] ( ) 2 2 1 2 2 12 1 1i i i du n pq u p pq pq u p dt n α µ α = = + − − −∑   ( ) ( )1 2 1 2 2 2 2 2 2 (1 ) ( ), n s pf u p t n χ λ κ β− + − + + ξ  ( ) [ ] ( ) 2 1 2 1 2 1 2 1 10 1 1 2 2 1 2 2 2 2 2 ( , ) 1 (1 ) ( ) , u rv u u n n pq u p pq n n s pf u p du α µ χ λ κ β − − = + − − − + − +  ∫    1 2 1 1 2 1 2( , ) ( ) ( , )r rv u u v u v u u= + * 1 1u u const= = with 2u u= * 1( ) ( , )r rv u v u u=  ( )220( ) exp 2 ( )r rr u r v u g= −  ( ) ( )1 1 1 1, ( ) , ( )r r ru v u u v u< , where the symbol ... indicates the standard in the space of values. this means that during the intermittent economic interaction with russia, the possibility of accidental transfer of enterprises with high-performance into lowperformance conditions is decreasing, in particular on the basis of the phenomenon of stochastic resonance. 5. conclusion trade with the countries which are non-members of the cu remains a key factor of economic development of the cu countries. secondly, there are no definitive assessments of the positive or negative effect of integration within the customs union for now. the lack of significant effects of reintegration for mutual cooperation, possibly indicate the error of russian experts concerning assumptions of high growth potential in member-countries as a result of the creation of new integration bloc. the results of modelling and integrated assessment of scenarios of interaction of ukraine with the cu show that the most appropriate scenario for ukraine is the following: «ukraine out of the ms: status quo +». in this scenario, ukraine keeps the advantages of being open for cooperation with key partners, and has benefits from the strengthening of economic sovereignty, based on diversified development strategy and energy efficient economy. comparison of the economic impact of a possible convergence of ukraine with the economies of the european union and russia. comparison of the economic fig. 2. illustration of the change in the economic structure of society during the convergence of ukrainian and russian economies baltic journal of economic studies 24 vol. 2, no. 1, 2016 impact of a possible convergence of ukraine with the economies of the european union and russia leads to the following conclusions. convergence of ukraine with europe requires from ukrainian enterprises the improvement in all aspects of management in order to step into the eu market, which is politically affordable. a prerequisite for this is a change in the principles of economic management. during the convergence with the eu it is necessary to introduce «social standards», use special measures to preserve traditional forms of business management, despite their temporary low financial capacity. that is, convergence with the eu economy leads to the transformation of modern closed economy in ukraine to an open economy with a possible transition to its high-performance condition, what is called «economic miracle». the convergence of the economies of russia closes down, for a long time, a modern type of economic relations with its inherent biting social contradictions, political and economic dominance of the owners of large enterprises, loss of economic and political rights by citizens, weakening of the sovereignty of the country. references: buyak, l.m. & pauchok, v.k. (2012). ukraine on the border between east and west: economic and mathematical model and analysis of its solutions. ternopil. grehit: 72. buyak, l.m. (2013). basic mathematical model of socio-economic processes in the european union. naukovyy visnyk nltu ukrayiny, 23(3): 362-369. buyak, l.m. & pauchok, v.k. (2013). mathematical model of a possible complex open economy of ukraine. naukovyy visnyk nltu ukrayiny, 23(15): 342-352. hnativ, b.v., kostrobiy, p.p. & tokarchuk, m.v. (2011). mathematical modeling of economic processes by nonequilibrium statistical mechanics. visnyk natsionalnoho universytetu «lʹvivsʹka politekhnika», 696: 93-100. malkov, s.yu., malinetskiy, g.g. & kurdyumov, s.p (2002). mathematic modelling of historical provesses. moscow: nauka. tikhonov, v.i (1982). statistic radio engineering. moscow: radio i svyaz: 624. toshkov, d. (2011). transposition of eu social policy in the new countries – eu member states. journal isssledovaniy sotsyalnoy politiki, 8(3): 295-318. chernavskiy, d.s., starkov n.i. & shcherbakov a.v. (2002). on problems of physical economy. ufn, 9(9): 1045-1066. леся буяк, мария григоркив моделирование возможных последствий интеграции хозяйства украины в экономику евросоюза и россии аннотация. целью работы является математическое моделирование процесса экономического партнерства двух стран и качественный анализ математической модели, который включает следующее: наметить пути возможного развития событий, сформулировать требования по выбору управляющих параметров и коэффициентов модели, предоставить экономическое толкование результатам моделирования, реальную альтернативу сценария экономической кооперации. методика. для исследования возможных социально-экономических последствий интеграции хозяйства украины в экономику евросоюза или россии применены методы математического моделирования. стационарные решения моделей отражено потенциалами соответствующих динамических систем и распределением количества участников экономики по сбережениям. результаты. построены базовая математическая модель экономики украины и две математические модели возможного ее сближением с экономикой евросоюза или россии, используя теорию экономической динамики. на основе экономического анализа математических зависимостей установлено выводы о возможных экономических последствиях интеграции хозяйства украины в экономики евросоюза или россии. практическое значение. в частности, установлено, что сближение с евросоюзом требует предварительной изменения принципов хозяйственного управления, своевременных мер государственного регулирования при реформировании социальных стандартов и практики коммерческой деятельности, особенно – в отношении традиционных форм хозяйствования предприятий с низкой финансовой возможностью. сближение с экономикой россии предопределяет консервацию современного типа экономики со многими недостатками коммерческого управления и регулирования, а также – приводит к ограничению экономических и политических свобод граждан, усиливает политическую нестабильность в стране. значение/оригинальность. полученные результаты расширяют современный экономико-математический инструментарий исследования интеграционных процессов и принятия соответствующих экономических решений. формализация моделей экономики с учетом влияния экономически структурированного общества на экономическое развитие позволяет на модельном уровне исследовать сложные динамические процессы интегрирования хозяйства украины в экономику евросоюза или россии. baltic journal of economic studies 65 vol. 5, no. 2, 2019 corresponding author: 1 international humanitarian university, ukraine. e-mail: kachuriner22@ukr.net orcid: https://orcid.org/0000-0003-2553-5071 2 national university "odessa law academy ", ukraine. e-mail: malvina.grushko@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-65-72 formation of the innovative project financing model in modern conditions viktoriia kachuriner1, malvina hrushko2 abstract. the state of development of the leading countries of the world proves that its main factors are innovative high technologies, new equipment, a new organization of labour and production, a new motivation for entrepreneurship. they ensure the economic stability of micro and macro systems, their competitiveness both in the domestic and foreign markets. given the limited nature of state financial resources, the problem of finding additional sources of financing for the purpose of activating the development of innovation activity in ukraine is becoming increasingly urgent. today, many countries are actively implementing modern models of financing of innovative projects. in many countries, hybrid financial instruments are transformed in the modern environment into hybrid investment models such as crowdfunding and crowdinvesting. research of existing models of innovative economic development is always relevant, development tendencies are constantly changing under the influence of global conditions. in ukraine, it is possible to predict the development of such innovative models as: a resource model without high-tech production (natural resources – production – money); innovative model (transformation of money for research into knowledge – transformation of knowledge into skills of workers and innovations – transformation of innovations into goods – money); intellectual-donor model. an analysis of the world experience of using such forms of activation of innovation activity in the usa, japan, western europe, the cis, and other countries proves their relevance and prospects for ukraine. at the same time, the efficiency of the functioning of innovation centres is largely determined by the proper level of financing of their activities, especially at an early stage. the model “university – innovation centres” aims to overcome the gap between education and the implementation of the knowledge gained in creating innovation. within the framework of this model, two blocks are key: a block of joint research centres “university – industry” and a block of the creation of innovation centres and startup. the advantages of such a mechanism are: firstly, for business – direct state support for innovations, the possibility of investing under the state guarantees; and secondly, for the state – reduction of budgetary expenditures at the expense of funds attracted in the sphere of innovation activity, increase of innovation activity of priority sectors of the economy, distribution of innovative risks. the model of joint research centres “university – business structure” provides two variants of financing of such centres. the first option is based on the formation of a research centre in the form of corporation, which may include universities, private investors, local authorities, other sponsors and stakeholders. traditionally, ukraine has significant potential in some important fields of science, such as medicine, physics, astronomy, biology, chemistry, materials science, space science, and earth science. participation in horizon 2020 allows creating additional opportunities for the successful development of these branches of science. key words: innovative model, innovation centre, innovative project, financing mechanism, horizon 2020. jel classification: o16, o38, h50, p42 1. introduction the state of development of the leading countries of the world proves that its main factors are innovative high technologies, new equipment, a new organization of labour and production, a new motivation for entrepreneurship. they ensure the economic stability of micro and macro systems, their competitiveness both in the domestic and foreign markets. within the framework of integration processes for our country, there was a necessity to form own model of innovative development of the domestic economy. in these conditions, positive and effective transformations of ukrainian society are possible only on the basis of the comprehensive use of all fundamental factors of social baltic journal of economic studies 66 vol. 5, no. 2, 2019 progress, the key importance of belongs to the science, the latest knowledge and technologies in the practical activities of all business entities. given the limited nature of state financial resources, the problem of finding additional sources of financing for the purpose of activating the development of innovation activity in ukraine is becoming increasingly urgent. the mechanism of turnaround financing and related services can be: loan, credit, leasing, joint activity, financial investment. state financial institutions, which ensure the implementation of the state policy of supporting innovation activities in the priority directions of scientific and technological development, finance innovative projects under preferential terms of returning the provided financing. today, many countries are actively implementing modern models of financing of innovative projects. as a rule, such projects are of an investment or innovative nature but they are not always closely related to the main activities of the enterprise. however, for some types of businesses, the funding system for individual projects may become the main source of implementation. project financing becomes one of the active forms of operational finance management. this is the ability to convert money into the final result – the project implementation, is important for the enterprise since it serves as an active tool for operational investment. in many countries, hybrid financial instruments are transformed in the modern environment into hybrid investment models such as crowdfunding and crowdinvesting. nevertheless, the application of even the most progressive models does not provide the maximum performance of the organization, if these models do not have an interconnected mechanism. in the context of building such a mechanism, the question arises about the establishment of effective systems for project management of an enterprise or entrepreneur. today, a unique universal solution that simultaneously includes all effective tools of multiproject management does not exist. in our opinion, there are still outstanding issues regarding the creation of a specific mechanism for financing the activity of local innovation projects. the methods and tools for such financing, as well as the mechanisms for investing and financing projects, their advantages for each business entity, need to be specified. research of existing models of innovative economic development is always relevant, development tendencies are constantly changing under the influence of global conditions. new countries-leaders emerge, which modernize their experience of financing innovative development, ineffective or fired forms of interaction disappear. such a process is fleeting and changing. the main purpose of the paper is to generalize foreign experience in the formation of models of innovative development of the economy and to define the main criteria for the identification of alternative ways on activating new mechanisms of financing innovative projects in ukraine and identifying prospects for further cooperation of innovation centres and other economic entities. 2. the methodology of research the theoretical foundations of innovative development and the issue of management of innovation processes are highlighted in the works of many well-known scientists, for example, in studies by galchinsky a., heiets v., kinakh a., seminozhenko v. (2002), heiets v. (2003), melnychenko o. (2012), hamann m. (2004) and others, there are considered general theoretical issues of innovation management at macro and micro levels, the influence of the innovative component on the development of an enterprise or a country, and determined the importance of the introduction and development of various forms of innovation activity in modern development conditions. the connection of innovations and the potential of a country or region are researched in scientific works by onyshko s. (2004), lugovy v., gusev v., knyazev v. (2002), bubenko p., semynozhenko v., amosha o., moiseyev g. (2006), and others. in addition, it should be noted that the conceptual framework for the adaptation of world innovation models of economic development has not yet been formed. taking this into account, there is a need to generalize the world experience in relation to the model of innovation development, which is the purpose of this work. problems of financing innovation and increasing its activity during the last decade are widely investigated by modern scholars: denisyuk v. (2010), fedulova  l., volosyuk m. (2011), martunyuk o. (2017), nikolayenko yu., sakun o. (2015), shostak l. (2010), kim k., hann i. h. (2014), hervé f. et al. (2016), baskerville r . f., cordery c. j. (2014), and others. the main aspect of these studies is the state of innovation activity, sources and ways of its financing under the current conditions of integration of ukraine’s economy into the world economy. in spite of the current developments of scholars in the field of the theory and practice of financing innovation, the problem of finding alternative mechanisms of financing for innovation centres in ukraine remains insufficiently revealed. according to international financial organizations’ data published in the specialized publications, ukraine belongs to countries with a very low level of high-tech products in exports (5%), while on average this figure in the world reaches 21% (philippines 65%, the usa 32%, ireland 41%, the netherlands 63%) (hamann, 2004). having analysed the state policy of developed countries in the field of innovative development by the degree of state regulation, two models of regulation of development of the country’s innovative potential can be distinguished. baltic journal of economic studies 67 vol. 5, no. 2, 2019 the anglo-american model of innovative development is characterized by complete autonomy and independence of entrepreneurship in innovation. under such a model, market mechanisms themselves contribute to accelerating the innovation process, therefore, the state focuses its efforts on supporting the development of a market environment. the second model of innovation policy is the french-japanese model of innovative development, characterized by a significant influence of the state on the development of the innovation process, in particular, by non-market methods – through direct grants and subsidies to enterprises and organizations that carry out innovation activities. however, none of these models in pure form is used by any country (shostak, 2010). the world experience of becoming a modern technology market in the usa, japan, sweden, and other countries shows that the main element of the state policy in the developed countries are the programs of creation of technoecopolises and technopark structures as innovative centres, which developments provide the latest technologies to various fields of industrial and agricultural production, transport and communication, etc. a striking example is finland, in which the so-called “scientific-industrial incubators” or “business incubators” operate. in such incubators, future commercially attractive inventions go from idea to manufacturing of competitive products, which are of high demand in the global market for goods and services. these incubators combine universities, research and production centres, lawyers and managers, venture companies into one single link. by the way, the main form of providing budget funds is to provide free subsidies, grants for research projects on a competitive basis. it is noteworthy that in finland, as in most developed countries, there are no preferences for those who create and implement innovative developments. from successful projects, the state receives a significant replenishment of the budget in the form of taxes. silicon valley (california, usa) is the largest investment centre, in which highly qualified personnel are concentrated: scientists, engineers, designers, programmers, lawyers, managers, venture entrepreneurs. in europe, joint government decisions of the eu member states have formed a number of institutions that provide direct support to the innovation process: the european investment bank, the european investment fund, the initial capital and eurotech capital projects, as well as a special small business support program (hamann, 2004). the main investment institute in europe is the european investment bank (european bank – eib). almost half of its industrial-oriented loans are intended for small enterprises, with the priority given to providing venture capital to small companies working in the field of new technologies. in ukraine, one can predict the development of such innovative models: 1) resource model without high-tech production (natural resources – production – money); 2) innovative model (transformation of money for research into knowledge – transformation of knowledge into skills of workers and innovations – transformation of innovations into goods – money); 3) intellectual-donor model (an abbreviated version of the model (ii), from which the stage of production is withdrawn). as the practical experience of world countries with different levels and efficiency of economic development shows, the second model of economic reproduction is the most effective. however, in ukraine today, the first and third models dominate: resource without hightech production (i) and intellectual-donor (iii). the mentioned models in the strategic perspective have a relatively low level of efficiency, as they lead to the depletion of the country’s resources, the leak of factors of production of the national economy abroad, and make it impossible to ensure high indicators of the welfare of the population (onyshko, 2004; shostak, 2010). an innovative type of economic development is increasingly becoming the foundation that determines the economic strength of the country and its prospects in the world market. the main feature of the contemporary expansion of forces in the world is a significant gap between the leading countries that create the “innovative enclave” in the world from the less powerful countries, which are forced to fully depend on the position of “active players.” in countries belonging to innovation leaders, there is a high concentration of the most profitable types of business (with the highest content of added value in the price of the product), mainly a high-tech structure of national production, the transfer of industrial-technological cycle of productions that are environmentally-friendly, resource-intensive, etc. abroad, concentration of the largest financial flows (shostak, 2010). an important point is the fact that the developed countries have started innovative development for quite a long time. the usa and japan are the economic superpowers that produce almost 40% of the world’s gnp. in the second half of the 1980s, japanese exports to the usa reached tremendous proportions for the latter, which was one of the main causes of the escalation of the japanese-american controversy. the usa remains the largest exporter and importer in the world. for example, the share of the us aerospace industry in world exports is 44 times higher than japan, while in the world exports, japanese cars are twice as large as american ones. japanese cars accounted for about 70% of the us car market in the 1990s, which made an attempt in 1995 to set a 100% tariff for japanese luxury cars. japan filed a complaint to the world trade organization and won the case (shostak, 2010). besides motor industry, the most competitive industries in the japanese industry include electronics and semiconductors, computers, baltic journal of economic studies 68 vol. 5, no. 2, 2019 office equipment, telecommunication equipment, home audio and video equipment, motorcycles, photographic equipment, machine-tool construction, shipbuilding, where japanese companies have big advantages. taking into account the analysis of the innovative development of the abovementioned developed countries, it should be noted that the first-priority task of forming an innovative development model in ukraine should be to overcome the false idea of the possibility of doing this by means of mechanical restoration of the necessary levels of state financing of the scientific and technical sphere. in this case, it is not only about the practical impossibility of accumulation of the necessary amount of funds in terms of the current state of public finances. most importantly, it is the lack of prospects of investing in the restoration of the scientific sphere without the emergence of adaptive to modern economy chains of the relationship between science, technology, and production. in ukraine, innovation has not yet become a proper means of improving competitiveness. the need for a transition to an innovative model of development remains relevant and is substantially enhanced in modern external and internal circumstances. it is worth noting that the model of the creation of innovation centres (in the form of technoparks, technopolises, business incubators etc., and the promotion of exclusively “high-performance” industries and productions) in ukraine gives local effects but is not very effective over the low susceptibility of the economy to innovations (fedulova, volosyuk, 2011). attempts to implement sectoral “technological leaps” in the conditions of maintaining the general unfavourable business and investment climate in the country, excessive fiscal pressure, the ineffectiveness of the institutional structure of the economy turn into losses in other sectors of the economy. production of high-tech industries does not find sales in other industries due to the high technological gap and the lack of motivation for use, which significantly reduces the synergistic effect of innovation, so the effectiveness of such “growth points” levels out on a public scale. therefore, the main task of innovative development policy is to ensure a balanced interaction of scientific, technical, and production potential, to develop and implement a mechanism for activating the innovation activity of business entities, and to disseminate innovations in all spheres of the national economy. 3. results and discussion an analysis of the world experience of using such forms of activation of innovation activity in the usa, japan, western europe, the cis, and other countries proves their relevance and prospects for ukraine. at the same time, the efficiency of the functioning of innovation centres is largely determined by the proper level of financing of their activities, especially at an early stage. to work out alternative financing schemes for innovation centres, it is expedient to describe this mechanism by creating special state programs. when creating such programs, it is advisable to take advantage of the us experience as one of the leading countries with an innovative type of the economy and the most effective mechanism for the formation of an innovation strategy. by adapting to the ukrainian conditions of the development of innovation centres such american programs as innovation research program, technology transfer program, small business technology transfer program, and advanced technology program (melnychenko, 2012), we propose to form a model “university – innovation centres – business”. the model of innovation project financing should be implemented at the following levels (nikolayenko, sakun, 2015): at the strategic level – public-private partnership agency, which should involve representatives of the public and private sectors. powers of the agency should include, first of all, the forecasting of the needs of the national economy, individual branches from the point of view of ensuring the technological advantages of their competitive development, competitive selection of innovative projects, creation or promotion of new and high-tech manufacturing, exhibition, information and marketing support of innovation activity; at the level of science – innovation centres (technoparks, industrial parks, science parks, innovation centres, research institutions, business incubators) that will assess the innovation capacity (market orientation) of research results, qualify innovation objects, provide accounting and tax assistance, patent protection, and registration of intellectual property rights to small innovative firms; at the level of implementation in production – commercial partnerships based on research institutions for the purpose of innovation activity, that is, commercialization of developments, which state scientific institutions will enter with intellectual property rights and private investors – with financial contributions; at the level of financing – innovative fund of joint public-private investment, which should be created in the form of a private joint stock company; formed in the form of a holding, 50% of the capital of which belongs to the state, and the rest – to private investors. in order to form effective mechanisms of financial support for innovation activity, innovations in industry, and ensuring economic growth in ukraine, it is expedient to introduce a separate structural element within the framework of the state financial system – innovation bank. this would contribute to an increase in the total turnover of financing for innovation projects of centres. at the initial stage of activity, the state must baltic journal of economic studies 69 vol. 5, no. 2, 2019 hold majority shares in this bank. other national cofounders of the bank will be large enterprises and any other interested solvent business entities, and subsequently, non-residents can be involved. in order to protect against risk and guarantee the return of private capital to an investor in case of a risk event, it is expedient to authorize the insurance company for investment in innovation selected by the executive authorities. this company should work closely with all institutional structures, first of all, with the innovation bank and the innovation fund. in order to ensure the co-financing of projects, it is necessary to form the following mechanism (denisyuk, 2010): providing direct loans by the innovative bank for those projects that cannot use the usual channels of the attraction of credit resources. it will open additional sources of resources for technoparks and business incubators while ensuring the financial turnover and profitability of the bank; provision by the innovation fund of joint publicprivate investment for the implementation of projects selected by the public-private partnership agency. this mechanism provides for the development of strategically important developments and research areas for the country; financial support of residents of industrial parks investing in innovations: co-financing of salaries for personnel involved in research work (50% is funded by the innovation fund); joint financing of projects, transfer to industrial parks of production with a greater value added (up to 40% is funded by the innovation fund). this would increase the attractiveness of the ukrainian industrial parks, create a business case for private investment in park construction and registration of parks in the national register, and stimulate the transfer of more high-tech industries to the country; co-financing of projects selected on a competitive basis by the public-private partnership agency, initiators of the creation of innovation centres: budget financing – 30% of the project cost, the rest – private companies or local self-government bodies; application of mechanisms of venture financing of risk innovative projects through the formation of joint venture capital funds at the regional level. it is advisable to apply the experience of israel and great britain. the share of specially created state investment funds in regional venture funds has become a catalyst for the development of venture capital investment and is still actively being implemented today. both funds are created in the organizational-legal form of a limited partnership and operate under the guidance of private management companies (usually foreign ones). the funds of the state usually make no more than 50% of each regional fund and the rest should be attracted from private investors. regarding the payment, there is the rule of the first victim in favour of the private investor (denisyuk, 2010). the advantages of such a mechanism are: firstly, for business – direct state support for innovations, the possibility of investing under the state guarantees; secondly, for the state – reduction of budgetary expenditures at the expense of funds attracted in the sphere of innovation activity, increase of innovation activity of priority sectors of the economy, distribution of innovative risks (martunyuk, 2017). the model “university – innovation centres” aims to overcome the gap between education and the implementation of the knowledge gained in creating innovation. within the framework of this model, two blocks are key: a block of joint research centres “university – industry” and a block of the creation of innovation centres and startup. for the creation of the first block, it is advisable to take advantage of the us experience as a basis. along with strategic business alliances over the past 30 years, the “university – industry” partnerships have been actively developing in the usa. financing in such cases is carried out on a contractual basis, and the owner of the research results is a financial company. the “university – industry” model has become so widespread that many institutions have created special centres (over 1000 throughout the usa) that serve such projects (nikolayenko, sakun, 2015). in our opinion, the stimulation of such cooperation contributes to accelerating the emergence of different types of innovation centres by combining the innovative potential of education and commercial progress, and the commercialization of innovations. the model of joint research centres “university – business structure” provides two variants of financing of such centres. the first option is based on the formation of a research centre in the form of corporation, which may include universities, private investors, local authorities, other sponsors, and stakeholders. each corporate member of the centre contributes to the joint fund an annual fixed membership fee, which is intended to fund fundamental research. the next step is to introduce scientific research into production by creating a spin-off company. in case of its successful operation, the centre’s fund should distribute the income received among the participants. universities and institutions need to report on licensing, investments from foreign investors in research and development and spin-off companies, income from spin-off activities, the number of jobs created or developed social products in front of the council of the centre. the second option involves participation in the financing of the innovative non-bank financial and credit institution “small innovative business support fund”, which was created in 2011 (resolution of the cabinet of ministers of ukraine (2011). the small innovative business support fund provides relatively small financial support to the baltic journal of economic studies 70 vol. 5, no. 2, 2019 centres – 20%. at the same time, 80% comes from other sources – mainly from industrial companies. if the centre can prove its ability to carry out serious research, the small innovative business support found provides a five-year grant that can be extended. the partnership of the parties in the centre is formalized through the adoption of joint decisions by the advisory industrial council of the centre, representatives of the university and business on conducting research works (the scheme is presented in figure 1). the indicator of success, according to the fund’s criterion, should be the amount of research carried out by the centre under contracts with industry. it is also determined that an important task for the state is to search for promising ideas at universities and research centres, to provide investment financing in the early stages of company development, to finance the development of business plans and research activities, and to expand the international cooperation of research organizations. the following mechanisms can be applied to provide financing: project financing up to 30% through direct subsidies; allocation of grants to half of the cost for the company if it conducts research in cooperation with the university, and not only develops a new product; allocation for the company of risky loans to 60-70% of the cost of developing a new product or process. the company is obliged to repay the loan if the development has been successfully introduced to the market; project financing up to two years, and in the case of favourable results of the development of a new product will continue for another 2-3 years in the form of a risky loan. such measures may be entrusted to the small innovative business support fund, as this does not contradict its statute and the purpose of creation. the horizon 2020 program is a key element of the eu’s research and innovation, with significant resources allocated (80 billion euros) for 2014–2020. research areas for project financing under the horizon 2020 program cover both natural and social sciences by three main thematic components (see table 1) (seventh fp7, 2013). associate membership in horizon 2020 allows ukraine to participate in the program under the conditions of a member state of the eu. in addition, this gives ukrainian research groups the right to act as a leading partner within the consortium. simultaneously with the acquisition of membership, an obligation to fund for financing the innovative project initial financial assistance universityscientific ideas centre for assessment and design (cpc) advisory industrial council of the centre preparation of feasibility study (fs) and industrial task (it) business structures formation of decision and financing decision on conducting r&d financing a greem ents the financial line of the full financing cycle of the project figure 1. formation of the research centre “university – business structures” source: improved by the authors on the basis of (nikolayenko, sakun, 2015) table 1 the main thematic priorities of the horizon 2020 frontier science industrial leadership social challenges european research council future and advanced technologies the marie skłodowska-curie actions for skills, training and career development research infrastructures (including electronic infrastructure) leadership in enabling and industrial technologies (leit): nanotechnology, advanced materials, biotechnology, advanced industrial production, ict, space access to risk financing innovations in small and medium enterprises health, demographic changes food safety, sustainable agriculture, marine research power engineering, transport, environmental protection, climate europe in a changing world; protecting freedom and security source: formed by the authors on the basis of seventh fp7 (2013), erasmus+ (2019) baltic journal of economic studies 71 vol. 5, no. 2, 2019 make financial contributions is established; however, half of such contributions may be covered at the expense of funds allocated to ukraine within the framework of the european neighbourhood instrument. in order to stimulate the cooperation of researchers from the countries of the eastern partnership and the eu member states and encouraging participation in horizon 2020, the commission has launched a project called “international collaboration in science, technology and innovation (sti) for the eastern partnership countries” (eap plus) (seventh fp7, 2013); erasmus+, 2019). the project consists of five events, including political dialogue and information campaigns: 1) identification of strategic priorities by supporting political dialogue between the eu and the eap participants and maximizing the association’s impact on h 2020; 2) strengthening the interaction of researchers and deepening participation in the h 2020, that is, the organization of information days, cooperation with scientific diaspora and grants for networking; 3) facilitating the implementation of a scientific and innovative interface that supports the community of best practices, i.e. analysis of joint patenting, clustering schemes, promotion of the concept of technology platforms to the eastern partnership countries; 4) optimum framework conditions and strengthening policy and program coordination through conducting training seminars for policymakers in the sphere of scientific and technical innovation, strengthening coordination and interaction with eu member countries’ policies and programs. 5) communication and information campaigns, activities using innovative measures. as of september 2017, ukrainian research teams submitted 41 190 applications to horizons 2020, 117 of which were successful (9.8%) and received funding in the amount of 17.23 million euros (project ri-links2ua, 2017). in order to facilitate the participation of ukrainian scientists in horizon 2020, a network of national contact points of ukraine was established, which includes universities and institutes of the national academy of sciences of ukraine. as of may 2018, there were 38 national contact points and 5 regional contact points (erasmus+, 2019). identify the key and largest projects that began to operate in ukraine and for which it is possible to formulate and use the proposed model for financing innovative projects. the anima project (aviation noise impact management through novel approaches) is aimed at developing a new methodology and tools for managing and reducing the impact of noise pollution on the environment. the project budget is 7.5 million euros for the period of 2015–2019 for a consortium of 22 partners from 11 countries. the ukrainian partner is the national aviation university (aviation noise impact management through novel approaches, 2018). the era-planet project (european network for observing our changing planet) aims to strengthen europe’s leadership in the global earth observing system of systems (geoss). the era-planet project will provide advanced tools and technologies to support decision-making processes for better monitoring of the global environment in various fields of earth observation. the project budget, implemented by a consortium of more than 40 institutions, is 11 million euros for the period from 2016 to 2020. ukrainian partner: space research institute under the national academy of sciences of ukraine and state space agency of ukraine (explore p2ps. era-learn, 2018). the ammodit project (approximation methods for molecular modelling and diagnosis tools) focuses on the use of applied mathematics in medicine and life sciences. budget: 823 500 euros. ukrainian partners: institute of mathematics of the nas of ukraine, institute of hydromechanics of the nas of ukraine, taras shevchenko national university of kyiv, national technical university of ukraine “igor sikorsky kyiv polytechnic institute” (cordis, 2018). the black sea horizon (bsh) project is directed to strengthen external relations of the eu with the targeted region by supporting biregional and regional political dialogue in science, technology, and innovation (sti). budget: 1 499 503 euros. ukrainian partner: institute for economics and forecasting of the national academy of sciences of ukraine (ukraine replication, awareness and innovation based on egnss, 2018). 4. conclusions regardless of the mentality of the nation or the innovation market, the creation of an innovative development model is a prerequisite for the development of society; it is the key to its normal development. of course, one can simply take over the foreign experience of innovative development of the economy, taking into account the specifics of the legislative framework and the state of the economy in general and effectively develop, however, if it were so easy, it would seem that all the countries of the world have long been on the path of effective innovative development. that is why we should not copy the achievements of our near and far neighbours but only learn from their mistakes. therefore, the proposed measures to improve the financial support of innovation centres are implemented through two state programs. these programs include the unification of innovative centres, financial institutions, industrial enterprises, higher education institutions, and private investors into a single system of interaction with the help of indirect instruments of state influence. the implementation of these programs will ensure the transition of production to a new innovative level, contribute to a positive shift in education, increase baltic journal of economic studies 72 vol. 5, no. 2, 2019 employment and, as a result, intensify the development of the national economy as a whole. the signing with the eu of the agreement on deepening relations and cooperation allowed ukraine to participate in the organization of joint measures and events devoted to scientific and technical development. the association for the coordination of cooperation between ukraine and the eu specifically emphasizes the need to promote the establishment of partnerships between the research sector and industry, as well as efforts to ensure the competitiveness of research results. according to the association agreement, in 2015, ukraine became a full participant in the key eu program on research and innovation – horizon 2020. traditionally, ukraine has significant potential in some important fields of science, such as medicine, physics, astronomy, biology, chemistry, materials science, space science, and earth science. participation in horizon 2020 allows creating additional opportunities for the successful development of these branches of science. references: melnychenko, o. (2012). innovative development of the national economy: challenges for the state, business and population. public construction, no. 2. denisyuk, v. (2010). commercialization of the results of scientific research: european experience and the state of ukraine. actual problems of scientific and technological and innovation policy in the context of the formation of a pan-european scientific space: experience and perspectives. kyiv: phoenix. resolution of the cabinet of ministers of ukraine (2011). on the formation of the state innovative non-bank finance and credit institution "fund for support of small innovative business": dated 12.12.2011 no. 1396. retrieved from: http://zakon2.rada.gov.ua/laws/show/1396-2011-%d0%bf bubenko, p., semynozhenko, v., amosha, o., zemlyakin, a., moiseyev, g. (2006). perspectives of innovative development of regions. kharkiv: "inzhek" vd. galchinsky, a., heiets, v., kinakh, a., seminozhenko, v. (2002). innovative strategy of ukrainian reforms. kyiv: knowledge of ukraine. heiets, v. (2003). innovative way of development is a modernization project of the ukrainian economy and society at the beginning of the xxi century. banking , no. 4. fedulova, l., volosyuk, m. (2011). trends in innovation and technological development of ukrainian industry. bulletin of the khmelnytsky national university, vol. 3, no. 5. hamann, m. (2004). state innovation management: ukraine and foreign experience. kiev: victoria. onyshko, s. (2004). financial support of innovation development: monograph. irpin: national academy of internal affairs of ukraine. lugovy, v., gusev, v., knyazev, v. (2002). system of priorities of the state innovation policy: sb. sciences works of the ukrainian academy of public administration under the president of ukraine. kyiv: uadu. issue 2. martunyuk, o. (2017). methodology for diagnostics of the company management and technological maturity. international economics journal montenegrin journal of economics, vol. 13, no 4. nikolayenko, yu., sakun, o. (2015). proposals to improve the financing mechanism of local innovation centers in ukraine. scientific herald of the international humanitarian university. series: economics and management, vol. 10. retrieved from: http://nbuv.gov.ua/ujrn/nvmgu_eim_2015_10_21 shostak, l. (2010). innovative models of world development. lviv polytechnic national university institutional repository. retrieved from: http://ena.lp.edu.ua seventh fp7 monitoring report. monitoring report (2013). retrieved from: https://ec.europa.eu/research/ evaluations/pdf/archive/fp7_monitoring_reports/7th_fp7_monitoring_report.pdf#view=fit&pagemode=none project ri-links2ua (2017). retrieved from: https://ri-links2ua.eu/object/document/481 erasmus+ (2019). retrieved from: http://mon.gov.ua/activity/mizhnarodni-zvyazki/uchast-u-programax-eserazmus-ta-gorizont-2020/gorizont-2020.html aviation noise impact management through novel approaches (2018). retrieved from: https://cordis.europa.eu/ project/rcn/212369_en.html explore p2ps. era-learn (2018). retrieved from: http://www.era-learn.eu/network-information/networks/era-planet cordis (2018). retrieved from: http://cordis.europa.eu/project/rcn/194356_en.html ukraine replication, awareness and innovation based on egnss (2018). retrieved from: www.project-ukraine.eu/ kim, k., hann, i. h. (2014). crowdfunding and the democratization of access to capital: a geographical analysis. robert h. smith school research paper. retrieved from: http://ssrn.com/abstract hervé f. et al. (2016). investor motivations in investment-based crowdfunding. baskerville, r . f., cordery, c. j. (2014). crowdfunding: a threat or opportunity for university research funding? baltic journal of economic studies 245 vol. 4, no. 2, 2018 corresponding author: 1 department of marketing and advertising, kyiv national university of trade and economics. e-mail: conference.fd@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-245-248 formation of brand positioning strategy diana fayvishenko1 kyiv national university of trade and economics, ukraine abstract. the purpose of this article is defining the term of positioning, as well as creation and implementation of the success principles of the brand positioning strategies, discussed the process of creating a positional scheme. methodology. applied the principle of systems, comparative analysis, induction, deductive method and gnoseological analysis (analytical, synthesis, logical, comparison). results from researching the principles of successful strategies for the development and positioning of a brand brought to the following conclusions: the brand positioning is a process of creating its own image, distinctive properties, positive associations and values in consumers’ mind in order to create a sustainable trademark image and ensure consumers’ attachment to this trademark. development and implementation of the company strategy of positioning comprises nine basic stages: 1) analysis of the external and internal environment, goods analysis; 2) trademark design; 3) selection and reasoning of differential positioning features; 4) defining a strategy (positioning method description); 5) defining strategic and tactical targets, foresight for their achievement; 6) development of an implementation strategy plan; 7) strategy implementation; 8) the results evaluation and strategy implementation control; 9) corrective actions. prospects for further research. more detailed analysis of the positioning concepts, the rationale for a systematic approach to positioning, their use in practice. background. marketing positioning presents an opportunity for the promotion of trademarks, market share expansion, sales increase. value/originality. a positioning strategy is the paramount part of the general positioning concept. the brand success on the market depends largely on the quality of development and realization of the positioning strategy. therefore, this issue is a key to developing an efficient positioning system. the rationale of the chosen subject has no contradictions because the brand positioning should be addressed not only as a marketing issue but an important general economic and even a social task for the company, the solution of which contributes to the goal of improving the quality of life for all its employees. key words: brand, positioning, trademark, strategy of positioning, marketing. jel classification: m00, m10 1. introduction positioning is the most important stage in the asset management strategy of the trademark. carefully considered positions provide development directions for the new products, market expansion, communication, pricing, selection of distribution channels. the brand positioning is a process of creating its own image, distinctive properties, positive associations and values in consumers’ mind in order to create a sustainable trademark image and ensure consumers’ attachment to this trademark (fayvichenko, 2016). today, based on the generalization (stone, 1998, davis, 2001, trout, 2003), one can make a determination that brand positioning, as a process, begins with the design of a trademark position or, as is often seen in the literature, the concept of positioning. it is difficult to specify the essence of positioning when its ultimate goal is not clearly understood. to form a complete idea of the essence of positioning, it is important to determine what the ideal position of the trademark is. a clear representation of the ideal position of a trademark is a prerequisite for researching positioning as a target process and developing a system for evaluating its effectiveness. 2. principles of successful brand positioning in the aspect of the development of the rapid positioning of the brand, an attention is drawn to scientific developments by kendukhov (2008) who believes that the problem is due to the lack of a clear understanding of what should be the ideal position of the trademark. a clear representation of the ideal position of a trademark is a prerequisite for researching positioning as a target process and developing a system for evaluating its effectiveness. logically, the investigator proves that the initial premise in determining the ideal baltic journal of economic studies 246 vol. 4, no. 2, 2018 position of a trademark should serve the understanding of the ideal consumer (aaker, shansby, 1982). that is, the ideal position of the trademark: the perception of the trademark by the consumer, which forms the ideal consumer. the ideal position should be reduced to absolute, only then can the criterion basis for assessing the effectiveness of positioning as a level of approximation to the ideal be determined. based on this premise, kendukhov (2008) formulates the definition of the ideal position of the trademark – this is its perception by the consumer, in which he is absolutely sure of the unique advantages of the trademark over other brands, with this brand associated exclusively with positive associations, it is perceived as irreplaceable value and necessary attribute of life; the perception in which the consumer is a fanatical supporter of this brand is fully convinced that consumers who buy goods under other brands make the wrong choice, considers it their duty to recommend this brand to other consumers, and feels the spiritual unity with consumers who have chosen this brand. thereby, the positioning of (kendukhov, 2008) is a process of managing the perception of a trademark by a consumer whose purpose is: persuasion of the consumer in the unique advantages of this trademark over other brands; formation of the consumer’s exclusive affiliates with this trademark; formation of the consumer’s sense of the indispensability and vital necessity of the brand; formation of fanatical devotion to the brand; raising a sense of duty to recommend this brand to other consumers; forming a sense of spiritual unity with consumers who chose this brand; forming a belief in the consumer that other consumers who buy goods under other brands make the wrong choice. the key to developing brand positioning and ensuring the successful outcome is an adherence to certain principles. the brand positioning should be performed under scientific methods, process-based and systematic approaches. the understanding and performing the management decisions in this area not only shall be based on the knowledge of marketing theory and practice but also on psychology, sociology, and other sciences. the positioning is effective if it is done consistently and continuously. if in the absence of planning in the process of positioning elements will prevail chance, important aspects may be lost. success, if achieved, must be consolidated and developed not through the weakening, but strengthening the effect on consumer’s mind. implementation of the trademark positioning must be performed under the rules of fair competition and strict compliance with the legislation on protection of trademarks (trout, 2003). a unique differentiating idea is a key to an effective brand positioning. widely engage the company employees, existing and potential customers to work on the development of basic positioning systems. in addition to new ideas, such engagement has a positive effect on increasing the degree of attachment to the brand. 3. stages of development and introduction of brand positioning note that today neither the scientific literature nor marketing practice has a justification for the development of brand positioning. positioning, as a process, begins with the design of a trademark position or, as is often seen in the literature, the concept of positioning. crevens (2003) sees the concept of positioning as a formulation of the essence of the company’s offer, indicating the ability of the organization to meet the needs and preferences of consumers. the author quite rightly notes that the concept of positioning the company should be based on the reasons why customers prefer to deal with it, and not with its competitors, and to broadcast these reasons to the target audience. extending the concept of positioning in marketing, j. trout and s. rivkin in “differentiate or die!” (2003) distinguish the following positioning tools: the championship in the category as a good differential idea; leadership as the most attractive and exciting idea; “hot commodity” as a good, differential idea; differential idea of specialization; the latest development as a differential idea; the advantage is a differential idea; commodity as a good differential idea; possession of the attribute as a way of differentiation. analysis of core studies on the subject (keller, 2007, mogileva 2010, stone 1998) allows for picturing a generalized for development and implementation of the brand positioning that conditionally includes nine stages. the first stage implies a collection, processing, and analysis of the competitive environment data, competitors’ policy regarding their own trademarks, the influence of macro-environment factors, analysis of the company market capabilities, its strengths and weaknesses, analysis of goods being sold or to be sold under this trademark. a trademark model is developed at the second stage: its image, the target audience is being determined, attributes, selection of the brand strategy (monobrand for monomarket, monobrand for polymarket, polybrand for polymarket) (kendukhov, 2008). selection of and rationale for differentiating positioning features are taking place at the third stage. the positioning strategy development based on the selected differentiating features takes place at the fourth stage. strategic (perspective) and tactical (upcoming) positioning goals are developed via foresight of the strategy implementation results at the fifth stage. they must comply with each other. typically, the second follows from the first. each goal must be achievable in practice. strategy implementation plan is developed at the sixth stage. decisions on the methods and means to achieve goals are being taken, as well as the planning baltic journal of economic studies 247 vol. 4, no. 2, 2018 documents, plans and instructions are being brought to the performers. each item of the plan must be drafted so that it is clear what kind of goal you achieve; what actions, measures, and works are to be made and to what deadline; who provides the resources, necessary to implement the decisions; what departments or persons are responsible for implementing the decision; who controls the implementation. items of the plans must be rationalized, exposed clearly and correctly (contain a statement of action, parameters, etc., rather than calls to do something), easy for the performers to understand and connected with the general marketing plans of the company. it should be noted that at the stages 2-6 foresight has an extremely vital role – a scientifically proven foresight of the most plausible scenario for the trademark progress, alternative ways and plan implementation deadlines. it is based on identification and correct assessment of the market development trends, competitors’ trademarks, changes in consumers’ behaviour, and so on. understanding the firm relations between different elements of the general positioning system, relations between the past, the present, and the future condition of the anticipated object. not only the foresight rationalizes the development of the present trademark and the process of its positioning, but the trademarks anticipated to penetrate the market as well. scientific analysis and calculation are not the only things determining the foresight success. it is also determined by imagination and the ability to foresee, which depends on the experience of corresponding specialists. in practice, foresight uses three complementary development tools for foresight development. obtaining an image of the future development of the anticipated object based on the experience acquired during the analysis of similar objects that had taken place earlier. extrapolation or interpolation, i.e. conditional prolongation of trends in the future, development patterns of which are well-known in the present and from the past. modelling, i.e. building different models of the future condition, carried out in accordance with the expected or desired alterations of certain conditions, development perspectives of which are studied sufficiently. at the strategy implementation’s seventh stage, plans are brought to the performers, specific actions and measures are carried out. (borgesi, signori, russo, 2005) reveals the strategic aspects of positioning in simple and double positioning. under a simple positioning, researchers understand the element of marketing strategies associated with segmentation. in their view, this term should be considered as a part of consumer behaviour of the consumer, namely, as a part of the process of buying/ selling. this behaviour is divided into several stages. one of them is the “assessment of alternatives”. it is at this stage that the consumer will weigh the information received about the product he intends to purchase. the information is “undergoing the purification process” during the manufacturer’s communication in order to create a specific, necessary for the consumer, vision of the product and its individual components, as well as a different view of the services in all possible variations. these elements, which will thus be obtained, will compare consumers with their vision of an ideal product and thus streamline demand. based on this, the consumer goes further in choosing a product. regarding double positioning, the authors propose the following provisions that are relevant to the behaviour that entrepreneurs and managers dealing with dual positioning strategies should have: positioning based on the “adviser” should be based on the benefits that can grow. such advantages may have a “technical” nature, for example – the simplicity of installing a complex product or the availability of spare parts, or direct advantages such as discounts and bonuses; the method, which informs the dual positioning to the consumer, should be such that as much as possible avoids confusion of the consumer. more precisely, the means, by which contact with the “advisor” is established, should be different from that used to establish contact with the immediate consumer. this seems quite natural if one takes into account the fact that the number of people involved in the process is always different; the proliferation of international trade processes such as consumer and consumer management (crm) makes it extremely easy to understand the nature of each individual consumer, and hence the people who are affected. it is possible even to distinguish the latter separately. this scenario makes the dual positioning strategies more effective. at the eighth stage, the results are evaluated and the strategy progress is monitored. here, the comparison of actual efficiency indicators of the strategies’ implementation with specific milestones that characterize the established strategic and tactical objectives. these guidelines should be clearly defined, rationalized and convey the final results. control must not be narrowed down to a formal registration of deviations of the actual results from the planned ones. if actual results are not up to the planned results, it is required to analyse the whole chain of the cause and effect relations, identify the causes, conditions of their occurrence. control must be substantive, specific. its objectives, parameters, and measures to be checked should be understood clearly. monitoring of the implementation of plans and specific measures must be performed from the moment of their approval. during the monitoring, it is required to ensure the verification consistency of the corrective measure status, prevention of shortfalls, accumulation of positive experience. monitoring must be done in a timely manner so that it is possible to correct the situation and take preventive measures. at the ninth stage, one must take, if necessary, corrective baltic journal of economic studies 248 vol. 4, no. 2, 2018 measures for the implementation of those stages, where the causes of actual results deviating from the planned results occurred. the linking chain of all stages is the process of specialists’ decision-making, who are responsible for development and implementation of the strategy. approval of a decision always precedes the action, regardless of who performs the action – a decisionmaker or any other person. each solution must include answers to the questions: what, when, and how to be done, who does. 4. conclusions results from researching the principles of positioning strategies in marketing bring to the following conclusions: the trademark positioning is a process of creating its own image, distinctive properties, positive associations and values in consumers’ mind in order to create a sustainable trademark image and ensure consumers’ attachment to this trademark; the basis for any positioning concept is an idea of differentiation a trademark, goods according to some properties; decision making is a multi-staged process, which generally includes the following stages: determining the goal, for the achievement of which the decision is taken; collection and update of the output informational materials; specification of possible limitations (on the market, resources, potential consumer, etc.); development of possible scenarios; selecting a criteria for the evaluation of the decision’s rectitude and efficiency; comparison and evaluation of each scenario under the adopted criteria; selection of the best option; foresight of the consequences occurred from implementation of the decision made; adjustment of the decision taken due to the foresight results or choosing another scenario if the prediction implies serious risks or inefficiencies of the decisions made due to the assumptions adopted during the foresight; foresight of the second scenario results and its adjustment or selection of the third scenario. prospects for further research: a more detailed analysis of the positioning concepts, analytical forecasts, the rationale for a systematic approach to positioning, their use in practice. references: aaker d., shansby j. (1982) positioning your product. business horizons, no. may-june, pp. 56-62. balmer. j., greyser s. (2003) perspectives on identity, image, reputation, corporate branding, and corporatelevel marketing. revealing the corporation, new york : routledge, 363 p. (in english) borgesi a. (2005) the possibility of strategic double positioning. marketing in ukraine, no. 6, pp. 66-69. brand valuation: the nancial value of brands. retrieved from: http://www.brandchannel.com/ davis s. (2001) upravlenie aktivami torgovoj marki [management of brand assets]. st. peterburg: peter, 272 p. (in russian) crevens d. (2003) strategicheskiy marketing [6-е izd] per. s angl. spb.: peter, 752 p. (in russian). fayvichenko d. (2016) the concept of brand positioning. mignarodnii naukovo-praktuchniy gurnal «tovaru i runki», no. 1(21), pp. 25-32 (in ukrainian) keller k. (2007) strategicheskij brand management: sozdanie, ocenka, upravlenie marochnim capitalom [strategic brand management: creation, valuation, management of brand equity]. moscow: publishing house " williams", 704 p. (in russian) kendyuhov v. (2008) effectivnist vucorustannya marochnogo capital [effectiveness of using branded capital]. donetsk: institute economy promislovist, pp. 96-103 (in ukrainian) mogileva a. (2010) zmist ta osobluvosti posizionuvannya tovariv na rinku [the content and features of the positioning of goods on the market]. odessa: tsedr , 273 p. (in ukrainian) smith d., park c. (1992). the effects of brand extensions are market share and advertising efficiency. journal of marketing research, vol. 29 (3), pp. 296-313. stone m. (1998) prjamoe popadanie: factoru prjamogo marketinga [direct hit: direct marketing factors]. minsk: amalfeya, 448 p. (in russian) tompson a. (1998) stratehycheskyi menedzhment. yskusstvo razrabotky y realyzatsyy stratehyy [strategic management. the art of strategy development and implementation]. moscow : banky y byrzhy, yunyty, 578 p. (in russian) trout j. (2003) differentiate or die! survival in an era of fatal competition. st. petersburg: peter, 224 p. trout j. (2003) positioning. battle for recognizability. st. petersburg: peter, 256 p. wind j. y. (1982) product policy: concepts, methods and strategy. reading, ma: addison-wesley, 505 p. baltic journal of economic studies 276 vol. 4, no. 3, 2018 corresponding author: 1 kyiv international university. e-mail: ydemyanchuk@gmail.com 2 department of public-law disciplines, kyiv international university. e-mail: ydemyanchuk@gmail.com 3 department of law, bila tserkva institute of economics and management, open international university of human development “ukraine”. e-mail: ydemyanchuk@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-276-282 influence of corruption on the economic development of ukraine in terms of reformation: a retrospective analysis lesia savchenko1, anatolii subbot2 kyiv international university, ukraine yurii demianchuk3 bila tserkva institute of economics and management, open international university of human development “ukraine”, ukraine abstract. the subject of the study is to investigate the causes of the influence of corruption on the economic development of ukraine in the context of reform. corruption occurs at all levels of society and in some way interferes in all elements of society, and thus negatively affects democracy and economic development of the country. the research methodology involves a retrospective analysis of the problem of inveteracy of corruption associated with the study of its impact on the economy. it is precisely endemic corruption that threatens the formation of ukraine’s stability and its transition to a market economy. corruption as one of the most ancient phenomena in society exists in every modern country. the general understanding of corruption is that corruption is detrimental to economic growth. there are also many causes of corruption, namely, a cultural factor, a psychological factor and, therefore, factors associated with the system can cause corruption in every society. the methodological basis for the research was the works of tylchyk o.v., bilous v.t., subbot a.i., lytvynenko v.i., hvozdetskyi v.d., popovych v.m., bodnarchuk o.h. in the field of administrative law and issues of counteracting and combating corruption, which indicate that there are some factors, such as monopoly power, discretionary power, and low civil servants’ liability, that may provide opportunities for the development of corruption. the purpose of the article was to analyse the causes of the impact of corruption on the country’s economic and political development. today, corruption has a wide range of activities that undermine the country’s development. researchers argue that corruption affects the country’s economic growth. however, contradictory evidence was found that corruption can have a positive effect on the country’s economic development or have no significant impact on economic performance. on the basis of analysis of these works, it was established that corruption is the result of institutional weakness, with a potential adverse effect on the country’s economic efficiency. corruption negatively affects the efficiency of public spending, reduces budget revenues and increases its deficit, impedes foreign direct investment, reduces the effectiveness of international assistance, and hinders economic development. as a result of the analysis, ways to reduce corruption are identified, which suggest a policy of reducing corruption in ukraine. the result of the study was conclusions on the need to develop and form a coherent system of scientific and legal views on identifying effective anticorruption measures, optimizing and improving the effectiveness of anticorruption activities, with the involvement of international experience in coordinating and minimizing information leakage and engaging civic initiatives among the non-public sector. key words: corruption, economic crime, fraud, economy, economic development. jel classification: к1, к14, к15, к42 baltic journal of economic studies 277 vol. 4, no. 3, 2018 1. introduction today, ukraine has implemented a number of important reforms that help to overcome corruption, in particular, in the areas of energy, finance, and economics. however, judicial reform continues to lag behind. the relevance of the study is that the combination of rampant corruption and market instability, political instability in ukraine are the main obstacles to the development of the economy in the country. anticorruption ukrainian laws have an impact on corruption conduct both in private and public sectors. the law on prevention of corruption has measures to monitor the implementation of anticorruption provisions. however, the weak judicial system limits the implementation of anticorruption laws of ukraine. thus, the imperfection of the legislative framework results in the rapid growth of corruption and economic crime in ukraine, preventing the state from becoming a fully-fledged, prosperous, democratic country capable of responding effectively to violations of its own sovereignty. current research on preventing and combating corruption is aimed at developing relevant, effective means to overcome this phenomenon. however, we are aware that without identifying the causes of the emergence and entrenchment of this phenomenon in the structure of the state, it is impossible to work effectively in overcoming the corruption phenomena that penetrate all socio-economic sectors. over the past few years, scientists’ opinions have been divided into determining the factors influencing the country’s economic development and the role of corruption in this process. theorists argue that economic development is the result of exogenous factors that affect the economy, for example, the level of technical progress. proponents of another point of view believe that economic development is primarily a result of domestic processes in the country. however, both the first and the second ones point to the development of corruption and the emergence of new corruption components in the country’s development processes. the main reasons for writing an article are the lack of a direct answer to the question of the dependence of these phenomena. in our opinion, the answer can be found in the history of the rooting of the phenomenon of corruption on the grounds of the formation and strengthening of the democratic nature of the state. therefore, the novelty of the research is to find out reasons for the rooting of corruption components on the basis of a retrospective analysis of ukraine’s development. the author tries to find out reasons for the sustainability of economic crime and corruption in ukraine on the basis of a historical analysis of events from the break with the soviet system to date, which determines the novelty of the proposed review. the result of this review is the formulation of proposals based on a retrospective analysis of causes of the sustainability of corruption and economic crime regarding the further reformation of ukraine under the conditions of support for civil society and the international community. 2. economic crime and corruption economic crime is usually identified with another term – corruption. there are different definitions of corruption. each definition highlights various dimensions of a particular phenomenon. however, we share the opinion of melnyk m.i. and hvozdetskyi v.d. in the context of the lack of a clear and unambiguous idea about the definition of corruption (melnyk, 2002; hvozdetskyi, 2013). in the scientific environment, corruption is defined as: 1) abuse of public authority by public officials, political and civil servants, in order to illegally enrich themselves or their subordinates (national integrity systems, 1997); 2) activities of state authorized persons aimed at the abuse of powers and positions and the related opportunities provided to them for obtaining from natural and legal persons material goods, services, advantages, benefits or other tangible or intangible effects, as well as bribery of officials by natural and legal persons (tereshchuk, 2000); 3) the bribery of public servants on the part of legal entities and individuals who encroach on normatively established social relations in the field of public service (ponomarev, 1993); 4) the use by an official of public authorities and management of his official position for personal enrichment (kabanov, 1995); 5) abuse by management entities of their powers to meet personal or group interests (mishin, 1991); 6) a social phenomenon that encompasses the whole set of corruption acts related to the unlawful use by persons authorized to perform state functions of the power given to them, official authority, appropriate possibilities for the satisfaction of personal interests or interests of third parties, as well as other corruption offenses, including those that create conditions for committing corrupt acts, or conceal or connive them (melnyk, 2002). from the above, we can distinguish three groups of definitions concerning the complex definition of the concept of corruption. the first group of definitions refers to public ethics. in this case, corruption is defined as the ethical mutual division of interests between public and private space. the second group of definitions relates to corruption issues with regard to transparency by the state. however, there is the third group of definitions that we propose as basic: corruption is one of many parts of a more complex criminal phenomenon, which is an economic crime. in the context of the abovementioned, bodnarchuk o.h. notes that the modern interpretation by the legislator of the “corruption” concept does baltic journal of economic studies 278 vol. 4, no. 3, 2018 not contribute to an effective counteraction to its manifestations in the realm of public power. in addition, it is impossible to give a clear, unambiguous, comprehensive legislative definition for the day. in this regard, bodnarchuk o.h. believes that the concept of “corruption” should be determined on the doctrinal rather than legislative level since it gives a generalized view of corruption as consisting of different in nature but identical in essence acts, which are not reduced to any particular type of offense and manifested in a variety of forms and entail criminal, administrative, disciplinary, civil liability. in addition, based on the experience of foreign countries, the lack of a legal concept of corruption is not a significant obstacle to the introduction of effective means of counteracting this phenomenon (bodnarchuk, 2016). since the practice and research of modern legal science in relation to the conceptual and categorical foundations of the phenomenon of corruption gives rise to the conclusion that there is no complete and meaningful definition of the “corruption” concept, therefore, our vision is not limited to crimes committed in the public sector, but also extends to those carried out by private sector entities. investigating the relation between the concepts of “corruption” and “economic crimes” tylchyk o.v. emphasizes that the shadow economy generates corruption, and the latter, in turn, creates the basis for the prosperity of the shadow economy. the cause and effect, the purpose and the means are so interrelated and interconnected that form a closed circle (piasetskaustych, 2016; tylchyk, 2015). thus, economic crime covers a wide range of offenses, from financial crimes committed by banks, evasion of taxes, illegal capital, money laundering, crimes committed by public officials (bribery, theft), etc. it is believed that economic crime causes significant social damage. this is because it affects not only democratic institutions but also undermines state property by reducing available resources for the implementation of state policy. at the same time, the social damage caused by such criminal activity is usually invisible: in addition to general indignation, it is difficult to have a precise understanding of the real consequences of these crimes (hvozdetskyi, 2013; tylchyk, 2015). moreover, selective and ineffective prosecution of economic crimes and responsible persons is evidence of structural impunity in our judicial system. of course, this is related to the fact that economic crimes are often provoked by powerful actors associated with political and economic power. economic crime stems from hidden power, which defines relationships between the economy and politics. market reforms implemented in ukraine over the past decades have led to a gradual process of borrowing major economic groups. now, this enthusiasm is expressed in the powerful influence of economic actors in the decision-making process, the implementation of state policy, and the distribution of economic and social resources. 3. reasons for the rooting of economic crimes in order to put an end to this situation, ukraine had to create its own legal rules and institutions. in the first years of ukraine’s independence, economic crime and corruption did not prevent laws that could solve them. according to tylchyk o.v., in this period, shadow activity was considered to be outside the planned state economy, which embodied the laws of the administrative-command control system and was recognized as unlawful, mainly criminal. the above statements are superficial because, despite the real economic activity outside the planned economy, which was determined by the criminal, certain types of crimes (for example, corruption) were identified with the shadowing of the economy (tylchyk, 2015). a retrospective analysis of the period shows that in the late 1990s, with the alleged further privatization, ukrainian development was deepened without adequate legal safeguards and the adoption of legal norms. resources continued to end up in the hands of the elite as a result of high-level corruption, leaving the overwhelming majority of citizens impoverished and without faith in the ukrainian state. recent world bank reviews of citizens’ perceptions of state integrity show that citizens have little confidence in government institutions. ukrainians believe that their country has a more serious problem of corruption than other countries (world bank, 2006). economic crime is a serious problem in ukraine. thus, the capture of the privatization process by economic crime and corrupt officials has led to a sharply polarized society. instead of the emergence of a powerful middle class, ukraine now has an extremely rich new elite and a depleted population. speaking about the factors influencing the historical periodization of the development of cognitive activity of the shadow economy and shadowing in our country, tylchyk o.v. notes the following: in relation to the peculiarities of the country’s historical development, its membership in post-soviet countries, such studies were conducted within the limits of the universally established doctrine for all the countries of the soviet union, and therefore they have their features in comparison with those, which have been carried out in other countries of the world; are carried out with considerable delay compared with the researches of western specialists and are based on western concepts and theories, which sometimes leads to errors during the translation, the introduction of new terms and concepts into the national science without taking into account the peculiarities of domestic doctrinal positions and modern realities (tylchyk, 2015). baltic journal of economic studies 279 vol. 4, no. 3, 2018 thus, the shadow economy and endemic corruption of the previous period are turning into modern problems of economic crime and corruption. their metamorphosis is formed by a variety of political, economic, geographical, and cultural factors, a common heritage of the transitional period. in this article, we argue that the legacy of the postsoviet period and the deliberate political decisions of the ukrainian government were not the main factors of the existing economic crime problems. ukraine failed to adopt the necessary legal infrastructure to combat economic crime and corruption. the political costs of economic crime for ukraine are impressive. the widespread corruption and penetration of economic crime into the political process hamper the development of new laws necessary for the development of a free democratic market economy. citizens have lost faith in the integrity and capacity of the legal process. very damaged tax authority and relations of officials with economic criminal schemes deprive the state of the necessary income. lack of resources due to their inability to levy taxes and large losses of income through illegal and insider privatization, ukraine cannot fulfil its obligations to citizens in providing decent wages, benefits, and medical care. on the basis of the above, we can state that the diversity of contemporary economic crime in ukraine is also explained by contacts with international corruption and the traditional factors contributing to the increase of economic crime. as a rule, the growth of economic crime against corruption is a transient phenomenon for countries in the period of establishment, a reaction of the system to the absence of legal norms during a period of profound redistribution of influence. according to this view, economic crime and corruption will become much less threatening when legal rules will be adopted to meet a market economy. economic crime in ukraine is a rather differentiated phenomenon. significant regional differences within ukraine are explained by geography, political structure, and historical heritage. the porosity of the borders of ukraine determined its transit functions for drug trafficking from the countries of southwest asia (iran and afghanistan) and central asia (kyrgyzstan and tajikistan), as well as the caucasus (chechnya, georgia, and azerbaijan), destined for eastern europe (mainly hungary) and western europe. economic crimes in the central part of ukraine are closely linked to construction, real estate, banking activities, and abuses dependent on international air connections (walter kurtz, sober look, 2014). taking into account the power and relevance of the issue under investigation, as well as the current diversification of criminal economic schemes, the prevalence of corruption indicates that this phenomenon will not quickly disappear. existing contacts of economic criminals and their international partners will contribute to the growth and complication of economic crime schemes. this applies in particular to more complex financial transactions related to money laundering abroad. the situation of counteraction to such phenomena is complicated by the fact that ukraine cannot separate criminal economic activity from neighbouring states. economic criminals and their organizations adapt to countries and develop together with the states. control of the domestic crime problem in ukraine is only partly under its control. 4. retrospective analysis of causes of economic crime in the article, the author tries to trace the causes, factors, and conditions that contributed to the development of economic crime against the backdrop of corruption. it is clear that these phenomena arose long ago as one of the oldest and most promising phenomena of human society, corruption and economic crime exist in all countries of the modern world, and this is not only a problem of countries in a state of development. the classic concept of corruption as a negative phenomenon of general politics was proclaimed during the times of antiquity by plato and aristotle. in his theory, plato considered democracy, oligarchy, and tyranny as regimes protecting the interests of rulers. this classic concept of corruption continues in our time and is central to the political thought of machiavelli, montesquieu, and rousseau. for machiavelli, corruption was a process, by which the integrity of citizens was undermined and eventually ruined. montesquieu considered corruption as a dysfunctional process that transformed the political order into a monarchy and despotism. according to rousseau, political corruption is a necessary consequence of the struggle for power. he argued that it is the political system that destroys a person and gives rise to its corruptibility (tylchyk o.v., bilous v.t., subbot  a.i., lytvynenko v.i., hvozdetskyi  v.d., popovych v.m., bodnarchuk o.h.). however, in the proposed review, we will confine our analysis to the post-soviet and modern periods. in particular, tylchyk o.v. characterizes the transitional post-soviet period with the growth of the shadow economy in relation to the existence of risks of the transition period (privatization, denationalization, the transition from the command and administrative system of governance to democratic one). a significant accumulation of administrative and legal rules, in particular, in the form of concepts and strategies of state regulation in various spheres of the economy, reforming the system of subjects of economic management and, respectively, adopting in a short time a large number of statutory legal acts regulating their administrative and legal status, which was accompanied by duplication of powers of various subjects in this area. accumulation of statutory legal acts regulating the issues of combating baltic journal of economic studies 280 vol. 4, no. 3, 2018 crime, which marked the high development of the so-called “economic crime” or “crime in the economy”, which acquire characteristics of organized crime (tylchyk, 2015). in the context of the above, we can state that the post-soviet heritage can be one of the most important factors, which explains the current distribution of economic crime and corruption in ukraine. the established hereditary schemes are perhaps much more complicated than the established shadow economy or authoritarian tradition without respect for the rule of law: the deliberate social policy aimed at controlling internal immigration, the development of the apparatus of social control and conscious government decisions of the last years of the post-soviet period, all this contributed to the rooting of modern economicallycriminal structures. the biggest element of the post-soviet period is corruption and the shadow economy. the shadow economy has not diminished since 1991, but now its influence is estimated at more than sixty percent of the economy. during the soviet era, members of the shadow economy who worked throughout the former ussr regularly bribed officials to ensure the effectiveness of economic schemes, and law enforcement officers became participants in corruption schemes to stop prosecutions. in ukraine, there was no lustration or detention of civil servants. consequently, the modern state was inherited by the same corrupt government officials. to date, these state officials enjoy an even more economically privileged position, since the property is redistributed without anticorruption laws, senior government officials of national and regional bodies receive significant material benefits from economic crime schemes. large cities were centres of a common shadow economy. citizens had more or less stable material security, and officials received unjustified benefits from corruption. for this reason, the problems of economic crime were particularly acute in kyiv, donetsk, dnipropetrovsk, etc. the criminals who were detained for economic violations at that time reappeared as key contributors to the current corruption economy (williams, 2004). previous and current security officials play an important role in the economic crime. the presence of former security representatives in commercial enterprises contributes to their current activities. the existing banking sector in ukraine uses many years of experience in special services that worked secretly and covered large illegal transactions. modern analysts v.a. predborskyi, r.s. demidov, o.v. kostin, v.t. bilous and v.m. popovych believe that economic crime arose practically spontaneously as a result of the collapse of the former ussr. however, it is obvious that the economic-political connection is an alliance of the former party elite, members of the apparatus of law enforcement and security, as well as groups of economic criminals who together encompassed the legal and illegal sectors of the economy. as we consider, this becomes the most destructive element of economic crime in ukraine. the criminalization of the banking sector and the privatization process became the main obstacles to the development of a free market and a fair distribution of property. the degree of these problems distinguishes economic crime and corruption in ukraine from other countries with the high crime rate. economic crime connected with the banking and financial markets destabilizes the country more than the more traditional elements of organized crime. corruption and economic crime cannot be simply differentiated. a large part of the committed economic crime combines access to information or goods and services of civil servants who are under the influence of corrupt schemes or the threat of the use of force. in this context, bodnarchuk o.h. stresses that the system of measures to counteract corruption and economic crimes should be aimed at increasing the complexity of the implementation of corruption offenses; restraining the risk of committing them; reducing the benefits of their commitment (bodnarchuk, 2016). we believe that such an approach will contribute to the destruction of criminal-economic relation in ukraine, which has a significant impact on the electoral and legislative processes by sponsoring candidates for parliament and by pressure on individuals in legislative authorities to ensure a policy that protects their interests. given that the criminalization of legislative bodies is a problem both at the national and regional levels. there is also the suggestion that this connection penetrates the highest levels of government in administrative sectors. the banking and oil and gas industries are the most backed up in this regard. employees in ukraine are helping their partners in the shadow economy, with whom they are inextricably linked by complex financial relations. sometimes this assistance is not financial but protects them from the application of the criminal law. this connection is common since the criminal world has established informal contacts with politicians. the current legislative process in ukraine partially destroys political and economic ties, which is particularly noticeable in the current transitional period, when the rada and regional legislative bodies must adopt legal limits for the development and regulation of a market economy. corruption in legislative bodies hampered adoption of necessary laws. members of the legislature, who personally use the transfer of property from the state to private use, impede the adoption of laws on the regulation of the economy or the limitation of money laundering, and laws that may lead to their prosecution. as noted in the studies by demianchuk yu.v., this contributed to the provision of immunity to members baltic journal of economic studies 281 vol. 4, no. 3, 2018 of the parliament, which intensified the criminalization of ukrainian legislation. members of the ukrainian parliament also oppose the establishment of conflicts of interest laws (demianchuk, 2016). the criminalization of legislative authorities is a serious problem. in particular, this thesis is confirmed by research by demianchuk yu. v. the impunity of civil servants raises the issue among citizens regarding the integrity of the legislative process. the cynicism of the election process is that parliamentary elections often allow members of the parliament to quickly earn money. the institutional capacity to consider political and economic ties in ukraine is rather limited. unfortunately, ukraine has no effective professional and institutional resources to overcome economic crime and corruption. differences between parliament and presidential administration create additional obstacles to mobilizing such measures. but the biggest obstacle is the lack of political will to solve these issues (melnyk). concluding a retrospective review of the causes of corruption and economic crime, we can say that ukraine has become an independent state without any practical experience in counteracting economic crime and corruption, and now it is slowly increasing capabilities for solving it. so far, ukraine has no effective law enforcement authorities and judicial system, sufficiently independent to block the impact of economic crime. the state has the limited institutional potential for advanced training of existing judges and prosecutors. with limited financial resources, the state can do little to train personnel to meet new requirements or prevent the spread of corruption. the deficit appears over the lack of not only the necessary criminal laws and procedures but also the civil legislation on markets, banking, and commercial transactions. effective tax policy is absent; therefore, corruption support for economic crime is more advantageous and convenient than cooperation with tax authorities. an analysis of the theoretical achievements of the implementation mechanisms necessary to support public functions has shown their ineffectiveness. in ukraine, law enforcement agencies cannot use the methods that are necessary for penetration into a criminal economic organization. even when enforcement mechanisms are present, corrupt law enforcement officials oppose criminals. distribution of functions between different branches of law-enforcement activity hinders the investigation. 5. conclusions retrospective analysis of the impact of corruption on ukraine’s economic development under conditions of reform, analysis of conceptual and theoretical problems of ensuring the overcoming of corruption and economic crime showed the need to develop and form a holistic system of scientific and legal views on identifying effective measures to counteract such phenomena, optimizing and improving the effectiveness of anticorruption activities. in particular, it was found that criminal-economic associations or groupings are the engine of systemic corruption. to solve this problem, international experience proposes to introduce impact forces that will facilitate the coordination and minimization of information leakage to criminal groups. such reforms can help the police to conduct investigations necessary to solve the problems of illicit trade. it is necessary to attract international cooperation for the return of illegal funds, which settled in the banks of europe and the united states. turning to the issue of economic crime and corruption, citizens must mobilize to force legislators and the government to develop the necessary solutions. as a result of the study of this problem, it has to be noted that ukraine has no knowledge of overcoming economic crime and financial resources to support public initiatives in the non-public sector. however, with political will, ukraine can try to solve the problem of domestic economic crime and corruption. ukrainian nationalism may not be strong enough to counteract the debilitating effects of a criminalized economy and widespread corruption. but, without sufficient independent media and nongovernmental organizations, society cannot create an effective anticorruption movement. if the situation does not change, there will be the unhindered growth of economic crime in the coming decades. just as society in the past helped to perpetuate control over the soviet state, the current passivity to growing power and the consolidation of economic crime and corruption could lead to a new form of authoritarianism as a reaction to such abuses. the ability of ukraine to remain a functioning sovereign state may in future threaten the serious consequences of economic crime and corruption. references: 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(2014). ukraine is on the brink of total economic collapse, business insider. baltic journal of economic studies 405 vol. 4, no. 5, 2018 corresponding author: 1 national technical university “dnipro polytechnic”, ukraine. e-mail: vasil-shvetc@ukr.net 2 national technical university “dnipro polytechnic”, ukraine. e-mail: anna270276@ua.fm 3 national technical university “dnipro polytechnic”, ukraine. e-mail: elenatriphonova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-405-411 evaluation of the conditions of effective logistic strategy implementation of an enterprise on the basis of functional and cost analysis vasyl shvets1, hanna baranets2, olena tryfonova3 abstract. in the context of the current dynamic environment, the complexity of socio-economic objects stipulates the increased requirements for their analysis. the field of strategic logistic management is not an exception. the logistic potential is considered as a control object. formation elements of the potential determine the conditions for the successful implementation of the selected logistic strategy of an enterprise. the potential of managerial logistic personnel, technological personnel, logistic infrastructure, product and technological innovations in logistics, marketing research, organizational and transfer potential are considered as logistic potential elements. problems concerning substantiation of logistic strategy selection, determination of the internal conditions to provide its efficient implementation, as well as quantitative measurement of the conditions, are still unstudied. the purpose of the paper is to carry out functional and cost analysis (fca) of logistic potential elements of an enterprise to estimate the correspondence of the internal conditions to the selected logistic strategy. methodology. fca as a method of research is used. the sequence of the fca implementation and characteristic of its main stages are considered in the paper. special attention is paid to expert assessments of the significance of logistic potential elements which are regarded as internal conditions for the strategic changes realization in the area of enterprise logistics. to do that, the paper applies techniques of priority ranking and pairwise comparisons. the consistency of the obtained results is proved statistically. statistic factor of the relative range has been applied to characterize the dispersion of individual significances obtained for each logistic potential element. results. the paper has developed a sequence of the fca implementation with the characterization of its basic stages. there has been described preparatory, information, analytical, research, and recommendation stages. the proposed sequence matches a traditional concept of the fca stages. however, their contents vary depending upon object specifics, identification of objectives and tasks of carrying out analysis. value/originality. the results of the study in the form of the expert evaluation of the significance of the logistic potential elements give an opportunity to plan the costs connected with the introduction of strategic changes in the field of an enterprise logistics. key words: logistic potential, logistic strategy, functional and cost analysis, situational profile, logistic costs. jel classification: c81, d78, m11 1. introduction in the context of the current dynamic environment, the complexity of socio-economic objects stipulates the increased requirements for their analysis. the field of strategic logistic management is not an exception. consideration of logistic management at an enterprise helps to understand that provision of the best conditions (opportunities) for the effective implementation of the tendencies for long-term changes is one of its tasks. in this case, the logistic potential can be considered as a management object, as a potential of an enterprise to implement optimization logistic properties while organizing a flow of material, financial, and information resources at the stages of production and logistic chain owing to integration capabilities to coordinate activities of functional subdivisions and availability of the providing conditions (i.e. staff, infrastructure, marketing etc.). in the strategic context, determination of conditions for a successful implementation of the selected logistic strategy is the general function performed by the logistic potential. the content of specific functions is to concretize the conditions described by the specified behaviour of the logistic potential elements depending upon the type of a strategy selected by an enterprise (figure 1). baltic journal of economic studies 406 vol. 4, no. 5, 2018 quantitative representation of the logistic potential elements importance can be obtained by means of functional and cost analysis (fca) helping prevent making inefficient decisions concerning the formation of internal conditions to implement a logistic strategy of an enterprise. 2. the state of research academic studies in the field of strategic management of enterprise logistics are of rather stable content, for example, scientific works of the following authors: d. waters (2009), v. dybska et al. (2008), v. sergeiev (2013), ie. krykavsky (2004). as a rule, studies determine the idea of logistics strategy, its tendencies, types, description of its development and implementation sequence, and estimation of external conditions. certain studies such as j. r . stock and douglas m. lambert (2005) concern the development of global logistic strategies, formation and development of strategic plans for supply chains logistics, and their certain links. at the same time, problems concerning substantiation of logistic strategy selection, determination of the internal conditions to provide its efficient implementation, as well as quantitative measurement of the conditions are still unstudied. the paper is intended to carry out fca analysis of potential elements of logistics to estimate the correspondence of the internal conditions to the selected logistic strategy. within the framework of the organized analysis procedure, equivalent characteristics of the significance of the logistic potential elements and the expenditures connected with their formation should be determined. 3. fca application to evaluate logistic potential of an enterprise fca is a technique of feasibility studies of systems aimed at optimizing the relations between their consumer properties and costs. consumer properties of the object are determined by its usefulness that is an ability to meet certain needs. taking into account the fact that fca is orientated to detect the external manifestations of the properties of an object in a certain system of relations then a function is considered as the basic utility component manifests itself in the field of production and consumption. therefore, the feature of the fca is to identify a set of expedient functions, which should be performed by a research object under specific circumstances. fca feature is a clear performance sequence to be met in the context of any type of its implementation. in the opinion of senchenko (2011), availability of strictly set action algorithm, as well as the opportunity for a researcher to demonstrate his/her creativity, i.e. to elements forming logistic potential tendencies of changes in logistic potential elements increasing stabilization reduction 1. potential of managerial logistic personnel 2. organizational potential 3. potential of managerial innovations 4. transfer potential 5. potential of logistic infrastructure 6. potential of technological personnel 7. potential of product and technological innovations in logistics 8. potential of marketing research profile of cost minimization strategy profile of diversification strategy profile of specialization strategy profile of logistic innovation strategy figure 1. situational profiles of changes in logistic potential elements developed for the selected logistic strategy source: baranets, 2016 baltic journal of economic studies 407 vol. 4, no. 5, 2018 form independently a strategy to study while keeping procedure sequence of stages, makes it possible to expand fca sphere. thus, the logistic potential of an enterprise is considered as an object of the fca as a set of elements implementing functions to form conditions for the efficient implementation of a certain logistic strategy. the paper has developed a sequence of fca implementation; its basic stages have been characterized in brief (table 1). the proposed sequence matches a traditional concept of the fca stages; however, their contents vary depending upon object specifics, identification of objectives and tasks of carrying out analysis. 4. identification of logistic potential elements and costs for their formation preparation stage determines object to be analysed. it was above mentioned that selection of the logistic potential as the object to be analysed is substantiated by means of its performance of functions intended to the provision of the enterprise logistic strategy implementation. the conditions are described by means of changes in the logistic potential elements as for the certain tendencies involving their quantitative evaluation. fca is a perspective analysis method; thus, setting its objective in the form of “a cost structure planning to ensure the effective logistics strategy implementation” corresponds to the peculiarity. formulation of the tasks should be subordinated to the primary objective. it is to estimate specifically conditions in terms of validity (significance)-cost format to ensure the effective implementation of the basic types of logistic strategies. in general, the idea of information stage is to collect data concerning the object under study; thus, step one of the stage is a determination of the logistic potential components, substantiation of their significance (functions) in the context of the necessity to create conditions for the logistics strategy implementation. the same step also describes dynamic characteristics of implementation conditions of basic types of logistic strategies. determination of changes in the behaviour of logistic potential elements is meant, i.e. their modelling with the help of situational profiles development (figure 1). table 1 the sequence to implement fca logistic potential elements to estimate correspondence between the internal conditions and the selected strategy stages name of the stage according to the selected object to be analysed a brief description of the stage 1. preparatory stage concretization of the object to be analysed logistic potential as a set of the elements, which certain changes create conditions to implement a logistic strategy of an enterprise. identification of an objective planning cost structure to create conditions for effective implementation of logistics strategy. statement of the tasks detailed evaluation of the conditions within “validity (significance) – cost” format to ensure the efficient implementation of basic types of logistic strategies. 2. information stage collection data of the object under study defining the logistic potential components; substantiating their significance (functions) in the context of the necessity to form conditions for the logistic strategy implementation; describing the dynamic characteristics. identifying costs to form the logistic potential elements. 3. analytical stage evaluation of the functions significance expert evaluation of the logistic potential elements validity (significance) using methods with the lowest subjectivity level, which provide a simultaneous highaccuracy evaluation. evaluation of the functions’ performance evaluating the structure costs to form the logistic potential elements as of the current date. 4. research stage construction of the combined fca diagram graphical representation of a ratio between the logistic potential elements validity (significance) and cost structure to form them as of the current date. identifying the logistics strategy type an enterprise is implementing or is capable of implementing as of the current date. determining the desirable strategic tendency of changes in the context of the enterprise. matching the current and perspective evaluation results with the response to a question “do the formed conditions correspond to the objectives aimed at provision of efficient implementation of the selected tendency of strategic changes?” 5. recommendation stage elaborating the recommendations and measures to eliminate the identified disparities if the current cost structure cannot provide the necessary conditions of the selected logistic strategy implementation over the following years, it is required to schedule value of total costs to form the logistic potential of an enterprise and to share them to the determined structure for the following year. source: the by authors baltic journal of economic studies 408 vol. 4, no. 5, 2018 step two of the information stage identifies costs to form the logistic potential elements. the problem needs particular attention since it involves: first – the detailed structuring, and second – the improvement of methodological foundations to determine total value taking into account investment and innovative nature of certain types of logistic cost. it is expedient to use for the step a technique to calculate total costs making it possible to compare both current and long-term investment logistic costs. according to the standard method, the total costs z are defined as follows: z c ei= + (1) where с is current production (prime) cost per unit; i is a unit investment; and е is a regulatory factor of the comparative effectiveness of the capital expenditures (cost-effectiveness ratio). if innovative logistic expenditures are an investment into different (in terms of scientific and technological level) objects, then formula (1) should be adapted to the conditions of complete logistic costs formation and represented in a more correct form: z c e il i i i i n = + = ∑ 1 (2) where, zl is the reduced logistic cost; і is the ordinal number of objects of logistic innovations according to the scientific and technological level (і=1;n); еі is the regulatory factor depending upon the scientific and technological level of the object of logistic innovations; and iі is the investment in ith type object. 5. evaluation of the significance of logistic potential elements the next stage of the fca is an analytical one, which general idea is to evaluate significance of the object functions and the expenditures connected with their performance. export estimation is very important to evaluate the significance of the logistic potential elements. if so, s. beshelev and f. hurvich (2008) approve that experts fill largely quantitative information gaps. formation of the logistic potential can be considered as a function implemented by subfunctions meeting the conditions listed in figure 1. it is proposed to use a method of priority ranking (mpa) and a method of pairwise comparisons (mpc) for the expert estimation of the subfunctions significance. in the context of method one, m-objects are selected (i.e. elements of the logistic potential formation). changes in priority tendencies (decrease, stabilization, progress) have been identified for each of them. the tendencies are com compared in pairs with the use of priority signs >, <, and = indicating respectively the higher, lower and approximately equal importance of each element change to implement the selected strategy. within the framework of each selected strategy, comparison system of the logistic potential elements is developed taking into consideration situational profile represented in fig. 1. then, the adjacency matrix to determine functional significance of each element of the logistic potential formation is developed on the basis of the obtained system. considering the possibility that the elements of logistic potential can be changed in two directions from their constant state, as well as polar changes from their increasing state to reducing state or backward, the priority ratios can take values from 0 to 1.0 and from 1.0 to 2.0 with 0.5 step. table 2 demonstrates the adjacency matrix, which also contains intermediate calculation parameters and the final estimation of the functions significance. mpc has also been used to determine relative significance of the logistic potential elements. pairwise comparisons are shown in the form of advantage matrices where each аij element is a priority level of function ui over uj (i j n, ,= 1 ). the expert work is in the fact that while performing a pairwise comparison of а1, ..., аn factors, a table of paired comparisons should be filled. if the significance of w1, w2,..., wn are unknown beforehand, then pairwise comparisons of elements are carried out with the use of subjective opinions quantifying on a scale numerically and then the problem of w parameter determination is solved. 9-point saaty’s scale can be used as the estimation scale (saaty, 2008). table 2 the adjacency matrix of the logistic potential elements formed to implement the cost minimization strategy function fi function fi sum of values in the line ui absolute priority ui significance hif1 f2 f3 f4 f5 f6 f7 f8 f1 1 1 1.5 1.5 1.5 1.5 2 2 12 87.5 0.200 f2 1 1 1.5 1.5 1.5 1.5 2 2 12 87.5 0.200 f3 0.5 0,5 1 1 1 1 1.5 1.5 8 55.5 0.127 f4 0.5 0,5 1 1 1 1 1.5 1.5 8 55.5 0.127 f5 0.5 0,5 1 1 1 1 1.5 1.5 8 55.5 0.127 f6 0.5 0,5 1 1 1 1 2 2 9 59.0 0.135 f7 0 0 0.5 0.5 0.5 0 1 1 3.5 19.0 0.042 f8 0 0 0.5 0.5 0.5 0 1 1 3.5 19.0 0.042 total 438.5 1.0 source: the authors’ calculations baltic journal of economic studies 409 vol. 4, no. 5, 2018 the range of the scale significance stages makes it possible to evaluate quantitatively the priority of a certain element of the logistic potential not only in terms of the changes fixed at the situational profile but also taking into account possible or more favourable deviations from the procedure. such variations are evaluated via intermediate values in the saaty ’s scale. matrix consistency or uniformity is an important issue while developing the pairwise comparisons matrix. expert determines uniformity index (ui) or consistency ratio (cr). cr≤0.10 is used as the allowable value. its calculation is based on a comparison of calculated and tabulated values of the consistency index. if in the context of pairwise comparisons matrix cr>0.1, then significant disturbance of opinion logic takes place. matrices of pairwise comparisons of the logistic potential elements formed to implement basic types of logistic strategies are developed according to the abovementioned explanations. then, the type of characteristic equations corresponding to the developed matrices, eigenvalues determined as the roots of the equations, maximum eigenvalue of matrix λmax, coordinates of the basic proper vector, index and uniformity ratio are determined. the procedure of matrices of proper vectors is time-consuming; thus, it is subject to approximation. the method of geometric mean distance measurement between the factors (elements) under estimation is applied (nikul, 2012). table 3 demonstrates results of the calculations according to the listed algorithms of accurate and approximate computations results for the strategy of cost minimization. data from table 4 were used to estimate the consistency of the expert opinions. we can see from the results that the expert evaluations are sufficiently consistent no matter which method of the parameters calculation for pairwise comparison matrix will be selected. table 5 represents summarized calculation results of the significance of logistic potential elements depending upon the selected strategy; they were obtained with the help of the above-listed methods. a technique of the data averaging has been applied to obtain the resultative significance of each function (figure 2). statistic factor of relative range ri has been applied to characterize the dispersion of individual significances obtained for the ith element. a researcher checks, if ri≤1 condition is met. table 6 demonstrates that consistency conditions are met. further implementation of the fca at the analytical stage involves an evaluation of the cost structure related to the logistic potential formation during the current period within the use of the above-mentioned methodological recommendations. table 3 evaluation of the significance of logistic potential elements formed to implement the cost minimization strategy fi fi accurate calculations approximate calculations f1 f2 f3 f4 f5 f6 f7 f8 proper vector normalized proper vector λmax proper vector normalized proper vector λmax f1 1 1 5 5 5 5 9 9 1.36 0.27 3.87 0.32 2.64 f2 1 1 5 5 5 5 9 9 1.36 0.27 3.87 0.32 2.64 f3 1/5 1/5 1 1 1 1 5 5 0.58 0.115 1.00 0.08 0.66 f4 1/5 1/5 1 1 1 1 5 5 0.58 0.115 1.00 0.08 0.66 f5 1/5 1/5 1 1 1 1 5 5 0.58 0.115 1.00 0.08 0.66 f6 1/5 1/5 1 1 1 1 5 5 0.58 0.115 1.00 0.08 0.66 f7 1/9 1/9 1/5 1/5 1/5 1/5 1 1 0 0 0.26 0.02 0.18 f8 1/9 1/9 1/5 1/5 1/5 1/5 1 1 0 0 0.26 0.02 0.18 ∑ 5.04 1.0 8.27 12.26 1.0 8.29 source: the authors’ calculations table 4 evaluation results of the consistency of the logistic matrices of pairwise comparison of the logistic potential elements type of the logistic strategy approximate calculations accurate calculations consistency index consistency ratio consistency index consistency ratio cost minimization 0.042 0.030 0.038 0.027 diversification 0.009 0.006 0.012 0.009 specialization 0.051 0.036 0.057 0.041 logistic innovations 0.087 0.062 0.128 0.092 source: the authors’ calculations baltic journal of economic studies 410 vol. 4, no. 5, 2018 table 5 calculation results of the significance of logistic potential elements depending upon the selected logistic strategy logistic strategy evaluation methods significance of the logistic potential elements f1 f2 f3 f4 f5 f6 f7 f8 cost minimization priority ranking 0.200 0.200 0.127 0.127 0.127 0.135 0.042 0.042 pairwise comparisons (approximate) 0.316 0.316 0.082 0.082 0.082 0.082 0.021 0.021 pairwise comparisons (accurate) 0.270 0.270 0.115 0.115 0.115 0.115 0 0 diversification priority ranking 0.156 0.156 0.156 0.148 0.045 0.045 0.148 0.148 pairwise comparisons (approximate) 0.195 0.195 0.075 0.075 0.034 0.034 0.195 0.195 pairwise comparisons (accurate) 0.184 0.184 0.114 0.114 0.018 0.018 0.184 0.184 specialization priority ranking 0.179 0.179 0.179 0.029 0.108 0.108 0.111 0.108 pairwise comparisons (approximate) 0.280 0.280 0.111 0.018 0.055 0.055 0.055 0.146 pairwise comparisons (accurate) 0.241 0.241 0.152 0 0.061 0.061 0.061 0.183 logistic innovations priority ranking 0.150 0.084 0.150 0.150 0.150 0.084 0.150 0.084 pairwise comparisons (approximate) 0.164 0.055 0.164 0.164 0.164 0.055 0.164 0.072 pairwise comparisons (accurate) 0.142 0.070 0.162 0.162 0.162 0.070 0.162 0.070 source: the authors’ calculations table 6 calculation results of consistency evaluation of the significance of logistic potential elements function relative range r determined in terms of the strategy: cost minimization diversification specialization logistic innovations f1 0.442 0.224 0.435 0.143 f2 0.442 0.224 0.435 0.423 f3 0.421 0.696 0.463 0.076 f4 0.421 0.644 0.703 0.076 f5 0.421 0.835 0.710 0.076 f6 0.484 0.835 0.710 0.423 f7 0.996 0.271 0.738 0.076 f8 0.996 0.271 0.515 0.161 source: the authors’ calculations 0% 20% 40% 60% 80% 100% сost minimization strategy diversification strategy specialization strategy strategy of logistic innovations 26,2 17,8 23,3 15,2 26,2 17,8 23,3 7,0 10,8 11,5 14,7 15,9 10,8 11,2 1,6 15,9 10,8 3,2 7,5 15,9 11,1 3,2 7,5 7,0 2,1 17,6 7,6 15,9 2,1 17,6 14,6 7,5 potential of marketing research potential of product and technological innovations in logistics potential of technological personnel potential of logistic infrastructure figure 2. average evaluation results of the significance of logistic potential elements source: the authors’ calculations baltic journal of economic studies 411 vol. 4, no. 5, 2018 6. identification of logistics strategy type research stage involves the comparison of relative values of cost share to form the logistic potential elements with the evaluation results of their significance. the stage involves the comparison of relative values of cost share to form the logistic potential elements with estimation results of their significance. the stage identifies such a ratio of the logistic potential elements in terms of their significance corresponding mostly to actual structure of total costs for its formation. hence, an analytical expert can determine the type of logistics strategy, which the enterprise is capable of implementing within the current period. determination of the compliance of current and perspective estimation results helps answer the question of whether the formed conditions correspond to the provision of the efficient implementation of the selected tendency of strategic changes. the last stage of fca implementation gives recommendations concerning the cost structure correction if the determined cost ratio of the logistic potential elements cannot provide formation of the required conditions to implement the selected logistic strategy over the next years. if so, it is required to start from the determination of the scheduled value of total costs to form logistic potential for the following period with their further distribution to changes in the elements according to their priority in terms of the developed profiles. 7. conclusions quantitative evaluation of the conditions for the effective implementation of logistics strategy in the context of an enterprise has been considered as a certain applied stage of the process of strategic management of logistic potential making it possible to make following conclusions: 1. the current development stage limits enterprise possibilities to attract resources for a logistics strategy implementation; thus, they have to use at the most their own logistic potential involving eight components: a potential of managerial logistic staff; organizational potential; a potential of managerial innovations; transfer potential; a potential of logistic infrastructure; a potential of technologic personnel; a potential of product and technologic innovations in logistics; and a potential of market research. it is expedient to evaluate qualitatively certain components of the logistic potential with the use of functional-cost analysis. 2. the authors have substantiated the technique for qualitative evaluation of the logistic potential components to estimate relevance of internal environment of an enterprise to the selected strategy. the functional-cost analysis involves several stages, more specifically: preparatory stage, information stage, analytical stage, study stage, and recommendation one. 3. a type of logistic strategy, implemented by an enterprise (able to implement), is determined according to the comparison results of a logistic potential structure (identified on the estimated significance of its certain elements) and structure of total expenditures connected with its formation. that has made it possible to specify managerial decisions as for the cost structure planning to form its elements. further studies should be intended to evaluate optimizing logistics potential which high level means an efficient organization of material and financial flows, and hence capability of an enterprise to use productively the formed conditions to implement the selected logistic strategy. references: baranets, g. (2016). obgruntuvannja vyboru logistychnoji strategjji promyslovogo pidpryjemstva [grounding the choice of logistic strategy an industrial enterprise]. ekonomichnyi dyskurs, 3, 88-98. (in ukrainian) beshelev, s., hurvich, f. (2008). matematiko-statisticheskie metody jekspertnyh ocenok [mathematical and statistical methods of expert evaluation]. moskva: finansyi i statistika. (in russian) dybskaja, v., zajcev, е., sergeev, v., sterligova, а. (2008). logistika. polnyj kurs mba [logistics: complete course mba]. moskow: jeksmo. (in russian) krykavskyi, ie. (2004). logistyka. osnovy teorii [logistics. theoretical framework]. lviv: nu «lvivska politehnika», «intelekt-zahid». (in ukrainian) nikul, e. (2012). algoritm analiza matric parnyh sravnenij s pomoshhju vychislenija vektorov prioritetov [algorithm of analysis of pairwise comparisons matrices using the priority vectors calculations]. izvestiya yufu. tehnicheskie nauki, 2, 241-247. (in russian) saaty, t. l. (2008). decision making with the analytic hierarchy process, int. j. services sciences, 1, 83-98. senchenko, s. (2011). ponjatija, koncepcii i metodiki funkcionalno-stoimostnogo analiza na sovremennom jetape razvitija jekonomiki [notions, conceptions and methods of function and value analysis at the modern stage of economics development]. izvestiya yujnogo federalnogo universiteta, 11, 70-74. (in russian) sergeev, v. (2013). korporativnaja logistika v voprosah i otvetah [corporate logistics in questions and the answers]. moskow: infra-m. (in russian) stock, j. r ., lambert, douglas, m. (2005). strategicheskoe upravlenie logistikoy [strategic logistics management]. moskow: infra-m. (in russian) waters, d. (2009). supply chain management: an introduction to logistics. 2nd ed. hampshire: palgrave macmillan. baltic journal of economic studies 233 vol. 4, no. 5, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. e-mail: orlov1284@ukr.net 2 kharkiv national university of internal affairs, ukraine. e-mail: ua_law_2014@ukr.net 3 kharkiv national university of internal affairs, ukraine. e-mail: jenyagladkova27@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-233-239 realization of the right of rebellion: from the manifestation of democracy to a crime against the state yurii orlov1, andrii yashchenko2, yevheniia hladkova3 abstract. the objective of the article is to identify, describe, and explain the grounds and conditions for realizing the right of rebellion, delimitation of the relevant democratic procedures from anti-state crimes. the main results of the research are that we have established the liberal and democratic principles for the realization of the right of rebellion. it has been established that it can be realized only on the grounds of the extreme necessity in restoring the rule of law, that is, while having an exclusively criminal and preventive purpose. we have also discovered that both a democratic procedure of realizing the right of rebellion can be solely considered on condition of sufficient justification, proof of the long ineffectiveness of other means of influencing the criminalized apparatus of the state, in particular judicial ones. it has been substantiated that the essential condition for the realization of such a right is the critical level of nonconfidence to the personnel of the highest agencies of state power in the overwhelming majority of the population, as well as the actual impossibility to apply (implement) the statutory forms of influence on their personnel. it is mandatory to consider the requirement of ensuring national security on the basis of a scientifically grounded criminological forecast of the deployment of mass resistance, taking into account the probable reaction to it by the subjects of international law. thus, the realization of the right of rebellion should be non-violent. in all other cases, there is a criminal seizure of state power. the applied value of the research is the fact that due to the developed system of grounds and conditions for realizing the right of rebellion, the latter, as it is, may be delimitated from political criminal practices aimed at dismantlement of the constitutional statehood, the seizure of state power. the results of the research may also be taken into account by political actors, as well as law enforcement agencies, courts while criminological substantiation, prediction of mass resistance measures, and legal assessment of such actions. value/originality. the authors of the work have improved the criminological vision of the movement of mass resistance, which can take place both in the form of the realization of the natural right of rebellion and in the form of anti-state crimes. the use of these developments can be useful in the retrospective legal assessment of the situation of mass protests, forms, means, and consequences of responding to them by the authorities, preventing abuse of the right of rebellion and related crimes. key words: the right of rebellion, seizure of state power, grounds, conditions, prevention of crimes, cessation of criminal activity. jel classification: k19, h56 1. introduction the origin and establishment of the post-soviet political and economic space of an independent state of ukraine, as well as other former union republics, took place and occurs in rather specific, historically unconventional conditions related to a radical change of not only the political system, but also of the ideological principles of social development, system of management. the direct or indirect integration of organized criminal gangs with political institutions was one of the peculiarities of this process, which significantly influenced the further genesis of all spheres of sociodynamics without any exception. as a result the commercial, criminal basis in its essence was firmly established in the structure of the latter, which largely determines the real direction of the functioning of a large part of the state apparatus, and which has little in common with the implementation of high social standards, the liberal and humanistic baltic journal of economic studies 234 vol. 4, no. 5, 2018 philosophy of domination in the whole. in such circumstances, the threat of initiation of mass protest actions of anti-criminal nature seems quite legitimate. the indicated circumstance allows including the issue about the grounds, conditions for the realization of the right of rebellion in the criminological perspective of the analysis to the category of urgent theoretical and practical problems. the objective of the article is to provide a scientific description and explanation of the grounds and conditions for realizing the right of rebellion, its delimitation from the criminal seizure of state power. the empirical basis of this research was the statistics, expert assessments of the diplomatic service employees of ukraine, the security service of ukraine, as well as the results of the non-included sociological monitoring of the mass protest movement in ukraine during november 2013 – february 2014, content-analysis of reports in mass media and communications. 2. the right of rebellion as a mechanism of restraint of “leviathan” t. hobbes, in his world-famous work, “leviathan” (hobbes, 2016), extensively argued the reasons for a social contract to delegate the right to legitimate violence to a “man-made divinity” and, finally, a sovereign one – for the state. according to the idea of the thinker, the latter should apply legitimate, impersonal violence (and therefore – coercion) as a result of sublimation of interpersonal violence. however, the construction of justice and the legitimacy of coercion collapse exactly at a time, when there is subjectification, appropriation of powers of the sovereign by individuals or groups of individuals, “privatization” of levers of public administration. the social project of “leviathan” has repeatedly discredited itself in a similar way in various historical moments and in different cultural contexts, which prompted the concept of the right of rebellion to life. in the famous “treatise on law,” thomas aquinas explains in detail the right of peoples to political opposition. in our opinion, we must agree with the idea of the philosopher that “... the resistance of the tyrant’s cruelty will be successful, as the action of any people not by their own initiative but by the decision of society. if the right of any large number of people reaches the point of imposing a king, then it is not unfair that the king put forward by them will be thrown down, or his power will be limited if he tyrannically abuses the royal power ...” (aquinas). a similar ethical and theological system of coordinates, which defines the red line in the interaction of citizens and public administration as rational categories, has subsequently embodied in the constitutions and other legislative acts of some states. for example, art. 7 of the constitution of the portuguese republic dated from april 2, 1976, has consolidated that “portugal recognizes peoples’ right to self-determination and independence and to development, as well as the right of insurrection against all forms of oppression” (constitution of the portuguese republic). the concept of the right of rebellion (in some interpretations – to public disobedience, to the opposition) has also acquired some development at the doctrinal level. scientific works focused on the development of this legal phenomenon belong to h. arendt, v. v. babin, e. vitalie, v. b. kovalchuk, s. p. pohrebniak, o. o. uvarova, d. shtenberger and some others. without making a detailed analysis of the existing points of view, we note only that their common feature is the recognition of the right of rebellion as a peculiar constitutional equivalent of the right to the necessary defence (pohrebniak, uvarova, 2013). in fact, it has a rational kernel of ethical justification for the possibility to realize the coup. however, following the indicated analogy, one should also admit that it can be applied only when the degree of oppression of the people has reached a critical point and is socially dangerous. in other words, the ethical basis of the coup is completely dependent on the criminological justification of the latter. 3. popular uprising at the crossroads of law and morals the realities of the present day prove that the most common scenario of the coup is the forced removal of heads of highest and central state authorities from performing official duties, which takes place without a precollected evidence base of their criminal activity, however, with subsequent objective investigation, proving the guilt and conviction in this case, there are two possible options: a) to use procedures stipulated by the law for dismissal from current positions, displacement, such as, for example, impeachment, no-confidence vote; b) without the usage of these procedures. the first of them – removes all questions about the legality of the dismissal of the relevant leaders and the coup in general, which is constitutional in the literal sense of the word. the second one leaves a lot of questions that quite often become the basis for political speculation and even military interventions by foreign countries under various motives: starting from restoration of the constitutional system to the protection of certain categories of people, who are really or mentally suffering from politically motivated harassment. in this case, some important evidence, considering a purely legal point of view, is obtained in a non-legal way, there are well-grounded remarks regarding non-compliance with the principle of presumption of innocence and the admissibility of evidence. this becomes possible in the context of the criminal proceedings on a general basis, without taking into account legal immunity, which the relevant head of state authority is deprived in an unforeseen by the law manner. baltic journal of economic studies 235 vol. 4, no. 5, 2018 however, for the sake of justice, it should be noted that in the case, when the criminal activity of officials of highest and central state authorities has the massive nature and is extremely latent, then the possibilities of legalizing the process of preliminary collection of evidence base does not exist at all (at least within the limits of using national instruments of criminal justice). then there is a logical question: how can one stop criminal activity in a situation, when law enforcement agencies at the highest political level are completely dysfunctional, and there is a lack of political will of the parliament, the president or other political actors to solve respectively the problem by using political means? it seems that the answer to this question lies in the basics of the methodology of legal consciousness. from the point of view of legal positivism, this is absolutely a stalemate situation, which is characterized by a permanent mass political victimization in the scale of the over whelming majority of the population of the entire state; the gap between the consistent patterns of sociodynamics and the functioning of state and imperious institutions becomes more and more relief contours, and public control over the public administration (including the use of mass media resources, the institution of public investigations, etc.) eliminated as it is, becomes ineffective. the conquest of the will of the ruling elite remains the only possible direction in the organization of social practices from the legal and positivist positions, and which is reduced to the widespread populism and abuse of law. however, trying to solve the problem of abusing the law by legal means (in the positivist sense) – it is nonsense. it is vitally necessary to get out of the dogmatic path of the ideological coordinate system. without deepening, however, to the depths of the discussion about the most expedient and well-balanced types of legal consciousness, we note that in order to substantiate the strategy of eliminating a defined criminalized socio-political crisis situation, we consider it advisable to apply the integrative concept of the vision of the nature of law, the content of which can be expressed through the synthesis of positivism, natural and legal conception, communicative and a number of other theories of law. the proper legal substantiation of events that is launched in the context of social justice, but is not provided with an appropriate legislative assessment becomes possible, in our opinion, only with such an integrative legal paradigm of the perception of legally significant aspects of social interaction. without claiming to formulate heuristic provisions in this regard, we note only that when it comes to assessing the coup as a socially acceptable or socially dangerous one, one should take into account that this is the sphere of interaction between morality and law. however, one should immediately comment on the current danger of introducing moralizing innovations to legal reality. the fact is that the space of ethics, as reasonably noted by i. l. zelenkova, is one of the few spheres of knowledge, where innovation often turns out to be threatening the very essence of this knowledge since moral laws must have inescapable value and significance. nevertheless, a person is provided with the widest possibilities to choose (or to design) his own and, at the same time, universally valid samples and ideals, precisely in the field of morality. the most complicated task at the same time is to stay within the ethical framework; proceeding from traditional morals, not to push away morality in general (zelenkova, 2001). therefore, the moral justification of the coup involves a priori the significant risks of potential abuse presumably incorrect provisions in the future that can give a free hand in extremist, terrorist organizations. however, the source of law-formation, which should be maximally accompanied by the law-making process, should be in the depths of ethical comprehension of the state of things. quite often, such an ideological and practical movement takes place in conditions of social conflict since any established system always strives for self-preservation. the same is applied to the political system and means of ensuring its stability, including legal ones. there is a well-known ecclesiastical work of sh.-l. montesquieu “the spirit of laws” in science and journalism. its key ideas about the relationship between the spirit and the letter of the law have become a trivial character at the present day, however, have not lost their relevance. the inconsistency of the legislative base (in particular, in the context of effective and accessible procedures of the influence of civil society institutions on state power in order to control its activities and, if necessary, the pre-term termination of the powers of individual officials), with the internal tendencies of social development – the essence of the law of dialectical contradiction, the visualization of the mechanism, the embodiment of which in the sociodynamics plane reveals internal sources of self-movement. the social system can only get rid of unacceptable for it elements of the system of law when effective channels of accumulation and articulation of its interests will be established by the institutions responsible for this process. consequently, constructive legal changes are rarely possible only after reformatting the political system, in particular by radical means. this is a consistive pattern. at the same time, the key requirement is the reality and the need for restoration of social justice, the violation of which is directly related both to the characteristics of the positive and legal core of the legal system, and to the inappropriate allocation and implementation of political and state will, supported by legislative anachronism. the attempt to specify the content of social injustice in the context of the grounds of the coup certainly leads to the necessity of its criminological substantiation. baltic journal of economic studies 236 vol. 4, no. 5, 2018 4. criminological goal for realizing the people’s right of rebellion it should be borne in mind that the definition of a crime or non-criminal nature of the coup as a political crime or an act of restoring justice and a radical manifestation of direct democracy is essentially a political assessment, which besides political factors, must be based on legal, ethical, and criminological principles. therefore, the resolution of the possibility or impossibility of using the political and criminological technology of the coup, as an extreme measure for the cessation of the activities of organized criminal groups within highest and central government agencies should in any case be solved separately and should necessarily take into account its exceptional nature. this makes us talk about the possibility of operating it only in the case when the use of other measures for a long time did not contribute to the achievement of the criminal and preventive purpose. in such a situation, the logic of reasoning can be built according to the scheme “by contradiction”: the genesis of the criminalization of the highest and central agencies of state power and, finally, its apogee in the form of merging the apparatus of the state with organized criminal groups can be represented as a kind of coup. capture of power occurs gradually and latently, using quasi-democratic procedures as means of covering and legalizing the criminalization of the state apparatus. the characteristic features of the latter’s functioning are the ultra-high level of corruption, political and legal populism, the commercialization of public benefits (first of all – among natural resources), poverty of the population, economic recession, and the constant growth of external debt obligations. o. m. bandurka pondering on the problem of the formation of criminalization as a social system has expressed commendable in this aspect opinions. he has noted that political struggle is changing by the internecine struggle of criminal groups. it is impossible to break beyond this process. the whole legal system, the constitution and laws serve the interests of the criminal world. the law does not prevent crime and does not restrain it, but only regulates the rules between the clan rivalry. social parasitism is growing, incentives for productive labour are eliminated ... society involved into a crater of criminality is quickly plunged into the abyss and the opportunity to escape to the surface becomes all the more glamorous (bandurka, 2013). it is obvious that such characteristics of the social system have nothing similar to the state’s implementation of its tasks, which are enshrined, in particular, in the constitution of ukraine. there is a complete or significant dysfunction of the main state institutions, and the sphere of dominance becomes closed. entrance to it (including through the elections) becomes possible only through the system of criminal (corruption) practices. conquering the activities of public administration at all levels to narrowminded interests made it possible for some theoretician in the law field to speak about the emergence of the form of state – corporate state, which was previously unknown to science. the number of appeals of citizens of ukraine to the european court of human rights can be a casual confirmation of the severity of the stated problems. there are about 10,500 complaints from the citizens about their violated rights and freedoms by ukraine. the vast majority of cases deal with such issues as: the right to liberty and personal integrity; the right to a fair trial; the right to peaceful possession of the property; the right to free elections; the right to a fair trial in relation to the right to execute a court decision, etc. (rumiantseva). and this is a reflection of only the part of the population that manifests the highest legal activity. the real scale of the systematic violation of human rights and freedoms in ukraine – have gained impressive parameters in recent years. whether the systematic enforcing of such a policy is a real coup when the very essence of the state is changed, and the direction of the activities of its organs acquires social parasitic features? rhetorical question ... whereas its subtext – is a real humanitarian tragedy, both in its manifestations, and the only possible way of solution within the life of one conditional generation of people. the latter is, somewhat, in the secondary coup (in fact – in the restoration of the rule of law), the purpose of which is to release the apparatus of the state, bringing it to a proper functional status, which would correspond to the social, legal, democratic vector of the country’s development. it is the stated criminal and preventive purpose, along with the requirements of legality, is one of the main criteria for distinguishing between a criminal coup (the forms of criminal tyranny) and the extraordinary manifestation of direct democracy. a criminal coup takes place in the presence of an exclusively political purpose or its significant predominance when the criminalization of state power is only used as an occasion for reformatting its personal composition. significant features of a criminal coup are the personalization of actions of the managerial, organizational character and their focus on the seizure of power in the literal sense of the term. this, first of all, means the desire to change the personnel of certain government agencies through the use of controlled influence, but not as a result of spontaneous acts of participants in mass protests. secondly, the seizure of power itself should be a desirable outcome of the actions of political actors and to be in the structure of the intellectual moment of direct intent as a form of guilt within the structure of the subjective aspect of the legal composition of their criminal activity. these are not the actions that led to the forced temporal acceptance of the powers of a certain state authority to prevent the baltic journal of economic studies 237 vol. 4, no. 5, 2018 occurrence of serious social and physical consequences. however, if we want the criminal and preventive purpose to be a sufficient ground for legalizing the coup, it is necessary that the goal of restoration of social justice corresponds to it. in other words: it is the large-scale political criminal activity should be the main reason for the violation of social justice. only under this condition, the criminological basis of the coup will be sufficient since it is considered in an inseparable tandem with an ethical basis. the latter will obviously be visualized in the presence of the critical mass of the population in the state (a conditionally qualified majority), which is the bearer of a kind of politically determined cognitive dissonance, a conflict of the real and desirable within the ideological aspect of state domination in the structure of mass political consciousness and collective and unconscious intersubjective emotionally resonance practices. such a combination of rational and irrational in substantiation of ethical and criminological unity is due to differences in various types of societies, even those that are linked by a common historical past. therefore, a significant criminalization of state power is not a sufficient reason for every society to legitimize the coup and bring it to the extent of permissible political and criminological technology. it should be mandatory noted on the intolerance of the vast majority of the population to the ruling political elite based on its adherence to organized crime and the absence of effective national mechanisms of decriminalization stipulated by the law (within the criminological sense) of highest and central state authorities. 5. foreign policy influence as a factor of the delegitimization (criminalization) of mass resistance in the context of the prevalence of the political goal of the coup, a separate scientific and purely practical interest raises the question about the significance of foreign policy influence on initiation and/or its occurrence, as well as legal, political, and criminological assessment in this regard. we believe that the presence of the indicated influence alone indicates either about exclusive nature, or at least about the predominance of the very political goal. indeed, it is hard to imagine the mode of an exclusively altruistic subject of a geopolitical format, which does not have a remote strategic goal by making substantial capital infusion while supporting the counterpart political actors within a certain country. however, in this situation, it is also important to determine its role within the general course of protest events, the significance for achieving the final result, besides establishing the very factor of external influence and its political goal, which is no less important for its correct assessment and the coup in general. the latter, in order to legitimize the researched technology, should be no more than a condition that in a certain, not essential way contributes to the implementation of the technological program. in all other cases – it is about the criminal coup. if there is a significant external influence (direct military, or veiled with the use of technologies of unstructured management), we believe that there is no realization of the people’s right to resistance (rebellion). consequently, there can be no discussion about legitimization, recognition of the coup as an acceptable political and criminological technology of combating crime that has occurred as a result of such influence. international regulatory acts are also based on the same positions. in particular, the resolution of the un general assembly dated december 20, 2012, no. 67/170, effectively condemns “unilateral application and provision of execution of unilateral coercive measures by certain states” to the countries violating human rights. thus, a foreign state itself, without un sanctions, cannot apply unilateral coercive measures to a state, where people try to realize jus resistendi (babin, 2013). such a placement of emphases in assessing the significance of the coup, depending on foreign policy influence, lies in the in-depth theoretical principles of national security, which is correspondently based on the concept of a national state. the stated concept, on the background of processes of globalization, holds strong positions in the structure of public administration strategies almost in all european countries and the world in general. according to w. beck, the policy of “gold handcuffs”, the creation of a dense network of transnational dependencies within the age of global crises and risks, leads again to the conquest of national independence – in contrast to the imperious achievements of a high-growth world economy (beck, 2011). one cannot argue this. thus, summing up the above, we note that the coup is not always criminal and, while the compliance with the relevant conditions of legality and justice, the existence of criminological justification, can be studied as an accepted political and criminological mean of combating crime in the context of realizing the people’s right to oppose. however, its acceptability should have temporary (ideally – single-action) character. the use of the technology of the coup for decriminalization (in the criminological sense) of the state apparatus, that is, the removal of persons among political criminals from its management should entail the further systematic reform of the basic principles of the activities of public administration, including the legal consolidation of the mechanism of termination of authorities of the heads of the state power in a non-radical way, for example, by expressing distrust, recalling elected positions, etc. we are convinced that the people’s right of rebellion in modern conditions should be transformed by appropriate legal means into the people’s right to a broad and effective control over state authorities, which must be ensured by effective procedural instruments baltic journal of economic studies 238 vol. 4, no. 5, 2018 for bringing the highest officials to responsibility. no wonder that the preamble to the universal declaration of human rights dated december 10, 1948, determined whereas “it is essential, if man is not to be compelled to have recourse, as a last resort, to rebellion against tyranny and oppression, that human rights should be protected by the rule of law” (general declaration). therefore, one of the most urgent tasks of the latest strategy for the development of state-building in ukraine, as well as in other european countries in the context of the latest challenges of the post-modern era, deprival of legitimacy, should be among other things: a) the integration of legal and criminological policy in the whole and in the defined aspect by the universal declaration of human rights, in particular; b) the development of political and anti-criminal activity of the population. according to a. kaufmann, the right to resistance is, first of all, not great, heroic deeds. it is everyday life. resistance is a small extent. this “small” resistance must be constant in order to make the “big” opposition obsolete (kaufmann). thus, the main instrument of political and criminological influence on crime, which should exclude the burdensome practice of state coups in all aspects, should be the developed political consciousness of all levels of the population and its constant participation in detection, recording, signalling and active counteraction to criminal practices of both general and political orientation. 6. risks of realizing the right of rebellion in the conditions of globalized world one cannot also ignore the essential condition for the implementation of the decision to apply political and criminological technology of mass resistance, namely, to its compliance with the requirements of ensuring national security. it should be noted that such a social problem in this aspect as the criminalization of power cannot be considered fragmentarily, exclusively at the national, regional level. it is comprehensive. therefore, the prediction of the results of applying political and criminological technology of mass resistance should also be comprehensive rather than sectoral in nature and take into account possible effects in the sphere of internal and external politics, both within ukraine and in relation to it. it is well known that any action generates counteraction. a significant change in the configurations of the political system of one country within the globalized world cannot affect the interests of other countries. hence there is a fundamental dependence of criminological policy on national security policy. we emphasize that the latter should be made on an integrated basis, take into account the geopolitical risks, as well as the composition, the character of the activity (in particular, criminal) of local political and economic elites. consequently, the use of various complex radical means and measures to combat crime should always be analysed for possible intensification of threats to territorial integrity, constitutional system and other components of national security (economic, informational, etc.). therefore, while determining the possibility or impossibility of applying political and criminological technology of mass resistance, even if there are necessary ethical, socio-psychological, legal, and criminological grounds, we should mandatorily forecast the actualization of risks for the national security system and to form the necessary countermeasures in advance. if it is impossible to do this, the specified technology cannot be applied until the occurrence of corresponding changes in the structure of external threats in relation to the protective potential of the state. 7. conclusions 1. the realization of the right of rebellion is a form of consolidation of civil society institutions in counteracting the deep, institutionalized criminalization of the political system and the dysfunction of law enforcement agencies when the form and content of the state enter into a complete (or substantial) dialectical contrary, that is, antagonistic relations. 2. the realization of the right of rebellion involves the radicalization of political and social confrontation, essentially aimed at the coup (in the social and criminological sense of the term), that is, to remove from administrative authority of the state by a group of persons for whom there is a reasonable suspicion (that is, who actually discredited themselves) in prolonged criminal activity, including political one. 3. the right of rebellion can only be realized on the grounds of the urgent need to restore law and order, that is, by having an exclusively criminal and preventive purpose. 4. it is also important to observe the combination of such conditions of realization of the right of rebellion: a) the long-term inefficiency of other means of influence on the criminalized apparatus of the state, which dysfunctions are evident in the sphere of protection of the rights and freedoms of the person, the fight against crime and justice, has been retrospectively proved; b) the lack of confidence of the personnel of the supreme agencies of state power in the overwhelming majority of the population; c) the actual impossibility to apply (implement) the democratic procedures stipulated by law for the influence on the personnel of the supreme agencies of state power, including the cases of massive actual blocking of instruments of non-state control over the course and result of their application; d) compliance with the requirements of ensuring national security on the basis of scientifically substantiated criminological forecast of the deployment of mass resistance, taking into account the probable reactions to it by the subjects of international law; e) the use of exclusively nonviolent, legitimate methods of influence. baltic journal of economic studies 239 vol. 4, no. 5, 2018 5. the procedure for establishing and substantiating these conditions depend on nature, the degree of criminalization of the state apparatus, the development of civil society institutions, the specific socio-political and criminal situation. 6. lack of necessary and sufficient grounds and conditions does not allow identifying a complex of appropriate measures with a democratic procedure for the realization of the right of rebellion. depending on the nature and meaning of the acts that constitute the content of such measures, they may be qualified as offenses, in particular, crimes. 7. essential features of a criminal coup are the personification of actions of the managerial, organizational character and their orientation to the seizure of power. references: hobbes, t. (2016). leviafan [leviathan]. m.: ripol klassik. (in ukrainian). akvinskii, f. o pravlenii hosudariei [on the reign of sovereigns]. retrieved from: http://www.unavoce.ru/library/ aquinas_ruling.html (access date: july 15, 2018) konstitutsiia portuhalskoi respubliki ot 02.04.1976 [the constitution of the portuguese republic dated from april 2, 1976]. retrieved from: http://www.concourt.am/armenian/legal_resources/world_constitutions/ constit/portugal/portug-r.htm (access date: july 15, 2018) pohrebniak, s. p., uvarova, s. p. (2013). soprotivleniie uhneteniiu. vosstaniie. revoliutsiia (teoretiko-pravovoi analiz v svete doktriny prav cheloveka) [resistance to oppression. rebellion. revolution (theoretical and legal analysis in the light of the human rights doctrine)]. pravo i hromodianske suspilstvo, 2, 4-61. (in russian) eticheskaia mozaika: opyt netraditsionnoi interpretatsii etiki [ethical mosaic: the experience of non-traditional interpretation of ethics]. (2001). minsk: ооо «medzhyk buk». (in russian) zlochynnist v ukraini: ekonomiko-kryminolohychnyi analiz [crime in ukraine: economic and criminological analysis]. (2013). kharkiv: zolota mylia. (in ukrainian) rumiantseva, v. v. ohliad stanu zvernen hromadian ukrainy do yevropeiskoho sudu z prav liudyny [review of the state of appeal of citizens of ukraine to the european court of human rights]. retrieved from: http://www.minjust.gov.ua/ 1957 (access date: july 15, 2018) babin, b. v. (2013). pravo na soprotivleniie kak hlobalnoie pravo [the right to opposition as a global right]. voprosy prava i politiki, 5. retrieved from: http://e-notabene.ru/lr/article_817.html (access date: july 15, 2018) bek, u. (2011). vlada i kontrvlada u dobu hlobalizatsii. nova svitova politychna ekonomiia [power and counterpower on the eve of globalization. new world political economy]. «nika-tsentr». 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(1985-1986). small scale right to resist. new england law review, 21(3), 571-580. baltic journal of economic studies 325 vol. 4, no. 3, 2018 corresponding author: 1 department of management and military economy, national academy of the national guard of ukraine. e-mail: fisun.konstantin.1958@gmail.com 2 department of management and military economy, national academy of the national guard of ukraine. e-mail: marianaumenko1955@gmail.com 3 department of administrative and information law, institute of law and psychology, lviv polytechnic national university. e-mail: bnp1969n@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-325-332 price of the efficiency of functioning of organizational systems using expert methods konstantin fisun1, mariya naumenko2 national academy of the national guard of ukraine, ukraine nadiya bortnyk3 institute of law and psychology, lviv polytechnic national university, ukraine abstract. expert methods involve the application of procedures in assessing the effectiveness of the functioning of a variety of classes of organizational systems. the task of assessing the effectiveness of the functioning of organizational systems is inextricably linked with the choice of particular indicators and the development of various methods for the formation of a generalized estimate. this article analyses methods of decision-making based on expert information, its aggregation, the selection of procedures for group coordination (arrow, 1951; litvak, 2004). the implementation of the generalized estimate of the quality of functioning of organizational systems is proposed. the methodology for constructing the multicriteria function of the object’s efficiency is divided into the structural identification and parametric identification. managing complex objects must be done objectively (artim, novosad, selivestrov, 2009; savras, yurnetes, 2008). in this case, the diversity and uncertainty inherent in the processes in these objects indicate the prospects for further development of these issues. the use of means of modern information technology in diagnosis is a useful and justified tool. the sequence of the solution of the task posed includes the formation of a hierarchical structure of performance indicators, the choice of the principle of constructing a generalized estimate, and the development of procedures for constructing this estimate. the complexity of solving these problems is determined by a number of objective difficulties faced by capital construction projects. first, there is the complexity of managing large industrial, highly mechanized processes performed by various teams with a large number of cooperative ties with a high level of specialization. secondly, the impossibility of building up the capacities of construction organizations on the basis of extensive methods because of the specific demographic conditions prevailing in ukraine. thirdly, the lack of planning, the lack of reliable standards and a scientifically sound methodology for resource planning at the scale of large construction organizations and the industry as a whole. in the context of solving the task of managing complex organizational systems (construction production), an important place is occupied by the problem of determining the main indicators characterizing the activity of production. there arises the problem of forming on their basis an integrated assessment of the organization’s performance. this problem is solved by improving the system of evaluation criteria for complex hierarchical organizations, based on the need to improve the final results of the production cycle operation. methodology. the purpose of the research in this work is the application of expert methods in assessing complex organizational systems, while the basis for the decision-maker is the expert findings and the consistency of their views. in the statement of the problem, it is assumed that the procedures for obtaining expert information are iterative. to achieve this goal, the following tasks were identified: it is necessary to form a hierarchical structure of performance indicators; choose the principle of constructing a generalized estimate; develop a procedure for constructing this estimate. complex organizational systems are considered, i.e. systems in which the formulation of the problem and the decision-making on the basis of the information received from the controlled object is carried out by the management entity. the main element of the subject of management is the group opinion of the internal expertise of the enterprise. it is assumed that the initial stage in assessing the effectiveness of the functioning of organizational systems is the selection of a subset of the most baltic journal of economic studies 326 vol. 4, no. 3, 2018 significant indicators from the set of performance indicators of the organization and determining their “weight” using the parametric identification method. this is a condition for constructing a multicriteria function of the efficiency of the selection process and the creation of problem-solving algorithms. key words: organizational systems, expertise evaluation indicators, group decision, majority rule, choice, performance. jel classification: b49, d70, o22 1. introduction the problem of solving the task of increasing the efficiency of enterprises and organizational structures is the choice of methods for the formation of quantitative and qualitative estimated figures. the accessible information space of buyers does not always allow carrying out the analysis in quantitative measurement scales, qualitative measurements assume the use of opinions of experts – specialists working in the given sector of production or research (hrabovetskyi, 2010). in this formulation of the problem, it becomes necessary to define a generalized estimate of the quality of functioning of each of the objects under study. it is assumed that using qualitative scales for assessing the performance of existing organizational systems, it is possible to form both a hierarchical structure of individual performance indicators and the subject’s operating procedure (goodwin, 2005; danelian, 2015). we will consider the subject of management as an expert commission or a “group decision”. in this connection, an expert way of solving the problem seems appropriate (kyny, raifa, 1981). the main stages are: the formation of the structure of indicators; partitioning the entire set of indicators into a set that evaluates various aspects of the operation of compared objects; optimization of the number of indicators, taking into account the adequacy of the set while maintaining the completeness of the information space about the objects under study (lootsma, 1980). trest zhytlobud-1 ojsc (kharkiv) was considered as a research object, as an example of a complex organizational system. the relevance of the topic is determined by the fact that one of the main macroeconomic indicators of the socio-economic development of any state is the volume of construction work. construction is a key area of the national economy, the results of which have not only important economic significance but also a social one. a special role of the industry is to create conditions for the development of other sectors of the country’s economy. the problems of this paper are to create procedures for the qualitative choice of performance indicators of organizational systems, taking into account the multifaceted nature of activities of the investigated object, primarily determined by the list (catalogue, nomenclature) of indicators. the choice of these indicators is not trivial, requires the use of certain procedures and “applicability” for specific objects (koval, lutsenko, oksanych, serdiuk, fomovskaya, 2017; lindina, orlov, 2015). moreover, the tasks of selecting performance indicators of enterprises, industry, state structures at any time of development are determined, taking into account the situational approach in management. iterative solution of problems forms the level of adaptability of group selection procedures. 2. analysis of recent research the application of expert methods for assessing the effectiveness of functioning of complex socio-economic systems relies, first of all, on the methodology of decision-making and group selection. it is necessary to note such authors as maslennykov (2017) and novosad, seliverstov (2009), who consider the main problems and objectives in the theory of group decision making. from the point of view of mathematical analysis, issues are mainly solved, not related to how the group choice occurs or should occur, but to what choice is objective from any point of view. the consolidation of different individual opinions about the order of preference of the objects under consideration into a single “collective” preference is the basis of group choice (semenov, 2015). the issue of group selection allows us to interpret it as a completely common problem of a “fair” transition from given “individual data sets” to a single “collective group data set”. at the same time, assessments and their nature can be of a very different nature. for example, it can be experts and their assessments (analysis of expert assessments), team members (voting models), the name of quality indicators and their values (decision-making by many criteria), initial characteristics (classification problem). at present, the use of mathematical methods and models of group selection is an essential factor in improving the scientific level of management. when preparing solutions, a complete mathematical formalization of technical and economic tasks is often not feasible. this is a consequence of their quality characteristics and complexity of objects. to solve these issues, expert methods are used, which are understood as a set of logical and mathematical-statistical methods aimed at obtaining from the specialists the information necessary in the preparation and selection of the optimal solution. expert methods are now applied in situations where the selection, justification, and assessment of the baltic journal of economic studies 327 vol. 4, no. 3, 2018 consequences of decisions cannot be performed on the basis of accurate calculations. such situations often arise in the development of modern problems of production management and complex organizational systems (especially in forecasting and long-term planning). 3. estimates of the effectiveness of complex systems the problem of evaluating the effectiveness of complex systems is inextricably linked with the choice of particular performance indicators and the development of various methods for the formation of their generalized estimate. in this case, the statement of the problem of generalized estimation of the quality of functioning can be formulated as follows. suppose, given a set of evaluated objects si i n, ,= 1 that have the same functional value and are characterized by some set of individual performance indicators x=(x1, x2,…,xm). it is necessary to determine a generalized assessment of the quality of the functioning of each object si i n, ,= 1 , i.e. on a given set of values of indicators, find the reflection: u x x x rm: ...1 2× × × ⇒ , (1) that assigns to each vector x x m∈ a real number, called a generalized estimate. using the function u, the vector of the performance quality estimates is determined and a linear order is established on the set of evaluated objects. let us consider each of the stages on the example of the evaluation of trest zhytlobud-1 ojsc. before the beginning of the examination using the “snowball” method, an expert group was formed consisting of six specialists in this issue (beshelev, hurvych, 1980). specialists, while retaining their team in the future, participated in solving the tasks of each of the three stages. when choosing the indicators of evaluation with the help of expertise, it is necessary to solve three tasks: – formation of a complete list of individual performance indicators; – division of the whole set of indicators into groups that characterize various aspects of the functioning of the evaluated objects; – minimization of the number of indicators within each group, while maintaining all or basic information about the objects contained in the initial set of indicators. to determine the full list of individual indicators of the evaluation of trest zhytlobud-1 ojsc, an iterative procedure was used, proposed in trishch (2013). before the survey, all experts were introduced to a pre-compiled set of indicators in an amount equal to 27. indicators could be added or deleted. polls were conducted anonymously. after each poll, two coefficients r1 and r2 were calculated to determine the resulting list of indicators and assess the consistency of expert opinions. define: r1 – the ratio of the number of experts who voted for this indicator to the total number of experts; r2 – the degree of consensus of experts, which is calculated by the formula: r m m ij i 2 1 2 1 = − < ∑ρ ( ) , (2) where pij – the number of elements in the symmetrical difference of the ratio of two experts, referred to the total number of elements in the union of relations under consideration, m – the number of experts. the summation according to formula (2) is made for all parameters of expert relations. the coefficient r2 takes the value from 0 (complete agreement of all experts) to 1 (complete disagreement). after the first round of the task of determining the full list of indicators, three indicators had a value of r1 (0,16). these indicators were excluded from further consideration. the values of the remaining r1 were in the range of 0,4-1. the overall compliance indicator r2 was 0,25 which necessitated the second round of pooling after preliminary familiarization of the experts with the results of the first round. r1 values for 24 indicators after the second round were not lower than 0,66 and the value of r1 was 0,05 which was the reason for stopping the procedure. after a joint discussion on including three indicators in the general list, the opinions on which were divided equally in the second round, it was decided to include them in the general list. the result of the examination was a list of 24 indicators. in view of the specific nature of the object of investigation, the task of dividing the complete list of indicators into groups turned out to be trivial. four areas of activity were identified (tables 1-4). due to the fact that the number of indicators in the third section significantly exceeds the number of indicators in the remaining sections, it was decided to highlight the most significant indicators in this section [9; 10]. for this, a procedure was used, the idea of which is as follows. each of the experts sorts the indicators according to their preferences and compiles adjacent matrices ( ), ,r k mij k = 1 , where m – the number of experts. then the matrix is determined, the elements of which are calculated by the formula: ωij ij k k m m r i j i j if if = − ≠ =      = ∑2 0 1 , ; , . (3) the physical meaning of this calculation is that, if ωij < 0, then more than half of the experts prefer the object i to the object j. hence, if φ ω( ) , ,i i nij j n = < = = ∑ 0 1 1 , where n – the number of indicators. in our case, six quasi-orders were obtained (according to the number of experts); baltic journal of economic studies 328 vol. 4, no. 3, 2018 r1: 9 > 11 > 2 >10 > 8 > 5 > 1 = 3 > 4 = 6 = 7; r2: 9 > 2 = 10 > 8 > 5 = 11 > 6 > 4 > 1 = 3 = 7; r3: 9 > 11 > 5 = 8 > 10 > 2 = 7 > 6 > 1 = 3 = 4; r4: 9 > 2 = 5 = 10 = 11 > 8 > 6 > 7 > 4 > 1 > 3; r5: 9 > 8 > 2 > 3 = 5 = 10 = 11 > 4 > 1 = 6 = 7; r6: 9 > 5 > 8 = 11 > 10 > 2 > 7 > 6 > 4 > 1 = 3. on the basis of these quasi-orders, adjacency matrices ω were constructed and the sums of its rows φ( ), ,i i n= 1 were calculated. as a result of the examination of ω, six indicators m={11,2,10,8,5,9} characterizing the activity of trest zhytlobud-1 ojsc for group 3 were identified as significant. the next step in solving the task (1) is the choice of the method for constructing the multicriteria function of efficiency (mfe) and the development of algorithms for obtaining and processing the initial information in accordance with the chosen method. the process of constructing the mfe can be defined by five indicators: the set of allowed values of indicators; set of properties of the attitude of preferences of the decision-maker (dm); the set of structures and the set of parameters of the mfe models; information about the preferences of dm. the main requirements of group selection, which make it possible to distinguish a set of particular performance indicators from a subset of the mfe from all functions, are the following: comparability and transitivity (arrow, 1951). table 1 set of indicators – section 1 № indicator name unit 1 number of employees people 2 number of employees plan/actual people 3 output per 1 employee (taking into account the provision of services) hryvnia 4 the average salary of 1 employee hryvnia 5 the share of wages of workers to the scope of work % table 2 set of indicators – section 2 № indicator name unit 1 salary fund hryvnia 2 productivity (output) hryvnia 3 ratio of the wage fund to output % 4 cost price hryvnia 5 profit hryvnia 6 profitability % table 3 set of indicators – section 3 № indicator name unit 1 the total amount of construction and installation works hryvnia 2 new housing supply cu m 3 number of apartments in housing people 4 number of tower cranes pcs 5 provision of services hryvnia 6 one crane performance people 7 one-crane production of commissioned areas cu m 8 installation of reinforced concrete structures cu m 9 the volume of completed construction and installation works (including unfinished construction) hryvnia 10 the total amount of construction and installation works using its own resources hryvnia table 4 set of indicators – section 4 № indicator name unit 1 commodity circulation hryvnia 2 completion and processing of materials hryvnia baltic journal of economic studies 329 vol. 4, no. 3, 2018 4. the methodology for the formation of the multicriteria function of efficiency the methodology for the formation of mfe can be conditionally divided into two parts: the choice of the structure of the generalized functional (structural identification) and the definition of parameters of this structure (parametric identification) (saaty (2008), yurin (2013). when solving the problem of choosing a structure, it should be remembered that none of the ways of combining individual performance indicators into a generalized functional is universal and can be applied only after careful analysis. it is planned to study the research object and the structure of preferences of dm. the main task of parametric identification is to establish quantitative relations both between users and between values of individual indicators. based on the specifics of the research object, the main requirements for evaluation functions in the areas of work and a generalized estimate of the activities of various economic entities (ee) can be determined. t1. stimulation of distribution of efforts in accordance with the importance of indicators. t2. encouragement of acceptance of heightened obligations and achievement of the maximum results. t3. stimulation of an even distribution of efforts in the areas of work. evaluation of activities in the areas of work is determined on the basis of the values of indicators and the corresponding coefficients of relative importance indicators (requirements t1) and is calculated by the formula u x q xjp i p i m i i ij i i ij ij p = − +  = ∑λ δ φ δ φ 1 1( ) ( ) ( , ) , (4) where ujp – assessment of the activity of the j-th ee in the p-th section; mp– total number of indicators included in the p-th section; λi p – the coefficient of the relative importance of the i-th index of the p-th section; δi if the performance evaluation for the i th indicator = −1, is carried out taking into account the obligations assumeed by this indicator otherw ; , 0 iise        ; xij – the value of the i-th indicator for the j-th ee; qij – the value of obligations assumed by j-th ee for the i-th indicator; φ φi iq x x( , ), ( ) – one-dimensional estimates for the i-th indicator with and without obligations, respectively. the purpose of one-dimensional evaluation functions φ( , )q x is to stimulate the adoption of strenuous obligations and their achievement (requirement t2). the function φ( , )q x will be called the stimulating function. to determine the structure of a function φ( , )q x , we use the theory of decision-making under many criteria, one of the basic concepts of which is utility independence (shubyn, sub, 2014). utility independence is a necessary and sufficient condition for the representation of multidimensional functions through one-dimensional functions, which greatly simplifies their construction. the various conditions of utility independence cause the existence of certain function structures φ( , )q x . we admit the case of additive independence for the utility of q and x. let us choose the scaling constants as follows: φ φ φ φ ( , ) ; ( , ) ; ( , ) ; ( , ) ; * * * * q x q x r q x r q x r r 0 0 0 1 0 2 2 1 0 1 = = = = > , (5) where x0 and x* – the worst and best values of the indicator, respectively; q0 and q* – the worst and best values of the system of indicators. let us consider two cases: x ≥ q ;. x ≤ q. the condition is x ≥ q. additive independence assumes that the value of a function φ( , )q x in any admissible area is equal to the sum of the value of the conditional evaluation function with respect to one variable and the increment of the conditional evaluation function with respect to another variable. from here: φ φ φ φ( , ) ( , ) ( , ) ( , )* *q x q x q x q x= + −0 0 , (6) taking (5) into account, we obtain: φ φ φ φ ( , ) ( ) ( ), ( , ) ( ) ( ),* q x r r r x q x r r q 0 1 2 1 1 2 2 21 = + − = + − (7) where φ1( )q and φ2( )q – one-dimensional estimation functions; φ φ1 0 2 0 0( ) ( )x q= = ; φ φ1 2 1( ) ( ) * *x q= = . substituting (7) into (6) we finally obtain: φ φ φ( , ) ( ) ( ) ( ) ( )q x r r r x r q= + − + −1 2 1 1 2 21 . (8) the condition is x ≤ q. similarly with x ≥ q we have: φ φ φ φ( , ) ( , ) ( , ) ( , )q x q x q x q xx x= − + 0 0 , (9) where qx means that q = x. taking into account (5) and (8) we finally obtain: φ φ φ φ φ( , ) ( ) ( ) ( ) ( ) ( ) ( )q x r q q r r x r qx x= − +[ ] + − + −1 3 3 2 1 1 2 21 1 φ φ φ φ φ( , ) ( ) ( ) ( ) ( ) ( ) ( )q x r q q r r x r qx x= − +[ ] + − + −1 3 3 2 1 1 2 21 1 , (10) where φ3( )q – one-dimensional estimation function; φ3 0 1( )q = ; φ3 0( ) *q = . to construct one-dimensional estimation functions in formulas (8) and (10) and one-dimensional functions φi x( ) in formula (4), one can use the method of principal points. to determine the scaling constants in the formula (5) and the coefficients of the relative importance of the indicators λi p in the formula (4), we use the saaty’s priority method (saaty, 2008). the idea of this method is as follows. suppose that each of the n indicators has weight ωi i n, ,= 1 , and judgments aij of experts about the relative baltic journal of economic studies 330 vol. 4, no. 3, 2018 importance of the indicators i and j are known. then the relation between weights and judgments is expressed as follows: a i j nij i j = =ω ω ; , ,1 . from here: a n i nij i jj n ω ω = = = ∑ , ,1 1 . or in a matrix form a nω ω= , where the elements of matrix a are judgments aij. the sum of elements of the i-th row is ω ωi jj n ( )1 1= ∑ , i.e. the sums of the rows are a multiple of the vector ω . the sum of elements of the j-th column is equal to ( )1 1 1 ω ω ωj i ji n = = ∑ . therefore, the inversion of the sums of column elements assumes the formation of a vector ω. these remarks will be used in the future. note that in matrix a, rows 2, ..., n are multiples of the first row. therefore, the matrix has only one nonzero eigenvalue equal to n. hence, the judgments matrix is matched if and only if the maximum value of the indicator a = n and the value of the maximum value of a minus n gives a measure of deviation from consistency and indicates when judgments should be checked. to eliminate the possibility of the appearance of nontransitive judgments and, consequently, to improve their coherence, it is necessary to first rank the objects and then apply saaty’s priority theory. to solve the problem of ordering objects, it is proposed to use a procedure that selects a particular algorithm from a certain set, taking into account the structure of the initial data. the procedure is iterative. after the survey round, two measures of agreement of expert relations are calculated: the widely known kendall’s coefficient of concordance (w) and the coefficient t(m) proposed in beshelev, hurvych (1980). to test the hypothesis of nonrandomness of the results obtained, the distribution χ 2 is used, if the number of experts is n> 7, or the table values for n ≤ 7. the result of the analysis of these coefficients’ values is either repeated rounds of the poll or a transition to the search for the resulting ordering. 5. getting the resulting ordering when you receive the resulting ordering of characteristics, one of three algorithms can be used. these are: majority rule algorithms, an algorithm for modifying a transitive closure, and an algorithm that uses the calculation of kemeny’s median. the execution of one or another algorithm is determined by the structure of the initial data and the possibility of applying a simpler principle. the procedure for obtaining the resulting ranking and determining the coefficients of relative importance is shown on the example of indicators characterizing trest zhytlobud-1 ojsc. previously, six significant factors were obtained, m={11,2,10,8,5,9}, included in the third section. for simplicity, we renumber them in order, i.e. 1 = 11, 2 = 2, 3 = 10, 4 = 8, 5 = 5, 6 = 9. six experts determined the following individual preference relations on the set of indicators m={1,2,3,4,5,6}: r1: 6 > 1 > 2 > 3 > 4 > 5; r2: 6 > 2 = 3 > 4 > 1 = 5; r3: 6 > 1 > 4 = 5 > 3 > 2; r4: 6 > 1 = 2 = 3 = 5 > 4; r5: 6 > 4 > 2 > 1 = 3 = 5; r6: 6 > 5 > 1 = 4 > 3 > 2. in connection with the fact that all six experts prefer indicator 6 to the rest, yet we exclude it from consideration, but in the resulting ratio its rank will be equal to 1. by n(a,b), we denote the number of relations ri for which ari b, i.e. a number of experts who prefer indicator a to indicator b. the relation constructed by the group solution is found from the principle: arb n a b f n⇔ ≥( , ) ( ) , (11) where f(n) – an arbitrary function of a natural argument satisfying the condition 0 ≥ f(n) ≤ n. in this case, f(n)= 2/3. as a result of the analysis of these relations, the consistency of the experts was found to be satisfactory. for example, the concordance coefficient w≈0,37, which at a significance level of 5% is acceptable. to find the resulting relation, the majority rule algorithm was first used. the matrix of the resulting relation for n(a, b) > f(n) has the form: r =                 1 1 1 1 1 0 1 0 0 1 0 0 1 0 0 0 0 0 1 1 0 0 0 0 1 . this relation is non-linear, so a more complex algorithm was used – transitive closure modification algorithm. to do this, we needed to find another relation satisfying the condition n(a, b) ≥ f(n), r =             1 1 1 1 1 0 1 1 0 1 0 1 1 0 1 0 0 0 1 1 . since the function f(n) was chosen such that f(n) > 1/2, the matrix of the relation r is replaced by the matrix of the relation r0, satisfying the relation r r r r0 1= −( )∩∪ . the search for the resulting relation q by the transitive closure modification algorithm is applicable provided that r q r⊆ ⊆ 0. the resulting q relation was acceptable for further analysis because it satisfies the property of linearity and transitivity: q =                 1 1 1 1 1 0 1 1 1 1 0 0 1 0 1 0 0 1 1 1 0 0 1 0 1 . baltic journal of economic studies 331 vol. 4, no. 3, 2018 the resulting order of indicators has the following form: rtotal : 6 1 2 4 3 5> > > > = . to determine the coefficients of the relative importance of the indicators using the saaty’s priority method, the following scale was chosen: 1 – equally important; 3 – a little more important; 5 – more important; 7 – significantly exceeds in importance. intermediate values are taken in cases of fluctuations between the main estimates. on the basis of judgments of experts on the relative importance of each pair of indicators, taking into account the fact that aij = 1/aji, aii = 1, the matrix a was obtained: a = 1 2 5 3 2 1 3 1 2 1 4 2 4 1 4 1 5 1 4 1 1 4 1 1 7 1 3 1 4 4 1 4 1 5 1 5 1 4 1 1 4 1 1 / / / / / / / / / / / / / // 7 3 4 7 5 7 1                   . we denote the column sum vector of the matrix a by c, and the vector of the inverted sums by c-1. we have: c = (5,233; 7,75; 22; 11,5;22;2;0,69), c-1 = (0,19; 0,13; 0,05; 0,09; 0,05; 0,48). as noted earlier, with accurate measurement should be ω = −c 1. in this case: ci i − = = <∑ 1 1 6 0 99 1, . this arose from the fact that judgments of the type aik = aij x ajk are violated. the expert group decided to increase the weight of the fourth indicator, and then the vector of coefficients of the relative importance of indicators of the third section became equal to: λ3 0 19= ( , ; 0,13; 0,05; 0,10; 0,05; 0,48). in the same way, weight coefficients were obtained for the indicators from sections 1, 2, 3. the generalized estimate of the organization’s activities was based on assessments in four areas of work, taking into account the second half of the requirement t2 and the requirement t3. the requirement t2 can be fulfilled by choosing a generalized estimate function in the form: u arctg r r r j j j j = + −  ≥ ≤   54 8925 40 742 0 04 150 40 0 40 , , , ( ) , , if if . (12) the generalized function, as well as the onedimensional estimation functions, was constructed using the principal point method. in formula (12), rj is chosen based on the requirement t3, and is the length of the segment in the direction specified by the vector λ = (0,25; 0,25; 0,25; 0,25) to the indifference surface on which lies the vector of estimates uj=(u1,u2,u3,u4) characterizing the activity of the j-th object by four sections. to determine rj, an expert-statistical method of constructing mfe was used which indifference surface is given by a surface of revolution. therein, the formula for calculation has the following form: r u u u u u j j j j j j= − −         − − ( , ) , ( , ) , ( , )λ λ λ λ λ λ 0 0018 0 026 2 2 2 2 2 2        r u u u u u j j j j j j= − −         − − ( , ) , ( , ) , ( , )λ λ λ λ λ λ 0 0018 0 026 2 2 2 2 2 2        , (13) where ( , )u j λ – the scalar product of vectors uj and λ. the considered expert methods can be applied for an estimation of efficiency of functioning of a wide class of organizational systems (gibbard (1997), savras, yurynets (2008). 6. discussion of the results of the study of the practice of applying the theory of group choice in the scientific literature on the problems of choice, there are significant discrepancies between the theoretical and applied works. in theory, the logical grounds of choice, axiomatics, general principles of rationality and harmonization are considered. most applied works are devoted to the construction of specific models and procedures, largely heuristic. the task arises to develop and systematize theoretically justified methods that can serve as a methodological basis for solving applied problems. recently, there is a noticeable transformation of interest in the theory of choice. much attention is paid to more complex organizational models, which allows significantly expanding the functionality of models, bringing them closer to the existing objects. 7. conclusions for applied purposes in the theory of group choice, there is not enough a fundamental answer to the question whether a choice having certain properties can be realized by a model from a certain class. it is important to find a simpler implementation in this class. as a result of the research: 1. when selecting the valuation indicators with the help of expertise, the task of forming a complete list of individual performance indicators of trest zhytlobud-1 ojsc was solved, and an iterative procedure was used. as a result of the examination, it was revealed that of the 24 performance indicators of the organization, the most significant are 11 indicators. at the next stage, 6 indicators were identified as the most significant. 2. based on the specifics of the research object, the main requirements for the evaluation functions in the areas of work and a general evaluation of the organization’s activities were formed. these evaluations include stimulating the distribution of efforts in accordance with the importance of performance indicators of the organization. baltic journal of economic studies 332 vol. 4, no. 3, 2018 and also include the adoption of increased commitments and the achievement of maximum results, a uniform distribution of efforts in the areas of work. to determine the coefficients of the relative importance of the performance indicators of the organization, a four-dimensional scale was chosen. 3. three algorithms were used to construct the procedure of a generalized estimate of the resulting ordering of characteristics. these are the majority rule algorithms, an algorithm for modifying a transitive closure, and an algorithm that uses the calculation of kemeny’s median. as a result of the analysis of the consistency of experts, it was revealed that the concordance coefficient is 0,37 that at a significance level of 5% is acceptable. expert systems presuppose a qualitative analysis of the production situation and the possibility of forecasting the innovative development of organizations in modern conditions. stimulating the activity of employees and creating a system of motivation will allow forming an adequate organization of work of the administration of enterprises on the principles of a sound system of performance indicators of structural divisions. expert assessments are one of the methods for forecasting the qualitative development of organizational systems. references: arrow k.i. (1951) social choice and individual values. new york: wiley, 124 p. beshelev s.d., hurvych f.h. (1980). matematyko-statystycheskye metodi expertnich otsenok. m.: statystyka, 264 p. hrabovetskyi b.e. (2010). metod ekspertnykh otsinok: teoriia, metodolohiia, napriamky vykorystannia: monohrafiia vinnytsia: vntu, 171 p. gibbard a. (1977). manipulation of voting schemes: a general result. econometrica, 587 p. goodwin p. (2005). how to integrate management judgment with statistical forecasts. foresight, 3, 8-12. danelian t.ya. (2015). formalnie metodi exspertnikh otsenok. ekonomyka, statystyka i informatyka, 1, 183-187. kyny r .l., raifa x. (1981). pryniatye reshenyi pry mnohykh kryteryiakh: predpochtenyia zameshchenyia. m.: radyo y sviaz, 560 p. litvak b.g. (2004). razrabotka upravlencheskogo resheniya. m.: delo, 392 p. lootsma f.a. (1980). saaty’s priority theory and the nomination of a senior professor in operations research. fur. i. oper. res., v. 4, n. 6, 380-388. lutsenko i., fomovskaya e., oksanych i., koval s., serdiuk о. (2017). development of a verification method of estimated indicators for their use as an optimization criterion. eastern-european journal of enterprise technologies, 2 (4(86)), 17-23. lindina m.y., orlov a.y. (2015). matematycheskaia teoryia reitynhov. nauchniy zhurnal kubhau, 104 (10). retrieved from: http://ej.kubagro.ru/2015/10/pdf/01.pdf maslennykov e.v. (2017). vozmozhnosty ispolzovanyia expertnikh znanyi v kachestve ystochnyka kontseptsyi razvytyia orhanyzatsyi. vestnyk moskovskoho unyversyteta, seryia 18, sotsyolohyia y polytolohyia, 23(2), 229-249. novosad v.p., seliverstov r .g., artim i.i. (2009). kilkisni metody expertnogo ocinuvannya. naukovo-metodichna razrabotka. k.: nadu, 36 p. saaty t.l. (2008). pryniatye reshenyi pry zavysymostiakh i obratnikh sviaziakh. analytycheskye sety. m.: lky, 360 p. semenov s.s. (2015). otsenka kachestva i tekhnycheskoho urovnia slozhnikh system: praktyka prymenenyia metoda exspertnikh otsenok. m.: lenand, 352 p. shubyn a.n., sub a.d. (2014). prymenenye metoda exspertnikh otsenok pry postroenyy reitynha. m.: yzd-vo ltd «zhurnal innovatsiy i investiciy», 10, 208-217. trishch h.m. (2013). system of dependencies for assessment of enterprises quality management processes. eastern-european journal of enterprise technologies, 4 (3(64)), 60-63. yurin a.y. (2013). metodi gruppovoho vibora dlia adaptatsii reshenyi, poluchennikh v rezultate rassuzhdenyi na osnove pretsedentov. iskusstvenniy intellekt i pryniatye reshenyi. m., informatika i upravlenye ran, 3, 78-85. yurynets r .v., savras i.z. (2008). formuvannia ekspertnykh hrup z vykorystanniam ekonomiko-matematychnykh modelei rishen. visnyk sotsialno-ekonomichnykh doslidzhen: zb. nauk. pr. odeu. za zah. red. m.i. zvierkova, 30, 413-417. baltic journal of economic studies 288 vol. 4, no. 2, 2018 corresponding author: 1 department of civil law and procedure of faculty № 6. kharkiv national university of internal affairs. е-mail: sciencegens@gmail.com 2 department of civil law and procedure, national academy of internal affairs. е-mail: alex0674682444@gmail.com 3 department of legal support for economic activity of faculty № 6. kharkiv national university of internal affairs. е-mail: zvg@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-2-288-300 shareholders agreement: comparative and legal analysis of the legislation and legal doctrine of ukraine, eu countries and usa yuriy zhornokui1 kharkiv national university of internal affairs, ukraine olha burlaka2 national academy of internal affairs, ukraine valentyna zhornokui3 kharkiv national university of internal affairs, ukraine abstract. the aim of article is to conduct comparative-legal research of legislative acts establishing legal background of shareholders’ agreement conclusion and execution in certain foreign states and ukraine along with presentation of ways to improve the relevant ukrainian legislation. subject of research is the experience in area of legal regulation of shareholders’ agreement conclusion and execution in certain foreign states and ukraine. меthodology. research is based on comparison of shareholders’ agreement conclusion and execution in ukraine, usa, russia and western europe (italy, switzerland and germany). author defines advantages and deficiencies of shareholders’ agreement conclusion and execution methodology and opportunities to implement relevant foreign practices (on the basis of comparative-legal analysis of specific provisions of civil legislation of ukraine). results of this research proved that in order to implement foreign experience related to legal support of shareholders’ agreement conclusion and execution strict civil law sanctions must be imposed. these measures are applied in the case if there are violations of shareholders’ agreement provisions. we consider that reimbursement is the most efficient and appropriate sanction for commitments deriving from the shareholders’ agreements including voting procedure at general meetings, approval of voting format by other shareholders, coordination of actions related to management, key activities, jsc reorganization and liquidation due to the fact that reimbursement amount is defined by the parties and does not depend on damage inflicted, is not reduced according to the court ruling and may be applied along with other civil law sanctions. practical implementation. positive experience of development of legal background for shareholders’ agreement conclusion and execution in certain foreign states proves that law enforcement procedures require identification of relevant agreement legal nature as for quite a long time these documents have been used by corporate relations parties. сorrelation/originality. comparative analysis of ukrainian, european and american legislative acts regulating shareholders’ agreement conclusion and execution has become a foundation for presentation of certain amendments. кey words: foreign experience, analysis, agreement, legal doctrine, shareholders, eu states. jel classification: f53, o52 1. introduction analysis of the legislation and practice of foreign countries has demonstrated that shareholders agreements as a tool for individual and legal regulation of the relations between shareholders are admitted in many legal systems. there is a certain imbalance in the legislation of european countries. legal acts of italy and russia contain provisions on the procedure for making, executing and conditions of the researched agreements. but in germany, france and switzerland there are no baltic journal of economic studies 289 vol. 4, no. 2, 2018 special provisions for regulating the relations between shareholders through agreements. this is fully applied to ukraine. however, legislative and regulatory compliance practices needs to clarify the legal nature of the relevant agreements, since they have long been used by the members of corporate relations. however, the legislation in many countries does not provide a clear answer both to the question about the parties, the content, the object of a shareholders agreement and its legal nature. at the current stage of state formation ukrainian integration to eu is acknowledged as prerequisite of further successful democratization and strengthening of civil society position (medvedev, 2014). тhat is why radical social and economic transformations of the last decade led both to positive and negative outcomes for ukraine (pavlenko et al., 2017). therefore, american and european experience is so important and valuable as regulation of shareholders’ relations gradually becomes a matter of great interest in the light of international cooperation and trade facilitation and orientation towards state prosperity and security. аnalysis of latest research and publications. significant contribution to research of problems related to comparative analysis of legislative acts and legal doctrine of ukraine, usa, russia and eu states was made by numerous scholars: е.  sukhanov, v.  vasiliieva, e.  haymann, r .  müller, i.  spasibofateieva, м. sibilev, v. yarotskyi, i. hewitt, v. chionna, g.  cian; alberto trabucchi, о.  kibenko, v.  belov, n.  кuznetsova, r .  маydanik, y.  kokhanovskaya, т. abova, d. mayer, g. stedman, j. jones, d. lomakin, v.  gureiev, n.  karzhavina, d.  stepanov, v.  litovkina, k. yaroshenko, y. romanova, y. petrova, i. venediktova. the aim of article is to conduct comparative-legal research of legislative acts establishing legal background of shareholders’ agreement conclusion and execution in certain foreign states and ukraine. in this regard resolution of plenum of the supreme court of ukraine dated from october 24, 2008 no. 13 “on the practice of corporate disputes reviewed by the courts” provides that the activities of joint-stock companies (hereinafter jsc), the relationships between the founders (shareholders), as well as issues of corporate management are regulated by laws and other legal acts of ukraine, in particular, mandatory norms, disregard of which violates public order (p. 8-9). however, despite the opposition expressed by some experts concerning the application of the researched legal category within joint-stock relations, we have to note that the concept of “joint-stock transactions” was first legalized by the law of ukraine “on jointstock companies” (we use the term of “transactions between shareholders”) (on joint-stock companies, 2008). such an allocation of the group of contractual obligations by the national legislator borrowed from the anglo-american legal system, where the joint-stock transactions they understand agreements between shareholders on the management of corporation, voting procedure, contains restrictions on expression of will and other use of the corporate vote (vasylieva, 2008). shareholders agreements are known to german law, which is close to ukrainian law. the german law allows the concert between shareholders to vote at the general meeting by concluding the agreement (stimmbindungsvereinbarung) (spasybo-fateeva et al., 2014). analyzing the german, french and italian professional literature on the formation of doctrines on shareholders agreements we may observe in each case that the emergence of such contractual relationships is the result of the formation of the doctrinal foundations of their appropriateness and legality. it mainly concerns such an aspect of corporate relations, as the issue of voting compared to the demand on the freedom of exercising the rights in one’s sole discretion. certain german experts in the middle of the xx-th century maintained their points of view of the admissibility to disclaim and limit own will and interest of the rights that is derived from participation in a business entity. it is stated that the coherence of a member of a company, in case of concluding the agreement on a certain way of voting, shall not be considered during the voting at the general meeting as more than a contradiction of his freedom to vote by any way, but rather it is an expression of his freedom (fischer, 1953; weber, 2000). shareholders agreements are common in the corporate practice in switzerland. their legality and admissibility is admitted by most scholars and court practice. analysis of doctrinal and practical research in this country leads to the conclusion that over a long period of existence of this problem as an object of research and practical interests, there is a sufficient scientific and practical understanding of the role and significance of shareholders agreements as a tool of accessory regulation and protection of corporate interests of shareholders (aktienübernahmevereinbarungen zwischen mehrheits und minderheitsaktionären: ein vorschlag zu einem wirksamen minderheitenschutz, vor allem in kleinen und mittleren aktiengesellschaften, 1973). legislative foundations for the possibility of concluding shareholders agreements in switzerland are general norms of contractual and corporate law. the art. 27 of the civil code of switzerland, which proclaims the principle of freedom of an agreement and inadmissibility of excessive obligations, should be called as the general basic norm of civil law. this principle is determining both for using shareholders agreements and for establishing the limits of their specific content. it is historically that in france there is somewhat different situation for the recognition of the possibility to conclude a shareholders agreement. thus, agreements between the shareholders of the duty to vote in a baltic journal of economic studies 290 vol. 4, no. 2, 2018 certain way were banned in france. it is associated with the understanding of the role of a shareholder, who participating in the general meeting shall decide on the basis of free will principle (sonnenberger, 2000). later in court practice such agreements were admitted, but with certain restrictions, in particular concerning the timing of their action and content. in england shareholders agreements regulate relations arising in connection with the management of the company, establish the dividend policy, are aimed at addressing “deadlock resolutions”, may impose restrictions on the disposal of shares: call option, put option, pre-emptive rights on acquiring shares by the shareholders, lock up provisions, tag along rights, drag along righs (hewitt, 2016). italy is one of the few eu countries, where the civil law contains special provisions aimed at regulating the procedure of concluding shareholders agreements. such a decision of the italian legislator was not a reflection of general european tendencies (chionna, 2008). italian experience in regulating shareholders agreements is of particular interest for studying this issue because we can observe the characteristics along with the fact of the presence of special norms of the civil law on such commitments, indicative, in particular to the norms of other states, such as the art. 32.1 of the law of the rf “on joint-stock companies”. this is due to the fact that many provisions of the italian civil law on this issue were borrowed by russian legislator concerning a joint-stock company. in legal doctrine presented approaches were not unequivocal supported. in particular, ye. o. sukhanov asserts that a shareholders agreement according to its legal nature is a civil and legal contract on exercising shareholders’ rights, not a “corporate transaction”, which determines the structure of the corporation’s management (suhanov, 2014). v. a . bielov does not support the position about a “clean” contractual nature of the researched relations between the shareholders indicating that they (relations) should be considered as “unilateral half-directed transactions with a plurality of persons on the side, which exercise them” (belov, 2013). there is a question whether shareholders agreements are the kind of civil and legal contracts, or whether they are independent type of contracts governed by the civil code of ukraine, but being outside the civil law, and are the object of other area – corporate law, the object and method of which are under the scientific discussion for many years. binding and legal rather than corporate nature of the shareholders agreements is generally admitted in european corporate law. derived from here is their binding nature only for persons who have signed them, but not for the whole corporation. thus, in case of violation of such an agreement by one of the shareholders, contractual responsibility can be relied on him, but the results of voting and decisions taken by the company are legally valid and can not be challenged. in germany and switzerland the shareholders agreements, usually are not considered as an independent type of agreement. the prevailing view is that it should be understood as agreements of shareholders that regulate legal relationships of the shareholders or groups of shareholder between each other (mayer, 2006). the basic norm that determines the admissibility of the shareholders agreements under german civil law, is the provisions enshrined in c. 5, § 23 of german law “on actions” (aktiengesetz vom 6. september 1965), under which “provisions supplementing the charter of the company are admissible, if the law does not contain an exhaustive regulation”. the shareholders agreements in german legal literature and practice are almost unanimously qualified as agreements on common activities and are regulated by §§ 705-740 of the german civil regulations on the agreement of partnership. however, it should be noted that the shareholders agreement in the form of “partnership” can solely exist, when its parties are only individuals, who do not have the status of entrepreneurs. in other cases, such agreements are considered as binding and legal agreements on the ways and peculiarities of realizing the rights to shares and rights from them and are regulated by the general norms on contracts. similarly, this issue is solved in swiss legislation, which recognizes several forms of real expression of the shareholders agreements: single and double sided binding agreements, a partnership agreement (müller, 1998). the latter in most cases is the basic form of fixing binding relationships between the shareholders. analyzing the experience of legislative regulation of the shareholders agreements in germany, switzerland, france, one can conclude that, firstly, these countries do not use legal concept – “corporate agreement”. none of the countries of continental europe does not apply the legal terminology of foreign countries in its legislation, including legislation on joint stock companies (exceptions are latin terms and names of some legal institutions that are quite specific to any country or the group, such as the concept of “trust”). anglicisms, which are followed by the modern adjective “corporate” may be used only as a doctrinal concepts. national legislator and the corresponding doctrine analyze, compared and receive legal structures used in other countries  – it is a natural process of international and interstate legal communication. however, we seek to use legal concepts that are specific to the national language. thus, the art. 2341 bis of the civil code of italy uses the term “patti parasociali”, which is literally interpreted as “an agreement concerning the company”. herewith the italian legislator does not use the adjective “corporate” («corporativo»), because the word “corporation” is used in a rather narrow sense, as a rule, to refer to groups baltic journal of economic studies 291 vol. 4, no. 2, 2018 based on membership, sometimes without a legal entity, for example, trade unions. the legislation of most countries in europe does not contain a legal definition of the shareholders agreement. the exception is italy, which civil law designates such agreements in different ways, including both the term “shareholders agreements”, and other terms that emphasize the variety of such agreements according to their nature and spheres of application. in particular, the shareholders agreement are designated as patto parasociale (also contratto parasociale). besides such term as sindacato azionario is used. it means agreements of shareholders with the terms for selling the shares. the term sindacato di blocco is used to state the type of shareholders agreements providing specifically only the condition for not selling the shares. thus, we can specify that the legislation of european countries does not generally contain the definition of the category “shareholders agreement” that is because of the fact that the corresponding construction has found its development and grounding within court practice and legal doctrine. however, the absence of such a definition only makes embarrassment, because does not allow to give a definite answer to some questions – one of which is the subjective matter  – the parties under such an agreement. there are three approaches to the establishment of the parties of the shareholders agreement. they are: 1) shareholders only (lomakyn, 2008; suhanov, 2014); 2) shareholders and a company (hureev, 2007; karzhavyna, 2007); 3) shareholders, the company and third parties (spasybo-fatieieva, 2009; stepanov, 2013). paying attention to guarantees of the minority shareholders, yu. v. romanova indicates that shareholders agreements under the laws of france, the united states and other countries, are concluded between the shareholders (romanova, 2004). despite the fact that corporate law does not literally establish that it is the company or third parties, who are not its shareholders, can be a party to such an agreement, but still we need to recognize that neither the company nor persons who are not its members can be a party to the shareholders agreement under current regulations, there are no corporate relations outside the legal entity. the second position related to the definition of the subject matter of the shareholders agreement is limited to the fact that it can be concluded between the shareholders or between the shareholders and the company, as the shareholders agreement signed only between the shareholders does not obligate the joint stock company to anything, which in turn, makes little sense in the agreement itself (hureev, 2007; karzhavyna “shareholders' agreement as a way of corporate conflict overcome and the problem of its validity under the russian”, business law, 4 (2007). why is there a need in practice to include a company among the parties of the shareholders agreement? according to d. i. stiepanov, it is for the reason that the bodies, which are derived from the general meetings of the corporation members through the corporation that is involved in this agreement as the party, had to be obliged to fulfill decisions taken by its members. typically, the scholar continues, the company may be a party either of an agreement, where all of its shareholders take part, or an agreement, which involves not all the shareholders, but where the corporation receives only the rights, but bears no obligations to other parties of the agreement (otherwise the rights of other shareholders, who do not participate in the agreement could be violated in favor of the parties to the agreement) (stepanov, 2013). this approach is confirmed by the international legal practice. in particular, provisions, by which the company becomes a party to a shareholders agreement, are more common in england (stedman, jones, 1998). it is worth paying attention to the existence of the third approach. thus, i. v. spasybo-fatieieva believes that the shareholders agreements relate to the concert between the shareholders (spasybo-fatieieva, 2009) ..., however, continued her position, notes that not only the shareholders can be their subjects, but also future shareholders (investors) (spasybo-fatieieva, 2009). instead, o. m. vinnyk offers acknowledge founders, shareholders and/or potential shareholders  – persons, who subscribed for shares of additional issue, as the parties of the shareholders agreement (vinnyk, 2010). the main reference of the supporters of the third approach is the fact that the company lenders and other third parties may enter into an agreement with the shareholders, whereby the latter, in order to guarantee the interest of third parties protected by the law, undertake to exercise their corporate rights in a certain way or to abstain (abandon) their implementation, including, to vote in a certain manner at the general meeting of the company members, to take other actions to manage the company, to acquire or dispose the shares in its authorized capital (shares) at a specified price and (or) under certain conditions to refrain from alienation of a shares (interests) to the occurrence of certain circumstances. the rules on corporate contract are applied to such an agreement (abova, 2013). let’s study these approaches. since the shareholders agreement has the appropriate name, the first thing making any associations  – is its recognition by the parties of only the shareholders. as we have already noted, the number of shareholders who conclude the shareholders agreement may be any, besides these can be both majority and minority shareholders, who have decided to protect their rights by consolidating their capabilities, these can be shareholders  – individuals or shareholders  – legal entities, these may be only two shareholders or all shareholders of a company without exception. it is obvious that only the shareholders are baltic journal of economic studies 292 vol. 4, no. 2, 2018 the parties of the shareholders agreement, only they acquire the rights and obligations under this contractual structure, execution of which is realized through the implementation of actions by the shareholders, the most common of which is the transfer of property and advance voting in a certain way. the shareholders in a joint stock company are not in legal relations between each other, but the latter may arise between them, if they conclude an agreement. in this case, there will exist two kinds of legal relations in a joint stock company  – between a joint stock company and each shareholder (corporate) and between the shareholders who entered into an agreement (contractual). the latter include not all the shareholders, but only those who signed the agreement. it does not act for the rest of the shareholders. therefore, the execution of such an agreement should be made by those shareholders, who are its parties (spasybofateeva et al., 2014). the proposition to participate in this agreement for both the company in the whole (herewith, the decision will be determined not by all of its shareholders, but only the parties of the shareholders agreement) and any third parties, including those, who did not buy the shares of a company (was not involved in the formation of the company’s property), but got essentially unlimited ability to determine the decision of a joint stock company, is not reasonable. we believe that even if these third parties will be lenders of a joint stock company, their crucial part in the affairs of a company is able to make no sense for other shareholders to participate in it, not even mentioning the fact that the interests of third parties and shareholders are not identical. european continental law does not usually recognize the opportunity of third parties that are not shareholders to participate in the shareholders agreements. since these are only the shareholders, who determine the purpose of its activities, and fix it in the statute and determine its fate, thus, only they have the right to participate in shaping the will of a company (and third parties by obtaining mastery over the votes of the shareholders may get the opportunity to influence the decisions of the corporation, the risk and the consequences of which take the shareholders of a company, but no the third parties). negative attitude to participation of third parties in the shareholders agreements is also due to the fact that they are excluded from the traditional corporate responsibilities to act in good faith and in the interests of the corporation in the whole (suhanov, 2014). instead, third parties according to english legal practice (potential buyers of shares) may be parties of the shareholders agreements obliging themselves by the provisions of an agreement of shareholders by signing the deed of adherence (petrova, khrapov, 2008). founders of a company often seek assurances that while the alienation of shares by anyone of them, a new purchaser will be bined with the terms of the shareholders agreement, and thus, the prolongation of the direct contractual nature of relationships between all the stakeholders will assured. accordingly, the shareholders agreements subordinated to english law, almost always include a condition that the registration of the fact of transfer of shares into the property to another person may occur only under the condition of joining a new owner to an existing shareholders agreement by signing the deed of adherence. in case of the alienation of a small number of shares by one of the members of the shareholders agreement, other shareholders-parties may require restrictions of the deed of adherence to obligations on the compliance with some certain provisions  – such as the conditions on confidentiality, obligations not to be engaged in competition, certain obligations related to decision-making and voting, etc. we believe that the company can not be a party to the shareholders agreement because it does not have the status of a shareholder and can not be a shareholder of itself. in the case that it bought the shares of its own issue, they are “dumb” until their alienation to already existing shareholders or third parties. besides this possibility could bring to life “circular reference” – the management of the company subordinated to shareholders should ask their permission for the inclusion / non-inclusion of any condition of the agreement. we should express some doubts regarding the recognition of potential investors as parties under the shareholders agreement. if we accept the possibility for third parties to participate in the conclusion of the shareholders agreements, we should also recognize the expansion of limits of shareholders relations that would come out the limits of a joint stock company. if we agree with the fact that the company creditors have the right to direct the actions of the shareholders of a particular company in the interests of third parties, thereby affecting the management of a company, would this situation cause the management of a company not by its shareholders, but by third parties. on the one hand this possibility is aimed at ensuring the interests of creditors and on the other – there is a question if the application of such a norm would lead to the occurrence of negative effects such as violation of corporate rights of the shareholder by persons, who are not members of shareholders relations, corporate capture or acquisitions, corporate conflicts. the issue of the content (terms) of the shareholders agreement and especially its object is still very urgent. to clarify this issue we should refer to the law and legal doctrine of european countries. in countries, where the shareholders agreements as a legal structure are recognized at the legislative level (italy and russian federation), the norms focused on their regulation, contain the list of the obligations that may be the object of such agreements. however, the regulation of the object of the shareholders agreements has fundamental differences. in general, the legislation baltic journal of economic studies 293 vol. 4, no. 2, 2018 of these countries contain similar obligations, but if the norms of russian legislation regarding the types of specific obligations have the nature of a possibility (the art. 32.1 of the law of russian federation “on joint stock companies”), the norms of italian law unequivocally confirm that only obligations listed in the art. 2341 bis of the civil code of italy may be the object of such agreements. besides, the structure of the p. 1 of this article makes it possible to conclude that only those agreements, which provide the obligations listed respectively in points a)  – c), may be recognized as the shareholders agreements, if they are concluded for the purposes set out in the same norm. thus, the shareholders agreement in italy can not contradict the mandatory norms of the law, its object is very limited. regarding the object of the shareholders agreement within english legal literature it has been noted noted that the main objective of joining it is the regulation of corporate rights and obligations of the shareholders both under the conditions of executing shares’ sale and purchase agreements, and during the creation of joint enterprises, including international ones (osypenko, 2010). thus, the shareholders agreements on the territory of the united kingdom, except the norms similar to the standards of memorandum, usually contain a more detailed description of the objective and scope of activities regarding joint ventures, procedure of financing the company and agreed on shareholders’ deposits in non-cash form; policy of profit distribution (makarova, 2010). such agreements in the french corporate law can generally refer only voting of shareholders and only during specific meetings (not during any period of time) and subjected to other serious limitations (sukhanov, 2014). specific types of obligations that may be the object of such agreements are describe more differentiated in germany and switzerland. this is due to the fact that authors, as a rule, list the specific typical kinds of obligations, which are the basis for the conclusion of the shareholders agreements. their detailed analysis demonstrates that they are covered by such types as the obligation to exercise voting rights, obligations to the features of the alienation of shares and obligations to the company. there are also atypical cases, but they are not common in the practice of concluding the shareholders agreements. these include obligations to third parties, not the shareholders about the transference of the rights, etc. the german and swiss legal doctrine offers to allocate such types of obligations that may be the object of the shareholders agreement, as a) to vote at the general meeting in a certain way, for example, only together under the previous concert or according to the suggestion of one of the parties; b) to sell shares only under certain conditions, for example, only by the consent of other shareholders; c) obligations to grant the right of preferred purchase under the pre-set price, in case of selling the shares; d) to provide (retreat) to a third party, for example, the voting rights to a creditor of the shareholder; e) to provide one of the shareholders the right to appoint his representative to the supervisory board, irrespectively to his share (mayer, 2006; schramm, n. d.). the law of ukraine “on joint stock companies” does not contain clear indication on the aspects of the company’s activities and specific actions of the shareholders that should be the object of the shareholders agreement. the bill no. 4160 dated from february 26, 2016 “on amending some legislative acts of ukraine on corporate agreements” has defined the object of such an agreement, which may be the realization by the shareholders their rights to shares and/or the rights under shares, as well as laying duties according to own will of the shareholder  – the parties of the agreement, leading to the conclusion that the shareholders may agree to establish a special procedure for decision making by the general meeting or the procedure of formation and activities of the executive agencies, supervisory board, to determine the procedure of conflict resolution, etc. based on the principle of the freedom of the agreement, the shareholders-parties of such an agreement have the right to agree on the validity term and correspondantly specify the exact day of its termination (or the event that terminates it). in practice, the parties may establish any validity of the agreement and predict the circumstances entail the automatic its termination (for example, liquidation of the company, its reorganization, bankruptcy, etc.). we believe that more effective measure to plan the termination of the agreement will be the establishment of its validity or classical way of termination – concert of the parties. the form of the shareholders agreement. freedom of the agreement in corporate law may be subject to limitations as according to the content, as under the reasons depending the document or the form it should be expressed. shareholders agreement is concluded in written form by drawing up one document signed by the parties. this approach is, in general, traditional. however, it should be noted that in germany and switzerland it is allowed to conclude such agreements also orally. in accordance with p. 2, c. 1 of the art. 32.1 of the law of russian federation “on joint stock companies”, the shareholders agreement is concluded in a written form by drawing up one document signed by the parties. as a consequence of non-compliance with simple written form of the agreement entails its invalidity. english law also does not require a specific form of the shareholders agreement, but in practice it is concluded in a simple written form or in the form of «deed». oral shareholders agreement according to english law is theoretically possible but in practice can not be applied. baltic journal of economic studies 294 vol. 4, no. 2, 2018 if the parties of such an agreement under english law are legal persons, they can sign the agreement in two forms: 1) simple written form. for its adherence the shareholders agreement must be signed by a person authorized by the supervisory board. typically, this is one of the members of the executive body, but may be another person who has any document confirming the authority to sign; 2) «deed» form (while concluding the shareholders agreement according to this form there are different options): a) sealed by the companies  – parties to the agreement and signatures of the persons authorized by the constituent documents (signatures of two directors or secretary and director of the company or other persons authorized by the supervisory board); b) the signing by two directors or a secretary and director of the company in the presence of a witness. the witness also must sign, specifying the address, place of work and position (according to the art. 44 of the english law on companies, 2006). c) signing according to the proxy notice (in this case the proxy notice must be made in the form of «deed»). if an authorized (trusted) person is an individual, his signature must be placed in the presence of a witness (who must also put the signature, indicate his address, place of work and position). if the trustee  – another legal entity (company), then it must fulfill all the same formalities as if the document is signed on its behalf. however, in both cases, an authorized (both individual and legal entity) person is obliged to notify that he acts on behalf of another person according to the proxy notice. in all cases the document must specifically state that it is – «deed». if it is assumed that the document («deed») does not take effect until the specific moment or event in the future, thus containing a pending condition, this fact must be due to the parties – mainly to avoid doubts or disputes in the future, in a written form through correspondence, presentation in a separate document, etc. in the absence of any indication on this intention of the parties will be deemed that «deed» came into legal force immediately after realization of all formalities. consequently, the shareholders agreement is concluded in a written form by drawing up one document signed by the parties. shareholders who signed it are obliged to inform the company about the fact of its conclusion. in case of default of this obligation the shareholders who are not parties to the shareholders agreement, are entitled to demand compensation for their losses. content of the shareholders agreement creates a set of the rights and obligations. there is a question: how agreements are brought into accord between shareholders (those rights and obligations provided by them) with corporate rights, rights for shares and rights from shares that are limits of acceptability restricting shareholders’ rights, which are established by the agreement and ultimately lead to their inequality and whether they are valid. it is rather difficult to provide the exact definition of “deadlock provisions”, owing to the lack of a unified approach to its description. in general, it is characterized as the inability to achieve the consent by the shareholders on key points of the activities of a joint-stock company. it often occurs, when the shareholders have different views on the issues of forming management agencies, spending the profits, determining the strategy of the company’s development. to resolve deadlock provisions there are various options for action. let’s pay attention to some of them. russian roulette. quite comprehensive solution, which main point lies in the fact that in the case of “deadlock situation” one or both shareholders make another shareholder the proposal of repurchasing the half of already priced joint-stock. the shareholder who receives such notification has the choice to cell his stock for the marked price or, conversely, to buy the other shareholders’ stocks for same price. texas shoot-out. each shareholders' agreement party which is in the “deadlock situation” forwards to independent mediator sealed proposal for price to buy another parties’ assets. the envelopes are opened simultaneously and the highest price bid wins, so the person who made it has to buy and the other side has to sell its shares for price as marked. multi-choice procedure. this mechanism is milder in comparison with referenced hereinabove. it is used when parties don’t want to enter into an obligation of severe and concrete deadlock situation solution. for example, this mechanism can provide specified set of predetermined options one of which will be chosen in fine. the advantage of such method is that parties in view of irreversible consequences connected with shares loss could act more reasonably and find the compromise solution. but the disadvantage of this model is than in case of effective negotiation process and final arrangement absence the process can draw down and affect the company activity. the parties would be bound to resort to arbitration which would decide what option has to be used. this circumstance brings some uncertainty in deadlock situation solution. cooling-off (mediation). its main point is that shareholders stipulations provide the parties’ duty to carry on negotiations using an outside mediator till the decision won’t be found. if the mutual decision won’t be found through the process of negotiations, the so called judgment of solomon should be taken by mediator on the basis of principle of reasonableness. from the first glance this method is mild but there is a possibility that the judgment of solomon will be that parties should wind up a company as far as they failed to solve the dispute by negotiations. baltic journal of economic studies 295 vol. 4, no. 2, 2018 deterrence approach. this mechanism should detain the parties from solving the deadlock situation by withdrawal of one party from shareholder's composition without resolving of disagreements by discussion. this is achieved by including in the contract, in a certain sense, onerous regulations for the party, which nevertheless initiates this procedure. instead of activing negotiations proposition and subsequent statement of impossibility to make a decision on key issues this party can come straight to the notifying about the deadlock situation. in this case the party which forwarded the notification should either buy out the other side shares for 125% of their fair market price or sell its’ share to the other side for 75% of its fair market price. this value is determined with the assistance of appraisers and auditors. such mechanism is still not always effective because on the one hand it excludes negotiations as method of discrepancies elimination and on the other hand maintains certain parties’ interests balance violation that could paralyze the activity of the company. parties’ responsibility by the shareholders agreement. civil legislation highlights five main forms of responsibility: restitution, compensation of moral harm, penalty payment, loss of downpayment, compensation payment. however, those measures are difficult in applying to the parties of share agreement. because of that, in practice are traceable cases of other forms of responsibility application inherent in foreign law, such as compulsory shares sale. for example we can give a shareholders agreement between swissport international ltd, zao “airline” ukraine international airlines”, airline business handling limited where was pointed the question of voting at the general meeting and the result of nonobservance was the duty of one party to dispose its’ share in favour of other party, this became the responsibility measure for disregard of provision. however, both science and practice gives ambiguous answer to the question: whether it is appropriate to provide an opportunity to attach in provisions of such agreement measures (forms) of responsibility not foreseen by civil law and, consequently, the possibility of judicial protection of the parties in the case of failure or improper performance of their obligations under the joint stock contract? by the shareholder agreement may be provided measures of civil liability for its failure or improper fulfillment. separate question is responsibility for dereliction of such duties because art. 29 of the law of ukraine “on joint stock companies” says only about shareholders’ responsibility for breaking the duty of participation in the general meeting. clumsy phrasing of this provision may affect the addressing of the issue of bringing to responsibility shareholders for the failure to fulfill other obligations established by the agreement between them. one of topical issues is one about possible consequences of shareholders agreement nonfulfillment, particularly, ways to protect shareholders’ corporate right in case of such agreement breach. in case of its violation by one of stockholders on him can be imposed a contractual liability in form of obligation to compensate damages to other parties or pay the agreed in advance penalty, but the results of voting and corporate decisions remain legally enforceable and can’t be contravened on that basis. according to english law shareholders agreements are assured by court defense as a usual contractual obligation. thereafter, shareholders’ protective means in case of provisions violations are: a) liquidated damages levy – in english contract law damages are not punitory but compensatory, in other words it don’t have the penal character; b) specific performance  – demand of stipulated by the contract obligations fulfillment; c) injunction for specific activities interdiction (injunction). in this case certain treaty provisions (warranties) give the shareholders right only for restitution, whereas other (conditions and representations) give the right for restitution and voidance of contract. although italian and russian legislations contain a reference to the norms of civil legislation, but orient to use common methods of collateral for commitments taking into account the specificity of obligations which originate from shareholders agreement. italian practice uses such methods of obligations collateral as forfeit, pledge of shares. in russian federation, on the contrary, only some measures which can be used in case of nonexecution of shareholders agreement exist: a) reparation of damages, caused by its infringement; b) award of a penalty, fine, mulch; c) payment of the consideration (firm amount or amount that should be defined under procedure outlined in shareholders’ agreement); d) imposition of sanctions resulting from agreement infringement. one of substantive issues of shareholders’ corporate rights protection techniques is possible consequences of shareholders agreement nonexecution. as a result of such agreement institute integration to the corporate practice appears an opportunity for shareholders to protect their interests at the contractual level, that is now used insufficiently. mandatory duties performance in kind. the law of ukraine “on joint stock companies” contains no express statement of possibility to specific performance (for example, make the shareholder to vote at the general meeting in a certain way). for the aim of defining the ability or inability to claim for specific enforcement at the fore should be the condition of obligation after the violation happen to be. nonperformance (improper performance) of duties according to the shareholders agreement by stockholder can cause: 1) the termination of obligations and abandonment of it unfulfilled, 2)  the existence of delay in execution of shareholders agreement. agreeably, claim for specific enforcement baltic journal of economic studies 296 vol. 4, no. 2, 2018 can be brought only in latter case, in other words, in case when shareholders whose rights were infringed does not take actions that could be interpreted as a waiver of joint stock agreement or acceptance of defective performance. in case of non-property liabilities infringement, envisaged by the joint stock agreement (for example, shareholders refusal from voting in specific way and so on) specific performance is inadmissible in case of: a) such liability has strictly fiduciary nature; b) such liability is hard to fulfill both from the perspective of real possibilities shareholder who has violated shareholders agreement and in terms of court decision implementation; c) claim to complete this obligation is not brought within a reasonable period of time after shareholder whose rights were violated by nonperformance or improper performance of shareholders agreement came to knowledge about committed violation. foreign legal literature, concerning the issue of application of liability measures for shareholders agreement violations, a long time already is recognized possibility of judgment for specific performance in case of such agreement terms violation. in particular, h. appenzeler considers in detail the problem of this measure application and admits that his party whose rights have been violated, may fundamentally require not only compensation of caused damage, but also actual obligation performance (appenzeller, 1996). a similar point of view expresses r . muller, noting that as one of the measures of responsibility, in case of shareholders agreement violation can be used claim for specific enforcement (müller, n.d.). p. forstmoser also declares the right to claim for specific performance by party which violated shareholders’ agreement measures (schluep, forstmoser, 1988). specific enforcement is not an appropriate mean of protection, because there are no mechanisms which would allow to force him to vote, for example, like it’s stipulated in the agreement, as if it could be possible in some another agreement. there is also absent the possibility to put into use such consequences as consider the shareholders-parties of the agreement will automatically expressed during the voting, for which reason, no matter in what way he voted, consider his vote given for adoption of a decision for which he was obliged to by the agreement. along similar lines is not acceptable during the shareholders vote count on the result of voting to check whether the vote of shareholder who signed the agreement corresponds the obligation he’s assumed by voting in a certain way. recognition of the transaction invalid and application of the consequences of its invalidity. in contradiction from ukrainian joint stock legislation law of russian federation “on joint stock companies” (p.  4 of art.  32.1) expressly provides that agreements committed by a failure to comply with conditions of share agreement are disputable. for example, if for the purpose of agreement violation party commits the shares disposal before a certain event, this purchase agreement could be invalidated by judicial procedure on the claim of its other side, if it’s proved that buyer knew or must be taken to have known about set restrictions. considering that the content of shareholders agreement parties correspondence (including limitations foreseen there) de jure shall be kept confidential a need in efforts arises in order to prove in court that the third person knew or should have known about the limitations stipulated in the contract. from the practical point of view it would be appropriate to consider that moment and provide in certain agreements some provisions containing warranties of relevant agreements noninfringement and also establish measures corresponding to parties’ liability. invalidation of general meeting decision. such method of violated rights defense is not quite new to corporate law. the share of legal controversies on invalidation of extraordinary and annual shareholders general meetings and as well as meetings of joint stock company supervisory board are almost half of all the joint-stock disputes being considered by the courts. to solve them the resolution of plenum of the supreme court of ukraine dated from october 24, 2008 no. 13 "on practice of court consideration of corporate disputes" is used successfully enough (resolution of plenum of the supreme court of ukraine, 2009). in this regard it seems to be explicable to capture this method of violated right protection in the art. 16 of civil code of ukraine. however, to answer the question about the possibility of its application in case of shareholders agreement breach is not so simple as it seems at first glance. on the purpose of keeping a balance of interest between shareholders and third parties law of russian federation “on joint stock companies” establishes that shareholders agreement violation can’t be the foundation for invalidation of company bodies’ decisions. thus, if agreement is established as a result of company decision making (these are significant company transactions and interested-party transactions) then it shouldn’t be considered invalid, even if its settlement breaks shareholders agreements’ treaties. so, if, presumingly, shareholders agreement settles the duty of all shareholders to vote at the general meeting in a certain way and this duty is infringed, for example, by stockholder who has controlling block of stocks, it’s impossible to consider this decision invalid because of agreement unfulfillment. the only possibility for stockholder whose rights will be infringed is to claim for usage of penalties to shareholder-violator, of course if such measures are stipulated in the agreement. this regulation will be logical ending for the rule that shareholders agreement is obligatory only for its parties. so, such an agreement, for one thing, sets aside of corporate law regulations and, for another thing, baltic journal of economic studies 297 vol. 4, no. 2, 2018 can’t create any legal effects for third parties including company personally, stockholders who didn’t take part in that, company contractors. this position is not one and only. in foreign legal doctrine significant expansion has approach, supported by russian law scientists as well, which insists on necessity of giving the possibility for shareholders of non-public corporations to influence the relations within the corporation. law, for example in usa and the netherlands, recognizes the permissibility of non-public corporations’ shareholders to asset agreements aimed at changing the legally established regulations governing internal relationships in the corporation. among practice lawyers exists the opinion that legislator shouldn’t exclude the possibility of influence of shareholders agreements’ violation on validity of company bodies decisions so peremptory. the decision about permissibility or impermissibility of such position should be decided taking into account type of stockholders relationship and whether the rights and interests of third parties are affected by decision made with breach of an agreement. if we are talking about, let’s say, about jsc which structure is built by closely held corporation model (where is small amount of shareholders and company shares are disallowed for trading) which has strong element of shareholders personal participation in company affairs, their actions are coordinated and interest are pretty equal, in that case arrangement violation could have influence for decision validity measurement. invalidation of shareholders general meeting decision in relation to adoption procedure violation: shareholders voted for decision in violation of undertaken by agreement obligations to vote in a certain way (for certain candidate for some position and so on) according to i. v. spasybo-fatyeyevoyi appears to be unacceptable protective measure as far as consequences of unfulfillment of an agreement by shareholders (arrangements for voting at the general meeting) should ensue only for this arrangement parties but not for the rest of shareholders. but general meetings decision causes consequences for all shareholders and its invalidation irreversibly will have an impact to all shareholders and jsc itself (spasybo-fateeva et al., 2014). that’s why fulfillment or unfulfillment of shareholders’ agreement can’t be the reason for general meetings’ and other company bodies’ decisions invalidation. the restitution can’t always be adequate measure against shareholders’ agreement nonobservance because of its proving complexity. thus, according to art. 16, 611 of the civil code of ukraine, the party which violated the obligation must compensate the other party inflicted losses – actual damage, as well as loss of expected profit. upon the request of damages recovery plaintiff must prove the wrongfulness of inflictors’ behaviour, his guilt (in accordance to requirements of art. 614 of the civil code of ukraine), nature and extent (assessment) of adverse consequences, cause and effect relationship between actions (inactions) of the offender by the consequences occurred. according to the content of the above-mentioned norms of the civil code, damages, being property losses, are the subject of proving in every specific case of its’ infliction. for shareholders whose rights were inflicted by shareholders agreement unfulfillment it will be quite difficult, and sometimes even impossible, to prove the fact of damage infliction and to determine its amount. for example, actions of shareholder who sold shares to the third party in disregard of prohibition established by shareholders agreement for its’ off-load within specified time, undoubtfully, will cause negative consequences for other agreement parties making more complicated implementation of company projects, putting under threat the company achievement of previously set targets and tasks that may cause the risk of failure to obtain dividends by shareholders, may lead change of the supervisory board and (or) the sole executive body and so on. however, it will be quite difficult to prove cause and effect relationship between such shareholders actions and possible negative consequences for other parties of this agreement as well as estimate the amount of expected profit loss. in the opinion of r . muller, in order to secure the obligations that are derived from the shareholders' agreement, it is possible to apply such methods: a)  contractual penalty; b) deposit of shares; c)  pledge of shares to cover contractual penalties; d)  transfer of shares to the common ownership of the respective shareholders; e) contribution of shares into holding company; f ) transfer of the authority to the representative the third party, who exercises the rights and obligations stipulated by the shareholders agreement; g) transfer of shares to the trust management of an independent third party or several persons; h)  establishment of shares purchase pre-emptive right in case of agreement violation; i) establishment of majority decision voting procedure among persons participating in the agreement (müller, n.d.). contractual penalty usage is one of the most popular measures of derived from shareholders’ agreement obligations collateral. however, a significant disadvantage of using this means of securing obligations is the fact that the forfeit amount can be reduced in a judicial proceeding. besides, considering the fact that the consequences of such agreement violation mostly can’t be valued in monetary terms, it’s not so obvious which forfeit could be "commensurable" with the consequences of obligation infringement. we believe that the forfeit will be an effective mean of the obligations fulfillment insurance utility if shareholders agreement prescribes such parties obligations as purchase or dispose shares by predetermined price and (or) in case of some circumstances occurrence to retrain from shares disposure till certain circumstances occur. baltic journal of economic studies 298 vol. 4, no. 2, 2018 the possibility of using the majority of effective methods on ensuring obligations’ performance depends on the parties’ ability to entrench the amount which should be payed in case of nonexecution the shareholders’ agreement obligations, particularly, the amount of forfeit. it allows to use such methods of obligations fulfillment ensuring as, actually, forfeit, pledge and also guarantee. shareholders agreement should be secured by the measure which definitely allows parties to predict the consequences of performance failure or its improper performance. that is what determined the appearance of such method of responsibility for this agreement violation as compensation, which remains firm and fixed amount that should be payed in case of agreement breach. compensation for shareholders agreement violation has purely warranties nature which provides proper obligations performance provided by this agreement. it is necessary to point out that appearance of such responsibility measure as compensation appears to be the implementation of one of the basic civil law principles  – freedom-of-contract doctrine and its real enforcement. upon that bona fide shareholder receives the possibility to decompensate not only losses but also moral harm which evolves unprejudicialy. one of the most up-to-day and the most complicated questions connected with the usage of compensation in case of shareholders agreement violation is question about possibility of decreasing the compensation amount in legal proceedings. compensation should be correlated with a monetary assessment of the adverse consequences of obligation breach. there are not foreseen and cannot be foreseen all possible measures of identifying the amount of caused harm because of variety of relevant actual facts of obligation breach. however, in each specific case the shareholder who goes to court for protection of the violated right and demands vindication of the compensation from violator should justify not only legality, but also economic expediency of settlements procedure offered by him that sometimes appears to be difficult, especially while calculating the expected profit loss. that’s why legislator provides parties of shareholders agreement the possibility to assess beforehand and in their own right the amount of losses that can be caused by each specific violation of such an agreement. in our opinion, compensation is the most universal and effective measure of responsibility of the parties to the shareholder agreement. first of all, compensation is established by the parties and can not be reduced at the court decision. secondly, for its appliance there is no need to prove the existence of losses. thirdly, the compensation recovery does not exclude the possibility of restitution in case of their existence. to protect the shareholders’ rights in case of shareholders agreement infringement and exclusion of legal uncertainties in the matter of applying the compensation in corporate law, it seems advisable to add to the art. 29 of the law of ukraine “on joint stock companies” by the regulation about if the regulations of a shareholders agreement are violated, the guilty party should compensate affected party the losses stipulated in the contract terms. only in that case, compensation could be recognized as the most effective protective measure for shareholders agreement parties and could be admitted as an essential guarantee of agreement fulfillment by its parties. 2. conclusions research of the problem of civil and legal regulation of the shareholders agreements in ukraine, the usa, russia and western european countries (by the example of germany, italy, switzerland and france), led to the following conclusions. 1. the shareholders agreement  – is an agreement concluded between the shareholders and is aimed at determining the procedure of actions, rights and obligations of the parties directly related to the management of a joint stock company, profit distribution, implementation of the rights and obligations of the shareholders, the decision of “deadlock” situations, if the number of votes of shareholders, who have different points of view on the decision of any matter, is equal. 2. objectives of the shareholders agreement  – is to regulate the behavior of the shareholders in any given situation. for example, to predict the distribution of seats and the balance of power in choosing the next part of members of the executive authority or to define different restrictions on the sale and purchase of shares of a joint stock company, i.e., the prohibition to sell shares to a certain point or, conversely, the obligation to buy shares of other shareholders under certain events. 3. generalizing analysis of the legislation and doctrinal sources of the considered systems of justice of european countries and ukraine makes it possible to distinguish the most characteristic features for the notion of shareholders agreement. first, the shareholders agreement is concluded in regard to the rights of shareholders; secondly, it provides methods or the peculiarities of the implementation of the rights of shareholders, including those not under the law and the charter of the company; thirdly, such agreements are of relative nature – their action is spread only for the parties of obligations. 4. indication of the purpose of the shareholders agreement in a regulatory form will make it possible to define its legal nature more precise, to make interpretation of the relevant norms regulating such agreements, to distinguish them as the legal construction from other similar agreements and to ensure prevention of abuse in exercising the rights by the shareholders. 5. in accordance with the legislation of european countries the shareholders agreement is concluded in a baltic journal of economic studies 299 vol. 4, no. 2, 2018 written form, in switzerland and germany it is possible to conclude it orally, but in limited cases. there are no additional requirements to the form of shareholders agreements, in particular there no registration requirements or notary registration of such agreements even if they supplement the provisions of the statute. we believe that shareholders agreements are to be concluded in a written form by drawing a single contract signed by the parties. 6. the relationships between shareholders settled by the shareholders agreement is not an analogue of corporate relations within a joint stock company. the joint stock company and other shareholders of that company may not be aware about the existence of the agreement. therefore, we can not talk about its “normative feature” or in other words “generally binding character” for all shareholders of the company. the action of such an agreement is not extended to the sphere of functioning and activities of the company. 7. measures of civil and legal liability applicable for the violation of the terms of the shareholders agreement are quite diverse. we believe that compensation is the most versatile and effective measure of liability for the obligations that derive from shareholders agreements, in particular such as to vote in a certain way at the general meeting, to coordinate the voting options with other shareholders, to agreed other actions related to the management, activity, reorganization and liquidation of the joint stock company due to the fact that the amount of compensation is determined by the parties and does not depend on the availability of damages, which can not be reduced by the decision of the court and can be used along with others measures of civil and legal liability. 8. the adjudgement to perform specifically is allowed in case of the violation of a shareholders agreement because it is not against the law in most cases and can be an effective mean of guaranteeing the rights of the shareholders. however, from a practical point of view, the real adjudgement of obligations, in case, if the object of a shareholders agreement is the obligation on voting procedure, will be ineffective mean to protect the interests of their parties. references: abova t. e. (2013) “on the new approaches to the civil-law transactions regulation in federal law "on amendments to parts one, two, three, and four of the civil code of the russian federation, as well as to certain legislative acts of the russian federation" draft”, regulation of private law social relations: tradition, modernity, perspective, (tov «bilotserkivdruk», odesa), р. 41. aktiengesetz vom 6. september 1965 (bgbl. i s. 1089), artikel 2 absatz 49 (22 dezember 2011) (bgbl. i s. 3044) url: http://www.gesetze-im-internet.de/aktg/bjnr010890965.html art. 384, on joint-stock companies (law of ukraine dated from september 17, 2008 no. 514-vi) 50(1) bulletin of verkhovna rada of ukraine (2008). belov v. a. (2013) civil law. special part. relative civil law forms: a textbook for bachelors vol. iv ( jurajt, moskow), 958 р. chionna v. v. (2008) la pubblicità dei patti parasociali. (giuffrè, milano), р. 2–4. christoph weber (2000) privatautonomie und außeneinfluß im gesellschaftsrecht tübingen: mohr siebeck. (zugl.: mainz, univ., habil.-schr., 1998/99), 92 р. die zweimannaktiengesellschaft, von hans-konrad peyer (1963) bern, and other. fischer (1953), gmbh-rundschau (gmbhr), 65 р. for example, in swiss science the foundations of modern doctrinal understanding of shareholders agreements are reflected in following scientific studies: eric haymann, aktienübernahmevereinbarungen zwischen mehrheits und minderheitsaktionären: ein vorschlag zu einem wirksamen minderheitenschutz, vor allem in kleinen und mittleren aktiengesellschaften (zugl.: zürich, univ., diss., 1973). graham stedman & janet jones (1998), shareholder’s agreements. р. 58-59. hans jürgen sonnenberger und christian (2000) autexier einführung in das französische recht von. ausgabe: 3., neubearb. aufl. heidelberg: verl. recht und wirtschaft, 190 р. hewitt i. (2016) hewitt on joint ventures (sweet & maxwell; 5th revised edition), 166 р. hureev v. a. (2007) problems of protecting the shareholders rights and interests in russian federation, (wolters kluwer, moskow), 115 р. innominatverträge: festgabe zum 60. geburtstag von walter r . schluep hrsg. von peter forstmoser. (polygraph. verl zürich: schulthess, 1988), 373 р. karzhavyna n. s. (2007) “shareholders' agreement as a way of corporate conflict overcome and the problem of its validity under the russian”, business law, 4, at 8. lomakyn d. v. (2008) corporate legal relationship: general theory and practice of its application in business entities (statut, moskow), р. 127–128. mayer d. (2006) “grenzen von aktionärsvereinbarungen”, 4 mitteilungen des bayerischen notarvereins, der notarkasse und der landesnotarkammer bayern, at 281. baltic journal of economic studies 300 vol. 4, no. 2, 2018 medvedev yu.  l. (2014) approximation of the law of ukraine to the right of the european union: conceptual categorical apparatus and methods of harmonization. bulletin of the lugansk state university of internal affairs named after e.o. didorenka. no. 1, р. 52-59. müller r . (n.d) “der aktionärbindungsvertrag”, at. 4, url: https://www.alexandria.unisg.ch/publications/54111/ l-en. osypenko k. o. (2010) “agreements of participants (shareholders) in russian and english”, 4 legislation, at 30–32. pavlenko s., sevruk v., kobko y. (2017) training police officers in the conditions of reforming the system of education of the ministry of internal affairs of ukraine in accordance with european standards. science and education. № 6, р. 142-150. petrova e., khrapov m. (2008) “shareholders' agreements regulation under the english law”, corporate lawyer, 9, at 46–47. resolution of plenum of the supreme court of ukraine dated from october 24, 2008 no. 13 “on practice of court consideration of corporate disputes”, 2 commercial legislation bulletin (2009), at 7. romanova yu.  v. (2004) “minority shareholders rights protection in russian and foreign civil law”, journal of russian law, 10, at 125. schramm h.-j. (n.d) “die rechtliche erfassung von aktionärsvereinbarungen”, url: http://www.cac-civillaw.unibremen.de/publikationen.html spasybo-fatieieva i. (2013) “shareholders agreements”, 12 pravo ukrainy, at 188. spasybo-fateeva y. v., sybylev m. n., jarockyj v. l. and other (2014), kharkiv school of civil law: protection of subjective civil rights and interests, (pravo, kharkov), 459 р. stepanov d. y. (2013) “contractual freedom and corporate law”, civil law and modernity: col. of. art. in memory of m. y. brahynskii, (statut, moskow), 366 р. “stimmbindungsabsprachen in kapitalgesellschafte: rechtsvergleichung und internationales privatrecht”, hansjürg appenzeller, (polygraph. verl., zürich: schulthess, 1996), 58 р. suhanov e. a. (2014) “corporate agreements in modern russian and foreign law” civil society and the development of civil law: col. of. art. for the anniversary of holder of habilitation degree in law, professor n. s. kuznetsovoi, (chao «yurydycheskaia praktyka», kiev), 190 р. vasylieva  v.  a. (2012) “corporate transactions: theory and practice”, сontemporary issues of civil, family and private international law (matvieievski tsyvilistychni chytannia), (alerta, kyiv), 24 р.. vinnyk  o.  m. (2010) “corporate-management technologies based on shareholders agreements: statement of a question and defining of issues array”, yaroslav mudryi national law academy of ukraine bulletin, 1, at 146. baltic journal of economic studies 62 vol. 1, no. 2, 2015 trends in the ukrainian loan market in the post-crisis period tetiana kubakh1, ukrainian academy of banking, ukraine abstract. the purpose of the paper is to systematize the data of the credit market of ukraine in the period of economic and political turmoil and the beginning of military confrontation with russia. the method of extended studies allows to trace the changes that have occurred not only in the banking system, but also in the whole of the economy. methodology. the study is based on a comparison of data on a number of indicators that were taken as a basis and allow to fully analyze the credit market as a component of the capital market in the period from 2000 to 2013. results of the survey allowed to clearly identify the problems that impede the stable development of the banking system of ukraine, among which are the following: high cost of banking products, the marriage of skilled personnel and lack of confidence in banks, low level of culture of users of financial products, low income, high yield deposit operations increases the cost of credit products, slowing of economic development, lack of reforms, social and political tensions, armed conflict with a neighboring state. practical implications. a clear definition of the problems in the credit market as a component of the banking system helped identify a number of areas that allow us to solve the situation. among them, first of all, we should highlight the following: the bank regulator (the national bank of ukraine), must take a great responsibility as the authority of last resort in the refinancing of a bank, on a continuous basis to implement the stress testing of banks in ukraine, to stabilize inflation and return confidence in the national currency, to set up a mechanism of mortgage lending by state banks. value/originality. the data was obtained as a result of thorough calculations possible not only to identify problems but also to identify their solutions that will enable the ukrainian banking system to reach a new stage in its development, and the credit market to make an essential source of economic development. key words: lending market, economic growth, economic development, financial soundness, banking system. jel classification: g01, g21, e51 1. introduction risk management enhancement is a priority objective in lending activities of banks. effective risk management is supposed to enhance financial soundness in individual banks and the banking system as a whole. the law of ukraine “on banks and banking activities”, enforced in november 2006, opened up access of foreign capital to the national financial market. the increasing share of foreign (european) capital in the ukrainian banking system enabled for essential increase in the credit portfolio of ukrainian banks. yet, inadequate management of lending policies in individual banks and the national bank of ukraine (nbu) as a regulator is still a pressing problem faced by the ukrainian banking system. small and medium enterprises in ukraine, which are supposed to be central to economic development, a priori have no access to longterm (five years long) loans required in times of structural reforms in the national economy. another debatable and unresolved problem is access to loans by physical persons, either in national or foreign currencies. although contributions of ukrainian work migrants to national gdp are estimated by national experts as nearly 8%, ukrainian population do not receive salaries and wages in foreign currencies. imperfect regulation of relations between lenders and borrowers and unstable operation of national enterprises cause additional risks for the banks, hampering economic development due to shortage of lending resources. issues of lending stimuli have been in focus of many ukrainian researchers: v.  d.  bazelevich, o.  i.  baranoski, g.  m.  gritsenko, o.  v.  dzyublyuka, v.  v.  kovalenko, v.  i.  mischenko, a.  m.  moroz, s.  v.  naumenkova, l. o. primostkin, to mention just a few. however, a range of issues related with creating stimuli for effective and balanced policies in еру post-crisis period in ukraine are yet to be studied. in view of the above, the study aims at analysis of recent trends in the ukrainian lending market and its efficiency enhancement perspectives. corresponding author: 1 department of finance, ukrainian academy of banking. e-mail: infopovh@mail.ru baltic journal of economic studies 63 vol. 1, no. 2, 2015 2. results the ukrainian lending markets has been under permanent transformations, with lending-specific issues being subject of concern by not only researchers or financial experts, but all the population groups. being dependent on the economic model, lending market has heavy implications for it. as a component of capital market, lending market has implications not only for the regulation of monetary circulation, but for flows, re-distributions and effective use of financial resources. the ukrainian banking system as a whole and the lending market in particular has demonstrated rapid expansion in the latest years, with notable quantitative and qualitative change in 2000–2013 (see chart 1). the banking system showed recovery in 2011, along with signs of stabilization in the national economy. yet, instability at the global financial market and lack of vivid positive change in the ukrainian economy slowed down development of the national banking system. a menacing trend has been the increasing ratio of bank liabilities to gdp after 2008, which signals the occurrence of problems with return of bank deposits in future. the problem per se occurred in august-september 2014. a good number of banks with debts to deposit clients are incapable to reimburse the debt at call, as specified in the deposit agreement. 21,8 23,3 28,3 37,9 39 50,4 63,4 84,1 102,4 109,5 99,6 111,9 108,2 102,4 18 19,4 23,9 33,1 33,6 44,4 55,5 74,3 84,9 96,2 86,1 83,0 73,6 76,9 13,9 15,7 20,7 27,8 28,2 36,8 50,3 68,1 83,4 83,6 73,5 71,8 60,9 62,7 3 3,9 4,5 5 5,3 6,2 7,7 10,1 12,5 12,6 12,6 14,4 13,0 13,6 0 20 40 60 80 100 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % ratio of bank assets to gdp, % ratio of bank liabilities to gdp, % ratio of bank loans to gdp, % ratio of bank equity to gdp, % chart 1. key indicators of the ukrainian banking system source: constructed by the author by data from nbu and state statistics service of ukraine the sufficiency of regulatory capital, slightly grown in 2000–2013 from 15.53% to 18.26%, indicates on inadequate capitalization in the ukrainian banking system. also, the gradually declining share of equity in the structure of liabilities is an evidence of risk policies pursued by banks with respect to liabilities and lending transactions. this weakens financial stability of the banking system, with negative effects for the financial security of the state. rapid decline in the profit rate of capital in 2009 and its negative value in 2010–2011 pushed bank managers to revise both organizing structure and client policies (see chart 2). yet, more rapid decline in profitability rate in 2013 than in the previous period shows that the problems faced by banks and the government as early as in the crisis year of 2008 have still been overlooked. -40 -30 -20 -10 0 10 20 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013% share of equity in bank liabilities, % profitability rate of capital, % chart 2. indicators of banking system capitalization source: constructed by the author by data from nbu and state statistics service of ukraine the essential problems for bank managers are: 1. high spending on introduction of new programs and services. 2. shortage of skilled personnel capable to effectively contact and communicate with clients. 3. population’s distrust in banks. 4. poor competencies and awareness of the public regarding use of bank services. 5. poor population’s income, hampering deposit strategies of banks. 6. high interest rates on deposits (20–23% on deposits in national currency), increasing the price of loans (25– 27%), repress lending capacities of banks. 7. bad condition of the national economy. 8. social and political instability. 9. military conflict. with consideration to the above, a more detailed analysis of the lending market as a capital market component is going to be made. in 2000–2013, the share of loans in gdp rapidly grew from 12% to 61%. this tendency may well be referred to as a positive one in the ukrainian economy, but the low quality of credit portfolio and the rates of lending expansion, apart from destabilizing effects for the capital market and the financial system, had negative implications for the overall social and economic conditions in ukraine. it should be born in mind that the share of loans in national gdp was rapidly growing in 2005–2009 due to “lending fever” of national economies. it should be noted that although the share of long-term loans in ukrainian gdp grew from 2 to 29% in 2000–2013, its peak (maximum) of 54% occurred in 2008 and 2009. the share of short-term loans grew from 9 to 32%, but, unlike longterm loans, it has been constantly up over the latest 14 years. regarding the change in proportion between long-term and short-term loans, a turning point occurred 2004, when the share of long-term loans in gdp exceeded first ever since, by 2%, the share of short-term loans in gdp. this trend followed baltic journal of economic studies 64 vol. 1, no. 2, 2015 up, with the gap between the two shares growing year-to-year; but in 2013 they were nearly equal. it is remarkable that it was in these years (2004 and 2013) when ukraine witnessed two revolutions, “orange revolution” and “revolution of honor”. it should be noted that the share of loans, in national and in foreign currencies, in gdp was gradually increasing in the analyzed period. however, while the share of loans in foreign currencies in gdp shrank remarkably from 46% (in 2008) to 20% (in 2013), the share of loans in the national currency grew in this period from 32% to 41% (see chart 3). it is remarkable that the share of credit portfolio in the assets was higher than the allowed maximum of 65% in 2006–2011. apart from the aggravating performance in the national banking sector, overburden with loans endangered financial security and stability of the national economy. it should be emphasized that while in 2000 the amount of loans given to legal entities exceeded the mount of loans with physical persons 19-fold, in 2013 this chart fell to 3.5-fold, which is an evidence of eating up the capital rather than its investment in economic purposes (see table 1). regarding the ratio of long-term and short-term loans, the short-term loans had a larger share in the total loans in 2000–2013, whereas in 2004 the ratio changed in favor of long-term loans, which, we believe, was a positive sign for economic development in the years to come. table 1 loan given by ukrainian banks in 2000–2013 year loans including long-term loans short-term loans total loans given to legal entities loans given to physical persons total loans given to legal entities loans given to physical persons total loans given to legal entities loans given to physical persons 2000 19574 18594 980 3514 3072 442 16060 16060 538 2001 28373 26955 1418 6156 5652 504 22218 22218 914 2002 42035 38721 3313 11849 10202 1647 30185 30185 1666 2003 67835 58849 8986 30553 24466 6086 37282 37282 2900 2004 88579 73785 14794 48003 36722 11282 40575 40575 3513 2005 143418 109895 33523 88599 31088 27511 54819 54819 6012 2006 245226 166683 78543 159033 92231 66801 86193 86193 11742 2007 426683 271417 155446 295362 159444 135918 131501 131501 19528 2008 733919 460529 273390 507715 266204 241511 226204 226204 27803 2009 723295 481984 241311 492321 268247 215367 230974 207982 25944 2010 732823 523208 209615 490091 311013 179038 242772 215679 28795 2011 776769 575545 201224 484924 324247 160677 291845 251298 40547 2012 793054 605425 187629 441026 308878 132148 352028 296547 55481 2013 885432 691903 193529 468879 333091 135788 416553 358812 57741 rate of growth, % 2000 66 67 43 33 30 58 76 78 32 2001 45 45 45 75 84 14 38 38 70 2002 48 44 134 92 81 227 36 36 82 2003 61 52 171 158 140 270 24 24 74 2004 31 25 65 57 50 85 9 9 21 2005 62 49 127 85 -15 144 35 35 71 2006 71 52 134 79 197 143 57 57 95 2007 74 63 98 86 73 103 53 53 66 2008 72 70 76 72 67 78 72 72 42 2009 -1 5 -12 -3 1 -11 2 -8 -7 2010 1 9 -13 0 16 -17 5 4 11 2011 6 10 -4 -1 4 -10 20 17 41 2012 2 5 -7 -9 -5 -18 21 18 37 2013 12 14 3 6 8 3 18 21 4 source: constructed by the author by data from nbu and state statistics service of ukraine 0 10 20 30 40 50 60 70 80 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % share of loans in gdp, % share of long-term loans in gdp, % share of short-term loans in gdp, % share of loans in foreign currencies in gdp, % share of loans in national currency in gdp,% chart 3. shares of loans in gdp source: constructed by the author by data from nbu and state statistics service of ukraine baltic journal of economic studies 65 vol. 1, no. 2, 2015 also, it should be noted that the loans to legal entities had a larger share in the total long-term loans and in the total short-term loans, but both shares fell down at the end the analyzed period. the indicator “rate of growth in loans given to legal entities” demonstrated insignificant variations (10% in average), whereas the indicator “rate of growth in loans given to physical persons” featured strong variations, especially in 2004, 2009 and 2013. regarding the rates of growth in loans to enterprises and population, both trends were far worse than before the crisis. also, higher rates of growth in loans given to physical persons compared with ones to legal entities, except in 2009–2010, should be emphasized, meaning more rapid growth in consumer lending compared with lending for real economy purposes. in circumstances like this, all the external (foreign) loans taken by ukrainian banks are forwarded to lending of consumer expenditures (mainly purchase of imported household appliances or cars) and mortgage. yet, easy access to mortgage pushed up construction sector in ukraine, on the one hand, and construction materials producers in other countries, on the other (as most part of construction materials are imports). therefore, through external loans commercial banks in ukraine tended to support foreign producers. however, the prevailing share of loans to enterprises in the total long-term loans may be regarded as an evidence of the increasing support to investment activities through lending. reconstruction and modernization of production facilities has been increasingly greater concern for national producers, enhancing in this way production capacities of the national economy. imbalances of assets and liabilities in the ukrainian banking system are illustrated in charts 4 and 5. 0 100000 200000 300000 400000 500000 600000 700000 800000 900000 1000000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 m l. u ah . deposits of legal entities and physical persons loans to legal entities and physical persons chart 4. deposits and loans, by legal entity and physical person source: constructed by the author by data from nbu and state statistics service of ukraine graph (chart 4) demonstrates prevalence of loans over deposits in 2007–2013, in spite of explicit signs of crisis at the ukrainian financial market, which is an evidence of the excessive credit expansion trend in the ukrainian banking system in this period. a reverse side of this trend is the degrading quality of credit portfolio. besides that, rapidly growing scopes of loans complicate monitoring of the credit portfolio quality by regulatory bodies, on account of its too high volatility. it should be noted that lending expansion preceded bank crises in many countries ( japan or countries latin america) in 80s and in countries of south-east asia in 90s. in the southern korea, on the eve of the crisis in 1997, absolute charts of problematic and bad debts grew from 12.3 trillion to 22.6 trillion usd, with their share in credit portfolio grown from 3.9 to 6%. so, economic boost in countries of south-east asia had hid for years the vulnerability of banking system, with the demand for loans stable as long as the economy growing. the latest crisis revealed low quality of credit portfolios of banks in many countries, which is essentially the fault of governments and central banks. experiences of the abovementioned countries show: when the rate of growth in loans is more than twice higher than that of gdp, this should be seen as a sign of potential occurrence of banking crisis (baranovs’kyj, 2004). -10 0 10 20 30 40 50 60 70 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % growth in loans given to legal entities and physical persons growth in gdp chart 5. rates of growth in loans and gdp source: constructed by the author by data from nbu and state statistics service of ukraine graph shown in chart 5 confirms the above thesis that top managers and administrations in ukrainian banks have drawn no lessons from the crisis of 2008. while purification of the ukrainian banking system by the crisis of 2009–2010 led to stabilization and healthy economic development as early as 2010, trends of 2012 and 2013 show that non-productive model of banking system was launched anew. it should be mentioned that the year of 2004 was rather difficult for the national banking system, and the year of 2008 marked the beginning of financial crisis, triggered by the shrinking global demand for domestically produced machinery and equipment, chemicals and basic metals. this, accordingly, aggravated the financial condition of enterprising entities (not to mention the default of some), resulting in failure of legal entities and physical persons to return bank loans. national currency devaluation resulted in shrinking capacities of borrowers (mainly physical persons) to repay bank loans, especially loans in foreign currencies, which triggered growth in problematic (overdue) loans of physical persons. this is a grave problem, because a limit exists, which, if passed over, will make the capital available in ukraine baltic journal of economic studies 66 vol. 1, no. 2, 2015 incapable to cover losses incurred by bank loans. when the losses exceed the capital, this may cause bankruptcies, which will require recapitalization. it is the reason why banks seek for prolongation of loans and various forms of credit portfolio restructuring, with the only purpose to pay interests (depending on the amount of bank’s capitalization or income). part of the banks started to sell their loans to collector firms in 2007 and 2008 [4]. as of 2010, banks transferred problematic loans on 2 to 5 billion usd to collector firms, which were mainly consumer loans. to enhance the quality of credit portfolio in commercial banks, the nbu enforced the resolution from 13.09.2010 no 424 “procedure for formation of reserves by banks on loans and interests charged on loans, and writing off bad debts”. nearly 30-fold growth in the amount of problematic (overdue) loans in 2000–2013 is an evidence of low quality of bank assets. yet, the share of overdue loans in credit portfolio has not been significant. while their lowest share was registered in 2008 as 1.3%, it grew up to 9.4% in 2010, and over seven months of 2014 it continued to grow, to reach 10.8%. there are several reasons behind this. first, devaluation of the ukrainian currency (hryvnya, uah) led to not only nominal revaluation of overdue loans in foreign currencies, but also to worsening of financial conditions of the borrowers. second, banks had losses due to annexation of crimea and legal prohibition to do business on the temporarily occupied territory. third, military actions forced the regulator to ban the conventional transactions with the credit portfolio across the area of antiterrorist operation (part of donetsk and lugansk regions in the eastern ukraine). forth, enforcement of the law of ukraine “on moratorium on expropriation of properties of ukrainian citizens, given as backing of loans in foreign currencies”; the law had to be enforced largely due to economic problems encountered by ukraine, especially the high volatility of the national currency exchange rate. in 2013, there were 968679 lawsuits in courts of general jurisdiction in the first instance, of which 184989 were about credit disputes, or 19% of the total number of cases. of these, claims were met in 137431 cases, or in 74% of the total number of lawsuits on credit disputes. fifth, weak system for protection of lenders’ rights, significant problems with sales of mortgaged property and court proceedings expenses. the outburst of financial crisis in 2008 showed failure of the banking system to transform savings into investment. insufficiency of loans for investment projects due to low capitalization of ukrainian banks pressed harder than anything else on the competitiveness of the ukrainian economy. given considerable wear of fixed assets across the economy, no visible change in resource and energy saving in production sector can be expected, which will further decline the global competitiveness of the ukrainian economy. however, the situation can improve if production enterprises seek for more efficient use of lending market tools. a large problem for domestic banks is that two thirds of the loans given to physical persons are loans in foreign currencies, with 70% of currency loans given by the largest ukrainian banks. commercial banks did not care that most part of borrowers did not earn income in foreign currencies and that if devaluation would occur repayment of interest and return of loans would be problematic, which would have negative effects for the banking system. borrowers are not always capable to have a good sense or awareness of the effects of inflation, currency fluctuations, price growth, reduced or lost earnings. unfortunately, there have been no mechanisms in ukraine to prevent (i) excessive lending at the global market by the domestic corporate sector, and (ii) lending in foreign currencies at the domestic market. in 2006, the nbu made the initial steps to prevent a growth in the deposits in usd by increasing two-fold the target for obligatory reserves on deposits in foreign currencies. in fact, it was one of a few successful measures to recover the ukrainian banking system (see chart 6). 54 56 58 58 58 57 50 50 41 49 53 62 65 68 46 44 42 42 42 43 50 50 59 51 47 38 35 32 0 20 40 60 80 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % loans in foreign currencies loans in national currency chart 6. measures of amounts of loans in foreign currencies by the imf classification, the level of dollarization in a country can be regarded as reasonable if it amounts to less than 30%. ukraine, therefore, has fallen under the category of countries with high dollarization level. it is a very negative tendency, as a foreign currency (usd or euro) has become a means of circulation, payment and savings along with the domestic currency. in view of this, dual-currency system is a problem to the nbu; if it is not dealt with, an effective monetary policy will be impossible. a large share of loans in foreign currencies, sometimes even a larger one than in the national currency (as was in 2008 and 2009, see chart 5) caused heavy pressures on the national currency exchange rate. the existence of a large share of loans in foreign currencies sustains a large demand for it at the internal interbank market. shrinking returns from exports cause currency deficit, which triggers devaluation of the ukrainian hryvnya. the situation is aggravated by the demand for foreign currencies from commercial banks that need to repay foreign debts, and by other tendencies referred to above. baltic journal of economic studies 67 vol. 1, no. 2, 2015 lending used to provide for a major share of income to ukrainian commercial banks prior to the financial crisis. once the lending shrank, the banks had to re-orient on the currency market where the transactions with currency purchase and sale became very profitable. also, in october – november 2008, the nbu carried out refinancing of the banking system, to rescue it from the liquidity deficit. the banks received 74 703.3 million uah in this period. because the control over use of this money is not perfect, experts say that a large share of this money was forwarded to the currency market, which opened wider currency speculation opportunities for banks (sale of bad loans by banks, key points). it is paradoxical that, on the one hand, banks carry out speculative transactions and have extra profits; on the other hand, their actions cause devaluation of their capital due to rapidly falling exchange rate of ukrainian hryvnya. hence, restructuring of credit investment in the national economy in favor of loans in foreign currencies was due to the following reasons: (i) lower level of interest rates on loans in foreign currencies compared with ones in national currency, with the stability of the national currency exchange rate to usd; (ii) the accelerating growth in deposits in foreign currencies at the domestic market and vigorous lending by domestic banks at the global financial market, expansion of importers who boosted the demand for loans in foreign currencies; (iii) the on-going inflation expectations; and (iv) the increasing numbers of banks with foreign capital. therefore, due to the rapidly growing lending, not balanced with the internal financial capacities of banks, and the resort of banks to the nbu for liquidity support, the nbu had to abandon any support of bank liquidity by the instruments of refinancing, if a bank had chronic imbalances between the terms of loans repayment and amounts of loans. according to the resolution of the nbu board from 21.04.2008 no 107, entered into force in april 22, 2008, when a bank needs refinancing from the nbu for liquidity support, it shall be required to submit information about its lending policy, specified by terms and amounts of the loans; the decision on refinancing shall be taken with account to this information (naumenkova, mischenko 2013). according to experts, measures like this are quite expedient. as shown by research, in the years of 2007 and 2008 currency imbalances and repayment term imbalances were rapidly increasing in the ukrainian banking system, which means the increasing gaps between the amounts of deposits and loans by repayment term and currency of repayment. risks amassing in the ukrainian banking system due to the increasing orientation on foreign loans, stroke heavy blow on the banking system in autumn 2008, when domestic banks faced limited access to external lending sources, due to liquidity problems at global financial markets and outflow of capital, which worsened their liquidity and increased devaluation pressures on the national currency. also, the increasingly important role of lending in the financial capacities of banks, especially foreign loans, increases the dependency of banks on foreign financial institutions, shocks at global capital markets and systemic risks threatening the financial soundness of the ukrainian banking system. yet, the causally related domestic problems of ukraine are no less vital: unstable financial condition and weakness of domestic banks and overall economic slackness. the main factors hampering the lending market in ukraine are the following: 1. the falling rates of economic growth (economic recession) due to military conflict, loss of control over a part of ukrainian territories and rapid shrinkage (if not closure in some sectors) of the russian market. 2. political instability, social tensions, inflation, rapid devaluation of the ukrainian hryvnya and shrinking populations’ incomes, which represses consumption and solvency of borrowers . 3. limited access of enterprises and population to loans as a consequence of the increasing government borrowing. 4. limited financial resources for potential borrowers, because the banks are legally required to increase reserves to secure stability. 5. shortage of lending resources due to weak domestic monetary capacities along with limited external resources, disabling long-term capital formation. 6. the degrading quality of assets and the increasing arrears, resulting from high credit risks, imperfect methods of risk management, absence of clear mechanisms for return of loans by insolvent borrowers. 7. inadequate legal protection of borrowers and lenders alike, low level of financial literacy with the population. 3. conclusions recovery from the monetary crisis is an imperative for economic development. practices of many countries show the efficiency of measures given below: • improve the system of regulation and supervision of bank equities, in parallel with a relief from administrative pressures, creating conditions for long-term capital formation; • improve the refinancing system, strengthen the function of central bank as the lender of the final instance; • carry out stress-tests of banks, to evaluate their capital sufficiency and capacities to encounter internal and external shocks; • sale of banks recapitalized by the government to effective owners; • improve the mortgage mechanism through engaging state-owned banks; • stabilize inflation and fix reasonable interest rates; • foster the attitude of trust to the national currency and banking system. the above measures, when taken coherently, can enhance banks’ efficiency and competencies, and their role as vital and vigorous contributors in economic recovery. baltic journal of economic studies 68 vol. 1, no. 2, 2015 references baranovs'kyj, o.i. (2004). financial security in ukraine (assessment methodology and tools support). – kyiv: knteu. – 759 р. ehorova, a.v. (2010). analysis and monitoring of bank lending , money and credit, vol. 10, p. 16–22. naumenkova, s., mischenko s. (2013). development lending in the post-crisis environment, banking, vol. 1, p. 3–19. new loans to households and non-financial corporations (2013). statistical release nbu. available at: http://www.bank.gov.ua karmazyna, a.s. (2011). world experience of analysis and monitoring of bank lending, вanking business, vol. 3, p. 21–28. kutsenko, o. (2011). consumer lending in ukraine: surveying the. project usaid «financial sector development» (finrep). available at: http://www.bank.gov.ua lavrushyn, o.y. (2012). the role of credit and modernization activities of banks in lending scope. – moscow: knorus. – р. 272. lahard, k. (2012). it is time to overcome the crisis. available at: http://www.imf.org/external/russian/pubs/ft/ survey/so/2012/new092112ar.pdf torubka, l.v. (2011). consumer lending in ukraine: current state and trends of development, bulletin of the university of banking nbu, vol. 3(12), p. 22–31. sale of bad loans by banks, key points. available at: http://ireu.org.ua/2014/08/28/prodazh-problemnix-kreditivbankami-klyuchovi-momenti татьяна кубах развитие кредитного рынка украины в послекризисный период аннотация. целью работы является систематизация данных развития кредитного рынка украина в период экономических, политических потрясений и начала военного противостояния с россией. метод продолжительного исследования позволить проследить изменения, которые происходили не только в банковской системе, но и в целом в экономике. методика. исследование основано на сравнении данных по ряду показателей, которые были взяты за основу и позволили в полном объеме провести анализ кредитного рынка как составляющей рынка капитала за период с 2000 по 2013 год. результаты роботы позволили четко определить проблемы, которые препятствуют стабильному развитию банковской системы украины, среди которых можно выделить следующие: высокий уровень себестоимости банковских продуктов; брак квалифицированного персонала; недоверие населения к банкам; низкий уровень культуры пользователей финансовыми продуктами; низкий уровень доходов населения; высокая доходность по депозитным операциям увеличивает стоимость кредитных продуктов; замедление развития экономики, отсутствие реформ; социально-политическая напряженность; военный конфликт с соседним государством. практическое значение. четкое определение существующих проблем на кредитном рынке как составляющем элементе банковской системы позволило определить ряд направлений которые позволять решить сложившуюся ситуацию. среди них прежде всего следует выделить следующие: банк регулятор (национальный банк украины) должен брать на себя большую ответственность, как органа последней инстанции при рефинансировании того или иного банка; на постоянной основе внедрить проведения стресс-тестирования для банков украины; стабилизировать уровень инфляции и вернуть доверие к национальной валюте; настроить механизм ипотечного кредитования государственными банками. значение/оригинальность. полученные данные в результате основательных расчетов позволили не только определить проблемы, но и выявить пути их решения, что даст возможность украинской банковской системе выйти на новый этап своего развития, а кредитный рынок сделать неотъемлемой источником развития экономики. baltic journal of economic studies 114 vol. 4, no. 5, 2018 corresponding author: 1 state university of infrastructure and technologies, ukraine. e-mail: mvkov@duit.edu.ua 2 state university of infrastructure and technologies, ukraine. e-mail: shevchuk_vo@duit.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-5-114-121 efficiency evaluation of cooperation bet ween transport enterprises and higher education institutions in the transport and logistics cluster maryna kovbatiuk1, vladyslava shevchuk2 abstract. the processes of formation and efficiency evaluation of the transport and logistics clusters’ operation as a tool of national transport competitiveness, possibility to attract investment to the field, in order to reach a high point of innovation development, are of a great interest nowadays. all mentioned above make additional requests to the modern specialists in the transport industry. it is possible to solve this problem as a result of cooperation between transport enterprises and higher education institutions in the process of cluster operation. thus, the subject of research is effective cooperation between transport enterprises and higher education institutions in the process of cluster structures’ cooperation. the aim of the research is the development of an integrated index of operating efficiency evaluation of transport enterprises and higher education institutions to evaluate its cooperation under the conditions of operation of transport and logistics cluster (tlc). methodology. in the research process, the methods of scientific knowledge such as analysis and synthesis were used in studying of the activity of self-supporting separated subdivision of kiliya shipbuilding and repair yard of private jointstock company “ukrainian danube shipping company” and state university of infrastructure and technologies in 2015–2017. economic-mathematical methods were used to make integrated index calculation of operating efficiency evaluation of transport enterprise and higher education institute, value scale determination of the integrated index of operating efficiency evaluation of the clusters’ entity. the expert evaluation method is used to define the values, characterized operation of transport enterprises and higher education institutions under the conditions of their cooperation within tlc and their significance. method of scientific abstract is applied to come to theoretical general conclusions. the system approach is the main one in the research. results. in the article, the methodological approach was used, it includes value system determination based on the expert evaluation, method of integrated index calculation and value scale development of an integrated index to evaluate performance efficiency of transport enterprises and higher education institutions under the conditions of their cooperation in transport and logistics cluster. this approach was applied on the example of the activity of self-supporting separated subdivision of kiliya shipbuilding and repair yard of private joint-stock company “ukrainian danube shipping company” and state university of infrastructure and technologies. it is determined that entities of transport and logistics cluster can achieve a general positive economic impact. practical implications. practical consequences are connected with the opportunity to use suggested methodological approach to make the calculation of entities’ efficiency as a result of their cooperation in the cluster. the practicability of the cooperation between transport enterprises and educational institutions in the transport and logistics cluster in this research is proved by the opportunity to get a lot of advantages as a result of this cooperation, by the positive change of main operating index of the cluster’s members. it is base for the development of further enterprise development strategy, proved by a jury of opinion and calculated integrated index of the effectiveness of their activity. value/originality. originality lies in the development of scientifically-grounded formulas for integrated index calculation of operating efficiency evaluation of transport enterprises and higher education institutions in the transport and logistics cluster and opportunity to identify efficiency level of their cooperation according to developed value scale. key words: transport and logistics cluster, transport enterprises, higher education institutions, cluster entities’ cooperation, integrated index of efficiency evaluation. jel classification: с13, d61, r49 baltic journal of economic studies 115 vol. 4, no. 5, 2018 1. introduction under the conditions of globalization and integration to the european union, the processes of economics reformation of ukraine have to form a new attitude type between entities and to develop also new implementation mechanisms of their economic interests, one of them is clustering. national competitiveness increase is a pre-condition in forming an effective economic system of any country. according to the global experience and conclusions of ukrainian scientists, the main direction of strategic changes in the economy of ukraine is a structural reformation of regional economics and operating of active investment policy focused on the development of modern industry and providing of transport services with the help of transport and logistics clusters (tlc). formation of the transport and logistics clusters is an efficient tool to increase the competitiveness of the national economy by means of costs minimization in the field of transport and logistics (chupaylenko, 2013). thus, the processes of formation and efficiency evaluation of transport and logistics clusters as a tool of national transport competitiveness, providing facilities to attract investment to the field in order to achieve the high level of innovation development are of a great interest. all mentioned above make additional requests to the modern specialists in the transport industry. it is possible to solve this problem as a result of cooperation between transport enterprises and higher education institutions in the process of cluster operation. thus, the subject of research is effective cooperation between transport enterprises and higher education institutions in the process of cluster structures’ cooperation. the aim of the research is the development of an integrated index of operating efficiency evaluation of transport enterprises and higher education institutions to evaluate its cooperation under the conditions of operation of transport and logistics cluster (tlc). methodology. in the research process, the methods of scientific knowledge such as analysis and synthesis were used in studying of the activity of self-supporting separated subdivision of kiliya shipbuilding and repair yard of private joint-stock company “ukrainian danube shipping company” and state university of infrastructure and technologies in 2015-2017. economic-mathematical methods were used to make integrated index calculation of operating efficiency evaluation of transport enterprise and higher education institute, value scale determination of the integrated index of operating efficiency evaluation of the clusters’ entity. the expert evaluation method is used to define the values, characterized operation of transport enterprises and higher education institutions under the conditions of their cooperation within tlc and their significance. method of scientific abstract is applied to come to theoretical general conclusions. the system approach is the main one in the research. 2. literature review a considerable contribution to the development of theory and methodology clustering is made by the famous scientist m. porter. he considered that enterprises of separate industries can be located in the particular regions of the country, have an active impact on the market entities, within they cooperate – suppliers, consumers, and competitors. in such a way, enterprises increase their competitiveness and as a result of such cooperation, a synergistic effect is appeared (porter, 2006). such issues as particulars, advantages of the clusters’ formation, grounding of necessity of clusters’ creation in ukraine are considered in the researches of p. t. bubenko (bubenko, 2009), v. heyets (heyets, 2008), n. g. kanishchenko (kanishchenko, 2006), u. e. kirilov (kirilov, 2013), і. о. martynyak (martynyak, 2008), s. v. onishko (onishko, 2010), s. i. sokolenko (sokolenko, 2004), and others. transport and logistics clusters as a category, their role and essence, problems of functioning and development are thoroughly studied by leading ukrainian scientists as o. o. karpenko (karpenko, 2015), o. m. polyakova (polyakovа, 2009), i. g. smirnov (smirnov, 2008, smirnov, 2012), o. a. chupaylenko (chupaylenko, 2013). however, the research papers are outlined with an efficiency evaluation of the cluster’s functioning or transport and logistics enterprises in the cluster structure. therefore, research issue on the functioning of transport and logistics clusters is relatively new in the scientific literature. simultaneously, a variety of aspects, including efficiency evaluation of enterprise activity and educational institutions as the result of their cooperation, is poorly considered and needs further studying. the necessity in grounded work on this aspect determines the choice of a research line. 3. the main material of the research practicability and efficiency in forming and functioning of cluster in the transport and logistics industry are based on the operating index of the logistics centres, logistics companies, storage facilities, suppliers, customers, financial lending institutions, design and scientific-research organizations, consulting and audit firms, insurance companies and forwarding agencies, labour forces and financial resources, having an effect on the level increase in management decision making: cost minimization, risk mitigation, helped to use in full resource potential and opportunities in the market for transport services. the efficiency of the transport and logistics cluster is a relative index, showing the relationship between results and costs, connected with the usage of production goods, labour power, entrepreneurial abilities by transport services, providing of certain baltic journal of economic studies 116 vol. 4, no. 5, 2018 quality under the conditions of limited resources and unlimited wants. therefore, an efficiency increase of the operation of transport enterprises and their association with other enterprises in the transport and logistics cluster provides a new development level of relationship between enterprises of the region, including transport and logistics technologies, improvement of investment attraction and territory (chupaylenko, 2014). there is a difficult relationship system among participants in the cluster, providing important synergetic effect from its functioning and playing a key role in the formation and maintaining of competitive strength. relationships among cluster members are different and dynamic. after establishing relevant relationships between tlc entities, there is a need for efficiency evaluation of their cooperation with the help of an integrated index of operating efficiency in each of them under the conditions of cluster functioning. the target of evolution is to define the current level of social and economic efficiency of the management system and to achieve eventual results of cluster entity’s activity. the research was conducted on the basis of the methodological approach; its sequencing is shown in figure 1. it includes index system specification based on the expert evaluation, methods of integral coefficient calculation and development of the value scale of the integrated index of operating efficiency on specified cluster entities. on the first stage, based on the expert survey (employees of transport enterprises, shipping companies; managers of logistics companies and scientists of the higher education institutions etc.), there were indices identified for integrated indices specification in order to find operating efficiency evaluation of transport enterprise and higher education institute in the cluster, and also their significance was identified. on the second stage, the analytical index system was formed from the most significant and informative indices. it is made for operating efficiency evaluation of transport enterprises and higher education institutions under the conditions of their cooperation in the transport and logistics cluster. as a rule, in national practice, the index system is used to define the economic operating efficiency of enterprises. it shows us the relation between expenses and obtained results, i.e. impacts that could be obtained from the interactive system in the cluster. taking into account that the main focus of the research is highquality staff training, the indices are identified to show the result of their usage (table 1). operating efficiency of higher education institutions is better to evaluate with the help of indices, indicated both educational and scientific constituent of their activity. the system of corresponding figures is set out in table 2. on the third stage to divide relative share among specified indices (for further integrated index calculation of operating efficiency of cluster entities), the authors made a survey of 10 ukrainian experts in clustering field, business-structures, state infrastructure authorities etc. survey findings are set out in table 3 and table 4. calculation data show us 38% of profit ration; 14.5% of labour productivity index; 17% of employment capacity 1. expert evaluation; with its help indices were identified. they show the operation of transport enterprises and higher education institutions under the conditions of their cooperation in tlc and significance. 2. index system formation to take operating efficiency evaluation on specified entities. 3. significance specification of each analytical value, and building of integrated indices for operating efficiency evaluation on cluster entities. 4. value scale building of integrated evaluation index to define operating efficiency level of specified entities in tlc. 5. integrated indices calculation of operating efficiency evaluation of enterprises and educational institutions in tlc. figure 1. the process of operating efficiency evaluation of tlc under the conditions of their cooperation source: developed by the authors baltic journal of economic studies 117 vol. 4, no. 5, 2018 table 1 indices of operating efficiency evaluation of transport enterprises index calculation formula specification profit ratio k c ð = pr pr – profit from realization of products (works, services), thousand uah; c – costs, thous. uah labour productivity index і lp lp lp = 1 0 lp1 –value of labour productivity of accounting period, thous. uah; lp0 – value of labour productivity of base period, thous. uah employment capacity coefficient (staff ) k qe qe ec r t = qеr – number of regular employees; qеt – total number of employees (permanent employed+ temporary employed). workplace providing coefficient k q q wp u p = qu – number of used workplaces; qp– number of possible workplaces. coefficient of educational-qualification staff level k q q eql ste she = qste – number of staff with transport education, people; qshe – number of staff with higher education, people. source: developed by the authors table 2 indices of operating efficiency evaluation of higher education institutions index calculation formula specification students’ number index і qs qs s = 1 0 qs1 – students’ number of accounting period; qs0 – students’ number of base period. employment coefficient k qs qs e e g = qse – number of employed students; qsg – number of graduated students. graduation coefficient k qs qs g g a = qsg – number of graduated students; qsa – number of accepted students in higher education institute. part of economic contract paper subjects k ecps ps ecps = ecps – number of economic contract paper subjects; ps – number of scientific-research subjects (economic contract + state-financed). budgeting coefficient for economic contract paper subjects k b b b ecps ecps ps = becps – budget volume for economic contract paper subjects, thous. uah; bps – budget volume for scientific-research subjects (economic contract + state-financed), thous. uah. source: developed by the authors table 3 expert survey findings on indices significance of operating efficiency evaluation of transport enterprise in tlc expert profit ratio lp index employment coefficient workplace providing coefficient coefficient of educationalqualification staff level expert 1 0,3 0,1 0,2 0,2 0,2 expert 2 0,3 0,1 0,3 0,2 0,1 expert 3 0,5 0,25 0,1 0,1 0,05 expert 4 0,4 0,1 0,15 0,2 0,15 expert 5 0,3 0,25 0,2 0,05 0,2 expert 6 0,4 0,1 0,2 0,1 0,2 expert 7 0,5 0,1 0,1 0,15 0,15 expert 8 0,3 0,15 0,2 0,05 0,3 expert 9 0,5 0,15 0,1 0,05 0,2 expert 10 0,3 0,15 0,15 0,15 0,25 average value of index relative share 0,38 0,145 0,17 0,125 0,18 source: developed by the authors baltic journal of economic studies 118 vol. 4, no. 5, 2018 coefficient; 12.5% of workplace providing coefficient; 18% of the coefficient of educational-qualification staff level have an effect on the integrated index of operating efficiency at the transport enterprise. expert evaluation consistency was estimated by pearson χ2 criterion (vasylenko, sencha, 2011). experimental value is more than a critical one, that is why we can consider obtained expert evaluation with a probability value of 0,95 as finalized. on basis of obtained data, we generate an integrated index for operating efficiency evaluation of transport enterprise (ітe) as a result of cooperation with higher education institution in transport and logistics cluster: і k і k k kòå ð lp ec wp eql= ⋅ + ⋅ + ⋅ + ⋅ + ⋅0 38 0 145 0 17 0 125 0 18, , , , , (1) it is proved that 37% of students’ number index, 13% of employment capability coefficient, 10% of graduation coefficient, 18.5% of a part of economic contract paper subjects, 21.5% of budgeting coefficient for economic contract paper subjects have an impact on the integrated index of operating efficiency in higher education institute. reliability of obtained findings is evaluated in a similar way and proved by finalizing expert assessment. as a result, we get the following formula of the integrated index for operating efficiency evaluation in higher education institute (іhei) in cooperation with transport enterprise in transport and logistics cluster: і і k k k khei s e g ecps b ecps= ⋅ + ⋅ + ⋅ + ⋅ + ⋅0 37 0 13 0 1 0 185 0 215, , , , , (2) value of integrated indices of operating efficiency evaluation of enterprises in tlc, calculated by suggested formulas including relative share each of the coefficients, is the basis for proving cooperation practicability of considered entities in the cluster. to identify operating efficiency level of entities in tlc, we build value scale of integrated indices on the fourth stage. to achieve it, we use dispersion analysis of alternative and specified features and define average quadratic deviation in alternative distribution number of integral coefficients of indices significance. quantified variability is figured by the low reference value, indicated as 0. highest value can be 1 and more, because a part of indices, according to that integrated indices of operating efficiency of cluster entities are calculated, focusing on 1, and only a few coefficients can increase 1 under particular conditions. then р – a part of units of integral coefficients of group weight that we calculate by the formula below and get the highest critical value on a scale value of the integrated index for transport enterprise and higher education institute: ð à à à à à= ⋅ ⋅ ⋅ ⋅1 2 3 4 55 (3) àі, i = 1 5, – integral coefficients of group weight. accordingly, q p= −1 (4) thus, the average quadratic deviation of integral weight coefficients from the reference value is calculated by the formula: σ = ⋅ð q (5) we obtain the following result thanks to the calculations above: ðòe = ⋅ ⋅ ⋅ ⋅ =0 38 0 145 0 17 0 125 0 18 0 1839 5 , , , , , , , consequently, qòe = − =1 0 18 0 82, , ðhei = ⋅ ⋅ ⋅ ⋅ =0 37 0 13 0 1 0 185 0 215 0 1804 5 , , , , , , , consequently, qhei = − =1 0 18 0 82, , as we can see, part of units of integral coefficients of group weight for transport enterprises and higher education institutions is the same in this research. consequently, for both cluster entities, the results from the average quadratic deviation of integral weight coefficients, and accordingly, a scale value of the integrated index of operating efficiency are the same. thus, σ = ⋅ =0 18 0 82 0 38, , , . table 4 expert survey findings on indices significance of operating efficiency evaluation of higher education institutions in tlc expert students’ number index employment capability coefficient graduation coefficient part of ecps budgeting coefficient for ecps expert 1 0,3 0,15 0,1 0,2 0,25 expert 2 0,35 0,1 0,05 0,3 0,2 expert 3 0,5 0,2 0,1 0,1 0,1 expert 4 0,4 0,15 0,05 0,15 0,25 expert 5 0,35 0,1 0,1 0,2 0,25 expert 6 0,3 0,2 0,1 0,2 0,2 expert 7 0,45 0,15 0,1 0,15 0,15 expert 8 0,4 0,05 0,1 0,2 0,25 expert 9 0,35 0,1 0,15 0,2 0,2 expert 10 0,3 0,1 0,15 0,15 0,3 average value of index relative share 0,37 0,13 0,1 0,185 0,215 source: developed by the authors baltic journal of economic studies 119 vol. 4, no. 5, 2018 the obtained result from average quadratic deviation of integral weight coefficients give us the opportunity to define course length of sufficient level of operating efficiency in tlc entity and it reaches 0,38. having used method 3σ , we build scale in units of standard deviation parts, having determined interval scale as 1 2 0 19σ = , and we obtain course length of the next level (low). then scaling interval of operating efficiency of cluster entity is calculated as 2 1 2 0 38⋅ = =σ σ , , made the difference between upper bound of low and sufficient levels, and the difference between lower bound of low level and upper bound of sufficient level has to be 3 1 2 3 2 0 57⋅ = =σ σ , . taking into account reported values, we build scale for magnitude estimation of the integrated index of operating efficiency in cluster entities (table 5). table 5 value scale of the integrated index of operating efficiency evaluation at transport enterprise and in higher education institution in tlc indicator value specification less than 0,19 critical level of operating efficiency of tlc entity from 0,2 to 0,39 low level of operating efficiency of tlc entity from 0,4 to 0,77 sufficient level of operating efficiency of tlc entity from 0,78 and more high level of operating efficiency of tlc entity source: developed by the authors this scale helps us to identify operating efficiency level of transport enterprise or higher education institution as a result of their cooperation in the cluster. on the fifth stage, we evaluate the operating efficiency of transport enterprises and higher education institutions in tlc by means of corresponding figures calculation. 4. results we use suggested methodological approach on a specific example. having analysed the potential capacity of each region of ukraine on the creation of a transport and logistics cluster, border areas draw our attention. their centres are large cities and urban agglomerations, international transport corridors pass through them. we consider the creation of transport and logistics cluster in the danube region is long-range for the development of international cooperation and experience exchange, and also for meeting eu requirements. let us make it clear, what transport enterprises and educational institutions can be its constituent part (table 6). the danube region has a lot of water transport enterprises, among them are kiliya shipbuilding and repair yard, pjsc “ukrainian danube shipping company”, pjsc “danube shipping management service” in izmail, vilkovo marine shipyard repair and maintenance, branch of jssc “ukrrichflot”. these companies can form a business association at the premises of shipbuilding and repair enterprises. table 6 main participants of transport and logistics cluster of danube region line of activity name of enterprise, organization, institution transport companies 1) zovnishtrans, llc 2) ust-danube waterway, se 3)ukrainian danube shipping company, pjsc freight-forwarding firms 4) avtologistika, llc 5) dunay-multi-service, llc 6) swtrans, llc 7) odessa regional chamber of commerce and industry repair and maintenance enterprises 8) kiliya shipbuilding and repair yard 9) danube shipping management service, pjsc in izmail 10) vilkovo marine shipyard repair and maintenance 11) branch of ukrrichflot, jssc ports, railway stations 12) ust-danube commercial sea port 13) izmail commercial sea port 14) reni commercial sea port 15) izmail airport educational institutions 16) state university of infrastructure and technologies 17) izmail maritime institute insurance companies 18) pj stock insurance company “ingo ukraine” 19) bc krona, pjsc banks 20) privatbank, pjsc database 21) ukrainian transport portal ukrtransport 22) transportation information system оlantrans government support 23) ministry of infrastructure of ukraine source: developed by the authors baltic journal of economic studies 120 vol. 4, no. 5, 2018 secondly, there are such companies as ust-danube commercial sea port, kiliya port station, izmail commercial sea port, reni commercial sea port; swtrans llc, zovnishtrans llc, ust-danube waterway, izmail airport, odesa regional chamber of commerce and industry. thirdly, among educational institutions, where the future specialists of transport industry study, are izmail maritime institute and separated subdivisions of state university of infrastructure and technologies (former kyiv state maritime academy named after hetman petro konashevych-sahaidachny), in particular, danube faculty of maritime and river transport (in izmail) and kiliya transport college (in kiliya). to make an assessment, we have chosen selfsupporting separated subdivision of kiliya shipbuilding and repair yard of private joint-stock company “ukrainian danube shipping company” (sss “ksry” pjsc “udsc”) and state university of infrastructure and technologies (suit) future specialists study at. analytical and integrated indices of their performance are calculated and set out in table 7. table 7 performance indices of ksry and udsc in 2015-2017 № indices 2015 2017 kiliya shipbuilding and repair yard 1 profit ratio 0,124 0,012 2 labour productivity index 3,06 0,98 3 employment capacity coefficient 0,99 0,95 4 workplace providing coefficient 0,11 0,08 5 coefficient of educationalqualification staff level 0,63 0,65 integrated efficiency index 0,78 0,43 state university of infrastructure and technologies 1 students’ number index 0,99 1,02 2 employment coefficient 0,8 0,85 3 graduation coefficient 0,95 0,97 4 part of economic contract paper subjects 0,5 0,5 5 budgeting coefficient for economic contract paper subjects 0,09 0,5 integrated efficiency index 0,67 0,78 source: developed by the authors kiliya shipbuilding and repair yard is having lost positions by selected indices during the analysed period. for example, profit ratio is decreased by 11,2 points, labour productivity index is down by 2,08, employment capacity coefficient – by 0,04 and workplace providing coefficient – by 0,03. however, the coefficient of educational-qualification staff level is increased by 0,02 points. and it makes possible to come to a conclusion about the unstable state of the enterprise operation. conducted research on the operating efficiency of the state university of infrastructure and technologies shows us the increase of all main indices: students’ number index is up by 0,03 points, employment coefficient – by 0,05, graduation coefficient – 0,02, budgeting coefficient of economic contract paper topics – by 0,41. it is worth mentioning, development enterprises and those with relaxation, having got united in the transport and logistics cluster, can achieve positive economic effect thanks to mutual support among all participants of the clustering process. that is the main advantage of clusters. because of advantages from enterprise incorporating in tlc, including expert commentary and researches of the leading scientists, it is expected the following increase of main operating indices of cluster entities in clustering: industrial production is increased by 6.5%; part of innovative-active enterprises in total amount from industries is increased to 30.3%; rate of development of transport infrastructure is up to 15%; increase of cargo transportation is up to 8.5%; investment activity is up to 5.3%. taking this trend into account, the predictable indices of operation in ksry and udsc were calculated. based on these values, the calculation of the integrated index of its operating efficiency as members of transport and logistics cluster for 2022 was made (table 8). forecasting period consists of four years because it is impossible to train skilled staff for ksry (training for specialists according to shortened program takes three years, whereas a complete program is developed for four years) and do effective teamwork among considered entities. table 8 predictable indices of operation in ksry and udsc № indices 2022 kiliya shipbuilding and repair yard 1 profit ratio 0,15 2 labour productivity index 1,53 3 employment capacity coefficient 1 4 workplace providing coefficient 0,55 5 coefficient of educational-qualification staff level 0,89 6 integrated efficiency index 0,68 state university of infrastructure and technologies 1 students’ number index 1,14 2 employment coefficient 0,9 3 graduation coefficient 0,98 4 part of economic contract paper subjects 0,65 5 budgeting coefficient for economic contract paper subjects 0,7 6 integrated efficiency index 0,9 source: developed by the authors obtained predictable values from integrated indices of members’ activity in transport and logistics cluster as a result of their cooperation after joining cluster are proof of: baltic journal of economic studies 121 vol. 4, no. 5, 2018 integrated index of operating efficiency of kiliya shipbuilding and repair yard reaches 0,68, therefore, it is within the scope of 0,4 and 0,77 and demonstrates sufficient level of the operating efficiency entity in tlc; integrated index of operating efficiency of state university of infrastructure and technologies reaches 0,9, i.e. it is within the scope of 0,78 and more and demonstrates a high level of the operating efficiency level in tlc. thus, joining the cluster and further cooperating of entities enable to achieve both individual and synergetic effect. 5. conclusions therefore, based on made calculations, we come to the conclusion that cooperation between transport enterprises and higher education institutions as tlc entities will have a positive impact. moreover, conducted research is a proof of practicability in cooperation between transport enterprises and higher education institutions in transport and logistics cluster and makes emphasis on the opportunity to get a lot of advantages from its cooperation, positive change in main indices of cluster members’ activity. suggested indices of operating efficiency evaluation of transport enterprises and higher education institutions in the cluster enable us to make a forecast about the impact from cooperation for similar entities in longrange transport and logistics clusters in other regions of ukraine, for instance, in kyiv and mykolaiv. after that, it is possible to identify the level of these indices by developed value scale and give well-grounded recommendations on joining of selected entities the cluster. references: bubenko, p. t., snіsarenko, o. b. (2009). innovacijnyj rozvytok regioniv [innovative development regions]. kharkіv, vyd-vo «fort». (in ukrainian) chupaylenko, o. a. (2013). rozvytok transportno-logistychnyh klasteriv v ukraini [development of transportlogistic clusters in ukraine]. retrieved from: http://publications.ntu.edu.ua/visnyk/28_2013/535-544.pdf chupaylenko, o. a. (2014). transkordonni transportno-logistychni klastery ta transkordonni objednannja v ukrai'ni [cross-border transport-logistic clusters and cross-border associations in ukraine]. retrieved from: http://publications.ntu.edu.ua/upravl_progect/2014_14_tech/266.pdf heyets, v. m. (2008). klastery i merezhevi struktury v ekonomici – tema dosyt cikava, ale na sogodni shhe do kincja ne vyvchena… [clusters and network structure in the economy – the topic is interesting enough, but it is still not fully understood ...]. ekonomist, 10, 10-11. kanishchenko, n. g. (2006). klastery v systemi nacionalnoi konkurentospromozhnosti [clusters in the national competitiveness]. visnyk of the knu. series economics, 85, 14-16. karpenko, o. о. (2015). mehanizm klasteryzacii transportno-logistychnyh pidpryjemstv [mechanism of clustering of transport-logistic enterprises]. efektyvna ekonomika, no. 10. retrieved from: http://www.economy.nayka.com.ua/ ?op=1&z=4428 kirilov, y. e. (2013). klastery jak instrument pidvyshhennja konkurentospromozhnosti nacionalnoi ekonomiky v umovah globalizacii [clustering as a tool to improve the competitiveness of national economies in a globalizing]. efektyvna ekonomika, no. 12. retrieved from: http://www.economy.nayka.com.ua/?op=1&z=2608 martynyak, i. o. (2008). formuvannja klasternoi polityky jak mehanizmu vdoskonalennja infrastruktury funkcionuvannja malogo i serednogo innovacijnogo biznesu v regioni [formation of cluster policy as a mechanism for improving the infrastructure operation of small and medium-sized innovative businesses in the region]. regional economy, 4, 54-62. onishko, s. v. (2010). derzhavne reguljuvannja klasteryzacii ekonomiky jak naprjamok rozbudovy nacionalnoi innovacijnoi modeli [clustering state regulation of the economy as a way of building a national innovation model]. actual problems of the economy, 11, 55-61. polyakovа, a. m. (2009). globalizacija transportno-logistychnyh system u svitovij ekonomici [globalization transport-logistics systems in the world economy]. bulletin of economics and transport industry ukrdazt, 26, 32-34. porter, m. (2006). konkurencija [competition]. moscow, publishing house «williams». (in russian) smirnov, i. g. (2012). transportno-logistychni klastery v jes ta integracija ukrainy v ci struktury [transportlogistic clusters in the eu and integration of ukraine in this structure]. retrieved from: http://ea.donntu.edu.ua/ bitstream/123456789/19844/1/66_smirnov.pdf smirnov, i. g., kosarev, a. v. (2008). transportna logistyka [transport logistics]. kyiv, tsul. (in ukrainian) sokolenko, s. i. (2004). klastery v globalnij ekonomici [clusters in the global economy]. kyiv, logos. (in ukrainian) vasylenko, o. a., sencha, i. a. (2011). matemachno-statystychni metody analizu u prykladnyh doslidzhennjah: navch. posib. [mathematical-statistical methods of analysis in applied research: teaching. manual]. odessa, onat them. o. s. popov. (in ukrainian) baltic journal of economic studies 62 vol. 4, no. 4, 2018 corresponding author: 1 odessa national maritime university, ukraine. e-mail: elennika@bigmir.net orcid: https://orcid.org/0000-0003-2549-429x 2 odessa i.i. mechnikov national university, ukraine. e-mail: edkuznietsov@gmail.com orcid: https://orcid.org/0000-0001-7569-7533 3 national university “odessa maritime academy”, ukraine. e-mail: elit-@ukr.net orcid: http://orcid.org/0000-0001-6371-7672 doi: https://doi.org/10.30525/2256-0742/2018-4-4-62-68 ways of development of the potential of state in the marine economic complex: ecological and economic aspects olena borshchevska1, eduard kuznetsov2, sergiy stepanov3 abstract. at present, issues of assessing the impact of economic activity on the environment as an integral part of the country’s economic development are becoming more and more relevant. environmental problems of the development of a marine economy complex may restrain the development of the economic potential of the state. moreover, the dynamic development of the state’s economy is possible only when economic entities adhere to the norms of an ecological nature. in this regard, the problem of assessing the impact on the environment, in particular, in the maritime complex in the projection of the economic component of development, as well as in this sense and the rational use of natural resources, is of paramount importance. the environmental tension is most often due to the placement of powerful chemical and petrochemical industries in the area of the maritime complex. in some areas, the level of environmental pollution is quite high due to the location of large facilities in the electric power industry (thermal and nuclear power plants). the economic component of the environmental impact assessment of the maritime complex is that one and the same natural resource is most often used by the economic entities of several countries. therefore, the assessment of the impact on the environment and the achievement of a balanced distribution of ecological and economic benefits for the rational use of natural resources, especially in the maritime complex, are today of great relevance. the purpose of the article is to analyse the problems of ecological and economic orientation in the maritime complex and, on the basis of generalization of such problems, to provide recommendations on systematization of measures for the comprehensive rational development of economic relations, taking into account the features of the coastal zone and the marine economic complex. methodology. analytical market reviews, materials of periodicals, resources of the internet are the informational and methodological basis of the investigation. to achieve the goal set, the following general scientific and special methods were used: economic and mathematical methods, structural-logical analysis, analogy, synthesis, comparison and integration, factor analysis. result. the system of measures of an economic and legal nature, which should be taken into account for successful and rational use of the marine economic complex in economic activity, is substantiated. problematic aspects and directions of their elimination are determined. the proposed model of the ecological and economic system of the maritime complex acquires a special significance in the context of the supranational task of developing measures for optimizing and rational use of natural resources on a global scale. the directions of the reform of the legal framework are considered. practical value. the system of measures of economic and legal character and their individual types can be applied for optimization and rational use of marine (water) resources, taking into account the peculiarities of economic development and the state of the marine-economic complex in ukraine and in other states. value/originality. most scientific works are devoted to the consideration of theoretical aspects of ecologicaleconomic systems, namely, the refinement of the essence of this instrument as a form of modern financial and economic dynamics. a part of the work is devoted to the consideration of the common features and national peculiarities of ecological and economic systems in individual countries and regions. the authors consider the issues of elaboration of measures for the optimization of economic activity, which combines the abovementioned aspects with the peculiarities of the formation of ecological-economic systems in the marine faring complex. baltic journal of economic studies 63 vol. 4, no. 4, 2018 it is also important to take into account the impact of planned legislative reforms on the development of economic activity in the marine faring complex of ukraine. the account of the peculiarities of the maritime complex in the framework of the national economy allowed developing directions for its further development. key words: ecological-economic system, marine economic complex, economic activity, rational use of resources, estimation of influence of economic activity on environment. jel classification: q22, 25, r19 1. introduction at the opening of the un conference in stockholm in 1972, its leader m. strong spoke about the need for people to move from an economic concept to an ecological and economic system. in recent years, the concept of “ecological and economic system” (further ees) scientists treated differently. for example, it is defined as a limited part of the technical sphere, in which natural, social, and production structures and processes are interconnected with flows of matter, energy, and information (akimova and khaskin, 2001). eеs is flexible and, for each region, it is necessary to develop an individual specific nature management (syromyatnikova, 2011). this should be accepted since people often neglect the balance of ecology and industry, pumping out natural resources, deforesting forests, flooding certain territories (“industrial regions”), because of which, at best, the ecological situation in them is in imbalance, and at worst – floods, earthquakes, technogenic catastrophes, etc. begin. in the classical sense, the ecological and economic system is represented in the form of a biochemical cycle of natural resources that are extracted as a result of production activities and are directed to meet human needs. the next step is the recycling of the waste material or its disposal, which results in secondary resources that are sent for re-consumption (figure 1). analysing the above interpretations of the ecological and economic system, it can be concluded that the stability of eеs depends on the balance of humannature relations. the development of technical progress leads to an increase in the volume of consumption of natural resources, but their extraction and waste from their use cause irreparable harm to the environment. the development of production leads to a steady increase in the volume of consumption of resources and the expansion of their range. but, firstly, the resources are limited. secondly, the use of almost every kind do waste external resources ecological and economic system production products (building materials, structures, etc.) human means of production n a t u r a l r e so u r c e s environment (ecological subsystem) assimilation biochemical cycle secondary resources waste treatment and recycling figure 1. ecological and economic system baltic journal of economic studies 64 vol. 4, no. 4, 2018 of resources causes the emergence of a large amount of waste that is harmful to the environment. there is a need to include environmental factors in the system of modern production. the solution of this task is achievable on the basis of the concept of ecologically sustainable development. it provides an opportunity to overcome the ecological crisis with simultaneous movement along the path of economic development and is directed to implement a system of economic principles aimed at preserving the environment, incorporating environmental factors into the functioning mechanism of the market (malyshev and solodkov, 2014). many domestic and foreign scientists were engaged in studying the impact of economic activity on the ecological situation in the world: v. andreitsev, yu. arutyunov, t. dietz, a. getman, v. gurman, v. kiseleva, v. kirilenko, a. malovsky, p. nesterov, s. pereverzeva, v. razumovsky, r. rycroft, j. regens, g. serov, k. smith, m. sharygina, m. shulga, s. voduanitskaya, a. yablokov, and others. intensive economic activity at marine exacerbated the problem of the ecology of the world ocean, which began to be regarded as a global problem. 2. the economic complex as an important component of the development of the real sector of the economy with the growth of the economies of the world’s states, the volume of international trade and, as a consequence, the importance of the marine economic complex increases. the development of the country’s marine-economic complex is one of the priorities for the development of the economic potential of the state that has access to the marine. according to modern research, the transport infrastructure occupies a leading role in the system of the world economic complex. since our planet is surrounded by a 2/3 water shell, which includes the seas and oceans, the main economic resource for economic activities is the marine economic complex. particularly relevant for ukraine as a sea power is the rational economic development of the marine economic complex in terms of both economic growth and rational use of natural resources from an ecological point of view. a positive factor in this sense is the interest of the legislator in the sphere of development of the marine economic complex. undoubtedly, the positive factor was the adoption of the sea doctrine of ukraine for the period until 2035, approved by the cabinet of ministers of ukraine on october 7, 2009, no. 1307. at one time, scientists such as o. kibik, o. podtserkovnyi, yu. drapailo, v. kotlubai and others made efforts to study the questions of determining the marine economic complex. as well as v. kovalevsky, yu. sednev, s. savelyev, but not one of the definitions did not take into account the environmental component, as equivalent to economic and legal activities. the marine economic complex is defined as “the territorial combination of economic entities of the maritime transport industry, subjects of other industries, regardless of ownership, that interact with each other and compete within the same field of activity, in order to meet the needs of the population and social production in maritime transport products and services by means of use of natural, intellectual-professional and man-made means” (kotlubai, 2014). other scientists define the marine economic complex as “a complex, multicomponent managed system, which objective functions are to ensure the economy of the countries with natural resources of the seas and oceans, expand the external economic potential that is formed at the level of enterprises, regions, and countries” (kovalevsky, 1998). however, these definitions do not take into account the ecological orientation of the marine economy, although this orientation should promote the development of partnership and good-neighbourliness with other countries since, unlike the state borders, if desired, the economy of the country can be separated, the ecological state of marine natural resources cannot be objectively limited by any boundaries, since a person cannot influence the laws of the functioning of nature as a single cyclically circulating system. it seems expedient to define the marine economic complex as a multi-purpose system of economic activity in the sphere of the use of marine natural resources, taking into account the rational and balanced development of the country’s economy and the preservation and restoration of the ecological state of the marine environment of the country itself and preventing the deterioration of the ecological state of the natural resources of the neighbouring countries. 3. “environmental” problems and directions of development of the marine economic complex the world approach at the moment is expressed in the fact that environmental safety is the priority of any activity. however, with the growth of human needs, the emergence of engineering, the extraction of minerals and the imbalance of nature management, the global environmental situation has recently deteriorated significantly. according to world analysts, the coastal objects of seaports cause the greatest harm to the region’s ecology – 77% – are industrial facilities that throw waste into the atmosphere and water resources (semina, 2006). intensive use of watercourses, surface and underground water bodies often leads to depletion of water resources. so, during irrigation about 50-75% of all water used is lost, industry and municipal services give 10-20% of irretrievable runoff. in order to maintain the condition of the water body in accordance with environmental requirements, the baltic journal of economic studies 65 vol. 4, no. 4, 2018 volume of the maximum permissible irrevocable water withdrawal is established and the requirements for environmental releases (discharge of water from the reservoirs) are established. the main criterion, at the same time, is the provision that in water bodies there should remain such a quantity of water that would ensure not only the ecological well-being of the water body but also the necessary conditions for water use. one of the priority directions of sustainable development of the black sea region of ukraine is cruise shipping since it has a huge effect on the development of the regional economy. ukraine has all the opportunities for the development of various types of marine tourism: cruise, yacht, beach, and others (golubkova, 2017, р. 205). the development of this sector will provide additional revenues to budgets of all levels, first of all, the local budget, creation of new jobs in the spheres involved in servicing cruise passengers, stimulation of the development of related industries, including shipbuilding and ship repair (golubkova, 2018). however, in recent years, the number of cruise ships entering the black sea has significantly decreased (table 1). table 1 analysis of ship calls of passenger liners to the port of odesa year quantity of ships 2013 106 2014 32 (applications – 159) 2015 13 2016 5 (applications – 36) 2017 1+12 (applications – 17) 2018 17 applications (forecast) source: (golubkova, 2018) the reasons for such a sharp decline were events in the east of ukraine, high port charges, unprofitable cruises in the black sea region, insufficient volumes of investment in modernization of the port cruise and tourist infrastructure and fleet. however, this area has opportunities for redirecting the economic activities of cruise operators in the development of domestic routes (sea, river, river-sea). however, the problem of pollution of the sea (coastal zone) from ships is topical. according to forecasts, the volume of international traffic will grow by an average of 4.5% per year, which, accordingly, entails the number of emergency events with tankers, and the risk of pollution of the marine environment by oil and oil products (gutsulyak, 2000). therefore, a comprehensive, systematic approach is required in the cooperation of states in the field of protection of the marine environment from pollution from ships and the study of such cooperation in interaction. according to the international maritime organization (imo) of the united nations, the ships of the world fleet annually transport 10 billion tons of ballast water, which carries 7-10 thousand species of viruses, bacteria, invertebrates, eggs and larvae of fish, other components of plankton that potentially become harmful in the ports of call. for example, it is proved that the cholera pandemic (1961–91), on the island of sulawesi, epidemics of cholera on the coast of peru are associated with shipping. in 1991–92 years in the usa, the causative agent of cholera in the water ballast of ships was found. when analysing the ballast water samples from ships arriving from china, india, japan, vietnam and north africa, causative agents of intestinal infections and helminth eggs were detected (korotkiy, 2002). in 2004, imo adopted the international convention on the control and management of ships’ ballast water and sediment (ballast water management convention, 2004). this issue is also regulated internationally by the united nations convention on the law of the sea (1982), the international convention for the prevention of pollution from ships (1973), the convention on the prevention of marine pollution from dumping of wastes and other matter (1972), the convention on intervention on the high seas in cases of oil pollution casualties (1969), the convention on civil liability for oil pollution damage (1969). cities in the coastal zone are often at the same time the centres of shipping companies, ocean fisheries (odesa), ports and resorts (mykolaiv), coordinate research and training activities for the marine economy, they accommodate sea transport, fishing industry (coastal and sea fishing), and resort economy. for example, in the city of odesa and the nearest suburban zone, which have unsurpassed resort potential, there are chemical facilities, an oil terminal for reloading and processing crude oil, a reloading cargo centre operates in the port in the centre of odesa, oil and gas exploration and production on the black shelf and the sea of azov. all this contributes to the development of economic potential, but the environment suffers from this. in modern conditions, the development of cities is accompanied by an increase in the volume and pace of construction, the complexity of the transport complex, the removal of industrial enterprises to the outskirts, the desire to smooth differences in the quality of the urban environment of new buildings and the centre, which implies the specialization of development projects. atmospheric air pollution is the most serious environmental problem of the modern city; it causes significant damage to the health of citizens, to the material and technical facilities located in the city (buildings, facilities, facilities, industrial and transport equipment, communications, industrial products, raw materials and semi-finished products) and green plantations. as a result of the work of industrial enterprises in the coastal zone of the sea, atmospheric air pollution baltic journal of economic studies 66 vol. 4, no. 4, 2018 is observed. excess of standards of air pollution in ukraine is observed in such cities as odesa, mykolaiv, chornomorsk, yuzhne. the main substances that determine the high level of pollution in odesa are: formaldehyde, benzo(a)pyrene, phenol, carbon fluoride, nitrogen dioxide, dust (lysenko, 2017). therefore, guidelines for integrated coastal zone management, in conjunction with the directive of the european parliament and commission 2014/89/eu of july 23, 2014, approving the standards of marine spatial planning, which define the principles of rational coastal and marine planning and management, become especially topical. the purpose of such legal regulation is to promote the rational and sustainable use of seas and coastal resources, balance the socio-economic and environmental interests, as well as improve the quality of decisions. “the maritime policy and territorial structure of the eu are very closely related, and this can be seen in the fact that marine politicians are beginning to shift into the sphere of state internal affairs, which requires a rethinking of how power is distributed among territorial bodies that have the legal authority to be involved in the formation of these policies and some tools such as marine spatial planning” ( j. l. suárez de vivero, j. r . mateos and d. f. corral, 2009). a clear implementation of the eu urban wastewater treatment directive, the agricultural nitrate directive, the directive on the creation of a basis for the planning of maritime areas, etc. it should be noted that the implementation of the association agreement with the eu, in particular, the directive no. 2011/92 on impact assessment of certain public and private projects on the environment, as well as the relevant provisions of directive no. 2003/4 on public access to environmental information, the convention on environmental impact assessment and the convention on access to information, public participation in decisionmaking and access to justice in environmental matters (aarhus convention), ukraine adopted the law “on environmental impact assessment” on may 23, 2017. unfortunately, at present, the obligation to conduct an environmental impact assessment of the project has not yet been adequately implemented. according to the ministry of ecology and natural resources of ukraine, as of march 2018, there are 200 procedures initiated, and by the end of the year, it is expected that this amount will reach 1,000. but compared to our neighbours, in poland, there were approximately 1500 applications for this procedure in 2017 (ukrinform.ua, 2018). at the same time, the lack of this law is that economic activity, which is already underway, does not require an environmental impact assessment, which may harm it. the most painful environmental factors affect the economy in case of catastrophes. on the territory of ukraine, an environmental disaster was the event in the kerch strait of the black sea, when due to a storm on november 10-11, 2007, 15 vessels were damaged in the strait. catastrophic for the ecology of the sea and coastal area was the pouring into the sea of about 1.2 thousand tons of fuel oil from the russian tanker “volgoneft-139”, which broke in half (medvjedjeva and andrusevych, 2015). in addition, because of the storm, vilnohirsk, khach-izmail, nakhchivan, and kovel, which transported about 2,000 tons of sulphur, also sank. during several days following the accident, there was a massive loss of birds and fish in the kerch strait. already five days after the shipwreck, the azovblack sea territorial department of the federal agency for fisheries of the russian federation estimated the total ecological damage in more than 10 billion us dollars. however, the amount of insurance of the owner of “volgoneft-139” to the third parties was $5 million, which is clearly not enough to compensate (medvjedjeva and andrusevych, 2015). the settlement of the ecological catastrophe and the search for a compromise are still going on. 4. conclusions and suggestions in the economic and environmental assessment, it is necessary to distinguish two aspects related primarily to the intensity of economic activity of the objects of the marine complex, as well as to its direct and indirect influence on the coastal zone and marine areas (lysenko, 2017). the main task of researchers in this field is the formation of a balanced interaction of the environment with the economy through the introduction of environmentally friendly technologies in production. the essence of ecologization is the preservation of the balance of production, the introduction of innovative technologies, the restructuring of the production and consumption, the rationalization of nature management, processing and utilization of waste, implemented at macro and microeconomic levels (melnik, 2001). to fulfil this task, it is necessary to develop and take into account the following environmental and economic aspects: 1. study of the impact of the economic project, plan or program of the marine complex on the ecological situation in the region, starting with the development and construction (implementation) phase. when studying the correlation of economic and ecological expediency of using one or another component of the ecosystem, the main result should be the allocation of the greatest economic effect with minimal environmental losses. 2. ensuring standards. the project documentation should include a comprehensive assessment of the envisaged technical solutions for the rational use of natural resources and measures to prevent the negative impact of construction (including the processes of production, installation, commissioning, operation, storage, transportation, sale, baltic journal of economic studies 67 vol. 4, no. 4, 2018 and disposal) and operation of the marine complex facility on the environment sanitary-epidemiological, ecological requirements, fire, industrial, nuclear, radiation and continued safety). it is also important to strengthen the responsibility of bodies and persons carrying out expert environmental activities. 3. tightening control over the extraction of natural resources, the impact of construction and operation of the facility on the environment. it is necessary to understand that the resources of the planet are not unlimited, so it is necessary to seek an economic and ecological balance – both for the extraction and processing of useful resources in order to save them. the economic activity of a person in any territory should be based on the use of local renewable natural resources, but not exceed their ability to regenerate. 4. development of environmental sections for the feasibility study of urban development projects in the coastal zone. “involving terrestrial designers and decision support methods that they use offers special advantages ... marine spatial planning should be applied across the jurisdiction of individual countries but with varying degrees of detail” (p.m. gilliland and d. laffoley, 2008). when planning the construction of facilities within the city in the coastal zone, the following priorities should be observed: strict adherence to the technological sequence of construction; reduction of construction time; complex use of the underground space of the city. when planning the construction of environmentally hazardous enterprises and organizations in the coastal zone, the following priorities should be observed: maximum reform and (or) elimination of environmentally hazardous enterprises and organizations; the maximum delivery of these facilities beyond the city limits, taking into account the opportunities for people’s work and economic activities. summarizing the above, it should be noted that for the development of the state’s marine complex, it is necessary, first of all, to assess the impact of the development of this sector of the economy on the environment in the region and then develop that direction of the economy that is the least harmful to the environment in the region and only in view of this can bring large economic benefits. references: akimova, t. a., khaskin, v. v. (2001). ekologiya. chelovek – ekonomika – biota – sreda [ecology. human – economy – biota – environment] moskva: yuniti-dana. (in russian) syromyatnikova, o. p. (2011). sovershenstvovanie mekhanizma regionalnogo upravleniya lokalnymi ekologoekonomicheskimi sistemami [development of the mechanism of regional managem ent of local ecological and economic systems]. ekonomika i ekologicheskiy menedzhment, 2, 244-253. malyshev, a. a., solodkov, n. n. (2014). faktory, vliyayushchie na ustoychivost ekologo-ekonomicheskoy sistemy [factors affecting the sustainability of the ecological and economic system] niva povolzhya, 30, 129-135. kibik, o. m., podtserkovnyi, o. p., drapailo, yu. z., kotlubai, v. o. (2014). derzhavna pidtrymka rozvytku moreghospodarsjkogho kompleksu ukrajiny (orghanizacijni ta pravovi aspekty) [state support for the development of the marine-economic complex of ukraine (organizational and legal aspects)] kherson: fop ghrinj d. s. (in ukrainian) kovalevsjkyj, v. v., mykhajljuk, o. l., semenov, v. f. (1998). rozmishhennja produktyvnykh syl [placement of productive forces)] kyjiv: tovarystvo «znannja»; koo. (in ukrainian) semina, n. v. (2006). ekologo-ekonomicheskie aspekty sistemy menedzhmenta okruzhayushchey sredy gosudarstvennogo predpriyatiya «morskoy torgovyy port yuzhnyy» [environmental and economic aspects of the environmental management system of the state enterprise "sea commercial port yuzhny "]. proceedings of the razvitie predpriyatiy morekhozyaystvennogo i neftegazovogo kompleksov: v mezhdunarodnaya nauchno-prakticheskaya konferentsiya (ukrainе, odessa-yuzhnyy, 2006), odessa-yuzhnyy: druk, pp. 44-47. gholubkova, i. a. (2017). osnovni tendenciji funkcionuvannja morsjkogho turyzmu v ukrajini [the main tendencies of the functioning of the nautucal tourism in ukraine]. proceedings of the morsjke pravo ta menedzhment: evoljucija ta suchasni vyklyky: xi mizhnarodna naukovo-praktychna konferencija nu «oma» ukrainе, odessa, april 6-7, 2017) (eds. mijusov m. v., gholikov v. a., shemjakin o. m. etc.), odessa: nu «oma», pp. 204-207. gholubkova, i. a. (2018). suchasnyj stan reghionaljnogho krujiznogho sudnoplavstva [the current state of regional cruise shipping]. proceedings of the morsjke pravo ta menedzhment: evoljucija ta suchasni vyklyky: xiі mizhnarodna naukovo-praktychna konferencija nu «oma» ukrainе, odessa, march 29-30, 2018) (eds. mijusov m. v., gholikov v. a., shemjakin o. m. etc.), odessa: nu «oma», pp. 126-129. gutsulyak, v. n. (2000). morskoe pravo [maritime law] moskva: roskonsult. (in russian) korotkiy, t. r . (2002). mezhdunarodno-pravovaya okhrana morskoy sredy ot zagryazneniya s sudov [international legal protection of the marine environment from ships pollution] odessa : latstar. (in russian) lysenko, n. s. (2017). ekonomiko-ekonologicheskie aspekty razvitiya morekhozyaystvennogo kompleksa [economic and ecologic aspects of the development of the marine economic complex]. proceedings of the morsjke pravo ta menedzhment: evoljucija ta suchasni vyklyky: xi mizhnarodna naukovo-praktychna konferencija nu «oma» ukrainе, odessa, april 6-7, 2017) (eds. mijusov, m. v., gholikov, v. a., shemjakin, o. m. etc.), odessa: nu «oma», pp. 215-219. baltic journal of economic studies 68 vol. 4, no. 4, 2018 juan l. suárez de vivero, juan c. rodrıguez mateos, david florido del corral (2009). geopolitical factors of maritime policies and marine spatial planning: state, regions, and geographical planning scope. marine policy, 33, 624-634. ukrinform.ua (2018). dva misjaci novomu zakonu ukrajiny «pro ocinku vplyvu na dovkillja». shho zminylosja pislja skasuvannja ekologhichnoji ekspertyzy? [two months of the new law of ukraine "on the assessment of the environmental impact". what has changed since the environmental expertise was abolished?] (unpublished). retrieved from: https://www.ukrinform.ua/rubric-presshall/2419890-zakon-ukraini-pro-ocinku-vplivu-nadovkilla-so-zminilosa-pisla-skasuvanna-ekologicnoi-ekspertizi.html (accessed 10 august 2018) medvjedjeva, m. o., andrusevych, a. о. (2015). osoblyvosti stvorennja i zastosuvannja mizhnarodno-pravovykh zvychajevykh ta doghovirnykh norm u ghaluzi okhorony navkolyshnjogho seredovyshha [the specialties of the creation and application of international legal customary and treaty rules in the field of environmental protection]. the herald of the kyiv, no. 6, pp. 66-69. melnik, l. g. (2001). ekologicheskaya ekonomika [ecological economy] sumy: «universitetskaya kniga». (in russian) paul m. gilliland, dan laffoley (2008). key elements and steps in the process of developing ecosystem-based marine spatial planning. marine policy, 32, 787-796. baltic journal of economic studies 18 vol. 4, no. 5, 2018 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: svieta_berezina@ukr.net orcid: http://orcid.org/0000-0002-9737-0651 doi: https://doi.org/10.30525/2256-0742/2018-4-5-18-25 methodological bases of classification of social risks svitlana berezina1 abstract. the purpose of the study is to develop methodological principles of classification of social risks in the context of requirements of social risk management. the risk is considered as possible occurrence of a risk of a negative state of a particular phenomenon or event, undesirable by the object. social risks are proposed to be all risks arising in the social sphere. when analysing the existing solutions to the problem, classifying social risks according to the requirements of social risk management, the paper uses the following research methods: system approach, analysis and synthesis. the research subject – social risks in the light of their classification by certain characteristic features from the perspective of requirements of social risk management. analysis of the application of hierarchical and facet methods for the classification of social risks is carried out. the use of a combined approach, i.e. when at some levels of classification risks are classified by using the hierarchical method, and at others – by facet one, is proposed. the necessity and sufficiency of 6 levels of risk division are shown. the 1st level of classification is directed to the division of a set of risks by nature and character of occurrence into macrolevel categories, accordingly, into natural, technogenic, economic, and social. the 2nd level is classified by factors of risk formation. these are risks of social policy, risks of stochastic nature of the formation, physiological risks, and behavioural risks. the 3rd level of classification – risks that are combined in the following forms by the sphere of activity: risks of reproduction of the population, employment of population, income and expenditure of population, living conditions and housing and utilities, education, healthcare, law enforcement, environment, risks of deteriorating social indicators when compared with other countries in the world. the 4th level of classification – by risk types, and the 5th – by levels of the hierarchy of public activity. the 1st, 2nd, and 4th levels are classified by the hierarchical method, 3rd and 5th – by facet method. the 6th level is facet with the horizontal distribution of risks into facets by different features. conclusion. it is substantiated that obtained results arise from the provisions of economic theory and are in agreement with the acting organisational structure of societal life, which will contribute to creating better conditions for managing social risks. social risk management begins from the definition of type and nature of risk, place and level of its formation, presentation of its determined characteristics. here a need arises to divide a set of risks based on the defined signs and criteria into separate subsets. that is, a need arises to classify risks into more concrete groups with similar features. accordingly, risk classification is important and necessary stage of social risk management. in practice, risk classification is carried out, as a rule, by using facet method when each facet includes an aggregate of risks with homogeneous values of this classification feature. facet classification is single-level, that is, it does not stipulate for further division of risks into more detailed groups, however, the need for vertical hierarchical multilevel specification arises. the analysis shows that multilevel combined classification system when hierarchical method alternates with facet one satisfies the requirements of social risk management. key words: social risks, social risk management, methods of classification, social risk classification by sphere of activity, classification by levels of hierarchy of society. jel classification: j11, j18, g17 1. introduction in the process of activity, people face a number of various risks. studying theoretical issues related to the management of risks, including social ones, is a relevant scientific and practical task. along with this, in addition to the definition of nature, main characteristics and functions of risks, risk classification and analysis of the causes of their formation are of great importance. the research object is social risks in the light of their classification by certain characteristic features from the baltic journal of economic studies 19 vol. 4, no. 5, 2018 perspective of requirements of social risk management. the purpose of the study – to develop methodological principles of classification of social risks in the context of requirements of social risk management. the following research methods are used in the paper: system approach (for building the author’s approach to the classification of risks as a system of interrelated elements), analysis and synthesis (when analysing the existing solutions to the problem, classifying social risks according to the requirements of social risk management). studies on the issue of social risks have been taking place for several centuries. their appearance is associated with various factors: aggravation of capitalist competition and the spread of gambling, in particular, stock market games etc. however, these studies were able to obtain real scientific foundation only after philosophical works by g.w.f. hegel (1770-1831) and sociology created by a. comte (1798-1857) and e. durkheim (1858-1917). they have developed a special view of society as an emergent system, i.e. a structure that has its own characteristic features different from features of subjects of society. a lot of works of foreign scholars are devoted to this research area: j. galbraith, r . holzmann, a. giddens, m. douglas, a. mozgovaya, n. luhmann, b. norman, o. renn, p. slovic, o. yanitskii, and others. they reveal the concept of risks and classify them according to various features and types, consider the issue of sources of “social risk” as a special variety. in ukraine, there are also many works devoted to the research topic, among which, first of all, we should note works of members of ptoukha institute for demography and social studies of the nas of ukraine conducted under the guidance of academician e. m. libanova (libanova, 2014, 2015; nadraga, 2015). these works formulated the most weighed definition of social risks as threats that emerge and are manifested within the social sphere of society, have negative social consequences, influence the vital activity of individuals, social groups, and society as a whole. there are also presented some approaches to the classification of risks. among the developments of other scholars, one should distinguish works by (libanova, gorbulin, 2015; vlasyuk, 2015; donets, 2014; shopenko, 2011) and many others. they study both general scientific topics and applied issues of risk classification. other works are of general-theoretical direction, for example, the paper by (beck, 2010) where the author proposes to consider all the sociology and economy through the lens of riskiness, or the work by (topyshko, 2017) that offers to withdraw from strict mathematical methods and assess risks on the basis of the so-called theory of fuzzy sets, and so on. now, studies are taking place by using methodological tools of such disciplines as: system theory; probability theory; mathematical theory of games; social theory; economic theory; prognostics; riskology, etc. many educational publications are devoted to separate issues of determining the essence and directions of classification of social risks. as a rule, simplified types of risk classification by some characteristic features are used there. in general, it can be stated that although a lot of publications and research studies are devoted to the problem of risk classification, such its aspects as a justification of approaches to the classification of social risks according to the requirements of social risk management remain relevant and extremely important for further research. 2. essence and problems of classification of social risks risk as a complex phenomenon has many characteristics. more often it is defined as the danger of loss of resources or lack of income compared with the option designed for the rational use of resources. the risk is also defined as a conscious possibility of the risk of unexpected losses of expected profits, property, money in relation to accidental changes in the conditions of economic activity, adverse circumstances (libanova, gorbulin, 2015). the complexity and diversity predetermine the possibility of existing of several definitions of risk concept from different points of view depending on the research goals. nevertheless, risks have their own features (all of them presuppose the danger of loss, come in the form of natural phenomena or events in society, etc.), which gives the author the possibility to give their unambiguous general definition in the form: risks – phenomena or events, the probable or foreseen occurrence of which will lead or may lead to negative consequences. such a definition is most general and to a great degree corresponds to the concept of risk management, which will contribute to more effective management of risks. the most widespread category of risks is social risks that affect the level and quality of life of the population. their concept can be formulated in the following form: social risks are risks that appear in the social sphere of society. or a more complete definition – social risks are phenomena or events that appear in the social sphere of society and the probable or foreseen occurrence of which will lead or may lead to negative consequences. in the majority of works, the following essential features of social risks are distinguished: differentiation (social risks are assumed by the individual, separate segments of the population or society as a whole); the probability of occurrence; the inevitability of losses (social risks initiate problems that cannot be completely excluded, solved but only minimised, managed with one or another degree of effectiveness); social responsibility of all social and professional groups of society (social risk management is successful only along with effective partnership, interested cooperation of all the participants of this process). baltic journal of economic studies 20 vol. 4, no. 5, 2018 according to the results of conducted analysis on nature of occurrence and manifestation, the following characteristic features of social risks also can be added: a) social risks arise in the social sphere. natural, technological, and economic risks generally affect the state (budget) and particularly individuals as the loss of property, health etc.; b) formation and level of influence of social risks to a great extent depend on the acting system of social policy and manner of implementation of its main categories; c) social risks have risk objects and subjects; d) risks of social policy for risk object may be both negative and positive (almost all researchers, as a rule, consider negative results of risks only); e) risks of social policy and behavioural risks provide for several options for making a decision; f ) in case of failure of risk option realisation, risk object suffers additional losses. there are a lot of approaches to the classification of risks differed both by classification features and by aims and objectives of the study. so, for example, by the area of formation (natural, technogenic, economic, and general civil), by the scale of action (universal and special), from the perspective of risk object (by its manifestation for separate population groups), depending on the probability of occurrence and cyclical nature of human life (planned, predicted, unexpected). in addition to such a classification, there are many other its types, which are systematised in table 1. such a division is acceptable only for preliminary analysis. in the event of the necessity of in-depth analysis, its disadvantages are: chaotic determination of classification features in the absence of a unified approach; different notions of the term of social risks when it means not all risks arising in the social sphere but only those covered by social protection; most of the classifications are designed to divide economic risks by reference to the general category “socio-economic risks” that do not always correspond to the requirements and essence of social risks; existing classifications do not correspond to the requirements of social risk management in terms of dividing risks into similar groups in order to determine management methods. accordingly, for a more detailed, essential analysis and development of measures of management of risk management tools, it is appropriate to investigate approaches to the classification from the perspective of economic theory, which considers classification as a system of distribution of objects (goods, phenomena, processes, concepts) into classes according to certain feature and research objective. 3. methodological approaches to the classification of social risks hierarchical, facet, and descriptive methods of object classification are distinguished in economic theory. the hierarchical classification system is built as follows: the initial set of elements is the 0 level and is divided according to the selected classification feature into classes (groups) that form the 1st level; each class of level 1 in accordance with its characteristic classification features is divided into subclasses that form the 2nd level and so on. table 1 classification of social risks by various features classification feature division of risks into classification groups by nature of causes intentional, unintentional by the time of formation retrospective, current, perspective by factors of formation political, economic by place of formation external, internal by consequences pure, speculative by area of formation (nature of activity) business risks: production, commercial, financial, insurance risks; and also occupational, investment, transport and other risks by hazard type technogenic, natural, and mixed by level of formation macro, meso, and micro level by degree of definiteness known, foreseeable, unforeseeable by stages of formation project, planned, actual by degree of reasonableness reasonable, unreasonable be degree of potential losses tolerable, critical, catastrophic by the scale of consequences global, regional, local depending on the form of impact on society direct, indirect depending on the probability of occurrence and cyclical nature of human life planned, predicted, unexpected by possibility of prediction foreseeable, unforeseeable by duration short-term, long-term source: systematised by the author baltic journal of economic studies 21 vol. 4, no. 5, 2018 the facet classification system allows selecting classification features independently as from each other, so from the semantic content of the classified object. classification features are called facets. each facet includes a set of homogeneous values of this classification feature. the classification procedure consists in assigning to each object the corresponding values from the facets. in this case, not all facets can be used, but only some that are characteristic of this feature. the descriptive classification system is designed for the organisation of information search, maintenance of thesauruses (vocabularies). it is especially widely used in the library search system. the essence of this classification method is as follows: a set of key words or phrases describing a particular subject area or a set of homogeneous objects is selected. and among the keywords can be synonyms; the selected keywords and phrases undergo normalisation, that is, from the set of synonyms one or several most used ones are selected; a dictionary of descriptors is created, that is, a dictionary of key words and phrases selected as a result of the normalisation procedure. the existing classifications of social risks are usually limited to the facet method. in this case, the classification is carried out on the basis of only individual, arbitrarily selected and clearly visible properties of objects. hierarchical classification is based on the division of risks into individual characteristic risk groups, followed by their division into types with more detailed features, i.e. groups combine specific types of risks by the essential feature of this group. unlike the facet, it is based on the full understanding of the essence of the objects being classified, and is not just identifying, but identifying-explanatory. it explains the common characteristics of the classification groups and the nature of the relationship between them. the detailing can be multilevel, in the form of a “tree of signs”, which are united into a single system. fig. 1 shows the classification scheme by hierarchical and facet methods. as an example, there is shown the division of the set of risks into subclasses based on the category into natural and others (it can be technogenic, economic, etc.). further, the natural risks are divided into smaller groups by their feature (for example, by the factor of occurrence), and so on. the same set of risks can be classified by a facet method into two or more types, for example, by scale of consequences into global, regional, and local. or the same set can be divided by another sign. depending on the purpose of the classification, the researcher or the manager chooses the appropriate method. 4. social risk classification according to requirements of social risk management the main requirement of social risk management in relation to the classification of social risks is their detailing to a level that would provide the possibility of its unambiguous definition for the analysis and selection of the model of risk management. the general scheme of the proposed combined classification of social risks is shown in figure 2. 5. social risk classification by categories of the formation although all types of risks are diverse, by a set of features they can be grouped into macro categories. the categories should be understood as grouping at the macro level of risks by essence, factors, nature of the occurrence, etc. in literary sources, the following categories of risks are usually distinguished: natural, technogenic, domestic, socio-political, technical, economic, climatic, environmental, political, socioeconomic, etc. almost all lists include the category of natural risks associated with natural phenomena. sometimes the climatic risks are isolated, although they are also natural, and therefore it is not meaningful at the macro level to allocate climatic phenomena as a separate category. technogenic and technical risks have uniform factors of the formation. in addition, they are prevented by similar methods. accordingly, it is advisable to combine them into one category – technological risks. socio-political, hierarchical system facet system risks by categories natural by scale .... .... global .... figure 1. scheme of risk classification by hierarchical and facet methods baltic journal of economic studies 22 vol. 4, no. 5, 2018 domestic, and socio-economic types of risks cover the risks arising in the social sphere of life of society and in the production of goods and services. they are distinguished both by the sphere and the causes and factors of origin, and the feasibility of their independent research is not in doubt. that is, in the list, there should be separate categories – economic risks and social ones. political risks are the risks generated by the socio-economic policy. it is quite clearly divided into economic and social policies. accordingly, the risks of socio-economic policy should be divided into economic and social ones and added to the categories of economic and social risks respectively, the more so they differ in methods of prevention or minimization. the analysis conducted shows that all risks by nature, causes, character, and factors of their occurrence should be divided into natural, technological, economic, and social. 6. social risk classification by factors of the formation the analysis shows that on the basis of the probability of occurrence, sources of origin, and nature of the action, social risks should be classified into the following groups: social policy risks, risks of probability type, physiological risks, and behavioural risks. the classification of risks by categories, factors of formation, and types of risks is given in table 2. risks of social policy are related to risk decisions of subjects of social policy. these are risks arising in the sphere of ser vices (education, culture, healthcare, public utilities, transport and communication, etc.), demographic and social risks (many children, single-parent family, orphanhood), environmental risks, etc. classification levels 1. classification by categories 2. by factors 3. by risk types risks natural technogenic economic social political probability physiological behavioural sphere of reproduction of the population labou r sphere sphere of income and expenditure of the population state region .... on a territorial basis by the possibility of prediction normal conditions extreme ..... birth rate decline relative aging of the population .... employment unemployment .... sphere of trade, transport and communication services …. foreseeable unforeseeable figure 2. scheme of combined classification of social risks source: developed by the author baltic journal of economic studies 23 vol. 4, no. 5, 2018 security policy risks – risks that occur accidentally in the social sphere as a result of non-compliance with labour protection requirements or violations of established safety rules (labour injury, temporary or permanent disability, occupational disease, etc.). physiological risks are risks, the causes of which are physiological reactions or properties of an organism of a particular person (birth, pregnancy and childbirth, old age, death). behavioural risks – risks, the causes of which are decisions and actions of specific people acting as independent persons. they can be both motivated and non-motivated decisions of individuals or groups of individuals. these include alcoholism, drug addiction, corruption, crime, mass protests, etc. the presented division of risks meets the requirements of risk management in terms of determining the methods of risk management that can largely reduce their consequences. 7. classification of social risks by types this level is classified by the hierarchical method. it provides for the division of each group of risks, which is determined by factors of formation, into separate risks included in this group. so, for example, in the group of physiological risks, there are risks of old age, death, etc. the logic of interaction and interrelation of the main categories of social policy shows that the basis for defining the spheres of social risk formation should be the signs of the corresponding spheres of social activity, that is, the part of an economic activity that serves the specific social needs of society. list of spheres of activities is widely used in modern economics. it is, for example, the classification of economic activities (kved 2010), chapters of statistical reporting (annuals of state statistics service of ukraine) and so on. for conditions of social risk management, it is appropriate to take the division of the social part of annuals of state statistics service of ukraine (for example, ukraine in figures 2017) into chapters called “population”, “employment”, “income and expenses of the population” etc. as the basis of such list of spheres. clarifying a little the name and highlighting separately the sphere “social assistance”, social risks in the context of risk management should be divided into the following spheres of social activity: 1) sphere of reproduction of the population; 2) labour sphere; 3) sphere of income and expenditure of the population; 4) sphere of trade, transport and communication services; 5) sphere of housing conditions and utilities; 6) education sphere; 7) sphere of healthcare; 8) sphere of law enforcement; 9) sphere of ecology; 10) sphere of the universe (comparison with countries of the world). somewhat unusual in this classification is the allocation of the sphere of the universe. however, in conditions of growing globalization of the world, it is extremely necessary to compare the indicators of the state and dynamics of our state with the indicators of other countries. such a comparison not only gives an idea of the current state of society but also directs development to use the experience of other countries. this level of classification is facet. social risks arise and are implemented at different levels of social activity: state, regional, local, etc. all levels of social activity and, accordingly, risks appearing on them, are in continuous interaction, are interdependent, and make up a single system. nationwide social policy is implemented at the macro level and provides for the choice of social priorities, directions of the government and other subjects of social activity, targeted promotion of certain spheres, implementation of social and environmental programs, etc. at the regional level, there is a social activity, which is an integral part of the policy of socio-economic development of the state. here are solved regional problems related to the development of table 2 types of risks by categories and factors of the formation category of risks causes of risks types of risks natural risks natural and climatic phenomena earthquakes; cyclones; hurricanes; floods; tornadoes; landslides; climate change; volcanic eruptions; soil erosion; drought; fire, epidemics, etc. technogenic risks accidents, service deficiencies, errors transport accidents and catastrophes; accidents at npps and tpps; accidents at chemical combines; accidents in gas and water supply systems; technogenic pollution of the environment; design errors; errors in the manufacture of objects; false actions of the personnel; poor service; low-quality repair; physical wear of equipment, etc. economic risks subjects of economic policy production risks; transport risks; commercial risks; trading risks; financial risks; risks of inflation and deflation; currency risks; investment risks; liquidity risks; business risks, etc. social risks social policy of society risks of population reproduction; unemployment risks; risks in the field of social services, etc. security policy temporary or permanent loss of labour capacity; labour injury; loss of a breadwinner, etc. physiological phenomena age; birth; death; disability, etc. the behaviour of an individual, group of persons behavioural risks of individuals, groups, associations of persons; alcoholism; narcotic addiction; corruption; theft; street crime; poverty; mass protests, etc. source: developed by the author baltic journal of economic studies 24 vol. 4, no. 5, 2018 the society in the region. it is obvious that making risky decisions both at the state and regional levels requires not only prior attention but also the preparation of measures to prevent the occurrence of negative situations. local self-government bodies are now dealing with a significant part of the issues of education, healthcare, culture, housing and communal services, consumer services, etc. it includes support for the livelihoods of the weak members of society – the disabled, the elderly, single, displaced persons, etc. naturally, there may be risks at this level too, so anti-risk measures to overcome their consequences should be foreseen. as a rule, researchers and practitioners in their works are limited with three hierarchical levels of occurrence and formation of social risks: state, regional, and municipal (local). however, it should be noted that in addition to the listed ones, risks also occur at the level of corporations, various associations (it seems fair to say, at the level of different groups), at the level of particular individuals. besides interstate levels of occurrence of social risks, in recent years, the external (world) level, where an intergovernmental social policy is formed and where appropriate risks arise, becomes more and more important. that is, the three-level system of hierarchy of occurrence of social risks has turned into a multilevel system. in this case, the list of hierarchical levels of social risks’ formation should include: 1. state level. 2. regional. 3. municipal. 4. group. 5. individual. 6. global risks (interstate). in addition to 5 considered levels of classification, the need to divide risks according to other features may arise in practice. for example, the researcher or manager needs to identify risks by place or time of occurrence. in such a case, the 6th level of classification can be used where necessary features can be added in facet form. so, figure 2 shows additional types of classification on a territorial basis and on the possibility of predicting the occurrence of risks. territorial risks constitute a special group. they concern the population living and working in usual or extreme, unfavourable natural and climatic conditions (northern territories, mountainous, arid areas etc.). their activity is carried out taking into account features of territorial risks. this relates to the age of retirement, labour experience, insurance premiums, and the like. according to the possibility of prediction, there are two groups of factors of social risk: foreseeable (actions that can be expected, evaluated, they are sufficiently studied by science, are subject to management) and unforeseeable (it is not possible to mark them on an a priori stage of a risk analysis, some may arise for the first time; this group of risks is most difficult to manage). risks of the first group can be felt, predicted, and marked for the future by studying, analysing the current situation, historical factors, as well as other indicators that may be involved in the field of social activity. unforeseen risks are not comparable. it is impossible to determine the time and probability of their active development and occurrence based on historical and other analyses. subjective and object risks are also distinguished. subjective risks are the risks that arise in the decisionmaking process by the subjects of power. object risks arise as a result of decision-making by risk objects (for example, an individual’s decision to play casinos, etc.). by the way, in the scientific literature, one can find classification of the segregation of residents by income, which expresses the probability of occurrence of risks of a certain level (giddens): beggarly – 10.7%; poor – 13.7%; proto-middle – 46.7%; middle – 20%; wealthy – 9%. although classifications of the 6th level characterise risks only from separate perspectives, along with previous types of risk division they make good sense for a more complete identification of risks. in conclusion, it can be argued that the proposed approaches to the classification of social risks more completely reflect the essence of this complex concept and will contribute to a better use of risk management methods in the process of social risk management. 8. conclusions 1. social risk management begins from the definition of type and nature of risk, place and level of its formation, presentation of its determined characteristics. here a need arises to divide a set of risks based on the defined signs and criteria into separate subsets. that is, a need arises to classify risks into more concrete groups with similar features. accordingly, risk classification is important and necessary stage of social risk management. 2. in practice, risk classification is carried out, as a rule, by using facet method when each facet includes an aggregate of risks with homogeneous values of this classification feature. the classification procedure consists in assigning to each risk the corresponding values from the facets. facet classification is single-level, i.e., it does not stipulate for further division of risks into more detailed groups. however, in the process of social risks management, the need for risk division into separate groups arises followed by their division into groups with more detailed features. that is, the need for vertical hierarchical multilevel specification arises. the analysis shows that multilevel combined classification system when hierarchical method alternates with facet one satisfies the requirements of social risk management. 3. study of the structure of social risk classification system showed the necessity and sufficiency of 6 levels of risk division. the 1st level of classification is directed to the division of a set of risks by nature and character of occurrence into macrolevel categories, accordingly, into natural, technogenic, economic, and social. the 2nd level is classified by factors of risk formation. the 3rd – by spheres of activity, the 4th – by risk types, and the 5th – baltic journal of economic studies 25 vol. 4, no. 5, 2018 by the levels of the hierarchy of society. the 1st, 2nd, and 4th levels are classified by the hierarchical method, 3rd and 5th – by facet method. the 6th level is facet with the horizontal distribution of risks into facets by different features. the latter are determined by researchers or managers depending on the objectives to be achieved. 4. the expediency of social risk classification by spheres and hierarchical levels of social activity is explained by the need to have risk characterisation from this perspective. classification by spheres of activity indicates not only the place of risk formation but also the subject of responsibility, the state authority in the sphere of which there is a danger. information on the level of the hierarchical structure of public life gives the specialists of risk management an insight into choosing a model to prevent its impact on the course of social activity. references: antonova, n. 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(2009). introduction to the system theory. niklas luhmann; ed. dirk becker. logos. libanova, e. m. (2015). human development in ukraine. modernization of social policy: regional aspect (collective monograph). national academy of sciences of ukraine. mozgovaya, a. (2001). sociology of risk: possibilities of synthesis of theory and empirical knowledge. risk in the social space. publishing house of the institute of sociology, russian academy of sciences. nadraga, v. (2015). social risks: essence, analysis, possibilities of influence. monographs. national academy of sciences of ukraine. novikova, o. (2016). assessment of social risks in the regions of ukraine as the basis for making management decisions on their overcoming. retrieved from: http://old.niss.gov.ua norman, b., brierley, p., gibbard, p., mason, a., meldrum, a. (2009). risk-based methodology for payment systems oversight. financial stability paper, no. 6, august, bank of england. libanova, e., gorbulin, v., pirozhkov, s. (2015). policy of integration of ukrainian society in the context of the challenges and threats of events in the donbass (national report). nas of ukraine. renn, o. (1992). the social arena concept of risk debates. s. krimsky and d. golding (eds.): social theories of risk. westport, ct (praeger). shopenko, a. (2011). social risks of a transitive society. abstract of thesis on the application doctors of sociological sciences. st. petersburg state university of engineering and economics. social risk: types and features. retrieved from: https://businessman.ru/socialnyj-risk-vidy-i-osobennosti.html social risks: concept and classification. retrieved from: http://mestiere.ru/02/25/socaln-riziki-ponyattya-ta-klasifkacya/ social risks. retrieved from: http://www.risk24.ru/sozialriski.htm slovic, p. (2000). the perception of risk. london: earthscan publications. social risk groups. retrieved from: http://za-strahovanie.ru/socialnoe-strahovanie/gruppy-socialnyh-riskov.html topyshko, n. (2017). social risks and the problem of assessing the level of social protection of the population on the basis of the theory of fuzzy sets. ostrog academy. yanitsky, o. (1998). russia: risks and dangers of a “transitional” society: collection of articles. publishing house of the institute of sociology, russian academy of sciences. vlasyuk, o. (2015). through decentralization: challenges, risks and priorities for reforming regional development in ukraine. regional economy, 1, 5-18. baltic journal of economic studies 6 vol. 4, no. 4, 2018 doi: https://doi.org/10.30525/2256-0742/2018-4-4-6-13 «green» infrastructure of the economy of recreational nature use natalya andryeyeva1, sergey nezdoyminov2, olena martynіuk3 abstract. the purpose of the article is to identify environmental risks and economic problems of the formation of the national ecological network and development directions of “green” tourism in the recreational and protected areas in the context of the transition to sustainable development. methodology. the abstract-logical method (in the process of theoretical generalizations and the formation of conclusions); methods of statistical, structural, and factor analysis (in the process of studying the structure and dynamics of the development of ecological networks); empirical research methods (comparison) are used. in preparing the article, the authors analysed the works of scientists, which reflect approaches to the definition of the role of ecological networks, the natural potential of recreational areas in the transition to sustainable development. changes in nature are evaluated through indicators of the dynamics of areas of the nature reserve fund, which form the national ecological network. results. according to the results of the study, it is determined that the area of ukrainian land belonging to the components of the national ecological network increased by 201.3 thousand hectares in comparison with 2000, but since 2014 this area has decreased by 0.6 thousand hectares. the area of forests and forest cover area increased by 2.8 thousand hectares, and the area of grassland and pasture fell by 7.8 thousand hectares. there is a tendency to increase the area of arable land, since 2014 it has increased by 15.8 thousand hectares and is 32541.3 thousand hectares. compared to 2014, the area of land under open development, quarries, mines, and related structures (157.1 thousand hectares) has increased by 0.8 thousand hectares and the land area used for transport and communication (496.8 thousand hectares) has increased (by 0.1 thousand hectares). in 2016, 32.5 billion uah were spent on the protection of the environment by enterprises, organizations, and institutions of ukraine, and in 2015 – 24.6 billion uah respectively. practical implications. the necessity of elaboration of regional measures to develop “green infrastructure” of ecosystem services is determined. in the regions of ukraine, it is necessary to develop balanced approaches to the use of the potential of nature conservation area of tourist nature use, international experience of implementing cross-border tourism projects in the carpathian national nature park, and to form integrated investment regional tourism projects of ecological orientation. state policy in the field of recreational nature management should regulate the development of recreation and tourism sphere, first of all, in view of compliance with the requirements of ecologically balanced use of natural resources and ecologically balanced development of territories. the introduction of green tourism development lines will have a positive effect on the formation of ecological networks. particularly, these measures are necessary to find additional investments for environmental protection measures and the development of ecological networks in ukraine. value/originality. in regions of ukraine, it is necessary to begin work on the creation of a network of hiking and cycle routes in nature protection recreational territories and in regional nature parks. their operation will enable the development of ecological networks, green tourism, and ecological areas of hospitality in the country. key words: ecological networks, sustainable development, natural potential, recreational territories, nature management, region. jel classification: q01, q26, q56, r11, l83 corresponding author: 1 institute for market problems and economic & ecological research of the national academy of sciences of ukraine, ukraine. e-mail: andreevann@ukr.net 2 odessa national economic university, ukraine. e-mail: 2072945@gmail.com 3 odessa national academy of food technologies, ukraine. e-mail: lena.martynyuk@gmail.com baltic journal of economic studies 7 vol. 4, no. 4, 2018 1. introduction the issue of the formation of ecological networks, the development of nature tourism in the recreational territories of ukraine for many years remains extremely important, first of all, in terms of ensuring sustainable and balanced economic development of the country in the long run. implementation of eu environmental directives in the field of climate change and protection of the ozone layer is taking place in the country, which allows the use of possibilities of the association agreement between ukraine and the eu to improve the state of the environment. the main task of state and regional management in the conditions of sustainable development is the structural restructuring of the economy on the basis of the mandatory integration of environmental policy into the strategy of economic reforms. in the regions of the state, there is a significant revival of international relations in the field of nature conservation and recreational use of natural resources. ukraine has joined a number of important international conventions and has assumed certain responsibilities, for which a number of government documents were adopted – on the concept of biodiversity conservation, on wetlands of national importance, etc. the exchange of international experience has intensified, and joint research has become commonplace, including on the creation of transboundary nature conservation objects. one of the directions of the implementation of the state environmental policy is the development of an ecological network in ukraine aimed at preserving the landscape and biological diversity and creating new objects of the nature reserve fund (nrf). the increase in the area of the nrf, which according to the program for the formation of ecological network in 2020 will be 15% of our country’s territory (now about 6%), should take place taking into account the ways of migration and distribution of plant and animal species (so-called ecocorridors). at the same time, financing of the complex of measures envisaged by the program for the formation of the national ecological network at the expense of the state budget of ukraine, as well as enterprises of all forms of ownership, is not sufficient. measures of the national program of the ecological network of ukraine to increase the area of lands with natural landscapes to the level sufficient to preserve their diversity in the regions of ukraine require additional investment. 2. materials and methods over the past years, environmental activities, problems in the formation of ecological networks have become the object of various studies. in preparing the article, the authors studied works of scientists, which reflect approaches to the definition of the role of natural potential in the strategy of sustainable development of territories. works of foreign researchers have the methodological significance for building an ecological network in developing countries (graham bennett, 2004; rob h. g. jongman, mart külvik, and ib kristiansen, 2004; paul opdam, eveliene steingröver, and sabine van rooij, 2006). the following articles are devoted to the formation of the ecological network at the national level: yu. r . sheliah-sosonko (sheliah-sosonko, 1999; sheliahsosonko, tkachenko, andriyenko, movchan, 2005), where the authors proposed one of the first general schemes for the formation of the national ecological network of ukraine, having developed scientific proposals for the improvement of the scheme for the formation of its natural territories with varying degrees of anthropogenic influence; h. i. denysyk (denysyk, 2010), where attention was drawn to the anthropogenic landscapes of ecological networks; v. m. shvaiko, v. v. maniuk (shvaiko, maniuk, 2017), who proposed an algorithm for the formation of a subregional ecological network using the qgis software. regional problems of sustainable development of natural potential and ecological risks in the field of tourism were considered by o. v. serova, a. f. kulagina (serova and kulagina, 2014); izakovičová z., świąder m. (izakovičová and świąder, 2017) conducted research on the problems of the formation of ecological networks in slovakia and poland; and many other scientists. the abstract-logical method (in the process of theoretical generalizations and the formation of conclusions); methods of statistical, structural, and factor analysis (in the process of studying the structure and dynamics of the development of ecological networks); empirical research methods (comparison) are used. official data from the state statistics service; laws and regulations of ukraine were used. changes in nature were evaluated through indicators of the dynamics of areas of the nature reserve fund, which form the national ecological network (national report on the state of the environment in ukraine in 2015, 2017). the purpose of the article is to determine problems of the formation of the national ecological network and directions of tourism development in the recreational and protected areas in the context of the transition to sustainable development. 3. results of the study of the state of formation of the national ecological network the national program for national ecological network development in ukraine for 2000–2015 identified the main structural elements (natural regions and corridors) and its constituent elements, in particular, territories and objects of the natural reserve fund, the water fund land, wetlands, water protection zones, forest land, etc. in the regions of ukraine, there are approved 8 regional schemes and 47 local schemes for the ecological network formation – in zakarpattia (13), zaporizhzhia (2), luhansk (4), lviv (1), poltava (1), baltic journal of economic studies 8 vol. 4, no. 4, 2018 ternopil (1), kharkiv (24), chernivtsi (1) regions. as of 2015, elements of eight natural corridors and one natural region have been processed, namely: the scientific elaboration of measures for the creation and development of the carpathian ecological network as a part of the pan-european ecological network is conducted; the substantiation of the spatial localization of the halytsko-slobozhanskyi interregional transboundary eco-corridor is carried out; the concept of the regional scheme for the formation of the ecological network of the dniester river meridian ecocorridor was developed and the map of the corridor was prepared; the concept of a regional scheme for the formation of the ecological network of the polissia ecocorridor was developed. scientists have prepared a conceptual framework for the structure and components of the azov-black sea ecological corridor; within the framework of international projects, proposals were made for the creation of the ecosystem of southern bessarabia, prepared the concept of the dnipro river eco-corridor, elements of the desna river natural corridor were worked out, an indicative map of the southern bug meridian eco-corridor was prepared. the scheme of the turka eco-corridor (for the migration of bison, brown bear, lynx, wild boar, and other wildlife between protected areas of poland and skolivski beskydy national park) and the scheme of the bukovinian eco-corridor (between vizhnitsky national park and vânători-neamț natural park (romania)) for the restoration of natural ecosystem connections (ecocorridors) between populations of bison, bears, and lynx in ukraine and romania were developed and approved by the decisions of the relevant local governments. studies indicate the existence of transboundary biosphere reserves (tbrs) of ukraine with neighbouring countries: the ukrainian-polish-slovak tbr “east carpathians” along with the ukrainian uzhanian national nature park and nadsyansky regional landscape park; ukrainian-romanian tbr “danube delta” along with the ukrainian danube biosphere reserve; ukrainian-belorussian-polish tbr “west polesie” along with the ukrainian shatsky national natural park; as well as: the transboundary ukrainian-slovak-german serial object of the unesco world heritage site “the primeval beech forests of the carpathians and the ancient beech forests of germany” with sites of the carpathian biosphere reserve and uzhanian national nature park; the transboundary ukrainian-belarussian wetlands “stokhid-pripyatprostyr” and the ukrainian wetlands of international significance “pripyat river floodplain” and “stokhid river floodplains”. the increase in the area of the ecological network was also due to the expansion of the area of forest plantations (national report on the state of the environment in ukraine in 2015, 2017). such an approach to building a national ecological network comply with the concept of “green infrastructure”, which involves integrated environmental landscape planning, considering the account of ecological networks, the environment, and biodiversity (de montis et al., 2016). these studies indicate that all of ukraine’s forests belong to the ecological network. according to the data of the state registration of forests (1996 and 2011), the area covered with forest vegetation increased by 173.7 thousand hectares (from 9400.2 thousand hectares to 9573.9 thousand hectares), and forest cover percent increased from 15.6% to 15.9%. at the same time, this increase was restrained by insufficient financing and limited allocation of land for their creation. during the same period, the area of territories and objects of the natural reserve fund in the forests of the state increased by 277 thousand hectares (from 987 thousand hectares to 1264 thousand hectares) and the area of forests reserve increased from 13.9% to 15.7%. in 2015, the territory of the newly created nnp “nyzhnodniprovskyi” included 30.7 thousand hectares (including 13.4 thousand hectares with the seizure) of the lands of forest enterprises. the area of field protection zones as of 01.01.2016 is 446.7 thousand hectares, the area of other protective stands is 1042.0 thousand hectares (as of 01.01.2015, respectively, it was 446.1 and 1034.8 thousand hectares). according to the state statistics service of ukraine, in 2015, forests were restored on an area of 60.4 thousand hectares (by 4.1% more than in 2014); in particular, planting of forests is conducted in the area of 2.5 thousand hectares (national report on the state of the environment in ukraine in 2015, 2017). the composition of the land belonging to the national ecological network of ukraine is given in table 1. data analysis shows that the area of land belonging to the ecological network components increased by 201.3 thousand hectares (or 3.9%) compared to 2000, but since 2014 this area has decreased by 0.6 thousand hectares. the area of forests and area covered by forest increased by 2.8 thousand hectares, and the area of grassland and pasture decreased by 7.8 thousand hectares. at the same time, there is a tendency to increase the area of arable land, since 2014 it has increased by 15.8 thousand hectares and is 32541.3 thousand hectares. compared to 2014, the area of land under open development, quarries, mines, and related structures (157.1 thousand hectares) has increased by 0.8 thousand hectares, and the land area used for transport and communication (496.8 thousand hectares) has increased (by 0.1 thousand hectares). remain unchanged: the area of land under temporary preservation (amounting to about 7.2 thousand hectares); lands under land reclamation and fertility restoration decreased by 0.3 thousand hectares (are about 55.6 thousand hectares); green areas of common use (totalling 91.0 thousand hectares) decreased by baltic journal of economic studies 9 vol. 4, no. 4, 2018 0.2 thousand hectares (national report on the state of the environment in ukraine in 2015, 2017). the main environmental risks (threats) of the biodiversity of the ecological network of ukraine are anthropogenic factors, which are classified into three groups: 1) direct physical destruction: hunting, fishing, felling, flooding of indigenous herbal vegetation types, overpopulation, fire, targeted burning, ploughing, quarrying, recreation and urbanization; 2) change of natural environments: sylvatization, reserve succession, fragmentation of ecotopes, modification of location; 3) pollution: biological, communal. also, the main threat to biodiversity in the forests is the effects of climate change. climate change processes cause an increase in the number of extreme weather events that have a negative impact on forests and forestry (increased forest fires, harmful insects, and outbreaks of diseases, the spread of windbreaks and hurricanes, worsening of the situation with drought). poaching and unauthorized felling are also one of the major threats to biodiversity. the degradation of the forest cover, despite some increase in its area, the increase in the area of eroded soils, and the decrease in the number of hunting species remain negative trends. as a result of declining cattle numbers throughout the country, successional changes occur in steppe and wetland ecosystems. lack of grazing leads to overgrown swamp ecosystems with shrubs, which in turn leads to a reduction in the areas of natural habitats of many species of animals and plants, including those included in the red data book of ukraine (national report on the state of the environment in ukraine in 2015, 2017). the world economic forum has prepared and published the results of this year’s global survey with its ranking of countries around the world on the level of environmental performance. the ranking is based on the 2018 environmental performance index 2018 (the environmental performance index, 2018), which reflects the achievements of countries in the field of management of natural resources and their rational use. the ecological efficiency index 2018 assesses the state of the environment and the viability of ecosystems in 180 countries of the world. this year, switzerland has been recognized as the leader in terms of environmental efficiency. the top ten leaders also included france, denmark, malta, sweden, great britain, luxembourg, austria, ireland, and finland. ukraine ranked 109th in the ranking and found itself between turkey (108) and guatemala (110). this year, the index of ukraine made 52.87 points. in addition, the worst value was given to an indicator that estimates the loss of our forest cover (14.08). in addition, the number of indicators is estimated to be less than 50 points, for example – biodiversity and habitat – 49.10 points (pozyciyi ukrayiny v rejtynhu ekolohichnoyi tõhusnosti u 2018 roci, 2018). thus, the ecological framework of the territory in most regions of ukraine requires the development of additional environmental protection measures. according to specialists, the ecological framework of the territory is a set of its ecosystems with an individual regime of nature management for each site that forms a spatially organized infrastructure that supports the ecological stability of the territory, preventing the loss of biodiversity and degradation of the landscape. the ecological framework carries out its functions in the presence of appropriate legal, economic, and managerial mechanisms that should be related to the existing level of economic infrastructure and technologies of nature management (elizarov, 1998). for carrying out the effective policy of preserving biological and landscape diversity in the modern environment, it is necessary to more accurately elaborate on the existing general schematic model of the ecological network of ukraine and a number of models of ecological networks of regional levels (shvaiko, maniuk, 2017). specialists also pay attention to the implementation of international experience in table 1 the composition of the land belonging to the national ecological network of ukraine components area (thousand hectares) as of 01.09.2000 area (thousand hectares) as of 01.01.2015 area (thousand hectares) as of 01.01.2016 forecast area (thousand hectares) by 2015 grasslands and pastures 7772,9 7848,3 7840,55 9536,6 forests and area covered by forests 10380,2 10630,3 10633,1 10955,7 open wetlands 940,4 982,6 982,3 940,4 radioactive contaminated land that is not used in the economy 136,0 123,8 123,7 136 open lands without plant cover or with insignificant vegetation cover 1180,8 1015,8 1020,6 1180,8 waters 2415 2426,4 2426,4 2415 total area (thousand hectares), the share of the total area of ukraine 22825,3 37,8% 23027,2 38,16% 23026,6 38,16% 25164,5 41,68% source: based on derzhavnyj komitet statystyky ukrainy, 2017 baltic journal of economic studies 10 vol. 4, no. 4, 2018 the formation of ecological networks. in modern times, the european ecological network “natura 2000” is the main means of preservation and protection of flora and fauna and natural habitats in europe (vashchyshyn, 2014). 4. economic problems of environmental protection and priority directions of sustainable development of “green” tourism the study of state statistics on the costs of environmental protection indicates that in 2016, ukraine’s enterprises, organizations, and institutions spent 32.5 billion uah on environmental protection and in 2015 – 24.6 billion uah respectively. in the total volume of ukraine’s capital investments in environmental protection, investments in integrated technologies make up 59%, cleaning – 40%, and other investments – 1%. as in previous years, the main source of financing of environmental protection expenses was the own funds of enterprises and organizations – 68%, at the expense of the state and local budgets – 6% of expenditures were financed, and the remaining funds came from other sources of financing (costs for the protection of the environment in 2016, 2017). at the same time, we draw attention to the fact that the share of expenditures on research and development in environmental protection in the general structure is almost 2%, which is extremely not enough for scientific support of measures for the formation of the ecological framework of the state territories (table 2). data analysis indicates that capital investment in air protection and climate change prevention has tripled in comparison with 2006 (table 3). but for the further development of the ecological network in the country, it is necessary to ensure the attraction of additional investments, an effective system of environmental protection, overseeing the recreational areas associated with the functional territorial system of ecological stability. at present, the european union has launched another initiative to build a “green infrastructure” for ecosystem services (izakovičová and świąder, 2017). according to un experts, ecosystem services represent a lot of benefits that nature puts on society. biodiversity – a diversity that is observed among living organisms, which is vital for the functioning of ecosystems and the provision of services. ecosystem services create opportunities for people’s lives, for example by providing them with food rich in calories and clean water, regulating diseases and climate, promoting pollination of crops and soil formation, as well as providing recreational, cultural, and spiritual needs of the population. despite its estimated value of 125 trillion usd, these assets do not find proper accounting in the political and economic life, that is, investment in their protection and management is insufficient (ecosystem services & biodiversity, 2018). ukraine has a very strong potential for the development of ecosystem tourism services in recreational areas. as of 01.01.2016, the country has 649 territories and objects of the nrf of national importance: 19 natural and 4 biosphere reserves, 49 national nature parks, 310 forest reserves, 134 natural monuments, 18 botanical gardens, 7 zoological parks, 19 dendrological parks, park-monuments of garden art. their total area was 2244.18 thousand hectares (within the territory of ukraine) or 54.97% of the total area of the nrf and 3.56% of the territory of ukraine. the number of territories and objects of the nrf of local significance was 7555 units with an area of 1.84 million hectares. the share of areas of territories and objects table 2 costs of protection and rational use of natural resources in 2016 costs of protection and rational use of natural resources by directions, thousand uah total including capital investments current expenses total of them for major repairs total 32488702,1 13390477,3 612636,1 19098224,8 including for atmospheric air protection and climate change problems 4263419,2 2502805,8 181832,1 1760613,4 cleaning of return water 8960117,4 1160029,1 248189,4 7800088,3 waste management 8928254,3 2208676,6 32473,3 6719577,7 protection and rehabilitation of soil, underground and surface water 1617183,2 419988,9 100903,1 1197194,3 reduction of noise and vibrational influence 361994,2 94788,5 43263,2 267205,7 conservation of biodiversity and habitat 594125,8 49577,9 1843,9 544547,9 radiation safety 7053479,2 6943976,2 76,9 109503,0 research and development in environmental protection 58649,5 2435,1 − 56214,4 other areas of environmental activity 651479,3 8199,2 4054,2 643280,1 source: based on derzhavnyj komitet statystyky ukrainy, 2017 baltic journal of economic studies 11 vol. 4, no. 4, 2018 table 3 capital investments for environmental protection in the areas of environmental protection measures (2006–2016) years total, thousand uah including for atmospheric air protection and climate change prevention cleaning of return water waste management protection and rehabilitation of soil, underground and surface water other measures 2006 2194188,5 762538,6 777924,5 339529,6 247695,4 66500,4 2007 3080687,6 1379250,6 809677,1 388386,6 393036,8 110336,5 2008 3731400,4 1476343,3 927352,9 422918,6 787303,8 117481,8 2009 3040732,7 1273789,4 882525,4 400016,9 401425,6 82975,4 2010 2761472,1 1139946,7 734663,4 475584,3 319922,0 91355,7 2011 6451034,6 2535632,6 721325,5 1183880,2 639123,1 1371073,2 2012 6589336,5 2462675,3 846955,4 730544,4 540516,8 2008644,6 2013 6038783,0 2411935,1 834114,8 713856,3 324980,1 1753896,7 20141 7959853,9 1915129,7 1122149,3 783965,4 359925,6 3778683,9 20151 7675597,0 1422946,6 848881,2 737498,9 388259,2 4278011,1 20161 13390477,3 2502805,8 1160029,1 2208676,6 419988,9 7098976,9 1 excluding the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol, and a part of the zone of the anti-terrorist operation. source: based on derzhavnyj komitet statystyky ukrainy, 2017 of certain categories in the nrf included: nature reserves – 5.03%, biosphere reserves – 6.18%, national nature parks – 32.13%, forest reserves – 33.89%, nature monuments – 0.71%, regional landscape parks – 19.25%, protected ecosites – 2.40%, botanical gardens – 0.05%, zoological parks – 0.01%, dendrological parks – 0.04%, park-monuments of garden art – 0.32%. the share of the nrf areas from administrative units’ areas (“reserve index”) varied considerably. the lowest – up to 5% – it was in vinnytsia, dnipropetrovsk, donetsk, zhytomyr, zaporizhzhia, kyiv, kirovohrad, luhansk, mykolaiv, odesa, poltava, cherkasy, kharkiv regions, the highest – more than 12% – in ivano-frankivsk, khmelnytskyi, zakarpattia, and chernivtsi regions, while in kyiv and sevastopol it was 14.9% and 30.3% respectively. in volyn, lviv, rivne, sumy, ternopil, kherson, chernihiv regions and the autonomous republic of crimea – 6-12%. thus, in the various regions of ukraine, the reserve index in 2015 ranged from 2.24 to 15.71% (national report on the state of the environment in ukraine in 2015, 2017). regional studies on the development of ecosystem services and recreation and tourism activities in the regions of ukraine show that with the assistance of the eu, two large-scale cross-border tourism projects in the ivano-frankivsk region have been implemented: “development of cross-border tourism and network in ivano-frankivsk (ukraine) and maramureș (romania)” and “velokraina”. within the framework of the first of them, the centre for ecotourism is organized in yaremche, and the second is aimed at developing a network of hiking and cycle routes in the region. the partners of the velokraina project are the carpathian national nature park, local community organizations, and the asociatia pentru turism cultura si tineret, a romanian partner organization. the project was implemented within the framework of the cross-border cooperation program “romania – moldova – ukraine”. the experience of implementing the forza project deserves attention – a comprehensive environmental, social, and economic project, where tourism development is defined as one of the means of raising the population’s income in transcarpathia. owning to the project, the tourist information centre in rakhiv and the transcarpathian tourist path in the rakhiv district were created. thanks to this project, the rakhiv forestry, and the carpathian biosphere reserve in cooperation with the mountain district administrations, about 80 km of the transcarpathian tourist path was organized (lintur, kampov and kasinets, 2018). note that according to international experts, the modern trends of “green” tourism in the conditions of sustainable development are recognized: 1) farm tourism – as a rapidly growing market of services, which allows residents to connect with nature; 2) tourism in protected areas with water areas and fishing villages; recreational fishing services are a growing tourism industry with approximately 118 million fishermen in the developed world; 3) natural tourism in forests is an important factor to be taken into account in regional planning and management of forestry activities. tourism revenues can be an incentive to implement sustainable forest management measures (ecosystem services and biodiversity, 2018). in the context of the problems considered, the tourism and recreation sector is an important sector of the national economy and a tool for the development of nature-recreational areas. thus, revenues from the tourist tax in ukraine in 2016 increased by 45.7% compared to 2015 and amounted to 54.1 million uah. according to baltic journal of economic studies 12 vol. 4, no. 4, 2018 the ministry of economic development and trade, the largest share of the paid tourist tax in 2016 fell to kyiv – 27.2%, in the second place – lviv region with 15.6%, in the third – odesa with 13.6%. according to the state fiscal service, the total amount of tax payments from entities in the field of tourism and resorts in 2016 increased by 45.5% compared to 2015 and amounted to 2.496 billion uah. the share of tax payments from the activity of hotels and other temporary accommodation means in the total amount of taxes paid in the field of tourism in 2016 amounted to 39.8% or 992.886 million uah. compared to 2015, the volume of such revenues increased by 1.6 times (payment of tourist tax in ukraine in 2016 increased by 45.7%, 2017). 5. conclusions research conducted has shown that the main goal of building an ecological network in ukraine is to preserve the landscape and biological diversity and create new objects of the nature reserve fund. state and regional policy on environmental protection, rational use of natural resources, provision of ecological safety of human life, ecologization of activity of recreation and tourism establishments should become the inalienable conditions for sustainable economic and social development of recreational territories. therefore, in the future, the state authorities need to form regional economic mechanisms for attracting investments in the field of environmental protection, stimulating users of natural resources to reduce the harmful impact on the environment, promoting rational and economical use of natural resources, the introduction of “green” tourism aimed at developing a network of hiking and cycle routes. in the regions of ukraine, it is necessary to develop balanced approaches to the use of the potential of nature conservation area of tourist nature use, international experience in implementing cross-border tourism projects in the carpathian national nature park, and to form integrated investment regional tourism projects of ecological orientation. the introduction of green tourism development lines will have a positive effect on the formation of ecological networks. particularly, these measures are necessary to find additional investments for environmental protection measures and the development of ecological networks in the regions of ukraine. references: de montis, a., caschili, s., mulas, m., modica, g., ganciu, a., bardi, a., ledda, a., dessena, l., laudari, l. & fichera c. r . 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(in ukrainian) vytraty na okhoronu ta racionalne vykorystannya pryrodnykh resursiv za napryamamy pryrodookhoronnykh vytrat u 2016 roci (2017). [costs of protection and rational use of natural resources in the areas of environmental protection expenditures in 2016]. retrieved from: http://www.ukrstat.gov.ua (accessed may 2018) (in ukrainian) baltic journal of economic studies 228 vol. 4, no. 3, 2018 corresponding author: 1 department of accounting, sumy national agrarian university. e-mail: l.poliatykina@ukr.net 2 department of finance, sumy national agrarian university. e-mail: ira_samoshkina@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-228-234 priority areas of the small business activation in ukraine larysa poliatykina1, iryna samoshkina2 sumy national agrarian university, ukraine abstract. the purpose of the article is to summarize and highlight the key areas of activation of small business enterprises. the goal of the research is to obtain accurate and complete information that would enable to determine the objective and overall assessment of small business operation at the present stage of development of business relations in ukraine; to identify impediments to their operation; to find reserves to improve the efficiency of small business operation. problem statement. the research is aimed at studying the current state and determining the prospects of the small business development in ukraine; analysing the deficiencies and formulating the main trends in the small business operation. in addition, the research goal is to examine the features of the creation, operation, and development of small businesses, and to go into the details of their basic challenges and specifics. methodology. analysis of small business operation and features of its conduct was carried out during the study. issues of the formation and operation of the small business, as well as workflow management and business administration at these enterprises, are controversial. as a result of the study, the tendencies of the operation of small business enterprises are considered, the main problems and their solution in ukraine are elucidated in detail. the crucial factor for the development of ent repreneurship in ukraine is the formation of extensive infrastructure to support the development of small businesses. efficient operation of this infrastructure contributes to the increased investment appeal of regions, the attraction of domestic and foreign investment, and the application of advanced technologies. practical implications. it is noted that expedient is the work to ensure further development of small businesses and their relevance to the economic development of the country as a whole. small businesses perform a variety of important economic and social objectives. they develop the real economy, increase employment opportunities, and promote competition. therefore, the development of small business is the important task of the government. value/originality. the analysis of the study conducted shows that the performance of the important economic and social role by small businesses is possible only due to the balanced state policy of comprehensive support for this sector of the economy. therefore, the promotion of the small business development in ukraine should be based on the implementation of the european experience that is based on the european standards of entrepreneurial development that will significantly contribute to the creation of a modern market economy with social justice. key words: small business, government support, entrepreneurship, investment, lending, competitiveness. jel classification: r11, d21, o12, m21 1. introduction the efficient tool to facilitate the effective development of small businesses is the infrastructure of its support, due to which the specific organizational and economic environment is formed for the promotion of entrepreneurship and rapid adaptation of small businesses to market conditions. the global experience and business practice show that the most dynamic element of the national economic structure, which is constantly changing, is a small business. under the development of the ukrainian economy, the strategic pathway to the creation of a competitive environment is the development of small businesses. small businesses have been the focus of attention over the course of decades. their activity is the multifaceted socio-economic phenomenon, where an entrepreneur or enterprise has the possibility of finding its level, and the external participants benefit as well. despite a considerable number of scientific works on this subject matter, the problem of small business operation baltic journal of economic studies 229 vol. 4, no. 3, 2018 remains in abeyance, and plenty of issues concerning the development of small business in ukraine call for further study. at present, the development of small business in ukraine is influenced by many factors, overarching of which may include a deficient legal framework; a lukewarm support from the governmental, regional agencies; the poor development of the infrastructure of sales, processing and storage of finished products; the lack of methodological support for the organizational and economic activities of small business. a great deal of focus has been recently placed on the study of the issues of the small business organization and operation. the problems of justification and trends of the small business development are studied in the works of both domestic and foreign scientists. a significant contribution to the development of the theoretical foundations and methodological approaches to the solution of the above problems is reflected in the works of scientists-economists. to ensure the ukrainian economic recovery, it is expedient to reform agricultural enterprises and to consider all possible options for restructuring in order to adapt production operations to the business environment and to increase their competitiveness in appropriate conditions. in this study, the pride of place is given to the problems of operation of small businesses, which are more resilient to external changes. given a small number of employees quickly adjusting to market changes, a small business may turn out to be the important basis, on which a pivot towards the effective business processes will begin. these enterprises provide the socially vulnerable sections of the population, in particular, young people, women, immigrants, etc., with the possibility of employment. they also gain experience, knowledge, and enhance their career and self-fulfilment at these enterprises. at the same time, the main objectives of the ukrainian economic policy, as before, remain the achievement of economic growth and full employment, raising the living standards of the majority of the population, support for the national currency exchange rate, external equilibrium, etc. the achievement of these objectives is largely associated with the state of affairs and prospects of the small business development. these issues have not been addressed in full that predetermines the need for the scientific research aimed at the formation and development of entrepreneurship, its effective operation that will ensure the country’s overcoming the protracted crisis. the important aspect of the impact of small business on the regional development is the solution to the problem of even distribution of business entities associated with the satisfaction of the population’s effective demand. the issues of the small business development at the branch level are not sufficiently addressed and require further study. however, a plenty of theoretical and practical aspects of using the potential of small business have not been settled yet. 2. terms of development of small business in ukraine in ukraine, small businesses are developed in the adverse conditions of the market economy. this process is dogged by massive problems. small businesses are established and have some support, but the competitive entrepreneurial type of economic management in small business has not been created yet. the current state of the national economic development in terms of ensuring the stabilization processes clearly shows that its main priority is the sustainable development of small businesses. as the experience of advanced economies shows, the urgency of food security is alleviated under the efficient operation of the agri-food sphere. the accelerated dynamics of changes requires a prompt and adequate reaction from the ukrainian society. joining efforts should be aimed at minimizing adverse effects and maximizing benefits from the deepening of economic integration. such an outcome can be achieved only through the creation of the functional economic system on the principles of sustainable development. a special place in these processes is given to small businesses. the main goal of transformations under the sustainable development is the formation of an effective manager – owner. the establishment of a new organizational and private model of the production organization objectively requires new approaches to the structure of financial performance of small businesses in ukraine. the solution to the issues raised requires a constant search for the ways of expedient and appropriate operation of small businesses of ukraine. this is required for business entities to be provided with the opportunity to ensure a continuous process of the product manufacturing and sales, to promptly pay for their obligations, and to freely make use of their own and borrowed capital. the development of small businesses in ukraine constitutes the development that meets the needs of the current generation and does not harm the ability of future generations to meet their needs by providing the interaction of economic, social, and environmental spheres. the stable development of small businesses is of exceptional social importance that is conditioned by an uncontested role in ensuring food security of the country. small business supports any scope of activities: industrial, commercial, insurance, etc. therefore, small business is considered to be the leading sector of the economy to ensure the reliability, efficiency, and flexibility of the country’s domestic market. it is important to emphasize that the domestic market depends primarily on the social and economic development of each state. thus, without small business baltic journal of economic studies 230 vol. 4, no. 3, 2018 society and economy have no opportunity either to develop or to exist. the state of the small business development in recent years indicates a steady trend towards the growth of this sector of the economy. peculiarities of small business enable to assert that it is characterized by such features as independence of action, opportunity for more flexible and operative decisions, adjustment to the peculiarities of local conditions, strong sympathies among the population, low operational costs, chances of a quick material success, long-term benefits, opportunities to combine several professions, etc. all these features enable small businesses to occupy a ranking place in the economic structure of ukraine. recently, the government has implemented several programs to support small business, the primary objectives of which are to ensure the development and assistance of small business. but despite this fact and the fact that small business is very important, its development and possibilities in ukraine fail to reach a high point. accordingly, the indicators of the small business development for many years remain quite low in comparison with other more economically developed countries. the factors, which adversely affect the development of small business in ukraine, are a general decline in the domestic commodity production, price advance, inflation, low level of the population solvency, corruption, etc. one of the main disadvantages of small business in ukraine is its uneven distribution across the country. small businesses are mostly spread out in kyiv, kharkiv, odesa. they account for almost a third of all businesses that are engaged in food production and trade. according to many experts, the main directions of further development of small business in ukraine in the short term are: the formation of appropriate legislative framework conducive to the small business development; the improvement of financial and credit support; the provision of the material and technical, and innovative conditions for the development of small businesses; the information and staffing support for business; the promotion of foreign economic activities of small businesses. the formation of appropriate legislative framework conducive to the small business development requires, first and foremost, the provision of legal guarantees to ensure the freedom and protection of private property; the development of effective legislation and regulations aimed at encouraging small businesses; the elimination of legal inconsistencies and repeal of provisions that impede the development of a private initiative. today, the most urgent problems are the development of new and improvement of existing laws and regulations on determining clear approaches to the property and forms of its protection; the creation of more favourable tax, investment, innovation, and pricing regimes for small businesses; the adjustment of the mechanisms of state regulation and control of entrepreneurial activity. the peculiarities of its development in ukraine, namely, the strengths and opportunities, as well as the main factors and threats that slow down the development of small business in ukraine at the stage of its operation, have been determined with the application of the swot analysis of small business (figure 1). strengths • autonomy; • small amount of seed capital; • flexibility to external changes; • development of ineffective market niches; • low costs of research. weaknesses • dependence on the unstable economic and political situation in the country; • restricted access to external financing; • sales market locality; • profit instability; • insufficient information support; • staff insecurity opportunities • ability to occupy any market niche; • growth, transition to big business; • provision of employees of different age groups with the employment opportunities. threats • bankruptcy threat; • difficulties with strategic planning; • low consumer purchasing power; • complexity and inconsistency of legislation (especially, tax); • corruption overgrowth. figure 1. swot analysis of small business in ukraine source: developed by the authors baltic journal of economic studies 231 vol. 4, no. 3, 2018 the new job formation, bona fide competition, rapid saturation of the market with goods and services, and innovation occur in the ukrainian domestic market due to small business. according to the data of economic sources, in ukraine, the sphere of material production employs more than 87.5% of the labour force, and only 12.5% works in the service sector. the analysis of foreign experience makes it possible to take a fresh look at the prospects for the small business development in ukraine. thus, since the 1990s, the share of small business in all industrialized countries has been substantial enough. in japan and france, 99% of all enterprises have been referred to small businesses. the degree of the small business development directly characterizes the degree of the state economy’s development as a whole. the development of small business in the west occur at an even greater rate as governments pay a considerable attention to small businesses, and facilitate their development at the national level. in most countries, small business represents the middle class, which is the basis for sustainable economic development. the economic analysis of business activities and evaluation of the economic performance of small businesses in the market conditions are based on the systematic approach, which is characterized by the comprehensive assessment of multifaceted factors, the targeted approach to their study with the aim of improving the performance of small businesses. as the result of the research conducted, it has been established that the main stage, by which business may be marked as successful, efficient, and profitable, is the stage of its development and operation, which is characterized, according to the doing business ranking, by such criteria as tax payment, lending, investors’ interest protection, contract performance. the results of the swot analysis show that small businesses compared to other business entities have significant advantages and opportunities, among which flexibility and ability to occupy any market niche are the most important. however, there are a number of weaknesses and threats that, in comparison with the european small enterprises, are wide enough. thus, the main drawback of small business in ukraine is a restricted access to the external financial resources, locality of sales markets and lack of adequate government support (especially, in the taxation sphere). from this perspective, the state regulation and promotion of small business should be aimed at levelling the impact of its drawbacks while turning them into potential opportunities. the analysis of the general environment and trends in the sphere of small business regulation shows that the most important factor of limitation of the small business development is the significant administrative and tax pressure. the fiscal policy of ukraine plays a significant role in the small business promotion, which provides for a reduced tax rate, an effective system of discounts in payment of overdue loans, etc. in ukraine, the number of tax payments is 5 per year (after the entry into force of the amendments to the tax code dated december 24, 2015) (pihnyak, 2014), and 350 hours are spent on their payment, while the total tax burden is 52.2%. it is important to focus on individual programs aimed at promoting small business. it is expedient to provide small business with support in the form of consultations on the financing management and marketing. the study conducted gives grounds to assert that one of the few achievements of the national tax policy is the introduction of the simplified taxation system of small businesses. 3. the need for state support for small businesses according to the law of ukraine “on development and state support of small and medium entrepreneurship in ukraine”, small businesses in ukraine include physical and legal entities of any organizational and legal form and form of business ownership, the average number of employees of which during the reporting period (calendar year) does not exceed 50 persons, and annual income from any activity does not exceed the amount equivalent to 10 million euro, determined at the average exchange rate of the national bank of ukraine (in 2015, about 242 million uah). as of today, the most important form of state support for small business in ukraine is the simplified tax system, which provides for the replacement of taxes and fees established by the state with the payment of a single tax and the application of a simplified form of accounting and reporting. to improve the efficiency of the established system of state support for small business, it is essential to carry out the following measures: to work out the financial strategy to attract the ukrainian and international banking capital for ensuring the development of small business in ukraine; to form the leasing system as one of the most challenging opportunities for the creation and development of the production base of small and medium business; to promote the development of the foreign economic activity of small businesses; to carry out the training and retraining of staff for work in small businesses; to create conditions for the effective development of entrepreneurship by creating a favourable infrastructure; to improve the information, and regulatory and legal support for the entrepreneurial activity in the sphere of small business; to improve the quality of advertising and exhibition, and publishing activities in this sphere; to develop the innovation activities of business entities, to promote the development of new technologies and inventions. baltic journal of economic studies 232 vol. 4, no. 3, 2018 financial and credit support for small businesses in ukraine is of prime importance nowadays. the state policy regarding financial support should be aimed at the establishment of a developed network of financial institutions, insurance companies, investment and insurance funds; the development of reciprocal lending and insurance companies; the development and implementation of the system of incentives of commercial banks that would provide preferential loans to small businesses. informational support involves the creation of a single information space, the systematization and harmonization of indicators and documents. the automation of management activities is the objective process, which should cover the industry as a whole. the basis of these activities is to create the environment, which should cover and unite the information, telecommunication, software provision, information technologies etc. that will contribute to a qualitatively new level of day-to-day operational work and the analysis of prospects for activities in general. the lack of own sources of financing of fixed capital renovation, unavailable services of banking institutions and other conditions require the development of the productive capacity recovery mechanisms, which are non-traditional for small businesses. the issues on the intensification of the investment activities of small businesses deserve attention when justifying the main trends of their development. the solution to the methodical problems of the rational implementation of the investment process in the region that is based on programs and strategic rationale for the regional investment projects and the establishment of the mechanism for their effective operation is of vital importance at the regional level. ensuring the production competitiveness requires the implementation of innovations, as well as the upgrade of technological equipment, which would make it possible to produce high-technology products. the fulfilment of this task is extremely risky because it requires a significant amount of investments and constant study of consumer demand. we have performed the analysis of investment activities of the agricultural sector in connection with the availability of numerous institutional constraints and administrative barriers. the government in the process of formation of innovative and investment activities assumes the regulatory functions. 4. the foreign experience the foreign experience shows that a prerequisite for success in the small business development is a comprehensive and sustained government support. in the crisis conditions of the economic development, it is the government support for small business that could lead to the improvement in the economic situation both in regions and the country as a whole. today, the government connects its hopes for rapid positive structural changes in the economy, the recovery from the economic crisis and creation of conditions for economic growth with smalland medium-size business. as evidenced by recent global trends, it is the targeted government support for enterprises, particularly small businesses, that is the most important feature of a modern policy in the field of entrepreneurship. in ukraine, despite the declared support for small business made by the state, its influence on the process of the small business formation is clearly insufficient. the important feature of the development and state regulation of small business in ukraine is the lack of emphasis on the social significance of small business, its ability to rapidly expand the demand for the labour force. small business is considered in the framework of the state policy only through the lens of economics. the continuation of this problem is the derivative problems of the excessive government regulation, numerous administrative barriers and low level of executive discipline in state authorities worsened by a high level of corruption. the issues concerning the organization of insurance activities of small businesses have been and are studied in details on the pages of periodicals and special literature. insurance provides the reliable protection of property interests of entrepreneurs and population in case of losses caused by fire, natural disaster, technological accidents, transport accidents and many other unforeseen circumstances. insurance has been well proven as a form of accumulation of personal savings to solve the social problems of the population (healthcare, pensions, education etc.). in recent years, insurance is widely used to cover any third party liability. the proposed ways and directions of the development of the ukrainian insurance market, in our opinion, will enable to accelerate the creation of an adequate insurance market as the objective attribute of the market economy and to facilitate the restoration of confidence of policyholders in insurers. today, a private entrepreneur, despite a large number of regulatory acts that would regulate this type of activities, is in a very difficult position. the creation of voluntary associations of private entrepreneurs protects small businesses in their competition with monopolistic structures in both domestic and foreign markets of output sales. the efficient tool to facilitate the effective development of small businesses is the infrastructure of its support, due to which the specific organizational and economic environment is formed for the promotion of entrepreneurship and rapid adaptation of small businesses to market conditions. at present, the expedient is the policy of support for a small business, the main objective of which is balancing the interests of the state and business, the provision of the best conditions for entrepreneurial activities, baltic journal of economic studies 233 vol. 4, no. 3, 2018 increase in the competitiveness of small businesses. small businesses are more resilient to external changes. given a small number of employees quickly adjusting to market changes, small business may turn out to be the important basis, on which a pivot towards the effective business processes will begin. these enterprises provide the socially vulnerable sections of the population, in particular, young people, women, immigrants, etc., with the possibility of employment. they also gain experience, knowledge, and enhance their career and self-fulfilment at these enterprises. it is advisable to take into account a number of advantages of this business, namely: low capital intensity and, therefore, an easy access of the population, a large number of enterprises that enables to promptly establish the production of various goods and services, mobility in the market and in the sphere of technologies that promotes the rapid development of entrepreneurship, the ability to hire additional labour force, the absence of bureaucracy in management, minor adverse environmental impacts. 5. the main problems hampering the development of small business the small business development has been facilitated by the fact that it is recognized by the state as one of the most important elements of the system of national economy that requires special attention and support. the main problems constraining the development of small business are: imperfection of the tax system; instability of budgetary financing of regional programs of small business support; immaturity of mechanisms of financial and credit support and risk insurance of small enterprises; lack of self-financing mechanisms; restriction of the small businesses’ access to productive capacities and property of the enterprises being restructured; lack of reliable social protection and security of entrepreneurs; organizational problems of interaction of small business with market and government agencies; administrative barriers to the small business development. in this regard, we believe that the small business development is based on the system interaction of the institute of entrepreneurship, information, and the factors that determine the direction of its operation. in the economy of the region, this includes an imperfect tax system; instability of budgetary financing of regional programs of small business support; immaturity of mechanisms of financial and credit support and risk insurance of small enterprises; lack of self-financing mechanisms (credit unions, reciprocal insurance companies); restriction of access of small enterprises to productive capacities and property of the enterprises being restructured. this development is conditioned by the transformation processes of the ukrainian economy that have shaped the current state of small businesses. the accelerated development of entrepreneurship in ukraine is possible on the basis of the consistent state policy on decentralization of economic management and improvement of market mechanisms and local power brokers. the main government functions promoting entrepreneurial activities that contribute to its rapid development include: creation of the conditions for training competitive specialists; creation of the mechanisms for entrepreneurial support and financing; implementation of the measures for the promotion and development of regional market infrastructure. summarizing the positive and negative aspects of the development of small businesses, it can be noted that by quantitative estimates, the formation of this economic sector is a strategic pathway for further development of ukraine’s economy. 6. conclusions the development of small business in ukraine is a significant but underutilized reserve of economic growth. its activation is one of the key priorities of the regulation of the social and economic development of the ukrainian economy. the economic, social, and environmental dimensions of the sustainable development have a complex nature that determines the need for a nonlinear approach to ensuring their harmonious combination. the environmental dimension of sustainable development of the agri-food system, which unites the manufacture and processing of products and the food market implies a stable economic growth of small businesses in the sphere of product processing. the introduction of these proposals will facilitate the adoption of scientifically grounded managerial decisions and further development of small business in ukraine. according to the research results, it is expedient to carry out further development of small businesses in ukraine, in our opinion, in the following directions: • formation of own markets of product sales; • introduction of innovative technologies of product manufacture; • implementation of investment projects on the acquisition of machinery and equipment under the lease; • making part of investments in the development of technology and production infrastructure; • creation of voluntary associations of private entrepreneurs; • increase in volumes of direct investment of small business at the expense of own funds and loans; • creation of risk insurance fund and enhanced cooperation with insurance companies. baltic journal of economic studies 234 vol. 4, no. 3, 2018 when studying the approaches of state regulation and small business promotion in ukraine under the tax policy formation, we revealed its strengths and weaknesses, as well as the opportunities for further development, and the threats inhibiting it. recommendations for improving the business development have been made on the basis of the study of state regulation of small business operation. most of the focus is placed on the issues of stirring up investment activity in the justification of the basic trends in the development of small businesses. the measures aimed at attracting financial resources to make investments at the regional level that will contribute to the development and establishment of small businesses have been proposed. in this regard, it is recommended to analyse the factors of regional investment prospects in ukraine. the article focuses on the role of government in promoting entrepreneurial activity, the interaction of entrepreneurship with other structural elements of society. the study has made it clear that the issues of the formation and operation of the small business, as well as workflow management and business administration at these enterprises, are controversial. pride of place is given to the problems of operation of small businesses, which are more resilient to external changes. given a small number of employees quickly adjusting to market changes, a small business may turn out to be the important basis, on which a pivot towards the effective business processes will begin. these enterprises provide the socially vulnerable sections of the population with the possibility of employment. the article focuses on the main arguments in favour of the features of the organization and operation of the insurance activity of small businesses. the main direction of future activities of small business is to create conditions for the effective implementation of entrepreneurial activities of business entities, to overcome any difficulties and solve problems related to the lack of knowledge and experience on doing business, to provide access to loans and required information, to facilitate the creation of new jobs, to overcome disparities in the regional economic development, to increase export capacities of small enterprises, growth of production and its restructuring, to facilitate an access of small business to modern innovative technologies. references: bryukhovetsky i.m. (2001). basics of entrepreneurial activity and agribusiness: publishing house "kozatsky val", pp. 304-345. kondratenko m.b. (2015). tax burden and ways of its optimization in ukraine [text]: author's abstract, pp. 3-20. law of ukraine "on development and state support of small and medium enterprises in ukraine" (2012). no. 4618-vi dated march 22, 2012. retrieved from: http://zakon5.rada. gov. ua/laws/show/4618-17 mikhailov m.g., poliatykina l.i. & slavkova o.p. (2008). organization of accounting in small business enterprises, pp. 241-255. pavlov o.i. (2012). sustainable development and security of the agro-food sector of ukraine in the face of globalization of challenges: monograph, pp. 207-214. pihnyak t.a. (2014). the world experience of public administration in the development of small business and the possibility of its adaptation in ukraine: monograph, pp. 123-146. poliatykina l.i. (2016). methodological and accounting-analytical support of sustainable development of small business enterprises: monograph, pp. 47-140. poliatykina l.i. (2018). modern trends to promote sustainable development of small business enterprises. eurasian academic research journal (issn: 1829-4863), multilanguage science journal, 1(19), 138-142. poliatykin s.o. (2018). features of innovation and investment activity in foreign countries: economic and law paradigm of modern society, 1, 39-44. the tax code of ukraine no. 2755-vi from 02.12.2010. retrieved from: http://zakon5.rada.gov.ua/laws/ show/2755-17 baltic journal of economic studies 60 vol. 4, no. 3, 2018 corresponding author: 1 department of criminal law disciplines, faculty of law, university of customs and finance. e-mail: inna_vitaminka@i.ua 2 department of criminal law disciplines, faculty of law, university of customs and finance. e-mail: olexandr.karnauhov@gmail.com 3 mariupol state institute of interregional academy of personnel management. e-mail: rva260778@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-60-67 economic and legal factors influencing social relations in the state inna yefimova1, olexander karnaykhov2 university of customs and finance, ukraine volodymyr reznichenko3 mariupol state institute of interregional academy of personnel management, ukraine abstract. this study identifies global factors conditioning the global problematic of the direction of social development. global threats were evaluated and defined as dangerous processes, phenomena, and situations that cause harm to health, safety, well-being, and the lives of all humanity, and require to be eliminated. the essence of global risks was defined. these risks were identified as events or conditions that may cause a significant negative effect for several countries or spheres within a strategic period if they occur. global problems were conceptualized. these problems were defined as phenomena, matters, and situations that are not completely understandable, interesting, actual, require solving and regulation, and in addition do not have unified solutions. current global challenges were analysed, defined as strategic guidelines that cause transformational changes and are receiving attention from humanity. global trends were defined as courses of social development. the composition and role of global actors were described and defined as international organizations, leading states, regional organizations, powerful corporations, institutional investors, large cities, and well-known personalities. directions of positive courses of social development were developed by means of using the authors’ mechanism of solving the global problematics. key words: globalization, social development, global factors, global problematics, global processes. jel classification: a13, f01, f6 1. introduction the comprehension of factors determining the process of social development is a primordial aspiration of scientific thought. unlike past trends, the current course of social development is stipulated by the process of globalization forming a unified social space with common global factors in it. the goal of this research thus consists in the conceptualization of global factors influencing the course of social development. to achieve this goal, we defined and performed the following tasks: to evaluate global threats, to define the essence of global risks, to concept the essence of global problems, to analyse present global challenges, to exposed global trends, and to describe the composition and role of global players. the global problematics of the course of social development from the twentieth to twenty-first centuries has been studied by many scholars (see: amin, 1996; dreher, 2006; filipenko, 2007; gelsdorf, 2010; lukianenko et al., 2013; madsen et al., 2016; richard, 2003; sardak, 2011, 2013; sassen, 2006; scudder, 2010 stukalo, 2006; went, 2004; zghurovskyi et al., 2010; hillebrand et al., 2010). in the twenty-first century, this matter remains topical. scientific searches have been activated by means of attracting an increasing number of researchers to this scientific discussion. however, despite a great number of publications concerning separate matters in this sphere, the problematic of the direction of social development has not received a complex systematic analysis. it thus requires further research aimed at the conceptualization of global systemically important factors. the main sources of the research include published works by scientists investigating urgent matters of social development, as well as data presented by international organizations. baltic journal of economic studies 61 vol. 4, no. 3, 2018 the scientific solution to the problem concerning the direction of social development requires the creation of methodological tools adapted to the current terminological apparatus, research methodology, and statistical base. the methodological basis of this study consists of using a systematic approach and methods: historical, logical, and theoretical generalization analogies abstraction observation; quantitative and qualitative comparison; complex and structural analysis; synthesis; grouping; thought experiment; and modelling. the logic of the research consists in the analysis of theoretical statements and empirical data in the sphere of covering global processes and performing systemoriented synthesis of scientific and methodical basics of factor influence on the direction of social development. 2. global threats. global risks. global problems in the twenty-first century, the direction of social development is defined through the influence of global factors that are under permanent transformation. on the ground of studying scientific sources presented in the list of references, the authors have defined that the main global factors defining the direction of social development include global threats, global risks, global problems, global challenges, global trends, and global actors (see figure 1). global threats. when viewing these six identified factors, we should note the following: the phenomenon of social development consists of the fact that this development is preceded by certain threats, and these threats, in turn, cause definite risks. as a consequence of the deployment of globalization processes, global threats began to form. according to data presented by various global sources (uno, the world health organization [who], world economic forum, transparency international, global footprint network, international energy agency, world resources institute, and british petroleum), the main threats to the sustainable development of humanity are the global decrease of energy security (es), the imbalance between the biological abilities of the earth and the requirements of humanity in the biosphere in the context of changes in the demographic structure of the world (bb), a growing inequality between the people and countries of the world (gini), the spread of global diseases (gd), child mortality (cm), corruption progression (cp), limited access to drinking water (wa), global warming (gw), state flexibility (sf), and global climate changes and natural disasters (nd) (zghurovskyi et al., 2010). american scientist t. scudder views global threats through the prism of providing standards of living: poverty and a growing gap between poor and rich people; cultural, economic, political, and religious fundamentalism; and global degradation of the environment. according to this author, these threats arise because of the process of consumption, the growing population, and urbanization (scudder, 2010). global risks. global risks are viewed as a separate category, but this category is almost completely equated with global threats (world economic forum, 2016). an appropriate interpretation of the world economic forum consists of the fact that a global risk is an uncertain event or condition that in the case of its occurrence may cause a significant negative effect for several countries or spheres over the next ten years (world economic forum, 2016, 11). during the last three years, the five biggest global risks have been: climate changes (global warming), weapons of mass destruction, water disasters, large-scale uncontrolled migrations, and price shocks related with the price to energy sources (price increase or decrease) (world economic forum, 2016, 11). geopolitical aspects take an important position among global risks. for a period of more than a single year, global risks are a significant factor in social development. this can be explained by the influence of global risks on economic dynamics, including financial crises. a high level of structural direction of social development in conditions of globalization global challenges (strategic guidelines, requirements, signals appeals, and inducements) global risks (the perceived possibility of danger, losses or bad luck) global trends (direction of development of actors, forces, situational factors, resources, processes) global problems (a difficult matter that requires a solution, study, and research and that does not have definite mechanisms for a solution) global actors (main moving forces that perform the formation of social development) global threats (impossibility or inevitability of occurrence of something annoying, awkward or unpleasant) figure 1. global factors influencing the direction of social development baltic journal of economic studies 62 vol. 4, no. 3, 2018 unemployment and underemployment result in and are accompanied by deep social instability (tymoshenko et al., 2015). global risks exert a potential influence on society and require prospective protection of the social and economic sphere. global problems. global risks and threats cause global problems in social development. given its very essence, a problem is not a negative element; it simply appears as a phenomenon in the process of development. this phenomenon causes contradictions, misunderstandings, the results of previous mistakes, and irrational or shortsighted decisions. the existing global problems of social development include the following: limited knowledge about the universe; origins of civilization; the mission and role of humans; absence of effective mechanisms for the progressive development of humanity; impossibility of preventing imbalances in demographic, economic, social, and managerial processes that lead to conflicts and wars; negative technical impact on the environment of vital human activities; shortage of resources; and the necessity of mastering and implementing new technologies (mayer, 2003; heiets et al., 2005). one billion people do not have access to clean drinking water; 1.6 billion people live without electricity; three billion people live without adequate sanitation. one billion people are illiterate. twenty percent of the world’s population have insufficient food, and currently, almost every fourth child has an insufficient body weight because of lack of food, as well as lack of water, poor sanitary conditions and medical services, incorrect nutrition, and insufficient care. the gap between the richest and the poorest countries was defined through correlation as 72:1. in 2005, 1.4 billion people lived in conditions of extreme poverty with a daily income of less than 1.25 usd per day, and in 2015 the number of such people was 920-970 million. the three richest people in the world have capital exceeding the incomes of forty-seven poor countries; of the world; the 475 richest people control the capital of half of all humanity. the correlation between one-fifth of the richest part and one-fifth of the poorest part of the world population has reached 1:75. during the last twenty years, the gap between the richest and the poorest group of people in the world has increased almost tenfold (zghurovskyi et al., 2010; lukianenko et al., 2013; world bank, 2015). there is no doubt that the world community is going through a difficult period. technological development, economic prosperity, and cultural evolution are global aspects of the development of a society that have increased our ability to solve many social hardships still present in our life. the gaps between poverty and prosperity within and between these countries are still growing; according to european specialist j.f. richard, if we do not act decisively before 2020 the number of people living on less than 2 usd per day may significantly increase and actually exceed three billion people (richard, 2003). protection of the natural environment is one global problem. a number of other serious problems, such as global pandemic diseases, illegal drug trafficking and smuggling of people, are creating new hardships for governments throughout the world. in general, problems caused by past phenomena or events are taking place in the present and may affect all spheres of human activities, any territory, and time of the functioning of human resources. we propose classifying social problems according to the following criteria.  the nature of their origin: those conditioned genetically, those formed by the environment, artificial;  the environment of their occurrence: natural, biological, technical, economic, social, managerial;  reality: real objective and subjective problems, virtual problems, pseudoproblems;  expectation: expected and unexpected problems;  threats: safe, dangerous, and catastrophic problems;  the possibility of overcoming: problems that can be solved and those that cannot be solved;  period of existence or influence: temporary, current, short-term, medium-term, long-term, strategic, and constant problems;  the rate of their occurrence or deployment: slow, rapid, and sudden problems;  the term of their occurrence: primordial, past, present-day, and future problems;  usefulness: useful, neutral, and harmful problems;  consequences or results: positive problems, problems without consequences or without results;  sphere of activity: food problems, problems concerning raw materials, energy (power) problems. 3. global challenges. global trends the global problematic of social development gives birth to global challenges. challenges are strategic guidelines that are desired by humanity compelled on one hand and voluntarily on the other. these are demands, signals, claims, and encouragement concerning the performance of certain actions in the sphere of production, distribution, exchange, and consumption on a global scale that cause certain transformational changes. challenges arise mainly because of two reasons. the first consists of unsolved current problems and threats in the society that affect the quality of human activities. the second consists of people’s aspiration to improve their mode of life, allow their families to prosper, and ensure a decent future for their descendants. people thus define their strategic guidelines; on one hand, they do this compelled and on the other hand, they do this voluntarily. specialists in the world economic forum have defined ten global challenges that require the cooperation of humanity (world economic forum 2015): – food security and development of agriculture. the forecasts claim that by 2050 the population of our planet baltic journal of economic studies 63 vol. 4, no. 3, 2018 will be nine billion people. in order to feed this number, 60 percent more food will have to be produced, which in turn requires the prosperity of small farmers. – economic growth and social integration. this problem consists of the fact that the recovery of the global economy after the crisis has been very weak and nonuniform. – employment, habits, and human capital are the three driving forces forming future university education. these elements will form the essence of higher education. – safety of the environment and resources. this presupposes that the problem of changing climate will be solved. – the future of the global financial system. this sphere requires the creation of world institutes because the monetary and credit system is unstable and is subject to various crises. – the future of the internet. given the problem of websites and e-mail accounts being hacked, the internet has forever altered the safety of information at all institutions. – gender parity, concerning the provision of gender equality, and women’s rights and opportunities in developing countries. – global criminality and fighting corruption, which is one of the ways of solving the problem of global poverty. – long-term investments, infrastructure, and development, including the introduction of innovations to infrastructure and industry, and carrying out various experiments in this sphere. – international trade and investments. the main global challenges in this sphere depend on china; the issue is how the economy of this country will be developed in world markets. kristen gelsdorf defines global challenges as any trends with the potential for serious global influences; thus certain humanitarian problems arise and these problems must be solved by world humanitarian organizations (gelsdorf, 2010). gelsdorf also presents a list of global challenges: climate changes. increasing temperature will collaterally lead to the extinction of territories; poverty and social inequality. approximately one-half of the world’s population lives at less than 1 percent of the world’s wealth; financial and economic crises. the decreased rate of world economic development has led to an increase in poverty and unemployment, which in turn causes an increased demand in developing countries for humanitarian help; food crisis. over one billion people all over the world suffer from hunger; 25,000 children die every day of insufficient nutrition; currently, two billion people suffer from microdeficit of nutrients. production of food will not be able to grow by 50  percent by 2025 compared to the present-day level in order to keep up with the growing population, so the food crisis will threaten human life worldwide; a deficit of water. the number of people without access to safe water will increase from over one billion people to two billion people by 2025; energy security. the demand for energy is growing, which will lead to a deficit of energy resources by 2030 and will create stronger stimuli to make investments in renewable energy sources; migration, which is growing and creates challenges within countries, as well as on the global level; increase of population and demographic shift. by 2025, the world’s population is predicted to increase to eight billion people, which will lead to an increased load on global resources and global institutions; urbanization. by 2060, the population in cities will increase twofold in asia, and in africa will increase by 150 percent. this will lead to significant social inequalities and risks, including significant problems with health, insufficient nutrition, underemployment, and low income. these problems are a constant threat to the safety of billions of people; pandemic diseases and infectious diseases. according to forecasts, any large-scale pandemic influenza could result in two to sixty million deaths. global trends. the abovementioned global threats, risks, problems, and challenges of social development affect the formation and development of global trends. a global trend as a direction of social development is a continuous process; the main modern global trends are: internationalization, socialization, integration, disintegration, urbanization, regionalization, homogenization, transnationalization, vertically oriented corporatization, shadowing, differentiation, polarization, confrontation, marginalization, fragmentation of state activities, sharpening of competition, activation of innovative and investing activities, stratification of the society, deepened international division of labour in the spheres of specialization and cooperation of production, and concentration of management (world economic forum, 2016). according to an investigation by s.e. sardak and v.t. sukhoteplyi, the most significant critical events will start to occur in 2030 when the world enters a new period of global dynamics in the sphere of human-resources development (sardak et al., 2013). social development will take place in accordance with identified scenario forecasts, depending on the dominating direction of human creative activities and on the size of the world’s population (sardak, 2011). according to the national intelligence council, the improvement of rights and opportunities of individuals and distribution of power between states and from states to informal networks will cause a significant influence. this process will be facilitated through the increase of asia’s share in the world economy, as well as through democratization on the international and national levels. two main megatrends can be defined (national intelligence council 2012, iii): the demographic megatrend, an especially quick ageing; and the resource megatrend, the growing demand baltic journal of economic studies 64 vol. 4, no. 3, 2018 for resources that, in the case of food and water, may lead to a deficit of resources. these trends will gain a significant momentum during the following fifteen to twenty years. in general, four megatrends are described in the report: 1) individual improvement of rights and opportunities, which will present an opportunity to lower the level of poverty, increase the global middle class, improve the level of education, and use new communications, technologies, and advantages of the health care system. 2) diffusion of power – no hegemonic power will be present. it will be the multipolar world. 3) the demographic megatrend. 4) the resource megatrend. global socialization also appears to be a recent global trend (sardak et al., 2017). the globalization and integration processes taking place within a national economy penetrate all spheres of life, not only the economy but also the social sector (simakhova, 2016). the main goal of increasing the social orientation of world countries consists of the restriction and neutralization of the potentially destructive nature (in the social context) of the market (bilska, 2015). international relations in the “new europe” are thus formed in the process of global socialization. by means of this socialization, the eu introduces its constituent liberal standards to central and eastern europe. socialization in europe can be best explained as a process of rational actions in the normative sphere of the legalized international situation (shimmelfennig, 2000). f.  shimmelfennig views global socialization only from the aspect of the political and democratic spheres. we give socialization a broader meaning, defining it as a trend and as a process in the economic sphere, as well as in the social sphere. financial globalization also contributes to the reinforcement of the abovementioned trends (stukalo, 2006). at the end of the first decade of the twenty-first century, global actors also caused an increasing impact on the direction of social development in the conditions of globalization. the issue of global actors is a matter sufficiently urgent to be discussed by scientists. there is a proposal to define global actors as global institutions (organizations), such as the wto or uno, communities of experts, tnc, or separate natural persons and legal entities with the significant power to influence world policy (madsen et al., 2016). first globalization contributed to the development of new forms of governmental authorities (von bogdandy et al., 2012). in other words, the traditional view of public authorities related to the state and politics cannot be simply transferred to the global sphere. regarding global actors, this means that they have social and political influence in the sense of exercising public power outside their countries. the second point is that scientists have proved that nongovernmental global actors play a significant role in the sphere of global policy and the construction of global society (sassen, 2006). world religious confessions also play an important role; for example, the state enclave vatican, which is an example of the civil power of the holy see of the catholic church), has its own non-commercial planned economy. the budget of the vatican is 310 million usd, and the general capital of this country is about 1 trillion usd. the sources of income include donations from catholics all over the world. in addition, great profit is brought by tourism – selling postage stamps, vatican coins, euros, souvenirs, payments for visiting museums. the greater part of the labour force is comprised of italian citizens. the words of holy fathers have significant importance in directing global trends of the world economy by means of over one billion believers representing the electorate. so, they define the direction of human resources management by generating ideas and their implementation in form of strategic guidelines, values, and priorities (vatican, 2013). we define global actors as follows: international organizations; leading states; regional economic and financial organizations; powerful corporations; institutional investors (pension funds, investment funds, insurance companies); large cities; well-known personalities (the richest owners, hierarchs of religious confessions, members of royal families, top managers of large companies, influential politicians, leading scientists, criminal authorities, heads of orders and societies as well as well-known sportsmen, actors, artists and other personalities) (filipenko, 2007; yakubovskiy, 2002). the role of global players in the process of directing global development is proved through statistical data. transnational corporations (tncs) control over 50 percent of the world’s industrial production; 67 percent of international trade; over 80 patents and licenses for new technical facilities, technologies, and knowledge; and almost 90 percent of direct foreign investments. movements of only 1-2 percent of their total cash can significantly change the parity of national currencies. the economic opportunities of large tncs can be compared with the gdp of average countries. the market capitalization of separate tncs exceeds 500  billion usd, and annual volumes of sales are 150–200 billion usd (samofalov, 2009). less than 1 percent of corporations form the core of the global economic hyperstructure that controls half of the world economy. at the end of the first decade of the twenty-first century, there were approximately 82,000 tncs, with 810,000 foreign branches. thanks to 90 percent direct foreign investments, they had a significant influence on national economies (shabalina, 2012). moreover, in 2012 the general cost of tnc assets increased to 87 trillion usd, which is fifteen trillion more than the world’s gdp. the level of employment in tncs was 72 million people, which is 2.2 percent of working people in the world (kuznecov, 2013). baltic journal of economic studies 65 vol. 4, no. 3, 2018 4. positive directions of social development in the twenty-first century, there is an increased necessity to search for ways to level the influence of dangerous factors on society because the traditionally recognized issues of the global problematic are supplemented by new global processes formed by past and modern generations (zghurovskyi et al., 2010). correcting the direction of social development in conditions of globalization under positivistic ideas will require: accepting global standards used for managing the development of human resources; designing a new world economic system; reforming the system of global institutionalization, intellectualization, and informatisation of the social environment; optimization of migratory movements of human resources; improvement of systems of supragovernment management and state management; optimization of the mechanism of international management and marketing; transformation of forms and methods of trading and economic exchange and collaboration; and deepening the level of economy socialization and labour humanization. after analysing theoretical basics of forming a global problematics in society, we can assume that this context is formed due to the predominant influence of human factors – various interests, various points of view, unwillingness to make concessions, and so on – and measures concerning the process of optimization often meet resistance because of their compulsory nature. this requires the construction of a mechanism for solving these problems, a mechanism that should be based on the management of human resources development. in figure 2, we propose a simplified scheme of the mechanism for solving the global problematics. as can be seen in figure 2, the process of solving the global problems requires the organization of monitoring that would provide diagnostics according to certain signals, and that would ascertain the history, dynamics of formation, and development of a certain problem situation. this work should be performed by an organization with authority in accordance with the importance of the given problem. received information will provide an opportunity to describe the problem and formalize it, for example, by building a model, to define the scale of the problem, the composition of human resources, and the form of their participation. on the basis of performed diagnostics, one can develop a plan to solve the problem by defining programs of actions, defining the composition of factors forming global problematics monitoring global problematics identification and characteristics of global problematics statement of the fact that the global problematic is solved development of a plan of action concerning the process of solving global problematics application of basic initial opposing measures marketing of necessary human resources, the definition of strategic benchmarks of development, coordination of interests, improving human capital, intellectualization of human activities, propagation of the necessity of researching and overcoming a problem, defining the attitude to the problem, revealing creative potential, the transformation of relations in society application of further applied opposing measures liquidation or neutralization of internal and external reasons for the problem; formation of internal and external factors helping to solve the problem; providing internal and external conditions for solving the problem; using internal and external methods of solving the problem by means of the most reasonable managerial functions, methods, principles, laws, values, standards restrictions and resources. preservation of experience used for solving global problematics scientific analysis of the process of solving the problem; taking measures for the prevention of an analogous problem in the future; preservation of information and transfer of experience figure 2. simplified scheme of the mechanism for solving the global problematics baltic journal of economic studies 66 vol. 4, no. 3, 2018 prognoses (forecasts), responsible personalities, the scope of authorities, necessary resources, time, and so on. after planning, it is necessary to organize initial events. this presupposes work in the spheres of information, communication and education, and coordination with human resources engaged in the internal and external environment. further events apply practical forms of solving the problem. 5. conclusion in conclusion, we should note that the beginning of the twenty-first century has its own problems of social development that is a consequence of new conditions of human activity and the changing nature of social relations. this problematic is caused by the formation of a unified common global space in the sphere of policy, economy, science, culture, and production – that is, it is caused by globalization. modern threats, risks, problems, challenges, and trends, which some decades ago were local and various in various regions, have now become global. the methods of managerial influencing of human resources appear to be completely dependent on the above-mentioned global components activated by global actors. the presence of the abovementioned problem issues in the social and economic systems of different management levels indicates systematic mistakes. they are historically formed and need to be adequately addressed to modern realities. this calls for the definition of a global ideological imagination of mankind for the organization of its life and development in the future. however, the formalization and certainty of the outlook of human civilization will require the implementation of transformations in the field of morality and social responsibility, which now dominate multifaceted views within the limits of polar contradictions from selfishness to altruism, from plunder to charity, from freedom to full dependence, from recognition of people equal rights to the recognition of choice, from compulsory liability to the possibility of its avoidance, from restrictions to total permissiveness, from unlimited domination to complete obedience, etc. and it must be borne in mind that these changes can provoke the emergence and aggravation of new global conflicts. in general, it must be conceded that the further direction of social development will depend on the forms and pace of globalization. as a result of the telecommunication revolution, the world is turning into a “global village”, where instability and rupture prevail, which makes it necessary to find a new balance of interests based on open and fruitful dialogue. accordingly, in order to optimize the socio-economic life of humanity, it is necessary not to stop globalization, but to improve its quality by creating opportunities for countries to find their own ways to overcome problems and achieve sustainable prosperity and security, which will determine the positive direction of social development. in the context of globalization, in order to prevent the loss of positive hereditary economic achievements and prevailing socio-cultural civilizational values, improve the environment of human life, and protect the rights, interests, and freedoms of the world, there is a need to optimize global factors, which influence the directions of social development. further research should analyse the development of scientific and methodical basics and applied mechanisms of directing social development in accordance with positivistic and progressive ideas. references: amin s. 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(2010). analysis of sustainable development – global and regional contexts, kyiv: ntuu kpi. baltic journal of economic studies 172 vol. 4, no. 3, 2018 corresponding author: 1 national prosecution academy of ukraine. 2 department of criminal law and procedure, kyiv national economic university named after vadym hetman. 3 department of criminal law and justice, academician stepan demianchuk international university of economics and humanities. doi: https://doi.org/10.30525/2256-0742/2018-4-3-172-178 tax avoidance as a threat to economic security: ways and methods of counteraction (domestic and foreign experience) serhii minchenko1 national prosecution academy of ukraine, ukraine olena oliinyk2 kyiv national economic university named after vadym hetman, ukraine andrii borovyk3 academician stepan demianchuk international university of economics and humanities, ukraine abstract. the article is devoted to separate issues of the use of criminal law in the regulation and protection of economic relations, as well as the question of the effectiveness of using such a method to ensure the country’s economic security. the comparison of methods and methods used in ukraine, the usa, germany, spain, belarus, which consisted both in the criminalization of certain acts and in the introduction of incentive and incentive rules for taxpayers. the subject of the study is the issue of criminalization and decriminalization of certain social relations in the field of economic security. first of all, it concerns the sphere of payment to the budget of taxes and other mandatory payments. the purpose of the article is to identify the factors that negatively affect the development of the modern economy. also, the study revealed and analysed the differences in the formulation of laws that provide for liability for tax evasion in order to find out the effectiveness of the latter. methodology. during the research, a complex of general scientific methods was used: the system – in the process of a comprehensive study of the system of criminal legal influence on the participants of the considered social relations; formally-dogmatic – when analysing the legal composition of crimes involving criminal liability for tax evasion; comparative-legal – within the framework of comparison of provisions of the current criminal code of ukraine and legislation on criminal liability of foreign countries; statistical – for the analysis and generalization of empirical information. conclusions. indicates the need for concentration of efforts aimed at carrying out preventive activities in the field of public relations, which, in turn, will contribute to the timely detection and termination of illegal activities, which is a serious threat to the economic security of each civilized country. the general concept for a set of measures that effectively and timely counteract certain socially negative (dangerous) tendencies that should take place today in the sphere of economic relations both in ukraine and abroad is developed and proposed. the authors expressed their own proposals regarding the improvement of the law on criminal liability for the issue raised. key words: taxes, fees, compulsory payments, evasion, financial resources, criminalization, fictitious entrepreneurship. jel classification: h23, e42, l26 1. introduction issues of state regulation of economic relations by criminalizing certain types of activity, in particular, in the area of taxation, use of financial resources, fictitious entrepreneurship, were considered at different periods by authors such as p.p. andrushko, v.i. borisov, l.p. brich, b.v. volzhenkin, n.o. gutorova, a.o. dudorov, a.g.  kalman, m.i. korzhansky, p.s.  matyshevsky, m.i.  melnyk, v.o. navrotsky, a.i. perepelitsa, v.m.  popovich, a.v. savchenko, v.v. stashis, y.l. streltsov, v.y. tatsiy, m.i. khavronyuk, v.p. khomenko, and others. the social and political situation in the country points to the need to reconsider the approach both to the criminalization of acts related to tax evasion baltic journal of economic studies 173 vol. 4, no. 3, 2018 and to the introduction of a series of encouraging and stimulating norms aimed at the formation of taxpayers’ legal consciousness, the creation of such a regime of economics, in which conditions are untimely and the incomplete payment of taxes will be economically less attractive than complying with the requirements of legislation in this area. however, in spite of the pain and urgency of this issue, the authors mentioned different approaches to resolving these issues, some agreement on the elaboration of a general concept for a set of measures that would effectively and timely counteract the socially negative (dangerous) trends that are supposed to be today in these areas has not been achieved. despite the fact that intentional tax evasion and compulsory payments, as well as fictitious entrepreneurship, as a means to achieve this goal, annually cause damage to the state budget more than crime of other categories, criminalization of these acts in the form that exists on this time, as a lever of influence on economic relations was extremely ineffective. in most cases, fictitious business, consisting in the formation of enterprises whose sole purpose is not the pursuit of economic activity, but the implementation of pseudo-operations, which, as a result of which enterprises in the real sector of the economy reduce their obligations to the budget by assigning a debt to false enterprises – “one-day” which have neither fixed assets nor any other property for foreclosure in order to compensate for the damage to the budget, is a component of tax evasion. 2. the current situation on the issue in ukraine at present, as a means of tax evasion, fictitious entrepreneurship in ukraine has become threatened, and the activity of registering fictitious companies, forming the required documents “on request” – has created a separate segment of the economy with a high level of organization and conspiracy. the abovementioned crimes not only seriously harm the state’s economic security due to the negative impact on tax and budget policies, social security, the development of priority sectors of the economy, the maintenance of the army, etc., but is also a significant obstacle to ensuring equal conditions for entrepreneurship and competitiveness, since “minimizers” for the lack of proper response from public authorities, are more competitive and crowded out of the market, which honestly pay taxes. such uneven preconditions also reject potential investors, for which compliance with the law is one of the main principles of business organization. under such conditions, it is important to introduce an effective mechanism for detecting, stopping unlawful activities for tax evasion, ensuring untaxed funds, bringing in guilty persons, or imposing financial sanctions as a means of preventing similar actions in further activities and equalizing opportunities with honest payers, a means of influencing and regulating economic relations. the problem of applying the criminal law, which implies a responsibility for tax evasion and false entrepreneurship, is a constant subject of debate among judicial and law enforcement agencies, but measures to improve them are not taken. revision of the disposition of art. 212 of the criminal code of ukraine, for example, has not changed since 2008 but has been supplemented by parts 4 and 5, which contain incentive norms for taxpayers, and the wording of art. 205 of the criminal code of ukraine, changed in 2011, in our opinion, only complicated the work of fiscal and other law enforcement agencies, directing their efforts to document circumstances that in themselves do not constitute a major public danger and the significant economic effect of their investigation is not achieved. recognition of a company fictitious is used by the fiscal authorities as a means of pressure on enterprises of the real sector of the economy without achieving an economic effect for the country. in our opinion, one of the reasons for the ineffectiveness of criminal liability for fictitious entrepreneurship as a lever of influence on economic relations is the imperfect formulation of its disposition, which focuses on identifying and fixing primarily the establishment of such enterprises, and not their activities. the infliction of large pecuniary damage serves only as a qualifying attribute of the offense (on amendments to the law of ukraine regarding humanization of responsibility for offenses in the sphere of economic activity, 2015). in this case, the necessary mandatory feature of the crime is the presence of a special purpose at the time of the acquisition of the formation of the enterprise – a cover of illegal activities. moreover, such a goal must be available to the person at the time of the commission of activities for the formation, acquisition of the enterprise. however, in most cases, individuals from among the socially deprived citizens have the sole purpose of obtaining material remuneration for the formal registration of their own enterprises. they are not interested in any further fate of the enterprise, nor for any purpose – legal or illegal – intend to use it by persons who offered and helped to register or re-register the company. in such circumstances, the intent of the said persons does not cover any specific illegal purpose and it is completely unknown to them what kind of illegal activity is intended to cover those who inclined them to register themselves with the enterprises. moreover, the disposition of this article is formulated in such a way that, if at the time of the acquisition or formation of the enterprise the person did not have any baltic journal of economic studies 174 vol. 4, no. 3, 2018 unlawful purpose, and such a goal appeared after the actions of the formation or acquisition of the enterprise, its actions do not contain signs of the said crime but it is practically impossible to prove the time of occurrence of such a motive. not in line with current conditions and trends in the development of social relations in the field of economic activity is the disposition of art. 212 of the criminal code of ukraine, which is constructed by the legislator as a crime with material composition. in order to find out the presence of features of the crime in the person’s actions, it is necessary that certain criminal liability laws be established, the consequences in the form of actual non-availability to the budgets or state target funds of funds in significant (large or especially large) amounts that are in a causal relationship with the actions or inaction of the guilty person. it should be noted that the scope of taxation in ukraine is regulated by the following legislative acts: the constitution of ukraine, the tax code of ukraine, the budget code of ukraine, the customs code of ukraine, the code of merchant shipping of ukraine, the laws of ukraine: “on principles of state regulatory policy in the field of economic activity”, “on personal income tax”, “on value added tax”, “on the cmu”, “on the state fiscal service of ukraine” and the number of subordinate normative acts that submit almost daily numerous changes and additions. such a state of tax law cannot but affects the quality of accounting and education of taxpayers themselves. 3. problematic issues regarding the application of legislation providing for criminal liability for tax evasion as noted above, the offense under consideration is deemed to be terminated from the moment of actual non-receipt of funds in the budgets or state target funds in significant (large or especially large) amounts. such non-use is deducted by the state fiscal authorities of ukraine, which, in accordance with their tasks and authorities, are responsible for implementing the state tax policy and carry out, within the limits of the powers provided for by law, control over the receipt of taxes and duties, customs and other payments, and other state budget funds. at the same time, the obligatory and the most difficult element to prove the guilt of committing the crime in question is the establishment of the guilty person’s intention to avoid paying taxes. in the presence of modern business entities, consultants engaged in accounting and reporting, or structural units in companies whose officials are engaged in these functions, to bring the knowledge of the head of the business entity about the incorrect application of the rules of taxation in the field of taxation, its awareness regarding the intentional actions aimed at tax evasion, is a complicated thing. as a result, the refutation of the arguments of the fiscal authorities and the prosecution party is based on the fact that the head of the company does not include accounting and tax accounting, taxes and deductions of taxes and duties since such functions have been transferred to other persons. on the other hand, the head of a financial unit or accounting department does not usually handle the entire document flow, since these functions are distributed among subordinate employees, most of which, although they directly carry out all economic transactions, however, are not subjects of the crime envisaged in art. 212 of the criminal code of ukraine. under such conditions, it is impossible to determine directly the managers who are interested in minimizing the tax burden without establishing the facts of the preliminary conspiracy, giving specific instructions from the company managers, forging documents, and directing them directly to the responsible authorities. in addition, the ambiguity and contradictory nature of the tax legislation, the diversity of the approach to their interpretation, and the constant change in the legal position of the tax authorities became the basis for the supreme court’s ruling of february 20, 2018, in the case no. 813/2617/15, where the court concluded that it was not may be brought to the responsibility of the taxpayer who acted in accordance with the tax advice provided to him in writing or in electronic form, as well as a general tax advice, in particular, on the basis of first, that in the future such generalizing tax advice or tax advice has been changed or cancelled (art. 53 of the tax code of ukraine). the lack of a clear legal position on the tax question, the opposite or changing position of tax authorities regarding their application is also an additional opportunity to avoid liability for non-payment of taxes. as a result, although criminal proceedings are initiated on the facts of evasion from taxes on hundreds of millions of hryvnias, there is virtually no information about the actual convictions of the perpetrators. a sample of the unified state register of judgments based on the search criteria “sentence”, “crimes in the field of economic activity”, “tax evasion” for the period from 01/01/2017 to 31/12/2017 revealed 38 sentences in cases of this category, of which, according to data accounting, as of august 2018, only 21 has become legally binding. the indicated sentences approved an agreement with the accused in 10 proceedings and sentenced to a fine in the amount of 17 thousand uah up to 255 thousand uah, and another 10 people were convicted on the results of proceedings in the normal manner to fines of the same magnitude. only one person has been ordered by a court of the first instance to pay a fine in excess of 2.5 million uah. at the same time, in 6 proceedings, the defendants were released from criminal liability on various grounds and 11 persons were acquitted (register of judicial decisions of ukraine). baltic journal of economic studies 175 vol. 4, no. 3, 2018 the study of persons sentenced for intentional evasion of taxes and the circumstances of a criminal offense revealed a certain tendency: most of them are not managers of the enterprise that evade tax payments, but were executives or founders of business entities with signs of fictitiousness and only contributed to the evasion from paying taxes to heads of other business entities, details of which were not established during the pre-trial investigation. cases of prosecution of heads of business entities are singular and more likely to look like an exception to the rule that gives grounds for the conclusion about inefficiencies in the impact on economic relations in the sphere of filling the budgets and protecting the economy by criminal means. 4. the experience of foreign countries in preventing crimes that adversely affect economic security however, there are many successful approaches to protecting the state’s economy from “minimizers” by creating conditions for their legitimate behaviour and payment of arrears to the budget and reimbursement of damages. here’s what offers us successful experience in foreign countries. so, the illustrative example of using the methods of influence on the unscrupulous taxpayer is the case of the portuguese footballer cristiano ronaldo, opened in june 2017, started on the report of the state tax agency of spain. in the case, the tax position was based on the fact that the transfer of non-proprietary rights to the brand was fictitious with the use of offshore companies. the reason for the decision in favour of the state was the conclusion of the court that the defence “could not provide specific explanations regarding tax operations that led to the commencement of investigations.” and this thesis is the basis of the decision to recover 15 million euro in favour of the spanish budget (https://juscutum. com/futbolisti-vs-podatkivci-ofshorne-merezh/). it is indicative that the fact of carrying out questionable operations, which resulted in the minimization of the tax burden, was acknowledged as proof of the tendency to avoid tax payments. in the court’s opinion, this is evidence of the intentional actions of a person who has benefited from this. in another case, considered in may 2017, the spanish supreme court ruled that a striker of the barcelona football club leonel messi and his father jorge oracio messi were sentenced to 21 months in prison for tax evasion of 4.1 million euro. the arguments of the defence that lionel messi did not know about his financial affairs and did not suspect any violations of the law when his father gave him documents or contracts for signature, the supreme court failed to take into account. according to the criminal legislation of ukraine, such actions could not be regarded as intentional, and thus would also be excluded from liability, for example, under the law of ukraine on criminal liability. why, unlike domestic legislation, which in these cases would be “powerless” to prove the fact of tax evasion, the legislation of spain proved to be effective. we will analyse the tax evasion wording for the spanish criminal code. in art. 305 of the criminal code of spain established that criminal responsibility occurs for any action or inaction, which leads to causing losses to the budgets by their failure to pay, debit debt or repossession (criminal code of spain, 1998). the sanction of the article provides for punishment in the form of deprivation of liberty from one to four years with a fine of six times the amount of assessed sums. at the same time, the article contains an incentive clause, which provides for exemption from criminal liability, if a person, before being informed of the commencement of a tax audit, or if such an examination has been initiated, but before the prosecutor’s office, the state prosecutor or procedural representative of the administration of the autonomy, or the local administration will file a complaint or a statement against that person, or until the prosecutor’s office or the investigating judge acts in consequence of which the person becomes aware of the initiation of an investigation (criminal code of spain, 2007). 5. comparative characteristics of legislation of ukraine and other countries thus, there are two significant differences in the formulation of the tax evasion and incentive disposition. 1. the formulation of the crime in the criminal code of ukraine presupposes the presence of such a mandatory element as a deliberate action and ultimate goal. the existence of intent for the spanish criminal code is not important; there is a sufficiently causal connection between actions or inaction and the occurrence of negative consequences in the form of ineligible funds to the budget. 2. incentive rule in part 4 of art. 212 of the criminal code of ukraine provides for the possibility of exemption from criminal liability in the event of repayment of arrears. this rule applies to a person who is under investigation and has acquired procedural status in it. the spanish criminal code, in contrast to one incentive, established in the criminal code of ukraine, introduced two incentives: 1) limitation of the time for recognition of the fact of tax evasion and repayment before the signing of an act or commencement of criminal prosecution; and 2) the multiplicity of debt collection in case of bringing the debtor in court. therefore, under domestic law, on the one hand, law enforcement officers have an extremely difficult task of proving the intentional actions of the head to baltic journal of economic studies 176 vol. 4, no. 3, 2018 minimize tax obligations, and on the other hand, if the law enforcement agencies achieve a positive result, when the evidence gathered cannot be denied, the debt can be repaid at any stage before the court leaves the counselling room, and in this way, the person not only avoids criminal liability but also uses the debt throughout the time of the proceedings is conducted that lasts for years. such conditions make it difficult to encourage the taxpayer to behave properly, as opposed to spain, where the payer is always in a position to: make a timely recognition of the fact of tax evasion and reimbursement, without any legal consequences for himself or on the basis of competition, to prove that all business transactions are conducted in compliance with the law, and in case of uncertainty – to be punished in the amount that reaches 600 percent of the amount of debt. in this case, the personal attitude of the payer to minimize tax, awareness of the conditions and procedure of taxation, etc., is not essential for the decision of the court to make a decision. a slightly different approach is demonstrated in the laws of the federal republic of germany and the united states, where criminal liability comes only from the facts of intentional tax evasion. non-payment of taxes by negligence, including due to lack of knowledge of the payer regarding the need for payment, excludes criminal liability. however, the application of such an approach is offset by the fact that the existence of intentions is not so much about its availability for the commission of specific actions, business operations, facilities that can be established in case of detecting the fact of forgery of documents or providing false information and, first of all, by assessing the value of property, the property of such a payer, the ability to lead a lifestyle for funds officially declared. that is, one of the main means of proving the taxpayer’s guilt in these countries is the use of indirect methods that only capture the fact of the mismatch of the property status with the declared profits and this is sufficient for the conclusion of the intention to avoid tax (http://www.stattionline.org.ua/histori/113/21088rozsliduvannya-uxilennya-vid-splati-podatkiv-dosvidfrn-ta-ssha.html). thus, it can be concluded that the formal definition of tax evasion as intentional acts in ukraine coincides with the definition in germany and the united states, in contrast to spain, where criminal acts are considered to be any act that results in harm to the budget through non-receipt of funds. however, in content, unlike ukraine, where the prosecution is inclined to commit concrete actions, forcing the responsibility for tax evasion in the us, the federal republic of germany, and spain intent most often due to the inconsistency of the general property status with declared income and the dubiousness of transactions. in this case, in the tax legislation of the united states and other developed countries, the presumption of innocence, in tax cases, proving the right to rely on the taxpayer and the latter is deprived of the opportunity to refuse to provide information that may be used against him during the trial. at the same time, although the usa legislation criminalized not only non-payment of taxes, even actions aimed at attempting to evade taxation, the very procedure for collecting tax arrears also prompts the payer to cooperate. the main purpose of tax authorities is precisely the filling of the budget and not the bringing of the person to liability. this approach is implemented by the implementers of the order, in which the taxpayer repeatedly sends claims for payment of taxes, which he can appeal to a tax authority or to a court. subsequently, the property of such a taxpayer is arrested, which can be cancelled before the start of tenders in the event of repayment of arrears. at the same time, payment of arrears with additional payments on it excludes prosecution and bringing a person to criminal liability. although unlike spain’s legislation, such incentive mechanisms for debt repayment as timeliness of such actions and the multiplicity of foreclosure are not applied, the same goal is achieved by arresting the property and selling it quickly if the debtor delays. a significant difference is also in the mechanisms of counteracting fictitious entrepreneurship. for example, according to the legislation of the republic of belarus, the use of fake enterprises is criminalized by establishing responsibility for: 1. purchase of goods by non-cash payment from fictitious enterprises with subsequent realization for cash. 2. acquisition of goods for cash through a parent company at a price lower than sold for a few percent and their subsequent sale. 3. purchase of goods at the minimum price and further realization of their fictitious enterprise. thus, the legislator of the republic of belarus, by criminalizing the aforementioned economic relations, directed efforts to establish criminal liability, first of all, not for the creation of a fictitious enterprise but for the use of his “services”, the task of such activity of losses, which is a real social danger. spanish criminal law (articles 290, 293, 294, 295) provides for the responsibility of the leaders of associations (actual or legal) for the formation of associations when they falsify annual and other documents that must reflect the legal or economic situation of the organization, which may contribute to the cause of economic harm to the association itself, its members or third parties (article 290 of the criminal code of spain) (criminal code of spain, 1998). fictitious entrepreneurship is seen as a form of fraud in france, greece, the prc, italy, germany, switzerland, baltic journal of economic studies 177 vol. 4, no. 3, 2018 the united kingdom, the united states, canada, as the main means of committing it is deception and abuse of trust (baturina, 2011). it is precisely the fact that managers of enterprises in the real sector of the economy are responsible for using the services of a fictitious enterprise can ensure the receipt of funds to the budget, in contrast to the massive prosecution of innocent people who are deprived of funds even in their existence. another stimulus to the detection and suppression of fictitious business is also the encouragement to cooperate in identifying fictitious enterprises in banks and other financial institutions. in particular, the us law requires financial institutions to detect suspicious transactions and report them to law enforcement agencies. for failure to comply with these requirements, financial institutions and their officials may be liable to civil and criminal liability in the form of fines that exceed the sum of a suspicious transaction in a multiple amount. in this case, signs of such suspicious transactions amounting to more than 10 thousand us dollars, a noneconomic operation, and any transactions that may be very useful in illegal activities are identified (osika, 2003). it should also be noted that there are problems in distinguishing the lawful optimization of tax liabilities or tax evasion and tax evasion as unlawful activities to reduce deductions to the budget. in domestic legislation, this issue remains unresolved; however, the usa has significant advances in this area. legal dictionaries interpret the avoidance of taxation as the use by a person of tax planning opportunities permitted by law to reduce fiscal obligations. as justice court judge 2 of the district john j. hend has rightly observed, “nobody, in fulfilling his public duty, to pay more than the law requires, since taxes are a forced deduction, not voluntary contributions.” however, the wording of art. 212 of the criminal code of ukraine, as well as paragraph 7201 of the pc of the united states, do not contain indications as to the unlawfulness of the actions of the subject aimed at minimizing (optimizing) tax liabilities that blurs the boundaries between lawful conduct for the optimization of activities and unlawful tax evasion (the criminal code of ukraine, 2001). legal uncertainty in domestic legislation between the possible legitimate conduct of the taxpayer to minimize payments is also one of the negative factors in the field of taxation. 6. practical application of the results criminal legislation needs to be amended as regards the formulation of the disposition of articles 212 and 205 of the criminal code of ukraine, as well as the introduction of incentive rules for the lawful conduct of taxpayers and financial institutions. in particular, from the disposition of art. 212 of the criminal code of ukraine, it is expedient to exclude such a sign as “intentional” by establishing liability for any actions, contrary to the requirements of tax legislation, which led to non-receipt of taxes and mandatory payments to the budget. it is necessary to establish an incentive rule for the absence of grounds for criminal prosecution in the event of payment of tax and funds for its untimely transfer until the commencement of criminal proceedings or the signing of a tax audit act. it is also desirable to implement in art. 212 of the criminal code of ukraine, stimulating the norm regarding the use of multiplicity in the event of blaming the plain in court. disposition of art. 205 of the criminal code of ukraine should be formulated in such a way that the criminal responsibility came only for the use of “services” of fictitious enterprises and not for the fact of their formation. in this case, the actions of those who created, acquired, or accompanied the establishment, the acquisition of the enterprise qualify as incitement or aiding in the use of a fictitious enterprise or as an aiding in evasion of taxes and establish criminal liability for late notification or failure to report suspicious banking transactions by financial enterprises the sector. the above proposals for changes to the legislation on criminal liability and tax legislation will have a positive impact on solving urgent problems in the field of public relations and will facilitate law enforcement and other state bodies in filling the budget and ensuring economic security throughout the country. 7. conclusions thus, we can conclude that the criminal law means of influencing economic relations in ukraine in the field of taxation are ineffective; their application does not ensure the proper economic security of the country. the complexity of eliminating the consequences of making fictitious business determines the need to concentrate efforts on preventive activities in this area, the timely detection and cessation of such activities, and the involvement in identifying questionable financial transactions of financial sector enterprises. the low effectiveness of the judicial practice of tax evasion and false entrepreneurship creates an impersonal perception of criminal behaviour and does not fulfil regulatory, punitive, and preventive functions. thus, in addition to developing effective methods of implementing economic policies both in the country and abroad, in many respects the resolution of problem issues aimed at achieving the stability of the economic situation depends on the timely perception and reproduction by the legislator in the normative material of the trends that are taking place today the world, especially in the field of such dynamic in nature of social relations. baltic journal of economic studies 178 vol. 4, no. 3, 2018 references: electronic resource. retrieved from: http://zakon4.rada.gov.ua/laws/show/4025-17 electronic resource. retrieved from: http://reyestr.court.gov.ua/review/72367032 electronic resource. retrieved from: http://www.reyestr.court.gov.ua/page/2 electronic resource. retrieved from: https://juscutum.com/futbolisti-vs-podatkivci-ofshorne-merezh/ criminal code of spain (1998). [ed. and with the prelude n.f. kuznetsova, f.m. reshetnikova; per. v.p. zyryanov, l.g. schneider]. m.: mirror, 218 p. electronic resource. retrieved from: artlibrary2007.narod.ru/kodeks/ispanii_uk.doc electronic resource. retrieved from: http://www.stattionline.org.ua/histori/113/21088-rozsliduvannyauxilennya-vid-splati-podatkiv-dosvid-frn-ta-ssha.html baturina e.v., litvinenko a.n. (2011). fictitious entrepreneurship: the problem of non-compliance of economic and legal regulation with real economic practice. bulletin of the st. petersburg university of the ministry of internal affairs of russia. st. petersburg, no 4(52), p. 100-105. osika i.м. (2003). counteraction of economic crime: review of international sciences.-pract. seed. right and safety. t. 2, no. 2, p. 213-219. electronic resource. retrieved from: http://www.big-lib.com/book/63_kriminalnii_kodeks_ykraini___10_ rokiv_ochikyvan/6786_vidmejyvannya_podatkovoi_optimizacii__vid_yhilennya_vid_splati_podatkiv__ federalnii_dosvid_ssha__ electronic resource. retrieved from: http://elar.naiau.kiev.ua/bitstream/123456789/1006/1/mikish_dis.pdf baltic journal of economic studies 25 vol. 2, no. 1, 2016 corresponding author: 1 department of finance, taras shevchenko national university of kyiv. email: sergiy.golikov@mail.ru basic concepts of tax security as part of the financial security of ukraine sergiy golikov1, taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to examine the essence of the term «tax security», its fundamental characteristics, such as threats, risks, interests and protection, defined how the state could provide them. the paper analyses economic, social and legal nature of the term. key indicators of tax security of ukraine identified and analyzed. in addition, the paper studies an integrated approach of tax security threats. in case of a big amount of threats, they divided to four main sources of threats: the state of the national economy, the state of the public finances, social features of the society and institutional environment. for each source, there have been identified and analyzed the most important factors of threats of tax security of ukraine. methodology. the survey based on an analysis of existing studies of ukrainian and foreign scientists about the essence and nature of "tax security" for the last 10 years. in addition, to determine the essence and the concept, goals and objectives, methods and principles of the economic nature of the tax security, main risks, threats, expectations and results of efficient tax security identified. to build an integrated approach it is necessary to analyse all existing and potential factors of threats. there data used from reports of the state statistics service of ukraine, ministry of economic development and trade of ukraine, pwc and world bank. results of the survey showed that tax security is such a condition of tax security, when the process of harmonization of taxation provided under effective management of risks and threats that arise in tax area, by taking the necessary measures by the executive bodies to meet the interests of the state, society and taxpayers (business entities, organizations, people). integrated approach of threats analysis of tax security shows that the most dangerous threats are those that are associated with poor economic development, considerable socio-economic stratification of the population, the level of shadow economy and low tax culture. the threat of the state of public finances is sufficiently large threat, but not the most dangerous, but the increase in the budget deficit and debt can affect significantly negatively on the tax security of ukraine. the institutional environment is another threat to the tax security. its main danger are the low efficiency of the tax authorities and uncertainty and ambiguity of legislation. practical implications. in order to prevent a drop in tax security it is necessary to conduct continuous monitoring aforementioned factors on the sources of threats. all mentioned sources of threats would help the state authorities to build an effective concept of tax security of ukraine. key words: tax security, financial security, economic security, indicators of tax security, tax security criterias, taxation. jel classification: f52, h2, h7 1. introduction social and economic life of ukraine depends on the security of all spheres of the state. imbalances in the financial system of ukraine connected with high risks and threats in the tax system. the main risk is a significant tax burden on economic entities, local budget deficit, low tax revenues, problems in the formation of the tax debt and so on. it is necessary to explore the essence of the concept of "tax security " and its main characteristics to resolve these problems. a considerable part of ukrainian and foreign scientists engaged in research of transformation processes in the economy related to state tax policy. the study of the nature and basic characteristics of the security tax given a great interest, because the level of tax security shows the effectiveness of the tax system as a whole and it will help to analyse whether the amount of revenue meets the needs of the state, business and society in general. the main ukrainian scientists on researching tax security are baranovskiy, berezhna, belostotskiy, ishchenko, zadorozhniy, martyniuk, poljanska, sokolovka, and among foreign authors – arefiev, kashin, ponomariev, timofeev and tikhonov. however, despite considerable researches in tax security, still more attention should be paid to the research of its fundamental characteristics, threats, risks, and protect the interests. baltic journal of economic studies 26 vol. 2, no. 1, 2016 2. economic, legal and social aspects of the term “tax security” after some investigation, the essence of "tax security " we can say that the scientists understand it as a form of security that must ensure the conditions of interaction between state, business entities and individuals in order to achieve the principle of mutual responsibility of management. the complexity of this term is that the authors define different features to this category (ishchenko, 2012). firstly, the tax security characterizes the security protecting of taxpayers interests and those who distribute gross domestic product through taxation. second, the ability of the system is to perform its functions in time and to respond to any changes. third, the ability and capacity to respond to the risks and hazards, eliminate, minimize, accept or ignore their impact on the tax security of all counter-parties. it is necessary to examine thoroughly this economic term, namely to analyse the economic, social and legal nature of its existence. this will allow characterizing the concept of "tax security ", its characteristics and principles of its functioning. the economic aspect of tax security means the level of fullness budget financial resources, which affects by a number of factors: the level of economic development, growth of gross domestic product, inflation, the tax burden on economic entities involved in reproduction. for better understanding of this aspect, you need to understand what does tax efficiency mean and how does it level determined. theoretically, the tax system should not prevent people to allocate their time and resources in a way that gave them the most benefit. taxes that satisfy this condition, called neutral taxes – that taxes do not undermine the structure of consumer spending, manufacturing in firms, they do not push individuals and companies to avoid paying taxes and do not create unnecessary tax burden. a neutral tax is not pushing people to spend more of their resources on business trips, medical care, reduce the cost of food and clothing just because a business trip or medical services, for example, is not taxed, and clothes and foodstuffs are taxed. taxes should not force people and businesses to spend more time and money in search of investment, which seems to reduce the tax burden. the effectiveness of taxes can show by the ratio of costs and results. the results can considered as the amount of taxes collected by the state budget, expenditures – funds for levying these taxes. on the other hand, if the payer has paid a large sum of taxes, it may cause a decrease in the activity of entrepreneurs and investors or business may shift into shadow that subsequently leads to a reduction in tax revenue (kashin, 2008). the legal aspect means the control of the tax system, creating conditions for fair taxation of social reproduction and declarations in terms of laws. in addition, abuse in the distribution of the budget can be minimized through regulated provisions. however, it is difficult to avoid table 1 the main risks, threats, expectations and results for tax security risks threats for the state: 1. the inability to obtain the planned volume of tax revenues; 2. inability to perform their functions; 3. the increase of the budget deficit due to a shortfall in tax payments; 4. the increase of tax offenses and abuses. for taxpayers: 1. tax pressure increase; 2. the complexity of the taxation; 3. penalties for late payment of taxes, because of the complexity of the tax system; 4. the suspension of business. for the state: 1. the tax evasion; 2. the inefficient use of collected taxes; 3. the increase in administration costs; 4. the lack of tax culture; 5. the constant changes in legislation.. for taxpayers: 1. excessive supervision of regulatory bodies; 2. unfair amount of tax burden among the various levels of business entities; 3. the growth of the shadow economy; 4. capital flowing abroad. opportunities results for the state: 1. timely and full payment of taxes by the business entities; 2. creating conditions to encourage households; 3. the existence of an effective tax system and tax sharing; 4. regulation of the tax collection mechanism and developing effective methods of dealing with tax evasion. for taxpayers: 1. the ability to pay taxes on time and fully; 2. transparent and efficient allocation of collected budget funds; 3. the increase of tax culture by business entities and consumers; 4. creating incentives for small business. for the state: 1. reduce management costs and taxes; 2. determine the optimal conditions of taxation of business entities; 3. develop an effective relationship between the amount of taxes and the size of tax benefits; 4. prevent regular changes to the legislation. for taxpayers: 1. transparency and clarity of tax reporting for business entities; 2. justice in resolving disputes and controversies between public authorities and business entities; 3. simplification of tax control for business entities by reducing the number of inspections and pressure; 4. the opportunity to be informed about significant changes in legislation (creating informational online resources) baltic journal of economic studies 27 vol. 2, no. 1, 2016 abuses due to the political and economic crisis, and of the fact that there are some differences and difficulties in the ukrainian legislation. the main difficulties are the contradiction of two types of accounting – financial and tax, many-sided interpretation of the distribution of the taxable costs and revenues, uncertainty in calculation of financial result, a single social contribution, income tax, value added tax and so on. as a result, all above-mentioned difficulties complicated process of declaring financial results of economic activity, there are ways to deliberate and so-called legal evasion of payment of certain taxes and reducing the total revenue of the state. the social aspect is the level of protection of interests of all entities – government, business entities and the public, through a fair taxation, tax preferences, and tax sharing between the subjects of the financial system. so-called "tax culture" rules and discipline should established, which would provide the necessary level of tax security. social orientation taxes must manifested by the ratio of direct and indirect taxation. moreover, direct taxation should prevail, which will reduce the burden on the consumers themselves, and in case of effective tax rates will activate the production in the state. moreover, collected taxes should be effectively implemented to solve socio-economic problems to satisfy the interests of both counter-parties: the state and the public. thus, only through sustainable development of economy, society and rational use of budgetary funds can achieve the necessary level of tax security that will satisfy the interests of all economic subjects. however, it is only possible with an effective, efficient and rational tax system (ivanov, 2010). 3. risks, threats, expectations and results analysis for tax security of all subjects of tax security to determine the essence and concept, goals and objectives, methods and principles of the economic nature of tax security it is necessary to identify the main security risks, threats, expectations and results if it will work effectively. to avoid duality we should determine the parameters listed above both the state (subject, which charges taxes) and taxpayers (subjects, who pays those taxes). we should consider under the risk the probability of adverse events for tax security caused by the inefficiency of the tax system, the effect of threats that are already exist, and the external and internal factors impact on it. the following table shows the main risks, threats, expectations and results for tax security (table 1). tax security characterized by the ability to maintain subjects results of their work under the influence of a variety of both external and internal threats and risks. the main goal of the state is to minimize tax risks by reducing the number of situations that cause a threat to tax security for economic entities, society and the economy in general. on the other hand, businesses must consider the danger and threat of their activities and conduct economic activity only until in the ratio resultscosts results exceeded. otherwise they will be forced to stop their activities, will make certain changes improve the efficiency or will go into the shadows, which has a negative impact for the state, because entities are the largest source of tax payments (voloshin, 2012). to ensure a sufficiently high level of social and economic life, tax shortcomings should be considered, which caused inefficient and inadequate relation of the state to taxpayers, and creating destabilizing effects in the tax system, such as tax abuses and violations, many tax evasion and using of intricate charging schemes (polonska, 2011). all tax risks should be carefully studied, analysed and measures to be undertaken to eliminate them. thus, tax security should mean a tax system that allows harmonizing taxation processes, on condition of an effective management of tax risks and threats by the state’s executive bodies, in order to satisfy the interests of economic entities. 4. basic indicators of tax security on different level tax policy is one of the main instruments for building an effective and efficient tax system, whose main task is filling the budget with sufficient amount of taxes, effective use of them, creating the conditions for entry into the world finance community (soloviev, 2011). it is always difficult to make the right decisions for the state; therefore, it is necessary to use of tax security indicators. the calculations of tax security indicators should use for further analysis and the data to use for forecasting key table 2 the main indicators of tax security by certain categories categories of tax security main indicators international tax security 1. the degree of harmonization of tax systems of other countries; 2. the sharpness and clarity of taxation to the foreigner. state tax security 1. the level of shadow economy; 2. the level of capital flows abroad; 3. the level of tax culture; 4. simplicity of tax control; 5. the efficiency of collected budget funds; 6. the amount of the penalties for late payment for taxes; 7. the stability of tax legislation; 8. the level of taxpayers subsidies; 9. the ratio of actual tax collection and revenue from them; 10. the level of tax efficiency; 11. the level of trust to public authorities. private entity tax security 1. the level of the tax burden; 2. the level of tax forecasting; 3. the number of inspections per year; 4. the effectiveness of tax management; 5. clarity of legislation. baltic journal of economic studies 28 vol. 2, no. 1, 2016 indicators of the tax system. properly designed and timely calculated indicators make it possible to have on hand the actual figures on economic development. there is still no legal standards for determining indicators of tax security in ukraine; therefore, we can take calculation method of economic security, developed by the ministry of economic development and trade of ukraine. indicators should split for certain subjects of tax system: international tax security, state tax security and private entity tax security. the following table shows the main indicators of tax security by certain categories (table 2). this table shows the basic indicators of tax security, the main of which is the efficiency of the taxes, a legal part of taxation, level of shadow economy and tax culture. one of the leading indicators is the level of tax burden on taxpayers, which shows the impact of taxes and fees on a single entity and the economic situation of the state. tax security is closely linked to the level of tax culture, which manifests itself in compliance with all legal tax laws and other legal acts by businesses, timeliness and accuracy of paying taxes, knowledge of laws, own rights and obligations, trust to the government and in its effective redistribution of all collected taxes and duties (korobov, 2010). trust and mutual cooperation between all subjects of tax relations will develop tax culture, which is the basis of fundamental changes in the tax policy of the state, building an effective national economy and ensuring reliable security of tax ukraine. however, despite the implementation of reforms in the tax system, the state of the tax security is still unstable because of the effect of certain risks, including: unsustainable economic growth and excessively high sensitivity to external factors; big number of shortcomings in the tax system, inefficient tax administration and lack of control in use of budget funds; high level of shadow economy (47% of shadow economy in 2015); monopoly ownership over strategic enterprises in strategic sectors of the economy by foreign companies; low efficiency of defending the national market from unfair competition of foreign products; lack of scientific and technological progress and sufficient investment in the economy. 5. integrated approach of threats analysis of tax security in order to clarify the content of threats of tax security for the state we should apply an integrated approach, which identify the existing and potential sources and factors of threats. sources of threats as possible causes of threats can cause destructive factors that adversely affecting the level of tax security and lead to threats. there are a significant number of factors of threats and other negative circumstances which negatively affect the efficiency and stability of tax security. existing destabilizing factors grouped by source of origin. the main sources of threats are the state of the national economy, state of the public finances, social features of the society and institutional environment. a number of factors allocated for each of the above sources of threats, the impact of which is the most critical and can cause a harmful impact. in addition, the vulnerability of certain areas of the tax system should take into account. the most significant effects of tax security should include the nature of economic development, social welfare and the degree of inflation. the nature of economic development means that economic growth in the state economy has the ability to reduce certain servicing costs the economy at the same time reducing the need for tax revenue. the nature of economic development means that the state economy has the ability to reduce certain servicing costs for the economy during an economic growth and reduce the need for tax revenues at the same time. however, despite the decrease in servicing costs on the economy, tax revenues may grow. this explains by the fact that during the boom phase in the growth of the economy, income of the individuals and entities increase, and household consumption increase, which in turn increases income taxes. the most important indicators of the national economy is the level and dynamics of gdp. in the following table is given the numerical value of these indicators (table 3). table 3 the growth rate of nominal gdp of ukraine over the period 2009-2014 year nominal gdp, mln. uah. absolute growth of nominal gdp, mln. uah. the growth rate of nominal gdp,% 2008 948 056 227 325 31,5 2009 913 345 -34 711 -3,7 2010 1 082 569 169 224 18,5 2011 1 316 600 234 031 21,6 2012 1 408 889 92 289 7,0 2013 1 454 931 46 042 3,3 2014 1 566 728 111 797 7,7 according to the table we can observe a decrease in nominal gdp in 2009 to 34 711 mln. uah, which can be explained by the downturn in the economy as a result of the global financial crisis, which caused a significant negative impact on the economy of ukraine. gdp growth in 2010-2014 years has been unable to reach its pre-crisis value. the dynamics remain positive, but the pace of growth slowed considerably – gdp growth in 2013 was only 3.3%. this can explained by the decline in production for most types of economic activity that began in 2011 and continues up today. such dynamics of gdp creates big risks to macro environment of the state and can cause even greater need for additional tax revenues to the state’s budget. the welfare level. at a high level of welfare, there is a potential basis for an increase in tax revenues in case of urgency, when the state needs for additional funds. when there is low level of prosperity, any attempts at extra cash from tax revenues will be ineffective. in addition, such baltic journal of economic studies 29 vol. 2, no. 1, 2016 actions affect adversely on the level of tax security. to demonstrate this factor look at the dynamics of the value of gdp per capita. according to the global competitiveness report world economic forum, the gdp in ukraine in 2013 was $3,919.41. despite the rather low level of gdp growth, ukraine is on the 91 place out of 144 countries in terms of gdp per capita. the closest our neighbours are lithuania ranks 44th ($ 16,003.00), russia – 49th place ($14,819.00), poland – 52 place ($13,394.00), kazakhstan – 53 place ($12,843.00), romania – 67th ($8,910.00). thus, welfare remains very low even in comparison with countries of the former ussr ukrainian. this poses a serious threat to the security tax, exacerbated by unfavourable gdp. inflation is the factor that has a significant impact on the level of tax security. business entities often do not meet the legislative deadlines of tax collection under the conditions of high inflation, because sometimes potential fines and penalties from delayed payment of taxes is more profitable, as money constantly depreciating, and one monetary unit used today is more than one money unit used after a certain period of time. these actions significantly worsen the level of tax security and are a huge threat. the second source of threats is the state of the public finances. the level and nature of the state’s impact on the economy depends on the efficiency and functioning. the most important factors that affect the state of public finances is the size of the budget deficit, public debt and tax burden. the budget deficit under article 2 of the budget code of ukraine is the excess of expenditures over gainful. the following table shows the values of the state budget deficit in recent years (table 4). table 4 the volume of the budget deficit in ukraine over the period 2009-2014 year state budget (mln. uah) state’s ratio of budget deficit/ surplus to gdp,% revenues expenditures deficit/ surplus 2008 231 686,3 241 454,5 -12 500,7 -1,32 2009 209 700,3 242 437,2 -32 736,9 -3,89 2010 240 615,2 303 588,7 -62 973,5 -5,94 2011 314 616,9 333 459,5 -18 842,6 1,79 2012 346 025,5 395 681,5 -49 656,0 -3,79 2013 339 180,3 403 403,2 -64 707,6 -4,45 2014 403 403,2 430 108,8 -78 070,5 -4,98 according to the data presented above table shows that in ukraine there is a constant budget deficit during the study period. great value of the budget deficit in 2010 is explained by the global financial crisis, which led to increase the costs for anti-crisis measures. ratio deficit/ surplus to gdp should not exceed 3%. the state budget deficit was within the allowable ratio only in 2008 and 2011. it is exceeding the rate of the marginal rate of 3% in 2009-2011 and 2012-2014, and the value continues to rise slowly. this is an evidence of a threatening situation for the whole system of public finance, including tax security. it may happen that the state will not have enough internal or external loans to cover the budget deficit, so the state will be forced to increase the tax rates, which can undermine the level of tax security. public debt under article 2 of the budget code of ukraine is the total debt of the state, both domestic and foreign, including all issued and outstanding debt obligations previously issued guarantees for loans etc. (budget code of ukraine, 2010). large public debt is a significant threat to the tax security of the state, as required large sums to its service – payments of interest or the body. chart shows the size of the domestic and external debt, which is growing steadily (fig. 1). the national debt has increased by 516 billion. uah. (88%) by 2014 and reached 1.1 trillion. uah. the reason was the growth in both domestic debts by 72%, which reached 489 billion. uah and the external debt by 103%, that reached 612  billion. uah. thus, debt load reached a critical level (the level of debt in 2015 will increase to 94.1% of gdp). such a high debt load explained by the fiscal and debt problems in public finances because of significant reduction in state revenues, increase of defence spending and expenditures, that will be used to service the public debt. 0 100 200 300 400 500 600 700 2007 2008 2009 2010 2011 2012 2013 2014 19 47 105 156 174 207 284 489 70 143 213 277 299 309 301 612 internal debt external debt fig. 1. the size of the internal and external public debt of ukraine for 2007-2014, bn. uah an important indicator of tax security is the ratio of public debt to gdp. the critical size of the rate must not exceed 60%, according to the budget code of ukraine. in recent years, the national debt built up rapidly, thereby worsening the debt security. the biggest debt burden is expected in 2015 for all the years of independence. the ratio of debt to gdp from 2001 to 2014 increased from 40 to 72.2% according to the information of the ministry of finance of ukraine. this ratio could be 94.1% in 2015, according to the imf. as a result, an increase in the cost of servicing the public debt expected, which reduces the possibility of government funding of other programs. the problem of the tax burden is also very sharp issue because the tax burden is one of the main characteristics of the tax system of the state. according to statistics, the share of tax revenues to gdp in ukraine in 2014 amounts 19.5%. compared to neighboring countries, the level of tax baltic journal of economic studies 30 vol. 2, no. 1, 2016 burden is in belarus – 16%, poland – 17%, russia – 15%, bulgaria – 18.1%. however, the level of tax burden is quite high in developed countries: germany – 26.5%, sweden – 22%, portugal – 23%, denmark – 35%. however, all these countries solve successfully the problems of socioeconomic development, despite the high tax burden. thus, ukraine has a significant level of tax burden. increasing tax burden in the future by introducing new taxes, may create unfavourable conditions for socio-economic development, tax revenues may fall and cause more menacing consequences for the tax security. the third source of threats is an institutional environment, which carries also a huge threat to the security of the tax ukraine. main factors of threat are the level of the shadow economy, the culture of taxpayers, effectiveness of tax authorities and the stability of the legislation. the level of the shadow economy is a very dangerous threat to the security tax, which is peculiar to all economies. however, countries with transitional economies are the most vulnerable to it. the shadow economy of ukraine ranges from 38% in 2010 to 47% in 2015 (ministry of economic development and trade, 2016). almost half of ukraine's economy is in the shadow, which causes a significant shortfall in taxes. moreover, there are a layer of companies that "work in the shadows" and do not pay taxes to the budget, which distorts the distribution of the tax burden and it falls on honest taxpayers. as a result, the tax morality of law-abiding taxpayers decreases. therefore large scale of shadow economy is a significant threat to the tax security of ukraine. the tax culture is low, which negatively reflects on the tax security of the state. the main reasons for the low tax culture and morality among taxpayers is insufficient awareness of the importance of tax revenues in social and economic development, high level of corruption in tax administrations, awareness of inefficient use of funds from the government budget, the examples of impunity for certain individuals or companies for tax violations, abuse of tax benefits, permanent changes in tax legislation. the level of tax security largely depends on the efficiency of the tax authorities. considerable dissatisfaction of tax authorities is observes recently, especially huge corruption, inefficient tax administration and control over tax payments. there has been some improvement in recent years, according to the report of pwc and the world bank group. they determine the ratio of ease of paying taxes. the overall time is 350 hours in 2015, that is necessary for the company to fulfil all tax obligations to the state, which is better by 28.7% than it was in 2013 (491 hours). however, this ratio is much higher than in many other countries. for example, in estonia it amounted 81 hours, in russian federation – 168, in lithuania – 175, in belarus – 183 hours, moldova – 185, latvia – 193, poland – 286 (paying taxes 2010, 2015. the global picture). we can observe more than double reduction in time needed to comply with tax obligations over the last 5 years. improvement of this indicator became possible mainly due to optimization of tax payments and the introduction of electronic reporting and payment of taxes. electronic reporting reduces administration costs, reduces direct communication between tax manager and taxpayers, and eliminates the possibility of corruption schemes. legislation stability is another factor of tax security threat. сonstant changes in tax legislation occur during the years of independence of ukraine. all political parties after coming to power are trying to lobby their own interests, as manifested in the adoption of changes to tax legislation. thus, taxpayers are able to evade all their profits without paying the full tax payments to the budget and do not bear responsibility for it, due to constant changes in legislation, contradictions and ambiguities in its interpretation. in addition, inadequate legislation increases the risk of inefficient tax collection and monitoring of timely and in full payment of taxes. social threats of tax security are a significant socioeconomic stratification of the population. this problem has existed in ukraine for many centuries. the tax burden distributed unevenly due to a flawed legislation. it is necessary to introduce a system of progressive taxation revenues in order to achieve fairness in taxation. however, it may still worsen security tax, because wealthy part of the ukrainian society will try to find taxation that is more attractive. this may be investing in foreign countries, transfer of capital to offshore or other more favourable method of multiplying wealth. 6. conclusions forming effective tax policies by selecting a winner model of tax payments can strengthen security tax. it is necessary to comply with the requirements tax security to the compliance requirements of national security to ensure effective economic development of ukraine. ukrainian government should regularly examine the effectiveness of methods, techniques and tools to ensure tax security. in addition, there is a need for the development and approval of the concept of ukraine's security tax, which include main priorities, goals and objectives by providing tax security. there will be difficult to implement effective social and economic development of the state without the concept. integrated approach of threats analysis of tax security shows that the most dangerous threats are those that are associated with poor economic development, considerable socio-economic stratification of the population, the level of shadow economy and low tax culture. the threat of the state of public finances is sufficiently large threat, but not the most dangerous, but the increase in the budget deficit and debt can affect significantly negatively on the tax security of ukraine. the institutional environment is another threat to the tax security. its main danger is low efficiency of the tax authorities and uncertainty and ambiguity of legislation. it is obligatory to conduct continuous monitoring of the above sources and factors of threats, which allow preventing a drop in tax security. baltic journal of economic studies 31 vol. 2, no. 1, 2016 references ischenko, v. (2012). the tax component of the financial security of the state, visnyk ekonomiky transportu i promyslovosti, kyiv, ukraine. ivanov, i. (2010). tax security: the nature and terms of security, ekonomika rozvytku, kyiv, ukraine. kashin, v. (2008). tax system: how to make it more effective? finansy, moscow, russia. korobov, v. (2010). financial security in the system of state financial control: avtoref. dys. candidate. ek. science, moscow, russia. official web site of the ministry of economic development and trade. http://www.minfin.gov.ua/ paying taxes 2010. the global picture. – pwc and world bank. (2010) https://www.pwc.com/gx/en/payingtaxes/assets/paying-taxes-2010.pdf paying taxes 2015. the global picture. – pwc and world bank. (2015) https://www.pwc.com/gx/en/payingtaxes/pdf/pwc-paying-taxes-2015-low-resolution.pdf polonska y.m. (2011). organizational support of system management decisions in tax planning criterion for tax security, kyiv, ukraine. soloviev, v. (2011). financial security as a fundamental factor of the state’s independence, bulletin berdyansk university of management and business, berdyansk, ukraine. voloshin, v., karkavchuk, v. (2012). system approach to analysis and ensure financial security of the company, donetsk, ukraine. сергей голиков основные принципы налоговой безопасности как составляющей финан совой безопасности украины аннотация. целью работы является изучение сущности термина «налоговой безопасности», его основных характеристик, таких как угрозы, риски, интересы и способы защиты, определить, каким образом государство может предоставить их. в статье проанализирован экономический, социальный и правовой характер этого термина. выявлены и проанализированы основные показатели налоговой безопасности украины. кроме того, в статье рассматривается комплексный подход анализа угроз налоговой безопасности. из-за большого количества угроз, они разделены по четырем основным источникам угроз: состояние национальной экономики, состояние государственных финансов, социальные особенности общества и институциональной среде. для каждого источника, были выявлены и проанализированы наиболее важные факторы угроз налоговой безопасности украины. методология. исследование основано на анализе существующих исследований украинских и зарубежных ученых о сущности и характере «налоговой безопасности» за последние 10 лет. кроме того, чтобы определить сущность и понятие, цели и задачи, методы и принципы экономического характера налоговой безопасности, были определены основные риски, угрозы, ожидания и результаты эффективной налоговой безопасности. для построения комплексного подхода необходимо проанализировать все существующие и потенциальные факторы угроз. данные взяты из отчетов государственной службы статистики украины, министерства экономического развития и торговли украины, pwc и всемирного банка. результаты исследования показали, что налоговая безопасность является таким состоянием налоговой безопасности, когда процесс гармонизации налогообложения взаимодействует с эффективным управлением рисками и угрозами, которые возникают в налоговой сфере, путем принятия необходимых мер исполнительными органами для удовлетворения интересов государства, общества и налогоплательщиков (хозяйствующих субъектов, организаций и людей). комплексный подход анализа угроз налоговой безопасности показывает, что наиболее опасными угрозами являются те, которые связаны с плохим экономическим развитием, значительным социально-экономическим расслоением населения, уровнем теневой экономики и низкой налоговой культурой. угроза состояния государственных финансов является достаточно важной, но не самой опасный, но все же увеличение бюджетного дефицита и долга может существенно негативно сказаться на налоговой безопасности украины. институциональная среда является еще одной угрозой для налоговой безопасности. её главной опасностью являются низкая эффективность налоговых органов, неопределенность и неоднозначность законодательства. практическое значение. для того, чтобы предотвратить снижение налоговой безопасности необходимо проводить непрерывный мониторинг указанных выше факторов на источники угроз. все упомянутые источники угроз бы помочь органам государственной власти выстроить эффективную концепция налоговой безопасности украины. baltic journal of economic studies 175 vol. 4, no. 5, 2018 corresponding author: 1 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. e-mail: timloskutov@ukr.net 2 university of state fiscal service of ukraine, ukraine. e-mail: legolas@ua.fm 3 danylo halytsky lviv national medical university, ukraine. e-mail: roslemekha@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-175-178 the concept of legitimate economic interest tymur loskutov1, sergey miroshnychenko2, rostyslav lemekha3 abstract. the purpose of the article is to define the concept of legitimate economic interest. the desired result of scientific research is achieved through the following tasks: the study of theoretical representations in relation to economic interest and legitimate interest, the definition of the concept of legitimate economic interest. the subject of the study is the notion of legitimate economic interest. the methodology of the research is a set of general scientific and special methods of scientific knowledge, which using made possible to study economic interest and legitimate interest and made possible the emergence and disclosure of the concept of legitimate economic interest. as a result of the analysis of scientific views on the notion of economic interest, it is established that scientists do not include legal features, which confirm the legality and legitimacy of economic interest, in its content. the inclusion of legal features in the definition of economic interest causes the definition of the concept of legitimate economic interest. it is concluded that legitimate economic interest is reflected in the legislation and follows from its general meaning. it is a simple economic permit, which is guaranteed, to a certain extent, by state bodies, and is expressed in the economic aspirations and economic actions and relations of a person concerning the fact of using of a particular economic good on the basis of the implementation of economic choice, which result is to change the economic situation of the person. as well as, if necessary, this simple economic permit is expressed in seeking protection from the judicial authorities in order to satisfy their own economy’s needs, which do not contradict the public interests, the constitution and laws of ukraine, justice, reasonableness, fullness, objectivity, equality, competitiveness and other principles of law. the practical value of scientific research is to reveal the content of an important means of meeting economic needs within the framework of legal regulation. the originality of the research is manifested in the fact that the article attempts to combine signs of economic interest and legitimate interest in defining the concept of legitimate economic interest. this approach provided for the disclosure of the person’s economic aspirations in connection with the rules of law. the prospects for further development in the direction of the study of legitimate economic interest are determined, in particular, concerning the fact of its relation with economic law and peculiarities of realization. key words: economic interest, legitimate interest, legitimate economic interest, economic relations, needs, aspirations, norms. jel classification: k10, k20 1. introduction effective development of the economy involves qualitative legislative support for the implementation of economic relations. for the legitimate fulfilment of the needs of economic relations, legal means are provided, the use of which makes it possible to achieve the desired result in the economic sphere. among the legislative means for the implementation of economic activities, there are generally recognized rights and responsibilities. they are enshrined in legal norms by definition of permissible, obligatory or prohibitive activity for regulation of interaction between the participants of economic relations. however, these legal means do not cover all the aspirations of economic entities to meet their material desires. therefore, the question arises about the development of other legislative instruments to ensure the implementation of economic relations. one such legal means is legitimate economic interest, which in its nature differs from economic rights and creates additional opportunities in relation to the implementation of different needs in the field of economic activity. in the bundle with this, the theoretical study of legitimate economic interest, in particular, in terms of clarifying its concept, may not be relevant. baltic journal of economic studies 176 vol. 4, no. 5, 2018 questions about economic interest were investigated by various scholars in the field of economics. at the same time, scientists focused on the study of general aspects of economic interest, economists defined the concept of economic interest without taking into account the law, legislative component. the methodology of the research is a set of general scientific (analysis, synthesis, induction, deduction, generalization) and special (comparative-economic, comparative-legal, formal-logical, system-structural) methods of scientific knowledge. the purpose of this article is to define the concept of legitimate economic interest. in order to achieve this goal, the following tasks should be performed: to study theoretical representations regarding economic interest and legitimate interest; to define the notion of legitimate economic interest. 2. investigation of the concept of economic interest in economic literature, there are widespread views on the definition of the concept of economic interest. k. m. matusevich writes that economic interests are the personified vital material and spiritual conditions of the existence of people, that is, the conscious economic needs of people. they are the source of motivation for socioeconomic actions of people, the driving force behind social economic reproduction (matusevich, 2014). o. e. babina and yu. p. lozova point out that the concept of “economic interest” is a complex category that defines motives and incentives for the actors of market relations, internal and external causes that give rise to economic interests, as well as the purpose of their realization (babina, lozova, 2013). o. m. didenko somewhat develops this definition of economic interest by adding that the motives and incentives of the actors of market relations should be realistic, due to certain property relations and the principle of economic benefits (didenko, 2013). these points of view on the concept of economic interest look very abstract since scientists use rather general terminology to disclose meaningful features to define this definition. in particular, the following features are unclear in terms of economic interest: spiritual conditions of being of people, the driving force of social economic reproduction, internal and external causes, the purpose of realization, real motives and incentives, etc. in the theory of economics, in addition to the economic interest of a person, the notion of economic interests of the enterprise, economic interests of the state and national interests in the economic sphere are determined. in particular, in his work, t. v. sak emphasizes the study of the economic interests of the enterprise, which defines as a system of values that is a consequence of existing needs in the field of economic activity, the achievement of which ensures the achievement of the goals set at each stage of the company’s lifecycle (sak, 2014). the above definition of the economic interests of the enterprise, as well as the previous concepts of economic interest, are too general, without bringing clear, meaningful features. this makes it impossible to separate economic interest from other means of obtaining the necessary result in the course of realization of economic activity of the enterprise. ye. y. sibertsiyeva distinguishes the category of “economic interests of the state” as an object of protection by the prosecutor in court, the content of which is disclosed through the aggregate of the needs and aspirations of the state represented by bodies of state power, local self-government, enterprises, institutions and organizations in obtaining from participation in economic relations certain values and blessings (sibirtseva, 2013). without criticizing the definition of the concept of the economic interests of the state, we are convinced that the issue of economic interest of a person who is not a representative, that is, a part of the state, becomes more relevant. since the economic interests of an individual are not covered by economic rights and freedoms, they are aimed at satisfying economic needs. regarding the economic interests of the state, their definition is undoubtedly an important aspect of the economic development of the state. at the same time, in itself the economic interests of the state do not create any optional opportunities for state bodies; the latter pursue economic interests through the exercise of certain powers, which include both rights and obligations. s. p. zavgorodnaya investigates national interests in the economic sphere, she proposes to understand the systematic and balanced set of economic needs of the person, society, and the state, which are the basis for the formation of national goals, the achievement of which guarantees the preservation and enhancement of national values, ensuring economic sovereignty and sustainable social and economic development (zavgorodnaya, 2015). with regard to this definition, our position is similar to the previous concept of the economic interests of the enterprise, that is, the notion of national interests in the economic sphere is disclosed in a rather general form. however, such an approach can be conditioned by the fundamental nature of the very phrase of national interests in the economic sphere. more meaningful concept of economic interests determines v. l. smysova, who notes that they are the socio-economic attraction and direction of the subject to meet the needs of economic and social benefits, the content of which is revealed through its economic aspirations and economic interactions (actions, relationships, relations) on the basis of the mechanism of economic choice , which leads to a change in the initial economic/social status of the subject, his economic results, self-development and self-development (smysova, 2018). baltic journal of economic studies 177 vol. 4, no. 5, 2018 in general, agreeing with the above concepts of economic interests, we believe that some duplication in relation to the above features is an indication on the one hand to the direction of the subject to meet economic and social needs, and on the other – to economic aspirations. also, the author unjustifiably blends the signs of economic and social interest, the meaningful features of which must be different. in addition, all the analysed theoretical views on economic interest have a drawback of ignoring the legal basis, which is a statement of legality and legitimacy of economic interest. in this approach, economic aspirations and interactions may not be in line with legal norms, which may lead to the recognition of economic interests as unlawful. to take into account in the content of the notion of economic interests the requirements of law and legality consider the concept of legitimate interest. let’s make a critical analysis of definitions of legitimate interest in order to distinguish its essential features and use the latter in the definition of economic interest. 3. investigation of the concept of legitimate interest t. o. pikul writes that legitimate interest is legal permission, which, in contrast to subjective law, has the character of legal aspirations. however, legitimate interest can be considered a certain possibility, but in the majority of its social, actual, and not legal (pikul, 2010). it is difficult for us to agree with the position of the scientist because legitimate interest is always a law (legal) opportunity for the participants of the legal relationship to meet their own needs. despite the fact that legitimate interests are not explicitly defined in the legislation, they are conditioned by legal obligations, which are directly “formalized” by legal norms. legal obligations, in particular, legal prohibitions, determine the legal limits of the legitimate interests of the participants in the legal relationship. in addition, the protection of legitimate interests is explicitly provided for by law. therefore, one cannot but recognize the law (legal) nature of the possibilities, which are the legitimate interests of the participants in the legal relationship. i. o. lychenko observes that it is inappropriate to determine the meaning of “legitimate interest” as a permit or aspiration. in the process of formation of legitimate interest, desire or need is a process of awareness, analytical processing and psychological assessment from the person. therefore, the very desire cannot explain the content of legitimate interest and perceived as an identical concept. the author also notes that legitimate interest is not a permission since the source of its occurrence is not only the will of the state but also the personal aspirations of the subject or the needs of the territorial community that exist objectively related to the very nature of the person, and their protection in some cases it can be manifested in the form of self-defence. that is, the state permit for such interests is not the primary one. they are provided by the state and come into legal significance only in the case of significance for a person and society (lychenko, 2011). we cannot agree with a scientist because the process of awareness, analytical treatment, and psychological assessment by a person of his desire is not an obstacle to the formulation of the notion of legitimate interest through the term “desire”. the use of the latter involves taking into account the psychological attitude of the person to the realization of their own needs by obtaining certain benefits. in addition, legitimate interests are closely linked to normative law. not prohibited by law, the desire of the participants in the legal relationship is the content of legitimate interests. in other words, it is not forbidden to always allow for aspirations. however, explicit legal permissions do not cover all the legitimate interests of the parties to the legal relationship. legitimate interests are, first of all, general permits arising from the content of legal acts. consequently, it is not a mistake to define the concept of “legitimate interest” as a legal decision, which is not directly specified in the law. the most complete definition of legitimate interest was given by the theoretician a. v. malko. the latter considers it as reflected in objective law or as a result of its general meaning, and to a certain extent guaranteed by the state of a simple legal permission expressed in the aspirations of the subject to use a particular social benefit, and also in some cases to seek protection to the competent authorities to meet their own needs, which do not contradict the public (malko, 1999, malko, 2000). a supporter of this position v. v. subochev adds that the interests, for which the subject seeks to enjoy a particular social good and, in some cases, seek protection from the competent authorities, should not contradict the rules of law (subochev, 2009). in our view, the needs or interests to which the person seeks to be satisfied must comply not only with the norms of law but also with his principles. therefore, a substantial addition to the signs of legitimate interest are indications contained in the content of the decision of the constitutional court of ukraine, adopted in the case on the constitutional petition of 50 people’s deputies of ukraine regarding the official interpretation of certain provisions of part one of article 4 of the civil procedural code of ukraine (a case concerning the protection of law interest). in this case, the constitutional court has ruled that the needs for satisfaction of which the person’s aspiration to use a concrete material and/or immaterial good is directed must be consistent not only with public interests but also with the constitution and laws of ukraine, justice, integrity, reasonableness, and other general principles (decision of the constitutional court of ukraine, 2004). thus, the legitimate interest is reflected in the legislation and follows from its general meaning. it is guaranteed to a certain extent by the state bodies and baltic journal of economic studies 178 vol. 4, no. 5, 2018 is expressed as a simple legal permission in the person’s aspirations to use a concrete good and, if necessary, to seek protection from the judiciary in order to meet their own needs, which do not contradict the public interests, the constitution and laws of ukraine, justice, reasonableness, completeness, objectivity, equality, competitiveness, and other principles of law. taking into account the signs of the legitimate interest concept and the views on the definition of the content of economic interest described above, one can define the notion of legitimate economic interest. 4. conclusions 1. the analysis of theoretical ideas about the concept of economic interest shows that scientists do not include legal features, which confirm the legality and legitimacy of economic interest, in its content. the inclusion of legal features in the definition of economic interest causes the definition of the concept of legitimate economic interest. 2. legitimate economic interest is reflected in the legislation and follows from its general meaning. it is a simple economic permit, which is guaranteed, to a certain extent, by state bodies, and is expressed in the economic aspirations and economic actions and relations of a person concerning the fact of using of a particular economic good on the basis of the implementation of economic choice, which result is to change the economic situation of the person. as well as, if necessary, this simple economic permit is expressed in seeking protection from the judicial authorities in order to satisfy their own economy’s needs, which do not contradict the public interests, the constitution and laws of ukraine, justice, reasonableness, fullness, objectivity, equality, competitiveness, and other principles of law. prospects for further developments in this direction may be the following: determination of the ratio of legitimate economic interest and economic law; disclosure of peculiarities of legitimate economic interest realization. references: matusevich, k. m. (2014). ekonomichnyi interes yak chynnyk i rushiina syla motyvatsii liudskykh dii [economic interest as a factor and driving force of motivation of human actions]. scientific herald of kherson state university, series: economic sciences, 4, 38-41. babina, o. e., lozova, yu. p. (2013). ekonomichni interesy v systemi rynkovykh vidnosyn [economic interests in the system of market relations]. water transport, 1, 75-79. didenko, o. m. (2013). teoretychne doslidzhennia naukovo-metodychnykh pidkhodiv do doslidzhennia sutnosti poniattia “ekonomichnyi interes” [theoretical study of scientific and methodological approaches to the study of the essence of the concept of “economic interest”]. democratic governance, vol. 12. retrieved from: http://nbuv.gov.ua/ ujrn/devr_2013_12_33 sak, t. v. (2014). ekonomichni interesy maloho pidpryiemnytstva yak obiekt zakhystu [economic interests of small business as an object of protection]. investments: practice and experience, 22, 67-71. sibirtseva, e. yu. (2013). ekonomichni interesy derzhavy yak obiekt zakhystu prokurorom v administratyvnomu sudochynstvi ukrainy [economic interests of the state as an object of protection by the prosecutor in the administrative legal proceedings of ukraine]. economics and law, 1, 66-70. zavgorodnaya, s. p. (2015). natsionalni interesy v ekonomichnii sferi: sutnist ta pobudova yikh iierarkhii [national interests in the economic sphere: the essence and construction of their hierarchy]. public administration aspects, 1-2, 40-47. smysova, v. l. (2018). do pytannia vyznachennia katehorii “ekonomichni interesy” [to the question of determining the category of “economic interests”]. strategy of economic development of ukraine, 42, 38-48. pikul, t. o. (2010). “subiektyvne pravo” – “zakonnyi interes”: poniattia ta dialektyka spivvidnoshennia [“subjective right” – “legitimate interest”: the concept and the dialectic of the relationship]. crimean legal gazette, 3(10), 151-158. lychenko, i. o. (2011). katehorialnyi analiz poniattia zakonnykh interesiv hromadian u sferi vlasnosti [categorical analysis of the notion of legitimate interests of citizens in the sphere of property]. customs business, 1(73), 145-148. malko, a. v. (1999). osnovy teorii zakonnykh interesov [fundamentals of the theory of legitimate interests]. journal of russian law, 5/6, 66-68. malko, a. v. (2000). subektivnoe pravo i zakonnyy interes [subjective law and legitimate interest]. jurisprudence, 3, 31-38. subochev, v. v. (2009). teoriya zakonnykh interesov [theory of legitimate interests] (doctor degree in law sciences, abstract of thesis, specialty 12.00.01 – theory and history of law and state, history of exercise on law and state), tambov: g.r . derzhavin tambov state university. the decision of the constitutional court of ukraine (2004). shchodo ofitsiinoho tlumachennia okremykh polozhen chastyny pershoi statti 4 tsyvilnoho protsesualnoho kodeksu ukrainy (sprava pro okhoroniuvanyi zakonom interes) [concerning the official interpretation of certain provisions of part one of article 4 of the civil procedural code of ukraine (case on the protection of law interests)]. retrieved from: http://zakon.rada.gov.ua/ laws/show/v018p710-04 baltic journal of economic studies 60 vol. 2, no. 1, 2016 corresponding author: 1 department of financial analysis and control, kyiv national university of trade and economics. e-mail: kostyk1991@gmail.com method of tax audit of certain categories of taxpayers by state fiscal service of ukraine bohdan kostiuk1, kyiv national university of trade and economics, ukraine abstract. tax audit is an important part of tax control. it’s aimed to control the observance of tax legislation on taxes and fees. the purpose of the research is to generalize the method of performance of tax audits of individual taxpayers by state fiscal service of ukraine. the subject of research is the methods of audit by state fiscal service of ukraine. methods. it was used general and specific methods of research, including: analysis and synthesis, system and process approaches, induction and deduction, etc. results. the problem of tax auditing process in ukraine is the absence of integrated and systematic approach for its implementation. unfortunately, the practice of the tax audit is not yet examined clearly. today the basic principles of tax audit are considered by the scientists only in theory. apart from the existence of guidelines on verification of a particular type of taxes, other obligatory payments that are designed fiscal service, the formation of evidence, procedure for using certain methods and techniques for auditing, information sources are ignored legislators and scientists. apart from the existence of guidelines on verification of a particular type of taxes, other obligatory payments which are designed by fiscal service, the formation of evidence base, procedure of usage of certain methods and techniques for audit, information sources and other issues are ignored by legislators and scientists. despite this, today the tax audit is a tool to fully examine and reduce the tax risks of the organization. another problem of tax audit is that legislation doesn’t fix the notion of tax audit so there is no exact interpretation of it. tax audit engages more efficient flow of taxes and fees to the state budget. although there is increase of the efficiency of the national tax auditing mechanism now, but there are some problems which need be resolved in order to ensure rational tax revenues in the budget under the present conditions of socio-economic and political reforms in ukraine. to further improvement of tax audit it should be applied new progressive methods of influence on taxpayers which is intended to limit the participation of tax payer in tax process and to reduce its potential capability to minimize tax liabilities. the practical significance of the study is determination of recommendations for improvement of the method of selection of taxpayers for tax audits. value/originality. information on methods of tax audit which was obtained in the study can be used in further studies on improvement of tax administration. key words: tax audit, taxpayer, cameral tax audit, control, code. jel classification: r14, d18, p2 1. introduction today economic reforms in ukraine are carried out against the aggravation of financial crisis, in addition with political crisis in the country. social tension is increasing sharply. the changes made in tax legislation are aimed primarily at increase of revenue part of the budget and reduce of the expense budget for the authorities. entities are accustomed to frequent changes in legislation and have learned to adapt to them. therefore, taxpayers should use effective methods of tax control as an effective tool for identification of tax offenses. tax audit should solve the problem of ukrainian economics deshadowing (legalization of incomes of all market participants), reduce of tax debts and balance of tax system in general. 2. role of the tax audit in the tax control process tax control is an independent kind of financial control directed to ensure the compliance with tax and other legislation by taxpayers, detection, elimination and prevention of tax offenses. the main purpose of tax control in modern ukraine is the constant revenue part of the budget. one of the components of tax control in ukraine is a tax audit. despite the definition of “tax audit” is often used in specialized literature and in everyday activity of audit companies, it does not have the only correct and reasonable interpretation. current national legislation and audit international standards don’t show the content of tax audit. thus, analysis of the current legislation of ukraine baltic journal of economic studies 61 vol. 2, no. 1, 2016 indicates a lack of definition of a tax audit in it, while the notion of “inspection” is used. in particular, the article 19 of the tax code of ukraine has only one mention of the possibility to perform tax audit by offices of state fiscal service of ukraine (hereinafter – sfs) in ukraine. in particular, article 19.1.39 establishes that among the functions of supervisory authorities they are entitled to perform institutional control and internal audit over compliance with legislation and the performance of official duties by regulatory bodies, enterprises, institutions and organizations belonging to the their management(tax codex of ukraine, 2010). there is a difference between definitions of “tax audit” in the specialized literature. usually, scientists consider it in two ways, as a feature or element of financial control and as oversight of the tax laws. tax audit is verification of accuracy, timeliness and completeness of tax calculations per applicable legislation, completeness and correctness of formation and submission to the tax authorities of all forms tax reporting (petrik, 2012). verification of tax liability could be done by tax audit or by confirmed procedures on verification of calculation of tax liabilities. the importance of tax audit for a company is an assessment of tax risks timely and negating them. thus, it should be noted that today there is a lack of proper scientific justification of conceptual basis of the tax audit, methodological support and legislative regulation. this situation leads to ambiguous interpretation of the essence of tax audit in the structure of tax auditing. therefore, further development of the national tax audit needs, above all, its exact definition and deep examination to improve the theory and practice of auditing. 3. tax inspection is the main form of tax audit there are three methods of tax control in ukrainian legislation: 1) accounting of the taxpayers, 2) information and analytical support of the sts and 3) tax checks. detail forms of inspections are specified in the article 75 of tax code of ukraine, according to which there are cameral, documentary and factual inspections. depending on the frequency and timing there are scheduled and unscheduled inspections, and depending on the place of control actions of authorized body’s − on-site and off-site inspections (tax codex of ukraine, 2010). furthermore, according to the tax code of ukraine, another kind of documentary unscheduled off-site inspection is inspection in electronic form, which is performed according to application of the taxpayer submitted 10 days before the expected start of its performance. organization of on-site tax inspection refers to a set of measures on preparation and planning of on-site tax audit; division of responsibilities between the participants of inspection group; a plan (program) of its holding; immediate verification of all planned issues; presentations of results; measures to remove and prevent tax offenses. the nature of the activities carried out by the tax authority within inspection process, is proposed to consider according its separate stage, among which there are: 1) preparatory phase (the effectiveness of tax inspection depends on the choice of object, the readiness of each participant to inspect and distribution of the group according to specific areas); 2) holding of inspection; 3) presentation of the materials of inspection. the most ordinary kind of tax inspection is cameral inspection. it is held in the office of sfs bodies solely on the basis of tax declarations (calculations) of the taxpayer. in other words, consent for its holding or direct participation of the taxpayer in this case is not required and presentation of any direction of conduct of cameral inspection or special decision of the head of the supervisory body is not required. within cameral inspection it is conducted the analysis of all tax reporting of the taxpayer and in case of violations it is drawn up an act in two copies signed by the officials who conducted the inspection. after registration of it in the sfs this act is given or sent by mail within three business days to the taxpayer for signing in established manner (revutsky, 2009). special attention should be paid to procedures of document exchange between the taxpayer and the supervisory authority. legal regulation of information exchange between taxpayers and the regulatory authorities has always been important. this is due primarily to the value of such exchange for legal arrangement between these entities. often the receipt or non-receipt of documents from one party to another is legal fact, which can generate not only financial and legal relations, but also administrative or even criminal. in this context it refers to the improper performance of tax obligation, which entails the liability. the attention should be paid on fundamental difference between documentary and cameral inspections from real ones – provisions of different laws regulate the procedure of their appointment and conduct. if the camera and documentary inspections are conducted by sfs bodies only in cases and in the manner prescribed by the tax code of ukraine, the procedure for conducting the ex post inspections can be additionally established and detailed by other laws of ukraine, the enforcement of which is of entrusted to the sfs. this leads to the formulation of regulatory uncertainty in possibility of tax audits and, in fact, it is contrary to the provisions of part 1, article 61.3 of the tax code of ukraine, according to which bodies of the state securities service, ministry of internal affairs, tax police, prosecutors and their official person cannot take a direct part in inspections carried out by supervisory authorities, and conduct inspections of entities on tax matters. the ex post inspection is the inspection held at the place of actual taxpayer activity, disposal of economic or other objects of property of such taxpayer. this kind of tax audit is carried out by the sfa bodies in compliance with the legislation on cash turnover, the procedure of taxpayers baltic journal of economic studies 62 vol. 2, no. 1, 2016 payment transactions, cash transactions, availability of licenses, patents, certificates, including the production and circulation of excise goods, compliance with legislation on an employment contract, registration of labour relations with employees by the employer. the documentary inspection is inspection the subject of which is accuracy, timeliness, completeness of accrual payment of all taxes and fees defined by the tax code of ukraine. there are following issues for documentary inspection: – tax declarations (calculations); – financial, statistical and other reporting; – registers of tax and accounting management of which is provided by law; – primary documents used in accounting and tax accounting and related with accrual and payment of taxes and fees; – obtained in accordance with law by the state tax service of documents and tax information. one of the innovations introduced by the law № 5083vi to tax code of ukraine is the implementation of electronic inspections. according to paragraph 10, section xx of tax code of ukraine, electronic inspections can be carried with taxpayers who: – use simplified system of taxation, accounting and reporting − from 01.01.2014; – entities of micro, small and medium businesses − from 01/01/2015; – other taxpayers − from 01.01.2016 (tax codex of ukraine, 2010). in accordance with paragraph 75.1.2 of tax codex of ukraine documentary unscheduled off-site inspection is inspection which is based on the application submitted by the taxpayer with little risk determined in accordance with the tax code of ukraine to the sfs where it is on tax accounting. so, electronic inspection will be conducted in the unscheduled process according to the initiative of taxpayer. this should be presented by its application. such declaration is provided within 10 calendar days prior to the expected start of the electronic inspection. secondly, only taxpayers with little risk have the right to start electronic inspection; taxpayers of simplified system of taxation, accounting and reporting are inspected since 01.01.2014. the main advantage of electronic inspection is that taxmen will not independently calculate the tax liability for the results. in other words, in case of understatement of tax liabilities by sfs body in the result of their conduct the taxpayer should pay sp called “self-penalty” and fine just under the paragraph. 50.1 tax code of ukraine. resolution on documentary scheduled, unscheduled and ex post inspections is approved by the head of sfs body according to the articles 77, 78, 79 and 80 of section ii of the tax code with indication of the subject (object), which is inspected, goals, the type of inspection, the grounds for inspection, start dates (except the ex post inspections) and duration of the inspection which is approved by the order meeting the requirements of the tax code. 4. method of selection of taxpayers for tax audits there are different methods for taxpayer’s audits selection. k. schwabiy, n. novitskaya offers following classification of these methods: – random selection; – inspection according to the data obtained from sources of suggestive information («method of alerts»); – inspection of the largest taxpayers; – analysis of taxpayers (comparison of data which the taxpayer stated in his tax return with information obtained from other sources); – inspection of those taxpayers whose previous audits found significant concealment of income; – inspection of all companies in a particular industry (schwabiy, novitskaya, 2007). it can be used as one method as in combination with others methods. for example, it is used as random method when the tax inspector selects entity which will be inspected from the indeterminate amount of taxpayers chosen by computer system, as the method of «alerts» when taxpayers about which there is information on their high probability of tax violations are inspected in canada and germany; in poland the method of sectoral inspections is often used when it is inspected all companies within the top-priority industry (construction, oil, transport, etc.), in the western europe and the us it is widely used the method of analysis, when all information about financial and economic activity of both legal and natural persons is provided to the common data base and in case of tax violations such entities or persons are inspected. methods of taxpayer’s selection before inspections in ukraine are fully depended on criteria. for scheduled inspections taxpayers are selected according to the system of early detection and termination of the shadow economy and destruction of tax minimization schemes, which provides remote audit of threats of tax evasion through analysis of available databases using special computer programs («risk-oriented system»), established in 2008 by methodical recommendations for plan scheduled inspections of entities which was approved by the state tax administration of ukraine #162 on 15.03.2010. taxpayer’s selection algorithm is based on a comprehensive consideration and qualitative information which is held by sfs bodies and determination of degrees of risk of commitment of tax violations. risk-oriented system would allow to select entities from the total number of taxpayers according to certain criteria who have the risk of commitment of tax violations without the intervention to the financial and economic activities of entities. the main criterion for selection of taxpayers to the plan of scheduled documentary off-site inspections under this system is a risk of commitment of tax violation by an entity. therefore, the method of selection of taxpayers for the scheduled documentary off-site inspections is a method of analysis − information on a taxpayer, which is at the disposal of sfs bodies is analysed, in the result of which it baltic journal of economic studies 63 vol. 2, no. 1, 2016 is selected taxpayers with the risks of non-payment of taxes or commitment of tax violations (dmitrenko, 2012). the selection of taxpayers for the unscheduled documentary off-site inspections is carried out not by the criteria but for base established by law the presence of which is the reason for such inspections. in particular, according to the article 78 of the tax code of ukraine the reasons which are the basis for tax inspection are: – availability of information indicating tax violations by taxpayer; – organizational and legal changes in the activity of the taxpayer; – request of another authority or person to conduct inspections; – supervision of the inspections. so, for unscheduled documentary off-site inspections the taxpayers are selected not according to the risk of commitment of violations by the entity but according to the information on the commitment of tax violation by the entity which is indirectly confirmed by information which is held by sfs and it is necessary to confirm or deny by inspection of its financial and business documents which can be done only during the tax inspection. performance of unscheduled documentary off-site inspections may take place at the initiative of the sfs bodies as well as other bodies (court, inquiry body, investigator, prosecutor). this initiative of sfs bodies can be as the result of following issues: 1) information indicating tax violations by entity; 2) results of inspection of documents of mandatory reporting of taxpayer or documents of documentary inspection performed by sfs bodies of higher level in order of control of the activity or inactivity of officials of sfs of lower level, during which it was found the incompliance of results of the inspection report with legislation or with incomplete clarification of issues of inspection which should to be clarified during inspection for making an objective conclusion on taxpayer’s compliance with legal requirements, enforcement of which is entrusted to the sfs bodies; 3) demand of a taxpayer when he submits to the sfs body objections to the inspection report or complaint made on results of tax notification-resolution, which need full or partial revision of the results of relevant inspection or cancellation of results of tax notification-resolution, where the taxpayer refers to circumstances in his complaint which were not examined during the audit, and their objective examination is impossible without inspection. consequently, the reasons for unscheduled documentary inspections can be classified as (1) initiative reasons which are undertaken by sfs bodies for the availability of information on tax violations in the activities of the entity and (2) obligatory reasons which are undertaken at the request of the relevant authorities, or upon the occurrence of certain circumstances. the selection of taxpayers for unscheduled off-site tax inspections is only possible if the initiative inspections, as procedural mechanism of preparation for inspection require the head of the sfs body to make a decision on its implementation. criteria for such selection are not defined by law (petrik, 2012). we offer to apply the criterion of economic efficiency of future inspections which consists in conformity of the aim (i.e. it is necessary to select those taxpayers whose chance of detecting violations is higher and the volume of more accruals will be the greatest) within selection of taxpayers for initiative unscheduled documentary off-site inspections. applying this criterion also takes into account the cost of work of fiscal authority’s employees to conduct unscheduled off-site tax inspections. grounds for conducting ex post inspections which are established in article 80 of tax code of ukraine can be systematized as follows: – availability of information which may show tax violations by the taxpayer; – obtaining of information from external sources about tax violation by taxpayer which is supervised by the sfs bodies («alert messages»). thus, as within unscheduled documentary off-site tax inspections, the criteria of selection of taxpayers for ex post inspections is not the risk of commitment of tax violations by the entity, but availability of information about commitment of tax violation by the entity to confirm or deny conduct of ex post inspection. the method of selection of taxpayers for conducting ex post inspections, in addition to analysis of information on taxpayers, is also a method of «alert messages» when inspection is carried out on data obtained from external sources which show tax violation by taxpayer, supervision of which is entrusted to the sfs bodies. in 2014, the only principle of selection of entities to the plan of inspections was the presence of their financial and economic risks of non-payment of fees to the budget. so, scheduled inspections were aimed solely to those companies which do not pay deliberately or pay payments not in full size to the budget, using the scheme to reduce or tax evasion. this approach has allowed to cut the number of planned inspections. the principal methods of selecting taxpayers for off-site tax inspections are: 1) the method of analysis of information about the taxpayers; 2) the method of economic efficiency of future inspection; 3) the method of «alarm messages». 5. conclusions today the process of further improvement of tax control methods and techniques of control ways continues. this process takes into account not only the experience of earlier years of tax service, but also the practice of tax services of other countries. to meet these goals it is established and gradually implemented new technologies of tax activity which are based on the use of modern computer technology. they are directed to the systematic and effective use of internal and external information for scheduled inspections and qualitative performance of audit functions, and on the effective counteraction to tax evasion, the elimination of the shadow economy. baltic journal of economic studies 64 vol. 2, no. 1, 2016 references tax code of ukraine of 02.12.2010, № 2755-vi (amended on 03.04.2014 g.). bulletin of the verkhovna rada of ukraine. − 2011. − № 13-14, № 15-16, № 17. − ct. 112. dimitrenko, e.v. (2012). tax audit service as a service of the state tax service and the most effective form of tax control.investment: practice and experience, № 19, p. 41-45. lebedynets, t. (2013). the role of internal audit in preventing and detecting fraud. the independent auditor, № 7(18), p. 60-63. naidenko, o.e. (2012). tax control: a tutorial. − h., ed. khnue, 224 p. peter, a.a. (2012). essence audit taxation under the rules of the tax code of ukraine and the order of organization. electronic scientific archive of the scientific and technical library of national university «lviv polytechnic», p. 190-197. proskura, k.p. (2013). organization and guidance of a tax audit as part of tax control. the independent auditor, № 5(iii), p. 43−48. revutsky, l.v. (2009). analysis of efficiency practices of tax audit in ukraine. bulletin khmelnytsky national university, № 4, p. 104−107. fradynskyy, o.a. (2013). comparative characteristics of inspections during tax audits and customs. proceedings of the international scientific conference [«strategic directions of socio-economic development in conditions of globalization»] (khmelnytsky, 18-20 april 2013). − khmelnitsky, khmelnytsky university of management and law, 2013, p. 448−451. schwab, k., novitskaya, n. (2007). method of choice of taxpayers for documentary checks. world finance, № 2, p. 85−92. богдан костюк методика проведения налогового аудита отдельных категорий плательщиков налогов органами государственной фискальной службы украины аннотация. целью работы является обобщение методики проведения налогового аудита отдельных категорий плательщиков налогов органами гфс украины. предметом исследования являются методы проведения аудита органами гфс украины. методика. при написании статьи использовались общие и специальные методы исследования, среди которых: анализ и синтез, системный и процессный подходы, индукция и дедукция и т. д. результаты. налоговый аудит является важным направлением и составляющей частью налогового контроля. его основное назначение состоит в обеспечении контроля за соблюдением норм налогового законодательства про уплату налогов и сборов. проблема развития организации налогового аудита в украине состоит в разработке комплексного системного подхода и связанных с ним методических решений, которые были бы способны создать условия для их практической реализации. на жаль, вопросы практики использования налогового аудита еще недостаточно изучены. сегодня основные принципы и особенности проведения налогового аудита рассматриваются отечественными учеными в основном в теоретической плоскости. несмотря на существование методических рекомендаций по проверке того или иного вида налога, сбора, другого обязательного платежа, которые разработаны налоговой службой, вопросы формирования доказательной базы, порядок использования конкретных способов и приемов аудита, источника информации и т.д. остаются вне поля зрения как законодателей, так и ученых. несмотря на это, сегодня именно налоговый аудит тот инструмент, который позволяет максимально точно изучить и снизить налоговые риски организации. другая проблема налогового аудита состоит в том, что на законодательном уровне понятие «налогового аудита» не закреплено, соответственно отсутствует законодательное определение, которое приводит к неоднозначному трактованию его понятия. налоговый аудит позволяет обеспечить более эффективное поступление налогов и сборов в бюджет страны. хотя на сегодняшний день и повышается эффективность механизма проведения отечественного налогового аудита, но рядом с этим существует ряд проблем, которые необходимо решить с целью обеспечения более рационального поступления налогов в бюджет соответственно к современным условиям социально-экономических и политических преобразований в украине. для дальнейшего усовершенствования налогового аудита необходимо использовать новые, прогрессивные методы влияния на плательщиков, которые способствуют максимальному ограничению участия плательщика в налоговом процессе и в уменьшении его потенциальной возможности минимизации налоговых обязательств. практическое значение исследования состоит в определении рекомендаций для усовершенствования методики отбора плательщиков налогов для проведения налоговых проверок. значение/оригинальность. полученная в ходе исследования информация о методике проведения налогового аудита может быть использована в процессе дальнейших исследований для усовершенствования налогового администрирования. baltic journal of economic studies 39 vol. 5, no. 1, 2019 corresponding author: 1 donetsk national university of economics and trade named after mykhailo tugan-baranovsky, ukraine. e-mail: gorina@donnuet.edu.ua orcid: https://orcid.org/0000-0003-0900-0640 2 donetsk national university of economics and trade named after mykhailo tugan-baranovsky, ukraine. е-mail: barabanova@donnuet.edu.ua orcid: https://orcid.org/0000-0002-2954-4090 doi: https://doi.org/10.30525/2256-0742/2019-5-1-39-47 marketing aspects of developing tourism services market in ukraine & the baltic countries ganna gorina1, valentina barabanova2 abstract. under the conditions of modern european integration processes, the quality of providing tourism services, which should meet the requirements of the population as much as possible, gains momentum. the regulation of tourism development in ukraine according to european standards and regulations impose the task of upgrading the tourism industry, search for innovative instruments to improve its functioning based on the best european practices example of the baltic states. marketing approaches in managing the demand for tourism services by means of innovative technologies are insufficiently defined. among the scholars who investigated the marketing aspects in the field of tourism activities should be distinguished the following: n. e. kudla, i. yu. martynov, o. m.  pravyk, i.  m.  shkoda and so on. the methodology is based on a systematic approach to the market for tourist services, marketing analysis as a management concept for this market, on the use of modelling as a methodological principle and a method of scientific knowledge. the mechanisms of increasing the efficiency of marketing activities in the field of tourism through the structural-functional model and model of management of the marketed approach system are determined. at the present stage, the issues of finding and implementing modern mechanisms for the formation and management of demand for a tourism product remain unsolved. results. the article is aimed at developing innovative methods for managing the process of implementing marketing approaches to the market for tourist services in ukraine. priority is the development of mechanisms for the formation of demand for tourism products through marking technologies. the authors developed a system of marking approaches, which includes the factors of the effectiveness of travel services; marking methods and techniques; forms of realization of tourist services. the mechanism of formation and management of demand for a tourist product, as well as communicative and social methods of increasing the efficiency of marking activity in the tourist services market in ukraine, is determined. practical implications. the article considers mechanisms of increasing the efficiency of marketing activities in the field of tourism. the expediency of using the european experience of the baltic states for the development of tourism in ukraine is emphasized. directions of further researches are offered. the structural-functional model of the system of marketing approaches and the organizational model of operational management of the process of realization of marketing approaches to the market for tourist services are developed. value/originality. the use of the proposed models will more effectively increase the efficiency of marketing activities in the modern market for tourist services. the authors prove that modelling, development, and implementation of models of marketing approaches is a powerful mechanism for achieving a new quality of tourism services market and ukraine. key words: european integration, tourism of baltic countries, system approach, market for tourism services, structural-functional model, marketing technologies, marketing communications. jel classification: m31, d47, l84 1. introduction structural changes in the economy, instability of the environment require a revision of the forms and methods of managing the market of tourism services. the topical issue is to define new and improving existing marketing tools, mechanisms for shaping the demand of consumers for tourism services by means of marketing communications. the search and development of new marketing approaches, the abandonment of obsolete authoritarian methods of managing the work of tourist enterprises, the introduction of innovative marketing technologies actualize the possibilities of realizing baltic journal of economic studies 40 vol. 5, no. 1, 2019 and satisfying the consumers’ demand for qualitative tourism services. implementation of marketing approaches to the market for tourism services requires taking into account social and psychological factors promoting the tourist product. it is time for the development of mechanisms for their influence on the formation and management of demand for tourism services. the problems of tourism with elements of the system approach are covered in the works: a. alexandrova, i. berezhny, m. kabeshkin, o. lyubivtseva, k. cooper, and others. among the scholars who investigated the marketing aspects in the field of tourism activities should be distinguished the following: n. e. kudla, o. m. pravyk, i. m. shkoda, i. yu. martynov and others. the analysis of marketing as a management concept in the tourism services market is carried out in the works of o. m. azaryan, a. p. durovich, a. s. kopanev, v. g. voronkova, n. l. zhukova, v. a. kvartalny, p. kotler and others. at the same time, in the works of the majority of authors, the insufficient attention is paid to the study of mechanisms for increasing the efficiency of marketing activities in the field of tourism and managing the demand for a tourist product by means of innovative marketing technologies. the article is aimed at the development of a structuralfunctional model of the system of marketing approaches to the market for tourism services in ukraine, the development of a model for managing the process of implementation of certain approaches. 2. the need to take into account the quality of the tourist product today tourism is one of the dynamic directions of socio-economic development of most countries in the world. in the light of european integration processes, ukraine is also actively developing in this direction. the clearly expressed need of the society today for meaningful leisure activities requires expanding the range of tourism services. according to o. lyubovtseva (2005), it is important “to study the proposal as a reflection of the real conditions of the country for the development of the tourism industry.” tourist operators should take into account the demands of the society regarding the quality of the tourist product, the reliability and completeness of information about travel services, means and methods of providing this information, etc. specific features of the tourism service provide for its other content, which requires planning and developing new marketing innovative approaches. intangible nature of the service complicates the decision-making process of a consumer to purchase tourist products, increasing requirements to the level of professional competence of travel agents and tour operators; the separation of the place of sale of tourism services and the place of consumption, which significantly increases the risk of inconsistency of the service received to its expectations; impossibility of accumulation. this situation is due to insufficient marketing education, ignorance of the leaders of tourism enterprises and staff, as well as insufficient practical experience in this area. in general, 95.7% of tourist enterprises in ukraine do not have a marketing department in the organizational structure. however, the fact that it operates is not proof of the priority of a marketing concept. the research confirms that authoritarian methods and reluctance to change outdated management guidelines prevail in the management of ukrainian tourist enterprises. in other words, the majority of directors of tourist enterprises (100% of the largest, 96% of the average, and 95% of small) are not ready to open access to all information in the enterprise and involve employees to making decisions and forming the marketing policy of the enterprise (yevtushenko, 2014). for us, contemporary interpretations of the notion of marketing in tourism, which are considered through the concept of marketing interaction, i.e., when there is the use of communication and social techniques for improving the effectiveness of marketing activities in tourism, are important. we proceeded from the fact that tourism in addition to economic performs a social function, and a travel company should form a socially oriented marketing strategy in the market of tourism services. “the marketing approach to the provision of tourism services suggests that the tourist product is only a ‘materialized’ means of achieving the purpose of travel. objects offered in the program of tours, to a certain extent, are a commercial form of tourist product, providing its cost and consumer value” (pravyk, 2008). 3. marketing approaches to providing tourist services o. a. lozova accentuated on marketing in tourism as an activity to stimulate the demand for tourist products (2012). marketing as a “managed social process” was defined by p. kotler (2006). it is interesting to define the marketing of tourism services made by n. e. kudla (2011). the scientist noted that this is: “a complex of measures related to the definition and development of tourist products, as well as its promotion in accordance with the psychological and social factors that need to be taken into account in order to meet the requirements of individuals and groups of people at rest, entertainments by providing them with housing, vehicles, food, leisure facilities, etc.” environmental factors are not directly controlled by travel companies. however, these factors have a very significant impact on customers’ behaviour. therefore, they should always be taken into account not only when making a marketing decision but also in everyday activities. in our view, environmental factors that are constantly to be studied and taken into account in professional activities in the tourism business are presented on a permanent basis in figure 1. baltic journal of economic studies 41 vol. 5, no. 1, 2019 over the past ten years, ukraine was visited on average by 20 million citizens in 2007, 17.2 million people came to our country (9.7% less than in 2006), and by 2009 the tourist flow decreased (the impact of the global economic crisis), and from 2010 to 2014 the tourist flow began to increase. so in 2012, taking into account the holding of euro 2012, our country was visited by 22.4 million people, which is 9.7% more than in the previous year. after euro 2012 it became easier for incoming tourism operators to prove potential customers that ukraine is a very interesting, new, and promising area for tourism, with the corresponding infrastructure, national colour. these facts positively influenced to increasing of tourist flows. about 3.4 million people (the highest number of tourists served by the subjects of tourist activity of ukraine) fell on the 2013 year, the growth rate of tourists increased by 9.0% compared with the previous year. in 2014, due to military actions in donetsk, luhansk oblasts, the difficult political situation and temporary occupation of the territory of the autonomous republic of crimea, the tourist flow decreased significantly – by 8%, but starting from 2015, positive trends in its development were determined in the tourism business, the number of tourist arrivals increased on 3% compared to the crisis 2014 year. while in the dynamics the number of citizens traveling abroad was not changed significantly during the analysed period, a negative tendency is observed among foreign citizens who visited ukraine: the largest drop in visits was for 2014-2015 years. in 2016-2017, the number of foreign tourists increased to 7% in 2016 and 10% in 2017 years. thus, there is a steady trend of growth of tourist flows in ukraine. such a positive tendency gives an opportunity to talk about the gradual growth of the trust of foreigners to our country. ukraine is gradually becoming an increasingly attractive market for tourist services for foreign tourism companies with great potential for its steady development. ukraine has all the prerequisites for proper economic development through tourism but it loses significantly in the competition, lagging behind the leading countries of the world in terms of the development of tourist infrastructure and the quality of tourist services. according to the components of the tourism competitiveness index in 2017, our state was among the dozens of countries with the lowest level of security and ranked the 127th position, in a favourable business environment – the 124th one, in terms of cultural wealth – the 51st, in health and hygiene are not all so bad because it belongs to the top ten countries, ranked the 8th, with price competitiveness – the 45th, according to tourism service development indicators – the 71st, with the level of international openness – the 78th, for the infrastructure of air transport – the 79th, for land and port infrastructure – the 81st, with the focus on tourism – the 90th, for natural resources – the 115th, for human resources and labour market – the 41st, for ict readiness – the 81st, for cultural resources and business trips – the 51st, in terms of environmental sustainability – the 97th. in accordance with the general index of tourism competitiveness, ukraine ranked the 88th position in the ranking of 136 countries (statystychnyy ekspres-vypusk, 2017). analysis of comparative dynamics of persons who travelled abroad and those who visited ukraine during 2007–2017 years, figure 2 indicates that in the tourist flows in 2012–2013, the ratio was about 49% to 51%, while in the period of 2014–2017 years, the share of persons traveling abroad was 65% compared to 35% of those who visited the country. one of the important factors in increasing the flow of tourists from ukraine to europe is the introduction of a visa-free regime for ukrainian citizens, first of all, those who used the services of travel companies. after all, far from all ukrainian citizens have a good command of foreign languages and have the appropriate skills to organize independent travel abroad. at the same time, travel companies are working in a more competitive environment now and, therefore, have to figure 1. environmental factors of influencing the tourist enterprises marketing in ukraine source: compiled by the authors baltic journal of economic studies 42 vol. 5, no. 1, 2019 not only improve their services (travel) they offer to the ukrainian population but also look for new tourist routes and interesting channels for the promotion of tourist services. according to the implementation of the strategy for the tourism services market development in ukraine, the following indicators are expected (tourism and resorts development strategy until 2026): 1) the increase in tourist expenses during trips to 80 billion uah in 2026; 2) the increase in the volume of capital investment in tourism and resorts to 6.6 billion uah in 2026; such a course of events will stimulate the intensification of competition among ukrainian travel agencies, encouraging them to diversify their offers. it does not exclude a certain increase in the quality of tourism services and a certain decrease in their prices. the experience of international tourism development in the baltic region is rather interesting for ukraine. for the baltic countries, such as estonia, latvia, and lithuania – tourism has become one of the most important priorities of economic development. these countries, like ukraine, are at the crossroads of interregional contacts, the transport routes pass through their territory that allows developing international tourism actively. according to the forecasts of the world tourism organization until 2028, the growth of the tourism sector in the baltic sea region will be higher compared to other regions of europe. the development of tourism will make a significant contribution to economic growth and well-being, figure 3 (the economic impact of travel & tourism, 2018). analysis of the comparative dynamics of the contribution of tourism to the gdp of the baltic states and ukraine during 2017–2018, figure 3 indicates that according to the world travel and tourism council (wttc), the steady growth of tourist flows by 2028 is forecasted (estonia – 5 944.0 million usd, 16.0% of gdp, latvia – 4 385.8 million usd, 10.9% of gdp, lithuania – 3 371.8 million usd, 6.0% of gdp, and ukraine – 7 841.4 million usd, 6.6% of gdp) (the economic impact of travel & tourism, 2018). the positive dynamics of tourism development in the baltic region of the eu is determined by the structural support of the european union. tourism development in latvia is one of the priority directions in the economy. thus, in latvia, there is a steady growth of foreign tourists, and the number of tourists already exceeds 4 million per year, which is almost twice as much as the population of latvia. “the tourism development program in the republic of lithuania for the years of 2014-2020 uses a slightly modified name – green tourism (ecotourism), which aims to monitor wildlife and local manifestations of culture without negative effect to the environment and providing the local population with socio-economic activities. the purposeful use by lithuania of the structural support of the european union has led to the development of local businesses: parks, alleys, cycling trails, beaches, other infrastructure changes that are used not only by tourists from abroad but also by the local population” (furtie, 2017). “a fairly fruitful interaction has been organized between the countries of the baltic states in the development of tourism infrastructure and the provision of electronic services. by common consent, the scandinavian model was adopted as a basis, which allowed outlining not only actual but also virtual boundaries between countries in the field of transport, travel and hotel business. the development of tourism in the baltic states accelerated after their accession figure 2. chart of tourist flows in ukraine in 2007-2017 source: compiled by the authors according to countries (statystychnyy ekspres-vypusk, 2017) baltic journal of economic studies 43 vol. 5, no. 1, 2019 to the european union. thus, all three states are perceived as the only tourist region. they created a single virtual infrastructure for tourist information (websites, brochures, and advertising)” (furtie, 2017). the tourism sector of the baltic countries has their advantages. firstly, it is the novelty. the baltic region is still considered quite new and not well-known in the world, which attracts the interest of business travellers. secondly, it’s the geographical availability, which is primarily provided by the airport “riga”. thirdly, it’s the price advantage compared with the countries of western europe. fourthly, there are hotels (especially in the segment of four and five stars), restaurants, and another tourist infrastructure. the fifth important factor is safety. following a series of terrorist attacks in paris and brussels, traditional destinations for business tourism began to lose their appeal to the organizers of major international meetings. but the demand for small, quiet, and not so popular among tourists of the city, such as riga, vilnius or tallinn, has increased. the experience of the baltic sea region countries in the eu indicates a more important role of tourism as a powerful factor in the economic growth of gdp, the creation of new jobs, the health promotion of the general population, the development of culture, peaceful contacts between peoples. tourist activity in ukraine should become a branch of the specialization of the national and regional economy, an attractive kind of business. 4. research methodology the current task is to create a complex of positive impressions and feelings of a tourist in order to transform him into a loyal customer with the possibility of applying in the future to him the concept of cem (client experience management) (biletska, 2012). establishing effective channels for a communication mechanism for providing information and creating a positive image of tourism services requires a reassessment of the importance and role of marketing and its tools. the study of the problem suggests that marketing aspects of the tourism industry require the development of more “effective tools, a single management space, which can ensure the integrity of the management system of the market, the effectiveness of the relationship of its components, coordination and interconnection of tourism subjects” (gorina, 2016). it is important to study tourism as an integrated system that includes various subsystems: financial and credit, medical, transport, cultural and entertainment, health and recreational, informational and advertising, etc. the system approach in tourism gives an opportunity to come to the study of this social phenomenon from a philosophical, sociological, and psychological point of view. the analysis of the market for tourism services with the use of a systematic approach has allowed us to distinguish its structure, and also to substantiate a set of indicators of evaluation of its results. the system approach allows us to take into account the variability of individual parameters of the system of marketing approaches to the market for tourism services, especially its behaviour in specific conditions, its uniqueness and unpredictability, the ability to adapt to changing conditions. an important feature of the system is its ability and desire for goal-formation, that is, the formation of goals within the system. let us note that the demand for a tourist product is unbalanced, prone to seasonal fluctuations, depends on many other factors, in particular, the geographic location of the region, political relations, socio-demographic, etc. it is important to create a structural and functional model of a system of marketing approaches to the market of tourism services, the elements of which will interact with each other and will be aimed at informing the consumer about the range of services, establishing a communication mechanism for providing information, creating a positive image for a particular tourism service. in this context, the problem of the development of figure 3. the direct contribution of travel & tourism to gdp in baltic countries and ukraine source: compiled by the authors according to (the economic impact of travel & tourism, 2018) baltic journal of economic studies 44 vol. 5, no. 1, 2019 channels and communication tools, the possibility of access to a range of sources on services for the use of innovative marketing technologies is actualized. the structural-functional model of the system developed by us is a multilevel structure, which consists of factors, marketing methods and techniques, forms of realization of the tourist product, figure 3. the mechanism of the formation of demand for tourist services by means of marketing technologies is determined by the peculiarities of consumption of tourism services, implementation of certain factors (nature of consumption, stimulation of demand, and promotion of tourism services, etc.), determined by the marketing methods and techniques, in the first place, innovative, figure 4. modelling, developing, and implementing models are powerful mechanisms for determining and achieving a new qualitative tourism services market. modelling as a methodological principle and a method of scientific knowledge allows, through the perfect creation of the figure 4. structural-functional model of the system of marketing approaches to the tourism services market source: compiled by the authors quality of tourism services the system of marketing approaches to the tourism services market marketing of tourism services as a complex of measures for defining, developing, and pricing tourist products marketing of tourist services as the interaction of communication and social services marketing of tourism services as a social process factors for travel services effectiveness the nature of consumption demand management promotion marketing methods and techniques as elements of technology traditional innovative forms of tourist product realization social media the image of tourism services market by means of marketing communications communication channels of formation baltic journal of economic studies 45 vol. 5, no. 1, 2019 system, its structure to determine the directions of management activity for the adoption of an adequate solution. it has been shown that the condition of the successful functioning of the named system is the integration of certain components that provide the qualitative characteristics and properties inherent in this system. among the characteristics of complex systems, in particular, the system of marketing approaches to the market for tourism services, one of the most important is the necessity to manage it. this process is carried out indirectly due to our organizational model of operational management of the socially oriented marketing strategy modern e-commerce marketing interaction communication marketing of tourism services providing communication and social methods for increasing marketing activities effectiveness informing the consumer about the range of services creating a positive image of the tourism service effective pr marketing communications in fo rm at io n in te rr el at io ns hi ps be tw ee n m ar ke t a ct or s social media marketing communications communication channels of demand formation advertising of the tourism product reputation management in on-line mode on-line content publications advertising on the internet advertising, effective pr managing customer experience demand management customer legal protection holding seminars on tourism issue of informational materials familiarity with unwto events in tourism m ec ha ni sm s of m an ag em en t o f t he pr oc es s of im pl em en ta ti on o f m ar ke ti ng a pp ro ac he s the mechanism of formation and management of tourist product demand by means of innovative marketing technologies realization and satisfaction of consumer demand for tourism services social media figure 5. model of the implementation process management of marketing approaches to the tourism services market source: compiled by the authors baltic journal of economic studies 46 vol. 5, no. 1, 2019 process of implementation of marketing approaches to the market for tourism services. the use of such a model allowed decentralizing the control effect on the process of effective implementation of tourism services, demand management, pricing, and promotion. we have identified effective mechanisms for the formation and management of demand for a tourist product: social media, marketing communications and communication channels for the formation of demand. they form the image of the tourism services market on the basis of establishing information relationships between market players (consumers, sellers, intermediaries). the components of the management model are also defined by communication and social methods of improving the effectiveness of marketing activities, which are inextricably linked with the main marketing objectives of the tourist enterprise: customer service satisfaction, increased number of loyal customers, increased profitability, etc. it is important to pay more attention to modern innovation-communication marketing technologies, which form the model of interaction of subjects in the market for tourism services. in particular, a significant role in creating a model of proficient service belongs to different forms of social media marketing (online content publishing, advertising on the internet, social bookmarking services, etc.). it is necessary to take into account the uniqueness of social media, namely the possibility of their interaction directly with the consumers of services. and also the fact (according to worldometers) that the number of people having access to the internet is growing rapidly, and in 2019 it could reach 7.6 billion people. in particular, 1.9 billion people are actively using social networks. more than 40% of the world’s population is currently connected to the internet, and by the end of 2017, about 2.9 billion users are forecast (teletov, 2010). all this requires not only a revision of obsolete approaches but also the construction of new modern marketing strategies for the development of the tourism market. one of the effective mechanisms for managing the process of implementing marketing approaches is the interest of consumers, the conquest of consumer attention by creating a positive image of the tourism service. we are talking about product promotion, effective advertising, consumers’ experience, and demand management. it is important to coordinate the actions, optimize management decisions that will improve the quality of the tourism services provided. 5. conclusions implementation of marketing approaches to the market for tourism services involves a socially oriented marketing strategy based on social and psychological factors promoting the tourist product. the mechanisms of influence on the formation and management of demand developed by us provide for a systematic approach to the market for tourist services. the structural and functional model of a marketing system approach takes into account factors of the efficiency of tourism services, marketing methods and techniques, as well as forms of realization of tourist product that provide the quality of tourism services. we have determined that the effectiveness of the functioning of the system of marketing approaches depends on the creation of a coherent management space in terms of the integration of its components. in the process of developing tools for implementing the components of a marketing system, we have identified the most effective management method. the model of managing the process of implementing marketing approaches to the market for tourism services developed by us will allow us to decentralize the managerial influence on demand, pricing, and promotion of the tourist product. references: biletska, i. m. 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"gilea: scientific bulletin": collection of scientific works, 118, 156-163. baltic journal of economic studies 351 vol. 4, no. 4, 2018 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. 2 kharkiv research institute of forensic examinations, ukraine. 3 kharkiv research institute of forensic examinations, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-351-355 lawmaking issues in the regulation of financial relations nataliia uvarova1, oleg mikhalskyi2, igor bohdaniuk3 abstract. the aim of the article. the problematic issues of financial legislation are revealed, as well as the adoption of financial and legal provisions as one of the stages of financial legal regulation is considered. the subject of the study is lawmaking issues in the regulation of financial relations. methodology. the study is based on an analysis of legal provisions regarding the legal regulation of financial relations in ukraine. the comparative legal method enabled to study certain provisions of the legislation of ukraine on financial relations, followed by the application of positive foreign experience in this sphere. the results of the study revealed the need for a detailed study of the problem. the most significant element for the existence and development of tax relations is considered. the author’s approach to improving the tax legislation of ukraine is exposed. practical implications. theoretical and legal foundations of financial relations in the economic and legal sphere are considered. a comparative legal study of legal provisions that affect the lawmaking issues in the regulation of financial relations and on this basis the definition of ways to improve the domestic legislation in this area. relevance/originality. the analysis of financial relations raises the issue of codification and harmonization of tax legislation that mediate the development of the tax system since the efficiency of the tax system of ukraine, the russian federation, and other countries depends on the uniformity of legal concepts used in the legal regulation of financial, banking, budgetary, tax activities. key words: law making, financial legislation, law enforcement, legal provisions, tax. jel classification: k2, k3, k4 1. the relevance of the topic the formation of ukraine as a sovereign independent state requires the urgent solution of important social problems in a strict compliance with the provisions of modern national and international law. first, this concerns the improvement of social relations in public administration and implementation of state powers, search for ways to prevent social conflicts and their legal resolution. in the national legal framework, a large number of provisions establish a special procedure for the adoption of financial regulations that determine funds for the budget generation, sources of its revenue, targeted distribution and use. therefore, the most important task is to define the forms and limits of the financial competence of state bodies, public and private entities authorized by the state to monitor compliance with tax legislation and bring to justice the subjects that violate this legislation. 2. literature review a significant contribution to the study of the place of the taxpayer in the legal mechanism of taxes was made by foreign and domestic scientists, such as s. s. alekseev, i. v. bilous, a. v. demin, m. s. kelman, d. a. kerimov, a. p. korenev, n. p. kucheriavenko, o. h. murashin, i. l. nevzorov, v. s. nersesiants, ye. v. pohorelov, t. n. radko, o. ya. rohach, o. f. skakun, a. i. khudiakov. the aim of the article is to reveal the problematic issues of financial legislation, as well as to consider the adoption of financial and legal provisions as one of the stages of financial legal regulation. 3. the main material the harmonization of existing legal provisions in the sphere of state power, such as the elimination of legal conflicts, compliance with international legal standards, coordination of legal provisions to achieve consistency of legislation, is the key to the effective functioning of state bodies and local governments. while the application of the general provisions of law is investigated sufficiently fully in the general theory of law and occupies one of the central places of modern legal science, a special theoretical analysis of the application of the provisions of financial law is rare. in addition, scientific perspectives on the essence of the application of this type of legal provisions are fundamentally different. baltic journal of economic studies 352 vol. 4, no. 4, 2018 unfortunately, in modern legal science, there is no unity in understanding the stages of applying the provisions of financial law, implementing regulations in this area. at the same time, the implementation of the provisions of financial law, specificity of legal nihilism in the financial sphere and others remain unattended many controversial issues arise in the application of various financial and legal regulations. therefore, the incorrect application of the provisions of tax legislation cannot give the state and society the necessary social effect. according to s. s. alekseev, the provisions of law should be studied from the perspective of the mechanism of legal regulation, that is, in the provisions of law, legal relations, a legal act, and other phenomena from the dogma of law and jurisprudence, the starting point and unifying source are theoretical provisions on legal regulation, especially its mechanism (alekseev, 2009). review of the legal regulation of social relations reveals the importance of the study of the provisions of law. therefore, according to a. p. korenev, analysis of the issues of financial and legal regulation enables to conclude that financial and legal regulation, as well as administrative law, can be implemented in stages, in a certain sequence (korenev, 1978). the authors of the article argue that financial and legal regulation consists of two stages, namely: 1) establishment of financial and legal provisions; 2) implementation of the provisions of financial law. therefore, the first stage is the establishment of the provisions of financial law. this activity consists of the adoption of financial and legal provisions, their improvement, change and cancellation, that is, the publication of legal regulations. it is well-known that lawmaking is a certain system of actions, such as the decision of the body on the need to develop draft legal regulations, the draft text preparation, its preliminary discussion by the relevant body, submission of the draft to the lawmaking body, adoption and approval of the draft, and publication of adopted legal regulations. it should be emphasized that in modern scientific legal literature, this term is understood rather differently. for example, according to a. f. skakun, lawmaking is a legal form of state activity with the participation of civil society (in cases provided by law), associated with the establishment (authorization), change, cancellation of legal provisions (skakun, 2001). according to m. s. kelman, lawmaking is a form of power activity of authorized subjects (initially the state), aimed at creating legal regulations to introduce, change or cancel legal provisions (kelman, murashin, 2002). v. s. nersesiants explains more extensively that lawmaking is a form of state activity aimed at creating legal provisions, as well as at their further improvement, modification, and abolition. this is the process of creating and developing existing law as a single and internally coordinated system of obligatory provisions that regulates social relations; this is a special activity for the establishment of legal regulation with a formal significance. the development and approval of new legal provisions are the main element in lawmaking (nersesiants, 2006). traditionally, scientists consider that in its social essence, lawmaking is transforming state willpower into law, its formalization into various legal regulations, empowering rules of behaviour they contain, with a generally binding nature. lawmaking is an important part of the whole process of law formation. according to t. m. radko, lawmaking is the main way for the state to influence the life processes that require resolving. lawmaking is an important indicator of state activity, its monopoly right (radko, 2009). therefore, lawmaking is the formation of appropriate provisions by adopting appropriate laws and sub-statutory legal regulations (in state financial activities) by the competent authorities, and at the same time, one of the main links in legal regulation of relevant relations (financial and legal), which is a certain bridge in the implementation of financial and legal provisions. some scholars emphasize that lawmaking generates legal regulation, and law enforcement concretizes it. however, enforcement of the provisions of law is not its development or refinement; it is the creation of a phenomenon of a different nature, on the “pattern” of abstract provisions. the law enforcement only regulates the specific situation in accordance with the will of the legislator. that is why lawmaking is quite significant to implement financial and legal provisions. i. l. nevzorov highlights, if laws contradict the needs of society and traditions of the people (the legislator fantasizes and “deceives”), law enforcement loses its essence since it becomes “bare lawlessness”. at the same time, if laws meet the actual needs of society, the continuous development and improvement of legislation should take place (nevzorov, 2002). according to v. nersesiants, lawmaking cannot stop at a certain stage but is always in a mobile state of development due to the dynamism of social ties, new needs of public life that require legal regulation (nersesiants, 2006). therefore, one of the permanent forms of development and rationalization of the existing legal system is the systematization of legislation. the term “systematization” (composed of parts, related to one another) is directly related to the category “system” and is derived from this word. a system is a set of interrelated elements that create an integrity and unity. provisions, formulated in laws and other legal regulations, are put into practice, reality if they are implemented in deliberately volitional actions of citizens. in modern legal literature, systematization includes traditionally four independent forms of legal activity. as a rule, these include: (a) collection, elaboration, systematical arrangement, storage, etc. of existing legal regulations by state bodies, enterprises, and other institutions (accounting for regulations); (b) preparation and publication of various collections baltic journal of economic studies 353 vol. 4, no. 4, 2018 of regulations (incorporation of legislation); (c) preparation and adoption of consolidated acts based on joining regulations on individual issues (consolidation of legislation); (d) preparation and adoption of new regulations containing both provisions of the former justified regulations, as well as new regulatory prescriptions (codification of legislation). according to a. rohach, the systematization of legislation is a generic concept that covers all activities aimed at streamlining legislation. four independent forms of legislation systematization are codification, incorporation, consolidation, the current making of regulations (rohach, 2003). a. v. demin argues that the higher the level of legislation systematization and orderliness, the fewer opportunities for its unreasonable interpretation, as well as for legal disputes and conflicts (demin, 2008). according to e. v. pohorelov, the systematization of legislation is the activity of rationalization and improvement of legislation, however, “rationalization of legislation” is not the aim of external systematization, and “improvement of legislation” is not the aim of internal systematization. since the systematization of legislation is its improvement by rationalization of the content and form of legislation and consolidation of all existing legal regulations into a coherent, internally and externally agreed system (pohorelov, 2000). according to some scientists, the aim of systematization of tax legislation is manifested in the main areas, such as: 1) provision of stability and sustainability to legislation since stability is an integral feature of tax legislation, essential for a permanent system to regulate human relations; 2) increasing the role of tax laws by reducing substatutory, in particular, departmental legal regulations, since the priority of the tax law enables to achieve internal consistency and stability of tax regulation; 3) creation of technically flawless, perfect in the form, convenient for use tax legislation. in other words, availability, clarity, compactness of regulations, which are identical in structure, terminology, and writing style, enable to interpret and apply the provisions. one of the important forms of lawmaking is codification, that is, a critical rethinking of existing legal provisions, elimination of contradictions and discrepancies between them. it is aimed at establishing new provisions that reflect the emerging needs of public life and fill the gaps in legal regulation to replace the obsolete legal regulations by new ones. d. a. kerimov underlined the differences between codification and lawmaking activities because codification is the preparatory legislative activity of the relevant codification bodies. the scientist argues that such a formulation limits the entire lawmaking to the approval of legal regulations does not correspond to reality and contradicts the understanding of lawmaking. codification work, as a rule, is not directly related to the current lawmaking activity and is carried out by special bodies, which, however, does not necessitate its separation from lawmaking in general. even in the formation of legal acts from narrow separate current issues, the codification of relevant legislative material is often carried out by reproducing certain provisions of previously existing legal acts (kerimov, 1955; kerimov, 1962). one of its types is a special codification, which includes regulations of a particular branch, institution, or a uniform complex of legislation. the result of codification is the adoption of codes, fundamentals of legislation, regulations, which always contain new provisions in a systematic way. to be precise, codification means restating regulations by eliminating contradictions, filling gaps, amendments. the common type of codified act is a code. considering this, it is important to pay attention to the provisions of the domestic tax legislation on the example of the tax code of ukraine. it is well-known that at the present stage in ukraine, tax reform is still ongoing. i. v. belous argues that a clear understanding of rights and obligations by tax process participants, the absence of gaps and contradictions in the relevant legal framework are the basis of the effective functioning of the tax system (bilous, 2011). therefore, tax legislation, as well as sub-statutory regulations on taxation, is in a continuous development and improvement. at the same time, a. i. khudiakov underlines that the legislator, encouraged by the practical needs, is improving existing legislation constantly. on the one hand, the gap between law and constantly changing public relations is reduced (that is, the legal superstructure complies with the economic basis), and on the other, a system of legislation is built enabling to study the system of public relations constantly (khudiakov, 2010). the tax legislation of ukraine consists of the constitution of ukraine, the tax code, the customs code of ukraine, and other customs laws on the regulation of legal relations arising from the taxation of duties on the movement of goods across the customs border of ukraine; existing international agreements, agreed to be bound by the verkhovna rada of ukraine, and which regulate the issues of taxation; legal regulations, adopted under and pursuant to the tax code of ukraine and laws on customs matters; decisions of the verkhovna rada of the autonomous republic of crimea, local authorities on local taxes and charges, adopted according to the rules established by the tax code (podatkovyi kodeks ukrainy). the issue of codification and harmonization of tax legislation that mediate the development of the tax system since the efficiency of the tax system of ukraine, the russian federation, and other countries depends on the uniformity of legal concepts used in the legal regulation of financial, banking, budgetary, tax activities. as noted, currently ukraine is in need of the preparation of a permanent regulation providing for the baltic journal of economic studies 354 vol. 4, no. 4, 2018 basic principles of relationships arising in levying taxes and charges. the regulation, which to a greater extent should solve the tasks, is the tax code of ukraine. it entered into force on january 1, 2011. based on the general provisions of this legal regulation, some aspects should be considered. this is not an exhaustive list of regulatory legal documents, but in future research, a more detailed analysis of this problem (sevruk, 2017) on the regulation of financial relations should be made. therefore, the implementation of foreign experience in national legislation will enable to create effective mechanisms (pavlenko, 2017) of regulation of the tax legislation of ukraine. 4. conclusion therefore, the current tax code in its content and structure should consist of two classical parts: the general and the special. the absence of such a distinction in the current edition introduces certain difficulties in the law enforcement of the provisions of the said codified regulation of the state. m. p. kucheriavenko’s perspective is extremely important when considering the concept of the tax code because he argues that the tax code should consist of four logical parts: general, particular, special, and tax production (kucheriavenko). this article advocates such an approach to the construction of the tax code and clarifies the architectonics of this codified regulation. consequently, the tax code of ukraine should include the general part (combining a set of material and procedural provisions having a generalizing character and relevant to each section of the particular part) and the special part (consisting of narrower sets of material and procedural provisions regulating the collection of each individual tax or charge). in addition, forming the general part of the tax code, it is advisable to divide the provisions, its components, into two sections: the first should cover mainly the material provisions regulating the execution of the tax obligation; the second should contain provisions regulating the process of administering taxes, charges (mandatory payments). at the same time, the section of the tax code that regulates the administration of taxes and charges (mandatory payments) has to differentiate provisions into several institutions: a) provisions that regulate the timely and full implementation of tax debt by payers; b) provisions that regulate the grounds and procedures for exercising tax control; c) provisions that regulate the administrative appeal; d) provisions that regulate tax violations and implementation of financial and legal sanctions for the violation of tax legislation. references: alekseev, s. s. (2009). obshchaia teoriia prava: uchebnik [the general theory of law: a teaching manual] (2nd ed.). m.: prospectus, 576 p. (in russian) korenev, a. p. (1978). normy administrativnogo prava i ikh primenenie [norms of administrative law and their application]. m.: juridical literature, 142 p. (in russian) skakun, o. f. (2001). teoriia derzhavy i prava: pidruchnyk [theory of state and law: a teaching manual]. kh.: konsum, 656 p. (in ukrainian) kelman, m. s., murashin, o. h. (2002). zahalna teoriia prava (zi skhemamy, krosvordamy, testamy): pidruchnyk [general theory of law (with schemes, crossword puzzles, tests): a teaching manual]. k.: condor, 583 p. (in ukrainian) nersesiants, v. s. (ed.). (2006). problemy obshchei teorii prava i gosudarstva: ucheb. dlia vuzov [problems of the general theory of law and the state: a teaching manual]. m.: norma, 832 p. (in russian) radko, t. n. (2009). teoriia gosudarstva i prava: ucheb. [theory of state and law: a teaching manual] (2nd ed.). m.: prospekt, 752 p. (in russian) nevzorov, i. l. (2002). printsip zakonnosti v pravoprimenitelnoy deiatelnosti [the principle of legality in law enforcement] (dissertation of phd in specialty 12.00.01). kharkov, 196 p. (in russian) rohach, o. ya. (2003). kodyfikatsiini akty v systemi zakonodavstva ukrainy [codification acts in the system of legislation of ukraine] (dissertation of phd in specialty 12.00.01). uzhhorod, 209 p. (in ukrainian) demin, a. v. (2008). nalohovoe pravo rossii: ucheb. posobie [tax law of russia: a teaching manual]. m.: rior , 380 p. (in russian) pohorelov, ye. v. (2000). kodyfikatsiina diialnist v pravovii systemi ukrainy [codification activity in the legal system of ukraine] (dissertation of phd in specialty 12.00.01). kh., 166 p. (in ukrainian) kerimov, d. a. (1955). zakonodatelnaia deiatelnost sovetskoho hosudarstva [legislative activity of the soviet state]. m.: gosyurizdat, 134 p. (in russian) kerimov, d. a. (1962). kodifikatsiia i zakonodatelnaia tekhnika [codification and legislative technique]. m.: gosyurizdat, 104 p. (in russian) bilous, i. v. (2011). problemy zastosuvannia norm [podatkovoho kodeksu ukrainy problems of application of the norms of the tax code of ukraine] proceedings from international scientific and practical conference to the 10th anniversary of scientific institution on financial law in the xxi century: achievements and prospects (october 4-7). k.: alerta. (in ukrainian) khudiakov, a. i. (2010). izbrannye trudy po finansovomu pravu [selected works on financial law]. st.-p.: judicial center – press, 472 p. (in russian) baltic journal of economic studies 355 vol. 4, no. 4, 2018 podatkovyi kodeks ukrainy [tax code of ukraine] (2011). vidomosti verkhovnoi rady ukrainy [bulletin of the verkhovna rada of ukraine], no. 13-14, no. 15-16, no. 17. art. 3. (in ukrainian) sevruk, v. h. (2017). normatyvno-pravovi zasady protydii pravookhoronnymy orhanamy ukrainy zlochynam, shcho vchyniayutsia orhanizovanymy hrupamy i zlochynnymy orhanizatsiiamy, yaki sformovani na etnichnii osnovi [normative legal principles of counteraction of law enforcement bodies of ukraine to crimes committed by organized groups and criminal organizations, which are formed on an ethnic basis]. molodyi vchenyi, 4, 337-342. (in ukrainian) pavlenko, s. o. (2017). normatyvno-pravovi zasady protydii diialnosti destruktyvnykh relihiynykh orhanizatsii: vitchyzniani realii ta zarubizhnyi dosvid [regulatory and legal principles of counteraction to the activities of destructive religious organizations: domestic realities and foreign experience]. pidpryiemnytstvo, hospodarstvo i parvo [entrepreneurship, economy and law], 2(252), 272-282. (in ukrainian) kucheriavenko, n. p. vvedenie v teoriiu nalohovogo prava [introduction to the theory of tax law] (vol. 2). kurs nalohovogo prava [the course of tax law] (vols. 1-6). kharkov : legas, 600 p. (in russian) baltic journal of economic studies 67 vol. 4, no. 5, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. e-mail: olenadzhafarova@gmail.com 2 university of the state fiscal service of ukraine, ukraine. e-mail: 80677171865@ukr.net 3 court of appeal of the odesa region, ukraine. e-mail: ia_2018@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-67-74 structural and legal analysis of banking safety in ukraine olena dzhafarova1, olena riabchenko2, igor artemenko3 abstract. the article is devoted to the scientific analysis of ukraine’s economic activity under the conditions of european integration processes. it is stressed that the value of the current economic activity is primarily determined by the processes of globalization, the formation of market relations, need for creation of guarantees in these conditions that will ensure a decent life for all members of society because of the need for ensuring the economic and overall national security of ukraine. however, it is necessary to consider that the access to world markets and formation of an open economy also mean an internal stability of the economy and financial system of the state. the purpose of the article is to clarify the concept of banking security, its main components and levels of development. the report data of the deposit guarantee fund (dgf) and the prosecutor general’s office of ukraine for the last years have been analysed. it also testifies about the lack of control and superficial attitude of the controlling bodies towards the processes of the banking sphere criminalization. it is determined that the dgf indicators do not correspond to those of the prosecutor general’s office of ukraine reports regarding the crimes committed in the sphere of banking. the government of ukraine should focus on domestic reforms, the creation of living standards, economics and politics in ukraine, which are as close as possible to european. only then it is possible to implement effective mechanisms aimed at neutralizing, minimizing the impact and eliminating the phenomena and factors leading to the creation of external and internal threats to the state’s financial security. key words: banking activity, banking security, state, economy, economic activities, world-economy, economic legislation, economic transformation, integration, globalization. jel classification: d63, g21 1. introduction ukraine has made a european choice as the main direction of its state policy, both internal and external, whose ultimate goal should be the full membership in the european union. for ukraine, european integration, on the one hand, this is the way of modernization of the economy, attracting foreign investment and technologies, increasing the competitiveness of domestic manufacturers, access to world markets, including the market for financial services. on the other hand, access to world markets, the formation of an open economy also means that the economy and financial system of the state must be internally stable, able to withstand the risks that accompany the processes of globalization and european integration. the processes of integration of the ukrainian banking sector into europe provide for the taking concrete measures aimed at ensuring the stability and enhancing the banking sector competitiveness. crime in the banking sphere was the focus of many researches in ukraine; however, they do not have a comprehensive scientific analysis of banking criminal legal protection. to solve the criminalization problem in banking, as well as to protect customers’ rights and improve their financial health taking into account the interests of creditors, the appropriate mechanisms are introduced. and this, in turn, requires regulatory and legislative framework improvement. effective functioning of the ukrainian banking system, as well as individual banking institutions, requires the conditions under which the impact of external and internal adverse factors will not result in negative effects. they can be provoked by any transformations that arise under the instability against reforming the banking system and military events in eastern ukraine. particularly relevant in the context of strengthening the european integration processes of ukraine is the determining the legal framework for ensuring bank baltic journal of economic studies 68 vol. 4, no. 5, 2018 security, which must comply with the international standards established. strengthening the country’s banking security and adapting domestic legislation to the provisions of the directives of the european parliament and of the council are complicated by significant criminalization of the ukrainian banking sector. modern eu regulatory requirements and mechanisms aimed at reducing credit risks and ensuring the financial sector stability in foreign countries can be ratified and properly implemented in domestic legislation, in particular, in the ukrainian banking sector, only if the level of shadow economy of ukraine and the criminalization of economic processes are reduced, in particular in banking. the european integration intentions of ukraine have made changes to the development of its economy and, in particular, to the financial sphere. substantially, these changes affected the banking system development, which is a systemic element of the financial and credit market. the essence of these changes manifests itself in the increase of foreign banks presence, the need to implement the eu banking legislation norms and methods of banking business in the domestic practice. all this determines the urgency of the effective development of economic and legal aspects of ukraine’s banking security in the european integration context. in the economic system of ukraine, banks often play a crucial role, and hence the issue of banking security has been widely covered in the economic literature. baranovskyi (2014) reveals that such a decisive role of banks is primarily due to the simultaneous functionality of a bank as a monetary institution, financial intermediary, and securities market intermediary. м. kurylo, a. klochko, d. zhuravlov, h. javadov (2018) reveal that permanent or sudden negative effects that arise in any field of activity may affect the final result of the bank’s activities. they may be of different origin and can cause damage both to the banking institution itself and to all entities with which it is associated. therefore, it is necessary to ensure conditions, under which the action of external and internal factors will not lead to negative processes. such conditions form a complex concept of banking security, which leads to a significant number of approaches to its definition. vasylchak (2009) finds out that the security of a bank is a state of sustainable life, which ensures the implementation of the main interests and priorities of the bank, and protection from external and internal destabilizing factors. prokopenko (2014) considers banking security as a qualitative attribute and characterizes it as a state, in which there are no dangers. vovchenko (2015) appeals to the complex and multidimensional notion of banking security. he interprets it as a certain state; possibility of further development; function of the state; regulation of the obligatory economic standards and requirements; the activities of the central banks, state bodies, as well as commercial banks for management functions while conducting banking transactions and making the deals; a set of technical regulations and requirements. according to deloitte international company, 93% of respondents claim the level of fraud in the banking sector has increased significantly over the past two years. considering significant losses, banking institutions should develop appropriate measures to improve banks’ reputation ( jayaprakash, 2016). a similar issue is the focus of the international study by migiro (2016), who studies the optimizing the bank’s loan portfolio and credit rating as the ways to improve bank efficiency and financial stabilization of the banking system. in their study, swanepoel and smit (2016) have proven that the banking industry sustainability plays a significant role in overall economic development. shcherbatykh (2016) links the security of a single bank with the security of the banking system as a whole. in his opinion, they affect one another. problems that arose in one bank can cause a “domino effect” and lead to a systemic banking crisis. according to weigand (2016), “u.s. banks continue to exhibit a more robust post-crisis recovery, while japanese and european banks continue to experience crisis-level conditions.” similar dynamics are also observed in the banking segment of the united kingdom since the total amount of fraud loss in 2016 amounted to 200.1 billion pounds sterling. fraud losses are distributed according to the type of services provided: payment cards, checks or remote services. in the uk, for example, about 80% of fraud occurs with payment cards, 18% – in the remote customer support, and only 2% of violations are related to checking transactions (steele, 2017). konig (2017) notes that recent financial crises have highlighted the need to create an effective structure for large eu banks at the international level in order to enhance financial stability. improving the banking system stability, for example, assessing credit risk and improving bank decision-making processes are discussed by alshawabkeh and kanungo (2017). weigand researched efficiency, growth, combination of assets, risk, operational efficiency, profitability, and capital reserves of the 20 largest banks in japan, the united states, and europe for 2003-2015 and made a conclusion that all banks hold more capital of the first level, than it is provided by the basel iii agreement, which led to a deep decrease in their net profit and returns on equity. nowadays, ukraine needs solving the issue that arose in the new political and economic conditions (klochko et al., 2017). moreover, the active course of ukraine at european integration involves bringing banking legislation in line with the eu requirements (in particular, with regard to the implementation of the provisions of the basel committee on banking supervision directives). as a part of the implementation of the eu-ukraine association agreement and the comprehensive program for the development of the financial sector of ukraine by 2020, the nbu continues baltic journal of economic studies 69 vol. 4, no. 5, 2018 to implement the eu directives in the ukrainian banking activities. however, these processes are accompanied both by positive and negative shifts, in particular, by raising the level of social relations criminalization in the banking sector. this is to some extent due to the fact that the domestic banking system is not yet sufficiently adapted to the crisis in the economy and the dynamic changes in legislation, as well as to the spread of various abuses and corruption in this area. therefore, any changes are stressful and are accompanied, as a rule, by unpredictable processes, which lead to socially dangerous consequences. the purpose of the article is to analyse the legal principles of banking security and its correlation with the criminological security of banking institutions in the context of european integration of ukraine. the authors’ research focuses on developing economic and legal measures directed at strengthening the country’s banking security. as another example, the fund for the guaranteeing of individuals’ deposits (2016) has recently filed 234 applications against the owners and managers of insolvent banks totalling 88.7 billion uah, of which claims for making the bank insolvent amount to 36.9 billion uah. in total, the fund filed 1,291 applications for crimes totalling 115.9 billion uah. khvorostina and yanitskiy (2017) reveal that according to the fund’s executives, more than 117 939 enforcement proceedings on their claims are executed in the state enforcement service bodies as of february 23, 2017. but it is very difficult to find examples of criminal cases initiated, and even more so with regard to cases brought to trial. the purpose of the article is due to the fact that banks in the economic system of ukraine play a decisive role. in previous studies, authors have repeatedly emphasized that the ukrainian banking is a valuable object of criminal law protection (klochko & nezhevelo, 2017), which requires legislative changes aimed at the formulation of appropriate security provisions. the article explores the concepts of banking security, criminological security of banking institutions, their content, relationships, and values for accelerating the bringing of ukraine’s legislation in line with the international law, in particular with the provisions of the eu directives on banking supervision. the methodological basis of the article is a set of methods and techniques of scientific cognition. as a general scientific method, a systematic approach is used, which allowed us to determine the problematic issues of adaptation of the ukrainian legislation to the international legislation provisions. the use of this method determined the study of internal causation, structural-functional, hierarchical, direct, and inverse relations, which allowed identifying the complex processes of banking development in ukraine, the nature of certain economic processes and phenomena. the documentary analysis made it possible to develop proposals and recommendations for further development of the criminal statistics in order to find out the actual state of criminalization of the banking activity in ukraine. transformation processes in ukrainian banking sector demonstrated that the national bank of ukraine (hereinafter – nbu) does not perform sufficient functions to ensure the hryvnia’s stability (three significant devaluations: 1998-1999, 2008-2009, and 2014-2017), and also to hold price stability. there are instability and widespread bankruptcy of banks. special attention should be paid to some discrepancy, namely: the share of crime in the economic, financial, banking, and budgetary spheres has not exceeded 3% in recent years. the comparison method allowed to compare the existing categories of banking security and the criminological security of banking institutions and to conclude that the existing economic and legal categories are, to a certain extent, interrelated and interdependent. this is due to the fact that their content reflects in general the state of its security of banking institutions from external and internal destabilizing factors. the authors also addressed the relevant legal journalism, on pages of which separate questions are being discussed concerning the issues of the research. methods of legal statistics were used to determine the quantitative indicators of certain types of criminal offences in banking. the study objective is to analyse the current ukrainian legislation (the criminal code of ukraine) aimed at preventing violations of banking legislation and making suggestions for their improvement. 2. criminal offenses in banking or the 2013-2018 period according to annual reports’ data of the prosecutor general’s office of ukraine reported data of the prosecutor general’s office of ukraine also contain contradictory and ambiguous criteria for determining the indicators of committing crimes in the banking sector. in particular, in the annual reports of the prosecutor general’s office of ukraine from 2011 to 2017, there are concepts that indirectly characterize the number of criminal offenses committed in the banking sector. in particular, we are talking about the following categories: crimes in the sphere of economic relations on credit and financial activity; crimes in the banking system; crimes in the field of economic activity; crimes in financial and insurance activities; crimes in the field of monetary intermediation; crimes related to the central bank activities; crimes in other types of monetary intermediation; crimes in other types of lending; crimes with regard to other financial services except for insurance and pension provision. thus, according to the report on the prosecutor’s work for 12 months of 2013, 527 criminal cases were filed in the field of economic relations on credit and financial activity; in the banking system – 260. baltic journal of economic studies 70 vol. 4, no. 5, 2018 according to the report of the prosecutor’s work for 11 months of 2014, 141 criminal proceedings were instituted in the field of economic relations on credit and financial activity; in the banking system – 89. during 12 months of 2015, according to the report on the prosecutor’s work, 175 criminal proceedings in the sphere of economic relations on credit and financial activity were instituted. note that in the 2013 report, there is no criterion of crimes committed in the banking system, as indicated in the previous reports on the prosecutor’s work for 2013-2014. according to the unified report on criminal offenses for 2013, taking into account the classification of offenses in banking specified above, we have registered: under article 200 of the criminal code of ukraine – 260 criminal offenses; under art. 222 of the criminal code of ukraine – 327; under art. 231 of the criminal code of ukraine – 17; and under art. 222 of the criminal code of ukraine – 12 criminal offenses were registered. according to the report on the prosecutor’s work for 12 months of 2014, 7 criminal proceedings were initiated in the area of economic activity to prevent and counteract the legalization of proceeds from crime, 1 of which was sent to the court. it should be noted that in the 2014 report, there is no criterion such as “credit and financial activity”, which is indicated in the previous reports for 2011-2012. according to the unified 2014 report on criminal offences, the following is recorded: according to art. 200 of the criminal code of ukraine – 285 criminal offenses; under art. 222 of the criminal code of ukraine – 345; under art. 231 of the criminal code of ukraine – 26; and under art. 232 of the criminal code of ukraine – 8 criminal offenses. in the report on the prosecutor’s work for the 12 months of 2015, the quantitative criteria by the activity areas have disappeared. thus, according to the unified report on the criminal offenses for 2015, it is recorded: under art. 200 of the criminal code of ukraine – 238; under art. 222 of the criminal code of ukraine – 129; under art. 231 – 14; and under art. 222 of the criminal code of ukraine – 5 criminal offenses. according to the unified report data on the criminal offenses for 2016, the following is recorded: under art. 200 of the criminal code of ukraine – 167 criminal offenses; under art. 2181 of the criminal code of ukraine – 6; under art. 2201 of the criminal code of ukraine – 1; under art. 2202 of the criminal code of ukraine – 1; under art. 222 of the criminal code of ukraine – 62; under art. 231 of the criminal code of ukraine – 19; and under art. 232 of the criminal code of ukraine 7 criminal offenses were recorded. the data of the report on the criminal offenses committed at the enterprises, in institutions and organizations by type of economic activity in 2015 show: with regard to financial and insurance activities there were 4,983 registered criminal offenses, out of which 1,104 were in the field of monetary intermediation (among which with regard to the central bank’s activity 462 criminal offenses were registered, other types of monetary intermediation – 642). in the sphere of financial leasing, 76 criminal offenses were registered; other types of lending – 1,112; in the field of providing other financial services except for insurance and pensions 3,420 criminal offenses were registered. in 2017, according to a unified report on the criminal offenses, pre-trial investigations for which were carried out by the national police, the following was recorded: under art. 200 of the criminal code of ukraine, 383 criminal offenses were registered; under art. 2181 of the criminal code of ukraine – 4; under art. 2201 of the criminal code of ukraine – 0; and under art. 2202 of the criminal code of ukraine – 1 criminal offense (ter-akopov, 2003). specified information on criminal offenses in banking for the period of 2011–2016 according to data of annual reports of the prosecutor general’s office of ukraine is presented in table 1. taking into account the classification of offenses in banking proposed by the authors, their dynamics are seen in accordance with the available data of the prosecutor general’s office of ukraine (table 3). the problem is the lack of the courts’ practice of using criminal liability legislation for offenses committed in the banking sector. directly related to these categories of criminal offenses is the resolution of the plenum of the supreme court of ukraine no. 3 dated april 25, 2003: “on the practice of using by the courts the legislation regarding liability for certain crimes in the economic activity”. the provisions of the resolution of the plenum of the supreme court of ukraine no. 5 dated april 15, 2005, are also useful in considering certain types of crimes in banking: “on the practice of applying by courts the regulations of criminal liability for legalization (laundering) of proceeds from crime”. however, the lack of a concretized practice in criminal cases concerning offenses committed in the banking sector complicates their effective judicial review and fair decisions adoption. year art. 200 of the cc of ukraine art. 209 of the cc of ukraine art. 2181 of the cc of ukraine art. 219 of the cc of ukraine art. 2201 of the cc of ukraine art. 2202 of the cc of ukraine art. 222 of the cc of ukraine art. 231 of the cc of ukraine art. 232 of the cc of ukraine 2015 238 58 129 14 5 2016 167 140 6 1 1 62 19 7 2017 383 160 7 3 2 67 24 17 2018 392 n/a 6 1 1 55 36 17 baltic journal of economic studies 71 vol. 4, no. 5, 2018 3. economic and legal aspects of banking security under european integration intensification in ukraine the national bank of ukraine (hereinafter – the nbu) is carrying out work on the implementation of the four fundamental acts for the banking sector: eu directive 2013/36 and eu regulation no. 575/2013 (the so-called crd/crr iv package), which establishes the rules for access to credit institutions’ activities, defines supervisory powers and instruments of prudential supervision; directive 2002/87/eu on supplementary supervision of banking groups; directive 2009/110/eu, which defines the rules for the establishment, implementation and prudential supervision of the activities of institutions working with electronic money. in addition, the nbu continues to adapt its own regulatory framework, taking into account the recommendation of the fatf antimoney laundering group and the provisions of the eu acts, in particular, directive 2015/849/eu and regulation 2015/847/eu. they relate to enhancing the efficiency of prevention and counteraction to money laundering and terrorism financing. banks often don’t share much about their security techniques since they don’t want to tip off criminals on how best to attack them. whether they talk about it or not, financial firms should be encrypting data, segregating credit card information from other types of data, and making web applications as secure as possible (palmer, 2011). the superficial attitude of banking institutions to their own security leads in some cases to negative consequences, the most unfavourable of which are criminal offenses. in the context of the banking activity criminalization in ukraine, the adaptation of domestic legislation to the eu requirements must be secured appropriately at the criminal law level. the criminological security of a banking institution is defined as its protection against criminal threats by means of factors that will enable them to anticipate, avoid or counteract them, taking into account certain environmental conditions specially created. as practice shows, banking institutions suffer the greatest losses from criminal offenses, which in criminological terms can be divided into the following groups: mercenary and violent crimes; financial and economic crimes; computer thefts. consequently, criminal threats to the banking institutions security by their sources are divided into two different types in terms of the nature and degree of danger: external – the output of certain factors of the banking institutions environment; and internal – the output of the banking system itself. criminological security in this aspect is defined as a state of protection of banking institutions, property and individuals from external and internal threats by criminal law (ter-akopov, 2003). in the current criminal code of ukraine (hereinafter – the cc of ukraine) among the criminal law prohibitions imposed by the legislator, which establish liability for illegal acts in banking, we distinguish a group of criminal law standards in accordance with their specific object. this group includes the following crimes: illegal actions with transfer documents, payment cards and other means of access to bank accounts, electronic money, equipment for their production (article 200 of the criminal code of ukraine); legalization (laun-dering) of proceeds from crime (art. 209 of the cc of ukraine); bringing the bank to insolvency (art. 2181 of the criminal code of ukraine); making the bank bankrupt (art. 219 of the criminal code of ukraine); violation of the rules of conducting a database of depositors or the rules of reporting (art. 2201 of the criminal code of ukraine); falsification of financial documents and financial institution reporting, concealment of a financial institution insolvency or grounds for revoking (cancelling) a license of a financial institution (art. 2202 of the criminal code of ukraine); fraud with financial resources (art. 222 of the criminal code of ukraine); illegal collection for the purpose of using or making use of information constituting commercial or banking secrets (art. 231 of the criminal code of ukraine); and disclosure of commercial or banking secrets (art. 232 of the criminal code of ukraine). all these crimes are intentional and unlawfully motivated. it supports nearly all processes or makes such processes possible in the first place (kokert & held, 2013). direct banks are subject to the same laws and regulations as traditional banks. sophisticated encryption software is designed to protect your account information, but no system is perfect. accounts may be subject to phishing, hacker attacks, malware and other unauthorized activity (michael, 2018). the importance of information and communications technology (it) for credit institutions has grown substantially over the past two decades. taking into account the active course of ukraine for european integration and related economic reforms, we can confidently state that the dynamic development of social relations in ukraine outstrips the development of its legislation. the complication of social relations in the process of their development in ukraine, inconsistent administrative decisions, which lead to more negative than positive changes, ignoring positive foreign experience in the field of ensuring the banking sector security in ukraine, and simultaneously “superficial” perception by the legislator of the course of humanizing criminal legislation without taking into account the peculiarities of functioning the country’s economic system and its key components during the period of instability and military conflicts lead to an increase in the public relations criminalization in ukrainian banking. thus, public relations, not sufficiently regulated at the legislative level, are not good for strengthening the baltic journal of economic studies 72 vol. 4, no. 5, 2018 national economy; what is more, they complicate its development and make the support through foreign investments impossible. this is due to the fact that the current legislation of ukraine is not capable of providing adequate banking security with its norms, including criminal law ones. in particular, the analysed statistical indicators of recent years show a significant level of banking criminalization in ukraine. note that due to the lack of their unified accounting and systematization, these data cannot be considered absolutely accurate, although they are as close as possible to the actual state of criminal offenses committed in the investigated sphere, as they are determined based on the information reflected in the annual reports of the deposit guarantee fund (hereinafter – dgf) and the annual reporting statistics of the prosecutor general’s office of ukraine on the crime rate. it should be noted that the issue of latent crime in the banking sector, which is believed to be the usual documentary or financial mistakes, is being unduly neglected by analysts of law-enforcement bodies and criminologists. the dgf was formed in accordance with the decree of the president of ukraine: “on measures to protect the rights of individuals – contributors of commercial banks of ukraine” no. 996/98 dated september 10, 1998. however, the available dgf data on the number of offenses committed are from 2010 in the open press. note that these data are not sufficiently specified, therefore, we consider them to be somewhat superficial. in particular, according to the dgf, information on criminal offenses committed in the field of banking is available from 2014. and from 2010 to 2013, reporting data on audits carried out by the dgf as a controlling body is presented in the framework of ensuring the functioning of the deposit guarantee system, protecting the rights and interests of depositors who are participants or temporary participants of the dgf. that is, the open press gave no completely accurate information on the crimes committed in this period in dgf banking activity. thus, according to the dgf report, in 2010, 101 violations were detected among 50 dgf participants (temporary participants). in total, in 2011, 97 violations were detected among 58 participants. the total number of banks in which database management deficiencies were found out based on the instruction on the creation procedure of individual depositors’ database from the dgf participants, approved by the dgf administrative council decision as from november 14, 2002 no. 13, was 46 banks, which is 22.44% of the total number of established violations by banks in 2012. in 2013, 524 violations were detected among 87 dgf participants. available data is on criminal offenses in banking for the period of 2013-2016 according to the dgf annual reports. in 2014, the dgf began active work to bring to justice the perpetrators of offenses in insolvent banks. the dgf developed guidelines for the dgf authorized persons to initiate criminal prosecution of perpetrators. as of december 31, 2015, 2 494 applications on criminal offenses were filed by the dgf authorized persons to the ministry of internal affairs, the prosecutor’s office, the security service of ukraine, and the state fiscal service (hereinafter – the sfs). in the same year, upon 10 applications, the suspected persons were notified on suspected malfeasance (crimes amounting to 26,090 bln uah); 105 applications closed the proceedings; materials for 6 applications were sent to the court; in one case, the court issued a verdict of not guilty (the case concerns the funds of pjsc “tavrika bank” in meinlbank) (richnyi zvit, 2016). according to the 2016 results of the dgf department of investigation of offenses and the dgf authorized persons, 1 113 references on criminal offenses were sent to law enforcement agencies, according to the results of which, 492 criminal proceedings were instituted, 9 of which were indictments to the court. also, in 2016, within the investigating criminal proceedings, in order to provide compensation for damage caused by criminal offenses, the dgf filed 103 civil lawsuits. improving criminal records of crimes committed in the banking sector and analysing the consequences of these criminal offenses will allow to conduct a deep analysis and to focus the efforts of both theorists and practitioners on identifying and eliminating the causes and conditions that create a favourable environment for committing these abuses. it is difficult to understand at the present time which criteria are used to compile the dgf reports and those of the prosecutor general’s office of ukraine regarding the abuses committed in the area investigated. the ambiguity of terminological definitions in these reports also does not allow for objective information about their objective indicators. so, among the terms, dgf experts apply when presenting statistical data on offenses in the banking business, the following are used: bank breach, the violation in insolvent banks, and criminal offenses. 4. conclusion the necessity of criminal law protection of banking activities is due to the increased public danger of these acts at the present stage of the society’s functioning, the crisis in the financial and banking spheres, the urgent needs to eliminate the gaps in the current legislation of ukraine on security issues in the banking sphere. in addition, directly within the banking sector, the introduction of a regulatory framework for warning against possible crimes, the attraction of qualified and highly moral personnel, the introduction of effective systems for the banking information protection, etc., should be priority areas of management. the provisions of the basel committee on banking supervision reflect the high and uniform baltic journal of economic studies 73 vol. 4, no. 5, 2018 standards in banking regulation and supervision. dealing with long-term systemic security problems in banking is a crucial task in the area of adaptation of the ukrainian banking legislation to the eu requirements. adaptation of ukraine’s legal standards to the eu directives’ requirements should be made by amending certain legislative acts of ukraine in order to increase the trust between banks and their clients; criminalization of actions in banking that contain a sign of social danger; liberalization of currency transactions to promote investments and exports; improvement in protecting the rights of financial service consumers; ensuring the nbu activities transparency and increasing its liability to society, improving the deposit guarantee system. it is necessary to form the proper jurisprudence for dealing with offenses in banking in order to properly assess them and bring the perpetrators to justice. at the same time, it is necessary to introduce a unified terminology that would indicate offenses (administrative and criminal) in the banking sector. at the present time, the procedure for preparing statistical reports (accounting) for criminal offenses is regulated by departmental orders. therefore, at least, it is necessary to have a general unified procedure for such reporting or adoption of a separate law of ukraine “on criminal records”. such legislative changes would have an effective impact on reducing the level of the banking sector criminalization in ukraine, which would have a positive effect on accelerating adaptation processes of domestic legislation to international standards. under unfavourable market conditions and outflow of capital, the problems of the banking sphere criminalization in ukraine cause crisis phenomena, which complicate the adaptation of the domestic legislation to the eu directives’ requirements. the actual state of things in the area of adaptation of ukrainian legislation on banking security to european standards cannot be defined as satisfactory. ukraine needs a thorough analysis of comments, recommendations, and proposals of european institutions on these issues. we believe that strengthening efforts and their effectiveness in this direction are also possible in the context of systematic public reporting of responsible authorities on taking these adaptation measures. lack of response of regulatory authorities to adverse conditions arising in the process of functioning of public relations in banking without the use of a specific strategy leads to socially dangerous consequences. however, the state has determined public and legal regulation and protection of social relations as its priority in banking. therefore, it is necessary to create an appropriate adaptation strategy that would take into account and deal with a holistic range of problematic issues that complicate and slow down the nbu’s tasks with regard to the integration processes of banking legislation. references: baranovskyi, o. 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(2003). prestupleniye i problemy nefizicheskoy prichinnosti v ugolovnom prave [crime and problems of non-physical causation in criminal law]. moscow: yurkniga. (in russian) vasylchak, s. v., motsio, r . yu. (2009). ekonomichna bezpeka bankiv ta metody yii zabezpechennia [economic security of banks and methods for its ensuring]. naukovyi visnyk nltu ukrainy, 19.12, 287-292. vovchenko, r . c. (2015). pidkhody do rozkryttia sutnosti finansovoi bezpeky bankivskoho sektoru natsionalnoi ekonomiky [approaches to essence reveal of finance security of banking sector of national economy]. zbirnyk naukovykh prats “finansovo-kredytna diialnist: problemy teorii ta praktyky”, 19, 1-59. retrieved from: http://fkd.org.ua/ article/view/56896/53702 weigand, r . a. (2016). the performance and risk of banks in the u.s., europe and japan post-financial crisis. investment management and financial innovations, 13(4), 75-93. retrieved from: http://dx.doi.org/10.21511/ imfi.13(4).2016.07 kryminalnyi kodeks ukrainy [the criminal code of ukraine]. retrieved from: http://zakon3.rada.gov.ua/laws/ show/2341-14 pro banky i bankivsku diyalnist [“about banks and banking” law of ukraine dated december 7, 2000 № 2121-ii] retrieved from: http://zakon2.rada.gov.ua/laws/show/2121-14 pro zakhody shchodo zakhystu prav fizychnykh osib – vkladnykiv komertsiinykh bankiv ukrainy. ukaz prezydenta ukrainy vid no. 996/98 [“on measures to protect the rights of physical persons as depositors of commercial banks of ukraine”: the decree of the president of ukraine dated 10.09. 1998 no. 996/98]. retrieved from: http://zakon5.rada.gov.ua/laws/show/996/98 richnyi zvit 2016. fond harantuvannia vkladiv fizychnykh osib [annual report 2016. deposit guarantee fund]. retrieved from: http://www.fg.gov.ua/images/docs/reports/annual_report_fgvfo_zvit_2016_ukr.pdf richnyi zvit fondu harantuvannia vkladiv fizychnykh osib za 2015 rik [annual report of deposit guarantee fund for 2015]. retrieved from: http://www.fg.gov.ua/images/docs/reports/звіт_фонду_гарантування_за_2015.pdf fond harantuvannia vkladiv fizychnykh osib. zvit za 2011 rik [deposit guarantee fund. report for 2011]. retrieved from: http://www.fg.gov.ua/files/docs/reports/zvi-t2011ukr.pdf fond harantuvannia vkladiv fizychnykh osib. zvit za 2012 rik [deposit guarantee fund. report for 2012]. retrieved from: http://www.fg.gov.ua/files/docs/reports/zvit_fgvfo_ukr_2012.pdf fond harantuvannia vkladiv fizychnykh osib. richnyi zvit 2013 [deposit guarantee fund. report for 2013]. retrieved from: http://www.fg.gov.ua/files/docs/reports/zvit_fgvfo_ukr_2013.pdf fond harantuvannia vkladiv fizychnykh osib. richnyi zvit 2014 [deposit guarantee fund. report for 2014]. retrieved from: http://www.fg.gov.ua/images/docs/reports/zvit_2014_ukr.pdf fond harantuvannia vkladiv fizychnykh osib. richnyi zvit 2015 [deposit guarantee fund. report for 2015]. retrieved from: http://www.fg.gov.ua/images/docs/reports/zvit_2015_ukr.pdf fond harantuvannia vkladiv fizychnykh osib. richny zvit za 2016 rik [deposit guarantee fund. report for 2016]. retrieved from: http://www.fg.gov.ua/images/docs/reports/annual_report_fgvfo_zvit_2016_ukr.pdf fond harantuvannia vkladiv fizychnykh osib. richny zvit za 2017 rik [deposit guarantee fund. report for 2017]. retrieved from http://www.fg.gov.ua/images/docs/reports/annual_report_fgvfo_zvit_2017_ukr.pdf baltic journal of economic studies 72 vol. 2, no. 1, 2016 corresponding author: 1 department of finance, national academy of statistics, accounting and auditing. e-mail: natasha_shevchuk_2012@mail.ru description of the budget control types in modern conditions of public finance management nataliya melnichuk1, national academy of statistics, accounting and auditing, ukraine abstract. the article highlights the essence of budgetary control. the features of control in the public sector performance are grounded as well as the relationship between verifiability and the controllability. it is proved that the achievement of public finance management needs its controllability. there is no alternative verifiability by ensuring controllability of budget resources. the classification criteria of budgetary control types according to the different classification criteria are developed. it has allowed to distinguish its following types: scheduled, unscheduled, previous, current, next, state, municipal, specialized, departmental, public, external, internal, solid, selective, comprehensive, effective, ineffective, centralized, decentralized, legislative, realizable, further, active, passive, available, projected, intermediate, final, mixed. the purpose of the article is to provide a classification criteria of budgetary control development, taking into account the role and functions of control in public finance management. the subject of the study is a set of financial relationships arising during the budgetary control due to appropriation of financial resources. methodology. the following methods have been used in the process of writing: cognition, induction, deduction, analysis and synthesis. results of the survey. thus, the main directions of budgetary control implementation we can consider the following ones: monitoring compliance with procedures for preparation, review and approval of state and local budgets; the implementation of revenue and expenditure of the budget at the national and local levels control; detection of theft of public funds, as well as their misuse; accuracy of accounting control; increasing the revenue base of the state budget detection; preventive measures to combat corruption and bribery in the public sector. the author’s approach to classification criteria of budgetary control types, unlike existing ones considers budgetary control as a complex in all its manifestations. it allows implementing budgetary control in full and at all stages of the budget process. it will significantly increase its efficiency and effectiveness. value/originality is specified in the following items. classification of budgetary control, which differs from previous approaches in more detail and grouping features has been improved according to: the degree of planning and subordination:, control entities, stages of implementation, level of activity, time direction, nature of action, implementation and assessment according to the timing, forms of implementation, the scope that makes more effective budgetary financial management control. key words: budget, finance, control, financial management, budgetary control, budgetary control types. jel classification: g20, g32, g38, g28, g29 1. introduction effective implementation of the state control functions in the financial sector largely determines the level of trust in society and business to government authorities, coordination of individual components of the budgetary system. forming an effective control mechanism of the cash flow budget is made according to adequate conditions of modern financial practices and the transformation of economic relations. it affords to determine the ability of supervisory authorities to respond quickly to violations of budgetary discipline, as well as to be responsible for the legitimacy of the appropriation of financial resources and their filling of all budgets. it causes the necessity budgetary control specifics investigation and its classification types’ allocation. the fundamentals of control state function implementation in the public sector lies in scientific works of scientists, including, in particular: o. andriyko (1999), s. zelenskyi (2011), m. zabashtanskyi (2011), l.  kovalenko (2011), v. fetisov (2003), v. shevchuk (2014), v. chernadchuk (2011). however, despite the constant paying attention to the area studied by both scientists and practitioners, some issues are insufficiently known, particularly for budgetary control performance. baltic journal of economic studies 73 vol. 2, no. 1, 2016 2. classification criteria of budget planning types assignment of control in the public sector is extremely high, because this type of control is aimed at detecting deviations in the formation and appropriation of financial resources of centralized fund, as well as timely adoption of corrective measures. their resulting will make it possible to predict the situation in the future and avoid negative phenomena. as being one of the key management functions, budgetary control at the same time is a relatively isolated subsystem. this subsystem is competent, and management process is controlled in accordance with the presence of control entities and their interaction. the absence or deterioration of any budgetary control subsystem components impairs or destroys both this management system and financial management system as a whole. the achievement of public finance management needs its controllability. according to shevchuk v. the controllability and verifiability on the one hand, is conditioned by cause-effect relationships between them. their correlation is interdependent, and it is additionally confirming the connectivity of controllability and verifiability (shevchuk, 2014). thus higher efficiency of budgetary control is achieved through its management purpose and methodological and regulatory capacity to compare regulatory and actual data. in case of minor deviations correction and review of scheduled indicators should be performed and the reasons for this discrepancy should be identified. therefore, knowledge of the methodological and organizational principles regarding the types of budgetary control is crucial. the following researches kovalenko l., zelenskyi s., zabashtanskyy m. distinguish the following classifications of budget control (l. kovalenko., s. zelenskyi., m. zabashtanskyy, 2011, p. 312): according to the entity: state, departmental, internal, and independent); according to the timing (forms): previous, current, next. we consider this classification is not perfect, because it reveals only two classification features that may not fully reflect all existing types of budgetary control. fetisov v. notes that budgetary control should be subdivided into: state, departmental, internal, public, and independent (fetisov, 200). this division, in our opinion, reveals it only from the standpoint of economic entities. other researchers also distinguish two classification features: – according to the entities performing budgetary control: control of legislative (representative) state and local self-government authorities; control of executive and administrative units; control performed by chief controllers; control performed by especial created supervisory and financial authorities and municipalities; internal financial audit; – according to the status and functions of supervisory authorities: external and internal. we consider this classification a broader one. it reveals the types of budget control, not only from the position of the entity, as it has been explored in the previous classifications, but it studies budgetary control, according to the status and functions of supervisory authority. andriyko o. distinguishes two types of budget control: general and special (andriyko, 1999). this approach makes it possible to consider it purely on general principles. this approach, in our opinion, makes it impossible to examine all of its components in detail. in his turn the scientist chernadchuk v. proposes the following classification (chernadchuk, 2011): 1) according to the stage of the budget process: – budget control at the stage of drafting budgets (budget planning control); – budget control at the stage of consideration and adoption of the budget and accounting act of ukraine and decisions due to local budgets (budgetary normative work control); – budget control at the stage of budget execution (control of budget implementation); – budget control at the stage of preparation and review statement about budget performance and a decision due to it it (monitoring the results of the budget). considering the following, we think it is important to take into account the following budgetary control features in determining its types: – the scope of the specific control function of the state; – budgeting at any level consists of various stages, which are controlled, according to the nature of the relationship between supervisory and controlled entity. according to the mentioned, we can specify the following types of budgetary control (pic. 1). 1. according the degree of planning: scheduled budgetary control is implemented by the supervisory authorities according to the plan of their supervisory work in the public sector. unscheduled budgetary control is the control exercised by the appropriate authorities if it is necessary and on behalf of centralized authorities according to the formation of effective and targeted appropriation of financial resources in the public sector. 2. according to the timing: previous budgetary control is carried out before the process of planning, drafting, review and approval of the budget towards the negative phenomena elimination that may lead to a decrease in the revenue part of the budget or misuse of budget funds. current budgetary control is exercised by the supervisory authorities in the process of monitoring compliance with budgetary discipline controlled entities. next budgetary control is carried out after the completion of financial transactions when a specific reporting period completed. its main goal is to establish the correctness, legality and economic expediency of the formation and appropriation of financial resources of the public sector. baltic journal of economic studies 74 vol. 2, no. 1, 2016 3. according to control entities: state budgetary control is the control performed by the centralized authorities during the budgeting implementation, as well as other issues of national importance solving in the field of formation, distribution and appropriation of financial resources of the public sector. municipal budgetary control is control performed by the local authorities during the budgeting implementation, municipal programs of development of the corresponding area, as well as other issues of local importance in the field of formation, distribution and appropriation of financial resources of local government. public classification features 1. according to the degree of planning unscheduled scheduled 2. according to the timing previous current following 3. according to the control entities state municipal specialized departmental 4. according to implementation form internal external 5. according to the nature of action solid selective complex 6. according to the implementation estimation: effective ineffective 7. according to the degree of subordination: centralized decentralized legislative regulating followup further 9. according to the level of activity: active passive 10. according to the time direction available predictable 11. according to the coverage degree intermediate final mixed 8. according tothe implementation stages: pic. 1. classification criteria of budget planning types compiled by the authors baltic journal of economic studies 75 vol. 2, no. 1, 2016 specialized budgetary control is carried out by specialized government authorities in the process of preparation, review, approval and implementation of the budget. departmental budgetary control is the control exercised by authorities due to formation and appropriation of financial resources in the public sector. public control – is the control of centralized and decentralized authorities’ activities performed by citizens on their being residents, and acting on behalf of the public. their supervisory powers do not have legal status, so decisions on the control results are, as a rule, a recommendation. 4. according to implementation form: external budget control is the state controls of the elected government authorities, specialized authorities and the public due to the legality of their organizational insubordinate their entities, which mainly deals with one aspect of the public sector activity. internal departmental budgetary control is the control for systematic verification of the current legislation principles on the formation and appropriation of financial resources in the public sector, which plays an important role in strengthening state discipline, law in the formation of the executive authorities, increasing their executive discipline. 5. according to the nature of action: solid budget control is exercised when it is necessary to check only the most important and complex operation, and when significant deficiencies, violations or abuse in the formation and appropriation of financial resources are found. this is the most effective type of budget control, although it is the most time consuming. selective budgetary control involves financial transactions, primary documents and accounting records verification concerning the revenue and expenditure budget for the specified time intervals within a period of long-term control. a comprehensive budgetary control is performed by supervisory authorities while checking the supervised entity, its departments, subordinate enterprises and organizations to comply with applicable legislation in respect of public sector funds for a certain period of time. 6. according to implementation estimation: effective budgetary control is the control of providing the timely measures implementation performed by supervisory authorities. they are aimed at an objective assessment of the fiscal policy areas and their implementation. ineffective budgetary control is the control, providing the measures implementation performed by the certain supervisory authorities. as a result an ineffective formation and targeted appropriation of financial resources occurs. 7. according to the degree of subordination: budgetary control is the control in the public sector, which is carried out by representatives of centralized power. decentralized budgetary control is the control involving authorized, local regulatory authorities supervising, which are elected through elections at the level of the separate political unit. 8. according to implementation stages: the legislative budgetary control is the control exercised by the ministry of finance during the planning, formation and presentation of the draft budget for consideration. regulatory budgetary control is the control exercised by the parliament according to the established rules in the process of consideration and approval of the budget. realizable budgetary control is the control exercised by the competent authorities, agencies and parliament (in attracting additional assignments) at the stage of budget execution and its revision. further budgetary control is the control involving a set of methods and techniques using performed by special authorities or parliamentary committees in the process of the financial statements checking as a result of the budget implementation. 9. according to the level of activity: active budgetary control affects the supervised entity through regulation function within the parameters set by the law. passive budgetary control involves the use of budget analysis in the implementation of control activities in the public sector as one of the control means. 10. according to the time direction: available budgetary control is the control implemented by the supervisory authorities towards the attainment of the fiscal policy objectives in a correspondent time period (or term) based on the real current statement. predicted budgetary control is the control when supervisory authorities seek to avoid negative phenomena in the formation and appropriation of financial resources based on predictions of the future financial standing according to previous and current analysis. 11. according to the coverage degree: the intermediate budgetary control is the shortterm control implemented by supervisory authorities on intermediate financial statement towards gaps identifying that may occur in the future. it can cause serious negative consequences in the future. final budgetary control is the control that characterized by its long-term nature exercised supervisory authorities by the results of the annual financial statements toward determining the level of efficiency of formation and appropriation of financial resources. mixed budgetary control is the control providing simultaneous intermediate and final controls in the course of the budgeting. according to the mentioned classification it is seen that today we can distinguish many types of budgetary control. their implementation will significantly increase the level of efficiency and in the future it will make possible to improve its action mechanism. baltic journal of economic studies 76 vol. 2, no. 1, 2016 3. conclusions thus, the main directions of budgetary control implementation are the following ones: monitoring compliance with procedures for preparation, review and approval of state and local budgets; the implementation of the revenue and expenditure of the budget at the national and local levels control; detection of theft of public funds, as well as their misuse; accuracy of accounting control; increasing the revenue base of the state budget detection; preventive measures to combat corruption and bribery in the public sector. the author’s approach to classification criteria of budgetary control types, unlike existing ones considers budgetary control as a complex in all its manifestations. it allows implementing budgetary control in full and at all stages of the budget process. it will significantly increase its efficiency and effectiveness. references andriyko, o. (1999). organizational and legal problems of state control in the executive branch: dsc thesis, kyiv, 378 р. chernadchuk, v. (2011). the isuue about budget forms and its control. financial law №3 (17) kyiv. – р. 23-26. fetisov, v.( 2003) the budget system of russia: moscow: unity-dana, 367 р. kovalenko, l. zelenskyi, s. zabashtanskyi, m. (2011). budget management, кyiv: publishing house “word”, 416 р. shevchuk, v. (2014) accountability as a means of control of economic systems: the problem of ensuring the effectiveness of control / theory and practice of accounting, analysis and audit: state of problems and perspectives of development: materials of the seventh scientific conference, kyiv, р. 292-294. наталия мельничук характеристика видов бюджетного контроля в современных условиях управления государственными финансами аннотация. в статье приведены сущность бюджетного контроля, обоснованно особенности осуществления контроля в бюджетной сфере, отражены взаимосвязь контролируемости с управляемостью. доказано, что достижение управляемости финансовыми ресурсами в бюджетной сфере требует их контролируемости. контролируемость является безальтернативной условием обеспечения управляемости бюджетными ресурсами. разработана классификация видов бюджетного контроля по различным классификационным признакам, что позволило выделить следующие его виды: запланированный, не запланирован, предварительный, текущий, следующий, государственный, муниципальный, специализированный, ведомственный, общественный, внешний, внутренний, сплошной, выборочный, комплексный, эффективный, не эффективен, централизованный, децентрализованный, законотворческий, регламентирующий, реализационный, дальнейший, активный, пассивный, имеющийся, прогнозируемый, промежуточный, конечный, смешанный. целью статьи является разработка классификации бюджетного контроля с учетом роли и функций контроля в системе управления финансовыми ресурсами бюджетной сферы. предметом исследования является совокупность финансовых отношений, которые возникают во время действия бюджетного контроля за использованием финансовых ресурсов. методология исследования. в процессе написания статьи были использованы следующие методы: познания, индукции, дедукции, анализа и синтеза. значение/оригинальность. таким образом, главными направлениями применения бюджетного контроля являются следующие: контроль за соблюдением процедуры составления, рассмотрения и утверждения государственного и местных бюджетов; контроля за выполнением доходной и расходной части бюджетов на общегосударственном и местном уровнях; выявление фактов хищения финансовых ресурсов в бюджетной сфере, их нецелевого использования; контроль за правильностью ведения бухгалтерского учета; выявление резервов увеличения доходной базы бюджета государства; проведение профилактических мер по борьбе с коррупцией и взяточничеством в бюджетной сфере. предложенный авторский подход к классификации видов бюджетного контроля. данная классификация отличается от предыдущих подходов большей детализацией и группировкой признаков: по степени запланированости и подчиненности, субъектами контроля, этапами осуществления, уровнем активности, временной направленности, характеру действия, оценкой осуществления и в зависимости от времени проведения, формы осуществления, сферы охвата, что позволяет сделать бюджетный контроль результативным в сфере управления финансовыми ресурсами. это позволяет применять бюджетный контроля в полной мере и на всех стадиях бюджетного процесса, значительно повысить его эффективность и результативность. baltic journal of economic studies 207 vol. 5, no. 1, 2019 corresponding author: 1 о.s. popov odessa national academy of telecommunications, ukraine. e-mail: striyla@ukr.net orcid: http://orcid.org/0000-0003-4683-1806 2 о.s. popov odessa national academy of telecommunications, ukraine. e-mail: orlov_vn@ukr.net orcid: http://orcid.org/0000-0001-6392-5500 3 о.s. popov odessa national academy of telecommunications, ukraine. e-mail: onat.iem@gmail.com orcid: http://orcid.org/0000-0001-5551-1148 doi: https://doi.org/10.30525/2256-0742/2019-5-1-207-213 economic activity of enterprises of the telecommunication industry in conditions of implementation of the newest technologies lyubov striy1, vasiliy orlov2, lolita zakharchenko3 abstract. the purpose of the article is to present the results of research on the direction of changing the content and forms of economic activity of telecommunication enterprises in the process of introducing the newest technologies. the article also proposes a micro model of one of the possible options for increasing the effectiveness of the economic activity of an enterprise by organizing its effective interaction with all participants of the telecommunication market. the study was performed on the example of communication enterprises operating in the communication space of ukraine. since the current markets for communication services integrated with the cyberspace of the internet are virtually global, it can be assumed that the results are typical for other communication spaces. methodology. theoretical and methodological basis of the research are monographs, scientific books, scientific articles of modern scientists in the field of telecommunications, the newest information and communication technologies, economic globalization, development of the internet. the basic documents that form the basis for analysing the performance of telecommunications enterprises are statistical data of the state statistics service of ukraine. other available internet publications have also been used. to ensure the validity of research results, the following methods were used: survey methods for clarifying concepts; economic-statistical and method of graphic representation in the study of directions of changes in economic activity of telecommunications enterprises in ukraine; economic modelling, in particular, the heuristic anaxiomatization approach, in the development of micro models of cooperation of the communication enterprise with other market actors in the process of economic activity, and some others. results. the conducted researches confirmed the assumption that there is a redistribution of incomes during the introduction of the newest technologies in the economic activity of telecommunication enterprises. the share of revenues from the provision of telecommunications services is declining, the share of revenues from the provision of internet services is increasing. to increase the effectiveness of economic activities of telecommunications enterprises, a micro model of cooperation has been developed and justified by the enterprise of communication with other market players in the process of economic activity. practical importance. the micro model of interaction reflects the actual structure of interaction between telecommunications enterprises and all participants in the global telecommunications market. practical implementation of the model can contribute to increasing the efficiency of the economic activity of telecommunications enterprises in the context of the introduction of new technologies. the model can also be used by other researchers to study various aspects of economic activity in the real market where telecommunication companies operate. value/ originality. the originality of the results lies in a detailed study of real trends of changes in the content of economic activity of telecommunication enterprises in the context of introducing new technologies, and in the development of a micro model for the interaction of the telecommunications enterprise with all other market players. key words: global market, economic activity, economics integration, internet services, infocommunications services, micro models of cooperation, survey methods, telecommunications. jel classification: c42, f15, l96, o12 baltic journal of economic studies 208 vol. 5, no. 1, 2019 1. introduction the introduction of the newest mobile communication technologies, broadband fixed technologies significantly expands enterprises communication capabilities. further development of information technologies contributes to the creation of new information products, a significant increase in the capabilities of the global cyberspace of the internet and its use in the economic activities of enterprises. the convergence of information and communication technologies allows us to continuously create and improve new infocommunication services that can meet the growing information needs of modern people. these factors stimulate the development of global markets for new and up-to-date services (communication services, information services, internet services and others, which are integrated into the concept of “infocommunication services”). the economic activity of communication enterprises in the process of introducing new technologies is becoming different. in particular, there is a redistribution of income of the enterprise from the provision of telecommunications services to the provision of internet services, as well as the provision of information services. however, the problem, the relevance of which is continuously increasing, practically is not studied by specialists, which leads to the feasibility of its research and publication of this article. literature review. one can single out several works published in recent years, where some possible aspects of solutions to this problem are described. the influence of the developing fourth industrial revolution on the change in the economic activity of enterprises is described by the swiss economist k. schwab. k. schwab, summarizing the experience and views of the world’s leading experts, as well as the leaders of the largest corporations, outlined the scientific analysis of the directions of this revolution in the book “the fourth industrial revolution”. according to the author, the newest technologies can synthesize new more advanced and more efficient technologies. in addition, a staggering combination of technological breakthroughs is possible in a wide range of areas (schwab, 2016). f. kotler & l. keller explored in their popular book some aspects of this problem, in particular, the choice of effective working strategies in the modern market (kotler & keller, 2014). p. drucker investigated the impact of new technologies in the 21st century on any industry (drucker, 2007). m. castells in his monograph described the impact of the information technology revolution on economic development (castells, 2000). in the monograph of t. kuzovkova, l. tymoshenko considered the requirements of the economy for infocommunication infrastructure, the laws of the infocommunication industry development (kuzovkova, tymoshenko, 2016). the authors of the monograph “economy and management of the enterprise: the main trends and problems of development” explored the functionality of the infocommunication services markets, possible directions for improving the economic activity of infocommunication enterprises (golubev, striy, zakharchenko, 2015). the current state, development trends, and organization of economic activity of telecommunications enterprises in modern conditions are considered in the articles: a. kling “what is economic activity?” (kling, 2011); l. zakharchenko “model of the process of economic activity of a modern enterprise” (zakharchenko, 2014); l. stryi “global economy: the current state of global markets” (stryi, 2016). however, among many publications about the analysis of the economic activity of telecommunications enterprises, there are practically no works about the impact of the introduction of new technologies on the efficiency of economic activity. the methodology of the research. theoretical and methodological basis of the research are monographs, scientific books, scientific articles of modern scientists in the field of telecommunications, the newest information and communication technologies, economic globalization, development of the internet. to ensure the validity of research results, the following methods were used: survey methods for clarifying concepts; economic-statistical and method of graphical representation in the study of the direction of changes in economic activity of telecommunications enterprises in ukraine; economic modelling, in particular, the heuristic anaxiomatization approach, in the development of micro models of cooperation of the enterprise of communication with other market actors in the process of economic activity, and some others. statement of the task of the article. the task of this article is to present the author’s vision of the following aspects of this problem: – clarification of the modern content of concepts; – research trends changes in the economic activities of telecommunications enterprises in ukraine; – representation of the model of interaction of the communication enterprise with other market entities in the process of economic activity. 2. clarification of the modern content of concepts the modern economic activity of communication enterprises as a result of the introduction of new technologies, increased competition, the globalization of telecommunications service markets, and the impact of other factors is substantially transformed both in content and in form. therefore, it is useful to clarify, in accordance with the new conditions, the formulation of the basic concepts associated with this problem: economic activity and global markets. clarification of concepts is performed by survey methods. baltic journal of economic studies 209 vol. 5, no. 1, 2019 “economic activity”. there is no generally accepted definition for this concept yet. the most common formulations are next. economic activity is any activity of economic entities aimed at obtaining economic benefits (https://studfiles. net/preview/1003463/page:13, 2018). economic activity is a set of actions at different levels of management, as a result of which people satisfy their needs through the production and exchange of material goods and services (http://abc.informbureau.com/ html/yeiiiiexaneass _aassoaeuiinou.html, 2018). the authors of the work (golubev, stryi, zakharchenko, 2015; kling, 2011; gukasyan, 2003) treat the content of this concept as follows. the term “economic activity” comes from the word “economy” and takes its origins from the “model of an economic man” proposed by adam smith. the model describes the behaviour in the market of the main subjects of the market for entrepreneurs and consumers. according to a. smith, an economic person acts in the market selfishly and rationally. he seeks to maximize profits as an entrepreneur and to maximize utility as a consumer. in the conditions of complete freedom of entrepreneurship, the producer strives to be guided by his own interests. but the laws of the market force him to produce not the products he would like to produce, but only those which are in demand, and sell them at the lowest possible price since only in this case he will be able to surpass his competitors and increase profits. thus, an entrepreneur may not think about the well-being of society, however, the market forces him to act rationally, as a result of his egoism benefits society, providing abundance in the market for goods and services of better quality and at a lower price. the activity of an economic person in the market is an economic activity (golubev, stryi, zakharchenko, 2015; gukasyan, 2003). the economic activity of the enterprise unites all types of work that must be performed to ensure that the target consumer receives the goods and services necessary to him. this is a set of actions, operations, work (business processes), the implementation of which leads to the receipt of an appropriate set of products or services that can meet certain needs and can be a product of exchange. the economic activity becomes profitable when the market has a certain effective demand for goods and services that the enterprise can offer (golubev, stryi, zakharchenko, 2015). thus, the economic activity of the enterprise includes all types of processes and works aimed at the production and supply to the market of goods and services that are recognized by consumers as useful and for which there is (or may be) demand. it should be noted that in global markets, communications companies can offer the market the newest products not known to consumers and for which demand needs to be formed. this is one of the features of the economic activity of communication enterprises (as well as other enterprises) in global markets. “the global market”. the problem of the globalization of markets began to be studied by researchers after the publication in 1983 of t. levitt’s book “globalization of markets”, the main idea of which is to affirm that all people living on the planet are more likely to have a similarity than a difference. modern communication technologies contribute to universal and comprehensive universalization – the world turns into one big village. enterprises can make good money if they, forgetting about differences, focus on the similarity of consumer preferences (levitt, 2001). according to stryi l., the global market is an open market in which enterprises are trying to sell identical high-quality goods, using the same methods of marketing and management; the global market benefits both producers and consumers (stryi, 2016). thus, the modern market for communication services, integrated with the help of cyberspace internet, is a global market. this market has an all-planetary infrastructure, on which, ideally, every person on the planet can have free access to all world communications and information resources. 3. research trends changes in the economic activities of telecommunications enterprises in ukraine the basic information documents that form the basis of the study are the statistical reports of the state statistics service of ukraine, the section “economic statistics”, the subsection “information society”, tables “the volume of services sold in the telecommunications and postal communications” for 2004-2017 (state statistics service of ukraine, 2018). in the process of analysis, only those data are used that relate to the investigated problem. articles were also used (stryi, orlov, zakharchenko, golubev, bogatyreva, 2017, telekom: itogi 2017, 2018; stryi, golubev, bogatyreva, savitskiy, 2018). during the period under study, ukraine’s telecommunications developed dynamically. in 2016, the total income of all enterprises of the industry from the provision of telecommunications services was 52 366 million uah (revenue growth compared to 2015 was 3.36%). in 2017, the total income of all enterprises of the industry from the provision of telecommunications services amounted to 55 127 million uah (revenue growth compared to 2015 was 5.27%). it is evident that thanks to the introduction of the newest communication technologies in the industry, a favourable environment has developed for improving the performance of the economic activity. according to the terminology of the state statistics service of ukraine, telecommunication enterprises provide consumers following types of services: – fixed telephony services (urban, rural, long-distance and international communication); baltic journal of economic studies 210 vol. 5, no. 1, 2019 – mobile communication services; – satellite communication services; – internet services; – other services. in the future, three types of services will be considered in the analysis of the survey results: – telecommunication services; – internet services; – other types of services. telecommunication services include fixed-line services and mobile communication services. the term “internet services” was first used in statistical information in 2016. in previous years, the state statistics service of ukraine in the section “computer communication” in a separate line showed “internet access services”. therefore, in this article, the semantic content of “internet services” is understood as communication activity for connecting a terminal (computer, smartphone, and any other device) of a consumer to the internet. the distribution of incomes of telecommunications enterprises by types of services in the period of 2015-2017 is presented in table 1. table 1 distribution of incomes of telecommunications enterprises by types of services, 2015-2017, mln. uah types of services 2015 2016 2017 telecommunication services, including: 41081 40595 41264 mobile communication services 33206 34077 35217 fixed line services 7885 6518 6047 internet services 7144 9102 10818 other types of services 2431 2669 3045 all types of services 50666 52366 55127 source: own research on the basis of (state statistics service of ukraine, 2018) figure 1 shows the dynamics of changes in the share of revenues of the main types of services in 2014-2017. from the graphs in fig. 1 it can be seen that in the process of introduction of the newest technologies began the redistribution of income shares by types of services. the share of revenues from the provision of telecommunications services in 2016 decreased by 3.58% compared to 2015, in 2017 – by 2.87% compared to 2016. for two years, the decline was 6.45%. the share of revenues from the provision of internet services increased in 2016 by 3.28% (compared to 2015), in 2017 – by 2.24% (compared to 2016). in two years, the growth in the share of revenues from the provision of internet services amounted to 5.52%. there is a redistribution of the share of revenues from the provision of telecommunications services in favour of internet services. the same conclusion regarding the research of the results of 2016 is made in the article (stryi, orlov, zakharchenko, golubev, bogatyreva, 2017). this means that the situation of “improving the effectiveness of economic activity” from the introduction of new technologies is becoming sustainable. the reasons for this development of this trend are the following. due to the price and technological reasons, internet services were provided mainly by specialized telecommunications companies – internet providers. after the introduction of the newest technologies by enterprises, the connection to the internet became available with the help of smartphones, tablets, and other mobile communication devices. internet services began to provide (and receive additional revenue), most mobile companies. with the growth in the number of internet users, the introduction of 3g, 4g technologies by telecom operators, the improvement of the mobile internet, the demand for internet services and, accordingly, the profit of enterprises from providing these services will grow. 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00% 90,00% % tc services internet services other types of services tc services 83,64% 81,10% 77,52% 74,85% internet services 12,88% 14,10% 17,38% 19,62% other types of services 3,68% 4,80% 5,10% 5,53% 2014 2015 2016 2017 figure 1. the dynamics of the change in the stake of income of types of services source: own research on the basis of (state statistics service of ukraine, 2018) baltic journal of economic studies 211 vol. 5, no. 1, 2019 after the introduction of these new technologies, internet users in ukraine have great opportunities to receive infocommunication services. infocommunication services – a relatively new phenomenon in the economy. infocommunication services have made it possible to more effectively meet the continuously growing needs of people in a variety of information and modern information products that arise in their economic and other activities. the formation of the information service begins with the consumer, accessing the network with the help of his provider, finds an internet company (intermediary), and formulates the requirements for the information product that he needs. the internet company (intermediary) communicates with the manufacturer of the information product or (in most cases) with the enterprise that replicates the information products. after solving the issue of payment, the consumer receives the product he needs directly to his terminal. in more detail, this trend is considered in (golubev, stryi, zakharchenko, 2015). after the introduction of the newest technologies, the desire of telecommunication enterprises to increase profits through the production and distribution of their own infocommunication services has emerged. the most common are the following infocommunication services which communication companies seek to provide to their customers: – interactive television; – a variety of video products (films, radio broadcasting, concerts, karaoke and much more); – ip-telephony; – software. the range of infocommunication services, which communication companies strive to provide to their customers, is continuously expanding, the quality of services is growing. the demand for these services is stable. the additional profit of enterprises from the provision of these services is also stable. this is a promising direction for the development of the economic activity of communication enterprises (golubev, stryi, zakharchenko, 2015). 4. the model of interaction of the communication enterprise with other market entities in the process of economic activity in the global market for telecommunications services, communication enterprises interact with all other market players. at present, the market is in the stage of development and structuring. in these cases, an effective method of his research is modelling using the heuristic anaxiomatizational approach. this approach allows us to make full use of the creative abilities of the researcher, a deep understanding of the essence of the simulated process. at the same time, it also allows you to drop the non-essential in order to focus on the main thing. this reduces the time for constructing the model and the effectiveness of its use by avoiding the formal description of nonessential details and elements (philosophical dictionary, ed., i. t. frolov, 5th edition, 1987). driving one of the possible variants of the model (authoring) is shown in fig. 2. when preparing the model and its description, the information data is used from the following sources (schwab, 2016; castells, 2000; zakharchenko, 2014; stryi, zakharchenko, golubev, 2014). consumers of telecommunications services, internet services, and information and communication services are all internet users, all organizations, government, culture, education, the army, the entire population, which provides massive demand for these services, steadily growing market demand and more high requirements for the quality and format of these services. this tendency is considered more detailed in the monograph (golubev, stryi, zakharchenko, 2015). the system of interaction between enterprises of communication among themselves (within the segment of communication services) is a network structure, which is somewhat conventionally shown in figure 2. network organization of economic activity is most effective in the rapidly changing conditions of the modern economy. m. castells notes that the formation of an information economy and globalization is characterized by the development of a new organizational logic. in his opinion, an effective organizational form of the modern economy is a network enterprise (castells, 2000). network organization of markets is characterized by high efficiency of economic activity; it is able to ensure effective interaction of all market participants and rapid adaptation to changes in the external environment (stryi, zakharchenko, golubev, 2016). the consumer can interact with the communication enterprise in three ways. providing communication services (tcs in figure 2 – traditional mobile and fixed telephony). currently, communication is the main interaction. providing these services brings the greatest revenue to businesses. provision of internet services (is in figure 2 – services of access to the network). the consumer receives the access channel to the cyberspace of the network and solves his problems. the income of enterprises from the provision of these services increases, as shown above. provision of own infocommunication services (ics). many communication enterprises, as already mentioned, themselves begin to produce infocommunication services (ics in figure 2). this is a promising area of cooperation, in which both consumers and communication enterprises benefit. however, the share of revenues from the provision of these services is still small. producers, brokers, and distributors of information products act continuously expanding a number of different companies: internet companies, enterprises baltic journal of economic studies 212 vol. 5, no. 1, 2019 producers of information products, enterprises, duplicating information products, business intermediaries, enterprises distributors, media businesses and other (stryi, zakharchenko, golubev, 2014; stryi, golubev, zakharchenko, 2016). this model (figure 2) reflects the actual structure of communication enterprises’ interaction with other participants of the global market and can be used by other researchers to solve various aspects of the study of the modern global market where telecommunications enterprises operate. 5. conclusions the study of the problem of the impact of the newest information and communication technologies, as well as their convergence on the development of the economic activity of telecommunications enterprises in the conditions of global markets, makes the following conclusions. 1. the notions “economic activity” and “global market” are specified. the economic activity of the enterprise includes all types of processes and works aimed at the production and supply to the market of goods and services that are recognized by consumers as useful and for which there is (or may be) demand. it is noted that the modern market for communication services, integrated with the cyberspace of the internet, is practically a global market. this market has an allplanetary infrastructure, on which, ideally, every person on the planet can have free access to all communications and information resources of cyberspace internet. 2. the conducted studies confirmed the assumption that in the process of introduction of the newest technologies in the economic activity of telecommunication enterprises, there is a redistribution of incomes. the share of revenues from the provision of telecommunications services is declining; the share of revenues from the provision of internet services is increasing. so, according to the state statistics service of ukraine, in 2015, the share of revenues from the provision of telecommunications services by ukrainian communication enterprises was 81.10%, in 2017 – 74.85%. the share of revenues from the provision of internet services in 2015 was 14.10%, in 2017 – 19.62%. 3. to increase the effectiveness of economic activities of telecommunications enterprises, a micro-model of cooperation (micro models of cooperation) of consumers enterprise of telecommunications cyberspace the internet producers, intermediaries, information product sellers tce tce tce tce tce tce tcs icsis tcs is ics net of tce legend: tce – enterprise of telecommunications; tcs – telecommunication services; is – internet services; ics – infocommunication services. figure 2. model of interaction of the enterprise of communication with other market actors in the course of economic activity source: own development baltic journal of economic studies 213 vol. 5, no. 1, 2019 a communications enterprise with other market players in the process of economic activity has been developed and justified. the micro interaction model reflects the actual structure of the communication enterprise’s interaction with all participants of the global telecommunications market. practical implementation of the model can contribute to increasing the efficiency of the economic activity of telecommunications enterprises in the context of the introduction of new technologies. the model can also be used by other researchers to study various aspects of economic activity in the real market where telecommunications companies operate. 4. the originality of the results obtained in the course of the study consists of detailed study of the real trends in the changes in the content of economic activities of telecommunication enterprises in the context of the introduction of new technologies, as well as in the development of a micro model for the interaction of the telecommunication enterprise with all other market actors. as further directions of research on this problem, it is possible to recommend studying the changes in demand for services under the influence of regulating price parameters of services in online modes. references: schwab, k. (2016). the fourth industrial revolution. retrieved from: https://eksmo.ru/book/chetvertayapromyshlennaya-revolyutsiya-itd819325 kotler, p., keller, l. (2014). marketing menedzhment [marketing management] (14nd ed., rev.). st. petersburg: piter. (in russian) drucker, p. (2007). zadachy menedzhmenta v xxi veke [management challenges in the xxi century]. moscow: alpina business books. (in russian) castells, m. (2000). informatsionnaia epokha: economica, obshchestvo i cultura [information age: economics, society and culture]. moscow: vushchaia schkola economicy. (in russian) kuzovkova, t., tymoshenko, l. (2016). analiz i prognozirovanie razvitia infocommunikacatsiy [analysis and forecasting development of infocommunications]. moscow: goriachaia linia-telecom. (in russian) golubev, a., stryi, l., zakharchenko, l. (2015). ekonomika i upravlenie na predpriatii: osnovnue tendtncgii razvitia [economy and management of an enterprise: the main trends and problems of development]. saarbrucken: lap lambert academic publishing. (in russian) kling, a. (2011). what is economic activity? retrieved from: http://econlog.econlib.org/archives/2011/02/ what_is_economi.html stryi, l. (2016). globalnaya ekonomika: sovremennoye sostoyaniye globalnykh rynkov [global economy: the current state of global markets]. naukovyy visnyk khersonskoho derzhavnoho universytetu, 18(2), 92-95. gukasyan, g. (2003). ekonomicheskaya teoriya: problemy «novoy ekonomiki» [economic theory: the problems of the "new economy "]. st. petersburg: piter. (in russian) levitt, t. (2001). globalizatsiya rynkov [globalization of markets]. klassika marketinga. st. petersburg. state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua stryi, l., orlov, v., zakharchenko, l., golubev, a., bogatyreva l. (2017). enterprises of telecommunications in ukraine: research of the present state and directions of development. technology audit and production reserves, 4/4(36), 15-21. doi: http://dx.doi.org/10.15587/2312-8372.2017.108664 telekom: itogi 2017. (2018). retrieved from: https://nv.ua/techno/it-industry/telekom-itogi-2017-3g-gonkikievstara-vodafone-i-lifecell-ukraina-zhdet-4g-i-mnp-2406286.html stryi, l., golubev, a., bogatyreva l. & savitskiy (2018). marketynhovyy analiz rynku posluh mobilnoho zvyazku v umovakh vprovadzhennya novitnikh tekhnolohiy [marketing analysis of the market of mobile communication services in the conditions of introduction of the newest technologies]. infrastruktura rynku, 17, 88-94. retrieved from: http://www.market-infr.od.ua/uk/17-2018 zakharchenko, l. (2014). model protsessa ekonomicheskoy deyatelnosti sovremennogo predpriyatiya [model of the process of economic activity of a modern enterprise]. naukovyy visnyk khersonskoho derzhavnoho universytetu, 9(4), 97-101. philosophical dictionary. ed. i. t. frolov. 5th edition. (1987). moscow: politizdat. (in russian) stryi, l., zakharchenko, l. & golubev, a. (2014). rynkovi mekhanizmy i struktury ekonomiky infokomunikatsiynykh posluh [market mechanisms and structures of the economy of infocommunication services]. ekonomika: realiyi chasu: naukovyy zhurnal, 1(11), 134-141. retrieved from: http://economics.opi.ua/ files/archive/2014/nl.html stryi, l., golubev, a., zakharchenko, l. (2016). model setevoy organizatsionnoy struktury gorizontalnoy korporatsii v infokommunikatsiyakh [the model of the network organizational structure of a horizontal corporation in infocommunications]. ekonomika: realiyi chasu: naukovyy zhurnal, 6(26), 114-121. retrieved from: http://economics.opu.ua/files/archive/2016/n4html baltic journal of economic studies 223 vol. 4, no. 4, 2018 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: pikusruslana3@gmail.com 2 taras shevchenko national university of kyiv, ukraine. e-mail: anna.hem@knu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-223-232 life insurance under reforming the pension insurance system ruslana pikus1, anna khemii2 abstract. the purpose of the paper is to generate practical recommendations on the prospects of life insurance development under reforming the pension insurance system in ukraine. methodology. in the article, a considerable attention is paid to international experience, the implementation of which is relevant for ukraine today. in determining the place of life insurance in european pension systems, the experience of spain and the united kingdom is considered, which is sufficiently indicative for ukraine and can serve as a model for reforming the national pension system. methodological basis of the article are methods of scientific cognition, which enable to expose basic conformities to the law of development of the pension systems in this countries and place of life insurance in them. such methods are in particular used as: analysis and synthesis – during the study of reforming pension systems, their detailed analysis and definition of their peculiarities; scientific abstraction – with the purpose of forming of theoretical generalizations and conclusions; also, the method of scientific synthesis, forecasting method, econometric modelling for forecasting the development of life insurance in ukraine up to 2020. results. the pension insurance system of ukraine is at the stage of reformation by introducing compulsory accumulation of pension funds and the development of voluntary non-state pension insurance. the main financial intermediaries providing voluntary pension accumulation services in ukraine are: banks – through the possibility of saving on retirement deposits, insurance companies – through life insurance products, and non-state pension funds (npfs) – through the voluntary participation of citizens in such funds. the article discusses the key differences in the activity of the given subjects in the system and also determines the place of life insurance itself in the system of pension insurance in ukraine. practical significance. having considered the key macroeconomic indicators of ukraine’s economic development, the article predicts the volume of investments into npfs and insurance premiums for life insurance companies using econometric methods; the benefits and prospects of life insurance are determined. practical recommendations on the prospects of life insurance development under reforming the pension insurance system in ukraine are formulated. value/originality. the modelling of the development of the non-state level of the pension system of ukraine allowed determining the dynamics of growth of contributions to life insurance companies and contributions to the npfs in 2017-2020 and drawing a conclusion on the positive prospects for the development of the life insurance market in ukraine and its special role in the successful reformation of ukraine’s pension system. key words: pension insurance, pension system, life insurance, voluntary pension insurance, non-state pension funds. jel classification: h55, g22, g23, j26, j32 1. introduction under modern conditions of the ukrainian economy, the system of pension insurance is not only a unique indicator of the perfection of the development of the social area but also the final indicator of the labour contribution of members of society to achieve progress, plays an important role in the financial system of the state, influencing the formation and redistribution of monetary resources in the regional and sectoral aspects. this necessitates the continuous improvement of the pension insurance system in accordance with the needs of society and the real level of economic development of the country. pension reform in ukraine should be the first step towards high-quality, equitable social security, as well as the full implementation by the state of its responsibilities to citizens. the experience of developed countries shows that attracting life insurance to retirement plans is an effective way to overcome the baltic journal of economic studies 224 vol. 4, no. 4, 2018 financial imbalance of the pension insurance system, increase individual responsibility of a citizen in the formation of his own pension protection, achieve social justice in the clear attachment of the amount of pensions received to pre-paid contributions, provision the economy with the long-term financial resources and investment growth of pension assets. the novelty of this article is a forward-looking analysis of the pension insurance system of ukraine through the development of life insurance, its place and role in the system of pension insurance. 2. literature review the role of life insurance is studied in the works of such domestic and foreign scientists as v. d. bazylevych, n. m. vnukova, o. m. zalietov, m. v. kravchenko, kurt kral, lans bovenberg, deborah lucas and others. the key aspects of reforming the pension insurance system of ukraine are highlighted in the works of such domestic scientists as e. m. libanova, m. i. malovanyi, s. a. melnikov, o. v. petrushko, m. b. rippa, v. k. rudyk, v. s. tolybyak, g. m. tretyakova, and others. however, many challenges to this problem remain unanswered, and existing proposals are controversial or debatable. the complexity and versatility of issues related to the development of the pension insurance system in ukraine, its reform and the role of life insurance in this process necessitate their further research and are evidence of the relevance of the chosen topic. 3. voluntary retirement savings in ukraine, life insurance companies can take a part in the formation of an additional pension for the population of the third-level of the pension system. during his life, the insurer pays contributions to the insurance company and, after surviving to a certain retirement age, receives benefits for a decent living. the pension system of ukraine, according to the current legislation, consists of three levels: the first – compulsory solidarity, the second – mandatory accumulation, and the third – voluntary accumulation. participants in voluntary accumulation are non-state financial institutions, and therefore, non-state pension funds (npfs) and banks can be at the level of competition among insurance companies that provide life insurance. banks and npfs offer a number of savings products, while life insurance companies provide clients (through life insurance policies in its various modifications) not only with the accumulation of funds but also with protection from a number of risks: in case of death or disability of the supporter, his/her family does not remain without funds, which in turn is a solution to the tasks of a social nature. other differences in the activities of these institutions regarding the offer of savings tools are given in table 1. let’s consider more detailed, how the abovementioned role and tasks of life insurance work in developed economies of the world, and above all, how many of these tools and how exactly they are involved in developing the effective pension systems. this will enable formulating the appropriate proposals for ukrainian realities, as in october 2017 the reform of the pension system is initiated in ukraine with the law of ukraine no. 2148-viii. 4. international experience an analysis of the current state of life insurance markets in developed countries of the world suggests that life insurance companies are the most powerful financial institutions. approximately 90% of the adult population has policies of long-term accumulative life table 1 comparative characteristics of non-state pension insurance by financial intermediaries criterion financial intermediaries non-state pension funds life insurance companies banks type of contract pension contract / pension scheme pension insurance contract deposit pension account the person in whose favour the contributions are paid a participant of the non-state pension fund the insured person the contributor pension funds amount of commitments in monetary terms by the pension fund to the participant insurance reserves from pension insurance contracts deposits amount types of retirement benefits pension for a specified period; one-time pension payment. the participant of the fund, in case of the choice of a life annuity, concludes the insurance contract of life insurance pension annuity pension (life annuity); pension for a specified term (insurance annuity) with guaranteed period of payment and without; one-time pension payment. one-time pension payment type of guarantee retirement contract as a type of pension guarantee by entering into a pension contract with a non-state pension fund pension insurance as a type of pension guarantee by entering into a pension insurance contract pension deposit as a type of pension guarantee by opening a pension account at a bank source: compiled by the authors baltic journal of economic studies 225 vol. 4, no. 4, 2018 insurance. life insurance, while formally remaining voluntary, is in fact compulsory in the economies of the highly developed countries, as most americans and europeans have formed a number of stereotypes, according to which life and health simply cannot be insured. the solvent demand for insurance policies in general and life insurance policies in particular in 2016 (swiss re, 2017) can be estimated at 3505 usd per average citizen, including life insurance policies of 1954 usd. the level of insurance culture in terms of life insurance policies is also increasing in the countries of eastern europe and asia, which are being reformed, especially regarding pension systems. according to the continental distribution of life insurance markets, their global shareholding belongs to insurance companies in asia – 38.22%, with a slightly smaller share of european countries – 32.81%, and north american insurers collect 23.26% of the world’s payments market. the aggregate share of markets in other continents (latin america, oceania, and africa) is only 5.7% of the world’s life insurance (swiss re, 2017). according to the report of the “swiss re” international analytical centre, in 2016 (swiss re, 2017), global insurance market of life insurance collected 2,217 billion dollars of contributions, which is 2.5% more than in 2015. this growth was lower than in the previous year – 4.4% but higher than the average figure in 10 years, which is 1.1%. the main sources of growth in life insurance contributions are markets of developing countries, because in 2016, premiums in such countries increased by 17%. an example of such development is the development of life insurance in china, which, thanks to the advent of classical life insurance products, including supplementary pension insurance (due to the reform of the pension system), as well as interest rate liberalization and government efforts to promote increased security of long-term savings, was able to provide 5.7% of the total increase in life insurance premiums in the world. the development of the life insurance market in asia is also based on an increase in demand for life insurance products in such countries as india, indonesia, and vietnam. in 2016, the growth rates of life insurance in north america and western europe were almost equal. in the united states, small nominal profits are offset by inflation, while in western europe downward figures reflect the market response to the introduction of solvency ii. although overall, the level of collected insurance premiums decreased by 0.5% to 2,110 billion usd, the high level of life insurance features these countries, because the penetration rate for life insurance varies from 5% to 10%. for developing countries, this figure does not exceed 3% (table 2). it is expected that the economies of developed countries should increase the amount of insurance premiums collected worldwide by a further 50% in dollar terms by 2021. it should be noted that in 2016 the markets of leading countries accounted for 81% of global insurance payments for life insurance (swiss re, 2017). at the same time, the development of life insurance in the world faces many obstacles, including low interest rates, a difficult price environment, and the need to adapt to regulatory changes, including the introduction of solvency ii for european countries, which has created new, tougher conditions for the operation of insurance companies. in developing countries, the stabilization of economic growth, population growth, urbanization, and the increase in the middle class are the basis of the positive table 2 the key indicators of life insurance development in the world in 2016 no. country ratio of life insurance premiums to the country’s gdp, % insurance premiums, million us dollars no. country ratio of life insurance premiums to the country’s gdp, % insurance premiums, million us dollars 1 usa 3.02 558847 16 singapore 5.48 17557 2 japan 7.15 354053 17 netherlands 2.13 16385 3 china 7.15 262616 18 indonesia 1.64 15299 4 uk 7.58 199369 19 thailand 3.72 15131 5 france 6.06 152817 20 malaysia 3.15 9189 6 italy 6.23 122438 21 israel 2.51 7997 7 south korea 7.37 104169 22 portugal 3.59 7446 8 germany 2.75 94661 23 poland 0.99 4664 9 india 2.72 61817 24 uae 0.69 2448 10 canada 3.27 49976 25 vietnam 1 2053 11 australia 2.99 37692 26 greece 1.01 1971 12 spain 2.8 34459 27 turkey 0.19 1644 13 switzerland 4.72 31151 28 croatia 0.86 429 14 finland 9.53 22620 29 kazakhstan 0.12 163 15 denmark 6.95 21327 30 ukraine 0.13 113 source: compiled by the authors using (swiss re, 2017) baltic journal of economic studies 226 vol. 4, no. 4, 2018 prediction of penetration into the life insurance field. in a broader sense, changes in demography, medicine, and technology can affect mortality and morbidity in many parts of the world, increasing the fundamental impact on life insurance. the experience of developed countries shows that life insurance plays a significant role in shaping pension plans for future pensioners at the level of the non-state pension system. in turn, non-state pensions, in particular, through life insurance instruments, play a significant role in about half of the countries of the organization for economic cooperation and development (oecd). thus, in 2016, for pension systems in the oecd countries, the average gross replacement rate for state pensions was 41%, while for non-state actors – 53%. when including the nonstate voluntary pension insurance, the average indicator for oecd increases to 59%. for eight oecd countries (belgium, germany, uk, ireland, usa, canada, japan, and new zealand), where voluntary non-state pensions are spread, and the average replacement rate is 63% for the average recipient, who wants to pay voluntarily, compared with 37%, when only mandatory accumulation is considered (oecd, 2017). defining the place of life insurance in pension systems of european countries, the experience of spain and great britain is sufficiently indicative for ukraine. spain’s experience is important for ukraine since its economy is at the stage of rebuilding after the debt crisis in europe and depends directly on the policy of cooperation with creditors (imf). it should be noted that in 2016 spain collected 21.5% more life insurance contributions than in 2015, which in cash amounts to 7 million euro. over the past 5 years, this indicator has grown by 7.87% (oecd, 2017), which was primarily due to an increase in contributions from retirement savings products and is a clear indication of the positive dynamics of the life insurance market, in general, the insurance market and the country’s economy. at the present stage of market transformation, spain has a three-level pension system consisting of dominant state pension plans (analogous to the solidarity pension system of ukraine), voluntary professional and private pension savings. the reform of the pension system in spain was carried out in 2011. there has been an increase in the retirement age from 65 to 67 years, as well as an increase in the number of years of payment of insurance premiums necessary for a full pension from 15 to 25 years. these changes began to be implemented gradually from 2013 and their full implementation is expected until 2027. currently, pension payments in this country are formed at the expense of workers’ contributions – 4.7% and employers’ – 23.6%. in december 2013, according to the reform plans, the “sustainability ratio” began to work, which linked the initial pension with changes in the expected life expectancy and changed the procedure for indexing public pensions under the state pension plan. starting from 2019, the sustainability rate will be based on the life expectancy after reaching the retirement age during 5 years. this ratio will only be applied once during the appointment of pensions and will be reviewed every 5 years. it is projected that the size of initial pensions may be reduced by 5 percent, on average, every 10 years. also in 2013, a new indexation method was introduced, according to which pensions are adjusted on the basis of the ratio of contributions to the pension system to expenditures over the past 5 years and the forecast for the next 5 years. according to the national institute of social insurance estimates, the new adjustment method will allow spain to save 33 billion euro (45.5 billion usd) by 2022. such savings methods should enable the state pension system to balance the contributions and disbursements in the short and long run. the non-state voluntary pension system of spain, which began to develop rapidly after the pension reform, is presented in the form of pension plans, which are provided by pension funds and insurance companies that provide life insurance. spanish legislation stipulates that life insurance companies may be subject to pension fund management. by the beginning of 2016, out of 82 authorized management companies, 47 were life insurance companies representing 57.3% of the market, and which account for 33% of the total assets of pension funds (imf, 2016). the positive dynamics of the development of the nonstate voluntary level of the pension system can also be explained by the tax benefits that feature the spanish law. contributions to private pension plans can be deducted from taxable income up to the specified annual limits, which today are: eur 10000 – for taxpayers under the age of 50; eur 12500 – for taxpayers over the age of 50. the legislation also establishes a limit of 30% of the taxpayer’s income for the tax year in question (50% for persons over 50 years of age). such limits are applied annually during the calendar year. the taxpayer may save the maximum marginal tax rate, which in 2017 accounted for 43%. also, additional contributions of up to 2000 euro can be made to the spouses’ pension plans, which are taxed from 0 to 8000 euro. for people with disabilities, these limits are higher and set at 24250 euro (advoco, 2017). direct relatives can contribute up to 10000 euro to retirement plans for people with disabilities. consequently, the reform of the spanish pension system and the experience of using life insurance are relevant to the ukrainian practice of reforming the pension system and can be used in the following part: increase in retirement age is a prerequisite for the reform of the state component of the pension system for its further effective functioning; life insurance companies, being the experienced financial market participants, can provide pension management services based on insurance policies both to individual enterprises, as well as npfs; baltic journal of economic studies 227 vol. 4, no. 4, 2018 tax incentives are a driving tool for the development of a non-state voluntary sector of the pension system (third level of the pension system of ukraine), which increases the motivation for participation in this system for both the employer and the worker or selfemployed person. individual conditions for taxation of participation in the pension system may be offered to people with disabilities. the uk economy is one of the world’s leading with the branched financial system and a wide range of services, so the experience of using life insurance under the reform of the country’s pension system is indicative. the uk is the fourth largest country in the world (after the usa, japan, and china) and the first in europe to develop the life insurance market and collects per year 65 million usd more than france, which is in the next position (table 2). despite the fact that the country had a small downward trend in life insurance contributions collected in 2016, they increased by 13% over the past 5 years (swiss re, 2017). the pension reform, which took place in the united kingdom in several stages, began in 2009, triggered dramatic changes in the country’s pension system in 2014, when the transition from a two-level state pension system to a one-level system was legislated. since april 2016, a new state pension system has entered into force, which introduced a single-rate state pension with a fixed rate for workers who retire after april 6, 2016. a full new state pension in the country can be obtained with 35 qualifying years of work experience and is based on insurance premiums to the national insurance fund. however, this system does not apply to pensioners who retired earlier than the specified date, for them the state pension is paid according to the old rules. such pensioners have the opportunity to receive a basic pension from the state, subject to the availability of 30 qualifying years, as well as an additional pension if they also contributed money under a special state pension plan that provided the second level of the state pension system. the basic pension is indexed each year, depending on the consumer price index. consequently, there are three types of pensions in the country and, accordingly, three ways of receiving them: state pension (for the registration of this type of pension, it is necessary to transfer a fixed amount monthly to the pension insurance fund for at least ten years); labour pension (employer pension plans); personal/private pension (personal savings of citizens). the reform will also increase the retirement age of 65 for men and 63 for women up to 66 years of age (from 2018 to 2020) and 67 years (from 2026 to 2028) for the citizens of both sexes. at the same time, the system of motivation for late retirement is working: for every 9 weeks, for which the pensioner has decided to postpone his retirement, the payment of the state pension will increase by 1%, i.e. by 5.8% per year (5 weeks and 10.4% per year under the old system). since april 2015, the flexibility of the population’s access to own pension savings has been increased, which gave the right to choose the way to receive pension benefits – in the form of a lump sum, payments for a certain time or the purchase of an annuity. the pension reform also applies to labour pensions and provides that all employers are required to automatically credit employees to their company’s qualified pension plan or to the nest state pension plan and make contributions on their behalf. enrolment is automatic for all workers, but unlike the employer, they have the right to refuse such participation (ssa, 2017). for labour pensions, there are two tools available: insurance schemes offered by life insurance companies and retirement plans created for self-government by the employer. insurance schemes are mechanisms that are provided directly by insurance companies, where the benefits provided are covered by one or more insurance contracts or annuity contracts. after retirement, the worker has the right to withdraw up to 25% of retirement savings once. this amount will be exempt from taxes. the remaining payments will be made proportionally and subject to income tax (ssa, 2017). for the purpose of providing a private pension in the uk, the so-called personal pension plans are an agreement that an employee can individually set up with an external supplier – an insurance company, an insurance agent or a broker. the credibility of this type of savings is evidenced by the ever-increasing amount of contributions and retirement benefits made by life insurance companies. thus, the total uk long-term pension payments in 2016 (statista, 2016) amounted to 122728 billion pounds, which is by 3.2% more than during the previous period. the overall trend of payments over the past ten years is positive. the average growth is around 7% per year. consequently, the experience of the uk regarding the role of life insurance companies in the country’s pension system is indicative for ukraine, which is at the stage of reforming the pension system. thus, insurance companies may not only participate in non-state voluntary insurance but also take a definite place in the introduction of the second level of the pension system, which will be mandatory for employers and workers. the availability of reliable tools for long-term savings, the fight against informal employment, and the motivation to legalize income can be provided with insurance products that offer life insurance companies and tax incentives for their consumers. also, the uk experience can be implemented in ukrainian pension legislation in terms of financial incentives for late retirement and the need to increase the retirement age of the population. accordingly, it can be concluded that life insurance in the developed world markets and emerging markets has a significant socio-economic value for the economies baltic journal of economic studies 228 vol. 4, no. 4, 2018 of these countries. the high growth of the insurance industry as a whole, and life insurance in particular, is an indicator of the effective development of the financial sector of these countries. the experience of developed countries shows how important is life insurance in pension systems in these countries. thanks to the implementation of foreign experience (countries such as spain and the uk) into the ukrainian pension system, we can talk about the relevance and prospects of life insurance as an effective tool for long-term retirement savings. in particular, obstacles such as the mentality of the population, distrust and stereotypes regarding insurance products, the imperfection of the management apparatus, high inflationary risks, and low incomes of the population may arise in the path of reforming the pension system as a whole and the development of life insurance in particular. one of the main problems is the solvent demand for non-state pension insurance in general and insurance products in the field of life insurance, the solution of which in the future will depend on the success of the functioning of both the second and third levels of the pension system in ukraine. 5. prospects for the development of life insurance in ukraine at the current stage of market transformation in ukraine, the demand for non-state pension system services and savings tools is quite low, which is explained by the low purchasing power of the population. in general, only 1.5%-2% of gdp is redistributed through the insurance industry in ukraine, while in developed countries this figure ranges from 6% to 12% (swiss re, 2017). the ukrainian insurance market is at an early stage of development but has a great potential. in 2016, the gross insurance premiums collected by life insurance companies more than doubled their respective volumes in 2011, while insurance premiums grew by 17% compared to 2011 (nfp, 2011-2017). the government of ukraine provides for the active implementation of economic and social reforms, as identified in the medium-term plan of priority actions (kmu, 2017). accordingly, in this scenario, in 2018, gdp growth is projected at 3%, in 2019 – by 3.6%, in 2020 – by 4%. the consumer price index (december to december of the previous year) is projected at 107% in 2018, 105.9% in 2019, and 105% in 2020. one of the most important tasks of the pension reform in ukraine is to stimulate the development of the non-state level of the pension system in order to preserve pension savings and further invest them in the ukrainian economy. in order to determine the prospects for the development of life insurance in ukraine at the reform stage, we have modelled the forecast for the development of this type of insurance as a part of the pension system of ukraine. in the scientific work, the basic models of econometric analysis are used, such as: polynomial model, arma and arima models. as a statistical basis, the time period of 10 years from 2006 to 2016 was chosen. it is planned to build a forecast from 2017 to 2020. the main indicators of the country’s economic development, which influence the degree of development of the non-state level of the pension system of ukraine, were selected as follows: the volume of gdp, since gdp is one of the main macroeconomic indicators of the economic development of any country – gdp; the total amount of incomes – income, and savings of the population of ukraine – savings; the amount of pension contributions to the npf – pension; insurance contributions to life insurance companies – life-ins. these indicators describe the level of incomes of the population and the part, which can be invested in voluntary pension accumulation and life insurance. features of the main macroeconomic indicators of ukraine’s economic development from 2006 to 2016 are presented in table 3. the process of forecasting the development of the non-state level of the pension system of ukraine is based on an algorithm that involves the construction of four econometric models. forecasting the volume of investments into npfs and insurance premiums into life insurance companies consists of the following stages: 1. the linear model of the dependence of the population’s income on the gdp growth rate. 2. arma model of type (0,1) of the volume of savings depending on the volume of gdp and household income. 3. arma model of type (0,1) of the amount of insurance premiums depending on the volume of income and savings of the population. 4. arima model of type (1,1,1) of pension funds’ contributions to npf depending on the volume of income and savings of the population. the following econometric models are constructed using the macroeconomic indicators of the development of the pension system of ukraine and in accordance with the defined modelling algorithm: 1. the linear model of the dependence of the income of the population on the volume of gdp, in the form of household_income = 0.896428 * gdp + 33356.67. 2. arma model of type (0,1) of the changes in volumes of savings depending on gdp growth rates and household incomes, in the form: savings = 0.490318 * household_income – 0.446560 * gdp [ma (1) = 0.458471] + 65753.37. baltic journal of economic studies 229 vol. 4, no. 4, 2018 3. arma model of type (0.1) of the growth rate of insurance premiums depending on the growth rates of income and changes in volumes of savings, in the form: life___ins = 0.001496 * household_income +0.006673*savings [ma (1) = 0.876809] 219.4848. 4. аriма model of type (1,1,1) of the growth rate of pension contributions to the npf depending on the growth rate of household income and changes in the volume of savings, in the form: pension = -0.000152 * * household_income + 0.000345 * savings [ar (1) = -0.566664 ma (1) = 3.025943] + 369.1841. the assessment of the quality of the constructed models was performed using the following criteria (table 4): adjustedrsquared criterion (more than 0.5) – to test the quality of the model; durbinwatsonstst criterion – for the auto-correlation test; prob. (f-stat) criterion (less than 0.05) – to check the adequacy of the model and its significance; m.a.p.e. criterion (8-15%) – to check the quality of the forecast. according to the results of econometric modelling, the projected volume of ukrainian population’s incomes in 2018 will amount to 2,203,324 million uah, and in 2019 – to 2,280,450 million uah, which is 3.5% more than in 2018. according to the projected figures, table 3 key macroeconomic indicators of development of the economy of ukraine, 2006-2016 year dynamics of average monthly salary, (uah) household incomes, (million uah) savings, (million uah) gdp, (million uah) contributions to insurance companies, (million uah) contributions to npfs, (million uah) 2006 1041 472061 37044 565018 608 120 2007 1351 623289 37840 751106 991 234 2008 1806 845641 22496 990819 1609 583 2009 1906 894286 69884 947042 1789 755 2010 2239 1101175 142289 1120585 2185 925 2011 2633 1266753 123123 1349178 2664 1102 2012 3026 1457864 147280 1459096 3222 1314 2013 3282 1548733 116266 1522657 2476 1588 2014 3480 1516768 83320 1586915 2160 1808 2015 4195 1743979 6200 1988544 2186.60 1886.80 2016 5183 1989771 -18400 2385367 2756.10 1895 source: developed by authors using (ukrstat, 2006-2016) table 4 characteristics of the econometric analysis models no. model equation model characteristics forecast for 2020 1 the linear model of the dependence of population income on the gdp growth rate household_ income = 0.896428*gdp + 33356.67 determination coefficient r2=0.985623, indicating a very close linear relationship. the value of prob. (f-statistics) = 0,00000, so the model is adequate both at the level of significance 0.05, and at the level of 0.01. increase in income by 19%, forecasted figure for 2020 is 2,369,221 mln. uah 2 arma model of type (0,1) of the changes in volumes of savings depending on gdp growth rates and household incomes savings = 0.490318* household_ income 0.446560* gdp [ma(1) = 0.458471] + 65753.37 determination coefficient r2=0.864671, indicating a very close linear relationship. the value of prob. (f-statistics) = 0.002008, so the model is adequate both at the level of significance 0.05 and at the level of 0.01. reducing savings by 9.2%, the forecasted figure for 2020 is 57 167, 69 mln. uah 3 arma model of type (0,1) of the growth rate of insurance premiums depending on the growth rates of income and changes in volumes of savings life___ins = =0.001496* household_ income + +0.006673* *savings [ma(1)=0.876809]219.4848 determination coefficient r2=0.912432, indicating a very close linear relationship. the value of prob. (f-statistics) = 0.000447, so the model is adequate both at the level of significance 0.05 and at the level of 0.01. increase in insurance premiums by 18.2%, the forecasted figure for 2020 is 3920.58 mln. uah 4 аriма model of type (1,1,1) of the growth rate of pension contributions to the npf depending on the growth rate of household income and changes in the volume of savings pension=-0.000152 * * household_ income + +0.000345*savings [ar(1) = -0.566664 ma(1)=3.025943]+369.1841 determination coefficient r2=0.947282, indicating a very close linear relationship. the value of prob. (f-statistics) = 0.008044, so the model is adequate both at the level of significance 0.05 and at the level of 0.01. increase in the amount of pension contributions by 4.2%, the forecasted figure for 2020 is 2887.23 mln. uah source: developed by the authors baltic journal of economic studies 230 vol. 4, no. 4, 2018 the income of the population in 2020 will be 2,369,221 million uah, which is 19% more than in 2016. the projected increase in household incomes in future periods can actively affect the level of population accumulation, the increase in the contribution activity to non-state pension funds and life insurance companies. the key factors influencing the saving activity of the population are (zaletov, 2006): expectations about the dynamics of prices and quantity of goods in the market; expectations of changes in the volume of income and financial position in the future; interest rates on loans and deposits; tax rates, as the increase in tax rates reduces the income of end-use and, as a consequence, reduces the consumption and savings; development of the system of state social insurance; development of capital markets, as they perform a dual function of stimulating savings and loans; demographic factors: age, gender, social status, education of the person who decides on the type of financial behaviour in general; level of corruption in the country; trust in financial institutions and the availability of convenient investment instruments. to date, in ukraine, only the banking sector has privileges among the financial institutions that provide long-term savings. there is a fund for guaranteeing deposits of individuals only for banking institutions, which in turn makes a life insurance company less competitive. in conditions of high level of mistrust of the population, unformed insurance culture and certain mental features, it is necessary to provide guarantees and broad rights to protect the insurer’s deposits and the investment income in life insurance, as this is one of the key factors in stimulating the placement of savings in the life insurance segment. according to the results of the model of population saving forecasting, there is a slight decrease. in 2020, the volume will be about 57,167.59 million uah, which is 9.3% less compared to 2017. this phenomenon can be explained by an increase in consumption and rising prices due to the devaluation of the hryvnia, because despite the increase in household incomes, the cost of living increases, which does not allow saving enough money that could be used to invest in the real economy or pension insurance. despite the declining dynamics of savings, the modelling results show that contributions to life insurance companies in 2018 will amount to 3,517.93 million uah, which is 6.04% more than in 2017 (3,316.604 million uah). estimates in 2020 should increase by 5.4% compared to 2019. given the social significance of life insurance, as well as the inherent investment in this area, a strong legislative framework is essential for its sustainable development and growth stimulation. in this issue, the experience of developed countries of the world can be drawn. the nearest priorities in regulating the life insurance market in ukraine should be: introduction of european principles of regulation of insurance activity; ensuring transparency of the insurance market by publishing reliable and regular financial statements; the struggle for the purity of the insurance market, by raising standards and increasing the responsibility for the failure to comply. according to the results of the modelling, the amount of pension contributions to the npf will be 2,516.38 million uah in 2018, 2,703.024 million uah in 2019, and 2,887.23 million uah in 2020. the actual state of payments to the non-state pension system of ukraine in part of the contributions to non-state pension funds is characterized by a slow increase in growth rates over the past 5 years. contributions to life insurance companies have a significantly higher gain and more powered dynamics. there is a passive increase in contributions to non-state pension funds with an active growth of contributions to life insurance companies, which features the overall improvement of the climate in the life insurance market in ukraine. according to the results of 2016, the amount of pension contributions to life insurance companies was 45.4% higher than to non-state pension funds, which confirms the effectiveness of life insurance companies and their benefits over non-state pension funds (figure 1). according to the results of 2017, the amount of pension contributions to life insurance companies was 45.4% higher than to non-state pension funds, which confirms the effectiveness of life insurance companies and their benefits over non-state pension funds (figure 1). consequently, modelling of the development of the non-state level of the pension system of ukraine is of high quality since all models met the limits of the abovementioned criteria. the analysis showed that the positive dynamics of the growth of pension contributions to life insurance companies and non-state pension funds will be maintained in ukraine during 2018-2020. life insurance has a high growth dynamic, which is a good indicator of the efficiency of the non-state pension insurance sector in ukraine. 6. conclusions 1. life insurance is an insurance that provides for the protection of property interests due to the death of the insured since the key feature is the fact that human life has no unambiguous approach to its value (monetary) assessment. under this type of insurance, it is impossible to accurately determine the amount of damage caused by the onset of the insured event. the main feature of life insurance is a combination of insurance protection and savings. on the one hand, life insurance is a tool that allows the state, both at macro and micro level, to increase the efficiency of financing social risks and removing the corresponding burden from the state budget, and on the other – it creates a powerful national investor. baltic journal of economic studies 231 vol. 4, no. 4, 2018 2. international experience of many countries of the world shows that life insurance is a powerful tool for the socio-economic development of society, both for developed countries and for developing countries. effective development of the insurance industr y and life insurance as a sub-sector reveals the highest level of development of the financial sector of the countr y; therefore, life insurance is one of the central types of the insurance market and of great socio-economic importance in all developed countries. 3. the experience of developed european countries (spain, great britain) in reforming pension systems can be used in determining the directions of the implementation of pension reform in ukraine and points to the need to involve life insurance companies in the development of the second and third levels of the pension system. 4. the key directions of implementation of international experience in reforming the pension system of ukraine are: increasing the retirement age, which is a prerequisite for the reform of the state component of the pension system for its further effective functioning; increasing the pension insurance record for a labour pool of the population, which was done in ukraine in october 2017 (swiss re, 2017), is a sound and wellconsidered decision inherent in pension reform in most foreign countries; the financial motivation of late retirement as a tool for an indirect increase of retirement age; involvement of life insurance companies in managing retirement plans as at separate enterprises, as well as in npfs as a whole; changes in tax legislation regarding tax exemptions for consumer savings products offered by life insurance companies, as well as for people with disabilities; involvement of life insurance companies in the functioning of the second level of the pension system, which, after a possible introduction in 2019, will become compulsory for employers and workers. 5. the modelling of the development of the nonstate level of the pension system of ukraine allowed determining the dynamics of growth of contributions to life insurance companies and contributions to the npfs in 2017-2020, and drawing a conclusion on the positive prospects for the development of the life insurance market in ukraine and its special role in the successful reformation of ukraine’s pension system. 6. the following ways of attracting life insurance to reforming the pension system in ukraine should be considered as promising for ukraine, as well as for further research: creation of favourable conditions for the development of life insurance as a tool for long-term pension accumulation at the third level of the pension system by improving reliability and establishment of certain guarantee funds; involvement of life insurance companies in the implementation of the second level of the pension system, which will give the right to choose an instrument of accumulation for the society and minimize the risk of nationalization of accumulated funds. 3222 2476 2160 2186,6 2756,1 2913,7 1314 1588 1808 1886,8 1895,2 1897,3 0 500 1000 1500 2000 2500 3000 3500 2012 2013 2014 2015 2016 2017 m ln . u a h contributions to insurance companies contributions to npf figure 1. amount of contributions to life insurance companies and non-state pension funds in ukraine from 2012 to 2016, mln. uah references: advoco (2018). tax treatment of private pensions in spain. retrieved april 17, 2018, from: http://www.advoco.es/ advice/14-health-a-social-security/90-tax-treatment-of-private-pensions-in-spain.html bovenberg, lans, & nijman, theo (2017). personal pensions with risk sharing. journal of pension economics and finance, 16, 450-466. cabinet of ministers of ukraine (2017). order "on approval of the medium-term plan of the government's priority actions by 2020" no. 275-р of 03 april 2017. retrieved from: https://www.kmu.gov.ua/ua/npas/249935442 baltic journal of economic studies 232 vol. 4, no. 4, 2018 ljutyi, i. o., borynecj, s. ja., varnalij z. s. and other (2017). pensijne strakhuvannja [pension insurance]. finansy [finances]. kyiv: lira-k, pp. 422-437. international monetary fund (2017). spain. financial sector assessment program technical note-insurance sector supervision and regulation. retrieved april 15, 2018, from: http://www.imf.org/en/countries/esp lucas, deborah (2015). joint risk of db pension underfunding and sponsor termination: incorporating option-based projections and valuations into pims. journal of pension economics and finance, 14, 172-185. oecd (2017), pensions at a glance 2017: oecd and g20 indicators, oecd publishing, paris. doi: http://dx.doi.org/ 10.1787/pension_glance-2017-13-en overview of financial services markets (2011/2017). national commission for regulation of financial services markets in ukraine, retrieved april 17, 2018, from: https://www.nfp.gov.ua/ua/informatsiia-pro-stan-i-rozvytokstrakhovoho-rynku-ukrainy.html petrushka, o. v. 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(2006). ubezpechennja zhyttja: monoghrafija [life insurance: monograph]. kyiv: international agency "bison". baltic journal of economic studies 150 vol. 5, no. 1, 2019 corresponding author: 1 sumy state pedagogical university named after a.s. makarenko, ukraine. e-mail: omvitaliy@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-1-150-159 institutional strategies of system security of technological & innovation systems vitaliy omelyanenko1 abstract. the purpose of this study is to consider the main aspects of system security providing institutional concept within the technological & innovation systems research methodology development through institutional innovations. in this paper, we will consider how the new evolutionary institutional theory of economic systems in the context of the space-time approach can help in organizing strategic management of development path of the innovation system, increasing system security, and effectiveness of its activities through the balance of system structure. methodology. the scientific novelty of the research and the solution of its tasks deals, first of all, with the application of the non-system approach, which allows one to consider the factors and results of functioning of such complex economic systems as innovation macro projects, innovation processes, institutional and informational environments, etc. within the framework of providing national security. involvement on a systematic basis of spatiotemporal analysis allows us to consider in the interrelation processes the distribution of flows of innovation resources and functions, on the one hand, and the distribution in time of similar flows. to solve the tasks of research, the classical scientific methods (analysis and synthesis, logical generalization, analogies, comparative comparison, and grapho-analytical methods), and specific methods of high technologies economy and innovation management were used. results. as a result of the study, the features of the systemic socio-economic patterns of the functioning of innovation system institutions and the mechanism of management of innovation development in the conditions of modern global technological transformations have been determined. in the future, this makes possible the substantiation of promising areas of state regulation (participation) aimed at activating innovation processes in the economy according to the priorities related to scientific and educational, cluster and network development, and the development of a set of models for the harmonization of the system of priorities of national security and sectoral priorities of innovation development. using the gained knowledge in practice will help to improve the state of national security, resource saving, improve conditions, and increase labour productivity, as well as the transition to sustainable development of the national economy. practical implications. systemic coordination of innovation components of state programs, stimulation of innovation activity, involvement of financial strategies in the innovation economy, expansion of international cooperation and activation of demand for high-tech products, increasing the effectiveness of innovation development programs of companies, and launching of national projects have been proposed as the objectives of forming institutional innovations. the proposed institutional and technological design methodology provides for the selection of institutional tools and scaling of the most effective development tools. value/originality. the proposed network mechanisms for systemic security ensuring provide the improvement of implementing innovative development programs for the largest companies with state participation; further development of priority technological platforms and innovation networks; harmonization of technological priorities and projects formed within the framework of technological platforms, with the tools of state strategies. key words: system security, national security, national innovation system, technology, analytics, networks, institutions. jel classification: c51, o14, o32 1. introduction in modern conditions, innovative development is critical for both business and society as a whole. at the same time, there is a necessity to improve the efficiency of state initiatives in the sphere of support and development of innovations and the formation of an institutional basis for systemic innovation policy. we can confidently state that in the development of these baltic journal of economic studies 151 vol. 5, no. 1, 2019 initiatives, insufficient attention was paid to researching the dynamic properties of innovation systems and analysing their management capabilities. as a methodological base for these purposes, we propose to consider the system theory, especially the system sustainable development theory, which is focused on the searching for opportunities to reorient the system to a development path that promotes a constantly growing rate of growth of opportunities to meet the needs of society. sustainability is the main and only criterion for system development, ensuring its integrity and further development. the stability of the socio-economic system is associated with the ability of the system to function steadily, to develop, to maintain movement along the planned trajectory with selfdevelopment. based on these ideas, we clearly see the role of the innovation system in sustainability ensuring. at the same time, innovation factor and its system nature should be considered both as a factor of ensuring the sustainability of development and as a factor of economic shocks that can displace the development trajectory. the processes of globalization and new technological paradigm formation have led to the emergence of a whole range of new economic, social, and political-legal problems of the nation’s socio-economic development. in this context, sustainability can be considered in the context of developing adaptation mechanisms with innovation nature, as well as a set of measures, the implementation of which will enable the innovation system to perform functions and achieve the nation’s development goal under normal conditions and in the presence of disturbances of endogenous and exogenous factors. successful implementation of these tasks requires the creation and development of innovation system that will support innovation at all stages of the innovation cycle, which is a key backbone factor in the socio-economic development and overcoming the current technological backwardness in the number of industries. at the same time, the formation of an institutional environment for the development of the balanced sector of research and development and effective national systems, which ensure technological modernization of the economy and increase its competitiveness on the basis of advanced technologies and large-scale investment in human capital, is a key task. thus, the formation of systemic innovation strategies within the framework of evolutionary institutional theory is a relevant scientific and practical task. so, the purpose of this study is to consider the main aspects of system security providing institutional concept within the technological & innovation systems research methodology development through institutional innovations. in this paper, we will consider how the new evolutionary institutional theory of economic systems in the context of the space-time approach can help in organizing strategic management of development path of the innovation system, increasing system security and effectiveness of its activities through the balance of system structure. 2. review of institutional aspect of innovative development modern analyses of technological & innovation systems are focused on emerging technologies often in early phases of development (reichardt, rogge, negro, 2017; jacobsson, bergek, 2004). typical for these early stages is the existence of a number of failures hindering the development and diffusion of new technologies so that it is particularly hard for them to compete with established technologies. for overcoming these failures and allowing the new technologies to become marketready, government intervention is needed. according to the models of the real business cycle (long, plosser, prescott), technological shocks directly affect the economy and, in the result of supply fluctuations, the nation can face a number of changes in socio-economic processes. technological shifts can be considered as the most important type of economic shocks causing fluctuations in the level of business activity. the models are based on schumpeter’s ideas: capitalism is characterized by waves of “creative destruction,” during which the introduction of new technologies constantly pushes existing firms out of business. analysing the modern trends, we can note that the same conclusion could be made also for the institutions (e.g. e-government can replace the traditional institutions with communication functions). in the 1970s, the followers of veblen have proclaimed technology and industrialization the driving forces value and source, and hierarchical structures as an opposite to the new forces. the followers of commons (socially legal institutionalism direction) have interpreted institutions as the way of choosing between the technological alternatives. at the same time, technological ideas of comparative advantages theory emphasize the fact that the international economy has also formed a critical direction in the study of international labour division, related to the scientific and technological revolution and technological progress. it was also revealed that “accelerated development” (based on modern western technologies), recommended by experts for less developed countries, often leads to a decrease in the standard of living of a significant part of society. this can be explained by the institutional differences and their impact on economic strategies. also, it is necessary to take into account the possibility of a technological gap and losing competitive advantages as a result of slowing down the rates of full cycles of innovative development. as a result, we face the question arises of developing the new foundations for institutional development baltic journal of economic studies 152 vol. 5, no. 1, 2019 strategies. in particular, the evolution of organizational forms is developing towards the widespread application of informal multidimensional self-organizing associated corporate entities, which meet the requirements of growth dynamics and complexity of new technologies and globally integrated production (mizjun, 2014). analysing dynamics of business associations and state in latin america, private sector organizations in china etc., doner (2010) affirms the vulnerability approach by the demonstrating how various types of crises precede and stimulate of institutional changes. explaining the institutional innovations implementation, the author argues that they require such situations, in which leaders (public or private) observe themselves as highly vulnerable to internal pressures and external threats alone with the lack of means to address them. research of schot & steinmueller (2017) considers post-world war ii growth experience that continued with relatively minor interruptions until the oil shocks of the 1970s and 1981 serious recession have intensified the competition between countries and highlighted differences in national industrial innovation and productive performance. these differences were caused by the different institutional innovations within the national innovation systems development. in this situation, we face the task of facilitating the emergence and stability of institutions, as well as the possible role of the state within the institutional evolution processes (hodgson, 2002). in the study (nelson, 2002), the authors have noted that institutional structure at any time has a profound effect on the technologies that are in use and are being developed. theoretical review confirms that increasingly evolutionary economists are coming to see institutions as moulding the technologies used by society, and technological changes itself. as a result of understanding these aspects in the study (bogatova, 2009), the appearance of innovation theories in the 1990s was noted. these theories are oriented on the practices of promoting the high-tech industries and models of socio-cultural assistance for the scientific and technological development, formed on the basis of economic cycle theories and socio-economic development concepts. in the latter (including the theory of the cycle), the role of innovations as a factor in economic dynamics is manifested in the following points: 1) technological dynamics (innovations in the real sector of the economy) lies in the basis of economic cycles; 2) there is a certain dependence of employment dynamics on the dynamics of new high-tech industries development; 3) the role of institutions plays a great role in the development of innovation activity; they are treated both as a brake for innovations and as a method of choice between technological alternatives; 4) there is an objective necessity to strengthen the role of the state in connection with innovation development (monitoring of innovations, planning, and forecasting); 5) in the innovation economy, disruptions occur due to a lag in the development of a new institutional structure; 6) the organizational forms and sizes of firms are largely determined by the technology used. the guiding idea of research (werle, 2011) deals with the fact that technologies and institutions are changed in an interactive process, which is mediated and influenced by activities of individual and collective actors. evolution of technical innovations proposed to be considered as a result of coordinated efforts whereby the mode of coordination can take the institutional forms of market, network, and hierarchy. also from an institutional perspective, it is important to note that innovation networks link different institutional sectors with each other. saviotti (2005) underlines that “innovations are created by the system, constituted by different parts or components interacting and determining the final outcome”. by stressing mainly the interactions between technologies and institutions, the author assumes that these interactions are much stronger and more important in determining the behaviour of the system. under the conditions of new technological paradigm and appropriate changes and challenges, according to (golichenko, 2012), the main direction of technology and innovation policy should focus on creating conditions and incentives for mutual orientation of public sector of r&d and industry, establishing equal cooperative linkages between them, including innovative development resources management. in the study (potts, 2017), it is highlighted that because of distributed information and fundamental uncertainty, an efficient institutional context for innovation economic organization in its early stages is often that of common pool resource. the theory of innovation commons comes from studies of hayek, williamson, and ostrom and presents an innovation problem as combined knowledge problem, implicit contracting problem, and the problem of collective action management. in the study (potts, 2016), the new economics of innovation based on such points of innovation commons approach was formulated: 1) it is based around market process theory (economics of entrepreneurship, economics of institutions). basic idea – innovation problem is actually an entrepreneurial discovery problem combined with a collective action problem (solved with institutions). 2) innovation problem: rules to coordinate knowledge for value discovery; 3) examples: coordination the processes between the new technology and emergence of industry (e.g., 3d-printing, blockchain etc.); 3) implication: new technology is not a new industry; new industry emergence requires governance baltic journal of economic studies 153 vol. 5, no. 1, 2019 (i.e. cooperation and rules, these eventually become industry groups or associations). the study (golichenko, 2012) notes the need to find a balance between the processes of cooperation, competition, and standardization. to increase the coherence of innovation resources, it is necessary to create institutional conditions. research (saviotti, 2005) points out the fact of technologies and institutions co-evolution and considers innovation systems as an example of systems that “is of collections of parts (or components) interacting in such a way that in presence of environmental variations the system adapts while preserving its structural identity.” in this context, the different institutional configurations or compositions can be considered within the specific structural features. to identify the trajectories of institutional transformation, the concept of innovation system foresight, which includes mobilizing of joint actions to improve an innovation system performance with the ultimate goal of improving desirable socio-economic performance, can be used (andersen & andersen, 2014). in (piirainen, et al, 2016), it was noted that foresight enables mutual understanding of key priorities, goals, and values and makes a connection between innovation policy and important social issues. so, an output of innovation system foresight can be considered within the consensus and coordination actions. it can be more-or-less jointly constructed statement about future priorities, actions, goals, visions, which leads to action as the collaborative process, resulting in new actions and initiatives. experts of deloitte (hagel, seely brown, 2013) underline that “institutional innovation (redefining the rationale for institutions and developing new relationship architectures within and across institutions to break existing performance trade-offs and expand the realm of what is possible) allows organizations to re-architect themselves to scale learning and generate richer innovations at other levels, including products, business models, and management systems.” research also deals with the learning effects, i.e. new institutional architectures have the potential to scale learning so that everyone learns faster by working together. experts note that economic actors no longer deal with static resources in the network but create an environment, in which participants learn faster as a result of participation in the network. within this networks, the scaling relationships (in addition to short-term transactions, institutional platforms that focus on building longer-term relationships are created) and scaling learning (realizing the longer-term opportunity to evolve institutional designs to accelerate learning among a growing number of participants) effects can be successfully established. allen & potts (2016) have proposed an alternative theory, which identifies the institutional origin of new technologies further back in commons when self-organizing groups of technology enthusiasts develop effective governance rules to pool distributed information resources. the study (egbetokun, et al., 2017) has concluded by proposing that for innovation systems theory to remain relevant in the near future there has to be a shift from systems to networks, i.e. network of actors within the same element and across elements. considered researches prove that institutional transformation and institutional innovations can be viewed as a tool for a system of technological & innovation systems but this aspect requires further studies. 3. proposed methodology of system security of innovation system providing analytics the scientific novelty of the research and the solution of its tasks deal, first of all, with the application of the non-system approach, which allows one to consider the factors and results of functioning of such complex economic systems as innovation macro projects, innovation processes, institutional and informational environments, etc. within the framework of providing national security. involvement on a systematic basis of spatiotemporal analysis allows us to consider in the interrelation processes of the distribution of flows of innovation resources and functions, on the one hand, and the distribution in time of similar flows. to solve the tasks of research, the classical scientific methods (analysis and synthesis, logical generalization, analogies, comparative comparison, and graphoanalytical methods), and specific methods of high technologies economy and innovation management were used. also, the following specific methods were used to determine the objectives of innovation communications: – adapted decision-making methods based on optimization of performance indicators; – methods based on the analysis of schemes for the strategic development of innovation systems and intersectoral high-tech complexes; – methods of searching for innovative ways of development and methods of integrated economic analysis of development policy. the fundamental principles of purposeful management of institutional dynamics within the framework of development strategies require constant research, as in the current conditions the situation in the innovation sphere is constantly changing. this requires identifying pressing problems and determining the prospects for its development in the conditions of technological changes. so the proposed methodology allows combining the system security strategy (kudrina, omelyanenko, 2018) and the nation’s development prioritization (prokopenko, omelyanenko, 2017). baltic journal of economic studies 154 vol. 5, no. 1, 2019 4. innovation aspect of institutions and interactions development (industry 4.0 case) the urgency of considering the transformation of institutions in innovation aspect is caused by the fact that the world is on the verge of the fourth industrial revolution, which leads to the restructuring of economic processes, and as a consequence, economic growth and competitiveness of the leaders. according to pwc experts, industrial manufacturers from around the world plan to invest $4.0 billion annually into the development of industry by 2020. recognizing the importance of ongoing developments in the field of system security, it should be noted that systematic research devoted to ensuring national security in the new conditions of innovation development has not been carried out so far. this is especially true in the processes of ensuring the interconnection of national security, innovation activities, and institutions, the formation of the concept of national innovation security, and its implementation in practice. talking about the security issues, the main reason for the critical (sensitive) dependence of the economies of developing countries on the external factor is the dysfunctionality of economic and innovation policies. it can be regarded as a condition, in which there are insufficient power and means to identify threats, to develop an algorithm for their disposal, and to find the appropriate resource. this is due to the fact that at all levels of the system, there are not generated biased strategies for the future to achieve the common desired for all economic actors and institutions. from the point of system security, the national security should be considered not only as a condition for the protection of national interests but also the availability and the possibility of using instruments of influence on economic and innovation processes to ensure long-term social welfare. thus, there is the possibility of developing tools for creating an effective system of people-to-people relationship and governance, aimed at innovation, a minimal conflict of interest, which will provide maximum opportunities for self-realization. in this context, we will particularly highlight the study of harmon, stevens & swim (1991), which can be considered as a fundamental work that reveals the interrelationships between national security and innovation with an appropriate financial strategy. also, the analytical report of the national science and technology council of the united states (2016) (a 21st, 2016) is particularly useful for defining the strategic guidelines for state security policy, which provides an opportunity to review the example of a systematic analysis of the impact of innovation on us national security and the identification of relevant strategic aspects, taking into account the active interaction between the institutes. so in the united states, innovation policy is seen as a coordinated, state-funded initiative to mobilize national resources to accelerate technological change and maintain leadership in global competition. this is realized through the mechanisms of institutional interaction. in these conditions, developed countries are faced with the issue of developing national innovation strategies since the new technological revolution represents a chance for them to change their role in global economic competition (the phenomenon of leapfrogging) but economies do not yet fully exploit the potential for development. the industry 4.0 workgroup group report states that these new system strategies should be based on a completely new approach to production as a conglomeration of major industrialists, experts, economists, academics, and the state. therefore, the question arises about the design of appropriate strategies and networks for innovative development (the author of the study dismisses them as innovation networks and institutions, which support their development) that will form interaction synergies. experts have formed a new typical feature of industry 4.0 solutions as “interaction efficiency.” often this idea is the starting point for assessing the readiness (conformity) of the particular economic system (state, region, enterprise) to industry 4.0 conditions. ability to interact with other innovation system participants, i.e. quickly integrate into the innovation networks or adapt to new conditions, openness to such interactions becomes an essential factor of competitiveness of any economic agent. for this reason, one of the key topics in advancing industry 4.0 technologies is the theme of interoperability and communications standards. support for a standard makes the product, service or system open to interactions for other participants. in our opinion, the same approach should be applied also for institutional interactions strategies. industry 4.0 and new technology modes as a tool for increasing productivity and creating economic independence and information security of country within the framework of system design will ensure the high level of use of industrial networks; autonomous and self-regulating production systems; the combination of modern information technology and classical methods of production. industry 4.0 due to its systems effects requires system decisions as for the business sector, as well as for state authorities. in a further section, we’ll consider the evolutionary approaches for the intuitional base of the national innovation system. 5. system-institutional approach to innovative development for the purposes of this study, innovation system as an example of the social and economic system baltic journal of economic studies 155 vol. 5, no. 1, 2019 should be considered as an integral set of interrelated and interacting social and economic institutions and relations regarding the distribution and consumption of innovation resources, production, distribution, exchange, and consumption of goods and services. the system is called stable structurally (dynamically, computationally, algorithmically, information, evolutionarily or self-organization) if it maintains a tendency to strive for the state that most closely matches the goals of the system, the goals of preserving quality without changing the structure, or leading to strong structural changes (behaviour dynamics; system functioning algorithms, information flows, evolution or self-organization) of the system on a certain set of resources (for example, on a time interval). based on the approach (samosudov, 2008), we can identify the following factors that determine the system stability of the innovation system: stability of dynamics of the structure of participants in innovation processes; institutional structure and its development; structure of the resource base and its dynamics; information interaction with participants of corporate relations. thus, a system approach to innovation development is more coherent to coordinate the implementation of national innovation priorities and to enhance the competitive advantages within the system “development – security” based on synergy. using the knowledge gained in analytical practice will contribute to improving the state of national security, saving resources, labour productivity, as well as the transition to sustainable (stable) development of the national economy. so the balanced innovation policy ensures the coordination of qualitative and quantitative connections of all elements in the innovation system. the development of a balanced innovation policy is very relevant because of the system of internal contradictions between goals, limited resources, and structure (platonova, 2016): system imbalances in the group of contradictions “goals-resources” and “structure-resources,” reflecting the imperfection of material and technical basis of the system (lack of resources or their unsatisfactory distribution by system elements); system imbalances in the group of contradictions “resources-structure” and “structure-goals,” related to the structure inefficiency, its inadequacy relative to goals and resources; system imbalances in the group of contradictions “resources-goals” and “goal-structure,” related to the discrepancy of the goal-setting. these system imbalances can be in the base of proposed institutional and technological design methodology, which is oriented on the implementation of institutional innovations (omelyanenko, 2018). from the practical point of institutional and technological design methodology within the framework of system theory of innovation system balance application in the context of spatial-temporal approach and system paradigm of innovation development, systemic factors of the balance of the economy can be identified, the methods of system dimensional measurements can be developed, quantitative analysis of their impact can be carried out, the possibilities of controlling systemic stability and the measures of economic policy, aimed at improving the balance of the economy in order to innovate its development and ensure national security, can be developed. an integrated result of the implementation of such logic should promote a system approach for national security purposes development management, which will be based on forecasting socio-economic changes, including those caused by the processes of innovation. the appropriate organizational and economic mechanism involves the ability of the economic system: 1) to realize the function of strategic system analytics (identification the paths of development based on technological analytics and institutional matrix efficiency); 2) to ensure sustainable development on the basis of innovation transformations through ensuring the principle of symmetry of intersectoral links; 3) to ensure functioning under the most unfavourable conditions through the use of own intellectual and technological resources (the principle of satisfaction of basic needs, the system ability to self-redevelopment and self-development); 4) to generate, implement, and accept innovations within the framework of innovation networks, providing a critical mass of qualitative transformations in the economy. an example of the evolutionary management of institutional transformations can be japan. the development of japan innovation system is based on an evolutionary approach: borrowing foreign scientific and technical achievements (buying licenses, setting up joint ventures, participating in multinational research projects) and subsequently encouraging the development of their own research, primarily on a corporate basis (based on large corporations). until the late 80s of the xx century, the first approach prevailed, although its importance in the overall strategy was gradually reduced. in the 80s, a course for maximum scientific and technical self-sufficiency with an emphasis on national innovation was formulated. the next stage in the formation of japan’s national innovation system can be attributed to the beginning of 2000s, when the council for science and technology policy, based on an analysis of global trends in the development of the world economy and current problems facing japanese society, developed a plan for a national strategy in the field of scientific and technical development. at the heart of the strategy is the nomination as the main baltic journal of economic studies 156 vol. 5, no. 1, 2019 national priority for basic research and the identification of two large-scale priority areas. the modern perspective plan, which is the basis of japan’s national innovation system, is based on the formulation and systematic approach to the interconnection of scientific and applied sectors and 1) includes four sections: life sciences, computer science, and telecommunication nanotechnology and materials, ecology; 2) mainly applied research and technology, including energy and resources, industrial technology, industrial and social infrastructure, problems of earth and space. the same logic can be put in the base of institutional and technological design methodology and eliminate the system imbalances because the institutional context has a direct impact on its content and structure. 6. strategical aspects of system innovation policy from the strategical point of view, we propose to consider the systemically acquired sustainability (in the framework of national innovation system), as well as localized acquired sustainability (in the framework of elements (actors) of national innovation system). so it is critically important to build effective institutions of innovation system that will allow timely detection of “windows of opportunities” in new markets where leaders have not yet been formed. for these purposes, it is necessary to learn how to anticipate new markets, to form technological images of the future, and to make purposeful efforts so that this future will take place in the most favourable institutional configuration. when we consider the strategical factors of institutional transformation, we should take account of the state of the innovation system. in particular, at the formation stage, it is necessary to create conditions for the transfer of final and intermediate results of r&d to industry, monitoring and elimination as institutional obstacles that limit innovation processes. when the level of maturity of the innovation system is reached, open procedures for the formation of cooperative interaction programs with representatives of industry and government and science are needed, in particular, the creation of technological platforms and networks that provide vertical interactions. so for the purposes of institutional and technological design, we propose to consider innovation networks, which realize such functions: 1. search for partners for the joint implementation of projects for the commercialization of technology, r&d, access to new markets, etc. this is one of the most popular services for companies of early stages of development that need technology partners that can provide them with a new level of development (e.g., the organization of production of serial products or components); 2. dissemination of technological information is an actual service for scientific organizations that are interested in broadly informing industry and companies about their research capabilities and competencies; 3. promotion of technological projects – using the various tools of network interaction, the centres participating in networked work can address the ideas of new projects more effectively and study the potential interest; 4. conducting technological marketing – carrying out continuous monitoring of technological information distributed among the members of the network (in particular, technological requests and proposals), the centres can conduct a primary analysis of demand and proposals in particular subject areas of research. considering institutional network strategies, we underline the necessity of ensuring the systematic participation of technology platforms, industry business associations and development institutions in the formation of an annual review, adaptation and actualization system of lists of priority technologies in cooperation with independent representatives of the expert community. figure 1 illustrates the strategical aspects of system innovation policy based on institutions. specified in fig. 1 mechanism is based on the following points and ideas: systematization of global economic & innovation trends, which causes intensification of innovation processes, taking into account the features of high technologies as a factor in the formation of competitive advantages and mechanisms of formation of infrastructure (intersectoral high-tech complexes – military-industrial complex, space industry), which allow combining the potentials of influence of individual subsystems of the economy and its analysis as a holistic formation; disclosure of the status of an institutional component of innovation development from the point of view of realizing national interests and identifying a list of key innovation priorities that will ensure effective neutralization of both real and potential threats (determined based on global foresight research) and thus maintain an appropriate level of national security; identification of place of innovation system in the system of national security, analysis of the impact of innovations on the state of economic security at the national and international levels, as well as the establishment of a clear quantitative linkages between the results of innovation activities of various sectors, including scientific, industrial, technological, and level national security. the implementation of these points requires the improvement of the mechanisms of interaction between the state, development institutions, and business actors. this requires active coordinating participation in this work as an integrator and coordinator of the process of developing effective solutions in a number of areas. baltic journal of economic studies 157 vol. 5, no. 1, 2019 formation of new institutions: institutions’ development is aimed at solving specific system problems of socio-economic growth (e.g. high-tech and high-hume development institutions) institutional reengineering: fundamental rethinking and transformation of processes in government entities with an aim to achieve significant improvements in key performance indicators strategic analytics (innovation risks and threats identification, future techno-economic trends identification, foresight) institutional structure efficiency evaluation institutional structure formation strategy determination of priorities, selection of basic structural elements mechanism, and formalization of the mechanism on the basis of system interconnections priorities of innovation policy: − technological renewal of industries within the framework of strategies “minimizing costs – maximizing the effect”; − enhancement of the nation’s technological security; − import substitution through global technological superiority; − formation of innovative sectoral ecosystems; − development by state-owned companies by the “open innovation” model; − the transition from innovations financing to innovation investing in; − the increase of competitiveness and stability of state-owned companies; − implementation of long-term technological and market strategies; − participation in the formation of new markets and timely access to new markets. institutionalization of innovations in such mechanisms: − mechanisms of innovation networks formation and coordination; − mechanisms of implementing innovation development programs for the largest companies with state participation and state corporations; − mechanisms of priority technological platforms and innovation networks development; − mechanisms of harmonization of technological priorities and projects formed within the framework of innovation networks, with the tools of government programs; − mechanisms of development (including based on development institutions) of innovation projects system financing; − mechanisms of participation of business associations in the formulation and implementation of innovation policies based on public-private partnership principles. figure 1. institutional and technological design framework within the system security source: the author’s development this is possible through ensuring the systematic participation of technology platforms, industry business associations, and various development related institutions in the formation of an annual review, adaptation and actualization system of lists of priority technologies in cooperation with independent representatives of the expert community. it is important to take into account that new technologies require tools of a new type, aimed not at catching up but at advancing development. it is precisely such mechanisms that are lacking so far in order to achieve a decisive breakthrough in the innovation sphere and to provide the country with a confident position in the emerging markets. 7. conclusions as a result of the study, the features of the systemic socio-economic patterns of the functioning of innovation system institutions and the mechanism of management of innovation development in the conditions of modern global technological transformations have been determined. in the future, this makes possible the substantiation of promising areas of state regulation baltic journal of economic studies 158 vol. 5, no. 1, 2019 aimed at activating innovation processes in the economy according to priorities related to scientific and educational, cluster and network development, and the development of a set of models for the harmonization of the system of priorities of national security and sectoral priorities of innovative development. using the gained knowledge in practice will help to improve the state of national security, save resources, improve conditions, and increase labour productivity, as well as the transition to sustainable development of the national economy. systemic coordination of innovation components of state programs, stimulation of innovation activity, involvement of financial strategies of the innovation economy, expansion of international cooperation and activation of demand for high-tech products, increasing the effectiveness of innovation development programs of companies and launching of national projects have been proposed as the objectives of forming institutional innovations. the proposed institutional and technological design methodology provides for the selection of institutional tools and scaling of the most effective development tools. the proposed network mechanisms for systemic security ensuring provide the improvement of implementing innovative development programs for the largest companies with state participation; further development of priority technological platforms and innovation networks; harmonization of technological priorities and projects formed within the framework of technological platforms, with the tools of state strategies. 8. acknowledgements the 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(2011). institutional analysis of technical innovation a review. soi discussion paper 2011-04. baltic journal of economic studies 249 vol. 4, no. 2, 2018 corresponding author: 1 department of enterprise and ecological examination of goods, lviv polytechnic national university. e-mail: farat_o@ukr.net 2 department of enterprise and ecological examination of goods, lviv polytechnic national university. e-mail: becmtpeet@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-249-253 formation of the information support for the entities of management by the development of innovation clusters olexandra farat1, marianа bets2 lviv polytechnic national university, ukraine abstract. in a context of rapid innovative economic development in the world, a particular importance gets the issue of creation and development of highly effective, the structured field of information, where all people, who are interested in developing of business innovation, are the entities of communication. availability of reporting mechanisms for interested people by country and getting feedback of information with the proposals of territorial authorities and economic entities for the realization of investment and innovative projects in regions should be considered as one of the main stages in the process of synchronizing innovation development in the ukrainian economy. the purpose of the researches in the article was to identify the main components of the formation of the information support for entities of management by innovation clusters development. the authors resolved the following tasks to achieve the goal: the genesis of domestic legislation with development of the information society in ukraine was considered; ukraine’s place in global rankings on development of information and communication technologies level during 2008–2016 was analysed, identification of information needs of participants in the process of creating and developing clusters was carried out, and communication strategy to stimulate the development of innovation clusters was developed. the genesis of the domestic legislation on the development of the information society in ukraine demonstrated a lack of systematic approach to the organization and the process of integral development of the information society. these legislations are characterized more recommendatory, than functionally-structured content. in particular, they do not address clearly defined mechanisms for achieving objectives that were in line with the specific functional responsibilities on all levels of public administration. the analysis of ukraine’s global rankings on development of information and communication technologies level during 2008–2016, evidences a significant passivity of all the participants in ukrainian economic life not only in a development processes and dissemination of information technology, also on the formation of structured arrangements of the information management of the main economic process, including the processes of creating and developing innovative cluster associations. an important prerequisite for the efficient development of information management’s mechanisms for the economy in ukraine is the identification of all actual information needs and connected entities of the business, research institutes, territorial authorities etc. the authors’ identification of information needs of participants in the process of creating and developing clusters will assess the significance of effects of casters associations on the country’s economy, in particular, the possibility of innovative development. the authors’ strategies to stimulate the development of innovative clusters will help improve creating information and clusters development depending on the purpose and sources of its simulating. key words: innovative development, cluster business combinations, information support, information support system, entities of clusters development management. jel classification: l10, o19, o32 1. introduction in a context of rapid innovative economic development in the world, a particular importance gets the issue of creation and development of highly effective, structured field of information, where all people, who are interested in developing of business innovation, are the entities of communication. availability of reporting mechanisms for interested people by country and getting feedback of information with the proposals of territorial authorities and economic entities for the realization of investment baltic journal of economic studies 250 vol. 4, no. 2, 2018 and innovative projects in regions should be considered as one of the main stages in the process of synchronizing innovation development in the ukrainian economy in accordance with the world realities. therefore, especially important is the issue of developing and harmonizing at the state level not only the mechanisms of direct and feedback between all participants in the innovation process (profile ministries, territorial authorities, independent economic entities and their associations), but also the legislative approval of the relevant methodology for evaluating the effectiveness of information state policy on stimulating the development of innovative business, in particular, cluster associations. nowadays, the issue of cluster paradigm development not only in the domestic economy but also in the global economic environment is of particular relevance, which leads to a steady increase in the number of researchers who pay their attention to clusters. among the domestic scientists who deal with research on the possibilities of cluster development and their impact on the growth of the economic competitiveness are: z.s.  varnalii, l.i. fedulova, i.o. degtyareva, o.i. zhabynets, yu.v. fedotova, and others. as for foreign scientists, the theme of clusters was especially explored by michael porter, g. lindquist, s. rozenfeld, e. gleiser and others. the key attention in the works of these scholars was given to the study of the essence of the notion “cluster” as a subject of market relations and its impact on the potential growth of the economy’s competitiveness in particular by its achieving “synergy and scale effects.” concerning the works devoted to the complex study of the information interaction between the entities of the cluster development management, such studies are rather superficial, especially from the side of domestic scientists. to achieve the goal, the authors solved the following tasks: the genesis of domestic legislation on information society development in ukraine was considered, ukraine’s place in global ranking of the level of information and communication technologies development during 2008–2016 was analysed, identification of the information needs of participants in the process of creating and developing of clusters was carried out, and a package of information support strategies to stimulate the development of innovative clusters was developed. 2. the genesis of domestic legislation on the information society development in ukraine the process of creation and development of the information society in ukraine began in 1998. a series of documents aimed at the formation of legal, organizational, scientific and technical, economic, financial, methodological, and humanitarian prerequisites for the development of informatisation was adopted. they are the following: 1. the law of ukraine “on the national program of informatisation”. according to this law, the national informatisation program aims at the system developing of national information resources, increasing the efficiency of domestic production on the basis of a widespread use of information technologies, formation and support of the market for information products and services, etc. 2. activities program of the cabinet of ministers of ukraine “overcoming the impact of the world financial and economic crisis and sustainable development”, which envisaged the measures necessary to overcome the consequences of the global financial and economic crisis in the context of the development of the information society in ukraine. 3. decree of the president of ukraine no. 47/2017 “on decision of the national security and defence council of ukraine dated december 29, 2016 “on the doctrine of information security of ukraine”. the considered genesis of the domestic legislation on the development of the information society in ukraine shows the absence of a systematic approach to the organization and implementation of the comprehensive development of the information society process in ukraine. these legislative acts are characterized by more recommendatory than functionally-structured content. in particular, there aren’t considered well-defined mechanisms for achieving the objectives that would be consistent with specific functional responsibilities at all levels of government. 3. analysis of ukraine’s place in the global ranking of the level of information and communication technologies development the processes of information society development in modern ukraine should be considered as one of the stages of the most qualitative reform of the national economy, which is intended to improve the paths of the key economic processes, such as: investment attraction, development infrastructure, deepening of international financial and economic cooperation, development of alternative paradigms of the economy functioning (ecologically oriented economy, cluster economy, etc.). recent virus attacks by the modified version of the wannacry virus  – “cryptolocker” (may 2017  – july 2017) have shown a significant weakness of information security for domestic enterprises and organizations, which has led to a deeper concentration of state attention on information security of enterprises and organizations. for the realization of this task, it is necessary to establish clearly the mechanisms of information interaction between business entities, nonprofit organizations, state institutions on the exchange of various information products, including databases of signature of viruses. baltic journal of economic studies 251 vol. 4, no. 2, 2018 this problem is reflected in the international ratings of ukraine. in particular, according to the published global information technology development report-2016 (the global information technology report), ukraine has ranked 64th out of 139 countries in terms of the information and communication technologies development in 2016. more details about the dynamics of this indicator for 2008–2016 are presented in table 1 (website of the economic discussion club, 2016). table 1 ukraine’s place in the global ranking of the level of information and communication technologies development during 2008–2016 years place in ranking total number of evaluated countries position change relative to the previous year (+/-) 2008 70 122 2009 62 134 -8 2010 82 133 +20 2011 90 138 +8 2012 75 142 -15 2013 73 144 -2 2014 81 148 +8 2015 71 143 -10 2016 64 139 -7 according to the data of table 1, during the reviewed period, ukraine has taken the mediated positions in this ranking, out of 9 positions in five, there was a decline in the level of information and communication technologies development according to the surveyed indicators relative to the previous year, and only in 2010, 2011, and 2014, an increase in the level of development of informational-communication technologies was observed. the data in table 1 indicate a significant passivity of all participants in the economic life of ukraine not only in the processes of development and dissemination of information technologies, but also in the formation of structured mechanisms for the systematic information provision of key economic processes (processes associated with the creation and development of innovative cluster associations). 4. identification of information needs of participants in the process of creating and developing clusters one of the important prerequisites for the effective development of information support mechanisms in the development of the ukrainian economy is the clear identification of all relevant information needs and related entities, in particular, business, research institutions, territorial authorities, etc. the experience of the advanced countries (the us, germany, sweden) shows that precisely progressive information policy is one of the key elements of the development of highperformance innovative business in the state. in essence, the information need of an enterprise is the need for obtaining certain information, which manifests itself then, when a target for a particular consumer arises, the achievement of which is impossible without external information intervention (witer, 2011). exploring the peculiarities of the process of information provision of the cluster development management entities, we will identify them in the structure of the modern economy. thus, according to (dehtiarova, 2011), key players of the clusters development issues are: • vertically or horizontally connected companies, business associations, providers of specialized services (marketing, logistics, financial) that in aggregate form the private sector of the domestic economy; • profile ministries, state agencies, the other public authorities of local, regional, and national levels; • educational and research institutions, namely: research institutes, universities, vocational training centres. all of them form the so-called “triple spiral”, the key role of the entities of the innovative clusters development management belongs to the government sector (profile ministries, state agencies, state authorities of local, regional and national levels), since they have the most complete authority, have more access to state financial resources, and can have a significant impact on the economic and legal environment in the state. identification of the information needs of participants in the process of creating and developing clusters is highlighted in table 2. the important criteria to assess the feasibility of information dissemination on development opportunities and nurturing of clusters are that they qualify certain requirements. these claims include: • municipal sector-based compatibility  – provides conformity distributed in the information region for the possibility of creating and long-term development of clusters and their sectoral complexes. • trend orientation – provides an orientation of the information dissemination on the world tendencies of economic, social, and environmental development of economic entities in order to facilitate their full competitiveness in the global economic area. • programme coherence  – provides the greatest possible to meet the needs of economic entities in access to resources offered by domestic, overseas, and joint development programs. the importance should be given to stimulating measures. the world practice shows that role of government in a process of organization stimulating measures are very considerable and can be manifested in different forms (target programmes, government grants, public-private partnership projects etc.) in particular, the most used stimulating measures that provide an baltic journal of economic studies 252 vol. 4, no. 2, 2018 opportunity to inform the potential participants, to unite them into clusters, and to perform other actions, are the following (zhabynets, 2014): • information platforms, platforms to search for partners, cooperation (for example, the regular distribution of marketing information and information connected to a technology development, events under the networks, work groups); • supporting start-ups and innovations (for example, identifying interlocutors and sources of financing to support the common innovative/research projects that incubators initiate and thrusters, initiatives to strengthen linkages between science and industry); • initiation of specialized of infrastructure projects (for example, the incubator concept, scientific and industrial parks); • cluster marketing (awareness-raising of cluster activities and its members at the regional, national, and international levels, for example, website, bulletin, cluster’s atlas). 5. strategies to stimulate the development of innovative clusters information management on the creation and stimulation of clusters must be ensured by clearly defined tools of strategic vision that is, having a package of policies of information management to stimulate the development of innovative clusters in ukraine. examples of such policy packages are given in table 3. the proposed strategies of information support to stimulate the development of innovative clusters must table 2 identification of information needs of participants in the process of creating and developing clusters the entity of development administration of clusters the information need the content of needed information business 1. the requirement for identifying available sources financial and material measures 2. finding ways to ensure strategic development 3. need to find ways of legal optimization the tax burden 1. access to information for preferential loans scheme, the potential of marketing etc. 2. access to information on the development opportunities through the amalgamation, cooperation with foreign partners etc. 3. access to information for possible tax preferences conditional on the implementation of the systemic innovation, development of programmes for social responsibility etc. the public authorities of local, regional, and national elections 1. seeking for potential participants able to perfectly develop the economy 2. maximum possible utilization of certain programmes for strategic development 1. information on economic entities, research institutes, which are of sufficient human, financial, material capital, and willing to system of innovation development education and research institutions 1. need for sources in the available production and developing potential intellectual capital. 2. sourcing of diversification their funding. 1. information about opportunities of its capacity of research institutions within the government programs, on request of the individual enterprise or groups. table 3 information support strategies to stimulate the development of innovative clusters purpose source of initial stimulation development of the existing innovative cluster establishment of a new innovative cluster initial stimulation from the government 1. the synchronous strategy of updating the functioning (transition to the government control for the production of new technologies or modernized product, in accordance with current requirements of the world market) 4. the vertical strategy of association for integration (creation of a cluster happens for governmental initiatives, by combining state-owned enterprises with the possible contribution of contractual arrangements of the private entities of management, by its information about possible gains from participating in territorial clustering) initial stimulation from the side of economic entities 2. the strategy of smooth innovative development (provides for the implementation to inform of the cluster’s members of relevant government institutions the need to give concessional loans, relevant authorizations, which given the current trends of industrial development systemically implementing in their progressive of innovative solutions and gives a clear justification of usefulness of such action 5. the horizontal strategy of integration groupings (cluster creating happens by an independent initiative of economic entities, using reverse channels of communication with the public authorities after relevant negotiation define the real economically desirable to create such a cluster (clusters), also mechanisms of government support for its (their) development combined initial stimulation 3. transformation strategy (full organizational cluster transformation: replacement of central business, diversification of the cluster by separating it into smaller clustering, the establishment of cross-border clustering) 6. a common strategy of integration groupings (a cluster (both internal and transboundary) is established by a joint of initiative public authorities’ initiatives and local companies, through their participation in the competition in the target government or regional programmes) baltic journal of economic studies 253 vol. 4, no. 2, 2018 suffer an appropriate legal and regulatory basis, that is, a clearly regulated in the proper industry legislative instruments (regional development strategies, sectoral development programmes, etc.) in order to ensure all specific the industries concerned of the national economy in ukraine. a certain strategic vision to stimulate the development of innovative clusters will improve the information establishment and development of clusters, depending on the purpose and source of its initial stimulation. 6. conclusion the objectives were completely solved by the authors. the genesis of the domestic legislation on the development of the information society in ukraine demonstrated a lack of systematic approach to the organization and the process of integral development of the information society. these legislations are characterized more recommendatory, than functionallystructured content. the analysis of ukraine’s global rankings on development of information and communication technologies level during 2008–2016, evidences a significant passivity of all the participants in ukrainian economic life not only in a development processes and dissemination of information technology, also on the formation of structured arrangements of the information management the main economic process, including the processes of creating and developing innovative cluster associations. the authors’ identification of information needs of participants in the process of creating and developing clusters will assess the significance of effects of casters associations on the country ’s economy, in particular, the possibility of innovative development. the authors’ strategies to stimulate the development of innovative clusters will help improve creating information and clusters development depending on the purpose and sources of its simulating. references: dehtiarova i.o. (2011) naukovi ta praktychni aspekty zastosuvannia klasternoho pidkhodu v upravlinni konkurentospromozhnistiu rehioniv ukrainy [scientific and practical aspects of application of the cluster approach in the management of the competitiveness of the regions of ukraine]. derzhavne upravlinnia: teoriia ta praktyka [public administration: theory and practice], no. 3. retrieved from: http://www.academy.gov.ua/ej/ej13/txts/ degtyaryova.pdf fedotova yu.v. (2015) dosvid ta perspektyvy funktsionuvannia klasternykh struktur v ekonomitsi ukrainy [experience and prospects of functioning of cluster structures in the economy of ukraine]. efektyvna ekonomika [effective economics] (electronic journal), no. 4. retrieved from: http://www.economy.nayka.com. ua/?op=1&z=3961 mazii n.h. (2011) pryntsypy ta mekhanizmy derzhavnoho rehuliuvannia rozvytku pidpryiemnytstva [principles and mechanisms of state regulation of enterprise development]. demokratychne vriaduvannia [democratic governance], vol. 8. retrieved from: http://nbuv.gov.ua/ujrn/devr_2011_8_8 sait ekonomichnoho dyskusiinoho klubu [website of the economic discussion club]. retrieved from: http://edclub.com.ua/analityka/reytyngovi-ocinky-ukrayiny-za-indeksom-merezhevoyi-gotovnosti-2016 sait nimetskoi konsultatyvnoi hrupy [website of the german advisory group. retrieved from: https://www.beratergruppe-ukraine.de/wordpress/wp-content/uploads/2016/01/pp_04_2015_ukr.pdf voitko s.v. (2012) upravlinnia rozvytkom naukomistkykh pidpryiemstv [management of the development of high-tech enterprises]. – kiev: ntuu «кpі», pp. 280. zhabynets o. (2014) realizatsiia v ukraini klasternykh initsiatyv za uchastiu strakhovykh kompanii: stan, dosvid, perspektyvy [implementation of cluster initiatives in ukraine with the participation of insurance companies: state, experience, prospects. journal of european economics]. zhurnal yevropeiskoi ekonomiky [ journal of the european economy], vol. 13, no. 2, pp. 205-213. baltic journal of economic studies 283 vol. 4, no. 3, 2018 corresponding author: 1 department of public management and administration, uman national university of horticulture. e-mail: svitovyy@ukr.net 2 department of public management and administration, uman national university of horticulture. e-mail: diachenko1950@gmail.com 3 department of public management and administration, uman national university of horticulture. e-mail: kgo.ukr@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-283-287 conceptual bases of state regulation of value added in the grain product subcomplex of ukraine oleksandr svitovyi1, mykola diachenko2, hryhorii kovalenko3 uman national university of horticulture, ukraine abstract. the purpose of the article is to analyse the dynamics of the development of the grain product subcomplex and to determine the conceptual foundations of state regulation of value added in this subcomplex of ukraine. methodology. in the process of research, the following methods were used, such as theoretical generalization, statistical analysis, and system approach. the method of theoretical generalization contributed to the definition of conceptual foundations of state regulation of value added in the grain product subcomplex. using the method of statistical analysis, the dynamics of production in the subcomplex was determined. the system approach allowed formulating directions for the development of the grain product subcomplex and improvement of the state regulation of value added. the results of the study showed that grain production in ukraine tends to increase. a similar situation is observed with the export of grain, but raw materials are products with low value added. the production and export of most products of processing grain and finished grain products with high added value in ukraine decrease each year. getting the maximum of value added in the grain product subcomplex can only be achieved provided the complex development of the subcomplex within the agro-industrial complex of our country and its interaction with other sectors of the economy. a particular attention should be paid to the strengthening of vertical and horizontal integration, development of cooperation in the grain product subcomplex in the state regulation of the process of creation of value added. also, we believe it is necessary to improve the legislative framework for the creation of clusters, approval of programs for their development at the national and regional levels. practical implications. improvement of state regulation of value added in grain product subcomplex of ukraine will ensure its intensive development. the consequence of such regulation will be the transformation of production of raw materials into high value-added production. value/originality. the research will help to understand, which directions of state regulation are most effective in maximizing the value added in ukraine’s grain product subcomplex. key words: state regulation, grain product subcomplex, grain processing products, value added, profit. jel classification: е64, o12, q18 1. introduction grain product subcomplex is the largest in the system of an agroindustrial complex of ukraine. this subcomplex provides one-fifth of the country’s exports and is one of the largest budget generating units. in addition, the grain product subcomplex is technologically linked with many other sectors of the agroindustrial complex of ukraine and the entire economy as a whole. given the current state of the national economy, the grain product subcomplex can become the locomotive of its revival. the main problem in this is the lack of comprehensive state development programs for both the agroindustrial production in general and the grain product subcomplex. it is important in the branches of the subcomplex to produce and sell not only raw materials but also products with high value added. this will increase the national food security and fill up the state budget, increase the gross domestic product and national income, and significantly improve the well-being of ukrainians. 2. theoretical approaches to the definition of value added there are several definitions of the concept of “value added”. for example, in the economic dictionary, this notion is interpreted as the difference between the baltic journal of economic studies 284 vol. 4, no. 3, 2018 value of manufactured goods and the cost of materials and raw materials used for their production. the value added consists of the salary, interest, and profit, added to the product by the enterprise or industry (zavadskyi, osovska, yushkevych, 2006). the same definition is given by the great encyclopaedic dictionary, indicating that this indicator is used to estimate the volume of production of enterprises and firms (bolshoy entsiklopedicheskiy slovar). the foregoing definition coincides with the interpretation of the value added of samuelson p.a. and nordhaus w.d. (samuelson, nordhaus, 1998). mcconnell campbell r . and brue stanley l. defined value added as the market price of the volume of products manufactured by the company, minus the cost of consumed raw materials and materials purchased from suppliers (mcconnell, brue, 1997). mankiw n. gregory shows that the added value of a firm is equal to the value of output, less the cost of intermediate goods purchased by it. for the economy as a whole, the value added should be equal to the value of all final goods and services. consequently, according to the scientist, the gross domestic product (gdp) is the sum of the value added of all firms in the economy (mankiw, 2000). thus, value added as one of the most important indicators of economic activity of an enterprise or individual industries can be calculated on gross and net bases, that is, before and after the exclusion of depreciation. in general, in the economy, the gross value added of all enterprises and industries for the reporting period is the gross domestic product. if from gdp to deduct consumption of fixed capital, then we obtain a net domestic product (savchenko, 2005), that is, the net product corresponds to the gross product, reduced by the amount of depreciation (felderer, homburg, 1998). in other words, the net domestic product is a newly created value in the branches of material production, that is, it is a national income. if we consider the formation of value added in the grain product subcomplex of ukraine, it should be noted that there is some injustice in its distribution between industries. odintsov m.m. argues that a part of the additional product, created in agriculture, is implemented not in the place of its production, but in the processing industry and trade. from this both agricultural and processing enterprises suffer. the latter loses raw material areas and cannot fully utilize existing production capacities (odintsov, 2011). consequently, the isolation of certain sectors of the grain product subcomplex, the inconsistency in pricing, leads to the fact that, due to lack of funds, grain production is unable to fully develop, to introduce advanced crop growing technologies, and to supply the necessary quantity of quality products for processing and into the trading network. 3. production as a basis for obtaining value added the basis for the development of the grain product subcomplex is, first of all, the production of grain, which tends to increase (table 1). in 2016, in comparison with 2012, in general, it increased by 43%, and the highest growth rate was observed in winter barley – by 2.7 times. however, production of oats, buckwheat, and winter rye has slightly decreased. such crops, which are promising from the point of view of grain export, are best grown. accordingly, the volume of production is 68.6% and 61.6% respectively. this year, 4.8 million tons of barley were exported, which is 51.1% of its production (derzhavna sluzhba statystyky ukrainy, 2017). of course, a large share of exports of these crops brings a currency income necessary for our country, but raw materials are products with low value added. the production of most grain processing products and finished grain products with high added value in ukraine decreases each year (table 2). for example, flour production for the period of 2012–2016 has decreased by 20.0%. the same is true for pasta. the production of finished products from grain is also decreasing. table 1 grain production in ukraine, thousand tons 2012 2013 2014 2015 2016 2016 in % to 2012 grain crops 46216 63051 63859 60126 66088 143,0 including winter wheat 15132 21863 23498 25937 25370 167,7 winter rye 675 633 473 387 390 57,8 winter barley 1325 2881 3345 3281 3637 274,5 spring wheat 631 416 616 595 729 115,5 spring rye 5611 4681 5701 5007 5799 103,4 oats 630 467 613 489 500 79,4 maize for grain 20961 30950 28497 23328 28075 133,9 millet 157 102 178 213 190 121,0 buckwheat 239 179 167 128 176 73,6 leguminous 473 372 481 502 877 185,4 source: derzhavna sluzhba statystyky ukrainy, 2017 baltic journal of economic studies 285 vol. 4, no. 3, 2018 not the best terms with the export of grain processing products. exports of cereals in 2016 amounted to 30.0 thousand tons, bread and bakery products – 83.5 thousand tons, which is, respectively, 8.0% and 7.2% of production (derzhavna sluzhba statystyky ukrainy, 2017). consequently, the situation in the grain product subcomplex does not look very optimistic in terms of obtaining more value added. therefore, in this case, it is necessary to strengthen the role of the state, attracting more instruments of state regulation. 4. directions of state regulation of value added in our opinion, obtaining the maximum value of the added value in the grain product subcomplex can only be provided the comprehensive development of the subcomplex within the agroindustrial complex of our countr y and its interaction with other sectors of the economy (figure 1). in state regulation, a special attention should be paid to strengthening vertical and horizontal integration, development of cooperation. this will strengthen the processes of creating added value in the grain product subcomplex . the cooperative movement is important to develop also among small farms, which, according to scientists, is an integral part of the ukrainian agro-industrial complex of ukraine. more than 93% of the proceeds from small farms are formed by the sale of crop production, indicating a high level of specialization in this field (prylipko, shevchenko, hryshchenko, 2016). in addition, most of these farms of producing mainly cereal crops. also, we believe it is necessar y to improve the legislative framework for the creation of clusters, approval of programs for their development at the national and regional levels. all these actions by the state should be aimed at stimulating the production of a subcomplex with a higher value added, based on the improvement of the competitiveness of products. in addition, government control needs to be strengthened both in terms of product quality and production conditions. we agree with the scientists who are proposing to introduce the experience of developed countries when the manufacturer is first certified, and then the products that he produces are controlled and certified. soils also undergo certification, where the table 2 production of some products of processing of grain and finished grain products in ukraine, thousand tons 2012 2013 2014 2015 2016 2016 in % to 2012 flour 2605 2565 2358 2211 2085 80,0 cereals 365 367 350 358 373 102,2 bread and bakery products short term storage 1686 1561 1357 1232 1160 68,8 cookies are sweet and waffles 392 388 299 249 249 63,5 macaronis, noodle and wares of flour similar 106 102 103 89,5 85,3 80,5 source: derzhavna sluzhba statystyky ukrainy, 2017 state regulation grain product subcomplex vertical integrationclustering horizontal integrationcooperation value added of subcomplex promoting the balanced development of industries and infrastructure increase in value current and strategic production planning and resource needs promotion and development interaction with other branches of the economy figure 1. place of state regulation in the strategy of development of grain product subcomplex and increase of value added source: the author’s development baltic journal of economic studies 286 vol. 4, no. 3, 2018 raw material is produced (sidnieva, kuzminska, 2015). certificated producer have more chances to export products and realize these products in the internal market on high prices and, thus, to get a greater value added. development of organic farming is also promising. scientists rightly believe that in the future, the demand for safe food will grow not only in ukraine but also in european food markets (sychevskyi, yuzefofych, 2014). production of such products is one of the important factors in increasing the value added of the grain product subcomplex, as their price is much higher than usual. it is also important that an analysis of the effectiveness of previously adopted state programs for the development of the agroindustrial complex and its subcomplexes was carried out. for example, in the countries of the eu, an estimation of efficiency of programs of state support for subjects of ménage already for many years is mandatory by an element of the process of making a decision about the expense of state facilities (bulana, 2014). in addition, domestic scientists argue that it is necessary radically to reform the style and methods of state regulation, to combine regulatory tactics with the development of strategies and promising forecasts (naymova, mityay, galitsky, 2016). in this context, it should be noted that the conceptual foundations of state regulation, in our opinion, should be ensured by the sequence of state programs in strategic development, rather than situational decision-making. the domestic grain market is not marked by the stability of prices, which leads to losses both in production and in processing industries. there are several reasons for this. first, agreeing with the opinion of some scholars, one can state that the state price influence on the domestic grain market is practically not felt. other countries introduce cyclical (compensatory) payments, which represent the difference between real market prices and the base guaranteed price. there is also a widespread practice of state support for the income of grain producers not so much by setting grain prices, but by reducing the cost of production (compensation of the share of the cost of equipment, fertilizers, imported fuel) (burkynskyi, lysiuk, nikishyna, 2015). secondly, in the conditions of the separateness of the grain producers and processing enterprises and the indicative planning, it is not possible at the state level to determine the optimal areas of grain crops and production. this leads to shortages or overproduction of certain products, which increases the price risks for manufacturers. it is also necessary to constantly care about raising the material incentives for grain product subcomplex workers since wages are one of the main elements of value added. a well-motivated employee performs his work more qualitatively, which positively affects the performance of the work, that is, profit. in our opinion, it is necessary to raise the prestige of agricultural labour and bring its level to the average level in the economy. consequently, to increase the value added in the grain product subcomplex, it is necessary to use all possible instruments of state regulation (figure 2). it is important to specify that the provision of soft loans to help grain producers to increase the cost of working capital in the periods before harvest. this stabilizes the financial condition of agricultural enterprises. it is also necessary to restore the special regime of taxation of agricultural producers with the value-added tax. that is, the state needs to leave these funds to producers in full for the purchase of goods and services. quotas on the export of grain processing products also need to increase. improvement of the administrative instruments of state regulation provides for the provision of the legal field. in the system of grain products subcomplex is necessary to eliminate the intermediaries, which take away in manufacturers’ significant part of the value added in the form of profit. 5. conclusions the study determined that in 2012-2016 in ukraine, grain production tended to increase. during this period, grain processing and production of finished products of grain, on the contrary, decreased. grain is exported mainly added value of the grain product subcomplex pricing tax administrative custom budget credit instruments of state regulation figure 2. instruments of state regulation of value added in the subcomplex of grain production source: the author’s development baltic journal of economic studies 287 vol. 4, no. 3, 2018 as raw material and its processing products in exports have an insignificant share. grain is a product with low added value. in this case, the budget gets extra revenue, and enterprise of grain products subcomplex – profit. getting the maximum of value added in the grain product subcomplex can only be achieved provided the complex development of the subcomplex within the agro-industrial complex of our country and its interaction with other sectors of the economy. the authors define the conceptual foundations of state regulation of value added in the grain product subcomplex. they are determined in the complex application of all instruments of state regulation. in order to increase the value added in the subcomplex, in our opinion, the state should adopt a set of such measures: 1. to conduct an analysis of the efficiency of previously adopted state programs for the development of the agro-industrial complex and its subcomplexes. ensure the consistency of government programs in strategic development, rather than situational decision-making. 2. improve the legislative framework for strengthening vertical and horizontal integration, development of cooperation, and the creation of clusters. 3. stimulate production of subcomplex products with a higher value added. 4. promote the development of organic agriculture. 5. carry out certification of producers of grain products. 6. provide partial compensation for the cost of equipment, fertilizers, imported fuel. 7. provide preferential loans to enterprises of subcomplex. 8. restore the special tax treatment of agricultural producers of tax on value added. 9. achieve an increase in quotas for the export of grain processing products. 10. bring the level of wages in agriculture, including in the grain product subcomplex, to the average of the economy. in further research, the authors will study the problem of increasing value added in small enterprises for the production and processing of grain within the 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(in ukrainian) baltic journal of economic studies 240 vol. 4, no. 5, 2018 corresponding author: 1 lviv polytechnic national university, ukraine. 2 national academy of internal affairs, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-240-243 foreign experience in electronic tax administration and the possibilities of its use in ukraine nataliia ortynska1, liudmyla savranchuk2, svitlana matchuk3 abstract. the aim of the article is to study the foreign experience of electronic tax administration on the basis of the analysis of scientific literature, and as well as to determine the possibilities for its use with further improvements of domestic legislation in this field in ukraine. the subject of the study is the foreign experience of electronic tax administration and the possibility of its use in ukraine. methodology. the research is based on the dialectical method of scientific knowledge and on general scientific methods, which are based on it, such as: analysis, comparison, analogy, induction, and others. results of the conducted study have shown that today there is a large number of countries where the digital tax format functions effectively and constantly develop. it is substantiated that the use of the experience provided in the article will give an opportunity to build a simple and effective system of electronic tax administration in ukraine. and this fact, of course, will influence positively on the financial sphere in ukraine. practical impact. the positive experience of establishing a legal framework for the provision of electronic tax administration in foreign countries proves that the digital tax format functions effectively and is constantly developing. besides, some practices of these countries in the field of electronic tax administration can be rather positive for implementation in the territory of ukraine. correlation/originality. conducting a comparative analysis of the legislation and legal doctrine of ukraine, and the countries of the european union and the usa regarding the legal provision of electronic tax administration is the basis for developing the most promising directions of development of domestic legislation in the financial sector of the entire ukrainian state. key words: international experience, e-administration, taxes, software, international law. jel classification: h87, k34, k33 1. introduction an analysis of any innovation legal phenomenon, mechanism, institute, industry, etc., provides for the definition of all its features: specificity, subject structure, subject matter, as well as comparison with a similar category in another legal system. in other words, to form approximately the final result of the implementation and its future prospect, at first you need to see what development it has acquired in another foreign country. in other words, you need to consider international experience. electronic tax administration is a rather new category in the tax and legal system of ukraine in general. at the same time, a large number of processes that are just starting in our country, in most developed countries of the west and east have already been existing for a long time. taking into account all these; we see the need to study the international experience of electronic tax administration and the possibilities of its use in the territory of ukraine. an analysis of international experience is a necessary condition for any scientific study. the introduction and development of e-administration in this aspect is not an exception. 2. the state of the research such famous scholars have studied some specific issues concerning the improvement of electronic tax administration in their scientific works as: v. m. harashchuk, v. m. shovkovyi, o. m. lefterova, o. iu. dubovyk, yu. b. ivanov, a. i. krysovatyi, a. ia. kyzyma, v. v. karpova, s. v. klymenko, a. l. chycherin, yu. o. kostenko, a. a. maievska, t. v. medynska, r. iu. paslavska, a. m. novytskyi and many others. however, despite a large number of scientific developments, there is no one comprehensive study devoted to the foreign experience of electronic tax administration in the legal literature. that is why the article aims to study the international experience of electronic tax administration and determine the possibilities for its use in ukraine. 3. presentation of the main material during analysing the foreign experience of e-administration and its possible use in national practice, the peculiarities of the use of information technology in the taxation process in the united states of america are baltic journal of economic studies 241 vol. 4, no. 5, 2018 of considerable interest. it should be noted that the tax system in the usa can be characterized either by national or european wide peculiarities, taking into account the long-term political and territorial dependence of this state on the united kingdom. as tkachenko n. m. states, the tax system of the united states consists of three levels corresponding to levels of government, such as: higher (federal level) – the establishment and collection of federal taxes, the administration of which is governed by federal laws, receipts from these taxes are counted to the federal budget; middle level (state level) – the establishment and collection of local taxes, administration of which is regulated by state laws, receipts are counted to state budgets; lower level (lower level of territorial administration – municipalities, districts, etc.) – collection of taxes introduced by local governments, receipts are counted to local budgets (tkachenko, 2004; andriushchenko, hryn, 2015). the us tax authority is the internal revenue service, which is an organizational member of the ministry of finance. the peculiarity of this fiscal service is its dual nature, which results from the implementation of different functions, such as public finance and law enforcement functions (shalnov, 1993). it should be noted that in accordance with the provisions of the normative legal acts, which are the basis of the activities of this department, the main purpose of the service is to provide us taxpayers with higher quality services. this can be implemented through the assistance in clarifying and enforcing tax liabilities, as well as through applying tax laws in an appropriate and fair manner to all. thus, the activities of the internal revenue service, first of all, are aimed at the interaction with taxpayers, on partnerships with them (savchuk, 2013). the us e-tax administration experience can be called one of the oldest in the world. the introduction of information technology in the tax process was connected with the development of e-government in the united states. among the many e-government programs in the 1980s, an attempt was made to automate the process of providing tax reporting and also some other tax services. the introduction of e-reporting has become a real breakthrough in this field, which can be proved by the increase in the level of efficiency and volume of taxpayer accounts. it should be noted that software development was made by public entities along with private ones (sonja e. pippin, mehent s. tosun, 2014). at the same time, a significant number of troubleshooting moments in electronic reporting were defined. first, e-tax administration has not achieved the same level of development throughout the country, which was due to the lack of opportunities for individuals in some regions to use online tax services. secondly, the system of electronic tax administration was rather complex compared to other e-government programs, such as online banking. and all these, in fact, had led to situations where payers did not understand how to use it (sonja e. pippin, mehent s. tosun, 2014). for today, tax reporting can be provided by communication channels in several ways: 1) you can prepare and send tax reporting through an intermediary audit firm; 2) you can fill in the reports by yourself with the help of the purchased software and then send the report through the operator; 3) you can fill out the report online on the sites of special operators, a list of which can be found on the portal of the national revenue service (demenko, 2013). the introduction of an electronic tax administration format helped to avoid queues, and also helped to save a large amount of time and money, which people usually spend on reporting to the tax authorities. besides, the reporting software automatically performs a lot of special calculations and it can find errors, and the electronic key system makes electronic reporting protected from thirdparty intervention (demenko, 2013). the next country to study is the uk. we think that its experience can be useful for us. i. o. tsymbalyuk, o. v. tsuz and o. v. kuznetsov state in their studies that britain is home to the science of taxation. the scottish economist adam smith is the founder of the tax theory, on which the modern british tax system is based. as we all know, he developed the concept of “free trade” and consistently advocated the idea that state intervention in economic processes should be minimal. smith also criticized indirect taxes, because they lead to wage growth, and consequently, there can be an increase in production costs and a decrease in profits. instead, he considered rent as the most unproductive expense, which does not turn into self-increasing cost (kuznetsov, 2010). the royal tax and customs service of great britain is the main body in the administration of taxes on income, profits, capital, the collection and systematization of accounting for customs duties, taxes related to the import of goods, as well as control of import and export flows of goods, etc. the structure of this body consists of four structural divisions, namely: a unit of taxation of individuals, a division of tax accounting, a corporate tax unit, and a unit of tax payment (shulatova, 2014). great britain also has great experience in electronic tax administration. particularly, each taxpayer has its own personal electronic tax registration page (“tax account”). all information about a particular taxpayer consolidates. besides, with the help of an electronic account you can: check and change your address in the taxpayer accounting system; see which tax code is used to calculate the tax; check the state of the pension calculation; manage tax credits, child benefits, etc.; receive emails from tax authorities (your personal tax account: promotional material, 2017). the approach of organizing information security within the framework of e-tax administration is sufficiently substantiated. for example, information security during working with a personal electronic account of a payer is provided by several factors at once: all online services can be used exclusively by those payers who have registered in the system and have passed the authorization, by entering a personal password and id; baltic journal of economic studies 242 vol. 4, no. 5, 2018 a high-quality software is used to protect information; when working with an electronic account, the security of payees information is provided by a special encryption technology called “secure sockets layer” (the free hmrc app: promotional material, 2017). special mobile applications have been developed and implemented for ease of use of electronic tax administration services in the uk. using these applications, taxpayer has the opportunity: to review his electronic tax account and determine which taxes are required to be paid; he can review his earnings; check the personal insurance number; review schedule of tax benefits; he can use a special tax calculator; participate in the process of correspondence with the tax authorities, etc. (the free hmrc app: promotional material, 2017). it should be mentioned that in the united kingdom, electronic tax administration is developing very quickly since information technology is being introduced in almost all areas of the tax system. first of all, this is due to the convenience of transferring a part of the taxation process to the online format, because its efficiency and effectiveness are significantly increasing under such circumstances. in addition, a significant factor in the rapid development of e-administration is the gaining relevance of e-commerce within the country’s financial system. the latter is a wide range of interactive methods for conducting activities on providing consumers with goods and services. also under the electronic commerce, we can understand any forms of business operations, where the parties interact through electronic technologies, but not in the process of physical exchange or contact (maievska, 2010). thus, the transfer of a significant part of the business on the internet causes the necessity of the formation of a corresponding model of the activities of state bodies. that is why the relevance of electronic tax administration is increasing. it should be mentioned that e-administration exists and is actively developing not only in the uk and the united states but also in many other foreign countries. for example, in australia, the general “digitization” of the government’s activities became the impetus for the creation of the electronic tax administration system. special electronic accounts for taxpayers were introduced, as well as convenient conditions for filing tax reporting through the internet. besides, in australia, they pay a lot of attention to the issue of security in the use by taxpayers of special electronic services. today a special two-tier structure of verification of the identity of the subject of taxation has been introduced, in the process of entering into his own account in the system of electronic administration. in the future, it is planned to introduce another level, which will include confirmation of the taxpayer’s voice (digitalisation of tax: international perspectives). brazil has also rather large experience in the field of building electronic tax administration. this state is building a tax system on the principle of complete automation of all processes inside this tax system. particularly, the key objects of the introduction of innovative technologies were: tax control, taxpayer accounting and tax reporting. at the same time, the introduction of electronic tax administration positively influenced the tax system. thus, according to 2015, 97% of tax audits were carried out electronically. and in most cases, certain violations of tax laws have been identified (koval, 2015). taking into account all of the above, today it is necessary to analyse in detail the already existing legal framework in ukraine, which regulates the administration of taxes. also, nowadays it is important to introduce effective proposals for changing this base, taking into account the tasks of modernizing the economy on an innovative basis. 4. conclusions so, the analysis of international experience in the field of electronic tax administration has shown that today there is a large number of countries where the digital tax format functions effectively and is constantly evolving. besides, the individual developments of these countries in the field of electronic tax administration are positive and necessary for the implementation in the territory of ukraine. particularly, in order to improve the e-administration of taxes in our state, it is necessary: first, we need to involve private organizations in the process of manufacturing software for the system of electronic tax administration. for ukraine, this experience is extremely useful, because this model of work allows attracting more experienced specialists who can create high-quality and, most importantly, functional software. this, in turn, will significantly improve the efficiency of electronic tax administration in general; secondly, in the process of direct introduction and construction of the system of electronic tax administration, it is expedient to use an approach, according to which the key emphasis is not carried out separately on the issue of introduction of technologies in the activities of the authorities. but the main attention is paid to the state support of information infrastructure in general. mainly, such an approach manifests itself in stimulating the private sector in the implementation of activities related to the creation of new technologies and their implementation in the life of society; thirdly, the system of electronic tax administration should be effective, but at the same time, it should be as simple as possible for taxpayers. in this aspect, it is advisable to use a uk experience. in this country, a subject of taxation has access to its electronic account in the system of electronic tax administration from a mobile phone through special software. and the functional and spectrum of electronic services for such an account are quite wide. the use of the mentioned above international experience will make it possible to build a simple and effective system of electronic tax administration in ukraine, which will surely have a positive impact on the financial industry of the entire state. baltic journal of economic studies 243 vol. 4, no. 5, 2018 references: tkachenko, n. m. (2004). podatkovi systemy krain svitu ta ukrainy. oblik i zvitnist: navch.-metod. posib. [tax systems of countries of the world and ukraine. accounting and reporting: a teaching manual]. k.: alerta. (in ukrainian) andriushchenko, i. ie., hryn, yu. v. (2015). mizhnarodnyi dosvid orhanizatsii podatkovoho administruvannia [international experience in tax administration]. efektyvna ekonomika, 11. retrieved from: http://www.economy.nayka.com.ua/ pdf/11_2015/41.pdf (in ukrainian) shalnov, a. (1993). u nalohovoho ynspektora prava polytseiskoho: (ssha) [the tax inspector has the right of the policemen: usa]. yzvestyia, 17 aprelia. (in russian) savchuk, v. a. (2013). svitovyi dosvid administruvannia podatkiv [world experience of tax administartion]. universytetski naukovi zapysky, 2(46), 353-358. (in ukrainian) sonja e. pippin and mehent s. tosun (2014). electronic tax filing in the united states: an analysis of possible success factors. electronic journal of e-government, 12(1), 22-38. (in english) demenko, o. ie. (2013). zarubizhnyi dosvid administruvannia podatkiv ta mozhlyvosti yoho vykorystannia v ukraini [foreign experience in tax administration and its use in ukraine]. nashe pravo, 7, 189-195. (in ukrainian) kuznetsov, o. v. (2010). osoblyvosti suchasnoi brytanskoi podatkovoi systemy [features of the modern british tax system]. finansy ukrainy, 4, 102-113. (in ukrainian) shulatova, y. s. (2014). zarubezhnui oput formyrovanyia y orhanyzatsyy edynoho orhana po voprovas fyskalnoi y tamozhennoi polytyky [foreign experience in the formation and organization of a single body on fiscal and customs policy]. vestnyk vhu. seryia: pravo, 3, 108-120. 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(in ukrainian) baltic journal of economic studies 124 vol. 5, no. 2, 2019 corresponding author: 1 university of state fiscal service of ukraine, ukraine. e-mail: martynenkovv86@gmail.com orcid: http://orcid.org/0000-0001-9078-8345 doi: https://doi.org/10.30525/2256-0742/2019-5-2-124-130 assessment of favourableness for the tax system of ukraine in the international context valentyna martynenko1 abstract. the purpose of the article is to study the background and key factors that ensured an increase in the ranking of the ukrainian tax system favourableness from the 174th position to the 43-d position during 2005–2016 – the greatest progress in the whole history of the “paying taxes” ranking. methodology. the research was made on the basis of the countries ranking method according to the tax system favourableness, conducted by the world bank together with the consulting firm pricewaterhousecoopers for the implementation of the annual “paying taxes” ranking. the ranking is based on the analysis of: taxes and mandatory deductions that a typical medium-sized enterprise must pay in the concerned year; the administrative burden connected with the payment of taxes and deductions; processes after filing and paying taxes. another method used in the article is the regression analysis of the impact of the unified social tax rate, the corporate income tax rate, the personal income tax rate, the volume of tax revenues, consolidated budget revenues and gross domestic product (gdp) in actual prices on the ranking position of ukraine in the “paying taxes”. results. in course of the study, it was found that the increase of the ranking of ukraine from the 174th to the 43-d position in the “paying taxes” during 2005–2016 became possible due to the liberalization of taxation for 2013–2017, in particular, the reduction of the corporate income tax rate by 7% and the unified social tax rate by 10%. other factors are as such: improving the tax administration quality: reducing the time for registration, filing and tax payment from 2185 hours in 2005 to 328 hours in 2016, with the worldwide average index of 240 hours per year; reducing the number of tax payments from 98 in 2005 to 5 (the worldwide average index is 24 payments) in 2016. practical implications. the result of the effective tax policy of the government of ukraine was the reduction of the total tax burden on business from 60.3% in 2005 to 37.8% in 2016 at the worldwide average index of 40.5% at the end of the investigated period. also, during 2005–2016, the consolidated budget revenues grew from 131.3 to 782.7 billion uah, including tax ones – from 100.7 to 650.8 billion uah. value/originality. based on the results of the study, the author substantiated that the main factor of the significant progress of the tax system of ukraine in the “paying taxes” ranking (from the 174th to the 43-d position during 2005–2016) was the liberalization of taxation by reducing the tax rates of corporate income tax and a unified social tax, as well as improving the quality and efficiency of tax administration. key words: “paying taxes” ranking, taxation, tax policy, tax system, tax rate, tax burden. jel classification: e62, h21, h24, h25, h32 1. introduction during the tax policy reform, the problem of correlation between the tax burden on the economy and the volume of tax budget revenues, which is the basis for the tax system optimization at the macro level, becomes topical. in this case, there is a conflict of interests – on the one hand, the government seeks to maximize tax revenues of the state, on the other one – the taxpayers wish to minimize the tax expenditures. however, in the conditions of a developed civil democratic society and a high level of economic literacy of the population, the antagonistic interests of the subjects of taxation are smoothed over because of the public interest priority. instead, in the context of the social and economic transformations taking place in ukraine, such a conflict is complicated and deepened by tax evasion, offshore schemes, high levels of the shadow economy, tolerance for corruption, and so on. the results of the tax system favourableness assessment of business development in ukraine are important both for the government and for the entrepreneurs. they create the fundamental basis for improving the business environment and allow tracking the main tendencies of tax transformations taking into account international comparisons. baltic journal of economic studies 125 vol. 5, no. 2, 2019 the problem of assessing the tax system favourableness of the country (macro-level) and the business environment development (micro-level) is a key one in recent tax studies. mina baliamounelutz and pierre garello (2013) examine the effects of taxation and tax progressivity on entrepreneurship in a large group of european countries, using macro-level panel data. oguzhan akguni, david bartolinii and boris cournèdei (2017) analysed how tax revenue responds to tax rates using evidence from a panel of 34 oecd countries over 1978–2014. the negative impact of taxation is particularly important when associated with cash constraints, weak demand and other framework conditions (bartolini 2018). shalini mitra (2017) showed that whether a positive, negative or non-relation arises between tax rates and informality depends on the degree of tax enforcement and the level of credit market development in an economy. xin long and alessandra pelloni (2017) considered the optimal factor of income taxation in a standard r&d model with technical change represented by an increase in the variety of intermediate goods. using a difference-in-differences methodology, alexander schandlbauer (2017) showed that an increase in the local u.s. state corporate tax rate affects the banks’ financing as well as their operating choices. daniel bradley, connie x. mao and chi zhang (2018) results suggest that tax increases lead to real effects at the expense of employees, with no similar benefit accruing for tax cuts. francisco ruiz, josé m. cabello, and blanca pérez-gladish (2018) are mainly concerned with those aspects related to the ease of doing business in terms of countries’ regulation. they build synthetic ease-of-doing-business indicators based on the world bank group’s indicators. dominika langenmayr and rebecca lester (2018) study whether the corporate tax system provides incentives for risky firm investment; the sign of the tax effect on risky investment hinges on firm-specific expectations of future loss recovery. eric ohrn (2018) estimated the investment, financing, and payout responses to variation in a firm’s effective corporate income tax rate in the united states: lower corporate tax rates and faster-accelerated depreciation each stimulate a similar increase in investment, per dollar in lost revenue. ioannis bournakis and sushanta mallick (2018) analysed the role of corporate taxation within a total factor productivity catch-up model, providing new insights on the unexplored fiscal aspect of the uk productivity puzzle. in the previous study of the author the optimal tax rates of the investigated taxes, used to maximize the tax revenue of the state are determined: 20% for the corporate income tax and 22% for the personal income tax (valentyna martynenko, 2018). in another scientific work of the author, the theoretical grounds for the development of the problem of tax security of the state are investigated (valentyna martynenko, 2015). the main purpose of the article is to study the main preconditions and key factors that ensured the increase of the ukrainian tax system favourableness ranking from the 174th position to the 43-d position during 2005–2016. 2. paying taxes methodology the assessment of the tax system favourableness of business development in ukraine taking into account the international comparisons is carried out by analysing the main tendencies of its transformations during 2005–2016 in the “paying taxes” ranking (the ranking of countries is conducted annually by the consulting firm pricewaterhousecoopers at the request of the world bank). the ranking methodology, on which the paying taxes ranking is based, was first developed by simeon djankov, tim ganser, caralee mcliesh, rita ramalho, and andrei shleifer (2010). they have investigated the effective tax rates for typical corporate profit in 85 countries based on a survey conducted jointly with the pricewaterhousecoopers consulting firm. currently, by the above-mentioned project implementation, the analysis of taxes and mandatory deductions, that a medium-sized enterprise will have to pay in a given year (for example, in the “paying taxes-2018” report for 2016), is conducted, as well as the administrative burden connected with payment taxes and deductions, and processes after reporting and paying taxes. the following taxes and deductions are investigated: corporate income tax, social security contributions and labour taxes paid by the employer, property taxes, transfer taxes, dividend tax, capital gains tax, financial transaction tax, waste collection tax, vehicle taxes and road taxes, as well as any other small taxes or fees (simeon djankov, tim ganser, caralee mcliesh, rita ramalho and andrei shleifer, 2010). the 2018 methodology of countries ranking on the degree of favourable conditions for tax payment is determined by sorting their distance from the boundary index determined for the indicator. the overall score for the country under the distance index from the boundary index in taxation is the arithmetic average of the four ranking indices: the general rate of taxes and contributions, %; time for registration, filing and tax payment, hours/ year; amount of tax payments; the index of procedures after the tax returns filing and paying taxes. in the “paying taxes” ranking of tax system favourableness, the total tax and contribution rate are calculated as the ratio of all taxes and contributions to be paid by the conventional standard medium-sized company, taking into account the existing benefits (corporate income tax, social contributions, and labour taxes paid by employers, property taxes, turnover baltic journal of economic studies 126 vol. 5, no. 2, 2019 taxes, local taxes and fees, taxes on vehicles, etc.) to the commercial profit of a conventional company. at the same time, the value-added tax (vat) and similar taxes such as sales tax or goods and service tax, as well as personal income tax, are not included in the calculation of the total rate of taxes and contributions, as they are not paid at the expense of the company. commercial profit of a conventional company (cp), which for a conventional company is 59,4-repeated amount of income per capita and is calculated by the formula: cp = s – cgs – gs– ae– oe– p + cgps – ie + ii – cd, s – sales; cgs – the cost of goods sold; gs – gross salaries; ae – administrative expenses; oe – other expenses; p – provisions; cgps – capital gains (from the property sale); ie – interest expense; ii – interest income; cd – commercial depreciation (0% for the land, 5% for the building, 10% for the machinery, 33% for the computers, 20% for the office equipment, 20% for the truck and 10% for business development expenses). at the same time, the threshold value limiting the minimal level of the total tax and social contribution rate is applied, as well as a non-linear transformation. the threshold value is determined by calculating the total tax and social contribution rate in the 15th percentile among countries in the ranking of the total tax and social contribution rate for all years of the research up to the “doing business – 2018” report. the threshold value is fixed at the level of 26.1%. all countries with the tax and social contribution rate below this threshold value receive the same point as a country which rate equals the threshold limit. 3. ukraine in the “paying taxes” ranking after analysing the ease of paying taxes by the annual world bank’s “paying taxes” reports for 2007–2018, we have formed table 1. from the data given in tab. 1, it is evident that during the analysed period in the paying taxes ranking of tax system favourableness, ukraine has increased its level more than in four times, having risen from the 174th position in 2005 to the 43rd position in 2016. at the same time, the lowest ranking corresponded to 181 and was held during the period of the global financial crisis in 2008–2010. the following positive dynamics of the ukrainian tax system favourableness is due to: the reduction of the total tax burden by 22.5% – the total tax and contribution rate decreased from 60.3% in 2005 to 37.8% (at the worldwide average tax burden of 40.5%) in 2016; the significant reduction in the time for registration, filing, and tax payment in 6.7 times – from 2185 hours in 2005 to 328 hours (at the worldwide average time 240 hours) in 2016; reduction of the number of tax payments by 19.6 times – from 98 in 2005 to 5 (at the worldwide average index – 24 payments per year) in 2016, with the maximum value this index reached in 2008 and made 147. the reduction of the tax burden on business during the analysed period was due to the introduction of a single table 1 summarized results on the position of ukraine in the paying taxes ranking index name index value in the paying taxes report for the relevant year*: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. total tax and contribution rate,% 60,3 57,3 58,4 57,2 55,5 57,1 55,4 54,9 52,9 52,2 51,9 37,8 on the average n/d** n/d n/d 48,3 47,8 44,8 44,7 43,1 40,9 40,8 40,6 40,5 2. time for registration, filing and tax payment 2185 2085 848 736 657 657 491 390 350 350 356 328 on the average n/d n/d n/d 286 282 277 267 268 264 261 251 240 3. number of tax payments 98 99 99 147 135 135 28 28 5 5 5 5 on the average n/d n/d n/d 31,0 29,9 28,5 27,2 26,7 25,9 25,6 25,0 24,0 4. index of procedures after filing tax returns and paying taxes 79,3 86,0 on the average 61,2 59,5 5. ranking, points n/d n/d n/d n/d n/d n/d n/d n/d 70,33 70,69 72,72 80,77 6. ranking place 174 177 180 181 181 181 165 164 108 107 84 43 * the difference between the year of the paying taxes report publication and the research year is 2 years, that is, the 2007 indices are calculated on the basis of the official data for 2005, and in 2018, according to the data for 2016; ** no data available. source: calculated by the author according to data (pricewaterhousecoopers, world bank group) baltic journal of economic studies 127 vol. 5, no. 2, 2019 rate of 22% for the unified social tax in 2016, the tax paid by employers, which replaced the previous differentiated tariffs from 36.8% to 49.7%. at the same time in the paying taxes-2018 report, the ukrainian economy, as compared to the others, was characterized by the largest reduction in the total tax and contribution rate for the companies in 2016. the decision to significantly reduce the rate of the unified social tax on the compulsory state social insurance was taken due to the pension reform implementation and the reform of the social sphere in order to legalize the “envelope” wages. thus, the decrease of the unified social tax rate had positively influenced the international image of ukraine in the ranking of tax systems favourableness, which is the part of the total annual rate of business easiness, therefore, in the world bank’s doing business 2018 report, our country has also improved its ranking by moving from the 80th position in 2017 to the 76th position in 2018. however, there is a need to analyse whether the reduction the unified social tax rate from 34.7% to 22% had a positive influence on the revenues from the mandatory state social insurance to the pension fund of ukraine (figure 1). as can be seen from fig. 1, at the end of 2016, the mandatory state social insurance revenues to the pension fund of ukraine decreased by 52% compared to 2015, which was the largest decrease during 2004– 2017, but at the end of 2017 there was an increase of unified social tax revenues by 42.3% compared to the same period in 2016. thus, the volume of mandatory state social insurance revenues to the pension fund of ukraine in 2017 (at the unified social tax rate of 22%) amounted to 93.5% of the year 2015 level (at the unified social tax rate of 34.7%). also, according to the data provided in 2018, the unified social tax revenues in the amount of 213.5 billion uah are planned, that is the planned growth of 34.3% compared to 2017. so, the results of the conducted analysis of the mandatory state social insurance reform in ukraine in early 2016 do not allow us to conclude on its rapid efficiency, since in 2016 the total mandatory state social insurance revenues to the pension fund of ukraine amounted to only 65.8%, while in 2017 it made 93.5% of the year 2015 level. if the plan for the year 2018 is fully implemented, the unified social tax will make up 125.7% of the pre-reform year 2015, and then one may talk of the medium-term effectiveness of the reform. as for the international image of ukraine, the reduction of the unified social tax rate from 34.7% to 22% in january 1, 2016, was really effective, because it raised the tax system favourableness ranking of our state from the 84th to the 43rd position and the ease of doing business ranking – from the 80th to the 76th position. let us conduct a detailed analysis of the paying taxes ranking components that provided ukraine with a positive dynamic in the currently available reports for 2007–2018, which, as already mentioned above, were formed according to the current state as of the end of 2005–2016. thus, the structure of the total tax and contribution rate is shown in figure 2. from the data shown in fig. 2, it is evident that during 2006–2015, the ratio of the amount of taxes and labour contributions paid by the conventional company (in ukraine a unified social tax only) to its commercial income (see formula 1) was close to 43%, instead of its the highest value of 45.4%, recorded in 2005, when the unified social tax rate was 32.3%, and the lowest one – 24.8% – in 2016 (the unified social tax rate was reduced to 22%). figure 1. influence of the unified social tax rate on the mandatory state social insurance revenues to the pension fund of ukraine during 2004–2017 source: calculated by the author according to data (cost.ua, minfin.com.ua) baltic journal of economic studies 128 vol. 5, no. 2, 2019 according to the paying taxes ranking reports, the ratio of the paid corporate income tax to the commercial profit of the conventional company reached its highest level of 13.5% in 2005, when the income tax rate was 25% and the lowest level of 8.7% – in 2015 when the income tax rate was 18%. the structure of the total tax and contribution rate has changed in the direction of an increase of the income tax share by 3.2%, other taxes by 1%, and the corresponding reduction of the share of taxes and labour contributions by 18.3% in 2016, compared with 2015. at the same time, the reduction figure 2. structure of the total tax and contribution rate in ukraine, % source: calculated by the author according to data (pricewaterhousecoopers, world bank group) of the total tax and contribution rate by 14.1% during this period, as already noted, was due to the legal setting of a unified social tax rate of 22% from january 1, 2016. the next component of the paying taxes ranking is the time for registration, filling and tax payment, which structure is shown in figure 3. from the data shown in fig. 3, it can be seen that in 2016, compared to 2005, the time for registration, filing and tax payment decreased by 1857 hours (the average annual decrease was 16%), including the valueadded tax – by 761 hours (the average annual decrease figure 3. structure of time necessary for the registration, filing, and tax payment in ukraine, hours source: calculated by the author according to data (pricewaterhousecoopers, world bank group) baltic journal of economic studies 129 vol. 5, no. 2, 2019 was 13%), the personal income tax and the unified social tax – by 708 hours (the average annual decrease was 18%), the corporate income tax – by 388 hours (the average annual decrease was 20%). thus, it can be concluded that the tax administration process in the ukrainian tax system is significantly improved, which is also confirmed by the dynamics of the number of tax payments that a conventional company must perform over the year under the main types of taxes (table 2). table 2 shows that in ukraine, the maximum amount of 147 payments to be made by a conventional company throughout the year was achieved in 2008 (paying taxes 2010), in particular: 6 corporate income tax payments per year, 24 payments per year for the pension fund contributions, social insurance (social tax), unemployment tax, occupational injury insurance, 4 payments per year of the tax on vehicles and environmental tax, 12 land tax payments per year, local taxes and value added tax, 1 advertisement payment per year. in 4 years, according to the paying taxes 2015, the number of tax payments in ukraine was optimized to 5 per year (as in georgia and singapore), while in norway, qatar, and the united arab emirates there were 4 payments, and in hong kong and saudi arabia – only 3 tax payments per year. at the end of the study, we will quantify the impact of several important macroeconomic factors that influenced the place of ukraine in the paying taxes ranking by calculating the pair correlation and determination coefficients (table 3). table 3 includes the correlation coefficients between the indicator “ranking of ukraine in the paying taxes” (the resulting sign) and 6 such macroeconomic indicators as: “the unified social tax rate”; “the corporate profit tax rate”; “the personal income tax rate”; “the volume of tax revenues”; “the consolidated budget revenues”; “gdp at actual prices” (factor characteristics). the value of the correlation coefficient indicates the direction of connection (direct, if the number is positive and inverse, if the number is negative) and the connection density (the closer the r value to 1, the denser is the connection). the value of the pair determination coefficient indicates the reliability of the connection or the extent of the factor sign effect on the resulting one (the closer the r2 value to 1, the more reliable is the connection and the impact is close to 100%). analysing the data given in table 3, it can be concluded that the greatest impact on the increase of the ranking of ukraine from the 174th to the 43rd position in the paying taxes during 2005–2016 had the corporate profit tax cut from 25% to 18% (influence measure 84.1%) and the growth of the consolidated budget revenues from 131.3 to 782.7 billion uah (influence measure 81.5%), including tax ones from 100.7 to 650.8 billion uah (influence measure 81.2%). 4. conclusions the assessment of favourableness for the tax system of ukraine in the international context enabled to come to the following conclusions: 1. in course of study, it was found that during 2005–2016, ukraine made significant progress in the “paying taxes” tax system favourableness ranking, moving from an outsider (the 174th penultimate position) to the top-50 (the 43rd position). 2. it was the largest progress in the world during the ranking existence. the main factor that influenced on table 2 a number of payments to be made by a conditional company over the year under the main types of taxes (position of ukraine) indicator name indicator value over the years: 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1. corporate income tax 5 6 6 6 5 5 1 1 1 1 1 1 2. labour taxes and contributions 60 60 60 96 108 108 24 24 1 1 1 1 3. other taxes 33 33 33 45 22 22 3 3 3 3 3 3 total amount of payments 98 99 99 147 135 135 28 28 5 5 5 5 source: calculated by the author according to data (pricewaterhousecoopers, world bank group) table 3 the rank of factors influencing the position of ukraine in the paying taxes ranking indicator name pair correlation coefficient r pair determination coefficient r2 1. unified social tax rate 0,506 0,256 2. corporate profit tax rate 0,917 0,841 3. personal income tax rate -0,769 0,591 4. volume of tax revenues -0,901 0,812 5. consolidated budget revenues -0,903 0,815 6. gdp at actual prices -0,890 0,792 source: calculated by the author according to data (pricewaterhousecoopers, world bank group, cost.ua) baltic journal of economic studies 130 vol. 5, no. 2, 2019 the mentioned positive dynamics was the liberalization of taxation – the reduction of the corporate income tax rate from 25% in 2005 to 18% in 2016, and the unified social tax rate for the mandatory state social insurance – from 32 to 22% respectively. this reduced the total tax burden on business by 22.5% from 60.3% in 2005 to 37.8% in 2016 at an average worldwide level of 40.5% by the end of the investigated period. 3. the improvement of tax administration quality played an important role in improving the tax system quality, which resulted in reduced time for registration, filing and tax payment by 6.7 times from 2185 hours in 2005 to 328 hours in 2016, with the average worldwide index of 240 hours per year; the number of tax payments has been reduced by 19.6 times – from 98 in 2005 to 5 (the worldwide average index made 24 payments) in 2016. 4. it is proved that the increase of the ukrainian tax system rank in the paying taxes ranking during 2005–2016 was most affected by the reduction of the corporate profit tax rate from 25% to 18% (r2 = 84.1), the consolidated budget revenues growth from 131.3 to 782.7 billion uah (r2 = 81.5), and the growth of the tax revenues from 100.7 to 650.8 billion uah (r2 = 81.2). 5. it is necessary to evaluate and to develop scenarios for forecasting the level of the overall tax burden on the national economy of ukraine 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corresponding author: 1 ternopil national economic university, ukraine. e-mail: v.ruzheliuk@tneu.edu.ua 2 ternopil national economic university, ukraine. e-mail: v.semaniuk@tneu.edu.ua 3 ternopil national economic university, ukraine. e-mail: burdeniuk@tneu.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-282-290 business accounting management in ukraine under the conditions of european integration viktoriya rozhelyuk1, vita semanyuk2, taras burdeniuk3 abstract. the purpose of the paper is the aggregation of theoretical, organizational, and methodological concepts of the information economy from the position of its impact on accounting system at processing plants to prove the directions of improvement of its components according to the requirements of modern management. methodology. the research of the concept of “information” gave the possibility to define the absence of scientific view on this issue. we suggest that talking about information we should understand the processed data including the system of accounting, which reduce the uncertainty of users. information for management has not yet been evaluated and not investigated the impact of information costs on the efficiency of making decisions. however, the calculation of costs for information services, which are also provided by the accounting system, is an important factor given the ability to optimize the preparation of information. to characterize the current stage of the development of the economy, the next concepts as “information economy”, “economy of knowledge”, “internet-economy”, “post-industrial economy” and “innovation economy” have been compared. the investigation gave the possibility to define that information and post-industrial economy are synonyms – the concept “post-industrial economy” characterizes the same stage of the development but from the retrospective point of view. such concepts as “knowledge economy”, “internet economy”, and “innovation economy” are components of the information economy, which form its characteristic features. nowadays, information plays an important role for a manager and influences the activity of an enterprise. the experience of successful companies shows that their achievements depend on the well-organized information system. practical implications. thus, the considerable part of information (78.5%) provided for managers belongs to business accounting that intensifies its role at an enterprise in the information economy. value/originality. it could not be overestimated the meaning of full and true information about the financial state and the results of the activity of an enterprise to solve current and prospective financial and economic problems. key words: information, information economy, information society, accounting system, business accounting system, processing plant, management, concept. jel classification: m42, m49 1. introduction transition to information output expansion and realization of information products and services change the location and prospects of the country in the world economy, supports its technological independence, increases compatibility that causes the actuality of forming and developing the information market, and exacerbates the problem of information support of the modern stage of economic development. at the modern stage, information product and services become strategic resources for economic development. a considerable role of information is in the financial business, where the decision making is based on punctual and reliable information what defines a high efficiency of such a decision and sometimes it can cause considerable losses. the main principle of a new paradigm of the information society is an orientation on intellectual, artistic, and creative potential. the global information society is a society of mental work, which is based on the use of knowledge in all spheres of human activity – production, science, and education. from the second half of the 20th century, one can observe features and tendencies of forming an information society that causes forming new objects of business accounting. this stage differs from “traditional” industrial economy by its essential displacement of the used human resources from tangible to intangible, baltic journal of economic studies 283 vol. 4, no. 4, 2018 increasing transactional sector and blurring of borders between branch markets. 2. the genesis of development of the information economy in the modern world of business modern highly developed countries enter a new historical stage of the development of civilization – post-industrial, information type of the development of society. different types of knowledge and information become the main factors in the development of such a society. they support the increase of impact on all spheres of human activity – production, education, culture, leisure and, first of all, management system. p. drucker suggests that the main goal in business management is creating wealth but not control costs, what should be implemented in modern management concepts (drucker, 2004). to manage effectively, one should predict the future. the true prediction can be supported by a deep retrospective analysis of rules of course of past processes. the information economy is a term used during the 1970s-1980s when a big part of gdp was supported by production, processing, storage, and dissemination of information and knowledge. the majority of people occupied in this activity, where electronic and information means of connection are used in the development of all main economic means. besides, the information itself is identified as products and investigated using statistic methods. characteristic peculiarities of information society are depicted in figure 1. therefore, we can affirm that in the last quarter of the 20th century, the humankind entered a new stage of its development – information society. economic information should be emphasized because it is very useful for people who deal with accounting information, which is called by a. barkhatov as “economic chronicle” (barkhatov, 2001) information in management is interpreted as the aggregate of data necessary for an active influence on the managed system to optimize it. the usefulness and efficiency of information in such a case is assessed according to its level of influence on the change of stage that presents the state of a managed social object. the nobel laureate j. stiglitz states that the information economy is a fundamental change of the paradigm, which occupied the ruling positions in economic science. it essentially influenced the modern approach to economic problems, explained phenomena, changed views on the functioning of economic mechanism and caused the reinterpretation of an adequate role of a state in society. the information economy is also called the economy of knowledge (stiglitz, 2005) it defines the necessity to determine and differentiate “information” and “knowledge”. undoubtedly, information and knowledge are connected concepts but the difference is fundamental. h. demsetz built such a logical chain: information creates a productive field for innovations stimulating the production of new knowledge that supports optimization of the location of the level of social development, which is characterized by increase in the role of information and knowledge in social life; increase in the part of information communications, products, and services in gdp; creation of global information space that support effective information human interaction, their access to world information resources, and satisfaction of their social and personal needs in information products and services. information society the society, where knowledge is the main product. distinct features of information society are the next: accessibility of necessary information for all members of society, the ability of society to produce all necessary information and support all members of society by means of access to this information the society, where production and consumption of information is the most important type of activity, information is considered the most important resource, new information, telecommunication technologies become the basic ones, and information surrounding among social and ecological become a new surrounding for human life. figure 1. definition of the concept “information society” source: developed by the authors baltic journal of economic studies 284 vol. 4, no. 4, 2018 physical resources and formation of other innovations (demsetz, 1997). investigating the stated above differences, m. sheresheva suggested that “information economy” considers the current stage of social and economic development and “economy of knowledge” as the next stage (sheresheva, 2008). it should be taken into consideration during forming the public economic policy of ukraine that defines the longterm competitiveness of a country. such an opinion can be true but we suggest that information economy, at the same time, characteristics of innovative and internet-economy includes elements of the economy of knowledge (figure 2). therefore, the modern stage of the development of the economy should be called information, which includes the stated above aspects. to define it, we should investigate the use of the concept of a post-industrial economy, which is often found in scholars’ works. o. volkova and m. denysenko wrote, “information explosion, which has happened recently and transformed the industrial economy into information, has essentially changed all social processes” (volkova, denysenko 2004). on the contrary, the production of tangible goods prevails in industrial society; in the information (postindustrial) society we can observe the production of intangible goods. information makes essential changes in the world outlook of a human being and society. some scholars suggest that information is a function of time. l. khoruzhii considered, “accounting of the reason of time is one of the obstacles to define information necessary for the future” (khoruzhii, 2004). in h. zakharchyshyn’s opinion (zakharchyshyn, 2012), information society widens space but restricts time stimulating the choice of priorities of activity. taking into account this fact, we should talk not only about usual components of resource potential but should emphasize a new resource – time at the micro level to evaluate the efficiency of an enterprise. 3. information as a product of accounting system in the information society current economic processes are characterized by swift information transfer about changes in branch markets so the decision about transactions can be taken in real time and transactions are made very quickly and practically twenty-four hours a day. usually, the advantages of information society are evident but the question is whether all its consequences were positive? f. fukuyama is the first who put this question (fukuyama, 2008). we should emphasize that there are many disadvantages to the information economy (figure 3). information and knowledge as more powerful productive forces caused the gap in profit between the richest and poorest countries of the world up to 72:1 at the beginning of the 21st century. during the last 25 years, it increased in 10 times. according to unesco data, 80% population on the earth has only the basic education or does not have it at all, 85% have never used a telephone, and 93% have never used a computer (chukhno, 2007). joseph e. stiglitz stated that information economy much influenced our imagination about economic policy and it can have a bigger influence in future (stiglitz, 2005). s. kuznyetsova ascertained (kuznyetsova, 2007), the strategic goal of the development of the information-based society is information-based economy in ukraine. besides, the issue of informationbased economy should be suggested in the context of economic entities, which use information. information economy changes not only characteristic of production and economic relations but also information technology, which has a direct influence on information – the main economic and social resource is an implementation of knowledge internet companies show the most rapid increase and influence, which give the possibility to transfer into the net not only sales of their products and services but also different business processes innovations – the main factor of increase of competitiveness in the information economy economy of knowledg innovative economy internet economy in fo rm at io n (p os tin du st ri al ) e co no m y figure 2. the main features of the information economy source: rozhelyuk, 2013 baltic journal of economic studies 285 vol. 4, no. 4, 2018 business accounting and that is the concept taken as the base of its theory (figure 4). information should be differentiated from data and knowledge. although, in some approaches, information is a generic concept for data and knowledge, which differ by a different stage of structural nature and understanding of information. for further investigation, we suggest defining the essence of the concept “information”. information is one of the actual, fundamental, and debate concept in modern science and practice. because of the absence of a common definition, in different branches there are different interpretations of information. the following definitions, which are oftener used: information about persons, subjects, facts, events, phenomena, and processes, which are presented in any objective form that supports the possibility of its filing and dissemination; data, which was transformed from an italicized part of the text; knowledge (information) about such objects as facts, events, phenomena, subjects, processes, imagination, which include concepts having a concrete content in some context; block of knowledge, facts, information that is interested in and should be processed and recorded; results of reflection caused by any interaction between objects, information about anybody or anything able for support of active actions. by general meaning of this word, information is not only what decreases the measure of the indifference of its user concerning any object. talking about the object, we should understand something existing independently from our consciousness. information is a reflection of an object in recipient’s (subject) consciousness. it gives the possibility to define the quality of information (petrenko, 2008). w. ashby considered information as diversity, at the same time c. shannon understood it as not any data + – solving problems concerning information crisis; – information human community; – free access to information resources; – realization of humanistic principles of social management; – the development of new information and modern technology; – free from routine work; – a high level of automation of information processing in industrial and social spheres; – formed the world and national markets of information services; – creating a free information database i n f o r m a t i o n s o c i e t y – – the problem of support with qualitative and reliable information; – the part of people (especially the elder) is difficult to adapt to information surrounding; – danger between “information elite” and consumers; – the increase of danger concerning corporate interests and private human life figure 3. positive and negative features of the information society information society accounting the development of communication and data transfer and calculation means new possibilities of facts recording of business activity, their registration and archiving new objects (elements) of business accounting first, intellectual such as knowledge, information, intellectual property etc., which produce new forms of goods figure 4. information economy’s influence on business accounting (rozhelyuk, 2013) baltic journal of economic studies 286 vol. 4, no. 4, 2018 exchanged between people but only that decreasing the level of consumer’s indifference (ashby, 1962). the concept of indifference became the key in the investigation of information by c. shannon, who stated that indifference could be only making the choice among two or some opportunities. nowadays, the majority of scholars defining the concept of “information” use the concept “indifference” (shannon 1963). therefore, v. petrovych (petrovych, 2010) suggested that information can be defined as the “block of data decreasing the indifference of the perception of surrounding world”. by a narrower meaning, information is data, which are an object of recording, dissemination, and processing” (hnilitskyi, orekhov, 2009). italian professor j. galassi (galassi, 2011) stated that the modern concept of information economy was developed from models of rational choice in the state of indifference. besides, the scholar added that study of information and information systems, which is business accounting, is “beneficial base for interesting reveals, rich suggestion and prospect for the further development.” there is a view (stiglitz, 2005) that information is a type of transactional costs. many economists from chicago school considered that information economy was suggested as a branch of applied economics. in s. haluzina’s opinion (haluzina, 2006), accounting data are “raw materials” for creating information. we do not agree with this opinion because the system of business accounting includes data, indices, and information. data are information, facts, values and their correlation, transformation and processing that give the possibility to receive information that is knowledge about a subject, process or phenomenon. the information contains only those data, which reduce the indifference of events interesting for the addressee, a user that is again received data and the quantity of information depends on the impossibility to predict them. therefore, the concept “information” is the concept that has a broad meaning. by information, we understand data, message, events or situations. it is disseminated and perceived as signals, that is why it is considered as any physical influence of material things or reflection of its influence, which has a concrete meaning. according to v. sukhina (sukhina, 1992), information can be defined as the measure of the arrangement of the material system. it is an information resource, that is, received knowledge and data about the state of the external and internal surrounding of the system are used in production and management as a factor to increase efficiency. 4. accounting information in management system at processing plants requirements of information society make managers of enterprises to increase the quality of the system of business accounting that supports the quality of information support of internal control. however, it should be noted that the level of the quality of business accounting does not meet modern requirements of management. it is necessary to define the terms and show the difference between “information” and “knowledge” that allows proving our understanding of essential differences between “information economy” as a modern stage of social and economic development and “economy of knowledge” as the next possible stage. the origin of knowledge management can be observed in plato’s works. however, only recently, essential changes have been made in economy and business, which stimulated the interest to the given problem. knowledge management is an aggregation of different subjects, different approaches, and concepts. their main goal is to create new and more powerful competitive advantages for enterprises. knowledge management predicts the creation of new knowledge and stimulation of its increase. theoretical base of knowledge management is: philosophy, psychology, pedagogy, sociology, logic, economics, management, marketing, management theory, informatics, and the whole range of applied economic, technical, and cross disciplines. knowledge is the result of cognitive human activity, which is in the form of adopted concepts, laws, principles, and fixed samples of phenomena and subjects. it can be empiric, insufficient generalized, and theoretical that reflects natural connections and relations. knowledge should be differentiated from the data and information. it is more than simply information: knowhow – tested proved procedures; know-who – people having experience or resources; know-what – ability to differentiate and chose the key models and actual actions; know-why – understanding of the context of a big experience (view); know-when – combination of feelings of rhythms, time, and realism. the given concept is characterized by internal interpretation, structural and bound features, and mutual activity (kandybovych, 2010). economy, like any activity of society, is based on information and at the modern stage of its development possession of knowledge and their usage are the main reason of economic development and the base of transformation processes. that is why, economic information is a special type of information, which is defined by l. khoruzhii (khoruzhii, 2004) as the aggregate available differences in the economic entity. these data should be fixed, transferred, processed, recorded, and used for management by an economic entity or its separate elements. facts are the base for such data that is all data about used resources. it is impossible to manage an enterprise effectively without information processes. the law of information means that the level of management can be higher when there is new information and when this information is used. therefore, in the accounting system, the law of information is active. baltic journal of economic studies 287 vol. 4, no. 4, 2018 with a particular focus on differences between “information” and “knowledge”, the author made a conclusion that the term “information economy” corresponds to the logic of the beginning stage of the social and economic development, which can be characterized as “information industrialism”. the given stage differs from “traditional” industrial economy by essential improvement of used resources from material to immaterial ones by an increase of transnational sector and disappearance of borders between branch markets. forming information in business accounting, factors, which limit appropriate and reliable information, should be taken into consideration. timeliness of information is one of such factors. excessive delay of data submission to interested users can cause the loss of its relevance. continuous waiting can support a high reliability of information but make it for small use. the use, which is received form formed in business information accounting, should be compared with expenses used for its preparation. any incorrect presentation of data in business accounting breaking the set of rules of its organization and conducting decreases sharply the value of accounting information. there are intentional and unintentional misrepresentations of reporting. intentional misrepresentation is a result of deliberate actions (or inactivity) of staff of an enterprise. they are made with lucrative impulses to mislead the users of reporting. unintentional misrepresentation of reporting is a result of unpremeditated actions (or passivity) of the staff of an enterprise. it can be the result of arithmetic or logical records, mistakes in calculations, oversight in accounting confidence, incorrect representation in the accounting of the fact of economic activity, property, and its condition. factors, which reflect the peculiarities of a state of a concrete branch of the activity of an enterprise in general that will support the appearance of misrepresentation, are the next: the state of the economy itself and economy of a country in general – crisis, depression or rise; age-specific possibilities of the rise of impossibility (bankruptcy) of economic entity because of the crisis of a branch; peculiarities of industrial activity of economic entity and technological peculiarities of production. the reason for accounting unreliability can become unsuccessfully chosen accounting policy, a method of its use or inadequacy of information disclosure in accounting reporting. despite available disadvantages, the majority of the information needs of the business are systematized into management information systems under current conditions of social development. management information system consists of interconnected subsystems, which provide information necessary to perform business. accounting information system is the most important subsystem that is why it plays the main role in the management of economic information in all departments of an enterprise and for all users. we suggest that under the conditions of constant complications of economic relations in society, as a rule, there are not one but some paths of achievement of the necessary result. following each path, there will be a result that is the activity will be productive. however, not all paths to achieve the result will be optimal from the point of view of corresponding criteria, the movement to the result using not optimal path cannot be defined as effective. therefore, we can make an important conclusion: any effective activity is successful but not any successful activity can be effective. resulting character is a necessary but insufficient condition for effectiveness. we should provide h. emerson’s expression about the role of business accounting (principle 6): “such as there may be detailed and accurate bookkeeping, on its own it cannot create productivity. its ideal components are: debit, credit and balance and availability of documents about each record. no norms, besides the norms, which were achieved in past, bookkeeping cannot show; the only unproductivity, which it can reveal is an achievement, not those results, which were achieved in past. bookkeeping cannot either create productive norm or try to get them. however, no modern enterprise can work without bookkeeping” (emerson, 1992). it is the best answer for those who consider that bookkeeping lost its meaning and even without making accounting procedures effective performance can be achieved. we can make the following conclusion: only that accounting system can be defined as effective, which owns synergy in full sense that is the maximal efficiency of common functioning of its elements. table 1 different types of knowledge described in the literature type of knowledge essence implicit personal knowledge connected with individual experience; skills, patterns of thinking, behaviour, intuition. implicit knowledge is in human minds, personal archives, on the contrary to explicit knowledge, it is personal, with contextual meaning and that is why it is difficult to formalize it and transfer. explicit accumulated experience, which can be emphasized and presented in the form of reports, analyses, management, instructions and recommendations for activity. this knowledge is easy to define, fix, record, and transfer using information technology. innovative unique knowledge, which supports a competitive advantage in the activity. they allow changing “rules of the game”. source: developed by the author based on (kandybovych, 2010; kovalyov, 2004) baltic journal of economic studies 288 vol. 4, no. 4, 2018 thus, pareto’s law can be used as a basic set for the analysis of reasons of efficiency of any activity and optimization of its results. an adequate choice of minimal quantity of the most important actions gives the possibility to receive the considerable part of the full planned result, besides further improvements are not effective and unjustified (according to pareto curve). the category of efficiency is very important and it is investigated by different scientific schools. management sets the valuable approach for business management, “everybody should bring value. he who does not bring value then he sells it.” therefore, indications of kpi (key performance indicators) should measure the efficiency of the work in each department or employee. it belongs to the accounting system. accumulated data in the information system are not necessary by themselves, they are valuable only then when they can be used for the managerial base of necessary decisions. such decisions fall under some systematization, which allows arrangement of requirement presented for the volume and structure of data circulating in the information system (figure 5). information from business accounting system is provided for users, which are divided into internal and external users. external users are considered to have a limited volume of information and internal ones – full. however, in modern conditions, when information is a subject for discussions, it is necessary to specify who users are, what are they, and what information requests they form. information, which is correspondent to ethical norms and is transparent and it is not created by managers, which try to present it better than it is in reality, is objective and reliable. users of all levels need information that is why there is an information base as the block of data, which is specific information raw materials, on the base of which information is formed. there are different definitions of information: as data, which decrease the indifference in some part to which they belong. thus, information is new knowledge, which does not exist in new type by itself but a consumer of information raw materials, which is data, which potentially carry information, generate it. 5. the business accounting system in information support at processing plants business accounting is the base of information company support. its main task is to support users with information about the business state. the final accounting product is information necessary for taking management decisions and their monitoring. accounting provides current information about the performed operation and final information about facts. the final product of accounting is information about facts about economic life during a month and quarter. accounting objects are defined for these goals; methods for forming information are defined; specialists are appointed. therefore, accounting management supports creating necessary conditions for a management system in providing information for making management decisions and their monitoring. company’s economic decisions from the position of: strange persons owners of enterprises plant managers equity participation participation in financing company projects decision on volume and structure of the capital decision on exempt assets expedient investment strategic projects optimization of current activity investment current decisions conclusion of current business contracts figure 5. company’s economic decisions taken from different positions (interests) baltic journal of economic studies 289 vol. 4, no. 4, 2018 a financial report under market conditions is interested for two groups of users. therefore, under the conditions of market economy, the set of users of report is wider than under the conditions of planned and administrative system, where the only internal and external user was a state or authority (ministries, fiscal bodies, statistic services) or manager of an enterprise, which was oriented on the fulfilment of state plans and tasks. paying attention to that fact that users’ interests are different, business accounting cannot satisfy all information needs. formed information in business accounting for external users satisfies general needs. business accounting does not reflect only facts but information about them. data about separate facts are transformed in the accounting system into information economic characteristic. correct and effective accounting gives the possibility to consider that on all stages of the accounting process, only that information is fixed and integrated, which is necessary for business management (nakonechna, 2009). external users are provided with not full information and they cannot see a broad picture of the business. taking into consideration the main task of business accounting, we can suggest that business accounting management is data collection management, their processing, and delivery of information. quantity, quality, and direction of the generated information are specified by life that is by business activity. during the whole period of existence of accounting, information was divided into good and bad (is not correspondent to requirements). information economy’s influence on business accounting system – a rapid development of computer technology and software development should be emphasized. it was proved that since the beginning of the second half of the 20th century, as many famous scholars predicted that information stage of social and economic development has come. this type of the economy is retrospectively called post-industrial and it involves aspects of internet economy, knowledge economy, and innovation economy. besides, information is processed data (including business accounting system), which decrease users’ indifference. moreover, it should be taken into consideration that in accounting management, modern economic processes require processing of more volume of information for different types of users. therefore, information for management is provided by not only the accounting system but also management control and analysis, which use accounting data. according to different assessments, accounting provides 70-80% of the information and the rest of it is provided by other functional services of an enterprise. company accounting section creates a product – information, which is always in great demand that requires the development and implementation of accounting management in the information economy. 6. conclusions the research of the role of business accounting as information system under the conditions of the settling of information economy gives the reasons to affirm that under the conditions of the information society, time element plays a very important role. in fact, nowadays, information loses its actuality; its value can be varied depending on the time that is why time element is determinant in business in providing a business accounting as an information producer. the business accounting system should be organized to provide necessary time-effective information with minimum expenses of efforts. a systematic approach in investigations, new technology, and information orientation of society created a base for the development of a new business accounting management. we agree with the opinion of many scholars, which consider business accounting as an information system because in business accounting, all its components systematically interact and each of them has qualities. their exclusion decreases general potential and efficiency of the information system. only in totality, they form information system, on which financial and economic activity of an enterprise depends. proceeding from modern social and economic conditions, scientific and technical progress, and an increase of the volume of information, which should be processed at enterprises, institutions, and organizations of ukraine, a computer-based form of business accounting is widely used. in spite of its disadvantages, the system simplifies accountant work and increases the speed and time of inquiry execution. general criteria of quality can be the correspondence of accounting information to requirements of national and international standards. however, each business entity should develop its own criteria of qualitative accounting information, the features of which are the following: sufficient content, reliability, structural, true, analytical, stable, comparative, accurate, fresh, legal, appropriate, done in time, understandable and confident character. therefore, experimental results gave the possibility to investigate a significant problem in the discontent of accounting information management needs. besides, incorrect accounting system management is the reason for dissatisfaction. on the one hand, managers do not know what information can be provided by the accounting system and on the other hand, their information request enquires a lot of time and efforts. altogether, if done right, such problems could be avoided if the information in accounting is formed to receive it easily without many efforts for the processing of unnecessary information. organizing business accounting system, it should be taken into consideration that it is not preferred to increase processed information content but it is necessary to optimize technology of processing of necessary and important information and be able to separate irrelevant information. baltic journal of economic studies 290 vol. 4, no. 4, 2018 references: drucker, peter 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(in ukrainian) baltic journal of economic studies 126 vol. 4, no. 4, 2018 corresponding author: 1 pereiaslav-khmelnitskyi state pedagogical university named after hryhorii skovoroda, ukraine. e-mail: professorignatenko@ukr.net 2 kherson state agrarian university, ukraine. e-mail: ks18.info@sfs.gov.ua doi: https://doi.org/10.30525/2256-0742/2018-4-4-126-133 development of regional programs for the development of agrarian enterprises with organic production on the basis of the european and international experience mykola ihnatenko1, natalia novak2 abstract. the objective of the article is to identify the problems of the development of organic agrarian production in ukraine, to determine its resources, directions and instruments of state regulation and support (including on the basis of advanced european and world experience), as well as the preparation of regional development and improvement programs. methodology. while the study, general scientific methods of scientific knowledge, as well as special methods of economic research were used. monographic and historical methods were used in the analysis of stages of the formation and development of organic enterprises. methods of problem-targeted approach, business planning, and investment planning were used in the preparation of organic farming and organic products development programs. results. the article reveals the main results, trends, and problems in the development of organic agrarian production in ukraine. there are presented positive examples of realization and distribution of its european and world experience, including on the principles of state regulation. features, forms, and directions of state support of enterprises with organic production are determined. means of its improvement were substantiated. the available and potential resources of the prospective development of organic production are determined. regional programs of implementation of proposals have been developed on the example of kherson region. practical importance. it lies in the possibility of introducing the results in the organic enterprises of the country, in the bodies of management and regulation of agricultural production, in decisions of the rural communities on the development of organic production and organic products market, preservation of agrarian resources, environment, employment of rural residents. scientific novelty. the state programs of organic production development are grounded on the basis of strengthening their regional, informational, and advisory components. key words: organic production, agriculture, enterprises, regional programs, state regulation, sustainable development, natural resources, ecology, market, improvement. jel classification: q15, p42, q01, q34, q13 1. introduction european and world practice of organic agriculture witnesses its positive results not only in the aspect of realization of its direct functions but also in the development of rural economics and rural territories on the whole. development of organic agriculture presupposes additional employment in a rural locality, new production perspectives for small farming economies, the rise of viability in rural communities, and other social benefits that are now so essential in ukraine. prospectively, organic farming and cattle breeding would allow for conformity and harmonization of social-economic and production-ecological goals of national agrarian enterprises. looking back at the world experience, it is fair to say that organic agriculture represents the practical realization of basic concepts of sustainable development. establishment of mechanisms of state regulation in the introduction of organic production technologies in ukraine requires the provision of a broad partnership for the purpose of the union of interests and needs of interested parties. what it in the first place means is the involvement in active cooperation of agricultural producers and their associations, bodies of state management, private consultative companies, certifying bodies, consumer organizations, scientific and educational institutions. in the second place, it refers to non-government organizations engaged in the sphere baltic journal of economic studies 127 vol. 4, no. 4, 2018 of ecology, institution-building, advisory activity, and development of strategies for the country’s agroproduction. at the same time, the analysis of the ukrainian market of organic production is complicated by the unavailability of official statistics concerning the examination of organic enterprises. this is why the marketing research and the data from the reports of foreign experts who certified organic agrarian production were the major sources of information. 2. the main results, trends, and problems in the development of organic agricultural production in ukraine according to data available with the international federation of organic agriculture movements (ifoam), the total area of ukrainian agricultural lands under organic farming reached the value of almost 300 thousand ha in the last years. it is an essential figure, for it appeared that ukraine surpassed some countries from eastern europe – eu newcomers where such farming was the priority within the joint agrarian policy of the european union. however, despite huge areas allotted for organic farming, the domestic market features negligible scale of national organic products for the end consumer. moreover, such products are represented solely by plants – cereal crops and sunflower (nearly 60.0% in the total structure). introduction of organic production technologies in cattle breeding is connected with a number of problems, e.g., shortcomings in expenditure accounting, high product cost, the immaturity of the market outlet, and absence of state support. this is why the transition to organic cattle breeding is today a predominantly loss-making business. the majority of enterprises that cultivate organic products are located in the southern (odesa, kherson regions), western (chernivtsi, ternopil, and lviv regions) and central (poltava region) regions of ukraine. it is a spirit of the times that these enterprises participate in joint projects (with companies from, in the first place, switzerland and germany) of the introduction of an organic trend in agricultural production. the results of the study of agricultural organic commodity producers’ performance show that the efficiency of management in organic agriculture to a great extent depends on the use of soil-protecting technologies, quality of seed materials and timely agro-technical measures. competent state bodies should provide their assistance in the research of market capacities and solution of marketing problems encountered by enterprises-organic producers who require complete and verified information as to consumers, their demands, and the market’s elasticity. with no study of demand and supply, consumer needs and specificities of their behaviour, it seems impossible to analyse, plan, and control production and sales today, for information have become a powerful instrument in successful entrepreneurship, even more important than money, materials, equipment, and labour resources. provision of the company with comprehensive and reliable information enhances its competitiveness and market perspectives. however, many problems should be solved in ukraine prior to the big-scale introduction of organic production of foods, and low level of ecological awareness in both producers and consumers of agricultural production seems to be among the most sensitive challenges (ihnatenko, 2015). the group of problems related to weak ecological awareness should be added with the absence of courses in theory and practice of organic farming management in educational institutions of different levels of accreditation. besides the lack of education and low ecological awareness, an unwillingness to overcome stereotypes (those that formed within a long period of agricultural intensification) is observed, as well as low innovation activity among sectoral managers and state regulatory officials. 3. features, forms, and directions of state support for enterprises with organic production aiming to encourage farmers to introduce new forms of agricultural management and help them in a transitional period when financial losses are likely to occur, the governments in many countries provided such entrepreneurs with state financial support. for example, “organic” enterprises in poland were additionally receiving in 2010 the equivalent of 127 usd per 100 ha of plough land, 42 usd per 1 ha of pastures (grasslands), and nearly 157 usd per 1 ha of perennial plantings. besides, the government had partially compensated the cost of “organic” enterprises’ certification. in ireland, the farms of less than 3 ha are allowed with 242 euros/ha in a transitional period and 121 euros/ha upon acquiring the “organic” status. agricultural producers working on lands of 3 to 40 ha are supported in the amount of 181 and 91 euros/ha correspondingly. lack of proper regulation in the market makes organic producers engage traditional outlets for agrarian food products with no mark-up received. it is a rather widespread practice when organic product certificate owners are represented by third companies that undertake its export. geography of supply is predominantly concentrated in highly developed countries of western europe (great britain, the netherlands, germany, switzerland), where the increasing demand for organic food significantly exceeds the offer (marmul, novak, 2016). the up-to-date sales opportunity investigations in ukraine confirm the fact that a uniform chain of satisfaction of national consumers’ demand for organic baltic journal of economic studies 128 vol. 4, no. 4, 2018 production (market investigations-productionprocessing-distribution-sales) is now broken. the situation urges the development of an efficient strategy of marketing that would provide for systemacity and balance among all market participants. the absence of an efficient system of state regulation and organic agriculture poor finance and credit mechanism stay to be among the factors that affect the development of the market for organic production. though the dynamics of the agrarian crediting is now much better (due to interest rates partial compensation from the state budget), the producers’ needs in borrowings are not yet fully satisfied. to help increase financing of organic commodity producers, it seems necessary to seek for different sources and crediting resources such as bank and loan association credits, the supply of machinery on conditions of the financial lease or instalment plan, etc. analysing environmental factors, it was essentially important to predefine special raw material zones for organic production. according to national scientists, nearly 15 million ha of ecologically clear lands could have been allotted for the cultivation of organic production in ukraine. the analysis of microfactors that effect on enterprise activity in the market of organic production allows for the conclusion that lack of information and additional costs for certification discourage the formation of infrastructure that would bring service to organic commodity producers (kyrylov, 2013). state regulation in the area of organic commodity production is believed to be necessary for the purpose of preservation of product’s high quality in all stages of its advance to the end consumer. besides, it is conditioned by high research intensity of production, market operators’ needs in informational and consultative support, and availability of transitional (from common to organic agriculture) period of activity since likeliness of losses and even bankruptcy sharply increases. formation of the system of national, regional, and local (rural community) support should consider specificities of social mechanisms in economics and the level of social responsibility of agricultural business since this or that way they effect on such support’s mechanisms and forms. social environment and organization of production directly effect on the behaviour of social groups and, correspondingly, on their interests and activity results and, subsequently, on management and groups’ status. thus, the state can regulate processes of agriculture ecologization through the correction of the behaviour of an interaction within different social groups of the population. it can be executed by way of active participation in people’s spiritual and cultural life and in all spheres of social relations through the state and private partnership. the latter is supposed to help form ecological awareness, a new system of ecological values, standards, and rules in the society, ecological culture, education and upbringing, principles of public informing on ecological problems. it is when all these issues are considered we may proceed with the further organization of agro-sector, rural economics, and rural territories on the whole. it should be emphasized that the majority of small and medium-sized farms are oriented towards profitmaking here and now. this is why they regard the introduction of organic farming to be disadvantageous, in the first place, due to objectively anticipated losses during the transitional period. in our opinion, organic farming is also restrained by the absence of clearly outlined legislative framework and infrastructure. besides, development of organic agrarian production is affected by inefficient management in some enterprises and insufficient state regulation on the whole, as well as by lack of agricultural business’ social responsibility (fedorov, khodakivska, korchynska, 2011). legal economic and social activity in organic production urgently requires its legislative support that would regulate and define, in the first place, the procedure of certification of its types. here we should note that state system of biosafety in creation, testing, transportation, and use of genetically modified organisms act, ukraine, adopted by the supreme council of ukraine, was an essential step towards the provision of food safety of the country and ecological safety of its agriculture. the law regulates relations between ukrainian executive authorities, and producers/consumers of genetically modified organisms and products manufactured with the use of permitted technologies that guarantee biological and genetic safety. no organic farming in the world uses either genetically modified organisms (gmos) or materials derived from them. according to eu legislation, farmers engaged in organic production are prohibited to apply gm-dropping (eg 834/07). practical introduction of organic production should take place simultaneously with ecologization of the whole agricultural production, rural territories, and the whole rural mode of life. on the national level, organic agricultural production is regulated by water, commercial, land, criminal, customs, tax, and civil codes of ukraine, as well as by its labour code and civil defence code. beginning from 2010, standards for plants optimal proportion in crop rotation within different natural/agricultural regions, the resolution of the cabinet of ministers of ukraine, became an effective giving way to the onrush of organic production. it is this resolution that regulates the structure of crop rotations and minimal periodicity of crop cultivation within a field. however, its practical observance is restrained by the technological and economic capacities of agricultural producers. that is, the government has only suggested a limitation of producers’ choice and capacities with no suggestion of economic conditions and resources to realize resolution’s provisions. baltic journal of economic studies 129 vol. 4, no. 4, 2018 the bases for the development of organic agrarian production are also regulated by the organic agricultural commodity and raw material production and turnover act, ukraine, adopted on 3 september 2013, № 425-vii (organic agricultural commodity and raw material production and turnover act, ukraine, 2013) and 2020 state ecological strategy act, ukraine, on 21 december 2010, № 2818-vi. the laws define legal and economic bases for organic agricultural products and raw materials production and turnover; measures to control and supervise such activity for the purpose of the provision of fair competition and proper functioning of the market for organic commodities. they also deal with improvement of the parameters of population’s health, preservation of the environment, soil quality improvement, soils rational use, and the consumer’s assurance in products and raw materials marked as organic. adoption of the aforesaid instruments was the evidence of positive changes in the institutional structure of organic movements and regulation of organic production. it resulted in a positive balance of the indices of social-economic rural development, one that provides for agricultural activity even in conditions of crisis. at the same time, the organic agricultural commodity and raw material production and turnover act, the law that is called to regulate the process of production of organic commodities has some significant defects since does not suggest the mechanism of organic producers’ support even in the period of transition. unobstructed development of organic production awaits introduction of amendments into organic agricultural commodity and raw material production and turnover act; 2020 state ecological strategy act; food products safety and quality act; agriculture’s of ukraine state support act; agricultural cooperation act; priorities in innovation activity act; national safety act; licensing and certifying bodies act; chicken production and market act; beef production and market act; pork production and market act; vegetable and fruit production and market act; hop growing and market act; flax production and market act; sheep production and market act; and food safety act. the prices and price formation act, ukraine, should be added with provisions, or new such law should be adopted for agro-industry where price formation specificities in organic production are taken into account especially in the segment that is capable not only of providing for the country’s food safety but for the people’s social protection and lowering of technogenic environmental loads. introduction of the adequate mechanism of price formation will require a great deal of legal work. conditions should be arranged for innovative development of agriculture and food industry in the fulfilment of art 7, priorities in innovation activity act, ukraine, where the highly technological development of agriculture and processing industry is recognized to be among prior strategic directions of innovation activity. at the same time, questions of infrastructure in the market for innovations in the agrarian sector and the introduction of organic agrarian technologies, that is, those that manifest friendliness towards the environment require legislative regulation. financial assurance is an important aspect in the development of organic agroproduction. it is with financial/crediting instruments, sanctions or preferences that the state encourages producers to undertake organic agriculture. mechanisms of agroproducers’ preferential crediting and taxation are aimed at the provision of access to financial resources and payment at the expense of income from borrowings. besides, the preferential regime of taxation is supposed to stimulate producers for the introduction of innovations and cheapening of the end product for the consumers. the good effect is awaited from tax holidays for those who started the process of organic standard certification until they gain profit from sales of their certified organic commodities (garmashov, fomichiva, 2010). developing national and regional programs of organic production support, one should be aware that not only the producers and the consumers of organic products but also the state sector shall become the recipients of program results. local authorities and state bodies should support producers and participate in such program in the capacity of third party performing as state/private partnership when agroproducers cooperate with international organizations and funds (shpychak, 2003). state bodies’ active position in questions of organic production is expected to speed up the investment component and provide for the functioning of the instruments of regulation and support. instruments of regulation should be preventive, that is, of precautionary character, and make producers apply organic technologies and strictly keep to technological process that would guarantee production of qualitative and safe commodities. producers who cause harm by way of applying intense technologies and gmos should additionally pay to special local funds of organic production support. should the technological process be frustrated, the producer must be aware of its consequences that would take the form of penalties or certificate revocation. major indicators of efficiency of financial/crediting and budgetary support of organic production must be as follows: dynamics of increase in production; consolidated budget revenue; employees’ income and labour quality; environmental health and agro-landscapes preservation; level of insurance protection; investment volume and structure; credits accessibility; activity’s financial results; social responsibility. baltic journal of economic studies 130 vol. 4, no. 4, 2018 the contraction of the scope of finance for scientific developments and the private enterprises’ unwillingness to allow scientists to their activity, as well as the contraction of the number of state research enterprises has artificially separated science and production. the recipients’ of advisory services readiness to cooperate with scientific institutions, share their own experience of problems solution, participate in scientific/production experiments, introduce innovative technologies and make investments would have been the evidence of the efficiency of the net of expansion of agrarian knowledge (lupenko, 2013). advisory activity in the agrarian sector as one of the instruments of the sector’s state regulation is called to assist the development of rural territories, the increase in the level of incomes and betterment of producers and rural inhabitants’ living standards at the expense of their acquirement of new competence. the economic component would have become an important element of the recipients’ of advisory services decision-making. information support of organic production should be performed in two directions. the first shall be the information for the producers of organic commodities, the second – for the commodity consumers. certifying companies, international certifying institutions, international organizations, organic producer associations, agricultural support cooperations that deal with organic production, organic product sale points, and organic commodity producers/consumers can themselves be sources of such information support. the role of the state, local authorities and rural communities lies in assistance to spreading of objective information concerning advantages of organic production and specificities of organic commodity price formation. to help form institutional environment of the organic agroproduction, and taking into account the world experience, the organic agricultural commodity and raw material production and turnover act awaits to be supplemented with a number of other legal instruments that would establish and specify the rules for the management of organic agroproduction; the structure and competence of controlling and certifying bodies; the provisions for sales of organic production and products, etc. sole availability of legal framework will not allow for the efficient functioning of the institutional environment, it cannot itself solve questions of marking, a collection of statistical import and export data, capacities of regional support of organic producers, local standardization on the basis of national standards, etc. the world experience tells us that each state solves the abovementioned problems with consideration of the mentality of producers and consumers. nomenclature of informational/consultative services in organic production begins with the formation of ecological awareness and youth’s ecological education, and proceeds with the organization of illustrative educational/ experimental farms that keep to organic principles of organic production, conduction of “days of the field” and other measures (skydan, grynyshyn, 2013). formation of the system of organic production’s state support should provide not only for its active development, organic commodity supply, and export of fine national competitive product but also raise preconditions for environmental improvements in rural territories and sustainable development of the economy on the whole. implementation of state policy of assistance to the development of organic production through the legal framework, management and infrastructure improvements, state/private partnership and social responsibility of agrobusiness would allow for the access to international markets and resources and, therefore, positively effect on the social-economic modernization of ukrainian agrarian sector. 4. available and potential resources for the long-term development of organic production the number of farmers producing organic commodities hugely increased in the world, as well as the number of people that consume their production. hence, the number of those associated in the participatory guarantee systems (pgs) increased. terminology and conceptual framework of pgs initiative were for the first time developed on a roundtable for alternative certification of organic production in brazil in 2004. the table was organized by the international federation of organic agriculture movements (ifoam) and the latin america agro-ecology movement (maela). according to ifoam, the pgs represent locally concentrated systems for the provision of quality. the systems unite producers and consumers on the basis of active participation of interested parties, and base on confidence, social links, and knowledge exchange. pgs-initiatives manifest themselves within the limits of national borders and are conditioned by formal and informal reasons. in particular, the pgs worldwide spreading was so quick and easy due to the cheap mechanism (no official certification required) of consumer’s supply with organic production by small farming economies. if we take the example of the development of organic market in ukraine, a 2012–2016 swiss-ukrainian project realized by the research institute of organic agriculture (fibl, switzerland), the pgs there was understood as a “system of quality guarantee focused on local development” (chudovska, 2013). according to estimations, there exist at least 41 pgs initiatives in the world today, which covered all continents, and nearly the same number is in the process of development. asia and latin america still remain leaders in the number of pgs-certified farmers, as well as take the lead in pgs recognition by their national governments. the fao dictionary indicates that pgs represents a system of collective guarantees. systems of collective baltic journal of economic studies 131 vol. 4, no. 4, 2018 guarantees have common aims with systems of certification by third parties (e.g., organic standard, plc, in ukraine) in the aspect of the provision of reliable guarantees for organic commodity consumers. at the same time, there exists an essential difference between pgs and traditional certification of organic production. as it appears from dictionary interpretation, direct participation of farmers and even consumers in the process of administration of guarantees within the pgs initiative is not simply welcomed but necessary. such participation is realistic when this refers to small farms and local markets where pgs initiatives are introduced. active involvement of all interested parties results not only in their increased capacity but in an increase of responsibility, too. this is why pgs initiatives emphasize the growth of knowledge and competence not only among producers but also consumers. the pgs is not yet admitted on the level of organic production international trade but is important for the development of domestic markets inclusive of ukrainian. according to data available with the ifoam, over 109,0 thousand producers and processors in the world are involved in pgs-initiatives, and 46,9 thousand of them are certified. pgs-initiatives are spread in 72 countries where 20 countries apply well-developed or those to be soon-introduced pgs-practices, 33 countries demonstrate only some applications of pgs, and 19 countries apply pgs only partially. pgs initiatives developed independently in different countries and in different cultural contexts in response to problems encountered by producers of organic commodities. however, they do possess a number of common and mandatory attributes, which are the availability of standards and norms; clearly established instalments; documented systems and procedures of management; mechanisms of conformity control; guarantees and marking; a system of penalties. guided by its own developments, the ifoam assesses producers for the compliance with pgs principles and demands imposed on organic production and, if the result is positive, permit to use its official logo. save for commodities, the logo can be used in websites, brochures, and advertising. thus, the pgs systems do not only guarantee the reliability of organic production but powerfully use local and alternative channels of sale. despite different methodologies and strategies, the observance of basic principles refers them to one and the same community. the pgs base on norms developed by interested parties and include democracy and solidarity of the process; opportunity of its use by small farms; principles and values that add to provision of means of living and wealth for farmers’ families and contribute to the spreading of organic agriculture; documented systems and procedures of management; mechanisms of farmers’ observance of established standards; the interested parties’ activation for the purpose of education with respect to said standards; mechanisms of farmers’ support in production of organic commodities and recognition of their belonging to organic sector; signs or markings that confirm organic status; clearly pronounced consequences of standards and norms non-observance. organic technologies take an important place among innovative eco-developments since are capable of providing the present-day agrobusiness with biological means of agricultural product protection; biofertilizers; biotechnologies of vegetable forage production in cattle breeding; means of bio-remediation, bio-degradation and bio-conversion of wastes, etc. unfortunately, since modern market of organic technologies is in its initial stage, there exists a problem of informational and financial support of organic innovation developers and providers who need instruments that would make their products and services more recognizable (inclusive of such intellectual property assets as know-how) for the purposes of sales and licensing. modern inventors engaged in innovative projects in the organic sector, especially those who work in the developing countries, have a unique chance to make use of wipo green, a platform initiated in 2012 by the world intellectual property organization (wipo) in cooperation with the other sectoral partners. the wipo green aimed at the development of the mechanism to help unite owners of new ecooriented (“green”) technologies and private individuals or companies interested in their commercialization and transfer. upon successful testing of experimental database of licensing and sales-ready eco-innovations, an official start was given in november 2013 to a net that now provides for immediate spreading of the technologies of energy saving, energy alternative sources, new ecotransport types, new ecological forms of agriculture and forestry, etc. in all regions of the world. the success shown by the wipo green is explained by their firm observance of the principles of transparency (openness of global store of technologies); synergism in partnership relations (freewill union of state and private sectors for the purpose of simplification of common work, quickening of investments and facilitation of mutually beneficial commercial operations); protection of intellectual property rights (guarantee of economic stimuli for development of new technologies). the wipo green is represented by two components: 1) the database, which is the catalogue of disclosed needs and assets of intellectual property classified according to 9 directions: agriculture and forestry, energy, water, pollution and waste, chemistry and modern materials, transportation, building and construction, green products, other areas; and 2) the net, which is a global platform connecting users and encouraging partnership links. as of 01 april 2016, the wipo green database indisposes information on any ukrainian organic baltic journal of economic studies 132 vol. 4, no. 4, 2018 project though it is evident that the platform has a number of essential advantages, in particular: absence of customs duties for technology suppliers; operations’ accompanying support, inclusive of registration of multi-jurisdictional patent application within the рст and access to wipo arbitration and mediation center; 300 free hours of online-consulting for active registered users participating in operations connected with “green” technologies and whose projects aim to provide support for developing countries or whose goals serve the interests of the world. we believe that registration of ukrainian producers of organic technologies would help involve expert knowledge in the widest spectrum of application, inclusive of intellectual property management, licensing and investments, as well as it would be helpful in building commercial bridges by way of linkage between providers and those who seek for “green” organic technologies. it is in the first place important to organize adequate institutional infrastructure capable of integrating all participants of organic production development into a single mechanism; and arrange for their respective scientific/educational and informational/consultative provision. 5. regional programs of implementation of proposals on the example of the kherson region evolution of organic agriculture, the present-day trends in its development, increasing experience of the introduction of organic farming in a still greater number of farms is the evidence that alternative agricultural practices are a quite realistic and prospective business (tikhonova, mezhinskaya-bruy, 2014). organic production still encounters a number of problems that require their thorough analysis and subsequent efficient solution for the purpose of the provision of favourable conditions to its development. we see such problems to be as follows: the insufficiency of the respective regulatory environment, and inconsistency/incompleteness of the existing legal framework that regulates the activity of those engaged in organic production; the absence of adequate institutional-legal, financialeconomic, and social-psychological conditions necessary for the development of organic production; the insufficiently developed infrastructure necessary to support organic production, and unavailability of tax preferences; low awareness among commodity producers, state bodies and local authorities as to opportunities and perspectives of organic production development; insufficient level of professional knowledge and experience among economic entities with respect to the management of organic production in presentday conditions and the absence of an efficient system of instruction of highly qualified experts in organic production. to solve the aforesaid problems and in pursuance of 2020 state strategy in agricultural industry, the resolution of the cabinet of ministers of ukraine no. 806-р as of 17 october 2013, where it was declared that state food safety will be achieved, food industry become highly efficient, agroproduction and food raise their competitiveness within domestic and international markets with simultaneous rise of rural employment, a program of organic production development in kherson region was elaborated. the program’s major aim lies in the arrangement of organizational/economic preconditions for economically efficient, competitive, socially and ecologically oriented development of the agrofood sector, population’s stable provision with fine and safe food from national producers. practical realization of program’s tasks and measures would add to rise of competitiveness among agricultural companies. besides, external effects are expected, the ones that would appear due to and in the process of activity of organic entity in other subjects of the agricultural sector. among the external effects, we would accentuate on additional income to be gained by the processing industry; decrease in unemployment and social payments; growth of profits from rural green tourism, organic cattle breeding, bee-farming, and pond fishery; agricultural lands’ cost increase; preservation of natural capital (romaniuk, 2015). realization of program measures would promote small and medium business; improve feedback between producers and consumers; help develop rural territories and local communities; contribute to the betterment of image and investment climate in the region, and facilitate its integration into national and world organic market. environmental benefits from the program’s realization are expected to be as follows: biological and landscape diversity, quality of soils and their functions, as well as water ecosystems, shall be preserved; ecological risks shall stay to be minimal; genetic fund of plants shall be preserved; the state of land resources and their reproduction shall become stable; newest ecological technologies shall be applied; ecological policy with respect to food safety shall improve; and pollutions from agricultural production especially those affecting water systems shall decrease. 6. conclusions development and realization of the region-level “organic” programs is a vivid example of the realization of national and regional strategies for the development of farming involved in organic production. in particular, the realization of the program of organic production development in kherson region and accomplishment of its tasks take place in the directions that would improve figures of economic activity of enterprises operating in the agrarian sector. the program’s realization is expected baltic journal of economic studies 133 vol. 4, no. 4, 2018 to significantly solve the problems of unemployment, rural communities’ budget filling, the creation of new jobs, and improvement of the ecological situation. the program’s major directions are as follows: 1) adjustment of organic production development’s legal environment; 2) financial-crediting and investment support; 3) informational support; 4) formation of infrastructure to support the development of organic production; 5) conduction of scientific research and qualifications upgrade among the staff employed in organic production. realization of the measures suggested by the 2016–2020 program is expected to result in the formation of favourable conditions for sustainable development of organic production in the region that would in its turn essentially contribute to the provision of regional food and ecological safety. also, a synergic effect is awaited in the form of additional economic, social, and ecological benefits. positive effects from the development of organic production shall take the form of increased incomes, enterprise competitiveness, decreased operation costs, and contraction of natureprotective payments. at the same time, the external effects are expected, the ones that appear due to and in the process of activity of organic entity in other subjects of agricultural sector, in particular, additional income of processing industry; decrease in figures of unemployment and social aid payments; growth if profits gained from green tourism, organic cattle breeding, bee-farming; strengthening of living standards; increase of agricultural lands’ cost. realization of program measures would promote small and medium business; improve feedback between producers and consumers; help develop rural territories and local communities; contribute to the betterment of image and investment climate in the region; facilitate the integration of the kherson region into the international organic market. references: ihnatenko, m. m. upravlinnya orhanichnym vyrobnytstvom ahrarnykh pidpryyemstv na zasadakh zdiysnennya sotsialnoyi vidpovidalnosti [management of organic production of agrarian enterprises on the basis of social responsibility]. economics and finance, vol. 12, рр. 4-11. marmul, l. o., novak, n. p. (2016). rozvytok orhanichnoho vyrobnytstva v ukrayini [development of organic production in ukraine]. economics of agro-production complex, vol. 9, рр. 26-32. kyrylov, yu. e. (2013). problemy ta perspektyvy rozvytku orhanichnoho vyrobnytstva v ukrayini [problems and perspectives of organic production in ukraine]. proceedings of the orhanichne vyrobnytstvo i prodovolcha bezpeka (ukraine, zhytomyr, april 19, 2013), zhytomyr: "polissya", рр. 53-57. fedorov, m. m., khodakivska, o. v., korchinskaya, s. g. (2011). rozvytok orhanichnoho vyrobnytstva [development of organic production]. kyiv: in-t agrar. economics. (in ukrainian) pro vyrobnytstvo ta obih orhanichnoyi silskohospodarskoyi produktsiyi ta syrovyny: zakon ukrayiny [organic agricultural commodity and raw material production and turnover: act ukraine]. retrieved from: http://zakon4.rada.gov.ua/laws/show/425-18 (accessed 24 june 2018) garmashov, v. v., fomichova, o. v. (2010). do pytannya orhanichnoho silskohospodarskoho vyrobnytstva v ukrayini [on the issue of organic agricultural production in ukraine]. bulletin of agrarian science, vol. 7, рр. 11-16. shpichak, o. m. (2003). obgruntuvannya tsiny na ekolohichno “chystu” produktsiyu [substantiation of the price for ecologically "pure" products]. ekonomichnyy dovidnyk ahrarnyka [economic directory of agrarist] (ed. luzana yu.a., sabluk p.g.). kyiv: press of ukraine, pp. 309-310. lupenko, yu. o. (2013). formuvannya popytu ta propozytsiyi na rynku orhanichnoyi produktsiyi [formation of demand and supply in the market of organic products]. proceedings of the orhanichne vyrobnytstvo i prodovolcha bezpeka (ukraine, zhytomyr, april 19, 2013), zhytomyr: "polissya", рр. 3-9. skidan, o. v., grinishyn, v. e. (2013). prohramuvannya rozvytku orhanichnoho vyrobnytstva v rehioni [programming of organic production development in the region]. proceedings of the orhanichne vyrobnytstvo i prodovolcha bezpeka (ukraine, zhytomyr, april 19, 2013), zhytomyr: "polissya", рр. 30-36. chudovskaya, v. a. (2013). formuvannya tsiny na orhanichnu silskohospodarsku produktsiyu v rynkovykh umovakh [formation of prices for organic agricultural products in market conditions]. economics of agro-production complex, vol. 1, pp. 142-146. tikhonova, n. o., mezhinskaya-bruy, o. yu. (2014). orhanichna produktsiya: perevahy i nedoliky [organic products: advantages and disadvantages]. scientific works of nukht, vol. 5, no. 20, рp. 9-14. romanіuk, i. a. (2015). osnovni chynnyky ta napryamy intensyfikatsiyi ahrarnoho vyrobnytstva v suchasnykh umovakh hospodaryuvannya [main factors and directions of intensification of agrarian production in modern economic conditions]. scientific works of pdaa, vol. 2(11), рp. 225-230. baltic journal of economic studies 104 vol. 4, no. 3, 2018 corresponding author: 1 department of management, national metallurgical academy of ukraine. e-mail: kaut_olga@ukr.net 2 department of management, national metallurgical academy of ukraine. e-mail: 13managua@gmail.com 3 department of international economics, political economy and governance, national metallurgical academy of ukraine. e-mail: kaf.pe@metal.nmetau.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-104-114 organizational and methodological aspects of management of economic consequences of technical risks olha kaut1, dmytro kozenkov2, valentyna lebedieva3 national metallurgical academy of ukraine, ukraine abstract. a methodological approach to the assessment of technical risks of an industrial enterprise based on logistics is determined and substantiated and it is recommended as a monitoring tool for risk events and their economic consequences, as well as the choice of technical risk management activities to minimize losses. scientific novelty of the obtained results consists of the substantiation of theoretical and methodological provisions, practical recommendations about mechanisms for managing economic consequences of technical risks in micrologistics systems. the purpose of research is to generalize and improve scientific and methodological bases of management of technical risks of a micrologistics system of industrial enterprise and to develop tools and practical recommendations for assessing their economic consequences. in order to achieve the stated purpose, the following tasks are formulated and solved: to improve classification of economic consequences of technical risks in micrologistics systems; develop a system of management of technical risks’ economic consequences; improve mechanisms for assessing and forecasting economic consequences of technical risks. the theoretical and methodological basis of research is conceptual provisions and scientific developments of specialists on risk management issues published in monographs, periodicals, materials of scientific and practical conferences on the research topic. the tasks are solved by using general scientific and special methods, mathematical modelling methods based on a system approach. results. the system of management of economic consequences of technical risks is substantiated that is a set of interconnected in time and space elements (subsystems) and their components, integrated into a certain integrity, and has a specific organizational structure, a set of economic methods, standards, models, and indicators of the impact of technical risks on production and service processes, as well as directions of decision-making concerning minimization of economic consequences of technical risks. unlike existing tools that allow assessing technical risks as an indicator of equipment reliability, the proposed system provides economic component in addition to technical one by means of thorough evaluation of technical risks’ economic consequences on a single methodical basis by material flows and on the whole by the micrologistics system, provides increased efficiency, multivariance, and adequacy of calculations of the technical and economic and financial planned indicators of the enterprise. the main components of the system for managing the economic consequences of technical risks are: a mechanism for evaluating the economic consequences of technical risks that occurred in the reporting period; mechanism of forecasting the economic consequences of technical risks; monitoring of the economic consequences of technical risks of micrologistics system, which is a methodological diagnostic tool, created within the operating information system of the enterprise and provides continuous monitoring of technical risk objects, analysis and control over the indicators of their activities and the impact on financial results of micrologistics system under uncertainty. practical implications. mechanism for evaluating the economic consequences of technical risks allows determining actual costs and losses associated with the failure of equipment for all elements of the micrologistics system (from a single object to logistics flows) on a unified methodical basis, to create an information base for forecasting the level of technical risk and its economic consequences in the planned period in the conditions of monitoring, to substantiate adequate methods of management of the economic consequences of technical risks. fuzzy model of the choice of activities is based on fuzzy production rules that reflect the scale of the entr and the level of tp. fuzzy model of the choice is based on production rules that reflect the scale of ectr and the level of tr. at the entrance to this model, the level of risk and the level of economic consequences, and at the exit – the class of activities that need to be adopted before implementation. key words: economic consequences of technical risks, monitoring, equipment, system of management of economic consequences of technical risks, metallurgical enterprises. jel classification: c53, g22, g31, g32 baltic journal of economic studies 105 vol. 4, no. 3, 2018 1. introduction modern conditions of economic activity of industrial enterprises of ukraine are characterized by a high level of risk, the source of which is the external environment, as well as production activity. a special role belongs to the production risk, and in its composition – to the technical risk, the objects of which are available equipment. management of technical risks and their economic consequences becomes an integral part of modern management, first of all, for enterprises of ferrous metallurgy. the target component of the technical risk is the economic consequences, which optimization means to minimize losses and costs in the places where they occur and maximize profits or minimize the damage to the entire micrologistics system. the reduction of losses from technical risks in ferrous metallurgy is hampered by both the state of equipment and the lack of a systematic approach to the management of technical and repair services, as well as the imperfection of methodological and information support for the assessment of technical risks in the manufacturing sector. existing methods and tools for risk management are used fragmentarily, mainly over the lack of the theoretical and methodological framework and practical application adapted to the domestic conditions. in such a situation, the need to improve organizational and methodical tools for managing the economic consequences of technical risks as a component of risk management system is rapidly increasing, which determines the relevance of this study. at the same time, debatable are important issues concerning the separation of technical risks from the totality of production ones, the definition of its essence and significance, the ambiguity of methodological approaches to the assessment. technical risks are usually investigated by technical specialists in the design and operation of equipment, and they are identified as a probability of failure of equipment during the operation of a production enterprise. the inadequacy of the study of links between the causes and the economic consequences of technical risks leads to inaccurate predictions and errors in determining the economic performance of economic entities. recently, in the domestic and foreign practice, the logistics management concept has become popular. the need to use a logistic approach is related to the evolution of the management process in the conditions of uncertainty and peculiarities of production processes of enterprises of ferrous metallurgy. information and methodological support for existing risk management systems, as well as organizational problems of their functioning, do not create conditions for ensuring the effectiveness of management decisions regarding the minimization of losses from technical risks. the presence of the abovementioned problems substantially limits the possibility of practical use of existing methodological tools and necessitates the improvement of the theoretical and methodological basis for evaluating the economic consequences of technical risks in order to increase the effectiveness of making managerial decisions and indicates the relevance of the chosen topic. 2. recent research analysis and problem statement the analysis of scientific publications on the decisionmaking problem in terms of uncertainty showed that the majority of scientific works widely consider theoretical issues of analysis of economic risk in general, as well as specific risks: banking, commercial, currency, credit, financial, strategic, political, etc. special mathematical methods and models designed to assess the likelihood of occurrence of adverse events of a risky nature in the economy are developed. the bibliography of scientific publications devoted to the study of risk management issues is extremely large and has over a thousand titles. these are the works of foreign and domestic scholars: i.t. balabanov, s.v. valdaitsev, v.v. vitlinskyi, v.m. hranaturov, a.i.  yastremskyi, and others. they considered the nature of the risk, determined the factors and causes of its occurrence, the characteristics of methods for assessing the degree of risk. at the same time, debatable are important issues concerning the separation of technical risks from the totality of production ones, the definition of its essence and significance, the ambiguity of methodological approaches to the assessment. technical risks are usually investigated by technical specialists in the design and operation of equipment, and they are identified as a probability of failure of equipment during the operation of a production enterprise. the inadequacy of the study of links between the causes and the economic consequences of technical risks leads to inaccurate predictions and errors in determining the economic performance of economic entities. the presence of the abovementioned problems substantially limits the possibility of practical use of existing methodological tools and necessitates the improvement of the theoretical and methodological basis for evaluating the economic consequences of technical risks in order to increase the effectiveness of making managerial decisions and indicates the relevance of the chosen topic. 3. the purpose and tasks of research the purpose of research is to generalize and improve scientific and methodological bases of management of technical risks of a micrologistics system of industrial enterprise and to develop tools and practical recommendations for assessing their economic consequences. baltic journal of economic studies 106 vol. 4, no. 3, 2018 in order to achieve the stated purpose, the following tasks should be solved: – to formulate a generalized classification of economic consequences of technical risks in micrologistics systems; – to develop a system of management of technical risks’ economic consequences; – to improve mechanisms for assessing and forecasting economic consequences of technical risks. 4. materials and methods of studying the system of management of the economic consequences of technical risks all technical risk objects of the micrologistics system cover a large number of technological equipment, each of which has its own peculiarities and specifics. the efficiency of the technological equipment is characterized by the following indicators: accuracy, productivity, capacity, the coefficient of efficiency, serviceability, and operational reliability. these indicators depend to a great extent on the degree of wear of parts and determine its technical condition. metallurgical equipment has its own characteristics, and in the analysis of reliability, all its components (parts) are divided into groups. the first group includes parts whose failure (violation of technical conditions) does not affect the operation of equipment (deformation of the casing, change in the colour of the surface, etc.). failure of these elements can be considered in isolation from the micrologistics system. the second group includes parts, the reliability of which for a certain time almost does not change (frames and body parts, low-volunteered elements with large reserves of strength). the third group includes parts, which repairs or adjustments are possible during the equipment operation or during its stop, without affecting its efficiency (debugging and replacement of the tool). the fourth group includes parts, which fail leads to equipment failures. technical risks and their economic consequences, occurring at all stages of the lifecycle of equipment and in any unit, cause the possible losses of the entire micrologistics system of the enterprise, and their minimization is a criterion for ensuring the efficiency of production. an adequate assessment of technical risks and their economic consequences can increase the validity of managerial decisions regarding the choice of activities aimed at reducing the frequency of occurrence of risk events and the magnitude of possible losses. at the heart of managing the economic consequences of technical risks is the purposeful organization of work to reduce the possible risk, minimize losses at the onset of a risk event, as well as the search for ways to receive or increase income (profit) in an uncertain economic situation. a generalized classification model of the economic consequences of technical risks is created based on the developed separate classifications of technical risks and their economic consequences (figure 1). the proposed systematization of economic consequences and directly risk events is intended for construction and use of the system of management of economic consequences of technical risks in order to increase the validity of the methodology of estimating losses and their impact on the financial and economic performance of enterprises under uncertainty. the developed structure of the management system for the economic consequences of technical risks is shown in figure 2. the system of management of economic consequences of technical risks is a set of interconnected in time and space elements (subsystems) and their components, integrated into a certain integrity, and has a specific organizational structure, a set of economic methods, standards, models, and indicators of the impact of technical risks on production processes and service, as well as decision-making directions for minimizing economic consequences in order to ensure the effective functioning of the micrologistics system of the enterprise under uncertain conditions. unlike existing tools that allow assessing technical risks as an indicator of equipment reliability, the proposed system provides economic component in addition to technical one by means of thorough evaluation of technical risks’ economic consequences on a single methodical basis by material flows and on the whole by the micro-logistic system, provides increased efficiency, multivariance, and adequacy of calculations of the technical and economic and financial planned indicators of the enterprise. the first component of the proposed system is a mechanism for assessing the economic consequences of risk events that occurred during the reporting period (figure 3). the methodical mechanism for assessing the economic consequences of risk events as an element of the enterprise risk management system is understood as the internal organizational structure of the subsystem of management of objects of technical risks, characterized by a certain set of states of operation (work, refusal), actions, and processes aimed at changing the state of objects in order to minimize losses. the result of the operation of the mechanism is the management decisions to implement activities to minimize the economic consequences of technical risks. 5. the mechanism for assessing the economic consequences of technical risks the mechanism for assessing the economic consequences of technical risks includes the following steps: qualitative analysis of risk events, calculation of direct losses and expenses of a single object for each event, estimation of economic consequences of technical risks, calculation of coefficients of technical risks, calculation baltic journal of economic studies 107 vol. 4, no. 3, 2018 by the influence on assets of the enterprise decrease in profit increase in losses predicted unpredicted by the sphere of spending for preventive measures to resolve the damage by the predictability of costs associated with a decrease in assets and/or an increase in liabilities unrelated to a decrease in assets and/or an increase in liabilities by the frequency of damage usual periodic unique by economic damage by financial result material labour financial economic consequences of technical risks by the type of loss direct indirect technical risks by the field of origin of a business unit of a separate contractor transferred by the way of minimization accepted mitigated by the severity of damage acceptable critical catastrophic by the type of responsibility damage and destruction of property damage to the health and lives of people by the level of planning operational tactical strategic by the place in the micrologistics system basic service by the degree of damage spread localized non-localized figure 1. classification of the economic consequences of technical risks of statistical characteristics of technical risks of the micrologistics system of the reporting period, selection of techniques for managing technical risks. stage i. qualitative analysis of risk events. investigation of a risk event, that is, the occurrence of a technical risk identifies the events (destruction, damage, simple) by the specialists of the enterprise in the places of occurrence of damage and preliminary estimation of the scale of losses, the identification of causes and perpetrators. information on the size of economic consequences is general information and contains information about: direct losses associated with equipment failures; indirect losses, expressed by loss of income and increase in operating expenses in relation to the settlement of risk events; damages related to liability to third parties; damages related to the life and health of the personnel. stage ii. statistical characteristics of technical risks of the micrologistics system of the reporting period. the main characteristics of technical risk by objects (single, complex, material flows, micrologistics system) are the frequency of risk events and the severity of damage. frequency (probability) is determined by the ratio of the total number of risk events that arose in the total number of technical risk objects. the relative severity of damage (the severity of loss) u is defined as the ratio of the total actual damage to the risk object sp to the maximum possible smax. the maximum damage can be estimated as the residual and market value of the risk objects of the micrologistics system. these indicators are used in conjunction with the technical risk factors for the ranking of objects when substantiating technical risk management techniques and selecting preventive activities when planning in the conditions of the monitoring system. stage iii. calculation of actual damage to a single object for each event. for a single entity, direct losses are economic outcomes (åíô) that are determined by the baltic journal of economic studies 108 vol. 4, no. 3, 2018 acceptance mitigation transference qualitative analysis of risk events statistical characteristics of technical risks of objects of the analysed period calculation of actual damage to a single object for each event economic consequences of technical risks coefficients of technical risks the choice of management techniques substantiation of management measures for economic consequences estimation of the predicted coefficients of technical risks forecast of economic consequences of technical risks of micrologistics system preventive measures m on ito rin g of e co no m ic co ns eq ue nc es o f t ec hn ica l r isk s o f t he m icr olo gis tic ss ys te m t e c h n i c a l a n d e c o n o m i c i n d i c a t o r s o f t h e e n t e r p r i s e m ec ha nis m fo rf or ec as tin g th e ec on om ic co ns eq ue nc es o f te ch nic al ris ks to p m an ag er s sp ec ial ist s a nd ex pe rts pe rfo rm er s ri sk m an ag er s e x t e r n a l i n f o r m a t i o n m ec ha nis m fo r a ss es sin g th e ec on om ic co ns eq ue nc es o f r isk e ve nt s t ha t o cc ur re d du rin g th e re po rti ng p er iod figure 2. structure of management system for economic consequences of technical risks direct calculation of the amount of losses from technical risk and additional compensatory costs (formula 1). åí v v v v vô ô òð ïð êîìï soc= + + + + , (1) where vô – total actual loss due to direct losses, uah; v òð – actual losses as a result of increased cost (increase of conditionally constant costs per unit of output) with a decrease in production in case of equipment failures, uah; v ïð. – costs for preventive measures in the reporting period, uah; v êîìï – costs for compensatory measures in the reporting period, uah; vsoc – socioeconomic losses (payment for personnel for equipment downtime, payment for injured personnel, and so on); total actual losses as a result of direct losses over technical risks that have been occurred are estimated as the amount of direct damage in places of origin, as well as non-localized losses outside the technical risk object (other elements of the logistics chain, external environment). , n n= 1 2, ,... , (2) where vi – actual losses for the i-th case, uah; n – the number of cases; the increase in the cost of production by increasing the conditional-constant costs of a unit of production with the reduction of production (v òð) determine the amount of lost profits that could be obtained by the enterprise in the absence of downtime in the event of equipment failure (formula 3): v ð t ö ñòð і i n = − = ∑ * ( ) 1 , (3) where tі – downtime due to technical risks in the reporting period, hours; р – average weighted productivity of the object, t/h; ö – the average price of products to be produced, uah/t; ñ – the average cost of production to be produced, uah/t; n – the number of cases; baltic journal of economic studies 109 vol. 4, no. 3, 2018 costs for preventive measures consist of those provided for and those not provided for by the applicable technical and organizational regulations of the enterprise, i.e. normalized and unnormalized (formula 4): v v vïð íîðì íåíîðì= + , (4) where víîðì – costs for preventive measures provided for by applicable technical and organizational regulations; víåíîðì – costs for preventive measures not provided for by applicable technical and organizational regulations; the cost of the compensation measures consists of the costs associated with the equipment damage (vïîø) and the costs associated with the destruction of the equipment (vðóéí): v v vêîì ïîø ðóéí= + , (5) the costs associated with the repair of the damaged object (vïîø) consist of material, labour, and financial costs (formula 6). v v v vïîø ìàò òðóä ôіí= + + , (6) where vìàò – costs associated with the purchase of spare parts and components, auxiliary materials, fuel, energy; vòðóä – wages of own workers, engaged in repair; vôіí – payment for services for the repair of third-party organizations; expenses related to the restoration of a destroyed object (vðóéí) are calculated by formula 7. v v vðóéí äåìîí іíâ= + , (7) where väåìîí – expenses for dismantling of the destroyed object, uah; vіíâ – current expenses and (or) investments for the restoration of the destroyed object. vi. the choice of methods for managing the economic consequences of technical risks ii. statistical characteristics of technical risks i. qualitative analysis of risk events iii. calculation of actual damage to a single object for each event v. coefficients of technical risks type of failure and causes of occurrence type of damage and its scale for enlarged objects logistic flows micrologistics system – the number of risky cases that have occurred – the number of objects of risk – total damage to the object sp for all risky cases – the maximum possible damage smax simple damage destruction the environment and property of third parties objects of technical risks production and service staff . .. ф jpmr .фmlsr ф lr socкомппртрф ф vvvvvен ++++= iv. economic consequences of technical risk for enlarged objects logistic flows micrologistics system ∑= l ф l ф jpm енен 1 . .. непр m ф l ф mls vенен += ∑ 1 ..∑= к фф l енен 1 acceptance transferencemitigation ranking of facilities according to the level of technical risk and the formation of a list of the main objects requiring the implementation of preventive measures figure 3. the mechanism for assessing the economic consequences of risk events baltic journal of economic studies 110 vol. 4, no. 3, 2018 if the recovery of an object cannot be carried out at the expense of current expenses, then the investment is necessary. investments for the restoration of a destroyed object may be made at own expense (using a part of the profit or special funds for output expansion); at the expense of borrowed funds (attraction of third-party investors); at the expense of loan proceeds (obtaining a loan from a bank or another financial institution or issuing bonds for a particular investment or innovation project). socio-economic losses (payment for personnel for equipment downtime, payment for injured personnel, and so on) are determined by formula 8: v v vsoc єêîí ñîö= +. , (8) where vєêîí. – salary of employees for an idle time due to technical risks; vñîö – payments for injury as a result of technical risk to people (payment of assistance for temporary disability to victims, social assistance and compulsory payments and fines provided by law). actual economic consequences of single objects are used to assess the economic consequences of technical risks of aggregated objects, logistics flows, and the micrologistics system as a whole. stage iv. economic consequences of technical risks. at this stage, the economic consequences of technical risks are calculated for the aggregated objects, material flows, and the micrologistics system. the economic consequences of technical risks for aggregated objects (link, shop, division) of the reporting period are calculated by formula 9: åí åíl ô ô ê = ∑ 1 , k k= 1 2, ,... , (9) where k – the number of single objects in the m-th aggregated object of technical risk. the economic consequences of technical risks for material flows are calculated by formula 10: åí åím p j ô l ô l . . . = ∑ 1 , l l= 1 2, ,... , (10) where l – the number of aggregated objects of technical risk by the j-th material flow. the economic consequences of technical risks for the micrologistics system are calculated by formula 11: åí åí vmls ô m p j ô m íåïð . . . .= +∑ 1 , m m= 1 2, ,... , (11) where m – the number of material flows in the micrologistics system; víåïð – costs for compensation for indirect damage that has arisen outside the object of technical risks (environment, third party property). indirect costs associated with damages outside the micrologistics system are carried out in accordance with applicable laws or court decisions. v v v v víåïð ñåðåä îñ ìàéí ìîð= + + + , (12) where vñåðåä – costs of compensation for damage caused by the technical risk to the environment; vîñ – costs of compensation for damage caused by the technical risk to the life and health of third parties; vìàéí – costs of compensation for damage caused by the technical risk to the property of third parties; vìîð – costs of compensation for moral damage as a result of technical risk in the event of a court decision. the methodology of estimating the economic consequences of technical risks of the micrologistics system developed by the author allows ensuring monitoring of the state of technical risk objects and determining the coefficients of technical risks for material flows and the micrologistics system as a whole. stage v. coefficients of technical risks. the calculation of the coefficients of technical risks is performed by the aggregated objects rl ô (formula 13), by material flows rm p j ô . . (formula 14), and the micro-logistic system as a whole rmls ô (formula 15). the calculation of the coefficients of technical risks by the aggregated objects is defined as the ratio of the actual åíl ô for an aggregate object to the maximum possible direct loss. r åí s l ô l ô = max , (13) where smax – the maximum possible direct damage to an aggregated object. the maximum damage may be limited to both the residual and market value of the object. the coefficient of technical risks of aggregated objects is used to rank objects according to the severity of the damage and to create a list of the main objects requiring implementation of measures to minimize the technical risk. r åí åí ï m p j ô m p j ô m p j ô m p j ô. . . . . . . . . . = + , (14) where ïm p j ô . . – actual profit by j -th material flow; r åí åí ï mls ô mls ô mls ô mls ô = + . . , (15) where ïmls ô – an actual profit of the micrologistics system. the coefficients of technical risks are used for the systematic evaluation of the technical condition of the equipment for all elements of the logistic chain, material flows (formula 14), and the micrologistics system as a whole (formula 15), which ensures the integration of its individual parts at the technical, technological, economic, methodological levels from the position of the only logistical approach. the coefficients of the technical risks of the micrologistics system are an indicator of the assessment of equipment reliability dynamics. detection of trends in the dynamics of technical risks by using these coefficients will increase the efficiency and adequacy of the selection of activities and the accuracy of the forecast of the impact of these activities on the financial performance of the enterprise in terms of uncertainty. stage vi. the choice of methods for managing the economic consequences of technical risks. the main baltic journal of economic studies 111 vol. 4, no. 3, 2018 techniques for managing technical risks and their economic consequences, according to the proposed classification (see figure 1), are the acceptance, mitigation, transference. the basis for choosing one or another method of management is the scale of economic consequences: catastrophic, critical, admissible (see figure 2). within the developed system, acceptable technical risks are regulated by accepting or mitigating, critical technical risks are regulated by transference or mitigation. the regulation of catastrophic risks, which by their nature are technogenic, is carried out at metallurgical enterprises through the transference to insurance companies licensed to carry out compulsory insurance in accordance with the current legislation. the regulatory reference information for identifying technical risks and the choice of methods for managing economic consequences and activities for their minimization is given in table 1. the thresholds of coefficients by type of risk are set specifically for each enterprise. the most commonly used method of management of the economic consequences of technical risks in the process of ongoing production activities, prevention and settlement of losses is mitigation. this technique allows choosing and justifying activities to eliminate risk factors, reduce the likelihood of occurrence and losses in case of equipment failure. the main groups of mitigation activities within the developed management system are: organizational and technical; financial and contractual; innovative. measures selected on the basis of risk assessment can be directed immediately to reduce the risk, eliminate risk factors or reduce economic consequences. the choice of activities is a classification task performed for each identified technical risk and contains the following steps: stage 1. construction of a model for assessing and selecting a class of activities. to construct the model, the following components are determined: – establish a compliance with the level of risk and classes of activities kij çàõ aimed at: reducing the risk ri (class of activities ki çàõ 1 ); elimination of risk factors (class of activities ki çàõ 2 ); reduction of economic consequences (class of activities ki çàõ 3 ); – determine classes of activities kij çàõ and levels of influence respectively on reducing the risk ri, eliminating risk factors. – set conditions and mechanisms for selecting alternative classes of activities kij çàõ depending on the assessed level of risk and the scope of possible economic consequences. stage 2. establishing the correspondence of risk levels and classes of activities to reduce them. each level of risk r based on the expert procedure is brought into conformity with a class of activities that determines the degree of impact of activities of the separated group to reduce this risk in the system (table 2). stage 3. establishing conditions and mechanisms of the choice of activities kij çàõ depending on the level of technical risks and the scale of economic consequences. table 2 the correspondence of risk levels and classes of activities to reduce them technical risk class of activities r1 r2 ….. rn usual hr k çàõ 11 k çàõ 21 ….. kn çàõ 1 periodical cr k çàõ 12 k çàõ 22 ….. kn çàõ 2 unique br k çàõ 13 k çàõ 23 ….. kn çàõ 3 the condition for selecting an alternative class of activities is to assign the value of the output variable ri to one of the three classes hr, cr, br, taking into account the excess of some established threshold (for example, 0.5). table 1 regulatory information for the identification of technical risks and the choice of methods for managing economic consequences and activities to minimize them type of technical risk range of quantitative risk assessment management method contents of events catastrophic (r > rпор.кат) transference compulsory insurance of objects of particularly dangerous technical risk acceptance a conscious decision to take a risk without preventive measures and the need to compensate for loss at its own expense critical (rпор.крит < r ≤. rпор.кат) transference transferring responsibility for risks to other entities (insurance companies, outsourcers, etc.) without eliminating risk factors mitigation elimination of risk factors, reduction of the probability of occurrence and (or) possible losses in case of equipment failures by introducing preventive measures and choosing the best solutions for compensation of damage (at the expense of capital expenditures) acceptable (r ≤ rпор.крит) mitigation elimination of risk factors, reduction of the probability of occurrence and (or) possible losses in case of equipment failures by introducing preventive measures and choosing the best solutions for compensation of damage (at the expense of current expenses) acceptance a conscious decision to take a risk without preventive measures and the need to compensate for loss at its own expense (current expenses) baltic journal of economic studies 112 vol. 4, no. 3, 2018 the correctness of this choice is ensured by observing the necessary requirements when constructing a model for assessing technical risks. in addition to the level of risk, the choice of a class of activities is affected by the scale of economic consequences. the fuzzy model of the choice of activities proposed is based on fuzzy production rules that reflect the extent of the economic consequences of technical risks and the level of technical risk. for all ri, the following stages of economic consequences are given: åí í ñ âacceptable critical catastrophicі åí åí åí= { }( ), ( ), ( ) . then the compliance of the risk levels taking into account the economic consequences and classes of activities can be established on the basis of rules of the following type: ï r h åí íif is and isi r і åí1 : ( )( ) , then class of activities is not selected; ï r h åí ñ âif is and is ori r і åí åí2 : ( ) ( ) , then class of activities ki çàõ 1 is selected; ï r c åí hif is and isi r і åí3 : ( )( ) , then class of activities is not selected; ï r c åí ñ âif is and is ori r і åí åí4 : ( )( ) , then class of activities ki çàõ 2 is selected; ï r â åí âif is and isi r і åí5 : ( )( ) , then class of activities is not selected; ï r â åí ñ íif is and is ori r і åí åí6 : ( )( ) , then class of activities ki çàõ 3 is selected. stage 4. constructing a fuzzy model of choosing a class of activities in the form of a fuzzy classifier. the main advantage of fuzzy classification is the possibility of formulating reliable classifications based on incomplete and not entirely reliable incoming parcels. the structure of the fuzzy model for choosing a class of activities in the form of a neuro-fuzzy classifier is shown in figure 4. fuzzy classifier consists of the following layers: layer 1. at the exit of elements of this layer, the degrees of belonging of the input variables (the level of technical risk and the degree of economic consequences) to the corresponding fuzzy sets are formed, that is: “low”, “medium”, “high”. layer 2. elements of this layer are intended to formulate components of the statements and preconditions of the rules. layer 3. elements of the layer, the number of which corresponds to the number of rules (п) after optimizing the basis of fuzzy rules. layer 4. elements of this layer perform a weighted accumulation of values with the release of elements of layer 3 and carry out operations on the feasibility of choosing each activity based on its economic efficiency. layer 5. the values at the outputs of this layer are used to select one of the classes of activities ki çàõ 1 , ki çàõ 2 , ki çàõ 3 with the degree of the expediency of choosing the appropriate class of activities. as a decision, choose a class with the most appropriate class of belonging. thus, implementing a fuzzy model for assessing the choice of a class of activities based on a neuro-fuzzy classifier allows not only determining a class of activities, нr ri сr вr нен енi сен вен ен ен п1 п2 п3 п4 п5 п6 ен ен ен ен ен no measures are taken class зах1ik class зах2ik class зах3ik layer 1 layer 2 layer 3 layer 4 layer 5 figure 4. the structure of the fuzzy model of the choice of class of activities baltic journal of economic studies 113 vol. 4, no. 3, 2018 corresponding to the level of technical risk and the degree of its economic consequences, but also assessing the degree of feasibility of such a choice. the second component of the proposed system is the mechanism for forecasting economic consequences (figure 2), which includes such a sequence of actions. – substantiation of measures of management of economic consequences of technical risks; – estimation of the forecast level of coefficients of technical risks; – forecast of economic consequences of technical risks of the micrologistics system. the reliability of the micrologistics systems is determined by the level of technical risk of all elements and is formed on the basis of careful selection of preventive measures financed at the expense of the enterprise or other sources. the criterion of the expediency of expenses to decrease technical risk is a correlation of additional expenses to increase reliability and reduce expected losses. features of the dynamics of characteristics of the reliability of technological elements of the micrologistics system in terms of ensuring reliability and fail-safeness lead to the following conclusions: – the characteristics of the reliability of single and duplicating equipment should be continuously monitored and analysed in order to timely detect critical moments of continued operation; – minimization of losses in the case of preventive technical influences requires preparation for the necessary preventive and repair work in order to have at the time of their carrying everything necessary for the performance of work in the normative term; – in cases where the equipment requires long-term repairs or is not subject to it, it is necessary to prepare backup equipment, to create reserves in order to prevent long-term stopping of the main production. the methodical tool for diagnosing the economic consequences of technical risks, the actual assessment of damage at a risk event, is the monitoring subsystem (figure 2), which is created within the operating information system of the enterprise and provides continuous monitoring of the technical risk objects, analysis and control of their performance indicators, and influence on financial results of the micrologistics system in conditions of uncertainty. the mechanism of monitoring the economic consequences of technical risks of the micrologistics system includes the following sequence of actions: technical and economic indicators of the enterprise are analysed, external information is taken and directed to the mechanism of economic consequences estimation and mechanism of forecasting of economic consequences. it is this mechanism that summarizes and processes information of management system of the economic consequences of technical risks. the subject of management of the economic consequences of technical risks is a group of people, a unit or a specialist who implement risk management measures based on practical recommendations for the implementation of a mechanism at a particular enterprise, the purpose of which is to provide a reasonable management solution for optimizing the economic consequences of technical risks. the organizational form of management of the economic consequences of technical risks at a particular enterprise is determined by the scale of production, strategic target settings, financial and information capabilities, as well as the state of the risk management system existing at the enterprise. the main organizational forms of management of the economic consequences of technical risks of enterprises, the choice of which in specific conditions is related to the scope of activities and strategy of risk management, are: the target department of risk management; special department of management of economic consequences of technical risks; a separate bureau (sector) in one of the divisions of the technical profile; a target team that brings together skilled professionals of various professions to manage economic consequences of technical risks and develop measures to minimize losses, and which independently plans and organizes its activities. for large and medium-sized enterprises, it is expedient to create in the structure of the management apparatus a specialized unit – a department or a bureau of risk management. when organizing a risk management unit, one should adhere to certain principles. firstly, the functions of control and decision-making on risks should be differentiated. secondly, the risk manager needs direct access to senior executives in order to ensure a timely response to the risk situation. thirdly, risk managers should always be aware of technical risks, that is, have direct access to the monitoring system. at small enterprises, management of all economic risks (including technical ones) is taken on by one of the key managers (head or his deputy), so only he can use a more effective form of risk management, for example, services of a profile consulting organization. regardless of the chosen organizational form of management, the economic consequences of technical risks, the sequence of actions, the availability of monitoring information by the persons who make management decisions for minimizing the consequences integrates the management system with the economic consequences of technical risks into the enterprise management structure. 6. conclusions the proposed management system for economic consequences of technical risk, in contrast to the existing ones, is directed to adequately assess the economic consequences (i.e., losses and costs) caused by risk events (equipment failures) and includes three mechanisms: estimating the economic consequences baltic journal of economic studies 114 vol. 4, no. 3, 2018 of the events occurred and the choice of methods to reduce them; forecasting the size of the expected economic consequences, taking into account preventive measures and assessing their impact on the financial result; monitoring subsystem, which allows to control actual and possible losses and additional costs for all elements of logistic flows and to make informed managerial decisions regarding the choice of measures to minimize the economic consequences of technical risks. the proposed mechanism of prediction of economic consequences of technical risks provides an adequate estimation of forecast indicators taking into account preventive measures and allows increasing the accuracy of calculation of planned financial and technoeconomic indicators of activity of enterprises and their subdivisions under conditions of uncertainty, taking into account the influence on their fluctuations of losses and additional expenses which can arise at risk events. the proposed methodology for estimating and predicting technical risks of objects is characterized by a multilevel system of hierarchically interdependent indicators: integral index of technical risk, complex index of technical risk of an aggregated object, through index of technical risk of the micrologistics system or its fragments. end-to-end assessment of technical risks of the micrologistics system (subsystem), in contrast to existing ones, is carried out by means of the vertical convolution of single or complex risk indicators for the objects of the main material flows (by production areas, by enterprises, by productions or by stages of the equipment lifecycle). the expediency of using a fuzzy model for assessing the choice of a class of activities based on the neurofuzzy classifier is substantiated. the use of a neuro-fuzzy classifier in the implementation of a fuzzy model of assessment and selection of classes of activities allows, besides fulfilling the requirements formed to it, to adjust and adapt this model to changing conditions as a part of an integrated model of risk management in the process of monitoring, modelling of the dynamics of their management and analysis of possible scenarios for managing situation development. references: balabanov i.t. (1996). risk-menedzhment. moskva, finansy i statistika, 192 p. valdaytsev s.v. (1992). riski v ekonomike i metody ikh strakhovaniya. spb.: spbdntp, 354 p. vіtlіnskiy v.v. (1996). analіz, otsіnka і modelyuvannya ekonomіchnogo riziku. kyiv, demіur , 212 p. granaturov v.m. (1999). ekonomicheskiy risk: sushchnost, metody izmereniya, puti snizheniya. moskva, delo i servis, 112 p. kornіychuk m., sovtus і. (2000). rizik і nadіynіst. ekonomіko-stokhastichnі metodi y algoritmi pobudovi ta optimіzatsіi system. kyiv, kneu, 212 p. kofman a. (1992). vvedenie teorii nechetkikh mnozhestv v upravlenii predpriyatiyami. minsk, vyshsshaya shkola, 224 p. malyuk o.s. (2016) obosnovanie ekonomicheskoy effektivnosti vnedreniya sovremennykh metodov planirovaniya remontov v usloviyakh energeticheskikh predpriyatiy. іnovatsіyna ekonomika, vol 1-2, pp. 193-197. meshalkin v.p. (2006). dinamicheskaya klassifikatsiya slozhnykh tekhnologicheskikh sistem. moskva, fizmatemat, 344 p. mostenska t.l. (2010). rizik-menedzhment yak іnstrument upravlіnnya gospodarskim rizikom pіdpriemstva. vіsnik zaporіzkogo natsіonalnogo unіversitetu, vol. 30, p. 77. yastremskiy o. (1997). osnovi teorіi ekonomіchnogo riziku. kyiv, artek, 248 p. baltic journal of economic studies 96 vol. 5, no. 1, 2019 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. 2 dnipropetrovsk state university of internal affairs, ukraine. 3 dnipropetrovsk state university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-96-100 legal characteristic of the franchise agreement in germany tsahik kolinko1, krystyna rezvorovych2, maryna yunina3 abstract. the purpose of the article is to study the legal nature of the franchise agreement in germany. the research subject is the franchise agreement in germany. the methodology of research. the study is based on the use of general scientific and special scientific methods and techniques of scientific cognition. the dialectical method allowed studying the definition of franchising agreement in germany and its essentials. the comparative legal method was applied in order to compare doctrinal approaches to this issue. interpretation of the content of laws and regulations of german legislation covering issues related to the conclusion of the franchising agreement in this country was carried out by means of the normative-dogmatic method. the system-structural method was used to study franchising agreement in germany as a unitary whole (system) with coordinated functioning of all its elements. methods of grouping and classification formed the basis for singling out a list of requirements needed to conclude franchising agreement in germany, as well as provision to be included in this agreement. methods of analysis and synthesis helped to investigate separate parts of such an agreement in order to formulate further conclusions. practical implications. the positive experience of germany in the regulation of issues related to the conclusion of the franchising agreement can be used for introducing corresponding changes in the legislation of ukraine. value/ originality. this scientific paper is the first study in ukraine devoted not to general issues of regulation of franchising activity in europe but specifically to franchising agreement in a separate country (in germany). key words: franchising, franchising agreement, franchiser, franchise, disclosure, essentials. jel classification: k12, f55 1. introduction franchising is one of the types of business activity, which allows earning extraordinary profits and achieving fast growth without significant investment or a broad managerial infrastructure. in such diverse spheres as food, trade, education, healthcare, financial services, etc., franchising is the most popular “catalyst” for international business and makes a significant contribution to world trade. governments from different countries are turning to franchise as an effective strategy for welfare since social franchising is a reliable way to solve major social problems. given the positive role that franchising can play in the global economy, it is important to understand how the regulation of this institution in different countries of the world takes place. as the franchise market in germany is well-formed and one of the most regulated, in this article we will turn to the experience of this particular state and analyse the features inherent in the franchising agreement, as well as the legislative acts that regulate this issue. the research of franchising as a type of international business was conducted by n. v. bezrukova, l. v. voroniak, t. m. hryhorenko, n. m. hrushchynska, o. m. kolodiziev, o. ye. kuzmin, a. m. mahomedova, v. ye. sakharov, v. s. tatarinov, t. m. tsyhankova, a. v. tsyrat, i. m. shkola and others. however, it is the first study in ukraine that is devoted to franchising in germany and, in particular, the legal characteristics of a franchising agreement in this country. in connection with the course of ukraine on european integration, it seems expedient to study the positive experience of the leading european countries for its further implementation in the legislation of our state. therefore, the purpose of this article is to study the legal nature of franchise agreement in germany – a state that has a fully formed franchise market, which has been achieved over a relatively short period of time. 2. presentation of the main material in germany, franchising originated in the late 60s of the last century, when the local trade networks nordsee (fish sandwiches to go), ihr platz (pharmacy), and obi (do-it-yourself stores) began to use franchising to reach rapid growth. due to this, from 1975 to 1985, the number of franchise companies increased from 40 to baltic journal of economic studies 97 vol. 5, no. 1, 2019 200. however, franchising reached the real prosperity in the early 90s after the reunification of the frg and gdr , when the people of east germany in search of work began to massively employ a franchise business (marzheuser-wood, 2014). during the last decade, franchising in germany has been developing at a rapid pace. thus, from 2007 to 2017, the total number of franchise companies increased from 630 to more than 1000. during the same period, the total number of employees in this area increased from 250 thousand to 700 thousand. the growth rates of the annual turnover of franchise companies in germany are promising. if in 2007 the annual turnover in the field of franchising was about 40 billion euros, then in 2017, it was estimated at about 99.2 billion euros, that is, it increased by more than 100% over 10 years. the three largest sectors of franchise activity are service provision (39%), retail trade (31%), hotels and gastronomy (20%) (statistiken zum thema franchise). on the territory of this country, there are a large number of both domestic and foreign franchise networks. national franchise networks such as apollooptik, arko kaffee und confiserie, and babyone are located next to such giants as mcdonald’s, hertz, intercontinental hotels, domino’s pizza, burger king, and mailboxes. each year impulse conducts research and selects the top ten german franchise networks, which later rewards valuable prizes. the german franchise association is an important authority in this segment. the german franchise association is a member of the european franchise federation and the world franchise council. this organization regularly conducts relevant research, publishes statistics and recommendations. despite the fact that the german franchise association (hereinafter referred to as the association) is a nongovernmental body and its membership is not binding, the principles contained in the association’s code of ethics, adopted in accordance with the european code of ethics for franchising, have a certain effect on the legal relationship in this field. this is due to the fact that the association is a union of franchise companies, for which it establishes mandatory rules of conduct and verifies whether strict membership requirements have been observed when joining the association. considering that membership in the association is considered a sign of the quality and authority of the franchisor, they all adhere to the guidelines to become (and remain) members of the association. there is no legal definition of franchising in germany. when considering the relevant category of cases, german courts use the definition given in clause 1 of the european code of ethics for franchising (european code of ethics for franchising) (hereinafter referred to as the code of ethics) adopted by the european franchise federation, to which the country under consideration belongs. according to this definition, franchising is a system for the sale of goods and/or services and/or technologies based on close and constant cooperation between legally and financially independent enterprises, a franchisor and a franchisee, within which the franchisor provides franchisee with the right and entrusts with responsibility to carry out business activity in accordance with the concept of franchisor. the franchisee, in exchange for direct or indirect financial remuneration, has the right to use the franchisor’s trade name and/or trademark, know-how, business and technical methods of activities, procedural system, and other intellectual property rights, using ongoing commercial and technical assistance within the framework and for a period of validity of a written franchising agreement concluded between the parties for this purpose. as can be seen from this definition, the parties to the franchise agreement are franchisor and franchisee. the law does not impose any restrictions on the business form of the franchisor, however, its most common form in germany is a limited liability company (gmbh) because it requires a minimum investment amount (at least 25,000 euros) and guarantees limited liability to creditors (within the framework of investments). other common forms of franchise companies are joint-stock company (ag) (minimum share capital – 50,000 thousand euros) and a newly introduced entrepreneurial company with limited liability (unternehmergesellschaft (haftungsbeschränkt)), which to a certain extent, is similar to a limited liability company (gmbh) and is popular due to the lack of a requirement for a minimum amount of capital (metzlaff, billing, 2011). in germany, there is no special law on franchising, but this issue is fully regulated. thus, the rules governing the implementation of franchising activities are contained, in particular, in: the general principle of culpa in contrahendo (the principle of pre-contractual liability in civil law), due to which a pre-contractual obligation to information disclosure was created; laws that provide for liability for misleading the person; agency law, including the provisions on reimbursement; commercial code of germany (hereinafter referred to as the german cc), in particular, in the principle of integrity, which is enshrined in this legal act; in the rule that agreements that violate the requirements of morality are invalid, as well as in the provision that in the presence of serious circumstances, the effect of long-term agreements may be terminated. in accordance with german law, the parties must act honestly and fairly when entering into business relations. this requirement also includes obligations to voluntarily disclose information based on the principle of culpa in contrahendo, provided for in part 2 of art. 311 of the german cc (bürgerliches gesetzbuch). when negotiating a franchising agreement, both parties must provide true information, not mislead one another and not make false promises, but they do not have the right to disclose material information. this is especially true for data that can significantly affect the success of the baltic journal of economic studies 98 vol. 5, no. 1, 2019 transaction (performance of other franchisees, financial risks, etc.) and encourage the potential franchisee to become a part of the network. the franchisee’s consent to the franchise must be based on reliable and verified data, so if the franchisor or his representatives provide false information, they will be liable in accordance with part 3 of art. 311 of the german cc. that is why a franchisor who wants to place his business in germany should be very careful because any noncompliance with the principle of culpa in contrahendo will mean that the agreement can be declared invalid. in the event of a breach of the above requirement, the franchisor must also return the franchisee to the state, in which the latter would be if the franchisor fulfilled his obligation to disclose information. this means that the unscrupulous franchisor must repay the funds received for the sale of the franchise, as well as to indemnify the franchisee all losses incurred in connection with the transaction. the law establishes a limitation period of three years for claims for recognition of a franchising agreement invalid. its course begins with the moment when the franchisee has learned about the circumstances that may be the basis for filing a statement of claim in court. although it is not legally defined, which information should be disclosed when negotiating a contract, you can learn about it by referring to german case law and the code of ethics. consequently, when entering into an agreement, data should be provided on: 1) the concept of franchising; 2) the initial and permanent provisioning provided by the franchisor; 3) the date of the establishment of the franchise network; 4) availability of “pilot” (trial) version of franchising activity; 5) the availability of the necessary capital and labour force for conducting franchising activities; 6) accurate information on the profitability of franchising activities; 7) the actual number of franchisees; 8) the number of pending court cases that may affect the activities of potential franchisees (part 3 of the code of ethics). information must be provided within a reasonable time before the conclusion of the franchising agreement. at the same time, the provision on the need for disclosure of data should not affect the conclusion of a preliminary agreement, if the parties have agreed on its conclusion. since the duration of such an agreement is rather short, it does not entail significant economic consequences and does not bind directly to conclude a franchising agreement. at the legislative level, it is not prescribed in which form the necessary data is provided. however, the german franchise association recommends providing them in writing. the written form is also provided for by the german case law and the code of ethics (clause 3.4). german lawyers who specialize in this field have even developed special templates with the necessary list of issues to ensure full disclosure. in addition, in clause 2.2 of the code of ethics, additional requirements are imposed on the franchisor, which he must perform before concluding a franchise agreement. they are as follows: 1) the franchisor must successfully engage in business over a period of time and run at least one pilot project before establishing his own franchise network; 2) the franchisor must be the owner or legal user of the company name, its trademark or any other special designation of the network; 3) the franchisor must undertake initial training for the franchisee, as well as provide him with ongoing commercial or technical support throughout the contract. in turn, the franchisee is obliged: 1) to make maximum efforts to develop the franchise network, to maintain its authenticity and reputation; 2) provide the franchisor with accurate data for verifying the effectiveness of doing business and compiling the financial statements necessary for the effective management of the franchise network; 3) provide the franchisor and/or his representatives with permanent access to the premises of the franchisor and provide necessary data at the franchisor’s request within reasonable timelimits; 4) not disclose to third parties the information on the know-how provided by the franchisor, either during the period of validity of the agreement or after its termination (clause 2.3 of the code of ethics). civil law does not provide for essential terms and conditions of a franchising agreement, which allows the parties to agree on their own discretion. restrictions on the application of certain provisions of the franchising agreement are an exception and mainly derive from antimonopoly legislation and laws relating to the terms of standardized agreements. nevertheless, clause 5.4 of the code of ethics contains a list of conditions that it is desirable to include in franchising agreement. they are as follows: 1) the rights and obligations of the franchisor and franchisee; 2) the goods and services provided by the franchisor, as well as the transfer of know-how; 3) franchise fee; 4) the procedure for the use of intellectual property rights; 5) duration of agreement: it should be enough for the franchisee to be able to return the initial investment (usually a franchising agreement is concluded for 10 years); 6) the conditions under which the contract may be terminated or renewed; 7) the conditions under which a franchisee can sell franchise business; 8) the franchisor’s right to develop this franchise network; 9) the provision for the immediate return of the franchisor’s property in the event of termination of the agreement and, if necessary, payment of compensation to the franchisee; 10) control right: the franchisee should receive recommendations on the limits of compliance with the concept of franchising activities; 11) sanctions for breach of a contract. art. 242 of the german cc states that the parties to the agreement act in accordance with the principle of integrity. this is the basic principle of german law and the general provision, which allows the court to adapt its decision to the circumstances of a particular case. baltic journal of economic studies 99 vol. 5, no. 1, 2019 the realization of this principle consists in assessing the terms of the agreement in terms of their reasonableness in accordance with the requirements of art. 307 of the german cc. the principle of integrity requires that the terms of the agreement are honest. the decision as to whether a particular behaviour violates this fundamental principle depends on the circumstances of each individual case. art. 305 of the german cc, entitled “general conditions for the conclusion of agreements”, applies to a franchise agreement insofar as one party joins the terms of the agreement, established by the other party (part 2, article 305). the terms of the agreement must meet the criteria of reasonableness and fairness and should not place one of its parties in an extremely unfavourable position with respect to another, which violates the requirement of integrity. otherwise, these provisions are invalidated and cancelled. for example, a franchisee who is not a limited liability company has the right to cancel the agreement within 14 days from the moment of its conclusion, if it contains an obligation to take delivery from the franchisor more than once, while the total amount of the franchisee’s contribution to the newly created company does not exceed 75 thousand euros (franchise 2019). the regulation of issues related to the conclusion of a franchise agreement is also governed by the unfair contract terms act (ucta), adopted in 1977 by the united kingdom parliament (unfair contract terms act 1977). in accordance with this law, any provision of the model agreement, which has not been discussed by its parties, is subject to verification of equity. if such a provision can cause infliction of loss to the franchisee, the franchisor is required to justify the need for it to be included in the agreement. in addition, according to the ucta, the franchisee has the same security guarantees as the buyer. however, it should be noted that the ucta is not an act binding on the international level. if the franchisor is registered in another country, the law can be applied that acts in its territory. however, in germany, when concluding a franchising agreement, the ucta is used almost always. since the franchising agreement in germany does not require state registration, it is considered concluded from the moment when the parties have reached agreement on all terms. compliance with the written form of this agreement is mandatory. further legal relations between the franchisor and the franchisee, if the franchisee undertakes to continue to purchase the goods and equipment from the franchisor, are regulated mainly by the agency law, as well as by the antimonopoly law. as the german antimonopoly legislation was fully aligned with the eu provisions in 2005, issues such as restriction of competition, price control, conducting procurement, and determining the territory of the agreement are currently regulated by the european competition law. according to art. 101 of the treaty on the functioning of the european union (тfeu) (treaty on the functioning of the european union), it is prohibited to conclude such agreements between enterprises that may affect trade between member states of the eu and which are aimed at preventing, restricting or distorting competition in the pan-european market. the validity of the franchising agreement is not legally binding, as the parties, as already noted, are free to agree on the terms of the contract. however, the provisions of the contract that the term of its action is, for example, 40 years, can be abolished in view of the illegal restriction of franchisee’s business freedom. on the other hand, the condition for a too short term of the agreement (1 year) can also be considered invalid, because for such a period of time the franchisee will not be able to establish such franchise activities as to fully recover all funds invested in the purchase of a franchise. at the same time, there are certain timeframes for the purchase of goods and equipment from the franchisor. thus, in a franchising agreement, it is often prescribed that the franchisee is obliged to buy goods only from the franchisor and no one else, including other franchisees. such a franchise obligation is legitimate only if it does not violate the rules of competition law and is necessary to maintain the authenticity and reputation of the franchise network. if such an obligation is not necessary to maintain the authenticity and reputation of the franchise network, then the block exemption regulation (ber), adopted in accordance with art. 101 (3) of the treaty on the functioning of the european union (commission regulation). according to art. 5 of this regulation, the procurement obligation is not subject to its regulation, if its term does not exceed five years. if the term of the obligation exceeds five years or is automatically prolonged then the provisions prescribed in the ber are applied. as a rule, a franchising agreement is terminated due to the expiration of its validity, receiving notice of its termination or concluding an agreement to abolish franchise relations. however, there may be circumstances that lead to sudden contradictions between the franchisor and the franchisee, as a result of which one party may wish to terminate the franchise agreement even without prior notice. according to german law, termination of the contract without notice is possible only when there is a good reason for this, and the franchisee (or franchisor) has officially filed a previous application for early termination of the agreement. only significant breach of the terms of a franchising agreement is a ground for its termination without notice. reasons for bringing the franchising agreement to an early termination without prior notice may be, for example, refusal to make a payment for the right to use a franchise or repeated violation of the main rules established for a franchise network (for example, a ban on cooperation with competitors). determining whether there is a reason to terminate the contract is sufficient requires a comprehensive assessment of the circumstances of each individual case, as well as the interests of the franchisor baltic journal of economic studies 100 vol. 5, no. 1, 2019 and franchisee. the termination of the contract must take place within a reasonable period of time from the moment the circumstances arise, which has led to a contradiction between the parties. it should be noted that according to the german law on standard business terms and conditions, the provision on “sufficient ground” applies to all franchising agreements without exception, even if it is not specified in the agreement itself. the same applies to the need to send an official notice before terminating a franchise agreement without prior reference. after the termination of the franchise agreement, the franchisee has the right to demand compensation for the income that he could obtain in the further implementation of franchising activities. if his claim is satisfied, the reimbursement may be equal to the average annual income over the past five years of activity. no reimbursement will be awarded if the agreement was cancelled by the franchisee itself or in the event of termination of the contract without prior notice over violation of rules of conduct by the latter (metzlaff, billing, 2011). survival of the franchising agreement may be made solely by mutual consent of the parties. for this reason, the franchisor may refuse to renew the contract without substantiating his decision. however, it should be noted that the franchiser’s freedom of choice is limited to a claim for damages. so, if the franchisor expressed his intention to extend the franchise agreement and thus prompted the franchisee to invest in updating the equipment necessary for doing business on the eve of the expiration of the agreement, and then refused to renew agreement, then the franchisee had enough grounds to apply to the court with a claim for damages. 3. conclusion on the basis of the above, we conclude that germany has formed a franchising market with a large number of local franchising companies in more than 42 different areas: from retail, fast food establishments, hotels, education, car rental, and provision of domestic services to energy, health care, and telecommunications. there is no single law on franchising in this country. since the provisions governing the issues of franchising in general and the franchising agreement in particular are in the german civil code, the german commercial code, in a competitive, case law, antimonopoly legislation, as well as in european and international legal acts, it can be concluded that the franchising agreement in germany belongs to the category of mixed contracts. the franchisor and the franchisee are subject to the principle of culpa in contrahendo on the disclosure of information at the stage of negotiations on concluding a franchising agreement, during which the parties must provide true data, not mislead each other, and not make false promises. as a result of the violation of this principle, guilty persons may be brought to civil liability and are obliged to reimburse for damages. in accordance with german civil law, the parties are free to determine the terms of the franchising agreement and may set them at their own discretion, but taking into account the general principles provided for by the civil code and the rules established in the anti-monopoly legislation. the recommended list of provisions to be included in the agreement is provided for in the european code of ethics for franchising, which is applied in germany for the regulation of issues related to this institution. also, this act contains additional requirements for the parties to the franchising agreement and the key principles of their activities. the maximum and minimum terms of the franchise agreement in the country under consideration are not provided, but usually, it is concluded for 10 years – the period for which the franchisee can recover the funds spent on the purchase of a franchise. a franchising agreement may be terminated due to the expiration of the term, its invalidation or upon a mutual agreement of the parties. references: marzheuser-wood, b. (2014). the franchise law review. germany. law business research ltd. london. statistiken zum thema franchise. retrieved from: https://de.statista.com/themen/1166/franchise/ european code of ethics for franchising. retrieved from: http://www.eff-franchise.com/data/eff%20code%20 of%20ethics%20for%20franchising%20-%20final%2007122016.pdf metzlaff, k., billing, t. (2011). franchise in 32 jurisdictions worldwide. germany. law business research ltd. bürgerliches gesetzbuch (bgb) in der fassung der bekanntmachung vom 2. januar 2002. retrieved from: http://www.gesetze-im-internet.de/bgb/bjnr001950896.html franchise 2019. germany. retrieved from: https://iclg.com/practice-areas/franchise-laws-andregulations/ germany#chaptercontent2/ unfair contract terms act 1977. retrieved from: https://www.legislation.gov.uk/ukpga/1977/50 treaty on the functioning of the european union. retrieved from: http://www.lisbon-treaty.org/wcm/the-lisbontreaty/treaty-on-the-functioning-of-the-european-union-and-comments.html/ commission regulation (eu) № 330/2010 of 20 april 2010 on the application of article 101 (3) of the treaty on the functioning of the european union to the vertical agreements and concerted practices categories. retrieved from: https://eur-lex.europa.eu/legal-content/en/all/?uri=celex%3a32010r0330 baltic journal of economic studies 181 vol. 4, no. 4, 2018 corresponding author: 1 uzhhorod national university, ukraine. e-mail: korsakr@i.ua orcid: https://orcid.org/0000-0002-7886-0671 2 ivan franko drohobych state pedagogical university, ukraine. e-mail: vilnickiy@gmail.com orcid: https://orcid.org/0000-0002-4969-052x 3 uzhhorod national university, ukraine. e-mail: ivan.hodia@uzhnu.edu.ua orcid: https://orcid.org/0000-0002-4027-8811 doi: https://doi.org/10.30525/2256-0742/2018-4-4-181-187 ukrainian-czech economic links: diplomacy, trade, and tourism (the beginning of the ххі century) roman korsak1, vasyl ilnytskyi2, ivan hodia3 abstract. the article’s purpose is in a complex manner to analyse ukrainian-czech economic cooperation throughout 2000-2017, particularly, in the sphere of economic diplomacy, trade, and tourism. the research methods. the methodological base for a systemic research into ukrainian-czech economic cooperation consists of general scientific principles and postulates, as also a wide spectrum of methods, which passed into the theory of international relations from philosophy, gnoseology, ontology, axiology, dialectics, logic, history, and other particular sciences. the results. it has been proved that the bilateral cooperation under consideration depended on the ukrainian-czech contract-legal base coordination level, which regulated their mutual relations, repayment prospects of ukraine’s “yamburg debt” to the czech republic, the scope of cooperation of each of the countries with the european union, and level of tourist attraction. the main long-term economic interests of ukraine in its relations with the czech republic were such: the development of an economic dialogue, the realization of the common ukrainian-czech economic and investment projects, and cooperation in tourism development. the economically-advisory dialogue between ukraine and the czech republic, according to their bilateral interstate agreements, was carried out by the ukrainian-czech commission on trade and economic cooperation, the working group on the liberalization of their mutual trade, and by other institutional bodies. the expert consultations about the cooperation in the areas of tourism, power engineering, agriculture, banking, and other social components made up an effective form of economic dialogue. the signed inter-governmental and inter-departmental contract-legal certificates became an effective result of positive economic cooperation. the most active work in this direction was done on the eve and in the first years of czechia’s membership in the european union. despite much work done, it did not bring about the possibility to solve problem questions and to eliminate existing barriers in the bilateral trade. after czechia’s joining the eu, the improvement of a trading mode between the two countries rests within the plane of agreements and the development of a necessary contract-legal base with the eu. conclusion. the bilateral economic cooperation between ukraine and the czech republic has every prospect for further intensification, especially, in the sphere of statistics of the bilateral trade and economic relations, in ukraine’s fulfilment of its commitments provided by “yamburg agreements”, and in the popularizations of ukraine’s positive tourist image. key words: ukraine, czechia, european union, “yamburg agreement”, trade and economic relations, economic cooperation, tourist cooperation. jel classification: b17, b27, f1, f18, z3, z32 1. introduction it should be primarily noticed that a generalizing research into the economic cooperation of ukraine and czechia is important both from the scientific and practical points of view, as it gives chances to estimate the level of their mutual relations and to find out certain drawbacks and possibilities of its development in political, social, and economic spheres. also, it is necessary to notice that for the czech republic ukraine is the second country (after russia) in the economic priority. in its turn, czechia is among ukraine’s five main trading partners among the eu countries. besides, it should be pointed out that the large-scale relations of ukraine with czechia in tourism are important for baltic journal of economic studies 182 vol. 4, no. 4, 2018 the understanding of processes of the organization of different areas of its economy and give a chance to define the common and different features of the establishment of tourism in both countries. 2. research methods the methods of researching into the relations between ukraine and czechia form a set of techniques and operations by which help some or other concrete activity in certain areas of diplomatic cooperation and, particularly, in trade and tourism development areas is carried out. the methodological base of studying the international relations, and hence, of a systemic research into the ukrainian-czech economic cooperation, is grounded on general scientific principles and stipulations, including a wide spectrum of methods transferred into the theory of international relations from philosophy, gnoseology, ontology, axiology, dialectics, logic, history, mathematics, and from practical activity on all fours. in general understanding, the scientific method manifests itself as a systematized set of consecutive steps, which need to be carried out for the achievement of a definite purpose. from the end of the хvііі century to the beginning of the хх century, the idea that every science has its own method of theoretical research holds a dominant position. however, from the second half of the хх century, the condition when each branch of science has at its disposal a whole arsenal of its own methods and, besides, expands the circle of those which it can borrow for the solution of the problems from the adjacent spheres of knowledge. the research methodology is understood as a set of principles, concrete methods and techniques, whereas the methods of scientific knowledge are different ways of analysing a concrete sphere of cognition, in this case – of the ukrainian-czech cooperation and its compound, specifically, – the trade, economic, and tourist business cooperation at the beginning of the ххі century. the statement of the considered theme became possible due to the general scientific methods of knowledge, such as: analysis, synthesis, systematicity, generalization, concreteness, historicism, and the dialectic method. in the scientific study, the following methods have been given an advantage: historicalgenetic, historical-diachronic, comparative, of empirical analysis, and other. 3. analysis of recent researches and publications it should be noticed that a research into the cooperation of the czech republic and ukraine was carried out by o. tsup in her ph. d. thesis. in it, the author made a concrete historical analysis of the process of formation and development of the system of modern czech-ukrainian interrelations, elucidated the evolution of the mainstreams of the cooperation between the two countries. furthermore, in the aforementioned dissertation, much attention is paid to a political compound and, due to this, most economic aspects of the bilateral czech-ukrainian cooperation are insufficiently revealed (tsup, 2009). the system of the foreign economic relations regulation in the czech republic has been examined in v. fedurets’s ph. d. thesis. in it, the author confines himself to an analysis of the formation of a new system of foreign economic relations of the czech republic in the process of the realization of the eu association agreement (fedurets, 2006). the problems of migration of the population from ukraine to the european union, particularly, to the czech republic, in which a significantly great ukrainian diaspora and a large quantity of labour emigrants live, are considered in o. malynovska’s works (malynovska, 2004). what concerns the foreign authors, the problems of the eastern policy of the czech republic, including one concerning ukraine, have been studied by v. votápek (votápek, 2004) in his article “the eastern policy of the czech republic in 1993–2004: successes, problems, and prospects” (votápek, 2004). among a number of other publications, which submit analyses of the czechia’s foreign trade policy, it is necessary to name j. hřích, whose researches present analyses of the czech-ukrainian cooperation under the conditions of the world economic crisis (hřích, 2008, 2009). m. kořan in his publications analyses the foreign policy of the czech republic (kořan, 2009, 2010, 2011, 2012, 2014). of the czech scientific editions, which reflect the foreign policy of the czech republic, the yearly “agenda of the czech foreign policy” (2010, 2011, 2012, 2013, 2016, 2017) should be primarily mentioned. in it, articles on the pressing question of the economic cooperation of czechia with ukraine are published annually. thus, the czech researchers consider questions concerning a formation of conceptual bases of the ukrainian-czech economic cooperation, forecasting and modelling its development. in its turn, the ukrainian scientists since recently have started studying the problems of the ukrainian-czech cooperation mainly in the political sphere, whereas the other spheres of the bilateral cooperation are not yet subjected to a complex generalization. 4. the article’s purpose the purpose is to generalize the development of ukrainian-czech economic relations. the achievement of this purpose implies the execution of the following tasks: baltic journal of economic studies 183 vol. 4, no. 4, 2018 – to analyse the bilateral diplomacy (economic dialogue) throughout the specified period; – to investigate features of the trade and economic cooperation between ukraine and the czech republic on the eve of the czechia’s joining the eu and under the conditions of its membership in it; – to define the basic directions of the ukrainian-czech cooperation in the sphere of tourism. 5. the economic diplomacy it should be noticed that, unlike the bilateral political cooperation, the economic-advisory dialogue between ukraine and the czech republic, since 1996, has been carried out on a constant basis. in accordance with the bilateral interstate agreements, the ukrainian-czech commission concerning the trade and economic cooperation, working group concerning the liberalization of the mutual trade, and the mixed ukrainian-czech commission concerning the international automobile transport have been formed. besides, the bilateral agreements have provided annual expert consultations about the cooperation in the field of atomic engineering and nuclear industry, state regulation and supervision of the safety at the use of nuclear energy, agriculture, banking, in the spheres of certification, state statistics, social maintenance, etc. annually, over 50 delegations of the ukrainian ministries, departments, regions, and cities visit czechia. the initiation and practical coordination of the necessary actions, as well as the efficient coordination of the positions of the parties, have been carried out by the embassy of ukraine in the czech republic and the trade-economic mission (korsak, 2015: 193-194). throughout 2000–2003 the bilateral economic relations developed in the course of the preparation of the czech republic for the entrance into the eu. a favourable factor then was that the government of the czech republic was consistently realizing its program lines in the sphere of international relations, including the deepening of the all-round contacts with ukraine. it was at that time that the minister for foreign affairs of ukraine paid a visit to czechia (2003) and meetings of the ukrainian and czech presidents and prime ministers took place during the international forums (2003) (korsak, 2003: 87-99). of the high officials who made visits to czechia were the president of ukraine (2009), the chairman of the supreme rada of ukraine (2005), the prime minister of ukraine (2006, 2011), the minister for foreign affairs of ukraine (2007, 2008, 2009), and a chain of other ministers, including those of the economic block. in its turn, ukraine was visited by the president of czechia (2005), the chairman of the chamber of parliamentary deputies of the czech republic (2008), the prime minister of the czech republic (2007, 2008, 2009), and its minister for foreign affairs (2010) (the materials for the account on the work of the ukrainian embassy in the czech republic, 2005: 2-3; the materials for the account on the work of the ukrainian embassy in the czech republic, 2006: 3-5; hřích, 2008: 333; hřích, 2009: 303-316; kořan, 2012: 17-28). after the presidential election of 2010 in ukraine, a crisis of the diplomatic dialogue between ukraine and czechia took place. the litigations of the exofficials brought about criticism from the eu countries, including czechia. for these reasons, the president of czechia v. klaus refused to visit ukraine in may 2012. the government of the czech republic pronounced upon an importance of the establishment of accurate conditions for an agreement of ukraine’s association with the eu as it would have activated trade, economic, and political relations between ukraine and the czech republic at a qualitatively new level (kořan, 2011: 15-32; kořan, 2013: 19-33; agenda pro českou zahranicni politiku 2011, 49). in the economic sphere, 34 interstate, intergovernmental, and inter-departmental contractlegal statements were signed throughout 2000-2017. the most active work in this field was carried out on the eve and in the first years of czech membership in the european union. but even before czechia’s joining the european community, an adaptation of the bilateral contract-legal base to the eu standards had begun. after the entrance of the czech republic into the european union, the agreements defining a trading mode between the two countries became invalid. since may 1st, 2004, four bilateral agreements were denounced, in particular, about trade and economic relations and scientific and technical cooperation. czechia, which was interested in an advancement of the export on the ukrainian market, often took the initiative in the contractual process (the materials for the account on the work of the ukrainian embassy in the czech republic, 2004: 8). it should be specified that the economic cooperation was co-ordinated by the activity of the ukrainianczech inter-governmental commission on trade and economic cooperation. after czechia’s acquisition of the membership in the eu, it was reorganized into the inter-governmental ukrainian-czech mixed commission on economic, industrial, scientific, and technical cooperation. in the period of czechia’s preparation for the entrance in the european union, the fifth (2000), sixth (2001), seventh (2002), and eighth (2004) sessions of the ukrainian-czech intergovernmental commission on trade and economic cooperation took place, in which the conditions and prospects of trade and economic cooperation between ukraine and the czech republic were considered. in the next two years, no sessions of the commission were organized, as the new agreement about the economic, industrial, and scientific-technical cooperation, which determined its function, was ratified by the supreme council (verkhovna rada) of ukraine only in 2006 (z baltic journal of economic studies 184 vol. 4, no. 4, 2018 prava o zahranisni politice česke republiky za rok 2000: 140-141; z prava o zahranisni politice česke republiky za rok 2002: 224-225; z prava o zahranisni politice česke republiky za rok 2003: 249-251; z prava o zahranisni politice česke republiky za rok 2004: 263-265). in 2007-2017, seven sessions of the inter-governmental ukrainian-czech mixed commission on economic, industrial, and scientific-technical cooperation were held. at the latest session (kyiv, on june 7-8, 2017), pressing questions of the ukrainian-czech trade, economic, and investment cooperation were discussed and an expansion of the interaction of the two countries at the regional equal was considered. it is possible to assert that the ukrainian-czech inter-governmental mixed commission remains an effective institutional, expert, and regular body in developing the directions of expansion, improvement, and deepening of the bilateral trade and economic relations (on the fourth session of the ukrainian-czech inter-governmental mixed commission, 2010; on the session of the ukrainianczech inter-governmental mixed commission, 2017). 6. the bilateral trade it should be noticed that throughout 2000-2017 the basic areas of the ukrainian-czech economic cooperation were such: mechanical engineering, chemical, heavy, light, and food-processing industries, the building complex, transport communications, and tourism. in 2001, ukraine and czechia managed to restore the general goods turnover (443.1 million us dollars), which had fallen half owing to the russian financial crises in 1999 has. during this period, the specified mutual trade was characterized by simple goods exchange operations, considerable debts of the ukrainian enterprises for the acquired czech products, the absence of the common projects, and low investment (korsak, 2003: 87-99). since may 1, 2004, when the czech republic joined the uniform eu customs space, its trading mode with ukraine changed, the access conditions of two countries on the markets became unequal, being more rigid for the ukrainian exporters. concerning the import of ukrainian products after the entrance of the czech republic into the eu, 8 antidumping measures, introduced by the european union were put in operation. the unilateral quantitative restrictions from the eu concerning the import of ukrainian metallurgical production, in particular, rolled metal, had the greatest influence. already in the first year of czechia’s membership in the eu, the losses of the ukrainian exporters from these restrictions reached 25-26 million us dollars (materіaly do zvіtu pro robotu posolstva ukraіny u cheskіі respublіtsі, 2005: 19-22). the strengthening of the economies of the two countries was accompanied by the dynamic increase of their goods turnover. 2006 was critical for the ukrainian export (341.6 million us dollars). the crisis level then reached minus indicators in comparison with 2005 (377.3 million us dollars) and 2009 (340.686 million us dollars) and – due to the world financial and economic crisis – the goods turnover volumes between the two countries were cut by half. after some increase of export from ukraine to the czech republic in 2010-2011 (626. 246 and 842.432 million us dollars correspondingly), in 2012 its decrease (707.040 million us dollars) took place again. that was an evidence of yet insuperable crisis phenomena in ukraine’s economy. the unequal conditions of the access of two countries on the markets, which for ukrainian manufacturers was more rigid, low competitive ability, and a considerable raw material compound of ukrainian export created a great rupture in the trading streams and rates of export increase in favour of czechia (z práva o zahranicní politice čr za rok 2006: 233-234; z práva o zahranicní politice čr za rok 2009: 296-299; z práva o zahranicní politice čr za rok 2010: 212-213; agendapro českou zahranicni politiku 2012: 47-48). since 2013, the reduction of the volume of czech import to ukraine (by 19.8%) took place and this tendency went on in 2014 (by 31.2%) and 2015 (by 30.3%). in czech import to ukraine, goods with large surplus value prevailed, such as reactors, boilers, machines, apparatuses, and mechanical devices (20.3% in the structure of czech total import to ukraine), electric cars and equipment (16.8%) (agenda pro českou zahranicni politiku 2013: 46-47). according to the data of the state statistics service of ukraine, the goods turnover volume between ukraine and the czech republic during 2016 increased to 1 219.709 million us dollar. the volume of the czech republic’s direct investments into the ukrainian economy in 2016 reached 129.2 million us dollars, which was 1.2% more than had been by january 1st, 2016. the state statistics service of ukraine, however, closed the data of the ukrainian investments into the economy of the czech republic. according to the czech national bank, the volume of ukrainian investments into the economy of the czech republic by 01.01.2016 reached nearly 50.50 million us dollars (torhovelno-ekonomichne spivrobitnytstvo mizh ukrainoiu ta chr; agenda pro českou zahranicni politiku 2016: 45-47). it’s worthy of note that after a serious recession throughout 2014-2015 the goods turnover between ukraine and czechia for the first quarter of 2017 increased by one-third and neared 315 million us dollars, which was by 32% more in comparison with the similar period of 2016 (torhovelno-ekonomichne spivrobitnytstvo mizh ukrainoiu ta chr; agendapro českou zahranicni politiku 2017: 33-34). ukraine’s “yamburg debt” to the czech republic equivalent to 1247 million cubic meters of natural gas had a particular negative influence on ukrainian-czech baltic journal of economic studies 185 vol. 4, no. 4, 2018 interstate cooperation. according to the inter-governmental agreement, which became valid in 1999, ukraine admitted its debt for the sum of 79.17 million conventional account units. among the countries involved in the “yamburg agreements” (ukraine, russia, kazakhstan), the question of the repayment of the debts was not settled only by ukraine. actually, till 2004 the parties conducted a long negotiating process concerning the sources of the repayment. the question of the settling of “yamburg debt” was raised by the czech side practically at all the bilateral meetings. the problem’s complexity consisted of ukraine’s lack of finances for the repayment of its debt and in the fact that ukraine had no necessary volume of natural gas of its own extraction. in the researcher’s opinion, a uniform way of the solution to this problem is to liquidate the debt not in gas volume but in dollars or other convertible currencies (korsak, 2015: 235-238). 7. the cooperation in the sphere of tourism as to the cooperation of ukraine and the czech republic in the sphere of tourism, it takes place within the context of the relations of ukraine, czechia, and the eu. in particular, the coordination of mutual relations in tourism is carried out by a higher body of executive power of the european union, that is, by the european commission, which – through the activity of the structural funds – carries out its work on tourism development in the eu countries. the specified body carries out investments into the tourism industry of the countries of central and eastern europe, to which czechia and ukraine belong (korsak, furtіі, 2016). it deserves noticing that the economic cooperation of ukraine and the czech republic in tourism realized on the basis of a corresponding agreement between ukraine’s ministry of culture and tourism and czechia’s ministry of regional development on the cooperation in the sphere of tourism from 17.02.2006 and of development programs “europe – 2020”, which purpose is to provide a high level of employment increase in the eu, to create an “innovative union” that would open the door to science and new technologies. it should be underlined that within the borders of the realization of the inter-governmental and inter-departmental cooperation agreements in tourism, the ukrainianczech inter-departmental working group was created (korsak, berets, 2016). the ukrainian-czech bilateral tourist cooperation is carried out also within the functional capacity of the european tourist commission (etc). furthermore, ukraine’s participation in tacis, a national program created to support smalland middle-scale enterprises for the purpose of maintaining effective functioning of the tourist infrastructure was one of the directions of its cooperation with the czech republic in the sphere of tourism. in particular, the corresponding program of development of the tourist infrastructure in view with the directions of the national network of international transport corridors and the basic transport highways was adopted (korsak, furtіі, 2016). as to the tourist streams, it should be noticed that in the recent years the citizens of ukraine make up 1% of the tourist visiting czechia and take the 15th place in the statistics of the most frequent visitors of the czech capital. the ukrainian tourists stay in czechia, on the average, for 2.7 nights. in addition to this, ukrainian tourists have taken fourth place in the statistics of the number of nights spent in prague. only tourists from spain (2.8 nights), italy (2.9 nights), and russia (3.9 nights) spend in prague more time than ukrainians (kravets v. hid po prazi ta chekhii). in the aforementioned context, it is necessary for the ukrainian governments to pay more attention to the development of the cooperation with czechia in the field of tourism, as it will give a chance to push the domestic tourist services on the european market and to receive an experience of tourist activity of the successful enterprises of the eu countries. thus, the cooperation of ukraine with the czech republic will raise economic efficiency of the national tourist sphere in the future. in the author’s opinion, the following questions should be settled with czechia in order to intensify ukraine-czech cooperation in tourist area: – to foster the improvement of quality growth of tourist services; – to develop systems of standardization and certification of the enterprises of the tourist sphere in ukraine, which could meet the international standards and norms of the european union; – to simplify border crossing and customs formalities in the official registration of documents; – to carry out investment activity; – to give technical help from the states of the european union; – to create a corresponding system of the preparation of the personnel and increase of its qualification by training it in the countries of the european union (korsak, furtіі, 2016). 8. conclusions so, the basic areas of the ukrainian-czech economic cooperation during 2000–2017 were such: mechanical engineering, heavy, chemical, light and foodprocessing industries, the building complex, transport communications, and tourism. after the entrance of the czech republic in the european union, for ukraine to expand its foreign economic relations with czechia and to strengthen the positions of its exporters on the czech market became important. therefore, the ukrainianczech trade and economic cooperation had a tendency of strengthening investment-production cooperation between the two countries, deepening industrial cooperation, and creating the common enterprises. baltic journal of economic studies 186 vol. 4, no. 4, 2018 for the improvement of the specified bilateral economic cooperation, it is necessary for the governmental factors of both countries to settle the following questions: – in the sphere of statistics of ukrainian-czech trade and economic relations, it is necessar y to improve the methods of statistical calculations of the bilateral goods turnover and, hence, to advance it to the corresponding technique of the european union; – to offer concrete actions from the ukrainian side on the fulfilment of the commitments set by the “yamburg agreements”; – to carry out timely calculations and to pay the long-term debts of the ukrainian enterprises for the production and equipment imported from czechia; – to liberalize customs formalities with the european countries for an increase of tourist streams; – to popularize ukraine’s positive tourist image in the european market. references: tsup, o. v. 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[from the account of the foreign policy of the czech republic in 2004]. ministerstvo zahranicních véci čr . bilaterílní vztahy české republiky, 334 p. (in czech) shchodo chetvertoho zasidannia ukrainsko-cheskoi zmishanoi komisii z pytan ekonomichnoho, promyslovoho ta naukovo-tekhnichnoho spivrobitnytstva (23-24 veresnia 2010 r.) [on the fourth session of the ukrainianczech mixed commission on economic, industrial, and scientific-technical cooperation (on september 23-24, 2010)]. ministerstvo ekonomichnoho rozvytku i torhivli ukrainy. retrieved from: http://ukrexport.gov.ua/ukr/ mk_info/?country=cze (in ukrainian) zasidannia ukrainsko-cheskoi mizhuriadovoi zmishanoi komisii z ekonomichnoho, promyslovoho ta naukovotekhnichnoho spivrobitnytstva (7-8 chervnia 2017 r.) 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[tourism development in the countries of the european union and the organizational experience for ukraine in the beginning of the ххі century] hileia: naukovyi visnyk. zbirnyk naukovykh prats. kyiv: «vydavnytstvo «hileia», vyp. 108(5), pp. 96-100. (in ukrainian) kravets, v. hid po prazi ta chekhii [kravets v. a guidebook of prague and czechia]. retrieved from: https://uk-ua.facebook.com/praha.guide.info/posts/ (in ukrainian) baltic journal of economic studies 148 vol. 1, no. 2, 2015 evaluation of the modern tendencies in the ukrainian stock market development oleksandr trofimchuk1, mykhailo trofimchuk2, international economics and humanities university named after s. demyanchuk, ukraine abstract. the purpose of the article is to research and critically evaluate the features of functioning and development the stock market in ukraine. the main point is to substantiate modern tendencies and to find ways of more efficient development of the ukrainian stock market. methodology. the research is based on the analysis of the important aspects which characterize stock market development. they are the volume of trading activity that was done on stock exchanges, level of market capitalization, economic concentration, price policy on market services, and control over the insider information use and manipulation identification. results. on the basis of volume of trading activity that was done on stock exchanges, features of stock market structure are determined. comparative analysis between the stock market capitalization level of ukraine and average world index of stock market capitalization is done. the level and dynamic of economic concentration is defined. features of competition between ukrainian stock exchanges are analyzed. great attention in research is paid to problems of control over the insider information use and principles of manipulation identification by stock exchanges. value/originality. the research showed that main amount of trading operations was done in “shadow” stock market, capitalization level decreased and stock market in ukraine does not meet international standards of transparency. further research should be focused on problems of ensuring the effective implementation of the basic principles of competition between market participants. main point is to provide law mechanisms to increase transparency level of the national stock market and to increase share of organized stock market in ukraine. key words: stock market, capitalization, competition on the stock market, organized stock market, stock exchanges. jel classification: g1, g20, f36 1. introduction ukraine chose the way of the economy development that oriented on integration into the european environment. it requires structural reform, including the construction of new and improvement of existing principles of the functioning in all economic and financial spheres, including stock market. developed stock market provides a process of capital accumulation and distribution in different economic areas. in this regard, there is a necessity of closer and substantiated study of the phenomena that ensure effective stock market functioning. the research of securities market functioning should be done on the basis of parameters that characterize the results of market activity. among them we will evaluate: the volume of trading activity that was done on stock exchanges, level of market capitalization, economic concentration, price policy on market services, control over the insider information use and manipulation identification. 2. trading activity the development and the scale of any market, including the stock market, is affected with the presence of competition between its participants. competitive principles of activity should be the basis of stock market operations on the stock exchanges because these organizations provide infrastructural redistribution of financial resources. in accordance with the law organized securities market in ukraine is represented by the stock exchanges. at the beginning of 2014, 10 exchanges operated on the ukrainian securities market: «kyivska mizhnarodna fondova birzha», «prydniprovska fondova birzha» «ukrainska mizhbankivska valiutna birzha», «ukrainska mizhnarodna fondova birzha», «ukrainska fondova birzha», «skhidno-yevropeiska fondova birzha», «ukrainian exchange», «fondova birzha «inneks», «fondova birzha «pfts», «fondova birzha «perspektyva» (nssmc, 2013). in ukraine stock exchanges enforce the minor volumes of trading activities. despite the fact that during 2004corresponding author: 1 department of management, international economics and humanities university named after s. demyanchuk. e-mail: mr.trofimchuk@gmail.com 2 department of economics and finance, international economics and humanities university named after s. demyanchuk. e-mail: mr.trofimchuk@gmail.com baltic journal of economic studies 149 vol. 1, no. 2, 2015 2013 years the volume of transactions that where done in the stock exchanges, demonstrated positive dynamics the main array of transactions with securities in ukraine was done outside the organized market (figure 1). in our view the reasons that caused such situation, the low quality of the securities issued by ukrainian enterprises, which determines the low level of enterprises development, poor competitive abilities, the lack of innovation factor in the strategic management and unwillingness to work transparently and to attract investments that cause a redistribution ownership on assets. the positive trend of recent years for the competitive relations development on the domestic securities market is the growth of the share of organized market in the total volume of trade transactions that were done on the stock exchanges. fig. 1. the dynamics of the organized (stock exchange) market share in total trading activity of the ukrainian securities market source: national securities and stock market commission thus, the open sales of financial instruments on stock exchanges from year to year demonstrate the growth dynamics but the volume of such trading activity is too small. thus, during the each of the study period by 2013, the share of executed securities transactions with the direct participation of trade organizations ranged from 2% to 11%. but in 2013 it increased up to 27.63% the rapid increasing of the share of trading volume of operations that were done on organized market in 2013 can be explained by the new tax that is dealing the operations that were done outside the stock exchanges. so, taxation rate for operations that providing out the stock exchanges at the moment is 1,5%. implementation of this tax facilitated the transfer of trading operations to the organized stock market, because nobody wanted to pay extra tax. however national stock market is still does not provide the competitive transformation of accumulated capital into investment resources on the transparent basis. 3. ukrainian stock market capitalization the great criteria to determine the level of stock market development is a capitalization. it should be noted that capitalization of the stock market is the fictitious index of companies’ value. it based on the multiplication of the current market value of the shares that were issued and their number. so it does not reflect a real value because different market factors make influence on shares prices. in the period from 2004 to 2007, on a background of economic growth of the national economy capitalization index of ukrainian listed companies showed steady rising trend. so during this period in absolute value it increased almost on 100 billion us dollars. but the global crisis negatively influenced on the index of stock market capitalization in ukraine, it is evidenced with the rapid decline of this indicator, both in the world and in ukraine (figure 2). fig. 2. dynamics of stock market capitalization ratio in the world and in ukraine source: the world bank group the level of ukrainian stock market capitalization in the period from 2008 to 2012 was extremely small in relation to gdp. in 2012 it was only 11.75%. w hile the average value of this indicator in the world was at level of 76,18%. in general, backlog in the capitalization ratio of the ukrainian stock market relative to the average ratio in the world in the period from 2004 to 2012 was about 60 percentage points. after 2008, when the stock market in ukraine collapsed, due to the global financial crisis, it began gradual growth. in 2010, capitalization ratio increased significantly, which was primarily associated with the increased number of securities of issuers were allowed to trade their stock on the market. but gdp of ukraine in 2011 and 2012 was growing faster than market capitalization of listed companies. this situation negatively influenced on capitalization ratio. thus, the total level of stock market capitalization used to reduce. we must to emphasize that on capitalization level influenced low volume of trading activity with shares on flagship of ukrainian stock market – ukrainian exchange and stock exchange pfts. in general, level of stock market capitalization in ukraine cannot be considered as objective index due to following reasons: transactions are concentrated mainly on shadow (non-organized) market, the agreements are concentrated mainly in the otc market, large number of closed (private) joint stock companies (at the beginning of 2013 in ukraine registered 18 008 private and closed joint stock it is 71,3% total number of joint stock companies in ukraine) very low share of issuers whose shares are included in quotation lists of stock exchanges (deeva, 2009). baltic journal of economic studies 150 vol. 1, no. 2, 2015 4. economic concentration and competition between stock exchanges in 2009 high concentration level persisted, but the situation on ukrainian stock market changed to oligopoly. from 2010 to 2013, was evident tendency to gradual monopolization of exchange services on the ukrainian securities market. this conclusion we can do after analysis of special special indicators that characterize economic concentration. in this purpose we can use quantity of stock exchanges herfindahl-hirschman index (нні), hall-tidemann index (нт), concentration ratio (cr3), concentration ratio (cr4), coefficient of entropy (е), the maximum share index (id(max)). the number of stock exchanges on the ukrainian stock market during the analysed period was not stable, but variations were not significant. the last 4 on the market operates 10 trading platforms. due to concentration ratio (cr3) and concentration ratio (cr4) in each period was hi level of economic concentration of stock exchanges on the market. evaluating these coefficients we can see that from 2004 to 2008, the market situation was close to a monopoly. in accordance with herfindahl-hirschman index during the research period this indicator was in frames 180010000 which indicates that the market for stock exchanges in ukraine was highly concentrated. however, in 2006 due to volume of this index (нні – 9286,95) the market was actually monopolized. according to the hall-tidemann index (нт) the highest level of economic concentration was in 2006 – 0.86. since 2009, entropy coefficient has been increased slightly, but its number is still small, so it means the existence of variation between monopoly and oligopoly market situation. similar conclusions can be made based on the maximum share index. according to its thresholds from 2004 to 2009 the stock exchange market in ukraine was practically monopolized by a few stock exchanges and from 2009 to 2012 there was an oligopoly situation. thus, all indicators characterize a similar trend, according to the results obtained on their basis, we can derive a synthesis conclusion – in recent years there is a redistribution of trading volume between different stock exchanges. so there is no a monopoly of a one stock exchange like it was in 2006. in last 3 years all trading operation are divided between three trading platforms (figure 3). now on the ukrainian securities market there is an exacerbation of the competitive relationship between the trade organizers. they are competing for increase of their share in the total turnover of trading operations with financial instruments. stock exchange pfts, which for a long period has been the flagship of the domestic stock market, due to various reasons, including the changes of political power in the country, began to lose its positions. in 2008 the share of stock exchange pfts in the structure of executed transactions on the securities market was 90%, but in 2013 only 23.8%. also reducing of market share of the ukrainian exchange and stock exchange pfts in the total trading volume, as the main areas where shares of ukrainian issuers are listing their shares, is an evidence that the stock market in ukraine is gradually diapering. fig. 3. the volume of trading operation with securities on ukrainian stock exchanges (in percentage ratio) source: national securities and stock market commission as we can see stock exchange perspectyva significantly increased its position. in 2009 market share of this exchange was 37.1% and in 2013 – 67.4%. moreover, the share of stock exchange perspectyva in this segment is growing every year. first of all this can be explained that main amount of trading operations with government securities was done exactly on this stock exchange. the rapid development of information technologies significantly facilitates automation of all aspects of stock table 1 evaluation of stock exchanges concentration on the securities market of ukraine index period number of stock exchanges (cr3) (cr4) (нні) (нт) (е) id(max) 2004 10 93,13 95,34 5849,065 0,50 0,089 0,764 2005 10 94,62 96,18 7814,923 0,61 0,056 0,796 2006 11 98,68 99,44 9286,95 0,86 0,019 0,828 2007 9 96,62 97,88 7714,555 0,66 0,061 0,775 2008 10 96,79 98,19 8129,354 0,68 0,048 0,780 2009 11 79,57 84,56 2671,506 0,25 0,148 0,587 2010 10 94,50 96,53 3382,475 0,36 0,124 0,614 2011 10 98,30 99,18 3279,797 0,35 0,118 0,545 2012 10 98,20 99,06 4283,282 0,46 0,101 0,691 2013 10 93,95 96,44 5127,961 0,48 0,095 0,723 baltic journal of economic studies 151 vol. 1, no. 2, 2015 exchange’s activity and makes great influence on non-price competition between stock exchanges. thus, the stock exchange perspectyva was the first in ukraine that has implemented market of applications «self-listing» (2010), clearing and settlement model through the specialized nonbank payment system (2009), had registered specification (2011) and launched in the term contracts system (2012). in addition, the dynamic movement of capital in an international scale, associated with the development of globalization processes, greater openness and deregulation of financial markets, increases the intensity of competition between exchanges that existed in the conditions of a closed market. considering this domestic stock exchanges have to perform a number of tasks associated with the price and non-price methods of competition: – active trade organizer positioning in the market, which involves keeping market niche with expanding the range of services (basic and collateral), flexible pricing policy; – search for a new sources to finance their development, because changes in information technology, improving the technical equipment, provides the necessity for constant updating of trading system, which requires capital investments; – improvement and development of the stock exchange marketing, development strategies, tactics of behaviour in the market in terms of increasing competition. 5. the tariff policy and profitability in competiешщт for the leading position in the organized securities market of ukraine, the significant role was played by the tariff policy of domestic stock exchanges. the most favourable operating conditions provide exchange pjsc “perspective” (table 2). during trading volume of the shares stock exchange perspectyva even ahead a key exchange in this market segment stock exchange ukrainian exchange where blue chips (shares of motor sich, center energo,” azovstal) are usually trade. however, in the leadership of this stock exchange, in addition to the obvious qualitative changes are negative phenomena. on the stock exchange “perspective” quite a large share in the total volume of trading is taken by companies which are associated in business activity with this exchange (modern credit technologies, academy of investments). such scheme could be used to artificially increase volume of trading for the purpose to create the image of a large and effective stock exchange. financial activity of ukrainian stock exchanges since 2008 has been demonstrating, reduction of the efficiency. the most profitable trade organizer, stock exchange pfts turned into a very unprofitable trading platform, compared to other major exchanges on the national stock market. as a result of clients churn from the pfts due to unstable situation in the board of directors of the exchange, the volume of transactions on this stock exchange has decreased. such situation had negative impact on the financial results of stock exchange activity compared with other main exchanges of ukrainian stock market (figure 4). abrupt increase of pfts profitability in 2013 was caused by having in the ownership financial assets on the banking accounts. so, it does not connected with successful operation, because as a result of operating activity of the stock exchange had 9.244 million uah of loss that year. fig. 4. dynamics of the profitability of th major ukrainian stock exchanges source: securities market infrastructure development agency in ukraine, the main income of stock exchanges consists of fees for access to trading, inclusion the securities to the exchange list, commission for the transactions and income from the sale of information. this commission income on transactions in the past year decreased due to lower equity trading activity. 6. countering to manipulation it should be noted that the effectiveness of the stock exchange as an infrastructure institution that provides the organization of trading operations, must be presented in ability to ensure transparent pricing and equal conditions and opportunities for all participants of trading operations. a key role in this plays the control of insider information use and mechanisms of countering to manipulation activity. table 2 fees for services of some stock exchanges in ukraine in the end of 2013 stock exchange the tariff policy pfts trading terminal – 500 uah one-time and 1000 uah. per month. inclusion the securities to the exchange list 500 one-time uah. providing supplemental information about the results of trading on stock exchange to – 100 uah. ukrainian exchange trading terminal – 500 uah one-time +tax and 600 uah per month +tax. inclusion the securities to the exchange list 500 uah one-time. perspektyva trading terminal – 1 uah one-time. inclusion the securities to the exchange list one-time 150 uah. providing supplemental information about the results of trading on stock exchange – 50 uah per every working day included to the reporting period. baltic journal of economic studies 152 vol. 1, no. 2, 2015 in legal document “about approval of the procedure to prevent price manipulation during trading with securities on the stock exchange” noted that stock exchange must to set up index and its level to indicate manipulation actions. but not enough attention is paid to the tracking the manipulative action due to the price deviations. we must say that mechanism of manipulation detection on the stock exchanges is rather formal and non-usable. in the rules of stock exchange pfts did not mentioned how to provide the definition of price volatility for securities and did not set up parameters that would be characterized volatility and manipulation. ukrainian exchange applies methods of tracking manipulation and controls contracts concluding by participants of trading operations based on such indicators: – excess of 25% share of operations of the total volume with certain securities in a calendar month$ – growth of the average value of exchange contract more than a 30% in a calendar month; – change in trading volume of certain securities in a calendar month more than 25%; – the excess the share of concluded contracts between the two traders on certain trading day with the same securities in which the bidders alternately are as buyers and sellers more than 20% of the total volume of trading with this security on the same trading day. stock exchange perspectyva in the context of manipulative actions detecting providing control of the agreements in a such parameters: – the excess more than 50% of the total exchange trades, amount of contracts concluded by certain participant with addressless applications (excluding applications done bymarket makers), the this security in a calendar month set value – 50%; – the excess more than 50% in a month of the total exchange trades concluded by participants in 6 months, the amount of contracts concluded by certain participant with addressless applications (excluding applications done by market makers). – changes in the volume of trades with certain securities in a calendar month on the set value amount more than 75% compared with the previous calendar month; to increase the effectiveness of competitive relations regulation it is necessary to make clear requirements to detect manipulative transactions on stock exchanges, exactly to define criteria that should be based on individual price deviations, it will enable to identify non-fair actions as manipulative actions exactly for certain shares. in particular, at the level of national securities and stock market commission, along with the existing methods, should be provided effective methodology of manipulative actions identification based on calculating individual significant prices deviation for every share. this will allow to respond the illegal actions of market participants and providing more transparent conditions for the functioning at the ukrainian stock exchanges. in most developing countries and in ukraine in particular, the low efficiency of the stock market is caused with common characteristic features: complete dependence on international capital flows, the lack of long-term investments and mainly speculative kind of operations. all this indicates about significant isolation of the domestic stock market from the real economy. this is explained with the fact that ukraine has a unique situation, which is characterized by a predominance of the informal (shadow) stock market and imbalance of its institutional elements. 7. conclusion the research results shows that stock market in ukraine can be characterized by too hi level of trading operations that are execute out of the organized market. it is the evidence that ukrainian stock market has low development level and as a result – low efficiency level. in general the dynamics of the stock market in ukraine does not meet the objective tendencies of its development and development of the national economy. imitation of activity of some stock exchanges, which are turned into simple auction where the lowest level of competition and there is usually operates the only one seller, which is represented by government and extremely limited number of buyers. despite on the positive dynamics of the volume of transactions that were concluded on the stock exchanges during the period 2004-2013, the main amount of trading was done in “shadow”. so, regulatory institutions could not guarantee the security to investors who were going to enter the national stock market. in this reason ukraine loose opportunity to attract capital and to develop its economy. also the stock market in ukraine has a low level of capitalization, so it does not perform its most important function – attraction investments for economic development. the analysis of the economic concentration of the stock exchanges showed that the competitive structure of the domestic organized securities market during 20042013 years was changing from monopoly to oligopoly. previously almost all operations were concentrated in one stock exchange pfts, but since 2009 three trade organizers had divided the market. identifying of manipulative actions is very important part of stock exchange activity. its purpose to protect all participants from unfair competition and from the acts of artificially inflating or deflating the price of a security. but ukrainian stock exchanges do not use efficient mechanism of manipulations identification. existing methods do not use include price deviations, so investors has big risks to conclude unfair deal. further research should be focused on improving methods that ensure the effective implementation of the basic principles of competition between market entities. also it is nessessary to to increase transparency level and to increase share of organized stock market in ukraine. all this is extremely important for securities market development and its further integration into european financial system. baltic journal of economic studies 153 vol. 1, no. 2, 2015 references deeva, n.e. (2009). ukrainian stock market capitalization: problems of evaluation and reaction on crisis. economic journal of donbas, 4 (18), р. 115–121. nssmc: national securities and stock market commission (2013). annual review and summary financial statements. [electronic resource]. – retrieved from: http://www.nssmc.gov.ua/activities/annual perspektiva stock exchange official web-site (2014). [electronic resource]. – retrieved from: http://fbp.com.ua. pfts stock exchange official web-site (2014). [electronic resource]. – retrieved from: http://www.pfts.com/uk/ pfts-report smida: securities market infrastructure development agency (2013) [electronic resource]. – retrieved from: http://www.smida.gov.ua/ the world bank group (2012). gdp. [electronic resource]. – retrieved from: http://data.worldbank.org/ indicator/ny.gdp.mktp.cd the world bank group (2012). market capitalization of listed companies. [electronic resource]. – retrieved from: http://data.worldbank.org михаил трофимчук, алексанр трофимчук оценка современных тенденций развития фондового рынка в украине аннотация. целью статьи является экономическое обоснование и критическая оценка особенностей функционирования фондового рынка в украине, поиск путей его развития с целью обеспечения эффективного исполнения возложенных на него функций. методология. исследование основано на анализе важных аспектов, которые определяют особенности работы и развития фондового рынка. к таким аспектам отнесено денежный объем совершенных сделок на фондовых биржах, уровень биржевой капитализации, степень экономической концентрации, ценовая политика бирж на рынке, контроль над использованием инсайдерской информации, а также идентификация манипулятивных действий. результаты. на основе объема торговой деятельности, совершенной на фондовых биржах, выделены особенности структуры фондового рынка. проведен сравнительный анализ между уровнем капитализации фондового рынка украины и среднемирового значения уровня капитализации рынка ценных бумаг. определены факторы оказывающее негативное влияние на уровень капитализации отечественного фондового рынка. осуществлена оценка динамики уровня экономической концентрации фондовых бирж в украине. раскрыты и обоснованы особенности конкуренции между украинскими биржами. значительное внимание в исследовании уделено существующим проблемам и методическим подходам к идентификации манипуляций с ценными бумагами. проведен анализ использования украинскими биржами методов выявления сделок которые имеют признаки манипулирования. значение/оригинальность. проведенное исследование носит комплексный характер параметров влияющих на функционирование и развитие рынка ценных бумаг в украине. установлено что основное количество торговых операций с ценными бумагами на фондовом рынке украины осуществляется вне фондовых бирж. так, регулирующие органы не могут гарантировать безопасность инвестиций, которые могли бы быть направлены с помощью фондового рынка на развитие национальной экономики. определение манипулятивных действий является очень важной частью биржевой деятельности. ее цель – защита всех участников торгов от заключения недобросовестных сделок. украинские биржи не используют эффективные методы идентификации манипуляций. дальнейшие исследования должны быть направлены на увеличение доли организованного фондового рынке в украине что возможно при совершенствование методов, которые обеспечивают эффективную реализацию основных принципов конкуренции и увеличивают прозрачность совершения сделок. все это крайне важно для развития рынка ценных бумаг в украине и его дальнейшей интеграции в европейскую финансовую систему. baltic journal of economic studies 412 vol. 4, no. 5, 2018 corresponding author: 1 chernihiv national university of technology, ukraine. e-mail: shkarlet@ukr.net 2 international institute of innovative educational technologies, ukraine. e-mail: pvu9@ukr.net 3 chernihiv national university of technology, ukraine. e-mail: maksim-32@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-412-420 directions of development of the financial services market of ukraine serhii shkarlet1, valeriia prokopenko2, maksym dubyna3 abstract. development of the financial services market is an important component of the national economy’s development. within this market, credit and investment resources are formed, which are the basis of economic development of the real economy sector of the state. it is this that determines the importance of creating conditions for improving the efficiency of financial institutions, which become intermediaries between persons who have free funds and those economic entities that they need. the outlined justifies the relevance of the topic. consequently, taking into consideration the objective of the study, the following aim of its implementation was set: to identify and substantiate the main determinants of the development of the financial services market in ukraine. to achieve this goal, the following tasks were set and solved: to identify the main, most important, measures of transformation of the environment of financial institutions functioning; to substantiate the essence of such measures and the peculiarities of their implementation; to specify basic actions within the limits of separate determinants of the financial services market development, to describe their applied character. method. in the course of the research, a range of different scientific methods was used. among the general techniques, it is necessary to allocate methods of observation, comparison, abstraction. it is advisable to include the method of economic analysis, synthesis, system approach, content methods, and event analysis in specific research methods. results. universal priorities of financial services markets development in different countries are determined and systematized, the analysis of which made it possible to investigate perspective determinants of the development of such a market in ukraine, peculiarities of their introduction into the functioning of the financial services sphere are described. among these measures are the following: increase in the stability of financial institutions, increase the transparency of the functioning of producers and consumers of financial services, raising the level of financial literacy in society, reforming the state regulation system of the activities of financial intermediaries, the formation of the trust infrastructure system. taking into consideration the received scientific outcomes, the justification of peculiarities on the implementation of these priorities in the system of the financial services market functioning in ukraine is conducted. practical implications. the research results obtained in the course of the research implementation regarding the possibilities of changing the financial services market for improving the efficiency of financial institutions work have an applied character, and their implementation will make it possible to form a new environment for the functioning of such economic actors. this will facilitate the transformation of financial resources to increase the formation of investment and loan funds. the results obtained can be used by public authorities that regulate the activities of financial institutions in the process of developing new strategic documents for the development of the financial services market in ukraine. value/originality. the conducted research is relevant, considering the significant impact of the financial services market on the development of the national economy, the proposed measures for the development of such a market are applied and can be used by public authorities in the regulation of the activities of financial institutions. this research has been conducted within the framework of the scientific work implementation department of finance, banking and insurance, chernihiv national university of technology, ukraine on the following topics: “financial stability of economic systems in crisis conditions of management” (no. 0115u001149) and “development of financial intermediaries in the turbulent conditions of the national economy’s functioning” (no. 0115u001149). key words: financial service, financial institution, financial credibility, financial intermediary. jel classification: g20, g21 baltic journal of economic studies 413 vol. 4, no. 5, 2018 1. introductions development of the national economy depends on a significant number of factors of exogenous and endogenous nature. however, development of the country’s economy occurs only in presence of available financial resources, which use contributes to the expansion of the activity of economic entities, provides an opportunity for them to introduce innovative technologies in their own work and increase the quality of products, creates conditions to increase the demand of population for goods and services. formation of financial resources in the state occurs solely through the system of financial intermediaries’ functioning. there are also cases of self-financing and using internal investments. however, active development of the national economy is connected with the activation of financial institutions’ activity. such intermediaries are able to transform temporary free funds of legal entities and individuals and turn them into investment resources. that’s exactly why the creation of conditions for normal operation of the mentioned institutions is a guarantee for fulfilling by them their own functions and increase in volume financial resources within the national economy. taken together, financial intermediaries and their clients form a single area of interaction – the financial services market, where the demand and proposition for financial resources among its main participants are levelled. the financial and economic crisis of 2007-2008 had a negative impact on the financial services markets development in many countries of the world and, in general, their economies. after that, the vast majority of governments redefined the role of financial services in the development of the national economy and increased requirements for the functioning of financial intermediaries. the crisis in this area also witnessed the existence of a significant number of problems of a different nature: inefficient mechanism of state regulation of the activities of financial institutions, low level of financial literacy of the population, violation of the rights of consumers of financial services, etc. the problems outlined are universal and inherent to all countries regardless of the levels of their financial services markets development. that is why the definition of a set of key areas for improving the functioning of such markets is an urgent task for the conditions formation for the further development of national economies. there is no exception to ukraine. the financial services market development as a macroeconomic system is being studied by scientists for a long time. the most thorough works in this area should include the researches of ye. a. bobrov, ye. p. bondarneko, b. m. vyshyvana, т. yu. zarypova, v. zymovets, v. ilchuk, yu. м. kovalenko, v. korneyev, s. s. кrasovsky, v. mishchenko, s. naumenkova, і. podsygun, і. і. rekunenko, і. soloshkin, v. а. titov, м. м. тretiakov, v. p. unets-khodakivska, s. і. yurii, g. v. yurchuk, v. v. yashchuk, i. asmundson, d. acemoglu, g. akerlof, r . bergner, r . herring, a. santomero, c. stijn, о. wyman, and others. however, despite numerous works in the sphere of financial services markets development, taking into consideration variability of external conditions of this market functioning and inherent dynamism, an issue on the development of such a market is urgent, especially in current turbulent operating conditions of financial intermediaries and financial entities’ functioning. 2. financial stability, transparency of activities, and financial literacy thus, let’s consider the main directions for the system development of the relations between producers and consumers of the financial services in ukraine, which implementation will promote an increase in the work efficiency of the market of such services (figure 1). 1. stability growth of financial institutions. certainly, ensuring financial stability of all financial institutions is an important part of the formation of an effective system of financial intermediaries functioning in the country. after the financial and economic crisis of 2008–2009, the consequences of which are felt today, an overwhelming number of state regulators in the financial services markets revised the conditions for the capital formation of such institutions to increase their reliability. appropriate decisions were also made in ukraine. initially, minimum size of the authorized capital of banks was raised to 125.0 million uah, and later to 500.0 million uah. ukraine is gradually moving towards the introduction of european approaches to ensuring the stability of the financial services sector. results were partially achieved only in the banking system through gradual withdrawal of unstable commercial banks from the financial services market of the state (and those of them which didn’t correspond to new criteria determined by the nbu) (on banks and banking, 2000). however, for instance, within the insurance market, there is a different situation. first, this market has not undergone such cleansing as the market of banking services and, therefore, a significant number of insurers operate on it, which in reality do not carry out active activity, are used partially for money laundering and in other, not related with insurance sphere, activity. as for the authorized capital of insurance companies, this situation has developed. in the countries of the european union, uniform rules governing relations in the field of insurance are developed, which stipulate the establishment of rigorous legislative requirements (eu directive). currently, in 28 eu member states, the insurance market has an updated system of insurers’ solvency requirements solvency ii (yukhymenko, 2015). baltic journal of economic studies 414 vol. 4, no. 5, 2018 quantitative requirements are realized through the specific requirements to the capital of insurance companies: minimum capital requirement (mrs), which provides for an increase in authorized capital of up to 2.2 million euros for the insurance companies engaged in risky types of insurance and for insurers engaged in life insurance this limit reaches a mark of 3.2 million euros. at present, for ukrainian insurance companies, the size of the minimum statutory capital, in accordance with article 30 of the law of ukraine “on insurance” (on insurance, 1996), for an insurer who deals with types of insurance other than life insurance, is set at an amount equivalent to 1 million euros, and for life insurance companies, 10 million euro at a foreign exchange rate. however, a difference between requirements for providing the minimum size of the statutory fund for ukrainian and european companies is that the domestic legislation provides: amount in euro is determined at the time of the authorized capital formation, and may not be reviewed later, despite the change in hryvnia exchange rate to euro. this has become especially relevant in the last few years. as for the european directive, then the capital adequacy of the established minimum level should be ensured on a daily basis, otherwise, supervisors for the activities of insurance companies in european countries may resort to the procedure for license withdrawal, as it jeopardizes the failure to fulfil its obligations to provide insurance services under concluded contracts (baliev, 2016). the outlined gives grounds for asserting that in order to improve the reputation of insurers, there is a need for a profound reform of the entire insurance market. in particular, it is necessary: 1) increase the level of information disclosure about end-users not only of banking institutions but also of other non-bank financial intermediaries; 2) increase requirements for formation of statutory capital of institutions, which attract clients’ funds; 3) clean up individual segments of the non-bank financial services market, especially in terms of withdrawal from such a market of really inactive credit unions, non-state pension funds, insurance companies (both lifeand non-life insurance); 4) increase requirements for the functioning of rating agencies, which assign credit ratings to financial institutions and thus affect the perception of the reliability of the financial services market participants. hence, an increase in the level of stability of financial institutions will contribute to the development of the entire financial services market. availability of financially able to counter the external threats of financial service providers is a key to increasing the efficiency of such a market and the rapid normalization of the work of financial intermediaries during the crisis periods of the national economy’s functioning. 2. increasing the transparency of the functioning of producers and consumers of financial services. an important condition for the development of the financial services market in ukraine is the increased transparency of the activities of all its participants. in scientific papers, it was decided to note the lack of determinants of the development of financial services in ukraine reforming the system of state bodies regulating the activities of financial intermediaries and ensuring the quality of its work increasing the level of financial literacy of citizens growth of stability of financial institutions ensuring transparency of financial intermediaries increased level of the financial services market development im pl em en ta tio n le ad s to im plem entation leads tocreating a trust infrastructure system and creating conditions for its development figure 1. the main imperatives of raising confidence in the financial services market source: compiled by the authors (berglof, bolton, 2002; cevik, kirci, dibooglu, sel, kutan, ali, 2016; sutton, jenkins, 2007; barjaktarović, paunović, ječmenica, 2013; baily, elliott, 2016; adnan, 2006; thalassinos, 2008) baltic journal of economic studies 415 vol. 4, no. 5, 2018 transparency in the activities of institutions providing financial services to clients. however, taking into account ukrainian realities, we believe that it is also necessary to introduce mechanisms for improving the quality of information about financial services consumers. vishwanath t., kauffman d. note that awareness among public authorities of the importance of transparency in the mechanisms of maintenance of welfare and development of economic markets is growing. in the economic sphere, greater availability of information, its reliability and timeliness improve resource allocation, increases efficiency and increases growth prospects. the scientific literature on financial crises recognizes that insufficient transparency is one of the factors that led to the emergence of long-term financial and economic crises (vishwanath, kauffman, 2001). the outlined only confirms the importance of research and increasing the level of transparency in the functioning of all economic actors. it is worth pointing out that transparency issues concern not only the work of financial institutions and information about their clients. this also applies to the functioning of public authorities that regulate financial services markets. it should be taken into consideration the thought of p. shtompka: “in order to increase the transparency of a public organization, the actions of the authorities should be the most open nature. it is necessary to develop and implement an effective information policy that would serve this purpose. to do this, you need to create independent media, independent centres that collect statistics, statistical agencies, reform monitoring centres on researching public opinion” (shtompka, 2012). in view of the above, in our opinion, in order to increase the transparency of functioning of the financial services market, it is necessary: 1. to improve the quality of the credit history bureau’s work by creating a single national system of credit records received by clients with the obligation of all credit companies and credit unions to provide relevant information. 2. to make the state databases of the population as accessible as possible for the work of financial institutions (database of convicted persons, data on court decisions in the field of financial services provision, data of the state executive service), as it happens in developed countries, where such information is not only provided in the open access, but also the access to it for institutions is synchronized, which increases the usability of its use and search. 3. to increase the transparency requirements of financial institutions, to obligatory provide to clients with information about the real value of financial services (as required by the law of ukraine “on consumer lending”, 2016), but this applies only to credit services). 4. to implement the mechanism of regulating information on the status of financial institutions by state authorities, to determine the data and requirements for their presentation obligatory for publication on official sites. 5. to create by analogy with the mechanisms of credit reference bureau for preventing fraud by clients of other financial intermediaries, except for credit. especially this measure is relevant for the activities of risk insurance companies that deal with cases of unfair customer behaviour. that is why it is worth creating a single database of unscrupulous clients, and insurance companies are obliged to participate in its creation and work. 6. to develop a mechanism for rating activities of nonbank financial institutions in a set of indicators to increase the awareness of clients concerning their work quality. 7. to strengthen the role of self-regulatory organizations in providing information requirements to financial institutions, especially as regards the development of rules for participants in such associations. 8. to take into account the experience of publishing the owners of banking institutions, which was implemented by the nbu, and to introduce it within other segments of the financial services market, to require financial institutions to provide data on their main actual owners. 9. to create a single platform on the basis of the main self-regulatory organization (or public institution) in the field of the functioning of the financial services market to fill its information with financial intermediaries. this would enable customers to compare the terms of financial products, analyse comparative data on the performance of financial institutions, and use the information of state regulators on the functioning of individual segments of the financial services market. 10. increase the use of the potential of modern information technologies to increase the level of information openness of financial institutions, etc. increasing the transparency of the work of financial institutions is an integral part of the development of the financial services market as it increases the transparency of its operation, which contributes to increasing the trust between consumers and producers of such services. 3. increasing the level f financial literacy in society financial literacy of society is an important condition for the development of the national economy and its financial system in particular. actually, all developed countries introduce measures to increase awareness of the specifics of the financial services use. it is worth noting that ukraine is to some extent an outsider in campaigns to raise the level of financial education and financial literacy for the population. the state authorities have not initiated or developed any programs in this regard, despite the fact that the introduction of educational programs for consumers is one of the first points of the implementation of the concept on the protection of the rights of consumers of financial services in ukraine (the concept of rights protection of consumers of financial services in ukraine, 2009). baltic journal of economic studies 416 vol. 4, no. 5, 2018 in ukraine, after the financial and economic crises of the last decade, the issue of improving the literacy of economic actors is quite acute. after 2008, a large number of individuals lost their property due to the inability to service credit obligations. this was caused by a lack of understanding of the risks of foreign currency loans. as a result, a significant number of clients of financial institutions felt guilty. in this situation, in fact, all those involved in the functioning of the financial services markets were guilty. customers have poorly read the terms of the loan agreements, financial institutions were not interested in explaining in detail the features of their financial products developed, state authorities did not pay enough attention to a significant increase in the volume of foreign currency loans within the entire banking system, did not affect the process. the misunderstanding between consumers and lenders was due to the active development of collecting companies, credit reference bureaus, and significant litigation cases. deepening of distrust between the above-mentioned subjects was accompanied by unusual cases of exceeding the assessed penalties in comparison with the initial amount of the loan. the crisis of 2013-2014 has shown that lessons learned from 2008 were made by both clients and financial institutions. however, the bankruptcy of banks, lowering the real value of state-guaranteed funds for deposit services again halted the process of restoring confidence in the activities of financial institutions, primarily commercial banks. because of economic transformations, banks have reduced the volume of loans for business entities. this niche was quickly taken by non-bank financial institutions (consumer lending). however, the conditions for obtaining loans in such institutions are complex and unprofitable for citizens. interest rates on loans exceed 300-400% per annum. customers are not always aware of the real amounts of overpayments for loans received and possible sanctions in case of late payment. these examples demonstrate the importance of raising the financial literacy of citizens in society, understanding their specifics of the functioning of the financial services sector, the ability to determine their own real possibilities of servicing loans. problems of the low level of financial literacy are also relevant for developed countries where financial services markets are developing more stable. however, according to studies conducted, even in the most economically developed countries, the majority of the population has a low level of financial knowledge and often overestimates the assessment of their own knowledge and skills in consumer lending products. simply put, most consumers around the world are not well trained to understand and manage their debt. this is a very weak foundation for building a sophisticated financial architecture (financial literacy and awareness in ukraine: facts and conclusions. project on financial sector development, 2010). increasing the level of financial literacy makes it possible to reduce the number of cases of use of financial services by consumers who do not realize the real conditions for their provision. that is why in this area it is necessary: 1) elaborate the national program for increasing the level of financial literacy of population for the long term; 2) create state funds (for instance, on account of financial resources of the nbu) financing of individual projects as for increasing the level of financial literacy; 3) use the hei potential to introduce the courses for increasing financial literacy in educational plans on specialists training (elaboration of separate themes on this subject); these issues are especially urgent for students of non-economic specialties; 4) involve international organizations for projects financing to increase the financial literacy of population, spread information through heis about the existence of such opportunities; 5) create within the bounds of state authorities, which regulate the activity of separate financial intermediaries, individual departments (for example, in the usa in the structure of the us consumer protection bureau, the department of consumers’ education and interaction with them operates), which would be involved in relevant problem (latkovska, 2013). it is also interesting to note the experience of italy in taking into account the level of financial literacy in the process of providing financial services. the client, coming to the bank, is required to complete a questionnaire which determines its level of financial literacy. and the bank does not have the right to provide him with a service that is more complex in its content than the level of literacy of the client. otherwise, in the case of a controversial situation, the court will be uniquely on the client side. today, it would be possible to adapt the existing experience to the ukrainian conditions (skapenker, 2013). increasing the level of financial awareness of the population contributes to increasing the resilience of financial institutions, normalizing relations between the participants in the financial services market, gradually increasing the level of trust between them. the outline only confirms the importance of implementing measures to change the current situation in this area. 3. reform systems of state regulation of the financial intermediaries’ activities development of the financial services market is impossible without the existence of reliable state regulation of its functioning. in ukraine, an inefficient system of such regulation was formed in which the nbu implements the most important functions in the baltic journal of economic studies 417 vol. 4, no. 5, 2018 activities of banking institutions, which are the largest financial intermediaries in ukraine, and national financial services commission and national securities and stock market commission supervise the rest of financial institutions. however, in addition to the nbu, financial and institutional capacity of other state bodies is limited, which also affects the quality of state regulation. the national financial services commission does not have a real opportunity to clear the market of insurance services from nominally existing insurers, as the funds of clients in such institutions will be lost. it is also not possible to compensate these clients’ resources, as implemented by the nbu in cooperation with the individual deposit guarantee fund. guarantee mechanisms in ukraine in the insurance services market have not been created. the outlined shows that in this area it is necessary to: 1) transform the system of state regulation in the sphere of financial intermediaries functioning by means of either the creation on the basis of the nbu of a single mega regulator, as it has already been established by the countries of the former soviet union (russia, kazakhstan), or to consider the concept of constructing another, more adapted to current realities of the system of supervision over the activities of such institutions (model twin peaks becomes the most popular among developed countries); 2) increase the role of the state in protecting the rights of financial services consumers, effectively create and organize efficient activities of the financial ombudsman; 3) increase the level of responsibility of executive authorities for making decisions in the sphere of reforming of the financial services markets; 4) promote the introduction of new information technologies for processing the data on the financial activities of insurers; 5) change the system for collecting information on financial intermediaries, to expand it with new indicators, criteria, and mechanisms for the disclosure of such data. reforming the system of state regulation of the financial services markets in ukraine is already an urgent problem and needs to be addressed, given the modern transformations of such markets and the new challenges facing the regulators that they create. 4. creation of a trust infrastructure system trust is a major factor in the development of the financial services market. in order for such a market to develop normally, formation of trust becomes the main task, without which it is impossible to increase the efficiency of interaction between producers and consumers of financial services. infrastructure is a complex, dynamic system, which elements have a common goal of the activity, which consists in the formation and implementation of measures to create the preconditions for the functioning of a particular phenomenon, object, process, i.e., promoting the development of another system. thus, the infrastructure of financial trust is a system of establishments and institutions with the same goal of the activity, which is to develop and implement measures to create the preconditions for building financial trust in society. in figure 2, the system of financial trust infrastructure is illustrated. thus, within its boundaries, it is possible to identify common elements that increase the efficiency of the work of all financial institutions and segmental organizations that play an important role in the development of individual components of the financial services market. the main element of the trust infrastructure in ukraine can be, for example, the guarantee fund for individuals, which provides guarantees of repayment in case of insolvency of the banking institution. however, in ukraine, in addition to this fund, there are no more guarantee mechanisms, which hold back the process of financial trust growth. that is why, in our opinion, the following should be done: 1) create insurance guarantee funds for clients’ insurers of life type (on adoption of the draft law of ukraine on the guarantee fund for insurance payments under life insurance contracts, 2013); 2) create mechanisms for guaranteeing deposits attracted by credit unions (non-bank financial institutions: assessment of their impact on the stability of the financial system, 2012); 3) adapt foreign experience and introduce guarantee mechanisms for the repayment of non-state pension funds of clients; 4) consider the introduction of the above mechanisms within the framework of certain types of services of risk insurance companies (for example, as civil liability insurance for land vehicle owners, which is realized by the motor (transport) insurance bureau of ukraine (on mandatory civil and legal liability insurance for motor vehicles owners, 2004)); 5) increase requirements for the insurance intermediaries’ activities, the effectiveness of their work, create an online rating system for providing their services and develop a list of unscrupulous insurance intermediaries who take fraudulent actions; 6) in general, develop a concept for building a trust infrastructure system in the state for the coordinated work of all its potential participants. thus, the introduction of these measures for the financial services market development will allow ukraine to create conditions for increasing the efficiency of financial intermediaries, increase the financial literacy of population that in the complex only will promote normalization of relations between the main participants of such a market. baltic journal of economic studies 418 vol. 4, no. 5, 2018 level of financial trust i n f r a s t r u c t u r e o b j e c t s favor to increa se favor to increase public authorities (verkhovna rada of ukraine, cabinet of ministers of ukraine, nbu, national commission for the regulation of financial services markets, national securities and stock market commission etc.) self-regulated of organization, association mass-media specialized mass-media online resources in the field of financial services markets research banking institutions stock exchanges registrators depositaries clearing institutions higher education institutions scientific institutions guarantee fund for individuals' deposits guarantee mechanisms in the insurance market guarantee mechanisms in the investment services market collector companies rating agencies credit reference bureau in the field of regulatory regulation in the field of information provision in the field of activities servicing in the field of personnel support in the field of operations guarantee in the field of operational activities figure 2. classification of the main components of the system of financial trust infrastructure source: compiled by the author taking into consideration (hrishova, dubyna, shyshkina, 2017; prokopenko, dubyna, 2015; chuprykova, 2014; shkarlet, dubyna, tarasenko, 2016; sho robert, 2000; thalassinos, 2008; thimann) 5. findings within the article, directions on the development of national financial services markets are substantiated. a fragmentary analysis of the current state of the financial intermediaries’ functioning in different countries has allowed identifying areas for their activities improvement and, respectively, the financial services market development. the following measures were identified as raising the level of financial literacy in society; increase in the transparency of the functioning of producers and consumers of financial services; increase in the stability of financial institutions; reforming the state regulation system of the financial intermediaries’ activities; formation of the trust infrastructure system. it is proved within the article that the outlined priority measures to improve the efficiency of financial services markets are relevant for all countries with a market economy since they solve complex problems of ensuring, first, effective interaction between financial institutions and their clients. most of the measures were determined based on an analysis of the effects of the financial and economic crisis of 2007-2008 on the individual markets baltic journal of economic studies 419 vol. 4, no. 5, 2018 functioning for financial services and the peculiarities of fighting them by governments of different countries. the article is devoted to the issue of reforming the financial services market of ukraine, which for the last ten years has been in complicated conditions of its own functioning, which is conditioned by the influence not only of the financial and economic crisis of 2007-2008, which was by its nature worldwide, but also by the local economicpolitical crisis of 2013-2014, which affected the functioning of all types of financial institutions and led to a significant deterioration in the economic situation of the country. 6. conclusions further perspective directions of research in the sphere of financial services markets should include the need for a deeper study of the peculiarities of the formation within the national economy of guarantee systems for ensuring the return of funds to customers in the event of the insolvency of financial service providers. issues of their complex study and combination in the unified concept of the trust infrastructure development in the country deserve special attention. references: baliev, v. ye. 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(in english) baltic journal of economic studies 276 vol. 4, no. 5, 2018 corresponding author: 1 university of customs and finance, ukraine. 2 university of customs and finance, ukraine. 3 h.s. skovoroda kharkiv national pedagogical university, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-276-282 legal regulation of liability for offenses in the financial sphere in the eu countries and ukraine: comparative analysis dmytro pryimachenko1, tetiana minka2, volodymyr marchenko3 abstract. the aim of the article is to conduct a comparative analysis of the legal principles for liability in the financial sphere in the eu and ukraine and to define ways of domestic legislation improvement on this basis. the subject of the study is the experience of european countries in the state regulation of liability for financial offenses. methodology. the study is based on a comparison of foreign experience in the legal regulation of liability for financial offenses on the example of european states with the status of the national tort law in this area. the use of general scientific and special scientific methods and techniques of scientific knowledge enabled to characterize the national experience of the legal regulation of legal liability for committing financial offenses by the coverage of the provisions of the criminal code of ukraine, the code of ukraine on administrative offenses, and the tax code of ukraine, as well as its comparison with the experience of the legal regulation of liability for offenses in the financial sector on the example of france, germany, latvia, spain, sweden, greece, and other eu countries. the results of the comparative legal study revealed that contrasting the eu member states, the national model of the legal regulation of liability for offenses in the financial sector is characterized by multi-levelness and varying degree of severity of punishment. practical implications. it is proved that the mechanism of the legal regulation of liability for financial offenses in ukraine is more improved than in european countries because of the legal provisions with a strict codification of financial offenses, their differentiation into administrative delicts and criminal offenses that enables to impose milder state sanctions on those acts that do not pose a significant social danger. relevance/originality. a comparative legal study of the experience of the legal regulation of liability for financial offenses provides a better understanding of the prospects for the development of national administrative tort law in this area. key words: legal liability, financial offenses, legal regulation. jel classification: g17, o16, p34 1. introduction violation of a stable social order always has a negative undertone whatever the intensity of such violation and severity of its consequences are. this aspect is particularly acute in the twenty first century when society is expanding its sphere of existence and the number of objects of influence and research. one of the most important areas of human life is financial since it involves the interests of all social formations, from individual to the entire state. moreover, the financial sector is important because it involves relations associated with material values, more often with high volumes of funds, which are financial resources in totality. without accurate managing and using the latter, any state will not be able to function properly; moreover, violated financial relations lead to disorder in a country. therefore, for the protection of financial relations, legal regulations that form the mechanism of liability for their violation are developed and adopted. furthermore, for the improvement of the legal regulation of liability for offenses in the financial sector, these issues require both scientific development and analysis of the foreign experience of european states. according to p.s. melnyk, foreign experience contributes to expanding our perceptions of the legal phenomena under the study; helps consider this or that problem from another angle, compare own achievements with the achievements of foreign colleagues; prevents wasting time to solve problems that have already found solutions in foreign publications. in addition, the extraordinary scientific relevance and practical utility of any comparative legal research are undeniable (melnyk, 2010). therefore, to highlight the positive aspects of the national system of legal regulation of liability for offenses in the financial sphere, as well as issues that need improvement in this regard, it is necessary to conduct a comparative analysis of the foreign experience of the eu and ukraine on this issue. baltic journal of economic studies 277 vol. 4, no. 5, 2018 the theoretical basis of this study is the achievements of many academic scholars in scientific research on various aspects of liability for offenses committed in the financial area, in particular, s. v. kivalov, z. m. budko, a. y. ivanovskyi, i. y. slubskyi, yu. p. bytiak, a. t. komziuk, m. i. melnyk, v. k. kolpakov, t. m. yamnenko, a. m. bandurka, a. m. klochko, r . s. satuev, v. m. popovych and others. 2. main material to begin with, a comparative analysis requires defining the concept of “responsibility” and “offense”. it should be noted that the etymology of the word “responsibility” means the obligation imposed on someone or taken on oneself to be responsible for a certain area of work, a case, for someone’s actions, deeds, words, leading to taking guilt for possible negative consequences (busel, 2005; slovar russkogo literaturnogo yazyka). it should be noted that the term “responsibility” is the subject of the study of many sciences that confirms its multidimensionality and significance for various aspects of social reality. philosophy studies responsibility as a concept that reflects the objective, historically specified nature of the relations between a person, a collectivity, and society from the perspective of conscious implementation of mutual requirements (illicheva, fedoseev, (eds.), 1983; popov, 2001). in the legal sphere, responsibility acquires the meaning of legal responsibility/liability and is interpreted as a form of social responsibility, the core of which is state enforcement of the sanctions provided by the law to the offenders (individuals and legal entities). legal responsibility is a legal relationship between the state represented by the authorities and the offender, subject to legal sanctions with negative consequences for him/ her (shemshuchenko, 1998). therefore, liability is negative state response, based on the relevant prohibitive legal regulations, to the offenses committed in relation to a particular object (legal relations in a specific sphere of public life), which gives a motivated right to apply methods of state coercion. in this case, the “key” to the occurrence of legal responsibility is the offense. according to the reference literature, to offend (to violate) means: 1) to do something contrary to the order, the law and so on; 2) to act, to do contrary to norms, customs, generally accepted rules, to deviate from something established, customary; 3) to recite anything wrongly, distort, misrepresent; 4) to interfere, interrupt any state, process or feeling; 5) to damage, destruct, destroy anything; 6) to start; 7) to cause, awaken something, set in motion, move something from the place; 8) to touch, take without permission something, and so on (bilodid, 1976). the offense has a wider meaning. for example, o. f. skakun defines the offense as a public hazardous or harmfully unlawful (wrongful) culpable act (action or inaction) of a delictual person, which entails liability (skakun, 2010). v. p. marchuk characterizes the offense as an unlawful, culpable act, individually or socially harmful or dangerous, by a delictual subject (marchuk, (ed.), 2003). k. h. volynka notes that the offense is a social and legal opposite of lawful conduct. such behaviour violates the rights and interests of either individuals or society as a whole. in total, offenses constitute a danger to society, violate the rule of law, the existing legal order (volynka, 2003; podorozhnii, 2016). in this regard, m.m. marchenko argues that in any society, the offense is a social and legal antipode of lawful conduct. there are many different definitions of an offense. in general, they can be summarized by saying that the offense is a culpable, unlawful, socially harmful act of a legally capable person or persons, which entails legal liability (bedniakova, 2006; marchenko, 2004; podorozhnii, 2016). in accordance with this definition, an offense in the financial sphere is an unlawful, culpable act that violates the normal state of legal relationships arising from the fact of the management, distribution, coordination, use and other actions with financial resources. to be precise, this is the violation of certain regulatory provisions of the budget, tax, banking, currency, monetary and other types of legislation (orliuk, 2010; romaniuk, 2013). it should be noted that in ukraine, the specifics of legal regulation of liability for offenses in the financial sphere varies according to the sectoral distribution of such unlawful acts, which is based on the degree of social danger and the degree of punishability of the latter. in this context, offenses can be classified into administrative offenses in the financial sphere and criminal ones, that is, crimes. accordingly, legal responsibility for the actions of the first group is provided for in the code of ukraine on administrative offenses (hereinafter – the cao), which shall protect the rights and freedoms of citizens, property, the constitutional system of ukraine, the rights and legitimate interests of enterprises, institutions and organizations, established legal order, strengthen the rule of law, prevent offenses, educate citizens to consistently abide by the constitution and laws of ukraine, to respect the rights, honour and dignity of other citizens, the rules of civil coexistence and to honestly fulfil their duties, obligations to the society (kodeks ukrainy pro administratyvni pravoporushennia). in particular, in chapter 12 of section ii of the cao, a number of legal regulations provide for liability for offenses in the financial sphere, such as: article 162 of the cao: the illegal purchase, sale, exchange, use of currency values as a means of payment or as collateral – shall entail a warning or imposing a fine of thirty to forty-four times baltic journal of economic studies 278 vol. 4, no. 5, 2018 minimum non-taxable incomes with the confiscation of currency values; article 1622 of the cao: the illegal opening or use of foreign currency accounts of individuals, committed by a citizen of ukraine residing permanently in its territory, as well as currency accounts of legal entities operating in ukraine, committed by an official of the enterprise, institution or organization or on his/her behalf by another person, as well as the commission of the said actions by a citizen, an entrepreneur, – shall entail imposing a fine amounting to 500 to 1,000 times minimum non-taxable incomes; article 1632 of the cao: non-submission or untimely submission of payment orders by officials of enterprises, institutions, and organizations for the transfer of payable taxes and charges (mandatory payments) – shall entail imposing a fine on officials amounting to from five to ten times minimum non-taxable incomes; article 1634 of the cao: failure to deduct or failure to transfer to the budget the sum of the tax on personal income in the payment of income to a natural person, transfer of personal income tax at the expense of enterprises, institutions, and organizations (except when such transfer is permitted by law); failure to notify or late notification on the incomes of citizens to the state tax inspectorates on the agreed format – shall entail a warning or imposing a fine on officials of enterprises, institutions, and organizations, as well as on citizens, entrepreneurs, of two to three times minimum nontaxable incomes; article 1638 of the cao: deliberate actions of an official participant in the stock market bearing marks of manipulation on the stock market, established in accordance with the law on state regulation of the securities market, – shall entail imposing a fine of one hundred to five hundred times minimum non-taxable incomes; article 16313 of the cao: violation of laws of ukraine and regulatory acts of the national bank of ukraine regarding the procedure for accepting cash for its further transfer by a non-bank financial institution which is licensed by the national bank of ukraine for transferring funds without opening accounts, a commercial bank agent – shall entail imposing a fine on officials of a non-bank financial institution licensed by the national bank of ukraine for transferring funds without opening accounts, a commercial bank agent of one hundred to two hundred times minimum nontaxable incomes; article 16314 of the cao: violation of the laws of ukraine and regulatory acts of the national bank of ukraine regarding the procedure for the transactions with electronic money – shall entail imposing a fine on officials of a legal entity, a business entity, of one hundred to two hundred times minimum non-taxable incomes, and others (kodeks ukrainy pro administratyvni pravoporushennia). specific offenses in the financial sphere, namely in taxation, and the specificities of the occurrence of liability for their commission are regulated by the articles of the tax code of ukraine (hereinafter – the tcu). in addition, this specified legal regulation controls a special type of liability, that is, financial. in accordance with article 11 of the tcu, financial liability for violating laws on taxation and other legislation is established and applied in compliance with the tcu and other laws. a financial liability is (financial) fines and/or penalties (podatkovyi kodeks ukrainy). the specified type of liability is applied in case of committing offenses directly stipulated by the provisions of the tcu, such as: article 117 of the tcu: non-submission, within the time limits and in cases provided for by the tcu, applications or documents for registration in the relevant controlling body, registration of changes in the location or other changes to their credentials, nonsubmission of corrected documents for registration or amendment, misrepresentation or incomplete submission, nonsubmission of information on persons responsible for accounting and/or drawing up tax reports in accordance with requirements of the tcu, – shall entail imposing a fine on self-employed persons up to 170 hryvnias, on legal entities, separate units of a legal entity or legal entity responsible for charging and paying taxes to the budget while performing the agreement on joint activity, up to 510 hryvnias; article 118 of the tcu: non-submission of information on the opening or closing of accounts of taxpayers to the relevant supervisory authorities within the established term by banks or other financial institutions – shall entail a fine of 340 hryvnias for each case of non-submission or delay; article 126 of the tcu: if the taxpayer does not pay the agreed amount of monetary obligation within the timeframe prescribed by law, such taxpayer is liable to a fine, etc. (podatkovyi kodeks ukrainy). the next group of offenses is crimes, that is, socially dangerous culpable acts, which entail a criminal liability (kryminalnyi kodeks ukrainy). a key feature of criminal offenses is a significant degree of their public danger, in other words, the high level of harm inflicted on society in connection with their commission. this factor determines much more severe legal responsibility for this type of offense than for administrative ones. the list of criminal acts in the financial sphere and certain aspects of liability for them are presented in the provisions of the criminal code of ukraine (hereinafter – the ccu). thus, a vivid example of a financial crime is the legalization of proceeds from crime, as provided for in article 209 of the ccu, that is, the commission of a financial transaction or transaction involving monetary or other assets gained from the commission of a socially dangerous unlawful act preceding the legalization (laundering) of proceeds, baltic journal of economic studies 279 vol. 4, no. 5, 2018 as well as the commission of actions aimed at concealing or disguising the illegal origin of such monetary or other assets or possession thereof, rights to such monetary or other assets, sources of their origin, location, movement, change in their form (conversion), as well as acquisition, possession or use of monetary or other assets gained from the commission of a socially dangerous unlawful act preceding the legalization (laundering) of proceeds. liability for such an act shall be the restraint of liberty for a term of three to six years with the deprivation of the right to occupy certain positions or engage in certain activities for up to two years with forfeiture of property (kryminalnyi kodeks ukrainy). furthermore, article 210 of the criminal code provides for liability for use of budget funds contrary to their target allocation, budget expenditures or granting of credits from the budget without established budget appropriations or exceeding approved expenditure limits; as well as article 211 provides for liability for publication of legal regulations that reduce budget revenues or increase budget expenditures contrary to the law. liability for the latter act shall be an imposition of a fine of hundred to four hundred times minimum non-taxable incomes or corrective labour for a term up to two years, restraint of liberty for a term up to five years with the deprivation of the right to occupy certain positions or engage in certain activities for up to three years (kryminalnyi kodeks ukrainy). therefore, the national model of legal regulation of liability for offenses in the financial sector is characterized by multi-levelness and varying degrees of severity of punishment. however, in foreign countries, such as the states of the european union, this issue is considered from a somewhat different angle. for example, the analysis of germany’s experience as one of the most financially progressive countries to date enables to conclude that the legal system of this country is characterized by the division of offenses in total. in particular, one of the types of punishable criminal acts is an administrative offense (administrative delinquency). however, the regulation of liability for them is not separated from the general provisions of criminal laws in comparison with ukrainian experience. for example, considering tax violations in the financial sphere, the tax code of germany, promulgated on october 1, 2002 (the fiscal code of germany) (fiscal code of germany in the version promulgated on 1 october 2002), is the most important legislative act defining the liability for tax crimes and offenses. it is worth noting that the german criminal code practically does not contain rules on liability for tax crimes, with the exception of punishments for falsifying the signs of payment of customs duties and disclosure of tax secrecy (romanko). in the second subparagraph of section 369 of the tax code, based on the principle of “lex specialis derogat generali,” in other words, the prevailing application has a special regulation of the tax code, the issue of possible competition of the criminal law of the tax code and the criminal code of the federal republic of germany is allowed. in order to analyse the specificities of the delineation of crimes and offenses in germany’s tax legislation, it is necessary to define the valid concepts and features of the crimes in the country. the criminal code of the federal republic of germany of november 13, 1998, provides for a formal definition of a crime. in accordance with section 11 of this law, ‘unlawful act’ means an act that fulfils all the elements of a criminal provision (kryminalnyi kodeks frn). unlawfulness is understood as an act contradicting to the legal order in general, that is, an act must involve the statutory structure of a criminal act or violation of public order (yermolova, serebrenikova, 2008; vaskevich). most legislative acts in germany are focused on the regulation of financial offenses related to money laundering. in particular, the provisions of the money laundering act of 1993 established the legal basis for the national system for counteracting this group of offenses. in addition, this legal regulation defined the list of participants of the system of financial monitoring, outlined the scope of obligations of the subjects of financial monitoring, and provided for sanctions for failure to meet requirements for client identification, collection, storage, and transmission of information to controlling bodies (gesetz uber das aufspuren von gewinnen aus schweren straftaten – geldwachegesetz; symovian, 2011). furthermore, the provisions of the german criminal code convey legal regulation of liability for “money laundering.” the most severe punishment for the specified offense is the restraint of liberty for a term of up to 10 years. however, in some confluence of circumstances, the punishment shall not be at all. sanctions are not imposed if a person voluntarily reports to the relevant authorities about the crime. in addition to sanctions for the legalization of criminal incomes, the code has established a list of crimes predicate to laundering. in accordance with section 12 of the german criminal code, all legal offenses punishable by imprisonment for one year and more may be “precedes” of the legalization. among the less serious crimes in this list are the following violations: bribe-taking, bribery, extortion, trafficking in persons, pimping, theft, misappropriation, fraud, forgery of documents, gambling without appropriate permits and a number of other offenses (symovian, 2011). next, the experience of france regarding the legal regulation of liability for offenses in the financial sector is worth analysing. it should be noted that the unlawful acts in this state are classified into three types, such as crimes, misdemeanours, and felonies (symovian, 2011). furthermore, the french system of legal regulations, provisions regulating liability for offenses in the financial sphere is quite extensive. accordingly, in france, articles baltic journal of economic studies 280 vol. 4, no. 5, 2018 on criminal liability for tax evasion are contained in the tax code of 1950 (articles 1727-1756). however, the criminal code of france of 1992 does not define elements of tax crimes (kozochkin, 2001; salkazanov, 2017). the french tax code defines criminal offenses, as: non-submission of a declaration of income or a delay in its submission (article 1728); provision of a knowingly false declaration (article 1729); untimely payment of taxes (articles 7130-7130 b); violation of the invoicing rules (article 1737); failure to declare or pay tax in electronic form (article 1738) and other misdemeanours. the breach of the above-mentioned regulations shall be punished by either fines or an increase in total tax payable (salkazanov, 2017). it should be noted that in france a number of specific legislative acts provide for liability for activities aimed at laundering the proceeds from committing drug-related crimes (mezentseva, 2002; romanko). the institution of liability for financial offenses is quite active in spain. for example, in the criminal code of this state, many articles impose sanctions on certain financial violations. in particular, in spain, manipulative actions related to stock markets are severely punished. for example, if a person uses or provides information relevant for quoting any type of securities on an organized, official or recognized market and receives for oneself or a third party an economic benefit exceeding 65 million pesetas (or the corresponding amount in euros), or causes damage by the same amount, the punishment shall be imprisonment for a term of one to four years and a fine of three times profit that a person has obtained by assisted to obtain thereof. the subject of such an offense is a person who has become aware of information due to the performance of his professional activities, such as a professional participant in the stock market (kryminalnyi kodeks ispanii; klochko, 2013). in spain, counterfeiting and tax evasion are also recognized as criminal offenses. liability for the latter is stipulated in article 305 of the criminal code of this state; according to it, the acts are punishable in case of damage to the state treasury of the state, autonomy, local treasury via non-payment of taxes, deductions, receipts, or use of state funds derived from underpayment of taxes not received, deductions or amounts to be refunded, or unreasonably received money. in this case, there are some exceptions. for example, even if the total unpaid or illegally retained funds exceed 15 million pesetas (one of the main attributes of incrimination), an offender may be exempted from legal liability for the said actions in case of a regulation of his/her tax obligations, before being informed by the tax authorities about the start of the audit aimed at determining tax obligations, or in the absence of such an audit, before the public prosecutor’s office (another public authority) submits a complaint or a statement against the said person or before the prosecutor’s office or investigating judge carries out actions that will result in the formal beginning of the case (kokorev, 2012). therefore, the analysis of many european countries reveals that mostly the legal responsibility for offenses in the financial sphere tends to impose criminal sanctions. in other words, financial offenses, regardless of the degree of their social danger, as well as the scope of punishment for their commission, are regulated by criminal legislation. for example, similarly to spain, swedish law incriminates a professional stock market participant for an act of manipulating stock market prices. in this country, abuse, such as the dissemination of misleading information to influence the price of any property, including securities, is criminalized. persons who occupy certain positions in the organizations involved in bidding on the stock market are among other subjects liable for such acts (klochko, 2013). in the overwhelming majority, it is precisely criminal responsibility for other offenses in the financial sector in sweden. however, in some countries of europe, financial offenses include such unlawful actions, analogues of which the legal system of our state does not contain. for example, the provisions of the criminal law of greece establish the legal responsibility for insurance fraud. this act is distinguished as an offense in many criminal laws and in russian pre-revolutionary legislation as well. the person is punishable, if in order to receive for him/herself or another person the insurance money for a movable or immovable asset, he/she creates the danger, against which the thing is insured, as well as a person, who similarly to obtain the sum insured, causes selfinflicted injury or enhances the consequences of bodily injury received as a result of an accident (talan, 2007). the austrian legislation provides for legal liability for “careless bankruptcy” carried out by a debtor of several lenders who inadvertently causes his/her insolvency, or being aware of own insolvency involuntarily causes damage to all or part of his/her lenders by entering into a new debt, pays a debt, pledges property, untimely offers to appoint external management of the property, conclude an amicable agreement, open a competition, etc. (talan, 2007). the foreign experience in the legal regulation of liability for offenses in the financial sphere of the republic of latvia is worth analysing. it is of interest because of common features in the legal systems of our states due to previous membership in the soviet union of this country and ukraine. for example, both in latvia and in our country, a codified act establishes liability for administrative offenses, along with crimes, in particular in the financial sphere. the code of the republic of latvia on administrative offenses recognizes as offenses following acts: non-compliance with procedures for registration of cash transactions, violation of consumer credit rules, tax evasion, false information in tax returns, etc., for which are liable to a fine (kodeks latvii pro administratyvni pravoporushennia). a similar model of the legal regulation of liability for offenses in the financial sphere is currently in force in baltic journal of economic studies 281 vol. 4, no. 5, 2018 some other european union countries, in particular in poland, lithuania, the czech republic, and slovakia (banchuk, 2015). 3. conclusions the comparative analysis enabled to argue that the legal regulation of liability for financial offenses in the countries of the european union and in ukraine has a wide range of differences, such as: first, in contrast to the ukrainian experience, offenses in the financial and other spheres in many eu countries are criminal acts that are subject to criminal laws, consequently, they entail criminal penalties; second, in many eu countries, the regulations providing liability for financial offenses are actually “scattered” among the provisions of a large number of legal regulations, often leading to legal conflicts; third, the legislation of the european union states, in some cases, establishes legal responsibility for such offenses in the financial sphere, which in our country today are not recognized as criminally/administratively punishable, or, according to the degree of their social danger, entail imposing considerably fewer sanctions than in europe. therefore, the analysis enabled to conclude that the mechanism of the legal regulation of liability for financial offenses in ukraine is more improved than in european countries. primarily, in our country, a strict codification of financial offenses exists. the differentiation of these offenses into administrative delinquents and criminal offenses is also positive because it enables to impose milder state sanctions on those acts that do not pose a significant social danger. nevertheless, the foreign experience of the legal regulation of liability for financial offenses should be analysed and applied to reveal outdated legal regulations and gaps in the national system of response options to financial offenses in order to overcome and correct these negative aspects. references: melnyk, r. s. 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(in ukrainian) baltic journal of economic studies 73 vol. 5, no. 2, 2019 corresponding author: 1 national university “odessa law academy”, ukraine. 2 national university “odessa law academy”, ukraine. e-mail: kibik@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-2-73-79 economic and organizational preconditions for the development of agency relations in a crisis period sergey kivalov1, olha kibik2 abstract. the purpose of the article is the research of economic-legal and organizational principles of problem solution of economic agents’ functioning and implementation of activities within the system of anti-crisis measures in order to ensure the effective functioning of the country’s economic system. crisis phenomena change the living tendencies of any economic agent. the purpose of each economic agent is to create sufficient capacity for functioning and development in favourable and especially in crisis conditions. in order to ensure the effective development of a business entity as an economic agent, the main condition is the maximization of its value by increasing the investment attractiveness and level of competitiveness in the domestic and foreign markets. formation of this condition is a prerequisite for survival in a crisis situation and development ensuring in favourable circumstances. the elements of anti-crisis management should be correctly integrated into the general policy of the management system of economic agents at the microeconomic and macroeconomic level. the subject of the study is the functioning of economic agents in a crisis. research methodology. the study is based on the use of general scientific and specialscientific methods of scientific knowledge. the dialectical method allowed investigating the definition of agency relations. the method of system analysis was used to study the principles and economic and legal preconditions of the functioning of the anti-crisis management systems. the system-structural method helped to study basic precrisis measures to develop crisis-response potential of maritime agency service. practical implications. the article considers the mechanism of economic and legal provision of anti-crisis management drawing on the example of maritime agents. the most significant components of the transaction costs of the principal are determined. value/originality. the role of maritime agents’ associations has been identified. the necessity and preconditions for accelerating the adaptation of the world experience of the functioning of self-regulated organizations in the field of the maritime agency, in order to improve the state of the majority of economic entities, is proved. the development of cluster forms of the organization of interaction of different participants in maritime activity was determined as a positive trend. the promising area for further research is the formation of a model of responsible relationships between economic agents of different levels in order to achieve optimal results of realization of individual and social economic interests at key stages of the life cycle of the economic systems functioning. key words: agent, agency relations, maritime agent, anti-crisis management. jel classification: m19, к30, d23, r49 1. introduction the crisis is the functioning stage of the vast majority of modern economic systems of different levels. currently, the crisis is the development phase of any complex system. the world bank has worsened the forecast of the world economic growth in 2019 from 3.0% to 2.9% due to the increased risks of adverse factors. in the future, it can only reach a level of 2.8% (worldbank, 2019). such indicators simultaneously are consequences and prerequisites for reducing the investment activity of economic agents of different levels. accordingly, many world experts predict a global economic crisis, which will definitely affect the performance indicators of the majority of countries. crisis phenomena of a global level are particularly threatening for developing countries in the context of internal conflicts of the political, economic, and social nature. ukraine is one of such countries, where the world bank predicted gdp growth by 2.9%. characteristics of crisis phenomena are conditioned by the state of the economic system itself and the influence of the environmental factors. taking into account the peculiarities of origin, existence, and baltic journal of economic studies 74 vol. 5, no. 2, 2019 overcoming of crisis phenomena is a prerequisite for the survival and further development of economic agents. at this time, there are different approaches to determining the essence of agents, the peculiarities of their functioning, the status of organizational and legal provision of agency activities, the role of agents in economic activity. economic agents, on the one hand, consider participants in economic processes that independently accept and implement economic decisions in the processes of production, distribution, exchange, and consumption. accordingly, the main economic agents are households, business entities, and the state. the role and economic power of each agent are determined by the factors of production, which belong to him. on the other hand, the agent is an entity that carries out economic activities in accordance with the rules determined by the principal. agency relations develop in various spheres of life of modern society. there is an opinion that public administration is a system of agency relations between society and public authorities. today the activities of business management agents, called institutional management agents, become more active. the problem of improving agency relations in corporate governance becomes relevant to corporate relations development. the development of modern macroeconomic systems is impossible without the presence of the developed network of agents, who have various functions and carry out various activities, in particular, business processes. international maritime transport is a sphere of modern economic activity, which is important for the development of world economic relations. the maritime industry has overcome a significant number of crises of various scales, timelines, consequences, etc. in addition, the majority of maritime businesses undergo a difficult period at this time. nevertheless, over a long period, there is an increase in volumes of sea transportation. maritime transport is a complex mechanism, an important component of which is the activity of maritime agents. the development of spheres and scales of agency relations and activation of agency activities are definitely positive trends. however, amid the economic crisis, the level of development of agency relations and agency activities can have a positive and negative impact on the functioning of economic systems of different levels. the basics of crisis management were the object of scientists’ research in the field of public administration, economics, law, etc. on that particular crisis periods, the problem of agency relations is one on the rise among the scientists. so the first serious attempt of scientists to investigate the influence of the state of agency relations on the development of economic systems was made in crisis times of 1928. events of the great depression period stimulated the development of the theory of agency relations. so the scientists a. berle and g. means defined the role of agency relations in ensuring the efficiency of the corporations’ functioning (berle, means, 1932). o. golovchenko, i. malyi, l. yemelianenko, i. radionova, v. shariy made a significant contribution to the study of crisis phenomena. however, it should be noted that crisis management aspects are separately investigated for enterprises, region or industry. most crises are caused by conflict situations. the operation of economic agents and agency activities is not an exception. the theoretical basis of the conflicts of principals and agents is highlighted in the researches of such foreign scholars as m. jensen, w. meckling, m. yermovsky, c. chach. the works of the such ukrainian scientists as o. kotlubay (kotlubay, 2008), n. primachova (primachova, 2014), v. zhikhareva (zhikhareva, 2012), and others are devoted to the study of the process of formation anti-crisis management system on sea transport for strengthening the potential of development of enterprises of the maritime complex. scientists from other countries p. alderton (alderton, 1998), costas th. grammenos (grammenos, 2002), p. kieran (kieran, 2003), s. kumar, j. hoffman (kumar, 2002), m. stopford (stopford, 1988) also paid attention to the development anti-crisis management potential. a special place in the system of agency activities for maritime states is the maritime agency service whose problems were studied by s. bonyar, v. vygovsky, o. kotlubay, a. kudyukin, l. nikolayeva, p. petrov. despite the presence of numerous scientific works, the problems of economic, legal, and organizational maintenance of effective functioning of agents in crisis conditions, which should be studied within the framework of the theory of agency relations, remain unsolved. the purpose of the article is the research of problemsolving principles of business entities as economic agents functioning and implementation of activities within the system of anti-crisis measures in order to ensure the effective functioning of the country’s economic system. 2. presentation of the main material the development has a cyclical nature, which causes periodic advent of the crisis. nowadays the list of crises is significant. thus, in theory, social crises are divided into economic, political, religious-spiritual, monetary, financial, demographic, environmental, managerial, etc. however, in practice, such crises mainly arise, which have signs of different types of crises, which makes them even more threatening for the future existence of the entity. crises need to be foreseen. not only crisis causes but also their various consequences are important. experience has shown that getting out of the crisis is associated with negative and sometimes positive effects. on the basis of the absence or ineffective anti-crisis management, the transition of the agent’s economic system to the state of baltic journal of economic studies 75 vol. 5, no. 2, 2019 the new crisis is likely, which may be even more profound and prolonged. crises can cause a chain reaction. the above is especially relevant for the modern stage of the dynamic development of economic agents. all economic agents aim at rationality but the possibilities of its implementation are quite limited by various factors. therefore, in order to ensure effective functioning and sustainable development, each economic entity has to use anti-crisis management tools. anti-crisis management as a concept is actively used in recent decades. in our time, anti-crisis management is a necessary component of governance in general. the purpose of crisis management is to increase the level of efficiency of the potential usage of an economic agent under the condition of rhythmic functioning due to timely avoidance, prevention, and elimination of risks. the development and implementation of the measures to prevent and to get out from crisis for economic agents, in particular system one, should be based on the national and global socio-economic systems and legal laws functioning. an obstacle to overcome crisis phenomena for the economic agent is the lack of an effective development policy or if there is any – economic and legal preconditions for its effective implementation. failure to match the interests of economic agents is a prerequisite for the emergence of conflict situations that increase the negative impact on the performance of individual agents and higher-level economic systems. the economic agents of different levels should form the anti-crisis management systems in consideration of the following principles (carlin, 2001), among which we consider the main such as the following: the principle of legality (anti-crisis management should be carried out in accordance with current legislation); the principle of shared objectives (all measures of anticrisis management are implemented in order to achieve the goal, which should be clearly defined by the time of achievement, quantitative and qualitative results); the principle of depth (the implementation of anti-crisis management measures is aimed at eliminating external symptoms of the crisis, identifying and, if possible, neutralizing the factors that predetermined the crisis); the principle of effectiveness (sufficient level of effectiveness of anti-crisis management can be ensured on the basis of optimal use of the potential of all elements of the anti-crisis management system, taking into account the condition of constraints and, accordingly, optimizing the costs of financial, material, time, and other resources); the principle of authority and responsibility (anti-crisis management should be carried out by persons who have the appropriate rights and must be responsible for their actions and their consequences); the principle of conformity (the system of anti-crisis management should be developed taking into account the specific conditions, features of functioning, and desired prospects for the development of an economic agent). within the conditions of the crisis, it is necessary to increase attention to the problems of agency relations improvement. there is a steady increase in the number of economic agents that interact with other agents of different levels and spheres of actions. in accordance with the theory of agency relations, the agent is in a relationship of subordination with the principal. agents operate actively in the areas of foreign economic activity, maritime business, tourism, advertising, banking, insurance, investing, etc. by legal reasons, contractual and non-negotiable agency activities are distinguished. by the degree of compulsory implementation of agency activities, it can be mandatory and optional. by the legal status of the agent, universal and specialized activities are distinguished. there are professional and unprofessional agents based on the principles of implementation. under the licensing obligation, agency activity may be such that it requires a license or not. the current trend is an active reduction of agency activities that require the necessity of licensing. let’s consider the issue of economic and legal provision of anti-crisis management drawing on the example of the work of maritime agents, whose range of activities is significant at this time and continue to grow despite the obstacles. entities providing maritime agency services are active participants in foreign trade activities engaged in the export of services and provide currency revenues to the state budget. at the same time, these companies create preconditions for the development of the potential of export-oriented national business structures, as the significant proportion of export goods is transported by the sea, that is, exported from seaports. maritime agent’s service is a commercial agency. the complex of ship agency services provided by the maritime agent to the shipowners, cargo owners, and consignees is the most common in seaports. the activities of a maritime agent are often compared to judicial practice. in the process of maritime carriage, there is a conflict of interests of the shipowner, charterer, cargo owner, stevedoring company, port administration, and other involved participants. a port agent represents and protects the interests of his principal, that is, he performs functions similar to lawyer functions. the maritime agent deal with formalities and actions related to the vessel’s arrival, stay, and departure, assists the ship’s captain in establishing contacts with the administration of the seaport and the captain’s seaport service, the owner of the maritime terminal, enterprises, institutions, organizations providing specialized services, ports operators, local authorities, in the supply and vessel service organizing in the port, draw up customs documents and cargo documents, etc. (grammenos, 2002). according to the estimates of the international nonprofit organization fonasba, which is an association of ship brokers and agents, up to 150 individual operations are required to allow the vessel to enter the port, to carry out cargo operations, to depart and to continue with the next port, many of which baltic journal of economic studies 76 vol. 5, no. 2, 2019 must be completed within a limited time (fonasba). additional time of presence of the vessel in the port of call related to the observance of the requirements of national legislation, the organization of transportation, etc., causes a significant increase in vessel costs and failure to comply with the shipping time. there are no two identical ports in the world, which causes differences in the ships’ service. thus, the skilled work of maritime agents is a prerequisite for the effective operation of the shipowners, port operators, and a wide range of end consumers of transport enterprises. the maritime agent carries out its activities in accordance with the usual practice of maritime agency. in accordance with the customs and practice of the maritime international agency, the conclusion of maritime agency agreements is mainly carried out by telex messaging of the maritime agent by the shipowner to or via e-mail. in such notification, only the characteristics of the vessel, which are necessary for the payment of channel, pilotage, port, and other mandatory fees, are given. the mentioned form of the contract conclusion of maritime agency does not contradict the norms of the current legislation of the majority of the countries, in particular, ukraine. that is, it is possible to conclude economic contracts in a simplified way by exchanging electronic letters, faxograms, etc. the contract is considered to be concluded upon the condition of reaching an agreement on the essential terms of the contract. the essential conditions of the agency agreement, in accordance with the current legislation of most states, is the scope, nature, and procedure for the agent to perform intermediary services, the rights and obligations of the parties, the conditions and amount of remuneration to the commercial agent, the validity of the contract, sanctions in case of violation of the terms of the contract, others necessary conditions specified by the parties (lokotey, 2017). the existence of the contract is not a guarantee of the absence of relations problems between the maritime agent and the principal. first of all, agents try to maximize the results of the implementation of their own interests, sometimes giving way to the interests of the client. such agent’s behaviour is possible provided that there are problems in the legal environment, in particular, in the sphere of regulation of competitive relations, the formation of information resources, organization of financial flows, etc. if there is an information advantage, the agent may be tempted to adjust his behaviour to increase his own profit. as an expert, the international organization fonasba has developed a set of standards that help to protect the interests of principals (fonasba). compliance with standards is a prerequisite for the optimal realization of economic interests and the maritime agents themselves. in the view of scientists and experts (bonyar, 2016; kibik, 2018), the main factors that slightly slow down the development of maritime agents markets in the developing countries, in particular in ukraine, are: the amount and length of coastal control procedures that compels shipowners and maritime agents to use corruption-based dispute settlement schemes with numerous representatives of the authorities; problems of non-compliance by maritime agents with the norms of professional ethics. in accordance with the unctad minimum standards (adopted in 1988), the responsibility of maritime agents is to carry out their activities in good faith, which implies fairness, impartiality, and due diligence on the part of the maritime agent in order to exclude fraudulent practices (unctad, 1988). however, each principal and each agent have their own economic interest. therefore, not all maritime agents working in the world seaports adhere to the provisions of the code of professional conduct. despite the increase in the intensity of the competition, there are many examples of various methods of misleading their principals used by maritime agents, which adversely affects the state of the principals and, subsequently, the agents themselves; arrangement of “special” conditions of cooperation between the port administration and the maritime agent, in which the agent takes priority over the main interests of the port administration, which adversely affects the performance of duties towards the principal; the existence of local monopolies and arrangements between private owners of maritime terminals and business entities providing services to the maritime agency. such violations of the principles of market activity do not comply with the provisions of the competition law; peculiarities of the activities of maritime agents on terms of deferred financing, which increases the degree of financial risks, especially in the context of limited own financial resources, high cost and complexity of obtaining the resources involved in crisis phenomena. a network of agency companies in the maritime business has been established in ukraine. foreign companies such as zim, sealand, cma cgm, mayersk, chinese “cosco”, nieddelloid, lloyd triestino, evergreen, cmn, etc. took up leading positions in the ukrainian ports in different times. in addition, such companies as bsgsa “inflot”, smt “yuzhny ltd.”, atis ltd., skif shipping llc, odemara llc, pacific metropolitan ltd., polaris ltd, interbroker llc, llc “rem shipping”, diamant ltd., novik ltd., and others operate in the market. recently, most of the national companies have considerably worsened their performance. some of the maritime agents may be described as being in a crisis state. some companies generally left the market without realizing a timely set of anti-crisis measures. agents associations that assess and control the companies’ professional level and provide a representation of the interests of agency companies at the international level are of particular importance for the prevention of crisis phenomena through the protection of interests. in ukraine, in the field of ship’s agency service, these functions are performed by the baltic journal of economic studies 77 vol. 5, no. 2, 2019 association of maritime agencies of ukraine. at the international level, the organization fonasba plays an important role. according to world practice, an effective means for the prevention and resolution of crisis phenomena is the vigorous activity of a self-regulated organization. in the world practice, the state delegates its functions to self-regulating professional organizations in order to improve the market situation, overcome corruption, reduce the costs of public administration, etc. ukraine has made the first steps in this direction. in order to improve the status of the majority of business entities, the process of world-wide experience of selfregulated organizations adapting, in particular, in the field of ship’s agency service, should be accelerated. the current trend is the development of cluster forms of organizing the interaction of different participants in business activities. in the world practice of maritime business, there has been observed the maritime clusters development at the basis of the ports, whose active agents are agency companies. rational behaviour of economic entities means that their purpose is to obtain the maximum end-result that can be achieved on the basis that they receive maximum income at a minimal cost. the maritime agent is not an exception who calculates his own remuneration and notes it on a disbursing account that the principal (shipowner) pays within a noticeable period. it is common practice that under favourable conditions, the remuneration of the maritime agent significantly exceeds its costs associated with the provision of maritime agency services. the fee for the agent’s loyalty to the principal is included in this interest. in crisis times, loyalty fees can sometimes go down significantly, which can lead to conflict situations. the agent’s expenses of the principal arise as a result of the principal’s transfer to the agent of financial resources to obtain certain products. the principal also bears other costs, in particular, to control the activities of the agent. due to certain actions of the agent to achieve the goals, the principal can suffer losses ( jensen, meckling, 1976). in the present context, the provision of agency services involves the formation of principal transaction costs, the overestimation of which may cause the formation of crisis phenomena. in general, the amount of transaction costs can be calculated using the formula: r r r r r r r r rtr orm ob m l cdm contr self other= + + + + + + +−inf inf lim , where rinform – information costs, which are determined by the need of information search, very poor volumes, and the level of information quality. as a result of the increased role and increase in the information resources cost, an increase in the amount of this component of transaction costs has recently been observed. under the condition of the increasing level of dynamism, the complexity of economic activity and, accordingly, the expansion of the relations between agents with principals, other agents, and economic agents, the level of information restriction for agents is reduced. economic agents need more volumes of relevant information. information is, on the one hand, more technically perfect, on the other hand, information is a more expensive resource. however, saving on costs associated with the acquisition or production of information resources is ineffective. in the sphere of ship’s agency service, information costs represent a significant proportion of production costs for the agent and the principal in the form of transaction costs; rob – the costs of opportunistic behaviour of one or both (all) economic agents that violate the agreements, rules, norms in their own interests to the detriment of other economic agents; rm – measuring characteristics costs that the agents produce; rinfl – influence costs, which involve the cost of resources due to attempts to influence the decision (behaviour) of other economic agents; rcdm – costs of collective decision-making. the current stage is characterized by the expansion of the spheres of the adoption of coordinated (collective, team) decisions. however, the development and adoption of such solutions require additional resources costs and sometimes losses; rcontrасt – contract costs associated with the need for contract preparation, legal support, negotiation, etc.; rcontrol – costs of the agent’s behaviour control during the contract performance and the results of contract performance; rself–lim – self-limited costs, related to the need to fulfil obligations and accordingly, temporary disregard of their own interests; rother – other costs. the majority of the abovementioned components of the total cost can be calculated approximately, in particular, using the expert judgment method. most accurately you can determine the third component, which is the payment size for the product, which is produced by the agent and accordingly implemented to the principal. the maritime agent acts on behalf of the shipowner and undertakes, on the basis of an order for payment, actions on his behalf, but at the expense of the shipowner. in the majority of the developed and developing countries, remuneration rates for a maritime agent for the agent’s service of the ships calling at national ports are established by agreement between the parties. from the beginning of june 2014, the practice of individual determination of a fee depending on the size and type of the vessel, the port of call; the purpose with which the vessel enters the port (for the transshipment of goods not related to cargo and (or) passenger operations, transit), availability of additional services, etc. (table 1) (lokotey, 2017). the usage of such pricing approach meets the current conditions of economic activity of the agent and the principal. given the adoption of effective price decisions from both sides, this approach contributes to baltic journal of economic studies 78 vol. 5, no. 2, 2019 the optimal realization of the economic interests of the principal and the agent. table data indicate that there are significant differences in the level of rates. in some positions, rates vary hundreds of times, due to the peculiarities of agency activities in specific ports, each of which is unique. differences in the rates’ level are also indicative for the world practice of ship’s agency service. the relative share of agency costs in the goods transportation cost comes to approximately 0.1%. the percentage of the cost of paying agency services in the contract for the supply of goods is approximately equal to 0.04%. despite such a relative share of the agency costs, the agent’s work can determine the critical state of vessel service in the port, significant problems in organizing the next stage of transportation, respectively, the final, in particular, financial, the results of transportation of goods to the end consumer. working in a complex and regulated maritime sector, maritime agents have to continually evolve; first and foremost, it is about the upgrading of company employees. in order to provide a high level of service to the clients, agents must comply with the provisions of the existing legal acts, in particular conventions, comply with numerous complex and detailed instructions, rules applicable to the activities of the maritime complex enterprises. the legal framework of the operation of entities of the maritime business activities is dynamic. lack of familiarity, incomprehensibility and, accordingly, non-compliance with the provisions of the current documents may lead to delays, claims, financial sanctions, fines, etc. on the other hand, the principals may also be mistaken. agents should not be responsible for such mistakes. fonasba actively supports the implementation of the principle “as agents only” (only as an agent) used in english law and other jurisdictions to protect maritime agents from errors or omissions of their principals. by signing contracts with the words “as agents only,” the agent under all conditions of the contract acts only as a representative of the principal, reducing the risks of conflict situations and the occurrence of crisis phenomena. among the factors that cause the crisis in the external environment of economic agents of the micro level, in particular, the agency companies, it should be noted the negative socio-economic situation in the country, the ineffectiveness of tax and legislative systems, reducing the market capacity, reducing demand and increasing the intensity of competition, the instability of the currency market, etc. analysing the possible crisis phenomena of ukrainian business entities, we can say that today they are mostly the manifestations of external negative influence. among the factors that determine the peculiarities of the current stage of the ukrainian ship’s service agencies development, the main ones are: the imperfection of the anti-crisis concept of agency activity and the legislative framework of the state anticrisis management in this sphere; increase of competition intensity in the markets of transport products, works, and services; variety of forms of ownership; the complexity of organizational management structures; the imperfection of the system of indirect state regulation enterprises methods that are in private ownership, etc. anti-crisis management of the sea complex operation of the majority of the states is carried out at the state, regional, and sectoral levels on the basis of direct and indirect methods. at the level of state-owned enterprises, anti-crisis management implies the usage of direct and indirect methods by the state. as for privateowned enterprises, the state may use indirect methods of anti-crisis management. anti-crisis management measures of the economic agents’ activities at the state level can be in the form of development and implementation of legislative acts, the definition of targeted financial and social policies, promotion of small business, support and stimulation of innovation activity, ensuring the country’s competitiveness in the world market, etc. all these measures are important for maritime agents. for the companies involved in the ship’s agency service, it is expedient to implement a set of basic pre-crisis measures to develop crisis-response potential (kibik, 2013): qualitative analysis of transport services markets, in particular, agents one; table 1 the range of agency fee rates in the seaports of ukraine agency services agency fee us dollars /vessel call minimum level maximum level ship’s agency service entering the port for the purpose of carrying out the operations with liquid cargoes 22 4181 ship’s agency service entering the port for the purpose of carrying out the operations with bulk cargo 25 3726 ship’s agency service entering the port for the purpose of carrying out the operations with general, forest, and mixed cargoes 57 7736 ship’s agency service entering the port for the purpose not related to the carriage of goods and (or) passenger operations 8 1422 agency service for passenger ships and private yachts 128 2289 additional agency services percentage of the provided service source: compiled by the authors based on the data of ministry of infrastructure of ukraine, lokotey, 2017 baltic journal of economic studies 79 vol. 5, no. 2, 2019 improvement of organizational and management structure; increasing the competitiveness of services, elements of resource potential, especially personnel, the company as a whole; analysis and optimization of financial results and indicators; solvency provision; improvement of price policy, etc. 3. conclusions and future research crisis phenomena change the living tendencies of any economic agent. the purpose of each economic agent is to create sufficient capacity for functioning and development in favourable and especially in crisis conditions. in order to ensure the effective development of a business entity as an economic agent, the main condition is the maximization of its value by increasing the investment attractiveness and level of competitiveness in the domestic and foreign markets. formation of this condition is a prerequisite for survival in a crisis situation and development ensuring in favourable circumstances. the elements of anti-crisis management should be correctly integrated into the general policy of the management system of economic agents at the microeconomic and macroeconomic level. an agent in any field of activity undertakes to command principal financial resources effectively and honestly. in practice, the agent’s behaviour due to different reasons may differ from the one that is most effective from the principal position. differences can take different forms. in the world practice, depending on the sphere where agency activities are carried out, there are laws, legal norms, traditions, customs, observance and consideration of which are intended to reduce the negative effects of such a phenomenon as the “limited rationality” of the agent. as the result of agency services provided, the principal meets the transaction costs, the size of which can significantly affect the financial and economic state of the principal, which may be a prerequisite for the crisis phenomena emergence. the promising area for further research is the formation of a model of responsible relationships between economic agents of different levels in order to achieve optimal results of realization of individual and social economic interests at key stages of the life cycle of the economic systems functioning. references: alderton, p. (1998). sea transport: operation and economics. london: tomas reed, 226 p. berle, a. and means, g. (1932). the modern corporation and private property, macmillan, n.y. bonyar, s. (2016). integration prospects of agency industry in ukraine in the european economic area. scientific journal of kherson state university, 21(1), 68–71. carlin, w. and soskice, d. (2006). macroeconomics: imperfections, institutions, and policies. oxford university press. darkening prospects: global economy to slow to 2.9 percent in 2019 as trade, investment weaken (2019). [online], available at: http://www.worldbank.org/en/news/press–release/2019/01/08/darkening–prospects– global–economy–to–slow–to–29–percent–in–2019–as–trade–investment–weaken drazen, a. (2001). political economy in macroeconomics. cambridge; massachusetts. grammenos, costas th. (2002). handbook of maritime economics and business. london, hong kong: llp. jensen, m. and meckling, w. (1976). theory of the firm: managerial behavior, agency costs and ownership structure. journal of financial economics, 3, 305–360. kibik, o. and kotlubay, v. (2013). prerequisites for the development of crisis management in the economic system of ukraine. research papers of national university “odessa law academy”, 13, 213–219. kibik, o., khaiminova i., kotlubay v., redina i. and belous e. (2018). development potential of ukrainian maritime enterprises. international journal of engineering & technology, 7(4.3), 461–466. kieran, p. (2003). world trends in shipping and port reforms. cpcs, transcom. kumar, s. and hoffman, j. (2002). globalization: the maritime nexus. loeb-sullivan school, maint maritime academy, castine. kotlubay, a. (2008). ukrainian merchant shipping problems and development prospects. odessa. lokotey, т. (2017). sea shipping agency operations: legal regulation, tax accounting and tax accounting. [online], available at: https://jurliga.ligazakon.net/analitycs/167198_operats–z–agentuvannya–morskikh– suden–pravove–regulyuvannya–bukhgalterskiy–ta–podatkoviy–oblk port procedure. (2019). [online], available at: https://www.fonasba.com/fonasba-initiatives/fonasba-portprocedure-survey primachova, n. (2014). anti-crisis management on sea transport. odessa. quality-standard. (2019). [online], available at: https://www.fonasba.com/fonasba-initiatives/fonasba-quality-standard stopford, m. (1988). maritime economics. london: harper collins academic. unctad (1988). minimum standards for shipping agents, distr. general unctad/st/ship/13 7 september 1988. [online], available at: https://unctad.org/en/publicationslibrary/unctadstship13_ru.pdf zhyhareva, v., kotlubay, a. and kibik, o. (2012). economics of maritime transport. burun knyga, harkov. baltic journal of economic studies 69 vol. 4, no. 4, 2018 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: ruslan1212@ukr.net 2 national university of life and environmental sciences of ukraine, ukraine. e-mail: meri2006@ukr.net 3 academy of labour, social relations and tourism, ukraine. e-mail: chornodid@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-4-69-75 marketing research of table eggs market ruslan buriak1, maryna rudenko2, ihor chornodid3 abstract. the object of research is the market for ukrainian table eggs. having analysed the domestic market for table eggs, the main trends are found there. the dynamics of the consumption of table eggs in our country over the last few years and the factors that have the greatest impact are studied. the aim of the article. the research is to analyse and assess the condition of the table eggs market. methodology. the study was conducted using a systematic approach, using methods of economic-statistical, logical, and functional analysis. the factors that influence the level of competition of domestic enterprises in the market for eating eggs are determined. established market concentration indicators and calculated the concentration coefficients and the herfindahl-hirschman index, which indicate a significant degree of concentration in the market of the four largest egg production companies and the tendency to reduce the share of giant companies in this market. value/originality. it is established that the domestic market for table eggs is oligopoly with undeveloped competition, which negatively affects its development, updating of assortment and consumer prices. one of the leaders in the market of food eggs is avangardco ipl, which offers the market its rather diverse branded products. the peculiarities of the activity of the agroindustrial company “avangardco ipl” as the leading producer of eating eggs in the market for poultry products with a high technological level, quality of products, and supply stability are investigated. in the future, such enterprises will gradually eliminate products produced at enterprises with less technological production, and therefore, more expensive and less qualitative. the features that are inherent in organic products and have their specifics in the context of the poultry product subcomplex are determined. on the basis of the conducted researches, the peculiarities of the demand for organic eggs produced by avangardco ipl were determined, which allowed substantiating the priority of the development of organic production for this enterprise in the market of our state and the eu countries. key words: poultry products, table eggs, consumer market, eggs market, market concentration. jel classification: q13, q11 1. introduction one of the main tasks of the agro-industrial complex of the country is providing food products to the population. a high-tech production, targeted at mass production of high-quality food products is crucial for modern agricultural economics. one of these high-tech industries is poultry keeping, organized on an industrial base. the demand for egg products is conditioned by physiological needs. to some extent, the demand depends on socio-economic factors and eating habits of the population. chicken eggs are widely used in our country; they are eaten, used as ingredients in various dishes, and found their use in the food industry. thus, formation and development of the egg market are crucial for the economy being one of the sources of food security (dychakovska, 2014). 2. analysis of the latest researches and publications the works of well-known scholars, such as o. berezin (2008) researched the peculiarities of agricultural production, their influence on the formation of flows of food resources, the conditions and factors of the formation of the national food market, the socioeconomic efficiency of its functioning, p. sabluk (2008) studied perspectives of the development of the agro-industrial complex of ukraine, l. stranchynska (2008) proposed strategic directions of perspective development of national markets, and others are devoted to the peculiarities of the functioning of the food market in ukraine. scientific works of the well-known domestic economists-agrarians, such as r . buriak (2011) studied to identify the factors influencing the formation of baltic journal of economic studies 70 vol. 4, no. 4, 2018 market conditions, market research and development of medium-term forecast of the ukrainian market of poultry products, d. kiriliuk (2014) conducted research on the poultry market, i. kishchak(2010) researched the state of the market for poultry and eggs in ukraine is examined, factors influencing the increase in exports of poultry products, r . myniv (2012) analysed the current trends of export-import of poultry eggs in ukraine, s. pashko (2015) investigated the economic mechanism of egg market functioning in ukraine and in the countries of the world, ya. yanyshyna (2013) researched the different approaches to understanding the category of “efficiency”; on the basis of it, the definitions of economic efficiency in poultry are analysed, i. yatsiv (2014) researched coefficients of export ponderability of poultry meat and eggs are calculated, and others show scientific research results devoted to the issues of development of poultry keeping. the aim of the article is to analyse and assess the condition of the table eggs market. egg protein is considered a standard of protein for its qualitative composition; it is crucial for the human diet and is one of the most reasonable and common food products. since some livestock products are not always reasonable for the low-income bracket, chicken eggs make a large part of the consumer demand for animal protein food products in ukraine. the energy value of 100 grams of egg mass makes approximately 157 kcal and its consumer price is approximately 3 to 4 uah based on the price of 18 uah for ten eggs (prices of avangardco ipl dated september 29, 2017). 72 grams of boneless beef or 44 grams of pork makes the same energy value but the cost of these products is 2 to 2.5 times higher. even the same energy value of milk (350 grams) will be more expensive for a consumer, not to speak of cheese. eggs are important for the human diet, providing the body with a well-digested and complete protein, vitamins, amino acids, and other substances the human body needs. in ukraine, the average consumption of eggs per person in 2016, according to the state statistics service, was 267 pieces, which is 7.9% lower than the norm established by the ministry of healthcare of ukraine (290 pieces). it is significantly reduced compared to the indicators of developed economy countries, where the average consumption of eggs reaches 300-350 pieces per person or more (state statistics service of ukraine). for the period from 2010 to 2016, the average consumption of eggs in ukraine varied notably (figure 1). the maximum consumption of eggs for the period specified was observed in 2014 (310 pieces per person), minimal consumption was observed in 2016 (267 pieces per person). if for the period from 2012 to 2014 egg consumption has grown steadily, starting from 2014 there is a gradual decrease in the eggs consumption, and as of 2016 in ukraine, only 267 eggs were consumed, or 86.13% of indicator for 2014. this reduction is caused both by a rise in the prices of eggs and reduction of income of the population (state statistics service of ukraine). 3. theoretical substantiation of models of forecasting of marketing market for table eggs eggs production is one of the most technological processes in livestock farming. it is marked with deterministic results of production and production process parameters optimized to achieve them to the greatest possible extent, thus reducing the products cost, increasing profitability and amount of profit, as well as accelerating the return on investments. effective eggs and egg products marketing is one of the main means of competitive struggle. consumer figure 1. dynamics of egg consumption in ukraine for 2010-2016 baltic journal of economic studies 71 vol. 4, no. 4, 2018 demands’ understanding is a key to success in today’s economy. today, the consumers are becoming more aware of the eggs properties and quality than they were not so long ago. experts in the eggs market should continuously monitor changes in consumers’ tastes. limited shelf life and limited terms for sale of table eggs require special storage facilities and substantially influences the formation of the appropriate infrastructure making it possible to deliver products to the consumer within the shortest possible period of time. the role of the state in the formation and development of the market for these products is also important. the main tasks of state regulation in this sector are as follows: market prices control, agricultural producers and rural people profits support, rural people support, production incentive, processing, and consumption of eggs, as well as products export (buriak, 2017). based on the researches, there have been summarized the external factors and the nature of their influence on the severity of competition on the table eggs market (table 1). having analysed the data obtained, it is possible to determine the potential capacity of the table eggs market in ukraine. to determine the consumer potential, the following formula was offered: p = с • n, (1) where p is the potential capacity of the consumer market, pieces of table eggs per year; с is the average index of consumption of table eggs per year, pieces per person; n is the country population. the ukrainian eggs market has a striking potential for development since the per caput eggs consumption in our country is much lower if compared to the average performance in europe (over 350 pieces per person per year in the uk, italy, france, and the netherlands) (pashko, 2015). in 2016, the table eggs consumption was 267 pieces per person. then the potential capacity of the domestic table eggs market, considering the statistically determined population in 2016 (42.7605 million people), will be: p2016 = 267 • 42,7605 = 11,417 billion pieces of table eggs per year. it is important to note that the consumer potential of the domestic table eggs market will only grow in a few years thanks to the improvement of consumer culture and human wellbeing. the demand for eggs is elastic. this is evident from the fact that a fair number of consumers are seeking cheaper products and reduces the consumption of eggs due to a price boom. let us study the main producers of table eggs in the ukrainian market (table 2). in 2016, the table eggs production output in ukraine made 8.45 billion pieces, compared to 2015 with 8.06 billion pieces, showing that in 2016 the table eggs production has increased by 0,39 billion pieces or by 4.8% compared to the same period in 2015 (association of poultry breeders of ukraine). it should be noted that during the period being studied, as shown in table 2, the main producers of table eggs in ukraine are as follows: avangardco ipl, group of companies “ovostar union”, and inter-zaporizhzhia; they are continuously reducing production outcomes. the dynamics of the share of the large companies market during this period resulted in the growth of the share of avangardco ipl table 1 factors influencing the level of competition on the table eggs market groups of factors the strongest factors positive factors or factors having no influence consumers slow growth of incomes of the population as the main consumer; high elasticity of demand for food products in terms of income and price; the possibility of changing the producer without additional expenses; a high level of awareness of the product and its price. both intermediate consumers and final consumers do not thread reverse integration; consumers are numerous, different, and non-concentrated. suppliers no alternative raw materials; the quality of raw materials determines the quality of the finished product and the efficiency of production; there is a compelling need for obtaining new technologies for the production of eggs packaging. suppliers are more diverse and nonconcentrated; suppliers do not thread direct integration for large eggs producers. substitute products the presence of “transition expenses” from the consumption of table eggs to the consumption of other protein products; significant rates of production and reasonable price for the consumer; large producers offer lover prices with a wide range and high-quality products. no real threat of the occurrence of new substitute products since today eggs are the cheapest protein product existing and potential competitors there is a real threat of the occurrence of new competitors, due to large foreign agricultural producers. the existence of the enterprises that will have a synergistic effect once entered the market. source: summarized by the authors on the material baltic journal of economic studies 72 vol. 4, no. 4, 2018 (31% of the market in 2016); stabilization after the recession in group of companies “ovostar union” (18.7% of the market share in 2016) and reduction of market positions of inter-zaporizhzhia by 1.4% (9.8% of the market in 2016). other companies showed a reduction in both sales and market share. to make the quantitative assessment of the concentration level, it is offered to use the concentration coefficient and the herfindahl–hirschman indexes. the first indicator (ik concentration coefficient) characterizes the share of the aggregate sale of products in the market, which falls on 4 leading enterprises: ік = i ip = ∑ 1 4 (2) where ik is the concentration coefficients; рі is the share of the leading enterprise of the industry, %. the herfindahl–hirschman indexes (ixx) define an index of market concentration as the sum of the squares of market shares, expressed as a percentage of all companies selling products in this market: іхх = i n ip = ∑ 1 2, (3) where ixx is the herfindahl-hirschman indexes; n is the number of companies in the market; рі is the share of the leading enterprise of the industry, %. to reflect the typology of the table eggs market, we will calculate the above-mentioned coefficients. estimated data and outcomes are shown in table 3. according to the concentration coefficient, calculated based on the share of the four largest enterprises, there is a high level of concentration on the market being studied (68.3% and 64.9% > 60%). however, the dynamics show the decrease in the share of large enterprises. if in 2015 the share of other egg producers made 29.8%, in 2016 it was 31%, the same showed the market leader, avangardco ipl. the herfindahl-hirschman indexes show the market share of all market participants. for the sake of convenience, other producers were classified as ‘other producers’. the herfindahl-hirschman indexes studied in the dynamics for the ‘other producers’ category are less than 1800 (since four largest enterprises amount to 1483.97 in 2015 and to 1435.89 in 2016). however, we can tell that the table eggs market in ukraine has not yet been monopolized, although having a high level of concentration. this is evident from the fact that the market considered safe for the positive competition if the share of one company does not exceed 31%. thus, following the results of 2016, the largest producer avangardco ipl holds the share of exactly 31% being a critical value whose increase will destroy the condition of positive competition (group of companies ‘avangard’). the quality of products and the stable supply is all eggs production sector needs to succeed on the domestic market. consequently, the products with the higher table 2 the main producers of table eggs in ukraine in 2015-2016 producer production output, billion pieces market share, % 2015 2016 deviation, % 2015 2016 deviation, % avangardco ipl 2,61 2,50 -4,2 30,9 31 0,1 group of companies “ovostar union” 1,57 1,51 -4,0 18,6 18,7 0,1 inter-zaporizhzhia 0,95 0,79 -16,5 11,2 9,8 -1,4 avias 2000 tov 0,64 0,44 -32,2 7,6 5,4 -2,2 krupets agri corporation 0,20 0,17 -16,5 2,4 2,1 -0,3 poultry factory podillya 0,11 0,08 -26,6 1,3 1 -0,3 ternopilska poultry farm pjsc 0,10 0,08 -20,4 1,2 1 -0,2 other poultry farms 2,26 2,50 10,4 26,8 31 4,2 totally eggs produced 8,45 8,06 -4,5 100 100 х source: developed by the authors table 3 monopolization dynamics of the table eggs market in ukraine companies 2015 2016 market share, % squared share market share, % squared share avangardco ipl 30,9 954,81 31,0 961 group of companies “ovostar union” 18,6 345,96 18,7 349,69 inter-zaporizhzhia 11,2 125,44 9,8 96,04 avias 2000 tov 7,6 57,76 5,4 29,16 others 2,4 5,76 2,1 4,41 іk 68,3 – 64,9 – іхх4 534,92 479,3 іххgen – 540,68 – 483,71 source: developed by the authors baltic journal of economic studies 73 vol. 4, no. 4, 2018 prices and lower quality will be gradually driven from the market by the products produced at enterprises with a higher technical level. today there is a group of egg processing companies in ukraine whose technical equipment correspond to the highest world level. one of them is avangardco ipl. it is one of the largest agro-industrial companies in ukraine producing chicken eggs and dry egg powder. as of year-end 2016, the company holds 31% of the industrial eggs market and 87% of the egg powder market in ukraine. the stock of laying chickens of avangardco ipl is one of the largest in the world. the company introduces new and upgraded technologies in its work: egg products fermentation, deep egg components separation; new eggs pasteurization and sterilization technologies, etc. – and provision of leading world companies with hardware. the products of avangardco ipl are demanded both in ukraine and abroad. 4. justification of marketing strategies for eco-products of poultry farms the most popular brands of table eggs produced by avangardco ipl are packaged eggs ‘kvochka’ (76% of sales of leased table eggs), ‘domashni’ (19%), and ‘organic eggs’ (5%) being certified organic table eggs. trademark ‘organic eggs’ is a special product for avangardco ipl. the company moves with the times and offers ukrainian consumers a modern organic product especially for those wishing to consume organic food. today, ukraine is at the initial stage of formation of the national market for organic products and this market room is still open. ‘organic eggs’ brand occupies the leading position in the portfolio of the trademark ‘kvochka’ and represents the main values of avangardco ipl, in particular, fresh and natural products. the motto: ‘organic eggs’ is the maximum natural benefit (group of companies ‘avangard’). we have studied the consumption of organic eggs and created a consumption-prices level dependence model. the hypothesis of the study is the low degree of dependence of the level of consumption of organic eggs on the level of consumer prices since this product is classified as unique in terms of energy and nutritional qualities. to support the low degree of dependence of the level of consumption of ‘organic eggs’ organic eggs on the level of consumer prices, we will use the correlation-regression analysis method. the level of average consumer prices and retail sales volumes of ‘organic eggs’ eggs per month for 2015–2016 will be the initial data. as a result, we obtain a correlation field characterizing the dependence of the egg consumption level on the retail price for ten eggs (figure 2). the lack of a correlation between the indicators being studied is demonstrated by a quite chaotic arrangement of points in the graph. to receive a mathematical support of this conclusion, let us show several pair regression equations characterizing the dependence of the level of consumption of ‘organic eggs’ eggs (y) on the average retail price for ten eggs (x) (table 4). in the pair regression equations presented, the determination coefficient varies within the range of 0.1932-0.2 proving the lack of significant connection between the phenomena being studied. the results of correlation-regression analysis confirm the low degree of dependence of the level of consumption of ‘organic eggs’ eggs on their average consumer price. this supports the strategic prospect of further development of this trademark for avangardco ipl. *axis ox – price of uan/ten pcs., axis oy – sales volume, million, pcs. figure 2. the level of eggs ‘organic eggs’ consumption per quarter depending on their retail price in the period from 2015 to 2016 baltic journal of economic studies 74 vol. 4, no. 4, 2018 5. conclusions having analysed the domestic egg products market, we can say that the market is oligopolistic with weak competition affecting its development, assortment updating, and consumer prices. one of the leaders on the eggs market is avangardco ipl, offering the market the branded products of the trademark ‘kvochka’, among which ‘organic eggs’ organic eggs brand occupies the top position in the portfolio and is one of the most advanced for avangardco ipl. organic products are more expensive and organic poultry products, especially egg products have the highest prices among others. this is due to the fact that the production of eggs has the shortest production cycle among livestock industries and poultry farms, by optimizing rations, managed to achieve the maximum reduction in the production cost for the products received. thus, the price for eggs in eco-shops exceeds the price in trading networks by a mean of 2-2.4 times. the abovementioned facts show that today the consumer segment of ecological products consists of the middle-class consumers whose family budget is not significantly affected by the high price of quality products (generowicz, kowalski, banach, 2012). however, it should be noted that the market for egg food in ukraine is not yet monopolized, although it has a significant level of concentration. this is also evidenced by the fact that the market for maintaining “healthy” competition is considered safe if one firm holds no more than 31% on it. table 4 comparative estimation of the accuracy of the pair regression models function type equation determination index (r2) linear y= 0,3731х+8,0435 r2 = 0,1953 square y= -0,0739х2+6,547х-120,85 r2 = 0,2 degree y= 2,0011х0,6614 r2 = 0,1938 exponential y= 12,2e0,0158х r2 = 0,1932 logarithmic y= 15,603ln(x)-34,6 r2 = 0,1959 source: developed by the authors organic products are higher in price and the greatest excess of prices for environmental products is observed in poultry products, including egg products. this can be explained by the fact that the production of eggs has the shortest production cycle in livestock industries, and poultry farms by optimizing rations have been able to achieve the maximum reduction in the cost price of the products received. thus, the price of eggs in eco-shops exceeds their cost in trading networks by an average of 2-2.4 times. the above facts indicate that at present, the consumer segment of ecological products is people with a higher than average wealth, for whom the high cost of quality products does not fundamentally affect the family budget. in conclusion, it should be noted that one of the advantages of the organic products market is the increasing demand for organic products in ukraine. this is shown by the increasing sales volumes of ‘organic eggs’ organic eggs brand produced by avangardco ipl, as well as the low sensitivity of sales of table eggs of this brand to the price change. however, low level of incomes of the population puts back the organic products market development. today, avangardco ipl with its product ‘organic eggs’ strives to enter foreign markets and export high value-added products. once ukraine signed the eu association agreement, the domestic market for organic products received all the chances to become an exporter of organic products to developed countries. references: berezin, o. v. 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(in ukrainian) baltic journal of economic studies 4 vol. 1, 2015 innovation policy features in the oecd countries ivan anisimov1, donetsk national university (vinnitsa), ukraine abstract. the purpose of the paper is to analyze the innovation policy features in the oecd countries and give the basic framework which defines rights and obligations of intellectual property rights (iprs) owners. governments play an important role in determining demand-side policies, such as smart regulations, standards, consumer education, taxation and public procurement that can affect innovation. because demand linked to supply, policies that affect both need to be better harnessed to drive long-term innovation and sustainable growth. policies to stimulate innovation require taking account of changes in the international economy and the transformation of innovation processes. to transform invention into innovation requires a range of activities. innovation now encompasses much more than research and development (r&d), albeit r&d remains vitally important. methodology. the data for the paper is taken from the publications and reports of the european commission, oecd, world bank etc. in the paper the descriptive analysis, supported by the quantitative analysis is applied. results. it is identified that rises in r&d intensity and innovation are driven by such factors: reduction of anti-competitive market regulations, which promotes business r&d and strengthens the incentives for innovations; stable economic conditions and low interest rates which encourage the growth of inno vation activity by creating a low-cost environment for investment in innovation; availability of internal and external finance. practical implication. it is given the basic legal framework which defines rights and obligations of ipr owners: reviewing exemptions to copyright in the light of the internet’s different uses; clarifying exemptions for research use; promoting an active and open commercialization policy for universities; encouraging the commercialization and monetization of ipr: for example draft licensing contracts, valuation standards; standards: encouraging pooling mechanisms, platforms etc.; accelerating patent processing while preserving quality. value/originality. received conclusions will help to understand the innovation policy features in the oecd countries what gives an opportunity to use their experience in ukraine. key words: innovation policy, intellectual property rights (iprs), innovation activity, knowledge and technology transfer, r&d expenditures. jel classification: f43, o31, o32, o34 corresponding author: 1 department of international economics assistant, donetsk national university (vinnitsa). e-mail: music23@mail.ru 1. introduction the ability to innovate and to bring innovation to market will be an important determinant of the global competitiveness over the future decade. there is growing awareness among politics that innovative activity is the main engine of economic progress as well as a potential factor in meeting global challenges in spheres such as the environment and health. not only has innovation moved to center-stage in economic policy making, but there is a realization which requires a coherent, “whole-of-government” approach. many oecd countries have adopted national strategies to foster innovation and improve its economic impact. even countries that have refrained from active industrial policy last years now seek new ways to improve the environment for innovation with the aim to boost productivity and growth. the usa for example, came forward with the “innovate america” strategy in 2005 (a strategy, 2005). the eu’s “lisbon agenda”, prepared in 2000, has today been updated and strengthened (the lisbon strategy, 2000). governments could also play a more direct role in enhancing innovation. public investment in science and research can play an important role in developing ict and other technologies and in enabling further innovation. this shows the importance of reforming the management and funding of investment in science and technologies, as well as public support to innovative activity in the private sector. the latter calls for a mix of direct and indirect instruments (tax credits, direct support and publicprivate partnership) support for innovative clusters and rigorous evaluation of such public support. baltic journal of economic studies 5 vol. 1, 2015 2. policy problems and challenges much of the rise in living standards is thanks to innovation – this has been the argument since the industrial revolution. nowadays, innovative performance is an important factor in determining competitiveness progress. besides, innovation is important to help address global challenges, for example, climate change and sustainable growth and development. but it is the application of advances in technology, in addition with innovative approaches to the creation of goods and ser vices, which translates scientific advances into more productive economic activity. this results in economic growth if market structures and the environment enable the more productive activities to expand. innovative effort is on the rise as a part of economic activity. investment in knowledge has grown more quickly than investment in industry and equipment since the 1990-s in most oecd countries, and has surpassed the latter in a few countries such as the usa and finland. r&d intensity of the economy has risen in a number of smaller oecd members, but remains more or less unchanged in the oecd area as a whole since 1995, and cross-country differentials remain (figure 1). 0 1 2 3 4 5 6 7 8 israel finland korea iceland germany chinese taipei singapore france belgium australia united kingdom norway china slovenia spain russian federation south africa turkey poland argentina romania 1995 2014 source: (innovation and growth, 2007, see p. 7) fig. 1. growth in r&d expenditures in oecd countries in 1995, 2014, % but intellectual assets are rapidly becoming the instrument of value creation through a number of channels. improvements in the skill composition of labor play a huge role in productivity rising. investment in r&d is associated with high rates of potential profit. and investments in software have also contributed to business performance and economic growth, accounting for as much as one-third of the contribution of ict (information and communications technology) capital to gdp growth since 1995 in france, denmark, sweden, the netherlands and the usa (oecd, 2007). the importance of innovation has been reinforced both by globalization and by advances in new technologies, which have enabled new competition forms and opened new markets for the creation of innovative goods and services. besides globalization has increased the pressure on oecd countries to move up the value chain and engage in a process of adjustment and innovation. there has been a significant rising in r&d effort in a number of economies outside the oecd area (figure  1), and, although starting from a low base, the associated growth of r&d capabilities in a number of major developing economies is making them competitive destinations for cross-border r&d. at least china is now a key global player in r&d in indicators of absolute size as well as growth rates, with gross expenditure in r&d reaching usd 115 billion in 2005 (at ppp s), compared to usd 227  billion in the eu (provisional) or usd 118 billion in japan in 2005 (oecd, 2006). recent oecd analysis has shown that rises in r&d intensity and innovation are driven by such factors. reduction of anti-competitive market regulations, which promotes business r&d and strengthens the incentives for innovations. besides, a low level of restrictions on foreign investment is important, as it can improve international knowledge transfers. stable economic conditions and low interest rates which encourage the growth of innovation activity by creating a low-cost environment for investment in innovation. availability of internal and external finance. an expansion in public research, which can support business sector research, albeit expanding both at the same time, will need efforts to raise the supply of labor force. fiscal incentives. tax impact for private r&d is often found to provide a stronger incentive to business r&d than direct government support. this may be because much direct support for r&d is permitted at meeting government goals, such as energy security or defense, and not at promoting private r&d. openness to foreign r&d, which is connected with higher productivity growth, especially when domestic r&d investment and capabilities are high too (oecd, 2006). 3. the importance of intellectual property rights (ipr) for innovation activity the important policy question remains how to set an appropriate balance between incentives and rewards to inventors and providing access to knowledge for users. over the recent years the balance has been shifting in favor of holders, at least in reaction to changing conditions but also as a deliberate move towards “pro-ipr policies” (“prointellectual property rights policy”). these policies have resulted in achievements, such as the progress of technology and knowledge transfers from universities and institutes in countries which have promoted patenting of public research; the expansion of the biotech sphere, which would have been hardly possible without patents on genetic innovations; and the multiplication of venture capital based startups, which often rely on intellectual property rights. as the policy, legal and economic environment are still evolving, the situation in the sphere of ipr is not stabilized. baltic journal of economic studies 6 vol. 1, 2015 public debates have turned around the efficiency and distributive impacts of consolidating ipr regimes. if strong ipr are required with the aim to give incentives for creative activities, they have not on the other hand endow the holder with such rights as to block all access to new technologies and knowledge. difficulties have emerged in the following areas. access to innovations for research use (biotech) or for further improvement have been hampered by patents in a number of cases, hence slowing down research. establishment of standards for interoperability and other use of ipr have been delayed or made more costly by strategies based on ipr . the reserve at most patent offices has exploded, creating uncertainty on a vast scale, while there have been concerns about the quality of patents. the extension of digital rights management (drm) systems is meeting with resistance as they put restrictions on the rights of consumers, hence reducing the scope of “fair use” of copyright law, for example. no satisfactory formula has been found for ensuring that inventors are rewarded while fully using the fluidity suggested by the internet. in the context of the changing environment for innovation, it is important to review the ipr system and practices to assess whether it continues to promote innovation and provide access to knowledge base, or if in certain cases the degree of control with which ipr owners are endowed could complex competition, use and the technology transfer. the new innovation environment suggests opportunities that could be seized more efficiently if the ipr system is adapted so as to become more flexible and play new roles in the economy. recent developments in the ip environment include. the progress of different types of “open modes” of innovation where knowledge flows between firms and between firms and universities, has increased the need for protection and strengthened the potentially damaging effects of excessive protection, which could complex access by third players. essentially, sharing is easier when there is a framework for incentives. as companies rely on inventions made by others, the number of licensing deals has grown, which strengthens the necessity for the technology market to be built on solid grounds, notably in terms of validity and valuation of the titles. progress in emerging technologies has advantaged from start-ups, which often have little assets other than their technology that they require to protect and use to raise capital. these companies help bring new ideas and innovations to the market. oecd governments, following the bayh-dole act of 1980 in the usa, have used ipr for leveraging the commercialization of inventions by universities which might otherwise have stayed on the shelves. in order to achieve a balance, ipr policy should go beyond the design of the basic legal framework which defines rights and obligations of ipr owners: it should also develop instruments whose own flexibility would help the system work. such a policy agenda means. reviewing exemptions to copyright in the light of the internet’s different uses. clarifying exemptions for research use. promoting an active and open commercialization policy for universities. encouraging the commercialization and monetization of ipr: for example draft licensing contracts, valuation standards. standards: encouraging pooling mechanisms, platforms etc. accelerating patent processing while preserving quality (for example through international cooperation). 4. reforming product and labor market policy reforms are required to strengthen innovation and productivity outcomes. stimulating the business sphere for innovation is very important, as business is the key driver of innovation. further liberalization of the services sphere and of network industries could foster stronger innovation in these sectors, which account for about 70% of gdp in oecd countries. more innovation-friendly regulation, combined with small barriers to trade and foreign investment would enhance competition and would foster the transfer of technology and knowledge across borders. reform of labor markets, notably through well-designed employment legislation, would help companies to adjust and permit them to draw benefits from their investment in innovation. oecd assessments have established a negative link between the restrictiveness of economic regulations in goods and labor markets, and productivity growth. in the goods markets limited competition among suppliers could increase the cost of inputs and make products supplied less innovative. it may discourage innovation, or make it costly to develop it or to defend the intellectual property. on the other hand, restrictive labor markets may restrict firms’ ability to put in place the changes in the workforce and firm organization necessary to reap benefits from new technology deployed. moreover, oecd empirical analysis shows that competition-restraining regulations slow the rate of catch-up with the technological frontier, where labor productivity is the highest. by implication, countries may have achieved faster productivity growth over the 19952014 period if they had set their regulations in each nonmanufacturing sphere on the least constraining stance in the oecd space in that industry (oecd, 2007). financial markets reforming can also stimulate innovation and growth, including by helping to eliminate the financing gaps faced by some innovative small companies. it is suggested that industrial sectors that are dependent on finance tend to grow faster in economies that have better developed financial systems. besides, the sectors that tend to be the most dependent on external financial sources are the ones that invest baltic journal of economic studies 7 vol. 1, 2015 the most in r&d (pharmaceuticals, refined petroleum products and electronic equipment). the market for the risk capital, particularly venture capital and less formal sources of finance such as business angels’ funds play an important role in the innovation financing. venture capital investment is small in most european countries as compared with north america, great britain and the netherlands. investment of innovation would be supposed by more efficient venture capital markets and easier access to external finance. differences in the availability and use of venture capital across countries may to some extent be rooted in different cultural attitudes towards entrepreneurship, but they also reflect policies that discourage risk-taking. improving disclosure of intellectual assets could help improve the allocation of capital. competition in financial markets encourages firms to improve their reporting and practices on intellectual assets. although, best practices have not been disseminated across firms and jurisdictions, and governments could encourage the transfer of best practices, already pioneered by advanced firms, in a principles-based manner (oecd, 2007). 5. importance of education system innovation relies heavily on the creation of knowledge, through both education and science. a well-performing and accessible education system facilitates the diffusion of innovation. the contribution of education is well documented. some of this occurs through science and innovation. investment in the education and highly skilled workers is an important factor in determining the contribution that research can make to scientific progress and innovation. besides, human capital is a key factor in the adoption of modern technologies and the introduction of innovative practices. much of the latter operates through growth in mfp arising from managerial practices, organizational change and inventions per se. growth of skills embodied in workers and managers play a key role in this process. growth in output per employed person is attributable to increases in the human capital of those in employment. creating and diffusing new products and processes needs strong science and technology (s&t) skills as well as many non-research soft and entrepreneurial skills. there is an increasing emphasis on policy issues connected with the availability of highly skilled labor, particularly highly skilled human resources in science and technology. strong s&t skills facilitate the uptake of new technologies which drives innovation throughout the economy. this places a premium on both the “quantity” as well as the quality of highly skilled labor in the economy. but as, innovative activity may appear from any part of the production process, not only from the r&d laboratory, “softer” or more intangible skills such as entrepreneurial ability, adaptability etc., also contribute to innovation, especially in services and in organizational innovation. as a result, in some of the successful education systems there is now less emphasis on the reproduction of subject matter knowledge, which develops skills that are easiest to automatize and offshore, and more focus on evaluating skills in the context of real-world complexity, such as expert thinking – the ability to structure problems, learning strategies and self-concept. education policy makers are paying attention to innovation outcomes, and there is increasing emphasis to move towards a school environment which is less elitist between training for theoretical and practical understanding, and geared towards making a majority of students successful. there is scrutiny of the efficiency of education systems throughout the oecd space, and a greater willingness to use international comparisons of outcomes in this area. as distinct from more spending in education as such, good education outcomes which can support a more innovative economy involve structural shifts in the way education is delivered, from uniformity in the system to individualizing learning, from a focus on provision to a focus on choice, from managing inputs to education towards devolving responsibilities and enabling outcomes, from talking about equity to delivery equity. on the latter aspect oecd data (oecd, 2004) show that many of the problems, in particular in europe, originate from compartmentalized and stratified systems where learning outcomes depend on the social background of individuals and potential therefore goes wasted. the oecd 2007 report going for growth (oecd, 2006) identifies education reform (basic and tertiary, depending on the country) as a priority action area for 18 out of 30 countries. 6. public funding as a key factor of innovation policy public investment in science plays an important role in developing ict and other technologies and in enabling further innovation. many fundamental innovations with deep and positive social impacts had their roots in public research and came from findings that were impossible to foresee. fundamental innovations such as the world wide web and the web browser emerged, not from competitive market processes, but from government-funded research held in universities, industry and government labs. much of the r&d was conducted as part of government programs, in some cases after the market had abandoned the research. reform of the funding of higher education and science institutions, by providing incentives that focus on excellence and relevance, can help strengthen the contribution of public investment to scientific progress and innovation. better governance of universities and laboratories can be achieved through the use of new methods, such as greater use of project funding (contracts and grants awarded through competition) as opposed to institutional block grants, increases of funding for researches that are linked to economic needs, and the creation of research centers that serve both to concentrate expertise particularly baltic journal of economic studies 8 vol. 1, 2015 fields of science and to foster research at the nexus of several disciplines. it also often requires a commitment to evaluating researchers and research institutes, as well as changes in the way such evaluations are conducted. evaluation criteria must consider that excellence in research has become in some disciplines, more connected with industry applications and contributions to addressing social problems. although, the science system have not be made more responsive to identifiable opportunities at the expense of creativity in exploring the knowledge frontiers within a long time frame. because changes in business strategies strengthen longstanding disincentives for private industry to invest in research, the need for government support rises. securing support for fundamental knowledge and research is a priority for many governments, even if some have found it difficult. it is also imperative to safeguard knowledge with the aim to ensure the broad transfer of the results of publicly funded research. more can also be done to link science and business, including by enhancing the climate for innovative business. many oecd members lag behind in indicators of modernizing their science-innovation interface. better management of ipr s in public institutes is important in order to develop relationships between public research and industrial innovation. efforts are required to boost exchanges of tacit knowledge between the public and private sectors, through the movement of labor force, for example. low rates of researcher mobility between the private and public sectors remain a big bottleneck to knowledge and technology flows in many countries. regulatory reform related to labor mobility and licensing can be complemented by measures that promote business demand for scientific inputs and improve the ability of public research institutes to transfer knowledge and technology to the private sector. policies to enhance science-industrybusiness relationships must be part of a strategy addressing the business sector’s demand for the results of public research. 7. innovation and environmental challenges innovation can contribute to meeting environmental and challenges, such as climate change, when the right incentives are given. the use of flexible instruments including taxes, emissions trading and technology-neutral performance standards should make incentives for innovation and foster the international transfer of clean technologies. to take one example, innovation in energy technology is becoming important to meet demand for energy amidst concern about the security of energy supplies and calls for environmental protection. governments across the oecd are investing enormous sums in r&d on new energy technologies, such as fuel cells, and seeking ways to smooth the transition to a more sustainable, economy. recent oecd work on hydrogen fuel cells has reviewed national efforts in this sphere and has found that, innovative activity is on the rise. but the level of investment in energy-related r&d may need to rise further, thanks to the growing importance of renewable energy since the return of high oil prices and the environmental goal of shifting away from fossil fuels. strengthening innovation is regarded as a challenging policy goal. as it places a premium on higher level skills and may involve significant adjustment, it can be perceived as conflicting with social goals, including income distribution and employment creation. indeed policies to strengthen innovation cannot be conceived and implemented in isolation. policy coordination is important  – only a wide-ranging strategy to foster and strengthen innovation could help address social and environmental aims while building a foundation for future economic growth. governance of policies towards innovation is important as innovation requires efforts from many government agencies, and from the national levels. coordinating policies is important to avoid duplication of efforts and ensure a coherence of policies at different levels. innovation doesn’t need to go at the cost of employment performance. some countries that have emphasized innovation last years have experienced strong employment growth, showing that these can go hand in hand. in reality, several countries that have observed strong employment growth over the past decade, such as spain and ireland, are today emphasizing innovation as the scope for further employment-led growth is becoming more limited and growth will require coming from more rapid productivity growth, including innovation. 8. conclusions the investigation allows making some conclusions. the capability to innovate will be an important determinant of the global competitiveness over the future decade. there is awareness among politics that innovative activity is the main engine of economic progress as well as a potential factor in meeting global challenges in spheres such as the environment and health. governments can play an important role in enhancing innovation. public investment in science and research can play a key role in developing ict and other technologies and in enabling further innovation. this shows the importance of reforming the management and funding of investment in science and technologies, as well as public support to innovative activity in the private sector. it is identified that rises in r&d intensity and innovation are driven by such factors: reduction of anti-competitive market regulations, which promotes business r&d and strengthens the incentives for innovations; stable economic conditions and low interest rates which encourage the growth of innovation activity by creating a low-cost environment for investment in innovation; availability of internal and external finance. it is given the basic legal framework which defines rights and obligations of ipr owners: reviewing exemptions to copyright in the light of the internet’s different uses; clarifying baltic journal of economic studies 9 vol. 1, 2015 exemptions for research use; promoting an active and open commercialization policy for universities; encouraging the commercialization and monetization of ipr: for example draft licensing contracts, valuation standards; standards: encouraging pooling mechanisms, platforms etc.; accelerating patent processing while preserving quality. references a strategy for american innovation. (2011). retrieved september 4, 2015 from https://www.whitehouse.gov/ sites/default/files/uploads/innovationstrategy.pdf innovation and growth. rationale for an innovation strategy. (2007). retrieved september 2, 2015 from http://www.oecd.org/science/inno/39374789.pdf oecd (2007). creating value from intellectual assets, policy brief. (2007). retrieved september 3, 2015 from http://www.oecd.org/berlin/41408747.pdf oecd (2006). main science and technology indicators (msti) retrieved september 5, 2015 from http://www.micit.go.cr/encuesta/docs/textos/ocde_indicadores_de_ciencia_tecnologia_e_innovacion_en_ mundo_en_cambio.pdf oecd (2006). going for growth. retrieved september 1, 2015 from http://www.oecd.org/eco/labour/36054358.pdf. oecd (2007). going for growth 2007. retrieved september 1, 2015 from http://www.oecd.org/eco/ labour/38088376.pdf oecd (2004). learning for tomorrow’s world. retrieved september 2, 2015 from http://www.oecd.org/ education/school/programmeforinternationalstudentassessmentpisa/34002216.pdf the lisbon strategy 2000-2010. an analysis and evaluation of the methods used and result achieved. (2000). retrieved september 5, 2015 from http://www.europarl.europa.eu/document/activities/ cont/201107/20110718att24270/20110718att24270en.pdf иван анисимов особенности инновационной политики в странах оэср аннотация. целью статьи является анализ особенностей инновационной политики в странах оэср и предложение базовых рекомендаций определения прав и обязанностей собственников прав интеллектуальной собственности. правительство играет важную роль в разработке политики, ориентированной на спрос: разумное регулирование, стандарты, обучение потребителей, налогообложение, государственный заказ. в силу того, что спрос и предложение взаимосвязаны, политика, влияющая на обе стороны вопроса, должна быть нацелена на перспективную инновационную деятельность и стабильный рост. политика поддержки инноваций должна учитывать изменения международной экономики и трансформацию инновационных процессов. трансформация изобретения в инновацию подразумевает широкий спектр видов деятельности. инновационная деятельность сегодня включает больше видов деятельности, нежели ниокр, хотя ниокр также имеют большое значение. методология. данные для исследования взяты из публикаций и отчетов европейской комиссии, оэср, мирового банка и т.д. использованы методы общенаучного познания и качественного анализа. результаты. определено, что на рост интенсивности ниокр и инноваций влияют следующие факторы: уменьшение антимонопольного рыночного регулирования, что стимулирует бизнес – ниокр и инновации; стабильные экономические условия и низкая процентная ставка, стимулирующая инновационную деятельность и инвестиции; доступность внешних и внутренних финансовых ресурсов. практическое значение. проведен анализ особенностей инновационной политики в странах оэср и предложены базовые рекомендации определения прав и обязанностей собственников прав интеллектуальной собственности: пересмотр льгот на копирайт в свете разнообразия интернет – пользователей; установление льгот для пользователей результатами исследований; поддержка политики активной коммерциализации для университетов; стимулирование коммерциализации прав интеллектуальной собственности, например, разработка проектов лицензионных контрактов, стандартов оценивания, поддержка механизмов трансфера и т.д.; ускорение выдачи патентов с учетом проверки качества. значение/оригинальность. полученные в результате исследования выводы помогут понять особенности инновационной политики в странах оэср, что даст возможность использовать их опыт в украине. baltic journal of economic studies 352 vol. 4, no. 5, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 uzhhorod national university, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-352-356 offshore territories: positive and negative impacts on the global economy anna tytko1, iryna sukhan2, marianna koshchynets3 abstract. the aim of the article is to analyse and clarify the areas of development of offshore zones in the functioning of the world economic system. the subject of the study is offshore zones and offshore international centres as the locus of laundering of funds obtained by illegal means and their impact on the economy in total. methodology. the study is based on the use of general scientific and special scientific methods in studying a coherent picture of development and possible trends in the further functioning of offshore zones in the global economic system. general scientific methods such as deduction, induction, analogy, analysis, synthesis enabled to reveal the implication of the world’s offshore zones as a system for laundering illegally obtained funds. the comparative method enabled to distinguish the specific features of offshore zones and offshore international centres and to identify common and distinctive features. the prognostic method allowed forming an original outlook on the advantages and disadvantages of offshore activities. logical-semantic and dogmatic methods enabled to define the concepts of “offshore jurisdiction”, “offshore zone”, “offshore financial centre” and their specific features. the results of the study enabled to consider offshore zones, offshore financial centres and international financial centres, in terms of their specific features, as certain territories and areas of certain states, where under the exclusive conditions of doing business outside the territory of registration, non-resident entities are granted benefits and privileges in doing business, taxation, registration, and financial reporting, as well as an exclusive privilege of confidentiality. practical implications. in the study, first, the concepts of “offshore zone”, “offshore financial centre”, “international offshore centre” are defined; second, the scientific approaches to their classification are analysed and compared in the specialized literature, the fifth directive is considered as the main legal regulation of money laundering and the beps project; third, the author’s outlook on the positive and negative features of offshore activities and their impact on the world economy are substantiated. relevance/originality. the author’s approach to the definition of the main features of offshore zones and offshore financial centres through the analysis of their qualitative characteristics is offered to determine the key areas of their development trends. key words: financial system, offshore financial centre, offshore zone, offshore jurisdiction, black lists, grey lists, directive, money laundering. jel classification: o16, p34 1. introduction it has been repeatedly emphasized that annually a system of well-established schemes of international offshore zones enables illegal withdrawal of large amounts of funds from the financial systems of each country. due to the creation of offshore jurisdictions, in the global economic network, socalled “tax havens,” the areas where capital operates freely and brings illegal proceeds to its owners, exist. the use of privileges and benefits of offshore zones, such as reduction of tax, currency and transaction control, and the confidentiality regarding the final beneficiary, confirms the relevance and necessity to study the activities of offshore zones and centres in their inextricable link, as well as their destructive impact on the economy of individual countries and the financial system in total. therefore, this enables to avoid taxation and use such schemes of the illegal currency movement to extend the scale of shadow processes in the global economy. at different times, the study of offshore activity and its impact on the development trends of the world economic system was undertaken by scholars, such as d. meadows, j. tobin, n. shaxson, v. v. virchenko, o. i. borysov, a. m. voronin, v. o. virchenko, d. yu. holubkov, n. yu. koniakhin, m. v. korolov, a. n. mykhailyn, v. p. leshchuk, d. yu. mamotenko, i. i. nikitchuk, a. i. ryzhkova, n. m. teliuk and others. baltic journal of economic studies 353 vol. 4, no. 5, 2018 in view of the above, it is relevant to study the issue of delineating the definitions of offshore zone, offshore financial centre, offshore jurisdiction, as well as the impact of such territories functioning from the perspective of “money laundering”, which is considered in this paper. in order to achieve this objective, the following tasks should be: first, to outline the delineation of the main definitions of offshore territories and make the appropriate classification; second, to analyse the development of offshore activities and international legislative regulation of offshore counteraction; third, to suggest original outlook on effects of the capital outflow through offshore territories on the world economy. 2. main material the experience of successful refinancing, avoiding the legal taxation system has become an integral part of the world economic community. according to boston consulting group statistics, the total offshore funds increased from 6 trillion usd in 2005 to 10 trillion usd in 2016, so the offshore territories hide 10-13% of world gdp (ekonomisty pidrakhuvaly: v ofshorakh skhovano 10-13% svitovoho vvp). the instability of the world economies, constant oil price fluctuation, and the financial and economic crisis lead to a revival of money laundering, furthermore, to expanding boundaries of the shadow economy. thus, as of 2016, about 35-40 countries of the world or their entities are offshore zones, which contribution to world gdp is relatively small (only 1.22%), while they account for about 60% of all financial transactions and 25% of the international movement capital in the world. considering the financial secrecy index study, in 2018, the global amount of illegal cross-border financial flows is estimated at 1-1.6 trillion usd per year, and the total assets of offshore jurisdictions and tax havens reach 32 trillion usd. according to the organization for economic cooperation and development (oecd), due to the existence of such offshore zones, up to 250 billion usd of tax revenues disappear from the financial system of the countries of the world (naskilky populiarni v ukraini ofshory). according to the 2016 international narcotics control strategy report of the anti-money-laundering agency, the countries with the highest levels of money laundering are russia, the united states, the united kingdom, germany, and france. the relevance of this problem is also due to the fact that only in 2018, in the european union about 110 billion eur were “laundered”, equivalent to 1% of the total gdp of the european union, as well as exacerbation of using offshore schemes in the legalization of incomes avoiding the tax system, which leads to the decreasing state budget revenues. therefore, this article attempts to determine the impact of offshore territories as free economic space on the economies of the states locally and on the global economy in total, as well as defining the concept of “offshore financial centre” and “offshore jurisdiction”. the concept of an offshore zone originates from english “off-shore”, which means “situated at sea some distance from the shore”, “outside own territory, abroad.” an offshore zone or offshore jurisdiction (this definition can also be found in the specialized literature) is one of the varieties of free economic zones characterized by the creation of a favourable monetary and fiscal regime, a high level of banking and commercial secrecy, and loyalty to state regulation. therefore, an offshore zone includes territories with a low or zero tax rate for all or certain categories of income, a certain banking or commercial secrecy, and a minimum or complete absence of reserve requirements of the central bank, or limitations on the currency convertibility. according to a. n. mykhailin, an offshore zone is a financial centre that attracts capital by providing tax and other preferences to non-residents of the country who have registered business in the offshore territory (mykhailyn, 2015). in addition, in the concept of “offshore financial centres” n. yu. koniakhin includes territories or states with an extremely preferential regime for registration, taxation and conduct of financial transactions for foreign companies and banks (koniakhina, 2008). furthermore, the business dictionary refers to offshore financial centres (hereinafter referred to as the ofc) as territories of such countries as anguilla, antigua, bahamas, bahrain, cayman islands, hong kong, isle of man, jersey, lebanon, luxembourg, the netherlands, antilles, panama, singapore and the united arab emirates (uae), which administrations do not interfere at all or partially in the legislative regulation of business and financial activities. in addition, the ofc also offers very low or zero tax rates and provides telecommunication infrastructure (business dictionary). in most cases, the ofc is identified with an international financial centre. international organizations define the term “offshore financial centre” as a territory divided into so-called tax havens and countries with favourable taxation, with a broad-based capital market that has a preferential tax and currency regime (encyclopedia of offshore: a practical guide, 2007). according to i. m. tovkun, the ofc should be regarded as a part of the territory of the state, within which companies of foreign residents are registered and entitled to trade, financial and other commercial transactions on preferential terms (tovkun, 2013). therefore, it can be argued that the main difference between offshore centres and offshore zones is that the latter are a part of individual states with preferential tax, currency, customs or administrative regimes and the absence of production activity of a non-resident country. baltic journal of economic studies 354 vol. 4, no. 5, 2018 more practically, definition of the afc can be interpreted as the centre where the bulk of the financial activity is an offshore party on both sides of the balance sheet (i.e. counterparties for most obligations and assets of financial institutions are non-residents), transactions are initiated elsewhere, and most of the institutions involved are controlled by non-residents. therefore, the main specific features of offshore territories are: 1) the primary orientation of business to a non-resident entity; 2) a favourable regulatory environment (low level of supervision, requirements and minimum disclosure); 3) schemes of low or zero taxation. for example, in accordance with the classification of recognized international organizations fatf (financial action task force on money laundering) and fsf (financial stability forum), the term “offshore financial centre” applies to territories with a developed capital market, preferential tax and currency regimes, and ignoring the recommendations of international financial institutions to improve international regulation and control of banking and financial currency systems (business dictionary). meanwhile, the ofc has a large amount of banking and insurance business on its territory, through which export-import transactions, operations with real estate, marine vessels, trust and consulting activities are carried out. offshore centres are larger in scale, infrastructure and production activities. therefore, the ofc usually include: jurisdictions with a relatively large number of financial institutions, primarily engaged in business with nonresidents; financial systems with external assets and obligations that are inappropriate to domestic financial intermediation charged to finance national economies; centres that provide some or all of the following services: low or zero taxation; moderate or easy financial regulation; bank secrecy and anonymity. according to the functional determination, available activities and relevant financial and economic activities, the centres can be classified into: international financial centres (london, new york, tokyo), which include major international service centres that support large domestic economies with deep and liquid markets that borrow short-term nonresident loans and provide long-term loans to nonresidents, with the further reliable legislative and regulatory framework. regional financial centres (hong kong, singapore, luxembourg) are fundamentally different from international ones by small-scale domestic economies. conventional financial centres (paris, frankfurt, tokyo, sydney). this category can include financial centres providing services, primarily aimed at meeting the needs of their national economies, not regions or the world. offshore financial centres, as a rule, differ from centres with very limited resources to support financial intermediation. such centres usually provide preferences, such as wide opportunities for global tax planning, and only then provide services of the international financial centre; minimal registration procedures; the adequate legal framework to ensure the integrity of relations between principals and agents countries; proximity to major economies or countries attracting capital inflows; freedom from exchange control; protection of assets from the influence of legal proceedings, etc. ya. a. shabeikin argues that according to the scale and nature of preferences provided, the offshore centres should be classified into territories with: preferential taxation providing full tax avoidance related to incomes of companies registered in a donor country. these territories are called tax havens (the antilles, bahamas, bermuda, british virgin islands, gibraltar, cayman islands, isle of man, nauru, turks, and caicos). moderate taxation, where the agreement on the abolition of double taxation is in force (shabeikina, 2014). in such territories, a minimum tax on profits is levied. in these countries, a favourable tax system, preferential terms for official offices have been created (ireland, switzerland, luxembourg, austria, the netherlands, antilles, mauritius, seychelles, vanuatu, madeira, western samoa, saint vincent, cyprus, etc.). the policy of investigating and countering offshore activities is implemented by a large number of international organizations, such as the most active organization for economic cooperation and development (oecd) and the financial action task force on money laundering (fatf). in view of february 2018, information on bank scandals in latvia, and then with the maltese bank pilatus and the danske bank affiliate in estonia, the eu countries decided on the need to strengthen the control of the “money laundering” through offshore companies. in light of these events, the council of europe adopted the fifth directive of may 4, 2018, which amended the current directive no. 849 of 2015 (piata dyrektyva yes rozshyriuie sferu diialnosti rehuliuiuchykh orhaniv yevropeiskoho soiuzu), among provisions of which the most important are enhancing transparency in the ownership of companies and trusts; improvement of transparency in information on beneficial ownership of companies and trusts; improvement of control over transactions involving high-risk third countries; providing extended powers to the european union financial intelligence units (fiu), especially in terms of free access to centralized registries of bank accounts and facilitating cooperation with national registries of member states; preventing the risks of financing terrorism and money laundering when using baltic journal of economic studies 355 vol. 4, no. 5, 2018 anonymous prepaid cards and virtual currencies; protection of informers, who report money laundering, including the right to anonymity. some ways to regulate offshore flows include the following: 1. to conclude agreements on cooperation and exchange of information between countries with offshore zones and non-offshore countries. 2. to include countries in the so-called “black” and “grey” lists of offshore jurisdictions (including in such a list entails various restrictions by non-offshore countries’ regulators). the main criterion for including countries in such lists is the adoption of requirements for the disclosure of confidential information regarding any tax issues, its tax transparency, willingness to join the beps plan and the exchange of information. thus, in 2016, the oecd included costa rica, uruguay, labuan and the philippines in the blacklist. according to fatf information, such countries are iran and the dprk. as of the end of 2017, the european union published a “black list” (17 countries), which included american samoa, barbados, bahrain, grenada, guam, macao (prc), marshall islands, mongolia, namibia, uae, palau, panama, samoa, saint lucia, trinidad and tobago, tunisia, south korea. meanwhile, 47 countries and territories, including “classical” tax-free offshore (belize, bermuda, cayman, isle of man, seychelles, etc.) fell into the grey list. 3. to provide special restrictive measures, in particular, legislation on the taxation of dividends received by residents from controlled foreign corporations. therefore, it can be argued that offshore territories such as cayman islands, panama, tunisia, seychelles and others plan to disclose the names of all nominee directors and managers of offshore companies. for example, belize obliged foreign beneficiaries to hold innominate shares at the registrars. meanwhile, the united states and other developed countries use many administrative regulations, strengthening the requirements for banks in terms of opening new accounts of offshore companies and control over the transactions of these suspect companies. in order to regulate offshore activities, the beps (base erosion and profit shifting) project, developed by the oecd with the active support of the g20 countries, has been introduced, the socalled action plan to address the problem of the tax base erosion and profit shifting. the content of this project as the main criterion for assigning any state to the “ black list” is international cooperation to counter offshore processes, further recommendations for national authorities and their further implementation in the legislation of the countries. any country ready to implement or create its own internal rules for regulating offshore operations can enter this project. the main areas of the plan implementation are solving tax challenges and the peculiarities of taxation the digital economy; neutralization of so-called “hybrid schemes”; countering tax base erosion through the payment of interest and other financial transactions; general countering “harmful tax practices”, considering the issue of transparency and substance; prevention of abusing the provisions of the agreements on the elimination of double taxation; prevention of schemes of artificial avoidance of the “permanent establishment” status; development of transfer pricing guidance for intangibles and transfer pricing in terms of risks and capital; development of transfer pricing guidance for other high-risk transactions; development of methods for collecting and analysing information on tax base erosion and profits shifting; introduction of rules for disclosure of “methods of aggressive tax planning”; optimization of transfer pricing documentation and accurate reporting; development and improvement of dispute resolution mechanisms on tax issues; development of a comprehensive multilateral convention on international taxation to modify ongoing tax treaties between countries (plan beps). the implication and scale of the world economy’s offshore tendency is also evidenced by the information provided by the state statistics service (as of july 1, 2018), which states that the largest investment in the private sector of ukraine came from cyprus, up to 9.18 billion usd, 28.2% of total revenues for the 6 months of this year. the number of foreign direct investments is 32.6 billion usd. the list of such countries includes cyprus, the netherlands, which share of the total investment is up to 21%, germany – up to 5.3%, switzerland – up to 4.7%, the british virgin islands – up to 4.1%. therefore, the greatest threat to the functioning of offshore centres and offshore zones is precisely in the privileges and preferences that these territories provide, such as: 1) the low level of taxation in offshore zones undermines the fiscal base of countries, residents of which use offshore services. according to the most conservative evaluations, the budgets of all countries of the world are deprived of at least 3 trillion usd hidden in offshore per year; 2) laundering illegally obtained funds contributes to increase of crime in all its manifestations, such as drug trafficking, trafficking in human beings, terrorist financing, and white-collar crime. offshore centres and zones stimulate the shadowing of the economy and the expansion of international organized economic crime; 3) due to weak regulation of offshore financial operations, the risk of uncontrolled flows of so-called hot money increases, destabilizing the global financial system; 4) harmful tax competition, taking profits from onshore countries to create an element of instability in the global economy and finances owing to high potential accumulation of capital in offshore zones, especially speculative ones; 5) contribution to unstable trends in the world economy and the financial baltic journal of economic studies 356 vol. 4, no. 5, 2018 system due to the high potential accumulation of capital in offshore areas; 6) stimulation of negative social and economic situation in donor countries; 7) intensification of capital withdrawals, leading to exacerbation of the shadow economy, and reduction of social and industrial infrastructure development; 8) granting unjustified privileges and preferences to individual companies, leading to unfair competitive conditions for mediumsized businesses. despite a number of negative aspects of doing business through offshore zones and offshore financial centres, this scheme has enough advantages, such as: 1) activating cross-border financial flows and accelerating the circulation of financial assets internationally; 2) stimulating financial flows and creating conditions for diversification of investments; 3) increasing access to loans and better capital transformation, the incentive to reduce the level of tax pressure, which causes deepening of international financial flows; 4) reducing the risk of expropriation and ensuring protection of property rights, which, in turn, can activate economic growth, primarily in donor countries, promoting the prosperity of those states where offshore zones are located. this contributes to the more harmonious development of the global economy in general, the competitiveness of companies at the national and global levels through the use of more flexible development strategies. we support the viewpoint of yu. p. hrihorieva, that the main reasons for the withdrawal of capital offshore are the unfavourable internal environment for doing business, corruption, high exchange risks, business criminalization, and imperfect tax and currency legislation (hryhorieva, 2016). 3. conclusions therefore, the activity of offshore centres and offshore zones in general is very negative for the development of the world economy, but primarily offshore territories are an advantageous place to hide and withdraw illegally proceeds from illegitimate activity, in particular, international criminal activity. a step-by-step study of offshore activities enables to avoid financial risks at an early stage of doing business, to improve the situation on the domestic market for developing countries; in addition, an analysis of the shortcomings in the work of offshore companies will improve the legislation of countries in terms of exchange legislation. the main area of countering tax base erosion and profit shifting, as well as money laundering prevention, should be the urgent implementation of the eu fifth directive 2015/849 to enhance transparency in identifying true beneficiaries of offshore companies and trusts’ owners, under open access to the registers of beneficial owners of legal entities and trust registered in all eu member states. references: ekonomisty pidrakhuvaly: v ofshorakh skhovano 10-13% svitovoho vvp [economists’ assessment: 10-13% of world gdp is hidden in the offshore territories]. retrieved from: https://glavcom.ua/news/ ekonomisti-pidrahuvali-v-ofshorah-shovano-10-13-svitovogo-vvp-451450.html (in ukrainian) naskilky populiarni v ukraini ofshory [how popular are offshore territories in ukraine]. retrieved from: https://biz.nv.ua/ukr/experts/cherkashyn/naskilki-populjarni-v-ukrajini-ofshori-2454606.html (in ukrainian) mykhailyn, a. n. (2015). slovnyk po zovnishnoekonomichnii diialnosti: uchbovyi posibnyk [dictionary of foreign economic activity: a teaching manual]. m.: alla-print. (in ukrainian) koniakhina, n. yu. (2008). «off-shores» – osobennosti funktsionirovaniia v strukture osobykh ekonomicheskikh zon [offshores features of functioning in the structure of special economic zones]. vestnyk tambovskoho unyversiteta, 12, 412. (in russian) business dictionary. retrieved from: http://www.businessdictionary.com/definition/offshore-financial-centreofc.html encyclopedia of offshore: a practical guide (2007). london. zurich boston: finance research group. tovkun, i. m. (2013). mizhnarodno-pravovi zasoby funktsionuvannia ofshornykh tsentriv [international legal means of functioning of offshore centres]. problemy zakonnosti, 123, 49. (in ukrainian) shabeikina, ya. a. (2014). ofshorni kompanii yak metod optymizatsii opodatkuvannia [offshore companies as a method of tax optimization]. science time, 4-4, 284-290. (in ukrainian) piata dyrektyva yes rozshyriuie sferu diialnosti rehuliuiuchykh orhaniv yevropeiskoho soiuzu [eu fifth directive expands the scope of the activities of the regulatory bodies of the european union]. retrieved from: https://offshorewealth.info/deofshorization/fifth-directive-widenes-area-of-activity-regulating-eu/ (in ukrainian) plan beps: konets epokhi agressivnoho nalohovoho planirovaniia [beps plan: the end of an aggressive tax-planning era]. retrieved from: https://www.nexus.ua/plan-beps-konets-epokhi-agressivnogo-nalogovogo-planirovaniya (in russian) naybilshe investytsii v ukrainu nadiishlo z ofshoriv [the largest investment in ukraine came from offshore] (state statistics). retrieved from: https://hromadske.ua/posts/z-pochatku-roku-naibilshe-investytsii-v-ukrainunadiishlo-z-ofshoriv-derzhstat (in ukrainian) hryhorieva, yu. p. (2016). deoffshoryzatsiia v systemi zovnishnoekonomichnykh interesiv rf [de-offshorization in the system of foreign economic interests of the russian federation] (dissertation of candidate of economic sciences (phd) in specialty 08.00.14.). (in ukrainian) baltic journal of economic studies 122 vol. 4, no. 5, 2018 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: t_deputy@ukr.net 2 berdiansk institute of public and municipal administration of classic private university, ukraine. e-mail: galicina.natalia73@gmail.com 3 zaporizhzhia national university, ukraine. e-mail: prorektor.znu@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-122-128 the statutory definition of gift value as a “filter” for effective state policy in the public service tetiana kolomoets1, nataliia halitsyna2, serhii kushnir3 abstract. the paper substantiates the importance of standardization of gift’s “value feature” for a public person as a reliable “filter” for eliminating threats for effective implementation of the state policy in the public service. methodology. the analysis of regulatory and law enforcement experience of different countries allowed distinguishing three basic regulatory models of “gift relations” in the public service – prohibitive, permissive, and mixed. clarification of the essence of each of them led to the conclusion on the expediency to choose the mixed model as an optimal alternative for an effective counteraction to the unlawful, non-purpose use of gift resource in the public service under the conditions of modern reformation state-building and law-enforcement processes. this model due to a simultaneous regulation of the principles of “prohibitive gift” relations, “permissive gift” relations envisages determination of the limits for possible reception of other gifts by public servants. it ensures elimination of the prerequisites as for waking “gift relations” in the public service, so for unreasonable use of the gift as a source for enrichment, encouragement means, and “instrument for influence” on the professional official activity of a public servant. results. a unique character of the gift in the public-official relations is caused, first of all, by its trifling “symbolic” value. due to this fact it can be considered as a “symbolic manifestation” of respect, gratitude to a public servant for his competent, honourable, lawful professional official activity. its symbolic “value feature” is its central feature that causes the need for its obligatory complete regulatory determination. on the basis of the comparative legal analysis of rule-making and law-enforcement experience of different countries, a number of basic approaches to the definition of “value feature” of a gift are distinguished (in a completely determined amount, in a multiple of the guaranteed rates established by the state, in a multiple to the salary of a public servant, in a generalized form without any quantitative indicators and with the list of possible external forms of gift’s manifestation etc.), and it is justified the feasibility of its binding to a certain number of the national currency (“solid”, “constant” indicator). practical implications. standardisation of this gift feature along with others which carry out an additional role (frequency of reception and source) should be at the level of the basic legislative act, which consolidates principles of “gift relations” in the sphere of public service in its entirety. taking into account the importance of this gift feature, any sub-legislative “alternative” in relation to the determination of gift value can’t exist eliminating the grounds for a controversial nature of regulation of relevant relations. value/originality. it will help to unify the regulatory standards for using gift’s resource in the public service as a whole, regulatory “filtering” effectiveness of the implementation of public policy in the sphere of public service as a whole. key words: public service, public servant, model, gift, statutory regulation, value, feature, proposals, filter, legislation. jel classification: d31, e24, j31, k00 1. introduction effective implementation of the state policy in the sphere of public service depends on a range of factors including “quality” of statutory regulation of its principles. in addition, it is important not only to consider positive domestic and foreign experiences of the functioning of institutions, which directly generate content of the public service but also of those ones, which play a role of “protectors” of its non-effective functioning. special restrictions for public servants have been occupying a prominent position and keep it now among protectors and non-compliance with which are considered as an unlawful act (in different forms of its manifestation) and stipulates a legal responsibility. baltic journal of economic studies 123 vol. 4, no. 5, 2018 traditionally, special restrictions for public servants are regarded to be a type of anticorruption measures and their non-observance is a violation of corruption content (with the consolidation of various formulations, type diversity in the legislation of different countries). for this reason, determining the main priorities of state policy in the sphere of public service, it is statutory consolidated not only the principles of introduction, disciplinary responsibility for public servants but also “filters” of anticorruption policy in order to eliminate the threats for an effective implementation of the state policy in the sphere of public service at large. analysis of the legislation of different states indicates that special restrictions for public servants are paid a lot of attention to (either at the level of a component of the main legislative act on public service or in individual legislative act of anticorruption nature), and the restriction for public servants concerning gifts reception is marked among their entire diversity. it is worth mentioning that gifts always “accompany” public official relations in different countries, however, their influence degree on these relations have differed in various countries that mainly caused by the specific nature of the chosen model for regulating relevant relations. prohibition, restriction, and permission are the most widespread methods for regulating relations, which are “ground” of official regulatory “gift” model in public-service sphere in different countries, practical realization of which taking into account historical, national peculiarities of rulemaking and law enforcement led to the different effectiveness degree of the state policy in the public service. it is important not only to choose one of the basic “gift statutory models” for regulating relations in the public service but also to introduce the “filters” putting in detail the principles of use of their resource, which would ensure an effective implementation of “gift” policy as an integral part of the state policy in the public service. that sort of “statutory filters” is traditionally considered the definition of gift source, the frequency of its receiving, type diversity of a gift etc. in addition, gift value should occupy a special place among them as it can lead to “gift quality” and degree of its influence on a public servant and his professional activities. regulatory determination of a gift facilitates resolving the issue on the delimitation of a gift from improper advantage, as well as classification of unlawful acts, which can be performed by a public servant that in its turn envisages different legal effects for the latter. in the context of a radical reconsideration of the state policy fundamentals in the sphere of public service, anti-corruption policy, searching for effective means for prevention of unlawful acts of corruption nature commissioned by public servants negatively influences the functioning of the public service as a whole, activation of regulatory and draft activities aimed at elaborating and adopting new regulatory legal acts geared towards the regulation of relevant relations, the issue of “regulatory filtering” of restrictions of public servants takes on particular importance. it is very important to analyse rulemaking and law-enforcement experience of different countries from the perspective of gift value for a public servant in order to clarify what model is the most perfect in content and the most effective in exercise. analysis of available provision of subject scope is vital in order to form a reliable scientific basis for understanding the phenomenon of gift value for a modern rulemaking process, which provides for complying with the principle of scientific character during the latter one. it allows specifying a range of problematic issues directly connected with regulatory determinacy of gift value for public servants, formulating proposals for the building of optimal regulatory “cost model” to settle relevant relations as an integral component of “gift” policy in the public service. all these issues are the purpose of the article. when writing the paper, we have used as general methods of scientific knowledge, as well as special, which allowed distinguishing the cost of a gift among all features diversity of the latter, justifying the expediency of its normative definition, formulating specific proposals for its statutory regulation taking into account the results of comparative legal studies of the experience of rulemaking and law enforcement of different countries. the basis was scientific, journalistic, regulatory sources. however, there are no research papers directly devoted to the issues of “value feature” of the gift for a public servant. there are either papers devoted to the range of problems towards special restrictions for public servants in general (vylloriia, synnestrom, bertok, 2010) or restrictions on gifts receptions, however without focusing on gifts value (kolomoiets, verlos, pyrozhkova, 2018), or experience of certain countries regarding regulating issues concerning gifts restrictions for public servants (zimneva, chumakova, 2015), or general analysis of determination of gift value for public servants, but using selective approach to characteristic of the experience of each country and separation of regulatory legal acts which fix gifts value (suslova, fluri, badrak, 2017). overall, this leads to a simplified approach to clarifying a resource of “values feature” of the gift for a public servant and its regulatory determinacy as a “filter” for effective implementation of the state policy in the sphere of public service. 2. “basic” regulatory models of “public relations” in the public service analysis of foreign experiences shows that in general, there are three “basic” regulatory models, which are consolidated as follows: prohibitive, permissive, mixed. the first, prohibitive, model envisages a total prohibition for public servants to receive any kind of gifts and in such a case gift value is not important. so, “gift feature” is not consolidated at the regulatory level for such a kind of baltic journal of economic studies 124 vol. 4, no. 5, 2018 model because prohibition makes any actions with gifts on the part of public servants impossible. for example, argentina provides the prohibition on gifts reception by public servants and criminal liability for prohibition violation (suslova, fluri, badrak, 2017). “prohibitive” model of “gift” relations is also consolidated in norwegian legislation indicating that prohibition is caused by “elimination of moral obligation for donator to create special conditions for public servants” as well as in the legislation of lithuania and czech republic to guarantee “incorruptibility” of public servants (suslova, fluri, badrak, 2017). in particular, public servants don’t have the right to receive gifts in great britain, germany, and spain. the latter legislation states that “…must reject any gifts…, which can put exercise of servant’s official functions in dependence on certain conditions” (vylloriia, synnestrom, bertok, 2010). at the same time, along with the prohibition on gifts reception, the legislator clearly specifies the duty of public servants to declare their income, which serves as an additional regulatory “filter” for monitoring public servants regarding their compliance with “gift” legislation. such a strict model, undoubtedly, “simplifies” the regulation of relations in the public service, ensures their determinacy and controllability. however, as the analysis of available scientific sources shows, gifts still “accompany” the public service relationship, including by virtue of “traditions” in relation to the exchange of souvenirs, signs (manifestations) of hospitality, loyalty, courtesy, etc. the diversity of relations that mediate professional activities of public servants, the subjects of such relationships, envisages the possibility of preconditions for “gift” relationships that can negatively affect the staffing of the public service as a whole, and serve as the basis for “activating” “gift” relationships in the public service, which also negatively affects the latter. it raises the issue whether it is necessary, taking into account the above mentioned, to introduce a prohibitive model of “gift” relations in the sphere of public service or will it be effective during the implementation? permissive model of “gift” relations provides lack of any indications towards the prohibition of gifts reception by public servants and hence indications towards their value that is quite logical. in particular, the legislation of japan doesn’t have any restrictions or prohibitions on gifts reception by public servants (suslova, fluri, badrak, 2017) as well as in taiwan (suslova, fluri, badrak, 2017). however, permission to receive gifts doesn’t mean uncontrolled nature of particular relations. by giving the right to public servants to receive a gift, the legislator simultaneously introduces the obligation for public servants to declare it. if there are no reasons to suggest about bringing of public servants to legal liability for violation of “gift” legislation in the part of compliance (non-compliance) with prohibitions or restrictions in relation with their lack. at the same time, there is a possibility to bring public servants to responsibility for non-compliance with requirements concerning the declaration of received gifts. in practice, in this case, the declaration legislation plays a role of a specific element of “gift” legislation in the sphere of public service, “filter” of state policy effectiveness in the public service. it is not expedient to justify such a “simplified” comprehension of the role and significance of a gift in the public-official relations (with the lack of any standards for conduct). gifts reception of any value from any persons in any number by a person authorized to exercise public authoritative powers creates a certain threat to the impartiality, transparency, objectivity, and legality of the activity of such a person. a gift can play a role not to show respect, appreciation, to press a person, sources of enrichment of the latter, etc. under such conditions, it is quite possible to use gift resource, not for its target purpose. it is not enough to rely on the obligation to declare all received gifts of public servants taking into account the fact that degree of compliance with the legislative requirements in the part of public servants’ declarations (under different conditions, circumstances) can differ. “gift” relations in the sphere of public service, taking into account the features of the latter, should be regulated in terms of determining the behaviour patterns of their subjects in order to ensure the effectiveness of the implementation of state policy in the public service. a mixed model is the most widespread regulatory model of “gift” relations in the sphere of public service, which simultaneously provides prohibition, permission, and restrictions on gifts reception by public servants and its “value feature” obtains sense in relation to the determination of the abovementioned restrictions. mixed type is the most typical regulatory model for most countries. for example, the legislation of mexico stipulates that delegates and their closest relatives are forbidden to receive “any commercial papers, real estates, proprietary rights or cession of rights on any kind, regardless of their value, independently or by virtue of other people from any persons, corporations, establishments whose interests touch upon the issue under consideration or if it can lead to conflict of interests” (suslova, fluri, badrak, 2017). at the same time, other gifts can be accepted, the most important thing is that they should not exceed the salary of a person up ten times and they must be declared. in the usa, it is prohibited to receive gifts that are directly related to the professional activities of a person and “gifts in cash”. at the same time, it is allowable to receive gifts from relatives and even “gifts on the basis of personal relations”, gifts received during official events (however, according to certain requirements for their use). in relation to other gifts, their reception depends on complying with some requirements including their value (kolomoiets, 2018). the similar model is also consolidated in the legislation of ukraine as follows: baltic journal of economic studies 125 vol. 4, no. 5, 2018 the prohibition covers the gifts that are directly related to the official activity of a person, as well as received from subordinates, and permissions are for gifts from close relatives and publicly available bonuses, discounts, privileges. the same models are introduced by other countries, however with some details for the grounds for reception of permissive gifts (for example, in ireland, public servants can accept gifts from relatives, close persons on “special occasions”), “restrictive” gifts (for example, in australia there is delimitation of gifts from official and non-official sources, in south africa there is specification on gifts’ reception during a year from one source) (suslova, fluri, badrak, 2017). it is a mixed model that allows identifying “polar” conduct parameters of subjects of “gift” relations in the sphere of public service as follows: what is generally forbidden (“taboo”), what is generally allowed (“absolute plus”). in addition, “gift” relations between these “polar” (“diametrically opposite”) parameters are also normalized by virtue of established frontiers (“boundaries”, “limits”) that provides an opportunity to mark “gifts which are restricted in their reception”, socalled gifts “limited in reception”. what does play a role of such boundaries? defining prohibitions and permissions on gifts reception, the legislator specifies subjects-donors in practice. in the first case, these are persons who enter in relations with a public servant, which are connected with a professional activity of the latter, or those who have relations based on subordination with them. in the second case, these are close persons of a public servant and persons who entry into relations with the public servant for whom his special status is the most important thing in general. in other words, in advance, the legislator determines the range of potential subjects of “gift” relations with the participation of public servant and defines subjective boundaries regarding relations with “restrictive gifts”. decided upon the subjects of “gift” relations with regard to “polar” and “limited” components, the gift itself should be subject to standardisation with a focus on its features. in this context, normative consolidation of gift definition takes on particular importance with the purpose of providing harmonisation of law-enforcement in the mentioned sphere. as a rule, the definition of a gift is formulated through enumerating its possible external forms of manifestations. for example, in the usa legislation, the gift for a public servant is considered as a “money reward”, non-act or other actions or things that can have a monetary expression”, “services, payment of education, transport, local travel, meals either in a natural form or in another one” (kolomoiets, 2018). almost similar definitions can be found in the legislation of ukraine, brazil. in general, there are several trends in the normative consolidation of a gift for a public servant – a narrowed and extended list of possible external forms of its existence. however, it is obligatory to indicate that it is received not for the unlawful conduct of a relevant person, but it is a reaction to the lawful acts of the latter. this gift feature distinguishes it from improper advantage. at the same time, as a reaction to the lawful actions of a public servant, the gift is not a payment for such an activity, therefore, it cannot be such that it is provided on a regular (periodic) basis, be proportionate to the efforts made by the public servant in the course of his professional activity, cannot play the role of incentive for the mandatory provision of a gift to a public servant in the future. in other words, the gift, according to its recourse, is a “symbolic” manifestation of respect, appreciation of a public servant for his lawful effective, fruitful activity according to its recourse. the nominal value of the gift, among other things, is intended to define this “symbolic” nature. the gift for a public servant is not his salary, neither incentive nor means of influence, including an illegal one, on professional activity of a public servant, not a source of his enrichment, but only “symbolic” gratitude, respect to the public servant. these gifts shouldn’t be mistakenly identified with treasured gifts, which according to the legislation of many countries, are recognised as the incentives for essential achievements in professional official activities of a public servant (for example, the legislation of the usa, ukraine, china), as well as separate from “official” (“business”) gifts, which can be accepted by public servants, as representatives of the state, community, during official events. “value feature” in relation to “official” (“business”) gifts are not important as they are presented for a state, territorial community, according to statutory established procedure, and for the government or municipal ownership of the state and their “direct contact” with public servants are temporary and caused by exercise of his special legal status. analysis of different foreign legislations shows that among all diversity of features of “restrictive” gifts, gifts’ value plays the most important thing and, as a rule, is the first in the list. and this fact justified as gift value significantly influences the whole resource of the latter causing influence of the gift on a public servant. in public-official relation, the gift plays a role of means of respect, gratitude to a public servant for his rightful professional activity. this fact raises profound attention to the definition of gift value and its regulatory consolidation. if this is a symbolic gratitude, respect manifestation, so they can’t be too large and, accordingly “symbolic”, “nominal”, “metaphoric”, provoke the feeling of return of the public servant or play incentive role for a similar obligatory gift reception in the future, desire for a personal enrichment by virtue of gifts. this stipulates a balance of a small value (symbolic nature) of the gift and its slight (symbolic) influence on a public servant in the form of manifestation of respect, gratitude and moral satisfaction. the value that should be absolutely determined at the legislative level can provide the implementation of a relevant real resource of the gift in public-professional relations. baltic journal of economic studies 126 vol. 4, no. 5, 2018 the use of value definition in this case like “that conforms to common norms” (for example, in the legislation of korea), “corresponds to the universally recognized concept of hospitality” (for example, in the legislation in ukraine), “under common traditions of communication”, “… in the context of courtesy manifestation” (for example, in the legislation of spain) can be only additional, however it is not advisable, as stipulates their subjective manifestation when defining and applying, practice variety of arbitrary resolution of the same issue by different persons, or by one person of different issues of “gift” content. this issue can be regulated by virtues of normative consolidation of a specific gift value as a “filter” of permissive nature for a public servant. 3. regulatory consolidation of gift value for a public servant in different countries in general, the legislator has followed this advice, but there is a distinct nature of the approach to the direct consolidation of the gift value for a public servant in different countries. for example, in australia gift value from non-official source can’t exceed two hundred australian dollars and five hundred australian dollars for the gift from official source, in canada – two hundred canadian dollars, in ireland – five hundred pounds, in korea – one hundred thousand wons, in russia – three thousand roubles, in singapore – fifty singapore dollars (bykeev, 2013), in brazil – one hundred reals (vasyleva, 2015), in the usa – twenty dollars for one donator in every particular case upon condition that the total value of all gifts from one source doesn’t exceed fifty us dollars during a year, and for congressmen and senators – three hundred and two hundred us dollars respectively (bykeev, 2013). for the majority of european countries, gift value is one hundred euro, but in denmark, the value is equal to one hundred and forty euros (bonsing, langsted, 2013). in great britain, the gift value for persons, who hold appointive position, can’t exceed one hundred and forty pounds (vylloriia, synnestrom, bertok, 2010). there are countries, the legislation of which consolidates gift value for public servants not in a “solid amount” but in “tying” to a particular regulatory determined amount. for example, in ukraine, the value of “restrictive” gift for reception by a public servant shouldn’t exceed one minimum cost of living for an able-bodied person established on the date of gift reception. at the same time, the value of all gifts received by a public servant within one year from one source may not be greater than two minimum costs of living established for an able-bodied person on the first of january of the year, in which the gifts were received (kolomoiets, verlos, pyrozhkova, 2018). the definition seems somewhat large and raising some questions on the adjustment of the coefficients for determining the value of one and a set of gifts, taking into account the potential possibility, considering sufficient regulatory permitted grounds, adjustment of the size of the subsistence minimum during the calendar year. the experience of mexico is also interesting, as already mentioned, according to its legislation the value of gifts “cannot exceed ten times the salary of the person receiving them” (suslova, fluri, badrak, 2017). there is a question, how one can clarify the issue of compliance with the requirements of “gift” legislation by a public servant in a case of change of his salary amount during the year in practice and, even more so, if such a change is repeated? is it possible to hope for the effectiveness of the regulatory consolidation of gift value in such a “format” as a “filter” for the implementation of public policy in the sphere of public service? the same question is raised in the case of a regulatory consolidation of the list of prohibitive (for example, in the legislation of mexico) or permissive (for example, in the legislation of china) forms of the external gift manifestation without an indication on their “maximum” value for a possible reception by civil servants. in particular, the legislation of china stipulates that public servants are forbidden to receive any gifts except books. as a consequence, analysis of law-enforcement practice illustrates frequent cases of the reception of unique books editions with covers made with the use of precious metals and stones by such persons. statutory consolidation of gifts “tying” for public servants exclusively to the periodicity of their reception is not justified in the context of providing the effectiveness of the implementation of government policy in the public service that in its turn can provoke clarifying the issue of their number. for example, the legislation of ukraine and south africa has indications on the availability of multiple gifts reception by public servants during a calendar year. in addition, a specification of legal frameworks can be connected with the identification of gift resource. in particular, the provision “from one source” is consolidated in the legislation of ukraine, south africa, “with an indication of the information about a donator” – in the legislation of italy, “from non-official source” – in the legislation of australia. without dispute, taking into account the specifics of the gift itself, which cannot be received permanently or periodically, it is important to consolidate quantitative restrictions towards gifts reception for public servants in terms of legislation. in order to eliminate threats of “gift influence” on a public servant, his professional activity on the part of a person (group), it is essential to provide for regulations on the minimisation (as a rule, no more than two) “gift” contacts of a public servant. however, it should be kept in mind that one “gift” contact with the gift which, due to its value, can influence a public servant more powerful than frequent “gift contacts” with the presence of low cost. thus, under any conditions, the gift value has to play a key role when defining and consolidating principles “gift relations” in the public service. an indication of a minimum frequency of gift reception baltic journal of economic studies 127 vol. 4, no. 5, 2018 and determination of its source will additionally consolidate a “symbolic nature” of the gift. and even the gift, which is repeatedly received by a public servant during a year from the same person, can’t significantly influence his professional official activity due to its low cost. for this reason, when formulating the principles of “gift” relations in the public service concerning so-called “limited gifts”, first of all, it is necessary to fix their maximum authorised value and then the restrictions on the frequency and source of their reception. the lack of a clear, statutory defined “value” feature of the gift causes models variety of “gift” relations with the participation of public servants that cannot be justified in any case. only a total regulatory definition of gift value, which can be received by a public servant, allows guarantying transparency, monitoring of “gift” relations in the sphere of public service in whole. how “value feature” of a gift should be defined? an answer to this question should be found simultaneously with an emphasis on the specific nature of the national rule-making. if in the state statutory instruments, which regulate the relations in the public-legal sphere, are aimed at taking into account “strong” figures (particular for countries with a high level of economic development), therefore, “gift” relations should be regulated using the same figures. if the regulatory activity of the state is connected with a dominant use of “minimum guaranteed value” (as a rule, it is particular for countries in the transitional period of their development, pivotal modification of functioning vectors etc.), so it is quite possible to consolidate “tying in” of the gift value for public servants to such measures at the regulatory level. any options of a statutory definition of gift value should be aimed at its maximum minimization that it plays exclusively the role of manifestation of “symbolic” respect, gratitude to a public servant, and eliminates any expression of interest in it on the part of the public servant. as well as the definition of the gift, subject of its reception and donation, the value of gift (or particular “solid” amount in the national currency, or “tying in” to the minimal government-guaranteed amount, which can’t change during a calendar year) should be regulatory consolidated in the basic legal act, which secure the models of “gift relations” in the public sphere. the definition of a “value” feature of a gift should be of such nature as to make impossible any unreasonable interpretation on the part of any subject of publicofficial legal relationships, and therefore, it should be absolute. the issue of the need to amend statutory stipulated regulation regarding “value” feature of a gift in the case of changes in the economic development of the state does not have particular urgency as the value of the gift must not be in line with economic processes in the state in any way. “symbolic” value rate should keep its position under any conditions, which is confirmed by experiences of the countries, the legislation of which have been consolidating “value” feature of the gift for public servants in a particular amount of the national currency for a long time. it is quite logical to raise the question what can be the value of a gift for a public servant? offering a suggestion to standardise the specific amount of gift value for a public servant in the form of a constant “solid” indicator, it would be worth specifying the proposal. what estimation should be a base for the definition of “value feature” for gifts which are regulatory restricted? unfortunately, analysis of “gift practice” in most countries doesn’t allow determining approaches’ solidarity of developers of legislative acts. at the same time, basically, value indicators of gifts for a public servant, which are consolidated in the current “gift law” in the sphere of public service in different countries, are from 10 to 45 per cent of their average salary. it would be perfectly possible to borrow the same practice and to develop unified legal standards for “gift relations” regarding the value of a gift for a public servant. to determine the “value” of the gift, it would be quite possible to propose the following algorithm of action. developers of a legislative act that fixes the principles of “gift relations” in the public service based on the amount of the average salary (without taking into account premiums, supplements, and possible extra payments) of a public servant in the country and determine “value feature” of the gift in the amount of ten percent of the average salary of a public servant in the national currency units. “value feature” of a particular gift is consolidated as a “solid indicator” in a relevant legislative act and is not subject to improvement as under any conditions the gift keeps the role of manifestation of “symbolic” respect, gratitude despite inflationary processes and change of average salary rate of a public servant. the most important thing is that statutory fixed approach to the definition of the “value” of the gift is consistent with the general tendencies of lawmaking and law-enforcement in the sphere of public service, public-tort sphere for a violation of public service law in order to ensure a high “quality” of legal framework for the implementation of state policy in the sphere of public service as a whole. 6. conclusions guarantee of the effective implementation of state policy in the sphere of public service is directly related to the “quality” of statutory consolidation of its principles also including those that are focused on eliminating threats to such efficiency. violations of a corruption nature along with breach of special restrictions by public servants, including restrictions on gifts reception, take a prominent place among such sort of principles. in spite of the standardisation of “gift relations” in different countries with choosing the basic model of such relations (prohibitive, permissive, mixed), in practice, the gifts “accompany” publicservice relations adversely affecting the public service as baltic journal of economic studies 128 vol. 4, no. 5, 2018 a whole. practical inexpediency of the implementation of “polar” regulatory models for a settlement of “gift” relations in the sphere of public service (prohibitive and permissive), due to which their promotion takes place, or excessive use of gift’s resource with the permissive modification of its intended purpose, causes choosing mixed model as an optimum alternative. the latter, thanks to the simultaneous regulatory consolidation of the principles of “permissive” and “prohibitive” “gift” relations, stipulates the fixation of the behaviour of public servants in relation to other (so-called “restricted for receiving”) gifts, which promotes the unshadowing of all “gift” relationships in the public service sector. in the definition of diametrically opposed, in content, behaviour models for public servants regarding gifts reception, namely prohibition and permission, the legislator actually determines the subject line for the gifts “restricted for receiving” as one of the standard “filters” of “gift policy” as a whole. the resource of the gift itself is important, the use of which can affect a public servant, his professional activity in different ways, in different extent. in order to prevent such an impact, it is expedient to fix the maximum value of a gift for public servants (“value feature” of a gift), which will create a “symbolic character” of a gift for a public servant, the role of manifestation of “symbolic” respect, gratitude for his professional bona fide, qualitative, lawful official activity. absolute determination of the “value feature” of a gift (in the form of a clearly defined number of the national currency units as the most alternative option) without the use of any estimative factors will contribute to unifying the practice of applying legislation on this issue, eliminating any subjective manifestations of its unreasonable interpretation. the statutory regulation of the “value feature” of a gift (as its primary feature) will serve as a reliable “filter” (in combination with limits on the frequency and sources) for an effective elimination of the risks for the implementation of “gift policy” in the sphere of public service and national policy in the public service as a whole. references: villoriia, m., synnestrom, s., bertok, ya. (2010). etyka derzhavnoi sluzhby: zapobihannia konfliktu interesiv ta vymohy do zakonodavstva [ethics of the public service: prevention of conflict of interest and requirements to the legislation]. kyiv: center for adaptation of the civil service to the standards of the european union. (in ukrainian) kolomoiets, t., verlos, n., pyrozhkova, y. (2018). a gift for a public servant – a manifestation of respect, reward or a means of unlawful influence. baltic journal of economic studies, 4(1), 227-234. doi: 10.30525/2256-0742/20184-1-227-234 zimneva, s., chumakova, a. (2015). legal regulation of civil servants in russia and germany receiving gifts. russian law journal, iii(3), 142-151. suslova, i., fluri, f., badrak, v. (2017). parlamentska etyka v ukraini. realii, potreby, perspektyvy [parliament ethics in ukraine. realia, needs, perspectives]. kyiv: center for adaptation of the civil service to the standards of the european union. kolomoiets, t. o. (2018). obmezhennia shchodo oderzhannia podarunkiv osobamy, upovnovazhenymy na vykonannia funktsii derzhavy abo mistsevoho samovriaduvannia za zakonodavstvom ukrainy: naukovopraktychnyi komentar [restrictions on gifts reception by persons empowered to implement the functions of state or local self-government under the law of ukraine: scientific and practical commentary]. zaporizhzhia: helvetika. (in ukrainian) bikeev, i. i. (2013). problemy otgranicheniya vzyatki ot podarka v rossii i za rubezhom: praktika i tendentsii [problems of delimitation of bribe from a gift in russia and abroad: practice and tendencies]. aktualnye problemy ekonomiki i prava, 1, 245-249. vasileva, v. m. (2015). regulirovanie konflikta interesov na gosudarstvennoy sluzhbe: brazilskiy opyt (chast 2) [regulation of conflict of interests in the civil service: brazilian experience (part 2)]. voprosy gosudarstvennogo i munitsipalnogo upravleniya, 3, 165-190. bonsing, s., langsted, l. (2013). “undue” gifts for public employees. an administrative and criminal law and criminal justice, 21, 163-184. baltic journal of economic studies 48 vol. 5, no. 1, 2019 corresponding author: 1 khmelnytskyi national university, ukraine. e-mail: mev2010conf@gmail.com 2 khmelnytskyi national university, ukraine. e-mail: harunelena74@gmail.com 3 khmelnytskyi national university, ukraine. e-mail: fmv.margo@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-1-48-53 comparative analysis of the customs regulation of vehicle import in the g20 countries lesia hrytsyna1, olena kharun2, margaryta dzuba3 abstract. the purpose of this article is to conduct a comparative analysis of customs regulation procedures for the import of vehicles operating in the g20 countries, to determine the possibility of adapting and using their experience in order to improve the customs procedure in force in ukraine. since most researches of ukrainian scientists mainly concern the adaptation of existing customs procedures to the requirements of the ukraine– eu association agreement and the search for ways to solve the problem of shadow schemes of vehicle import, the selected research purpose is relevant. the subject-matter of the study is the procedures for customs regulation of the import of vehicles of the g20 countries. methodology. to achieve this purpose, a set of general scientific methods was used that ensure the objectivity and validity of the results obtained, namely, methods of abstraction, comparison, analysis and synthesis, generalization. results. the research results showed that ukraine is far behind the leading countries in terms of implementing the standards of environmental and technical safety of imported vehicles. if compliance with the requirements of environmental safety, namely compliance with european standards, is still taken into account when importing, then the issues of technical safety are not regulated by the current customs procedure. secondly, the system of taxes and payments that are paid in ukraine upon importation, namely duty, excise duty, and vat, does not provide for compensation for the negative impact of imported vehicles on the environment. thirdly, comparing the practice of temporary importation of vehicles operating in the g20 countries and ukraine has allowed highlighting a number of inconsistencies. so, in the g20 countries, only non-residents can use this regime in the vast majority. citizens of the country are entitled to temporary admission only if strictly defined requirements are met. however, unlike ukrainian practice, the very procedure for temporary admission implies the absence of requirements for payment of customs duties and other payments, regardless of whether the person who uses it is a resident or non-resident of the country. practical significance. the conclusions made allow proposing the necessity to amend the current procedure by introducing the practice of confirming the conformity of imported vehicles with the technical requirements for their operation, increasing the tax burden on vehicles with low environmental efficiency, settling the issue of the availability of the regime of temporary admission of vehicles and strengthening control over compliance with this regime. relevance/originality. proposals for the adaptation and use of the experience of the leading countries in the field of customs regulation of import of vehicles are a way to prevent the negative phenomena in ukraine in this area. key words: international trade, import, customs regulation, vehicles, g20 countries. jel classification: f10, f13, f53 1. introduction at the present development stage of globalization, no country can remain economically successful without active participation in international trade processes. the development and strengthening of foreign trade relations remain the only effective method of ensuring the exchange of goods and services in order to meet the needs of consumers from different countries. given that the production of vehicles in ukraine at this stage is underdeveloped, imports are the main means of saturation of the domestic market. in view of this, the consideration and study of the procedure for the customs regulation of imports of vehicles in order to improve it become of particular relevance. it should be noted that in ukraine, active work in this direction is carried out mainly at the level of specialized customs and fiscal baltic journal of economic studies 49 vol. 5, no. 1, 2019 institutions, including the subordinated educational and research institutions. issues of improving customs legislation, improving customs regulation procedures are actively investigated in the work of such scientists as pryimachenko d. v., dorofeieva l. m., leheza ye. o., mazur a. v., prus l. r ., ruda t. v., slastonenko o. o., lutsyshyn z. o. and others. however, most studies in this area mainly concern the adaptation of existing customs procedures to the requirements of the ukraine– eu association agreement and the search for solutions to the problem of shadow import schemes of vehicles. at the same time, the issue of studying the international experience of customs regulation of imports of vehicles of the leading countries of the world, the search for ways to adapt it to domestic conditions remains beyond the attention of the scientific community. when preparing this article, our purpose was to carry out a comparative analysis of customs procedures for the import of vehicles operating in the g20 countries, to identify the possibility of adapting and using their experience in order to improve the current ukrainian procedure. 2. customs regulation of the import of vehicles in the g20 countries the study of customs procedures for the import of vehicles operating in the g20 countries allows identifying a number of common features that are inherent to them. the first of them is the requirement for compliance of imported vehicle with current safety standards, which are designed to reduce the risk of harm to citizens and reduce the negative impact on the environment. in most of the countries under consideration, there is a severe penalty for violating the requirements that stipulates for a significant fine and/or imprisonment. so, in canada, the main statutory documents regulating these issues are the motor vehicle safety act (1993), motor vehicle safety regulations, and motor vehicle tire safety regulations (sor/2013-198). in accordance with the applicable procedure, canada is allowed to import: a) vehicles purchased in the usa and, accordingly, after the registration in the registrar of imported vehicles, must be inspected and certified to comply with applicable safety standards; b) other vehicles that comply with canadian vehicle safety standards, or those that are not regulated, or are imported temporarily (canada border services agency. memorandum d19-12-1, 2016). in australia, imported vehicle safety requirements are determined by the motor vehicle standards act (1989) and developed according to law third edition australian design rules (2006). according to the rules, before importing any vehicle into australia, it is necessary to contact the department of infrastructure, regional development and cities to obtain vehicle import approval, which confirms its compliance with the approved rules and standards. typically, the authorization procedure takes up to 20 business days. moreover, the owner is responsible for ensuring that the vehicle meets the requirements for the biosafety of imported vehicles and does not contain asbestos. for vehicles equipped with air conditioning or refrigeration systems, there are requirements for the presence of an import license for emissions of ozone-depleting substances and synthetic greenhouse gases (australian government. department of infrastructure, regional development and cities; department of home affairs, 2018). in japan, such a basic document is road transport vehicle act (law no. 185 of 1951), according to which it is prohibited to use a vehicle that does not meet the requirements for technical safety and emission level. the testing centre operating under the ministry of land, infrastructure, transport and tourism of japan is responsible for the inspection (ministry of land, infrastructure, transport and tourism, 2018). in the usa, a system of regulatory acts is developed that is designed to protect the domestic market from the import of inappropriate quality vehicles – it includes motor vehicle safety act of 1966, vehicle safety compliance act of 1988, motor vehicle information and cost savings act of 1972, and motor vehicle information and cost savings act of 1972 with corresponding amendments and additions (u.s. customs and border protection, 2018). in general, vehicles may be imported in the usa under the age of 25 that meet federal motor vehicle safety standards. it is also allowed to import vehicles older than 25 years, provided that the confirmation of their compliance with the applicable standards is not required (national highway traffic safety administration, 2018). since germany, france, and the united kingdom (the latter as of 1.08.2018) are eu members, respectively, there are uniform rules and requirements on the technical and environmental safety of vehicles in the territories of these countries. in 2007, directive 2007/46/ec approved the european community whole vehicle type approval – the only approach to obtaining a permit for the operation and use of vehicles in the eu. the validation of the vehicle’s compliance with the applicable requirements is the receipt of the certificate of conformity, valid on the territory of all member countries. at the same time, this directive (2007/46/ec, chapters ix, x) allows for providing member countries with national (national typeapproval of small series) and individual approvals, which are valid only in the territory of only the country that issued them. as in the usa, old vehicles do not fall under current requirements, the age of which, depending on the type, is 10-25 years. the second one is the requirement to pay taxes and fees on imported vehicles. the main tax payable upon import is an import duty, which is calculated on the basis of the customs value of the imported goods. baltic journal of economic studies 50 vol. 5, no. 1, 2019 there are two main approaches to its calculation – traditional and alternative. according to the traditional approach, the customs value of the goods is determined as its contractual value, that is, the price actually paid or payable for goods if they are sold for export to the importing country. at the same time, the additional costs, such as, for example, commission fees to the seller, transport costs, etc., are included in the customs value. an alternative approach is used in case of the impossibility of using the traditional one. in this case, the customs value may be determined by the contract value of identical or similar goods imported into the country or by the estimated value (agreement on implementation of article vii of the general agreement on tariffs and trade 1994, articles 1-24). source of information about the cost of identical or similar vehicles can be the reference systems that have become actively distributed in a number of countries – in canada it is canadian black book, in eu countries – eurotax, glass’s guide, and parker’s guide. it is worth noting that japan does not provide for the import duty on vehicles ( japan’s tariff schedule, 2018, section xvii), while in other countries under consideration – canada, australia, the usa, germany, france, and the united kingdom – only imports from individual countries with which the agreements on simplification of customs regulation of export-import operations have been signed are exempted from duty. so, in canada and the usa, duty is not paid if the country of origin of the vehicle is a member country of the north american free trade agreement (north american free trade agreement, article 302). similarly, customs duties do not apply to imports of vehicles in france, germany, and the united kingdom from other eu member states (consolidated versions of the treaty on european union and the treaty on the functioning of the european union 2012/c 326/01, article 30). the practice of reducing or completely eliminating customs duties is also applied by the countries that have signed bilateral agreements on trade and economic cooperation. for example, this practice applies when importing vehicles between the usa and australia (australia – united states free trade agreement, 2005), japan and australia ( japan-australia economic partnership agreement, 2005), canada and the eu (canada-european union: comprehensive economic and trade agreement, 2017). note that this information is relevant as of august 1, 2018, and may be changed in course of time. according to recent studies by buettner t. and madzharova b. (2018), the reduction of import duties and the introduction of additional payments (primarily sales tax) as a way to compensate for the loss of customs revenues is a general development tendency for world trade. thus, among other payments used in the market of vehicles of the g20 countries, sales taxes, excise taxes, environmental and other fees are common. in canada, there are charges for both national and local sales taxes. so, owners of imported vehicles pay goods and services tax (gst); harmonized sales tax (hst) and/or provincial sales tax (pst). additionally, taxes are paid for air conditioning and excessive weight of the vehicle (canada border services agency. memorandum d19-12-1, 2016). owners of vehicles with excessive fuel consumption are subject to taxation in canada and the usa. meanwhile in the usa, unlike canada, the sales tax is exclusively local tax, the size and conditions of which vary depending on the state (u.s. customs and border protection, 2018). australia provides for goods and services tax (gst), which is ten percent of the value of taxable imports and, in some cases, a luxury car tax (lct). the latter is paid at a rate of 33% of the value that exceeds the defined threshold. for the fiscal year of 2018–2019, the threshold for the payment of luxury car tax is: a) for vehicles with low emissions and fuel consumption – 75,526 dollars; b) for other vehicles – 66,331 dollars (australian government. department of home affairs, australian taxation office 2018). a similar tax exists in the united kingdom – owners of vehicles worth more than £40,000 must additionally pay £310 a year (importing vehicles into the uk, 2018). in germany, france, and the united kingdom, the main sales tax is value added tax (vat), which varies from 19% to 20% in the countries concerned. also, there is a tax on co2 emissions in the territory of the eu (kunert uwe and kuhfeld hartmut (2007), european commission. taxes in europe database v3). the practice of paying a sales tax also exists in japan. when importing a vehicle into japan, it is necessary to pay a consumption tax of 8% of the value and acquisition tax, which amounts to 3-5% depending on the type of vehicle and its destination. in japan, as in canada, the tax on the excessive weight of a vehicle is widespread – the so-called vehicles weight tax (national tax agency of japan, 2018). as a number of researchers note (lasse fridstrom та vegard ostli (2017), m. crippa, g. janssens-maenhout et al. (2016), gang xu, tomio miwa et al. (2015)), the application of environmental standards and additional payments, the size of which correlates with the level of environmental safety of vehicles, is a powerful tool used by the world’s leading countries to control the internal market. special requirements are applied to vehicles temporarily imported into the territory of countries. in this case, it is usually not necessary to confirm the vehicle’s compliance with applicable local standards and to pay any taxes or fees. the main requirement put forward in most countries when applying the temporary admission regime is the non-commercial use of the imported vehicle, the provision of guarantees, and its further removal from the country after the expiration of the temporary stay. the temporary import permit is also granted for vehicles imported for the purpose of their participation in exhibitions, demonstrations, tests, etc. baltic journal of economic studies 51 vol. 5, no. 1, 2019 in canada, the right to the temporary import of vehicles is provided to tourists and visitors (up to 12 months), to students (for the period of study), to persons with official work permits (up to 36 months). a similar procedure can also be used by canadians who rent a car in the usa. in this case, the period of stay of a vehicle in canada is, as a rule, up to 30 days (canada border services agency. memorandum d1912-1, 2016). in the usa, in addition to non-residents, the right to the temporary import of a vehicle can also be used by citizens of the country who work abroad and make a short-term visit to the usa (u.s. customs and border protection, 2018). the right to a temporary, up to 12 months, import of a vehicle on the territory of the country for tourists and temporary residents is provided for by the laws of japan, australia. in order to obtain permission for a temporary stay of a vehicle on the territory of canada, japan or australia, you can use the procedure carnet de passages en douane (carnet de passages en douane. carnet countrie, 2018). in the united kingdom, germany, and france, the period of temporary stay of a vehicle for non-residents can be up to 6 months. exceptions to this rule are possible for certain groups of non-residents of the eu, namely students and persons working in the country. in some cases, the right to temporary importation of a vehicle may also be used by eu residents who use official transport services or use a leased vehicle, provided that the company providing the rental services is registered outside the eu (importing vehicles into the uk, 2018, temporary importation of a vehicle notregistered in the eu, 2018). 3. customs clearance of imported vehicles in ukraine consideration of the procedure for customs clearance of imported vehicles in force in ukraine will be carried out in accordance with the abovementioned scheme. 1) compliance with standards. according to the current legislation of ukraine, customs clearance and subsequent state registration of imported new and used vehicles are subject to compliance with environmental standards. for the period from january 1, 2016, to december 31, 2019, vehicles imported to the territory of ukraine are allowed not less than euro-5 level, starting from january 1, 2020 – not lower than the euro 6 level. a document that certifies the conformity of vehicles with the requirements of technical regulations and national standards is a certificate or other document confirming compliance, issued in accordance with the legislation of ukraine, indicating to what level of environmental standards the vehicle conforms by the design (euro-2 – euro-6 or another level) (pro dejaki pytannja vvezennja na mytnu terytoriju ukrajiny ta rejestraciji transportnykh zasobiv: zakon ukrajiny, 2005). 2) taxes and payments. in accordance with article 49 of the customs code of ukraine (ccu), the customs value of goods transiting through the customs border of ukraine is the value of goods used for customs purposes, based on the price actually paid or payable for these goods (mytnyj kodeks ukrajiny, 2012). when importing a vehicle into the territory of ukraine, it is necessary to pay: a) an import duty, the value of which for most types of vehicles is 10%. when importing from eu countries, the duty rate is set lower than the established in the schedule of reduction of customs rates stipulated by the ukraine–eu association agreement. reduced, in accordance with the free trade agreement between canada and ukraine (2017), is also a rate of import duty on vehicles from canada; b) in the case of attributing a vehicle to excisable goods, an excise tax is also charged, the rates of which are set in paragraph 215.3 of article 215 of the tax code of ukraine (tcu). the size of this tax depends on the age of the imported vehicle, the type of fuel used, the engine volume and power; c) value-added tax at a rate set by article 193 of the tcu. at present, the amount of this tax is 20% of the amount of customs value, import duty, and excise tax (pro mytnyj taryf ukrajiny: zakon ukrajiny, 2013; podatkovyj kodeks ukrajiny, 2010). 3) mode of temporary import of a vehicle. temporary importation into the customs territory of ukraine of personal use vehicles for a period of up to one year is allowed both to citizens and non-citizens of ukraine. vehicles imported into the territory of the country under this regime cannot be used for commercial purposes, be ungrouped or transferred to the ownership, use or disposal of other persons. at the same time, when non-resident citizens use this regime, the calculation of customs payments and the provision of guarantees are not provided subject to registration of such vehicles in the authorized bodies of foreign states. however, resident citizens, in accordance with the current legislation, are obliged to pay all customs payments which, under the law, are to be paid upon the import of such vehicles and to provide a written commitment to re-export such a vehicle outside the customs territory of ukraine, in compliance with the applicable terms (mytnyj kodeks ukrajiny, 2012). 4. conclusions considering the purpose of our research, it is worthwhile to focus on the following aspects. firstly, ukraine is far behind the leading countries of the world in implementing the standards of environmental and technical safety of imported vehicles. if compliance with the requirements of environmental safety, namely compliance with european standards, is still taken into account when importing, then the issues of technical safety are not regulated by the current customs procedure. in fact, checking the conformity baltic journal of economic studies 52 vol. 5, no. 1, 2019 of the vehicle to the technical requirements is carried out already at the stage of its registration, which, in our opinion, contradicts the practice of the countries under study. secondly, the system of taxes and payments that are paid in ukraine upon importation, namely duty, excise duty, and vat, does not provide for compensation for the negative impact of imported vehicles on the environment. according to the analysis conducted, additional payments for excessive fuel consumption, co2 emissions are the norm for the leading countries of the world. thirdly, comparing the practice of temporary importation of vehicles operating in the g20 countries and ukraine allows highlighting a number of inconsistencies. so, in the g20 countries, only nonresidents can use this regime in the vast majority. citizens of the country are entitled to temporary admission only if strictly defined requirements are met. in addition, the very procedure for temporary admission implies the absence of requirements for the payment of customs duties and other taxes and fees, regardless of whether the person using it is a resident or non-resident of the country. given the above, we believe that the introduction of amendments to the procedure for customs clearance of imported vehicles in ukraine is extremely relevant. however, it should not be a reaction to the problems that have become exacerbated but a way to prevent negative phenomena by adapting and using the experience of the leading countries. this will be facilitated by the introduction of the practice of confirming the compliance of imported vehicles with the technical requirements for their operation, increasing the tax burden on vehicles with low environmental efficiency, resolving the issue of access to the regime of temporary admission of vehicles, and strengthening control over compliance with this regime. references: agreement on implementation of article vii of the general agreement on tariffs and trade 1994. retrieved august 1 2018 from: https://www.wto.org/english/docs_e/legal_e/20-val_01_e.htm#articlei australia – united states free trade agreement (2005). retrieved from: https://ustr.gov/sites/default/files/ uploads/agreements/fta/australia/asset_upload_file148_5168.pdf australian government. australian taxation office (2018). luxury car tax rate and thresholds. retrieved august 1 2018 from: https://www.ato.gov.au/rates/luxury-car-tax-rate-and-thresholds/ australian government. department of home affairs (2018). importing a motor vehicle retrieved. august 1 2018 from: https://www.homeaffairs.gov.au/busi/cargo-support-trade-and-goods/importing-goods/importing-motor-vehicles australian government. department of infrastructure, regional development and cities (2018). importing vehicles into australia. retrieved august 1 2018 from: https://infrastructure.gov.au/vehicles/imports/ buettner, t., madzharova, b. (2018). wto membership and the shift to consumption taxes. world development, 108, 197-218. canada border services agency (2016). memorandum d19-12-1: importation of vehicles. retrieved from: https://www.cbsa-asfc.gc.ca/publications/dm-md/d19/d19-12-1-eng.pdf canada-european union: comprehensive economic and trade agreement (2017). retrieved august 1 2018 from: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/ text-texte/toc-tdm.aspx?lang=eng carnet de passages en douane (2018). carnet countries. retrieved august 1 2018 from: https://www.cpdcarnet.com/ carnet-countries consolidated versions of the treaty on european union and the treaty on the functioning of the european union 2012/c 326/01. retrieved from: https://eur-lex.europa.eu/legal-content/en/txt/?uri= celex%3a12012e%2ftxt european commission (2018). taxes in europe database v3. retrieved august 1 2018 from: http://ec.europa.eu/ taxation_customs/tedb/splsearchform.html european parliament and the council of the european union (2007). directive 2007/46/ec establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles. retrieved from: https://eur-lex.europa.eu/legal-content/en/ txt/?uri=celex:32007l0046 gang xu, tomio miwa, takayuki morikawa, toshiyuki yamamoto (2015). vehicle purchasing behaviors comparison in two-stage choice perspective before and after eco-car promotion policy in japan. transportation research part d: transport and environment, 34, 195-207. importing vehicles into the uk (2018). retrieved august 1 2018 from: https://www.gov.uk/importing-vehiclesinto-the-uk/temporary-imports japan customs (2018). japan's tariff schedule as of april 1 2018. retrieved from: http://www.customs.go.jp/ english/tariff/2018_4/index.htm japan-australia economic partnership agreement (2005). retrieved august 1 2018 from: http://dfat.gov.au/ trade/agreements/in-force/jaepa/pages/japan-australia-economic-partnership-agreement.aspx kunert uwe, kuhfeld hartmut (2007). the diverse structures of passenger car taxation in europe and the eu commissions proposal for reform. transport policy. 14(4), 306-316. baltic journal of economic studies 53 vol. 5, no. 1, 2019 lasse fridstrom та vegard ostli (2017). the vehicle purchase tax as a climate policy instrument. transportation research part a: policy and practice, 96, 168-189. m. crippa, g. janssens-maenhout, d. guizzardi, s. galmarini (2016). eu effect: exporting emission standards for vehicles through the global market economy. journal of environmental management, 183(3), 959-971. ministry of land, infrastructure, transport and tourism (2018). inspection. retrieved august 1 2018 from: http://www.mlit.go.jp/english/inspect/car13e.html mytnyj kodeks ukrajiny [customs code of ukraine] 13.03.2012, № 4495-v. retrieved august 1 2018 from: http://zakon5.rada.gov.ua/laws/show/4495-17/print1524226494328254 national highway traffic safety administration (2018). vehicle importation and certification requirements. retrieved august 1 2018 from: https://one.nhtsa.gov/cars/rules/import/ national tax agency of japan (2018). information for taxpayers. retrieved august 1 2018 from: https://www.nta.go.jp/ english/taxes/index.htm north american free trade agreement. retrieved august 1 2018 from: http://www.international.gc.ca/tradecommerce/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/fta-ale/index.aspx?lang=eng podatkovyj kodeks ukrajiny [tax code of ukraine], 02.12.2010, № 2755-vi. retrieved august 1 2018 from: http://zakon2.rada.gov.ua/laws/show/2755-17 pro dejaki pytannja vvezennja na mytnu terytoriju ukrajiny ta rejestraciji transportnykh zasobiv: zakon ukrajiny [on some issues related to registration and importing motor vehicles to the customs territory of ukraine and registration: the law of ukraine], 06.07.2005, № 2739-iv. retrieved august 1 2018 from: http://zakon5.rada.gov.ua/ laws/show/2739-15/print1524226494328254 pro mytnyj taryf ukrajiny: zakon ukrajiny [customs duty rates of ukraine: the law of ukraine], 19.09.2013, № 584-vii. retrieved august 1 2018 from: http://zakon3.rada.gov.ua/laws/show/584-18 temporary importation of a vehicle not-registered in the eu (2018). retrieved from: https://www.zoll.de/ en/private-individuals/travel/entering-germany/duties-and-taxes/temporary-importation-of-a-vehicle/ temporary-importation-of-a-vehicle_node.html u.s. customs and border protection (2018). importing a motor vehicle. retrieved august 1 2018 from: https://www.cbp.gov/trade/basic-import-export/importing-car ugoda pro vilnu torgivlyu mizh ukrayinoyu ta kanadoyu [ukraine – canada free trade agreement] (2017). retrieved august 1 2018 from: http://zakon5.rada.gov.ua/laws/file/en/text/53/f466018n6.docx baltic journal of economic studies 214 vol. 5, no. 1, 2019 corresponding author: 1 national academy of internal affairs of ukraine, ukraine. 2 national academy of internal affairs of ukraine, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-214-217 international experience of declaring property, assets and private interests anna tytko1, hanna stepanova2 abstract. the aim of the article. to analyse the specificities of asset and private interest declaration by public officials and representatives of political power, as well as to suggest the author’s original differentiation of declarations of assets, income, private interests, and gifts. the subject of the study is the procedure for submitting declarations by persons entrusted with functions of the state and local self-government bodies in some countries of western europe. methodology. in the article, the method of deduction and induction enabled to study the features of violating the requirements of financial control through the procedure for submitting a declaration by persons entrusted with functions of the state and local authorities. the methods of deduction and synthesis enabled to define the concept of “asset and interest declaration”, practiced in some countries of western europe. a comparative legal analysis enabled to study the procedure for submitting an income and expenditure declaration in some western european countries, identifying the main types of conflict of interest and income declarations, as well as differentiating persons obliged to submit declarations. the results of the study revealed that the foreign experience of asset declaration is closely intertwined with the private interest declaration. practical implications. in the study: first, the specificities of foreign declaration practice, according to the subjects of such declaration submission, are outlined; second, the procedures for submitting declarations of income and expenditures, as well as interests, are analysed and compared; third, the author’s perspective on the differentiation of declarations and declarants is substantiated. relevance/originality. the comparative legal analysis enabled to study the procedure for submitting a declaration of public officials in some countries of western europe, empowering to form perspective areas of legislation development in this sphere. key words: declaration, private interest, property and assets, conflict of interest, public official, financial control, gift. jel classification: g18, h53, о15 1. introduction in most european countries, an income and expenditure declaration is considered as a mechanism of effective financial control and as a means of preventing corruption offenses. nowadays, since corruption offenses grow intensively in the financial and economic sphere, corporate corruption strengthens, the number of offenses related to corruption, abuse of public funds increase, the tendencies of nepotism and cronyism in the system of the state budget distribution strengthen, the issue of improving the declaration procedure is very relevant. the corruption offenses and offenses related to corruption were studied by scholars, such as v. b. averianov, yu. p. bytiak, m. yu. bezdolnyi, o. i. butovych, o. yu. drozd, o. v. klok, v. k. kolpakov, a. t. komziuk, m. i. melnyk, v. kiselechnyk, v. ya. nastiuk, s. s. rohulskyi, m. stefanchuk, m. i. khavroniuk, t. v. khabarovova, and others. therefore, the interrogation of income, asset, and private interest declaration in some countries of western europe, as well as differentiation of the subjects responsible for the declaration, becomes relevant and is considered in this paper. for the successful achievement of these aims, the following tasks should be carried out: 1) to consider submitting declarations by persons entrusted with functions of the state and local selfgovernment bodies practiced in some western european countries; 2) to differentiate specificities of submitting declarations of a conflict of interest and declarations of income; 3) to determine the procedure for submitting a declaration in the financial control system; 4) to carry out a comparative analysis of the procedure for declaring assets in ukraine and abroad; 5) to determine the subjects of submitting asset declarations. 2. presentation of the main material nowadays, the declaration of assets is a part of the system of financial control since this procedure can be considered as an administrative and legal means of preventing corruption. foreign experience shows that baltic journal of economic studies 215 vol. 5, no. 1, 2019 a declaration can include not only the obligation to declare incomes and expenditures but also the fixing of personal and family members’ private interests. therefore, an unresolved issue is the declaration of income, expenditures, property, other assets, financial obligations of the declarant’s family members. abuse of official position and excess of authority by public officials causes deepening of illicit enrichment, furthermore, discredits the apparatus of state power and spreads corruption offenses in society. from year to year, each state strengthens procedures for financial control over the incomes of public servants, for example, through the procedure for declaration of incomes and assets by high-ranking officials (prevention of corruption in the public sector in eastern europe and central asia). the issue of declaring assets by persons entrusted with functions of the state or local self-government causes constant complications. due to the changes in the anticorruption strategy, the current legislation changes constantly, giving rise to many problems associated with the late submission of a declaration, therefore, the study of international experience in declaring incomes is relevant. in the countries of western europe for a long time, a procedure for declaring assets exists, which is often accompanied by simultaneous declaring private interest. legal liability for violating the requirements of financial control contributes to raising the level of responsibility of public officials as persons entrusted with functions of the state and local self-government bodies. today, ignorance of the current legislative provisions often leads to legal liability for those who hold responsible and particularly responsible positions, which may adversely affect further career advancement, since persons liable for corruption offenses cannot subsequently enter the public service or hold positions in law enforcement agencies. the asset declaration system enables to implement a number of tasks that should be resolved through the introduction of a transparent mechanism for demonstrating all financial revenues of public officials, preventing conflicts of interest, investigating cases of illicit enrichment and other unlawful actions by persons performing managerial and administrative functions, moreover, ensuring public confidence in the state apparatus. declarations of assets and expenditures are considered as a key tool for preventing a conflict of interest and identifying illicit enrichment. in accordance with part 5 of article 8 of the un convention against corruption, each state shall establish measures and systems requiring public officials to make declarations to appropriate authorities regarding, inter alia, their outside activities, employment, investments, assets and substantial gifts or benefits from which a conflict of interest may result with respect to their functions as public officials (konventsiia orhanizatsii obiednanykh natsii proty koruptsii). in europe, two types of such declarations are differentiated: • general declarations of personal interests and interests of family members or close relatives; • participants’ declaration of any interest they may have in a case pending before a legislative body or an executive authority where they are members. in most european countries, financial declarations of public officials are defined as “income and asset declarations” or “financial disclosure/asset declarations.” the provisions of anticorruption legislation reveal that the purpose of financial declarations is to monitor selectively the lifestyle of the subjects of declaration in order to establish the conformity of their standard of living with the assets and income received by them and their family members in accordance with the declaration of a person entrusted with functions of the state and local self-government bodies. in each country, the declaration of assets is included in certain areas of regulatory policy of the legislature in different ways. all existing schemes can be grouped into three main categories, such as the general legislation on the regulation of public service; special legislation on the declaration of income, conflict of interest and on the anti-corruption; special legal regulations. the main categories of information that requires declaration are movable and immovable property, valuable assets, gifts, debentures, etc., but the point remains about the need to declare travel paid by third parties, especially high percentage (41%) of such declaration is in the countries of the organization for economic cooperation and development with high income (table 1). proper consideration of the asset declaration as one of the main mechanisms for counteracting corruption requires differentiating the main tasks of this system, including preventing conflicts of interest and illicit enrichment. most european countries combine these two goals in a successful symbiosis by declaring income and expenditure. model of asset declaring in order to identify the fact of illicit enrichment aims to reveal the concealment or theft of assets and criminal and administrative liability. another model aims to identify a conflict of interest, in particular, situations from which corrupt behaviour may result with respect to the functions of a public official. subjects of the declaration are different public officials depending on the duties assigned to them. for example, persons obliged to declare assets are: in armenia, bulgaria, france, norway, sweden, the members of parliament and government; in armenia, bulgaria, france, kosovo, portugal, spain, political officials of a particularly responsible position; all public baltic journal of economic studies 216 vol. 5, no. 1, 2019 servants in belarus, latvia, poland; special categories such as advisers and officials at state-owned enterprises, in bosnia and herzegovina, ireland, latvia, lithuania, portugal, the united kingdom; ministers and managers in albania, estonia, ireland (using asset disclosure for identifying politically exposed persons). first of all, a declaration consolidates information on personal income, assets, gifts, expenditures, monetary and non-monetary interests. a declaration of income does not necessarily cover all the assets of a person, but only that part, which can directly or indirectly contribute to a conflict of interest or lead to the illicit enrichment of a person. it is also widespread to include in the declaration and disclose information about the assets of family members of persons who are in the public service (working in the state sector). family members usually include spouses and minor children. in countries such as armenia, azerbaijan, belarus, georgia, latvia, moldova, and ukraine, three types of declarations exist: 1) annual declarations (submitted annually during the performance of the functions of the state and local self-government bodies); 2) a declaration submitted at entering the office; 3) a declaration submitted after release (yak deklaruiut maino derzhsluzhbovtsiv u riznykh krainakh svitu). in addition, the financial control system can include other types of declarations, such as a declaration of substantive changes in property status (macedonia) and so-called exceptional declarations (albania), where officials file declarations to determine the source of monetary assets from the third parties during the performance of their official duties. international practice differentiates administrative, criminal, civil, and disciplinary liability for violation of the procedure for declaring income. according to international reports, the procedure for filling in declarations has a number of shortcomings, such as late submission of an income declaration; incompleteness of the information submitted in the declaration; failure to submit a declaration of income; submission of inaccurate information in the declaration; concealment of income or assets (tilman hoppe). analysis of the experience of declaring assets and private interests enables to distinguish the following types of asset declarations. the personal income declaration is a financial document for property income, which is not mandatory in france, while in germany and the uk, members of the parliament are required to declare income, but this does not apply to representatives of local self-government bodies. for example, members of the british parliament must declare income if they exceed £59,000 (tilman hoppe). in hungary and italy, members of parliament (in italy, public servants as well) declare income, while in poland, representatives of local self-government bodies, as well as politicians and members of parliament, are required to declare their income. in latvia, both politicians and public servants fill the declarations. the declaration of family income is also a means of financial control, which indicates the income of family members and relatives. in poland, the subjects of such declaration are representatives of local self-government and politics. in hungary, all family members living with politicians and public servants shall declare their income. the gifts shall be declared in latvia by all public servants, including representatives of local selftable 1 information categories reflected in the declaration world asia europe and central asia latin america and the caribbean middle east and north africa the high-income oecd countries real estate 88% 100% 90% 100% 82% 78% sources of income 77% 73% 95% 96% 45% 100% stocks and securities 86% 100% 95% 100% 64% 87% bank accounts 80% 86% 86% 100% 64% 72% cash (not in accounts) 29% 45% 38% 37% 36% 16% income 67% 73% 90% 93% 27% 63% movables 80% 86% 90% 100% 82% 56% obligations 72% 82% 71% 100% 45% 56% activities prior to work in the public sector 58% 45% 71% 85% 27% 75% combined managerial posts 41% 45% 38% 33% 27% 84% gifts 39% 59% 57% 33% 9% 53% other part-time positions 30% 32% 19% 19% 36% 69% unpaid activity 29% 18% 38% 22% 9% 69% expenditures 18% 18% 38% 22% 0% 25% travel paid by third parties 14% 14% 5% 4% 0% 41% activity after termination of work in the public sector 14% 0% 29% 7% 0% 34% baltic journal of economic studies 217 vol. 5, no. 1, 2019 government bodies and members of parliament. in poland, this applies only to politicians and elected local officials, in hungary, to members of parliament. in germany, spain, and the united kingdom, politicians and members of parliament are subject to such declaration. for example, members of the british parliament must declare gifts, if their value exceeds 1% of their wages, in germany, when it exceeds eur 5,000, in france, any gift is declared regardless of value (tilman hoppe). a declaration of the private interest related to contractual management is one of the politician’s declarations required in portugal and spain (includes income information for three years before the appointment and, accordingly, two). in germany and spain, this declaration is obligatory for representatives of local self-government bodies. in the uk, politicians declare the private interest and interests of family members and close associates whenever a reason to believe that the latter may influence their decisions occurs. in france, hungary, italy, and poland, the submission of such a declaration is not obligatory, but in case of an existing conflict of interest, the person is obligated to declare the private interest. 3. conclusions declarations of private interests and assets/incomes are often not delimited, so one declaration, as a rule, combines information on private interests and existing property assets. the most common types of declarations are: 1) a declaration of private interests related to decisionmaking and voting, which is formally a declaration of private interests and is obligatory in countries such as portugal, spain, and germany. in the uk, a public official, a member of parliament and a representative of the local self-government body are required to declare private interests, both their own and ones of family members and close associates, whenever they influence making important decisions in the performance of their duties. 2) an income declaration. this income declaration is not obligatory if any declarations of private interests and assets exist. commonly, the income declaration applies to politically elected persons and elected local officials. 3) an asset declaration enables to identify and control the conflicts of interest of local elected officials, members of parliament and political parties. this declaration is widespread in hungary, france, and spain. 4) an income declaration of the family is established mainly for the declarants, who hold political positions, responsible and especially responsible positions in public authorities. specific rules of declaration regulate the procedure for receiving gifts, as the latter can become a prerequisite for illicit enrichment, so the gifts are regulated by strict rules and prohibitions. in european practice, gifts are prohibited if: 1) a gift calls into question a public official’s independence and freedom to act; 2) gifts cannot be disclosed for public authorities and citizens; 3) the market value of a gift exceeds the established rate. references: prevention of corruption in the public sector in eastern europe and central asia. retrieved from: http://www.oecd.org/corruption/acn/acn-prevention-corruption-report.pdf konventsiia orhanizatsii obiednanykh natsii proty koruptsii [united nations convention against corruption]. (the law of ukraine no. 252-v of october 18, 2006). holos ukrainy. (in ukrainian) using asset disclosure for identifying politically exposed persons. retrieved from: http://siteresources.worldbank.org/ extfinancialsector/resources/using_asset_disclosure_identifying_peps.pdf yak deklaruiut maino derzhsluzhbovtsiv u riznykh krainakh svitu. chy ye ukraina osoblyvoiu? [how to declare the property of civil servants in different countries of the world. is ukraine special?]. yevropeiska pravda. retrieved from: https://www.eurointegration.com.ua/articles/2016/09/26/7054986/ practitioner manual on processing and analysing income and asset declarations of public officials drafted by tilman hoppe, project long term adviser with in put fromvalts kalniņš, council of europe expert. ( january 2014). retrieved from: https://rm.coe.int/16806db62d practitioner manual on processing and analysing income and asset declarations of public officials drafted by tilman hoppe, project long term adviser with in put fromvalts kalniņš, council of europe expert. ( january 2014). baltic journal of economic studies 356 vol. 4, no. 4, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 national academy of internal affairs, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-356-360 modern technologies of acquisition of funds of citizens by the financial pyramid serhii cherniavskyi1, andriy zapototskyi2, anton syzonenko3 abstract. the purpose of the article is to study the criminalistics of the use of the most common technologies of acquisition of funds of citizens, done by the way of the financial pyramid. the subject of the study is the content of criminal technology of fraudulent way of the financial pyramid. methodology. the research is based on the use of general scientific and special-scientific methods and methods of scientific knowledge. the historical-legal method allowed determining the genesis of the concepts of “technology of criminal activity” and “financial pyramid”, as well as the formation of scientific and theoretical views on problems and methods of combating them. the comparative legal method was used to compare the doctrinal approaches of legislative regulation to counteract fraud committed by the method of the financial pyramid. the system-structural method contributed to the awareness of the technologies of preparing, committing, and concealing the fraud. the methods of grouping and classification were the basis for the author’s approach to the differentiation of technologies for the acquisition of funds of citizens, depending on the organizational and legal form, under the cover of which a financial pyramid was created. the statistical method is used in the analysis of investigative and judicial practice for ten years. the results of the study showed that the method of financial pyramid used for committing fraud is fully structured and includes criminal technologies for preparing, committing, and concealing the fraud. the combination of separate technologies in the mechanism of the crime is aimed at masking the active phase of criminal activity under civil-law relations, which complicates the timely detection of the signs of the crime both by the victim and by law enforcement agencies. practical implications. the research carried out the typing of fraudulent techniques using the financial pyramid method, which is the basis for developing and improving methods of disclosure and investigation of crimes. value/ originality. on the basis of the proposed author’s approach to the differentiation of technologies of criminal activity, it is possible to predict the emergence of the new ways of committing fraud in the financial sector. key words: fraud, financial pyramid, technology of criminal activity, way of committing a crime. jel classification: f38, p34 1. problem statement and degree of its scientific development currently, the schemes for the acquisition of funds of citizens by the way of the financial pyramid, disclosed by law enforcement agencies of ukraine, cause special concern of their scale. during 2006-2016, according to the ministry of internal affairs and the national police, in proceedings of investigators, there were almost 300 criminal cases (proceedings) on crimes in this category, in which more than 200 thousand citizens were found to be victims. the resulting aggregate losses amounted to over 2 billion uah, of which the victim was compensated no more than a quarter (an analytical note on the state and structure of crime in ukraine for 2008-2017). all these ways of illegal acquisition of property of citizens distinguish the high level of professionalism of criminals, masking their activities with the help of well-known world brands and economic entities with offshore status, use of modern information technologies, special methods of psychological influence, as well as corruption support from interested officials of all levels. the problems of proving fraud committed by the method of a financial pyramid are primarily due to the fact that the organizations under the protection of which such a pseudo-organization has been created are usually officially registered and conclude civil-law agreements with victims, and signs of acquisition of property are, as a rule, much later the onset of criminal consequences. moreover, modern payment systems, primarily different schemes of “on-line” payments, create conditions for obtaining and laundering of proceeds from crime. as a result, property rights and interests of ukrainian citizens may be affected, as well as the preconditions for baltic journal of economic studies 357 vol. 4, no. 4, 2018 increasing tension in society (explanatory note to the draft resolution of the verkhovna rada of ukraine). different aspects of counteraction to fraud, which were done by using financial instruments and psychological effects, were investigated in their works by a. f. volobuiev, v. i. haienko, s. v. holovkin, ye. v. dekhtiarov, s. m. kniazev, o. v. kravchenko, v. v. lysenko, y. m. meslovskyi, o. l. musienko, t. v. okhrimchuk, t. a. pazynych, i. m. popova, t. l. tsenova, v. yu. shepitko, and others. at the same time, in the scientific literature, the peculiarities of the technology of fraudulent actions concerning the acquisition of funds of citizens in the form of a financial pyramid are not disclosed. therefore, the purpose of this article is to highlight the characteristics of the technology of acquisition of funds of citizens in the way of the financial pyramid in modern conditions. 2. presenting the main material scientists offer different approaches to the definition of a financial pyramid, which collectively form the three main concepts: economic, mathematical, and legal (cherniavskyi, 2010). typically, financial pyramids are recorded as business entities (financial institutions) that attract funds for a particular project. if the real profitability of the project is lower than the income promised to investors or none at all, then a part of the means of new investors is directed to the payment of dividends to the previous one. the logical result of this situation is the inevitable financial failure of the project and the damage of the last investors. practice shows that after the collapse of the pyramid, no more than 10-15% of attracted funds can return. after all, the funds collected by the organizers of the pyramid do not direct the acquisition of liquid assets but immediately used for payments to the first participants, advertising, and personal enrichment. the longer the pyramid functions, the less is the percentage of possible returns in case of its liquidation (kardava, 2002). financial pyramid as a method of fraud should be distinguished from quite legitimate financial activity on a number of grounds, which indicate the fraud of investors (depositors), which are the basis of the “pyramid”: 1) the main task of the organizers of the financial pyramid is the attraction of new investors, whose participation is provided by new project revenues, that is, the amount of funds attracted from investors exceeds the amount of profit value that provides a certain investment project; 2) the presence of active advertising in the media, which promises to pay dividends at an interest rate, the size of which significantly exceeds the average market; 3) the use of technically equipped offices in prestigious areas of cities, holding pathetic presentations, a wellestablished system of work with clients; 4) the opaque scope of activity, that is, participants in the financial pyramid cannot verify the nature of the investment project and the direction of the attracted funds; 5) the use of several companies that hide the financial pyramid, multiple reorganization, change of organizational forms, legal address, offshore registration of companies; 6) creation of a convincing legend of investments, the illusion of deep analysis and scientific substantiation of investment policy, use of cover documents, in particular, regarding the support of the project by state authorities, powerful financial institutions; 7) payment of dividends and return of borrowed funds at the initial stage of the activity of the financial pyramid (at the stage of “promotion”) in order to create confidence in the reliability of the project to investors. thus, the financial pyramid should be considered, firstly, as a method of fraud that ensures the realization of the fraudulent intent of fraudsters and, at the same time, as a tool for earning profits by professional managers through the attraction of investors’ funds. the fundamental distinction between a financial pyramid as a criminal activity and a real business project is the reality of the commitments undertaken by the organizers to investors, as well as the source of dividend payments. in science, the technology of criminal activity reflects a set of actions (operations) of the subject to prepare, commit, and conceal the crime in their dynamics and sequences occurring in specific conditions of place and time (cherniavsky, kniazev, tatarov, etc. (2013). the features of these elements affect the character and location of traces and signs of crime. the financial pyramid as a method of fraud includes a number of technologies of criminal activity aimed at preparing, committing, and concealing the illegal possession of someone else’s property by deception and abuse of trust. the study of judicial practice shows that usually at the stage of creating a financial pyramid, criminals use the following technologies: 1) the creation of economic entities or acquiring rights to management established by economic entities; 2) obtaining detailed information on the procedure for conducting individual financial transactions and conducting reconnaissance activities by fraudsters; 3) the use of organizational and technical measures to cover criminal activity; 4) attracting new participants to increase the volume of the financial pyramid; 5) application of psychological influence to impacted victims; 6) additional measures for masking criminal activity. consider these technologies in more detail. 1. creation of business entities or acquiring rights to management established by economic entities at the stage of preparation for committing fraud is aimed at: using their organizational and legal status to simulate baltic journal of economic studies 358 vol. 4, no. 4, 2018 legal financial and economic activity; legalization of a criminal group in a market environment of a certain region (country, city); access to economic and financial instruments (opening bank accounts, concluding commercial agreements, leasing office space, etc.). typically, fictitious business entities are used to create a financial pyramid, they are registered on the front men, persons who have lost their passports, are in places of deprivation of liberty, mentally ill or those who have left for permanent residence abroad. so, for the purpose of realization of the criminal intent, the organizers of the financial pyramid were registered with the ngo “fund k.”. the official founder of this organization has become a citizen of retirement age a., who never worked and agreed to give his personal data for the reward. wronging with the intentions of the organizers, immediately after registration a. transferred to unidentified persons received registration documents, seal and facsimile of his signature (cherniavskyi, vozniuk, zapototskyi, etc. (2016). in the name of such organizations, for the most part, lay the idea of quickly obtaining extra profits (“your chance”; “fast money”); use of advanced business technologies and affiliation with world innovations (“business capital”, “elite-centre”); patronage of the mythical forces (“mercury”; “hermes”); international relations (“golden circle international”; “global system of trainings”); noble motives to help lowincome groups of the population (“averter”). in some cases, in the name of these organizations, in violation of the current legislation, there is a reference to affiliation with financial institutions, as well as well-known foreign companies. 2. getting detailed information on the procedure for conducting certain financial transactions, keeping proper records, the situation of the financial market, studying the possibilities and effectiveness of control by law enforcement agencies, the rules for drawing up documents for conducting financial transactions, the order of their filling and passing from the executor to the addressee, the order of application of search and information systems by fraudsters. this information organizers and members of a group of scammers who create a financial pyramid, use it from personal experience, as well as acquire by means of observations, consultations with specialists, studying of special literature. having enough information, fraudsters in many cases make a model of committing a crime. subsequently, this model is embodied in plans, schemes, calculations, charts, etc. at the same time, the role and place of each participant in the future criminal scheme are modelled (planned). for example, during the six months, p. was searching for employees for the newly created llc “bank ukraine” as financial advisers. for the purpose of carrying out the criminal activity, three people – experts of the financial market who carried out seminars with participants of the criminal group, which talked about the latest stock and trades activities, as well as prospects for future activities of the company, were involved. during the seminars, members of the criminal group were trained to work with clients while preparing them for work as financial advisers (according to the main investigation department of the ministry of internal affairs of ukraine, 2011). the use of reconnaissance activities is aimed at finding and establishing contacts with the heads of business entities, banks, and other financial institutions in order to create an appropriate image, in particular, through advertising in mass media (internet), with representatives of control and law enforcement agencies to ensure corruption coverage of their activities with persons who have special knowledge of certain technological processes of financial transactions, in particular, in computer networks, flow of documents to use them as support consultants. 3. organizational and technical measures for the coverage of criminal activities are aimed at leasing offices, hiring staff, providing business attributes, distributing wide-ranging advertising to create a false representation of citizens about conditions of the participation in the organization, the production of necessary documents (forms, standard contracts, business cards, certificates, licenses), the purchase of the necessary equipment, computer and office equipment, and other measures for the technical maintenance of actions at all stages of the commission a crime. 4. involvement of new participants in the financial pyramid is realized, as a rule, through meetings (workshops, trainings, lectures) conducted by organizers of fraud with potential victims (private investors) on the basis of leased premises (assembly rooms of state institutions, cinemas, hotels, etc.). the typical scheme of these meetings consists of several stages: participants of the gathering are collected by distributing on behalf of the organization of invitations (guests are often invited together with “partners”, whose role is played by members of the criminal group, with the aim of psychological pressure from their side to unprepared citizens); the organizer personally meets the invited guests and invites them to get acquainted with the organization’s colour brochures illustrating its “achievements” and authority in the respective circles; for a public performance, the organizer, as a rule, goes out to the improvised scene for music and, for example, appears to be the marketing director of a virtually nonexistent internationally renowned company (for more convincing, he gives the floor to his accomplices who act as “wealthy” through participation in the organization); with reference to the rules of the organization, the organizer states that he has the right to raise funds and to distribute them for the benefit of the members of the organization; baltic journal of economic studies 359 vol. 4, no. 4, 2018 during the meeting, participants receive forms of confidential agreements with the organization, applications, and other documents that create the illusion of involvement in a serious business project; among the sources of income from participation in the organization they promise to victims, firstly, the opportunity to obtain “crazy interest” (usually from 40 to 100%) through the participation in financial, trading, and stock markets; secondly, to earn “big money” as a result of their ability to invest in a “serious innovation project”, usually abroad (offer to use for a quick enrichment initially small amounts of funds, in particular, borrowed); at the end of the workshop with novices, personal conversations are conducted, during which, in view of a particular psychological state of the person, the organizers convince the latter of the veracity of their words; numerous demands for the return of savings correspond to the fact that this is not foreseen by the “club rules” but the only way to return the money is to attract as many new participants as possible. so, in preparation for committing crimes in order to mislead the public, f. held seminars at the business centre in kyiv, where they told invited citizens about the utility of investing money in instruments of the financial markets of the world, in particular, the international company, he is the representative of the territory of ukraine and eastern europe. at the workshops, f. told citizens about the profits that can be obtained from investing money into financial market instruments. during the preparation for committing crimes, f. and other members of the criminal group developed promotional leaflets for further distribution to future clients of the company. to the indicated booklets on the instructions, f. introduced false information about the history and activities of the non-existing international group of companies, positioned in booklets as a worldrenowned and reliable asset management company, represented in 33 countries of the world. at the same time, citizens were encouraged to invest money in accordance with the investment programs of the company that provided the profits (up to 5% per month and 54% per annum). financial advisers of the company, not being aware of the criminal intentions of f., persuaded the clients in the profitability of investing funds (according to the materials of the main investigation department of the national police of ukraine, 2016). 5. a characteristic feature of the activities of financial pyramids is the involvement of new participants using psychological influences or methods of neuro-linguistic programming (nlp). the basis of nlp is the use of so-called “anchors” – shaped stimuli that cause a certain reaction. nlp receptions are increasingly used in advertising, management, counselling, training for advanced training, etc. to achieve more effective communication, individual development, and accelerating the development of certain skills. getting into the club, the person does not even assume that it is imperceptibly influenced by psychological pressure and hypnosis. hidden instructions and commands, the feature of which is the incentive to make unconscious decisions, are built to the structure of the expressions of “moderators”. the lyrics contain no contradictions and controversies in the arguments; the neutrality of the material presentation is maintained. the examples presented did not affect any of the present, so the listeners did not have any doubts or negative associations. thanks to these techniques in the classroom, there was a sense of agreement, sympathy for the leader, and his messages were evaluated as correct and logical. at the final stage of such a “workshop”, there are so-called “individual interviews”, combined with additional psychological influence, aimed at ultimately suppressing the will of the victims for their predilection to the transfer of money to fraudsters. on the stage in the centre of the hall lay tables, for which all the same “managers” sat down. central illumination is usually turned off. the entire “interview” process is accompanied by loud music. creating convenient conditions for communication, “managers”, follow the instructions of the organizers, persuading citizens to join the “company”, demanding to immediately give consent and to confirm their words to make appropriate monetary payments. in several proceedings, the experts analysed the musical accompaniment of “workshop” to the existing sound recordings of musical compositions, testimonies of victims and witnesses. found that there was a targeted use of specially selected rhythms that performed a polyfunctional role in the mechanism of psychological impact on victims. the peculiarities of musical compositions, their rhythm and rapid pace (120-140 beats per minute) destabilized the emotional state of the victims, deprived them of their ability to concentrate attention, caused the inhibition of mental activity, the weakening of logical thinking, which in the decision-making situation led to surface judgments, hasty actions, dependence on external stimuli. 6. there is now a clear tendency to mask financial pyramids through three outwardly legal areas of work. the first direction is the creation of “elite clubs”, whose members expect to receive high revenues from joint activities. the most striking example of the creation of such clubs is the network created by the organizers of financial pyramids in a number of our cases. it was based on elite closed clubs, whose members were bound to have an extremely respectable appearance, to pay high contributions (at least $1,000) for the right to enter and visit the club. clubs were extremely cautious in choosing future members, given their financial status, suggestiveness, willingness to believe unreliable statements, etc., and immediately warned novices about baltic journal of economic studies 360 vol. 4, no. 4, 2018 the need for the quickest involvement of new entrants, otherwise, dividends would not be paid. at the same time, members of the club did not officially buy any shares or bonds but made contributions as donations of some amount of one private person – to another. the second direction is the division of the “pyramid” into several specialized divisions, most of which deal with outwardly legal activities and is an officially recognized source of profit. an example of this structure is the activities of the club foundation k., which, in place of one company, created a whole system of organizations (18 business entities), engaged in investments, financial transactions, and purely trading activities in ukraine and abroad. an important feature of modern financial pyramids is their strong religious slant, in particular, in the field of eastern mysticism. the heads of “affiliates” and the most responsible officials in religious organizations that are used to create a financial pyramid were appointed only from the closest students of the founder, who formally only engaged in spiritual education. however, the financial basis of these organizations is the usual pyramid of payment of bonuses to participants who joined earlier due to the contributions of beginners. realization of the analysed technologies of misappropriation funds of citizens in the way of the financial pyramid takes place taking into account the organizational and legal form, under the cover of which the financial pyramid was created, in particular: 1) in the activities of credit unions; 2) in the field of investment activity (in the form of providing services or investing in a profitable project); 3) under cover of insurance organizations; 4) under the guise of attracting funds from citizens to construction; 5) through the tools of providing financial services on the internet. the first two groups are the so-called “classical pyramids”, whose organizers are covered only by external attributes and promises of profits in the future. the last three types of the financial pyramid are used economic substantiation of investments (in construction, insurance, in the virtual financial markets) as masking of criminal acts. 3. conclusions we described the modern criminal technologies of acquisition of funds of citizens in the form of a financial pyramid and the distinctive features (characteristic features) inherent in various types of “financial pyramids”. the method of financial pyramid used for committing fraud is full-fledged and includes criminal technologies for preparing, committing, and concealing of someone else’s property. the combination of these technologies in the mechanism of the crime is aimed at masking the active phase of criminal activity under civillaw relations, which complicates the timely detection of the signs of the crime both by the victim and law enforcement agencies. the scientific generalization and typification of fraudulent techniques in the form of a financial pyramid is the basis for developing and refining methods for the disclosure and investigation of these crimes, and for forecasting the emergence of new ways of criminal activity. references: an analytical note on the state and structure of crime in ukraine for 2008-2017. retrieved from: http://mvs.gov.ua explanatory note to the draft resolution of the verkhovna rada of ukraine "on holding parliamentary hearings on the topic: "problems of legislative regulation of the activity of modern types of financial pyramids based on the use of information technologies and systems of direct sales". retrieved from: http://www.zakon1.rada.gov.ua cherniavskyi, s. s. (2010). financial fraud: methodological principles of investigation: [monograph]. k., 624 p. kardava, d. v. (2002). network marketing – pyramid? scam? or ... the system of distribution of goods and services. m., pp. 128-136. cherniavsky, s., kniazev, s., tatarov, o. and others (2013). investigation of fraud committed by the method of a financial pyramid [text]: manual. k., 138 p. cherniavskyi, s. s., vozniuk, a. a., zapototskyi, a. p., etc. (2016). investigation of criminal offenses related to fictitious business and the activities of "conversion centers" [text]. k.: nat. acad. internal affairs, 92 p. baltic journal of economic studies 89 vol. 1, no. 2, 2015 the role of the tax burden in the taxation of ukraine olha melnyk1, vinnytsya state agrarian university, ukraine abstract. the purpose of the paper is to underline and present the important of the tax burden in the taxation of ukraine and to show its influence on the profit of the enterprises. the problem of the optimization of the taxes is closely connected with two factors. the first factor is that the aim of the tax system is to fill the state budget. the second factor is to make fovourible conditions for business to prosper. also, the aim of the research is еру development of scientific and methodological foundations of practical recommendations on the management of the tax burden with an economic entity on the basis of more efficient use of production resources. to achieve this aim the amendments of the tax code and the introduction of new rates and taxes were considered, which affects the activities of the company. also the main criteria of the indicators for assessing the tax burden on the company were formed. the object of research is the process of management of the tax burden on the basis of increase of efficiency of use of industrial resources of the enterprise. the subject of the study is the theoretical and methodological and practical aspects of the tax burden, and its calculation methods for reduction and increase, based on the characteristics of business administration. methodology. the theoretical base of the issue is taken from the economic bases, the works of the native and foreign scientists on the topic of the influence of the taxation on the work of the enterprises, their profit, the analysis of the statistic data during the last few years. to achieve these goals the following methods were used: a method of system analysis and synthesis, methods of statistical groupings, economic and mathematical, logical and comparative analysis. the information base for writing articles constitutes a legal and regulatory acts of ukraine, the statistical data of the state committee of statistics of ukraine, the reporting enterprises in ukraine. results. the main theoretical result is the justification of the main principles of making business taking into consideration the taxation of the country, and make it profitable. practical implications/value. the practical value of the results are expressed in using the special methods in practical activity of the enterprise on the base of making the mechanism of the management of tax paying with increase the a efficiency of all the resources of the company. key words: tax burden, taxation, revenues, state budget, gdp. jel classification: e62, h21, h71 1. introduction one of the most important components that optimizes the tax system of ukraine is a radical increase of the positive impact on full-fledged market and all market infrastructure. also it influences on a favorable investment climate in the formal economy and on ensuring the efficient and safe investment, creating mechanisms for protection impairment funds and competitive environment as the implementation mechanism for the most effective business decisions. the optimal level of tax burden is and important relevant factor for the dynamics of business activity and for the development of production and the economy as a whole, as well as socio -political stability. 2. review of recent sources of research and publications the theoretical basis and practical issues of taxation are covered in the works of many local and foreign authors. the issue of tax burden, its impact on economic activity and income taxpayers, causes and consequences of its uneven distribution between economic trends and ways to change are discussed in the works of local economists а. sokolovska, т. kalinesk, l.shabysta, v. vyshnevskyy, z. varnaliy, v. savchenko, о. malyshkina . the authors of recent publications that have examined the issue of taxes and tax burden in ukraine are і. bilous, g. datsenko, n. korkun, о. korotevych, n. lohanova, yu. panura, м. stepura, о. tymchenko. during the existence of the tax system many foreign and domestic methods to determine the tax burden developed, but in spite of that common approaches still exist. the majority of scientists consider the tax burden on the state level, but some of them consider it at the level of the enterprise. however, taking into account specific national tax system, studies need to be updated and systematization of theoretical and practical attempts to assess the level of tax burden on businesses. the aim of the article is to corresponding author: 1 departament of international economy, vinnytsya state agrarian university. e-mail: epidersia@ukr.net baltic journal of economic studies 90 vol. 1, no. 2, 2015 improve the methods of analysis of tax burden business enterprises, to identify possible indicators for its evaluation at the macro level and its impact on the revitalization of the national economy. 3. the state budget revenues during the last years fiscal policy was conducted by the government of ukraine against the background of an unstable global economy and volatility in international financial markets. filling the budget revenues occurred in a reformed tax law, in accordance with the tax code of ukraine. among the features of filling the revenue part of the budget in 2014-2015 are the following: reduction in tax rate; increase the excised tax on alcohol, alcoholic beverages, tobacco, petrol and diesel; change directions of paying the value added tax, including processors, who carried out the supply of milk, raw milk , dairy products, meat, meat products and other products processing animals, 30 percent of the positive difference between the amount of tax liability and the amount of tax loan paid into a special fund of the state budget of ukraine and 70 percent the special accounts opened by them in the state treasury, which helped protect farmers – milk producers with providing real receiving compensation for donated raw materials; provide support for farmers favorable purchasing prices for milk; encourage the development of dairy farming in ukraine; prevent a rapid rise in prices for dairy products for consumers of the country; cancellation from july 1, 2012 the zero rate of tax to vat transactions for the supply of natural gas imported into the customs territory ukrayinynak "naftogaz ukraine"; introduce a special procedure for consideration of the negative value of the object of taxation on income tax results in the next tax periods; enrollment fees for the provision of some administrative services to the general fund of the state budget; introduction of charging court fees, which was introduced from 01.11.2011 by the law of ukraine of 08.07.2011 №3674-vi “about court fee” instead of revenue to pay costs for technical support proceedings in the courts. the adoption and implementation of the new customs code of ukraine in 2012 provided growth of state budget revenues without hindering legitimate import-export operations. new customs code of ukraine meets the international convention on the simplification and harmonization of customs procedures. in order to stimulate the development of small and medium business in ukraine as an important factor of social and economic stability of the state in the period of financial and economic crisis and to implement the program of economic reforms of the president of ukraine for 2010-2014 "prosperous society, competitive economy, effective state" law of ukraine from 04.11.2011 № 4014iv «about amendments to the tax code of ukraine and some other legislative acts of ukraine on the simplified system of taxation, accounting and reporting" and from 22.03.2012 № 4618-vi «about the development and state support of small and medium enterprises in ukraine" were established. these laws improved and simplified tax system with changes in tax legislation and the business environment, ensure its conformity with modern trends of tax policy, prevent tax evasion, in particular, provided favorable conditions for development of small and medium enterprises; ensured the competitiveness of small and medium enterprises; the conditions to stimulate investment and innovation activity and employment growth through the development of entrepreneurial initiative of citizens. 4. the influence of the tax burden on the economy of the country research tax burden on the economy is important, because of the number of taxes, their types and rates, differentiation, availability and validity of tax benefits, which depends largely on their possible impact on stimulation economic actors, their capacity for accumulation and investment, determines the extent of structural change in the economy and increase its effectiveness (melnyk, 2005). the tax burden as a fiscal indicator shows the degree of centralization and socialization of gdp created in the budgetary system of the country and socialized redistribution of gdp through the system with providing economic agents of social benefits, direct and indirect financial assistance. as a price index it describes the weight of the tax burden obligatory payments to any resultant source (company revenue, profits, labor costs , costs of households, etc.). in ukraine today there is no general methodic calculating of the tax burden. there is no official statistics of this indicator, there is only a few scattered data, which indirectly can make his mark. there is a wide range of ideas about evaluation methods and indicators of the tax burden. generally, most definitions of " tax onloading " is limited to its calculation algorithm. the methodological basis of the analysis of the tax burden is a general scheme of the macroeconomic turnover, which is based on the system of national accounts. circulation revenues and expenses is associated with economic actors taxes at different stages  – production, creation, distribution and redistribution of income. in the international system of national accounts classification applicable taxes is based on the tax base and covers taxes on products for production, on income and deductions for social insurance (melnyk, 2005). at every stage of circulation revenues, as reflected in national accounts, groups of different taxes are formed, the total amount of which is related to synthesis of economic indicators – gdp, and it can characterize the level of tax burden on the economy (table 1, 2). baltic journal of economic studies 91 vol. 1, no. 2, 2015 apparently, according to the system of national accounts at the production stage the proportion of taxes an average of 6.01 %. the lowest value set in 2005 – 5.31 % , most – 6.9% in 2000 growth rate of output growth rates correspond to the total amount of taxes is illustrated in fig. 1. fig. 1. continued growth in output and the total amount of taxes for the period 2005-2015 biennium source: calculated by the authors according to the state statistics service of ukraine (http://www.ukrstat.gov.ua/) and the state treasury service of ukraine (http://www.treasury.gov.ua/) as can be seen from the table 2 stage distribution and use of income share of tax increases and the average value is 13.38%. if we consider the 2015 figure is the proportion of tax is lower than in 2014 at 1.57% , as compared to 2000 4.01%. also it must be considered as part of the tax burden on the social security payments that make up an average of 11.52%. the highest figure was recorded in 2005 at a rate of 12.21%, which is 0.76% less than in 2015. if the total amount of taxes to grieve at all stages of circulation revenues and expenses of economic agents the average of the tax burden for the period 2000–2015 is 30.91 %. moreover, statistics indicate a decrease in the share of taxes in national accounts in 2015 compared to 2000 as illustrated in fig. 2. source: calculated by the authors according to the state statistics service of ukraine (http://www.ukrstat.gov.ua/) and the state treasury service of ukraine (http://www.treasury.gov.ua/) 5. the range of the tax burden in different countries the tax burden varies significantly across countries (table 3). analysis of the share of taxes in gdp of several countries in europe and asia shows that ukraine in terms of tax burden does not exceed this figure in other countries, and in many of them the share of taxes in gdp is much higher. for example, in sweden, italy, belgium, france, denmark, the figure is in the range 45-47%, greece, great britain, iceland, slovenia, germany – 35-37%, chile, korea, turkey – 21-27% (http://www.org/ statistics/). table 1 the evolution of the system of national accounts at the manufacturing stage 2000 2005 2008 2010 2012 2014 2015 production at basic prices , mln 373893 995630 2072172 1955685 2388289 2895283 3150653 taxes on products , mln. uah 27338 54183 126425 119988 130957 184195 200912 subsidies on products , mln. uah 1530 1332 2545 3124 2547 1917 3973 taxes less subsidies ,mln. uah 25808 52851 123880 116864 128410 182278 196939 taxes as% of production at basic prices 6,90 5,31 5,98 5,98 5,38 6,30 6,25 source: calculated by the authors according to the state statistics service of ukraine (http://www.ukrstat.gov.ua/) and the state treasury service of ukraine (http://www.treasury.gov.ua/) table 2 the evolution of the system of national accounts at the stage of distribution and use of proceeds 2000 2005 2008 2009 2012 2014 2015 gdp at market prices , mln. uah 170070 441452 948056 913345 1082569 1302079 1459096 taxes on production and imports , mln. uah 31707 62777 142599 134842 149602 204136 226743 subsidies on production, mln. uah 3184 6700 25817 19516 18263 17562 40603 taxes less subsidies million . usd. 28523 56077 116782 115326 131339 186574 186140 taxes as% of gdp 16,77 12,70 12,32 12,63 12,13 14,33 12,76 actual employers contributions to social insurance 18044 53891 114222 103998 125882 146945 167055 the share of actual social insurance contributions hectares of gdp 10,61 12,21 12,05 11,39 11,63 11,29 11,45 total taxes less subsidies % 34,28 30,22 30,34 29,99 29,14 31,91 30,46 source: calculated by the authors according to the state statistics service of ukraine (http://www.ukrstat.gov.ua/) and the state treasury service of ukraine (http://www.treasury.gov.ua/) baltic journal of economic studies 92 vol. 1, no. 2, 2015 in ukraine, the average level of taxation consists of a situation where many taxpayers avoid paying taxes, the economy still operates loss-making enterprises, some businesses in arrears in the payment of taxes, and the amount of tax benefits are comparable to the amount of tax revenue (malyshkin a., 2013). it is advisable to note that the tax burden is important in terms of tax administration and may be a direct target of this administration, and it is not only a quantitative characteristic as the subject of theoretical analysis, that is a study of the effects of explicit and implicit impact on the welfare of their tax payers. many publications are devoted to the measurement of the tax burden on business. their analysis shows that the formula for calculating the relevant indicator appears on the amount of taxes included in the budget now under applicable law, without regard to effect their shifting as a result of which the formal (defined by law) and real taxpayers do not match. a price mechanism taxes formally entered into the budget entity may be partially or fully translated into goods and services to buyers or sellers of inputs. professor a. sokolovskaya notes that impersonal taxes paid to the budget of the company, can not be compared with taxes on individual. after the first of them really affects the company as a separate business entity, reducing working capital and limiting investment opportunities in retained earnings development of production, higher wages working, and so on. it is noted that these arguments can not deny the need to study the effect of shifting the tax burden from one company to the other, and ultimately – to individuals. 6. conclusions evaluation of the tax burden in ukraine shows that taxation is moderate compared to the market of developed countries, however, worth noting that the total amount of tax burden computed with the ratio of tax revenues for a certain period of gdp in ukraine does not reflect the real situation, and therefore can not be the basis for addressing the ways and methods of improving taxation system in the context of economic growth. investigating the tax burden on the company proposed to conduct in order to determine the factors that influence the shifting of taxes possible direction of shifting (that is, the area of distribution tax), the circumstances and reasons that prevent it shifting, and its implications for business enterprises, defining urgency and calls for further in-depth analytical research in this direction. table 3 taxes as a share of gdp in oecd countries as a percentage [http://www.ukrstat.gov.ua/] years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 countried chili 18,98 18,72 19,06 20,71 22,00 22,78 21,40 17,21 19,53 21,21 20,84 korea 23,21 24,01 23,27 23,96 25,05 26,52 26,52 25,53 25,06 25,91 26,81 turkey 24,62 25,93 24,07 24,26 24,52 24,08 24,22 24,64 26,20 27,83 27,66 switzerland 28,93 28,24 27,83 28,11 27,91 27,69 28,13 28,74 28,05 28,55 28,17 ireland 27,73 28,15 29,60 30,13 31,60 31,12 29,23 27,59 27,38 27,90 28,28 canada 32,81 32,67 32,47 32,32 32,60 32,27 31,59 31,42 30,56 30,39 30,74 israel 36,31 35,55 35,51 35,68 36,00 36,39 33,79 31,35 32,42 32,60 31,58 estonia 31,02 30,76 30,56 30,64 30,68 31,43 31,85 35,35 34,01 32,28 32,52 spain 34,42 34,04 34,88 36,04 36,91 37,29 33,15 30,92 32,50 32,15 32,87 greece 33,86 32,31 31,50 32,14 31,62 32,47 32,10 30,49 31,65 32,17 33,76 great britain 34,83 34,44 34,91 35,43 36,27 35,75 35,81 34,17 34,86 35,75 35,25 czech republic 34,88 35,82 36,26 36,10 35,64 35,87 34,98 33,76 33,95 34,93 35,50 iceland 35,33 36,74 37,90 40,69 41,49 40,64 36,72 33,88 35,18 35,98 37,19 slovenia 37,85 38,04 38,13 38,62 38,26 37,66 37,07 36,99 38,13 37,05 37,38 germany 35,63 35,78 35,02 35,03 35,66 36,10 36,49 37,37 36,17 36,93 37,59 luxembourg 39,32 38,13 37,35 37,58 35,86 35,63 37,34 39,05 37,34 37,00 37,76 hungary 37,98 37,91 37,66 37,31 37,29 40,33 40,14 39,85 38,04 37,05 38,92 norway 43,09 42,32 43,05 43,20 43,47 42,93 42,12 41,99 42,64 42,51 42,21 austria 43,63 43,47 43,04 42,11 41,53 41,77 42,75 42,45 42,20 42,32 43,18 finland 44,68 44,11 43,47 43,91 43,81 42,97 42,90 42,85 42,51 43,68 44,08 sweden 47,46 47,77 48,06 48,87 48,32 47,36 46,44 46,56 45,42 44,19 44,31 italy 41,09 41,53 40,76 40,59 42,08 43,19 43,03 43,39 42,96 43,01 44,42 belgium 44,74 44,26 44,40 44,47 44,11 43,60 43,95 43,10 43,54 44,06 45,28 france 43,52 43,34 43,57 44,10 44,39 43,67 43,51 42,46 42,87 44,07 45,29 denmark 47,86 48,02 49,03 50,83 49,62 48,90 47,76 47,76 47,42 47,68 47,96 baltic journal of economic studies 93 vol. 1, no. 2, 2015 references belous, i. 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(2012). the tax burden on legal entities in ukraine and its impact on economic growth. finance of ukraine, issue 10, p. 34-43. state statistics service of ukraine. [electronic resource]. – retrieved from: http://www.ukrstat.gov.ua/ state exchequer service of ukraine. [electronic resource]. – retrieved from: http://www.treasury.gov.ua/ ольга мельник роль налоговой нагрузки в системе налогообложения украины аннотация. целью исследования есть подчеркнуть и представить важность налоговой нагрузки в системе налогообложения украины, показать ее влияние на прибыль субъектов хозяйственной деятельности страны. проблема оптимизации налогообложения связана с двумя факторами, а именно: как наполнить бюджет страны и в то же время создать благоприятные условия для деятельности предприятий, для их развития. также, целью исследования есть разработка научно-методических основ, практических рекомендаций на счет управления налоговой нагрузкой субъекта хозяйственной деятельности на базе повышения эффективности использования производственных ресурсов. для достижения данной цели было рассмотрено изменения налогового кодекса, введение новых ставок и налогов, которые влияют на деятельность предприятия, также, были сформированы основные критерия т показатели оценки налоговой нагрузки на предприятие. объектом исследования есть процесс управления налоговой нагрузкой на основе увеличения эффективности использования производственных ресурсов предприятия. предметом исследования есть теоретико-методологические и практические аспекты управления налоговой нагрузкой, ее расчет и методы уменьшения и увеличения, исходя из особенностей введения хозяйственной деятельности. методика. теоретическую основу исследования составляют основы экономической теории, научные труды отечественных и зарубежных ученых по теме влияния налогообложения на работу предприятий, их прибыль, анализ статистических данных в сравнении нескольких лет. для достижения поставленных целей использовались следующие методы: метод системного анализа и обобщения, методы статистических группирований, экономико-математического, логического и сравнительного анализа. информационную базу для написания статьи составляют законодательные и нормативные акты украины, статистические данные государственного комитета статистики украины, отчетные данные предприятий украины. метод системного анализа и обобщения использовался при исследовании теоретических подходов к выбору эффективных методов управления налоговой нагрузкой предприятия в практике хозяйственной деятельности. методы экономико-математического, логического и сравнительного анализа использовались при обобщении, обработке и аналитической оценке первичных фактических материалов. результаты. основным теоретическим результатом является обосноваbaltic journal of economic studies 94 vol. 1, no. 2, 2015 ние основных принципов ведения хозяйственной деятельности предприятия с учетом налоговой системы страны, при этом сохраняя прибыльность предприятия. результатом исследования также есть усовершенствование подходов к поискам резервов на предприятиях для уменьшения налоговой нагрузки, классификация факторов, которые влияют на уровень налоговых платежей субъекта хозяйственной деятельности. кроме того, обращено внимание на организационную структуру предприятия, в основе которой есть налоговый менеджмент, который позволяет установить связь между отделами предприятия в процессе планирования, анализа и контроля использования ресурсов с целью снижения налоговой нагрузки. практическое значение результатов выражается в использовании определенных методик в практической деятельности субъекта хозяйственной деятельности на базе формирования механизма управления налоговыми платежами методом увеличения эффективности использования производственных ресурсов предприятия. baltic journal of economic studies 18 vol. 5, no. 2, 2019 corresponding author: 1 khmelnytskyi national university, ukraine. e-mail: nataligavlovska@gmail.com orcid: https://orcid.org/0000-0003-1084-2853 2 khmelnytskyi national university, ukraine. e-mail: e.m.rudnichenko@gmail.com orcid: https://orcid.org/0000-0002-9407-2026 3 khmelnytskyi national university, ukraine. e-mail: lisov75@ukr.net orcid: https://orcid.org/0000-0002-0923-0983 doi: https://doi.org/10.30525/2256-0742/2019-5-2-18-23 transformation processes in the system of providing economic security of investment activities of industrial enterprises nataliia havlovska1, yevhenii rudnichenko2, ihor lisovskyi3 abstract. the article objective is identifying the main transformational processes affecting the economic security of investment activities of industrial enterprises, which are the guarantee to their long-term development and the formation of a program for the transformation of the economic security system of enterprises in order to protect investment activity from the negative impact of changes in the external and internal environment. methodology. the research is based on analytical materials and results of the evaluation of the dynamics of world investments for 2017 and statistical information concerning direct investments from different countries of the world in ukrainian economics. the main postulates of the institutional theory are also used to characterize institutional changes in ukraine for detailing their impact on the economic security of the investment activity of ukrainian industrial enterprises. results. the research results indicate negative tendencies in the sphere of investment both for the country as a whole and for particular economic entities. this is caused by the military conflict in the east of the country and investors’ distrust to the institutional component of the functioning of the domestic economy. this situation indicates the need to introduce changes in the system of economic security of domestic enterprises. practical implications. the authors developed the program for the transformation of the economic security system of enterprises, taking into account the actual needs for ensuring the economic security of their investment activity. value/originality. after transformations implementation, the economic security system of enterprises receives new characteristics and allows mitigating relevant threats with different efficiency level. key words: economic security, investment activity, transformations, institutions. jel classification: b41, d21, h56, m21, p40 1. introduction the technological backwardness of domestic industrial enterprises is the issue for discussions of domestic and foreign specialists for a long time. among the main ways out of a crisis, most of them require the attraction of investment funds of different origin. joint investment, reinvestment, state support are the most commonly used terms for describing the current state of investment activity of most industrial enterprises. however, the socio-economic and political processes that are taking place in ukraine significantly limit the investors’ interest in investing in industrial enterprises. at the same time, for many economic entities, the problem of ensuring the economic security of investment activity is acute as a result of imperfect legislation, opaque fiscal policy, the specifics of the courts’ work and the raids intensification. therefore, the research topic is relevant and purposeful, especially considering the importance of industrial enterprises for economic development and state budget filling. investment activity is accompanied by a significant number of threats and risks, which are transforming according to the situation in the markets and changes in the socio-economic environment of economic entities. accordingly, there is a need to improve the economic security of economic entities and form new approaches for ensuring the economic security of their investment activities. the problem of economic security of domestic enterprises and the investment development is baltic journal of economic studies 19 vol. 5, no. 2, 2019 investigated in the works by (vasyltsiv, 2008), (kyrylenko, 2005), (stadnyk, 2008), (voinarenko, 2016) et al. however, the security of investment activities of business entities is highlighted fragmentally and requires in-depth studies, taking into account the current trends in the economic functioning. the methodological basis of work is the empirical research of investment activity in terms of different countries and the ukrainian economy in particular. also, the postulates of the institutional theory are applied, which can justify the behaviour of individual subjects at the macro and micro levels. in this case, the works of such specialists as (furubotn, 1998), (hamilton, 1986), (williamson, 1985) are studied. 2. characteristics of modern investment trends realities of the present lead to the necessity of the transformation of the economic security system of domestic enterprises both in general and within certain spheres and activities. investment activity is extremely important from the standpoint of enterprise development and the preservation of assets ownership, which requires the development of new approaches to ensuring the economic security of such activities through transformation processes in the enterprise management system as a whole and various functional areas in particular. investment priorities in terms of the world leading countries show investors’ interest in highly profitable projects, in spite of a rather high-risk level. for a long time, the constant search for competitive advantages forced investors to invest in emerging economies and to choose business partners for their own business development among them, but in 2017, these trends slightly changed. today the leaders in attracting foreign investment (figure 1) are the united states, china, hong kong, brazil, singapore, and the netherlands. these trends are conditioned by the favourable business climate in these countries and the persistent positive trends in the development of various spheres of economic activity. 3. investment activity and domestic economic security regarding the state of the domestic economy and the inflow of foreign direct investment, it is necessary to state mainly the negative tendencies associated with the military conflict in the east of the country and the distrust of foreign investors to the reforms declared in 2014. however, first of all, this situation is related to the military conflict within the state and the distrust of investors to business security. today, the security issue is extremely relevant for ukraine, because, according to the rating agencies surveys, the security level in society and the internal and external conflicts level in our state are characterized as “dangerous.” thus, the most well-known rating and the comparison of the most dangerous and safe countries in the world include the ranking of the world countries according to the global peace index. the global peace index is a comprehensive indicator, which characterizes the peacefulness of the world countries, measures the level of domestic violence and the level of its foreign policy aggression. the global peace index shows, which countries can be considered the most secure (and vice versa – dangerous) for human life. it is calculated according to the methodology of the economist intelligence unit organization 275 136 104 63 62 58 50 46 41 40 35 30 29 25 24 23 19 19 17 17 0 50 100 150 200 250 300 figure 1. the inflow of foreign direct investment in 20 largest recipient countries in 2017, billion us dollars source: developed by the authors on the basis of (world investment report 2018. investment and new industrial policies, p. 4) baltic journal of economic studies 20 vol. 5, no. 2, 2019 (analytical unit of the british magazine economist). global peace index is assessed on the basis of 23 criteria, divided into three categories: 1) the level of social security; 2) the dimensions of ongoing internal and international conflicts; 3) the level of militarization. the countries are ranked in points from 1 to 5 for each group of indicators. the less the points, the more peaceful the country is according to this criterion. the rating of ukraine among the countries according to the global peace index for 2008–2018 is shown in figure 2. in 2018, according to the global peace index, ukraine ranked 152nd among 163 countries of the world and is between pakistan and sudan. in addition, our country has entered the list of countries that suffered the most radical deterioration of the peace compared to 2008 (with such countries as syria, mexico, and egypt). table 1 analysis allows us to draw conclusions on the improvement of the global peace index in 2018 compared with 2017 by 2 positions. the upgrade in the rating occurred despite the formalization of the trade blockade against the donbas in march 2017, which led to an increase in internal conflicts in the state and the increase in political instability before the elections in 2019. among the positive breakthroughs, the experts noted some successes in combating external conflicts, the consequences of terrorism and the successes in dealing with forced migrants, although this did not affect the dynamics of investment attraction significantly. it is significant that the main source of investment for ukrainian enterprises (figure 3) is the russian federation, offshore zones (cyprus and others), which indicates the return of domestic capital in the form of foreign investment in the country’s economy but with a completely different level of protection. that is, for a long time, the taxation optimization and protection of invested capital remain the determining factors of influence on investments dynamics for ukrainian business. however, not all domestic enterprises can operate with significant amounts of money and are able to create companies in offshore zones, while it’s also necessary to take into account the dubious legality of such actions from the position o f state legislation. therefore, the protection of investment and investment activity from the negative impact of the external and internal environment is one of the priorities for most enterprises. it is an effective system figure 2. the rating of ukraine among the countries according to the global peace index for 2008–2018 source: developed by the authors on the basis of (institute for economics & peace (2014–2018) global peace index) table 1 dynamics of the global peace index rating estimation for 2014–2018 criteria 2014 (162 countries) 2015 (162 countries) 2016 (163 countries) 2017 (163 countries) 2018 (163 countries) r at in g po si tio n e st im at io n r at in g po si tio n e st im at io n r at in g po si tio n e st im at io n r at in g po si tio n e st im at io n r at in g po si tio n e st im at io n 1. level of social security 98 2,529 145 3,190 150 3,384 148 3,340 150 3,328 2. dimensions of internal and international conflicts 157 3,200 151 2,830 156 3,272 156 3,218 159 3,494 3. level of militarization 124 1,986 126 1,670 158 2,810 152 2,534 140 2,272 total index value 141 2,546 150 2,845 156 3,287 154 3,184 152 3,113 source: developed by the authors on the basis of (institute for economics & peace (2014–2018) global peace index) baltic journal of economic studies 21 vol. 5, no. 2, 2019 of economic security of enterprises that can neutralize such a negative impact and provide an adequate level of investment security in line with today’s realities. as stated in (rudnichenko ye. m., 2018), the decisionmaking takes place in accordance with the actual and potential risks and threats of the enterprise’s activity (observance of the safety criterion), the profitable activity of the enterprise taking into account the negative influence of environments is being ensured (observance of the profitability criterion) and finding the optimal correlation between the security state and the activity profit is being implemented (balance) when determining the managerial influence within such management object as enterprise economic security. 4. forming the transformation program of the enterprise economic security system it is typically that institutional changes in ukraine take place with difficulties and hoping to solve the investors’ problems only through the legislative changes is quite difficult. therefore, at the level of each particular enterprise, the transformation program of the economic security system should be formed taking into account the actual needs for ensuring the investment activity economic security. in order to do this, it is necessary to determine general preconditions for the formation of such a program emphasizing on economic security and investment activity (figure 4), which form the general system of economic security of investment activity. commenting on figure 3, it should be emphasized that the normative activity field of business entities in ukraine is rather developed, but the legislation observance by all market players and the possibility of protecting their rights in court is a cause for criticism by foreign investors for several years. regarding the strategic component, it should be noted that at the level of individual enterprises, strategic aspects are considered and a certain investment strategy is formed, although not for the long term. and strategic priorities are mainly declarative at the institutional level. the investment sources definition and their protection are a priority task of management at the macro and micro level since the risk of invested capital loss is restrained by most foreign investors, while domestic ones try to protect it in different ways, despite the legality of such operations. personnel and material-technical support and their protection as objects of economic security involve a complex of actions directly on a concrete enterprise, taking into account its specifics and development features. and the profit distribution affects the investment sources formation and depends on the enterprise owners’ policy. regarding the status of the enterprise economic security system (eess) and the subordination within the enterprise, it is necessary to note the significant differences in the efficiency and the accuracy of the management decisions made in the enterprise economic security system with the supersystem status and the status of the ordinary unit. taking into account the general features of the economic security formation in the field of investment management mentioned above, it is necessary to develop a program of transformation of the economic security system, taking into account the actual needs of ensuring the economic security of investment activity. such a program should include a certain list of items, namely: 1. identification of changes in the external and internal environment. 2. identification of threats and their distribution by the degree of importance for investment activity. 3. formation of management decisions regarding the transformation of the eess in accordance with actual threats to investment activity. russian federation; 1667 cyprus; 427,7 great britain; 403,9 netherlands; 255 austria; 249,9 italy; 209,9 hungary; 187,6 british virgin islands; 140,2 switzerland; 108,6 turkey; 103,2 usa; 85,2 other countries; 567,6 figure 3. direct foreign investments (share capital) from the world countries in the ukrainian economy by the results of 2016, billion us dollars source: developed by the authors on the basis of (state statistics service of ukraine (2016) baltic journal of economic studies 22 vol. 5, no. 2, 2019 4. determination of the subjects of managerial influence, which is responsible for the transformation of the eess. 5. identification of objects of transformational influence within the system of economic security. 6. instrumental provision of transformational influence. 7. implementation of transformations of the eess in accordance with actual threats to investment activity. 8. evaluating the effectiveness of the eess transformations in the context of protecting its investment activity and defining further actions. commenting on the above program, we note that the initiation of transformation occurs as a result of changes in the external and internal environment of the enterprise activity. at the same time, not all changes will be significant and will require an appropriate response for economic security; therefore, it is necessary to determine the immediate threats to the enterprise as a whole and to its investment activity in particular. after this stage, the significance of threats is determined and appropriate management decisions are made that directly trigger the process of implementing the transformations of the economic security system. an important stage in the transformation program is the identification of responsible persons who will make transformations and identify the range of people who will be directly involved in the processes mentioned above. identification of objects of transformational influence within the system of economic security will be carried out taking into account the specifics of investment activity figure 4. prerequisites of forming a program for the transformation of the enterprise economic security system source: developed by the authors normative support investment activity economic security strategic directions of investment sources of investment personnel support material-technical support profit distribution normative support the strategy of state development and security component in particular protection of investments financing sources personnel component of economic security economic security of logistics determination of the eess status and subordination within the enterprise economic security of investment activities and priority directions of enterprise development, which require adequate support. it also determines a certain set of tools that can be used for transformational influence and forms the necessary regulations for their application. after that, the implementation of the transformation of the eess in accordance with the actual threats to investment activities takes place and their effectiveness is determined. after the transformation, the system of economic security acquires new characteristics and allows mitigating the actual threats with different levels of efficiency. as a result, the management of enterprise determines the following actions for the implementation of transformations and evaluates the prospects for further cyclical functioning of the program under study. 5. conclusions taking into account the current trends of capital movements and the investors’ interest in stable incomes, it is not worthwhile expecting a rapid growth of foreign investment in the ukrainian economy in the near future. the results of empirical studies presented in the work give prove to this statement. according to these results, ukraine is not in the top twenty leading countries in foreign investment and, taking into account the fall in ukraine’s rating among countries according to the global peace listing index over the past five years, it will be very difficult to regain investors’ confidence. in this regard, the main task for ukrainian enterprises is to protect own capital and mitigate the threats and risks associated with significant turbulence of the ukrainian baltic journal of economic studies 23 vol. 5, no. 2, 2019 economy and internal-organizational processes. this requires the improvement of the economic security of such enterprises due to the necessary transformations. transformation of the enterprise economic security system can partly offset the negative impact of the external and internal environment by improving the economic security system and increasing the reaction speed of such a system to actual threats. therefore, the program formation for the transformation of the economic security system taking into account the actual needs of ensuring the economic security of investment activity is one of the obligatory elements of the strategic development of investment activity of any enterprise. such a program includes eight elements, starting from the identification of changes in the external and internal environment and ending with the evaluation of the effectiveness of transformations. considering the insufficient number of scientific and methodological approaches to the instrumental support of transformation processes and the direct improvement of the enterprise economic security system, it is necessary to carry out further research on this issue, defining effective tools for the implementation of the proposals outlined in the article. references: vasyltsiv, t. h. (2008). ekonomichna bezpeka pidpryiemnytstva ukrainy: stratehiia ta mekhanizmy zmitsnennia [economic security of ukrainian entrepreneurship: strategy and mechanisms for enhancement]. lviv: aral, 384 p. (in ukrainian) kyrylenko, v. i. (2005). investytsiina skladova ekonomichnoi bezpeky [investment component of economic security]. kyiv: kneu, 232 p. (in ukrainian) stadnyk, v. v., rudinchenko, ye. m., tomal, t. s., nepogodina, n. i. (2008). innovatsiino-investytsiini stratehii v upravlinnia rynkovoiu vartistiu pidpryiemstva [innovative-investment strategies in managing the market value of enterprises]. khmelnytsky: triada, 234 p. (in ukrainian) united nations (2017). world investment report 2018. investment and new industrial policies, geneva: printed at united nations. retrieved from: http://unctad.org/en/publicationslibrary/wir2018_en.pdf state statistics service of ukraine (2016). priami investytsii (aktsionernyi kapital) iz krain svitu v ekonomitsi ukrainy u 2016 rotsi [direct investments (share capital) from the world countries in the economy of ukraine in 2016]. retrieved from: http://www.ukrstat.gov.ua/operativ/operativ2016/zd/ivu/ivu_u/ivu0416.html (in ukrainian) rudnichenko, ye. m., havlovska, n. i., yadukha, s. y. (2018). implementation of managerial innovations in the sys-tem of providing economic security for subjects of foreign economic activity. scientific bulletin of polissia, 1(13), 88–94. retrieved from: http://nvp.stu.cn.ua/uk/component/k2/item/950-rudnichenko-ye-m-havlovskan-i-yadukha-s-y-implementation-of-managerial-innovations-in-the-system-of-providing-economic-security-forsubjects-of-foreign-economic-activity.html furubotn, e., richter, r . (1998). institutions and economic theory. the contribution of the new institutional economics. ann arbor, michigan: the university of michigan press, 672 p. hamilton, d. (1986). technology and institutions are neither. journal of economic issues, 20(2), 525–532. williamson, o. e. (1985). reflection on the new institutional economics. journal of theoretical and institutional economics, 141(1), 187–195. voynarenko, m. p., dzhedzhula, v. v., yepifanova, i. yu. (2016). modeliuvannia protsesu pryiniattia rishennia shchodo dzherel finansuvannia innovatsiinoi diialnosti [modelling the process of making decisions on sources of financing of innovation activity]. economic annals-ххi, 160(7–8), 126–128. retrieved from: http://soskin.info/ userfiles/file/economic-annals-pdf/doi/ea-v160-25.pdf (in ukrainian) institute for economics & peace (2018). global peace index: measuring peace in a complex world. retrieved from: http://visionofhumanity.org/ baltic journal of economic studies 233 vol. 4, no. 4, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 national academy of internal affairs, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-233-237 financial control as a means of countering economic corruption in ukraine oksana kuzmenko1, oleksii drozd2, viktoriia chorna3 abstract. the aim of the article is to study the theoretical and legal principles of organization and implementation of financial control as a means of countering economic corruption in ukraine. the subject of the study is financial control as a means of countering economic corruption in ukraine. methodology. the research is based on the use of general scientific and special scientific methods and techniques of scientific knowledge. the historical and legal method enabled to determine the preconditions for the origin of corruption as a negative social phenomenon. the comparative and legal method was used to compare doctrinal approaches to the differentiation of types of financial control. the system-structural method contributed to the perception and identification of the most negative impacts of corruption on the country’s economy. the methods of grouping and classification were the basis for the author’s original approach to the distinction between the types of the shadow economy, such as the informal economy, hidden economy, and criminal economy. the technical legal method enabled to investigate corruption in ukraine, to identify its shortcomings, gaps, contradictions, and miscalculations, as well as to develop recommendations aimed at their elimination. the results of the study revealed that the ineffectiveness of state financial control in ukraine contributes to the blossoming of corruption in ukraine, due to the lack of legal regulation of its implementation and coordination in the activities of various controlling bodies, the weakness of the legal and methodological basis of their activities. they define law-making, law-executing, and law-enforcement activities, coordinate the functioning of financial and legal regulation. practical implications. in the research, first, the key aspects of the genesis of financial control as a means of countering economic corruption in ukraine are outlined; second, scientific approaches to their classification in the special literature are analysed and compared; third, the author’s original differentiation is substantiated. relevance/originality. the author’s original approach to the differentiation of financial control as a means of countering economic corruption in ukraine is the basis for developing the most promising directions for the improvement of domestic legislation in this area. key words: corruption, public administration, financing, shadow economy, financial control. jel classification: p44, h83, o16 1. introduction corruption is a phenomenon that affects the national security of any country. it depends on the effectiveness of public administration. citizens and businesses are the most vulnerable to this phenomenon. the modern business is the flowering of oligarchic clans working in cooperation with state officials of the highest level. therefore, the current economy of ukraine is inefficient and corrupt, state enterprises continue to spend the budget to enrich their controlling stakes. regulatory authorities decide on pricing according to the needs of dominant business interests. the land reform is blocked to provide benefits to agricultural magnates. even the military budget is under the pressure via corruption procurement methods. banking reform is accompanied by expropriation of public funds by private owners of banks. small and medium-sized businesses suffer from internal corruption, which is based on abuse of authority, dishonest actions in exchange for money or personal benefits of company employees. unfortunately, it is extremely widespread in the ukrainian business environment causing these companies significant financial and reputational losses. this phenomenon affects the business climate in ukraine not less than corruption. 2. literature review in their works, a number of authors interrogated certain aspects of this problem, such as t. vasilevska, v. galunko, o. yeshchuk, o. onyshchuk, s. rivchachenko, o. tokarostapenko. in general, the anti-corruption was studied by v. alexandrov, v. kolpakov, m. melnyk, r . melnyk, baltic journal of economic studies 234 vol. 4, no. 4, 2018 i. nurullaiev, s. rogulskyi, s. stetsenko, v. tilchyk, o. tkachenko, r . tuchak, i. yatskiv, and others. therefore, the study of the doctrinal approaches to the concept and content of financial control as a means of countering economic corruption in ukraine, which is the aim of this article, becomes relevant. for its successful achievement, the following tasks should be solved: first, to outline the key problems of the development of corruption in ukraine; second, to analyse the perspectives in the special literature regarding the types of financial control; third, to propose the author’s original approach to the definition of financial control as a means of countering economic corruption in ukraine. 3. the main material academician of the national academy of sciences v.m. heiets argues that the causes of the collapse of the ukrainian economy are the criminalization of relations between state institutions and business, the most profitable sectors of the ukrainian economy, distributed between the clans, and the “separation” of ukraine from the world economy (heiets, 2009). therefore, the diversified ukrainian corruption in public administration deprives the individual anticorruption countering of its expediency and leads to an “unfavourable” equilibrium characterized by a constant level of corruption, low total investments, and weak economic growth of the state. the most negative impacts of corruption on the country’s economy include: 1. expanding the shadow economy. this leads to a reduction in tax revenues to the budget. as a result, the state loses financial levers of economic management; social problems are exacerbated due to budget defaults. 2. competitive mechanisms of the market are violated because often the winner is not the one who is competitive but the one who has been illegally able to gain advantages. this leads to a decrease in market efficiency and brings discredit on the ideas of market competition. 3. the emergence of effective private owners decelerates, primarily due to violations during privatization, as well as artificial bankruptcies, usually associated with bribery of officials. 4. budget funds are used inefficiently, in particular, when distributing government orders and benefits. this complicates further budget problems of the country. 5. prices increase due to “corruption costs”. as a result, consumers suffer. 6. agents show disbelief in the ability of the authorities to establish, control, and adhere to honest rules of the market game. 7. the investment climate degrades leading to unsolved problems of overcoming the decline of production, renovation of fixed assets. 8. corruption is expanding in non-governmental organizations (firms, enterprises, and public organizations). this leads to a decrease in the efficiency of their work, and accordingly, in the effectiveness of the economy of the country as a whole (blank, batrakova, 2016). corruption leads to the emergence of a shadow economy, based on the economic activity of subjects seeking to conceal their wealth, avoid paying taxes, and hide the movement of their assets. the main causes of a shadow economy are the imperfection of ukrainian legislation contributing to tax pressure, confusion in tax administration, the lack or absence of assistance in obtaining tax benefits, lobbying interests of business groups close to the authorities. the shadow economy is manifested through the informal economy, hidden economy, and criminal economy. these types of shadow economy should be considered in detail. informal economy is a diverse activity of subjects that is currently not controlled by the state, is not subject to taxes due to its mass scale, growth of information technologies, lack of citizen awareness, aimed at using the services provided at home (tutoring, construction works, sale of products from household plots in the spontaneous markets). the hidden economy is a legitimate economic activity, which, along with general-authorized actions, uses various manipulations to generate additional profits due to imperfect legislation. the criminal economy is various illegal economic activities, not allowed by the state. it is characterized by illegal income and non-payment of taxes. according to the world bank’s doing business data, in case of a positive countering corruption and the withdrawal of the ukrainian economy from the shadow, ukraine will receive 6 billion hryvnias, which is about 6% of ukraine’s gdp, the deficit of the whole system of finances is about 8-9% by the results of this year (patrikieieva). nowadays, the main corrupt schemes that lead to economic corruption occur: in public procurement; in using budget funds (during the distribution of state orders and privileges); in the implementation of international and state programs; in providing administrative services. therefore, the spread of corruption and its impact on market relations in the country lead to a violation of the competitive market, because often the winner is not the one who is competitive but the one who is illegally able to benefit. this causes a reduction in the market efficiency and discredits the ideas of market competition as a whole; besides in public money, the state suffers significant financial losses because of violations of competitive principles, such as overestimation of baltic journal of economic studies 235 vol. 4, no. 4, 2018 the value of government contracts and poor supply of contracts concluded as a result of corruption. indirectly, the state loses over the lack of interest from representatives of international business to enter the state procurement market considering the current situation in ukraine. therefore, competition is reducing, moreover, market prices are being overestimated, new advanced technologies are not applied, and ukraine’s integration into the european economy is decelerating. therefore, according to the anti-corruption centre, in one year, ukraine spends about 300 billion uah per year on public procurements; more than two billion hryvnias were returned to the state budget by preventing certain corruption schemes in 2016 (it zadlia reform). another corruption manifestation is an inefficient use of budget funds; in particular, in the distribution of state orders and benefits that further complicates budget problems of the country. in addition, when government orders are executed by organizations “recommended” by an official, who has received remuneration from such an organization, poor execution of such orders is of a high probability, which is followed by “reimbursement” at the expense of public funds. moreover, if one body is empowered to provide administrative services combined with control and supervisory functions, corruption risks arise because of the uncertainty of the assigned authorities and appointment of the appropriate body, reducing the objectivity of examination and revision of administrative cases. obviously, the managerial (service) type of activity and the inspection type of activity use different methods and forms. moreover, in case of a violation of the rules for issuing a certain permit (license), the body that inspects the activities of a private person, first, will not be interested in identifying own shortcomings, and second, it finds itself outside of the external control, which also gives rise to corrupt practices. nowadays in ukraine, there are more than 70 supervisory bodies. at the same time, the total funds actually charged to the budget in 2017 were at 9% of the total amount of imposed financial sanctions. it should be noted that one visit of a representative of the controlling body to the company costs the state 11.6 thousand uah ($350), and the average amount of proceeds from fines per one inspection is 180 uah ($6). shadow revenues lead to an unfair distribution of national profits, as corrupt officials accumulating for themselves a significant part of the financial resources of the state direct them to finance the import of luxury goods, as well as to the currency market increasing the pressure on the country’s balance of payments. in addition, for the sake of their security and secrecy, corruption profits are usually offshored depriving the domestic economy of financial resources necessary to socio-economic growth (bereza). the analysis of the abovementioned aspects of corrupt practices reveals that their main negative impact on the financial system of the country comes from reducing tax revenues and losses of public funds in the form of losses, or in the form of excessive expenditures for the state. the state tries to counter economic corruption mainly by the introduction of financial control over persons performing functions of the state and local self-government bodies. financial control is aimed at identifying the illegal enrichment of the indicated subjects, disclosing the inconsistency of the dynamics of the actual declaration of property (movable and immovable) with official incomes, which should be the basis for bringing a person to criminal liability (according to transparency international, last year 115 ukrainian officials declared 375 offshore companies in 41 countries). the illegal enrichment of officials, associated with their position, the use of official functions for obtaining various preferences and abundance for themselves, relatives or third parties, is especially dangerous. it should be noted that these persons could not act outside an official economy since the latter is a prerequisite for the establishment of corruption relations, because to abuse powers, a person should occupy a certain position in governmental bodies and be empowered. in addition, the official economic subsystem is a cover for the shadow economy, because for enrichment corruptors use their powers and evade legal liability. persons, authorized to perform state or local government functions, are obliged to file a declaration by filling in on the official website of the national agency for prevention of corruption. the law of ukraine “on prevention of corruption” provides for to examine declarations in detail within ninety days from the date of submission of a declaration, including clarifying the validity of the declared information, the accuracy of the assessment of the declared assets, testing for a conflict of interest and signs of illegal enrichment. for example, according to the ministry of justice of ukraine, authorized departments (persons) of territorial subdivisions and organizations, institutions and enterprises (within its supervision) submitted declarations in the number of 45,517, of which: 14668 by public officials (of which 5824 persons discharged or retired in 2017), 20773 by rank and file and command staff of the state criminal-executive service, 4252 by officials of legal entities of public law. therefore, the requirements to submit electronic declarations were fully implemented by 41798 persons, violated by 463 persons, and not executed by 3256 persons. to be precise, for the failure to submit declarations, 3719 people should be brought to administrative responsibility, in fact, in 2017, 4436 people were brought to administrative responsibility for all corruption-related offenses. therefore, the inevitability of punishment for corrupt practices is not observed and the principle of punishment for the committed offences is not followed (zahalni pokaznyky stanu zdiysnennia sudochynstva v ukraini za 2017 rik). baltic journal of economic studies 236 vol. 4, no. 4, 2018 the legislation provides for that the declarations of officials in responsible positions, subjects occupying positions of high corruption risks, the list of which is approved by the national agency, are subject to obligatory complete examination. declarations filed by other entities of the declaration are subject to obligatory complete examination in case of inconsistencies in them detected by logical and arithmetic control. a novelty of the legislation is monitoring the way of life of the subjects of the declaration. the reporting subjects’ lifestyle monitoring is carried out selectively by the national agency to conform their standard of living to the property and income obtained by them and their family members according to the declaration of the person authorized to perform the functions of the state or local self-government. such a monitoring is based on information from individuals and legal entities, as well as from the media and other open sources of information, which contain evidence on the inconsistency of living standards of the reporting subjects with their assets and income in the declaration. in case of revealing signs of corruption offense or corruption-related offense based on monitoring, the national agency informs bodies specifically authorized for countering corruption. the latest legislative innovation on financial control of officials obliges a subject of the declaration to notify the national agency for the prevention of corruption on any significant change in his/her property status, such as receipt of income, acquisition of property exceeding 50 minimum wages established on january 1 of the corresponding year. within ten days from the date of receipt of income or the acquisition of property, the subject of the declaration must notify the national agency in writing. the information shall be entered into the unified state register of declarations of persons authorized to perform functions of the state or local self-government and shall be made public on the official website of the national agency. nowadays, to ensure the timeliness and validity of declarations, the legal responsibility is established for the following practices: 1) untimely submission of the declaration without valid reasons; 2) failure to notify or untimely notification of the opening of a currency account in a non-resident bank; 3) failure to notify or untimely notification of substantial changes in the property status; 4) submission of deliberately false information in the declaration, if such information differs from the reliable in total from 100 to 250 living wage for able-bodied persons; 5) submission of deliberately false information in the declaration if such information differs from reliable in total more than 250 living wage for able-bodied persons; 6) deliberate failure to submit a declaration (article 366-1 of the criminal code of ukraine). it should be noted that characterization of failure to notif y or untimely notification of substantial changes in the property status by persons authorized to perform functions of the state or local selfgovernment has gaps concerning the unclear definition of these concepts. therefore, failure to submit a declaration differs from the late submission only by the fact that at the time of the proceedings the person has not yet filed such a declaration. regimes of liability (criminal and administrative) for failure to submit and for late submission of the declaration are socially conditioned because a deliberate failure to submit a declaration means that the person actually refuses to submit such a declaration. in this case, financial control based on a declaration is impossible, which requires additional and significant efforts of the controlling bodies to establish the actual property status of the subject of the declaration. instead, the late submission of the declaration does not mean the loss of the opportunity to control, however, due to the delay in submitting the declaration, such a control cannot be carried out in a timely manner, which violates its order and enables concealment of assets by an official. the above also demonstrates the difference in the danger of the offences under consideration (mikhailichenko, 2017). in addition, ukrainian legislation imposes an obligation to conduct financial monitoring of financial transactions equal to or exceeding 150 thousand hryvnias in total. however, such a link is not appropriate since declaring expenditures is meant to identify those employees whose expenditures do not correspond to their income. therefore, the wage-linked principle would be advisable. 4. conclusion therefore, to improve the ukrainian legislation and make it closer to world practice, appropriate changes should be made; and accordingly, the declaration of false information should be criminalized to tighten crime prevention in official and professional activities related to the public services; moreover, only the introduction of the most repressive influence on the actions of the relevant nature may turn filling and submission of assets declarations by public officials into the real mechanism for combating corruption. therefore, the ineffectiveness of state financial control in ukraine as a whole is caused by the lack of legal regulation of its implementation and coordination in the activities of various controlling bodies, the weakness of the legal and methodological basis of their activities. that is why nowadays, ukraine as a legal state should create a legal framework for financial control involving society. baltic journal of economic studies 237 vol. 4, no. 4, 2018 references: heiets, v. (2009). makroekonomichna otsinka hroshovo-kredytnoi i valyutno-kursovoi polityky ukrainy do i pid chas finansovoi kryzy [macroeconomic assessment of monetary and monetary and exchange rate policy of ukraine before and during the financial crisis]. ekonomika ukrainy [ukraine economy], 2, 5-24. (in ukrainian) blank, m. e., batrakova, t. i. (2016). vplyv koruptsii na ekonomiku ukrainy [the influence of corruption on the economy of ukraine]. naukovyi visnyk uzhhorodskoho natsionalnoho universytetu [scientific bulletin of uzhgorod national university], 7, 25-28. (in ukrainian) patrikieieva, n. ukraina vyhrala vid borotby z koruptsiieiu 6 miliardiv dolariv – analityky [ukraine has won $ 6 billion out of countering corruption – analysts]. retrieved from: https://www.radiosvoboda.org/a/29359933. html (in ukrainian) it zadlia reform [it for reforms]. retrieved from: http://it4reform.org/2015/02/23/top-3/ bereza, o. d. koruptsiia u sferi derzhavnoho upravlinnia yak strymuiuchyi faktor sotsialno-ekonomichnykh reform [corruption in public administration as a restraining factor in socio-economic reforms]. retrieved from: http://academy.gov.ua/ej/ej19/pdf/22.pdf (in ukrainian) zahalni pokaznyky stanu zdiysnennia sudochynstva v ukraini za 2017 rik [general indicators of justice in ukraine in 2017]. statistical collection. retrieved from: http://www.viaduk.net/clients/vsu/vsu.nsf/(documents)/ f137f88c3d532965c22581d4003a6158 (in ukrainian) mikhailichenko, d. h. (2017). vzaiemodiia elementiv deliktnoho zakonodavstva dlia zabezpechennia antykoruptsiinoho finansovoho kontroliu [interaction of elements of tort law to provide anti-corruption financial control]. sudova ta slidcha praktyka v ukraini [judicial and investigative practice in ukraine], 4, 24-37. (in ukrainian) baltic journal of economic studies 301 vol. 4, no. 2, 2018 corresponding author: 1 department of security management, law enforcement and anti-corruption activities, educational and scientific institute of law, interregional academy of personnel management. e-mail: kam_2000@ukr.net 2 department of history of state and law, educational and scientific institute of law and psychology of national university "lviv polytechnic". e-mail: sbr@gmail.com 3 department of civil law disciplines, educational and scientific humanitarian institute of v.i. vernadskyi’s taurian national university. e-mail: ilchenkoi@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-2-301-308 comparative analysis of foreign and national experience of ukraine in administration of value added tax anatolii kislyi1 educational and scientific institute of law, interregional academy of personnel management, ukraine bohdan stetsiuk2 educational and scientific institute of law and psychology of national university "lviv polytechnic", ukraine inna kovalenko3 educational and scientific humanitarian institute of v.i. vernadskyi’s taurian national university, ukraine abstract. the aim of the article is to carry out a comparative analysis of foreign and national experience in the administration of value added tax; to outline the content of this tax, to define its role in the tax systems of foreign countries, as well as clarify the features of charging value added tax in individual foreign countries. the subject of the study is foreign and national experience of ukraine in the administration of value added tax. methodology. the methodological basis of this research is a comparison of the features of the administration of value added tax in ukraine and foreign countries. based on the aspects of the administration of vat in canada, belgium, france, great britain, and others, the advantages and disadvantages of different conditions for charging vat are highlighted. on the basis of the comparative legal analysis, the possibilities of the application and implementation of foreign experience in the national vat administration are determined. the results of the study revealed that, in the activities of tax authorities, international experience of the administration of value added tax implies the consolidation of rigorous methods of influencing tax entities through applying appropriate penalties. however, this aspect is combined with a high level of legal awareness and law-abidingness of tax entities. in addition, foreign experience involves the active use of information technology in the administration of vat, which facilitates its charging and increases its efficiency. practical implications. positive international experience of the administration of vat confirms that improvement of the quality of this mechanism requires providing centralization of the tax administration in the state; intensifying the implementation of the latest technologies in this process; increasing citizens' legal consciousness in taxation, and so force. relevance/originality. a comparative analysis of the features of the administration of value added tax is the basis for the development of national experience in this field. key words: value added tax, tax administration, foreign experience. jel classification: e62, h71, f38 1. introduction without doubt, independence of ukraine is a positive factor for the development of democratic tendencies of our country. however, independence in all internal and external relations has necessitated the development of political and economic sectors of the country. in this context, the issue of improving the tax system was particularly acute, since the old model was not acceptable due to, first, the change of the economic vector from the planned-command to market direction, and, second, the active introduction of international standards in taxation. at the same time, the main task of the tax system evolution is to ensure its stability, which, in turn, should lead to a number of positive factors: baltic journal of economic studies 302 vol. 4, no. 2, 2018 increase of financial revenues to the budget; improving the tax collection mechanism, etc. it should be noted that the development of the tax system is a complex aspect, which involves solving a number of problems. in particular, in recent years, the relevance of the administration of value added tax (hereinafter referred to as vat) has increased, since the latter is important for budget forming. therefore, the theoretical development of this problem requires an analysis of foreign experience in the administration of vat, for example, according to r .s. melnyk, foreign experience contributes to expanding perceptions of legal phenomena under the study; helps to look at this or that issue from another perspective; compare own achievements with the achievements of foreign colleagues; do not waste time solving the problems that have already found solutions on the pages of foreign publications (melnyk, 2010). 2. literature review the issue of the administration of value added tax has always been under thorough consideration of many foreign and domestic scientists. in particular, this issue was the subject of research of v.l.  andrushchenko, yu.v. bondar, o.v. budko, yu.a. veryha, o.s. husakov, m.ya.  demianenko, ya.v.  lytvynenko, v.m.  melnyk, s. blancart, e. dollan, j. stiglitz and others. meanwhile, the comparison of foreign and national experience in the administration of value added tax has not been studied exhaustively that underlines the relevance of this study. the aim of the article is to conduct a comparative analysis of foreign and national experience in vat administration and consider possibilities for its implementation in ukraine. 3. main material it is worthy to note that the value added tax (hereinafter referred to as vat) is a rather complicated and interesting economic and legal category. the vat system was first proposed in germany in 1919. wilhelm von siemens, who called it " veredelte umsatzsteuer " (translated as ‘ennobled turnover tax’). at that time, this tax was called ‘ennobled on turnover’ or ‘ennobled turnover tax’. later, namely in 1921, thomas s. adams proposed to introduce vat in the form of a business tax, as a substitute for the us corporate income tax. initially, these proposals were ineffective, and the introduction of this tax was of no need. however, from time to time, tax authorities from different countries referred to the ideas of wilhelm von siemens and thomas s. adams. the need to eliminate the shortcomings of the turnover tax and the growth of fiscal needs prompted the search for alternative types of indirect taxation. the modern scheme of this tax was developed and described by french economist m. lauré in 1954 (azarov, et al., 2004; korolchuk, 2010). these days vat is widely used in many countries, including ukraine. of course, since the middle of the twentieth century, the essence of this tax has changed. in this study, it is advisable to outline the concept of vat. thus, according to article 14 of the current tax code of ukraine (hereinafter the tcu), the value added tax is an indirect tax that is calculated and paid in accordance with the rules of the current legislation (podatkovyi kodeks ukrainy, 2010). obviously, the legislative interpretation of vat does not reveal the content and purpose of the tax, therefore, quite often, researchers introduce their own definitions of this category. in particular, according to economic science, the value added tax is a type of tax that is charged not on the total value of the goods, but on its increase at each subsequent stage in the overall chain of sales and production. ultimately, the difference between the proceeds from the sale of goods and services and the amount of raw material, semi-finished products and services received from suppliers is subject to the tax (ambartsumov, sterlykov, 1993; vaschenko, 2003). according to g.v. bekh and s.g. pepeliaieva, vat is a multi-stage, indirect tax, which serves a part of the newly created value, included in the price of the sale of goods (works, services) and paid by the consumer of these goods (works, services) to the state budget at each stage of production of goods, performance of works, provision of services. its charging at each stage of the turnover gives vat universality and inevitability (kucheriavenko, 2001; bekh, 2001). t.m. semenenko emphasizes that the value added tax is an indirect tax, which is part of the newly created value of goods (works, services) that is formed at each stage of production, turnover and is included in the price of the goods and paid by the end user. vat is a tax on domestic consumption of products, in fact, an increase in the price of goods (works, services), which are consumed in the customs territory of ukraine (semenko, 2011). correspondingly, o.i. okseniuk defines vat as a consumption tax that is charged on the value added, created at each stage of production, paid by the end user and funded to the budget by the seller, except in cases of transactions with the participation of non-residents (okseniuk, 2015; podolianchuk, 2017). in the same way, a.g. ziunkin and l.k. voronova define the value added tax as an indirect tax on goods and services, the main modern form of universal excise tax, which is established for the newly created value by the payer (ziunkin, 2003; voronova, 2006). consequently, the value added tax is an indirect, commission-determined tax that is calculated at each stage of production and is dependent on the type of enterprise, the tax system used on it, which payment entity is the final consumer. baltic journal of economic studies 303 vol. 4, no. 2, 2018 this tax is known in many foreign countries, and, consequently, the mechanisms of its administration vary. nevertheless, before determining the foreign experience of the vat administration, it is necessary to answer the question of what the administration of taxes is in general. the etymological basis of the concept is the term "to administer," which according to the provisions of interpretative dictionaries means: 1) to manage an institution, organization, enterprise; 2) to supervise in bureaucratic manner, using orders and commands instead of a specific guiding (busel, 2005; bilodid, 1970). meanwhile, in the context of tax administration, this concept is interpreted more broadly than purely management or supervision, according to a large number of scientists. a.o. selivanov claims that tax administration is legal relations that are drawn up in the implementation of measures for repayment of tax debt by the authorized state bodies and provide for the application of methods of compelling and compulsory nature to taxpayers (selivanov, 2002; lastovetskyi, 2004). v.b. marchenko considers the administration of taxes as an administrative process in the field of tax charging, that is, as a procedure established by law for the consideration and resolution of individual (administrative) cases that arise in the field of tax charging by specifically authorized bodies (tax administrators) and, in certain cases, by competent courts (marchenko, 2009). professor a.z. dadashev considers tax administration exclusively from the perspective of tax control (dadashev, 2002). in turn, i.p. vakulich considers the form of tax revenues, specificities of taxation in various sectors of the economy and spheres of activity, the write-off and restructuring of tax debt, reduction of the tax base, application of the system of benefits, and so on to be tax administration (vakulych, 2003). some researchers argue that tax administration is manifested through established by law rights and obligations of taxpayers, authorities of the state tax service and other supervisory bodies (nikitina, 2002; pryshva, 2004). however, evidently, the most complete and correct definition of the concept of tax administration is stated in the provisions of the tax code of ukraine. in accordance with article 14 of the tcu, the administration of taxes, duties, customs duties, a single compulsory state social insurance contribution and other payments in accordance with the legislation, which is monitored by the controlling bodies is a set of decisions and procedures of the controlling bodies and actions of their officials, which determine the institutional structure of tax and customs relations, organize the identification, registration of taxpayers and payers of the single contribution and objects of taxation, provide service for taxpayers, organize and control the payment of taxes, fees, payments in accordance with the procedure established by law (podatkovyi kodeks ukrainy, 2010). therefore, based on the legally established definition, the tax administration is an integral legal mechanism, that is, a set of relevant procedures, decisions and regulations through which the taxation is managed in ukraine. consequently, the administration of vat is the branch of the classical administration mechanism. however, s.m. gritsa states that so far the administration of the value added tax has not been considered enough in the scientific literature. some authors consider accounting of taxpayers, defining the object of taxation and vat rates, tax exemptions, the procedure for calculating and paying the vat, accounting for calculations of the vat with the budget, and so on to be the main functions and procedures for administration of the vat (value added tax, 2004; hretsa, 2014). therefore, in this research, consolidating the above-mentioned information, the concept of the value added tax administration is synthesized, according to which it is a mechanism of the state regulation of a vat levy, as well as all related legal relations. considering foreign experience, nowadays the vat is very actively used and developed in many european countries. in particular, e.s. khoroshaiev argues that the value added tax is the perfect form of universal excise duties, which has become an integral part of modern european taxation. its presence in the national fiscal system is one of the conditions for membership in the european union (khoroshaiev, 2008). confirmation of this conclusion can be seen on the example of many countries. for example, the value added tax is a key element of the french budget system. objects of taxation are the price of goods and services. the main positive feature of the vat is neutrality in relation to enterprises, as well as the reality and stability of budget revenues. this creates favorable conditions for the export of products. to a certain extent, the consumption of luxury items is discouraged. in france, the vat comes fully to the central budget (kharchenko, 2017). it should be noted that the efficiency of this tax administration is explained by several aspects. first, in france, the vat is charged at several rates. the key rate is of 18.6%, and increased of 22%. at the same time, the law provides for the existence of a reduced rate of 5.5%, which is applied to most household goods and agricultural products, books and medicines. the same reduced rate is applied to certain types of services: tourist and hotel services, freight and passenger transportation, entertainment events, lunches for employees of enterprises (kniazev, chernik, 1997). in addition, france has a euro-continental model of taxation that is characterized by a high share of social security contributions, as well as a significant share of baltic journal of economic studies 304 vol. 4, no. 2, 2018 indirect taxes, consequently, indirect taxes account for about 60% of the tax revenues of the general budget of france. in this context, the vat is applied to all operations of production and trade, and as a result, all business transactions carried out by both commercial organizations and private individuals are subject to tax (ovcharenko, rieznik, n.d.). the key authority in the system of the value added tax administration and other mandatory payments provided for by french legislation is the ministry of economy, finance and industry. in the structure of this executive body there is a special department, the general directorate of taxes, whose authorities include a wide range of powers, in particular: implementation of tax control, examination of taxation issues, and so forth (tax liability in france, n.d.). it should also be noted that france is one of the countries with a special regime for the payment of the value added tax in agriculture, which, in turn, is implemented in two standard forms. the latter differ from each other by the payment regime, accounting and tax composition of entities. for example, there is a regime of the tax on total turnover (the farmer keeps a journal of chronological accounting of sales and the vat, and also stores the invoices received during purchases for the final calculation of the year) and the regime with the option for entrepreneurs engaged in intra-industry trade (for example, trade in cattle) (bezkrovnyi, 2012). the experience of the vat administration in belgium is interesting to analyze. in this state, the value added tax is levied on a consumer in a consistent manner during the conclusion of each transaction in the production and distribution process, in particular in the supply of goods and services in of belgium and the purchase of goods outside the eu. each vat payer includes the vat in the price of the product when selling. finally, the tax is paid by the end user, who cannot deduct the vat paid on purchase. at the legislative level, several types of tax rates have been introduced, which vary according to the type of entrepreneurial activity. in addition, taxpayers may submit vat returns on a quarterly basis, depending on whether the threshold for deliveries exceeds 1,000,000  eur (not including the vat) annually (kmit, shuhailo, 2017). taxpayers, whose business is in areas such as mobile phones, computers, and vehicles, may only use this option under certain conditions. taxpayers, who file a tax return on a quarterly basis, must pay a tax in the first and second months of the quarter. taxpayers, who submit a monthly declaration must pay taxes at the end of december for december. all payments must be made via bank transfer. notably, taxpayers have the right to choose independently their tax reporting form. therefore, for today they can file a tax or electronic declaration of the vat via a special information system "intervat" (pokyntelytsia, 2009; kmit, shuhailo, 2017). in addition, there are other specificities of belgian value added tax administration mechanism, which is stated in the legal literature.  l.v.  andrushchenko, z.s.  varnalii, i.a.  prokopenko, t.v.  tuchak note that the key characteristics of the vat administration in this country are: 1) no mandatory pre-registration for submission of vat tax returns and additional information on intraeuropean transactions; 2) in order to ensure the confidentiality of the declarations filed through the internet, the relevant information is encrypted using electronic signatures. therefore, vat payers must obtain appropriate certificates from the certification body or receive an electronic id card reader; 3) the essential advantage of belgian system is that the necessary data for vat authorities regarding vat obligations can be either manually made in the required forms or downloaded as a separate file from the accounting software, etc. (andrushchenko et al., 2012; drahalchuk, 2017). in the united kingdom, where both direct and indirect taxation are equally developed, a leading role in the system of the latter plays the value added tax. due to it, in the country, up to 17% of consolidated budget revenues are formed. there are three tax rates: 0%, 5% and 17.5%, some of the objects are exempt from taxation. the controlling and monitoring system for vat payers’ activity is based on the mechanism of voluntary registration. all payers, who have completed at least one business transaction in excess of 5,500 pounds, are subject to registration. the tax authority assigns a taxpayer a registration number (andrushchenko, 2004; proskura, 2012). the treasury, which is constitutional and has the status of the main ministry, conducts the administration of vat and other taxes in the uk. practical administration is carried out by two structural subdivisions of the treasury: the internal revenue service and hm customs and excise. it should be noted that in the uk, tax authorities carefully monitor transactions of only 15% of taxpayers who provide up to 70% of tax revenues. therefore, the cost of controlling and monitoring of their activities can be lowered and more attention can be paid to those who provide the highest income. at the same time, control over the activities of other payers is based on a risk-oriented system, which involves conducting regular routine inspections according to the standard procedure (popova, 2011; proskura, 2012). in germany, the vat administration mechanism has specificities. in this country, there is a standard vat rate (16%) and a reduced rate (7%), which deals with food products (except drinks), print publications, hotel services, public catering establishments and public transport. there is a well-developed system of local taxation. a key aspect of the german model of administration, not only vat, but all other statutory mandatory payments and fees, is rather high and severe baltic journal of economic studies 305 vol. 4, no. 2, 2018 financial penalties for tax offenses, which, in turn, stimulates the vast majority of taxpayers to pay taxes voluntarily in due time. it is also important to note that there is no single tax administration in germany, and tax collection and tax control functions are assigned to various structural subdivisions of the federal ministry of finance and the ministry of lands (karlin, 2004; proskura, 2012). bulgarian foreign experience in the vat administration is noteworthy. in particular, it is the first country to implement the idea of creating special vat accounts. for such accounts, there is a special regime of use: cash is credited and written off only for vat transactions or payments to other taxpayers (yarosh, n.d.). such an approach significantly reduces the corruption component in charging vat, and increases the budget-forming aspect of this tax. therefore, based on the experience of many european countries where vat is used as one of the key budget supplementing instruments, its administration, regardless of the type of tax system of a particular state, develops constantly towards increasing the efficiency of vat collection, and is open for introduction of innovative technologies. however, the value added tax is known not only in european countries. it is actively used in many other countries, whose experience in administering this tax should also be considered. for example, in japan from april 1, 1989, along with the introduction of a new tax system a new for japan tax, a tax on consumption, was introduced. this tax is levied on all transactions in the sale of goods and services, except cases specified in the legislation. the tax is paid at different stages of production and sales of goods, but only the added value is taxed. that is, in essence, it is a value added tax (azarov, et al., 2004). it should be noted that in japan, vat is calculated using the balance sheet method, an alternative to the commonly used credit method. the balance sheet method is based on the calculation of the value added (wage costs, tax payments, depreciation, planned profit) and the application of a certain tax rate to it (pasichnyk, 2015). it should be emphasized that in japan the mechanism of tax administration and vat in particular differs greatly from its european analogue. this, above all, is due to the peculiarities of the tax system of this country. thus, the japanese tax system is oriented on the specific characteristics of the local population. the country has traditionally highly developed legal consciousness and law-abidingness, and the vast majority of citizens are simply not in a position to violate the law. the strength of this system is not in severity of punishment, but in the existing system of control over payers, which makes it practically impossible to evade the completion of the declaration. of course, there are those who evade taxes. however, according to the law on the state control over tax violations, they can be subject to various sanctions, from fines to criminal prosecutions. japanese tax police works rigidly, consistently and fundamentally, regardless of individuals and positions (world tax experience, n.d.). in addition to a rigid fiscal policy, the key to the effective administration of vat in japan is the high level of centralization of the tax collection. in particular, all state-defined mandatory payments and fees are divided into three groups: direct income taxes, direct taxes on property and direct and indirect consumer taxes, which are subject to vat. in addition, all of them are sent to the state budget, and a single centralized system of tax authorities collect them (world tax experience, n.d.). the value added tax also exists at the federal level in canada, where it has a fiscal value. the peculiarities of its administration are connected, first of all, with the specifics of the tax system of the state. thus, the latter is based on the principle of tax federalism, which implies the presence of significant powers of regional and local authorities in taxation (tkachenko, 2004). the administration of vat and all other taxes in canada is carried out by the canadian customs and revenue agency, which reports to the parliament through the minister for national income. this agency also administers most local taxes, but local authorities make a certain fee for the service. in some provinces, the administration of local taxes is carried out by regional authorities (the ministry of income of a certain region). tax administration fees in canada make up about 1% of tax collections. every year, tax authorities check on-site about 2% of taxpayers. all payers are divided into four categories by risk of committing an offense. most often, payers with the highest levels of risk are checked (proskura, 2012). according to k.p. proskura, the high efficiency of the administration of vat and all other taxes in canada is due to a generally rational and flexible tax policy that organically takes into account the interests of all, the state and territories and taxpayers (proskura, 2012). a large number of specific features has the administration of vat in israel. along with many european countries, in israel, vat plays a key role in indirect taxes. it was introduced in 1976. it should be noted that about 700 tax officials are involved in the collection of this tax. there are about 1,000 taxpayers (mostly commercial enterprises) per one tax official. to control the payment of vat, all payers are categorized as large, medium and small according to the volume of activity. this differentiation enables to focus on those payers who pay large amounts, by the principle of "pareto," 20% of the determined effort gives 80% of the results. this enables effective control over taxpayers at a minimal cost. one of the key features of the vat administration is the requirement for obligatory registration of all taxpayers (global tax experience, n.d.). it should be noted that the presence of the value added tax in almost all countries of the post-soviet area emphasizes the need to consider the mechanism of its administration in these states. one of the most baltic journal of economic studies 306 vol. 4, no. 2, 2018 progressive in this area is the experience of belarus. according to t.v. sydorova and e.v. komliev, vat is one of the two indirect taxes most often paid and one of the taxes most often charged in general. vat is an indirect multi-stage tax, as it is included in the price of the product and ultimately paid by the end user (komlev, sidorova, 2017). the object is the added value, while the entities, in accordance with the tax code of the republic of belarus, are: organizations; individual entrepreneurs; the trustees for the turnover of the sale of goods (works, services), property rights arising in connection with trust management of property; individuals in cases determined by law (the tax code of the republic of belarus, 2009). analyzing the current mechanism of the administration of vat in the republic of belarus, l.n. lykova admits an inherent "aggressive model", in particular, in the tax control. the latter is characterized by a noticeable punitive character, which manifests itself in a range of sanctions for violation of tax laws (lykova, 2015). however, the republic of belarus is among the countries where information technology is being actively introduced into the vat administration mechanism. therefore, today according to article 106-1 of the tax code, a special electronic invoice operates in the administration of vat system. the latter is a mandatory electronic document for all vat payers who have an object of value added tax or an obligation to submit an electronic invoice, and it is the basis for calculating value added tax between the seller and the buyer and deducting amounts of vat. electronic document flow of electronic invoices between sellers and buyers is carried out using the portal of electronic invoices, which is an information resource of the ministry of taxes and duties of the republic of belarus (the tax code of the republic of belarus, 2009). 4. conclusions therefore, the value added tax acts as an effective fiscal instrument in many countries of the world, since it can provide significant revenues to the state budget. that is why, in most countries, the vat administration mechanism improves constantly. in ukraine, nowadays one of the key places in indirect taxation belongs to vat. consequently, it would be advisable to adopt and implement relevant experience in the vat administration in ukraine, in particular: 1) to optimize the size and scope of vat rates according to the standards of european countries, for example, france, great britain, belgium, etc.; 2) to intensify the implementation of innovative technologies in the activities of tax authorities to improve the quality and efficiency of implementation of the mechanism of the administration of vat; 3) to centralize the mechanism of tax administration, as well as strengthen the powers of the controlling bodies of the branch and sanctions for violation of the legislation in the vat collection by the pattern of the republic of belarus and israel; 4) to increase the awareness of the country 's population in taxation by the pattern of japan, explaining the rights and obligations to prevent illegal behavior. therefore, the use of this experience will become a 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(in ukrainian) baltic journal of economic studies 333 vol. 4, no. 3, 2018 corresponding author: 1 department of audit and taxation, central ukrainian national technical university. e-mail: nataliia.shalimova@gmail.com 2 department of audit and taxation, central ukrainian national technical university. e-mail: gm_gm@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-333-342 approaches to the interpretation of the term “historical financial information” as the criterion for the classification of audit, review, and other assurance engagements nataliia shalimova1, iryna androshchuk2 central ukrainian national technical university, ukraine abstract. the criterion “underlying subject matter” and the associated criterion “subject matter information” is an essential element of the assurance engagements and the basis for distinguishing their different types. the purpose of the study is to define the characteristics of “historical financial information” and the forms of its structured representation as a defining criterion for the classification and differentiation of audit, review, and other assurance engagements. the subject of the study is the term “historical financial information” in the context of its use in international standards on quality control, auditing, review engagements, assurance engagements, and related services. methodology. to achieve the goal set in the work, a complex of general scientific methods (analysis, synthesis, induction, deduction, abstraction) and methodical techniques (systematization, generalization, review, comparison) was used. in the study of the historical stages of using the terms “financial statements” and “historical financial information”, the method of system analysis, historical and logical methods were used. the study of their essence as mandatory elements of the assurance engagements was based on provisions of the dialectical method of knowledge of processes and phenomena in their interconnection and development. in developing approaches to the interpretation of the term “historical financial information”, the algorithm for selecting engagements for different types of objects and directions of standardization a method of modelling was applied. results. based on the systematization of the historical stages of the use of terms “financial statements” and “historical financial information” in iaasb international standards, it is substantiated that the interpretation of the term “historical financial information” is not specific, allows the ambiguity of interpretations, which complicates the processes of identifying the type of engagements, agreeing its conditions, lead to dissatisfaction of users with the results of auditors’ work. it is substantiated that prior to the definition of the term “historical financial information” as the main criterion for distinguishing between audit, review, and other assurance engagements, two approaches can be applied: narrow when the term “historical financial information” is limited to a complete set of financial statements, a separate financial statement, an account, an article or item of financial statements, and a broad one, which stipulates the allocation of different forms of structured presentation on the basis of specification of required characteristics of historical financial information. problems of their influence on the application of international standards are generalized. practical implications. based on the proposed approaches, an algorithm for selecting objects that can be the subject of various assurance engagements has been elaborated. it is useful for both auditors and for responsible parties, intended user, clients and will increase the effectiveness of their cooperation and reduce the “expectations gap”. problems of the impact of “narrow” and “broad” approaches to the interpretation of the essence of the term “historical financial information” on the content and directions of the improvement of international standards and national regulatory documents are systematized. value/originality. the research developed a theoretical approach to distinguishing types of audit services based on the specification of the scope of the application of international auditing standards (isas) and assurance engagements (isaes). there is substantiated the possibility of using narrow and broad approaches to understanding the term “historical financial information” as a subject matter, the definition of possible forms of structured representation of historical financial information as a subject matter information and the key condition for the delineation of audit, review, and other assurance engagements. key words: assurance engagements, audit engagements, historical financial information, financial statements. jel classification: m40, m42 baltic journal of economic studies 334 vol. 4, no. 3, 2018 1. introduction although financial statements are traditionally considered to be the main object of audit and this viewpoint has traditionally been formed and remains in the theory and practice of auditing, the broader understanding of the essence of the audit led to the widespread definition of the audit since the 90s of the twentieth century. gradually it was replaced by the term “assurance engagement” and the structure of audit services has changed significantly, which is characterized by the following: 1. international framework for assurance engagements and international standards on quality control, auditing, review engagements, assurance engagements, and related services (isas, isres, isaes, isrss) were developed. they are applied to different by its content engagements (audit of historical financial information; review of historical financial information; assurance engagements other than audits or review of historical financial information; related services). 2. the content of other documentation in the sphere of auditing was enhanced, particularly codes of ethics for professional accountants, in order to make detailed requirements for different types of auditing services. on the one hand, these tendencies are logical and predictable since the information-oriented society demands from auditors to expand the range of services and to include any information, but on the other hand, the tendencies are not easy to perceive and change the traditional idea of the content and purpose of the audit. as higson a. states in corporate financial reporting (2014, p. 111), “the refocusing of auditors on assurance services could almost be classified as an audit revolution.” for that reason, organizational and methodological principles of identification, acceptance, and fulfilment of various types of assurance engagements as the main components of the auditing services need constant improvement, taking into account the tendencies of a complication of their structure and the necessity to comply with the requirements of the international standards. but for further development of the theory and practice, there should be a clear classification of assurance engagements, features of separating the audit and reviewing historical financial information from assurance engagements other than audit or review of historical financial information. despite the fact that basic elements of the assurance ((a) a three-party relationship involving a practitioner, a responsible party, and intended users; (b) an appropriate underlying subject matter; (c) suitable criteria; (d) sufficient appropriate evidence; and (e) a written assurance report in the form appropriate to a reasonable assurance engagement or a limited assurance engagement), which are the basis for such a classification, find their reflection in the international standards and the international conceptual framework for assurance engagements (article 26), their interpretation is not concise. it has the ambiguity of interpretations, which complicates the work of auditors in the process of identifying the type of engagement, harmonizing the conditions of the engagement, impeding its proper implementation, and resulting in dissatisfaction of users with the results of the work of auditors, narrowing the market of audit services, not using the audit potential to the full. 2. a literature review of audit and assurance classification it should be noted that the study of this issue has a slightly different dimension in foreign and national publications. the publications of the ukrainian scholars have still been inclined to the classification of audit services, which is a consequence of the “broad” interpretation of the audit and was used in foreign publications of the twentieth century that were translated into the russian and ukrainian languages in the early 1990s, for example, the textbook “montgomery’s auditing” (1997, pp. 38-41) and the textbook by arens a.a. & loebbecke j. (1995, pp. 11-12). this classification included auditing of financial statements, compliance audits and operational audit (management, efficiency, etc.), and the features of such a classification were the object of the audit, target direction, direction, scope of coverage, assignment, etc. these classifications are certainly important but the starting point for the classification of audit services should be international standards, taking into account their crucial role in the regulation and standardization of auditing, as well as the need to comply with the requirements of these documents in the process of auditing. however, the national science has rather fragmentary studies. in particular, the study of the main types of audit services and their comparison according to the criteria that are formed with the use of obligatory elements is suggested by davydov h. (2009, pp. 81-84, 104-113) and gedz m. (2007, pp. 79-80). these classifications are an attempt to delineate the engagements. but the first textbook does not specify the nature of the subject of the engagement and the second one does not take into account the possibility of financial information to have a predictive and historical (past time) character. also, national scientists suggest classification of audit services using required elements of an assurance engagement for specific objects. samchynska ya. (2012, p. 98) made an attempt to specify the type of audit services for such an object as the strategic principles of the company’s operation; proskurina n. (2014) studied observance of the principle of continuity of activities. there are also suggestions of options for introducing an audit of taxation (tax audit) and methods for checking the indicators of tax returns into the current regulatory base of an audit by malyshkin o. (2015, p. 211), petryk o. (2012, p. 13), artyukh o. (2015). baltic journal of economic studies 335 vol. 4, no. 3, 2018 this problem is encountered by scientists and experts of other post-soviet countries, and it is particularly acute in those countries that have gone through the introduction of their own audit standards that are not consistent with the requirements of international standards. in particular, s. pankova (2013) focuses on the problem of identifying such types of audit services as verification of project (forecast) investment documentation, an audit of marketing and, in general, problems of classification of audit services (international federation of accountants (ifac/iaasb), 2012). in foreign studies, a considerable attention is paid to the analysis of the evolution of audit in the context of engagements of an audit of financial statements (ittonen k., 2010). the textbooks provide a classification of assurance engagements that meets the requirements of international standards (soltani b., 2007; eilifsen a., messier jr., w.f., glover s. & prawitt d., 2006; gill g., cosserat g., leung p. & coram p., 2001). but it should be noted that there is also a reference to the traditional classification of the audit, which is not consistent with international standards (drd. pop (grigorescu) i.i., 2012). in the context of other assurance engagements, they are presented in the study of specific objects (hasan m., maijoor s., mock t.j., roebuck  p., simnett r. & vanstraelen a., 2005; simnett r., nugent m. & huggins a.l., 2009; janković s. & krivačić d., 2014; sonnerfeld a., 2014). in the context of these issues, it is advisable to draw attention to the developments of other countries and international organizations. the international standards focused on differences between reasonable assurance engagements and limited assurance engagements that were considered by such features as (1) objective, (2) evidencegathering procedure, (3) the assurance report (since the standards published in 2004). in particular, the federation of european accountants has been offered survey on the provision of alternative assurance and related services across europe, which analyses the differences between different services. in november 2015, the australian government (the department of finance) issued guidance on the delimitation of the concepts of “audit” and “assurance” (resource management guide no. 210 clarification of the terms “audit” and “assurance”), the purpose of which was to provide detailed recommendations for users about the elements. they provide the analysis of various situations and issues arising from the use of the terms “audit” and “assurance” and suggestions on how to avoid them. 3. problems of classification of assurance engagements the abovementioned works characterize differences among the types of assurance engagements at the stage of their adoption, as well as at the stages of their implementation and completion. but the most important are the criteria that make it possible to clearly distinguish the audit and the review of historical financial information from other assurance engagements. these differences are due, first of all, to the characteristics and required elements of the assurance engagement. the first three elements (three-party relations, subject, and criteria) determine the possibility and conditions for accepting the assurance engagement, and also in some way affect the outcome of the engagement; the fourth and fifth elements (evidence and report) directly affect the process and determine the outcome of this engagement. however, the very criterion “subject” and the associated criterion “subject matter information” are the basis for the identification of various types of assurance engagements and, therefore, the question arises to specify the content of the term “historical financial information”, which remains unnoticed in scientific works. the purpose of the study is to define the characteristics of “historical financial information” and the forms of its structured representation as a defining criterion for the classification of engagements for audit, review, and other assurance engagements. 4. methodology the research was done on the basis of the theory of scientific cognition using a systematic approach to the study of phenomena and processes. to achieve the goal set in the work, a complex of general scientific methods (analysis, synthesis, induction, deduction, abstraction) and methodical techniques (systematization, generalization, review, comparison) was used. the information base of the study has become the official documents and standards of the international auditing and assurance standards board of the international federation of accountants, educational, scientific, monographic, and reference literature, scientific publications of the national and foreign scientists on the theory and methodology of auditing and assurance. in the study of the historical stages of using the terms “financial statements” and “historical financial information”, the method of system analysis, historical and logical methods were used. the study of their essence as mandatory elements of the assurance engagements was based on the provisions of the dialectical method of knowledge of processes and phenomena in their interconnection and development. in developing approaches to the interpretation of the term “historical financial information”, the algorithm for selecting engagements for different types of objects and directions of standardization a method of modelling was applied. 5. study of the interpretation of the subject matter and subject matter information in the international standards the historical stages of the development of international standards and the use of terms “financial statements” and “historical financial information” in the context of determining the scope of international standards can be summarized as follows (table 1). baltic journal of economic studies 336 vol. 4, no. 3, 2018 table 1 historical stages of using the terms “financial statements” and “historical financial information” in international standards stage and characteristics distinctive features stage 1. 1999-2001 the origin and development of international standards on auditing (isa) (international standards on auditing & ifac code of ethics. 1999; 2001 ifac handbook of auditing and ethic pronouncement). 1. in the foreword, it is noted that isas are intended for the use in the audit of financial statements, but if they are adapted, they may be applied to the audit of other information; 2. the conceptual framework of international standards on auditing (isa 120) operates the term “financial statements”. 3. the glossary of terms interprets financial statements as “the balance sheets, income statements or profit and loss accounts, statements of changes in financial position (which may be presented in a variety of ways, for example, as a statement of cash flows or a statement of fund flows), notes and other statements and explanatory material, which are identified as being a part of the financial statements.” stage 2. 2003 further development of isa and adoption of international standards on assurance engagements 100 handbook of international auditing, assurance, and ethic pronouncement. 2003 edition 1. the term “historical financial information” was introduced but it was suggested only in the foreword where it was stated that international standards on auditing (isa) were issued as the standards to be applied in reporting on the credibility of historical financial information,” and in certain standards, particularly isa 545 “auditing fair value measurements and disclosures”, 810 “the examination of prospective financial information.” 2. there was no clear interpretation of the term “historical financial information”. 3. the text of international standards applies the term “financial statements”, the interpretation of which was not changed. stage 3. 2004 acceptance of the international framework for assurance engagements and the introduction of a clear structure of standards, review of isa (handbook of international auditing, assurance, and ethic pronouncement. 2004 edition). 1. the term “historical financial information” is again suggested only in the foreword while defining the scope of the isa, and in some standards (isas 545 and 810). 2. the blocks of standards “audits and review of historical financial information” and “assurance engagements other than audits or reviews of historical financial information” were introduced. 3. interpretation of the term “financial statements” was not changed and is further used in international standards on auditing. stage 4. 2005-2009 review of isa, the introduction of new standards and development of the projects of the new international standards on assurance engagements other than audits or review of historical financial information (handbook of international auditing, assurance, and ethic pronouncement. 2005-2007 edition). 1. the interpretation of the term “financial statements” was changed to “a structured representation of the historical financial information.” 2. the term “historical financial information” is again suggested only in the preface when defining the scope of the isa, and in some standards (isa 545 and 810). but this term is widely used in the new standards, particularly on quality control: international standards on quality control (isqcs 1) “quality control for firms that perform audits and reviews of historical financial information, and other assurance and related services engagements” and isa 220 “quality control for audits of historical financial information”. stage 5. 2010-2017 review of isa, the introduction of new standards, review of the international framework for assurance engagements (handbook of international quality control, auditing , review, other assurance, and related services pronouncements. 2010, 2012, 2013, 2014, 2015, 2016–2017 edition). 1. the term “historical financial information” was introduced into the glossary of terms. 2. the term “historical financial information” is used in the foreword to determine the scope of the application of international standards on auditing and international standards for engagements for review. 3. it was first mentioned that isas are written in the context of an audit of financial statements by an independent auditor and they are to be adapted as necessary in the circumstances when applied to audits of other historical financial information. 4. the interpretation of the term “financial statements” was not changed in the glossary. 5. the term “other historical financial information” is found in three international standards only when indicating the possibility of adapting the international standards on auditing (isa 200, isa 260, and isa 805). 6. international standards on auditing and international standards of engagements for review continue to use the term “financial statements”, although the blocks themselves are called “audits of historical financial information” and “reviews of historical financial information”. 7. the term “historical financial information” is used broadly in the reviewed standards. so the term “historical financial information” was firstly suggested only in the international standards of 2010 and it has not been changed in further editions. the glossary of terms states that “historical financial information is the information expressed in financial terms in relation to a particular entity, derived primarily from that entity’s accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.” the term “financial statements” is interpreted as baltic journal of economic studies 337 vol. 4, no. 3, 2018 a “structured representation of the historical financial information, which ordinarily includes accompanying notes, derived from accounting records and intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.” the term can refer to a complete set of financial statements, but it can also refer to a single financial statement, for example, a balance sheet, or a statement of revenues and expenses, and related explanatory notes. these definitions remain unchanged in further editions of international standards. at the same time, international standards do not indicate that financial statements are just one form of structured representation of historical financial information. the term “other historical financial information” is found in international standards only when indicating that the isa is set out in the context of the audit of the financial statements and should be adapted, as appropriate, when using other historical financial information during the audit. this remark is in the preface to the international quality control, auditing, review, other assurance, and related services pronouncements (paragraph 11), isa 200 “overall objectives of the independent auditor and the conduct of an audit in accordance with international standards on auditing” (paragraph 2), isa 260 “communication with those charged with governance” (paragraph 2), isa 805 “special consideration – audits of single financial statements and specific elements, accounts or items of a financial statement” (paragraph 1). only in the application and other explanatory material of isa 805 “other historical financial information” is associated with single financial statements and specific elements, accounts or items of a financial statement. in appendix 1, examples of such other historical financial information (specific elements, accounts or items of a financial statement) are listed: – accounts receivable, allowance for doubtful accounts receivable, inventory, the liability for accrued benefits of a private pension plan, the recorded value of identified intangible assets, or the liability for “incurred but not reported” claims in an insurance portfolio, including related notes; – a schedule of externally managed assets and income of a private pension plan, including related notes; – a schedule of net tangible assets, including related notes; – a schedule of disbursements in relation to a lease property, including explanatory notes; – a schedule of profit participation or employee bonuses, including explanatory notes. therefore, the term “historical financial information” has a broader meaning than the term “financial statements” and contains other information but only that can be obtained from the accounting information system. in fact, taking into account the content of the abovementioned definitions, we can conclude that historical financial information can be expressed in various structured forms, not only in the form of financial statements, as this is not mentioned in the definition. for example, tax reports are also information expressed in financial indicators that are obtained primarily using the company accounting system. this issue requires a clearer solution. in some countries, where value and relevance of other types of reporting, in particular tax, statistical and managerial are extremely high (this applies to ukraine), it is difficult to determine which type of engagements (audit or other assurance engagements) should be used in such cases. 6. substantiation of two approaches to the definition of the term “historical financial information” as the main criterion for the differentiation of audit, review, and other assurance engagements in the present situation, two solutions are possible. on the one hand, traditionally, the terms “historical financial information” and “financial statements” as a form of its structured representation are linked. and if to follow literally the terms of international standards, it is possible to limit the term “historical financial information” to only: (1) full set of financial statements (all isa); (2) financial statements prepared in accordance with the special purpose framework (isa 800 “special consideration – audits of financial statements prepared in accordance with special purpose framework”); (3) single financial statements, specific elements, accounts or items of a financial statement (isa 805 “special consideration – audits of single financial statements and specific elements, accounts or items of a financial statement”); (4) summary financial statements (isa 810 “engagements to report on summary financial statements”). however, the term “historical financial information” may be considered broader with the following required elements: (1) information should be expressed in financial terms in relation to a particular entity; (2) information should disclose economic events occurring in past time periods or about economic conditions or circumstances at the points of time in the past; (3) information should be derived primarily from that entity’s accounting system. by this approach, the types of historical financial information are broadened. the use of a broad approach to the interpretation of the term “historical financial information” allows, firstly, specifying the objects of the engagements, and secondly, expanding the understanding of the structured representation of historical financial information and the nature of the audit engagements. baltic journal of economic studies 338 vol. 4, no. 3, 2018 if we adopt a broad approach to the interpretation of the term “historical financial statements”, then examples of its types can be: i. full set of financial statements, its components, articles, items or accounts as components of financial statements (traditional presentation). ii. other forms of reports: (1) tax reports, its individual components, articles, and items; (2) statistical reports, its components, articles, and elements; (3) internal (managerial) reports, its components, articles, and elements (but only that which corresponds to the abovementioned required elements). ііі. various official financial and accounting records that contain historical financial information, such as statements of receivable balances and current liabilities (but only that which corresponds to the abovementioned required elements). the problem of application of this approach is that the isas are only aimed at disclosing the audit issues, it is the financial statements that are specifically mentioned in isa: isas are written in the context of the audit of financial statements (isa 200 (paragraph 2), isa 805 (application and other materials a3). the requirements of isa are sufficiently sound; they have established the obligatory study of specific objects, in particular, the system of internal control, observance of the principle of continuity, subsequent events, etc. the study of the issues mentioned above may not be obligatory in terms of user requirements, for example, when the subject matter is statistical or tax reports. noting that this is an audit engagement performed under the isa, the auditor immediately sets requirements for organizing it, for example, considering the applicability of isa 570 ‘going concern” and other specific standards. isa 200 and isa 805 allow adapting international standards on auditing in the circumstances if they are applied to the audit of “other historical financial information” but require an analysis of the appropriateness and necessity of applying certain isas. in the context of considering this problem, it should be noted that in recent years, analytical studies have been published on the conditions of application and the benefits of such types of tasks that are subject to the iaasb international standards, such as reviews of historical financial information and related services, especially engagements to perform agreedupon procedures regarding financial information (international standard for related services (isrs) 4400). in particular, the federation of european accountants has been offered survey on the provision of alternative assurance and related services across europe, which analyses the differences between different services. their execution is appropriate in cases where users require a limited level of assurance or only results of comparisons of the data of the primary documents and generalized accounting information. if we assume that historical financial information has a broad interpretation, then it is possible to conclude that audit as an assurance engagement can also be performed in two forms: (1) direct engagements; (2) attestation engagements. these types of assurance engagements are considered in the international framework for assurance engagements, but they are only considered in detail in relation to other assurance engagements, that is, assurance engagements other than audit or review of historical financial information. the second type of the engagement is a traditional audit of financial statements, in which the subject of the engagement (information about the financial position, performance, and cash flows) and subject matter information (financial statements) are clearly regulated and prepared by the responsible party. but the first type of engagement is an engagement that can be performed without a structured presentation of subject matter information that covers historical financial information. in a direct engagement, the auditor measures or evaluates the underlying subject matter against the criteria. in addition, the practitioner applies assurance skills and techniques in order to obtain adequate evidence of the outcome of the measurement or evaluation of the underlying subject against these criteria. information on the subject of the engagement is provided to users in the report. the need for such an engagement may arise in the absence of certain information in the financial statements. for example, it may be necessary to perform the engagement of auditing cash flow in foreign currency as direct engagements, since the cash flow statement provides generalized information and there is no detailed information about the type of currency. 7. application of a broad approach to specifying the type of assurance engagement if we adopt a broad approach, then it is possible to identify the entities that will serve as a subject for various assurance engagements: the audit engagements that will be performed in accordance with the isa, or other assurance engagements that will be performed in accordance with the international standard on assurance engagement 3000 “assurance engagements other than audits or reviews of historical financial information”. the approach is based on the analysis of a compliance with the mandatory elements of the definition of the term “historical financial information”. this analysis is useful when the subject of the engagement is not reporting as a whole, but individual entities. figure 1 shows the relationship between the characteristics of the subject, information on the subject of the problem and types of engagement, which can be used to develop an algorithm for identifying the type of engagement. baltic journal of economic studies 339 vol. 4, no. 3, 2018 the sequence of the study of subject and information on the subject of engagement to select the type of engagement st ag e i. a gr ee in g on th e su bj ec t o f en ga ge m en t settlements with buyers and customers and their presentation in accounting and financial reporting settlements with buyers and customers and their presentation in accounting and financial reporting forecasting of cash flow from buyers and customers st ag e ii . sp ec ifi ca tio n of in fo rm at io n on th e su bj ec t m at te r of en ga ge m en t balance sheet articles, statement of financial results, statement of cash flows, notes agreements, documents on payment, shipment, documents for settling claims, litigation financial forecasts of cash flows from buyers and customers st ag e ii i. id en tif ic at io n of c ha ra ct er is tic s of th e su bj ec t m at te r in fo rm at io n of en ga ge m en t information about calculations is expressed in financial indicators information on the subject is expressed in financial terms but mainly in descriptive terms financial forecasts are presented in financial indicators information reveals the results and volume of settlements with buyers and customers that took place in the past the assessments are also subject to documents drawn up in the past, and organizational and administrative documents information discloses forecast of financial information information is obtained from the accounting system information at the same time is derived from the accounting system and is the basis for it forecast calculations are performed on the basis of historical information obtained from the accounting system st ag e iv . a na ly si s of c om pl ia nc e w ith th e cr ite ri a fo r de te rm in in g hi st or ic al fin an ci al in fo rm at io n is information expressed in financial terms in relation to a particular entity? + + does information disclose economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past? + -/+ is information derived primarily from that entity’s accounting system? + -/+ -/+ st ag e v . se le ct io n of th e ty pe o f en ga ge m en t audit engagement of displaying the results of settlements with buyers and customers in the financial statements, which will be executed in accordance with the isa, taking into account the requirements of isa 805 assurance engagement other than audit or review of historical financial information, which will be executed in accordance with isae 3000 assurance engagement other than audit or review of historical financial information, which will be executed in accordance with the isae 3400 figure 1. study of the subject matter and subject matter information using a broad approach as the basis of the algorithm for identifying the type of assurance engagement baltic journal of economic studies 340 vol. 4, no. 3, 2018 8. comparison of two approaches to the definition of “historical financial information” in developing directions for the development of standards and regulatory assurance engagements table 2 presents the systematization of problems of the influence of “narrow” and “broad” approaches to the interpretation of the essence of the term “historical financial information” of the content and directions for the improvement of international standards and national regulatory documents. 9. conclusions for further development of the theory and practice of performing assurance engagements, it is important to clearly distinguish the audit and review of historical financial information from other assurance engagements. the main criterion for their selection is the subject of the engagement “historical financial information” and, accordingly, the possible forms of its structured representation. to do this, it is necessary to specify the content of the term “historical financial information” in the context of its application in the international standards. it is substantiated that two historical approaches to the interpretation of the term “historical financial information” can be applied: the narrow approach is used when the term “historical financial information” is limited to a complete set of financial statements, a separate financial statement, an account, an article or item of financial statements, and the broad approach that involves the use of mandatory characteristics of historical financial information as the basis for the allocation of its various groups, forms of structured representation and the algorithm for selecting objects that may be subject to various assurance engagements. the selected advantages and disadvantages of each approach determine further development of standards in the sphere of performing audit services and statutory regulation at the level of international standards and regulations (standards) at the national level. table 2 display of the influence of approaches concerning the interpretation of the term “historical financial information” criteria narrow approach broad approach essence to limit the term “historical financial information” to information that is presented in a complete set of financial statements, a separate financial statement, an account, an article or item of financial statements. to consider the term “historical financial information” taking into account its key elements without reference to financial statements. advantages clarity, lack of ambiguity in the interpretation, preservation of the traditional approach to audit review widening of the range of objects in accordance with the requirements of international standards disadvantages outside of the sphere of influence, there is other historical financial information that falls neither under the scope of the influence of isa nor under the sphere of influence of the isae. lack of clear recommendations for the adaptation of provisions of international standards on auditing when verifying other historical financial information. impact on international standards and expected changes to specify the term “other historical financial information” and the possible forms of its structured representation. to provide the scope of the international standards on auditing only for the audit of financial statements. to provide clearer conditions for the adaptation of provisions of international standards on auditing when verifying other historical financial information, in particular, tax, statistical and other reporting forms, financial and accounting documents. to introduce certain international standards on assurance engagements of other historical financial information and possible forms of its structured representation. to extend the provisions of the international standards on auditing in order to regulate the requirements for carrying out audit 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(2007). auditing : an international approach. financial times press. sonnerfeldt a. (2014). regulating third party assurance engagements on sustainability reports in sweden – issues and challenges. european company law, volume 11 (2014) / issue 2; university of oslo faculty of law research paper no. 2014-30. retrieved from: http://dx.doi.org/10.2139/ssrn.2471522 baltic journal of economic studies 14 vol. 4, no. 4, 2018 corresponding author: 1 kharkiv national university of internal affairs, ukraine. 2 kharkiv national university of internal affairs, ukraine. 3 kharkiv national university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-14-23 intellectual capital development within the conditions of the information society oleksandr bakumov1, vladyslav neviadovskyi2, olha shaituro3 abstract. in the era of rapid development of the information society, there is a problem of accumulation and rational use of intellectual capital, as well as the need to ensure its development. now it is impossible to carry out the effective activity of enterprises without technologies, know-how, inventions, knowledge and experience of workers. since world globalization and rapid transformation of the domestic economy led to some kind of economic and financial instability, which leads to an increase in interest in the research and use of information, it becomes necessary to study the possibilities of providing intellectual capital development in entrepreneurship and in the country. it should also be noted that sufficient funding for the development of intellectual potential leads to increased competitiveness of the country as a whole. therefore, intellectual capital in a society with information as the main source holds key positions and is at the centre of a number of issues related to the development of entrepreneurship in the country, the development of the information society, the knowledge society, and the digital economy. taking into account the cultural and value aspect and the explicit and implicit problems of multi-agent interaction in the information society, we believe that the approaches to the definition of the “information society” should not be antagonistic to each other, but symbiotic, and integrate the workings of each area of research of scientists, taking into account rapid development, globalization and informational synergistic effects that arise in recent years, it can be argued that the concept will be repeatedly transformed. it is investigated that, in the context of the information society, the concept of “intellectual capital” appears. we determine that intellectual capital is an aggregate of knowledge, experience, skills, creativity, abilities, relationships, accumulated in the process of intellectual activity, that have economic value and are used in the process of production and exchange for the purpose of obtaining income. the conducted research allows generalizing the conclusion that exactly the development of information and communication technologies has led to the emergence of an information society, which was an impetus for the development of e-economy, which precisely determined the emergence of e-commerce as its inherent part. it is proven that financing for the development of intellectual capital is required for many reasons; however, one of the keys is to raise the level of competitiveness not only of enterprises but of the state as a whole. thus, the intellectual potential of citizens is aimed at the economic, technical, and cultural development of enterprises and their own state. therefore, the support and development of the information society and its main good, namely, information and knowledge, should be actively implemented in enterprises for further development of entrepreneurship, the economy of the country and the state. that is why the research of models of financial provision of intellectual capital, which was carried out in the article (investment, crowdfunding, innovative), are defined as perspective directions of development of science and practice. key words: information society, knowledge society, e-economy, network economy, intellectual capital. jel classification: j24, f21, l86, f20, a13 1. introduction in the era of rapid development of the information society, there is a problem of accumulation and rational use of intellectual capital, as well as the need to ensure its development. now it is impossible to carry out the effective activity of enterprises without technologies, know-how, inventions, knowledge and experience of workers. since world globalization and the rapid transformation of the domestic economy led to some kind of economic and financial instability, which determines an increase in interest in the research and use of information, it becomes necessary to study the possibilities of providing intellectual capital development in entrepreneurship and in the country. it should also be noted that sufficient funding for the development of intellectual potential leads to increased baltic journal of economic studies 15 vol. 4, no. 4, 2018 competitiveness of the country as a whole. therefore, intellectual capital in a society with information as the main source holds key positions and is at the centre of a number of issues related to the development of entrepreneurship in the country, the development of the information society, the knowledge society, and the digital economy (radionova, 2008). the main purpose of the article is to analyse methodological foundations of formation of “information society”, “information economy”, and to identify prospects for ensuring the development of intellectual capital as a key factor of information society of the country. 2. the methodology of research among the scholars who considered the issues of informatisation of society and economy, one can distinguish scientific achievements of n. v. apatova (apatova, 2013), l. s. vynaryk, a. n. shchedryn, n. f. vasyleva (vynaryk, shchedryn, vasyleva, 2007), a. i. rakitov (rakitov, 1991), a. toffler (toffler, 1996), d. bell (bell, 2004), i. h. khanin (khanin, 2012), y. masuda (masuda, 1983), j. baudrillard (baudrillard, 2013) and others, each of them investigated individual directions of origin, evolution, and development of informatisation and information society, transformational properties, and prospects for the future. issues of intellectual capital, its role in enterprises, economic space, and development of the country as a whole were dealt with by domestic and foreign scientists such as a. brooking (brooking, 2001), yu. bukhanova, s. klymko (klymko, 2006), l. edvinsson, m. malone (edvinsson, malone, 1999), i. radionova, e. skrzypek, s. ushakova (ushakova, 2015). scientific papers of such scholars as i. botkin, o. drahan, t. maiorova, s. illiashenko are aimed at solving the issue of financing intellectual capital. at the same time, the new nature of economic growth, the decisive role in it of non-material factors, first of all, the need to provide transformational processes in the information society, require a more detailed study and analysis, which led to the writing of the article. the modern information revolution has become possible due to the coincidence of many factors: 1) the emergence of digital means of processing large volumes of electronic information resources, the rapid development of electronics; 2) the development of the space industry and the establishment of satellite communication technologies; 3) the development of information and network technologies and the emergence of the internet (vynaryk, 2007). in accordance with the scientific doctrine of a. i. rakitov, the essence of the information revolution is to “change the tool base, the way of transferring and storing information, as well as the amount of information that is accessible to the active part of the population” (rakitov, 1991). according to the concept of information revolutions by a. toffler (toffler, 1996, p. 275), d. bell (bell, 1998, p. 195), “informatisation of society is not a scientific and technical fashion ...”, “…the process of informatisation today acts as a global”, it can “...be qualified as a new socio-technical revolution.” i. khanin believes that “the basis of ... civilizational changes is the sixth information revolution, the result of which is the formation of a new civilization in the world – an information society” (khanin, 2012). a society, in which the production and use of information and knowledge are an important activity, is undoubtedly transformed by obtaining new properties and attributes, the main of which are the following: 1) formation of a single information and communication space of the country as a part of the world information space; 2) formation and further dominance in various areas of perspective information and digital technologies; 3) creation and development of a market for information and knowledge bases at a higher level than the market for natural resources, labour and land, and the constant emergence of new opportunities to meet the needs of society through information products and services; 4) the growth of the role of information and communication infrastructure in the system of social production; 5) raising the level of education, scientific and technical and cultural development by expanding the possibilities of information exchange systems; 6) high level of education due to the expansion of the possibilities of information exchange systems at the international, national, and regional levels and, accordingly, increased role of qualification, professionalism, and ability to creativity as the most important characteristics; 7) high importance of information security of the person, society, and state, creation of new security systems; 8) transformation of the traditional system of ensuring the rights of citizens and social institutions to freely obtain, disseminate, and use information to modern standards (chaffey, 2011). the methodological positions regarding the term “information society” are somewhat divergent. in the scientific literature on economics, management, and information management, there are two opposing approaches to its interpretation. according to the first one, which is followed, in particular, by y. masuda (masuda, р. 9, 479-494), d. bell (bell d., 2004), m. castells (castells, 2011), j. baudrillard (baudrillard, 2013), s. n. kolesnikov, n. n. ermoshenko (ermoshenko, 1991), the information society is considered an economic concept that has important technological characteristics. logical is the approach of d. bell (baudrillard, 2013), who expresses the view that the basis of the information society is a new intellectual technology, which is used in making managerial decisions. the opposite view is respected by m. poster (poster, 1997), r . robertson (robertson, 1992), baltic journal of economic studies 16 vol. 4, no. 4, 2018 a . r akitov (r akitov, 1991), z. brzezinski, a . toffler (toffler, 1996); they consider the social component of this term, focusing on communication as the main catalyst and an impetus for transformation in society. the main distinguishing features of the information society include: 1) information economy; 2) a high level of information needs of all members of society and the actual satisfaction of these needs for the bulk of the population; 3) high information culture; 4) the free access of every member of the society to information limited only by the information security of the individual, community groups, and the whole society (diatlov, 2015). taking into account the cultural and value aspect and the explicit and implicit problems of multi-agent interaction in the information society, we believe that the approaches to the definition of the “information society” should not be antagonistic to each other, but symbiotic, and integrate the workings of each area of research, taking into account rapid development, globalization and informational synergistic effects that arise in recent years, it can be argued that the concept will be repeatedly transformed. the tasks to be solved in the transition to the information society are presented in figure 1. let us outline the main problems that catalyse before the society in the framework of a definite research direction, which are objective: firstly, behavioural (acceptance and adaptation to a new social organization, rethinking the role and significance of knowledge and information, their value for the progressive development of society; the influence of intellectual technologies and telecommunications on the behaviour of members of society) (bell, p. 150-160, 500-508); secondly, institutional (the problem of interaction between historically established political institutions and all global economic agents; the problem of the relationship between the ruling elite and the masses in the information space; the problem of cultural diversity and pluralism; the problem of the choice of development course of science and education) (laudon, laudon, 2012); thirdly, cultural and ecological (the change of the essence of social institutions (from family to school); the problem of the growth of volumes of information flows; the impact of total globalization on the formation of a new system of values of super industrial society; the problem of the formation of a new mental reality activation of the use of modern information and communication technologies for the more effective work of the authorities and the development of public services oriented to the needs of citizens development of cooperation at the regional, national, and international levels in the process of formation of the information society creation of effective information and communication infrastructure ensuring broad support for the idea of an information society and active participation of citizens in its formation transport, environmental protection, health, science, education and culture stimulation of the use of modern information and communication technologies in the field of business, as well as in areas of particular importance to society large-scale education of the population for the use of new types of services and opportunities provided by the information society provision of effective access to scientific, technical, economic and other information through information systems ensuring the protection of the rights of citizens in the conditions of rapid development of information and communication technologies t as ks to b e ad dr es se d in th e tr an si tio n to a n in fo rm at io n so ci et y figure 1. tasks to be solved in the transition to an information society source: developed by the author based on castells, 1985; diatlov, 2012; martynyuk, 2015 baltic journal of economic studies 17 vol. 4, no. 4, 2018 based on fragments received from demassified mass media; formation of ecological culture) (castells, 1997; martynyuk, 2015). consequently, an information society characterized by permeability in all spheres of human life has a certain economic, legal, and technological foundation, which is based on the active globalization of economic, political, and cultural processes. as we see, advances in information technology and communication change our way of life: how we work and do business; how do we raise children; studying and conducting research; how we have fun. the information society not only affects the interaction of people but also requires traditional organizational structures to be more flexible, more active, and more decentralized. p. drucker argued that there was a transition from an economy based on material wealth to a knowledge-based one (drucker, 2003). m. porat highlights the primary sector (information products and services directly used in the production, distribution or processing of information) and the secondary sector (information services produced for domestic consumption by governmental and non-governmental organizations) of the information economy (porat, 1999). for d. bell, the number of employees providing services and information is an indicator of the informational nature of society. post-industrial society is based on services. post-industrial society is one in which most workers or all workers are not involved in the production of material values (bell, 1998). however, it is in the context of the information society where the notion of “intellectual capital” appears. according to the definition of l. edvinsson and m. malone, intellectual capital is the difference between market value and the book value of an organization, that is, the amount of hidden assets that are not included in the company’s balance sheet. thus, intellectual capital is non-financial capital, reflecting the hidden gap between market and book value (edvinsson, malone, 1999). the interpretation of this concept is still quite controversial; however, we understand it as the knowledge, skills, and production experience of specific people and intangible assets that are productively used to maximize profits and other economic and technical results. it consists of: 1) human capital (factors that allow better understanding what individuals are, namely: professional skills, leadership, interpersonal skills, and motivation); 2) organizational capital (factors that are closely related to organizational structure and processes such as: corporate culture, communication, organization, innovation in products and technologies, and transfer of skills and information systems); 3) consumer capital (created by the company’s external relations with shareholders, investors, partners, customers, and suppliers). 3. results and discussion as noted by l. s. vynaryk, a. n. shchedryn, n. f. vasyleva, the main distinguishing features of the information society are: “information economy”; “... a high level of information needs ... of society”; “free access of everyone to electronic information resources”; “development of the economic space in which business entities operate”; “the appearance of ... electronic information”; “the need to take into account the time factor” (vynaryk, shchedryn, vasyleva, 2007). thus, the evolutionary processes of the formation of the information society, naturally affect the formation of the electronic economy (chaffey, 2011; kalakota, 2010; laudon, 2012). examples and trends of virtualization of the economy are shown in figure 2. as n. o. chuchko, n. v. apatova, l. s. vynaryk, a. n. shchedryn, n. f. vasyleva note, ec influences the e-economy: 1) the transition from the unified consumption to the individual is carried out; 2) e-commerce can be carried out both at the national and international level but it is virtually impossible to divide these levels and to determine the geographical location of the seller; 3) e-commerce allows to balance the state in the international division of labour (apatova, 2013); 4) investment and trade barriers disappear; global market strategy is developing; 5) the competition between individual countries and interstate economic centres sharply intensifies, and victory in acute competition requires continuous innovation to support economic and information leadership in global markets (vynaryk, shchedryn, 2007). in a broad sense, the e-economy is an economy based on the widespread and intensive use of information, knowledge, and information technology; in the narrow sense – a network economy, that is, an economy based on network technologies and models of businessto-business (business 2 business) and business-toconsumer (business 2 consumer) (matvieiev, 2012). i.a. matvieiev interprets e-economy as “... the form of economic activity of the information society, which characterizes the totality of relations in the system of digital production of goods and services, their distribution, exchange, and consumption” (matvieiev, 2012). for example, v. a. vysotska uses the term “virtual economy” and interprets it as: “... an economy based on interactive business and on the main law of mansaving time” (vysotska, 2008); the same term in the broader sense defines the virtual economy as: “a special economic space, in which electronic commerce, electronic business is carried out; it is an economy based on the use of interactive capabilities” (vysotska, 2008). k. v. chekina determines the notion of “network economy”, defining it as “... commercial (economic activity) carried out by means of electronic networks” (chekina, 2015). this idea may be supplemented by the point of view of s. a. diatlov, who defined the term baltic journal of economic studies 18 vol. 4, no. 4, 2018 “information and network economy” as “... a global network of complex and organized multilevel structure of interrelations between economic agents through the internet and other telecommunication facilities” (diatlov, 2015). he also applies the concept of “electronic economic activity”, considering it only from the point of view of trade, that is, “... the sale of goods and services in electronic form (software, information, etc.) with the use of modern information technologies”; this point of view is very controversial because it does not take into account other areas of e-business, such as outsourcing, leasing, factoring, recruiting, insurance, etc. (diatlov, 2015). the existence of various interpretations allows covering all the diversity of manifestations of e-economy and considering it as a form of economic activity, the structure of interrelations, business environment, and process. thus, one can agree with the scholars who say: “... technological process and innovation are long-term driving forces of economic growth” (diatlov, 2015). summarizing the foregoing, let us highlight the place of e-commerce among the segmented levels of e-economy (figure 3). the knowledge-based economy is a conceptually new phenomenon that leads to a radical change in the fundamental principles of the economy and society as a whole, the formation of a new paradigm of socioeconomic development and scientific knowledge. according to expert estimates, from the middle of the xx century, the amount of knowledge available to mankind doubles every 20 years, according to the world bank, physical capital in the modern economy forms 16% of the total wealth of each country, natural – 20, and human capital – 70%. in countries such as japan and germany, the share of human capital is up to 80% of the national wealth (karpus, 2011). the formation of knowledge-based economies by states is reflected in a number of theories that have emerged in modern science. these theories include the theory of the economic nature of knowledge, the laws of management based on the use of knowledge and the impact of knowledge on economic factors; economic tools for measuring knowledge; the priority of the role of a person in the new economic development, which in their totality require generalization and systematization. e xa m pl es a nd tr en ds o f v ir tu al iz at io n of th e ec on om y • the non-consolidation of the volumes of cash masses of most currencies of the world by real commodities (for example, only the amount of us dollars in circulation exceeds three times the gdp of all countries in one year); • the flow of investment in developed countries from the sphere of production to the service sector; • spread of “futures” or “forward” contracts that are often based only on speculative profits and do not take into account the realities of the present; • “branding” of production, that is, the division of the world market of a specific product between several manufacturers with a name that is in fact just the brand’s owners, while real production takes place in no-name factories in china or other developing countries; • abandon of most investors from real investments in favour of financial (acquisition of securities companies not for the control over enterprises and the receipt of dividends from profits on production but for the purpose of resale securities at a higher price); • increase in the cost of collecting, processing, and using information that is not even considered an asset of the firm under the existing financial statements (for example, customer base, employee knowledge, etc.); • the spread of the role of intangible goods and services in the economy, the cost of which is often overestimated in comparison with the prime cost (for example, software, transport tariffs). figure 2. examples and trends of virtualization of the economy source: developed by the author based on goroviy, 2011; martynyuk, 2015 baltic journal of economic studies 19 vol. 4, no. 4, 2018 the development of the economy and modern entrepreneurship, in conditions of global competition, is almost impossible without the active orientation of production structures on innovation and intellectual activity. in this regard, the question arises about the definition of intellectual capital, the analysis of methods for its evaluation, since it is the efficient use of intellectual capital that allows significantly improving the quality of products, information, new managerial technologies, and industrial innovations, which is an integral part of the economic policy of the modern enterprise. most of the existing opinions of economists regarding the definition of intellectual capital can be divided into two main groups: intellectual capital is identified only with the human factor; intellectual capital is an expanded system, the processes and structure of which are represented by the search for optimum intellectual efficiency and relations between colleagues. we define that intellectual capital is an aggregate of knowledge, experience, skills, creativity, abilities, relationships, accumulated in the process of intellectual activity, that have economic value and are used in the process of production and exchange for the purpose of obtaining income. the way of intellectual capital management in an enterprise depends on the accepted concept of intellectual capital development, company strategy, and situational conditions, which in turn determine the volume and means of financing of intellectual capital development. the process of intellectual capital management at an enterprise includes: 1) development of intellectual capital policy; 2) storage and holding of intellectual capital in the database; 3) increase, renewal, and distribution of intellectual capital; 4) protection of intellectual capital; 5) monitoring of intellectual capital. the benefits that can be achieved through the effective management of intellectual capital and its proper financial support (bell, 2004): 1) increase in the value of intellectual capital; 2) determination of requirements of knowledge, experience, and qualifications on the basis of the adopted strategy; 3) eliminating the possibility of repeating the same mistake; 4) promotion of innovation; 5) use of existing knowledge; 6) adaptation of new knowledge to the company’s needs; 7) more efficient use of information and technical resources; 8) provision of development, maintenance, and protection of resources; 9) promoting the creation of knowledge and innovation through each employee; 10) application of knowledge for planning and achieving goals and objectives; 11) exchange of knowledge, their collection and distribution in the appropriate place; 12) modifying the activities and reorganizing the organization in such a way that the organization more effectively applies knowledge, minimizes the lack of knowledge, develops knowledge that increases the value of products and services; 13) management and control of future knowledge; 14) more effective use of innovations; 15) results of research and development, strategic alliances. at the present stage, the inalienable policy of each state is the formation of “knowledge potential” and a breakthrough to a higher level of “knowledge society”. in an inefficient economy of ukraine, we must deviate from inefficient financing, which triggers many of the weaknesses. it is necessary to facilitate the implementation of an innovative breakthrough, 1st investments and innovations and the internet industry 2nd internet infrastructure 3rd internet software 4th internet brokers, electronic trading, advertising 5th e-commerce 6th offshore programming 7th distance education segm ented levels of e-econom y 8th individual internet services figure 3. segmented levels of e-economy source: developed by the author based on diatlov, 2015; martynyuk, 2015 baltic journal of economic studies 20 vol. 4, no. 4, 2018 cultivating the development of special funds for supporting youth entrepreneurship in the context of regional programs, improving the system of grants for research institutions and individual scientists, based on improving the efficiency of using their intellectual resources at the expense of creativity. it is also necessary to improve university science in carrying out research and development, financing mechanisms for the development of science, improving the quality of scientific development, development of integration processes in the scientific sphere, participation in research programs, grants, increasing cooperation of scientists, private firms, and sponsors, activation of the influx of young people into science (ilnitsky, 2015). here are some indicators of the world’s largest companies focusing their strategy on industrial indicators of the economy and knowledge economy. as you can see, the definition of tobin’s q ratio, as an analytical indicator of the investment attractiveness of the company, shows that companies focused on the digital society and knowledge economy have a higher level of competitiveness and market attractiveness. the stability of its value to a large extent depends on the existence of inter-firm goodwills, which are difficult to determine from the book value but reflect the market sensitively. the main source of financial support for the development of intellectual capital at enterprises is their own sources, while foreign investment, state support, accumulation of financial resources in the stock markets, and crowdfunding in aggregate occupy no more than 12%, which indicates that external resources are almost not used (lukyanenko, dvornik, 2018). having analysed the sources of financing, one can conclude that insufficient financial support for the development of intellectual capital is associated with the nationwide instability of the economic system, which reduces the attractiveness of innovative projects. instead, state provision does not meet the needs of the modern intellectual capital market in ukraine. therefore, it is expedient to optimize the structure of sources of funding through the use of new mechanisms and tools for attracting resources. it must be understood that focusing on own financial resources has significant disadvantages and constrains the overall development of intellectual capital both individually and in ukraine as a whole. moreover, alternative methods of financing, accumulation of financial resources in stock markets are nothing else than the issuance of securities, and crowdfunding is a venture financing that involves attracting private funds to the development of innovation projects or enterprises, contributing to the development of intellectual capital. it is a truly progressive and effective financial support method since it allows the use of internet resources and online trading platforms. today, crowdfunding is a highly effective investment tool. it is functional, accessible, and easy both for organizations and for ordinary citizens. many crowdfunding projects in the countries of the european union and other developed countries are aimed at financing innovations. the ukrainian crowdfunding market is only at the stage of origin, and the development of crowdfunding in ukraine is an urgent need for the development of entrepreneurship of various sizes, the formation and introduction of innovative products. therefore, the issue of financing the development of intellectual capital has been updated in recent years, however, incorrect allocation of funds, dissatisfaction with the needs of the market, and the lack of a wellestablished system do not allow replacing obsolete forms, thereby worsening the state of the economy. the role of the main elements of intellectual capital is increasing, which in one way or another implies its revaluation in the information society. business table 1 indicative analysis of individual indicators of companies with different strategic priorities (focus on the traditional economy, focus on knowledge economy) the company name company assets (billion dollars) number of employees (thousand people) r&d expenses (ratio to the number of employed, thousand dollars) r&d expenses to sales volume (%) tobin’s q ratio companies focused on the traditional economy daimlerchrysler 372 441 14 2,9 0,42 general motors 315 594 13,5 4,9 0,36 ford motor company) 284 345 17,4 4,1 0,32 nippon steel 34 26,3 11,9 4,1 0,34 companies oriented to knowledge economy microsoft corporation 59,5 50,6 86,6 16,9 2,39 intel corporation 44,4 80 36,8 9,4 1,47 international business machines corporation (ibm) 88,3 319 16 5,5 1,9 cisco systems, inc 35,2 35 63,4 10,8 1,42 source: developed by the author based on (lukyanenko, dvornik, 2018) baltic journal of economic studies 21 vol. 4, no. 4, 2018 is carried out through employees, strong trademark, advanced technology, corporate culture. they should be understood as a special type of knowledge flow between a person, a client, and an organizational capital, as well as an impact on the creation of value (ilnitsky, 2015). knowledge is assets, therefore, as with all assets, it needs to be managed and their financing should be secured. and if the background of the enterprise allows partners to conclude that it is easy to work with then it is business capital, the benefits of which should be used as much as possible, while realizing at the same time the limited use of it. many companies finance the development of new technologies that they believe will give them competitive advantages (lukyanenko, dvornik, 2018). it is also necessary to pay special attention to the dual education and cooperation of the educational sector with the business sector. the experience of other countries proves that the emergence at the end of the last century in europe of research or business universities that combine science and education on the basis of innovation and the principles of quality management is the best environment and determines innovative development. such a model of innovation development was first proposed by professor of stanford university henry etzkowitz. it is based on the collaboration of the institution of higher education with business and combines innovation, research, education, allows the use of high technologies and bringing them to new markets. the institution of higher education of a business type is a “player” in the markets for educational services and products, knowledge-intensive services and works. also, companies, which products can be presented in digital form (for example, music, video games, computer software), have certain features. they are able to make all agreements entirely in the virtual trading space, delivering goods through the internet to the buyer’s computer. sometimes even patents are registered that will deliberately not bring profit to their authors. so why not companies go the alternative way and finance the purchase of a technology license, instead of re-inventing it? one of the ways of reliable protection of new technologies is patenting. replacing visual communication by alternative also adds new opportunities for business development. virtualization of interaction, management, and access to databases and knowledge expanded geographical, temporal, and linguistic horizons, reduced the costs of communication, coordination, education, and access to information. often, additional sources of funding may come to commercial organizations as a result of grants from the state, foreign and domestic partners on an adversarial basis, the creation of consortia of universities and government institutions to expand the scope of research. or they come due to indirect financial support using financial instruments and mechanisms for the development of small business forms, as well as various forms of subsidizing and lending innovative products. particular attention also should be paid to the issue of financial support for the development of employees of enterprises as carriers of one of the main elements of intellectual capital – knowledge and skills. only qualified and competent employees who work at the enterprise can realize the benefits of new technological solutions when they are already implemented. now, de facto, there has been a global “modernization” of many spheres of production, a wide introduction of innovations from foreign experience, computerized machines, and automated technologies. that is, the employee has not to deal with the tasks that were before but to make decisions in a variety of difficult situations. therefore, the financial support of professional training and professional development of employees allow significantly improving the quality of intellectual capital and become one of the important stages of investment. the low educational and qualification level of employees leads to the emergence of situations where the business is provided by personnel at the expense of the invitation of workers from other countries. however, as a consequence of the necessity to pay ultrahigh remuneration of labour in this case, it is much more profitable to invest financially in training and retraining of specialists from among those already working at this enterprise. evidence in favour of this view is the possibility to receive services from qualified employees directly in the organization, as well as to send them to consult other enterprises for additional payment, which is an additional profit for the enterprise. given the above, it is important to bring practical benefits through consideration of the need for funding to enhance competitiveness. and it should be emphasized that, provided sufficient financial support for the development of intellectual capital, not only the enterprise but also the state as a whole obtain competitive advantages. however, the most interesting issue is why ensuring the financing of intellectual potential with high probability gives us the right to speak about the competitiveness of not only a separate enterprise but the entire country. increasing the competitiveness of the whole country is possible only by improving the situation of a separate economic entity. that is, it is the realization of a common goal through an individual one, and it is possible to preserve the intellectual potential of the state while maintaining a level of competitiveness. 4. conclusions this study has proven that there is a great need for the proper financial provision of intellectual capital in the era of the information society, the knowledge society, and the knowledge economy that inherit each other. but over the imperfect distribution mechanism and the inappropriate choice of funding sources, the economic development is slowing down. baltic journal of economic studies 22 vol. 4, no. 4, 2018 the conducted research allows generalizing the conclusion that exactly the development of information and communication technologies has led to the emergence of an information society, which was an impetus for the development of e-economy, which precisely determined the emergence of e-commerce as its inherent part. it is proven that financing for the development of intellectual capital is required for many reasons; however, one of the keys is to raise the level of competitiveness not only of enterprises but of the state as a whole. thus, the intellectual potential of citizens is aimed at the economic, 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(2011). marketing.com: e-commerce, social media, and mobile internet in practice / translation: j. naeije and nhtv (nederlandse hogeschool voor toerisme). 1-st ed. houten: noordhoff uitgevers, 141 p. vynaryk, l. s., shchedryn, a. n., vasyleva, n. f. (2007). onlaynovyy elektronnyy biznes: monografiya [online e-business: monograph]. donetsk, nas of ukraine. (in ukraine) vysotska, v. a. (2008). osoblyvosti proektuvannya ta vprovadzhennya system elektronnoyi komertsiyi [features of designing and implementation of e-commerce systems]. visnyk natsionalnoho universytetu «lvivska politekhnika». kompyuterni nauky ta informatsiyni tekhnolohiyi, no. 629, pp. 34-45. baltic journal of economic studies 171 vol. 5, no. 2, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: plahtiy@vsau.vin.ua orcid: http://orcid.org/0000-0002-5379-1577 2 vinnytsia national agrarian university, ukraine. e-mail: fedorishina@i.ua orcid: https://orcid.org/0000-0003-1577-6699 3 vinnytsia national agrarian university, ukraine. e-mail: tomchuk_of@vsau.vin.ua orcid: https://orcid.org/0000-0003-0974-8018 doi: https://doi.org/10.30525/2256-0742/2019-5-2-171-175 socio-economic component of preferential taxation of individual income tetiana plakhtii1, lidiia fedoryshyna2, olena tomchuk3 abstract. the purpose of the article is to study the socio-economic component of the preferential taxation of individuals. it is shown that the tax social benefit is the ability of the taxpayer to reduce the calculated total monthly taxable income in the form of wages. methodology. the object of taxation is determined according to the status of the payer. so, for a resident – is: the total monthly (annual) taxable income; income from the source of their origin, which are finally taxed when they are charged (payment, provision), and foreign incomes – income (profit) received from sources outside. the object of taxation of a non-resident is: the total monthly (annual) taxable income from the source of its origin and income from the source of their origin in ukraine, which are finally taxed during their calculation (payment, provision). results. the basis of taxation is the total taxable income – any taxable income accrued (paid, provided) in favour of the taxpayer during the reporting tax period. imagine the structure of the aggregate resources of households, which in the overwhelming majority are subject to tax. individual income tax is fiscally significant for budgets of all levels, since after the distribution through the budget system the lion’s share remains at the disposal of local budgets practical implications. although ukraine is a market economy country, in our opinion, observance of these recommendations will have only a positive effect both on activating the regulatory function of the individual income tax and on the level of income differentiation of the population as a result. value/ originality. in view of a large number of studies of domestic scientists on this issue, it is necessary to systematize tax deductions from individual income tax in accordance with the concept of tax expenditures, taking into account the specifics of tax legislation. the established indicators for the tax social benefit are calculated according to the following algorithm: the maximum amount for the application of the tax social benefit: the subsistence minimum for an able-bodied person on january 1 of the reporting tax year, multiplied by 1.4 and rounded to the nearest 10 hryvnias. the size of the tax social benefit is equal to 50% of the subsistence minimum for an able-bodied person (per month), established by law on january 1 of the reporting tax year. key words: taxes, income, personal income tax, tax exemptions, tax social benefit, tax object, budget, insurance premiums. jel classification: g28, h24, j20 1. introduction modern ukrainian society took the vector for integration into the european union and the implementation of its system. at the stage of its formation, ukraine has a number of social and economic problems. their solution will increase growth for modern ukrainian society, which has taken the vector for integration into the european union and the implementation of its values system, is in the process of dialectical development and constant change. but like every country at the appropriate stage of its formation, ukraine has a number of social ecofriendliness. their decision will contribute to the growth of public welfare and economic basis, the formation of the necessary amount of financial resources for conducting the necessary transformations, enhancing macrofinancial and macroeconomic stability of the state, as well as ensuring a decent standard of living for the population and the overcoming of social problems. baltic journal of economic studies 172 vol. 5, no. 2, 2019 in september 2015, ukraine joined the process of implementing the goals of sustainable development by 2030, which envisaged the achievement of qualitative and quantitative results in four areas: social welfare, economic growth, protection and preservation of the environment, and also fair justice and peace. one of the key and fundamental goals is the reduction of inequality, poverty reduction, good health and well-being, quality education, as well as decent work and economic growth (fedoryshyna, 2017). the achievements of tasks within their framework are extremely important for ours the state and become especially relevant in the light of the need to overcome a number of social and economic problems that have emerged during independence. among them, in the first place, one can distinguish between the social and economic university and the poverty of the population, as evidenced by numerous scientific research and statistical surveys level and quality of life of the population. in the context of the economic crisis, payments play a key role in ukraine in the accumulation of material and financial resources necessary for managing income and budget expenditures. in general, a long way in shaping the state budget at the expense of income over the centuries has changed: from the natural form, under the conditions of an undeveloped market economy, to the absolute use of monetary form now. the most actual method of accumulation by the state of a social product has become fiscal payments – that is taxes that provide a lion’s share of budget revenues. today, taxes have undergone significant changes and especially the personal income tax, which requires detailed study and detail of such notion as “socioeconomic component of preferential taxation.” at present, it can be stated that the tax social benefit is intended to enable the taxpayer to reduce the calculated total monthly taxable income in the form of wages. 2. economic crisis effects on consumer behaviour the purpose of the article is to study the socioeconomic component of the preferential taxation of individuals. with the independence of our country, the individual income tax has undergone many transformations and repositioned. on july 5, 1991, the law of the ukrainian ssr “on the income tax on citizens of the ukrainian ssr , foreign citizens and stateless persons” was adopted. its action was stopped by the decree of the cabinet of ministers of ukraine “on personal income tax” as of 26.12.1992. however, on may 22, 2003, the verkhovna rada of ukraine adopted the law of ukraine “on personal income tax”, which entered into force on january 1, 2004, and since january 1, 2011, tcu standards have been applied. due to the permanent changes in the editorial and content character of ukraine’s pit many formal and real features are similar to the profitable taxes of the eu countries, in particular, germany, poland, france, which is confirmed by the ratio of the main tax objects, the list of taxpayers and administration procedures. according to art. 162 tcu, taxpayers are (fedoryshyna, 2017): 1) individuals – residents who receive income from the source of their origin in ukraine, as well as foreign incomes; 2) individuals – non-residents who receive income from the source of their origin in ukraine; 3) tax agents (fedoryshyna, 2017). the object of taxation is determined according to the status of the payer. so, for a resident – is: the total monthly (annual) taxable income; income from the source of their origin in ukraine which is finally taxed at the time of their accrual (payment, provision) and foreign incomes – income (profit) received from sources outside ukraine. the object of taxation of a non-resident is: the total monthly (annual) taxable income from the source of its origin in ukraine and income from the source of their origin in ukraine, which are finally taxed when they are charged (payment, provision) (aleskerova, 2015). the basis of taxation is the total taxable income – any taxable income accrued (paid, provided) in favour of the taxpayer during the reporting tax period. pit is fiscally significant for budgets of all levels, since after the distribution through the budget system the lion’s share remains at the disposal of local budgets. however, the detailing of individual income tax receipts in the context of budget classification codes indicates the need to take into account threatening trends. the main instrument for reducing poverty is the distribution and redistribution of income, which is carried out including at the expense of taxes. let’s analyse how privileged taxation of individuals’ incomes implemented in ukraine can meet the challenges and global environment and internal challenges. “tax exemption” – is the fiscal legislation that provides for the taxpayer to be exempted from the obligation to charge and pay taxes and duties. at present, there is no reason to elaborate a clear definition and the concept of “tax exemption” and “tax expenditures” enshrined in the legislation, as it will allow distinguishing the tax exemptions from the existing variety of forms of various types of tax exemptions and directly those that are classified as tax expense. therefore, the consolidation in the tcu of a clear and unambiguous list of criteria for tax breaks and other forms of tax exemptions and exceptions to the general rules of taxation has not only theoretical but also purely practical significance. the absence of an adequate tax-exempt minimum income for citizens in ukraine to meet the needs of primary necessities, which accordingly is not taxed, is a serious obstacle to the growth of the welfare of the population. baltic journal of economic studies 173 vol. 5, no. 2, 2019 3. differences in consumer spending behaviour among age groups we share the opinion of the researcher aleskerova y. (aleskerova, 2016) that today the actual role of the non-taxable minimum is fulfilled by the tax social benefit (further – tsb), which has a number of restrictions both in size and according to the criteria for its receipt. taking this into account, we agree with the numerous suggestions of researchers on the need to improve the tsb and substantiate their own approaches (aleskerova, 2016). according to the tax code of ukraine, different sizes of tax social benefits are established depending on categories of taxpayers: *100 (“normal”), * 150, * 200 % – the size of the subsistence minimum for an able-bodied person on january 1 of the reporting year. note that the size of the tsb is the subject of constant refinements. so, in the law of ukraine “on personal income tax” as of 22.05.2003 № 889-iv for the transition period till 2007, the limit on its maximum value was established by introducing a reduction coefficient. and by 2014, the size of the tsb remained at the level of 50% of the subsistence minimum for an able-bodied person (per month) on january 1 of the reporting year, and from 01.01.2015, according to clause 1 of section xix “final clauses” of the tcu had to be equal to 100% of this size (that is, 1 218 uah). however, the law of ukraine “on amendments to the tax code of ukraine and certain laws of ukraine (regarding the tax reform)” no. 71-viii increased the size of the tsb was postponed for another year – until january 1, 2016. however, in 2016, tsb was determined at the level of 50% of the subsistence minimum for ablebodied persons with the transfer of this norm from item 1 of the xix “final provisions” in subparagraph 169.1.1 paragraph of article 169 tcu. taking into account the inclusion of the reduction coefficient in the main text of the code, we estimate the likelihood of an increase in the tsb to 100% of the subsistence minimum for able-bodied persons in the near future as insignificant. in general, tsb can be called a virtual privilege because of its insignificant size (table 1). as can be seen from the data in table 1, the size of the tsb for 4 years actually remained unchanged and taking into account the size of inflation – even decreased, which in our opinion converts a fixed size of the tsb to a conventional value. the fixed maximum amount of income, which gives the right to use the normal size of the tsb, also seems to us to be economically irrational in terms of strengthening the regulatory function of the tax. based on the values of the subsistence minimum and according to the norms of the tax code of ukraine, the tax social benefit in 2017 had the following indicators: the maximum amount for the application of the tax social benefit: 2240 uah, ordinary social benefit (100%) – 800 uah, increased social benefit (150%) – 1200 uah, increased social benefit (200%) – 1600 uah, the benefit in 2018 will have the following indicators: the maximum amount for the application of tax social benefits: 2470 uah, ordinary social privilege (100%) – 881 uah, increased social benefit (150%) – 1321.50 uah, increased social benefit (200%) – 1762 uah. the tax social benefit is granted in the amount equal to 50 percent of the subsistence minimum for an ablebodied person. 4. survey methodology in accordance with the law of ukraine “on the state budget of ukraine for 2017” [8], the budget for 2017 includes the following social indicators: minimum wage in 2017: in monthly amount: from january 1, 2017 – 3200 uah; hourly rate: from january 1, 2017 – 19.34 uah. table 1 changing the tax social benefit and its related indicators in 2011–2018 year marginal wage giving right to tsb the subsistence minimum for able-bodied persons as of the 1st of the reporting year reducing factor the amount of the tsb 100% (subparagraph 169.1.1 and subparagraph 169.1.2 tcu) (col. 3 х col. 4 х 100%) 150% (subparagraph 169.1.3 tcu) (col. 3 х col. 4 х 150%) 200% (subparagraph 169.1.4 tcu) (col. 3 х col. 4 х 200%) 2011 1 320 941 50 % 470,5 705,75 941 2012 1 500 1 073 50 % 536,5 804,75 1 073 2013 1 610 1 147 50 % 573,5 860,25 1 147 2014 1 710 1 218 50 % 609 913,50 1 218 2015 1 710 1 218 50 % 609 913,50 1 218 2016 1 930 1 378 50 % 689 1 033,50 1 378 2017 2240 1600 50% 800 1200 1600 2018 2470 1762 50% 881 1321,50 1762,00 source: the state fiscal service of ukraine baltic journal of economic studies 174 vol. 5, no. 2, 2019 minimum wage in 2018: in monthly amount: from january 1, 2018 – 3723 uah; in hourly rates: from january 1, 2018 – 22.41 uah. subsistence minimum in 2017: for able-bodied persons: from january 1, 2017 – 1600 uah, from may 1, 2017 – 1684 uah, from december 1, 2017 – 1762 uah. in average per person: from january 1, 2017 – 1544 uah, from may 1, 2017 – 1624 uah, from december 1, 2017 – 1700 uah. subsistence minimum in 2018: for able-bodied persons: from january 1, 2018 – 1762 uah; from july 1, 2018 – 1841 uah; from december 1, 2018 – 1921 uah. on average, one person: from january 1, 2018 – 1700 uah; from july 1, 2018 – 1777 uah; from december 1, 2018 – 1853 uah. for children under the age of 6: from january 1, 2017 – 1355 uah, from may 1, 2017 – 1426 uah, from december 1, 2017 – 1429 uah. for children aged 6 to 18 years: from january 1, 2017 – 1689 uah, from may 1, 2017 – 1777 uah, from december 1, 2017 – 1860 uah. for people who have lost their ability to work: from january 1, 2017 – 1247 uah, from may 1, 2017 – 1312 uah, from december 1, 2017 – 1373 uah (fedoryshyna, 2017). the established indicators for the tax social benefit are calculated according to the following algorithm: the maximum amount for the application of the tax social benefit: the subsistence minimum for an able-bodied person on january 1 of the reporting tax year multiplied by 1.4 and rounded to the nearest 10 uah (clause 169.4.1 tcu). the size of the tax social benefit is equal to 50% of the subsistence minimum for an able-bodied person (per month), established by law on january 1 of the reporting tax year (section 169.1.1 tcu) (fedoryshyna, 2017). 5. findings with the size of the subsistence minimum for an able-bodied person as of 01.01.2018 in the amount of 1762 uah, the marginal revenue for application of the tax social benefit in 2018 will be: 1762 hryvnias x 1.4 = 2470 hryvnias however, the size of the minimum wage from 01.01.2018 is 3723 uah. therefore, less than this value cannot be charged to the employee for the monthly labour rate. so, it turns out that the tax social benefit will not be applied to the income of the vast majority of employees, since their salaries should be higher than uah 3723, and the maximum income for the application tax social benefit for 2018 – uah 2470. the size of the general tax social income for 2018 amounts to 50% of the subsistence minimum for an able-bodied person (per month) established by law on january 1 of the reporting tax year (clause 169.1.1 of the tax code): 1762 hryvnias 50% = 881 hryvnias. thus, only the workers who work under conditions of part-time work will be able to benefit from the general tax social income, and this is not always the case. 6. conclusions the lack of relevant statistical information in ukraine due to the lack of accounting for budget losses through the provision of individual income tax benefits does not allow for the use of an adequate mathematical instrument that has been successfully used in countries such as germany, poland, france to determine the change in tax revenues from tax increases for tax incentives for hired workers. the introduction of the concept of tax expenditures into domestic practice will provide a completely new impetus to the relationship around tax deductions from individual income tax. therefore, it is recommended to apply tax incentives to attract investment. although ukraine is a market economy country, in our opinion, observance of these recommendations will have only a positive effect both on activating the regulatory function of the pit and on the level of income differentiation of the population as a result. in view of a large number of studies of domestic scientists on this issue, it is necessary to systematize tax deductions from individual income tax in accordance with the concept of tax expenditures, taking into account the specifics of ukrainian tax legislation. references: kucheriavenko, m. p. (2010) aktualni pytannia nauky finansovoho prava: monohrafiia. [topical issues of financial law science: monograph]. kharkiv: nats. yuryd. akad. ukrainy im. ya. mudroho. (in ukrainian) aleskerova, yu. v., voronetska, i. s., korniichuk, h. v., kravchuk, o. o. (2015). finansovo-ekonomichnyi slovnykdovidnyk po silskomu hospodarstvu [financial-economic dictionary-reference book on agriculture]. vinnytsia, ukraine: pp "td "edelveis i k". (in ukrainian) aleskerova, yu. v., marakhovska, t. m. (2016). fiskalna polityka rozvytku sotsialno-ekonomichnoi sfery ukrainy [the fiscal policy of the development of the socio-economic sphere of ukraine]. hlobalni ta natsionalni problemy ekonomiky, 12, 413–418. (in ukrainian) aleskerova, yu. v. (2016). fiskalnyi mekhanizm sotsialno-ekonomichnoi sfery yak skladova finansovoho mekhanizmu derzhavy [the fiscal mechanism of the socio-economic sphere as a component of the financial mechanism of the state]. prychornomorski ekonomichni studii. 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(2018). analysis of investment activities of enterprises of ukraine. economic system development trends: the experience of countries of eastern europe and prospects of ukraine. derzhavna fiskalna sluzhba ukrainy [the state fiscal service of ukraine]. retrieved from: http://sfs.gov.ua/ (in ukrainian) zakon ukrainy “pro derzhavnyi biudzhet ukrainy na 2017 rik” [on the state budget of ukraine for 2017]. retrieved from: http://ukrainepravo.com/ (in ukrainian) informatsiia z ofitsiinoho saitu derzhavnoi sluzhby statystyky ukrainy [information from the official site of the state statistics service of ukraine]. retrieved from: http://www.ukrstat.gov.ua/ (in ukrainian) konstytutsiia ukrainy: vid 28.06.1996 № 254k/96-vr [the constitution of ukraine: dated june 28, 1996 № 254k/96-vr]. retrieved from: http://zakon4.rada.gov.ua/ (in ukrainian) korobkina, n. h. (2014). henezys podatku na dokhody fizychnykh osib v ukraini [genesis of personal income tax in ukraine]. istoriia torhivli, podatkiv ta myta. dnipropetrovsk: akademiia mytnoi sluzhby ukrainy. (in ukrainian) korobkina, n. h. (2014). kontseptualni zasady reformuvannia podatku na dokhody fizychnykh osib [conceptual principles of reforming the tax on individuals' income]. reformuvannia podatkovoi systemy ukrainy v konteksti hlobalizatsiinykh vyklykiv. irpin: naukovo-doslidnyi tsentr z problem opodatkuvannia. (in ukrainian) podatkovyi kodeks ukrainy: vid 02.12.2010 № 2755-vi. [the tax code of ukraine: № 2755-vi of 02.12.2010]. retrieved from: http://zakon1.rada.gov.ua (in ukrainian) fedoryshyna, l. i., hlazko, n. d., lysak, yu. d. teoretychni aspekty podatkovykh pilh [theoretical aspects of tax privileges]. retrieved from: http://www.rusnauka.com (in ukrainian) baltic journal of economic studies 75 vol. 4, no. 5, 2018 corresponding author: 1 national university “odessa law academy”, ukraine. e-mail: dyntuvaleriia@gmail.com 2 national university “odessa law academy”, ukraine. e-mail: olegdykyj@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-75-81 cryptocurrency in the system of money laundering valeriia dyntu1, oleh dykyi2 abstract. the target of the article is to study the place of the cryptocurrency in the process of money laundering. the subject of the article is to investigate the ways and means of usage cryptocurrency for money laundering, the possibilities, and limits. problem’s setting. the authors of the paper have emphasized that despite the broad usage of cryptocurrency all over the world for different kinds of purchasing and transactions, there is no unified position regarding the definition of cryptocurrency, as well as its legal status. moreover, the aforementioned circumstances trigger the difficulties during the criminal investigation of money laundering by using cryptocurrency. thus, law informant agencies are facing challenges with the identification of criminals’ personality and the fact of crime commitment. in addition, in the article, the authors articulate the main concept of cryptocurrency: anonymity and decentralization, which engender the main aggro while crime investigation. methodology. the research is based on an analysis of historical stages of cryptocurrency creation: from friedrich august von hayek’s idea of “currency independent from banking and governmental” to the establishment of decentralized currency. moreover, there were analysed the cases of money laundering where criminals who used cryptocurrency have been identified and press charged. in addition, the comparative methods were used to collate different positions regarding cryptocurrency all over the world and inside ukraine. the position of the main authorities and organizations regarding the legal status of cryptocurrency was investigated as well. the results of the study revealed that a cryptocurrency is a convenient tool for money laundering because it gives relative anonymity for the owner of the currency, as far as it does not require any personal information about the user and his location. aforementioned feature minimizes the opportunity for law enforcement agencies to track back the criminal activity and to identify the criminal personality. furthermore, cryptocurrency transactions are out of the government control because for conducting any transactions by using cryptocurrency, there is no need for their verification by third parties like a bank, governmental authority or nongovernmental organizations. in addition, the user can have more than one account and conduct transactions from different places at the same time. key words: cryptocurrency, money laundering, criminal investigation. jel classification: k14, k24, l86, o17, o33 1. introduction ххі century became the era of skyrocket and rapid development of science and technology, which is unthinkable without the world wide web. however, the creation of the aforementioned indispensable tool counts less than 50 years. in 1969, charley kline made first but an unsuccessful attempt of remote login the computer of stanford research institute. this date can be considered as a day of creation of a new way of interaction between people all over the world. then in 1989, tim bernerslee offered cern the concept of the new distributed information system, which he named the world wide web. since that time all spheres of life step by step have shifted their main activities into the augmented reality of the world wide web. the same fate befell the economy, which during the last 15 years has digitalized almost all main processes. the latest breakthrough in the digital economy was done by the creation of new means of payment – cryptocurrencies, which emission and accounting are based on asymmetric encryption by utilizing cryptographic methods of protection. currently, the attitude to the cryptocurrency has different avenues, from complete abnegation of its potential and benefits to all-consuming adoration as a future way for liberation out of financial government control. we do not support any of the radical viewpoints regarding cryptocurrencies considering it as a tool, which has advantages and disadvantages. however, law enforcement agencies all over the world identify the use of cryptocurrencies for commitment to different types of crime, mostly correlated with baltic journal of economic studies 76 vol. 4, no. 5, 2018 economic and financial spheres, in particular, money laundering. aforementioned anxiety triggers the necessity for deep research of ways and means of using cryptocurrencies in the process of money laundering, which determines the relevance of this article. 2. literature review the study of using cryptocurrency for illegal activities is under the consideration of such scientists as bezverbnyi  k., kasatkin a., kornev i., krylov g., robbek a., and others. however, despite the significant contribution of the aforementioned scientists into considering the topic, the current situation with usage cryptocurrency for the commitment of economic crimes demands the deeper contemplation of it, especially regarding money laundering. 3. brief characteristic of the virtual currency the determination of money’s origin was always the issue of discussions. paul anthony samuelson wrote that “money is an artificial social convention” (samuelson, 1993). consequently, if the social convention was created it must have a purpose. aristotle suggested that exchange requires the emergence of the equivalent payment instrument (bechler, 1995). inasmuch as exchange can be considered as a social agreement, thus the establishment of the money can be seen as a social treaty. however, there are a lot of supporters of another theory of money’s emergence. for instance, k. marx laid the foundation of evolutionary theory, which later was finalized by ludwig heinrich edler von mises. he articulated that arise the inevitable tendency when means of exchange which were used became less exchangeable and were rejected one by one, until was lived that single goods which became universally applied as a means of exchange, in other words, as money (mises, 2005). we support the viewpoint of david rolfe graeber who admitted that problem is that there is no evidence which proves the aforementioned theory, and however there are a lot of facts which refute it (graeber, 2011). nevertheless, despite different opinion about roots of money, nowadays they have important role all over the world and can be considered as a bunch of socially recognized information, which has their own value, information about the amount of cost, which is recognized by business entities in the transactions correlate with goods and services, and sometimes with money themselves as a commodity of a special kind (surikov, 2015). currently because of the forth industrial revolution (schwab, 2016) and rapid development of it technologies, the framework of economy was changed and caused the emergence of new phenomena – digital economy, which can be considered as a series of economic, social, and cultural activities that are performed online and are related to the use of information and communication technology (zupan, 2016). thus, the digitalization of the economy has set up the boundless environment with renewed trading rules. furthermore, it triggers the creation of the virtualization of the world bank system – a transformation of banking on the base of informational technology implementation into bank sector; according to the form, it is a transition of bank sector into electronic flatness of utilization, which can be seen in following forms: electronic banking, electronic payment systems (domestic and international) (pelo, 2015). consequently, the high-speed rise of digital trade market and virtualization of the world bank system demanded the creation of the certain financial tool, which can be used via the internet and ensured the high speed of transactions. such kind of instrument has become virtual currency. it should be noticed that comply with fincen’s regulations to persons administering, exchanging, or using virtual currencies “in contrast to real currency, ‘virtual’ currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency” (fcen, 2013). virtual currency is different than electronic money, which is a digital means of fiat currency and is utilized for electronic transfer of reflecting fiat currency cost and is considered as a legal means of payment (karcheva and nikitchuk, 2015). furthermore, the distinction between virtual currency and other means of payment is the method of the emission of payment units and the organization of their storage and transfers system. in addition, “unlike gold or silver virtual currencies have no non-monetary use or value – they are just bits of data” (wsbi, 2014). furthermore, the value of virtual currencies is based on the convention among system’s users, which are working via the internet (dziuba and orzeszko, 2015). according to the european central bank position which was expressed in “virtual currency schemes – a further analysis” “virtual currency is a digital representation of value, not issued by a central bank, credit institution or e-money institution, which, in some circumstances, can be used as an alternative to money” (ecb, 2015). moreover, in report of the financial action task force, virtual currency is considered as a “digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction. it is not issued or guaranteed by any jurisdiction and fulfils the above functions only by agreement within the community of users of the virtual currency” (fatf, 2014). thus, “virtual currencies represent both the emergence of a new form of currency and new payment technology to purchase goods and services” (bolt and oordt, 2016). baltic journal of economic studies 77 vol. 4, no. 5, 2018 there are three types of virtual currency: closed, virtual currencies with the unidirectional flow, and virtual currencies with the bidirectional flow. in fact, closed virtual currency does not link to the real economic sector. it is intended for payment for virtual goods or services, for instance, virtual games, and cannot be utilized out of the virtual community. as an example, world of warcraft (wow) gold can be taken, which is used in the computer game with a similar name (karcheva and nikitchuk, 2015). all unconvertible virtual currencies are centralized: according to the definition, they are emitted by the central administrator, which controls system, sets the rules for using the virtual currency, maintains a centralized payment register, and has right to withdraw currency from circulation (karcheva and nikitchuk, 2015). the virtual currency with unidirectional flow. such currency can be purchased according to a specially set course by using “real” currency; however, it is impossible to comply with the same course to exchange it backward. such currency can be purchased according to a specially set course by using “real” currency; however, it is impossible to exchange it backward in conformity with the same course. its main purpose is the payment of virtual goods and services, nevertheless, some of them allow paying for real goods and services. as an example can be taken facebook credit, amazon coins, nintendo points, bonuses for passengers, who often enjoy the services of the particular airline (badzym and drevush, 2014). virtual currencies with the bidirectional flow. such currency can be purchased and bought according to a certain exchange course, in other words, to convert it (badzym and drevush, 2014). the term “converted currency” does not mean its official convertibility (for instance in a case of the gold standard) but only indicates its “de facto” convertibility (for instance, due to the existence of the relevant market). thus, virtual currency is “convertible” only until that time, while individuals and legal entities carry out transactions with it, and another except it as far as “convertibility” of virtual currency does not insure by the legislation (karcheva and nikitchuk, 2015). the main propose of it is payment for real and virtual goods and services (badzym and drevush, 2014). as an example of “converted currency,” cryptocurrency can be taken. 4. the stages of cryptocurrency creation despite the significant popularity of cryptocurrency in ukraine and other european countries, its particular definition still has not been articulated. we support the viewpoint that “cryptocurrency is a digital decentralized currency, a unit of which is a coin cryptographically protected against tampering since it is an encrypted information that cannot be copied, while all information about transactions is stored in the blockchain system” (inshyn, mohilevskyi, drozd, 2018). very often the creation of cryptocurrency correlates with the replication to the social demand for a currency independent from banking and governmental institutions, after economic crises in 2008 when they lost their reliability. however, the idea of private money is not new; it was articulated in the book of austrian economist friedrich august von hayek “the denationalization of money.” his main idea was that government should be deprived of the money’s emission monopoly with a target to prevent the inflation process (hayek, 1976). furthermore, milton friedman in 1999 during the interview admitted that “…the internet is going to be one of the major forces for reducing the role of government. the one thing that’s missing, but that will soon be developed, is a reliable e-cash, a method whereby on the internet you can transfer funds from a to b without a knowing b or b knowing a, the way i can take a usd 20 bill and hand it over to you and then there is no record of where it came from” (wsbi, 2014). his prediction was precision because progressive instruments and systems are establishing neoteric paradigms for transactions and new channels of capital (hileman and rauchs, 2017). it should be noticed that the roots of cryptocurrency go to the end of the previous century, in particular, in 1983 david chaum offered the idea of combining transparency and anonymity of transaction for all users by utilizing “blind signature” (chaum, 1982). then in 1990th, the movement of crypto-anarchists was formed – cypherpunk whose idea was the usage of cryptography and other similar tools for changing the social order. in 1993, one of the founders of the cypherpunk eric hughes announced the confidentiality of transactions by using multi-step encryption and published. in 1994, timothy c. may published the work “the cyphernomicon: cypherpunks faq and more, version 0.666” where he described safe untraceable encrypted transactions, which would use the p2p system which does not need verification by third parties and would cause the independent from the government (may, 1994). in 1998, wei dai offered cryptocurrency “b-money”. he wrote “i am fascinated by tim may’s crypto-anarchy. unlike the communities traditionally associated with the word ‘anarchy’, in a crypto-anarchy, the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. it’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations” (dai, 1998). in 2005, nick szabo created “bitgold”. as a libertarian wing of cypherpunk inspired by the novel of ayn rand “atlas shrugged” he wanted to create “galt’s gorge” in the cyberspace – free trade zone. firstly he came to the idea of creation smart-contracts, which was based on blockchain system in 1990th, and later on invented cryptocurrency. baltic journal of economic studies 78 vol. 4, no. 5, 2018 5. the analyses of bitcoin as a cryptocurrency currently, the most popular cryptocurrency which is used by bidirectional flow is bitcoin. bitcoin is decentralized p2p (person to person) payment network, which serves its users without central bodies and agents. from the users’ point of view, bitcoin is analogue of cash but only for the internet (in bitcoin information site). the maximum amount of bitcoin in the world is restricted and cannot be more than 21 million. the creation of bitcoin is correlated with the name of satoshi nakamoto, who on september 3, 2009, via the internet published an article “bitcoin: a peer-to-peer electronic cash system” (nakamoto, 2009), in which he described the main principals of new cryptocurrency. the main characteristics, which distinguish bitcoin from traditional electronic money and cashless settlements, that bitсoin is not debt obligations of the issuer. any person, who has access to the internet and enough amount of computer memory, can be a user of bitcoin. for this purpose, utilizer has on the official website to choose “wallet” and to install it. the wallet can be installed on the personal computer, mobile phone, or can be available via the internet. it should be noticed that wallet has the specific address and it contains information about closed keys “seed” for all bitcoin, which belongs to the particular user. by utilizing the aforementioned wallet user can do any transactions. essentially, all owners of bitcoin’s accounts, wallet, as well as participants of transactions, are holders of individual accidentally generated numbers, which become key or “password” for that element or activity. any key or “password” is absolutely unique and anonymous because does not need user’s personal data and owner of that key becomes the owner of the account, wallet or transaction. peer-to-peer system which is utilized by bitcoin allows users to do transactions between themselves without interruption of the third party. operations are checked by network nodes and records to a distributed ledger database – blockchain. blockchain automatically gives information to one party that another party of the treaty legally has paid for goods or services. in the aforementioned transaction, there isn’t a third party. the system literally is controlled by all participants. any person who participates in cryptocurrency commerce has the same capability to control the movements of cryptocurrency. all verified transactions are included into blockchain. the transaction is a transfer of value between bitcoin’s wallets which are included into blockchain. bitcoin’s wallet applies the key to sign a transaction. key provides mathematical proof that bitcoin comes from the owner of the “wallet”. all transactions are transmitted between users and commonly begin to be confirmed by the network during the next 10 minutes through the certain process – “mining”. “mining” is a process of producing electronic money with aid of solving by the computer, certain the cryptographic algorithms (lyubshina and zolotaryuk, 2016). bitcoin is mined by blocks, the initial size of one block is 50 bitcoin, however, after every 250000 blocks, and their amount is declining twice. on the average, each block is mined in 10 minutes. to save the aforementioned parameter after any 2016 mined blocks, the complexity of their mining is adjusted. since the amount of equipment, which is used for mining constantly increase, thus the share of mined blocks for each of them constantly decrease. by simple calculation can be determined the amount of bitcoin which is generated per day: 25×24×6 = 3600. thereby, the amount of emission is known in advance (robbek, 2014). it should be noticed that governments of different states of the world have a different opinion about the legalization of bitcoin inside their countries. for instance, the new law, which has come into a force in japan, allows utilizing bitcoin as a legitimate means of payment. as for ukraine, according to the explanation of national bank of ukraine regarding the legality of “virtual currency/cryptocurrency” bitcoin usage in ukraine – bitcoin is a monetary surrogate, which does not have provision by the real cost and cannot be used by individuals and legal entities on the territory of ukraine as a means of payment, as far as it contradicts norms of ukrainian legislation (natsionalnyi bank ukrainy, 2014). it should be noticed that the explanation of the national bank of ukraine cannot be considered as a norm as far as it does not provide any responsibility; therefore, it can be utilized as a kind of notification or warning (drozd, lazur and serbin, 2017). it should be noticed that “an ambiguous approach to cryptocurrency in different countries of the world creates additional problems for determining the legal status of cryptocurrency” (drozd, basai, churpita, 2017). the aforementioned position of national bank of ukraine was formed because transactions with bitcoin does not allow to identify persons who realized them and it opens significant opportunities for crimes commitment, which correlate, in particular, with money laundering. for instance, fbi reported that if bitcoin becomes more widely accepted among vendors and users, the fbi anticipates seeing increased bitcoin money laundering activities (fbi, 2012). 6. the place of bitcoin in the money laundering process money laundering can be defined as a financial transaction and other activities, which are committed for a particular target of concealment the real origin of the revenue. it should be noticed that “money laundering begins with the fruits of a crime – the underlying or “predicate” offense – and ends with funds that can be used safely or at least with minimal risk, for any purpose” (levi and reuter, 1997). baltic journal of economic studies 79 vol. 4, no. 5, 2018 in the world practice, the biggest case in the history of online money laundering is liberty reserve. in may 2013, the u.s. department of justice has pressed charges against the company “liberty reserve” (which was the system of electronic transactions and located in costa rica) and seven its managers and employees. they were accused of commitment unregistered commercial activity with the provision of money transfer services and money laundering by the assistance of transactions of illegal income more than 6 billion us dollars. this system was functioning in colossal dimensions, counted millions of users all over the world, including 200000 users in the usa. in its framework, approximately 55 million transactions were carried out; almost all of them were illegal. inside the system, their own virtual currency “liberty dollars” or ld was used, however, in the initial and end point of transaction money were converted and stored in fiat currency (usd). as a result of conducted wellcoordinated actions, the ministry of finance of the usa determined “liberty reserve” as the financial agency, which triggered concern in terms of money laundering comply with chapter 311 us anti-terrorism act (patriot act) and completely deprived its access into the financial system of the usa (fatf, 2015). as an example of the utilizing bitcoin cryptocurrency for criminal activity, successful functioning of hiding website “silk road” can be taken. it was the biggest virtual market of drugs trading. all transactions via that website were conducted with aid of bitcoin and anonymity for users was given through the functioning in darknet, which viability was carried out by using the tor software. “silk road” was functioning as a peculiar bitcoin’s bank, where any user had to have account for conducting transaction via the website, if it was possible not less than one (or even thousands) bitcoin address “silk road”, which were attached to user’s account on the website and were stored on the server, which was controlled by “silk road”. for purchasing, a user sent mined bitcoin to the bitcoin address of “silk road” which was attached to his account on the website. after the realization of purchasing, the user’s currency transferred in the system of escrow account until the complete end of the transaction, then bitcoin of user/customer transmitted from escrow account to bitcoin address of the silk road’s seller. furthermore, “toggle-switch” was used for any buyer which directed all payments with aid of complicated series quasi-random fake transactions … almost excluding the opportunity to binding payment to any bitcoin, which was sent from the website (mergenovna, krylov, bezverbnyi, kasatkin and kornev, 2016). currently, the aforementioned website “silk road” has shut down, and persons who governed it were brought to criminal responsibility. 7. conclusions to sum up, it should be emphasized that modern technologies facilitate using cryptocurrency, in particular, bitcoin for money laundering. this process has become more complicated and intelligent, as far as elaboration allows: firstly, to eliminate bonds between real person and account of virtual currency because bitcoin address and protocols do not require the client’s identification; secondly, to conduct conversation by utilizing simplified system, which does not need a person. whereas, virtual currencies’ exchange does not have strict regulation, as those, which work with fiat currencies and according to the law have to store particular documentation about clients; thirdly, to create unlimited amount of account, which objectively makes it impossible to control all transactions; fourthly, to utilize tools which block the opportunity to track back particular activity (anonymizers etc.). for instance, dark wallet, which mixes together several transactions and complicates the opportunity to track back the particular address of bitcoin wallet, which sends bitcoin. in addition, transactions can be done through the tor network, which directs particular web-traffic through several relays, in that way hiding the real user’s ip-address. thus, bitcoin allows conducting different schemes of money laundering, which almost block the possibility of the criminals’ identification. this feature triggers new challenges for law enforcement agencies to seek out new forms and methods of money laundering investigation. moreover, the aforementioned characteristics of cryptocurrency are pushing lawmakers all over the world to unify the legislative system regarding 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(2016). e-skills and digital economy. statistical office of the republic of slovenia. retrieved from: http://www.stat.si/statweb/file/docsysfile/8970/e-skills_and_digital_economy.pdf (accessed 30 october 2018) baltic journal of economic studies 235 vol. 4, no. 3, 2018 corresponding author: 1 department of economic analysis and accounting, national technical university “kharkiv polytechnic institute”. e-mail: rinavmar@gmail.com 2 department of management of foreign economic activity and finance, national technical university “kharkiv polytechnic institute”. e-mail: drugova.elena.sergeevna@gmail.com 3 department of finance, ukraine state fiscal service university. e-mail: oksanaskvur81@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-235-243 methods for diagnosing the effectiveness of the enterprise’s financial strategy in the strategy controlling system maryna reta1, elena druhova2 national technical university “kharkiv polytechnic institute”, ukraine oksana lisnichuk3 ukraine state fiscal service university, ukraine abstract. the purpose of the article is to describe how the controlling system is implemented and controlling tools are applied at enterprises in ukraine. the article contains selected results of the survey research conducted by the authors at logistics enterprises in ukraine. the obtained data were used to verify the hypotheses and to evaluate the controlling system implementation at the pharmaceutical companies in ukraine. methodology. to substantiate the essence of management accounting tools, the authors used the method of grouping of management accounting tools, affecting the achievement of its goals. the results of the empirical study show that almost half of the surveyed logistics companies use controlling systems in business practice. these are primarily large and medium logistics enterprises regarding employment scope and annual sales revenue. the companies applying the controlling system, as well as the business entities without it actually use operational (traditional) controlling tools, e.g. traditional cost accounting systems complemented by the selected strategic method of controlling. conclusion. the proposed classification of management accounting tools permits to organize the terminological apparatus of the management accounting system in general and at enterprises in particular. key words: strategic controlling, strategic management, controlling tools, solutions in controlling, strategic method of controlling, controlling system, strategic scorecard, unclear plurals, level, system of indexes, finance. jel classification: r14, d18, p2, b40, g39, m40 1. introduction modern globalization, constantly growing market competition, consumers’ changing tastes, permanent technology development and ever-increasing requirements for quality and workability of products and services make the enterprise management focus simultaneously upon three different vectors: to improve own competition position in the market, to minimize risks of adverse events affecting enterprise’s activities etc., to create conditions for sustainable development. to meet these requirements, the enterprise’s managers should implement different management tools, directed both upon effective management of internal processes and forecasting of external impact to achieve the desired effect and to ensure balanced enterprise sustainable development. one of the modern management tools, widely expanded in the second half of the xx century, is controlling, aimed at creating the proper information support needed to make reasonable management decisions. controlling is a modern management concept, which allows a quick response to changes in the environment and aimed at creating appropriate adaptation measures. at the same time, the need for conditions for the long-term sustainable development of the enterprise requires the development and implementation of the strategic controlling. the enterprise development in long perspectives is largely determined by the quality and probability of information support for strategic management. so it seems reasonable to assert that the key information includes target values of key indicators defined by the mission, vision, and strategic behaviour of enterprises. issues of strategic controlling implementation in business baltic journal of economic studies 236 vol. 4, no. 3, 2018 management have not been yet described enough. so the goal of this research is to ground scientific and practical approaches to building and implementation of strategic controlling, to determine strategic controlling tools, to analyse opportunities for their application at ukrainian pharmaceutical enterprises. 2. theoretical specification of strategic controlling controlling as a concept first was developed in the us, but the modern content of this category appeared in germany. so, currently, the terms “management accounting”, “managerial accounting” are used in the united kingdom and the united states. in ukraine, both terms are used but controlling as a system at the level of economic entities practically is hardly applied. ukrainian scientists just begin to develop the controlling theory, to study its existence and applicability in the domestic economy. aspects of controlling as the science are studied by such economists as j. weber, a. daite, e.  mayer, r . mann, d. khan, p. horvat, m.s. pushkar, l.o. suharova, s.m. petrenko, t.a. lev, d.v. gulin, o.l.  maksimenko, s.a. smirnov, o.a. tereshchenko, і.і. tsigilik, and others. the researches show that “controlling” concept is defined differently in modern literature (table 1). this is actually caused by that at every enterprise controlling is associated with different needs and functioning conditions leading to individualization of implementation and functioning of the controlling system, mechanism, and process. so, in our opinion, controlling is a functionally separated direction of informative analysis at the company related to the information support function for the management decision-making of financial and economic, resource, operational, tactical, and strategic nature. unlike other accounting and analytical systems providing information support for management processes, the strategic controlling system is aimed at revealing the main tendencies and events in the external and internal environment that may impact on the business, and allows to assess resource support for developed plans (tokareva, 2008), revealing errors, factors, and problems, which impede the implementation of selected strategies, and developing measures for the adaptation of enterprise’s strategies to changing environmental conditions, which in turn helps adopt perfect management decisions (zhilina, zagidullina, 2011). the controlling system is an accounting and analytical system, implementing the synthesis of elements of accounting, control, planning, forecasting, table 1 controlling definitions in the literature author definition characteristic edward nowak (edward nowak, 2011) “controlling is a company management system supporting managers in controlling the course of the business processes taking place therein and coordinating various areas of activity from the point of view of the company as a whole to achieve the assumed goals.” m. sierpiriska (m. sierpiriska and b. niedbala, 2014) “controlling may be treated not only as an integrated system of planning and control but also as a certain philosophy of operation of an effective and flexible company, skilfully manoeuvring in the dynamic and uncertain environment. controlling understood in such a way is a tool for selection of the organisation’s development strategy, objectives and tasks, coordination and assistance in the performance of these tasks, assessment of the success rate of the entity on the market, and growth in its market value [14].” j. weber ( j. weber, 2001) “controlling means a function inside the management system in such companies, whose executive system (operation) is coordinated through plans. the purpose of controlling is to coordinate all management subsystems. it has the same instruments and mechanisms at its disposal, which are used by the management system. the purpose of controlling is to increase the effectiveness and efficiency of management and strengthen adaptation to the changes taking place inside and outside the company.” bokareva l.g. (bokareva, 2008) interprets strategic controlling as a new form of management for the assessment of resources availability and implementation of announced plans. quality of development of long-term projects, their ability to achieve the set goals is controlled by strategic controlling [6]. alekseyeva i.v. (alekseyeva, 2010) defines the purpose of strategic controlling as evaluation of implemented strategic goals set by top-management in terms of resources’ availability, and rates “coefficient of resistance” of the environment (quality management, corruption, institutional restrictions, and etc.), where these goals are implemented [7] mann r . (mann, 2012) “controlling is a system of rules which prevents surprises and the red light on when danger appears to require relevant measures in the management.” refäuter, d. (refäuter, 1990) “controlling is called subsystem of the management system, it helps to achieve business goals, it prevents from surprises, and it draws attention to danger at the time. it is a specific form of work with information. the role of controlling is not to manage but to help management by using information about real processes.” gurčík, ľ., (gurčík, 2001) “controlling is an integration tool of management that supports management decisions venture and managers. the base controlling is very good information systems and management accounting. it enables effective communications among organizational subsystems of the company.” source: compiled by the authors according to the research results baltic journal of economic studies 237 vol. 4, no. 3, 2018 coordination, providing both operational and strategic management of goal achievement and enterprise’s performance. the development of strategic thinking and strategic approaches to management resulted in changes in controlling concept – contributed to the development of its strategic aspect, aimed at forming abilities and development of adaptation strategies and enterprise’s adjustment to changes in the environment, basing on the strategic planning and coordination system. with the enterprise’s strategic controlling, a mechanism is created to quickly respond to innovations and changes of market environment, however, in our opinion, controlling implies not only a situational reaction but also provides tools for forecasting and developing preventive measures to minimize the risk of the external and internal environment. the strategic controlling system includes two levels of management: strategic level – the system of the enterprise’s strategic accounting (assessment of the correctness of the decisions at different levels of management in terms of compliance with the general strategy of enterprise development); operational level – the system of the enterprise’s management and financial accounting. some authors (konsek, ciechonska, 2017) suggest the controlling concept be considered in functional, instrumental, and institutional aspects to effectively harmonize directions of its development and functionally separate from other management subsystems. however, in spite of the management levels, in our opinion, the goal of strategic control is to reveal organizational, technical, and financial abilities to achieve strategic plans in terms of rapid changes in the external business environment, as well as to keep monitoring of the results of the implementation of strategic goals and objectives. a corporate strategy defines prospects for enterprise development in general. it focuses upon implementing the enterprise’s mission and is aimed at maximizing the owners’ welfare. typically, the enterprise functional strategies are formed by its main activities. the main strategies of this level include: marketing, production, financial, innovation, etc. however, it should be noted that in the formation of common strategic goals, their financial components should be considered first, as well as financial goals, which may adjust the process of forming the enterprise’s general strategy. financial strategic goals are formed based on the enterprise’s general strategic goals, directly related to each other and play a leading role in the effectiveness of the enterprise’s strategy implementation (lisnichuk, 2012). ensuring the enterprise’s sustainable development in the long perspective contributes to the implementation of effective mechanisms for assessing threats of the internal and external environment in order to minimize their impact on the strategy results. and therefore, it becomes relevant to develop and implement appropriate methodological approaches to the assessment of the effectiveness of the enterprise’s implemented strategic goal that would have high reliability. 3. theoretical researches of strategic controlling tools strategic controlling collects basic information for the preparation of a strategic plan and includes assessment of the stakeholders’ expectations, and keeps monitoring indicators characterizing of the enterprise strategy implementation effectiveness. to perform these basic controlling functions in economic theory and practice, many tools have been developed. controlling tools often coincide with the management accounting tools, which essence is its complexity, consistency, and coherence of individual components of the tools. thanks to the synergy in mobilizing the company’s potential, which enhances the ability of its counteraction to environment influence (mazaraki, fomina, 2016). at the same time, the strategic controlling system is aimed at coordinating all management subsystems, using all available tools and mechanisms inherent in the conventional management system. the purpose of controlling is to increase the management efficiency and to strengthen adaptation to changes inside and outside the company. management accounting tools are economic tools, which allow to methodically (technically) implement its procedures. a.a. taran and r .m. tsygan distinguish the following tools of management accounting: • information and reporting tools implemented through permanent analysis of financial results, expenses of responsibility centres, adjustment of accounting information, support for the operative formation of internal management reporting on the enterprise’s business activity; • matrix-analytical tools (calculation of expenses for the product life cycle, of target costs, of investments, of cost and its deviation, cost analysis); • tactical and operational tools (financial analysis of performance indicators, static and dynamic tools for investment evaluation, budgeting, functional and cost analysis, expenses accounting and costing, standardcosting, targeting-costing, abc-costing, kaizencosting, direct costing, analysis of indirect costs, etc.); • strategic predictive tools (swot analysis, gap analysis, balanced scorecard system (bsc), portfolio analysis (analysis of the activity distribution according to individual strategies for products and markets, etc.) (taran, tsygan, 2013). a. mazaraki and o. fomina have another opinion (mazaraki, fomina, 2016), offering the classification of controlling tools by the following areas: management functions (accounting, analytical, control, organizational); management accounting (operational, strategic). for example, strategic analytical tools may include: investment analysis, strategic analysis (including baltic journal of economic studies 238 vol. 4, no. 3, 2018 analysis of strategic partners: competitors, buyers, suppliers); analysis of own potential; quality analysis; strategic pricing (pricing at the product lifecycle stages), value chain analysis, cost factors, product life cycle, strengths and weaknesses (swot analysis), functional and cost analysis (fca). such strategic analytical tools as a balanced scorecard system and management reporting become independent. however, each of these tools is not focused upon solving the problem of quick and easy monitoring of the effectiveness of the enterprise’s strategy implementation, which makes difficult generating relevant objective information through a strategic controlling system. therefore, using the researchers’ experience, we propose to improve the methodology of the diagnostics of the effectiveness of the enterprise’s strategy implementation. the variety of existing concepts and tools suggests that the issue of diagnostics in modern strategic management is considered quite deeply. however, methodological approaches that fully satisfy the needs of express diagnostics have not yet been proposed. in our opinion, the diagnostics of the effectiveness of the enterprise’s strategy implementation in the strategic controlling system is a continuous process of complex identification of problems (deviations according to certain criteria) in the strategic plan of the enterprise development, aimed at optimization and adjustment of the enterprise’s strategic development. that is, the diagnostics of the enterprise’s strategy effectiveness conceptually should include two components: determination of the scope of evaluation and formation of a list of criterion indicators and based building indicators to assess the effectiveness of the enterprise’s strategy implementation. according to the current definition, the purpose, objects, methods, and principles of diagnostics in the strategic enterprise management system are determined (figure 1). however, it should be noted that the financial indicators are considered to be indicators of enterprise figure 1. diagnosing the implementation strategy effectiveness, as a part of the enterprise’s strategic management source: by the author (reta, 2016) the goal of diagnostics is proper recognition of deviations based on an assessment of the strategic aspects of development, taking into account the entity’s characteristics objects of diagnosing are the entity’s financialeconomic system by directions of strategic development, its elements and relations principles methods collection analysis assessment optimization and correction of the strategy forecasting diagnostics periodicity complexity systemacity adequacy fullness flexibility dynamics based on the methodology: methods of diagnosing of strategic positions; methods of diagnosing of competitive advantages methods of diagnosing of crisis state based on the polycrystal nature of the indicator: matrix models; discriminant analysis; based on the theory of networks; baltic journal of economic studies 239 vol. 4, no. 3, 2018 development and the effectiveness of its strategy implemented. the effective financial strategy of the enterprise ensures implementation of the enterprise functional strategies, and therefore, deterioration of the enterprise’s financial indicators shows stable adverse trends in their development. therefore, in our opinion, in the first place, the effectiveness of the enterprise’s strategy implementation should be determined through its financial component. the modern concept of sustainable development involves balanced development by four components – finance, customers, internal business, and development. the development by these four components is consistent with the balanced scorecard concept, which came into common use at modern enterprises enabling them to determine their own indicators and to generate one within each of the four components considering characteristics and specifics of the enterprise. however, one tested in certain studies can be accepted as a basis (table 2). according to the balanced scorecard system, it is planned to group the system of indicative indicators into four directions. the implementation of this approach aims to form a set of indicators, which assess the enterprise’s strategy effectiveness primarily based on publicly available data that can be obtained from public information sources. following the hypothesis that the enterprise’s strategic goal and tasks should generally be focused upon ensuring the enterprise’s long-term sustainable development, we believe that the strategy implementation effectiveness will firstly be determined by achievement of the planned level of key indicators for each area of the enterprise’s activity, which are collectively aimed at the enterprise’s strategy implementation. in our opinion, the strategy implementation can be considered in two aspects – global (creation of conditions for continuous growth of the enterprise and creation of additional cost) and local (possibility of implementation of separate components of the general strategy by separate directions). the result of the evaluation is to obtain an integral indicator, which allows evaluating not only the overall effectiveness of the strategies but also to obtain information for changes. the choice of the method for evaluating the strategy implementation effectiveness depends on the accuracy of the assessments obtained, calculation complexity, intuitive understanding of the calculation algorithm, and other factors providing the convenience of the practical application of the method. so the plural fuzzy tool is believed in many cases to be simpler than probabilistic table 2 strategic scorecard for the company index strategic goals strategic indicators effects of achievement of objectives strategic indicators factors of future success financial perspective includes indicators affecting the increase in the enterprise cost and considered by the investor in making decisions growth in sales level sales growth rate sales growth as compared to the plan reduction in operating costs cost level ratio costs reduction as compared to the plan improvement in debt collection receivable turnover ratio debt management program customer perspective includes indicators describing the value of products and services for consumers, requirements and meeting of the need for the enterprise’s products or services, consumer properties of products, for which the consumer agrees to pay increase in market shares market share monitoring of the construction market fast and excellent service average time of order execution customer satisfaction survey building of customer loyalty number of new customers as compared to regulars customer satisfaction survey internal-business-processes perspective includes indicators characterizing creation of values necessary for consumers, namely: organization of technological and business processes of the enterprise branding expenditures on advertising brand recognition surveys high product quality number of complaints assessment of internal quality control systems optimization of order execution time order execution time order processing study learning and development perspective includes indicators of modernization and improvement of their know-how, determination of ways to support the necessary level of process productivity and efficiency, indicators of increase of the enterprise’s human resources and personnel management systematic employee qualification improvement employees productivity expenditures on trainings as compared to the plan ensuring adequate level of employee satisfaction employee productivity satisfaction survey streamlining of information systems expenditures on information systems access to it technologies source: compiled by the authors according to the research (j. konsek-ciechońska, 2017; v.m. porohnya, v.o. losj, 2008) baltic journal of economic studies 240 vol. 4, no. 3, 2018 methods. even researchers which affirm the affinity of the two approaches, indicate that the fuzzy set theory may be more accessible for practical use (smolinska, 2011). in order to structure the approach to assessing the effectiveness of the enterprise’s strategy implementation, indicators x1, x2, ..., xn can be combined into groups that would characterize individual aspects of this complex concept. accordingly, we should evaluate the weight of βj of each of m groups of the indicators. in addition, each i indicator in j group can be put in line with pij assessment of its importance in recognizing the level of the enterprise’s strategy effectiveness. the weights of baseline pij and groups βj are determined using the fishburn scale (fishburn, 1981; shvets & tsykalo, 2017). in accordance with the fishburn principle, the indicators are ranked in order of decreasing weight, and their weightings after the ranking are calculated by the formula: p n i n n m j m m ij j j j j= ⋅ − + ⋅ + = ⋅ − + ⋅ + 2 1 1 2 1 1 ( ) ( ) , ( ) ( ) β (1) the fishburn’s rule reflects that nothing is known about the importance of indicators and their groups except their hierarchy. then the estimation (1) corresponds to the maximum entropy of the available informative uncertainty about the research object. a generalized indicator of the effectiveness of the enterprise’s strategy (g) is calculated by the formula: g p xj j m ij i n ij j = ⋅        = = ∑ ∑β 1 1 (2) where j is the index of the group of indicators, j = 1, m; i – the index of the indicator in the group, i = 1, nj; nj – number of indicators in j group; βj – the weight of j group; pij – the weight of i indicator of j group. indicators used to diagnose the effectiveness of strategy implementation should meet the following requirements: indicators should be used, which have a sufficient impact on the final result of the enterprise’s activity. therefore, in order to construct the model, we selected 15 relative indicators that characterize the four most important aspects of the enterprise’s activity in strategic development. the indicators are selected by the following provisions: the indicator significance and influence on the enterprise’s financial and economic state; indicator information value; relative simplicity of calculation and availability of indicators (availability of information necessary for their calculation in public reporting). the selected indicators characterize the dynamics of the enterprise’s economic development (table 3). the rank of the group and the rank of the indicator in the group are selected in an expert way using the appropriate methods. also, we note that all indicators are stimulants (i.e., the higher value of the individual indicator, the higher level of effectiveness of the enterprise’s strategic development), which makes it avoid any additional transforming formulas. 4. results and discussion of researches on the strategic controlling at enterprises in ukraine to approve the proposed methodology, we selected the pharmaceutical industry of ukraine as one of the most dynamically developed branches of the economy. the pharmaceutical market in ukraine remains the second largest in the cis countries (after russia). the sale structure in the market, as in previous years, consists mainly of finished pharmaceuticals (84% of total sales in 2017), medical products, cosmetics and dietary supplements (a. chernorotov, 2018). one of the important tendencies in 2016–2017 is the change of the negative dynamics of the decline in sales in kind to positive, with the subsequent acceleration of growth. thus, in 2017, drug sales in the retail segment amounted table 3 practical strategic scorecard to measure the strategy implementation effectiveness group of indicators group ranking group indicators group indicators ranking finance 2 cover ratio (х11) 6 quick ratio (х12) 5 absolute liquidity ratio (х13) 4 equity-assets ratio (х14) 3 financial stability index (х15) 1 coefficient of long-term financial independence (х16) 2 manoeuvrability factor of equity (х17) 7 customers 1 net change profit (х21) 2 return on sales (х22) 1 internal processes 4 return on assets (х31) 3 fixed assets suitability (х32) 4 return on equity (х33) 2 profitability of assets (х34) 1 personnel 3 productivity (х41) 1 personnel cost-effectiveness (х42) 2 baltic journal of economic studies 241 vol. 4, no. 3, 2018 to about 61.2 billion uah or 1.1 billion packages, that is, the growth in monetary terms was 20.8%, in kind – 6.5% (in 2016 – 19.8% and 5.6% respectively). the growth of drug sales significantly outpaced the growth rate of retail trade in the country (in 2017 – 8%). this tendency persists in 2018 as well, according to the results of this march, drug sales in ukraine increased by 26.6% in monetary terms and by 6% in kind. one of the key indicators of the market – the weighted average price of one package of domestic medicinal products – as for 2017 amounted to 31.4 uah (+ 14,7% compared to 2016), and imported medicines – 128,3 uah (+ 8.8%). in 2017, there was an increase in the substitution impact on the price (growth of sales in kind and partial change in demand in the segment of more expensive drugs), while reducing the impact of the inflation component. local companies have strong positions in the retail sector. so, according to the analysis of work in 2017, the top 20 companies have 9 ukrainian companies. there is also a gradual change in the ratio of domestic and imported medicines to the increase of domestic products, such growth was 10% in 2016 (ukrainian pharmaceutical market tendencies, 2017). the share of ukrainian manufacturers in the domestic pharmaceutical market in the monetary term continues to increase. by the end of 2017, this figure amounted to 43.3% (in 2016 – 43.0%, in 2015 – 41.5%). the estimation of the effectiveness of the strategy implementation by the pharmaceutical enterprises of ukraine is shown below. the research was conducted on four ukrainian pharmaceutical companies: farmak public joint stock company (farmak pjsc), darnitsa pharmaceutical firm private company (darnitsa pc), kyiv vitamin plant private company (kvp pc), scientific and production centre “borshchagovsky chemical and pharmaceutical plant” public joint stock company (borschagovsky cpp pjsc). the integral indicator for assessing the strategy implementation effectiveness was calculated by the formula (2). the calculation results are shown in table 4. according to the analysis, it can be noted that during the analysed period, implementation of strategic development at the investigated pharmaceutical companies tended to worsen, despite certain positive developments in general in this area. in general, the studied enterprises are able to withstand internal and external threats; however, in order to increase the implementation efficiency, certain adjustments should be made to handle weaknesses and to create a comprehensive information base for timely monitoring of the global strategy implementation and functional strategy implementation. the offered indicator of estimation of the enterprise’s strategy implementation efficiency allows rapid diagnostics based on indicators calculated on public data and expansion of the list of indicators depending on analytical needs of the enterprise management. 5. conclusions in conclusion, it should be noted that strategic controlling as a new form of management control allows determining expediency, efficiency, rationality of the business strategy, in order to achieve a balanced, sustainable, and long-term profitable financial and economic activity of the enterprise, which is adjusted depending on external economic conditions and competition level. summarizing the results of the research, it should be noted that permanent changes in the enterprise’s table 4 calculation of the integral indicator of the strategy implementation efficiency at pharmaceutical companies group indicators farmak pjsc kvp pc darnitsa pc borschagovsky cpp 2016 2017 2016 2017 2016 2017 2016 2017 cover ratio (х11) 0,031 0,038 0,048 0,058 0,062 0,138 0,054 0,054 quick ratio (х12) 0,026 0,032 0,024 0,032 0,063 0,155 0,036 0,039 absolute liquidity ratio (х13) 0,001 0,002 0,002 0,003 0,037 0,103 0,002 0,002 equity-assets ratio (х14) 0,098 0,132 0,208 0,183 0,178 0,393 0,295 0,278 financial stability index (х15) 0,113 0,171 0,267 0,199 0,246 0,285 0,333 0,328 coefficient of long-term financial independence (х16) 0,043 0,046 0,051 0,051 0,049 0,057 0,055 0,054 manoeuvrability factor of equity (х17) 0,003 0,003 0,003 0,005 0,006 0,008 0,003 0,003 net change profit (х21) 0,092 0,030 -0,022 0,028 -0,015 0,000 0,125 -0,044 return on sales (х22) 0,036 0,037 0,027 0,027 0,043 0,036 0,027 0,016 return on assets (х31) 0,074 0,070 0,066 0,069 0,074 0,090 0,026 0,028 fixed assets suitability (х32) 0,006 0,006 0,008 0,010 0,005 0,005 0,006 0,006 return on equity (х33) 0,016 0,008 0,010 0,006 0,010 0,005 0,006 0,002 profitability of assets (х34) 0,007 0,007 0,007 0,006 0,005 0,005 0,006 0,002 productivity (х41) 1,090 0,910 1,578 1,222 1,761 1,431 1,586 1,423 personnel cost-effectiveness (х42) 0,073 0,063 0,080 0,061 0,141 0,097 0,081 0,042 integral indicators 1,709 1,556 2,358 1,958 2,664 2,807 2,640 2,233 baltic journal of economic studies 242 vol. 4, no. 3, 2018 activity and transformation of the main management functions necessitate controlling to be implemented, which the main purpose is to form rational information flows at the enterprise. controlling can be described as a forward-looking system of informational, analytical, methodological, and instrumental support for implementing the management cycle in all areas of the enterprise’s activities and processes. controlling is a key management tool, required for implementing the strategy of the enterprise’s sustainable development. the conducted researches indicate that the proposed integral indicator may increase the analytical capabilities figure 2. results of the evaluation of the effectiveness of the enterprise’s strategy implementation and comparison of the values obtained of the diagnostics and provide a multilevel assessment of the enterprise’s strategy effectiveness. the advantage of this indicator is the ability to obtain a resultant value that is defined as the weighted average by all selected indicators, on the one hand, and by all 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(2001). wprowadzenie do controllingu. katowice: oficyna controllingu. baltic journal of economic studies 84 vol. 2, no. 1, 2016 corresponding author: 1 management faculty, dnipropetrovsk regional institute of public administration, national academy of public administration under the president of ukraine e-mail: ogdankn@gmail.com methodological bases of public administration of public development in ukraine kyrylo ohdanskyi, dnipropetrovsk regional institute of public administration, national academy of public administration under the president of ukraine abstract. an author in the article examines theoretical bases in the question of dynamics of community development. according to classic canons a dynamic process on any of levels of management hierarchy can be presented as a complex of changes of its ecological, economic and social components. for today, national politics in the field of realization of conception of community development does not take into account most theoretical works, which testify that in our country the mechanism of its effective adjusting is not yet created. in connection to this the author of the article accents the attention on the necessity of the use in modern ukraine realities of the effective approaches to government control of community development. as the subject of research of the article the author chose the analysis of process of community development and methodological bases for the choice of variants for a management by this process. system approach is chosen by author as a research methodology. the aim. analysis of theoretical bases and developing of the new approaches to the government administration of community development. an author divides the process of community development by constituents: social, economic and ecological components. from the indicated warning it is necessary to take into account the objective necessity of developing of the new conceptual approaches to the elaboration of tool of adjusting of community development. for the decision of this task the author of the article it is suggested to use the category “dynamics”. an author in the article does the analysis of different interpretations of term “dynamics”and offers his own interpretation in the context of community development. our researches confirm that, mainly, it is methodologically possible to form the blocks of quantitative and quality factors of specific different information of ecological, economic and social character. author’s researches confirm that it is methodologically possible to form the blocks of quantitative and quality factors containing specific different information of ecological, economic and social character. it is useful to apply for the simplification of process of analysis of community development and for the choice of instruments for his adjusting. author is predisposed to that the amount of constituents in every block must be varied depending on the depth of research. an optimal amount in a range 7-11 indicators in every block is offered by the author. the obtained system will have a subjective estimation and can be used only for the decision of the concrete assigned tasks. in case of changing of accents and aims of government control of community development the structure of these blocks must be reoriented. if to talk about possibility of creation or modeling of the universal system of blocks, then her using as a standard is possible only in the developed countries, and also in case of absence of indexes for comparison. conclusion. the author argues in the article, that the primary concern of government regulation of community development is a necessity of clear determination of orientation of development. the special attention is given to the question of study of instruments of adjusting of community development. the author makes an accent on the necessity of application of the offered developments in practice for the quality monitoring and estimation of level of community development. key words: public development, dynamics, methodology, tools, integrated model. jel classification: i15, b41, c81, c65 baltic journal of economic studies 85 vol. 2, no. 1, 2016 1. introduction in the early 90-ies of the twentieth century, ukraine declared its aspiration to ensure sustainable development. the term "sustainable development", proposed by the uno conference on the natural environment and development in 1992, in its essence comes to maintain the specifics of social changes, "... to satisfy the needs of nowadays but not to endanger the ability of future generations to meet their own needs" (the program of actions «agenda for the 21st century», 2000). according to this fact, the structure of sustainable development is formed by such components as economic, social and environmental. the economic peculiarity of implementation of "sustainable development" deals with resource saving, the social one focuses on the preservation of the stability of social systems through the equitable distribution of welfare, and environmental peculiarity deals with maintenance of abilities to self-recovery. it is important that all three elements of sustainable development should be considered and implemented simultaneously and balanced. however, the national field of implementation of the concept of sustainable development does not confirm the statements of the theoretical notions by the empiric experience. in this context, the modern realities as to sustainable development indicate that in our country a mechanism for its ruled dynamics has not been created yet. moreover, in ukraine according to the use of the concept of "sustainable development" to refer to the steady growth of economic indicators its implementation is not confirmed even by longterm predictions. so, according to calculations done by the scientists of the state university of the institute of economic forecasting of the national academy of sciences of ukraine the changes of the indicator of the gdp per capita of population close to 2050 will be so small that ukraine will remain the low places in the world rankings (hejets, 2003). 2. analysis of recent research and publications this prospect requires a search for ways of creating conditions and development of toolkits to ensure sustainable development. in the context of this requirement there is a need to emphasize such rather important fact as attraction of national scientific community to solve sustainable development challenges practically simultaneously with foreign experts. ukraine is not in luck to move in the way of scientific developments on this problem and it really was and remains on the edge of the scientific thought achievements. issues of sustainable development were studied by such leading ukrainian scientists as o.  bilorus (bilorus, 2005), z. herasymchuk (herasymchuk, 2008), m. zgurovsky (zgurovskiy, 2009), b. danylyshyn (danylyshyn, 1999), l. maslovska (maslovska, 2003), l. melnyk (melnyk, 2005), m. hvesyk (hvesyk, 2012) and others. 3. previously unsettled problem constituent the point is that developed and offered to use diagnostics methods of components of sustainable development are based on the concept of the static character. meanwhile, the emergence of the term sustainable development is conditioned by the changes in the characteristics of its components within certain ranges, which require attracting the theory of dynamics. the system formation that sustainable development is, has its beginning and end, develops within a specific space and time. it should be stated that this essentially defined methodological aspect has been out of scientific investigations. famous ukrainian scientists and statesmen v. semenozhenko and v. hejets emphasized as regards this "... one of the key problems of ukrainian strategic documents is incomprehension of the dynamics, changeability ... almost in every document the changes that are taking place are not taken into account... " (semynozhenko, 2008). 4. main purpose of the article however, despite the existence of a spectrum of scientific developments, the empirical realities do not confirm the decision of all problems related to the theoretical and methodological support of sustainable development. moreover, according to the generalization of the new reality the position, under which its modern explanation is impossible on the basis of created conceptual and instrumental apparatus, is distinguished. because of the mentioned warnings should be taken into consideration the objective necessity to develop new conceptual principles of informational and tool providing and controlling sustainable development based on the dynamic approach arises. 5. results and discussions existing scientific heritage that has the interpretation of the term "dynamics" and to a certain extent, according to the stages of social promotion to civilized life, reveals its nature and adsorbs a variety of definitions of the diversified nature. summing up of the conceptual views on the essence of the notion "dynamics" allowed qualifying it as an aimed in space and time process, described by the quantitative and qualitative characteristics. according to the classical canons the dynamic process on any of the hierarchical levels of management can be represented as a complex of changes of its environmental, economic and social spheres. the availability in the socio-economic processes all components of dynamics allows providing the socioecological-economic dynamics with the concept of such nature: it is a process of a continuous targeted change of social, ecological and economic parameters in interaction and interdependence with appropriate domination of one of them and movement in the direction of civilization progression. actually, the socio-ecological-economic baltic journal of economic studies 86 vol. 2, no. 1, 2016 dynamics is the cumulative trajectory that the society moves. such understanding of social dynamics will allow formulating strategy and tactics of reformation transformations more carefully. given arguments as to the possibility of implementation of the economic system "theory of dynamics" provide an opportunity to outline the concepts "economic dynamics", "social dynamics", "environmental dynamics", as local processes of parameters changes of economic systems in time and space in the appropriate direction. in our opinion, the economic dynamics should be associated with the process of natural changes of the quantitative and qualitative parameters of the economic subsystems in time and space, aimed to achieve a certain aggregate result. as to the social dynamics, it is as a quantitative and qualitative, space and time, evolutionary process of natural changes of the potential of socialization and improvement of welfare of population. environmental dynamics is also a process in space and time with the quantitative and qualitative changes in logical and evolutionary character, but connected with the force of pressure of economic activity on the environment. it should be noted that a systematic coherent socioecological-economic model on the conceptual apparatus has not been formed recently. although such attempts have been made but there are not differentiation of the quantitative and qualitative factors of influence (valenkevych, 2012). our investigations confirm that, in the main, methodologically it is possible to form blocks of the quantitative and qualitative factors of specific various information of environmental, economic and social nature. based on the postulate of the adjective of "quantitative ", as some number whether quantity of anything, or "qualitative", as specific certainty of the subject, we make selection of informational and analytical characteristics that are under statistical accounting and allow expressing a greater number of signs through the least possible number of parameters. the quite important is the issue of the number of variables, by which one or another component of social dynamics has to be described. the experts for the operational assessment of a controlling measure of any process recommend limiting characteristics to 7-11 (gusarov, 2003). but for the real ruled public dynamics the determination of the factor filling of its constituents is not enough. to solve the issues in the administrative context the models, which can synthesize quantitative and qualitative achievements within their limits, in particular, and in total, are necessary? the complexity of their construction is in application of this methodology that would allow reproducing factor influences of different measures in the general indicators. to form assessment models of the cumulative dynamic progress and its constituents we used the tested instruments of bringing the various indicators to the comparative form through indexes. the calculation of indices is the process of comparing actual figures with the standard. building the perfect object carries definitely subjective evaluation of the load. we, in particular, in the process of reasoning of one or another standard preferred only to the developed countries, and in the case of absence of indicators for comparison, carried out the optimization calculations. 6. conclusions and further researches directions based on these standards and recommendations, we have calculated the indexes on all sets of factors of constituents of the socio-ecological-economic dynamics and for their explication qualification zones of their controlling were outlined. of course, the point is to diagnose long-term trends that carry the applied load that is important to understand the quantitative-qualitative interdependence of production, processes of socialization and greening. we have no reason to affirm that introduction in practice the analytical management activity of developed methodological bases simultaneously eliminates all the problems and provides the processes of social civilization promotion with clear directional character. the question is the opening by them the new tool and organizational possibilities to make balanced managerial decisions to ensure the social dynamics. their potential to make quick administrative actions under the indicators that provide signals on the rollback of this or that zone handling by public promotion will contribute to the enhancement of the effectiveness of management of social dynamics. from the new paradigm standpoint the monitoring and evaluation of socio-economic-environmental dynamics, which focuses on and takes into account the complex of changes of parameters of ecological growth and ecological development, testing its main principles should be continued and the potential ability of combination of the purely analytical capabilities and improvement of the management system should be implemented then. references bilorus, o.g. (2005). global perspective and sustainable development. – k.: iapm, 492 p. valenkevych, v.p. (2012). argumentations of evaluation of socio-ecological-economic development of an administrative and territorial unit. a mechanism of economic regulation, № 3, p. 16-25. herasymchuk, z.v. (2008). regional policy for sustainable development: theory, methodology, practice: monograph. – lutsk: nadstir'ya, 528 p. gusarov, y.v. (2003). management: dynamics of non-equilibrium: scientific edition. – m.: ecomonics, 382 p. baltic journal of economic studies 87 vol. 2, no. 1, 2016 danylyshyn, b.m. (1999). sustainable development in the system of natural and resources limitations. – k.: sops of ukraine naofss, 367 p. hejets, v.m. (2003). ukraine's economy: strategy and long-term development policy. – k.: ief naofss of ukraine; feniks, 1008 p. maslovska, l.ts. (2003). sustainable development of the productive forces of regions: theory, methodology, practice: monograph. – k.: kneu, 365 p. melnyk, l.g. (2005). metodology of development: monograph. – sumy: universytetska knyga, 602 p. the program of actions "agenda for the 21st century ": adopted by the uno conference on environment and development in rio-de-janeiro. (2000). – k.: intelsfera, 360 p. semynozhenko, v. (2008). ukraine – 2015: not to lose future. day, 24 january, 16 p. zgurovskiy, m.z. (2009). sustainable development of the regions of ukraine. – k.: ntuu "kpi", 197 p. hvesyk, m. (2012). national paradigm for sustainable development of ukraine. sustainable development, № 4, p. 5-10. кирилл огданский методологические основы общественного управления общественным развитием в украине аннотация. автор в своей статье рассматривает теоретические основы в вопросе динамики общественного развития. согласно классическим канонам динамический процесс на любом из уровней иерархии управления может быть представлен в виде комплекса изменений его экологических, экономических и социальных компонентов. на сегодня, национальная политика в сфере реализации концепции общественного развития не учитывает большинства теоретических наработок, что свидетельствуют о том, что в нашей стране механизм ее эффективного регулирования еще не создан. в связи с этим автор статьи акцентирует свое внимание на необходимости использования в современных реалиях украины эффективных подходов к государственному регулированию общественного развития. предметом исследования статьи автор выбрал анализ процесса общественного развития и методологические основы для выбора вариантов для управления этим процессом. методологией исследования автором выбран системный подход. цель. анализ теоретических основ и разработка новых подходов к государственному управлению общественного развития. автор делит процесс общественного развития на составляющие: социальный, экономический и экологический компоненты. из-за указанных предупреждений следует принимать во внимание объективную необходимость разработки новых концептуальных подходов к разработке инструментария регулирования общественного развития. для решения данной задачи автором статьи предложено использовать категорию «динамика». автор в статье делает анализ разных толкований термина «динамика» и предлагает свое толкование в контексте общественного развития. наши исследования подтверждают, что, в основном, методологически можно образовывать блоки количественных и качественных факторов специфической различной информации экологического, экономического и социального характера. исследования автора подтверждают, что методологически можно образовывать блоки количественных и качественных факторов содержащих специфическую различную информацию экологического, экономического и социального характера. это удобно применять для упрощения процесса анализа общественного развития и выбора инструментов для его регулирования. автор склоняется к тому, что количество составляющих в каждом блоке должно варьироваться в зависимости от глубины исследования. автором предложено оптимальное количество в диапазоне 7-11 индикаторов в каждом блоке. полученная система будет иметь субъективную оценку и может быть использована только для решения конкретных поставленных задач. при изменении акцентов и целей государственного регулирования общественного развития структура этих блоков должна быть переориентирована. если говорить о возможности создания или моделирования универсальной системы блоков, то ее использование в качестве стандарта возможно только в развитых странах, а также в случае отсутствия показателей для сравнения. вывод. автор в своей статье аргументирует, что первоочередной задачей государственного регулирования общественного развития является необходимость четкого определения направленности развития. особое внимание уделяется вопросу изучения инструментов регулирования общественного развития. автор делает акцент на необходимости применения предложенных разработок на практике для качественного мониторинга и оценки уровня общественного развития. baltic journal of economic studies 179 vol. 4, no. 5, 2018 corresponding author: 1 kherson state university, ukraine. e-mail: makar0684@gmail.com orcid: http://orcid.org/0000-0001-9929-8967 2 kherson national technical university, ukraine. e-mail: nat-o@ukr.net orcid: http://orcid.org/0000-0002-1019-5708 3 kherson state university, ukraine. e-mail: textil.ks@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-179-187 improving the method approach to the rating evaluation of employees as professional career development serhii makarenko1, nataliia oliinyk2, tatyana kazakova3 abstract. theoretical and methodical aspects of rating performance appraisal of academic workers of higher educational institutions are the object of research. the purpose of the article is to study peculiarities of the functioning of institutions of higher education and to improve processes of rating assessment of employees as a part of the development of professional careers. methodological basis of research consisted of scientific works of domestic and foreign scientists and leading specialists, statistical and analytical materials of state authorities. results are obtained through the use of methods: statistical and economic – to determine the peculiarities and trends of the development of institutions of higher education in ukraine; economics and mathematics – to study the impact of the main indicators of activity and performance of higher education institutions and purchasing power of the population on the total volume of gross domestic product; abstract-logical – for theoretical generalization and formulation of conclusions. the results of the conducted research testify to the necessity of introducing a set of measures for optimization of labour costs for scientific and pedagogical workers of higher education institutions without worsening the quality of provided educational services. it has been revealed that the lack of a sound methodological approach to employee rating and appropriate means of motivation for professional development can lead to the loss of existing intellectual potential and competitive positions of higher education institutions in the market for educational services in general. to maintain the existing intellectual potential justified the introduction of an organizational and economic system for optimizing labour costs, which should consist of the following five main stages: collecting information, processing information received using expert and econometric and mathematical models, calculating the predictive values of factors and productive indicator, development of measures and directions of optimization of labour costs, development of a system of planning career development of personnel. with the introduction of a rating assessment of the activities of academic workers and its attachment to the development of professional careers, it is necessary to avoid possible professional burnout due to overload. a further study of the mechanism of determining the optimal predictive model, taking into account the influence of the shadow sector on the official statistical indicators of the development of the economy and the educational sector, in particular, deserves further study. key words: academic workers, rating estimation, professional career, pay, coefficient of competence, multiple linear regression. jel classification: m12, m54 1. introduction in today’s operating conditions, the most important task of ensuring the effective operation of business entities of all forms of ownership is the permanent introduction of measures is optimize production costs without degrading the quality of made products, work performed, services rendered. the absence of the necessary sources of financing for the development of the educational sector in the state and local budgets, reducing the purchasing power of the population and, consequently, reducing the number of potential students and listeners, and optimizing the costs of economic activity, also need domestic institutions of higher education. baltic journal of economic studies 180 vol. 4, no. 5, 2018 taking into account that the largest share of the costs related to the functioning of higher education institutions is borne by the expenses of the payment of the work of pedagogical and scientific and pedagogical workers, one of the main directions of their optimization is the definition of a reasonable number of employees for the provision of quality educational services. at the same time, in order not to lose the accumulated intellectual potential, the top management of institutions of higher education should develop an effective system for optimizing labour costs taking into account the quality of educational services and the potential contingent of future students, students, postgraduates and doctoral students, with the simultaneous introduction of a phased system of career development for employees who effectively and in a timely manner fulfil the established functional responsibilities and are engaged in self-development within defined curricula and scientific international grants. the indicated determines the relevance of the topic of research, its purpose, and content. the purpose of the article is to study peculiarities of the functioning of institutions of higher education and to improve processes of rating assessment of employees as a part of the development of professional careers. the methodological basis of research consisted of scientific works of domestic and foreign scientists and leading specialists, statistical and analytical materials of state authorities. results are obtained through the use of methods: statistical and economic – to determine the peculiarities and trends of the development of institutions of higher education in ukraine; economics and mathematics – to study the impact of the main indicators of activity and performance of higher education institutions and purchasing power of the population on the total volume of gross domestic product; abstract-logical – for theoretical generalization and formulation of conclusions. 2. literature review some aspects of the study of the labour activity of the population and the individualization of the processes of training and development of employees were investigated in analytical works of a. a. derkach, v. h. zazykyn & a. k. markova (2000), v. t. lozovetska (2015), h. pivniak, o. aziukovskyi, m. trehub & a. bardas (2017), s. o. tsymbaliuk (2017), n. a. tyukhtenko (2016). improvement of the processes for managing the professional development of workers was dealt with by l. i. beztelesna & a. v. pecheniuk (2016), o. herasymenko (2003), b. a. kaminskyi (2006), b. i. mokin & yu. v. marymonchyk (2004), o. h. obmok (2014), o. v. skibitska (2004). despite significant work, there remain problems that require additional scientific analysis, especially as regards the improvement of professional development processes, based on the coordination of the interests of the institution of higher education and career strategies of the individual through the introduction of objective rating assessment. 3. development of an organizational and economic system for the optimization of labour costs improvement of processes of professional career development of personnel, including academic workers of higher education institutions, is one of the most important elements for ensuring the effective operation and development of business entities of all forms of ownership. the lack of a well-founded system for assessing business activity and proper means of motivation at each stage of a scientific and pedagogical career can lead to the loss of incentives by subordinate employees to permanent self-improvement and qualitative and timely implementation of their assigned functional responsibilities. at the same time, in the conditions of the total lack of funds in the state budget of ukraine for the development of the educational sector, for the maintenance of the existing intellectual potential, the primary introduction of a substantiated organizational and economic system for optimizing labour costs is necessary. the said system should have the following five main stages: collecting information, processing received information using expert and econometric and mathematical models, calculating predictive values of factors and the effective indicator, developing measures and directions for optimizing labour costs, developing a system for planning a career development (figure 1). 4. analysis of the performance indicators of higher education institutions using the knowledge and experience of the leading experts of the educational sector, local authorities, budgeting enterprises and organizations of kherson (kherson region, ukraine), the influence of the main indicators of activity and efficiency of institutions of higher education and purchasing power of the population on the total volume of the gross domestic product was investigated. according to respondents’ opinion, the following indicators have the greatest influence on the total gross domestic product: the average number of economically active population aged 15-70; number of graduates from higher education institutions; the number of persons who graduated from the postgraduate study; the number of people who have completed doctoral studies; real wage index. the necessary materials for further processing and determining the reliability and validity of building a forecast model of development in the dynamics of 2010-2017 years is reflected in table 1. baltic journal of economic studies 181 vol. 4, no. 5, 2018 organizational-economic system for optimizing labour costs collection of information external business environment internal business environment processing received information 1 s t a g e 2 s t a g e mathematical models of processing models of processing using expert methods recovery of inessential factors of influence; check for multicollinearity; determination of coefficients of competence of experts and specific factors of impact factors on the resultant indicator 3 s t a g e calculation of the predicted values of the factors and the effective indicator development of measures and directions for the optimization of labour costs 4 s t a g e optimizing the use of labour resources; optimization of the educational load; expanding and commercializing the provision of additional educational services development of personnel career planning system 5 s t a g e analysis of results of the implementation of measures and directions on optimization of labour costs end. negative result end. positive result figure 1. the organizational and economic system of optimization of labour costs source: developed by the authors table 1 necessary materials for further processing and determination of reliability and validity of construction of the forecast model of development in the dynamics of 2010-2017 years years gross domestic product at constant prices in 2010, uah million (y) the average number of economically active population aged 15-70, thousand persons (x1) number of graduates from institutions of higher education, persons (x2) the number of persons who graduated from the postgraduate study, persons (x3) the number of persons who completed doctoral studies, persons (x4) real wage index, % (x5) 2010 1079346 20894,1 636291 8092 450 110,2 2011 1138338 20893,0 609033 8350 483 108,7 2012 1141055 20851,2 595251 8292 418 114,4 2013 1140750 20824,6 560381 8075 566 108,2 2014 1066001 19920,9 484482 7597 524 93,5 2015 961821 18097,9 447418 7493 563 79,8 2016 985299 17955,1 386668 6703 551 109,0 2017 1009931 17854,4 421131 6087 543 119,1 source: official site of the state statistics service of ukraine baltic journal of economic studies 182 vol. 4, no. 5, 2018 the formula was used for calculating the correlation coefficients; the following relationship was established between the performance indicator (y) and the factors indicated: ryx1 = 0,9319 – in accordance with the scale of the assessment of the relationship of variables, the relationship between y and x1 is considered very high, and, therefore, the effect of this factor on the final result is significant and the figure indicated by the model should be included; ryx2 = 0,839 – the connection between y and x2 is considered high; ryx3 = 0,7648 – the connection between y and x3 is considered higher than average; ryx4 = -0,5691 – the connection between y and x4 is considered average; ryx5 = 0,4334 – the connection between y and x5 is considered lower than the average. at the same time, calculations show that the growth of the x4 indicator (the number of people completing doctoral studies) has a negative impact on the overall performance y (gross domestic product at constant prices in 2010). the above can be argued that in the current conditions of development of science in ukraine, the defence of dissertation papers for obtaining a scientific degree of a doctor of sciences in most cases is a theoretical one without the possible introduction of the results obtained in the practice of domestic business entities of all forms of ownership. as a result, the growth rate of the wages of workers who successfully defended the dissertation far exceeds the rate of growth of their productivity and efficiency. in some cases, when in the dissertation papers on obtaining the scientific degree of the doctor of sciences highlight the actual issues for society and provide an effective mechanism for their solution, at the stage of preparation of the dissertation work there is “remittance” of doctoral students to foreign companies in order to ensure the further exportation of their intellectual potential abroad. as regards the low level of influence of the index x5 (real salary index) on the performance indicator y, this may be due to the conditions of the functioning of the domestic business. that is, an increase in the cost of labour costs may be related not to the increase in the quality of the performed functional responsibilities but to be the result of the introduction of mandatory programs for the protection of the socially unprotected population at the state level (the existence of a tax social benefit, a steady increase in the size of the subsistence minimum and minimum wages, etc.). also, one of the conditions for the feasibility of using this group of factors in further research is to verify the presence of multicollinearity. using the formula to check the presence of multicollinearity between the factors, a significant correlation was found between the x1 indicator (average number of economically active population aged 15-70) and x2 (number of graduates from higher education institutions). this is due to the fact that those who graduated from higher education institutions and do not plan to continue postgraduate and doctoral studies in the short and medium term are economically active and replenish the relevant labour market. at the same time, graduates of higher education institutions need to take into account the fact that in today’s realities of the domestic labour market availability of a higher education diploma does not guarantee an individual free employment in the chosen specialty owing to the possible lack of correspondence between demand and supply in the labour market, as well as possible lack of relevance of knowledge gained conditions of intensive development of scientific and technological progress. the calculations also revealed a low level of correlation between the real wage index and the number of persons who obtained the qualification level of a bachelor’s, master’s, and also a scientific degree of the candidate of sciences (doctor of philosophy), doctor of sciences. this is due to the unwarranted expectations of the indicated persons regarding the possible signif icant increase in their wages in the event of successful completion of the relevant training programs. thus, in the conditions of employment outside of higher education institutions, the presence of a scientific degree of a candidate of sciences (doctor of philosophy) in the chosen direction of activity can additionally bring the individual only 5% of the size of the salary, doctor of sciences – 10%. on the other hand, in the case of employment in higher education institutions, the amount of allowances may amount to 15% and 25% respectively. however, in the context of reducing the number of potential students and students and the total lack of funds, the indicated allowance may not be charged for the payment of labour to scientific and pedagogical workers. it is also necessary to take into account that if there is a practical value of the prepared dissertation work and a high level of professionalism of a scientific figure in the chosen research direction, the level of his remuneration will be several times or even an order of magnitude higher than the average wage level in the industry. as a result, in order to minimize the cost of paying the single contribution to the pension fund of ukraine (22% of salaries), personal income tax (18% of deductions from accrued wages), military salary (1.5%), trade union fees (1% in case of joining the primary trade union organization), a highly skilled worker indicated by the official payroll will receive a salary within the minimum legal level, in fact, several times or even an order of magnitude higher. 5. prognostic trends in the development of the economy and the educational sector in order to improve the quality and validity of the calculations on the impact of higher education quality indicators on the gross domestic product, taking into baltic journal of economic studies 183 vol. 4, no. 5, 2018 account the existing link between the performance indicator and the proposed factors, multicollinearity, indicators “average number of economically active population aged 15-70 years” and “the real wage index” should be eliminated from the multiple linear regression. consequently, the regression, according to the views of the experts and taking into account the results of the mathematical processing performed, should at least be as follows: y = a0 + a1 + * x1 + a2 * x2 + a3 * x3, (1) where y – gross domestic product at constant prices in 2010, uah million; x1 – the number of graduates from institutions of higher education, persons; x2 – the number of persons who graduated from the postgraduate study; x3 – the number of persons who have completed doctoral studies, persons. а0, а1, а2, а3 – coefficients. according to the data given in table 1, the following function is received: y 1242,46 0,8655 x 27,3525 x 797,63 x1 2 3= + ∗ + ∗ + ∗ the calculations of the elasticity coefficients (eyx1 = 0,4205, eyx2 = 0,1948, eyx3 = 0,3835) indicate that the greatest impact on the gross domestic product is the “number of graduates from higher education institutions”. consequently, the leadership of institutions of higher education must first of all focus on ensuring the maximization of the quality of services rendered to this group of consumers. it is also necessary to take into account that the cost of studying on a budget form for the higher education “bachelor” (on average, about 35 thousand uah per year) is estimated by state experts to be almost three times higher than the cost of training on a contractual basis. introducing a phased increase in the cost of training on a contractual basis up to 35 thousand uah per year at current prices, while simultaneously reducing the number of seats on the budget form of training can lead to a decrease in the demand for educational services of domestic higher education institutions and to increase the number of potential entrants and students who will go to obtain higher education abroad or to the leading central ukrainian universities, reducing them most contingent of regional higher education institutions. one can state that the fact that with the constant growth of the subsistence minimum and minimum wages, the expenses for labour remuneration of academic and service workers increased significantly during the last years. at the same time, the share of consolidated budget expenditures on higher education in the structure of total expenditures during 2010-2017 has significantly decreased. thus, according to the results of 2017, their share amounted to 3.7%, which is respectively 0.5 pp and 2.9 pp less compared to 2016 and 2010. this indicates the urgent need to develop and implement measures to optimize the labour costs of scientific and pedagogical workers. 6. development of measures and directions of optimization of labour costs today’s realities in the development of the educational industry require top management of institutions of higher education, especially the regional level, the introduction of a mechanism to minimize labour costs by optimizing the number of pedagogical and scientific and pedagogical workers. when implementing these measures, the leadership of higher education institutions should first of all focus on the quality of services provided to applicants for higher education “bachelor” and “master”. at the same time, it is necessary to provide an optimal combination of mastering students and students with theoretical and practical skills from the chosen specialties. at the same time, the implemented complex of measures should not only preserve existing qualitative components of educational and scientific activities but also create an effective model of career development of personnel. the development of a methodical approach to rating the activity of academic workers, which will allow taking due account of all qualitative and quantitative achievements of employees and the importance of each group of factors in the current conditions of development of the educational branch, is of paramount importance. the organization of the preparation of processes for evaluating the activities of scientific and pedagogical workers should foresee the formation of a commission with the involvement of both leading figures from higher education institutions and specialists from state authorities, local self-government, public organizations, and leading business structures. priority responsibilities of this commission should include the analysis of the national and regional labour market and the definition of the level of demand and requirements for the chosen specialty from potential employers; determination of the value and economic expediency of the results of scientific research carried out by academic workers in a certain area of research (participation in international grants, research projects under state orders, other projects for local contracts, obtaining foreign and domestic patents, etc.); realization of comparison of available qualitative characteristics of academic worker with requirements of the market to the level of training of specialists in the chosen specialty; transfer of qualitative results of academic workers into the overall quantitative scale of evaluation and identification of the most competitive workers in a certain segment of the educational services market, etc. the main task of evaluating the activities of the staff is to establish indicators that can be characterized as general moments, which are equivalent to all employees of institutions of higher education, as well as norms of pedagogical and scientific activity for a particular workplace or position. baltic journal of economic studies 184 vol. 4, no. 5, 2018 it is interesting to note that there is a regulation on the rating assessment of the activities of the teaching staff, developed at the kherson national technical university (2016). according to this regulation, the evaluation of the results of the activities of academic workers is carried out in two parts: constant activity (coefficient of weight is equal to 0.33), which characterizes the qualification potential of the teacher accumulated by him for all time of work; an active part (0,67) which takes into account professional competence, pedagogical skills, and scientific and creative activity of the teacher over the last five years. on the example of the faculty of economics of the kherson national technical university, it was found that the average score for the teaching staff in terms of one person for the results of 2016-2017 amounted to 1174,68 points. at the same time, if there is a scientific publication in the periodical, which is included in the scientific and metric databases scopus or web of science core collection, a scientist and pedagogue will receive only 75 points for each publication, which is 6.4% of the average score in the calculation per person. this is despite the fact that the state executive authorities together with the top management of institutions of higher education try to establish a close connection between the number of allocated places on the budget form of training and the number of publications of academic workers in periodicals that are included in the scientometric databases scopus or web of science core collection. as an example, in order to increase the scientific activity of subordinates, in accordance with the march 2016 regulations on bonuses for publications in publications that are indexed in the international scientometric databases of the web of science core collection (other than the emerging sources citation index) and (or) scopus (national university of kyiv-mohyla academy, 2016), president of the national university of kyiv-mohyla academy carries out a corresponding bonus of the university employees. the amount of the bonus is calculated for each publication separately, and when determining its size, account is taken: the number of publications by the employee in the publications included in the scientometric databases scopus and web of science core collection (except emerging sources citation index); number of co-authors of publications; quartile magazine according to scopus’s scientometric databases and/or web of science. taking into account the specifics of the functioning of certain structural subdivisions of the kherson national technical university, the results of the conducted assessment can show fundamentally different values among the academic staff of individual departments, which, at the same time, may not be related to the quality of the provided educational services and functional responsibilities that are performed. the above may arise due to the lack of opportunities at the state and regional level to publicize and test the results of research conducted. in order to eliminate these shortcomings in the system of evaluation and creation of a universal university rating, it is necessary to introduce a mechanism for the transfer of activity indicators within each structural subdivision into a single comparative coefficient and compare only the obtained values with the indicators of other units. also, in the developed regulations on the rating assessment of the teaching staff, the level of practical and professional training of academic workers outside the institutions of higher education is almost ignored. therefore, in order to improve the quality and validity of the results, a working group is proposed for the development of the relevant provision, which would include representatives of public authorities, non-governmental organizations, and leading business structures of the respective administrative-territorial unit. it is also necessary to introduce a substantiated methodology for determining the proportion of each of the areas of scientific and pedagogical activity by taking into account the coefficients of competence of each of the experts involved. to calculate the coefficient of competence of experts, we propose the use of the following formula, developed in previous studies (tyukhtenko, makarenko, 2016): c ... n 1 2 n= + + +ñ ñ ñ , (2) с – coefficient of competence of experts; с1 – coefficient, which is assigned depending on the work experience (occupied position); с2 – coefficient, which is assigned depending on the existing level of education, scientific degree; сn – coefficient, which is assigned depending on the n-factor; n – the number of factors on which the qualification level of experts is evaluated. as an example, for conducting an evaluation of the activities of the academic staff of the faculty of economics and management of the kherson state university (kherson, kherson region, ukraine), it is proposed to set up an expert commission, which will include: deputy director of the department of economic development and trade of the kherson regional state administration – head of the department of analytics, planning and information compilation, master’s degree, two higher educations (expert № 1); head of the department of personnel management of the main directorate of the state fiscal service of ukraine in the kherson region, the autonomous republic of crimea and sevastopol, master’s degree, and two higher educations (expert  № 2); vice-rector of kherson state baltic journal of economic studies 185 vol. 4, no. 5, 2018 university for educational and scientific-pedagogical affairs, candidate of economic sciences, associate professor (expert № 3); dean of the faculty of economics and management, kherson state university, doctor of economics, associate professor (expert  № 4); head of kherson regional interbranch council of trade unions, master’s degree, two higher educations (expert  № 5); director of the leading industrial enterprise of “amalteya” ltd., master’s degree, two higher educations, postgraduate student of correspondence form of study in specialty 051 “economics” (expert  № 6); director of the leading industrial enterprise of the leather factory “platan ltd”, master’s degree, two higher educations (expert  № 7); chairman of the board of the public organization “business association “my-khersontsi”, master’s degree (expert № 8). given that each commission expert has a different level of education, experience and, as a consequence, different positions, it is proposed to calculate the competence ratios of commission members in the following way. to calculate the coefficient, which is assigned according to the existing level of education (k1), we propose to use the following scale of assessment: persons with the lowest degree of higher education “ bachelor” receive 1 point. for all others, their score level of assessment will increase depending on the interval of study, that is: for those with a higher education level “specialist” – 2 points, “master” – 3 points, “candidate of sciences (ph.d.)” – 6 points, “doctor of sciences” – 8 points. for individuals with two or more higher educations, there are postgraduate students or doctoral students plus one additional score. in order to calculate the coefficient, which is assigned depending on the work experience (position held) (k2), it is proposed to take into account not only the experience of the work profile of the work group but also the scale of the managerial activity of the expert (the number of subordinates, the production capacity of the departmental subdivision and the subject of management in general, etc.). taking into account that among the main requirements for obtaining the academic title of associate professor and professor, there is the presence of the corresponding scientific degree and work experience, and also that the indicated qualitative components of an academic worker are taken into account in the subsequent career growth and are attributes of directly scientific and pedagogical activities, their additional consideration when evaluating the competence of experts is inappropriate. table 2 gives an example of the calculation of the competence coefficients of the experts of the proposed working group for the development of the regulations on the rating assessment of the teaching staff. table 2 calculation of the coefficients of competence expert mark к1 mark к2 ê• 2 № 1 4 4 38 4 4 31 0,117148 № 2 4 4 38 3 3 31 0,101019 № 3 6 6 38 5 5 31 0,159592 № 4 8 8 38 2 2 31 0,137521 № 5 4 4 38 5 5 31 0,133277 № 6 5 5 38 6 6 31 0,162563 № 7 4 4 38 4 4 31 0,117148 № 8 3 3 38 2 2 31 0,071732 amount 38 1 31 1 1 source: developed by the authors the example of determining the competencies of the experts in table 2 allows taking into account the individual level of practical and scientific training of each of the respondents and reducing the level of error when using the intuitive group of methods. at the next stage, it is necessary to define a range of indicators, which allow conducting an assessment of the effectiveness of the activities of scientific and pedagogical workers to build a relationship between the indicated indicators and the professional career of the individual. in our view, the key indicators by which evaluation of academic workers of institutions of higher education in economics and management can be divided into two groups are: qualitative (communication skills, leadership skills, persistence, timeliness of the executed decisions, complexity of functional duties, activity and initiative at work, etc.) and quantitative (work experience in the profile and in institutions of higher education, level of education, average academic load, participation in r&d, average duration of the course overseas internship; total volume of trained papers (in printed sheets) over the last five years: publications in periodicals included in scopus science and metric databases or web of science core collection; publications in scientific journals included in the list of scientific journals ukraine, or in a foreign peer-reviewed scientific publication, teaching and methodological works, monographs, abstracts, author’s programs, etc.). taking into account that all groups of indicators are important in assessing the effectiveness of subordinate employees, the expert group established should determine the specific weight of the influence of each of the factors on the overall performance indicator, in this case, on the level of competitiveness of the academic worker. as an example, you can propose to use their rankings by each of the experts from greater to smaller in the following way: σ baltic journal of economic studies 186 vol. 4, no. 5, 2018 using the calculated coefficient of competence and evaluating the score of each of the factors (depending on the determined range of fluctuations between factors), it is necessary to determine the relative importance of each of them for the level of competitiveness of the academic worker. the next step is to conduct an individual assessment of academic workers for each of the identified factors. for a qualitative group of indicators, it is suggested to use point assessment using the following method: from 1 (not developed quality) to 10 (significantly improved quality). the next step is to use a two-step technique, and this will allow all metrics to be translated into a single measurement scale. in the first stage, the rating assessment is carried out on the basis of the calculation of relative deviations of the indicators of each employee from the best values of such indicators of other employees of this area of research by the formula: rj = xmax xij xmax xmin − − , (3) rj – rating of a specific academic worker for each of the indicators that characterize a separate scientific and pedagogical component; xij – the value of the i-th j-th employee figure; xmax – the maximum value of the i-th indicator; xmin – the minimum value of the i-th indicator. at the second stage, the overall rating of a particular employee is determined on all indicators, taking into account their specific weight of influence on the resultant factor, using the formula: rcpj = σrj * qi, (4) qi – the specific gravity of the influence of the i-th indicator in the aggregate of the indicators on which the calculation is performed. the results of the calculation determine the place of a particular employee in the ranking of the selected group of indicators. the best one is a worker whose rating value is the lowest. table 3 provides an example of calculations of the values of the rating assessment of academic workers. also, with the introduction of a rating assessment of the activities of academic workers and its attachment to the development of professional careers, it is necessary to avoid possible professional burnout due to overload. for managers of institutions of higher education, the permanent development and implementation of a set of measures to improve the management of time resources are also one of the main directions for increasing the efficiency of activities through the growth of labour productivity and more efficient use of existing productive assets. 7. conclusions and recommendations for further research the results of the conducted research testify to the necessity of introducing a set of measures for optimization of labour costs for academic workers of institutions of higher education without worsening the quality of provided educational services. to maintain the existing intellectual potential justified the introduction of an organizational and economic system for optimizing labour costs, which should consist of the following five main stages: collecting information, expert number 1: factor 1 > factor 2 = factor 3 > factor 4 = ... > factor n expert number 2: factor 4 > factor 3 = factor 1 > factor 2 = ... > factor n ................................................................................................................................... expert number 8: factor 3 > factor 4 = factor 2 > factor 1 = ... > factor n table 3 an example of calculations of the values of the rating assessment of academic workers academic worker work experience by profile, month coefficient experience in higher education institutions, m. coefficient education, points coefficient ..... the overall ranking is based on the specific gravity of the factors place № 1 82 0 69 0,89 7 0,25 ... 0,127 1 № 2 0 1 131 0,565 6 0,5 ... 0,282 4 № 3 40 0,512 123 0,607 8 0 ... 0,138 2 № 4 0 1 239 0 6 0,5 ... 0,225 3 № 5 52 0,366 48 1 4 1 ... 0,305 5 specific gravity of factors 0,15 0,1 0,15 ... max = 82 max = 239 max = 8 ... min = 0 min = 48 min = 4 ... source: developed by the authors baltic journal of economic studies 187 vol. 4, no. 5, 2018 processing information received using expert and econometric and mathematical models, calculating the predictive values of factors and productive indicator, development of measures and directions of optimization of labour costs, development of a system of planning career development of personnel. it has been revealed that the lack of a sound methodological approach to employee rating and appropriate means of motivation for professional development can lead to the loss of existing intellectual potential and competitive positions of higher education institutions in the market for educational services in general. in order to improve the quality and validity of the results, a working group is proposed for the development of the relevant regulation, which would include representatives of public authorities, nongovernmental organizations and leading business structures of the respective administrative-territorial unit. it is also necessary to introduce a substantiated methodology for determining the proportion of each of the areas of scientific and pedagogical activity by taking into account the coefficients of competence of each of the experts involved. a further study of the mechanism of determining the optimal predictive model, taking into account the influence of the shadow sector on the official statistical indicators of the development of the economy and the educational sector, in particular, deserves further study. references: beztelesna, l. i., pecheniuk, a. v. (2016). upravlinnia profesiinym rozvytkom naukovo-pedahohichnykh pratsivnykiv: monohrafiia [management of the professional development of academic staff: a monograph]. rivne: nuvhp. (in ukrainian) derkach, a. a., zazykyn, v. h., markova, a. k. (2000). psykholohyia razvytyia professyonala: uchebnoe posobye [psychology of professional development: a textbook]. moscow: nauka. (in russian) derzhavna sluzhba statystyky ukrainy (2018). ekonomichna aktyvnist naselennia ukrainy 2017: statystychnyi zbirnyk [economic activity of the population of ukraine 2017: statistical collection]. retrieved from: http://ukrstat.gov.ua (accessed 11 july 2018) derzhavna sluzhba statystyky ukrainy (2018). osnovni pokaznyky diialnosti vyshchykh navchalnykh zakladiv ukrainy na pochatok 2016/17 navchalnoho roku [main indicators of activity of higher educational institutions of ukraine at the beginning of 2016/17 academic year]. retrieved from: http://ukrstat.gov.ua (accessed 18 july 2018) herasymenko, o. o. (2003). ekonomichnyi mekhanizm stymuliuvannia pratsi u sferi naukovoi ta naukovo-tekhnichnoi diialnosti (na prykladi vyshchykh navchalnykh zakladiv ukrainy) [economical mechanism of stimulation of labor in the field of scientific and scientific-technical activity (on the example of higher educational institutions of ukraine)] (phd thesis), kyiv: kyiv national taras shevchenko university. kaminskyi, b. a. (2006). upravlinnia personalom vyshchykh navchalnykh zakladiv [personnel management of higher education institutions] (phd thesis), lviv: institute of regional research of nas of ukraine. kherson national technical university (2016). polozhennia pro reitynhove otsiniuvannia diialnosti profesorsko-vykladatskoho skladu khersonskoho natsionalnoho tekhnichnoho universytetu [regulations on rating assessment of the kherson national technical university teaching staff activity]. retrieved from: http://kntu.net.ua/ukr/content/download/48525/285531/ file/%d0%b4%d0%be%d0%b4%d0%b0%d1%82%d0%be%d0%ba%20%e2%84%96%205.pdf lozovetska, v. t. (2015). profesiina kariera osobystosti v suchasnykh umovakh: monohrafiia [professional career of the individual in modern conditions: monograph]. kyiv: institute of vocational education naps of ukraine. (in ukrainian) mokin, b. i., marymonchyk, yu. v. (2004). metodolohichni osnovy materialnoho stymuliuvannia efektyvnoi diialnosti personalu vnz iz pidhotovky naukovo-pedahohichnykh kadriv ta stvorennia yakisnoi naukovoi produktsii [methodological basis of material incentives for effective operation of university personnel training of the teaching staff and the creation of high-quality scientific products]. visnyk vpi, 2, 26-31. national university of "kyiv-mohyla academy " (2016). premiiuvannia spivrobitnykiv naukma za publikatsii u vydanniakh, shcho indeksuiutsia v naukometrychnykh bazakh [awarding of employees of the national university "kyiv-mohyla academy " for publication in editions that are indexed in science-based databases]. retrieved from: http://www.library.ukma.edu.ua/index.php?id=single&no_cache=1&tx_ttnews[tt_news]=974 obmok, o. h. (2014). oblik rezultativ reitynhovoi otsinky diialnosti naukovo-pedahohichnykh pratsivnykiv [accounting of the rating assessment results of the activities of academic staff ]. visnyk ahrarnoi nauky prychornomoria, 3(80), 83-90. pivniak, h., aziukovskyi, o., trehub, m., bardas, a. (2017). formuvannia derzhavnoho zamovlennia na pidhotovku fakhivtsiv inzhenernykh ta fizyko-matematychnykh spetsialnostei [formation of the state order for training of professionals of engineering, physical and mathematical specialties]. vyshcha shkola: naukovo-praktychne vydannia, 2, (151), 17-32. skibitska, o. v. (2004). stymuliuvannia rozvytku tvorchoho potentsialu pratsivnykiv vyshchoi shkoly [stimulating the development of creative potential of high school employees] (phd thesis), kyiv: institute of regional research of nas of ukraine. tsymbaliuk, s. o. (2017). determinanty trudovoi aktyvnosti personalu v systemi motyvatsii [determinants of personnel labor activity within the system of motivation]. aktualni problemy ekonomiky, 1(187), 264-272. tyukhtenko, n. a., makarenko, s. m. (2016). vykorystannia ekonomiko-matematychnykh modelei pry planuvanni chyselnosti ta skladu pratsivnykiv na pidpryiemstvakh usikh form vlasnosti [economic and mathematic models for staff planning at enterprises of all ownership forms]. aktualni problemy ekonomiky, 1(175), 435-442. baltic journal of economic studies 33 vol. 4, no. 3, 2018 corresponding author: 1 research institute of public law. e-mail: halunkov@i.ua 2 open international university of human development “ukraine”. e-mail: urijchizmar1974@mail.com orcid: http://orcid.org/0000-0002-4870-562x 3 department of scientific and legal expertise and legislative work of research, institute of public law. e-mail: kurkovaksena@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-33-41 modern mechanism of strengthening innovative activity of transport enterprises valentyn halunko1 research institute of public law, ukraine iurii chyzhmar2 open international university of human development “ukraine”, ukraine kseniia kurkova3 institute of public law, ukraine abstract. in order to create a well-functioning mechanism for the operation of the transport complex of the national economy of ukraine and to increase the competitiveness of domestic transport in the world transport markets, a number of problems facing transport enterprises and the transport infrastructure of ukraine in general need to be solved. the main issues are: a low level of service, non-compliance of the technical and technological level of domestic transport with european requirements, lagging development of transport services technologies, unsatisfactory level of transportation safety, a significant environmental load of transport to the environment, etc. the international transport corridor is a complex of land and water traffic arteries with appropriate infrastructure in a particular direction, including auxiliary structures, access roads, border crossings, service points, cargo and passenger terminals, equipment for traffic management, organizational and technical measures, legislative and regulatory acts that ensure the carriage of goods and passengers at the level corresponding to the requirements of the european community. itc №№ 3, 5, 7, 9 pass the territory of ukraine and have a priority development in the national transport network. relevant innovations that should support the transport industry and improve the service of providing transport services are as follows: electronic freight technology and single-window technology as a factor of acceleration of cargo movement; introduction of electronic document flow in logistics and transport activities (e.g., implementation of projects of electronic submission of information, electronic booking of queues, electronic declaration); development and implementation of standards for electronic document flow; methods of management and control over transportation costs in order to reduce the cost of delivery of goods by vehicles; application of cloud technologies and mobile devices; management of delivery terms; creation of new supply chains/transport corridors and multimodal formats, etc. the advantage of electronic document flow is that this system allows quickly sharing information. this is the implementation of single-window principle in transport terminals, where the most labour-intensive processes are associated with the processing of documents – both on arrival of cargo and on shipment. therefore, it provides an opportunity to accelerate the time to handle a fairly large amount of information, multimodality – the possibility to transfer information from one mode of transport to another and make decisions at the junctions of transport modes. to date, the uis has been used in the most developed ports, airports, and other intensive border crossing points in the world, attempts have been made to use it in odesa, illichivsk, “yuzhnyi”, and bilhorod-dnistrovskyi ports. for developing the mentioned structural transformations, we propose to introduce an improved organizational-economic mechanism of regulation of innovative activity. the proposed structure should have inherent functions related to the state innovation and investment policy in the transport and road complex, which will allow ensuring the effectiveness of the organizational-economic mechanism for regulating the innovation activity of transport enterprises. key words: transport enterprises, international transport corridors, innovative activity, single window, uis european association, organizational-economic mechanism, mechanism improvement. jel classification: r41, r42, o32, g140 baltic journal of economic studies 34 vol. 4, no. 3, 2018 1. introduction the globalization of the world economy causes the intensification of inter-state economic ties, many times increasing the role of transport. from a geographic perspective, efficient transportation contributes to aligning regional disparities between countries and at the level of the trans-european transport network (ten-t). this allows considering the transport system as an important factor in economic growth, creating competitive advantages for national economies within the framework of the world economy, which is especially important given the integration of transport markets in europe and the intensification of trade between the eu and ukraine. the characteristic features of the current state of the transport industry in ukraine are the critical level of financial condition and the practically worn rolling stock and material and technical base. one of the ways of the indicated problems is the promotion of innovative activity of transport enterprises by the state, which will positively influence the progressive development of the transport system of ukraine. to achieve this goal, authorities and business representatives are discussing existing differences and ways to eliminate them, attracting investors to innovative projects. an example of such cooperation is the conference “transport and logistics innovation” on 10.10.2013, organized by the ministry of infrastructure of ukraine, the ukrainian logistics alliance, logisticpoint, the state enterprise “premier expo”, and led to the introduction of an electronic document flow system for key actors of transport infrastructure (materialy konferentsiyi, 2013). the purpose of the article is to consider theoretical and practical provisions of development of innovative mechanisms of activities of transport enterprises at the state and interstate levels. 2. the methodology of research technical and technological lagging in the level of transport development in ukraine hamper the economic development of the country, its european integration, leads to unsatisfactory level of transport services, reduction of speed of goods promotion, dependence of foreign trade of ukraine on foreign transport, loss of competitiveness of domestic transport, growth of danger and ecological load. the main causes of these problems are (prokopenko, 2012): – insufficient financing of state transport development programs; – insufficient volume of the attraction of foreign and domestic investments in transport development; – imperfect taxation system; – imperfection of the regulatory framework, slow harmonization of domestic transport legislation to the international one; – intensification of the competitive struggle for transit flows in the context of the european union’s approach to the borders of ukraine, etc. the introduction of advanced transport technologies aimed at ensuring competitiveness in the market for transport services involves increasing the competitiveness of transportation on the basis of transport logistics. this allows coordinating the movement of material, informational, and financial flows on the “door-to-door” and “just-in-time – jis” principles that will increase the quality of the provided transport services, which include the transportation of goods from the supplier to the consumer, will improve the service of cargo handling services. to do this, it is necessary to create interconnected logistical centres, promote the development and wide use of container transportation, conduct mixed (intermodal, multimodal) transportation and interaction of different modes of transport in transport nodes, the introduction of modern information technology for data exchange, transport documentation, electronic document flow. 2.1. international transport corridors the development of the transport system is impossible without the realization of the transit potential of ukraine. according to the british institute of rendall, ukraine has the highest transport transit rating of 3.11 in europe (postanova kabinetu ministriv ukrayiny, 2016). the transit rating of the territory of one or another country takes into account the development of transport systems and networks in it, as well as the level and state of the infrastructure. implementation of transit capacities in ukraine requires the development of a national transport network, which involves the development of main routes, which concentrate the largest transport flows and systems of international transport corridors (itc) with the corresponding infrastructure. this is the most important direction of development of the transport-road complex in the innovation sphere. the development of international transport corridors is one of the conditions for ukraine’s integration into the eu, as well as its establishment as a transit state. international transport corridor is a complex of land and water traffic arteries with appropriate infrastructure in a particular direction, including auxiliary structures, access roads, border crossings, service points, cargo and passenger terminals, equipment for traffic management, organizational and technical measures, legislative and regulatory acts that provide the carriage of goods and passengers at the level corresponding to the requirements of the european community. itc provides for the presence of automobile, railway, and water transport modes, operating near each other or as a band-wide in the tens or even hundreds of kilometres but oriented in one direction. creation of modern international transport corridors will allow connecting individual cities or settlements within baltic journal of economic studies 35 vol. 4, no. 3, 2018 several countries. for this, it is necessary to introduce innovative technologies for the movement of passengers and cargo between regions of european and other continents. four strategic directions have been developed: i. central europe – cis countries; ii. southern europe, the near east, africa – cis countries; iii. scandinavia, the baltics – the near east, transcaucasia, central asia; iv. northern europe – middle asia, china, the far east. itc №№ 3, 5, 7, 9 pass the territory of ukraine and have a priority development in the national transport network (table 1) (sereda, 2012). in addition, ukraine initiated the creation of a new baltic sea – black sea itc and proposed to include illichivsk-poti ferry crossing in the europe-asia transport corridor (traceca project). one of the important links of the corridor europe –caucasus – asia is the black sea route connecting ukraine and georgia. since 1996, there is an automobile, and since 1999 – the railway ferry illichivsk (odesa) – poti (batumi), created on the initiative of ukraine. following the signing of the trilateral agreement between georgia, ukraine, and bulgaria, a regular train ferry service on the poti – illichivsk – varna line was opened. in 2004, the railway ferry service illichivsk – derince (turkey) began to operate. until 2002, the route traceca in ukraine ended in the port of illichivsk. in 2001, it was decided to continue the traceca in the land territory of ukraine from illichivsk to the yahodyn border point with poland (with the prospect of entering the baltic sea) (sayt dp “administratsiya morskykh portiv ukrayiny”). the development of the itc and the integration of the national transport system in the european one require the construction of a new network of highspeed railroads. the construction of a new railway network involves a speed of up to 300 km/h, the use of a fundamentally new rolling stock and a track of 1,435  mm in width instead of 1520 mm (postanova kabinetu ministriv ukrayiny, 2016). an important role in the itc system is played by information infrastructure that accumulates, processes, stores, and disposes of information on the availability of cargo, the need for one or other vehicles, provides continuous monitoring of cargo passing, and increases the level of their preservation. 2.2. development of transit potential of ukraine ukraine’s conditions are favourable for the development of maritime transport: in the south, there are the black and azov seas, which do not freeze and table 1 international transport corridors no. of itc route countries-participants 1 helsinki – tallinn – riga – kaunas and klaipėda – warszawa and gdańsk; finland, estonia, latvia, poland 2 berlin – poznań – warszawa – brest – minsk – smolensk – moscow – nizhny novgorod germany, poland, belarus, russia 3 brussel – aachen – köln – dresden – wrocław – katowice – kraków – lviv – kyiv; belgium, germany, poland, ukraine 4 dresden/nürnberg – prague – vienna – bratislava – győr – budapest – arad – bucharest – constanța/craiova – sofia – thessaloniki – plovdiv – istanbul germany, the czech republic, austria, slovakia, hungary, romania, bulgaria, greece, turkey 5 venice – trieste/koper – ljubljana – maribor – budapest – uzhhorod – lviv – kyiv; italy, slovenia, hungary, ukraine 6 gdańsk – katowice – žilina, with a western branch: katowice – brno; poland, slovakia 7 the danube river (water) austria, hungary, yugoslavia, bulgaria, romania, moldova, ukraine 8 durrës – tirana – skopje – bitola – sofia – dimitrovgrad – burgas – varna albania, macedonia, bulgaria 9 helsinki – vyborg – st. petersburg – pskov – moscow – kaliningrad – kyiv – liubashivka/rozdilna – chișinău – bucharest – dimitrovgrad – alexandroupoli finland, russia, ukraine, moldova, romania, bulgaria, greece 10 salzburg – ljubljana – zagreb – belgrade – niš – skopje – veles – thessaloniki austria, slovenia, croatia, serbia, macedonia, greece baltic sea – black sea (gdańsk – warszawa – kovel – odesa) poland, ukraine europe – caucasus – asia (тrасеса) bulgaria, romania, ukraine, moldova, georgia, turkey, armenia, azerbaijan, kyrgyzstan, tajikistan, kazakhstan and uzbekistan source: formed by the author baltic journal of economic studies 36 vol. 4, no. 3, 2018 are connected with the mediterranean sea via the bosporus. the sea-economic complex of ukraine in the black sea-azov basin includes 13 continental seaports with a throughput of 262 million tons per year. the most important seaports are odesa, yuzhnyi, illichivsk, izmail, kherson, mykolaiv, and others, on the banks of the sea of azov – mariupol and berdiansk. despite the favourable conditions for the development of maritime transport, according to statistics, it accounts for only 2.4% of freight turnover and 0.1% of passenger turnover from the total volume of services provided. in sea transport of goods, the main share is occupied by transportation in foreign (international) connections, which in recent years makes up about 70% (sayt dp “administratsiya morskykh portiv ukrayiny”). according to the state statistics committee, the main types of cargo are metals (24%), construction materials (23%), grain (11%), ore (12%), oil and petroleum products (5%), chemical and mineral fertilizers (3%), forest materials (2.5%), coal, etc. (sayt dp “administratsiya morskykh portiv ukrayiny”). the main problem of maritime transport is the significant obsolescence and physical deterioration of vehicles and port equipment. the average life of trading vessels of ukraine exceeds 15 years. therefore, given their technical condition, the vast majority of western ports prohibit such merchant ships from entering an internal raid. the outdated infrastructure of ukrainian ports significantly reduces their productivity (up to 50% of the productivity of the ports of western countries). the vast majority of merchant fleet vessels are small-tonnage. the average displacement of ukrainian vessels is 3-5 times less than the similar indicator in such countries as the usa, japan, greece, etc. the bulk of the fleet, controlled by domestic ship-owners, is registered in foreign ship registers, which threatens the independence of the transport support of foreign trade of ukraine. 3. results and discussion under the current conditions, for ukraine, the strategic benchmark for innovative development is the implementation of a technological breakthrough and the creation of a national innovation system that will anticipate the identification of priorities of innovation activity and the formation and implementation of innovative development programs and stimulation of innovation activity. first of all, the priority directions of innovative activity in the transport system are almost not defined, not substantiated, and weakly interconnected. therefore, a clearer definition and justification according to the criteria of innovation of priority directions of innovation development of the transport system will enable to form an effective sectoral state innovation policy for activating innovation activity of transport enterprises. by the resolution № 1056 on 28.12.2016, the cabinet of ministers of ukraine has determined priority innovative directions in the transport sphere for the period of 2017–2021 (table 2) (postanova kabinetu ministriv ukrayiny, 2016): today, the latest innovations that support the transport industry and improve the service of transport services are: – electronic freight technology and single-window technology as a factor of acceleration of cargo movement; – introduction of the electronic document flow of logistics and transport activities (for example, the implementation of projects of electronic submission of information, electronic booking of queues, electronic declaration); – development and implementation of electronic document circulation standards; – methods of management and control over transportation costs in order to reduce the cost of delivery of goods by vehicles; – application of cloud technologies and mobile devices; – management of delivery terms; – creation of new supply chains/transport corridors and multimodal formats, etc. in our opinion, the main objective for improving the service of providing transport services is to introduce electronic document flow of logistics and transport activities. if one analyses the full cycle of delivery of goods, the main time is occupied by operations of preparation of the cargo for transportation and, accordingly, delivery to the client, the term of transportation of goods in most cases takes less time. therefore, technology and, above all, information technology should be aimed at reducing the time for the preparation and completion of operations related to the development of infrastructure and technology associated with the development of transport vehicles (voychenko, 2015). table 2 innovative development directions of the transport system innovative technologies required in the sphere of transport for the period of 2017–2021 aggregates and systems of the new generation for speed and high-speed rail transport development and implementation of intelligent and digital systems to systems of transport logistics new generations of processes and technology in the aircraft, ship and space-rocket industry development of navigation systems and control of aviation, ship and rocket technology source: formed by the author baltic journal of economic studies 37 vol. 4, no. 3, 2018 the advantage of electronic document flow is that this system allows any links to quickly exchange information with each other. this is the implementation of the principle of “single-window” in transport terminals, where the most labour-intensive processes are associated with the processing of documents – both on arrival of cargo and on shipment. therefore, it provides an opportunity to accelerate the time to handle a fairly large amount of information, multimodality – the possibility to transfer information from one mode of transport to another and make decisions at the junctions of transport modes. also, it is necessary to take into account the important factor involved in the process of cargo execution, except the sender and the recipient, agents (forwarders), carriers, service of transport terminals, and state bodies (customs, phytosanitary control and others, depending on the specifics of the cargo). all this is reflected in a certain number of documents – the invoice, the consignment note, the customs declaration, the export permit, etc. (voychenko, 2015). the use of various platforms for electronic document circulation by different actors will not allow the transport system to function effectively; therefore, it is necessary to introduce a system of “single-window” – a common system of electronic document flow for all the agents of the transport market. to date, the pilot project “single window” is used in the activity of the odesa sea commercial port, the terminals of “tis” in the territory of the yuzhnyi sea commercial port, and the sea commercial port of chornomorsk (voychenko, 2015). let us consider the statistical reporting of ports’ work using the single window system as of april 2017 (table 3) (the site of the state enterprise “administration of sea ports of ukraine”). analysing the above data, it can be concluded that during the period since the introduction of the single window system, there is a trend of increasing the number of successfully registered containers in the system for their loading. since the end of 2015, ispc has been implemented and used in all seaports of ukraine. in particular, a ship arrival registration module works in all harbours. in odesa, black sea, yuzhnyi, and bilhorod-dnistrovskyi seaports, registration of the ship’s arrival takes place exclusively in electronic form. in all other ports – the arrival of the ship is made in parallel mode using the electronic system and in paper form. in odesa, the black sea port, and the seaport “yuzhnyi” (for tis-container tov), the ispc system is used for the import of containerized cargoes imported by the sea mode, the transportation of which is carried out by road and rail transport (vnedreniye tekhnologiy elektronnoy obrabotki gruzov po tekhnologii íata e-freightv ukraine: problemy i perspektivy, 2014). in addition, the port of odesa uses an ispc export module for container and general cargoes and in the tov “black sea fishing port” – a module for export of container cargoes is introduced. the next step in the development of the ispc application will be the full transition to the electronic form of ship registration in all ports of ukraine. simplification of trade procedures has become central to ukraine in the context of integration into european and world markets. ukraine needs to improve the information security of international trade, one of the main elements of which is the transportation of goods across borders. creation of the mentioned system will allow all agents of foreign economic activity – participants of the transport process – to provide information simultaneously, in one single place, in a standard form and to one agency, institution, organization (regardless of the form of ownership). today, the uis is used in the most developed ports, airports, and other intensive border crossing points in the world. in western europe, the specified form of single-window functions in ports of hamburg (germany), rotterdam (the netherlands), antwerp (belgium), felixstowe (great britain), le havre, marseille (france), barcelona, bilbao (spain). on the basis of specified ports, european port community systems association (epcsa) was established (vnedreniye tekhnologiy elektronnoy obrabotki gruzov po tekhnologii íata e-freightv ukraine: problemy i perspektivy, 2014). the introduction of the uis, initially at the local level with the prospect of using this experience to create a national single window will bring ukraine closer to the eu trade development strategy, where a program for developing a network of national mechanisms of single window has already adopted that will exchange information on the basis of standards of the un and world customs organization. thus, at the first stage of the project, the main objective is to implement the above-mentioned un recommendations, assignments to the cabinet of ministers of ukraine by creating appropriate software and information complexes, means of communication between the participants of the uis, organizational support of interaction between state and non-state enterprises and institutions on the way of optimization of transport processes, reduction of threats of unpredictable subjective circumstances, cancellation of the human factor’s influence on the process of moving goods and vehicles across borders and, consequently, increasing the volume of foreign trade, revenues to the state budget of ukraine, taxes and fees. the uis, which is currently being formed at the odesa sea commercial port, uses the existing experience and best practices of european ports (vnedreniye tekhnologiy elektronnoy obrabotki gruzov po tekhnologii íata e-freightv ukraine: problemy i perspektivy, 2014; the site of the state enterprise “administration of sea ports of ukraine”). baltic journal of economic studies 38 vol. 4, no. 3, 2018 ta bl e 3 st at is ti ca l d at a of th e w or k of th e se a co m m er ci al p or ts o f u kr ai ne w it h th e sy st em o f e le ct ro ni c do cu m en t fl ow “ si ng le w in do w ” in a pr il 2 01 7 po rt s i nd ic at or s o de sa s c p yu zh ny i s c p c ho rn om or sk yi s c p o rd er s o rd er s c on ta in er s c on ta in er s o rd er s o rd er s c on ta in er s c on ta in er s o rd er s o rd er s c on ta in er s c on ta in er s 20 14 р . 20 17 р . 20 14 р . 20 17 р . 20 15 р . 20 17 р . 20 15 р . 20 17 р . 20 14 р . 20 17 р . 20 14 р . 20 17 р . to ta l: 50 28 61 39 99 74 13 91 3 83 16 7 21 0 65 2 44 7 60 8 12 32 15 61 of th em in o ffi ce 49 33 60 93 97 56 13 82 6 83 16 7 21 0 65 2 44 7 60 8 12 32 15 61 of th em in th e u sp a 95 46 21 8 87 0 0 0 0 0 0 0 0 of th em in ro ad tr an sp or t 46 81 57 72 77 74 11 65 4 83 13 8 21 0 46 8 43 1 54 6 12 00 89 4 of th em in ra ilw ay tr an sp or t 34 7 33 8 22 00 22 18 0 17 0 17 2 16 60 32 66 4 to ta l p er m it s is su ed b y cu st om s au th or it ie s fo r lo ad in g on v eh ic le s: 50 50 53 33 99 61 99 45 84 20 1 21 2 84 5 44 0 59 8 11 64 12 70 of th em , p er m its is su ed b y cu st om s au th or iti es fo r l oa di ng o n ro ad tr an sp or t 47 13 50 45 78 33 85 70 84 16 9 21 2 59 7 42 5 55 1 11 33 88 8 of th em , p er m its is su ed b y cu st om s au th or iti es fo r l oa di ng o n ra ilw ay tr an sp or t 33 7 26 0 21 28 13 39 0 20 0 23 6 15 45 31 37 9 to ta l p er m it s is su ed b y cu st om s au th or it ie s to le av e th e bo rd er c ro ss in g po in t a nd p or t: 10 34 4 99 56 0 0 0 1 11 10 of th em , p er m its is su ed b y cu st om s au th or iti es to le av e th e bo rd er c ro ss in g po in t a nd p or t o n ro ad tr an sp or t 80 08 87 99 0 0 0 0 81 9 of th em , p er m its is su ed b y cu st om s au th or iti es to le av e th e bo rd er c ro ss in g po in t a nd p or t o n ra ilw ay tr an sp or t 23 36 11 57 0 0 0 1 29 1 so ur ce : f or m ed b y th e au th or o n th e ba sis o f v ne dr en iy e te kh no lo gi y el ek tr on no y ob ra bo tk i g ru zo v po te kh no lo gi i í at a e -fr ei gh tv u kr ai ne : p ro bl em y i p er sp ek tiv y, (2 01 4) ; s ay t d p “a dm in ist ra ts iy a m or sk yk h po rt iv u kr ay in y” baltic journal of economic studies 39 vol. 4, no. 3, 2018 for the development of these structural transformations, we propose to introduce an improved organizational and economic mechanism for regulating innovation activity. the overall structure of the organizational and economic mechanism of innovation activity at a transport enterprise is a complex system of functional links between objects, subjects, means, methods, and other components of innovation activity. such a system can be used to achieve a wide range of strategic objectives of the enterprise. in order to determine the conditions for attributing projects and other technical and technological improvements to innovation and investment, and considering that innovation in the field of transport is aimed at creating high-tech products of the highest standards that meet international requirements in order to ensure the implementation of resource and energy saving, environmental and safe technologies, and to improve the quality of transport services, it is necessary to adhere to the criteria of environmental friendliness, safety, quality on the condition of improvement of these parameters by not less than 5% (voychenko, 2015). in relation to this, there is proposed a scheme of improved organizational and economic mechanism for regulating innovation activity of transport enterprises of ukraine that is shown in figure 1. the law of ukraine “on innovation activ ity ” prov ides for the creation of central executive authorities in the field of innovation activ ities of various ty pes of economic activ ity. they should prepare proposals for the implementation of innovation polic y in the relevant economic field, create organizational and economic mechanisms for suppor ting its implementation (postanova k abinetu ministriv ukray iny, 2016). therefore, it is proposed to improve the organizational str ucture of the ministr y of infrastr ucture of ukraine by means of creating a separate authority or depar tment. the proposed structure should have functions related to the state innovation and investment policy in the transport and road complex, which will allow ensuring the effectiveness of the organizational and economic mechanism for regulating the innovation activity of transport enterprises. 4. conclusions the development of the transport system is impossible without the realization of the transit potential of ukraine. the introduction of advanced transport technologies aimed at ensuring competitiveness in the market for transport services involves increasing the competitiveness of transportation on the basis of transport logistics. creation of modern international transport corridors will allow connecting individual cities or settlements within several countries. for this, it is necessary to introduce innovative technologies for the movement of passengers and cargo. an important role in the itc system is played by information infrastructure that accumulates, processes, stores, and disposes of information on the availability of cargo, the need for one or other vehicles, provides continuous monitoring of cargo passing, and increases the level of their preservation. at the state level of ukraine, the creation of such a system will give a real impetus to the development of a favourable economic and legal space, harmonization of data exchange between various participants in transport business processes and state regulatory bodies, in accordance with the requirements of world standards. in our view, this will be the first step towards the creation of a national single-window format and the associated positive shifts aimed at the european integration, the formation of international supply chains and transfers, the limitation of bureaucratic procedures, and the fight against corruption. in terms of the transformation of ukraine’s economy, the core of scientific and technological advance is an innovative component aimed at activating mechanisms for the creation of new competitive products and services, the introduction of a new format for business communication, and the formation of new business environment conditions. to ensure the development of the innovative potential of transport companies, we offer the following general proposals: – to create an effective innovation mechanism in the country, due to constant state support of domestic producers, the attraction of additional financial resources, and constant financial control of independent experts; – to form a permanent increase in innovation potential based on the introduction of new production technologies, scientific and technical developments that can provide competitive advantages for ukrainian entrepreneurs in both the domestic and foreign markets in the short term; – to ensure the provision of transport services and transfers of appropriate quality that correspond to european and international standards. the source of economic growth can be innovation activity, as of large enterprises of basic industries, as well as of other spheres of the economy, especially transport enterprises and enterprises providing transport services. in order to implement innovations in transport and logistics activities, it is necessary to take into account the experience of the countries of the world, which actively use the latest innovative technologies, and develop unified standards for their effective use. baltic journal of economic studies 40 vol. 4, no. 3, 2018 figure 1. ways to improve the organizational and economic mechanism for regulating innovation activity of transport enterprises of ukraine theoretical substantiation of the essence of the innovative activity of transport enterprises the main provisions of the functioning of the organizational and economic mechanism for regulating innovation activity of transport enterprises of ukraine the main directions of innovative activity of transport enterprises proposals for increasing the effectiveness of the organizational and economic mechanism for regulating the innovation activity of transport enterprises ways to improve the organizational and economic mechanism of regulation of innovation activities of transport enterprises in ukraine organizational mechanism economic mechanism legal mechanism creation of the department of innovation and investment policy financial support legislative support for economic stimulation and financial support for innovation preferential taxation of innovation activity. preferential customs regulation of innovation activity. realization of innovative activity by transport enterprises of ukraine to amend the laws of ukraine in order to improve economic incentives and financial support functions of the newly established department for carrying out the state policy of regulation of innovation activity of transport enterprises preparation of proposals for priority directions of innovation activity of transport enterprises. implementation of state registration of innovation projects of transport enterprises, monitoring of their implementation. approval of necessary volumes of budget funds for lending to innovative projects of transport enterprises. implementing measures to improve the investment climate. organization of advanced training of specialists in the field of innovative activity of transport enterprises. implementation of sectoral technical and environmental standards for the operation of vehicles. development of laws and regulations providing innovative development in the field of transport. study of the world experience of attracting investments and mechanisms of stimulating innovation development, etc. creation of a state transport innovative financial and credit institution “on enterprise profit taxation” providing low-interest, noninterest loans. support of realization of innovative projects. control over the use of funds provided. formation of affiliate programs investor-bankstate. “on unified customs tariff” “on value added tax” references: postanova kabinetu ministriv ukrayiny (2016). deyaki pytannya vyznachennya serednostrokovykh priorytetnykh napryamiv innovatsiynoyi diyalnosti zahalnoderzhavnoho rivnya na 2017-2021 roky [resolution of the cabinet of ministers of ukraine "some issues of defining medium-term priority areas of innovation activities of the national level for 2017-2021"]. retrieved from: http://zakon3.rada.gov.ua/laws/show/1056-2016-%d0%bf vnedreniye tekhnologiy elektronnoy obrabotki gruzov po tekhnologii íata e-freightv ukraine: problemy i perspektivy (2014). [introduction of technologies for electronic cargo handling using iata e-freight technology in ukraine: problems and prospects]. 02.04.2014. vol. 66, № 13, р. 804. baltic journal of economic studies 41 vol. 4, no. 3, 2018 voychenko t. (2015). napryamy innovatsiynoyi diyalnosti u vodno transportniy haluzi [areas of innovative activity in the water transport industry]. vol. 31, рp. 142-143. prokopenko n.s., vyklyuk m.i. (2012). rehulyuvannya innovatsiynoyi diyalnosti pidpryyemstv transportnoho mashynobuduvannya: monohrafiya [regulation of innovative activity of transport engineering enterprises: monograph]. lviv: "liga-press". sereda a.r . (2012). otsinka rivnya vplyvu rehulyuvannya na efektyvnist innovatsiynoyi diyalnosti pidpryyemstv transportnoho mashynobuduvannya [assessment of the level of regulation influence on the efficiency of innovation activity of enterprises of transport engineering]. proektuvannya, vyrobnytstvo ta ekspluatatsiya avtotransportnykh zasobiv i poyizdiv: shchorichnyy naukovo-vyrobnychyy zhurnal – design, production and operation of vehicles and trains: annual scientific and production magazine. vol. 20, рp. 247-253. turpak t.h. (2007). innovatsiyi yak faktor efektyvnoyi diyalnosti portovoho hospodarstva richkovoho transportu ukrayiny [innovations as a factor for effective operation of the port economy of river transport of ukraine]. problemy nauky: mizhhaluzevyy naukovo – tekhnichnyy zhurnal – problems of science: interdisciplinary scientific and technical journal. no 8, рp. 33-38. materialy konferentsiyi (2013). innovatsiyi dlya transportu i lohistyky. materials of the conference "innovations for transport and logistics". retrieved from: http://transukraine.com.ua/conference_page_id=125 pilotnyy proekt «yedyne vikno – lokalne rishennya» (2014). statystyka [pilot project "single window – local solution". statistics]. retrieved from: http://www.singlewindow.org/publications/17?lang=ukr sayt dp «administratsiya morskykh portiv ukrayiny» [the site of the state enterprise "administration of sea ports of ukraine"]. informatsiynu systemu portovoho spivtovarystva vprovadzheno v usikh morskykh portakh ukrayiny [information system of the port community implemented in all seaports of ukraine]. retrieved from: http:// www.uspa.gov.ua/pres-tsentr/novini/novini-ampu/11677-informatsionnaya-sistema-portovogo-soobshchestvavnedrena-vo-vsekh-morskikh-portakh-ukrainy baltic journal of economic studies 301 vol. 4, no. 4, 2018 corresponding author: 1 yaroslav mudryi national law university, ukraine. e-mail: sereda_olha@ukr.net orcid: https://orcid.org/0000-0003-3018-0789 doi: https://doi.org/10.30525/2256-0742/2018-4-4-301-305 the emergence and development of taxation in the legal tradition of the peoples of eastern europe olha sereda1 abstract. the purpose of the article is to determine patterns of the creation of taxation given the centuries-long history of state-building of the peoples of eastern europe; to reveal the interaction of public and state elements as factors in creating a tax system. the use of dialectical, historical and legal, comparative methods allowed analysing standards, specifications and guidelines and solve a number of objectives: to find out the origin of taxes in the history of state creation; determine the laws of the origin and development of taxation in accordance with the nature of social relations; identify the factors that influenced the formation of taxation of the peoples of eastern europe. in the course of the study, it is found that taxation arises on the principles of self-government, social contract, and collective responsibility. before the state creation, compulsory payments were collected from the population at the level of the communities and their associations in the form of “gifts” and “poliudie”; payment for the rituals; as well as tribute-farming. objects of taxation were “dym” – a household with a house and a fire; “plough” – a plough or a plot of land that could be cultivated with one plough. generally recognized for peoples and states of the early middle ages was the payment of tribute-indemnity. polans, severians, vyatichi paid tribute to the khazars, and in the northwest of rus – to the varangians, the drevlians – to the kievan land. the process of forming the state (princely) tax system began by prince oleg from the abolition of tribute-farming in favour of other peoples and the establishment of an internal single tribute in favour of the kievan land. depending on the relations between the lands of rus and the prince, this tribute acquired either the form of “gift” or farming. in 947, princess olga conducted a tax reform and used it for the affirmation of princely possessions. places, norms, and sizes of tribute in favour of the princely treasury are determined. the results of the study will enable the tax institution to be recognized as a dynamic, historical phenomenon, formed on the basis of a social contract and a consolidating function. key words: tax history, tax, tax system, emergence of taxes, tribute, tribute relationships in slavic tribes, tax system of kievan rus. jel classification: b15, k10, n13, n43 1. introduction taxes are a dynamic state-legal institute, a financial instrument of the state, which allows the state mechanism “to live” in the economic-legal space. this is an important link that directly or indirectly connects society with the state, thus involving it in the process of accumulation of financial resources for various strategic and social tasks. this relationship is supported by the state will and compulsion in accordance with the law. at such a “positivist” approach to understanding the nature of the tax, its social component is lost. at the moment, the institution is perceived solely as a state initiative, a general obligation and coercion. the social component is limited by the taxpayer and the addressee in the case of financing social needs (pensions, allowances, scholarships, reimbursements, etc.). due to this, we observe a negative perception of the taxation system because of the lack of understanding and the idea of cooperation between the state and taxpayers. these are two opposing sides, where the latter took the position of the affected critics. harmony and cooperation between them are possible under the condition of “rehabilitation” of legal awareness and formation of the tax system on the basis of the common good. it is in the field of tax relations that the principle of a social state should be implemented. on this basis, a scientific study, the purpose of which is to reveal not only the state (normative) nature of taxes but also the public one, acquires a special relevance. its research requires coverage of wide chronological boundaries, analysis and comparison of various historical cultures and formations. such an approach with the help of dialectical, comparative, systemicstructural methods will allow solving a number of tasks: baltic journal of economic studies 302 vol. 4, no. 4, 2018 to find out the origin of taxes in the history of statebuilding of the peoples of eastern europe; determine the laws of the origin and development of taxation in accordance with the nature of social relations; identify the factors that influenced the formation of taxation in the legal tradition of the peoples of eastern europe. the genesis of the tax system in connection with the social processes of the ancient peoples and the middle ages is disclosed in the works of such researchers as n. i. turgenev, v. a. lebedev, e. seligman, p. i. tarasov, i. m. diakonov, v. o. kuri, s. m. kashtanov, and others; changes in taxation during the bourgeois society were investigated by a. smith, s. gustav, o. horbromashkevych, i. yanzhul, and others. it should be noted that the works of these authors have a doctrinal character, form the foundation for modern research in the field of tax law and its formation, in particular, by m. p. kucheriavenko, m. m. sheverdin, h. h. osadcha, f. o. yaroshenko, v. l. pavlenko, and others. 2. the main material the tradition of taxation of the peoples of eastern europe “was born” along with the state. 14 associations of east-slavic tribes (polans, dulebs, buzhans, volhynians, severians, tivertsi, uliches, etc.), which appeared in the history of the world as early as one thousand ad, became the socio-political basis for the deployment of state-building processes. in the v-viii  centuries, their social organization was transformed into military-political unions in the form of tribal principalities: polans and severians with the centre in kiev (the principality of kiev); ilmen slavs, krivichs, chuds, merya – near the city of novgorod. governance was carried out on the basis of a broad democracy, veche organization with the delegation of executive functions to an elected or “called” prince. the byzantine historian procopius of caesarea described the political system of the slavs as follows: “they are not governed by one person but have long been living in the rule of people and ... all things are always conducted jointly…” (bojko, 1999). this way of governance determined the procedure for satisfying the economic needs of the community and fulfilling its obligations on the principles of selfgovernment, the participation of the people in the decision of community affairs, collective bail, and responsibility. common duties were the maintenance of the prince, the rituals; payment of military tributefarming. these forms of “financial” participation of the people became the first pre-state compulsory social contributions. in cases of “calling” the prince, he was given a “gift” or a “tribute” in the sign of hospitality and goodwill of the community. “gifting” of the prince was ritualsymbolic in nature. the population came to meet with gifts and bows, congratulating him during the poliudie – an annual autumn-winter visiting the lands of the principality. therefore, the property received in this form was called “gifted poliudie”. slavic principalities protected themselves whether they themselves were looking for booty from neighbouring peoples. in the area of relations between the winner and the conquered people, the common practice was the payment of tribute-indemnity. tributeindemnity was paid periodically or one-time as farming for non-aggression in favour of the winner. this model was universally accepted for peoples and nations of the early middle ages. tribute-indemnity, as well as “gifted poliudie”, was paid by “dym” – a household with a house and a fire. the object of taxation was also “plough” – a plough or a plot of land that could be cultivated with one plough. in turn, hunting tribes had the experience of paying tribute per head. up to the x century, tribute was paid, as a rule, in natural form: squirrels, valuable fur, honey, grain, and others. slavic tribes had a rich experience in receiving and paying tribute in the form of indemnity. on the one hand, procopius of caesarea mentions slavs and antes who have plundered european lands with robbery and indemnities. the campaigns of the slavs in 860, 907-911, and 941 to byzantium (under the influence of the khazar khaganate) were slashing. according to the rus-byzantine treaties, the greeks undertook to pay a tribute-indemnity, to free the merchants of rus from paying customs duties, and took on the burden of their allowance for the time of stay in byzantium. on the other hand, the primary chronicle records that the polans, the severians, the vyatichi paid tribute to the khazars, and in the northwest of rus – to the varangians. the khazars in the vіі-іх centuries created the state of the khazar khaganate in the territory of south-eastern europe. they controlled the trade routes between east and west and pursued an active aggressive policy. one of the great victories was domination over the south slavic centre. slavs were obliged to pay tribute in favour of khaganate: the polans – a sword per hearth, the severians and vyatichi – “по белей веверице отъ дыма” (litvina, 2002). the kievan prince askold became a tributary of the khaganate and the khagan military governor. nestor the chronicler described the khazars’ charging of the tribute from the polans in the following lines. “then the khazars came upon them [the polans] as they lived in the hills and forests, and demanded tribute from them. after consulting among themselves, the polans paid as tribute one sword per hearth, which the khazars bore to their prince and their elders, and said to them, ‘behold, we have found new tribute.’ when asked whence it was derived, they replied, ‘from the forest on the hills by the river dnieper.’ the elders inquired what tribute had been paid, whereupon the swords were exhibited. baltic journal of economic studies 303 vol. 4, no. 4, 2018 the khazar elders then protested, ‘evil is this tribute, prince. we have won it with a one-edged weapon called a sabre, but the weapon of these men is sharp on both edges and is called a sword. these men shall impose tribute upon us and upon other lands.’ all this has come to pass, for they spoke thus not of their own will, but by god’s commandment.” the chronicler compared the dependence of the polans from the khazars with the egyptian slavery of the jews: “for the egyptians perished at the hand of moses, though the jews were previously their slaves” (dnipro, 1989). in turn, the varangians, according to the text of the trinity list of the novgorod chronicle, were demanding “...дань даяху варягомъ от мужа по белки и веверици; а иже бяху у нихъ, то насилье деяху словеномъ, кривичемъ и мерямъ и чюди” (puzanov, 2007). the burden and intensity of duties, according to historians, aroused a long-lasting economic crisis in the first quarter of the іх century. however, in 862, the local population managed to expel the varangians “beyond the sea” and “began to rule by themselves.” for better order and ending internal strife, the slavs and the finns made the decision to elect “собе князя, иже бы володелъ нами и судилъ по праву.” according to nestor the chronicle, in 862, at the invitation of five tribes – two slavic and three finno-ugric from the south baltic, the varangian dynasty comes to them: three brothers – rurik, sineus, and turvor. however, their power was not absolute, the local elders retained their rule and influence. the princes divided the “rus land” among themselves and began to reign and assigned cities to their followers. among them were two boyars, askold and dir, who did not reach the byzantine empire “along the dnieper”, settled to reign in the land of the polans (tolochko, 1998). the only successor after them was oleg. the prince decided that novgorod should pay the varangians tribute to the amount of 300 grivnas a year for the preservation of peace and druzhina’s service. this tribute to varangians was received until the end of the reign of yaroslav but already as a payment for military service. in 882, oleg settled himself in kiev and then the policy of consolidating the northern and southern slavic tribes under his authority of the kievan prince and the kievan land began. this event has accelerated the development of state-building processes in eastern europe. “kievan rus” formed as an early medieval state in the ix century in the process of political association of the east slavic tribes. its origin was not a single action, document or conquest. this is a unique way of multicultural interaction and consolidation of various pagan tribes of different levels of social organization (slavs, khazars, varangians); byzantine-greek civilization. it conditioned the peculiarities of the formation of a state mechanism: the institutes of the head of state, the machinery, the court, and the taxation system. their formation took place in the legal field of local slavic and scandinavian customs; rules of canon and roman law (with the adoption of christianity). in the pursuit of supremacy and unanimous rule, oleg demanded that the slavs pay tribute to him according to the old custom “по всей русстей земле.” any other forms of tribute to the conquerors abolished in favour of the prince. according to laurentian codex of the chronicle, in 884, oleg attacked the severians, and conquered them, and imposed a light tribute upon them and forbade their further payment of tribute to the khazars, on the ground that there was no reason for them to pay it as long as the khazars were his enemies. the same mechanism was applied to the radimichians. the chronicle consolidated the negotiations’ results, which stated that the tribute was paid to the khazars, and at the same time, the demand of oleg – “do not pay the khazars, but pay me ... and they paid oleg a shilling apiece, the same amount that they had paid the khazars.” as a result, the khazar khanagate lost its slavic tributaries. thus, a new tribute was introduced on the one hand by force, and on the other – was a lighter alternative to previous tribute-indemnities. every land met the kievan prince in different ways, and his goal was achieved either by force or by agreement: “oleg began military operations against the derevlians, and after conquering them he imposed upon them the tribute of a black marten-skin apiece. thus oleg established his authority over the polans, the derevlians, the severians, and the radimichians, but he waged war with the ulichians and the tivercians.” communities that “gifted” the prince or paid tribute as a farming did not lose their autonomy and lands. however, thus they recognized the military-political rule of the community of the polyanians over other tribal associations. the refusal to pay tribute meant the dissolution of the political alliance with the prince and the transition to a state of war. so tribute did not become universal and did not turn into a state tax. all forms of tribute out of the habit of the slavs were paid during the poliudie to the prince, rarely – independently by the population in kiev. the latter was called “povoz” or “podvoda”. gradually, the term “poliudie” combined various forms of payments from the population in favour of the prince: tribute, gifts, urok, bows, feeds, extraction, duties, and various fees. with the increase of territories, the governors of the prince were delegated to places – “posadniks”, elder “men” – druzhinniki. they were appointed from the inner circle of the prince. the time and place of the collection at first did not have a clear definition and created a space for conflict between the principality and the kievan prince. a striking example of this was the drevlian uprising against igor in 945. the reason for the confrontation was an excessive “taxation” in response to the refusal of the drevlians from their obligations after the death of oleg. it is described in detail in the primary chronicle, which states: baltic journal of economic studies 304 vol. 4, no. 4, 2018 “igor attacked the drevlians in search of tribute. he sought to increase the previous tribute and collected it by violence from the people with the assistance of his followers.” returning to kiev, he demanded more property, and he directed his druzhina to the drevlians again. in response, the drevlians consulted with their prince mal and decided to protect from him as from the wolf that steals and kills the sheep. disagreeing with the protest, igor met with them in a battle near iskorosten, where he was killed. this conflict, during the days of princess olga, broke into a thin political struggle for liberation from the supremacy of the kievan land on the one hand, and on the other – complete conquest of the drevlians to kiev and the transformation of the ruthenia into the princely domain. she has captured drevlian lands by force and cunning and “imposed upon them a heavy tribute, two parts of which went to kiev, and the third to olga in vyshgorod; for vyshgorod was olga’s city.” moreover, the princess standardized the order of collecting tribute throughout rus: “olga went to novgorod, and along the [river] msta she established trading-posts and collected tribute. she also collected imposts and tribute along the [river] luga. her hunting-grounds, boundary posts, towns, and trading-posts still exist throughout the whole region, while her sleighs stand in pskov to this day. her fowling preserves still remain on the dnieper and the desna, while her village of olzhichi is in existence even now.” (dnipro, 1989). since 947, tribute and imposts began to be systematically charged at the appropriate time and of fixed size. princess olga defined “uroki” and “statutes”. uroki established a list of duties, which set the size and terms of payment of tribute. the size was determined for each tribe separately. also, the “urok” was used in the sense of duty to be executed at a specified time and the exact size. a statute is a definition, an interpretation of the collection procedure. for the collection of taxes, “stanovyshcha” were defined – administrative and financial points in the centres of rural communities – pogosty. these were the trading posts for the entire region, so it was here that the princely strongholds were located and princely men lived. they collected tribute, all duties, and also conduct a princely court on the principles of custom and law. consequently, the features of tax payments in the period of the establishment of the prince’s authority and the consolidation of the slavic lands under the authority of the kievan prince were determined by the nature of his relations with the local princes, veche, and the community as a whole. the population paid tribute in the form of: 1) military tribute (drevlians); 2) voluntary gift from the communities-allies (polans); 3) state duty in the princely or patrimonial possession. the introduction of a new system was firstly in the land of the drevlians and then expanded from the southern part of rus to the north. rules of the tax law of kievan rus became statutory determined in the code of common law – russkaya pravda. in the legislation of princes of xi-xii centuries, the term “оустави дани” is used to define a tax. it marked a clear definition of the tribute size, time and place of its collection. a special attention should be paid to the structural part of the code – “pokon virnyi”. his document determined the amount of money and food that came to the prince’s men when collecting the vira from the community. with the advent of christianity, there were taxes in favour of the clergy. these are various additional types of sales duties on domestic trade, such as duty on trade in fairs during temple holidays. volodymyr the great in 988 established the “tithe”. it was intended for the construction of the church of the dormition of the virgin (church of the tithes) in kiev. initially, it was temporary in the amount of one-tenth of the income of the population and eventually transformed into the lifetime right of the clergy. satisfaction of state needs was also carried out through a series of personal duties, non-monetary fees, and duties. the first included certain types of work for the maintenance of the princely estate and land (to set up a princely court, to feed horses, to mow the princely meadows, to cultivate his fields, to harvest wood, to provide chickens for princely falcons, go hunting, etc.). with the development of the princely estates, the money replaced the non-monetary form of taxation. the international trade of the slavs with the byzantine empire, the khazar khaganate, and the arabian caliphate exerted a considerable influence on the formation of tax relations of kievan rus. due to the works of arab writers, it can be concluded on the general rule for paying tithe on the borders of rome, khazaria from various types of slavic goods. by the ix century, its own customs on the principle of collecting tithe was formed in rus. a separate category of taxes was customs duties and trade fees. unlike the tribute, a collection of duties was carried out in monetary form. among them, there are two groups: zastavni, which were levied before the start of trade for travel, and sales. zastavni included poberezhni (from moored ships and boats); perevoz (by ferry or boat), mostovshchina (for passing through the bridge), kostki (for travel along the protected roads). the duties were levied on the person who carried the goods and the cargo. internal duties and fees significantly impeded the development of trade, since their size and quantity were not regulated. after the death of yaroslav the wise, centrifugal tendencies intensified in the old russian state. his sons failed to ensure effective management and lost control in internal strifes. fragmentation between lands was facilitated by external factors – the pechenegs’ capture of pereiaslavshchyna in 1068; and internal uprisings of the population, in particular, kievans against izyaslav. feudal councils (1097, 1100, 1101, and 1107) and baltic journal of economic studies 305 vol. 4, no. 4, 2018 wise reign of vladimir monomakh (1113-1125) only slowed the process of the collapse of rus into separate independent principalities: halych, volhynia, kiev, murom, pereyaslavl, rostov-suzdal, chernihiv-siversk, polotsk-minsk, smolensk, tmutarakan, turov-pinsk principalities, novgorodian and pskov lands. already by the beginning of the xiii century, their number has reached 50. in each of the principalities, a model of taxation operated that was based on ancient customs. 3. conclusions 1. the taxation in kievan rus arose and was carried out on the principles of self-government, social contract, and collective responsibility. 2. before the state creation, compulsory payments were collected from the population at the level of the communities and their associations. the first “prestate taxes” were “gifts” and “poliudie” for the prince’s allowance; payment for the rituals; as well as military tribute-farming. they were paid in natural form. 3. generally recognized for peoples and states of the early middle ages was the payment of tributeindemnity. the polans, the severians, and the vyatichi paid tribute to the khazars, and in the northwest of rus – to the varangians, the drevlians – to the kievan land, at the time of the fragmentation and decline of kievan rus – to the pechenegs and tatar-mongols. 4. objects of taxation were “dym” – a household with a house and a fire; “plough” – a plough or a plot of land that could be cultivated with one plough. 5. the process of forming the state (princely) tax system began by prince oleg from the abolition of tribute-farming in favour of other peoples and the establishment of an internal single tribute in favour of the kievan land. depending on the relations between the lands of rus and the prince, this tribute acquired either the form of “gift” or farming. in 947, princess olga conducted a tax reform and used it for the affirmation of princely possessions. places, norms, and sizes of tribute in favour of the princely treasury were determined. references: bojko, o. d. (2006). istorija ukrajiny [history of ukraine]. kiev: akademvydav, 686 p. (in ukrainian) dnipro (1989). litopys rusjkyj. povistj mynulykh lit [the ruschronicle. the tale of past years]. kiev: dnipro, 274 p. (in ukrainian) litvina, a. f., uspenskiy, f. b. (2002). kievskaya i moskovskaya rus [kiev and moscow rus]. vol. 1, moscow: yazyki slavyanskoy kultury, 944 p. (in russian) puzanov, v. v. (2007). drevnerusskaya gosudarstvennost: genezis, etnokulturnaya sreda, ideologicheskie konstrukty [old russian statehood: genesis, ethnoculturus environment, ideological constructs]. izhevsk: udmurtskiy university, 624 p. (in russian) tolochko, o. p., tolochko, p. p. (1998). kyjivsjka rusj [kievan rus]. in v. smolij (ed.). kiev : aljternatyvy, 352 p. (in ukrainian) baltic journal of economic studies 131 vol. 5, no. 2, 2019 corresponding author: 1 odessa national academy of food technologies, ukraine. e-mail: melikh@gmail.com 2 admiral makarov national university of shipbuilding, ukraine. e-mail: bogatyrev@gmail.com 3 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 doi: https://doi.org/10.30525/2256-0742/2019-5-2-131-136 conceptual approaches to the development of health-improving tourism olena melikh1, konstantin bogatyrev2, inna irtyshcheva3 abstract. the article highlights approaches to the development of health-improving tourism. the purpose of the article is to investigate medical and health tourism in ukraine and to identify the preconditions for forming measures for further development. the subject-matter of the study is the theoretical and practical aspects of the development of health and wellness tourism in the country. in the course of the study, the following methods are used: dialectical, logical, and system approaches – to identify patterns and factors of development of health-improving tourism, graphical analysis – for the schematic representation of the generalized theoretical and practical results of the study, logical generalization of the results – to substantiate the main approaches to the development of health-improving tourism in the country. a healthy nation is a key to a successful country, therefore, studying the conceptual issues of ensuring and implementing methods of medical and recreational activities among the population is very relevant. among the main methods of health-improving activities of people is tourism. an analysis is made among the main development indicators of health-improving tourism, where: during the study period, there was an increase in the number of subjects of tourist activities, including travel agents and subjects carrying out excursions, but negative is the reduction of tour operators; increase in the number of employed; increase in the number of tourists served by tourist enterprises; the average annual increase in the number of tourists, tourists traveling abroad, tourists within ukraine. the number of places in the health-improving tourism establishments has decreased, while the servicing of visitors, on the contrary, has increased. positive is the increase in the arrival of foreigners. there is justified the establishment of the central fund for the promotion of health-improving tourism development in order to increase the efficiency of state regulation, stimulate innovation-investment processes in health-improving tourism, which in turn will ensure an increase in the quality and standard of living of the population, which will lead to the sustainability of the socio-economic development of the state. the main goals and tasks of the central fund for the development of health-improving tourism are defined; directions of its activity and sources of financing are outlined. the work of the fund will enable intensifying tourist and sports activities in the country and increasing the efficiency of medicalrecreational processes of the population in the current conditions of integration. key words: medical and health services, health and wellness tourism, tourism activities, sports activities. jel classification: g28, i15, l83 1. introduction environmental pollution over industrial development causes a deterioration of public health. therefore, today health-improving tourism occupies one of the leading places in the tourism industry because the active promotion of a healthy lifestyle, a slight increase in the profits of the inhabitants of economically developed countries makes many seek rehabilitation and rest in other, environmentally-friendly regions. health and wellness tourism is based on the use of natural resources: mineral waters, medical mud, and climatic conditions, which, combined with each other, have a positive effect on the treatment of various diseases and give a corresponding result to health promotion. ukraine has all the components for the development of health-improving tourism, namely: natural conditions, resources, development of resort infrastructure, use of modern methods of treatment, the attraction of foreign investments. therefore, the issue arises as to the improvement of conceptual approaches to the development of health-improving tourism in ukraine. baltic journal of economic studies 132 vol. 5, no. 2, 2019 the issue of organization of health-improving tourism and its place in the tourist industry system is disclosed in the works of foreign and domestic scholars. however, paying tribute to the results achieved, it is possible to identify a number of insufficiently worked out issues as regards to conceptual preconditions and factors for the development of health-improving tourism in the country. study of problems and prospects of the current state of health-improving tourism, as the main basis for the creation of conceptual approaches to development. solving global problems with tourism development requires creating a model of tourism policy of the state. in the context of integration of tourist flows, there is a need to create a state authority that will provide the appropriate level of health-improving tourism in ukraine. 2. the essence and features of health-improving tourism according to m. rutynskyi and v. petranivskyi, the notion “health-improving tourism” does not have a clear interpretation. the simplest definition can be formulated as follows: health-improving tourism – a trip to the resort areas for the purpose of recovery and treatment. the purpose of health-improving tourism is the complex use of natural healing factors and motor activity in therapeutic and prophylactic purposes. it is clear that medical and health tourism are often combined due to the similar purpose of travel and the realization of this goal on the basis of the use of one base (2012). health-improving tourism is divided into medical, the purpose of which is treatment as such, therapy, rehabilitation after illness, and preventive (wellness tourism), aimed at maintaining the body in a healthy condition and maintaining the balance between physical and psychological health. wellness tourism, in turn, can be active (sports and fitness) and passive (beauty programs). the term “wellness” in the scientific literature has appeared relatively recently and it means a good state both of the body and soul, relaxation, the recovery of forces of the body through active wellness activities. if we proceed from the classification of travels, medical tourism can be conventionally attributed to special types of tourism, namely, tourism with therapeutic purposes. such a definition includes not only trips to the resort but also other trips for the purpose of treatment, for example, for surgery in a foreign clinic (outbound tourism). recently, more and more foreign tourists (inbound tourism) are coming to ukrainian resorts for treatment. trips to the resort for a certain category of ukrainian citizens are paid by the state (social tourism). the development of health-improving tourism in ukraine is determined by the influence of various natural, historical, cultural, social, economic, political, and international factors. moreover, the present-day specifics are that the formation of a highly developed tourism industry and its integration into the world market are related to the need to solve acute socio-economic problems during the transformation of socio-economic relations. in order to analyse the level of functioning of the medical and healthcare industry in ukraine, it is worth considering some indicators of international health and wellness tourism. international health and wellness tourism occupies a significant place both in the economy of individual countries and in the whole world. in 2017, the direct, indirect, and mediated contribution of health and wellness tourism to the world economy was about 10.4% of gdp. this is stated in a press release by the world travel and tourism council (wttc). the organization conducted a study of the impact of tourism on the world economy in 185 countries of the world and concluded that tourism and related industries created 10.4% of world gdp or 8.3 trillion dollars. in addition, every tenth vacancy in the world is related to tourism, and in the sector as a whole – about 313 million jobs. the study also said that 2017 was one of the most successful for tourism in history. the tourist sphere has grown by 4.6%, which exceeds world gdp growth (which is 3%). according to the wttc, the tourism industry has created about 7 million new jobs – 20% of all vacancies worldwide (carenko, shpak, 2014). relative indicators of the development of healthimproving tourism industry of ukraine are more modest compared with the indicators of international tourism (table 1). according to the data of the table, it is clear that the direct contribution of the tourism industry of ukraine to the gdp formation in 2017 is estimated at 18.13 billion uah, which is 0.6%; according to the forecasts till 2022, this indicator should increase by only 294.37% – up to 71.5 billion uah while the share remains unchanged. with regard to employment, tourism attracts 10.29 thousand jobs, or 0.05%, according to forecasts, these values will increase to 1368.8 thousand and 5.8%. in 2017, export earnings from international visitors amounted to 0.1% of the total exports (0.41 billion uah), and by 2022 their growth is expected to 59.2 billion uah, which in turn will increase the indicator to 4.6%. the direct contribution of tourism to gdp is determined by the sum of income from foreign and domestic tourism, less the costs associated with the provision of tourism services. as already noted, in health and wellness tourism, both direct and secondary results are quite clearly manifested. in particular, direct, indirect, and induced (derivative) economic consequences of tourism activity are allocated. direct results are related to direct incomes of tourist enterprises. indirect results relate to revenues from tourism in related industries, and the reason for the baltic journal of economic studies 133 vol. 5, no. 2, 2019 emergence of induced results is the growth in demand for goods and services as a result of growth in volumes of medical and recreational activities. therefore, in order to determine the real effectiveness of tourism, it is necessary to take into account its combined effect: direct, indirect, and induced. rest abroad since 2015 is becoming more popular and accessible among ukrainians, and their expenditures are gradually reaching domestic consumption (the amount of expenses of domestic tourists and foreign visitors). in particular, the cost of compatriots on foreign holidays and travel since 2010 increased by 4.4 times, while travel across the country increased by only 2.5 times. the total contribution of the tourism industry of ukraine to gdp according to the wttc in 2017 reached 147.2 billion uah in nominal prices and has a steady growth trend; in particular, the direct contribution of the industry to gdp amounted to 39.6 billion uah (table 2). as the data of table 5 show, the direct contribution of tourism to gdp of ukraine (by activities directly related to the provision of tourist services, in particular, tourist enterprises, hotels, airlines, and other companies providing passenger transport services, restaurants and recreational facilities working directly with tourists) during 2011–2013 has a rather dynamic growth: from 11.6 billion usd in 2011 to 13.9 billion usd in 2013, but after 2014 there is a sharp drop from 7.4 billion usd to 5.5 billion usd. despite some positive trends in the development of health and wellness tourism in ukraine, there are a number of problems, namely: 1. a small number of medical and recreational enterprises due to significant barriers to entering the market for tourist services in ukraine. the indicator of bed/population ratio of health-improving enterprises (the number of places per 1000 people) in ukraine is low (with the norm of 10 places per 1000 people, there are only 2.9 hotel places in ukraine). 2. lack of a well-developed and officially accounted network of alternative means of accommodation of economy class. 3. inconsistency of prices and the level of quality of medical and health services. the cost of living in ukrainian health-improving enterprises is 2-3 times higher than the cost of living in hotels of a similar level in europe. 4. low level of competition of health-improving enterprises in the market over the lack of corporate standards for services quality management. 5. the underdevelopment of the network of tourist information centres, signposts, information facilities along the highways, which hinders the development of not only inbound but also domestic tourism. 6. limited use of electronic and automated booking systems, which indicates a low level of tourist service culture. 7. lack of ukrainian tourist offices abroad. 8. lack of funding and qualified specialists for the restoration of historical, cultural, and architectural monuments. thus, despite the negative phenomena that occur in the economy and society, the tourism industry is constantly table 1 the main indicators characterizing the development of the tourist industry of ukraine in 2017 and the forecast for 2022 indicators 2017 2022 (forecast) the absolute value in the tourism industry share to the corresponding indicator by country, % the absolute value in the tourism industry share to the corresponding indicator by country, % 1 2 3 4 5 the direct contribution of the tourism industry to gdp 18,13 billion uah 0,6 71,5 billion uah 2,0 number of jobs 10,29 thousand 0,05 1368,8 thousand 5,8 contribution to export earnings 0,41 billion uah 0,1 59,2 billion uah 4,6 contribution to import earnings 0,57 billion uah 0,4 26,23 billion uah 2,3 investment volume 0,52 billion uah 0,2 16,7 billion uah 1,4 source: compiled according to the data (official website of the state statistics service of ukraine) table 2 the economic contribution of tourism to ukraine’s gdp indicators 2011 2012 2013 2014 2015 2016 2017 the direct contribution of tourism, billion usd total revenue from tourism 11,6 13,2 13,9 7,4 4,9 5,0 5,5 other final consequences of tourism (indirect and induced), billion usd capital investment 5,7 6,5 5,7 5,0 5,5 6,8 7,9 public expenditures 0,2 0,2 0,2 0,2 0,1 0,1 0,1 source: compiled according to the data from (melnichenko, shvedun, 2017) baltic journal of economic studies 134 vol. 5, no. 2, 2019 increasing the volume of tourist products. according to the statistics, the results of the medical and healthcare industry in recent years show the development of this sphere and its positive tendencies. 3. conceptual approaches to the development of health and wellness tourism best practices of state support to the socioeconomic development of the tourism industry, the implementation of which is seen as useful for ukraine: – improvement of the legislative and regulatory framework for the activities of resorts, resort areas, and resort and tourist regions; – expansion of the range and number of resort and tourist products; – active introduction of management and marketing methods at resorts; – creation of an alliance of polish resorts; – organization of the advertising campaign of resort and tourist regions (borushchak, 2008); – ensuring stable development rates of the national economy and real incomes of the population combined with controlled inflation and exchange rate changes; – a powerful advertising campaign to popularize the country as a touristically attractive area; – spreading of programs (including nutrition) “all inclusive”; – intensification of the development of the tourist cluster, which involves the integration of representatives of the tourism industry, science, education, public administration, local government, and public organizations; – expansion of the range of tourist services and improvement of the national standard of their quality, in accordance with the modern market demands; – provision of preferential loans for young people who are participants in educational and cultural tourism programs, as well as tax privileges for economic entities, who invest in the preservation and restoration of the historical and cultural heritage and the environmental state of recreational territories; – declaring an open door policy, which cancels entry visas for tourists from a number of countries; – organizational support for the development of objects of the tourism industry in depressed (including industrial) territories; – simplification of land allocation procedures for new resorts and their connection to communications; – maintenance of a favourable crime situation, as well as relatively low tourist expenses for transfers, meals, and accommodation; – promoting the attraction of private investment and budget financing for the development of transport and social infrastructure (including taking into account the needs of persons with disabilities); – creation of summer international camps, centres of ecological tourism (volunteer camps), summer universities and language schools, conducting international contests, competitions, festivals, etc. (velichko, 2016). it is appropriate to assume that the system of strategic state regulation of the development of the tourism industry is built in a certain sequence. in particular, exclusively the system of state management strategies in the tourism industry consists of the following components: – the strategy of development of the tourism industry of the national level; – strategies for the development of certain industries which are a part of the tourism industry in the form of individual projects or target programs and provide an optimal solution to the systemic problem of tourism industry development; – strategies and target programs for the development of the tourism industry of regions and cities, which should be built on the basis of the strategy of development of the nationwide tourism industry taking into account the specific properties of each separate territory. in order to increase the efficiency of state regulation, stimulate investment activity, and increase the socioeconomic development of tourism in the country, we propose to establish a central fund for the promotion of health and wellness tourism development (figure 1). regarding the sources of financing of the central fund for the promotion of health and wellness tourism, we identified the following: – funds from the state, regional, and local budgets; – private sector funds; – funds of international technical assistance programs; – funds of investors who will be involved in the realization of specific investment projects and implementation of programs; – funds from international financial organizations (world bank, international monetary fund, european bank for reconstruction and development, european investment bank, etc.); – funds from banks and non-bank financial institutions; – financial resources of commercial and non-commercial business entities, public associations, individuals, including foreign ones. the expected results of the fund’s activities are an increase in healthcare and investment activity, formation of a favourable tourist environment, achievement of sustainable economic growth in ukraine, and increase in the standard of living and health of the population. so, in our opinion, stabilization and revitalization of the state socio-economic development are impossible without radical changes in the role of tourism in the economic recovery. the current situation encourages the search for effective economic forms that would be able to radically and quickly change the situation in the country for the better. baltic journal of economic studies 135 vol. 5, no. 2, 2019 зв ’я зо к, t he le ve l o f g en er al e co no m ic d ev el op m en t of th e re gi on t he le ve l o f d ev el op m en t o f i nv es tm en t in fr as tr uc tu re l ig ht in du st ry , c om m un al e nt er pr is es , t ou ri sm an d re cr ea tio n se ct or o f t he b or de r i nf ra st ru ct ur e, th e na tio na l e co no m y, an d so ci al s ph er e t ou ri sm po lic y of th e st at e g oa ls t ax p ol ic y c us to m s po lic y b or de r p ol ic y m an ag em en t d ec is io ns l eg is la ti ve p ro vi si on o f t he to ur is t p ro ce ss t ou ri st a tt ra ct iv en es s fo rm at io n of to ur is m d ev el op m en t b ud ge t e st ab lis hm en t o f a s ys te m o f s ta te g ua ra nt ee s an d sa fe ty o f t ou ri st tr ip s d ev el op m en t o f p ro gr am s of to ur is t d ev el op m en t o f t he s ta te a nd re gi on s r eg ul at io n of th e to ur is m m ar ke t a nd e xp an si on o f c oo pe ra tio n w ith o th er s ta te s a llo ca tio n of p ri or ity d ev el op m en t d ir ec tio ns fo r e ac h re gi on se pa ra te ly a nd im pl em en ta tio n of in di vi du al to ur is m p ol ic y e nc ou ra ge m en t o f c ofi na nc in g of in ve st m en t p ro je ct s by do m es tic a nd fo re ig n in ve st or s fo rm at io n of a fa vo ur ab le to ur is t e nv ir on m en t a ch ie vi ng s us ta in ab le e co no m ic d ev el op m en t c re at in g eq ua l c on di tio ns fo r a ll pa rt ic ip an ts in th e to ur is m p ro ce ss im pr ov em en t o f b ud ge t, ta x, an d in ve st m en t sy st em f ac to rs in fl ue nc in g to ur is m ac ti vi ti es o bj ec ts o f s ta te to ur is m st im ul at in g to ur is m a ct iv ity : c re at in g ta x an d cu st om s pr iv ile ge s, re du ci ng th e co st o f a v is a an d pr oc ed ur es fo r ob ta in in g it; s im pl if ic at io n of th e pr oc ed ur e fo r r eg is tr at io n an d lic en si ng o f t ra ve l c om pa ni es so ur ce s of fi na nc in g fo r to ur is m pr oj ec ts a gr oin du st ri al a nd tr an sp or t co m pl ex es , c on st ru ct io n, co m m un ic at io ns , f oo d in du st ry , ag ri cu ltu re , t ra de , p ro du ct io n of co ns um er g oo ds pu bl ic in ve st m en t, fo re ig n, jo in t, pr iv at e in di ca to rs o f e co no m ic g ro w th fi gu re 1 . m od el o f r ea li za ti on o f t he s ta te to ur is m p ol ic y baltic journal of economic studies 136 vol. 5, no. 2, 2019 4. conclusions an analysis of the current state of development of health and wellness tourism has shown that during the study period, there was an increase in the number of subjects of tourist activities by 9.02%, including travel agents by 10.01%, and subjects carrying out excursion activities by 25.19 %; however, decrease in the number of tour operators by 0.4% is negative (this is the only indicator this year, which has a negative dynamics); increase in the number of employed by 7.33%; increase in the number of tourists served by medical and recreational enterprises was 38.04%; the average annual increase in the number of tourists servicing by 38.04%, tourists traveling abroad by 39.61%, and tourists within ukraine by 33.59%. the number of places in institutions decreased only in 2017 compared to 2016 by 1.85%, and compared to 2015 it increased by 0.65%. the service of visitors in institutions in 2017 increased by 51.32% compared to 2015 and by 50.10% compared to 2016. positive in 2017 is the increase of foreigners visiting our country by 149.45% compared to 2015 and by 91.30% compared to 2016. at the same time, against the background of these growing indicators, there is an increase in the indicator of the quality of the load, it is quite high – 32.42 in 2015, 37.06 in 2016, and 38.50 in 2017, that is, the average level of loading of health-improving enterprises in ukraine is only 385.0%. therefore, health and wellness tourism has a positive impact on the socio-economic development of the state, as foreign experience shows that 10% of world gdp is a contribution from tourism and related industries and 20% of job creation. the establishment of a fund for the promotion of health-improving tourism development in order to increase the efficiency of state regulation and to stimulate health-improvement, tourism, and investment activity is substantiated, which will ensure the increase in the state socio-economic development and the strengthening of public health. the main goals and tasks of the central fund for the development of health-improving tourism are defined; directions of its activity and sources of financing are outlined. the work of the fund will enable intensifying health-improvement activities in the country and increasing the efficiency of the national economy in the current conditions of integration processes. references: rutinskij, m., petranіvskij, v. (2012). lіkuvalno-ozdorovchij turizm: aktualnі cіlі ta suchasnі pіdhodi do organіzacії [therapeutic and health tourism: actual goals and modern approaches to the organization]. visnyk of lviv university. series of international relations, 29, 179–189. borushchak, m. (2008). strategіya rozvitku turistichnih regіonіv: avtoref. dis. ... d.e.n.: spec. 08.00.05. rozvitok produktivnih sil і regіonalna ekonomіka. lviv. velichko, l. yu. (2016). peredovij svіtovij dosvіd derzhavnoi pіdtrimki rozvitku turizmu: uroki dlya ukrayni [legal, managerial and economic aspects of the transformation of modern civil society]. kyiv. donchenko, l. m., gostieva, n. p. (2014). problemi ta perspektivi derzhavnoi pіdtrimki rozvitku turizmu [problems and prospects of state support for tourism development]. state and regions. series: public administration, 1, 37–42. zakon ukraini «pro turizm» [law of ukraine "on tourism"]. retrieved from: http://tourlib.net/zakon/pro_ turyzm.htm zaharchuk, s. (2014). fіnansovo-ekonomіchnі problemi funkcіonuvannya turistichnoi galuzі [financial and economic problems of the tourism industry]. economy. management. innovations electronic science. professional edition, 1(3). retrieved from: http://www.nbuv.gov.ua melnichenko, o. a., shvedun, v. o. (2017). osoblivostі rozvitku іndustrіi turizmu v ukraїnі [features of the development of the tourism industry in ukraine: monograph]. kharkiv: view of nutzu. mirovoj atlas dannyh [world atlas of data]. retrieved from: https://knoema.ru/atlas/topics/ %d0%a2%d1%83%d1%80%d0%b8%d0%b7%d0%bc rogliev, h. j. (2005). sіlskij turizm – perspektivnij napryamok rozvitku turistskoi іndustrіi ukraini [rural tourism is a perspective direction of development of the tourist industry of ukraine]. scientific and practical journal "tourism: theory and practice, 1, 43–48. savіcka, o. p., savіcka, n. v. (2013). strategіya rozvitku turistichnoi іndustrії v ukrainі: regіonalnі aspekti [strategy for the development of tourist institution in ukraine: regional aspects]. bulletin of the national university "lviv polytechnic". (series "problems of economics and management"), 754, 68–74. smolii, v. a. fedorchenko, v. k., tsybukh, v. i. (2006). entsyklopedychnyi slovnyk-dovidnyk z turyzmu [encyclopaedic dictionary of tourism]. kyiv: publishing house “slovo”. official website of the state statistics service of ukraine. retrieved from: http://www.ukrstat.gov.ua/ carenko, o. v., shpak, l. o. (2014). rozrobka mekhanіzmu zaluchennya fіnansovih іnvesticіj v turistichnorekreacіjnij kompleks regіonu [development of the mechanism of attraction of financial investments in the touristrecreational complex of the region]. investments: practice and experience, 6, 11–14. chekalyuk, v. v. (2014). turizm yak chinnik formuvannya derzhavnogo іmіdzhu [tourism as a factor in the formation of a state image]. information society, 19, 13–16. gaworecki, w. w. (2000). turystyka. warszawa: polskie wydawnictwo ekonomiczne. baltic journal of economic studies 26 vol. 4, no. 5, 2018 corresponding author: 1 state research institute of ministry of internal affairs of ukraine, ukraine. e-mail: 40natalija@gmail.com 2 state research institute of ministry of internal affairs of ukraine, ukraine. e-mail: alexgkulik@ukr.net 3 donetsk law institute of the ministry of internal affairs of ukraine, ukraine. e-mail: lsv300sv@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-26-30 illegally-obtained income as a structural component of shadow processes in the economy natalija berlach1, oleksandr kulyk2, sergii losych3 abstract. the study of shadowing processes in the economy is an integral part of the methodological knowledge, aimed at forming the security environment of the world community, its development on the way to overcoming crisis situations in the economy, politics, and society. this being said, it is difficult to overestimate the role of the state in determining appropriate approaches to assessing the results of such activities, justifying the selection of certain current methods of influencing public relations in the economic field in order to ensure their functioning within the legal framework. drawing empirical conclusions and recommendations in this article are aimed at substantiating the links between the result of economic activity and economic activity as such, which determines the characteristics of welfare and well-being of a person, his/her enrichment. thus, the formation of a cognitive social link between human welfare, emotional factors, and the economic crisis situation in the state has a common denominator, which makes it possible to assess the level of economic development of the country as a whole, to identify processes of shadowing of the economy, provided that illegally-obtained income is determined in its structure. coming up with “regulatory filters” that allow synthesizing the object (illegally-obtained income), at which measures for detecting and transforming it into the legal economic field are aimed, it is possible to achieve a real result in counteracting the shadowing of national economies. certain measures currently being taken at the level of national legal systems in this area should be compatible with those adopted by the european union and, at least, as stringent as other measures applied at the international level. the specified determines the necessity to search for optimal ways of defining the concept of illegally obtained income, its place and role as a structural component of shadow processes in the economy. methodology. the solution to the set goal is realized using the cognitive potential of the system of philosophical, general scientific and special methods. analysis and synthesis allowed identifying the signs of illegal income, the shadowing of the economy, counteracting the shadow economy, and forming the last concept. methods of grammatical review and interpretation of legal norms contributed to identifying gaps and other shortcomings of legislation on problems of ensuring counteraction to the legalization (laundering) of illegally-obtained income, developing proposals for its improvement, in particular, regarding the specifics of defining the meaning of the concept of “illegally obtained income” in domestic legal framework, the relationship of this concept with other economic and legal concepts. the comparative legal method allowed determining the development directions for domestic normative acts in order to bring them in line with the generally accepted european standards. key words: income, shadow economy, shadowing of economy, money laundering, legalization of income, economic crimes, unlawful enrichment. jel classification: e64, о15, p24 1. introduction reducing the scale of the shadow economy is an integral part of the strategy of reforming any legal state of the world and a pledge of promoting a system of guarantees for the decent development of man and citizen. achieving high social security standards with the recognition of the priority of balancing national and individual interests, free economic development, is possible only on condition that each member of the society is aware of his/her role in preventing illegal activity in the sphere of economy and other areas that are recognized as components of national security of the country. this being said, it is difficult to overestimate the role of the state in determining appropriate approaches baltic journal of economic studies 27 vol. 4, no. 5, 2018 to assessing the results of such activities, justifying the selection of certain current methods of influencing public relations in the economic field in order to ensure their functioning within the legal framework. in this regard, it is understandable that scientists from different countries of the world are interested in identifying such key indicators of the level of economic security of the country as the level of shadowing of its economy, which should be calculated based on generally accepted methods, taking into account the peculiarities of the formation and development of national economic and legal doctrines. undoubted is a provision formulated by the nobel prize winner d. north who devoted a series of papers to the analysis of transformational economies of postsoviet countries, regarding the fact that the economy and finances of countries that adopted formal rules of the game, developed under other economic and financial systems, were doomed to failure from the very beginning. moreover, the so-called “shock therapy” and hasty, unconsidered privatization destroyed not only the old (planned) economic system but also the main motivational incentives for development, led to unprecedented corruption at all levels of power and criminalization of society. the most acute contradictions have appeared in the institutes of financial and credit sphere, which caused high rates of inflation and galloping depreciation of national currencies, imbalances of state budgets and balance of payments, and were accompanied by the collapse of investment programs and a high level of shadowing of the national economy (savych, 2014). recognizing the state of economic shadowing as an indicator of economic security, it is obvious that the task of determining the structure of the economy’s shadowing is also determined, taking into account the changes and trends of macroand microeconomic processes. at the same time, it is indisputable that the definition of the content of each structural element should be clearly defined, which will ensure the quality of observation, analysis, relevant calculations, and the authenticity of the results. such a definition needs to be consolidated at the level of a legal act. 2. identification of signs and structural components of the shadow economy according to the said thesis, it should be noted that in ukraine, the definition of the shadow economy is proposed in the methodological recommendations for calculating the level of shadow economy, approved by the order of the ministry of economic development and trade of ukraine № 123 as of february 18, 2009. in this by-law, the shadow economy is recognized as the economic activity of an economic entity that is not registered in the established procedure, which is characterized by minimizing the cost of production of goods, performance of works, and provision of services, evasion of taxes, fees (obligatory payments), statistical questionnaires, and submission of statistical reporting, the result of which is a violation of the established norms (the level of minimum wage, the length of working time, conditions and safety of work, etc.) (order of the ministry of economy of ukraine № 123, 2009). such a definition generates many discussions and observations on the deficiencies of the formulated features, which do not allow specifying, which of them are key, which will allow distinguishing such activity from other economic activities. moreover, if we assume that the main characteristic of the shadow economy is economic activity itself, then it would be logical to expect methods of calculating the level of the shadow economy on such a basis in the said document. however, the first of these methods, called “direct” and the one used to calculate macroeconomic parameters of the shadow economy, relates to the calculation of the level of the shadow economy by the method of “population expenditure – retail trade turnover” and is to identify the existence of an excess of consumer cash expenditures on the purchase of goods over the total volume of sales to the population by all economic entities in the legal sector of the economy (order of the ministry of economy of ukraine № 123, 2009). this method is based on the comparison of specific indicators of “cash expenses” and “amounts of monetary turnover”, which leads to the conclusion that the amount of the excess of costs relates to such characteristics of economic activity as shadow. the analysis of other methods also allows us to conclude on such a necessary sign of the shadow economy as a “result” of economic activity, which in fact is the main goal of the implementation of such an activity and an indicator that allows setting the volume of the shadow economy. accordingly, the following characteristics of economic activity: “unregistered in an established manner” resulting in “violation of the established norms” should be extended in relation to the description of its results. as a rule, such results are referred to as “revenues”, “funds” and so on. one should agree with the thesis that the scale and conditions for realization of certain types of economic unregistered activities, which in most of the still valid laws and regulations and scientific works are attributed to the so-called “productive part” of the shadow economy, are to be substantially modified today. actually, it needs to be reviewed, especially in the theory, what exactly should be attributed to this “productive part”. previously, as an example, the results of households, tutoring, etc. were often presented. today, such economic activity is regulated and its results make up a significant part of the population’s income (tylchyk, 2017). among the factors hampering growth in countries such as ukraine, kazakhstan, brazil, russia, the world bank names badly deteriorated household balances. also, the world bank pointed to a transport blockade of uncontrolled baltic journal of economic studies 28 vol. 4, no. 5, 2018 territories in the donbas, which led to weak data of industrial production (the world bank has improved the forecast of ukraine’s gdp growth in 2018). accordingly, it is possible to determine economic performances of households as a part of the shadow economy only if it is implemented in violation of legal requirements. such violations may have signs and be qualified as: civil, property, disciplinary, administrative, criminal. depending on the composition of the offense to be established, measures are taken to influence the offender concerned. actually, for the specified types of offenses, it is proposed to carry out gradation of measures of influence in order to stop the spread of shadow processes in the economy. the most widespread among them are: measures of property liability/liability for damage, administrative influence, including administrative responsibility, the most severe are measures of criminal law influence, involving the bringing of persons to criminal liability. it should be noted that some scholars point out that the shadow economy – the economic activity associated with tax evasion, the types and methods of tax evasion are both forms and ways of concealing the “shadowing” of activity (nesterova, 2008). others – focus on the requirements of the united nations system of national accounts (1993), according to which the economic activity is an activity that meets the following requirements: – firstly, it is carried out with the aim of obtaining an economic benefit from the production and sale of goods and services; – secondly, the activity is possible if there is a certain solvent demand for the goods and services being produced; – thirdly, all agreements between sellers and buyers are concluded by mutual agreement (the united nations system of national accounts, 1993). accordingly, it is proposed to exclude criminal activity and its results from the shadow economy, arguing that there is no sign of voluntary agreements between entities, which is contrary to the recognition of such activity as an economic one (cheremisina, 2007). this thesis once again indicates the absence of a single approach to defining the concept of “shadow economy”, as well as its structure, methods of calculation, related to the complexity of the phenomenon, the peculiarities of its genesis in different countries. however, summing up the numerous discussions, the attention is drawn to the need to consider that most of the program documents, reports from both domestic and international experts, international monitoring organizations contain provisions that the shadow economy is the basis of a complex, organized multilevel system, which includes money laundering, and the whole shadow infrastructure that provides for its functioning (legislative, judicial, political, ideological, cultural, ethical, system of values and codes of conduct) actively influences the state of the shadow processes. as an example, the following data is available: as of may 2013, according to estimates by the international association oxfam, losses in the form of tax revenues to the budgets of countries around the world amounted to more than 156 billion usd, which is twice the amount needed to end poverty. ukrainian companies do not actually trade in direct contracts with direct importers of domestic products and use offshore zones to generate profits abroad. from 2012 to september 2015, only four main trading countries with low tax jurisdiction (switzerland, virgin islands, great britain, and cyprus) account for about 64% of exports of cereals and oilseeds, as well as products of their processing, 44% of exports of ferrous metals and products of them, and 61% of exports of ore and energy products; the volumes of potentially lost taxes only in the area of trade in grain and oil crops from 2012 to september 2015, according to assumptions, amount to 1.5-1.7 billion usd that could be used to improve the socio-economic situation and innovative development of ukraine (kravchuk, 2016). the above emphasizes the urgency of unifying the approaches to defining the concept of “shadow economy” taking into account the best ways to eliminate these inconsistencies, which lead to real inhibition of activities to ensure counteraction to shadow processes in the economy, in particular, legalization (laundering) of illegally obtained income, not only for the purpose of serving the national interests of ukraine, but also of the whole world. in this definition, the characteristics of such features as economic activity and its results should be pointed out: income, money, etc. in terms of both the calculations and the formation of a system to counter the spread of shadow economic activity, it is required to indicate the unlawful nature of the activity, which leads to the formation of relevant results (revenues, funds). 3. defining the state policy directions on the prevention of money laundering each state determines the priority directions of ensuring that the said incomes fall into the legal circulation and bringing to justice the persons committed crimes in the economy by shadowing it. studying the experience of foreign countries, it is possible to state that attention is paid to countering the legalization (laundering) of illegally obtained income. measures taken at the level of the national legal systems in this field should be consistent with those adopted by the european union and, at least, as stringent as other measures taken at the international level. in this direction, subjects of national systems for counteracting shadow economy are guided, in particular, by the fatf recommendations and the instruments of other international bodies engaged in combating money laundering and terrorist financing in organizing and providing the said counteraction. as for other types of offenses (civil, property, disciplinary, administrative, financial), it is necessary to baltic journal of economic studies 29 vol. 4, no. 5, 2018 state the absence of strategically defined approaches in the individual countries (including ukraine) about the comprehensive impact on the persons who commit them. in the aspect of taking into account the positive experience, one should point out that in the republic of belarus, the law “on the bodies of financial investigations of the state control committee of the republic of belarus” as of 16.07.2008 is in force that, among the tasks of the financial investigation authorities, provides for the protection of the interests of society and the state from criminal and other illegal encroachments in the sphere of economy, ensuring economic security of belarus, investigation of criminal cases, administration of the administrative process in accordance with the competence of the bodies of financial investigations (law “on the bodies of financial investigations of the state control committee of the republic of belarus”, 2008). that is, attention is focused not only on crimes, as well as the counteraction to the legalization of the proceeds from their commission, but also on other types of offenses, which make up a significant part of the shadow economy. it is worth mentioning also about the approach used by the policy maker of the lithuanian republic. it meets the requirements of the fatf guidelines on anti-money laundering and anti-terrorist financing, while in the provisions of delegated legislation devoted to the characterization of financial investigations in the republic of lithuania, the possibility is provided without collecting data about the criminal origin of income, but having established that the property of a person whose value exceeds the amount fixed in the legislation, in particular, 500 minimum subsistence levels, is not proportional to his/her legal income, to decide on the launch of a pre-trial investigation, a suspicion of wrongdoing under article 189-1 (illegal enrichment), and the implementation of measures of procedural influence in order to ensure the confiscation of property or extended confiscation (order “on recommendations for financial investigations”, 2013). 4. conclusions an example of another approach to ensuring the impact on the shadow processes, in relation to dealing with the proceeds received by an illegal but not criminal way, is the proposals and adoption of the laws on their “legalization” – the introduction into official circulation. such an approach is supported not by all scholars and ordinary citizens but is occasionally initiated and implemented. so, we can quote suggestions from individual scholars and politicians in ukraine regarding the so-called “legalization of income”. in particular, the authors of the draft law “on amendments to the tax code of ukraine (regarding the legalization of property in connection with the voluntary declaration of property status and undeclared personal incomes)” indicate that in connection with the need to unshadow the economy of ukraine in general and property relations in particular, return private capitals to the economy and fill the budget of ukraine, the legalization of property should be introduced in connection with voluntary declaration of property status and undeclared personal incomes. the institute for similar legalization of incomes (zero declaration, tax, economic, financial amnesty, etc.) since the end of the xx century is used periodically in many countries – the usa, belgium, germany, italy, france, sweden, switzerland, kazakhstan, latvia, and so on. usually it is implemented, firstly, with the purpose of establishing a sort of relationship between the state and taxpayers, and secondly, to increase budget revenues and increase the volume of legal investments into the economy (draft law, 2017). the above proposals are not new, there have already been attempts of a similar nature; it is worth mentioning the “tax compromise” in ukraine that did not bring the expected results. therefore, the need for a strategic definition of approaches to the complex impact on persons committing crimes and other types of offenses (civil, property, disciplinary, administrative, financial) in the field of the economy, which results in the formation of incomes of illegal origin and increase in the size of the shadow economy, is urgent. references: savych, i. v. (2014). determinants of the formation of the shadow economy of ukraine. young scientist, 12(15), 87-92. on approval of methodical recommendations for calculating the level of the shadow economy: order of the ministry of economy of ukraine on 18 february 2009 № 123. ministry of economic development and trade of ukraine. retrieved from: http://www.me.gov.ua/legislativeacts/detail?lang=uk-ua&id=4bb297a0-c900-404f8c6f-5f76f18b1503 tylchyk, o. (2017). administrative and legal provision of counteraction to shadow economy: the monograph. publishing house “helvetica”. kyiv. the world bank has improved the forecast of ukraine’s gdp growth in 2018. retrieved from: http://tyzhden.ua/ news/193890 nesterova, n. v. (2008). shadow economy and tax evasion. management of economic systems: electronic scientific journal, 1(13). retrieved from: http://uecs.mcnip.ru the united nations system of national accounts (1993). retrieved from: https://unstats.un.org/unsd/ nationalaccount/sna.asp cheremisina, n. v. (2007). statistic measurement of the shadow economy: regional aspect: thesis for dr. sc. (economics). samara. baltic journal of economic studies 30 vol. 4, no. 5, 2018 kravchuk, o. v. (2016). alternative mechanisms of socio-economic development of ukraine. centre for social and labour studies. law “on the bodies of financial investigations of the state control committee of the republic of belarus” on 16.07.2008. retrieved from: http://base.spinform.ru/show_doc.fwx?rgn=23925 order of the prosecutor general of the republic of lithuania “on recommendations for financial investigations” on 19 march 2013. retrieved from: https://censor.net.ua/news/238090/litva_gotova_podelitsya_s_ukrainoyi_ opytom draft law of ukraine “on amendments to the tax code of ukraine (regarding the legalization of property in connection with the voluntary declaration of property status and undeclared personal incomes)”. retrieved from: http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61891 baltic journal of economic studies 160 vol. 5, no. 1, 2019 corresponding author: 1 dniprovskii university of the humanities, ukraine. e-mail: mpv12@i.ua 2 dniprovskii university of the humanities, ukraine. e-mail: uk_dgu@ua.fm doi: https://doi.org/10.30525/2256-0742/2019-5-1-160-167 the concept of constitutional freedom of a person to conduct entrepreneurial activity serhii penkov1, mykola chabanenko2 abstract. the article studies the concept and features of the constitutional freedom of a natural person to conduct business activity in ukraine. it is analysed features of human freedom under consideration. the authors present their own definition of the constitutional freedom of a person to conduct entrepreneurial activity. the issue of peculiarities of management of a natural person as a business entity is considered. it compares the legal status of a natural person with the legal status of a private entrepreneur. the article lists the duties of a private entrepreneur, as well as limitations on the performance of any types of activities by private entrepreneurs. it considers a procedure of the state registration of a private entrepreneur. the paper defines the essence and main range of tools of mechanisms of state regulation of entrepreneurial activity in ukraine. the issue of mechanisms regulation is covered. it is formed the principal functions, tools, and methods which the state follows in regulating entrepreneurship. the role of the state in managing the economy and functioning of business entities is discovered. the international experience of state business regulation is described. statistics are indicated, and specific examples of countries are formed. lines for handling problems concerning stimulating small and medium-sized enterprises are specified. based on the analysis, generalization and systematization of research papers, and also weaknesses of government regulation of entrepreneurship in ukraine are presented. the authors draw conclusions and propose ways for improving government regulation in order to improve and develop entrepreneurship in ukraine. theoretical approaches to the determination of the concept of the subject of offences counteraction are presented. definition of the subject of offences counteraction in the sphere of entrepreneurial activity is analysed, and a range and system of the mentioned subjects are specified. subjects of offences counteraction in the sphere of entrepreneurial activity vested with administrative and jurisdictional powers are put into an individual group. key words: guarantees of constitutional freedom, government regulation of entrepreneurship, constitutional freedom, entrepreneurship, entrepreneurial activity, legal status, offences in entrepreneurial activity, offences counteraction, freedom of entrepreneurial activity, business entity. jel classification: k10, k22, k38, r00, r30 1. introduction human constitutional right and constitutional freedom of entrepreneurial activity are closely related but not alike. every person has the right to conduct an entrepreneurial activity, which is not forbidden by law. prohibition of certain types of entrepreneurial activity and restriction on entrepreneurial activity for particular categories of individuals by the current laws confirms their theoretical significance and the necessity of solving important practical tasks concerning a person’s exercise of the constitutional freedom. one of the most popular subjects of entrepreneurial activity is a natural person as a business entity. the topical issue is the differentiation of legal status of a natural person who carries out business activities or other activity in the economy into a legal status of a person as an entrepreneur and legal status as a natural person. another problem is that today, in fact, there is no special legislative act, which would consolidate the legal status of a citizen-entrepreneur. the problem of the human constitutional right and freedom of entrepreneurial activity was studied by theorists, constitutional lawyers, and economists. among them, there are papers by e. a. andriukhyn, t. v. blashchuk, k. h. boberskf, l. s. yelizarova, d. v. zadykhailo, a. v. kovach, o. o. kolomiiets, t. m. kravtsova, l. o. nikitenko, n. o. sanyakhmetova, s. v. riznyk, v. c. shcherbynf, a. v. shchuruk, and others. but despite a large number of publications, it should be noted that there is a deficiency of studying baltic journal of economic studies 161 vol. 5, no. 1, 2019 and investigating the issue of citizens’ participation in the economic and legal sphere. a range of important problems of a theoretical and practical nature are still unresolved. one of the problems is the lack of a single legislative act that would consolidate the specifics of the activity of a private entrepreneur and objective prohibitions and restrictions on conducting the entrepreneurial activity. at the same time, the role of the state is significantly enhanced in modern society. this is manifested in various spheres of activity, in particular, in the elaboration of the system of regulatory and legal acts aimed at regulating the market, entrepreneurial activity, customs rules, banking activities, prices, wages, and social protection of the population. government regulation of entrepreneurship is the state’s influence on the activity of business entities, and its necessity is determined by the objectives of economic policy aimed at achieving sustainable development of the state and its regions, ensuring the constant growth of indicators characterising the level of well-being and quality of living standards in the country. the term “mechanism” is used in engineering where it means a device that transmits or converts the movement, and the meaning of this term is also associated with the internal structure of the machine. this word is used as the definition of the internal structure, the system of something and also it can be used for characteristics of the complex of states and processes, which form a certain phenomenon. issues of improving the mechanism of government regulation of entrepreneurial activity under the conditions of activation of the country’s integration processes are priority tasks and require a comprehensive examination. there is a need to distinguish and generalise the terminology of “public administration” in the part concerning the concepts of regulation and government regulation of entrepreneurial activity. the determination of theoretical-methodological and practical principles of the formation and development of mechanisms of government regulation of entrepreneurial activity is an important scientific and practical task, which should be exercised by creating multifarious control mechanisms, their adaptation to the conditions of the external environment of enterprises operation. 2. constituent elements of constitutional freedom of a person to conduct entrepreneurial activity in ukraine the current legislation of ukraine doesn’t have definitions for the concept “business entity – citizen”. the ukrainian legislation also has a lack of a unified terminological approach to the definition for the mentioned category of business entities, and it is used the following terms: “citizen as a business entity”, “entrepreneur without the status of a legal entity”, “citizenentrepreneur”, “private entrepreneur”. it is noted that the use of several terms in relation to one concept deforms the will of the legislator, causes difficulties in the process of law applying, and negatively affects enforcement of the rights and interests of the participants of legal relations. and due to this fact, it is justified the introduction of terminological sameness regarding the identification of a person as a business entity and the use of “business entity – citizen” for the term because this term is most correct for the denomination of relations between an individual and the state (vinnyk, 2017). a private entrepreneur is a relatively new entity of economic law as entrepreneurial activity under a statecontrolled economy was banned and its legalization in ukraine was carried out in accordance with the law of ukraine “on entrepreneurship” (1991), which was repealed due to the entry into force of the commercial code of ukraine (hereinafter referred to as cc of ukraine). a citizen is recognized as a business entity if he/she conducts entrepreneurial activities on the basis of his/her state registration as an entrepreneur without the status of a legal entity. a citizen-entrepreneur is liable to the full extent of his/her assets in accordance with the law, which may impose a court-enforced collection on it (art. 128 of cc of ukraine (hospodarskyi kodeks ukrainy, 2003)). state registration of a particular natural person by making relevant records into the unified state register is a determinative component for gaining the status of an entrepreneur, including the agriculture sphere according to the law of ukraine “on state registration of legal entities, private entrepreneurs and public formations. in accordance with art. 18 of the law, an entrepreneur has to submit the following documents for state registration of a private entrepreneur: application on state registration of a private entrepreneur; application on simplified tax system for a natural person and/or a registration application for voluntary registration as a payer of value-added tax in the form approved by the central executive body, which ensures the formation of the state tax and customs policy at the request of an applicant; notarized written permission of parents (adoptive parents) either guardian or tutorship and guardianship authority for a person aged sixteen years and who has a desire to carry out entrepreneurial activity but doesn’t have absolute civil capacity; agreement (declaration) on the formation of family farm enterprise, in a case of state registration of a natural person who establishes a family farm enterprise independently or together with family members according to the law of ukraine “on farming enterprise”. the procedure for state registration of a private entrepreneur involves: checking the completeness of documents submitted to a public registrar and baltic journal of economic studies 162 vol. 5, no. 1, 2019 completeness of the information indicated in the registration record; verification of documents submitted to the state registrar for confirming a lack of grounds for refusal to conduct state registration; making entry about a private entrepreneur in the uniform state register; registration and issuance of an extract from the uniform state register. according to art. 26 of the mentioned law, examination of documents submitted for state registration and other registration actions is carried out within 24 hours after the receipt of documents submitted for state registration and other registration procedures (pro fermerske hospodarstvo, 2003). legal status of a private entrepreneur is characterised by the availability of the following elements: official registration as a business entity, accounting in the bodies of the state fiscal service and the pension fund of ukraine as a taxpayer and a unified contribution for compulsory state social insurance respectively, production of a seal (if necessary), opening of a current account in a banking institution (as required), licensing application (in the case of provision of licensing types of activities). according to objects of activity, a natural person can carry out: industrial entrepreneurial activity, that is, activity in the process of which certain goods are produced; non-production entrepreneurial activity, within which one distinguishes as follows: activity on work performance, rendering of services (conduct repairs, provision of information services, implementation of transportations); trading activity; other non-production activities, in particular, activities in the financial market. a citizen-entrepreneur implements his/her activities according to the principles of freedom of enterprise and fundamentals provided by art. 44 of the cc of ukraine. a citizen-entrepreneur implements his/her activities according to the principles of freedom of enterprise. in addition, entrepreneurship is considered as independent, initiative, systematic, at one’s own risk, legal activities on goods production, work performance, rendering of services, trading activity with a view to gain a benefit. citizens of ukraine, citizens of other states, stateless persons can conduct business but it is limited to deputies, servants and officials of government and local self-government bodies, servicemen, personnel of prosecution service, court, state security, etc. an entrepreneur is obliged: to obtain a license for conducting peculiar types of business activities according to cases and procedure prescribed by the law; to notify the state registration authority of the change of his/her address indicated in the registration documents, objects of activity, other essential conditions of his/her business, which must be specified in the registration documents; to adhere to the rights and legitimate interests of consumers, ensure the required quality of the goods (works, services) that they produce, observe the rules of mandatory certification of products, established by law; to prevent unfair competition, other violations of anti-monopoly and competition legislation; to keep records of business performance in accordance with the requirements of the legislation; to provide the bodies of revenues and duties with a declaration of property status and income (tax return), other relevant information for tax charges and other mandatory payments in due time; to pay taxes and other obligatory payments in the form and in the amount set forth by the law (p. 6 of art. 128 of the cc of ukraine) (pro fermerske hospodarstvo, 2003). the constitution of ukraine states about the right to carry out business activity which is not forbidden by the law (konstytutsiia ukrainy, 1996) that is quite equivocal: entrepreneurial activity cannot be prohibited because such activity is socially useful in a market society, and the state can only impose restrictions on the implementation of its individual types or certain subjects. due to the fact that ukraine hasn’t any unified legislative act, which would set objective bans on business performance, there are many negative developments in the business area. the legislation includes restrictions on the performance of certain types of activities by private entrepreneurs. it is referred to activities involving the distribution of narcotic drugs, psychotropic substances, their analogues and precursors; activities related to the protection of certain high-security objects of state property law, as well as activities involving forensic, medical, forensic psychiatric examinations and the development, testing, production, and operation of carrier rockets including their space launches for any purpose; activities involving the production of composite motor petrol or with the addition (combination) of bioethanol and/or bio-components on bioethanol base to the hydrocarbon base (gasoline, distillations, components, etc.); activities involving the production of bioethanol (article 4 of the law of ukraine “on entrepreneurship”) (pro pidpryiemnytstvo, 1991). 3. mechanism of government regulation of constitutional freedom of a person to conduct entrepreneurial activity in ukraine with the development of commodity production, its monopolization and complication of reproductive processes, the possibilities of regulating market mechanism were limited. in the economy, there are significant disadvantages: a violation of equivalence between aggregate supply and demand, inflation, unemployment. all this mess affects the functioning of business structures. not all business entities can adjust to that sort of an economic situation. under baltic journal of economic studies 163 vol. 5, no. 1, 2019 the conditions, there is an objective need to intensify the role of the state in regulating the economy and functioning of business entities. the development of entrepreneurship in ukraine has reached the stage where the improvement of regulatory policy determines its further prospects. government regulation of business is a system of legal, organisational, regulatory, and control measures of the state aimed at creating a favourable business environment and managing the public sector to ensure the efficiency and competitiveness of the national economy. today, ukraine as an independent, selfsufficient state, guarantees all entrepreneurs (despite their organizational forms of entrepreneurial activity) equal rights and creates the same opportunities for functioning, access to material, technical, financial, labour, information, natural, and other resources upon conditions of execution of works and supplies for state needs. bodies of the state administration build their relations with entrepreneurs using: a tax and financialcredit system that fixed tax rates and interests on public loans; tax privileges; prices and pricing rules; targeted grants; exchange rate; the amount of economic sanctions; state property and a system of reserves, licenses, concessions, leasing, social, economic and other rules and norms; scientific and technical, social, state and regional programs; agreements for works and supplies for state needs (buhlak, zhuravlov, 2016). the state carries out business regulation through: legislative provision of freedom of competition, protection of consumers against unfair competition and monopoly abuse in any spheres of entrepreneurial activity; tax and financial-credit policy, including the establishment of tax rates and interest on state loans, tax breaks, prices and pricing rules, exchange rate, size of economic sanctions; definition of social norms of enterprise operation, according to which an entrepreneur is obliged to provide respective labour conditions, labour protection, remuneration not lower than the fixed minimum level, as well as other social guarantees, including social and health insurance and social security; establishment of environmental norms and standards; involvement of entrepreneurs in realising various scientific-technical and economic regional and state programs; the conclusion of contracts for the execution of works and the provision of services for state needs. the main means of regulatory government influence on the activities of business entities are state order; licensing, patenting and fixing quotas; certification and standardization; application of norms and limits; regulation of prices and rates; provision of investment, tax and other incentives; provision of grants-in-aid, compensations, targeted innovations and subsidies (cherednychenko, 2014). successful development of an enterprise is possible only in the context of the security of positive competition, the creation of favourable conditions and sustainable support from the state, effective activity of market mechanisms. mechanism of government regulation of entrepreneurship is a system of measures elaborated by the state taking into account market requirements and interests of business entities. government regulation is performed by the means of the system of norms and measures that prescribe business entities conduct using both administrative methods of influence (laws, decrees, orders, acts, instructions, regulations, etc.) and a system of economic methods and regulators (taxes, prices, bank interest, privileges, sanctions, etc.). government business regulation has own functions, instruments (methods) and relevant authorities. instruments, or methods, of government regulation and business support can be divided into economic, administrative, and psychological. among the administrative methods, the most important and perspective is the regime of the greatest business advancement upon the implementation of a corresponding legal basis, which would not impede the functioning of large business organisations and government enterprises. economic methods are divided into three groups. financial methods of entrepreneurial development are soft lending, availability of investment resources, subsidy assistance, joint financing of socially significant projects. fiscal methods, a reasonable reduction of business rates that contributes to business expansion, are equally relevant. the input method is the development of human resources, including training and retraining of personnel on the basis of state educational programs; information provision, including participation in exhibitions, conferences, fairs and access of business organisations to material resources. thus, the mechanism of government administration is a complex and system entity, which organically combines various components: economic, motivational, organizational, political, and legal (prokopets, 2018). the basis of regulatory and legal support is legislative and other statutory and legal acts, relevant rules of civil, credit and financial, tax, administrative, labour and other branches of the current legislation where the cc of ukraine is the main one. state committee of ukraine on regulatory policy and entrepreneurship is the central body that ensures the formation and implementation of state policy in the sphere of development and support of entrepreneurship. the main tasks of the body are the development of entrepreneurial policy, the generalization of a practical application of business legislation, elaboration of proposals aimed at its improving. in addition, the committee promotes the development of small business, the system of consultancy and information support and prepares proposals for the baltic journal of economic studies 164 vol. 5, no. 1, 2019 implementation and improvement of the mechanisms of financial and credit backing of entrepreneurship and its foreign economic activities, coordinates the system of training and retraining of personnel, etc. ukraine has a significant number of public organisations, which are aimed at making a contribution to entrepreneurship (kyrychenko, 2015). the mechanism of state regulation in ukraine is enshrined in the laws “on protection of economic competition”, “on protection against unfair competition”, “on advertising”, and “on auditing activities” in the code of ukraine and civil code of ukraine. the regulation of the external economic activity of entrepreneurial organisations is carried out on the basis of the provisions set forth in the law of ukraine “on foreign economic activity” which are fundamental for all business entities and should be taken into account during organising of this type of activity. it is necessary to focus on the means of technical regulation consisting of norms, standards, limits, and standardization system, which is directed to the activity of business entities in order “to achieve an ideal degree of ordering in a particular sphere, the result of which is an increasing degree of conformity of product, processes, and services with their functional purpose, elimination of barriers to trade and promotion of scientific and technological cooperation” (krehul, bank, 2016). we can state that the main principles of government support of entrepreneurship are the organizational structures of human resources and scientific and methodological support, as well as the developed market infrastructure and informational and consulting support of entrepreneurship. studying the experience of government business regulation in the countries of the european union (hereinafter referred to as the eu), it is important to emphasize that their concept of supporting small and medium-sized businesses in them is clear and comprehensible. it takes into account national and paneuropean interests, includes goals and principles of that sort of policy and has mechanisms and organizational structures for its implementation. today, small businesses that are constantly growing in the economy of great britain account for 25% of the total workforce. italy is recognized as the european leader in this sphere, which has nearly 800 thousand industrial enterprises in the country and 99% of small and medium-sized enterprises in the total. in germany and the netherlands, small and medium-sized businesses provide about 40% of exports, in italy – 25–30%, in france – 20–25%, and in japan – 10–15%. the main directions of government support for small and medium-sized businesses in eu countries are the formation of the infrastructure for support and entrepreneurship development, the establishment of a system of benefits and a transparent taxation system, the availability of financial and credit support and cooperation with large enterprises, etc. however, it does not mean the creation of “hothouse” conditions for small and medium-sized enterprises, but it is rather a means of balancing the opportunities of small, medium, and large enterprises under the competitive struggle, a way to compensate entrepreneurs’ reimbursement for their activities in risky spheres. in the usa, despite the dissemination of idea maximization of the freedom of economic activity, the role of the state in regulating entrepreneurial activity is a significant but ambiguous one. the relations between the state and the business sector have a “wave-like” tendency – from regulation of business activity to its deregulation (that is the reduction of state influence on entrepreneurial activity), which was distributed in the late 1960s and spread in 1970–1980s. most american scientists point out that at the present stage, the relationship between entrepreneurship and state is antagonistic, and their partnership is considered impossible and harmful to society. at the same time, although business entities take the majority of their decisions on their own, the scope of their activities is reduced, and, accordingly, the sphere of state influence increases. that sort of a tendency to enlargement of the state involvement in the participation in regulating entrepreneurship is becoming widespread and has an ascending trajectory as analysts emphasize. in regards to ukraine, it can be noted that the priority of government regulation and support of small and medium-sized enterprises in the information society predetermines the need to switch from direct administrative assistance to the formation of favourable economic and social environment for the improvement of mechanisms and instruments for promoting the development of entities of small and medium-sized enterprises. according to the foreign experience, small enterprises are the most flexible and advantageous for the implementation of scientific and technical, innovation and latest achievements. however, in ukraine, their share in producing a gross domestic product is much lower than in countries with a developed market economy. the state can contribute to solving this problem by investing a part of the funds received from the privatization of state property in the development of facilities and equipment of entrepreneurship; elaboration and implementation of a mechanism for the transfer of facilities and production capacities to manufacturing enterprise of small enterprises, including those who release in the process of liquidation, reorganization and bankruptcy of enterprises; use of the productive capacity of enterprises under leasing conditions that will enable business organizations to minimize the cost of purchasing fixed capital, and the possibility to deposit a share of business property in their capital stock or its transferring into the economic management of business organisations will increase their security capacity and stability; assistance in the process of formation of a developed real estate market. baltic journal of economic studies 165 vol. 5, no. 1, 2019 4. offences counteraction in the business sphere as a guarantee of the constitutional freedom of a person to conduct entrepreneurial activity in ukraine analysing the system of subjects countering offences, it should be noted that they form a holistic functional and organizational mechanism, which is characterized by the common purpose and management in the sphere of offenses counteraction. on the one hand, the specificity of the mechanism is conditioned by the multiplicity of functions performed in relation to security, prevention, control, cessation, consideration, investigation, and disclosure of offenses and, on the other hand – by the distribution of tasks among subjects of different levels due to the hierarchical structure of the system for countering offences. this system is a complex social organisation because its groups of similar bodies form relatively independent organizational units that function on the basis of identical laws. each of these units is a sub-system of a larger system and, at the same time, consists of its sub-systems (khomko, kulhavets, 2016). in addition, we also propose the authorities of public administration, judicial bodies, the whole complex of enterprises, establishments and organizations operating in various spheres of social activity etc. to attribute to the subjects of offences counteraction. however, it is essential to pay attention to the important feature of the mentioned activity. the specified spectrum of functions is carried out by the majority of these bodies along with the solution and accomplishment of other tasks. execution of the function of counteracting offences is the main type of activity for a relatively small part of such actors. the above bodies have the appropriate rights and duties to influence one or other criminal factors, and due to this reason, they carry out relevant information, methodological, resource, and personnel support. we mark that some scientists attribute the following ones to subjects of counteraction to offenses: subjects who directly carry out individual prevention; subjects carrying out preventive measures during the performance of their control and law enforcement functions; subjects which are mainly engaged in the management and coordination of activities for the prevention of offenses; and even the orthodox church (bachynskyi, 2018). however, in our opinion, such provisions are quite controversial taking into account the specifics of the issue under consideration. we also cannot disagree with the standpoints of researchers who identify the president of ukraine and the cabinet of ministers of ukraine, who “form the legislative and other regulatory and legal bases for offenses prevention, establish competence, rights and duties of other entities of the activity, carry out its financial, personnel, logistical and other resource support, planning, control and other functions of state legal administration in this sphere”; the relevant units of the bodies of internal affairs (now – the national police – authors), the security service of ukraine, prosecution authorities and other law enforcement agencies with subjects that maintain information and analytical procurement; units of law enforcement authorities with subjects that detect criminal factors. the latter group is the subjects that implement response measures to individual crimes and crime in general. summarising the above, it is possible to specify the subjects of counteraction to the offense as follows: public and administrative authorities; local self-government bodies; executive and regulatory bodies; the national police of ukraine; security service of ukraine; prosecutor service; courts; general and economic management bodies; informational, statistical, medical, educational and cultural-educational institutions; trade unions, public units of law enforcement, parties, faithbased organisations; services for minors; correctional labour colonies and others like that. based on this list of actors counteracting the offense, one can also determine the system of their powers. in a short form, the above authorities perform the following tasks and functions in relation to offences prevention: to determine the main directions, tasks, forms, and methods of counteracting offenses in the state; to carry out informational and analytical provision for counteraction to the offense; to detect and inform about criminal factors; to carry out response measures directly to individual offenses, as well as measures for elimination, reduction or neutralization of criminal factors including measures for correction of personality deformations and elimination of circumstances that have been caused it (kasianenko, 2018). analysing the concept and essence of the subjects of offences counteraction, one can state that the scope of their powers in this sphere (except for bodies with special focus) is a quite wide and common for many areas of social life of the state and society, and entrepreneurial activity is no exception. thus, we propose that the subject of offences counteraction in entrepreneurial activity is considered both as a system of government and non-government bodies, public organisations, social groups and citizens whose activities are aimed at eliminating the causes and conditions that result and favour offenses in business commercial activity (entrepreneurship), preventing offenses at different stages of the unlawful behaviour of the participants in the sphere of entrepreneurship, as well as their bringing to legal liability. it is essential to mark that the range of subjects counteracting offences in entrepreneurial activity is quite broad and to analyse their activities within our study is impossible (bilousov, 2017). as it was mentioned above, for most of the subjects contracting offences is a task that is carried out along with the main tasks such as the baltic journal of economic studies 166 vol. 5, no. 1, 2019 generation of a legislative framework and manifestation of initiatives in this sphere, management, control, and supervision over the activities of participants of legal relations in the sphere of economic activity in general and business entities in particular, as well as compliance with relevant legislation. powers directly related to counteracting offenses in business activities are prescribed to relevant specially established bodies including non-governmental ones. in addition, according to the cc of ukraine, control measures over entrepreneurial activity are exercised by state supervision of nuclear and radiation safety (except for state supervision over activities involving sources of ionizing radiation where activities with their use are not subject to licensing), state architectural and construction inspectorate (supervision), state supervision of economic activities for the provision of financial services (except for money transfer operations, financial services in the securities market, derivative securities and the market for banking services), state supervision and control over observance of the legislation on labour and employment of the population in accordance with the procedure established by law and taking into account the peculiarities defined by the laws in the relevant spheres and international agreements, in particular, state supervision (control) in the civil aviation industry taking into account the specifics established by the air code of ukraine, regulatory and legal acts adopted for its implementation (aviation rules of ukraine) and international contracts in the field of civil aviation. thus, the system of counteracting the offenses in the entrepreneurial activity is rather numerous and diverse, therefore, we propose to divide the above authorities into several groups depending on such criteria as the form of ownership, the nature of the activity, the complex of powers in the sphere under investigation: 1. state bodies of general competence exercising powers to counteract offenses in the sphere of entrepreneurial activity along with their main functions (the verkhovna rada of ukraine and local selfgovernment bodies, the president of ukraine and his administration, the cabinet of ministers of ukraine and local state administrations, the ministry of finance of ukraine, the ministry of economic development and trade of ukraine; the ministry of revenues and duties of ukraine; law enforcement agencies (security service of ukraine, the ministry of internal affairs of ukraine, national police of ukraine, prosecutors service, etc.), judicial agencies; other central executive bodies that carry out activities to combat offenses in business along with their basic functions). 2. state specialized committees, departments, services, and inspections established directly for the purpose of counteracting offenses in the sphere of entrepreneurial activity (state fiscal service of ukraine, state financial inspection of ukraine, economy protection department of the national police of ukraine, antimonopoly committee of ukraine, state inspection of ukraine for consumer rights protection, state property fund of ukraine, state treasury service of ukraine, etc.). 3. bodies of the financial credit system (national bank of ukraine, commercial banks). 4. non-state actors for business offenses prevention. it should be noted that some of the above-mentioned state bodies (administrative commissions, rayon, city district, city or city district courts, the national police of ukraine, bodies of state financial control, revenue and duties bodies, etc.) can be included into a special group of entities that are endowed with administrative and jurisdictional powers. their full list is contained in section iii “bodies authorized to consider cases concerning administrative violations” of the code of ukraine on administrative offenses (hereinafter referred to as the cuao). the aforementioned subjects have the right to consider cases of administrative offenses the contents of which are listed in chapter 12 “administrative offenses in the areas of trade, catering, services, finance and business” of the cuao (kodeks ukrainy pro administratyvni pravoporushennia, 1984) and are authorized to bring guilty persons to administrative responsibility. 5. conclusions the constitutional freedom of a person to conduct the business activity is an economic opportunity of a person on an independent, initiative, systematic, at one’s own risk activity for the realization of the right to manufacture, the performance of works, provision of services, trade in order to profit, which is enshrined in the constitution and is not prohibited and detailed by the laws of ukraine. features of constitutional freedom of a person to conduct business activity are as follows: its consolidation in the constitution and laws of ukraine; non-restrictive and non-prohibitive nature of human opportunities for entrepreneurial activity; independence, initiative, regularity, risky nature of activity; manufacturer, works performance, provision of services, trading; receiving of profit. we propose to amend the legislation in the following way: a) in art. 42 part 1 of the constitution of ukraine, to add “freedom of enterprise in ukraine is guaranteed” and further as the text goes before the words “everyone has the right to carry out entrepreneurial activity” ... (konstytutsiia ukrainy); b) in art. 43 of the commercial code of ukraine, to consolidate “entrepreneurs have the right” and further as the text goes instead of the words “entrepreneurs are guaranteed freedom”. the implementation of the proposed changes and recommendations will facilitate improving the realisation of the constitutional freedom of an individual to conduct entrepreneurial activities. baltic journal of economic studies 167 vol. 5, no. 1, 2019 under modern conditions, entrepreneurial activity needs a detailed legislative regulation, which is intended to promote the further development of both the various forms of entrepreneurship and the economy of ukraine as a whole. to date, there is no special regulatory act that would establish the legal status of a citizen-entrepreneur and objective prohibitions and restrictions on the implementation of the entrepreneurial activity. therefore, a new legal act must be adopted that would consolidate the relevant status and peculiarities of the management of a private entrepreneur as a business entity. it would be expedient to fix the list of activities where the entrepreneurship is prohibited in art. 128 of the cc of ukraine. references: vinnyk, o. m. (2017). hospodarske pravo: kurs lektsii (zahalna chastyna) [commercial law: series of lectures (general part)]. kyiv: lira-k. (in ukrainian) hospodarskyi kodeks ukrainy: zakon ukrainy vid 16 sichnia 2003 r. № 436-iv [commercial code of ukraine: the law of ukraine: the law of ukraine dated january 16, 2003 no 436-iv]. retrieved from: https://zakon.rada.gov.ua/ go/436-15 pro fermerske hospodarstvo: zakon ukrainy vid 19 chervnia 2003 r. № 973-iv [on farming: the law of ukraine dated january 19, 2003 no 973-iv]. retrieved from: https://zakon.rada.gov.ua/go/973-15 konstytutsiia ukrainy vid 28 chervnia 1996 r. № 254k/96-vr [the constitution of ukraine dated june 28, 1996 no 254к/96-вр]. retrieved from: http://www.zakon.rada.gov.ua/go/254к/96-вр pro pidpryiemnytstvo: zakon ukrainy vid 7 liutoho 1991 r. № 698-xii [on entrepreneurial activity: the law of ukraine dated february 7, 1991 no № 698-xii]. retrieved from: https://zakon.rada.gov.ua/go/698-12 buhlak, yu. o., zhuravlov, d. v. (2016). administratyvno-pravovi zasady detinizatsii vidnosyn u pidpryiemnytskii diialnosti: monohrafiia [administrative and legal principles of the shadowing of relations in entrepreneurial activity: a monograph]. kyiv: helvetica. (in ukrainian) cherednychenko, h. a. (2014). mekhanizm derzhavnoho rehuliuvannia pidpryiemnytskoi diialnosti v ukraini ta napriamy yoho vdoskonalennia [the mechanism of state regulation of entrepreneurial activity in ukraine and directions of its improvement.]. economics and management: problems of science and practice: collection of scientific articles, 1, 162-167. prokopets, l. v. (2018). mekhanizmy derzhavnoho rehuliuvannia pidpryiemnytskoi diialnosti [mechanisms of state regulation of entrepreneurial activity]. biznes-navihator, 1-1, 162-166. kyrychenko, yu. v. (2015). konstytutsiine rehuliuvannia prava na pidpryiemnytsku diialnist v ukraini ta derzhavakh kontynentalnoi yevropy [constitutional regulation of the right to entrepreneurial activity in ukraine and the states of continental europe]. naukovyi visnyk khersonskoho derzhavnoho universytetu. seriia: yurydychni nauky, 5(1), 75-79. krehul, yu. i., bank, r . o. (2016). bezpeka pidpryiemnytskoi diialnosti v ukraini: administratyvno-pravovyi aspekt: monohrafiia [security of entrepreneurship in ukraine: administrative and legal aspect: a monograph]. kyiv: kyiv. nats. torh.-ekon. un-t. (in ukrainian) khomko, l. v., kulhavets, kh. yu. (2016). pravove rehuliuvannia pidpryiemnytskoi diialnosti: navchalnyi posibnyk [legal regulation of entrepreneurship: a textbook]. lviv: lvduvs. (in ukrainian) bachynskyi, a. ya. (2018). mekhanizmy derzhavnoho rehuliuvannia pidpryiemnytskoi diialnosti v ukraini [mechanisms of state regulation of entrepreneurial activity in ukraine]. vcheni zapysky tavriiskoho natsionalnoho universytetu imeni v. i. vernadskoho. seriia: derzhavne upravlinnia, 29(68), no. 2, 52-55. kasianenko, d. i. (2018). osoblyvosti hospodariuvannia fizychnoi osoby yak subiekta pidpryiemnytskoi diialnosti [features of management of a private entrepreneur as a business entity]. molodyi vchenyi, 10(2), 659-662. bilousov, ye. m. (2017). aktualni problemy hospodarsko-pravovoho zabezpechennia ekonomichnoi bezpeky ukrainy: monohrafiia [actual problems of economic and legal provision of economic security of ukraine: monograph]. kharkiv: pravo. (in ukrainian) kodeks ukrainy pro administratyvni pravoporushennia: zakon ukrainy vid 7 hrudnia 1984 r. № 8073-x [code of ukraine on administrative offences: the law of ukraine dated december 7, 1984 no 8073-x]. retrieved from: http://www.zakon.rada.gov.ua/go/80731-10 baltic journal of economic studies 244 vol. 4, no. 5, 2018 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: volodymyr.parsyak@nuos.edu.ua orcid: https://orcid.org/0000-0002-4756-8977 2 admiral makarov national university of shipbuilding, ukraine. e-mail: eyzhukova@gmail.com orcid: https://orcid.org/0000-0001-8966-8354 3 kherson branch of admiral makarov national university of shipbuilding , ukraine. e-mail: parsyak.katerina@gmail.com orcid: https://orcid.org/0000-0001-7523-9065 doi: https://doi.org/10.30525/2256-0742/2018-4-5-244-250 world shipbuilding: driving forces and relevant development vectors volodymyr parsiak1, olena zhukova2, кaterina parsiak3 abstract. the purpose of the paper is to find out under the influence of which external impulses and according to which vectors events in the field of shipbuilding are taking place in our time. concentrating attention on them, the authors sought to provide shipbuilders-practitioners with guidelines useful for making weighted and sometimes fateful business decisions. the conducted research seems timely from the viewpoint of the formation by the owners and management of the development strategy of domestic shipyards. especially those related to the “new wave.” in the overwhelming majority, it is represented, paradoxically, by small and mediumsized enterprises. in recent years, they have been striving to find their own place in the international market for engineering, construction, repair, conversion, operation, and recycling of products whose line makes the structure of the chosen industrial specialization. the fact that the prospects for this business, despite the known difficulties, are optimistic is evidenced by the dynamics of the absolute volume of cargo transportation by sea and the construction of new vessels it has caused. methodology. the performed generalizations are based on the analytical processing and systematization of data obtained by the authors from available information sources. as a result, substantiation of the arguments confirming the formulated working hypothesis regarding fundamental changes in the global shipbuilding – a key type of marine economic activity – has been obtained. among its many features – a high level of competition, in which more and more new rivals are drawn. the study outlines the factors, under the influence of which the identified metamorphoses occur. this creates the prerequisites for identifying causal relationships between the first and second ones. in particular: humanity’s facing with the realities of the fourth industrial revolution, signs of which are easily detected in shipbuilding; awareness by governments, socially responsible business, the public of the fatal consequences of neglecting environmental safety, affecting the natural environment and people employed in the maritime industry or residing in its area; advances in the sectoral international division of labour, accompanied by the emergence of new shipbuilding centres; the rising cost of marketing and building ships and the desire of shipowners to get an effect on the scale of the facilities used. at the same time, obstacles that occur along the way are identified. practical implications. in support of the conclusions, we analyse the experience of leading enterprises, which serve as an example for imitation and deserve further development. they are not limited solely to technical and technological innovations but find the use of new organizational forms of mobilization of accumulated potentials. among them are shipbuilding clusters. turning to their creation, the initiators seek to strengthen the competitive positions of participants in developed segments and actively form new promising markets. value/originality. as a result of systematization of the key areas of the drift of world shipbuilding, an information platform has been created, based on which shipyard management is able to foresee the future of the business under its care. key words: economy, shipbuilding, maritime economy, industry 4.0, ecological safety, scale effect, international specialization. jel classification: f20, l10, l19 baltic journal of economic studies 245 vol. 4, no. 5, 2018 1. introduction shipbuilding – one of the oldest and extremely competitive types of maritime business, the relation of which in ukraine is not indifferent. but if the authorities, individual officials, and party leaders only mention it in the context of the implementation of certain election measures (this is especially noticeable on the eve of 2019), then the business (mostly small and medium) proves the desire to preserve the maritime status of the state. it’s not easy to do. therefore, due to everyday troubles, owners and management do not always have time to verify corporate growth and development strategies with planetary vectors for advancing the initiated business. without their awareness, in the globalized world, as well as in the markets for complex engineering structures (vessels, ships, offshore mining platforms, wind power devices), any mistake leads to loss of market advantages, depletion of the portfolio of contracts with corresponding financial implications. there are many examples. it is the short-sightedness of the former leaders of the black sea shipbuilding plant, vat “shipbuilding plant “okean” (put up in august 2018 for sale after the announcement of its bankruptcy), the plant named after 61 communards along with unpretentious thinking of the leaders of the profile ministries led to the decline of the once-flowering industry. only the aircraft carriers of the naval forces of china remind of its upsets. all of them (buildings or complete complexes) were built in the past at ukrainian shipyards. the following disgraces get a particularly bitter taste as well because they happen at a time when: on average, during the launching ceremonies taking place on the staples, in slips and dry docks of enterprises scattered by the territories of all (except antarctica) continents, a traditional bottle of champagne is annually smashed on boards of more than 1350 newly built vessels; ninety percent of the world’s commercial traffic is transported by sea. but the advantage of the vessels is not limited to this. specially trained specialists also conduct industrial fishing and fish processing, provide artificial growth of live edible and decorative organisms, entertain travellers during cruises, run the underwater utility lines, conduct searches and evacuation of those who have suffered an accident, counteract attacks of pirates, explore and extract minerals, mobilize renewable energy sources, deprive the environment of pollution, are concerned with the arrangement of the coastal zone of the seas and inland reservoirs, etc.; large and small shipowners are not tired of replenishing briefcases of ship order with new contracts so shipyards enthusiastically get down to work. so we must stop lag behind! 2. brief literature review it would not be fair to abstract from the workings of our predecessors. some have devoted their publications to the clarification of the nature of economic cycles in world shipbuilding (hossain, 2017; nikiforov, 2011). others highlight regional aspects of the issue (the statistics portal, 2018; grey, 2015). the annual reports of international organizations and specialized statistical databases have proved to be extremely useful (shipbuilding industry, 2017; review of maritime transport, 2017). these and other publications are investigated by the authors with interest and attention. as a consequence, the results obtained are represented in figure 1. consider each component of the scheme in more detail. 3. integration of shipbuilding in the contexts of industry 4.0 a feature of the xxi century has become a series of transformations in the world economy, which under the german initiative have been called the fourth industrial revolution (industry 4.0). it is expected that it will obtain absolute domination in the industry of intellectual production based on digital systems, which through the internet collect information and keep control of the supply chain throughout all stages of the product’s lifecycle. the launched processes have not sidestepped such a high-tech activity as shipbuilding. in support of this hypothesis, we give a few arguments. 1. distribution of systems of automatic control of figure 1. development of world shipbuilding source: the author’s generalization key vectors integration of shipbuilding in the contexts of industry 4.0 total ecologization of technologies of vessel construction and operation the growth of orders for large-scale engineering structures reformatting the international shipbuilding specialization baltic journal of economic studies 246 vol. 4, no. 5, 2018 vessels and operations of cargo handling in ports. for example: computer navigation, global positioning of ships, automation of loading and unloading works. they allow, firstly, reducing the number of crews, dockers’ crews and, secondly, increasing shipping safety and productivity of cargo terminals. the growth of the popularity of complex operating systems is due, among other things, to the explosive rise of container traffic. the software developed controls the flows of goods, port equipment in real time, plans to distribute containers to the warehouse area, control the work of trucks, trains arriving for or with cargo. 2. development of new technologies for the design, construction, and operation of ships. in particular: a) offering shipping companies a diverse range of products of various sizes thanks to the combination of standard hull fragments. this reduces the production cycle, simplifies the conversion of one or another part of the object during scheduled or unpredictable repairs; b) robotizing of production processes as a means of increasing their economic efficiency by reducing the cost of work and the limited involvement of staff to perform hazardous technological operations. an example is the south korean shipyard “geoje” of samsung corporation, which uses robots in 68% of welding processes (ноdson, 2014). and where the presence of a worker is mandatory (during the construction of vessels, some operations cannot be automated in principle), they offer exoskeletons. these devices allow manipulating parts and knots weighing 100 kg; c) the coordination of many functions in order to accelerate the development and implementation of new products in the market that would satisfy the customer’s idea of an acceptable price-quality ratio. among them, as appropriate, – marketing (monitoring market needs, pr events, sales organization, including e-commerce), the timely order of an extremely wide range of component parts, metal, manufacture of ship structures from it and, of course, the search for sources of coverage of huge current costs. for the industry concerned, given the competitive environment in which its enterprises operate, the duration of the construction of vessels, ships, drilling platforms (from a few months to several years), this is especially important. the response to the corrective request was the transfer to shipbuilders from the engineering bureaux of 3d models of the hull, its systems, and individual building sections arranged according to international standards. here, as never before, the technology of electronic information exchange becomes useful. here are some of the many examples: саls-technology – continuous acquisition and lifecycle support, design for manufacture and assembly, design for production, kronodoc solutions. they provide opportunities, firstly, for the processing of superfluous information flows, which tend to increase and improve the intensity; and secondly, to create, share, and distribute knowledge from available sources; thirdly, for rational distribution of employees’ efforts and saving of funds due to the complete exclusion of paper from circulation (parsyak, 2015). 4. total ecologization of technologies of vessel construction and operation it follows from the growing awareness of the need to prevent harmful emissions to the environment. this is not a trivial moralisation. according to scientists (ceeh, 2011), over the past few years, air pollution from international shipping has caused 50,000 premature deaths only in europe. the fact is that because of the chemical reactions in the air, the exhaust gases from marine engines are converted into small particles and harmful aerosols. together with black carbon, they fall into the lungs of people, from there – into the bloodstream, and then – into the internal organs, causing their disorder. this is a terrible price paid by mankind for the growth in shipping. according to the concept of “environmental (blue) logistics” (seroka-stolka o., 2014), everyone concerned should take care of minimizing waste and contaminations in the supply chain that is under control. from this, shipyards should build energy-efficient vehicles. in particular, due to: a) the transfer of main and auxiliary engines to alternative fuels. for example, liquefied gas. this will reduce the carbon dioxide emissions into the atmosphere tens of times (compared to diesel fuel) and will reduce the cost of shipping by taking into account the difference in the prices of the first and second energy carriers. moreover, due to this innovation, the strict environmental safety standards introduced by the international maritime organization (imo) and the responsible governments of the countries will be respected. for example, european ports allow vessels using fuel containing 0.1% sulphur (review of maritime transport, 2016). an acceptable alternative is exhaust gases “washing” with an aqueous alkaline solution. we will consider that in scrubbers developed for this operation both sea and fresh water are applied with the same success. the effect is striking: the device holds 99% of со2 and 98% of solid particles. after final testing of the emission reduction technology, experts expect to achieve one hundred percent compliance with the imo criteria for the discharge of water used for the intended purpose, while maintaining the work of the main machinery at the same time (zundkvist, 2011); b) application of renewable energy sources. so, for example, solar marine systems developed by eco marine power co. ltd ( japan) are installed on such large vessels as car transporters, cargo and passenger ferries, oil tankers, not to mention suburban river and pleasure boats (quick, 2012). the computers, with which they are equipped, follow the best use of the current weather conditions, take care of “folding of sails” and their baltic journal of economic studies 247 vol. 4, no. 5, 2018 security during a storm; c) the use of light composites in the vessel construction. they have an impressive weight and strength ratio. among the most promising is buckypaper. this is a sheet made of carbon nanotubes. if to make a composite of the corresponding number of these sheets, we get a material 10 times lighter but 500 times stronger than steel (kaczor, 2008); d) fastening “air kites”-towers to the stems. they accelerate the movement and, as a result, save fuel. this exotic technique is evidence that specialists continuously think over ways and means of depriving mankind of dependence on energy sources, which, on the one hand, are being exhausted and, on the other, the use of which spoils the environment. testing of such an auxiliary power (manufacturer – skysails company) of 600 m2 on beluga vessel with a deadweight of 20 thousand tons, which carried out a transatlantic sail between hamburg (germany) and guanta (venezuela), and from there to mo i rana (norway), has shown that the innovation saves fuel on average two thousand dollars a day (richard, 2008). 5. the growth of orders for large-scale engineering structures tankers hold the leading positions. the largest of the giants built – seawise giant (renamed as happy giant, knock nevis, and mont) – had a deadweight of 565 thousand tons. in the container transport sector, mol triumph reached a record 20170 teu. the passenger ship “harmony of the seas” invites about seven thousand passengers on board each voyage. and in addition – 2100 crew members and service staff. the main reason for the “gigantomania” is the desire to save on a scale, as with the increase in size, the transportation capacity of vessels grows faster than the construction cost and operating costs together. for example, in order to build a tanker with a deadweight of 550 thousand tons, at least 1.7 times less metal is needed than for 22 vessels of similar designation with a deadweight of 25 thousand tons. the number of its crew will be 20 times smaller, and fuel cost will be lower four times (narusbayev, 1988). the size of vessels, in turn, determines the tonnage of a certain shipping sector and freight rates. they are an integral part of the price of cargo, and in the future – of goods, whose production depends on the supply of materials, component parts, and semi-finished products. at the same time, there are also counterarguments for increasing the size of ships. how do such “goliaths” manage to cross not only man-made channels but even natural channels with their limited depths? where to find investments for the establishment of appropriate infrastructure in the ports that will service them? how do the corresponding costs affect the expected scale effect? are insurance companies (especially after the 2008 global financial crisis) powerful enough to compensate owners for loss of their vessels or their damage due to a collision, overturn, fire, terrorist act? what are the consequences for the environment in this case1? the following and many other questions are waiting for the answer. 6. reformatting the international shipbuilding specialization in the middle of the last century, shipyards of the old and new worlds were unconditionally shipbuilding great. but soon they encountered problems, which resulted in the fact that almost two-thirds of the shipyards ceased in europe, which led to the job loss of hundreds of thousands of people. the response to the latest challenges and threats by competitors has been large-scale innovation diversification measures that have made it possible to open or strengthen positions in the following market segments: innovative and premium ships. in particular, ocean yachts, ferries, cruise liners, research vessels, roll-on/ roll-off ships, chemical carriers, offshore and “blue” ships. at the last, harmful emissions to the atmosphere and into seawater have been eliminated, fuel-saving technologies have been introduced. this is motivated by special programs of a holistic approach to engineering and building of environmentally friendly objects, started in particular in the european union. among their participants – ship, classification societies, research institutions, and institutions of higher education; wind parks they are created with such intensity that some ships have completely reoriented themselves on the installation of offshore wind generators and their maintenance. from a number of organizational innovations, we draw attention to the spread in the countries of our continent as an effective tool as it turned out as clusters. since the creation of the european network of maritime clusters, it has been 13 years since. today it covers more than ten national marine clusters: sea vision uk (great britain), bundesministerium für wirtschaft und technologie (germany), cluster maritime français (france), federazione del mare (italy), clúster marítimo español (spain), and others. by their structure, almost all of them integrate the following activities: design, construction, maintenance, repair, and modernization of vessels and other floating marine structures; manufacture and sale of all kinds of equipment for ships and other marine floating facilities and structures; financial, legal, technological, port, and logistics activities, ship’s agency service; exploitation of vessels, floating marine structures, 1 the cost of cleaning only the water area and the coast after the explosion on the prestige tanker was 12 billion usd (prestige oil spill, 2008) baltic journal of economic studies 248 vol. 4, no. 5, 2018 drilling platforms. unlike the industry form of business organization known from the past, modern industrial clusters are characterized by high innovation that feeds the roots in the informal integration of large companies with a great number of small and medium enterprises, technology centres, engineering firms, which cooperate within the framework of a joint value chain. as a result of considerable efforts, now 300 shipyards have enough orders, which provide work more than 500 thousand workers. their efforts generate income that amounts to about 30-40 billion euros per year (lo c., 2013). as for tankers, ships for general cargoes, container carriers, their construction is mainly concerned with china, south korea, japan. together, though not negotiating this, they turned the asia-pacific region into a new centre of world shipbuilding (figure 2). a characteristic feature of the last decade was the emergence of shipbuilding business in developing countries: algeria, bangladesh, vietnam, india, indonesia, malaysia, the philippines. most concentrated their efforts on small and medium-sized facilities and has already managed to serve export markets. for example, singapore specializes in support and supply vessels, dredgers, yachts, research vessels. their main competitive advantages are: cheap labour. even cheaper (who could have thought!) than in china; government support. in malaysia, ships are exempt from taxes on the import of components and on sale. in 2015, the shipbuilding/ship repair industry strategic plan was approved here, which aims to ensure control of two percent of the world’s shipbuilding by 2020 (fardaus, 2014). some shipyards seek economic unions with more experienced international partners. in this context, attention is drawn to the beginning of the release of vietnamese german and japanese licensed ship facilities: wärtsilä, man diesel, and mitsubishi. the list of states that are rapidly increasing the volume of trade by newly built ships has increased due to brazil, mexico, and venezuela, which gives grounds for attributing latin america to applicants for the participation in competitions for the commitment of shipowners in the most attractive market segments. brazil, for example, sees prospects in the construction of oil platforms and vessels of the offshore sector. the real shipbuilding boom that swept the world’s “newcomers” did not leave indifferent foreign investors. among the most active are: shipbuilding firms. they are attracted, firstly, by a low cost of production; and secondly, an increase in demand for shipping services, which increases the portfolio of contracts. in 2015, china has directed 10.9 billion usd in indonesian shipbuilding. this is only a share of 63 billion usd planned to be spent on infrastructure development in the archipelago country (grey, 2015); shipping companies. their motivation is more branched out. on the one hand, the desire to increase control over the suppliers of their fixed capital. on the other hand, the desire to take advantage of the vertical integration of own business with the potential of the shipyard2. and, finally, savings on a scale. it is noteworthy that shipyards-newcomers have the ability to learn and increasingly apply for orders for high-tech facilities, which may mean the loss of europeans’ best card in a competitive struggle. 4. conclusions 1. the world economy does not have any chance to exist and develop without shipbuilding, the enterprises of which produce a number of complex engineering structures. each of them serves a specific kind of economic activity. at the same time, the shipyards’ load depends on the business activity. its increase causes extraordinary demand, requires the 22035 25035 13309 1537 4187 china south korea japan eu other countries 0 5000 10000 15000 20000 25000 30000 gross register tons figure 2. leading shipbuilding countries source: the statistics portal, 2018 2 under the agreement between the south korean hanjin heavy industries, a part of the holding company hanjin group, and the largest shipping company of france cma cgm group, not in japan and not in china, but in the philippines, three of the world’s largest container carriers with a capacity of 20 thousand teu will be built (grey, 2015) baltic journal of economic studies 249 vol. 4, no. 5, 2018 intensification of their movement from the warehouses of finished goods to the places of consumption. simultaneously, deceleration of the business activity entails postponement of purchases, inhibition of sales, negatively affects the work of shipyards. this pattern should be predictable both by rulers and corporate management. 2. the relentless pursuit of capital for expanded reproduction was the result of shifting the centre of gravity of world shipbuilding from europe and the usa to the far east, to south-east asia, and latin america. those who were contemptuously considered as “emerging” quickly turned from outsourcers into independent players in the shipbuilding markets, creating a fair competition for investor countries. it was not just an unexpected surprise, but immediately affected the mood of shipowners, who were attracted by relatively cheap means of sea transport. especially – superfluous. the benefit turned out to be double since the scale effect also showed itself. in turn, europe and the usa were faced with the closure of shipbuilding enterprises, the disappearance of jobs, and the bursts of social discontent among coastal residents. 3. if this had happened in the ix or even the early xx century, an economic confrontation would likely lead to the resumption of the status quo by military means. meanwhile, the world has changed significantly and civilized methods of confrontation were invented to counter self-created rivals. the first of these was the proclamation of the relevance of the serious attitude towards environmental protection. especially since it actually fell under the threat of irreversible negative consequences for human life. this has created an industry that has not been seen before – the offshore industry, in that part that is related to alternative energy. the second counterpoint was the emphasis made on the use of innovative technologies at all stages of the lifecycle of shipbuilding products. by their help: a) the time and cost of construction of vessels aligned, in comparison with the “oriental tigers”; b) the market received an unprecedented offer, which constitutes the unique competitive advantage of the eu and the united states. how long – time will show. 4. world experience – not fun to take pleasure or to fear. world experience is, above all, a great opportunity to make sound conclusions, gain wisdom, learn from others’ mistakes or positive achievements. it is obvious that power and business during the time of ukraine’s existence as an independent state failed even to preserve, much less improve shipbuilding. this does not mean, by the way, that everything is lost. appropriate beliefs feed the activities of the new generation of shipyards. we are confident that the future belongs to them! references: ceeh (2011). scientific report № 3. assessment of health-cost externalities of air pollution at the national level using the eva model system. centre for energy, environment and health report series. retrieved from: http://ceeh.dk/ceeh_reports/report_3/ceeh_scientific_report3.pdf developments in international seaborne trade – review of maritime transport (2016). chapter 1. united nations publication. retrieved from: http://unctad.org/en/publicationslibrary/rmt2016_ru.pdf fardaus, f. (2014). potentials of shipbuilding industry. retrieved from: https://bdnews24.com/ business/2014/01/15/potentials-of-shipbuilding-industry grey, e. (2015). southeast asia’s shipbuilding evolution. retrieved from: https://www.ship-technology.com/ features/featuresoutheast-asias-shipbuilding-evolution-4572766/ narusbayev, a. a. (1988). shipbuilding of xxi century. – l.: shipbuilding. ноdson, h. (2014). robotic suit gives shipyard workers super strength. retrieved from: https://www.newscientist.com/ article/ mg22329803.900-robotic-suit-gives-shipyard-workers-super-strength#.u-bkmkprzpx hossain, k. а., zakaria, n. m. g. (2017). a study on global shipbuilding growth, trend and future forecast. procedia engineering, 194, 247-253. kaczor, b. (2008). future planes, cars may be made of «buckypaper». retrieved from: https://usatoday30.usatoday.com/tech/science/discoveries/2008-10-17-buckypaper_n.htm lo, c. (2013 ). blue growth: keeping europe's shipyards afloat. retrieved from: http://www.ship-technology.com/ features/featureblue-growth-keeping-europe-shipyards-afloat/ nikiforov, v. g., nesluhov, d. s. (2011). modern trends in the development of the world shipbuilding shake from the standpoint of the theory of economic cycles. the branch and regional economics: problems of management and solutions, 1, 101-105. parsyak, v. n., soleswick, m. b. (2014) integration of marine engineering and information and communication technologies. shipbuilding and marine infrastructure, 2, 144-155. prestige oil spill (2008). top 10 most expensive accidents in history. retrieved from: http://www.wreckedexotics.com/ articles/011.shtml quick, d. (2012). energysails harness wind and solar power to cut ship fuel consumption. retrieved from: http://newatlas.com/eco-marine-power-energysail-solar-sails/25005/ richard, m. g. (2008). cargo ship with kites: first trans-atlantic trip a success! retrieved from: https://www.treehugger.com/cars/cargo-ship-with-kites-first-trans-atlantic-trip-a-success.html baltic journal of economic studies 250 vol. 4, no. 5, 2018 review of maritime transport. united nations conference on trade and development (unctad). (2017). retrieved from: http://unctad.org/en/publicationslibrary/rmt2017_en.pdf seroka-stolka, o. (2014). the development of green logistics for implementation sustainable development strategy in companies. retrieved from: https://www.sciencedirect.com/science/article/pii/s1877042814054706 shipbuilding industry – statistics & facts (2017). retrieved from: https://www.statista.com/topics/3712/ shipbuilding-industry/ the statistics portal (2018). regional breakdown of the global shipbuilding market. retrieved from: https://www.statista.com/statistics/263399/regional-breakdown-of-the-global-shipbuilding-market-by-contracting/ zundkvist, l. (2011). reducing emissions from marine vessels. retrieved from: http://www.maritimemarket.ru/ article.phtml?id=1351 baltic journal of economic studies 122 vol. 1, no. 2, 2015 life cycle of a wine brand viktoriia paziuk1, chernihiv national university of technology, ukraine abstract. the aim of the work is to determine the life cycle of the wine brand, the development of ways to improve its effectiveness at different stages of the life cycle. being scientifically informed of the existence of the life cycle of the brand allows modern enterprises to enhance their competitive position in the market and take advantage of the acquired differences in order to attract more attention from consumers. methods. the study is based on scientific methods of research of economic phenomena: the dialectic, abstract logical (in the exercise of theoretical generalizations to the definition of the concept of «life cycle of the perpetrator of the brand), a scientific abstraction, comparison and ordering (the study of factors influencing the life cycle of the perpetrator of the brand and the factors influencing a choice of products for consumers), statistical and problem-chronological (the study of the requirements of the brand in a changing consumer preferences), logical generalization (in determining the social and ethical functions guilty brand). results. the stages of the life cycle of the wine brand, which take into account its characteristics and form its social and ethical functions. describing the requirements for the wine brand in the changing tastes and preferences of consumers. specification of wine promotion of the brand in an increasingly competitive environment. preconditions have been set for a new wine brand. the practical significance. the brand always increases the value of the product and its entry into new markets, as well as reduces the time to attract consumers. possibility to ensure the growth of the brand in a declining market; building market share in a highly competitive environment; marketing innovative products in order to create a new sales strategy. after all, to gain and maintain the popularity of a certain product, one must personalize it with giving associations and a way to provide it with distinctive features. only then the product will cause its strong commitment and provide the expected profit. a brand contributes to an adequate instant reaction of manufacturers and distributors of products to internal and external challenges in a dynamic shift in the consumer market and increases competition. the value/ originality. modern scientific studies increasingly gain urgency of development, existence and determination of characteristics of the brand life cycle. however, given specificity of the wine industry, the coverage of this issue in the literature requires constantly new and innovative approaches to problem-solving efficiency of the brand. the article explores and describes factors that affect the life cycle of the wine brand management that provides gain competitive advantages in certain stages and allows to extend the brand in the face of increasing competition. key words: brand, wine products, competition, life cycle, creating, wine brand, social and ethical function, factors value, consumer, idea, consumers’ tastes and preferences. jel classification: m30, m31, m39 corresponding author: 1 department of finance, banking and insurance, chernihiv national university of technology. e-mail: vikalazarenko@rambler.ru 1. introduction in a market environment for an effective response to competitive pressures a manufacturer must possess effective competitive advantages. under these circumstances, the formation of a brand is extremely important. to keep the planned sales volume of wine production it is important to identify and analyze a life cycle brand features. the brand life cycle is a concept more generalized and powerful than the product life cycle. the duration of the brand existence is determined with the length of the brand commercial success of the the enterprise production program, which may consist of a plurality of kinds of the product life cycle, the time of which implementation do not match. in the process of the enterprise functioning total volume of sales is ensured with maximum of sales of a certain product the life cycle of which is at the stage of saturation. this creates the effect of a successful company in a competitive environment (zozulov, 2004). if an irreversible decline in sales takes place enterprises create conditions for the decline of the brand and its exit from the market. if the enterprise production program consists of one or two products, the life cycle of the brand can be commensurated with the product life cycle. in this case, the life cycle of the brand concept turns to be individual for a single product or service. scientifically baltic journal of economic studies 123 vol. 1, no. 2, 2015 based subsistence of a brand life cycle allows modern enterprises to strengthen their competitive position in the market and use acquired differences to attract more consumers’ attention. in modern scientific studies the developments concerning the existence and determining of characteristics of the brand life cycle are increasingly gaining relevance. the articles of domestic and foreign scientists and brand managers: zozuliov o. dligach a. fedoriv a. jones, d., b. pustotin, d. ohilvi, n. klyayn, d. traut, s. pronin investigate and describe the factors affecting the wine brand life cycle, the management of which provides gaining competitive advantage at certain stages and allows to extend the brand in the increasing competition ( jones, 2005, dligach, 2011, fedoriv, 2013, pustotin, 2015, trout, 2012). but taking into account the specificity of the wine sector, the issue of domestic literature highlights is incomplete and constantly needs new and innovative approaches to problem solving of the wine brand effectiveness. the main goal of this work is to determine the life cycle of the wine brand, develop ways to improve its effectiveness at different stages of the life cycle. 2. features of the wine brand life cycle the consumer selects the product on an emotional level and activity of the company is based on the implementation of a technology aimed at producing high quality products as the basis of introducing a brand, it is the presence of the brand that will allow the manufacturer to build an emotional connection with the consumer. many manufacturers of wine products are seeking standard solutions with predictable results. but creating and promoting of the wine brand is always a risk as consumers’ emotions can be very different. the correct system for creating brand is the main secret of success for any manufacturer. innovative methods must be at its core. creating a wine brand, especially under current difficult conditions, foresees significant investments. bases for creating and promoting a wine brand are the same as in other types of business: understanding market demands and anticipating consumers’ wishes, knowing the benefits and features of the product – its strengths and weaknesses, and also being informed about the products of your competitors. the main feature of work with wine products is a differentiated approach to a particular market segment. the effectiveness of the wine brand is significantly enhanced when the brand is built on the right identified trends and forecasts of the production program and reflects the wishes, preferences and tastes of consumers (fig. 1). stages of the wine brand life cycle have the following features: on the stage of development of the brand it is necessary to analyze the market, to study competitors’ experience and to segment customers with identifying their key needs and desires, to create a wine product positioning, to develop a system of visual identity of the brand, to launch a series of communication campaigns to come up with a name, to elaborate packaging, label and a system of visual identity. it is very important that the manufacturer before the introduction of the brand to the market would be ready to have clear and complete understanding of the situation in logistics, seasonality of consumption, seasonal promotional activity, knowledge of competitors’ activity, knowledge of the target audience and others; the stage of introduction of the brand in the market is the most difficult and risky task. this stage is charecterized with instability, costs, even losses for the manufacturer. at the stage of implementation of the brand it is important to pay attention to the preliminary key factors: the right moment, a high-quality product, distribution, knowledge of the target audience, a clear message and clearly deliberated advertising strategy. new brands that started in the market during the period of decreasing leaders’ activity tend to occupying rapidly a significant share, and helding it for several years. the brand affects the perception of the product, the competition, facilitating the entry and negotiations with retailers, helping to create fashion. thanks to the right implementation of the brand a consumer becomes less sensitive to the price and the brand suffers much less pressure from the innovation processes; the stage of growth of the brand the brand is characterized with active introduction of the brand to the market, a powerful advertising support, increasing spending on marketing activities. the intensive growth may be extended p ro fi t, b introduction growth saturation duration of a saturation stage (loyalty) is determined by the term of maximum demand for goods stages in the life cycle of the brand time, t б working out fig. 1. the life cycle of the wine brand baltic journal of economic studies 124 vol. 1, no. 2, 2015 by additional stimulation of consumers through a variety of marketing tools, such as finding new distribution channels, expanding segments. the stage of saturation (loyalty) is usually much longer than the previous stages, and the producer, usually seeks to extend it further. the phase of saturation is defined by the term of product presence in the market (pyankova, 2012). important tools of support at saturation stage are: an efficient distribution system, good marketing, competitive product price, innovative method of quality control, narrow and precise positioning. 3. factors that affect the wine brand lifetime the key strategic factors that influence the wine brand life cycle are the product life cycle and the market life cycle. thus, from the first steps of brand promoting it is important to predict the lifetime of the product and the market. ukrainian wine market in recent years has undergone a number of changes as for the european values and preferences. the share of wine production in ukraine accounts for about 10% of total consumption of alcohol. at the same time, in european countries in the structure of drinking wine occupies 70-80%, which demonstrates the potential of growth of the ukrainian wine market. the reason is that all products go through similar stages of public recognition. as the society begins to accept and support innovation, new product increases, and ultimately reaches maturity. when there is a better alternative product or when at changing social benefits, sales volume is directed on the decline, the conditions for transition to the final stage of the life cycle – «recession»are created. with brand it is possible to provide growth on a falling market; increasing the market share under conditions of high competition; joining the market with innovative products in order to develop new marketing strategies. firstly, for effective communication it is necessary to provide important, understandable and attractive idea. secondly, there must be adequate resources for the campaign. thirdly, the success rate increases dramatically if you join a new market segment. it is also necessary to provide the right choice of qualitative raw materials. the consideration of these factors affects the effectiveness of the wine brand under conditions of increasing competition. 4. wine brand in the increasing competition today in the domestic market of wine production there is an increasing competition from other states producers that requires from local wineries efficient activities to improve competitiveness. it also has its explanations: difficult economic conditions in the industry, reducing the commodity market, increasing of restrictions by the state. currently, ukrainian producers have difficulties in increasing competitiveness because the competitive advantage primarily depends on the quality of wine production and consumers’ confidence. under current difficult conditions, domestic producers face a choice: to roll advertising activity and leave the market positions or to strengthen their positions and reduce the distance with competitors. in addition, the ukrainian market of alcoholic beverages should consider the indirect competition among other types of alcoholic beverages. as the practice showed manufacturers that build relationships with consumers on the values of the brand are stronger and more profitable than others. consequently, the domestic brands to ensure the competitiveness of products are destined to radical, bright, brave decisions and are required to be different from existing brands and surprise by their originality and attractiveness. consumers appeal to the brand that is increasing its popularity. 5. factors influencing the choice of products by consumers factors influencing the choice of consumers of products include: high quality, commitment to the brand, the interest for something new. another fact that influences consumers’ choice is the price. since the mass consumer in ukraine has a relatively weak purchasing power, it also affects the choice of wine beverages. nowadays, european countries are actively promoting a healthy lifestyle and no less actively promoting natural products. thus, social and ethical factors also encourage consumers to opt for a particular brand. socio-ethical factors include consumption culture and social status of the consumer. consumer’s behavior is influenced with such reference groups as family, social status, and his personal characteristics, especially such as age, family life cycle stage, occupation, economic condition, personality type and presentation of himself (aleshin, 2013). in ukraine, there is a very weak culture of wine consumption, only a small number of consumers of alcoholic beverages prefer wine (fedoriv, 2015). that is why the wine brand must constantly attract new customers, rather than focusing on consumers who gave their preference to other alcoholic drinks for many years. thus, promoting the wine brand is more efficient among consumers above 21. for successful branding one must use a set of tools based on the demonstration of product use, intake, the benefits of the product, using rules and standards, terms of consumption, product information, how to feed and ritual consumption. if measures relating to the creation and promotion of the wine brand in the first place will transmit the emotional essence of the brand and will not be too focused on the qualitative and quantitative characteristics of the product, only in this case it will be a success and provide the explosive sales growth (saveliev, 2011). it is important to build a brand that will work with the expectation of long term. selling wine in the market requires a fundamentally different approach. traditions determine demand and impose supply. today there is a stereotype of consumer’s thinking, formed in soviet times. many ukrainian consumers are more focused on the external perception: the desire for luxury and prestige is baltic journal of economic studies 125 vol. 1, no. 2, 2015 brand of a new product searching for methods and means of improving production technology, improving the product quality updated wine brand the wine market change of tastes and preferences, the growing demands of consumers to the wine product change of perceptions and attitudes towards the wine brand that does not meet the declared quality of the product adjustments of the wine brand to new tastes and wishes of consumers marketing research of a wine market implementation of new requirements to upgrading the wine brand manifested even among ordinary customers. unfortunately, today, some manufacturers offer mass consumer a product of low quality in an expensive package and inspirational advertising. in many advanced markets, people are more focused on their satisfaction or comfort than the opinion of others. we still concider traditional family values, but in the west such things are in the past – there are a lot of singles, people who meet their personal tastes and needs. 6. requirements for the brand under conditions of consumers’ changing preferences a brand as a sociocultural phenomenon is purposefully created as cultural and symbolic object, functioning in te system of mass communications as a modified purposeful image. distinct features of the brand are built around semantic core and position basic values of the subject of communication (velitchenko, 2014). the life cycle of a popular brand that has a rich history of its development, the popularity and recognition, can have quite a long period of existence, because it always has its supporters who do not betray their will. that is the last stage of the wine brand life cycle that can take a long time as there is a product that is in demand and occupies a certain niche in the market. new brands that appear and are promoted intensely, using modern marketing technologies to advertise new products, are often not quite perfect and can not always meet love and support from consumers, reducing thus the product life cycle and accordingly the life cycle of its brand (pustotin, 2015). so the producer should track the commodity market, tastes and wishes of consumers, that must be taken into account in the new requirements for the product and, therefore, be reflected in the ways of promotion and improvement of the brand itself (fig. 2). dynamic changes in the consumer market, increasing of competition require an appropriate instantaneous reaction of manufacturers and distributors of products to the external and internal challenges. in the face of declining demand for the products it is necessary to identify the factors that lead to this condition and offer the market updated high quality products with appropriate marketing accompaniment with its main effective tool, which is the brand. 7. social and ethical features of the wine brand the brand, which is focused on social responsibility reflects a centuries-old culture of wine production, brings the necessary knowledge, related not only to wine, but also to the tradition, art, promoting a healthy lifestyle. so the brand is not just profitable, but also performs this or that particular social work. and the consumer makes an informed choice in the favor of a brand, supporting one or another project. global brands are really irreplaceable cultural and social elements (saveliev, 2014). many manufacturers have no clearly prescribed long-term strategy to create and promote the brand and are engaged in unconscious waste from the budget into image advertising, a logo, leaflets and so on. thus the brand needs to be managed, especially because it affects all key indicators of production. buyers prefer brands, primarily influenced with emotional factors. a good brand promotes certain types of fig. 2. the background of creation of the new wine brand baltic journal of economic studies 126 vol. 1, no. 2, 2015 social relationships. one of the components of the brand success is well-coordinated teamwork and commitment to continuous improvement and innovation. doing wine business is limited with a huge number of various framework related to the perception of centuries-old culture of wine, legislative restrictions, unforeseen emotional decisions of consumers. foremost it is meant the need to develop the concept of sales and create the right brand image. 8. conclusions on the creation of the wine brand should work together financiers, marketers, analysts, strategists, artists, promotion and graphic designers, copywriters, architects. it is necessary to develop a system of visual identity of the brand, the original name and choose rather rational and informative style of communication. the strategy of creating and branding should contain a step algorithm and a set of tools that allow to move from spontaneous advertising campaigns to systematic brand management system, motivate employees and stimulate the growth of its popularity. the brand has always increases the value of the product, reduces the time for consumer’s attraction and its entering new markets. thus, the brand is the highest achievement of management strategies and marketing policy. after all, to gain and maintain the popularity of a certain product, it is necessary to individualize, to give associations and images to give it different characteristics. only then the product will cause a strong commitment to itself, to ensure its expected income growth in the future. references zozulov, a. (2004), pisarenko nl market positioning: how to begin building successful brands. – k. : knowledge press, 2004. – 199 р. jones, p. (2005) the role of advertising in the creation of strong brands / under the editors john philip jones. – williams, 2005. – 496 p. aleshin, m. (2013) the phenomenon of loyalty for goods and brands. [electronic resource]. – retrieved from: http://adme.ru/. pyankova, o. (2012) life cycle concept of the brand [electronic resource]. – retrieved from: http://dspace.nuft. edu.ua/jspui/bitstream/123456789/7222/1/1223.pdf pustotin, v. (2015) brand management as a process. [electronic resource]. – retrieved from: http://innovations.com.ua/ua/articles/finance/19350/upravlinnya-brendom-yak-proces fedoriv, a. (2015) marketing-ukrainian forum dyrektorov: 2015 [electronic resource]. – retrieved from: http://www.marketingforum.com.ua saveliev, v. (2014) marketing b2b technology sales in crisis [electronic resource]. – retrieved from: http://www.advanter.ua/articles.php?articlesid=66 velitchenko, s. (2014) pr – technology country branding of kazakhstan in the context of religious values knowledge-based society. [electronic resource]. – retrieved from: http://euroasia-science.ru/zhurnaly/40zhurnal-4/politicheskie-nauki/809-pr-tekhnologii-tranovogo-rendinga-kazakhstana-v-kontekste-dukhovnykhtsennostej-intellektualnogo-obshchestva dligach, a. (2011) 8 stories about brands. [electronic resource]. – retrieved from: http://www.advanter.ua/ articles.php?articlesid=59 saveliev, v. (2011) natural wines and strong brands. [electronic resource]. – retrieved from: http://www.advanter.ua/articles.php?articlesid=53 fedoriv, a. (2013) one word for the brand. [electronic resource]. – retrieved from: http://innovations.com.ua/ua/articles/finance/18731/odne-slovo-dlya-brendu pustotin, v. (2015) branding leaders. 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(2012) may 11, 2012 brand strategy: repositioning commodities [electronic resource]. – retrieved from: http://www.brandingstrategyinsider.com/jack-trout виктория пазюк жизненный цикл винного бренда аннотация. целью работы является определение жизненного цикла винного бренда, разработка путей повышения его действенности на разных стадиях жизненного цикла. научно обоснованное существования жизненного цикла бренда позволяет современным предприятиям усилить свои конкурентные позиции на рынке и воспользоваться приобретенными различиями для привлечения большего внимания со стороны потребителей. методика. исследования базируются на общенаучных методах исследования экономических явлений: диалектический, абстрактно-логический (при осуществлении теоретических обобщений к определению сущности понятия «жизненный цикл виновного бренда), научное абстрагирование, сравнение и систематизация (при исследовании факторов влияния на жизненный цикл виновного бренда и факторов, влияют на выбор продукции потребителями), статистический и проблемно-хронологический baltic journal of economic studies 127 vol. 1, no. 2, 2015 (при исследовании требований к бренду в условиях изменения предпочтений потребителей), логического обобщения (при определении социально-этических функций виновного бренда). результаты. определены стадии жизненного цикла винного бренда, которые учитывают его особенности, а также сформированы его социально-этические функции. описаны требования к винному бренду в условиях изменения вкусов и предпочтений потребителей. раскрыта специфика продвижения винного бренда в условиях усиливающейся конкуренции. установленны предпосылки создания нового винного бренда. практическое значение. бренд всегда увеличивает ценность продукта и его выход на новые рынки, а так же сокращает время привлечения потребителя. с помощью бренда возможно обеспечить рост на падающем рынке; наращивание рыночной доли в условиях высокой конкуренции; выход на рынок с инновационной продукцией с целью формирования новой стратегии сбыта. ведь чтобы завоевать и сохранить популярность определенного продукта, необходимо индивидуализировать его, наделить ассоциациями и образом, предоставить ему отличительные особенности. только тогда продукт будет вызывать к себе стойкую приверженность и обеспечивать ожидаемую прибыль. адекватной мгновенной реакцией производителей и реализаторов продукции на внешние и внутренние вызовы, в условиях динамических сдвигов на потребительском рынке и обострение конкуренции, является бренд. значение/оригинальность. в современных научных трудах все больше актуальности набирают разработки, о существовании и определения особенностей жизненного цикла бренда. но учитывая специфику винной отрасли, освещение этого вопроса в литературе требует постоянно новых и инновационных подходов к решению проблем эффективности виновного бренда. в статье исследуются и описываются факторы, влияющие на жизненный цикл винного бренда, управление которыми обеспечивает усиление конкурентных преимуществ на определенных его стадиях и позволяет продлить срок действия бренда в условиях усиления конкуренции. baltic journal of economic studies 188 vol. 4, no. 4, 2018 corresponding author: 1 kherson state agrarian university, ukraine. e-mail: kirilov_ye@ukr.net 2 kherson state university, ukraine. e-mail: lawyer7522@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-188-193 state regulation and support of tourism services in the rural regions in accordance with european requirements yuriy kyrylov1, vadim yarovoy2 abstract. the objective of the article is to identify the problems of development of rural green tourism as an important direction of tourism activity in ukraine and to substantiate their solution on the basis of state regulation and support. methodology. in order to achieve an objective of the study, the general scientific and special methods were used: analysis and synthesis in the study of scientific principles of state regulation of services of rural green tourism; statistical analysis, comparison and generalization – in the study of the peculiarities of the organizational and economic mechanism of state regulation and support of rural green tourism services and the definition of modern aspects of the mechanisms of state regulation of rural green tourism; abstract-logical method – for synthesis and formulation of conclusions and proposals. results. the article reveals the challenges and problems of the development of rural population and rural areas in ukraine. a special role in their solution of tourism activities in the form of rural green tourism was determined. therefore, a considerable attention is paid to its state regulation and support. they are carried out in the form of regulatory and legislative support, monitoring systems, pricing services, taxation, etc. practical importance. the obtained results can be used in practice by the state authorities, local authorities and self-government bodies, public organizations. the conducted study, conclusions drawn on their result, are the basis for: a further in-depth scientific study of the theory of public administration, development of recommendations for the improvement of conceptual provisions and measures for the implementation of an effective mechanism of state regulation and support of rural green tourism services. the scientific novelty of the results is that the theoretical foundations and conceptual approaches to improving the mechanisms of state regulation and support of rural green tourism services in ukraine are substantiated. key words: tourism activity, rural green tourism, state regulation, support, rural territories, employment, population. jel classification: z32, м38, j21, р23 1. introduction the challenges posed by the modern economic system and its innovative development towards rural areas and agrarian enterprises make them look for interdependence and spatial patterns in the organization of vital functions of the population, processes of production and in its results. a particular attention is required to be paid to the level and quality of life of rural residents, employment opportunities and sources of income based on the use of available capital and other resources of agrarian formations, farms, and agrohomes. tourist activity, first of all, rural green tourism as a direction of diversification of the economy of agrarian enterprises, is one of the ways of developing the village and reducing unemployment among the rural population. therefore, their study has an important theoretical and practical significance. areas of development of services of rural green tourism in agrarian enterprises are concentrated in those areas where there are appropriate conditions for their operation. the state, based on the use of socio-economic and geopolitical levers, forms the environment, in which agrarian enterprises operate and interact. an important task for the development of rural green tourism on their basis is the regulation of the relevant regulatory framework, given the changing conditions of the environment. his should ensure the effective interaction of state and public structures for the successful development of tourism business in the rural areas. 2. challenges and problems of development of rural population and rural areas in ukraine the legislative acts of ukraine concerning services of rural green tourism of agrarian enterprises are baltic journal of economic studies 189 vol. 4, no. 4, 2018 the constitution of ukraine, the laws of ukraine “on entrepreneurship” (“on tourism”, 1995), “on farmers” (“on private peasant economy”, 2003), (draft law of ukraine “on rural green tourism”, 2007) and some other statutory and regulatory enactments. as the analysis showed, for the effective development and regulation of rural green tourism, the law of ukraine “on rural green tourism” should be put into effect, the draft of which was adopted by the verkhovna rada resolution no. 2179 as of november 16, 2004. this law defines the general legal, organizational, and socioeconomic principles of the implementation of the state policy of ukraine in the field of rural green tourism and aims at ensuring the rights of citizens enshrined in the constitution to rest, freedom of movement, healthcare, a safe environment for life and health, satisfaction of spiritual needs and other rights when making tourist trips. it establishes the principles of rational use of tourist resources and regulates relations related to the organization and implementation of rural green tourism in the country. specific features, reflected in the draft law of ukraine “on rural green tourism”, are changes in the specifics of licensing tourist activity; obligatory (optional) licensing of certain types of rural green tourism; regulation of issues related to the need for vocational training of subjects providing and carrying out activities in the field of rural green tourism; development of new types of contracts and clarification of their contents, which are concluded between the subject of this type of activity and the tourist. the draft proposes to develop standards that would regulate the requirements for providing rural green tourism services. these are requirements for premises, sanitary and hygienic conditions of accommodation, service personnel, food conditions, fire safety, registration of vacationer, civil liability of owners, property insurance. the next regulatory document is the decree of the president of ukraine “on the main principles of development of the social sphere of the village” (2000), in which one of the means of development is the “development of auxiliary activity in the field of tourism (green tourism)” and giving priority “to the revival of national culture, customs, traditions and ceremonies, development of folk crafts”, which is impossible without the development of tourist activity. investigating the institutional environment for providing rural green tourism services showed that from the beginning of 2015 in ukraine, there is no document that would describe shortand long-term prospects for the development of tourism activity in general and, therefore, rural green tourism in its composition. the cabinet of ministers of ukraine issued a decree “on approval of the concept of the state target program for the development of tourism and resorts for the period until 2022” on august 1, 2013. practical use of this order has not been obtained, as of march 03, 2014 it was cancelled (by the decision of the cabinet of ministers of ukraine, 2014). given this situation, it is necessary to elaborate a scheme of the interaction of subjects for the implementation of a strategy supporting the development of entrepreneurship in the field of rural green tourism (figure 1). 3. the main directions of state support for rural green tourism services in ukraine on the basis of the analysis of the legislation of ukraine on rural green tourism, it is determined that the main directions of the state policy that will promote further effective development of this sphere are: improvement of regulatory legal principles of regulation of relations in this area of activity; definition of rural green tourism as an important link in ukraine’s tourism industry, encouraging domestic and foreign investment in this area and creating new jobs. it is also the development of foreign and inland rural green tourism, promoting its transformation into a cost-effective and competitive segment of the tourism industry. it is about the creation of proper conditions for the development of services of rural green tourism, support for priority directions of tourist activity by simplification and harmonization of tax, currency, customs, border, visa, and other types of regulation. on the other hand, it is a comprehensive encouragement of ukrainian citizens to participate in the development of the field of rural green tourism as a profitable part of tourism activity and an additional source of replenishment of personal incomes of citizens, local and state budgets. it is necessary to take into account the demand of consumers for certain types of services of rural green tourism when developing and approving national and local rural development programs and their location areas (romaniuk, 2016). areas of implementation of state support for rural green tourism are reflected in figure 2. the development of rural green tourism services by agrarian enterprises should be supported both at the state level and at the level of public organizations. its main aspects are agro-resource, socio-economic, cultural and tourist and ecological and natural sciences. therefore, in order to regulate the implementation of rural green tourism by agrarian formations, the interaction of state and public structures (non-governmental organizations) that are concerned with relevant industries or activities is required. 4. principles of state regulation of services of rural green tourism, which ensure the coherence of economic interests of enterprises, society, and the state important features of state regulation of services of rural green tourism by agrarian enterprises are the principles that ensure the coherence of economic baltic journal of economic studies 190 vol. 4, no. 4, 2018 feedback strategy of state development strategy of regional development strategy of development of services of rural green tourism by agrarian enterprises analysis of the situation, determination of the potential and problems of functioning of rural green tourism services by agrarian enterprises summary reports formation of real permissible results the choice of tools and levers of influence on the activities of agrarian enterprises development of programs for the development of rural green tourism services by agrarian enterprises regional monitoring centres legislative base resources assessment of proposals and decision-making formation of the institutional environment local selfgovernment bodies association of promotion of rural green tourism services evaluation of performance owners of agrarian enterprises feedback feedback figure 1. management of the development of subjects of implementation of business strategy in the field of rural green tourism interests of enterprises, society, and the state. their observance should become a peculiar prevention for unsystematic, voluntaristic, and destructive intervention in the organizational and economic mechanism of management (ihnatenko, 2010). principles of state regulation, as well as management, are the result of a generalization of the inherent features, characteristic links, and constantly reproductive features, which become basic in the work of authorized subjects of state regulation. the analysis showed that state regulation of services of rural green tourism by agrarian enterprises in ukraine provides for the following principles to be observed: definition of the priority directions of the state policy in the field of agrarian and tourist activity, development of rural territories; distribution of powers between executive authorities and local self-government bodies, rural communities; consolidation of specific administrative functions within the competence of state regulatory bodies; systematic legal regulation of state regulation, the creation of its proper financial base; integrity, coherence, and effectiveness of mechanisms for the implementation of state policy. the main principle of state regulation of rural green tourism services is the delegation of functions and powers of the central executive body in this area to public associations of rural masters provided that they comply with the requirements specified by law. priority directions of state policy in the sphere of rendering services of rural green tourism to agrarian enterprises are also determined in the national program of tourism development in ukraine. baltic journal of economic studies 191 vol. 4, no. 4, 2018 improvement of the legal framework for regulating relations in the field of rural green tourism services by agrarian enterprises comprehensive encouragement of ukrainian citizens to participate in the development of rural green tourism services attraction of national and foreign investments in the development of rural green tourism services by agrarian enterprises recognition of rural green tourism as an important link in the tourism industry in ukraine and an important factor in ensuring self-employment and raising the living standards of the rural population creation of favourable conditions for the development of services of rural green tourism, support of priority directions of tourism activity in this area by simplifying and harmonizing tax, currency, customs, border, and other types of regulation ensuring the popularization of rural green tourism services and promoting its transformation into highly profitable and competitive field of activity creation of economic conditions that stimulate the development of rural green tourism services for agrarian enterprises and rural areas, provision of targeted lending development of social infrastructure of communities and encouragement of rural population to the development of the private initiative taking into account the needs of rural green tourism services by agrarian enterprises in developing and approving national and local tourism development programs organization and development of the system of improving the quality of services and informational support of rural residents and consumers of rural green tourism services by agrarian enterprises involvement of property and funds of legal entities and individuals in order to create a complex of quality services of rural green tourism by agrarian enterprises m ai n di re ct io ns figure 2. main directions of state support of rural green tourism in ukraine realization of the state policy in the field of rendering services of rural green tourism is carried out by: sending budget funds for the development and implementation of programs for its development, promotion, and advertising; normative regulation of relations in this sphere; delegation of authority to conduct categorization of rural green tourism objects by the association of villagers; organization and maintenance of statistical accounting and reporting of this kind of activity; organization and implementation of state control over observance of the legislation; assistance in the initiation, development, and implementation of international programs, as well as programs implemented through external investments, grants, etc. in this area; providing baltic journal of economic studies 192 vol. 4, no. 4, 2018 comprehensive assistance in creating the proper infrastructure (marmul, ihnatenko, sarapina, 2016). the main principles of state support for the provision of rural green tourism services by agrarian enterprises are equality of conditions, targeting separate agriculture and local communities, financing of projects in the field of rural green tourism services, rural infrastructure development, advertising, participation in exhibition and fairs, creation of folklore-cultural parks and parks of folk crafts (based on settlements that are carriers of a certain brand), the introduction of a comprehensive system of training for those employed in the green tourism and some others. in order to support the development of rural green tourism services at the regional level, it is necessary to implement measures aimed at creating a profitable tourism industry that should meet the needs of domestic and international tourism taking into account the natural and climatic, recreational, socio-economic, historical and cultural potential of rural areas of the region and other capabilities. as a result of the analysis of the ukrainian legislation on the regulation of relations between business entities in the field of rendering services of rural green tourism, agrarian enterprises have been offered ways to regulate its legal framework (rutynskyi, zinko, 2008). this will enable to create a more favourable environment for the recreation of the urban population and activities in the field of rural green tourism. the reasons that deepen the existing problems of regulating its services by agrarian enterprises are the following: 1. some local rural communities or local authorities overestimate the services of rural green tourism for a promising socio-economic development of their placement. 2. the degradation of the environment due to an increase in anthropogenic pressure on natural systems and the absence of mechanisms for its strict regulation and control in ukraine. 3. potentially higher indicators of crime and consumption of public goods through the levelling of the local cultural level, the transition to the standards of mass culture brought by tourists and the emergence of the need for a higher standard of living than is possible under the current employment in agricultural production. 4. loss of the atmosphere of “rural life” by the village due to the excessive influences and crowds of tourists and their relaxed living in the countryside. 5. loss of artistic uniqueness of products of folk craftsmen due to the increased demand for their products, and therefore – the transition of masters to the simplified small-scale production of their products with an emphasis on their souvenir attributes. owners of agrarian enterprises providing rural green tourism services need special loans for the development of rural green tourism on acceptable terms, taking into account the potential of the borrower and providing the banking institution with the lowest level of risk. in view of this, it is necessary to revise the specialized program “village house” and reorient it to areas of financing from the state budget, not only for the construction of housing but also for the construction of the adjoining territory. one of the priority tasks is the categorization of private estates in the field of rural green tourism services. it allows economic entities to report on the appropriate quality of housing conditions and the level of services, to establish a payment that corresponds to a certain category. it is such a marketing tool that will contribute to the promotion of certain objects of rural green tourism with the confirmation of the corresponding certificate (kravchuk, 2008). an in-depth study of tourists’ requests in the field of rural green tourism services for agrarian enterprises and the offer of new tourist services to the market will be one of the means of diversifying the sources of rural incomes as components of integrated rural development and rural infrastructure, as well as one of the factors of the poverty reduction strategy in rural areas. providing certain preferences, including tax, for economic entities in the field of rendering rural green tourism services and maximizing the simplification of accounting in them will only facilitate the effective regulation of this branch of entrepreneurship. the identified features will ensure a higher level of development of services of rural green tourism by agrarian enterprises in a certain territory and will position it as an important means of stimulating and investing the socio-economic development of the village: promoting the development of rural infrastructure, complex rural development and rural infrastructure, creating new sources of income of rural population, as well as better provision of the rest of urban residents in the countryside; popularization of ukrainian culture; dissemination of knowledge and information on the historical, natural, ethnographic features of ukraine. 5. conclusions a comprehensive analysis of the peculiarities of state regulation of the provision of rural green tourism services by agrarian enterprises and rural masters and farms has shown that its development in the regions of ukraine is becoming more extensive every year. it is one of the promising means of solving social issues concerning rural population employment, their socioeconomic development, the introduction of innovations and attraction of investments. the fulfilment of the tasks set for the regulation and development of rural green tourism will contribute to the qualitative development, organization, and management, as well as the attraction of investments in the tourism industry and the economy of ukraine as a whole; the formation of its positive image in europe and in the world. baltic journal of economic studies 193 vol. 4, no. 4, 2018 references: the verkhovna rada of ukraine (1995). pro turyzm: zakon ukrayiny vid 15 veresnya 1995 roku № 324/95-vr [on tourism: law of ukraine dated september 15, 1995 no. 324/95-vr]. bulletin of the verkhovna rada of ukraine, vol. 31, art. 241. the verkhovna rada of ukraine (2003). pro osobyste selyanske hospodarstvo: zakon ukrayiny vid 15 travnya 2003 roku № 742-iv [about the private peasant economy: law of ukraine dated may 15, 2003 no. 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[on the basic principles of the development of the social sector of the village: decree of the president of ukraine no. 1356 dated 20.12.2000]. retrieved from: http://zakon3.rada.gov.ua/laws/show/1356/2000 (accessed 22 june 2018) pro skhvalennya kontseptsiyi derzhavnoyi tsilovoyi prohramy rozvytku turyzmu ta kurortiv na period do 2022 roku: rozporyadzhennya [on approval of the concept of the state target program for the development of tourism and resorts for the period until 2022: order]. retrieved from: http://zakon3.rada.gov.ua/laws/show/638-2013%d1%80 (accessed 21 june 2018) deyaki pytannya optymizatsiyi derzhavnykh tsilovykh prohram i natsionalnykh proektiv, ekonomiyi byudzhetnykh koshtiv ta vyznannya takymy, shcho vtratyly chynnist, deyakykh aktiv kabinetu ministriv ukrayiny: postanova kabinetu ministriv ukrayiny [some issues of optimization of state target programs and national projects, saving of budget funds and the recognition of certain acts of the cabinet of ministers of ukraine: resolution of the cabinet of ministers of ukraine]. retrieved from: http://zakon3.rada.gov.ua/laws/show/71-2014-%d0%bf (accessed 22 june 2018) romanyuk, i. a. (2016). formuvannya korporatyvnoyi kultury ta dilovoyi reputatsiyi turystychnykh pidpryyemstv [formation of corporate culture and business reputation of tourist enterprises]. economy and management of culture, vol. 2, pp. 26-31. ihnatenko, m. m. (2010). problemy ta perspektyvy rozvytku silskoho turyzmu v ukrayini [problems and prospects of development of rural tourism in ukraine]. scientific bulletin of the lviv national university of veterinary medicine and biotechnology. sz gzhytsky. series "economic sciences", vol. 1(43), no. 12, рр. 252-255. marmul, l. o., ihnatenko, m. m., sarapina, o. a. (2016). sotsialno-ekonomichnyy potentsial silskykh terytoriy yak osnova rozvytku pidpryyemstv silskoho zelenoho turyzmu na zasadakh innovatsiynosti [socio-economic potential of rural territories as the basis of development of enterprises of rural green tourism on the basis of innovation]. economy and management of culture, vol. 2, рр. 32-38. rutinsky, m. ya., zinco, yu. v. (2008). silskyy turyzm [rural tourism]. kyiv: knowledge. (in ukrainian) kravchuk, i. (2008). derzhavne rehulyuvannya rozvytku turyzmu: zarubizhnyy dosvid ta perspektyvy vprovadzhennya [state regulation of tourism development: foreign experience and prospects of implementation]. visnyk of lviv national university. series "international relations", vol. 24, рр. 134-141. baltic journal of economic studies 115 vol. 4, no. 3, 2018 corresponding author: 1 department of accounting, economics and human resources management of enterprise, prydniprovska state academy of the civil engineering and architecture. e-mail: elena.kakhovskaya@gmail.com 2 scientific research department, kyiv national university of trade and economics. e-mail: ndch_tl@knteu.kiev.ua 3 department of applied economics, odessa institute of trade and economics of kyiv national university of trade and economics. e-mail: ekolesnikova.od@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-115-122 economic efficiency of investments into personnel development of enterprises olena kakhovska1 prydniprovska state academy of the civil engineering and architecture, ukraine tetiana lositska2 kyiv national university of trade and economics, ukraine katerina kolesnikova3 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine abstract. the purpose of the article is the research of further improvement of investment process into personnel of the enterprises, using modern methods and tools, which are put into practice, for an increase in resulting economic effects of enterprise’s activity. a key element in the functioning of companies is a balanced management system, so improving the effectiveness of investing in human capital should be considered by management as a priority. therefore, it is important to improve the process of investing in personnel, using modern methods and tools that improve the efficiency of the company. results. the structure of human capital is disclosed, which can be represented as a set of such components as health; competence; technical and special skills, which include the costs of continuing education, remuneration, other benefits and compensation. problems that restrain investment of investments in personnel and tasks of personnel development policies are highlighted, the main one of which is maximizing the return on investment in employees. practical implications. a motivating factor is an investment in planning and career motivation, which allows achieving a balance between the interests of the enterprise and the employee on the basis of principles: scientific, fairness, observance of labour legislation, efficiency, consistency. the definition of the economic efficiency of staff development in general form consists of three consecutive stages: the definition of the cost structure and their valuation; the definition of the structure of results and their valuation; comparison of the calculated values of costs and results reduced to one point in time. value/originality. management of investments aimed at the development of human capital will increase not only the effectiveness of the realization of human potential but also the efficiency of the use of all tangible and intangible assets of the enterprise. key words: investments in personnel development, investment efficiency, evaluation of investment efficiency in personnel, social aspect of investing in company personnel. jel classification: d25, j24, м12, m53 1. introduction level of economic development of any state depends on a large number of factors and components, among which an important place is taken by the level of functioning efficiency of the industrial companies as one of the main components in the state economic system. this efficiency is reached due to the creation of the balanced production management system on the basis of simultaneous and rational management of three types of the company capital: fixed capital, working and human capital. the last researches of domestic and foreign authors about the efficiency of investment into a human capital demonstrate that more significant and longer effect brings direct investments in forming and personnel development of the companies, instead, of the simple use of the fixed or working capital. baltic journal of economic studies 116 vol. 4, no. 3, 2018 2. analysis of recent research and publications problems of investment into a companies’ human capital are very relevant for their effective work as personnel structure, its knowledge, abilities and professionalism become high-valuable assets of the enterprises, which at competent management are transformed to the capital bringing the increasing income to the owner of the business. unlike costs for the workforce in the ukrainian legal acts, as well as in the international regulating documents according to the work’s statistics, there is no accurate and unambiguous determination of essence of investments into personnel, as in a human capital of any enterprise. scientists of the different countries worldwide are engaged in the solution of this problem. the american economists mcconnell and brue (2013) define the essence of investments into personnel as certain actions and the related costs, which improve skills, capabilities, and labour productivity of workers and will be repeatedly compensated by the increasing income in the future. according to the authors, it can serve as the predominating incentive for such investments. all human capital investments mcconnell and brue (2013, р. 484) divide into the following groups: expenses for education (include general and special, formal and informal preparation on a workplace); expenses on healthcare (expenses on prevention of diseases, medical attendance, dietary food, improvement of housing conditions); expenses on mobility thanks to which workers migrate from places with rather a low production to places with rather high. according to one of the founders of the basic model theory of the intellectual capital h. becker, investments into the human capital, except offered by mcconnell and brue, still have to contain costs of children’s education and also information search about the prices, income, and salary. this scientist for the first time carried out calculation of economic education efficiency by calculation of return from investments in the human capital. this efficiency is 12–14% of annual profit. h. becker’s (2003, p. 66) contribution to the development of a branch of knowledge under the name “human capital” still considered the main scientific work in this area. jac fitz-enz (2006, p. 66), in turn, emphasized that investments into development of employees are costs of all educational and qualification actions of the enterprise and the program for development of personnel. i.m. novak (2006, p. 84-85) approaches determination of essence of investments into personnel at the corporate level based on “total costs of the employer on the reproduction of workforce power” of which “qualitatively new human capital with the high level of qualification, health and working capacity” is result. many researchers consider human capital investments as the instrument of influence and stimulation of reproduction. v.p. antonyuk (2007) considers that human capital investments are “the costs performed for the purpose to increase in productive employee abilities and future income.” o.m. bilyk (2004, p. 382) connects increases in cost efficiency from investment into personnel with the subsequent natural macroeconomic growth and defines investments into an intellectual capital as “production costs of specific goods (certain means of production – knowledge, qualification, etc.), which are directed to a gain of opportunities and, as a result, the worker’s earnings (the total revenues of the country).” the interrelation between the efficiency of investment into a human capital and macroeconomic growth found the reflection in works of o.a. grishnova (2001, p. 18) and s.o. tsimbalyuk (2006, p. 104). both authors consider that such attachments “bring quite considerable in volume, long in time, and integral in character economic and social effect.” a similar approach to the determination of investment’s efficiency into personnel is noted also in work of such scientists as m. bublik, v. koval, v. redkva (2017, p. 236). such differentiation of investment orientation promotes identification of the most effective directions of investments based on the analysis of the level of return, labour productivity, and dynamics of indicators’ change of intellectual potential and physical health of employees. in the same manner increase in the level of motivation and interest in good results of the production process is a positive tendency of forming, development and reproduction of a human capital. despite numerous researches concerning the concept “investment into personnel” and efficiency assessment of such investment, such researches have no system complex character, in addition, have no connected investments into personnel with the decision to invest and also to decide social problems of personnel. the purpose of the article is the research of further improvement of investment process into personnel of the enterprises, using modern methods and tools, which are put into practice, for an increase in resulting economic effects of enterprise’s activity. 3. fundamentals of the formation and functioning of the policy of investing in personnel now, human resource management becomes one of the most significant strategic management functions. it is connected with the fact that in the economy based on knowledge, a workforce is the carrier of the labour and intellectual potential capable of providing competitive force and realizing the profitability potential of the economic entity in the achievement of long-term prospects by it. the practice of the developed countries showed that the considerable competitiveness of the companies is guaranteed by no means not so much at baltic journal of economic studies 117 vol. 4, no. 3, 2018 the expense of natural resources and the progressive equipment, how many for the account results of rapid formation of the human capital. human potential, managers’ ability to competently put and execute the purposes, and also effective use of resources become major factors of the successful existence of the enterprise. in these conditions, achievement of strategic objectives of human resource management is impossible without the implementation of investments into personnel assuming costs of development and realization of labour potential and formation of the human capital as a non-material asset of the economic entity capable of bringing income to both the worker and the employer. the concept “investments” is, first of all, the process of an investment in the enterprise’s assets for the purpose of receiving investment income. investment process always assumes receiving income, which has to be predicted, planned, and calculated, and investment decisions are agreed with the strategic objectives of the company. therefore, it is necessary to plan, consider, analyse, and control not only the expenses connected with compensation for the use of labour but also expenses, which are carried out for the purpose of development and realization of labour potential and formation of the human capital. there are sets of such components as health; the general skills connected with basic preparation, ability of information search and its use during the solution of problems, natural abilities and education level; the technical and special skills connected with engineering procedures, including physical capacities and also the analytical skills leading to improvement existing or to the creation of new equipment and technologies, which can present the structure of the human capital. moreover, if employees pay the general skills independently or they are financed by the state, then other components of the human capital demand investments from the enterprises. therefore, investing in labour protection, the company will help to keep the health of employees at the necessary level, to cut expenses on payment of sick leave, and to reduce losses because of the employees’ absence in a workplace. all these actions can be considered income from investments in healthcare. now the mortality rate in ukraine among other countries of europe also makes the highest 1455 people on 100 thousand of the population. for comparison, the minimum level of mortality is in switzerland – 467,2 persons. western europe, in general, has by 1,5 times lower mortality rate, than central europe, and in the balkan countries, except greece, and the baltic countries – the mortality rate represents nearly 1 thousand on 1000 thousand persons. maintaining health and efficiency of personnel at the enterprises is promoted by strengthening of labour protection and improvement of working conditions through the improvement of the organization and service of workplaces, introductions of ergonomic actions and so forth. it provides the need of accurate observance of the legislation requirements of for the sphere of labour protection, investigation and accident prevention on production and occupational illnesses, ensuring receiving by workers all the provided legislation and collective agreements of privileges and compensations for working conditions (info-light, 2017). investments into technical and special components are connected as with the search of the necessary employees meeting certain requirements so with the development of their potential and preservation of these personnel in the company. carry costs for professional development, the worthy compensation capable of holding the employee at the enterprise, other privileges and compensations to such investments. at the same time, an important point is the understanding of the dependence of the number of personnel, valuable to the enterprise, on the level of investments in it. it is possible to carry to such investments: costs of the search of competent experts, the salary, privileges, and other payments, funds allocated for professional development and the level of special and technical knowledge and skills, and also the funds allocated for health protection and insurance. the competitive salary, privileges and other payments increase the probability that all investments directed to the development of special and technical skills reduce the risk of the departure of the employee from the enterprise. besides, they promote an increase in productivity as are the important motivating factor. investments into planning and motivation of career allow reaching balance between the interests of the enterprise and the worker as the consecutive advance of the employee on a number of positions promotes the realization of concrete goals of the enterprise. thus leads also to the development of the intellectual potential of the worker and definition of a position, at which he could work with the bigger creative return. however, only the expenses of the enterprises connected with compensation are carried out according to the existing current legislation. and investments in personnel (professional education; motivation for development; directly development of personnel; health protection), are performed with the presence at the enterprise of free financial resources and the sufficient level of competence of the enterprises’ chiefs, allowing to estimate economic feasibility of certain costs of personnel for the purpose of its development for receiving additional, higher profit. at the same time, the policy of investment into personnel has to be characterized by the systematic approach and its complexity, which, in its turn, relies on such principles as a scientific character, justice, observance of the labour law, efficiency, the sequence, methodicalness. in the conditions of maximizing profit, the owner of the company interests whether investments in the human capital are expedient as they affect resulting economic effects of activity of the company how baltic journal of economic studies 118 vol. 4, no. 3, 2018 developed principles of work on the development of personnel promote achievement of strategic objectives. heads have to perceive the employees as a potential source, but faith in employees as in a financial leverage meets seldom, and many managers consider these efforts not investment, but the next expenses. it is possible to allocate the following problems that constrain an investment of expenses into personnel: any invest interest of employers in personnel in connection with an indistinct understanding of efficiency of these investments; insufficiency of financial resources for ensuring investments into the human capital; insufficient level of encouragement of professional workers’ development; uncertainty of the employer concerning loyalty of workers who undergo study as workers who improved skills can pass to other enterprise that will lead to loss of finance; lack of the universal method of investments’ efficiency assessment into personnel; insufficient motivation of workers to increase in the professional level; misunderstanding by employers of cause and effect relationship between investments into personnel and efficiency of the enterprise’s activity; complexity of expenses’ definition, which need to be performed to investments into personnel; neglect difference in return from investments into different categories of personnel (momcheva, 2013); the long period of return on investment in personnel, which, by estimates of researchers, only in education make 10-20 years, and on average – 16 years (novak, 2006). despite the big costs connected with the training of skilled workers and maintenance of their qualification level, the modern organizations nevertheless consider costs of development of personnel as investments, which respectively have to bring a return in the form of an increase in efficiency of the enterprise’s activity. statistically, the most part of investments in the study of personnel is made by the companies, which are engaged in finance, insurance, the real estate, high technologies and transport services. and, mostly, a smaller part of investments is made by the companies in the field of production, healthcare, agriculture, construction and development of fields. at the same time, in the companies from officially fixed by the strategy of human resource management revenue counting on one employee is nearly 3 times higher, and return from investments into personnel is 70% more, than at the companies, which have no such fixed strategy (risin, 2009). one of the main objectives of the development policy of personnel is maximizing return from capital investments in employees. such economic justification of the offered policy of development can be based on the analysis of the existing policy, assessment of the efficiency of the held events, the introduction of necessary changes. thus, calculation of economic efficiency of separate elements of personnel development – planning of career, vocational education of personnel, and preparation of a personnel pool – will allow realizing the system approach defining the influence of the system of personnel development on all company in general. 4. stages of the process of assessing the effectiveness of investment in personnel development determination of the economic efficiency of personnel development in a general view consists of three consecutive stages: 1) determination of expenses structure and their cost assessment; 2) determination of results structure and their cost assessment; 3) comparison of the estimated sizes of expenses and results brought to one timepoint. it is known that the production efficiency only for 30-35% depends on investments, the others – on the skill level of workers and experts. it is possible to draw conclusions from such figures on the importance of vocational training on production: in the countries of the european union, the frequency of professional development of workers represents about 5 years, in japan – from 1 to 1,5 years, in ukraine professional development is carried out each 12 years (gemma, 2013). revenue, profit, prime cost, products, development on one worker, losses of working hours on one worker, the average salary on one worker, etc. can act as indicators of the activity results in the organization reflecting the influence of personnel development. the main attention of modern researchers and analysts is concentrated on the assessment of the efficiency of vocational education. however, the existing techniques can be used for the assessment of development’s efficiency in general, as training is a key element of the system and the main form of development of personnel. the most popular is the four-level model of assessment of learning efficiency and methodology of calculation of return on investment into training (return on investment (roi)), which were developed by the famous expert in the field of human resource management jack phillips in the early nineties. the essence of this technique comes down to the creation of a relationship of cause and effect between the provided training and result of the activity of the trained personnel. stages of the process of efficiency’s assessment of investments into the personnel development (based on jack phillips’s technique): i. planning. the plan of investments’ assessment into the personnel development, which contains: 1. the description of indicators, which dynamics will characterize results of the provided training. these indicators have to be the objective and economic effect of their change (growth in incomes, cost cutting) can be estimated. baltic journal of economic studies 119 vol. 4, no. 3, 2018 2. the methodology of data collection (questioning, observations of personnel, analysis of the administrative reporting, etc.). 3. sources of data collection (reporting of the enterprise, participants in training, heads, working groups, etc.). 4. evaluating terms. 5. list of the persons responsible for collecting and data processing necessary for assessment. ii. data collection is made according to the methodology defined at the first stage during, in time and after training for objective assessment of the dynamics of the chosen indicators. iii. identification of effect of the provided training. for an exception of the influence of the external factors that are not connected with the provided training the following approaches are used: • trend analysis of the previous periods. the tendency of indicator’s change before carrying out training is defined. the difference between a trend and the actual result is attributed to training influence; • expert assessment of the influence of the gained knowledge on indicators’ dynamics. managers of the company, detached onlookers or other training’s participants can act as experts. iv. transformation of the obtained data to a money equivalent. the indicators characterizing productivity, quality, and time expenditure are transformed. when calculating total costs of training, the salary of employees, administrative expenses, etc. are considered not only costs of development of the training’s program, such as manipulative materials, a fee of experts and rent. calculation of value of an indicator “return on investment” (roi) is made on a standard formula: roi = (gi – e) / e, (1) where gi – gain on income(profit); e – expenses for education(training). there are four main aspects, which should be considered for the calculation of the roi of investments into personnel: productivity; absenteeism (absence from the workplace for various reasons); turn; adaptation speed. each of indicators plays an important role in the assessment of investments into personnel, but it is necessary to focus on something one as too many factors influence a resulting effect – profit. so, for example, results of the research conducted by robert zemsky et al. (2002) demonstrate that increase in education level by 10% productivity grows by 8.6%, and the same growth of fixed assets increases productivity only by 3.4%. thus, the profitability of investments in the human capital is almost three times higher, than investments in cars and the equipment. not always, it is possible to isolate indicators, which are not subject to external factors’ influence. in such cases, it is necessary to confirm the received value of an roi’s indicator, having analysed the effect of the provided training in three directions: “reaction of participants of a seminar”, “knowledge” and “behaviour”. if in these directions good results are received, it is possible to claim that distortion of assessment of roi is insignificant or is absent. introduction of roi assessment’s system in training significantly simplifies life to specialists in personnel and improves their mutual understanding with top management as the report on training can be presented in the form of tables, from which it is accurately visible how many employees were trained, what expenses, what gain of business indicators. in addition, to financial service with its help, it is easy for top managers to estimate return from the provided training. jac fitz-enz (2006) as a key indicator for determination of investments’ efficiency into personnel suggests using return on investment coefficient in the human capital (hcroi). it is defined as a ratio of the profit got after a deduction of all expenses on labour (except for the salary and privileges) and the size of expenses on labour (the salary and privileges). voronkova, belichenko, & popov (2006) adds to the key indicators of investments’ efficiency of: productivity indicators; speed of passing of the business’s procedure, engineering procedure; expenses and any results when performing special programs and initiatives; skills of workers, loyalty, moral atmosphere in collective; ability of personnel to study, transparency of the procedure of investment. hamblin and kirkpatrick’s method does not allow how much the company needs funds for training personnel in order to reach the correctly set business goals, and tobin & stephen s. golub (1998) proposed to calculate the indicator of intellectual capital as a whole as the ratio of the market value of the asset to replacement cost. 5. transformation of investment activity and investment portfolios of companies in the direction of increasing expenditures on human capital investments into the human capital have to be considered on an equal basis with investments into development and maintenance of business. motives of investment into the human capital have to be defined not only economic, but cultural, psychological, and social factors. for the achievement of economic success, business firms have to be socially oriented that forces them to change the investment strategy, including the structure of the investment portfolios in social projects (koval, prymush, & popova, 2017). already big and average, and sometimes small enterprises are estimated from a position of the relationship between workers and consumers, between workers and the management (owners) and also estimate according to their contribution to society and its development. thus, baltic journal of economic studies 120 vol. 4, no. 3, 2018 the enterprises from “business” of the enterprises become the “social” enterprises, which in the mission combine a gain of income and support of interaction with the external environment, investing and actively directing economic trends that form the world. the emergence of this kind of the enterprise is promoted by the following factors (kaji, edelman, & khan, et al., 2018): the growth of individuals in business: more attention is paid to the quality of work and influence of work’s results on a society where the enterprise functions, thanks to globalization and fast communication, which gives an opportunity hyper-quickly to communicate and express the opinion, influencing social changes globally and in real life; the business itself is able to fill a so-called vacuum in society: based on world poll, it was revealed that business embodies trust of the population for 54% against 43% of trust to the government. people wait from business for decisions in healthcare, the safety of a cyberspace, the help in making the world fairer, etc.; technical progress has a bilateral impact on society: on the one hand – serious opportunities to reach stability and growth, on the other hand – training of cars, artificial intelligence, the performance of work instead of the person. all this needs mastering from the person new knowledge and skills and consequently, needs investments into personnel. the enterprise has to be the active participant of social life and social projects today, consider a certain trend in labour market development. yes, more and more workers pass into a work freelance segment, rendering the services as the entrepreneur. the enterprises have to consider such opportunities of cooperation already now, understanding all its pluses and shortcomings. now for the successful person, his development is on the first place and if the enterprise considers and encourages the development of the person in the company, the level of efficiency of this person is much higher, than those who act as a part of collective. the main criterion of success of the company success of each worker as parts of this enterprise appears. the last becomes impossible without investment into the continuous development of workers. besides, the farsighted organizations see a certain potential and an opportunity for an increase in life and professional experience with life expectancy growth. usually, it needs innovative methods and policy of maintenance due to investments of a longer career, development of new career models. twenty percent of defendants of a research confirmed cooperation with workers of advanced age. this factor of durability allows the companies to solve an urgent social problem and to get advantages from employees devoted to the company with wide professional experience. importance of the embodiment of new approaches to the development of personnel due to investments in personnel is confirmed by data of the international poll on regions of the whole world (table 1). the tendency to increase in life expectancy, in turn, increases the number of 55 years working further on. in figure 1, the level of interest in workers of advanced age is displayed. in spite of the fact, that the general statistics show not great interest to workers of advanced years, but, according to the same statistics (kaji, edelman, & khan, et al., 2018), during the period from 1996 to 2014, about 68% of the senior workers (at the age of 55-64  years) opened the enterprises and began new business in comparison with 32% of young businessmen (at the age of 20-34 years). besides, workers of advanced years, which worked in it, study several times quicker new mobile programming, work with artificial intelligence, and other modern technologies. they should not spend 5-8 years on the study if to speak about youth. such an approach needs creation of new programs of personnel’s investments for people of advanced years quicker to adapt them to the enterprise’s activity. global tendencies indicate the general aging of the population, and most likely the enterprises, which will ignore this fact, will not be able to compete with those companies, which considered this tendency further. creation of such an environment in the company, which will maximize the advantages of workers of advanced years, is necessary. however, for this purpose it is necessary to reconstruct radically approaches to improvement of knowledge, skills, table 1 value of factors of personnel’s development depending on the region factors global americas europe, middle east and africa asia pacific latin & south america north america africa central & eastern europe middle east nordic countries western europe asia oceania from careers to experiences 84.1% 87.2% 80.6% 84.7% 80.3% 81.3% 81.4% 79.8% 91.6% 87.3% well-being 84.0% 88.2% 78.9% 88.0% 75.1% 84.8% 83.3% 80.1% 91.6% 86.6% the hyper-connected workplace 82.1% 85.5% 84.6% 85.0% 72.8% 79.9% 84.3% 78.9% 83.6% 89.0% new rewards 77.4% 85.3% 71.1% 85.6% 74.8% 85.0% 58.8% 69.8% 87.5% 65.6% citizenship and social impact 76.7% 81.0% 76.1% 86.8% 63.6% 76.6% 67.8% 72.0% 83.0% 82.8% ai, robotics, and automation 72.4% 70.4% 64.5% 70.7% 67.0% 74.5% 83.0% 69.2% 84.1% 73.2% the longevity dividend 69.1% 74.8% 59.7% 73.2% 58.1% 70.5% 63.8% 69.2% 76.5% 66.7% source: formed on the basis (kaji, edelman, & khan, et al., 2018) baltic journal of economic studies 121 vol. 4, no. 3, 2018 and competencies of workers, considering 35-40 years of fruitful work, instead of 20-25 years as it paid off earlier. thus, after 55 years, employees will own the same knowledge, skills, as well as youth, but they still will have an experience, which they will be able already to give to the younger generation of workers. another trend is a tendency to change in the employees’ approach to work. recent researches (kaji, edelman & khan, et al., 2018) showed that more than 75% of youth (aged from 20 up to 35 years) plan to open own business, it is more than 70% of this 25% which remained will work as freelancers and only 12% of this 25% assume full work at the enterprise. the similar tendency has to be considered by experts in human resource management, to include such workers in programs of professional development, obtaining new skills and knowledge at the level with permanent members of staff. 6. conclusions and further researches directions in the conditions of economic instability, a lack of resources and investments, many ukrainian companies begin to save on everything and, first of all, on personnel: cut down salaries, social payments, worsen working conditions. however, it is worth remembering that income from investments into the human capital gets not only to the carrier of the human capital but firstly to the organization in which it is implemented, further to the region and the country in general. strategic management of the investments aimed to the development of the human capital will allow increasing not only efficiency of realization of human potential, but also the efficiency of use of all material and intangible assets of the company. the human errors arise because of low qualification that can lead to big losses and do harm to production and health of the personnel. all above-mentioned causes the enhanced attention to the person as to a major factor of production especially as in modern conditions to achieve a gain in productivity is possible only thanks to the intellectual potential of personnel. therefore, economic stability and competitiveness of the enterprise, first of all, depend on effective investments into the human capital at the optimum control of risks in this sphere. new tendencies indicate in personnel’s development and views of a working environment indicate need of investments’ uses not only into increase in professional knowledge of already existing workers: considerable investments reorganization and adaptation of new models, programs and the systems of integration of the existing world trends in the workforce market demands, which are objective and have to be considered. further ignoring of these trends will lead to problems of braking of development of the companies, and as a result – spheres and branches of national economy. an integrated approach to the assessment of investment’s efficiency into the personnel development provides adoption of reasonable decisions in the sphere of the human capital’s management of the companies. the fullest use of all opportunities and directions of investment into personnel at the level of the company will allow providing: the gain in productivity of work, which leads to increase in volume of made production and services and, as a result, to increase in profit of the company; increase in competitiveness of products and company services thanks to improvement of their quality and optimization of costs of their production; reduction and elimination of unproductive expenses and losses of time during production; reduction of turnover of staff and prevention of staff shortage on the most important production positions; optimization of number of staff of the enterprise; improvement of qualitative characteristics of personnel of the company; increase in motivation to work at workers. figure 1. organizational attitude for the older workers (over 55) source: formed on the basis (kaji, edelman, & khan, et al., 2018) baltic journal of economic studies 122 vol. 4, no. 3, 2018 references: mcconnell c.r . & brue s.l. 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(2018). the rise of the social enterprise 2018 deloitte global human capital trends. deloitte development llc (2018). retrieved from: https://www2.deloitte.com bublyk m., koval v. & redkva o. (2017). analysis impact of the structural competition preconditions for ensuring economic security of the machine building complex. marketing and management of innovations, vol. 4, 229-240. doi: 10.21272/mmi.2017.4-20. koval v., prymush y. & popova v. (2017). the influence of the enterprise life cycle on the efficiency of investment. baltic journal of economic studies, vol. 3, is. 5, 183-187. doi:10.30525/2256-0742/2017-3-5-183-187. baltic journal of economic studies 99 vol. 5, no. 3, 2019 corresponding author: 1 institute of human and social sciences, national technical university “dnipro polytechnic”, ukraine. e-mail: legezajul@gmail.com 2 national university “odesa law academy”, ukraine. e-mail: elenasurilova@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-99-103 legal regulation of the application of economic mechanisms for ensuring the rational use of natural resources: the experience of foreign countries yuliia leheza1, olena surilova2 abstract. the purpose of the study is to determine the most optimal ways to solve the problems of financing the implementation of environmental protection measures formulated based on the positive experience of foreign countries in the field of ensuring the rational use of natural resources. methodology. the method of comparative legal research was used to analyse foreign experience in the application of economic mechanisms for ensuring the rational use of natural resources, and the methods of modelling, analysis, and synthesis allowed determining the directions of increasing the efficiency of economic incentive use in ukraine. research results. based on the studied experience of legal regulation of the application of economic mechanisms for ensuring the rational use of natural resources in the countries of the european union, the united states of america, great britain, canada, and other foreign countries, it was concluded on the expediency of its implementation in ukraine. the author determined the appropriateness of the introduction of tax privileges of economic activity of entities that promote the use of advanced technologies, which contribute to reducing the negative impact on the environment. the expediency of application in ukraine of an extensive system of taxation of activities associated with the use of natural resources by means of activating the introduction of direct taxes paid directly by natural users is substantiated. the practicability of inclusion of payments for obtaining appropriate special permits (licenses), which are granted not only for the use of natural resources but also for the activities related to environmental pollution, in the system of economic mechanisms for ensuring the rational use of natural resources is substantiated. the practical importance of the study. the expediency of introducing in ukraine the approach of financial substantiation of national and regional programs in the sphere of natural resources utilization, which are realized at the expense of state and local budgets and successfully applied in foreign countries, is proved. the originality of the research. the results and conclusions of th e research can be used in the process of improving the legal regulation of the application of economic mechanisms for ensuring the rational use of natural resources. key words: administrative act, use of natural resources, permit, environmental tax, economic mechanism, license. jel classification: e63, h21, k32, k34, q20 1. introduction in the conditions of the rapid development of energy consumption, increasing technogenic and anthropogenic pressure on the environment, the issue of solving environmental problems ceases to be a domestic problem and requires the effective application of international and intergovernmental levers of influence. implementation of environmental protection measures is impossible without proper funding. the study of the experience of public management in the sphere of the use of natural resources in foreign countries will allow optimizing the modern national environmental protection system. the introduction of the environmental tax in ukraine has become an unconditional achievement of the tax reform, but its effectiveness, unfortunately, has not been confirmed by time. such a conclusion is based on the state of the environment in ukraine. a significant part of the territory of ukraine is approaching the inevitable ecological catastrophe, associated with the lack of an efficient system of accumulation of financial resources for the formation of natural guard funds, with the need to introduce a system of formation of secondary mineral raw material base capable of solving not only environmental but also energy problems. the search for the most optimal ways to solve problems of financing baltic journal of economic studies 100 vol. 5, no. 3, 2019 the implementation of environmental protection measures is possible through the introduction of foreign experience in the field of study, which determined the purpose of this research. the formation of comparative law science is becoming more and more relevant in the context of the integration of modern legal systems, the convergence of law systems. the development of the science of comparative law was initiated in the writings of such scholars as m. m. marchenko, l. a. luts, p. m. rabinovych, o. v. kresin, m. a. damirli, yu. o. tykhomyrov, and others. determination of foreign experience of public administration in certain spheres of public life becomes particularly relevant in the context of the intensification of european integration processes and the need for the introduction of international standards of legal regulation. the improvement of the public administration system in the sphere of use of natural resources is a part of the eu association agreement signed by ukraine with the european union in 2014, the implementation of which is scheduled for 2022. therefore, issues of studying the systems of economic mechanisms for ensuring the rational use of natural resources in foreign countries, including the countries of the european union, which predetermine the purpose of writing this article, become especially relevant. 2. permit-licensing proceedings as a means of ensuring the economical use of natural resources in foreign countries modern states seek to consolidate the regulation of the protection of the rights of citizens to a safe environment at the constitutional and legal level, and thus, the implementation of the ecological function of the state is declared as a direction of the state’s activities in the environmental protection, restoration, and reproduction, rational use of natural resources owned by state, territorial communities, legal entities, and individuals, provision of environmental safety, security and protection of environmental rights of individuals and legal entities. conducting this study, we can say that the specific principles governing the use of certain types of resources can be distinguished in the legislation of some industrialized countries. licensing the use of natural resources is a widespread form of public administration in such foreign countries as great britain, france, germany, etc. in great britain, all significant water intakes from surface and groundwater are controlled by the licensing system through the identification in the licenses of the amount of water that can be taken from the water source. most applications for licenses require a comprehensive assessment of the availability of resources and the possible impact on the environment. in order to protect the environment, a large number of licenses issued for water intake from water sources considerably limit water intake during low water years or allow special water use only in winter, when the volume of natural water resources increases (mandzyk). the opposite of the licensing system is the system for the sale and purchase of rights to use water resources (usa, canada, mexico). for example, the system of payments for the use of water resources in the countries of western europe consists of two main types of payments: 1) payments for water resources intended for redistribution (extraction) of rent from the water user that appears in the process of exploitation of water resources (they are determined based on the value of rental income and are oriented towards that part which should be withdrawn from the water user); 2) payments to maintain the existing water management system. they are a tool for collecting funds necessary to cover administrative costs for controlling the use of water resources and certain infrastructure costs (any licensing fees, etc.). additional payments are withdrawn for services related to the assessment of water resources (laboratory analysis, registration and certification of documents, etc.). these payments come to a special fund designed to improve the quality of the relevant services (khvesyk, holian, 2007). 3. taxation of activities related to the use of natural resources in foreign countries formation of environmental funds is carried out not only at the expense of revenues from the use of natural resources, obtaining special permits or licenses for their use, or for receiving other types of administrative (public) services in the field of natural resource use, but also through the introduction of taxation of activities, resulting in the environmental deterioration. in particular, in the federal republic of germany, the taxation of lubricating oils, crude oil, and petroleum products is additionally introduced (mandzyk). under the same principle, the system of environmental taxes and fees is built in the french republic, finland, and italy. similarly, fuel tax is the source of special funds for environmental protection measures in the netherlands. such a tax covers 50% of expenses of the ministry of ecology, including expenses for prevention and compensation of losses, subsidization of implementation of advanced technologies for cleaning and processing, as well as financing of chemical waste disposal (malikova, 2001). taxation of activities related to the use of natural resources in foreign countries is carried out through the issuance of such types of compulsory payments as royalty, sovereign tax, special taxes on profits of mining companies, differentiated rent payments, land tax, payment for the right to subsoil use, deductions for protection and restoration of subsoil, excise, emission fee, sales tax, export tax, and others. herewith, the advantage is given to taxation in a direct way or direct taxes. in particular, renters are, as a rule, users of natural resources. the most important direct taxes on natural baltic journal of economic studies 101 vol. 5, no. 3, 2019 resources include the following: rent, tax on access to natural resources, taxes on mining and exploration, as well as payment for the right to use natural resources, calculated per unit of the leased territory. the rent is set at the nominal level in the first years of exploitation of the natural resource but gradually increases to stimulate the tenant to develop production. royalties – a payment to the state for the right to use an exhaustive natural resource. it is calculated based on the gross income of the producer, but not net profit (martynenko). also, among the means of public administration in the field of natural resources utilization, which have become widespread in the countries of western europe, there is the application of preferential taxation of investment activity aimed at reducing the negative impact on the natural environment. in the netherlands, in particular, tax incentives are applied in the amount of 10-15% of the total amount of environmental tax if the enterprise implements investments for environmental protection measures (martynenko). similarly, in spain, tax incentives have been introduced up to 30% of environmental investment activity (martynenko). 4. introduction of innovative environmental technologies for energy saving as a basis for applying economic incentives to business entities numerous scientific studies in the field of ecology, economics, and economics of nature use have repeatedly proved that the use of natural resources as sources of energy is enough for no more than 50-60 years. accordingly, the use of the secondary mineral raw material base, including technogenic waste, other renewable energy sources, will allow solving a significant number of global energy supply problems in europe, the usa, and canada. in accordance with the joint declaration of the member states of the european union, priority issue to be considered by the european commission is the consideration of legislative initiatives related to the energy union, in particular those that are a part of the clean energy for all europeans program (european commission, 2016). one of the measures that have proved its effectiveness in the countries of western europe and the usa is the environmental labelling of hazardous products, which is carried out based on environmental certification of the enterprise and environmental licensing of economic activity as a means of public administration in the field of ensuring environmental safety requirements (environmental statistics in europe, 2010). environmental labelling is an advertising tool that stimulates the sale of environmentally friendly goods, which makes them more competitive compared to unmarked, increases demand for them. this enables manufacturers to raise the price of these types of goods, compensating for the increased costs of their environmentalization. eco-labelling significantly influences the amount of import duties by reducing them. the european commission constantly monitors the environment of the european union member states. in particular, in june 2017, the commission approved a reasoned opinion addressed to the government of the republic of poland on the need to take measures to reduce the emission of gasoline vapour into the air, in accordance with the requirements of commission directive 2014/99/ec (european commission – fact sheet, 2017). in particular, the european commission notes that the government of the republic of poland has not developed the relevant legal acts to determine the system for monitoring and checking gasoline regeneration systems. commission directive 2014/99/ ec is crucial for the protection of human health and the protection of the air by limiting the emission of volatile organic compounds of gasoline. such emissions cause excessive levels of toxic benzene and photochemical ozone formation leading to respiratory diseases, including bronchial asthma. in addition, ozone is a greenhouse gas. accordingly, in order to comply with the requirements of the european commission’s motivation decision, the government of the republic of poland has a period of two months to resolve such a legislative gap. failure to comply with the requirements of the european commission is the basis for a lawsuit against the republic of poland to the court of justice of the european union on the application of economic sanctions (european commission – fact sheet, 2017). also, the level of adverse impacts and harmful emissions in romania, which results in more than 25,000 premature deaths per year, does not meet the air quality standards. the elimination of these disadvantages is possible by increasing the effectiveness of air monitoring by conducting an environmental assessment of air quality throughout the country and taking measures to limit the negative impact of pollutants (sulphur dioxide, nitrogen dioxide and nitrogen oxides, particulates, lead, benzene, carbon and ozone oxides, arsenic, cadmium, mercury, nickel and polycyclic aromatic hydrocarbons) on the population (european commission – fact sheet, 2017). ensuring the quality of natural resources is a priority for leading foreign countries. in particular, according to uk legislation, the need for an environmental assessment before the design of any construction, and in the future – periodic monitoring of the environment has been determined. in the process of environmental planning and management, the initial version of the environmental expertise is compared with other assessment options, which allows more optimal determination of the parameters of anthropogenic impact (rytikova, 2010). problems of household waste disposal, reduction of consumption of polyethylene bags in accordance with the requirements of eu directive 2015/720 as of november 27, 2016. according to the eu directive 2015/720 as of baltic journal of economic studies 102 vol. 5, no. 3, 2019 november 27, 2016, up to 2019, consumption is planned to be no more than 90 such packages per person per year, and by the end of 2025 – no more than 40 packages per person per year. the consumption of polyethylene bags should be reduced due to the introduction of prohibitions on their use. certain requirements have been made to the governments of cyprus, greece, italy, and poland that they did not inform the european commission of the measures taken. to comply with the european commission’s requirements, a deadline of two months is set, after the expiration of which sanctions in court will be imposed (european commission – fact sheet, 2017). the leading place in the utilization and recycling of the household waste in the countries of western europe is occupied by the federal republic of germany. on a nationwide scale, the start of sorting waste was in 1990, when several large waste recycling enterprises were united under the brand grüne punkt (“green dot”). since then, the responsibilities of every german include waste sorting. after all, unprocessed waste is a poison for nature and many types of waste can be used several times. therefore, for example, for the return of specially marked bottles and beer cans, they return the deposit to the buyer (diachuk, 2014). confirmation that the issue of environmental protection and ensuring the rational use of natural resources is the introduction of the practice of environmental actions in the developing country that does not have sufficient funds for the formation of appropriate funds, a country whose state budget allows such expenses. between such countries, the so-called “debt-for-nature swaps” are concluded (zimmermann, 1993). their essence is that the bank or an interested group of environmentalists buys (or receives forever) from the creditor at a much lower price the part of the external debt of a developing country, which is unable to pay this debt. then, this amount is transferred to the central bank of the borrower and used for environmental protection measures in a country that has been released from the debt. debt write-off in exchange for measures to protect the environment is practiced by germany (martynenko). 5. conclusions the conducted analysis of the norms of legislation on the use of natural resources in foreign countries made it possible to conclude on the need to revise the taxation system of the relevant legal relations in ukraine. consequently, most countries apply economic mechanisms to regulate the use of natural resources. therefore, it is advisable to conclude that it would be expedient to increase the effectiveness of the interaction between ukraine and the european union in the implementation of intergovernmental environmental policy in order to preserve the environment in this part of the planet. studying the experience of legal regulation and organization of the system of public administration in the field of the use of natural resources in the countries of the european union, united states of america, great britain, canada, and other foreign countries allows us to conclude that it is expedient to implement it in ukraine. public management in the sphere of natural resource use in foreign countries is characterized by an extensive system of taxation of activities related to the use of natural resources, while there is a tendency to introduce direct taxes paid directly by natural resource users and indirect taxes (paid by other subjects). also, the system of compulsory state fees for the use of natural resources includes payments for obtaining appropriate special permits (licenses) that are granted not only for the use of natural resources but also for activities related to environmental pollution. thus, since the 1970s, the market of “rights” to pollution has been formed in the united states of america and, accordingly, through the implementation of such permits, special environmental funds are created and also financing of the system of state executive authorities and local self-government in the sphere of natural resources use is provided. in addition, it is advisable to introduce an approach of the financial feasibility of national and regional programs in the field of natural resources utilization that are being implemented at the expense of state and local budgets. references: mandzyk, v. m. svitovyi dosvid spravliannia platezhiv za korystuvannia vodnymy resursamy [world experience in charging for the use of water resources]. retrieved from: http://economics-of-nature.net/uploads/arhiv/2008/ mandzyk.pdf malikova, o. i. (2001). upravlenie ohranoj okruzhayushej sredy v federativnoj respublike germanii [environmental management in the federal republic of germany]. vestnik moskovskogo universiteta. ekonomika, 1(6), 71–82. (in russian) martynenko, v. o. dosvid krain yes shchodo suchasnykh mekhanizmiv upravlinnia okhoronoiu navkolyshnoho seredovyshcha v ukraini [experience of eu countries in modern mechanisms of environmental protection management in ukraine]. retrieved from: http://dspace.uabs.edu.ua/bitstream/123456789/896/1/5.pdf khvesyk, m. a., holian, v. a. (2007). instytutsionalna model pryrodokorystuvannia v umovakh hlobalnykh vyklykiv: monohrafiia [the institutional model of nature management in the context of global challenges: monograph]. kyiv: kondor. (in ukrainian) european commission (2016). european commission and germany reach agreement on a fair and nondiscriminatory road charging scheme / european commission. press release, brussels, 1 december 2016. retrieved from: http://europa.eu/rapid/press-release_ip-16-4221_en.htm baltic journal of economic studies 103 vol. 5, no. 3, 2019 environmental statistics in europe (2010). facts and figures on the environment: from environmental taxes to water resources. environmental statistics in europe, 189. retrieved from: http://europa.eu/rapid/pressreleasesaction. do?reference=stat/10/189&format=html european commission – fact sheet (2017). june infringements package: key decisions. european commission – fact sheet, brussels, 14 june 2017. retrieved from: http://europa.eu/rapid/press-release_memo-17-1577_en.htm rytikova, k. a. (2010). teoretychni ta praktychni aspekty suchasnoho svitovoho dosvidu finansuvannia ekolohichnoi diialnosti [theoretical and practical aspects of the modern world experience in financing environmental activities]. teoretychni i praktychni aspekty ekonomiky ta intelektualnoi vlasnosti : zbirnyk naukovykh prats pdtu, vol. 2, pp. 230–235. (in ukrainian) diachuk, o. v. (2014). z yevropeiskoho dosvidu zakhystu dovkillia. [from the european experience of environmental protection]. ekolohichnyi artykul. retrieved from: http://www.library.vn.ua/elbooks/ekologia2013/5.htm zimmermann, h. (hrsg.) (1993). umweltabgaben: grundsatzfragen und abfalwirtschfftliche anwendung. bonn, s. 1. baltic journal of economic studies 234 vol. 5, no. 2, 2019 corresponding author: 1 vinnytsia institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: doc.olga@ukr.net orcid: http://orcid.org/0000-0002-1277-8202 2 vinnytsia institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: khachatryan9191@ukr.net orcid: http://orcid.org/0000-0002-9532-0116 doi: https://doi.org/10.30525/2256-0742/2019-5-2-234-241 world spatial features of doing business olga tkachuk1, valentyna khachatryan2 abstract. this article determines that in today’s conditions of doing business, the increase of profits is one of the main reasons for the emergence of social challenges, such as social insecurity, low level of solvency of most people, lack of high moral values. today, the most important is building business relations, primarily, on the basis of implementation of moral and ethical principles that can contribute to the general welfare. so, the subject of research is the ways to ensure optimal conditions for growth of small and medium business with the using of world experience, as well as studying the main directions that realized by successful states for support of entrepreneurship. methodology. the conducted research shows that the level of corruption in ukraine, imperfect legislation, and volatile tax system with significant load negatively affect the activities of small and medium-sized businesses. however, availability of economic stability, favourable tax and lending rates, tangible government support testify that there are optimal terms for doing business in such countries as the usa and member states of the eu. content analysis is carried out on materials of works of foreign and domestic scientists using ukrainian official and statistic data provided by experts. in the process of preparing the article, the general scientific methods of research are used: logical analysis, observation, formalization, synthesis, abstraction. the goal of the study is to analyse the main peculiarities of start-up and doing of entrepreneurial activity in the format of individual world countries, which give an optimal environment and favourable conditions of development of small and medium business and are interested in attracting foreign entrepreneurs for building their business, as well as identify basic mechanisms used by governments of these countries to support equilibrium in the spatial market. conclusions. so, the analysis of main features of launch and implementation of business in the cut of individual world countries showed that the essential task of the present is an introduction of moral laws and ethical principles into business space, which is able to ensure the optimal development of social relations. also, it is determined that start of any business for an entrepreneur is connected, first of all, with the choice of the most attractive kind of activity, taking into account which goods and services are currently in demand by consumers. in addition, it has been discovered that today the best territory in the world for conducting business is the usa – with its powerful domestic market, honest legislation, and state support. for ukrainians, it is appropriate to create a business in neighbouring states members of the eu, whose governments actively promote the optimal terms for foreign entrepreneurs to open own business, separately, in poland, slovakia, the czech republic. at the same time, it has been investigated that corruption is the main reason that hampers the development of civilized business relations in ukraine. imperfect legislation and unstable tax system with a significant load negatively affect the activities of small and medium companies, complicating conditions for obtaining loans, increasing risks, primarily as a result of the growth of inflation. thus, significant government support, especially loyal attitude towards small and medium businesses under the simple conditions of attracting investors, provides opportunities for effective business development in the eu. key words: business, capital, entrepreneurship, social responsibility, business culture, right, tax allowance. jel classification: m14, m21, m38 baltic journal of economic studies 235 vol. 5, no. 2, 2019 1. introduction the groundwork of doing business in the world practice remain unchanged and based on the honest performance of contractual obligations, timeliness, and the formation of high quality in receipt of results, proceeding on the fact that the main orient is the achievement of socio-economic efficiency. of course, unprofitable entrepreneurial activity is doomed to failure – it is leaving from the market, closing biz or diversifying. starting up any business for an entrepreneur is beginning from an understanding of which direction is most the attractive for him – what is the most interesting thing to do and what is under force, as well as what goods and services today the demand of consumer directs. after determining the scope of activity, the next stage is directly organization of own business – the preparation of the business plan. going on the thorny path of entrepreneurship, a person repeatedly faces many complex issues and is experiencing a lot of ups and downs, regularly turning to the business plan, adjusting it according to changes taking place in the internal and external environment of the company (poteet, 1994). an important toolkit of enterprise management is planning of profits. consequently, the business strategy is oriented towards profitability, so the plan is fundamental. as a whole, total profit of company should be equal to the amount that is able to provide the required level of return on investment and decent remuneration of the owner’s labour, taking into account staff salaries and tax liabilities payments. 2. literature review, goal and tasks of the research the great amount of works of well-known foreign scientists, particularly david j. rachman (1995), michael h. mescon (1995), courtland l. bovee (1995), john v. thill (1995), g. howard poteet (1994), joan a. johansen (1994), antonio m. olmi (1994), john m. murphy (1994), and others is devoted to the latest theoretical and applied research of the ways of organization of own biz, its functions, social responsibility, legal and psychological environment, which promotes development of entrepreneurship. as well, they are considering the basics of doing business, its organizational structure, ethical norms and practices of management, the sequence of actions during the purchase or sale of the company, the choice of the legal status of the organization and management of cash flows. the aim of research of many ukrainian economists is studying such important issues as: main innovative approaches of organization of international business and specifics of the conceptual views on the working and implementation of business strategies of transnational companies – v. p. onishchenko (2015); basic provisions of business ethics, ethical problems of business relations in the field of entrepreneurship and management – о. lesko, m. pryshchak, o. zaliubivska, g. ruzakova (2011); challenges, related to starting up and doing business with foreign partners taking into account their ethnic characteristics – i. dumanska (2014); the main directions of improvement of innovation and investment activity in the modern transformational conditions of development – s. usherenko (2014); main tendencies of functioning and improvement of domestic business in modern terms – i. prychepa (2017). the following directions, as we think, require further consideration: prospects of conducting ukrainian business abroad; the choice of more favourable conditions for starting own affair in other countries; an overview of the opportunities that individual states provide to foreign nationals for the opening of business. the goal of the research is to analyse the main peculiarities of start-up and doing business in the format of individual world countries, which give an optimal environment and favourable conditions of development of small and medium business and are interested in attracting foreign entrepreneurs for building their business, as well as identify basic mechanisms used by governments of these countries to support equilibrium in the spatial market. the main tasks of our study is to find the successful terms and opportunities for doing ukrainian business in other states, confirm the importance of forming modern relationship only on the basis of application of moral values and ethical principles in presence of social responsibility of entrepreneurs, and also to clarify head challenges that hinder the development of domestic business that, in turn, directs ukrainians for doing entrepreneurial affairs abroad. 3. the principles of forming a moral and socially responsible business in modern conditions, the desire to accumulate capital is one of the main reasons for the emergence of social problems, in particular, such as social insecurity and low level of material possibilities of most people, lack of high intellectual and moral development of the population. an essential task of the present is the introduction into the public economic space of moral laws that are able to provide the optimal distribution of national wealth. it is known that almost half of the world’s achievements (46%) are owned by 1% of the population, which has wealth 65 times bigger, as of capital of rest of citizens (reuters). unfortunately, the economy in ukraine in comparison with the countries of european union is characterized by more significant social imbalances, since in the 90s of the 20th century, a new social structure of domestic society with a significant polarization on the poor and extremely wealthy has begun forming (cherenko, makarova, libanova, 2012). at a new stage in the development of the return to lost landmarks, when the baltic journal of economic studies 236 vol. 5, no. 2, 2019 economic theory was considered in close connection with moral values, the latter serve as a fundamental basis for eliminating or smoothing inequalities. moral economy is a price type of housekeeping of internally rich people, living in society according to spiritual laws (kryuchkova, 2011). traditionally, morality is consistent with christian values. at the same time, main principles shaping freedom and responsibility of personality, united and fair society, an independent competitive state are the following (institute of economic strategies, 2011): 1. the priority of the spiritual over the material things; fidelity to ethical laws and moral norms is the basis of national self-determination. 2. the priority of state strategic and public interest over private, conjuncture one. 3. leading socio-political role of the state-embodiment of national independence. 4. confirmation of rights and private dignity of a person in close connection with his moral responsibility to others. 5. the development of civil society is a guarantee of a personality’s growth and the establishment of social justice. any freedom and independence imply a responsibility for personal choice, realized in own, freely accepted decision. at the same time, there is a subsequent dependence – the more freedom, the greater the responsibility. for building the moral and socially responsible business as a condition for the development and prosperity of a society, such principles can be used (institute of economic strategies, 2011): 1. except for material goods, it is necessary to take into account the spiritual meaning of life, worrying about others, social welfare. 2. accumulation of capital is not an end in itself but contributes to the formation of decent standards of living for every human and all community. first of all, it is about the donation of a certain part of the incomes for social needs. 3. the culture of business relations, fulfilment of obligations help to become better for man and business. non-execution of agreements reduces the reputation of an entrepreneur, and as a consequence – the image of the country in general. 4. a person needs time for spiritual life, relaxation, creative expression. 5. the state, society, business should promote the worthy existence of those who work, including the incapacitated population of the country. 6. work should be realized in safe terms for the employee, as well as in the absence of illegal methods of doing affair (violence, threats). 7. political and economic powers should be distributed. participation of business in policy can be only transparent and open. 8. the inability of entrepreneur to ignore moral laws by appropriating someone else’s property, establishing low wages, misleading partners, consumers. 9. in a competitive relationship, one should not use human weaknesses and instincts. the competition is worthy and morally justified when it does not ruin business ties. 10. it is necessary to respect any property and the right of other people to dispose of their capital; encroaching on someone else’s things is immoral. so, the human-oriented policy of a company can be a successful economic strategy. about it evidences the experience of leading european countries, in which the level of development of social responsibility is significantly higher than in ukraine. realizing social tasks, the enterprise “makes the world better,” acquires a good image in state institutions, consumers of products, partners, and personnel. according to fleishmanhillard in the eu, 87% of employees of european companies feel highly involving during work at a socially responsible organization (dokuka). social responsibility is a part of the business culture and ethics of leading companies in the world, providing a number of benefits at the state, regional and corporate levels. among them – an improvement of reputation in business space, between consumers, strengthening of competitive positions, the growth of trust and as a result – an improvement of financial indicators of activity, the formation of a safe natural environment, increase of professionalism of personnel and its cultural level. the latter promotes the development of economic systems, expansion of social stability and growth of living standards on the basis of the embodiment of spiritual and moral principles in society. the category of “social responsibility” in ukraine and abroad is perceived differently. in the understanding of foreigners, a socially responsible company adheres to public social laws, cares about the material wellbeing of its workers, and optimally utilizes resources, motivating to innovative development. ukrainian businessmen see own role more narrowly, limited to the payment of tax obligations, the implementation of state legislative requirements and charity (kotler, lee, 2005). in general, entrepreneurs in the world are the same people as everyone else: they show their responsibility to society and the environment, adopting ethical rules defining the values and principles that need to be used for decision-making (rachman, mescon, bovee, thill, 1995). many successful companies are trying to encourage their workers on the example of taking their own participation in public life. they are engaged in charity, sacrificing significant funds for social needs and environmental protection. in general, the corporation consists of separate individuals, who approve decisions based on private moral benchmarks. in the case that every person in the organization acts in accordance with ethical standards, the entire company behaves baltic journal of economic studies 237 vol. 5, no. 2, 2019 accordingly – a total favourable internal microclimate is formed. the key is each worker must have a good understanding of the consequences of own actions and make the right choice. but it is often impossible to divide the situation into “white and black.” in this case, there are three advisable philosophical principles that allow us to determine the correctness of actions: utilitarianism, respect for human rights and justice. in accordance with the concept of utilitarianism, the right decision is characterized by the fact it can give maximum benefit to most people. the value of this approach depends on the ability of an individual to predict and analyse the consequences of their decisions, requiring such one that will serve the majority. the observance of human rights is based on faith and the duty to protect the rights of others and to reject any decision that is in the position to violate that. management respects the right of the individual on the secret or open detection of thoughts and it does not motivate workers till actions against their interests, religious or ethical looks. principles of justice are in that all people demand identical relation, and the established social rules should be carried out steadily by them. those who do the harm others have to be liable, compensating for the losses. so, a fair decision is honest, impartial and reasonable, consistent with ethical rules that can be applied in a particular situation (rachman, mescon, bovee, thill, 1995). in the 1960s of the 20th century, the level of responsibility of businessmen to buyers has increased, the respect to their needs has grown. it was observed more attentive perception of consumer rights, in particular: to security, to obtaining reliable information, to choice and presentation of claims (table 1). the right to safety means: the existence of a list of certain standards for produced goods; the necessity to comply with them by manufacturers and entrepreneurs that is controlled by the government. along with the rigorous actions on the part of the state, there are the following incentives that encourage of manufacturers to abidance of products safety norms: the criminal responsibility, the reduction of volumes sales in case violation of requirements (for example, loss of reputation). the right to receive information implies the existence on the label of truthful pointers of the risks associated with the use of this product. regardless of whether it is useful or harmful, consumers have the right to obtain reliable information about the composition, cost, and rules of application. over time, governments have developed many laws and regulations, the purpose of which is the prohibition in providing incorrect data about goods by manufacturers. business responds excellently to the right to choose: the amount of various goods available to the consumer today is amazing. the question is only in the limits of the decision, on what products there is a big choice – harmful (cigarettes, alcohol), such as air corn or dubious rock music, etc. also, or is it necessary to prohibit certain types of advertising, such as targeted at children. the right of consumers to make claims finds consent and understanding in most successful companies. they actively work with reviews of clients (that help to correct errors) and make good decisions about the release of new products and services, based on information received from consumers (rachman, mescon, bovee, thill, 1995). as for the interaction of businessmen with wage earners, one of the varieties of incentive reward is a premium – payment more than a regular salary, in particular, till the holiday, as encouragement, for accelerating the turnover of commodity stocks during the year or achieving the goals of company and commissions (percentages) based on sales volume (rachman, mescon, bovee, thill, 1995). 4. the best territory for doing business today and the main challenges of ukrainian business and so, we think, the best territory for doing business today is the usa. it is a great option for those who want to build an honest affair. the powerful inside market, low level of corruption, government support and promotion to development of small business, positive attitude of people for entrepreneurship allow working with pleasure: there is a real possibility to invest own money usefully and do profitable business. want to note that the lowest in the world taxes interest rates are in the usa, and they are absent in general in wyoming and nevada, except annual re-registration fee. owner of business – foreigner has a right to receive the domicile in the country and in 5 years – to citizenship. the features of doing business in the usa are the following (2016): table 1 consumer rights in business relationships controlled by the government consumer rights essence right to security availability of a list of certain product standards that producers and entrepreneurs need to follow right to reliable information presence of reliable information about the composition, cost, and rules of application of products right to choice availability of a variety of goods and services available to the consumer right to presentation of claims customer reviews that help the manufacturer or the entrepreneur to correct mistakes and make better decisions about the products and services offered source: (rachman, mescon, bovee, thill, 1995) baltic journal of economic studies 238 vol. 5, no. 2, 2019 1) for open business, it is necessary to start all from scratch – experience will not be needed. it concerns the basics of busy converse, building a relationship with partners, the study of special english literature and research of communication skills during interaction with different organizations, as well as monitoring of experience of other companies in terms of tough competition; 2) it is possible to work only in civilized methods with the help of the realization of different marketing technologies and by way of creation of trust relationship with clients. friendly or family ties in the administration are not transferred to working relations, the conduct of tender policy solves all issues; 3) compliance with the rules of etiquette is mandatory. successful are those companies that have good service and careful attitude towards buyers. it is advisable for the business owner to communicate independently with the clients, take up of correspondence, meetings, actively engaging in business processes. in the usa, it is customary to ask for yourself: a job promotion, participation in the interesting project – with the application of the effort and justification of the proposal. also, the using of outsourcing, in particular, in accounting, legal direction, technical support, and staff remuneration is a good decision. it is the reliable, relevant, relatively inexpensive way that demonstrates the conduct of transparent business. it should be recalled that outsourcing is a system of operations aimed at transferring certain processes and functions from one company to another one – this is essentially the use of other resources. corruption is the main reason that hinders the development of civilized business relations in ukraine. by the level of the latter in 2017, the state was in the first place among 41 of the european countries (doing business in ukraine and the eu). small and medium companies suffer the most – bribery obstructs to take profits. there is also a situation of extreme politicization of business: most government officials are owners or beneficiaries of private enterprises, they defend the interests of big business. as we know, the beneficial owner is a person or several persons who directly (indirectly) owns the company or have a significant influence on making important decisions. this is not always defined in the constitutive provisions of legal entity, but in fact, it is the owner of all assets and receives incomes from organizational activities. the personality of the beneficiary is often not disclosed, it is hidden behind a number of fictitious firms or directors. the latter may be used for money laundering. with the legitimate purpose, such owners are kept secret – for tax planning. consequently, an ordinary citizen has essential problems with reproducing transparent business relations: some companies have privileges and incentives, despite significant legislative violations, others – operate in conditions of lengthy audits in the absence of serious legal mistakes. imperfect legislation and an unstable tax system with a high level of load also negatively effect on the entrepreneurial activity of small and medium companies. now ukrainians have less own funds to open a business, at the same time, the conditions for obtaining loans are complicated, and risks are rising, first of all, as a result of an increase in inflation. the distribution of the main business problems in ukraine from the point of view of entrepreneurs and society is given in table 2. so, an increasing number of domestic businessmen are interested in opening own affair in the eu. economic stability, favourable tax and lending rates, and tangible government support cause the desire in ukrainians to do business right there. there is a particularly loyal attitude towards small and medium businesses in the eu, with simple conditions of attracting investors. anticorruption legislation and national mentality of europeans provide for transparent entrepreneurship conduct. the governments of the eu member-states offer entrepreneurs tax rates, much lower than in ukraine. at the same time, a stable eu economy ensures the ability of banks to provide low-interest rates, creating tangible benefits for businessmen. table 2 the positioning of modern challenges in ukrainian business in terms of entrepreneurs from the point of view of society currency instability 78% currency instability 78% low buyers ability 69% low buyers ability 70% high taxes 60% high taxes 75% the legislative vulnerability of business 40% the legislative vulnerability of business 63% difficulty in managing taxes 37% difficulty in managing taxes 46% pressure from the controlling institutions 30% pressure from the controlling institutions 64% difficulties in lending 24% difficulties in lending 34% complicated customs procedures 13% complicated customs procedures 36% source: melnyk, 2018 baltic journal of economic studies 239 vol. 5, no. 2, 2019 5. investigation of doing business conditions in some european countries with the identification of the possibilities for opening ukrainian business there so, in the list of doing business, poland ranks the 45th position among world countries (association of ukrainian business in poland). establishing company there, an entrepreneur automatically gets access to european lending with minimum rates. the government is pleased to support foreign investors through tax privileges, subsidies, the creation of special economic regions, grants – depending on the type of business activity. regarding targeted assistance from the polish state budget or with the eu, the conditions for obtaining are the following: the presence of significant investments, the creation of vacancies for the citizens of poland, support for the development of the field of innovative technologies. poland is the best place for ukraine to open business abroad: a similar language, close cultural traditions, simplicity and a certain low cost of its launch. also, the entrepreneur gets access to the markets of eu memberstates. the profitable business can be servicing computer equipment, creating translation agency and beauty salons or companies engaged in importexport operations with ukrainian counterparts. in our opinion, the important feature is a lack in poland of restrictions on the reproduction of operations in foreign currency. at the same time, companies established by non-residents can be financed from sources located abroad. regarding doing ukrainian business in slovakia, it should be noted that the country represents itself on the european market, first of all, as a tour operator – that is a very attractive niche for opening own affair. profitable can be various small companies, such as confectioneries, car-care centres or agribusiness. in the innovation sphere – there are internet commerce, it companies, and bioenergy. the government actively supports the latter by providing guarantees for a ransom of green electricity at fixed rates for 15 years (business in slovakia). by investing in a start-up business, the entrepreneur is able to count on investment stimulation and privileges, the terms of receipt of which depend on the degree of regional growth, level of unemployment and volume of investments – in compliance with the eu legislation. in turn, the czech republic provides foreigners with several opportunities for entrepreneurship (how to “relocate” the ukrainian business to the czech republic). first of all, these are hotel and restaurant business, excursion bureaus, souvenir shops, as well as small business – trade, leasing real estate, beauty industry, etc. the attractiveness of the country for conducting business is the fact that foreign and czech entrepreneurs have the same rights during the registration of own affair. also, in the process of entrepreneurship establishment in czechia, the owner gets access to markets of the eu countries and permission to purchase real estate or land on the territory of the state with receiving a business visa for a year with the possibility of its extension. foreign business in the country can use tax or monetary privileges (in particular, due provision of jobs to the czech population or financing the professional development of employees). as for the eu market, despite the fact that it is one of the most liberal in the world, it contains the tools of restricting trade for countries which are not the members of the union. the specialties of the eu’s trade ties with other countries have several common features: 1) protective mechanisms of trade relations used by the eu member countries, created on the basis of main principles of the wto; 2) they are the groundwork for the existence of a free market and provide open competition between companies of the eu member states and producers from other countries; 3) through the effective use of safeguard mechanisms for free trade, there is a significant reduction in imports due to the strengthening of anti-dumping policy (features of doing business in the eu). in order to maintain the optimum trade balance and protect producers of the eu member states, some specific tools below discussed are used (features of doing business in the eu). anti-dumping mechanisms. as you know, dumping is a process, within which a manufacturer from a country that is not a member of the eu sells in it goods at prices lower than market or production cost. in the conditions of illegal actions on anti-dumping legislation, the foreign producer must necessarily compensate for the caused damage. penalties may be: fixed, varied or calculated as a percentage from the total supply volumes. anti-subsidy measures. the subsidy, in this case, is targeted support from non-eu countries of national producers, as a result of which the latter are able to sell products at prices lower than market or production costs. for support of the equal competitive environment, the export of such products to the eu is terminated, and its exporters/importers must pay penalties, which appear in additional import duties on these goods. preventive (precautionary) steps are used during rapid changes of market conjuncture in a situation where the volume of exports of certain goods to the eu increases so quickly that the member states of the association don’t have time to adapt to new trading conditions. in this case, the eu in conjunction with the wto are developing and implementing special measures to correct and stabilize the microclimate in a competitive space, etc. baltic journal of economic studies 240 vol. 5, no. 2, 2019 6. conclusions and recommendations for further research so, the analysis of main features of launch and implementation of business in the cut of individual world countries showed that the essential task of the present is an introduction of moral laws and ethical principles into business space, which is able to ensure the optimal development of social relations. also, determined that start of any business for an entrepreneur is connected, first of all, with the choice of the most attractive kind of activity, taking into account which goods and services are currently in demand by consumers. it has been defined that social responsibility is a part of the business culture and ethics of leading global companies, which provides them a lot of advantages at the state, regional, and corporate levels. in addition, it has been discovered that today the best territory in the world for conducting business is the usa – with its powerful domestic market, honest legislation, and state support. for ukrainians, it is expedient to create a business in neighbouring states members of the eu, whose governments actively provide the optimal terms for foreign entrepreneurs during opening own business: these are poland, slovakia, and the czech republic. so, having established a company in these countries, foreign owner obtains access to the eu markets, economic stability, favourable tax and lending rates, and tangible government support cause desire in ukrainians to do business exactly there. also, the anti-corruption legislation and national mentality of europeans ensure transparency of business. at the same time, it has been investigated that corruption is the main reason that hampers the development of civilized business relations in ukraine. there is also a situation of extreme politicization of business: most government officials are owners or beneficiaries of private companies or defending the interests of big business. imperfect legislation and unstable tax system with a significant load negatively affect the activities of small and medium companies, complicating conditions for obtaining loans, increasing risks, primarily, as a result of the growth of inflation. fixed, that eu governments offer entrepreneurs tax and credit rates significantly lower than in ukraine. it is established that following powerful tools are being used to maintain the optimum trade balance and protection of local producers in the eu: anti-dumping, anti-subsidy and preventive measures – therefore, as we see, the eu member countries take care about own spatial development and welfare of their citizens. thus, significant government support, especially loyal attitude towards small and medium businesses with simple terms of attracting investors, provides opportunities for effective business development in the eu. that’s why it is quite justified that today ukrainian entrepreneurs are interested in starting their own business in the eu. references: asotsiatsiia ukrainskoho biznesu v polshchi [association of ukrainian business in poland]. retrieved from: 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(2017). perspektyvy rozvytku pidpryiemnytstva v ukraini za umov hlobalizatsii ta yevrointehratsii [prospects for the development of entrepreneurship in ukraine in the context of globalization and european integration]. retrieved from: http://ir.lib.vntu.edu.ua/bitstream/handle/123456789/17096/2270. pdf ?sequence=3&isallowed=y rachman, d. j., mescon, m. h., bovee, c. l., thill, j. v. (1995). sovremennyy biznes [modern business]. moscow: respublika. (in russian) usherenko, s. v. (2014). innovatsiino-investytsiina diialnist ukrainskykh pidpryiemstv: suchasnyi stan i priorytety aktyvizatsii [innovative and investment activity of ukrainian enterprises: current state and priorities of activation]. retrieved from: http://soskin.info/userfiles/file/2014/7-8_2014/7-8_2/usherenko.pdf vedennia biznesu v ukraini ta yes – korotko pro usi «za» i «proty» [doing business in ukraine and the eu – briefly about all "for" and "against"]. retrieved from: http://leopolis.news/vedennya-biznesu-v-ukrayini-ta-yeskorotko-pro-usi-za-i-proty/ baltic journal of economic studies 80 vol. 5, no. 2, 2019 corresponding author: 1 cherkasy state business-college, ukraine. e-mail: kuklin_oleg@ukr.net orcid: http://orcid.org/0000-0001-6904-3496 2 cherkasy state business-college, ukraine. e-mail: m.y.kryvoruchko@gmail.com orcid: http://orcid.org/0000-0001-6150-864x doi: https://doi.org/10.30525/2256-0742/2019-5-2-80-85 institutional analysis of interregional socio-economic convergence in the context of european integration: interdisciplinary methodological approach development oleg kuklin1, mykhailo kryvoruchko2 abstract. relevance. the problem of interregional convergence within eu-countries has been of great interest among scholars. such an interest is explained by the fact that joining the european union may cause deepening interregional disparities among eu-members. as a result, there is a need to develop a model of interregional convergence in socio-economic development that would help countries to face the challenges of regional development during the process of european integration. the multidimensional nature of issues relating to interregional disparities implies the usage of an institutional approach that allows an analysis combining economic and non-economic factors. the purpose of this paper is to develop an interdisciplinary methodological approach to the analysis of interregional socio-economic convergence in the context of european integration from the institutional perspective. methodological basis. valuable and very interesting studies along this research line have been undertaken by a number of scholars who have used different methodological approaches that include neoclassical analysis, “core-periphery” theory, institutionalism, “resource abundance curse” phenomenon. the outcomes of their studies serve as a solid ground for in-depth research on interregional convergence that allows analysing this phenomenon from different perspectives. however, the issues regarding the regional dimension of institutional influence on the socio-economic development in the context of european integration have not been thoroughly covered in the economic studies. results. based on analysis of theoretical and empirical studies in the areas of interregional disparities and institutional economics, the interdisciplinary methodological approach has been developed, which implies reaching the following objectives: 1) to analyse interregional disparities in eu-members within the framework of neo-classical growth theory, 2) to examine regional dynamics using methodology of “core-periphery” theory (“new economic geography”); 3) to research the presence of “resource abundance curse” phenomenon in the regional development in the eu-countries; 4) to examine the institutional dimension of interregional disparities; 5) to analyse position papers on the eu cohesion policy implementation to outline the institutional challenges of the latter. therefore, the research output allows developing an interdisciplinary approach to the analysis of the institutional aspect of socio-economic convergence that combines a quantitative (empirical) and qualitative analysis. key words: european integration, interregional socio-economic convergence, institutional dimension of interregional disparities, neo-classical convergence analysis, new economic geography, resource abundance curse, the eu cohesion policy. jel classification: b50, r10 1. introduction the problem of interregional convergence among eu countries has been of a great interest, which is explained by the fact that european integration may accentuate the level of interregional differences in eu-members; this requires searching for an adequate mechanism to transit the integration process with fewer economic and social losses for territorial development. the multidimensional nature of interregional disparities implies an institutional approach to developing the baltic journal of economic studies 81 vol. 5, no. 2, 2019 model of interregional convergence in socio-economic development. valuable and very interesting studies along this research line have been undertaken by anders, barro, bevan, bode, coase, havrylyshyn, krugman, lane, north, sala-i-martin, tiffin, and others. these scholars have used different methodological approaches that include neo-classical analysis, “core-periphery” theory, institutionalism, “resource abundance curse” phenomenon. the outcomes of their studies serve as a solid ground for in-depth research on interregional convergence, which allows analysing this phenomenon from different perspectives. however, the issues regarding the regional dimension of institutional influence on the socio-economic development in the context of european integration have not been thoroughly covered in the economic studies. research into the institutional influence on economic development holds one of the prominent places in modern economics. the seminal works of r . coase (1937) and d. north (1990) laid the groundwork for this line of research within the framework of new institutionalism. a cornerstone idea of the new institutional theory is an assumption that a market, unfriendly to political and legal environments, increases the cost of transactions for economic agents, which has a negative impact on business activity. as a result, poorly developed institutions foster the existence and development of a black economy, inefficient distribution of public resources, and grabber-oriented economic activity. a number of empirical studies indicate the presence of a significant correlation between indicators of institutional and economic development (see bevan, estrin, and meger, 2004; knack and keefer, 1995; gwarthey, holcombe, and lawson, 2004; havrylyshyn and van rooden, 2000). in addition, this approach illustrates a basic tenet of the “resource curse” phenomenon – the situation where a resource-rich country experiences a recession due to the functioning of market-unfriendly institutions (see lane and tornell, 1998; robinson, torvik, and verdier, 2006; mehlum, moene, and torvik, 2006; kolstad, 2007). wide usage of the new institutional approach demonstrates high theoretical and empirical value and importance in modern economic studies. this theoretical and methodological approach also formed the underlying basis applied to analyses of institutional change in the post-communist transition countries, including ukraine (see anders, 2001; tiffin, 2006; black and tarassova, 2003). 2. research objectives and methodology the current paper aims at developing an interdisciplinary methodological approach to the analysis of interregional socio-economic convergence in the context of european integration from the institutional perspective. particularly, the research focuses on the analysis of theoretical and empirical studies in the area of interregional convergence aiming at formulating research objectives to examine the institutional dimension of interregional convergence in the eu member-states. the institutional nature of the examined issue and its complexity determine the research framework that targets answering the following research questions within the scope of this study: 1. what research approaches could be applied in order to examine the interregional convergence with regard to its interdisciplinary dimension? 2. does the empirical evidence on analysis of interregional development in ukraine indicate convergent or divergent tendencies? 3. what methodological approaches could be applied to the development of the research framework of the model of interregional convergence in ukraine? how adequate and accurate would such model be? 4. could the same interdisciplinary methodological approach be applied to the analysis of interregional convergence in the eu-members? 5. taking into account that interregional convergence analysis is based on the empirical (quantitative) basis, what type of qualitative analysis could be used to enhance the interdisciplinary nature of the research framework? taking the above-mentioned research questions, the research methodology implies usage of theoretical and empirical evidence in the area of convergence as a methodological basis; whereas, the application of the method of analysis, systematization, and generalization would allow one to formulate the core of a methodological approach to analysis of interregional convergence in the context of european integration. 3. results and discussions a rigorous foundation for the reduction of interregional disparities as a research topic was laid in the 1950s: the pioneering studies were undertaken by r . solow (1956) and t. swan (1956) laid the groundwork for the neo-classical economic growth theory. further development of the convergence model was connected with the seminal works done by r . barro and x. sala-i-martin (1991, 1992). these scholars are considered the creators of a simple and straightforward approach to the analysis of the economic systems’ convergence, which was based on the econometric testing of the assumptions of a negative correlation between the dynamics of the output (income) growth rate and its initial absolute value. nowadays the neo-classical approach has a wide application in studies on cross-country and interregional convergence and divergence, in different countries’ baltic journal of economic studies 82 vol. 5, no. 2, 2019 unions and associations, particularly, in the european union. this research venue is closely related to the studies, in which the interregional disparities (which are very high) in ukraine are analysed in the context of european integration. the research findings indicate the presence of a strong divergence in the level of available (disposable) income – (see kryvoruchko, 2015a); another important conclusion that has been derived from the empirical analysis is a strong dependence of regional development on abundant natural resources, i.e., the more a region extracts and exports mineral resources, the better is its economic performance (see kryvoruchko, 2015b). therefore, there has been created a situation where public policy in regional affairs was influenced by particular interest groups, which were competing for the access to the mineral deposits, while ignoring the crucial factors of socio-economic development, such as productivity, social justice, and welfare. a separate study examines the institutional influence on the interregional disparities in socio-economic development in ukraine (see kryvoruchko, 2015c). the research methodology was based on the new institutional approach and application of regression analysis: three empirical models consisting of the coefficients of variation of gross regional product per capita, available income per capita, salary per employee in place of dependent variables, and institutional governance indicators in place of independent ones, were tested on a linear correlation. the empirical evidence indicated that the correlation between the variation of available income and institutional governance was insignificant, despite that there was a strong and significant correlation with gross regional product and salary. the preliminary assumption on the negative sign of regression parameters did not come true; therefore, the research conclusion stated that the positive nature of institutional influence on the interregional disparities in ukraine could be explained by the resource-oriented structure of ukrainian economy: overall economic growth leads to speeding-up of economic development of the leading regions, which in turn, causes deepening interregional disparities. following the “core-periphery” theoretical and methodological framework (see krugman, 1991; bode and mutl, 2010; bosker, brakman, garretsen, and schramm, 2010; brakman, garretsen, and schramm, 2006), research has been undertaken in order to estimate the presence of either interregional convergence or divergence in ukraine. the empirical evidence indicated a positive correlation between industrial market size and the level of available income per capita leading to the conclusion concerning the presence of interregional divergence in ukraine (see kryvoruchko, 2015d). understanding that the major issues in the regional development in ukraine are institutional in nature, there has been developed an institutional model of interregional convergence in socio-economic development. its methodological framework (see kryvoruchko, 2016a) implies examining how the industrial and resource orientation of regional economy influences the institutional factor of regional development. the choice of variables indicating such a factor has been made in order to research two dimensions of institutional environment changes, namely, social and structural ones; crime rate and innovation market size has been chosen respectively as indicators to evaluate the two dimensions mentioned above. the institutional model of interregional convergence also implies examining the influence of social and structural factors of regional development on the socio-economic development on the regional level, the level of interregional disparities, and the institutional environment on the national level. empirical testing of correlations within the institutional-social convergence model indicates surprisingly positive correlations between industrial and resource orientation of a regional economy and the crime rate; crime rate as a determinant factor fosters socio-economic development on the regional level, reduces interregional disparities in wage level, and reflects the public’s negative perception of government accountability in ukraine. the controversial nature of such factors as the crime rate’s impact on the convergence model leads to a reconsideration of the role of the crime rate; this indicator could be used in place of the institutional indicator on the national level along with other institutional indicators within the structural framework of the version of the institutional model. empirical correlation testing within the institutionalstructural convergence model indicates a positive influence of the industrial (but not the resource) orientation of a regional economy on the innovation market size; the innovation market size as a determinant factor has a positive impact on socio-economic development on the regional level; in addition, the innovation market size reduces interregional disparities in the level of disposable income per capita, and reflects a positive public perception of the control of corruption and government effectiveness, as well as reducing the crime rate on the national level. empirical evidence leads to the conclusion that the developed convergence model is adequate and accurate. the research outcome indicates the importance of structural reforms rather than social changes in order to reduce interregional disparities in ukraine, to foster socio-economic development on the regional level, and to improve the overall institutional environment in ukraine. this conclusion complies with the evidence that an innovation-driven economy is more favourable for interregional convergence than the resourceoriented one (see kryvoruchko, 2016b). generalization of the analysed studies allows one to use their methodologies in order to examine the institutional mechanism of interregional convergence among eu countries. the eu-members differ by the baltic journal of economic studies 83 vol. 5, no. 2, 2019 structure of their national economies and the level of interregional disparities, which is the focus of the research to be undertaken. the following research objectives would be achieved in order to examine the interregional disparities in socioeconomic development with respect to the complexity of this issue: 1. to analyse interregional disparities in eu-members within the framework of neo-classical growth theory, i.e. using βand σ-analysis. 2. to examine regional dynamics using the methodology of “core-periphery” theory (“new economic geography”), which is based on researching the correlation between wage/income level, interregional migration, and industrial market size. 3. to research the presence of the “resource abundance curse” phenomenon in the regional development in the eu-countries by analysing the correlation between regional growth rate and the share of mineral resources in the regional export/import. 4. to examine the institutional dimension of interregional disparities by analysing the influences of institutional governance and doing business indicators on the coefficient of variation of socio-economic development indicators. reaching the above-mentioned objectives would allow one to make a well-grounded conclusion from different perspectives on the presence of divergent or convergent tendencies in regional development. understanding the different dimensions of regional dynamics will provide solid groundwork for formulating a methodology for the interregional convergence model, which purpose is to examine the institutional mechanism of the interregional convergence in socio-economic development in the context of european integration. the methodology implies an analysis of the correlation between institutional factors (which indicate social/ structural changes in the regional development) and interregional variation in socio-economic development, as well as regional socio-economic development indicators. such an approach would allow evaluating the influence of the institutional factor both on regional development and on interregional disparities. the proposed methodology could be applied to all eu-members or the groups of eu-countries with similar socio-economic characteristics, though there remains some flexibility. cross-country and crossregional correlation analysis would be used as the research method along with single/multiple time series regression analysis. an important component of an institutional approach to interregional divergence in the context of european integration is the analysis of the eu cohesion policy. the european commission is implementing the cohesion policy aimed at reducing disparities within eu member-states and their regions. the eu cohesion policy has been of great interest to the scholars researching interregional cohesion in the context of european integration (see bachtler, mendez, and wishlade, 2016; dudek, 2014; mendez and bachtler, 2015). regardless of the progress in socio-economic convergence, good institutional governance remains an important challenge for the eu cohesion policy implementation effectiveness (see european commission, 2017). in order to widen the scope of the empirical research on institutional governance’s influence on interregional cohesion in the context of european integration, one should analyse political positions (position papers) on the cohesion policy implementation to bring a qualitative component into the research. position papers are the documents published by the eu member states’ national governments and research institutions as a response to the european commission’s call for consultations regarding different issues. the methodological basis for the analysis of position papers implies a research background in political agenda of european union from the perspective of institutional development and decision-making (see kreppel, 2002; madeliene, kreppel, plechanova, and verdun, 2015). 4. conclusions the research outcome indicates that within the scope of this paper, there has been developed an interdisciplinary methodological approach to the analysis of interregional socio-economic convergence in the context of european integration. having answered the research questions, one has come to the following conclusions: 1. there are different research approaches that could be applied to the analysis of the interregional convergence with regard to its interdisciplinary dimension. particularly, the neo-classical, coreperiphery, resource abundance and institutional governance methodological approaches allow outlining different aspects of interregional convergence. 2. overall, the empirical evidence on analysis of interregional development in ukraine indicates divergent tendencies. another important conclusion is a strong dependence of regional development on abundant natural resources. 3. neo-classical, core-periphery, resource abundance and institutional governance methodological approaches could be applied to the development of the research framework of the institutional model of interregional convergence in ukraine. empirical evidence indicates that the developed model is adequate and accurate. 4. the same interdisciplinary methodological approach could be applied to the analysis of interregional convergence in the eu-members. the eumembers differ by the level of economic development and interregional cohesion; therefore, one would baltic journal of economic studies 84 vol. 5, no. 2, 2019 expect different empirical output within the proposed framework of analysis. 5. in order to enhance the interdisciplinary nature of the research framework, in addition to empirical (quantitative) analysis, the analysis of position papers on the eu cohesion policy could be added to the research framework as its qualitative component. position papers are the officially published documents that express a view (position) on the eu cohesion policy implementation challenges and perspectives. therefore, the combination of classical and nonclassical methodological approaches to the interregional analysis provides the multidimensional foundation for examining potential challenges of european integration to the regional development. the proposed methodological approach implies the following two research lines. the first one is related to the institutional framework that is to be applied to the analysis of institutional governance and interregional convergence within the eu countries. the second one is related to studying political positions on institutional aspects of the eu cohesion policy implementation. following these two research lines allows combining quantitative and qualitative methods, as well as enhancing the interdisciplinary nature of the developed research methodology. the undertaken research on the methodological approach to the institutional analysis of interregional socio-economic convergence in the context of european integration lays down the foundation for quantitative and qualitative research. the further development of this research line depends on the research output of the conducted analysis. particularly, one could consider grouping the eu countries based on common convergent/divergent tendencies, institutional governance issues, core-periphery relations, and resource/innovation-driven type of the economy. another important area of further research on interregional convergence could relate to an analysis of the institutional strengths/weaknesses of the eu cohesion policy implementation, and their impact on the institutional environment in the eu countries. such research could point out either the eu cohesion policy implementation fosters cross-country and interregional institutional cohesion within the european union. the outlined research perspectives require a significant volume of scholarly work, both quantitative and qualitative. its scope goes beyond a journal article; 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(2006). ukraine: the cost of weak institutions. imf working paper № 06/167. baltic journal of economic studies 54 vol. 5, no. 1, 2019 corresponding author: 1 academician stepan demianchuk international university of economics and humanities, ukraine. 2 national academy of internal affairs of ukraine, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-54-58 comparative legal aspects of ensuring the economic security of companies in resolving corporate conflicts in ukraine and the united states vitalii demianchuk1, pavlo bortsevych2 abstract. the aim of the article is to reveal the legal nature of corporate conflicts and ways to overcome them in ukraine and the united states. the subject of the study is corporate conflicts caused by the corporate relations that arise between the owners of corporate rights, as well as the relationship between the owners of corporate rights and management bodies of the company. methodology. the study is based on general scientific and specialscientific methods and techniques of scientific knowledge. the logical semantic method enabled to determine the content of the concepts of “corporate conflict” and “greenmail”. the comparative legal method enabled to compare the doctrinal approaches to this issue. the same method enabled to analyse us law regarding the subject matter. the normative dogmatic method enabled to interpret the content of legal regulations of domestic and foreign legislation that regulate the issue of corporate conflicts and ways to overcome them. the system-structural method enabled to analyse objective and subjective causes of corporate conflicts. methods of analysis and synthesis enabled to distinguish features of corporate blackmail as the cause of corporate conflicts. the method of legal modelling enabled to develop proposals regarding greenmail prevention in ukraine. practical implications. studies on the issue of greenmail in the us helped to develop recommendations for prevention of greenmail in ukraine, as well as to identify issues requiring further consideration and research. relevance/originality. the concepts of “corporate conflict” and “greenmail” are defined. the objective and subjective causes of the occurrence of corporate conflicts, the reasons for their occurrence, as well as the subjective component of the parties to the corporate conflict are analysed. the absence of the legal definition of the concept of greenmail and the effective mechanism of its prevention is stated, therefore, appropriate recommendations to prevent its occurrence are formulated. key words: corporate conflict, conflict of interest, objective causes, subjective causes, greenmail, corporate blackmail. jel classification: g34, m14, o16 1. introduction the company’s development and economic stability and security are predetermined by the rapport and constructive dialogue between the owners of the company’s corporate rights. in many modern countries with a developed market economy, due to legislation, judicial practice, and corporate relations development, the principles of overcoming corporate conflicts with the least economic risk for companies themselves have been created. in this regard, the study of the legal aspects of the mechanism for overcoming corporate conflicts using the experience of the united states is relevant and crucial to regulate on its basis the corporate relations of companies in countries with developing economies, in particular, ukraine. the emergence of a market economy in ukraine has led to the emergence of a large number of business partnerships and the active development of corporate legal relations. in ukraine, the advent of a market economy has led to the occurrence of a large number of business partnerships and the active development of corporate legal relations. the formation of new social relations has caused corporate conflicts. in most cases, the main causes of such conflicts are the inadequacy of the legal mechanism for ensuring the rights of the corporate relation participants and the lack of proper legal culture in corporate management. it should be noted that the elucidation of the legal nature of corporate conflicts and ways to overcome them have been and remain relevant among scholars. however, despite the relevance of the issue, the revelation of the legal nature of corporate conflicts in ukraine remains inadequate. the aim of the article is corporate conflicts caused by the corporate relations that arise between the owners of baltic journal of economic studies 55 vol. 5, no. 1, 2019 corporate rights, as well as the relationship between the owners of corporate rights and management bodies of the company. 2. presentation of the main material the researchers define the concept of corporate conflict differently, especially as regards the delineation of this concept with the notion of “conflict of interest.” according to a. bobryshev and e. bokhanov, a corporate conflict can be defined as disagreements (disputes) between shareholders (investors) and managers regarding shareholders’ rights violation that leads or may result in lawsuits against the company, controlling shareholder or managers in decisions taken by them, early termination of powers of management bodies, substantial change of shareholders. h. aleksieiev argues that the concept of “corporate conflict” must be distinguished from the concept of “conflict of interests” (alekseev, bobryshev, bokhanova, 2002). a. zhornokui claims that, unlike a corporate conflict, the term “conflict of interest” does not mean a situation of a corporate conflict, but a situation that has a high probability of a corporate conflict (zhornokui, 2007). in addition, a conflict of interest is defined as a situation in which a managerial decision is chosen under contradictions between the good of the company and own interest of the manager. summarizing the views of the scientists, corporate conflicts can be defined as conflicts that arise between the participants in corporate relations, directly related to corporate interests and those that cause negative consequences for both the enterprise and its participants or pose a real threat to their occurrence. the occurrence and development of corporate conflicts are due to four groups of factors and causes: objective, organizational and managerial, sociopsychological and personal. the first two groups are objective, the third and fourth are subjective (danilova, 2010). understanding the objective and subjective nature of the causes of corporate conflicts in the management of a joint stock company is very useful for their prevention, for the development of optimal strategies for the shareholders’ behaviour during typical conflicts. the objective causes for their occurrence are mainly the circumstances of the social interaction of shareholders, which have led to the collision of interests, thoughts, etc. for example, the board of directors of a joint-stock company has a vacancy for a post of a board member, which is claimed by several persons from managerial personnel, who, in accordance with the current legislation, are in labour relations with the company. since the vacancy is one and applicants are several, the interests of the latter coincide objectively, that is, regardless of their desire. such a coincidence can lead to a conflict. the subjective causes of corporate conflicts are related mainly to the individual psychological features of the opponents who choose the conflict, and not some other way of resolving the objective contradiction. in this case, the shareholder does not consider a compromise solution, does not try to discuss this contradiction together with the opponent to remove it, but chooses a strategy of counteraction. in our opinion, the reasons for which the shareholder chooses a conflict are subjective in the context of the above. in our opinion, the reasons why a shareholder chooses a conflict in this context are subjective. even under superficial consideration of the nature of the relations between objective and subjective causes of conflicts, the specificities are evident, such as a clear distribution of objective and subjective causes of conflicts or their opposition, obviously, is unjustified. any objective cause is important in the occurrence of a particular conflict situation, including due to the subjective factors. it should be noted that approval of the regulations on the joint-stock company management by the general meeting of shareholders could contribute to reducing the number of corporate conflicts through the settlement of situations, which may cause corporate conflicts, in these documents. however, in most cases, the elaboration of such instruments depends on the personal initiative of joint-stock company officials, that is, on the subjective factor. therefore, the majority of objective causes are to a certain extent subjective, and the subjective motives of conflicts are ultimately objectively determined. as a rule, the subject-matter of a corporate conflict in joint stock companies is the ownership of the shares of the company and rights that these securities give (participation in management, participation in the distribution of company profits, etc.). the interests of shareholders are aimed at revenue from the company’s activities. revenue can be realized in two ways: dividends and increase of exchange rate of shares (moroz). studying the legal nature of corporate conflicts, the subjective composition of the parties to the corporate conflict should be considered. the persons who may be participants in a corporate conflict can be grouped into: majority shareholders; minority shareholders; members of the board of directors (supervisory board) and managers. majority shareholders are focused on the long-term prospects of company development and minimal risks. if they have to choose between dividends and profits capitalization, they tend to prefer profits capitalization, as it contributes to the sustainability and strategic plans of the company’s development. the interests of minority shareholders differ. they are interested in short-term prospects, such as revenue from baltic journal of economic studies 56 vol. 5, no. 1, 2019 their participation in the company now. therefore, the main interest of minority shareholders (dividends) will prevail over profits capitalization. meanwhile, company managers do not face the risk of losing their property. if a company becomes unprofitable, managers lose their jobs, but not their property. if such activity is profitable, managers receive a bonus. managers risk not their property, but the property of owners (shareholders). moreover, since managers are not owners, the risk of abuse on their part in relation to both the company and its owners exists. the conflict between managers and owners is the most frequently encountered corporate conflict (iorhachova, 2011). the study of the legal nature of the conflicts that arise in corporate relations reveals that one of the reasons for the occurrence of corporate conflicts is the abuse of corporate rights, in particular, greenmail, or in other words, corporate blackmail. in the specialized literature, the term greenmail is interpreted as a procedure for acquiring a significant number of shares in a company to challenge it with the threat of hostile takeover with a view to further reselling these shares at a premium price for the targeted company (bielikov, hraivoronskyi, kholchenkov, 2009). for example, the greenmailer can offer shareholders or the joint-stock company itself to buy any batch of shares at “a bid price”, that is, for a higher and unacceptable price. in case of failure, the greenmailer begins a war against this joint-stock company. sometimes this is done through various manipulations with the right to convene a general meeting of shareholders. in particular, the joint-stock company is flooded with requirements for the election of the new board of a joint-stock company, fraudulent documents are used, numerous lawsuits are filed and continuous legal proceedings begin. actions for securing a claim and other proceedings in a court session may be used by greenmailers in their favour. in some cases, this is done in order to reduce its capitalization and make it more sensitive to hostile takeovers by striking the business reputation of an economic partnership. in other cases, greenmailers act for the main competitor of their chosen victim, for example, before a large tender for order distribution. provided the value of the company’s business is much smaller than its assets (buildings, land), the third possibility occurs. in addition, greenmail also refers to individual cases of counteracting the reorganization of the company. it should be noted that other means of greenmailers’ actions exist. evidently, the relationship between the joint-stock company and a greenmailer is the relationship between the company and its shareholder, within which the shareholder abuses his/her rights. thus, the following main features of corporate blackmail can be distinguished: 1) this is a form of interference in the activities of a joint-stock company; 2) based on the fact of possession of a certain number of shares, which does not allow having a significant impact on the management of a joint stock company; 3) the interference is aimed at hampering the operating activities of the joint-stock company and, consequently, creating certain negative consequences for the company and (or) its shareholders, including their finance and property; 4) the purpose of such actions is the sale of the block of shares at a premium price to the controlling shareholder or the company itself or to receive other property provision; 5) while the actions of corporate blackmailers are formally legal, they can be qualified as abusive rights (gololobov, 2004). in the united states, where corporate blackmail was used for the first time, different approaches to understanding and assessing greenmail exist both at the legislative level and in the legal science community. in 1984, us corporations spent over $3.5 billion to reacquire securities from unwanted shareholders at premiums totalling over $600 million above market prices (williams, 1985). the main factor that caused the growth of cases of companies’ repurchases of their shares at a premium price was the tendency for corporate raiders to use market openness and the possibility of negotiated acquiring of shares for the accumulation of shares that enabled to circumvent more stringent requirements of the legislation on a tender offer (hartnett). in the us, at the federal level, no regulations ban greenmail. moreover, greenmail is possible and regulated in detail by the current federal tax laws of the united states. thus, according to the internal revenue code, the income, which is recognized as greenmail, is taxed at 50 percent (greenmail). therefore, us legislators decided to “punish” greenmailers, imposing a tax burden on them, and making, in effect, corporate blackmail economically inappropriate for greenmailers. meanwhile, it is also a good way to replenish the state treasury. however, in practice, this legislative measure fails to provide protection for the corporation itself, which has to pay huge premiums in case of a corporate takeover threat. it should be noted that only in a few states us state laws provide for restrictions on the purchase of shares above the market value in certain cases (molotnikov, garslian). in new york, it is provided for that no domestic corporation shall purchase more than ten percent of the stock of the corporation for more than the market value thereof unless such purchase is approved by the affirmative vote of the board of directors and a majority of the votes of all outstanding shares at a meeting of shareholders. however, the prohibition shall not apply when the corporation offers to purchase shares from all holders of stock or for stock, which the holder has been the beneficial owner of for more than two years (new york consolidated laws). similar provisions are in the baltic journal of economic studies 57 vol. 5, no. 1, 2019 states of minnesota (minnesota statutes) and arizona (arizona revised statutes). therefore, even in the specified states, greenmail is not banned, only certain procedural restrictions are imposed. this can be explained by the fact that states cannot establish regulations in any way contrary to federal law. however, these restrictions still affect the state of affairs in corporate blackmail. the main effect of these restrictions on greenmail is that companies become less appealing to raiders due to the elimination of one of the means of proceeds (molotnikov, garslian). moreover, according to scientists, these provisions may restrict speculation in shares and prevent the decrease in the value of shares, which often follows the redemption of shares in such situations (profusek, bober, johnson, 1986). the analysis of the provisions of the civil code of ukraine (tsyvilnyi kodeks ukrainy), as well as the provisions of the law of ukraine “on joint stock companies” (pro aktsionerni tovarystva), enables to state the absence of a legal definition of the concept of greenmail and effective mechanism for its prevention. this is because in ukraine, the phenomenon of greenmail has not yet become widely used since corporate relations are developed insufficiently in comparison with the usa, however, the possibility of the significant distribution of greenmail in the future should not be excluded. therefore, it should be noted that the modern development of corporate relations is accompanied by the occurrence and existence of various corporate conflicts, which leads to the violation of the rights of participants of corporate relations. it is worth agreeing that corporate conflict and conflict of interest are different concepts, although they are interconnected. the basis of any corporate conflict is objective organizational, managerial, socio-psychological, and personal factors. 3. conclusion summarizing the approaches of researchers to solving the problem of greenmail leads to the conclusion that in order to prevent the occurrence of greenmail, every legal entity in ukraine should develop a set of protection that would include: minority shareholders minimization; compliance of the internal corporate documents of the company with the current legal regulations; maximum compliance with the rights of shareholders provided for by law; control over access to insider information of the company; prevention of corporate intelligence, third-party influence on management. considering that the mechanism of corporate rights protection in ukrainian companies is in the process of formation, it would be advisable to use the positive experience of the us and american companies in combating this phenomenon to prevent greenmail. references: alekseev, g. v., bobryshev, a. d., 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(in ukrainian) pro aktsionerni tovarystva [on joint-stock companies] law of ukraine no. 514-vi of september 17, 2008. retrieved from: http://zakon4.rada.gov.ua/laws/show/514-17/page (in ukrainian) baltic journal of economic studies 101 vol. 5, no. 1, 2019 corresponding author: 1 mykolayiv national agrarian university, ukraine. e-mail: kotikova@i.ua orcid: http://orcid.org/0000-0003-1420-1500 2 petro mohyla black sea national university, ukraine. e-mail: oleksandr.kuzmenko@chmnu.edu.ua 3 petro mohyla black sea national university, ukraine. e-mail: irina.semenchuk@chmnu.edu.ua doi: https://doi.org/10.30525/2256-0742/2019-5-1-101-111 sustainable agricultural land use in the post-socialist camp countries: monitoring and evaluation olena kotykova1, oleksandr kuzmenko2, iryna semenchuk3 abstract. the purpose of the article – to carry out the monitoring and evaluation of agricultural land use sustainability in the post-socialist camp countries. methodology. during the study, the following methods were used: dialectical, abstract and logical, system analysis, index, and graphical comparison. monitoring and evaluating of the agricultural land use sustainability involves periodic tracking relevant indicators based on available official statistics, central authorities’ information, local authorities and carrying out, on the basis of monitoring, the ranking in the postsocialist camp countries by comparing the obtained results with their best values. monitoring and evaluating of the agricultural land sustainability conducted to monitor the process of sustainable agricultural development goals implementation, problems’ identification of regions agricultural land use and their causes, improving the efficiency of administrative decisions of central executive authorities, local authorities and the land market actors. elements of scientific innovation. existing methods for determining the integral indicator for comparing the land use sustainability and own method was suggested, by which the relevant calculations and conclusions were made. the proposed methodology ensures the implementation of appropriate objectives and indicators for monitoring the global sustainable development goals 2016–2030 achievement in ukraine. practical significance. the availability of the integral environmental and economic indicators at the macro level is ideal for people who make decisions in terms of consideration of the environmental factors on the country’s development. the main goal of an integral indicator for comparing the sustainability of land use development in the regions of ukraine creating is to ensure the possibility of ranking these regions in order of their total potential decreasing and thus defining “depressed” for providing the state aid to them. conclusions. according to the given methods, it has been proved that agricultural land use in the countries of the post-socialist camp has a positive dynamics but the sustainability indicators for all indicators have not achieved yet. it has been defined that estonia, latvia, and slovenia got the first three places; and croatia, lithuania, and romania got the last places in the ranking of sustainability of the agricultural land use for the countries of the post-socialist camp. in accordance with settlements for solving the problems in the area of agricultural land use, the state should focus on less developed regions where the environmental situation is difficult, productivity and land return reduced, slowed population growth, and which have an excessive migration. key words: sustainable development, agricultural land use, method, methodology, region, indicators. jel classification: c83, о52, q01, q15, r11 1. introduction in september 2015, in a framework of 70th un general assembly session in new york, un summit for the adoption of the development agenda beyond 2015 was held. the summit is seen by the international community as an event of historic significance. summit’s problems covered all aspects of socio-economic development, national competitiveness, environmental and energy security and a global partnership for development, and the volume of thorough preparatory work had no precedent in history. after the summit before the un member countries, facing new challenges identified adapt global goals and their monitoring. in ukraine, there also has started work on sustainable development goals establishing, for 2016–2030 years, on the relevant targets and indicators for monitoring of the objectives achievement (unu, 2017). baltic journal of economic studies 102 vol. 5, no. 1, 2019 currently, fao has developed a global strategy for agricultural and rural statistics improving (fao, 2017), in which various tasks will be implemented, including the task of defining parameters and indicators for food security monitoring (sdg 2), and – the global warming, biofuels, and environment. the initiative on developing the global strategy for improving agricultural and rural statistics was a response to the decline in the quantity and quality of agricultural statistics. the purpose of the global strategy is to provide access to national and international statistical systems to obtain baseline data for sdg monitoring. however, the system of indicators is not yet presented by fao and, therefore, not monitored. in ukraine, at the official level, there is also no monitoring and evaluation of sustainable agricultural land use in ukraine’s regions. 2. methodology and methods the most authoritative foreign researchers on the sustainable development problems are donella h. meadows (2004), g. brundtland (2002), м. ashby (2015), n. droste (2016), k. fiorella (2016) and others. however, these researchers did not conduct the investigations of agricultural land use sustainability in ukraine. domestic scientists offer different approaches to indicators system building for sustainability assessment. the most convenient way, from the viewpoint of the decision-making, is the definition of a single integrated indicator, but in respect to the methodology, it is very difficult to develop this indicator. nowadays, about three thousand ecological indicators are developed and used in practice in the world, and more than 2/3 of them are partial ecological indicators. the existence of such a large number of environmental parameters requires their appropriate classification for more targeted and effective use of indexes and indicators in identifying and solving the specific range of environmental challenges. the availability of the integral environmental and economic indicators at the macro level is ideal for people who make decisions in terms of consideration of the environmental factors on the country’s development. the researchers can judge the degree of the stability of the country, ecological development trajectories according to only one such indicator. therefore, this indicator can be a kind of analogue of gdp, gnp, national income, with the help of which the success of economic development and economic prosperity is often measured. however, at present, there is no universal integral indicator of sustainability. in the prior studies (kotykova, 2012), we presented the results of critical analysis and synthesis of existing approaches and methodologies for regional development assess. in previously defined ones, it should be provided a new method of monitoring and evaluation of the state regional policy implementation (the method of the state regional policy implementation monitoring and evaluation, 2015). according to the socio-economic development monitoring by 2015, by the list of measure’s indicators, specified in the order of monitoring and evaluation of implementation of the state regional policy (the procedure of the state regional policy implementation monitoring and evaluation, 2015), the results are monitored in 12 areas: the economic and social cohesion; economic efficiency; investment and innovation development and foreign economic cooperation; the financial self-sufficiency; small and medium enterprises; labour market efficiency; infrastructure development; renewable energy and energy efficiency; accessibility and quality of education services; availability and quality of services in health care; social protection and safety; environmental management and environmental quality. the rating evaluation is performed by comparing the deviation values of each concrete region of their best values in the respective regions (reporting) period and the corresponding regions ranging from the 1st to 27th place. the rating evaluation is based on the parameters relative deviations calculation of each region from maximum and minimum values of such parameters in the other regions, by the formula: r x x x x x x x x j i n maxi ij maxi mini i n ij mini maxi mini = − − + − −− − ∑ ∑� � � �1 1 , (1) where rj – the sum of ratings of a particular region for each of the indicators, characterized the area of activity; xij – the value of i-indicator for j-region; xmaxi – the maximum value of i-indicator; xmini – the minimum value of i-indicator. the formula’s first part is used for indicators’ evaluation, which increase is positive (for example, the volume of industrial output per capita), the second part – for indicators’ evaluation, which increase has a negative value (for example, the amount of unpaid wages). determining the arithmetic mean of the rating sum of the particular region by all annual assessment indicators, describing an area of activity, based on a formula: r r n cpj j= � , (2) where rcpj – the arithmetic mean of the rating sum of the particular region by all assessment indicators of an activity area; n – the number of indicators, which are calculated by different directions. the indicators’ calculations determined the integrated grade as the average value of the rating sum of a particular region in all directions by the formula: i r m j m cpj = ∑� 1 , (3) where ij – the average value of the rating sum of a particular region in all directions; m – the number of directions, for which the calculation was made. baltic journal of economic studies 103 vol. 5, no. 1, 2019 it should be noted that some of the complex rating evaluation indicators of socio-economic development by 2015, which are published by the ministry of regional development, construction and housing and communal services of ukraine (the socio-economic development monitoring in 2015, 2016) can be considered as partially reflecting the level of agricultural land use sustainability. however, the indicators are scattered in different directions, partly presented in the report and not allow monitoring and making a holistic assessment of the agricultural land use sustainability of ukraine’s regions. on the other hand, the methodology mentioned above is used to determine the effectiveness of the state regional policy implementation. the main purpose of monitoring and evaluating the agricultural land use sustainability of ukraine’s regions is to allow their rankings and determination as “depressed” that require implementation of the appropriate measures for sustainable development goals achievement. since the official approved procedure of monitoring and evaluating the sustainability of agricultural land use regions of ukraine does not exist, we propose to conduct such monitoring on the basis of the methodology substantiated above (fao, 2017) with the necessary modifications that meet the sustainable development goals of ukraine for 2015–2030. methodological explanations for figure 2. 1.1. the share of arable land in the farmland square – the percentage of arable land of agricultural land: 1 1. = a l a l g r , (4) a lg – agricultural land is defined as land systematically used to produce agricultural products; it includes arable land, fallow, permanent crops, hayfields, and pastures. agricultural lands may be owned, rented, and may be used on a temporary or permanent basis by agricultural enterprises, and individuals; arl – arable land – land plots that are permanently cultivated and used for agricultural crops including permanent grasses and clean fallow, areas of hothouses and greenhouses. arable land doesn’t include hayfields and pastures ploughed up for full improvement and when they are permanently used under grass fodder crops for hay-mowing and livestock grazing, as well as inter-row spaces in orchards used for sowing. 1.2. monetary valuation of a hectare of arable land (normative monetary value per hectare of arable land): 1 2. .�= ⋅ ⋅r p t , (5) r – rental income on arable land; p – price quintals of grain; t – a term of rental income capitalization (33 years). 1.3. forest area: 1 3. .�� = fl tl , (6) fl – forest land; tl – the total land area. 1.4. inter-regional migration – the difference between the number of arrivals in an area and the number of departures abroad. 1.5. the rate of natural population growth in rural areas – the difference between live births and the number of deaths. 1.6. average monthly nominal wage in agriculture. nominal wages – payment to employees in cash and kind for time worked or work done, tariff rates (salaries), bonuses, allowances, and other payments. it includes mandatory deductions from employee salaries, income tax, single social tax, war tax. 1.7. supply of housing in rural areas: 1 4. .�� = hs rp , (7) hs – the housing stock – a set of premises, including residential buildings, special buildings (dormitories, shelters, homes for elderly and disabled people – adults and children, children’s homes, and boarding schools), apartments, office accommodation, other accommodation in buildings suitable for living; rp – rural population – people living in rural areas. 1.8. agricultural output per 100 hectares of farmland – production crop and animal production – total production volume in physical terms is estimated by dividing the production volume by agricultural land for the reporting year. 1.9. land return: 1 9 1 2 . . . = � ap , (8) agricultural products (at constant prices) – the value of livestock and crop production. 1.10. per capita agricultural production. per capita crop and animal production is estimated by dividing the production volume by the average annual number of present population for the reporting year. 1.11. polluted water into surface waters – the volume of allowable emission of non-treated and contaminated waste (industrial and municipal) discharged into surface waters. 1.12. emissions of harmful substances into the atmosphere per 1 km2 – air emissions, total and carbon dioxide emissions. 1.13. the wastes generation per 1 km2. waste – any substance, materials made as a result of the production or consumption, as well as goods (products) that wholly or partially lost their consumer properties and have no further use for the place of their creation and from which the owner should get rid of by recycling or removal. 3. data and estimation procedures monitoring and evaluation of the agricultural land use sustainability involve periodic tracking of relevant indicators based on available official statistics, information of central authorities, local authorities and, baltic journal of economic studies 104 vol. 5, no. 1, 2019 on the basis of monitoring, carrying out the ranking of ukrainian regions by comparing the obtained results with their best values. monitoring and evaluation of the agricultural land sustainability are conducted to monitor the process of sustainable agricultural development goals implementation, problems’ identification of regions agricultural land use and their causes, improving the efficiency of administrative decisions of central executive authorities, local authorities and the land market actors. given the goals and objectives of monitoring, we can identify four stages of monitoring and evaluating the agricultural land use sustainability (figure 1). at the first stage, in order to determine the list of relevant indicators, it’s necessary: to justify the assessment criteria (which information should be available for simple calculations, there should be a few, but they must describe, as much as possible, the development of land areas); to develop such methodology for calculating the integral index that organizing by different methods did not significantly affect the position in the ranking. in addition, it should be quite simple and clear, and partial indicators, obtained during the calculation of integrated indicators, should not be just relative ratios but have economic content. since, as noted above, the indicator system should reflect the level of achievement of global sustainable development goals 2015-2030, and then to the partial list of criteria, in our view, should include the following parameters (figure 2): growth class or monetary evaluation of soil per hectare of farmland; the share of arable land in the farmland; forested area; the volume of agricultural production per 100 hectares of farmland; land return; the volume of polluted water in water surface; emissions of harmful substances into the air; formation of toxic industrial waste; the volume of agricultural production per capita; interregional migration; natural population growth in rural areas; average nominal wages; provision of housing. as an integral indicator of the land use sustainability in ukraine (at the macroand meso-levels) according to the analogue to the green gdp, we propose to calculate the indicator of the gross agricultural production per capita taking into account the economic losses from soil pollution and other forms of anthropogenic influence: sd gap el p lu = − � � , (9) however, despite the fact that in ukraine the population tends to decrease, to apply the indicator to keep track of the dynamics of the land use sustainability is incorrect because with other conditions remaining the same, or even with some deterioration in their values, the decrease in population will lead to the increased values of the land use sustainability, which denies the essential meaning of the sustainability. therefore, the integrator should be used as the basic integral indicator of the land use sustainability and for comparisons at the regional level. for the assessment of the changes in the land use sustainability over time, formula 2 can be used: sd gap el al lu = − � � , (10) it is clear that the area of the agricultural land, as well as the population, may be reduced; however, if such changes are the results of the anthropogenic impact, the consequences of this will be reflected in the formula through economic losses (eb). other reasons for the withdrawal of agricultural lands from circulation have positive environmental or social consequences (e.g., for the establishment of the protected area) and, therefore, they do not distort the results of calculation of the indicator. another situation can happen when the agricultural land area will be expanded. however: firstly, for ukraine, considering the indicators of agricultural land development, it is impossible at least in significant quantities; secondly, in this case, the indicator cp3 will be decreased (with other conditions remaining the same). st ag es o f m on ito ri ng a nd e va lu at io n і stage determining the list of relevant indicators (partial criteria) іі stage calculation of indicators, tracking their dynamics ііі stage implementation of the regions rating (ranking) for each indicator and calculation of the overall rating assessment іv stage conformity assessment of the results to the sustainable development goals figure 1. the monitoring and evaluating stages of land use sustainability source: created by the authors baltic journal of economic studies 105 vol. 5, no. 1, 2019 4. results at the second stage, the calculation of the proposed list of indicators is provided. the data for 2006 and 2013 are presented in tables 1, 2, and 3. the range of these fluctuations according to the indicators, calculated by different methods, in most countries ranges from zero to one and only in slovakia and ukraine the fluctuation is two units. the value of the indicator in slovenia is significantly different from the indicators of other countries. the excess in the value of the indicator sdlu(i) compared to sdlu(ii) is set in all countries. positive changes in most regions are found in two partial indicators: the land return (a negative trend is noted in the ar of crimea, donetsk, zakarpattia, and lviv regions) and the volume of polluted water into surface waters (a negative trend is noted in the ar of crimea and sumy region). the dynamics study of the specified indicators shows the improvements in all regions according to six partial indicators: monetary evaluation of farmland per hectare (the largest increase is found in the cherkasy region and the lowest one – in the chernihiv region); average nominal wages (the largest gain is set in the kyiv region and the lowest – in the odesa region); the volume of agricultural production per 100 hectares of farmland (the largest increase figure 2. the system for monitoring and assessment of the agricultural land use sustainability indicators of ukraine’s regions source: created by the authors goals and objectives of sustainable development for 2015–2030 indicators 15.3 by 2030, to struggle the desertification, restore degraded land and soils 1.1.the share of arable land in farmland, % 1.2. monetary valuation of hectare of arable land, uah 1.3. forest area, % 1.4. inter-regional migration, % 1.5. the rate of natural population growth in rural areas 1.6. average monthly nominal wage in agriculture, uah 1.7. supply of housing in rural areas, m2 2.3 by 2030, to double the agricultural productivity and incomes of small food producers 15.1 by 2020, to ensure the preservation, restoration and sustainable use of terrestrial ecosystems, including forests 11.1 by 2030, to provide universal access to housing 3. ensuring the healthy lifestyle and promote well-being 1.1 by 2030, to eliminate the extreme poverty for all people around the world 10.7 to promote the orderly, safe, legal, and responsible migration and mobility of people 2.4 by 2030, to introduce the farming practices that can improve productivity and increase production volume 1.8. agricultural output per 100 hectares of farmland, thousand uah 2.3 by 2030, to double the agricultural productivity and incomes of small food producers 1.9. land return, uah/ uah 2.2 by 2030, to put an end to all forms of malnutrition 1.10. agricultural output in per capita, uah 1.11. polluted water into surface waters, millions m3 1.12. emissions of harmful substances into the atmosphere per 1 km2, t 1.13. formed industrial toxic waste per 1 km2, t 6.3 by 2030, to increase the water quality by eliminating waste dumping 11.6 by 2030, to reduce the negative environmental impact of cities 12.5 by 2030, substantially reduce the amount of waste baltic journal of economic studies 106 vol. 5, no. 1, 2019 table 1 the land use sustainability assessment of the post-socialist countries by the integral indicator in 2013, units of national currency countries the calculation of sdlu by formula 9 the calculation of sdlu by formula 10 values obtained by formula 10 in relation to the values obtained by formula 9 (+,-) bulgaria 303,7 628,6 324,9 latvia 178,3 302,6 124,3 lithuania 576,9 730,2 153,3 poland 423,8 1487,2 1063,4 romania 1547,8 3521,8 1974 slovakia 79,0 306,5 227,5 slovenia 0,0 0,0 0,0 croatia 1641,5 7870,2 6228,7 czech republic … … … estonia 133,8 280,2 146,4 ukraine 2697,6 3444,1 746,5 source: calculated by the authors according to the state statistics service of ukraine and federal state statistics service table 2 monitoring and evaluating indicators (partial criteria) of the agricultural land use sustainability of regions of ukraine in 2006 regions indicators 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 ar of crimea 79.1 11191 12.4 110.8 -4.5 952 16.7 210.5 0.19 1337 80 4.7 43.28 vinnytsia 90.5 10018 14.2 78.2 -13.2 793 31.3 300.4 0.30 3216 2 8.0 0.03 volyn 70.3 9069 34.3 97.2 -4.7 773 21.6 323.5 0.36 2720 1 2.8 0.03 dnipropetrovsk 93.5 9852 6.0 109.9 -11.5 1139 26.1 263.2 0.27 1729 660 39.9 29.57 donetsk 86.9 10556 7.7 92.8 -11.7 1202 23.7 270.4 0.28 1084 1374 71.5 239.53 zhytomyr 74.8 6235 35.5 77.7 -13.7 793 26.4 233.7 0.38 2430 23 2.5 0.82 zakarpattia 47.6 7946 56.5 62.8 -0.1 868 22.1 506.6 0.64 1684 13 5.5 0.32 zaporizhzhia 88.4 10250 4.3 86.2 -11.0 1091 25.0 177.4 0.17 2052 457 13.9 289.91 ivano-frankivsk 72.2 8653 45.6 85.7 -3.7 923 23.3 493.6 0.57 1775 26 22.9 3.68 kyiv 84.5 9684 23.7 104.6 -15.3 1058 34.9 413.6 0.43 1429 16 7.2 5.64 kirovohrad 95.9 9722 7.3 53.5 -12.0 819 26.3 211.2 0.22 3567 21 2.5 0.65 luhansk 72.6 8033 12.8 67.3 -12.8 1022 24.2 159.8 0.20 1173 222 24.0 33.31 lviv 69.2 8064 31.7 90.8 -5.6 923 22.7 404.5 0.50 1658 180 9.5 10.96 mykolaiv 91.1 7985 4.9 92.1 -7.4 955 22.6 172.5 0.22 2530 29 2.8 22.09 odesa 86.5 8515 6.7 94.6 -7.4 966 23.7 202.4 0.24 1946 183 4.2 0.08 poltava 90.0 10513 9.5 100.0 -14.9 961 27.2 260.4 0.25 3208 5 6.6 0.33 rivne 72.6 9513 39.7 84.3 -1.9 888 22.3 316.1 0.34 2386 25 2.9 0.52 sumy 78.9 8913 19.1 69.0 -17.7 857 25.8 198.7 0.22 2354 10 3.3 73.66 ternopil 84.5 9612 14.4 72.4 -8.3 727 23.3 298.2 0.31 2609 3 3.9 0.01 kharkiv 83.3 9847 13.2 124.5 -12.5 974 23.3 228.8 0.23 1787 20 10.3 2.89 kherson 94.0 10480 5.3 67.8 -5.6 800 21.6 196.2 0.19 3102 28 2.3 0.24 khmelnytskyi 81.3 10449 13.8 80.2 -14.5 792 28.0 248.8 0.24 2642 7 2.8 0.10 cherkasy 93.8 12059 16.1 89.7 -15.3 846 30.1 378.7 0.31 3742 20 5.0 0.13 chernivtsi 73.1 10301 31.8 110.0 -3.1 819 22.7 414.6 0.41 2075 7 4.0 0.01 chernihiv 69.9 7398 22.4 83.6 -23.0 790 29.3 188.1 0.26 3010 29 2.7 0.20 source: calculated by the authors according to the state statistics service of ukraine note: see the list of indicators in figure 2 baltic journal of economic studies 107 vol. 5, no. 1, 2019 is found in the cherkasy region and the lowest – in the luhansk region); the volume of agricultural production per person (the largest increase is found in the cherkasy region and the lowest – in the donetsk region); supply of housing (the largest increase is found in the kyiv region and the lowest – in the mykolaiv region); natural population growth in rural areas (the largest increase is found in the odesa region and the least – in the ivano-frankivsk region). negative changes in most regions are found in four partial indicators: the share of arable land in the area of farmland (positive changes took place in luhansk, kherson, and chernivtsi regions; the indicator value did not change in kyiv and zaporizhzhia regions); forested areas (positive changes took place in the ar of crimea, kyiv and ivano-frankivsk regions, and the indicator value did not change in dnipropetrovsk, donetsk, odesa, and kherson regions); emissions of harmful substances into the air (positive changes took place in volyn, dnipropetrovsk, donetsk, zaporizhzhia, and sumy regions); formation of toxic industrial waste (positive changes took place in zaporizhzhia and sumy regions). in terms of inter-regional migration, the positive trend observed in vinnytsia, volyn, zhytomyr, zakarpattia, ivanofrankivsk, kyiv, kirovohrad, lviv, odesa, rivne, sumy, ternopil, kherson, khmelnytskyi, and chernivtsi regions. among post-socialist countries, ukraine according to the indicator of sustainability ranks the first place according to the indicator calculated by the first method and the third place according to the indicator calculated by the second method (figure 3). ranking of the regions in terms of the share of arable land in the farmland testifies positive changes in the ranking of volyn, dnipropetrovsk, zhytomyr, ivano-frankivsk, odesa, poltava, and rivne regions. the positions in the indicator ranking of luhansk and chernivtsi regions significantly reduced (table 4-5). by the indicator of monetary farmland evaluation improved the position in the ranking of mykolaiv, poltava, and ternopil regions, and deteriorated – in zakarpattia, rivne, khmelnytskyi, and kherson regions. in terms of forest areas the least of changes occurred – just in four regions: increased the kyiv and kharkiv regions rating, reduced – the luhansk and chernihiv regions rating. table 3 monitoring and evaluating indicators (partial criteria) of the agricultural land use sustainability of regions of ukraine in 2013 regions indicators 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 ar of crimea 80.8 24651 11.5 109.0 0.5 2204 19.0 448.4 0.18 3353 93 5.0 98.90 vinnytsia 90.8 22067 14.3 86.2 -9.6 2410 34.3 979.3 0.44 11014 1 8.6 109.7 volyn 73.1 19976 34.6 100.0 -0.3 2008 25.1 765.8 0.38 6097 1 2.4 28.4 dnipropetrovsk 94.7 21701 6.0 85.7 -6.5 2344 27.6 688.5 0.32 4584 325 35.9 9420.2 donetsk 87.8 23255 7.7 71.6 -8.7 2581 26.0 645.2 0.28 2635 507 62.1 2006.9 zhytomyr 81.3 13732 37.7 85.9 -8.9 2420 32.2 652.7 0.48 6643 3 3.0 22.5 zakarpattia 48.0 17599 56.8 70.3 3.2 2261 24.0 1072.1 0.61 3435 2 5.4 9.3 zaporizhzhia 88.4 22577 4.4 78.2 -6.2 2052 27.1 447.1 0.20 5349 77 13.0 168.2 ivano-frankivsk 76.4 19060 45.6 103.5 -1.5 2560 25.7 1138.0 0.60 4062 1 18.2 121.4 kyiv 84.6 21331 23.1 153.6 -10.1 2766 44.6 990.1 0.46 3272 3 9.9 85.5 kirovohrad 96.7 21415 7.7 75.0 -7.7 2251 27.9 641.7 0.30 11561 5 3.0 1582.4 luhansk 72.1 17694 13.4 59.0 -9.2 2126 26.2 382.5 0.22 2892 142 19.6 667.1 lviv 71.0 17762 31.8 91.6 -2.5 2421 25.7 869.8 0.49 3470 46 10.9 121.6 mykolaiv 92.5 17588 5.1 79.8 -3.5 2073 23.5 530.6 0.30 8023 25 3.4 94.5 odesa 88.8 18757 6.7 129.4 -1.8 1770 27.1 514.8 0.27 4740 81 4.9 21.3 poltava 92.8 22853 9.9 93.9 -10.6 2404 30.1 866.2 0.38 10952 5 6.1 200.3 rivne 77.7 20954 40.2 84.9 1.9 2296 24.0 829.3 0.40 5669 7 2.8 78.9 sumy 80.0 19633 19.3 77.6 -13.5 2220 29.5 651.1 0.33 8271 27 3.3 28.4 ternopil 85.8 20043 14.6 79.5 -5.9 2048 25.8 836.4 0.42 7488 2 4.2 48.9 kharkiv 84.2 21688 13.3 110.9 -7.8 2396 26.4 671.5 0.31 5343 13 10.5 65.6 kherson 93.7 23151 5.3 69.9 -2.8 2037 22.8 554.7 0.24 9123 2 2.6 12.2 khmelnytskyi 82.0 23016 13.9 87.5 -10.9 2453 31.4 780.2 0.34 8793 1 3.9 53.9 cherkasy 94.3 26562 16.2 87.6 -10.9 2488 33.4 1142.2 0.43 11821 8 7.2 49.2 chernivtsi 72.1 22685 31.9 120.3 -0.5 2213 25.6 1007.5 0.44 4973 2 4.8 51.3 chernihiv 75.0 16295 23.2 81.6 -18.5 2157 38.3 542.9 0.33 8777 17 2.9 21.1 source: calculated by the authors according to the state statistics service of ukraine note: see the list of indicators in figure 2 baltic journal of economic studies 108 vol. 5, no. 1, 2019 6 7 4 5 3 9 10 2 8 1 6 8 5 4 2 7 10 1 9 3 0 5 10 15 b ul ga ri a l at vi a l ith ua ni a po la nd r om an ia sl ov ak ia sl ov en ia c ro at ia e st on ia u kr ai ne the calculation of sdlu by formula 9 the calculation of sdlu by formula 10 figure 3. the land use sustainability assessment of the post-socialist countries by the integral indicator in 2013 source: calculated by the authors according to the state statistics service of ukraine and federal state statistics service table 4 partial rating criteria for sustainability of agricultural land use of ukraine’s regions monitoring and evaluating during 2006 regions 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 ar of crimea 11 2 17 2 5 9 20 18 23 23 16 10 20 vinnytsia 20 9 13 18 15 17 2 9 11 3 2 14 2 volyn 4 16 5 7 6 21 19 7 7 7 1 4 2 dnipropetrovsk 22 10 22 4 10 2 9 12 13 19 21 21 18 donetsk 17 3 19 9 11 1 13 11 12 25 22 22 22 zhytomyr 9 25 4 19 16 17 7 15 6 11 11 2 12 zakarpattia 1 23 1 24 1 13 18 1 1 20 7 12 8 zaporizhzhia 18 8 25 13 9 3 11 22 25 15 20 18 23 ivano-frankivsk 5 18 2 14 4 11 14 2 2 18 13 19 14 kyiv 15 13 8 5 19 4 1 4 4 22 8 13 15 kirovohrad 25 12 20 25 12 16 8 17 20 2 10 2 11 luhansk 7 21 16 23 14 5 12 24 22 24 19 20 19 lviv 2 20 7 11 6 10 15 5 3 21 17 15 16 mykolaiv 21 22 24 10 7 8 16 23 21 10 15 4 17 odesa 16 19 21 8 7 7 13 19 17 16 18 9 3 poltava 19 4 18 6 18 10 6 13 15 4 4 17 9 rivne 6 15 3 15 2 12 17 8 8 12 12 5 10 sumy 10 17 10 21 20 14 10 20 19 13 6 6 21 ternopil 14 14 12 20 8 22 14 10 10 9 3 7 1 kharkiv 13 11 15 1 13 6 14 16 18 17 9 16 13 kherson 24 5 23 22 6 19 19 21 24 5 14 1 7 khmelnytskyi 12 6 14 17 17 18 5 14 16 8 5 4 4 cherkasy 23 1 11 12 19 15 3 6 9 1 9 11 5 chernivtsi 8 7 6 3 3 16 15 3 5 14 5 8 1 chernihiv 3 24 9 16 21 20 4 21 14 6 15 3 6 source: calculated by the authors note: see the list of indicators in figure 2 contrary, the significant changes took place in the ranking in terms of interregional migration: most grown ranking in ivano-frankivsk, zhytomyr, and khmelnytskyi regions; dnipropetrovsk, donetsk, and mykolaiv regions significantly reduced in terms of the ranking position. in terms of natural population growth in rural areas, the most of the regions worsened their position in the ranking, the highest and lowest ranking, increased and reduced by five positions respectively in volyn and khmelnytskyi regions. the biggest difference in the change of rating positions held in terms of average nominal wages. by 18 points dropped zaporizhzhia and odesa regions ranking, by 13 points increased khmelnytskyi region ranking. positions of zakarpattia, rivne, ternopil, and chernivtsi regions remained unchanged. according to the rating of the housing supply, the position of the mykolaiv region has increased significantly and the positions of zhytomyr, odesa, sumy, and chernihiv regions reduced a little. baltic journal of economic studies 109 vol. 5, no. 1, 2019 table 5 partial rating criteria for sustainability of agricultural land use of ukraine’s regions monitoring and evaluating during 2013 regions 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 ar of crimea 10 2 17 5 6 17 25 23 25 22 14 13 16 vinnytsia 19 9 13 12 18 8 3 6 7 3 1 17 17 volyn 5 16 5 7 1 24 20 12 11 12 1 1 6 dnipropetrovsk 24 10 22 14 12 11 10 13 16 18 16 24 25 donetsk 16 3 19 22 15 2 15 17 20 25 17 25 24 zhytomyr 11 25 4 13 16 7 5 15 4 11 3 5 5 zakarpattia 1 22 1 23 1 13 21 3 1 21 2 14 1 zaporizhzhia 17 8 25 19 11 21 12 24 24 14 12 21 20 ivano-frankivsk 7 18 2 6 4 3 18 2 2 19 1 22 18 kyiv 14 13 9 1 19 1 1 5 5 23 3 18 14 kirovohrad 25 12 20 21 13 14 9 18 19 2 4 6 23 luhansk 3 21 15 25 17 19 14 25 23 24 15 23 22 lviv 2 20 7 9 7 6 17 7 3 20 11 20 19 mykolaiv 20 23 24 17 9 20 23 21 18 9 9 8 15 odesa 18 19 21 2 5 25 11 22 21 17 13 12 4 poltava 21 6 18 8 20 9 7 8 12 4 4 15 21 rivne 8 14 3 15 3 12 22 10 10 13 5 3 13 sumy 9 17 10 20 23 15 8 16 15 8 10 7 7 ternopil 15 15 12 18 10 22 16 9 9 10 2 10 8 kharkiv 13 11 16 4 14 10 13 14 17 15 7 19 12 kherson 22 4 23 24 8 23 24 19 22 5 2 2 2 khmelnytskyi 12 5 14 11 22 5 6 11 13 6 1 9 11 cherkasy 23 1 11 10 21 4 4 1 8 1 6 16 9 chernivtsi 4 7 6 3 2 16 19 4 6 16 2 11 10 chernihiv 6 24 8 16 24 18 2 20 14 7 8 4 3 source: calculated by the author note: see the list of indicators in figure 2 in terms of agricultural production per 100 hectares of farmland, ranking positions of crimea and donetsk region increased the most; thus poltava and cherkasy regions significantly lost in the ranking. in terms of land return, the rating of the donetsk region increased by eight positions, while vinnytsia and sumy regions lost four positions in the ranking. by indicator of agricultural production volume per capita, the rating equally decreased and increased (by five positions), respectively, in sumy and volyn regions. the worst situation in the regions is in terms of indicator of polluted water volumes into surface waters – in all regions (except volyn and poltava regions where the rating has not changed) positions in the ranking declined. contrary, in terms of emissions into the atmosphere, almost all regions rating improved (except volyn, poltava, and rivne regions). in terms of the formation of toxic industrial waste vinnytsia (15 points), kirovohrad (12 points), and poltava (12 points) regions significantly improved its positions; 14 points down the sumy region rating. calculation of total rating assessment is proposed to be done according to previously created methodology (unu, 2017). according to the calculations in 2013, the first three places in the ranking respectively received zakarpattia, volyn, ivano-frankivsk regions (table 6). thus, the first two positions in the ranking of the regions did not change and, in the ivano-frankivsk region, the rating increased by five positions. in zakarpattia region, partial indexes are the highest by five of the thirteen indicators: the share of arable land in farmland, forest area, the rate of natural population growth, land return, and the formation of industrial toxic waste. in the volyn (2nd place), kyiv (9th place), and cherkasy (10th place) regions, the partial indicators are the highest by the three indicators. in ivano-frankivsk region, which in the ranking took the third place, 9 of 13 partial indicators have the values above 0,6. the last three places in the ranking took donetsk, zaporizhzhia, and luhansk regions. the main reason for such low indicators, the common for all these regions, – is the high volumes of polluted water emissions into surface waters and emissions of harmful substances into the atmosphere. in addition, in zaporizhzhia region, there is the lowest forest area and land return, in luhansk region – the lowest partial indices of agricultural production per 100 hectares volume and inter-regional migration; in donetsk region – the lowest volume of agricultural production per one person. in general, the gap between the highest and the lowest generalized indicator for the agricultural land use sustainability development assess was 0,403 (2,2 times). baltic journal of economic studies 110 vol. 5, no. 1, 2019 5. conclusions 1. the proposed methodology is developed to rank the stability of the agricultural land use and includes the set of the most important partial criteria. 2. it is found that at the present time, there are many models of the indicators systems, the common element of which is the availability of simple, linking indicators and indicators that point to the distance to the target. however, the anticipated indicators are largely of the controversial nature and they have not received general recognition in the world. 3. the expediency is proved and two methodological approaches for the agricultural land use stability assessment have been made up: the construction of the aggregate indicator, with the help of which it is possible to judge the degree of the land use sustainability at the macro level; the construction of the integral indicator to compare the countries’ land use sustainability. 4. the method for determining the aggregate indicator has been developed and the method for determining the integral indicator of the agricultural land use sustainability that takes into account environmental, economic and social aspects of the process and its characteristics in the countries of the post-socialist camp has been improved. 5. according to the given methods, it has been proved that agricultural land use in the countries of the post-socialist camp has a positive dynamics, but the sustainability indicators for all indicators have not achieved yet. 6. in accordance with settlements for solving the problems in the area of agricultural land use, the state should focus on less developed regions where environmental situation is difficult (crimea, dnipropetrovsk, donetsk, ivano-frankivsk, and luhansk regions), productivity (crimea, zaporizhzhia, luhansk, zakarpattia, and kyiv regions) and land return (crimea, zaporizhzhia, luhansk, and kherson regions) reduced, slowed population growth (poltava, sumy, khmelnytskyi, cherkasy, and chernihiv regions) and have an excessive migration (zakarpattia, kirovohrad, luhansk, and kherson regions). table 6 the integral indicator for evaluation of agricultural land use sustainability in the regions of ukraine regions 2006 2013 2013 against 2006, + іі place by the rating іі place by the rating іі place by the rating ar of crimea 0.423 21 0.413 21 -0.010 0 vinnytsia 0.527 7 0.594 5 0.067 -2 volyn 0.630 2 0.700 2 0.070 0 dnipropetrovsk 0.422 22 0.391 22 -0.031 0 donetsk 0.407 23 0.374 23 -0.033 0 zhytomyr 0.501 10 0.570 8 0.069 -2 zakarpattia 0.654 1 0.742 1 0.088 0 zaporizhzhia 0.395 24 0.369 24 -0.026 0 ivano-frankivsk 0.525 8 0.619 3 0.094 -5 kyiv 0.520 9 0.569 9 0.049 0 kirovohrad 0.462 15 0.495 16 0.033 1 luhansk 0.360 25 0.339 25 -0.021 0 lviv 0.489 13 0.480 17 -0.009 4 mykolaiv 0.437 19 0.433 20 -0.004 1 odesa 0.431 20 0.451 18 0.020 -2 poltava 0.485 14 0.514 14 0.029 0 rivne 0.531 6 0.584 7 0.053 1 sumy 0.451 17 0.505 15 0.054 -2 ternopil 0.553 4 0.520 13 -0.033 9 kharkiv 0.437 18 0.448 19 0.011 1 kherson 0.455 16 0.548 11 0.093 -5 khmelnytskyi 0.496 11 0.588 6 0.092 -5 cherkasy 0.532 5 0.568 10 0.036 5 chernivtsi 0.619 3 0.619 4 0.000 1 chernihiv 0.491 12 0.533 12 0.042 0 source: calculated by the authors baltic journal of economic studies 111 vol. 5, no. 1, 2019 references: unu (2017). sustainable development goals 2016-2030. retrieved 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(2004). limits to growth. the 30-year update. chelsea green publishing. harlem brundtland, gro. (2002). world summit on sustainable development. bmj. 325. 399. 10.1136/ bmj.325.7361.399. ashby, m. (2015). materials and sustainable development (1st edition). droste, n., kuikman, p. and others (2016). steering innovations towards a green economy: understanding government intervention. journal of cleaner production, 135, 426-434. fiorella, k., chen, r ., milner, e. (2016). agricultural interventions for improved nutrition: a review of livelihood and environmental dimensions. global food security, 8, 39-47. kotykova, o. (2012). methodological and methodical bases of complex evaluation of sustainable development of agricultural land use. collection of scientific works sworld. odesa: kyprienko. cabinet’s of ministers of ukraine resolution (2015). the method of the state regional policy implementation monitoring and evaluation. retrieved from: http://zakon2.rada.gov.ua/laws/show/856-2015-%d0%bf/ paran58#n58 cabinet’s of ministers of ukraine resolution (2015). the procedure of the state regional policy implementation monitoring and evaluation. retrieved from: http://zakon2.rada.gov.ua/laws/show/856-2015-%d0%bf ministry of regional development, construction and housing and communal services of ukraine. department of regional development (2016). the socio-economic development monitoring in 2015. retrieved from: http://www.minregion.gov.ua/wp-content/uploads/2016/03/otsinka-sotsialno-ekonomichnogo-rozvitkuregioniv-za-2015-r.-prezentatsiyni-materiali.pdf baltic journal of economic studies 218 vol. 5, no. 1, 2019 corresponding author: 1 mykolayiv national agrarian university, ukraine. e-mail: timofany@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-218-223 sustainable development of agricultural producers is a condition for their successful functioning in the world market hanna fedosieieva1 abstract. purpose. substantiation of a holistic system of goals of steady development of agricultural producers on the conditions of their successful functioning in the world market taking into account global and local trends in the development of the world economy, peculiarities of agricultural activity in ukraine, and directions of development of the world agricultural market. the methodology of research. the reliability of the study is due to the use of an integrated approach and a significant set of research methods, in particular: systematic approach – in studying the connections between phenomena and processes in the system of formation of a holistic system of steady development of agricultural producers on the conditions of their successful functioning in the world market; monographic – for a comprehensive and in-depth study of the peculiarities of the modern manifestation of the key factors of sustainable development of agricultural producers, provided that they operate in the world market; dialectical and abstract-logical – when conducting theoretical generalizations and forming conclusions; the method of scientific abstraction – with a selection of key factors that determine the steady development of agricultural producers; etc. findings. considered the main goals of sustainable development on the basis of values, principles, and key factors of the development of the world economy. determined the main global tendencies of development of the world agricultural market. on the basis of the study, an integrated system of goals for the steady development of agricultural producers in the conditions of their functioning in the world market has been formed. it is noted that the basis of the sustainable development of any system is a combination of economic development with a minimal negative impact on the environment and the socialization of newly created economic transformations. originality. the integrated system of goals of steady development of agricultural producers in the world market, which includes three interconnected blocks: economic, social and ecological, for which each priority is defined, is substantiated. the main conditions for achieving these goals are presented. practical implications. the obtained results can be used in substantiating directions of the formation of stable competitive advantages of agricultural producers in the world market. key words: sustainable development of agricultural producers, world market, agricultural productivity, profitability of agricultural activity, social development, ecological development, innovative technologies. jel classification: q17, d92, q50 1. introduction the united nations millennium declaration, adopted in 2000 by the 189 countries at the un millennium summit, defined the millennium development goals, a comprehensive framework of values, principles, and key development drivers by 2015. in september 2015, in the framework of the 70th session of the un general assembly in new york, the united nations summit on sustainable development, and the adoption of the agenda for development after 2015, which approved new development benchmarks, took place. the final document of the summit “transforming our world: the 2030 agenda for sustainable development” approved 17 sustainable development goals and 169 objectives. more than 800 leading experts in the thematic areas of sustainable development have been involved in adapting identified goals and objectives in ukraine. representatives of ministries and agencies, government agencies, un agencies in ukraine, international organizations, the business community, expert community, public organizations (primarily those representing the interests of the most vulnerable groups), and civil society represented the proposals for sustainable development of ukraine. this work was supported by all un agencies in ukraine, the united nations development program in ukraine, baltic journal of economic studies 219 vol. 5, no. 1, 2019 the green economy program implemented by the german society for international cooperation on behalf of the federal ministry for economic cooperation and development of germany and jointly with the institute of demography and social studies named after m. v. ptukha, national academy of sciences of ukraine. as a result of this work, the goals of sustainable development of ukraine in four directions were identified: fair social development; sustainable economic growth and employment; effective management; environmental balance and sustainability. the public vision of ukraine's development until 2030 includes such benchmarks for achieving as the welfare and health of the population, which will be provided by the innovative development of the economy, built on the sustainable use of natural resources. the structure of exports envisages changes aimed at shifting from raw materials and products of primary processing to high value-added products and services. economic growth should be based on the green economy model. thanks to energy saving measures and the use of energy efficient practices, the energy intensity of the gross domestic product should be substantially reduced. concerning agriculture, the national goals of the sustainable development of ukraine in this direction are determined by: increasing the productivity of agriculture twice, first of all, due to the use of innovative technologies; ensuring the establishment of sustainable food production systems that contribute to the conservation of ecosystems and gradually improve the quality of land and soils, primarily through the use of innovative technologies; the restoration of degraded lands and soils with the use of innovative technologies; reduction of food loss in production and supply chains. in addition to the aforementioned, the ministry of economic development and trade of ukraine has developed a number of tasks, which should be carried out according to the types of economic activity (to create financial and institutional systems that will ensure the development of scientific research and scientific and technical development). in addition, specific tasks relate to the rural population (increase the level of employment, provide access to vocational education, ensure access to social services), infrastructure provision of rural life (to develop a high-quality, reliable, sustainable, and accessible infrastructure based on the use of innovative technologies) and other. the objective of the work is to substantiate the integral system of tasks of sustainable development of agricultural producers in the conditions of their functioning in the world market taking into account global and local trends of world economic development, peculiarities of agricultural activity in ukraine, and directions of development of the world market for agricultural products. 2. the system of sustainable development of agricultural producers the globalization of the world economy has led to the emergence and rapid development of the following processes: a violation of the stability of metabolic processes in the biosphere due to manmade and anthropogenic burden; world food problem; stimulation of ecologization of agricultural production and increase of demand for organic agricultural products in the developed countries of the world; increase of world volumes of production of genetically modified agricultural products; annual reduction of world land (including agricultural land) and water resources; rapid development of bioand energy-efficient technologies, etc. the identified processes directly affect the trends of world trade in agricultural products. thus, taking into account the identified goals of sustainable development at the international and national levels, as well as globalization processes in the world and their impact on the development of the world agricultural market, we have identified the system of sustainable development of agricultural producers in the conditions of their functioning in the world market, figure 1. sustainable development of agricultural producers in the conditions of their functioning in the world market should include three interconnected components: economic, ecological, and social one. after all, the basis of the sustainable development of any system is a combination of economic development with a minimal negative impact on the environment and the socialization of newly created economic transformations. in general, achievement of certain goals can be achieved at the expense of innovative development of agricultural commodity producers and a balanced state social and economic policy in the field of agriculture. the block of economic goals of the sustainable development of agricultural producers in the conditions of their functioning in the world market is quite extensive, it is determined by the peculiarity of the development of certain branches of agriculture, the location of agricultural producers, the level of their logistical support, the size of certain agricultural enterprises, the orientation to a greater extent on internal or external market and other factors. in addition, the realization of the economic goals of sustainable development directly affects the resolution of social and environmental issues in rural areas. 3. the economic component of ensuring the sustainable development of agricultural producers in general, the basis for solving the problem of the sustainability of the development of agricultural commodity producers, including, in the conditions of their functioning in the world market, is the solving of the following tasks: baltic journal of economic studies 220 vol. 5, no. 1, 2019 1. improving the productivity of agricultural production. at present, in ukraine, increasing productivity of agricultural production is achieved mainly through the use of quality seed materials, mineral fertilizers, and plant protection products. at the same time, the managerial, personnel, and technical components of productivity are often not taken into account. in our opinion, the main components of the formation of productivity of agricultural production are not only available land resources, used seeds, fertilizers, and plant protection products. we believe that the greatest influence on the productivity of agricultural production is carried out by agronomy management of agricultural producers, the expediency of using certain agrotechnologies and their level of innovation, the presence of related systems in the production process (drying systems, cleaning of agricultural products, the possibility of delivering them with a minimum level of losses and capacity for its storage). 2. production of niche and organic agricultural products. today, at agricultural enterprises of different sizes and forms of ownership, cultivating crops is predominantly subject to the conditions of the agricultural market, and economically attractive crops are grown, the realization of which makes it possible to obtain a stable profit. the production of monocultures (corn, rape, soybeans, grain crops) and saturation of field crop rotation with sunflower prevails, which leads to intensive use of nutrients from the soil harvesting complex and depletion of soils. such a situation negatively affects not only the environment but also depletes the natural resources of the region, which in the long run may lead to a complete decline of rural areas. in such conditions, stimulation of the production of niche agricultural products at the regional level will contribute not only to solving economic and environmental problems in the activities of agricultural producers but also to improving sustainable development of agricultural producers in the conditions of their functioning in the world market economic component social component ecological component improving the productivity of agricultural production development of social infrastructure in the countryside increase in the wages of agricultural workers increase in the employment rate of the rural population increase in profitability of agricultural activity control over the use of genetically modified organisms application of biological means of protection of plants and organic fertilizers restoration of degraded agricultural lands production of niche and organic agricultural products increase in exports of agricultural products with added value and corresponding quality development of infrastructure provision of agricultural production development of scientific research and scientific and technical developments import of innovative technologies improvement of the mtb of agricultural commodity producers development of the internal market for environmentally friendly products development of agricultural certification system improvement of legal regulation of relations in the agrarian sector the effective socio-economic policy of rural development improvement of the quality of life in the countryside rational use of land resources reducing the level of pollution of reservoirs figure 1. the system of sustainable development of agricultural producers in the conditions of their functioning in the world market source: the author’s research baltic journal of economic studies 221 vol. 5, no. 1, 2019 the social component of rural development. in addition, the production of niche products is a priority direction for the agrarian sector of ukraine, declared in the state strategies 3 + 5, aimed at strengthening the competitive advantages of small and medium-sized agricultural producers at the national and international levels. at the same time, it should be understood that the production of certain types of niche products should be directly proportional to the peculiarities of the regional conditions of agricultural activity and correspond to trends of development of world markets of niche types of agricultural products. in this context, in certain regions of ukraine, it is appropriate to stimulate the production of organic agricultural products, honey, garlic, sorghum, walnuts, flax, mustard, raspberries and blackberries, beans, peas, and blueberries. organic farming is a sustainable form of agriculture that involves cost-effective resource management and has great potential for growth around the world. numerous studies confirm that organic farming provides improved environmental and resource provision (land, water, etc.), protection of animals, climate, income situation for people employed in agriculture and, in general, for rural areas. the official statistical surveys of the international federation of organic agriculture movements (ifoam) confirm that in 2002, in ukraine, there were registered 31 farms that received organic status, in 2017 there were already 430 certified organic farms, and the total area of certified organic agricultural land amounted to 423.5 thousand hectares. most ukrainian organic farms are located in odesa, kherson, kyiv, poltava, vinnytsia, transcarpathian, lviv, ternopil, zhytomyr regions. ukrainian certified organic farms – of varying sizes – range from several hectares, as in most european countries, to several thousand hectares of arable land. studies of the federation of the organic movement of ukraine show that the modern domestic consumer market for organic products in ukraine began to develop from the beginning of the 2000s, amounting to: 400 thousand euros in 2006, 500 thousand euros in 2007, 600 thousand euros in 2008, 1.2 million euros in 2009, 2.4 million euros in 2010; this figure increased to 5.1 million euros in 2011, to 7.9 million euros in 2012, to 12.2 million euros in 2013, to 14.5 million euros in 2014, to 17.5 million euros in 2015, and to 21.2 million euros in 2016. due to favourable climatic conditions and fertile soils of ukraine, local organic farming has great potential in global competition and offers additional prospects for the highly effective development of domestic agricultural producers. however, currently, ukrainian agricultural producers predominantly produce organic raw materials for export. development of the domestic market is still at its beginning, but it is already possible to recognize the tendency for positive development. spatial proximity to the eu export market and overcoming barriers to trade create an opportunity for foreign direct investment and the transfer of services and technologies. the modernization of agriculture and the improvement of working conditions associated with this will have a positive effect on the further development of the ukrainian organic sector. 3. the development of infrastructure provision of agricultural production in the conditions of sustainable development of ukrainian agriculture should be directed not only to increase of the production of this product but also to the creation of a comfortable social environment, a favourable psychological climate in the labour collective of the agricultural enterprise, the social motivation of labour. in addition, the production activity of agricultural producers must take into account the environmental situation in a particular region and be realized in such a way that not worsen the present state but improve it. currently, it is considered that enterprises producing agricultural machinery and equipment, mineral fertilizers, chemical ameliorants, seeds, and other materials for agriculture, research institutes form the production infrastructure of agriculture. at the same time, the most important are the research organizations and institutes that are developing: the latest technologies for the protection, reproduction, and enhancement of soil fertility; technical means of ecologically safe use of water resources; knowledge intensive technologies of organic crop production; resource-saving technologies of production of agricultural products, etc. in our opinion, the infrastructure support for the production of agricultural products, in addition to the above, should include the capacity for storing the produced products in a qualitative state for the longest period of time and at least educational and recreational facilities that will contribute to the improvement of the quality of labour resources of agricultural producers. the development of infrastructure support for agricultural production at the present stage of development of our country is possible only if the efforts of the state and private sector with the international institutions are combined. it has been established that almost all funds allocated from the public budget, provided by international donor countries, international organizations to the state or provided by international financial institutions on a commercial basis, in the context of the construction of infrastructure facilities, are directed mainly to the development of a system of elevator capacities, vegetable, and fruit storages. at the same time, in our opinion, the priority should be given to the development of research institutions that are potentially able to provide innovative agricultural development, to develop rural infrastructure, and to improve the environment. at the same time, if private enterprises receiving commercial loans themselves decide on the direction of the received baltic journal of economic studies 222 vol. 5, no. 1, 2019 funds, then the state must develop, present, and raise funds for the outlined projects for the development of infrastructure support for agricultural production. in the case of their successful realization, domestic agricultural producers will be able to improve their competitive advantages in the world market. 4. increase in exports of agricultural products with added value. the question of formation of added value in agriculture is rather controversial; politicians often speculate on it, scientists and practitioners argue. so, it is quite commonly believed that the added value in agriculture is the cost of processing raw materials and bringing them to a ready-to-use product. for example, grain – raw materials, flour – a product of the added value of raw materials “grain,” bakery products – a product of the added value of raw materials “flour” etc. in this context, the data of the state statistics service of ukraine should be considered. the largest share in the commodity structure of exports of agricultural products and food industry in 2017 was made up of herbal products, mainly due to supplies of grain to foreign markets – 70.54%. fats and oils of vegetable or animal origin were exported in the amount of 4605.7 million uah, with the basis of exports of sunflower oil – about 70%. the finished food products accounted for 15.93% of the total export value. based on the data presented and the abovementioned approach to the definition of added value in agriculture, we can state that, in fact, ukrainian enterprises are predominantly exporters of products with no added value. in addition to this thought, one should pay attention to the approach of adam smith and his followers, including p. samuelson. adam smith, in his work, “inquiry into the nature and causes of the wealth of nations,” argued: “the cost added by the workers to the cost of materials is broken down by itself ... into two parts, one of which goes to pay their wages and the other to pay the profit of their entrepreneur for the entire capital, which he advanced in the form of materials and wages.” consequently, the added value consists of labour, profits, and taxes minus subsidies. the same added value is deducted by subtracting intermediate consumption from the total output. according to the public council under the ministry of agrarian policy and food of ukraine, the share of added value in the total output of agricultural products in 2016 amounted to 42.4%, while in general in the ukrainian economy the same indicator was only 37.6%. consequently, ukrainian enterprises mainly export agricultural products as raw materials, although they receive a higher share of added value in the production of agricultural products than in the overall economy of ukraine. therefore, it is partly possible to agree with the opinion that spacecrafts, rocket space complexes, and carrier rockets are the finished products for enterprises of the space industry of ukraine, as well as bulls, dairy raw materials, grain of wheat or sunflower seeds are finished products for farm enterprises. at the same time, we believe that the urgent issues of the present in the activities of agricultural producers are the increase in production and sales (including the external market) of processed products. at the same time, it is not necessary to mix up the degree of depth of processing of agricultural products with its added value. indeed, even deep sub-farm processing or production of food is equated and counted (added) to agricultural production, provided that the products are produced within the limits of one economic entity from their own agricultural raw materials. it should be noted that the direction of activity of agricultural producers in the world market is formed, including, under the influence of demand and supply of certain types of agricultural products. global demand for grain is much higher than world demand for flour, while global demand for sunflower oil is higher than global demand for sunflower seeds. of course, it should be kept in mind that processed products are more expensive, and the process of processing is accompanied by the creation of new jobs; social development of territories where processing takes place; increase in revenues to budgets of different levels, etc. from this, when increasing exports, it is necessary to focus on increasing the level of the so-called added value, first of all, for those types of products that have a corresponding demand on the world market, can be produced and sold by small and medium-sized agricultural enterprises (products of vegetable growing, beekeeping, livestock farming, fruit and berry farming, etc.), create conditions for the socio-economic development of rural areas and minimize (or do not) pollute the environment. all this can be realized only with the support of the state (financial, regulatory), the influence of international and ukrainian public organizations, raising the level of consciousness of agrarian business, the efforts of local settlement district and regional councils. thus, in order to increase the volume of agricultural production and its exports, a general improvement of the investment climate in the state and the investment attractiveness of agricultural enterprises is necessary; well-considered real support of the state is aimed at finding additional sources of financing for existing projects on the construction of processing facilities in rural areas with the input of raw materials of local agricultural enterprises and creation of favourable conditions for the search of markets for newly created products taking into account the state of food security of the country; effective cooperation of all stakeholders (state, public and business) to implement the most promising projects for the creation of added value of agricultural products in the conditions of sustainable development of agriculture in ukraine. 5. increase in profitability of agricultural activity in the conditions of sustainable development is possible baltic journal of economic studies 223 vol. 5, no. 1, 2019 due to increase in volumes of production and sales of manufactured products, diversification of agricultural activities with an orientation towards organic and niche agricultural products, reduction of the cost of production of agricultural products, restoration of parity pricing in the agro-industrial complex of ukraine. 4. conclusions sustainable development of agricultural producers in the conditions of their functioning in the world market can be achieved at the expense of: constant development of scientific research and scientific and technical developments in domestic agriculture, creation of favourable conditions for the implementation of foreign economic activity by agricultural commodity producers, including for the import of innovative agricultural technologies; improvement of the material and technical base of agricultural producers; development of the internal market for environmentally friendly products; improvement of the system of certification of agricultural production; improvement of legal regulation of relations in the agrarian sector; realization of effective socio-economic policy of rural development. it is the effective fulfilment of the set tasks that will enable the formation of sustainable competitive advantages of agricultural producers in the world market and poses problems for further research by the author. references: herasymiv, z. m. (2016). stalyi rozvytok silskoho hospodarstva [sustainable development of agriculture]. ahrosvit, 9, 16-19. (in ukrainian) kovalchuk, s. ia. (2017). vplyv hlobalizatsiinykh protsesiv na rozvytok silskykh terytorii u konteksti selozberihaiuchoi modeli ahrarnoho pidpryiemnytstva [influence of globalization processes on the development of rural areas in the context of the village-saving model of agrarian entrepreneurship]. ekonomika i suspilstvo, 8, 52-58. (in ukrainian) khristian novak, dr. yokhannes kotchi (eds.). (2016). orhanichne silske hospodarstvo dosvid nimechchyny – mozhlyvosti dii dlia ukrainy: zvit z ahrarnoi polityky [organic farming experience of germany – opportunities for ukraine: agrarian policy report]. proekt «nimetsko-ukrainskyi ahropolitychnyi dialoh». kyiv. (in ukrainian) orhanik v ukraini [organic in ukraine]. federatsiia orhanichnoho rukhu ukrainy. retrieved from: http://www.organic.com.ua/uk/homepage/2010-01-26-13-42-29 (in ukrainian) sabluk, v. (2017). yak «vyrostyty» dodanu vartist v apk [how to "grow" added value in the agroindustrial complex]. agropolit.com: hariacha ahropolityka. retrieved from: https://agropolit.com/blog/123-yak-virostitidodanu-vartist-v-apk (in ukrainian) sait orhanizatsii “mizhnarodna federatsiia orhanichnoho silskohospodarskoho rukhu” [site organization international federation of organic agricultural movement]. retrieved from: https://www.ifoam.bio/en. (in ukrainian) tovarna struktura zovnishnoi torhivli u 2017 rotsi (2018). [commodity structure of foreign trade in 2017] derzhavna sluzhba statystyky ukrainy. retrieved from: http://www.ukrstat.gov.ua/ tsili staloho rozvytku: ukraina. natsionalna dopovid (2016). [sustainable development goals: ukraine. national report]. kyiv: ministerstvo ekonomichnoho rozvytku i torhivli. (in ukrainian) uzhva, a. m. (2015). formuvannia staloho rozvytku silskoho hospodarstva: zarubizhnyi dosid [formation of sustainable development of agriculture: foreign experience]. naukovyi visnyk uzhhorodskoho natsionalnoho universytetu. seriia: mizhnarodni ekonomichni vidnosyny ta svitove hospodarstvo, 5, 174-176. (in ukrainian) yaroslavskyi, o. (2017). dodana vartist u silskomu hospodarstvi. formuvannia ta rozpodil [added value in agriculture. formation and distribution]. ahroportal. retrieved from: http://agroportal.ua/ua/views/blogs/ dobavlennaya-stoimost-v-selskom-khozyaistve-formirovanie-i-raspredelenie/ (in ukrainian) baltic journal of economic studies 32 vol. 2, no. 1, 2016 corresponding author: 1 department of finance and banking, donetsk national university of economics and trade named after mykhayilo tugan-baranovsky. e-mail: hudz@inbox.ru 2 department of accounting and audit, donetsk national university of economics and trade named after mykhayilo tugan-baranovsky. e-mail: 0676120330@mail.ru research methodology fundamentals of the ukrainian processing and manufacturing enterprises economic potential yurii gudz1, tetyana zadnipranna2, donetsk national university of economics and trade named after mykhaylo tugan-baranovsky, ukraine abstract. the purpose of the paper is to find the most appropriate application ways for simulating of the business activities of the manufacturing and processing agriculture enterprises dealing in the corruptive ukrainian environment and to overcome the fundamental methodology contradictions to be able to perform more accurate results of the economic potential assessment despite the sophisticated defects inherent in current industry sector. methodology includes publication research, interviews and practical comparison of the published statistic data and real production volume, returns and other indicators to be able to estimate actual potential of the target enterprises. the paper comes through the classical analytical methods showing their application pros and contras in highly corruptive environment with the strong trend of data falsification. results of the survey show the basic economic methods applicable for the research activity of processing and manufacturing enterprises operating in the field of agriculture. the authors’ experience picks up the problem of the urgent need of new methodology among vast abstractive researching executed by the majority of the scientists as they have some contradictions when we apply them for the real industry segment or even an enterprise. corruption affecting the general statistic data misrepresents the facts therefore current (classic methods) are not able to show real economic trends in the industrial segment. so the authors persist on the significance of the corruption distortion considering e.g. to identify the actual macroand microeconomic indicators, indexes and ratios we involve the stage researching system of multidimensional comparative analysis to rank received rating and find appropriate position for enterprise and as we cannot ignore a constantly growing shadow sector of ukrainian economy we perform economic potential assessment of the target enterprise with the identification of the shadow sector with the help of the offered in the paper formula. this set of the mentioned above tools allows us to estimate the influence of the inner and outer environment influence into the researchable object and show the actual phenomena trends. another benefits of the offered ranking system is involving of several scientific approaches (every approach obtains its own pros and contras) so if they deal together we increase our accuracy. practical implications. ukraine has been being independent over a quarter of a century and unfortunately corruption has penetrated into each and every sphere of social and economic life including agriculture and due to the a great deal of fabricated data leading domestic scientist to study the macromicroeconomic state and processes mostly from the abstractive point of view. therefore the methodology clarification and algorithm of the analytical method application estimate the target enterprises’ economic potential more accurate. value/originality. considering the identification of the shadow industry sector (the volume ukrainian scientists cannot ignore) we may avoid dramatic mistakes in researches defining macroeconomic indexes, other economic and financial options. key words: economic research methodology, general purpose research methods, specific research methods, multidimensional comparative analysis, identification of shadow sector, assessment of the economic potential. jel classification: c10, g10, g17, n55 baltic journal of economic studies 33 vol. 2, no. 1, 2016 1. introduction for 25 years of independence, ukraine has been turned into the most corruptive country in europe. corruption has penetrated into the each and every sphere of social life including economical researches. invalid data of the enterprises, its manipulation for purposes of general statistics, double economic or political standards, conflicting legislation actually make impossible true research results. virtually all the set of laws in the country that have been launched by the authorized bodies is adapted to suit the needs of both oligarchic groups and deputies themselves running their business by means of fictitious persons. there is hardly ever a research methodology (almost any modern system) involving true data. to gain information concern the particular state we need to conduct a complex research. the core issue in the methodology of the economic activities is to implement the methods showing the real nature of the process. unfortunately the majority of the ukrainian scientists study the macro-microeconomic states and processes from the abstractive point of view. for the processing and manufacturing enterprises it is worse to apply general purpose economical methods and the micromacroeconomic ones to study the activity of the enterprise and the set of special and general purpose ones to study not only the enterprise’s activities but the whole industry. therefore it is rather sophisticated to study the economic research methods. the issue is the sphere of interests for a wide range of domestic and overseas scientists: м. andreev (guidelines, 2004), k.p. vlasov (research methods and arrange of experiments, 2002) і.f. zіnov'ev (methods of economic research, 2005), a.b. іgnatіeva , e.m. korotkov (research of management, 2003), b.l. krutov, f.a. kuzіn (master’s thesis, 1997); m.m. maksimtsev (reserch of management systems, 2005), c.b. mochernіy (methodology of econoic research, 2001), vladimir popov (the basis of scientific research, 1989), s.ya. saliga (fundamentals of assessment of economic effectiveness of companies, 2007 & methods improvements in company’s economic activity assessment, 2007), v.m. sirih (the method of jurisprudence: the basic elements of the structure, 1989), s.a.  smіrnov, v.a. tihomirov (guidelines to write thesis and abstracts, 2004), s.g. cheremіsіna (methods of economical researches, 2005). the thesis purpose is to show the basic economic methods applicable for ukrainian agriculture processing and manufacturing economical researches. 2. basic methodology elements and the research methods the form of any science existence including management and economics is a scientific research. scientific research is the activity designed for complete study of an object, a process, a state, a structure or communication then to define and apply useful results. the basis for the scientific research is its methodology (information: acquisition, protection, analysis textbook on information and analytical work, 2001). to the point of s.v. mochrnonyi’s view, methodology is the set of the different methods and tools for scientific cognizing (methodology of economic research, 2001). e.m. korotkov concerns research methodology as a set of purposes, approaches, guidelines, priorities, means and methods of the research conducting (research of management systems, 2003). the dictionary written by s.i. ozhegov and n.iu. shedova defines the term with two meanings: a set of methods applicable for different fields of activities; and as the doctrine on new methods to get knowledge (ozhegov, shvedova, 1999). a new methodology definition is demanded as the mentioned above ones include some defects: the methodology is not only a set of methods but it is a particular algorithm how to conduct them as well as defined purposes and tasks; therefore the research methodology is a complex system to cognize particular phenomena, including particular goals, tasks, algorithm and methods of economical researches. the basic methodology elements are the research methods. such scientists as p.i. andreev, s. a . smirnov, v. a .  tykhomyrov admit that the research method is as system of orders, guidelines, samples showing how to do something (andreev, 2004). scientists v.i.  krutov and v.v.  popov have another point of view. they maintain opinion that the methodology is the way to cognize objective reality. ukrainian scientist k .p. v lasov concern the method as either the set of tools and operations of practical research conduction or theoretical cognizing of the reality in order to solve special problems (v lasov, 2002). organizing the scientists’ statements we can define the method of economic researches. the method of economic researches is a set of research stages of phenomena, process or objects involved to define key features. to study the particular phenomena we ought to use not a single research method but the set of ones. v.m. syrykh deals with general purpose, philosophic or other special methods (syrіh, 1980). in f.a. kuzin’s view the research methods can be shared into two groups: the ones of general purposes and the special ones. he shares the general purpose ones into three large subgroups: empirical research methods (watching, comparison, measurement, experiment); the mixed methods implemented for the levels of empirical and fundamental researches (abstracting, analysis, synthesis, induction, deduction, simulating); method of fundamental research (the adaptation from abstraction to concrete one), (kuzin, 1997). k.p. vlasov and s.v. mocherny present the similar classification of the scientific research methods. they consider there are general purpose ones, disciplinary ones and interdisciplinary ones (mocherny, 2001). the russian scientists g.i. andreev and s.a. smyrnov and baltic journal of economic studies 34 vol. 2, no. 1, 2016 v.a. tykhomyrov just give the list of the general purpose methods e.g. watching, comparison, measurement, experiment, abstracting, analysis and synthesis, induction, deduction, simulating, idealization, formalization, logical methods and historical one (andreev, 2004). a.v. ignatiev and m.m. maksymntsev say completely different ideas about the methods in their book (ignatiev, 2000). they admit there are the basic types: 1) based on the specialists’ experience and intuition; 2) system of formalizing presentation; 3) complex ones. i.f. zinoviev, s.ia. salyga, f.v. zinovieva and s.g.  chremisinoi (zіnov'ev, 2005, page 8) study major local methods e.g. formalizing of economic circumstance, designing methods, analysis of indexes, convention analysis, grouping method, a method of the relative values, economic and mathematical simulating, method of analogues, method of forecasting based on the indicating values, marketing methods, the methods of the assessment of the shadow economy, methods of the economic risk assessment, a methods of couple comparison based on the multivariate scales. to study the effectiveness of the economic potential management we need to form the general set of the research methods based on the domestic and overseas scientists’ experience. 3. the basic general purpose methods for effectiveness assessment the basic general purpose methods suitable for effectiveness assessment of the economic potential application between processing and manufacturing enterprises are watching, comparison, abstracting, analysis and synthesis. the methods of measurement and experiment are not applicable to study economical phenomena. the experiment and measure methods suits more perfectly for technical and agriculture sciences. to study the economic potential of the processing and manufacturing enterprises economical and mathematical methods (optimization economic models) assessment methods of financial state , functioning effectiveness, investment attractiveness method of couple comparison which is based on the multi measured scaling correlative-regressive analysis determinate factorial analysis index analysis multi measured comparative analysis table and graphic methods induction and deduction abstracting analysis and synthesis comparativeness watching specific research methods analogy general purpose research methods research methods of the economic potential of the agriculture processing and manufacturing enterprise pic. 1. research methods of the economic potential of the agriculture processing and manufacturing enterprise baltic journal of economic studies 35 vol. 2, no. 1, 2016 in the field of agriculture we can apply induction, deduction and analogies. watching shall be defined as the regular, systematic and dedicated perception of the whole or partial process and other objects. the watcher does not interrupt the object’s behaviour in favour of tactics to catch the one’s features and characteristics. the methods show what the objects have in common or in particular in the further process of the compassion. analysis and synthesis are the complex methods based on the consequent implementation of the set of tools and trends when sharing the target objects on the basic parts, elements and features (analysis) and combination of the particular objects into the one whole (synthesis). analogy is the method of scientific cognizing applicable for getting knowledge form the similar objects. induction and deduction form the set of the researches which depends on each other, it is planning process from the particles to the whole, from less common statements to a bit more common (induction) and vice versa (deduction). abstracting is the imaginative deviation away from the basic features, correlation and affairs and the simultaneous sharing of just one of a few features of the object. we also can speak about such research methods as graphic one or table one. infographic helps to see the general trends of the economic phenomena and the information arranged as a chart suits better for calculating and applicable for systematization and comparison. the specific methods can be used for economic potential management analysis and the forms of the methods are listed below: – multidimensional-comparative analysis; index analysis; – means of determinate factor analysis which include: – chain substitution, absolute differences, a method of relative differences, integral method; – correlated-regressive analysis; – a method of couple comparison based on the multidimensional scaling; – assessment methods of the financial state, effective functioning and investment effectiveness; – economical and mathematical methods (optimization economic simulating). graphic methods of economic potential management at the agriculture processing and manufacturing enterprises are shown in the picture shown in picture 1. let’s study the stages of the research conducting and specific features of every mentioned above method. multidimensional comparative analysis is necessary for the complex assessment of the enterprises’ economic activity results. we meet such a task if we face a need to make ratings of a few enterprises (savitskaya, 2002). the basic stages of the multidimensional comparative analysis are placed in the chart (chart 1). with the help of the couple comparison method based on the multidimensional scaling we can find influence of the inner and outer environment into the system state. the method is applicable for every segment of agriculture industry and for the enterprise at the micro level. the first stage of the methods is to create the hierarchy of demands to the structure. such hierarchy allows finding the most significant elements showing the essence of the problem at the assessment stage and find correlation between them. the second stage is the conduction of the couple comparativeness in the matrixes founded at the every stage of the hierarchy. the third stage is the definition of the influence and ranking of the limit (zіnov 'ev, 2005 & 1999). the method of the correlative-regressive analysis belongs to statistic methods. the basic tasks of the method are to analyse statistical data and find the mathematical correlation among the researchable features and define with the help of the correlation index correlative intensity. afterwards we have defined the correlation between the phenomena and quality of the correlation we implement statistics (correlative and regression methods) to form a numeral correlation. correlative and regression methods fulfil two basic tasks: – they define with the help of regressive equation the analytical form of correlation between х and у characteristic variations; – they define the level of the intensity among the characteristics. 4. practical implication in economic and statistic researches we often use straight-line form of correlation, described by the following regressive equation ух=ао+ а1х, double factor simulating model is defined by the equation ух=а0+а1х1+а2х2 (vashkіv, pasteur, storozhuk, 2001). economic indexes are relative means characterizing the trends in economic phenomena concern time, space or concern any other factor. economic researches are often used the index of general commodity value. the index is made as a ratio of sales volume (in money units) and chart 1 stages of the multidimensional comparative analysis stages description 1 definition of the indexes which serve as ground for the economic activity assessment, the information about the indexes is collected and applied for the outlet data matrix 2 we define an optimal element in the every column and make it equal to one. then all the elements of the аіj column are divided into the optional element of the standard enterprise (тах аij). as a result we get a matrix of standardized ratios (хіj). хij=аіj/тах аіj 3 all elements of the coordination matrix are squared. if the target considers different weights of the ratios so the squared means have to be multiplied by the means of the corresponding weighted indexes (к). calculated in compliance with: rj = к1*хj2 +к2*х2j2 +...кп*хпj2 4 the rank the received ratings (rj) and find the position for every enterprise baltic journal of economic studies 36 vol. 2, no. 1, 2016 forms on the base if price and the product amount. at the decomposition of the general index we can define a general influence of every of them (zіnov'ev, 2005; marmoza, 2005; zinoviev, 1999; vashkіv 2001). relative and absolute change of the monetary volume of the sold products in the base period to compare with the reported one are calculated on the base of two factors: real volume of the products and the prices. therefore we shall define the index of monetary volume of the production: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (1) the difference between numerator and denominator shows the absolute increase of the sold product increase and as a result the changes in the real production volume makes: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (2) with the same objective we can calculate the index of the real physical volume of production: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (3) the absolute growth of the monetary volume of the sold products due to the real increase of the product volume and sales price changes makes: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (4) so we can define the index: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (5) the absolute growth of the monetary volume of the sold basic production due to the price change makes: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (6) define the indexes and the absolute growth with following mutual correlation: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (7) і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . (8) as factorial analysis we understand the methodology of the complex and systematic study and measurement of the factor influence onto the means of the resultative indicators (zinoviev, 1999 & 2005; savitskaya 2002). the basic task of the factor analysis is the following: – selection of the factors for analysis of the research of resultative indicators; – classifying and systematization of the factors in order to provide complex and systematic approach to study the factor influence into the economic activity; – to study the forms of the dependence and simulating between factor and resultative characteristics; – calculation of the factor influence and the every factor role assessment at the changing environment; – operation with factorial model. the factor analysis obtains three types of the popular models: additive ones: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = multiplicative ones: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = multiple ones: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = mixed ones: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . estimating the financial state we usually apply the ratios of the property, economic activity volume, purchasing capacity, cash position; investment attractiveness. the corrective indexes are applied to get accurate financial means. to estimate the financial state and investment attractiveness we implement such basic indicators: depreciation ratio, renovation ratio, dropout ratio, ratio of the active share of the fixed assets, indicator of the operative capital of the enterprise, operative capital flexibility, funding ratio, financial stability ratio, liquidity ratio (immediate, general, short-term), investment profitability ratio, equity capital ratio, sales profitability, manufacturing profitability, working account receivable ratio, floating finished product ratio, a ratio of the floating accounting payable etc. (zinoviev, 1999 & 2005; savitskaya 2002). the scientific literature defines effectiveness of economic activity with the set of different ratios, but they don’t reflect the general state of the effectiveness of the processing and manufacturing activity. general indicator of the effectiveness of the processing and manufacturing activity is described by l.i. kyrylova, s.ia. salyga, k.s. salyga, o.v. skackova (2007). general indicator of the effectiveness of the processing and manufacturing activity is calculating with a formula: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . where is an indicator of the economic activity of the company; тhis is volume of the commodities, produce at one circle of the monetary capital, uah; со – average annual costs of the fixed assets and material property; см – capitalized material and other costs, uah; кч – ratio of the turning the labour costs into the monetary costs; ч – number of working people. research literature contains long and routine calculations and it contains a floating ratio to show capitalization of the remuneration, profit, material costs that doesn’t suit general average annual effectiveness of the process and manufacturing of economic activity. the better result shall be got with the next formula: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . where чдр – net operating income; baltic journal of economic studies 37 vol. 2, no. 1, 2016 со – value of the fixed assets; см – material costs (the value of the floating funds); зпріч – annual remuneration pro one worker; ч – number of the working people. so we can summarize that the formula shows the effectiveness of the involved resources for to fabricating the products. linear programming is an issue of the optimal (mathematical) programming responsible for tasks arranging. the economy meets such tasks at the practical implementation of the optimal principles of management and planning (fedoev, 2000). to realize the optimal principles of management and planning means to solve the following task: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = , where – is a mathematical note of the optimal criteria for the target function. the task for optimization we can write the following way: to find the minimal or maximal meaning: і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔0 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔0 − �𝑔𝑔0𝑔𝑔0 і𝑔𝑔𝑔𝑔 = ∑𝑔𝑔1𝑔𝑔1 ∑𝑔𝑔0𝑔𝑔0 ∆𝑔𝑔𝑔𝑔 = �𝑔𝑔1𝑔𝑔1 − �𝑔𝑔1𝑔𝑔0 𝐼𝐼𝑔𝑔𝑔𝑔 = 𝐼𝐼𝑔𝑔 x 𝐼𝐼𝑔𝑔 ∆𝑔𝑔𝑔𝑔 = ∆𝑔𝑔 + ∆𝑔𝑔 𝑌𝑌 = �𝑋𝑋𝑋𝑋 𝑛𝑛 𝑖𝑖=1 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑌𝑌 = �𝑋𝑋𝑋𝑋 = 𝑋𝑋1 + 𝑋𝑋2 + 𝑋𝑋3 + ⋯ + 𝑋𝑋𝑛𝑛 𝑛𝑛 𝑖𝑖=1 𝑌𝑌 = 𝑋𝑋1 𝑋𝑋2 𝑌𝑌 = 𝑎𝑎 + 𝑏𝑏 𝑐𝑐 ; 𝑌𝑌 = 𝑎𝑎 x 𝑏𝑏 𝑐𝑐 𝐸𝐸 = 𝑇𝑇 𝐶𝐶𝐶𝐶 + 𝐶𝐶м + кч + ч 𝐸𝐸 = чдр со + см + зпріч х ч max(min)𝑓𝑓(𝑋𝑋)�����𝑋𝑋�𝜀𝜀𝐷𝐷 𝑓𝑓(𝑋𝑋)����� = 𝑓𝑓(𝑥𝑥1, 𝑥𝑥2, … 𝑥𝑥𝑛𝑛), ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = . with limitations: ∅1(x1,x2,…xn){≤,≥,=}b1, ∅2(x1,x2,…xn){≤,≥,=}b2, ∅3(x1,x2,…xn){≤,≥,=}bm, xj ≥ 0, j = making a research we accept the information as one of the basic part there. to study economical potential of the enterprise we can use statistical statements of the company, internet-resources, annual statistical data base issued for the needs of the researchable region. statistic statements are presented in different papers. the basic forms of the statistical statements used in researches to study economical potential of the processing and manufacturing enterprises in ukraine are: a report for manufacturing of business commodities (paper №1-п), labour report (paper №1-пв), report on used operational time (paper – зпв), report on number of the working people, their qualification and training (paper № 6-пв), report on availability and move fixed assets, amortization (depreciation) (paper № 11-03), balance sheet (paper № 1), financial report (paper №2), flow of funds report (paper № 3), report on equity capital of the company (paper № 4). the shadow economic segment is growing in ukraine. the volume of the shadow economic activity reached the volume you cannot ignore otherwise you will receive wrong dramatic mistakes in your research defining macroeconomic indexes, economic and financial options. making the economic potential assessment of the processing and manufacturing enterprises we shall consider the identification of the shadow sector of the ukrainian economy. to find the volume produced by the shadow industry sector we can apply the following formula: vt = імз іфр х 1,1 х vл . where in vt – the volume of the shadow production; iмзindex of the material cost growth; 1,1 – corrective ratio set by the experts; іфр – index of the real volume of the products; vл – volume of the official production. 5. conclusions the ground for any science is a scientific research. the core part of the scientific research is its methodology applied with a defined set of methods. by the way it is possible to conduct a research of the effective management of the economic potential with general purpose and specific methods. general purpose methods are watching, comparison, analysis, abstracting, synthesis, induction, deduction, analogy, charts and graphic methods. specific methods which are popular making an analysis of economic potential management are multidimensional comparison analysis, index analysis, means of determinative factor analysis (chain substitution, absolute differences, integral method, correlative-regressive analysis, method of couple comparison based on the multidimensional scaling, methods of the financial state assessment, functioning effectiveness, invest attractiveness, economical and mathematical methods (optimization of economical and mathematical models). references andreev, m. 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(2007). methods improvements in company’s economic activity assessment: from gu "zіdmu" – zaporіzhzhya, 56 p. fedoev, v.v., garmash, a.n., dayitbegov d.m., (2000). economic, mathematics and empiric methods and models: from unity – moscow, 391 p. юрий гудзь, татьяна заднипрянная основы методологии исследований экономического потенциала перерабатывающих предприятий в украине аннотация. целью работы является нахождение способов моделирования деятельности перерабатывающих предприятий в сельскохозяйственном секторе в условиях присущей украине высокой коррупции и преодоления противоречий классической методологии для того, чтобы предоставить более точные результаты оценки экономического потенциала не смотря на значительные погрешности данных в этом секторе промышленности. методика основывается как на опубликованных данных исследований и предоставленных интервью, так и на практическом сравнении официальных статистически данных, реальных объемов производства, доходов и других показателей, на основе которых оценивают экономический потенциал предприятий целевой выборки. статья рассматривает классические аналитические методы, а также их сильные и слабые стороны с точки зрения практического применения с учетом погрешности объекта исследования находящегося в высоко коррумпированной среде с ярко выраженной тенденцией фальсификации данных для анализа. результаты исследования показывают основные методы экономики, применимые для исследовательской деятельности сферы перерабатывающих предприятий работающих в сельском хозяйстве. опыт авторов раскрывает проблему необходимости ввода новой методики, которая будет выгодно отличаться своей практической применимостью и позволит большинству ученых отойти от абстрагированности исследований. так как из-за коррупции большая часть статистической информации имеет ряд значительных допусков, она не является достаточным основанием для выявления действительных экономических тенденций в промышленности. авторы настаивают на более точном математическом определении влияния коррупции на макрои микроэкономические показатели, используемые в поэтапных исследованиях – например, таких как многомерный сравнительный анализ для ранжирования предприятий в соответствии с заданными показателями. мы действительно не можем игнорировать постоянно растущий теневой сектор украинской экономики при осуществлении оценки экономического потенциала предприятия, поэтому в процесс анализа вводим его математическую оценку. набор вышеупомянутых приемов и инструментов позволяет нам оценить влияние внешних и внутренних факторов на исследуемый объект и действительные тенденции данного экономического явления. дополнительными преимуществами предложенной системы ранжирования – это включение в процесс анализа нескольких подходов (с описанными их сильными и слабыми сторонами), которое в целом повышают точность полученных результатов. практическое применение. украина уже является независимым государством более 25 лет и, к сожалению, за это время коррупция проникла во все сферы социальной и экономической жизни страны, включая сельское хозяйство и, благодаря, большому количеству фальсификаций данных большинство отечественных ученных изучают макрои микросостояния и процессы в основном с абстрактной точки зрения. поэтому модернизация существующей методики и предоставление алгоритмов применяемых методов оценивают экономический потенциал целевых предприятий более точно. значение оригинальность. беря во внимание теневой сектор промышленности (уже в том объеме, который невозможно не игнорировать) мы можем избежать значительного искажения данных в исследованиях при вовлечении макроэкономических коэффициентов и других экономических и финансовых опций. baltic journal of economic studies 1 vol. 4, no. 3, 2018 corresponding author: 1 department of marketing and innovatics; department of social communications & information activity, lviv polytechnic national university. e-mail: olena.y.bobalo@lpnu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-3-1-7 future of offline marketing ahead of the rapid development of online marketing olena bobalo1 lviv polytechnic national university, ukraine abstract. quick internet coverage all over the world created new possibilities of its usage as a new mass media which are more flexible, dynamic and, what is more important, almost uncontrollable. and they require approaches and knowledges which differ from existing ones. so companies, which want to be active in the biggest net and want to influence on theirs target audiences, they started to develop direction of internet (on-line) marketing. new marketing activities created new professions directly connected to internet. in recent years on-line marketing became very important part of marketers’ life and very fashionable. every company which understands the importance of new technologies actively lives in the internet. its marketing activity is more and more concentrated on internet. so, main aim of this article is to investigate the company’s real possibilities to catch ukrainian target audience through the internet. so, the next tasks were set to achieve purpose given above: to analyze internet penetration in ukraine and compare it with other countries, to separate the types of target audience who uses internet on the regular base, to investigate the presence of people with high purchasing power in the internet and determine their activity in the net. the research’s methodology of this paper is based on comparative analysis – for observation of internet penetration in different countries; scientific cognition – for analysis of social groups in internet; system-activity principle as a part of system principles – when a part of internet users is separated according to their activity and income level; specific-scientific methodology – for formalization of utilization of offline marketing tools; scientific abstraction – for the conclusions. some research results are based on demographic statistics; results of periodic investigation of internet users’ profile. results of the research show that big amount of potential consumers with highest purchasing power aren’t regular internet users. that is why the offline marketing practices need to be observed as a substitute of online marketing. and significant part of the paper is dedicated to find out which offline marketing instruments are still useful for ukrainian consumers. real examples of offline marketing are giv-en, including experience of well-known ukrainian it-companies who are leaders of modern technologies implementations. analysis of most common offline marketing techniques shows that even progressive companies of information and communication technology sector often use such instruments. key words: offline marketing, internet market, internet users, highest purchasing power buyers, offline marketing techniques ukraine. jel classification: m31, l86 1. introduction online marketing becomes more and more popular among marketers every year. quantity of vacancies connected to internet marketing grows constantly. representatives of human recourses’ departments are looking for smm/sem/seo/ppc employees, internet social media listeners, specialists in e-mail campaigns, digital marketing etc. marketing departments start to refocus from classical marketing approaches and instruments into online marketing. that is understandable: information and computing changes on the global markets lead to falling of the consumer’s interest to traditional information sources. marketing specialists try to find something new to attract targets audiences and tie them up to company’s products. now new generation choose not pepsi, but internet. a lot of young generation of marketing executives stops to work with classical marketing instruments and totally switched to online marketing. all of them are trying to catch their target audience in the internet. ukrainians companies aren’t standing apart of such processes and acts very vigorously in searching of online experts. as of march 1, 2018, one of the most sought-after online job search site hh.ua ranked online marketing vacancies on the 3rd place between 31 specialist’s fields of marketing vacancies (head hunter, 2018). so here is the list of questions: still offline marketing alive? does it valid in modern digital baltic journal of economic studies 2 vol. 4, no. 3, 2018 life? does it have a future? could we catch all kinds of target audience in internet? for this moment there are no complicated researches on the given theme which analyze valid situation in ukraine, so author decided to investigate questions mentioned above. for this purpose, studies of ukrainian and international research agencies were used. among them are presentation of the study’s results of the ukrainian internet user behavior by google connected consumer study, internet penetration in ukraine by factum group ukraine, age structure of the population of ukraine by state statistics service of ukraine. all of them were fulfilled during 2017. also author’s personal investigations during second part of 2017 are included into research. they are based on sources of professional internet marketing and scientific sources such as trust in digital technology will be the internet’s next frontier, for 2018 and beyond by scientific american, 5 clever offline marketing strategies for b2b brands by b2bmarketing.net, 6 offline marketing strategies that support your online brand by hinge and analyze of ict companies’ visual and activity presence during it arena lviv (biggest it event in eastern europe). 2. conducting research and results in july-august 2017, factum group ukraine conducted the observation of internet market in ukraine. results say that 64% (21 million persons) of ukrainians use internet. it is shown on the graph 1. it means that 36% don’t use it at all and it’s more than 11.7 million of ukrainians. it’s necessary to take into account that 64% includes persons who use internet at least 1 time per month. could such kind of persons be effective computer/internet users? there is a doubt. according google survey (google connected consumer study, 2017) 66% of ukrainians use internet, but only 48% of them use internet daily. this is approximately 16 million persons. it’s necessary to say that ukraine has lower internet penetration even than our closest neighbors. graph 2 indicates that internet penetration in ukraine is only 46%, which is by 6% less than in russia, by 16% less than in poland. given on the graph 3, internet age structure shows that most active internet users are between 15 and 44 years old – 71%: 35% of the age 15-29 and 36% of the age 30-44. 35% 36% 16% 9% 4% 15-29 30-44 45-54 55-64 65+ graph 3. age structure of the internet users in ukraine source: factum group, 2017 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% ukraine romania russia turkey china poland germany usa 66% 69% 74% 75% 78% 82% 84% 86% graph 2. internet penetration in different countries source: google, 2017 64% 36% use min 1 time per month don't use graph 1. internet users in ukraine source: factum group, 2017 baltic journal of economic studies 3 vol. 4, no. 3, 2018 persons from the gap 35-65 years old belong to the highest purchasing power buyers of the ukrainian population. as this survey doesn’t show the necessary results, it’s better to observe google connected consumer study 2017. graph 4 shows a more detailed distribution by age categories. so, near 51% internet users belong to consumers with the highest purchasing power. quantitatively it’s 8.16 million persons. 7% 9% 27% 23% 18% 10% 5% 16-19 20-24 25-34 35-23 45-54 55-64 65+ graph 4. age structure of the internet users in ukraine source: google, 2017 according to the survey of state statistics service of ukraine, in 2017 population 35-65 years old counts 18.4 million ukrainians (state statistics service of ukraine, 2017). taking into account that active online users of that age consist of 8.2 million persons, so, biggest part of the most accounts’ payable population doesn’t use internet in their quotidian life: approximately 10.2 million ukrainians which is shown on the graph 5. this data are confirmed by the graph 6 and 7. where is shown that more than 50% of internet user are students, pupils, unemployed, employees without high education, retired or engaged in the house hold. and these groups in ukraine belong to categories with rather low or average incomes. and only 27% of persons from graph 6 could belong to persons with high and below average incomes. it’s necessary to take into account that quantity of internet users increases almost due to the youngest category which has a low level of buying possibilities. but if to assume that ukraine will develop like developed countries, where marriage and purchase of residential real estate are postponed to more matured ages, then age gap 25-34 years old (27%) becomes very attractive. counting on the written above we could make a conclusion that it’s impossible to catch biggest part of the most accounts’ payable audience through the internet, so producers of goods or services, which are focused on 35-65 years old consumers, should use more traditional marketing tools or invent something extra new. experienced executive elizabeth harr, co-founded a microsoft solutions provider company, recommends some offline marketing strategies that can support online brands: networking, speaking engagements, print 19% 17% 12% 11% 11% 9% 8% 6% 2% 1% 0% 5% 10% 15% 20% specialist with higher education worker employee (without he) student/pupil engaged in the household unemployed retired selfemployed enterpreneur, farmer, small… military, police internet users don't use internet at all 18,4 mil persons 8,2 mil persons 10.2 mil persons graph 5. internet usage by the most accounts payable consumers source: state statistics service of ukraine graph 6. social structure of regular ukrainian internet users, % source: factum group, 2017 baltic journal of economic studies 4 vol. 4, no. 3, 2018 publications, cold calls, print advertising, associations and trade shows (haar, 2017). also, counting on ukrainian consumer’s psychology, possibility to receive fake but not original product, a list of products and services which aren’t good for selling them through the internet, especially in ukraine, is recommend: • elite products from the common categories (expensive): automobiles, interior’s elements, alcohol, jewelry, consumer electronics, home appliance, smokings/evening dresses; • services which are buying by the recommendation: architecture & interior’s design, spa-procedures, sport clubs etc.; • professional and production equipment. in these cases personal contact is needed and customer wants to see the product personally. such products and services could be (and better be) promoted through internet mostly with informational aim. counting on the growing quantity of bots, main aim of which is to promote client’s goods/services/ image and to discredit the other for what they are also payed, the trust to comments started to decrease during last few years (chakravorti, 2018). also quantity and quality of advertising block programs increases year by year, in 2016 pagefair registered 30% growth of global advertising block programs use (admitad, 2017) and biggest social network facebook announced that they are reducing posts from brands, publishers, marketers, and news stories (the telegraph, 2018). all that will lead to diminution of advertising possibilities in internet. analysis of the different marketing instruments’ utilization by the big amount of ukrainian’s companies (including big itc companies) lets propose the list of offline marketing techniques which seems to be useful for a long time: • analytics; • visual identity/brand book; • promotions, event marketing; • personal contacts; • internal communications; • atl. if secondary analytics/surveys could be found in the internet, serious primary surveys mostly still fulfill by the personal interviews: • target audience, it’s behavior, influence categories; • products/services; • company; • results of the off/online actions; • information for the company/marketing strategy’s creation; • both kinds of environment: internal & external (incl. competitors, distribution etc.); • loyalty/acknowledgment/popularity; • focus groups, panels, trials. it doesn’t mean that such kind of analytics is impossible to fulfill through internet, but in most of the cases it’s easier to receive offline results and they will be more trustable. with the help of internet is possible to investigate company’s site activities and to run some analytics with loyalty clubs. visual identity is always topical even if the company exists only in the virtual world and the main tools are: • company’s name / tm, its logo, slogan etc.; • architectural constructions/interior; • institutional/public documents (forms, presentations); • business cards; • souvenir products; • press-walls, etc. logo, font, slogan, set of colors, requirements to logo placement (and other parts of brand book) help to separate any company/product from another. google, apple, microsoft spend huge amounts of money to create individual, interesting and impressive buildings and interiors not only to attract best employees but to amaze visitors, which is shown at the figure 1. this positively influences on company’s image (mcdermott, 2017) (figure 1). during visits of it-companies or any exhibition (even high-tech or it), products with company’s visual identity always are present. pens, souvenirs, flash 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 2014 2015 2016 2017 18 13 11 10 13 58 53 53 52 50 24 34 36 38 37 below average average above average graph 7. income level of regular ukrainian internet users, % source: factum group, 2017 baltic journal of economic studies 5 vol. 4, no. 3, 2018 drives, t-shirts, bags etc. – all of these goods are with company’s/products logos: look at the figure 2. offline promotions and event marketing continue to be important part of marketing strategies (haar, 2017; mcdermott, 2017) and the most often used techniques are: • participation in exhibitions, trade shows, salons and industry events; • sponsorships / patronage; • press conferences; • social and promotional events. all these tools lead to quick results and are frequently used by well-known ukrainian and international companies and organizations. figure 3 shows stand figure 1. google and microsoft offices source: setia, 2017; mcwhirter, 2016 of it-company eleks during it arena lviv, press conference it-companies softserve, epam, international company bayer and klichko foundation. promos feed target audience in terms of speaking engagement, network creation and face-to-face connections. they could help to position company as a high professional, customer friendly, society oriented and opened to consumer institution. such promotional events as trials and testing (especially for fmcg and other commodity goods) are difficult to fulfill through online marketing. it’s possible to send samples by post mail, but in such case activity lose its main goal: to stimulate consumer to make immediate purchase. figure 2. items with clear brand identity source: own photo and from internet baltic journal of economic studies 6 vol. 4, no. 3, 2018 for example famous tech-companies like apple, yahoo, alphabet, seagate, hp are active sponsors of super bowl and other sport activities (mayo, 2016; connelly, 2017). as it was mention above personal contacts are frequently used for achieving positive results of external institutional communications. so such kinds of instruments are still useful in the digital age: • official/unofficial meeting (banks, industrial equipment, education and repair services, merchandising, consulting etc.); • phone calls (service centers, loyalty programs, selling through the internet and tv shops, cold calls, etc.); • doors open days; • work with key clients. leading world universities continue to invite potential students to visit their campuses to get acquainted with all the benefits of student life. they propose free of charge campus excursions and meetings with teaching staff and students. tesla now is successfully selling its vehicles only through internet, but what will happen when there will be 100-1000 of such proposals from other producers? it’s logical to assume that such companies will come back to proven personal contacts and test drives to persuade clients in buying their product, but not competitors. for a long time personnel of each company plays an important role of ambassador between institution and target audience. when internal company`s image is equal to external, such companies are successful. this equity could be reached due to internal communications. and some of them are more effective being offline: • solemn / corporate events; • personnel training; • contests / lottery / loyalty programs for employees; • signboards / boards / working tools. a lot of prominent institutions continue to hold the internal events offline. maserati solemn events, nestle team building programs, new year celebrations in or outside the office, christmas balls in austrian institutions – it’s a short list of actual internal offline events. graph 8 shows that 49% of ukrainians trust ukrainian tv as a source of information, so confidence level to media is quite high (sociological group «rating», 2018). that is why atl activities are still popular between different kinds of companies. tv, press, radio and outdoor advertising remains the most expensive type of marketing tools. figure 3. examples of offline promos source: own photo and from internet 0% 10% 20% 30% 40% 50% ukrainian tv ukrainian internet-sites internet social nets ukrainian press ukrainian radio 49% 41% 37% 33% 29% graph 8. ukrainians’ trust level to different media source: sociological group «rating», 2018 baltic journal of economic studies 7 vol. 4, no. 3, 2018 3. conclusions so, information mentioned above leads us to some conclusions and recommendations: 1. it’s impossible to catch biggest part of the audience with the highest purchasing power through the internet, ‘cos this target audience don’t use internet at all or use it occasionally. 2. some products and services aren’t good for selling them through the internet. 3. offline marketing is still effective tool and so will stay in the nearest future. 4. combination of on-line and offline marketing is efficient and could give synergetic effect, so marketing strategies should include both of them. 5. due to the growth of information flows, it is necessary to look for new ways of influencing the consumer, as internet users becomes more advanced and increase of quantity and quality of advertising block programs, installation of which increases each year. references: admitad (2017, august). adblock vs. cost-per-action marketing: cooperation works better than conflict partnership. search engine land. retrieved from: https://searchengineland.com/adblock-vs-cost-per-actionmarketing-cooperation-works-better-conflict-279811 chakravorti b. (2018, january). trust in digital technology will be the internet’s next frontier, for 2018 and beyond. scientific american. retrieved from: https://www.scientificamerican.com/article/trust-in-digitaltechnology-will-be-the-internet-rsquo-s-next-frontier-for-2018-and-beyond/ connelly t. (2017, january). apple moves into sports sponsorship with fc bayern munich partnership. the drum. retrieved from: http://www.thedrum.com/news/2017/01/31 /apple-moves-sports-sponsorshipwith-fc-bayern-munich-partnership factum group (2017, december). proniknovenie interneta v ukraine. ukrainian internet association. retrieved from: http://inau.ua/sites/default/files/file/1801/iv_kvartal_2017.pdf google (2017). presentation of the study’s results of the ukrainian internet user behavior. google connected consumer study. retrieved from: https://ukraine.googleblog.com/2017/10/google-connected-consumerstudy-2017.html haar e. (2017, july). 6 offline marketing strategies that support your online brand. hinge. retrieved from: https://hingemarketing.com/blog/story/7-offline-marketing-strategies-that-support-your-online-brand head hunter (2018, march). retrieved april 3, 2018, from: https://hh.ua/search/vacancy?enable_ snippets=true&specialization=3&currency_code=uah&clusters=true&area=5&from=cluster_area mayo b. (2016). apple sponsoring super bowl host committee with free prod-ucts and equipment but declined to be included in marketing. 9to5. retrieved from: https://9to5mac.com/2016/01/19/apple-sponsoring-superbowl-host-committee-with-free-products-and-equipment-but-declined-to-be-included-in-marketing/ mcdermott m. (2017, october). 5 clever offline marketing strategies for b2b brands. b2b marketing. retrieved from: https://www.b2bmarketing.net/en-gb/resources/blog/5-clever-offline-marketing-strategies-b2b-brands mcwhirter g. (2016). 4 tech and finance companies rock out at the office. interior design. retrieved from: http://www.interiordesign.net/slideshows/detail/8946-work-this-way-4-tech-finance-offices/3/ setia r . (2017). 20 trickiest questions asked in google interview. tech blog corner. retrieved from: http://techblogcorner.com/2017/11/24/trickiest-questions-asked-in-google-interview/ sociological group «rating» (rating group ukraine) (2018, january). otsinka medychnoi sfery v ukraini: gruden’ 2017. retrieved from: http://ratinggroup.ua/research/ukraine/ocenka_medicinskoy_sfery_v_ukraine_ dekabr_2017.html state statistics service of ukraine (2017). vikova struktura naselennya ukrainy (1989-2017). retrieved from: http://www.lv.ukrstat.gov.ua/dem/piramid/all.php the telegraph (2018, january). facebook overhauls news feed to promote 'more meaningful' posts from family and friends – raising questions for businesses. retrieved from: http://www.telegraph.co.uk/technology/2018/01/12/ facebook-overhauls-news-feed-promote-meaningful-posts baltic journal of economic studies 179 vol. 4, no. 3, 2018 corresponding author: 1 university of modern knowledge. e-mail: 40533@ukr.net 2 private higher educational institute “college of finance and law”. e-mail: gubanovatamara@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-3-179-183 legal dimension of the state scientific policy of ukraine serhii mosondz1 university of modern knowledge, ukraine tamara hubanova2 private higher educational institute “college of finance and law”, ukraine abstract. at the present development stage of ukrainian society, the fact of absence of conceptual understanding of the content of state scientific policy and mechanisms of its formation and implementation is stated. the above stipulates the need to formulate a complete and perfect theory of state scientific policy and its legal confirmation. the purpose of the article is to formulate the author’s conception of the state scientific policy and substantiate the necessity of its legal consolidation in ukraine through the prism of the analysis of provisions of the current legislation, as well as the critical study of works of modern scholars. achievement of the formulated purpose is carried out by means of complex and consistent application of the corresponding scientific tools presented by such methods of scientific knowledge as: logical-semantic, system, structural-logical, methods of grouping, deduction, induction, analysis and synthesis, etc. results. in the article, an analysis of scientific developments devoted to the clarification of the content of the state scientific policy is carried out. the author succeeded in establishing that state scientific policy is often viewed from structural positions, that is, as a formation consisting of a certain set of elements. in the author’s opinion, such an approach is somewhat mechanical, since those many connections and factors that ensure its smooth functioning remain out of sight. in order to solve this task, as stated in the article, it is necessary to nominate and consolidate the state scientific policy at the legislative level as a strategy and tactics of state activity in the field of science that corresponds to national interests and international standards. as a summary, the conclusion is drawn that modernization of legal acts in the field of science should consist in harmonizing legal principles with european standards, creating legal grounds for building a modern national scientific system. the development and adoption of the law of ukraine “on state scientific policy of ukraine” deserves, in the author’s opinion, the priority attention among the problems to be solved in the legal sphere on issues of state scientific policy of ukraine. key words: policy, state policy, state scientific policy, public administration, science, grounds, development, efficiency, legal consolidation. jel classification: k00, k1 1. introduction against the backdrop of the globalization challenges, historically developed forms of organization of science cannot remain unchanged, so there is an urgent need for the transformation of state policy in connection with the transition from exclusively state science to the creation of new mechanisms for public administration, sources of funding and organization of scientific activities. in addition, due to the complication of the public administration object, in which market elements appeared, effective mechanisms should be developed that would ensure the development of science and, at the same time, create conditions for improving its economic and social efficiency. various theoretical substantiations of state scientific policy in general and in ukraine in particular are found in the scientific works of such well-known scholars as: a. abdulov, a. azizov, v. arutiunov, a.  bezborodov, o. vahanov, h. volkov, l. hokhberh, n. hordieieva, d. hvishiani, a. hudkova, o. dynkin, h. dobrov, s. zdioruk, h. kalytych, d. karkavin, k. korzhavin, v. kremen, b. liebin, b. malitskyi, baltic journal of economic studies 180 vol. 4, no. 3, 2018 l.  mindeli, s.  mykulynskyi, o. popovych, k. popper, v. rasudovskyi, a. sokolov, and others. in recent years, the ukrainian state has been actively involved in creating elements of a market innovation system and adapting science as its most important element to new political, social, and economic conditions. however, the actions of public administration bodies in this area were not always systematic and consistent. as a result, new and old forms of organization of science not only exist in parallel but also conflict to some extent. in a number of areas of public administration, science does not have adequate human resources, information, analytical, and financial support. in view of the foregoing, there is the necessity for forming and legal consolidation of the new state scientific policy of ukraine, which would have a complex, crosssectoral character, pursue specific goals, be based on the organic system of planned documents, supported by an effective mechanism of implementation, carried out within the framework of a unified social development policy. 2. definition of the category “state policy” in the legislation of ukraine speaking about state policy as a category, we must take into account the fact that although the term “state policy” is widely used in ukrainian legislation, it does not contain a clear statutory definition of what we should understand under this category. the analysis of ukrainian legislation allows us to note the following: firstly, the category of state policy is usually used in a specific context, in linking to specific needs. thus, for example, p. 1 of part 1 of article 1 of the law of ukraine “on principles of state regional policy” on 05 february 2015 includes the statutory definition of “state regional policy” (verkhovna rada ukrainy, 2015); secondly, in the legislation of ukraine, the synonymous categories of state policy are used. for example, the constitution of ukraine in part 1 of article 116 speaks about “policy of the state” and in part 4 of article 138 uses the term “policy of ukraine” (verkhovna rada ukrainy, 1996); thirdly, there is a special law of ukraine “on principles of internal and external policy” on 01 july 2010 (verkhovna rada ukrainy, 2010), which, although does not define “state policy”, outlines the main principles of the implementation of external and internal state policy of ukraine; fourthly, on state policy, in the context of realization of its separate directions, it is said in a rather large number of laws of ukraine and subordinate legislation, for example, in the law of ukraine “on waste” on 05 march 1998 (verkhovna rada ukrainy, 1998) or in the regulation on the ministry of regional development, construction, and housing and communal services of ukraine, approved by the resolution of the cabinet of ministers of ukraine on 30 april 2014 № 197 (verkhovna rada ukrainy, 2014). at the same time, these acts also do not define the category of “state policy”; fifthly, the ukrainian legislation regulates the main directions of the state policy of ukraine. it is about the external and internal state policy of ukraine. thus, in accordance with the law of ukraine “on principles of internal and foreign policy” on 01 july 2010, ukraine’s internal policy consists of: internal policy in the spheres of development of local self-government and stimulation of regional development; internal policy in the field of the formation of civil society institutions; internal policy in the field of national security and defence; internal policy in the economic sphere; internal policy in the social sphere; internal policy in the environmental sphere and the sphere of technogenic safety, etc. the principles of ukraine’s foreign policy include: ensuring ukraine’s integration into european political, economic, legal space with a view to gaining membership in the european union; ensuring national interests and security of ukraine by maintaining peaceful and mutually beneficial cooperation with members of the international community in accordance with generally recognized principles and provisions of international law; provision by diplomatic and other means and methods provided for by international law of protection of the sovereignty, territorial integrity and inviolability of ukraine’s state borders, its political, economic, energy, and other interests; providing protection of rights and interests of citizens and legal entities of ukraine abroad; establishment of the leading place of ukraine in the system of international relations, strengthening of the international authority of the state, and so on (verkhovna rada ukrainy, 2010). 3. a general idea of policy under the condition of the absence of a clear definition of the category “state policy” in the legislation of ukraine, it is necessary to refer to the works of scientists on this issue. in our opinion, any definition of state scientific policy should not contradict the general idea of policy in its traditional sense. so, the policy can be considered as a consequence of external influences and the distribution of power, as a set of leading ideas, as a set of institutional structures, and as a decision-making process (tertychka, 2002). in the most abstract form, the policy represents the sphere of interaction between classes, parties, nations, peoples, states, social groups, power and population, citizens and their associations. this is the most important and complex part of social life (matuzov, 1997). the abstract form of understanding of policy does not determine a full-fledged approach to defining its meaning, as there are a lot of controversies around the baltic journal of economic studies 181 vol. 4, no. 3, 2018 definition of this categorical notion. this is related to the multidimensional and multifaceted nature of this phenomenon. this statement is confirmed by the historical fact, the essence of which is reduced to the fact that the issues of politics, state, society constantly attracted the attention of thinkers of different eras and peoples. in the history of political thought, such classical works on social philosophy as the republic and the laws by plato, politics by aristotle, de re publica and de legibus by cicero, the prince by machiavelli, leviathan by hobbes, tractatus politicus by spinoza, the spirit of laws by montesquieu, the social contract by rousseau, the metaphysical elements of justice by kant, foundations of natural right by fichte, elements of the philosophy of right by hegel, and also papers written by locke, weber, jaspers, and other thinkers of the past and present are markedly distinguished. however, it should be noted that in the works of the ancient pillars of public opinion, not policy as a certain kind of state activity as much as the political world in the modern sense is investigated (gadzhiev, 1997). 4. the issue of state policy in the national scientific literature in the domestic scientific literature, the issue of state policy has not yet been adequately covered, but some issues of this problem, namely: the conceptual foundations of state policy, its analysis, means of implementation, etc. are set out in the works of some domestic scholars. thus, the conceptual foundations for understanding the state policy in general can be reduced to the following formulations: state policy – a political activity of the state and its institutions, aimed at ensuring order in society, harmonizing and subordinating various social interests, achieving social harmony, and organizing the management of social processes’ development (lohunova, shakhov, shevchenko, 1999); state policy – a relatively stable, organized, and purposeful activity (inactivity) of state institutions, carried out by them directly or indirectly on a particular problem or a set of problems that affects the life of society (rebkalo, tertychka (red.), 2002); state policy – a relatively stable, organized, and purposeful activity of the government in relation to a particular problem or subject of consideration, which is carried out directly or indirectly through authorized agents and affects the life of society (romanov, rudik, brus, 2003). 5. functions of state policy in turn, state policy is reflected in its functions. it is well-known that for the modern law-bound state, the main function is to protect the interests of man, protect his rights and freedoms, and ensure proper living conditions. other functions of the state are more or less subordinate to its implementation. among them, one can distinguish, firstly, the creation of democratic conditions for the definition and coordination of interests of various social groups of society; secondly, the creation of conditions for the development of production; thirdly, the promotion of education, science, and culture; fourthly, environmental protection; fifthly, protection of the constitutional system; sixthly, ensuring law and order. in this regard, one can talk about state policy in various spheres of society. for example, about the social, cultural, scientific, economic, regulatory, environmental, legal policy of the state. thus, state policy is reflected in the direction of regulation of social relations, which are formed in real life. 6. the essence of state scientific policy the issue about the essence of the very state scientific policy also provokes heated discussions that reflect the divergent views of scientists and practitioners in relation to the role of the state in the scientific system. in this context, we consider it necessary to analyse modern approaches of ukrainian scholars to the conceptual category mentioned in the title of this article, which can be reduced to understanding in narrow and broad aspects. thus, in the broad sense, b.a. malytskyi defines state scientific policy as a long-term state’s behaviour in matters related to science (malytskyi (red.), (2001). representatives of the narrow approach (s.i. zdioruk, h.i. kalytych, k.m. korzhavin) under the state scientific policy understand the totality of actions of state officials (state authorities, which they personify), aimed at solving problems arising in the process of human activities in the field of science (zdioruk (red.), 2006; kalytych, korzhavin, 2008). among the types of principles for the formation of state scientific policy, they distinguish legislative, statutory, and purely political (personal). the first two areas are often combined with each other, the latter is mainly considered in the context of the role of the individual in the state process due to the complexity of distinguishing the actions of individual political leaders in the adoption of a political decision, especially when the change of policy direction occurs contrary to the current legislative and regulatory framework of activity (kalytych, korzhavin, 2008). the analysis of the above definitions indicates that state policy is often viewed from structural positions, that is, as a formation consisting of a certain set of elements. such an approach is to a certain extent a mechanical one because these numerous connections and factors that ensure its smooth functioning are out of view. that is why, in our deep conviction, in the basis of understanding of state policy, two aspects should be distinguished – strategic and tactical. baltic journal of economic studies 182 vol. 4, no. 3, 2018 taking as a basis the above scientific provisions, we can determine the state policy as a strategy and tactics, which determines activities of the state in a certain area of life of society and the state. such activities are carried out by the state systematically in order to achieve certain socially useful results. in our opinion, this very approach to the understanding of state policy allows showing its teleological nature, that is, it is aimed at achieving a certain specific goal, which should be determined by the state policy strategy in a particular field. this, however, does not exclude the possibility that there may be intermediate goals, which achievement is determined by the tactics of state policy, and achievements, which are a certain stage in the fulfilment of the general purpose of state policy in a particular field. 7. forecasting, strategic planning, and targeted programming in the field of science taking into account the above, in our opinion, state scientific policy can be nominated as a strategy and tactics of state activities in the field of science, which meets national interests and international standards. at the same time, the important stages of formation and, at the same time, the key determinants of its effectiveness are forecasting, strategic planning, and targeted programming. forecasting in the field of science is a scientifically grounded hypothesis about the possible state of science in the future, depending on the nature of the forecast background, as well as on the terms and means of achieving the goals set. forecasts of the state of science are developed for short-term (1-3 years) and mediumterm (5 years) periods. the central executive body in the field of science is responsible for the development of predictions of the state of science. forecasts of the state of the scientific sphere are being developed in accordance with the procedure established by the cabinet of ministers of ukraine. indicators of the predictions of the state of the scientific sphere serve as the basis for the development of state target programs on science. the state scientific policy of ukraine is formed on the basis of reliable, scientifically grounded forecasts, the results of which coincide with its general plan as much as possible. strategic planning in the field of science – a key element of strategic public administration in the development of science, which helps authorities responsible for the implementation of scientific policy directions to make decisions that are coordinated with the approaches to the realization of their functions, goals, and objectives. the main form of planning in the field of science is the development of state targeted programs aimed at solving the most important problems in the development of science. state targeted programming in the field of science is an algorithm for developing a set of interrelated tasks and measures aimed at solving the most important problems of science development, are carried out using the funds of the state budget of ukraine and agreed upon by terms of execution, the composition of performers, resource provision. state target scientific programs are developed, approved, and implemented on the basis of the law of ukraine “on state target programs” in accordance with the procedure established by the cabinet of ministers of ukraine. national target science programs are developed for a period of five years. sectoral and local target science programs are developed for a period of three to five years, taking into account the duration of the current national target programs. state target scientific programs are the main means of realization of priority directions of development of science and technology by concentrating the scientific and technical potential of the state to solve the most important natural, technical, and humanitarian problems. state target scientific programs on the priority directions of science and technology development are formed by the central executive body in the field of scientific activity on the basis of targeted projects selected on a competitive basis. the place and role of forecasting, strategic planning, and targeted programming in implementing state policy in the field of science in ukraine are stipulated by three factors. firstly, the indicators of expected scientific results are the basis for substantiating simultaneously the strategic plans of the bodies implementing the policy in the field of science and budget programs, aimed at a concentration of financial resources for the implementation of this policy. they serve as a bridge for the integration of resultoriented planning. secondly, the criteria and indicators for evaluating the results of the implementation of scientific policy are the core, on which the forecasts for the development of the situation in the field of science are based, the action plans on their implementation based on results of monitoring, comparison with the set target indicators and corresponding indicators for the countries, acting as a base of comparisons (“benchmarking” – in accordance with international practice), are formed and adjusted. thirdly, monitoring, critical evaluation of expected scientific results, program implementation, and responsibility for failure to achieve results are prerequisites for improving the effectiveness of legal regulation. after analysing the specified conditions for increasing the efficiency of the state scientific policy, we further emphasize the priority importance of the legal support for its implementation, since state policy as a whole, as well as its separate directions, are not realized in nonlegal forms. undoubtedly, one legal provision is not enough for the implementation of state policy, but it is a “starting point”, “rules of the game” on which the proper direction of the state policy will actually be implemented. a characteristic feature of the practical application of a large array of legal acts in the field of science is the failure to fulfil the majority of legal enactments, which baltic journal of economic studies 183 vol. 4, no. 3, 2018 can be partly explained by the lack of their specificity, numerous references to other legislation, which is either not yet fully developed, or amorphous, vague, or transfer solution of issues to the level of ministerial, departmental acts that have not yet been adopted. however even taking into account this kind of explanation, all this testifies to systemic signs of legal nihilism in the field of state scientific policy, which are laid through the state system of lawmaking. 8. conclusions it can be stated that the modernization of legal acts in the field of science should consist in harmonizing legal principles with european standards, creating normative grounds for the development of a modern national scientific system. the strategic goal of the transformation of public administration in this area should be the construction of a new model of interrelations between a scientist and a society, in which the equality between the interests of the state and the scientist will be respected. to this end, the state should formulate its scientific policy and create such institutional forms that would increase the demand for the intellectual product. from the side of the scientist, this means taking commitments to reveal his creative potential, for which the state will create the most favourable conditions, including through the formation of an appropriate legislative space aimed at the realization of aspirations and opportunities of each scientist. in our opinion, the drafting and adoption of the law of ukraine “on state scientific policy of ukraine”, as well as the adoption of the laws of ukraine “on state support of branch science”, “on protection of rights to scientific discovery”, “on status of scientific worker”, “on stimulating the development of innovative, scientific, and scientific and technical activities of higher educational institutions of ukraine”, deserves priority attention among the problems to be solved in the legal sphere on issues of state scientific policy of ukraine. references: verkhovna rada ukrainy (2015). pro zasady derzhavnoi rehionalnoi polityky: zakon ukrainy vid 05 liutoho 2015 roku № 156-08 [on principles of state regional policy: law of ukraine on 05 february 2015 № 156-08]. vidomosti verkhovnoi rady ukrainy, no. 13, art. 90. verkhovna rada ukrainy (1996). konstytutsiia ukrainy [the constitution of ukraine]. vidomosti verkhovnoi rady ukrainy, no. 30, art. 141. verkhovna rada ukrainy (2010). pro zasady vnutrishnoi i zovnishnoi polityky: zakon ukrainy vid 01 lypnia 2010 roku № 2411-17 [on principles of internal and foreign policy: law of ukraine on 01 july 2010 № 2411-17]. vidomosti verkhovnoi rady ukrainy, no. 40, art. 1452. verkhovna rada ukrainy (1998). pro vidkhody: zakon ukrainy vid 05 bereznia 1998 roku № 187/98-vr [on waste: law of ukraine on 05 march 1998 № 187/98-вр]. vidomosti verkhovnoi rady ukrainy, no. 36-37, art. 242. verkhovna rada ukrainy (2014). pro zatverdzhennia polozhennia pro ministerstvo rehionalnoho rozvytku, budivnytstva ta zhytlovo-komunalnoho hospodarstva ukrainy: postanova kabinetu ministriv ukrainy vid 30 kvitnia 2014 r. № 197 [on approval of regulation on the ministry of regional development, construction, and housing and communal services of ukraine: resolution of the cabinet of ministers of ukraine on 30 april 2014 № 197]. retrieved from: http://zakon5.rada.gov.ua/laws/show/197-2014-%d0%bf tertychka v. (2002). derzhavna polityka: analiz ta zdiisnennia v ukraini [state policy: analysis and implementation in ukraine]. kyiv: vyd-vo solomii pavlychko “osnovy”. (in ukrainian) matuzov n.i. (1997). ponyatie i osnovnye prioritety rossiyskoy pravovoy politiki [concept and main priorities of russian legal policy]. pravovedenie, no. 4, pp. 6-17. gadzhiev k.s. (1997). vvedenie v politicheskuyu nauku [introduction to political science]. moscow: izdatelskaya korporatsiya «logos». (in russian) lohunova m.m., shakhov v.a., shevchenko m.f. (1999). kontseptualni zasady teorii polityky [conceptual foundations of the theory of politics]. kyiv: vyd.-vo uadu. (in ukrainian) rebkalo v.a., tertychka v.v. (red.) (2002). derzhavna polityka: analiz ta vprovadzhennia v ukraini: konspekt lektsii do navchalnoho modulia [state policy: analysis and implementation in ukraine: a compendium of lectures to the training module]. kyiv: vyd-vo uadu. (in ukrainian) romanov v.ie., rudik o.m., brus t.m. (2003). derzhavna polityka: analiz ta mekhanizmy yii vprovadzhennia [state policy: analysis and mechanisms for its implementation]. dnipro: dridu nadu. (in ukrainian) malytskyi b.a. (red.) (2001). aktualni pytannia metodolohii ta praktyky naukovo-tekhnichnoi polityky [urgent issues of methodology and practice of scientific and technical policy]. kyiv: ukrintei. (in ukrainian) zdioruk s.i. (red.) (2006). humanitarna polityka ukrainskoi derzhavy v novitnii period: monohrafiia [the humanitarian policy of the ukrainian state in the modern period: monograph]. kyiv: nisd. (in ukrainian) kalytych h.i., korzhavin k.m. (2008). naukovo-tekhnolohichnyi ta innovatsiinyi rozvytok: kontseptsii, modeli, rishennia [scientific-technological and innovative development: concepts, models, solutions]. kyiv: ukrintei. (in ukrainian) baltic journal of economic studies 238 vol. 4, no. 4, 2018 corresponding author: 1 yaroslav mudryi national law university, ukraine. 2 yaroslav mudryi national law university, ukraine. 3 kharkiv institute of finance of kyiv national university of trade and economics, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-4-238-243 innovation as a factor of the socio-economic efficiency of tax consulting olga marchenko1, nataliia maryniv2, olga yarmak3 abstract. the aim of the article is to study the theoretical and methodological principles of the interconnection and interdependence of innovation and the socio-economic efficiency of tax consulting and on this basis to determine the areas and tasks of innovation management in this sphere. the subject of the study is innovation and innovative tax consulting services. methodology. the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the systematic approach enabled to reveal the content of the social and economic efficiency of tax consulting as the integrity of its economic performance as a practical legal activity based on enterprise and a structural unit of the national economy and socio-economic effects of its functioning as an institution of legal economy and the rule of law. the method of functional analysis enabled to substantiate the author’s approach to the definition of infrastructural and imputed functions of the tax-consulting institute, to reveal the content of its innovative function, its internal and external components. based on a categorical analysis of innovations in the legal sphere, the concept of innovations and innovative services of tax consulting is considered to reveal a combination of legal, economic, social, and innovative characteristics in its content. the methodology of facet classification enabled to determine and characterize types of innovations in tax consulting, such as product, process, management-organizational, social innovations, as well as to ground areas and measures of management of innovative activity in this sphere of practical legal activity. the results of the study revealed that the social and economic efficiency of tax consulting as a unity of its economic performance and socio-economic effects are closely interconnected with its innovation, because innovations as certain changes in the product, technology, service provision, consulting, and market activity are efficiency factor, while possibilities of their implementation depend on the economic results of entrepreneurial activity in legal assistance on taxation and the quality of management of innovation activity. practical implications. in the research, the classification of tax consulting innovations enabled to reveal the areas and management measures of innovation development in this practical legal activity to ensure its efficiency as a type of entrepreneurial activity and socio-economic institute, consisting of updating the product portfolio by developing and providing bundled, boutique services, development of niche industries; tax consulting on-line and automation of typical professional services; use of legal crowdsourcing and crowdfunding; introduction of the model of open innovation; management of innovative knowledge; formation of external and internal tax consulting networks; pro bono services. relevance/originality. the proposed author’s approach to the definition of the socio-economic efficiency and the innovative function of tax consulting, their interconnection and interdependence is the theoretical basis for, first, studies of socio-economic and legal conditions and factors of effective legal assistance on taxation on an innovative foundation, and second, development of activities for the innovative improvement of tax consulting, and effective realization of its functions. key words: tax consulting, social and economic efficiency of tax consulting, innovative function of tax consulting, innovations and innovative services of tax consulting, management of innovative activity of tax consulting subjects. jel classification: e62, k34, l80, m21, o31 1. general problem statement under the current development of the legal economy, implementation of systemic socio-economic reforms, development of international economic relations, globalization and european integration, the role of tax consulting in providing economic entities with professional knowledge and information on tax planning and reporting, optimizing the tax burden in accordance with the requirements of the current legislation is of particular importance. this requires baltic journal of economic studies 239 vol. 4, no. 4, 2018 a significant increase in the socio-economic efficiency of tax consulting based on innovation. 2. literature review nowadays, the practice of tax consulting demonstrates many concrete examples of innovations in this sphere, which requires their analysis, generalization and, accordingly, systematization of knowledge on the conditions, factors, and areas of innovative provision of the socio-economic efficiency of professional legal assistance to economic entities on taxation issues. the economy and law experts emphasize the importance of the analysis and practice of legal (shevchenko, 2017; khokhuliak, 2016; miroshnykov; foremnyi, 2017; yurydychni startapy na rynku yurposluh; bot-providnyk), which is a significant stage in the scientific research, but not sufficient to reveal the role of innovation in socio-economic efficiency of tax consulting as entrepreneurship and the institute of legal economy. 3. unsettled issues of a general problem the important interconnected components of the problem of innovative factors of the tax consulting effectiveness are: 1) interpretation of the content of social and economic efficiency of tax consulting and its innovative function, substantiation of their interconnection and interdependence; 2) definition of innovation types and innovation areas in professional assistance on taxation, theoretical substantiation of the content of “innovation of tax consulting,” “innovative services of tax consulting”; 3) justification of management areas of innovative activity in tax consulting to ensure its socio-economic efficiency. the aim of the article is to justify the content and types of innovation and innovative services of tax consulting as factors of its socio-economic efficiency and on this basis to determine the areas and measures of management of innovation activity in professional assistance on taxation. 4. the main material tax consulting, as a provision of professional assistance to businesses and the population on taxation, is: first, an important component of many business services, such as audit, management consulting, legal and accounting business services, etc.; second, legal practice, that is, a certain type of practical legal activity; third, the entrepreneurial activity of lawyers and their organizations in providing professional tax services to achieve a certain legal result and profit; fourth, the socio-economic institute, a component of the legal economy. therefore, the content of the socio-economic efficiency of legal consulting is multidimensional with economic, legal, and social characteristics, hence it should be defined systematically to reflect, first, the dual nature of tax consulting as a business aimed at profit, and professional practice of lawyers, aimed at achieving a certain legal result; second, its social role as a formation and development factor of a law-governed state and legal economy. based on the systematic approach to determining the social and economic efficiency of tax consulting, the following components should be included in the content of this category: – economic efficiency of tax consulting as a type of business activity and a structural unit of the national economy; – socio-economic effects of tax consulting, connected with its functions, in other words, the main areas of implementation of its claimed purpose (social role) as a socio-economic institute, which at the microeconomic level is a support in achieving the goals of individuals and legal entities in the legal sphere by providing them with legal assistance; at the macroeconomic level, is in ensuring and protecting law and order in all spheres of human activity. the system of tax-consulting functions includes: – its functions, which reveal its content as a professional activity of lawyers to provide business entities and the population with the necessary legal knowledge and information, that is, functions of accumulation and retransmission; – infrastructure function for minimizing customer market transaction costs; – imputed (assigned) functions: implementation of legal, rationalizing, innovative, regulating functions. socio-economic effects of tax consulting characterize its impact on the development of the rule of law and the legal economy due to the development and nature of its functions. economic effectiveness and socio-economic effects of tax consulting depend on its innovation. an innovative function is inherent in tax consulting, that is, internal (development and introduction of innovations and innovative services in legal assistance on taxation issues); and external, that is promoting the innovative activity of business entities in the legal space, legal protection of innovations and innovators. it should be emphasized that the internal and external components of the innovative function of tax consulting are interdependent and interrelated and determine its innovation as the ability to innovate and innovation as a certain level of perception of innovations by the subjects of tax consulting. nowadays, the innovative function of tax consulting becomes the main factor of the socio-economic efficiency of its subjects. practical implementation of the innovative function contributes to not only legal but also socio-economic outcomes of lawyers and customers of tax-consulting services, as well as society as a whole. it is important to distinguish between the concept of legal novelty (a novelty in law), legal innovation, taxbaltic journal of economic studies 240 vol. 4, no. 4, 2018 consulting innovation, innovative legal services, and innovative tax-consulting services. in legal science, the term “legal novelty” is defined as: 1) improvement of regulatory documents as the result of legislative activity, such as new laws and articles in the current laws, amendments and changes made to regulations, etc.; 2) certain legal actions. therefore, legal novelty is a purely legal category. it should be emphasized that novelties in law are implemented in the practice of tax consulting as an entrepreneurial activity in providing legal assistance via the market. in the content of legal innovations as legal novelties introduced into practical legal activity and the changes caused by them in the legal space and legal practice, the purely legal and market characteristics of legal consulting are combined. according to l.s. shevchenko’s classification, legal innovations include: 1) new legal knowledge as an intellectual product of scientific research, introduced to the market of legal services; 2) new or improved technologies for providing legal services; 3) formation of new legal services and practices (shevchenko, 2017). innovations in tax consulting are the introduction of new ideas, intelligent products, advisory technologies on taxation and the entrepreneurial activities of its subjects. innovative tax consulting services are new or improved professional actions of lawyers to provide individuals and legal entities with legal assistance on taxation issues to achieve the legal result and ensure the satisfaction of the needs and benefits of consulting process participant. the content of these concepts combines the legal, economic, social, and innovative characteristics of tax consulting. the development and effectiveness of innovative activities of tax consultants depend on the quality of management, improvement of which is an important condition and a factor in their socio-economic efficiency. determination of the main areas of innovative activity management in tax consulting is based on the classification and characterization of innovation types, such as: product innovations (new services and practices of tax consulting); process innovations concerning the technologies, methods, and techniques of practical legal activity of tax advisers; organizational and managerial innovations (new organizational forms of tax consultors, managerial and social innovations. 1. product innovations in tax consulting. the task of innovation management in tax consulting is the timely identification of possible changes in the market for legal services and the implementation of activities to preserve and strengthen competitive positions based on product innovations. nowadays, product innovations in tax consulting are: 1) integrated (bundled) professional services involving knowledge and experience of specialists in various branches of law, economists, financiers, accountants, psychologists, and other professionals; 2) individualized (boutique) professional services that are non-standard and not replicated; 3) transformer services adapted to the requirements and specifics of the various tax consulting industry; 4) niche industry of tax consulting, the introduction of which is caused by a change in the structure of demand for services in taxation in a particular economic activity. for example, the development of start-ups in various economic sectors leads to the demand for their support by tax professionals forming a new segment (niche) of tax consulting. 2. process innovations in tax consulting. an important area of the innovative management of tax consulting is the development of on-line counselling and the automation of typical professional services. in ukraine, a legal online platform bitlex, a resource freelawyer.ua, have already been created to find a lawyer for litigation or for consultation (bot-providnyk). according to yaremenko, these online services do not provide advisory or other legal services, but they have contracts of work/partnerships with law firms or are on-line platforms for freelance lawyers. such services are nothing more than another modern channel for selling legal services (yaremenko, 2016). it should be emphasized that on-line counselling is carried out by lawyers and law firms that develop this area of tax consulting; therefore, this technology does not lead to the depersonalization of services and the replacement of lawyers with legal bots. unlike on-line services, the automation of tax-consulting services, based on the programs that replace lawyers, allows solving certain legal issues without the participation of lawyers. for example, for introducing innovative legal tech projects, software is created to analyse and prepare legal documents without the assistance of professional lawyers, as well as to almost automate the decision-making process on legal issues, to make contracts, wills and other documents (miroshnykov). an example of such technologies is the donotpay bot-lawyer created by joshua broder now launching an updated version of the program to help people with small legal issues. since 2016, the project has helped to challenge hundreds of thousands of fines for parking for 7 million pounds. after updating, the botlawyer will be able to conduct other operations in various fields of law (krasilnikova, 2017). the introduction of these technologies facilitates access to justice for the general population that leads to the formation of new segments of tax consulting. in 2015, a joint study by the hague institute of innovation in law and the kharkiv institute of sociology revealed the problem of access to justice for the population in ukraine, according to the following data that more than half of ukrainians have faced this problem over 5 years, 59% of ukrainians have never even sought advice from lawyers and lawyers, and only 5% of ukrainians are ready to solve their problems by suing out (haazkyi instytut innovatsii u pravi provede konkurs sered yurydychnykh startapiv…). according to e. miroshnykov, these projects help ordinary citizens reduce legal service costs and gain baltic journal of economic studies 241 vol. 4, no. 4, 2018 wider access to justice (miroshnykov). consequently, these technologies have signs of not only procedural but also social innovations in legal consulting. the new area of tax-consulting innovation management is the management of legal crowdsourcing (technology for the search, selection, mobilization, transfer and use of legal knowledge in electronic communities). legal crowdsourcing covers the following areas: obtaining legal knowledge and information through the internet; custodianship as an involvement in solving certain legal problems of many participants of the professional electronic communities that do not have territorial, geographical, corporate or other restrictions; provision and promotion of legal services and their creators through the internet. the management of legal crowdsourcing covers such forms as: 1) internal legal crowdsourcing, that is, the exchange of legal knowledge and information within the firm. this form of crowdsourcing is appropriate, in case of, first, the divisions of the law firm are territorially separated from each other, and second, a remote work on the internet as an employment pattern of a lawyer; 2) partner legal crowdsourcing, that is, intellectual cooperation of lawyers of different firms for the exchange of legal knowledge and information; 3) external legal crowdsourcing as an involvement of knowledge of the participants of electronic communities in solving a certain legal problem; 4) legal crowdsourcing, used by law firms, government agencies. the application of legal crowdsourcing increases the ability of tax consulting companies to involve knowledge and information resources and increase the effectiveness of consultancy. 3. managerial and organizational innovations in tax consulting. first, an important component of the management of tax-consulting innovations is the choice and implementation of the organizational pattern of the innovation process. in the pattern of closed innovations, the law firm independently, at its own expense and risks, carries out all stages of the innovation process in confidentiality. characterizing closed innovations h. chesbrough emphasizes the necessity of an independent discovery of r&d, its improvement to the level of the product and getting results to profit from it (chesbrough, 2007). the pattern of open innovation involves, first, certain stages of the innovation process carried out beyond the law firm by cooperating with independent researchers, scientists, specialists, innovators; and second, innovative products, created outside the firm, in the innovation process. intellectual property should make a profit if other use it and intellectual property should be bought from other companies if it meets one’s business pattern (chesbrough, 2007). implementation of the open innovation pattern increases the economic efficiency of tax consulting as a business significantly. second, innovation management is the management of knowledge necessary for innovation. the task of management of innovative knowledge of tax consulting is their involvement, storage, accumulation, protection, and effective use in the consulting process. the main objects of management of innovative knowledge are: 1) holders of new knowledge (lawyers and other professionals, whose intellectual activity is an intellectual product). it is the human capital of tax consulting innovations; 2) intellectual property objects that are a part of the intellectual capital of a law firm. this is a capital knowledge of tax consulting; 3) the knowledge base of tax consulting, can be formal (information accumulated on paper and electronic media, which is a generalization of collective knowledge about different areas of activity of its subjects); informal (corporate culture and corporate memory); 4) the movement (integration) of innovative knowledge covering their creation, involvement, transformation, accumulation, storage, exchange, and use. knowledge management contributes to their transformation into the intellectual capital of tax consulting, the use of which ensures the growth of value, profit, and other benefits. the organizational innovations in tax consulting are the application of a virtual law firm by creating its external and internal networks. the network principle is the basis for forming an innovative knowledge management and intellectual professional activity management system. the internal network is based on the group work of lawyers and other professionals, whose result is not the total individual contributions to solving the problem but a positive synergistic effect of integrating intellectual resources of tax consulting. the core of the external network is an intelligent network that includes providers of knowledge and information necessary for effective advisory activity. it consists of various information firms, agencies, clients, partners, state bodies, community organizations, professional associations of lawyers, educational institutions, mass media, etc. construction of an intellectual network is important in increasing the efficiency of tax consulting. novelty in the management of innovative financing of tax consultants is the use of (howe, 2012) (technology for involving a large number of people, such as internet users, connected by network communities, to finance a variety of legal projects, start-ups, social innovations). crowdfunding enables a law firm to not only involve the necessary funds for innovation but also minimize market transaction costs for these purposes. 4. social innovation in legal consulting. the non-standard solution of social problems is the element of the content of social innovation (boiko-boichuk, 2009). nowadays, the social innovation of legal consulting in general and tax consulting in particular are legal рro bono services, directly connected with the decision of problematic access of the population to justice, an effective implementation of social responsibility of legal business. legal pro bono services are not paid by their consumers, and the expenses of lawyers for their provision are not compensated. baltic journal of economic studies 242 vol. 4, no. 4, 2018 it is legal assistance free of charge for the consumer and non-recompensable for lawyers. it is a wide range of professional lawyers’ services that meet all the requirements and criteria of practical legal activity. in addition, although pro bono publico legal is carried out free of charge and without compensation for lawyers, this is not the charity of lawyers, but their systematic professional activity in providing legal assistance, the implementation of which is a criterion of professionalism and social responsibility of legal business entities. a. nasadiuk emphasizes that the range of “true” pro bono is extremely broad: from legal counselling of individuals and organizations, legal support to workers in culture and sport in the lawmaking process, and analytical reports for international reviews (nasadyuk, 2016). according to the code of professional ethics of the american bar association, a specialist should devote at least 50 hours of pro bono publico legal services a year. furthermore, a significant number of companies provide much more hours (pro bono: sekret uspekha yuridicheskoi kompanii). in ukraine, in 2015, 49% of lawyers render legal pro bono services (rabota ne pro bono). a socially responsible legal business is a factor for the implementation of this social innovation in legal practice. 5. conclusions and areas of further research the social and economic efficiency of tax consulting as a unity of its economic performance and socioeconomic effects are interconnected with its innovation, because innovations are efficiency factor, while possibilities of their implementation depend on the economic results of entrepreneurial activity in legal assistance on taxation. the innovation of tax consulting, as certain changes in the product, technology, service provision, management of consulting and market activity of its subjects, is the object of innovation management in practical legal activity determining its content and main areas. nowadays, the management of the innovative development of tax consulting involves the management of creation and introduction of new legal services, innovative technologies of legal activities, organizational and managerial innovations, social innovations that provide creators and consumers of legal services with a qualified legal assistance in taxation, competitiveness, and efficiency. further research is aimed at developing measures for improving the socio-economic efficiency of tax consulting on the basis of the innovative knowledge management and introduction of an innovation pattern to innovative activity to overcome financial, intellectual, and time constraints, optimization of transformation and transaction costs on innovation activities of subjects of tax consultancy by involving knowledge and activities of external independent participants in the innovation process and transferring some of their functions and separating units for certain stages of innovation. references: shevchenko, l. s. (2017). innovatsiinist yurydychnoho biznesu: kryterii ta chynnyky. [innovativeness of the legal business: criteria and factors]. proceedings from international scientific and practical conference on formation and development of innovative potential of the ukrainian economy, 2, 10-13. (in ukrainian) khokhuliak, o. o. (2016). tendentsii rozvytku meharehionalnykh rynkiv yurydychnykh posluh [trends in the development of megaregional markets of legal services]. naukovyi visnyk mizhnarodnoho humanitarnoho universytetu. seriia “ekonomika i menedzhment”, 16, 108-111. (in ukrainian) miroshnykov, ye. legal tech v ukraini: innovatsii u yurysprudentsii [legal tech in ukraine: innovation in law]. retrieved from: http://yur-gazeta.com/publications/practice/inshe/legal-tech-v-ukrayini-innovaciyi-uyurisprudenciyi.html (accessed september 5, 2018) (in ukrainian) foremnyi, d. 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(2016). sotsialnyi paket. kakie initsiativy pro bono podderzhivaiut yurfirmy i pochemu [social package. what pro bono initiatives are supported by law firms and why]. yuridicheskaia praktika, 39. retrieved from: http://pravo.ua/article.php?id=100114037 (accessed september 5, 2018) (in russian). pro bono: sekret uspekha yuridicheskoi kompanii [pro bono: the secret of success of a law firm]. retrieved from: http://jurliga.ligazakon.ua/news/2013/9/10/97411.htm (accessed september 5, 2018) (in russian) rabota ne pro bono [non-pro bono work] (2015). yuridicheskaia praktika, 30-31. retrieved from: http://pravo.ua/ article.php?id=100111580 (accessed september 5, 2018) (in russian) baltic journal of economic studies 283 vol. 4, no. 5, 2018 corresponding author: 1 melitopol institute of public and municipal administration of the classic private university, ukraine. e-mail: ra_va@ukr.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-283-290 institutional modernization of the global economy maryna radieva1 abstract. the aim of the research is the improvement of the concept of the institutional structure of the economy in the conditions of corporatization on the basis of researching the international experience of development of stable basic institutions of the institutional environment. methodology. the methodological basis of the study is the provisions of the institutional theory using the analysis methodology “institutional matrix”. historical-logical and dialectical methods were also used to study the contradictions in the processes of formation and development of the international institutional environment. results. institutional dynamics is the result of the functioning of a global international and specific national institutional environment, a formed subclass, ideological, economic, nationalhistorical factors, essential values, ethnic characteristics and characteristics of the nation’s mentality that are formed under the influence of long-term cultural influence and as a result of social interaction. forced creation of new structures and private-property relations, supported by a massive import of market institutions in the absence of adequate national formal institutions and informal corporate culture, has led to non-fulfilment of contracts, a low business culture, opportunistic behaviour and informal contracts. in the process of introducing economic agents to institutional changes, invent quasi-market mechanisms: the predatory use of all types of resources, barter, income concealment, shadow schemes of tax evasion, offshore, “under-the-counter” wages, raiding, corruption at all levels of government, wide scale and versatility opportunism, violation of contracts, and the consumption of fixed assets. these manifestations intensified the structural deformations of the market and the transformational risks of the national economy. it is revealed that the development of the corporate economy on an innovative basis under the influence of globalization and monopolization, changes the individual institutions of the basic yand xmatrices. a new concept is proposed for constructing an institutional matrix using two principles of economic distribution: the market economy and the distribution economy; on the corporate and individual sectors of the economy. two types of institutional matrices – corporate k-matrices and individual i-matrices – function in basic xand y-matrices, dividing each of the economies into two unequal parts (in terms of effectiveness, influence and significance of consequences). corporate transformations turn individual complementary institutions of the market economy into the basic institutions of the corporate part of the y-economy. continuing institutional displacement requires finding the optimal balance between basic and complementary institutions in the corporate and unincorporated sectors of the ukrainian economy, based on the use of specific institutional matrices, which will allow for institutional construction and minimize the social costs of the country’s evolutionary development. the concept of the institutional-matrix structure of the economy has been improved taking into account the modern tendencies of corporatization. the economy is defined as a set of basic institutions of two types of matrices that are unequal in efficiency, influence and significance of consequences: the corporate k-matrix and the individual private ownership of the i-matrix. practical implications. the distribution of the economy into the corporate and individualprivate ownership sectors was the result of institutional transformations of certain complementary institutions of the market economy into basic ones, reveals the ways and sustainable mechanisms of institutionalization for the effective transformation of local institutional environments. the creation of an effective institutional environment will be ensured through the cultivation of institutional changes. value/originality. the ongoing institutional displacement due to the intensification of the processes of monopolization and internationalization requires the search for an optimal balance of basic and complementary institutions in the corporate and unincorporated sectors of the ukrainian economy, based on the use of specific institutional matrices, which will allow for institutional construction and minimize the social costs of the country’s evolutionary development. key words: basic institute, complementary institution, institutional matrix, institutional environment. jel classification: d02, d23, e02, e71 baltic journal of economic studies 284 vol. 4, no. 5, 2018 1. introduction in the modern global economy, the renovation of the institutional environment is almost uncontrollable. institutional biases continue, contrary to popular belief about the “specific, but formed”, institutional environment. the vector of institutional transformations of the global and national economy is changing, the rethinking of which is yet to come. in the ukrainian economy, a number of factors have developed, actively opposing the processes of establishing an effective institutional environment. the unfavourable development of the institutional environment has resulted in inadequately formed labour, capital, land markets, the economy’s orientation toward administrative and distributive relations, inefficiency and injustice of property relations, the information closeness of the capital market, high transaction costs, high uncertainty, and the reduced investment attractiveness of ukrainian companies. features of institutional development are impossible to borrow the management mechanisms used in developed countries with historically created formal and informal institutions. reforming of the borrowed western institutions led to unpredictable and negative consequences. specific political, ideological, and economic factors in the development of the ukrainian economy require new approaches to the institutionalization of the country. the task of finding new approaches is reducing the negative impact and negative consequences in the process of restructuring state and non-state ukrainian institutions. the fundamental feature of the ukrainian institutional environment is the complexity or even the impossibility of establishing western institutions since institutional changes have a clearly expressed national specificity. the import of institutions with subsequent legal fixing, which in most cases ensures the institutionalization of the economy, is not always effective, and sometimes impossible. there is a need for their cultivation and selfdevelopment in the national institutional environment. 2. institutional matrices of the global economy stable basic institutions of the institutional environment form an “institutional matrix” (north, 1990). the institutional matrix is understood as a set of basic institutions that form a framework for retaining the main subsystems of the environment, ensuring reproduction and institutional dynamics. the basic institutions reflect the deep features of social structures that determine the number of possible trajectories for the further development of an institutional society. the nature of the basic dominant institutions determines the nature of the institutional development of the economic system. basic economic institutions fix ways of the interaction of economic entities with the institutional environment for achieving the best result, that is, institutionalizes the forms of economic integration of society. recently, the concept that a variety of institutional complexes is based on one of two matrices has become widespread. the x-matrix is inherent in the states of the eastern part of the world – russia, most countries in asia and latin america; b-matrix is typical for countries of western europe and the united states. institutional matrices in the economy. social institutions exist independently of the cultural context, outside civilizational forms. both matrices consist of three groups of basic institutions: economic, political, and ideological. each institution of one matrix is opposed to the corresponding institution of the other matrix. the institutional matrix ensures the historical stability of institutions with respect to external and internal influences. in society, the principle of the dominance of the basic institutions of the matrix operates, which means the dominance of all three types of institutions of this matrix. the institutional matrix is characterized by integrity, that is, the dominance of one of the basic institutions of the matrix leads primacy and the other two types of institutions in society. at the same time, complementary institutions can operate with an alternative matrix, but they have an auxiliary character. the basic institutions establish restrictions on the operation of complementary institutions (kirdina, 2017). basic institutes are historical invariants that retain their nature, provide a “blocking effect” for selfmaintenance of the matrix structure (donchenko, 2013). complementary institutions ensure the stability and balance of the socio-economic system. basic institutions are characterized by unmanageability and can lead society to chaos and crisis. targeted actions of the state and government are directed to the development of complementary institutions for balancing a particular public sphere. the balanced ratio of basic and complementary institutions becomes the task of managing the institutional structure. the economic structure of society is the result of a combination of production relations. objective prerequisites for the creation of an institutional economic system are the peculiarities of material conditions and technologies, that is, the technological basis of institutional changes (north, 1990; schumpeter, 1989; kirdina, 2017). analysis of institutional dynamics based on the introduction of new technologies reveals the dialectics of interaction between institutions and individuals. institutes are formed in a specific institutional environment, respectively, institutions determine the purposeful direction of human activity. economic institutions that become the most effective means of organizing a national economy are formed in concrete material conditions, determined by them and do not exist outside these provisions. the basis for the development of the matrix becomes such characteristic of the material and technological environment of the baltic journal of economic studies 285 vol. 4, no. 5, 2018 country as communal (or uncommunicated), that is, the use of the environment as a single indivisible system, parts of which can’t be separated without the threat of disintegration of the environment. the communality of the material and technological environment provides for the continuity of the links between the elements. the properties of the communality (non-communality) of the environment do not change over time. the material and technological environment determines institutional technologies and enhances the character of the manifestations of basic institutions (kirdina, 2017). the type of property – general or private – is associated with the amenities and costs of specification and protection of property rights. historically, the individual properties of the material medium of the ukrainian economy determined its “communality” preventing the consolidation of private property rights: particularly the economic landscape, unfavourable climate, short-term field work, specific cultivation techniques, the use of slash-and-burn agriculture, low temperature, low crop yields and the consequent need to expand the acreage, permanent transfer to another land, the market unprofitable. 3. institutional-matrix concept of modern economy the use of the specifics of institutional matrices allows for the implementation of institutional construction and minimizing the social costs of the country’s evolutionary development. however, historically, the mental orientation of institutional dynamics is conditioned and the recognition of the economy of the aggregate of basic and complementary institutions in accordance with the type of matrix does not abolish the processes of modernization of the institutional environment. the unsuccessful institutional transformations of ukrainian society indicate, rather, the ill-considered, rather than the hopelessness of institutional transformations. the success of further reforms is related to the restoration of the effective functioning of the basic x-type institutions, the substantial modernization of their forms, the continuation of the search and the institutional development of effective complementary institutions. however, let’s believe that the division of the world into the xand y-type economies does not correspond to the current trends of globalization, corporatization, and monopolization of the world economy. the corporate economy is gradually changing the individual institutions of the basic b-matrix of countries with market economies of the west and the us and affects the vector of development of the x-matrix institutions. the introduction of innovations allows the corporation to overcome the inertia of the permanent institutions and change them. corporations are subjects of the market economy –have a hierarchical structure corresponding to the institution of coordination of the opposite matrix. a corporation is an aggregate of enterprises or industries operating on the basis of consolidation and forms a cooperative institution. the need to increase the capitalization of corporations led to a special institution of jointstock (not common and private) property. it is almost universally recognized that the goal of the corporation (and some scientists consider the corporation itself to be an independent organism) is not the maximization of profits, but the opportunities for further growth. let’s try to clarify the composition of the main institutions of modern economic systems, distributing the economy to the corporate and individual sectors, by a similar distribution to the planning and market economy proposed by galbraith (1952). two types of institutional matrices – corporate k-matrices and individual i-matrices – function in basic x and y matrices, dividing each of the economies into two unequal parts (in terms of effectiveness, influence and significance of consequences). corporate transformations transform the complementary institutions of the market economy, such as coordination, cooperation, and collectivism, into the basic institutions of the corporate part of the b-economy (figure 1). by the method of purposeful observation, theoretical generalization and empirical analysis, let’s have confirmed the existence of several institutions that form the basis of the institutional matrix of the corporate environment. this sample is a collection of individual institutions of the xand y-matrices, which become the basic institutions of the corporate economy. each element of the institutional environment is a set of basic and complementary institutions that are specific to this level of the institutional environment. the institutional environment is formed under the influence of political, ideological, economic, nationalhistorical factors and becomes a reflection of the specifics of the development of these factors. the existence of a relationship between the ownership structure and the processes of democratization of society and the economy confirms the analysis of ownership structure in developed countries. political structure – authoritarian or democratic – forms the dominant nature of governance in corporations. in countries with a developed economy and democratic political structure, corporations with a large number of owners prevail, in countries with an authoritarian political order, corporations with a dominant owner (family or state) are formed. a significant concentration of corporate assets in the hands of several owners can significantly influence the dynamics and results of political reforms and democratic reforms, preventing the formation of a new institutional environment. the inadequacy, inconsistency, and ineffectiveness of the institutional framework lead to disagreements between corporate and social goals, generates social conflicts (radieva, 2018). baltic journal of economic studies 286 vol. 4, no. 5, 2018 the scenario of the development of society depends on the idea – an informal institution, under the influence of which the development of a new society is taking place. the idea is transformed into the priority goals of society. this explains the features of the law of the unity of productive forces and production relations in the ukrainian economy. the problem of the lag in the development of production relations from the development of productive forces as a result of the action of many factors, primarily technological, can be solved in two ways: first, the production relations develop to the level of productive forces; second, production forces are destroyed to the level of production relations. if the idea provides for the selection and development of institutions, tightening production relations to productive forces, society develops on its own, and more progressive society is born. the national ukrainian idea was formed and continues to degenerate in a specific institutional environment, reflecting the pathologies of the democratization of society and affects the development of the economy’s democratization. the goals of the dominant groups in the structure of the share capital distribution are determined by the goals of the given society, formed by the political and economic elite. the structure of property distribution among certain groups of owners becomes a reflection of the idea, transformed into priority goals of society. let’s suppose that there is also an inverse relationship: the goals of society are determined by the goals of the dominant corporate owners, who are the political and economic elite of this society. the national idea is reborn as a result of the transformation of property relations. it is likely that the dominant owners of corporate rights, which are the political and economic elite of society, will determine the goals of this society. imposing the goals of the dominant groups to the whole of society can be disastrous for the system, destroying it through political, social, and economic crises. the state’s goal is introducing an institutional control and preventing attempts to subordinate the interests of society to the interests of economically closed groups with antisocial goals. obstacles to modern market reforms are conditioned by the specifics of society, which has caused the spread of the civilizational and socio-cultural paradigm of the development of society. part of the failure of reform can be explained by the socio-cultural characteristics of the country. the sociocultural system is characterized by a combination of essential values and ethnic characteristics of social actors, formed under the influence of long-term cultural influence and as a result of human interaction. directions of the transformation of society are connected with sociocultural models, determined by the priority form of behaviour of subjects: societies with traditionalist values demonstrate the priority of prescribed norms and rules of conduct; societies with liberal values provide opportunities for client-oriented innovative actions. the way of traditionalist societies generates the stability of totalitarian structures, alienation of a person from public life, low innovative activity. the socio-cultural approach complements the analysis of institutional transformations by methods based on the revealed patterns of historical formation and stability of sociovalue structures, the diversity of manifestations of the main socio-economic processes in different cultural and historical contexts, but not without some limitations. the use of a sociocultural approach to the analysis of economic transformations makes it possible to reveal the ways and stable mechanisms of the institutionalization of a new social and economic system. societal transformation (transformation of the macrolevel) determines the pace and ways of the transformation of local institutional environments. mentality can be presented as a stable institution, containing information on national economic, political, and ideological features. mentality forms the core of culture, organizes the activities of individuals in accordance with generally accepted behaviour, values,  i-matrix characteristics of institutions:  competition.  private property.  exchange.  orientation to profit.  specialization.  horizontal.  individualism.  freedom k-matrix characteristics of institutions::  coordination / monopoly.  exchange.  joint-stock, consolidated property.  orientation to self-preservation, development.  cooperation, diversification.  hierarchical vertical.  collectivism.  subordination figure 1. institutional-matrix concept of modern economy baltic journal of economic studies 287 vol. 4, no. 5, 2018 perceptions, attitudes, customs, national traditions, morality. national mentality and stereotypes of national behaviour themselves organize the activities of individuals. the ukrainian mentality is formed under the influence of two opposite tendencies of ukraine’s development as the hetman’s republic and part of the imperial state. let’s describe some characteristic features of the national mentality, become essential characteristics of the ukrainian institutional environment, and the factors of their formation. to them let’s refer collectivism, motivation to achieve short-term goals, ineffective incentives for development, the orthodox spiritual priority over the worldly. confessional factors influenced the formation of the national mentality and the formation of the economic system. religion is the most important factor in shaping the structure of society’s values. it is reflected in the values of religious salvation, the directions of spiritual integration of different peoples and ethnic groups, forms of the interrelation between the spiritual and social structure, the nature of secular culture, determines the level of the society’s final orientations. development of forms of interaction, mutual assistance, and the formation of collectivist consciousness of the people contributed to the remoteness of the periphery from the centre and the features of economic activity. the lack of communication and transport for centuries enshrined the public’s perception of the powerlessness of the central government. 4. characteristics of the institutional environment of the ukrainian economy the specifics of the institutional environment determine the specifics of the economic system, which can have formal and informal components by the criterion of the vast majority of formal or informal institutions. the informal economy is the self-organization of economic agents, the principles of which are not institutionalized in formal rules. informal “rules of the game”, not controlled by official institutions, extend to those relations between economic agents, excite households and the shadow economy. the development of the informal economy is wrong to associate only with the characteristics of the transitional period, but rather can be presented as a logical consequence of the peculiarities of the national mentality and ideology. the ukrainian economy intuitively chose the path of development, the most consistent with the national mentality. the factor of the informal economy development has become the traditionally negative attitude towards the bureaucracy, the perception of the state as an enemy, which can be deceived, robbed, broken promises. even more, distanced people from the state violent state reforms. institutional bias caused by russian reformers – peter i, p. stolypin, v. lenin, m. gorbachev – created fundamentally new formal institutions, pulling out broad masses of the population from the usual stable institutional arrangements. violent changes had an extremely painful impact on the existence of society. another feature of the national environment was the redistributive nature of the economy (polanyi, 1957) with subsequent transformation into the distribution economy (bessonova, 2017). self-organization of non-market economic relations of the distributing economy is based on the mechanisms of redistribution, coexisting with market institutions on the principles of “dominance-compensatory”. the geographic area forms a market or non-market type of institutional core, ensures effective coordination of local environments: natural-climatic, material-technological, national-demographic, cultural-religious. the theory of integral institutionalism justifies the invariance of the nature of the institutional core of each type of economy, while the institutional forms are changing in accordance with the peculiarities of the institutional platform. quasi-market mechanism of the distribution economy has the external features of a market economy, but it retains latent distribution content, pulling firms into the struggle for state resources. corporations use influence on power structures to control competition. the functioning of new corporate forms and modern quasi-market institutions ensure the formation of a system of “liberal distribution”. the main element of such a system will be state corporations with a vertically integrated structure, the complexes will be replaced hierarchically by hierarchies (bessonova, 2017). the revolutionary nature of historical and modern institutional transformations, accompanied by a sharp change in formal institutions with simultaneous lagging behind informal ones, led to a normative institutional gap. the consequences of the backwardness of the development of informal institutions were the unbalanced development of the system, the inefficiency of the functioning of formal institutions, the destruction of traditional culture, and the rapid development of the shadow economy. transformations of the social system, a sharp change in the priority form of ownership, the creation of new organizational corporate structures led to deep socioeconomic problems: loss of trust in the power and a sense of involvement in general political processes, a low level of trust between business and government has become a factor in the inefficiency of market reforms; the effectiveness of market reforms proved to be inadequate social and economic efficiency, which is not comparable with the paid high price in the form of deep destruction of production and technological potential, which is inadequate for the costs of other countries with economies in transition; the fall in the social standard of living of the population, unemployment, social insecurity became an excessively baltic journal of economic studies 288 vol. 4, no. 5, 2018 high price paid by the bulk of the population for the transition to capitalism. according to official figures in 2006, the average monthly income of the population was 657.31 uah, in 2016 – 3576.9 uah, in 2017 – 3632.7 uah. the average monthly nominal wage of hired workers (43.1% of total revenues) was: in 1995 – 73 uah, in 2000 – 230 uah, in 2002 – 376 uah, in 2004 – 590 uah, in 2005 – 806 uah, in 2006 – 1041 uah; in 2007 – 1351 uah, in 2008 – 1806 uah, in 2009 – 1906 uah, in 2010 – 2176 uah, for the period of 2013–2017 respectively – 3234 uah, 3476 uah, 4195 uah, 5070 uah, 7104 uah. let’s note a significant differentiation of wages by types of economic activity and regions. the inflation index for the period 2013-2018( january-june) was as follows: 100.5%, 124.9%, 143.3%, 112.4%, 113.7%, 104.4% (derzhavna, 2018); the polarization of people according to the standard of living took place and continues: 5% – rich; 80% – on the brink of poverty. according to official statistics, the quintile coefficient of funds characterizing the differentiation of the living standard of the population in 2016 was 3.0 times. the population with average per capita equivalent of a total income per month is below the actual living wage, as a percentage of the total population; in 2014–2016 it was 16.7; 51.9; 51.1. the country has lost its competitiveness due to the growth of technical backwardness, the lack of investment resources, and the outflow of capital, which greatly worsens the international position of the country. the structure of industrial production is changing radically, with the predominant share of which is the production of commodity sectors, mainly metallurgy. the state of the technical and technological base of the economy, which annual rates of output exceed the rates of input, poses another threat to the effective development of the national economy (kolomiiets, golovkova, 2017). a sharp decline in fundamental research, underfunding of applied research and a decrease in production of science-intensive products constitute a serious obstacle to a competitive national economy. developing countries on an innovative basis spend on science needs not less than 2.5% of gdp. two countries in the world – south korea and israel – spend on research and fertility more than 4% of gdp. according to eurostat in 2003 and 2013, science spending in percentages of gdp is respectively: south korea – 2.35%, 4.15%; eu – 3.14%, 3.4%; the united states – 2.55%, 2.77%; japan – 1.8%, 2.03; china – 1.13%, 2.08%; ukraine – 1.06%, 0.7%. in 2015, this indicator in ukraine decreased to 0.62%; reducing the volume of public investment in the real sector of the economy adversely affects the prospects for economic development. the volume and structure of such investments play an important role in the economy, influence the implementation of structural reforms, support the rapid return on capital to the region, provide the necessary level of employment; orienting the business to maximum profits, ignoring corporations social goals and the lack of a state position (and therefore laws and mechanisms) on the social responsibility of business led to corruption and oil, grain, sugar, gas, construction crises; manipulation with budgetary paintings allows reporting on filling the budget in spite of the true reality – the rapid growth of ukraine’s debts. the national debt of the country was in 2007 71,3 billion uah. as of december 31, 2017, the volume of state and stateguaranteed debt of ukraine was 1 374 995,5 uah, out of which 1 374 995,5 uah – external debt; unreasonable taxation system carries out the fiscal function of filling the budget, does not ensure the implementation of the economic function (stimulation of production, cross-sectoral capital transfer); ukraine accepts the position of the country of the “global periphery” in the global economy with the fulfilment of the function of providing conditions for highly developed countries; oligopolistic structure of markets with a high level of monopoly power; high level of shadowing and criminalization of many markets in which bureaucratic and criminal groups distribute commodity and financial flows through conspiracy, administrative or force pressure. economic reforms in ukraine, primarily aimed at increasing the efficiency of the economy, led to the emergence of many formal institutions, both by origin and, in fact, became “formal”. the practice of creating the ukrainian formal institutions demonstrated their separation from the informal norms of the new economic order, which led to the emergence of sustainable, inefficient, really “formal” institutions. reformed ukrainian legislation introduced a large number of new and modified formal institutions in a short period of time. a complex system of regulation was created, the characteristics of which were: 1) the contradictory nature of certain norms to each other and informal norms; 2) the “height” of administrative barriers during the passage of bureaucratic procedures, irresistible without “obligatory” payments, do not come to the budget; 3) the selectivity of punishment, the criteria for choosing which are informal rules. this greatly complicates the orientation in formal rules for economic agents, allows the use and interpretation of contradictions in their own interests and creates the ground for the use of informal illegal rules. unequal conditions of competition as a result of the functioning of the ukrainian regulatory system are becoming a serious obstacle to the country’s socio-economic development. the ukrainian economy demonstrates the opposite institutional deformation. forced creation of new organizational structures and new private-property relations was not accompanied by the formation of adequate enforcement mechanisms for the execution of contracts. the absence of formal institutions for baltic journal of economic studies 289 vol. 4, no. 5, 2018 contract enforcement, reinforced by the lack of informal business culture, causes a low culture of contracts, nonfulfilment of obligations. the massive import of market institutions was dictated by the desire to accelerate ukraine’s global integration, deepened institutional discontinuities, strengthening the state and business inclination towards opportunism. the propensity of domestic business to opportunistic behaviour and informal contracts increases institutional structural market deformities and transformational risks of the national economy. the imbalance in the development of the institutional environment raises the danger of the possibility of shadow structuring and criminalization of economic life. in the context of systemic transformations, society has two options for development: to reject new institutions or to slowly adapt to them. the contradiction between informal and formal rules is settled in two scenarios: according to the first, one of the rules survives; for others – it is determined the possibility of embedding a formal rule in a network of informal ones. informal rules can change indirectly through the introduction of a new system of formal rules or spontaneously. evolutionary development of the system by a small increase in informal rules ensures the spontaneous crystallization of a small part of informal constraints as conditions for maintaining the stability and development of complexly organized systems (shastitko, 2002). the transformation of the spontaneous behaviour of the subjects into the modelled one is connected with the gradual replacement of ineffective informal institutions by legitimate norms on the basis of synchronization of the elements of the institutional field (tkach, radieva, 2014). the process of adapting economic agents to unpleasant institutional changes is ensured by new quasi-market institutions, mostly informal ones. quasimarket mechanisms include the predatory use of all types of resources, barter, income concealment, shadow schemes for tax evasion, offshore, “under-the-counter” wages, raiding, corruption at all levels of government, widespread and multifaceted opportunism, breach of contracts, “budget” opportunism and the like. quasimarket relations create an institutional environment that ensures the selection and updating of basic institutions aimed at strengthening the deformations of the economy. the failure to take into account the specifics of the functioning of the institutional environment in the formation of ukrainian corporations has led to institutional discontinuities. in developed countries, the formation and consolidation of institutional forms of economic integration were carried out through their historical development in concrete material conditions. the corporate governance model created by the results of compulsory corporatization of state-owned enterprises was focused on achieving short-term personal gain, rather than creating effective institutional integration forms. the consequence of institutional gaps has been the emergence of stable, ineffective formal institutions and informal quasi-market institutions that have ensured the adaptation of economic agents to unacceptable institutional shifts. the consequence of a sustained institutional disruption was the imbalance in the development of the institutional system. the dynamics of the institutional environment demonstrates outstripping the development of the formal subsystem over the informal, which generates destabilizing processes, such as the development of the informal economy. institutional changes led to an increase in transaction costs, in the administrative economy usually paid for by the state. as a result of the combined effect of these factors, a systemic crisis occurs, during which the efficiency of production is reduced. 5. conclusions institutional dynamics is the result of the functioning of a specific national institutional environment, shaped under the influence of political, ideological, economic, national-historical factors, essential values, ethnic characteristics and characteristics of the nation’s mentality, shaped by long-term cultural influence and as a result of social interaction. the failure to take into account the specifics of the national institutional environment, such as collectivism, motivation to achieve short-term goals, ineffective development incentives, the orthodox spiritual priority over the mundane, communal environment, traditionalist values led to institutional disruptions in the formation of ukrainian companies. the unbalanced development of the formal and informal components of the institutional environment has generated the main two types of normative institutional discontinuities. the rapid development of the formal subsystem over the informal led to destructive processes in the economy, such as the informal nature of economic relations with the growth of transaction costs, the destruction of traditional culture, the indignation of the household, the shadow economy and criminality; and the redistributive nature of the economy with the transition to a distributing economy with quasi-market mechanisms. forced creation of new corporate structures and private-property relations, supported by a massive import of market institutions in the absence of adequate national formal institutions and informal corporate culture, led to non-fulfilment of contracts, low business culture, opportunistic behaviour and informal contracts. invented in the process of adaptation of economic agents to institutional changes of quasi-urban mechanisms, such as the predatory use of all types of resources, barter, concealment of income, shadow schemes of tax evasion, offshore, “under-thecounter” wages, raiding, corruption at all levels of government, and the multifacetedness of opportunism, the violation of contracts, the consumption of fixed baltic journal of economic studies 290 vol. 4, no. 5, 2018 assets, strengthened the structural deformations of the market and the transformational risks of the national economy. the development of the corporate economy on an innovative basis under the influence of globalization and monopolization changes the individual institutions of basic b-and x-matrices. a new concept of building an institutional matrix based on the distribution of the economy on the corporate and individual sectors is proposed. two types of institutional matrices – corporate k-matrices and individual i-matrices – function in basic x and y matrices, dividing each of the economies into two unequal parts (in terms of effectiveness, influence and significance of consequences). corporate transformations make separate complementary institutions of the market economy into the basic institutions of the corporate part of the b-economy. continuing institutional displacement requires finding the optimal balance between basic and complementary institutions in the corporate and 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(in russian) baltic journal of economic studies 357 vol. 4, no. 5, 2018 corresponding author: 1 national academy of internal affairs of ukraine, ukraine. e-mail: gavruha@ua.fm 2 hon. prof. m.s. bokarius kharkiv research institute of forensic examinations, ukraine. 3 kharkiv national university of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-357-363 organizational aspects of fiscal authorities in ukraine and foreign countries: comparative analysis olena tykhonova1, oleksandr sviderskyi2, iryna yefremova3 abstract. the aim of the article is a comparative legal study of the organizational aspects of fiscal authorities in ukraine and in some foreign countries and so to determine ways to improve domestic legislation in this area. the subject of the study is the domestic and foreign experience of the structure and activity of fiscal authorities in such countries as the united states, the uk, france, the republic of latvia, the republic of belarus and kazakhstan. methodology. the study is based on the use of general scientific and special scientific methods and techniques of scientific knowledge. the historical method enabled to study the origin and formation of fiscal authorities in ukraine. analysis and synthesis enabled to interrogate the fiscal system of ukraine and some foreign countries as a complex legal phenomenon, defining its essence, characteristics, and targets. the method of the system approach enabled to determine the place of individual fiscal authorities in the financial system of the country, to analyse their main responsibilities, functions and areas of activity. the comparative legal method enabled to analyse the experience of the organization and activities of fiscal authorities in foreign countries, as well as to define the ways of its implementation in the national legal system. the results of the study revealed that for today the experience of ukraine in the organization of activity of fiscal authorities is rather progressive and modern, and the national fiscal system is characterized by consolidation of powers in coordinating and controlling taxation and customs, which defines progressiveness of our country. practical implications. the positive experience of the fiscal organization in foreign countries suggests the expediency of including national fiscal authorities in a single centralized system of executive power, through the creation of a separate ministry. this will enable not only to improve the efficiency of generating the state budget but also in the future will lead to overcoming the gap between the tax-customs policy and its application results. relevance/originality. a comparative analysis of the organizational aspects of fiscal authorities in foreign countries is the basis for developing priority areas for improving the fiscal system of ukraine, identifying gaps in its work, as well as introducing in the activity of fiscal bodies the newest methods that can increase their level and bring them into line with international standards. key words: fiscal authorities, taxation, customs, foreign experience. jel classification: p34, h21 1. introduction the welfare of any state depends on many factors, for example, the state budget is a source of accumulated financial resources which are means for the state, as the embodiment of the supreme perfect social formation, to secure its existence. therefore, one of the key factors is the process of generating the state budget. the special official agencies, such as fiscal authorities are responsible for this activity. for that reason, the legal status and organizational aspects of the work of the latter are of particular interest, as the study of their functioning specifics will improve the professional performance of the fiscal authorities, and so will directly affect the level of state financial interest protection. considering the current objectives of our state, such as the active integration into the world community, the elaboration of a strategy for fiscal consolidation involve studying the organizational matters of similar state department functioning in other countries and comparing them with national realities. from this perspective, the primary areas of ukraine’s fiscal policy improvement can be figured out, the gaps in its work that require “regulatory filling” can be identified, as well as the most recent methods can be introduced in the activities of fiscal authorities to increase their level and bring into line with the international organizational standards. baltic journal of economic studies 358 vol. 4, no. 5, 2018 both domestic and foreign scientists analysed the legal status of the fiscal bodies, as well as their structural features. for example, the issues of historical development and the formation of national fiscal bodies were considered in the works of v. t. belous, o. o. bandurka, v. i. poliukhovych, v. k. shkarupa, l. m. kasianenko and others. the theoretical legal aspects of fiscal authority functioning were covered by v. h. demianchyshyn, m. p. kucheriavenko, ye. s. vilkova, s. a. bakanova, v. v. labotskyi, s. m. popov, o. h. riabchuk, o. p. fedotov and others. organizational-legal aspects of the fiscal authority of foreign countries were reflected by o. b. puhachenko, o. d. oliinyk, d. h. muliavka, n. p. flisak, ye. s. khoroshaieva, and others. however, a qualitative comparative analysis of organizational aspects of fiscal authorities of ukraine and foreign countries has not been carried out to date. the legal literature reveals the essence of this issue only superficially. 2. main material it should be noted that etymologically the term fiscal, from which the concept of fiscal service derives, has a wide range of definitions. today, the dictionary literature represents the following interpretations: 1) a taleteller, an informer; 2) a spy; 3) an official who deals with state affairs; 4) an official who oversees the implementation of laws, in particular in the financial sector (chudinov, 1894; mikhelson, 1866; ozhegov, shvedov, 2006). according to another interpretation, the term “fiscal” derives from the latin word “fiscus,” that is, a cashier, the treasury. it is used in public finances to identify either officials or sources of the flow of money into budgets (marynchak, 2017). therefore, based on linguistic tendencies, fiscals or fiscal authorities are a system of state bodies and their officials that function in the sphere of generating the state budget and its monitoring. in other words, it is the branch of charging various types of duties and taxes. it is the subject of the activities of domestic fiscal authorities and institutions of foreign countries. to begin with, for a comparative analysis, the organizational aspects of the national fiscal bodies should be covered. historically, fiscal authorities in ukraine traced its origin back to the 18th century. in this period, peter i issued his decree “on fiscals,” which introduced in the russian empire (which at that time included the territory of ukraine) the position of fiscals (civil servants), who controlled and supervised over the courts and the state treasury (tikhii, 2006; pozharskii, 2004). an important milestone in the development of fiscal authorities was the state chancellery, created by empress catherine ii as an independent financial institution. in the governorates, it was headed by vice governors, the second-highest ranking officials in the system of local government, indicating the excellent status of the newly formed body. in the institution to administer the governorates as of november 7, 1775, chapter ix “on the activities of the state treasury chamber,” the duties of the treasury chamber included control over the timeliness, completeness and correctness of collection of incomes, ensuring their storage and delivery. the inadmissibility of exceeding powers by it or the interference in its activities were provided (dzisiak, 2001; smolkin, 1990). during the soviet period, in ukraine, centralized fiscal authorities were represented by two separate departments that carried out functions related to the generating of the state budget, namely the state tax service of the ussr , subordinated to the ministry of finance of the ussr and the ministry of finance of the union republics, and the main directorate of the state customs control under the council of ministers of the ussr (oliinyk, 2014; berezhniuk, 2009). the current state fiscal service of ukraine was established by the resolution of the cabinet of ministers of ukraine no. 236 as of may 21, 2014, which approved the regulations on the state fiscal service of ukraine (hereinafter – the sfs). in accordance with this legal regulation, the sfs is a central executive body, directed and coordinated by the cabinet of ministers of ukraine via the minister of finance, implementing state tax policy, state customs policy, the state policy on administering the single contribution to the compulsory state social insurance (hereinafter referred to as a single contribution), state policy on combating offenses in the application of tax, customs legislation, as well as legislation on payment of a single contribution (the cabinet of ministers of ukraine, 2014). in its activities, the sfs is guided by the constitution and laws of ukraine, decrees of the president of ukraine and resolutions of the verkhovna rada of ukraine, adopted in accordance with the constitution and laws of ukraine, acts of the cabinet of ministers of ukraine, other legislative acts (the cabinet of ministers of ukraine, 2014). it should be noted that the sfs is subject to implement a large range of objectives, the main of which are defined in the regulation: 1) realization of the state tax policy and policy on state customs, the state policy on combating offenses during the application of tax, customs legislation; control, within the limits of authorities provided for by law, for revenues to the budgets and state target funds of taxes and fees; the state policy on monitoring the production and circulation of alcohol, alcoholic beverages and tobacco products, the state policy on administering a single contribution, as well as combating offenses in the application of legislation on payment of a single contribution; the state policy on monitoring the timely execution of settlements in foreign currency within the baltic journal of economic studies 359 vol. 4, no. 5, 2018 statutory period; compliance with the order of cash settlements for goods (services), as well as control over licenses for economic activities subject to licensing in accordance with the law, commercial patents; 2) making proposals to the minister of finance for ensuring the formation of: the state tax policy; the state policy on state customs; the state policy on combating offenses during the application of tax, customs legislation, monitor receipts to budgets and state trust funds of taxes and duties, customs and other payments; the state policy on monitoring the production and circulation of alcohol, alcoholic beverages and tobacco products; the state policy on administering a single contribution, as well as the combating violations in the application of legislation on payment of a single contribution; the state policy on monitoring the timely execution of settlements in foreign currency within the statutory period; compliance with the order of cash settlements for goods (services), as well as control over licenses for economic activities subject to licensing in accordance with the law, commercial patents (the cabinet of ministers of ukraine, 2014). the scientific views of the legal experts regarding the legal status of the sfs of ukraine should be considered. in general, the creation of this institution and its performance are perceived as improvement of the state financial management. for example, in her scientific works, s.s. popova has repeatedly emphasized that the formation of a civil and democratic society in our country is interrelated with the increase in the efficiency of public authorities, in particular, the state tax and customs service, since the performance of tax and customs officials affects largely the conditions for economic activities in the state and financial budgetary support for the functioning of the entire state apparatus (popova, 2015). according to o.o. briginets, the sfs of ukraine is the main instrument in ensuring the financial security of the state and a guiding element for generating the state budget of ukraine, due to its legal status of a central executive authority, which implements the state economic policy and performs consolidated functions of tax and social payment collection (bryhinets, 2016). therefore, the fiscal authorities of ukraine are an important element of public administration, as well as an instrument for providing financial revenues to the state budget. their activities are centralized since the central executive authorities coordinate them. in addition, the characteristic feature of the sfs of ukraine is the combination of the several services’ areas (customs and tax) in the framework of its activities. consolidation of functions of generating the state budget within a single body enables to improve the control over budget revenues, to protect effectively the data of legal relations from violations, as well as to ensure a stable financial system of the state in total. furthermore, for comparative analysis, the work of fiscal bodies in foreign countries should be studied. primarily, the organizational aspects of fiscal agencies in the united states should be considered, because this country has one of the most powerful economies in the world, which proves the effectiveness of the internal mechanism for collecting taxes, duties and other government-determined official charges. contrasting to ukraine, in the united states of america, the fiscal authorities are represented by two separate departments. with regard to the tax administration bodies, the us federal tax and financial control service is the core of this system. the main element in its structure is the internal revenue service (hereinafter referred to as the irs), which is subordinated to the department of the treasury. the organizational structure of the irs is based not on types of taxes, but on the functional features of the taxation system, that is, the structure is functional. the main structural divisions of the irs are a tax return processing service, a tax return auditing service, a tax collection service, a criminal investigation service, a taxpayer support service, an international department, an information and computer technology department, a personnel department (proskura, 2012). the us internal revenue service should meet three main objectives, such as: 1) to enhance voluntary compliance with tax laws; 2) to meet the interests of taxpayers and reduce the administrative burden on them as much as possible; 3) to enable the tax service to function better by improving the tax system and staff development, that is, ensuring the efficiency of the service by the quality of its performance and high qualifications of employees (danilov, flissak). in addition, the us internal revenue service is the central but not the only us tax authority that directly implements the fiscal function of the state. in the usa, as a federal state, the fiscal system has three levels: at the upper level, the irs controls compliance with tax laws and collects federal taxes; at the middle level, state tax offices, revenue departments collect taxes and charges introduced by the state legislatures; revenue departments that are headed by state executive heads, that is, governors, consist of units that solve the issues of identification and registration of taxpayers, tax returns and remittances, calculations of taxes, their enforcement, assistance to taxpayers; at the lower level, local tax authorities collect taxes introduced by local authorities (encyclopaedia britannica; bandurka, 2007). the “customs” part of the us fiscal system is represented by the us bureau of customs and border protection, one of the largest and most comprehensive baltic journal of economic studies 360 vol. 4, no. 5, 2018 agencies of the us department of homeland security, which is in charge of preventing terrorism and terrorist weapons, regulating and facilitating international trade, charging customs duties, and ensuring us trade legislation (chentsov, taranova, 2009). the main functions of the bureau include: law enforcement, which involves countering terrorism and illegal migration; protection of the national economy; protection of the environment and public health; preservation of cultural heritage; protection of the state border; facilitation of legitimate international trade and tourism (savarets, 2017). it should be noted that the structural organization of the service consists of 5 divisions: office of field operations, which performs functions of customs and passport control at checkpoints and customs control zones; border patrol, which performs its functions outside the border crossing points; air and marine operations; as well as investigative operations support; trade; and enterprise service (savarets, 2017). the experience of great britain, another financially well-developed country, is worth considering. the organizational model of fiscal authorities in this state is similar to the national one. her majesty’s revenue & customs serves as the key agency in this area, a government agency “without a ministerial portfolio”, created by the parliament act in 2005 as a new body replacing the internal revenue service and customs and excise (savarets, 2017). in accordance with its legal status, the uk’s revenue and customs service is the main tax and customs authority in the country that administers and enforces statutory payments in favour of the state, supports the stability of the tax system, as well as the prevention and termination of offenses in a certain industry. the main tasks of the service are: to safeguard the flow of money to the exchequer; to make sure that money is available to fund the uk’s public services; to facilitate legitimate international trade; to protect the uk’s fiscal and economic security; to administer statutory payments, taxes and charges; to administer social payments, etc. (hm revenue & customs: about us). the organization of the authority includes approximately 70 different departments and services, some of which are the department of customs transformation, the customs department, the department of indirect tax control, the department of financial operations, etc. (hm revenue & customs: about us). in france, a wide range of fiscal functions is also consolidated within a single body, the state service for customs and indirect taxes, which is subordinated to the ministry of state accounts. the service has three main objectives: 1) to counteract fraud in the financial and tax sector; 2) an economic mission, that is, to make sure that the companies operating in france meet european trade standards; 3) to administer and collect taxes, statutory payments and duties (les multiples missions de la douane française). in the republic of latvia, fiscal authorities are represented by the state revenue service, formed by merging the state financial inspection and the customs department. it is a public authority directly subordinate to the minister of finance. the state revenue service of latvia is responsible for the accounting of tax payments and taxpayers, administering state taxes, levies and other obligatory payments in latvia, as well as administering taxes, levies and other mandatory payments to the eu budget and implementing customs policy (on state revenue service). the srs of latvia is one-levelled organization. it is represented by the central apparatus, the state revenue service and the central customer service and customs control points. the service is headed by a director general appointed by the minister of finance for a term of five years. the srs structure has various departments, including finance department, financial police department, national customs board, customs police department, tax control department, national tax board, department of legal consultant, etc. (on state revenue service; oliinyk, muliavka, 2016). a characteristic feature of the fiscal authorities of latvia is the use of the newest methods of management in their work. in particular, these include the sectoral approach to tax administration, focused on specific sectors of risk. this means that in case of identification of possible non-fulfilment of tax responsibilities, primarily preventive measures of tax administration are applied to taxpayers of this specific economic sector in order to ensure that their tax responsibilities will be fulfilled over time. only in case of failure to achieve the strategic result, fiscal authorities use tax control (oliinyk, muliavka, 2016). the foreign experience of the fiscal organization in the italian republic should be analysed, though the system of these bodies is rather cumbersome and ramified. o. m. iliushyk, m. o. pishchanska and m. khainttsen argue that the experience of italy is interesting, because the administration of taxes is engaged in three independent executive authorities, such as: first, the tax authorities themselves (agenzia delle entrate); second, the customs authorities (agenzia delle dogane) responsible for customs duties, as well as excise duties and vat paid for the import of goods and services; third, the agency responsible for real estate and cadastral accounts (agenzia del territorio); in addition, some functions of tax administration are transferred to other bodies and organizations. for example, state organizations (such as equitalia spa) are responsible baltic journal of economic studies 361 vol. 4, no. 5, 2018 for enforcement of paying legally imposed taxes, the special tax police (guardia di finanza) bears down on avoidance and evasion (khainttsen, 2010; iliushyk, pishchanska, 2018). furthermore, in analysing the organizational aspects of foreign fiscal authorities, the specificities of the structure of similar departments of not only western and european countries but also of the post-soviet states should be considered because their legal systems have many common features with the national one. for example, the fiscal system of one of ukraine’s closest neighbour, the republic of belarus, is represented by two separate authorities. for example, the ministry of taxes and duties is the central body of the state administration, authorized: to carry out the state policy and to regulate and manage taxation; to exercise within its competence state regulation to ensure compliance with legislation on the production and circulation of alcoholic, inedible alcohol-containing products, inedible ethyl alcohol and tobacco products, circulation of tobacco raw materials; to implement state policy in gambling, including licensing such activities, as well as coordinating the republican bodies of state administration, local executive and regulatory bodies in gambling (o ministerstve; polozhenie o ministerstve po nalogam i sboram respubliki belarus). the ministry has diverse responsibilities. for example, according to the legislation of the republic of belarus, the main objectives of this organization are: to ensure, within the limits of the competence, compliance with the tax legislation, as well as economic activity and licensing legislation, etc.; accounting for total taxes and other obligatory payments due and actually paid; to develop proposals on tax regulation and management; to implement currency control; to organize tax inspections, etc. (o ministerstve; polozhenie o ministerstve po nalogam i sboram respubliki belarus). in state regulation of customs affairs, in accordance with the legislation of the country, the state customs committee of the republic of belarus is a republican government body that implements the state customs policy, as well as directly administers the customs. the committee is subordinate to the council of ministers of the republic of belarus, and on specific issues to the president of the country. the main responsibilities of the committee are: to carry out the state customs policy, direct management of the customs and to coordinate other state bodies and other organizations in this area; to ensure, within the limits of its competence, economic security of the republic of belarus, to protect its economic interests; to develop and apply methods and means ensuring compliance with customs legislation; to facilitate the acceleration of commodity circulation when importing goods into the republic of belarus and exporting goods from the republic of belarus through the customs border of the eurasian economic union in the republic of belarus; to counteract smuggling and other crimes, which inquiries are within the competence of the customs authorities, administrative offenses, which are the subject of the competence of the customs authorities; to ensure the fulfilment of the international obligations of the republic of belarus relating to customs matters (o nekotorykh voprosakh tamozhennykh organov). in the republic of kazakhstan, the organizational principles of fiscal authority activities are characterized by many specific features. in this country, the departments function based on centralization. yes, fiscal authorities are a part of the ministry of finance of the republic of kazakhstan. the objective of this body is also management and inter-sectoral coordination in budget planning, budget execution, accounting and financial reporting, budget accounting and budget reporting on the implementation of the republican budget and, within its competence, of local budgets, the national fund of the republic of kazakhstan; in public procurements; in management of republican property; state regulation in rehabilitation and bankruptcy, counteraction to the legalization (laundering) of proceeds from crime, and financing of terrorism; the organization and implementation of single public procurement for budget programs or goods, works, services, determined by the authorized body, as well as the participation in the formation and implementation of tax policy and policy on customs, as well as in the prevention, detection, termination, disclosure, and investigation of economic and financial crimes, offenses within the limits provided for in legislation (o nekotorykh voprosakh ministerstva finansov respubliki kazakhstan). the structural element of the ministry is the state revenue committee. in accordance with the legislation of kazakhstan, the latter is an agency which, within the competence of the central executive body, exercises regulatory, implementing and controlling functions in customs to ensure the completeness and timeliness of tax, customs and other mandatory payments to the budget, calculations, deductions, transfer of social payments, state regulation of production, and circulation of ethyl alcohol, alcoholic beverages and tobacco products, circulation of certain types of petroleum products and biofuels, state regulation and control for rehabilitation and bankruptcy, participation in the implementation of tax policy and customs policy, participation in the development baltic journal of economic studies 362 vol. 4, no. 5, 2018 and implementation of customs regulation, in the republic of kazakhstan, of goods movement across the customs border of the eurasian economic union, their transportation on the single customs territory of the eurasian economic union under customs control, temporary storage, customs declarations, release and use in accordance with customs procedures, customs control, power relations between state revenue bodies and persons exercising the rights to own, use and dispose of the specified goods within the limits stipulated by the legislation, as well as functions for the prevention, detection, termination, disclosure, and investigation of criminal and administrative offenses, which this body is charged for by the legislation of the republic of kazakhstan and other functions in accordance with the legislation of the republic of kazakhstan (ob utverzhdenii polozheniia o komitete gosudarstvennykh dokhodov ministerstva finansov respubliki kazakhstan). 3. conclusions therefore, for today the experience of ukraine in the organization of fiscal authorities is quite progressive and modern. the national fiscal system is characterized by the consolidation of powers in coordinating and controlling taxation and customs, which defines the progressiveness of our country. analysis of foreign experience revealed that this organizational model of fiscal authorities is typical of such developed countries as latvia, the uk, france, and kazakhstan. however, the positive experience of the 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(in ukrainian) o ministerstve [on the ministry]. in the portal of the ministry of taxes and levies of the republic of belarus. retrieved from: http://www.nalog.gov.by/ru/o_ministerstve_ru/ (in russian) polozhenie o ministerstve po nalogam i sboram respubliki belarus [regulations on the ministry of taxes and levies of the republic of belarus] (decree no. 1592 of october 31, 2001). in the portal of the ministry of taxes and levies of the republic of belarus. retrieved from: http://www.nalog.gov.by/ru/polozhenie-o-ministerstve-ru/ (in russian) o nekotorykh voprosakh tamozhennykh organov [on some issues of the customs authorities] (decree no. 228 of april 21, 2008). in national legal portal of the republic of belarus. retrieved from: http://pravo.by/ document/?guid=3871&p0=p30800228 (in russian) o nekotorykh voprosakh ministerstva finansov respubliki kazakhstan [on some issues of the ministry of finance of the republic of kazakhstan] (decree no. 387 of april 24, 2008). in legislation portal of the republic of kazakhstan. retrieved from: https://online.zakon.kz/document/?doc_id=30176584#pos=5;-275 (in russian) ob utverzhdenii polozheniia o komitete gosudarstvennykh dokhodov ministerstva finansov respubliki kazakhstan [on approval of the regulation on the state revenue committee of the ministry of finance of the republic of kazakhstan] (order no. 306 of june 14, 2016). in legislation portal of the republic of kazakhstan. retrieved from: https://online.zakon.kz/document/?doc_id=33514533#pos=14;-45 (in russian) baltic journal of economic studies 24 vol. 5, no. 2, 2019 corresponding author: 1 state research institute for informatization and modeling of economy, ukraine. e-mail: mfertua@gmail.com 2 state research institute for informatization and modeling of economy, ukraine. e-mail: petr_nebotov@ukr.net 3 state research institute for informatization and modeling of economy, ukraine. e-mail: eivanov.dndiime@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-24-29 foreign trade policy for integration into global value chains igor guzhva1, petro nebotov2, yevhen ivanov3 abstract. the purpose of the article is to define and argue the key criteria and directions of foreign trade policy, which become crucial in conditions of country’s integration into global value chains, as well as to reveal the impact of major regulatory barriers to trade that prevent ukraine’s integration into global value chains. the subject-matter of the study is the peculiarities of foreign trade regulation under global value chains expansion. methodology. the methodological principles of research involve the joint application of a set of well-known common scientific methods, as well as special research methods in economics, such as the method of system and structural analysis to generalize spheres, directions, and tools of gvc-friendly trade regulation. results. the essence of global value chains as a modern concept for international trade analysis is revealed. new approaches to trade and economic policy aimed at improving the country’s participation in global value chains are analysed. key spheres, in which bottlenecks for global value chains usually occur, are investigated. the growing importance of liberalization of trade in services in order to integrate into gvc successfully is stressed. main barriers that prevent the ukrainian economy from effective integration into gvc are outlined. basic shortcomings in ukraine’s export control system that constrain the expansion of the country’s exports of dual-use goods and technologies are outlined. practical implications. the article contains a comprehensive set of tools and regulations to revise approaches, directions, and efficiency criteria of governmental foreign trade policy according to global value chains concept. value/originality. identified requirements for foreign trade policy allowed investigating the effectiveness and perspectives of ukraine’s trade and investment regime from a gvc point of view. key words: government regulation, global value chains, market access, trade facilitation, trade infrastructure, barriers to trade, export control. jel classification: f13, f15, f68 1. introduction the modern territorial organization of transnational corporations was formed under the influence of irreversible processes of deepening the international division of labour, the main role in which played componential specialization. this contributed to the development of a qualitatively new form of international cooperation – the global value chains (gvcs). the diversification of production processes across different regions and countries contributes to a steep reduction in trade costs through the development of information and communication technologies. this factor has a tremendous impact on the acceleration of globalization, as it leads to inclusion of new markets and entire countries in the world reproduction process, stimulates the diffusion of innovations, scientific and technological advance, creation of new jobs. gvcs emerged as strategies for organizing geographically dispersed industries into a single, effective complex based on their specialization and complementarity for the production of a particular end product or service. in gvcs, each country generates not the full value of the goods but takes part in the generation of value added at some stage of goods’ development, production, and marketing. this reduces costs and improves the competitiveness of products by placing individual stages of production where it is the most beneficial. consequently, radical transformations take place, which determines the participation of countries in the international division of labour at different stages of production, taking into account the technological level, features of competition, access to resources and international markets. this necessitates a revision of the principles of industrial and foreign trade policy of the government. baltic journal of economic studies 25 vol. 5, no. 2, 2019 the study of foreign trade policy effectiveness in the context of integration into gvcs is a relatively new approach in present economic thought. however, due to a number of methodological advantages, the global scientific and business community became increasingly interested in trade-related issues associated with gvcs. the economists such as cattaneo (2010), nicita (2013), gereffi (2010), frederick (2010), barrientos (2010), dedicated their investigation to the gvcs issues. on the other hand, existing studies analyse the criteria for integration into the gvc primarily in the context of developing a favourable investment climate, while the trade aspects of government regulation in this area are covered in a fragmented and non-systematic way. the purpose of the article is to define and argue the key criteria and directions of foreign trade policy, which become crucial in conditions of country’s integration into gvcs, as well as to reveal the impact of major regulatory barriers to trade that prevent ukraine’s integration into the gvcs. 2. adaptation of foreign trade policy to global value chains expansion undoubtedly, the development of gvc is a positive result of globalization, as it allows the inclusion of nearly all countries in the global economy. this contributes to their economic and social development. moreover, for the struggling countries and those without significant internal growth drivers, the integration into gvc is perhaps the only possibility of qualitative inclusion in the system of global capital flows and the international flows of goods and services. but the benefits and opportunities of participating in gvcs require enterprises to be able to deliver the products in the right amount, at the right quality and price, and at the right time. the benefit of gvcs participation may be high, but the same applies to entry requirements. and these requirements are put forward not only to business but also to the authorities. formation and support of gvcs is a complex process that requires their organizers (mostly tncs) to systematically study the conditions of economic activity and the efficiency of engaging in a global supply chains when choosing foreign suppliers or opening subsidiaries. under these conditions, the main objective of the foreign trade policy is the ability of the national economy to meet the criteria for effective involvement and participation in gvcs, which is a determining factor of countries’ integration into the world economy. this factor is vital for developing countries and transitional economies because participation in gvcs forms their main and often the only possibility to intensify trade relations, attract foreign investments and high technologies, which, in turn, will contribute to qualitative restructuring and diversification of their exports, increasing the possibility of using positive trends of world economy development and leading to international competitiveness growth (unctad, 2014). in general, the use of gvc for economic development requires revision of established approaches to the trade and economic policy on a number of issues, both nationally and internationally. first, as import components become an important source of increasing competitiveness for exports, approaches and criteria of customs and tariff policy are necessary to revise. the calculation of protection degree should take into account not only the duties on finished products but also duties on imported components to exclude situations when components are protected at a higher rate than finished products. in order to develop exports, it is necessary also to reduce anti-export offsets of promising producers of high value-added products that arise in the case of longterm high tariff protection. secondly, as modern international production is characterized by uneven participation of companies in gvcs, the revision of general protectionism model is also required. about 80% of world trade takes place within or with the participation of transnational corporations. protection of their interests in such conditions drives government away from protectionism at national borders to the protectionism of existing chains by means of: cost reduction, simplification of trade procedures for multiple unimpeded border crossings, promotion of unified regulatory systems and protection of intellectual property rights across the world. this leads to a correction of the protectionist model: stimulation of materials and components import is desirable when connected with the perspective of increase of finished products exports (park, 2013). thirdly, the modification of the protectionist model changes the agenda for bilateral and multilateral trade negotiations and the content of the agreements concluded on their basis. to defend and promote interests of the gvcs participants, the following agreements are elaborated: wto trade facilitation agreement (tfa) signed in 2013 to reduce transaction costs in international trade; trade in services liberalization agreement launched in 2012 outside the wto system in order to reduce barriers to services markets access; anti-counterfeiting trade agreement signed by 22 eu members or the protection of intellectual property rights, etc. fourthly, the integration agenda of key countries and blocs of the world also undergo a radical transformation. granting preferences for existing gvcs becomes the main objective of international economic integration. for this purpose, free trade agreements, in addition to tariff issues, increasingly include issues aimed at reducing other trade costs for gvcs (liberalization of trade in services, trade facilitation, restrictions on the use of local components, etc.), as well as measures aimed at protecting the established gvc (rules of origin, protection of intellectual property rights, baltic journal of economic studies 26 vol. 5, no. 2, 2019 competition rules, etc.). thus, the formation of deep and comprehensive free trade zones becomes a distinctive feature of up-to-dateness. at the level of an individual country, the effectiveness of foreign trade policy in this context is achieved by elimination of a variety of obstacles (both at the border of the customs territory and for economic activity within the country) to guarantee predictable and uninterrupted movement of goods and services (figure 1), since engagement in global gvcs is mediated by international trade and investment flows (koval et. al., 2018). according to figure 1, internationally-accepted methodology distinguishes nine main areas of government competence related to the international movement of goods and services that may raise barriers to foreign trade activities: a) market access includes a variety of tariff and nontariff measures that discriminate foreign competitors in favour of domestic producers; b) customs effectiveness reflects the speed and ease of customs clearing, the quality and range of services provided by the customs authorities. the poor work of the customs authorities reflects in ineffective resources allocation and in rejection of the best world practices, resulting in unnecessary inspections and additional time spent during customs procedures; c) burden of customs procedures goes beyond the customs administration and reflects the effectiveness of coordinating its activities with other agencies for trade regulation and control, as well as with customs authorities of neighbouring countries; d) transparency of customs authorities reflects the barriers associated with corruption in relevant services that may be embodied in “simplification payments” to reduce procedures duration or in additional delays in the case of a refusal to give a bribe; e) availability and quality of transport infrastructure reflect the access to airports, the quality of automobile roads and railway, traffic congestion in ports and various characteristics of other vehicles. unsatisfactory road, rail, sea or air transport networks can be a major burden, especially when moving goods over long distances; f ) availability and quality of transport services reflect the effectiveness of government regulation of the market of transport and logistics services, which is aimed at eliminating the monopolization of these markets and providing favourable conditions for the development of all possible types of relevant services in the domestic market; g) availability and application of information and communication technologies reflect the scope of paper documentary elimination in favour of electronic record-keeping by state bodies, transport and logistics companies in the field of tracking and controlling the movement of goods and services; h) regulatory environment reflects the quality of the country’s legislative environment related to potential costs and risks of foreign trade operations as a part of the investment process. first of all, it concerns the regime of foreign labour hiring, peculiarities of foreign exchange regulation in foreign trade, the level of liberalization of international capital flows, etc. key barriers to gvcs market access customs administration infrastructure investment regime 1. barriers to exports and imports: tariffs; quantitative restrictions; technical barriers to trade; sanitary and phytosanitary measures; rules of origin; local component requirements. 2. effectiveness of customs; 3. the burden of customs procedures (cooperation between the customs of different countries, the complexity of the bureaucratic burden of customs clearance); 4. transparency of customs authorities. 5. availability and quality of transport infrastructure; 6. availability and quality of transport services; 7. availability and application of information and communication technologies (tracking the movement of goods) 8. regulatory environment: investment policy; requirements for hiring foreign workers; currency regulation in foreign trade; 9. physical security figure 1. key trade and investment barriers to gvcs expansion source: based on (world economic forum, 2015) baltic journal of economic studies 27 vol. 5, no. 2, 2019 i) physical security reflects the state’s ability to maintain a low level of economic crime in order to reduce transaction costs for insurance and security of foreign trade operations by international business. obviously, despite the advantages of this classification, in real practice, the boundaries between the spheres of state influence on foreign trade relations in some cases may be rather vague. for example, facilitation of customs control can be seen both as a withdrawal of a non-tariff measure and as an increase in the efficiency of customs services. on the other hand, the introduction of changes in one area may result in changes in other areas. introduction of rigid quantitative restrictions automatically leads to an increase in the complexity of customs procedures and creates significant risks of lowering the transparency of customs authorities. the regulation of foreign trade in ser vices also becomes increasingly relevant as there is a significant level of interconnection between the openness of the ser vices market (in particular, transport, logistics, distribution) and the development of infrastructure (world economic forum, 2012). in this case, ser vices are considered as a factor that ensures the production and movement of goods along the value chain. restricting foreign competition in the sphere of transport services can lead to an increase in the cost of moving products between the links of the chain. moreover, sticking to the transport services of national companies requires the transshipment of goods at the border from domestic vehicles to vehicles of a foreign carrier, which leads to delays in deliveries and unnecessary costs. this practice becomes totally unacceptable as the competitiveness of international production and sales highly depends on just-in-time deliveries in order to avoid costs for idle standing at the border or storage in the destination country (sirko, 2014). thus, barriers to international trade in services have a negative impact on gvcs due to rising import prices and a reduction in export competitiveness. each of the above-mentioned components in their interaction and interconnection becomes critical to conducting a productive policy since the omission of certain elements leaves barriers that block or increase the value of international trade. in particular, the experience of transition economies, where the qualitative restructuring of foreign trade turnover did not take place, shows that trade liberalization alone is not able to provide an increase in the efficiency of the country’s participation in international division of labour and gvcs without implementation of accompanying domestic reforms in the areas of transport infrastructure, customs services, public administration of foreign economic activity, attraction of innovative fdi, etc. 3. compliance of ukraine’s foreign trade policy with the criteria for integration into global value chains the policy of the ukrainian government regarding the functioning of customs authorities, infrastructure, the market for transport services, and a number of other regulatory aspects that have the greatest impact on the scale and quality of integration into gvcs remains unsatisfactory. the existence of a number of tangible obstacles to the cross-border movement of goods in ukraine can be traced to the duration of export and import operations, as well as to the level of transaction costs (table 1). duration of export-import operations averages 28-29 days, in poland – 14-17 days, in turkey – 13-14 days, in sweden – 6-9 days, and in the usa – only 5-6 days. taking into account that an increase of customs clearance duration by 10% reduces import volumes by 5-25% depending on the product group and country of destination (ostashko, 2011), it can be argued that table 1 average duration and value of foreign trade operations in some countries countries export import corruption perceptions indexduration, days value, usd duration, days value, usd venezuela 56 3490 82 3695 20 ukraine 29 1880 28 2455 25 russia 22 2401 21 2595 28 brazil 13 2215 17 2275 42 romania 13 1485 13 1495 43 turkey 13 990 14 1235 50 poland 17 1050 14 1025 60 usa 6 1090 5 1315 73 great britain 8 1005 4 1050 76 germany 9 905 7 940 78 sweden 9 725 6 735 89 finland 9 615 7 625 89 source: based on (world bank, 2014; transparency international, 2015) baltic journal of economic studies 28 vol. 5, no. 2, 2019 there is a significant limiting effect on the participation of ukrainian producers in gvcs from expenditures related to imperfect tax systems, bureaucratic burden, volatile legislation, poor customs services, etc. a similar situation is observed in the average cost of transporting the container through the customs border: in countries with a low level of economic development, it in most cases exceeds two thousand usd, while for most oecd countries it is less than one thousand usd. shcherbata (2011) estimates that the share of customs procedures costs in ukraine is about 4-5% of total trade costs, which approximately equals the current average import tariff. at the same time, transaction costs make up 40% of ukrainian business profits from foreign trade, while in developed countries this indicator is 3-5% (osadcha, 2009). there is a certain correlation between the scale of the barrier in foreign trade and the level of the index of perceptions of corruption in the country. table 1 shows that the us and european countries with corruption perceptions within the 60-89 range have already managed to create far more favourable conditions for international trade than ukraine with an indicator of 25. the high level of corruption in ukraine is one of the key factors reducing the effectiveness of customs authorities and creating significant barriers to foreign economic activity. for instance, after the customs clearance of goods in 2013, only 50% of the fees were paid to the state budget, the rest was lost because of corruption; the total annual amount of the loss is estimated at up to 40 billion uah (paskhaver, 2014). according to the global competitiveness report 2015–2016 (schwab, 2015), despite one of the lowest levels of import tariff in the world, ukraine takes 113th place out of 140 countries in the competitiveness rating by indicator “burden of customs procedures.” it should be noted that the use of opaque and complicated customs clearance procedures in ukraine to a large extent resulted in the imposition of more stringent requirements for its tariff liberalization from the wto side. hammels (2015) estimates that the costs incurred by businesses in delaying the movement of goods at the customs border for one day are equivalent to an additional duty of 0.6-2.1%; the most sensitive to time delays is trade in intermediate products. in the field of infrastructure, the situation in ukraine, according to this rating, is not much better. among the 140 surveyed countries, ukraine occupies a relatively high place only in terms of railways quality (28th), but much lower – in seaport infrastructure (108th) and air transport (97th), automobile roads are in a disastrous condition (132nd). the quality of the logistics is at a somewhat higher level. according to arvis (2014), ukraine ranks 72nd among 160 countries by “logistic performance index” and 52nd in terms of tracking the movement of goods. ukraine also has a number of unresolved issues in export control related to the identification of goods, technologies, and services. regulatory, organizational, technical, and informational solution to this problem will significantly improve the efficiency of ukraine’s integration into gvcs that cover trade in goods, services, and technologies of dual use. the ratio of goods, technologies, and services that are actually subject to export control standards to goods, technologies, and services that have only external features of such products is 1 to 9 in ukraine. it is obvious that such a proportion requires the organized identification of goods, technologies, and services, which, on the one hand, keeps 90 per cent of export in goods, technologies, and services (that have only external signs of export control objects) unobstructed and, from another, applies export control norms and procedures to the rest of exports where it’s really necessary. control of dual-use technologies remains the riskiest moment in ukraine’s export control system. dualuse technology is rather specific: on the one hand, it is based on scientific and technical achievement or intellectual property; on the other hand, the technology must contain certain consumer properties, that is, the scientific and technological achievement must be brought to the level of the product in order to become a technology. as a rule, the second component is financially more valuable, although the first determines the intellectual potential of technology. transmission of the intellectual part of technology allows determining its essence, but to bring it to the product is the necessary stage of introduction into production. this specificity of technology when it is promoted to the market requires effective management, including strengthening of export control (vladimirov, 2011). the need for state support and management of technology transfer, primarily dual-use technologies, is especially important in modern ukraine. the scientific and technological base created in previous years is used extremely inefficiently under conditions of the transformation period. many research organizations working on state defence orders, having the highest scientific and technical potential and creating the intellectual property of the world level, are not able to bring them to the level of high-tech technology, which is why they are forced to bring to the market a “semifinished products.” hence, the value of the goods is lower than the objective value of such objects. the inadequate assessment of the latest technology and know-how in exports does not bring the country a proper economic benefit, especially as it concerns the know-how, the transfer of which is mostly carried out at prices much lower than world ones, and often for free. a clear system of interaction between the export control authorities, central and other executive authorities during the exchange of information and joint activities aimed at ensuring the proper control of international transfers of goods and their use in accordance with the international obligations and guidelines adopted by ukraine in export control and non-proliferation become significantly important. baltic journal of economic studies 29 vol. 5, no. 2, 2019 4. conclusions thanks to technological development and the cheapening of international trade, gvcs have become the main and most important component of the global economy, which determines the pace of world development. the growing fragmentation of production at the international level, development of the international specialization of countries in specific production processes and business functions, and the growing role of international intermediaries in global trade led to significant practical value and an increasing interest in the concept of gvcs. on the other hand, the effective entry of national economy to gvcs requires a number of fundamental changes in approaches to the regulation of foreign trade. w hen import components become an important source of increasing competitiveness for exports, changes in the approaches and criteria of the customs and tariff policy are necessary. stimulating the import of materials and components becomes desirable in those cases where it is connected with the perspective increase of finished products export. in addition, gvcs significantly complicates the set of foreign trade policy measures required for their servicing. mechanisms such as simplifying trade procedures and multiple unimpeded border crossings, promoting advanced quality and safety management systems, protecting intellectual property rights in partner countries become crucial. in ukraine, poor attention is paid to the use of the internal potential of the foreign trade activity intensification through the participation in gvcs. the regulatory policy aimed at ensuring the proper functioning of the customs authorities and the transport and communication infrastructure of foreign economic activity, which creates significant obstacles to the crossborder movement of goods and ukraine’s integration into international production and distribution networks, remains unsatisfactory. instead, reducing the level of bureaucratic obstacles at the customs will give ukraine much more advantages than for leading economies in the world. references: arvis, j.-f. (2014). connecting to compete 2014: trade logistics in the global economy. washington: world bank. barrientos, s. (2010). economic and social upgrading in global production networks: developing a framework for analysis. retrieved from: http://www.capturingthegains.org/pdf/ctg-wp-2010-03.pdf cattaneo, o. (2010). global value chains in a postcrisis world: a development perspective. washington: the world bank. frederick, s. (2010). the global apparel value chain, trade and the crisis: challenges and opportunities for developing countries. washington: the world bank. gereffi, g. (2010). the offshore services industry: a global value chain approach. durham: center on globalization, governance & competitiveness. hummels, d. (2012). time as a trade barrier. washington: nber working paper. nicita, a. (2013). global supply chains: trade and economic policies for developing countries. geneva: unctad. osadcha, n. v. (2009). systemic representation of the regulatory customs regime under conditions of foreign economic activity globalization. bulletin of economic science of ukraine, 1, 134–146. (in ukrainian) ostashko, t. o. (2011). special wto measures to protect agricultural food markets. kyiv: institute of economy and forecasting. (in ukrainian) koval, v., slobodianiuk, o., yankovyi, v. (2018). production forecasting and evaluation of investments using allen two-factor production function. baltic journal of economic studies, 4(1), 219–226. doi: 10.30525/2256-0742/ 2018-4-1-219-226 park, a. (2013). supply chain perspectives and issues: a literature review. geneva: wto publications. paskhaver, o. (2014). repair the country. information-analytical weekly "dzerkalo tyzhnya. ukraine", 7, 1–5. sirko, a. v. (2014). economic theory. political economy. kyiv: center for educational literature. (in ukrainian) shcherbata, n. z. (2011). foreign economic policy of the european union in free trade areas. lutsk: volyn national institute. (in ukrainian) shwab, k. (2015). the global competitiveness report 2015–2016. geneva: wef. transparency international (2015). corruption perception index. retrieved from: http://www.transparency.org/ country#ukr vladimirov, t. o. (2011). conceptual framework for the development of the export control system of ukraine. scientific herald of the academy of municipal management, 4, 207–213. unctad (2014). trade and development report, 2014: global governance and policy space for development. geneva: unctad. world bank (2014). doing business 2015: going beyond efficiency. washington: world bank group. world economic forum (2012). the shifting geography of global value chains: implications for developing countries and trade policy geneva: wef, 2012. world economic forum (2015). enabling trade: increasing the potential of trade reforms. geneva: wef. baltic journal of economic studies 343 vol. 4, no. 3, 2018 corresponding author: 1 division of central investigation department, national police of ukraine. 2 department of criminal law, national academy of internal affairs. 3 department of criminal procedure, national academy of internal affairs. e-mail: elena031077@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-3-343-348 correlation bet ween the system of remuneration of police officers and their professional performance: foreign experience artem shevchyshen1 national police of ukraine, ukraine olha kryshevych2, olena lepei3 national academy of internal affairs, ukraine abstract. the aim of the article is to analyse the foreign experience of correlation between the system of remuneration of police officers and their professional performance, to identify the features of fixing the rate and types of police officers’ remuneration in some foreign countries, and to ascertain the relationship between such remuneration and their professional performance. the subject of the study is the foreign experience of correlation between the system of police officer remuneration and professional performance. methodology. the research is based on a comparison of the system of police officer remuneration in ukraine and in foreign countries. based on the analysis of the features of police officer remuneration in canada and the united kingdom, the advantages and disadvantages of the different conditions and procedure of remuneration are determined. based on a comparative legal study of certain provisions of ukrainian legislation, the possibilities and limits of implementation of positive foreign experience in this sphere are determined. the results of the study revealed that encouraging employees according to the professional performance enables to solve problems connected with the increase of efficiency of the law-enforcement system in ukraine. therefore, nowadays, the development of clear criteria for assessing the professional performance of law enforcement officials, construction of an effective system of material incentives based on professional performance are a priority task. therefore, in the course of further reform of the police, such as improving social policy, the issue of forming new principles and methodology for the encouragement of employees objectively considering their professional performance is of particular importance. the use of foreign experience in solving such problems can be a positive example for domestic public administration bodies in the implementation of social reforms in law enforcement structures. practical implications. positive experience of correlation between the system of remuneration of police officers and their professional performance confirms that the system of indicators should evaluate comprehensively the activities of employees, units, and the national police system as a whole, include the full range of indicators necessary for evaluation, exclude duplicate or secondary indicators, consider the priority of the tasks performed, clearly reflect the degree of achievement at all levels of the system, and be based on the potentials of budget financing. the system of supplementary payments must be based on a finite number of professional performance indicators. moreover, it is important to meet such criterion as objectivity, adequacy of types, and rate of supplementary payments. in addition, fixing supplementary payments, based on performance efficiency indicators, should reflect the danger, importance for the state and society and specificity of the tasks performed, as well as the priority exercised by the police. in addition, the number of indicators linked to supplementary payments should be optimal, otherwise, in case of an overly-specified system with a large number of indicators reflecting relatively small functions, there is a risk of shifting from solving key problems, as well as compensation for the decline in the quality of core duty performance by a large number of less significant functions. relevance/originality. comparative analysis of the correlation between the system of remuneration of police officers and their professional performance is the basis for the development of the most progressive directions to improve domestic legislation. key words: law-enforcement bodies, police, remuneration, professional performance. jel classification: p17 baltic journal of economic studies 344 vol. 4, no. 3, 2018 1. the relevance of the topic at the end of the xx – beginning of the xxi century, social protection of citizens has become a priority area of the social policy of any civilized state. today, for many countries, one of the main objectives of social policy is to support the stability of the population’s income, high-quality medical care, development of the social insurance system, provision of equal access to education services and decent retirement pension. in developed countries, providing social protection for their citizens is an essential part of the national economy. therefore, the existence of an effective system of social guarantees both leads to an increase in the welfare of the population and contributes to economic growth and stabilization of the political and social situation in the state. a special role in the social policy of any state belongs to ensuring the social protection of public officials, including police officials. considering maintenance and encouragement of police, the general secretary of the uk police federation jeff mosley emphasizes indicatively that either society wants to have a police service that it deserves and is ready to pay for it, or it does not. in any case, it should be ready to make a decision ( jenkins, 1999). the scope of tasks related to police reform is quite broad. one of the key areas is to increase the effectiveness of the entire law-enforcement system. the solution to this issue affects not only the capacity and ability of the police to perform professional functions at a decent level but also to ensure that their status is consistent with the contest and needs of modern society. today, it is evident that the recent reform has yielded some results. however, in order to make the law-enforcement system effective, the measures taken are not enough. much more needs to be done to reduce crime, optimize budget expenditures for law enforcement bodies, including police forces, to reduce corruption, change the attitude of citizens towards this structure, and to increase the prestige of service in law enforcement bodies. in the course of the police transformation, one of the key areas is to form a new system of social guarantees provided to employees and members of their families. meanwhile, the adoption of a package of documents on social guarantees is the first step towards improving the system of social protection of employees. the effective implementation of these plans and the construction of the police model, which is consistent with the state’s strategic objectives and requirements of modern society, ensure the successful modernization. definitely, this important and complex process requires proper scientific support. in this regard, in terms of further reformation of law enforcement bodies, in particular, the police, the study of the experience of foreign countries is relevant because it enables to expand the totality of existing ideas on improving the lawenforcement system, social policies on employees and their family members, to find constructive decisions. the aim of the article is to analyse the foreign experience of correlation between the system of remuneration of police officers and their professional performance, to identify the features of fixing the rate and types of remuneration of police officers in some foreign countries, and to ascertain the relationship between such remuneration and their professional performance. 2. the main material the enactment of the 2015 social guarantee package within the large-scale reform of the law enforcement bodies was the first step towards improving the system of social protection for police officers. in particular, these include the law of ukraine “on the national police” ((pro natsionalnu politsiiu)), the law of ukraine “on retirement pensions of persons discharged from military service, and some other persons” (pro pensiine zabezpechennia osib, zvilnenykh z viiskovoi sluzhby, ta deiakykh inshykh osib), resolution of the cabinet of ministers of ukraine “on approval of the regulation on the national police” (pro zatverdzhennia polozhennia pro natsionalnu politsiiu), resolution of the cabinet of ministers of ukraine “on remuneration of police officers of the national police (pro hroshove zabezpechennia politseyskykh natsionalnoi politsii), “on the procedure for calculating the years of service, appointment, and payment of pensions and remuneration to the commissioned officers, warrant officers, midshipmen, extended military servicemen and military service under the contract, persons of senior commanders and junior enlisted of the internal affairs bodies, police officers and their family members” (pro poriadok obchyslennia vysluhy rokiv ...), order of the ministry of internal affairs of ukraine “on approval of the procedure and conditions for payment of remuneration to provide police officers of the national police and cadets of higher educational institutions of the ministry of internal affairs with specific learning conditions” (pro zatverdzhennia poriadku ta umov vyplaty hroshvoho zabezpechennia politseyskym natsionalnoi politsii...) etc. currently, the most important priority in the course of further reforms is an increase in the effectiveness of the social policy concerning the police officers. nowadays, comparative analysis of social practices of various foreign countries is one of the most common methods of social policy research. such an analysis enables: to gain experience for the future, identify the strengths and weaknesses of the social policy conducted, in particular, in law enforcement bodies; to evaluate tendencies, dynamics, results, and consequences of social renovations; to predict priority directions of development of social policy in law enforcement structures. baltic journal of economic studies 345 vol. 4, no. 3, 2018 it should be noted that in foreign countries, as a rule, police officers, in their legal status, are state or municipal officials and subject to the general legal regimes. however, according to their professional responsibilities and specifics of activity, police officers occupy a special place among other public officials. consequently, it is reflected in the system of their social protection. in recent years, many countries in the world have been undergoing social reforms in law enforcement bodies. above all, these reforms are aimed at improving the effectiveness of law enforcement activities, reducing the scale of crime, increasing public confidence in such bodies. each country implements these tasks in its own way considering its political, socio-economic situation, traditions, the experience of the previous stages of reformation. furthermore, there are common in most countries of the world key areas of social policy reform in law enforcement bodies. in particular, these include: change of staffing level; optimization or reduction of budgetary expenditures for maintaining the police; improvement of the system of remuneration; regulation of the system of supplementary payments to employees; development of new procedures of encouragement of professional activities; improvement of the system of social guarantees. in the course of the reform of law enforcement bodies, ukraine solves many similar problems, such as the formation of employee income and encouragement of professional activities. an important stage in the process of transformation is the development of a system of objective and clear performance indicators of law-enforcement activities and solving the problem of correlation between the system of remuneration of police officers and their professional performance, the rate of salary and encouragement of the work with professional performance. considering foreign experience, the absence of a single approach to the linkage between the rate of salary and encouragement of professional activities of police officers with their professional performance should be noted. for example, salaries of most canadian public officials, especially police officers, are not based on professional performance. only about 4% of public officials receive salaries that depend on professional performance. the other 96% of salaries are set according to a fixed salary scale. there are about 50 professional categories in canada. inside each category, there is an additional scale for determining the level of complexity of the work performed. within each scale, annual step-by-step promotions are possible (up to five in each). the salary increase for canadian government employees is not related to the effectiveness of the work. however, for all employees, there are supplementary payments that consider the intensity and overtime work, as well as the increase in the cost of living. the rate of supplementary payments is determined during negotiations with trade unions. in other words, canadian public officials, in particular, police officers, have two ways to raise salaries without changing jobs: grow on the scale of remuneration applicable to the relevant professional category; get an annual supplementary payment related to the rise in the cost of living. it should be noted that although the level of remuneration of police officers in canada is not based on the professional performance of their work, their salaries are generally higher than the remuneration of other categories of employees in the public sector. in other words, firstly, the level of police officer remuneration reflects the specifics of law enforcement activities related to the fulfilment of certain functions of the state, as well as increased physical and psychological stresses, the risk to the lives of employees and their families. according to statistical data, the average salary of police officers is above the salary level of other categories of employees in the budget sphere. for example, the average salary of a police officer in ottawa is 35.67 cad per hour, while the average salary of social workers is 27.87 cad or almost 30%  lower; in toronto, the average salary of social workers is 17% lower: from 36.47 cad for police officers and 31.19  cad for social workers. however, in some provinces, such as alberta, the average and maximum level of salaries for police officers are lower than for other categories of employees in the public sector (official website of the royal canadian equestrian police). moreover, for the police of canada, a sharp increase in salaries is characteristic after several years of service. for example, immediately after successful completion of training at police schools, the annual salary of the constable is 49,680 cad per year. during 36 months of service, the annual salary gradually increases by more than 1.5 times, up to 80,498 cad. the salary of senior management personnel of the canadian civil service is based on professional performance. for each of the five degrees in this particular professional category, the government of canada sets the basic pay rate, and then the salary increases depending on the performance during the calendar year. supplementary payment for the performance is divided into two equal parts. one part is added to the permanent supplementary payment, which operates in relation to the rate of the salary. the other part is not guaranteed, because each year it can be paid or not depending on professional performance. every year, the senior manager and his/her supervisor conclude a contract regarding the effectiveness of professional activities. the contract defines the expected results for the coming year; however, rarely these contracts are expressed in figures. generally, baltic journal of economic studies 346 vol. 4, no. 3, 2018 they are of a “qualitative” nature, for example, the task is to increase the level of training, develop a new policy in dealing with a particular issue or administrative regulation, and even put personal goals concerning the individual style of leadership (in some cases it is a mandatory requirement). at the end of the calendar year, the manager is interviewed by his/her supervisor. the evaluation can be unsatisfactory, satisfactory, good, and excellent. then the rate of supplementary payment to the salary is calculated on the basis of a simple formula: the higher the score, the higher the percentage of supplementary payment. nevertheless, for each level, there is a limit on the rate of maximum supplementary payments. however, an opposite approach can be considered. in the united kingdom, in 1984, a system of remuneration for public officials was introduced, based on the assessment of the effectiveness of their work on the results of the performance certification. initially experimental, this system became an obligatory component of uk public officials’ remuneration policy. since 1995, the incentive system for remuneration has been improved and expanded. in recent years, labour encouragement is one of the most important principles of the system of material support for british public officials. several normative legal acts regulate indicators of encouragement for employees of executive power. in addition, this principle is implemented in various individual agreements and contracts. these documents provide estimates of service effectiveness and employee encouragement tools. among encouragement factors, there is the direct dependence of the rate of remuneration on the achievements of professional performance. the only exception is the senior management: their salary level is set individually, taking into account the degree of responsibility, the assessment of the unit’s performance, professional experience, and qualifications. in 2011-2012, during the country’s economic downturn and freezing of salary increases for uk public sector officials, tom winsor, chief inspector general of her majesty in police affairs, conducted an independent analysis of issues related to the remuneration of police officers to reform it. the two reports, published in 2011-2012, highlighted and assessed the real needs of the modern british police in relation to the economic realities of the country and problems of aging population (official website of the uk government). the main recommendations consisted of the following provisions: to reduce the salaries of employees who start a police career and have no work experience (that is, lowering the so-called “starting salary”). the purpose was the need to encourage long-term police service; to consider the level of salaries of police officers in connection with certain professional skills, paying supplementary payment to officers, who use these skills in their professional activities (equated to £600). to do this, special skills, which a police officer should possess and for which an additional payment should be paid, were suggested to be listed. the purpose of this measure was the development of employees’ professional knowledge, raising the level of qualification to use the potential in full, as well as changing the public opinion about the level of professionalism of the police; to consider salaries in close relation with professional performance, increasing remuneration only to those employees who, on the basis of the calendar year results, performed a job satisfactorily or better; to conduct the so-called “fitness testing” regularly to make sure that all employees are in good physical shape, because a badly trained worker endangers himself, his colleagues, and society. the reports were suggested to make an exception for employees who were injured during the period of service and to grant them a delay of one year for testing, as well as an opportunity to improve their health. officials who would not be able to pass the test for the second time should be dismissed from the police with the payment of retirement benefits and a lifetime premium pension; to appoint employees, who have a certain level of qualifications, appropriate work experience and a certain level of education, for the position of police officers; to introduce a mandatory weekend system for police officers; to involve in overtime work only certain categories of employees in exceptional cases, paying compensation for overtime work; to increase the retirement age to 60 years. the ministry of internal affairs of great britain took most of winsor’s recommendations, given in the reports. moreover, as a result of the reform, the rate of police officer salaries has increased (with the exception of certain categories) compared to other public officials and employees of other sectors and employees will still be retired earlier than other state employees and receive a higher pension in comparison with other categories of pensioners. however, following the ratification of the recommendations contained in the two w. winsor’s reports on salaries by the minister of the internal affairs of great britain, salaries of certain categories of police officers were reduced. mostly, this has affected employees, newly recruited to the police, and employees with low seniority. for example, since april 1, 2013, constable salaries have been reduced: from £23 259 to £19 000 for newly recruited employees; from £25 962 to £21 000 for constables with low seniority (рoliceoracle). in ukraine, encouraging employees according to the professional performance enables to solve problems connected with the increase of efficiency of the law-enforcement system. therefore, nowadays the development of clear criteria for assessing the professional performance of law enforcement officials, baltic journal of economic studies 347 vol. 4, no. 3, 2018 the creation of an effective system of material incentives based on professional performance, are a priority task. at present, the rate, conditions, and procedure for the appointment of encouraging payments are not aimed at improving the effectiveness of the law enforcement service. for example, the legislation specifies that the heads of the police have the right to award police officers in accordance with the specificities of the service and personal contribution of a policeman to general professional performance of the service, considering the specifics and peculiarities of the performance of the tasks assigned to him/her and within the limits approved for remuneration for the maintenance of the national police. therefore, in the course of further reform of the police, such as improving social policy, the issue of forming new principles and methodology for the encouragement of employees objectively considering their professional performance is of particular importance. the use of foreign experience in solving such problems can be a positive example for domestic public administration bodies in the implementation of social reforms in law enforcement structures. on the one hand, using foreign experience, certain methods of problem-solving can be “copied” or mechanically transferred to ukrainian realities. on the other, it should be considered that some aspects of reform are of a universal nature, while others can only be applied under certain conditions related to the political situation in the country, the level of development of the economy and social sphere, as well as the level of criminalization of society. however, obviously, the system for assessing the efficiency and professional performance of law enforcement activities should have a hierarchical structure and be based on the level of strategic goals and objectives, requirements of society and the state to the police, to the level of specific tasks of units and individual employees. the efficiency of police activity depends on obtaining a certain remuneration (moral or material) for the good performance of one’s authorities, as well as on the assessment of the activities of police officers both from colleagues and leadership and, to a large extent, from the public and the media (kuba, topoleskyi). 3. conclusions therefore, it should be noted that the system of indicators should evaluate comprehensively the activities of employees, units, and the national police system as a whole, include the full range of indicators necessary for evaluation, exclude duplicate or secondary indicators, consider the priority of the tasks performed, clearly reflect the degree of achievement at all levels of the system, and be based on potentials of budget financing. the system of supplementary payments must be based on a finite number of professional performance indicators. moreover, it is important to meet such a criterion as objectivity, adequacy of types and rate of supplementary payments. in addition, fixing supplementary payments, based on performance efficiency indicators, should reflect the danger, importance for the state and society, and specificity of the tasks performed, as well as the priority exercised by the police. furthermore, the number of indicators linked to supplementary payments should be optimal, otherwise, in case of an overly-specified system with a large number of indicators reflecting relatively small functions, there is a risk of diverting attention from solving key problems, as well as compensation for the decline in the quality of core duty performance by a large number of less significant functions. references: jenkins c. (february 1999). concerns raised over gap between funding and pay. police review, 7. pro natsionalnu politsiiu [on national police] (law of ukraine of july 2, 2015). retrieved from: http://zakon2.rada.gov.ua/laws/show/580-19 (in ukrainian) pro pensiine zabezpechennia osib, zvilnenykh z viiskovoi sluzhby, ta deiakykh inshykh osib [on pension provision of persons released from military service and some other persons] (law of ukraine of april 9, 1992). retrieved from: http://zakon5.rada.gov.ua/laws/show/2262-12 (in ukrainian) pro zatverdzhennia polozhennia pro natsionalnu politsiiu [on approval of the regulation on the national police] (resolution of the cabinet of ministers of ukraine no. 877 of october 28, 2015). retrieved from: http://zakon3.rada.gov.ua/laws/show/877-2015-%d0%bf/paran9#n9 (in ukrainian) pro hroshove zabezpechennia politseyskykh natsionalnoi politsii [on the remuneration of police officers of the national police] (resolution of the cabinet of ministers of ukraine no. 988 of november 11, 2015). retrieved from: https://www.kmu.gov.ua/ua/npas/248668490 (in ukrainian) pro poriadok obchyslennia vysluhy rokiv, pryznachennia ta vyplaty pensii i hroshovoi dopomohy osobam ofitserskoho skladu, praporshchykam, michmanam, viiskovosluzhbovtsiam nadstrokovoi sluzhby ta viiskovoi sluzhby za kontraktom, osobam nachalnytskoho i riadovoho skladu orhaniv vnutrishnikh sprav, politseyskym ta chlenam yikhnikh simey [on the procedure for calculating the years of service, appointment and payment of pensions and remuneration to the commissioned officers, warrant officers, midshipmen, extended military servicemen and military service under the contract, persons of senior commanders and junior enlisted of the internal affairs bodies, police officers and their family members] (resolution of the cabinet of ministers of ukraine no. 393 of july 17, 1992). retrieved from: http://zakon5.rada.gov.ua/laws/show/393-92-%d0%bf (in ukrainian) baltic journal of economic studies 348 vol. 4, no. 3, 2018 pro zatverdzhennia poriadku ta umov vyplaty hroshvoho zabezpechennia politseyskym natsionalnoi politsii ta kursantam vyshchykh navchalnykh zakladiv mvs iz spetsyfichnymy umovamy navchannia [on approval of the procedure and conditions for payment of remuneration to provide police officers of the national police and cadets of higher educational institutions of the ministry of internal affairs with specific learning conditions] (order of the ministry of internal affairs of ukraine no. 260 of april 06, 2016). retrieved from: http://zakon5.rada.gov.ua/ laws/show/z0669-16 (in ukrainian) official website of the royal canadian equestrian police. retrieved from: http://www.rcmp-grc.gc.ca/ recruitingrecrutement/rm-mr/rates-taux-eng.htm official website of the uk government. retrieved from: https://www.gov.uk/police-pay-winsor-review рoliceoracle. retrieved from: http://www.policeoracle.com/pay_-and_conditions/police_pay_scales.html kuba n., topoleskyi r . systema otsinky efektyvnosti roboty natsionalnoi politsii [the system of assessing the effectiveness of the work of the national police]. retrieved from: http://khpg.org/index.php?id=1455530110 (in ukrainian) baltic journal of economic studies 159 vol. 5, no. 3, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: podolianchuk_l@i.ua orcid: https://orcid.org/0000-0003-0234-8943 2 vinnytsia national agrarian university, ukraine. e-mail: taniprof@i.ua orcid: http://orcid.org/0000-0002-5379-1577 3 vinnytsia national agrarian university, ukraine. e-mail: gudzenko_nm@i.ua orcid: http://orcid.org/0000-0002-0978-4257 doi: https://doi.org/10.30525/2256-0742/2019-5-3-159-169 current liabilities and their accounting in the at tracted capital management system olena podolianchuk1, tetiana plakhtii2, nataliya gudzenko3 abstract. the purpose of the article is to reveal the essence of the attracted capital, to clarify the legal, economic, and legal content of the liabilities, to justify the relationship between the categories of “liabilities”, “arrears”, “calculations” and “liabilities” and “attracted capital”, assess domestic and foreign experience in the classification of liabilities, justify information management of the attracted capital, taking into account the step-by-step accounting process of current liabilities, introduce proposals for the classification of current liabilities with the aim to improve the management of current liabilities as a part of debt capital. methodology. the methodological basis for the disclosure of the research goal was the scientific advancement of scientists, legislative and regulatory acts on issues of accounting obligations. results. the study found that, in the conditions of unstable economic development, one of the important tasks of enterprise management is a rational choice of the asset formation sources structure. the article reveals the essence of the term “capital” and it is found out that the basis of the definition is the material-real form. problems of the contents of attracted and borrowed capital are outlined. the study of legislative documents, which defined the content of the category “liabilities”, was conducted. legal components of current liabilities characteristic are explored and discussed issues are defined. the legal and economic aspects of liabilities are investigated. as a result of the research, the theoretical substantiation of the essence of the categories “liabilities”, “debt” and “settlements” was conducted. it is proved that all current liabilities are divided into real and potential ones. the order of displaying information about current liabilities at all stages of the accounting process is substantiated. it is confirmed that the basis of the management accounting for the attracted capital is the primary documents, accounting data, and generalized forms of internal and external reporting. practical implication. the analytical data of the composition and the structure of attracted capital of agricultural enterprises with detailed analysis of structure of current liabilities are presented. it is confirmed that liabilities occupy a significant share in the structure of capital and are a source of economic activity financing of enterprises. it is determined that not all liabilities arising in civil and commercial law are recorded in the accounts. we substantiated the characteristic features of liabilities. it is determined that all liabilities that are the subject of accounting are legal and economical. the opinion on the content of the definition of “commitment” is taken into account with the accounting, economic, and legal constituents. as a result of the study of foreign experience in the classification of current liabilities, the author’s interpretation of the classification of current liabilities is presented. value/originality. an important objective for the management system is the objective classification of liabilities, their assessment and reliability of accounting. it is proposed to distinguish certain classifications of current liabilities for the purpose of managing borrowed capital in terms of current liabilities. key words: attracted capital, indebtedness, settlements, current liabilities, accounting. jel classification: m21, m41 1. introduction in the activities of business entities inevitably there are interconnections with different contractors. this is due to the requirements of the business and the market. there is the implementation of economic processes and, as a consequence, the emergence of relationships in the middle of the company and beyond. in other words, in each enterprise there are calculations, it can baltic journal of economic studies 160 vol. 5, no. 3, 2019 have debts and certain liabilities to contractors. the state of payments, the timeliness of debt repayment, the completeness and quality of performance of liabilities characterize the business reputation of the enterprise, its plateau and credit, as well as financial stability in general. therefore, it is important not whether the company has an obligation, but what is its share in the attracted capital and how to implement effective management. in view of this, the significance for the management system is the semantic load, the correct classification of liabilities, their assessment, and reliability of accounting. 2. brief literature review the work on the content of liabilities as an object of accounting, analysis, and control deals with the works of many domestic scientists, in particular: n. p. mykhaylyshyn (mykhaylyshyn, 2012), o. o. zelenina (zelenina, 2012), o. b. chornenka (chornenka, 2017), n. v. potryvaeva (potryvayeva, 2016), o. m. petruk (petruk, 2012), yu. yu. myronova (myronova, 2016), l. v. chyzhevska (chyzhevska, 2011), n. r . dombrovska (dombrovska, 2014), v. o. hanusych (hanusych, 2015), v. m. rasenko (rasenko, 2012), l. l. gevlych (gevlych, 2017), as well as significant contribution to development accounting system of liabilities is made by the following foreign experts: shaіsta wasiuzzaman (2015), ala’a adden abuhommous (2017), jiri chod (2017), katarzyna świetla (2015), richard barker and anne mcgeachin (2013). paying tribute to the scientific developments in the theory and practice of accounting liabilities, some aspects require further study, systematization, and clarification. controversy over the essence of categorical apparatus predetermines the need for interpretation of liabilities from the legal, economic and accounting point of view. a variety of classification criteria for liabilities requires a generalization of their classification for the needs of users of information. different approaches to recognizing liabilities require further research to assess their compliance with accounting principles (business continuity, historical (actual) cost and prudence). all this testifies to the relevance of the chosen topic of the study and the need for systematization, refinement, improvement of the theoretical and methodological provisions of accounting liabilities. 3. current liabilities in the structure of attracted capital to reveal the content of the topic under consideration, first of all, we note that the management of capital – is the adoption of managerial decisions related to the definition of the optimal sources of its formation and the policy of rational use in the process of various activities. the research of scientific literature shows that the term “capital” has an ambiguous interpretation. in a broader sense, capital is characterized as all sources of enterprise assets formation. hence, this definition is used in relation to both sources of capital formation and assets. characterizing the sources, distinguished by “passive capital”, which is divided into own and borrowed (borrowed), and characterizing assets – about “active capital”, dividing it into main (non-current assets) and working capital (stocks, cash, accounts receivable, etc.). in a more narrow definition of capital – it is expressed in the value of fixed and working capital. in this case, capital as aggregate resources used in business represents its material and material basis. shaista wasiuzzaman determines that the relationship of working capital (and its components) with profitability may not be as simple as it seems and may be dependent on other influences such as economic policy (wasiuzzaman, 2015). the disclosure of the nature of capital and its characteristics are complicated by the presence of many classifications and types of capital. in scientific publications, there are discussions about the nature of borrowed and borrowed capital. all of this, in our opinion, is explained by the linguistic characteristics of terminology. to understand the essence of these concepts, we turn to the academic explanatory dictionary. involve means to use something somewhere, and borrow – to borrow something from someone; take something for someone in temporary use; to give something to someone else (academic explanatory dictionary). the substantiation of the essence of the enterprise capital is closely connected with the definition of its composition and structure, as evidenced by statistical data (table 1). according to the state statistics service of ukraine, there is a situation of annual growth in the size of current liabilities of enterprises in all sectors of the economy (figure 1). this situation shows that entrepreneurs do not have their own funds to ensure the continuity of activities and are forced to resort to external sources. as n.p. mykhailyshyn notes, the presence of obligations is considered a normal state of any operating company since they are the basis of the relationship between economic entities (mykhaylyshyn, 2012). in addition, the firm’s management should be aware of the importance of trade credit to finance sales growth (abuhommous, 2017). a supplier who automatically monitors the number of orders ... may restrain the risk of looking for seller behaviour with the threat of more stringent lending conditions. it provides suppliers with a financial advantage over banks... (chod, 2017). in the present economy, it is essential to access the correct information coming from the market. the source of such information is financial statements of entities, prepared in accordance with accepted accounting principles and ethical behaviour requirements (katarzyna, 2015). baltic journal of economic studies 161 vol. 5, no. 3, 2019 table 1 current liabilities and support of ukrainian enterprises* current liabilities and support state on 31.12. 2012 31.12.2013 31.12.2014 31.12.2015 31.12.2016 uah million % uah million % uah million % uah million % uah million % total 2472841,7 100 2689338,2 100 3151253,0 100 4114903,2 100 5846688,7 100 including: short-term bank credits 316987,2 13 371760,5 14 428243,2 14 455709,4 11 496947,2 9 current debt for long-term liabilities 90788,7 4 100649,8 3 payables 2065065,8 83 2169850,8 81 1733245,0 55 2196263,4 53 2587426,8 44 current security 15166,8 1 45794,7 1 30456,8 1 59357,8 1 future income and deferred commission income from reinsurers 31910,3 1 29025,8 1 31486,1 1 37109,7 1 other current liabilities 914944,3 29 1400987,5 34 2665847,2 45 * data are given without taking into account the results of activity of banks and budgetary institutions on the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and part of the zone of anti-terrorist operation source: state statistics service figure 1. dynamics of current obligations of enterprises of ukraine, million uah source: state statistics service to support the given opinion, we will present an analysis of the composition and structure of the liabilities of agricultural enterprises (table 2). the analysis confirms that in today’s situation, when currency fluctuations occur, enterprises operate at risk, without the involvement of additional resources, it is impossible to carry out activities. summarizing the calculations, the data can be argued that the obligation in the structure of sources of formation of the property of the enterprises under study occupies from 1% to 76% (figure 2). all this again confirms the objectivity of “attracting resources from the side” but, at the same time, it is necessary to manage the attracted capital rationally. as we can see from figure 2, attracted capital, in the form of liabilities, is an important source of financing of economic activities of enterprises, it significantly affects their financial position, and therefore, there is a need for efficient management of cash flows, settlement operations, arrears, etc. from the accounting-economic point of view and from the position of management, o. o. zelenina substantiated the need to withdraw from the stock of attracted capital of third-party and loan capital. to third-party capital is assigned – accounts payable for goods, works, services, advances received deferred payments, promissory notes issued, settlement liabilities, loans – long-term and short-term loans of financial institutions, bond loans, financial lease liabilities, turnaround financial assistance, funds received as a result of factoring transactions (zelenina, 2012). the author’s opinion is justified, as it enables the identification and structuring of accounting objects related to the attracted capital. baltic journal of economic studies 162 vol. 5, no. 3, 2019 table 2 analysis of composition and structure of attracted capital, thousand uah indexes 2015 2016 2017 thousand uah % thousand uah % thousand uah % ltd “peremoga” equity 13191,9 99 17093,5 98 21749,8 95,5 liabilities: 144,6 1 379,6 2 113,5 0,5 current payables for: goods, work, services 144,6 1 183,2 1 67,2 0,3 other current commitments 196,4 1 46,3 0,2 balance 13336,5 100 17473,1 100 21863,3 100 ltd “ahroposluhtransservis” equity 12821,8 65 16448,0 66 23388,0 68 liabilities: 7034,6 35 8297,3 34 10947,7 32 long-term liabilities, targeted financing and provision 4600,0 23 4493,0 18 4608,0 13 current payables for: goods, work, services 2350,7 12 2253,1 9 3681,9 11 calculations with the budget 39,4 0,2 38,9 0,1 insurance calculations 5,4 0,03 payroll calculations 39,1 0,2 33,2 0,1 62,5 0,2 other current liabilities 1518,0 7 2556,4 8 balance 19856,4 100 24745,3 100 34335,7 100 jvf “lan” equity 253,9 29 366,0 48 453,4 24 obligation: 625,3 71 398,9 52 1773,3 76 long-term bank credits 150,0 17 83,3 11 16,6 1 short-term bank credits 37,5 5 412,3 21 current payables for goods, works, services 117,1 13 256,6 33 725,2 38 other current commitments 358,2 41 21,5 3 319,2 16 balance 879,2 100 764,9 100 1926,7 100 source: according to the form n1 of business entities 4. normative legal substantiation and scientific approaches to the content of the studied categories note that in the accounting standards, the definition of capital is absent, only the following terms are treated: equity – the difference between assets and liabilities of the enterprise; assets – resources controlled by the enterprise as a result of past events, the use of which is expected to result in future economic benefits; liabilities – debts of an enterprise that arose as a result of past events and whose recovery in the future is expected to lead to a reduction in the resources of the enterprise embodying economic benefits (national accounting provision (standard) 1). thus, it can be argued that liabilities in various forms of engagement are used to carry out the business activities of an enterprise. formation of views on the category of commitment has a long history but the economic literature covers different approaches to the essence of the study definition. there is no refutation in the normative documents (table 3). richard barker and anne mcgeachin point out that international financial reporting standards are inconsistent with respect to the recognition and measurement of liabilities, both in the conceptual framework for financial reporting and in accounting standards themselves (richard & mcgeachin, 2013). according to n.p. mykhailyshyn, not all liabilities that arise in civil and commercial law are recorded in the accounts. isolation from the whole complex of liabilities of the enterprise of their limited part, which is reflected in the financial statements, provides for the qualification of a number of liabilities of economic entities for the purposes of accounting as conditional (mykhaylyshyn, 2012). baltic journal of economic studies 163 vol. 5, no. 3, 2019 table 3 determination of liabilities in normative documents normative document definition the commercial code of ukraine a business recognized as a liability that arises between a business entity and another participant (participants) in a business relationship based on the grounds provided for by the economic code, in virtue of which one entity (obliged to be a party, including the debtor) performs a certain action of economic or managerial nature in favour of another entity (to perform work, to transfer property, to pay money, to provide information, etc.), or refrains from certain actions, and another entity (the controlled party, including the creditor). it has the right to demand from the obliged party to fulfil its duty. the civil code of ukraine the liability is a relationship in which one party (the debtor) is obliged to make a certain action in favour of the other party (creditor) (to transfer the property, to perform work, to provide a service, to pay money, etc.) or to refrain from committing a certain action (negative obligation) and the creditor has the right to demand from the debtor fulfilment of his duty. national accounting provision (standard) 1 “general requirements for financial statements” liability – an enterprise debt that arose as a result of past events and whose recovery in the future is expected to lead to a reduction in the company’s resources that embody economic benefits. international accounting standard 37 provisions, contingent liabilities and contingent assets liability is an existing obligation of an entity that results from past events and the settlement of which, in expectation, will result in the extinction of the entity’s resources, which embody economic benefits. source: formed by order of the ministry of finance of ukraine, 2012; law of ukraine, 2003; law of ukraine, 2003; international accounting standard, 2012 figure 2. structure of current liabilities source: according to economic entities our research gives grounds to substantiate the view that most researchers characterize the nature of the liabilities in accordance with the specifics of the field of their research. therefore, the scientific literature reveals the economic and legal aspects of the liabilities. in domestic practice, the notion of “liability” from the legal point of view prevails. as a legal category, an economic obligation is a business relationship governed by law. by virtue of the existence of these relations, one party is authorized to require another business transaction: transfer of property, performance of works, provision of services, and the other party is required to comply with the requirements of the subject of the obligation and, with this, the right to demand an appropriate remuneration – payment of funds, counter services. thus, the essence of the obligation is the rights and liabilities of the parties. for example, in a sales contract, the buyer has the right to demand from the seller to transfer the purchased goods to him. this buyer’s right corresponds to the baltic journal of economic studies 164 vol. 5, no. 3, 2019 seller’s obligation to convey to the buyer the goods sold to him (mykhaylyshyn, 2012). from an economic point of view, an obligation is considered as payable, which greatly narrows this concept. however, it is in this interpretation that it is used by accountants-practitioners. in the account of an obligation – this is the source of the formation of financial resources to finance the operational, investment, and financial activities of the enterprise. in the future, arrears on liabilities should be repaid by transferring certain assets or services. thus, the obligation is the claims of creditors in relation to the assets of an enterprise. the presence of liabilities (debts) reduces the economic requirements of the enterprise and its capital. in civil and commercial law, an obligation arises from a contract, regardless of whether certain actions have already taken to fulfil it (mykhaylyshyn, 2012). in the account at the time of signing the contract, the liability is not reflected. that is, only those liabilities that arise from the execution of contracts are reflected in the account, but not at all from the contracts itself. for example, the company concluded a contract for the supply of goods. in accounting, the requirement for these goods and the obligation to pay them do not receive any reflection. an accountant may not guess about the existence of such liabilities. and only after the start of the contract: after the first delivery or payment (prepayment), the accountant begins to reflect the facts of economic life (mykhaylyshyn, 2012). thus, it can be argued that the liabilities are inherent in certain characteristics: from the point of view of the law – establishes the grounds for liabilities and the procedure for making settlements; from the economic point of view – determines monetary relations and, as a result, the emergence of payables to counterparties; accounting – documented the consequences of the implementation of the terms of specific contracts and summarizes the information in the system of accounts and reporting. hence the conclusion – all liabilities that are the subject of accounting have legal and economic content. therefore, in accounting practice, along with the definition of “obligation”, the terms “indebtedness” and “settlements” are used. quite often, the contents of the category debts are compared with debts or liabilities. given the economic and legal content of these concepts, we can conclude that identification is unacceptable. successfully notes o. v. chornenka that payables are defined as the result of the legal relationship of the entity, which is the result of committing a certain action of one entity to another entity, an individual, the state, an extra-budgetary fund for the transfer of inventory, cash or other assets, provision of services, performance of works, or actions of legislative and regulatory documents (arrears of taxes or other mandatory payments to the budget and extra-budgetary funds) and gives the creditor the right to claim (chornenka, 2017). the affirmation of n. v. potryvaeva is that calculations are acts of disposal of own funds in favour of another person or receiving funds from another person, ensure the implementation of economic relations between people, producers, and consumers, etc. on the movement of results of labour received not for their own consumption but for the satisfaction of public needs. it is the calculations accompany the exchange process, through which commodity producers, intermediaries, and sellers enter into relationships with consumers (potryvayeva, parakonna, 2016). o. m. petruk believes that arrears or calculations are reflected in accounting as debts, payments, that is, the promise of payment for actually delivered inventory or services provided. if we promise to pay the buyer, then the account should reflect the promise of the contractor to put the goods, which can also be a valuation. in this case, the fact is actually about the accounting of a bilateral promise – a treaty. if all components of a bilateral legal commitment are reflected in the accounting, we conclude that it is also accounted for. the difficulty in understanding this phenomenon is that the civil law obligation is bilateral, so a certain part of the legal obligation must be shown separately from the creditor, and the other – separately from the debtor. their reflection in the account takes place through the system of double entry – the fundamental method of accounting since in transactions, there always is a lender and a debtor (debit and credit). all cases of existence and use of double entry cannot be explained by purely economic reasons because there is a legal basis for conducting business operations (petruk, 2012). the conducted research makes it possible to substantiate the essence of the category of “liability” (figure 3). in our opinion, the liability is a legal relationship between economic entities, which causes the occurrence of indebtedness under certain calculations. 5. national and international accounting experience and classification of current liabilities in accordance with accounting standards, liabilities are divided into: long-term; current; contingent liabilities; income of future periods (act of the ministry of finance of ukraine, 2000). a liability is recognized if its valuation can be reliably determined and there is a likelihood of a future decrease in future economic benefits arising from its repayment (act of the ministry of finance of ukraine, 2000). having analysed the normative documents by scientists, the main characteristics of the liabilities were substantiated: baltic journal of economic studies 165 vol. 5, no. 3, 2019 specific economic resources (returns are subject to resources or their monetary equivalent – depending on the terms of the contract); address (resources are returned to the lender or another third party on behalf of the lender); the maturity of the debt; remuneration for the use of resources; sanctions and violations of contractual liabilities in terms and amounts of debt repayment (myronova, batsman, yatsenko, 2016). one of the controversial issues in the research of scholars is the divergence of views on the classification of liabilities, including current ones. scientists and accounting practices confirm that the classification of company liabilities by individual types is necessary to ensure their management and the objectivity of the presentation of information in the financial statements for decision-making by users. honestly, l. v. chizhevska notes that the first step in achieving the definition of objects is their classification based on the general phenomenon of the unity of opposites (chyzhevska, zelenina, 2011). according to n. r . dombrovska, scientific classification is a method of studying a plurality of objects by their division into groups according to the general sign of the way of knowing the essence, content, degree of similarity, and differences of objects (dombrovska, 2014). in accordance with the accounting provision (standard) 11 “liabilities”, current liabilities include: short-term bank credits; current indebtedness under long-term liabilities; short-term bills issued; accounts payable for goods, works, services; current payable on payments (from received advances, with the budget, from extrabudgetary payments, insurance, with wages, with participants, from internal settlements); current provision; other current liabilities (act of the ministry of finance of ukraine, 2000). a special kind of current liabilities is collateral. usually, they are created to recover future operating expenses for: payment of holidays to employees; additional pension provision; performance of warranty liabilities; restructuring, fulfilment of liabilities upon the termination of activity; execution of liabilities on burdensome contracts, etc. (act of the ministry of finance of ukraine, 2000). in the current account liability, an unplanned obligation is also specified in the accounting standards: 1) an obligation that may arise as a result of past events and whose existence will be confirmed only when one or more uncertain future events occur or are not going to happen, over which the enterprise has no full control; or 2) the present obligation that arises from past events but is not recognized as it is unlikely that the obligation to settle will require the use of resources that embody economic benefits or because the amount of the obligation cannot be reliably determined (act of the ministry of finance of ukraine, 2000). contingencies that will become real if there is or will not happen in a future event (for example, before a court makes a decision on the amount of penalties) are recorded in the off-balance sheet account fixing of the facts of the occurrence of obligations and their repayment accounting nature economic nature legal nature the grounds for the obligation and the procedure for the implementation of transactions monetary relationships that determine the costs and income calculations arrears liability figure 3. the author’s interpretation of the category of “commitment” source: substantiated by the author baltic journal of economic studies 166 vol. 5, no. 3, 2019 042 “contingent liabilities” (order of the ministry of finance of ukraine, 1999). in addition, the structure of enterprise liabilities can be supplemented by financial liabilities. they are potential opportunities for the entity to provide security. however, clear and precise explanations regarding the accounting of financial liabilities p(s)a 13 does not provide (order of the ministry of finance of ukraine, 2001). we agree with the opinion of v. o. ganusich that the controversial issue in accounting for current liabilities is the presence in their composition of incomes of future periods. it is known that future period income is the income received in the current reporting period, but which relates to future reporting periods. there is a contradiction here, because they do not correspond to any of the signs of liabilities, but belong to them (hanusych & loya, 2015). in foreign scientific literature, current liabilities are divided by degree of probability into actual, estimated, and conditional. in particular, b. needles, h. anderson, d. caldwell give such a characteristic to these types of liabilities: 1) actual – arise from a contract or legislation. they can be calculated accurately. actual liabilities include debts on accounts, promissory notes, dividends to pay, sales tax, payroll, etc. 2) estimated – it is an obligation, the exact amount of which cannot be determined before a certain date. examples of such liabilities are taxes on income, payment of warranty liabilities, and holiday pay. 3) conditional – non-existent liabilities. nevertheless, they are potential liabilities because they depend on the future event arising from the previous agreement. conditional liabilities are classified into permissible, probable, possible (needles, andersen & caldwell, 1994). when assessing the content of the national accounting standards, we consider that current liabilities are reflected in the liability of the balance sheet for the respective objects (types) (table 4). the data in table 4 indicates that the informational content of the balance in terms of current liabilities for all users is satisfactory. both external and internal users of the information can carry out a general risk analysis and the possibility of loss due to default. more detailed information for managing the attracted capital can be obtained by internal users using separate internal reporting forms that are developed taking into account the specifics of each entity’s activity separately. studies conducted confirm that the financial and economic activity of enterprises leads to the emergence of many types of liabilities and a large number of creditors. the organization and accounting of liabilities, as well as their correct presentation in financial statements, depend on how well the division and classification of the objects of accounting were correctly carried out, as well as on the correct classification of the characteristics (travinska, 2018). therefore, it is appropriate to consider that each business entity should establish a system for recording short-term liabilities in such a way that it records as quickly as possible the accounting information on the presence and movement of current liabilities at the enterprise. because the data on the commitment is the basis for making managerial decisions and conducting further control and analysis of the state of the enterprise. therefore, every entity must continuously carry out activities to improve the accounting of short-term liabilities (potryvayeva, parakonna, 2016). in order to correctly determine the company with the choice of one or another feature of the classification of liabilities, it is important to weigh the sources of its origin and remember that its basis is not only the accounting origin but, above all, a series of legal relationships that leads to the emergence of the relationship. considering the classification features of different scholars, and different approaches to the classification of liabilities, one can see that some of them are based on the legal basis of origin. so, before assigning an obligation to one or another kind, it is necessary to substantiate its character and to follow a series of relations that arise with the counteragent (rasenko, 2012). in international accounting standards, the liabilities, depending on their essence and the concept of a liability table 4 display of current liabilities in the balance sheet (statement of financial position (form n1)) the title of the balance sheet line code in the balance sheet account code short-term bank credits 1600 60 promissory notes issued 1605 62 current payables for: long-term liabilities 1610 61 goods, work, services 1615 63 payments to the budget 1620 64 incl. from income tax 1621 insurance payments 1625 65 payroll calculations 1630 66 current payables to received advances 1635 681 current payables to settlements with participants 1640 67 current payables to internal settlements 1645 682 current payables to insurance activities 1650 65 current provision 1660 47 deferred income 1665 69 deferred commission income from reinsurers 1670 49 other current commitments 1690 685 total section 1695 х source: order of the ministry of finance of ukraine, 2012; order of the ministry of finance of ukraine, 1999 baltic journal of economic studies 167 vol. 5, no. 3, 2019 event, are classified in (international accounting standard 37): legal obligation; constructive obligation; contingent liabilities; provision. therefore, in order to balance the discrepancy between the time of accounting and legal liabilities, some foreign researchers propose to recognize the obligation at the time of conclusion of contracts, which would lead to the appearance of forecast lines in the balance sheet and, in their opinion, would increase the interest of investors (rasenko, 2012). it can be stated that the emergence of additional articles such as contingent assets or contingent liabilities will not lead to an increase in the investment attractiveness of an enterprise, because they cannot be shown on a balance sheet on a prudent basis. disclosure of such information in the notes on the basis of the example of other off-balance sheet items will only give extra trouble to accountants who will be forced to further track the closing of such accounts in the performance of their liabilities. according to scientists, the existing practice of accounting for liabilities is expedient and effective, and the disclosure of contracts that are expected to be executed in the notes, as part of the report of directors, in projects is adequate to the international requirements for the organization of accounting (hevlych, katranzhy, 2017). the conducted study makes it possible to compare the content of current liabilities defined by national and international accounting standards and justify its own approach in the classification of current liabilities (table 5). consequently, it can be stated that all current liabilities are divided into real and potential: all current liabilities on which the entity makes certain calculations are actual; contingent liabilities and legal liabilities that cause the consideration of amounts of liabilities specified in the contracts are conditional; the collateral that is a part of the current one is estimated. in order to open an account for the management of the attracted capital, we consider it appropriate to substantiate the order of displaying information on current liabilities at all stages of the accounting process. the first stage in accounting for current liabilities is the initial generalization of the occurrence of arrears, which will lead to settlements. its essence is characterized by a documentary reflection of the consequences of the implementation of the terms of the concluded contracts. the second stage of the accounting process is the current accounting, which is the process of registration of primary accounting data in the system of accounts and registers of synthetic and analytical accounting. the final stage of the accounting process is final. it can be characterized as the formation of the reporting indicators for a certain period and providing users with the final information in the relevant reporting forms, in particular, the external: balance sheet (statement of financial position) and the notes to the financial statements for each type of contingent liability, the following information is provided: brief description of the obligation and its amount; uncertainty as to the amount or maturity; amount of expected repayment of obligation by the other party; internal – in self-developed reports, tables, forms, etc. at the enterprise. thus, the basis of the management accounting for the attracted capital is the primary documents, accounting data and generalized forms of internal and external reporting. 6. findings our research gives grounds for expressing the opinion that in the scientific literature various, approaches to the classification of current liabilities are highlighted. however, taking into account the norms of accounting standards and the needs of internal users since they only need detailed information on current liabilities, we propose the following classification for management purposes: 1) by the form of engagement: commodity: for products and goods; for services, for work; money: from wages, taxes and fees, financial transactions, etc. 2) by object(s): liabilities to banks, bills, suppliers and contractors, taxes, insurance, employees, participants, etc.; 3) by way of repayment: monetary, non-monetary; table 5 comparison of the content of liabilities under national and international accounting standards determination procedure invoice plan accounting provision (standard) 11 content international accounting standard 37 realistic accounts 60-68 current liabilities accounting for all current liabilities constructive commitment potential off-balance sheet account 04 contingent liabilities accounting of reasonable amounts of claims, fines, penalties, etc., the decision on their recovery is considered in court conditional obligation account 47 current provision accounting for the provision of vacations, warranty, material incentives, etc. software not provided not provided accounting contracts legal obligation source: the author’s interpretation baltic journal of economic studies 168 vol. 5, no. 3, 2019 4) by type of activity: operational, financial, liabilities that arose due to another type of activity; 5) by the possibility of evaluation: actual, estimated, conditional; 6) by maturity: up to three months, from three to six months; from six to twelve months; 7) depending on the order of determination: real and potential. this approach will enable business entities of various fields of activity and forms of ownership to detail analytical accounts of liabilities and develop forms of internal reporting for operational analysis, control and, in general, effective management and rational decisionmaking. 7. conclusions the conducted research shows that there is no uniform approach to the categorical and conceptual framework of the studied terms “attracted capital”, “liability”, 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(2017). osoblyvosti pidkhodiv do vyznachennya sutnosti "potochni zobovyazannya" ta yikh klasyfikatsiyi [peculiarities of approaches to the definition of the essence of “current liabilities” and their classification]. finance, accounting , banks, 1, 70–78. baltic journal of economic studies 218 vol. 5, no. 3, 2019 corresponding author: 1 chernihiv national university of technology, ukraine. e-mail: shkarlet@ukr.net 2 donetsk national technical university, ukraine. e-mail: dolozirina@gmail.com 3 chernihiv national university of technology, ukraine. e-mail: maksim-32@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-218-224 budgetary revenue breakdown at the local level of public administration in federal countries serhiy shkarlet1, iryna dolozina2, maksym dubyna3 abstract. ensuring the financial autonomy of local government bodies is an important component for creating conditions on accelerating the development of individual territories of the country and increasing the efficiency of their use. creation of mechanisms for providing sufficient amounts of financial resources, activities of the above-mentioned authorities require thorough research in this area, especially within the study of foreign experience by building budget systems and organizing redistribution of financial resources between their individual components at different levels. experience of federative countries is particularly significant in this area. the outlined confirms the relevance of the chosen topic of the article. accordingly, the following goal of the research was set – to identify structural features and trends in the transformation of budget revenues at the local level of public administration in federative countries from 2000 to 2015. to achieve this goal, the following tasks were set: to determine the revenues structure of local government in federative countries; to analyse main tendencies of the change of the specified structure during 2000–2015; to apply cluster analysis in order to identify groups of countries that are similar to the processes of revenue generation of local government budgets in federative countries. methodology. statistics for assessment of budgetary revenue’s breakdown in several federative countries by the imf data was processed, assessment of breakdown transformation with the use of the ryabtsev index was done, and similarity and distinctions of revenue’s breakdown in different countries with the use of the hierarchical cluster analysis was investigated. outcomes. it was found that among the analysed federative countries, the own tax revenue has a significant share (higher than 30% in a breakdown of all revenue) only in belgium, germany, australia, canada, and also in bosnia and herzegovina; the inter-budgetary transfers take the main position in financing of local budgets in austria, belgium, canada, russia, and brazil; own non-tax revenues in local budgets are significant only in australia and bosnia and herzegovina. it was proved that in fifteen years only in russia, the opposite type of revenues breakdown sources was created and it demonstrates shifting to the centralization of public finance. it was also revealed that in 2000, the countries’ cluster structure by breakdown sign had obviously expressed group character, but further it evolved from a group structure to the step structure displaying specifics in the formation of local budgets’ revenues in each country. practical implications. practical outcomes of the study are analytical information on the structure of revenues of local government in federative countries, which may be useful by introducing new mechanisms for increasing the financial autonomy of local self-government. in addition, the obtained data may be useful for other not federative countries in terms of studying peculiarities of the formation of budget revenues of local government and analysis of the impact of such revenues on the socio-economic development of separate territories. value/originality. the conducted study is relevant given the importance of developing local government in federative countries and providing it with the necessary financial resources for independent self-functioning. the data obtained during the research implementation are of practical value and can be used in the process of implementing measures to increase the financial independence of budget revenues at the level of local self-government in federative countries. this research was carried out within the framework of the scientific work performing of the department of finance, banking and insurance of the chernihiv national university of technology on the following topics: “financial stability of economic systems in crisis management” (no. 0115u001149) and “theoretical and applied aspects on financial provision of the national economy” (state registration no. 0113u002741). key words: budget, revenues, breakdown, local governance, fiscal policy, federal states. jel classification: e62, h71, h72 baltic journal of economic studies 219 vol. 5, no. 3, 2019 1. introductions the local governance is the most operative, flexible, and likely the most effective problem-solving mechanism of local communities. this fact causes the tendency of decentralization of the power in the majority of the countries. at the same time, possibilities of increase in charges of local government in providing public services are limited for a number of reasons. at first, the financial autonomy of local governments is significantly limited to the potential of own income. at second, financial resources of local communities may differ that causes the growth of the horizontal conflicts and imbalances. at third, the culture of interaction and cooperation of communities for the implementation of joint projects is an immanent feature of institutional traditions not in all countries. in addition, at fourth, although decentralization of public finance is the general tendency, it is implemented not with identical speed and with various restrictions in different countries. the federal countries, thanks to features of this type of state system, obviously have the most fertile field for the development of local governance. however, decentralization of powers only theoretically means an increase in the financial autonomy of local budgets. їin this regard, the issue on features identification of the revenues of local budgets formation and breakdown of sources of their receipts is of considerable interest. thus, the purpose of this article is to study the peculiarities of the formation of local budgets incomes of federal states (australia, belgium, germany, austria, canada, switzerland, the usa, malaysia, the russian federation, mexico, india, argentina, brazil, and bosnia and herzegovina). to achieve this goal, the following main tasks were identified:– to identify and analyse the revenue structure received by local government bodies of federal states at places in 2000, 2005, 2010, and 2015; – to distinguish basic features of the structure transformation of the defined income in the relevant periods; – to determine by means of cluster analysis homogeneous federative countries on the basis of similarity of revenue structure of local self-government budgets and their transformation during 2000–2015. in order to solve these problems, the following research methods were used during the research: grouping – when the totality of countries is allocated for the analysis of the structure of incomes received by their local authorities; analysis and synthesis – when considering the structure of local budgets and summarizing the results obtained; structural analysis – determining the proportion of individual revenue streams in the total amount of revenues to local government in federal countries; cluster analysis – to identify groups of countries based on similar principles and peculiarities of the formation of such revenues; index analysis, in particular, the ryabtsev index – to identify the level of similarity and differences between the structure of budget revenues of the said authorities in federal countries. nowadays more and more researches are devoted to studying the experience of various countries in the formation of local budgets’ resource base. among the latter, it is necessary to pay attention to works by p. mrkývka, d. czudek, d. foremny, v. bobáková, l. malikká, d. s. reznichenko, p. zhang, g. turley, n. ermasova. this issue also draws the attention of ukrainian scientists among whom the works of o. muzyka, i. volokhova, a. sokolovskaya, and n. rekova are the most noticeable. however, in scholarly works, the experience of individual countries with different types of government in the field of local budget revenues, providing the necessary financial resources to the territorial communities, is being considered fragmentally. but, such studies can distinguish both positive and negative features of ensuring the accumulation of local budget revenues and use the results obtained in the process of transformation of national budgetary systems. particularly relevant results of the study may be for those countries that gradually form their own budget system today, transforming it into the needs of a new system of powers division between central and local authorities. 2. investigation on the distribution of local budgets of individual federal countries in this way, we begin with an analysis of the revenue structure of the local governments’ budgets of various federal countries. at the same time, a more careful comparative analysis is necessary for the understanding of an overall picture and regularities of fixing to local budgets of certain types of sources of income. 1) to process statistical material for the assessment of budgetary revenue’s breakdown. as a statistical basis of the research data of the imf on public finance of several federal countries (austria, germany, belgium, canada, the usa, india, the russian federation, switzerland, argentina, brazil, mexico, bosnia and herzegovina, and malaysia) were used. data on absolute values of revenue of local government budgets in national currencies were processed that allowed calculation of the corresponding budgets’ breakdown indicators in 2000, 2005, 2010, 2015. five-year intervals were chosen randomly, but owing to similarity of electoral cycles of change of governments, and respectively, possible changes of the principles of the budgetary policy, such approach quite allows monitoring of any transformations in the structure of budgetary revenue categories. unfortunately, owing to lack of data, not all selections formed as identical by the size, however, their addition with information of national statistics was not done proceeding from the need to provide comparability of basic data. it is also necessary to pay attention to the fact that in tables given below, the main categories (taxes, grants, other revenue) are not always baltic journal of economic studies 220 vol. 5, no. 3, 2019 disclosed in categories of a lower order, i.e. basic data are not always classified completely that influences results of the assessment of structural changes dynamics. 2) to analyse the dynamics of revenue’s structural changes for local governments’ budgets in federal states. assessment of breakdown transformation was done with the use of the ryabtsev index (ryabtsev, chudilin, 2011). let s s sn1 1 2 1 1, ,� � � � �…( ) and s s sn10 20 0, ,� � � � �…( ) are vectors of shares of each analysed category of revenue in the budget of a certain level respectively during the studied and basic period. then, the extent of structural changes can be estimated as: i s s s s r i n i i i n i i = −( ) +( ) = = ∑ ∑ 1 1 0 2 1 1 0 2 the choice of the ryabtsev index among other quadratic indexes (the gallagher index, the monroe index, the gatev index, the szalai index, the aleskerovplatonov index) was caused by two circumstances – its sensitivity to small selections and existence of a scale of assessment of structural distinctions (table 1) that allowed interpreting the received coefficients without the use of the comparative analysis. 3) to analyse the similarity and distinctions of revenue’s breakdown. as not only categories of budgetary revenue (tax revenues, transfers, own nontax income) but also their subcategories are of great importance for assessment of distinction of breakdowns, the hierarchical cluster analysis (a method of singlelinkage clustering with euclidean distances) according to the recommendations of a. jain (1999), p. berkhin (2006) in a statistica 10 package was applied to the solution of this task. breakdowns of formation of local budgets’ revenues in 2000 in several federal countries are presented in table 2. their studying gives the chance to note that the importance of sources of income was very different. it can be said also that the highest shares of own tax revenues in local budgets were in emerging the countries and switzerland which is a confederation. in the majority of the countries, the main source of such receipts was taxes on income and property (except austria). rather a significant level of own non-tax receipts (on average – 23.8%) was a common feature of the formation of local budgets’ revenues. however, the breakdown of tax revenues in basic data was not determined for canada, malaysia, russia, and mexico, so these results can be hardly considered as full. among features which can be revealed in 2005 (table 3), it should be noted reduction of a share of own tax income (38.8% in comparison with 44.0% in 2000) due to some growth of specific weight of the inter-budgetary transfers and income from property and services. table 2 local budgets’ revenue breakdown in 2000, %* categories / countries** aut bel deu aus can che usa mys rus mex revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 taxes 16.6 29.0 37.1 37.1 39.2 57.8 37.5 54.9 72.4 58.4 on income, profits, and capital gains 0.1 8.5 29.5 0.0 0.0 48.8 2.3 0.0 35.7 0.0 on payroll and workforce 9.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 on property 2.6 17.1 5.1 37.1 0.0 8.1 26.9 0.0 0.0 0.0 on goods and services 4.0 3.2 2.4 0.0 0.0 0.2 8.3 0.0 0.0 0.0 on international trade and transactions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 other taxes 0.1 0.2 0.1 0.0 0.1 0.7 0.0 0.0 7.6 1.1 social contributions 3.9 5.8 1.5 0.0 0.0 0.4 0.5 0.0 0.0 0.0 grants 61.6 45.9 34.3 17.5 43.6 13.5 39.1 17.1 9.5 27.3 from other general government units 61.6 45.9 34.3 17.5 0.0 13.5 39.1 17.1 9.5 27.3 other revenue 17.9 19.2 27.1 45.3 17.3 28.4 22.9 27.9 18.1 14.3 property income 1.6 0.8 1.9 2.5 0.0 5.1 10.3 0.0 12.6 1.0 fines, penalties, and forfeits 0.0 0.0 1.2 0.8 0.0 0.5 0.0 0.0 0.3 0.0 transfers not elsewhere classified 2.2 0.0 4.8 9.6 0.0 0.8 0.9 0.0 5.1 5.1 * hereinafter: grey coloured cells contain values that differ from 0; ** hereinafter: aut – austria; bel – belgium; deu – germany; aus – australia; can – canada, che – switzerland, usa – united states, mys – malaysia, rus – russian federation, mex – mexico, ind – india, arg – argentina, bra – brazil, bih – bosnia and herzegovina source: calculated on the basis of imf government finance statistics table 1 the scale of assessment of structural distinctions by the ryabtsev index levels characteristic of breakdown similarity 0.000 – 0.030 identity of breakdowns 0.031 – 0.070 very low level of distinction of breakdowns 0.071 – 0.150 low level of distinction of breakdowns 0.151 – 0.300 essential level of distinction of breakdowns 0.301 – 0.500 considerable level of distinction of breakdowns 0.501 – 0.700 very considerable level of distinctions of breakdowns 0.701 – 0.900 opposite type of breakdowns 0.901 and more complete antithesis of breakdowns source: ryabtsev, chudilin, 2001 baltic journal of economic studies 221 vol. 5, no. 3, 2019 in 2010, the falling tendency of the importance of own tax income in local budgets of emerging countries is empirically designated (table 4). shares of this category of income in russia and brazil made a little more than 20% whereas in the highly developed countries changes were not cardinal. the largest share of own tax revenues as well as in 2005 may be noted in bosnia and herzegovina. it is necessary to emphasize that structures of categories of own tax and non-tax revenues most differed among the emerging economies also: if in brazil and bosnia and herzegovina taxes on operations with goods and services played the most significant role in tax income receipts then in russia – income taxes did. the most cardinal changes in comparison with 2000 may be found in the formation of local budgets of the russian federation: the share of tax revenues was reduced almost twice that had been compensated for the account of the inter-budgetary transfers. it is also important to concern specifics of bosnia and herzegovina, in which tax income of local budgets consisted mainly of taxes on internal operations with goods and services. besides, mechanism of proportional distribution of receipts from all taxes between budgets of all levels is characteristic of this country (unlike other countries in which separate taxes are assigned mainly only to the budget of the central government or local budgets). similar phenomena have been noted also in 2015 (table 5). the share of own tax revenues in russia decreased by 4.6 percentage points and made 16.0%, the share of own non-tax receipts in local budgets’ revenue breakdown at austria, canada, switzerland increased a little, however, these changes do not reflect the transformation of institutional structure of the budgetary system, and are situational. table 3 local budgets’ revenue breakdown in 2005, % categories / countries aut bel deu aus can che bih rus revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 taxes 14.9 31.2 37.6 38.6 37.9 57.5 56.3 36.7 on income, profits, and capital gains 0.0 10.7 29.7 0.0 0.0 48.4 1.5 30.2 on payroll and workforce 10.0 0.0 0.0 0.0 0.0 0.0 7.3 0.0 on property 2.7 17.1 5.5 38.6 0.0 8.3 10.4 5.8 on goods and services 2.2 3.1 2.4 0.0 0.0 0.2 26.7 0.7 on international trade and transactions 0.0 0.0 0.0 0.0 0.0 0.0 8.8 0.0 other taxes 0.1 0.4 0.0 0.0 0.1 0.7 1.4 0.0 social contributions 3.4 5.1 1.6 0.0 0.0 0.4 0.1 0.0 grants 59.7 47.2 34.4 13.1 44.8 12.5 10.4 53.1 grants from other general government units 59.6 47.1 34.4 13.1 0.0 12.5 9.7 53.1 other revenue 22.0 16.5 26.4 48.4 17.3 29.5 33.3 10.1 property income 2.5 0.7 2.1 2.9 0.0 4.6 8.2 0.8 fines, penalties, and forfeits 0.0 0.0 1.3 1.2 0.0 0.6 0.1 0.6 transfers not elsewhere classified 4.2 0.0 4.0 12.4 0.0 0.7 0.9 2.0 source: calculated on the basis of imf government finance statistics table 4 local budgets’ revenue breakdown in 2010, % categories / countries aut bel deu aus can che bih rus bra revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 taxes 14.9 30.9 36.7 35.5 36.2 57.7 53.5 20.6 20.8 on income, profits, and capital gains 0.0 11.1 29.1 0.0 0.0 47.6 8.0 16.7 1.8 on payroll and workforce 10.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 on property 2.5 17.0 5.1 35.5 0.0 8.5 6.3 3.5 7.3 on goods and services 2.2 2.4 2.4 0.0 0.0 0.2 38.8 0.4 11.7 other taxes 0.1 0.4 0.0 0.0 0.1 1.5 0.4 0.0 0.0 social contributions 2.9 5.8 1.7 0.0 0.0 0.3 0.0 0.0 7.1 grants 62.8 46.3 35.1 15.2 47.6 11.4 10.5 44.0 61.3 other revenue 19.4 17.0 26.6 49.4 16.1 30.6 36.0 35.4 10.8 property income 2.1 0.6 2.1 2.2 0.0 3.7 7.7 0.3 2.4 fines, penalties, and forfeits 0.0 0.0 1.6 1.1 0.0 0.5 0.1 0.6 1.5 transfers not elsewhere classified 1.8 0.0 3.4 17.8 0.0 0.4 11.9 26.8 2.9 source: calculated based on imf government finance statistics baltic journal of economic studies 222 vol. 5, no. 3, 2019 3. outcomes analysis by using cluster analysis within the study of the structure of local budget revenues the cluster analysis of the countries on the basis of structure of formation of local budgets’ revenues (figure 1) shown increase in a variety between the countries in 2005–2010 in comparison with 2000 (it can be traced by the level of euclidean distance which top threshold in 2000 was 45, 2005 – 55, 2010 and 2015 – 60). besides, it should be noted that if in 2000 the cluster structure had obviously expressed group character whereas, since 2005, the steady group including bosnia and herzegovina and australia (high specific weight of own non-tax receipts in local budgets, a low share of the inter-budgetary transfers in income while about 1/3 receipts – own tax income) and also the big subgroup including austria, germany, and belgium (low and very low levels of own tax income – 10-40%, and the average levels of the inter-budgetary transfers – 40-65%) could be found. for the rest, the cluster structure evolved from a group structure to the step structure displaying specifics in the formation of local budgets’ revenues in each country. as for a question of assessment of dynamics of structural transformations, proceeding from the values of the index of ryabtsev (table 6), the following can be found. in fifteen years in russia, the opposite type of revenues breakdown sources was created – if in 2000 almost ¾ of table 5 local budgets’ revenue breakdown in 2015, % categories / countries aut bel deu aus can bih rus bra revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 taxes 14.4 30.5 38.7 38.1 39.8 56.5 16.0 22.8 on income, profits, and capital gains 0.0 10.3 30.9 0.0 0.0 9.4 12.2 2.4 on payroll and workforce 10.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 on property 2.3 17.3 4.9 38.1 0.0 7.1 3.2 8.0 on goods and services 1.8 2.9 2.9 0.0 0.0 39.9 0.5 12.2 other taxes 0.1 0.1 0.0 0.0 0.1 0.1 0.0 0.2 social contributions 2.2 5.1 1.4 0.0 0.0 0.0 0.0 8.8 grants 65.1 47.4 37.5 14.5 42.6 4.7 59.9 57.6 other revenue 18.3 17.0 22.4 47.3 17.6 38.8 24.1 10.8 property income 2.0 0.3 1.7 2.8 0.0 3.1 0.3 3.4 fines, penalties, and forfeits 0.0 0.0 1.3 1.2 0.0 0.1 0.4 1.6 transfers not elsewhere classified 1.2 0.0 2.9 16.3 0.0 7.0 6.3 3.2 source: calculated based on imf government finance statistics local budgets income was provided with tax revenues, the corresponding indicator of 2015 was only 15% at insignificant (6 percentage points) increase in a share of own non-tax income. essential level of distinction of breakdowns has been noted also in australia – however these changes had single character and they can be connected with shortcomings of statistical grouping (in 2000 share of revenue of local budgets by category “administrative fees” made 32.5% whereas further at approximately identical share of category “other revenue” which part is “administrative fees” its internal structure was not marked out properly in basic data). 4. conclusions consequently, a study on the analysis of the income structure of local government bodies in federative countries makes it possible to draw the following conclusions. 1. the research has shown that among the analysed federal countries, own tax revenue has a significant share (higher than 30% in a breakdown of all revenue) only in belgium, germany, australia, canada, and also in bosnia and herzegovina. the inter-budgetary transfers take the main position in the financing of local budgets in austria, belgium, canada, russia, and brazil. own non-tax receipts in local budgets are significant only in australia and bosnia and herzegovina. table 6 ryabtsev indexes of change of local budgets’ revenue breakdown countries 2005/2000 2010/2005 2015/2010 2015/2000 austria 0.032 0.041 0.022 0.049 belgium 0.039 0.013 0.013 0.042 germany 0.019 0.019 0.048 0.064 australia 0.216 0.055 0.036 0.216 canada 0.014 0.029 0.052 0.010 russian federation 0.543 0.230 0.191 0.709 bosnia and herzegovina 0.152 0.111 0.150* * 2015 by 2005 baltic journal of economic studies 223 vol. 5, no. 3, 2019 a) b) c) d) local 2000 aus rus сhe mex mys can deu usa bel aut 15 20 25 30 35 40 45 l e n g th local 2005 bih aus can сhe deu rus bel aut 20 25 30 35 40 45 50 55 l e n g th local 2010 bih aus can сhe rus deu bel bra aut 10 15 20 25 30 35 40 45 50 55 60 l e n g th local 2015 bih aus can deu bel bra rus aut 15 20 25 30 35 40 45 50 55 60 65 l e n g th figure 1. clusters of countries by local budgets’ revenue breakdown in: a) 2000; b) 2005; c) 2010; d) 2015. 2. in fifteen years only in russia, the opposite type of revenues breakdown sources was created and it demonstrates shifting to the centralization of public finance. essential level of distinction of breakdowns has been noted also in australia. 3. in 2000, the countries’ cluster structure by breakdown sign had obviously expressed group character, but further it evolved from a group structure to the step structure displaying specifics in the formation of local budgets’ revenues in each country. thus, it is clear that in countries that are trying to transform the current system of government by decentralizing it with the increase of responsibility of the local government, it is not expedient to take into account the experience of the russian federation since decentralization also implies a change in the structure of revenues of such bodies. also, by analysing the outcomes of the study, especially those that were identified using cluster analysis, it can be concluded that in the last twenty years, the similarity of income structures of local government bodies in federal countries has become less and the differences have become more prominent. this indicates that there can be no universal way of creating a budget system for countries conducting reforms in this area. each state, taking into consideration the mentality and historical peculiarities of its development, must form its own model of appropriate allocation of financial resources between different levels of executive power, gradually changing it to improve the efficiency of its functioning. the study also provides grounds for arguing that the structure of the budgets revenues of state authorities in different federative countries is also quite different, which indicates the importance of realizing the ultimate goal of reforming the budget system of individual states. the only correct and most effective way, as evidenced by the results of the analysis, does not exist. it is the above-mentioned conclusions that indicate the relevance of the chosen topic of the article and the need baltic journal of economic studies 224 vol. 5, no. 3, 2019 for further research in this area. particularly interesting and one that deserves attention is a correlation analysis between the level of incomes of local government bodies and indicators of regional economic development of separate territories, namely, the gross regional product, the level of average wages, and the unemployment rate. it is also interesting to consider that there may be research into the patterns between the different types of structure of the budget revenues mentioned above and indicators of economic development: which plays a more important role in the development of individual 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(2016). fiscal decentralization, flat administrative structure, and local government size: evidence and lessons from china. public administration and development, 36(3), 198–214. baltic journal of economic studies 37 vol. 5, no. 3, 2019 corresponding author: 1 odessa i.i. mechnikov national university, ukraine. e-mail: olga.gornyak.et@gmail.com orcid: https://orcid.org/0000-0002-4954-8101 2 odesa national polytechnic university, ukraine. e-mail: l.a.voloschuk@gmail.com orcid: http://orcid.org/0000-0002-9692-7438 3 odessa i.i. mechnikov national university, ukraine. e-mail: ganett@ukr.net orcid: https://orcid.org/0000-0002-0866-6638 doi: https://doi.org/10.30525/2256-0742/2019-5-3-37-43 formation of components of economic development of the country and its regions within the framework of decentralization olga gornyak1, lidiya voloshchuk2, ganna prokofieva3 abstract. the reform of economics’ decentralization caused the need to interpret differently the role and importance of regions in the structure of the economic system. the regional economy, along with the national economy, becomes an equal participant in economic activity both on the domestic and foreign markets. the purpose of the article is to study the peculiarities and formation of components of economic development of ukraine and its regions in the process of decentralization of economic power, revealing its tendencies and contradictions, as well as ways of their overcoming. methodology. the article uses general scientific and special methods: generalization, systematization, economic and statistical analysis, and modelling. this allowed us to study the peculiarities of the economic development of ukraine and its regions in the process of decentralization, to identify its tendencies and contradictions, as well as to justify ways to overcome them. results. the analysis of components of economic development in a regional context provides an opportunity to identify the main trends and prospects for the economic development of the country. among the components of economic development, the main role is performed by the economic component since it determines the main trends of the economy of the country and regions. there are offered qualitative and quantitative components’ parameters that provide sustainable economic development in conditions of uncertainty. practical meaning. the implementation of these results will overcome the disproportion of regional economic development in ukraine. equalization of the regional economic development involves the creation of a favourable investment environment in the regions, as the current trends of regional development lead to the fact that regions and other territorial entities become independent gamblers near the state in the global economic space. value/оriginality. the article analyses the factors and consequences of the decentralization of the economy. unlike the existing approaches, this makes it possible to more systematically present the results of economic development at the present stage. key words: economic development, regional economic development, national economy, regional economy, region, components of economic development, decentralization of economic power. jel classification: h70, r10, r50, r12, r13 1. introduction the development of national and regional economies is characterized by ukraine’s peculiarities and is a consequence of the previous stages and specific aspects of the present one. the present stage of the development of the economy is marked, first of all, by the processes of decentralization of economic power. this involves a change in the system of state administration, financing, the economy in the social sphere, as well as shifts in the structure of the national and regional economy, the growth of the role of regions and territories, the provision of self-development mechanisms and, eventually, the improvement the quality of life and well-being in ukraine. in the last three decades, the regions have started to differ significantly from each other in terms of economic development, and the national economy is characterized by unevenness, disproportionality, and bifurcation of economic development (prokofieva, 2018; filippenko, baltic journal of economic studies 38 vol. 5, no. 3, 2019 2006). taking into account the contradictory effect of economic development factors at different levels, it can be noted that such characteristics have been formed over a sufficiently long period, which complicates the provision of prerequisites for sustainable economic development at the current stage. in recent years, the reduction of these differences between regions, bringing them closer in terms of the level of economic development, has become much more difficult, while the war is carried in the eastern regions of ukraine and the crimea is occupied by russia. but, considering the growing role of the regional economy, there have already been formed objective conditions for more comprehensive development of the national economy and regions. in this process, besides objective processes, the important role is played by the state, its scientifically based policy. in ukraine, there were adopted the laws on decentralization of power and granting of independence to regions, the realization of which will eventually ensure harmonization of economic development of regions (voluntary association of territorial communities, 2015). the realization of decentralization principles can be confirmed by such results as the formation of united territorial communities (hereinafter named as utc): in 2015, there were created 159 communities, and in 2018 – 874 of them. the legal capacity of the communities, through which the decentralization is being implemented, according to analysts, is related to their capacity for “strategic development based on the use of all available resources” (zhalilo et al., 2018). in view of the fact that only 3.9 thousand of 10.9 thousand communities were united, that is 60.4% of the communities have not been united yet, so the attention should be paid to the further development and formation of capable communities, to study the causes and possibilities of decentralization potential’s realization. the processes of creation of utss should be intensified by effective interaction between state authorities and local self-government bodies. in addition, the role of regional government should also increase steadily. a large number of works by leading ukrainian and foreign economists are devoted to the issues of economic development of the national and regional economy. among them there should be mentioned, first of all, such economists as a. s. galchynskyi, v. haiets, d. geld, d. golblat, ya. a. zhalilo, d. m. maier, e. macgrew, d. rauch, j. perraton, t. protsenko, v. f. semenov, o. p. tyshchenko, a. filippenko and others. their works provide theoretical concepts and methodological principles for the analysis of economic development both in the developed and in the transformational economies. but there is a need for further analysis of the peculiarities of the economic development of the transformational economy in a context of decentralization. 2. components of economic development of the national and regional economy the process of decentralization of economic power is based on an objective analysis of the current state of development of the national and regional economy of ukraine. regions of ukraine differ in terms of natural conditions, social and economic development, as well as by ethnolinguistic, historical, psychological, religious, and cultural characteristics. depending on a particular feature, ukraine’s economy is divided into regions. thus, according to historical and economic characteristics, there are defined old-industrial, agro-industrial, and transportrecreational regions; according to the economicgeographical position, there are distinguished seaside, prydniprovsky (near dnipro river), border-mountain and plain regions (semenov, protsenko, 2009). this classification is not yet recognized by the official statistics because statistical data is grouped based on the division of the ukrainian economy into the regions, which is obsolete and does not reflect the current trends in the region’s economy. in modern conditions, an important role is played by the spatial factor, which is the result of the interaction of economic agents located in the territory. the economic development of the national economy and regions under the influence of the spatial factor is ensured not through a competitive but through cumulative growth. agglomeration effects, effective urban structures, favourable investment climate in the region, level of regional infrastructure development and others act as spatial factors (held et al., 2003). the process of cumulative growth involves the action of all factors that determine the peculiarities of regional development. the results of their actions can be both positive and negative. in determining the level of cumulative growth, it should take into account the impact on productivity in the region of the economy from the scale of production, technological progress, the structure of production, the favourability to innovations in the leading industries of the region. cumulative growth supposes self-development of the region through the use of the region’s competitive advantages, internal factors, and opportunities for interaction with other regions (maier et al., 2003). using this approach, the national economy evolves itself in the process and via interaction between regions’ economies, eliminating the competitive allocation of resources between regions, in other words, the philosophy of the organization of national and regional economies is changing (zhalilo et al., 2018). economic development is a complex multilevel process, the study of which involves an analysis of its essence, structure, factors, and consequences. the structure of economic development can be represented as an organic combination of its components: geographical, demographic, economic, financial, social, environmental, and institutional. their characteristics are presented in table 1. baltic journal of economic studies 39 vol. 5, no. 3, 2019 the analysis of the level of economic development in ukraine involves solving the problems of uneven distribution of incomes between regions, the difference in the rates of growth in production, unemployment rates, and social indexes. the policy, economic and social history of ukraine, and the complexities of systemic changes must also be taken into account. there are many variants of classification of ukrainian regions in the literature in terms of the level of social and economic development. these classifications are already included in the textbooks (semenov, 2006; semenov, protsenko, 2009). most researchers believe that all regions of ukraine are represented by three groups: developed regions; regions with an average level of development; and regions with a low level of development, which, in their turn, are divided into backward and depressed. according to the classification of the institute of reforms, in the group of developed regions of ukraine, there are distinguished such regions with a high development level as zaporizhzhia and lviv regions (8% of the total number of regions), as well as regions with a very high level of social and economic development, namely: dnipropetrovsk, donetsk (before the beginning of hostilities in 2014) and kharkiv regions (12%). thus, the group of developed regions occupies 20% of the total number of regions. the group of regions with an average level of development (12%) includes kyiv and odesa regions, and crimea (prior to the annexation). regions with very low development (40%) include such regions as volyn, zhytomyr, zakarpattia, kirovohrad, rivne, ternopil, kherson, khmelnytskyi, chernihiv, and chernivtsi. the low level of development (28%) is typical for such regions as vinnytsia, ivano-frankivsk, luhansk, poltava, sumy, and cherkasy (semenov, protsenko, 2009). this classification has certain disadvantages because the level of development of some areas is not accurately measured. for example, poltava region belongs to a group with a low level of development, although, according to all social and economic indexes, it should be included in regions with an average level of development. 3. geographical and demographic component of regional economic development of ukraine the regions of ukraine differ in size and population number, which forms the natural basis for diversity and uneven social and economic development. speaking about the territory size, the largest variance were between odesa (33.3 thousand square kilometres) and chernivtsi (8.1 thousand square kilometres), which is 4.1 times, and as to the population number – 5.2 times – between donetsk region (4691.9 thousand people) and chernivtsi region (911.8 thousand people) (regions of ukraine 2016, 2017), although the population of donetsk region has significantly decreased over the past five years in connection with military actions, which led to a sharp decline in the population of the donetsk region, both due to migration and as a result of hostilities. the analysis of indexes of a geographical and demographic component of regional economic development of ukraine shows the following results. according to the size of the territories, the largest regions are odesa (33.31), dnipropetrovsk (31.914), chernihiv (31.865), kharkiv (31, 415), zhytomyr (29.832), poltava (28,748), kherson (28,461), and kyiv (28,131). the smallest regions are chernivtsi (8,097), zakarpattia (12,777), ternopil (13,823) and ivano-frankivsk (13,9). table 1 components of economic development of the national and regional economy and their main characteristics demographic and geographic economic financial social environmental institutional 1. the size of the territory 2. population 3. indexes of mortality and fertility 4. the number of the working-age population 5. population density 6. ethno-cultural features 7. level of urbanization 1. gross domestic product and its dynamics 2. the share of grp in gdp of the country 3. investment climate and dynamics of investments 4. sectoral structure of national and regional economy and trends of its development 5. foreign economic activity and dynamics of direct foreign investments 6. national and regional markets, their structure and capacity 1. financial resources of development and their dynamics 2. structure of financial resources 3. the economic activity’s crediting of financial enterprises 4. financial resources of insurance companies 5. financial resources of pension funds 6. household finances, their structure and dynamics 1. the level of life and welfare of the population 2. structure and dynamics of incomes and expenses 3. poverty level 4. social problems of development of the country and regions 5. level of employment and unemployment 6. human development index 1. the ecological stability of the country and the region 2. average life expectancy 3. pollution of territory, water and air 4. urbanization processes and their consequences 5. structure of production in the context of the ecological component 1. institutions and bodies of economic power 2. institutions of real infrastructure 3. institutions of financial infrastructure 4. public institutions 5. forms of organization of national and regional economies source: developed by the authors baltic journal of economic studies 40 vol. 5, no. 3, 2019 the calculation of the population growth rate indicates a reduction in its number in vinnytsia, zaporizhzhia, kirovohrad, luhansk, and mykolaiv regions, with the largest decrease in 2016 and 2017. also, the population’s decline is observed in kharkiv, kherson, poltava, sumy, khmelnytskyi, and cherkasy regions. at the same time, the highest rates of population decline are typical for chernihiv and donetsk oblasts, although the reasons are different for these areas. population declines in ternopil region as well, the population decline rate in 2015 was 0.39%, in 2016 it was already 0.61%, and in 2017 – 0.65%. in odesa region, the growth rate is negative in 2011, and during 2014–2017, while positive values are observed in 2012 (0.29%) and in 2013 (0.05%). other regions have more positive dynamics. according to the growth rate, the population growth had been increasing by 2015 in volyn, zakarpattia, ivano-frankivsk, and chernivtsi regions. in the rivne region, the growth rate becomes negative only in 2017 (-0.18%). in kyiv region and kyiv city, population growth is increasing throughout the period under review. herewith growth rates in kyiv city are positive, however, declining from 2013 (regions of ukraine, 2016, 2017). 4. economic component of regional economic development of ukraine among the economic indexes that reflect the level of economic development in ukraine, there are defined the dynamics of social and economic development, the state of the labour market, investment climate, and foreign economic relations. the main economic problems of ukraine’s development are the intensive aging of fixed assets. the share of equipment that has been operating for over 20 years is constantly increasing, which leads to an increase in repair costs. according to the calculations of economists, about 1 million workers are directly engaged in repairs in ukraine, and, taking into account indirect works, 3 million workers, that is, every sixth employee of the manufacturing industry (semenov, protsenko, 2009). the problems of formation of the modern territorial structure of production, restrictions for the construction of new industrial enterprises in large cities, the use of opportunities for small and medium-sized cities, as well as urban-type settlements, where specialized enterprises, branches, and business units should be located, are remaining important issues. these problems can be successfully solved in the process of decentralization since local authorities receive wider powers and larger financial resources. the dynamics of social and economic development is fundamentally ensured by industries that manufacture products mainly for the domestic market. these are the building activity, machine construction, telecommunications, and food industry. particularly the influence of these industries is displayed in the conditions of mutual trade bans of ukraine and russia. the export-oriented industries, such as the metals and chemical industries have also contributed significantly to the development dynamics, but during recent years, the situation has changed both in the country and in world markets, and thus the positive impact of these industries has significantly decreased. among the export-oriented industries that continue to increase their potential and positively influence on economic dynamics, there are singled out the agricultural industry, high-tech industries, and light industry. the dynamics of industrial production depends primarily on the specialization of the regions. thus, in the eight regions of ukraine (donetsk, dnipropetrovsk, zaporizhzhia, ivano-frankivsk, luhansk, mykolaiv, rivne regions), the industry has a resource-raw material direction. in them the products of the fuel industry, iron and nonferrous metal industry, electric power industry occupies more than 50% of industrial production, and their share in the industry of ukraine amounts to 60% (semenov, protsenko, 2009; regions of ukraine, 2016, 2017). at the same time, the regional structure of the industry is outdated. so, in the list of industries, hightech industries are not singled out. the index analysis of the economic components of regional economic development makes it possible to draw the following conclusions. during 2010–2016, the indexes of the gross regional product have a positive dynamic. growth of the grp (gross regional product) takes place in all regions, except donetsk and luhansk, due to the temporary occupation of a part of these territories. at the same time, the decreasing of the grp occurs in 2013 in the zakarpattia, zaporizhzhia, and kyiv regions. this becomes evident in calculating the growth rates of this index (zakarpattia – (-0,01869), zaporizhzhia – (-0,86817), kyiv – (-1,05077)). in addition, during this period, the growth rates on the whole territory of ukraine are falling, which can be related to the political situation in the country during this period. however, in subsequent years, we can observe the increase in growth rates in most regions in comparison with the previous years. the calculation of the grp share in gdp (gross domestic product) shows that the largest significant share has dnipropetrovsk region (2010 – 10.76%; 2016 – 10.25%), donetsk until 2014 (2010 – 11.95%, 2016 – 5.76%) and the kyiv city, which has the largest share in gdp (2010 – 18.22%; 2016 – 23.44%). also, kharkiv, kyiv, luhansk, lviv, odesa, and poltava regions have a significant percentage. the smallest share of grp in gdp – chernivtsi (2010 – 0.92%, 2016 – 0.89%), ternopil (2010 – 1.18%, 2016 – 1.30%), zakarpattia (2010 – 1.42%, 2016 – 1.36%), and volyn (2010 – 1.34%, 2016 – 1.35%) regions (regions of ukraine, 2016; geits, oleksandrova, bazhal, 2007). a negative trend with long-term consequences is the irregular distribution of investments between regions baltic journal of economic studies 41 vol. 5, no. 3, 2019 and the decrease of capital investment index over the past five years. for the period of 2010–2018, absolute capital investments increased from 189,061 million uah to 219,420 million uah, that is 116.05%, but the growth rates of investments in 2012–2013 are negative, respectively -8.56% and 12.19%. from 2014, they gain positive values but almost do not exceed the growth rates in 2010–2012 (semenov, 2006). among the regions under this index in 2016, kyiv and dnipropetrovsk regions (33,169.0 million uah) gained the lead and, among the cities, kyiv gained the lead (106,295.5 million uah); the lowest index was in chernivtsi region (2,668.8 million uah). the difference between them was decreased, respectively, by 12.5, 12.4, and 39.8 times. this is an objective basis for further disproportions in the economic development of the regions. capital investment indices were the lowest in donetsk (44.0%) and luhansk (39.2%) regions where a military operation is taking place. this index was higher in khmelnytskyi (102.6%), zakarpattia (94.6%), volyn (89.5%), zaporizhzhia (89.8%), sumy (89.1%), lviv (88.5%), poltava and kherson (86.1%), rivne (80.7%), cherkasy regions (80.3%) (regions of ukraine, 2016, р. 191). the mentioned regions in the total volume of capital investments occupy a small part but the dynamics of investment processes in them is higher than in areas with a significant amount of investment. it would be possible to consider this as a positive moment if it was happening against the backdrop of growth, rather than the investment bust. since 2017, volumes of investments have decreased significantly in all regions, which indicates a deterioration of the investment environment in ukraine. the significant share of foreign investments in the structure of capital investments for the whole of ukraine increased in 2010–2014 from 2.1% to 2.6%. the highest index was in kyiv region – 22.1%, in ivano-frankivsk region it was 5.3%, in lviv – 2.0%, in rivne – 1.3%, but starting from 2017, these indexes haven’t almost changed, and some of them even has decreased (regions of ukraine, 2016). indexes of the and exports volume show a positive balance during the analysed period in vinnytsia, dnipropetrovsk, zhytomyr, zaporizhzhia, kirovohrad, mykolaiv, poltava, rivne, sumy, kherson, and cherkasy regions. the somewhat different situation takes place in other regions. during the analysed period, there is a domination of imports over exports in kyiv, lviv, kharkiv regions and in kyiv city. however, in the volyn, zakarpattia, ivano-frankivsk, odesa, ternopil, khmelnytskyi, chernivtsi, and chernihiv regions, import dominated until 2013–2014. although it is generally accepted that the domination of exports is a positive phenomenon, in this case, the cause of the change in dynamics is crisis processes in the country, which led to importers distrust. in the future, the reduction in imports has a positive impact because it stimulates national production. the growth rates of exports and imports were negative during 2013–2015. in addition, it is important to note that in a significant number of regions, the negative import growth rates have appeared since 2012 (volyn, dnipropetrovsk, donetsk, zhytomyr, zaporizhzhia, ivano-frankivsk, mykolaiv, rivne, sumy, kherson, and chernihiv). the index of labour productivity gains the lowest growth rates in 2013–2014 on the whole territory of ukraine. in subsequent years takes place an increase in labour productivity. the average standard deviation indicates how much in the mean specific values differ from their average meanings. it is a square root of the variance. the smaller the variance, the less the deviation from the average. the calculation of these indexes showed the following results. the average value and the average standard deviation are confirmed by our preliminary conclusions about the share and volume of grp in gdp of ukraine and allow hereinafter dividing the regions into those with the largest share in the grp, the average, and the smallest. the average investment value indicates that the largest amount of investments comes to kyiv city, dnipropetrovsk, kyiv, donetsk, lviv, odesa, and kharkiv regions. at the same time, the chernivtsi, chernihiv, kherson, and zakarpattia regions receive the smallest part of investments. according to the calculated average values of exports and imports, the largest volumes of exports come from kyiv city, dnipropetrovsk, donetsk, and zaporizhzhia regions. at the same regions, as well as in the kyiv region, the volume of imports is also the largest one. however, there is observed the imports domination in kyiv city and in kyiv region, whereas in other regions, the domination of exports is observed. the calculated dispersion values for all indexes in all regions indicate significant deviations from the average values. this may be a demonstration of disproportion in the dynamics of the economic components of ukraine regional development. economic phenomena in the country are not stable and predictable. the industrialized regions are investment attractive, as there is a direct dependence between the volumes of industrial production, capital investments, and foreign investments. in such regions as dnipropetrovsk (16.5%), donetsk (12.4%), zaporizhzhia (6.6%), poltava (5.6%), kharkiv (4.9%), and kyiv city (24.6%) concentrates 70.6% of industry products and services. in the named regions and kyiv city, the capital investments are accounted for 51.1%, including foreign one (regions of ukraine, 2016, p. 190, 205). investments, including foreign one, are invested mainly in leading industrial sectors, while other industries are on the down-grade and not receive adequate funding. the lack of strategic foreign investors and the weak investment activity of ukrainian enterprises are connected with unfavourable investment climate, baltic journal of economic studies 42 vol. 5, no. 3, 2019 mechanism incompleteness of the capital market of the national and regional levels, and the inconsistency of the state investment regional policy. in addition, the regional economic development is constrained by the low level of regional competition, the deepening of regional disproportion, the competition for foreign investments between the state and regions, as well as taking into account by investors not only the rational distribution of production but also the level of development of market infrastructure, possibility of the lobbying of regions interests in government agencies. the disproportion in regional economic development can be overcome with the help of structural changes that are most needed for regions with the domination of agricultural and resources industries. they need government support for the process of structural changes, the solution of social problems, and the development of new industries and spheres. in the process of decentralization, these problems are also solved by incorporating local development mechanisms and realizing the economic interests of regions and communities. international business activity of the regions also contains significant disproportions. the part of such regions as dnipropetrovsk, donetsk, zaporizhzhia, and kyiv in all ukrainian exports is more than 50%. at the same time, the structure of exports is dominated by goods with a low share of added value: ore, metal products, products of the chemical industry, cereals. these regions also account for a larger share of imports. while the share of such regions as zhytomyr, kirovohrad, rivne, ternopil, kherson, khmelnytskyi, chernivtsi, and chernihiv amounted to less than 1% (regions of ukraine, 2016, 2017). the result of these processes is the leadership of industrialized regions of innovative development since they are concentrated by the scientific institutions, highly-qualified personnel, developed industrial and non-production infrastructure, institutes of development and support of entrepreneurship. as a result, a potential basis is created for effective development policy of these regions, while in the most regions, even under decentralization, it is under challenge, as previous development has conserved problems that need to be resolved before starting the mechanism of modern economic development of these regions. 6. conclusions equalization of the regional economic development involves the creation of a favourable investment environment in the regions, as the current trends of regional development lead to the fact that regions and other territorial entities become independent gamblers near the state in the global economic space. some regions are actively involved in international economic relations. the regions of ukraine are not developed to such level, and the disproportions that exist between the developments of the regions do not contribute to the dynamics of their economies. the low competitiveness of most regions of ukraine leads to the fact that even competitive regions do not provide high rates of development. decentralization processes that began after the adoption of relevant laws in 2015 cannot solve all the accumulated problems. the financial situation in the regions is also characterized by significant disproportions and since the process of decentralization is concentrated primarily on financial decentralization, in the final analysis, the unevenness and disproportionality of regional economic development may be increased, especially in the first stages of a real 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(2013). formuvannya modeli ekonomichnoho rozvytku ukrayiny u pislyakryzovyy period [formation of model of economic development of ukraine in the post-crisis period]. kyiv: niss. (in ukrainian) zhalilo, ya. a., makarov, g. v., danylyak, o. o., rudenko, a. f. (2018). detsentralizatsiya vlady: yak zberehty uspishnist v umovakh vyklykiv? [decentralization of power: how to maintain success in a challenging environment?]. kyiv: niss. (in ukrainian) voluntary association of territorial communities: law of ukraine dated on february 5, 2015, no. 157-viii. retrieved from: https://zakon.rada.gov.ua/laws/show/157-19 (accessed 05 april 2019). baltic journal of economic studies 116 vol. 5, no. 4, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: sergeykozachenko@ukr.net orcid: https://orcid.org/0000-0002-8469-7081 2 national scientific center “institute of agrarian economics”, ukraine. e-mail: alexpanadiy@gmail.com orcid: https://orcid.org/0000-0002-4771-812x 3 vinnytsia national agrarian university, ukraine. e-mail: chudaklina@ukr.net orcid: https://orcid.org/0000-0002-9687-5148 doi: https://doi.org/10.30525/2256-0742/2019-5-4-116-121 applied aspects of the distribution of spendings for management accounting and control anna kozachenko1, oleksandr panadiy2, lina сhudak3 abstract. the article deals with questions of distribution of expenses of agricultural producers of goods for the purposes of management accounting and control. methodology. in the course of the research, the arguments in support of the proof of the managerial nature of accounting of expenses and calculation of the prime cost of agricultural products are advanced. it causes the shift of emphases of management accounting to this section as to one of the key instruments of management of expenses of the agricultural enterprises. results. expense management on the basis of accounting tools is the main leverage over the administrative strategy of agrarian producers in the conditions of strengthening of the volatility of the market, aggravation of the competition, and the growing influence of the world prices for products of agricultural production on pricing at the subjects of the agrarian market. at the same time, cost accounting and calculation of product costs make a separate subsystem of management accounting, based on a combination of various elements of a method of accounting. this subsystem consists of its internal divisions and parts, and a segment of cost distribution for the maintenance of machines and equipment of agricultural enterprises is investigated in the article. in particular, the article demonstrates the statement about the discrepancy of the actual state of distribution of these expenses to the order provided by ukrainian normative and methodical documents in the field of accounting, and the key reasons of this negative phenomenon are being established. the first of such reasons is insignificance of sanctions for violation of accounting legislation, which exists in ukraine, and the international accounting rules, which according to the established statutory requirements or their own initiative are used by agricultural producers. the second reason lies in an optional character of methodical approaches, developed at the level of the relevant ministries and departments, to the accounting of expenses for cars and the equipment, at the low initiative of accountants with the postsoviet style of thinking that is fatal to the idea of the reliable distribution of these expenses. practical implications. to resolve the problem of reliability of information about costs of machines and the equipment negotiated in prime cost of agricultural products (works, services), an automatic algorithm of distribution of these expenses is offered, which is supposed to be realized via the corresponding accounting software. the point of use of the software is caused, on the one hand, by considerable by labour input of the process of accumulation and allocation of costs on the offered algorithm, and on the other hand, by technical capabilities of the agrarian enterprises which, according to data of the last researches in this sphere, point at the almost completed process of automation of accounting in agriculture on the basis of computer accounting programs. value/originality. the methodological basis of such an algorithm is created by the developed suggestions for improvement of the distribution of costs for machines and equipment maintenance by ensuring the personified accounting of expenses on every object of these means of labour. it is proposed to carry out the further distribution of accumulated expenses on direct fuel consumption expenses on these objects when using active machines and mechanisms in terms of directions of expenditure and in proportion to productivity when using motorless mechanisms. key words: cost accounting, cost calculation, accounting of machines, equipment accounting, management accounting, control. jel classification: m40, m41, m49, o21 baltic journal of economic studies 117 vol. 5, no. 4, 2019 1. introduction according to standard approaches, cost accounting and control and cost calculation are the main elements of management accounting. this is justified since the official cost accounting documents in international and ukrainian accounting systems do not include precise step-by-step algorithms for such accounting and cost distribution. even the most creative accountant will find such algorithms neither in the domestic accounting standard 16 costs nor in the international accounting standard 2 inventories. this means that the functions and full powers of developing the methods of accounting and costing calculation in some enterprises are their own prerogative. that is why these questions belong to the field of managerial accounting as a direct complement to standardized accounting. however, the influence of the soviet and post-soviet system of social relations, which shows itself in the reluctance of domestic accountants to develop their own accounting and calculation methods, which is based on the expectation that such a state will provide such development, results in the official methodological instructions issued by various ministries and other executive bodies in ukraine with regard to cost accounting and costing calculation. however, today, more and more large enterprises start to work on the development of their own methods of accounting for costs and calculations. the methodical recommendations issued by various authorities contain developed and summarized on the basis of the research of achievements of best practices approaches to cost accounting and calculation of the cost price of products, works, and services in certain areas of the national economy. these approaches are selected for logic, the stage of public discussion, and further testing at pilot enterprises. in ukraine’s agriculture, cost accounting and costing of products, works, and services of enterprises of the area are contained in the methodological recommendations on planning, accounting and calculation of pricing of products, works, and services of agricultural enterprises, which were approved by the ministry of agrarian policy and food of ukraine in 2001 (nakaz pro zatverdzhennja metodychnykh rekomendacij z planuvannja, obliku i kaljkuljuvannja sobivartosti produkciji (robit, poslugh) siljsjkoghospodarsjkykh pidpryjemstv, 2001). implementation of the requirements of these methodological recommendations provides the management services of agrarian enterprises with information on the costs of their various re-parts and incisions. consequently, at a certain level of experience and organization of accountants, the requirements of the methodological recommendations are necessary for their implementation in the day-to-day work of agricultural enterprises. but the question remains whether there is a correlation between the real approaches to cost accounting and agricultural cost accounting in official recommendations. its relevance is valid given two points, related not only to the accounting but also to the control: 1. the insignificance of fines and other penalties for violating the accounting procedure, which solves the hands of accountants in order not to take care of the implementation of complicated accounting rules in practice. 2. optional nature of the methodological recommendations, including in terms of cost accounting and calculation of the cost of production, works, services of agricultural enterprises. 2. a brief overview of the literature management accounting in agriculture in ukraine in its conceptual positions was the subject of research by such scientists as v. m. zhuk (zhuk, 2009), v. b. mossakovskyi (mossakovsjkyj, 2013), etc. the accounting and distribution of indirect costs in agricultural enterprises were investigated by j. p. ishchenko (ishhenko, 2005), t. y. kodimskaya (kodymsjka, 2013), t. m. ostapenko (ostapenko, 2013), o. l. primachenko (prymachenko, 2011), etc. accounting of maintenance costs for machinery and equipment was the subject of o. v. borovich (borovych, 2009), s. o. mikhailovina (mykhajlovyna, shajko, oljadnichuk, 2015), l. i. stadnik (stadnik, 2015). however, these publications do not include studies on the compliance of the accounting of these costs in agricultural enterprises with methodological requirements and scientific proposals for its improvement. in foreign practice, among the latest researchers on management accounting in agriculture, it is necessary to distinguish fatih abubakar, zeki dogan, lisa jack, philipp johnson, and nora zardi. these authors were developing management accounting in the agrarian sphere from sociological, fundamental, and applied positions; however, they do not possess improved methodology and concrete methodical approaches to the accounting of expenses and calculation of product cost, especially in a segment of costs for machines and equipment maintenance. therefore the purpose of the article is justification of need of putting accounting and distribution of costs for maintenance of machines and equipment of the agricultural enterprises in order which is required by the standards and methodical recommendations on accounting of expenses and calculation of product cost (works, services) in agriculture and also development of suggestions for improvement of this accounting and distribution with identification of expenses on objects of capital assets used for production of agricultural products, for improvement of management and control of prime cost of agricultural products. baltic journal of economic studies 118 vol. 5, no. 4, 2019 3. the results of justification of improvement of accounting and distribution of costs for machines and equipment maintenance one of the proofs of the reliability of the accounting data on the costs of agricultural enterprises and the cost of agricultural products is a regulation, according to which transfers of the cost of these products carries out costs for the maintenance of working machines and equipment. according to the existing methodological approaches, these costs are spent on the accounts of “production costs” and “total production costs”. in the account “production costs” in the context of analytical accounts, wages the cost for the maintenance of those funds that are directly used in the production of one particular culture. if machines and equipment are used to grow several crops, the cost of their maintenance is kept on the account of “total production costs”. at the same time, the last account is accounting for other costs that cannot be directly attributed to the cost of agricultural products, and existing methodological recommendations for each type of such total production costs include their own separate distribution bases. for example, for the cost of renting land, the base of distribution is the area of these lands, for the cost of salaries of general staff – direct labour costs for the objects of accounting in the account “production costs”, etc. for the costs of machines and equipment, such a base is the number of machine-days of work and conditional reference hectares for a machine-tractor park or ton-kilometres for a motor-vehicle park. but in practice, accountants often do not want to determine the cost of production (works, services) for labour-intensive algorithms. this leads to the fact that all expenses that are subject to distribution are transferred to the cost using a single universal basis. this describes the distortion of cost indicators in the context of objects. a practical example of the foregoing can be considered the definition of the cost of production of one of the agricultural enterprises of the kyiv region. this enterprise distributed all indirect costs, including expenses for the maintenance of machinery and equipment, in proportion to the area of agricultural land occupied by the respective crops. there were no aggregated data on the quantitative indicators of the work of the vehicle fleet and machinetractor park at the enterprise. therefore, data for the calculation of the amount of distributed costs were used for the article “fuel and lubricants” for each crop. the choice of this indicator is grounded on the fact that it more universally characterizes the intensity of the use of machines and equipment. therefore, the distribution of the cost of maintaining these machines for fuel consumption is much more logical than for the area in the context of crops. after all, the cultivation of different crops involves a different amount of technological operations. in addition, at the disposal of the same company are often lands of different viscosity, litter, etc. that is why crops with a much smaller crop area often require much more technology resources than crops with a larger crop area. and this, in turn, is reflected at the level of costs of fuel and lubricants. the results of the recalculation of costs and the comparison of their sums by crops before and after transfer are presented in table 1. this example is far from being unitary. similar distortions with the wrong choice of distribution centres for indirect costs occurred at the enterprises of vinnytsia, kyiv, odesa, and other regions of ukraine. observing this fact, it must be admitted that reliable information on production costs and cost of agricultural products is neither owned by the state nor by owners of agricultural enterprises. it is impossible to solve this problem through administrative means. ukrainian agricultural enterprises are already overloaded with an excessive number of inspections by official bodies. this leads to the conclusion that in order to ensure the correct allocation of costs to the cost of products (works, services), it should be anticipated in automatic mode. it is possible to realize this by laying the appropriate software algorithms for allocating costs to the accounting products provided for table 1 recalculation of the distribution of costs for maintenance of machines and equipment at the enterprise “x” for crops crop amount of actually distributed costs for cultivating areas, uah the total cost of spent fuel, uah (the sum of direct costs for the article “pmm” the share of distribution by fuel consumption the amount of distributed costs overcharge (+) or understatement (-) of actual costs of crops compared with the estimated, uah (3-5) 1 2 3 4 5 6 wheat 743454,19 235895,58 0,15146772 589577,54 +153876,65 sugar beet 537155,39 393693,53 0,252789227 983964,45 -446809,06 sunflower 1568649,41 431946,16 0,277351106 1079569,85 +489079,56 soybean 953645,42 451925,60 0,290179834 1129504,78 -175859,36 winter barley 89525,90 43937,50 0,028212114 109813,69 -20287,79 total 3892430,31 1557398,37 1,0 3892430,31 х source: own calculations baltic journal of economic studies 119 vol. 5, no. 4, 2019 accounting automation. this offer has sense even for the reason that accounting software, according to scientists, is used by approximately 90% of accountants of agricultural enterprises (pavljukovecj, 2014). given the availability of a clear, automated tool for allocating the cost of crops to accountants, such a distribution will not be a big challenge. however, in order to implement such automation algorithms, it should be recognized that the current procedure for distributing costs for maintenance of machinery and equipment of agricultural enterprises between the objects of accounting provided for by the methodological documents of the ministry of finance of ukraine also needs to be improved and revised. accounting for the costs of maintaining machines and equipment in a generalized manner for all homogeneous objects also does not ensure the accuracy of assigning these costs to the relevant objects of costing. according to the results of the reporting period, various objects of fixed assets have different performance, but for objects of cost accounting, these costs are averaged over the method. this statement is illustrated quite simply. for example, two tractors of the same capacity are in operation at the plant, but one of them is domestic, and the other one is imported. the monthly amount of expenses for maintenance of the tractor purchased abroad is 30000 uah, domestic – 7000 uah. at the same time, for a particular reporting month, the purchase of a tractor abroad had a production of 500 hectares, and domestic – 600 hectares. the works were carried out: under the crop of wheat – 300 hectares, under corn crops – 200 hectares, soybean crops – 600 hectares. the costs of maintenance of tractors were carried out on a separate subaccount of the account “total production costs” and carried by the objects of cost accounting in proportion to the conditional reference hectares (table 2). according to the results of the analysis of the production of these machines, according to the summary data of the work of the machine-tractor park, it was established that the imported tractor has performed on works on wheat 100 hectares, on works on corn – also 100 hectares, on soybeans – 300 hectares. if the maintenance costs of these machines were distributed among crops in proportion to the production of each of the cars, the rates of these costs would be (table 3). according to the data of the table, the sum of costs on the supply of agrimotor compared with the first variant (table 2) differs a lot. when distributing costs with its identification on each agrimotor, there is also distribution of costs on maintenance of machines, for instance, on wheat are 13169-10101=3068 uah by more accurate distribution than by general. how is it possible to provide with the more exact distribution of costs on the maintenance of machines and equipment? accountants should open “total production costs” sub-account “maintenance of machines and equipment”, in its limits-analytical cards-accounts on each object of the main means. these cards-accounts are suggested to be elaborated in such structure: 1. first table: it accumulates the costs of maintaining each specific machine in a layer of expenses (depreciation, repair costs, other maintenance costs). 2. second table: the display of fuel consumption by machine (mechanism) in terms of directions of fuel table 2 distribution of costs for maintenance of tractors crop amount of completed works, hectares percentage of distribution on conditional reference hectares, % distribution of expenses for the maintenance of a tractor, uah 1 2 3 4 wheat 300 27,3 10101,00 corn 200 18,2 6734,00 soybean 600 54,5 20165,00 total 1100 100,0 37000,00 source: own calculations table 3 distribution of costs for maintenance of tractors with identification of costs for each of them crop imported agrimotor domestic agrimotor total costs, uah (4+7) amount of completed works, master hectares percentage of distribution, % sum of distributed costs, uah amount of completed works, master hectares percentage of distribution, % sum of distributed costs, uah. 1 2 3 4 5 6 7 8 wheat 200 40,0 12000,00 100 16,7 1169,00 13169,00 corn 100 20,0 6000,00 100 16,7 1169,00 7169,00 soybean 200 40,0 12000,00 400 66,6 4662,00 16662,00 in all 500 100,0 30000,00 600 100,0 7000,00 37000,00 source: own calculations baltic journal of economic studies 120 vol. 5, no. 4, 2019 consumption (directions of work execution). this accumulation is required to determine the proportion of distribution of costs from table 1 between cost accounting objects. fuel costs are easily tracked according to the records of tractor drivers, combine harvesters’ records, truck traffic letters, passenger car travel letters. 3. third table: displays the amounts of distributed costs from table 1 according to the proportions defined in table 2, with corresponding allocation of expenses from the account “total production costs” to the accounts of expenses accounting for the objects that were consumers of the services of these machines. 4. conclusions the results of the study carried out in this article indicate the following: 1. the current practice of distributing the costs of maintaining machines and equipment in agrarian enterprises does not correspond to the rules established by the ministry of finance of ukraine. 2. the distorted distribution of costs for the maintenance of machines and equipment of agricultural 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(2009). development of management accounting application at hungarian agricultural enterprises: abstract of the doctoral (ph. d.) dissertation. godollo, pp. 12–17. baltic journal of economic studies 251 vol. 4, no. 5, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 vadym hetman kyiv national economic university, ukraine. email: shmatova_85@ukr.net 3 vadym hetman kyiv national economic university, ukraine. email: vitalii.cherneha@kneu.edu.ua doi: https://doi.org/10.30525/2256-0742/2018-4-5-251-255 legal description of the factoring contract in romania svitlana pylypenko1, yuliia udovenko2, vitalii cherneha3 abstract. in light of the fact that capital is a major factor in production, the development of entrepreneurial activity becomes impossible without considering the financial market and the resources provided to its subjects. regardless of the degree of development, any entrepreneurial activity is engaged in direct contact with financial markets, in particular through institutions that act as intermediaries in raising money and services. the development of a solid basis for doing business requires understanding the rules of functioning of the financial system and its mechanisms. considering the current economic situation, as well as the procedure for granting loans by banks, which is gradually becoming more complicated, while the national and international markets require capital movement, factoring becomes the most accessible instrument and only source of financing, with which the latter increases concurrently with sales. therefore, the aim of this article is to study the legal nature of the factoring contract in romania: to identify its regulation object, functions, types, legal features, and other specificities to introduce the positive experience of foreign colleagues to the legislation of ukraine. methodology. it is proved that the current legislation concerning the issue of factoring in ukraine should be improved because in our country the factoring market is still not very common in spite of its rapid development in the world. moreover, there are no thorough studies on factoring in general and a factoring agreement in particular; some issues on this topic have been considered only in scientific articles. therefore, the authors refer to the legislation of romania to determine those features of legal regulation, which have contributed to the rapid and effective development of this institution in this country, and to make appropriate proposals for improving domestic legislation with the use of positive foreign experience. results. the article suggests a general description of the factoring contract in romania: the concept of this agreement is revealed; the object of its regulation, as well as implementation of the factoring contract, is determined; its functions and features are described; the parties to the agreement and their legal status are determined. the specificities that have contributed to the rapid enlargement of factoring in romania are given particular consideration. practical implication. the factoring agreement as an operating instrument for credit institutions is especially important due to its constant practical applicability that enables to choose the optimal commercial activity both at the national and international levels. relevance/originality. in ukraine, given the need for further development of entrepreneurial activity, the issue of increasing total factoring operations is important. the implementation of positive international experience on this issue in domestic legislation is essential for this stage. key words: factoring, factoring contract, receivables, client, factor, debtor, subrogation, liquidity. jel classification: g17, h68 1. introduction in light of the fact that capital is a major factor in production, the development of entrepreneurial activity becomes impossible without considering the financial market and the resources provided to its subjects. regardless of the degree of development, any entrepreneurial activity is engaged in direct contact with financial markets, in particular through institutions that act as intermediaries in raising money and services. the development of a solid basis for doing business requires understanding the rules of functioning of the financial system and its mechanisms. considering the current economic situation, as well as the fact that the procedure for granting loans by banks is gradually becoming more complicated, while the national and international markets require capital movement, factoring becomes the most accessible instrument and only source of financing, with which the latter increases concurrently with sales. in addition, factoring is the cheapest form of short-term financing. providing financing without baltic journal of economic studies 252 vol. 4, no. 5, 2018 guarantees and being a complex product of commercial management, the factoring agreement is considered the most optimal economical solution for companies that do not have sufficient financial support, but have a welldesigned business plan (paraschiv, 2013). despite the rapid development of this market segment of financial services over the last years in the world, factoring in ukraine has not yet become sufficiently widespread due to economic instability and rising inflation. instead, in the neighbouring country of romania, the factoring market is developing at the fastest pace in europe. therefore, the aim of this article is to study the legal nature of the factoring contract in romania: to identify its regulation object, functions, types, legal features and other specificities to introduce the positive experience of foreign colleagues to the legislation of ukraine. the results of the study are a general description of the factoring contract in romania, exposed in the article, such as: the concept of this contract is revealed, the object of its regulation, as well as implementation of the factoring contract, are determined, its functions and features are described, the parties to the agreement and their legal status are determined. the specificities that have contributed to the rapid enlargement of factoring in romania are given particular consideration. 2. main material in world practice, factoring operations have become widely used for product sales since the 60s of the last century. the dynamics of the market for factoring services in the leading countries of the world during the last 7 years is positive, the annual total growth is about 18%. in ukraine, for the first time, the possibility of factoring operations was provided for in the law of ukraine “on banks and banking” as of march 20, 1991 (pro banky i bankivsku diialnist, 2001); for example, art. 3 provides for that banks can perform banking transactions to acquire the right to receivables of goods and services, taking credit risk of such receivables and collection of these receivables (factoring). despite the fact that factoring as an operating instrument for credit institutions is especially important because of possibility to choose the optimal commercial activity both at the national and international levels, in ukraine it has not yet become sufficiently widespread due to economic instability and inflation. at the same time, over the past five years, the romanian factoring market has grown by more than 100%, and in 2015, it was the largest growth in europe (35%), up to 3.65 billion euros. the factoring market in romania began to develop in 1993 through specialized departments of banks, and in 2006, specialized non-bank financial institutions were created. currently, 15 participants operate in the romanian factoring market. in order to protect and represent the interests of the factoring sector and those involved in this activity, in 2011, the romanian factoring association (rfa) was created, which currently has nine members. in april 2012, the rfa signed an agreement on cooperation with the international factors association (ifa). it is known that the ifa is the largest association of financial companies in the world, and its members are factoring companies, lenders that provide asset financing, and other institutions that perform financing receivables. at present, the association has more than 375 corporate members. the cooperation agreement is extremely important as it is aimed at assisting the members of this association by providing information, organizing scientific events to discuss factoring issues, facilitating other activities agreed by the signatories. in addition, the agreement supports the participants in the romanian market by providing them with the necessary data, access to professional training, and guaranteeing their creditworthiness. since 2013, annually the rfa has been studying changes in the key factors of the factoring market. this analysis is based on information provided by members of the association and other non-bank financial institutions. moreover, the rfa managed receivables from companies by 14.5 billion eur , providing the country’s economy with significant support. in the development of the romanian factoring market, the main role is assigned to banks through their specialized divisions. meanwhile, non-bank financial institutions also contribute greatly, in particular by ensuring a diversified market for companies of any profile. now, the romanian market has high interest from foreign capital to finance the factoring sector, in particular, non-bank financial institutions. the concept of factoring traces its origin to anglosaxon law of the xvii century when it played a significant role in the development of international trade, because of contribution to the supply of textiles to the united states of america by england. the specialized literature states, “british industrialists who supplied textiles to british emigrants, penetrating even deeper westward, appreciated the need to find guarantors to provide their exports. undoubtedly, these were the first factors” (gavalda, 1978). internationally, the factoring contract is regulated by the unidroit international factoring convention, adopted on may 28, 1988 (konventsiia unidrua pro mizhnarodnyi faktorynh), and the united nations convention on the assignment of receivables in international trade, adopted on december 12, 2001, in new york (konventsiia orhanizatsii obiednanykh natsii pro postupku debitorskoi zaborhovanosti v mizhnarodnii torhivli). given the significant role played by factoring in the development of international trade, the importance of establishing uniform rules for a legal framework facilitating international factoring was recognized. therefore, the unidroit convention on international factoring was signed in ottawa. baltic journal of economic studies 253 vol. 4, no. 5, 2018 according to article 2 of this convention, “factoring contract” means a contract concluded between one party (the supplier) and another party (the factor) pursuant to which: a) the supplier may or will assign to the factor receivables arising from contracts of sale of goods (services) made between the supplier and its customers (debtors) other than those for the sale of goods (services) bought primarily for their personal, family or household use; b) the factor is to perform at least two of the following functions: finance for the supplier, including loans and advance payments; maintenance of accounts (ledgering) relating to the receivables; collection of receivables; protection against default in payment by debtors; c) notice of the assignment of the receivables is to be given to debtors. in romanian legislation, the definition of a factoring agreement was first provided in article 2 letter b) of the emergency ordinance no. 10/1997 on easing the financial deadlock and economic losses (emergency ordinance no. 10/1997 of 1997 on easing the financial deadlock and economic losses) as a contract between a party called the adherent, supplying goods or providing services, and a bank or a financial institution, called the factor, under which the latter shall finance tracking receivables and safeguard the credit risk, and the adherent assigns to the factor claims arising from the sale of goods or the provision of services to third parties. this definition was somewhat adjusted according to article 146 of the annex to order no. 1418/1997 of the secretary of state, minister of finance and governor of the national bank of romania (the secretary of state, minister of finance and governor of national bank of romania), adopted on the chart of accounts for banks and the methodological standards for its use. according to the annex, the factoring is the operation whereby the client called ‘the adherent’ assigns ownership of receivables (bills) to its commercial bank, called ‘the factor’, which has an obligation, under contract, to ensure recovery of receivables of the adherent, assuming their risk of default. finally, article 6 of the law no. 469/2002 on certain measures for strengthening the contractual discipline (law no. 469/2002 of 2002 on certain measures for strengthening the contractual discipline) defines the factoring contract as a contract between the party, providing goods or services, called the adherent, and a bank or a financial specialized institution, called the factor, under which the latter shall finance tracking receivables and preserves against credit risks and the adherent assigns to the factor receivables arising from the sale of goods or services to third parties. it should be noted that according to this legal regulation, the factor had to assume three obligations in its relationships with the adherent, without the possibility to choose one of them: financing, monitoring receivables, and safeguarding credit risks. the mechanism for the implementation of factoring operations can be described as it follows: under the factoring contract, the adherent sends original invoices or certified copies to the factor thereof with the mention that they were sold and that the payment is to be made to the factor; subrogation must be reported to the debtor to pay it by the factor; the factor pays indebtedness to the adherent at face value, less commission either immediately, therefore, before their maturity (old line factoring) or at maturity if the contract was concluded in that form (maturity factoring). in practice, such a system is used for only immediate payment of a percentage of the invoices by the factor, while the remaining should be repaid after the receivable. in most cases, a framework factoring contract is used that comprises the obligation of the factor to buy and the client to sell all claims or those that meet certain criteria, which the parts determine, while each claim assignment is entered into a factoring contract separately. it should be noted that the adherent may send a receivable to the factor only partially and repay the rest by himself. factoring operations are classified by the following criteria: 1) according to the time of payment of receivables from the adherent by the factor: a) an ‘old line’ factoring contract, that is, payment of receivables is made by the factor when receiving bills, so before they reach maturity; b) a maturity factoring contract, that is, the factor pays claims when it is payable; c) an agent factoring contract, that is, the factor buys the receivables of the adherent and upon assignment, pays the bills in advance, assuming the risk of default by debtors. the difference is that the adherent undertakes the management of receivables, when receives them in own name and transfers them to the factor; 2) according to the right of recourse that the bank can exert over the adherent: a) a factoring contract with recourse, that is, the adherent takes the debtor’s credit risk or refusal to pay the debt; b) a non-recourse factoring contract, that is, the factor pays receivables when receiving the invoices from the adherent; 3) according to participants in the factoring operation: a) an internal factoring contract, that is, the factoring operation takes place on the territory of a single country, intervening only one factor; b) an external factoring contract, that is, an international commercial contract takes place, intervening two factors: the import factor and the export factor (nemeş, 2013). the object of the factoring agreement is the receivables, which the factor monitors, finances, and preserves against credit risks, in exchange for which the adherent assigns all its claims on debtors to the factor. in order to become an object of a factoring agreement, the receivable shall be clear and liquid, and it should distinctly specify its maturity or, at least, an opportunity to specify it. future receivables may also be the object of a factoring agreement. in view of the risk the factor undertakes, the factoring contract includes a special provision that the adherent is obliged to transfer all invoices, including accounts receivable, to the factor, and the factor can accept only those baltic journal of economic studies 254 vol. 4, no. 5, 2018 that show a high degree of certainty about their repayment at maturity by the debtors (“exclusivity”). in addition, the factoring agreement includes a requirement of globality, through which the adherent shall transfer all its claims on debtors to the factor. this prevents assigning by adherent to the factor only bad debts, which are difficult to recover and retain only certain receivables. the two requirements are interdependent (stănciulescu, nemeş, 2013). factoring is a bilateral agreement involving the adherent and the factor. the debtor is a participant of a factoring operation, but is not a party, although he/she has some concerns in it, what will be discussed later on. the adherent is a conscientious supplier of goods or provider of services or a contractor, that is, a natural or legal person engaged in a particular type of commercial activity. according to specialized literature, the adherent can be a non-commercial legal entity, recognized by law as having the ability to conduct business (for example, an associations, funds or unions) (vartolomei, 2006). while the adherent can be both a natural or legal person engaged in a particular type of commercial activity, and according to some scientists, a non-commercial legal entity, can only be a specialized financial institution or banking company which is a legal entity. the debtor is a buyer of goods or recipient of services to which he is to pay the equivalent of money, products or services provided. in terms of the factoring agreement, after the adherent transfers the payment obligation to the factor, the debtor is obliged to pay all the amounts recorded in the invoices only to the factoring company. payment is made at maturity. in case the debtor refuses to pay, the factor is entitled to submit a claim to the court, and the debtor, in turn, may defend himself by using all the remedies, which he would have applied if the applicant were the client himself. for example, the debtor may object to a prohibition on certain actions, a debt repayment before receiving an appropriate notification or a repayment before the distribution of receivables. legal features of the factoring contract are: 1) the contract is mutually binding, as its conclusion entails interdependent obligations borne by both parties. the factor undertakes to provide financing, management of receivables and their preservation against credit risks and the client undertakes to submit ownership on receivables arising from the sale of goods or providing services; 2) the factoring contract is consensual because it is concluded through the mere agreement of the parties. the written form is a condition required for the transaction. in practice, no bank will conclude a factoring contract other than in writing; 3) the factoring contract is onerous as each part aims to achieve a material benefit. factoring is essentially onerous; without the price that the factor pays for receivables assigned by the adherent a factoring contract does not exist; 4) the factoring contract is continuing because it runs over time; 5) the factoring contract has personal character, according to the doctrine recognized by the scientific majority, because in order to conclude it, the adherent should possess characteristics, such as professional competence, customer stability, respectability, credibility. some authors doubt this feature because the decision of the factor to refund is influenced by monetary issues and less by the personal characteristics of parties involved in the factoring mechanism (stănciulescu, nemeş, 2013); 6) the agreement is a contract of adhesion because the factor imposes contractual terms. in practice, he can select debtors by himself and deny the assumption of doubtful debts of the adherent; 7) the agreement is an ancillary contract because it determines the relationship between the adherent and the debtor, arising from receivables assigned to the factor; 8) this is a commutative contract because the parties know their obligations under this agreement from the moment of conclusion. according to romanian legislation, the factoring contract can be random in case of the factoring contract without recourse, that is, the factor bears the risk of insolvency of the debtor; 9) the contract is complex because it includes an assignment of debt, a subrogation, additional obligations for the factor, such as monitoring of accounts, their keeping, taking credit risk and financing the adherent. a special condition of validity of the factoring contract consists of the material delivery of invoices by the adherent to the factor. the essential functions of the factoring contract are: 1) a function of financing, also called a liquidity function. under the factoring contract, the factor provides the client with financing services without any additional guarantees; the guarantee is the assignment of all accounts. so the factor, subject to acceptance receivable from the adherent, is obliged to provide the latter with the necessary liquidity, profits from which he gets even before maturity. it should be emphasized that this type of financing is only for a period of 90 to 120 days, and in exceptional cases for 180 days; 2) a service function or management function. when executing a factoring contract, depending on the type of factoring, the factor can provide the adherent with an integrated package of services, which includes: assessing the creditworthiness of the debtors; accounting of debtors with all necessary data on receivables; monitoring of debtor creditworthiness; responsibility for the invoices presented; responsibility for collecting receivables; providing explanations on debt liquidation; providing explanations on accounting and financial debt management; conducting consultations on taxation issues during the implementation of factoring operations, etc. this function is of particular importance in factoring since it enables the client to avoid spending additional baltic journal of economic studies 255 vol. 4, no. 5, 2018 costs and time and focus exclusively on his work on the manufacture (supply) of goods or services. 3) a function of credit risk taking. in accordance with this function, the factor takes credit risk after a preliminary examination of the debtor’s creditworthiness, that is, his ability to pay off in full and in a timely manner. this means that after the concluding the factoring contract, the factor shall not make a recourse claim to the adherent in case of debtor bankruptcy or delayed payment (petre, 2007). therefore, a comprehensive description of the factoring agreement in romania enables to single out the features that contributed to the rapid development of factoring in this country. under challenging economic conditions, the factoring contract is a solution for companies to focus on their commercial activities of manufacturing and purchasing goods or supply of services while maintaining liquidity without having to give guarantees. another advantage of the factoring contract is protection against the risk of indebtedness of borrowers, buyers of goods or recipients of services provided. finally, the growing interest of companies for the factoring contract is caused by the possibility to use the experience of banks in assessing the creditworthiness of adherents, in the management and administration of receivables. on the other hand, factoring is interesting also for the members of the romanian factoring association because it enables them to manage liquidity for a fee, which is higher than the interest rate applied to the loan in the credit market. banks and specialized non-bank financial institutions concluding factoring contracts, in turn, use all guarantees and privileges of companies manufacturing (supplying) goods or providing services. 3. conclusions to sum up, the factoring contract is interesting due to the specific provisions: the requirement of exclusivity clause and the requirement of globality. the adherent is obliged to assign all his receivables to the factor, while the latter may accept only that he considers safe in terms of their payment at maturity. for the development of the factoring market in our country, in the factoring contracts, the list of services provided by banks and other financial institutions should be extended to include such services as: accounting of sales, inventory, management of monetary assets; providing the adherent with information about the financial and economic status of customers; providing the adherent with statistical data concerning the main consumers of the product that he produces (supplies) and its total sale on the market, etc. thereby, the factoring company will become not only as a credit institution for the adherent but also the one to provide with banking, insurance, accounting services as well as important commercial information. this will greatly save time and money of the manufacturer (supplier) of the goods and will help him focus solely on his core business. references: paraschiv, s. m. (2013). factoring agreement – instrument for credit institutions. international journal of juridical sciences, 4, 138-142. pro banky i bankivsku diialnist (2001). [on banks and banking: official bulletin of ukraine] (law of ukraine no. 2121-iii of december 7, 2000). ofitsiynyi visnyk ukrainy, 1-2(1), 1. (in ukrainian) gavalda, c. (1978). encyclopédie juridique, paris: dalloz. retrieved from: https://www.editions-dalloz.fr/ encyclopedie.html?cat=123 konventsiia unidrua pro mizhnarodnyi faktorynh [unidroit convention on international factoring] (international document of may 28, 1988). retrieved from: http://zakon.rada.gov.ua/laws/show/995_210 (in ukrainian) konventsiia orhanizatsii obiednanykh natsii pro postupku debitorskoi zaborhovanosti v mizhnarodnii torhivli [united nations convention on assigning account receivables in international trade] (international document of december 12, 2001). retrieved from: http://zakon.rada.gov.ua/laws/show/995_a37 (in ukrainian) emergency ordinance no. 10/1997 of 1997 on easing the financial deadlock and economic losses. official gazette, 72. (april 22, 1997). retrieved from: http://cis01.central.ucv.ro/revistadestiintepolitice/files/numarul52_2016/3.pdf the secretary of state, minister of finance and governor of national bank of romania (n.b.r .) (august 8, 1997). order no. 1418/1997 on the chart of accounts for banks and the methodological standards for its use. official gazette, 189. retrieved from: http://cis01.central.ucv.ro/revistadestiintepolitice/files/numarul52_2016/3.pdf law no. 469/2002 of 2002 on certain measures for strengthening the contractual discipline. official gazette, 529. ( july 19, 2002). retrieved from: http://cis01.central.ucv.ro/revistadestiintepolitice/files/numarul52_2016/3.pdf nemeş, v. (2013). dreptul contractelor civile şi comerciale în reglementarea noului cod civil [the right to civil and commercial contracts in the regulation of the new civil code]. bucharest: hamangiu publishing house. stănciulescu, l., nemeş, v. (2013). dreptul contractelor civile şi comerciale în reglementarea noului cod civil [law regulation of civil and commercial contracts in the new civil code]. bucharest: hamangiu publishing house. vartolomei, b. (2006). contractul de factoring [the factoring contract]. bucharest: lumina lex publishing house. petre, c. (2007). factoringul, o alternativă modernă de finanţare a întreprinderilor europene [factoring, a modern alternative to financing european businesses]. eirp proceedings, vol. 2. baltic journal of economic studies 176 vol. 5, no. 2, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: npravduyk@gmail.com 2 vinnytsia institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: vitalii.pokynchereda@gmail.com 3 vinnytsia national agrarian university, ukraine. e-mail: a.pravd4449@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-176-183 the human capital of an enterprise: theory and assessment methodology nataliia pravdiuk1, vitalii pokynchereda2, maryna pravdiuk3 abstract. at the present stage of social development, there is a transformation of the persistent views on the place and human role in the economic system. human capital assets as a set of productive abilities, personal traits, and employee motivation developed as a result of investment become a key factor in the production process, without which any prospects of economic growth are neutralized. the purpose of the article is to provide a theoretical substantiation and systematization of existing methods for assessing human capital, to identify the advantages and disadvantages of their practical application in the enterprise activity, and to develop recommendations aimed at improving the human capital assessment methodology in order to further reflect information on the cost of human capital assets in accounting and reporting of enterprises methodology. the methodological basis of the study is the historical and logical method used in the study of the economic essence of human capital assets and the evolution of human capital assessment methodology. dialectical method and comparative analysis have been used to determine the differences between existing human capital assessment methods and to identify positive and negative aspects of their practical application. the methods of scientific abstraction, induction and deduction, analysis and synthesis have been used in developing the methodology for assessing human capital assets and justifying the opportunities for its integration into the accounting and reporting system of the enterprise. results. it has been established that in international practice, there is a cost-based, profitable, and expert methodology for assessing human capital assets. based on the analysis of positive and negative aspects of the application of these methods, it is substantiated that from the standpoint of accounting the most cost-based model of human capital assets is the most optimal since it is based on the principle of actual cost peculiar to accounting practice. taking this into consideration, a cost-based methodology for assessing human capital assets of the enterprise has been suggested, according to which the cost of human capital assets is calculated by capitalizing the costs borne by the employee and the enterprise at all stages of the formation and development of human capital assets, namely, the costs of developing the employee’s physical abilities (the cost of developing his/her physical abilities), the cost of training (tuition fee in educational institutions), the cost of obtaining professional experience (the cost of professional experience), and the costs of its professional training (the cost of vocational training in the process of his/her employment). practical meaning. the introduction of the suggested methodology for assessing human capital assets creates the prerequisites for the subsequent display of information in business accounting and reporting, which in its turn increases the level of informativity of accounting data, promoting to meet the growing needs of external and internal users of information, provides an opportunity to consider the value of human capital in determining the market value of the company. besides, the suggested assessment methodology enables to produce information about the cost of human capital assets of the enterprise, which is the basis for determining the effectiveness of its use. value/originality. the suggested methodology for assessing human capital assets creates prerequisites for its implementation in the accounting system of the enterprise, which will create the basis for displaying information about the cost of human capital assets in the enterprise’s reporting, which corresponds to the objectives of value-oriented enterprise management. key words: human capital, human resources, working power, assessment, accounting. jel classification: j24, j41, м41 baltic journal of economic studies 177 vol. 5, no. 2, 2019 1. introduction the internationalization and globalization of the world economy put forward the task of forming a management system capable of responding timely and adequately to the challenges of socio-economic existence, dictated by its transition to the post-industrial stage of social development. today, it becomes evident that the development of a successful and socially responsible state is impossible without the effective use of human capital. social and economic development is determined not so much by the perfection of production means, technologies, but by a human being, his/her intelligence, skills, and abilities. the outcomes of the conducted scientific researches show that at the present time, the cost of knowledge, skills, and abilities accumulated by people exceeds the cost of physical capital. considering this, the issue of rational management of human capital must become the centre, around which new paradigms of state and corporate governance will be formed. j. fitz-enz noted: “when we talk to managers about the most important resources, they occasionally point to balance assets. at the same time, they mention people, technologies and information they produce, corporate culture, brand popularity, management ability – all intangible, unrecorded assets” (fitz-enz, 2006). under the present circumstances, not physical capital plays an increasingly important role, as was typical for the industrial age, but the human capital assets, the bearers of which are the population. that is, in the knowledgedriven economy the role of mental labour is increased and the importance of the physically demanding job is reduced, there is a rethinking of the role of human beings from contemplative to the effective factor of production, without which any prospects of economic development are reduced to nothing. as a consequence of this, there is a displacement of the management base from tangible assets to intangible, which is human capital. development of human capital theory, formation of methodological provisions for its accounting and assessment became the object of scientific research of many scientists, in particular: t. arkan (2016), j. barburski (2012), g. s. becker (1993), f. butynets (2010), t. davydiuk (2011), o. denysiuk (2016), m. dobiia (2010; 2012), n. gudzenko (2017), l. fernstrom (2010), e. flamholtz (1982), v. kalpana (2016), m. nastenko (2017), j. roos (2010), s. pike (2010), v. pokynchereda (2016; 2017), n. pravdiuk (2016), o. sahnenko (2017) et al. the scientific work of the authors is to develop the concept of human capital, as well as to develop theoretical and methodological principles of reflection of human capital in the accounting and reporting of the company. however, giving credit to the scientific achievements of their predecessors, it should be noted that certain aspects related to the formation of methodological approaches to the valuation base of human capital, taking into account the current trends of economic development, need to be systemized and improved. works by scientists on economic theory, labour economics and accounting, personal calculations and observations served as an information base of the study. in the process of research, we have used a set of general scientific and special methods of cognition. studying methodological approaches to the assessment of human capital, the methods of theoretical generalization, grouping, comparison, analysis, and synthesis have been used. the purpose of the study is to substantiate the theoretical provisions and development of practical recommendations aimed at improving organizational and methodological provisions of human capital assessment under the conditions of operation and development of the post-industrial economy. 2. theoretical foundations of human capital assessment under modern conditions, company management should take into account the objective trends of the post-industrial economy, consisting in the prevalence of the role of a human factor over other production factors. if management ignores the real state of affairs in the economy, that leads to destructive changes in the activities of the company, which reflects on its profitability and competitiveness. human capital is the centre, around which a system of state and corporate governance must be formed. in this case, the necessary condition for the establishment of effective management of human capital is the creation of an information support system for decision-making, the main role in which belongs to accounting. when developing the accounting concept of human capital, theorists attach significance to the assessment because it is a central, fundamental element of the accounting method. the assessment, being an integral part and one of the most important elements of accounting, is, at the same time, a complex and multifaceted problem that is further exacerbated when it comes to providing cost measurement for human capital assets. difficulties faced by the accountants are related to the difference in the assessment of human capital assets from the conventional method of determining the cost of material objects. many economists, considering the company resources as the subject of accounting, note that the company’s greatest wealth is its personnel, human potential, do not receive due evaluation in the accounting, resulting in its unfitness for economic work. according to the survey conducted by one of the international consulting firms, 95% of managers of american and european companies recognize the lack of reliable methodology to assess human capital assets, baltic journal of economic studies 178 vol. 5, no. 2, 2019 and a third of them, in general, indicate the absence of any mechanisms for the implementation of this task (roos, pike, fernstrom, 2010). despite the fact that a number of methods for assessing human capital assets have been developed in economic science, at present time, there is no comprehensive holistic approach that would ensure the accuracy of evaluation procedures performed, the ability to record them, and was implemented in accounting standards. at the same time, representing the human capital of the company in value terms will enable the formation of information that will serve as the basis for assessing the human potential of the company and will promote its effective management. “if you cannot measure anything, it means you cannot manage it”, – scientists note ( journal human resources, 2008). the problem of providing cost measurement to employees is not entirely new. in the xvii-xix centuries, the issues studied were in the centre of scientific interests of the classics of political economy. v. petty, the founder of the labour theory of value, first tried to give a monetary valuation to a person, noting that “the value of some human individuals is equal to eight-year income brought by them” (petti, 1940). at the same time, different subjects, according to the researcher, had not the same value. for example, an adult was evaluated by the scientist twice expensive than a child, and the cost of a sailor was three times higher than the “price” of a peasant. the value of the entire population of that time in england was evaluated by v. petty at about £ 417 million, and the cost of each resident amounted to an average of 69 monetary units from simple mathematical calculations of the researcher it follows that the death of 100 thousand people is equal to a loss of almost 7 million pounds sterling for the country (petti, 1940). in fact, it was the first attempt in the history of economic thought to assess human resources. a. smith, the scotch, another representative of the political economy, when providing a monetary value to an employee took into account the category of wage, which not only included the amount of efforts made and time spent on work performance but also provided remuneration for the efforts made to acquire knowledge that enables successful performance of production tasks. the researcher emphasized that higher wages should be paid for the work of highly skilled employees since they are able to work more productively in comparison with other employees. in the middle of xx century, f. knight and i. fischer came to the conclusion that wages are a percentage of investments in specialist’s training while discounting a certain amount of income received, we can calculate the cost of these resources. in this way, according to researchers, we can calculate the cost of capital, land, and human resources. i. fischer believed that investments made into equipment and in education have much in common, which is to increase future cash flows. despite the fact that the ancestors of classical economic theory did not create a common concept for assessing human capital, their best practices became the theoretical basis for the further development of the value theory of human capital, which is in active progress up to the present. understanding the importance of human capital in the economic system has led to the emergence of a large range of methods both in the theory and practice for its evaluation, which should be reasonably classified as income-bearing, cost-based, and expert. the costbased method is based on the calculation of the entire set of costs related to the physical and professional development of employees. the income-bearing method involves assessing the value of the product created in the process of implementing the labour potential in the future. expert methods for determining the value of human capital assets are based on the judgment of a specialist using pre-determined weight coefficients. 3. the cost-based method of human capital assessment a detailed analysis of scientific works of scientists on the assessment of human capital shows that researchers give priority to the cost-based method. at present, this technique is the most studied, to a certain extent, is consistent with the principles of accounting, in particular, the principle of historic (actual) cost. the cost of human capital according to this method is identical to the total cost of its formation, retention, and reproduction. advantages of using historic evaluation are the following: ease of use, which does not require the use of a complex mathematical apparatus; a high level of objectivity and reliability since such evaluation is carried out in relation to the events that have already occurred and can be documented, thus depriving the accounting system of predictable and probable indicators. most scientists, within the limits of the cost evaluation method, calculate the value of human capital by capitalizing the incurred costs of maintenance, education, and upbringing. that is, human capital is considered in the triad: capital – labour – the remuneration for the work performed. in this case, the salary for the work performed is the notion of measuring the human capital of an employee (dobiia, barburski et al., 2012). in our opinion, the position of researchers, which is based on the identification of the value of human capital with the size of wages and the amount of other social payments, are false. indeed, at first glance, a highly skilled specialist must claim a higher level of remuneration than an unskilled person. however, under modern conditions, the wage level correlates not only with the qualitative parameters of employees but also baltic journal of economic studies 179 vol. 5, no. 2, 2019 with the sectoral affiliation of the company, the average level of remuneration, as well as other factors that are not related to the level of personnel training. detailed and in-depth coverage of the cost method for assessing human capital was reflected in the scientific works by e. flamholz, who in due time suggested to assess human capital at the initial (historic) prime cost or at replacement cost (cost of substitution) (flamholtz, 1982). according to the assessment method suggested by the scientist, the initial cost of human capital includes the costs of its formation and training. the first group of costs includes the company’s expenses for the recruitment of personnel (placement of announcement in the media stating about vacancy notices, payment for services of recruitment agencies), selection (testing costs, interviews), expenses for the creation of the workplace, internal displacement, etc. the costs of training include costs for instructions and formal training of employees, their training according to the place of work, loss of productivity in connection with training, etc. each of these cost groups covers direct and indirect costs that collectively form the initial cost of human capital with subsequent depreciation of this value. the substitution method evaluates the total cost of human capital through the determination of the value of individual employees. to provide each employee with the cost measurement, they simulate the situation of his dismissal and, at the same time, calculate the total amount of expenses, which includes the cost of substituting the current employee with another, capable of performing the function of the previous one, and the loss of labour productivity during this substitution. the mechanism for the formation of the value of human capital at historical cost and replacement cost is shown in diagram form in figure 1. the assessment of human capital, carried out by the method of replacement, in our opinion, will not provide a sufficient level of accuracy of information. let us suppose, two employees, for the selection, hire and development of which the company incurred identical costs in terms of volume, due to different physiological features and level of preliminary vocational training, will have unequal productivity, and therefore, different value for the subject of economic activity. despite many supporters of the cost-based approach to human capital assessment, it should nevertheless be personnel recruitment personnel selection employment personnel placement costs related to the internal displacement/ promotion introductory training, primary training training at the workplace direct costs indirect costs direct costs indirect costs costs for the formation costs for training initial cost of human capital costs for the instructor’s service loss of labour productivity during training of personnel + losses through inactive time of vacancy when you search for a substitution payments on dismissal loss of efficiency due to dismissal direct costs indirect costs costs related to dismissal replacement cost of human capital = figure 1. method of calculation of the initial and replacement cost of human capital source: flamholtz, 1982 baltic journal of economic studies 180 vol. 5, no. 2, 2019 noted that such a method is subjected to constructive criticism from specialists in the field of human resources management. in particular, some economists point to the existence of objective obstacles to its implementation. for example, in practice, it is not always possible to draw a clear line between the costs incurred in forming a labour collective, with the costs involved in supporting and raising the level of skills of employees. one cannot also take into account the risk that the costs incurred by business entities for the formation and development of personnel were partially taken into consideration, and therefore, the calculated human capital cost would be inaccurate. besides, the scepticism of scientists towards the cost evaluation methodology is explained by the avoidance of qualitative characteristics of personnel. scientists emphasize that both qualification and experience, being ones of the key characteristics of employees as factors of production in the market economy, unfairly remain outside the evaluation process. the approach, offered by the group of polish scientists (dobiia, barburski, gorowski, koziol, kurek, 2012) deserves attention within the cost evaluation model. the methodology for assessing human capital, offered by scientists, is based on the assertion that capital does not come from anything but has its origin, which allows giving it a monetary expression. the source of human capital, according to researchers, is an investment in obtaining vocational education, increased by the amount of expenses for the maintenance of an employee. using the category of property, scientists have offered a formula for calculating the employee’s capital, the size of which depends on the amount of initial investments, risk premium, and capitalization period: h h et pt= ⋅0 , (1) where ht – employee’s human capital; h 0 – initial investments; p – risk premium; t – capitalization period. the cost of employee’s human capital is the result of the capitalization of the costs of its maintenance and formation. these investments are the source of the employee’s ability to perform work, which is improved along with an increase in work experience. at the same time, scientists note that the cost of human capital will be constantly changing since the costs of its formation and professional development have permanent, rather than one-time nature, as it often happens to the financial investments. in view of the abovementioned, the assessment method is presented by the authors in a formalized form: h t k e q t( ) ( ) ( )= + ⋅ +[ ]1 , (2) where h(ò ) – the cost of employee’s human capital; k – capitalized costs for employee’s maintenance; e – capitalized costs for obtaining vocational education; q t( ) – time factor. to calculate the growth of human capital, which is generated in the process of labour activity of each employee, you must take time factor into consideration. scientists believe that due to cyclicality, recurrence of work, the employee will spend (w) percent less effort on its implementation each successive year. at the same time, the growth of the ability to perform work in the future will have a downward trend. exactly the procedure for calculating this component when determining the value of human capital, in our opinion, is the main disadvantage of the given methodology. the risk is that the value of experience coefficient depends on the evaluator’s subjectivity, which, in its turn, will affect the final estimated value of human capital. however, despite this disadvantage, taking into account the time factor when determining the value of human capital makes it possible to assess its important structural part – experience: q t t w ( ) ln( ) ln= − − 1 1 2 , (3) where q t( ) – time factor; w – employee’s training coefficient; t – years of employee’s professional activity, t >1. uncomplicated mathematical transformations make it possible to apply the formula for calculating employee’s human capital as the sum of three components: h t k e d t( ) ( )= + + ; (4) d t k e q t( ) ( ) ( )= + ⋅ , (5) where h(ò ) – the cost of employee’s human capital; k – capitalized costs for employee’s maintenance; e – capitalized costs for obtaining vocational education; d(t) – the cost of employee’s experience; q t( ) – time factor. agreeing in general with the logic of the scientists referring to the approach to human capital assessment, we believe that the described methodology contains inaccuracies that require elimination through the introduction of certain corrections. in order to do so, we will consider in details the content of each component of the presented evaluation model. the costs on the employee’s maintenance (k) include the investment in the formation of the human body as a carrier of accumulated professional knowledge (abilities, skills) and investment in basic education. since basic education is free, the total amount of costs is reduced to the capitalized investments in human physical development. besides, the value of basic knowledge does not matter, as, let’s say, professional knowledge. one of the founders of the theory of human capital g. becker asserted that an employee who has a specific human capital than an employee with the total capital is more valuable for the company (becker, 1993). we believe that the size of subsistence minimum established by law and accumulated before the beginning of human labour activity can be considered as an investment in the formation of physical abilities of future employees. the costs of obtaining education (e) are equal to the amount of money invested by the employee in the formation of knowledge required for the performance baltic journal of economic studies 181 vol. 5, no. 2, 2019 of his/her labour activity. to take into account the quality of specialist’s training, we offer aggregate costs on education to be adjusted on the success rate of education calculated on the basis of the average score of academic certificates (k). having calculated the influence of time factor (q (t)) on the value of human capital by the formula (3), it was established that during the first years of employee’s labour activity (1 to 5 years depending on the value of training coefficient (w)), there is a decrease in the value of human capital due to the fact that an indicator (q (t)) gains negative value. in our opinion, this position is false because exactly the first years of practical activity are the most valuable. during this period, there is the consolidation of theoretical knowledge and employee’s development as a qualified specialist, therefore, the value of human capital should have increased. in order to take into account the position we outlined, we offer to make changes to formula 3. the transformed formula for calculating the factor of experience will have the following form: q t w t( ) ( )= − −1 1 , (6) where q t( ) – time factor; w – coefficient of employee’s training; t – years of employee’s professional activity. taking into account the best practices of scientists in the part of the human capital assessment and personal perspective to solve this problem, we offer the author’s approach to the assessment of human capital. in accordance with the recommended methodology, the total cost of employee’s human capital presented through the assessment of his/her qualitative characteristics, namely, physical abilities, education, experience and professional knowledge, must be calculated according to the formula: h t k e d t s( ) ( )= + + + , (7) where н(т) – the cost of employee’s human capital, uah; k – the cost of physical abilities, uah; е – the cost of education; d(t) – the cost of experience; s – the cost of professional knowledge. here is an algorithm for calculating the initial value of employee’s human capital through the specification of the methodology for assessing the components of human capital possessed by the employee at the time of his/her acceptance to the company staff (figure 2). in the process of conducting business, new technologies are introduced, the manufacturing process is complicated, in general, all activities are carried out under the conditions of an unstable socialeconomic situation. operation under the conditions of uncertainty requires the employees to master additional technical-economic knowledge formed by their direct participation in conferences, seminars, advanced training courses, etc. the company’s costs for personnel training according to their economic content are investments in human capital. taking into account the foregoing, the cost of professional knowledge (s) as a component of human capital, we offer to make an assessment for the methodology presented in figure 3. at the same time, the change in the initial indicators (living wage, length of service, etc.) used when calculating the cost of an employee’s human capital, requires a revaluation. 4. the income-bearing method of human capital assessment it should be noted that recently, among the theorists and practitioners, an income-bearing approach to calculate the value of human capital becomes more intangible assets in terms of the cost of vocational training that brought the expected result the cost is calculated on the basis of data on the cost of education: , where − the initial value of professional knowledge; − costs, incurred by the company for employee’s training; k − academic progress coefficient (if applicable) 5 grade point average k 1,0 0,8 0,6 4 3 initial value of employee’s professional knowledge current costs in terms of the cost of vocational training that did not bring the expected result amortization method of accelerated reduction of residual value: division of the value of the right to use labour assets for the company costs during the expected period of their use: (3-5 years) the cost is calculated by summing up the costs for employee’s physical development until he/she reaches the working age by the following formula: , where − the initial value of physical abilities; т – number of years according to an age-specific category, years; − minimum subsistence level, established by law per person according to age-specific category initial value of employee’s human capital physical abilities experience the cost is determined on the basis of data on the cost of education and grade point average of academic diploma according to the following formula: , where − the initial value of education; − cost of education; k − academic progress coefficient the cost is calculated on the basis of data on the cost of education, work experience, and factor of experience according to the following formula: ; , where − the initial value of experience; − the cost of employee’s training; w − training coefficient; − employee’s working experience, years education grade point average k 5 4 3 1,0 0,8 0,6 figure 2. evaluation method of the initial value of an employee’s human capital source: the author’s development baltic journal of economic studies 182 vol. 5, no. 2, 2019 popular; it is based on the assessment of future potential benefits from its use. scientists are convinced that this approach is more logical from the standpoint of the economy because it corresponds to the accepted perception of any potential as an opportunity to obtain benefits in the future, and the possible result is related to a qualitative and quantitative component of labour potential. in accordance with the income-bearing approach, human capital is assessed by the discounting of the future value of income from its use and is calculated by the formula: d d i c t t = +( )1 , (8) where dc – current income level; dt – future income level; і – current interest rate; t – number of years. instead, the practical realization of the incomebearing method encounters significant methodological barriers that are related to the calculation of the overall economic result for the period of using human capital assets. instead, researchers acknowledge that the practical implementation of the income-bearing method encounters significant methodological barriers that are related to the calculation of the overall economic effect for the period of using human capital assets. this, as noted by the researchers, is due to the fact that the final result of labour potential use is influenced by a significant number of difficult predicted factors, including the pace of technical progress, the level of integration and division of social labour, the level of prices and inflation, structural changes, etc. t. davydiuk, having carried out a thorough analysis of the possibility to introduce the income-bearing method for the assessment of human capital, points out to the following disadvantages: firstly, the difficulty in obtaining the initial information for the calculation; secondly, the difficulty in determining the exact amount of income generated by each employee of the company separately; and thirdly, the complexity of establishing a link between knowledge and experience of employees and financial outcomes of the company. therefore, the entire calculation is based on the future volume of net profit, the value of which is difficult to predict (davydiuk, 2011). 5. expert method of human capital assessment we should pay attention also to the expert methodology for assessing human capital, through which you can obtain not less valuable information management. its main advantage is the maximum consideration of qualitative characteristics of employees, which is the expression of the individual value of a particular employee, the level of his/her professional skills and competence, which collectively form the total cost of the human capital of the business entity. undoubtedly, the expert methodology corresponds to the logic of understanding the economic role of a person, because in particular employee’s qualitative characteristics, such as the ability to think outside the box, the ability to apply the accumulated knowledge, skills, and experience contribute to better orientation in atypical business situations and the adoption of optimal solutions. however, expert evaluation of company human capital has a significant disadvantage – subjectivism. the calculated cost of human capital will depend to a certain extent on the knowledge, skills, and will of the evaluators. and this, in its turn, can affect the correctness of managerial decisions taken on the basis of such information. thus, the most optimal way from the perspective of the possibility of adapting to the accounting system of the company is the cost-based methodology for intangible assets in terms of the cost of vocational training that brought the expected result the cost is calculated on the basis of data on the cost of education: , where − the initial value of professional knowledge; − costs, incurred by the company for employee’s training; k − academic progress coefficient (if applicable) 5 grade point average k 1,0 0,8 0,6 4 3 initial value of employee’s professional knowledge current costs in terms of the cost of vocational training that did not bring the expected result amortization method of accelerated reduction of residual value: division of the value of the right to use labour assets for the company costs during the expected period of their use: (3-5 years) the cost is calculated by summing up the costs for employee’s physical development until he/she reaches the working age by the following formula: , where − the initial value of physical abilities; т – number of years according to an age-specific category, years; − minimum subsistence level, established by law per person according to age-specific category initial value of employee’s human capital physical abilities experience the cost is determined on the basis of data on the cost of education and grade point average of academic diploma according to the following formula: , where − the initial value of education; − cost of education; k − academic progress coefficient the cost is calculated on the basis of data on the cost of education, work experience, and factor of experience according to the following formula: ; , where − the initial value of experience; − the cost of employee’s training; w − training coefficient; − employee’s working experience, years education grade point average k 5 4 3 1,0 0,8 0,6 figure 3. methodology for evaluating the value of an employee’s professional knowledge source: the author’s development baltic journal of economic studies 183 vol. 5, no. 2, 2019 assessing human capital, which mainly serves the purposes of financial and managerial accounting, while the income-bearing and expert methods of assessment are limited to managerial accounting. 6. conclusions under the conditions of a post-industrial economy, human capital is the most important strategic resource of the company. employees, their knowledge, experience, and qualification make a decisive contribution to ensure the progressive promotion of business entities, raising their levels of profitability and investment attractiveness. under these conditions, approaches to human capital management need to be improved, which is possible by the high-quality accounting and information provision of the management process, which is mainly based on the value terms of labour resources. according to the outcomes of the conducted study, it was found that in the scientific literature, there are three methods for evaluating human capital assets, grouped by cost-based, income-bearing, and expert approaches. based on the analysis of positive and negative aspects of existing methods, it has been substantiated that from the standpoint of accounting, the most optimal is a cost-based model of human capital assessment since it is based on the principle of actual cost proper for accounting theory and practice. taking into account the achievements of scientists, we have presented the approach to the evaluation of employee’s human capital, on the basis of which the cost is calculated by summing up the costs for its creation, namely, the costs for the formation of employee’s physical abilities, the costs of obtaining education, the costs of experience and expenses for vocational training of the employee in the process of his/her labour activities. practical implementation of the suggested costoriented methodology for assessing human capital is an important tool for quantifying the cost of personnel of the company, which will ensure its subsequent reflection in the system of accounting and reporting. the success of the company business will be correlated with the rationality of personnel management, which will be based on a reliable assessment of human capital. references: arkan, t. (2016). human resources accounting: a suggested model for measurement and valuatio. finanse, rynki finansowe, ubezpieczenia, 1(79), 173–193. retrieved from: https://wneiz.pl/nauka_wneiz/frfu/ 79-2016/frfu-79-173.pdf becker, g. (1993). human capital: a theoretical and empirical analysis (with special reference to education). chicago and london. butynets, f., dobiia, м. et al. (2010). teoryia izmerenyia kapitala i prybyli. krakow: fundacja uniwersytetu ekonomicznego w krakowie. denysiuk, o., pokynchereda, v. (2016). ozinka liudskoho kapitalu. visnyk kyivskoho natsionalnoho torhovelnoekonomichnoho universytetu, 1(105), 109–121. retrieved from: http://visnik.knteu.kiev.ua/files/2016/01/9.pdf dobiia, м., barburski, j. et al. (2012). chelovecheskiy kapital v ekonomicheskoy perspektive. kyiv: kondor. fitz-enz, j. (2006). rentabelnost investitsiy v personal: izmerenie ekonomicheskoy tsennosti personala. мoskow: vershina. flamholtz, e. (1982). rechnungslegung über kosten und wert des humankapitals; in: schmidt, h., humanverzögerungsrechnung, berlin, new york. kalpana, v. (2016). human resource accounting in indian companies – importance and challenges. international journal of scientific engineering and research (ijser), 4(5), 15–18. retrieved from: http://www.ijser.in/archives/ v4i5/ijser15788.pdf petti, v. (1940). ekonomicheskie i statisticheskie raboty. moskow: gosudarstvennoe socialno-ekonomicheskoe izdatelstvo. pokynchereda, v., gudzenko, n., nastenko, m. (2017). human resource accounting in the system of value-based business management. retrieved from: https://businessperspectives.org/journals/investment-managementand-financial-innovations/issue-2-cont-12/human-resource-accounting-in-the-system-of-value-based-businessmanagement pravdiuk, n., pokynchereda, v. (2016). trudovi resursy pidpryiemstv: oblikovo-analitychne zabezpechennia upravlinnia: monohrafiia. vinnytsia: pp “td “edelveis i k”. roos, j., pike, s., fernstrom, l. (2010). intellektualnyiy kapital: praktika upravleniya. saint petersburg: vіsshaya shkola menedzhmenta. sahnenko, o. (2017). metody otsinky liudskoho kapitalu. ekonomika i suspilstvo, 10, 24–27. retrieved from: http://economyandsociety.in.ua/journal/10_ukr/5.pdf stein, d. (2010). bilanzierung von humankapital. grundlagen und möglichkeiten für die unternehmerische praxis. köln. the official website of the journal “human resources” (2008). “measure – control means”. retrieved from: http://otdelkadrov.by/number/2008/7/izmerayt-upravlya baltic journal of economic studies 129 vol. 4, no. 5, 2018 corresponding author: 1 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine. e-mail: kreidichin@gmail.com 2 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine. e-mail: 2203883@ukr.net 3 borys grinchenko kyiv university, ukraine. e-mail: kazakoksana1974@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-129-139 the application of monetary incentive policy in current economic conditions iryna kreidych1, nadezhda roshchyna2, oksana kazak3 abstract. the aim of the article is studying the process of implementation of promotional monetary policy by investigation of the functionality of the transmission mechanism channels. the paper singles out the peculiarities of the implementation of monetary policy in well-developed and developing countries. the subject of the study is: the structure of the monetary transmission mechanism; the functionalities of both traditional and non-traditional channels and their influence on promotional monetary policy are defined. an analysis of the existing structure of the transmission mechanism made it possible to determine the strength and speed of feedback between participants and the degree of influence on the real sector and to formulate appropriate proposals for its adjustment or activation. in addition, it is indicated that, under the present conditions, it is non-traditional channels that acquire special significance; also, the main factors that have shifted the priority vector in their direction are defined. alongside this, the study presents modern modifications of promotional monetary policy and their significance for the modern economic world. methodology. the classic methods of scientific research are used in the article, among which are the following: observation, abstraction, comparison, systematic approach, analysis, and synthesis. results. the conducted study clearly demonstrates that, in the process of changing financial relations, the significance of the transmission mechanism channels in the process of implementing promotional monetary policy changed, too. at the same time, it is expedient to single out the reasons that lead to a change in the role of some channels of monetary transmission in relation to others. current research and developments are not limited to the above structure of the transmission mechanism channels. moreover, their list is constantly replenished, which is indicative of the existence of transformational processes affecting the financial sector. the approaches to the structure of the transmission mechanism and the functionality of its channels, determined in this article, make it possible to assess the effectiveness of implementing monetary policy. practical implications. clarified complex causes of destructive nature, which initially level out practically any actions with regard to the system approach, namely, the absence of the integrated combination of interests of all social and economic spheres: state-business-society. also, the results of the study provide an opportunity to identify further trends in the changing transmission mechanism channels in the implementation process of monetary policy and use this knowledge by planning and forecasting for the functionality of transmission channels. value/originality. this research was carried out within the framework of the scientific work of the department of theoretical and applied economics of the national technical university of ukraine “igor sikorsky kyiv polytechnic institute” (no. 0112u007817) on the topic: “globalization of industrial capacity formation trends in the terms of post-industrial transformation”. key words: promotional monetary policy, channels of monetary transmission mechanism, structure of monetary transmission mechanism. jel classification: b50, e50 1. introduction modern transformations of the world economy, which form the strategic foundations of its future development, lead to a revision of the system of established values and views: from the role of the state, social institutions, political elites, the financial market to a change in the structure of economic development factors. the pluralism of approaches when choosing a rational strategy for monetary policy and making specific managerial decisions is felt particularly deeply baltic journal of economic studies 130 vol. 4, no. 5, 2018 today since unique features of the formation and development of states are reflected in the process of the above-mentioned choice. at the same time, in the transformation processes, the dominant role is played by the speed of change of ideological institutions, the historical development of which differs significantly from state to state, which further enhances the adaptive lag and, accordingly, the management process becomes more complex and requires a regular review of the fundamental foundations of one or another society. in the context of collisions of globalization processes, with simultaneous localization of economies, confrontation of political systems and meta-goals, the only way to increase the effectiveness of monetary policy is the application of a systematic approach that covers all aspects of development in a comprehensive manner. modern world trends show that promotional monetary policy becomes the most relevant, which is associated with some negative medium-term trends that determine the widespread slow growth of the economy. not only potential economic growth in well-developed and developing countries fall due to a reduction in capital expenditure, but also actual economic growth is anaemic and below its potential dynamics, which is caused by the continuation of the painful process of reducing the debt burden, first in the us, then in europe, and now in highly debt-laden developing countries. in this situation, numerous technological innovations did not lead to increased productivity, the progress of structural reforms remains slow, and the prolonged cyclical stagnation dilutes the basis of both professional skills and industrial capital. in addition, economic policy, especially monetary policy, is becoming less traditional; non-traditional instruments of monetary policy have become the norm in most well-developed and developing countries. in this case, we can state another economic aberration: inflation still remains extremely low and continues to fall in well-developed countries, despite all the unconventional measures of central banks and their growing balances. in our opinion, special attention, bearing in mind the issues raised, should be given to the study of exactly the transmission mechanism of promotional monetary policy, which allows taking into account the interaction of all socio-economic processes, while harmonizing the interests of all groups of participants and balancing resources of all kinds. 2. theoretical background of the research the results of the study of the transmission mechanism and its influence on the strategic development of the state are presented in works of many scientists and experts including: j. m. keynes, j. tobin, f. mishkin, b. bernanke, j. taylor, m. gertler, s. cecchetti, m. friedman, j. stiglitz, and others. studies show that the most significant results based on considerable theoretical and practical research were achieved by industrialized countries. at the same time, it should be noted that despite such significant developments in the field of studying the mechanism of monetary transmission, the views on its impact on the development of economy differ significantly, which is explained by individual conditions and goals of the functioning of a state. for the first time, the transmission mechanism and its impact on the economy are mentioned in the keynesian analysis. j. m. keynes called the transmission (transfer) mechanism a system of variables, through which the supply of money affects economic activity. he believed that monetary regulation and changes in the volume of money supply have an impact on reproduction only by influencing the investment process and only if it is able to change the psychological situation in the money market by lowering the rate of interest. keynes published his work on the analysis of economic activity in 1936, but his views’ peak popularity among economists came in the 1950s and early 1960s when most economists adopted his system of evidence (semiturkin, 2013). over time, representatives of the monetarist school of economic thought supplemented this theory in a number of aspects. now, when it is especially important to continue research, these issues are dealt with by the central banks of various countries of the world, as well as by supranational organizations. economic theory and world practice have developed certain approaches to understanding the operation of the mechanism presented, which allows central banks to use them when developing and implementing monetary policy. taking into account theoretical and empirical approaches to the study of this issue, specialists significantly expand the concept of the transmission mechanism and present it as a dynamic phenomenon characterized by constant changes, endogenous with respect to the characteristics of the economic system. in fact, the study of the effect of the transmission mechanism is very complex, but the socio-economic processes taking place in a state largely depend on its effectiveness. as for developing countries, their experience and achievements are not so significant, since in most cases, they are only approaching the process of developing the most acceptable model of the transmission mechanism, one of the main goals of which is to ensure the efficiency of transformation processes. it should be noted that, despite so much attention from developing countries to the study of the transmission mechanism, the ability to implement already proven practices is offset by a number of factors. the main ones are the following: underdevelopment of market institutions, intervention by the state or a number of states in economic processes, monopolization of the economy, a significant proportion of the shadow economy, high baltic journal of economic studies 131 vol. 4, no. 5, 2018 inflation, dollarization, and a number of other aspects. all this leads to the fact that the measures developed do not correspond to the real state of affairs, feedback is lost between the participants in the process; the mechanism of the transfer mechanism, the quantity and quality of the statistical data are distorted, which, in turn, seriously complicates the problem of an adequate assessment of its impact. thus, when studying the transmission mechanism in developing countries, it is necessary to take into account a huge number of exogenous and endogenous factors, as well as a constant change in the economic behaviour of the subjects, the formation and development of the institutional and technological structure. these aspects have a significant impact on the structure of the transmission mechanism and, as a consequence, on the effectiveness of monetary policy. within this context, at the first stages of the study of the mechanism presented, the process of analysing its structure, namely, determining the most important and significant channels for transferring monetary policy impulses to the real economy, taking into account the dominant factors and conditions, is of particular practical value. in addition, an analysis of the existing structure of the transmission mechanism makes it possible to establish the strength and speed of feedback between participants and the degree of influence on the real sector and to formulate appropriate proposals for its adjustment or activation. 3. several approaches to defining the structure of the transmission mechanism in the conventional form, the structure of the transmission mechanism is represented as a set of channels, which are peculiar links of macroeconomic variables, through which the impulse of change is transmitted (mishchenko, 2015). the analysis of the existing developments on the structure of the transmission mechanism we conducted allows us to state that there is only a description of the general specification of the aggregate of its channels, without an unequivocal opinion on the significance of each of them, as well as on individual aspects of their functioning. it should be noted that views on directions of the transmission influence of monetary policy differ even in countries with a well-developed market economy, despite the length of theoretical and empirical research. at the same time, the modern basis for the study of the transmission mechanism very successfully operates with different views on defining its nature and structure and, despite the difference in approaches, in the applied aspect, they complement each other very harmoniously. at the heart of their differences, there are such fundamental questions as: by what means does monetary policy influence the behaviour of the subjects of the real sector and by what channels do its impulses reach the microlevel. according to the “money view”, central banks influence the short-term interest rate in order to transfer the impulse to the exchange rate and the long-term interest rate. their correction leads to a change in the costs of attracting capital, in the ratio of internal and attracted funds, in the volume of investment in production. however, taking into account modern developments in this area, it should be noted that international studies have revealed the low elasticity of short-term interest rates to the costs of raising capital (semiturkin, 2013). the main role in the “money view” is given to the demand for investment from the private sector, as a result of which the weaknesses of the financial sector and externalities fall out of the sphere of attention. supporters of the “money view” stand for models with a minimal number of equations, the main variable of which is represented by monetary aggregates and, as a rule, this theory is used when targeting such ones. the “money view” is also called “traditional” because its postulates are more characteristic of keynesianism. moreover, it examines the influence of monetary policy only through the lens of the financial sphere, which greatly narrows down and simplifies its perception. nevertheless, this approach has its own application potential since it is completely based, as it has already been mentioned above, on traditional macroeconomic models and has a full structural theoretical justification, which is very convenient to use in econometric modelling. the processes of the influence of monetary policy on aggregate demand and on the development of production are reflected to the fullest extent possible in the “lending view” of the transmission mechanism. as for the “lending view”, its theory is based on the microeconomic models of the neo-keynesian school and focuses on the fact that the imperfection of the financial market prevents the effective functioning of the financial sector. on the one hand, this leads to limitations of cross-sectoral capital flows, on the other one, to a rise in the cost of credit, that is, to the appearance of a premium for external financing, which is paid by enterprises in the real sector in addition to the initial interest rate. the key point of the “lending view” is that the central bank influences not only interest rates but also the volume and cost of the loan (the amount of the premium). the influence is exercised through a change in the welfare of enterprises, which acts as loan support. the relationship between monetary policy and premium derives from the characteristics of the functioning of the credit market. this feature can be represented in the form of a relationship between the welfare of an enterprise and its creditworthiness: the lower the welfare of enterprises, the less creditworthy they are, that is, the higher the premium for them and the lower the possibility of new borrowings. this effect of the influence of monetary policy on the economy is called a “financial accelerator”. it is worth noting that the baltic journal of economic studies 132 vol. 4, no. 5, 2018 “lending view” is most applicable for economies with a well-developed banking system and a high proportion of loans in financing the real sector. moreover, the practical importance of this approach is expressed in determining the special role of information asymmetry in determining the amount of the premium for external financing; it divides the behaviour of large and small companies. the “lending view” has considerable analytical potential in determining the viability of a financial institution, which makes it possible to apply it in microeconomic analysis of the selective influence of monetary policy on individual financial institutions. relatively recently, in the 2000s, a third view – the “supply view” – emerged. the basis of the “supply view” is the supply of production factors. after the formation of a monetary impulse, it is production companies that are the first to react, correcting the needs exactly in the factors of production. thus, restrictive monetary policy lowers the demand for labour, capital and thus leads to a negative production shock. the “supply view” makes it possible to expand the explanation of the work of the transmission mechanism since it views the economy not only from the side of aggregate demand but also from the supply side. this approach has gained special practical recognition due to the fact that it allows studying transformations in the real sector of the economy, to which theory traditionally attributes stationary behaviour in the short term (moiseev, 2013). theoretical and practical analysis of these approaches testifies to the absence of an agreed opinion on the structure of the transmission mechanism. the main reason for the discrepancy in this area lies in the field of the transfer of and control over impulses generated by monetary policy – it creates an initial impulse that is transmitted through the transmission mechanism, without further control over it. in view of the research conditions introduced above, in the process of analysing and evaluating the transmission mechanism channels, particular attention is paid exactly to the channels through which monetary policy maximally impacts the real economy. if we consider this process from a pragmatic point of view, its results should reflect the channel’s functionality in achieving the goal set (investment activation, output growth, exchange rate stability, inflation targeting, multi-targeting, etc.), as well as further features and prospects for operation. thus, the study of the structure of the transmission mechanism must begin with a review of the stages of development of impulses transmitted by monetary policy to the real economy. initially, central bank instruments have an impact on the exchange rate, interest rates, asset prices, and lending terms. at the second stage, there are changes in the nominal expenditures of enterprises and households associated with the correction of prices for financial assets, which in turn leads to a change in the structure of the balance of borrowers, the volume of savings, loans, and investments. the second stage of the correction of market interest rates begins. the third stage is the result of the combined effect of the first two ones and is characterized by the transition to a new economic equilibrium through macroeconomic adaptation, which entails a revision of prices and wages. differences between the channels of money transmission are observed in the first two stages. these differences are based on the nature of the relationship between participants in economic processes – the presence of violations or lack of communication in any part of the transmission mechanism can reduce or even neutralize the results of monetary policy (tuleuov, 2014). as for the channels, through which the monetary impulse of the changes passes, such channels as the interest channel, the foreign exchange channel, the credit channel, the asset price channel, the expectations channel, the monetarist channel, etc., are traditionally singled out. however, in order to obtain more accurate research results, a more rigorous and clear classification of the transmission channels is needed. 4. classification of channels of monetary transmission for effective implementation of promotional monetary policy, a clear understanding of its structure and features of the functionality of the channels declared in the structure is necessary. the approaches to defining the nature and structure of the transmission mechanism considered above demonstrate that the basis for the theories that define the principles of the transmission mechanism operation is formed by the conditions, under which the market operates (perfect/imperfect ones); within this context, traditional and non-traditional channels of the transmission mechanism (sinelnikova-muryleva, 2017) are singled out. traditional channels operate in the absence of market frictions, aberrations, and asymmetries; the functionalities of these channels are described within the framework of traditional models of the macroeconomic theory. imperfect conditions of the functioning of the market are reflected in the functionality of non-traditional (banking) channels, with an emphasis on studying the behaviour of credit institutions. the study of these channels, with consideration for the chosen topics, has a greater practical potential for application since they function under imperfect market conditions, in the presence of information asymmetry in the borrowed funds market, behavioural aberrations of economic agents, which, in principle, characterize modern market conditions. frictions of the financial market do not allow talking about equality in the cost and availability of domestic and external sources of financing for various economic agents. in general terms, the classification of the transmission mechanism channels is shown in figure 1. baltic journal of economic studies 133 vol. 4, no. 5, 2018 in the modern world, many experts are sceptical about studying the neoclassical transmission channels; their arguments are reduced to operating with the fact that the conditions in which they manifest their functionality, by and large, represent a theoretical construction. however, in our opinion, the results of these fundamental developments should be used to solve specific problems. with the help of the ideas outlined in this approach, we can assess the “degree of market perfection”, identify factors of influence on the behaviour of economic entities, and adjust monetary activities. the functionality of these channels, in general, is reflected in the “money view” of the structure and essence of the transmission mechanism. interest channel. the functionality of the interest channel is as follows: promotional monetary policy leads to a decrease in nominal interest rates, which reduces the level of real interest rates, which, accordingly, reduces the cost of capital, which leads to increased investment and further to output growth. the degree of the impact of monetary policy on the real economy through the direct interest rate channel depends on the horizon of the effect of interest rates on the costs of economic agents, which is why the focus in this channel is on the relationship between real long-term interest rates and economic agent costs since it is long-term interest rates that reflect the cost of new investment projects. as a consequence, decisions of economic agents on making investments when changes in interest rates take place are decisions made on the basis of analysis of some long-term prospects. the ambiguity of judgments about the functionality of this channel led to the study of channels that expand the scope of its influence on the choice and behaviour of economic entities. traditionally, they include: tobin’s q channel, the exchange rate channel, and the consumption channel. let us consider the features of the functionality of each of the presented channels. tobin’s q channel. nobel laureate economist james tobin suggested that companies make investment decisions based on the following ratio, now called the “tobin’s q ratio” (tobin, 1969). tobin’s indicator relates the market value of a company (measured by the market price of its shares) to the replacement value of its assets (1): q p c = � (1) where: p is the value of capital assets that is formed in the securities market; c is the replacement value of the company’s assets equal to the amount of expenses necessary to acquire the company’s assets at current prices. tobin believed that the amount of net investment should depend on whether q is more or less than one. non-traditional channels traditional channels interest channel tobin’s q channel exchange rate channel consumption channel credit rationing channel banking channels bank lending channel bank capital channel balance channel money flow channel unexpected price level change channel household liquidity channel risk taking channel information channel deposit channel figure 1. classification of channels of monetary transmission baltic journal of economic studies 134 vol. 4, no. 5, 2018 if q is greater than one, then the securities market values the registered capital at an amount greater than the cost of its replacement. in this case, enterprises can make new investments at the expense of fewer shares that have a high price in the market. the tobin’s q model makes it possible to describe the following transmission mechanism: the result of the promotional monetary policy is an increase in the amount of money in economic agents, as a result of which they are inclined to invest these funds, including in the stock market. the growing interest in investing in the stock market leads to an increase in the value of shares, which, accordingly, increases the q indicator. as a consequence, the cost of new equipment becomes inexpensive relative to the market value of a company, which stimulates companies to make investments and, ultimately, increases output. exchange rate channel (international trade channel). this channel is one of the key channels of the transmission mechanism. in its functionality, parity of interest rates is also included. with lowering the interest rate, the value of domestic assets of a state is also reduced. in comparison with foreign assets, they lose their investment attractiveness. the change in the vector of interests of economic agents towards foreign assets whose value is expressed in foreign currency devalues the national currency. positive results of the devaluation of the national currency are represented by an increase in net exports and aggregate demand. a large number of scientific works are devoted to the investigation of the functionality (working capacity) of this channel (sinelnikova-muryleva, 2017). such interest is caused by its immense importance for monetary policy and its effective implementation. through the exchange rate, formed within the framework of flexible exchange rate formation, this channel is one of the most volatile macroeconomic indicators: it is the first to react to various shocks and economic changes due to the absence of rigidity in the foreign exchange market. empirical analysis of the functionality of this channel makes it possible to identify several significant and important points affecting its effectiveness: the sensitivity of the exchange rate to changes in interest rates, as well as the degree of openness of the economy, since the more open the economy, the greater the importance of the exchange rate channel. in addition, the growth of globalization and openness of economies is an important factor leading to the growth of the importance of the role of the exchange rate channel in monetary transmission. consumption channel. the functionality of this channel allows displaying the actions of monetary transmission in the field of consumption by changing the relative prices in the economy. in addition, its functionality allows identifying several effects, the consideration of which will allow clearer determining the environment of its influence: the substitution effect and the effect of wealth (the income effect). the direction of the substitution effect is always “negative”, i.e. in response to the growth (relative) of the price of a product the consumer reduces its consumption. the direction of the effect of wealth in the general case is not determined and proceeds from an agent’s preferences, as well as from the condition of the initial (original) possession of wealth. the mechanism of the effect of wealth lies in the fact that promotional monetary policy will increase agents’ demand for assets in view of the fact that agents will have more money in their hands and they will strive to spend them, including in the markets of various assets, which leads to an increase in their cost. the consequence of the increase in the cost of assets will be an increase in the financial wealth of a household, which will increase the amount of resources available for consumption. this will stimulate the consumption of economic agents and, as a result, increase aggregate demand. however, when studying the influence of this effect, it is worthwhile to clearly understand that the direction of its influence will depend on whether an agent is a lender or a borrower, as a change in prices redistributes wealth between them. a fall in the price level increases the real value of the debt of a borrower, as a result of which the creditor becomes enriched. the study of the functionality of the non-traditional channels of the transmission mechanism, as already mentioned above, is carried out under imperfect conditions of the financial market, namely in all kinds of credit markets, as a result of which very often these channels are called credit channels. these channels make it possible to explain the compositional effects of monetary policy to a greater extent, as they reflect the increased role of the credit market in the development of the economy and, as a consequence, the transition of monetary authorities to the use of measures of unconventional monetary policy. in general, the functionality of non-traditional channels can be represented as the process of redistribution of limited borrowed funds for both banks and corporations. credit rationing channel. credit rationing is observed in cases where creditors do not issue loans to borrowers willing to pay interest at the rate set, even if they all agree to deposit the relevant funds as collateral and meet all other requirements for their solvency. lenders are confident that a high-interest rate will lead to more rapid growth in bad debts than a low-interest rate. therefore, with the implementation of promotional monetary policy, a low-interest rate makes loans more affordable and raises demand from less risk-prone borrowers. the result will be an increase in the number of solvent borrowers, which weakens the problems of creditors relating to adverse selection. all this is reflected in the rise in lending levels, which stimulates an increase in investment and, further, in output. banking channels. this type of transmission mechanism channels is considered by experts as mechanisms, through which the impact of interest rates on the market baltic journal of economic studies 135 vol. 4, no. 5, 2018 is increased. in addition, the existence of these channels is explained by the fact that economic agents do not always have access to ways of financing investments other than bank loans. banking channels are divided into the bank lending channel and the bank capital channel. the bank lending channel arises as a result of the presence of information asymmetry in the financial market and, directly, banks play a key role in its resolution. information asymmetry in the financial market leads to the fact that, for most of the economic agents, bank lending is the only available source of borrowed resources. this significantly limits the freedom of choice and the interchangeability of resources. empirical analysis has shown that the bank lending channel has the greatest impact on small businesses and households that have no access to alternative sources of financing, unlike large enterprises. the functionality of this channel is that promotional monetary policy increasing reserves and bank deposits, accordingly, increases the volume of a bank’s credit resources, which, given the situation, allows lending to a large number of economic agents; as a result, the growth of investment activity and of aggregate demand takes place. it should be noted that the bank lending channel is connected with the study of the influence of monetary policy on the volume of lending by various deposit institutions. a critical question posed by experts when examining the functionality of this channel is whether monetary policy really has such a significant impact on the supply and price of bank resources (bernanke, gertler, 1995). with a restraining monetary policy, as a result of open market operations conducted by the central bank, the volume of bank reserves, including deposits, is significantly reduced, which leads to a reduction in lending volumes. taking into account this situation, the process of adaptation to new conditions, which directly depends on the rate of substitution of deposits by alternative sources, becomes very important for banks. this situation took place in the united states as a result of “regulation q”; it was characterized by higher reserve requirements and the presence of less developed and liquid markets for banking obligations. however, experts note a decrease in the functionality of this channel due to the simplification or cancellation of a number of institutional constraints, as well as to the rapid spread of financial innovations. bank capital channel. the ideological component of the functionality of this channel is based on the fact that the state of the balance sheet of financial intermediaries affects their credit potential. promotional monetary policy can lead to an increase in asset prices, therefore, external financing for banks becomes cheaper, the risk of losses in the structure of the loan portfolio is reduced, and its quality increases. it is quite logical to revise the active part of the bank balance in the direction of increase. in addition, low-interest rates increase net interest margins and lead to higher profits for banks, eventually improving their balances due to the possibility of reinvesting profits and increasing the return on assets (bernanke, 1988). this will have a positive effect on the investment climate in the state and will help increase output. balance channel. numerous scientific studies conducted within the framework of studying the functionality of the balance channel demonstrate its significance for the implementation of promotional monetary measures for the development of the state economy (bernanke, gertler, 1989). the main emphasis in the studies is put on the study of the potential impact of changes in monetary policy on the state of an enterprise’s balance sheet and its main indicators. it should be emphasized that, as in the case of the bank lending channel, consideration of its functionality takes place in the presence of information asymmetry in financial markets. at the same time, despite the similarity in functionality with the bank capital channel, there is a difference between them, which consists in the fact that, in the first case, balances of financial intermediaries (creditors) are analysed, and in the second one, balances of economic agents (enterprises and households). the mechanism of action of this channel is that during the implementation of incentive monetary measures, the value of the assets of an enterprise increases, which is reflected in the increase in its collateral value and, accordingly, its creditworthiness; at the same time, the share of agents in the authorized capital of the enterprise also increases, which focuses their attention on the development of the enterprise and leads to a drop in demand for risky projects. the share of noncreditworthy enterprises decreases, the probability of non-repayment of loans decreases, information asymmetry decreases, the problem of unfair behaviour is partially levelled off, which leads to increased lending. the study of the influence of the state of a borrower’s balances on his business activity has developed in the theory of “financial accelerator” (bernanke, gertler, gilchrist, 1999). the essence of this theory is that the primary shock that led to a change in a borrower’s balance sheet, as a result of the effect of “financial accelerator”, multiplies many times, affecting his business cycle. very often, in the literature, one can find another channel that complements the analysed one, namely, the money flow channel (sinelnikova-muryleva, 2017). the functionality of the channel with promotional monetary policy leads to a reduction in interest payments on the loan of an enterprise, which increases its money flow, improves its balance and liquidity, as well as the creditors’ confidence in paying the loan. unexpected price level change channel. the functionality of this channel leads to a decrease in the value of a company’s debt obligations in real terms as a result of unexpected growth in stock prices. thus, reducing the debt burden leads to an increase in the company’s real value. baltic journal of economic studies 136 vol. 4, no. 5, 2018 household liquidity channel. the functionality of the channel in question is that, as a result of promotional monetary policy, the prices and the value of an enterprise increase, which in turn influences its investment preferences toward investing in illiquid assets; accordingly, the demand for durable goods and real estate increases, which increases output. risk-taking channel. it should be noted that this channel has received its understanding and development relatively recently. under conditions when interest rates are close to zero, this affects the reduction of bank profits, which leads to the fact that banks are more inclined to invest in risky projects (borio, 2012). it is noted that, in addition to the above, low-interest rates increase the value of assets and collateral, which is reflected in an increase in the bank balance and in the improvement of the financial condition of a borrower, which leads to a reassessment of bank risks. deposit channel. just like the risk-taking channel, it is quite new. its functionality is based on such assumptions as: banks have market power, which is to regulate the liquidity of economic agents; in addition, the value of deposits for agents is determined by their liquidity and security (drechsler, 2014). an example of the functionality of this channel can be the united states, where the growth of the rate for federal funds led to an outflow of deposits due to a disproportionate change in spreads for different types of deposits. analysis of empirical data showed that the interest in highly liquid demand deposits increased more than the interest in urgent deposits. the result is capital flow from deposits into cash, and then the latter is invested in less liquid assets, and not in deposits, but rather in shares or bonds. in a natural way, this reduces the credit resources of banks and the volume of investments and output decreases. information channel. recently, special attention has been paid to studying the information channel of the transmission mechanism; this is due to the fact that the importance of certain channels due to the development of financial markets and the weakening of market frictions is falling. the functionality of this channel is expressed in maintaining by the central bank a certain level of expectations of economic agents through information interventions. supporting a high level of inflationary expectations, the monetary authorities also affect the reduction in the real interest rate, which is well explained by the fisher equation and is considered as the difference between the nominal rate and the expected inflation and leads to an increase in investment activity. 5. modern modifications of promotional monetary policy analysis of modern approaches to the study of monetary policy demonstrates that the functionalities of many channels lose their relevance and significance under modern conditions characterized by economic instability, the unpredictability of emergence of crisis situations, and the presence of contradictory trends. already now, the world economy is characterized as the “new abnormal” in terms of production volumes, economic policy, inflation, the behaviour of financial markets, and the dynamics of prices for key assets (rubini, 2016). as a result, special attention is paid to the effective implementation of non-traditional monetary measures that provide an opportunity to take a fresh look at the already established (traditional) and especially to highlight the functionalities of non-traditional channels. non-traditional monetary measures include: zero interest rates policy (zirp), quantitative easing (qe), credit easing (ce), central bank statements about future intentions/signalling measures (fg – forward guidance), negative deposit rates (ndr), unsterilized foreign exchange intervention (ufxint). each of the presented non-traditional measures represents a derivative of innovative approaches in the financial field and of the functionality of non-traditional monetary channels. zero interest rates policy is a direct outcome of promotional monetary policy; it is based on the functionality of the interest channel and is used during periods of economic downturn. central banks minimize the interest rate, which makes the monetary resources as accessible to all groups of economic agents as possible. the program of quantitative easing is used in conditions of zero/near-zero short-term interest rates when the alternative costs of keeping money are also close to zero; there is the so-called “liquidity trap” that, with increasing money supply, absorbs excess money supply through increased money demand. investment activity is falling, which leads to lower output and neutralizes, ultimately, promotional monetary actions. to overcome this problem, as it has been mentioned above, the quantitative easing program is used, which is used when the interest rate cannot be pushed any lower. this program operates on the basis of various methods for mitigating national reserve requirements: reducing mandatory reserve requirements, introducing new rules for averaging reserves, expanding the list of allowed exceptions in calculating reserve requirements, etc. as a result, the level of money supply increases, which affects investment and output. a distinctive feature of quantitative easing is that its purpose is not to change the interest rate but to increase the money supply. as for credit easing, its mechanism of action is that, on the basis of various methods, for example, through lending to financial institutions, through the provision of liquidity to key credit markets or through the acquisition of long-term securities, various financial markets are stimulated. the application of these measures allows central banks to perform the function of the lender of last resort in a new way. baltic journal of economic studies 137 vol. 4, no. 5, 2018 the effectiveness of the policy of quantitative and qualitative easing can be well traced in the case of well-developed economic countries such as japan and the united states, the analysis of which makes it possible to identify the necessary condition for effective implementation of those monetary measures, namely, a smooth process of bank lending. signalling measures act indirectly through perceptions and expectations of economic agents. the mechanism of the action of signalling measures is essentially based on the immanent results of promotional monetary policy; it is the impact on the level of inflationary expectations on the part of economic entities. in addition, the expectation factors include: expectations from the future policy course, expectations of a relative shortage of various assets and their risks. in addition, it can also be seen in the literature that signalling measures are also called policy commitment or policy announcements (kavitskaya, 2011). the policy of negative deposit rates implies an increase in the money supply by additional injection into the economy through a negative interest rate. the mechanism of action of this policy is that an amount less than the loan amount has to be returned, which increases the amount of monetary resources of the bank and, accordingly, of economic agents. in 2008-2016, against the backdrop of the global crisis, the policy of negative interest rates was introduced on a temporary or long-term basis in countries such as sweden, japan, denmark, italy, switzerland, and the netherlands; also, in 2014, negative rates were introduced by the european central bank. supporters of this policy believe that it can facilitate the emergence of utterly debt-ridden western economies from the crisis. unsterilized foreign exchange intervention is one of the types of official currency interventions that result in changes in the monetary base. in the context of promotional monetary policy, the central bank buys foreign currency and sells the national currency, as a result of which there is an increase in international reserves and an increase in the monetary base and, accordingly, an increase in the money supply. it can be stated that critical changes in the leading countries of the world led to a revision and further modification of promotional monetary policy and, accordingly, of the role of non-traditional channels. it should be noted that the central banks of not only well-developed but also developing countries had to resort to such measures. however, the scope of application of non-traditional monetary measures in developing countries was much smaller. the sets of instruments used by the central banks of developed and developing countries were also significantly different. a very important point that demonstrates the need for such a careful study of all approaches to and views of the structure of the transmission mechanism of promotional monetary policy is that there is no single recipe for its application. one cannot just limit oneself to the division of countries in well-developed and developing ones. a certain economic community is present; on the other hand, well-developed countries have a high level of institutional development; their structure of financial markets and their scheme of the interaction of fiscal and monetary policies, their high standard of living etc. are fundamentally different than those of developing countries. and, despite the growing role of economies of developing countries, it is not possible to overcome certain aspects of the ideological component of their development in the near future. the study of the fundamental bases of the strategic development of developing countries demonstrates either the absence of a systematic approach, or it is considered only at the theoretical level as such, without further implementation in real economic life. as a result, we can observe a number of negative and, what is not unimportant for the implementation of effective monetary measures, destructive consequences; they include, at the methodological level: the absence of a single conceptual apparatus, the absence of a unified system of indicators for assessing effectiveness, the absence/non-use of adequate forecasting techniques, imperfection of methodological tools, insufficient application/non-use of economic-mathematical methods; at the organizational level: the absence of an adequate regulatory framework, nominal and declarative nature of measures, the absence of effective monitoring, control, and coordination mechanisms, lack of accountability, a high degree of bureaucratization, inertia and lack of flexibility, the complexity of the planning procedure, etc. however, with a deeper analysis of the causal relationships, we can state more complex causes of destructive nature, which initially level out practically any actions with regard to the system approach, namely, the absence of the integrated combination of interests of all social and economic spheres: state-business-society. moreover, the study of each component of the presented triad, in developing economies, in most cases, indicates that they are also in the process of formation – without clear contours, rules, and principles of functioning, since a country that is at the stage of transforming the ideological foundations passes a sufficiently long stage of their formation, which is often expressed in conflicts of interests and the adoption of destructive solutions at all levels. in fact, this explains the absence or an insignificant number of really adequate, and therefore effective, promotional monetary measures since they are developed taking into account clearly arranged and functioning elements, which, a priori, is not true. to introduce something in order to obtain a maximum effect is possible only if there is a “contact”, feedback, and clear rules between the participants in the process. at the same time, when studying the transmission mechanism in developing countries, it is necessary to baltic journal of economic studies 138 vol. 4, no. 5, 2018 understand that the influence of destructive factors is strengthened by such aspects as: the formation of the transmission mechanism occurs under the conditions of a continuous change in the economic behaviour of agents, of the formation and development of the technological and institutional structure; the influence of a huge number of exogenous and endogenous factors, for which reason the central bank must take into account the consequences of economic shocks arising independently of its own influence, as well as the impact of technological and structural changes in the transformational economy and changes in the behaviour of economic entities. empirical analysis of monetary policy and, accordingly, the transmission mechanism in most developing countries has shown that the most significant channels are the exchange rate channel, the interest channel, and the credit channel. the functionalities of these channels have been discussed above, but their reach is limited by such conditions as: a low level of financial market development, high public sector share, a high degree of dollarization of financial assets, exposure to macroeconomic shocks. the result of the influence of these factors is reflected in the functionality of each of them. despite positive consequences of the devaluation of national currency in the form of growth in net exports, this leads to a decrease in net wealth, makes investment less attractive, which affects the amount of financial resources attracted and results in lower investment and output. as for the interest channel, its impact on the real economy is rather insignificant, primarily due to a low level of the development of the financial market. also, in economies with high inflationary processes, the effect of this channel is neutralized by the high volatility of inflation. the range of the functionality of the credit channel is often limited by the functionality of the banking channels (the bank lending channel and the bank capital channel). the functioning of this channel is not efficient enough due to the unfavourable credit climate, high risks, the absence of solvent borrowers and tight price and non-price lending conditions amid a general decline in the profitability and solvency of borrowers. 6. conclusion the conducted study clearly demonstrates that, in the process of changing financial relations, the significance of the transmission mechanism channels in the process of implementing promotional monetary policy changed, too. at the same time, it is expedient to single out the reasons that lead to a change in the role of some channels of monetary transmission in relation to others. the first group includes institutional changes in financial markets. we should also note that the structure of financial markets is of key importance from the point of view of the functionality of individual channels of monetary transmission, as well as of the effectiveness of monetary policy in general. the second group of reasons would include changes in monetary policy modes to achieve the corresponding goal. in particular, a transition from one mode of monetary policy to another is usually associated with the fact that the central bank starts using different instruments of monetary policy. the most significant factor in the third group is the emergence of the socalled expectations channel, which plays an increasing role in terms of monetary transmission, reducing the importance of traditional channels. modern research and developments are not limited to the above structure of the transmission mechanism channels. moreover, their list is constantly replenished, which is indicative of the existence of transformational processes affecting the financial sector. the approaches to the structure of the transmission mechanism and the functionality of its channels, determined in this article, make it possible to assess the effectiveness of implementing monetary policy. further research will be aimed at determining the impact of monetary policy modes used on the structure of monetary transmission. references: semiturkin, o. n. (2013). kharakteristika transmissionnogo mehanizma denezhno-kreditnoy politiki v razlichnyh ekonomicheskih shkolah [characteristics of transmission mechanism of money and credit policies in different economic schools]. vestnik omskogo universiteta, 3, 228-233. (in russian) mishchenko, v. i., mishchenko, s. v. (2015). udoskonalenniia dii kanaliv transmissiinogo mehanizmu hroshovo-kreditnoi polityky v ukraini v umovah perekhodu do targetuvaniia infliatsii [improving of the acting of the channels of transmission mechanism of money and credit policies in ukraine in conditions of transition to inflational targeting]. retrieved from: http://www.irbisnbuv.gov.ua/cgibin/irbis_nbuv/cgiirbis_64.exe ?i21dbn=link&p21dbn=ujrn&z21id=&s21ref=10&s21cnr=20&s21stn=1&s21fmt=asp_ meta&c21com=s&2_s21p03=fila=&2_s21str=ape_2015_1_52 (in ukrainian) moiseev, s. r . (2013). transmissionnyi mehanizm denezhno-kreditnoy politiki: osnovnyye polozheniya [transmission mechanism of money and credit policies: conceptual issues]. vestnik pridnestrovskogo respublikanskogo universiteta, 3. (in russian) tuleuov, o. a. (2014). transmissionnyi mehanizm vozdeistviya netraditsionnogo (nestandartnogo) instrumenta denezhno-kreditnoi politiki – kolichestvennogo smyagcheniya na ekonomicheskuyu aktivnost [transmission influencing mechanism of non-traditional (substandard) instrument of money and credit policies]. retrieved from: https://cipe.kz/ ru/articles/macroeconomics.html?id=30 (in russian) baltic journal of economic studies 139 vol. 4, no. 5, 2018 sinelnikova-muryleva, e. v. (2017). analiz transmissionnyh mehanizmov denezhno-kreditnoy politiki banka rosii v usloviyah perehoda k infliatsionnomu targetirovaniyu [analysis of transmission mechanism of money and credit policies of the bank of russia in conditions of transition to inflational targeting]. moskow. (in russian) tobin, j. a. (1969). general equilibrium approach to monetary theory // money creditbank, 1(1), 15-29. bernanke, b. s., gertler, m. (1995). inside the black box: the credit channel of monetary policy. the journal of economic perspectives, 9(4), 27-48. bernanke, b. s. (1988). credit, money, and aggregate demand. american economic review, 78(2), 435-439. bernanke, b., gertler, m. (1989). agency costs, net worth, and business fluctuations. american economic review. bernanke, b. s., gertler, m., gilchrist, s. (1999). the financial accelerator in a quantitative business cycle framework. handbook of macroeconomics, 1, 1341-1393. borio, c., zhu, h. (2012) capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism? journal of financial stability, 8(4), 236-251. drechsler, i., savov, a., schnabl, p. (2014).the deposits channel of monetary policy. ssrn. rubini, n. (2016). ‘novaya nenormalnost’: chem bolna globalnaya ekonomika [new abnormality: what illness has the global economics?]. retrieved from: https://www.rbc.ru/opinions/ economics/05/02/2016/56b444899a794749fb9b8f61 (in russian) kavitskaya, i. l. (2011). finansovyii krizis i politika tsentralnogo banka [financial crisis and central bank policy]. journal of institutional studies, 3(4), 27-33. (in russian) baltic journal of economic studies 86 vol. 5, no. 2, 2019 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: valentynakutsyk@gmail.com 2 lviv polytechnic national university, ukraine. e-mail: leonidostapenko89@gmail.com 3 national university of state fiscal service of ukraine, ukraine. e-mail: pudrik.nusta@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-2-86-89 development of procedures for ensuring the repayment of tax debt as a guarantee of the formation of an investment climate valentyna kutsyk1, leonid ostapenko2, denys pudryk3 abstract. the right of a person to engage in economic activity on the principles of free competition, in accordance with legal requirements, is a guarantee of the prosperity of a socially oriented country. since basic taxes and payments, which are used to set budgets of different levels, are collected from the results of such economic activity. in order to provide for the systematic performance of this constitutional obligation by taxpayers, control in the sphere of taxation, customs sphere, the corresponding state supervisory bodies function. the activity of these authorities in the majority of countries is stated as such that is aimed first of all at the provision of services to subjects of taxation and implementation of control measures on the basis of risk-oriented approach, and in the case of detection of violations – the application of tools directed to their termination and ensuring maximum prevention of the negative consequences of such violations. it is hardly possible to deny the importance of the formation of adequate tools for the control entities in this area. this being said, the quality of such tools is characterized, on the one hand, by indicators of the provision of expected budget revenues, which will allow implementing approved government programs for social protection of the population, on the other – by the maximum focus on preserving the possibility of continuing economic activity by subjects of taxation. according to data of the world bank that estimates the ease of doing business in 190 countries of the world in the framework of the annual survey, ukraine holds 71st position by 10 indicators (including tax administration). in order to improve mechanisms of tax administration, especially supervisory bodies’ tools for ensuring the repayment of tax debt, it is unconditional to study and search for ways of perceiving and introducing the positive experience of these countries. methodology. the achievement of the formulated purpose is ensured by the use of the cognitive potential of the system of philosophical, general scientific and special methods. given the aspiration for developing security measures for the repayment of tax debt, which are generally accepted and effective in terms of a specific legal system, comparative-legal method has become the main one as it allowed determining development directions of these measures taking into account the experience of countries with rather stable indicators of the economy. methods of grammatical review and interpretation of legal rules have contributed to identifying gaps and other shortcomings in legislation that regulates the repayment of taxpayers’ debts and developing proposals to improve them. practical implications. the practice of supervisory bodies’ activity can be effective provided that tools are clearly defined in laws and regulations and are understandable (both in terms of content and procedure) to all participants in the legal relationship on ensuring the repayment of tax debt. taking into account new laws of social and economic realities that are changing rapidly under the accelerating development of information technologies, not only ukraine but also other countries need to improve the specified area of activity of the supervisory bodies. key words: supervisory bodies in the economy, tax administration, effectiveness of tax debt repayment procedures, tax lien, quality of services for taxpayers. jel classification: h21, h24, h71, k34 baltic journal of economic studies 87 vol. 5, no. 2, 2019 1. introduction the prosperity and proper level of social protection of the population in most european countries are connected with the systematic, continuous, and responding to the anticipated forecasts filling of budgets of different levels, achieved through a timely performance by taxpayers of their constitutional obligation to pay taxes, levies, and other obligatory charges. in states with a high standard of living, a highly developed economy, and a low corruption perceptions index, there is also a high level of timely voluntary payment of tax liabilities, either independently determined or accounted by the controlling body. at the same time, such a level of activity of taxpayers and tax discipline is associated with key provisions in the system of tax administration, which first of all include legal regulation mechanisms for the taxpayer’s tax debt repayment procedure. taxpayer’s tax debt is rather a complicated economic and legal category. in any state, there is an unconditional well-considered approach to the formation of a mechanism for managing tax debt, including the application of a set of measures, namely: preventive measures – to eliminate circumstances that may lead to the occurrence of a tax debt, measures to ensure the performance of obligations to pay taxes by taxpayers, and direct measures for the collection of tax debt. 2. classification of tax debt repayment measures in georgia, lithuania, estonia, latvia, republic of azerbaijan, kazakhstan, and ukraine in the tax legislation of the vast majority of postsoviet countries, it is foreseen to fulfil the tax obligation: voluntarily by the taxpayer and in a compulsory manner, in the case of non-fulfilment of the tax liability by the taxpayer within the term established by law. with regard to the latter situation, one can distinguish the initial stage of proceedings for the compulsory repayment of tax debt, which can be related to fixing the fact of the taxpayer’s notification of the tax debt. for example, in azerbaijan, in accordance with para. 65.1 of art. 65 of the tax code of the republic of azerbaijan, if the taxpayer fails to fulfil the tax liability within the term specified by the tax code of the republic of azerbaijan, the tax authority sends to the payer a notice of charge within five days on taxes, interest, and financial penalties applied, accrued or recalculated in accordance with the tax code of the republic of azerbaijan. already the next step of the supervisory body is to provide a credit institution or a person who carries out banking operations with an order to collect arrears of taxes, interest, and financial penalties from the current or other accounts of the taxpayer in national or foreign currency, which is an implementation (payment) document (tax code of the republic of azerbaijan, 2000). it should be noted about the difference in the terms provided to the taxpayer to pay a tax debt (from 10 to 60 days) after informing about its existence and during which the controlling authority does not apply the enforcement measures for the amounts indicated. the maximum term is provided by the tax code of ukraine and is 60 days, which, in the opinion of many researchers and practitioners, is not reasonable enough, because due to such an approach, the implementation of the tax liability is delayed, quite often taxpayers use the provided time to conceal funds and other property, at the expense of which further tax debt can be secured. after informing about the existence of tax debt, as a rule, on the next working day, the controlling body is obliged to continue with the application of security measures. the lists of measures for securing and enforcing the tax debt vary considerably. for example, in georgia (in accordance with article 238 “securing tax collection compliance by the tax authority”), it is provided that in order to secure tax collection compliance, the supervisory authorities apply the following measures: imposing a tax lien/mortgage; levying a tax on a third person; seizing property; selling seized property; presenting a collection order to a bank account; collecting cash from the cash register of the taxpayer. at the same time, it is important to focus attention on the possibility provided to the supervisory body to determine the order of application of the said measures, unless otherwise provided for by the tax code (tax code of georgia, 2010). unlike the abovementioned provisions, the tax authority in ukraine, which is currently in a state of regular reform, not only has no such a specifically described instrument but is also limited in choosing the procedure for applying tax debt security and repayment measures. analysis of the provisions of laws and regulations of other countries (in particular, estonia, latvia, lithuania, azerbaijan, and kazakhstan), which regulate the order of application of tax debt enforcement measures, allows suggesting that the most widespread are the measures by which, firstly, the information on debt recognition is recorded, the opportunity for the taxpayer to choose a support provider or to take advantage of the possibility of transferring the terms of payment. after that, the supervisory authority has the right to block funds on the taxpayer’s accounts in banks, without permission to commit such actions in court (except for the procedure provided for by the tax code of ukraine). also, security is provided by establishing a restriction on the alienation of immovable and movable property. 3. features of measures to prevent the formation of tax debt and ensure the repayment of already formed one attention should be paid to such procedures that, according to the purpose of the application, can be contributed as to measures preventing the formation baltic journal of economic studies 88 vol. 5, no. 2, 2019 of tax debt, so to measures ensuring the repayment of already formed one. in the majority of countries, these are measures, the application of which is initiated by a taxpayer itself. in accordance with the tax code of ukraine, in the presence of the established list of circumstances specified by the cabinet of ministers of ukraine, a taxpayer may be granted with instalment, deferral of monetary obligations or tax debt. these are the means of collateral consisting in transferring the terms of payment of taxpayers’ money liabilities or tax debt at a rate equal to the amount of 120 percent annual discount rate of the national bank of ukraine acting on the day of the decision of the supervisory body to make a decision on instalment, deferral of monetary obligations or tax debt (tax code of ukraine, 2010). the tax code of estonia provides that the tax administrator, upon request of the taxable person who is experiencing the complication of tax payment, has the right to arrange payment of his tax debt on the instalments, as well as the payment of such a known liability, which term has not yet come. the subject of taxation provides a reasonable request and a payment schedule to get instalment (article 111 of the ta of estonia) (taxation act of the republic of estonia, 2002). the guarantee of the application of such measures, called the instalment and deferral of a tax liability or a tax debt, is called a lien (sometimes the name is specified as a tax lien) or a guaranty, according to the legislation of ukraine – only a tax lien. it should be noted that the legislation of ukraine restricts the taxpayer’s right to use the guaranty, rather common and that is actively used in other countries. obviously, such restrictions once again raise the issue of introducing alternative security measures with the involvement of the third parties, which require improvement of legal regulation and control over the activities of banks and other financial institutions in the country. it is important to note the reasonableness of the approach of the estonian legislator, who has put measures to secure and enforce the tax liability, including the repayment of tax debt, in one chapter (chapter 12 “security”). among these securities, there are provided: surety, an amount of security paid into the bank account designated therefor as a deposit; a registered security over movables or a mortgage established for the benefit of the state, a rural municipality or a city (article 122) (taxation act of the republic of estonia, 2002). a tax authority has the right to issue an order to a credit institution for the seizure of the bank account of a debtor or for the transfer of money from the bank account of a debtor to the bank account designated therefor in the amount of the tax arrears. a credit institution is required to comply without delay with such order for the seizure of the bank account of a taxable person. if the amount in the bank account is smaller than the amount to be transferred according to the order of the tax authority, the credit institution is required to comply with the order in an amount equal to the amount in this bank account and further receipts of money in the bank account of the debtor (article 131) (taxation act of the republic of estonia, 2002). if we turn to the tax code of ukraine, then, unfortunately, we can again state that the current legal procedure is different from the given one since the supervisory body itself has the right to make decisions only in relation to the application of the tax lien of the taxpayer’s property, that being said, the code states that if the taxpayer does not allow the tax authority to make a property inventory of such a taxpayer in tax lien and/ or fails to submit the documents necessary for such an inventory, the tax authority draws up an act of refusal of the taxpayer from property inventory in tax lien and appeals to the court to stop cost transactions in the taxpayer’s accounts, prohibit alienation of property by such a taxpayer, and oblige such a taxpayer to allow the tax administrator to conduct property inventory in tax lien (tax code of ukraine, 2010). the relevant restrictions on the supervisory authority’s powers under the legislation of ukraine are also discussed during the characterization of measures for the compulsory collection of tax debt. the analysis of court decisions on the resolution of tax disputes allows indicating systematic practical problems related both to the specified restrictions and to the gaps in the formulation of legal regulations (first of all, provisions of the tax code of ukraine) regarding types of security measures and measures to collect tax debt, procedures for their application. scientists are talking about such problems (tylchyk, 2011); their proposals remain unconsidered at the level of legislation, though. procedures for tax debt repayment are differentiated depending on the type of taxpayer. there are: repayment of a tax debt of legal entities (organizations) and individuals-entrepreneurs; repayment of a tax debt of individuals who are not subjects of economic activity. depending on the subject, who is obliged under the law to decide and repay a tax debt, the following procedures are allocated: a) by judicial procedure. when the supervisory body in order to apply the procedure for repayment at the expense of the taxpayer’s property must apply to the court and obtain a court decision on the repayment of tax arrears from the taxpayer. b) under administrative procedure. the supervisory body independently applies procedures for taxpayer’s tax debt repayment but, for making an appropriate decision, it pre-appeals to the court for a permit; the taxpayer has the right to appeal such actions in court. the judicial procedure for making a decision on the application of measures to repay tax debt, as the researchers claim, guarantees a more objective consideration of the issue on a tax debt and the validity of claims of the supervisory body. at the same time, the case takes place on the principles of competition in the process, where the taxpayer more actively protects the baltic journal of economic studies 89 vol. 5, no. 2, 2019 rights. such an order is more complex for supervisory bodies and requires of them good legal preparation, consideration of the case takes a considerable time. the burden on the judicial system considerably increases, and consideration of such a case requires a judge of a high level of qualifications in the field of taxation. 4. conclusions processes of introducing new forms of interaction between the state and taxpayers are in constant development, which today is seen in an attempt to put forward a leading idea, the essence of which is to establish and observe partnership relations and socially useful results. summarizing the above, one can conclude that countries with a legal system close to ukraine in the issues of regulating the types and procedure for applying the tools aimed at ensuring the repayment of tax debt go through reformatting the basic approaches depending on the chosen priorities of state development at a particular historical stage. if we reflect the logical course of development of the tools of supervisory bodies in the field of taxation, in particular, the procedures for ensuring the repayment of tax debt, then two main ways can be presented. the first one – to establish an institution of security means, which are maximally aimed at eliminating the alienation of the taxpayer’s property (including funds and valuables in bank accounts). the decision on the use of these tools is made by the supervisory authority subject to the development of systemic and qualitative control, in the first place – judicial. the second one – to develop a set of security means aimed at creating the conditions for the continuation of the taxpayer’s economic activity and expanding the circle of subjects involved in making the decision to select a specific security measure in order to exclude the occurrence of high corruption risks in the activities of supervisory bodies in this area. references: ukraine has risen to 5 positions in the ranking of doing business-2019. retrieved from: https://biz.liga.net/ ekonomika/all/novosti/doing-business-2019-ukraina-podnyalas-na-5-pozitsiy tax code of georgia. retrieved from: https://matsne.gov.ge/ka tax code of the republic of azerbaijan (approved by law of the republic of azerbaijan on july 11, 2000. № 905-iq). retrieved from: http://www.taxes.gov.az/modul.php?name=qanun&cat=3&lang=_rus tax code of ukraine. law of ukraine on 02.12.2010 № 2755-vi. verkhovna rada of ukraine. gazette of the verkhovna rada of ukraine (gvr), 2011, № 13-14, № 15-16, № 17, art. 112. retrieved from: https://zakon.rada.gov.ua/laws/ show/2755-17#n1370 tylchyk, v. (2011). administrative and legal mechanism for the resolution of tax disputes: thesis for cand. sc. ( jurisprudence): 12.00.07. irpin. taxation act of the republic of estonia (2002). retrieved from: https://v1.juristaitab.ee/sites/www.juristaitab.ee/ files/elfinder/ru-seadused baltic journal of economic studies 145 vol. 5, no. 5, 2019 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: iryna.prykhodko2015@gmail.com orcid: http://orcid.org/0000-0002-3366-1185 researcherid: v-6261-2017 2 ivan franko national university of lviv, ukraine. e-mail: ohinok.solomiya@gmail.com orcid: http://orcid.org/0000-0001-5462-5362 doi: https://doi.org/10.30525/2256-0742/2019-5-5-145-150 factors affecting franchising development in the economy of the european countries iryna prykhodko1, solomiya ohinok2 abstract. the purpose of the study is to distinguish and analyze the factors that influence the development of franchising in the globalized system of world economic relations. the usage of franchising as a mechanism to activate the innovative activity in ukraine will increase the effectiveness of innovation introduction in the economy. methodology. the research is based on the scientific works and researches of domestic and foreign scientific. the methodological grounds for the study are general scientific and special-scientific methods, knowledge. the comparative method was used to compare the growth rate of franchising in different countries. the statistical method was used to establish data that shows franchising development in different economies. the interpretation was used to explain the results of the empirical study. the method of grouping and classifying was used to characterize the ratio of the leading industries in using franchising and types of franchises. abstract-logical and graphic interpretation was used in the study of peculiarities of franchising development strategies. method of analysis and synthesis helped to formulate conclusions. results. a franchise form of business activity organization will enhance the efficiency of the ukrainian economy and increase the competitiveness of national products in the european market, therefore the franchising strategies of european companies’ entry on the ukrainian market were analyzed. in the context of integration, the efficacy of the franchise tool for business in ukraine was proven. practical implications. the study is devoted to a detailed analysis of how the network age affects the franchisor’s network size, and it is proven that the older the franchisor is, the more franchise points it has. it is analyzed that with the increase of all these indicators, the network size grows, and the percentage of own points has a little effect; a franchise fee also increases according to the franchise network size; the amount of royalty depends on the investment level and the franchise network size. value/originality is the theoretical and empirical study of factors influencing the development of franchising. the highlighted positions can be used for further study of franchise development. key words: franchising, franchisor, franchisee, franchise fee, royalty, franchise outlets. jel classification: f23, m21 1. introduction the modern world economy is characterized by a high degree of globalization and the integration of not only economic life but also the problems of mankind closely related to it. since national boundaries are becoming less important, the distinction between countries’ economies is eroded, and internationalization and transnationalization contribute to the convergence of national economies, the formation of economic unions and single economic space; among global challenges, there is environmental degradation, which is under a strong influence of devastating economic activity, is of the central importance. one of the effective instruments for the transition to states’ innovative development, therefore, to ensuring their sustainable development is franchising, which promotes the strengthening of economic ties between countries at the present stage of the development of world economic relations, penetrates virtually all spheres of economic activity and is one of the most effective and democratic ways to go beyond national markets. franchising favours the strengthening of economic relations between countries at this stage of their development, as today it is involved in almost all areas of economic activity and is one of the most effective and democratic ways of transcending national markets. due to the above, the issue is relevant to the study. although franchising is considered to be a relatively new kind of activity arrangement, it is baltic journal of economic studies 146 vol. 5, no. 5, 2019 a dominant form of doing business both in the united states and europe, and its growth rate becomes more and more significant every year. in terms of international and continental integration, the issue of increasing the number of small and medium-sized enterprises offering their products under certain conditions becomes especially important. at the stage of the development of world economic relations, franchising facilitates to strengthen economic ties between countries and has penetrated almost all economic activity spheres; it is one of the effective and democratic ways of going beyond national markets. under modern conditions of market fierce competition, low awareness and relatively limited financial capacities, franchising is a powerful and effective tool to address these issues. it is well known that franchising promotes the business, becomes more informed, and it also weakens fierce competition in a particular segment of the market. this phenomenon can be explained by the fact that the market economy is mainly formed by large enterprises and small and medium businesses. the first ones can stabilize the economy and influence the development of scientific and technological progress, and small and mediumsized enterprises are quite mobile and able to form a competitive environment. 2. analysis of recent research and publications the principles of the scientific substantiation of franchising as a progressive method of business were laid down by g. j. bolt, yu. bondarenko, j. evans, b. karloff, d. kaufman, j. kornai, j. stiglitz, enhanced and complemented by m. woodrow, v. dovhan, d. klein, r . martin, m. mandelson, a. minkler, d. north, i. rykova, j. fielding, j. henson and others. a significant contribution to the franchising issue development was made by the following ukrainian scientists: o. kuzmin, d. baiura, o. bilorus, v. budkin, i. burakovskyi, l. halperina, n. hrushchynska, m. dudchenko, n. komar, a. kredisov, d. lukianenko, v. novytskyi, ye. panchenko, yu. pakhomov, o. plotnikov, a. poruchnyk, a. rumiantsev, s. sidenko, yu. spektorov, o. trushenko, a. filipenko, yu. fedun and others. the principles of ecological franchising are substantiated in the papers of i. illiashenko. therefore, the main purpose of this study is to distinguish and analyze the factors that influence the development of franchising in the globalized system of world economic relations. the urgency of the study is intensified in the context of the recent appearance of franchising in general and in the ukrainian market; an insufficient number of researches on the mentioned topic of domestic scientists and the need to increase the economic potential of our state as soon as possible to ensure a decent position in the world market. 3. franchising as a special form of business organization in european countries franchising as one of the most popular ways to conduct and expand business provides both parties of a franchise contract with undeniable advantages. a franchise strategy is the fastest and easiest way to penetrate foreign markets. the role of a franchise strategy as an instrument of sales network expansion is growing, since an increase in the number of franchise points contributes to the company’s rapid development. franchising is a product of intellectual property, which is realized at the expense of domestic investors and allows enterprises to create a network with a single brand name inside and outside the european union. franchising is popular because it creates favorable conditions for expanding networks for goods sales both in domestic and foreign markets and allows raising the number of missions in a short time and at a low cost. if franchising business is developing within a country, it means the attraction of foreign direct investment that meets the needs of businesses for limited resources and allows them to improve the quality of their products and increase competitiveness in general. franchising is recognized in the world as the most progressive form of doing business. franchising attractiveness is determined primarily by its transparency and complexity. such a business strategy offers great prospects, since it enables to attract foreign investment from different countries to develop one industry, as well as to implement high standards (stawicka, 2009). the role of franchising in europe is growing every year, as on the basis of the single european market membercountries have received significant benefits connected with the intensification of international production and promotion of small and large companies. analyzing the dynamics of the growth of franchises in europe, one can see that in each country it is different and it is not surprising, because there are countries such as great britain, france, italy, belgium for which franchising is not a new phenomenon but fairly highly developed and widespread, whereas for example in poland, it has gained great popularity only in recent years. according to the report on the franchise market in poland, which was prepared by the company profit system, the dynamics of the number of franchise outlets over the past 10 years has been continuously growing. in previous years the polish franchise market was mainly represented by franchise systems belonging to catering, but now the development of concepts in the service field has accelerated that significantly brings poland to the highest european standards, which are characteristic of european markets (european franchise federation, 2019). considering the leading industries in europe with the use of franchising in general, then their ratio can be defined as follows: fast food restaurants – 53%; hotel business – 14%; full service restaurants – 11%; service sector – 8%; retail trade – 6% (figure 1). baltic journal of economic studies 147 vol. 5, no. 5, 2019 the country’s acquisition of the membership in the eu promotes the spread of franchising as a tool to increase the number of goods sales networks, as it is the opportunity for national firms to enter large and small foreign markets (figure 2). it is worth noting that the franchise european market stands out for its special features and is disposed to such trends as: – the increase in franchise subsections within the network that is an increasing number of franchisees are trying to open as many outlets of their franchisors as possible; – the internationalization of european franchising is enhanced, it is promoted not only by transcending the country of origin by a certain franchise network, but also by the membership in the european union; – increased usage of new technologies; – the establishment of franchise associations in each country of europe. comparing the dynamics of the number of franchise outlets in ukraine and poland, one can see that franchising is developing much more slowly in our country despite the fact that over the last eight years in our country there has been the positive dynamics of the development of franchise networks. the franchising market in ukraine is presented mainly by brands of national origin; however, european franchise networks occupy 24% of the market. in the conditions of low innovation activity of our state, it is important to use franchising, which acts as one of the forms of financing high-tech activities. adopting the experience of european countries, ukraine will 53% 14% 11% 8% 6% 0% 10% 20% 30% 40% 50% 60% figure 1. the ratio of the leading industries in using franchising in europe source: international franchising : the european union, 2018 20,00 40,00 60,00 80,00 100,00 120,00 140,00 160,00 figure 2. growth rate of franchising in the eu member-countries in 2018 source: european franchise federation, 2019 baltic journal of economic studies 148 vol. 5, no. 5, 2019 have more chances to increase the competitiveness of the economy in all and take a favorable position in the international market. moreover, franchising is the most democratic instrument of doing business, as developing its own franchise network the franchisor brings not only his brand and production methods but also high standards, which his goods correspond with, to new markets and territories. also, it is worth noting that franchising is a very effective method of expanding sales networks in overseas markets since it is an active and very common way of doing business that is going to ukraine from the european union. the most widespread in ukraine is merchandise franchising − 181 offers, followed by service franchising − 111 offers, business format − 90 and production – 23 (figure 3). among domestic franchises, 77 − service, 69 − merchandise, 58 – business format and 10 − production franchises. among foreign ones, the situation is somewhat different: 112 − merchandise, 34 − service, 32 – business format and 13 – production ones. the exclusive rights to operate in the country or even in the region are also analyzed; with 118 franchisors of 405 franchises are willing to provide such rights to their franchisees. among these 118 proposals, 89 are foreign, and only 29 are domestic ones. this is due to the fact that master franchises are usually used by the franchisor that goes to a new market. franchise fees have a fairly wide price range − from its total absence to a fairly significant price of 100,000 dollars and more. the same applies to the investment while starting a business: from 20 dollars to over 1 million dollars. it is noteworthy that mostly there are no franchise fees in franchises of merchandise franchising, as the franchisor receives main income from the sales of their goods through franchisee shops and royalty payments. the average cost of the analyzed franchises (a franchise fee) is 5,525 dollars, investment − 45,407 dollars. the investment capacity of all franchises for one business point (excluding a potential one) is 11,896,682 dollars, and with a franchise fee − 13,322,098 dollars. location requirements are often one of the main conditions of franchisors, due to their concern not only about income but also about the development and maintenance of the company’s prestige as well as compliance with a business plan. retail stores, their own premises and offices are quite popular among the analyzed franchises, confirming the distribution by business categories. the following is a variety of locations and the franchisor’s requirement frequency: the retail store − 163, own premises − 96, the office − 86, the restaurant − 67, booths − 45, shopping streets and shopping centers − 13, work at home − 12, the vehicle – 11. frequently, the franchisor offers several franchise packages that differ in many conditions, one of which is location. this is most commonly used in public catering when several formats of retail outlets, from a small vehicle to a restaurant, are offered. among 43 franchise categories in the market, there are the following franchises: retail trade − 158, catering − 86, training − 20, servicing − 19, delivery − 17, printing and design − 11, distribution − 9, travel and tourism − 8, financial services − 8, beauty − 8, promotion and advertising − 7, entertainment and events − 7, production − 7, repair and maintenance − 6, food − 4, internet services and communication − 4, sport and fitness − 4, health care and medicine − 4, chemical industry − 4, media − 4, children and infants − 3, electrical equipment − 3, cleaning − 3, vending − 2, legal services − 2, agriculture − 2, real estate agencies − 1, design and architecture − 1, recruitment − 1, photography − 1, consulting services − 1, animals – 1. the fact that the number of franchises in categories is larger than the franchises analyzed is because some offers have several packages, or one and the same franchise merchandise 45% service 27% business format 22% production 6% figure 3. types of franchises in ukraine source: asotsiatsiya franchayzynhu ukrayiny baltic journal of economic studies 149 vol. 5, no. 5, 2019 belongs to several categories. the most common among ukrainian franchises is public catering − 58, retail trade − 55, servicing − 11, delivery − 11 and studying training − 9. the most common among foreign franchises is retail trade − 103, public catering − 28, studying and training − 11, servicing − 8 and printing and design − 7. 4. the results of testing of factors affecting franchising development model in the franchising analysis, dependent variables can be represented by: size of a network, rate of franchise, royalty and rate of own franchise points etc. table 1 the main factors affecting the size of a franchising network development dependent variable – size of a network model 1 model 2 model 3 age 147,0664* (1,974938) 206,1044** (2,725401) rate of franchise fees 0,248064*** (2,867457) investment level 0,013387* (1,776396) royalty 72301,87** (2,240383) rate of own franchise points -457,3140 (-0,083973) source: made by the authors table 1 shows the values of coefficients and t-statistics (in brackets). * means significance at alpha = 0.1, ** − significance at alpha = 0.05 and *** − significance at alpha = 0.01. the study shows that the size of a franchisor’s network is affected by the network age (the number of years in the market). an additional year of operation in the market on average brings 147-206 additional network points. networks with a higher investment level, a higher rate of franchise fees and royalty are also expanding more actively. extra thousand dollar investment means a larger network size by 13 points, an additional 100 dollars of a franchise fee means a larger network size by 24 points, and additional 1% of royalty means a larger network size by 723 points. % of their own points does not significantly affect the size of a franchise network. table 2 shows the values of coefficients and t-statistics (in brackets). * means significance at alpha = 0.1, ** − significance at alpha = 0.05 and *** − significance at alpha = 0.01. the amount of a franchise fee is affected by the network age (the number of years in the market). an additional year of work in the market assumes additional 239-314 dollars of a franchise fee. networks with a higher investment and royalty rate have also a higher franchise fee. additional required thousand dollars of investment involves a larger amount of a franchise fee by 29-37 dollars, and an additional 1 dollar of royalty provides a larger amount of a franchise fee by 15-18 dollars. also, the amount of a franchise fee is affected by the size of the network itself. each additional point allows increasing a franchise fee by 0.99-1.39 dollars. table 3 the main factors affecting the royalty in the franchise network (case 1) dependent variable – royalty model 1 model 2 size of a network 0,0000033** (2,240383) investment level 0,000000178* (1,944827) rate of own franchise -0,007555 (-0,205473) -0,008259 (-0,217953) source: made by the authors table 3 shows the values of coefficients and t-statistics (in brackets). * means significance at alpha = 0.1, ** − significance at alpha = 0.05 and *** − significance at alpha = 0.01. the amount of royalty (in %) is affected by the network size. additional thousand network points on average increase the royalty rate by 0.3%. thus, networks with a higher investment level have a higher royalty rate. additional required 10 thousand dollars of investment means a larger royalty rate by 0.178%. table 4 the main factors affecting the royalty in franchise network (case 2) dependent variable – royalty model 1 model 2 rate of franchise fees 0,014109** (2,304758) investment level 0,001649*** (3,828943) age of a network -6,488691 (-1,290835) -4,717505 (-0,782908) source: made by the authors table 2 the main factors affecting the rate of franchise fees dependent variable – rate of franchise fees model 1 model 2 model 3 model 4 age 314,8562** (2,144314) 239,2356 (1,117504) size of a network 0,992251*** (3,049694) 1,394554 (1,621134) investment level 0,037849** (2,586787) 0,029793** (2,115550) royalty 18,53503** (2,304758) 15,47544* (1,971539) source: made by the authors baltic journal of economic studies 150 vol. 5, no. 5, 2019 table 4 shows the values of coefficients and t-statistics (in brackets). * means significance at alpha = 0.1, ** − significance at alpha = 0.05 and ***− significance at alpha = 0.01. networks with a higher required investment level and a higher franchise fee have a higher royalty rate. additional required 10 thousand dollars of investment includes a larger royalty rate by 16.49 dollars and the additional sum of 1,000 dollars of a franchise fee includes a larger royalty rate by 14,109 dollars. 5. conclusion having analyzed the influence of various factors on the development of franchising in ukraine, european countries and the usa, the authors can draw the following conclusions: – the network age affects the franchisor’s network size. that is, the greater the franchisor’s age is, the more franchise points it has; – the size of a franchise network is affected by the investment level, a franchise fee and royalty. with the increase of all these indicators, the network size grows, however, the percentage of own points have a little effect; – according to the investment level, a franchise fee also increases according to the franchise network size; – the amount of royalty depends on the investment level and the franchise network size. franchising is the most democratic tool for doing business, as developing their own franchise network, franchisors bring not only their own brands and production methods to new markets and territories but also high norms and standards that their products meet; franchising is one of the tools for the formation of innovative development of the global economy. the high popularity and considerable prevalence of franchising are determined by the fact that it offers real opportunities for the development of goods sales networks both in domestic and foreign markets, attracting relatively little money and most importantly for a small period of time. franchising opens up wide opportunities for the development of not only small and medium-sized businesses but also for the country’s economy as a whole; therefore, further scientific developments should concern first of all the search for ways, methods and tools to attract new technologies and innovations, especially environmentally friendly ones. references: asotsiatsiya franchayzynhu ukrayiny [franchising association of ukraine]. retrieved from: http://www.franchising.org.ua (accessed 5 february 2019). (in ukrainian) burnett, r . (2004). law of international business transactions. 3rd ed. sydney, 329 p. commission regulation (ec) n  2790/1999 of 22 december 1999 on the application of article  81(3) of the treaty to categories of vertical agreements and concerted practices (1999). vol. 42, l 336, pp. 21–25. european franchise federation. retrieved from: http://www.eff-franchise.com (accessed 3 april 2019). international franchising: the european union (2018). retrieved from: http://www.unh.edu/news/docs/ rcif_eu2006.pdf (accessed 26 february 2019). ohinok, s. (2016). the strategy of entry of franchise networks from the eu into the ukraine’s market. handel wewnętrzny, 3(362), 228–238. reestr seti v ukraine [register of "networks in ukraine" in 2018]. retrieved from: http://www.franchising.org.ua/ page/reestr_seti_v_ukraine (accessed 4 april 2019). (in russian) stawicka, m. k. (2009). franczyza – droga do sukcesu. warszawa, 208 р. top 500 franchises in europe in 2015. retrieved from: http://www.franchisedirect.co.uk/top500/ (accessed 5 february 2019). wynogradska, a. (2004). komerciine pidpryemnytstwo: suchasnyi stan, strategii rozwytku [commercial entrepreneurship: current state, development strategies]. kyiv, 807 p. (in ukrainian) ziółkowska, m. j. (2010). franczyza nowoczesny model rozwoju biznesu. warszawa, 228 p. baltic journal of economic studies 137 vol. 5, no. 2, 2019 corresponding author: 1 odesa institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: ameline@ukr.net 2 odessa i.i. mechnikov national university, ukraine. e-mail: kniazian1970@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-137-143 social innovations in the professional training of managers under the conditions of knowledge economy development natalia mushynska1, marianna kniazian2 abstract. the transformation in the system of business relations in modern times has led to the formation of the economy based on knowledge. relevant processes place qualitatively new demands to the managerial staff in this system and, consequently, to the technologies of their professional training. effective usage of innovations in pedagogy for the training of managers becomes one of the fundamental factors in the formation of competitiveness of knowledge economy. the purpose of the paper is to reveal the essential characteristics, generalization and justification of social and pedagogical innovations in the professional training of managers under the conditions of the formation of a knowledge economy. the methodological principles, which the given analysis is based on, include the implementation of a set of universal and special methods of scientific cognition. results. the role of education is defined as the foundation for the economy based on knowledge. in total, it is possible to distinguish three main areas for optimization of the process of professional and personal development of future managers: expanded implementation to the system of in-class activities forms, methods and technologies that teach to perform practically all managerial functions and actions under different market conditions; implementation to the educational institution of out-of-class forms of practical work that develop market and managerial thinking and other qualities, skills, and abilities; expansion of personality developing space in the educational institution. so, in the context of the knowledge economy formation, important means for the development of managers’ economic knowledge are those that are aimed at studying, analysing the achievements of economic thought, understanding information, and generating their own effective options for management optimization. based on this, the priority social and pedagogical innovations are: projecting and modelling in management, research, and creative activity. practical implications. in the project process, a clear formulation of the project’s goals and objectives, development of the final material product (business plan; measures to optimize management of a certain enterprise sector; a set of diagnostic methods for assessing the professional competence of applicants for the position, etc.) were assumed. modelling allowed developing and exploring models of objects of economic activity, which helped to systematize knowledge about them, to specify their components, to disclose new functions. research and creative activity allowed students to study at the empirical and theoretical levels in the economic sphere, the laws of its phenomena functioning in the context of their systemic interconnection with the goal of knowledge development about it, generating and implementing effective approaches to solve problems. key words: knowledge economy, social and pedagogical innovations, projecting, modelling, research and creative activity, training of managers. jel classification: a10, a29, i23, m54 1. introduction in modern times, in most countries of the world, there are radical changes in the functioning of national economy: the scale of international commodity flows is expanding, the process of globalization is boosting, the level of national wealth is increasing. the integration of economy at the regional and national levels, which is promoted by the development of communication and information technologies, changes the nature of speciality in the global economy, promotes the development of offshore, relocation of finished goods production and provision of services to regions with low costs. globalization is gradually changing the picture of the world, and in addition to positive changes, there are a number of challenges: baltic journal of economic studies 138 vol. 5, no. 2, 2019 increasing the vulnerability of workers, slowing down the growth in the number of working places and reducing the overall share of wages in national income. the most effective response to these challenges is the spread of knowledge that is steadily leading to the development of the national economy. knowledge becomes the main driving force of increasing productivity (koval et al., 2018), as well as a source of high-quality economic growth. knowledge and innovation are becoming more and more important for companies engaged in various types of economic activity. in turn, it puts the countries in charge of forming the basic factors that influence the process of generating knowledge in the economy. first of all, this is the development of human capital and education. employment in the knowledge economy is determined by the increase in the value of skilled labour, and the political course of many countries is increasingly focusing on the development of human capital. education becomes an integral part of further development of the innovation sector, human potential and successful employment of professionals under the conditions of an economy based on knowledge. first of all, it concerns the training of future managers in the business sector, which will operate under fundamentally new conditions of the knowledge economy. this determines the actuality to define prospective social and pedagogical means directed to the quality improvement and adaptation of professional training of managers to the new conditions of the global economy functioning. 2. analysis of recent researches and publications a number of national scientists devoted their scientific works to the research of innovations in the training of managers (bereka, 2009; elkin, 2013; pshenychna, 2016; tereshchenko, 2016; zhukov & kobal, 2017; vorona, 2017). these authors in their works analyse the interdependence between the formation of an innovative model of the economy, the development of the system of professional training for management of innovative activities and the increase in the efficiency of enterprises; consider the problems and perspectives of modernization in training of managers in the context of innovative reformation of the education system in modern ukraine. great attention is paid to the latest methods of managers’ training with the use of developing and contextual technologies to educate higher education graduates. the principal attention is paid to the problem of the formation of key competencies of future specialist in economics (grant, 2005), among which the most important, according to the scientist, is the ability “to communicate quite complex ideas and theories in a clear manner, undertake numerical calculations, and interpret data presented in a variety of forms.” scientists (dusi et al, 2014; korniyaka, 2018) emphasize on the necessity to form reflexiveness, positive attitude towards others, and the ability to communicate effectively as an inevitable requirement for the personality of modern specialist working in a multicultural society. of great significance is also the study of the role of emotions in the development of professional and reflexive views of future professionals, including economists (rezvan, 2014; shymko, 2017). while considering the existing scientific works of great importance, it should be noted that the study of pedagogical mechanisms of professional training of managers who take into account the specifics of management activity in the context of the formation of the knowledge economy has still been paid insignificant attention. this leads to the necessity for further scientific research in the actualized problem. the purpose of the study is to reveal the essential characteristics, generalization and justification of social and pedagogical innovations in the professional training of managers in the conditions of the formation of the economy based on knowledge. 3. peculiarities of formation of the knowledge economy in modern conditions the formation of the knowledge economy involves the transition from one state to another, higher, more qualitative and progressive. the development of knowledge, from our point of view, provides for their systematic expansion, rethinking and interpretation, which serves to solve modern problems in the economic sphere in order to ensure stable growth of the economy and the well-being of society. the foundation of the modern knowledge economy is qualitative education, which is given a priority role, since it becomes the basis for building a fundamentally new type of society, where the competition of knowledge becomes the driving force of the economy. increasing volumes of monetary resources in leading countries of the world are aimed at training specialized specialists and researches, which allows maintaining a high level of competitiveness of economies in the international arena. highly-educated specialists become the basis for the formation of leading sectors of the national economy, where the highest level of labour productivity is observed, creating the largest volumes of added value. these sectors of the economy include, in particular, the information and communication technology sector (ict), which makes a major contribution to welfare growth (table 1). in order to achieve the level of advanced countries development in the formation of the knowledge economy, it is necessary for education not only to give knowledge and skills but, above all, to create innovations that will have the potential for commercialization of them in the form of new goods and services. in ukraine, in 2017, the share of the research workers (researchers, technicians, and support staff ) in the total number of employed population was 0.58%, including researchers – 0.37%. according to eurostat, in 2015, the highest share was in finland (3.21% and 2.35%), austria baltic journal of economic studies 139 vol. 5, no. 2, 2019 (3.10% and 1.92%), and sweden (2.97% and 2.33%); the lowest share was in romania (0.53% and 0.33%), cyprus (0.83% and 0.61%), poland (1.0% and 075%), and bulgaria (1.0% and 0.65%). the share of doctors of sciences and doctors of philosophy (candidates of science) among the scientists of the research institute was 27.7%, among researchers – 43.8%. more than half of the total number of doctors of sciences and doctors of philosophy (candidates of science), who carried out research and development, worked in organizations of the state sector of the economy, 36.1% – higher education, 5.4% – entrepreneurship sector. according to preliminary calculations, the share of total expenditures in gdp was 0.45%, including at the expense of the state budget – 0.16%. according to 2016, the share of expenditures on research and development in the gdp of the eu-28 countries averaged 2.03%. more than the average share of research and development costs was in sweden – 3.25%, austria – 3.09%, germany – 2.94%, denmark – 2.87%, finland – 2.75%, belgium – 2.49%, france – 2.25%; smaller – in macedonia, latvia, romania, cyprus, and malta (from 0.43% to 0.61%). currently, in countries with a developed market economy, production of knowledge and high technology serves as the main source of economic growth. however, knowledge doesn’t often bring revenue. as a rule, they are realized in the form of innovations. a key tool for the practical implementation of new knowledge and technologies is the general national innovation system. table 1 dynamic transition to the economy, based on knowledge, in oecd countries indicators 1995 2000 2005 2010 2015 2017 gdp per capita according to ppp, thousands us dollars in prices in 2011 28,7 32,8 35,4 36,0 38,4 39,6 r&d expenditures, % of gdp 2,12 2,27 2,20 2,36 2,45 2,49 number of researchers, thousand people per million population 2,47 2,69 3,09 3,34 4,05 – share of services in the field of ict in the total export of services, % 2,94 5,49 6,97 7,92 7,66 9,79 income of payments balance from the copyright usage, billion dollars of the usa 46,6 91,2 167,6 242,9 315,1 336,1 source: made by the authors according to the world bank (2018) table 2 financing of internal expenditures for research and development activities in different sectors in ukraine (thousands uah) 2015 2016 2017 total 11001889,5 11530697,5 13379292,4 according to activity sectors state 3728725,8 3672219,4 7788641,7 entrepreneurship 6682532,1 7132981,8 4614846,4 higher education 590631,6 725496,3 975804,3 private non-profit – – – source: made by the authors according to the state statistics service of ukraine (2018) table 3 the specific weight of expenses for research and development in gdp (in per cent) countries 2010 2011 2012 2013 2014 2015 2016 2017 eu 28 1,93 1,97 2,01 2,02 2,03 2,04 2,03 … bulgaria 0,56 0,53 0,60 0,63 0,79 0,96 0,78 … estonia 1,58 2,31 2,12 1,72 1,45 1,49 1,28 … spain 1,35 1,33 1,29 1,27 1,24 1,22 1,19 … latvia 0,61 0,70 0,66 0,61 0,69 0,63 0,44 … lithuania 0,78 0,90 0,89 0,95 1,03 1,04 0,85 … germany 2,71 2,80 2,87 2,82 2,87 2,92 2,94 … poland 0,72 0,75 0,88 0,87 0,94 1,00 0,97 … romania 0,46 0,50 0,48 0,39 0,38 0,49 0,48 … slovakia 0,62 0,66 0,80 0,82 0,88 1,18 0,79 … slovenia 2,06 2,42 2,57 2,58 2,37 2,20 2,00 … hungary 1,15 1,19 1,26 1,39 1,35 1,36 1,21 … czech republic 1,34 1,56 1,78 1,90 1,97 1,93 1,68 … ukraine 0,75 0,65 0,67 0,70 0,60 0,55 0,48 0,45 source: made by the authors according to the state statistics service of ukraine (2018) baltic journal of economic studies 140 vol. 5, no. 2, 2019 the primary and most important goal of creating such a system is to develop the process of formation and introduction of innovations, which requires the use of social and pedagogical innovations in professional training of highly skilled specialists in the sphere of management. innovation is a system of means directed for implementation into the economy of certain methods and technologies, which have the aim to increase the efficiency of the operation of an enterprise, company, industry. social and pedagogical innovations are innovations directed for the improvement of the quality of the content, organization, management of education. in our opinion, these innovations in the development of economic knowledge serve for the growth of information, its analysis, systematization, and interpretation. it is important that this knowledge differs with prognostic nature, helps not only to solve modern problems but also to make the basement for foreseeing and solving possible problems in the future. pedagogical innovations are a kind of social innovations that are related to the educational process in order to achieve maximum results and include the development of a system of principles and criteria, quality assessment of realization of the educational process, the implementation of new approaches to the system of professional training of managers. in the context of the formation of knowledge economy, special importance in professional training of managers is given to innovative activity, which is directed to the implementation of various pedagogical innovations that cover all aspects of the didactic process: forms of organization of educational process, the content and technologies of learning, educational and cognitive activities. an important means of development of economic knowledge of managers are those that are aimed at studying, analysing the achievements of economic thought, understanding information, generating own effective options for management optimization. changes in education role in our society along with the development of the knowledge economy have led to the growth of innovation processes in the professional training of managers and education in general. from a passive process carried out in traditional social institutions, education is acquiring an active character. previously, the unmistakable orientation of education was the formation of knowledge, skills, abilities, which ensure readiness for the fulfilment of managerial responsibilities and were understood as the ability of individual for adaptation in community. nowadays, education is increasingly oriented to the creation of such technologies and methods of influence on personality, which provide a balance between the social and individual needs of a specialist, launch the mechanism of personality self-development thus training them for the realization of his own personality in the process of performing managerial functions. 4. knowledge management in an innovative system of education of managers in the transition to a knowledge economy in the educational process, it should be taken into account that the formation of a knowledge economy influenced the increase of the requirements to all aspects of a manager’s personality, and not only to their individual qualities. a common type of new managers becomes “mobile” performers or “ordinary” entrepreneurs who create a new business. a more successful model is a specialist who is able to draw conclusions and is able to raise the company in the state of crisis. modern effective management involves the ability to communicate, be accessible, encourage and accept the flow of ideas, demonstrate flexibility in behaviour. the results of large-scale research conducted in recent years show that the managers of the xxi century should possess: good preparation for strategic planning; acceptance of changes and their management; the ability to manage quality systematically; the skill of communication; readiness for mentoring and supporting; the ability to delegate responsibility correctly (pikalov & hlukha, 2017). the fundamental transformation of national economic systems under the conditions of development of knowledge economy sets the task to construct the educational process in accordance with qualitatively new principles, which go beyond not only knowledge formation but also the development of skills and abilities. today, the successful solution of the task of professional manager formation requires: purpose acceptance by the educational institution as the main one; organization of scientific and pedagogical staff activities and activities of other permanent staff for the comprehensive formation of future specialists as managers, professionals, and individuals; organization of work of future managers for selfformation as professional individuals; creation in an educational institution of supportive social and psychological climate and suitable conditions for the proper professional development of personality of future managers; organization of current control and progress check of the course and results of professional development of personality of graduates as managers. in total, it is possible to distinguish three main directions of optimization of the process of professional and personal formation of future managers: extended inclusion in the system of classroom studies of forms, methods, and technologies that teach to perform all managerial functions and actions practically in different market conditions; the inclusion in educational institution of out-of-class forms of practical work that develop market and managerial thinking and other qualities, skills, and abilities; the expansion of personality forming space baltic journal of economic studies 141 vol. 5, no. 2, 2019 of educational institution through the organization of continuous industrial practice. on this basis, priority social and pedagogical innovations are projecting and modelling in management, research and creative activity. it should be noted that these innovations in professional training of managers are realized, first of all, through interactive technologies and computer technologies. 5. social and pedagogical innovations in the professional training of managers an important social and pedagogical innovation in the development of economic knowledge is project activity, which involves conducting a certain search and study of theoretical information. the project assumes the following: clear formulation of the purpose and objectives of the project; search for necessary knowledge to solve project tasks; planning and fulfilment of concrete actions for its implementation, indicating the deadlines for each action; development of the final material product (business plan; measures systems for optimization of management of the enterprise certain sector; a set of diagnostic methods for assessing the professional competence of applicants for a position, etc.); drawing of conclusions. modelling allows us to develop and explore models of objects of economic activity, which helps to systematize knowledge about them, to specify their components, to reveal new functions. in the humanities, the structure of the model is represented by interconnected segments, among which the following are obligatory: goal-oriented (representation of purpose); methodological (theoretical basis (scientific approaches and principles)); structural (components of the object); functional-diagnostic (stages of functioning of the studied object and their monitoring). the development of models in the management sphere allows significant expansion of concepts about certain phenomena, processes, objects, and optimization of their functioning for the benefit of our society. innovation in research and creative activity is explained by two factors: firstly, the volume of information is dynamically increasing; accordingly, in order to be aware of the latest achievements in management sphere, it is necessary to be able to process it (to select, analyse, classify) quickly and implement it relatively to the solution of specific problems; secondly, the efficiency of the enterprise operation mostly depends on the manager’s ability to generate, test, and implement innovations. research and creative activity infers studying at the empirical and theoretical levels of the economic sphere, functional regularities of its phenomena in the context of their systematic interconnection with the purpose of knowledge development about it, generating and implementing effective approaches for problems solutions. this activity may have an objective to obtain subjectively or objectively new knowledge about management sphere, where subjectively new knowledge is new to the researcher of a particular problem, and objectively new one is the knowledge that differs in social significance and, finally, defines the effectiveness of enterprise operation. in the management sphere, research and creative activity, as a means of development of economic knowledge, is reasonable to organize in accordance with the following steps: allocation among the problems of the main and secondary ones; setting the goal; development of a logically consistent, flexible plan and selection of effective research methods; study of the necessary theoretical information, presenting of its annotation and abstract; consulting with professionals about this problem; generation of original ideas on how to solve the problem, selection of the most effective ones, their argumentation, preliminary approbation with subsequent implementation into practice; conducting empirical research (observations, expert assessment, surveys, etc.); the processing of the received information, its analysis, comparison of various facts; comparison of results of the experiment with the theory; generalization of research results; drawing of conclusions and recommendations; forecasting of possible variants of development of the studied phenomena. research and creative activity allows developing economic knowledge in the most active way, both for personal development (knowledge of a specific manager) and social development (potential growth of progressive management experience of an enterprise, firm, company). we have conducted a study of 112 students (63 girls and 49 boys) to indicate their interest in each defined social and pedagogical innovations in the process of their professional training as managers. students were asked the question “which social and pedagogical innovations suggested below are of greatest interest to you: projecting, modelling, research, or creative activity?” the results were categorized according to the gender of the students. the data is presented in table 4. table 4 indication of students’ interest in social and pedagogical innovations social and pedagogical innovations number of students. gender total female male projecting 33.3% 34.7% 68.0% modelling 27.0% 38.8% 65.8% research and creative activity 39.7% 26.5% 66.2% total 100% 100% baltic journal of economic studies 142 vol. 5, no. 2, 2019 the greatest girls’ interest is caused by research and creative activity (39.7%), whereas for boys it is modelling (38.8%). at the same time, it is necessary to emphasize that modelling causes the least interest among girls (27.0%). in the second position of interest indicating, both girls and boys turned out to be interested in designing (33.3% were among girls interested in designing, and 34.7% – among boys). the smallest number of boys (26.5%) indicated that their research and creative activity was of the greatest interest to them. as a result, the largest number of students (68.0%) shows the highest interest in designing, 66.2% – in research and creative activity, 65.8% – in modelling. these results indicate the necessity to increase the interest of students in modelling as an important social and pedagogical innovation in the professional training of managers. it should be emphasized that the complex of qualities that should be developed by future managers in order to prepare them for professional activity under the conditions of knowledge economy must include: the ability to conduct a qualitative independent analysis of economic realities; awareness of the possibilities of your personal career; knowledge of national economy; the ability to cherish the workplace, an understanding that it is not guaranteed for life; modern economic thinking, ability to conduct economic calculations within the limits of the activity and personal life; curiosity, ability to acquire knowledge, acquire skills in self-study and career enhancement; personal qualities: honesty, conscientiousness, proficiency, initiative, responsibility, professional flexibility; ability to work in a group, skills of business communication; communication skills in industry, trade, business, commerce; friendliness, as a basis for success in relationships, politeness, sincerity, attentiveness, motoriness; the ability to assess statistical data in the press, understand economic tables and graphs; ability to analyse, generalize, identify, apply knowledge in a dynamically changing environment (seliverstova, 2010). at the same time, pedagogical innovations should not lose sight of the development of general business skills in professional training of managers. these abilities include the ability: to determine the real goals for oneself, to calculate the path to those goals that are difficult to reach by one-time effort; analyse situations and problems; nominate professionally and scientifically substantiated versions of the origin of the problem and the ways of its solution; anticipate difficulties in problem-solving; outline ways and means to solve the problem and compare them with their capabilities (experience, training, qualities, abilities, skills, time, etc.); make decisions based on choosing one solution from a number of possible ones, calculate stages and methods of implementation, means of provision, immediate results, possible side effects and long-term consequences; self-critically evaluate the correctness of the chosen solution and the calculation of its implementation; control the progress of the decision, evaluate the intermediate results and the success in movement to final goal. mastering the profession of a manager under the conditions of formation of the knowledge economy is an important stage of professional self-determination. no one can make a person the one he/she does not want to be. everyone becomes a professional in that way as they have created themselves as professionals. studying in a professional institution is the right time and place to create ourselves as a professional. introduced social and pedagogical innovations should give future managers a clear understanding of this and a strong motivation for professional self-improvement, comprehensively strengthen discipline, intentional, conscientious, and constant encouragement of internal sources for selfdevelopment. the state policy, which is directed to the adaptation of the educational system to modern conditions of the knowledge economy, can facilitate the use of pedagogical innovations. this requires, first of all, the creation of incentives for the use the information technology in the learning process for better adaptation of future managers to the latest requirements of professional activity. the specific mechanisms of state policy that can contribute to the achievement of defined goals are the following: public education order that can be distributed both to the public sector of education that is absolutely necessary and to the commercial sphere, where private educational organizations will receive certain state support, including direct financing, investments, institutional improvement, especially preferential conditions in the case of ordering from the government authorities to prepare management specialists; tax regulation for selective influence on educational organizations. first of all, it concerns organizations of secondary vocational education, as well as higher education and organizations of additional education. in our opinion, the state may and should carry out differentiated taxation and reduce taxes to educational organizations that ensure priority in the realization of general national programs for the training of management specialists both for business and for spheres that provide outbreaks in science, culture, etc.; providing educational institutions that implement general national training programs for managers, privileged loans that will be provided for a longer than usual term, and at lower interest rates or on easy credit terms. the mechanisms of credit regulation are well known, so we would not go into details of this rather well-known instrument; the realization of means of coordinated institutional support in the education sphere. in this context, deserves the support the idea of creating educational clusters, which will be an effective form, that will ensure the unity of state regulation objects since such clusters baltic journal of economic studies 143 vol. 5, no. 2, 2019 can be key areas, to which the regulatory influence of the state will be directed; direct state investments in the sphere of education focused on concrete solutions in the sphere of realization of state educational programs; the intensification of organizational efforts is aimed at developing programs of public-private partnership, which are actively developing in the field of education. finally, it should be noted that government policy for the implementation of social and pedagogical innovations may be associated with a number of difficulties (lack of funds, conservatism in the educational sphere, lack of technological development). 6. conclusions the formation of a global knowledge economy has greatly changed the requirements for the content and quality of professional training of managers in modern times, facilitated the growth of the requirements for all aspects of a manager’s personality. this causes the necessity for development and practical implementation of social and pedagogical innovations (fundamentally new means and methods of interaction during education) that cover all aspects of the didactic process: the forms of organization of educational process, the content and technology of teaching, educational and cognitive activity, etc. the basic directions of introduction of social and pedagogical innovations in order to improve the process of professional and personal formation of managers might become: inclusion to the system of professional training forms, methods and technologies that teach to perform practically managerial functions under different market conditions; implementation of out-ofclass forms of practical work that develops managerial thinking; expansion of personality developing space by the providers of educational services through the organization of continuous industrial practices. projecting, modelling, research and creative activity are considered by us as the most important social and pedagogical innovations for the development of economic knowledge. at the same time, training of managers should develop a complex of both professional and personal qualities in order to enable future managers not only qualitatively use the acquired skills but also independently master new knowledge, create innovations that will have the potential for further commercialization. references: bereka, v. ie. (2009). implementation of innovative technologies in the system of education managers training. pedahohichnyi dyskurs, 6, 19–23. (in ukrainian) dusi, p., messetti, g., steinbach m. (2014). skills, attitudes, relational abilities & reflexivity: competences for a multicultural society. procedia – social and behavioral sciences, 112, 538–547. elkin, m. v. (2013). the role of innovation in the management of training of an educational institution manager. pedahohika formuvannia tvorchoi osobystosti u vyshchii i zahalnoosvitnii shkolakh, 30, 159–162. (in ukrainian) grant, s. (2005). teaching and assessing skills in economics. cambridge university press. koval v., polyezhaev y., bezkhlibna a. (2018). communicative competences in enhancing of regional competitiveness in the labour market. baltic journal of economic studies, 4(5), 105–113. doi: 10.30525/22560742/2018-4-5-105-113 pikalov, v. l., hlukha, h. ya. (2017). concerning the problems of training modern top managers of business entities. akademichnyi ohliad, 1(46), 71–82. (in ukrainian) pomyluiko, v. y. (2017). development of social and communicative conpetens of adults: psychological and pedagogical conditions for corporate training. psycholinguistics, 21(1), 138–147. pshenychna, l. v. (2016). training the manager of innovative development of education: professional and personal self-improvement. pedahohichni nauky: teoriia, istoriia, innovatsiini tekhnolohii, 9, 137–150. (in ukrainian) rezvan, o. (2014). the role of emotions in the development of a future specialist’s professional and reflective views. austrian journal of humanities and social sciences, 2, 132–136. seliverstova, n. i. (2010). training of managers in higher education: theoretical and pedagogical aspect. zaporizhzhia: znu. (in ukrainian) shymko, v. a. (2017). character analysis of oral activity: contact profiling. psycholinguistics, 21(1), 186–202. state statistics service of ukraine (2018). scientific and innovative activity in ukraine. retrieved from: http://www.ukrstat.gov.ua (in ukrainian) tereshchenko, m. m. (2016). problems of modernization of innovation managers training in the context of reforming the education system in ukraine. hileia: naukovyi visnyk, 115, 329–333. (in ukrainian) vorona, p. v. (2017). methodological peculiarities of management of innovative projects in the content of manager training for management of innovation activity. vytoky pedahohichnoi maisternosti. seriia: pedahohichni nauky, 20, 48–53. (in ukrainian) world bank (2018). the world bank data by indicator: science & technology. retrieved from: https://data.worldbank.org/indicator zhukov, s. a., kobal, m. v. (2017). improving the effectiveness of training managers in an innovative economy through interactive methods. visnyk ekonomichnoi nauky ukrainy, 2, 37–43. (in ukrainian) baltic journal of economic studies 24 vol. 4, no. 4, 2018 corresponding author: 1 kyiv cooperative institute of business and law, ukraine. email: serg.bardash@gmail.com 2 kherson state university, ukraine. email: tatiana@osadcha.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-24-32 accounting of results of rent relations serhii bardash1, tetiana osadcha2 abstract. in the conditions of the implementation of the concept of sustainable development, the study of accounting reflection of the results of rent relations becomes relevant in view of solving a number of strategic tasks that today face economic entities. the solution to this problem is proposed on the basis of the definition in the system of accounting concepts of economic nature of results of rent relations arising owing to the involvement of renting factors in the economic process. the purpose of the research is to determine the formulation of proposals for the accounting reflection of the results of rental relations. the methodological basis of the study is the historical and logical method used to study the evolution of rent and approaches to the disclosure of its economic meaning. the dialectical method and comparative analysis are used to identify significant differences in the definition of rent, formed at different stages and forms of economic relations. methods of analysis, synthesis, induction, deduction, abstraction, idealization, and generalization are used to identify the results of rent relations in the system of accounting concepts and the formulation of proposals for accounting rent and rent payments. scientific results. based on the critical assessment of the plurality of researchers’ opinions regarding the disclosure of the economic content of the rent, it has been established that: the rent is an integral part of the value added, but the added value in the accounting system is not accounted; the rent is a component of the income from operating activities carried out with the use or exploitation of limited natural resources; the complication of the previous value appraisal of rent makes it impossible to reflect it as a part of income; the amount of rent depends on the demand for the goods. if the product is sold at cost or below the cost, there will be no rent. the higher the sales price, the greater the share of rent in sales income. taking into account the above, the rent as an income from the extraction/use of natural resources, as well as the use of other renting factors, is proposed to be reflected on the off-balance sheet account “rent” with the allocation of sub-accounts by type of economic rent received. rent payments are proposed to be attributed to operating expenses since their inclusion in production costs contradicts the economic nature of such costs, unjustifiably increases the prime cost, and contradicts the principle of equitable distribution of rent. the practical importance of the study is to increase the level of disclosure of information for making managerial decisions, in particular: determining the maximum allowable reduction in the price of sales of finished products, while maintaining an acceptable level of profitability for increasing demand, expanding the market and, consequently, increasing profits; directing the entire amount of rent or its part to the implementation of environmental measures, modernization of the material and technical base, activation of innovation activities, etc. value/originality. the main advantages of the research conducted are the determination of the subject and object composition of rental relations, justification of the expediency of identifying the economic rent as an additional income, presenting proposals for the accounting of rent and rent payments, which will help to solve problems of the organization and methodology of the results of rent relations, as well as improving the reporting of economic entities. key words: theory of rent, rent relations, rent, rent payment, accounting of results of rent relations. jel classification: m41, m49 1. introduction in the conditions of the implementation of the concept of sustainable development, the study of issues of accounting reflection of rent relations is important in view of solving a number of strategic tasks that today face economic entities. integration processes, which ukraine actively joins, create new opportunities for the business, connected with the expansion of markets. such perspectives lead to the rejection of insufficiently effective methods of cost management in the current conditions of competition and transfer of emphasis on revenue management. it is possible to solve these issues effectively, including on the basis of the theory of rent. baltic journal of economic studies 25 vol. 4, no. 4, 2018 the economic theory defines features of rent relations at the state level, but in the accounting, there is no information on the accounting reflection of the rent as one of the types of the business entity’s income, with the exception of individual publications, in particular, a monograph by (osadcha, 2016). this leads to a targeted decrease in the relevance of information on income from the use of rental resources since none of the forms of existing reporting provide any information about any kind of rent. insufficient attention to rent significantly increases the risk of an inadequate assessment of the financial condition of business entities and affects the objectivity and effectiveness of management decisions. one of the important problems to be solved is the essential identification of rent in the system of accounting concepts since without this it is impossible to evaluate its value and determine its impact on the formation of incomes of socio-economic agents. 2. literature review issues of the theory, as well as the expedience of distinguishing its types, were studied in their writings by w. petty, a. smith, d. ricardo, j. c. mill, a. marshall, j. a. schumpeter, m. blaug, and others. the search for an explanation of rent phenomenon, as well as its impact on the behaviour of economic entities, has intensified significantly due to the results of scientific research, stated in the works by g. tullock, j. m. buchanan, a. krueger, in particular, the list of types of rent was significantly expanded, however, at present their proposals did not bring the scientific community closer to the solution of the scientific problem of the possibility of rent accounting by participants in the field of economic relations. over the past years, scholars have increasingly raised issues of accounting as an information source for managing a particular type of rent. so, issues of individual types of rent were investigated by zhuk (2012); zamula (2010); zdan (melnyk) (2011); ostapchuk (2012), and others. positively evaluating the results of previous studies, it is worthwhile recognizing that the unconditional inclusion of rent as additional income or surplus of a business entity from the use or employment of the renting resource (production factor), with the exception of rent payments, did not occur in the system of accounting notions. this situation can be explained by the fact that: “despite different approaches to the interpretation of certain types of rent, modern researchers determine rent relations as a system of economic relations between the state and business entities for the receipt, distribution, and redistribution of rental income in terms of utilization (on the right of ownership or management) of limited and different in quality resources” (hrazhevska, 2014). at the same time, the author of the publication in no way determines the possibility of accounting for the procedures for obtaining, distributing, and redistributing rental income based on the accounting system of the economic entity. one of the main reasons for the current situation is the existence of two major difficulties associated with the theory of rent, namely: “this is a failed result of the false tendency to synthesize the incompatible cost theories ... the lack of unity in relation to the very essence of rent” (worcester, 1946). in issues of realization of rent relations between the state and business entities, there are many debatable issues. in particular, there are ongoing discussions on accounting and payment of rent payments, as a manifestation of rental relations. so, according to v. matiukha (matiukha, 2013), the withdrawal of a rent payment from a subsoil user in favour of the state should take place in the amount of excess profits (surplus – the difference between the received and the average-normal profit). in accordance with the above proposal, the author equates rent payment to rent, as additional income, what, in our opinion, is difficult to accept. in the publication, zanko (zanko, 2016) discloses features of rent payments for the use of subsoil in the accounting system in accordance with p. 18 of provisions (standards) of accounting and norms of the tax code of ukraine, but the question of how to account for the rent – as additional income or superprofit of subsoil users, remains out of study. an attempt to actualize the issue of the need for rent accounting was made in the publication by s. zdan (melnyk) (zdan (melnyk), 2011). according to the author, rent is a rather complex aspect of the revenue part of the enterprise, therefore “at this stage, it is very difficult to determine its size and, as a result, to reflect in accounting. the first problem of the reflection of rental income in accounting is the lack of not only a single approach to the definition of rental income, but also a clear understanding of its availability not only on agricultural lands.” according to l. paraskevych (paraskevych, 2012), the main reasons for the inhibition of the rental income reflection procedure are the availability of different legislative approaches to the definition of income, expenses, and also the formation of the enterprise financial result, which, in our opinion, corresponds to reality. also, among the recent publications of ukrainian scholars, one should mention the publication of o. bondar (bodnar, 2017), who conducted a retrospective analysis of the genesis of rent in the system of value concepts, but the answers to how to assess the rent to find ways to further reflect it in accounting and the creation of information provision for fair distribution of rent as a component of the concept of sustainable development is not given in the publication. baltic journal of economic studies 26 vol. 4, no. 4, 2018 it is worth paying attention to the publication of t. osadcha (osadcha, 2015), in particular, to the proposal to reflect the rent for various rental resources on the account of financial results. without denying the proposals put forward, it should be considered expedient to continue research on this issue. consequently, there are grounds to state that the scientific community has now come to the unconditional conclusion about the relevance of rent accounting; however, there are no formally approved proposals for the theoretical substantiation and methodical implementation of accounting for rent relations among ukrainian scientists. the purpose of the study: to formulate proposals for the accounting reflection of the results of rental relations. research methods: historical and logical method is used to study the evolution of rent and approaches to the disclosure of its economic meaning. the dialectical method and comparative analysis are used to identify significant differences in the definition of rent, formed at different stages and forms of economic relations. methods of analysis, synthesis, induction, deduction, abstraction, idealization, and generalization are used to identify results of rent relations in the system of accounting concepts and the formulation of proposals for accounting rent and rent payments. 3. the main material rent is one of the categories that began to be studied and researched as one of the first; however, the definitive explanation was not received to this day. in addition, the scope of its application and the list of resources associated with its occurrence and manifestation are constantly expanding. this led to the emergence of a huge list of types and forms of rent (osadcha, 2016), which gives rise to the need to identify and analyse reasons for such a popularity of the category of rent among scientists by identifying objective and subjective factors-reasons. permanent transformation of economic relations causes a change in views on the understanding of rent as an economic category. after analysing a number of scientific works devoted to the genesis of the theory of rent, it has been established that the views of scholars on the nature of rent have evolved in a certain way. thus, the representatives of the classical political economy, in particular, w. petty, a. smith, d. ricardo, j. c. mill believed that natural rent had a double understanding of natural rent as a product of nature and a product of labour, but in terms of cost estimation of rent they had somewhat different views. so, w. petty equated the rent to the full added value, without dividing the latter into profit and rent. a. smith determined the rent as an excess of the amount of profits usual for this area and laid the duality of the rents approach as a product of land and income, determined by high demand at a limited offer (rent). however, in our opinion, this understanding of the rent leaves the latter outside the composition of accounting objects, since the rent, taking into account the position of a. smith, will be determined in the light of modern realities after the implementation of accounting procedures by comparing two profits – actually received by a certain entrepreneur and ordinary for a given area. important for this study is the position of a. smith, according to which rent was considered a qualitatively different part of the product price than wages and profits. low or high wages and capital gains are the cause of a high or low price, while a smaller or larger amount of rent is the result of a price. according to a. smith, the rent is the balance obtained as a result of the deduction from the product price of wages or profits on capital; therefore, one cannot assume that rents, wages, and profits are obtained in the same order. what is also important is that, according to a. smith, the size of the rent depends on the larger or smaller size of the product price, which consists of three elements: wages, profits, and rent. d. ricardo’s doctrine of rent was theoretical and practical, based on the definition of the value given by a. smith and the positions on private ownership of land. according to a number of researchers meshcherov (2006); zeldner (2003), kudryashova (2003), starting with d. ricardo to the present, there has been practically no significant development in the aspect of the synthesis of the theory of value and rent (bodnar, 2017), since d. ricardo determined the rent as an economic category and insisted on the mistakes of mixing the rent with the rent payment, so moving the rent from everyday life categories to categories of economic theory. according to d. ricardo, the main condition for the existence and determination of the rent is “the investment of two identical quantities of capital and labour” into a product, which prices will be comparable with the purpose of determining the rent. another approach to determining the size of rent is proposed by j. s mill, according to whom the rent is equal to the cost savings that bring the best machinery and land as resources with exceptional properties. “according to the ideas of k. marx, the rent is one of the forms (along with profit and interest) of added value created by the additional labour of hired workers and assigned by the landowner. k. marx saw the emergence of rent as an economic category not in the sphere of production but in the sphere of distribution, where profit turns into rent” (bodnar, 2017). thus, in the context of the labour theory of value and in the conditions of the market capitalist economy, rent was considered as one of the forms of added value, the source of which is the work of hired workers, and was considered its surplus above average for the industry profit. baltic journal of economic studies 27 vol. 4, no. 4, 2018 subsequently, a. marshall and his followers, on the basis of criticism of marxist views, expanded the understanding of rent relations, which, in their opinion, cannot be limited only by services of the land. principles of the rent formation were extended to all types of resources, the supply of which is limited (fixed). followers of the theory of v. pareto ( j. robinson, k. e. boulding, h. d. henderson, r . tiffin, a. meyer) have another view of understanding the rent. as noted by d. a. worcester, they understood rent as the income from any factor that exceeded the level needed to maintain its operation in this area of use. this very income over and beyond (or less in the case of a negative rent) the fair return of a factor, of course, is a surplus income (worcester, 1946). a slightly different view from the above is set forth in the article by a. a. alchian “rent” in the world’s most famous encyclopaedic edition “the new palgrave dictionary of economics”: “‘rent’ is the payment for use of a resource, whether it be land, labour, equipment, ideas, or even money. typically the rent for labour is called ‘wages’; the payment for land and equipment is often called ‘rent’; the payment for use of an idea is called a ‘royalty’; and the payment for use of money is called ‘interest’.” accordingly, representatives of institutionalism, in particular, tullock (1967); buchanan (1980); krueger (1974) consider the rent as a result of restricting competition in order to obtain monopoly rights. according to g. tullock, any improvement of resources by the entrepreneur makes them relatively less common. such an improvement has a positive effect on public welfare, and additional rent (quasi-rent) arising from the use of more efficient resources or technologies is temporary. in the absence of artificially created barriers, market competition inevitably erodes it, reduces it to a normal level (tullock, 1988). “modern neoclassical theory resolutely refused to separate rent from other types of noncompetitive revenues” (kuzyk, 2004). the fair level of income is determined solely by the conditions of competition in the resource market, and as a norm, a perfect competition is proposed. thus, it is impossible to allocate rent income as such in each individual case. d.a. worcester in his article “reconsideration of the theory of rent” drew attention to the existence of many, sometimes incompatible views about the essence of rent (worcester, 1946). the author has established that in the scientific circulation, different interpretations of rent are used, namely: “1. payments of the entrepreneur for certain factors of production. 2. part of business payments paid to certain factors of production. 3. revenue received by the owners of certain production resources. 4. part of the income received by the owners of certain production resources. … there are other ways to formulate different definitions that would increase the number of exact values, but this list points to the main problem. … the pairs of items 1 and 2, 3 and 4 relate to different concepts, and only an unscrupulous analyst can call them one term.” d. a. worcester tried to solve the most important problems of the theory of rent, in particular, whether the rent is included in the cost of production or not? he based his argument on the fact that the term “rent” should be applied at the firm level; therefore, it would be appropriate to attribute the rent to the remuneration of a certain type of production factors since the remuneration comes to the owner of the factor. one cannot ignore the position of economists w. jevons, p. wicksteed, h. j. davenport, and others, who opposed the measurement of rent as a surplus, because it explains nothing and “introduces it into the category of uncontrolled ‘additional’ incomes.” returning to the interpretation of the rent formulated by v. pareto (pareto’s rent) as a payment over and in addition to the alternative cost, d. a. worcester notes that such a definition seriously weakens the meaning of the term “rent”, respectively, there is a single type of income that has neither an alternative nor real value – this is a net profit. taking into account the aforesaid, d. a. worcester proposes the introduction of a new term for describing the actual surplus income of production factors at the firm level – “factor income” (since “non-value costs” by g. stigler are closely related to the analysis of intermediate levels from firm to society as a whole, for which the term “rent”, according to d. a. worcester, should not be used). consequently, this publication in 1946 in the american economics review states that “... the theory of rent remains very unclear since the payment of rent associated with various functions of power varies greatly...” (worcester, 1946) d. a. worcester positioned his concept of alternative cost as the third option, describing the discussion of two points of view: “rent combines elements both of surplus and costs” (classical theory) and “rent is a part of the total payments that cover the surplus” (pareto’s rent). at the same time, modern western economic literature pays much attention to alternative costs. the economic theory of the enterprise implies that the company’s alternative costs are a part of its cost structure. in real-world business situations, the use of the financial indicator of “threshold interest rate” is close in its essence to the use of the concept of alternative costs in the economic theory of the enterprise. thus, the phenomenon of alternative costs has firmly entered the western theory and business practice of a modern market economy. however, this cannot be said at all about rent, for which only some of the authors find a very limited place in their writings, which has been implicitly reflected in the educational literature. so, only a few lines are devoted to rent in one baltic journal of economic studies 28 vol. 4, no. 4, 2018 of the universally recognized world’s best textbooks on economics. p. a. samuelson and w. d. nordhaus in part iii. factor markets: labor, land, and capital of economics provide the following definition of rent or, more precisely, the net economic rent: “rent (or pure economic rent) is payment for the use of factors of production that are fixed in supply.” despite the fact that at first the notion of rent is given only to land, it is further noted that “aside from land, we can apply rent considerations to gold mines, 7-foot-tall basketball players, and anything else in fixed supply.” s. fischer gives a similar definition of rent: “since land is traditionally considered as a quantitatively fixed factor, the word ‘rent’ is often used to refer to income from any factor derived from its limited supply. thus, the factor brings the rent if it is paid at a level that is higher than necessary to ensure the supply of services for this factor.” the fact that the use of natural resources in the economic activity, other than land, forms a rent is noted by other researchers. in particular, n. zhikaliak considers the mining rent to be a kind of natural rent and divides it into mining, which does not depend on the behaviour of the economic entity, and entrepreneurial in the mining industry, which depends on the behaviour of the economic entity. under mining rent, the author understands a part of the economic profit from the transfer of ownership rights to land plot and subsoil for the extraction of minerals, or from the sale of mining products. entrepreneurial rent, in the interpretation of the author, is a part of the economic profit from the sale of rights to mineral resources or products of the mining industry, which is mainly determined by the actions of economic entities in the process of investing in current activities (zhikaliak, 2013). according to v. mishchenko, among the types of mining rent, it is necessary to allocate a monopoly rent, which is received from those areas where rare minerals are extracted, which are sold at monopoly prices determined only by the payment capacity of consumers (mishchenko, 2004). according to yu. navrozova’s research, the water rent is a kind of surplus profit, which depends on the natural properties of water received by the economic entity through the exploitation of limited water resources of different qualities (navrozova, 2008). under the natural rents, m. halushchak understands the additional profit, which is received in addition to a certain return on capital and labour spent. natural resource rent arises as a result of economic activity associated with the use in the public production of natural resources as a means of production (halushchak, 2008). consequently, taking into account the fact that the source of rent is a natural resource, and the obligatory condition for its occurrence is the conduct of economic activity, all types of natural rent can be considered components of economic rent, which is received by the economic entity, some of which then paid to the owner of such a resource in the form of rent payments. according to b. paskhaver, price mechanism cannot serve as a regulator of rental relations, since the rent does not form a price, because it is a part of the created added value. however, it is quite controversial in the scientific literature to include the payment for the use of land in production costs. b. paskhaver believes that the inclusion of rent by landholder in production costs should not affect the price level since such individual costs will not be socially necessary. otherwise, prices for agricultural products would be determined not only by the actual costs of their production but also by forms of rental relations. consequently, he advocates the opinion that only at the level of the immediate commodity producer within the framework of his economic interests it is possible to consider the rent and the price of land as an element of advanced means (paskhaver, 1972). s. zdan (melnyk) observes another opinion, which states that: “direct land rent is manifested at the final price of finished agricultural products” (zdan (melnyk), 2011). the current legislation of ukraine contains a definition, according to which rent income (land rent) is the income that can be derived from land as a means of production, depending on the quality and location of the land. rent income is calculated as the difference between the expected gross income from sales of products received on the land plot and the production costs and profits of the producer. consequently, taking into account the review of opinions of the scholars who were at the origin and who developed the theory of rent, as well as the content of other publications by hurovska (2011); bazylevych (2008); zakharchuk (2011), one can state that the rent was treated as: added value; component of profit; transformed profit; form of added value; fee for using resources; surplus income (additional income) or surplus profits obtained as a result of efficient use/exploitation of the renting resource; passive income, which does not require conducting business activity from its recipients. under the indicated polymorphic nature of rents, its consideration as a potential object of accounting becomes of considerable importance with the following reasons: 1. the rent is a component of value added, but the value added in the accounting system is not accounted for. it is worth paying attention to the fact that: at the macroeconomic level, added value – a social form created by hired workers of an additional product. added value can be determined only based on the application of the national accounts system. in determining it at the baltic journal of economic studies 29 vol. 4, no. 4, 2018 microeconomic level, there are serious complications, because at the stated economic level, “added value – the value created within the enterprise as a result of the impact on the means and objects of labour and includes added value” (ullubijeva, 2009). the application of tax legislation also does not solve the problem of its definition, since in accordance with article 188.1 of the tax code of ukraine, the vat base for the supply of goods/services is determined on the basis of their contractual value, taking into account national taxes and fees (with the exception of separate fees and payments). so, from the point of view of the applied economy, value added is an economic indicator that determines the value created by the enterprise in the production process. in fact, the value added of production includes the costs of its production, expenses related to remuneration of labour and social insurance, depreciation deductions, income tax. at the same time, the added value is not subject to accounting and is not reflected in the report “on financial results of the enterprise” even under the existing calculation methods. 2. rent is a component of income from operating activities carried out using or exploiting limited natural resources. 3. rent occurs only because of the existence of a difference in production costs in different land areas or at different labour and capital costs because, as d. ricardo pointed out, there is no rent as long as only areas of the highest quality are to be processed. when it comes to switching to the worst-quality areas, the former should give an excess of income, because the worst areas should compensate for all production costs, otherwise they would not be involved in the production. thus, the very appearance of land rent depends on the need to move from the areas of better quality to less fertile lands. one can determine the difference in the cost of production or spent capital to one and the same entity only based on the results of a certain production cycle, the preparation of quarterly or annual financial statements. accordingly, it is expedient to identify the rent as an additional income, which, in our opinion, cannot be equal to the size of the rent payment. in this position, the rent cannot be reflected in the expense. 4. the complexity of the previous value appraisal of rent makes it impossible to reflect it in income. it is worth mentioning that incomes are reflected upon the implementation or receipt of funds. 5. the amount of rent depends on the demand for goods. if the product is sold at cost or below the cost, there will be no rent. the higher the sales price, the greater the share of rent in revenue from sales. 6. rent as a type of income will directly affect the optimization of the use of economic resources of the business entity, will be important in defining priorities and shaping development plans. business, focusing on demand satisfaction, determines the prospects, priority of individual activities according to potential profits, the size of which will largely depend on the procedure of identification of the rent, the consequences of which will form a series of economic levers of influence on production, through which cooperation between individual links and participants in the production and commercial process, as well as stimulation of the improvement of technologies and an increase in the efficiency of resources use, will be ensured. describing the second aspect of rental relations – rent payment, we consider it necessary to express a number of considerations. rent payments for the use of natural resources in the vast majority of countries of the world are in the form of rentals, royalties, and bonuses, the volume of which has its own features. for example, in india, the fee for the use of mineral resources for the extraction of iron ore is 10% of its market value (matiukha, 2013). as o. zakharchuk notes “... in the usa, enterprises engaged in the extraction of minerals pay rent, bonuses, royalties. in scandinavian countries, enterprises pay a standard tax of 28%, a special tax – 50%, and royalty in deposits” (zakharchuk, 2011). according to o. zakharchuk, the large amount of rent payments is justified since the amount of rent is large. an argument in favour of a high level of rent payments is the fact that the entity does not invest anything, but bear the costs of extracting only. summarizing the situation in ukraine, it should be noted that enterprises that produce minerals only increase their revenues, since the interest rates on the cost of mined minerals are less than the amount of value added tax refunded to such entities-exporters. “the imperfection of the existing system of payments for the use of subsoil in ukraine leads to negative consequences, namely: mining rent falls on subsoil users, which is, as a rule, private enterprises” (matiukha, 2013), even so do not expect a fair distribution of rents. as v. zanko notes, “if an enterprise has determined the amount of rent for the use of subsoil for the extraction of minerals, which should be paid to the budget for each unit of mined raw material of a certain type, it may include the cost of charging such rent, as other direct costs to the production cost of commodity products of the mining enterprise” (zanko, 2016). under this approach, rental payments will be returned to the business entity in the price of the finished product sold. in our opinion, such an approach only increases the sale price and in no way affects the economic behaviour of a business entity that, in a situation of the imperfect market such as in ukraine, is usually a monopolist. in order to ensure a fair distribution of the income from the extraction of energy resources and other minerals, the obligatory rental payment must be higher than the refundable value added tax rate and be within the range of 5-10% of the market value of minerals and to be paid quarterly in the form of advance payments with a mandatory adjustment of the sum of payments at the end of the fiscal year. baltic journal of economic studies 30 vol. 4, no. 4, 2018 the regulation of the organization and accounting of natural resources and, consequently, natural rent, is absent in most countries of the world due to the prevalence of state ownership of natural resources. in national standards, natural resources are referred to in the provision (standards) of accounting 7 “property, plant and equipment” in the part of land plots that are accounted for in the subaccount 101 “land plots”, and the cost of improving them – the subaccount 102 “costs for improvement of land plots”, as well as purchased natural resources for subsequent extraction (of oil, gas, etc.) – subaccount 114 “natural resources”. a similar situation is observed in international standards, where the international financial reporting standards 16 “property, plant and equipment” refers to the registration of land plots. however, p(s)a 7, as well as ifrs 16, does not apply to non-renewable natural resources (they are characterized by limited reserves, can only be used once (mineral wealth)). that is, the majority of renewable natural resources and all non-renewable as sources of formation of natural rent are not covered by accounting. according to our belief, the attribution of natural resources to fixed assets is ungrounded in view of a number of their characteristics other than fixed assets, namely: 1) lack of wear; 2) natural origin; 3) ability to biological transformation. in 2009, the provisions (standards) of accounting 33 “expenditure on exploration of mineral resources” were approved, which define the methodological principles for the formation of information on the cost of exploration and determination of volumes and quality of mineral resources and its disclosure in the financial statements in accounting. the standards of this provision (standard) are applied by enterprises, organizations, and other legal entities (hereinafter referred to as “enterprises”) irrespective of ownership forms (except for banks, budgetary institutions, and enterprises that, according to the law, make financial statements according to international financial reporting standards) and do not apply to the stages pilot industrial development of deposits. consequently, the accounting of natural resources is not governed by this standard in accordance with ifrs 6 “exploration for and evaluation of mineral resources”. as for the american accounting system, which is regulated by us gaap accounting standards, the classification and assignment of natural resources to objects of accounting in them is similar to the ukrainian practice. but in us gaap, unlike the ukrainian provisions (standards) of accounting, issues of accounting and reporting of natural resources to oil companies are further disclosed. thus, the methodology of accounting for natural resources as a source of natural rent requires improvement in terms of recognition by accounting objects of all natural resources and rights to their use, as well as the formation of their classification, methods for their evaluation, reflection in accounts and in the reporting of the enterprise. the specified will create the basis for a reliable determination of the amount of natural rent from a certain type of natural resource. regarding other factors of production (innovative methods and technology, creative staff, information, etc.), they are in the vast majority reflected in the accounts. it should be taken into account that the process of identification of rent depends on a large number of endogenous and exogenous factors that determine the behaviour of participants in rental relations, affect the process of creation and distribution of income from the use of resources. in this case, the exogenous factors such as the legislative and regulatory activity of the state will have a decisive influence, as a result of which there is a market infrastructure that creates a system of accumulation and appropriation of rent, the allocation and extraction of surplus profits, through rent payments, etc. however, such an endogenous factor will play a decisive role as an improved accounting system that will perform the tasks: formation and provision of complete, timely, and reliable information on rental income for effective management of an innovative or sales activity of an entity and its rental payments to budgets of different levels; ensuring control over the use of rental resources (rentcreating factor), income received by a business entity; creation of sufficient information support for the analysis of rental income. economic preconditions necessary and sufficient for the organization and maintenance of accounting of rent by the economic entity should include identification of: the object, – rent-forming factor (resource), which uses (exploits) the economic entity-payer of rent, which brings economic benefits and provides an economic advantage over the use (operation) of such an object; income of the entity that uses (exploits) such an object that includes the rent; rent estimates for determining rental income, the share of rent in income from a particular activity, and the subsequent implementation of rent payment; forms of documents and methods of accounting in the accounts of rent (rental income) and rent payment, followed by their reflection in the financial statements of the economic entity-payer of the rent. thus, at the entity’s level, accounting of rent relations is necessary for the effective management of this entity. based on strategic goals, the owner or user of rental resources that receives a significant amount of rent from their particular type may decide to invest additional resources for improving these resources in order to increase the amount of the rent received or spend on improving other types of resources that are worse by their properties and do not generate income from their use. baltic journal of economic studies 31 vol. 4, no. 4, 2018 4. discussion the main advantage of the research conducted is the determination of the subject and object composition of the rent relations, justification of the expediency of identifying the economic rent as an additional income, elaboration of proposals for accounting for rent and rent payments, which will constitute sufficient grounds for solving the problems of the organization and the methodology of results of rent relations. 5. conclusions according to the results of the research conducted, it is found that rent relations today are not reflected in the accounting system in full. to eliminate the established discrepancies in the interpretation of the essence of the rent, one should take into account the legal basis of rent relations in terms of identification of their possible entities. in particular, one should proceed from the fact that, in accordance with the current legislation and the absence of direct prohibitions, the parties (subjects) of rent relations can be: • the individual (the recipient of the rent (rent income) and at the same time the payer of the rent payment) – the individual (the recipient of the rent); • the individual (the recipient of the rent (rent income) and at the same time the payer of the rent payment) – the legal entity (the recipient of the rent); • the legal entity (the recipient of the rent (rent income) and at the same time the payer of the rent payment) – the individual (the recipient of the rent); • the legal entity (the recipient of the rent (rent income) and at the same time the payer of the rent payment) – the legal entity (the recipient of the rent). given the above, all the subjects of rent relations, which according to the law are obliged to keep accounting and financial statements, should carry out measures for the organization and maintenance of rent accounting. mandatory accounting of rent relations is determined by the fact that the payer of the rent will generate additional income and expenses associated with rent payment, and the recipient of the rent will generate revenue, from which the tax will be required. if the quasi-rent arises without further payment of rent, since the rent-forming resource (innovative methods and technology, creative personnel, information) is in the ownership or in the operational management (ownership) of the business entity, so there is no entity to which the rental payment should be transferred (make additional payments), the necessity of conducting its accounting will be conditioned by the creation of an information base for assessing the temporary competitive advantage and determining the tactics of its effective use. knowledge of the amount of rent forms a competitive advantage because, at actually lower costs and market value, revenue is greater than that of competitors. knowledge of the amount of rent will allow reducing the sale price, saving the level of profitability, increasing the volume of sales and, therefore, income and profit. rent as an income from the extraction/use of natural resources, as well as the use of other rent-forming factors, should be reflected in the off-balance sheet account “rent” with the allocation of subaccounts by types of economic rent received from extraction/use, other exploitation (lease) of natural resources, other rent-forming factors. record on the corresponding off-balance sheet account will be made after the analysis of the public financial statements, including reporting on expenses and income of business entities – competitors. the reflection of the obtained rent on the results of the last fiscal year will provide management information for possible variants of management decisions in the current fiscal year, namely: determination of the maximum allowable reduction in the price of sales of finished products keeping an acceptable level of profitability to increase demand, expand the market and, consequently, increase profits; directing the entire amount of rent or part thereof to the implementation of environmental measures, modernizing the material and technical base, activating innovation activities, etc. rent payments are proposed to be attributed to operating expenses since their inclusion in production costs contradicts the economic nature of such costs, unjustifiably increases the prime cost, and contradicts the principle of equitable rent distribution. in order to replenish the financial sources of the implementation of sustainable development concept and ensure the equitable distribution of income from the use of natural resources belonging to the people of ukraine, it is proposed to set rent payments for exporters at 5-10% of the market price. prospects for further research are the development of proposals for making adjustments to the plan of accounting, 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(1946). reconsideration on the theory of rent. american economic review, vol. 36 ( june), pp. 258-277. baltic journal of economic studies 61 vol. 5, no. 5, 2019 corresponding author: 1 yuriy fedkovych chernivtsi national university, ukraine. e-mail: t.kovalchuk@chnu.edu.ua 2 yuriy fedkovych chernivtsi national university, ukraine. e-mail: a.vergun@chnu.edu.ua doi: https://doi.org/10.30525/2256-0742/2019-5-5-61-66 improvement of the method of analysis of asset management efficiency tetyana kovalchuk1, andriy verhun2 abstract. assets are the key factor in the financial well-being of a business (the financial health of a business). their composition and efficiency of use directly influence the end result of the enterprise's economic activity. effective asset management can improve financial sustainability and increase the competitiveness of an enterprise. therefore, in order to ensure financial sustainability and competitive advantage in the long run, it is necessary to address the challenge of continuous improvement in asset management. financial analysis is an important tool for substantiating and controlling asset use decisions. as the turnover and return on assets depend to a large extent on the particularities of the industry and the conditions of business, the means of financial analysis must be tailored to specific situations. therefore, the issues of improving the methods of financial analysis that would take into account the peculiarities of the activity of the enterprise are urgent. the purpose of this study is to substantiate a methodological approach to the analysis of asset utilization of ukrainian bakeries. the methodological basis of this study is a system-based approach to solving the problems of analytical asset management. in generalizing the methodological principles of financial analysis of asset management effectiveness, techniques of abstract-logical method are used, namely: analysis and synthesis, induction and deduction, analogy and comparison. there were used methods of average and relative values, methods of modeling and factor analysis to make all the calculations; they were used to establish the relationship between the systems of financial indicators of asset efficiency. the calculation of the indicators of profitability and asset utilization in turnover was made according to the financial statements of ukrainian bakeries. asset management is aimed at increasing the efficiency of their use, the main generalization of which is the return on assets. the need to improve the methodology for analyzing the return on assets is due to the limited use of this indicator in the analysis of unprofitable enterprises on the one hand, and, on the other hand, to the need to take into account the specifics of the industry where the enterprise operates. under conditions of loss, the asset return indicator distorted reflects the impact of its change factors, and industry features are reflected in different turnover rates of individual components of assets, and accordingly, in different intensity of their impact on profitability. the proposed approach is based on a multifactorial model that reflects the dependence of the asset on return to sales, non-current assets to sales, inventory to sales, accounts receivable to sales and cash assets to sales. the model determines the intensity of the impact on the return on assets of the partial indicators of the assets to sales. the calculations were made by a group of bakeries from different regions of ukraine. as a criterion for assessing the effectiveness of asset management, it is proposed to use the average growth rate of partial indicators of the model of return on assets, which is determined taking into account the intensity of their impact. the specifics of the approach are more focused not on absolute indicators, but on indicators of dynamics, on the identification of trends. the advantage of the proposed indicator is the ease of interpretation, especially for the case of loss-making, which is peculiar for one third of the enterprises of the industry. key words: asset management, asset utilization efficiency, indicators of assets efficiency, return on assets, ratios of assets to sales. jel classification: g31, g32 1. introduction in any enterprise, asset management is an important element that covers a wide range of tasks. they are represented in two directions: management of noncurrent and current assets. in the first direction, potential reserves for improving the efficiency of the use of non-current assets in the future period should be identified in the process of analysis and optimization of their total volume and composition should be carried out on this basis. the management baltic journal of economic studies 62 vol. 5, no. 5, 2019 of non-current assets is strategic. therefore, the most important task here will be justified by the criterion of increasing the efficiency of use timely updating of production facilities. although the management of non-current assets is also related to the current financial activities of the enterprise, the decisions regarding them relate to the long term. the management of current assets is more related to the current activity of the company, so its effectiveness will be determined in the short term. it includes the effective management of the balance of goods and finished products, inventories of raw materials, accounts receivable, efficient use of cash and management of other current assets. effective management of current assets can be argued if it ensures the continuity of the production process; accelerating the turnover of circulating assets and increasing their profitability; minimization of risks and costs associated with the formation and use of current assets, maintaining a sufficient level of liquidity of the enterprise. as the outward signs of such efficiency would serve a reduction in the duration of the operating cycle; improving the organization of logistics; acceleration of the shipment process of products and processing of settlement documents, acceleration of repayment of receivables, optimization of the balance of cash assets. the success of these tasks depends to a large extent on the quality of information support for managerial decision-making. the decisions to be made must be based on reliable, validated information that truly reflects the objective reality, and the conclusions should be substantiated by accurate analytical calculations. in addition, an important management requirement is to provide a systematic approach when each object under study is viewed as a complex dynamic system that includes a number of elements, in some way related to each other and to the external environment; the study of each object should be carried out taking into account all internal and external relations, the interdependence of its individual elements. an important prerequisite is adherence to this principle when forming methodological support for the analysis of accounting data on the assets of the enterprise. the justification of the methodology for analyzing the efficiency of assets use of the enterprise is just the subject of this study. 2. current state of analysis of asset management effectiveness management approaches to ensuring the effectiveness of current and non-current assets differ, it is explained by their different economic and material substance. however, methodological approaches to the analysis of individual components of assets have common features. their effectiveness is determined by the ratio of the effect of use (sales) to the value of the assets themselves. in fact, efficiency can be achieved either by increasing the effect of the use of assets, or by reducing the period from receipt of the order to the shipment of finished goods and receiving cash from it, or by reducing the amount of attracted assets. in evaluating the efficiency of management’s use of company assets many analysts compute total asset turnover and return on assets (schwetje, vaseghi, 2007). probably one of the most commonly used vital signs implemented in studying the financial health of a company is return on assets (roa), that is viewed by many as an appropriate means of measuring management’s efficiency in using company resources (financial accounting, 2012). it is calculated as net income divided by average total assets (dewhurst, 2014). roa shows how well or poorly management is employing the company’s total assets to make a profit (the higher the return on assets for company, the more efficient management is utilizing the company’s asset base) (twineyo-kamugisha, 2017). furthermore, it indicates if it is worth using borrowings to finance assets (if the interest rate for the borrowings is lower than the return on total assets, the use of borrowings has proved worthwhile) (schwetje, vaseghi, 2007). so a high return on assets indicates that the business has performed well by making profitable investments in the past, but it does not necessarily mean that you could buy the same assets today at their reported book values (brealey, myers & allen, 2011). the informativeness of the roa indicator is confirmed by the study of 544 failing and unfailing firms that illustrates that, as early as four years before they went bankrupt, the failing firms were earning a much lower return on assets (roa) than firms that survived. (beaver, mcnichols & rhie, 2005). if for the analysis of the efficiency of the use of total assets, including the efficiency of the use of noncurrent assets, the profitability indicator is generally accepted, the efficiency of the use of current assets is determined by other characteristics. in use, current assets are transformed from one settled state to another, thus, making a turnover. therefore, the most important indicators of the efficiency of current assets use are turnover rates. they are calculated for the total working capital as a whole and for the various components of working capital separately. in addition, it must be taken into account that some company’s rivals may be pursuing power or scale-related targets (e.g., biggest turnover in the industry) that are frequently far removed from profitability targets, so it is very hard for groups pursuing profitability targets to grow in such conditions (vernimmen, 2005). therefore, in terms of comparative analysis, the use of turnover rates will be more preferential. turnover ratios are calculated by the ratio of sales revenue and the average of assets or their constituent elements. turnover rates indicate management’s efficiency at generating sales. sales must occur before baltic journal of economic studies 63 vol. 5, no. 5, 2019 the profits can be earned from normal operations and if assets are not well used to create sales, the profits will probably never arise (financial accounting, 2012). the most general is total asset turnover. it is computed by the following formula (financial accounting, 2012): total asset turnover = sales revenue/average total assets this figure provides an indicator of how productively capital has been utilized within the company by measuring how many times capital invested in the total assets has been turned over (schwetje, vaseghi, 2007). normally, the higher this ratio is, the better, the more often capital has been turned over, the more efficient the assets have been utilized for the generation of sales (schwetje, vaseghi, 2007) but, as often the case with ratios, it is needed to look at industry norms (dewhurst, 2014). as already mentioned, turnover ratios are calculated for different components of assets. though turnover ratios are not as common with noncurrent assets as with current assets, however, if a company has large amounts reported for various fixed assets but fails to create high revenue balances, the ability of management to make good use of those assets has to be questioned (financial accounting, 2012). so there is a necessity to calculate the noncurrent assets turnover, in particular, fixed assets turnover indicating the efficiency by which a company uses its property and equipment to generate sales revenues. these figures are calculated by taking net sales for a period and dividing it by the average net book value of the company’s noncurrent assets (fixed assets). the efficiency of the use of current assets is measured by such indicators as inventory turnover, receivables turnover, cash turnover. they represent how speedily a firm converts its inventories and accounts receivable into cash, how readily it pays its bills, and how efficiently it uses its assets to generate sales (scov, 1994). inventory turnover shows how often a firm is turning over its inventory, shows the number of times that a firm’s inventory balance was turned (“sold”) during a year (skousen, walther, 2009) and similar to the asset turnover ratio, the inventory turnover is better when higher (dewhurst, 2014). it is simply another way to measure the speed by which a company sells its inventory: the larger the turnover number, the faster inventory is selling (financial accounting, 2012). equally important is to monitor the rate of collection because many businesses have substantial dollars tied up in receivables, and corporate liquidity can be adversely impacted if receivables are not actively managed to insure timely collection (skousen, walther, 2009). the age of receivables and the receivables turnover are the measures of speed or slowness of cash collections (financial accounting, 2012). that number reveals how many times firm’s receivables are converted to cash during the year (skousen, walther, 2009). so the higher the receivable turnover, the faster collections are being received. although turnover ratios are most common for the assets discussed above (inventory, receivables, fixed assets), any asset can be examined as a turnover ratio as long as the appropriate numerator is used in the calculation (wahlen, baginski, & bradshaw, 2011). cash turnover ratio is computed by dividing sales by the average cash balance during the year (amanda, 2019). it shows the efficiency with which cash is managed. cash turnover is a measure of the efficiency of cash used by companies because the cash turnover rate describes the speed of return of cash invested in working capital (amanda, 2019). the higher cash turnover rate means the faster cash return goes to the company. thus, cash will be used again to finance operational activities so as not to disrupt the company 's financial condition (haryanto, sodikin & chaeriah, 2018). 3. formulation of the problem obviously, no aggregate indicator or group of indicators can claim to be universal and objective in all situations. its "objectivity " depends on the policy adopted, the specificities of the particular situation, etc. therefore, the development of new indicators may be useful when it is necessary to take into account certain characteristics. the methodological approach being developed must be systemic, which means considering objects as complex systems that combine many elements of external and internal links. comprehensive analysis involves a comprehensive study of the economy of the enterprise based on the study of the system of economic indicators, taking into account the factors that affect the results of the enterprise. in applying this approach, the following should be noted. roa indicator, while reflecting overall performance, does not quite reflect the performance of individual components of assets (their turnover) as it is significantly influenced by the profit factor. profit depends on both income and expenses. therefore, if the average asset value was not large and the costs associated with earning income were significant, then asset efficiency by turnover ratio would be relatively higher than asset efficiency by profitability. that is, turnover figures will show the return on investment of assets (regardless of cost), and roa will show the efficiency of all activities, which also takes into account the costs associated with the use of these assets. in particular, profitability depends on market conditions, such as prices and management's ability to adapt to changes. therefore, in some periods, businesses may suffer losses not so much due to internal factors but the external ones. analyzing the effectiveness of asset management during periods of impairment, if performed on the basis of profitability indicators, there may be some difficulties. this is due to the fact that it is difficult to distinguish between internal and external factors and, therefore, to mark negligible aspects of baltic journal of economic studies 64 vol. 5, no. 5, 2019 performance change. therefore, it would be useful to use an asset management performance indicator that is as generalizable as the return on assets and, at the same time, takes into account internal aspects. in addition, it is obvious that this indicator should take into account the dynamics of the process of use (management) of assets. therefore, it is important to distinguish between the goals of using turnover and profitability. the first indicators show the return on invested capital in the form of sales, the second perform the return in the form of profit. the interpretation of these indicators may not coincide. this is due to the effects of other operating and non-operating factors for changing profits. thus, the considerable income received per 1 uah of assets will be reflected in a considerable speed of turnover of assets, and the resulting small profit will be reflected in the low return on assets. profit is one of the most volatile indicators, because it is affected by both internal factors (that determine virtually all aspects of the enterprise) and external. in addition, the level of profitability, as well as the efficiency of use of assets depends on the status and characteristics of the industry in which the enterprise operates. different industries have different structure of assets, different turnover of their components and therefore different influence of turnover indicators on profitability. an analysis of industry statistics shows that from 2013 to 2017, the proportion of unprofitable enterprises ranged from 27.5% to 37.7% (table 1), that is, one third of enterprises suffered losses. table 1 net profit (loss) of enterprises (%) year proportion of enterprises that made a profit in the total number of enterprises proportion of enterprises that received losses in the total number of enterprises 2013 62,3 37,7 2014 62,4 37,6 2015 72,6 27,4 2016 72,5 27,5 2017 71,4 28,6 source: the report of the state statistics service of ukraine, 2017 4. modelling of efficiency indicator the indicator discussed above – return on assets (roa) – can be represented as such a factor model: roa p na i ar ca = + + + where, p – operating profit, na – non-current assets, i – inventory, ar – accounts receivable, ca – cash assets. by dividing the numerator and denominator by net sales (s) we obtain the following dependence: roa p s na s i s ar s ca s = + + + in this model: � p s – return on sales (ros), na s – non-current assets to sales ratio (nas), i s – inventory to sales ratio (is), ar s – accounts receivable to sales ratio (ars), c s – cash assets to sales ratio (cs). the indicators of nas, is, ars, cs are inverted to the above discussed turnover rates (non-current assets turnover, inventory turnover, receivables turnover, cash turnover ratio). they reflect another aspect of asset management effectiveness. if turnover figures show a return on invested capital, then assets to sales indicators show the “cost” of assets to generate returns in the form of income. effective asset management is characterized by an increase in turnover rates, but a decrease in congestion rates. given the above designations, this model can be represented as: roa ros nas is ars cs = + + + it shows that the return on assets depends on the profitability of sales and methods of managing assets, their structure and the degree of attraction to turnover. these indicators are largely determined by the characteristics of the industry which the enterprise belongs to. as the model implies, an increase in return on sales (ros) and a decrease of indicators: noncurrent assets to sales (nas), inventory to sales (is), accounts receivable to sales (ars) and cash assets to sales (cs) will help to increase return on assets (roa), that is, increase asset utilization efficiency. however, it is necessary to consider the peculiarities of interpretation of this model for the case of loss. in the case of unprofitableness, a decrease in the denominator of the formula (assets to sales by type) will indicate an increase in the unprofitableness, i.e. a decrease in efficiency. and this contradicts the previous interpretation. thus, the return on assets is of limited use in the analysis of unprofitable enterprises, because the change in the focus of the function loses the economic content of dependency. the indicator gives a distorted idea of the structure of influence. however, it is possible to obtain an objective assessment of the asset's performance on the basis of this model, including in the case of impairment, if we consider the change in factor baltic journal of economic studies 65 vol. 5, no. 5, 2019 indicators dynamically. in this approach, it is suggested to use the average rate of growth of the variable return on assets, which is determined on the basis of the individual rate of growth of each factor. the latter are adjusted by appropriate weights. the survey used information on the performance of 23 bakeries located in different regions of ukraine. in the first stage, by each enterprise was determined the impact of return on sales (δroa(ros)), noncurrent assets to sales (δroa(nas)), inventory to sales (δroa(is)), accounts receivable to sales (δroa(ars)) and cash assets to sales (δroa(cs)) on the indicator return on assets (roa). objective evaluation uses an integrated method that allows to measure impact without setting a strict order. according to this method, the impact is determined by the formulas: ∆ ∆ ∆ ∆ ∆ ∆ roa ros ros nas is ars cs nas is ars cs nas is ( ) = + + + × + + + + ln 1 1 1 1 0 00 0 0+ +ars cs ∆ ∆ ∆ ∆ ∆ ∆ roa ros ros nas is ars cs nas is ars cs nas is ( ) = + + + × + + + + ln 1 1 1 1 0 00 0 0+ +ars cs ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆roa fas roa roa ros nas is ars cs fas( ) = ( ) + + + × � ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆roa is roa roa ros nas is ars cs is( ) = ( ) + + + × � ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆roa ars roa roa ros nas is ars cs ars( ) = ( ) + + + × � ∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆roa cs roa roa ros nas is ars cs cs( ) = ( ) + + + × � the second stage. in determining the significance of each factor, it is taken as a basis that it is reflected in the magnitude of its impact on the rate of return on assets. the calculation is made by the formula: λx i i n i i roa x roa x n= ( ) ( ) × =∑ ∆ ∆ 1 where, λxi – weighting coefficient, xi – factor of influence, n – number of factors, ∆roa (xi) – the impact of the factor on the return on assets. the results of the calculation of the weight coefficients for the group of studied enterprises are presented in table 2. at the last stage, a generic indicator of asset efficiency is formed: g n g i n x xi i �= × = ∑ 1 1 λ where, gxi – the rate of growth of the respective asset turnover rate in circulation. or: g g g g g�= × + × + × + ×( )1 4 1 8029 1 0375 0 8999 0 2597, , , ,fas is ars cs table 2 weighting coefficients by group of baking enterprises enterprises λnas λis λars λcs chernivtsi bread-baking complex 1,4838 1,2250 1,2001 0,0911 drohobych bread-baking complex 2,4809 1,1642 0,2282 0,1267 stryi bread-baking complex 2,5088 0,5567 0,8597 0,0749 vasylivka bread-baking complex 3,8437 0,0435 0,0145 0,0983 shostka bread-baking complex 1,0622 1,7990 0,9441 0,1947 konotop bread-baking complex 1,6073 1,5789 0,4865 0,3273 nikopol bread-baking complex 1,8399 0,1296 1,9948 0,0357 kryvyi rih bread-baking complex №1 1,4497 1,2452 1,2833 0,0219 cherkasy bread-baking complex 2,6515 0,9129 0,4303 0,0054 dnipropetrovsk bread-baking complex №9 1,3503 0,9179 1,5913 0,1405 pjsc "novovolynsk bread-baking complex" 1,6100 0,1961 0,9269 1,2670 pjsc "olevsk bread-baking complex" 2,2330 0,8008 0,4328 0,5334 pjsc "khlibnyy kolos" 0,9257 1,3272 1,7424 0,0046 pjsc "slavuta bread-baking complex" 1,4601 1,7490 0,3487 0,4422 pjsc "izyaslav bread-baking complex" 0,5741 0,8126 1,6937 0,9197 pjsc «chortkiv bread-baking complex» 2,3581 0,4684 1,0353 0,1382 open joint stock market entity "berezhany bread-baking complex" 3,3667 0,3695 0,1150 0,1488 pjsc "lyubotyn bread-baking complex" 1,3383 1,9037 0,7307 0,0273 pjsc "korosten bread-baking complex" 0,9835 1,8969 1,0048 0,1147 pjsc "novograd-volynskyy bread-baking complex" 2,4551 0,5333 0,1833 0,8282 pjsc "ovruch bread-baking complex" 1,8205 1,2759 0,7664 0,1371 pjsc "dzerzhynskbread-baking complex" "toretsk bread-baking complex" 1,2862 1,7096 0,7946 0,2095 pjsc "kryvorizhkhlib" 0,7770 1,2468 1,8899 0,0862 average by group of enterprises 1,8029 1,0375 0,8999 0,2597 baltic journal of economic studies 66 vol. 5, no. 5, 2019 the value of this indicator should be less than 1. this will mean that the efficiency of use of assets during the period under review has increased. 5. conclusions existing methods of analyzing the effectiveness of the use of assets in most of them involve the use of a system of indicators, including indicators of return on assets, asset turnover, and duration of asset turnover. an analysis of these indicators shows that they may not fully reflect the asset management performance of unprofitable enterprises and require such an interpretation of the results of the calculations, which would take into account the specifics of the industry in which the enterprise operates. on the basis of multifactor model of return on assets the indicator of efficiency of assets use of the enterprise is developed. it represents the average rate of growth of non-current assets to sales, inventory to sales, accounts receivable to sales and cash assets to sales, adjusted for the individual importance of each according to the intensity of their impact on the indicator of return on assets. this indicator reflects the peculiarities of the assets turnover of the bakery industry in ukraine and is convenient for analyzing the use of assets of both profitable and unprofitable enterprises. the developed methodological approach to the analysis of asset management integrates traditional performance indicators into the system and allows considering them in the dynamics and taking into account the weight of the impact of the performance indicators of individual components of assets on the profitability indicator. it can be applied to different industries, taking into account the features of asset turnover and the level of profitability. the proposed metric provides an understandable criterion for generalizing the dynamics of asset performance indicators by type. a value of less than 1 indicates an increase in efficiency in the study period. the decision-maker thus receives a tool for evaluating the effectiveness of decision-making related to asset management, taking into account industry specificities. references: amanda, r . i. (2019). the impact of cash turnover, receivable turnover, inventory turnover, current ratio and debt to equity ratio on profitability. journal of research in management, 2(2), 14–22. retrieved from: https://www.researchgate.net/publication/334320658_the_impact_of_cash_turnover_receivable_ turnover_inventory_turnover_current_ratio_and_debt_to_equity_ratio_on_profitability beaver, w. h., mcnichols, m. f., & rhie, j. w. (2005). have financial statements become less informative? evidence from the ability of financial ratios to predict bankruptcy. review of accounting studies, 10(1), 93–122. brealey, a. r ., myers, s.c. & allen, f. (2011). principles of corporate finance. new york, mcgraw-hill/irwin, 969 p. dewhurst, j. a. (2014). an introduction to business and business planning – bookboon.com. retrieved from: https://bookboon.com/en/an-introduction-to-business-and-business-planning-ebook financial accounting (2012). saylor academy, 746 p. haryanto, sodikin, a., & chaeriah, e. s. (2018). effect of turnover of cash, receivables turnover and inventory turnover on return on assets. journal of arts humanities and social sciences studies, 3(1), 62–81. schwetje, g., & vaseghi, s. (2007). the business plan how to win your investors' confidence. new york, springer berlin heidelberg new york, 180 p. skousen, c. j., & walther, l. m. (2009). current assets – bookboon.com, p. 97. retrieved from: https://bookboon.com/ en/current-assets-ebook skov, n. a. (1994). finance and management. warczawa, pret, p. 247. the official site derzhavna sluzhba statystyky (2017). activities of enterprises. retrieved from: http://www.ukrstat.gov.ua/ druk/publicat/kat_u/publ9_u.htm (in ukrainian) twineyo-kamugisha, e. r . (2017). the basics of business management. vol i.: leadership, financial management and economics – bookboon.com, 283 p. retrieved from: https://bookboon.com/en/the-basics-of-businessmanagement-vol-i-ebook vernimmen, p. (2005). corporate finance theory and practice. chichester, john wiley & sons ltd, p. 1032. wahlen, j. m., baginski, s. p., & bradshaw, m. (2011). financial reporting , financial statement analysis and valuation: a strategic perspective. mason, ohio, thomson, p. 1261. baltic journal of economic studies 50 vol. 5, no. 4, 2019 corresponding author: 1 state institution “institute of regional research named after m.i. dolishniy of national academy of sciences of ukraine”, ukraine. e-mail: tgvas77@ukr.net orcid: https://orcid.org/0000-0002-2889-6924 2 lviv university of trade and economics, ukraine. e-mail: economist_555@ukr.net orcid: https://orcid.org/0000-0002-1830-1800 3 stepan gzhytskyi national university of veterinary medicine and biotechnologies lviv, ukraine. e-mail: kunytskam@gmail.com orcid: https://orcid.org/0000-0003-2559-1065 doi: https://doi.org/10.30525/2256-0742/2019-5-4-50-58 social security of ukraine and the eu: aspects of convergence and improvement of migration policy taras vasyltsiv1, ruslan lupak2, marta kunytska-iliash3 abstract. unresolved problems of social and economic development of ukraine, exacerbated by critical negative consequences of military aggression and political instability, are accompanied by deep socio-economic contradictions and aggravation of large-scale social problems. at the same time, the qualitative system of social security, characteristic of the eu, is not formed. as a result, negative phenomena and trends are accumulated in social sphere there that manifest themselves in the critical deformations of social development, with the formation of threats of degradation and depopulation, the increase of environmental problems, deterioration of social structure, weakening of social guarantees of human rights that are evidenced and confirmed by mass and active labour migration of the ukrainians abroad. ensuring ukraine’s social security objectively requires an in-depth study based on a systematic approach, applying eu principles, provisions, practices, and standards. the purpose is to substantiate approaches and means of convergence of social security of ukraine and the eu and develop recommendations for the improvement of migration policy. methodology. as the methodological basis of the study, theories of socio-economic growth, modern concepts of institutional and structural economic reforms have been worked out, methods of statistical, structural-functional, and system analysis, grouping have been applied. results. the imbalances of social security of ukraine and the eu have been determined according to the following components: labour market and employment of population; reproduction of population and labour potential of the state; migration and food security. areas of accelerated asymmetry increase in the social development of ukraine and the eu, which serve as a key factor in “pushing out” the population and high rates of labour migration from ukraine to the eu member states, have been identified. strategic approaches and means of equalizing critical deformations and convergence of the system of social security of ukraine in the process of integration into the eu have been determined; tools for improving the state migration policy have been developed, which implementation would result in improvement of the systemic and structural characteristics of labour potential migration. conclusion. the study results obtained represent the existence of significant disparities in key indicators and components of the social security system of ukraine and the eu. low level of living standards and social protection of population serves as a factor in increasing the scope of external labour migration and, correspondingly, a critical weakening of human and labour potential of the state. tools and means of the state policy of convergence of the social security system of ukraine and the eu should focus on achieving the goal of systemic development of human capital and be implemented in the following directions: ensuring demographic security, upgrading health care system, renovating the quality of education, preserving cultural values, establishing a competitive labour market, improving housing affordability, social infrastructure development, systemic social insurance of population. key words: social security, convergence of the social policy of ukraine and the eu, human potential, migration. jel classification: е24, f22, h53, j63 baltic journal of economic studies 51 vol. 5, no. 4, 2019 1. introduction ukraine is characterized by the lower key indicators of human development in comparison with the majority of eu countries, which objectively hinder the european integration and euro-atlantic aspirations of ukraine, and reflect real problems in the field of formation and effective use of human capital. both the cause and the consequence of these trends are the lack of quality and complete system of social security of the state. the imbalances of social security between ukraine and the eu are a powerful factor of “pushing” ukrainians out of ukraine and their active foreign, primarily labour migration. the unevenness of the social security systems of ukraine and the eu not only leads to weakening of the national security of ukraine (primarily due to the deterioration of the intellectual and labour capital of the nation, the restriction of resource supply, and the reduction of the competitiveness of the economy, decrease of the social and investment attractiveness of the territories) but also threatens europe as a whole due to aggravation of poverty on the continent, insufficiently regulated migration, declining incomes, under-utilization of the potential employment and consumption in the domestic market of one of the largest european countries. research of such scholars as c. ziller, m. wright and m. hewstone (2018), y. young, p. loebach and k. korinek (2018), s. lee (2018), j.-e. bettignies and d. robinson (2018), c. jennings and s. sanchezpages (2017), c. brinch, e. hernæs and z. jia (2017), o. vlasyuk (2016), b. bratsberg, r . oddbjørn and k. röed (2014), f. gonzalez and j.-f. wen (2014), v. gorbulin and a. kaczynski (2010), m. gonzalezeiras (2008), r . burkhauser and k. holden (1982) is devoted to the problems of ensuring the country’s social security, including the migration factor. key aspects of the formation and expansion of the european principles and standards for the provision, functioning, and development of the economy in the context of strengthening the formation of the system of social security of the state are highlighted in works of such scholars as g. genna, f. justwan (2019), l. d’hooge, p. achterberg and t. reescens (2018), o. ilyash (2018), e. shcherbakova (2018), j. paju (2017), k. bagmet and h. obeid (2017), p. schoukens (2016). the results of research of s. pozo (2018), a. young and m. tackett (2018), f. mandelman (2016), c. naiditch, a. tomini and c. lakhdar (2015), b. chiswick and p. miller (2014), k. han (2013), m. fisher (2013), p. klein and g. ventura (2009), c. mueller (1982) are a significant theoretical and applied basis for the formation of the principles of social security of the state, improvement of migration policy. despite tried and tested theoretical and methodological principles of the state policy of the formation of a system of social security, the issue of not so much the formation and provision, as the achievement of convergence of the key conditions and parameters of social security systems of the states implementing the processes of the european integration, and the eu, as well as identification of the most systemic negative consequences of existing social security imbalances (in particular, critically threatening scope of external labour migration) and the development of tools and means of counter-strategy in the process of harmonization of social security systems, simultaneously implying a strong synergy effect, remains a significant layer of outstanding theoretical aspects and practical recommendations. the purpose of the article is to substantiate approaches and means of social security of ukraine and the eu convergence and to develop recommendations for the improvement of migration policy. 2. comparison of social security options of ukraine and the eu: confirmation of threats growth comparative characteristics of the key indicators of social security of ukraine and the eu testify to the existence and expansion of critically threatening social security challenges. thus, in ukraine, the income level of the population is significantly lower, and there are problems in the main parameters of the labour market (table 1). the level of average monthly income per one household member in 2017 was eur 96, while the average value of this indicator in eu countries was eur 1702, being 17.7 times higher. in particular, the highest figures among european households were in luxembourg (eur 2618), germany (2318), austria (2222), france (2077), and the lowest ones were in bulgaria (920), latvia (1120), greece (1211). it should be noted that in early 2018, the minimum monthly wages in the eu countries ranged from eur 261 (in bulgaria) to eur 1999 (in luxembourg). at the same time, all european countries can be divided into three groups: the first one includes the countries where minimum monthly wages are less than eur 500 (bulgaria (261), lithuania (400), romania (408), latvia (430), hungary (445), croatia (462), czech republic (478) and slovakia (480)); the second one comprises the countries where minimum monthly wages range from eur 500 to eur 1000 (estonia (500), poland (503), portugal (677), greece (684), malta (748), slovenia (843) and spain (859)); the third one includes the countries with the minimum monthly wages exceeding eur 1000 (great britain (1401), germany (1498), france (1498), belgium (1563), the netherlands (1578), ireland (1614), and luxembourg (1999) (public union “economic discussion club”, 2019; eurostat, 2018). as far as ukraine is concerned, the minimum monthly wages in equivalent to euros baltic journal of economic studies 52 vol. 5, no. 4, 2019 amounted to eur 108, which is almost 2.5 times less than its lowest value among eu countries. if the share of minimum wages in the average earnings in the eu countries ranges from 39.0% (in estonia, ireland) to 64.0% (in portugal, slovenia), then in ukraine the corresponding ratio is 48.0%. as a result, both the level of income and the minimum wages in ukraine are significantly inferior to the lowest value of these indicators across all eu countries. as of 2017, 64.2% of the population were employed in ukraine, while in the eu percentage of employment averaged 71.1% (6.9 p.p. more), and the maximum value was 81.2% (17.0 p.p. more). as for the eu countries, the highest employment rates were recorded in sweden (81.2%), germany (78.7), united kingdom (77.6), denmark (77.4), and the lowest rate was in greece (56.2), croatia (61.4), italy (61.6). ukraine yielded on the unemployment rate (and this is official data, while actual data are much worse), as well as on the share of wages in the income of the population. in particular, for the last decade, the unemployment rate in the 28 member countries of the eu is the lowest one (8.3%). among the member states, the lowest unemployment rate was observed in the czech republic (2.4%), germany and malta (3.5%), hungary (3.7%), and the highest unemployment rates were observed in greece (20.8%) and spain (16.1%). as it follows from the data presented in table 2, ukraine is characterized by a lower level of population reproduction and labour potential. thus, the birth rate in ukraine was 0.5 ppm lower than the average for the eu countries, and the death rate was 4.2 ppm higher; the birth rate dropped by 0.2 per one woman in the reproductive age. among the 28 member countries of the eu, the death rate exceeds the birth rate in 16, in particular, the highest difference was observed in bulgaria (6.5 p.p.), latvia and lithuania (4.1), croatia (4.0), hungary (3.8), romania (3.6). and, on the contrary, the birth rate exceeded the death rate in ireland (by 6.6 p.p.), cyprus (3.7), luxembourg (3.3), and sweden (2.4). at the same time, the highest birth rates are in sweden and france (fertility rate per woman in the reproductive age – 1.9), the lowest ones are in spain and italy (1.3). if the mean age of childbearing in the population is 28.0 years in ukraine, then in the eu it is 2.6 years more table 1 social security of ukraine and the eu in 2017: labour market and employment parameters indices countries l ev el o f a ve ra ge m on th ly in co m e pe r on e ho us eh ol d m em be r, e u r m in im um w ag es a s o f t he e nd o f t he ye ar , e u r l ev el o f d is pa ri ty o f m in im um to av er ag e m on th ly w ag es , % g ro w th in de x fo r t he c os t o f l ab ou r sh ar e of e m pl oy ee s w ho re ce iv ed le ss th an 1 05 .0 % o f t he n at io na l m in im um w ag es ,% sh ar e of w ag es in th e in co m e of po pu la tio n, % em pl oy m en t r at e (a cc or di ng to th e m et ho do lo gy o f t he in te rn at io na l l ab or o rg an iz at io n (i lo )) , % u ne m pl oy m en t r at e (a cc or di ng to th e m et ho do lo gy o f t he in te rn at io na l l ab or o rg an iz at io n (i lo )) , % ukraine 96 108 48.0 5.5 3.0 61.0 64.2 10.1 e u -2 8 average across the countries 1702 856 53.0 2.1 5.0 76.0 71.1 8.3 maximum value 2618 1999 64.0 15.1 19.0 91.4 81.2 25.9 minimum value 920 261 39.0 0.2 0.0 66.8 63.9 4.1 source: compiled according to (public union “economic discussion club”, 2019; state statistics service of ukraine, 2019; eurostat, 2018) table 2 social security of ukraine and the eu in 2017: population reproduction and labour potential parameters indices countries f er til ity ra te p er on e w om an in th e re pr od uc tiv e ag e b ir th ra te ( pe r 1 .0 00 pe op le ), % d ea th ra te ( pe r 1 .0 00 pe op le ), % th e av er ag e m ed ia n ag e of th e po pu la tio n, ye ar s в a ve ra ge li fe ex pe ct an cy a t b ir th , ye ar s sh ar e of li fe o f t he po pu la tio n, sp en t o n w or k (i n pe rc en ta ge to li fe e xp ec ta nc y) , % sh ar e of th e po pu la tio n, n ot ea rn in g liv el ih oo d du e to o ld a ge s, % ukraine 1.4 9.4 14.5 40.8 71.9 48.8 37.8 e u -2 8 average across the countries 1.6 9.9 10.3 42.6 80.9 44.0 29.9 maximum value 1.9 12.9 15.5 45.8 83.5 50.2 34.8 minimum value 1.3 7.6 6.3 36.6 74.9 37.7 20.5 source: compiled according to (public union “economic discussion club”, 2019; state statistics service of ukraine, 2019; eurostat, 2018) baltic journal of economic studies 53 vol. 5, no. 4, 2019 (30.6 years). thus, among the european countries, the highest average age of mothers at maternity is in ireland (32.1 years), spain (32.0), italy (31.8), luxembourg (31.7), and the lowest average age is in bulgaria (27.6), romania (27.8). it should be noted that if on the average across the eu countries, in 2017 the average life expectancy was 80.9 years (ranging from 74.9 years in lithuania, latvia and bulgaria to 83.5 years in spain), then in ukraine it makes up only 71.9 years, or 9.0 years less. at the same time, both in ukraine and in the eu, the average age of the population is quite mature: the median age of ukrainians is 40.8 years, while the age of the eu population was 42.6 years. in this case, the youngest european country according to the median age of the population is ireland (36.6 years), the oldest is germany (45.8 years). the indicators of the share of population, not earning livelihood, are significantly worse in ukraine (37.8%, while the average in the eu countries – 29.9% (from 20.7% in ireland to 34.8% in italy), as well as share of life of the population spent on work (48.8% vs. 44.0%). in particular, the italians and luxembourgers are spending the least shares of their lives: 37.7% and 39.9% respectively, and the most shares of their lives spend swedes (50.2%), danes (49.9), and the netherlanders (49.0). according to the information, presented in table 3, it is possible to give preliminary findings about the significantly lower rates of immigration and emigration of the population in ukraine compared to the countries of europe. however, the real state of affairs is not the same. ukraine is the european leader in the scope of external labour migration. however, this refers to unreported labour migration. according to the national bank of ukraine, the amounts of remittances of the ukrainian migrant workers in 2018 exceed 9.0 billion eur , which is 18.3% more than in 2017; the amounts of remittances exceed the amounts of direct foreign investments in ukraine by 3.8 times (national bank of ukraine, 2019). according to various estimates, about 3.0-5.0 million ukrainians participate in external labour migration, ranging from 12.0% to 20.0% of the able-bodied population of the state. this is an evident proof of not only critically high scopes of external labour migration but also of the rapid growth of its rates and the increasing threats to ukraine’s economic and social security. it should be noted that in 2017, net migration is characteristic of the 23 eu countries, where this indicator varied from 0.1 ppm (in poland) to 31.3 ppm (in luxembourg). instead, in other countries, there was a migration decline, which varied from -0.8 ppm (in bulgaria) to -9.7 ppm (in lithuania). most of the net migration fell on germany (476.000 people), great britain (281.000), spain (166.000), and sweden (102.000). at the same time, a particularly significant negative balance of migration was formed in countries with a long-term prevailing migratory drop-off, including: romania (-49.600), croatia (-31.800), lithuania (-27.600) (shcherbakova, 2018; eurostat, 2018). both the consequence and the cause of insufficient social security in ukraine were the values of indicators of the food component of the social security system (table 4). thus, average daily dietary calories in ukraine in 2017 amounted to 2,742 kcal, while the average calories in the eu were 3416 kcal (24.6% more). among the european countries, the lowest dietary calories are consumed by cypriots (2661 kcal/day), bulgarians (2877), slovaks (2902), hungarians (2988), and the highest calorie diet (over 3,500 kcal a day) is consumed by the belgians (3793), austrians (3784), irish (3591), luxembourgers (3568), italians (3539). in general, the disparity between ukraine and the highest level of this indicator made up 38.3%. however, as we see, the value of this indicator in ukraine is inferior even to the minimum level in the eu countries. this is evidence of inadequate consumption of the necessary products by the population and, therefore, the complication of opportunities for proper reproduction. the population of the eu countries has better financial capacities, which is reflected in the spending pattern. so, if in ukraine food expenditures account for 54.3% of total consumer’s expenditures, then average food expenditures in the eu countries make up only 12.3%. even in the european countries with a maximum value of this indicator, the level of food expenditures is significantly lower, by 34.8 p.p. it should be noted that the lowest levels of consumer’s expenditures on food of less than 10.0% in the eu countries were found in the households of luxembourg, austria, and ireland, and the highest – in lithuania, estonia, and bulgaria (about 20.0%). table 3 social security of ukraine and the eu in 2017: migration policy parameters indices countries inter-state immigration of the population intensity ratio, per 1.000 people inter-state emigration of the population intensity ratio, per 1.000 people inter-state migration transfers of the population intensity ratio, per 1.000 people net (gross) migration rate of the population, per 1.000 people ukraine 14.0 7.0 11.0 0.5 e u -2 8 average across the countries 8.8 18.1 15.3 2.4 maximum value 47.2 52.1 69.0 31.0 minimum value 5.0 3.2 2.0 -10.0 source: compiled according to (public union “economic discussion club”, 2019; state statistics service of ukraine, 2019; eurostat, 2018) baltic journal of economic studies 54 vol. 5, no. 4, 2019 similar tendencies are specific also to comparative opportunities of europeans and ukrainians concerning expenditures on recreation and culture. if in ukraine the share of expenditures on this source was only 1.5%, then the average in the eu countries amounted to 8.5%, and in the countries-leaders on this indicator they spend more than 10.0% (finland (11.0%), denmark (10.9%), malta (10.8%), slovakia (10.6%). the population of ukraine is also in a permanent state of shock associated with high rates of inflation and instability of the national currency. thus, just in 2017, the capital groups price index reached 17.9%, while in the eu countries it averaged 2.1%. at the same time, it should be noted that the expenditure level of the eu citizens for payment of utility bills is higher, 22.5% (estonia (29.1%), great britain (28.4%), cyprus (26.5%), germany (25.6%), belgium and the czech republic (24.5%), ireland (23.9%), whereas in ukraine it reaches 17.2%. but this situation should not be regarded as positive, as there is a continuous increase in utilities cost, and a significant part of the population of ukraine is on the verge of poverty and cannot fully pay for the housing and communal services received. despite the problems described, a gradual increase since 1997 in the level of human development index is peculiar for ukraine, which is positive. but, despite the upward dynamics of this index, ukraine’s places in the country ’s human development ranking remain low. for example, in 2017 ukraine was at the 88th place out of 189 countries of the world. by 2016 there it lost four rating positions. if in 1990–1994 ukraine was at the 45th place in the ranking, then during 1995–2017, the highest value, the 69th place was achieved in 2010. further, the overall trend is negative, which, on the one hand, is the evidence of deterioration of social security system functioning in ukraine and, on the other hand, the consequence of the shortcomings of the state policy of ensuring social security (human development reports, 2018). the policy of convergence of the social security system of ukraine and the eu, the main objective of which is to resist socio-economic risks that reduce the level of convergence of the social security system of ukraine and the eu in the process of european integration, requires an increase in the indirect effects of collaboration in the social sphere. 3. low social security causes migration from ukraine to the eu low level of convergence of reforms and transformations in the sphere of social security of ukraine and the eu is due to the passivity and financial insolvency of the existing state policy, an overabundance of goals and a small number of means to achieve them, in particular: – lack of real opportunities for reforming the labour market reproduction policy and employment regulation; – limited influence of the state policy on raising the level of real earnings of population and reforming the system of social protection of wage workers and labour migrants; – lack of effective social dialogue and cooperation by eu partner countries; – deepening of regional disproportions in the development of social infrastructure and lack of procedures for implementing eu norms and practices for the development of the primary healthcare sector; – inconsistency of educational potential with the needs of innovative development of the region’s economy; – the increase of gender violence, discrimination against women and men in the labour market and their weak social protection in society. over the last years, an accelerated increase in asymmetry in the development of the social security system of ukraine and the eu has been observed, being one of the main reasons for the intensification of migration (in particular, external migration) processes in ukraine (figure 1). it should be noted that today ukraine is among the top ten donor countries of the international labour migrants table 4 social security of ukraine and the eu in 2017: food supply parameters indices countries a ve ra ge d ai ly d ie ta ry ca lo ri es o f t he po pu la tio n, k ca l p er pe rs on sh ar e in th e av er ag e da ily ra tio n of th e pr od uc ts o f ve ge ta bl e or ig in , % sh ar e in th e av er ag e da ily ra tio n of th e pr od uc ts o f an im al o ri gi n, % c ap ita l g ro up s p ri ce in de x sh ar e of fo od ex pe nd itu re s i n to ta l co ns um er ’s ex pe nd itu re s, % , % sh ar e of u til iti es ex pe ns es in to ta l co ns um er ’s ex pe nd itu re s, % sh ar e of e xp en di tu re s o n re cr ea tio n an d cu ltu re in to ta l c on su m er ’s ex pe nd itu re s, % ukraine 2742 71 29 17.9 54.3 17.2 1.5 e u -2 8 average across the countries 3416 71 29 2.1 12.3 22.5 8.5 maximum value 3793 78 22 6.0 19.5 29.1 11.0 minimum value 2877 61 39 -1.9 8.1 10.4 4.5 source: compiled according to (public union “economic discussion club”, 2019; state statistics service of ukraine, 2019; eurostat, 2018) baltic journal of economic studies 55 vol. 5, no. 4, 2019 in the world. thus, according to various estimates, almost 28.0% of the economically active population of ukraine are external labour migrants while, at the same time, more than 15.0% of the able-bodied population may be outside the country. 4. alternatives to social security modelling an important role in the process of formation and implementation of the state policy of strengthening ukraine’s social security should be assigned to the synthesis of both positive practices and failures as a part of the world experience of state regulation in this area, which is especially important in the context of taking into account possible risks and threats to the state’s social security in a short-, medium-, and long-term prospects. it is appropriate to take into account the positive practices of european states in implementing liberal, conservative, and paternalistic models of social policy (table 5). scopes to ta l n um be r of m ig ra nt w or ke rs : 4 .9 m ill io n pe op le (2 7. 4% o f t he ec on om ic al ly a ct iv e po pu la tio n) th e nu m be r of u kr ai ni an s w ho w or k si m ul ta ne ou sl y ou ts id e th e co un tr y: 2 .7 m ill io n pe op le (1 5. 1% o f t he ec on om ic al ly a ct iv e po pu la tio n) in 2 00 3– 20 18 , 6 .3 m ill io n pe op le le ft u kr ai ne a nd n ev er r et ur ne d (3 .0 m ill io n pe op le tr av el le d ac ro ss th e w es te rn bo rd er a nd 3 .3 m ill io n pe op le a cr os s th e ea st er n bo rd er ) th e du ra tio n of w or k ab ro ad o f t he m aj or ity o f m ig ra nt w or ke rs r et ur ni ng to u kr ai ne d oe s no t e xc ee d on e ye ar (2 9. 0% w or ke d fo r m or e th an a y ea r, 1 4. 0% w or ke d fo r se ve ra l y ea rs ) figure. 1. key quantitative indices of external labour migration of ukraine intensity as of the beginning of 2019 source: centre for economic strategy, 2019 table 5 characteristics of social policy models in the eu countries models features states liberal – restriction of state regulation of the system of social and labour relations; – ensuring reliable legal protection of non-governmental organizations in the social sphere; – achievement of the high efficiency of trade union organizations in the field of social protection; – providing targeted social assistance to the poorest people; – enhancement of the involvement of the insurance industry in financing social programs; – restriction of budget financing of social services united kingdom of great britain, ireland conservative – approval of the state control system of compulsory collective responsibility; – developed corporate social security system; – expansion of social partnership as an arrangement for coordinating the interests of employees and employers; – approval of consistency between the insurance contributions of employees and employers and the amount of budget deductions for social measures; – providing by the state of high control over channels of redistribution of budgetary social deductions; – distribution of practice of paying the amount of social assistance proportional to the received earnings and the amounts of insurance payments sweden, denmark, finland, norway paternalist – increased participation in the regulation of social and labour relations of state and departmental structures; – the versatility of social protection as the right of all citizens guaranteed by the state; – establishment of the high role of the state in the socialization of incomes of the population, where public authorities provide a high level of quality and accessibility of social services; – expansion of solidarity system of social protection; – implementation of mechanisms for the functioning of insurance funds and warranty bonds; – consolidation of legal provisions and motivation for concluding collective contracts and agreements germany, france, austria, belgium, the netherlands, switzerland source: composed by the authors baltic journal of economic studies 56 vol. 5, no. 4, 2019 5. means of social security convergence european experience demonstrates that only an integrated approach to addressing the identified problems is effective by way of smoothing critical social security deformations. taking into account the abovementioned critical risks in the social sphere that do not contribute to the convergence of the social security system of ukraine and the eu, the strategic approaches and tools of intensifying the implementation of reforms in ukraine and changes in the conditions of european integration should be as follows: 1) in order to ensure the improvement of human development environment, fight against discrimination, the creation of new competitive jobs, the growth of employment rates and control of the factors of “pushing out” the population abroad, strengthening the market flexibility and security of the employed workers, the implementation of european principles and guidelines of responsible business and corporate practices should be guaranteed. the provisions of the un global compact 2000 and the ilo tripartite declaration on corporate social responsibility are the institutional and methodological support of these practices; 2) in order to ensure growth of employment rates of the population and reduce the number of compulsory dismissal of workers, the ministry of social policy of ukraine and the national employment agency jointly with the confederation of free trade unions of ukraine are to begin work on the introduction of a fourday working week for low-skilled workers (reduction of working hours by 20.0%); in order to legalize the “shadow” employment and support the competitiveness of the economically active population in the labour market, urban and district employment centres should introduce the practice of holding european forums and consultations; a package of laws on financial and banking activities in order to increase the stability and attractiveness of the formal employment sector should be adopted at the legislative level, and risk pooling bank (insurance bank) should be established for refinancing, reimbursement of interest rates for using the currency; 3) in order to intensify cooperation in creating the full potential for the population in ensuring an adequate level of working life quality, to improve the system of social protection within the framework of the implementation of the association agreement with the eu, work for bringing the legislative and normative base of ukraine to the european practices and requirements should be continued. this requires clarification of a number of important provisions of the institutional and legal system in the areas of employment of disabled persons, alternative pensions, social insurance, etc. 4) in order to implement the intentions regarding the improvement of resource provision in the field of medicine and healthcare, strategy for the development of the national blood system in ukraine should be put into practice. opportunities for this will only appear after the formation of a multi-level system of relevant advisory committees under the leadership of the independent competent authority (as prescribed by the directive of the european parliament and of the council of europe of 27 january 2003 no. 2002/98/ec); 5) the provisions of the international health regulations (ihr) for the purpose of prevention and better control of the spread of infectious diseases should be institutionalized; active cooperation with the member states of the ihr , in particular, with the means of institutional and technological cooperation, financial and resource assistance, creation of conditions and environment for the qualitative use of the advantages and opportunities of institutionalization of the ihr in the state should be carried out and developed; 6) the alignment (in accordance with european practices) of the institutional and psychological principles in the sphere of spatial mobility of young people, especially in the educational sphere, which will be facilitated by the formation of an appropriate electronic communication space (based on eures model (european job mobility portal) should be promoted within the framework of cooperation; various programs of student exchanges, joint foreign trainings, etc. should be implemented. it is necessary to promote such tools as “youth employment initiatives” and “youth guarantee schemes” within the framework of the concept of the state target social program “youth of ukraine” for 2016–2020. implementation of the said measures and initiatives will allow influencing virtually the most critical aspects of the social sphere, and at the same time involving the so-called points of prospective cooperation between ukraine and the eu within the framework of social policy, which will have a dual effect in the context of convergence of social security systems. 6. means of migration processes regulating the overriding need in the context of the state control of migration processes is: 1) within the framework of the activity aimed at improving social protection of the ukrainian migrant workers, to promote the implementation of contractual relations with the eu in the field of social protection and pension benefits of such persons, the formation of conditions and opportunities regarding the development and implementation of circular migration programs in both directions; 2) in order to reduce labour migration, to ensure increasing incomes of the population as a powerful factor in the control of external migration, and to implement high-quality alternative forms and methods of strengthening social responsibility of employers for the creation of appropriate working conditions baltic journal of economic studies 57 vol. 5, no. 4, 2019 and adequate social protection of employees. for the purposes of the latter, the practice of social dialogue has become widespread and effective in the eu countries; 3) to eliminate obstacles to the mobility of the population, to increase its territorial mobility, and also to ensure the growth of domestic demand for labour with the incentives of domestic employment of citizens as a tool of control of external labour migration. in order to provide the latter at the regional and local levels, it is necessary to promote the implementation of socioeconomic development programs, in particular, in support of the development of the most promising areas of economic activity for the respective territory; 4) for the proper adaptation of persons who are returning from abroad, it is important to develop a tool for receiving money by them until they are employed; to introduce a state system of tax and customs privileges and affordable financial and credit support for the launch of a private small business; to develop the mechanism of recognition of qualifications in accordance with their profession and specialization during employment abroad; to deepen european cooperation aimed at integrating labour migrants, in particular, implementation of the action plan on integration of refugees by 2020. implementation of the measures specified will allow to improve the structural features of migration such as shadow/official, permanent/shuttle trader’s, loss/ qualitative reproduction of human capital, low paid/ highly skilled labour, etc., which simultaneously will promote both the increase of the quality of life and improvement of the key characteristics of the system of social security of ukraine, its actual approaching the standards of social security of the eu. 7. conclusions social security challenges of ukraine have intensified, especially in the areas of reproduction of the population and labour potential, functioning of social sphere and labour market, incomes and employment of the population. they result in worsening of working conditions and loss of material wealth, depopulation and aging of the nation, spread of poverty and wealth divide, deterioration of the material and technical, financial and investment, intellectual and personnel provision of healthcare, education, culture, art, sports, and as a consequence, in a decreased social protection of the population, increased mood of dissatisfaction with life and social policy of the government, including the desire for emigration and external labour migration. approximation of ukrainian social security standards to the eu standards in the process of european integration, spatial and structural coherence and alignment of the elements of social security system are a prerequisite for modernization and formation of a more reliable system of social security of a person in ukraine in accordance with the european approaches, principles, and provisions. the state policy in the field of convergence of social security system of ukraine and the eu, in particular, with regard to the regulation of migration processes, should be directed towards the achievement of the goal of systemic development of human 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studies 168 vol. 5, no. 1, 2019 corresponding author: 1 uhhorod national university, ukraine. e-mail: zarybey@bigmir.net 2 national academy of internal affairs of ukraine, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-1-168-173 mediation institution: experiences from countries across the world mykhailo pitiulych1, iryna nakonechna2 abstract. the aim of the article is to study the process of implementation of the institute of mediation in ukraine and across the world. the subject of the study is mediation institution, analysed from scientific perspectives and on the basis of provisions of foreign and ukrainian legislation. methodology. the study is based on general scientific and special-scientific methods and techniques of scientific knowledge. the logical semantic method enabled to determine the content of the concepts of “mediation” and “labour dispute”. the comparative legal method enabled to compare the doctrinal approaches to this issue. the same method enabled to analyse the legislation on the subject matter in the us and leading european countries. the normative dogmatic method enabled to interpret the content of legal regulations of domestic and foreign legislation that regulate the issue of mediation. the systemstructural method enabled to identify the main differences of mediation from other ways of economic dispute resolution. methods of analysis and synthesis enabled to identify the main purpose of mediation and the main task of a mediator, as well as the key advantages of this institution. the method of legal modelling enabled to develop proposals regarding this institution introduction in ukrainian legislation. practical implications. studies on mediation institution in the us and leading european countries helped to develop recommendations for this institution introduction in ukrainian legislation, as well as to identify issues requiring further consideration and research. relevance/originality. the concepts of “mediation” and “greenmail” are defined. the main purpose of mediation and the main task of a mediator, as well as the key advantages of this institution, are identified. in ukraine, in comparison with other countries, the indecisiveness and inconsistency of the actions of the domestic legislator are stated as the key problem of mediation institution. it is underlined that nowadays-ukrainian society is ready for this institution’s introduction because mediation is the alternative way of dispute resolution, which enables to solve a number of social and economic problems. key words: foreign experience, mediation, dispute resolution, legislation, legal regulation. jel classification: j52, k34, l43 1. introduction any socially oriented democratic state of the world is obliged to create conditions, under which each person will feel protected in all activities. in the context of the global economic crisis, constant fluctuations in the economy and the growth of unemployment, the issue of labour rights protection of workers is particularly acute. international labour law provides a number of labour guarantees, among which one of the keys is the ability to protect their rights in accordance with the law. however, the high corruption of courts and a significant delay in labour dispute resolution affects negatively the quality of labour rights protection by this body of state power. therefore, new institutes in the area of labour occur, among which mediation plays an important role all over the world. indeed, this method allows for a more efficient and qualitative labour dispute resolution. however, despite all the progressiveness, a number of problematic issues related to mediation introduction not only in ukraine but also all over the world. meanwhile, it should be noted that in some states, the institution of mediation functions effectively. some specific issues regarding mediation introduction in ukraine were considered in the works of: r. l. hordiienko, m. ya. polishchuk, p. s. prybutko, r. v. mykhailenko, l. m. dubchak, a. p. huskova, d. v. matkina, p. a. bushchenko, a. m. sliusar, n. m. shvets, v. v. zhernakov, s. a. podoliak, t. o. podkovenko, o. o. sosiura, d. a. kratiuk, and many others. however, despite a large number of scientific researches, there is no comprehensive study on the comparative legal analysis of mediation institution in ukraine and in the countries across the world in legal literature. therefore, the aim of the article is to study the process of implementation of the institute of mediation in ukraine and across the world. baltic journal of economic studies 169 vol. 5, no. 1, 2019 2. presentation of the main material primarily, it should be determined what mediation institution is in general? the term “mediation” comes from the latin for “intermediary,” mediatio; the same meaning has the word in english, in french (médiation). in social psychology, scientists consider mediation as a specific form of the resolution of disputes, conflicts, reconciliation of interests (materialy kursu pidhotovky mediatoriv iz kola posadovtsiv; hordiienko). both domestic and foreign scientists have tried to define the essence of the concept of “mediation.” for example, a. rau, t. sherman, and s. peppet, exploring alternative dispute resolution, define mediation as a process, in which the parties, with the assistance of a third party neutral, systematically make efforts to find out their common and different views, explore the possibilities of alternative dispute resolution and seek compromises to reach an agreement on resolving their own dispute (rau, sherman, peppet, 2002; polishchuk, 2014). ch. moore argues that mediation is often an interference in a negotiation or conflict of a third party who is not authorized to decide on dispute resolution but helps the parties to resolve the dispute voluntarily. moreover, the mediation procedure should also contribute to restoring trust and mutual respect between the parties (moore, 2003). ch. besemer defined mediation as a technology for solving the conflict with the participation of a neutral third party. most define mediation as a specific conflict resolution approach, in which a neutral third party provides a structured process to assist conflict parties to come to a mutually acceptable resolution to controversial issues (materialy kursu pidhotovky mediatoriv iz kola posadovtsiv; hordiienko). ukrainian researchers have also considered the definition of the essence of the specified term. in particular, h. v. yeromenko argues that mediation is a process of negotiation to resolve a controversial issue involving a neutral third party, a mediator, who conducts this negotiation process, hears the arguments of the parties on the substance of the dispute and actively helps them understand their own interests, evaluate the possibility of compromises and come to satisfactory decision on their own. to be precise, the author states that mediation is one of the so-called alternative (extrajudicial) dispute resolution, the effectiveness of which is particularly high in all countries where this institution is introduced (yeromenko). in conflict resolution studies, according to p. s. prybutko, р. v. mykhailenko and l. m. dubchak, “mediation” (from latin mediation for “intermediation”) is private and confidential use of mediators to resolve a conflict situation. it enables to avoid time-consuming litigation and unpredictable extra costs. the authors emphasize that mediation is the process of conflict settlement between two disputing parties with the participation of the third neutral party. as an alternative to litigation and other forceful procedures, mediation has a number of advantages, the most important of which is conflict resolution through the parties’ decision made voluntary and equitably, which equally satisfies the parties concerned (prybutko, mykhailenko, dubchak et al., 2010). t. i. shynkar understands mediation as an alternative to the judicial procedure form of pre-trial or out-ofcourt or extra-judicial dispute resolution and conflict settlement, which is voluntarily chosen by parties concerned (or appointed by the authorized body), with a view to reaching an agreement between them, and which structured procedure requires the presence of a third party (impartial and neutral mediator); mutually agreeable for the parties to a dispute or conflict, not authorized to make own decisions for any of the disputing parties, but intended to provide professional, comprehensive (multi-sided) assistance to a fair resolution/settlement of a conflict/dispute and through mediation bringing the disputing parties to a stable and constructive dialogue, which in the end leads to a compromise, stable, and mutually appropriate to the parties agreement to achieve preventing or reducing the conflict, eliminating its determinants, improving its resolution, reducing costs of resolving the conflict/ dispute and/or refusing to litigate a conflict/dispute, terminating proceedings already begun and/or reducing total claims (shynkar, 2017). a. p. guskova and d. v. matkina argue that mediation is an out-of-court dispute settlement between subjects with the participation of a disinterested party; one of the informal ways of conflict resolution; a process in which the parties meet together with the elected, impartial, neutral mediator (arbitrator) who assists with negotiation to develop a mutually acceptable, viable decision under the existing conflicting interests between them (guskova, matkina, 2009). according to s. f. demchenko, the main differences between traditional litigation and mediation are that the judge hears the parties and, based on the relevant articles of the law, makes a decision. on the contrary, the task of the mediator is much more complicated: to assist the conflicting parties with own way to resolve a controversial issue. therefore, the mediator must have additional specific knowledge. know how to organize the process of conflict resolution in such a way that its parties would be involved in the process of voluntary creative search for such a solution to their dispute that would satisfy both sides and open up new opportunities for their further interaction (demchenko, 2009). it is worth agreeing with m. m. kuzmina, that the main objective of mediation is an orientation towards reaching an agreement, a consensus, a joint decision that will satisfy both parties of the conflict. the main difference between mediation and other methods of economic dispute resolution is that it does not focus on finding and proving the rightness of a particular party. baltic journal of economic studies 170 vol. 5, no. 1, 2019 the main task of the mediator is to concentrate efforts on strengthening the ability of the parties to mediation, on parties’ recognizing and accepting each other with all differences in views. a mediator is a person whose task is to assist the parties to achieve reconciliation in the dispute. the mediator has no authority to make decisions, and his/her role and importance in the mediation process are determined by the following three positions: 1) providing feedback to the disputing parties so that they can understand the prospects for dispute resolution and find out the main needs and interests of each other in the present dispute; 2) rationalization of parties’ negotiation; 3) encouraging the disputing parties to negotiate on the principle approach and find solutions that are generally in line with their main interests, and in individual cases and at the request of the parties, introduction of significant proposals aimed at stimulating, directing the parties to reach agreement (kuzmina, 2008). to sum up, the above arguments prove that mediation, as a way of dispute (conflict) resolution, can be used in many areas of public life, depending on specifics and peculiarities acquired. since in this work, mediation is considered as a mechanism for the resolution of a labour dispute, the latter should be determined. labour disputes are disagreements, unresolved in direct negotiations, between the worker (the staff ) and the employer regarding the application of labour law regulations, as well as the establishment of new or changes in existing working conditions. the moment of labour dispute occurrence is the claim to the appropriate body examining labour disputes (ortynskyi, hryshchuk, matska, 2008). in the labour law study, according to p. a. bushchenko, a. m. sliusar and n. m. shvets, labour disputes are understood as disagreements, unresolved by direct negotiations, between the employee (or his/her authorized representative) and the employer (or his/her authorized body) over the application of regulations of labour legislation or the establishment or modification of working conditions, which are resolved in the manner prescribed by law (bushchenko, sliusar, shvets, 2013). v. v. lazor argues that a labour dispute is a claim to rights of one part to a labour relation to rights implementation provided for by labour law, collective agreements, other labour contracts, decided by the jurisdiction authority in the manner prescribed by law (lazor, 2005). o. o. kondratiev argues that the labour dispute is unsettled disagreements, submitted to the appropriate competent authorities for examination, between the subjects of labour and other closely related legal relations over the application of working conditions, established by law, or other legal regulations, or over the establishment of new (changing existing) working conditions of employees and public servants, not enshrined in normative acts and solved in the manner prescribed by law (kondratev, 1985). therefore, labour disputes are disagreements between an employee and an employer, arising in the course of work, the resolution of which requires the involvement of a third party (in this case, the mediator). to sum up, mediation is primarily a process of peaceful settlement of disagreements that may arise between an employee and an employer. such activity is carried out, in accordance with the law, by the third impartial party (mediators), which has special knowledge, skills, and abilities. the main purpose of the mediator is to establish a dialogue between the disputing parties and ensure its resolution promptly and effectively on mutually beneficial terms for the disputing parties. therefore, the benefits of the mediation are: 1) it is the most civilian way of dispute resolution, through which the parties can find an understanding and, possibly, continue to work together, that is, in this case, the ability to meet the needs of both disputing parties increases; 2) it allows to reduce significantly the burden on the courts and reduce court costs; 3) it is a more efficient way of labour dispute resolution; 4) according to the world practice, dispute resolution through mediation leads to 98% of successful implementation of agreements the parties themselves; 5) it contributes to raising the level of legal consciousness of the population and the people’s confidence in justice. however, despite the advantages, the mediation institution in ukraine, including labour dispute resolution, remains poorly developed, and its implementation is hampered constantly, all attempts to “legitimize” it remain at the level of draft laws. however, global practice shows that mediation implementation is important since 85% of disputes with a mediator are successful. therefore, the study of foreign experience in this area is important for the ukrainian legislator. considering the positive foreign experience of mediation introduction, the united states of america (hereinafter referred to as the us) should be mentioned first, since for many years this country has demonstrated the effective functioning of the institution under consideration. the entire us law system is aimed at ensuring voluntarily dispute resolution out-of-court; moreover, the judge may interrupt litigation and advise the parties to work with the mediator. in the us, pilot mediation programs engaging volunteer mediators began in the early 1970s in several large cities. they were so successful that hundreds of other programs were conducted throughout the country over the next two decades, and today the practice of mediation is widespread in the us. the us litigation system is aimed at voluntarily dispute resolution before a court session in most cases; moreover, the judge may interrupt litigation and advise the parties to work with the mediator (stanovlennia mediatsii v ukraini). the american arbitration association, which has adopted its rules of arbitration and mediation used by internal arbitration as well, is very influential (podoliak, 2012). baltic journal of economic studies 171 vol. 5, no. 1, 2019 the us legal framework for mediation is the uniform mediation act of 2001 and local acts, such as mediation rules from the united states district court for the western district of michigan. this legal act has united 2.5 thousand different laws regulating mediation in different states. he provides for the basic concepts and terms of the procedure for mediation (kratiuk, chernyshov, 2013). it should also be noted that the act has established legally that mediation has become an integral and growing part of dispute resolution processes in public institutions, dispute resolution programs in communities, commercial and business entities, as well as among private disputing parties. therefore, in the us, in comparison with ukraine, the institution of mediation is already an integral part of the legal system of the state. however, it should be emphasized that, in contrast to our country, in the us, the institution of mediation is already well-established and functions effectively. in the uk, the mediation procedure was established by prominent john harding (a project in coventry) and a founder member of the consortium for restorative justice martin wright (a project in wolverhampton). in 1981, the national victim support published the first survey of british mediation development, and in 1984, a new public organization, the firm, was created, recently renamed to mediation u.k ., which coordinated the regional practice of mediation (golovko, 1998; nestor, 2014). in addition, initiatives for mediation are implemented by public organizations such as the national consortium for the support and resocialization of offenders, face to face (york city). their activities have attracted attention from the ministry of the interior, which began to provide organizational and financial support to relevant projects. these projects are financed from local budgets, as well as charitable organizations (for example, the joseph rowntree charitable foundation) (golovko, 1998; nestor, 2014). in france, mediation services are provided by public organizations, and mediators shall be accredited by the public prosecutor, after which they can sign a contract with the ministry of justice of france on the provision of mediation services. they are free for process participants and paid from the state budget (shynkar, 2016). in austria, mediation services are provided by the department of the ministry of justice and the association of probation and social work. the association is an independent private entity subsidized by the ministry of justice and has its own management and quality control system for providing services. in austria, mediators should have qualifications in the field of law, social work or psychology and undergo compulsory training in mediation programs (shynkar, 2016). undeniably, in germany, the mediation was “imported” from the us. in this country, the practice of commercial mediation has not yet been widespread, but it has succeeded in forming a professional community of mediators and experts, who practice in the field of alternative dispute resolution, in addition, nowadays the theme of mediation is relevant and is under constant discussion in a wide range of circles. in germany, along with extra-judicial mediation, judicial mediation gains in popularity, because it is harmoniously integrated into the justice system. since 2004, judicial mediation has been successfully developing in the form of model projects implemented under the control of german justice authorities in courts of a number of lands of the country (mediatsiia v mire; gafner, 2015). another european country under consideration is belgium. the belgian law “on mediation” as of june 22, 2005, defines mediation as a process that allows people, involved in a conflict, by their voluntary consent, to participate actively in solving problems arising from the crime through the help of an impartial third person in full confidentiality; the law emphasizes the confidentiality of the procedure. with intent, the belgian government speaks of the mediation process, not the procedure. the belgian law was adopted under the influence of the council of europe recommendations on mediation in criminal matters and the fundamental decision of the council of ministers of the european union, and many provisions of these legal regulations automatically transferred into legislative provisions. this concerns the principles of mediation such as voluntariness, confidentiality, immediacy, mediator neutrality, and mediation availability, its admissibility at all stages of the criminal process and autonomy within the framework of criminal justice (sosiura, 2014). in belgium, almost all mediators are professionals and shall meet high professional requirements. all mediators shall have education in social work no less than at the college level. personal qualities are also important for the profession of the mediator, such as the ability to work independently, knowledge of the law. in order to engage in mediation activities, each applicant submits a written test and is interviewed. the mediator should not only carry out mediation but also continuously inform and cooperate with judicial and law enforcement agencies to stimulate the transfer of their cases to mediation (sosiura, 2014). it is worth noting that mediation is an extremely important component of the legal system of poland. the first attempt to introduce mediation into polish legislation was due to the adoption of the new penal code, which entered into force on september 1, 1998. in fact, one year was given to train practitioners to apply new criminal law. however, even after the consolidation of mediation in legislation, practitioners’ views concerning its application differed due to the lack of clarity of legislative provisions, in particular, who should propose mediation and determine the timing of its conduct (zemlianska, 2004; podkovenko, 2016). much attention is paid to the training of mediators in poland. the polish center for mediation, established baltic journal of economic studies 172 vol. 5, no. 1, 2019 in 2000, has a major role in coordinating the mediation and training activities of specialists required, although the history of this association dates back to 1992. at present, the polish center for mediation has more than 1000 members and more than 50 branches and subdivisions throughout the country and is engaged in mediation in all spheres of public life (including family, educational, civil, economic, labour, social, criminal law, cases on juvenile offenders, collective disputes) with the consent of the courts, the prosecutor’s office, the police, individuals, companies, and other institutions. the polish center for mediation actively promotes mediation in poland as an alternative conflict and dispute resolution (podkovenko, 2016). in ukraine, mediation institution is hampered. for example, in 2011, nearly eight draft laws on mediation were adopted in ukraine (no. 8137 as of february 21, 2011; no. 10301 as of april 5, 2012; no. 103011 as of april 19, 2012; no. 2425а as of june 26, 2013; no. 2425а-1 as of july 3, 2013; no. 2480 as of march 19, 2015; no. 2480-1 as of april 9, 2015; no. 36651 as of december 29, 2015). each of these draft laws contained a number of interesting but controversial moments, never implemented. comparison of ukrainian draft laws with already existing legislation of other countries shows that both domestic and foreign legislators focus on the issue of admission to the profession of a mediator. for example, the last draft law of ukraine “on mediation” stipulates that a mediator may be a person having attained the age of twentyfive, had higher or vocational education and passed professional mediation training, which must include 90 academic hours of initial education, including at least 45 academic hours of practical skills training (pro mediatsiiu). similar provisions are in the laws of other countries, in particular: in austria, a professional mediator may be a person who has reached the age of 28 years, has a statutory professional qualification, is credible and has entered into an insurance contract for civil liability (karmaza, 2017); in albania, a mediator may be a person who has a university degree diploma, has reached the age of 25 years, has completed a course of training, has a license, is registered in the register of mediators and has no conviction for committing an intentional crime (karmaza, 2017); in kazakhstan, a professional mediator is required to have a higher education, to reach 25, to complete professional training, to be included in the register of professional mediators; an unprofessional mediator may be a person who has reached the age of 40 and whose data is registered as a nonprofessional mediator (karmaza, 2017). 3. conclusion therefore, it should be noted that in ukraine, in comparison with other countries of europe and the world, the key problem of mediation institution is the indecisiveness and inconsistency of the actions of the domestic legislator. w hile most countries improve the appropriate legislation on mediation constantly and effectively, as well as develop new methods, etc.; in ukraine, the legislator has hardly progressed, avoiding decisive steps. therefore, the problems of mediation institution in ukraine reveal the controversial attitude of the ukrainian authorities towards this institution. on the one hand, the country develops draft laws in this area constantly, and scientists are interested in this issue. on the other hand, the indecisiveness of the legislator concerning the adoption of the law of ukraine “on mediation” is vague since only the adoption of the law will enable to identif y practical problems in this area and to determine the vector of further actions. the impression is that, in this way, the authorities are afraid of losing control of society, which could solve a large number of problematic issues without state interference, which in turn results in the loss of funds for corruption by state authorities. however, today ukrainian society is ready to implement this institution because mediation is an alternative 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(in ukrainian) baltic journal of economic studies 112 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-112-117 public-private partnership as a mechanism for financing infrastructure modernization olha kravchenko1 abstract. the article is devoted to the study of the possibilities of attracting private business for financing stateowned infrastructural facilities. the purpose of the paper is to study the practice of attracting private business for the modernization of infrastructure, including railway and the development of an approach to the formation of a variety of infrastructural objects transferred to the public-private partnership, based on an assessment of the possible reduction of their potential. methodology. the study is based on an empirical analysis of data on the practice of financing infrastructure modernization, as well as a swot analysis of the prospects for the development of european railways. results of the research showed that the public-private partnership has significant advantages over the budgetary one due to not only reducing the financial burden on the state budget but also increasing the efficiency of using state-owned facilities. in the field of railway transport, the volume of public-private partnership and the number of projects being implemented is insignificant due to significant state interference in its activities. swot analysis showed that railways have significant development potential, and its further increase will be achieved not through expansion of the network, but its modernization and innovative development. the dangers of the development of railways are associated with possible ineffective state policy in the field of railway transport. however, the complete transfer of the rail infrastructure to private business is not expedient since it is of strategic importance. the determination of the list of facilities for transfer to public-private partnership should be based on an analysis of the degree of their interest in private business, the need for their modernization and the possibilities for its financing. these objects are sections of the railway network included in transport corridors, as well as providing access to seaports. at the same time, the criterion of the first priority of the transfer of objects for the public-private partnership should be based on an assessment of the change in their production and economic potential when postponing modernization. value/originality. the implementation of the proposed approach to the selection of infrastructure facilities for public-private partnership will allow not only carrying out technical and technological renovation of the railway infrastructure, preserving the integrity of the strategic transport network, but also minimizing possible economic and social losses due to underfunding of its innovative development. key words: infrastructure, modernization, financing, public-private partnership, rail transport. jel classification: g32, h54, r42, l92 corresponding author: 1 state university of infrastructure and technology, ukraine. e-mail: kravch.olha@gmail.com 1. introduction in the second half of the xx century, the process of cardinal changes in all spheres of the social and economic life of both developed and developing countries began. this was the result of the formation of a new paradigm of economic development, the objective consequence of which was the change in key determinants of the management of the national economies. the structural changes that have taken place also touched on spheres that were traditionally considered to be facilities of the direct state administration. the integration processes taking place on the eurasian continent necessitate the formation of a developed infrastructure that must be not only innovative but also interconnected, i.e. form a single network and be interoperable to ensure the free movement of resources, goods, and services both within the state and with foreign partners. according to the organization for economic cooperation and development, improving the quality of infrastructure also stimulates productivity growth (cova, pagano, notarpietro, pisani, 2017). this necessitates a significant investment in infrastructure, the development of which should be spent up to 4.1% of gdp (mckinsey global institute, 2013). the experts of the mckinsey global institute note that in order to ensure the predicted growth of world gdp, the investment in infrastructure should reach 57 trillion usd up to 2030. it is obvious that it is virtually impossible for governments of even developed countries to finance the necessary capital investments at the expense of the state budget baltic journal of economic studies 113 vol. 5, no. 1, 2019 (the infrastructure of the eu countries is financed at 84%, other developed countries – 91% of the required level). at the same time, such investments should be considered as an indispensable condition for the development of the national and global economy, the failure of which leads to negative consequences for both the state and private business. the experts note that in the conditions of the budget deficits, the state will stimulate the emergence of new interesting investment opportunities (ernest & young (cis), 2014). thus, the problem of the formation of sufficient financial resources for the development of infrastructure is relevant for theoretical and applied research. to solve this problem, the practice of attracting private capital for modernizing the infrastructure by the example of the railway was explored, and an approach was proposed to the formation of a number of the infrastructural facilities transferred for modernization and further exploitation to private structures, based on an assessment of the possible reduction of their potential in the event that capital investments in them are postponed due to the lack of available financial resources. 2. models for financing infrastructure development as already noted, the state funds for the development of infrastructure are not enough now. this determines the need to attract the private business to finance both the modernization of existing facilities and the creation of new ones. one of the most promising forms of such cooperation between the state and private business is now recognized as public-private partnership (ppp). according to the world bank, ppp is used in more than 134 countries; 15-20% of all investments in infrastructure are financed at their expense (world bank group, 2015а). modern ppp theory develops on the basis of liberalconservative doctrines, which are the basis of the institutional economic theory. in modern terms, ppp is viewed as an institutional and organizational alliance between the state and business in order to implement the national and international, large-scale and local, but always socially significant projects in a wide range of activities (varnavsky, 2005). at the same time, there is a departure from the traditional position according to which ppp is possible only in industries, in which the transfer of state property to private ownership is prohibited. the adaptive approach, which predetermines the possibility of ppp in any spheres, where such interaction will be effective and mutually beneficial, is becoming more widespread. ppp is recognized as the most progressive company of the partnership between the state and private business. this is due to the fact that such a partnership gives significant advantages over the budgetary one due to: (1) reducing the financial burden on the state budget, increasing the efficiency of using state-owned facilities, improving the quality of service; (2) of a long-term nature with clearly defined time frames, which allows not only short-term and medium-term planning but also strategic planning. in addition, the widespread introduction of concessions makes it possible to expand the opportunities for attracting the private investments in industries where privatization is impossible, to modernize them without losing control over facilities of strategic importance for the state. the consequence is an increase in the frequency of use of ppp mechanisms in developing countries (colverson, perera, 2011). in developed countries, there is a considerable positive experience in creating such temporary alliances for the implementation of the specific projects. the world bank identifies three main types of ppp: rot (rehabilitate–operate–transfer), rlt (rehabilitate– lease–transfer), brot (build–rehabilitate–operate– transfer) (world bank group, 2015а). these types of ppp oblige concessionaires to perform certain works to modernize (improve) the property received (transferred) under the contract, while the cost of the works performed is not refundable. in the scientific literature, 5 main types of concession contracts are considered (hanaoka, perez palapus, 2012; kilvington, 1996; etc.). bot “build–operate–transfer” (or dbot “design– build–operate–transfer”) is a classical concession model that underpins ppp legislation in many european countries. the conclusion of such a contract assumes that the concessionaire performs the entire complex of works on the construction (reconstruction) of the facility, exploits it, and receives from it income within a certain (fixed) period, after which the facility is transferred to a public partner (state, authorized state bodies, etc.); вто “build–transfer–operate” involves financing the entire complex of works on the construction (reconstruction) of the facility by the private investors and transferring it to the ownership of a public partner immediately after the construction is completed; concessionaires receive this facility for the further exploitation and income generation. воо “built–own–operate” (or dвоо “design– built–own–operate”). private investors carry out the construction (reconstruction) of the facility, and then acquire ownership of it, on the basis of which it is used for a period agreed with the public partner. воот “built–own–operate–transfer” (or dвоот “design–built–own–operate–transfer”). private investors carry out the construction (reconstruction) of the property, acquire ownership of it, and operate for a certain period of time, after which the facility is transferred to the ownership of a public partner. вво “buy–build–operate” (or ldo “lease– develop–operate”, waa “wrap–around–addition”). the peculiarity of these concession models is that they baltic journal of economic studies 114 vol. 5, no. 1, 2019 are a kind of transfer of already existing assets to the ownership of the private partners who must modernize these facilities without taking any obligations on the terms of its transfer to a public partner. 3. railways as a facility of public-private partnerships when formulating ppp conditions and, as a consequence, the choice of the concession model, there is always a problem of harmonizing the social and economic efficiency of its implementation, which is exacerbated by the analysis of the infrastructure facilities of strategic importance. this is also true for rail transport, which is now returning its significance as a ‘locomotive of development’ not only for developing economies but also for developed ones, which also has a great social significance. at the same time, the technological features of railways determine their monopoly position not only as one of the most accessible modes of transport but also the main carrier of a certain range of goods, primarily large volumes of bulk materials from the centres of their production (mining and agricultural products) to the place of their further processing. effective rail transport can become an important catalyst for economic growth and development, stimulate trade, link production sites to the regional and international markets, promote national and cross-border integration of regions and facilitate access to the labour market, education and health services. in addition, rail transportation is more energy efficient than automobile or aviation, which is especially important in the face of rising energy shortages. it is expected that € 1.8 billion will be directed to the development of the strategic sections of the railway network that provide the ‘highest eu added-value and impact’ (european commission, 2017). however, the centralized financing of the infrastructure both at the eu level and the governments of individual states is not effective enough, because (1) the main criterion for selecting projects is not the appropriateness of their implementation but the necessary amount of financing that is the main is not the strategic aspect of the railway network development, short-term effect; (2) financing of short-term projects aimed at maintaining the infrastructure in working order, rather than its innovative development, is a priority. in addition, the consequence of the direct subsidization of rail transport is in a sense dependent behaviour that negatively affects the efficiency of its operation. at the same time, world bank experts note that attracting private capital, including through ppp on railways, will improve the efficiency of railways through the introduction of modern and clean technologies (world bank group, 2017). effective joint use of the railway infrastructure, modernized as a result of the implementation of the rrp, will help to increase not only the incomes of the state and private investors but also the attractiveness of the capital investment in the development of the railways. now, in terms of the volume of ppp and the number of projects being implemented, rail transport is at the 3rd (penultimate) position among other modes of transport (figure 1). in 2015, according to the world bank, 5.8 billion usd was raised for the development of railways through the ppp mechanism (world bank group 2015b). despite the strengthening of the position of railway transport, its attractiveness for private business has declined. so, during the period of 2010–2014, annually, investments in its development with the participation of private business averaged to 8.6 billion usd, that is, in 2015 they were less than the average annual level by 33%. at the same time, the total volume of such investments in the development of transport infrastructure increased by 53% compared to the average level for the previous five years. of the seven projects concluded on the basis of ppp, only one is connected with the main railways and the rest – with the development of the subway. this situation is the consequence of (1) the great social significance of rail transport, its role in ensuring the national security of the state and, as a result, significant state intervention in production and economic activity, and (2) the fact that the maximization of profits from its use cannot be the basic principle of development (м. sussman, 2013). this determines the need to tighten the terms of the concession agreements related to the development of the railway infrastructure. at the same time, swot analysis, conducted for the european railways (table 1), demonstrates the high potential of rail transportation. at the same time, the potential will increase substantially in the conditions of the ‘industrial renaissance’, when the need for regular and stable transportation of large volumes of goods to medium and long distances increases. the increase in capacity (network capacity and transport capacity) will be achieved through the non-expansion of the network (developed european countries already have welldeveloped rail networks), and its modernization and innovative development. as can be seen from table 1, the dangers of the development of rail transport are mainly related, on the one hand, to the possible irrational state policy in the field of railway transport, and on the other hand, to the ineffectiveness of the market mechanism. the experts of the international bank for reconstruction and development indicate that the success of the implementation of ppp projects is largely determined by government support, developed legal framework, a correct assessment of the ratio of benefits and costs, as well as the distribution of risks (ibrd, 2012). thus, these problems can be minimized by implementing a balanced state strategy to support the innovative development of the transport infrastructure. baltic journal of economic studies 115 vol. 5, no. 1, 2019 7 33 7 8 0 5 10 15 20 25 30 35 40 45 airports roads rails ports u s $ bi lli on s subsector total investment number of new projects figure 1. investments in transport by subsectors source: built by the author based on world bank group, 2015b table 1 swot matrix for railways strengths weaknesses 1. a fairly stable customer base. 2. the possibility of year-round transportation; independence from weather conditions. 3. the possibility of carrying out mass transportations for long and medium distances. 4. large load capacity of rolling stock. 5. the possibility of transportation in specialized cars. 6. a fairly stable customer base. 7. traction unit has high reliability and durability. 8. high traffic safety. 9. high environmental friendliness of transport. 1. binding to the network of railways, the construction of which is very expensive. 2. the high cost of initial-final operations (stations and devices in places of loading and unloading). 3. the high cost of maintaining the infrastructure. 4. long payback periods for investments in infrastructure and rolling stock. 5. the necessity of subsidizing passenger transportation. 6. high level of state intervention in financial and production activities. opportunities threats 1. creation of a single transcontinental network europe-asia. 2. internationalization of rail transport. 3. realization of the policy of ‘industrial renaissance’ in eu countries; high rates of development of the asian economies. 4. possibilities for increasing the volume of transport. 5. development of multimodal and intermodal transport. 6. growth in demand for high-speed passenger transportation. 7. the possibility of an innovative leap in railway technology over the next 3-5 years. 1. the difficulties of ensuring the full interoperability of railway networks of different countries. 2. imbalance in supply and demand for services in the industry. 3. reducing the competitiveness of rail transport. 4. tougher state regulation of rail transport. 5. unreasonable pricing policy of railway companies. source: developed by the author using data from (drexler t., 2012; european commission, 2008; pwc, 2015; etc.) since the railway infrastructure is of strategic importance, its full transfer to private business is not expedient. this can be explained by the fact that (a) the state may for some time lose control over the strategic facility; (b) private business may violate the terms of the contract, which will result in not becoming an innovative infrastructure development, but its deterioration. therefore, there is a set of problems associated with the transfer of facilities (sections of the railway network) for ppp. let’s consider some of them. problem 1. define the list of ppp facilities. such facilities must satisfy the following conditions: (1) the facility should be of interest to private business, that is, the expected benefits of operating the facility should exceed the costs of its modernization, that is: t t t k t t t t b fp t d ki t d= = ∑ ∑ ( ) +( ) ≥ ( ) +( )1 10 , where t(t = 0,t) – years of the implementation of the concession agreement; tf – year of end of financing of modernization of the concession facility; tb – the year from which the concessionaires will profit from the operation of the facility; pk (t) – profit planned for the year t; ki (t) – capital investments provided for by the concession agreement; d – the price of the capital; (2) there is an urgent need to modernize a facility or section of the railway network, given that there is an acute shortage of financial resources for the implementation of such a project, that is: fr fpn ≥ , baltic journal of economic studies 116 vol. 5, no. 1, 2019 where frn – the amount of financial resources required to upgrade an infrastructure facility or a network section; fp – financial capabilities of the state budget. the analysis showed that the sites that meet these conditions are sections of the railway network included in transport corridors, as well as providing access to seaports. in this case, the following will be provided: firstly, the necessary balance between the economic interests of investors (concessionaires) and the state since these sections of the network are the most in demand in the process of transport, especially multimodal and intermodal; secondly, the preservation and development of the capacity and transport capacity of the national railway network, the increase of its interoperability with the paneuropean (for example, on ukraine’s railway transport, equipment and technologies of the third generation are used, and in european countries 4-5 generations, which creates certain technological difficulties when carrying out transit and international transport); thirdly, the promotion of the social development of the regions covered by the concession, by saving and creating new jobs. problem 2. the criterion for the first priority of the transfer of facilities for ppp. the selection of the facilities to be transferred to the ppp should include the following stages: analysis of the level of physical and moral depreciation of individual facilities or sections of the railway network; assessment of the financial needs for their modernization; analysis of the economic and social (positive and negative) consequences of the transfer of a particular facility in the ppp. such a criterion should be based on an assessment of how its production and economic potential will change, provided that modernization is postponed: c p p kil c a= − , where pc – the potential of the railway infrastructure facility, provided that capital investments in its modernization are carried out this year; pa – the potential of the railway infrastructure facility, provided that capital investments are postponed; ki – the amount of necessary investment. then for the transfer to the concession in the first place should be offered facilities for which the greatest reduction in potential will be obtained. this will allow not only carrying out technical and technological renovation of the railway infrastructure but also minimizing possible economic and social losses due to underfunding of its innovative development and maintaining the integrity of the strategic transport network. 4. conclusions the conducted research has shown that despite significant positive experience and significant advantages of ppp for financing the modernization and development of the railway infrastructure, it is practically not used. this is due to the low investment attractiveness of railway transport due to the high cost of introducing innovations and significant payback periods of investments, and rather strict government regulation of its activities. the swot analysis showed that rail transportation not only retains its importance but also has significant growth potential in the conditions of “industrial renaissance” in european countries. at the same time, the complete transfer of the railway infrastructure to private business is not expedient since it is of strategic importance. therefore, the facilities transferred to the ppp should be both interesting for private business and for the urgent need of modernization, which the state cannot fully finance in the near future. the main criterion determining the possibility of transferring the facility of the railway network to the rrp should be an assessment of the change in its production and economic potential in the event that financing for modernization is delayed. it is determined that in order to maintain the technical and technological integrity of the railway network, in the first place, it is necessary to transfer to ppp the facilities, underfinancing of the modernization of which will lead to a significant reduction in their production and economic potential. at the same time, the problem of forming a set of the indicators remains unresolved, which will most fully reflect the change in both the production-economic and social potential of the railway infrastructure facility in the implementation of modernization, including as a result of ppp. references: colverson, s., perera, o. (2011). sustainable development: is there a role for public–private partnerships? winnipeg, manitoba, canada: international institute for sustainable development. cova, p., pagano, p., notarpietro, a., pisani, m. (2017). secular stagnation, r&d, public investment and monetary policy: a global-model perspective: working paper. № 1156. roma: bank of italy. drexler, t. (2012). perspektivy razvitiya zheleznykh dorog v evrope [prospects for the development of railways in europe]. europerails. retrieved from: https://europerails.ru/perspektivy-razvitiya-zheleznyx-dorog-v-evrope/ (accessed 28 june 2018). (in russian) ernest & young (cis) (2014). course 2030: research infrastructure in russia. retrieved from: http://www.ey.com (accessed 28 june 2018). baltic journal of economic studies 117 vol. 5, no. 1, 2019 european commission (2017). investments in eu transport: commission proposes €2.7 billion for 152 projects. retrieved from: https://ec.europa.eu/transport/themes/infrastructure/news/2017-06-23-2016-cef-call_en (accessed 12 july 2018). european commission (2008). modern rail modern europe. retrieved from: https://ec.europa.eu/transport/ sites/transport/files/media/publications/doc/modern_rail_en.pdf (accessed 28 june 2018). hanaoka, s., perez palapus, h. (2012). reasonable concession period for build-operate-transfer road projects in the philippines. international journal of project management, 30(8), 938-949. international bank for reconstruction and development (2012). public-private partnerships: reference guide. washington. kilvington, a. (1996). the boot concept and other project financing techniques, lecture presented for the study group in the international construction contracts seminar, 22-26 april 1996, horsely, uk. mckinsey global institute (2013). infrastructure productivity: how to save $1 trillion a year. retrieved from: https://www.mckinsey.com/~/media/mckinsey/industries/capital%20projects%20and%20infrastructure/ our%20insights/infrastructure%20productivity/mgi%20infrastructure_full%20report_jan%202013.ashx (accessed 18 may 2018). pwc (2015). assessing the global transport infrastructure market: outlook to 2025. retrieved from: https://www.pwc.com/gx/en/transportation-logistics/pdf/assessing-global-transport-infrastructure-market.pdf (accessed12 july 2018). sussman, м. 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(in russian) baltic journal of economic studies 39 vol. 2, no. 1, 2016 corresponding author: 1department of economic control and audit, sumy national agrarian university. e-mail: yuyelnikova@gmail.com relationship derivatives financial markets, money and stock markets as a subsystem of financial market yulia yelnikova1, sumy national agrarian university, ukraine abstract. under conditions of intensive strengthening of globalization of world financial markets and deepening of the crisis, the main source of which are financial markets, financial derivatives market is rapidly developing. in such circumstances, we observe very active growing demand for tools, the main purpose of which is to reduce the financial risk – derivatives. outlined trend has also involved ukraine. in this connection, there is an objective need to develop estimate the interconnection of the money and stock markets and derivatives market. it should be kept in mind that achieving the outlined goal is possible only under condition of the full understanding of the scientific and methodological principles of the development of these markets. purpose is to estimate the interconnection of the money and stock markets and derivatives market by building a mathematical model of system of structural equations that will promote the compilation of scientifically based program of derivatives market. methodology. by using methods of economic-mathematical modelling were estimated the degree of influence of studied markets factors on financial derivatives market development and by changing this or that factor were predicted future trends of its operations. results of the survey showed the current state and problems of derivatives market functioning. at the same time, our study allowed us to talk, that factors of the money and stock markets have a different impact on the derivatives market. so, the majority of money market factors have a reverse influence on the development of derivatives market. instead, the stock market has a direct influence. practical implications. the proposed scientific and methodical approach to evaluating the impact of factors on the derivatives market allows: influenced by different factors; to conduct a qualitative interpretation of the quantitative changes in the level of market development; to form a complete system of state regulation of derivatives aimed at rational its development. value/originality. the approach to the structural modelling of money and stock markets impact on market of derivatives allows not only to determine the effect of each factor, but also to form a complete system of state regulation of derivatives aimed at rational its development. key words: financial derivatives market, stock market, money market, financial market, financial depth. jel classification: g17, e 44, c 58 1. введение сегодня механизм регулирования и надзора рынка производных финансовых инструментов (далее – рпфи) характеризируется большим количеством проблем, которые свидетельствуют о необходимости пересмотра фундаментальных основ организации этой системы, а именно концентрации внимания на аспектах устойчивости финансовой системы в целом, а не на ее определенных финансовых учреждениях. функционирование рпфи невозможно рассматривать без исследования факторного воздействия, которое осуществляется фондовым и денежным рынками. динамика показателей этих рынков вызывает изменения в отдельных структурных элементах финансового рынка, одним из которых есть рпфи. поэтому, с целью определения современных тенденций и перспективных направлений развития рпфи на ближайший период необходимо применить методы экономико-математического моделирования, которые позволяют оценить степень влияния каждого фактора исследуемых рынков на развитие рпфи и спрогнозировать будущие тенденции его функционирования путем изменения того или иного фактора. таким образом, целью моделирования влияния фондового и денежного рынков на рпфи есть построение математической модели с помощью системы структурных уравнений, является основанием для составления научно обоснованных программ развития рпфи. 2. взаимосвязь факторов денежного рынка и рпфи в результате использования метода экспертного оценивания в качестве показателей, которые характеризуют развитие денежного рынка, было выбрано baltic journal of economic studies 40 vol. 2, no. 1, 2016 глубину финансового рынка, индекс реального эффективного обменного курса (далее – ирэок), реальная процентная ставка, дефлятор ввп и глобальный индекс капитала s&p gei. показатель «глубина финансового рынка (financial depth) характеризует связь между насыщенностью экономики финансовыми ресурсами и темпами экономического роста (poliukhovych, 2011). этот показатель довольно часто используют для определения влияния развития финансового рынка на экономическую систему государства в целом. в последние года рост количества финансовых продуктов-инноваций с высоким уровнем риска, существование встроенной инфляционной спирали, наращивание объемов секьюритизированных активов, господство либеральной монетарной доктрины вызвали увеличение глубины финансового сектора и отрыв его от реального, тем самым создавая предпосылки для возникновения кризисов и цикличности финансового рынка в целом и рпфи в частности в будущем. так, в период кризиса 2007-2009 гг. в круговороте товарно-денежно-финансовых потоков наблюдается снижение избыточной доли финансовой нагрузки в виде «финансовых пузырей» и система кругооборота капитала возвращается к равновесному состоянию. однако после кризисных событий благодаря «эффекту отскока» произошло восстановление глубины финансового сектора на уровне, превышающем докризисные. таким образом, этот показатель имеет линейную связь с номинальной стоимостью биржевых и внебиржевых пфи, поскольку характеризует уровень развития финансового рынка. такую же направленность имеет связь между ирэок и номинальной стоимостью биржевых и внебиржевых пфи, поскольку как инструмент хеджирования пфи позволяют нивелировать валютный риск, что особенно актуально сегодня. реальный эффективный обменный курс – расчетный валютный курс, который является индикатором изменения ценовой конкурентоспособности отечественных товаров по отношению к продукции основных торговых партнерах страны (bezpiatov, 2004). ирэок является индикатором изменения ценовой конкурентоспособности страны в международной торговле. экономическое содержание ирэок заключается в отображении изменения обменного курса, откорректированного на уровень инфляции в странах – торговых партнерах. факторами, влияющими на динамику ирэок, являются: значение номинального обменного курса к валютам стран-партнеров и соотношение уровня инфляции в стране до масштаба цен в странах-партнерах. итак, значительные колебания этого показателя вызывают изменения объемов торгов на рынке пфи, носящие как спекулятивный так и хеджированный характер (рис. 1). согласно данным, представленным на рисунке 1, в 2012 году наблюдается впервые за четыре года девальвация рэок, что сопровождается значительным увеличением объемов торов на рынке пфи по сравнению с предыдущими годами когда была ревальвация рэок. кроме этого, растет также спекулятивный спрос на эти инструменты, поскольку участники имеют реальный шанс получить прибыль от изменения обменного курса. так, сегодня, в период высоких темпов инфляции и массовых кризисных явлений во всех сферах экономики, одним из действенных инструментов является установление плавающего обменного курса. для нбу, в процессе осуществления монетарной политики, в первую очередь, основной задачей остается инфляционное таргетирование. эффект от изменений курсовой политики для инфляции будет более существенным, чем от регулирования других монетарных параметров, что обусловлено более сильным взаимосвязью между указанными факторами. в связи с чем, коммерческие банки активно используют валютные деривативы с целью обеспечения нормальной ликвидности, условия и ограничения обращения которых регламентирует постановление нбу «об утверждении положения о порядке и условиях торговли иностранной валютой» от 10.08.2005 № 281 (prymostka, 2001). в свою очередь, реальная процентная ставка имеет обратную связь с объемами торговли на рынке пфи, поскольку в случае увеличения уровня реальной процентной ставки растут объемы как прямых, так и портфельных инвестиций, что, в свою очередь, вызывает утечка денежных средств с рпфи. реальная процентная ставка, с одной стороны, является доходом инвестора от вложения средств на определенные цели и определенный период времени в будущем с другой же, является ценой, которую платят инвестору за привлеченные денежные средства. для инвестора она отражает доходность его инвестиций, а для заемщика – расходы, которые он должен понести в связи с привлечением средств. в свою очередь, величина реальной процентной ставки отражает стоимость капитала для инвестора без учета инфляции. 0,1 3,8 24,0 24,9 18,0 9,3 3,7 8,1 3,1 -7,5 -7,9 -7,3 -10,0 -8,0 -6,0 -4,0 -2,0 0,0 2,0 4,0 6,0 8,0 10,0 0,0 5,0 10,0 15,0 20,0 25,0 30,0 2009 2010 2011 2012 2013 2014 отечественный рпфи, млрд. грн. рэок, % рис. 1. динамика объема отечественного рынка пфи и рэок за 2009-2014 гг. (national commission on securities and stock market, 2015) baltic journal of economic studies 41 vol. 2, no. 1, 2016 увеличение объемов прямых инвестиций по сравнению с портфельными приводит к переориентации денежных потоков с рынков капитала на рынки реальных активов, позволяет отвлечь избыточную ликвидность с рпфи и снизить их объем в краткосрочном периоде, в свою очередь, в долгосрочной перспективе благодаря укреплению реального сектора экономики создает предпосылки для устойчивого функционирования рпфи в будущем. так, снижение темпов экономического роста и ухудшением ситуации в реальном секторе, рост рискованности производства отражается на росте объемов хеджирования операций на рпфи, которые являются фундаментальной основой функционирования рынка. функционирование рпфи не может быть если утраченные связи между ним и реальным сектором. в свою очередь, преобладание спекулятивных мотивов в избранных стратегиях участников рынка, непрофессиональное поведение в условиях высокой волатильности рынка пфи негативно влияют на развитие этого рынка. дефлятор ввп характеризует изменение во времени общего уровня цен на товары и услуги, реализуемые конечным потребителям. это самый широкий показатель, характеризующий инфляционные изменения цен. дефлятор ввп имеет обратную связь с объемом торговли на рынке пфи, поскольку в целях нивелирования риска обесценения денежных единиц в результате инфляции субъекты хозяйствования увеличивают свой спрос на пфи. так, некоторые из пфи связанные с высоким риском возникновения негативных колебаний цен. крах фондового рынка в сша в 1987 году. был вызван широким распространением «портфельного страхования». субъекты, которые страховали себя таким образом, были более склонны инвестировать в ценные бумаги, чем другие. когда снижение рыночной конъюнктуры привело в действие механизмы страхования, неожиданное стремительное увеличение продаж вызвало сбой в функционировании рпфи и в конце концов его «коллапс». несбалансированность позиций по опционам часто приводила к значительным и необоснованным колебаниям валютных курсов, а отсутствие ограничений на маржу или на операции с пфи была причиной возникновения значительных системных рисков. однако специалисты не считают внедрение ограничений на величину маржи при операциях с деривативами, свопам или какими-то другими инструментами регулирования теми средствами, которые могут снизить нестабильность на финансовом рынке. скорее всего, такие меры приведут к уменьшению «глубины» рынка, то есть объемов операций с капиталом (group of thirty, 2010). следует отметить, что рост уровня инфляции приводит к росту на мировых рпфи объемов торговли такими специфическими защитными продуктами как инфляционные свопы (inflation-linked swaps), которые пользуются большим спросом у пенсионных фондов, которые используют их для хеджирования своих инфляционных ожиданий. глобальный индекс капитала s&p тоже имеет обратную связь с номинальной стоимостью биржевых и внебиржевых пфи, поскольку сегодня, в условиях масштабной глобализации финансовых рынков в целом и его сегментов в частности, отечественный рпфи тесно связан с мировыми рпфи (рис. 2). мировой финансовый кризис (2007-2009 гг.) возник не на всех финансовых рынках одновременно. согласно данным рисунка 2, на финансовом рынке украины и его сегментах кризис возник с временным лагом в один год. так, до 2008 г., отечественный рпфи характеризовался высоким уровнем волатильности и ликвидности, из-за чего в этот период наблюдается значительный приток иностранного капитала в украину, поскольку на финансовых рынках развитых стран царил кризис. однако, в 2008 г., когда последствия кризиса проявились и на отечественном рпфи, иностранные инвесторы изъяли свой капитал, а объем торговли, в свою очередь, на этом рынке сократился на 0,17 млрд грн. 3. взаимосвязь факторов фондового рынка и рпфи в результате использования метода экспертного оценивания в качестве показателей, которые характеризуют развитие фондового рынка, было выбрано рыночная капитализация компаний, находящихся в листинге на биржах, объем торгов на фондовом рынке, количество профессиональных участников фондового рынка, общая стоимость акций и удельный вес биржевого рынка в общем объеме торгов на фондовом рынке. рыночная капитализация компаний, находящихся в листинге на биржах линейно связана с номинальной стоимостью биржевых и внебиржевых пфи, поскольку характеризует уровень развития рынков базовых активов. следует отметить, что уровень капитализации с распространением процессов финансиализации и существованием отрыва финансового от 0,2 0,02 0,03 0,27 0,1 3,75 23,99 24,91 18,01 9,31 52,82 48,65 112,22 -82,19 31,08 53,84 -36,29 -4,06 -21,30 -51,50 -100,00 -50,00 0,00 50,00 100,00 150,00 0 5 10 15 20 25 30 2004 2006 2008 2010 2012 2014 2016 отечественный рпфи, млрд. грн. рис. 2. динамика глобального индекса капитала s&p gei и объема отечественного рпфи (bank for international settlements, 2015; national commission on securities and stock market, 2015) baltic journal of economic studies 42 vol. 2, no. 1, 2016 реального сектора перестал отражать реальную позицию компаний на рынке, эффективность их деятельности и перспективы развития, поскольку этот фактор приобрел несколько искусственного характера и стал отражать способность компании получать прибыль в результате спекулятивных операций с собственными акциями на биржевых площадках и внебиржевых торговых платформах в рамках господствующей концепции «stock market capitalism». так, самой высокой своей точки уровень капитализации фондового рынка достиг в 2007 году. в этот год украинский рынок зарегистрировал второй в мире показатель роста (130%). в свою очередь, спекуляции с целью получения быстрой прибыли, развитие интернет-трейдинга, конкуренция за право управления предприятием значительно повысили спрос на акции и на пфи на них. так, объем торгов на рынке пфи в 2007 г. выросли на 0,01 млрд грн., а в 2008 г. – на 0,27 млрд грн., а в течение 2009 г. – на 6,3 млрд. грн., что демонстрирует впечатляющую динамику развития отечественного рпфи (group of thirty, 2010). объемы торговли на фондовом рынке тоже имеют прямую связь с номинальной стоимостью биржевых и внебиржевых пфи, поскольку обеспечивает высокую ликвидность финансовых активов и диверсификации инвестиционных рисков. благодаря этому фондовый рынок стимулирует инвестиции в долгосрочные проекты. необходимо отметить способность фондового рынка сокращать стоимость внешнего финансирования предприятий, что также способствует их экономическому развитию. в период экономического спада с целью поддержания нормы прибыли на прежнем уровне направляют свои капиталы в более рискованные инновационные инструменты – в частности пфи. вследствие притока потока спекулятивных денег возникают так называемые «пузыри», которые являются предпосылкой возникновения кризиса на рынке вплоть до восстановления его равновесного состояния на другом уровне его развития. ярким примером такой закономерности является финансовый кризис 2008, причиной которой стало массовое использование пфи с целью получения спекулятивной прибыли. таким образом, общая стоимость акций имеет обратную связь с номинальной стоимостью биржевых и внебиржевых пфи. в свою очередь, количество профессиональных участников как фактор линейно связан с уровнем развития биржевого рпфи, поскольку характеризует развитие инфраструктуры этого рынка. если инфраструктура рынка является достаточно разветвленной и сложной, то и сам рынок будет более развитым. при этом следует иметь в виду, что количество профессиональных участников не может расти постоянно, поскольку существует предел насыщения рынка, когда каждый дополнительный участник не только не способствует развитию рпфи, а, наоборот, создает определенные препятствия для этого. кроме, количественной характеристики профессиональных участников, весьма важным является и их качественный состав. так, рпфи функционировать эффективно только тогда, когда на нем осуществляют деятельность квалифицированные профессиональные участники. поэтому в украине как и в мире существует тенденция к повышению к ним требований. кроме этого, следует отметить, что возникновение кризисов на рпфи связано со спекулятивной поведением его профессиональных участников, поскольку их спекулятивная активность связана с высокой волатильность рынков базовых активов и самих пфи, что определяет собственно возможность спекуляции в ее классическом определении: как покупки или продажи инструмента для его последующей продажи/покупки, не связанного с его непосредственным применением и с ожиданием изменения цены этого инструмента. господство спекулятивных мотивов в рыночных стратегиях профессиональных участников рпфи обусловливает появление финансовых «пузырей» на этом рынке. эти «пузыри» возникают в результате виртуального использования пфи в их самовоспроизводстве, то есть они не подкрепляется соответствующими операциями в реальном секторе экономики. именно это подтверждает существование проблемы отрыва финансового сектора от реального, приводящие к возникновению кризисов. удельный вес биржевого рынка в общем объеме торгов на рынке ценных бумаг линейно связана с номинальной стоимостью пфи, поскольку чем больше именно эта доля, тем рынок более организованным, контролируемым, что, в свою очередь, обеспечивает более высокий уровень развития рпфи. стоит отметить то, что соотношение между объемами торговли пфи на биржевом и внебиржевом в разное время было разным: в 70-е годы хх в. наблюдался рост оборота пфи за счет биржевых торгов, однако уже в 80-х гг. произошла переориентация торговцев пфи на внебиржевые рынки, которая сохраняется и по сей день. удельный вес внебиржевого рынка в структуре финансовых рынков разная в разных странах: в японии она составляет около 1%, в сша – 25%, чехии – 60%, словакии – 80%, россии – 90%, в украине – 98%. итак, в мире только около 16% номинальной стоимости сделок с пфи заключаются на организованных биржах. такая тенденция связана, в первую очередь, с тем, что биржевой рпфи более урегулированным, регламентированным. кроме этого, на бирже цены несколько выше по сравнению с внебиржевым сегментом рпфи, что заставляет участников этого рынка участвовать в внебиржевых торгах (gordon, 2005). однако, широкомасштабное преобладание внебиржевого рынка, отсутствие механизмов покрытия кредитных рисков контрагента, низкий уровень риск-менеджмента организаторов торгов является основой для возникновения кризисов на рпфи. в  связи с чем, с 2011 г. наднациональные и нациоbaltic journal of economic studies 43 vol. 2, no. 1, 2016 нальные регуляторы начали вводить нормативные акты, основной целью которых является именно правовая регламентация осуществления торгов на внебиржевом рпфи. так, с этой целью в сша и европе разработано и внедряется обновленное законодательство для регулирования национальных рынков: national market system (сша), mifid ии (европа). с 1 января 2013 вступил в силу закон сша «о налогообложении иностранных счетов» и комплексное законодательство по регулированию финансовых рынков: dodd-frank (сша), mifid ii, emir (европа). в основе этих законов с целью регулирования рпфи предполагается активное развитие единой европейской торговой системы t2s для централизованного клиринга большинства инструментов внебиржевого рпфи, что будет способствовать повышению его уровня ликвидности и прозрачности. в соответствии с регламентом европейского парламента по урегулированию рынка внебиржевых пфи ес принял без замечаний регуляторные технические стандарты, которые были представлены европейской организацией по ценным бумагам и рынкам (esma). указанные технические стандарты предусматривают стандартизацию процессов торговли внебиржевыми пфи с целью повышения ликвидности и прозрачности рынков пфи с помощью централизованного клиринга. именно эти действия регуляторов способствовали тому, что участники рынка начали постепенно переходить на биржевой рпфи, тем самым способствуя развитию самого рынка в целом. 4. выводы основной задачей исследования выступает: во-первых, учесть в модели следующие группы факторов характеристики рассматриваемых рынков: глубина финансового сектора; реальная процентная ставка; индекс реального эффективного обменного курса; дефлятор ввп; глобальный индекс капитала s & p; рыночная капитализация компаний, находящихся в листинге на биржах; объем торгов на рынке ценных бумаг; общая стоимость акций; количество профессиональных участников фондового рынка; доля биржевого рынка в общем объеме торгов на рынке ценных бумаг; биржевой объем пфи; внебиржевой объем пфи, во-вторых, оценить параметры модели и степень ее адекватности реальным данным. осуществить моделирование влияния фондового и денежного рынков на рпфи пу тем построения математической модели с помощью системы структ урных уравнений, является основанием для составления научно обоснованных программ развития рпфи. представим общую модель как совокупность пяти простых моделей функционирования денежного, фондового рынков и рпфи в разрезе каждой пары показателей. модели (системы регрессионных уравнений) функционирования денежного и фондового рынков являются общими факторами моделей и обычно называются моделями измерений, в то время как модель множественной характеристики рпфи под влиянием двух указанных моделей называется структурной моделью. с целью составления научно обоснованных программ развития пфи автором осуществлен формализацию влияния показателей денежного и фондового рынков на функционирование рпфи: 1) взаимосвязи показателей денежного (глубина денежного сектора), фондового (рыночная капитализация компаний, находящихся в листинге на биржах) рынков и рпфи (1); 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,443𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,937 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 1,900𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 3,259𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 52,592 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,027 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,390𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,500𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,222𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,463 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,365𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 − 1,480𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 41,285 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,321𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 54,065 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 87,476𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 16,969𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 11656,390 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −0,341𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,473𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 1,098𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 1,881 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 (1) де finm – уровень развития денежного рынка; rpfi – уровень развития рпфи; finm1 –глубина финансового рынка; fonm1 – рыночная капитализация компаний, находящихся в листинге на биржах; fonm – уровень развития фондового рынка. 2) взаимосвязи показателей денежного (индекс рэок), фондового (объем торгов на рынке ценных бумаг) рынков и рпфи (2); 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,443𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,937 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 1,900𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 3,259𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 52,592 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,027 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,390𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,500𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,222𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,463 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,365𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 − 1,480𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 41,285 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,321𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 54,065 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 87,476𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 16,969𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 11656,390 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −0,341𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,473𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 1,098𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 1,881 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 (2) де finm – уровень развития денежного рынка; rpfi – уровень развития рпфи; finm2 – индекс реального эффективного обменного курса; fonm2 – объем торгов на рынке ценных бумаг; fonm – уровень развития фондового рынка. 3) взаимосвязи показателей денежного (реальная процентная ставка), фондового (общая стоимость акций) рынков и рпфи (3); 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,443𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,937 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 1,900𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 3,259𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 52,592 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,027 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,390𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,500𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,222𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,463 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,365𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 − 1,480𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 41,285 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,321𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 54,065 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 87,476𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 16,969𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 11656,390 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −0,341𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,473𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 1,098𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 1,881 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 (3) де finm – уровень развития денежного рынка; rpfi – уровень развития рпфи; finm3 – реальная процентная ставка; fonm3 – общая стоимость акций; fonm – уровень развития фондового рынка. 4) взаимосвязи показателей денежного (дефлятор ввп), фондового (количество профессиональных участников фондового рынка) рынков и рпфи (4); 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,443𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,937 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 1,900𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 3,259𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 52,592 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,027 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,390𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,500𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,222𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,463 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,365𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 − 1,480𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 41,285 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,321𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 54,065 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 87,476𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 16,969𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 11656,390 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −0,341𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,473𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 1,098𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 1,881 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 (4) де finm – уровень развития денежного рынка; rpfi – уровень развития рпфи; finm4 – дефлятор ввп; baltic journal of economic studies 44 vol. 2, no. 1, 2016 fonm4 – количество профессиональных участников фондового рынка; fonm – уровень развития фондового рынка. 5) взаимосвязи показателей денежного (глобальный индекс капитала), фондового (доля биржевого рынка в общем объеме торгов на рынке ценных бумаг) рынков и рпфи (5). 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,443𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,937 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 1,900𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 3,259𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 52,592 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,027 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹1 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,390𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,500𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,500𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹2 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,222𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 0,463 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,365𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 − 1,480𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 41,285 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹3 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −2,321𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 54,065 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 87,476𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 16,969𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹4 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 11656,390 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = −0,341𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 = 0,473𝑅𝑅𝑅𝑅𝐹𝐹𝐹𝐹 + 1,098𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 1,881 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹5 = 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 + 0,500 (5) де finm – уровень развития денежного рынка; rpfi – уровень развития рпфи; finm5 – глобальный индекс капитала s&p; fonm5 – удельный вес биржевого рынка в общем объеме торгов на рынке ценных бумаг; fonm – уровень развития фондового рынка. таким образом, суммируя полученные результаты всех построенных пяти моделей взаимозависимости исследуемых рынков по совокупности структурных уравнений, можем комплексно отразить систему факторного влияния фондового и денежного рынка на рпфи (табл. 1). проанализировав данную систему факторов, были определены неоднозначное влияние факторов фондового и денежного рынков. так, большинство факторов фондового рынка оказывают прямое влияние на рост уровня развития рпфи, кроме реальной процентной ставки. относительно факторов денежного рынка, то большинство из рассмотренных показателей осуществляют обратное воздействие на развитие рпфи, в частности общая стоимость акций, количество профессиональных участников на фондовом рынке и удельный вес биржевого рынка в общем объеме торгов на рынке ценных бумаг. применение предложенного подхода к структурному моделированию влияния денежного и фондового рынков на рпфи позволяет проанализировать влияние каждого фактора изучаемых рынков на развитие рпфи и количественно определить изменение того или иного фактора на рост уровня развития рпфи на перспективу, кроме того данная система моделей позволяет определить связь между отдельными факторами, их действие на каждом из рынков и вообще взаимодействие фондового, денежного и рпфи. references bank for international settlements (2015). reading allowed: otc derivatives market activity in the first half of 2012. retrieved from http://www.bis.org/ statistics/derstats.htm. bezpiatov, a.v. (2004). the development of derivatives in emerging economies: dissertation for the degree of candidate of economic sciences in specialty 08.05.01. kyiv. gordon, v.b. (2005). derivatives market and prospects of its development in ukraine: dissertation for the degree of candidate of economic sciences in specialty 08.04.01. kyiv. national commission on securities and stock market (2015). reading allowed: reports of the national commission on securities and stock market of 2000-2013. retrieved from http://www.ssmsc.gov.ua/showpage. aspx?pageid=12. poliukhovych, v.i. (2011). features of international experience in the process of model of state regulation of the stock market of ukraine. private law and entrepreneurship, issue 10, 156-159. prymostka, l.o. (2001). financial derivatives: analytical and accounting aspects, kyiv: kneu. official website of the bank for international settlements (2015). retrieved from http://www.bis.org. group of thirty (2010). enhancing financial stability and resilience: macroprudential policy, tools, and systems for the future retrieved from http://www.group30.org/images/pdf/macroprudential_report_final.pdf таблица 1 обобщение результатов оценки воздействия денежного и фондового рынков на рынок производных финансовых инструментов количественная оценка влияния рост уровня развития рпфи на 1% рост уровня развития фондового рынка на 1% рост уровня развития финансового рынка на 1% фондовый рынок fonm1, млрд. дол. 1,90 1,00 fonm2, млрд. дол. 0,50 1,00 fonm3, % -2,37 1,00 fonm4, од. 87,48 1,00 fonm5, % 0,47 1,00 денежный рынок fіnm1, % 0,44 1,00 fіnm2, ч.од. 0,39 1,00 fіnm3, % -2,22 1,00 fіnm4, % -2,32 1,00 fіnm5, ч.од. -0,34 1,00 baltic journal of economic studies 45 vol. 2, no. 1, 2016 юлия ельникова взаимосвязь рынка производных финансовых инструментов, денежного и фондового рынка как подсистем финансового рынка аннотация. в условиях интенсивного укрепления глобализации мировых финансовых рынков и углубление кризиса, основным источником которого является финансовый рынок, рынок производных финансовых инструментов стремительно развивается. в таких обстоятельствах, мы наблюдаем очень активный рост спроса на инструменты, основная цель которых заключается в снижении финансовых рисков – производные. в изложенных тенденциях также участвует украина. в связи с этим, существует объективная необходимость в оценке взаимосвязи денежного, фондового рынков и рынка производных финансовых инструментов. следует иметь в виду, что достижение намеченной цели возможно только при условии полного понимания научных и методологических принципов развития этих рынков. цель. оценить влияние денежного и фондового рынков на рынок производных финансовых инструментов путем построения математической модели с помощью системы структурных уравнений, что способствует составлению научно обоснованных программ развития рынка производных финансовых инструментов. методика. с помощью методов экономико-математического моделирования оценить степень влияния каждого фактора исследуемых рынков на развитие рынка производных финансовых инструментов и спрогнозировать будущие тенденции его функционирования путем изменения того или иного фактора. результаты исследования. в статье осуществлен анализ современного состояния и проблем функционирования рынка производных финансовых инструментов. при этом, проведенное исследование позволило нам говорить о том, что факторы денежного и фондового рынков имеют неоднозначное влияние на рынок производных финансовых инструментов. так, большинство факторов фондового рынка оказывают прямое влияние на рост уровня развития рынка производных финансовых инструментов, кроме реальной процентной ставки. относительно факторов денежного рынка, то большинство из рассмотренных показателей осуществляют обратное воздействие на развитие рынка производных финансовых инструментов, в частности общая стоимость акций, количество профессиональных участников на фондовом рынке и удельный вес биржевого рынка в общем объеме торгов на рынке ценных бумаг. практическое значение. предложенный научно-методический подход к оценке влияния факторов на рынок производных финансовых инструментов позволяет предоставить количественную оценку изменения уровня развития рынка под действием различных факторов; провести качественную интерпретацию количественного изменения уровня развития рынка; сформировать полноценную систему государственного регулирования рынка производных финансовых инструментов направленную на рациональное его развитие. значение/оригинальность. разработанный подход к структурному моделированию воздействия денежного и фондового рынков на рынок производных финансовых инструментов позволяет не только определить влияние каждого из факторов, но и количественно оценить изменение того или иного фактора на рост уровня развития этого рынка. baltic journal of economic studies 306 vol. 4, no. 4, 2018 corresponding author: 1 volodymyr dahl east-ukrainian national university, ukraine. e-mail: belousova_2014@ukr.net 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: alx.melnikova@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-4-306-314 economic development of eastern european countries (оn the example of ukraine): regional aspect kseniia sieriebriak1, oleksandra melnykova2 abstract. research background. modern trends in world politics and international relations dictate new schemes for establishing links between regions and encourage states to constantly improve them. one such form is economic cooperation between regions, whose development strategies are gradually being introduced in countries around the world. since ukraine signed an association agreement with the european union, in most economic and legal issues it relies on the experience of the european countries. in addition, worthy of attention is the analysis of the current state of the regional development in ukraine and on its basis the formation of the basic principles for interregional cooperation. such experience and identifying main economic trends in the formation of economic cooperation between different regions can help ukraine to introduce this process in practical terms and possibly avoid the most popular problems in this area. purpose of the article. the provisions of the article provide a systematic estimation of the regional development of ukraine based on the calculation of the spearman coefficient from 2006 to 2016. on the basis of these calculations, the main preconditions for the economic development of interregional cooperation are analysed and the basic principles of such cooperation for the regions of ukraine are formed. methodology/methods. this work is based on the generalization of the official methodological information of the following ukrainian regions that are the most interested for the economic foundations of the interregional development. ukraine has a new decentralization reform for the regions, which will be able to give impetus to the economic development and increase the effectiveness of the interregional ties. nevertheless, since this process is quite new for our country, it is critically important to study foreign experience in this field. in the future, as a result of such studies, it would be possible to develop economic and legal mechanisms for introducing the best world practices in the ukrainian legal field. value/originality. the provisions of the article solve an important theoretical and practical task – firstly for ukraine – contribute to the formation of the interregional cooperation institution since by this time there is no unanimous opinion on the legislative level or on the scientific one. it seems possible, through such studies, to create the real mechanisms for the regional development in ukraine and their cooperation with each other. most ukrainian and world economists view the development of the regions as such in themselves, no one examines it through the prism of economic development of interregional cooperation. we support and use this approach, because it is very important, as it provides an opportunity to comprehensively analyse the current state of the meso-level in ukraine. for the first time in ukraine, the results of the formation development at the regional level in the context of interregional cooperation are presented in the detailed description that could give the opportunity to ukrainian economists for the next step in this scientific field. practical implications. the results of this article will form the basis for the assistance to various regions in ukraine in the matter of strategic planning and their cooperation since no clear and detailed actions for them have yet been recorded. in addition, this work is relevant for representatives of state authorities and scientists who deal with issues of the regional economy because no one in ukraine has ever considered these issues in the context of interregional cooperation. key words: regional economy development, regions, interregional cooperation. jel classification: p25, o10, r11 baltic journal of economic studies 307 vol. 4, no. 4, 2018 1. introduction one of the priority directions for implementing the state policy in many countries of the world is to ensure sustainable regional development; the ways of achieving are the same in different countries of the world. this concern the solution of such issues as overcoming regional disproportions, ensuring effective development of the productive forces, rational using of regional resources etc. considering ukraine’s desire to become a full-fledged member of the european union in accordance with the signed association document and to become a strong and competitive subject of the world arena, it is important to seek new sources and forms of development of the state regional policy. in such conditions, the interdependence of ties between regions is becoming increasingly important, based on their cooperation in various fields of activity (infrastructure, information, social services, etc.) for the overall improvement of the people’s welfare and the development of regions and the country as a whole. given this, the economic cooperation between regions is one of the main forms of the modern development of the regional policy in many countries of the world, including ukraine. in contrast to the process of competition, the economic cooperation between regions in the strategic dimension is able to provide effective complementation of resources, expand opportunities for building up the internal potential of each region, and achieve synergies from their interaction. it could consolidate the nationwide socio-economic development. in addition, the modern trends in world politics and international relations make the old schemes of establishing economic ties between regions ineffective and this situation encourages states to continually improve them. therefore, a comprehensive approach to the research of the development process of the economic cooperation between regions will make it possible to present a picture of the trends in the development of interregional ties of some countries in the world. in addition, it could identify the problems of this type of cooperation with a view to working out the most effective solutions for improving this process in ukraine. 2. research methodology the research is based on official statistics of ukraine, based on the tendency of the ukrainian regional development for the period from 2006 to 2016. the methodological basis of the regional economic cooperation development is the systemic and situational approaches. according to the system approach, the regional development could be regarded as a system consisting of certain interrelated elements that ensure its life activity, and elements of a larger system, which functioning and development are determined by economic laws and patterns characteristic. according to the situational approach, regional development is a complex socio-economic system, characterized by a number of its unique features. ukraine has a new decentralization reform for the regions, which will be able to give impetus to the economic development and increase the effectiveness of the interregional ties. however, since this process is quite new for our country, it is critically important to study foreign experience in this field. in the future, as a result of such studies, it will be possible to develop economic and legal mechanisms for introducing the best world practices in the ukrainian legal field. 3. the current assessment of the regional development in ukraine the prerequisite for the economic ties development within any country in the world is the identification of trends in the overall economic development of its regions, allows many stakeholder groups (scientists, practitioners, society as a whole) to identify the problems of the relevant development area and look for ways to solve them. ukraine is no exception in this case since, for an adequate study of the basics for interregional cooperation, it is necessary to understand the current state of the country, in particular, the trends and the effectiveness of its regions’ development. such analysis and assessment are possible using a large arsenal of methods, among which the most accurate are the economic and mathematical methods because they allow us to explore the possibility of carrying out an assessment in dynamics. thus, it is proposed to assess the tendentiousness and effectiveness of economic development in the ukrainian regions, using the spearman rank correlation coefficient for the period of available statistical data, namely from 2006 to 2016. the use of the spearman rank correlation coefficient for assessing the tendencies in the economic development of the regions in ukraine provides for the determination of the rates of change (ti) of indicators characterizing the development of the economy through efficient investments (тgrp > тci), which ensure the outstripping growth of industrial (тvsip) and agricultural (тap), as well as the cost of innovative products (тvip), so there is an accelerated growth of value added (тgrp). in addition, this affects the improvement on the structure of the population consumption (тip > тrтe), the growth of the total labour productivity (тgrp > тnp), the reduction of the technogenic load on the environment (тvsip > тvru), the decrease in the unemployment rate (тnp > тup). the proximity of the actual dynamics to the normative series, which has to be not downward (> 1 or > 100%), testify to the presence of development by socioeconomic and innovation factors (1): тgrp>тip>тrтe>тvip>тvsip>тap>тci>тnp>тvru>тup>1, (1) where grp – the gross regional product; ip – incomes of the pop ulation; baltic journal of economic studies 308 vol. 4, no. 4, 2018 rte – retail turnover of enterprises; vip – the volume of realized innovative products; vsip – the volume of sold industrial products (goods, services); ap – agricultural products; ci – capital investment; np – the number of the population; vru – the volume of fuel and energy resources/ natural gas use; up – an unemployed population. to determine the degree of compliance of the normative and actual series of indicators for the development of the region’s economy, the spearman rank correlation coefficient (2) is applicable: (2) where s(d)2 – the squares sum of the differences in the indicators series rank; n – ranks number in series. the results of calculations using formulas 1 and 2 showed that during the analysed period, the proportions of socioeconomic development did not fully correspond to their normative dynamics series (table 1). the analysis of the tendencies in the economic development of the regions in ukraine made it possible to establish that in 2006-2007 17 regions developed more or less answering the regulatory range of the economic indicators dynamics, as evidenced by the spearman rank correlation coefficient. in particular, only kyiv city, lviv and poltava regions had a stable and average relationship between the indicators (0.7 > k > 0.8); other regions had an unstable relationship of which: 7 regions – moderate (0.5 > k > 0.6) and 7 more regions – bright (0.6 > k > 0.7). it should also be noted that during this period, there was a slight fluctuation in the correlation coefficient between its maximum and minimum value (0.489), i.e. the range of interregional differences was the least. in the years of 2007-2008, the situation deteriorated somewhat as the number of regions that developed according to the established ratios of economic indicators fell to 12, or almost a third. the highest correlation rates were in kyiv (0.758), sumy (0.721) and chernihiv (0.745) regions. in the period under review, the spread of the correlation coefficient increased to 0.582 and the range of differences in coefficient values was observed between kyiv (0.758) and dnipropetrovsk (0.176) regions. along 2008-2009, the relationship between the strategic and actual series of dynamics for all regions was weak and unstable, as the values of the spearman’s rank correlation coefficients were lower than 0.5, and ranged from -0.442 to 0.261. such low values can be explained by the fact that during this period, the regions were unable to adapt quickly to the rapid deterioration of the economic situation, a decrease in investment activity, and a decline in industrial and agricultural production caused by the global financial and economic crisis. in subsequent years (2009-2010) in the economy of most ukrainian regions, there was some recovery. in particular, according to the normative series of indicators dynamics, dnipropetrovsk, donetsk, lviv, khmelnytskyi regions operated by 50-60%; volyn, ivano-frankivsk, kirovohrad, luhansk, poltava, sumy regions – by 60-70%; vinnytsia, zhytomyr, kyiv, mykolaiv regions – by 70-80%. only five regions could not overcome the barrier value of the rank correlation coefficient of 0.5, among them: zaporizhzhia, odesa, rivne, ternopil, and kharkiv regions. from 2010 to 2013, the regions developed unevenly. during this period, the economy of the regions was inefficient (0.5 > k). for the vast majority of regions, the economy was characterized by a correlation coefficient in the range of 0.5 > k > 0.8. only three regions had a stable and close relationship between the normative and actual series of dynamics (0.8 > k > 0.9) – chernivtsi (2010-2011), zakarpattia, and lviv regions, and also kyiv city (2011-2012). in 2013-2014 as a result of unpredictable political events, all regions of ukraine, except the rivne region, again had a weak correlation between the strategic and actual series of indicators dynamics (k < 0.5), which caused a decline in the economic performance. by the end of 2015, only a few regions had positive shifts: volyn, kyiv, odesa, chernivtsi (0.5 > k > 0.6), lviv, poltava, kharkiv regions (0.6 > k > 0.7), and in 2016 only khmelnytskyi region had a moderate and unstable relationship between the actual and normative structure of the region’s economic indicators (0.5 > k > 0.6). in general, it should be noted that in 2006-2016, coefficients of rank correlation quickly changed their value with large amplitude, which indicates an inefficient use of the existing production potential of the regions. in addition, the rank of some indicators also often changed in a dynamic series, the reason for this was the frequent change of goals and directions of development, the absence of a system of criteria for assessing the effectiveness of economic development, through which it is possible to assess the effectiveness of the regions functioning. based on the analysis, we will determine the economic problems of the region’s development during 2006-2016 (table 2) (timoshin, a. s., tiazhkorob, i. v., davydenko, v. m. and volkov, s. v., 2008). thus, the results of assessing the development trends in the economy of the ukrainian regions based on a dynamic standard of socio-economic indicators make it possible to conclude that the biggest problem in each researching period is the decrease in the industrial production output. the reason for this negative trend is the loss of a significant number of industrial enterprises located in a territory beyond the control of the ukrainian authorities (after the war in 2014 in the east of the country), the presence of a significant share of products baltic journal of economic studies 309 vol. 4, no. 4, 2018 ta bl e 1 d yn am ic s of s pe ar m an ’s ra nk c or re la ti on c oe ffi ci en t f or a ss es si ng th e ec on om ic d ev el op m en t e ff ec ti ve ne ss in th e re gi on s of u kr ai ne in 2 00 620 16 t he r eg io ns o f u kr ai ne 20 06 -2 00 7 20 07 -2 00 8 20 08 -2 00 9 20 09 -2 01 0 20 10 -2 01 1 20 11 -2 01 2 20 12 -2 01 3 20 13 -2 01 4 20 14 -2 01 5 20 15 -2 01 6* * m аx m іn sc op e u kr ai ne 0, 47 9 0, 67 3 -0 ,0 91 0, 58 8 0, 46 7 0, 50 3 0, 60 0 -0 ,0 06 0, 72 1 0, 48 3 0, 72 1 -0 ,0 91 0, 81 2 v in ny ts ia 0, 45 5 0, 29 7 0, 03 0 0, 75 8 0, 58 8 0, 46 7 0, 64 8 0, 44 2 0, 47 9 0, 13 3 0, 75 8 0, 03 0, 72 8 vo ly n 0, 57 6 0, 47 9 -0 ,2 12 0, 69 7 0, 55 2 0, 49 1 0, 73 3 0, 24 8 0, 50 3 0, 01 7 0, 73 3 -0 ,2 12 0, 94 5 d ni pr op et ro vs k 0, 61 2 0, 17 6 -0 ,1 39 0, 55 2 0, 55 2 0, 70 9 0, 62 4 0, 17 6 0, 40 6 0, 15 0 0, 70 9 -0 ,1 39 0, 84 8 d on et sk 0, 61 6 0, 46 7 0, 01 8 0, 53 0 0, 49 1 0, 55 2 0, 51 5 -0 ,2 85 0, 22 4 0, 06 7 0, 61 6 -0 ,2 85 0, 90 1 z hy to m yr 0, 51 5 0, 40 6 -0 ,1 88 0, 79 4 0, 58 8 0, 67 3 0, 61 2 0, 22 4 0, 46 7 0, 30 0 0, 79 4 -0 ,1 88 0, 98 2 z ak ar pa tt ia 0, 49 1 0, 60 0 0, 01 8 0, 79 4 0, 39 4 0, 89 1 0, 74 5 0, 06 7 0, 28 5 0, 03 3 0, 89 1 0, 01 8 0, 87 3 z ap or iz hz hi a 0, 26 1 0, 62 4 -0 ,0 18 0, 44 2 0, 68 5 0, 53 9 0, 58 8 0, 16 4 0, 60 0 0, 18 3 0, 68 5 -0 ,0 18 0, 70 3 iv an ofr an ki vs k 0, 53 9 0, 41 8 0, 04 2 0, 64 8 0, 67 3 0, 68 5 0, 44 2 0, 12 7 0, 32 1 -0 ,0 50 0, 68 5 -0 ,0 50 0, 73 5 k yi v 0, 61 2 0, 75 8 0, 13 9 0, 77 0 0, 55 2 0, 63 6 0, 53 9 0, 23 6 0, 55 2 0, 35 0 0, 77 0 0, 13 9 0, 63 1 k iro vo hr ad 0, 33 3 0, 39 4 -0 ,0 42 0, 69 7 0, 49 1 0, 32 1 0, 56 4 0, 15 2 0, 46 7 0, 38 3 0, 69 7 -0 ,0 42 0, 73 9 lu ha ns k 0, 55 2 0, 53 9 -0 ,0 18 0, 69 7 0, 33 3 0, 53 9 0, 11 5 -0 ,1 88 -0 ,0 91 0, 21 7 0, 69 7 -0 ,1 88 0, 88 5 lv iv 0, 73 3 0, 53 9 0, 16 4 0, 55 2 0, 57 6 0, 85 5 0, 49 1 0, 27 3 0, 63 6 0, 45 0 0, 85 5 0, 16 4 0, 69 1 m yk ol ai v 0, 44 2 0, 57 6 0, 24 8 0, 79 4 0, 57 6 0, 45 5 0, 57 6 0, 00 6 0, 43 0 0, 20 0 0, 79 4 0, 00 6 0, 78 8 o de sa 0, 60 0 0, 34 5 0, 12 7 0, 41 8 0, 61 2 0, 53 9 0, 57 6 -0 ,0 55 0, 55 2 0, 45 0 0, 61 2 -0 ,0 55 0, 66 7 po lta va 0, 73 3 0, 22 4 0, 11 5 0, 62 4 0, 24 8 0, 32 1 0, 30 9 0, 34 5 0, 60 0 0, 38 3 0, 73 3 0, 11 5 0, 61 8 r iv ne 0, 69 7 0, 60 0 -0 ,0 67 0, 35 8 0, 57 6 0, 51 5 0, 62 4 0, 50 3 0, 35 8 0, 23 3 0, 69 7 -0 ,0 67 0, 76 4 su m y 0, 43 0 0, 72 1 0, 11 5 0, 68 5 0, 43 0 0, 77 0 0, 64 8 0, 16 4 0, 41 8 0, 20 0 0, 77 0 0, 11 5 0, 65 5 te rn op il 0, 58 8 0, 64 8 0, 26 1 0, 43 0 0, 64 8 0, 33 3 0, 45 5 0, 22 4 0, 47 9 -0 ,1 00 0, 64 8 -0 ,1 00 0, 74 8 k ha rk iv 0, 57 6 0, 67 3 0, 00 6 0, 40 6 0, 21 2 0, 60 0 0, 69 7 0, 09 1 0, 61 2 0, 10 0 0, 69 7 0, 00 6 0, 69 1 k he rs on 0, 45 5 0, 44 2 0, 17 6 0, 64 8 0, 28 5 0, 60 0 0, 49 1 0, 32 1 0, 40 6 0, 05 0 0, 64 8 0, 05 0 0, 59 8 k hm el ny ts ky i 0, 39 4 0, 47 9 -0 ,1 15 0, 53 9 0, 69 7 0, 72 1 0, 37 0 0, 23 6 0, 27 3 0, 51 7 0, 72 1 -0 ,1 15 0, 83 6 c he rk as y 0, 63 6 0, 62 4 -0 ,1 15 0, 64 8 0, 56 4 0, 46 7 0, 21 2 0, 47 9 0, 40 6 0, 0 0, 64 8 -0 ,1 15 0, 76 3 c he rn iv ts i 0, 61 2 0, 41 7 -0 ,4 42 0, 60 0 0, 85 5 0, 49 1 0, 66 1 0, 11 5 0, 51 5 0, 41 7 0, 85 5 -0 ,4 42 1, 29 7 c he rn ih iv 0, 62 4 0, 74 5 0, 00 6 0, 68 5 0, 22 4 0, 51 5 0, 37 0 0, 35 8 0, 43 0 0, 26 7 0, 74 5 0, 00 6 0, 73 9 k yi v ci ty * 0, 75 0 0, 45 0 -0 ,1 00 0, 13 3 0, 31 7 0, 88 3 0, 73 3 0, 13 3 0, 41 7 0, 47 6 0, 88 3 -0 ,1 00 0, 98 3 к m ax a cr os s a ll re gi on s 0, 75 0 0, 75 8 0, 26 1 0, 79 4 0, 85 5 0, 89 1 0, 74 5 0, 50 3 0, 72 1 0, 51 7 k m in a cr os s a ll re gi on s 0, 26 1 0, 17 6 -0 ,4 42 0, 13 3 0, 21 2 0, 32 1 0, 11 5 -0 ,2 85 -0 ,0 91 -0 ,1 c oe ffi ci en t s pr ea d (s co pe ) 0, 48 9 0, 58 2 0, 70 3 0, 66 1 0, 64 3 0, 57 0 0, 63 0 0, 78 8 0, 81 2 0, 61 7 so ur ce : c al cu la te d on th e b as is of th e s ta te s ta tis tic al s er vi ce o f u kr ai ne , 2 01 8 n ot e: * e xc lu di ng t a p ( di d no t r ep or t o n th e pr od uc tio n of a gr ic ul tu ra l p ro du ct s) ; ** e xc lu di ng t v ip ( th er e ar e no st at is tic s o n th e ra te o f g ro w th in th e in no va tiv e pr od uc ts v ol um e by 2 01 6) . baltic journal of economic studies 310 vol. 4, no. 4, 2018 table 2 the economic problems of the ukrainian regions’ development during 2006-2016 order of indicators the economic problems of regional development 2006–2007 тgdp < тip decrease in the industrial production output тgdp < тap decrease in the agricultural production output тgdp < тci decrease in investment efficiency 2007–2008 тgdp < тip decrease in the industrial production output тgdp < тap decrease in the agricultural production output тvip < тip decrease in the cost of innovative products тcі < тnp decrease in investment volume тnp < тup increase in unemployment 2008–2009 тgdp < тap decrease in the agricultural production output тgdp < тvsip decrease in the total labour productivity тvsip < тup increase in unemployment тcі < тup decrease in investment volume тvsip < тip decrease in the cost of innovative products 2009–2010 тgdp < тip decrease in the agricultural production output тcі < тup decrease in investment volume тvsip < тip decrease in the cost of innovative products 2010–2011 тgdp < тip decrease in the agricultural production output тgdp < тcі decrease in investment efficiency тip < тrte deterioration of the structure of the population consumption тip < тci decrease in the vested interests efficiency 2011–2012 тgdp < тcі decrease in investment efficiency тip < тvru decrease in the vested interests efficiency тip < тrte deterioration of the structure of the population consumption тvip < тip decrease in the cost of innovative products 2012–2013 тgdp < тap decrease in the agricultural production output тip < тrte deterioration of the structure of the population consumption тcі < тnp decrease in investment volume 2013–2014 тgdp < тip decrease in the industrial production output тvip < тip decrease in the cost of innovative products тip < тrte deterioration of the structure of the population consumption тcі < тnp decrease in investment volume тnp < тup increase in unemployment 2014–2015 тip < тci decrease in the vested interests efficiency тvip < тip decrease in the cost of innovative products 2015–2016 тgdp < тip decrease in the industrial production output тgdp < тap decrease in the agricultural production output тgdp < тcі decrease in investment efficiency тnp < тup increase in unemployment with low added value in the production structure, the high cost of energy carriers and materials, on the output of basic industries on foreign sales markets. taking into account the results of the economic analysis of the regions’ development, it would be advisable to develop cooperation between those regions, which have different problems (for sharing experience in those areas that have insufficient development in a given region and to solve them effectively). in practice, interregional connections in ukraine are born spontaneously depending on the geographical location, that is, cooperation arises between neighbouring regions. this leads to a deepening of socio-economic disparities between regions and affects negatively the country development as a whole. such a state of things could be improved by introducing a unified national development strategy for interregional cooperation to clearly plan priorities, goals, and objectives in this area, and to confidently direct the country towards sustainable development. unfortunately, now such a strategic document is absent in the regulatory and legal field of ukraine, and therefore, it is expedient to study the foreign experience of implementing the economic cooperation process between regions and its normative regulations. 4. formation of the main principles or the cooperation between regions in ukraine the study of the existing experience from the different countries in the world about the formation and development of economic cooperation between regions tell us about the strength of the interregional integration, expanding cooperation of regions in new market conditions that imply an increase in their economic independence. economic cooperation of the regions offers many opportunities for ensuring the progressive and balanced social and economic development of each of the subjects based on establishing strategic, equal, and mutually beneficial relations between them. the regional level of international relations was widely spread at the end of the 20th century and became one of the characteristic features of the world system relations in the 11th century. initiated by the federal states, first by the usa and canada (börzel, van hüllen, 2014) in the american continent, belgium (chuzhykov, 2008) together with other decentralized states of europe, the economic ties between the regions in recent decades have entered the practice of many countries. therefore, among the main tools for implementing the strategy for interregional development, the following can be singled out: the activities of non-state institutions and their assistance in enhancing interregional links; the availability and participation in targeted development programs for territories; the operation of special funds for regional development and support baltic journal of economic studies 311 vol. 4, no. 4, 2018 of problem areas; the conclusion of contracts between the state, regional agencies development and other stakeholders of interregional development; the activities of institutions engaged in research of the interterritorial and urban planning; participation in various grant programs of international partners together with regional and interregional investors (čiegis, 2001). the southern states of the usa and the canadian province of quebec were pioneers in the development of economic cooperation between the regions (ornstein, stevenson, 1999). accordingly, their activity to establish relationships with the regions of other states has provoked a response from the partners. as interregional cooperation has become more important for social and economic development, one more area of the subnational authority’s activity has been recognized. this led to the understanding that the representation of the regional interests in the international arena is a part of the official responsibilities of the regional leaders and within the framework of a nationwide foreign policy. the activities of governments of some regions and more actively developed interregional ties in this connection have been a stage in the regulation of intra-state relations. this process is understood as the development of the necessary institutions for coordinating regional and national interests, coordinating international activities of the regions, and has served as a model for other subnational units. the canadian province of quebec, for instance, was often seen as a model of political and economic cooperation by such spanish regions as the basque country, catalonia, flanders, wallonia. these regions brought their own approaches to solving emerging problems, which led to the emergence of the so-called ‘the catalan model of cooperation.’ in the middle of the twentieth century, the world observed the rapid development of public self-awareness in the regions of many countries, which was reflected in the formation of appropriate legal and institutional mechanisms at the domestic and international levels. thus, various forms of international contacts are supported by regions in practically all democratic states with a federal structure. this phenomenon also becomes characteristic of decentralized countries, such as spain and the united kingdom, as well as for unitary and centralized states, for example, japan or the people’s republic of china (hänggi, 2006). that is, in regional cooperation they see the way to the development of their economy and the strengthening of international positions as a state with a relatively small volume of gross domestic product (gdp), as well as major world leaders. at the end of the twentieth century, the interregional activities of the people’s republic of china significantly intensified. thanks to the reform of the regional administration (called “the concept of the purported regionalization”) the subjects of cooperation were granted broader rights, not only in the context of foreign economic activity but also the possibility of establishing special zones and other priority development areas (for trade and investment cooperation). to develop regional cooperation in modern europe, there is a fairly developed legal and solid institutional basis. the european charter and conventions, such as the european charter of local self-government (strasbourg, october 1985), the european outline convention on transfrontier co-operation between territorial communities and authorities (madrid, may 1980), the european charter for regional languages and the languages of minorities (strasbourg, november 1992), including the part concerning crossborder exchange, the charter of the congress of local and regional authorities of europe (adopted by the committee of ministers on january 14, 1994). it should also be mentioned the european charter of regional self-government, the draft of which was adopted by the congress of local and regional authorities of europe of the council of europe on june 5, 1997 (the committee of the regions, 1999). since 1990, the european union (eu) has begun to provide financial support for interregional cooperation using a number of initiatives, programs, and projects, the common areas of which are listed in table 1. support programs such as meda (for remote regions of the country that are not eu members); tacis cbc (covering the border regions of russia, ukraine, belarus, and moldova); cards (program for the western balkan countries); lace (project of the assembly of european border regions, includes advocacy for the implementation of positive practices of cooperation between regions) (doidge, 2007) and others (table 1). undoubtedly, for the successful implementation of the projects aimed at the cooperation between regions, it is necessary to transfer appropriate powers from central to regional authorities and local governments that are able to provide not only organizational but also financial support to project participants. the principles followed by the countries of central and western europe are also suitable for the implementation in the area of economic cooperation between the regions and the countries of eastern europe. thus, the experience of romania testifies to the existence of an effective and ramified system of non-state institutions and organizations that contribute to the establishment of interregional links. such institutions include regional development agencies and chambers of commerce and industry that ensure the effectiveness of links between regions in the following areas: 1) to search for partners in the regions of other countries for implementing joint programs for social and economic development; 2) to participate as a partner in eu programs and joint projects at the international level (doidge, 2014). in the countries of central and western europe, the activities of the regional development agencies are baltic journal of economic studies 312 vol. 4, no. 4, 2018 also extraterritorial in nature and are aimed at similar goals. the legislation of the eu does not contain reservations regarding the organizational and legal form of these agencies; therefore, predominantly such are the entities that are formed in accordance with the procedure provided by law on their own initiative or initiative of the government at any level. for instance, in ireland, spain, germany, the united kingdom, regional development agencies are formed as the state enterprises, in portugal and france – as the joint-stock companies with a state share in the statutory fund. the experience of the european countries is also practiced by the participation of the chambers of commerce and industry as the initiators of the creation and functioning of the regional development agencies. the international chambers of commerce are used to establish partnerships for the implementation in different joint programs, so this type of cooperation is an economic cooperation between regions. considering the experience of the eu countries in forming the foundations of the interregional economic cooperation, it should be noted that in the context of the decentralization reform in ukraine and its competitive positioning on the world arena, it is necessary to intensify cooperation of our country’s regions not only within the national but also international level. there are certain changes in this direction – cooperation within the framework of the carpathian euroregion, the bug euroregion, the danube transnational programme, etc. at the same time, the underdevelopment of the institutional infrastructure, the uncertainty in the competence of the regional and local authorities in the field of interregional cooperation, the lack of the strategic programming of the regional development limits the participation of the regions only by separate tactical activities. 6. conclusions regional and interregional policies that are almost indivisible operate variously in the economically active countries and are treated differently: as a part of the state overall policy to redistribute income in society, especially in the countries with a target-oriented market economy or as a part of the regional politics. obviously, it is impossible to reduce the differences in income and living standards of the population without reducing the differences in the regional economic development levels, clearly manifested in interregional cooperation. as foreign experience shows, regional policy and interregional relations development in any country should differ in the following features: the presence of a conscious and formulated goals vision of the regional and interregional development of the country; the existence of authorities that are responsible for changing the regional territorial proportions; availability of the special tools aimed at raising problem areas in a strategic dimension. thus, the analysis of the foreign practice in the formation and implementation of the economic cooperation between regions makes it possible to identify the main prerequisites for this process, on which should be paid attention when implementing this type of interaction in the ukrainian legal and institutional field (fig. 1). it will force the formation of integration-type regions that will function to solve common problems or to obtain a certain benefit for the development of their territory. the current stages of the world economy’s spatial changes and the ukrainian economy are characterized by the implementation of complex, radical transformations of the administrative and territorial structure. now, for our country, this is connected with the implementation of the decentralization reform components, the essence of which is the direct redistribution of power between the state and table 4 the most common support areas from the eu for the cooperation between regions name of the direction purpose participants priority areas of the financing cross-border cooperation development of the joint local and regional initiatives regions of eu member states, ukraine small and medium business. tourism and culture. protection of the environment. transport, information, communication networks and services. joint using the infrastructure in the sphere of culture. cooperation of judicial and administrative bodies. supranational cooperation territorial integration of the eu countries. regions of the baltic sea countries, the mediterranean sea, central and eastern europe balanced development in the cities. innovative activity. protection of the environment. interregional cooperation (interreg iіі) experience exchange between the regional and local organizations of the eu countries. countries of the eu, norway, switzerland innovative activity and knowledge-based economy’s development. protection of the environment. source: compiled on the basis of (the european commission, 2017) baltic journal of economic studies 313 vol. 4, no. 4, 2018 local levels. on the one hand, the signing and entry into force of the association agreement between ukraine and the eu dictate to our country the necessity to activate the european integration reforms, but on the other hand, certain regional differences occur in our country. moreover, in the process of a frantic pace of world development and the introduction of scientific and technological progress elements, the approach to understanding the role of economic (productive) resources, which play the main role in the process of carrying out any economic activity, is modified somewhat. therefore, for the positive foreign practices, introduction in this area and for a qualitative transition of ukraine from traditional to innovative development of the economy, a. smith’s classic trilogy “land-labourcapital” requires thorough supplementation. thus, in any country with a modern economy, it is no longer enough simply to accumulate and use traditional types of resources (natural, material, financial, labour), it is important to ensure balanced development of the regions and interregional cooperation in the strategic dimension. undoubtedly, the complex task of forming a unified national economic space in ukraine is strategic, and therefore, its solutions in the context of the world economic, political, and cultural integration are impossible without activation, expansion, and deepening the interregional links, institutionalization of which is a prerequisite for sustainable development of the economy throughout countries, and it can become a topic of further research in this field. the economic cooperation between regions (ecr) economic cooperation between regions should be based exclusively on the common interests and needs of all participants; the basis for economic cooperation is the potential advantages of the regions, due to common technologies, similar applications of the corresponding resources, etc. with interconnection and complementarity; exchange of experience and achievements in raising the level of social and economic development between regions is seen as the basis for increasing their overall competitiveness; it is necessary to transfer the appropriate powers from central authorities to local governments (real, not nominal); presence of an extensive and effective system of the non-state institutions in the field of cooperation between regions; formulation of the development strategy about the interregional cooperation process for each region; creation of an electronic register of the interregional cooperation projects in each region; an objective assessment of the economic potential for each region, identifying common interests. the prerequisites for the formation and implementation of the ecr development strategy creation of favourable conditions for realizing the potential of the economic cooperation between regions by the state and regional authorities figure 1. preconditions for the formation and development of the economic cooperation between regions based on the foreign experience references: the state statistical service of ukraine (2018). regional statistics. retrieved 15 may 2018 from: http://www.ukrstat.gov.ua/operativ/menu/menu_u/sestr.htm timoshin, a. s., tiazhkorob, i. v., davydenko, v. m. and volkov, s. v. (2008). economic and mathematical support for evaluation of the economic development tendency of the regions in ukraine. volodymyr dahl east-ukrainian national university bulletin, 11(241), 45-56. börzel, t. a. and van hüllen v. (2014). one voice, one message, but conflicting goals: cohesiveness and consistency in the european neighbourhood policy. journal of european public policy, vol. 21(7), 1033-1049. doi: 10.1080/13501763.2014.912147 chuzhykov, v. (2008). modernization of eu regional policy. economy of ukraine, 3, 51-58. (in ukrainian) čiegis, r . (2001). implementation of sustainable development in development strategies of cities and regions, in efficiency of public administration. kaunas: technologija, pp. 224-246. ornstein, m. d. and stevenson, h. m. (1999). politics and ideology in canada: elite and public opinion in the transformation of a welfare state. montreal: mcgill-queen’s university press. baltic journal of economic studies 314 vol. 4, no. 4, 2018 hänggi, h. (2006). interregionalism as a multifaceted phenomenon: in search of a typology. interregionalism and international relations. london: routledge, pp. 31-62. the committee of the regions (1999). opinion of the committee of the regions on the ‘recommendation of the congress of local and regional authorities of europe on a european charter of regional self-government’. retrieved 19 apr 2018 from: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a52000ir0039 doidge, m. (2007). joined at the hip: regionalism and interregionalism. journal of european integration, 29(2), 229-248. doi: 10.1080/07036330701252474 the european commission (2017). esif-viewer, visualising planned investments using european structural and investment funds. retrieved 25 apr 2018 from: http://s3platform.jrc.ec.europa.eu/esif-viewer?p_ auth=na2f 99ze&p_p_id=generalesi f v iewer tool_wa r_generalesi f v iewer toolpor tlet_i nsta nce_ uqemgwastps9&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_ col_count=2&_generalesif viewertool_war_generalesif viewertoolportlet_instance_uqemgwastps9_ javax.portlet.action=performsearch doidge, m. (2014). interregionalism and the european union: conceptualizing group-to-group relations. intersecting interregionalism: regions, global governance and the eu. dordrecht: springer, pp. 37-54. baltic journal of economic studies 182 vol. 5, no. 4, 2019 corresponding author: 1 kyiv city state administration, ukraine. e-mail: l.pidchosa@ukr.net 2 taras shevchenko national university of kyiv, ukraine. e-mail: igorlut@gmail.com 3 institute of international relations of taras shevchenko national university of kyiv, ukraine. e-mail: oleksandr.p@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-4-182-196 decentralization of inter-budget relations: theory, practice, and international experience liudmyla pidchosa1, igor lyutyy2, oleksandr pidchosa3 abstract. the purpose of the article is to justify the methods of budget policy for the redistribution of cash flows in terms of differentiating powers at different levels of government and to analyse intergovernmental regulation improvement. the subject of the study is the methods of budget policy and intergovernmental regulation improvement. research methodology. the research is based on analysis, comparison, and generalization of statistical data concerning territorial development, distribution of production capacities, migration of population and its determinants, statistical data on the state of macro-financial turbulence. the hypothesis is based on the above data. practical implication. the budget policy is directed to reaching a certain socio-economic effect at a certain stage of social development, is implemented by the authorities with appropriate powers in a certain territory. in the administrative and budgetary reform, intergovernmental relations are multidimensional and their research needs to be conducted from the point of their categorization in terms of scale and long-term achievement of the set goals and objectives, as well as depending on priorities in the budget process management. achievement of the effective system of intergovernmental relations is possible only if there is the unity of all subjects of the budget system. in this context, the most pressing issues of intergovernmental interactions and regulation of cash flows are highlighted. value/originality. the proposed model of principles, tools, and mechanism of distribution and regulation of intergovernmental fiscal flows will provide an opportunity to ensure the unity of all levels of the budget system and their interaction, which, in turn, will ensure macro-financial stability of the state, efficient allocation of budget expenditure, development of society’s democratization and uniform socio-economic development of some regions. key words: budget, intergovernmental fiscal regulation, fiscal decentralization, local authorities, territorial justice, editing coefficient, negative transfers, governmental grants, subsidies, local communities, local budgets. jel classification: h61, h68, h72 1. introduction in the conditions of permanent changes, escalation of the military situation in eastern ukraine, national currency depreciation, population migration and other factors of macro-financial instability, one of the main tasks facing the ukrainian economy is the construction of an innovative socio-economic mechanism enabling to balance the financial system of the country while implementing economic reforms. increasing efficiency of the budget system functioning and equal systematic inter-budgetary relations are especially important in the context of strengthening processes of democratization, decentralization, and the growing role of local communities. such an approach predetermines the priority of theoretical and practical problems requiring scientific reflection, legislative and, consequently, practical solutions at various levels of implementation of the budget process in ukraine. first of all, the range of such issues includes the provision of the revenue part of the budgets of cities and regions and the formation of effective budget interaction at different levels. these issues can be solved with purposeful government policy; meaningful and effective financial control; budget fund audit; introduction of a system of incentives and penalties. they also need conditions of implementation of stimulating fiscal policy at regional levels and direct interaction of all subjects of financial relations and local government bodies. 2. analysis of recent research and publications according to the general theory of social welfare in economic science, the main criterion of effectiveness is the satisfaction of personal needs on the basis of baltic journal of economic studies 183 vol. 5, no. 4, 2019 the pareto optimality criterion. the essence of public goods is the commonality and equality of consumption. the effective allocation of resources is based on the rational and optimal placement of factors of production, such as scientific potential, land, labour, and capital. thus, the efficiency of the country’s economic system is an estimated category. the theory of decentralization became the further development of the theory of public goods. this theory is based on the assertion that decentralization of power is the key to the rational allocation of resources. the treatment of this statement is interconnected with the concept of external effects and is manifested in the following interconnections: negative phenomena at the local level can lead to an appropriate response at the regional and state levels in the public and private sectors. a similar situation occurs with positive phenomena. according to this concept, territorial associations are the basic unit of the public sector and public finance economy. following the classics a. pigou, p. samuelson and r . musgrave, the world-leading economists consider decentralization of power from the point of view of the most effective provision of public goods with a diverse range of use and the most efficient allocation of budgetary funds. as a result, this mechanism will promote efficient division of powers and jurisdiction between government levels. richard musgrave states in his works that the provision of public services and goods is spatially limited. thus, public goods can be distributed depending on the range of their provision. for example, state defence can accordingly be attributed to a large range of provisions; as well as pre-school education for children is respectively referred to a small range. also, the higher is solvent demand from some consumers, the lower is the spending of individual consumers of public goods. as a result, the need for a spatial association of consumers with relatively similar needs can be argued. that in turn will lead to the fact that each consumer automatically becomes a member of a certain defined financial community whose main purpose is to provide him/her with certain public goods. according to the above, it is necessary to balance the cash flows of the territories, achieve equal distribution of social services and benefits throughout the country and create financial support funds. services of adjacent local territorial associations may be duplicated; therefore, the principle of allocation requires their interaction in order to avoid double costs. 3. formulating the goals of the article the main objective of restructuring intergovernmental fiscal relations is closely connected with the general objectives of state policy. these objectives include economic growth, improving the quality and standards of living of the population, democratization of the society, increasing efficiency and accountability of the government, and achieving macro-financial stability. they should be achieved using the criteria of economic efficiency, budgetary responsibility, social justice, and political consolidation. political consolidation in this context can be defined as the process of consolidation of unity and accord of social and political forces (people, social groups, political parties and public organizations, etc.) in order to strengthen their responsibility and determination to solve common problems. thus, the operational goal of fiscal decentralization reform is real decentralization of the budget system, namely, the expansion of official powers and responsibilities (budget autonomy) of territorial associations, while creating and strictly adhering to unified rules in relations between different branches of government. according to foreign experience, all models of fiscal decentralization are formed to achieve territorial (regional) justice. at the same time, it is necessary to focus on the most successful approaches in the foreign practice of fiscal policy regarding equalization of territorial development of regions, elimination of vertical and horizontal imbalances in the socioeconomic development of the state. 4. statement of the base line inter-budgetary relations in the context of fiscal decentralization act as both economic and political concepts. from the political point of view, it is possible to consider this term from the standpoint of state law where intergovernmental relations act as a form of government based on the principle of subsidiarity and the idea of basic democracy. regarding the economic aspect, in the context of fiscal decentralization, intergovernmental fiscal relations represent a system of decentralized use of public funds formed according to the principle of effective allocation of resources. the above two directions are closely interconnected and cooperate with each other. namely, the first direction within defines the purpose and objectives of the principle of subsidiarity. the second direction resolves the task and purpose within the framework of the theory of fiscal decentralization defining the criteria for decentralization and ways of implementing this idea in practice. the effective allocation of resources is based on the rational and optimal placement of production factors, such as scientific potential, land, labour, and capital. thus, the efficiency of the country’s economic system is an estimating category. one of the main aspects of the regulation of intergovernmental fiscal cash flows is the interaction of all levels of government with financial responsibility in accordance with their powers in order to maximize the effectiveness of the provision of public services of baltic journal of economic studies 184 vol. 5, no. 4, 2019 a varying range of action. the term fiscal decentralization is defined by the above-mentioned in the expert environment. as for functioning of the state, the principle of effective allocation of resources at all levels of decentralization of power determines its targeting solely on the interests and needs of citizens and implementation of functions using the minimum amount of resources. 5. datasets and methods 5.1. study area the current challenges faced by the ukrainian economy are caused by many destabilization factors which, in turn, lead to macro-financial instability (table 1) and intergovernmental imbalances (table 2). because of the unfavourable economic climate in ukraine, aggravation of migratory mindset and increase of labour migration, the world bank forecasts that ukraine as a state may face a shortage of skilled labour and ablebodied young people in the near future, and hence the lack of a rising and promising young generation. along with the situation of macro-financial instability, since april 2014, the government of ukraine has begun reforming local self-government and territorial organization of power. thus, in the period from table 1 implementation of local budgets by income (taking into account transfers from the state budget), us dollars region 01.12.2017 01.12.2016 01.12.2015 01.02.2014 01.12.2013 01.12.2012 vinnytsia 656764770 469871947 440773154 23402307 312295690 289627476 volyn 445254282 321786796 310035241 8617324,1 162899446 156531787 dnipropetrovsk 1448054291 1106206762 1048154725 59993335,8 1156471263 1109381413 donetsk 782976263 602306882 656250849 68498738,6 1414854555 1311542661 zhytomyr 515168842 380864370 350340936 12782229,2 245306785 232628073 zakarpattia 457940498 338242333 336189080 8515308 164959144 154574109 zaporizhzhia 739145656 570141442 509334292 25497209,1 506090626 486496207 ivano-frankivsk 556307893 422514173 383572115 10416014,4 217846540 218559322 kyiv 850067845 595469294 525472230 26303390 529988526 480618712 kropyvnytskyi 399791690 297873330 276892661 10517480,8 212492608 199698087 luhansk 263568102 208214987 233400724 27726593,8 507556768 520547098 lviv 1051427187 771439204 711668606 24406829,3 502459048 484711066 mykolaiv 441222944 333821403 320148684 13371562,4 257216016 258906613 odesa 949424185 704767921 659572749 32772989,8 583681867 555798805 poltava 667416629 496066447 436451820 22277997,7 438611881 448962424 rivne 483355695 347117901 338383232 9932386,04 201816271 195872684 sumy 459526385 354164312 304439755 14937934,7 248055262 244841347 ternopil 414396585 319084485 282123425 7252232,2 153495656 141268739 kharkiv 1029029873 796942832 717287316 37046646,1 725954254 697641652 kherson 382667181 287744586 280425538 14447165,1 191536707 185533579 khmelnytskyi 529913969 389709862 358449522 13777670,1 248652527 227093627 cherkasy 528651322 390592319 349510879 14270087,1 281665024 279184954 chernivtsi 331988233 255464466 238962298 7648303,49 144586694 131566707 chernihiv 427464282 310409550 278467245 11721172,1 203175444 196724142 the city of kyiv 1620098536 1326963573 1273701471 76555146,4 1448779257 1399894550 source: the table is compiled by the authors based on the state statistics service of ukraine data 2015 to 2018, there are 728 amalgamated territorial communities (atcs). these amalgamated territorial communities (atc) are composed of 3378 former local councils (state statistics service of ukraine, 2017) where 6.3 million people live. adjustments were made to the budget code of ukraine during this period. however, there is still no clear budget strategy in this direction, no clear legislative constraints or mechanism of budget decentralization itself. an effective public financial control has not been introduced either, especially in the context of the democratization of society. consequently, a model of intergovernmental regulation of money flows needs to be developed; it will be an element of an innovative socio-economic mechanism to balance the financial system of the country. 5.2. data sources the datasets used in this study include: (1) ukraine’s gdp for 2008–2018 taking into account data updates; (2) macro-financial indicators of ukraine for 2008–2018 taking into account data updates; (3) indicators of the amalgamated territorial communities (atc) (including data on atc formation, atc macrofinancial indices, atc population dynamics). baltic journal of economic studies 185 vol. 5, no. 4, 2019 5.3. methods the study of inter-budgetary regulation of cash flows as a condition for self-realization of local budgets was carried out in classic fashion: (1) the choice of subject, object; definition of the purpose and objectives of the study; (2) accumulation of information; (3) development of hypotheses; (4) choice of research methods; (5) processing and analysing of the results of experimental research; (6) writing the text and presentation of results. in this study, we aim to explore the main aspects of the model of intergovernmental fiscal regulation connected with the european integration processes in ukraine, the need to restructure the budget system, development of the society democratization, and the need to achieve macro-financial stability. in this research, we identify the leading aspects of international experience in this area, including achievement of budgetary equilibrium, the formation of territorial development funds, and analysis of necessary changes at the legislative and executive levels. to analyse the current atc state and the possibility of achieving budget security in line with the financial security of the territories, the method of analysis was used, namely: the specific international experience of fiscal decentralization and budgetary decentralization table 2 statement of equalization from the state budget to regional budgets of ukraine, thousand us dollars regional budget 2012 2013 2014 2015 2016 2017 vinnytsia region 131014 140568 103980 3310 1773 1536 volyn region 63137 82657 62155 3462 2671 2229 dnipropetrovsk region 24079 36793 18908 0 0 0 donetsk region 100429 101353 122897 0 0 0 zhytomyr region 70783 98467 62338 2649 1538 1530 zakarpattia region 63822 82380 58387 5263 3827 3931 zaporizhzhia region 71064 92175 69328 0 0 0 ivano-frankivsk region 58909 84888 64044 4131 3885 4278 kyiv region 33986 46929 37619 0 0 0 kropyvnytskyi region 52168 64096 43628 1584 921 1013 luhansk region 94701 115671 91482 1128 582 798 lviv region 105203 151920 113088 2041 610 1075 mykolaiv region 65008 81015 58499 1505 1339 955 odesa region 81109 115148 81143 465 500 0 poltava region 26954 65081 42235 0 0 0 rivne region 59412 79173 56561 3292 2250 2495 sumy region 47817 76858 51976 385 501 594 ternopil region 59991 77370 55325 3127 2081 3364 kharkiv region 61971 115682 85039 0 0 0 kherson region 65318 81306 57187 3499 2356 2620 khmelnytskyi region 75583 93179 66366 3448 1732 1954 cherkasy region 57422 74989 53707 1654 1005 811 chernivtsi region 47139 60957 44395 3987 2998 3587 chernihiv region 49684 70038 48637 2097 1225 903 the city of kyiv 0 15594 0 0 0 0 source: the table is compiled by the authors based on the state statistics service of ukraine data in the context of restructuring the budget system were analysed. the formalization method: used to construct hypothetical-deductive models of functioning of budget decentralization elements; constructing a model of linear dependence for determining indicators of influence on the macroeconomic situation in the country. the hypothetical method was used in the process of developing the hypothesis. the observation was used throughout the whole research period to monitor changes in the global economy, in the national economy that could have affected the process of budget decentralization or shape its specific characteristics. the comparison was used in the research process of the role of fiscal decentralization and its impact on the achievement of macro-financial stability; budget decentralization in the countries of the world as a factor of democratization of the society; reconfiguration of strategies and mechanisms of interaction of fiscal decentralization of world budget systems and their elements. to study the issue of fiscal decentralization and the issue of achieving budget balance, we divided the whole ukraine into the following categories: strong, medium, and weak territories, depending on industrial production (figure 1) and the regional gross product (figure 2). the time period from 2008 to 2018 was investigated (table 3). baltic journal of economic studies 186 vol. 5, no. 4, 2019 figure 1. classification of regions of ukraine according to the volume of sold industrial products (goods and services) strong territory; medium territory; weak territory table 3 regional gross product, $ regions 2008 2009 2010 2011 2012 2013 2014 2015 2016 ukraine 189611 114168 135321 162760 182387 190332 132243 90388 91745 vinnytsia 4019 2513 2949 3637 4128 4524 3666 2721 2862 volyn region 2557 1528 1804 2205 2501 2578 2016 1440 1375 dnipropetrovsk 20937 11666 14517 17503 18496 19113 14712 9782 9403 donetsk 23529 12967 16123 20128 21347 20616 9999 5228 5288 zhytomyr 3002 1841 2343 2741 3106 3210 2485 1747 1843 zakarpattia 2642 1568 1912 2257 2676 2675 2010 1316 1246 zaporizhzhia 8489 4681 5342 6191 6854 6794 5497 4048 4012 ivano-frankivsk 3577 2155 2556 3344 4036 4150 3137 2084 1977 kyiv 7137 4694 5619 7394 8708 8616 6630 4729 4948 kropyvnytskyi 2792 1674 1969 2505 2757 3164 2397 1748 1770 luhansk 8597 4806 5693 7150 7346 6889 2616 1084 1206 lviv 7107 4494 5207 6513 7745 7916 6077 4304 4417 mykolaiv 3882 2542 3007 3454 3651 4004 2951 2191 2224 odesa 9399 6081 6735 7687 8093 8720 6245 4535 4608 poltava 6824 4204 5536 6532 7073 7308 5819 4358 4472 rivne 2815 1684 1985 2413 2724 2751 2394 1602 1518 sumy 3242 2008 2292 2863 3117 3346 2533 1889 1780 ternopil 2124 1397 1591 2037 2245 2261 1806 1212 1195 kharkiv 11878 7365 8162 9608 10278 10664 8050 5675 5957 kherson 2635 1680 1956 2306 2420 2596 1938 1464 1490 khmelnytskyi 3212 1970 2262 2855 3280 3303 2680 1868 1879 cherkasy 3820 2338 2794 3377 3908 4136 3206 2311 2285 chernivtsi 1767 1061 1237 1496 1646 1720 1254 841 817 chernihiv 2984 1830 2126 2646 2992 3030 2346 1680 1668 the city of kyiv 33913 21192 24580 27972 34461 39069 29781 20532 21505 source: the table is compiled by the authors based on the state statistics service of ukraine data baltic journal of economic studies 187 vol. 5, no. 4, 2019 figure 2. classification of regions of ukraine, according to the regional gross product strong territory; medium territory; weak territory 6. discussion of the raised problem the purpose of intergovernmental regulation at the regional level is to ensure local budgets with necessary financial resources, thus, allowing the implementation of certain powers secured in legislation (figure 3; figure 4). in this context, the main instruments of intergovernmental regulation can be: 1. a legislative determination of the rates of deductions to local budgets from taxes subject to enrolment to the higher-level budget (national budget of ukraine or local (territorial) budget). 2. grants to local budgets in order to equalize their budget security through the creation of financial support and other financial assistance. 3. deductions from local budgets to higher-level budgets: ‘negative (deductible) transfers’ from budgets that are most secure (saburov et al., 2001). as a result, this mechanism can be allowed to provide local budgets with the necessary revenues. the advantages and disadvantages of the aforementioned models are specified in table 4. consequently, the authorities are facing the number of questions of proportional distribution of main funds of intergovernmental regulation between the transfer channels for local budget funds (figure 5). according to world practice, the proportion in the distribution of the major amounts of funds is chosen once for a long term (gershberg and winkler, 2004). the advantages of long-term deductible rates include: the ability of local authorities to independently forecast their own revenue for a long period; increased incentives in cities and regions to increase tax collection and, accordingly, increase the tax base in the territories (figure 6). table 4 advantages and disadvantages of budget decentralization models german model american model probability of existence with significant interregional disproportions + – possibilities for solving social policy tasks > < preservation of incentives to improve the quality of socio-economic policies from representatives of regional authorities – + the degree of approaching the traditions of the ukrainian economy < > source: the table is created by the authors baltic journal of economic studies 188 vol. 5, no. 4, 2019 figure 3. classical theory of fiscal decentralization source: the scheme is compiled by the authors based on (saburov et al., 2001) the german model of cooperative federalism (provisions of the basic law ensuring equal conditions of life in the general territory of the country, minimum powers for territories under significant federal regulation of territorial development) the american model of decentralized federalism (maximum authority of the territories with insignificant federal regulation of territorial development) figure 4. variety of models of fiscal decentralization source: compiled by the authors based on (saburov et al., 2001; kyrylenko, 2002) argumentative and unsolved issues in the area of ​​budget expenditures сontradictions between the autonomy of regional and local authorities in defining expenditures and achieving the principles of social justice lack of appropriate quantitative estimates of expenditure needs of budgets of different levels (or national minimum social standards) insufficient level of budget expenditure efficiency figure 5. disputed and unsolved issues in the field of budget expenditure source: the scheme is compiled by the authors baltic journal of economic studies 189 vol. 5, no. 4, 2019 however, this mechanism is limited, namely, the tax base is distributed unevenly throughout the territory of ukraine, which, in turn, can lead to a significant difference in the budget security of different territories as a result of consolidated uniform standards. the use of inappropriate financial support for cities and regions with their own revenues makes it possible to ensure a more even fund distribution between figure 6. quantitative standards for decentralized budget services source: the scheme is developed by the authors local budgets, but this may reduce the interest of local authorities in increasing the volume of revenues and taxes and developing their own tax base (table 5). providing financial support to the regions and territories of ukraine in the form of government grants, in turn, allows public authorities to significantly influence the policy of local governments in accordance with the priorities defined at the regional level (figure 7). figure 7. the concept of territorial justice source: the scheme was adapted and modified by the authors from (harvey, 2010) table 5 the purpose and basic principles of providing financial assistance to lower-level budget source: the table was compiled by the authors based on (saburov et al., 2001; bordignon, 2006) baltic journal of economic studies 190 vol. 5, no. 4, 2019 thus, the choice of proportion between the amount of funds provided to local budgets in the form of deductions from taxes, government grants, and subsidies should be determined by the ratio of priorities: stimulation of local authorities to tax base development and uniformity in financial resource distribution (figure 8). similar choices should also be made by regional governments with respect to their territorial communities since the regions should also have the right to use the indicated tools (harvey, 2010). however, it should be borne in mind that, according to world practice, territorial communities may also receive financial assistance from the regional budget, in addition to financial assistance from the regional budgets, and its amount is determined annually, whereas the norms of deductions to the budgets of territorial communities should be established by the decision of the regional representative body and should have a certain validity period (table 6). therefore, the options facing local governments in the year of adoption of uniform tax deductions from the budgets of territorial communities may somewhat change in subsequent years. therefore, regional authorities can review the norms of deductions to the budgets of territorial communities with greater probability. with regard to negative (deductible) transfers, this tool allows for an increase in the following ratio: uniform deduction rates => financial assistance. with the help of negative transfers, it is possible to set higher rates of deductions to less secured local budgets (which, in turn, will significantly increase budget security in the respective cities and regions) (figure 9). at the same time, the rationale for using higher standards is fully preserved in the cities and regions that do not list options for approaches to equalizing interregional disparities: the situation in ukraine: 1. ensuring equal living conditions throughout the country the ukrainian legislation does not regulate the obligations of the authorities regarding the equalization of interregional disproportions there is a traditional contradiction between donor and recipient regions 2. ensuring minimum social standards figure 8. determining the extent of equalization of interregional disproportions source: the scheme was developed by the authors negative transfers and match the criterion for collecting a negative transfer, since only a certain proportion (no more than 50%) will be withdrawn from the amount of the excess of their twice-average income level (de mello, 2000). the financial resources that can be allocated to carry out delegated powers do not relate to their own revenues and do not affect the balance of local budgets. these funds should be allocated for financial support to implement the powers at the level of government transferring these funds. these funds’ allocation should be clearly determined by the relevant budget services available in the regions and cities and, if necessary, the cost factors that reduce or increase the cost of these services. today, the current legislation of ukraine needs change, namely, to establish the possibility of establishing territorial development funds to transfer government grants to local budgets for partial financing of investment programs (projects) for the development of territorially important public infrastructure, as well as regional funds for co-financing social expenditures for transferring funds to support financing first-priority socially significant expenditure of local budgets (gershberg and winkler, 2004). a similar scheme should be formed for regions. changes to the budget code of ukraine should allow the use of other forms of financial support for cities and regions, including budget loans (table 7). direct distribution of funds through any of the funds must be carried out according to a unified method and/or based on the common criteria and conditions for all types of cities and regions that must be established by ukrainian legislature. table 6 forms of intergovernmental transfers at the regional level fo rm s o f in te rg ov er nm en ta l tr an sfe rs a t t he re gi on al le ve l funds provided to local budgets to equalize their budget security through financial support funds grants from regional funds for financial support of territorial communities grants from regional funds for financial support of districts grants from district funds for financial support of territorial communities source: the table was compiled by the authors based on (de mello, 2000) baltic journal of economic studies 191 vol. 5, no. 4, 2019 «negative transfers» from the most sustainable with budget revenues budgets of the cities subventions transferred to regional funds of financial support of territorial communities and regional funds of financial support of territorial districts subventions transferred from territorial communities to the budgets of the region to perform interterritorial functions funds provided to local budgets for implementation of delegated powers through compensation funds figure 9. negative transfers from the most sustainable city budgets source: the scheme was created by the authors based on (gershberg and winkler, 2004) regional funds of financial support for territorial communities and local budgets are necessary for the provision of undesignated financial assistance (grants), their use should be within the competence of the recipient but comply with the current legislation. this fund distribution mechanism is aimed at providing financial resources to relevant local budgets for solving issues within the competence of local governments of the respective levels of the budget system (de mello, 2000). table 7 budget loans for regions (source of deficit financing)1 the purpose of providing budget loans: 1. to partially cover the budget deficit of districts, regions, cities of ukraine (for up to three-year term); 2. to cover temporary cash disruptions (for up to three-year term); 3. to implement measures to eliminate the consequences of natural and industrial disasters (for a term up to three years at a 0% rate); 4. for construction; reconstruction; overhaul; repair and maintenance of public roads (for a term up to five years); 5. for implementation of measures to support the monocities of ukraine in total (for a term up to 3 years); the loan fee is ¼ of the refinancing rate of the national bank of ukraine source: the table was developed by the authors based on (patsias et al., 2013) the issue of government grants also needs further elaboration, namely, in consolidating the possibility of delegating to the subjects of the highest level the authority to provide subsidies to territorial communities at the expense of the regional budget (table 8). the funds for implementation of this delegated authority should be provided to higherlevel entities from the regional compensation funds (prud'homme, 1995). this mechanism should be clearly defined in the legislation of ukraine. table 8 comparison of subsidies to equalize budget coverage to support measures ensuring the balance of regional budgets grants for equalization grants for providing balance approval of the law on the state budget volumes in general and for each recipient region are approved; the total volume is approved; it is distributed by regions by the government during the year; the degree of “transparency” of distribution methods by region significant (advantage) low (drawback) possibility of prompt response to the situation in the regions missing (drawback) available (advantage) source: the table was compiled by the authors based on (de mello, 2000) 1 monocity is a locality that depends on one or several city-forming enterprises in terms of employment and infrastructure. the word monocity is a reduction of the monoprofile city concept where the prefix ‘mono’ means ‘sole’. baltic journal of economic studies 192 vol. 5, no. 4, 2019 as a result, this mechanism will prevent the emergence of imbalances in the alignment of the budgetary provision of territorial communities, which may arise when levelling their budgets directly at the regional level. a new type of intergovernmental transfers (subventions) – negative transfers – should be levied from the most secured cities and regions to reallocate these funds to other, poorly resourced cities and regions (figure 10). negative transfers paid from local budgets should be credited to the regional fund of financial support of separate territorial communities (prud'homme, 1995). according to the current legislation and approved by the verkhovna rada of ukraine, negative transfers paid from district budgets should be credited to the regional fund of financial support. transfer of such subvention from local budgets to the national budget can be provided if the estimated tax revenues of local budgets of the corresponding type are twice as high and exceed the per-city average (of the same type) per person. at the same time, the withdrawal in the form of a negative transfer is subject to no more than 50% of the amount exceeding the double level of the calculated tax revenues of the average regional level (prud'homme, 1995). the procedure for calculating a negative transfer must be determined by the legislation of ukraine. it should be noted that in highly subsidized regions, despite the fact that the range of fiscal provision with tax revenue of cities may be substantial, it is likely that none of them is able to cover their spending needs at the expense of local and fixed taxes and fees. when using a negative transfer, it is also necessary to take into account that after a reduction of the incomes of withdrawn cities, their budget security should be ensured to be not lower than in other cities after the disbursement of financial assistance. donations from the fund of financial support should be directed to cities that do not list negative transfers from their budgets (prud'homme, 1995) (figure 11). in the event that the city fails to fulfil the obligation to transfer the said subvention, public authorities should have the right to reduce the rates of deductions from the national and (or) regional taxes for this city, as well as to centralize part of the proceeds from local taxes into the budget. funds of financial support of cities are created in order to provide them with financial resources to perform functions of local government. this task can be solved by reducing the gap between levels of cities’ budget provision and sufficient levels to discharge their powers. calculation of budget support for potential recipients2 of financial assistance and equalization procedure will be different for different funds (prud'homme, 1995). the budget security of cities is the object of budget equalization. the budget security (tax revenue) is defined as the ratio of estimated tax revenues per inhabitant that can be obtained based on the level of development of the city and its economic structure (tax potential), and a similar average indicator in cities of the same type figure 10. distribution of subventions by regional fund of financial support source: the table was created by the authors based on (de mello, 2000) 2 recipient (lat. recipere – receive, receive) – an object or entity that receives anything from another person or entity called donor. baltic journal of economic studies 193 vol. 5, no. 4, 2019 taking into account the structure of population, social, economic, geographical, climatic and other objective factors and conditions influencing the cost of providing the same amount of budget services per capita. estimated tax revenues – tax potential – are estimates of revenues that can be charged to the city budget from tax sources fixed by the city budget. when calculating this value, it is not necessary to use indicators that objectively characterize the possibility of receiving tax revenues from the tax base fixed to the city but the actual income for the reporting period. this requirement has an exception during the transition period, when the assets of individual financial support funds may be partly distributed using actual and projected incomes of individual cities (dabla-norris and wade, 2002). the use of data on actual incomes in calculating budget security can lead to reduced incentives for cities to mobilize revenues, as a reduction in revenue from tax sources will be compensated (when they are included in the estimated tax revenues) by increased financial assistance in the following year. conversely, an increase in actually received tax revenues from the local budget may lead to an adequate reduction in the amount of financial support, that is, ultimately, to the absence of an increase in its own revenues (figure 12). calculation of tax potential can be based on the assessment of the tax base in the context of the corresponding type of cities by the aggregate indicator (similar to the gross domestic product, the volume of industrial production and turnover) or using the tax base by type of taxes (dabla-norris and wade, 2002). in case of using an aggregate indicator reflecting the overall level of development of the city’s economy (i.e., tax potential), the assessment is based on the ratio of value-added (industrial production, wage fund) with the projected tax revenues from the unit of value-added (industrial production, wage fun) (alfirman, 2003). if necessary, conversion factors for the sector structure of the city’s economy can be used; they reflect differences in the level of entrusted tax revenues from the equal figure 11. options for decentralization reform of intergovernmental transfers source: the scheme was developed by the authors system of incentives additional restrictions for subsidized regions (prohibition on exceeding salaries for regional civil officers, financing of expenditures not allocated to regional authorities) incentive grants 10-20 regions with the highest performance indicators of regional administrations setting tighter restrictions for high-end beneficiary regions (in addition: signing special agreements with the ministry of finance; implementation of the regional budget in the treasury; verification of the budget report by state control bodies, etc.) figure 12. system of incentives for regional authorities source: the scheme was created by the authors based on (dabla-norris and wade, 2002) baltic journal of economic studies 194 vol. 5, no. 4, 2019 amount of value-added (industrial production, wage fund) in various sectors of the economy of the city. it should be emphasized that the use of conversion factors is necessary in the case indirect taxes (for example, excise taxes on alcohol), as well as unevenly distributed resource payments (related to used aggregate indicators that are not directly correlated with value-added, industrial production, wage fund) are transferred to cities. the formula for calculating the tax potential (tcu «x») (alfirman, 2003) in the case of ukraine is the following: tcu õ ftr vdu õ cfu õ tvau« » * « » * « »= � �  (1) the tax capacity of the “x” city of ukraine = total ukrainian forecast for tax revenues in cities of this type * the amount of value-added (industrial production, wage fund) in the city “x” of ukraine * conversion factor for the sector structure of the “x” city’s economy of ukraine / total value added in ukraine (industrial production, wage fund). the conversion factor for the sector structure of the city’s economy (cfu õ�« » ) is determined by the formula (holtz-eakin and rosen, 1988; de borger, 1994): cfu õ avau xy avau õ r y r avau y avau� � � � �« » « » « » « » « »= ∑ ( ) × ( ) ( ){ }    cfu õ avau xy avau õ r y r avau y avau� � � � �« » « » « » « » « »= ∑ ( ) × ( ) ( ){ }    (2) conversion factor = σ (amount of value-added (industrial production, wage fund) in “y ” branch of the economy (industry) in the “x” city of ukraine) / (value-added (industrial production, wage fund) in all branches of economy ( industry) in the “x” city of ukraine) * (projected (reporting) volume of all tax revenues assigned to cities, for “y ” sector of the economy (industry) of ukraine) / (forecast (reporting) volume of all tax revenues assigned to cities in all sectors of the economy (industry)) of ukraine / (value-added (industrial production, wage fund) in the “y ” sector of the economy (industry) in all cities of ukraine) / (value-added (industrial production, wage fund) in all sectors of the economy (industry) in all cities of ukraine). at the same time, in order to ensure the most stable distribution of financial assistance, it is necessary to use the reporting data for several periods (years) to determine the tax potential. tax potential can also be estimated by types of taxes in the case of the possibility to allocate and estimate indirect metrics of the tax base of cities. for example, for land tax, the cadastral value of land could be used as an indicator (probably, with adjustments to certain defined benefits for certain categories of taxpayers); for taxes on small businesses – the volume of their turnover could be used (brueckner and saavedra, 2001). the tax potential by type of tax should be assessed based on the assumption that the tax base available in the city is used with the region’s average efficiency (the same amount of tax is levied from one unit of measurement in which the tax base is expressed). for these taxes, the tax potential is estimated by multiplying the indicator selected as the tax base for the average representative3 tax rate. thus, the average representative tax rate (for entities) is calculated as the ratio between the projected tax collections and the tax base of this tax for all cities (brueckner and saavedra, 2001). tcu xy tbu xy tftru y ttbu y� � �� � �« » « » « » « »= ×  (3) the tax potential of the city “x” of ukraine and from the “y” tax of ukraine (tcu xy�« » ) = the “y” tax base of ukraine in the “x” city of ukraine in the forecast year * the total forecast of tax revenue “y” of ukraine to the budgets of all cities of this type of ukraine / total tax base of the tax “y” of ukraine. thus, the tax potential for all types of taxes (tcu x« » ) for this calculation will be determined by the formula (brueckner and saavedra, 2001): tcu x tcu xy« » « »� �= ∑ ( ) (4) the amount of tax potentials in the city by type of taxes in the city “x” of ukraine (the amount of tax potential) = σ (tax base of tax “y” of ukraine in the city “x” of ukraine in the forecast year). when using the assessment of tax potential based on aggregate factors, it is not necessary to use separate accounting for a significant number of branches of economy and industry, especially if one takes into account the fact that the levels of tax burden practically do not differ for each of them. in the same way as the representative tax rates method is applied, which does not necessarily include the assessment of each type of tax (especially if its share in the city’s tax revenues is insignificant). the adjustment factor for expenditure should be used to assess the differences between cities of the same type to find the cost of providing one and the same amount of budget services per inhabitant in the area (dablanorris and wade, 2002; gershberg and winkler, 2004). the use of an adjustment factor is necessary for the distribution of intergovernmental transfers for the cities with significant objective socio-demographic, climatic, geographical, transport and other conditions that determine the more or less high cost of an identical set of goods and services. in case that these differences are insignificant, the application of this coefficient is ineffective (dabla-norris and wade, 2002; gershberg and winkler, 2004). in general, the factor should represent the amount of budgetary funds to be used in the city for implementation 3 representativeness is the ability of the sample aggregate to reproduce the main characteristics of the general aggregate. representativeness is achieved through the correct formation of a sample which must reproduce the overall object by principal for the study parameters. parameters like reliability and validity play a significant role in determining the quality of information obtained as a result of empirical research, in addition to representativeness. baltic journal of economic studies 195 vol. 5, no. 4, 2019 of its assigned budget service responsibilities, taking into account price factors, compared to the per capita average for all cities of the type considered, located within the respective territory (dabla-norris and wade, 2002; gershberg and winkler, 2004). the financial support fund distribution based on the assessment of the level of budget security must be carried out in order to increase this level in the least secured cities. the level of budget security shows how many times more or less the amount of budget revenues of a particular city is (reduced to a comparable type by accounting for price factors and the number of consumers of budget services), the average per capita income of all cities of this type (dabla-norris and wade, 2002; gershberg and winkler, 2004). the level of budget provision of cities by their own revenues to the distribution of funds of financial support funds ( bpu õ�« » ) may be determined by the following formula (gershberg and winkler, 2004; brueckner and saavedra, 2001): bpu õ tcu õ pu õ afenu õ tftru pu� � � � � �« » « » « » « »= ×{ }( ) ( )   bpu õ tcu õ pu õ afenu õ tftru pu� � � � � �« » « » « » « »= ×{ }( ) ( )   (5) the level of budget provision of the city “x” of ukraine to the distribution of the financial support fund finances = the tax potential of the city “x” of ukraine / population of the city “x” of ukraine * adjustment factor of the city’s expenditure needs “x” of ukraine / total ukrainian forecast for tax revenues in cities of one type / population of the city, oblast of ukraine. if the level of budget provision of the city, obtained using this formula, is more than one, then it is provided with income more than all cities of this type (by 20%). and if the level of budget security is less than one, then this city’s income is less than average among cities of this type (60% of the average level) (dabla-norris and wade, 2002; gershberg and winkler, 2004). the next step after determining the levels of budget provision of cities of the same type is ranking by levels. in general, the main purpose of allocating financial support for cities is to reduce the differences (equalization) of the level of local budget revenues (compared considering population and price factors) by increasing the amount of financial resources in the least secured tax revenue cities, in order to ensure the highest possible budget services to the population (in accordance with the powers of local self-government bodies). equalization of budget security is carried out by various methods, in particular, by the method of proportional equalization, alignment to the maximum possible level, and the combined method. thus, the proposed model of principles, tools and mechanism of distribution and regulation of intergovernmental fiscal flows will provide an opportunity to ensure the unity of all levels of the budget system and their interaction, which, in turn, will ensure macro-financial stability of the state, efficient allocation of budget expenditure, development of society’s democratization and uniform socio-economic development of regions of ukraine. 7. conclusion the issue of intergovernmental regulation of cash flows is of great current interest due to the following challenges: the policy of european integration; carrying out the decentralization of power reform; increasing population migration; devaluation of the national currency; military-political tension; negative dynamics of macroeconomic indicators; economic turbulence; reduction of investment attractiveness; outflow of skilled labour; and reduction of expenditures for the following socially significant areas: health care, education, social assistance for the elderly. the 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(2018). participatory budgeting as a form of dialogic accounting in russia: actors' institutional work and reflexivity trap. accounting auditing & accountability journal, 31(4), 1098–1123. baltic journal of economic studies 291 vol. 4, no. 5, 2018 corresponding author: 1 non-governmental organization “noosphere”, ukraine. e-mail: aegladchenko@i.ua 2 cherkasy state technological university, ukraine. e-mail: aegladchenko@i.ua doi: https://doi.org/10.30525/2256-0742/2018-4-5-291-296 innovative clusters of business accelerators in the sphere of science and technology entrepreneurship mykhailo ryabokon1, yurii pikalov2 abstract. in a broad sense, the author’s study was preconditioned by the problem of arranging the efficient system for positioning of the enterprises of venture entrepreneurship acceleration and incubation that today is quite a controversial aspect. at the same time, for today there are no studies and publications related to the identification of approaches to the positioning of clusters of the enterprise innovative activity acceleration that will make it possible to find the most efficient approaches to acceleration. therefore, this paper is aimed at identifying the basic approaches in the positioning of startup acceleration and incubation institutes. methodology. the study is based on the algorithms of cluster analysis. having identified the key parameters of the analysed institutions, using the “statistics7” program package, we have combined the input data to address the challenge of cluster analysis, consisting in classification breakdown, which meets the criterion of optimality. proceeding from the research target, the rule “single linkage” was chosen as the key function. according to this rule, there are two objects, being the closest to each other. at the next step, the object, which has the maximum degree of similarity with one of the cluster objects, joins them. this method is also called the method of the closest neighbour as the distance between two clusters is defined as the distance between the closest two objects in different clusters. 1 pearson is chosen as a degree of distance as far as the given data cannot be presented as points in k-dimensional space. results. the first part of this research contains a justification of the positioning indicators among the analysed startup accelerators, which were chosen for cluster analysis according to functioning models. in the second part, we consider the distinction of the functioning models of the obtained clusters and the features, typical for every enterprise, which has been involved in the study. proceeding from the calculation of the configuration of distances of cluster formations using the method of k-means while approaching the process of startup acceleration and incubation, we have identified the aspect, which is of primary importance for the formation of resultative startup-accelerator. practical implications. the obtained results make it possible to optimize the resources in the process of creation and positioning of startup accelerators and incubators. value/originality. based on the developed configuration of the distances of cluster formations using the method of к-means in approached-to-startup acceleration and incubation process, we have found out the best practices in the area of venture business acceleration. key words: indicators, system parameters, positioning, capitalization, enterprise, acceleration, science and technology entrepreneurship, incubation. jel classification: m13, l60 1. introduction modern stage of global development is involved in globalization processes, characterized by enhancement of innovative activity in all spheres, as well as harnessing high technology and manufacturing innovative scienceintensive products, which are the key factors of steady economic growth for the majority of the developed countries of the world. at the same time, it seems clear that the innovative economy cannot be built without an active development of enterprises, conducting research and development activities. within the framework of forming the innovative structure, such institutions as a business incubator, technopark, technopolis, engineering school, high-tech centres, etc. have been developed and focused on creating favourable conditions for innovative activities, support and development of small-scale innovative entrepreneurship. the above-mentioned forms of scientific and technological business are a system that integrates science, education, and production. it is an essential infrastructure baltic journal of economic studies 292 vol. 4, no. 5, 2018 element of national innovative systems, which promotes the formation of an innovative economy by the way of: development of science-intensive technologies and enterprises; selection and support of the promising scientific projects; commercialization of research findings and scientific and technological developments; rendering various services to small business entities, primarily, related to development of firms in the startup phase, etc. at the same time, today we have a relative dispersion of organization forms of such kind of activities. thus, a justification of the axiomatics of the elements of venture entrepreneurship efficiency is of particular interest. a study of different aspects of entrepreneurship formation and development in terms of the innovative infrastructure is contained in the following papers: g. n. ganamotse, m. samuelsson, r. m. abankwah, t. anthony, t. mphela (2017); d. dellermann, n. lipusch, p. ebel, j. m. leimeister (2017). a study of the innovative practice of business incubation, which allows the identification of management specifics in different countries, is contained in the following works: c. m. dasilva, p. gurtner (2017, january), j. gonzalez-uribe, m. leatherbee (2017), s. shane, n. nicolaou (2017). at the same time, for today there are no studies and publications related to the identification of approaches to the positioning of clusters of the enterprise innovative activity acceleration that will make it possible to find the most efficient approaches to acceleration. therefore, this study is aimed at the identification of the best practices of international science and technology business functioning based on a calculation of clusters. 2. methodological approach having identified the key parameters of the analysed institutions, using the “statistics7” program package, we have combined the input data to address the challenge of cluster analysis, consisting in classification breakdown, which meets the criterion of optimality. proceeding from the research target, the rule “single linkage” was chosen as the key function. according to this rule, two objects, being the closest to each other, i.e. which have the maximum degree of similarity, are combined at the first step. at the next step the object, which has the maximum degree of similarity with one of the cluster objects, joins them. this method is also called the method of the closest neighbour as the distance between two clusters is defined as the distance between the closest two objects in different clusters. 1 pearson (1 minus coefficient of pearson’s correlation) was chosen as a degree of distance as far as the given data cannot be presented as points in k-dimensional space. when addressing a huge amount of problems in economics or sociology, the objects can be presented as points in k-dimensional space. in this case, it is expedient to use 1 – pearson (1 minus coefficient of pearson’s correlation). 3. conducting research and results in order to conduct cluster analysis we have selected 19 institutions in the sphere of acceleration of the innovative activity and the following indicators, which are basic characteristics of their functioning: initial investment *thousand dollars); share in the project (%); total number of projects, registered in 2017; number of successful projects; amount of time to be spent on acceleration; time period of incubation program; capitalization (million dollars); number of sectoral areas under consideration. thus, the first indicator, which is of utmost importance while defining the effectiveness of building the accelerating institutions, is the amount of initial investment. among the largest and the most popular institutions of similar format, which were selected for this study, their distribution is quite uneven. therefore, this aspect is of utmost importance. the next aspect of the positioning of the institution in the sphere of startup acceleration and incubation is represented by dynamics of the number of registered projects and the number of successful projects. in this aspect, differentiation among the analysed institution is also dispersive. the next aspect of the positioning of institutions in the sphere of startup acceleration and incubation is represented by capitalization. there was found no homogeneous situation in relation to this indicator among the analysed enterprises. the level of capitalization in the selection of the analysed enterprises is quite differentiated. thus, since 2005 the total market capitalization of all companies of yc, which funded 1,430 companies and almost 3,500 founders, makes more than 5 billion dollars. sparklabs has insignificant capitalization in comparison with the above-stated institution, which makes 1.2 billion. however, sparklabs is quite a typical mechanism of positioning, which is reflected in the following elements: they invest up to 40,000 dollars in all startups in exchange for up to 6% of shares in every startup. this share is subject to negotiations depending on the amount and investment status of project launch; in the course of the acceleration program startups take part in our training sessions, where they have a chance to learn and communicate with the well-known korean and international entrepreneurs. besides, during office work startups can have feedback from general partners of sparklabs; sparklabs provides free-of-charge office premises in maru180 centre for the startup in korea and benefits for the amount over 900,000 dollars, starting from cloud services, legal advisers and sendgrid. besides, sparklabs is the first korean member of global accelerator network (gan), which means that our startups also can be provided with various benefits of gan (main statistics of worldwide seed accelerators (2017)). for today, techstars ventures have venture capital in the amount of 400 million dollars. baltic journal of economic studies 293 vol. 4, no. 5, 2018 the fund techstars ventures 2017 also has 265 million us dollars and now they invest the amount of 150 million us dollars from the third fund (according to their website). they invest in the companies-accelerators, established by graduates-accelerators. figure 1 shows the total market capitalization of the analysed enterprises, specialized in startup acceleration and incubation in 2017. we can see quite significant differentiation among the analysed enterprises, specialized in startup acceleration and incubation in terms of market capitalization. thus, y combinator and techstars have the determinant amounts of capitalization that, in our opinion, is caused by the fact that they were the first institutions of that type. in general, as we can see from the author’s analysis, startup accelerators of the usa prevail on the market for innovations and startups. for instance, among the analysed enterprises by the level of capitalization, the european and asian enterprises have on average from 200 to 500 million dollars. however, startup accelerators from the usa have higher indicators on account of running certain enterprises after their launch. the last indicator within the framework of the author’s analysis is differentiation by the number of sectoral areas under consideration. it should be noted that the emphasis in today’s general trends of venture investment is laid on sectoral specialization. although, among the analysed institutions, we can see quite insignificant differentiation of project, which they admit (not exceeding 8 projects). at the same time, the basic today’s trend is an enhancement of the role of the enterprises, specialized in startup incubation and acceleration. figure 2 shows the general results of cluster analysis related to approaches in the positioning of certain institutes of startup acceleration and incubation in 2017. using this method we have obtained a hierarchic structure of clusters with the above-stated characteristics, which allows identifying homogeneous formations – “clusters”. as we can see in figure 2, three cluster formations can be identified at the distance level from 2.5 to 5. 10 institutions, which undoubtedly occupy a significant segment on the global market, have grouped into cluster no. 1: start-up chile, china axelerator, fdi.asia, seedcamp, boomstartup, growlab ventures, betaspring, angelpad, the brandery, springboard. the peculiar features of institutions of the first cluster, distinctive from the other cluster formations, are represented, first of all, by their geographic location in the developing countries. modern characteristics of institutions of this cluster consist in the insufficient infrastructure, which is demonstrated by relatively low indicators of political and economic stability, ease of doing business, costs on legal proceedings and high inflation processes. the above-listed aspects, jointly with a certain outflow of high skilled personnel, create a precedent when the indicator of total amount of registered projects (% from the number of applications) is much higher than in the second and third clusters. thus, for instance, start-up chile (sup) is a typical representative of the first cluster start-up chile (sup). it is generally available startup accelerator, created by the chilean government for high-capacity entrepreneurs to launch their startups and use chile as a basis. as a rule, projects raise 90% of the total amount of costs on program, as well as by the way of reimbursing the costs or as advance payment. however, project startup should provide 10% of the rest of money. chilean applicants may submit an application for additional 10 million of chilean peso if they live abroad and obtained master’s degree from a leading foreign university. although, 10% of share in the project is the highest indicator among the analysed 0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 capitalization (billion dollars) figure 1. the market capitalization of the analysed enterprises specialized in startup acceleration and incubation in 2017 baltic journal of economic studies 294 vol. 4, no. 5, 2018 clusters. y combinator and techstars are two institutions, which today have the largest audience of investors and startups, which have involved or wish to get involved in venture investment, have grouped in the cluster no. 2. first of all, basic characteristics of the enterprises of the second cluster are represented by the amount of initial investment, which is much more than in the first and third clusters. such a context is possible on account of considerable capitalization. these two institutions are the first formations of this type. this, y combinator has been founded in 2005. from 2005 to 2008 one program had been conducted in cambridge, massachusetts, and another one had been conducted in mountain-view, california. in january, 2009 y combinator announced that cambridge program would be closed and all further programs would be conducted in the silicon valley. in 2009 sequoia capital has carried out investment round in the amount of 2 million us dollars that were invested in y combinator. it will enable this company to invest in about 60 companies per year, in contrast to their previous investment in 40 companies per year (main statistics of worldwide seed accelerators (2017). techsters also has the characteristics, similar to y combinator. sturtaps have an opportunity to submit an application to take part in the program of techstars, and their viability will be evaluated by the managing director of the program that they apply for as well as by the screening committee, consisting of diverse members of techstars network. in exchange to 6% of ordinary shares, every company, admitted by techstars, receives 20,000 dollars; plus a convertible note in the amount of 100,000 dollars, access to techstars network for a lifetime, more than one million dollars of benefits and three-month program of accelerators, which is conducted in three stages (main statistics of worldwide seed accelerators (2017)). cluster no. 3 contains a group of three institutions, which, in contrast to the others, have higher specialization and also put emphasis on their positioning in less number of projects, which are admitted to acceleration program. the third cluster of the institution is characterized by a less preparatory period. thus, the analysed enterprises of the first and second cluster have 90 days of acceleration program in average, although the enterprises of the third cluster conduct the acceleration program during 70 days (main statistics of worldwide seed accelerators (2017)). one of the typical representatives of the third cluster is alphalab – national startup accelerator, founded in 2008. as a chartered member of the global accelerator figure 2. basic characteristics of approaches in the positioning of certain international institutions of startup acceleration and incubation in 2017 baltic journal of economic studies 295 vol. 4, no. 5, 2018 network (gan) and one of the first ten accelerators of the entire world, alphalab has invested and collaborated with 113 companies, including 12 acquired companies. alphalab network consists of leading entrepreneurs, investors and mentors in the pittsburg region and other countries. success stories, related to startups in the highly-developed companies, include nowait (acquired by yelp), jazz, black locus (acquired by home depot), shoefitr (acquired by amazon) and the zebra. alphalab is also a part on the startup stage of a seed fund, which has invested over 50 million ud dollars in more than 160 companies, which jointly raised over 1.3 billion dollars. these companies include modcloth, 4moms, civic science, mobile technologies (acquired by facebook facebook) and showclix. in general, analysing structural elements of the enterprises of the third cluster, it should be noted that, according to their characteristics, these enterprises have a more selective approach to consideration and acceleration, as well as incubation of new projects. in order to compare the difference in approaches to the above-stated process, we have calculated a configuration of the distances of cluster formations using the method of к-means (see figure 3). figure 3 shows that, despite the fact that all clusters have quite different approaches to positioning, the total financial return in all the analysed clusters is quite similar. 4. conclusion therefore, in the course of clusterization of the enterprises, specialized in the acceleration of scientific and technological entrepreneurship, we have justified the indicators, which demonstrate the key system parameters of the positioning of the largest ones by capitalization and other quantitative and qualitative indicators. first of all, it is quantitative and qualitative methods and forms of startup investment, which make it possible to optimize and enhance the effectiveness of the startup phase of acceleration or incubation. secondly, it is the quantitative characteristics of share in the project (%), which enables us to determine the extent of the developers’ readiness to alienate a certain part of the project. thirdly, it is a total amount of the registered projects (% of the number of applications), which determines general principles and methods for selection and its impact on final results. fourthly, it is a number of successful projects. this indicator clearly determines which projects have a capacity for effective exit and positioning. fifthly, it is an amount of time, spent on acceleration, which enables us to understand the difference between the existing training programs and to single out effective elements. sixthly, it is the level of capitalization, which makes it possible to justify the impact of the amount of capitalization on final incomes. seventhly, it is a quantity of sectoral areas under consideration. this indicator is also highly relevant in terms of understanding of the existing trends in effectiveness of organizing the process of acceleration or incubation. justification and calculation of the above-stated indicators enabled us to conduct cluster analysis, using the approaches to functioning of the enterprises, specialized in acceleration and incubation of venture businesses, as well as to develop the following classification: accelerators and incubators-followers, which have a distinctive feature of insufficient infrastructure, demonstrated by relatively low indicators of political and economic stability, ease of doing business and, as a result, they are characterized by significant share in projects, undergoing acceleration or incubation, which is much higher than in other clusters; specific accelerators and incubators, which have larger specialization, and they also lay emphasis in their positioning on the higher level of readiness of the projects, which are admitted to the acceleration program along with a very slight period of acceleration. based on the developed configuration of the distances of cluster formations using the method of к-means in approached-to-startup acceleration and incubation process, we have found out that, despite the fact that all clusters have quite different approaches to positioning, the total financial return in all of the analysed clusters is quite similar. therefore, further analysis of the most effective accelerators and incubators is of considerable interest in terms of finding the best practices in the area of venture business acceleration. x1 x2 x3 x4 x5 x6 x7 -4 -3 -2 -1 0 1 2 3 cluster 1 cluster 2 cluster 3 figure 3. the configuration of the distances of cluster formations using the method of к-means in approaches to startup acceleration and incubation process baltic journal of economic studies 296 vol. 4, no. 5, 2018 references: ganamotse, g. n., samuelsson, m., abankwah, r . m., anthony, t., mphela, t. (2017). the emerging properties of business accelerators: the case of botswana, namibia and uganda global business labs. journal of entrepreneurship and innovation in emerging economies, 3(1), 16-40. dellermann, d., lipusch, n., ebel, p., leimeister, j. m. (2017). building your iot ecosystem: proposing the hybrid intelligence accelerator. dasilva, c. m., gurtner, p. (2017, january). accelerators: an assessment of acceleration models. in academy of management proceedings (vol. 2017, no. 1, p. 12198). academy of management. gonzalez-uribe, j., leatherbee, m. (2017). the effects of business accelerators on venture performance: evidence from start-up chile. the review of financial studies, 31(4), 1566-1603. shane, s., nicolaou, n. (2017). exploring the changing institutions of early-stage finance. journal of institutional economics, 1-17. yakowicz, w. (n.d.). the 15 best startup accelerators in the u.s. retrieved june 13, 2018, from: https://www.inc.com/ will-yakowicz/the-15-best-startup-accelerators-in-the-us.html graham, paul ( january 2009). “california year-round”. y combinator. retrieved june 13, 2018, from: http://old.ycombinator.com/ycca.html manalac, kat (2016). “yc office hours in 11 countries this fall”. y combinator posthaven. retrieved june 13, 2018, from: https://blog.ycombinator.com/yc-office-hours-in-11-countries-this-fall “techstars alumni companies”. techstars (2017). retrieved june 13, 2018, from: https://www.techstars.com/ companies/ the bic – business and innovation centre (2017). retrieved june 13, 2018, from: http://bicminho.eu/what-isa-eu-bic/?lang=en main statistics of worldwide seed accelerators (2017). retrieved june 13, 2018, from: https://www.seed-db.com/ accelerators sazonets, i. l., gladchenko, a. y. (2011). dialectical unity of globalization and regionalization processes within world economy. actual problems of economics, (126), 66-72. baltic journal of economic studies 100 vol. 6, no. 1, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: lpanova@i.ua 2 f.g. burchak scientific-research institute of private law and business of national academy of law sciences of ukraine, ukraine. e-mail: makhinchuk@gestors.com.ua doi: https://doi.org/10.30525/2256-0742/2020-6-1-100-104 the civil law nature of electronic money liudmyla panova1, vitalii makhinchuk2 abstract. the purpose of the article is to examine the civil law nature of electronic money. the subject of the research is the features of the civil law nature of electronic money. methodology. research methods are chosen based on the object, subject and purpose of the study. the study used general scientific and special methods of legal science. thus, the analysis and synthesis method as well as the logical method were used to formulate a holistic view on electronic money, their features and legal nature. the logical-semantic method was used to establish the meaning of the concepts “electronic money”, “non-cash money”, “payment instrument”, “electronic payment instrument”. the comparative method was used when analyzing scientific categories, definitions and approaches. the legal modeling method was applied to formulate the author’s definition of the term “electronic money”. results. the article generalizes scientific views on the civil law nature of electronic money. a distinction has been made between electronic money and currency unit, non-cash money and the right to claim. as the result it has been established that electronic money is the monetary obligation. practical implication. the study should assist in developing the unified approach to the issue of the civil law nature of electronic money. value/originality. as the result of the study the author’s definition of the concept “electronic money” with regard to its civil law nature has been proposed. key words: electronic money, civil law nature, currency unit, payment instrument, cash, non-cash money, issuer. jel classification: e42, k19 1. introduction the current stage of market economy development is characterized, in particular, by the emergence of a large number of new forms and methods of calculations. the development of information technologies plays an important role in this process, many of which are being used extensively both in the banking and trade. at the same time, the demand for such information technology is increasing, as various forms of e-commerce become more and more popular, i.e. the ways of doing business through the internet or otherwise, which eliminates or minimizes the personal contact of an entrepreneur with contractors and consumers. as a result, a wide range of ways to accept payments for goods, works and services, and to obtain appropriate cash is available to entrepreneurs. one of the most innovative methods of calculations, which is most widely used and characterized by rapid development, is electronic money. despite the fact that electronic money emerged in the 1990s, they entered into circulation only in the early 2000s, and the interest in them has been steadily increasing every year since then. thus, as of 2018, the volume of e-money issued in ukraine amounted to 83.2 million uah, the volume of transactions with electronic money exceeded 7 million uah, and the amount of electronic money on e-wallets reached 62 million uah (official site of the national bank of ukraine). until recently, the procedure for conducting electronic money transactions was virtually unsettled. thus, the concept of “electronic money” appeared in the legislation of ukraine only in 2010. since then, a significant number of legal acts regulating the issue of non-cash payments have been amended. however, despite the legislator’s efforts to regulate this type of public relations, there is currently a lack of research on the legal nature of electronic money and the legal regime associated with it. besides, in order to harmonize national legislation with that of the european union, the national bank of ukraine has proposed to update the procedure for conducting electronic money transactions, which makes such study even more relevant. 2. presentation of the main material let us begin our study on a definition of the concept of “electronic money”. in particular, paragraphs 7 and 8 of the directive 2009/110/ec of the european parliament baltic journal of economic studies 101 vol. 6, no. 1, 2020 and of the council dated september 16, 2009 (hereinafter referred to as the eu directive), governing the single market for e-money and the development of this sector, state that it is appropriate to introduce a clear definition of electronic money in order to make it technically neutral. that definition should cover all situations where the payment service provider issues a pre-paid stored value in exchange for funds, which can be used for payment purposes because it is accepted by third persons as a payment. the definition of electronic money should cover electronic money whether it is held on a payment device in the electronic money holder’s possession or stored remotely at a server and managed by the electronic money holder through a specific account for electronic money. that definition should be wide enough to avoid hampering technological innovation and to cover not only all the electronic money products available today in the market but also those products which could be developed in the future” (directive 2009/110/ec of the european parliament and of the council dated september 16, 2009). the committee on payments and settlement settings (now the committee on payment and market infrastructures), the international standard setter for payment systems, defines electronic money (e-money) as “value stored electronically in a device such as a chip card or a hard drive in a personal computer” (cpss, 2003). in ukraine, the legal regulation of the issues related to electronic money is carried out in accordance with the civil code of ukraine, the law of ukraine “on payment systems and funds transfer in ukraine” dated april 05, 2001, the law of ukraine “on e-commerce” dated september 03, 2015, resolutions of the board of the national bank of ukraine “on amendments to certain regulations of the national bank of ukraine on regulation of issue and circulation of electronic money” no. 481 dated november 4, 2010, approving the regulation on electronic money, regulations of the board of the national bank of ukraine “on transactions with the use of electronic payment methods” no. 705 dated november 05, 2014. according to article 15 of the law “on payment systems and funds transfer in ukraine” (hereinafter referred as to the law) electronic money is a unit of value stored on an electronic device, accepted as a means of payment by a person other than the person who issues it, and is a monetary obligation of that person, whether in cash or non-cash form of money. thus, from the content of the above definition it becomes obvious that electronic money is of dual nature, i. e., on the one hand, it is a means of payment, and, on the other hand, it is an obligation of the issuer, which indicates the presence of a civil legal component in the legal nature of electronic money. there are several scientific approaches to defining the civil law nature of electronic money, according to which electronic money is: 1) the form of non-cash form of money; 2) monetary obligation of a bank; 3) the right to claim; 4) the counterpart for security; 5) the equivalent of money. the third and the fourth approaches are essentially the same, because securities are inherently property rights (shimon, 2015). regarding the recognition of electronic money as the equivalent of money, the following should be noted. according to article 192 of the civil code of ukraine the legal payment instrument, which is obligatory for acceptance at nominal value throughout ukraine, is the hryvnia, the currency of ukraine. according to part 3.3, article 3 of the law the hryvnia as currency is the only legal tender in ukraine, which is accepted by all physical and legal persons without any restrictions on the territory of ukraine for carrying out transfers and payments. the national bank of ukraine monopolizes the issue of the national currency of ukraine and organizes cash circulation (section 2, part 1, article 7 of the law of ukraine “on the national bank of ukraine”). electronic money is issued in exchange for cash or non-cash money by the banks other than the national bank of ukraine, which, prior to their issue, have agreed the rules on the use of electronic money with the national bank of ukraine in the manner prescribed by the normative legal act of the national bank of ukraine (article 15 of the law). therefore, as it is stated in the letter of the national bank of ukraine no. 25-112 / 6750 dated june 07, 2013, “electronic money cannot be equated with the status of the currency of ukraine, since it is issued by the banks and has its limitations on distribution and operations within a limited category of persons… the currency of ukraine – the hryvnia – is the only legal payment instrument. that is, the payment instrument exists in the form of monetary unit”. electronic money cannot also be an electronic means of payment, since the laws of ukraine distinguish between the terms “electronic payment instrument” and “electronic money”. thus, paragraph 1.14, article 1 of the law states that “electronic payment instrument” is the payment tool that provides its holder with the possibility of using payment device to get information about the proper holder of money and initiate their transfer. the payment instrument is the tool of the particular form on paper, electronic, or other data storage device used to initiate transfers. payment instruments include transfer documents and electronic means of payment (section 1.31, article 1 of the law). the definition of “electronic money”, which we have considered above, is given in article 15 of the law. therefore, electronic money, as we have defined, is neither a payment instrument nor an electronic payment instrument, since it does not fall under any of the required characteristics. since the concept of “means of payment” is not enshrined in the legislation baltic journal of economic studies 102 vol. 6, no. 1, 2020 of ukraine, k.r . petrofanova assumes that electronic money should be understood as means of payment to repay monetary obligations, which arise for one reason or another (petrofanova, 2016). the second approach to determining the nature of electronic money is that electronic money is a form of non-cash money. however, as we have already defined, the hryvnia as the currency of ukraine is the only legal tender in ukraine. the funds also exist in cash (bank notes) or non-cash form (bank accounts). therefore, non-cash money is a universal means of payment, whereas the circulation of electronic money is limited by a particular payment system. the issuer of money is exclusively the national bank of ukraine, whereas the issue of electronic money is performed by the bank, which, prior to the beginning of their issue, is obliged to agree the rules on using electronic money with the national bank of ukraine in the manner established by the regulatory act of the national bank of ukraine. electronic money issue is realized by providing it to the users or commercial agents in exchange for cash or non-cash money. the issuer is obliged to ensure that the amount of electronic money issued by it does not exceed the amount of cash or non-cash money received from the users and agents (other than replenishment agent) and the amount received by the replenishment agent to be transferred to the issuer (clause 2.2 of the regulation “on electronic money”). non-cash money exists in the form of entries on the bank account, while electronic money exists in the form of records on an electronic device – a chip contained in a plastic card or other media, computer memory, etc. used to store electronic money (clause 1.3 of the regulation “on electronic money”). in this case, the amount of electronic money on non-replenishable electronic device should not exceed 4 000 uah, and the amount of electronic money on replenishable electronic device should not exceed 14 000 uah. in general, the users have the right to use electronic money to make payments using replenishable electronic device, which is available to the user up to 62 000 uah during the calendar year. the user of electronic money can be a business entity or an individual. a business entity has the right to use electronic money to pay for goods, works and services. an individual user has the right to use electronic money to pay for goods, works and services and to transfer electronic money to other individual users. a business entity has the right to receive electronic money and to present it for repayment only in exchange for non-cash funds. an individual has the right to receive electronic money and to present it for repayment in exchange for cash or non-cash money (article 15 of the law). besides, electronic money, unlike non-cash money, cannot be the subject of a credit agreement and a deposit agreement. according to articles 1054, 1058 of the civil code of ukraine there is a special entity in these relations: a bank or financial institution related to economic entities. according to the rules of electronic money circulation established by the regulations on electronic money, electronic money can be freely transferred only between individuals; business entities have the right to use electronic money only to pay for goods. consequently, financial institutions do not have the right to carry out appropriate transactions with electronic money for the conclusion of a credit agreement or deposit agreement (petrofanova, 2017). according to v.s. loshchynin (2013), the main difference between electronic money and non-cash money is not the lack of use of bank accounts, but the procedure and the moment of termination of monetary obligations when using them. first, the transfer of electronic funds is always irrevocable; its irrevocability occurs at the moment of using the electronic means of payment, which is equivalent to the inability to withdraw a payment order; secondly, at the same moment the monetary obligation of the payer to the recipient is considered to be fulfilled. s.i. shimon (2013), studying the concept of “electronic money”, notes that it, by the civil law nature, are similar to the right to claim to the issuing bank on the repayment of electronic money, which in accordance with articles 15.1, 15.4 of the law is implemented by exchanging it for cash or non-cash money. but electronic money also differs from the right to claim, and the legal relationship to its use and repayment are inherent in some features of legal relations in the provision of financial services, which in some way unites them with official money. thus, electronic money can be anonymous and repeatedly used (transmitted several times from one subject to another), excluding in that respect the right of claim, which as a subjective civil right can be exclusively identified. considering that electronic money is a claim then, as a matter of terminology, it would mean that the user has the “right to claim”. but in fact, the user has the right to request the exchange of electronic money for cash or non-cash money. besides, such an obligation of the bank is due to the fact that the electronic money came into the electronic purse of the user, that is, it became their owner. the obligation of the bank to issue money to the holder of electronic money is not an obligation of a counter property granting, which exists in obligations, in which property right to claim can be the object of legal relations. the lawmaker itself, like most scholars, supports the view that electronic money is exactly the monetary obligation, which arises on the basis of a civil contract, the agreement of two parties, under which one party – an individual or a business entity, indicated its willingness to exchange cash or non-cash money for electronic money. it is the will of an individual, or an entity, not of the issuer, unlike the issue of the hryvnia as legal payment instrument in ukraine, the exclusive right baltic journal of economic studies 103 vol. 6, no. 1, 2020 to the issue of which belongs to the national bank of ukraine, is the main condition for the issue of electronic money (petrofanova, 2016). thus, a user, who purchased electronic money in exchange for cash or non-cash money, is the owner of electronic money. from the perspective of civil law, it acts as a creditor in the obligation, in which the user assigns the right to claim to the merchant (the business entity, registered in accordance with the legislation of ukraine, which accepts electronic money as a means of payment for goods under the contract, concluded with the issuer or settlement agent) against the debtor – the issuing bank (the issuer is a resident bank that issues electronic money and takes on the obligation to pay them off ). in this case, the claim is expressed it is through electronic money, that is, there are civil and legal relations, in which there is a classic replacement of the creditor in the obligation, provided for in article 512 of the civil code of ukraine. the original creditor transfers all the rights in relation to the obligation to the new creditor to the extent and on the conditions existing at the time of transfer of these rights (petrofanova, 2016). t. lisitsa (2012) also believes that electronic money is not cash (either cash or non-cash money). electronic money transactions are accounted for as debt claims, and therefore, electronic money is an asset in the form of receivables. d. savchuk (2013) supports their views on the civil law nature of electronic money. he believes that electronic money is not a settlement in cash, but a liability, although cash and non-cash money by their legal nature can also be considered liability by their legal nature. the first one is unconditional obligation of the national bank, and the second one is the obligation of banks to the customers. i.m. plisko (2014) argues that electronic money is a tool for calculating the electronic payment system’s obligations to its customers, and the transfer of electronic money from wallet to wallet between such customers of the payment system is, in fact, the transfer of the right to claim under such obligations. based on the views of the aforementioned scientists, we came to the conclusion that electronic money is the monetary obligation of the issuer in electronic form, the accounting of which is carried out on an electronic device (a chip contained in a plastic card or other medium, computer memory etc.). 3. conclusion at present, the ukrainian scholars do not have a unified view of the legal nature of electronic money. some consider it as currency, the others see it as a right to claim to the issuer, a form of non-cash money, a monetary obligation and so on. having studied various approaches to this issue, we came to the conclusion that electronic money is the monetary obligation of the issuer in electronic form, the accounting of which is carried out on an electronic device (a chip contained in a plastic card or other medium, computer memory etc.). it should be emphasized that this issue is also debatable in the world. for example, s. lanskoy (2000) viewed this concept as a unit of account, a means of payment, a monetary document, a debt instrument, and concludes that electronic money is a debt instrument that facilitates the circulation of bank money. alan l. tyree (1999) examines electronic money as an assignment, a negotiable instrument and a contractual obligation, and leans towards the latter, as the legal analysis of payment by liability transfer that makes the most sense and which accords most closely with the practice and expectation of the parties is the contractual obligation analysis. finally, it should be noted that the definition of electronic money provided in ukrainian legislation is in line with part 2 of article 2 of the eu directive, according to which “electronic money” means electronically, including magnetically, stored monetary value as represented by a claim on the issuer, which is issued on receipt of funds for the purpose of making payment transactions and which is accepted by a natural or legal person other than the electronic money issuer. references: alan l. tyree (1999). the legal nature of electronic money. 10 jbflp, 273. retrieved from: http://www2.austlii.edu.au/ ~alan/svc-legal.html cpss (2003). “a glossary of terms used in payments and settlement systems”, report by the committee on payment and settlement systems, bank for international settlement, basle. retrieved from: https://www.bis.org/ cpmi/glossary_030301.pdf directive 2009/110/ec of the european parliament and of the council of 16 september 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending directives 2005/60/ec and 2006/48/ec and repealing directive 2000/46/ec (text with eea relevance). retrieved from: https://eur-lex.europa.eu/legal-content/en/txt/?uri=celex%3a32009l0110 lisitsa, t. (2012). elektronni hroshi ta internet-torhivlia [electronic money and online trading]. balance sheet, 47, 37–41. (in ukrainian) loshchynin, v. s. (2013). pravovaya priroda elektronnyih denezhnyih sredstv i struktura pravootnosheniy pri raschetah s ih ispolzovaniem [the legal nature of electronic money and the structure of legal relations in the calculation with their use]. phd dissertation. moscow. (in russian) baltic journal of economic studies 104 vol. 6, no. 1, 2020 official site of the national bank of ukraine. retrieved from: https://old.bank.gov.ua/control/en/publish/ article?art_id=125412&cat_id=22918283 on payment systems and funds transfer in ukraine: law of ukraine of april 05, 2001 no. 2346-iii. bulletin of the verkhovna rada of ukraine, 29, 137. (in ukrainian) petrofanova, k. r . (2016). osoblyvosti pravovoi rehlamentatsii elektronnykh hroshei v ukraini: tsyvilno-pravovyi aspekt [features of legal regulation of electronic money in ukraine: civil aspect]. theory and practice of law, 2. retrieved from: http://nbuv.gov.ua/ujrn/tipp_2016_2_6 (in ukrainian) petrofanova, k. r . (2017). porivnialna kharakterystyka elektronnykh, hotivkovykh ta bezghotivkovykh hroshei [comparative analyses of electronic, cash and non-cash money]. problems of legality, 139, 86–94. (in ukrainian) plisko, i. m. (2014). osoblyvosti vidobrazhennia v bukhhalterskomu obliku rozrakhunkiv elektronnymy hroshyma [the features of visualization of electronic money payments in accounting]. bulletin of the chernihiv state technological university. series: economic sciences, 2, 230–235. (in ukrainian) pro elektronni hroshi: postanova pravlinnia natsionalnoho banku ukrainy vid 25 chervnia 2008 r. № 178 [on electronic money: regulation of the board of the national bank of ukraine of june 25, 2008 no. 178]. retrieved from: https://zakon.rada.gov.ua/laws/show/z0688-08 (in ukrainian) pro natsionalnyi bank ukrainy: zakon ukrainy vid 20 travnia 1999 r. № 679-xiv [on the national bank of ukraine: law of may 20, 1999 no. 679-xiv]. bulletin of the verkhovna rada of ukraine (bbr), 1999, no. 29, art. 238). (in ukrainian) savchuk, d. (2013). elektronni hroshi – ne hroshi? [electronic money – not money?]. retrieved from: http://www.kyivpost.ua /opinion/op-ed/electronic-groshi-ne-groshi-35984.html (in ukrainian) serge lanskoy (2000). the legal nature of electronic money. revista de análisis del bcb, 3(2), 97–119. shchodo vyznachennia okremykh poniat: lyst natsionalnoho banku ukrainy vid 07.06.2013 r. № 25-112/6750 [concerning the definition of certain concepts: the letter of the national bank of ukraine dated of june 07, 2013 no. 25-112/6750]. official site of the verkhovna rada of ukraine. retrieved from: http://law3.rada.gov.ua/laws/ show/v6750500-13 (in ukrainian) shimon, s. (2015). elektronni hroshi: forma hroshei chy mainovi prava vymohy? [electronic money: a form of money or property rights claims?]. legal ukraine, 9, 36–41. (in ukrainian) shimon, s. (2013). o grazhdansko-pravovoy prirode elektronnyih deneg [on the civil law nature of electronic money]. science. society. state, 3(3). retrieved from: https://cyberleninka.ru/article/n/o-grazhdansko-pravovoyprirode-elektronnyh-deneg/viewer (in russian) tsyvilnyi kodeks ukrainy: zakon ukrainy vid 16 sichnia 2003 r. № 435-iv [civil code of ukraine: law of ukraine of january 16, 2003 no. 435-iv]. bulletin of the verkhovna rada of ukraine, 40–44, 356. (in ukrainian) baltic journal of economic studies 88 vol. 2, no. 1, 2016 corresponding author: 1 department of administrative management and alternative energy recourses, vinnitsia national agrarian university. e-mail: onyshchukyulia@mail.ru the development strategy of the sugar industry in the context of european integration of ukraine yuliya onyshchuk1, vinnitsia national agrarian university, ukraine abstract. the main problem of the ukrainian economy today is the total loss of production potential. losing production, the country becomes an outsider in the world economy, “falls out” of the system of international division of labour, giving leadership in the production of traditional goods for it to countries with lower benefits, but more civilized approach to production. one of these traditional products, which have always been “calling card” of ukraine is sugar. methodology. the basis for the study of the sugar industry, we have chosen a systematic approach, in which the industry is seen as complex, complete system structural elements, united by a common purpose. at the same time, then the sugar industry is food processing subsystem, part of the process and part of agriculture. research industry as system and component of a higher order corresponds to the need to maximize the efficiency of its development. the development of the sugar industry in ukraine should not be a simple transition from one system to another as and complex multifactorial process that represents the law of transition of quantitative changes in quality. implementation of the main goal of the sugar industry in a dynamic environment is possible only if the selection and implementation of effective strategies must be built into the strategy of agricultural development and national economic strategy. therefore, the subject of our research are theoretical and applied aspects of effective development of the sugar industry of ukraine and the purpose of research – strategy development sector in terms of european integration. results. under the development strategy of the sugar industry, we understand the unique set of actions and decisions on how to achieve development with minimal energy system. we believe that the strategic goal should be a creation of modern, technically perfect, economically efficient and socially important sugar industry, able to produce competitive products, satisfy the full domestic demand for sugar, to ensure the formation of the state reserve and expand the export base. to achieve this, the industry has a number of assumptions that are regarded as its capabilities, as well as a number of restrictions that impede the development process can significantly influence the content of the strategy or the process of implementation and require removal. together they form the strategic position of the sugar industry, which today we can characterize as extremely weak. achieving strategic objective involves the development and implementation of a package of measures which we have divided into three areas: restructuring measures, technical and technological modernization of the industry, diversification of production activities and measures of organizational and economic modified sugar production. value/originality. the implementation of the proposed measures will overcome the crisis on the first phase, on the second  – stabilize production and create conditions for increasing it in the future and, finally, ensure economic growth in the long term. key words: sugar industry, sector, strategy, development, modernization, restructuring. jel classification: l66, m20, o1 1. introduction the nowadays critical situation of the sugar industry in ukraine requires urgent action to tackle the crisis, stabilize the industry and economic growth in the long term. the only effective tool to solve this problem is to develop an effective, science-based strategy for recovery and further development of sugar industry. the strategy is a practical activity, a set of unique actions that achieve goals based on the rational use of resources and subjected to constant impact of changes in the environment. the unique strategy is a strategic vision for the development of the sugar industry in ukraine considering the situation in the world and available potential that still remains. without a sound, effective strategy for industry development trajectory remains unclear, and its prospects – unpredictable. the complexity of the current situation depends not only on the deep decline of sugar in ukraine, but also a high degree of instability of national and world economy, baltic journal of economic studies 89 vol. 2, no. 1, 2016 which makes high demands on the quality of strategy for its flexibility and adaptability, requires more attention to details. in other words, uniqueness is the main feature of the development of strategy of the sugar industry in ukraine. it must neutralize threats, and use the potential, and enhance weaknesses of the industry. it’s very relevant under conditions of deepening european integration, when the requirements for effective activity, competitiveness, technical and technological level of sugar ukrainian grow repeatedly. in view of the main features of the sugar industry, which not only consists of several subsystems and components, and itself is a subsystem of agriculture, its development strategy must be consistent and fit into the overall strategy of agricultural development of the country. therefore, the subject of our research are theoretical and applied aspects of effective development of the sugar industry of ukraine and the purpose of research – strategy development sector in terms of european integration. 2. the aims and objectives of the strategy the process of developing a strategy is a sequence of stages, the main ones are: defining the mission field, formulating strategic goals and specification of a subgoals, objective analysis of the possibilities and limitations justify actions and choices of alternatives that achieve the strategic goal, development strategy implementation mechanism. the mission of the sugar sector in ukraine is determined by its traditional role in the social and production needs of the population and food industry in one of the most important consumer basket of food – sugar. talking about strategy of the development of the industry, while forming strategic goal should focus on a desired result of this process, the achievement of which ultimately clearly characterize the efficacy of the strategy. thus, the strategic goal of development is to create a modern, technically perfect, economically efficient and socially important sugar industry, able to produce competitive products, satisfy the full domestic demand for sugar, to ensure the formation of the state reserve and expand the export base. achieving the strategic goals ensured the consistent implementation of the objectives of lower level, including: – overcoming the crisis in the sector; – stabilization of production and creating conditions for its extension in the future; – ensuring sustainable economic growth. decomposition of strategic objectives allows to specify the tasks facing the sugar industry, and outline time horizons, defining priorities and future ones. as optimality criteria by which the estimated impact of the objectives in the first case should be selected to minimize losses in the second – break-even condition, and the third – the maximization of profit for the current state of the sugar market and existing facilities industry. 3. the possibilities and limitations the probability of achieving the strategic goal primarily depends on available opportunities and constraints that influence the effectiveness and efficiency of development strategy. available in development potential can be used as the starting point of exit from the crisis and ensure future growth, it includes: – stable demand in the domestic market; – inexhaustible potential for increasing the resource base; – the possibility of a comprehensive recycling and waste management, development of modern modes of production, including energy; – existing technical potential of the sector; – formed human resources; – infrastructure software industry; – the existing institutional framework. throughout the history of the functioning of the sugar industry in ukraine demand for sugar showed more or less stable trend and, despite reducing its volume during the last decade primarily due to depopulation principle fall has not occurred. given the stability of domestic demand can consider it as a primary factor in the rationale for the development of the sugar industry in ukraine. in support of this possibility evidenced by the intense competition on the international market by cane sugar, as well as the manufacturers of more expensive products that are subsidized by their countries, high transport costs of imported sugar – all these factors make ukrainian sugar producers a competitive advantage in the domestic market in the foreseeable future. in addition, as noted in chapter two, ukraine has unique conditions for self-sufficiency of sugar beet, which can be considered an absolute competitive advantage not only in domestic but also in the international market of sugar. creating appropriate incentives for the development of sugar beet can provide almost unlimited resources. the sugar industry provides a range of sectors, not only sugar, but its production waste, which is a valuable raw material, such as for alcohol industry, animal husbandry, agriculture, energy, mining and others. the most promising direction using waste sugar production today recognized an industrial production of high-octane additives, bioethanol, biogas and organic fertilizer. using these capabilities not only save the sugar industry in our country, and give it a new impetus to development. in particular, brazil, the world leader in the production of sugar, recycles only about half grown sugar cane, and the rest used to produce bioethanol. thus the ratio of sugar cane used to solve food problems and energy problems are variable parameter that depends on energy prices and sugar. most of brazil’s sugar mills have the capacity to produce both sugar and ethanol, but because it is the only exporter which can diversify within a year 5-10% of the capacity for processing sugar or ethanol for processing in response to changes in the profitability of these two products. this makes it flexible enough and, baltic journal of economic studies 90 vol. 2, no. 1, 2016 depending on the dynamics of markets sugar and ethanol can determine the scale of production and exports of both goods. this opportunity can be used in ukraine. features of the sugar industry defined as technical potential, formed over the years, and although today depreciation most factories reaches 55-60%, and fuel, raw materials, auxiliary materials per unit of production higher than those in developed european countries accumulated potential can not be ignored – it is the base from which stabilize the sugar industry and its future development. in addition, the industry is also positive examples. this is particularly powerful in cherkasy region and one of the largest in ukraine palmirskiy sugar factory, which is produced daily to 18 thousand. tons of sugar, which meet the highest quality standards and are supplied to companies focused on the use of modern food technology. human resources of industry are represented by technology experts, economists, managers and others. he also formed years of experience sugar industry, preparation of raw materials, the production process and so on. of course, reducing the attractiveness of the industry, incentives to improve the quality of work and the deepening of disparities in pay led to the “washout” of specialists and flow them in other areas, however, subject to change trends rely on their return, professional development is possible. despite the decline, the sugar industry has the appropriate infrastructure to ensure represented warehouse, repair, tool, energy management, mainline facilities, communications networks, transport, communications, specialized business services sectors, etc., allowing it to function smoothly within the existing system, at least we can talk about mutual compliance and substantive servicing subsystems. for a long time formed the “rules of the game” in the industry and the sugar market, a set of institutions and institutions took shape in certain institutional matrix that regulates relations in the system of production, sale and consumption of sugar and waste sugar production, because existing institutional environment can be considered a prerequisite that provides some possibility of recovery and further development of the industry, because it is through the regulatory framework, quotas, licensing and standardization implemented the vast majority of organizational, technological and administrative measures. on the existing institutional framework could be based on the initial stage and transform it into a process of transformation itself adequately to changes in the sugar industry and the conditions of its environment. along with the opportunities and reserves, which the industry has for its development there are a number of limitations that could significantly affect the content or the process of strategy implementation. the most significant constraints for the sugar industry are: – technological backwardness and obsolescence of production; – high specific resource consumption and low efficiency; – inefficient production management, poor manufacturing process and ineffective regulation of the sugar market; – the lack of scientific and technological progress and a low level of innovation; – a source of social tension; – lack of financial resources in the sector and its low investment attractiveness; – lack of integration, weak linkages between producers of sugar beet, sugar factories and scientific institutions (danylyshyn, strashynska, 2008). technological backwardness, outdated equipment is not a major obstacle in the development of the sugar industry in ukraine. while the majority of the world uses sophisticated equipment, advanced technologies of deep processing of sugar beet, in our country the majority of sugar mills “celebrated” his century, the share of modern equipment is less than 30%, the rest – is extremely outdated. this is why sugar refineries are now three or even two weeks a year, which is extremely unprofitable. hence the high cost of ukrainian sugar, its discrepancy with european quality standards, low competitiveness, high loss of electricity, heat, water and, as a consequence – loss of almost all of the industry. the share of fuel and energy cost of processing 1 ton of sugar beets in the vast majority of ukrainian plants reaches 35-40%, and its share in the cost of sugar – about 30%, in some companies, this figure is even higher. the cost of fuel equivalent to the mass of sugar beet in ukraine in general make 4,5-5%, while the sugar factories of europe specific consumption of fuel equivalent to the mass of beets does not exceed 2,5-3,0% (lyskov, 2000). some factories are faced with the problem of reconstruction energy efficiency because of an 80th century. (increased capacity from 3 thousand tons to 6 thousand/day), which at that time was quite acceptable because of the low cost of energy. today, businesses operate with the withdrawal of syrup, which accounted re-heated, cleaned, boil – it significantly increases the energy consumption and production costs and reduces efficiency. low level of manufacturing process is a result of significant downtime, loss of raw materials and finished products, reduced productivity, inconsistencies in the various stages of production time and more. as external constraints can be considered failure “rules” from the side of the state, creating instability in the industry and reduces the degree of reliability for investors and participants. ineffective regulation of destabilizing the manufacturer increases its risks, and reduces the mediumand long-term forecasts and plans, eliminates the motivation to develop. an important limitation of the industry is insufficient (almost no) introduction of highly efficient equipment and modern advanced technologies, new materials, information technology and so on. the trend towards the closure of sugar factories, most of which are located in rural areas creates a number of social problems: mass loss of public jobs, reducing its income and baltic journal of economic studies 91 vol. 2, no. 1, 2016 level of solvency, the destruction of infrastructure created in the zone operation of the factory, including social, etc. moreover, in addition to usually single employer, sugar factory is a source of heat and electricity for residents of rural areas, stopping one or more factories will cause social strain within certain areas, but the massive closure boom can cause social or even social collapse. the low level of efficiency associated with a high specific resource consumption and inefficient management and marketing, is a major cause of lack of financial resources needed not only of current activities, but also for development. at the same time, unstable financial state of the industry is causing distrust of the banking system, eliminating its main source of borrowed funds of sugar makes unattractive for investors, thereby closing the “thing devoted circle of poverty”. private investors will provide capital only when they are confident of a competitive return on their investment (danylyshyn, strashynska, 2008). this problem has deep roots, for decades lacked financial resources and investment from happening in the required amounts, which gave rise to the problem of technical backwardness, sparing refineries capabilities to implement measures for technical re-equipment and repair. insufficient integration of sugar company’s sugar beet producers significantly worsens the situation first on a background of continuous decline in economic motivation, for growing sugar beets in the second. the result is an increase in crop beet by sugar plants, and although in the short term it is output and solves the problem of the survival of the sugar industry, but in the future may be destroying factor for agriculture, through modern circumstances forced to violate the rotation, moving on less expensive and more profitable crops. as pointed valiavska s.m. and prudka e.a., this approach does not solve the problems of the industry, as in any country except ukraine, the manufacturer alone does not grow beets for their needs and not deliver them for recycling. this involved farmers and agricultural producers. the state establishes a quota and price of raw materials grown under this quota. thus, there is no excess production, prices remain stable and balanced. 4. the system of practical measures the set of capabilities and limitations of the sugar industry form a picture of the sector’s strategic position at the present stage, we can characterize as extremely weak. such a situation requires the development and implementation of complex technical and technological, organizational, economic and administrative measures aimed at improving efficiency and resource, industrial, institutional, commercial and social functional subsystems sector. to achieve the strategic goal in real economic conditions successfully, it is necessary to develop and implement effective integrated and flexible system of practical measures of the sugar industry, which can be divided into three areas: – restructuring and technical and technological modernization of the sector; – diversification of production; – organizational and economic modified sugar production. the main objectives of these groups of measures is to stabilize production with minimal resources and creating prerequisites for its increase in the future, the financial recovery of the industry, to ensure stable profitability producers to reduce production costs and ensure its competitiveness both in the domestic and foreign markets, achieving full balance production capacity of raw materials, infrastructure and social sphere surrounding areas. given the need to implement sub-strategic goal of the sugar industry, providing a gradual transition from the industry crisis economic growth, a set of measures should logically reflect this process, reflecting alternative development opportunities and objective goals. the availability of alternatives makes strategy more flexible and adaptable – to change the value and power of influence of various factors on the availability of alternatives allows the field without much loss to adjust their behaviour or change the path of development. it should be emphasized that the process of modernization of the sector was obviously the wrong way, all the efforts and resources directed to “intensive care”, with often inefficient factories for restoration, repair, partial technical improvements, etc. – thus the industry distanced from the progressive development. instead the situation that characterizes the state of the industry and market conditions require radical restructuring, both territorial and functional sugar industry in ukraine, and if we abandon this path, our country will lose one of its traditional industries, hitting a dependence on imports, losing a source of income for workers, employers, and for the budget against the backdrop of the general economic crisis will cause a negative multiplier effect, causing a reduction in the chain of production and consumption in the macroeconomic scale. no alternative restructuring of sugar in modern conditions and international experience proves, western european countries put out of operation thin, unprofitable and unpromising businesses, reconstructed, promising increased capacity and received efficient sugar industry. and the experience of these countries shows the same gradual technical adjustment as rapid changes in the structure of the sugar industry in ukraine is not only impossible financially and technically, but also threaten social explosion. that is why our country needs its own unique program of transformation of the sugar industry, which consists of successive stages and should be implemented gradually in view of the difficult economic situation and industry, and agriculture, and the country as a whole. thus, in the first block, in accordance with the principle of consistency, should take measures: baltic journal of economic studies 92 vol. 2, no. 1, 2016 – gradual decommissioning wasted low sugar factories; – technical reconstruction and modernization of the industry by raising technical, technological and organizational level of production. it must be emphasized that the initial focus should be on those parts of the process where it is possible to obtain the greatest effect  – as in saving resources, including energy, and to obtain additional revenue through, for example, deep and complex processing of raw materials, improve the quality of the final and intermediates etc. – restructuring the industry through consolidation and concentration of production capacity increase for companies that provide effective production of products, raw balancing zones and production capacity. since the process of closure of inefficient enterprises already happening naturally (in 1990 employed 192 factories, in 2014 – 46 and in 2015 – 35) under the influence of market, political and economic changes in the country and on the world sugar market, should focus on promising businesses to bring their capacity to economically optimal to ensure the minimum average costs. there are two possible alternatives: reconstruction and modernization and new construction, with both advantages and disadvantages and effectively elected or combined depending on the conditions, the feasibility of production at a particular plant, development prospects, the state of the respective raw zones etc. – the introduction of new innovative waste or lowwaste and clean technologies using modern highly efficient equipment and equipment, alternative energy, new materials, etc., which allow to increase volumes of extraction of sugar, receive high-quality co-products, including energy; – technical and technological support intensification of production; – the creation of an efficient infrastructure through reorganization of transportation, storage, handling both raw materials and finished product in order to reduce their costs and improve the efficiency of primary production and modernization of the energy, repair, tool households to reduce the value of the corresponding components in cost of production; – production ecologization (reduction of emissions, introduction of energy saving technologies, etc.). the core strategy of the sugar industry has become a major diversification that due to production in the sugar factories of other products and expanding the production program will, as the lyskovo v.v., increase trade turnover, expand the financial base, dynamic and efficient use of production reserves, increase efficiency and profitability of companies (lyskov, 2000). the trajectory of development should provide the ultimate movement of sugar factory (single product) to the sugar mill (poly product) since diversified companies are more sustainable and competitive compared to highly specialized and have not only the possibility of redistribution of capital in favor of more profitable types of production and support thus less profitable but also to minimize the possibility of industrial and commercial risks. given the seasonality of the sugar production diversification will align its load, eliminating downtime, increase efficiency of fixed assets and work, for what periods of maximum load capacity of sugar and other industries do not have to be the same, but the core production program thus has to be sugar production. in terms of diversification is expected to take a number of measures: – expand and improve the range of products of sugar production through the development and expansion of different types of sugars (“coca-cola’s”, candy, mint, adding cinnamon and ginger, etc.), gelling products based on sugar, sugar lipstick and depth recycling and obtaining by-products – molasses (followed by the production of dry molasses concentrate, including the transfer of sucrose in its calcium salt, not counting the fact that molasses is a traditional material for the production of alcohol and yeast, glycerine, lactic and citric acids , a component of animal feed, etc.), pulp (production of dry feed, pectin glue for the textile industry and so on.), food pectin, sugar factory lime (production on its base fertilizer-melioration mixtures and cement) after alcohol bards, molasses (which today is scarce resource for the production of alcohol and high-oxygen additive to gasoline) and others experts of sugar industry counted that existing demand in ukraine for described products and substances, can’t be satisfied by operating factories, indicating that the market has a large capacity and opens up attractive prospects and potential for growth and development of the sector; – development and expansion of biofuel production through a combination of technological and organizational processes of production of sugar, bioethanol, biogas and solid fuels, which will solve the problem of energy supply and energy independence sugar industry, keep the area existing , workplaces, reduce production costs, improve product competitiveness. the first phase is possible by mounting the sugar factories settings (danylyshyn, strashynska, 2008), in the long term requires deep technical modernization and reconstruction of refineries on the basis of directions of diversification. studies show that sugar beets aren’t the best n the raw material for fuel, but one of the most effective in ukraine in connection with high performance and significant output of bioethanol from 1 ha of crops – about 4,62 tons. according to experts, domestic bioenergy could absorb and sugar factories – adapt, sugar beets grown on an area of even 1 million and the forecast calculations doronin a.v. in 2020, for the production of biofuels for domestic and foreign markets, with full self-supporting sugar to be involved 87 sugar plants (danylyshyn, strashynska, 2008); – introduction of flexible manufacturing technologies that allow the transition to another type of product (eg sugar for biofuels and vice versa) depending on market conditions and trends emerging in the domestic and foreign markets; – development of international scientific and technical cooperation in the field of technology. baltic journal of economic studies 93 vol. 2, no. 1, 2016 block of organizational and economic modifications of sugar production includes: – the introduction of advanced forms of production and work to streamline processes and reduce the loss of all kinds of resources; – the integration of sugar beet producers and sugar companies, the introduction of the contract system of relations, the formation of agricultural clusters and more. specifically, l.v. strashynska considers that the system of integration interaction of participants on a contract basis is the most convenient and easy because within this integration is quite easy to change the scope of cooperation  – the related adjustment as the number of participants and volume of their mutual obligations, which is especially important during volatile market conditions . contracting requires much less time compared to the other options of vertical integration of production (danylyshyn, strashynska, 2008). today, as already noted, is dominated by a tendency to self-sugar cultivation of raw materials for their own needs. most manufacturers support this trend, seeking to reduce their own risks associated with the provision of raw materials, and the future is seen by them for this approach. however, it should be noted that a similar scheme in the first place, contrary to the logic of the social division of labour and is not used in any country in the world, and secondly, reduces the effectiveness of both beet and sugar production, depriving agriculture traditional activities, and sugar – burdened with additional features and risks, although initially this situation is quite acceptable because of the difficult situation in the sector. ultimately, a mature market system will create conditions for mutually beneficial interaction between sugar mills and sowing beets enterprises based on economic motivation – profit, while support and motivation for cultivation sugar beet s by farms must take the state as culture quite demanding and less profitable than others; – reorganization management industry as a whole and now including the introduction of modern management concepts, marketing strategies, information technology decision support; – creating an effective and flexible information technology planning production of sugar, ongoing monitoring of the state of internal and external environment and its changes carried out as a direct and indirect impact on production; – restoration quality scientific, technical and staffing industry development mechanism implementation of scientific achievements in sugar production; – restoration and improvement of the system of continuous training and skills development for the sugar industry; – providing technical, sanitary and phytosanitary rules greener production processes and products according to international standards, improving product quality; – organization process of passing international certification in order to increase export potential and expand into new markets; – development and introduction of branch system of monitoring and forecasting of domestic and foreign markets; – the creation of specialized technology parks. 5. the mechanism of implementing the strategy the condition for the effective implementation of the development strategy of the sugar industry has become an effective mechanism in the classical sense is a “converter” technical, technological, economic and organizational efforts and investments of sugar on a pre-planned results, revenues, profits, production, competitive position in domestic and foreign markets and more. it includes a set of tools, a set of methods and means of influence on economic processes that ensure implementation of measures and achievement of strategic objectives, and consists of two subsystems – providing and functional. the first subsystem includes planning tools, encouragement, motivation, control, and the second – the tools of financial, material and staffing process development strategy. functional subsystem includes: – continuous monitoring of the situation and the impact on decision-making in the implementation of the strategy; – organization of communications staff in the implementation of the strategy, a joint adjustment of their actions; – motivation of staff; – risk management. providing subsystem includes: – available financial potential of the sector; – a mechanism to attract investment. total investment required for a deep restructuring and modernization of the industr y exceeds the capacity of the state and the possibility of sugar factories, as the mechanism provides flexible combination of public and private investment; – technical support of implementation of the strategy. in the process of implementing the strategy, any system is experiencing ongoing impact of the external environment, and therefore reacts to these influences, changing the trajectory of development, is trying to adjust to minimize loss or maximize your win. the mechanism of implementing the strategy should take account of these changes, an appropriate adjustment strategy, increasing its flexibility and adaptability. the sooner adjustments are made to the forecasts, strategic, tactical and operational plans, the more effective mechanism. the mechanism of implementation of the strategy involves selection of the optimum combination of actions (options) for each stage of development that most adequately correspond to the trajectory of the realization of strategic objectives and conditions of the external and internal environment of the industry. the criterion of effectiveness of the mechanism development strategy is the simultaneous fulfilment of the following conditions: baltic journal of economic studies 94 vol. 2, no. 1, 2016 – the efficient use of capacities; – meet the demand for the products of the industry; – the availability of sufficient financial resources at every stage; – logical sequence of implementing measures. no matter how effective was not a mechanism for implementing the development strategy of the sugar industry, it can not independently provide one hundred percent the strategic goal, as the industry is working in a particular institutional environment, which, as noted earlier, includes formal and informal institutions that create conditions and “rules” in. in particular, at the state level is provided: – regulatory and legislative functioning and development of the sector; – regulatory policies; – the creation of investment climate; – development of mechanisms of subsidies and preferential loans sugar, credit incentives and state guarantees for loans; – legislative restriction of the use of sugar substitutes; – formation of the system of international relations that affect the export-import operations, creating conditions for interstate industrial cooperation, implementation of state policy to stimulate exports of sugar; – the implementation of economic policies: fiscal, monetary, investment, innovation, structural, social; – implementation of foreign policy: protectionism or free trade. some impact on the field of exercise and informal institutes and institutions, so the best scenario development strategy ukraine’s sugar industry can only be a harmonious combination of intra mechanism for implementing existing instruments with institutional environment. 6. conclusions the implementation of the proposed measures will overcome the crisis on the first phase, on the second – stabilize production and create conditions for increasing it in the future and, finally, ensure economic growth in the long term. with the successful implementation of the development strategy of the sugar industry, the efficiency and effectiveness of the proposed technical and technological, economic and organizational measures can be expected positive changes in the socio-economic field, the reconstruction and stabilization of sugar in the domestic sugar market, economic growth in the future, new jobs, improve social conditions of workers in the industry, winning stable positions on foreign markets. references agricultural development strategy until 2020. (2012). – [electronic resources]. – retrieved january 17, 2016 from http://www.auu.org.ua/rynky-ta-ciny/novini-rinkiv danylyshyn, b.m. (ed.), strashynska l.v. (2008). strategy of development of food market in ukraine: monograph – kiev, profi, 627 р. lyskov, v.v. (2000). the formation of an efficient structure of the sugar industry of ukraine – kiev, institute of economics national academy of sciences of ukraine, 210 р. юлия онищук стратегия развития сахарной промышленности в контексте европейской интеграции украины аннотация. основной проблемой украинской экономики сегодня является тотальная потеря производственного потенциала. теряя производство, страна превращается в аутсайдера мировой экономики, “выпадает” из системы международного разделения труда, отдавая лидерство в производстве традиционных для нее товаров странам, имеющим меньшие преимущества, но более цивилизованный подход к производству. одним из таких традиционных товаров, который всегда был “визитной карточкой” украины, является сахар. методология. основой методологии для проведения исследований развития сахарной промышленности нами был выбран системный подход, в рамках которого отрасль рассматривается как сложная, структурно завершенная система элементов объединенных общей целью. в то же время сахарная промышленность является подсистемой пищевой промышленности, входит в состав перерабатывающей и выступает элементом агропромышленного комплекса. исследование отрасли как системы и составляющей системы более высокого порядка обусловлено необходимостью обеспечения максимального уровня эффективности ее развития. развитие сахарной отрасли украины должно быть не простым переходом от одного качества системы к другой, а сложным многофакторным процессом, отражает действие закона перехода количественных изменений в качественные. реализация же основной цели развития сахарной отрасли в условиях динамичной внешней среды возможна только при условии выбора и реализации эффективной стратегии, которая должна быть встроенной в стратегию развития апк и общегосударственную экономическую стратегию. поэтому предметом нашего исследования являются теоретические baltic journal of economic studies 95 vol. 2, no. 1, 2016 и прикладные аспекты эффективного развития сахарной промышленности украины, а целью исследования – разработка стратегии развития отрасли в условиях евроинтеграции. результаты. под стратегией развития сахарной отрасли мы понимаем уникальный набор действий и решений относительно способов достижения целей развития с минимальными затратами энергии системы. считаем, что стратегической целью должно стать создание современной, технологически совершенной, экономически эффективной и социально значимой сахарной отрасли, способной производить конкурентоспособную продукцию, удовлетворять в полной мере внутренний спрос на сахар, обеспечивать формирование государственного резерва и расширять экспортную базу. для достижения этой цели отрасль имеет ряд предпосылок, которые рассматриваются как ее возможности, а также ряд ограничений, тормозящих процесс развития, могут существенно повлиять на содержание стратегии или на процесс ее реализации и требуют устранения. вместе они формируют стратегическую позицию сахарной отрасли, которую сегодня мы можем характеризовать как очень слабую. достижение стратегической цели предполагает разработку и реализацию целого комплекса мероприятий, которые мы разделили на три направления: мероприятия по реструктуризации и технико-технологической модернизации отрасли, меры по диверсификации производства и меры по организационно-экономической модификации сахарного производства. значение/оригинальность. реализация предложенных мероприятий позволит на первом этапе преодолеть кризисные явления в отрасли, на втором – стабилизировать производство и создать предпосылки для его наращивания в будущем и, наконец, обеспечит экономический рост в долгосрочной перспективе. baltic journal of economic studies 213 vol. 5, no. 5, 2019 corresponding author: 1 state higher educational institution “kherson state agrarian university”, ukraine. e-mail: averchev2011@ukr.net orcid: https://orcid.org/0000-0002-8333-2419 2 state higher educational institution “kherson state agrarian university”, ukraine. e-mail: annaavercheva@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-5-213-221 analysis of economic aspects of buckwheat, panicum and rice growing and production in central and eastern europe and ukraine oleksander averchev1, hanna fesenko2 abstract. the purpose of the article is to study the analysis of economic aspects of buckwheat, panicum and rice growing and production in central and eastern europe and ukraine (2016, 2017, 2018). the subject of the study is the market of large crops in central and eastern europe and ukraine. the study is based on the analysis of statistics of production of buckwheat, rice and panicum for 2016-2018. it was established that in the current and the previous grain seasons buckwheat was in the list of objects of state regulation that set minimum and maximum intervention prices, which gave grounds to the agrarian fund of ukraine to carry out financial or commodity interventions in case of unfavorable price situation on the market. it is proved that ukraine has everything that is needed for developing its own rice industry. the favorable natural and climatic conditions of southern ukraine, the availability of engineered rice irrigation systems, the close cooperation and friendship of the rice institute with commodity producer, varieties of domestic breeding, environmentally safe cultivation technology make it possible to obtain high yields. so meteorological and hydrological conditions therefore play an important role in levels of crop production but they also have a knock-on effect on prices through the causal effect of supply and demand. this is true for the eu, as it is across the globe. of course, with the european union covering such a large area and including such diverse climates, adverse weather conditions in one region are often offset by optimum conditions in another. however, where the production of certain crops is concentrated in a few regions, the eu production levels will be particularly susceptible to weather conditions as well as to pest attacks. where known adverse weather conditions have impacted on crop levels this is mentioned. cereal harvest in the eu higher in 2017 despite drought conditions in many areas of central and southern europe and reduction in cultivated area. monsoon countries, which due to weather conditions harvest twice a year, do not have much higher and sometimes even lower rice yields than ukraine does. it is set that despite the difficult weather conditions, the grain industry provides sustainable production, which guarantees the food and economic security of the country. cereal crops are the basis for the formation and maintenance of the state's strategic food, feed and export balance. key words: production, cereal crops, growing, buckwheat, rice, panicum. jel classification: o13, q11, q14, q18 1. introduction the current stage of development of the agrarian sector of the ukrainian economy is characterized by complex dynamic transformations, which is connected with the constant changes of supply and demand of agricultural products in the market, the cost of production means and global climate changes, which were reflected on the ukraine territory. in ukraine, grain production has been and will be a leading sector of agriculture. increasing grain production is a strategically and environmentally important task that underpins the country 's food independence. the grain economy of the country forms a food fund, provides livestock with feed grain, creates state grain reserves and forms a certain share of exports. along with the main cereal crops such as wheat, corn, barley, an important role is played by cereal crops, dominated by buckwheat, panicum and rice. the natural climatic conditions and fertile lands of ukraine contribute to the development of the cereal industry and make it possible to obtain high-quality grain cereals in volumes sufficient to meet domestic needs and to form export potential. at the same time, further development of the industry requires a thorough baltic journal of economic studies 214 vol. 5, no. 5, 2019 economic assessment, revision of a number of positions regarding the technical, technological, organizational, economical and market conditions of functioning of the whole complex. ukraine's cereals sector is strategic for the national economy. cereal grain and its products have always been liquid because they form the basis of the state's food base and security. cereals are of great importance in the human diet. in the agricultural market, cereal crops have leading positions in export, processing and inland consumption, which proves their strategic role in ensuring the food and economic security of the country and that is why for farmers it is an important task to maintain and increase the volume of grain production. buckwheat, panicum and rice are one of the promising high-yielding cereal crops. 2. analysis of economic aspects of cultivation and production of cereals in central and eastern europe crops can be broadly categorized into two groups, those that are non-perennial and those that are perennial. non-perennial crops are those that do not last more than two growing seasons and typically only one. perennial crops last for more than two growing seasons, either dying back after each season or growing continuously; these are also termed permanent crops. crop production is particularly sensitive to prevailing weather conditions at key times of the year. for example, depending on a crop's stage of development, heavy spring frosts can damage the growth of cereals and destroy fruit blossoms. likewise, summer droughts can cause crops to wither or to scorch and strong winds and heavy rain can flatten crops, making them hard to harvest. meteorological and hydrological conditions therefore play an important role in levels of crop production but they also have a knock-on effect on prices through the causal effect of supply and demand. this is true for the eu, as it is across the globe. of course, with the european union covering such a large area and including such diverse climates, adverse weather conditions in one region are often offset by optimum conditions in another. however, where the production of certain crops is concentrated in a few regions, the eu production levels will be particularly susceptible to weather conditions as well as to pest attacks. where known adverse weather conditions have impacted on crop levels this is mentioned. cereal harvest in the eu is higher in 2017 despite drought conditions in many areas of central and southern europe and reduction in cultivated area. the harvested production of cereals (including rice) in the eu was 309.9 million tonnes in 2017 (see figure 1), about 11.9 % of global production. this represented a rebound of +2.7 % or 8.2 million tonnes more than in 2016, despite drought conditions in many areas of central and southern europe and a reduction in cultivated areas of 1.6 million hectares. to put this in some context, the eu's harvested production of cereals in 2017 remained some 23 million tonnes lower than the record harvest of 332.6 million tonnes recorded in 2014. france harvested 68.5 million tonnes of cereals in 2017, a little more than one fifth (22.0 %) of the eu's total production. germany harvested 45.6 million tonnes (14.7 % of the eu total) and poland harvested 31.9 million tonnes (10.3 %). the overall increase in harvested production at the level of the eu was driven by the strong rebound (+26.4 %) in france, as well as in poland (+7.0 %) but also romania (+24.7 %). the higher production levels in france and romania resulted from much higher yields, as the cultivated areas in both were lower in 2017 than in 2016 (-2.1 % and -5.4 % respectively). higher production levels in some member states offset, at the eu level, the lower harvested production levels in drought-hit spain (-30.9 % on 2016, with cultivated areas only -3.6 % lower), hungary (15.8 %, with cultivated areas -6.4 % lower in 2017), italy (-11.1 %, with cultivated areas down -3.3 %) and smaller cerealproducing countries like slovakia (-28.1 %), croatia (-23.8 %), greece (20.9 %), austria (14.5 %), slovenia (14.3 %) and czechia (-13.3 %). cereal harvest higher mainly due to sharp rise in wheat production but also grain maize. the eu harvested 142.6 million tonnes of common wheat and spelt in 2017, representing 46.0 % of all cereal grains harvested. this was 7.9 million tonnes more than in 2016, an increase of +5.9 %, despite cultivated areas being -3.6 % lower. the harvested production of grain maize and corn-cob-mix (ccm) in the eu was 64.7 million tonnes in 2017, up 1.9 million tonnes (or +3.0 %) on 2016, despite the cultivated area also being -3.4 % lower. the harvested production of oats and spring cereal mixtures was 11.3 million tonnes across the eu in 2017, an increase of +4.0 %, reflecting a similar rate of increase in cultivated area. most of this rise was due to higher yields for spring cereal mixtures, as the harvested production of oats remained broadly unchanged (+0.4 %) despite an increase of +2.5 % in the cultivated area. to complete the picture, the harvested production of barley in 2017 was -2.3 % lower than in 2016 at 58.7 million tonnes. with the average apparent barley yield across the eu being similar in 2017 to that in 2016, the lower harvested production reflected the reduced cultivated area. the production of rye and winter cereal mixtures (-0.4 %) remained similar to the level in 2016. picardie and centre-val de loire are the most important regions for wheat production, bavaria for barley. at a more detailed level, the eu regions with the largest production of wheat in 2017 were the two french baltic journal of economic studies 215 vol. 5, no. 5, 2019 regions of centre-val de loire (3.3 % of the eu total) and picardie (3.2 %). other regions with considerable wheat production were the german regions of bayern (2.7 %) and niedersachsen (2.4 %), as well as the lithuanian region vidurio ir vakaru lietuvos regionas (central and west lithuania) (2.6 %). the german region of bayern (bavaria), renowned for its beer production, was the eu region with the highest barley production in 2017 (3.9 % or the eu total). other important regions for barley production were centreval de loire (3.4 %) and champagne-ardenne (3.1 %) in france and castilla-la mancha (3.2 %) in spain. prices for wheat, barley and rye bounced higher in 2017 but were still about 30% (see figure 2) lower than the recent 2012 peak. the average price of cereals in 2017 bucked the downward trend of the previous four years, rising by +3.0 % in real terms. there were price rises for wheat (an average +4.5 % in real terms), barley (+5.6 %) and rye (+6.4 %). in contrast there were further declines, albeit moderate, for grain maize (-1.7 %) and oats (-0.5 %). however, for all types of cereal, real terms prices remained about 30 % lower than the recent peak price levels of 2012. the downward pressure on cereal prices resulted from a series of successive global record harvests. 3. economic aspects of buckwheat, rice and panicum growing and production in ukraine agriculture has long become a business. in addition, the main task for farmers is to maximize profits by increasing revenues and reducing costs. therefore, each crop is viewed through an economic prism, that is, how much money can be obtained from its growing in the end per 1 ha. buckwheat, panicum and rice are among the promising high-yielding cereals (averchev, 2015). much attention is paid to buckwheat production by farms that have standing orders from cereals producers, since buckwheat does not belong to leading crops. most figure 1. harvested production of cereals (including seed) and most commonly grown cereals, by nuts 2 regions, 2015-2017, (million tonnes) baltic journal of economic studies 216 vol. 5, no. 5, 2019 farms grow buckwheat to support their own beekeeping, and grain is more commonly sold and processed in the region where it is produced. it is also used in fodder production, namely small grain, as well as bran, which are obtained during grain processing. this crop is considered a valuable honey plant and a good forecrop in crop rotation. previously, buckwheat was considered a strategically important food product that had an impact on food security in the country. in recent years, many alternative types of cereals which can replace buckwheat have appeared in the domestic market of ukraine, which is why this type of product affects the overall food situation in the country. price controls the level of consumption. so now we have the following price situation: buckwheat costs 10% more than rice (orlenko, 2016). consumer basket in ukraine is calculated in such a way that buckwheat consumption per year is 2 kg / person, rice – 2.5 kg / person, and panicum – 1 kg / person. at the same time, compared to the countries of europe (poland), the consumption of buckwheat is 75% lower than in ukraine and for rice this number is 65%. among all the cereal crops, rice is the most important, most productive, most ancient and most caloric crop. it is grown on all continents of the world. the largest areas are dedicated to rice, the same as to wheat and maize. the area of rice sowing has tripled in the last 100 years and now amounts more than 150 million hectares. rice has a higher potential yield compared to wheat at 800-1000 kg / ha, which provides an annual gross harvest of almost 600 million tons. rice has about 30 species, but in cultivation the most common is oryza sativa, an annual plant with a height of 50-200 cm, 80-140 cm in ukraine. not only in ukraine, but in most rice sowing countries of the world, the rice systems are located near the sea coasts and are in close proximity to the resort areas. in the early years, the technology of rice growing did not meet the requirements of ensuring ecological balance. therefore, the scientists of the institute of rice of the national academy of agrarian sciences of ukraine conducted extensive research and created a new environmentally friendly technology, taking into account all the requirements of environmental protection, which received positive conclusions of state expertise. the experience of the rice institute on the environmental problem solving has attracted the attention of foreign colleagues. the main task of modern agricultural production, including rice, is to obtain a high economically viable grain yield, which is largely facilitated by the cultivar. rice growing as an intensive industry requires new varieties with high productivity, adapted to biotic and abiotic environmental factors, which in different agroecological conditions could give maximum return on investment (scorohod, 2011). nowadays, such valuable cereal crop as panicum receive insufficient attention, although it is characterized by high drought tolerance, which is quite positive feature especially taking into account the gradual changes in climate over the last decade. and this crop also provides fairly stable yields in our area, regardless of weather conditions, for example, unlike buckwheat (www.fao.org). panicum is one of the major cereal crops in the world. this spring cereal is appreciated for its high taste in grain (millet). it is resistant to drought. it is a culture of short daylight that has a fast growing season. due to these properties, it is often sown as a postharvest crop. however, panicum has never held a leading role among crops in the agricultural sector of ukraine. it is one of the major cereal crops of ukraine, the value of which is determined by the virtually waste-free use of processing products in the food, feed, pharmaceutical, microbiological, industrial branches, as well as the possibility of its growing in post-harvested sowings, which ensures two yields and increase the yield per figure 2. deflated price indices for cereals, the eu-28, 2010–2017 (2010 = 100) baltic journal of economic studies 217 vol. 5, no. 5, 2019 hectare. unprocessed panicum is used as a very valuable animal feed. the waste that is received during the processing of grain into cereals (flour, husk) is also a feed. panicum straw and hay are close to meadow hay by their qualities. panicum is widely used as a replacement crop in the event of re-sowing of fallen winter and early spring crops, which is especially important for yield and income of the current year. in the composition of panicum protein content is 12%, starch is 81%, fat is 3.5%, fiber is 1-2%. the grain is rich with minerals, trace elements, vitamins b1, b2, b5, b6, c, carotenoids and other physiologically active elements. also, the culture contains a large amount of starch, so it is used for the production of alcohol (the main journal of agribusiness, 2018). the underestimation of the value of panicum growing is wrong. panicum is a high-yielding cereal crops. by adhering to the growing technology, it yields grains over 5000 kg / ha. these yields are often higher than yields of other cereals. in 2018, buckwheat provided the largest acreage, production and yield, and rice provided the least (table 1). table 1 production of buckwheat, panicum and rice in ukraine for 2015-2018 crop harvested area, thousands of hectare gross mass after processing, thousand tons yield, kg / ha 2015 buckwheat 127.7 128.1 1000 panicum 112.8 213.2 1890 rice 11.7 62.5 5340 2016 buckwheat 153.7 176.4 1150 panicum 107.7 189.7 1760 rice 12.0 64.7 5390 2017 buckwheat 185.3 180.4 970 panicum 56.1 84.4 1500 rice 12.7 63.9 5050 2018 buckwheat 113.3 137.0 1260 panicum 54.8 80.5 1460 rice 12.6 69.2 5490 according to official statistics, the area from which buckwheat was harvested in ukraine in 2018 decreased by 72 thousand hectares, to 113.3 thousand hectares. at the same time, the average yield increased by 290 kg / ha and amounted 1260 kg / ha, the gross yield exceeded 13 700 thousand tons, which is 7.0% more than in 2015. the situation is better with rice. the area from which the yield were harvested in 2018 amounted 12.6 thousand hectares, which is more than 0.6 thousand hectares in 2016 and by 0.9 thousand hectares more compared to 2015. at the same time, the yield increased by 490 kg / ha compared to 2017 and it is 5490 kg / ha at a gross yield of 69.2 thousand tons. rice, along with buckwheat, is the leader of consumption among cereals among the population of ukraine. total domestic rice production provides only 35% of the market's needs, so this market is now import-dependent. although by 2014, the situation was somewhat different: rice plantations located in crimea made it possible to grow much of the country 's needs. in 2018, ukrainian agrarians harvested 805 thousand tonnes of panicum, which is 4.6% less than in the previous year. in particular, agricultural enterprises produced 52.0 thousand tons of panicum, which is 5.9% more than in 2017, and households produced 28.5 thousand tons (-20.2%). the decrease in the volume of panicum production is due to both the reduction of acreage under it and the decrease in the average crop yield. last year, 54.8 thousand hectares were sown with panicum, which is 2.3% less than in 2017. the average yield decreased by 2.7% and amounted to 1460 kg / ha. according to the estimates of grain market experts, it is planned to reduce the area under buckwheat in ukraine, because buckwheat growing technology provides certain specific features. it is necessary to take into account the norms of buckwheat sowing, biology of nutrition, growth, and flowering for high yields of buckwheat. that is why it was given the status of a capricious crop. in total, there are currently 30,000 ha of rice irrigation systems in ukraine. in recent years, rice has been sown on an area of about 13 thousand hectares, and with the restoration of such systems, especially in the odessa region, it is possible to increase the area under rice by another 2 thousand hectares. the general climatic conditions and water resources of ukraine allow growing rice on the area of more than 100 thousand hectares. experts say that at this stage it is necessary to increase the area of rice crops. the crop itself is not easy to grow, it requires a special climate: heat and humidity. in ukraine, farmers buy seeds at the only rice institute in ukraine, where more than 800 hectares of this type of cereals are grown (informational digest, 2018). rice cereals of domestic production are made exclusively from grown grain, since there are no state stocks of rice in ukraine. it contains the required range of valuable indicators of quality, which is not inferior to the imported rice, and far exceeds it by other qualities, including culinary ones. however, under market conditions, its price is forced to equate to low-calorie. the cheapest third-grade cereal made from the grain of state stocks of exporting countries after long-term storage or of its mixture with freshly produced grain comes in large quantities to ukraine from abroad. such grain quality is much worse than domestic quality, both in terms of biochemical parameters and the way it looks baltic journal of economic studies 218 vol. 5, no. 5, 2019 and smells, but due to the cheap and low purchasing ability of the population, it dictates a general decrease in prices in the market (scorohod, 2011). 4. analysis of buckwheat market in ukraine, the most favorable zones for buckwheat growing are the forest-steppe and polissia zones, where natural and climatic conditions allow protecting crops from arid winds, which allows plants to grow better during the growing season and have higher yields. soils and conditions of other regions are also suitable for buckwheat growing, but due to low yields, the acreage of this crop is insignificant. according to the results of 2018, the largest gross buckwheat harvests were received in zhytomyr (28.0 thousand tons), khmelnytskyi (18.6 thousand tons), sumy (11.6 thousand tons), kyiv (10.7 thousand tons). t), kharkiv (10.4 thousand tons) and vinnytsia (10.1 thousand tons) regions. for comparison, the yield of this crop in the kherson region is 980 kg / ha with a gross harvest of 0.5 thousand tons (table 2). 5. analysis of panicum market analysis of the panicum market, according to a study of the association of ukrainian club of agrarian business, showed that it is one of the most promising niche agrarian markets. despite the small volumes of table 2 structure of buckwheat production in ukraine for 2015-2018 regions of ukraine harvested area, thousands of hectare gross mass after processing, thousand tons yield, kg / ha 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 ukraine 127.7 153.7 185.3 113.3 128.1 176.4 136.8 137.0 1000 1150 970 1210 vinnytsia 1.0 9.9 11.8 7.7 1.4 13.9 13.6 10.1 15.1 14.0 11.5 13.0 zhytomyr 6.3 10.1 20.1 21.3 4.4 13.4 16.1 28.0 7.0 13.2 10.2 13.1 transcarpathian 0.2 0.1 0.4 0.3 0.1 0.1 0.5 0.6 5.3 9.6 15.9 19.2 kyiv 7.7 9.4 13.0 6.9 9.5 14.9 12.0 10.7 12.5 15.7 10.7 15.6 sumy 17.7 21.0 21.5 11.1 23.8 23.4 20.3 11.6 13.4 11.1 11.5 10.4 kharkiv 12.5 19.2 19.8 9.0 30.6 20.6 13.7 10.4 24.5 10.8 6.9 11.6 kherson 1.0 1.5 1.6 0.4 0.9 1.7 1.5 0.5 9.1 10.8 9.2 9.8 khmelnytskyi 10.7 12.0 16.9 11.9 10.0 16.4 14.1 18.6 9.4 13.6 13.0 15.6 table 3 structure of panicum production in ukraine for 2016-2018 regions of ukraine harvested area, thousands of hectare gross mass after processing, thousand tons yield, kg / ha 2016 2017 2018 2016 2017 2018 2016 2017 2018 ukraine 107.7 56.1 54.8 1896.7 844.0 804.6 1760 1500 1460 dnipropetrovsk 12.3 6.2 5.9 21.43 8.26 9.33 1740 1330 1570 zaporizhzhia 17.7 6.3 6.0 27.33 8.88 4.33 1540 1400 720 kyiv 1.5 0.5 1.2 2.48 0.82 2.66 1640 1640 2220 poltava 4.2 2.2 2.4 9.08 3.85 5.55 2170 1770 2310 kharkiv 11.9 5.1 6.1 22.32 8.90 13.39 1860 1750 2180 kherson 12.3 6.8 6.3 22.72 12.11 7.34 1850 1780 1170 khmelnytskyi 0.1 0.4 0.1 0.45 0.67 0.35 2650 1740 2890 cherkasy 1.6 0.4 0.6 3.22 0.79 1.6 2010 2310 2940 panicum yield in ukraine (about 150-200 thousand tons annually), the country occupies a leading position in the world export of these products. growing panicum is beneficial in areas where other cereals suffer from drought. panicum is heat resistant, forms a high yield even at high temperatures. this cereal is a replacement crop and, even in the most unfavorable years, provides a yield of 1000 kg / ha. subject to the requirements of agricultural technology and optimal sowing density, the yield will be 1500-1700 kg / ha. in ukraine, the largest volumes of panicum production in 2018 were in the kharkiv (13390 thousand kilos) and dnipropetrovsk (9330 thousand kilos) regions. the highest yields were in the cherkasy (2940 kg / ha), khmelnytskyi (2890 kg / ha), poltava (2310 kg / ha), kyiv (2220 kg / ha), kharkiv (2180 kg / ha) areas. in the kherson region, the gross harvest amounted to 7340 thousand kilos with a yield of 1170 kg / ha. panicum growing will be most effective after legumes, perennial grasses, clear of weeds of winter and arable crops. it is not recommended to sow panicum after corn (as well as before it), as both plants are affected by the pediculate. 6. analysis of rice market rice in ukraine is grown in the kherson and odessa regions. also today there is an interest in the cultivation baltic journal of economic studies 219 vol. 5, no. 5, 2019 of this crop in the poltava and dnipropetrovsk regions. climate change in the country has no impact on the rice market. everything is determined by technology. rice can only be grown on special engineering-grade irrigation systems, most of which have been constructed some time ago. on a normal field, it is very difficult to grow this crop, except in the presence of drip irrigation, but the cost of such equipment is quite expensive. prior to the annexation of crimea, the main crops were rice on the peninsula. ukraine exported the goods to turkey, romania and bulgaria. for domestic consumption it is needed more than 150 thousand tons, and in ukraine only 70 thousand tons is harvested. in general, ukraine meets its own needs in this crop by 35% by purchasing parts of it in pakistan, china, india and vietnam. there are currently three directions for increasing the area under rice in ukraine: – restoration of existing rice systems. this can increase the acreage by 2 thousand hectares, i.e. up to 15 thousand hectares; – the use of contour and drip irrigation, which help to equip larger areas, but today drip tape is the main component that increases the cost of production that is 11-15 thousand uah / ha annually; – spreading the positive experience of 2018 regarding the involvement of fish farmers in rice cultivation, since they already have ponds, pure water which can be used for irrigation, that can increase the area under rice by another 5-6 thousand hectares. in 2018, the gross rice harvest in the kherson region was 44.5 thousand tons, and the yield was 5770 kg / ha with the harvested area of 7.7 thousand ha. in the odessa region, the gross harvest was 24.7 thousand tons, and the yield was 5050 kg / ha with the harvested area of 4.9 thousand ha. in the south of ukraine, rice is sown mainly along the black sea, that is, the coastal resort area, in connection with which scientifically grounded systems of agriculture and water use are of particular relevance, which should maintain a safe phytosanitary condition, promote the reproduction of humus in the soil and stabilize ecological situation in rice sowing areas. washing regime during rice growing promotes soil salinization, which makes it possible to grow other crops in rice crop rotation. thus, rice sowing not only provides the country with valuable food, but also improves soil fertility. scientific research and practice show that if rice ceases to grow in a few years, there will be secondary salinization of the soil, which will again turn these lands into a desert (the main journal of agribusiness, 2018). 7. study of consumption of buckwheat, rice and panicum buckwheat consumption in the domestic market tends to decline. the main reasons for this are high purchase prices for buckwheat grain, as well as declining population. while in 2015, buckwheat grain food consumption was 120 thousand tonnes, in 2017 it decreased to 108 thousand tonnes. at the same level, buckwheat food consumption remained last year. thus, buckwheat production was sufficient to meet domestic nutritional requirements. in 2016, after a sharp decline in buckwheat production, there was a gradual rise in prices for grain. in the period to june 2016, buckwheat grain went up from 11 to 20 thousand uah / t and buckwheat increased from 19 to 32 thousand uah / t. buckwheat production amounted to 176.4 thousand tonnes in 2016, which is 13.7% more than the previous year. in the 2016-2018 marketing year the price situation was more stable. the minimum purchase prices for buckwheat grain and, consequently, for buckwheat groats were observed during the harvesting period, that is, at the beginning of the season, and their maximum growth was at the beginning of march. thus, the purchase prices for buckwheat grain in the current season ranged from 13.5 to 18 thousand uah / t, and for buckwheat groats from 23 to 27.5 thousand uah / t. in the 2017 season, panicum prices rose situationally, which was primarily driven by an increase in demand and the quality characteristics of raw materials offered by farmers. thus, after the seasonal decline in prices at the beginning of 2016-2017, demand prices in august 2016 were fixed in the range of 3000-3800 uah / t. as demand increased and the number of grain products with high quality indicators decreased, prices began to rise, with their peak rising in march 2017. at the thought of the operator’s market, the main reason of this situation was the activation of demand. however, the low quality characteristics of the raw materials offered on the market and the high prices often did not satisfy the buyers, who already began to lower demand prices at the end of march. so, in 2018 purchase prices for panicum were fixed at the level of 8000-9000 uah / t, but in october 2019 there was a decrease to 7200 uah / t (figure 1). table 4 purchase prices for panicum and buckwheat in ukraine at the beginning of october 2019, uah / t purchase prices october 2019 buckwheat, uah / t panicum, uah / t 13000 7200 rice is a crop that consumes more moisture than others to develop. therefore, the cost of its growing increases by about 30% each year due to the rise in price of water supply. this especially concerns not for selfflowing systems, but for systems using electric pumps, when the cost of water supply is also affected by the price of electricity. according to its biological needs, rice uses 13.5 thousand cubic meters per ha, taking into account evaporation, but in ukraine on average it baltic journal of economic studies 220 vol. 5, no. 5, 2019 consumes more than 22-23 thousand cubic meters per ha (scorohod, 2011). the wholesale price of rice reduced from 18 uah / kg at the beginning of the year to 14.5 uah / kg now. there are two reasons for this. the first is that today we are saturating the market with our own products by 30-35%, although by 2014 this indicator was at the level of 50%. therefore, ukraine was less dependent on the global market environment. today the world price of rice is reducing. the second reason identifies that rice and buckwheat belong to the category of more expensive cereals, and when the purchasing ability of the population decreases, one of the indicators of this phenomenon is the decline in demand for these products. about 30 enterprises are engaged in rice production in ukraine. domestic production is up to 70 thousand tons of raw material. the harvest is partly spent on seeds and the rest is processed. 8. conclusions the domestic market is experiencing a decline in demand for buckwheat and rice grain in the current year. this is due to the overall rise in prices in this market segment. consumers prefer cheaper types of cereals. however, in the new season, the situation on the buckwheat market may change. in the current and previous grain seasons, buckwheat was on the list of objects of state regulation, which set minimum and maximum intervention prices that gave reason to the agrarian fund of ukraine to carry out financial or commodity interventions in case of unfavorable price situation on the market. however, the types of agricultural produce that will be included in the list of such objects in the 2016-2018 marketing year are not identified yet. therefore, it is hoped that ukraine will determine the volume of purchases of this grain, as well as other crops, and redistribute the funds allocated for such purchases in the country’s budget. ukraine has everything that is needed to grow its own rice industry. the favorable natural and climatic conditions of southern ukraine, the availability of engineered rice irrigation systems, the close cooperation and friendship of the rice institute with commodity producers, varieties of domestic breeding, environmentally safe cultivation technology make it possible to obtain high yields. monsoon countries that, due to weather conditions, harvest twice a year do not have much higher rice yields and sometimes even lower than ukraine does. the formation of a cereal market, both at the regional level and in the country as a whole, foresees, first of all, the development of horizontal links that rely on market infrastructure, which allows maintaining and regulating market relations in the large economy. in this regard, there is a need to develop new elements of market infrastructure, giving them the necessary legal and economic power. creating conditions for the commodity zones of a cereal market will require the use of a set of measures that regulate the process of transition to market relations and at the same time allow to form and develop it with its inherent elements: freedom of enterprise, the right of the manufacturer to dispose of their products and income, competition, elimination of monopoly, pricing depending on supply and demand, etc. in today 's environment, the cereals market is an objective necessity, which allows to improve the country 's grain supply through its own production, and to increase its efficiency. however, the orientation of the large-scale economy on market relations, as a means of automatic solution of all its problems, will not be able to radically change the situation in the production, marketing and use of grain in the coming years, since the legislative and regulatory framework is not yet fully formed. thus, despite the difficult weather conditions, the grain industry provides sustainable production, which guarantees the food and economic security of the country. cereals are the basis for the formation and maintenance of the state's strategic food, feed and export balance. references: averchev, o. v. (2015). growth, development and productivity of buckwheat depending on the terms and methods of sowing and seed rates. collection of scientific papers of the uman state academy, 53, 61–66. orlenko, o. v. (2016). theoretical-methodological and applied principles of functioning of the grain industry in ukraine. extended abstract of dissertation of doctor of economical sciences. 08.00.03. classic private university of zaporizhzhia. scorohod, i. s. (2011). directions for increasing ukraine's competitiveness in world markets. lesya ukrainka volyn national university, no. 2. the state of food insecurity in the world. available at: http://www.fao.org/docrep/i0876e00.htm (accessed 22 may 2019). the grit of truth. suggestion: the main journal of agribusiness. available at: http://propozitsiya.com/ua/analizrynku-krup-eksport-vygidnishe-vnutrishnogo-rynku (accessed 24 may 2019). informational digest. available at: https://pro-consulting.ua/ua/pressroom/varim-svoyu-kashu-ob-osnovnyhrezultatah-issledovaniya-rynka-krup-v-ukraine (accessed 26 may 2019). baltic journal of economic studies 221 vol. 5, no. 5, 2019 official site of the state statistics service of ukraine. available at: http://www.ukrstat.gov.ua/ (accessed 26 may 2019). ukrainian market of cereals shows positive dynamics. suggestion: the main journal of agribusiness. available at: http://propozitsiya.com/ua/analiz-rynku-krup-eksport-vygidnishe-vnutrishnogo-rynku (accessed 28 may 2019). analysis of cereals market. export is more profitable than the domestic market. proposal: the main journal of agribusiness. available at: http.//propozitsiya.com/ua/analiz-rynku-krup-eksport-vygidnishe-vnutrishnogo-rynku (accessed 28 june 2019). bondarenko, s. m. (2017). an assessment of the quality level of products at an enterprise. an efficient economy, no. 4. available at: http://www.economy.nayka.com.ua/?op=1&z=5527 (accessed 10 may 2019). organoleptic methods of quality determination. available at: https://docs. google.com/document/d/1siz79fan crsmc11zmijxovchhtbmquwe8fxfruexzuw/edit (accessed 08 may 2019). requirements for the cereals quality. available at: https://studfiles.net/preview/5118611/page:4/ (accessed 10 may 2019). eurostat (2018). the eu in the world – agriculture, forestry and fisheries. extracted april 2018. available at: https://ec.europa.eu/eurostat/statistics-explained/index.php/the_eu_in_the_world_-_agriculture,_forestry_ and_fisheries (accessed 10 may 2019). hart, k., allen, b., keenleyside, c., nanni, s., maréchal, a., paquel, k., nesbit, m. & ziemann, j. (2017). research for agri committee – the consequences of climate change for eu agriculture. follow-up to the cop21 – un paris climate change conference, brussels: european parliament: agriculture and rural development. available at: http://www.europarl.europa.eu/regdata/etudes/stud/2017/585914/ipol_stu(2017)585914_en.pdf (accessed 10 may 2019). harvey, f. (2016). use of strongest antibiotics rises to record levels on european farms', the guardian. baltic journal of economic studies 242 vol. 5, no. 2, 2019 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. e-mail: alexander_hristov@ukr.net 2 university of customs and finance, ukraine. e-mail: lipinskivlad@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-2-242-248 comparative analysis of forensic expert activity: an administrative, criminal, criminalistic, economic approach oleksandr khrystov1, vladyslav lipynskyi2 abstract. the article is devoted to the economic and legal comparative analysis of judicial expert activities. the issues concerning the problems of quality assurance of the expert activities, harmonization and convergence of the understanding of the possibilities of judicial economic expertise in solving problems of justice, taking into account economic conditions. as a first step to creating a general theoretical development for judicial economic expertise could be the creation of a list of vocabulary of basic terms of forensic economic expertise. the legislation of ukraine, which regulates activities of forensic experts, is as follows: the law of ukraine “on forensic examination”, “instruction on conducting forensic examination”, “procedure for certification and official registration of forensic examinations procedure”, “some issues of provision of paid services by research institutions on forensic examination of the ministry of justice”, “on approval of the instructions on procedure and amount of reimbursement and compensation to individuals invited by inquiry agencies, pretrial investigation agencies, procuracy, courts or authorities that oversee cases of administrative violations, and payments to governmental research institutions on forensic examination for expert and specialized services provided by their employees” approved by the cabinet of ministers of ukraine, and a set of multi-agency orders. the common features include the existence of department specialized forensic expert institutions, which are entrusted to conduct an examination as follows: specialized research institutes of the ministry of justice of ukraine and the ministry of healthcare, expert services of the ministry of internal affairs, security service of ukraine, etc. moreover, forensic examinations, which are often arranged in criminal proceedings and sometimes in administrative proceedings, can be carried out exclusively by forensic experts who are employees of such institutions. at the same time, the law provides for the possibility of carrying out forensic expert activity on a business basis, on the ground of special authorization, as well as onetime agreements, by citizens who have the qualification of a forensic expert, which is often used in administrative proceedings. neither a judge nor any other persons, who are involved in administrative or criminal procedures, have this kind of expert knowledge. by virtue of the knowledge that is converted by forensic experts in the source of evidence, important issues of a case are resolved that would be impossible without forensic expertise. in legal science, there is an idea that expert activity, due to its specificity, is much wider than expert procedure regardless of the fact whether it is carried out in administrative or criminal procedures. key words: forensic expert activity, administrative procedures, criminal procedures, law, legislation. jel classification: e44, h10, k10, k13 1. introduction in the first and second procedures, forensic experts are guided by the same regulatory framework: the constitution of ukraine, laws, by-laws, international treaties, etc. for example, in accordance with the constitution of ukraine, the principle of the rule of law is recognized and in force. art. 8 of the constitution contains the provision that the constitution of ukraine has supreme legal force, laws and other regulatory legal acts are adopted on the ground of the constitution of ukraine and must comply with it (verkhovna rada ukrainy, 1996). initiation of legal action to protect the constitutional rights and freedoms of a person and a citizen is directly guaranteed on the basis of the constitution of ukraine. in accordance with art. 9 of the fundamental law, the international treaties in force, the consent to their binding is agreed by the verkhovna rada of ukraine, are a part of the national legislation of ukraine (verkhovna rada ukrainy, 1996). baltic journal of economic studies 243 vol. 5, no. 2, 2019 m. h. shcherbakovskyi, in one of his papers, notes that depending on what aspect of the forensic activity an emphasis is laid on, a forensic inquiry is understood as: the institute of evidence and procedural laws; the system of procedural relations; the form of expert knowledge use; the procedure of investigating and drawing up a procedural document upon its completion – an expert report (shcherbakovskyi, 2008). the task of administrative procedure is to solve individual administrative cases, which are disputes about the legitimacy of bringing to administrative responsibility, as well as disputes in various branches of legislation such as budget, customs, tax law, etc. expertise significantly expands the evidence-based possibilities of subjects of administrative and tortious as well as administrative and judicial procedures and also makes it possible to use unlimited opportunities of the modern science during the trial (romanenko, 2013). 2. the administrative approach of forensic expert activity the code of administrative procedure of ukraine (hereinafter referred to as the capu) doesn’t have the definition of the term “forensic expertise,” but the terminology has been developed by scholars in research on forensic expertise issues in administrative procedure. some scholars define the forensic expertise in the capu as a special research of certain actual facts of an administrative case, which is conducted on the basis of decision of administrative court by a special subject (a person), which has expert knowledge in science, art, technology, profession, etc. that leads to the appearance of a new source of evidence – expert conclusion (dzhafarova, 2013). others define the forensic expertise in administrative proceeding as one that deals with an issue on the ground of expert knowledge and skills, which occur during a proceeding and judicial examination of administrative cases (kravchuk, 2016). one of the differences between the expert examinations in administrative and criminal proceedings is that in the first case it is scheduled and carried out less often. the reason for this is the administrative process itself, which concerns the management sphere. most often the legal acts, decisions of the subjects of authoritative powers are disputed. moreover, an expert study is often not binding. in criminal proceedings, six grounds for the mandatory schedule of an expert examination, which are often appointed by a court, investigation bodies or at a request of the defence, are legally determined. in administrative procedure, an expert examination can be scheduled exclusively by a court (art. 102 of the capu), which decides on the application of a party to a case or suo motu to schedule an expert examination in the case, but it can be also conducted on the request of trial participants (art. 104 of the capu), when a party to a case has the right to present an expert report, which is drawn up on its request, to the court (verkhovna rada ukrainy, 2005). therefore, art. 68 of the capu defines the expert as a person who has special knowledge necessary to clarify the relevant circumstances of a case (verkhovna rada ukrainy, 2005). the code of ukraine on administrative offenses does not provide the definition for an expert. at the same time, the criminal procedure code of ukraine defines the expert as a person who have scientific, technical or other special knowledge, has the right, in accordance with the law of ukraine “on forensic examination”, to conduct an examination and who is entrusted to investigate objects, phenomena, and processes that contain information about the circumstances of the commission of a criminal offense and to give an opinion on questions arising during criminal proceedings and relating to the sphere of his knowledge (verkhovna rada ukrainy, 2013). the cpc of ukraine also has restrictions on the possibility to involve persons, as an expert, who have official or other dependence on the parties to criminal proceedings or a victim. so, such persons must announce their recusal on legal grounds. according to the standards of the capu, an expert can be appointed by the court or involved by a participant of a trial. in other words, each party can involve own expert in order to conduct special investigations that is a trusted person whose opinion is a bona fide. but this kind of person can act only for the benefits of the interested party, and due to this fact, there are doubts about his impartiality and reliability of the report. however, this provision is more democratic than in cpc of ukraine, as arts. 69 and 243 of cpc (the procedure for expert involvement) indicate that an expert acts by an order which is provided by a court and has impersonal nature. an interested person petitions for investigating judge to carry out an expert examination but such a request doesn’t include the surname of a forensic expert, who will carry out an examination. the rights of experts are other distinction. the capu interprets the rights of experts as follows. the expert has the right (verkhovna rada ukrainy, 2005): – to study case files which are very important, because due to poor actual knowledge about the subject of investigation it will be difficult for an expert, and sometimes it is impossible, to be up to speed on what is a matter of the investigation. – to submit a petition for additional files and samples, if the examination is scheduled by the court. the expert uses this right in the case when it is impossible to carry out the investigation without particular files. paragraphs 3-6 copy the law of ukraine “on forensic examination” and repeat the right of an expert in criminal procedure as follows: – to present facts found out in the course of performing the expert examination in the report, which have importance for a case and are beyond doubts in regard to expert initiation that can be limited differently baltic journal of economic studies 244 vol. 5, no. 2, 2019 in the cpc of ukraine. the expert in the administrative procedure has more freedom of action in this aspect that permits him to indicate personal comments in the report towards facts, which are not taken into account by the court and which, in his opinion, have importance to solve a case on the merits. – to be present during performing legal proceedings that concern subject and object of investigation, as well as expert initiation, as an expert upon his own initiative decides it is necessary to carry out a comprehensive and impartial examination to answer questions, which are raised by the court. – to file a request for interrogation of case’s participants and witnesses for the purposes of expert examination performance – an opportunity to realize expert initiation to the full extent, due to which an expert, acting dynamically and crossing the line of formalistic performance of court order, determines the extent of relevant information, which is required for proper implementation of his responsibilities. – to use other rights provided by the law of ukraine “on expert examination”. these rights can be: to file complaints about the actions of the person in whose proceedings the case is, if these actions violate the rights of a forensic expert, as well as to receive remuneration for conduct of forensic examination, if its performance is not an official task, etc. (verkhovna rada ukrainy, 2005). the legislator has added this provision in order that an expert doesn’t cross the line of a neutral party of another participant of a proceeding, standing up for neither the defence nor the prosecution. 3. forensic experts on the basis of the law of ukraine “on the protection of persons involved in criminal proceedings” securing protection is implemented for forensic experts on the basis of the law of ukraine “on the protection of persons involved in criminal proceedings” (verkhovna rada ukrainy, 1994). the law stipulates the protection of life, health and different, equal to others, kinds of protection for participants of legal proceedings, including the expert participating in proceedings, in order to minimize the impact on him and his professional activities on the part of the interested party. among the security measures, the law defines as follows as: close protection, housing and property protection; provision of special personal protective equipment and danger notification; use of technical means of control and monitoring of telephone and other negotiations, visual observation; change of documents and appearance; change of place of work or study; resettlement to another place of residence; placement in a preschool educational institution or institution of social protection for the public; confidentiality of personal data; private trial or other measures that would ensure the safety of the participant of court proceedings (verkhovna rada ukrainy, 1994). during the examination, the expert initiative may be manifested through the selection of the most rational way of conducting the research, as well as violation of the limits of questions, which are raised by the court in order to substantiate new facts that are important for the resolution of criminal or administrative proceedings (melnik, 2005). there are also differences related to the issue or examination time. the capu has a point of the possibility to schedule a forensic examination during the preparation of an administrative case for consideration that is regulated by para. 2 p. 8 of art. 180 of the capu. the schedule of an examination is also among the means of providing evidence (it is indicated in art. 115 of the capu), which is implemented on the basis of an application submitted to the court in full or in part (verkhovna rada ukrainy, 2005). the cpc of ukraine in accordance with art. 93, evidence gathering is carried out by the parties to the criminal proceedings by conducting investigative actions, one of which is the schedule of examination, after the criminal proceedings have been undertaken within the framework of the investigation. the indictment, which is sent to court, includes not only collected evidence of guilty, including the findings of forensic examination but also the amount of expenses for the involvement of an expert (article 291, para. 2, p. 8). however, this fact does not prevent the examination by a court order during a trial at the request of one of the parties provided by art. 332 of the cpc of ukraine. that’s a problem if the reports presented as evidence contradict each other, and the interrogation of experts has not eliminated these contradictions, or the ground is the provision of art. 509 of cpc, according to which there is a need for a psychiatric examination as a result of inadequate conduct of the defendant, although the notion of inadequacy causes doubts as there is no definition of adequacy as such in the literature on procedural issues, and there is no description of the inadequacy criteria and the subjects who assess the adequacy (verkhovna rada ukrainy, 2013). there are also differences in the subject of inquiry. in administrative proceedings, subjects are documents, actions of entities of authoritative power, public persons, people, vehicles, and in criminal proceedings such objects are anything except legal matters. so, it may be concluded that the range of objects in criminal proceedings is wider, and in administrative proceedings, each object has specific, distinctive properties because it solves managerial issues. there are differences between the procedural provisions also in relation to the expert’s report as evidence. in the administrative procedure, the expert’s report is an independent procedural form to verify available evidence and obtain a new one, and the main purpose of the examination is a qualitative assessment of facts by an expert, taking into account the requirements of the law (yanchuk, 2009). baltic journal of economic studies 245 vol. 5, no. 2, 2019 assessment of the expert’s conclusion as evidence is stipulated by art. 108 of the capu, according to which the expert’s report is accepted by the court together with other evidence and does not have a predetermined force. generally, the evidence is assessed in accordance with art. 90 of the capu: the court considers the evidence which is provided by the parties, in its internal conviction, on the basis of their direct, comprehensive, complete, and impartial investigation (verkhovna rada ukrainy, 2005). in reference to the expert report, the court evaluates it from the standpoint of belonging, admissibility, authenticity, and sufficiency, in accordance with the general principles of the law of evidence. the expert report is interpreted as appropriate if it permits to establish or confirm facts under consideration in the proceedings. the examination establishes or denies facts that are the subject of consideration. an assessment of expert’s report in a criminal proceeding, in the context of belonging, is determined by the presence of connections and determinations of the facts that are established by him in relation to the subject of ultimate fact or its individual elements. in order to recognize the expert reports reliable, it is necessary that it is based on the results of the study of objects collected in accordance with adherence to the relevant procedural requirements (honcharenko, 2010). a forensic examination is considered eligible if it has appropriate procedural form and there are no doubts about its compliance with the current laws, whether particular evidence is a means for the establishment of facts, which are subjected to be proved. furthermore, the general proof rules are observed, namely, the completeness and accuracy of collected and synthesized information. recently, proof from the contrary has become popular among scholars. features of incompetent proof are most often presented in the scientific literature on the issues of evidence of law: they are received with violation of human rights and freedoms, as a result of not clarifying the rights of the parties to the process; violation of restrictions established for certain categories of persons (syzonenko, 2003). the evaluation of evidence in criminal proceedings is regulated by art. 94 of the cpc of ukraine according to which an investigator, a prosecutor, an investigating judge, a court, on the basis of a comprehensive, complete, and impartial investigation of the circumstances of the criminal proceedings, assess each submitted evidence by internal conviction in relation to belonging, admissibility, authenticity, and the set of evidence collected in terms of sufficiency and interconnection (verkhovna rada ukrainy, 2013), which is in common with the provisions of the capu. scholars interpret the evaluation of evidence in different ways. a. r . bielkin defines it as a logical process for the establishment of existence and character of links between evidence and the determination of role, significance, sufficiency, and ways of evidence use in order to ascertain the truth (belkin, 1999). ye. h. kovalenko determines the evaluation of evidence as the mental activity of a person (investigating officer, investigator, prosecutor, judge) which is aimed at examining facts to establish the truth in the case and which is carried out in certain logical forms in accordance with the law and legal consciousness to their beliefs, based on a comprehensive, complete, and impartial analysis of all circumstances of the case in aggregate. it is also aimed at establishing the authenticity and belonging, admissibility and sufficiency of the evidence, their relationship and significance for solving issues that constitute the ultimate fact (kovalenko, 2011). this definition is quite exact as it fully reflects the content of proof and dealing with the evidence of relevant actors. scholar-criminalists note that the expert opinion assessment is carried out in the criminal procedural dimension both as formal and as content one. the formal assessment consists in verifying the correspondence of the number of raised questions, their compliance with the procedure, the sufficiency of materials provided for the study, the content of the proceedings used by the expert to formulate a conclusion. in turn, the content evaluation includes analysis of methods, tools, and techniques of investigation, completeness and validity of the investigation, correctness, logic and the absence of contradictions (varfolomeieva, honcharenko, boiarov, honcharenko, popeliushko, 2011). another scientific position is connected with the fact that the expert’s opinion may be evaluated by the initiator of the schedule of an expert study, and in addition all those who are familiar with the materials of criminal proceedings, while statements, petitions, and protests concerning an expert opinion contribute to the establishment of the truth in the proceedings (markus, 2007). if we compare this provision with administrative proceedings, there is a significant difference when familiarizing with the expert’s conclusion of the parties. if the forensic examination was conducted before the trial began, then as a proof, it together with a copy of the statement of claim is presented to the other party, and all comments on it are not left too late before the final decision is made. that is, the other party is given time to express its opinion about the provided evidence, to challenge it or to agree with it. in addition to the above-mentioned differences, it is also possible to specify forensic examinations in these two procedures. if the legislator determines the obligatory types of forensic examinations in art. 242 of the cpc of ukraine, they are as follows: determining the causes of death – forensic examination of the corpse is applied; determining definite bodily injury – forensic medical examination of the degree of bodily injuries – living persons, as well as forensic examination of the mechanism of infliction of bodily harm; determining the mental condition of a suspected person – forensic psychiatric examination – outpatient baltic journal of economic studies 246 vol. 5, no. 2, 2019 or in hospital depending on the fact whether such person was registered with a psychiatrist; when determining the age of a person – forensic medical examination of living persons, as well as psychological examination; establishing the sexual maturity of a victim – forensic medical examination; determining the amount of tangible damage – commodity examination (verkhovna rada ukrainy, 2013). the types of examinations in the administrative procedure are determined more complex. among certain types of expert examinations in the administrative procedure are forensic-economic, construction and technical, fire and technical, handwriting, forensic, medical and social, commodity, the examination of land evaluation, art examinations, etc. the unified state register of judicial decisions denotes an annual increase of the number of performed forensic examinations in the administrative proceedings. the forensic economic examination is among the leaders in administrative procedure, which is a form of implementation of finance and economic control, and it is also very important to justify the reliance of managerial decisions that are adopted by enterprises (perevozova, 2013). economic examination is defined by scholars as the study of certain problems that arise in the process of economic activity of the entity and require qualified actions of expert (experts) to achieve a specific goal and to solve peculiar tasks related to financial and tax accounting, financial and economic activity and finance and credit operations, as well as to prevent significant threats and risks from this kind of subject (derii, dema, 2017). we believe that we should agree with this definition. legal examination is important for administrative procedure as it related to the establishment of compliance with the current legislation, purpose and means, certain mechanism for the implementation of act being appealed, the list of documents submitted for the relevant actions, as well as the sufficiency of subject powers for their execution (kalmykova, 2013). among the new types of forensic examinations in administrative procedure, it is also determined psychological examination, which becomes more widespread. it can act as proof of the following: whether a certain person can be a subject of an administrative infraction, what is the form of his guilt and which motives of behaviour were fundamental. in most cases, a psychological examination is carried out during administrative proceedings, and the information which is subjected to be analysed by an expert contains testimonies of offenders, witnesses, victims to the circumstances of committed actions. a psychological examination is carried out in several stages. at the first stage, experts investigate the available evidence, in future, they can apply for the submission of documents, which would more fully characterize the personality of the examinee, than an experimental psychological investigation is carried out and, based on its results, the expert opinion is formed, which is announced in court. it is difficult to solve issues with several examinees: it is not clear how to conduct the study – either simultaneously or sequentially (kostytskyi, 2013). in accordance with the current legislation, as well as any other evidence, the court evaluates the examination on the basis of inner convictions, in concordance with case files. as a special feature of administrative proceedings in the schedule and execution of forensic examinations, it is necessary to mention the division of examinations into additional, repeated, commission and complex (arts. 9-11 of the capu), which exists also in criminal procedural law, but procedural requirements for which are not indicated at the legislative level, in the cpc of ukraine. particular attention should be given to novels associated with amendments to the capu, which cover issues of legal regulation of court costs in administrative proceedings. thus, the articles of the capu determine the types of court costs, the procedure and terms of their reimbursement, disposition of funds, etc. art. 132 of the capu states that the court costs consist of court fees and expenses related to the consideration of a case. the amount of court fee, the procedure for its payment, reimbursement, and fee waiver shall be consolidated by law. costs related to the case consideration are expenses: on professional legal assistance; of parties and their representatives connected with their arrival at the court; associated with the involvement of witnesses, specialists, translators, experts and expert examinations; related to the disclosure of evidence, the examination of evidence over their location, the provision of evidence; connected with other procedural actions or preparation for consideration of the case (verkhovna rada ukrainy, 2005). when scheduling an expert examination or involving an expert, the law provides advance payment of legal expenses. thus, the court may oblige the participant, who filed an application for the schedule of an expert examination, the involvement of an expert, provision, disclosure or study of evidence at their location, advance (in advance), to cover the costs associated with a particular procedural act. if several parties have filed a motion, the necessary amount of money shall be paid, in equal shares, by relevant participants of the case in advance, and in cases where the relevant procedural action is carried out on the initiative of the court – by the participant (participants) of the case, who is obliged by the court (art. 136 of the capu) (verkhovna rada ukrainy, 2005). the article also specifies the consequences of late payment of court costs – in the case of non-payment of particular sums in advance in term specified by court, a court can reject the request for schedule of examination, involvement of an expert, provision, disclosure or study of evidence at their location and make a decision on the basis of other evidence provided by the case baltic journal of economic studies 247 vol. 5, no. 2, 2019 participants or cancel the previously approved decision on the schedule of an expert examination, the provision, disclosure or study of evidence at their location. a court reviewing the merits of the case may redistribute the expenses, specified in this article, paid by the party to the case in advance, in accordance with the rules on distribution of court costs established by this code (verkhovna rada ukrainy, 2005). article 137 of the capu determines the volume of expenses related to the involvement of experts and performing expert examinations, the procedure for their payment, and the consequences of late payment. thus, an expert receives a reward for executed activities (rendered services) related to the case, if it is not a part of his official duties. in cases where the amount of expenses for the work (services) of an expert or performance of expert examination was not previously paid by the participants of the case (in advance), the court recovers these amounts in favour of an expert or expert institution from a party, which is determined by the court in accordance with the rules on the apportionment of court costs that are consolidated by this code. it is determined at the legislative level that expenses for the preparation of an expert report upon the request of a party, carrying out an examination, the involvement of an expert is established by the court on the basis of contracts, accounts, and other evidence. however, it should be noted that the form, structure, and content of these contracts and accounts remain the gap. the definition of the requirements in the article regarding the balance of costs with complexity, extent of work, and time for its implementation, which states that the volume of expenses for the payment of works (services) of the expert involved by a party must commensurate with the complexity of work (services), its volume and time spent to perform work (services) doesn’t not eliminate gaps, as well as the following provisions of this article: in case of non-compliance with the requirements for commensurability of expenses, the court may, at the request of the other party, reduce the volume of costs for the payment of works (services) of a specialist, translator or expert, which are subjected to the distribution between the parties; obligation to prove the incommensurability of costs is laid upon the party claiming a reduction in costs, which are is subject to be distributed between the parties (verkhovna rada ukrainy, 2005). according to para. 9 of art. 139 of the capu in deciding on the distribution of court costs, the court takes into account: whether these expenses are connected with consideration of a case; whether the volume of these costs is reasonable and proportional to the subject of a dispute, case significance for the parties, including whether the result of the case solution may influence the image of a party or whether a case sparkles a public interest; party’s behaviour during conducting a trial that leads to delaying of case consideration, in particular, submission of clearly unfounded claims and requests by a party, fact-free assertion or denial of certain facts by the party, which are important for the case, etc.; actions of a party in relation to the pre-trial settlement of a dispute (in cases where pre-trial dispute resolution is mandatory according to the law) and the dispute settlement by peaceful means during the consideration of a case, the stage of case consideration in which such actions were performed (verkhovna rada ukrainy, 2005). the requirements for the amount of expenses, which a party has paid or should pay in connection with the consideration of the case, is established by the court on the basis of evidence provided by the parties (contracts, accounts, etc.), as the regulation of art. 139 of the capu indicates. it is also noted that such evidence is submitted before the end of legal debate in the case or within five days after approval of court decision if a party has made a corresponding application before the end of the court debate in the case. in the context of the lack of a relevant application or failure to submit appropriate evidence within the deadline, the application remains unconsidered. the peculiarities of the decision on court costs are noted in art. 143 of the capu, which states that a court resolves the issue on court costs in a decision, ruling or order. at the same time, participants of a case, witnesses, experts, specialists, and interpreters may appeal a court decision on costs, if it concerns their interests. however, if a party, for good reason, cannot submit evidence that verify the amount of legal expenses incurred by it, the court may, on the basis of application of such a party submitted before the end of legal debates in the case, decide the issue of legal costs after the decision for essence of complaints. a specific feature is that, in order to resolve the issue of court costs, the court appoints a court session, which is held not later than fifteen days from the day of the decision on the merits of the claims, or makes an additional decision if a party cannot, for good reason, submit proofs of the amount of legal expenses incurred by it until the end of legal debate. in the case of adoption of a decision on termination of proceedings on the case, keeping a claim without consideration or approval of the decision on the claim satisfaction in connection with its acknowledgment, the court decides on the distribution of court costs not later than ten days from the day of the adoption of relevant court decision, if a party to a case provided an appropriate application and evidence verifying the amount of court costs (petrova, shulzhenko, 2018). 4. conclusions the specific nature of forensic examination in this area is related to a range of issues that are solved by administrative proceedings – from the consideration of misconduct to public-law disputes with the subjects of authoritative power. the capu does not provide the term “forensic examination” but, on the basis of above mentioned, it is clear that forensic examination in the baltic journal of economic studies 248 vol. 5, no. 2, 2019 administrative procedure involves the use of special knowledge while the proceedings, during which there is a new source of evidence – the expert’s opinion. comparing forensic expert activity that takes place in administrative procedure with the same one in criminal procedure, it is necessary to note a significant difference not only in the execution of procedural provisions of the appointment and conducting of forensic examinations, evaluation of expert’s opinion but also in the diversity of issues that are investigated by experts. of course, administrative proceedings differ from criminal ones but the main details related to forensic expert activity should be reduced to one standard in order to improve the regulatory framework that determines procedural activity. references: shcherbakovskyi, m. h. 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(2005). aktualnye voprosy ekspertnoj iniciativy [topical issues of expert initiative] (phd thesis). chelyabinsk. yanchuk, o. iu. (2009). sudova ekspertyza v administratyvnomu sudochynstvi [forensic examination in administrative legal proceedings]. visnyk akademii advokatury ukrainy, 2(15), 145–150. honcharenko, v. h. (2010). ekspertyzy u sudovii praktytsi [forensic examinations in judicial practice]. kyiv: yurinkom inter. (in ukrainian) syzonenko, a. s. (2003). nedopustymist dokaziv u kryminalnomu sudochynstvi [inadmissibility of evidence in criminal proceedings]. visnyk verkhovnoho sudu ukrainy, 5(39), 57–59. belkin, a. r . (1999). teoriya dokazyvaniya [evidence theory]. moscow: norma. (in russian) kovalenko, ye. h. (2011). naukovi zasady kryminalno-protsesualnoho dokazuvannia: monohrafiia [scientific fundamentals of criminal procedure proving: a monograph]. kyiv: yurinkom inter. varfolomeieva, t. v., honcharenko, v. h., boiarov, v. i., honcharenko, s. v., popeliushko, v. o. 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(2013). osoblyvosti provedennia sudovo-psykholohichnoi ekspertyzy v administratyvnomu protsesi [peculiarities of the implementation of psychological expertise in administrative procedure]. naukovoinformatsiinyi visnyk ivano-frankivskoho universytetu prava imeni korolia danyla halytskoho. seriia «pravo», 8, 10–16. petrova, i. a., shulzhenko, a. v. (2018). similarities and differences of forensic expert activity in administrative and criminal procedures. administrative law and administrative-procedural law: origins, achievements and prospects of development: collective monograph. riga: izdevnieciba «baltija publishing». baltic journal of economic studies 121 vol. 2, no. 1, 2016 corresponding author: 1 department of economy and law, national university of food technologies. e-mail: shtv2008@mail.ru the theoretical and methodical approach to an assessment of a level of development of the enterprise in conditions of globalization tatiana shved1, national university of food technologies, ukraine abstract. the subject of this article is theoretical, methodical and practical aspects of enterprise development in conditions of globalization. the purpose of this research is to provide theoretical and methodical approach to an assessment of a level of development of the enterprise, which is based on the relationship between the factors and influence, illustrating the effect of the internal and external environment of enterprises functioning, and indicates the level of development of the enterprise. methodology. theoretical basis of the study was the examination and rethinking of the main achievements of world and domestic science on the development of enterprises. to achieve the objectives of the research following methods were used: systemic and structural analysis for the formation of methodical approaches to the selection of the factors, influencing the development of enterprises; abstract and logical – for the formulation of conclusions and proposals; the method of valuation and expert assessments to the implementation of the proposed theoretical and methodical approach to an assessment of a level of development of the enterprise in conditions of globalization. results of the research is the proposed theoretical and methodical to an assessment of a level of development of the enterprise in conditions of globalization, which is associated with the idea of development of the enterprise as a system with inputs–factors, influencing on the development , and outputs – indicators of the level of enterprise development within these factors. so, the chosen factors – resources, financial-economic activity, innovation and investment activities, competition, government influence, and foreign trade. indicators that express these factors, are capital productivity, labour productivity, material efficiency within the first factor; the profitability of the activity, the coefficient of current assets, the total liquidity coefficient, financial stability coefficient, the coefficient of beaver within the second factor; the proportion of intangible assets, the coefficient of investment in the third factor; the market share of enterprises in total volume of industry's production in the fourth aspect; the coefficient of the tax burden under the fifth factor and the share of exports in total production in the last factor. within this approach to avoid the different dimensions of the particular indicators illustrating the level of the enterprises development it’s carried out their rationing. the importance of each factor influencing the level of development of the enterprise in conditions of globalization can be conducted through the use of expert research, verification of the representativeness of which is by using the coefficient of concordance to determine the level of consistency of experts’ opinions and the criterion of pearson, which confirms its importance. in the event of a sufficient consistency of opinion of experts have the ability to offer an integrated indicator of the level of development of the enterprise in conditions of globalization through the use of a common desirability function of harrington. assessment of a level of development of the enterprise in conditions of globalization for a particular industry is by using well-known scales of desirability, which is in the range from 0 to 1 and allows one to calculate the integral indicator and to determine the level of development as high, medium, low and critically low. key words: the level of development of the enterprise, globalization, indicators, factors affecting the development of enterprises, development strategy of the enterprise. jel classification: l23, f61, c67, o12, l53 1. введение углубление интеграции социально-экономических систем отдельных государств в единое экономическое пространство, повышение конкуренции на внутренних и внешних рынках, ускорение научно-технического развития во всех сферах общественной деятельности предопределяют необходимость разработки и реализации качественных, своевременных, целенаправленных baltic journal of economic studies 122 vol. 2, no. 1, 2016 и системных решений в сфере управления производством субъектов хозяйствования. современный этап развития рыночных отношений требует от национальных предприятий активных действий, направленных на повышение эффективности их функционирования. однако, данная проблема является неразрешенной без комплексной оценки уровня развития предприятий. последнее повышает актуальность исследования методических подходов к названной проблематике как для экономической науки, так и для практики. теоретические и практические аспекты деятельности и развития предприятий, проблемы оценки эффективности их функционирования были освещены в трудах таких ученых как: в. андрийчук (andriychuk, 2005), и. гонтарева (gontareva, 2012), а. іванилов (ivanilov, 2009), м. мейер (meyer, 2002), ю. погорелов (pogorelov, 2011), с. покропивный (pokropivniy, 1999), а. шеремет (sheremet, 2011) и др. в работах этих авторов рассмотрены необходимость эффективной деятельности предприятий как важного элемента рыночной системы, освещены методологические вопросы развития предприятия и его оценки с точки зрения ресурсного и результатного подходов, определена совокупность показателей, которые отражают определенные изменения на предприятии и тому подобное. несмотря на большое количество опубликованных работ, теоретическую и практическую их ценность, немало методических аспектов проблематики требуют дальнейших научных исследований, что определило цель исследования – предложить теоретико-методический подход к оценке уровня развития предприятия, который основывается на взаимосвязи между факторами влияния, иллюстрирующие действие внутренней и внешней среды функционирования предприятий, и показателями уровня развития предприятия. четкость и лаконичность в их трактовке позволит не только оценить уровень развития предприятия в условиях глобализации, но и на этой основе предложить конкретные действия, направленные на его повышение. 2. система факторов и показателей для оценки уровня развития предприятия в условиях глобализации деятельность предприятия, в первую очередь, обусловлена имеющимися ресурсами, которые используются в производственном процессе, их количеством, составом и эффективностью использования. ресурсное обеспечение потенциала предприятия можно определить как совокупность основных факторов производства (материальных, технико-технологических, трудовых), что является основой формирования потенциала предприятия. самостоятельный выбор видов и направлений использования ограниченных ресурсов, что обеспечивает стремление предприятий к постоянному развитию обусловлен конкуренцией, стимулирующие механизмы которой в глобализационных условиях особенно усиливаются. конкурентный тип рыночных отношений в современных условиях связан с целенаправленным стимулирующим воздействием государства на предпринимательский сектор через использование соответствующих инструментов фискальной, денежно-кредитной, антимонопольной политики. повышение эффективности производственной деятельности и темпов экономического развития предприятия в условиях глобализации возможно только за счет осуществления предприятиями активной инвестиционной и инновационной деятельности. интегрирование экономики страны в мировое хозяйство, ее участие в различных видах международного сотрудничества повышает роль и значение внешнеэкономической деятельности предприятия. следовательно, развитие предприятия зависит от многих факторов, которые иллюстрируют действие как внутренней, так и внешней среды функционирования предприятий и такими факторами в условиях глобализации, по нашему мнению, являются: имеющиеся ресурсы и возможности их использования; конкуренция между предприятиями на рынке; направленность государственного влияния на поддержку развития предпринимательского сектора; инвестиционно-инновационная деятельность предприятия; финансово-экономическая деятельность предприятия, внешнеэкономическая деятельность предприятия. имеющиеся ресурсы и возможности их использования иллюстрируются с помощью таких известных показателей, как: фондоотдача, материалоотдача и производительность труда. уровень конкуренции между предприятиями на рынке можно выразить через долю предприятия на рынке. направленность государственного влияния на поддержку развития предпринимательского сектора характеризуется долей уплаченных налогов в общих затратах предприятия (коэффициент налоговой нагрузки). показателями инвестиционно инновационной деятельности предприятия является доля нематериальных активов и коэффициент инвестирования. результаты финансово-экономической деятельности предприятия демонстрируются с помощью рентабельности деятельности предприятия, коэффициентов оборачиваемости активов, общей ликвидности (покрытие), финансовой устойчивости (автономии) и коэффициента бивера. показателями же внешнеэкономической деятельности предприятия является доля продукции на экспорт в общем объеме продукции предприятия. 3. методический подход к оценке уровня развития предприятия в условиях глобализации понимая, что каждый в отдельности из указанных показателей, во-первых, не имеет всеобъемлющего характера, во-вторых, только частично отражает результативность факторов, влияющих на развитие baltic journal of economic studies 123 vol. 2, no. 1, 2016 предприятия, способом решения таких ограничений считаем идентификацию интегрального показателя уровня развития предприятия в условиях глобализации. последний способен сбалансировать, с одной стороны, необходимость включения достаточно большого количества аспектов развития предприятия и чрезмерную формализацию данного показателя и, с другой стороны, возможность его практического использования для интегрального оценивания уровня развития как отдельных предприятий, так и отрасли в целом. понятно, что уровень развития предприятия должен отображаться с помощью определенных показателей. оценка уровня развития предприятия может быть реализована с использованием специфического показателя  – интегрального показателя уровня развития предприятий отрасли в условиях глобализации, выражающийся общеизвестной функцией харрингтона: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (1) где d – среднее геометрическое отдельных желательностей (частичных функций желательности уj (п) – показателей уровня развития предприятия). пределы изменения значений обобщенной (d) и частичных (уj) функций желательности – [0;1]. в основе построения этой обобщенной функции содержится идея преобразования натуральных или относительных значений критериев в безразмерную шкалу желательности в пределах от 0 до 1, то есть формализации представлений исследователя о важности тех или иных значений отдельных критериев оптимальности. эта общепринятое соответствие приведено в таблице 1. таблица 1 стандартные оценки по шкале желательности желательность оценки по шкале желательности очень хорошо 1,00 – 0,80 хорошо 0,80 – 0,63 удовлетворительно 0,63 – 0,37 плохо 0,37 – 0,20 очень плохо 0,20 – 0,00 в нашем случае предлагаем использовать d как среднее геометрическое отдельных показателей уровня развития предприятия (уj), которые могут иметь одинаковую или разную значимость и приведены к безразмерной форме, то есть быть нормируемыми. в качестве факторов, которые влияют на уровень развития предприятия и выражаются соответствующими показателями (уj), были выбраны следующие: фактор «ресурсы» – п1, фактор «финансово-экономическая деятельность» – п2, фактор «инвестиционно-инновационная деятельность» – п3, фактор «конкуренция»  – п4, фактор «государственное влияние» – п5, фактор «внешнеэкономическая деятельность» – п6. поэтому показатель уровня развития предприятия (пррп) может приобрести вид: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (2) где 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ; 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ; 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ; 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ; 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ; 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 . поскольку факторы, которые выражаются соответствующими показателями п1-п3 являются функциями от нескольких факторов, пррп приобретает следующий вид: пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 , (3) где a1 – фондоотдача, a2 – производительность труда, а3 – материалоотдача; b1 – рентабельность деятельности, b2 – коэффициент оборачиваемости активов, b3 – коэффициент общей ликвидности (покрытия), b4 – коэффициент финансовой устойчивости (автономии), b5 – коэффициент бивера; c1 – доля нематериальных активов, c2 – коэффициент инвестирования; f1 – доля рынка предприятия; k1 – коэффициент налоговой нагрузки; s1 – доля продукции на экспорт в общем объеме продукции предприятия. 4. интегральный показатель уровня развития предприятия в условиях глобализации одной из главных задач, возникающих перед исследователем при использовании интегрального показателя уровня развития предприятия является нормирование значений факторов с целью избежания разноразмерности. как правило, величины нормируются в диапазоне от 0 до 1. чаще всего с этой целью применяется линейное преобразование следующего вида: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (4) где у(х) – нормированный показатель, х – текущее значение фактора, xmin – минимальное значение фактора, xmax – максимальное значение фактора. таким образом в результате получим безразмерный показатель уровня развития предприятия, который имеет пределы от 0 до 1. сравнение рассчитанных значений данного показателя для разных предприятий или отраслей даст возможность сделать вывод об уровне их развития, тогда как его расчет в рамках отдельного предприятия за разный промежуток времени позволит выявить тенденции прогресса (роста) или регресса предприятия за анализируемый период времени. как отмечалось ранее, отдельные показатели, выражающие влияние факторов на уровень развития предприятия (п1-п6) могут иметь одинаковую или разную значимость, в результате чего вид формулы для расчета показателя уровня развития предприятия может быть другой. введение в формулу 2 весового коэффициента (значимость факторов) даст возможность учитывать уровень значимости каждого фактора, который влияет на уровень развития предприятий отрасли и выражается соответствующими показателями. baltic journal of economic studies 124 vol. 2, no. 1, 2016 показатель уровня развития предприятия может быть средним геометрическим частных показателей п1-п6, которые имеют одинаковую значимость. в случае, когда показатели имеют разную значимость должна быть использована формула расчета среднего геометрического взвешенного и в этом случае формула 2 приобретает вид: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (5) где e1, е2, е3, е4, е5, е6 – весомости (значимость факторов). следующим этапом предложенной методики является ранжирование показателей п1-п6 по шкале порядка, то есть определение их места в порядковой шкале. место показателя в этой шкале называется рангом. количественное значение ранга в ряду возрастающей порядковой шкалы увеличивается от 1 до m. определение суммы рангов каждого из показателей экспертной оценки и коэффициентов их весомости осуществляется по следующей формуле: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (6) де n – количество экспертов; m – количество показателей качества, которые оцениваются (m=6); qi,j – коэффициент весомости j-го показателя в рангах (балах), который дал эксперт. при этом ∑ = = 6 1 1 i ie . определение весомости влияния факторов (ei), которые влияют на уровень развития предприятия и выражаются через соответствующие показатели (п1-п6) и их распределение для предоставления рангов (gi) в возрастающем порядке отражены в таблице 2. понимая, что весомость влияния каждого из факторов, выраженных соответствующими показателями (п1-п6), которые в свою очередь определены с помощью показателей (а1-а3; b1-b5, c1-c2, f1, k1, s1) разная, оценить весовые коэффициенты (е1-е6) возможно за счет мнений экспертов. как правило, аналитические экспертные оценки предполагают длительную и тщательную предварительную работу экспертов над анализом тенденций, оценкой состояния и путей развития объекта прогноза. этот метод дает возможность в полном объеме использовать всю необходимую информацию об объекте исследования, что, несомненно, повышает точность осуществляемого прогноза. методическим обеспечением осуществляемого экспертного оценивания может быть анкета. совокупность ответов должна дать полную характеристику изучаемой проблемы, и позволить установить изучаемые причинно-следственные связи. после осуществления оценки параметров модели важным этапом является проверка адекватности модели, т. е. оценки степени соответствия ее параметров характеристикам объекта исследования. так, с целью определения уровня согласованности мнений экспертов, то есть проверки репрезентативности проведения экспертного оценивания целесообразным является использование коэффициента конкордации (w), который вычисляется по формуле 7: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (7) где 12 – постоянная величина в формуле расчета коэффициента конкордации, предложенной кендаллом; n  – количество показателей (в нашем случае сценариев с разными значениями хі); m – количество экспертов; rij – сумма баллов j-го сценария, присвоенного ему і-м экспертом; 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 – средняя сумма баллов всех показателей. расчет коэффициента конкордации для каждого показателя уровня развития предприятия даст возможность определить, насколько мнения экспертов согласованы друг с другом, то есть принадлежат к одной генеральной совокупности оценок. величина коэффициента конкордации может меняться в пределах от 0 до 1, причем его равенство единице означает полную согласованность мнений экспертов, а равенство нулю свидетельствует, что связи между оценками, полученными от разных экспертов, не существует. в случае, если w<0,2-0,4 согласованность экспертов является слабой, а при значении данного коэффициента в пределах 0,6-0,8 можно говорить о существовании сильной согласованности экспертов (novosad, seliverstov, 2008). в случае сильной согласованности мнений экспертов с целью определения существенности коэффициента конкордации целесообразным в использовании является критерий пирсона (χ2). таблица 2 определение весомости влияния факторов, которые влияют на уровень развития предприятия факторы, выраженные показателями эксперты 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ei1 2 3 4 5 6 n п1 е1 п2 е2 п3 е3 п4 е4 п5 е5 п6 е6 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 1 baltic journal of economic studies 125 vol. 2, no. 1, 2016 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 . (8) расчетное значение χ2 – критерий пирсона сравнивается с табличным значением, если оно превышает табличное, то коэффициент конкордации существенный, а мнения экспертов являются согласованными. отметим, что табличное значение критерия пирсона с вероятностью р=0,95 составляет 3,24 (lapach, 2002). в случае превышения расчетного значения критерия пирсона над табличным, есть возможность усреднения значений показателей уровня развития предприятия в каждой точке для дальнейшего расчета оптимальных границ факторов. определение рангов на основе синтеза мнений экспертов позволяет видоизменить формулу 5 в соответствии с установленным рангом в таблице 3: 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 , (9) где g1, g2, g3, g4, g5, g6 – ранги весомости влияния факторов на уровень развития предприятий отрасли, которые выражаются через соответствующие показатели. оптимизация зависимости уровня развития предприятия от факторов воздействия осуществляется с использованием обобщенного критерия оптимизации (поскольку в данном случае важным является соблюдение всех оптимальных числовых значений выходной переменной) – функции желательности харрингтона. для преобразования соответствующих значений откликов (yj) можно использовать компьютерную программу excel и получить достаточное количество значений преобразования в долевую шкалу желательности. из этих значений, учитывая целевую функцию – оценка уровня развития предприятий отрасли в условиях глобализации, необходимо понимать, что в случае значений обобщенной функции желательности харрингтона (d) в пределах желательности – очень хорошо и хорошо (в соответствующих интервалах 1,00-0,80 и 0,80-0,63) уровень развития предприятия является высоким; в пределах желательности 0,37-0,63 уровень развития предприятия является средним; в соответствующем интервале 0-0,37 уровень развития предприятия является низким и, если значение меньше 0,2 уровень развития предприятия считаем критически низким. определения показателей уровня развития предприятий отрасли в условиях глобализации, которые представляют отрасль за разный промежуток времени позволит выявить тенденции роста или регресса отрасли за анализируемый период времени. заключительным самым сложным и самым ответственным этапом данного моделирования является анализ и интерпретация полученных результатов. этот этап исследования завершается формулированием способов повышения уровня развития предприятия в рамках каждого из предложенных факторов, составляющих стратегию развития предприятия. в контексте нашего понимания сущности развития как закономерного и непрерывного процесса количественно-качественных изменений состояний функционирования предприятия в направлении достижения высшего или низшего уровней, который находится под влиянием факторов внутренней и внешней среды предприятия наиболее приемлемым является понимание стратегии развития предприятия как долгосрочной комплексной программы конкретных действий на определенную перспективу, что в любом случае исключает возможность негативных количественно-качественных изменений состояний функционирования предприятия. в упрощенном обобщенном виде можно предложить три вида стратегии развития предприятия в условиях глобализации: стратегии роста, стабильности, банкротства. стратегия стабильности состоит в сохранении и поддержке существующих направлений деятельности предприятия и достигнутых показателей развития предприятия в условиях глобализации. для стратегии роста характерно установление ежегодного значительного превышения интегрального показателя уровня развития предприятия над его значением в предыдущем году и направленность на улучшение частных показателей, а в итоге интегрального показателя уровня развития предприятия в условиях глобализации. стратегия банкротства выбирается в том случае, если частичные и интегральный показатель уровня развития предприятия является настолько низким, что отсутствует возможность продлить деятельность из-за недостатка ресурсов, денежных средств и тому подобное. по нашему мнению, в случае значения показателя уровня развития предприятий в пределах от 0,80 до 1 есть необходимость выбрать стратегию стабильности, а в пределах от 0,63 до 0,80 – стратегию роста. при условии средтаблица 3 определение рангов весомости влияния факторов на уровень развития предприятия факторы, выраженные показателями эксперты 𝐷𝐷 = �∏ 𝑦𝑦𝑗𝑗𝑚𝑚𝑖𝑖=1 𝑚𝑚 пррп = �п1 ∗ п2 ∗ п3 ∗ п4 ∗ п5 ∗ п6 6 где п1 = �𝑎𝑎1 ∗ 𝑎𝑎2 ∗ 𝑎𝑎3 3 ; п2 = �𝑏𝑏1 ∗ 𝑏𝑏2 ∗ 𝑏𝑏3 ∗ 𝑏𝑏4 ∗ 𝑏𝑏5 5 ; п3 = √𝑐𝑐1 ∗ 𝑐𝑐2 2 ; п4 = 𝑓𝑓1; п5 = 𝑘𝑘1; п6 = 𝑠𝑠1 пррп = �п1(𝑎𝑎1, 𝑎𝑎2, 𝑎𝑎3) ∗ п2(𝑏𝑏1, 𝑏𝑏2, 𝑏𝑏3, 𝑏𝑏4, 𝑏𝑏5) ∗ п3(𝑐𝑐1, 𝑐𝑐2) ∗ п4(𝑓𝑓1) ∗ п5(𝑘𝑘1) ∗ п6(𝑠𝑠1) 6 𝑦𝑦(𝑥𝑥) = 𝑥𝑥−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚−𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 пррп = �п1 е1 ∗ п2 𝑒𝑒2 ∗ п3 𝑒𝑒3 ∗ п4 𝑒𝑒4 ∗ п5 𝑒𝑒5 ∗ п6 𝑒𝑒6, ∑е 𝑒𝑒𝑖𝑖 = ∑ 𝑄𝑄i,j 𝑚𝑚 i=1 ∑ 𝑄𝑄i,j 𝑚𝑚,𝑚𝑚 𝑚𝑚=1,j=1 ∑ = = 6 1 1 i ie 2 _ 1 1 2 3 12 ( ) n m ij i j r r w m n n = =   −   = − ∑ ∑ _ 1 1 1 n m ij i j r r n = = = ∑∑ ( )2 1n m wχ = ⋅ − ⋅ пррп = �п1 𝑔𝑔1 ∗ п2 𝑔𝑔2 ∗ п3 𝑔𝑔3 ∗ п4 𝑔𝑔4 ∗ п5 𝑔𝑔5 ∗ п6 𝑔𝑔6, ∑𝑔𝑔 � 𝑄𝑄i,j 𝑛𝑛 i=1 � 𝑄𝑄i,j 𝑛𝑛,𝑚𝑚 𝑖𝑖=1,j=1 � 𝑄𝑄i,j 𝑛𝑛 i=1 ei gi1 2 3 4 5 6 7 8 9 10 п5 е5 g5 п1 е1 g1 п2 е2 g2 п3 е3 g3 п6 е6 g6 п4 е4 g4 σ 21 baltic journal of economic studies 126 vol. 2, no. 1, 2016 него уровня развития предприятия значение интегрального показателя уровня развития предприятия может колебаться в пределах от 0,37 до 0,63 и сопровождается выбором стратегии роста. если интегральный показатель уровня развития предприятия имеет значение от 0 до 0,37, уровень развития предприятия является низким и существуют возможности выбрать стратегию роста. однако, если данный показатель меньше 0,2 уровень развития предприятия считаем критически низким с отсутствием возможности продлить деятельность и необходимостью применить стратегию банкротства. заметим, что каждая из названных стратегий детализируется в выбранной долгосрочной комплексной программе конкретных действий на определенную перспективу. 5. выводы следовательно, оценка уровня развития предприятия в условиях глобализации может быть осуществлена на основе такого теоретико-методического подхода, который основывается на учете взаимосвязи между факторами влияния, отображающих действие внутренней и внешней среды функционирования предприятий, и показателями уровня развития предприятия, которыми предложены следующие: фондоотдача, производительность труда, материалоотдача, рентабельность деятельности, коэффициент оборачиваемости активов, коэффициент общей ликвидности (покрытия), коэффициент финансовой устойчивости (автономии), коэффициент бивера, доля нематериальных активов, коэффициент инвестирования, доля рынка предприятия, коэффициент налоговой нагрузки, доля продукции на экспорт в общем объеме продукции предприятия. в направлении реализации подхода возможно использование интегрального показателя уровня развития предприятия с помощью названных частных показателей с целью обоснования стратегии дальнейшего развития предприятия в условиях глобализации. references andriychuk, v. 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(2011). teoriya ekonomicheskogo analiza – moskva, infra–m, 352 p. татьяна швед теоретико-методический подход к оценке уровня развития предприятия в условиях глобализации аннотация. предметом исследования данной статьи являются теоретико-методические и практические аспекты развития предприятий в условиях глобализации. цель исследования – предложить теоретико-методический подход к оценке уровня развития предприятия, который основывается на взаимосвязи между факторами влияния, иллюстрирующие действие внутренней и внешней среды функционирования предприятий, и показателями уровня развития предприятия. методика. теоретической основой исследования стало изучение и переосмысление основных достижений мировой и отечественной науки по проблемам развития предприятий. для достижения поставленной цели исследования применялись следующие методы: системного и структурного анализа – для формирования методических подходов к выбору факторов, влияющих на развитие предприятий; абстрактно-логический – при формулировании выводов и предоставлении предложений; метод нормирования и экспертных оценок – для реализации предложенного теоретико-методического подхода к оценке уровня развития предприятия в условиях глобализации. результатом исследования является предложенный собственный теоретико-методический подход к оценке уровня развития предприятия в условиях глобализации, который связан с представлением развития предприятия как системы, имеющей входы – факторы, влияющие на развитие, и выходы – показатели уровня развития предприятия в пределах названных факторов. так, факторами избраны – ресурсы, финансово-экономическая деятельность, инновационно-инвестиционная деятельность, конкуренция, государbaltic journal of economic studies 127 vol. 2, no. 1, 2016 ственное влияние и внешнеэкономическая деятельность. показателями, которые выражают названные факторы, являются – фондоотдача, производительность труда, материалоотдача в пределах первого фактора; рентабельность деятельности, коэффициент оборотности активов, коэффициент общей ликвидности, коэффициент финансовой устойчивости, коэффициент бивера в пределах второго фактора; доля нематериальных активов, коэффициент инвестирования в рамках третьего фактора; доля рынка предприятия в общем объеме производства отрасли в рамках четвертого фактора; коэффициент налоговой нагрузки в рамках пятого фактора и доля продукции на экспорт в общем объеме продукции предприятия в рамках последнего фактора. в рамках названного подхода с целью избежания разноразмерности частных показателей, иллюстрирующих уровень развития предприятий осуществляется их нормирование. учет весомости каждого из факторов, влияющих на уровень развития предприятия в условиях глобализации может проводиться на основе использования экспертного исследования, проверка репрезентативности которого происходит с помощью коэффициента конкордации с целью определения уровня согласованности мнений экспертов и критерия пирсона, который подтверждает его существенность. в случае достаточной согласованности мнений экспертов есть возможность предложить интегральный показатель уровня развития предприятия в условиях глобализации на основе использования общей функции желательности харрингтона. оценка уровня развития предприятия в условиях глобализации для конкретной отрасли происходит с помощью общеизвестной шкалы желательности, которая находится в пределах от 0 до 1 и дает возможность вычислить интегральный показатель и определить уровень развития как высокий, средний, низкий и критически низкий. baltic journal of economic studies 47 vol. 6, no. 2, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: maksym.sitnicki@ukr.net orcid: http://orcid.org/0000-0002-0452-0404 researcherid: x-3756-2018 2 taras shevchenko national university of kyiv, ukraine. e-mail: iranetr@ukr.net orcid: https://orcid.org/0000-0001-5586-5405 * this scientific paper published with support by visegrad fund. doi: https://doi.org/10.30525/2256-0742/2020-6-2-47-53 interdependence assessing for net worked readiness index economic and social informative factors* maksym sitnicki1, iryna netreba2 abstract. the purpose of the paper is to identify the common factors and their influence on features of nri and, as a result, the impact on the competitiveness and well-being of ukraine. the most influential economic indicators for the similar economic changes in the european countries are determined. exploratory factor analysis has been used to uncover the underlying structure of relationships between measured variables that constructs the value of the networked readiness index (nri). methodology. this research is based on a materials for the eastern european countries, including ukraine, bulgaria, the czech republic, estonia, latvia, lithuania, poland and romania, which have been used for the numerical evaluation of the data. the selection criterion for these countries is in many respects a similar evolutionary path of market economy development. exploratory factor analysis (efa) is used to investigate possible relationships between variables that are unique factors and nri. in this case, efa is used to analyze the relationship between environment subindex (political and regulatory environment with business and innovation environment), readiness subindex (infrastructure, affordability and skills), usage subindex (individual usage, business usage, and government usage) and impact subindex (economic impacts and social impacts) or observable variables and how it is affected by total summary nri. as the predefined structure has not been set, efa is used to measure the underlying factors that affect the variables in the data structure. selecting factors and variables so as to avoid too much similarity of characteristics is also important. the set of subindexes values is divided on 31 variables corresponding to the reports' data. efa has been carried out on r programming language for statistical computing by using environment and graphics supported by the r foundation for statistical computing (gnu project). results. data dependency estimation for the macroeconomically significant network readiness index has been implemented. it is proposed to construct a space of constituent parameters. eigenvectors have been obtained for an array of data for the economies of eight european countries, which allow us to estimate the general development trends for macroeconomic decision-making problems. in particular, three complex factors are identified. practical implications. the vectors determine change of the constructs of the value of the networked readiness index of countries. efa with dataset rawfl, method is maximum likelihood, diagonals of the correlation matrix are equal to squared multiple correlations. pa test is carried out to compute the eigenvalues for the correlation matrix. the study also made it possible to forecast the pace of development of information technology under the influence of the global viral pandemic covid 19, which will launch a global economic and social recession. value/originality. the algorithm proposed in this research is proved improving of discriminating between indicators in construct of the value the networked readiness index. key words: factor analysis fa, network readiness index (nri), information technologies, economic impacts, macroeconomics, development trends assessment. jel classification: e17, c38, m38, f62, o31, r11 baltic journal of economic studies 48 vol. 6, no. 2, 2020 1. introduction network readiness index (nri) is called a technological readiness. its value measures the country 's ability to use the capabilities of modern information and communication technologies (ict). therefore, the nri provides useful conceptual framework to evaluate the impact of icts at a global level, and to benchmark the ict readiness and the usage of their economies (insead's endowment, 2019). the nri is part of the annual global information technology (gitr) report. this information is published in collaboration with insead. the report contains the most authoritative and comprehensive assessments of the impact of icts on the competitiveness and well-being of countries (bilbao-osorio, dutta, and lanvin, 2013). we have tried to evaluate value of impact of ict on the competitiveness of ukraine and to compare with the competitiveness of nations. so composite of three data components is used for research work. among them, there is the countries' base that is environment offered by a country for ict including market, political, regulatory approaches, the country 's readiness to use ict including evaluation of the country 's individuals, businesses, and governments participants, the usage of amount of ict. since icts stimulate business activity and have a leading influence on the innovations’ development, increasing of productivity and competitiveness, that thereby determinate the competitiveness and wellbeing of countries. our research is not based on the specific model and uses common idea that there are close relationship between the countries’ level of icts development and economic well-being of counties. we have been more interested in identifying the common factors impact on the competitiveness and well-being of ukraine. therefore, nris are expressed as a function of common factors, unique factors, and errors of evaluation. in a post-industrial society, the digital economy is a basic category that determines the current state and future growth of the country in the long run. fundamental transformation processes are a powerful generator of new ideas, products, services. improvements in information technology lead to an increase in the amount of data to be processed. it affects the economy, politics, demography, socio-cultural environment, foreign economic relations. the level of development of the country's economy depends on the level of development of information and communication technologies and the degree of their use. informatization forms the basis for using new business models and enhancing the effectiveness of decision-making. according to statistics, a high level of development of information and communication technologies is observed in countries with a high value of the ratio of the level of gross domestic product to the number of working population (world bank open data, 2016). also, such development shapes the activities of research universities, which create innovative solutions. the study (sitnicki, 2018) has developed an author's view of a model of digital research universities, the development of which will affect the global ranking of the research universities. the paper (sitnicki, 2018a) has identified the priorities for the development of the eu research universities on the basis of an analysis of the world-class universities' rating indicators, to enhance their innovation potential in an information society environment. the research (zhylinska, sitnicki, vikulova, 2019) develops the author's methodological approach and indicators for conducting a systematic assessment of the innovation potential of research universities, which are the drivers of innovative development of the national economies. the study (pasieczny, sitnicki, 2019) revealed a number of organizational discrepancies and mismatches that affect the value of organizations and their ability to grow in an information society environment. 2. data and methods for analyzing datasets reports’ data general data have been obtained as annual editions of the gitr , which point to developing and emerging economies are focusing on innovation as a prerequisite to sustain the high economic growth rates. against this background, the role of ict for supporting economic growth and creating highly skilled jobs has attracted such attention and research. there is also a development of the concept that icts may accelerate the reorientation of certain economic activities of developing countries. so the icts are now widely recognized as an important source of efficiency gains for companies. they are enabling them to optimize their resources and functions that have increased other productive investments. finally, ict is also recognized as a key source of innovation, which can lead to an increased economic growth and new sources of high value-added jobs (bilbao-osorio, dutta, and lanvin, 2013). the gitr series has been published by the world economic forum in partnership with insead and contain ict advances over the last decade. the various numerical data describes influence of ict on societal well-being and importance of its diffusion for longterm competitiveness. the annual global information technology reports feature the latest results of the nri, offering an overview of the current state of ict readiness in the world and including detailed profiles for each economy. for example, the report 2013 includes data tables with global rankings for the nri’s 54 indicators of 144 economies, accounting for over 98 percent of global gross domestic product (gdp) with a comprehensive data section. according to the conventional approach to assess the level of development and use of information and baltic journal of economic studies 49 vol. 6, no. 2, 2020 communication technologies at the macroeconomic level calculate networked readiness index (nri), which is featured in the reports (bilbao-osorio, dutta, and lanvin, 2013, 2014; dutta, geiger, lanvin, 2015; baller, dutta, and lanvin, 2016). according to the calculation methodology outlined in (bilbao-osorio, dutta, and lanvin, 2013), the networked readiness index (nri) is calculated taking into account four groups of subindices, table 1. table 1 significant indicators for digital economy subindex indicators a. environment subindex 1. political and regulatory environment (9 indicators) 2. business and innovation environment (9 indicators) b. readiness subindex 3. infrastructure (4 indicators) 4. affordability (3 indicators) 5. skills (4 indicators) c. usage subindex 6. individual usage (7 indicators) 7. business usage (6 indicators) 8. government usage (3 indicators) d. impact subindex 9. economic impacts (4 indicators) 10. social impacts (4 indicators) the reports (bilbao-osorio, dutta, and lanvin, 2013, 2014; dutta, geiger, lanvin, 2015; baller, dutta, and lanvin, 2016) states that the following principles are taken into account when calculating this index: 1) the current legislation governing these processes plays a crucial role in the effective use of information and communication technologies at the macro and microeconomic levels; 2) the prerequisite for the calculation nri is the high quality of the use of information and communication technologies, which is ensured by the developed infrastructure and access to the necessary data; 3) it is necessary to evaluate the use of information and communication technologies on aggregate indicators in different directions: business sector, population of the country, government; 4) the use of information and communication technologies should be implemented in order to develop improvement strategies at the macroeconomic level. materials for the eastern european countries, including ukraine, bulgaria, the czech republic, estonia, latvia, lithuania, poland and romania, have been used for the numerical evaluation of the data. the selection criterion for these countries is in many respects a similar evolutionary path of market economy development, table 2. the data of the countries, given in the table 2, have been used for the implementation of factor analysis of interdependencies. for each of cited countries data similar to those given in table 3 for ukraine, table 4 for poland or table 5 for the czech republic have been used. the use of nri data allows us to identify external factors that affect the countries’ rating and level of use of information technology, as well as to develop measures to improve the processes of information and digital economy development at the state level. a great deal of research is devoted to the problems of using information and communication technologies in the global environment and the digital economy. table 2 networked readiness index for the european countries for the period from 2013 to 2016 countries 2013 2014 2015 2016 ukraine 3.9 3.9 4.0 4.2 bulgaria 3.9 3.9 4.0 4.1 the czech republic 4.4 4.5 4.5 4.7 estonia 5.1 5.3 5.3 5.4 latvia 4.4 4.6 4.7 4.8 lithuania 4.7 4.8 4.9 4.9 poland 4.2 4.2 4.4 4.5 romania 3.9 3.9 4.2 4.1 table 3 informative indicators for ukraine for the period from 2013 to 2016 subindex and indicators 2013 2014 2015 2016 a. environment subindex 3.5 3.5 3.6 3.8 1st pillar: political and regulatory environment 3 2.9 3 3.2 2nd pillar: business and innovation environment 4.1 4.1 4.2 4.3 b. readiness subindex 5.3 5.5 5.6 5.7 3rd pillar: infrastructure 3.8 4.1 4.7 4.7 4th pillar: affordability 6.9 6.9 6.6 6.6 5th pillar: skills 5.3 5.5 5.6 5.6 c. usage subindex 3.3 3.3 3.4 3.6 6th pillar: individual usage 3.2 3.5 3.7 3.9 7th pillar: business usage 3.3 3.4 3.5 3.6 8th pillar: government usage 3.3 3.1 2.9 3.1 d. impact subindex 3.3 3.2 3.5 3.7 9th pillar: economic impacts 3.2 3.1 3.3 3.4 10th pillar: social impacts 3.4 3.2 3.7 4.0 baltic journal of economic studies 50 vol. 6, no. 2, 2020 in (сhmeruk, 2018), a thorough analysis of the level of development of the digital economy in ukraine compared to the eu countries has been carried out. according to the results of the comparative analysis on the dynamics of the subindices networked readiness index, unequal distribution of implementation and use of information technologies has been found, depending on the industries, economic sectors and the regions studied (strohmaier, schuetz, vannuccini, 2019; degerli, autekin, degerli, 2015). it is noted that the pace of use of information technologies in the financial sector is far ahead of the indicators obtained in the public sector of ukraine's economy. there is also a significant lag behind the nri indicators of the european countries with high income, upper middle income, according to the world bank (bilbao-osorio, dutta, and lanvin, 2013). the authors of the study argue that the problem of information technology development is related to the lack of a digital strategy at the macroeconomic level. according to the results of (degerli, autekin, degerli, 2015; florenz, 2012; petkova, ryabokon, vdovychenko, 2019) it is also proven that the nri has a tendency to increase in the countries with high incomes, "upper middle income", “lower middle income”. the paper also demonstrates the relationship between the level of use of information technology and diffusion of innovations at the state level. the report (digital economy report, 2019) has identified the need for state regulation of the introduction of information technology, the development of digital economy development strategy. the strategy should provide for qualitative changes in the economy to reduce the gap in information rates between countries with different levels of income. developing countries should receive international support for global it projects, which implies improved legislative framework. in our view, there is a correlation between some of the data used to calculate subindices and nris and other indices used to evaluate the digital economy in table 4 informative indicators for poland for the period from 2013 to 2016 subindex and indicators 2013 2014 2015 2016 a. environment subindex 4.1 4.1 4.2 4.2 1st pillar: political and regulatory environment 3.8 3.8 3.8 3.9 2nd pillar: business and innovation environment 4.4 4.5 4.6 4.6 b. readiness subindex 5.3 5.4 5.6 5.8 3rd pillar: infrastructure 5.0 5.1 5.1 5.3 4th pillar: affordability 5.6 5.8 6.2 6.6 5th pillar: skills 5.2 5.3 5.4 5.5 c. usage subindex 4.0 4.1 4.1 4.2 6th pillar: individual usage 5.0 5.1 5.1 5.3 7th pillar: business usage 3.4 3.5 3.6 3.6 8th pillar: government usage 3.6 3.6 3.6 3.6 d. impact subindex 3.4 3.4 3.7 3.8 9th pillar: economic impacts 3.3 3.4 3.4 3.6 10th pillar: social impacts 3.5 3.4 4.0 4.0 table 5 informative indicators for the czech republic for the period from 2013 to 2016 subindex and indicators 2013 2014 2015 2016 a. environment subindex 4.2 4.2 4.3 4.5 1st pillar: political and regulatory environment 4.1 4.0 4.1 4.3 2nd pillar: business and innovation environment 4.4 4.4 4.5 4.6 b. readiness subindex 5.0 5.5 5.5 5.9 3rd pillar: infrastructure 5.9 6.0 6.1 6.3 4th pillar: affordability 4.0 5.1 5.0 5.8 5th pillar: skills 5.1 5.3 5.3 5.5 c. usage subindex 4.4 4.4 4.3 4.5 6th pillar: individual usage 5.2 5.3 5.3 5.8 7th pillar: business usage 4.1 4.1 4.2 4.3 8th pillar: government usage 3.8 3.7 3.3 3.4 d. impact subindex 4.0 3.9 3.9 4.1 9th pillar: economic impacts 3.7 3.6 3.9 4.1 10th pillar: social impacts 4.3 4.1 4.0 4.2 the importance of evaluating indicators for global economic decisions baltic journal of economic studies 51 vol. 6, no. 2, 2020 a globalized environment. it is assumed that the data obtained by the nri for the eu countries may be related to the following indicators: (1) the digital economy and society index (desi) (digital economy report, 2019; moroz, 2017). it is an internationally agreed upon composite indicator of the socio-economic development of a country, which allows you to identify investment priorities for the development of information technology and digital economy as a whole. (2) digitization index (digital economy report, 2019; cámara, tuesta, 2017). it is an internationally agreed upon composite indicator that allows you to evaluate environmental factors that influence the use of information technology to enhance a country 's competitiveness. obviously, there is a correlation between indices (1) and (2) with the e-government readiness index (mohammeda, ibrahima, 2013) and the global competitiveness index (balzaravičienėl, pilinkienė, 2012). the basis of this study is the value of the nri for 20132016 (bilbao-osorio, dutta, and lanvin, 2013, 2014; dutta, geiger, lanvin, 2015; baller, dutta, and lanvin, 2016), as well as the results of the research described above. available data from 2013 till 2016 gitrs have been selected for 8 countries such as bulgaria, the czech republic, estonia, latvia, lithuania, poland, romania and ukraine (bilbao-osorio, dutta, and lanvin, 2013, 2014; dutta, geiger, lanvin, 2015; baller, dutta, and lanvin, 2016). factor analysis of the nri indicators the base for research is a significant difference of indicators that characterize nris of bulgaria, the czech republic, estonia, latvia, lithuania, poland, romania and ukraine. significant difference has been shown as an example of a simple correlation and covariation matrixes, figure 1, 2. 3. results and discussion we have used the exploratory factor analysis (efa) to investigate possible relationships between variables, which are unique factors and nri. in our case, efa is used to analyze the relationship between the environment subindex (political and regulatory environment with business and innovation environment), readiness subindex (infrastructure, affordability and skills), usage subindex (individual usage, business usage, and government usage) and impact subindex (economic impacts and social impacts), or observable variables and how it is affected by total summary nri. as predefined structure has not been set, efa is used to measure the underlying factors that affect the variables in a data structure. selecting factors and variables so as to avoid too much similarity of characteristics is also important. the set of subindexes values is divided on 31 variables corresponding to the reports' data. efa has been carried out on r programming language for statistical computing by using environment and graphics supported by the r foundation for statistical computing (gnu project) (the r project for statistical computing, 2019). efa with dataset rawfl, method is maximum likelihood, diagonals of the correlation matrix are equal to squared multiple correlations. pa test is carried out to compute the eigenvalues for the correlation matrix. the plot the values from largest to smallest are shown on figure 1. nri indicators covariation matrix source: developed by the authors figure 2. nri indicators correlation matrix source: developed by the authors baltic journal of economic studies 52 vol. 6, no. 2, 2020 figure 3. the number of eigenvalues before the intersection point indicates three factors to include in your model. eigenvalues of factors are shown values more than 1 on figure 3. the eigenvalue criteria is the most used approach for the number of factors to be extracted. in this method, eigenvalue is plotted on a graph and factors are selected. loadings of the factor with three largest are numerical values that indicate the strength and direction of these factor on a measured variable nri. that is, the obtained values of factor loadings indicate how strongly the factor influences the measured variable. 4. conclusions data dependency estimation for the macroeconomically significant network readiness index has been implemented. it is proposed to construct a space of constituent parameters. eigenvectors have been obtained for an array of data for the economies of eight european countries, which allow us to estimate the general development trends for macroeconomic decision-making problems. in particular, three complex factors are identified. they determine the change of constructs the value the networked readiness index of countries. proposed algorithm is proved improving of discriminating between indicators in construct of the value the networked readiness index. the conducted factor analysis is important for ukraine in terms of planning for further development of information technologies. the intensification of the transition of state and business structures to the online mode is about to take place. based on the global economic and social trends identified in the study, we predict that by april 2020, the world will intensify the use of information technology by almost three times. this will be caused by the global economic recession, triggered by the severe administrative restrictions on the rights and freedoms of the people and organizations from a viral pandemic covid 19 that has begun to spread globally since late 2019. we believe that as a result of such an external imperative and the actions of the national governments of the countries of the world, already in 2021, the users of information technologies will increase significantly and almost all organizations that survive after this economic recession will have an obligatory component of online technologies in operation management. in an information society environment that is increasingly pushing society to move to the virtual space, most countries in the world already have strategies in place for integrating government and business processes into digital technology. ukraine needs to intensify its analytical work on the systematic monitoring of economic and social factors that affect the country 's ability to take advantage of modern information and communication technologies. future developments in this area of research may be to improve the methodology of assessing ukraine's network readiness index, based on a more thorough analysis of the most influential economic indicators of such economic changes in the european countries. 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(2019). systematic assessment of innovative potential of a research university. baltic journal of economic studies, vol. 5, no 2, pp. 38–44. doi: 10.30525/2256-0742/2019-5-2-38-44 сhmeruk, h. (2018). the level of digital economy development in ukraine: comparative analisys by index of networking readiness. synthesis of science and society in solving global problems – shioda gmbh: 15–22. baltic journal of economic studies 1 vol. 5, no. 4, 2019 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: andrzejp1@vp.pl doi: https://doi.org/10.30525/2256-0742/2019-5-4-1-6 europe 2020 as an innovation challenge to the świętokrzyskie voivodship andrzej pawlik1 abstract. the article aims to explain the substance of europe 2020 with a focus on innovation development projects and to assess the level of innovation in the świętokrzyskie voivodship against the backdrop of other polish voivodships. the article is composed of three parts. the first part presents the substance and assumptions of europe 2020. part two contains an analysis of the innovation of voivodships with a focus on the świętokrzyskie voivodship (non-model method was used in this section). in part three, the emphasis is on presenting a forecast of the innovation of voivodships in 2020. key words: innovations, innovation, innovation potential, strategy. jel classification: o31 1. introduction undoubtedly, in the days of globalisation, technical and technological progress as well as of the information society, the transition to the knowledge-based economy becomes inevitable. investment in innovation, research or workforce skills gains in importance as it increasingly influences economic development on a national and regional scale. the phenomenon of innovation is addressed ever-more frequently. populations, enterprises, and countries, which develop and release an ability to generate innovation, succeed in economic and civilisational terms. the traditional factors of production, i.e. land, capital, and labour, continue to be important to economic activity but they yield to knowledge. therefore, knowledge and information become the source of wealth and the most significant production factors. the europe 2020 strategy, approved by the european council in 2010, constitutes the european union’s response to various challenges: those resulting from ongoing globalisation, the breakthrough in the world economic order, the sovereign debt crisis, and the first signs of weakening social support for the european idea as exemplified by brexit. the article aims to explain the substance of europe 2020 with a focus on innovation development projects, to assess the level of innovation in the świętokrzyskie voivodship against the backdrop of other polish voivodships, and to present a forecast of voivodship innovation in 2020. 2. the assumptions and objectives of europe 2020 the basis for the preparation of the europe 2020 strategy was a summary and critical evaluation of the achievements and failures of the lisbon strategy (“lisbon strategy evaluation document, 2010”). although the lisbon strategy did not attain a number of its goals, it was still valuable. it contributed to the setting of the european union’s development priorities in the long term and to the realisation of the need for structural reforms in the member states. in june 2010, the european council adopted the europe 2020 strategy as a new long-term programme for the socio-economic development of the european union for 2010–2020. according to the council, none of the main development challenges identified in 2000, the reasons for preparing the lisbon strategy, lost any of its relevance. the current strategy constitutes the european union’s response to various socio-economic challenges. recovering from the financial and economic crisis was treated as the first and short-term task of the new strategy. at the same time, the main policy assumption was that no immediate measures should result in a departure from actions for long-term structural reforms. long-term problems such as globalisation, rising demand for limited resources and ageing populations are increasingly important. ‘europe 2020 – a strategy for smart, sustainable and inclusive growth’ comprises three interconnected and mutually reinforcing thematic priorities (communication, 2010). those are consistent with the idea of sustainable growth based on three pillars: the economy, the environment, and society. they are as follows: – smart growth, i.e. developing an economy based on knowledge and innovation. delivering on this priority requires improving the quality and attractiveness of european higher education, significant r&d baltic journal of economic studies 2 vol. 5, no. 4, 2019 expenditure, bridging the gap between science and business needs, as well as promoting innovation and knowledge transfer throughout the union or making maximum use of information and communication technologies; – sustainable growth, i.e. promoting a more resourceefficient, greener, and more competitive low-carbon economy; – inclusive growth, i.e. fostering a high-employment economy delivering social and territorial cohesion. in contrast to the lisbon strategy, europe 2020 contains no specified overarching goal. instead of a single overarching aim, a package of five headline targets was adopted. they are important to all the member states, regardless of their membership periods or differences in development levels. those targets show where the european union should be by 2020 and can be used to monitor progress towards the strategy implementation. the main targets are as follows (communication, 2010): – 75% of the population aged 20–64 should be employed; – 3% of gdp should be invested in r&d; – the ‘20/20/20’ climate/energy targets should be met, which means reducing greenhouse gas emissions by at least 20% compared to 1990 levels, increasing the share of renewable energy sources in final energy consumption to 20%, and a 20% increase in energy efficiency; – the share of early school leavers should be reduced to 10% and the share of the population aged 30–34 having completed tertiary education should increase to 40%; – the number of people living below the national poverty lines should be reduced by at least 20 million. the above-mentioned targets are interrelated and critical to the success of the strategy. for each member state to be able to tailor the europe 2020 strategy to its particular socio-economic situation, the commission proposed that eu goals should be translated into national targets. europe 2020 contains a new implementation instrument in the form of flagship initiatives. seven flagship initiatives were specified to catalyse progress under each priority theme (communication, 2010): – innovation union; making better use of science in practice; – youth on the move; enhancing the quality and attractiveness of european education systems at all levels; – a digital agenda for europe; the eu’s digital single market based on high-speed internet; – resource-efficient europe; implementing the energy/ climate package and efficient use of resources in production and consumption; – an industrial policy for the globalisation era; improving the competitiveness of the european industrial sector in the global market; – an agenda for new skills and jobs; modernising labour markets and empowering people by developing their skills throughout the lifecycle, as well as increasing mobility; – european platform against poverty; ensuring social and territorial cohesion such that people experiencing poverty and social exclusion are enabled to live in dignity and take an active part in society. the implementation of those initiatives is a common priority, which involves actions at all levels of eu organisations, member states, local and regional authorities. the degree of specification of actions within the seven initiatives varies widely, from initiatives with secured funding, e.g. ‘a digital agenda for europe’, to those without indicated sources of financing, e.g. ‘european platform against poverty’. 3. the innovation of voivodships in considerations of the innovation of voivodships in poland, it is necessary to first explain the concept of ‘potential’. the notion of ‘potential’ is used in various sciences; in economic sciences, it is very important as an economic category determining the effectiveness and efficiency of any activity (pawlik, 2012). it comes from the latin word potentia, meaning ‘capability’, ‘power’. it is derived from aristotle, who distinguished between actuality and potentiality, i.e. something that does not yet exist but may materialise in certain conditions or if conditions change (beczkiewicz, 1968). it is assumed that innovation potential can be defined as a set of interrelated elements of resources, which will be transformed into a new state thanks to an activity pursued. a resource is a quantitative and static category. it can be treated as a base for potential. potential comprises resources necessary to the achievement of defined objectives of innovation activities. innovation potential can be understood as an ability to generate, diffuse, and consume innovation by specific entities in a given area (guzik 2003). the innovation potential of a region also includes anything the region can use – natural resources, man-made resources, intellectual resources (zarządzanie działalnością innowacyjną, 2010). innovation potential constitutes the sum of economic potential, scientific potential, technology and innovations potential, as well as of intellectual potential. the aforementioned components are closely related. intellectual potential reinforces scientific potential, technology and economic potentials, it also creates the potential for itself. scientific potential reinforces intellectual, technology, and economic potentials. technology potential reinforces intellectual, technology, and economic potentials, whereas economic potential reinforces intellectual, scientific, and technology potentials. each potential can pose a barrier to the growth of all the other four potentials. each of them creates the potential for itself (zarządzanie działalnością innowacyjną, 2010). studies show that the economies of polish voivodships are not based on potentials necessary to their development. baltic journal of economic studies 3 vol. 5, no. 4, 2019 the analysis conducted used selected characteristics reflecting innovation. the characteristics were selected so that they should reflect the following (gorzelak, 1979): relevance to the phenomena under analysis, the unam biguity and precision of definition, the exhaustiveness of the scope of the phenomenon concerned, the logic of interrelations, maintaining comparability of the representation of sub-phenomena, measurability – i.e. the possibility to numerically express the levels of characteristics – and the availability and completeness of statistical information for all objects (śmiłowska, 1997). in the examination, preference was given to variables with relative values since the inclusion of a number of metrics in absolute values could lead to misrepresentation (młodak, 2006). the analysis conducted used selected characteristics reflecting innovation. those were divided into four components – groups characterising different areas adding up to describe innovation. within the components defined, statistical characteristics were determined so as to interpret innovation in the description of the component concerned. due to the subject-matter of the analysis, the main criterion for the selection of characteristics to be studied further was relevance, i.e. the inclusion of variables representing in substance the phenomenon covered (pawlik, 2014). from the point of view of the research structure, the principle followed was the substantive relevance to specific components defined for the innovation of voivodships. the selection of variables was based on the available literature and various research approaches. forty-six statistical characteristics were selected to describe the innovation of individual voivodships and divided into four groups: economic potential, scientific potential, technology and innovations potential, as well as intellectual potential. all of them combined interpreted innovation potential. in order to ensure relevant and disjoint sets, the analysed characteristics were appropriately verified to determine variation (the coefficient of variation was calculated (dziekański, 2015)) and the correlation between all the variables1. the number of statistical characteristics was largely limited by their availability. as the source material, the analysis used data from the local data bank (bank danych lokalnych) of the polish central statistical office (gus) for 2002, 2009, 2016 and a forecast for 2020. unfortunately, the limited size of the article prevents a full presentation of the characteristics and the course of the study. on the basis of the 46 characteristics – variables, the non-model method was used to calculate composite indices for each of the four groups (economic potential, scientific potential, technology and innovations potential, as well as intellectual potential), followed by the computation of the overall composite index (the arithmetic mean) in 2002, 2009, 2016 and, based on the result obtained, a forecast for 2020 – table 1. table 1 innovation potential of voivodships – the overall composite index in 2002, 2009, 2016 and a forecast for 2020 voivodship 2002 2009 2016 2020 dolnośląskie 0.309 0.496 0.683 0.790 kujawsko-pomorskie 0.178 0.314 0.450 0.529 lubelskie 0.209 0.330 0.450 0.519 lubuskie 0.128 0.224 0.319 0.334 łódzkie 0.253 0.431 0.609 0.711 małopolskie 0.336 0.516 0.695 0.798 mazowieckie 0.643 0.937 1.230 1.399 opolskie 0.129 0.255 0.380 0.453 podkarpackie 0.159 0.273 0.387 0.452 podlaskie 0.152 0.245 0.337 0.391 pomorskie 0.211 0.360 0.508 0.594 śląskie 0.365 0.578 0.790 0.912 świętokrzyskie 0.141 0.256 0.370 0.437 warmińsko-mazurskie 0.137 0.227 0.316 0.368 wielkopolskie 0.286 0.472 0.659 0.766 zachodniopomorskie 0.215 0.304 0.392 0.443 source: own calculations based on the gathered statistical database containing 46 variables for particular voivodships in 2002, 2009, 2016 on the basis of the local data bank, gus, and forecasts for 2020, a. pawlik, dystans innowacyjny województw w roku 2016, wydawnictwo uniwersytetu jana kochanowskiego, kielce 2014, p. 105. the composite indices of the innovation potential of particular voivodships are presented in alphabetical order of the voivodships. it is important to consider not only the rank of a voivodship but also the index value obtained by that voivodship in the subsequent years of the study. the innovation potential of voivodships was defined with the use of the overall index including the four potentials presented before. the highest overall indices – determining the innovation potential of voivodships reflecting all the four components in 2002, 2009, 2016 – characterised the following voivodships: mazowieckie (0.643; 0.937 and 1.230), śląskie (0.365; 0.578 and 0.790) and małopolskie (0.336; 0.516 and 0.695). in 2002, the lowest overall indices of innovation potential were obtained for the following voivodships: lubuskie (0.128), opolskie (0.129) and warmińskomazurskie (0.137). in 2009 and 2016, the group with the weakest innovation potential was as follows: lubuskie (0.224 and 0.319), warmińsko-mazurskie (0.227 and 0.316), podlaskie (0.245 and 0.337), opolskie (0.255 and 0.380) and świętokrzyskie (0.256 and 0.370). it must be emphasised that the rank of voivodships in specific potentials translated into the final rank in the overall innovation potential. the final ranks in terms of innovation potential of the weakest voivodships were determined, inter alia, by their ranks in technology and innovations potential. for example, the high index within that component of the świętokrzyskie voivodship was 1 the study adopted the maximum threshold (limit) of correlation at r=0.5 baltic journal of economic studies 4 vol. 5, no. 4, 2019 ultimately translated into the 13th place of the świętokrzyskie voivodship in terms of innovation in 2016. the świętokrzyskie voivodship ranks low in scientific potential and intellectual potential. thanks to its technology and innovations potential, the świętokrzyskie voivodship ranked 13th in terms of overall innovation potential. the data contained in tables 1 and 2 unambiguously indicate the average level of the innovation of voivodships. the ranks but primarily the index values for the świętokrzyskie voivodship in specific years (0.141; 0.256 and 0.370) are somewhat alarming. high values of indices reflecting economic potential, scientific potential, technology and innovations potential, as well as intellectual potential determined the final ranks of voivodships in terms of innovation potential. it must be stressed that the ranks of voivodships in subsequent potentials translated into the final position in the overall innovation potential – the innovation index. therefore, considering innovation potential, the świętokrzyskie voivodship should primarily develop economic potential, scientific potential, technology potential, and intellectual potential. in the context of the europe 2020 strategy, the goal of a 3% share of r&d expenditure in gdp is unattainable for poland, all the more for the świętokrzyskie voivodship. reducing greenhouse gas emissions, increasing the share of renewable energy sources, and improving energy efficiency will be also difficult to achieve; those objectives pose a challenge to poland and an enormous one to the świętokrzyskie voivodship. the targets of reducing the share of early school leavers, increasing the share of persons having completed tertiary education, and lowering the number of people living below the national poverty line are attainable in both poland and the świętokrzyskie voivodship by 2020. 4. the forecast for the innovation of voivodships in 2020 by analysing the time series composed of observations at three points in time (the composite indices in 2002, 2009, and 2016), the innovation potential of voivodships was forecast for 2020 (table 2). the publication limitations prevent a more detailed discussion of the methodology contained in the author’s book (pawlik, 2014). figure 1 presents the forecast innovation potential of voivodships in 2020. in 2020, the innovation potential will increase in all the voivodships, especially in the mazowieckie voivodship, the centre and the top performer in terms of growth in innovation potential. the śląskie will also speed up, being an unquestionable vice-leader, thanks to increased economic, technology figure 1. forecast innovation potential of voivodships in 2020, i – economic potential, ii – scientific potential, iii – technology and innovations potential, iv – intellectual potential source: оwn study based on the composite index values for individual potentials baltic journal of economic studies 5 vol. 5, no. 4, 2019 and innovations and intellectual potentials. the małopolskie voivodship will rank third, with strong scientific potential and intellectual potential. due to growth in economic and intellectual potentials, the dolnośląskie voivodship will be ranked fourth. the dolnośląskie voivodship will be slightly ahead of the wielkopolskie voivodship, also characterised by significant dynamics of economic and intellectual potentials. fierce competition between voivodships may contribute to reducing differences in the innovation potential of the following voivodships: małopolskie, dolnośląskie, and wielkopolskie, followed by the łódzkie voivodship with the strong intellectual potential. to recapitulate the study conducted, it must be pointed out that the presented indices for 10 voivodships basically do not exceed 0.500, which indicates weak positions of voivodships in terms of innovation. 5. conclusion in the europe 2020 project, the european union rightly stresses the importance of knowledge and innovation as drivers of competitiveness. the position of polish voivodships, particularly against the backdrop of european regions, confirms the need for taking appropriate measures (hollanders, 2016). therefore, the european commission proposes a new cohesion policy to strictly link access to structural funds and cohesion funds with the implementation of structural reforms promoting economic growth. in accordance with the goals of europe 2020, the european commission proposes to significantly increase investment in r&d and innovation, education, infrastructure, and energy performance in the 2014–2020 budget. for example, appropriations in the amount of eur 50 billion within the connecting europe facility will be used to finance major projects concerning the development of ict, cross-border transport and improving energy efficiency. the facility will bridge missing links between europe’s major economic infrastructures, e.g. cross-border investments necessary to the transmission of energy across europe. as demonstrated by the study, in 2020, polish voivodships, catching up with the strongest and clearly leading the mazowieckie voivodship, will be characterised by average attractiveness to residents and investors in terms of potential. the development of particular groups of the forecast innovation potential of voivodships (table 2 and figure 1) shows a distinct advantage of the mazowieckie in comparison with the other voivodships; furthermore, it follows from the investigation that: 1) economic potential becomes the basis for innovation potential; 2) the greatest innovation potential will continue to characterise the mazowieckie voivodship, still significantly ahead of the other voivodships; 3) the least innovation potential will be observed in the following voivodships: lubuskie, warmińskomazurskie, and podlaskie. the above-mentioned voivodships also had the lowest potentials in 2002, 2009, and 2016; 4) only voivodships with strongly developed economic potential such as the pomorskie voivodship are likely to significantly increase their innovation potential; 5) special development programmes should be targeted at the lubuskie, warmińsko-mazurskie, and świętokrzyskie voivodships; 6) the analysis of developments in the innovation potential of the voivodships covered shows many new challenges to the regional policy by 2020 and for the following years. by 2020, all the voivodships will experience an improved economic situation but not all of them will grow at the same rate. the index analysis results corroborated significant intra-regional differentiation in the level of development and a strong concentration of activity in the mazowieckie voivodship. importantly, however, the key role in development will be played by innovation potential. the europe 2020 strategy represents the european union’s ambitious response to the aforementioned challenges and constitutes one of the most advanced modernisation programmes in the history of european integration. in addition, the strategy poses an enormous challenge to poland, in particular, to the świętokrzyskie voivodship, in terms of strengthening research potential and improving innovation. table 2 forecast composite indices of potential in 2020 ep sp tp ip dolnośląskie 0.9862 0.5969 0.6793 0.8990 kujawsko-pomorskie 0.5800 0.2621 0.4788 0.7936 lubelskie 0.4397 0.3501 0.4054 0.8827 lubuskie 0.6023 -0.0361 0.1532 0.7786 łódzkie 0.6720 0.5501 0.5490 1.0718 małopolskie 0.7007 0.8274 0.6687 0.9964 mazowieckie 1.7515 1.0192 1.4530 1.3707 opolskie 0.6192 0.1417 0.2469 0.8023 podkarpackie 0.4223 0.1715 0.3568 0.8592 podlaskie 0.4279 0.1957 0.2771 0.6619 pomorskie 0.8883 0.4005 0.2860 0.8001 śląskie 0.9908 0.5877 1.0295 1.0402 świętokrzyskie 0.5331 0.0699 0.4238 0.7195 warmińsko-mazurskie 0.4462 0.0911 0.2232 0.7116 wielkopolskie 0.9092 0.5375 0.7301 0.8861 zachodniopomorskie 0.6725 0.0936 0.2219 0.7829 source: own calculations. ep – economic potential, sp – scientific potential, tp – technology and innovations potential, ip – intellectual potential 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(2016). regional innovation scoreboard (ris). maastricht university. retrieved from http://www.merit.unu.edu (accessed august, 31, 2018). lisbon strategy evaluation document, european commission, commission staff working document, sec(2010)114, final, 2.2.2010, brussels. retrieved from: http://ec.europa.eu/transparency/regdoc/rep/2/2010/en/sec-2010114-f1-en-main-part-1.pdf młodak, a. (2006). analiza taksonomiczna w statystyce regionalnej. difin, warszawa. pawlik, a. (2012). potencjał innowacyjny w rozwoju regionalnym. wydawnictwo uniwersytetu jana kochanowskiego, kielce. pawlik, a. (2014). dystans innowacyjny województw w roku 2016. wydawnictwo uniwersytetu jana kochanowskiego, kielce. śmiłowska, t. (1997). statystyczna analiza poziomu życia ludności polski w ujęciu przestrzennym. studia i prace zakładu badań statystyczno-ekonomicznych, gus i pan, z. 247, warszawa. zarządzanie działalnością innowacyjną (2010). ed. białoń l., wydawnictwo placet, warszawa. baltic journal of economic studies 30 vol. 5, no. 2, 2019 corresponding author: 1 ternopil national economic university, ukraine. e-mail: tanya.drakohrust@gmail.com 2 ternopil national economic university, ukraine. e-mail: prodan.iryna@gmail.com 3 ternopil national economic university, ukraine. e-mail: ubilynska@i.ua doi: https://doi.org/10.30525/2256-0742/2019-5-2-30-37 migration challenges: trends and implications for ukraine and countries of eastern europe tetiana drakokhrust1, iryna prodan2, uliana tkach3 abstract. transformational processes in the global economy are due to strengthening the integration of national economies, increasing transnationalization, deepening internationalization of production and exchange, are accompanied by the activation of migration challenges. the purpose of the article is to examine and analyse the migration challenges, their development trends and the potential consequences for ukraine’s and countries of eastern europe economic potential. to achieve the goal, the study focuses on the following tasks: to consider and analyse the main factors that have a direct impact on the socio-economic development of the country, such as the activation of international mobility of the ukrainian people, armed conflict in eastern ukraine, the introduction of a visa-free regime with the eu; to make a socio-economic analysis of migration processes in the countries of eastern europe; to consider and analyse the possible (potential) scenario of the development of the impact of migration challenges on the ukrainian economy; to offer recommendations on mitigating the negative manifestations of the current migration challenges for ukraine. methodology. in the process of writing the article, methods of scientific abstraction, observation, synthesis of generalization were used to distinguish key socio-economic factors influencing migration challenges. the information and analytical base for the study of migratory challenges is the monographic works of foreign and domestic economists devoted to international migration, materials and analytical reports of international organizations dealing with migration (international organization for migration, international labor organization, united nations population and development commission, world bank and others), regulatory and statistical data of the state authorities of ukraine, results of scientific research of the institute of demography and social research after m. v. ptukha nasu, internet resources. the practical significance of the scientific research is to clarify the migration challenges, their development trends and potential implications for the economic potential of ukraine on the basis of macroeconomic indicators; the likely economic consequences of the introduction of a visafree regime for the european union for ukraine and the projected tendencies of migration challenges as proposed scenarios, indicating developers and prospects for forecasting. key words: migration, migratory challenges, migration processes, economic development, migrants, internally displaced persons, visa-free regime, armed conflict, international migration. jel classification: o15, o10, f22, f63 1. introduction in the context of the rapid intensification of international mobility of the population of ukraine, which is taking place in line with the natural globalization of the growth of world migration, the importance of regulating migration processes, giving them an organized, safe and non-conflictual character, is increasing. adequate migration policies are needed, on the one hand, to minimize the risks of migration and, secondly, to use a significant positive migration potential in the interest of development. it should be added that the ability of national governments to properly regulate migratory movements is a prerequisite for successful international cooperation, without which migration management, as a multilateral process, is impossible. despite this, despite the considerable progress in the development of ukraine’s migration policy, which has been observed in recent years, there is still a lack of clear, focused, integrated regulation of migration. in addition, the second not less important factor, which has influenced and continues to affect the serious baltic journal of economic studies 31 vol. 5, no. 2, 2019 growth of both international and internal mobility of ukraine, an armed conflict in the east of ukraine. the number of victims of the conflict in eastern ukraine in june 2017 was the highest in the last ten months. according to the un, 12 people were killed and 57 wounded on the background of the recovery of serious clashes. as a result of the war, the ukrainian economy suffered seriously with a reduction of 11.2% in 2016 and 13.6% in 2017. according to the world bank, in 2017, ukraine’s annual gdp per capita amounted to $2,500 (at the current exchange rate), compared to about $4,000 in 2013. from the outbreak of the conflict in the donbas in mid-april 2014 and by may 15, 2018, at least 10 090 people were killed, referred to in the united nations 18th report on the human rights situation in ukraine. the report emphasizes that among the dead in the donbas – 2777 civilians, 23 966 people were injured. the un emphasizes that this is a conservative estimate, and real numbers are likely to be higher. in addition, according to the press service of the ministry of social policy, as of february 5, 2018, more than 1.5 million people were internally displaced. and the third most important factor is usually the visa-free regime. on may 11, 2017, the council of ministers of the european union approved for ukraine a visa-free regime. then, after signing the official document, on june 11, 2017, ukrainians were given the opportunity to ride without borders. in an integral form, economic processes are reflected in a variety of financial indicators. the economic consequences of the introduction of a visa-free regime with the eu are no exception in this regard. however, for some of these effects, such as the impact of the introduction of a visa-free regime on the state of the domestic labour market, it is difficult to provide a clear financial assessment. on the other hand, in some areas, the impact of introducing a visa-free regime with the eu on the state of our country’s economy will be quite clearly reflected in changes in ukraine’s balance of payments. this study will attempt to answer the question whether all these factors have been stimulated by the ukrainian economy and also to consider the possible (potential) scenario of the development of the impact of migration challenges that dictates our present to the ukrainian economy. 2. trends in migration in ukraine before and after the deployment of armed conflict the large scale of external migration was characteristic of ukrainian society for a long time after the collapse of the ussr . however, in 2008–2009, the dynamics of migration became weaker. according to an all-ukrainian study on labour migration in 2005–2008, 1.5 million ukrainians worked abroad, and in 2010–2012 this figure was 1.2 million. the decrease was mainly due to the global economic crisis and the decrease in demand for ukrainian workers in the eu and russia. in 2005–2008, the most popular countries for ukrainian labour migrants were russia, italy, and the czech republic, while in 2010–2012 the main directions were russia and poland. for pre-war migration, a more rational approach to choosing a country of destination is characteristic of the accumulated experience over many years and a significant network of migrants. by 2014, most ukrainian labour migrants came from the western part of the country. in the period under review, the migration of ukrainians was of a purely economic nature, unlike, for example, residents of georgia or the north caucasus who were forced to flee war or persecution. prior to the conflict, ukrainians practically did not apply for refugee status in eu countries. trends in migration processes in ukraine are influenced by socio-economic circumstances. 2013– 2016 were very difficult for the ukrainian economy. there was a decline in gdp, industrial production, with the exception of some industries. the largest decline is demonstrated machine building and metallurgical industry. only from 2016 began a slow start improvement of the situation. reduction of foreign direct investment, unstable external demand, and substantial reduction of capital investment will allow in the coming years to rely only on domestic demand, whose potential is comparable to in previous years, much weaker. unfavourable conditions of conducting business and low solvency of the population lead to a reduction in the number of western companies in the market and not the realization of investment potential in ukraine (kulchyczka, 2017). the current account balance is stable in the negative zone. the overall internal and external state debt of ukraine continues to increase. the deficit of the current account of ukraine’s balance of payments in 2013, that is, before the deterioration of the economic situation in 2014–2015, amounted to about 13 billion us dollars. the need of ukraine’s economy for external financing remains high. the external market gives little prospects. in 2013, as in 2012, ukraine counted on domestic demand for industrial products production. the formation of domestic demand was more influenced by the dynamics of real wages and retail turnover. this indicator has a steady tendency to decrease both in 2012 and in 2013. for macroeconomic policy, important is the assessment of macroeconomic indicators characterizing the state of the economy in general (ioncev, 2007). consider the study of the dynamics of the basic macroeconomic indicators of ukraine with the forecast up to 2017 in table 1 titled the dynamics of nominal and real gdp for the period of 2007–2015 with a forecast by 2017 (world development indicators). baltic journal of economic studies 32 vol. 5, no. 2, 2019 in table 1 it can be seen that gdp per capita decreased by 7% in the 2014 year and according to the forecast will resume in 2017 at the level of 2013, there is also sharp fluctuations of the gdp growth rate in the crisis and post-crisis period of 2007–2010 changes to fluctuations with less amplitude. table 2 presents the main indicators of the dynamics of the state debt for the period of 2007–2015 with a forecast for 2017. consequently, the state debt in ukraine has sharply increased since 2014 and continues growth. regarding financing of the general deficit of the state budget, then according to the government, it will amount to at least 2% of gdp. at the same time, the expenses of public administration in relation to incomes increased in 2014 almost 2 times in 2013. dynamics of projected changes in population, annual rates a natural increase of 1000 people and a net migration rate of 1000 people for ukraine is presented in table 3. appropriate projections were carried out by international experts of the world bank. as can be seen from table 3 to 2050 the population of ukraine is expected to be reduced to almost 10 million people. in ukraine, the indicator of net migration is expected to be negative. dynamics of projected changes in working age (according to age the range accepted for international assessments – 15-64 years) of the population at 1000 persons for ukraine are presented in table 4. as you can see, in ukraine a stable decrease in the number of representatives of the corresponding age group is expected. between 1991 and 2012, the total population fell by more than 7 million people as a result of a sharp decline in fertility and a negative balance of migration. the study argues that this trend will continue, and the total population will be reduced by another 10 million by 2050. in addition, by 2050, it is projected that almost half of the population will be over 45 years old. the share of persons aged 60 and over will increase more by 2050 by 1.5 times, and persons aged 80 and over for the same period will increase 3.4 times. table 1 dynamics of nominal and real gdp for the period of 2007–2015 with a forecast by 2017 types of gdp 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 nominal gdp (billion usd) 143 180 113 138 163 175 178 135 144 182 gdp per capita (usd) 3,07 3,886 2,454 2,99 3,562 3,82 3,91 2,98 3,19 4,079 real gdp growth (%) 7,6 2,3 14,8 4,2 5,1 0,3 0,0 7,0 0,0 4,0 real gdp growth per capita (%) 8,2 2,9 14,3 4,6 5,5 0,6 0,1 6,6 0,5 4,5 source: (medium and long-term scenarios for global growth and imbalances. retrieved from: http://www.oecd.org/berlin/50405107.pdf/) table 2 indicators of the dynamics of the state debt for the period of 2007–2015 with a forecast for 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 change in total public debt / gdp (%) 1,1 10,6 14,1 10,5 3,1 3,0 4,7 20,8 7,5 1,0 balance of payments / gdp (%) 2,0 3,2 8,7 7,0 4,1 6,6 6,7 11,0 7,5 4,0 government debt / gdp (%) 12,3 20,2 34,8 39,5 36,3 36,5 40,0 60,1 62,7 58,7 net government debt / gdp (%) 10,1 18,6 33,8 37,2 35,5 36 39,6 59,7 62,3 58,3 source: register of commission documents table 3 projected changes in the total population of ukraine changes 2015-20 2025-30 2035-40 2045-50 total population at the end of the period 43 164 39 842 36 554 33 658 change in population during the period -1482 -1718 -1581 -1426 annual natural growth rate per 1000 people -6,57 -8,25 -8,25 -8,07 net migration rate per 1000 people -0,18 -0,20 -0,21 -0,23 source: world bank staff calculation based on data from imf balance of payments statistics yearbook 2013 and data releases from central banks, national statistical agencies, and world bank country desks table 4 projected changes in working age (15-64 years) of the population average (per 1000 people) in ukraine 2015-20 2025-30 2035-40 2045-50 -2401 -1324 -1268 -1719 source: migration profiles – common set of indicators. retrieved from: http://esa.un.org/miggmgprofiles/mpcsi.htm baltic journal of economic studies 33 vol. 5, no. 2, 2019 the answer to the negative trends of economic development has become the formation and functioning of large-scale flows of external labour migration. this process in the existing realities has more positive effects for ukraine than the negative, and there is a kind of fuse to achieve excessive regional migration asymmetry in the country (timofeiev, 2013). according to the results of a study conducted in 2012, the state statistics service of ukraine and ptoukha institute for demography and social studies of the nas of ukraine, for the period of 2010–2012 1.2 million ukrainians (3.4% of the population aged 15 to 70 years old were working or looking for work abroad. the main areas of employment were: construction (46%), home care (18%), and agriculture (11%), wholesale and retail trade (9%), industry (4%), hotel and restaurant sector (4%), transport sector (4%), other (4%). the majority of ukrainians travelled to the neighbouring countries – russia (43% of migrants), poland (14%), hungary (2%), and a number of european countries (czech republic (13%), italy (13%), spain (5%), portugal (2%) and other countries (8%)). the volume of international labour migration in ukraine for 2015 was as follows results of the research of iom 688000 persons, including 423800 long-term (migration not less than 1 year) and 264400 short-term migrant workers. in addition, about 310 000 people expressed their intention to migrate to the next 12 months, which is about 45% of the current volume. ukraine’s internal mobility is twice as large as the number of external labour migrants (1 643 000 people). the total volume of internal migration in 2014 was 9% of the economically active population in ukraine. the annual pace of domestic mobility is expected to increase by about 50% in 2015–2016 (international organization for migration (iom)). according to the data of this survey, the volumes of migrations are smaller in comparison with the data of the state statistics and idds named after m.v. ptoukha of the national academy of sciences, obviously, this is due to a decrease in the level of openness of respondents in crisis conditions. in 2013–2014, there was a new wave of migration emerges in ukraine – internally displaced persons from temporarily occupied territory and districts antiterrorist operation. according to the state migration service, as of december 31, 2014, the total number of such persons, taking into account displaced within the donetsk and luhansk oblasts was close 630 thousand people (lukyanenko, 2014). at the end of march 2017, their number increased to 1065 thousand people. according to the ministry of social policy, their number exceeded 1.6 million persons in march 2017. according to the un, a number of refugees and internally displaced persons in ukraine (including those who moved to other regions ukraine, and those who left the country) is 1.8 million people (libanova, 2006). negative trends of economic development of ukraine have caused the formation and development of largescale flows of external labour migration. mostly, ukrainian citizens work in the eu countries (mainly in poland, the czech republic, and italy), as well as in russia. for most of the period of independence, foreign labour migration was the largest in terms of volume migration movements. however, the annexation of the crimea and the beginning of hostilities on eastern ukraine caused the formation of flows of internally displaced persons, which today become comparable with flows of external labour migration. 3. socio-economic analysis of migration processes in the countries of eastern europe considering the role and importance of international migration in the demographic development of countries, we note that it can grow for most countries as the subject to increase the volume of immigration or emigration, and the extent of temporary labour migration and forced migration. consider the situation in three eastern european countries for which complete data are available, and ukraine. the dynamics of the projected changes in the population, the annual rate of natural increase per 1000 people and the net migration rate per 1000 people for the countries of eastern europe are presented in the table below. as can be seen, the annual rate of natural growth per 1000 people in poland and the czech republic is approximately the same, with the population in poland is almost 7 times larger. the worst indicator at the end of the period is expected in bulgaria. the total population is projected to decline substantially in all countries in this group, except the czech republic. annual rates of natural growth per 1000 people in the czech republic are the smallest, although they remain negative. consider the dynamics of the projected changes in the population of able-bodied age population (15-64 years) population per 1000 people, which is presented in the following table. according to table 6, in the second five-year period, an improvement is expected with a further sharp rise in the rate of decline, with the best expected changes expected in the czech republic. over the past decade, the role of migrants in the world has grown. according to the world bank, migrants earn an average of about $2.6 trillion a year, which puts the migration economy in sixth place in the world – before britain and after the french economy. many studies have shown that the effectiveness and efficiency of foreign migrants are much higher than indigenous people. over the past 20 years, many developed countries have doubled the number of immigrants. in the united states, their number has reached almost 46 million, or baltic journal of economic studies 34 vol. 5, no. 2, 2019 about 15% of the employed population. the absence of a positive dynamics of the growth of the number of migrants is evident in ukraine. thus, the preservation of migration growth will not only ensure sustainable population growth in the coming decades but will also help to slow down the aging population and smooth the age structure of the population. 4. probable economic consequences of the introduction of the visa-free regime of the european union for ukraine most expert forecasts about the migration situation in ukraine put forward hypotheses regarding the general tendencies of the development of migration processes. according to researchers, the introduction of a visa-free regime with the eu and the military-political situation in ukraine and in the countries of the world can also have a significant impact on the changing nature of migration movements of the population. since the existing system of visa-free travel does not give the right to employment of ukrainians abroad, it was determined that the introduction of a visa-free regime would not be significantly affected by the scale of migration of skilled personnel but could lead to an increase in the detection of unregulated ukrainian migrants in the eu. at present, ukrainians who are illegally staying in the eu and the schengen area are mostly identified with visas or residence permits that expired, rather than those who illegally crossed the border and did not have any work permits. in 2016, about 27 thousand ukrainian citizens with unregulated status were found in the eu, which is considerably less than the number of persons who used legal means of migration (kompleksnyj demografichnyj prognoz ukrayiny na period do 2050 r.). most ukrainians were found during an illegal stay in poland (17 445 people), hungary (3620 people), czech republic (1550 people), germany (2270 people). instead, it is expected that the introduction of a visafree regime will reduce the number of asylum seekers from ukraine to the eu, as the status of asylum seeker will be less and less used by migrants as a possibility to legally stay in the eu for a term of up to three months. it should be noted that in 2014–2015, there was an increase in flows of asylum seekers from ukraine to the eu due to military aggression in the east of ukraine and the annexation of crimea. in 2016, for the first time since the conflict began, the growth of ukrainian asylum seekers in the eu declined: 12 475 applications were registered, which is 43% less than in 2015. the main factor that is likely to affect the number of asylum seekers from ukraine to the eu may be a high level of refusal, which is explained by the possibility table 5 predicted changes in total population 2015-20 2025-30 2035-40 2045-50 bulgaria total population at the end of the period 6 827 6 213 5 611 5 077 change in population during the period -285 -314 -291 263 annual natural growth rate per 1000 people -6,76 -8,28 -8,39 -8,17 the net migration rate per 1000 people -1,44 -1,57 -1,74 -1,92 czech republic total population at the end of the period 10 924 11 053 11 101 11 218 change in population during the period 147 34 34 61 annual natural growth rate per 1000 people -0,05 -2,09 -2,10 -1,60 the net migration rate per 1000 people 2,77 2,72 2,71 2,71 poland total population at the end of the period 38 158 37 448 35 840 34 079 change in population during the period -264 -476 -873 -867 annual natural growth rate per 1000 people -0,13 -2,33 -4,61 -4,80 the net migration rate per 1000 people -0,20 -0,20 -0,21 -0,22 source: world bank staff calculation based on data from imf balance of payments statistics yearbook 2013 and data releases from central banks, national statistical agencies, and world bank country desks table 6 projected changes in the population of able-bodied age (15-64 years), average (per 1000 people) country 2015-20 2025-30 2035-40 2045-50 bulgaria -310 -213 -281 -251 czech republic -200 -32 -190 -124 poland -1381 -523 -798 -1626 source: migration profiles – common set of indicators. retrieved from: http://esa.un.org/miggmgprofiles/mpcsi.htm baltic journal of economic studies 35 vol. 5, no. 2, 2019 for citizens who have been prosecuted in temporarily occupied territories to live safely in the rest of ukraine (malynovska, 2016). in 2016, the share of refusals increased from 70% to 75% (from 6630 failures in 2015 to 8785 failures in 2016). often, ukrainians sought refuge in countries with a large ukrainian diasporas: italy, spain, germany, and poland. on the other hand, introducing a visafree regime creates more favourable conditions for arriving in eu countries and applying for asylum for those internally displaced persons who were unable to integrate in ukraine (korniyenko, 2013). the impact of the political situation on the intensity of migratory flows in ukraine is extremely difficult to predict even in the near future. it is possible to expect a further reduction of the scale of the departure of ukrainians to russia, especially from the western territories, and the reorientation of migration flows to the eu. nevertheless, migratory flows to the russian federation will remain significant due to the simpler mechanism of obtaining work in comparison with the eu, the knowledge of ukrainians by the russian language, cultural and territorial proximity. 5. conclusions modern migration processes in ukraine were shaped by influence socio-economic development and geopolitical transformations of the latter a decade. the largest migration flows are external labour migration, movement of internally displaced persons and forced migration for borders of the country from the regions of combat operations. events in the east of ukraine influenced not only the internal state redistribution of the populationbut also on the course of external labour migration of ukrainians. in the period from 2014, the number of ukrainian labour migrants grew, they increasingly began to choose for employment eu countries, not the russian federation. however, the share increased ukrainian citizens who work abroad without having an official one legal status, the consequence of which is the violation of their rights and freedoms. provided further confrontations in eastern ukraine can be expected to continue. as for the introduction of a visa-free regime with the eu for the development of the ukrainian labour table 7 scenarios of the impact of migration challenges on the ukrainian economy developer perspective forecasting predictable tendencies of migration challenges ukrainian centre for social reforms 2050 scenario 1: medium option. termination of the reduction of the intensity of contacts and a positive migration balance with the countries of the former ussr , the second wave of repatriation of deported peoples; increased volumes of arrival from europe and america due to the increase in the number of representative offices of foreign companies; development of the flow of immigration to ukraine from emerging countries. scenario 2: high version. accelerated level of population growth in ukraine; ahead of the development of the ukrainian economy compared to cis countries and eastern europe; a positive migration balance throughout the period; growth of immigration from eu, cis, africa, and asia. scenario 3: low version. the growth of emigration of skilled personnel to eu countries; the growth of emigration to the russian federation of citizens of russian descent; low level of consolidation of migrants from afro-asian countries; a positive migration balance will be observed in 2030–2035, after which the departure to the russian federation is intensified. scenario 4: low-end version. lack of state policy on attracting migrants; an economic downturn; growth of emigration to the eu and cis countries; reduction of immigration from afro-asian countries; a negative migration balance throughout the period. yaroshevych m. lasinskaya m. betliy o. center for oriental studies, poland 2050 scenario 1: low scenario (best). the growth of gdp in eastern european countries by 1%, in eu member states – by 4%; the growth of emigration from ukraine to the eu countries by 2020 to 1.4 million people, after which the gradual reduction of the number of emigrants to 0.9 milli on people in 2050. scenario 2: average scenario (realistic). the growth of gdp in eastern european countries by 0%, in eu member states – by 2%; the sharp increase in emigration from ukraine to the eu countries by 2019 to 1.6 million, followed by a gradual reduction of the number of emigrants to 1 million in 2050. scenario 3: high scenario (worst). gdp reduction in eastern european countries by 2%, gdp growth in eu member states by 0%; the gradual growth of emigration from ukraine to the eu countries to 1.9 million people in 2050. ukrainian institute of public policy 2020 scenario 1: unmanaged migration (status quo). the growth of population due to migration exchange; increase in the share of illegal migrants; the deterioration of the criminogenic situation and the emergence of ethnic conflicts due to the influx of migrants from the countries of central and eastern asia; increasing pressure on the labour market. scenario 2: managed migration. immigrant skills development; improvement of the economic situation of the country by attracting and efficient allocation of labour resources. source: official site of the state statistics service of ukraine baltic journal of economic studies 36 vol. 5, no. 2, 2019 market, it is worth paying attention to the following points. first, the above-mentioned regime opens up more promising opportunities for finding work for ukrainian citizens and organizing training for ukrainian youth in european higher education institutions. secondly, taking into account the attractiveness of the european labour market for ukrainians, one can expect, in the near future, to increase the number of ukrainian citizens who go to work and study in the eu. at the same time, exit from ukraine will not have low-skilled workers; we believe there is a very negative impact on the development of the ukrainian economy. however, an increase in labour migration to european countries of highly skilled workers, as well as young people, if it does not return to ukraine after training, can nevertheless negatively affect the development of the national economy if ukrainian enterprises lack highly skilled workers. therefore, we believe that in order to prevent such a course of events, ukrainian enterprises will need to raise wages for their future specialists and create better conditions for attracting young people to diverse enterprises. in addition, it should be remembered that the introduction of a visa-free regime with the eu for ukrainian citizens under the current conditions automatically becomes a sphere of hybrid aggression against ukraine. indirectly, this is evidenced by the reaction of russian politicians and the media to this event. therefore, this direction of international relations should become at least an object of monitoring of the relevant ukrainian think tanks. in an integral form, economic processes are reflected in a variety of financial indicators. it is no exception in this regard and the economic consequences of the introduction of a visa-free regime with the eu. however, for some of these effects, such as the impact of the introduction of a visa-free regime on the state of the domestic labour market, it is difficult to provide a clear financial assessment. on the other hand, in some areas, the impact of introducing a visa-free regime with the eu on the state of our country’s economy will be quite clearly reflected in changes in ukraine’s balance of payments. as regards the scenarios of the impact of migration challenges on the ukrainian economy, factors of influence are the demographic situation, unemployment rate, wages, migration policy, as well as the political situation in ukraine and in the world. each of these factors affects the dynamics of the number of migrant workers. so, in particular, the reduction and aging of the population in the eu, the presence of hidden unemployment in ukraine, the problems of youth employment after education, the wage increase is 3–5 times in the eu countries compared to ukraine, and the highest wages in all countries-residents of ukrainian migrants, lack of concrete measures in ukraine aimed at the repatriation of ukrainians, and the presence of such measures in foreign countries, political instability in ukraine – all these factors contribute to increasing quantity of migrants to the eu. we emphasize that the experience of the czech republic, poland, and other eastern european countries is particularly valuable in creating conditions for healthy competition, including protection of property rights, adoption of relevant laws. in addition, the practice of these countries shows that the strategy of modernization policy for all transition countries should consist of concentrating all national resources on the development of certain potentially competitive industries, hence the selective targeted state influence on these processes through financing, variation in tax rates, creation of a legal regime and differentiation of social measures. the tendency to leave ukraine is observed in all categories of the population, experts say. the main reason – a difficult economic situation, which contributes to the increase in the number of people willing to go to work abroad. emigration from eastern european countries differs by at least two peculiarities. first, it has a largely ethnic or ethnocultural basis. residents of poland and romania, who moved to germany in the mid-1990s, were mostly ethnic germans, and many of those who moved to hungary were ethnic hungarians. similarly, from the former soviet union in the 1990s, mainly germans and jews were leaving, at least finns, greeks, czechs, and poles, and from the cis countries to russia during this period, usually came ethnic russians and russian-speakers. thus, at the moment, the greatest influence on the further development of the impact of migration challenges on the ukraine’s economy has such a factor as the political situation in the country. the migration policy of the highly developed countries of the european union is aimed at attracting immigrants, including ukrainians, which contributes to the increase of migration. however, all measures of foreign countries will not matter for the ukrainian emigrant, if, as an alternative, he will have prospects in the motherland. if after stabilizing the political situation in ukraine, the country’s economy will develop in such a way that a ukrainian migrant will be able to receive decent wages to ensure normal living conditions for his family, social guarantees, favourable conditions for doing business, he will not need to seek low-skilled work or work with a high level of injury abroad. particularly promising, in this direction, is the development of measures for the return to their homeland of young people studying abroad, and can use the experience gained in ukraine to conduct business in ukraine. baltic journal of economic studies 37 vol. 5, no. 2, 2019 references: doslidzhennya ta dialog shhodo polityky u sferi migraciyi i groshovykh perekaziv v ukrayini (2016). [international organization of migration (iom), representation in ukraine]. retrieved from: http://iom.vh.lucky.net/sites/ default/files/mom_migraciya_yak_chynnyk_rozvytku_v_ukrayini.pdf (in ukrainian) korniyenko, o. o. (2013). migracijna polityka ukrayiny v systemi globalnogo rozvytku svitovoyi ekonomiky [management of a modern city]. kyiv, issue 3–4/7–12(51–52), 51–56. (in ukrainian) libanova, e. m. (2006). kompleksnyj demografichnyj prognoz ukrayiny na period do 2050 r. [ukrainian center for social reforms]. kyiv, 138 p. (in ukrainian) kulchyczka, k., sushko, i. (2017). nevregulovana i vymushena migraciya z ukrayiny do ys pered otrymannyam bezvizovogo rezhymu: mozhlyvi naslidky ta ochikuvannya [europe without boundaries]. kyiv, 108 p. (in ukrainian) lukyanenko, d. g., poruchnyk, a. m. (2014). mizhnarodna ekonomika: pidruchnyk [international economics: textbook]. kyiv: kneu, 762 p. (in ukrainian) malynovska, o. (2016). mihratsiia v ukraini: fakty i tsyfry [migration in ukraine: data and statistics]. kyiv, 32 p. (in ukrainian) ioncev, v. a. (2015). svit u dzerkali mizhnarodnoyi migraciyi [scientific series: international migration of population: russia and modern world]. moscow, 215 р. (in ukrainian) timofeiev, a. (2013). problemy zovnishnoi trudovoi mihratsii v ukraini: suchasni tendentsii [synopsys: text, context, media]. kyiv, 9 p. (in ukrainian) valentey, d. i. (1985). demograficheskiy entsiklopedicheskiy slovar [demographic encyclopedic dictionary]. мoscow: sov. entsikl. (in russian) world development indicators. retrieved from: https://data.worldbank.org/country/ua?locale=uk (in ukrainian) baltic journal of economic studies 188 vol. 4, no. 5, 2018 corresponding author: 1 national academy of internal affairs, ukraine. 2 national academy of internal affairs, ukraine. 3 national academy of internal affairs, ukraine. doi: https://doi.org/10.30525/2256-0742/2018-4-5-188-199 organized crime in the financial system: foreign experience mykhailo markov1, oleh yemets2, andrii forostyanyi3 abstract. the aim of the article is to analyse combating organized crime in the financial system of ukraine and abroad; develop specific proposals to optimize the legislative provision of such activities on the basis of the study of positive foreign experience with a view to its further implementation into the relevant legal regulations of our state. the subject of the study is the interrogation of legal regulations of leading foreign countries that regulate the issue of combating organized crime in the financial sphere, the principles of the activities of these countries’ respective organizations aimed at counteracting organized crime in the financial system, as well as state mechanisms for countering organized crime in the us financial system, european and other countries. methodology. the study is based on general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method enabled to formulate the definition and determine the essence of the subjects in the system of combating crime, as well as mechanisms of anti-shadowing of the ukrainian economy. the normative-dogmatic method enabled to interpret the content of legal regulations of domestic legislation that regulate the issue of organized crime in the financial system. the comparative legal method enabled to compare doctrinal approaches to the issue of organized crime in the financial system of ukraine and abroad. the same method was used to analyse legislation of foreign countries regarding the issue under the study. methods of analysis and synthesis enabled to study individual units of the institute of organized crime in the financial system. the sociological method was used to evaluate the results of the survey, conducted among employees of the national police of ukraine, on the need to take into account foreign experience in counteracting organized crime in the financial system. the method of legal modelling allowed making proposals regarding the improvement of the institute for combating organized crime in the financial system of ukraine. practical implications. the analysis of foreign experience of police activity, as well as special bodies and organizations, in combating organized crime in the financial system, carried out on the basis of a comparative legal study of principles, provided for in the international legal documents and their use in the police activities of democratic states, determined the expediency of their implementation in the police activities of the bodies of the national police of ukraine. relevance/originality. the study proved that the legal basis for combating organized crime in the financial system of the examined states is the constitution and national laws, as well as specialized legal regulations, which define the status, rights and duties, the responsibility of employees of special subjects in combating organized crime in the financial system. in addition, in foreign countries, competencies are clearly distributed between national and special authorities to exclude duplication of powers. in view of the proved necessity of creating an effective system of counteraction to organized crime in the financial system of ukraine, positive foreign experience implementation can become the driving force to strengthen the rule of law and legal order in our state. key words: foreign experience, organized crime, financial system, state security. jel classification: f52, p43 1. introduction ukraine declared its desire to enter the european commonwealth of developed democracies, which have high standards of safety, well-being and standard of living of people, as well as the priority of human rights, the rule of law, and ensuring the inevitability of punishment for those who committed a crime. strengthening democratic institutions is impossible without reducing the negative effects of corruption and organized crime, which remain one of the greatest threats in our country today (yevropeyskyi dosvid...). today, the state of the ukrainian economy, transformations and processes that have taken place in the baltic journal of economic studies 189 vol. 4, no. 5, 2018 past, and especially in recent years, convincingly testify that the solution of the problems of socio-economic development has become strategic and global, has become one of the most important in the state. the overcoming of crisis phenomena, the struggle with the consequences of the global financial crisis, and the transition to sustainable economic growth require further elaboration of mechanisms for regulating the economy both at the state and at the regional level (ruden). legal instruments of a market economy began to be used extensively for the purpose of unlawful enrichment of certain segments of the population. as a result of the operation of the extensive network of fake business entities and their highly organized informal associations – converting centres annually suffer multimillion losses by the state, citizens, and legal entities. a fictitious enterprise appears as a tool for committing a whole range of mercenary crimes (tax evasion, smuggling, fraud with financial resources, etc.) (hryhorovych, 2018). this situation is related to the fact that crime adapts to the transformations of the socio-economic structure of society and dynamically reacts to social and legal control in order to avoid it (hryhorovych, 2018). therefore, economic crime is becoming an increasingly problematic, threatening phenomenon for ukraine as an independent and young sovereign state. existing long-standing imperfect economic relations are used by criminals to parasitize the body of a society, to secure significant own material revenues at the expense of non-payment of taxes, corruption, fraud with financial resources, legalization by means of “money laundering”, occupation of prohibited types of economic activity, direct encroachment on all forms of property, and committing other crimes of economic orientation. certainly, such acts should not and do not remain without a proper response from the state; they oblige their law enforcement agencies to carry out an uncompromising struggle with them (tokarchuk, 2013). the problem of counteracting organized crime in the financial system by a specialized body is theoretically allegedly solved – scientific works on the international experience of the creation and functioning of the relevant specialized bodies are enough. at the same time, attention is drawn to the lack of a systematic analysis of the feasibility of establishing such a body in ukraine, taking into account ukrainian specificity. insufficiently highlighted is the question of the place and role assigned to the state bureau of investigations among other law enforcement agencies, including pre-trial investigation bodies. the problem is also compounded by the weakness of the financial control system in ukraine and the cis countries, in which it is virtually impossible to establish the origin of cash, large amounts are in circulation in cash (tokarchuk, 2013). in this regard, the study of foreign experience in the fight against organized crime in the financial system is becoming especially urgent today, which led to the selection of the relevant topic. a significant contribution to the study of the problem of counteraction to organized crime in the financial system was made by foreign and domestic scientists: v. volynets, p. grigorovich, o. juga, s. dmitrov, l. dolia, s. egorichev, a. yezhov, zh. zhukovsky, m. zhuravel, f. zhuravka, y. kobko, v. v. kovalenko, s. kravchuk, l. v. krivonos, i. lapinsky, o. litvinov, m. martynov, v. muntian, o. onyshchuk, s. onishchenko, і. osyka, s. pavlenko, a. parshutin, l. polovinsky, a. repecka, v. ruden, v. sevruk, s. shandruk, o. tokarchuk, n. chorna, r . chornyi, o. shostko, o. yunin. the purpose of the article is to analyse the counteraction of organized crime in the financial system in ukraine and abroad, as well as to develop concrete proposals to optimize the legislative provision of such activities by special international law enforcement agencies in the fight against crimes committed in the financial system by organized groups and criminal organizations. 2. presenting the main material the financial sector claims to be the undisputed global leader in economic globalization. the volumes of financial transactions have increased significantly and now dozens of times greater than the volume of trade turnover. under the conditions of financial globalization, the market orientation of banks has intensified; the influence of new participants in financial markets – pension, investment, hedge funds, insurance companies, brokerage firms and others – has increased. in the end, financial globalization has contributed to the emergence of new opportunities for banks and increased the risks in their activities (valiutne rehuliuvannia ta kontrol). the main elements of the financial system are: national finances; local finance; finances of subjects of management of all forms of ownership; non-productive business finance; finances of the population; financial market; financial infrastructure. taking into account the main elements of the financial system in the current conditions of the functioning of the world economy, each country tries to achieve a high level of socio-economic development. as the processes of globalization give rise to increasing demands on the parameters of the national economy, ukraine must develop a strategy for its development that can adequately reflect our state (chorna, chornyi, shandruk; yunin, sevruk, pavlenko, 2018) and counteract organized crime in the financial system. relevant radical socio-economic transformations that have taken place over the last decade have caused both positive and negative changes in modern ukrainian society (pavlenko, sevruk, kobko, 2017), which promotes the introduction of foreign experience in combating organized crime in the financial system at all levels by state and law enforcement agencies of ukraine the analysis of the main approaches to the definition of mechanisms for the shadowing of the ukrainian economy baltic journal of economic studies 190 vol. 4, no. 5, 2018 provides grounds for arguing that the main mechanisms, according to scientists, are economic (improving the tax system, reforming the national financial control system, stimulating investment processes, creating favourable conditions for entrepreneurship development, fighting corruption, etc.) it is necessary to agree with the opinion of s. o. pavlenko that corrupted ties, which are closely regulated in the legislative, executive, and judicial authorities, lead to the establishment of their dependence on criminal structures, which ensures the adoption of necessary decisions for them, in violation of current legislation or existing social norms (pavlenko, 2016). correctly, in our opinion in this regard, o. onyschuk notes: the effectiveness of measures to combat crime largely depends on achieving their uniformity within a coherent and consistent unified european policy. this condition is becoming more and more necessary in the face of such phenomena as organized crime, which is often international in nature, in the face of which national systems may prove ineffective. in modern europe, where the boundaries between countries disappear, one cannot but consider the police and its powers in the international perspective. the problem is how effective the police are in the fight against crime, which increasingly crosses the state borders, including organized crime (onyshchuk, 2011). the current organized crime in the financial system not only poses a danger to the national interests of individual states but also represents a direct threat to international security, since it has become transnational in nature. first of all, it concerns countries with an unstable sociopolitical and economic situation that are at the stage of economic and political transformation, which includes ukraine (pohoretskyi, 2007; pavlenko, 2017). the leaders of organized criminal groups are paying particular attention to searching and establishing connections among corrupt officials engaged in law enforcement, regulatory activities in the economic sphere, judges, local authorities, and other officials competent to make important for organized crime solutions. this contributes to the increase in the number of corrupt officials who hold a responsible position. it should also be taken into account that corruption is characterized by a high level of latency (dzhuzha, 2007; pavlenko, 2013). in the course of the research, during the questioning of the bodies of the national police of ukraine, it was established that 91% of our state should take into account foreign experience in combating organized crime in the financial system. also, at this poll of respondents, the question was asked: the experience of foreign countries you would have taken for the implementation of the bodies of the national police of ukraine, which received the following answer: the united states – 21%; great britain – 19%; poland – 15%; switzerland – 13%, italy – 11%, france – 11% and 10% fell on the experience of other countries. therefore, taking into account the survey conducted, we will analyse the experience of the abovementioned countries, since practical workers are interested in exactly which entities carry out counteraction to organized crime in the financial system and regulate such activity by legal acts. taking into account the above, we will provide reasoned conclusions regarding the implementation of positive foreign experience for ukraine. consequently, the actors of counteraction to crime form a holistic in a functional and organizational relation system, connected by the common purpose and management in the field of counteracting crime. the complexity of this system is due, on the one hand, to the multifaceted tasks of ensuring security, prevention, termination, disclosure, and investigation of crimes and, on the other hand, the division of tasks between subjects of different levels, which is conditioned by the hierarchical construction of the system. this system is a complex social organization because the groups of homogeneous organs entering into it form relatively independent organizational formations that function on the basis of identical laws. each of these formations is a subsystem of a larger system and at the same time consists of its subsystems (lytvynov, 2015; sevruk, 2017). it should be noted that one of the most effective instruments of shadowing in many countries of the world is, first of all, systems and mechanisms for financial control over proceeds of illegal origin. for example: a) in italy, a government decree introduced a ban on cash payments for large sums; b) in germany, a mandatory declaration of settlements with non-residents has been introduced; c) in japan – mandatory financial monitoring (financial institutions are obliged to notify authorized public authorities about major financial transactions). in addition, in germany, reporting of suspicious transactions to financial monitoring bodies should not only banks and financial institutions but also lawyers, auditors (muntiian, 1999; the financial times, 2011; weu council of ministers, 1995; onyshchenko, lapinskyi, 2013). so moving on to the coverage of the tasks, we will first analyse international special bodies and organizations that combat organized crime in the financial system. today, there are many special law enforcement agencies, but we consider it necessary to distinguish between the three most effective ones that combat organized crime in the financial system. such international law enforcement organizations are primarily the international criminal police commission (interpol), the european police office (europol), the office for the coordination of the fight against organized crime and other dangerous types of crime on the territory of cis member-states (ocfаoc). the existence of such structures can be defined as one of the organized responses of the world community to the illegal activities of such groups. at the regional level, the most developed such cooperation in europe is the european police office (europol) and the cis countries – the office for the coordination of the fight against organized crime and other dangerous types of crime on the territory of cis member-states baltic journal of economic studies 191 vol. 4, no. 5, 2018 (ocfаoc), in other geopolitical regions issue the creation of such organizations remains open. however, despite existing international acts of various levels and the work of international law enforcement organizations, the problem of combating transnational organized crime remains a worldwide issue (etnicheskaia orhanyzovannaia prestupnost; sevruk, 2018). europol is currently coordinating the work of the police services of all 28 european union member states. unlike national police forces, europol does not have its own investigative bodies. europol works closely with law enforcement agencies in 28 eu member states and other non-eu partner countries and countries such as australia, canada, the united states, and norway (yevropol). also, europol has a relationship with the eu member states and with organizations that interact with europol on the basis of cooperation agreements: albania, australia, canada, colombia, iceland, norway, switzerland, interpol and us law enforcement agencies: bureau of alcohol, tobacco, firearms and explosives (atf), drug enforcement administration (dea), united states secret service (usss); federal bureau of investigation (fbi); immigration and customs legislation (ice), and the internal revenue service (irs). this network has secured communication channels provided by europol. in addition, europol has two liaison officers deployed to washington dc (usa) and interpol headquarters in lyon, france (yevropol). the prospects for ukraine’s cooperation with eurojust, the collective body of the eu, which aims to assist member states in the investigation of crimes and accelerate the coordination of the work of the competent authorities (those performing investigative functions), should also be taken into account. for ukraine, it is important that eurojust, for the fulfilment of its tasks, is authorized to conclude agreements and establish cooperation with third countries that are not eu members. taking into account that the assistance and support of eurojust in the criminal prosecution of criminals, members of organized communities, which it provides at the request of the countries, promotes the eventual disposing of organized groups and criminal organizations, the signing of the relevant international agreement with this organization is of the utmost importance. moreover, the eu working bodies urge states to expand operational cooperation between the competent authorities, especially within the framework of bilateral and multilateral mechanisms and agreements (further). it is these aspects of the prevention of organized crime in the financial system, in particular, the transnational nature, reflected in the united nations convention against transnational organized crime, which defines the following directions for combating organized crime in the financial system of the world: the first area includes strategies to restrict the possibilities of committing criminal activity by reducing the existing or future opportunities for organized crime groups to operate on legitimate markets with the use of proceeds of crime through legislative, administrative, and other measures (paragraph 2, article 2 of the convention) (konventsiia oon). the second direction within the framework of crime prevention strategies is the need to reduce the level of vulnerability of the lawful economy in order to prevent the possible penetration of organized criminal organizations into it. organized crime seeks to penetrate the lawful economy for a number of reasons, for example, in order to: a) legalize and invest the proceeds of crime; b) acquire respectability and social rehabilitation for “their” people – members of organized communities; c) gain control over the territory in which criminal groups carry out their operations to obtain maximum economic and political benefits and minimize the risk of detention, arrest, and conviction (referred to as “lawenforcement risk”) (repetskaia, 2001). in implementing this strategic direction, it must be taken into account that the success of its implementation provides for the optimal combination of regulation and deregulation measures. in 2004, the council of europe (within the framework of the octopus program) published the “review of the model case of organized crime (bps)” prepared by the group of specialists on criminal law and criminological aspects of organized crime (pc-s-co) (aromaa, 2006). eight most effective strategies for the impact of organized crime (from the perspective of experts) that were implemented in different countries were selected. they are: the protection of witnesses, the transfer of the burden of proof of the legal origin of the property subject to confiscation, the offender (shostko, 2007), listening to communication and electronic surveillance, analysis of crime through the study of its patterns and trends, international cooperation, criminalization of participation in an organized group in the material legislation, cooperation in the field of combating human trafficking, precautionary measures (so-called administrative approach (shostko, 2008)). recognizing the high degree of harm caused by economic crimes to society and the world financial system, the police directorate of the general secretariat of interpol formed a department for combating financial and economic crime, which also includes a working group of the рорас specializing in the control of income received as a result of criminal activity. the research of flatwash group is aimed at detecting suspicious financial transactions and money, property and property acquired in a criminal way, as well as in the cis countries (martynov, 2010). in some states, financial intelligence units have been formed that are integrated into the single egmond network, which aims to intensify the exchange of information on economic crimes and the creation of a single international database of such crimes. the main attention is paid to crimes in the field of money laundering (tokarchuk, 2013). baltic journal of economic studies 192 vol. 4, no. 5, 2018 given the urgency of the problems associated with money laundering, the g20 summit in paris in 1989 created the financial action task force (fatf). the fatf is an intergovernmental body that develops a policy to combat the legalization of proceeds from crime and promotes its implementation at the national and international levels. the fatf consists of 29 participating countries: australia, austria, argentina, belgium, brazil, the united kingdom, greece, denmark, ireland, iceland, spain, italy, canada, hong kong (china), luxembourg, mexico, the netherlands, germany, new zealand, norway, portugal, singapore, the united states of america, turkey, finland, france, switzerland, sweden, and japan and two regional organizations: the european commission and the gulf cooperation council. the fatf cooperates with other international organizations working in this area, such as the united nations office on drugs and crime, the council of europe, the asia-pacific group against money laundering, and the caribbean financial action task force. the fatf secretariat is located in the organization for economic cooperation and development (oecd) (dolia, 2001). the main task of the fatf is to ensure that all financial centres adopt the international standards in the area of prevention, detection, and prosecution of money laundering. to accomplish this task, fatf has developed forty recommendations, which are international standards and constitute the basic structure of anti-money laundering measures to be applied at the global level. forty recommendations define the general principles of action that should be reflected in the national legislation of the countries on the following issues: criminal liability, the administration of justice, the application of administrative and civil enforcement measures, the functioning of the financial system, issues of international cooperation, etc. they emphasize the need to strengthen national legal actions aimed at the counteraction to money laundering, to increase the role of the financial and banking system in this matter, and to expand international cooperation. although recommendations are not an international binding convention, many countries have committed themselves to state regulation of the fight against money laundering. the fatf focuses on analysing global financial flows, banking and financial systems and money laundering practices, trying to identify weaknesses in combating this phenomenon. the said body continuously monitors and analyses how the fatf member countries are faced with money laundering and processes to bring fatf legislation into line with the laws of certain countries that have expressed their support for the global effort to combat money laundering (kryvonos, 2014). in the case of negative findings from the results of this analysis, the fatf has the right to apply certain measures of influence that can be expressed in the country’s alert, making the country a “blacklist” (the list of non-fatf countering countries), as long as to apply recommendations on limiting cooperation with offending countries. the consequence of such sanctions may be restrictions and termination of settlements, blocking funds on correspondent accounts of banks and accounts of enterprises, closing these accounts etc. (cabinet of ministers of ukraine and the national bank of ukraine). in addition to the above-mentioned bodies, such as interpol, europol, ocfаoc, eurojust, fatf, un, there are also other special international organizations that coordinate work in the field of prevention and counteraction of organized crime in the financial system. such organizations are today: 1. egmont group (egmont financial intelligence unit) 2. moneyval – committee of experts on the evaluation of anti-money laundering measures and the financing of terrorism. 3. eurasian group on combating money laundering and financing of terrorism (eag). 4. basel committee (committee on regulation and supervision of banking). 5. the wolfsberg group is an interbank association. 6. international monetary fund. 7. world bank. 8. european bank for reconstruction and development. consequently, after analysing the above-mentioned special bodies and organizations for combating organized crime in the financial system, one should consider the direct positive experience of the states, which effectively counteract this day. first of all, one such state is the united states. professor of chicago-kent college of law philip n. hablutzel has analysed the development of current us legislation in the area of counteraction to money laundering, including amendments made to american legislation after the events of september 11, 2001. in particular, the legal definition of the legalization of criminal proceeds was expanded, and now the crime is recognized as conducting the operation itself with funds of doubtful origin, regardless of the fact of proving a predicate crime. the criminal responsibility for the legalization of criminal “profits in the united states is established both at federal level and in each individual state, including the so-called “structuring” – the distribution of a large amount of money for small amounts in order to avoid checks by the government, which is regarded as deceit in order to hide the riley transaction. it also expanded significantly the list of financial and non-financial institutions, which are obliged to report to public authorities about dubious financial transactions; and imposed a duty for lawyers and auditors to report suspicious financial and property transactions of their clients. violations of these requirements impose strict civil and criminal liability, one of the types of punishment of which is a fine in the amount that can twice exceed the amount of suspicious transaction (osyka, 2003). baltic journal of economic studies 193 vol. 4, no. 5, 2018 for example, in the united states, special fbi units (fbi swats) are used to fight organized crime (gangs, syndicates, mafia) – assault groups with special army armaments that exist in each of the 56 regional branches of the fbi and use a special tactic to neutralize criminals during special operations, in which skills and abilities are beyond the reach of ordinary policemen (volynets, 2014). the us experience in combating legalization (laundering) of criminal profits proves the following. in the united states, the legal definition of the legalization of criminal proceeds was expanded, and now the crime is recognized as conducting the operation itself with funds of doubtful origin, regardless of the fact of proving a predicate crime. criminal liability for the legalization of criminal proceeds in the united states is established both at the federal level and in each individual state. a separate responsibility for the establishment and for the so-called “structuring” – the distribution of a large amount of money for small amounts in order to avoid checks by the government. such activity is regarded as misleading in order to conceal suspicious transactions (polovynskyi, 2008). since the legalization of criminal proceeds consists in the implementation of any cash operations, countering the legalization is, first of all, in tracking cash flows and cashless funds. one of the most effective ways of tracking cash flow is monitoring payments. today, in the united states, two of the most common forms of settlement are working – with checks and credit cards. both forms of settlements are through the system of the federal reserve and the central bank, which monitor the payments with the use of checks and credit cards. the american strategy to combat money laundering cannot be called rational and rational. despite legislative innovations, we cannot say that the federal government has managed to prosecute all illegal transactions with the money of dubious origin. in addition, the issue of interaction between law enforcement and controlling bodies is not resolved. thus, in the strategy of the american government to combat the legalization of criminal proceeds, 10-12 different federal agencies are responsible for different directions of its implementation, and the mechanism of their cooperation is not developed (zhuravel, 2010; tokarchuk, 2013). but after september 11, 2001, this law has expired, and informing banks of clients, including individuals, about the information provided to law enforcement authorities on their request, is prosecuted by criminal law. the jurisprudence goes the same way. according to the latest us supreme court decision, bank account information is not the information covered by the rules for the non-disclosure of private data in accordance with the 4th amendment to the us constitution, which cleans the privacy of a person from third-party interference. now banks are obliged to provide law enforcement authorities with any information about their clients on the requirements of law enforcement agencies (osyka, 2003). the strategy of the american government to combat the legalization of criminal proceeds has also changed. today, it aims at combating the financing of terrorism and depriving the financial foundation of organized criminal groups. if earlier law enforcement agencies have tracked the sources of doubtful income, now focus is on the sources of their use. recent studies conducted in the united states show that even money that has been obtained quite legitimately can be used for criminal purposes. this is especially true of the activities of various deaneries and religious organizations that collect donations and spend them on organizing terrorist acts or other criminal activities. this form of activity is very attractive to terrorists and criminals since it plays the role of a fairly effective cover. considerable attention was paid to the detection and confiscation of hidden funds obtained as a result of criminal or terrorist activities, the prevention of the legalization of criminal proceeds and predicate crimes – the source of criminal proceeds. attention is also paid to the study of criminal statistics, in particular, regarding the financial analysis of legalization operations to find out the actual size of profits of specialists in the economy who advise offenders, which unofficially amounts to 4, 8 or 12% of the amount to be legalized. today, such statistics are expressed by the amount of confiscated property and the number of persons convicted for this crime. so, in 2001, 639 moles were confiscated and in the fiscal year 2001–2002, nearly 1,000 people were prosecuted, only 50 of which were sentenced to more than 3 years’ imprisonment. professor hablutzel called the exchange of operational information an important element in counteracting the legalization (laundering) of criminal profits. even after the events of september 11, 2001, the united states, even the traditional rivals of the fbi and (ru) began to actively exchange data, but at the international level, this problem remains acute. negative factors still lack trust in the agencies of individual countries and warnings about deliberate misinformation and misuse of the information received. for the development of international cooperation in this area, the centre for the investigation of financial crime, the tasks of which is to establish ties with law enforcement agencies of different states and organise information interchange with them by signing relevant international agreements and amendments to domestic legislation (osyka, 2003). in the uk, the first anti-money laundering provisions were contained in those related to illicit drug trafficking (1986). in 1990, this country became the first european state to ratify the council of europe convention on laundering, search, seizure and confiscation of the proceeds from crime (strasbourg convention) (yehorycheva, 2014). for example, in the united kingdom, individual elements of the currency control system continue to be used. yes, there are restrictions on the circulation of currency values, control over foreign currency investment, the fight against the legalization of proceeds of crime, which involves the joint working group and baltic journal of economic studies 194 vol. 4, no. 5, 2018 the national bank of the united kingdom for financial investigations are being actively pursued. according to the uk’s experience in combating the legalization of criminal proceeds, each bank has an authorized employee responsible for complying with the requirements of banking legislation in the area of combating the legalization of criminal proceeds. each year an authorized employee must undergo retraining on new legislation, means, and methods of counteraction in this area. a bank employee who has not taken appropriate anti-money laundering measures is liable for criminal law (kravchuk, 2010). in the uk, a new form of work with informants was introduced. from now on, all information related to money laundering is sent to a centralized authority. the payment for the services of informants was assumed by banks – 75% and the ministry of internal affairs – 25%. this should help increase the effectiveness of combating the legalization of criminal proceeds (tokarchuk, 2013). according to polish experience, in poland in the area of combating legalization (laundering) of criminal proceeds, the legal basis is the law “on tax control” and the law “on counteraction to the legalization of dirty money”, the relevant provisions of the criminal and currency codes. the law “on tax control” in the structure of the ministry of finance created the bureau. in accordance with the law “on counteraction to the legalization of dirty money”, the department of finance established the financial information department and entered the post of general inspector of financial information, which has the status of deputy minister. thus, today in the structure of the ministry of finance of poland, in parallel, there are two departments: the department of financial information and the bureau of tax control (zhukovska, 2008). on july 27, 2002, a new law “on foreign currency” was issued in poland, which regulates the execution of foreign exchange transactions. this law abolished all restrictions on the movement of funds between poland and the eu countries. at the same time, the law provides for some restrictions regarding the movement of funds from non-eu countries. currency restrictions can be removed by obtaining currency permits that are of two types: general and private. the general currency permits are issued by the ministry of finance, and private ones are the national bank of poland. the main measure of currency regulation was the transition to a flexible exchange rate and the introduction of the “free-swimming” regime in 2000. thus, the government and the national bank of poland were able to solve the problem of the impossibility of combining three goals, namely: stability of the exchange rate, capital mobility, and monetary autonomy (zhuravka, 2008). in the structure of the ministry of finance, the taxation bureau was established, which started its activity in 1998, and after the introduction of amendments to the law on tax control of june 7, 2002, the scope and functions of the bureau were significantly expanded through a combination of tax and customs control functions. related staff members of the bureau were provided with appropriate police rights, close to carrying out operational and investigative measures (osyka, 2003). the tax office has a vertical structure with the main office in warsaw, tax offices in 16 voivodships and prefectures of tax records in the counties. at present, the bureau employs over 350 people throughout poland. the responsibilities of the bureau include: counteracting violations of current legislation in the field of external and internal commodity circulation; detection of violations and crimes in the field of management of public funds and funds derived from the european union and international financial organizations (after the accession of poland to the european union income from various organizations began, at the same time, there were cases of non-economic spending, embezzlement, and other means of theft of these funds); prevention of corruption of public servants of the ministry of finance; control over declarations of income and property status of civil servants, including employees of structural subdivisions of the ministry of finance; the disclosure of crimes that encroach upon polish national culture, archival resources and intellectual property; detection of property obtained by criminal means and that which is subject to confiscation; revealing mechanisms for transporting money into the territory of poland, which are derived from crimes; conducting analytical work on these types of crimes (tokarchuk, 2013). but, according to polish experts, even the best domestic laws in the area of counteraction to legalization cannot be sufficiently effective without international cooperation since criminals are very rarely confined to the territory of one state, causing problems of a jurisdictional and organizational nature. therefore, the domestic legislation of the states should be adapted to the needs of international cooperation, that is, to have common features. first, on the system of legal aid, as well as the exchange of information between the police, customs, and tax services. thus, the ministry of internal affairs of ukraine and poland have an agreement on mutual assistance, and in august 2001 a protocol was signed on the cooperation between the main commandant of police of poland and the ministry of internal affairs of ukraine, which specified the persons responsible for separate areas of crime control, including for counteraction to legalization of money. the experience of solving current issues of operational work under the protocol has shown excellent effectiveness of direct contacts between law enforcement officers of different states. secondly, it is necessary to create an effective and harmonious system of extradition of criminals and property belonging to them; thirdly – to establish free access to information and documents in the territory of other states through the conclusion of bilateral agreements on the basis of reciprocity (osyka, 2003). baltic journal of economic studies 195 vol. 4, no. 5, 2018 in switzerland, since 1990, articles on money laundering have been introduced into the criminal code, which provide for maximum sentences for this crime in the form of deprivation of liberty for a term up to three years, in serious cases – up to five years together with payment of a significant amount of monetary in 1997, the federal law on money laundering was adopted (in other words, the anti-money laundering act), which forms a part of the legislation regulating the activities of financial intermediaries. it established the main obligations of financial institutions to counteract the legalization of criminal incomes and gave supervisors the right to elaborate detailed rules for the banking and non-bank financial market sectors. in general, this regulation envisages strengthening control over banks and other financial intermediaries, their obligation (and not the right, as was recorded in 1994) to report suspicious transactions, to conduct customer identification, and therefore means a significant restriction of banking secrecy, the law of which was adopted in 1934 (yehorycheva, 2014). in accordance with the requirements of the law, before establishing business relations with clients, financial institutions should identify them on the basis of valid documents, as well as identify the real beneficiaries. they also have the duty to find out the economic background and purpose of conducting unusual and suspicious transactions, to demand necessary documents from clients and to store them for ten years. the money laundering reporting office switzerland (mros), a federal police service, has also been set up under the anti-money laundering act. when communicating to this body about transactions for which there is a solid suspicion of their connection with money laundering or terrorist financing, financial intermediaries are obliged to “freeze” the relevant assets for a period of up to five days, while they are exempted from disclosure responsibility secrets and the consequences of such actions (yehorycheva, 2014). in 1995, the italian currency office created a special department to combat the prevention of the use of financial institutions to launder criminal proceeds (kolesnikov, 1999). italy’s current legislation obliges banks and other intermediary institutions to maintain detailed documentation on resident currency transactions in order to avoid attempts to launder money. gamma-vassali law (1990) criminalized the operation of “laundering” and for the first time in the world practice has defined the concept of “criminal organization of the mafia type.” the italian criminal code provides for sentences of 7 to 12 years’ imprisonment and fines. the punishment can be increased if the same actions are committed by officials while using their official position. as a result of legislative changes in 1990, the state is obliged to monitor the detection and termination of attempts to legalize criminal money. the monitoring system assumes that the transfer of any amount abroad is accompanied by the simultaneous declaration of income (kryvonos, 2014). in france, traitement du renseignement et action contre les circuits financiers clandestins (tracfin), fiu of the ministry of economy, finance and industry of france, which operates the information clearinghouse, is a central organ of the system for combating and preventing the legalization of criminal incomes and combating the financing of terrorism. tracfin (tracfin) is the body to which information about the accounts opened in banks of individuals and legal entities is provided. the french law does not contain requirements to provide information on financial transactions in the event that the amount of the financial transaction exceeds a certain limit. signs for providing financial data monitoring entities to tracfin on financial transactions are motivated by the suspicion that it is being carried out in order to legalize criminal proceeds, namely, funds that can relate to: organized crime, drug trafficking, financing terrorism, and corruption. particular attention is required for financial transactions worth more than 15 thousand euros if they are intricate or have no economic sense. crimes related to legalization (laundering) of funds are punishable by imprisonment for a term of 8 years and a monetary fine (kovalenko, dmytrov, yezhov, 2007). so, after analysing the effective experience of the united states, great britain, poland, switzerland, italy, and france in combating organized crime in the financial system, we consider it necessary to distinguish, in our opinion, interesting provisions concerning the subject matter and other states such as spain, ireland, cyprus, greece, austria, belgium, japan, hong kong. in spain, the criminal code (article 301) refers money laundering to a section on bribes and similar offenses. it includes all serious crimes with a term of imprisonment of more than three years. the money laundering act includes combating income from organized crime, terrorism, drug trafficking. in ireland, the criminal law act of 1994 obliges all financial institutions to require new clients who will carry out large transactions, documentary evidence of the origin of money. the cyprus banking strategy is based on the “know your client” principle and seeks to identify individuals who have several trust accounts that are not compatible with their business form, or accounts receivable from a large number of different private recipients, as well as those customers who try to open an account for a large sum even on disadvantageous conditions. according to this strategy, bankers should know the origin of funds, the history of all accounts opened in the bank, the frequency of customer appeals to the bank. the legislation of greece provides for the identification of clients in the case of contracts, opening accounts, hiring safes, lending on bail; at the same time, identification does not require insurance operations for insignificant amounts and terms and related to pension insurance. in austria, the only one in the european union that allowed anonymous bank accounts to be issued, a fatf baltic journal of economic studies 196 vol. 4, no. 5, 2018 program has been developed to phase out them. in particular, the austrian criminal code declares the crime of laundering all assets derived from the commission of serious crimes involving imprisonment for a term of more than three years. the belgian financial authorities, strictly controlling the movement of money, must check all transactions worth more than 10 thousand euros. the special money laundering act of january 11, 1993, includes terrorism, organized crime, drug trafficking, weapons, the use of underground labour, trafficking in human beings, prostitution, the illegal use of hormones in animals, human trafficking, serious and organized tax fraud that violates financial interests. the european community, corruption, untypical investments, false bankruptcy. in accordance with the royal decree of june 11, 1993, a special structure – the financial information sector (сtif) – was created under the auspices of the ministries of finance and justice. this body analyses, with the involvement of relevant experts, the declarations of banks, exchanges, and other financial institutions about suspicious transactions, uses information from police, customs and other government agencies (kryvonos, 2014). until recently, only legislation on the laundering of illicit drug trafficking was settled in japan’s legislation. these issues were regulated by the law on special exceptions to the law on the control of narcotic drugs and psychotropic substances (1991), which has been abbreviated as the law on drugs. in 1998, its provisions were implemented to the basic principles of supervision over financial institutions, developed by the financial supervision agency established in the same year (since 2000 – financial services agency). simultaneously, an amendment to the law on currency exchange and foreign trade ordered banks and currency exchange operators perform in some cases identification of customers but did not provide any responsibility for non-compliance. the adopted in 1999 the law against organized crime in japan was expanded range of offenses relating to money laundering and later those provisions were included in the supervisory framework (yehorycheva, 2014). in hong kong, it has long been considered the most corrupt financial capital of the world in 1973 created an independent commission to combat corruption, subordinate to the governor of hong kong, which assigns each person the commission investigating the post (parshutin, 2015). therefore, it can be argued that the current system of measures to combat organized crime in the financial system is based on the following basic principles: a minimum amount of financial transaction over which all transactions of a certain type to be registered designated law institutions and individuals to further test possible – usually a sum of 10 thousand usd; developed and introduced into the action list of features that allow you to determine whether or related financial transaction carried out among those held for money laundering or terrorist financing; responsibility for informing law enforcement or regulatory agencies regarding suspicious transactions imposed on certain subjects through which financial transactions are conducted; governments provide one of the executive power to coordinate the activities of all law enforcement and regulatory agencies in combating the legalization of proceeds and terrorist financing, acquiring the status of fiu (yehorycheva, 2014). almost all countries have created special organizations dealing with money laundering. in the united states, this is the department for fighting financial crimes, created under the us department of the treasury; in japan – the financial analysis centre, the financial intelligence office of japan, in greece – the special antimoney laundering board, in argentina – the financial information committee, in brazil – the financial supervisory authority. in mexico, there are two special organizations –the directorate general for transaction investigation and the anti-money laundering agency. the problem of money laundering in financial institutions in belgium is the ministry of finance and justice created the financial information sector, which analyses suspicious transactions, as well as reports from police, customs, and other government agencies and, if necessary, checks the information suspend suspicious transactions (kryvonos, 2014). in conclusion, it should be noted that the counteraction to organized crime in the financial system requires special attention and special approaches, as scientists who develop methodological recommendations and practical workers who use them during detection, termination, and prevention (sevruk, 2016). an analysis of the foreign experience of police activity, as well as special organs and organizations on combating organized crime in the financial system, namely, on the basis of a comparative legal analysis of the principles defined in international legal instruments and their use in the police activities of democratic states, determined the feasibility of their implementation in the police activities of the bodies of the national police of ukraine. this will allow departing from the standards of the soviet law enforcement system and updating the approaches to combating organized crime in the financial system in ukraine due to the necessity of using the foreign experience of law enforcement bodies and the implementation of the international legal framework taking into account national interests and peculiarities of domestic experience. currently, a number of issues exist in the practical activities of this direction. so, given the results of the survey respondents determined that the state of scientific elaboration combating organized crime in the financial sector needs to be improved by identifying conceptual-categorical apparatus of organized crime in the financial sector (72%), the study of organized crime in the financial sector as a criminological phenomenon baltic journal of economic studies 197 vol. 4, no. 5, 2018 (68%), others (63%). the most important thing for ukraine in this context is the study of the foreign experience of foreign countries that have succeeded in this area – 87% of respondents (androsovych, 2018). from this line, we consider it necessary to highlight the position of s. pavlenko that a society raised in a low moral environment cannot effectively counter organized crime in the financial system. therefore, the priority measures of state policy should be the education of moral qualities of the individual (pavlenko, 2015). of course, in the current economic situation in ukraine, we cannot adopt all the positive foreign experience in combating organized crime in the financial system, but the study of its individual components and their implementation in practice of law enforcement bodies of ukraine will improve performance when combating organized crime in the financial system. 3. conclusion summing up the above, there is the question of the need to create an effective system for combating organized crime in the financial system in ukraine. therefore, the use of foreign experience of state mechanisms for the prevention and counteraction of organized crime in the financial system allows formulating a complex of effective national levers of state regulatory influence on counteracting this type of crime. the problem of organized crime in the financial system has become international in recent years. at the same time, the international community recognizes that organized crime in the financial system has become a global threat to economic security, which is why states are required to adopt agreed measures to combat this socially dangerous activity, both at the national and international levels. therefore, it is necessary to agree on this issue v. sevruk, the proposed system should have interstate status and concentrate information on all law enforcement agencies and special international law enforcement agencies (interpol, europol, pcsco, eurojust, fatf, egmont group, moneyval, eurasian group on combating money laundering and financing of terrorism (eag), basel committee (banking regulatory and supervisory committee), the wolfsberg group, the international monetary fund, the world bank, the european bank for reconstruction and development). such a system will create some work to overcome this phenomenon on a global scale, for those who commit counteraction to organized crime in the financial system – prerequisites for international cooperation on counteraction in this whole (sevruk, 2017). it should be noted that our analysis of foreign experience in the fight against organized crime in the financial system of the united states, european, and other states allows you to highlight a number of points that characterize the above aspects of such a counteraction: the legal basis of these states are the constitution and national laws, as well as specialized legal acts, which defines the status, rights and responsibilities, the responsibility of employees of special actors to counter organized crime in the financial system. also, in foreign countries, there is a clear division of competences between national and special 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(in ukrainian) baltic journal of economic studies 17 vol. 6, no. 2, 2020 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: serg.bardash@gmail.com orcid: http://orcid.org/ 0000-0001-5711-5229 researcherid: f-4116-2018 2 kherson state university, ukraine. email: tatiana@osadcha.com orcid: http://orcid.org/0000-0003-4258-0907 researcherid: f-4110-2018 doi: https://doi.org/10.30525/2256-0742/2020-6-2-17-24 current status of state financial control of ukraine and ways of its improvement sergiy bardash1, tatiana osadcha2 abstract. the urgency of the research is conditioned by the crisis of state financial control in ukraine, in particular by the artificial lowering of the role of the state financial control for public administration in terms of determining the problems and prospects of the socio-economic development of the country. the study is evaluating the results of control measures conducted by the state audit service of ukraine and the accounting chamber of ukraine, development of recommendations for their improvement and phrasing. the methodological framework of the research is a comparative analysis of the series of dynamics of the established financial violations, systematic analysis of the quantitative and qualitative composition of the revealed violations, cause-and-effect analysis of the dynamics of the revealed financial violations, abstract-logical method, synthesis and generalization to substantiate the basic theoretical provisions, formulation of conclusions. the scientific results. based on the performance evaluation of state financial control the article proves the failure of contemporary inquiries to support the interests of the state and civil society, defines the main reasons of such inconsistency. it is also determined that the significant improvement of the situation can be achieved through: awareness of the importance of the parliament and government of state control as an exclusive functionality tool of information source for nationwide scale management decisions centers about the actual situation in the national economy; accomplishment of the concept of preventive controls to facilitate optimization controls, saving budget funds for their implementation and state control servicing, establishment of the necessary evidence for further damages compensation to the state and reduction of the number and volume of financial misconducts in the future; centralization of state financial control, which will consolidate efforts to control completeness of formation, legitimacy, appropriateness and distribution efficiency, redistribution and use of financial resources of the state, eliminate duplication of control tools, create a single database of control tools and their results, optimize servicing costs of state financial control bodies. the practical significance of the research is to develop first-priority recommendations for improving the organizational foundations of state financial control and methods of conducting control measures. significance/originality. the results obtained form an integrated view of the consequences of functioning of the state financial control bodies, the level of legal consciousness, professional competence and responsibility of officials of state authorities, local self-government, and other entities of economic relations for the consequences of managing state financial resources. key words: state financial control, financial resources, financial misconduct, preventive control system, centralization. jel classification: m41, m42, m48 1. introduction permanent changes in approaches to the management of the ukrainian economy without a well-defined strategy of state development have made inevitable a radical transformation of one of the most important elements of state administration: state control. the result of such changes has been that the state financial control (hereinafter referred to as sfc) lost its effectiveness, it became inherently episodic, haphazard, situational, fragmentary coverage of financial, including budgetary and tax, relations of the entities of the national economy. according to many experts, about 50% of ukraine's economy is in the shadow, financial distortions tend to increase. creation of specialized anti-corruption bodies in no way affected reduction of corruption in ukraine. the current state of parliamentarism, the selectivity baltic journal of economic studies 18 vol. 6, no. 2, 2020 and fragmentation of parliamentary control, as well as the incompleteness of the transformation process of sfc do not allow to control the legality, expediency and efficiency of distribution and use of state financial resources by state authorities, local self-government bodies, entities of state ownership, to operate reliable information on the socio-economic status of the national economy to develop a long-term and mediumterm strategies for its development. insufficient scientific elaboration of issues of organization, coordination of actions of sfc bodies, methods of its conducting is one of the reasons for strategic errors in the system of management of the economy of ukraine. throughout ukraine's independence, the effective management of state property and funds remains the question of the day. the sfc system should play a major role in this matter, however, as the experience of its entities shows, the country 's government is satisfied with the composition and efficiency of the sfc system. according to hetherington (1998), the inconsistency of state authority actions with the expectations of the ukrainian citizens led to low living standards, impeded development and excessive corruption. one of the few elements of the sfc system is the state audit institution, which is able to guarantee and promote confidence to state authority at the macro level by determining the economic feasibility, efficiency and effectiveness of the country 's resource management and quality of the state control (heald, 2018). this conclusion is confirmed by the positive experience of the eu countries, as well as the usa, canada and other countries in this field. hay and cordery (2018) emphasize that public sector auditing as it is currently known is old-established, dating from the 1860s, but also a living organism that continues to change. the authors draw parallels between independent audit and public audit and substantiate that there are many explanations that can be applied to examine the value of public audit, including agency, signaling, insurance, management control, governance and confirmation of explanations (hay, cordery 2018). based on the deep analysis of scientific publications and history, hay and cordery (2018) conclude that further productive research should include comparative studies of supreme audit institutions and their impact; examination of changing governance practices in the public sector and their impact on auditing. regarding this, the researches based on a cross-national comparison are useful (bowerman, et al., 2003; blume; voigt, 2011; morin, 2016; jeppeson, et al., 2017). interethnic comparison plays a significant role in identifying deficiencies in the functioning of the sfc system of ukraine, but domestic researchers continue to seek ways to improve it. recently, the issues of development of state financial control under the conditions of market economy of ukraine (basancov, 2008); development of financial control system in ukraine (vyghovsjka, 2010); current models of the sfc system in the countries of the european union, organizational and functional structure of the sfc system, status and problems of its development (ivanova, 2010); organization and implementation of state control in ukraine (dmytrenko, 2011); organization of the system of state financial audit in ukraine (slobodjanyk, 2014); the essence of the sfc system (shevchuk, 2015) continue to be raised in specialized scientific circles. i. drozd, v. symonenko, i. stefaniuk and others also continue to investigate the theoretical, methodological and practical aspects of sfc actively. however, positively assessing the individual results of domestic scientists in the search for ways to build an effective sfc system in ukraine, it should be noted the fact that there are significant deficiencies in its functioning, which provides certain grounds for the recognition of sfc as one of the significant factors inhibiting the development of ukraine's economy. the objectives of the research are to evaluate the performance of the sfc bodies, to provide recommendations for their improvement, and to formulate proposals for the transformation of the sfc system. 2. сharacteristics of the state financial control indicators economic changes in the development of the public sector of economy accompanied by the requirement of fierce competition in the world market, the necessity of rational use of financial resources should encourage public authorities to reconsider their attitude towards sfc. this is due to the fact that over the last decade the state has in fact lost a coordinating and guiding role in the formulation of policies regarding the management of state property and state financial resources. an indirect proof of this fact is the strong desire of the government of ukraine to announce annually the sale of sufficiently attractive state-owned enterprises, since the theses about the inefficiency of management of state-owned enterprises are heard all the time including from the leadership of the government. existing problems of public administration caused the institutional imbalance of sfc. the state of fiscal discipline has deteriorated significantly, which threatens ukraine's national security in the financial sphere. extensive facts of theft of budget funds, other violations of financial and property character continue to be revealed from year to year (figure 1). this is due to the fact that the number of enterprises, organizations and institutions subject to audit is rapidly decreasing from year to year (80075 in 1997, and 6040 in 2013, 1546 in 2018). it is significant for further assessment of the level of economic legal consciousness of heads of state-owned baltic journal of economic studies 19 vol. 6, no. 2, 2020 enterprises, organizations and institutions, other budgetary units, as well as the level of preventiveness of the control measures taken and the management decisions made based on their results, that the information that there is a negative tendency to increase the volume of violations, including by their types, except for the period starting from 2016 (figure 1), as a direct decision of the prime minister of ukraine has been a moratorium established on taking control measures from 2014. it is worth noting also that the figures of the volume of violations detected by the state audit service of ukraine (hereinafter referred to as sas) and the accounting chamber of ukraine (hereinafter referred to as acu) in 2006-2015 (figure 2) allow us to make certain assumptions about certain trends of the attitude of the state authorities to sfc. in particular, an increase in the volume of revealed violations by 2010 (figure 2) may indicate either an increase and uncompromising functioning of the sfc system, or a very unprofessional management of public resources (in 2010, the ac revealed violations amounted to uah 52 billion, the sas revealed violations amounted to uah 12.1 billion). the trend of change in indicators of revealed violations after 2010 may indicate the existence of political pressure on the activities of the sfc entities, which, in our opinion, could condition the selectivity of control measures and response to their results, which resulted in a significant decrease in the volume of violations revealed. thus, in 2018, the ac revealed violations amounted to uah 17 billion, and the sas – uah 2.250 billion. these indicators are a definite proof of the above thesis against the comparison of expenditures of the state budget of ukraine in 2010 – about uah 308 billion and in 2018 – about uah 918 billion. for specialists it is clear that a significant decrease in the indicators of the revealed violations is not a consequence of increasing the level of responsibility for taxpayers' funds management and conscious adjustment of economic interests of top management of state-owned enterprises, institutions, organizations, as well as other budgetary units for the benefit of the ukrainian citizens. the above considerations are made against the background of the awareness of the fact that the economic interests of individuals, endowed with the state power, and the overwhelming majority of the ukrainian citizens who have chosen a pro-european choice for the development of the country, are inconsistent. in particular, the volumes of financial violations established by the ac in 2016-2018 indicate the postponement of positive changes in the management of public resources (figure 3). when characterizing the quality of public resources management, it should be borne in mind that the most widespread violations of financial and budgetary discipline 500,2 325 1275,2 1276 1298,1 642,9 955 886,6 1332,5 2057,3 2067,9 1070,9 1122,6 1181,6 264,7 72,1142 225,7322,1 105,9 128,7 216,5 80,1163,4 24,181,1 47,6 65,5 0 500 1000 1500 2000 2500 2006 2007 2008 2013 2016 2017 2018 deficiency of monetary and material assets, uah mln. inappropriate expenses, uah mln. illegal expenditure of resources, uah mln. short supply of financial resources, uah mln. figure 1. dynamics of financial violations revealed by the state audit service of ukraine in 2006-2018, uah mln. source: compiled by authors based on materials of mnykh, 2015, the state control and revision service of ukraine 2006-2018 (mnykh, 2015; derzhavna kontroljno revizijna sluzhba ukrajiny 2006-2018) baltic journal of economic studies 20 vol. 6, no. 2, 2020 in the country remain from year to year: violation of the requirements of the budget code in terms of misuse of budgetary funds, taking for payment commitments in excess of the approved supplies, diversion of budgetary funds to long-term receivables; unnecessary spending of budgetary funds as a result of payment of excessive amounts and cost of works performed and services rendered; spending of budgetary funds for the purchase of furniture, equipment, vehicles and other material assets in excess of the limit standards, as well as costs for the maintenance of vehicles beyond the set limits; unlawful transfer of state and communal property to entities of non-governmental ownership; failure to apply mandatory public procurement procedures; depreciation of assets as a result of non-indexation, as well as a result of non-acquisition of acquired property and surplus of commodities and materials. presently, in order to realize the need to strengthen control over public funds management processes, the relative indicators shown in figure 4 gain in importance (rakhunkova palata ukrajiny, 2018). the realization that there is no improvement in budgetary discipline today, no strengthening of a responsible attitude to the management of public resources is observed, in our opinion, conditioned the fact that the accounting chamber of ukraine refused to provide structured data on the causes of violations revealed in 2018 (rakhunkova palata ukrainy, 2018). based on the dynamics of the number of control measures carried out by the sfc bodies, it can be argued that functioning of both the public administration system and the sfc system is at an unsatisfactory level, as evidenced also by a number of macroeconomic indicators of the state of the national economy, in particular, contraction in manufacturing, public budget deficit, and public debt growth etc. one of the factors of the unsatisfactory assessment of the activities of the sfc bodies by civil society is the low level of compensation for the damages caused, which in turn leads to the non-implementation of the preventive function by the financial control. thus, the number of enterprises, institutions and organizations audited by the sas decreased from 80075 units in 1997 to 1546 units in 2018, but this did not reduce the number and monetary estimate of violations. thus, in 1997, on average, one audited enterprise (institution, organization) had violations in the amount of uah 18038, and in 2009 this indicator was equal to uah 210526, which is 11.7 times higher than in 1997. average compensation for 1997-2009 amounted to 42.7%. in absolute terms, the compensation amounted to uah 8787.6 million, or 42.45%, for 11 years. accordingly, uah 11911.8 million remained uncompensated (bardash, 2008). the stated negative trend is observed today too. thus, according to the sas statistical reports for 20162018 (derzhavna kontroljno revizijna sluzhba ukrajiny, 2016-2018), the average percentage of compensation and expenditure renewal carried out in violation of the law made 24.2%. in general, when assessing the quality of the materials of the control measures conducted by the sas, it should be noted that for 2016-2018, the average percentage of eliminated financial violations that led to the loss of financial material resources, taking into account violations revealed in previous years, was 33.5%. it should also be noted that in 2018, the sas inspected 1546 enterprises, institutions and organizations, which was 1.93% of the indicator of 1997. 0 10 20 30 40 50 60 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 sas acu figure 2. volumes of violations revealed by the state audit service of ukraine and the accounting chamber of ukraine in 2006-2018, uah billion source: compiled by authors based on materials of the state control and revision service of ukraine, 2006-2018, the accounting chamber of ukraine, 2015-2018 (derzhavna kontroljno revizijna sluzhba ukrajiny, 2006-20018, rakhunkova palata ukrajiny, 2015-2018) baltic journal of economic studies 21 vol. 6, no. 2, 2020 the stated situation regarding the level of compensation for the damage caused to the state gives grounds to suggest that the system of law enforcement agencies, as well as the courts, do not contribute to the protection of the interests of the state, since the quality of the material on the revealed financial violations is so low that in fact there is no possibility to make motivated court decisions to compensate the state for the damage caused. it is worth paying attention to the fact that inappropriate response of heads of the state authorities to managerial decisions of heads of departmental enterprises and institutions in whose economic activities financial irregularities have been revealed does not contribute to eliminating and preventing violations in the future. 3. directions of improvement of the system of state financial control in ukraine therefore, the preventive function of the sfc control measures remains declared, since the financial violations do not diminish. their numbers and varieties are only 0 2 4 6 8 10 12 illegal use, including misuse of public funds inefficient use of public funds violation of revenue administration 2018 2017 2016 0 10 20 30 40 50 60 70 80 use of budgetary funds without proper regulatory grounds planning in violation of applicable law and lack of legal grounds budgetary losses due to unjustified decisions ineffective management of public funds amounts underpaid to the budget on the results of financial and economic activities 2017 2016 figure 3. types of violations revealed by the accounting chamber of ukraine in 2016-2018, uah billion source: compiled by authors based on the accounting chamber of ukraine, 2015-2018 (rakhunkova palata ukrajiny, 2015-2018) 0 2 4 6 8 10 12 illegal use, including misuse of public funds inefficient use of public funds violation of revenue administration 2018 2017 2016 0 10 20 30 40 50 60 70 80 use of budgetary funds without proper regulatory grounds planning in violation of applicable law and lack of legal grounds budgetary losses due to unjustified decisions ineffective management of public funds amounts underpaid to the budget on the results of financial and economic activities 2017 2016 figure 4. some relative indicators of the causes of violations revealed by the accounting chamber of ukraine in 2016-2017, % source: compiled by authors based on the accounting chamber of ukraine, 2016-2017 (rakhunkova palata ukrajiny, 2016-2017) baltic journal of economic studies 22 vol. 6, no. 2, 2020 increasing. elimination of the identified deficiency can be achieved by implementing the concept of preventive control based on implementation of hypotheses about possible violations and versions of their commission in the control process. this concept is aimed at achieving a new quality of functioning of the financial control system at all levels, as well as optimizing the process of monitoring the indicators of its duration and resource saving for its implementation, formation of evidence base for further compensation for the damages caused, as well as determining measures to eliminate the revealed violations and preventing them from occurring in the future. the above methodological proposal is aimed at improving the performance of the sfc bodies, but the deficiencies identified in the research should be eliminated by applying a conceptual systematic approach to addressing them, taking into account measures to improve the public administration system. that is why it is time to create a coherent sfc system, based on uniform organizational and methodological principles. such a system should adequately respond to the numerous economic problems that arise in the implementation of financial relations in the formation, distribution and use of financial resources, to ensure the unity and stability of organizational and economic links between branches of the legislative and executive power, to cover all sectors and levels of the economy. it should be noted that in addition to the abovementioned features of the new desired quality of the sfc system of ukraine, there should be a significant improvement in the organizational structure, content of control measures, financial, personnel, information support, establishment of close relations with other state control bodies, etc. however, there is also a time to coordinate the activities of the sfс bodies, since control measures, which are sometimes duplicated, are carried out at the expense of a single source, which is the budgetary funds, including taxpayers’ funds. lack of a clear understanding of the format of relationships and the purposeful focus of functioning of the state control bodies at the levels of the legislative and executive branches of power, as a rule, is the main reason for strategic failures in the public administration system. currently, scientists are proposing several approaches to the transformation of the current system of state control, starting with the development and implementation of the concept of the sfc development, to proposals for improving the current regulatory prescription of the activity of state control bodies, the introduction of new forms of control, etc. the suggestions presented in the domestic scientific literature are aimed at resolving the issue of the establishment of the main sfc body or the separation of powers between the legislative and executive branches of power. accordingly, the issues of coordinated resolution of state control problems remain unresolved. today, only a set of disparate chains of state control operates in ukraine, which do not interact sufficiently with each other, it is not a system in the scientific sense. in fact, the modern national sfc is a collection of state control bodies of the legislative and executive branches of power, which perform disparate, uncoordinated control functions, so, taking into consideration the theory of system classification, such a set is difficult to recognize a complete system and identify: – “as a complex system, because there are no interconnections and interactions between a large number of public authorities that can be recognized as simple systems. if they exist, they are only one-sided in nature between the executive branch control bodies; – as a large system, because: the intended purpose of subsystems (separately for the legislature and separately for the executive branch) or simple systems (for separate bodies of state control) are not always subordinated to the purpose of the whole system; there is a lack of large amount of information links between the subsystems; there are no elements of self-organization (in the vast majority of state control bodies of the executive branch of power); – as a purposeful system, because the totality of state control bodies does not have the ability to form and change in whole as a system in the processes of adaptation to the environment and development” (bardash, 2009). other significant disadvantages of sfc are the lack of a unified informational and methodological base, as well as its imperfect legal regulation, which significantly reduces its effectiveness and complicates the achievement of the defined purpose. one of the possible ways of solving the established deficiencies should be considered centralization of the activity of the sfc bodies, which will contribute to the construction of a unified system of state control based on unified organizational and methodological principles, unified rules of functioning and solution of the set tasks with a clear definition of the control bodies and distribution of their functions and powers. this proposal in no way contradicts national trends in decentralization, since the latter has been chosen as a possible option to eliminate the effects of financial centralization. state control over ukraine's independence period has never been centralized, on the contrary, there has been an unjustified increase in state control bodies, which, in our opinion, has sometimes led to justified claims for their activity. nowadays, the organizational structure of the highest bodies of state control of the leading countries of the world is decided differently, based on their historical development and selected strategies of their socioeconomic development. it is worth noting that at present we cannot fully transfer the experience of the state control organization in the developed countries of the world into domestic practice for the following reasons: insufficient development of the national baltic journal of economic studies 23 vol. 6, no. 2, 2020 system of public administration; absence of a strategy for the development of the national economy and the identification of the main tasks of state control bodies in the context of its development. however, a transformation of the state control system is needed, so it is worth considering a model that would create the organizational preconditions for its effective functioning and would form the basis of its conceptual restructuring. such transformation should be based on: – establishment of a control body, to which all other state control bodies, both of the legislative and executive branches, would be subordinated; – the integrity of the state control system as an element of the public administration system; – introduction of random checks of the data obtained by the state control bodies based on the results of the control measures carried out. the first step aimed at recognizing the state control bodies by the system should be the construction of two subsystems: the bodies of control of the legislative and separately executive branches of power (the ac and territorial accounting chambers, as well as the sas respectively, headed by other bodies of state control in the system of executive power). the next step is to centralize a complex system to coordinate subsystem activities, eliminate duplication of control measures, and optimize expenditures for their conducting. we believe that the most appropriate proposal is to create a unified collegial body (for example, the state control bureau), which would include representatives of the existing sfc bodies. according to functional tasks, this bureau should be the body of strategic management, overall planning and ongoing coordination of sfс in ukraine. the main activities of this body should be: – approval of a unified annual plan of control measures, which should be based on the annual plans of the ac and sas, as well as prospective plans of control activities. within the framework of the stated proposal, the sasu as the main body of state control of the executive power, should develop a general plan taking into account the plans of control measures of the state fiscal service of ukraine, as well as the plans of control measures of other state control bodies of the executive power; – improvement and development of standards for control measures, as well as methods of assessing their effectiveness; – carrying out of random quality control of the implemented control measures. the state control bureau should be at the forefront in establishing an integrated system of external and internal state control, implementing international standards of state control, aligning them and harmonizing with national legislation as one of the significant factors that will significantly affect the quality of control measures and significantly reduce the level of corruption. 4. conclusions and further researches the conducted research according to its purpose gave the grounds to reach the following conclusions: 1. the activity of the state financial control bodies of ukraine does not meet the current requirements for guaranteeing the interests of the state and civil society and is correlated with the overall assessment of the activity of all public authorities. the main reasons for this assessment are as follows: – reduction of the level of interest of the governing bodies of state power in carrying out control over the distribution and expenditure of financial resources, in addition to controlling the completeness and timeliness of formation of the revenue part of the state and local budgets; – low level of compensation for the damages caused to the state; – insufficient preclusiveness of control measures, which causes the volume and types of financial violations to increase. 2. state control must meet a number of requirements that are determined by the interests of the state. first of all, it is about ensuring the effectiveness of the activities of the bodies that make up its power apparatus, and of the total system as a whole. an important condition for ensuring the effect of the functioning of state control bodies is the systematicity, optimality and balance of their control actions. failure to comply with at least one of these conditions leads to the inefficient functioning of the entire system of state control, as well as, in the future, the public administration system. 3. substantial improvement of the activities of the sfc bodies can be achieved through: – awareness of the importance of state control by the parliament and the government, as the only instrument for providing the centers of decision-making of national importance with information on the actual state of affairs in the national economy; – implementation of the concept of preventive control, which will help to optimize control measures, to save budgetary funds for their implementation and maintenance of the state control bodies, to create the necessary evidence base in order to further compensation for the damages caused to the state, as well as to reduce the number and volume of financial violations in the future; – centralization of sfc, which will consolidate efforts to control the completeness of the formation, legality, expediency and effectiveness of the distribution, redistribution and use of public financial resources, eliminate the facts of duplication of 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(2014). formuvannja systemy derzhavnogho audytu v ukrajini [formation of the state audit system in ukraine]. monograph. sumy: fop natalukha a. s. shevchuk, o. a. (2015). sutnistj systemy derzhavnogho finansovogho kontrolju [the essence of the system of state financial control]. financial space, vol. 1(17), pp. 304–308. vyhovs'ka, n. h. (2010). rozvytok systemy finansovogho kontrolju v ukrajini [development of financial control system in ukraine]. the dissertation author's abstract for the degree of doctor of economic sciences. baltic journal of economic studies 44 vol. 5, no. 3, 2019 corresponding author: 1 yaroslav mudryi national law university, ukraine. 2 kyiv national economic university named after vadym hetman, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-3-44-49 economic and legal aspects of the franchise agreement in the united kingdom kostyantin gusarov1, anastasiia diadiuk2 abstract. the purpose of the article is to study the economic and legal nature of the franchise agreement in the united kingdom (uk). since franchising in this country is well-established as a successful and highly-regarded growth model, it is advisable to identify the key economic and legal features of the franchise agreement, in which the parties specify their rights and obligations, the franchise price, the duration of the franchise relations, the procedure for performing calculations, etc. the subject of the study is a franchise agreement in the uk. research methodology. the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method allowed us to investigate the definition of a franchise agreement in the uk and its key terms. the comparative legal method was used to compare doctrinal approaches to this issue. the statistical method was used to establish data that reflects the effectiveness of franchising activities. the method of system analysis helped to find out in which areas of economic activity franchising is most demanded. interpretation of the content of the uk legal acts governing issues related to the conclusion of a franchise agreement in this country was realized with the help of the normative-dogmatic method. the system-structural method was used to study the franchise agreement in the uk as a single entity (system) with the coordinated functioning of all its elements. the methods of grouping and classifying formed the basis for separation the list of conditions which are necessary for concluding a franchise agreement in the uk, as well as the provisions that should be included in the content of this agreement. methods of analysis and synthesis helped to study some parts of this agreement to formulate further conclusions. practical application. the positive experience of the uk in regulating issues related to the conclusion of a franchise agreement can be used for making appropriate changes to the ukrainian legislation. correlation/ originality. this scientific work is the first research in ukraine devoted not only to general issues of regulation of franchising activity in europe but specifically to the franchise agreement in a separate country (in the uk) and its legal and economic peculiarities. key words: franchising, franchise contract, franchisor, franchisee, disclose, contract terms, termination, renewal. jel classification: k12, m21 1. introduction franchising is a business organization that allows one party – the company owner (franchisor) – to transfer the right to sell goods/products/services of the company to the other party (franchisee) for a fee. for the franchisor, it is a great opportunity to expand its business, and for the struggling entrepreneur, it is a possibility to become a business owner, to gain experience while not creating anything new. one of the most important features of franchising is the reduction of business risks. according to statistics, 85% of all newly created enterprises cease to operate during the first five years but only 14% of all newly created firms established within the framework of franchising. considering the positive role that franchising may perform in the global economy, it is important to understand in what manner is this institution regulated in different countries of the world. since the franchising in the uk is extremely diverse and covers many types of business and consumer markets, and has proven to be a successful and highly estimated growth model, in this article, we will turn to the experience of this particular state, and analyse the features, which are inherent in the franchising agreement, as well as legislative acts that regulate this issue. 2. analysis of recent research and publications the study of franchising as a type of international business was undertaken by n. v. bezrukova, l. v. voroniak, t. m. hryhorenko, n. m. hrushchynska, o. m. kolodiziev, o. ye. kuzmin, a. m. mahomedova, v. ye. sakharov, v. s. tatarinov, t. m. tsyhankova, a. v. tsyrat, i. m. shkola and others. however, this baltic journal of economic studies 45 vol. 5, no. 3, 2019 would be the first study in ukraine devoted to franchising in the uk, and in particular, the economic and legal characteristics of the franchise agreement in this country. the goals of this article is to explore the history of the emergence of franchising in the uk; regulation of franchise activity in this country; contractual issues relating to franchise agreements (including pre-contract disclosure requirements, formalities, parties’ rights and obligations, fees and payments, term of agreement and renewal, termination of the agreement). 3. presentation of the main material in its earliest form, franchising first appeared in the uk with the advent of the tied pub system, but at that time, it didn’t become popular. in the 50s, the interest in franchising had been growing significantly, its concept was taken up by an increasing number of enterprises in various sectors of the economy. there was a rapid growth in the development of international franchising; the first international standard franchises appeared in the uk. in 1959 servicemaster, the largest international franchise company began its operations in the uk. by the mid-1960s, some of the largest fast-food brands had become well-established international franchises, led by mcdonald’s and kfc. however, in the 1970s, franchising in the uk was suspended. this was partly due to economic fluctuations but more because of the damage caused to its reputation by pyramid schemes, which falsely represented their activities as franchising. however, by the end of the 1970s, the uk’s eight largest domestic brands – servicemaster, dyno-rod, holiday inns uk, kentucky fried chicken, wimpy international, ziebart gb, prontaprint and budget rent a car appeared. they tried to rebuild the reputation of franchising and to differentiate their activities from the illegal practice of financial pyramid schemes. in order to achieve this goal, the british franchising association (bfa) was established in 1977. during the last decade, franchising in the uk has been developing at a fast pace. about 1000 domestic and foreign franchise networks operate in the territory of this country in the most diverse sectors of the economy. the authoritative annual research into the state of the industry bfa/natwest franchise industry survey has found that both shortand long-term growth trends in the franchise sector are extremely powerful, including since the economic recession in 2008. indeed, there is a significant annual increase in terms of numbers of brands franchising, numbers of franchisees, numbers employed in franchise businesses, and the overall turnover of the franchise sector. the same study has shown that about 90% of franchisees report the profitability of their business and less than 4% of franchise companies fail for commercial reasons each year (the british franchise association). the total contribution to the uk economy from franchising is estimated at gb£15.1 billion, which generate about 44,200 franchise companies. the total number of employees in the franchise sector has reached 621,000 people. 38% of british franchisers work internationally: 30% of them in europe, 8% in the united states of america (chris wormald). all typical franchise models have found their place in the uk market. the choice of model depends on a variety of commercial factors, such as the nature of the business, the required level of investment, and the position of the franchisee. for example, for local franchising franchisors choose: direct franchising for individual companies franchisee; area development agreements or “cluster franchises”, where franchisees are granted the right/obligation to open a number of outlets in a defined geographic territory; development agreements (without sub-franchising) for the whole of the uk or very large regions (such as scotland); master franchising, where the master franchisee selects, teaches and supports his sub-franchisees; franchising of a joint venture, where the franchisor and franchisee work towards a common goal (chris wormald). the law does not impose any restrictions on the organizational and legal form of the franchisor but the most common form in the uk is a limited liability company. other common forms of franchise companies are a joint-stock company, a private company or a partnership. when entering foreign markets, the franchisor can open a branch, establish a local subsidiary or enter into a joint venture with a local company to create an infrastructure in a new territory. in this case, of course, it is necessary to consider taxation and transfer pricing issues. since the uk has no special laws regulating franchise activity, in 1977 a specific regulatory body, the british association of franchising (bfa), was established, the main task of which is to accredit a company’s suitability for membership based on strict criteria related to operational practices, business procedures, franchise agreement terms – and the support offered to franchisees. membership in the bfa is not mandatory but many franchisors are joining this organization since it accredits franchise companies, and acts as a trade association. membership in the bfa imposes certain obligations on franchisors; in particular, they must adhere to: 1) disciplinary procedure; 2) complaints procedures; 3) appeals procedure; 3) the advertising standards agency’s code of advertising practice; 4) the bfa code (british franchise association), which was adopted by this organization in accordance with the european code of ethics for franchising (hereinafter referred to as the code of ethics). the bfa code includes some of the provisions of the code of ethics, as well as the special provisions inherent in the franchising of the uk, which specify the norms of the code of ethics; 5) reporting requirements. baltic journal of economic studies 46 vol. 5, no. 3, 2019 the provisions of the bfa code must be unquestioningly fulfilled by the members of the association; the sanction for non-compliance is the exclusion from the organization. among the main requirements enshrined in this code, one can distinguish the following: 1) a potential franchisor must run at least one pilot project before creating its own franchise network; 2) the franchisor must return the previous deposits; 3) advertising should not contain ambiguous and false statements; 4) the parties must act in good faith with respect to each other, including in resolution of disputes. as it was already noted, british legislation does not have clearly defined norms that regulate the implementation of franchise activity. this also applies to franchise agreements, which are mostly concluded in accordance with the provisions of the contract law. despite the lack of a special law, this issue is fully regulated. thus, the rules governing the implementation of franchise activities are contained, inter alia, in: 1) the competition act 1998, which regulates the conclusion of contracts, including franchise agreements. the competition act prohibits agreements that have an effect on trade and restrict competition in the uk. an agreement that violates the requirements stipulated by this act may be declared null and void, and the parties may be liable for the fine of up to 10 percent of their income. third parties affected by such agreements may claim damages; 2) block exemption regulation (ber)), adopted in accordance with section 101, paragraph 3 of the treaty on the functioning of the european union (commission regulation). thus, if the franchise agreement contains restrictive provisions, it may be exempted from the prohibition of the conclusion of antitrust agreements if the total market share of competitors in the relevant market does not exceed 5 per cent, or the market share of each non-competing entity in the relevant market does not exceed 10 per cent. this provision is called the de minimis principle, but it does not generally apply to franchise agreements, as they usually include provisions aimed at market sharing between the parties. if the de minimis principle cannot be applied, the franchise agreement may be exempted from the prohibition in accordance with the ber , which apply only to contracts that do not contain certain types of severe restrictions of competition, and the market share of the franchisor and franchisee in the relevant market does not exceed 30 percent (clause 8 of the ber); 3) the trading schemes act 1996, which was adopted to regulate pyramid schemes. since franchise agreement falls under the definition of trading schemes, the provisions of the act 1996 apply to it. the act provides for criminal and civil sanctions for violation of its norms; 4) data protection act 1998 (as amended on may 25, 2018), which regulates the processing of personal data. the activity of any enterprise in the territory of the uk, which is carried out using data on an individual, is subject to this law. violation of the provisions of the data protection act may result in criminal and/or civil liability; 5) unfair contract terms act 1977 (ucta). franchise agreements in the uk usually contain provisions on exemptions that seek to restrict or exclude the franchisor’s liability to a franchisee. the legality of such provisions is determined with reference to this act, which states that these provisions are enforceable only if they are fair and reasonable; 6) the bribery act 2010, which prohibits the offering or receiving of bribes in the uk and provides for severe penalties for companies and societies that are not in a position to prevent bribery in their organizations. that is, theoretically, franchisors can be held liable if their franchisees accept or give bribes. therefore, franchisors are required to take adequate measures to prevent bribery (hamilton pratt). there is no generally accepted definition of franchising in the uk, so bfa uses the definition given in paragraph 1 of the code of ethics adopted by the european franchise federation (code of ethics of the european franchise federation). in accordance with this definition, franchising is a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent undertakings, the franchisor and its individual franchisees, whereby the franchisor grants its individual franchisee the right, and imposes the obligation, to conduct a business in accordance with the franchisor’s concept. the right entitles and compels the individual franchisee, in exchange for a direct or indirect financial consideration, to use the franchisor’s trade name, and/or trade mark and/or service mark, know-how, business and technical methods, procedural system, and other industrial and/ or intellectual property rights, supported by continuing provision of commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between parties for this purpose. at the same time, bfa emphasizes that the franchise agreement should be fair and comprehensive. there is no such thing as a “standard document” that meets the needs of all businesses without exception in franchise relationships. each contract is unique and is adapted to the requirements of franchise activity. a good franchise agreement will ensure that the obligations and rights of both parties – i.e. franchisor and franchisee – are set out as required and the final contract is likely to run to 40 or more pages. however, it does not mean that the franchise agreement is a balance of rights and obligations between equitable business partners. since franchisor is responsible for the entire network, it may sometimes act contrary to the interests of the individual franchisee for the benefit of the network (british franchise association). in the uk, unlike most european countries, there is no legally binding obligation to disclose information before concluding a franchise agreement. there is baltic journal of economic studies 47 vol. 5, no. 3, 2019 also no legal requirement for its parties regarding the voluntary provision of information since the burden of responsibility for data verification lies solely with the purchaser in accordance with the principle of “caveat emptor” (the buyer beware). it means that it is up to the potential franchisee to demand, request, and investigate certain information from relevant sources and to evaluate it from the point of view of equivalence, as well as to conduct a review of the franchisor’s activities. however, a franchisor is obliged to answer fairly and honestly on direct questions. the franchisee has the right to file a lawsuit in case of providing him with misleading information that led to the conclusion of the contract on terms contrary to those charged by the franchisee or to the causing damages (iain bowler). article 3.3 of the bfa code requires bfa member franchisors to provide a copy of the code to prospective franchisees, along with a “full and accurate written disclosure of all information material to the franchise relationship within a reasonable time prior to the execution of these binding documents.” the guide to the code contains further guidance on the extent of “full and accurate written disclosure”. besides, this issue is also regulated by the unfair contract terms act (ucta) (unfair contract terms act 1977). according to this act, any provision in the standard form agreement, which has not been negotiated by its parties, is subject to a fairness test. if the provision could damage the franchisee, the franchisor is required to justify the necessity for it to be included in the content of the contract. in addition, according to the ucta, a franchisee is afforded the same protection as a consumer. concerning the payments for franchise activity so it is usual for the franchisee to pay an initial fee upon signature of the agreement followed by an on-going management services fee. according to the bfa’s code of ethics, the initial fee should cover the cost of establishing the franchisee in business with a small element of profit to the franchisor. a franchisor should not be seen to be achieving its main income from the sale of franchisees alone; instead, this should be achieved from the on-going management fee. this ensures that the franchisor’s success is linked to that of the franchisee. the on-going fee usually termed as a management fee can be structured in a number of ways e.g. a fixed fee or a percentage of the franchisee’s total turnover after vat or a combination of both. in addition, a marketing contribution may be charged which again is usually a percentage of the franchisee’s turnover. this money is held centrally and applied to the general promotion of the brand and business. it is usual for the on-going fees to be paid monthly so as to be able to keep a close eye on the sums (or weekly if appropriate). british law does not provide for essential terms of the franchise agreement. nevertheless, paragraph 5.4 of the code of ethics contains a list of conditions that is advisable to include in the content of a franchise agreement. they are as follows: 1) rights and obligations of the franchisor and franchisee; 2) goods and services provided by the franchisor, as well as the transfer of knowhow; 3) franchisees payment obligations; 4) provisions on the use of intellectual property; 5) duration of the contract: it should be long enough for the franchisee to amortize the initial investment (usually a franchise contract is concluded for 10 years); 6) the conditions under which the contract may be terminated or renewed; 7) the conditions under which a franchisee can sell the franchise business; 8) the franchisor’s right to develop a franchise network; 9) the provision for the immediate return of the franchisor’s property in case of termination of the contract and, if applicable, compensation of the franchisee; 10) control right: guidelines on the degree the franchisee is bound to the business concept should be handed to him; 11) contract penalties. the rights and obligations of the parties to the franchising agreement are provided in the bfa code. in accordance with its provisions, the franchisor must: 1) guarantee the right to use the know-how transferred and/or made available to the franchisee, which knowhow it is the franchisor’s responsibility to maintain and develop. in accordance with the definition given in the same code, know-how is a body of non-patented practical information, resulting from experience and testing by the franchisor, which is secret, substantial and identifiable; 2) in the pre-contractual, contractual, and postcontractual phases of its relationship with franchisees, use all reasonable means to prevent any wrongful usage of or, in particular, the transmission of know-how to, competing networks so as to avoid prejudice to the interests of the network; 3) offer to its franchisees an unqualified right to sell or transfer their business as a going concern; 4) inform prospective and individual franchisees of its internet communication and/or sales policy. the franchisee, in its turn, is obliged: 1) to collaborate loyally with the franchisor in ensuring the success of the network, which the franchisee has joined as an informed and fully independent entrepreneur. this provision underlines the fact that any potential franchisee is independent of the franchisor but, at the same time, must assume responsibility for the success of the joint activity; 2) to be responsible for the human and financial means that it engages in its franchise business; 3) to act loyally towards each of the other franchisees of the network. the validity of the franchising agreement is not legally defined, but at the same time, there is a certain duration of the provision concerning the purchase of goods and equipment from the franchisor. thus, it is often agreed in a franchise agreement that the franchisee is obliged to acquire goods from the franchisor and not from other sources, including other franchisees. such an obligation is legitimate only if it does not violate the rules of competition law and is necessary to maintain the identity and reputation of the franchise network. if such an obligation is not necessary baltic journal of economic studies 48 vol. 5, no. 3, 2019 to maintain the identity and reputation of the franchise network, then the block exemption regulation (ber) is applied. according to article 5 of this regulation, purchase obligation is not subject to its regulation, if the duration of this obligation does not exceed five years. if the duration of the obligation exceeds five years or is tacitly renewable then the provisions prescribed in the ber are applied to it. the franchise agreement in the uk is a long-term contract, which is concluded for a term of five to ten years. the main condition is that this term should be sufficient enough for the franchisee to be able to return its initial investments and to benefit. as a rule, a franchise agreement is terminated due to the expiration of its validity. it is not usual to allow the franchisee a right to terminate the agreement as the franchisor will wish to ensure that the franchisee is committed to the franchise for a decent period of time. therefore the rights of termination tend to be onesided in favour of the franchisor and in the presence of an exclusive list of breaches on the part of the franchisee. the examples of such breaches are: regular non-payment, constant customer complaints about the quality of service, and the behaviour of the franchisee, which negatively affects brand reputation. usually, a franchise agreement includes a provision on restricting competition that applies to the franchisee after the termination or expiration of the franchise agreement. this provision prohibits the franchisee to compete from the premises or within the franchised territory or soliciting customers for a period of up to 12 months posttermination. in order to be legally valid, this provision should be limited in both time and territory. the franchise agreement may be renewed by the mutual consent of the parties, which must be registered in the relevant clause of the agreement. in the case of franchisor’s refusal to continue cooperation, a franchisee does not obtain the right to demand compensation unless such right is enshrined in the contract. in accordance with the bfa code, all legal grounds for the renewal of franchise agreement should be clearly stated in the contract itself. 4. conclusion from its feudal roots to becoming one of the fastestgrowing sectors of the uk economy, franchising has come a long way. every year one can observe an increase of all indicators of franchise activities that testifies to its remarkable success and popularity. however, franchising in the uk is relatively unregulated compared to other european countries. since the uk does not have a single franchise law, this kind of economic activity is regulated by the code of ethics (bfa code), adopted by the british franchise association in accordance with the provisions of the european code of ethics for franchising, adopted by the european franchise federation. bfa is an organization that accredits franchisors and requires its members to comply with its standards, which are enshrined in the bfa code and other technical bulletins. although british law does not have clear rules governing franchise activities and conclusion of franchise agreements, these issues are fully regulated by a number of uk and european legal acts. in the uk, unlike most european countries, there is no legally binding obligation to disclose information before concluding a franchise agreement, as well as no legal requirement for its parties regarding the voluntary provision of information. however, the bfa code obliges its member franchisors to provide prospective franchisees with a full and accurate written disclosure of all information necessary to establish franchise relations with potential franchisees. the uk legislation does not also provide for essential conditions for a franchise contract, so the parties have the right to determine them at their own discretion in accordance with the recommendations provided in the bfa code. the validity of the franchise agreement is not legally defined but should be sufficient enough for the franchisee to be able to return its initial investments and to benefit. the maximum allowed duration of the contract will depend on whether it contains any provisions restricting competition. the right of termination tends to be one-sided in favour of the franchisor; there is no practice of termination of the agreement at the request of the franchisee. it is recommended to include provisions on terms of termination of the franchise agreement into its content. the franchise agreement may be renewed by the mutual consent of the parties. in the case of franchisor’s refusal to continue cooperation, a franchisee does not obtain the right to demand compensation. it is recommended to state all legal grounds for the renewal of franchise agreement in the contract itself. references: the british franchise association. history of franchising. retrieved from: https://www.thebfa.org/aboutfranchising-the-bfa/history-of-franchising/ chris wormald. domestic and international franchising, master franchising, and regulation of franchise agreements in the uk (england and wales): overview. retrieved from: https://uk.practicallaw.thomsonreuters.com/0-6329722?bhcp=1&transitiontype=default&contextdata=(sc.default)&firstpage=true&comp=pluk british franchise association. the code of ethics (bfa code). retrieved from: http://www.thebfa.org/aboutbfa/code-ofetics baltic journal of economic studies 49 vol. 5, no. 3, 2019 commission regulation (eu) no 330/2010 of 20 april 2010 on the application of article 101(3) of the treaty on the functioning of the european union to categories of vertical agreements and concerted practices. retrieved from: https://eur-lex.europa.eu/legal-content/en/all/?uri=celex%3a32010r0330 hamilton pratt. franchising in the uk. retrieved from: http://www.hamiltonpratt.com/franchising-uk/ code of ethics of the european franchise federation. retrieved from: http://www.eff-franchise.com/data/ eff%20code%20of%20ethics%20for%20franchising%20-%20final%2007122016.pdf british franchise association. the franchise agreement. retrieved from: https://www.thebfa.org/franchise-mybusiness/the-franchise-agreement/ iain bowler. england & wales: franchise 2019. retrieved from: https://iclg.com/practice-areas/franchise-lawsand-regulations/england-and-wales unfair contract terms act 1977. retrieved from: https://www.legislation.gov.uk/ukpga/1977/50 baltic journal of economic studies 42 vol. 6, no. 1, 2020 corresponding author: 1 national aviation university, ukraine. e-mail: goncharenko-zakrevska@ukr.net 2 interregional academy of personnel management, ukraine. e-mail: goncharenkomf@ukr.net orcid: https://orcid.org/0000-0002-6331-6518 3 university of modern knowledge, ukraine. e-mail: osipovalw@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-1-42-50 predictive analysis of research of the institutional aspects of market environment distortions nataliia honcharenko-zakrevska1, mykhailo goncharenko2, liudmyla osipova3 abstract. further changes and improvement of the conditions necessary for the development of economy, market and institutional environment should be based on gradual institutional transformations of the most important spheres of social relations, taking into account all the peculiarities of functioning of enterprises of different types of economic activity and forms of ownership. the regulation of the market environment should be based, first of all, on an institutional approach by creating an adequate support mechanism and stimulating its development. the purpose of the article is to formulate the methodological bases for the study of institutional aspects of market environment disortion on the basis of predictive analysis and institutional engineering. the authors summarize that the institutional environment has certain rules of behavior for the subjects of the socio-economic system, which reduce uncertainty in the functioning of this system, and also contribute to the growth of welfare of members of society. it has been determined that, both formal and informal, they must promote the effective functioning of economic processes and represent social value and productive force in socio-economic development in themselves, forming such a resource of society as social capital, which supplements and regulates the use of physical and human capital. the availability of social capital reduces the amount of transaction costs and, accordingly, the number of services for monitoring and controlling the behavior of participants in the economic process. it is proposed to conduct research based on predictive models of forecasting manner, that is used to predict the income and expenses of the subject and its future status. the overall macro-factor analysis of market distortions has made it possible to determine that the most comprehensive analysis of the elements of the institutional environment is carried out by the world bank, with the help of several groups of indicators: the first group includes political liberties and political stability, the second one isthe efficiency of governance and the quality of regulatory activity, and the third one is the rule-of-law assessment of the quality of compliance of the human rights, property rights. it is also possible to determine the dynamics of the efficiency of government in the countries of central and eastern europe. predictive analysis of the market environment allowed us to consider institutional changes, both through the prism of quantitative analysis of economic agents and qualitative factors of influence (the perfection of rules, time interval for their implementation, etc.). also, it allowed to analyze the disparities in the market environment from the point of view of trajectories formed by gradual changes and trajectories that have certain "breaks", jumps or "institutional shocks". the authors present the characteristics of the results of a predictive analysis of institutional development. it is generalized that the final assessment of institutional changes and their effectiveness can only be determined after their implementation. pre-forecasting gives a plausible estimate of the effectiveness and a predictable estimate of chreodity of the development option. it also proposes the introduction of institutional engineering as an activity aimed at developing models of economic institutions that are consciously and purposefully introduced into the market environment and mass economic behavior. the main problem lies in the development of such rules and principles of activity, the adherence of which would contribute to the effective solution of those problems for which they were created. key words: countries of central and eastern europe, institutionalism, institutional distortions, market distortions, predictive models, macro-factor analysis, governance effectiveness, institutional trajectories, institutional engineering. jel classification: e11, e60, h77, o11, z19 baltic journal of economic studies 43 vol. 6, no. 1, 2020 1. introduction further changes and improvements to the conditions necessary for business development should be based on a gradual institutional transformation of the most important spheres of social relations, taking into account all the peculiarities of the functioning of structures of different types of economic activity. the regulation of the market environment should be based, first of all, on an institutional approach by creating an adequate support mechanism and stimulating its development. the wish of the countries of central and eastern europe for freedom, democracy, rapid integration into the civilized world and rejection of the totalitarian past were accompanied by a series of economic shocks related to the reorientation of the economy to new trading partners, rapid growth in energy prices, lack of funds to support unprofitable production and a corresponding reduction in gross domestic product and incredibly high inflation. almost thirty years of economic development in the post-socialist countries of central and eastern europe have led to some conclusions about the successful and unsuccessful economic strategies and conditions for the sustainable growth of living standards in these countries (djankov, glaeser, la porta, 2013). the experience of institutional change in the postsocialist countries of central and eastern europe, which has undergone a rather radical way, which can be seen as a kind of socio-political experiment at the global level and a good opportunity to analyze the formation of an effective institutional framework in the transition from one type of political system of economy to another, is important. the formation of the institutional system in countries in transition comes in two parallel ways. on the one hand, the authorities are pursuing reforms that underpin the development and implementation of formal rules. on the other hand, traditions and customs (routines) serve as the institutional basis for the preservation of traditional relations based on the customary system of values and motivation of the activity of individuals. during the period of sharp breaking of the existing formal rules and norms, as well as the creation of new norms, “scissors of inconsistency” are formed between the existing traditions and the new formal institutions. in this connection, there is a problem of overcoming the existing contradiction, which can only be solved by creating an effective institutional system of a transformational society. the changes that have taken place in recent years in ukraine provide a wealth of empirical material for discussion in economic science on the relationship between expected and unanticipated decision-making by economic entities. institutionalism is one of the most methodologically productive areas of economic theory in the study of the content, ways and mechanism of systemic transformation in market economies (kovalenko, 2013). it should be noted that this is due to its general orientation towards a comprehensive study of the fundamentals of the functioning and development of economic systems in a broad social context. the fundamental prerequisite for institutional analysis of economic systems is that the economy is not limited by the market. it determines the entry of institutionalism into the field of active interdisciplinary interaction with other social sciences and involvement in the study of a wider range of variables that are not purely economic in nature, but determine the implementation of economic processes and economic development, such as: historical, social, psychological, legal, political, philosophical and ethical, ethno-cultural, etc. due to its methodological specificity, institutionalism can be used to solve various problems, both specific and general (brennan, biukenen, 2005). 2. methodology of research the countries of central and eastern europe represent a specific example of institutional distortions generated by an established system with an outdated ideology. institutional change is a complex, speedy process of changing old rules of behavior, which are limiting economic development, to new ones, which provide new opportunities for increasing well-being. however, it should be noted that with the sharp transformations of the institutional structure, there are increasing opportunities to obtain certain privileges for individual social groups based on the growing asymmetry of information and the imperfection of new institutes. in general, in the recent period, the scientific works of nort d. (2008), lance d., douglass (1970), kouz  r . (1993), david p. (1985), sukharev o.s. (2011), hodgson j. (2006), kleiner g.b. (2004), veblen t. (1980) and others have updated the study of the category of institutional environment within neoclassical economic theory as a major trend in modern economic science. according to l. davis and d. nort, the institutional environment is “a set of fundamental political, social and legal principal rules that guide economic and political activity (the rules that govern elections, property rights, and contract rights are examplesof such principal rules” (david, 1985; nort, 2008). therefore, a set of formal and informal rules is drawn up in society that limits and determines the directions of behavior of participants in a particular institutional system. in our opinion, we will understand the category of "institute" as certain rules of behavior of the subjects of the socio-economic system, which reduce uncertainty in the functioning of this system, as well as contribute to the growth of welfare of members of society. formal institutes that regulate the behavior of the subjects of the system are the family, the firm, the market of various factors of production, the baltic journal of economic studies 44 vol. 6, no. 1, 2020 government, the banking system and others. we think of a particular company, bank or ministry as an institution. certain variations in the interpretation of the institute and institution in the ukrainian economic literature often occur. informal institutes can be considered a set of certain values, motives, traditions and customs, as well as trust in certain formal institutes in society (hodgson, 2006). it has been determined that, both formal and informal, they must promote the effective functioning of economic processes and represent social value and productive force in socio-economic development in themselves, forming such a resource of society as social capital, which supplements and regulates the use of physical and human capital. the availability of social capital reduces the amount of transaction costs and, accordingly, the number of services for monitoring and controlling the behavior of participants in the economic process. according to x. sala-i-martin, institutes influence the efficiency of the economy in the same way as production technologies: an economy with bad institutes is more inefficient in the sense that more resources are needed for the same volume of production (sala-i-martin, 2002). at the same time, bad institutes are reducing incentives to invest in physical and human capital, in new technologies. the process of introducing good or proper institutes is somewhat more complicated and different from the process of introducing new technologies. the theory distinguishes between two types of institutional change: forced and imposed (gukasyan, 2013). forced institutional changes are described as a modification or replacement of an existing institutional mechanism, or the emergence of a new institutional mechanism, whether voluntarily initiated or organized, used by an individual or group of individuals to gain new opportunities for greater profitability. on the contrary, imposed institutional changes are introduced and enforced by government or law-based regulations. forced or spontaneously initiated institutional changes should be driven by profitable revenue growth opportunities that cannot be achieved under the original institutional framework. forced institutional changes can occur solely for the purpose of redistributing existing incomes among different groups of voters (kleiner, 2004). in the diagnostics of defining the distortional proportions and their impact on the market environment, models are used that allow to structure and identify the relationships between the main and indirect indicators. there are three main types of diagnostic models: 1) descriptive; 2) predictive; 3) normative. descriptive models are the main ones, they include the following: construction of a system of balance sheets, analysis of reports in vertical and horizontal analytical sections, trend analysis of performance indicators, analysis of relative indicators and ratios, comparative or spatial analysis, factor analysis, system of analytical coefficients. predictive models are the models of forecasting manner. they are used to forecast the income and expenses of the analysis subject and its future status (bilenko, 2013). the most common of these are: 1) calculations of the point of critical loss (break-even analysis); 2) preparation of forecasting financial reports; 3) models of dynamic analysis; 4) models of situation analysis. normative models are models that make it possible to compare actual performance with the normative ones. these models are generally used in internal analysis. their essence is to set norms for each structure characteristic for the respective technological processes and to find out the reasons for deviations of actual data from these norms. development of predictive models is necessary to create a general financial strategy of a structural object and to provide its resources, to evaluate its capabilities in the future. it should be based on a study of real financial opportunities, internal and external factors, and cover issues such as optimization of funds and capital, profit sharing, investment and pricing policies. the main attention is paid to the identification and mobilization of internal reserves to increase cash income, the formation of a rational policy for the distribution of profits, the efficient use of capital at all stages of the entity 's life. the value of forecasting analysis of predictive models is that it allows you to assess the financial situation in advance from the point of view of its compliance with the development strategy, taking into account changes in the internal and external conditions of the market environment and its functioning. usually there are four methods of forecasting the financial state of an object: extrapolation; method of periods of turnover; budgeting method; method of preliminary (forecasting) results. 3. results and discussion 3.1. general macro-factor analysis of market environment distortions an effective institutional mechanism can be selected from the many possible ones, given both the production and transaction costs of its implementation. since the transaction costs of implementing certain social agreements depend on other mechanisms (e.g., laws, customs and ideologies), the most effective institutional mechanism is a function of these agreements in the institutional structure. justin yifu lin emphasizes that "forced institutional changes occur when there are certain opportunities to achieve additional benefits and arise in violation of institutional equilibrium, that is, there must be some reason that the existing institutional mechanism is no longer the most effective in the system of institutional choice" (lin, 1989). baltic journal of economic studies 45 vol. 6, no. 1, 2020 institutional changes in the countries of central and eastern europe combined such economic phenomena that are associated with long-term economic stagnation, lack of economic growth and total deficits in the consumer market, since integration into global financial and economic institutions required changes in legislation, promulgation and liberalization of all the processes of socio-economic life. this gives grounds for a thorough analysis of the whole spectrum of changes in the institutional environment of countries, and these changes are quite revolutionary and distinguished by different regions (sukharev, 2011; bolotina, shubnaya, 2016). a number of international organizations conduct systematic studies of the quality of the country's institutes on a long-term basis, enabling the results to be included in a formalized economic analysis. the most comprehensive analysis of the elements of the institutional environment is carried out by the world bank, which forms a worldwide base of governance indicators, which understands the traditions and institutes through which power is exercised in the country, in particular the processes of selecting, controlling and replacing government; the ability of the government to effectively formulate and implement sound policies, as well as the respect of the population and the state for the institutions that manage economic and social interactions between them (kaufmann d. kraay and m. mastruzzi, 2010). the first group of indicators includes political liberties and political stability, the second one is the efficiency of governance and the quality of regulatory activity, the third one is the rule-of-law assessment of the quality of compliance of the human rights, property rights, as well as the quality of the judiciary, law enforcement agencies and the control of corruption, encompassing state power is used for private gain. analysis of the second group of quality indicators of institutes that are important for successful economic development: the efficiency of governance and the quality of regulatory activity shows a significant differentiation of these indicators among the postsocialist countries of central and eastern europe (measurements are based on percentage ranking, determining the country 's place on the level of quality of the institutional environment from 1 to 100%, that is, the best in the institutional environment of the state will be in the higher percentile groups). the countries of central europe and the baltic countries, which were between 70-80% in 2011, demonstrate steady dynamics of improving governance efficiency since 1996; reverse dynamics, although in the upper group, is demonstrated by hungary and poland (bilenko, 2013) among the european cis countries, the lowest indicators for 2011 are for belarus – 13.7%, ukraine – 21.8%, and the russian federation – 42.2%. in 2017, trends showed an increase in the indicator in all countries, with the highest figures in the czech republic – 81.9% and slovenia – 80.5%. among the post-soviet countries, the highest rate is in the russian federation – 39.8%. the peculiarity of prominent countries is that the dynamics in these indicators are almost absent, that is, institutional reforms are not implemented, and therefore there is degradation and dysfunction of socio-economic institutes. the level of economic development directly correlates with the quality of the institutional environment. in addition, the vulnerability to external financial and economic shocks increases with stable long-term strains of the institutional environment. let us try to analyze the nature of institutional distortions in post-soviet countries (in particular, in ukraine) in the context of economic development. let us briefly dwell on the analysis of the main phases of the reform of the command and administrative economic system of the countries of central and eastern europe. the first phase (1990-1994) was the rapid liberalization table 1 dynamics of public governance efficiency in the countries of central and eastern europe countries public government efficiency, % 2000 2005 2011 2017 the eu member countries – average figures 71.8 75.2 75.2 76.0 the czech republic 75.1 81.0 81.5 81.9 hungary 81.0 75.6 73.0 73.8 latvia 62.9 70.7 72.5 73.2 lithuania 60.5 74.6 72.0 72.8 poland 73.2 68.3 71.6 73.1 the slovak republic 71.7 78.5 76.3 77.2 slovenia 78.5 77.6 79.6 80.5 post-soviet countries – average figures 27.17 27.5 27.8 30.2 belarus 28.3 12.7 13.7 14.5 moldova 30.7 26.3 33.6 33.4 the russian federation 26.3 38,0 42.2 39.8 ukraine 23.4 33.2 21.8 33.2 source: the worldwide governance indicators. available from: http://info.worldbank.org/wgi baltic journal of economic studies 46 vol. 6, no. 1, 2020 of commodity and foreign exchange markets, the opening up of the economy to foreign goods and investors. in this phase, we can already observe two trajectories of economic development in the countries of eastern europe (poland, hungary, the czech republic, the slovak republic, slovenia) and the post-soviet european independent countries (ukraine, the russian federation, belarus, moldova, georgia). in particular, for the first group of countries, economic liberalization was carried out for almost all groups of goods and markets, and was accompanied by the creation of new efficient markettype institutions. for the second group (the post-soviet countries), liberal reforms have been compounded by an even greater imbalance in the economy and tight monetary stabilization to overcome hyperinflation without creating both institutes and the real market-type institutions and a decline in gross domestic product (borovkov, 2013). the process of realization of social opportunities of the country is rather slowed down because the formation of the middle class is stopped, bourgeoisie wins, the former political elite begins to reap the economic benefits: profits, dividends on shares, redistribution of budget funds in their favor. the policy of eliminating the middle class causes a reduction in resistance to the dictatorship, as well as destroys the social potential of technological innovation. the results are the de-industrialization, de-professionalization of the economy (yaremenko, 2007). although the initial potential was quite high, the reason, in our opinion, is that human capital (education level) is quite significant, but it is not supplemented by social capital. consequently, the external effects of high levels of education in educational institutions and the rising incomes disappeared. higher education focused on academic humanities education. the lack of filters, sufficiently clear and effectively controlled criteria leads to a lack of meaningful action in a public context, causes weakness or, in general, lack of professionalism, consistency, experience, constant change. the classical scheme of development of resourcebased branches caused the monopolization of industry, the economy did not begin to work for a person, and economic growth was not caused by a high level of capital, a high level of savings. the imbalance in the labor and capital markets is caused by an institutional component, in particular the directorate corps, which, having gained freedom of action, aggressively and uncontrollably aggravates the deformation of these markets in order to obtain extra profits and create oligarchic structures in the industrial, banking and political environment (martynyuk, 2015). 3.2. predictive analysis of the market environment in predictive analysis, institutional changes should be considered both through the prism of quantitative analysis of economic agents and qualitative factors of influence (the perfection of rules, the time interval for their implementation, etc.). after all, in some cases changes to institutes, such as tax laws that reduce the tax burden of the country, are almost instant increase in the number of taxpayers; for others, such as the business tradition of conscientious performance of contracts, attracting new business supporters may take a long time, etc. different institutional changes undergo different trajectories of development. to describe these trajectories in quantitative terms, let us consider the dynamics of the spread of institutional change in a market environment. qualitative changes in the institutional trajectory of development mean the sequence of changes that a particular (basic) institute undergoes. to determine the trajectories of change of institutes, there are two essentially different types of them in a predicative analysis: 1) trajectories formed by gradual changes; 2) trajectories, such as certain “breaks” containing, jumps or “institutional shocks”, when one institute ceases to operate and its function in the economy is started by another institute (or a whole group). according to the classification of institutional changes, the trajectory of the second type can be characterized as those including discrete changes. the institutional changes in the trajectory that arise in the process of evolution are not unreasonable in nature, but obey certain patterns, called the "trajectories of stochastic extrapolation development." the frequency of institutional changes and policy decisions that provoke such changes in the modern economy in the most developed countries, far outstrips agents' ability to act and accomplish tasks, to bring solutions to the outcome (gukasyan, 2013). for probabilistic and measurable spaces, a stochastic process is a set of random variables that can be written as: {х (t) : t ∈ t} (1) in many issues of institutional change analysis, the point t is the value of time, x is a random variable that represents the value observed over time t. but such a stochastic process can also be written to reflect the values, two variables, and functions. therefore, when designing a new institute, it is necessary to take into account the reactions of agents and other institutes that are intended to interact with it. the complexity of the research of this process is that even with the introduction of one institute, its interaction with many other institutes is difficult to predict. by predictive analysis of institutional changes, we understand the set of actions for the formation of institutes, their introduction into the market environment, change, correction, borrowing of institutes (planning changes in legislation, new legal rules, organizational forms and their changes). institutional design in the general sense is interpreted as a method of baltic journal of economic studies 47 vol. 6, no. 1, 2020 creating institutes, often in terminological terms, these concepts are almost identical. this is the fundamental difference between these ideas and the two approaches. in the first case, it is precisely the dysfunction that causes the blocking effect, in the second, on the contrary, the blocking effect produces dysfunction. a little has been done in predictive analysis of the managed replacement of one institute by another and the choice of the preferred mode of institutional dynamics ("path dependence/independence" or path determinancy) in economic science and, more specifically, in institutional theory (kleiner, 2004). most macroeconomic models go beyond the minimal impact of institutes on economic dynamics and decision-making. adaptation of structures to new rules, or changes in the content of old rules, which for this reason are undergoing updating or correction, determines the quality level of passage or obstruction of a given rule or set of rules. and, as a rule, this is not taken into account by modern macroeconomic science. in other words, institutional forecasting is an algorithm that justifies the sequence of management of institutes, their functioning, the creation of a mode of adaptation to new rules, substitution, etc. it should be an integral part and mainstay of government, but it can be carried out at the level of the government, the legislature, at the level of regional power, and even at the level of the firm and individual household, which establish the rules of their functioning and making everyday economic decisions. at each level, institutional engineering has its own specificity and significance. laws approved by parliament have a higher priority and power than regional legislation. however, by power of execution, a regional legal act may have a clear advantage. another reverse scenario may also be present. in conclusion, it is worth mentioning that institutes have different powers, purposes, and differently regulate the same processes in the economy, so the cumulative effect of the impact is difficult to assess. in addition, when talking about different modes of development of institutes, they use the terms of path dependence, path independence or path determinancy. it is understood that the new institutes reveal three of these modes of communication with the old institutes. in fact, it is possible to establish the existence of a particular regime only by a separate institute, but if we consider the interaction of all institutes with each other, and in society there is a single institutional and market space, then it is rather implausible to speak of path independence even in the face of revolutionary changes. the emergence of new technology and techniques is, on the one hand, a minor revolutionary change, but if the scale of such change is significant, then there is a change in the mode of production, a significant increase in productivity and expansion of technological capabilities in the country, and this affects the market environment in general. on the other hand, new techniques and technologies give rise to new rules, algorithms for actions, including those related to the maintenance of this technique, but these rules incorporate certain algorithms for servicing old technical analogues, so whatever the technical leap in development forward, generations of techniques imitate one another more or less consistently. therefore, path dependence is always there: this is how knowledge is built up, and how new knowledge arises, usually on the basis of previous accumulated knowledge. even a paradigm shift is made on the basis of criticism, therefore, also based on a detailed study and understanding of the former paradigm of knowledge (hodgson, 2006; bolotina, shubnaya, 2016). the choice of an institutional development trajectory, as a rule, does not occur according to a strict criterion or some cost ratio. that is to say, chance plays a major role here: no authority endowed with adequate institutional planning methods and taking into account the sufficient number of predicative criteria required for forecasting. in this regard, it is difficult to talk about what the cost ratio will be when implementing the chosen scenario. undoubtedly, agents who make decisions on the formation of a vector of institutional development are dependent on cost ratio parameters. from the perspective of predictive analysis of institutional engineering, it is advisable to evaluate the trajectory of development, the state of institutes in each case, using preferably the same evaluation criteria for different countries, firms, organizations, institutional systems. when planning institutes, it is important not only to ensure the regime, whether of path independence or path determinancy, but also to take into account the time of introduction of the institute, the push of this institute to the highest efficiency and the need for future correction or replacement of the institute after a certain time. the situation in this area of activity and economic and institutional forecasting is developing more scholastically than consistently (tambovtsev, 2005; yaremenko, 2007). determining the chreod trajectory of development is a difficult task, since it is sometimes difficult to answer which mode of development of path dependence, path independence or path determinancy will be a chreod one. if we consider these issues based on the principles of institutional forecasting, combined with a predictive analysis of the market environment, prospective cost estimates and quality parameters, peer review will have a high correlation coefficient. let us generate a forecast for the three baseline scenarios based on the following criteria (see table 2). as it can be seen from the presented characteristics, the most costly, poorly predicted from the point of quality of change is the mode of institutional development of path independence. it is this mode that can be considered as falling under the chreod effect, although with an imbalanced baltic journal of economic studies 48 vol. 6, no. 1, 2020 system a vector that takes it to a whole new level of development can be found (sukharev, 2011; holubka, 2015). in any case, the presence of such effects as the "lock in", "qwerty", is associated with dysfunction of institutions and with the inability to predict the effectiveness of future features of the market environment, institutional and technological development. it is generalized that the final assessment of institutional changes and their effectiveness can only be determined after their implementation. pre-forecasting gives a plausible estimate of the effectiveness and a predictable estimate of chreodity of the development option (david, 1985). as we can see, time becomes a very significant limitation in assessing the efficiency and rationality of determining the vector of development, with the introduction of new institutes, in determining the reactions of agents and the formation of models of their adaptation. time determines the quality and efficiency of transactions, the effectiveness of management and other decisions made, including decisions aimed at choosing the development trajectory of institutionalism. all these questions form, determine the list of tasks and methods that need to be addressed within institutional forecasting and engineering. if the scenario of institutional change from the previous development trajectory is selected, it considers a situation in which, at any given moment in the economy, not any (arbitrary) institutional changes, but only deterministic ones, can occur, which can be implemented in the prevailing conditions and which, in turn, arose as a consequence of the previous similar situations. only the institutional change will enter into mass practice, the benefits of which will be higher than the costs of moving to a new rule. obviously, such a transition can also be ensured by artificially reducing the effectiveness of the use of the old rule, for example by dramatically increasing the amount of sanctions imposed by the state on individuals. this loses the value of previously created human capital, specific to the old rule, but the total expected benefit of using the new rule, taking into account discounting, fully compensates for such losses. this concept denies the possibility of convergence of economic systems, which were initially based on nonoverlapping institutional structures. institutional engineering refers to activities aimed at developing models of economic institutes that are consciously and purposefully introduced into the market environment and mass economic behavior. the main problem lies in the development of such rules and principles of activity, the adherence of which would contribute to the effective solution of those problems for which they were created. the basic elements of the institutional system are transactions, contracts, and deals. throughout the transition period, the ukrainian economy has shown a very low degree of contract performance. the payments for the delivered products were not made on time, the salary was delayed, dividends were not paid, credit agreements were not executed. "out-of-contract" behavior has become almost the norm of business relations. a similar situation is inevitable for a transitional society in which the former institutional framework has already been broken and a new one has not been built yet. this means that the institutes that did not exist under the socialist system were not created, such as: – legally qualified private property; – numerous legal institutes (codes, laws); – institutes that determine responsibility for the property of others (optimal notms of accounting, banking regulation, securities market regulation); table 2 the authors present the characteristics of the results of a predictive analysis of institutional development criteria path dependence path independence path determinancy the goal of the vector introduction of new institutes while preserving old institutional forms introduction of new institutes while preserving old institutional forms introduction of new institutes while preserving old institutional forms effort area development of old institutes on the basis of correction formation of new institutes formation of new institutes functional filling defined by the old functions of the institutes determined by the new functions of the institutes interconnection of old and new institutions sensitivity to the term of change depends on the scale of dysfunction of the old institutes it is determined by the degree of rejection of new adaptive norms and the adequacy of the reactions of agents it depends on the overall effect of the old and new rules costs of operation relatively low overcharged relatively high the level of adoption of new norms low because new norms are invisible / high because old rules dominate too high, when there is no need for new norms / relatively low, when needed a satisfactory option is the average degree of alienation the level of system stability to transformation stable unstable urgently stable baltic journal of economic studies 49 vol. 6, no. 1, 2020 – institutes that structure and make predictable the behavior of market partners (contract law) and more. these mechanisms are almost impossible to borrow in finished form, so you have to create your own. transitional societies have such a name because they are unstable and can remain in that state for a long time. however, the ukrainian experience suggests that, under certain conditions, the transition model may have stable equilibrium traits. there are several indicators when society and the economy cease to be transitional. from a quantitative point of view, market transformation is complete when gdp exceeds the pre-reform level. modern institutional theory is based on the premise that the transition ends when the formation of a new institutional foundation is completed. according to d. nort's definition, "transition societies are societies in a state of institutional imbalance: finding a new equilibrium point in the institutional space means completing the"transition" (nort, 2008). 4. conclusions there will be effective institutional forecasting if it provides, with other conditions being equal, minimal deviations from the results obtained. however, the requestor of institutional engineering is not always interested in establishing institutes that provide such savings. in general, the effectiveness of predictive analysis with forecasting and the effectiveness of institutes resulting from its implementation are different things, which are a consequence of the asymmetry of the distributional effects and the imbalances of the market environment generated by the rules, as well as their incompleteness. the importance of analyzing institutional change, both positive and regulatory, in the modern world is extremely high: institutional change is taking place almost continuously in all economic systems, not only in the eu, but also in developing countries. some have a positive effect on the further development of the economy, others, on the contrary, contribute to stagnation, while there are some who do not affect economic behavior at all. massive institutional changes are also occurring at the level of individual economic organizations: firms, corporations, etc. there are also examples of successful and unsuccessful changes. therefore, their study should be the subject of continuous scientific and applied research. if we look at the world economic history, we can state that no country, since the era of liberalism, has successfully completed the construction of the national state and national economy under the rules of liberalism. only the conditions of strict protectionism, state monopoly and control contributed to the consolidation of society and economic growth. necessary tools for the formation of national unity in the country are the priority development of education, culture, army, and police. despite the fact that laws and state institutes are not directly engaged in production, but they directly affect the reproduction of productive forces. the nation must recoup a part of material wealth in order to support culture, skill and the unification of productive forces (gukasyan, 2013). interest in the predictive analysis of institutionalism and the market environment is growing significantly in the face of a crisis that has recently become a dominant feature of the global economy. the level of economic development of the market environment is directly related to the quality of the institutional environment. vulnerability to external financial and economic shocks increases with the duration of deformation of the institutional environment. in our view, in order to gain sustainable economic development, sustainable economic growth, it is necessary that the macroeconomic equilibrium be supplemented by the institutional equilibrium, the criterion of which is the fulfillment of functions entrusted to them by society and ensuring its development as a whole, uniform distribution of income, formation of middle class. references: borovkov, a. a. 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(2004). the evolution of institutional systems. moscow: science. kovalenko, y. (2013). instytutsionalizatsiia finansovoho sektoru ekonomiky [the institutionalization of the financial sector]. national university of sts of ukraine, irpen. kouz, r . (1993). fyrma, rynok y pravo [firm, market and law]. moskow: delo ltd. lance, d., & north, c. douglass (1970). institutional change and american economic growth: a first step toward a theory of institutional innovation. journal of economic history. № 30. lin, j. y. (1989). an economic theory of institutional change: induced and imposed change. justin yifu lin. cato journal. vol. 9. № 1. martynyuk, o. (2015). formation of the imperatives of sustainable development for structural transformations of the economy. bulletin of the odessa national university. series: economics. volume 20. issue 6. sala-i-martin, x. (2002). fifteen years of new growth economics: what have we learned? economic growth: sources, trends, and cycles, edited by norman loayza and raimundo soto. santiago, chile: central bank of chile. sukharev, o. s. (2011). institutional change, efficiency and structure of economy. saarbrucken: lambert academic publishing. sukharev, o. s. (2011). elementary model of institutional change and economic welfare. montenegrin journal of economics. vol. 7, no. 2. the worldwide governance indicators (2019). retrieved from: http://info.worldbank.org/wgi/ tambovtsev, v. l. (2005). fundamentals of institutional design. moscow: infra-m. nort, d. (2008). instytutsii, instytutsijna zmina ta funktsionuvannia ekonomiky [institutions and institutional changes in economy]. kyiv: osnovy. veblen, t. (1980). the theory of the empty class. moscow: progress. yaremenko, o. l. (2007). institutions and economic freedom of economic entities. economic theory. no. 3. baltic journal of economic studies 364 vol. 4, no. 5, 2018 corresponding author: 1 odesa i.i. mechnikov national university, ukraine. e-mail: truba-v@ukr.net 2 odesa i.i. mechnikov national university, ukraine. e-mail: viktoriyaborshch@gmail.com 3 odesa i.i. mechnikov national university, ukraine. e-mail: olgast1@bigmir.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-364-370 methodological frameworks for state regulation of health care system in the post-soviet countries vyacheslav truba1, viktoriia borshch2, olha haran3 abstract. the main purpose of the paper is to analyse the methodological framework for state regulation and public administration of the health care sector in the post-soviet countries (the case of ukraine). methodology. this study combines economic, legal, and managerial analysis of ukrainian healthcare system. in this study, a complex of the general scientific and special research methods was used to achieve the goal of the study. the method of historical and logical analysis of the literature was used. the functional and structural analysis was used with the purpose to research the state regulation of public relations in health care. methods of comparative and statistical analysis and their synthesis were used to study the dynamics of development of legal basis in the health care sector. method of summarization was used to make conclusions and recommendations for optimizing state regulation policy in ukrainian health care. scientific works of national and foreign scientists in the sphere of state regulation of health care sphere, national and international legal documents were used as the informational basis for the conducted research. findings. in the paper, international basis for the formation of the ukrainian state regulation mechanism is defined. the conceptual basis of state regulation mechanism is analysed. the difference between state regulation and public administration in healthcare is determined. components of the healthcare market are allocated in order to analyse certain methods of their regulation. main direct and indirect administrative and economic methods of state regulation in different medical markets are analysed. the framework for medical reformation is determined. practical implications. the results of this study form the theoretical and methodological basis for practical improvement of the state regulation system of public relations in ukrainian health care. key words: health care system, state regulation, economic and legal basis, market relations in healthcare. jel classification: i18, i15 1. introduction the constitution of ukraine considers human being, the right to life and health, right to honour and a good reputation, right to the inviolability of private and family life, right to security as one of the highest values of ukrainian legal system and a primary assumption for human vital activity (the constitution of ukraine). among other rights, provided by the constitution, we can highlight the right to medical care as the one, which guarantees human physical existence, and which is essential for maintenance and improvement of ukrainian nation’s health. state regulation of medical activity in ukraine is an inseparable part of state policy and public administration in the healthcare field. nevertheless, the legal framework in the field of health as a key tool of public administration has not been still separated as a legal institute in ukraine. but the systems analysis of a number of scientific works, regarding the formation and development of the human right to health care, demonstrates the existence of effective attempts to make ukrainian community responsible for its health. this research is urgent because of the existence of deliberative issues regarding the state regulation of public relations in the healthcare field not only in the national but also in the international science. thus, it is necessary to solve some social contradictions. these contradictions in the public administration activity deepen understanding of the objective patterns for its functioning, development, and improvement, and have a crucial impact on the adequate interpretation of the essence of managerial phenomena and processes in the healthcare field. the goal of this paper is to analyse the methodological framework for state regulation and public administration of the ukrainian health care sector. to meet this goal, the following tasks have been put before the researches: baltic journal of economic studies 365 vol. 4, no. 5, 2018 1) to define international frameworks as the basis for state policy formation in health care, 2) to determine the conceptual basis for state regulation and public administration in the healthcare field; 3) to analyse the system of state regulation methods in ukrainian health care; 4) to propose the directions for medical reformation in ukraine. the issues related to defining the relationships between state regulation of medical activity and the level of lawyer in the healthcare, managerial and medical staffs’ training is still poor researched. methodological, organizational, and legal frameworks for medical state regulation and developing the legal instruments for transplantation, euthanasia, reproductive medicine and so on require further improvement. 2. methodology this study combines economic, legal, and managerial analysis of ukrainian healthcare system. in this study, a complex of general scientific and special research methods was used to achieve the goal of the study. the method of historical and logical analysis of the literature was applied. the functional and structural analysis was used with the purpose to research the state regulation of public relations in health care. methods of comparative and statistical analysis and their synthesis were used to study the dynamics of development of legal basis in the health care sector. method of summarization was used to make conclusions and recommendations for optimizing state regulation policy in ukrainian health care. scientific works of national scientists in the sphere of state regulation and public administration of the ukrainian health care sphere, national and international legal documents were used as the informational basis for the conducted study. 3. international frameworks for state policy formation in health care formation of ukrainian state policy in the health care is characterized by the general patterns, which are universal for most countries. the law of ukraine “fundamentals of the legislation of ukraine on health care” dated november 19, 1992 (no 2801-xii, revised on june 10, 2018) (law of ukraine fundamentals...) determines that the state and community guarantee the priority of health care in the country’s activity. in the formation of state policy, the principles of international treaties, in which ukraine participates, have to be used. european code of social security (strasburg, 1962) (european code of social security treaty) and charter on social rights (havana, 1982) (charter on social rights) are the policy documents, which are the main for the most countries in developing the state policy in the health care field. the main frameworks for the formation of healthcare state policy and strategy were declared at the first international conference on health promotion (canada, 1986) and are known as the ottawa charter for health promotion (charter adopted at an international conference on health promotion). it provides for the implementation of a new managerial technology in the healthcare field, based on the cross-sectoral approach. at this conference, it was determined that health determinants are biologically and socially resulted and programmed, and the state policy on health promotion must combine diverse but complementary approaches including legislation, fiscal measures, taxation and organizational change and requires the identification of obstacles to the adoption of healthy public policies in non-health sectors, and ways of removing them (charter adopted at an international conference on health promotion). the following directions must be realized, in accordance with the charter for health promotion: (1) to build the health policy, based on a cross-sectoral approach; (2) to create supportive environment, based on socio-ecological approach to health; (3) to strengthen community actions in setting priorities, making decisions, planning strategies, and implementing them to achieve better health; (4) to develop personal and social skills through providing information, education for health, and enhancing life skills; (5) to reorient health system for disease prevention and primary medical care (charter adopted at an international conference on health promotion). thus, the main goals, which meet this charter and are crucial for the development of the healthcare sector worldwide, are the following: 1) to move towards the healthy public policy and to advocate a clear political commitment to health and equity in all sectors; 2) to counteract the pressures towards harmful products, resource depletion, unhealthy living conditions and environments, and bad nutrition; and to focus attention on public health issues such as pollution, occupational hazards, housing and settlements; 3) to respond to the health gap within and between societies and to tackle the inequities in health produced by the rules and practices of these societies; 4) to acknowledge people as the main health resource; to support and enable them through financial and other means, and to accept the community as the essential voice in matters of its health, living conditions, and wellbeing; 5) to reorient health services and their resources towards the promotion of health; 6) to recognize health and its maintenance as a major social investment and challenge (charter adopted at an international conference on health promotion). the right to health (article 12) was defined in general comment 14 of the committee on economic, social and cultural rights – a committee of independent experts, responsible for overseeing adherence to the covenant (general comment). baltic journal of economic studies 366 vol. 4, no. 5, 2018 all above-mentioned and other international charters and declarations form the next core elements of a human right to health. they are (1) progressive realization using maximum available resources; and (2) non-retrogression, i.e., the state should not allow the existing protection of the right to deteriorate unless considering all the options, assessing the impact and fully using its maximum available resources. the main features of the right to health are its availability, accessibility, acceptability, and quality. thus, worldwide, the human right to health must be met by the national state healthcare programs and policy on national and regional levels by looking at underlying determinants of health as a part of a comprehensive approach to health and human rights (human rights and health). 4. the conceptual basis for state regulation of health care legal science defines the “state regulation” concept as the state’s exercise of a set of activities (organizational, legal, economic and so on) in the field of social, economic, political, cultural, and other public processes with the purpose to harmonize them, to lay down general rules and norms of social behaviour, and to prevent any adverse effects in the society (shemchuchenko, 1999). public administration and state regulation are two separate types of state activity. public administration supposes a direct managerial impact on the management objects by means of administrative powers and methods, characterized by the directive guidelines and instructions for their performance. state regulation supposes only imposing limits and bounds for facilities, under which they could freely operate. state regulation, unlike the public administration, is directed not only to the management object but also to the environment. therefore, state regulation is wider in power influence, then public administration. the state regulation in the health care field supposes formation of general norms and rules for the realization of medical activity, i.e. medical care, responsibility for these following rules, the influence of the government and its authorities on the medical entities’ activity. it must be based on the adequately formed strategy of the community development, state medical programs, medical standards and gears of their mandatory execution, state control and administration coercion. the government uses not only legal but also organizational, financial, personnel, and others tools. thus, the state regulation in the health care field must be based on the national budget, tax, credit, investment, monetary, financial, scientific, technical policies, i.e. the regulation has to be provided through regulations, state budget, state control, tax system, standards, customs tariffs, and prioritization. therefore, one of the main tasks of the socially oriented country is a balance between citizens’ interests in the qualitative and highly qualified medical care and its providers, which are the medical entities and employees. so, on the one hand, the government must satisf y the expectations and interests of its citizens in their right realization on the medical care, and on the other, satisf y the interests of medical providers. at the same time, it must encourage providers to provide as much as possible qualitative services at low costs. so, we can emphasize that the state regulation of health care is directed to the creation of favourable organizational and financial conditions for medical entities in market conditions. thus, such a regulation does not suppose government intervention into organizational and vocational activity, except for cases specified by law. the main goal of the state regulation in the health care field is strengthening of human health, preventive health care, providing the highly qualified medical care, improving the quality life, and preservation of the gene fund of ukrainians. the main tasks of state regulation in health care is (1) to impact on the development of the medical entities in all forms of property; (2) to control the quality level of medical services and medical care for solving social problems, related to health; (3) to introduce legislation ensuring equal conditions for the medical entities; (4) to implement strong demographic policy directed to increasing the fertility level and mortality reduction; (5) to expand access to medical assistance for population; (6) to ensure sanitary and epidemiologic well-being for population; (7) to provide the effective multi-channel financial system and to increase the state financial support in the health care field; (8) to encourage the population to healthy lifestyle; (9) to intensify the development of the medical and pharmaceutical industry, including medical appliance and medical items manufacturing, drug production and so on. state regulation in healthcare has two main components, presented in figure 1. objects of health state regulation are the specific relationships and phenomena, branches of medical and other types of activities in healthcare, system, territorial, branch, and functional subsystems of the ukrainian health care sector. we can allocate two types of health state regulation’s objects: (a) material and (b) intangible. to the first group, we can include medical entities, their staff, fixed capital, financial resources. to the second one, we can attribute work relations, relations between patients and staff of the medical entities, intellectual capital and so on. but the main object of such a regulation is human health and its status, which we can influence improving it. the main subjects of health state regulation in ukraine are the verkhovna rada of ukraine, president of ukraine, national security council, central executive authorities, among which is the ministry of health of ukraine, and also local executive authorities (hladun, 2007). baltic journal of economic studies 367 vol. 4, no. 5, 2018 5. methods of state regulation in the healthcare field achieving the goals of state regulation of any socioeconomic field is provided by a number of methods. methods of state regulation are the ways of state influence on business, market infrastructure, a nonprofit economic sector in order to create conditions for their effective functioning, considering directions of economic and social policy. we can classify methods of state regulation by two attributes: by forms and means of influence. according to means of influence, there are (a) administrative methods, based on the state authority, include prohibitory, permitting and coercion measures; (b) economical methods create particular conditions and guide the development of the socio-economic relations to the right way. according to the forms of influence, there are (a) direct methods impact the market actors’ functioning by means of administrative, legal, and economic tools of direct influence; (b) indirect methods impact the market actors’ functioning by means of creating the particular economic conditions and environment, enforcing them to move to the certain direction; it is an influence on the economic interests. health care sector includes a number of interrelated markets, such as medical services market, the market for medical technologies and equipment, health insurance market, labour market, medical education market, pharmaceutical market, and financial market (figure 2). thus, taking into consideration the general classification of the state regulation methods and structure of the healthcare market, we can identify the following groups: 1) according to means of state regulation, there are: − tools, used in the context of administrative methods; − tools, used in the context of economic methods; 2) according to the forms of state regulation, there are: − direct methods; − indirect methods; 3) according to the market of the healthcare sector, there are: − tools, used for regulation of the medical services market; − tools, used for regulation of medical technologies and equipment market; − tools, used for regulation of the medical insurance market; − tools, used for regulation of the labour market and the market for medical education; − tools, used for regulation of the pharmaceutical market; 4) according to the instruments, used in the healthcare markets, there are: − tools, used for increasing supply and medical services (goods) quality; − tools, used for increasing effective demand for medical services and goods (ivanov, berezhna, 2014). in table 1, we have classified tools of state regulation in the ukrainian healthcare market. state regulation in healthcare central and local authorities and other legal entities, engaged in health policy implementation; and communication system between them the legal system, establishing legislation in healthcare and regulating content and process of medical state regulation institutional system of healthcare the legal system of healthcare figure 1. components of state regulation in the health care field health care sector medical services market market formedical technologies and equipment health insurance market labour market medical education market pharmaceutical market financial market figure 2. structure of the healthcare market baltic journal of economic studies 368 vol. 4, no. 5, 2018 table 1 consolidated table of state regulation methods in the ukrainian healthcare field 1. medical services market tools in the context of administrative methods (direct) tools in the context of economic methods tools in the context of direct economic methods tools in the context of indirect economic methods focused on encouraging supply and medical services (goods) quality effective demand for medical services and goods licensing of medical activity; accrediting and registration of medical entities; standardization of medical services quality. state financial support for the healthcare sector. exemption from profit taxes; exemption from land charges. exemption from vat for medical services; particular costs, related to healthcare inclusion to the expenses of income tax payer; medical goods’ (services) cost exclusion from the calculation of the general month taxable income of income tax payer; medical goods’ (services) cost inclusion to tax credit. 2. market for medical equipment and technologies tools in the context of administrative methods (direct) tools in the context of economic methods tools in the context of direct economic methods tools in the context of indirect economic methods focused on encouraging supply and medical services (goods) quality effective demand for medical services and goods protection of intellectual property rights by means of patenting objects of intellectual property; registration and certification of medical equipment. financial support for medical scientific researches; financial support for purchasing equipment. – exemption from an excise tax of sales transactions of cars for invalids; use of lower vat rate at a level of 7% to operations related to delivery and import of medical items and/or medical equipment for clinical researches. 3. pharmaceutical market tools in the context of administrative methods (direct) tools in the context of economic methods tools in the context of direct economic methods tools in the context of indirect economic methods, focused on encouraging supply and medical services (goods) quality effective demand for medical services and goods registration and standardization of medicines’ quality and medical items; licensing of the production, wholesale and retail trade of medicines and medical items; state price control for medicines and medical items. financial support for medicines and medical items purchasing. exemption from fee for the certain types of activity for apothecary, for delivery of the medicines and purchasing of the preferential business license (trade patent). use of lower vat rate at a level of 7% to operations related to delivery and import of medicines; duty-free for pharmaceutical production; use of lower vat rate at a level of 7% to operations related to delivery and import of medicines for clinical researches. 4. medical insurance market tools in the context of administrative methods (direct) tools in the context of economic methods tools in the context of direct economic methods tools in the context of indirect economic methods focused on encouraging supply and medical services (goods) quality effective demand for medical services and goods licensing of insurance activity. functioning of the fund of social insurance for labour accidents and professional diseases in ukraine. – costs for health insurance inclusion to the total costs of the income tax payer. 5. labour market and medical education market tools in the context of administrative methods (direct) tools in the context of economic methods tools in the context of direct economic methods tools in the context of indirect economic methods focused on encouraging supply and medical services (goods) quality effective demand for medical services and goods licensing and accreditation of educational establishments; standardization of the quality of educational services. financial support for training, retraining, further training and remuneration of medical staff. – – baltic journal of economic studies 369 vol. 4, no. 5, 2018 thus, from table 1 we see that the main tools used in all healthcare markets are administrative direct methods, such as licensing, accreditation, standardization and price control. the direct economic method is the financial support of different medical activities, e.g. medical scientific researches, education and training, purchase of medical equipment, medicines and so on. indirect economic methods are represented by tax regulation policy. so, we can argue that the ratio of direct administrative and economic methods in the ukrainian state regulation system is 40% both; 15% is a ratio of indirect economic methods, directed to the effective demand for medical services and goods; and 5% is for indirect economic methods, directed to supply and medical services (goods) quality in the system of state regulation methods (figure 3). analysis of the state regulation methods allows making a conclusion that state regulation is fragmented, leading to its improvement because the complex state regulation of all related healthcare markets is not provided. it complicates the process of market relations formation and reduces the effectiveness of medical reforms in ukraine. 6. state regulation of market mechanisms in the healthcare field the position that market relations in the healthcare sector cannot be spontaneous and not regulated, and the scope of market laws must be limited, is generally accepted. the healthcare, indeed, is the specific branch, which could not be fully oriented only on the market relations. the necessity of limitation of market relations in healthcare is due to its specificity. first of all, this is because of the humanitarian focus of medical activity, which is provided for the supremacy of the medical results over financial ones. and in this regard, the scope of market relations is limited. humanity, fairness, and quality of medical care must be the requirement under any economic relations. thus, research on the use of direct and indirect administrative and economic methods in the different markets of the healthcare sector presented above is urgent. in this way, the effectiveness of the healthcare sector should be accessed from the position of medical, social, economic, and financial activities. so we see that medical entities mostly act despite the economic calculations, principles, and their profitability. thus, it is necessary to structure medical services, which can be or cannot be involved in market relations. from the other hand, the market relations in healthcare cannot exist per se, because of the position of the state as a monopolist. for what it’s worth, we could not avoid the state regulation. the following criterion could be defined in order to determine the spheres of state (non-market) medical segments: (1) ratio of expenditures on provision of free medical care with the expenses, which are transferred to the population in case of its absence; and (2) state’s economic opportunities and welfare of population. therefore, to provide an effective healthcare system, a viable management mechanism in the healthcare field must be developed. it must combine: − the centralized budget allocation of leading medical and educational medical centres; − financing of the prevention medicine from the local budgets; − financing of other types of medical care from the insurance funds; − transition of some medical services on commercial (paid) base. the shift of the healthcare sector to a market economy provides for the following changes in the medical business model: 1) to change the organizational and legal status of medical entities, i.e. their transformation to the independent legal entity with wide-ranging powers; 2) to change property forms of many medical entities in order to form the significant commercial sector of healthcare; 3) to change the nature of relations between the medical stakeholders from social and administrative towards economic ones; 4) the shift from the financing of medical entities towards financing medical care. this supposes 40% 40% 15% 5% direct administrative methods direct economic methods indirect econonomic methods for effective demand indirect econonomic methods for effective supply figure 3. the ratio of methods in the general system of state regulation methods baltic journal of economic studies 370 vol. 4, no. 5, 2018 identification of standard costing for particular diseases treatment. thus, the main task of public health is to define expenses for healthcare in accordance with the prevalence rate; 5) to change the financial principle from costs financing towards the purchase of medical services by the payer; 6) to change the flow of funds for healthcare by addition to financing from the taxes the compulsory contribution from compulsory and voluntary health insurance and direct payment for medical care; 7) decentralization of financing; 8) to increase sources of funding, i.e. a number of sources should be used (insurance payments, direct payments and so on) instead of one source from the state budget. 7. conclusions in drawing conclusions, it is necessary to emphasize that around the time of ukrainian independence, the formation of modern medical law, the shift from state monopoly in healthcare towards diversifies healthcare system, based on competitive markets, is a real progress of our country. this enhances the quality of medical care for the population. modern medical reforms create the basis for autonomization of medical entities and their independent financial, organizational, and business activity; this provides equal rights to all entities of different property forms. but nevertheless, economic and political crisis and low level of community’s prosperity in ukraine hinder the development of the non-state commercial sector of healthcare, and hence the reformation of the healthcare field. therefore, the modern medical reformation must take into consideration the gears and methods not only of direct economic and administrative ones but also propose the indirect economic methods of state regulation of health care in order to develop the healthcare market and make it the front-runner of social and economic policies in ukraine. references: the constitution of ukraine (1996). statements of verkhovna rada, 30. law of ukraine fundamentals of the legislation of ukraine on health care (november 19, 1992, no 2801-xii, revised on june 10, 2018). retrieved september 12, 2018 from: http://zakon.rada.gov.ua/laws/show/2801-12 european code of social security treaty no. 048. retrieved september 12, 2018 from: https://www.coe.int/en/ web/conventions/full-list/-/conventions/treaty/048 charter on social rights no. 995_418 (february 15, 1982). retrieved september 15, 2018 from: http://zakon.rada.gov.ua/laws/show/995_418?lang=en charter adopted at an international conference on health promotion. the move towards a new public health (november 17-21, 1986 ottawa, ontario, canada). retrieved september 15, 2018 from: https://www.who.int/ healthpromotion/conferences/previous/ottawa/en/ general comment no. 14 (2000). the right to the highest attainable standard of health (article 12 of the international covenant on economic, social and cultural rights) retrieved september 14, 2018 from: https://tbinternet.ohchr.org/_ layouts/treatybodyexternal/download.aspx?symbolno=e%2fc.12%2f2000%2f4&lang=en human rights and health. official web-site of who. retrieved september 15, 2018 from: http://www.who.int/ news-room/fact-sheets/detail/human-rights-and-health shemchuchenko, yu. s. (1999). juridical encyclopedia in 6 volumes, volume 2, kyiv. hladun, z. s. (2007). conceptual basis of state and legal regulation of healthcare. the proceedings of the 1st ukrainian scientific and practical conference “medical law in ukraine”, 19-20.04.2014, lviv. ivanov, yu. b., berezhna, ju. v. (2014). instrumentation of the health protection sphere state regulation in ukraine. economy and region, 4(47), 101-106. baltic journal of economic studies 224 vol. 5, no. 1, 2019 corresponding author: 1 national university “odessa law academy”, ukraine. е-mail: fedotov_ap@ukr.net 2 kharkiv national university of internal affairs, ukraine. dnipropetrovsk state university of internal affairs, ukraine. е-mail: m.voloshyna@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-1-224-232 reformation of the institutional anti-corruption system in the context of european integration transformation aleksei fedotov1, maryna voloshyna2 abstract. ukraine belongs to a group of countries in which political, grand, and petty corruption deeply rooted in various spheres of life and became an organic element of social relations. during 2014-2018, the fight against corruption in ukraine was identified as one of the key priorities of the state policy. this was also noted by international organizations. the implemented reforms contributed to moving ukraine from 144th place in 2013 to 130th place according to the corruption perception index. the purpose of the article is determined as to study reforming of the institutional system of the fight against corruption in the context of european integration transformation directed to increasing transparency and openness of the state as an institute and improving the governance. traditionally, three functional types of corruption are distinguished: political corruption, grand corruption, and petty corruption. the author presented a generalized group of indicators of measuring the efficiency of the fight against corruption, including: group 1. economic indicators: reduction of economic losses as a result of the elimination of specific corruption schemes and the elimination of conditions that give rise to corruption; group 2. indicators of the activity of the law-enforcement system: the number of persons brought to administrative and criminal responsibility for corruption violations and crimes; amounts of damages recovered; group 3. indicators of public acceptance of the effectiveness of counteraction to corruption: assessment of the dynamics of corruption in various dimensions by different social and professional groups. for successful application of the experience of eu countries when developing effective anti-corruption policy in ukraine, it is necessary: firstly, determine and implement in ukrainian legislation relevant international legal rules of state, regional, and local nature; secondly, given the successful experience of certain countries, identify a complex of most important for ukraine factors aimed at providing effectiveness of state policy of preventing corruption, structure them based on principles of priority and the most functionality in order to create a model optimal for ukrainian conditions; thirdly, develop and form for this model proper institutional support of regulatory character that would harmoniously combine state, regional, and local levels of public administration. the paper determines “direct” anti-corruption effects of corresponding changes in economic governance. it is obvious that direct effects can be levelled by corruption risks in related spheres. so, the delegation of certain powers and financial resources to the local level in the process of decentralization objectively restricts corruption in the relations of “centre-regions” in terms of the distribution and use of financial resources, however, without effective anti-corruption system at the local level, the anti-corruption effect of decentralization will be less than expected. in order to overcome mass violations of anti-corruption norms and rules, it is needed to implement a whole range of measures to criminalize corruption, that is, to establish criminal responsibility for corruption offenses and corruption-related offenses and create a law enforcement system capable of effectively counteracting the corruption actions that we have identified in the study. key words: corruption, shadow economy, anti-corruption policy, performance measurement of fight, anti-corruption measures. jel classification: o17, f42, h11, d73, r10, k32 baltic journal of economic studies 225 vol. 5, no. 1, 2019 1. introduction unfortunately, ukraine belongs to a group of countries where political, grand, and petty corruption deeply rooted in various spheres of life and became an organic element of social relations. corruption leads to losses of state and population as a result of ineffective use of budget funds, low quality of public services, and also increases the uncertainty of the environment in which economic agents and households operate. however, assessing this phenomenon in ukraine, an impartial researcher faces problems since international ratings primarily measure corruption only, while economic assessments of the losses from corruption and, accordingly, the benefits of overcoming it are very lacking. during 2014-2018, the fight against corruption in ukraine was identified as one of the key priorities of the state policy. due to a number of successful measures, certain progress in overcoming corruption was also noted by international organizations. implemented during these years reforms contributed to moving ukraine from 144th place in 2013 to 130th place according to the corruption perception index. two main lines of actions that reduce the level of corruption in the country can be generalized: the narrowing of opportunities for corruption due to reforms in various sectors and the creation of an effective system of institutions for fighting corruption. the article will consider the changes made in the first direction. the purpose of the article is determined as to study reforming of the institutional anti-corruption system in the context of european integration transformation directed to increasing transparency and openness of the state as an institute and improving the governance. at the same time, for the analysis, a limited number of anti-corruption measures have been selected, which have already given an economic effect in those areas where corruption has traditionally been considered a visiting card of ukraine. all opinions and views expressed in the paper belong exclusively to its authors and do not necessarily reflect the official policy or position of the government of ukraine or any government agency or members of the international editorial board. the article is based on sources and data in which the given information is reliable on the date of release (ukraine against corruption, 2018). 2. the methodology of research corruption and fight against this phenomenon is a complex and multidimensional process. therefore, assessments of the scale of corruption, the willingness to fight it (political will), and the effectiveness of various anti-corruption measures vary greatly. herewith, it should be noted that all known today international ratings measure precisely perception of corruption, while the scientific economic assessments of corruption losses and, accordingly, the benefits of overcoming it are obviously rare. measuring the scale of corruption and an adequate assessment of the effectiveness of anti-corruption measures are a challenge for experts, politicians, and society. but without such an analysis, it is impossible to measure the degree of success of the anti-corruption strategy and to adequately adjust the content, time, and mechanisms for implementing the appropriate steps. overcoming corruption becomes the main prerequisite for the successful european integration processes, at the same time, it should be pointed out that adoption of laws aimed at implementing the state anti-corruption policy and required for the successful european integration processes takes place due to the pressure on the authorities and politicians on the part of civil society. a formal approach to the process of fight against corruption indicates that dominant corruption factors in ukraine become not only factors of materialeconomic but also ideological, moral nature, general and legal culture. obvious inefficiency of measures applied in relation to corruption determines the expansion of the issues of research on corruption and mechanisms of its influence in various spheres of economics, sociology, law, and public administration. formation of state anti-corruption policy and definition of political corruption are investigated in works by stepanova a . (2015), kyrylenko o. (2015), popok a ., reshota v. (2013), rybak a . (2011), and others. european principles of good governance and reform of the system of executive authorities in ukraine, as well as implementation of principles of good governance as a factor of activation of economic-political development of the state, were studied by shevchuk b. (2012), yameletsky o. (2012), martynyuk o. (2015), paweł dziekański (2017). at the same time, the study of reformation of the institutional anti-corruption system in the context of european integration transformation is relevant and still insufficiently presented in domestic scientific publications. traditionally, three functional types of corruption are distinguished, namely: political corruption. it is the manipulation of political decisions, rules, procedures, and activities of institutions in the area of resource allocation and financing by politicians abusing their authorities in order to preserve and enhance their power, status and wealth, and to obtain private gain; grand corruption. it covers actions of senior officials in order to profit at the expense of society through distorting influence on state policy and mechanisms of state functioning at the central (national) level; petty corruption. in this case, it is about the daily misuse of power by middle and low-level officials in the process of dealing with citizens in solving their (citizens’) personal problems. we have limited ourselves to analysing measures aimed at overcoming political corruption first of all. baltic journal of economic studies 226 vol. 5, no. 1, 2019 at the same time, we understand that the strategic goal is to create zero social tolerance for corruption at all levels. in general, corruption and, accordingly, counteraction to this phenomenon is a complex and multidimensional process. components of the formation of counteraction strategy in the field of political corruption are grouped in figure 1. according to the content, all measures aimed at fighting corruption can be conditionally divided into two groups: a) detection of corrupt acts and punishment of the perpetrators, and b) elimination of the conditions for the occurrence of corruption. the main goal of the article is determined as to study positive shifts in the system of economic governance which are aimed at eliminating conditions for the existence of political corruption and providing transparency of corresponding regulatory mechanisms as a prerequisite for the successful prevention of the appearance of corrupt acts. we believe that in the broader sense in the system of state government, it is important not only assessments of the effectiveness of the counteraction in this area but also the ability to protect the relevant reforms from active attempts to examine existing achievements and to directly or indirectly slow down the country’s anticorruption progress. due to objective reasons, we did not seek to analyse all possible corruption schemes (participants, volumes, instruments) and the effectiveness of the anti-corruption system being created today. outside of this study, many questions remain regarding the sfs and customs reform, judicial reform, gas sector and public procurement reform, as well as issues of radical institutional changes and the definition of economic schemes for corruption mechanisms. these issues require a special analysis due to objective reasons: size and format of research. undoubtedly, there is a problem of availability of the data necessary for the analysis and the reliability of the available information. the need for international cooperation and application of progressive foreign experience in preventing corruption is reflected in the united nations convention against corruption, which specifies that corruption is no longer a local problem and has transformed into transnational phenomenon that influences society and economies of all countries, which predetermines primary importance of international cooperation in the field of counteracting and controlling corruption (united nations convention against corruption, 2003). active cooperation in the sphere of anti-corruption policy is carried out by european institutions. first of all, it concerns the council of europe. the approach of this organization to the fight against corruption has three interrelated aspects: development of pan-european norms and standards, control over their observance, as well as the provision of technical assistance to the states and regions (letter from the ministry of justice, 2011). traditionally, the issue of preventing corruption occupies one of the prominent places in the policy of european states. it is obvious that organizational and legal forms and methods of its implementation vary since each of the states has its own specifics. for example, the fight against corruption in germany is based on the task of destroying the material, first of all, the financial institutional anticorruption system the political will of change transparency of state policy system of changes of political institutions developing an effective dialogue on the principles and priorities of state policy elimination of economic conditions for the occurrence of corruption anticorruption legislation figure 1. components of reforming the anti-corruption system source: formed on the basis of ukraine against corruption (2018) baltic journal of economic studies 227 vol. 5, no. 1, 2019 base of corruption. the overall strategy of the german government in the field of prevention of corruption is to eliminate, as a result of legislative, organizational, personnel, and other measures, the misuse by civil servants of their official position. the regulatory framework is maximally improved. an effective tool is the creation of a registry of corrupt firms. its essence lies in the fact that the company included in such a register is deprived of the right to perform any government orders and becomes the object of more attention on the part of law enforcement authorities. however, in germany, first of all, there are attempts to end corruption in the minds of members of society (popok, reshota, 2013). the development of a comprehensive policy aimed at preventing corruption in poland began under the powerful influence of the eu. in may 2000, vice prime minister of poland l. balcerowicz initiated the formation of a working group at the economic committee of the council of ministers, whose purpose was to prepare a report on the main sources (factors) of the spread of corruption and an action plan for its elimination. the group included ministers of key departments and representatives of government institutions, experts of the world bank, the institute of public affairs under the anti-corruption program (stefan batory foundation) (korupcja a polityka antykorupcyjna, 2011). since the adoption of the anti-corruption strategy in 2002, poland has adopted a large number of laws and regulations, optimized administrative structures, which not only increased their effectiveness but also became a mechanism for preventing corruption (the simplicity of many procedures actually deprived officials of the tools that could be used to claim bribes). at the same time, the philosophy of functioning of administrative structures is changed towards increasing responsibility for providing public services. policy of preventing and fighting corruption in poland implements a wide range of disciplinary and criminal measures (strengthening criminal and administrative legislation in the fight against corruption; establishment of specialized institutions; creation of special mechanisms of external and internal control over activities within the public administration authorities; effective judicial system), preventive measures (mechanism that simplify various procedures where subjects are, on the one hand, a citizen, on the other – public bodies; elimination of gaps in legislation that allowed for corruption abuses; clearly defined codes of conduct of public officials and concrete steps of action in certain situations; provision of access to public information and e-governance; education of the population and officials; support of non-governmental organizations, etc.) (paweł dziekański, 2017; rybak, 2011). in central europe, considerable attention is being paid to the adoption of detailed anti-corruption laws aimed at criminalizing the full range of acts related to bribery. most countries have also introduced anti-corruption programs at the national level. the answer to the fight against corruption in many countries was the increase in the number of anti-corruption legislative acts. in particular, the fight against corruption as one of the main priorities of the government of the czech republic is based on an appropriate strategy. it is aimed at reducing the level of corruption, gradual implementation of measures on the basis of the balance of prevention and suppression of corruption and transparency of this process. when developing the strategy, projects of transparency in government procurement platform were used (rybak, 2011). 3. results and discussion corruption in ukraine – not just socio-economic phenomenon that is present in varying degrees today in many countries of the world. it is a system of relations that penetrated all spheres of society’s life. before revolutionary events in 2014, despite loud political statements and some anti-corruption decisions, corruption only intensified, as reflected in relevant international rankings (table 1). data for calculations are obtained from the following sources: world economic forum; global insight country risk ratings; bertelsmann foundation transformation index; imd world competitiveness center yearbook; world justice project rule of law index expert survey; political risk services international country risk guide; varieties of democracy (v-dem); economist intelligence unit country risk service; freedom house nations in transit (ukraine against corruption, 2018). according to data given in table 1, on the eve of the revolution of dignity, ukraine was perceived as one of the most corrupt countries in the world, occupying 144th place (the higher the score in points and, consequently, the smaller the place of the country, the less corrupt it is considered and vice versa) by this indicator in the world. a similar situation is observed in relation to other indicators, on the basis of which the corruption perceptions index is calculated. table 1 the corruption perceptions index by transparency international and data sources to calculate it, 2012-2017 year 2012 2013 2014 2015 2016 2017 place in rating 144144+ 142+ 130+ 131130+ corruption perceptions index: general score (conditional points) 26-3 25-1 26+1 27+1 29+1 30+1 source: formed on the basis: international monetary fund (2017). retrieved from: https://www.transparency.org/research/cpi/overview) baltic journal of economic studies 228 vol. 5, no. 1, 2019 in economic terms, corruption in ukraine has become a serious obstacle to its economic development. without its elimination, ukraine will simply not be able to overcome the historical lag behind developed countries and regions of the world. if ukraine cannot reduce corruption, gdp per capita in 2040 will be only 30% of the same indicator in the eu єс (ukraine against corruption, 2018). if the level of corruption in ukraine will reduce to the highest corruption level among eu member states, ukrainian gdp per capita will be 40% of the eu average indicator. if the level of corruption in ukraine will be the same as the eu average, gdp per capita in 2040 will exceed 50% of the eu average, and this gap will be reduced rapidly in the future. ukraine is traditionally characterized by a high level of shadow economy (table 2). in 2014, the level of shadow economy was 43% in relation to official gdp (calculations of the ukrainian ministry of finance, 2010-2017). it is clear that, under equal conditions, the shadow economy is both a source and a result of corruption. although the size of the shadow economy is gradually diminishing since 2015, its level remains large, with all the relevant political and economic consequences and corrupt content. at the same time, it should be remembered that the high level of the shadow economy is also explained by the fact that the shadow economy itself is one of the business strategies that allows it to mitigate the impact of the economic crisis (and therefore, naturally, its level has increased during the crisis). it should be noted separately that ukraine traditionally had a high level of tolerance of society to petty corruption. this, in particular, was reflected in the widespread belief that the government simply does not work without corruption. for the sake of justice, we would point out that such an opinion had some support among experts dealing with economic development. an assessment of the effectiveness of measures aimed at overcoming corruption is a rather complicated problem. in order to make an assessment, we based our study on the approach that can be described as follows: 1. it is impossible to absolutely accurately determine the real volume of corruption (and, therefore, it is impossible to accurately determine the economic losses of society) since any assessment of this phenomenon depends on the methodology and the initial assumptions of the analysis. this is also true for the assessment of the economic effect of anti-corruption measures. under such conditions when discussing the scale of the relevant phenomena, one way or another there is the question of their underestimation or overestimation, moreover, the affirmation of the correctness or incorrectness of such assessments is mostly subjective. 2. in technical terms, the effectiveness of the fight against corruption can be assessed using several indicators, each of which has its own specific scope of application, summarized indicators are presented in figure 2. it is obvious that these indicators are interrelated; however, at the same time, each group has its own scope of application. note that traditionally in the discussions on the issues of anti-corruption policy, their participants operate precisely with the indicators of the second and third groups, or they contrast indicators of these groups against indicators of the first group. in our opinion, this does not allow adequately assessing the state of affairs in the field of fighting corruption. 3. in one form or another, corruption is present in many spheres of life in ukraine. of course, without a detailed “sectoral” analysis of corruption and an objective assessment of the effectiveness of the relevant anti-corruption measures in such spheres as education, medicine, healthcare, military procurement, etc., it is difficult to talk about the real pace and extent of anticorruption progress of the country. herewith, it should be considered that society is extremely sensitive to the processes taking place in these areas, which objectively complicates discussion on the efficiency/inefficiency of the relevant anti-corruption measures. undoubtedly, the solution to these issues is formed by a complex multi-faceted mechanism, within this work we propose to consider the following classification of anti-corruption measures, which is presented in table 3. table 2 the level of the shadow economy in ukraine to gdp year the level of shadow economy, % to ukraine’s official gdp change in the volume of ukraine’s real gdp, % to the respective period of the previous year 2010 38 4,1 2011 34 5,5 2012 34 0,2 2013 35 0,0 2014 43 -6,6 2015 40 -9,8 2016 35 2,4 2017 33 2,3 source: formed on the basis of international monetary fund (2017). calculations of the medt of ukraine (2010-2017). retrieved from: http://www.me.gov.ua/documents/list?lang=uk-ua&id=e384c5a7-6533-4ab6-b56f-50e5243eb15a&tas=tendentsiitinovoiekonomiki baltic journal of economic studies 229 vol. 5, no. 1, 2019 in general, it should be noted that the purpose of all these measures is to build a system of management of the relevant spheres on the basis of economic expediency and transparency and ensure their functioning in full compliance with the public interest in the strict sense of the term. the formation of the national legal framework for fighting corruption is based on the relevant international anti-corruption conventions, other international legal documents containing clear internationally accepted definitions, which acts should be considered corrupt offenses, which entities should be responsible for them, which sanctions and other criminal measures (such as special confiscation and special measures for legal entities) should be established, etc. confirming its european integration aspirations, over the last decade ukraine has ratified the criminal law convention on corruption of the council of europe as of january 27, 1999 (law № 252-v as of 18.10.2006), the additional protocol to this convention dated may 15, 2003 (law № 253-v as of 18.10.2006), the civil law convention on corruption of the council of europe as of november 4, 1999 (law № 2476-iv as of 16.03.2005), the united nations convention against corruption as of december 11, 2003 (law № 251-v as of 18.10.2006), the council of europe convention on laundering, search, seizure and confiscation of the proceeds from crime and on the financing of terrorism (law № 2698-vi as of 17.11.2010), the united nations convention against transnational organized crime as of november 15, 2000 (law № 1433-iv as of 04.02.2004), and the council of europe convention on the manipulation of sports competitions as of september 18, 2014 (law № 1752-viii as of 16.11.2016). by ratifying the council of europe civil law convention on corruption, ukraine has joined the group of states against corruption (greco). on the basis of anti-corruption standards determined in these and other international documents, numerous laws were adopted: a) of general nature on responsibility for corruption offenses and offenses related to corruption: “on the principles of state anti-corruption policy in ukraine (the anti-corruption strategy) for 2014–2017”, “on corruption prevention”, “on purification of government”, separate provisions of criminal, criminal procedure, civil, civil procedure codes of ukraine, code of ukraine on administrative offences, and code of administrative procedure of ukraine; b) on the activities of specialized anti-corruption bodies: “on the national anti-corruption bureau of ukraine”, “on the prosecutor’s office”, “on the national police”, “on the state bureau of investigation”, “on the security service of ukraine”, “on operational search activities”, “on organization-legal bases of fight against organized crime”; c) on ethical rules, anti-corruption restrictions and prohibitions for some officials, and on political corruption prevention: “on civil service”, “on judicial system and status of judges”, “on political parties in ukraine”, “on election of the president of ukraine”, “on elections of people’s deputies of ukraine”, separate provisions of the labour code of ukraine, etc.; d) on corruption prevention in the economy and sports: “on public procurement”, “on economic competition protection”, separate provisions of the commercial and commercial procedure codes of ukraine, “on prevention of the impact of corruption offences on the outcomes of sports competition” and others; g ro up in g in di ca to rs t he e ff ec tiv en es s of c ou nt er ac tio n to c or ru pt io n group 1. economic indicators: reduction of economic losses as a result of the elimination of specific corruption schemes and elimination of conditions that give rise to corruption group 2. indicators of the activity of the law-enforcement system: the number of persons brought to administrative and criminal responsibility for corruption violations and crimes; amounts of damages recovered group 3. indicators of public perception of the effectiveness of counteraction to corruption: assessment of corruption dynamics in different dimensions by different social and professional groups figure 2. summarized group of indicators to measure the effectiveness of the fight against corruption source: summarized by the authors based on: ukraine against corruption (2018) baltic journal of economic studies 230 vol. 5, no. 1, 2019 table 3 anticorruption measures: key characteristics and interconnections the purpose of anti-corruption measures measure application procedure anticorruption effect creation of a full-fledged gas market aligning gas prices for different categories of consumers. termination of joint activity agreements. revision of contracts for gas supplies from russia. alternative channels of gas supply to ukraine. reform of njsc naftogaz’s corporate governance. reducing opportunities for price arbitrage. depolitization of gas relations with russia. reducing opportunities for political corruption, including by eliminating the intermediary (rosukrenergo). minimizing the opportunities to obtain corrupt rents due to the presence of a monopoly supplier. strengthening the company’s resilience to external political influences, which ultimately lead to the appearance of various corruption schemes. fight against tax pits and conversion platforms introduction of the system of electronic administration of vat. implementation of the risk monitoring system in the vat administration system. automatic refund of vat unshadowing financial flows and minimizing a scheme tax credit creating a transparent, open, and competitive public procurement market implementation of prozorro’s public procurement system. creating a system for monitoring public procurement by the state audit service of ukraine. creation of a special monitoring portal dozorro. purchase of medicines by io. ensuring direct open competition between suppliers identification of risks of abuses in public procurement and their minimization at all stages of the procurement process. public oversight of public procurement by all stakeholders. the opening of state registers and other data related to public administration and ensuring equal access to it for all parties concerned determination of data sets to be made public. creation of the unified state open data portal and relevant specialized open data portals. creation of the unified state register of declarations of persons authorized to perform state or local government functions. minimizing the conditions for manipulating and abusing relevant data expanding the possibilities of public control over the activity of the authorities ensuring equal access to relevant data for all stakeholders. prevention of abuse by officials. eliminating excessive administrative control of entrepreneurial activity by simplifying the relevant procedures deregulation. provision of administrative services in electronic format. simplifying the registration of medicines of foreign origin. reducing regulatory costs for business. automatic provision of administrative services without the “mediation” of the authorized representative of the state. shortening the procedure for bringing foreign drugs to the ukrainian market. prevention of political interference and corruption, delimitation of regulator and owner functions, the introduction of internationally recognized corporate governance standards corporate governance reform reduction of intra-corporative corruption space. strengthening the company’s resilience to external political influences, which ultimately lead to the appearance of various corruption schemes. clearing the banking sector from institutions that are actually an instrument for implementing various schemes of abuse by their owners. introduction of identification of ultimate beneficiaries. resolving the issue of lending to related parties. transparency of the ownership structure of banks as a factor of increasing the efficiency of banking supervision. prevention of the appearance of various schemes of abuse by the owners of banks. source: formed based on ukraine against corruption (2018); calculations of the ukrainian ministry of finance (2010-2017); international monetary fund (2017) e) on access to information: some provisions in the civil, commercial, budget, and land codes of ukraine, laws “on the national agency of ukraine on detection, search and management of assets obtained through corruption and other crimes”, “on the state registration of legal entities, sole traders and public and civil organizations”, “on state registration of property rights to real estate and their encumbrances”, “on road traffic”, “on the state land cadastre”, “on television and radio broadcasting”, “on the transparent use of public funds”, “on information”, “on access to public information”, and “on access to court decisions” etc. based on the above-listed laws, dozens of acts of secondary legislation were adopted by the cabinet of ministers of ukraine, national agency on corruption prevention, ministry of justice of ukraine and others. all this enables us to state that, in general, a legislative framework for corruption prevention has been created in ukraine. yet, in spite of the fact that many laws were passed, 35% of 200 anti-corruption measures, which, according to the state program for anticorruption strategy implementation were supposed to be implemented by the end of 2017, have not been implemented. there is no anticorruption strategy or baltic journal of economic studies 231 vol. 5, no. 1, 2019 its state implementation program for 2018 and beyond. also not passed are many important anti-corruption laws, which could have helped the further recovery of ukraine’s economy, finances, social protection systems etc. these include laws on transparency with respect to allocation of budget expenditures and usage of natural resources, administrative procedures, lobbying (draft law “on ensuring transparency and legality of communication with the authorities”, 2017), integrity checks, protection of whistle-blowers, establishment of the office of business ombudsman (the draft law “on the establishment of a business ombudsman”, 2016) etc. 4. conclusions for successful application of the experience of eu countries when developing effective anti-corruption policy in ukraine, it is necessary: firstly, determine and implement in ukrainian legislation relevant international legal rules of state, regional, and local nature; secondly, given the successful experience of certain countries, identify a complex of most important for ukraine factors aimed at providing effectiveness of state policy of preventing corruption, structure them based on principles of priority and the most functionality in order to create a model optimal for ukrainian conditions; thirdly, develop and form for this model proper institutional support of regulatory character that would harmoniously combine state, regional, and local levels of public administration. the paper determines “direct” anti-corruption effects of corresponding changes in economic governance. it is obvious that direct effects can be levelled by corruption risks in related spheres. so, the delegation of certain powers and financial resources to the local level in the process of decentralization objectively restricts corruption space in the “centre-regions” relations in terms of the distribution and use of financial resources, however, without effective anti-corruption system at the local level, the anti-corruption effect of decentralization will be less than expected. the system of corruption prevention includes rules of anti-corruption behaviour general for all subjects under the anti-corruption legislation and special ones – for separate groups of such subjects (deputies, public servants, judges, workers of law enforcement authorities, heads of state enterprises and so on) or separate spheres, and also means of control, monitoring, and other means for ensuring compliance with the specified rules and provides for the possibility to change them if indicated by corresponding indicators. in order to overcome mass violations of anticorruption norms and rules, it is needed to implement a whole range of measures to criminalize corruption, that is, to establish criminal responsibility for corruption offenses and corruption-related offenses and create a law enforcement system capable of effectively counteracting the corruption actions that we have identified in the study. as further research directions, we consider appropriate to investigate in more detail some spheres specified by us as strategically important directions of reform for ukraine. references: about twenty principles of struggle against corruption (1997). resolution (97) 24 of the committee of ministers of the council of europe. adopted by the committee of ministers on november 6, 1997 at the 101st session. retrieved from: http://zakon2.rada.gov.ua/laws/show/994_845 calculations of the ukrainian ministry of finance (2010-2017). retrieved from: http://www.me.gov.ua/ documents/list?lang=uk-ua&id=e384c5a7-6533-4ab6-b56f-50e5243eb15a&tas=tendentsiitinovoi ekonomiki draft law "on ensuring transparency and legality of communication with the authorities" (reg. no. 7129 dated september 20, 2017) on september 22, 2017 was given for 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(2015). byudzhetne rehulyuvannya v umovakh instytutsiynykh peretvoren [budgetary regulation in the context of institutional reforms]. molodyy vchenyy [young scientist], 2(17), 25-28. ukraine against corruption (2018). ukraine against corruption: economic front. economic evaluation of anticorruption measures in 2014-2018. dnipro: t.k. united nations convention against corruption (2003). retrieved from: http://zakon2.rada.gov.ua/laws/ show/995 сі6 the draft law "on the establishment of a business ombudsman" (reg. no. 4591 dated may 5, 2016) was adopted as a basis on may 31, 2016. retrieved from: http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=58980 shevchuk, b. (2012). european principles of good governance and reform of the executive power system in ukraine. democratic governance, 9. retrieved from: http://www.lvivacademy.com yameletsky, o. (2012). implementation of the principles of "proper" governance as a factor in activating political participation. retrieved from: http://archive.nbuv.gov.ua baltic journal of economic studies 170 vol. 5, no. 3, 2019 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: bylja@ukr.net orcid: http://orcid.org/0000-0001-7458-0587 doi: https://doi.org/10.30525/2256-0742/2019-5-3-170-177 cloud-based accounting soft ware: choice options in the light of modern international tendencies yuliia popivniak1 abstract. the development of information technology combined with globalization, standardization, and proliferation of services based on the use of the internet, and personal economic sanctions against some russian software vendors in ukraine made the search for new effective alternatives to existing programs among accounting cloud services extremely urgent. the purpose of the article is to study the international experience of cloud accounting software use, its strengths and weaknesses, threats and opportunities and to develop approaches to the choice of cloud services at the enterprises. the methodology which was used for analysing the advantages and disadvantages of implementing accounting software based on cloud technologies is swot analysis. the method of evaluating alternatives when choosing software provides for simultaneous comparison of its cost and a set of functional and technical characteristics. results. practically for all types of activities, the indicators of using cloud accounting services in ukraine as in many other eastern european countries (poland, greece, bulgaria, latvia, romania, hungary, etc.) lag behind the average european (31 countries analysed), and the worst situation is observed in the spheres of information and communications, professional, scientific, technical and real estate activities. investing in the use of cloud products is at a low level due to their downsides related to privacy, trust, control, and data security. the choice of a cloud service or a cloud service provider must take into account the size of the enterprise, the volume of workflow, the number of employees, the forms of organization of accounting system, as well as the key service characteristics that we focus on in the article. practical implications. analysis and the right choice of cloud-based accounting software lead to the undeniable benefits for an enterprise (cost savings, convenience, mobility, etc.). this makes it possible to use the services, which are much cheaper than analogues, and most adapted to the conditions of business operations in a particular country. it also allows deepening the list of criteria for the choice of accounting software that would meet the needs of an individual enterprise. value/ originality. research data of the state and features of the application of accounting cloud services provide a better understanding of the current trends in their development and the place of ukrainian enterprises among the leaders and outsiders in the international market for the users of such services. key words: cloud accounting, internet, accounting software, international experience, cloud services. jel classification: m41, o33, o57 1. introduction the rapid development of information technologies in conjunction with the global processes of standardization, globalization, increasing competition, the spread of services based on the use of the internet, is increasingly raising the issue of activating the implementation of cloud technologies in enterprises, because these technologies are a source of growth and innovation, allow not only accumulating and storing information about the economic activities of the enterprise but also carrying out its processing and analysis, solving many problems the accounting system is facing. despite some threats of using cloud technologies, there are obvious cost savings in their acquisition and maintenance. the strengths of cloud services are the increased efficiency of accounting work, the flexibility, ease of access and simplicity of use, the ability to work with large volumes of information, the problem of protection of which is today very acute and confirmed by the numerous cyberattacks that have recently taken place in ukraine and in the world. in this case, according to many scholars and practitioners, information is more protected from unauthorized access in the “cloud”. the peculiarity, which determines the urgency of researching the topic of choosing cloud-based accounting software products in ukraine, is the introduction of personal special economic sanctions baltic journal of economic studies 171 vol. 5, no. 3, 2019 against russian suppliers of these products (1c llc, parus corporation llc, galaxy center cjsc). the outlined trend points to the need for a gradual abandonment of russian software products, which is currently used by a significant number of ukrainian enterprises, and the search for new effective alternatives. in so doing, relevant is the study and consideration of international trends, the achievements of science and the practice of accounting with the use of cloud technologies in countries where their development has reached the highest level. the current paper aims to study the international experience of using cloud software products in accounting to formulate approaches to the selection of their best possible options at the actual stage of economic activity. the object of consideration is the accounting software of the enterprise based on cloud services, and the tasks are: 1) carrying out a comparative analysis of indicators of the state of use of cloud services for accounting at ukrainian enterprises and enterprises of other eastern and western european countries; 2) identification of opportunities, threats, strengths and weaknesses of the introduction of accounting software based on cloud technologies; 3) developing a methodology for selecting the best cloud accounting services among existing alternatives, taking into account the world experience. 2. brief literature review in recent years, the number of economic publications devoted to the use of cloud technologies (in particular, in accounting) is increasing. however, most of the information is found in technical literature, market research, or journalistic articles. among the ukrainian scientists who considered this problem, we distinguish i. f. aulov, i. d. horbenko, v. i. hrytsenko, s. f. legenchuk, t. v. lytvynova, m. p. pavlyukovets, o. a. ursatyev, v. frolov, m. o. shchurovska, o. v. yanovska, and others. at the international level, the general principles of cloud computing (the conceptual-categorical apparatus, key characteristics and categories of the cloud computing service, their roles, types of capabilities, deployment models, cross-cutting aspects) are defined in international standard iso/ iec 17788: 2014 (e) (international organization for standardization / international electrotechnical commission, 2014). the listed aspects are also covered by the organisation for economic co-operation and development (organisation for economic cooperation and development, 2014), national institute of standards and testing (united states department of commerce) (mell, grance, 2011) and in the works of numerous researchers (vacca, 2017; rountree, castrillo, 2014; marinescu, 2013). a lot of attention is devoted to the study of the features of the application of cloud services in accounting. so, x. tang, ch. yan & y. kang rightly argue that the choice of software is the main problem of the automated form of its maintenance (tang, yan, kang, 2013). at the same time in the modern world, enterprises do not need to own servers or buy software for their installation on their own computers (ebenezer, omane-antwi, kyei, 2014). it is more profitable to use accounting systems based on cloud technologies, which provide a way of keeping records completely online and providing customers with on-demand services (christauskas, miseviciene, 2012). making forecasts about the development of the accounting profession, m. galarza believes that for the accounting service of the future, it is important to switch to cloud software, which will provide her with a strong statement and opportunities that were not available earlier (galarza, 2017). when deciding on the choice of an accounting cloud product, we take into account its strengths and weaknesses, risks and prospects for use. these issues have been studied in the scientific papers of many scientists (ebenezer, omane-antwi, kyei, 2014; özdemir, elitaş, 2015; dimitriu, matei, 2014, 2015). some scientists and practitioners wrote about the methodology of selecting accounting cloud services (asatiani, penttinen, 2015; dimitriu, matei, 2014; b. ionescu, i. ionescu, bendovschi, tudoran, 2013; needleman, 2017; christauskas, miseviciene, 2012). a. adhikari, m. i. lebow & h. zhang focused on such a technique in an international context, taking into account the characteristics of the enterprise (size and level of internationalization), international functions (multicurrency, multireporting, and multilingualism) and the main selection criteria (support and security, hardware and operating platforms, flexibility and cost) (adhikari, lebow, zhang, 2004). despite numerous studies, in modern scientific literature, the issues of applying accounting software based on cloud technologies are not fully covered, especially in ukrainian realities. there is a lack of publications on comparative analysis of accounting cloud services on various grounds, as well as domestic programs and their foreign equivalents. the problem is the analysis of statistical data on the use of cloud computing, as in ukraine the information in this section of the recently was not formed separately. only since 2016 a new methodology for the organization and conduct of state statistical observation “use of information and communication technologies in enterprises” has been applied. undisclosed are the issues of exploring opportunities and providing recommendations on the choice of accounting cloud services by the enterprises that are at the stage of demand formation and accumulation of experience of using cloud technologies by foreign companies. baltic journal of economic studies 172 vol. 5, no. 3, 2019 3. international experience of cloud-based accounting software use researchers call the period from 2010 to this day the stage of “mobile” accounting software, which is based on the internet and mobile applications that meet all the requirements of consumers (b. ionescu, i. ionescu, bendovschi, tudoran, 2013). starting from 2013, the virtual stage in the development of information support is continuing, which means the spread of virtual workplaces and cloud technologies (which, however, began to be applied in large enterprises in the early 2000s (vacca, 2017; marinescu, 2013)) (pavlyukovets, 2014). in ukraine, only 5.57% of enterprises that use the internet connection, purchased in 2016 cloud software for financial and accounting purposes, while to the network have access up to 93.5% (average percentage for eu countries is 7% and 97%, respectively). the leaders in terms of internet possibilities use and, in particular, the proportion of purchased accounting cloud services in europe are finland (26%), norway (22%), and sweden (21%), as evidenced by the results of the comparative analysis of relevant statistics data (figure 1). as can be seen from figure 1, among the 31 countries analysed, ukraine ranks the 18th, with the leader (finland) ahead of it by 4,66 times. there is also a noticeable tendency in countries with better indicators of the use of accounting cloud services that they are applied primarily in small and medium-sized enterprises, while in lagging countries – in large ones. in ukraine, the highest percentage of software usage based on cloud technologies is at large enterprises (6.7%), while for medium and small enterprises it is 5.9% and 5.4% respectively. only in manufacturing and construction, the percentage of ukrainian enterprises, acquired cloud services for financial and accounting needs, is higher than the average for eu countries (figure 2). for all other activities, ukraine lags behind the average european indicators, with the worst situation being in the information and communication sectors (2,4 times lagging behind), professional, scientific, and technical activities (2,1 times lagging behind), real estate activities (lagging behind in 1,8 times). the leader in almost all type of activities in europe in 2016 is finland (exceptions – sweden’s first place in transportation and storage and norway’s – in professional, scientific, and technical activities). in 2017, the world’s largest cloud infrastructure service providers were amazon web services (34%), 0 5 10 15 20 25 0 5 10 15 20 25 fi nl an d n or w ay sw ed en d en m ar k n et he rl an ds e st on ia ir el an d u ni te d k in gd om c ro at ia b el gi um sl ov ak ia l ith ua ni a sl ov en ia c ze ch r ep ub lic l ux em bo ur g m al ta po rt ug al u kr ai ne sp ai n fr an ce h un ga ry g er m an y it al y c yp ru s a us tr ia r om an ia l at vi a r ep ub lic o f m ac ed on ia b ul ga ri a g re ec e po la nd all enterprises, without financial sector large enterprises (250 persons employed or more) small enterprises (10-49 persons employed) medium enterprises (50-249 persons employed) figure 1. share of enterprises that bought finance/accounting cloud software applications in the total number of enterprises with internet access in 2016, % source: compiled by the author according to (state statistics service of ukraine, 2017; eurostat, 2017) baltic journal of economic studies 173 vol. 5, no. 3, 2019 microsoft (13%), ibm (8%), google (6%), and alibaba (4%) (statista, 2018). according to clutch 2017 annual cloud computing survey (panko, 2017), 48% of the world’s it companies plan to increase their investments in cloud computing by 11–30% and 14% – by 31–50% compared to the previous year (49% of the enterprises surveyed want to make significant investments in software as a service (saas) and 38% – in infrastructure as a service (paas) (statista, 2018)). in many countries of eastern europe, investing in the acquisition of cloudbased software products for accounting purposes is not too common. we should find out the reasons for this phenomenon, the possible risks and disadvantages of using such software, in order to eliminate them and take advantages of its implementation. 4. cloud-based accounting software implementation: strengths, weaknesses, opportunities, and threats before choosing the software, the enterprise should answer the question of its full readiness to exploit cloud technologies, the feasibility of their implementation in comparison with the programs that are already in use, the possibilities of transforming the accounting system into a more effective one. the most important strength of these technologies is the possibility of saving money, especially beneficial for small and mediumsized enterprises that do not need expensive and oversaturated with functions programs. particular attention should be paid to the weaknesses and threats of using cloud accounting services that relate to privacy, trust, control (figure 3). among other things, ukrainian enterprises are characterized by problems of legislative regulation, prejudices related to a lack of knowledge (both in the choice of accounting cloud products, and the skills of using them), and the low level of information security. according to some studies in the cloud environment, the level of security is higher than in the traditional one, and 45% of the surveyed it professionals consider security to be the main advantage of cloud services (rountree, castrillo, 2014; panko, 2017). we agree with the rule: who wants to expose the accounting information to the greatest risk, accumulates it in one place (lehenchuk, lozynskyy, 2014). according to pwc data, in 2017 cybercrime took second place in the world among all economic crimes (46% of enterprises suffered, what is 14% more than in the previous year). in so doing, the highest percentage of cybercrimes was typical for financial services (41%) and the losses, as their result, cost some companies over 100 million dollars (pwc, 2018). in ukraine, the level of cybercrime in 2017, compared to 2016, was 3,1 times higher, and in the first three months of 2018 reached already 31.3% a year earlier (prosecutor general of ukraine, 2018). obviously, in the ukrainian realities, data security is a challenge to the implementation of accounting cloud services, especially in a hybrid war with russia, one of the tools of which is precisely cyberattacks. finland finland finland sweden finland finland finland norway finland 0 10 20 30 40 50 ukraine maximum minimum eu countries (average) figure 2. ukraine’s place among the leading european countries by the share of enterprises that purchased finance/accounting cloud software applications, by the types of activities in 2016, % source: compiled by the author according to (state statistics service of ukraine, 2017; eurostat, 2017) baltic journal of economic studies 174 vol. 5, no. 3, 2019 5. method of the accounting cloud services selection it is important that accounting, based on cloud technologies, is realized more as a service, and not as a product (dimitriu, matei, 2015). this is confirmed by the ukrainian practice of economic activity, where payment for the use of cloud services is a payment for services in the field of informatization (although due to imperfections in legislation it can be mistakenly recognized as royalties, and services themselves as telecommunication services). the tariffication unit may be the number of users, records in the database, the amount of network traffic, processed data and transactions, the operating time of the user applications. payment includes also the cost of maintenance, updates, and data protection. at the same time, a threat is the wrong choice of a cloud service or a cloud service provider by not taking into account the size of the enterprise, the volume of workflow, the number of employees, the forms and principles of an accounting system policy-making, and important requirements for the technical and functional characteristics of programs that we will focus on. opportunities 1) growth, innovations, the digital transformation of accounting practice; 2) improvement of the accounting department’s work efficiency; 3) creation of the collaborative working environment; 4) mobile automated accounting data gathering, access to digital accounts; 5) mobility; 6) information agility, real-time insights and more informed decision-making; 7) efficient use of computer system resources; 8) large-scale computation and big data; 9) movement from operational and transactional accountant’s role to role of strategic advisor; 10) possibility to try the cloud software before buying; 11) access to a wide selection of advanced accounting applications, cloud solutions and financial technology tools; 12) obtaining competitive advantages over the enterprises, which do not use cloud technologies in accounting. weaknesses 1) cultural resistance, lack of trust in providers; 2) dependence on reliable and fast internet connection, power supply; 3) inability to use previous software versions; 4) interoperability between programs, applications, and clouds by different providers; 5) lack of awareness, knowledge and work skills; 6) integration with existing architecture, an adaptation of business processes; 7) probability for cloud software’s speed or functionality to be reduced (limited); 8) lack of proper economic expediency evaluation of movement to the cloud-based software; 9) technology challenges. threats 1) dependence on offerings, performance, pricing from providers; 2) data security dependence on the quality of providers’ services; 3) risk of hacker attacks; 4) lack of proper legislation (both nationally and internationally) and regulation; 5) uncertainty about the privacy, auditability, ownership, location of data and control over it; 6) accounting data loss or theft; 7) cloud services’ unavailability; 8) difficulties in unsubscribing or changing service provider; 9) lack of protection of intellectual property in the cloud; 10) choosing the wrong cloud model, service category or provider; 11) difficulties in identifying the source of the threat. strengths 1) reduction of technological difficulties and management efforts; 2) ensuring accuracy and quality of data; 3) reduction of environmental effect, better hardware resources utilization; 4) geographically unlimited access through remote access to the network; 5) cost reduction and saving time; 6) data back-up, scaling, conversion and recovery; 7) ease of understanding and use, flexibility, userfriendly interface; 8) automatic support, updates, the possibility of using add-on accounting modules and training services; 9) reduction in information technology staff; 10) no upgrade fees; 11) powerful software-driven reporting, data analysis and forecasting. swot analysis figure 3. swot analysis of cloud-based accounting software implementation at enterprises source: developed by the author baltic journal of economic studies 175 vol. 5, no. 3, 2019 c. christauskas & r . miseviciene distinguish the following main functions of accounting information systems: data collection and storage, provision of information, provision of control, and forecasts of the future (christauskas, miseviciene, 2012), and c. s. kent, r . a. milligan & w. a. knoblauch examine three criteria for selecting accounting programs – fundamental characteristics, features and outputs (kent, milligan, knoblauch, 1985). a. asatiani & e. penttinen highlight sales, purchases, payments, reporting, and payroll as groups of tasks that accounting software must perform (asatiani, penttinen, 2015). taking into account the peculiarities of accounting software in the “cloud”, approaches in the processed literature and data from the site capterra, which accumulates the world experience of using accounting software for more than 500 thousand professional users (capterra, 2018), a rating of the 10 most popular and affordable programs is formed (from 201, using cloud services) (table 1). the rating construction methodology assumes integration of 14 of cloud-based accounting software main functional characteristics (accounts payable, accounts receivable, bank reconciliation, billing and invoicing, cpa firms accounting, expense tracking, fixed asset management, fund accounting, government accounting, nonprofits accounting, payroll management, project accounting, purchase orders, tax management), 40% of the total evaluation of the popularity of the cloud service is the number of customers, 40% – the number of users, and 20% – social score. the algorithm for determining the rating by the criterion of affordability requires consideration of the cost of software, the number of features offered, and the average customer review score. as we can see, most foreign cloud products are designed for the needs of small and medium-sized enterprises. at the same time, the use of programs of such well-known in ukraine vendors as sap, oracle or microsoft is not cheap. it should also be taken into consideration that they do not take into account the economic and legislative peculiarities of the work of ukrainian enterprises; therefore, they need additional costs for modification and adaptation. in such circumstances, it is advisable to consider the proposals of domestic developers of accounting cloud services (figure 4). comparing the average price of the service (since the cost often varies depending on the package of services offered by the provider) in us dollars equivalent according to the national bank of ukraine rate and the table 1 rating of the most popular and affordable cloud accounting software in october 2018 rank most popular software most affordable software accounting software (vendor) name number of features supported (max. 14) price (per user / per month), $ main clients accounting software (vendor) name number of features supported (max. 14) price (per user / per month), $ main clients 1 quickbooks (intuit inc., usa) 11 5,00– 30,00 se1, sb2 accounting by wave (wave financial inc., canada) 14 free se, sb 2 freshbooks (freshbooks inc., canada) 3 15,00– 50,00 se, sb reckon one (reckon ltd., australia) 11 5,00-30,00 sb, mb 3 accounting by wave (wave financial inc., canada) 14 free se, sb odoo accounting (odoo s.a., belgium) 14 14,00 se, sb, mb, lb 4 microsoft dynamics 365 (microsoft corp., usa) 13 40,00– 210,00 se, sb, mb3, lb4 easy accountax (easy accountax, uk) 12 2,40-15,00 se, sb 5 xero (xero ltd., new zealand) 14 27,50– 75,00 sb, mb simplebooks (gosimple software ltd., uk) 5 6,00 se, sb 6 oracle financials cloud (oracle corp., usa) 5 600,00 se, sb, mb xero (xero ltd., new zealand) 14 27,50– 75,00 sb, mb 7 sage business cloud accounting (sage group plc, uk) 8 10,00– 25,00 se, sb zoho books (zoho corp. pvt. ltd., india) 8 2,90–4,50 se, sb, mb 8 odoo accounting (odoo s.a., belgium) 14 14,00 se, sb, mb, lb billy (billy us inc., usa) 5 15,00– 39,00 se, sb 9 zoho books (zoho corp. pvt. ltd., india) 8 2,90–4,50 se, sb, mb smarty (smarty software ltd., uk) 8 2,00-45,00 sb 10 kashoo (kashoo inc., canada) 9 16,65– 29,95 se, sb officewise (officewise, usa) 13 0,00–8,95 se, sb, mb, lb 1 – self-employed; 2 – small businesses, 3 – medium businesses, 4 – large businesses source: developed by the author according to (capterra, 2018) and information on the official websites of software vendors baltic journal of economic studies 176 vol. 5, no. 3, 2019 minimum set of functions that accounting software must perform at the ukrainian enterprise (tax accounting; reporting; databases of registers, directories; electronic workflow; electronic primary documents; integration with other software; ease of modification; data security; bank accounts management; job management/payroll; version for mobile phone; demo version; consolidation of reporting, updates and support), we note the superiority of master:accounting over other programs in terms of functionality, but the biggest disadvantage of this software is its high price. more popular and affordable is, for instance, sota (from the developer of accounting software m.e.doc), but its weak side is the low level of data security. thus, when choosing a cloud service for accounting, all factors should be weighed on the basis of the needs of a particular enterprise. should also not be excluded such additional factors as the provider’s reputation, the availability of a free trial period, guarantees, telephone and web support, purchase discounts, user-friendly interface, the possibility for program to grow together with the enterprise and the needs of its customers. 6. conclusions the conducted research of features of a choice of accounting cloud services on the basis of the international experience of their use provides grounds for the following conclusions. 1. the level of application of cloud technologies for accounting purposes in ukraine as in most eastern european countries remains today below the average european indicator for almost all types of activities. at the same time, the gap between the best practices, which are concentrated in the scandinavian countries, ranges from 3,4 times to 8,6 times. 2. when choosing software products, all their advantages and additional features (cost savings, convenience, increase of the efficiency of the accounting service, mobility) should be compared with weaknesses and threats, especially related to privacy, trust, and data security. 3. nowadays in the world, there are many cloud computer programs, different in cost, functional and technical capabilities. however, they do not take into account the national peculiarities of the business operations, which in ukraine are related to the search for reasonably priced products, the need for parallel tax accounting, enhanced data security, etc. therefore, we recommend promoting the improvement and development of domestic cloud services, based on the best practices for developing and using them in the usa, canada, uk, australia, etc., by introducing such services at ukrainian enterprises. expanding the analysis tools according to the size of an enterprise, its type of activity, and other additional conditions for choosing software, we consider this to be the focus of further research. 343,4 64,5 89,5 30,4 77,6 53,5 39,2 32,5 34,2 16,1 5,0 0,0 0,0 50,0 100,0 150,0 200,0 250,0 300,0 350,0 0 2 4 6 8 10 12 a verage price, $ / year n um be r of fe at ur es s up po rt ed number of features supported average price, $ / year figure 4. comparison of the main ukrainian cloud-based accounting software as 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(2017). cloud computing security: foundations and challenges. boca raton: crc press. baltic journal of economic studies 421 vol. 4, no. 5, 2018 corresponding author: 1 kherson state agricultural university, ukraine e-mail: pivden-zemlja@ukr.net 2 kherson state agricultural university, ukraine e-mail: key19955@meta.ua 3 donetsk state university of management, ukraine e-mail: dsum.prof.rabota@gmail.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-421-430 methods of evaluation and conceptual-strategic directions of economic security of agricultural enterprises yurii yaremko1, liliia shykova2, larysa syvolap3 abstract. the purpose of the paper is to identify an effective method for assessing economic security and to formulate conceptual and strategic directions for raising the level of economic security of agricultural enterprises operating in conditions of instability and uncertainty. methodology. in the process of research, general scientific and specific research methods were used. in particular, the method of statistical analysis was used in determining the dynamics of the number of agricultural enterprises. the methods of synthesis and analysis were used to identify the negative trends that affect the activities of agricultural enterprises. using from abstract to specific methods, an algorithm for assessing the level of economic security of agricultural enterprises and the formation stages of the enterprise economic security concept were determined. results. the article defines the main modern functioning tendencies of agricultural enterprises. it is suggested to use such means as financial, human resources, legal, informational, organizational to ensure the proper level of economic security of agricultural enterprises. the article states that the methodology for assessing the level of economic security consists of two approaches: qualitative and quantitative determination of the level of economic security. the authors systematize the indicators for assessing the level of economic security of the agricultural enterprise. the basic features of the economic security concept of agricultural enterprises are determined. the general strategies of the enterprise are described, which can be used both for agricultural enterprises and for other companies of different branches of the economy, in accordance with the level of economic security. practical meaning. the article provides materials that give an understanding of the algorithm for assessing the level of economic security of an agricultural enterprise. the authors present the systematization of components and indicators for assessing the level of economic security, which in practice allows the most effective and reliable determination of the level of economic security. the detailed description of the company’s general strategies allows us to identify and implement precisely the strategy that will maximize the level of economic security of the enterprise. strategic directions improved by authors for the formation of economic security of agricultural enterprises provide the opportunity to identify the necessary tools, with the help of which it is possible to achieve the maximum level of economic security of the enterprise. value/originality. the paper analyses the methodology of evaluation and conceptual-strategic directions of economic security of agricultural enterprises, which proves the urgency and necessity of the considered issues. the presented results of the research and the propositions on the strategic improvement of the economic security level of agricultural enterprises can improve the efficiency of the enterprises of the agrarian sector. taking into account the significant contribution of agriculture to the country’s economy, the research allows improving not only the performance of individual enterprises but also the effectiveness of the national economy as a whole. key words: economic security, agricultural enterprise, methodology of evaluation, concept, strategy. jel classification: q10, q12 baltic journal of economic studies 422 vol. 4, no. 5, 2018 1. introduction the risk character of entrepreneurial activity and increase of the level of competitive struggle determine the necessity of forming economic security of economic entities. this problem is especially relevant for agricultural enterprises, given the increased riskiness of their activities, which is due to the natural climatic factor and the use of land as the main means of production. the presence of a number of unresolved problems, in particular, lack of own funds to ensure expanded reproduction of production, inefficient use of resource potential, decrease the level of managerial personnel qualification, prevent most agricultural enterprises from maintaining a high level of economic security. in ukraine, agriculture is one of the most important sectors of the economy. one-third of the total gross value added to the state is provided by agriculture itself. however, today enterprises in this industry operate in conditions of instability and uncertainty. such a situation negatively affects both the level of economic security of agricultural enterprises and the level of economic security of the country. in the conditions of the formation of the market economy of post-socialist countries, to ensure the economic security of enterprises of the agro-industrial complex in each region of the country is of paramount importance. insufficient scientific and methodological development of these issues, poorly legitimate provision of their decisions and problem solving, the absence of cardinal practical measures of active state regulation of economic security management processes create extreme conditions in ukraine when statehood will be lost, the economy will collapse completely. the use of a system for ensuring the economic security of agricultural enterprises and regions of the country will allow the rational management of enterprises, firms, farms in each region to take active management decisions for the withdrawal of the economy from the crisis, in which most of the regions of the country appeared. the business practices in the agrarian sector require profound scientific research in solving the issues of economic, food, financial, environmental, and other types of security of ukraine, its regions, enterprises, firms and farms of the agrarian sector of the economy. in order to increase the level of economic security of agricultural enterprises, it is necessary to conduct continuous monitoring of it, using the most effective method of assessment, which should take into account all factors that affect the level of economic security. the correct method for assessing the level of economic security provides the opportunity to form the most effective strategy for the development of economic security of the enterprise. the purpose of the paper is to identify an effective method for assessing economic security and to formulate conceptual and strategic directions for raising the level of economic security of agricultural enterprises operating in conditions of instability and uncertainty. 2. trends in the agricultural sector the agrarian sector is of great importance for the economy of many countries, including ukraine. the level of economic development depends on the functioning efficiency of agrarian enterprises. agrarian enterprises (agricultural enterprises) represent an open system, influenced both by internal and external factors. negative trends in the economic and political spheres of the country also affected the activities of agricultural enterprises. this, first of all, has led to a negative trend in the change of the agricultural enterprises’ number (table 1 and figure 1). analysis of the dynamics of the number of agricultural enterprises for the period of 2013-2017 showed that the number of agricultural enterprises in 2017 decreased by 3,488 units compared with 2013. despite the increase in the number of agricultural enterprises in 2016, compared with 2014, and 2015, the number of these enterprises has not reached the level of 2013. this tendency has developed under the influence of national conditions, namely: increase in the cost price of cultivating crops (devaluation of the hryvnia, unstable exchange rate provoke a rise in prices of fuel, fertilizers, raw materials, agricultural machinery, etc.); personnel problems (high qualified personnel insufficiency, despite that every fifth of ukrainians works in the field of agriculture); difficulties with financing; degradation of agricultural lands (violation of scientifically substantiated systems of agriculture, monoculture of agriculture) (problemy siljsjkogho ghospodarstva ukrajiny, 2016). thus, the negative tendencies that have developed in the field of agriculture make it possible to state that the level of economic security of agricultural enterprises has been reduced. however, in order to form an effective table 1 the dynamics of the number of agricultural enterprises in ukraine for 2013-2017 indicator years deviation 2017/20132013 2014 2015 2016 2017 agricultural enterprises, units 49046 46199 45379 47697 45558 -3488 of them farms 34168 33084 32303 33682 34137 -31 source: compiled by the authors using the source (ofitsiinyi veb-sait derzhavnoi sluzhby statystyky ukrainy, 2018) baltic journal of economic studies 423 vol. 4, no. 5, 2018 strategy to increase the level of economic security of agricultural enterprises, it is necessary to carry out a reliable diagnosis of the level of economic security of agricultural enterprises, using such an assessment methodology that will take into account all components of the economic security of agricultural enterprises. 3. methodology for assessing the economic security of agricultural enterprises the main objective of assessing the level of economic security is the timely identification of external and internal threats to the effective operation of enterprises and the definition of strategic directions for improving the level of economic security in order to ensure sustainable development of the enterprise in the future. the objects of economic security of agricultural enterprises consist of two types: 1. the activity of the enterprise (production, sales, etc.). 2. resources of the enterprise (financial, personnel, land, material and technical). economic security entities include individuals or entire units that, in their function, should ensure an adequate level of economic security of the enterprise. in order to ensure an adequate level of economic security of agricultural enterprises, it is recommended to use the following means (stepanov, 2017): 1. financial (without which it is impossible to form economic security, functioning and development of the enterprise). 2. personnel (personnel dealing with economic security, its experience and professionalism, the attraction of highly skilled workers). 3. legal (development of legal acts on the creation, operation of the enterprise and maintenance of its economic security). 4. information (computers, informational products, security networks). 5. organizational (creation of specialized units, organizations that help to provide economic security, provide appropriate consultations). the abovementioned means of ensuring the proper level of economic security of agricultural enterprises are one of the components of economic security, therefore, the effectiveness of their use significantly influences the proper use and monitoring of the level of economic security, it is necessary to implement an algorithm for assessing the level of economic security. many scientists are concerned with the formation of procedures and methods for assessing the level of economic security, in particular the agricultural enterprise: m. bendikov, a. baranovsky, l. bekhter, v. dukhov, d. zadorozhny, s. ilyashenko, d. kovalev, t. kornienko, v. prokhorov, n. reverchuk, d. stepanov, and others. in a scientific paper, kornienko t. o. (kornienko, 2013) provides an algorithm for assessing the level of economic security of agricultural enterprises, which consists of 6 stages (figure 2). the above-presented algorithm for assessing the level of economic security shows the necessity of a certain methodical approach, which will allow making the most reliable estimation of the level of economic security, taking into account both external and internal factors of influence on the economic security of the enterprise. despite a significant number of scientific papers on the assessment and diagnosis of economic security of the enterprise, today there is no single approach to assessing the level of economic security. these approaches can be divided into two groups: the first group – the following methods are used: step-analysis, swot-analysis, bankruptcy diagnostics; the second group – the complex criterion is determined according to the level of the basic indicators of the activity of enterprises, or methods of integrated assessment of the determination of specific components of economic security are used. 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 2013 2014 2015 2016 2017 49046 46199 45379 47697 45558 34168 33084 32303 33682 34137 agricultural enterprises, units of them farms figure 1. dynamics of agricultural enterprises in ukraine for 2013-2017 source: ofitsiinyi veb-sait derzhavnoi sluzhby statystyky ukrainy, 2018 baltic journal of economic studies 424 vol. 4, no. 5, 2018 thus, the first group includes methods of assessment that characterize the level of economic security of the enterprise, mainly through qualitative indicators. the second group includes quantitative assessment methods, which are based exclusively on the calculation of quantitative indicators. we propose, when conducting an assessment of the level of economic security of the agricultural enterprise to use an integrated approach, that is, it is necessary to apply both methods of quantitative assessment, and methods of qualitative assessment. this is due to the specifics of the activity of agricultural enterprises, which uses such main resource as land, whose efficiency is influenced not only by quantitative factors but also by qualitative (natural and climatic conditions, geographical location, etc.). considering that the enterprise’s economic security is a multi-component category, it is necessary to evaluate first of its individual components and then to determine the overall level of economic security. however, in modern economic literature, there is no generalized definition of the components of the economic security of an enterprise; therefore, the assessment of the level of economic security is not always objective. summarizing different approaches to determine the components of economic security of an enterprise, we propose to use the following components: financial, technical and technological, industrial, intellectual and personnel, investment-technological, informational, ecological, power, legal, market, sales. the human resources component plays an important role when assessing the economic security of agricultural enterprises. for example, according to analysts 80% loss of tangible assets puts our employees, companies and the average personnel security problems reduce profit by 6-9%. therefore, agricultural enterprises, which have a high turnover because of the seasonality of production, as well as low salaries and difficult working conditions, it is important to take account of this component in the integrated assessment of economic security ( johansen  s., 1991, modeliuvannia ekonomichnoi bezpeky: derzhava, rehion, pidpryiemstvo, 2006). in table 2, the authors systematized indicators of assessing the level of economic security of the agricultural enterprise. the sum method is used to determine the level of components of economic security. thus, the level of k component is determined by the formula (1): l n f x i n i= = ∑ 1 1 ( ), (1) where l – the level of k-th components of economic security of the enterprise; f(xi) – correlation between the actual value of the components of the index and the base; n – the number of indexes. the correlation between the actual value of the components of the index and the base is determined by the formula (2): f x x x i іf іb k ( ) =       ,, (2) where xif is the actual value of the index component; xib – the base value of the index component; k 1, if xib > xif, or k = 1, if xib < xif. 1. determination of sources of danger and an information base for assessing the level of economic security of an agricultural enterprise. 2. selection and systematization of indicators of activity of the agricultural enterprise on the functional components of safety. 3. comparison of actual and limit values of safety indicators and their distribution by security zones. 4. development of the scoring system for calculating the economic security index of the agricultural enterprise. 5. determination of the average value for each functional component of the economic safety of the agricultural enterprise. 6. calculation of the complex index of economic safety of the agricultural enterprise based on the average value. figure 2. algorithm for assessing the level of economic security of agricultural enterprises source: kornienko, 2013 baltic journal of economic studies 425 vol. 4, no. 5, 2018 table 2 components and indicators for assessing the level of economic security of the agricultural enterprise components of economic security of the enterprise indicators (indices) financial component equity to total assets ratio; coefficient of long-term debt; current assets manoeuvrability ratio; leverage ratio coefficient of financial dependence; coefficient of current liquidity; reserve coverage ratio; absolute liquidity ratio; quick liquidity ratio; accounts receivable turnover ratio; accounts payable turnover ratio; asset turnover ratio; return on assets. techno-technological component intensity of technology update; scientific and production novelty of applied technology and technology; the competitiveness of products. production component index of the ratio of arrival and departure of funds; capital intensity; return on capital; material capacity; material return; profitability index of fixed assets; profitability index of production; working capital turnover ratio; inventory turnover ratio. intellectual and human resources component index of staff fluctuations; index of correlation of hired/retired personnel; index of percentage of production personnel in the total number; index of innovative activity; index of conservation of implemented rationalization proposals; the ratio of labour productivity and equipment facilities; the ratio of labour productivity and wages; index of social responsibility. investment and technological component index of investments; index of progressiveness of long-term biological assets; index of progressive use of long-term biological assets; information component coefficient of completeness of information; coefficient of accuracy of information; coefficient of contradictory information. ecological component index of expenses for measures of natural protection; index of ecological payments. power component the share of negative influences in the past and current periods of the enterprise; definition by expert estimation method. legal component the ratio of losses incurred by the enterprise as a result of violation of legal norms and the overall size of losses, which avoidance is due to the activities of legal services. market component definition of the environment (opportunities and threats); definition of the internal environment (strengths and weaknesses). components for sale index of agricultural goods supply in the foreign market; index of agricultural goods supply on the domestic market; index of timely payment for agricultural products; profitability of sales. source: summarized by the authors with (kornienko, 2013; bekhter, 2013) baltic journal of economic studies 426 vol. 4, no. 5, 2018 it is necessary to determine the average component level (component) to form an integral indicator of the level of economic security. quantitative assessment of the level of economic enterprise requires qualitative characteristics of the results. the qualitative estimation approach of the economic safety level of the enterprise is offered on the desirability function basis. it characterizes the mathematical representation of the law of the transition of quantity to quality, as the quantitative index value is converted into an assessment of desirability, based on this condition of the evaluated object (in this case, economic security). the range of the desirability function lies on the segment [0, 1] (allen julia н., 2005). thus, the level of economic security of an enterprise is estimated by strategically important directions of enterprise activity, which influence the final result of the enterprise activity. therefore, considering the importance and necessity of assessing the level of economic security of enterprises, they are included in the general concept of enterprise security. 4. conceptual-strategic directions of economic safety of agricultural enterprises the concept of agricultural enterprise security is a system of views of enterprise management on security issues at various stages and levels and in various spheres of its economic activity, and also defines the main ways of their solution, principles, directions, and stages of security measures implementation. formation of the concept of economic security of the enterprise includes four main stages (figure 3). thus, taking into account the peculiarities of the formation of the concept of economic security of an enterprise, it is important to determine not only the level of economic security but also on the basis of the results to develop strategic directions for increasing the level of economic security of the enterprise. formation of strategy of any enterprise is one of the main factors of effective functioning. in accordance with the life cycle of the enterprise, the chosen strategy can be adjusted in accordance with the results of the enterprise, in particular, its economic security. the main strategic groups of the company are general (corporate) strategies, product and commodity strategies, competitive (business) strategies, functional strategies, resource strategies. significant interest for many scholars is precisely the general strategies that make it possible to determine the directions of global enterprise development. so in the scientific work, gholik v. v. (gholik, 2014) describes general enterprise strategies that can be used also at agricultural enterprises (table 3). thus, the information presented in table 3 shows that all corporate strategies of the company are divided into three main groups: growth strategies, stabilization strategies, and exit strategies (reduction). according to the results of the assessment of the level of economic security of the enterprise, one of the strategic groups can be applied. taking into account the potential of the enterprise, it is necessary to implement specific types of strategies from a particular strategic group. in accordance with the above, the authors suggest (figure 4) the improvement of strategic directions for the formation of the economic security of the agricultural 1. analysis of the influence of internal and external factors on the state of economic security of enterprises. 2. components and means of providing and principles of economic security of enterprises. 3. assessment of the current state of the level of economic security of the enterprise. 4. development of a set of measures and tools to ensure the economic security of the enterprise. 4.1. budget planning of the implementation of a set of developed measures to ensure the economic security of the enterprise. 4.2. planning the level of security of the company financial, labour and material resources. 4.3. current planning of financial and economic activity of the enterprise. 4.4. operational implementation of the planned measures to ensure the economic security of the enterprise. 4.5. control over the implementation of all planned activities. 4.6. adjustment of a set of measures to ensure the economic security of the enterprise. figure 3. formation stages of the enterprise economic security concept source: formed by authors with source (kudelja, 2014) baltic journal of economic studies 427 vol. 4, no. 5, 2018 table 3 corporate (general) enterprise strategies (gholik, 2014) types of strategies the content of a particular type of strategy growth strategies are options for developing existing business, creating a new business or entering new markets and increasing the rates of economic efficiency of production to improve the enterprise. growth strategies are inherent in enterprises operating in dynamic industries with rapid technological change. an enterprise can grow as a result of increasing the scope of its current activities; introduction of a new direction of work or expansion of technological capabilities; expansion of the consumer group, which involves an increase in the quantitative indicators. the basis for growth is the internal development or acquisition of other enterprises (mergers, acquisitions, joint ventures) or a combination of these activities. growth strategies for agricultural enterprises include increasing their size, filling the strategic portfolio with additional types of activities and products, as well as the transition to new management principles that ensure the qualitative development of the enterprise. it is the growth strategy that should become a priority for agricultural enterprises in order to ensure their competitiveness. concentrated growth in agriculture, mainly due to the expansion of production capacities, that is, the consolidation of agricultural enterprises that creates the preconditions for the formation of competitive advantages. intensification strategy it envisages the intensification of agrarian enterprises, whose purpose is to increase the quality of production and increase the efficiency of production on the basis of sustainable development, reducing the material money and labour costs per unit of production due to the qualitative improvement of all parties of production. it is implemented through the introduction of chemicals, melioration, breeding and seed production, biotechnology, specialization, mechanization and automation, resource and energy saving technologies, investment growth and capital investments, improvement of forms and methods of labour organization and management, personnel training. vertical integration distribution of the scope of the organization in one industry (in the direction of suppliers, consumers or on the properties of the product itself ). this strategy involves the unification of producers of interconnected and related industries operating in the next stages of the product vertical, focusing on “key competencies of the organization” and providing the organization with important strategic benefits: economies of scale in the production process, minimization of transaction costs, opportunities for accelerated technological development, creating incoming barriers to competitors. horizontal integration it is an association or absorption of producers of one level of grocery vertical. it is characterized by combining the efforts of agricultural enterprises to jointly produce certain products or perform one specific purpose (road construction, land reclamation, etc.) on a single raw material or technological basis. it is carried out by creating local units such as a mill, a bakery, an oilseed, a sausage shop, etc. mixed integration it turns out in the union of enterprises of various industries, between which there is no technical and technological connection with the production and sale of products (production of building materials in agricultural enterprises, the creation of subsidiary enterprises for the production of agricultural products in the composition of industrial enterprises or associations). diversification it involves penetration into new spheres of activity that are not characteristic of the organization before or are intended to modify, supplement or replace existing products. concentric (centre) diversification it consists in replenishing the range of products, similar to those produced by the company, based on available capacities and on the basis of opportunities embedded in the mastered market. horizontal diversification it turns out to be an addition to the range of related goods, not similar to those produced by the company, but interesting for existing markets. for agricultural centres and/or enterprises, horizontal diversification means the inclusion in their product portfolio, in addition to high-yielding productions, of a limited list of highly liquid crop products from other sectors (horticulture, horticulture, livestock, seed production, breeding), as well as units serving the main production. conglomerate diversification characterized by the replenishment of the range of goods that are related neither to existing products or markets nor to the technology used in the enterprise. applies to large corporations, for example in the form of bioelectric installations. an example of the diversification of agricultural enterprises is also the objects of social infrastructure in rural areas. globalization of activity the essence lies in a twofold idea: targeting the conquest of markets and the ability to use all of the organization’s global resources to compete in any chosen market. it envisages the organization’s entry into international alliances and alliances that benefit from the scale of production. characteristic for large agricultural holdings and corporations operating in the international market. acquiring relevance in the context of the food crisis and high potential of the agricultural sector of ukraine and the possibility of entering the international market. stabilization strategies are developed when the enterprise cannot grow for various reasons or its growth will be ineffective when the company dominates the market or operates in the formed industry with a stable technology, and they focus on existing activities and their support. stabilization of the organization’s activities may be carried out by modifying its own products, supporting its own potential or protecting the market share. it can be chosen only for a certain period and only by financially sustainable agricultural enterprises working on modern production technologies. the possibility of using agricultural stability strategies is due to the slow pace of technological change compared to other industries, as well as the inability of most agricultural producers to innovate. baltic journal of economic studies 428 vol. 4, no. 5, 2018 types of strategies the content of a particular type of strategy differentiation of products provides modification or improvement of traditional products produced by the organization due to the use of new technical principles in the production of products, the addition of such changes to products that may cause new needs or new areas of consumption in order to continuously improve products. characteristic of organizations that are characterized by innovation and entrepreneurial activity. the pause strategy it involves the deliberate suspension of production or the growth rate of sales at a high level of capacity utilization (80-85%) in order to reduce the proportion of costs, improve the quality of consumer services and product quality. cautious promotion strategy it is aimed at preparing the organization in various areas of auxiliary activities while maintaining the stable business of the business in order to create the appropriate potential in the face of increased demand. strategy “nothing changes” it involves carrying out ordinary activities, but without involving promising investments, expansion of production facilities, penetration into new markets, lack of new development or product improvement, maintenance of traditional consumers by various incentive measures. strategy of concentration provides that an organization to protect the market allocates a specific market segment, using low prices or unique offers, controlling costs by concentrating on key products. output strategies (reductions) are selected by enterprises that need to regroup after the growth period or in order to increase efficiency; is the gradual or accelerated suspension of activities to release resources for more efficient use or transfer to more attractive areas. cost reduction strategy focused on finding opportunities and reducing certain types of costs, has the nature of temporary, shortterm measures and provides for the reduction of relatively small flow of expenditure. for agricultural enterprises, this is usually the omission of technological operations, the use of low-quality seeds, materials, low wages, etc. strategy of reduction of divisions it involves the closure or sale of the enterprise branches (divisions). characteristic for diversified enterprises, which poorly combine different production, aimed at obtaining funds for the development of promising activities. widely used by agricultural enterprises that remove from the product portfolio capital-labour-intensive long-cost, unprofitable sub-sectors of plant growing and livestock farming. harvesting strategy the aim is to maximize the receipt of financial income by reducing investment, with the exception of current expenditures in the minimum amount required. precedes the liquidation of the enterprise. restructuring strategy provides organizational, economic, legal, technical measures aimed at changing the structure of the enterprise, its management, a form of ownership, organizational and legal forms that can lead the company to financial recovery, increase the volume of production of competitive products, increase production efficiency. reorganization strategy provides for restructuring, reformatting, aimed at suspending the activities of a specific legal entity without the liquidation of affairs and property with the subsequent state registration of a new legal entity. includes the following options: merge, join, split, select, transform. rehabilitation strategy includes a system of financial and economic, industrial, technical, organizational, legal, and social measures aimed at achieving or restoring the solvency, liquidity, profitability, and competitiveness of the debtor company in the long run, that is, a set of all possible measures that can lead the company to financial healing. elimination strategy applies to the inability of an enterprise to carry out its activities; is a form of exit from the market, which is used for the withdrawal of resources and the transfer to another type of activity through sale or liquidation. (end of table 3) enterprise, proposed by yaremova m. i. (yaremova, 2013), which depends on the level of economic security of the enterprise. the analysis of strategic directions for the formation of economic security of agricultural enterprises has shown that the choice of a particular group of strategies depends on the level of economic security that was obtained after its evaluation. so with a high level of economic security, it is proposed to use a development strategy aimed at maintaining the existing level of economic security, as well as raising its level in the future. the stabilization strategy is used in enterprises with medium and low levels of economic security. this strategy allows you to optimize the financial and operational resources of the enterprise for their more effective use in the future. the critical level of economic security requires management of the strategy of survival, which is accompanied by the introduction of radical measures to increase the level of economic security of the enterprise (reformatting the production process, organizational structure of the enterprise, etc.). 5. propositions in the process of implementation of strategies for raising the level of economic security of agricultural enterprises, it is proposed to implement certain measures in accordance with the basic components of economic security, namely: 1. financial component. in order to strengthen the financial component, it is proposed to attract financial resources by attracting external investments and lending. baltic journal of economic studies 429 vol. 4, no. 5, 2018 the economic security of agricultural enterprises high level average level low level critical level development strategy maintenance of existing level, accumulation and use of the existing potential for enterprise development stabilization strategy restoration of the company’s potential, establishment of the speed of transformation survival strategy making changes in the activity and organizational structure of the enterprise measures to implement the strategy concentrated growth intensification strategy integration strategy diversification strategy globalization of activity differentiation of products cautious promotion strategy the pause strategy cost reduction strategy strategy of concentration the strategy of “nothing to change” harvesting strategy restructuring strategy strategy of reduction of divisions reorganization strategy rehabilitation strategy elimination strategy measures to implement strategies for key components of economic security financial: attraction of direct investments; obtaining preferential loans; insurance of agricultural products. resource-technical: updating of the material and technical base at the expense of own funds, borrowed funds, and financial leasing. personnel: use of an effective system of the motivation of work; increasing responsibility for the results of work; raising the qualification level of employees. industrial: providing continuous production process; introduction of intensive, innovative technologies. ecological: preservation of natural potential by introducing ecologically safe technologies, limiting the use of agrochemicals. sales: establishing long-term economic ties with economic contractors; search for effective channels of realization; the conquest of new markets is down. revised by the authors figure 4. strategic directions of the formation of economic safety of agricultural enterprises source: improved by the authors based on source (yaremova, 2013) baltic journal of economic studies 430 vol. 4, no. 5, 2018 2. resource-technological component. increasing the level of resource and technological security is possible due to financial leasing as one of the ways of long-term lending. this allows you to upgrade your company’s core assets and avoid problems with borrowed funds. 3. production component. the main directions in the increased level of industrial safety are: improving the production process and implementing resourcesaving technologies. 4. personnel component. improvement of the system of personnel motivation, systematic development of professional skills, the favourable psychological climate in the team – the main factors in improving the personnel efficiency of the enterprise. 5. ecological component. ensuring an appropriate level of the environmental component of economic security involves the introduction of environmentally sound technologies, limited use of agrochemicals, and the use of organic fertilizers. 6. sales component. to strengthen the marketing component of economic security, it is necessary to increase the production of finished products, and not raw materials. this requires the use of marketing measures that will allow them to enter new markets, increase the competitiveness of products and enterprises in general. 7. constant monitoring of the external and internal environment of the enterprise will allow maintaining at the proper level such components of economic security as power, market, and legal. 6. conclusions taking into account given above, we can conclude that ensuring an adequate level of economic security is one of the main functional tasks of the management of the enterprise. for the development and implementation of effective mechanisms for raising the level of economic security of enterprises, including agricultural ones, it is necessary to monitor systematically the state of economic security, using both quantitative and qualitative methods for assessing the level of economic security of an enterprise. the paper presents a methodology for assessing the level of economic security, which is based on certain components of economic security (financial component, technical and technological component, production component, intellectual and personnel component, investment and technology component, information component, environmental component, power component, legal component , components of sales, market component by the sum method. to calculate the overall level of economic security, it is proposed to use an integral indicator, which is determined by the average level of components. obtaining the results of the assessment of the level of economic security allows us to choose the most effective conceptual strategy for raising the level of economic security of the enterprise. the authors outline strategic directions for the formation of economic security of agricultural enterprises, the use of which depends on a certain level of economic security. references: allen julia н. shifting perspective to achieve and sustain enterprise security. news at sei on: march 1. 2005. retrieved from: http://www.sei.cmu.edu/ library/abstracts/news-at-sei/securitymatters20053.cfm bekhter, l. a. 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(2006). modeliuvannia ekonomichnoi bezpeky: derzhava, rehion, pidpryiemstvo [modeling of economic security: state, region, enterprise]. injek. ofitsiinyi veb-sait derzhavnoi sluzhby statystyky ukrainy [official website of state statistics service of ukraine] (2018). retrieved, march, 2018, from: http://ukrstat.gov.ua problemy siljsjkogho ghospodarstva ukrajiny [problems of agriculture of ukraine] (2016). aghrarnyj rynok. retrieved from: https://news.finance.ua/ua/news/-/371151/nazvano-top-5-problem-silskogo-gospodarstva-ukrayiny stepanov, d. s. (2017). formuvannja ta diaghnostyka ekonomichnoji bezpeky siljsjkoghospodarsjkykh pidpryjemstv [formation of economic security and diagnosis of agricultural enterprises]. international scientific journal "internauka", 3(25), 144-146. baltic journal of economic studies 122 vol. 5, no. 4, 2019 corresponding author: 1 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine. e-mail: kreidichin@gmail.com 2 institute of innovative education of kyiv national university of construction and architecture, ukraine. e-mail: allal64@ukr.net 3 open international university of human development “ukraine”, ukraine. e-mail: oleynikunvukraina@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-122-129 forming the conditions of innovative development of enterprises in the transformation economy iryna kreidych1, alla bielova2, gheorghij olijnyk3 abstract. the aim of the article is to study the innovative capabilities of a production enterprise, it is determined that the inefficient use of innovative ideas by enterprises results from the need to increase the economic development of industrial enterprises and the introduction of innovative ideas and projects, as well as the development of a model of innovative development of the corresponding type. the subject of the study is: factors of generating signs of innovation, the influence of scientific and technical developments on the industrial enterprise is determined. the analysis of the existing structure allows us to determine precisely the priority directions of innovative development in the conditions of global changes and integration into the world economic space of post-socialist enterprises, taking into account constructive and key factors ensuring their resultant effect. in addition, a closed scheme of the formation of a system of strategic innovation development, which will allow the verification of the adequacy of predictive values and ensure the achievement of strategic innovative performance of the business entity, is proposed. methodology. the article uses classical methods of scientific research, among which are: observation, scientific abstraction and comparison, analysis and synthesis. results. the conducted research is based on the thesis that structural and dynamic shifts within the production enterprise and their transition to a qualitatively new level of economic growth are only possible if active development of innovative resources of different nature will increase the ability of the enterprise to self-development, improve competitive positions, and make it possible to become an equal partner in the world community. practical implications. explains the complex causes of the current state of industrial enterprises, namely, former socialist enterprises, their problems were identified, and the ways of the enterprises’ exit to the new level of development are proposed taking into account the constitutive and key factors of ensuring the effectiveness of the innovation activity itself. the closed-loop scheme of strategic innovation development of a production enterprise is suggested in the practice of management that will protect an enterprise from the inefficient use of innovative resources and innovative opportunities on the basis of a counter-check on the adequacy of the constructed forecasts and the feasibility of carrying out innovative changes and attracting investment resources. value/originality. this research was carried out within the framework of the scientific work of the department of theoretical and applied economics of the national technical university of ukraine “igor sikorsky kyiv polytechnic institute” (№ 0112u007817) on the theme: “globalization of the directions of formation of industrial potential in conditions of post-industrial transformation”. key words: innovative potential, strategic innovation development, innovative capacity, innovative opportunities, innovative development of economic processes. jel classification: о30 1. introduction under the new modern conditions of the development of the economy of any country and its orientation into the world economic space, the activation of innovation activity becomes increasingly important, since without significant changes and fundamentally progressive structural changes with the renewal of fixed assets and improvement of the structure of capital, it is impossible to effectively ensure the socio-economic development of a business entity and the state as a whole. in developed countries, the scientific and technical policy tends to change to an innovative one since it baltic journal of economic studies 123 vol. 5, no. 4, 2019 has expanded capabilities in addressing the tasks of modernizing the economy, creating new knowledge and implementing them in operational processes that are conditioned by the economic benefits of both the business entity and the economy of the country in general. market economic conditions and integration in the global european space force the economic actors to fully realize the necessity of transition to an innovative way of development that implies a number of practical measures of implementation of this course. but, despite all taken measures, a significant number of productionindustrial complexes still did not show activity in questions of innovative development and change in the direction of continued existence in an unstable market environment and development. 2. theoretical base of research theoretical and applied aspects of innovation development of industrial enterprises are devoted to the development presented in the writings of such scholars as j. schumpeter, v. medinsky, s. ildemenov, p. zavlina, a. kazantseva, l. mindeli, and others. studies show that the most significant results based on theoretical and practical studies have been achieved by countries with a developed market economy. it is also worthwhile to note that approaches to the definition of innovation as such and its impact on enterprise development vary, which is explained by different approaches to the definition of an object and the peculiarities of its implementation. however, at the moment, further systematic and universal questions regarding the expediency of forming an effective organizational and economic model of innovative development of an industrial enterprise that will ensure its functioning in a changing market environment with the provision of competitive advantages and long-term existence will require further study and solution. 3. identification of urgent problems hindering active innovation innovative development around the world is conditioned by the necessity of constantly increasing and maintaining competitive advantages while the active involvement of innovative ideas, innovative technologies enables enterprises to operate effectively in the market, feeling themselves a full participant in the market process, stimulating the interest of attracting new consumers, improving the performance of the latter. the level of competitiveness of an economic entity depends to a large extent on its innovative potential, the activity of perceiving new ideas, the ability to develop new technologies and adapt to market conditions in a timely manner. it is worthwhile emphasizing that taking into account the depth of innovation processes, the breadth of application and utility from an innovative product from the consumer’s point of view is the driving argument of an entrepreneurial structure since not all innovations lead to the growth of competitiveness, but those that are oriented towards new markets and are accompanied by original ideas and developments. many researchers in the subject are discussing the time, place, and conditions of innovation, as unsuccessful research focused on a narrow segment of the market can level innovation as such. it is worth pointing out that the experience of developed countries on the basis of radical reforms shows that the innovative development of economic processes without understanding the ultimate goals of transformational change and the goals of their achievement could threaten a serious failure. many researchers note the lack of interest in national enterprises in the development of innovation as such. and the reason in our view lies in the fact that in the conditions of constant threats to the national statebuilding, innovation is not given enough attention (sviridova, 2016). the low level of corporate expenses is often associated with the imperfection of the process of technological modernization, that is, enterprises must first modernize production and replace the fixed assets in structural subdivisions/shops, and then move on to innovations based on the original ideas embodied in the development. however, practice shows that large investments and innovations do not compete with each other, but rather they are accompanying each other. moreover, it is those enterprises that have been actively investing in recent years, carrying out innovations of high quality, but have a significant share of enterprises that have never mastered investments, but did not engage in research and development, and did not implement new technologies and did not produce new goods/services. one can distinguish the urgent problems hindering active innovation, in particular, ukrainian enterprises: 1. lack of current legislation regulating innovation activity at the enterprise, the law “on innovation activity” has not been passed, etc. this is the cause of many controversies and misunderstandings between the government, academics, and enterprises about the very concept of innovation development, and the definitions of innovation products, innovation processes, etc. 2. insufficient financing of innovative activity by enterprises due to the high cost of implementation and development of innovations, as well as long-term investments. enterprises do not have their own funds to finance research, and the possibility of attracting funds from external sources is too limited. lenders do not have guarantees to repay loans and receive dividends, as innovation activity is exposed to a much greater number of risks than investment activity. 3. also, domestic enterprises are characterized by the lack of a modern base for the implementation of baltic journal of economic studies 124 vol. 5, no. 4, 2019 scientific developments due to significant depreciation of fixed assets or their absence. a large number of industrial, construction and engineering enterprises are characterized by high resource intensity and energy intensity of production, which is already aggravated by the level of wear and tear of production equipment. due to the backwardness of the capital stock of enterprises, the economy as a whole is unacceptable for financial investments in conducting research and practical developments. 4. presence of the phenomenon of resistance to innovations, which is most often due to two reasons: – from the point of view of a business entity – a person is fearful of everything new, not inherent in the current state, which manifests itself, as a rule, in transitional moments, especially crisis, military-economic, sociopsychological instability, when the introduction of something new is perceived as a threat to the existing; – from the perspective of the investor, the emergence of a new, more progressive technology, usually built on new principles, creates a threat to the existing. therefore, investors are trying to keep it for a while, at least until then, as long as the previous investment resources will not bring a beneficial effect. 5. lack of highly skilled personnel capable of effectively managing the innovation process and the personnel problem is felt at all levels of management, both country as a whole, and separate economic entities. 6. the expense of conducting marketing researches of innovative goods/services makes it impossible to carry them out at an appropriate level, and in case of an unstable economic situation, the predicted estimation of demand for innovative products, even in the shortterm period, becomes complicated. 7. innovation and production activity requires the company to have an adequate management structure aimed at the innovative effect with new requirements and living conditions. 8. low estimation of human capital, which is not taken into account when determining the authorized capital, neither in substantiating innovation-investment decisions nor in choosing the appropriate strategy for innovative development of a business entity, while the worldwide practice has gained wide popularity and actively used systems on the development of intellectual human potential. according to the latest statistics, in ukraine, the most active innovations are large enterprises with a population of more than 1,000 people, characterized by the possibility of financing and lobbying their own interests, which determines the success of the competition. according to foreign experience, innovative development is more convenient for large enterprises and corporations. it is worthwhile to note the need to form an effective system for managing innovative activities and mastering innovative management technologies at those enterprises that have the opportunity to innovate. innovative development in a large industrial enterprise can be effectively implemented with the active inclusion of a special organizational structure that can be called the centre of innovation and technological support, and the creation of units at enterprises that would be directly responsible for innovation and innovation can accelerate the process where the merger is allowed in such divisions the functions of strategic and innovative development, which are closely interrelated and provide an effective innovative development of a business entity (sviridova, 2016). it is worth pointing out that the modern type of sectoral economic development depends on the realization of potential competitive advantages, stimulation of innovation development, which is connected with the intensification of the processes of increasing the innovation and information potential, as well as the practical use of intellectual technologies that allow the processing of databases and optimize not only production processes, but also management technology. innovative activity varies according to regional levels with their own infrastructure, their own level of development, specific approaches to the development and attraction of innovative and investment resources. one of the most important problems of the present and the development of the economy of innovation type is to ensure the effectiveness of the introduction of new forms of entrepreneurial activity where the formation and development of adequate innovative systems capable of effectively implementing innovative ideas of a higher level on the basis of high organization, effective use of resources of different nature that will ensure the achievement of balance their functioning and elimination of destructive consequences in the process of innovations from the regional committee effective strategy for innovation. we consider it worthwhile to note that the inefficient use of innovative ideas by enterprises is due to the need to improve the efficiency of the implementation of the problems of the economic development of industrial enterprises and the implementation of targeted innovative projects, which is why the increasing priority is the question of determining the priority directions of strategic development in the conditions of global changes and integration of the country’s economy before european dimension, taking into account the constructive and key factors ensuring their resultant effect. hence, the solution to this task is urgent, which will enable the development and substantiation of theoretical and conceptual foundations for the formation of the basis of strategic innovation development of enterprises and the introduction of the organizational and economic mechanism of strategic development of the latter for the purpose of securing a whole-oriented innovation development of industrial enterprises. baltic journal of economic studies 125 vol. 5, no. 4, 2019 4. classification and structuring of innovations and innovation development of a production enterprise classification and structuring of innovations are shown in figure 1. characterizing the classification features of innovation presented in the figure, where it is expedient to distinguish between the six types of innovations, namely, the basic innovation based on scientific discoveries, inventions and aimed at the development of new products, new technology, and new types of services. improving innovation is based on the improvement of manufactured goods and the introduction of advanced technologies. as for industrial innovation, they are implemented based on the introduction of new developments in the production process and are characteristic of primary production activities. management of the same innovations will strengthen managerial technologies with new knowledge and directly affect the production activities of the entrepreneurial sector. the product innovation to meet the needs of highquality new products according to customer’s request and process – introducing new elements in the key processes of the entity, namely, management, production, marketing and internal factors determined, which is based on the effectiveness of the resulting performance. if the first stage of the innovation process begins with basic research, the second – research of their practical application, the latter provides just the production of a new product with unique properties. innovation process covers the development cycle of a scientific and technical idea before its realization, where successful innovative activity involves determining the conditions for its implementation, namely: – technological advantage of the goods offered to the consumer; – the desire to produce qualitatively new products; – favourable competitive environment; – adequate organizational and managerial structures (the effectiveness of the marketing and sales system, which interacts with innovative active enterprises with consumers to identify and meet the new requirements of buyers to the proposed goods). in the event that the producer-innovator orients the activity not to the needs of the consumer but to the basis of new knowledge, the percentage of innovation success is significantly reduced, because the consumer is interested not in a new product but in new benefits from it; – availability of innovative potential of enterprises actively introducing innovative ideas and innovative developments. for this purpose, the company must possess intellectual, material, financial, personnel, and other resources. the above characteristics of the innovative development of the construction company are interdependent and complementary; they can be defined as a key factor in making innovative decisions for the effective development of the business structure in the spatial-temporal aspect, taking into account the factors of the macro and micro-environment. it is advisable to form the classification structure of the production enterprise, taking into account both the signs and the types of innovative development of the latter (figure 2). the author’s above calculations and justification determine the probability of the process of purposeoriented management of the formation, growth and use of the innovative potential of the manufacturing enterprise by attracting the optimal composition of methods, instruments, and application tools in the context of improving the technology of management of innovation development in relation to the resources available in the company, reserves and opportunities of different nature. it must be admitted that the formation of an organizational model for the management of the activity of production enterprises is, at present, a priority methodological task, which, in the event of its solution, will determine the regularities of their goal-oriented movement through the use of the established theoretical approaches and reveal the most general connections and representations of reality (mikitenko, 2009). as an abstract object of economic research, we consider the process of management of a production enterprise in the context of achieving its dynamic equilibrium and performance. hence, for the formation of the organizational model of the innovation enterprise, it is necessary to distinguish the basic characteristics and the composition of the regressors incorporated into the generalized model, the target functions, and the area of definition of this function with a set of constraints and innovation the degree of novelty the nature of the activity technological parameters basic improving productive managerial grocery store processable figure 1. classification of innovations by signs of structuring baltic journal of economic studies 126 vol. 5, no. 4, 2019 conditions that determine the degree of abstraction of the future model. organizational and economic models are designed to reduce the degree of uncertainty, increase the level of informative value, in order to reduce risks, improve competitiveness, and increase profitability. prominent scholars-economists deduct different interpretations of receiving rewards – profits. at the same time, profit maximization is seen as a measure of its successful functioning as a target function, which is determined by the volume of production, the level of prices and the minimization of production costs: in addition, those firms that did not increase profits disappeared as a result of market competition. the objection to the implementation of in-depth analysis of processes within the firm and the explanation of its behaviour through the parameters of the importance of the impact of the market without taking into account its type and features – leads to abstracting the enterprise, as such, and allows considering it as a model of implementation of the “black box” dominant by input flow, which one can predict the output parameters and determine the results of the activity. such a basic model of innovation development ensures the implementation of profitability management functions of the enterprise; at present, it allows describing its behaviour in a competitive market environment and provides many opportunities for receiving and processing the necessary information flow from the external environment. in order to choose the most effective and rational form of organization of innovation activity, it is necessary to have an idea of the scale and future prospects of the innovative development of the enterprise. the study of world economic processes shows that a whole-oriented policy in support of the development of innovative entrepreneurship provides significant economic growth, and state support for innovative entrepreneurship provides the realization of potential opportunities of the enterprise with the development of strategic perspectives. hence, it is possible to recognize that in modern conditions, the functioning of an industrial enterprise, when innovations become a priority in the system of measures of public administration, a comprehensive study of quantitative measurements of innovative development of the economic category and the material basis of the production complex becomes the most relevant. its results would more accurately determine the vector of development of the industrial market and the enterprises they serve, to substantiate and offer 1. by sources and preconditions: external; internal; common. 2. by the main characteristics: qualitative quantitative qualitative-quantitative 3. by way of holding: evolutionary revolutionary mixed 4. by the time factor: dynamic forward one-time periodic constant 5. by objects: primary restoration expanding reducing stabilizing 6. by stability: stable unstable interrupted dropping 7. by repetition: cyclical non-cyclical cannot be described 8. by balance: balanced unbalanced 9. by complexity: complex local episodic 10. by the degree of activity: active passive figure 2. classification of innovation development of a production enterprise baltic journal of economic studies 127 vol. 5, no. 4, 2019 alternative ways of constructing an adequate model of innovation development, which will be based mainly on the use of internal sources and will significantly increase their efficiency. in connection with this, the problem of determining a new paradigm – firstly, clustering of modern production enterprises – is being actualized, and secondly, identification of their measurements with the delimitation and grouping of specific functions of correlates concerning the implementation of an effective technology of innovation development of the industrial sector, which determines the processes of formation and development of methodology of effective management, corresponding concept, mechanism, and models of purpose-oriented management of formation, increase, and use of innovative potential in the system of the coordinates of the production complex. 5. the policy of the strategic innovation development of a production enterprise construction of an optimal macroeconomic model of innovative development of industrial production, the implementation of which is based on the synchronicity of the principles of systematic, integrated and process approaches for safe high-performance innovative development strategy, which in turn will promote sustainable development. the company has a focus on the information space and verify that information provision – an opportunity to get constantly updating information on the effectiveness of the formation, increase and now use the innovative capacity and efficiency of its use. it makes sense and it should be stressed that: not always ensuring the operational processes of innovation development, it will operate as an enterprise manufacturing industrial and economic system of innovation and information type. because unbalanced enterprises consist of a certain number of elements and can be interconnected by showing only the innovation-information patterns. consequently, the formation of the modern model of innovation development of the manufacturing enterprise will ensure the purpose-oriented innovation, structural and dynamic changes, and will eliminate the imbalance of the operation of the business entity (mikitenko, 2009). at present, it is necessary to identify the strengths, weaknesses of the enterprise, as well as the opportunities and threats for strategic innovation development, which will promote sustainable balanced economic growth by creating conditions for the formation of intellectual capital, innovation infrastructure, stimulation of the activity of innovative processes and consumer interest. hence we recognize that the formation of a model of strategic innovation development of a construction company is a common feature of purpose-oriented implementation of structural shifts in a construction enterprise based on the dominant components of the integration-alarm concept of the corresponding strengths – a powerful material base – effective resource potential – highly skilled and cheap labour – cheap access to raw materials – the availability of intellectual capital – availability of scientific achievements – availability of production achievements – availability of industrial potential – branch structure of production – ramification and development of innovation infrastructure – developed marketing system weaknesses – lack of state support – lack of state incentives – low productivity – ineffective distribution of income – low interest in innovative development – staff inactivity – inconsistency with organizational and management structure – large dependence on importing energy resources – low wages – unscheduled connections from the subsystem – low level of innovation – set-aside of equity for the introduction of innovations – inefficient production structure – significant aging of fixed assets – insufficient provision of information resources – improper development of innovation infrastructure opportunities – the direction of the authorities on the innovative way of development – the excellent economic and geographical position – appropriate use of the intellectual potential – development of own high-tech and high-tech industries – development of innovative clusters – opportunities to enter the external market – visual cooperation with foreign partners/investors – increasing funding for research and innovation activities through non-state funding – increasing the competitiveness of industrial products – increase the share of high-tech products in the structure of exports – development of innovation infrastructure threats – shortage of labour force – delayed knowledge update – low socio-economic development (industry, state, region) – reduction of working capacity (low labour cost) – inadequate state financing of scientific developments – dependence on legislative acts – the low share of scientific workers (offset of adequate funding) – insufficient opportunities for domestic enterprises to access external sources of financing – reduction of demand for high-tech products of domestic industry – the relevant level of protection of intellectual property baltic journal of economic studies 128 vol. 5, no. 4, 2019 type, the use of which allows ensuring the density of interconnections between elements of strategic innovation development, which form and develop priority for a certain enterprise production-organizational, socio-ecologicaleconomic and techno-technology tech relationships and interdependence forming a certain integrity and achieve innovative orientation of the production company. hence, taking into account relationships and interdependencies, we can identify and distinguish the target functions on the basis of which we propose the structural and logical structure of a closed scheme for the formation of the policy of innovation development of production enterprises in order to provide a strategy for its innovative development and increase the competitiveness of the latter (figure 3). we recognize that the introduction of the proposed closed-loop scheme of strategic innovation development of a manufacturing enterprise will allow the determinants to be effective in terms of resource constraints and unstable environments, and is a specific means of counter-checking the adequacy of built-up forecasts and the feasibility of carrying out innovative changes and attracting investment resources. consequently, in the practice of management, a closed scheme of formation of the system of strategic innovation development, which will be ensured by the formation of organizational and economic conditions, the generation of the driving force in the context of achieving their innovative performance, is proposed. figure 3. closed scheme of formation of strategic innovation development policy of a production enterprise in order to ensure its reliability and competitiveness 4. formation of indicators and development of methods for evaluating structural and dynamic shifts with the definition of the most important regressors of influence on innovation in accordance with the priorities of the counter-strategy of innovative development of the enterprise. 8. methodological approaches developed within the framework of general scientific approaches: system analysis, complex analysis, abstract-logical, analytical-economic analysis, economic-statistical, sequential randomness, economic-mathematical modelling, information reliability of systems and theory of relativity. 9. development and implementation of the basic provisions of the innovation development of the manufacturing enterprise to ensure their reliability, competitiveness, and transition to a new quality level of development through the implementation of the original system of innovation development. 2. the main characteristics of the production enterprise, innovation opportunities, and innovative potential. quantitative qualitative 1. output conditions of the production enterprise are identified taking into account the transformation of the external environment and the existing innovative potential for the construction of a counter strategy for innovation development. the purpose of the counter-strategy of innovation development of a production enterprise is the efficiency of innovative processes and the high competitiveness of the offered products in conditions of a changing environment and destructive changes in the market. 3. harmonization of technological sub-targets (which are determined based on “target tree” in the defined scenario of the innovation of the production enterprise). 5. selection of the most important factors influencing the pace of innovative development of the manufacturing enterprise and the formation of factors of competitiveness of production of the enterprise. 6. formation of competitive advantages of a manufacturing enterprise based on the potential factors of competitiveness in the context of the target orientation of innovative processes based on the results of the innovative development of the enterprise. 7. checking the adequacy of the forecasts and the correspondence of the achieved results – provided by the counter-strategy of innovation development of the manufacturing enterprise with the definition of a set of facilities and procedures for the transition of the enterprise to a new innovative level, taking into account the volatile market mechanism and permanent threats to state-building. a k ey u nc er ta in ty in th e im pl em en ta tio n of th e ch os en s ce na ri o of in no va tiv e de ve lo pm en t o f co ns tr uc tio n en te rp ri se s in u kr ai ne baltic journal of economic studies 129 vol. 5, no. 4, 2019 only the formation of such an optimization complex will ensure the achievement of innovative goals of the development of a production enterprise aimed at the adaptive activation of innovation. so, we recognize that innovative projects are a key element in managing the scientific and technological development of the economic entity. 6. conclusion the conducted study shows that under the new modern conditions of the development of the economy of any country and its orientation to the world economic space, the activation of innovation activity becomes increasingly important since without significant changes and fundamentally progressive structural changes with the renewal of fixed assets and improvement of the structure of capital, it is impossible to effectively ensure the socioeconomic development of a business entity and the state as a whole. the article presents the solving the issue of defining a new paradigm: clustering of modern production enterprises; identification of their measurements with the delimitation and grouping of specific functions of correlates concerning the implementation of an effective technology of innovation development of the industrial sector, which determines the processes of formation and development of the methodology of effective management, corresponding concept, mechanism and models of purpose-oriented management of formation, increase and use of innovative potential in the system of the coordinates of the production complex. the analysis of the existing structure allows determining precisely the priority directions of innovation development in the conditions of global changes and integration into the world economic space of post-socialist enterprises, taking into account constructive and key factors ensuring their resultant effect. in addition, a closed scheme of formation of a system of strategic innovation development, which will allow the verification of the adequacy of predictive values and ensure the achievement of strategic innovative performance of the business entity, is proposed. from the above, we state that it cannot be excluded that innovation activity should be a part of a more general management system, and systematic innovation in manufacturing enterprises can be secured by the consequences of the implementation of the fundamental principles: organizational and legal management; technological; ecological economics; financial complex, which direct and secure the production and economic system to increase the competitiveness of industrial products and the efficiency of the operation of the enterprise as a whole. further research will be aimed at determining the impact of innovative activity on the level of socioeconomic development of the country. references: khudoliy, v. y., alymov, o. m., dragan, i. v., & lytsur, i. m. 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(in ukrainian) baltic journal of economic studies 65 vol. 2, no. 1, 2016 sustainable development and ecological responsibility of business viktoria krykun1, institute of international relations of taras shevchenko national university of kyiv, ukraine abstract. today sustainable development is a widely used term, which has been increasingly influential in recent years. debates about sustainability no longer consider sustainability solely as an environmental concern, but also incorporate economic and social dimensions. however, while a social and economic dimensions of sustainable development are widely discussed, environmental degradation becomes more and more crucial each year and is likely to reduce human well-being all across the world within the next few decades. the purpose of the paper is to analyse ecological ‘pillar’ of sustainable development, its historical background, main steps towards implementation of ‘new global environmental rules for society. methodology. the paper is based on statistical information from public sources, reports of different international organizations and institutions, which are used to stress and underline main crucial points of research. results of the survey show, that environmental quality, economic development and social well-being are interdependent and the main aim of international institutions, independent countries, businesses and society is to achieve environmentally sustainable development. environmental issues make strong impact on modern economy. responsible global strategy of development provides the whole society with rules, how ‘wise’ technological changes and economic policy can make industrial production processes less polluting and less resource intensive but yet more productive and profitable. practical implications. strategy of sustainable development and it’s three basic dimensions have found practical implication in one complex model, which illustrates the level of development of each country – the human development index, which is focusing on three basic dimensions of human development: life expectancy at birth, mean years of schooling and expected years of schooling and gross national income per capita. another data, which is used on the basis of sustainable development indicator’s’ is environmental performance index – method of quantifying and numerically marking the environmental performance of a state's policies, which was designed to supplement the environmental targets set forth in the united nations millennium development goals. all these indicators and indexes should be a platform for modern successful socio-economic development of ukraine. value/originality. the theme of sustainable development has long history and levels of development, but yet it is very popular and important for each country and the world as a whole. many issues of this strategy of development depend not only from governments, but from the engines of economic growth – companies. today the aim for businesses is to create higher standards of living and quality of life, proper ecological situation in the communities in which they operate, while still preserving profitability for stakeholders. key words: sustainable development, ecological responsibility, business social responsibility, indicators of sustainable development, human development index, environmental performance index. jel classification: f63, f64, f50 corresponding author: 1 department of international business, institute of international relations of taras shevchenko national university of kyiv. e-mail: v.krykun@mail.ru 1. introduction for most of the last couple of hundred years the environment has been largely seen as external to humanity. there was such an idea that resources are inexhaustible and it’s not necessary to save them. as economy grew, new technologies were investigated, wide range of complex goods and services was proposed by companies, the environment was conceived as humanity’s triumph over nature. the main idea till xx century was that human knowledge and technology could overcome all obstacles including natural and environmental ones. as bacon, one of the founders of modern science stated, ‘the world is made for man, not man for the world’. this period of cooperation between human and nature is called technological approach, which means, that the main role in this cooperation play people and the rules of nature cannot and shouldn’t interrupt scientific, technological and social progress of humanity. such approach has led to baltic journal of economic studies 66 vol. 2, no. 1, 2016 the situation, when question of nature preservation turned into question of humanity survival. biosphere can be stable and renewable if people don’t pass through ‘back off point’ and ecological balance doesn’t violate. each ecosystem has the property that regulates its internal environment and tends to maintain a stable, relatively constant condition of properties such as temperature or ph, which is called homeostasis. in simple terms, it is a process in which the body’s internal environment is kept stable, despite changes in external conditions. because of very intensive anthropogenic and anthropogenic influence, today people face a lot of problems, such as reduction of untouched ecosystems, high temps of renewable natural resources consumption. concern over air and water pollution rapidly spread to a range of other conditions – soil erosion, pesticide contamination, deforestation, declining animal populations and species, and so on – through the efforts of environmental scientists, activists, and policy-makers. one of the huge ecological problems, which has appeared because of intensive economic development, is agricultural chemicalization, which lead to increase number of mineral fertilizer and pesticides usage. in almost all cases such activities don’t cause rise in crop capacity volumes, but vice versa, soil becomes worked out, and loses its fertility for many decades. another problem concerns food security. while earth population rises, there is over proportionate consumption of ecological clean products, and lack of minimum volume of food for biggest part of people all over the world. according to environmental performance index report 2016, air pollution is a growing global problem, worse in rapidly developing economies, like china and india, than in wealthy or very poor nations. more than 3.5 billion people, or half of the world’s population, live in nations where average exposure to fine particulate matter exceeds levels the world health organization considers safe (10 micrograms/m3). one-third (1.3 billion) of these people live in the east asia and pacific region, where in china and south korea more than 50 percent of their populations are exposed to unsafe levels of fine particulate matter. in india and nepal, the percentage is nearly 75 percent. the number of people lacking access to clean water has been cut nearly in half from 960 million in the year 2000 to 550 million, or around 8 percent of the world’s population, today, but still it isn’t a good index. in other words, current populations and lifestyles are exhausting non-renewable resources like fossil fuels; creating shortages of renewable resources such as fresh water, fisheries, and forests; and generating accumulating levels of pollution, particularly hazardous wastes. 2. concept of sustainable development such poor tendencies lead to immersion of another concept of cooperation between human and nature, which is called ecological approach. the followers of this approach stress that people should work and develop in frames of natures’ rules. evolution of society is considered as part of nature evolution and is located on the second place vis-à-vis nature. of course, such approach is supported by deep ecologists, who prioritizes the needs of nature, and isn’t effective for modern socioeconomic development, but some it’s theses might and should be include in strategy of humanity’s well-being. so, game plan of humanity survival and development lies in golden middle between ecological and technological approaches. the first initiative, which tried to combine interests of further technical progress and environmental protection, was united nations conference on the human environment, which dates back to a swedish initiative in the economic and social council in 1968 and was held in stockholm in 1972. the main purpose of the conference was to alert world opinion to the growing danger of pollution, the rapid growth of human settlements and the degradation of soils and other natural resources, and to provide a basis for action to meet these problems (vasseur, 1973). as the result, the conference proposed two documents and one program, which aimed to protect and improve the environment for future generations. the first document was a declaration on the human environment with its 26 principles, among which are that states have the sovereign right to exploit their own resources and the responsibility to ensure that, in doing so, they do not harm the environment of other states or of areas beyond the limits of national jurisdiction; and that states shall co-operate to develop international law to provide compensation for victims of pollution that crosses over national boundaries. the declaration states further that the capacity of the earth to produce vital renewable resources must be maintained and restored or improved wherever practical. another principle declares that states shall take all possible steps to prevent pollution of the seas by substances that are liable to create hazards to human health, harm living resources, damage amenities or interfere with legitimate uses of the seas. the declaration also stresses the importance of scientific research and development in the context of environmental problems. another document is an action plan for the human environment which includes 109 recommendations and guidelines for governments and international organizations in sphere of control over contamination from man-made pollutants, management of the use of natural resources, improvement of the cities, and ways in which nations can co-operate to save and enhance their common heritage. also, during the conference on the human environment was proposed to establish body, which will be the leading global environmental authority that sets the global environmental agenda, promotes the coherent implementation of the environmental dimension of sustainable development within the united nations system and serves as an authoritative advocate for the global environment. the united nations environment programme was founded in june 1972 and today declare as its’ global mission to provide leadership and encourage baltic journal of economic studies 67 vol. 2, no. 1, 2016 partnership in caring for the environment by inspiring, informing, and enabling nations and people to improve their quality of life without compromising that of future generations. the un’s world commission on environment and development, chaired by gro harlem brundtland of norway provided world with the term ‘sustainable development’, which is used today not only in environmental, social and economic spheres, but also in everyday language. this term came into use after the publication of the brundtland commission’s report on the global environment and development in 1987. this commission defined sustainable development as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (brundtland commission, 1987). the report stresses that humanity, whether in an industrialized or a rural subsistence society, depends for security and basic existence on the environment; the economy and our well-being now and in the future need the environment. it also points to the planetwide interconnections: environmental problems are not local but global, so that actions and impacts have to be considered internationally to avoid displacing problems from one area to another by actions such as releasing pollution that crosses boundaries, moving polluting industries to another location or using up more than an equitable share of the earth’s resources (hopwood, mellor and o’brien, 2005). following the brundtland definition, it is clear that ‘needs’ themselves change, so it is unlikely that those of future generations will be the same as those of the present generation (redclift, 1993). obviously development itself contributes to the characterization of ‘needs’, by helping to define them differently for each generation, and for different cultures. for example, according to united nations development programme, the set of main new 17 sustainable development goals, which were coined in the 2030 agenda for sustainable development, are aimed to end poverty, fight inequality and injustice, and tackle climate change by 2030. this is relatively new initiative, which was born at the united nations conference on sustainable development, rio+20, in 2012, and which can stress on the main needs of nowadays and future generations and help to provide global strategy of development for all countries. the objective was to produce a set of universally applicable goals that balances the three dimensions of sustainable development: environmental, social, and economic. the sustainable development goals replace the millennium development goals, which in september 2000 rallied the world around a common 15-year agenda to tackle the indignity of poverty. the mdgs established measurable, universally-agreed objectives for eradicating extreme poverty and hunger, preventing deadly but treatable disease, and expanding educational opportunities to all children, among other development imperatives (2030 agenda for sustainable development, 2015). 3. main indicators of sustainable development sustainable development is often presented as being divided into three ‘pillars’: economy, environment and society (kahn, 1995). economic sustainability includes market allocation of resources, sustained levels of growth and consumption, an assumption that natural resources are unlimited. social sustainability encompasses notions of equity, empowerment, accessibility, participation, sharing, cultural identity, and institutional stability. it seeks to preserve the environment through economic growth and the alleviation of poverty. environmental sustainability involves ecosystem integrity, carrying capacity and biodiversity. it requires that natural capital be maintained as a source of economic inputs and as a sink for wastes. resources must be harvested no faster than they can be regenerated. wastes must be emitted no faster than they can be assimilated by the environment (kahn, 1995). table 1 the paradigm of sustainable development in agenda 21 as elaborated by kahn element criteria economic sustainability growth productivity development trickle down social sustainability equity participation empowerment institutional stability accessibility cultural identity environmental sustainability eco-system integrity biodiversity carrying capacity source: kahn, 1995 all these three dimensions of sustainable development should be connected and interlinked into one complex model, which illustrates the level of development of each country and denotes debilitated points. such universal index – the human development index (was developed by united nations development programme) is focusing on three basic dimensions of human development: to lead a long and healthy life, measured by life expectancy at birth; the ability to acquire knowledge, measured by mean years of schooling and expected years of schooling; and the ability to achieve a decent standard of living, measured by gross national income per capita. the report which was published by united nations development programme in 2015, titled ‘ work for human development’, ranks countries by human development index and its components value and details the values of the three hdi components: longevity, education (with two indicators) and income (table 2). the report argues that with better health and education outcomes and reductions in extreme poverty, 2 billion people have moved out of low human development levels in the last 25 years, the report says. 830  million people are classified as working poor who live on under $2.00 a day. over 200 million baltic journal of economic studies 68 vol. 2, no. 1, 2016 people, including 74 million youth, are unemployed, while 21 million people are currently in forced labour. the report stresses that with green growth, new jobs will be created, the nature of others will be transformed, and others will end altogether. these changes ideally should be supported by systems of social protection and safety nets. for example, around 45 million additional health workers will be needed to meet the health objectives of the sustainable development goals. that would see the global health workforce increase in size from 34 million in 2012 to 79 million by 2030. in broad terms, the concept of sustainable development is an attempt to combine growing concerns about a range of environmental issues with socio-economic issues. the brundtland report and active discussions of sustainable development conception culminated with the first earth summit in rio de janeiro in 1992. at this earth summit diplomats from over 120 nations signed five pacts framing sustainable development as the overarching policy of the 21st century. the 27 principles of the rio declaration on environment and development ‘define the rights and responsibilities of nations as they pursue human development and well-being’. next document, agenda 21, the framework for action proposed at the earth summit, was the call for partnerships between business and environmental groups. it is a comprehensive plan of action to be taken globally, nationally and locally by organizations of the united nations system, governments, and major groups in every area in which human impacts on the environment. the statement of principles on forests avows the responsibility of countries to manage, conserve, and develop world forests in a sustainable manner. the convention on biological diversity implores nations to ‘adopt ways and means to conserve the variety of living species’. the united nations framework convention on climate change seeks ‘to stabilize greenhouse gases in the atmosphere at levels that will not dangerously upset the global climate system’ (keating, 1993). 4. ecological responsibility the rio declaration in 1992 reflected an increasing concern with global environmental issues: a concern that was to lead to the establishment of a number of institutional mechanisms to try and ensure that environmental problems could be managed more effectively. one of such mechanisms was the kyoto protocol – the first and unique agreement between nations, which by means of economic instruments (international emissions trading, clean development mechanism and joint implementation) mandated country-by-country reductions in greenhouse-gas emissions. the framework pledged to stabilize greenhouse-gas concentrations ‘at a level that would prevent dangerous anthropogenic interference with the climate system’. under kyoto, industrialised nations pledged to cut their yearly emissions of carbon, as measured in six greenhouse gases, by varying amounts, averaging 5.2%, by 2012 as compared to 1990. unfortunately, kyoto protocol never met its objectives. industrialised countries would be legally obliged to cut their greenhouse gas emissions 5% on 1990 levels by 2008-2012. developing countries – including china, india, brazil and south africa (some of these countries are the largest contributing countries to the global warming problem) – would face no restriction on their emissions but were encouraged to adopt policies to promote greener growth. another problem of kyoto protocol is that many countries which are responsible for great part of the word’s emissions, for example usa, haven’t ratified kyoto protocol, are not obliged to reduce greenhouse gas emissions and there are no international instruments how to force or convince countries to take certain obligations on international level. so, this document has a lot of weak spots and today international community is seeking for new methods of ecological regulation and sustainable development. one of such new steps towards solving climate change problem was paris climate agreement, which was adopted in 2015. the agreement sets out a global action plan to put the table 2 top 10 countries with very high human development in human development index, 2014 human development index (hdi) life expectancy at birth expected years of schooling mean years of schooling gross national income (gni) per capita gni per capita rank minus hdi rank hdi rank country value (years) (years) (years) (2011 ppp $) 1 norway 0.944 81.6 17.5 12.6 64,992 5 2 australia 0.935 82.4 20.2 13.0 42,261 17 3 switzerland 0.930 83.0 15.8 12.8 56,431 6 4 denmark 0.923 80.2 18.7 12.7 44,025 11 5 netherlands 0.922 81.6 17.9 11.9 45,435 9 6 germany 0.916 80.9 16.5 13.1 43,919 11 6 ireland 0.916 80.9 18.6 12.2 39,568 16 8 united states 0.915 79.1 16.5 12.9 52,947 3 9 canada 0.913 82.0 15.9 13.0 42,155 11 9 new zealand 0.913 81.8 19.2 12.5 32,689 23 source: human development report, 2015 baltic journal of economic studies 69 vol. 2, no. 1, 2016 world on track to avoid dangerous climate change by limiting global warming to well below 2°c, because, according to different investigations, if greenhouse gas emissions continue to rise, we will pass the threshold beyond which global warming becomes catastrophic and irreversible. also, governments agreed on the need for global emissions to peak as soon as possible, recognising that this will take longer for developing countries. the eu and other developed countries will continue to support climate action to reduce emissions and build resilience to climate change impacts in developing countries. also, they intend to continue their existing collective goal to mobilise usd 100 billion per year until 2025 when a new collective goal will be set. the eu will cut its emissions by 40%, compared with 1990 levels, by 2030. the us will cut its emissions by 26% to 28%, compared with 2005 levels, by 2025. china will agree that its emissions will peak by 2030 (harvey, 2015).this climate agreement will be opened for signature for one year on 22 april 2016 and will enter into force after 55 countries that account for at least 55% of global emissions have deposited their instruments of ratification, therefore the us as the world’s biggest emitter should join it. according to the method of quantifying and numerically marking the environmental performance of a state’s policies, which was designed to supplement the environmental targets set forth in the united nations millennium development goals – the 2016 environmental performance index (epi) – the top five countries, which are making progress addressing some environmental issues, are finland, iceland, sweden, denmark and slovenia. epi’s climate and energy indicators primarily signal how countries are decarbonising economic growth rather than whether their climate policies are having a tangible effect. these indicators cannot point to underlying drivers of decarbonisation, whether they are due to economic decline or through concerted policy effort. denmark, for instance, has made strong commitments to reduce emissions through increasing efficiency and renewable energy production. singapore, as a result of its high urban density, has been able to lower its carbon intensity relative to economic peers over the last decade. other countries, such as russia, are likely overachieving compared to economic peers due to recession rather than ambitious climate efforts (epi report, 2016). 5. business social responsibility in context of sustainable development global environmental situation depends on each country, each society and each company, which produce some goods and services. collaboration between these three parties gives positive results, which are reflected on reduction of atmosphere pollution, water and land resources, resources-saving technologies adoption, utilization and repeated usage of waste products, flora and fauna renewal programs and many others. after initial fig. 1. climate change performance in the 2016 environmental performance index for selected top carbon-emitting countries, gauged according to the gdp-standardized trend in carbon intensity and trend in carbon emissions, environmental performance index 2016 baltic journal of economic studies 70 vol. 2, no. 1, 2016 reluctance, 95% of large companies in europe and the usa now believe that sustainable development is important. over 150 of the world’s major companies in mining, oil and gas, auto, chemicals, logging, banking and finance, cement, electricity generation, drugs and biotechnology are members of the world business council for sustainable development (wbcsd, 2001). almost all huge multi and international companies adopt different business responsible initiatives, which support country, society and environment. companies operating in different socioeconomic contexts and sectors address very different sustainability issues. although some of these give greater attention to social issues and sustainable development, some to innovation and improved reputation, some to wider relationships and business sustainability. but all such socially responsible activities are closely linked with three main ‘pillars’ of sustainable development – economy, society and environment. as j. mcguire stressed in his definition of social responsibility of business – ‘the corporation must take an interest in politics, in the welfare of the community, in education, in the ‘happiness’ of its employees, and, in fact, in the whole social world about it. therefore, business must act ‘justly’, as a proper citizen should’ (mcguire, 1963). 6. conclusions over the past few years, sustainable development has emerged as the latest development catchphrase. a wide range of non-governmental as well as governmental organizations have embraced it as the new paradigm of development. many companies integrate different social initiatives into their global strategies and succeed in them. sustainable development very often is interpreted as ‘sustained growth’, ‘sustained change’, or simply ‘successful’ development. as a result, business social responsibility can be understood as a component of new systems of societal governance. today the aim for businesses is to create higher standards of living and quality of life, proper ecological situation in the communities in which they operate, while still preserving profitability for stakeholders. companies not only are engaged with their stakeholders but are themselves stakeholders alongside governments and civil society. references 2030 agenda for sustainable development. 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(1995). concepts, definitions, and key issues in sustainable development: the outlook for the future. proceedings of the 1995 international sustainable development research conference, manchester, england, keynote paper, 2-13. keating, m. (1993). the earth summit’s agenda for change. geneva: centre for our common future, viii, x, 12-13: 63-67. kothari, r . (1990). environment, technology and development. in ethics of environment and development, belhaven: london; 27–35. kyoto protocol to the united nations framework convention on climate change. (1998). united nations. lee, k. (2000). global sustainable development: its intellectual and historical roots. in global sustainable development in the 21st century, edinburgh university press: edinburgh; 31–47. mcguire, j.w. (1963). business and society. new york: mcgraw-hill. redclift, mr. (1993). sustainable development: needs, values, rights. environmental values 2: 3–20. vasseur, e. united nations conference on the human environment. report. (1973). water research pergamon press, vol. 7: 1227-1233. world business council for sustainable development. (1998). trade environment and sustainable development: a briefing manual. world business council for sustainable development: geneva. baltic journal of economic studies 71 vol. 2, no. 1, 2016 виктория крикун устойчивое развитие и экологическая ответственность бизнеса аннотация. сегодня устойчивое развитие – это широко используемая, популярная и влиятельная концепция, которая уже давно основывается не только на экологической составляющей, но и на социальном и экономическом измерениях. в то время как социальные и экономические факторы устойчивого развития широко обсуждаются, экологическая деградация с каждым годом все больше усугубляется, и негативно влияет на благосостояния социума. целью работы является анализ экологической составляющей концепции устойчивого развития, исторических вех ее становления, основных этапов имплементации новых глобальных экологических правил. методология. статья основывается на статистической информации из официальных источников, отчетов международных организаций и институций. результаты исследования показывают, что все три индикатора – качество окружающей среды, экономическое развитие и благосостояние социума – взаимосвязаны и основной целью международных институций, стран, бизнесов и общества есть достижение экологически устойчивого развития. экологические проблемы очень сильно влияют на экономический рост. глобальная стратегия развития, основывающаяся на социальной ответственности, обеспечивает общество сводом правил для разумных технологических нововведений и экономической политики, которые делают процессы промышленного производства экологически чистыми и менее ресурсозатратными, но в то же время более продуктивными и прибыльными. практическое значение. одним из основных инструментов концепции устойчивого развития является индекс человеческого развития – интегральный показатель, рассчитываемый ежегодно для межстранового сравнения и измерения уровня жизни, грамотности, образованности и долголетия, который рассматривается в данной статье. еще один показатель – индекс экологической эффективности, комбинированный показатель, который измеряет достижения страны с точки зрения состояния экологии и управления природными ресурсами, также основывается на принципах и целях устойчивого развития. все эти индикаторы и индексы должны послужить платформой современного социо экономического развития украины. значение/оригинальность. тема устойчивого развития имеет достаточно длинную историю и многочисленные этапы развития, но до сих пор остается популярной и важной для каждой страны и мира в целом. многие аспекты данной стратегии развития зависят не только от правительств, но и от основных «двигателей» экономического роста – бизнеса. сегодня целью бизнеса является создание высоких стандартов жизни, надлежащей экологической ситуации в странах пребывания, оставаясь в то же время прибыльными для своих акционеров. baltic journal of economic studies 60 vol. 2, no. 2, 2016 corresponding author: 1 department of economics of enterprise, innovation and advisory services in agriculture, lviv national university of veterinary medicine and biotechnology named after s.z. gzhytsky. email: zavadovska.j@gmail.com idp stabilization assistance: routes to optimization in ukraine yuliia zavadovska1 lviv national university of veterinary medicine and biotechnology named after s.z. gzhytsky, ukraine abstract. the purpose of the paper is to advise to optimization improvement pathways in idp stabilization system in ukraine that currently lacks real-time global-scale coordination, resulting in less efficient peaceful change. it is argued that with funding uncertainty, the system halts at middle level, aiming at sustainability. the article states that to improve, it needs to maintain high motivation and marketability of its professionals through skills and professional certification. future grassroots projects should focus on mind changes. methodology. a desk and in-depth study has been carried out of several national idp stabilization programs dealing with the government that ensure infrastructural support to communities hosting idps. it has been studied how the programs “mindchange” their stakeholders (2014-2016 data) via regional ngos and supports grassroots, using a real-time communication platform with features of cloud, internet banking, social network and dedicated server. improving change generation tools, it leverages transformation with small, but not too small, resources to catalyze change. results of the research showed that the bargain between external priorities and grassroots interests should favor program interest with “soft” projects, and listen to grassroots with “hard” projects. however, funding for non-state actors could have a 4–level structure, including: national projects for regional change strategies; regional ngo support funds; simple grassroots grants; and individual innovation prizes. practical implications. regional ngos can improve beneficiary satisfaction and widen participation by supporting informal civic movements. for slowlyfunded programs, a pre-funding risk assessment report could be useful to assess change that is happening before the funding starts. additionally, internships as a mind changing tool in idp perception should focus on young professionals and high-ranked mps, the latter to be engaged in group cooperation, aimed at professionalizing and strengthening their united voice to advance reforms in the region’s governments, the 60+ generation must give way to 50+ reformers and build on 35+ functional change-makers. value/originality. the article concludes with the statement that we approach the need to establish an international coordination and control system, with idpsa growing from an anti-poverty and democracy-building system – into the framework of support and stabilization the vital social functions in the regions of the world. while we agree that idpsa in our region duplicates some functions of the state, therefore, it should be the state, supported by the global coordination system, which performs these functions directly – putting us closer to the developed economies and democracies of the world. according to the author, the structure of idpsa might replace important sectorial functions in such states, building a humane world with common goals and aspirations of the higher values – where the combination of global security and humanism objectives and growth will be in harmony with the preservation of regional historical identity. key words: global coordination, internally displaced persons, support assistance, regional change strategies, grants programs. jel classification: a13, j11, a23 1. introduction over the previous 3 years the internally displaced persons stabilization assistance (idpsa) system in ukraine has successfully built a partially coordinated global organizational structure that effectively helped change the global balance of power, reform at self-governance levels and improve idp living standards. however, the system lacks global focus and real-time coordination. local partners and subcontractors became conservative, slow and not quite transparent. the consequence (filyak, 1012) of these drawbacks is the low efficiency of real changes as well as distorted data on the assistance effect in target communities. obviously, it’s time to change – to improve baltic journal of economic studies 61 vol. 2, no. 2, 2016 the system of idpsa distribution, optimize financial flows, resolve the dynamics issue of the system and make it more flexible in interaction with grassroots organizations. addressing these challenges, including the view of a government-integrated idpsa global coordination mechanism, is the purpose of this essay. 2. basic organizational challenges of idpsa system in ukraine at the mid-level of idpsa system in ukraine, much organizational inertia has been accumulated so far, and the system itself tends to lose transparency. it looks like cells, once filled with workers and experts who now wish to keep their seats at all cost. like an enterprise, once innovative – and now with standardized products, with people who are now older and wishing a quiet retirement. despite some rotation by age and expertize, the composition of the system at the level of idpsa recipients has stabilized, and although it co-opts new individuals sometimes, this process is not as active as 3 years ago when organizational structures were actively formed and expanded. this huge mechanism in ukraine is not receiving enough funding now and its expansion is not seen as viable  – instead, optimization is brought to the front. but, once stabilized, its bureaucracy wants to continue its existence and carry out its meaningful social function  – peacefully, without significant risks and overloads. this somewhat contrasts with the recent growth of tension in the world and questions as to implementation of the tasks in humanitarian international stability, which often rely on these organizations. can it be that they do not want to perform their direct functions? the same can be said about the traditional, well-established national or regional ngos  – grantees or idpsa subcontractors  – building bureaucracy, seeking stability. therefore, conditions for professional development and improved loyalty should be created for the system’s professionals, including those who are formally employed by national projects via local ngos. on one hand, the professionals (citizens of the target countries) do not see prospects for future development, working from project to project, but on the other, they need certification and professional advancement  – otherwise they realize that they remain uncompetitive in case of market exit. 3. integrating social movements in traditional ngos social movements, including those supporting idps, as opposed to formal ngos are gaining popularity in ukraine in the recent years. in particular, political mass actions are based on such movements and often funded by cash. although the movements sometimes include unique personalities and seem to cost less, but they have a number of defects in their pure form, namely: irresponsibility, lack of grant professionalism, no chain of command, lack of prioritization and responsibility (e.g., neglecting the importance of transfer of experience), and no clear leadership. therefore grants for regular activities framed in project performance matrices should be provided to the registered ngos, which would then coordinate the activities of informal groups and social movements. a solution exists, bringing together the human mass potential of social movement and the professional organizational and bureaucratic capacity of an ngo. regional ngos in this case should have «public», «youth» or «artistic» department or support an informal social movement, providing small grants in the form of cash prizes for its creativity and desire for social change. a formal ngo controls reporting schedule and quality of work of social movement on personal connections. it can lose funds, but not much. this “creative department” or partner movement will allow: 1) preparing future management and leadership from among the movement’s youth and activists, 2) involving the masses of people in solving such local problems that really need wide public involvement, 3) a deeper and more accurate study of local beneficiary needs, resulting in recommending more contextually adapted solutions to the donor (improving bureaucratic, inflexible programs), 4) testing and implementing such social and cultural research projects that do not require traditional grant funding, but can be supported by crowd-funding or in-kind contributions of the implementing team. this last point is important in view of the relative cost efficiency of different types of social activities. there are some activities that are traditionally financed by donor, but can be implemented on a voluntary basis and by highly motivated people without project funds. at the same time, there are key activities relating to «basic support» in important public sectors, requiring control, consistency and bureaucracy, and accordingly, funds and organizational structure. 4. program instruments – prioritization versus localization the work in territorial development always contains a hidden conflict of interest. an idpsa program declares its priorities, however, the local community insists on their own interests  – often direct financial or infrastructural benefits, often neglecting social capital or education system improvements (filyak, 2014). hidden conflict of interest at grassroots level reduces program efficiency at the regional level. if there are subcontractors between the donor and the grassroots level, they often adjust the harsh donor priorities to the local situation, softening requirements and interpreting them to bargain with the communities. on the other hand, sometimes the development program managed the career bureaucrats determines priorities too tightly and clearly. this approach can be understood on a national or regional level, because it contains a political component, or with soft (educational) projects, but at the community level, the program surely needs to be baltic journal of economic studies 62 vol. 2, no. 2, 2016 more flexible and context-adaptable, leaving the space for maneuver in the logical frameworks. it is necessary to carefully listen and hear the needs of local groups, avoid imposing the program views when the community really better knows what urgent issues they need to decide in order to move forward with achieving program priorities. projects for development of the region or the target country must be sufficiently flexible and adaptable  – as sometimes they will be funded 1-1,5 years after the submission of an application, and during that time the situation in the target country can change dramatically. for example, events in ukraine 2013-2014 have restructured market for traditional ngo donor services and have «frozen» many projects, at the same time changing approaches to the programs that work with the government and youth and highlighted other priorities, primarily those associated with idp support. in developing countries, events are often dynamic. often, officials of development agencies located in conservative developed economies where no changes occur often do not realize how quickly the situation can change in developing countries. it is important that such change in the target countries is often led by young people living in the world of new views and rapidly changing technologies. these new trends and changes are often not completely understood by a generation of development program decision-makers. for correlation of project documents, a mechanism of «risk report» could be established  – to be developed by the authorized person of the future subcontractor 3-1 months before the acceptance of funding, containing a summary of ongoing change in the target country that might have affected the project document during the time when proposal was reviewed by the donor, and recommendations for amendments to the plan of activities and budget of the project document due to possible changes in the target country, that is already taking place. the authorized persons should have responsibility for the content of the recommendations and changes in such reports, as it might affect large budgets sometimes. the recipients of these reports in the donor office should be appointed from among the people who have ability to think flexibly in order to understand the novelty of change and dynamism inherent in young opinion leaders. 5. financial and institutional instruments: forms of subsidization at ngo / project level idpsa in ukraine is currently multi-vectored with different levels of funding. the frequently practiced delegation of grants programs to national and regional ngos disperses finance and blurs the clarity of strategic plan  – there are many different projects but an integrated impact-oriented strategy cannot be seen. idpsa should directly implement the major projects focused on the impact in the regionthrough designated project offices instead of subcontracts to (inter)national ngos. in addition, regional ngos in target countries often lose the coordinating function for smaller ngos and local action groups, in fact competing with them. at the micro-level, grant procedure for small ngos and initiative groups is often overburdened by bureaucratic procedures, not fully transparent and difficult to report. this mechanism requires simplification in order to address real needs, highlight success stories and good ideas and models for further replication. therefore, funding mechanisms for non-state actors in the region can be structured as follows: national level: targeted projects and programs in priority areas with its own national staff. the purpose is to reach strategic goals in transformation areas, impact on selfgovernance, advocate legislation improvement in favor of idp support, and introduce a global idpsa coordination mechanism integrated in the government. these projects are either widely distributed on a territory or focus in the central city, acting with the consent of the national government but without much interference. region level: large regional ngos  – as part of a global coordination mechanism, providing policy support “by sector” to self-governance. basic support to smaller ngos, those follow-up small grants at grassroots level. stable support to social and health ngos serving vulnerable groups. local level. easy and transparent online mechanism of grants to local initiative groups incorporating idps to address their special needs as well as grants for starting new groups and «start-up ideas.» easy in applying and reporting. any initiative group can apply, cash transactions permitted. reporting close to real time, budget operations can be tracked through an electronic system. leaders of initiative groups are personally responsible for project. 6. the lower margin of effective investment in change donors in the region have been increasingly looking for clear linkage between the activities of an idpsa program or a grantee  – and the expected effect, and are willing to support only those activities, which act as a catalyst of change, with donor program budget as a kind of «lever» for initiation of such changes, and in fact using several times more of target country’s resources to actually transform the situation. when the objective of the program is irreversible change in the region or locality, we should agree that it is necessary to finance the focal catalysts of such changes. yet still, the funding agency should understand that there is a minimum limit of resources for investment in the territory, below which the “catalyzing of the change” will not occur and, consequently, local resources of the target territory will not be effectively involved in the donor’s project to produce the replication and imitation effects and thus it will fail to get a much more significant support from local stakeholders. in other words, sometimes the donor does not want to «pour enough gasoline» in the fire of change, and it is not lighted or smoldering instead of igniting baltic journal of economic studies 63 vol. 2, no. 2, 2016 rapidly. dollar prices in ukraine increased so significantly over the past 15 years and up to the mid-2014 that small investments in change are obviously not enough. in comparison with early 2000s, consumer prices have grown by 2.54 times in many countries in the region. since the cost of living in ukraine increased several times during the previous 15 years, and usd value to gold fell repeatedly, it is not possible in 2016 to expect sustainability plans, significant long-term effects and impact from a small grant project worth 2-5 thousand usd. of course, there are exceptions, but generally small grants do not have a lasting impact. however, the application forms for some small grants programs often require to explain what his project will «impact» and which is the «long-term effect.» with the cost of one job creation in ukraine of over 7000 usd (pishchulina, 2009), it is difficult to speak of «effect» and «impact» from small ngo projects developing community infrastructure, or, even more so, when the project has a «soft» character (does not create physical infrastructure) and by its nature can not lead to any kind of significant «impact.» however, subcontractors of idpsa agencies willingly request grantees to describe the «influence» and «effect» and sometimes even «sustainability after of the end of funding» – it seems they form their own progress reports based on these statements. however, in this case, at the highest idpsa levels, a clearly exaggerated, distorted information is obtained, as small grantees (especially with «soft» grants) also distort their statements about the expected «impact» and «change», trying to get a grant. it seems senseless to require impact and change, and sustainable after-project funding models, from a small education or consulting project worth 3-5 thousands usd. such funding for «soft» projects in ukraine would be acceptable in form of a prize for an innovative idea, which can be replicated and used for a more ambitious development program in the region from which the idea came. 6. data and information technology: electronic grants support systems for idpsa grassroots level to facilitate and simplify reporting, enabling project publicity in real time, quick support to beneficiaries and timely corrective action to achieve the desired strategic effects in the region, we suggest a software and consulting system. organizationally, server software is hosted in fig. 1. composition of electronic grants support system for idpsa baltic journal of economic studies 64 vol. 2, no. 2, 2016 the donor office or a processing center, while the client software can be downloaded to the grantee’s pc or mobile device and operated by an authorized person responsible for grant. this scheme also includes an organizational mediator – a regional ngo whose mission is to simplify and facilitate contact of grassroots grantees with the coordinating donor office. such international system of electronic support might be logically structured as follows: as you can see, the software can combine features of electronic banking payment systems, social networking, cloud technology and a call center. the system is designed for different conditions: when the quality of the grantees’ internet in good (constant connectivity with online web platform) or bad (preliminary preparation of documents on the «client» device and sending them afterwards, communication via sms or a built-in chat to synchronize documents between the client device and its personal account on the web platform), and for different conditions of a grantee’s available technical support (only 1 pc available, or a notebook, or tablet pc, or a telephone, or all these devices can be used). it allows using the existing platforms (organizationally – regional ngos as support centers, offices of development programs, technically  – mobile operators’ channels, existing software solutions in the field of cloud technologies, dedicated servers, social networks, and mobile banking) and is relatively inexpensive to organize. instead, it will save time and will improve feedback of the grassroots grantees and even final beneficiaries with the donor agency – creating the ability to track changes and project activities in real time. in particular, the client software will have a button «complain to your donor». in this case, the information on the aims, objectives and expectations of the aid program is not lost for local/grassroots grantees and will not be falsely interpreted at the level of implementing partners or sub-contracting ngos. this mechanism can provide a direct link between the very «top» decisionmaking level and the very «bottom»  – for example, a small local ngo operating a micro-grant worth usd1000. 7. ukraine and idpsa system: transforming youth attitudes changing the minds and attitudes of the population through an idpsa program can be seen as a key element of reform in ukraine, as rather deep mental attitudes still remain in the population from the soviet period. as part of such programs, foreign internships are practiced as a tool to share experiences and form new visions of opinion leaders and youth. the recent practice has shown that in this region, the internships are useful only for two categories of people – young future professionals and elected highranked public decision-making officials. of course, there are others, including an academic scholarship system, but they are often not subject of idpsa programs, and, as they do not involve actors of change, but rather focus on the development of science, we suggest assessing the efficiency of these 2 levels or types of internships within the idpsa system. the first level should be focused on future professionals (like chefs, technicians, veterinarians, waiters, and future professionals among idps – many of them young people, students) who obtain new experience and at the same time a motivation for higher living standards and civilizational development through participation in such events. upon return, they would increase the cultural level of their region and the state, by adopting the best achievements of service, culture, business standards and technologies from abroad. these youth internships for independent specialists with an entrepreneurial mind stimulate the desire of a change for the better in ukraine, with these people as advocates of change. young beginners, independent narrow specialists, including entrepreneurs with commercial profile should be invited to such internships, because upon return, these people will have the right and jurisdiction to make their decisions and will have the possibility of change – at least in their own small business and in personal lives. if the development program forms youth grassroots leaders inside the target countries, it should take care that in the long run, this leader remains motivated and with her/ his group, actually leading it. in addition, such programs could take care of proportional “dispersion” of leaders in social groups  – to optimize control functions, rationalize competition and fill team management gaps. 8. idpsa and governance – transforming political minds speaking of as a tool to improve governance, the second level should focus on high-ranked civil servants and elected representatives. in particular, members of parliaments of the rather centralized countries in western nis, who got an internship in other countries, are useful and highly experience and then link it to these new, efficient examples and models. such internships are changing their minds towards the prospects of positive change in their country. after the trainings they have the technology for change and see how to improve the company, technology, economics; why it is done exactly this way and what other options are there. for greater efficiency and implementing the change in practice, such internships should link these “change technologies” to local level, in particular, compare sectorial policies and their legal regulation practices in the country hosting an internship and the country of origin. after seeing the positive difference abroad and understanding the legal way to have it at home, a parliamentarian can write a better bill enabling to develop a particular sector of the home economy, or improve social services, and change other national legislature. to sum up  – such internship is useful for decision-makers to expand their horizons, gain technology and methods to resolve problems meeting social needs at home, through comparison and the baltic journal of economic studies 65 vol. 2, no. 2, 2016 following desire to bring the home country to the higher economic and socio-cultural standards. however, it doesn’t pay off to show «a better life» to regional officials – people without decision-making powers: they do not take strategic decisions and therefore cannot initiate change, especially in countries with centralized government. selfgovernance (e.g., exchanges between city mayors) is an exception thoughwith more decision-makers having influential voices and considering commercial use of the innovations they see. we propose a model of effective internships with midlevel inclusion, where efficiency can be expected. this model suggests internships for the same organization but for hierarchically different levels of participants. the first internship is attended by official decision-making leaders, who will afterwards send their mid-level employees to second internship covering the same issues but focusing on implementation level. the change, resulting in internships, can occur if decision-makers (internship 1) see an institutional mechanism abroad allowing implementing changes, later giving clear guidance to subordinates (internship 2) to use this technology of change. in order to implement this, global idpsa coordination mechanism should ensure monitoring of target reaching for change at the institutional level: through round table mechanisms to measure the real efficiency of civil servant internships and training, and through periodic discussions and consultations with former participants  – now “changemakers”. in addition, it is necessary to ensure that the key positions for change are occupied by competent “changemakers”, able to implement a full cycle of innovation project development: starting from an idea and to the working product. when using internships to achieve greater efficiency in the idpsa global coordinating system, one should bring internship participants from ukraine to the host country with the same level of centralization but a higher standard of living and societal development. participants coming from a certain region need a new experience in a likely, but more developed, region in the host country. for greater efficiency, one should avoid culture shock of employees participating in training, creating a system of rapport instead, and strengthening contact points between the program and internship participants. references filyak, m. «managerial scratch notes» of phase 1 project. gromadski initsiatyvy. (13): 3-4. business planning in small cooperative entrepreneurship. chasopys publishing, 2013. filyak, m.s. outcomes of phase 2 micro projects’ potential and sustainability analysis. gromadski initsiatyvy. (21): 8-16. a national idp monitoring and situation analysis system (excerpts for round 1). gromadski initsiatyvy (32): 2-10. pishchulina, o. new jobs in ukraine: results and prospects. department of economics and social strategies. retrieved from: http://old.niss.gov.ua/monitor/october09/15.htm юлия завадовская пути оптимизации работы системы стабилилизации внутренне перемещённых лиц в украине аннотация. целью работы является выработка рекомендаций по отношению оптимизации работы системы стабилизации внутренне перемещённых лиц (впл) в украине, которой, по мнению автора, не хватает в реальном времени координации в глобальном масштабе, что приводит к снижению эффективности перемен в мирную сторону. из-за неопределенности в финансировании система останавливается на среднем уровне, с целью обеспечения устойчивости. по мнению автора статьи, для улучшения в системе должны поддерживаться высокий уровень мотивации и самореализации её специалистов посредством улучшения их навыков и достижения профессиональной сертификации, a будущие низовые проекты должны быть направлены на изменение умов в сфере помощи впл. методология. было проведено кабинетное и фокус-групповое исследование ряда национальных программ по стабилизации впл, которые работают с правительством, таким образом обеспечивая инфраструктурную поддержку территориальным общинам, принимающим впл. было изучено, как именно данные программы «изменяют восприятие» их выгодополучателей (данные 20142016 гг.) с помощью региональных нпо и поддерживают низовые группы, используя в режиме реального времени коммуникационные платформы с особенностями облака, интернет-банкинга, социальной сети и выделенного сервера. улучшая инструменты генерации изменения, она использует преобразование ситуации с небольшими, но не слишком малыми, ресурсами для ускорения перемен к лучшему для впл. результаты исследования показали, в целом, что сделка между внешними приоритетами и низовыми интересами должна способствовать програмному интересу в случае с «мягкими» проектами, а также слушать низовых партнёров с «жесткими» проектами. финансирование негосударственных субъектов в сфере baltic journal of economic studies 66 vol. 2, no. 2, 2016 поддержки впл может иметь 3 уровневую структуру, в том числе: национальные проекты для стратегий региональных изменений; региональные фонды поддержки нпо; простые низовые гранты. практическое значение. региональные нпо могут повысить степень удовлетворенности получателей помощи и добиться расширения участия путем поддержки неформальных гражданских движений. для медленно финансируемых программ, отчет об оценке риска перед предоставленим финансирования может быть полезным для оценки изменений, которые происходят ещё до начала финансирования. вместе с тем, стажировки как инструмент изменения мировоззрения впл и функционеров системы их поддержки следует сфокусировать на молодых специалистах и высокопоставленных депутатах системы самоуправления. данный инструмент должен быть направлен на профессионализацию и укрепление их единого голоса для продвижения секторных реформ в регионах и сообществах, и в этой сфере поколение 60+ лет должно уступить дорогу реформаторам возраста 50 + и опираться на функционеров возрастом 35+ лет. значение/оригинальность. исследование завершается утверждением о том, что мы подходим к необходимости создания международной координации и управления системой, поскольку корни программ поддержки впл происходят из системы по борьбе с бедностью и из построения демократии – в рамках поддержки и стабилизации жизненно важных социальных функций в регионах мира. в то время как мы согласны с тем, что система поддержки впл в нашей стране дублирует некоторые функции государства, следовательно, она должна быть включена в государство, при поддержке глобальной системы координации, которая выполняет эти функции напрямую – и это приведёт нас ближе к развитым экономикам и демократиям мира. структура системы поддержки впл может заменить все более важные функции, такие как построение гуманного мира в стране с общими целями и устремлениями высших ценностей – где сочетание глобальных целей, рост безопасности и гуманизм будут находиться в гармонии с сохранением региональной исторической идентичности. baltic journal of economic studies 184 vol. 5, no. 2, 2019 corresponding author: 1 kyiv national university of technologies and design, ukraine. e-mail: radionova_n@ukr.net orcid: https://orcid.org/0000-0002-8855-2963 2 kyiv national university of technologies and design, ukraine. e-mail: margarita1111@ukr.net orcid: https://orcid.org/0000-0002-6205-0754 3 kyiv national university of technologies and design, ukraine. e-mail: taya48@i.ua orcid: https://orcid.org/0000-0002-8648-117x doi: https://doi.org/10.30525/2256-0742/2019-5-2-184-190 dual nature of industrial enterprise cost management system natalia radionova1, margaryta skrypnyk2, tayisiya voronkova3 abstract. the research subject is the cost management system of an industrial enterprise. the purpose of the article is the theoretical substantiation of the methodical aspects of the cost management system as a part of the industrial enterprise management system. each company pays attention to the formation of costs because they affect the financial results. the improvement of the enterprise management system in modern economic conditions will not be effective without the establishment of a functional efficient cost management system, the formation of which is advisable to implement using both domestic and international practices. however, not every ukrainian industrial enterprise has an efficient cost management system that optimizes the level of costs. methodology. the empirical and theoretical methods such as analysis and synthesis, logical approach, interpretation, modelling, and visual systematization using the graphical method have been used in the work. the article considers the place of the cost management system in the management system of an industrial enterprise. there has been shown the influence of the cost management system on the strategic and tactical purpose of the enterprise. subsystems of the cost management system have been considered and their components have been disclosed. functions of the cost management system have been presented and the value of each subsystem element has been considered. the structure of the cost management system in the enterprise management system is clearly represented. practical implications. an efficiently operating cost management system cannot only be aimed at an enterprise’s surviving in today’s market conditions. it should facilitate the implementation of tactical and strategic enterprise goals. as tactical goals, we can note the growth of enterprise profitability. the enterprise strategic goal in a market environment is to increase its value. however, the efficient cost management is a rather complicated process, because costs are variable and consist of numerous elements of different content and origin depending on various factors that are sensitive to the external environment, often have a controversial composition and are hardly subjected to the desired regulation. value/originality. the system approach has revealed the dual nature of the company’s cost management system. on the one hand, the enterprise cost management system is a subsystem of the enterprise management system. on the other hand, the cost management system can be considered as an independent system, which includes subsystems and a set of interconnected elements that interact with each other to achieve a high economic performance of the enterprise. among the subsystems, there have been distinguished economic and functional, organizational and managerial. for the formation of the economic and functional subsystem, m. porter’s approach to the creation of the value chain of production was used. moreover, the value chain for an industrial enterprise should start not from the material and technical supply, as m. porter proposed, but from the study of market demand for products. key words: enterprise management system, cost management system, cost optimization, industrial enterprise, value chain. jel classification: d24, l11, m11, m31 baltic journal of economic studies 185 vol. 5, no. 2, 2019 1. introduction the current level of the economic condition of industrial enterprises necessitates not only cost management but also the development of a cost management system that would ensure that the company achieves its tactical and strategic goals. the study of the research subject on cost management has led to the conclusion that, in general, as a system, it is not presented in the economic literature. only separate elements of the cost management system, each of which achieves a certain set of goals and is practically not related to others, are elaborated in detail. therefore, based on the existing theories, we give our vision of the essence of the enterprise cost management system. the purpose of the article is the theoretical substantiation of the methodical aspects of the cost management system as a part of the industrial enterprise management system. scientific works investigation allows distinguishing the basic approaches to the costs’ interpretation as a category. for example, m. g. chumachenko and i. p. bilousova interpret costs from the point of view of the resources use for the enterprise’s work (chumachenko, bilousova, 2008). within the economic approach, costs are interpreted from the position of cost factors, to achieve the financial result (skrypnyk, 2011). the accounting approach proposes linking costs with the enterprise’s assets and liabilities (deriy, 2015). v. kozak asserts that costs directly influence management decisions (kozak, 2019). the marketing approach considers costs as a factor affecting the products price (harkavenko, 2007). the issues concerning the enterprise cost management were highlighted in the works of ukrainian and international scholars of economics, among them are a. a. balan, v. a. deriy, r . s. kaplan, v. h. kozak, g. v. kozachenko, yu. s. pogorelov, g. a. makukhin, m. porter, m. i. skrypnik, t. v. taler, a. v. cherep, m. g. chumachenko, i. p. bilousova, s. s. harkavenko, m. i. yudina. however, a wide range of theoretical, methodological, and applied issues related to the development of the cost management system at an industrial enterprise has not received a sufficiently complete and systemic solution in ukrainian economy yet and needs further research. 2. a comprehensive approach to cost management the analysis of scientific literature shows that, according to most national and international economists, cost management is a process that represents a continuous, integrated impact of various factors on the costs of an enterprise in order to ensure their optimum level, structure, and dynamics. we believe that it is expedient to present the cost management process as a system since the cost management process should have an integrated approach, has to be related to all areas of the enterprise, and be sensitive to changes occurring in the external and internal environment (figure 1). therefore, as we can see from figure 1, the enterprise management is a holistic system that has its own subsystems (informational, technical and innovative, economic, production organization, and human resources management). each subsystem performs its functions and has its own elements. thus, the information subsystem reflects the aspects of regulatory, legislative, organizational, methodological, and analytical support of the enterprise management system. the technical and innovative subsystem includes technological and material support for the enterprise functioning and its development on an innovative basis. the subsystem of the production organization is responsible for the development and coordination of production processes, the sequence of the enterprise technological operations. the subsystem of human resources management includes issues of the qualitative and quantitative composition of employees, their duties and relationships. the economic subsystem of the enterprise management system, controlling the use efficiency of production means and labour productivity, is responsible for not only optimizing the production volume and sales but also for achieving the tactical and strategic enterprise goals. the first goal includes economic viability, as a complex concept, since two indicators characterize the enterprise economic viability: profit and profitability. it is possible to indicate an increase in the market value as a strategic goal of an enterprise in a market environment. cost management is an element of the enterprise management system, which is interconnected with all its subsystems and has an impact on the tactical and strategic enterprise goal. 3. subsystems of the cost management system consequently, cost management can be considered as a system having its own subsystems and elements. the cost management system, like any other system, should consist of four main parts, from the morphological point of view. the first part is the object to which the action of this system is directed (in our case, it is the costs at different stages of the product life cycle). the second part is cost management functions (solutions development, implementation of solutions, control). the third part is a sequence of operations (algorithm, methodology, etc.). the fourth part includes the entities that perform all these operations, without which the system will not be able to function. these parts, together with the organizational structures that will ensure their functioning, constitute the organizational and managerial subsystem of the cost management system (skrypnyk, 2011). from our point of view, the cost management system has a dual nature, on the one hand, it is a subsystem of baltic journal of economic studies 186 vol. 5, no. 2, 2019 e nt er pr is e m an ag em en t sy st em su bs ys te m s in fo rm at io na l t ec hn ic al a nd in no va tiv e pr od uc tio n or ga ni za tio n e co no m ic le gi sl at iv e su pp or t, or ga ni za ti on al an d m et ho di ca l, an al yt ic al s up po rt h r te ch ni ca l su pp or t, m an uf ac tu ri ng te ch no lo gy m at er ia l re so ur ce s, in no va tio n de ve lo pm en t de ve lo pm en t, us e, an d im pr ov em en t of p ro du ct io n pr oc es se s qu al ita tiv e co m po si tio n qu an tit at iv e c om po si tio n jo b re la tio ns in cr ea se in th e en te rp ri se v al ue g ro w th o f pr of ita bi lit y c os t m an ag em en t sy st em p ro fi ta bi lit y su bs ys te m s o rg an iz at io na l a nd m an ag er ia l e co no m ic a nd f un ct io na l e le m en ts c os ts o bj ec t fo re ca st in g pl an ni ng n or m s et tin g so lu tio ns de ve lo pm en t fu nc tio ns o f co st m an ag em en t s ys te m im pl em en ta tio n of so lu tio ns st ra te gi c g oa l t ac ti ca l g oa l pr of it m et ho ds a b c m et ho d d ir ec t c os tin g st an da rd c os tin g a bs or pt io n co st in g c v p an al ys is t ar ge t c os tin g c os t k ill in g l c c a na ly si s c os t b en ch m ar ki ng v c c m et ho d k ai ze n co st in g с в м m et ho d r es ea rc h an d de ve lo pm en t o rg an iz at io n a cc ou nt in g m ot iv at io n e nv ir on m en t r es ul ts : c os ts m ee t t he p ro du ct io n ne ed s; th e co st le ve l c or re sp on ds to th e co ns um er s’ in te re st s b uy er s v al ue ch ai n m at er ia l a nd te ch ni ca l su pp ly c on tr ol se qu en ce o f op er at io ns a na ly si s se ar ch f or d ow ns iz in g re se rv es c oo rd in at io n r eg ul at io n su bj ec ts h ea ds , m an ag er s, a cc ou nt an ts , e co no m is ts , e xt er na l co ns ul ta nt s pr od uc tio n st ud y of d em an d o rg an iz atio na l st ru ct ur e sa le c os t m an ag em en t m et ho do lo gy r es po ns ib ili ty c en tr es st or ag e fi gu re 1 . th e st ru ct ur e of th e co st m an ag em en t s ys te m in th e en te rp ri se m an ag em en t s ys te m so ur ce : o w n el ab or at io n baltic journal of economic studies 187 vol. 5, no. 2, 2019 the enterprise management system (as an economic system of the higher level), which is under the influence of the enterprise management system. on the other hand, it acts as an independent hierarchical system (as an economic system of the lower level) that has its own subsystems, elements, functions, methods, that regulates the enterprise cost level, taking into account its strategic and tactical goals and technological and organizational peculiarities. in its turn, it affects the overall enterprise management system. in addition to the organizational and management subsystem, we consider it expedient to distinguish an economic and functional subsystem in the cost management system. this subsystem will provide an effective value chain of production. nowadays, special attention is paid to the formation of a value chain as a means of increasing the degree of consumers’ satisfaction and more efficient cost management. normally, a value chain is a set of activities that create value, ranging from input sources of raw materials (suppliers) to the manufacture of finished products delivered to the end user. we believe that the value chain of a garment business should be created not from suppliers of raw materials, as m. porter predicted, but from market research on the demand study for finished products (porter, 2005). given that a modern industrial enterprise must implement innovative material and technical support, we propose to include the research and development costs into the value chain. further, there are classical components – material and technical support, production, storage, realization. the co-ordination of separate components of the value chain creates conditions for increasing the degree of consumer satisfaction with regard to price, quality and range and timely delivery of products. an enterprise that performs activities within the value chain works much more efficiently and at a lower cost than comparable manufacturers of competing products since all activities are not a set of independent components but constitute a system of interconnected steps when the results of one affect the costs of others. 4. methods of enterprise cost management to ensure the functioning of the cost management system, there are a large number of cost management methods (abc method, direct costing, standard costing, absorption costing, cvp analysis, target costing, cost killing, lcc analysis, cost benchmarking, vcc method, kaizen costing and others) (kozachenko, 2007). it should be noted that each of the existing methods is not a universal tool for solving all enterprise problems; each method has its advantages and disadvantages. we believe that in order to obtain an efficient cost management system in modern conditions, it is necessary to apply an approach that will have the tools necessary for the enterprise to use different concepts, combining their individual elements into one method. the existing methods of cost management research allowed to distinguish classical and modern approaches that take into account market factors (comparison with competitors, management of the target price, taking into account the life cycle of products, etc.), that is shown in table 1. to improve the enterprise cost management, we suggest applying a new methodological approach (cbm method). the cbm method has an integrated approach to solving problems of the industrial enterprise cost management because it takes into account technological and organizational factors of production and allows finding reserves of cost optimization at each technological stage. table 1 the general classification of cost management methods traditional methods market methods domestic practice foreign practice normative – the method of costs by norms and deviations standard costing system – cost method by norms and deviations cost volume profit – distribution analysis procedure – accounting by the costs of individual processes direct costing system – incomplete costs method target costing – method of target price management preliminary – allocation of costs for redistribution of production activity based costing – calculation by the type of activity life cycle costing – calculation of expenses by the stages of the product life cycle ordered – cost accounting for individual orders absorption costing – distribution of all costs between sold products and product balances benchmarking – comparison of costs with leading enterprises killing costing – maximum cost reduction method value chain costing – a method for managing the value chain kaizen costing – constant cost reduction method just-in-time – the cost of the quantity of products that is needed at the moment functional cost analysis – providing optimal correlations between quality and cost strategic cost analysis – based on the sequence of operations to create the value of the product source: compiled by the authors baltic journal of economic studies 188 vol. 5, no. 2, 2019 5. functions of the enterprise cost management system it should be noted that the enterprise cost management system provides fulfilling all functions and the availability of appropriate elements that are inherent in any object management (balan, 2014). the cost management starts with forecasting. forecasting is a method that uses both experience and current assumptions about the future in order to determine it. if the forecasting is performed well, the result will be a picture of the future, which can be used as a basis for planning (kaplan, 1998). forecasting is inextricably connected with planning. the next step is to develop a production plan since it will determine the level of planned and actual production costs in the future. the quality of this question solution depends on the extent to which the necessary conditions and limitations are fully taken into account. in our view, during planning, it is necessary to take into account the availability of available factors of production; the cost of material resources; price forecasts for manufactured products and possible scope of its realization. the task of planning a production program can be solved by means of known methods of linear programming, with special attention to the choice of the target function. the cost planning is a system of technical and economic calculations, the purpose of which is to substantiate economically the current costs necessary for the production and marketing of enterprise industrial products in the planned period, which meets the requirements for the quality of these products in the conditions of market relations (taler, 2006). in particular, the planned cost calculations are used in profit planning, determining the economic efficiency of some organizational and technical measures and production in general, in the internal production planning, in establishing free (market) and government regulated wholesale prices for industrial products, as well as in determining the profitability level (cherep, 2005). the next step in the planning phase is defining the planned production costs for all types of resources used by the enterprise, based on cost centres. then the planned value calculation of the production cost is performed and, in our opinion, this calculation should be done in two alternative options – full and subset. with elastic demand for manufactured products, this approach serves for pricing purposes. there are different types of forecasting and cost planning used by enterprises. therefore, at the stage of long-term planning, we resort to long-term planning, and at the stage of short-term planning – to the current one. short-term plans are made for a month, a quarter, a year; long-term (perspective) plans determine the enterprise development for 3-5 years (for large enterprises – for a longer period). the task of long-term planning is to choose an adequate variant of the enterprise activities based on the analysis of the chances and risks generated by the external, macroeconomic environment, strengths and weaknesses of the enterprise. it is necessary to forecast the expected conditions and changes in the external economic environment (to calculate the probability of recession, increased competition, higher inflation, etc.). in a market environment, every enterprise aspires for development: it is necessary to develop new products, to improve production, or to combine both of these directions. the development requires investment in new products development, the formation of sales markets, creation of technical and human resources, search for suppliers of material and technical resources. choosing a certain way of action, especially one that includes the involvement of resources in production for a long period, the enterprise management should have a clear idea of the amount of costs associated with the decision. each considered scenario meets certain costs, which should be calculated at the long-term planning stage. with regard to short-term planning, current plans specify the implementation of long-term goals of the enterprise. norm setting is a process of designing and approving norms and standards that set limits on the use of resources necessary to ensure the production process and sales of products (works, services). the purpose of cost regulation is to ensure the efficient use of resources through comprehensive efforts to reduce the total cost of production and sales of products. this can be achieved if in norm-setting the main attention will be paid to the possibilities of using modern high technologies and equipment and the appropriate production organization, labour, and management, which would reduce the cost of resources and timely reflect this decline in cost standards. the organization is the most important element of effective cost management. at this stage, it is possible to establish how the enterprise manages costs, that is, who does it, in what period, what information and documentation are applied, what methods are used. cost centres, cost places, and responsibility centres for compliance with cost guidelines are determined. a hierarchical system of linear and functional relationships between managers and specialists involved in cost management is developed. this system should be compatible with the organizational and production structure of the enterprise. for the management process, it is difficult to overestimate the accounting value, which serves as a link between economic activity and enterprise management (chumachenko, bilousova, 2008). accounting chronologically organizes and displays data on the enterprise economic activity through their registration for further use. in accounting procedures, baltic journal of economic studies 189 vol. 5, no. 2, 2019 cost data are processed, stored up to the right moment, and then presented in such a way that they become useful information. information in the form of reports is transmitted to the company’s management for making the best decisions. motivation is intended to intensify and stimulate research into such ways of influencing the production participants, which would encourage compliance with the established cost plan and find ways to reduce them. for this purpose, both material and moral factors of encouragement are applied. the cost analysis is a process of reflecting the use of costs and results of past, present, and future production activities of a relevant management model oriented towards the main goal of the enterprise (yudina, 2013). such an analysis as an element of cost management is necessary for information preparation in order to make effective business decisions. for example, in assessing the required amount of material inventories, future costs are determined by forecasting based on the analysis and the information on actual costs is provided by accounting. the cost analysis, which forms an element of the control function, helps to assess the efficiency of utilizing all enterprise resources, to identify reserves for reducing production costs, to gather information for preparing plans and making sound management decisions regarding costs. the search for cost optimization is aimed at its rational reduction in achieving the optimal combination of product quality and the level of cost resources for its production. the main reserves or sources of reduction of operating costs are manifested in the process of more efficient use of instruments of labour, material and supplies and workforce. the main reserves of cost reduction can be divided into two categories: internal and external. the internal factors can include: improvement of the use of labour resources (improvement of production technology, optimal use of production opportunities, mechanization and automation of production processes); improvement of the production organization, labour and management (personnel development, optimization of management and labour, loss reduction of working time, improving the labour norm setting and motivation); improvement of the use of material and supplies (computerization of accounting, loss prevention from defective articles, standardization improvement of material costs, savings of material resources). the external factors include: inflation processes in macroeconomics; prices for consumed resources; the tax burden on the enterprise; specialization and cooperation in the conditions of globalization and competition. the cost systematic reduction ensures not only increase of the enterprise profitability but also gives additional means for further development. the next stage is control over the process of cost formation, which means the comparison of the planned and actual indicators. in case of deviations, a regulation is made, because of which plans are changed, or there is an effect on the situation in order to bring it closer to the planned indicators. in this case, the regulation effectiveness indicator is the magnitude of the cost deviation for each resource. the closer the size of actual costs to the target, the closer the actual cost to the planned, taking into account the actual performance of the production program. the control effectiveness is conditioned by corrective management actions aimed at bringing actual costs in line with planned or refined plans if these cannot be met because of objective changes in the production conditions. the timely coordination and cost management allow the company to avoid a major breakdown in accomplishing the planned economic performance. 6. conclusions costs are an important aspect of each manufacturing enterprise. costs form the products price and have a direct influence on the financial results of the enterprise’s work. with the same income level, the enterprise may have a profit or loss, depending on the costs’ amount. therefore, effective cost management is relevant to each manufacturing enterprise. the relevance of the research topic causes a significant amount of scientific work on cost management. costs are considered by scientists from the position of different approaches: resource, economic, accounting, management, and marketing. there are different cost management methods that can be classified as traditional and market-based. for rational cost management at the enterprise, a cost management system must be established. the cost management system should be aimed not only at the survival of the enterprise but also at the implementation of its tactical and strategic goals. the cost management, which will be aimed at achieving the above goals, is a rather complex process, because costs are variable and consist of numerous elements of different content and origin, depend on various factors, are sensitive to the external environment, often have a controversial composition and are difficult to adjust to desired regulation. summing up, we should note that the cost management system has a dual nature and can be considered as an independent system that includes subsystems and a set of interrelated elements that interact with each other to achieve a high economic performance of the enterprise. the improvement of the enterprise management system in modern economic conditions will not be effective without establishing an efficient cost management system, the creation of which is advisable to implement using both national and international practice. baltic journal of economic studies 190 vol. 5, no. 2, 2019 references: balan, a. a. (2014). systema upravlinnya vytratamy na promyslovomu pidpryyemstvi [cost management system in industrial enterprises]. ekonomika: realiyi chasu, 3(13), 43–49. harkavenko, s. s. (2007). marketynh [marketing]. kyiv: libra. (in ukrainian) deriy, v. a. (2015). ekonomichni pokaznyky vytrat pidpryyemstva ta sobivartosti produktsiyi v obliku, statystytsi y analizi [economic indicators of the expenditures of enterprise and the costs of production in accounting, statistics and analysis]. oblik i finansy, 2, 15–21. kaplan, r . s. (1998). cost and effect: using integrated cost system to drive profitability and performance. president and fellows of harvard college, usa. kozak, v. h. (2009). vyznachennya ponyattya «vytraty» ta yikh otsinka [definition of the "costs" concept and its estimation]. reformuvannya ekonomiky ukrayiny: stan ta perspektyvy : zb. mater. iv mizhnar. nauk.-prakt. konf. (ukrainian, kyiv, november 26–27). kozachenko, h. v., pohorelov, yu. s., makukhin, h. a. (2007). upravlinnya zatratamy pidpryyemstva [costs management of the enterprise]. kyiv: libra. (in ukrainian) porter, m. e. (1990). the competitive advantage of nations. new york: free press. skrypnyk, m. i. (2011). orhanizatsiya obliku vytrat u rozrizi tsentriv vytrat ta tsentriv vidpovidalnosti [organization of cost accounting in terms of cost centers and responsibility centers]. oblik i finansy apk. kyiv: tov yuf «yur-ahro-vest», 1, 46–49. taler, t. v. (2006). poshuk shlyakhiv znyzhennya sobivartosti produktsiyi promyslovoho pidpryyemstva [searching the ways to reduce the production’s cost of industrial enterprise]. derzhava ta rehiony, 5, 415–417. cherep, a. v. (2005). mozhlyvosti zastosuvannya novykh orhanizatsiynykh struktur upravlinnya z metoyu znyzhennya sobivartosti produktsiyi [possibilities of application the new organizational structures of management in order to reduce the production’s cost]. visnyk natsionalnoyi akademiyi derzhavnoho upravlinnya pry prezydentovi ukrayiny, 2, 208–215. chumachenko, m. h. (2008). dyskusiyni problemy obliku vytrat i kalkulyuvannya sobivartosti produktsiyi [discussion problems of costs accounting and the products cost calculation]. bukhhalterskyy oblik i audit, 10, 3–7. yudina, m. i. (2013). analiz kryteriyiv ta napryamiv zmenshennya vytrat vyrobnytstva u sobivartosti produktsiyi [analysis of criteria and ways of production expenditure reduction in product cost]. visnyk khmelnytskoho natsionalnoho universytetu. ekonomichni nauky, 4(2), 98–102. baltic journal of economic studies 59 vol. 6, no. 3, 2020 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: pereverzeva@ukr.net 2 zaporizhzhia national university, ukraine. e-mail: volkovvp49@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-3-59-66 assessment and forecasting of favourable conditions for social entrepreneurship development anna pereverzieva1, volodymyr volkov2 abstract. the objective of the study is to develop favourable environment’s assessment and forecasting methodology for social entrepreneurship development in market economies. methodology. econometric method to build regression model of country’s favourable conditions for social entrepreneurs’ relationship to its determinants is applied in the research. the research is based on previously developed multi-step algorithm: statistical data systematization, regression model building and relevant variables’ selection, new regression model building excluding insignificant variables, type of regression model setting and scenario forecasting. the type of regression model that best describes the correlation nature has been determined. scenario forecasting of country’s favourable conditions’ changes for social entrepreneurs based on “state policy support of social entrepreneurship development” implementation has been carried out. three scenarios of social entrepreneurship development have been designed: pessimistic, inertial (basic) and optimistic. research data comes from statistical databases of “the best countries to be a social entrepreneur” poll conducted by the thomson reuters foundation in 2016 and 2019. study results revealed that country’s favourable conditions for social entrepreneurs’ development are mostly affected by government policy support and investment access which form particular environment aimed at successful economic performance inside a country. practical implications. assessment and forecasting of favourable development of social entrepreneurship reveals its strengths and weaknesses that need to be improved through implementation of centralized “government policy for the development of social entrepreneurship.” this enables countries not only to keep scores of “the best country for the development of social entrepreneurship”, but also to improve their position in the future. value/originality. nowadays social entrepreneurship is becoming a tool to overcome current challenges and preserve human potential by the resurgence of innovative forms of business. one of the ways to achieve the objective is proposed in our study. key words: social entrepreneurship, government policy support, favourable conditions for social entrepreneurship development, access to investment, public understanding, social entrepreneur, scenario forecasting. jel classification: l31, o11, c13 1. introduction current development is characterized by the significant impact of global challenges on global economies, regardless of their level of development. however, developed countries take an advantage to meet path dependence with minimum losses to society, and developing countries do not have enough capacity to overcome today’s challenges and threats. there is an objective need to find consolidated solution and effective mechanisms that will restore capacity and ensure relevant standard of living. social enterprises and their accelerated development become an effective tool in the context of significantly reduced households’ incomes, high unemployment, growing and deepening poverty. this innovative form of business allows to meet population basic needs amid limited income, mitigates unemployment problem, applies and improves managerial skills of social entrepreneurs. we emphasize that to promote development and effective functioning of social entrepreneurship, it is necessary to create relevant environment in the country, which depends on sustainable determinants. we believe that the assessment of set national favourable conditions for social entrepreneurs’ development together with factors that shape them is extremely important. after all, it distinguishes strengths and weaknesses that claim constant attention. scenario forecasting allows to identify possible trends of country’s economic development under governmental support of social entrepreneurship and its boosting. baltic journal of economic studies 60 vol. 6, no. 3, 2020 the results of the study have revealed that government policy support (significance of regression coefficient – 0.239) and access to investment (significance of regression coefficient – 0.238) are the most important factors that impact the development of social entrepreneurship. analysis have showed that social enterprise is not perceived by an entrepreneur as a way to make money and favourable environment does not depend on social enterprises’ prevalence in a country. thus, the last two factors have been found out to be insignificant. the article has a clear structure, its elements are logically represented. literature review is divided into separate parts, which consider: interpretation of the theoretical concept of “social entrepreneurship”, government support for the development of a social enterprise and role of a social entrepreneur to ensure this effective innovative form of business performance. detailed description of the research methodology and its approbation have been given. the article is summarized by the results and prospects for future research. 2. concept of “social entrepreneurship” the issue of “social entrepreneurship” theoretical definition is debatable. the problem solution stems from peculiarities of country’s legal, economic and social environment. after all, in some countries there is no legislative regulation of social entrepreneurship, its legal status is not defined, there is no clear definition of economic features of its performance and development, assessment and social impact are not clearly explained as well. scholars (zulkefly, ghani, alquliti) who focused on economic features of social enterprises and their social significance, proved the dominance of non-commercial goals over commercial ones, which is the main, i.e., ultimate, goal of a certain social problem solution. nevertheless, scholars prove the complementarity of economic and social goals, if the latter prevail, in their study. at the same time, the issues of differentiation between the concept of profit and non-profit organizations (horishna, 2016), definition of their key goal, the relationship between economic and social parts remain controversial. emphasizing the influence of non-commercial goals, scholars identify the following characteristics of social entrepreneurship such as self-sufficiency, financial stability and innovation (konovalova, kharynina, 2016). that is, along with the social effect, an important task is to maintain financially balanced functioning and development of social entrepreneurship through the introduction of innovative approaches. theoretical analysis of “social entrepreneurship” concept is presented in the studies of b. drayton (drayton, 2019), who has focused his attention on two key characteristics: innovation and the ability to tackle social problems. they induce its introduction in underdeveloped and developing countries being an essential tool for acceleration of socio-economic development. scholars consider that social entrepreneurship’s key mission is the opportunity to change the world ( jill kickul, thomas s. lyons, 2016), which is relevant amid growing global problems, the need to consolidate efforts around the world and rethink future development priorities. 3. the role of government policy support for social entrepreneurship development scholars who have analyzed peculiarities of social enterprises’ activity (agustina, budiasih, ariawan, gorovoy, 2020, p. 258) demonstrate that one of the decisive determinants of the efficiency of the innovative form of business is government policy support, which primarily involves its legal regulation and legal status determination (svynchuk, 2019), as well as economic support through fiscal policy. moreover, social entrepreneurship is the basis for higher economic growth in the country. besides, the significance of government policy support clearly stresses the need to articulate criteria for social business differentiation (william a. schambra, 2010). it has been pointed out that government policy should promote introduction of social innovation at both regional and national level (keohane, georgia levenson, 2013). scholars (sahasranamam, nandakumar, 2018) highlight characteristic features of public institutions’ impact and role in functioning and development of social enterprises. 4. the role of a social entrepreneur indeed, a social entrepreneur is essential to any business entity regardless of the prevailing commercial or non-commercial goals. most scholars (lunkina, ivanenko, 2019; sahasranamam, nandakumar, 2018) are inclined to believe that the mission of social entrepreneurs requires special environment and direct correlation between the development of individual capital of social entrepreneurs and public institutions. scholars (konovalova, kharynina, 2016) have found out that social entrepreneurship as innovative form of business supports social entrepreneur’s self-realization and self-improvement, as well as it affects the ability to improve managerial skills (pryshchak, lesko, 2016). the critical literature review dedicated to the basis of “social entrepreneurship” theoretical concept, highlighting of the key development factors, the impact of individual human factors on the effectiveness of social enterprises’ performance and their mission implementation confirms the need for such an baltic journal of economic studies 61 vol. 6, no. 3, 2020 innovative form of business in most countries regardless of the level of their development. each economy faces global problems, which cannot be solved by traditional forms of business. that is why we apply, in our opinion, key hypotheses about the development of social entrepreneurship in countries: н1: government policy support is a key determinant in the development of social entrepreneurship and favourable economic environment building. н2: social entrepreneurship development largely depends on investment. 5. survey methodology to study the development of social entrepreneurship around the world we used the thomson reuters foundation poll on favourable conditions for social entrepreneurship development (the best countries to be a social entrepreneur) as raw data. the poll was conducted for 43 countries in 2016 and 2019, i.e., with time lag of three years. general indicator of country’s favourable conditions and impact factors have been applied for the quantitative assessment, namely: government policy supports social entrepreneurs, attracting skilled staff, public understanding, i.e., public awareness of social entrepreneurship aim and its importance, making a living, i.e., social entrepreneurship as a way of making money and life support, gaining momentum as social entrepreneurship promotion and access to investment. data allow to assess and forecast the development of social entrepreneurship in countries with different levels of economic development based on step-by-step algorithm (figure 1). the first step of the algorithm involves data systematization needed to assess and forecast favourable conditions. favourable conditions for social entrepreneurship development (y) and their impact factors ( x ii, ,= 1 6 ) are qualitative variables estimated as percentage. for quantitative analysis, indicators as a fraction of a unit are transformed into indices. as a result of the regression model building, it has been revealed that x5 determinant is insignificant (by insignificance characteristics of the regression model), so country’s favourable conditions for social entrepreneurship do not depend on this form of business promotion (gaining momentum). the complete equation of the regression model is presented as: y x x x x x x= + + + + + +0 046 0 224 0 123 0 204 0 045 0 183 0 1501 2 3 4 5 6, , , , , , , y x x x x x x= + + + + + +0 046 0 224 0 123 0 204 0 045 0 183 0 1501 2 3 4 5 6, , , , , , , , (1). coefficient of determination r2 0 9757= , . a new regression model with relevant determinants is built as the next step of the algorithm. y x x x x x= + + + + +0 129 0 237 0 160 0 205 0 055 0 2081 2 3 4 6, , , , , , y x x x x x= + + + + +0 129 0 237 0 160 0 205 0 055 0 2081 2 3 4 6, , , , , , , (2). coefficient of determination r2 0 9591= , . х4 determinant has been revealed as insignificant (making a living), which demonstrates social entrepreneurs’ ability to earn a living. next step is to build a new regression model not taking into consideration determinants х5 and х4: y x x x x= + + + +0 141 0 239 0 173 0 2 0 2381 2 3 6, , , , , , (3) coefficient of determination r2 0 9157= , . all determinants are significant in the obtained new formula of the model (3), that is country’s favourable conditions for social entrepreneurship depend on: government policy support of social enterprises (х1 – government policy supports social entrepreneurs), skilled staff attraction (х2 – attracting skilled staff ), understanding of social enterprises’ goals (х3 – public understanding) and access to investment (х6 – access to investment). figure 1. step-by-step algorithm of the assessment and forecasting of country’s favourable conditions for social entrepreneurship development source: built by authors themselves statistics systematizationstep 1 step 2 building general regression model and identification of insignificant variables step 3 building a new regression model by relevant determinants step 4 identification of the regression model’s type, which illustrates correlation between country`s favourable conditions for social entrepreneurship development and relevant components step 5 development of scenario forecasting amid implementation of “government policy support for social entrepreneurs” baltic journal of economic studies 62 vol. 6, no. 3, 2020 таble 1 country’s favourable conditions for social entrepreneurship development and impact factors country by ranking the best countries to be a social entrepreneur government policy supports social entrepreneurs attracting skilled staff public understanding making a living gaining momentum access to investment y x1 x2 x3 x4 x5 x6 canada 0.7187 0.7292 0.6875 0.5625 0.7708 0.9583 0.6250 australia 0.6450 0.6818 0.5000 0.5417 0.7708 0.8333 0.5455 france 0.6377 0.7083 0.6458 0.4375 0.6250 0.7917 0.5000 belgium 0.6170 0.7000 0.4773 0.4773 0.6667 0.8409 0.6136 singapore 0.5972 0.7708 0.2708 0.5000 0.5208 0.8125 0.5000 denmark 0.5957 0.5455 0.8182 0.5417 0.4545 0.7708 0.3409 netherlands 0.5896 0.5625 0.5417 0.3958 0.6250 0.7917 0.4773 finland 0.5860 0.5833 0.7727 0.4375 0.7708 0.6875 0.3636 indonesia 0.5758 0.5208 0.4583 0.4167 0.5625 0.9167 0.4091 chile 0.5712 0.5417 0.5833 0.5833 0.4583 0.7917 0.4792 israel 0.5702 0.6042 0.6458 0.4375 0.5000 0.8333 0.3409 united arab emirates 0.5664 0.4375 0.6458 0.4375 0.5625 0.8125 0.3750 united kingdom 0.5556 0.5625 0.6250 0.3542 0.6042 0.7727 0.3750 pakistan 0.5543 0.3958 0.7083 0.5000 0.7708 0.7083 0.4091 south korea 0.5533 0.7500 0.3864 0.4167 0.5000 0.6667 0.3750 sweden 0.5459 0.6042 0.7045 0.3542 0.5625 0.7917 0.3182 switzerland 0.5458 0.4583 0.6250 0.5208 0.4773 0.6667 0.2708 italy 0.5401 0.4375 0.7083 0.6250 0.6042 0.6458 0.4091 hong kong 0.5398 0.5833 0.4375 0.4583 0.3125 0.7292 0.3636 india 0.5386 0.5000 0.5417 0.3750 0.5625 0.7917 0.4091 germany 0.5294 0.3864 0.6667 0.4375 0.5625 0.8333 0.2955 philippines 0.5284 0.4792 0.4773 0.3750 0.6607 0.6875 0.3958 russia 0.5207 0.6750 0.3958 0.3958 0.6458 0.7292 0.3500 egypt 0.5183 0.4545 0.5417 0.4167 0.5208 0.8409 0.3542 thailand 0.5183 0.6458 0.4793 0.4167 0.5625 0.7292 0.3864 argentina 0.5107 0.5000 0.6818 0.3750 0.4792 0.7292 0.3636 austria 0.5052 0.4583 0.5833 0.3125 0.4375 0.7500 0.2955 greece 0.5039 0.5000 0.375 0.3125 0.425 0.6818 0.3542 nigeria 0.5017 0.4167 0.5625 0.4167 0.4792 0.7500 0.3542 malaysia 0.4940 0.5833 0.3636 0.3750 0.5000 0.7083 0.2727 spain 0.4871 0.3750 0.6458 0.2920 0.4545 0.7500 0.3864 united states 0.4790 0.3750 0.5625 0.3958 0.6042 0.7045 0.2045 norway 0.4774 0.5208 0.6042 0.2917 0.5417 0.7083 0.2727 south africa 0.4770 0.2917 0.5417 0.3750 0.6042 0.8542 0.2708 poland 0.4497 0.6667 0.3333 0.1875 0.5258 0.5833 0.2917 ireland 0.4377 0.4375 0.5208 0.2083 0.5417 0.7708 0.2727 china 0.4375 0.4792 0.375 0.2708 0.4375 0.5625 0.4167 brazil 0.4200 0.2273 0.5208 0.3333 0.4583 0.6875 0.275 colombia 0.4171 0.2500 0.4167 0.3542 0.6042 0.7292 0.3182 venezuela 0.4048 0.1458 0.4583 0.5625 0.3542 0.5625 0.1875 japan 0.4039 0.3409 0.4318 0.3409 0.4545 0.6042 0.3182 turkey 0.3813 0.1875 0.6250 0.2500 0.3958 0.7500 0.1591 mexico 0.3643 0.1667 0.5000 0.2083 0.5417 0.5833 0.2708 source: data integration by the authors [the best countries to be a social entrepreneur 2019 http://poll2019.trust.org/] baltic journal of economic studies 63 vol. 6, no. 3, 2020 the second step of the algorithm defines the type of function, which accurately describes correlation (table 2). table 2 functions of correlation between country’s favourable conditions for social entrepreneurship development and impact factors type of model coefficient of determination r2 linear 0.9157 power 0.9030 indicative 0.8908 hyperbolic 0.8006 quadratic 0.8006 logarithmical 0.8801 root 0.8935 source: calculated by the authors themselves thus, we choose a linear function as a basis, because it has the highest coefficient of determination r2 = 0.9157 and it is analytically represented by formula 1. coefficients of significance before model variables indicate that government support has the biggest influence on the country ’s favourable conditions for social enterprise development (x1 with 0.239 coefficient of significance). access to investment (x6 with 0.238 coefficient of significance) occupies the second place. this confirms hypotheses h1 and h2. the third most important factor is public understanding of social enterprises’ goals and their perception (x3 with 0.200 coefficient of significance). attraction of skilled staff has the lowest impact on favourable conditions (x2 with 0.173 coefficient of significance). the method of forecasting of the country’s favourable conditions should be proposed on the basis of the obtained results in case it implements government policy support of the innovative form of business. we provide forecasting by the example of canada, the best country in the ranking in 2019. let us calculate changes in country’s favourable conditions for social entrepreneurship development and coefficients of significance according to the model (formula 3) for the country in 2016 and 2019 (table 3). based on table 3 data, let us calculate increment rate for a 3-year period (2016-2019s) by the formula: t x x x i n i = 2019 2016 , (4) where txi – determinant’s increment rate x ii, , , ,= 1 2 3 6 , xi 2019 – value of the determinant x ii, , , ,= 1 2 3 6 in 2019, xi 2016 – value of the determinant x ii, , , ,= 1 2 3 6 in 2016. the calculated rating of increment rate’s value allows us to forecast country’s favourable conditions for social entrepreneurship development by 2022, if other impact factors remain equal. taking into consideration the necessity of all countries to tackle global challenges, we believe that to achieve a high level of development, it is necessary not only to fix own position, but to improve it by implementing “government policy support for social entrepreneur’s development”, preserve human resources and meet their basic needs understanding significant income reduction. scenario forecasting of social development based on “government policy support for social entrepreneurs” is presented in table 4. таble 3 factors’ growth rates, which impact country’s favourable conditions for social entrepreneurship development (case of canada) country year government policy supports social entrepreneurs attracting skilled staff public understanding access to investment x1 x2 x3 x6 canada 2019 0.7292 0.6875 0.5625 0.625 2016 0.708 0.6875 0.479 0.583 average increment rate 1.03 1.00 1.17 1.07 source: calculated by the authors applying data [the best countries to be a social entrepreneur 2016: http://poll2016.trust.org/; the best countries to be a social entrepreneur 2019: http://poll2019.trust.org/] таble 4 scenario forecasting of social entrepreneurship development, 2022 (case of canada) scenario forecasting government policy supports social entrepreneurs attracting skilled staff public understanding access to investment increment rate x1 x2 x3 x6 pessimistic 1.06 1.01 1.18 1.08 inertial 1.07 1.02 1.19 1.09 optimistic 1.08 1.03 1.2 1.2 source: developed by authors themselves baltic journal of economic studies 64 vol. 6, no. 3, 2020 three scenarios have been used for forecasting in case of “government policy support of social entrepreneurship development” implementation: pessimistic, inertial, and optimistic. increment rates for each of the scenarios have been determined on the basis of the calculated increment rates in table 3. in the pessimistic scenario, government policy support (x1) will increase by 6%, the possibility of attracting qualified staff (x2) by 1%, public understanding of social enterprises’ goals (x3) by 18%, access to investment (x6) by 8%. in the inertial scenario, growth rates of the studied factors are 7%, 2%, 19%, 9%, respectively. impact factors make much progress in the development of social entrepreneurship in the optimistic scenario – 8%, 3%, 20%, 10%, respectively. according to the regression model and scenario forecasting built by us, one can calculate country’s favourable conditions for social entrepreneurship development changes (table 5). according to polling results for 2019, canada is the best country having 0.719 level of favourable conditions of social entrepreneurship development. the obtained calculations demonstrate the level’s growth by 0.750 if “social entrepreneurship development policy” would not have been introduced in 2022. taking into consideration risks that affect all countries around the world, lack of progressive changes does not allow countries to maintain and improve their position. therefore, introduction of “government policy support of social entrepreneurs’ development” is an objective basis of further economic development preservation. it should be noted that introduction of “government policy support of social entrepreneurs’ development” both in optimistic and in pessimistic scenarios provides marked increase in social entrepreneurship development y = 0.759 (table 5). graphical interpretation of scenario forecasting of social entrepreneurship development in canada is presented by figure 2. figure 2 clearly illustrates that optimistic scenario reveals the largest growth in the country’s favourable conditions for social entrepreneurship development, таble 5 calculation of country’s favourable conditions for social entrepreneurship development changes, 2022 (case of canada) scenario forecasting government policy supports social entrepreneurs attracting skilled staff public understanding access to investment the best countries to be a social entrepreneur x1 x2 x3 x6 y without implementation of “government policy support of social entrepreneurs” 0.740 0.729 0.804 0.602 0.750 pessimistic 0.762 0.736 0.811 0.608 0.759 inertial 0.769 0.744 0.818 0.613 0.765 optimistic 0.776 0.751 0.825 0.675 0.784 source: calculated by authors themselves 0,759 0,765 0,708 0,729 0,784 0,66 0,68 0,7 0,72 0,74 0,76 0,78 0,8 2016 2019 2022 pessimistic scenario inertial scenario optimistic scenario note: axis of abscissas – years; axis of ordinates – index (level) of country’s favourable conditions for social entrepreneurship development figure 2. scenario forecasting graph of social entrepreneurship development (case of canada) source: built by authors themselves baltic journal of economic studies 65 vol. 6, no. 3, 2020 which confirms the need to start and enhance “government policy support of social entrepreneurs’ development” in the context of higher global challenges and economic risks. 6. findings to determine the nature of correlation between country ’s favourable environment for social entrepreneurship development and impact factors, regression analysis have been used by us. thus, we have detailed significant and insignificant components and proposed the model that relevantly describes the nature of dependence: linear regression model. according to the analysis results, the following groups of factors have been identified: significant (relevant): х1 – government support (government policy supports social entrepreneurs), х2 – attraction of qualified staff (attracting skilled staff ), х3 – public understanding, i.e., public awareness of social entrepreneurship aims and their importance (public understanding) and х6 – availability of investment (access to investment); insignificant (irrelevant): х4 – social entrepreneurship as an ability to earn a living (making a living), х5 – social entrepreneurship extensive promotion (gaining momentum). analysis of the coefficients of significance have found out that the most important determinants for the assessment and forecasting of favourable conditions for social entrepreneurship development are government policy support (coefficient of significance 0.239), access to investment (coefficients of significance 0.238), public understanding (coefficients of significance 0.200), attraction of skilled staff (coefficients of significance 0.173). our assessment and scenario forecasting of social entrepreneurship development allowed us to conclude that there is urgent need to introduce “government policy support of social entrepreneurs’ development” to keep the status of the “welfare nation” and “economy with a human face”, which indicates the trend towards a human-centered economy as the most important priority for the future development of the state and society. for convenience, we summarize the results of the hypotheses in the table below: table 6 summary of findings hypotheses: н1: government support is the key determinant of social entrepreneurship development and favourable environment building adopted н2: social entrepreneurship development largely depends on investment adopted source: own study 7. conclusions methodology of assessment and forecasting country’s favourable conditions for social entrepreneurship development as an effective form of business to meet population basic needs in market economies amid scarce resources has been proposed in the article. regression analysis has been applied as an analytical method. relevant mathematical model to describe characteristic correlation between country’s favourable conditions for social entrepreneurship and correct factors has been built. government support and access to investment have been considered as the most influential determinants. the model is based on the statistical survey in 43 economies. we have proposed to implement “government policy support of social entrepreneurs’ development”, which allows not only to keep the status of the top country for social entrepreneurs, but also improve results for the future. the scenario forecasting has been made applying the example of canada as the top nation by favourable conditions for social entrepreneurship development in 2019. graphical interpretation of the scenario forecasting with the comparison of each scenario has been presented. the method of forecasting is universal and can be used for countries with any level of economic development. our work is not without limitations. we propose only one method to assess and forecast country’s favourable conditions for social entrepreneurship development. this method does not fully take into account all unpredictable challenges and risks that are impossible to expect in advance. improvement of the proposed methodology taking into consideration maximum number of risks, which certainly affect accuracy of future scenarios’ assessment and forecasting is the subject of further research. references: zulkefly, n. a., ghani, n. a., & alquliti, w. 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(2019). osoblyvosti rozvytku sotsialnoho pidpryiemnytstva: zakordonnyi dosvid [features of the development of social entrepreneurship: foreign experience]. modern economics, vol. 5, pp. 142–147. retrieved from: https://modecon.mnau.edu.ua (accessed 15 march 2020). the best countries to be a social entrepreneur 2016. retrieved from: http://poll2016.trust.org/ (accessed 15 march 2020). the best countries to be a social entrepreneur 2019. retrieved from: http://poll2019.trust.org/ (accessed 15 march 2020). baltic journal of economic studies 222 vol. 5, no. 5, 2019 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: bogdanshchur1965@ukr.net 2 danylo halytsky lviv national medical university ukraine. e-mail: roslemekha@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-5-222-225 consequences of criminal offenses: impact on the economic security of countries and opening in the globalization conditions bogdan schur1, rostyslav lemekha2 abstract. in the context of globalization, the development of foreign trade, the simplification of customs formalities, the strengthening of economic relations with the eu and other countries of the world are priorities of the foreign economic policy of most countries of the world. at the same time, the priority is to ensure national security, in particular, such components as economic, including customs, environmental security, protection of interests of public and private persons, domestic producers, compliance with the requirements of international pacts, other instruments ratified by a particular state. in this regard, particular attention is given today to the problems of international trade liberalization through customs policy instruments, in accordance with the international convention (kyoto convention) on the simplification and harmonization of customs procedures dated 18 may 1973, the provisions of which concern cooperation with authorities, customs services, including those in the field of counteraction to customs offenses, which include any violation of customs legislation (kyoto convention, 1973). the key to the development of states' social security is the stability of receiving revenues to the budgets of all levels, which are paid by taxpayers in accordance with certain regulations on the basis of voluntariness. despite the recognition of the urgent task of establishing close interaction and activation of common efforts to counter violations in this area, it is quite difficult to harmonize the provisions of current legal acts in the eu countries regarding the definition of such concepts as "smuggling", "counterfeit", etc. as a variety of offenses in the customs field, establishing the consequences and the main measures of responsibility for their commission. according to a study by frontier economics, each year, the counterfeit costs the g20 countries 2.5 million jobs and about $ 120 billion in lost taxes and increased costs of crime, the cost of treatment and death costs resulting from the use of dangerous counterfeit goods (iliupolu, 2017). the urgency of detecting offenses in the customs field, the use of the most effective tools aimed at preventing their spread, stopping and preventing negative consequences can hardly be denied. at the same time, the quality of such instruments is characterized, on the one hand, by the indicators of securing the expected budgetary revenues, which will allow the implementation of the approved government programs for social protection of the population, on the other – the maximum focus on maintaining positive gains in forming a favorable business climate, the possibility of continuation by them, activities in the field of economics in the regulatory field. this research is aimed at solving this problem. methodology. the achievement of the purpose of this publication is based on the cognitive potential of a number of philosophical, general scientific and special methods. the main method of research, given the desire to determine the directions of development of national scientific opinion on the subject of the publication, was the dialectical methods of analysis and synthesis, the comparativelegal method allowed to identify promising measures to counteract these offenses, taking into account the experience of highly developed eu countries. methods of grammatical consideration and interpretation of legal norms contributed to the identification of gaps and other shortcomings of the legislation governing the grounds and the procedure for bringing to justice the perpetrators of them, to develop proposals for its improvement. practical implications. experience of formation and development of quality assurance of legal institutions defining the principles of activity of subjects of the national security system is connected with the clarity of determining the consequences of offenses including, in the customs sphere, activation of baltic journal of economic studies 223 vol. 5, no. 5, 2019 means of their neutralization with the use of justifiable coercion, to the extent corresponding to public the dangers and consequences of such an offense. key words: customs offenses, administration of customs payments, efficiency of customs clearance procedures, counteracting smuggling, stopping the spread of counterfeits, administrative liability, criminal responsibility for the right of violation in the customs sphere. jel classification: o34, k11, k14, k23 1. introduction due to the lack of functional capacity of the state institutions, which are designed to counteract the spread of offenses, the public distrust of the controlling bodies, the legal nihilism of a large part of the population, not only in ukraine but also in many eu countries, the volume of violations of customs rules are increasing. the most dangerous of them are those defined by international instruments, such as smuggling. the subject of this crime is defined in each national code depending on the actuality of legal protection of certain interests, goods, etc. in particular, in ukraine the criminalized trafficking subjects include: cultural values, poisonous substances, explosives and radioactive substances, weapons or ammunition (except for smooth-bore hunting weapons or ammunition to it), parts and firearms on various weapons, as well as special technical and means and secret information (according to the criminal code of ukraine (article 201 of the criminal code of ukraine)), timber of valuable and rare trees, untreated timber, banned for export outside the customs territory of ukraine (article 201-1 of the criminal code of ukraine)) ; narcotic drugs, psychotropic substances, their analogs or precursors or counterfeit drugs (article 301 of the criminal code of ukraine) (the criminal code of ukraine, 2001). in addition, these violations, which are criminally punishable under the criminal law of many countries, imperfect legal regulation, which is subject to systematic and not always systematic interference, does not create an obstacle for the actions for which the responsibility is provided by administrative and legal norms. in addition, a significant percentage of abuse of privileges when importing goods in post items for resale, with the aim of avoiding payment of duties, which becomes a catalyst for increasing the shadow economy in the country. increasing risks and threats of destabilization of the economic security of the state, causes aggravation of the socio-economic situation in society, deterioration of the quality of life of the population and the emergence of unhealthy competition in the market (tylchyk, tylchyk, 2018). increasing the impact of destabilizing tendencies on ensuring the economic security of the state requires the development of priority directions for its strengthening. 2. determination of the consequences caused by offenses in the customs sphere given the different types of offenses, their consequences are related to the harm of the following two main groups. firstly, the economic and social ones (as a result of the entry into the market of counterfeit and pirated products, the state loses its monopoly on the export/import of certain groups of goods, especially those which are excluded from the general list of turnover and national producers suffer significant losses due to loss of demand for domestic products; shortfall in full budget revenues; encourages the spread of unfair competition). secondly, security: things, substances that pose a danger to society, life, human health, ecology, violations of human rights of individuals, in particular in the case of smuggling of cultural values, etc., get into uncontrolled circulation. the cross-border e-commerce market is projected to grow to $ 1 trillion in 2020 and about 1 billion people worldwide will make crossborder online purchases of goods. by 2022, crossborder b2c e-commerce will account for one-fifth of total online retail sales. cross-border e-commerce is projected to deliver one-fifth of total online retail sales by 2022 (national small and medium business platform, 2019). thirdly, institutional: since the intensification of the growth of smuggling and counterfeit products with the state resources invariable for their control and administration requires optimization, given the limited human resources of the customs authorities. the question of the effectiveness of combating irregularities in the customs sector and supporting public administration structures to reduce the incidence of such violations is the focus of research by such organizations and institutions, in particular: – by international organizations: within the oecd task force on countering illicit trade – illicit trade: converging criminal networks (april 2016); trade in counterfeit and pirated goods: mapping the economic impact (april 2016); governance frameworks to counter illicit trade (march 2018) and world customs organization – wco study report on cross-border e-commerce (march 2017); communication from the international customs community on cross-border e-commerce (december 2017); – eu institutions (european commission, european anti-fraud office or olaf, eu intellectual property baltic journal of economic studies 224 vol. 5, no. 5, 2019 office or euipo) – digital traceability in the fight against illicit trade: improving rules and practices (november 2017); enforcers and brand owners' empowerment in the fight against counterfeiting (october 2017); synthesis report on ipr infringement ( june 2018); – the public sector (coalition against illicit trade or cait, institute for economic research and policy consulting) – implementing digital solutions to address the issue of cross border illicit trade (november 2017); mailing and importing: realities in ukraine and international practice (october 2017). in 2018, the oecd issued the framework standards for combating illicit trade (cherkashin, 2019). 3. characteristics of legal support for the development of institutions of legal responsibility for offenses in the customs sphere the problem of the consequences of offenses, especially criminal offenses, is fundamental. discussions on the formation of approaches on the correlation of consequences and liability in the form of specific types of penalties (for crimes these are the types of punishments) are renewed both during fundamental changes of national legislation and during the introduction of responsibility for certain offenses. in particular, in ukraine as in other post-soviet countries, the outlined issue was of paramount importance when drafting the codes of independent states. at the same time proclaimed a radical change in the vector of this ratio, in order to approve the declared intentions of forming a human-centered state, with equal opportunities for each person, on the basis of equality before the law. the recognition of the need for a radical change in the approaches to the concept and content of offenses, their consequences, and punishments, the application of other penalties were reflected in the adopted national criminal codes, adopted in ukraine in 2001. compared to other countries, it was rather late, which makes it possible to conclude that the national legislator is prudent and modest about the process and expects high efficiency of novelties, practical acceptance, and recognition by society. also, it is logical to expect the harmonization of the provisions of the said code with other laws that determine the grounds and procedure for bringing to justice. at the same time, theorists and practitioners have noted both the numerous gaps in the penal code and the lack of resolution of key problems. in particular, the consequences of such a situation were systematic laws amending the new code, which only came into force. finally, today the issue of rethinking the doctrine of the offenses and the consequences that they have caused has become relevant again. the law of ukraine "on criminal offenses" was adopted and the updated criminal code is being prepared. in addition, the code of administrative offenses remains in force, taking into account the provisions of which most of the provisions of the customs code of ukraine are formulated. therefore, the problems of improving the system of general and special parts of the criminal code, the classification of crimes, in particular on the basis of the severity of the consequences caused, need to be addressed. in the current legislation, it is quite arbitrary and in the absence of unification of indicators characterizing socially dangerous consequences and objects of offenses. scientists note the lack of a systematic approach not only in regulatory acts but also among theoretical studies. noting that quite often, by characterizing one or more offenses and offering completely different amounts of damage, individual researchers do not focus on elaborating common approaches to determining the socially dangerous consequences of offenses. the optimization of the relevant parameters must be unified and of a complex nature. authors of the doctrine of criminal law of ukraine assessing the situation of developing sound value criteria of crime in the sphere of economic activity (respectively tax and customs spheres) emphasize the fact that without conducting thorough criminological and empirical studies it is unlikely to be possible to overcome the risk of quantifiability, as a consequence, failure to comply with the most relevant requirement in the above mentioned areas – the social conditionality of the criminal law well (criminal legal science in ukraine: state, problems and development, 2013). critical reflection on draft normative acts intended to determine the grounds and procedure for bringing persons to legal liability must be combined with the preparation of recommendations on the delimitation of crime, criminal offenses, administrative offenses and so-called "financial offenses". at the same time, it is important to determine the social guidelines, consequences and significance of such proposals by domestic scientists as restoration of criminal responsibility for what they consider to be unreasonably decriminalized acts (evasion of foreign exchange earnings, fictitious business, commodity smuggling, insolvency violations) (criminal law in ukraine: state, problems and ways of development, 2013). 4. conclusions considering the need to ensure the harmonization of the criminal legislation of ukraine and other european countries, it is worth paying attention to the restrictions on borrowing dualism, when criminal law is contained not only in the criminal code but also in other laws, even by-laws. on the other hand, the introduction in the legal acts of an approach recognized in most european union countries regarding the administrative liability of legal entities due to the existence of the concept of baltic journal of economic studies 225 vol. 5, no. 5, 2019 "objective guilt", according to which the intent and negligence of the offender should not be established, and it is sufficient to state the fact violation of the law by a legal person, the presence of guilt in such case is presumed. in addition to the fine, the legislation of most european countries, in particular, the code of administrative offenses of the republic of lithuania provides for the deprivation of the right to engage in entrepreneurial activities, to receive financial assistance from the state, and to confiscate property used to commit an offense (spivak, 2019). the major consequences of tax and customs offenses are that the state, and not its controlling bodies, lose control over the production and circulation of goods due to the use of various schemes to reduce the tax burden. references: iliupolu, a. (2017). proekt twinning provodyt navchannya spivrobitnykiv mytnykh orhaniv [the twinnihg project provides training for customs officers]. the official site of the state service of intellectual property of ukraine. retrieved from: http://sips.gov.ua/ (accessed 20 november 2019). (in ukrainian) kryminal’nyj kodeks ukrainy (2001). [the criminal code of ukraine]. supreme council of ukraine. № 25-26, 13.1. (in ukrainian) pashko, p., tylchyk, o., & kotukha, o. (2018). ontology of scientific cognition of shadow economy and economic shading. baltic journal of economic studies vol. 4, no. 2, pp. 151–158. doi: 10.30525/2256-0742/2018-4-2-151-158 tylchyk, o., pluhatar, t., & kotukha, o. (2018). determinants of shadowing the economy: the genesis of economic and legal doctrines. baltic journal of economic studies, vol. 4, no. 3, pp. 302–308. doi: 10.30525/2256-0742/20184-3-302-308 tylchyk, o., dragan, o., & nazymko, o. (2018). establishing the ratio of counteraction concepts to the legalization (laundering) of illegally-earned income and counteraction to the shadow economy: the importance of determining performance indicators of european integration processes. baltic journal of economic studies, vol. 4, no. 4, pp. 341–346. doi: 10.30525/2256-0742/2018-4-4-341-345 tylchyk, o. riabchenko, y., & popivnik, o. (2018). management (administrative) activity of controlling authorities in the taxation area: essence and types. baltic journal of economic studies, vol. 4, no. 5, pp. 343–351. doi: 10.30525/2256-0742/2018-4-5-343-351 tylchyk, v., bielai, s., & morozov, i. (2018). the innovative approach to crisis situations monitoring of social and economic origin that endanger the security of ukraine. baltic journal of economic studies, vol. 4, no. 3, pp. 15–21. doi: 10.30525/2256-0742/2018-4-3-15-21 tylchyk, v., jankovska, l., & khromyshin, i. (2018). national economic security: an economic and legal framework for ensuring the conditions of european integration. baltic journal of economic studies, vol. 4, no. 1, pp.  47–56. doi: 10.30525/2256-0742/2018-4-1-350-357 analiz obsyahiv kontrabandy v ukrayini: masshtaby, pryami/nepryami vtraty byudzhetu ta ekonomiky (2019). [contraband analysis in ukraine: scale, direct / indirect budget and economic losses]. retrieved november 2019, from: https://platforma-msb.org/analiz-obsyagiv-kontrabandy-v-ukrayini-masshtaby-pryami-nepryami-vtratybyudzhetu-ta-ekonomiky/ (in ukrainian) cherkashin, v., neshodovsky, i., & savarets, a. (2019). vykorystannya mizhnarodnykh poshtovykh ta ekspres vidpravlenʹ u skhemakh z ukhylyannya vid splaty mytnykh platezhiv ta shlyakhy protydiyi [use of international postal and express shipments in customs evasion schemes and countermeasures]. institute for socio-economic transformation. kyiv. retrieved from: https://apitu.files.wordpress.com/ (in ukrainian) pravova doktryna ukrayiny: kryminalʹno-pravovi nauky v ukrayini: stan, problemy ta shlyakhy rozvytku (2013). [legal doctrine of ukraine: criminal law in ukraine: state, problems and ways of development] / by head. ed. v. ya. tatsia, v. i. borisov. kharkiv: law. 5 vol. 1240 p. (in ukrainian) spivak, i. (2019). yurydychna osoba yak spetsyfichnyy sub'yekt administratyvnoyi vidpovidalʹnosti za porushennya mytnykh pravyl [legal entity as a specific subject of administrative responsibility for violation of customs rules]. law and public administration, vol. 1, pp. 65–73. (in ukrainian) baltic journal of economic studies 104 vol. 5, no. 3, 2019 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: lyutikovp@gmail.com 2 publishing house “helvetica”, ukraine. e-mail: vikhliaievm@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-3-104-107 conceptual fundamentals for reforming domestic legislation on legal entities pavlo liutikov1, mykhailo vikhliaiev2 abstract. the article highlights the need to adopt an integrated program act, which would determine not only scientific and theoretical fundamentals of the institute of legal entities as actors of administrative law but also would stipulate, based on elaborated and unified scientific provisions, the basic vectors of reforming and developing administrative legislation on a legal entity. through the prism of particular fundamentals of administrative doctrine, the current legislation, and its practical application, the authors propose to introduce a possible option of the structure and the most general and important provisions of the concept of reforming the domestic administrative law on a legal entity. key words: legislation, legal capability, concept, legal capacity, subject, legal entity. jel classification: k15, k19, k39 1. introduction active updating of the domestic legislation, which has taken place in ukraine over recent years, demonstrates a rapid tendency towards the approximation of domestic principles of legal regulation to the best european standards. moreover, such reformation processes also cover administrative law regulating the legal status of individuals in the relations with public authorities. today, there is a successful and system-related reforming in administrative law of our state that is impossible without the creation of new administrative law doctrine, the main task of which is to ensure the focus of administrative law on the priority of the rights of natural and legal entities, the observance of constitutional principles in all areas of public life without exception and to give up an outdated dogma of soviet administrative law completely. in this conte xt, v. b. averianov has repeatedly emphasized that, unfortunately, today the domestic administrative law is oriented, first of all, to meet the needs of the state (averianov, 2008) that was peculiar to the so-called soviet period of formation of administrative law. the modern development and transformation processes of administrative science require fundamentally new approaches to the study of the problems of public administration institutes, the parties of administrativelegal relations, problems of the civil service, different aspects of administrative and judicial procedures for appealing decisions, actions and inactivity of actors of public administration and their officials, etc. aimed at establishing the principle of rule of law. such conditions became a prerequisite for reviewing not only the essence of administrative law but also its subject-matter and method. thus, it had an effect not only on the system of subjects of administrative law which tends to increase the number of its elements but also on the principles and approaches of scientific research of the problem under consideration. for this reason, it is beyond argument that the issue of the analysis of the legal status of subjects of administrative law, including reconsideration of their role and significance in the modern realities and in the nearest future, come to the force. in different historical periods of formation and development of administrative law doctrine, the problems of the parties of administrative law caught the attention of many scholar lawyers. in particular, the issues were studied by v. b. averianov, o. m. bandurka, v. m. bevzenko, yu. p. bytiak, n. v. halitsyna, v. m. harashchuk, i. p. holosnichenko, s. t. honcharuk, v. m. horshenev, i. s. hrytsenko, ye. v. dodin, yu. a. dorokhina, o. f. yevtykhiiev, a. i. yelistratov, o. t. zyma, d. m. lukianets, o. ie. lunov, v. l. kobalevskyi, l. v. koval, t. o. kolomoiets, v. k. kolpakov, a. t. komziuk, m. v. kostiv, o. v. kuzmenko, t. o. matselyk, r. s. melnyk, a. v. pasichnyk, i. i. slubskyi, yu. o. tykhomyrov, o. m. yakuba, ts. a. yampolska and others. as a rule, the scientific search of the above scholars covered certain subjects, their groups, baltic journal of economic studies 105 vol. 5, no. 3, 2019 general characteristics of the whole set of subjects of administrative law, etc. however, unfortunately, only individual papers paid sufficient attention to the problems related to the participation of legal entities or their particular types on one or other administrativelegal relations (for example, papers of n. v. halitsyna (halitsyna, kolomoiets, 2011), e. e. dodina (dodina, 2002), yu. a. dorokhina (dorokhina, kolomoiets, lukashevych, 2011), i. h. petrova (petrova, 2014), o. l. zhyltsov (zhyltsov, 2006), o. t. zyma (zyma, 2001), d. m. lukianets (lukianets, 2006; 2007), t. o. kolomoiets (kolomoiets, 2004), m. v. kostiv (kostiv, 2005), a. v. pasichnyk (pasichnyk, 2012), i. i. slubskyi (slubskyi, 2008), i. o. fedotova (fedotova, 2012), v. a. kryzhanovska (kryzhanovska, 2016) et al.) but the issues of administrative-legal status of legal entities and their place in the general system of subjects of administrative law have not been studied thoroughly. due to this fact, it is worth mentioning the lack of generally accepted or even unified approaches to covering the mentioned range of problems. the article is devoted to the solution of the following main tasks. 1. to emphasize the relevance of scientific research of the problems under consideration. 2. to formulate the conceptual principles for reforming domestic administrative legislation. taking into account the above, as well as the practice of law enforcement, one can argue that there is a need to adopt an integrated program act, which would determine not only scientific and theoretical fundamentals of the institute of legal entities as actors of administrative law but also would stipulate, based on elaborated and unified scientific provisions, the basic vectors of reforming and developing administrative legislation on a legal entity, such as more general program documents including the concept of administrative reform (the president of ukraine, 1999) or the concept of administrative law reform (the verkhovna rada of ukraine, 2000), etc. in our opinion, it would be logical, in the context of the development of the general concept of administrative law reform, to elaborate and consolidate a corresponding umbrella document at the regulatory level, which would determine not only scientific and theoretical foundation of the institute of legal entities as subjects of administrative law but also would stipulate specific ways for reforming legislation in this area by applying developed and unified scientific approaches. the proposed title of such a document is the concept of reforming the domestic administrative legislation on a legal entity. on the basis of certain principles of the administrative law doctrine, the current legislation and practice of its application, we are going to propose a possible option of the structure and most general and important provisions of the concept of reforming the domestic administrative law on the legal entity. in addition, the structure of such a concept may look in the following way. 2. general provisions on a legal entity as a subject of law within this section, it is necessary to outline and cover the content of the general features and the concept of a legal entity as a subject of law in general that allows us to identify the position of a legal entity in the system of subjects of law. in particular, we propose to define a legal entity as a subject of law in the following way: it is a subject of legal relations, which has a corresponding organizational and legal form (enterprise, institution, organization, unit, etc.) of any form of ownership created and registered in accordance with the procedure established by law, possesses the necessary volume of legal capacity and capability (including passive dispositive capacity), enters into a legal relationship on its own behalf, has a sufficient degree of solitary property for participation in the legal relationship, may be the plaintiff and defendant before the court. 3. general provisions on a legal entity as a subject of administrative law within this section, it is essential to consolidate and define the essence of features and concept of a legal entity as a subject of administrative law. in particular, we can mark alternative characteristics of the subjects: legal procedure for the establishment and state registration of legal entities; administrative legal capacity and administrative legal capability as characteristics of administrative personality of a legal entity; the participation of legal entities in administrative legal relations is usually mediated by the realization of public interest, in particular, by its protection, provision, etc.; the ability of a legal entity to be a plaintiff and defendant in an administrative court (administrative procedural legal personality); organizational unity of a legal entity; business legal structure. the concept also should stipulate a unified origin moment of administrative legal capacity for all subjects of such a form of incorporation – the moment of their official registration (entering relevant data into the unified state register of legal entities and individual entrepreneurs) legally specifying the provision that all actions committed by persons prior to the state registration of a legal entity are committed on behalf of certain subject of legal relations (shareholders, founders, participants, etc.), which at that time act on their own behalf or on behalf of a group of such entities but not on behalf of the legal entity which has not yet been created. moreover, the concept should provide that administrative legal capacity originates along with administrative legal capability – at the moment of registration of a legal entity, and their range depends on some factors and conditions. it seems fundamental since, in our opinion, administrative legal capacity and administrative legal capability are dynamic, varying terms (for example, the scope of the administrative personality of a legal entity depends on the availability or baltic journal of economic studies 106 vol. 5, no. 3, 2019 receipt of licenses, permits, etc.). in addition, the scope of administrative legal capacity and the system of the socalled opportunities to exercise rights and obligations (administrative legal capacity) also depends on a number of other factors and conditions external (caused by legal requirements and provisions) and internal (conditioned by the norms of constituent documents of a legal entity) nature – the purpose, tasks, functions, internal structure, and composition of the entity, the procedure and way of its establishment, reorganization and liquidation, forms and methods of activity, form of ownership and funding sources, etc. therefore, the conclusion that legal capacity is stable and the legal capability is a dynamic feature of legal personality is not really logical as it is stated in a large number of scholarly papers (for example, theses of yu. m. kozlov (kozlov, 1999), t. o. matselyk (matselyk, 2011) and other scholars). it should be noted that the above general principles of the administrative and legal status of legal entities should be the basis for considering the legal entities as subjects of administrative law and determine the vectors for the formation of legislation in this area. 4. special aspects of the implementation of the administrative-legal status of legal entities in public administration under the framework of section iii, it seems logical to determine the peculiarities of participation of legal entities and their kind in relevant administrative legal relations arising in public administration, in particular: while exercising the state and local self-government powers, state registration, licensing, monitoring, and attestation procedures. in addition, it is necessary to determine the general aspects of the administrative and legal status of public administration bodies with an emphasis on their operating and service orientation when providing various administrative services (including in the process of registration, permitting, monitoring, attestation procedures), administrativelegal status of private legal entities, limits of the exercise of their rights and obligations (powers), increase of non-mandatory principles in forming and developing public relations, etc. among specific proposals to the current legislation, the concept may include the need to fix, at the legislative level, the administrative-legal status of the cabinet of ministers of ukraine, executive office of the president of ukraine, and the verkhovna rada of ukraine with their indication as the legal entities according to the form of incorporation that is not available in the modern legislation of ukraine today. in terms of legislation, it is also essential to consolidate a norm concerning the fact that administrative legal capacity and administrative legal capability of central executive bodies take place simultaneously because their origin is not always in step today. within the section, the concept has to centre around administrative contract as a special form for establishing horizontal links between legal entities in public administration, the institute of which, unfortunately, has not yet been sufficiently regulated in terms of legislation. in particular, in this regard, the concept has to propose the idea that the institute of administrative contract with its legal definition, principles of the implementation of its provisions, clear and unified procedures for its conclusion, modification and break is subjected to consolidation within the framework of the future administrative-procedural code – in its separate section. the very approach seems the most logical and reasonable and can simplify the practice of concluding administrative contracts in public administration. 5. special aspects of the implementation of the administrative and legal status of legal entities in respect of the application of the measures of administrative enforcement and administrative liability in this section, the concept has to fix the general issues concerning the participation of legal entities the sphere of legal relations under consideration. moreover, within section iv, the concept has not only to specify characteristics of administrative-legal status of legal entities and its implementation but also to identify the fundamentals for unification of the measures of administrative enforcement, which can be applied by authorised subjects, as well as to define in a clear way the very system of jurisdictional bodies endowed with the authority to use such measures of influence. at the same time, the concept has to provide the peculiarities of the implementation of the administrative and legal status of both jurisdictional bodies and legal entities, which are subjected to the measures of administrative enforcement, including subjects of an administrative misdemeanour, and consequently, to propose concrete ways of reforming the institute. in particular, in the content of the concept, it is important to consolidate the unified principles of administrative liability of legal entities with a clear definition of the guilt of a legal entity, penalties that can be applied to such entity, the system of jurisdictional bodies, which will be authorized to consider cases of administrative misdemeanours committed by a legal entity and to adjust these provisions to the normative legal acts establishing the administrative and legal status of the bodies of public administration, including their powers to impose an administrative penalties. 6. conclusions it is essential to mark that in this case we offer only an alternative model of the structure of such a concept and present it for discussion and consideration of its content. as it has been mentioned, the purpose of the baltic journal of economic studies 107 vol. 5, no. 3, 2019 concept is to unify both doctrinal and legal provisions on a legal entity that makes it possible to reform the domestic administrative legislation on a legal entity systematically and gradually by virtue of the so-called clearly written “roadmap”. reforms provided by the concept must be implemented consistently and in compliance with the deadlines for the implementation of a specific measure. indeed, as rightly pointed out by legal scholars and experts in the theory of rulemaking, a solid reform of the law will be real and effective only if it is conducted solely on the basis of the developed and statutory concept of the implementation of reforming. references: averianov, v. b. (2008). pryntsyp verkhovenstva prava u diialnosti derzhavy ta v administratyvnomu pravi [principle of the rule of law in government activities and administrative law]. kyiv: konus-yu. (in ukrainian) halitsyna, n. v., kolomoiets, t. o. (2011). administratyvno-pravove rehuliuvannia poriadku stvorennia i diialnosti tovarystv z obmezhenoiu vidpovidalnistiu v ukraini: monohrafiia [administrative-legal regulation of the procedure for establishing and activities of limited liability companies in ukraine: a monograph]. zaporizhzhia: zaporizhya national university. (in ukrainian) dodina, ye. ie. (2002). administratyvno-pravovyi status hromadskykh orhanizatsii v ukraini [administrative-legal status of non-governmental organisations in ukraine] (phd thesis), odesa. (in ukrainian) dorokhina, yu. a., kolomoiets, t. o., lukashevych, v. h. (2011). zabezpechennia prav yurydychnykh osib v administratyvnykh provadzhenniakh: monohrafiia [provision of the rights of legal persons in administrative proceedings: a monograph]. kyiv: istyna. (in ukrainian) petrova, i. h. (2014). administratyvna vidpovidalnist yurydychnykh osib u sferi okhorony ta vykorystannia pryrodnykh resursiv [administrative liability of legal persons in the sphere of protection and use of natural resources] (phd thesis), kyiv. zhyltsov, o. l. (2006). administratyvna vidpovidalnist yurydychnykh osib: protsesualno-pravovyi aspekt [administrative liability of legal persons: procedural-legal aspect] (phd thesis), zaporizhzhia. (in ukrainian) lukianets, d. m. (2006). administratyvno-deliktni vidnosyny v ukraini: teoriia ta praktyka pravovoho rehuliuvannia: monohrafiia [administrative-tort relations in ukraine: theory and practice of legal regulation: a monograph]. sumy: vtd «universytetska knyha». (in ukrainian) lukianets, d. m. (2007). rozvytok instytutu administratyvnoi vidpovidalnosti : kontseptualni zasady ta problemy pravorealizatsii [development of the institute of administrative liability: conceptual fundamentals and enforcement challenges] (phd thesis), kyiv. (in ukrainian) zyma, o. t. (2001). administratyvna vidpovidalnist yurydychnykh osib [administrative liability of legal persons] (phd thesis), kharkiv. (in ukrainian) kolomoiets, t. o. (2004). administratyvnyi prymus u publichnomu pravi ukrainy: teoriia, dosvid ta praktyka realizatsii: monohrafiia [administrative coercion in public law of ukraine: theory, experience and implementation practice]. zaporizhzhia: polihraf. (in ukrainian) kostiv, m. v. (2005). administratyvna pravosubiektnist yurydychnykh osib ta osoblyvosti yii realizatsii v administratyvno-deliktnykh vidnosynakh [administrative identity of legal persons and special aspects of its implementation in administrative-tort relations] (phd thesis), kyiv. (in ukrainian) pasichnyk, a. v. (2012). pravovi zasady nabuttia i prypynennia administratyvnoi pravosubiektnosti yurydychnymy osobamy pryvatnoho prava [legal fundamentals for acquisition and termination of administrative legal identity by legal persons of private law] (phd thesis), kyiv. (in ukrainian) slubskyi, i. i. (2008). administratyvna vidpovidalnist yurydychnykh osib [administrative liability of legal persons] (phd thesis), kyiv. (in ukrainian) fedotova, i. o. (2012). yurydychni osoby yak subiekty mytnykh pravovidnosyn [legal persons as subjects of customs legal relations]. mytna sprava, 2(80), 9−14. (in ukrainian) kryzhanovska, v. a. (2016). administratyvna vidpovidalnist v administratvynomu pravi ukrainy [administrative liability in administrative law of ukraine] (phd thesis), lviv. (in ukrainian) state statistics service of ukraine. kilkist subiektiv yedrpou za pravovym statusom [number of subjects of usreou with the legal status]. retrieved from: http://www.ukrstat.gov.ua/ the president of ukraine (1999). kontseptsiia administratyvnoi reformy v ukraini: ukaz prezydenta ukrainy vid 22 lypnia 1998 roku [concept of administrative reform in ukraine: the decree of the president of ukraine as of july 22, 1998]. ofitsiinyi visnyk ukrainy, 21, 32. (in ukrainian) the verkhovna rada of ukraine (2000). proekt postanovy pro kontseptsiiu reformy administratyvnoho prava ukrainy vid 11 veresnia 2000 roku [draft decision on the concept of reform of administrative law in ukraine as of september 11, 2000]. retrieved from: http://w1.c1.rada.gov.ua/pls/zweb_n/webproc4_2?skl=4&pf3516=6054 kozlov, yu. m. (1999). admynystratyvnoe pravo: uchebnyk [administrative law: a textbook]. moscow: yuryst. (in russian) matselyk, t. o. (2011). administratyvna pravosubiektnist yak ontolohichna zdatnist osoby buty subiektom administratyvnoho prava [administrative legal identity as an ontological human capability to be a subject of administrative law]. naukovyi visnyk chernivetskoho universytetu. pravoznavstvo, 597, 90−94. (in ukrainian) baltic journal of economic studies 136 vol. 6, no. 3, 2020 corresponding author: 1 uzhhorod national university, ukraine. e-mail: maryna.korol@uzhnu.edu.ua orcid: https://orcid.org/0000-0003-4031-0858 doi: https://doi.org/10.30525/2256-0742/2020-6-3-136-142 dynamics of main indicators of the canadian banking system maryna korol1 abstract. relevance of research. during the global financial collapse of 2008–2009, canadian banks demonstrated stability and vastly avoided the international crisis. there was a view that canada’s banking system was strict and overly risk-oriented, but after the crisis, it was recognized as logical in terms of lending, which required careful government supervision and regulation based on the principles of security and reliability. in fact, the world economic forum recognizes canadian banks as the most stable in the world. so, all mentioned above prompted us to study the dynamics of the main indicators of the canadian banking system. the aim of the study is to summarize and characterize the existing trends of banking system evolution in canada. methodological basis of the study is based on the analysis of the study of the canadian banking system according to the indicators of the number of banking institutions, their profitability / loss, the quality of the loan portfolio and analysis of the largest banks in the country. a systemic analysis of the quantitative and qualitative composition of the above-mentioned banking indicators, synthesis and generalization were used to generalize and formulate conclusions. scientific results. this article is devoted to the study of the dynamics of the main indicators of the canadian banking system during the period from 2000 to 2019 inclusively. it is argued that the number of commercial banks has had a positive dynamics during the analyzed period, even the period of the global financial crisis of 2008-2009 has not reduced their number, which indicates the stability and prudent policy of commercial banks and the central bank as a whole. it has been established that 2019 is the year of the historical maximum assets of the canadian banking system (more than 277% of canada’s gdp). it is shown that the assets of eight largest banks in canada account for 91% of the total assets of the banking sector. a record decline in the bank’s profits was recorded in 2009. the quality of the loan portfolio of commercial banks in canada since 2009 shows a significant decrease in the share of outstanding loans. the practical significance of the study is to rate the strengths and weaknesses of the canadian banking system. significance / originality. the results achieved form an integrated view of the functioning of the canadian banking system. the following studies will focus on methods and models for verifying the stability of banking systems, including the canadian banking system. key words: banks, banking system, assets and liabilities of commercial banks, quality of loan portfolio of commercial banks. jel classіfіcatіon: e51, e59, g21, g34 1. introduction the canadian financial system is largely a product of the banking model developed by alexander hamilton, the first us treasur y secretar y. adam short, a historian-economist who wrote a series of articles for the journalists of the canadian association of bankers at the turn of the twentieth centur y, went so far as to call hamilton “the father of the canadian banking system”. today, the canadian banking model remains true to hamilton’s ideal. the main idea was that the links between financially oriented structures at the national level and the government under any normal political conditions would gain stability, inspire trust and respect within the state and abroad. we share the view of scientists who argue that the relative stability of canadian banks during the recent crisis compared to the united states reflected the original institutional foundations laid in the early nineteenth century. the canadian concentrated banking system, which developed by the end of the twentieth century, absorbed key sources of systemic risk – the mortgage market and investment banking – and was tightly regulated by a single general regulator in contrast to the relatively weak, fragmented and crisis-prone us banking system (bordo, redish & rockoff, 2011). baltic journal of economic studies 137 vol. 6, no. 3, 2020 stability of canadian banks during the financial crisis can be explained by the fact that, in canada, the banking system has been built on the basis of large financial institutions, scale and diversification of which have strengthened their resilience, while the us system is fragmented, creating small and vulnerable financial institutions, while developing a powerful market and a confusing set of rules for financial institutions. however, there are scholars who argue that despite the fact that the canadian banking system is more resilient in times of crisis than the us, in the context of market banking, the winning position is occupied by the us banks (calmes, théoret, 2013). so, what is the secret of the canadian banking? according to l. booth (booth, 2009), the ultimate secret is that the heads of all canadian banks are commercial bankers, not investment bankers, so the focus remains on mutual banking. the above-mentioned works of scientists and many other works have inspired the study of the dynamics of the canadian banking system. 2. number of banks and departments of the canadian banking system the need to adapt to changing circumstances and opportunities is not new to the canadian banking system. for almost two centuries, the development of the system involved: geographical expansion, consolidation of the industry, expansion of a wide range of financial services, etc. canada has a mature, competitive and centrally regulated banking system, the government of which believes that there should be a clear distinction between the financial services sector and the commercial sector of the economy. the current state of the canadian banking system can best be understood and interpreted by studying the dynamics of its indicators such as the number of banking institutions, their profitability/loss, the quality of the loan portfolio and analysis of the largest banks in the country. the country’s eight largest banks have developed significant business, opened branches in foreign countries, including the west indies. this is partly due to the commercial relations established there, and partly due to the nature of the canadian economy (active export and import trade has made them a significant trader in foreign currency). in general, canadian banks have survived the financial crisis much better than most of their international competitors. thus, based on the data shown in figure 1, in 2019, there were 85 financial institutions in the country, 53 of them were domestic banks and subsidiaries of foreign banks, the number of the latter increased by 43% during the study period. even the period of the financial crisis of 2008-2009 did not affect the decrease in the number of banks, which indicated a balanced policy of commercial banks and the central bank in general. regarding the number of branches, since 2014, there has been a negative trend, a decrease of 7.21%. however, 42% of all branches operate in ontario. what concerns ontario, it is the national financial center of canada, with about 12,000 firms offering a wide range of financial services, from retail banking and lending, capital management and payment processing. banks make up the largest part of the ontario financial services segment. having one of the highest concentrations of banks, capital markets and insurance companies in the world, ontario is a center of canada’s financial services (ontario canada, 2019). in 2018, canada’s six largest banks managed 5,578 branches in the country, which is 2.9% less than ten years ago. although the decline is not as dramatic as once predicted by those who believed that atms and mobile banking would stop the spread of traditional branches and affiliates, the number of which does not correlate with population growth. however, it is still an important part of banking, and in canada, the two largest lenders are putting pressure on competitors, increasing 37 37 41 42 40 41 42 44 46 49 48 47 47 50 50 53 24 21 20 19 21 20 20 21 17 16 15 15 15 15 15 16 25 23 21 19 19 20 20 21 21 18 16 16 16 17 17 16 86 81 82 80 80 81 82 86 84 83 79 78 78 82 82 85 0 20 40 60 80 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 subsidiaries of foreign financial institutions domestic trust and loan companies and associations domestic banks and subsidiaries total number of institutions figure 1. dynamics of the total number of canada’s financial institutions, 2004-2019 source: compiled by authors based on materials of the cdic (cdic, 2009; cdic, 2015; cdic, 2020) baltic journal of economic studies 138 vol. 6, no. 3, 2020 profits per branch. the royal bank of canada and the bank of toronto-dominion earn $14 million a year from each of their internal branches, outpacing competitors. scotia earned $11 million, cibc – $10.2 million, bmo – $9.2 million and national bank – $8.2 million. as of 2018, canada had 20 branches for every 100,000 adults, which less comparing to about 25 of them before the 2008 financial crisis, according to the world bank. in comparison, the number of branches in the united states was 31 per 100,000 adults, and in 2008 – 35 (doug, 2019). 3. assets and liabilities of the canadian banking sector at the end of december 2019, the total assets of canadian banks amounted to $6.4 trillion (figure 3), which is more than 277% of canada’s gdp (forecast). thus, canada’s assets reached a new all-time high, and the lowest level was recorded – 104% of gdp in 1988. canada ranked 10th out of 96 countries in terms of banking assets as a share of gdp, 20 places above the position observed 10 years ago. canada’s average gdp growth rate from 2000-2019 is 8% (helgi analytics, 2019). it should be noted that the share of assets of the eight largest banks in canada in 2019 account for 91% of total assets. however, their share during the study period increased from 88% to 91%. at the end of 2019, the share of assets in the national currency in banks’ portfolios was 47% or $2.97 trillion, 7% down. the volume of assets in foreign currency for the same period showed 1 09 5 1 11 2 1 11 5 1 11 9 1 11 0 1 05 6 1 04 3 2 69 9 2 72 0 2 72 2 2 69 7 2 63 6 2 56 9 2 49 1 67 1 69 8 70 3 69 8 69 8 69 1 68 2 79 6 81 7 82 8 82 3 81 6 80 9 80 65900 6020 6140 6140 6150 6180 6 205 6 321 6 348 6 303 6 190 6 026 5 890 0 1000 2000 3000 4000 5000 6000 7000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 yukon nwt/nunavut british columbia alberta saskatchewan manitoba ontario quebec new brunswick prince edward island nova scotia newfoundland total banks` branches figure 2. dynamics of the number of branches, 2006-2018 source: compiled by authors based on materials of the canadian bankers association, szmigiera (canadian bankers association, 2020; szmigiera, 2020) 0,00 1000,00 2000,00 3000,00 4000,00 5000,00 6000,00 7000,00 2011 2012 2013 2014 2015 2016 2017 2018 2019 canadian western bank laurentian bank of canada national bank of canada cibc bmo financial group figure 3. dynamics of canadian banking sector assets, 2011-2019 source: compiled by authors based on materials of the canadian bankers association, banks around the world, bank of canada (canadian bankers association, 2018; banks around the world, 2019; bank of canada, 2020) baltic journal of economic studies 139 vol. 6, no. 3, 2020 an increase of 29% and amounted to 53% or $3.403 trillion (bank of canada, 2020 в). in 2019, the largest share in the asset portfolio in canadian dollars is occupied by mortgages, which amounted to $1.31 trillion. the volume of housing mortgages at the end of 2019 increased by 37% and amounted to 41% of the total portfolio of assets and 19% of assets in national currency. the share of corporate mortgages was 6%, and the share of total assets and assets in canadian dollars was 3% and 1%, respectively (bank of canada, 2020 а). the total amount of loans in canada’s asset portfolio is 64% and has been in this range since 2002 (2002 – 57%, 2010 – 55% (bank for international settlements, 2018). securities account for 19% of commercial banks’ assets at the end of 2019, of which foreign currency securities have the largest share – 14% (bank of canada, 2020 а). individual loans have the largest share in the total value of loans in the national currency at the end of 2019, which amounted to $528.61 billion or 18% and 8% of assets in national currency and in total assets, respectively. also other loans have high share, including interim financing or “bridge financing” designed to cover short-term business needs, which amounted to $375.27 billion and amounted to 13% and 6% of total assets in national currency and total assets, respectively (bank of canada, 2020 а). regarding the liabilities of commercial banks, during the period under study there is a relatively positive dynamics (figure 4). the financial crisis of 2008-2009 did not have an extremely negative effect on the liabilities of commercial banks, reducing total volumes by only 5%. thus, the liabilities of commercial banks in 02.2020 increased 4 times compared to 2000. regarding their structure, starting from 2019, the largest share is occupied by demand deposits of individuals. 4. net income of banks in the canadian banking system regarding the net profits of banks, their record decrease was recorded in 2009 – by 88% (figure 5). as of 2019, the net profit of banking institutions in canada showed a growth of 2% and amounted to 49.38 billion canadian dollars. in general, after the financial crisis, the net profit of commercial banks showed a positive trend, but this year the growth was the lowest in 10 years. all income items of canadian commercial banks in 2019 showed a positive trend (slightly weaker than last year), except for income from securities transactions, which decreased by 18% compared to last year (office of the superintendent of financial institutions, 2020). according to analysts, profitability was limited by such factors as falling income from capital market instruments and higher reserves for bad loans. analysts expect earnings per share (eps) to increase by only 3% – 4% in fiscal year of 2019, according to a survey by reuters. this would be the slowest growth rate since 2009. according to gabriel deschaine, an analyst at the national bank of canada, banks’ investments to -1000000 0 1000000 2000000 4000000 6000000 7000000 20 01 -0 101 20 02 -0 101 20 03 -0 101 20 04 -0 101 20 05 -0 101 20 06 -0 101 20 07 -0 101 20 08 -0 101 20 09 -0 101 20 10 -0 101 20 11 -0 101 20 12 -0 101 20 13 -0 101 20 14 -0 101 20 15 -0 101 20 16 -0 101 20 17 -0 101 20 18 -0 101 20 19 -0 101 20 20 -0 101 20 20 -0 201 canadian dollar assets total foreign currency assets 5000000securities issued or guaranteed by canada, canadian province, canadian municipal or school corporation other canadian dollar assets customers' liability under acceptances personal loans other business loans reverse repos 3000000 figure 4. dynamics of liabilities and capital of banks in canada, 2001-02.2020 source: compiled by authors based on materials of the bank of canada (bank of canada, 2001 a; bank of canada, 2020 в) baltic journal of economic studies 140 vol. 6, no. 3, 2020 expand their business in capital markets, especially in the united states, have not yet yielded income, but the cost of this strategy has certainly had an impact. also, a significant impact on the slowdown in the dynamics of profits of commercial banks could have an increase in the results of 2019 deductions to the reserve for impairment by 27% caused by consumer insolvency, which in september 2019 increased by 19% (saminather, 2019). among interest income, the largest share is accounted for loans, 24% of which are loans to individuals for non-business purposes ($45.1 billion, 10 ,0 2 10 ,3 3 7, 75 12 ,2 8 14 ,6 6 13 ,5 2 20 ,7 1 21 ,1 4 13 ,6 5 16 ,1 3 22 ,5 2 25 ,8 4 31 ,1 6 33 ,4 4 35 ,7 0 37 ,4 1 39 ,4 1 45 ,6 1 49 ,0 2 49 ,9 1 3% -25% 59% 19% -8% 53% 2% -35% 18% 40% 15% 21% 7% 7% 5% 5% 16% 7% 2% -40% -20% 0% 20% 40% 60% 80% -40,00 -30,00 -20,00 -10,00 0,00 10,00 20,00 30,00 40,00 50,00 60,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 net income (billion dol.) dynamics figure 5. net income of canadian banks, 2000-2019 source: compiled by authors based on materials of the office of the superintendent of financial institutions (office of the superintendent of financial institutions, 2020) + 11%) and 32% are other loans. mortgage revenues in 2019 accounted for 25% of interest income and reached $47.5 billion. (office of the superintendent of financial institutions, 2020). another feature that showed a negative trend in 2019 was the non-interest income received from insurance, which amounted to $4.9 billion and decreased by 3% compared to 2018 and account for 6% of non-interest income (office of the superintendent of financial institutions, 2020). regarding net income in terms of the largest banks, they are distributed according to the data in figure 6. 7, 54 8, 34 9, 00 10 ,0 3 10 ,4 6 11 ,4 7 12 ,4 3 12 ,8 7 6, 47 6, 64 7, 88 8, 02 8, 94 10 ,5 2 11 ,3 3 11 ,6 9 6, 47 6, 61 7, 30 7, 21 7, 37 8, 24 7, 92 8, 80 4, 19 4, 20 4, 33 4, 41 4, 63 5, 35 5, 45 5, 76 3,34 3,35 3,22 3,59 4,30 4,72 5,28 5,12 0,00 10,00 20,00 30,00 40,00 50,00 60,00 2012 2013 2014 2015 2016 2017 2018 2019 canadian western bank laurentian bank of canada national bank of canada cibc bmo financial group scotiabank td bank financial group royal bank of canada total net income figure 6. net income of the banking system of canada in terms of the largest banks, 2012-2019 source: compiled by authors based on materials of the canadian bankers association, office of the superintendent of financial institutions (canadian bankers association, 2018; office of the superintendent of financial institutions, 2020) baltic journal of economic studies 141 vol. 6, no. 3, 2020 5. the quality of the loan portfolio of canada’s commercial banks let us analyze the quality of the loan portfolio of canada’s commercial banks. in 2002, the highest share of non-performing loans to total gross loans was observed at the rate of 1.26% (figure 7). since 2009, the canadian banking sector has shown a significant decrease in the share of outstanding loans (-0.82%, as of 2017), which indicates a prudent credit policy in the banking sector. 6. conclusions the canadian banking system is an efficient commercial banking organization with an almost 0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1,8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 bank non-performing loans to gross loans for canada figure 7. dynamics of the share of outstanding loans, 2000-2017 source: compiled by authors based on materials of the world bank (world bank, 2019) perfect system of operation. based on the study, the following conclusions can be drawn: – it is established that even the period of financial crisis has not affected the number of banks in canada. regarding branches, since 2014 their negative dynamics has been observed; – the assets and liabilities of commercial banks for the study period characterize the positive dynamics. the period of the financial crisis of 2008-2009 reduced the net income of canadian banks, while 2019 showed an increase of 2%; – the dynamics of the share of outstanding loans in the banking sector since 2009 shows a significant decrease. in general, the dynamics of the main indicators of the canadian banking system for the period under study indicates their positive dynamics, except for the years of the financial crisis of 2008-2009. references: bank for international settlements (2018). structural changes in banking after the crisis, no. 60. retrieved from: https://www.bis.org/publ/cgfs60.pdf (accessed 10 july 2020). bank of canada (2020 а). retrieved from: https://www.bankofcanada.ca/valet/observations/v53006708,v36 935,v53006709,v53006711,v53006712,v53006710,v37324,v36907,v36908,v36905,v36896,v36921,v3692 4,v36926,v36927,v36920,v53006713,v36918,v36919,v53006714,v36933,v36934,v36885,v36884,v36883/ csv?start_date=1980-01-01&end_date=2020-04-01 (accessed 10 july 2020). bank of canada (2020 в). retrieved from: https://www.bankofcanada.ca/valet/observations/v53006715,v530 06716,v36945,v53006717,v53006718,v53006719,v53006720,v53006721,v53006722,v36939,v36965,v3697 1,v36972,v36956,v36968,v36960,v36961,v36962,v36964,v41598372,v53843372,v36938,v36937,v36936/ csv?start_date=2000-01-03&end_date=2020-02-01 (accessed 10 july 2020). banks around the world (2019). list of banks in canada 2011-2018. retrieved from: retrieved from: https://www.relbanks.com/canada (accessed 10 july 2020). bordo, м., redish, а., & rockoff, н. (2011). why didn’t canada have a banking crisis in 2008 (or in 1930, or 1907, or ...)? retrieved from: https://www.nber.org/papers/w17312 (accessed 10 july 2020). booth, l. (2009). the secret of canadian banking: common sense? world economics, vol. 10, no. 3. retrieved from: https://www.researchgate.net/profile/laurence_booth/publication/46547316_ the_secret_of_canadian_banking_common_sense/links/00b4951a6090fe60dd000000.pdf (accessed 10 july 2020). calmes, c., & théoret, r . (2013). is the canadian banking system really “stronger” than the us one?”. retrieved from: http://www.cifo.uqam.ca/publications/pdf/2013-03.pdf (accessed 10 july 2020). baltic journal of economic studies 142 vol. 6, no. 3, 2020 canadian bankers association (2020). bank branches in canada. retrieved from: https://cba.ca/bank-branchesin-canada (accessed 10 july 2020). canadian bankers association (2018). database of domestic banks’ financial results fiscal year-end 2012-2017. retrieved from: https://cba.ca/bank-financial-results-annual (accessed 10 july 2020). cdic (2009). annual report 2008. retrieved from: https://www.cdic.ca/wp-content/uploads/2008-annualreport.pdf (accessed 10 july 2020). cdic (2015). annual report 2014. retrieved from: https://www.cdic.ca/wp-content/uploads/2014-annualreport.pdf (accessed 10 july 2020). cdic (2020). annual report 2019. retrieved from: https://www.cdic.ca/wp-content/uploads/cdic-2019-annualreport.pdf (accessed 10 july 2020). doug, a. (2019). branches still pay off for canada’s banks even in the app era. journal bloomberg. retrieved from: https://www.bloomberg.com/news/articles/2019-12-10/branches-still-pay-off-for-canada-s-banks-evenin-the-app-era (accessed 10 july 2020). helgi analytics (2019). bank assets (as % of gdp) in canada. retrieved from: https://www.helgilibrary.com/ indicators/bank-assets-as-of-gdp/canada (accessed 10 july 2020). office of the superintendent of financial institutions (2020). financial data for banks. retrieved from: https://www.osfi-bsif.gc.ca/eng/wt-ow/pages/findat.aspx (accessed 10 july 2020). ontario canada (2019). invest in ontario. financial services. retrieved from: https://www.investinontario.com/ banking#bring-your-bank (accessed 10 july 2020). saminather, s. (2019). canadian banks are about to report their slowest earnings growth since the financial crisis. journal reuters. retrieved from: https://business.financialpost.com/news/fp-street/rpt-preview-canadian-banksset-to-report-slowest-earnings-growth-since-crisis-on-confluence-of-headwinds (accessed 10 july 2020). szmigiera, m. (2020). number of bank branches in canada 2000-2018. retrieved from: https://www.statista.com/ statistics/594343/number-of-bank-branches-canada/#statisticcontainer (accessed 10 july 2020). world bank (2020). bank non-performing loans to gross loans for canada. retrieved from: ttps://fred.stlouisfed.org/ series/ddsi02caa156nwdb (accessed 10 july 2020). world bank (2019). bank non-performing loans to total gross loans (%). international monetary fund, global financial stability report. retrieved from: https://data.worldbank.org/indicator/fb.ast.nper .zs (accessed 10 july 2020). baltic journal of economic studies 118 vol. 5, no. 1, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-1-118-125 intellectually-innovative clusters as the basis of industrial potential development oleg kuzmin1, natalia stanasiuk2, olexandra vivchar3 abstract. the purpose of the paper is the formation of a new type of industrial clusters as a modern basis for the spatial development of industrial potential. methodology. the methodological basis of the article is methods of scientific cognition, which allow revealing the essence of the clustering process. in particular, the following methods are used: fuzzy cluster analysis – for the construction of intellectual-innovative industrial clusters; grouping – for the determination of types of intellectually-innovative industrial clusters; systematization – for studying foreign experience; abstraction – for the formation of theoretical generalization and conclusions. results. foreign experience of effective cluster structures creation in the industrial sector of the economy is analysed and the necessity of establishing cooperation between education, science, and business structures is proved. by means of the indistinct s-averages method, taking into account indicators of development of industrial potential intellectual and innovative components, measures matrices of ukraine’s administrative-territorial units belonging to four clusters have been developed, each of the clusters differs by the development level of corresponding component (very high, high, average, and low). on the basis of the achieved results, the conclusion is made that it is necessary to create intellectually-innovative industrial clusters in which administrative-territorial units with the high development level of intellectual potential will act as a catalyst of innovative development of the industrial potential. the role of the state is defined as an activator of establishing cooperation between education, science, and business structures. it was offered to work out the conception of cluster policy and distinguish pilot projects in the industrial sector of the economy taking into account modern directions of the global economic development. global practical experience of stimulation of industrial potential innovative development is generalized on a cluster basis. with the aim to institutionalize the activity of intellectually-innovative industrial clusters creation, it is offered to use a cluster passport with the introduction of such sections as innovativeness of a project and relevance to the strategic targets of the state economic development. practical implications. practical implications are related to the possibility of establishing an effective dialogue not only between business structures but also with educational establishments, scientific institutions, and government bodies. value/originality lies in the development of a typology of industrial clusters taking into account indicators of development of intellectual and innovative components and the formation on this basis of the cluster concept of the development of industrial potential. key words: cluster, innovations, innovative development, industrial potential, intellectual component. jel classification: o31, f63 corresponding author: 1 lviv polytechnic national university, ukraine. e-mail: oleg.y.kuzmin@lpnu.ua orcid: https://orcid.org/0000-0002-6014-6437 2 lviv polytechnic national university, ukraine. e-mail: ovssns@ukr.net orcid: https://orcid.org/0000-0002-6885-9431 3 lviv polytechnic national university, ukraine. e-mail: 63vivchar@gmail.com 1. introduction under the condition of the current situation of protracted financial-economic crisis in ukraine, cluster organization of industrial production is considered to be a stimulator of transition to the innovative development model. the cluster approach to the industrial potential development will promote the increase of its competitiveness due to establishing an effective dialogue not only between business structures but also with educational establishments, scientific institutions, and government bodies. we should note that, according to the research conducted by the international agency bloomberg in 2016, ukraine is in the list of top-50 countries of the world by the innovative index value and on the 5th place by the level of educational component development (bloomberg baltic journal of economic studies 119 vol. 5, no. 1, 2019 innovation index, 2016). creation of single european scientific space still remains an urgent issue nowadays, which will allow creating favourable conditions to carry out scientific researches and increase the effectiveness of scientific developments. creation of intellectually-innovative industrial clusters in ukraine will get the knowledge resource closer to enterprise structures, make the transfer of knowledge faster, and provide a gradual transition to the development of industrial potential on the innovative basis. to achieve this purpose, there are the following tasks: to study foreign experience of effective cluster structures creation in the industrial sector of the economy; to carry out clusterization of administrative-territorial units of ukraine by the indexes of development of industrial potential intellectual and innovative components; to work out the conceptual principles of intellectuallyinnovative industrial clusters creation. 2. foreign experience of cluster creation it should be noted that а. marshal was among the first who defined advantages of establishing network collaboration between economic agents, examining the industrial regions of great britain (industrial agglomerations) (2008). ideas as to advantages of network collaboration became the basis for cluster theory development. according to м. porter, a cluster unites not only interdependent companies but also scientific research institutions, higher educational establishments, and other organizations that complement each other (1990). in european countries, cluster development of industrial potential is one of the conditions of competitiveness growth of national economy. in particular, strategy of industry competitiveness growth on cluster basis was worked out in slovenia. the core documents of cluster policy development in the mentioned countries are the european regional charter and the cluster initiative greenbook. successful operation of industrial clusters is determined by maintaining a stimulation policy aimed at establishing cooperation between research institutions, universities, and industrial sector. the example of such successful collaboration is silicon valley in the usa, establishing partnership relations between stanford university and hi-tech enterprises in the field of electronics became the basis for its development. as a result, the level of economic development of the region rose considerably, new workplaces appeared, and the level of innovativeness of industrial projects increased. the launch of the plant producing electronic computing machines in 1956 became a significant result of the introduction of scientific developments in industrial production. today, clusterization is the basis for defining priorities of innovative policy and working out investment-innovative programs in the region. thus, the intellectual potential is the basis for innovative development of the industrial potential, and its accumulation will become the key factor for the transition to the innovative economy. therefore, higher educational establishments and scientific research institutions must occupy a central position in modern innovative clusters. in this case, the role of academic establishments is to train proper specialists, and upgrade the employees’ qualification, the task of scientific institutions is to carry out scientific researches focused on market needs. taking into account foreign experience, colleges must be located near the sites of industrial enterprises in order to provide practical part of the educational process, and universities location should be in the centre of development of a certain type of industrial activity in order to ensure the solving of current and strategic development issues (druhov, 2012). there is no single opinion as to scientific research institutions because scientific structural units of universities can carry out scientific researches. the growth of their activity will lead to developing a new type of research universities able to become centres of cluster formation. in е. mansfield’s opinion, scientific researches of the applied nature are the basis of successful economic development of a country, and improvement of national economic competitiveness (1998). h. etzkowitz and l. leydesdorff consider the development of “triple spiral” between a production sector (enterprise structures), intellectual infrastructure (research institutions, universities), and management bodies (state authorities, local self-government authorities) to be the basis for the economic development of innovative type (2000). we agree that establishing effective ties between the mentioned participants will allow setting up a creative environment in the country capable of generating new knowledge with the aim of their practical application in the industrial economic sector. 3. clusterization of administrative-territorial units of ukraine according to ukrainian scientists, cluster approach is an effective means of transition of industrial potential onto innovative development basis (zhalila, 2014; kulishov, 2013; khmara, 2013). in addition, an innovative cluster gets a boost for the development due to the high innovative ability of cluster’s participants (mazniev, 2013). l. і. fedulova points out that development of clusterization will promote technological development of industrial potential that will assure organization of much higher technological approaches in the national economy (2010). main obstacles, according to v. heiets, on the way to the industrial development on the innovative basis are the following: lack of financing of fundamental baltic journal of economic studies 120 vol. 5, no. 1, 2019 and applied researches, shortage of skilled workforce, deterioration of investment climate in the country, low level of innovative infrastructure development, political and economic instability (2015). in addition, the scientist proves the necessity of establishing cooperation between the state, science, education, and enterprise structures with the aim to eliminate the development of negative tendencies. in order to determine spatial features of the development of intellectual and innovative components, we suggest using indicators provided in the work (kuzmin, shpak &stanasiuk, 2017). the system of indicators, which characterizes cluster’s constituents, includes: for evaluation of the development level of educational constituent: the share of students of higher educational establishments of i-iv levels of accreditation in the number of population, %; number of higher educational establishments of i-iv levels of accreditation, units; for evaluation of the development level of scientific constituent: ratio of researchers in the number of economically active population, %; number of scientific organizations, units; the share of scientific and scientific-technical works in gross regional product, %; for evaluation of the development level of innovative constituent: the share of industrial enterprises that introduce innovations, %; the share of industrial enterprises that introduce market innovations, %; technological innovativeness of industrial enterprises, units per 1 industrial enterprise; product innovativeness of industrial enterprises, units per 1 industrial enterprise; a number of industrial enterprises that supplied innovative products outside ukraine, units. the system of indicators was worked out taking into account possibilities of getting relevant statistic data from the website of the state statistics service of ukraine. the research was carried out in 25 administrativeterritorial units of ukraine by means of the indistinct s-averages method that provides the best results under the condition of the vagueness of information. regarding that s value is determined by an expert method; we suggest distinguishing four clusters regarding the development levels of certain constituents (very high, high, average, and low). each administrative territorial unit, to a certain extent (from 0 to 1), belongs to a certain cluster. none of the clusters can contain all elements or, vice versa, be empty. the following matrix, built with the formula (taraskina, 2013), is used to define the final result: m m m ... m m m ... m ... ... ... ... m m ... m 11 12 1l 21 22 2l c1 c2 cl =             , (1) where: м – a matrix of the degree of belonging, mij – degree of belonging of j administrative-territorial unit to i cluster. the results of non-distinct clusterization of administrative-territorial units of ukraine by the indexes of intellectual constituent development are shown in table 1. taking into account the indexes of development of academic and scientific constituents, the biggest cluster is the third one, which comprises 16 administrativeterritorial units. administrative-territorial units belonging to the first cluster (dnipropetrovsk, lviv, odesa, and kharkiv regions) concentrate basic relative share of academic and scientific establishments of ukraine. however, the inner structure of the cluster is too complex because the degree of belonging of regions ranges from 0,35 (kharkiv region) to 0,90 (dnipropetrovsk region) that explains the high degree of variation of other indexes. the same situation is observed in the fourth cluster, which consists of zaporizhzhia, mykolaiv, sumy, and chernivtsi regions that are characterized by far lower indexes of intellectual constituent development. the most favourable conditions for accumulation of the intellectual potential are in the city of kyiv, which is the leader by indexes of development of both academic and scientific constituents. specific indexes were used to study the innovative constituent that allowed analysing the product, technological and market innovativeness of industrial enterprises, as well as the level of innovations transfer (table 2). it’s worth mentioning that the first cluster is the biggest by size on a quantitative criterion and administrativeterritorial units that it consists of concentrate the bulk of innovatively active industrial enterprises. administrative-territorial units characterized by the high level of innovations transfer are the part of the fourth cluster. administrative-territorial units, which belong to the second cluster, are characterized by high indexes of market innovativeness. the lowest indexes of innovative activity are specific for administrativeterritorial units of the third cluster. administrative-territorial units of ukraine were grouped by the levels of intellectual and innovative constituent’s growth of the industrial potential in table 3. the characteristic feature of intellectually-innovative clusters creation is that attention is focused not on the separate industrial enterprises but on establishing cooperation between research institutions and business structures. such clusters are able to grow under the condition of a high frequency of ideas generating and existing possibilities of their implementation. baltic journal of economic studies 121 vol. 5, no. 1, 2019 table 1 the matrix of belonging degree of spatial concentration of intellectual constituent to four clusters number of a cluster administrativeterritorial units number of a cluster 1 2 3 4 1 2 3 4 + vinnytsia 0,02 0,00 0,89 0,09 + volyn 0,01 0,00 0,94 0,05 + dnipropetrovsk 0,90 0,01 0,04 0,06 + donetsk 0,07 0,00 0,70 0,23 + zhytomyr 0,01 0,00 0,95 0,04 + zakarpattia 0,02 0,00 0,88 0,10 + zaporizhzhia 0,19 0,01 0,13 0,67 + ivano-frankivsk 0,01 0,00 0,96 0,03 + kyiv 0,05 0,00 0,66 0,28 + kirovohrad 0,02 0,00 0,87 0,11 + luhansk 0,04 0,00 0,78 0,18 + lviv 0,74 0,01 0,10 0,15 + mykolaiv 0,17 0,01 0,18 0,63 + odesa 0,52 0,01 0,20 0,27 + poltava 0,03 0,00 0,84 0,13 + rivne 0,02 0,00 0,88 0,10 + sumy 0,03 0,00 0,19 0,78 + ternopil 0,04 0,00 0,77 0,19 + kharkiv 0,35 0,30 0,15 0,20 + kherson 0,00 0,00 0,97 0,03 + khmelnytskyi 0,01 0,00 0,95 0,04 + cherkasy 0,03 0,00 0,64 0,33 + chernivtsi 0,01 0,00 0,08 0,91 + chernihiv 0,01 0,00 0,95 0,05 + kyiv (city) 0,00 0,99 0,00 0,00 calculated by the authors according to source: vidkryta statystychna baza derzhavnoi sluzhby statystyky ukrainy table 2 the matrix of belonging degree of spatial concentration of innovative constituent to four clusters number of a cluster administrativeterritorial units number of a cluster 1 2 3 4 1 2 3 4 + vinnytsia 0,07 0,03 0,84 0,06 + volyn 0,04 0,02 0,13 0,81 + dnipropetrovsk 0,03 0,02 0,12 0,82 + donetsk 0,06 0,05 0,17 0,72 + zhytomyr 0,09 0,04 0,72 0,15 + zakarpattia 0,16 0,15 0,28 0,41 + zaporizhzhia 0,19 0,71 0,07 0,03 + ivano-frankivsk 0,42 0,24 0,24 0,10 + kyiv 0,07 0,04 0,44 0,45 + kirovohrad 0,61 0,25 0,10 0,04 + luhansk 0,09 0,07 0,21 0,62 + lviv 0,42 0,15 0,36 0,08 + mykolaiv 0,50 0,29 0,15 0,07 + odesa 0,21 0,08 0,59 0,11 + poltava 0,30 0,22 0,37 0,11 + rivne 0,03 0,02 0,13 0,82 + sumy 0,25 0,43 0,18 0,14 + ternopil 0,29 0,28 0,24 0,19 + kharkiv 0,30 0,55 0,10 0,05 + kherson 0,24 0,64 0,08 0,04 + khmelnytskyi 0,05 0,02 0,82 0,10 + cherkasy 0,71 0,13 0,13 0,03 + chernivtsi 0,72 0,11 0,13 0,04 + chernihiv 0,12 0,05 0,73 0,11 + kyiv (city) 0,42 0,40 0,13 0,05 calculated by the authors according to source: vidkryta statystychna baza derzhavnoi sluzhby statystyky ukrainy baltic journal of economic studies 122 vol. 5, no. 1, 2019 otherwise, a cluster will lose its reproductive ability, that is, creative environment acts as a cluster creation core. taking into account the achieved results, dnipropetrovsk, lviv, odesa, kharkiv regions, and kyiv can become such centres in ukraine. this fact gives the opportunity to talk about the possibility of the creation of five intellectually-innovative clusters capable of concentrating innovatively active industrial enterprises around themselves. today, the most dynamic innovative development of industrial potential is observed in lviv, kharkiv regions and kyiv with high indexes of development of both intellectual and innovative components. the most negative situation is observed in the odesa region that proves the necessity to establish cooperation between scientific institutions, academic establishments, and business entities. the emergence of similar contradictions in other administrative-territorial units points to the necessity of involving the state to act as an activator of the innovative process and as a regulator of establishing collaboration. 4. formation of conceptual principles of intellectually-innovative industrial clusters creation we believe that, first of all, it is necessary to adopt the conception of cluster policy in order to do systematization of clusterization processes in ukraine. it should contain not only aims, tasks, priorities, and directions but also foresee the introduction of pilot projects of implementation of the actions of cluster policy on both state and regional levels. for this purpose, the state, first of all, should work out the program of pilot clusters on the central level to list territorial clusters (on competitive principles), which are the most significant for the state. taking into account the necessity of technological development of industrial potential, innovative industrial clusters must be organized by the following types of industrial activity: production of computers, electronic and optical products; production of electric equipment; production of chemicals and chemical products; production of basic pharmaceutical products and medication. in order to make industrial production environmentally friendly, it is useful to introduce projects related to the introduction of the resource and energy saving technologies, and low-waste manufacturing plants. according to s. y. glazev, the development of microelectronics, biotechnologies, genic engineering, robot technology, nanoand picotechnologies, systems of artificial intelligence, as well as systems of high-speed transportation, and space exploration will promote the development of higher technological structures in the national economy (1990). a set of certain actions should become inseparable as to the state support of industrial potential development on a cluster basis. they should include stimulation of participation of large enterprises in clusters structure, granting some tax deductions (taking into account the assessment of the productive and innovative potential of territorial clusters), providing target-oriented grants to local budgets (under the condition of co-financing of clusters from regional budgets) and others. we should note that basic forms of stimulation of small innovative enterprises including cluster industrial systems were developed long ago in the world practice (figure 1). alongside scientific research and educational establishments and organizations, intellectual and innovative clusters must include such participants:  enterprises and organizations that take a direct part in production and distribution of the ready-made goods or services, suppliers of goods or services;  enterprises and organizations that compose infrastructure of production and distribution of the ready-made goods or services;  organizations of market infrastructure (auditing, consulting, crediting, insurance and lease services, logistic, trade, business with real property); table 3 qualitative structure of clusters of the spatial collaboration of intellectual and innovative constituents of the industrial potential cluster low average high very high constituents intellectual constituent vinnytsia, volyn, donetsk, zhytomyr, zakarpattia, ivanofrankivsk, kyiv, kirovohrad, luhansk, poltava, rivne, ternopil, kherson, khmelnytskyi, cherkasy, chernihiv regions zaporizhzhia, mykolaiv, sumy, chernivtsi regions dnipropetrovsk, lviv, odesa, kharkiv regions the city of kyiv innovative constituent vinnytsia, zhytomyr, odesa, poltava, khmelnytskyi, chernihiv regions volyn, dnipropetrovsk, donetsk, zakarpattia, kyiv, luhansk, rivne regions zaporizhzhia, sumy, kharkiv, kherson regions ivano-frankivsk , kirovohrad, lviv, mykolaiv, ternopil, cherkasy, chernivtsi regions, and the city of kyiv source: composed by the authors baltic journal of economic studies 123 vol. 5, no. 1, 2019  organizations of innovative infrastructure (business-incubators, techno parks, industrial parks, regional centres of innovative development);  organizations to support the development of small and middle business infrastructure (venture funds; centres for technology transfer; centres and agencies for entrepreneurship growth, regional development, attracting investments; native financial institutions; agencies for commodities export support; funds of entrepreneurship support; funds of crediting assistance, investment funds, closed stock investment funds which attract investments for small and middle business entities, etc.). the form “cluster passport” is offered to use in order to institutionalize the activity of cluster creation, which should contain the following information: the name of the cluster; initiators of the project of cluster creation; regulatory assurance of cluster activity (standards international experience of clusters introduction usa: establishing a commission of clusters creation; analytical work in scientific and educational centres; direct financing – subsidies, loans. canada: state financial support of clusters, specifically allocation of initial capital and attraction of private companies’ facilities. france: granting of subsidies, and loans that reach 50% of expenditures for the creation of new products and technologies. italy: assistance to industrial districts through discounts on export, warranty coverage, the attraction of investors, consulting. germany: priority is given to the introduction of cutting-edge technologies through consolidation of industry and scientific centres efforts. switzerland: grant of loans, including interestfree ones; creation of funds of innovations introduction. finland: creation of cluster chains, i.e. cooperation of the private sector, state, trade and professional associations, research and academic establishments in the innovative process. austria: development and support of the program of clusterization on the basis of: a system of innovations stimulation; productivity growth; employment growth. great britain: creation of funds which introduce innovations with the calculation of possible commercial risk. netherlands: free of charge office work conduct on the requests of individual inventors, free services of patent proxies, exempt from duties payment. japan: creation of a national network of centres for industrial technologies introduction on the basis of universities, supporting the sphere of education, university science, and venture business. india: target-oriented grants on scientific research developments in the innovative field and industry. national actions of support of clusters organizational development by public authorities creation of the specialized organization of cluster development that provides coordination of its participants, which can be created in different legal forms. performing the cluster structure analysis, production chain of added value, carried out by the main participants of the cluster, determination of barriers for cluster development. working out a strategy of cluster development and the plan of actions as to their implementation that includes setting up of cluster projects and actions, aimed at the organization of favourable conditions for cluster development. establishing effective informative cooperation between participants of the cluster. figure 1. introduction of the world practice of stimulation of industrial potential development on a cluster basis source: summarized by the authors (kastels & khimanen, 2006; khomych, 2007; chykarenko & mamatova, 2011) baltic journal of economic studies 124 vol. 5, no. 1, 2019 and regulations); definition of cluster missions and its visions (cluster conception); cluster participants (legal/natural entities) and their voluntarily obligations; management staff of the cluster (council or core of the cluster); expected results of the activity (short-term and long-term); target (address) groups that “experience” the results of cluster activity; stages of cluster creation (name of the stage, responsibility, terms of implementation); necessary resources (material, technical, financial, human, intellectual, and others); potential risks (internal and external) and ways of their prevention (overcoming or reduction of influence); cluster stakeholders (to carry out external control and represent interests of the cluster on all levels) (sharov & chykarenko, 2012). we recommend adding the following blocks: project innovativeness (product, technological or market) and relevance to the strategic priorities of economic development (of states, regions, etc.). it is necessary to note that the creation of innovative clusters can also take place by the cost of state and local budgets. in this case, financial mechanism of state support of implementation of wide range of cluster projects must be quite flexible and involve several directions, for example: development of transportation, energy, and engineering infrastructure; development of housing and social infrastructure, including of material and technical base for health protection, culture and sport; development of innovative and educational infrastructure, implementation of works and projects in the field of research and developments, carrying out innovative activity, training and upgrading employees’ qualification; taking other actions in order to increase competitiveness of not only the organizations-participants of a cluster but also the territory of cluster location, and to rise the life quality of territorial communities. 5. conclusions summarizing the achieved results, we state the following: 1. taking into account foreign experience, establishing collaboration between a research sphere and business structures is an essential stimulator for innovative development of the industrial potential. the leading role in a cluster network belongs to research institutions and educational establishments, which role is to develop and invent an innovative product that meets market requirements and priorities of the economic policy of the state. 2. keeping in mind the results of administrativeterritorial units’ clusterization in ukraine, we offer to distinguish five intellectually-innovative clusters by the indexes of intellectual (centres for knowledge resources) and innovative constituents’ development (the economic basis of a cluster) with cluster formation centres in kyiv, dnipropetrovsk, lviv, odesa, and kharkiv regions. creation of intellectuallyinnovative industrial clusters will assist the effective use of knowledge, the increase of intellectual labour efficiency, and application of its results for the transition of industrial potential onto the innovative development basis. 3. considerable spatial asymmetry on the levels of development of intellectual and innovative constituents underlines the necessity of involving the state as a regulator and stimulator for establishing partnership relations, as well as an activator of innovative processes in the state. provision of state support for pilot projects realization aimed at hi-tech productions development will allow increasing the competitiveness of the national industrial potential and national economy in particular. references: bloomberg innovation index (n.d.) retrieved from: https://www.bloomberg.com. chykarenko, i., mamatova, t. 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(in ukrainian) baltic journal of economic studies 197 vol. 5, no. 4, 2019 corresponding author: 1 sumy national agrarian university, ukraine. e-mail: l.poliatykina@ukr.net 2 sumy national agrarian university, ukraine. e-mail: ira_samoshkina@ukr.net 3 sumy national agrarian university, ukraine. e-mail: olena.slavkova.snau@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-197-202 economic aspects of the development of insurance activity of small businesses larysa poliatykina1, iryna samoshkina2, olena slavkova3 abstract. the goal of the article is to summarize and highlight the main economic aspects of the development of insurance activities of small businesses in the countries of eastern europe. the small business performs a number of important economic and social tasks. the main arguments in favour of the features of the organization and operation of insurance activities of small businesses are considered. the purpose of the research. the purpose of this scientific research is to develop a methodological approach to the organization of insurance activities in small business and make proposals on the ways of their improvement. insurance provides reliable protection of property interests of entrepreneurs and the population in case of losses caused by fire, natural disaster, technogenic accidents, traffic accidents, and many other unforeseen circumstances. problem statement. in the economy of countries of eastern europe, there are a number of features of small business development. entrepreneurship contributes to the expansion of the sector of employment, the creation of new employment opportunities for the unemployed population, and the dismissal of employees from enterprises, which operate inefficiently. insurance provides reliable protection of property interests of entrepreneurs and the population in case of losses caused by fire, natural disaster, technogenic accidents, traffic accidents, and many other unforeseen circumstances. insurance has proved itself as a form of accumulation of funds of citizens to solve their social problems (health, pensions, education, etc.). in recent years, insurance is widely used in the event of third-party liability. the issue on the problems of the organization of insurance activities of small businesses has been and is studied in detail in periodicals and special literature. methodology. the analysis of the operation of small business and the features of its conduct was made during the study. the issues of the formation and operation of small business, as well as workflow management and business administration at these enterprises, are controversial. as a result of the research, the regulatory framework of the operation of insurance enterprises in the sphere of small business has been analysed. the article focuses on the main arguments in favour of the features of the organization and operation of insurance activities of small businesses. there is a need for the intensification of insurance activities. practical implications. the study of scientific works and the practice of economic activity indicate that some of the theoretical provisions regarding the interpretation of the features of the organization and operation of insurance activities of small businesses are of a polemical character, and a number of important aspects of their organization, evaluation, and the methods of organization should be improved. value/originality. the main directions of the insurance activity of small businesses in the global economy have been studied. the ways and directions of activation of insurance activities are offered. the strategy of the development of small and medium-sized businesses in the insurance sector in ukraine is proposed. the strategy is aimed at ensuring the gradual development of insurance activities of small businesses, given the temporarily limited financial support and significant challenges in the economy of eastern european countries. key words: insurance, insurer, insurance market, small business, entrepreneurship, state support. jel classification: m21, e21, o12, r58, r13 1. introduction recently, the problem of small business development is gaining global importance. it has become urgent even in developed countries. the small business performs a number of important economic and social tasks. in addition to tax payments to the budgets of all levels, it develops the real sector of the economy, creates additional jobs, and promotes competition. therefore, baltic journal of economic studies 198 vol. 5, no. 4, 2019 the development of small business is an important task of the economy of eastern europe. the sphere of small business is an important sector of economic development of the state, region, territorial community. entrepreneurs assume the responsibility and risks of doing business and create tangible and intangible values that are the basis of the country’s wellbeing, form a significant part of the tax revenues of the state and local budgets. at present, entrepreneurial business requires strong government support. both government authorities and public organizations of entrepreneurs themselves (unions, associations, agencies) should provide small business with every possible assistance. to do this, it is necessary to formulate a clear unified state and non-state policy regarding the development of small business, using the best practices of developed countries across the globe. the modern economy is characterized by a complex combination of different scale of production: large scale with a tendency towards monopolistic structures, and small one emerging under the influence of many factors. on the one hand, the steady trend of scientific and technological progress is the concentration of production. it is the large firms with large material, financial, and human resources, qualified personnel that are able to make large-scale scientific and technical developments, which determine the technological progress. on the other hand, in recent years, there has been an unprecedented growth of small and mediumsized businesses, especially in areas where there is no need for significant capital, a large amount of equipment and cooperation of a great number of employees. there are a lot of small and medium-sized enterprises in knowledge-intensive industries, as well as industries related to the production of consumer goods and the provision of services. in order for small businesses to be able to acquire an advantage over their large and medium-sized competitors, it is advisable for them to create various kinds of associations, both short-term and longterm. it should be mentioned that small businesses have vulnerabilities. the main one is a small amount of individual capital. for the vast majority of small enterprises, self-financing is the main source of seed capital or the replenishment of funds already invested in the business, and only in the case of sufficiently successful business operations, it is possible to use bank loans. but commercial banks are always reluctant to engage with small businesses because small loans are less profitable for them. the differentiation and individualization of demand in the sphere of production and personal consumption contribute to small production. the development of small business production creates favourable conditions for putting the economy back on a sound footing, as it contributes to the development of the competitive environment, the creation of additional jobs, the implementation of structural reorganization, the expansion of consumer sector. in addition, the development of small business leads to saturation of the market with goods and services, an increase in export potential, more effective use of local raw materials. 2. development of insurance activity of small businesses in the countries of eastern europe the analysis of foreign experience enables to look at the prospects of small business development in a new way. in light of the current economic crisis, which has affected many states, the problem of small business has appeared ever more pressingly. as the best practice shows, the main criterion, on the basis of which enterprises of various organizational and legal forms belong to small business entities, is, first of all, the average number of employees per enterprise. the degree of small business development directly characterizes the degree of development of the state economy as a whole. the development of small businesses in the countries of eastern europe is at an even greater rate, as national governments pay considerable attention to small businesses and contribute to their development at the national level. in most countries, small business is the middle class, which is the basis for sustainable economic development. as the literature review shows, countries that are developing thanks to small and medium-sized business have made great economic progress (taiwan, singapore, indonesia, etc.). if we observe how the pace of development of small enterprises in these countries has changed, we can draw a parallel between the development trends in the whole country. for europe, small business is a kind of basis for socio-economic development. there are more than 20 million enterprises engaged in small and mediumsized business and, accordingly, give more than half of the total turnover and value added. the share of employed in small business in europe is about 70%. the vast majority of small enterprises work in trade, construction, and food industry. it can be stated that small business stimulates manufacturers to compete. their development depends on the success of the small and medium-sized business. therefore, a policy of support for small business, the main goal of which is to balance the interests of the state and business, ensure the best conditions for entrepreneurial activity, increase the competitiveness of small business, is implemented within the framework of the european union. analysing the development of small business in different countries, it is expedient to focus on japan as a country of individual entrepreneurship. in this country, 5,738,000 enterprises, that is 99% of their total number, refer to small business. they employ 88% of all employees. baltic journal of economic studies 199 vol. 5, no. 4, 2019 in the usa, 77% of private sector employees work in small business, accounting for 47% of the total sales of goods in the country, as well as 50% of the gross domestic product. the small business administration (sba), which solves three important tasks (financial support to small and medium-sized enterprises, assistance in obtaining state orders, provision of technical and consulting services on management issues), is the leading body of state support for small business. as for england, the government tries to support small business, primarily through the banking system. in particular, each bank has its own lending program. one of them is a program for creating and expanding the business that provides for the granting of credit in the amount of 5-100 thousand pounds for a period of 5 years. in the eu countries, the share of the population working in insurance companies in 2017 was, on average, 0.45%. insurance density is of particular importance for the characteristics of insurance in small businesses. such countries as sweden, germany, austria, spain, luxembourg, etc. are characterized by the high level of insurance penetration. the countries of eastern europe (czech republic, poland, hungary, bulgaria, etc.) are characterized by the lowest rates of insurance penetration, not exceeding 3%. the ukrainian insurance market shows a significantly lower level of development not only in comparison with the most developed european countries but also in other countries of eastern europe. among the main factors causing problems in the development of the insurance market, we can distinguish the following. first, the structure of insurance portfolios of many insurance companies is unsatisfactory. in particular, the low demand for insurance services leads to an increase in the volume of insurance activities mainly due to compulsory types of insurance. 3. features of the implementation of insurance activities the insurance market is characterized by its insufficient development, structure imperfection, a tendency towards the conclusion of short-term contracts, weak development of reinsurance, instability of the financial condition of plenty of insurance companies that results in untimely fulfilment of obligations to insurers. the increase in the share of life insurance in the structure of the insurance market will contribute to the development and promotion of cumulative insurance in general, as well as the growth in the economic standard of living of the population, which will lead to an increase in savings. the increase in the level of insurance payments can be achieved by increasing the financial solvency of insurance companies, including by increasing their income from investment activities. the conditions for achieving this goal at the macro level is to stabilize the economy as a whole, the banking sector, and promote the development of the stock market; at the micro level – to form a balanced structure of the insurance portfolio of insurance companies, to implement an effective marketing policy in relation to insurance services. the conducted analysis of the development of the insurance market of ukraine in comparison with the european union has shown that in terms of insurance density, the penetration of insurance and the level of insurance payments, ukraine occupies the last and penultimate position among european countries. at the same time, the insurance market is negatively characterized not only by its significant lagging behind such developed countries as germany, sweden, finland, france, and others but also by significantly weaker positions compared to the countries of eastern europe – bulgaria, hungary, czech republic, poland, slovakia. the main challenges of the development of the insurance market are: the formation of an unbalanced structure of the insurance portfolio of individual insurance companies and the resulting disproportions in the development of various types of insurance; low level of insurance payments and the problem of integrity of insurance companies; public distrust of insurance companies and low interest in insurance products; limited reliable and liquid financial instruments for the implementation of investment activities of insurance companies. all abovementioned problems and imbalances in the development of the insurance market are interrelated and require a comprehensive solution. features of the implementation of insurance activities in ukraine. despite the difficulties in the formation of the national insurance market, the volume of insurance operations is significantly increasing. this is due to the fact that in the non-market economic environment, the compensation for damage was mainly made by the state at the expense of budget in ukraine. the implementation of the program of property privatization has intensified the need for insurance protection of new owners of property from the risks that lead to its loss or damage. during the years of independence, ukraine created mainly a legislative and regulatory framework for insurance. this has made it possible to develop the insurance market on the principles of competition that contribute to the improvement in the quality of insurance services. however, nowadays the level of the insurance market development in ukraine is not more than 10% of potential risks, while this figure reaches 90-95% in most developed countries. the share of our country in the world market reaches only 0.01%, and less than 0.05% of the volume of insurance services provided in europe, despite the fact that ukraine is home to more than 7% of the european population and has a large industrial, agricultural, and scientific potential. the development of the national insurance system over a three-year period is characterized by a significant increase in the following indicators. baltic journal of economic studies 200 vol. 5, no. 4, 2019 given the level of inflation, there was an actual growth in the volume of the market of insurance services. it should be noted that the insurance market of ukraine is much younger than the insurance markets of the leading countries of europe (some of them have been operating for more than 100 years). insurance activities may be carried out with the involvement of insurance brokers and insurance agents as the excluded activity and may include consulting, expert information services, work related to the preparation, conclusion, and execution of insurance (reinsurance) contracts. insurance agents are considered to be citizens or a legal entity that acts for and on behalf of the insurer and performs a part of its activities (conclusion of insurance contracts, receipt of insurance payments, the performance of works related to the payment of the amount of coverage and insurance indemnity). the insurance agent is a representative of the insurer and acts in its interests for a commission on the basis of an agreement concluded with the insurer. the set of insurers operating in a certain economic environment forms the insurance system. its main task is to provide insurance services. the insurance market is characterized by the ongoing diversification of companies on a departmental basis – the creation of their own captive insurance companies in industries, departments, spheres of production, and even at individual enterprises. a captive insurance company is a subsidiary company established by an industrial or commercial enterprise (a group of companies, financial group, etc.) in order to cover its own risks. the main purpose of the creation of captive insurance companies is to keep the funds allocated for insurance at the disposal and under the control of the founders of a parent company, which are the clients of their captive companies. there are no limited liability companies in the list of permitted types of organizations in ukraine. it is known that such business structures are very common in the family business. owners in case of any danger are responsible for the debts of the company only to the extent of the contributions made to the authorized fund. the conditions for the establishment of these companies protect against the penetration of undesirable actors into their business. along with the positive, there are plenty of negative factors, in particular, few opportunities to increase the authorized capital, difficulties in exercising control over the company operation that is especially important in the field of insurance services. the state regulation in ukraine is carried out on the basis of the two interrelated and, at the same time, most influential forms: legal support and supervision over insurance activities. the legal support of insurance is carried out through the adoption of legislative acts and regulations governing insurance activities. the task of the state body of insurance supervision is to protect the interests of policyholders and ensure the reliable operation of insurers in the insurance market. at present, the state supervision of ukraine over insurance activities enables to prevent financial shortage that may occur if insurers fail to comply with the requirements of the insurance legislation. but it must be understood that ukraine belongs to the emerging market countries, which are characterized by significant instability and a large number of business risks. therefore, at this stage, taking into account the problems of non-payment in the economy, the critical financial condition of the majority of enterprises-insurers, low level of solvency of the population, as well as undermined public confidence in the financial system, it is expedient to consider an increase in the financial reliability and solvency of insurers to be the most priority activities of the insurance supervision bodies. the effective supervision over insurance activities is one of the most important prerequisites for ensuring social and economic stability in the society, and the improvement of the efficiency of supervision bodies is one of the main tasks for the government of each country. foreign experience. compared with european countries, ukraine has the insurance market, which is at a significantly lower level of its development, characterized by insufficient capitalization and financial stability of insurance companies, unbalanced development of certain types of insurance, the low interest of the population in insurance services. however, the focus of ukraine on european integration determines the need for a comparative analysis of the domestic and european insurance markets to identify and overcome the main shortcomings and imbalances of the domestic insurance market, to ensure its sustainability and competitiveness. despite an increased focus of domestic scientists on the functioning of the insurance market, the level of its development remains extremely low, compared to european countries. it is necessary to analyse not only the main characteristics of the current state of the insurance market, regularity and shortcomings of its development, but also the relationship between the general economic and specific factors and indicators of the market development, the formation of a set of measures to improve its functioning. 4. prospects for the development of insurance in small businesses the main objectives of small businesses may include: innovative growth and development of industries, regions, and the country as a whole; rise in the standard of living of the population of regions and the country as a whole; the formation and sustainable progressive development of the innovative economy of the state. to achieve them, it is necessary to form and provide priority directions of innovative development of small businesses, as well as to develop a comprehensive model of socioeconomic operation of small businesses as one of the main elements of the innovative production mechanism. baltic journal of economic studies 201 vol. 5, no. 4, 2019 in connection with the goals to be sought, small business is intended to solve the following tasks: to identify the factors of innovative growth of large, small, and medium-sized businesses, as well as to determine the impact of each factor; to identify the factors affecting the improvement of the level and quality of life of the population; to characterize the possibility of expansion of the middle social layer, as well as to form the priority directions of innovative development of small business. the development of the market will result in the transition of the insurance business to a commercial basis and an increase in the cost of services. however, there is another, a non-profit form of an insurance organization, which does not pursue the purpose of making a profit. this form is presented by mutual insurance companies. mutual insurance companies, like joint-stock insurance companies, insure property interests related to life, health, working capacity, and pension provision of the policyholder or insurer. the property interests, such as the risk of loss, shortage or damage to property; the risk of liability for damage to the life or property of other persons (civil liability) and the risk of losses from business activities due to the counterparty’s failure to fulfil its obligations, are insured. citizens and legal entities may insure these risks by joining mutual insurance companies and raising the required amount of funds. members of the company are both policyholders and insurers that create the economic prerequisite for providing them with real insurance protection at minimum prices. the non-profit orientation of mutual insurance excludes profit from the price of insurance, and the possible excess of insurance premiums over insurance payments and the investment income of the mutual insurance company ensure a reduction in the price of insurance. mutual insurance makes no profit. its objective is to cover the costs of management and insurance risk. if the operating year results in excess, it is either distributed among members of the company or counted against their premiums. it only makes sense that mutual insurance should be cheaper than joint-stock insurance. summarizing all the above, we can add that the state and insurance business are partners. their partnership is based on the unity of fundamental strategic interest, which is to create a highly efficient economy and achieve a high level of well-being of people. the material basis for the organization of mutual insurance is financial and economic that is the provision of insurance services at more attractive price terms than in commercial insurance. the expansion of activities and an increase in the number of insurance risks leads to the increased importance of the insurance factor for an enterprise, as insurance costs increase accordingly. the actual reduction of corresponding expenses is provided by the organization of mutual insurance. in addition, the need for mutual insurance is determined by a large number of risks that commercial insurers refuse to insure because of their loss or great responsibility. the demand for the policyholder is satisfied directly by the policyholders – the organization of the mutual insurance company. 5. conclusions for a more effective operation of elements of the infrastructure of business support, it is essential to carry out the following actions: to adopt the regulatory legal acts regulating the creation and operation of elements of the business support infrastructure; to adapt the international experience of formation and effective operation to domestic realities; to create the system of state accreditation of institutions of the business support infrastructure, which will provide training and advisory services to small business; to increase the amount of financing for the development of the business support infrastructure network; in particular, by providing funds from the state and local budgets, providing premises and required equipment on preferential terms, methodological and information support; to provide the business support infrastructure facilities with highly qualified personnel, etc. given the international experience, the main directions of the development of insurance activities in the countries of eastern europe could include the following: – development of life insurance due to the fact that this type of insurance plays an important role in ensuring the safety of citizens and the mobilization of capital; – formation of legislation that stipulates for clear principles and regulatory procedures that meet the interests of both policyholders and insured parties; – ensuring the regularity of reporting of insurers and intermediaries in a single form, taking into account the standards provided by the regulatory body; – establishment of requirements for the minimum size of the authorized fund and requirements for the solvency of insurers; – establishment of new rules for placement of insurance reserves; – participation of foreign insurers in the market in order to provide the maximum range of insurance services; – the solution to the issue of compulsory health insurance of citizens, which is quite practiced in other countries; – adoption of a long-term strategy for the insurance market development. the ways and directions of improving the insurance market, in our opinion, will make it possible to accelerate the creation of a full-fledged insurance market as an objective attribute of the market economy and contribute to the restoration of trust of the policyholder from insurers. given the trends in the global economy and the limited factors of production (land, capital, etc.), in the coming years, one should expect further growth in the production, processing, and provision of services to small businesses in the countries of eastern europe. baltic journal of economic studies 202 vol. 5, no. 4, 2019 references: database – eurostat / european commission. retrieved from: http://ec.europa.eu/eurostat/data/database law of ukraine "on development and state support of small and medium enterprises in ukraine" (2012) no. 4618-vi dated march 22, 2012. retrieved from: http://zakon5.rada.gov.ua/laws/show/4618-17 mikhailov, m. g., poliatykina, l. i., & slavkova, o. p. (2008). organization of accounting in small business enterprises. kyiv: center for educational literature. pakhnenko, o. m., semenoh, a. yu., & milyutina, m. o. (2017). insurance market of ukraine and eu countries: comparative analysis. monograph. mukachevo. poliatykina, l. i. (2016). methodological and accounting-analytical support of sustainable development of small business enterprises. monograph. sumy. poliatykina, l. i. (2018). modern trends to promote sustainable development of small business enterprises. eurasian academic research journal, multilanguage science journal, 1(19), 138–142. poliatykin, l. i. (2018). busines organization in the agricultural sector: economic and law paradigm of modern society. scientific journal by open europe, 1, 44–49. poliatykin, s. o. (2018). features of innovation and investment activity in foreign countries: economic and law paradigm of modern society, scientific journal by open europe, 1, 39–44. statistical information. retrieved from: http://ukrstat.gov.ua/ the tax code of ukraine no. 2755-vi from 02.12.2010. retrieved from: http://zakon5.rada.gov.ua/laws/ show/2755-17 vasechko, l. i. (2016). current issues of development of the insurance market of ukraine. economic area, 109, 146–154. zhuravka, o. s. (2017). analysis of the current state of the insurance market of ukraine: effective economics. retrieved from: http://www.economy.nayka.com.ua/?op=1&z=5493 baltic journal of economic studies 144 vol. 5, no. 2, 2019 corresponding author: 1 cherkasy state technological university, ukraine. e-mail: seyalla@ukr.net orcid: https://orcid.org/0000-0001-8783-2149 2 cherkasy state technological university, ukraine. e-mail: ksyxarudenko@gmail.com orcid: https://orcid.org/0000-0002-0713-5405 doi: https://doi.org/10.30525/2256-0742/2019-5-2-144-152 methodological bases and principles of formation of the organizational structure of the enterprise by the golden ratio theory alla opalenko1, oksana rudenko2 abstract. the relevance of the study of business process management at manufacturing enterprises is determined by the presence of uncertainty and the existence of risks, in particular, structural risks. the timeliness and value of the abovementioned problem are also determined by the low level of implementation of risk management at enterprises. the provision of mechanisms for increasing the level of risk management is an extremely relevant problem of the modern economy, and the construction of risk optimization models is one of the main in the system of factors that affect the effective operation of the enterprise and the prospects for its development. the purpose of the article is to determine principles of formation and approaches to the construction of an “ideal” organizational structure of a manufacturing enterprise. the application of such principles will allow conducting effective management of a production enterprise. methodology. development of economic systems requires from industrial enterprises to develop new approaches to business process management, contributes to the spread of innovation in all spheres of production, forms a new image of structures, and provides their competitiveness in the domestic and world markets. an important area of research is the management of business processes of the enterprise, which will provide conditions for the development and effective operation of production enterprises on the basis of new knowledge, technologies, and effective management. the study was carried out based on the activity of pjsc “shpolyansky foodstuffs plant” for 2014–2018. the practical result of the research conducted is recommendations for the implementation of the risk management system at the manufacturing enterprise, and as a stage – building an “ideal” organizational structure that will allow timely responding to the problems of risk management. originality. enterprises combine many business processes that carry out thousands of operations, therefore, it is relevant to develop effective approaches suitable for their detailed description, analysis of the features of operation, optimization, control, diagnosis of problem situations, and the formation of measures for their elimination, management of structural risks. this requires the creation of effective tools for solving these tasks. key words: business process, economic system, risk management, organizational model of risk management system, organizational structure of enterprise, harmonization (golden ratio principle), structural risk. jel classification: b40, d20, l20 1. introduction a significant contribution to the development of theoretical and applied provisions in the field of studying the peculiarities of the operation and analysis of business processes of enterprises is made by a lot of domestic and foreign scientists, among which it is worth to highlight the works written by i. alieksieiev (alieksieiev, 2016), p. bazylevych (bazylevych, 2011), a. vendrov (vendrov, 2004), o. korzachenko (korzachenko, 2015), l. vylkov, j. becker, m. kugeler, v. taratukhyn (becker, vylkov, kugeler, taratukhyn, rosemann, 2007), v. repin (repin, 2013), and many others. in their works, scholars focus on the study of the essence of the description of features of the operation of enterprises and individual business processes, their structuring and restructuring, analysis, the main advantages and disadvantages of existing approaches, etc. business process modelling is a way to make the production enterprise more efficient, to get the description of the process through various elements, to structure the issues. so, one of the directions – is the baltic journal of economic studies 145 vol. 5, no. 2, 2019 study of the organizational structure of the enterprise as a way to model business processes. many scholars studied the concept of “organizational structure”. so, the papers by i. ihnatieva (ihnatieva, 2008), n. kaliuzhna (kaliuzhna, 2005), n. metelenko (metelenko, 2009), s. petrenko (petrenko, 2010), i. prodius (prodius, 2012), k . simakov (simakov, 2001), and i. sedikova (sedikova, 2013) conduct a comparison of the types of organizational structures, present advantages and disadvantages, concepts of development, formation, specif y principles and stages of improvement of organizational structures of management. the conducted studies allow stating that there is currently no single, universal organizational structure of management of a production enterprise. thus, the relevant scientific and applied task is to develop an organizational model of the risk management system of a production enterprise, taking into account the specificity of activities in order to ensure effective operation in an unstable environment. organizational model (enterprise model) in the context of defining the concept of business modelling is defined in the work by m. fox (fox, 1998) as a representation or presentation of a structure, activity, processes, information, resources, people, goals, and constraints on organization of business, government or other form of organization. the organizational model of the risk management system of a production enterprise shows the interdependence and interconnection of all elements of the structure, and also reveals their main functional responsibilities. in particular, the paper by i. pysarevskyi (pysarevskyi, 2008) notes that organizational structure regulates the division of tasks between subdivisions, their competence in solving certain problems, the general interaction of these elements. when constructing the organizational model of the risk management system, it is necessary to specify the structure of subordination of units, to define functions, powers, and responsibilities. 2. multilayer management system in accordance with the system approach principle the management system according to the system approach principle, which is proposed in the paper by v. volkova (volkova, 2001), includes layers of decision-making (choice, training and adaptation, selforganization). scholars propose to form multilayer decision-making systems for solving business management problems (figure 1). in works by o. markovskyi (markovskyi, 2010), this multilayer structure was developed, taking into account the current state of activities of ukrainian banks, and another accounting and control block was included. the analysis conducted showed that for production enterprises, the separation of the accounting and control block is also relevant. from the point of view of the general principles, in fig. 2, a multilayer organizational model of the enterprise structure was constructed using a modified multilayer structure by o. markovskyi (markovskyi, 2010). the activity of a production enterprise is associated with the emergence of risk under the influence of various factors of the unstable external (internal) environment. thus, for example, refusal or untimely delivery of raw materials (materials) will stop the technical process of production, so a risk of loss of regular consumers of manufactured products appears. another example is the change in the raw material price or the growth in the size of loan commitments or lease payments for the use of industrial equipment, premises, land plots, or the lack of temporarily free funds for investment, which also leads to risk and lower the enterprise performance. p, g u, p, g (m) y self-organization training and adaptation choice levels of the complexity of the decision to be made process figure 1. the multilayer structure of decision-making source: volkova, 2001 baltic journal of economic studies 146 vol. 5, no. 2, 2019 3. key aspects for building a harmonious organizational structure of the enterprise let us consider more in detail the issue of harmonization and the “golden ratio”. the principle of the golden ratio is used in various fields of activity. among researchers, it is necessary to distinguish o. ivanus (ivanus, 2003, 2005, 2006, 2008, 2011), who, in particular, in the monograph (ivanus, 2011) describes modern stages of development and study of the concept of harmony by scholars, formulates problems of innovative economics and the need for its harmonization, theoretical approaches and methodological basis of the concept of innovation management as a harmonious management, i.e. which is based on the golden ratio principles; describes the automated system of harmonious innovation management. in the paper (ivanus, myronova, 2008), o. ivanus and n. myronova have concluded that firms and industries that are successfully developing in accordance with a certain set goal of maximizing profits, in their development tend to self-harmonization of their indicators. the reason for this is that the maximization of the global system indicator leads to an increase in the number of indicators and parameters of the system, which are distributed according to the normal law (gauss’s law). i. kriuchkova (kriuchkova, 2004, 2008), o. bilotserkivets, t. burlai, n. honchar (bilotserkivets, burlai, honchar, 2007), studying this problem, came to the conclusion that economic dynamics depend on proportions, the principle of the golden ratio in the economy contributes to the optimization of the “energy” of growth, and not by the principle of “growth for accumulation” but growth for a stable social progress. i. kriuchkova (kriuchkova, 2004, 2008) emphasizes that the harmony for european countries is closer to the golden ratio, and for ukraine, taking into account that it is in the phase of economic recovery, the structure differs from the harmonious one because there are violations in the macrostructural proportions of gdp, namely, in the distribution of primary and gross income between sectors of the economy, which led to a violation of the proportion that determines the stability of development – between consumer spending and capital formation. this, according to the scholar, is the reason for the reduction of investment in the sphere of production. in the monograph, n. hronska (hronska, 2006) considers the principles, methodological aspects, and models of harmonious transformations of the spheres of the economy and management, proposes marketing, logistics, environmental concepts of harmonious transformations. the scholar describes the process of formation of a paradigm of harmonious transformations in relations between economic and ecological environments. i. dezhkina (dezhkina, 2008) uses the principle of the golden ratio in the management of an industrial enterprise; v. vyshnevetskyi, h. hryshuk, and v. vyshnevetskyi (vyshnevetskyi, 2006) underline the importance of the golden ratio for the development of small and mediumsized business. s. ivanchuk (ivanchuk, 2008) connects the principle of the golden ratio with the lifecycle of economic systems. among the scholars who also investigated the golden ratio, the processes of self-organization and selfdevelopment of systems, e. soroko (soroko, 2003, 2006) and m. radiuk (radiuk, 2003) can be highlighted. for business process modelling, in particular, the construction of an ideal organizational structure of a production enterprise, the research of activities of pjsc “shpolyansky foodstuffs plant” was conducted, the activity of which is aimed at the production of cacao, chocolate, and sugar confectionery. figure 3 presents the organizational structure of shpolyansky foodstuffs plant pjsc (until 2014) and figure 4 – the organizational structure of shpolyansky foodstuffs plant pjsc approved on september 1, 2014. accounting and control training and adaptation self-organization choice marketing and strategic planning department quality control department transport logistics department economic planning department, accounting department hr and osh department export department production processes department raw materials procurement department legal departmentrisk management department information services department figure 2. multilayer organizational model of enterprise structure source: compiled by the author based on (markovskyi, 2010; harashchuk, 2009) baltic journal of economic studies 147 vol. 5, no. 2, 2019 chairman of the board production chips making shop machine shop economic shop confectionery shop mayonnaise production shop road transport shop sales and supply management gas boiler house production laboratory sales department supply department financial, social and hr management economic planning department accounting department hr department lawyer audit commissionsupervisory board sausage making shop oils production shop flour mill shop food concentrates shop cereal shop sunflower mass production shop figure 3. the organizational structure of pjsc “shpolyansky foodstuffs plant” (until 2014) source: organogram of the enterprise thus, for the introduction of the risk management system at a production enterprise, it is necessary to create a separate structural unit – the risk management department. it should be noted that the development of job descriptions of employees, the formation of an effective system of division of powers among employees, the establishment of communication channels and the transmission of information – an integral part of the implementation and effective operation of the department. separated and included in the accounting and audit block, the risk management department ensures timely detection, analysis, and management of risks of the enterprise. an obligatory condition for decision-making is to take into account the time aspect (figure 5), that is, the dependence of the level of uncertainty in the enterprise’s activity on time. an enterprise is a complex economic system that unites interdependent components of productioneconomic, technological, and external environment. it is the complexity of economic processes and uncertainty that emphasize the need for the risk management department to timely respond to changes in the external environment. fig. 6 represents a scheme of managerial influence on enterprise activity. the risks that arise in the course of the enterprise activity are investigated, recorded, analysed, quantitatively and qualitatively evaluated, and an action plan for managing them is developed. the management of the enterprise approves managerial decisions regarding the implementation of measures to reduce the level of risks (negative consequences) to favourable for the enterprise, as well as partial elimination or reduction of risk factors. as a result, we have a managerial influence that changes the activity of the enterprise. having added the organizational structure with the risk management department, it is also worth analysing on what layer it will be located. the department controls core activities of the enterprise, that is, it should be in the block of accounting and control. the complexity of the external environment is determined by a number of factors, which affect the enterprise activity and, consequently, the risk management department. it is the employees of this department who must study, research, analyse, quantitatively and qualitatively evaluate, reduce the negative impact of risks on the activities of the production enterprise. the organizational model has a clear structure, functions, and place of the risk management department in the overall management system of a production enterprise, and if the costs for the activity of each stratum are consistent with the principle of harmony, then it is considered to be an “ideal” organizational structure. baltic journal of economic studies 148 vol. 5, no. 2, 2019 e le ct ro m ec ha ni ca l se rv ic e fg w ar eh ou se m ea su ri ng l ab or at or y c hi ef t ec hn ol og is t st an da rd iz at io n, c er tif ic at io n an d q ua lit y sp ec ia lis t d ep ar tm en t o f l eg al se rv ic es a nd h r m an ag em en t e co no m ic d ep ar tm en t h ea d of t ra ns po rt d ep ar tm en t t ra ns po rt d ep ar tm en t in fo rm at io n an d l og is tic s d ep ar tm en t m t sd d ep ar tm en t f or r ec ep tio n an d pr oc es si ng o f a gr ic ul tu ra l r aw m at er ia ls a nd s un fl ow er k er ne l p ro du ct io n o ils pr od uc tio n sh op sa us ag e m ak in g sh op c hi ps m ak in g sh op c on fe ct io ne ry sh op h al va m ak in g sh op m ay on na is e pr od uc tio n sh op sh ar eh ol de rs ’m ee tin g su pe rv is or y b oa rd c ha ir m an o f t he su pe rv is or y b oa rd d ir ec to r h ea d of l ab or at or y fo r f ea si bi lit y st ud ie s l fs h ea d of d ep ar tm en t o f m ar ke tin g an d fe a d ep ar tm en t o f m ar ke tin g an d fe a c hi ef a cc ou nt an t se cr et ar y m at er ia ls w ar eh ou se n at io na l m an ag er fi na nc ia l d ir ec to r d ep ut y d ir ec to r f or l eg al a ff ai rs an d h r m an ag em en t d ep ut y d ir ec to r fo r a dm in is tr at iv e an d e co no m ic a ff ai rs a nd o s e ng in ee r c hi ef m ec ha ni c h ea d of f g w ar eh ou se h ea d of q ua lit y c on tr ol d ep ar tm en t – h ea d of l ab or at or y h ea d of in fo rm at io n an d lo gi st ic s d ep ar tm en t fi gu re 4 . th e or ga ni za ti on al s tr uc tu re o f p js c “ sh po ly an sk y fo od st uff s p la nt ” ap pr ov ed o n 01 s ep te m be r 20 14 baltic journal of economic studies 149 vol. 5, no. 2, 2019 t1 t2 …. tmax absolute uncertainty high risk level u nc er ta in ty le ve l low risk level moderate risk level figure 5. time dependence of uncertainty level in the activity of the system source: developed by the author e xt er na l e nv ir on m en t management system, organizational structure enterprise activity risks risk management department figure 6. scheme of managerial influence on enterprise activity source: supplemented on the basis of (klymenko, 2011) 4. research results the main principles of the formation of an “ideal” organizational structure are presented in table 1. according to the above table, there are three approaches to building an “ideal” organizational structure, namely: regarding the production enterprise, table 1 principles of forming an “ideal” organizational structure of a production enterprise regarding the production enterprise itself the orientation of management structure to achieve long-term operating results structural-functional ordering, which manifests itself in close relations between structural elements effective solving of management tasks in the operating organizational structure the flow of information should not be meaningfully distorted close links between goals, objectives, economic conditions efficient use of available resources effective staffing, training, sufficient incentives, a professional and psychological adaptation of human resources enterprise reorganization should address the causes of conflict situations and solve problems in general improvement of production activity of the enterprise regarding top management improvement of the quality of managerial decisions the management’s authorities to make managerial decisions should be focused on long-term strategies as in large and complex systems, the chief executive (director general) cannot directly monitor all processes, it is worthwhile to group the units at the top management level transparency in structural subdivisions and high professional skills of heads of these subdivisions a small number of deputy directors, whose duties and responsibilities are clearly delineated the presence of change management specialists, whose tasks are to ensure the enterprise’s response to changing market conditions small time expenditure of the enterprise management to eliminate situations that arise as a result of mismatch of the organizational structure used no misuse of powers baltic journal of economic studies 150 vol. 5, no. 2, 2019 o t h e r s t r u c t u r a l e l e m e n t s top management of the enterprise r i s k m a n a g e m e n t d e p a r t m e n t functions and responsibilities perspective and methodical development group determination of periodicity of work on risk control in the enterprise activity maintaining ties between top management and other departments identifying and forecasting the needs of groups in the risk management department development (ordering) of methods, models, software-algorithmic and informational means planning and control group formation of budgets necessary for the implementation of actions and/or control procedures for risk prevention and management review of reports on risk monitoring, analysis, management development of actions and/or control procedures for risk prevention and management developing a risk map organization of effective risk management risk management group choosing an effective risk management method selection of anti-risk program of enterprise activity to reduce the negative influence risk monitoring and analysis group determination of the main risk factors fixation, the timely transmission of information about the risks that have arisen and can cause losses identification, quantitative and qualitative assessment of risks figure 7. organization of work of the risk management department source: developed by the author regarding the risk management department correct relations between individual subdivisions, which is associated with the definition of their purpose, working conditions, and incentives; division of responsibility between employees; organization of information flows; the choice of appropriate technical means clear definition of competencies, impossibility to duplicate authority of management clear subordination clear definition of decision-maker responsibility for mistakes and errors correspondence of rights and duties influence of professional skills and abilities on the operating results of the enterprise but not the influence of the human factor a change in the working conditions of one subdivision must be agreed in order not to lead to a new functional, legal or other correlation of employees and subdivisions (a change in the ideal structure) increase in the responsibility of higher units in the structure source: developed by the author (end of table 1) baltic journal of economic studies 151 vol. 5, no. 2, 2019 top management, and risk management department, each of which has its own specifics of activities and a list of authorities. the very organization of work and functions of each group of the risk management department is shown in figure 7. in the risk management department, it is worth to form four groups, each team must clearly perform its tasks, know its functions and responsibilities. a prerequisite for the effective operation of the risk management department is to take into account the time aspect of risk, namely, the time dependence of the level of uncertainty in the activity (figure 5); therefore, it is necessary to make decisions in the zone of low and moderate level of risk. the enterprise’s top management occupies the leading role in making managerial decisions related to the issues of risk management since the very top management approves decisions in relation to the implementation of effective risk management plan, the introduction of an anti-risk program of action, or rejects if considers them meaningless. 5. conclusions therefore, for the management of a production enterprise in the current conditions of a market economy, effective use of technical, economic, organizational, informational, financial, labour, and other resources is necessary. at the same time, the management system and its various levels play an important role in increasing the competitiveness and profitability of the enterprise, where, regardless of the form of ownership and professional orientation, an organizational structure of management is formed that ensures efficient activity. references: alieksieiev, i. v., bondarchuk, m. k., voloshyn, o. p. 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(1998). enterprise modeling. american association for artificial intelligence. ai magazine, 3, 109–121. baltic journal of economic studies 77 vol. 2, no. 1, 2016 corresponding author: 1 department of finance and economic security, accounting and audit, o.m. beketov national university of urban economy. e-mail: tvmomot@gmail.com 2 department of finance and credit, kharkiv national university of construction and architecture. e-mail: avanesova@i.ua systematization of international experience of ensuring economic security of exacerbation of the threats and challenges of a new type for national and international security tatyana momot1, o.m. beketov national university of urban economy, ukraine nina avanesova2, kharkiv national university of construction and architecture, ukraine abstract. the aim of the work is to systematize the international experience of economic security both in terms of individual countries and the global economy as a whole. setting such a goal it is associated with the growth of globalization and integration processes in the world economy, which are the new threat of economic security. methods. theoretical and methodological basis of the study were research and findings on issues of economic security at the level of the world economy as a whole and individual national economies in particular. we used such general scientific and special methods, such as analysis and synthesis, comparison, generalization, adaptation. the findings led to the conclusion that the protection of national interests and the formation of an economic security strategy – the most important functions of the state, the implementation of which is impossible without a system of self-regulation mechanisms and regulation. the government should implement a set of measures to promote economic growth, and that will guarantee the economic security of the country. these measures should cover all sectors of the economy. these measures include the implementation an active structural and social policies, enhancing the activity of the state in investment, financial, monetary and foreign economic sphere, the continuation of institutional reforms. the practical significance is to separate the differences used methodological approaches to ensure the economic security of the eu member countries and the cis. this is explained by the fact that the first group of countries is focused on standards and borrows the experience of the leading eu countries (germany, france), and the second group, located in the zone of influence of russia (moldova, ukraine, belarus, kazakhstan), – on the russian developments and standards. in turn, russia in their design focuses more on standards to ensure economic security, which have been made in the period of the soviet union. value/originality. the results obtained allowed to identify the main strategic goal of the western european countries, the usa, canada and japan in the field of protection of national economic interests, which is understood as sustainable economic growth and modernization of the economy in accordance with the conditions of competition on the world market. key words: globalization, economic security, national economy, global economy, strategies of economic security. jel classification: f01, f29, f52, f69 1. introduction at the core of the trends of modern international relations is the world of the xxi century the concept – it's agreed principles of relations between states in the international arena, which will contribute to the establishment of peace, without violence, ensure comprehensive security, transition states and regions to sustainable development, building on the planet of a harmonious civilization, consisting of various states, nation, culture, religion. globalization is the main tool for the implementation of this concept, but it causes a lot of conflict in international relations, which are the most relevant at the present stage. globalisation – an objective phenomenon that does not depend on the will of individuals. the processes of globalization are now deepened and spread with increasing speed. the certain objective conditions of modern development. no country, no economy, no society cannot remain aloof from these processes. they are baltic journal of economic studies 78 vol. 2, no. 1, 2016 connected with the peculiarities of the approval of the post-industrial production technology, the deepening international division of labour, internationalization in modern conditions the main types of industrial activity, the dramatic changes in the information sphere, increasing interdependence among countries, the socialization of economic processes, the democratization of political institutions, the internationalization of public life, the convergence of spiritual values that humanity stands. on a global scale, globalization is reflected in the growing interconnection and interdependence of the world's population in the various fields of activity. this process combines the economy, politics, culture and information sector, technology and management. this convergence was made possible by the accumulation of enormous humanity 's material and spiritual values, which create an objective basis for the development of modern civilization process no matter what socio-state form it acquires. the idea is that the accumulation of human values in economics, politics, science, culture, morality eventually became more important than the achievements in these areas, certain state-national entities. the main problem that has arisen in the course of globalization, in terms of maintaining state sovereignty, is the contradiction between the growing political and economic interdependence of countries and peoples on the one hand, and the preservation of a public right to own and at their own discretion to decide their own problems on the other. due to the progressive erosion of the boundaries between the national economies of the problems previously considered exclusively foreign, are increasingly becoming an integrated international internal political character. government actions of one country can lead to very serious consequences on the other side of the globe. in these circumstances, it becomes evident the need to harmonize responsible decisions, and hence the establishment of appropriate institutional arrangements. and the process of establishing such mechanisms is very intensive. if in 1909 there were 37 intergovernmental organizations, at the end of the century it has become 260. international is organizations such as the eu, the w to, nafta, mercosur and several others, taking on some of the functions delegated to them by individual states, effectively limiting sovereignty. loosening the foundations of state sovereignty it is directly related to the aggravation of the problems of territorial integrity of states, interference in their internal affairs on the part of multinationals and various international organizations, the planting of alien moral values. the main conclusion, which prevails in the assessment of modern globalization processes and forecasting their future, is as follows: at the moment there is an urgent need to understand globalization processes compatible with ensuring the economic security of individual states and the international community as a whole. 2. economic security as an international phenomenon the changes in the international situation marked the beginning of new approaches in the field of political, economic and military relations of the countries of the world community. under these conditions, state security is closely linked to economic issues. however, as the threat of war in the modern world is not completely removed, with particular acuteness there is a problem of security of the state and practical steps in this direction. the urgency of the problem is due to a number of circumstances, internal and external. this is, firstly, a complication of internal economic, social and political problems in a number of countries: the state budget deficit, unemployment, rampant "shadow economy " and other negative effects of production decline, political instability and worsening social tensions. secondly, in the context of a weakening of some countries intensified the desire of other powers to the military and technological superiority over them, the use of "economic instruments" pressure to achieve their political interests. thirdly, it is vitally important compliance issues are a balance between the positive and negative sides of the impact of foreign economic relations of the course and the pace of socioeconomic reforms, as well as ensuring national defence. one of the most important tasks of any state in the moment is to achieve such a level of security that would ensure internal stability, the country 's active participation in international division of labour and at the same time it would guarantee national security. the economic security of the state – an integral part of national security, which is defined as the state of protection of the national economy from external and internal threats, with which it is able to ensure the progressive development of society, its economic and socio-political stability in the conditions of existence of unfavourable external and internal factors (hordyenko). as noted gogvud b.v and l.a gang (hohvud, 2004), the economic security of the state is determined by the level of development of the productive forces and the state of socio-economic relations, the development of scientific and technical progress and the use of its achievements in the national economy, foreign trade exchange and international situation. the material is basis for economic security components of development of the productive forces capable of providing expanded reproduction, civilized standard of living of citizens and economic independence of the state. the economic security of the state responsible not only for successful economic development, but also the need to establish the protection of national economic interests is arrangements. in essence, the theory and practice of economic security policy before the start of the 90s was armed with a single country in the world – the united states. as it was established, neither western europe nor japan has not recovered, "economic security " of the common foreign economic policy, even though the external economic baltic journal of economic studies 79 vol. 2, no. 1, 2016 block is sometimes present as a separate component of a more general doctrine of "comprehensive national security ", for example, in the foreign policy practice of japan's early 80-ies. the same as this unit is included in each of the three concepts of china's national security, which together make up what is called in china, deng xiaoping theory. analysis of more than 20 definitions of "national economic security ", formulated by economists of the former soviet republics, the definitions of the hungarian official documents, poland, lithuania, as well as more than 10 definitions given by scientists in developed countries (usa, canada, japan, germany, france, spain) shows that for each group of countries characterized by the use of different approaches. thus, in the post-soviet countries, the majority of the definitions of "national economic security " is given by "interests" in post-socialist countries – through measurement of "international security ", in developed countries – through the concept of "sustainability ". this is understandable. problems of market transformation, combined with the integration of national economies into the world economy, as well as the establishment of democratic institutions in the postsoviet countries have deeper roots than in the eu member countries. in countries with developed market economies, such problems are virtually absent (kolupaev, 2012). international economic security is defined "as that state of the world economy, which to the greatest extent meets the economic interests of the us in general." despite the indisputable us leadership in the world economy, however, in washington suggest that the us made efforts to ensure the country 's national interests, including its economic aspects, inadequate. it is now very actively discussed the idea of forming a special economic security council or the un (security council type), or as an independent international organization aimed at organizing and coordinating all international economic institutions such as "7", the wto, the imf, oeсd and so on. as the main financier of the organization will be the united states, according to its end use must be determined, first of all, the economic interests of the usa (annual report). 3. threats to economic security as the subjects economic security threats serve those parts of the economic system, the parameters of which can go beyond the limits. substantiality as security objects can act objects, processes and properties of both qualitative and quantitative parameters of objects and processes. the qualitative is characteristics of the economic security of objects characterized by different quantitative indicators (leds). this allows you to define the criteria of economic security through the establishment of the boundary values of economic security indicators. raising these thresholds means security decline to an unacceptable level for the corresponding object. threats in the economy are complex. to understand them, it's a lot of threats should be streamlined by classifying them based on certain principles. these principles classifying threats interests in the economic sphere are (orlova, 2013): universality, that is, the fullest possible coverage of the whole set of threats to vital economic interests in the formation of the totality, which is subject to classification. this unaccounted any threats can make their classification incomplete and, therefore, useless, since it is likely it becomes a situation where are any of the unrecorded threats will contain features that are not in the accepted classification; completeness of the information that is the best representation of the content of each of the identified threats. without such a representation cannot be set sufficiently clear classifications of threat and take it to any group and prioritize its elimination, neutralization or weakening; practical importance is drawing of the classifier threats such their characteristics, which are important, above all, for the adoption of measures to eliminate, neutralize or mitigate these threats. it should be remembered that the use of the qualifier of any far-fetched, of abstract ideas about streamlining identified threats together vital economic interests will only lead to the fact that such a qualifier would be useless in practice; the importance and priority, that is, the establishment within each classification group degree of importance of each group went down in this threat, and on this basis, the establishment of threat for each priority in its elimination, neutralization or weakening. classification of the most probable threats to economic security is presented in table 1 (nikulina, chistnikova, orlova, 2012). table 1 the most likely threats to economic security sign classification threats types of threats by direction of personality society of state by source internal external by the probability of real potential relative to human activities objective subjective by the nature of occurrence natural anthropogenic by awareness conscious unconscious by the degree perception inflated adequate understated imaginary the scale of the action general state regional local baltic journal of economic studies 80 vol. 2, no. 1, 2016 such a classification of threats interests in the economic sphere helps to reveal the reasons for the birth of such threats understand their content and to evaluate their intensity, helps organizations more effectively combat them. 4. economic security strategy security strategy is an important element of strategic planning in the field of national security – the basic document of the state security sector. on the basis of its decision-makers make important management decisions. thus, according to v.p. horbulin and kachynskyj a.b. (horbulin, kachyns'kyj, 2007), economic security strategy should be aimed not only at ensuring the socio-economic and socio-political stability of society, but also to provide the national economy with the necessary resources; protection of export products; maintaining adequate living standards. at the same time one of the main priorities for the implementation of economic security strategy advocates the construction of system of state regulation in this area that is crucial to prevent the collapse of society. strategic planning of the security of the state is carried out to ensure a coordinated, targeted and effective activities of public authorities and local governments, civil society institutions, the armed forces, other formed in accordance with the laws of military units, law enforcement bodies and special services of the civil protection, defence -industrial complex, other forces and security sector funds (varnalij). they, on the basis of current legislation, must transform security policies in political action, legal, institutional, military and other measures for the implementation of national interests, first and foremost, to identify, predict, prevent and neutralize human security threats (citizen), society and state. that is, the performance of the developed strategic planning process and duly approved activities, according to g.p. sytnyk (sytnyk), must provide an adequate response to the threat to the national interests and readiness of the system of national security to perform its functions and tasks of the state to promote integration into the international and regional security. analysis of previous experience and research of the designated problem allows to allocate such directions to strengthen the economic foundations of the state security, such as: 1) reforming the tax system, ensure that the fiscal policy of the state to reduce the proportion of all the components of material inputs in the economy; 2) improving the efficiency of use of public funds; ensuring effective state control of activity of subjects of natural monopolies, the transparency of their use of financial resources, the efficiency of the tariff and regulatory policy; 3) the direction of economic policy measures to strengthen the financial condition of entities, ensuring their focus on increasing profitability and capitalization; 4) promotion of exports, especially high-tech, along with the implementation of public policies, the need for advancing the expansion of the internal market, to avoid critical dependence of the national economy on world markets; 5) improving the competitiveness of the national economy, which is not possible with the current is the level of innovation activity of enterprises and for which is necessary to form the national innovation system, the expansion of investment opportunities for the realization of innovative projects. 5. the international experience of economic security experience is large of eu countries – germany and france. in france, the main state document, which addresses certain provisions of economic security, is the national security law in 1964. in germany, there is no such law. the main interests of the country in the field of national security, including its economic component, are presented in the form of official directives of the ministry of defence. germany sees ensure their economic security in maintaining the economic and social progress, democratization in europe and worldwide, the protection of economic blackmail, freedom of trade and access to raw materials and markets in the framework of a fair world economic system. despite the fact that germany is one of the largest consumers of imported raw materials, this fact is not considered as an economic security threat. while maintaining the achieved level of energy consumption seeks to achieve growth of industrial production and the increase in german export prices. still, the main focus of the eu countries are doing to ensure national security through the measurement of european security, not paying attention to such an important (such as the former post-soviet or totalitarian countries) own capacities to ensure economic security. for example, in the aforementioned directive of the ministry of defence of germany stated that "the problems of our complex world can be solved best through international discussion and compromise, so the german security policy focuses on international relations and supranational institutions." in other words, in western europe the economic security of the country is not understood as the pursuit of self-sufficiency and independence of the national economy or policy from the rest of the world, as well as a state of stable and sustainable economic and social development of the country, which can be achieved through close political and economic cooperation. experience japan. in japan, the transition from traditional security treatment in the military-political sense to the broad interpretation of the concept of security has occurred in the early 1970s, when quite clearly delineated signs the end of the era of unchallenged us economic supremacy on a global level and in some regions, especially in asiapacific region. economic security for the actualization of japan was associated with another important aspect – with the desire to enhance the country 's role in international baltic journal of economic studies 81 vol. 2, no. 1, 2016 affairs through the use of its power of the world's second economic power. the main obstacle to this goal was the economic vulnerability of japan, due to the high level of external resource dependent, achieved at the time of 80%. based on this priority in national security it was made advancing economic development, trade-economic and scientific-technical cooperation with other states. since then, national economic security has been allocated under which began to understand the ability of the economy to withstand any external threat. experience in the united states and canada. according to the information centre of canada, the strategic objective of the government in the area of ensuring the economic security of the country is to maintain the conditions for long-term growth in labour productivity and capital, and thus – the standard of living, including a robust and dynamic business environment conducive to innovation, to attract domestic and foreign investment and sustainable economic growth. the first national program of economic security can be called a memorandum to the united states, approved in 1990, with a view to taking appropriate measures to ensure economic security. in this document, as priority objectives additionally introduced the application of the national economic interests of the us to compete with rivals in the world arena and the protection of "the leading us position in the fields of technology" and "the preservation of the economic power of the united states" directly associated with carrying out measures to ensure the economic security. subsequently, the us president has repeatedly initiated the adoption of the congress of various documents, which contain the names of the phrase "economic security." for example, the act on the economic security of the united states in 1996 was dedicated to the information security of the united states, in particular, the fight against economic espionage. in this document, "economic security " is understood as a part of national security; it is aimed at strengthening the legal protection of information about innovations and innovations from foreign espionage, which are the basis for improving the competitiveness of the us economy. following the terrorist attacks september 11, 2000 there is a shift in emphasis in the contents offered to take to ensure the economic security of documents in the united states. so, to ensure the economic security of the package 2001 is mainly dedicated to the problems of workers losing their seats as a result of the destruction of buildings in new york, as well as the organization of social assistance to these citizens (in medicine, education). in this document, however, offered to revive the us economy measures that should allow for the construction of more buildings, lead to a reduction in unemployment and an increase in jobs; proposals to increase energy independence (separate energy plan), to reform the education system, to expand the markets for their products abroad. the experience of small countries in western europe (netherlands, belgium, denmark, luxembourg, switzerland) to ensure the economic security shows that the main strategic objective for the protection of national economic interests them is to ensure sustainable economic growth and modernization of the economy in accordance with the conditions of competition on the world market. these countries are not able to significantly influence the formation of the structure of the world economy. they are forced to adapt to the conditions of the global economy, change the existing structure of national economies and the proportion of their development. from this derive strategic objectives of creating a flexible, efficient structure and specialization of the economy. timely conducted structural reforms designed to enhance the competitiveness in foreign markets and mitigate the social consequences of structural change for the population of these countries. the baltic is countries and the countries of central europe. czech republic, hungary, poland, slovakia and the baltic states in the early 1990s, was elected virtually the same model of economic security, which included the following: an assessment of the geopolitical situation in the region; definition of the vector and development strategy; the alignment and implementation of behaviours’, including in the economic sphere, in accordance with the dominant trends of regional and global evolutionary process; correlation of basic quantitative and qualitative indicators of development with global and regional standards; adjustment of the course of economic reforms. the basis of their security policy course has been laid on the convergence of national interests and european interests; political, economic, institutional, cultural transformation, in accordance with western standards. the fundamental principle of the concept of the hungarian security policy is that security cannot be reduced only to the political and military; it increases the importance of economic factors. the main element of the hungarian concept is the concept of the integrated nature of the security, including its economic component: no state is cannot is strengthening their security at the expense of another state; security can be comprehended and provided only in terms of cooperation. on this basis, the hungarian security policy rests on three fundamental pillars: political, military and economic integration with western europe. the second fundamental of basis of hungarian security policy are the opportunities offered by regional cooperation within the visegrad group, central european initiative, as well as bilateral relations. the main threats to the economic security of hungary, as noted in the concept are: underdevelopment regions of central and eastern europe from western european countries, the difficulties of transition to a market economy, problems of formation of democratic institutions. in poland, the hungarian concept to economic security threats listed above added another – the cessation or significant restriction of imports of strategically important raw materials. baltic journal of economic studies 82 vol. 2, no. 1, 2016 post-soviet countries. the analysis of publications shows that ukraine, despite the peculiarities of foreign policy, is under the dominant influence of russian developments in the sphere of economic security. equally, this applies to georgia and kazakhstan. 6. conclusions without economic security of the state cannot be sustainable development of the economy and the welfare of citizens. the protection of the national interests is the formation of an economic security strategy – the most important functions of the state, the implementation of which is impossible without a system of self-regulation mechanisms and regulation. the government should implement a set of measures to promote economic growth, and that will guarantee the economic security of the country. these measures should cover all sectors of the economy. these measures include the implementation an active structural and social policies, enhancing the activity of the state in investment, financial, monetary and foreign economic sphere, the continuation of institutional reforms. the difference between the used methodological approaches to ensure the economic security of the eu member states and cis countries due to the fact that the first group of countries is focused on standards and borrows the experience of the leading eu countries (germany, france), and the second group, located in the zone of influence of russia (moldova, ukraine, belarus, kazakhstan), – on the russian developments and standards. in turn, russia in their design focuses more on standards to ensure economic security, which have been made in the period of the soviet union. the main strategic goal of countries in western europe, the usa, canada and japan in the field of protection of national economic interests is to ensure sustainable economic growth and modernization of the economy in accordance with the conditions of competition on the world market. references hordyenko, d.v. osnovy ekonomycheskoj bezopasnosty hosudarstva. [electronic resource]. – retrieved from: www/csef.ru hohvud, b.v., & han, l.a. (2004). analiz polityky real’noho svitu. – k.: osnovy, 396 р. kolupaev, v.a. (2012). formirovanie koncepcii nacional’noj jekonomicheskoj bezopasnosti v zarubezhnyh stranah. belorusskaja jekonomika: analiz, prognoz, regulirovanie. jekonomicheskij bjulleten’ nijei minjekonomiki rb, №12, р. 2-9. annual report to congress on foreign economic collection and industrial espionage, july 1995. – internet. orlova, a.v. (2013). ugrozy jeconomicheskoj bezopasnosti. modern directions of theoretical and applied researches, 2013. nikulina, e.v., & chistnikova, i.v., & orlova, a.v. (2012). economic region potential. scientific reviewed magazine «scientific sheets bsu history political science economy». – belgorod: id “belgorod”, № 13 (132), p. 60-66. horbulin, v.p., & kachyns’kyj, a.b. (2007). systemno-kontseptual’ni zasady stratehii natsional’noi bezpeky ukrainy. – k. : dp “nvts “yevroatlantykinform”, 592 р. varnalij, z. problemy ta shliakhy zabezpechennia ekonomichnoi bezpeky. [electronic resource]. – retrieved from: http://www.rainbow.gov.ua/news/25.html sytnyk, h.p. bezpeka derzhavy kriz’ pryzmu osoblyvostej suchasnoho etapu tsyvilizatsijnoho rozvytku. [electronic resource]. – retrieved from: http://nationalsecurity.org.ua/category/library татьяна момот, нина аванесова систематизация международного опыта обеспечения экономической безопасности обострения угроз и вызовов нового типа для национальной и международной безопасности аннотация. цель работы состоит в систематизации международного опыта обеспечения экономической безопасности, как с точки зрения отдельных государств, так и для мирового хозяйства в целом. постановка такой цели связана с нарастанием глобализационных и интеграционных процессов в мировой экономике, которые несут новые угрозы экономической безопасности. методика. теоретической и методологической основой исследования стали научные положения и выводы по проблемам обеспечения экономической безопасности на уровне мирового хозяйства в целом и отдельных национальных хозяйств в частности. при этом использовались такие общенаучные и специальные методы, как анализа и синтеза, сравнения, обобщения, адаптации. результаты исследования позволили сделать вывод, что защита национальных интересов и формирование стратегии экономической безопасности – важнейшие функции государства, реализация которых невозможна без системы механизмов саморегулирования и регулирования. государство должно осуществить комплекс мер по обеспечению экономического роста, что и будет гарантией baltic journal of economic studies 83 vol. 2, no. 1, 2016 экономической безопасности страны. эти меры должны охватить все сферы экономики. в число этих мер входят осуществление активной структурной и социальной политики, усиление активности государства в инвестиционной, финансовой, кредитно-денежной и внешнеэкономической сфере, продолжение институциональных преобразований. практическое значение состоит в выделении отличий используемых методологических подходов к обеспечению экономической безопасности в странах-членах ес и странах снг. это объясняется тем, что первая группа стран ориентируется на стандарты и заимствует опыт ведущих стран европейского союза (германии, франции), а вторая группа, находящаяся в зоне влияния россии (молдова, украина, беларусь, казахстан), – на российские разработки и стандарты. в свою очередь, россия в своих разработках ориентируется больше на стандарты обеспечения экономической безопасности, которые были достигнуты в период существования ссср. значение/оригинальность. полученные результаты позволили определить основную стратегическую цель стран западной европы, сша, канады и японии в области защиты национальных экономических интересов, под которой понимается обеспечение устойчивого экономического роста и модернизации экономики в соответствии с условиями конкурентной борьбы на мировом рынке. baltic journal of economic studies 98 vol. 6, no. 4, 2020 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: kutsykpetro@gmail.com orcid: https://orcid.org/0000-0001-5795-9704 researcherid: g-9204-2019 2 lviv university of trade and economics, ukraine. e-mail: redchenko@ukr.net orcid: https://orcid.org/0000-0001-8234-4074 researcherid: f-3039-2013 3 lviv university of trade and economics, ukraine. e-mail: rvoronko@ukr.net orcid: https://orcid.org/0000-0003-3796-2556 researcherid: f-8536-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-4-98-102 management control and modern decentralized technologies petro kutsyk1, kostiantyn redchenko2, roman voronko3 abstract. modern decentralized technologies, such as distributed registries, blockchain, smart contracts and decentralized autonomous organizations (dao), are becoming more popular every year. therefore, the subject of our research, the results of which are presented in this article, is the processes of digitalization in the field of management control and key technologies that allow to organize an effective system of management control in a decentralized organization. the success of management control is determined not only by its ability to identify and correct undesirable deviations in a timely manner, but also by the presence of a special corporate culture based on trust and fairness. moreover, a positive corporate culture reduces the need for a number of control procedures designed to compensate for the lack of trust within the company. this effect can also be seriously enhanced by modern digitalization technologies. the research methodology included a broad review of literature sources and a comparative analysis of modern concepts of decentralized management, as well as drawing conclusions about promising ways to evolve management control systems. the aim of the study is to identify the impact on management control systems of modern technologies such as blockchain, smart contracts and decentralized autonomous organizations. the authors summarized the experience of applying these technologies in management control systems, which are designed to ensure high individual and team performance to achieve the strategic goals of the company. the conclusion is that the blockchain-based decentralized autonomous organization (dao) is changing the forms and methods of management control, increasing the role of collective decisions and opening the way for employee initiative. dao can significantly reduce internal and external transaction costs, including costs associated with the management and operation of management control systems. different procedures for approval, confirmation and verification, as well as the adoption of standard management decisions are unified and automated. accordingly, the time and the total amount of effort spent by managers to perform routine actions related to monitoring and control of employees' actions is reduced. decentralization of control also reduces the impact of administrative procedures and ensures a higher level of trust within the organization. the decentralized model of management control is relevant for various areas of business and management, but special prospects can be seen in the field of decentralized finance (defi), where a wide range of professional controllers and users can be involved in auditing smart contracts and identifying shortcomings in financial services. key words: management control, blockchain, smart contracts, digitalization, decentralized autonomous organizations. jel classification: m11, m15, d20 1. introduction management control is one of the categories difficult to be defined clearly. firstly, it is closely related to the methods of planning and monitoring the activities of an enterprise, such as budgeting and costing. secondly, its task is to measure performance and to assess the degree baltic journal of economic studies 99 vol. 6, no. 4, 2020 of achievement of the set goals, both organizational and individual. thirdly, management control takes care of the creation of effective levers of motivation, which ensure the maximum effective fulfilment of priorities by employees directly related to the implementation of the organization’s strategy. such multitasking allows us to consider management control, on the one hand, as a conceptual “umbrella”, which combines various activities of managers in the organization, especially those related to the planning of operations and monitoring their results (euske, 1984), and on the other, as an important element of a corporate culture focused on delivering significant results for the organization (redchenko, voronko, 2015). management control in its modern sense can be described as a process, in which managers form the prerequisites and the mechanism for ensuring high individual and team performance to achieve the strategic goals of the organization. this definition details and develops the opinion of robert n. anthony, according to which management control is to exert managers’ influence on other employees of the organization in order to implement its strategy (anthony, 1988). the success of such control is determined not only by its ability to detect and correct undesirable deviations in a timely manner, but also by the presence of a special corporate culture based on trust and fairness. moreover, a favourable corporate culture reduces the need for a series of control procedures, which are to compensate for the lack of trust within the company. 2. analysis of recent research and publications the concept of trust as the basis of effective management was scientifically developed in the early 1970s by such well-known scientists as c. clifford, m. deutsch, d. mcgregor. the process of building trust-based relationships is closely linked to the quality of internal communications within the company, the results of employees’ individual experience in developing relations with others (clifford, 1971), and the need to take risks in order to achieve the goals set (deutsch, 1968). trust can be seen as an anticipation that the people we depend on will live up to our expectations (shaw, 2000), as well as a prerequisite for the constructive and productive work of groups and teams. the balance of control and trust is important in managing business organizations. this problem has been considered in the scientific works of such researchers as l. b. cardinal, søren jagd, chris p. long. these authors argue that managers try to strike a certain balance between trust and control, that is, to create a reasonable mix of control measures on the one hand, and efforts to create an atmosphere of trust and justice on the other. such a balance strongly depends on the organizational context – on internal and external factors and requirements that exist in certain companies. at the same time, the main task of management control in any company is to create such conditions under which the achievement of the necessary (target) results by executives is ensured with minimal use of the levers of formal power. this allows the managers to reach a level of interaction with employees, when the imperative of coercion is replaced by the imperative of trust, and administrative control gradually evolves towards selfcontrol. at the same time, the level of trust in business organizations is not always high enough to effectively solve numerous management tasks. with the advent of modern technology, some authors have argued that a lack of confidence in business and society can be offset by tools such as distributed data registers (ledgers) and blockchain (lansiti, lakhani, 2017). but the effects of these technologies on modern systems of management control are twofold: on the one hand, new opportunities for human interaction and confirmation of operations occur, and, on the other, threats of overdecentralization of control emerge. these and other problems of the development of management control along with the introduction of new technologies and digitalization remain insufficiently covered in the foreign and domestic scientific literature. therefore, the purpose of this article is to investigate the impact on management of modern technologies such as blockchain, smart contracts and decentralized autonomous organizations. 3. digitalization and blockchain technology in the recent past, people saw digitalization solely as an opportunity to improve or speed things up: computers had to do the same operations as humans, but more efficiently, better and more accurately. today, we witness machines, which not only gradually take on those functions traditionally performed by humans, but also demonstrate the capacity for self-learning and development (ai – artificial intelligence) and interaction without human participation (iot – internet of things). industrial, household and software work (internet bots) are being implemented rapidly and they are successfully performing routine operations of varying complexity. according to the international federation of robotics (ifr), worldwide sales of robots have increased by an average of 19% annually between 2012 and 2017, peaking in 2017 when sales increased to 30% (executive summary world robotics 2018). in the field of business, digitalization not only determines the automation and robotization of production processes, but also profoundly alters business procedures, internal communications and managerial decision-making technologies. in addition, digitalization requires a fundamentally different approach to data collection and processing. even baltic journal of economic studies 100 vol. 6, no. 4, 2020 today, a large number of companies accumulate data not because they have a clear idea of where, how and when they can be used, but simply because the data are “collectable”. the information systems of such companies are full of reports and messages that no one uses to make management decisions. digitalization does not recognize this approach: the company should collect only the data that are used in the costing process. sifting through a multitude of information messages, the system selects and leaves only the information that is relevant to the specific goals, and then organizes it, analyzes and converts it into a format of recommendations for managers and other responsible persons. as a result, for corporate management decision-making, companies are progressively using real-time systems that can support the development of detailed scenarios and business forecasts. with growing volumes and complexity of information used to make managerial decisions, the problems of security and trust are increasingly acute. the more participants are involved in communication processes and in the preparation of business information, the more difficult it is to ensure the protection and accuracy of this information. it is in the use of distributed ledger technology (dlt) and blockchain that today scientists and practitioners are looking for solutions to this contradiction. since blockchain technology was first introduced in 2008 by its anonymous developer, hiding under the pseudonym of satoshi nakamoto, and then used to create the first cryptocurrency, the bitcoin, a number of progressive solutions for business, finance, government and etc. have already been created on its basis. the attention paid to this technology is largely due to the fact that the participants of the blockchain-based network do not necessarily trust each other. the distributed ledger technologies, on which the blockchain is based, allows transactions to be made, with almost absolute certainty that no one will be able to tamper with records or make any unauthorized corrections. this dramatically alters traditional approaches to verifying electronic documents: for example, when dealing with asset transactions, blockchain allows a full, automated audit of all transactions to recognize an entity’s control over an asset. such verification is accomplished by building and storing the source information of any asset in the blocks when each digital transaction leaves a unique record in the database, creating the ability to audit any digital event in the past. such a record is made in all registers associated with the asset and each company can access the relevant information in a copy of such register, knowing the necessary key (melnychenko, hartinher, 2016). according to a global survey conducted by deloitte, an international auditing firm, 53% of executives in large companies from around the world said that in 2019, blockchain technology would be “crucial” for their organization. in the previous year, the same answer was given by 43% of respondents (deloitte, 2019). among the benefits of the technology, respondents noted, in particular, that blockchain is “democratizing” access to information and contributing to increased trust within organizations. 4. smart contracts: a basis for the development of decentralized autonomous organizations (dao) another innovation that significantly affects the quality of interaction between people in organizations are blockchain-based programs that are self-executing and do not require human involvement (or considerably reduce such participation) – the so-called smart contracts. in general, a smart contract is not “smart” in the literal interpretation of its name. rather, it is an algorithm, a program written in one of the programming languages (for example, in the object-oriented programming language named solidity, specially developed for the ethereum platform), which makes the process of fixing calculations automated and independent of the parties after the smart contract was uploaded to the system. thus, the technology solves the problem of lack of trust between the parties to the contract when a person – an independent arbitrator – becomes unnecessary (yakunin, 2018). the scope of smart contracts is constantly expanding to cover a wide variety of areas. for example, the us government is considering implementing a blockchainbased system that supports smart contracts and can improve government contract management (higgins, 2017). smart contracts have been recognized at the state level in belarus and are used in municipal institutions (e.g. hamburg, germany) and many private companies. distributed ledger technology and smart contracts are at the heart of the so-called decentralized autonomous organizations (daos). their emergence is interpreted by some researchers as the result of (to some extent, idealized) crypto-technological revolution (mougayar, 2015). daos are based on a set of rules and algorithms by which business transactions are executed. the content and terms of transactions are set using smart contracts and their execution is automatic. information about each completed transaction is entered in a decentralized registry, which facilitates the interaction of participants and provides high information reliability of the system. from a technical point of view, dao is a computer program that runs a distributed chain of independent users and establishes a single set of corporate rules of conduct. the dao program code presupposes a certain decision-making process, just as in traditional legal entities. these virtual organizations can be programmed for fully autonomous operation or manual mode when baltic journal of economic studies 101 vol. 6, no. 4, 2020 users control the assets with varying degrees of intensity (ivanov, 2017). 5. convergence of dao and management control systems the benefits of daos are, first and foremost, a significant reduction in internal and external transaction costs, including costs associated with the management and maintenance of management control systems. the various procedures of coordination, confirmation, verification and approval, as well as the adoption of typical (standard) management decisions are unified and automated. accordingly, the time and overall effort of managers to perform routine actions related to monitoring and controlling the actions of their subordinates is reduced. some processes, such as the payment of remuneration, can be completely autonomous with the help of daos: smart contracts simply state the conditions that must be fulfilled by employees to receive the appropriate amounts, and then, if they are fulfilled, payroll calculations are automatically run. the application of daos is quite possible in many traditional companies, where it enables to transform the vertical management structures of any division. for example, implementing dao in the finance department can help to avoid budget fraud and resolve controversial payroll situations. in addition, the dao “breaks” the usual patterns of interaction between people in the organization and displaces unproductive management approaches. if, in a traditional management system, company executives directly determine the actions of subordinates (for example, the subordinates may be forced to attend unproductive meetings or gatherings on a regular basis), in a decentralized structure, the decisive factor is whether or not a given action can create value (achieve success at work). if performing a particular procedure makes no sense to the dao members’ opinion, they do not vote for it and, accordingly, do not do so, devoting their time to issues that they consider more relevant. thus, the command methods of leadership in dao do not work – in this case, more important issues are the principles of operation and internal policies, which are agreed and consented by the participants of the decentralized organization. accordingly, management control in terms of dao use takes on forms other than in traditional administrative structures. if the latter give the key role to the manager, who must determine the rules and conditions of the team, in decentralized autonomous organizations decisions are taken collectively. this minimizes such phenomena as subjectivism and personal sympathy on the part of traditional company executives towards individual employees. on the other hand, the absence of a formal hierarchy in dao opens a direct path for innovation and employee initiative, an important factor for business development in terms of the technological revolution. at the same time, management control in the conditions of implementation of dao can face some difficulties. this is due to the nature of the distributed registries, ledgers and the blockchain in particular, which contain transaction records made by dao members. the trust model implemented in blockchain technology involves performing sophisticated mathematical calculations to add to the chain the next block with the next batch of transaction records. such calculations require special equipment which helps the network members to try to calculate the correct number to open the next block of transactions and receive rewards. however, the security of records in a global or public blockchain is guaranteed, first and foremost, by a large number of network members (“miners”) who work in a decentralized manner, and therefore it is highly unlikely for some of them to obtain control of most of the network resources. but in a particular company, bank, or government organization, it is more appropriate to use a private, non-public, blockchain record that can be viewed by any external user. the difference is that the creation of blocks in a private blockchain is centralized and carried out according to the rules defined by the company itself. only trusted internal users have access to private blockchain records. however, individual outsiders (such as auditors) may also, as an exception, be entitled to view information or use separate applications. private blockchain is almost completely controlled by the company, which causes both opportunities and threats. on the one hand, a company can develop and update blockchain functionality more quickly, and on the other hand, it may face the challenge of ensuring the necessary level of security and trust between different groups of participants. to avoid problems, a private blockchain should have well-designed protocols that allow managers and network owners to effectively control all its members (add and remove members, increase or decrease their rights and authority, define consensus-based decisionmaking rules, etc.). at the same time, network owners should bear in mind that excessive control can negate the benefits of blockchain that are associated with its autonomy, decentralization and security. 6. conclusions the technological component of modern management control systems is becoming increasingly important to ensure the expected level of performance of such systems. the interaction of managers and employees is increasingly conditioned by the use of new technologies such as blockchain, smart contracts, the internet of things, and artificial intelligence. in this regard, when considering management control systems, baltic journal of economic studies 102 vol. 6, no. 4, 2020 it is worth remembering the effects of emergence, that is, the manifestation of completely new qualities (decentralization, , autonomization, etc.). it is also important to overcome the lack of trust in the relationships between the participants in the management processes in companies. without overestimating the role of modern technologies, we note that they are one of the main drivers of high personal and team performance today. the tools of human interaction in organizations, such as smart contracts and decentralized autonomous organizations, bring management control to a new level of development, when the main role is played not by administrative procedures but by reaching consensus and providing a high level of trust between employees and management. a promising area for the development of decentralization of management control is the area of finance. many projects are now being implemented in the field of decentralized finance (defi), which is a decentralized, public and unreliable ecosystem that combines various financial services based on public blockchains, mainly ethereum. defi does not have centralized management structures: the rules for conducting business operations are written in a smart contract. 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(in russian) baltic journal of economic studies 155 vol. 5, no. 5, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: u.umantsiv@knute.edu.ua orcid: https://orcid.org/0000-0003-0788-7110 researcherid: n-7018-2016 2 kyiv national university of trade and economics, ukraine. e-mail: l.lebedeva@knute.edu.ua orcid: https://orcid.org/0000-0001-8632-5460 researcherid: o-2213-2016 3 national technical university "kharkiv polytechnic institute", ukraine. e-mail: anastasia_mitrofanova@ukr.net orcid: https://orcid.org/0000-0002-5427-8927 doi: https://doi.org/10.30525/2256-0742/2019-5-5-155-164 modern trends in governance of state ownership relations iurii umantsiv1, larysa lebedeva2, anastasiia mytrofanova3 abstract. today, the diversity of functions of the state is objectively expanding, especially in the context of socially oriented economies of developed countries. effective governance of state property serves as a solid foundation for successful performance of the state functions. the chosen topic is of particular relevance in the context of ukraine's transformational economy. the subject of research is the system of economic relations of state property. methodology. in the course of the study, a general philosophical dialectical method was used to find contradictions in the phenomena and sources of their development, such as the essence of state property and its contents. common scientific methods were also used: analysis and synthesis; comparative analysis; statistical methods for calculating the structure and dynamics of indicators of condition and development of state property. the overall system for assessing the socio-economic efficiency of state property management was carried out on the basis of microeconomic indicators and macroeconomic indicators (indicators of economic and social efficiency). the purpose of the paper is to reveal the trends of development of state ownership relations in the european countries as well as in ukraine, in particular, the difficulties of the process of managing them, as well as to formulate possible ways to overcome such difficulties. conclusions of the study. today, the importance of the state as a public institute is objectively increasing in the most economically developed countries. by succeeding in achieving positive institutional changes in ownership relations (creating favorable conditions for smes, developing market infrastructure, conducting moderate privatization of state property, transferring state-owned enterprises to market tracks, maintaining policies for protecting national interests, etc.) the grounds for economic growth and improvement of the social sphere in france and poland were made. though the conducted analysis showed that the development of state property in ukraine is contradictory, it has the following problems: ambiguous character of privatization; low efficiency of state property governance; insufficient efficiency of work of enterprises with state ownership; institutional problems. overall, the socio-economic efficiency of state property governance in ukraine needs improvement. thus, the state policy of property governance should include, in particular, the following steps: development of a national model of governance, as well as strategies for the development of state property; organization of state property management entities; development of a system of criteria and indicators for assessing not only the economic but also the social efficiency of state property governance. key words: state property, role of state in economy, state corporate rights, socio-economic efficiency, privatization. jel classification: b52, h11, h82, p26 1. introduction the degree of participation of the state in the economic, social and humanitarian life of society throughout the history of mankind has gradually increased, while experiencing temporary fluctuations in the expansion and narrowing of the sphere of state responsibility. economic thought, responding to the needs of economic reality, has given rise to two groups of schools in relation to government intervention in the economy. first, liberal schools that believe that natural market baltic journal of economic studies 156 vol. 5, no. 5, 2019 forces are capable of achieving economic equilibrium, therefore, the role of the state should be reduced to a "night watch" (classical school of political economy, marginalism, neoclassical school, modern neoliberal theories). secondly, schools that believe that the market mechanism is incapable of self-regulation, so state regulation of economy is designed to compensate for the "fiasco of a market" (mercantilism, utopian socialism, marxism, keynesianism, institutional economics). during the twentieth century understanding of the role of the state in macroeconomic regulation fluctuated between two poles, which appeared in the alternation of periods of privatization, on the one hand, and nationalization, on the other hand. today, importance of the state as a public institute is objectively increasing in the most developed countries with a socially oriented market economy. state property management can be seen as one of the fundamental functions of the state in the process of institutional change. problem with the state's fulfillment of this function is one of the factors that harden the flow of economic reforms in ukraine in the transformation period, in particular, problems of privatization of state property, management of corporate rights of the state, the consequences of which are reflected in the current development of the domestic economy. therefore, this topic of research is extremely relevant. first of all, there is a need for a comprehensive approach that considers not only the corporate rights management of the state, which is a very common topic today, but also the problems of governance of state property. researchers mainly focus on analyzing a number of microeconomic indicators of the quality of state property governance (mukha, 2012) or assessing the quality of corporate governance (popov, 2009; fedorenko, 2014). while the analysis of macroeconomic indicators of social effectiveness of governance, as well as comprehensive studies of state property governance, as a rule, remain out of the scientists' attention. therefore, the purpose of the paper is to reveal the trends of development of state ownership relations in european countries as well as in ukraine, in particular the difficulties of the process of managing them, as well as to formulate possible ways to overcome such difficulties. this purpose was achieved by using a general philosophical dialectical method to find contradictions in the phenomena and sources of their development, such as the essence of state property and its contents. common scientific methods were also used: analysis and synthesis; comparative analysis; statistical methods for calculating the structure and dynamics of indicators of the state and development of state property; graphic modeling. the logic of the presentation of the material is as follows: in the beginning, reviews of recent publications on the subject is given, then the problems of development of state property in the eu (on the example of france and poland) as well as in ukraine are considered. the discussion section offers an author's vision of how to solve the problems of governance of state property in ukraine. finally, the conclusions of the study are presented. 2. analysis of recent research and publications governance of the state property relations is a complex issue that raises many cross-cutting problems that have been raised by different researchers. thus, the current trends in the evolution of the property rights and their impact on economic development are examined in the works of v. volchik (volchik, 2014), m. ticha (2009), a. zawojska (zawojska, 2013), l. cviklova (cviklova, 2016). privatization processes and their contradictions in the transformational economy are analyzed in the works of o. popov (popov, 2009), m. khokhlov (khokhlov, 2008) and others. the research of corporate governance system of the state was made by r. mukha (mukha, 2012), o. paskhaver (paskhaver, 2008), a. fedorenko (fedorenko, 2014), iu. umantsiv, o. ishchenko (umantsiv, iu., ishchenko, o., 2017) and others. in the works of s. lazzarini (lazzarini, 2018), o.tkachuk, v. khachatryan, (tkachuk, khachatryan, 2019), v. v. bokovets et al (bokovets, zamkova, makhnachova, 2017) the effectiveness of state and private enterprises is compared. state and private property rights, their specification and erosion are discussed in the works of r. shiryaeva (shiryaeva, 2011), m. justesen ( justesen, 2015). 3. presentation of the main material 3.1. governance of state property in the countries of eu today, the importance of the state as a public institute is objectively increasing in the most economically developed countries. state property governance can be seen as one of the fundamental functions of the state in the process of institutional change. france has an interesting experience of state involvement in shaping institutional ownership changes. this country is characterized by the most developed (of all western european countries) state regulation of the economy, which is manifested in indicative planning (the formation of strategic plans and current forecasts is done by the general commissariat for planning). the economy of france accumulates all forms of ownership today, such as: state, collective, individual, mixed. after large-scale nationalization (energy, coal, chemical industry, ferrous metallurgy, transport engineering, household electrical equipment production, construction, communication and transport, etc.) in the 1950's and 1960's a third of the property was owned by the state, including a fifth of the industry, banks, motor vehicles, major insurance companies and broadcasters. the main objective at this time was industrialization in order to maintain the baltic journal of economic studies 157 vol. 5, no. 5, 2019 status of a strong state in france. accordingly, the public sector made 30% of all investments. after two waves of denationalization, which took place in the 1970s and 1990s, many industrial enterprises and banks remained in the public sector. but the mechanism for managing them has changed significantly. soes have been transformed into joint-stock companies (stateowned majority in shares), and transferred to a budgetindependent operation. in the xxi century the country's policy is aimed at further developing the competition that underpins free enterprise and trade. accordingly, the creation of small businesses is constantly stimulated by various types of assistance in obtaining long-term and short-term loans, providing tax benefits, guarantees and credit insurance, providing commercial information, establishing legal guarantees to prevent complete bankruptcy, the selection of specialists to coordinate the activities of small businesses. today, the state policy is aimed at further socializing the property institute. thus, in france, the internal redistribution of shares is legislatively stimulated. the tendency for companies to become fully owned by their staff is becoming more prominent. in essence, it is a matter of creating a cooperative form of ownership not through the merger of small individual owners, but through the acquisition of the enterprise by its staff. thus, france has a formative influence on the property institute through methods of state regulation, in particular by stimulating entrepreneurial activity, creating conditions for further cooperation and so on. poland's practice of shaping institutional ownership changes is particularly valuable to ukraine. after all, this country is close to ukraine both in the tradition of organizing the socio-economic sphere (in the historical aspect of socialist living conditions with all the original components), and in geographical location. prior to the reforms (1990), poland's economy was in a state of deep systemic economic crisis (hyperinflation, declining production levels, and living standards). accordingly, a course was laid on cardinal systemic changes, which were then called "shock therapy ". the following measures have been taken to ensure stabilization: strict monetary policy; elimination of the budget deficit by reducing subsidies for food, raw materials, energy industry, abolition of most tax benefits; liberalization of prices except for energy, transport tariffs, rent, medicines; introduction of partial conversion of currency of poland in the conditions of its considerable devaluation, unification of the exchange rate in all markets and liberalization of foreign trade; rigid restrictive income policy. but “shock therapy” was criticized by the political elite of poland, and in 1994-1997 a successful program of gradualist reforms was introduced with the strategy for poland, which was fundamentally different from the previous liberal policy of reforms. the key vectors were the following: creation of necessary institutions, state intervention in the economy, fair distribution of income. the country 's major macroeconomic indicators have been significantly improved during the reforms. between 1990 and 1992, the so-called "small-scale privatization" took place in poland, with the large share of retail and consumer services transferred into private hands. the share of the private sector in gdp has increased from 29% in 1989 to 47% in 1992, and reached almost 70% in 1996. as for the privatization of large enterprises, the government was in no hurry, because it understood the importance of gradual changes in the principles of their management. in other words, the strategy for poland program was based not on the destruction of the public sector, but on the gradual privatization. correspondingly, the corporatization of state-owned enterprises with a limited number of shareholders and the transition to management through the hiring of competent managers has been done (palekhova, 2008). thus, state-owned enterprises mostly operate with the participation of private capital and are organizations over which the state exercises control to achieve the set objectives with maximum efficiency. at the same time, in strategic enterprises, especially in the sphere of energy and heavy industry, the state retained a controlling stake, and for better capital rising, some of the shares are quoted on the stock exchange. this applies, for example, to the polish energy group or to other energy companies. as of 2015, the state retained a minority stake in 346 enterprises and a majority stake in 47. thus, in 2015, the annual dividend income exceeded the profit from the sale of enterprises by 10 times, reaching the level of 45 billion zlotys ($ 12 billion) (belas, 2016). thanks to the creation of large and export-oriented small and medium-sized enterprises in the years of transformation to market economy, poland has managed to overcome the crisis in industrial production quite quickly (2008 – 2009). during the financial crisis, smes were supported and stimulated by the significant expansion of the bank guarantee system and facilitated access to eu funds. thus, by succeeding in achieving positive institutional changes in ownership relations (creating favorable conditions for smes, developing market infrastructure, conducting moderate privatization of state property, transferring state-owned enterprises to market tracks, etc.) the grounds for economic growth and improvement of the social sphere in the country were made. 3.2. the problems of governance of state property in ukraine the place of state property in modern economic systems is primarily determined by its central role as a basis for state to fulfill its functions. in our view, the quality of these functions implementation is possible only under the condition of adequate development of state property relations. baltic journal of economic studies 158 vol. 5, no. 5, 2019 according to the law of ukraine “on managing objects that are in state ownership” (article 1), the process of governance of state property is exercised by the cabinet of ministers of ukraine. the state property may include natural resources, basic means of production in all sectors of the economy, financial resources, gold and foreign exchange reserves, as well as cultural values. state corporate rights are a particular subject of governance. according to the resolution of the cabinet of ministers of ukraine “on approving basic conceptual approaches to improving the effectiveness of corporate governance of the state”, the state corporate rights (csr) are determined by the state's share in the capital of a company, and include the right to manage such a company, gain profit (dividends), and the distribution of assets in the event of liquidation. in ukraine, the development of state property, especially in the course and in the wake of the economic reforms of the 1990s, is very controversial. let us distinguish the following problems of development of state property in ukraine: 1) the nature of privatization and its results; 2) problems of efficiency of governance of state property and state corporate rights; 3) problems of state-owned enterprises as separate economic units; 4) blurring of state and private property rights; 5) interconnections between "ownership-power" relations. 3.2.1. the nature of privatization and its results large-scale privatization of state-owned property was the basis of economic downturn in the process of transformation of the economic system of ukraine. in 1992, the verkhovna rada adopted the laws of ukraine “on privatization of small state enterprises (small privatization)”, “on privatization papers”, “on privatization of state housing fund”. to ensure the implementation of the legislative norms, a special body of executive power – the state property fund of ukraine – was created. since 1992, the state privatization programs have been approved annually by the verkhovna rada, which contain the conditions, plans and organizational measures for privatization for a year. the first state privatization program identified the following strategic goals of this process: the creation of a layer of non-state owners as the basis of a multifaceted economy; increasing the efficiency of production facilities; development of competitive environment and restriction of monopolies; attraction of foreign investments. thus, privatization process was entrusted with the fundamental tasks of developing private ownership and stimulating private initiative in the process of market transformations. in addition, its fiscal function on filling the revenue part of the state budget was recognized as important. during the first decade of privatization process, the share of state property in fixed assets in ukraine decreased from 81.3% to 56.7%, and the share of public sector employees fell from 78.7% to 35.5%. trade and public catering, household services, light and food industry developed rapidly. in many industries, with the exception of electricity, fuel, milling, the private sector prevailed. the majority of industrial products (63.6%) were produced by non-state enterprises. however, unfortunately, not all objectives have been successfully achieved, as the privatization process has encountered some difficulties, such as the lack of a clear strategy; inefficient use of received funds; insufficient legislative support; shadow privatization; the practice of bringing businesses into bankruptcy in order to rebuy them. 3.2.2. problems of efficiency of governance of state property and state corporate rights it is important to analyze the effectiveness of the process of governance of state property. assessing governance effectiveness involves having a set of metrics that have not been created yet. researchers (solovjan, 2011; fedorenko, 2014) often propose a solution to this problem through the use of fairly traditional indicators, rather than creating the system of indicators aimed specifically at assessing the governance of state property. in addition, as a rule, they tend to evaluate the economic efficiency itself rather than the socio-economic or social management effectiveness. in particular, following indicators are used: annual profitability of corporate rights; return on assets, sales, net profit. if we try to give a general quantitative description of the state property governance process carried out by the state property fund of ukraine (spfu), we will see that, according to the fund (state property fund of ukraine, 2019), it transferred uah 5.362 billion to the state budget in 2017, and uah 0.25 billion was received for the fulfillment of its tasks. that is, as a result of the governance activity of the fund, the state received a net income of uah 5.112 billion. however, if we consider the structure of this income, it turns out that 62.9% was obtained through the privatization of state property; 19.7% at the expense of leasing of state property; 17.3% due to dividend income and net income. thus, most of the proceeds from the governance of state-owned property are short-term revenues, which cannot be planned as a basis for economic growth of the country. at the same time, regular revenues from state-owned enterprises, dividends and rents, which can be used for long-term budget planning, account for much less of the revenue. let us formulate the general system of indicators for assessing not only the economic efficiency, as it is most often done, but also the socio-economic efficiency of governance of state property, in particular of corporate state rights in state-owned companies (see table 1). baltic journal of economic studies 159 vol. 5, no. 5, 2019 researchers (mukha, 2012; solovjan, 2011) often concentrate on calculations and analysis of a group of microeconomic indicators of economic efficiency of governance of state-owned enterprises; examine the financial position and dividend policy of individual entities selected for analysis. however, the analysis of macroeconomic indicators of economic and social efficiency of state property governance, as a rule, either is not conducted at all or is not carried out in sufficient volume. let us calculate and analyze selected macroeconomic indicators of economic efficiency of state property governance (see table 2) for the period of 2010–2017 in ukraine. the total annual yield on corporate rights in state owned companies is low, fluctuating from year to year, and has a general tendency to decrease. during this period, the absolute number of entities at different stages of bankruptcy (property disposal, liquidation) decreased significantly; a similar trend is observed with regard to the share of enterprises in the process of bankruptcy in the total number of enterprises managed by spfu. expenditures on innovation activities (financed from the state budget) have unstable values and fluctuate from year to year, but the percentage is quite low (from 0.4% to 4.47%). in our view, among the indicators of social efficiency, one of the most important is the wages in traditional sectors of the public sector compared to other sectors and to the national average in general (see table 3). as we can see from the table, the wages in the traditional public sectors exceeded the average in ukraine only in the sphere of public administration, as well as defense, social insurance by 1.1-1.4 times, with trends in 20162018 indicating further increase of this indicator. however, at the same time, in those areas that reflect the state's fulfillment of basic social functions, i.e. in the field of education, health care, social assistance, functioning of cultural institutions, there is a steady tendency to lag behind the national average wage. thus, in the field of education, such a gap is 16-27%; in the health and social table 1 a system of indicators for assessing the effectiveness of state property governance, in particular corporate state rights group indices essence 1 2 3 microeconomic indicators, including: indicators of economic efficiency and financial sustainability – labor productivity, capital productivity, capital intensity, material efficiency, material intensity, capital stock at the enterprise; – profitable amount of assets for sale; – net profit in the share capital; – revenue from fixed assets, number of employees. characterize the economic efficiency and financial sustainability of the functioning of state-owned enterprises or state-owned enterprises dividend policy indicators – stock price dynamics; – ratio of the share price to its nominal value; – volume and dynamics of dividend payments; – dividend per share in circulation; – net profit per share in circulation; – share of net profit paid as dividend; – the ratio of dividends to the share price (return on equity) characterize the state's income from corporate rights in (public) open jointstock companies indicators of quality assessment of corporate governance – fulfillment of the financial plan of the enterprise in terms of revenue from sales of products, net profit, transfer of net profit to the budget; – fulfillment of agreement conditions characterize the quality of corporate governance of heads of state-owned enterprises or representatives of the state in governing bodies of commercial companies macroeconomic indicators, including: cost-effectiveness indicators – volume and dynamics of deduction of profit (dividends) to budgets; – total annual profitability of corporate rights – efficiency of use of resources: productivity of labor, capital productivity, capital intensity, material efficiency, material intensity, capital stock of labor in the public sector; – number of enterprises in the process of bankruptcy. – innovation expanses (financed from the state budget) characterize the economic efficiency of the public sector as a macroeconomic entity social performance indicators – level and dynamics of wages in the public sector; – employment of socially disadvantaged sections of the population; – maintenance of social infrastructure facilities; – level of prices for products; – participation of businesses in government programs, including social programs characterize the quality of the performance of social functions of the state using state property source: made by the authors baltic journal of economic studies 160 vol. 5, no. 5, 2019 care sectors it is 28-34%; in the functioning of cultural institutions it is 15-29%. at the same time, in 2018, wages in the wholesale and retail trade area were by 1.1 times higher than the national average; in the field of information and telecommunications by 1.6 times; in the field of financial and insurance activities by 1.8 times. it should be emphasized that the state property fund applies its own methodology for assessing the quality of governance, which focuses on subjective factors and consists of assessing the quality of managerial functions performed by government representatives in joint stock companies. as a result, the spfu concluded that management effectiveness remains poor. thus, only 11% of companies demonstrate high efficiency in management; 14% of companies showed a satisfactory level; and the vast majority – 75% of the companies – were found to be ineffective in terms of the management quality (fedorenko, 2014). the reasons for this unsatisfactory condition lie in the following problems of governance of state property, namely: a) a lack of a strategy for governance of state property in general and state corporate rights in particular; b) a complex system of public authorities responsible for corporate governance; c) low professional level, interest and responsibility of authorized bodies in the management process; d) conflict of regulatory and managerial functions of the state; e) unfavorable structure of corporate rights (mytrofanova and reshetnjak, 2019). 3.2.3. problems of functioning of state-owned enterprises in our view, the problems faced by state-owned enterprises in the course of their activity can be considered at several levels. at a micro level, there is a lack of resources for technological upgrade of table 2 macroeconomic indicators of economic efficiency of public property governance year indices total annual yield on corporate rights, uah resource efficiency: labor productivity in the public sector, uah number of enterprises in the process of bankruptcy, units / share of bankruptcies in the total number of enterprises managed by spfu,% innovation expanses (financed from the state budget,% of total expenditures) 2010 n / d 1.66 158 / n / d 1.08 2011 0.019 1.61 128/26 1.04 2012 0.018 1.61 121 / 24.9 1.95 2013 0.004 1.57 110 / 23.9 0.26 2014 0.008 1.64 65 / 17.3 4.47 2015 0.004 1.76 63 / 16.9 0.40 2016 0.011 1.74 55 / 15.4 0.77 2017 0.003 n / d 55 / 16.1 2.49 source: calculated by authors based on (mytrofanova and reshetnjak, 2019; fedorenko, 2014) table 3 wages in traditional public sector compared to the average in ukraine years average salary, uah. salary; government, defense, social insurance salary; education salary; health care and social assistance salary; functioning of libraries, archives, museums and other cultural institutions uah relative to the average wage uah relative to the average wage uah relative to the average wage uah relative to the average wage 2010 2250 2735 1.22 1884 0.84 1616 0.72 1912 0.85 2011 2648 3049 1.15 2077 0.78 1762 0.67 2124 0.80 2012 3041 3432 1.13 2532 0.83 2186 0.72 2579 0.85 2013 3282 3719 1.13 2696 0.82 2351 0.72 2737 0.83 2014 3480 3817 1.10 2745 0.79 2441 0.70 2769 0.80 2015 4195 4381 1.04 3132 0.75 2829 0.67 3049 0.73 2016 5183 5953 1.15 3769 0.73 3400 0.66 3705 0.71 2017 7104 9372 1.32 5857 0.82 4977 0.70 5464 0.77 2018 8865 12698 1.43 7041 0.79 5853 0.66 6381 0.72 source: calculated by the authors based on (report on the work of the state property fund of ukraine and the progress of privatization of state property in 2017, 2018) baltic journal of economic studies 161 vol. 5, no. 5, 2019 production, significant depreciation of fixed assets, low degree of financial stability and liquidity. in the case of non-natural monopolies, there are difficulties in competing in the industry, including trade and online services (gorodnichenko et al., 2018), and the difficulty of finding competitive advantages (gerasymenko et al. , 2017). macro-level enterprises of any form of ownership are in one way or another confronted with the unpredictable economic policies of the state, that are often influenced by political cycles and demands of the international financial institutions. in addition, the overall macroeconomic conditions in the country are rather unfavorable, as ukraine experienced several major economic crises during the years of independence (1990s, 2008–2009, 2014–2015), which have led to decline in domestic demand, the outflow of staff, the rise in the cost of credit and more. at the global level, the intensification of competition (nwabueze and mileski, 2018), political upheavals, and the absence of sufficiently large world-class monopolies to compete effectively with the world's leading companies in the world markets are significant obstacles. 3.2.4. blurring of state and private property rights institutional theory of property rights implies the need for a clear specification of property rights to ensure the effective functioning of property relations. otherwise, the erosion of property rights opens up opportunities for protection problems and opportunistic behavior. insufficient regulation of property rights is common in post-socialist countries, including ukraine, as a result of radical market reforms, rapid privatization processes, and the lack of prompt construction of the institutional foundations of the new economic system. as a consequence the lack of specification in property rights is expressed in two sectors. firstly, in the sphere of modern functioning of the state property itself. here, according to research (shirjaeva, 2011), there are many problems due to the fact of ownership by civil servants of unregistered property that can be used to pursue their own interests. such abuses may be linked to the establishment of monopoly prices for goods and services of natural monopolies (tariffs for rail transport, gas prices, etc.); to public procurement at inflated prices; to direct distribution of state property or use for their own purposes. secondly, in the area of the connections between private and public property, that have been linked to privatization processes historically. in this case, the lack of transparency of privatization procedures raises the question of the initial legitimacy of the transfer of certain objects (including strategic ones) into private or joint-stock ownership. moreover, such processes continue today. for example, privatization plans for 2018 (analytical note on the work of the state property fund of ukraine and the course of privatization of state property for 9 months of 2018, 2018) included such companies as turbo-atom, president-hotel, mykolaivoblenergo, which are in the list of ten enterprises-leaders in terms of dividend payments to the state budget. at the same time, privatization has traditionally featured the sale of unprofitable enterprises with the aim of improving state finances and transferring such enterprises to a more efficient owner. in addition, privatization plans include entities that have been previously listed as entities that cannot be objects of privatization. moreover, these enterprises have a monopoly position or are of strategic importance for economy of the country. preparations for the sale of these assets in accordance with the spfu report (state property fund of ukraine, 2018) were made only after they have been excluded from the non-privatization list. on the other hand, if it is proven that certain businesses were acquired unlawfully, re-nationalization of them, even with compensation for the owners, will lead to the phenomenon of "erosion of property rights", when the right of private ownership is not protected. therefore, neither national nor foreign investors will be interested in investing without being confident in the sound protection of their rights. unfortunately, in ukraine in the 2000s the term of "re-privatization" came into existence, i.e. the return of privately owned enterprises back to the state, which at one time led to chaos with the determination of property rights for some objects. 3.2.5. interconnections between "ownership-power" relations by definition, the historical phenomenon of interconnections between "ownership-power" relations is the following: "power (ownership) gives rise to the concept of property; property is born as a function of possession and power. ownershippower is an alternative to the european antique, feudal and bourgeois private property in the non-european structures” (vasilev, 1993). it is emphasized that the phenomenon of interconnections between "ownershippower" relations can be viewed in two respects: as a distinctive feature of non-european societies, and as a characteristic feature of the senatorial-vassal relations in the era of the european middle ages (cirel, 2006). historically, this phenomenon has appeared in the period of kievan rus and the moscow state. a distinctive feature of this phenomenon is the primacy of power over property, i.e. a high status in the social hierarchy, due to the occupation of a certain position in the civil service, becomes a prerequisite for owning wealth. moreover, since property depends on the authority, in the event of termination of civil service, private ownership of the wealth acquired is not guaranteed. baltic journal of economic studies 162 vol. 5, no. 5, 2019 it is difficult to say whether this phenomenon, which is actually spreading today in ukraine, is caused by history itself. probably it is not. more probable reasons are the lack of specification of state and private property rights, the lack of separation of state power from business, the availability of opportunities for abuse, corruption factors. as a result, an appointment of certain persons to higher governmental posts is made not by their objective abilities and knowledge, but by the large private property ownership. property and power are mutually conditioned and merged. a closed circle of "property-power" connections is formed then, which may be interrupted by the coming to power of new elites, when both property and power are redistributed, and previous decision-makers often lose everything. 4. discussion the problems in the field of state property development in ukraine need a dynamic and highquality solution. thus, in the sphere of privatization processes, it is necessary to harmonize the policy of privatization of state-owned enterprises with the longterm goals of governing of state property; determine the scientifically sound amount of state property and consolidate it legally. it is necessary either to ensure the stability of the list of strategic state-owned objects that are not subject to privatization, or to reform the procedure for excluding companies from this list, to ensure its transparency and purposefulness, to eliminate the corruption component; to stop the privatization of really profitable enterprises. the fiscal function of privatization should play a subordinate role in relation to the function of improving the efficiency of public property management. among scholars (mukha, 2012; solovjan, 2011; fedorenko, 2014), the “market”, “competitivecentric” approach to solving problems of the system of governance of state property and in particular state corporate rights is dominant. the essence of this approach lies in recognizing the primacy of economic efficiency over social. in particular, it is proposed to optimize the number of state-owned enterprises; to improve the structure of their efficiency by exempting the state from the management of small blocks of shares amounting to 25%; to transfer a part of the state's stake in the trust administration. it is also proposed to abolish the rule on the mandatory deduction of part of the net profit of the state-owned enterprise into the state budget. the idea is to allow the sale of part of the shares of state-owned joint-stock companies with 100% state ownership in order to attract additional investments. of course, an unbiased analysis, inventory of existing state property, in particular, its efficiency is necessary. considering the specifics of the industries in which state-owned enterprises operate (education, health care, defense, economic security, strategic industries, natural monopolies, public goods), it may be inevitable that unprofitability (or subsidy) occur. in other words, reduced economic efficiency is a "pay " for social efficiency. therefore, it is necessary to radically change the very approach to assessing the performance of state-owned enterprises, and accordingly the process of managing them – from a purely "market" to one that takes into account the degree of fulfillment of their state functions, i.e., including the social component. under these conditions, social performance indicators (see table 1) should be included in the system of performance indicators for state property governance; otherwise, the objectives of the analysis and the method of evaluating results will not be consistent with each other. in our opinion, problems in the process of public corporate governance in ukraine can be solved using the following measures: a) streamlining the composition and functions of the entities managing the efficiency state corporate rights; b) creation of a domestic corporate model in the field of state corporate rights governance, taking into account foreign experience and national peculiarities; c) development of the state efficiency management program of state corporate rights and strategic planning to improve the quality of management in this field in the short and long run; d) drafting of the law of ukraine “on corporate rights of the state”, which should regulate relations in this sphere and protect the interests of the state; e) open the state agency of ukraine in management of state corporate rights and property, the regulations of which have been developed but are not yet in force; e) amend the law of ukraine “on civil service” with respect to raising the requirements for the quality of work of civil servants, as well as establishing the responsibility for their activities (mytrofanova and reshetnjak, 2019). institutional problems of eroding state and private property rights, as well as the existence of interconnections between "ownership-power" relations, in our view, are extremely difficult to solve, as they concern not only purely economic sphere but also established forms of behavior, informal rules that have become traditional over the last few decades and are difficult to influence. at the same time, it is necessary to try to include the specified institutional component in the state policy of governance of property relations. the current situation requires an increase in the degree of protection and specification of public and private property rights, ensuring the inviolability of both private and public property rights. the key to this is not only to improve legislation, but also to increase confidence in the country 's law enforcement and judicial systems. it is necessary to amend the law of ukraine "on civil service" to strengthen the accountability of civil servants for making decisions related to the disposal of state property. it is necessary to ensure that the legislation regulates actions of the bureaucratic baltic journal of economic studies 163 vol. 5, no. 5, 2019 apparatus regarding the disposal of such objects. the role of civil society representatives in preventing the "conflict of interest" concerning state property objects should be strengthened. 5. conclusion today, the importance of the state as a public institute is objectively increasing in the most economically developed countries. by succeeding in achieving positive institutional changes in ownership relations (creating favorable conditions for smes, developing market infrastructure, conducting moderate privatization of state property, transferring state-owned enterprises to market tracks, creating, policies for protecting national interests, etc.) the grounds for economic growth and improvement of the social sphere in france and poland were made. according to the results of this study, development of state property in ukraine is characterized by the following problems: supremely sensitive nature of privatization; low efficiency of governance of state property and state corporate rights; insufficient efficiency of functioning of state-owned enterprises as separate economic units; institutional problems such as an erosion of state and private property rights and interconnections between "ownership-power" relations. in our view, general system for assessing the socioeconomic efficiency of state property governance should include the following indicators: microeconomic indicators (indicators of economic efficiency and financial sustainability, dividend policy, quality assessment of corporate governance); macroeconomic indicators (indicators of economic efficiency and social effectiveness). analysis of selected macroeconomic indicators of economic efficiency of public property governance in 2010–2017 in ukraine showed that the annual yield of corporate rights of the state is low and tends to decline; the number of enterprises in the bankruptcy procedure has significantly decreased. as an indicator of social efficiency wages in the public sector in comparison with the average in ukraine were taken, that are low with a tendency to decrease. overall, the socioeconomic efficiency of public property governance in ukraine needs improvement. the ways to solve problems in the sphere of state property governance in ukraine, in our opinion, lie, firstly, in strengthening the strategic thinking in the centers of decision-making, in avoiding situational ill-considered steps. secondly, it is necessary to streamline the list and functions of controlling bodies in order to eliminate duplication of their functions. thirdly, in the process of analyzing the effectiveness of state property governance, it is necessary to strengthen the social component. fourth, it is necessary to include an institutional component in the state policy for managing the relations of state property in order to solve problems of erosion of state and private property rights, as well as the interconnections between "ownership-power" relations. the subject of further research in the outlined direction may be a 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(in ukrainian) baltic journal of economic studies 174 vol. 5, no. 1, 2019 corresponding author: 1 main territorial department of justice in kherson region, ukraine. e-mail: predmestnikov@ukr.net 2 national university "odessa law academy ", ukraine. e-mail: gumenyuk_vitaliy@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-174-181 harmonization of economic and legal mechanisms for deepening eu-ukrainian relations oleh predmestnikov1, vitaliy gumenyuk2 abstract. the policy of ukraine for the establishment and development of relations with the european union began in 1993, was carried out all the years of ukraine’s existence, and received intensive deepening with the beginning of the formation of an international treaty – the association agreement, which includes a list of legal, social, economic, and technical regulations, and deep and comprehensive free trade area (dcfta), in 2014 and its final signing in 2017. political and economic objectives of the agreement are of fundamental importance to the future of both ukraine and the whole european region. the political goal is to implement european standards on the territory of ukraine. this implies the introduction of fundamental european values, namely democracy, rule of law, respect for human rights and the standards of the european security system. the agreement does not foresee membership in the european union, however, does not exclude such an opportunity in the future. the economic goal is to help to modernize the ukrainian economy by expanding trade volumes with the eu and other countries, as well as reforming economic regulation mechanisms in line with the best european practices. subject to the improvement of the business climate, ukraine will become attractive for foreign and domestic investment for further production for export to the eu and other markets of the world. harmonization of standards and european regulations has become a much more important process than the fulfilment of strictly technical requirements and underlies the introduction of effective governance without corruption. in the process of harmonization of interaction, an adaptive institutional mechanism was formed (the highest level – annual summits; the key coordinator is the association council, consisting of members of the council of the european union and members of the european commission, and members of the cabinet of ministers of ukraine; the level of operational coordination – the association parliamentary committee, which includes members of the european parliament, representatives of the verkhovna rada of ukraine, and the civil society platform; in order to coordinate processes on the territory of ukraine, the ukrainian government has introduced a few supervisory committees and commissions). the harmonization of the economic aspect of the mechanism has been determined in solving issues of openness of markets for duty-free import from ukraine in april 2014, obtaining a visa-free regime with the eu, abolishing export-import tariffs, implementing european technical standards for food safety, phytosanitary norms, competition policy, service provision, and public procurement policy. the issues of further deepening of relations include a review of the terms for the introduction of regulations and legislative provisions before their actual implementation, stabilization of financial and economic processes in the country, and further development of democratic values and social institutions. key words: deepening eu-ukrainian relations, eu-ukraine agreement, dcfta, foreign policy, economic relations, harmonization mechanism. jel classification: o19, f15, f42, r50 1. introduction international financial and political relations between ukraine and the european union were launched in december 1991, when the minister of the eu presidency – the netherlands – officially recognized the independence of ukraine on behalf of the european union. ukraine’s policy on the formation of relations with the european union is based on the law of ukraine “on the principles of internal and external policies” (dated 01.07.2010). according to article 11 of this law, one of the fundamental principles of ukraine’s foreign policy is “ensuring ukraine’s integration into the european political, economic, legal space in order to become a member of the eu” (analytical note, 2015). at the same time, ukraine’s intention to build relations with the eu on the principles of integration baltic journal of economic studies 175 vol. 5, no. 1, 2019 was announced much earlier. so, in the resolution of the verkhovna rada of ukraine as of 02.07.1993 “on main directions of foreign policy of ukraine” ukraine first declared its own european integration aspirations. in order to maintain stable relations with the european communities, ukraine has entered into partnership and cooperation agreement, the implementation of which was the first stage of promotion to the associate and subsequently to its full membership in this organization” (association agenda, 2014). following the revolution of dignity, which was held in ukraine in 2014, the verkhovna rada of ukraine adopted the resolution “on confirmation of ukraine’s course on integration into the european union and priority measures in this field” as of 13.03.2014, which also confirmed the irreversibility of ukrainian course on european integration, which aim is to become a member of the european union. the deepening of relations between ukraine and the european union (eu) has resulted from the formation of an international treaty – the association agreement, which includes a list of legal, social, economic, and technical regulations, and deep and comprehensive free trade area (dcfta). most of the provisions of the association agreement and the dcfta are of a purely technical nature, and its signing in 2014 was an act of strategic and geopolitical importance in the history of ukraine. the losses ukraine has suffered as a result of its political decisions are prohibitively large in terms of territory, economy and, above all, human life, but so far, the country’s resoluteness to succeed remains steady. political and economic objectives of the agreement that are of fundamental importance to the future of ukraine as an independent and secure european state are completely understandable. the political goal is to deepen the implementation of the “european choice” of ukraine. this implies the introduction of fundamental european values, namely democracy, rule of law, respect for human rights and the standards of the european security system. the agreement does not provide for membership in the european union, but this possibility is not excluded in the long run. the economic goal is to help to modernize the ukrainian economy by expanding trade volumes with the eu and other countries, as well as reforming economic regulation according to best european practices. subject to the improvement of the business climate, ukraine will become attractive for foreign and domestic investment for further production for export to the eu and other markets of the world. the agreement regulates the modernization of ukraine by bringing standards and regulations in line with eu standards, which in general are in line with international best practice. harmonization of standards and european regulations is a much more important process than the fulfilment of purely technical requirements and it underlies the introduction of effective governance without corruption. the eu has almost fully opened its market for dutyfree imports from ukraine in april 2014. for a number of products, transitional periods are used. this means opening up more export opportunities for the ukrainian economy. gradually during several years, starting from january 2016, ukraine cancels its import tariffs for eu countries. the association agreement and the deep and comprehensive free trade area (dcfta) agreement will enable ukraine to become one of the medium or large economies of the eu with a highly developed and diversified industrial structure. the technical requirements for entry into the eu market are high and rigorous, however, they are applied professionally and fairly without any (unlike other) geopolitical manipulations. financial support, including eu grants and loans or investments from european financial institutions, is provided through investment and technical support in the event of high adaptation costs. the provisions of the agreement and the dcfta are numerous and complex, therefore, ukraine and the eu will have to go through the complex path of processoriented structural changes. the mechanism for fulfilling obligations is rather flexible due to the procedures for extending the terms and amending the list of legislative acts subject to mutual consent of the parties. the authors determined the purpose of a detailed consideration of legal, economic mechanisms for harmonizing standards and regulations for deepening eu-ukrainian relations and identifying the most optimal ways for mutually beneficial development. 2. the methodology of research the association agreement between the european union (eu) and ukraine is a comprehensive treaty covering ukraine’s political and economic relations with the eu. the trade section of the agreement provides for the establishment of deep and comprehensive free trade area (dcfta), which is an important component of the agreement as a whole. the agreement was initialled in march 2012 and would have to be signed at the eu summit in vilnius in november 2013. but at the last moment, president yanukovych has decided not to sign it, which caused the political events on maidan, and subsequently russia’s aggression in the form of the annexation of crimea and the hybrid war in the east of the donbas. the signing of the agreement took place in two stages later. initially, the political part (in march 2014, prime minister arseniy yatsenyuk) and then the economic part (in june 2014, newly elected president petro poroshenko) were signed. baltic journal of economic studies 176 vol. 5, no. 1, 2019 the verkhovna rada of ukraine and the european parliament ratified the agreement in september 2014, and the eu member states, except for the netherlands, – during 2015 and early 2016. in the netherlands, the ratification process was interrupted by the negative result of the referendum, which took place on april 6, 2016. however, the temporary application of the agreement remains unchanged. the netherlands (and hence the eu as a whole) completed the ratification on may 30, 2017. the provisional application of the agreement began in november 2014, in addition to the dcfta, the “provisional” application of which began in january 2016, after a one-year delay at the request of russia. the final version of the agreement came into force on september 1, 2017 (eu-ukraine, 2017). the agreement is a “mixed agreement” (that is, it contains provisions within the competence of the eu member states), all eu member states have also ratified it in accordance with their national legislation and procedures. in order to avoid delays in ratification, the eu and ukraine have agreed to apply large parts of the agreement on an “interim basis.” this applies to most of the provisions that fall within the competence of the eu. the agreement creates a comprehensive institutional framework that plays an extremely important role in the monitoring and implementation of certain provisions of the agreement. annual eu-ukrainian summits receive additional, ever clearer legal frameworks that did not exist before. the highest level of political dialogue is confirmed at the summits, which set out general rules for the implementation of the agreement, as well as an opportunity to discuss any bilateral or international issues of mutual interest. the last ukrainian-eu summit took place on 12-13 july 2017 (for the first time since the ratification of the association agreement). the discussion was devoted to the importance of ambitious reforms, especially in the fight against corruption, the introduction of the eu visa-free regime for ukrainians, and the conflict in the east of ukraine (emerson, movchan, 2018). below the summit level, the key institution is the association council, consisting of members of the council of the european union and members of the european commission, on the one hand, and members of the cabinet of ministers of ukraine, on the other hand. the association council meets at least once a year at ministerial level and is the main institution monitoring the application and implementation of the agreement. in addition, the commission considers any other key issues relating to the relationship between the two parties. since the entry into force of the agreement, the association council met four times. at its last meeting on december 8, 2017, the eu and ukraine welcomed the progress made in implementing a comprehensive reform program, assessed the steps taken to implement the association agreement, and emphasized the need to intensify efforts to implement reforms. in particular, the association council considered and discussed ways of further development of reforms that were jointly developed by the eu and ukraine within the association agenda, welcoming the successes in decentralization, the reform of public administration, the adoption of the electoral code and the privatization law in the first reading (eu-ukraine, 2017). the association council may make “binding” decisions when provided for in accordance with the agreement. this means that the eu (and its member states) and ukraine are obliged to implement these decisions. in addition, it may issue non-binding recommendations, such as the “association agenda” document, which details the implementation process. both the decision and the recommendations are taken with the consent of the parties (european parliament, 2009). the scope of decision-making powers is rather limited since the joint organization can only make decisions that fall within its competence under the agreement. the association council receives assistance from the association committee consisting of representatives of the parties at the level of senior officials that, in turn, receives assistance from the specialized subcommittees (eu-ukraine, 2015). at its first meeting, 15.12.2014, the association council approved the personal regulations, as well as the regulations of the association committee and subcommittees. in addition, subcommittees on justice, freedom and security and on economic and other sectoral cooperation were created. in accordance with the agreement, a trade committee has already been established to consider all issues related to the dcfta, supplemented by several subcommittees (for example, on customs cooperation and on trade and sustainable development). finally, the agreement established the parliamentary association committee, which includes members of the european parliament, representatives of the verkhovna rada of ukraine and the civil society platform (eu-ukraine, 2015). 3. results and discussion after the political events of maidan during 2013-2014, ukraine returned to the goal of becoming a truly democratic state, which was confirmed by democratic parliamentary and presidential elections. however, there is an urgent need to further improve the functioning of democratic institutions. the association agenda demands, among other things, the creation within the constitutional reform of an effective system of checks and balances between the branches of power and the strengthening of local self-government and regional authorities. in 2016, the first part of the constitutional reform was adopted – judicial reform. baltic journal of economic studies 177 vol. 5, no. 1, 2019 however, important constitutional changes related to decentralization remain blocked by the verkhovna rada. in addition, the distortion of certain political decisions is of concern over the influence of nontransparent groups of interests both in the parliament and in the government. the success of the anticorruption policy is a prerequisite for the overall success of the agreement and the economic future of ukraine. many heads of the association contribute to this goal, for example, in terms of transparency of government procurement, however, the ukrainian government needs to solve a number of key issues related to the functioning of the judicial system and the prosecutor’s office and several anticorruption institutions. there are also problems of forming the real political force at the highest level in relation to the implementation of anti-corruption policy in specific situations. obtaining a visa-free regime with the eu, in the first place, was to introduce a comprehensive action plan for the general liberalization of the visa regime. in december 2015, the european commission recommended the introduction of a visa-free regime, which began in july 2017. this was the most positive achievement for both parties, as for ukraine, in terms of implementing the eu requirements, and so for the eu itself, given the extreme political sensitivity of all aspects of border management and migration policy (european parliament, 2017). cancellation of tariffs is the classical economic basis for establishing a free trade area. the eu has largely weakened the market access restrictions in april 2014 by granting ukraine “autonomous trade preferences” and abolishing 94.7% of its import duties. according to the terms of the full-time provisional application of the dcfta, which began on january 1, 2016, ukraine should gradually abolish its customs duties on imports from the eu for seven years. these measures initially had only limited impact on exports from ukraine to the eu due to the cessation of production in the occupied territories, logistical problems, and a downward price trend in the world commodity markets. however, recently, exports to the eu have grown rapidly, jumping by 30% in 2017. at the same time, the eu share in ukrainian exports and imports increased due to a sharp decrease in trade volumes with russia. the structure of exports to the eu has shifted towards machines and equipment, fats and oils, ready-made food products, and products of animal origin (emerson, movchan, 2018). the use of duty-free tariff quotas for agricultural products has increased as ukrainian producers gradually solve problems related to the requirements of food safety and the weak demand for their products. the main sector for which special protection measures have been introduced is the automotive industry of ukraine, which will continue to be blocked by the growth of imports from eu countries up to 15 years. this has increased additional costs from consumers but it is planned to intensify the development of ukrainian production in the short-term. the agreement contains provisions relating to antidumping measures, subsidies, and special protective measures to secure the importing state’s economy against serious damage or threat of such damage. earlier, the eu widely applied antidumping duties to ukrainian steel and bulk chemical products, however in the last 2017-2018 such measures are much less common. in october 2017, the eu introduced a final antidumping duty on imports of steel products from ukraine and a number of other countries. there are certain problems of ukraine’s inconsistent trade policy with some violations of the provisions of the dcfta (eu-ukraine, 2017). the dcfta also includes important measures to ensure fast and efficient customs services. ukraine is gradually complying with its legislative obligations in accordance with the new customs code, most provisions of which comply with the requirements of eu legislation. nevertheless, the main task for border posts on the borders with the eu remains to work without delays and corruption. adoption of european standards for industrial, agricultural, and food products is extremely important for modernizing and improving the competitiveness of the economy. ukraine has defined a strategy aimed at eliminating technical barriers to trade with the eu by bringing its legislation in line with the eu main directives and adopting a very large number of eu standards. in the agro-food sector, ukraine is launching a comprehensive strategy for the implementation of eu sanitary and phytosanitary standards (decision, 1/2014). table 1 priority principles of rule of law and foreign policy section of the agreement efficiency of implementation 1.1. political institutions active creation of new institutional structures, the presence of structural weaknesses and the influence of oligarchs 1.2. human rights the human rights standards are being actively developed, structural adjustments are introduced into the legislation (except for the occupied territories) 2.1. judiciary institutional reforms have a limited result 2.2. corruption to create active positive legislative and institutional shifts, there is not enough political freedom 2.3. movement of persons liberalization of the visa regime is a major positive step 3. foreign policy and security the eu overwhelmingly supports ukraine, continuing political and economic sanctions source: compiled by the authors based on eu-ukraine (2015); eu-ukraine (2017) baltic journal of economic studies 178 vol. 5, no. 1, 2019 subsequently, it will provide high standards for the safety of food products for ukrainian consumers and will create better opportunities for ukrainian enterprises to export their products to the eu and to other markets in the world. progress in the implementation of these two policy areas concerning technical regulations and standards for industrial and agricultural goods is a significant step but not as fast as it was planned. the competitive and diversified service sector is of great importance for the ukrainian economy. the agreement contains detailed elaborated, comprehensive provisions on liberalization commitments and reservations, and the ukrainian side has a greater scope for liberalization commitments and fewer reservations than the eu. within the framework of the agreement, work is underway to fulfil ukraine’s obligation to bring its legislation in the field of public procurement to the relevant eu directives. the government is already implementing e-procurement that proves to be useful in terms of improving efficiency and reducing the corruption component. the system of intellectual property rights in ukraine has several disadvantages compared to advanced european and international practices, which is a source of great concern from the eu and the usa. it is expected that these shortcomings will be eliminated in the new legislation that will be adopted and implemented. ukraine has already largely brought its competition policy into line with eu standards and international standards. in addition, further legislative and institutional reforms are foreseen. the financial sector of ukraine is under strong pressure determined by the need to maintain the stability of the banking system and provide external debt servicing. however, the government and the central bank continue to implement a comprehensive long-term program to update regulatory acts on the basis of eu legislation as an important component of the overall process of reforming the economy. from the point of view of macroeconomic policy, during the years of its independence, ukraine has achieved only small success in reforming its economic policy, demonstrating unsatisfactory results, with the exception of periods of very favourable commodity prices (law of ukraine №2210-viii, 16.11.2017). in 2014-2015, ukraine experienced a severe economic crisis and suffered infrastructure losses over russian aggression, which further aggravated the negative consequences of the global economic crisis. nevertheless, moderate growth resumed in 2016 and 2017 (respectively 2.4 and 2.5%). the eu provides significant financial assistance on various channels, including macroeconomic loans complementary to the imf funds, as well as budget support and investments from the eib and the ebrd. in the period of 2014-2020, the amount of this aid may reach 12.8 billion euros (emerson, movchan, 2018). prospects and priorities of reforms and approximation of legislation. from the above, it follows that many questions will arise as to the terms of approximation and implementation of certain acts of eu legislation, as well as how and when it is necessary to update the list of legislative acts intended for implementation in the financial sphere. financial regulators (nbu, national commission for the state regulation of financial services, national securities and stock market commission) have jointly drawn up a detailed action plan: comprehensive program for the development of ukraine’s financial markets until 2020, which includes an obligation under the agreement with the eu, as well as obligations to others international partners and, of course, takes into account internal needs (law of ukraine table 2 deepening economic relations and free trade area section of the dcfta agreement efficiency of implementation 4. market access for goods significant growth in the export of goods in the eu, there are certain violations of the dcfta 5. trade protection measures the eu has introduced an anti-dumping duty on some steel products 6. customs services slow improvement of legislation, which in practice is not always effective and corrupt 7. technical standards preparation for acaa negotiations is in progress. harmonization of eu standards and regulations slowed down in 2016–2017 8. food safety (sps) an integrated sps strategy is implemented, vital for the agro-food sector; the expansion of individual access to the eu market for products of animal origin at the level of products and companies 9. services ukraine is more liberal than the eu, so the approximation of legislation to eu requirements is slow 10. public procurement significant progress has already been made, but some rules of the new legislation contain risks of levelling or reversal 11. intellectual property rights legislation has been improved, but the weak practicality of its application causes dissatisfaction on the part of the eu and the usa 12. competition policy improvement of the statutory framework has not yet been reflected in the definition of the practical effectiveness of the antimonopoly policy 13. statistics the statistical system is actively developing, closer to the eu requirements source: compiled by the authors based on eu-ukraine (2015); eu-ukraine (2017) baltic journal of economic studies 179 vol. 5, no. 1, 2019 №2210-viii, 16.11.2017; law of ukraine “on consumer lending” №1734-viii, november 15, 2016). in early 2017, the regulators revised the program to postpone the deadlines for implementation from 2019 to 2021 in order to take into account slow progress in adapting legislation and delays in drafting bills. the program was also revised to update the eu legislation that had to be implemented in view of the evolution of the eu legal framework. a more detailed list of current deadlines set at the beginning of 2017 is given in table 4. however, further revisions are conducted taking into account the large delays: by february 2018, only three of the ten directives and regulations that were expected to be harmonized in 2016–2018 have been implemented at least partially. in particular, a new law on consumer lending was adopted in 2016, which largely complies with the consumer credit directive (2008/48/ec). the new law, aimed at facilitating business and attracting investment by securities issuers (2017), contains updated rules on issuance of securities and public securities offerings, information disclosure rules for securities issuers, and regulation of professional securities market participants. it implemented a part of the mifid/mifid ii rules. the nbu has achieved significant progress in changing banking supervisory regulation that brought it closer to the eu standards. despite the underdeveloped financial markets and the slow progress in the implementation of eu standards in ukrainian legislation, the nbu and the securities commission are gradually introducing the latest eu legislation without waiting for the official renewal of the obligations under the agreement. the financial market development program of ukraine contains a schedule for the implementation of current eu financial services legislation, as well as new eu legal provisions such as directives 2015/2366, 2015/849, 2014/59/ec etc. when the association agreement was signed, the regulatory approximation in the financial services sector was scheduled with the ultimate goal of introducing a full regime for the eu internal market. this would allow ukrainian banks and other operators of financial services markets to provide services in the eu on the same basis as companies from eu countries. so far, the introduction of such a financial mechanism is not possible, as the eu is close to a centralized model of supervision in the banking sector and other financial services sub-sectors. in the banking sector, the implementation of eu standards could be confirmed by a significant share of subsidiaries of eu banks (among non-state banks). in addition, the obligations under the association agreement coincide with the nbu’s plans for the implementation of the prudential regulation of basel iii (resolution nbu, 2015). 4. conclusions summarizing the research, the emphasis is placed on the main points of the formation and development of cooperation processes and the establishment of relations between the eu and ukraine, as well as the opportunity to deepen such relations on mutually beneficial terms. the agreement on association and cooperation between ukraine and the eu entered into force on september 1, 2017, after the delay in ratification in one of the member states (the netherlands). it aims to create a common institutional economic, legal, and political interaction mechanism that will ensure monitoring and regulation of the implementation of the agreement and will create a platform for conducting a mutually beneficial political dialogue. the temporary application of the ratification of individual standards and interaction regulations began on november 1, 2014, except for the provisions of the table 3 deepening economic cooperation section of the agreement efficiency of implementation 14. macroeconomics the macroeconomic situation tends to intensify and recover, but in recent years, the pace has slowed down 15. financial services structural reforms are rapidly developing 16. transport adaptation of legislation and infrastructure restructuring are very slow 17. power engineering diversification of gas supply, reforming in a radical state 18. environmental protection achieving the eu’s recommended regulations is not possible within a specific timeframe 19. digital technology the ict sector is developing rapidly but the legislation is very slowly adapting to the eu 20. consumer protection gradual adaptation of legislation; development of institutional capacity 21. corporate law major legislative reforms have been carried out to adapt to eu legislation 22. agriculture limited obligations, controversial land legislation 23. social policy the main regulations comply with eu rules and standards 24. education and culture a relatively large resource of human capital, although there are certain problems 25. science and technology participation in the program “horizon 2020”; significant advantages 26 agencies and programs cooperation is on a gradual development 27. cross-border cooperation important projects with poland, slovakia, hungary, and romania, however, there are some problems with implementation 28. public society establishing ncas with the ability to protect democratic transformations, but they are under a certain pressure baltic journal of economic studies 180 vol. 5, no. 1, 2019 dcfta, the application of which began only on january 1, 2016. delay with the dcfta appeared as a result of a trilateral meeting between the eu, ukraine, and russia on september 12, 2014, where a decision was made (under russian pressure) to postpone the implementation. however, the autonomous trade preferences of the eu (i.e., the unilateral introduction of the tariff section of the provisions on the dcfta) have been applied during the interim period. therefore, in general, as a result of delays, the loss of economic and political processes was insignificant. the scope of the temporary application is extremely broad and encompasses almost all of the provisions on the dcfta and the main sections on general principles, political dialogue, rule of law, and numerous issues regarding sectoral cooperation. the supervisory board of the association has broad powers to amend the annexes of the agreement but not its main text. these institutional arrangements began to work after the association agreement entered into force. at the time of executing the agreement, the financial sector of ukraine was in a state of financial instability of the banking system and uncertainty about the financial aspects of servicing external debt after the emergence of an artificial financial crisis. however, the ukrainian government continues to implement a comprehensive long-term program of regulatory modernization of the financial sector, using eu legislation as a basis. the eu and the association for deepening relations consider it an important part of the process of modernizing the economy as a whole. eu countries recognized that in the process of approximation to the eu standards, the original timetables were too ambitious, and some new eu legal provisions, such as mifid 2, seemed too complicated for a relatively modest level of development of financial markets in ukraine. yet there are good reasons for continuing to adapt the eu’s international practices to ukrainian legislation. the commitment to the association agreement can be the basis for improving the situation in the financial, economic, political, and social sectors. nevertheless, the government of ukraine must take a fresh look at ways of further reforming the financial sector, taking into account the reduced prospects for providing a complete regime for the domestic market as the ultimate goal of approaching the requirements of the association agreement. this may involve increased flexibility in the implementation of commitments under the association agreement. the agreement has also launched political goal, important for the european region, it is to ensure that ukrainian democratic institutions adhere to the basic european values. the agreement provides for close monitoring of democratic institutions, including in the context of the rule of law and human rights. respect for democratic values is considered in the agreement so essential that, in the event of their serious violation, the agreement may be terminated, in contrast to the violation of other regulations. table 4 deadlines for the implementation of eu legal regulations in accordance with the 2020 program 2016-2018 1606/2002 (ias regulation, 2016) * 2013/34/ec (accounting directive, 2017) * 2009/103/ec (directive on motor insurance) 2002/92/ec (directive on insurance mediation) 2003/41/ec (directive on occupational retirement provision) 2014/51/ec (omnibus ii, 2018) 648/2012/ec (regulation on the infrastructure of the stock market) 2015/847 (regulation on information accompanying transfers of funds) 2015/849 (the fourth directive on the fight against money laundering) 2008/48/ec (directive on credit agreements for consumers) * 2019-2020 2014/56/ec (amending directive on audit) 2009/65/ec (ucits iv) 2007/16/ec (directive on eligible assets) 2009/110/ec (the second directive) on electronic money 2003/51/ec (directive on the modernization of accounts) 537/2014 (directive on audit) 2009/138/ec (solvency ii) 2013/36/ec (crd iv) 2014/49/ec (consolidated version of directive on deposit guarantee schemes) 2014/59/ec (directive on the regulation of troubled banks) 97/9/ec (directive on investor-compensation schemes) 2014/57/ec (directive on market abuses) 596/2014 (market abuse regulation) 1060/2009 (regulation on credit rating agencies) 86/635/ес (directive on bank accounts) 2006/46/ec (directive on company reporting) * 2007/14/ec (directive on transparency) 2003/71/ec (prospectus directive). 2008/11/ec, 809/2004,1787/2006, 1289/2008 2004/109/ec (directive on the transparency of listing companies) 2010/43/ec, 2010/42/ec, 583/2010, 584/2010 (ancillary acts of ucits) 2014/17/ec (directive on mortgage lending, 2017) * 2001/65/ec (directive on fair value) 1569/2007/ec (equivalence of accounting standards) 91/674/ес (directive on insurance accounts) 2001/24/ec (directive on bankruptcy) 2014/65/ec (mifid 2). 2002/87/ec (directive on financial conglomerates) 2020–2021 2015/2366 (the second directive on payment services, 2020) 575/2013 (crr iv) 2013/36/ec (crd iv) 98/26/ec (directive on settlement finality) 2009/44/ec (amending directive on settlement finality) 909/2014 (regulation on central securities depositories) 2002/47/ec (directive on financial collateral arrangements) note: * partially or fully implemented. source: compiled by the authors based on eu-ukraine (2015); eu-ukraine (2017); emerson m., movchan v. (2018) baltic journal of economic studies 181 vol. 5, no. 1, 2019 references: analytical note (2015). verkhovna rada 06/2015, berlin / kiev, june 2015. retrieved from: www.beratergruppe-ukraine.de/ wordpress/wp-content/uploads/2014/06pb_06_2015_en.pdf association agenda (2014). association agenda between ukraine and the eu to prepare and facilitate the implementation of the association agreement. retrieved from: https://ier.page.link/agenda decision (1/2014). decision of the association council on the adoption of regulations of the association council, the association committee and its subcommittees. retrieved from: https://zakon.rada.gov.ua/laws/ show/845_001 eu-ukraine (2017). eu-ukraine association council – joint communiqué, 8 december 2017. retrieved from: http://eeas.europa.eu/ukraine/docs/st06978_15_en.pdf eu-ukraine (2015). the eu-ukraine association agenda on the preparation and implementation of the association agreement was approved by the eu-ukraine association council on march 16, 2015. retrieved from: http://eeas.europa.eu/ukraine/docs/st06978_15_en.pdf european parliament (2009). resolution of the european parliament of 30 april 2009 regarding the situation in moldova. retrieved from: http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep// text+motion+b6-2009-0264+0+doc+xml+v0//en&language=en european parliament (2017). recommendation of 15 november 2017 to the council, the commission and the eeas on the eastern partnership, in the run-up to the november 2017 summit. retrieved from: http://w w w.europarl.europa.eu/sides/getdoc.do?pubr ef=-//ep//te xt+ta+p8-ta-2017-0440+0+ doc+xml+v0//en&language=en emerson m., movchan v. 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"on amendments to certain legislative acts of ukraine concerning facilitation of business and investment attraction by securities issuers" (vidomosti verkhovnoy rady), law. retrieved from: http://zakon.rada.gov.ua/go/2210-19 law of ukraine "on consumer lending" № 1734-viii (november 15, 2016). information from the verkhovna rada 2017, № 1. retrieved from: http://zakon.rada.gov.ua/go/1734-19 paweł dziekański (2017). diversification synthetic indicator for evaluating the financial capacity of local government. the case of polish voivodeships. acta universitatis agriculturae et silviculturae mendelianae brunensis, 65(2). retrieved from: https://doi.org/10.11118/actaun201765020611 resolution nbu (2015). on amendments to the resolution of the board of the national bank of ukraine dated june 18, 2015, no. 391 and the comprehensive program of the financial sector development of ukraine till 2020. retrieved from: https://zakon.rada.gov.ua/laws/show/vr028500-17 smagliy, k. (2017). “a wake up call for ukraine’s civil society”, kennan cable, no. 25. retrieved from: https://www.wilsoncenter.org/publication/kennan-cable-no25-wake-call-for-ukraines-civil-society transparency international (2016). “corruption perception index 2016”. retrieved from: https://www.transparency.org/news/feature/corruption_perceptions_index_2016 baltic journal of economic studies 40 vol. 2, no. 2, 2016 corresponding author: 1 department of finance and credit, lviv cooperative college of economics and law e-mail: golubka_mikki@ukr.net transformation processes in the development of the financial and economic as well as cooperative education in the western territories of ukraine (the second half of xix – the beginning of the xx century): state, peculiarities, galician leaders, educational associations, theoretical methodology mykhailo holubka1 lviv cooperative college of economics and law, ukraine abstract. in the article, the transformation processes of the development of financial and economic as well as cooperative education in the western territories of ukraine in the second half of the xix  – the beginning of the xx  century, its state, peculiarities, scientific results of galician figures, educational associations, historical and economic aspects were covered. the methodology and the general essence of the financial and economic as well as cooperative education, the high importance of its quality were found out. the significance of financial and economic as well as cooperative education for realizing the opportunities for the self-understanding of a human as an economically active member of the nation was identified. the purpose of this study is to find out the personal and the peculiarities of the financial and economic as well as cooperative education in the western territories of ukraine in the second half of the xix – the beginning of the xx century with the transformation on the processes that take place under the modern conditions of the development of the national education system. methodology. the features and the transformation processes which defined environment conditions for financial and economic as well as cooperative education in the second half of the xix – the beginning of the xx century on the territory of western ukraine were identified. special attention is paid at the identification of financial and economic as well as cooperative education with business culture that includes the need to consider the public interest. a very important role of activation of the cooperative movement in the ukraine western territories that were not independent was admitted. the institutional framework of the development of the financial and economic as well as cooperative education of the population that has proved a key role in these processes and various institutions of self-education partnerships was analyzed. the broad functionality of such associations and the transformation of the main goal of its activities from educational proper to educational, financial and economic were revealed. the basic achievements of associations and associates in terms of the support for the establishment of various organizations for the business purposes, cooperatives, educational institutions, professional courses, publishing, organization of specialized events, financial institutions, etc. were described. the performance of other institutions was researched; their main activities for the development of financial and economic as well as cooperative education of the population in the western territories of ukraine in the second half of the xix-the beginning of the xx century were specified. taking into consideration the significant role of the cooperative movement for the formation of financial and economic as well as cooperative education of the population at that time, some economists-philosophers and their lay-outs in the advantages of this form of economic activity were mentioned. the characteristics of financial and economic as well as cooperative education in the western territories of ukraine in the second half of the xix-the beginning of the xx centuries with a focus on national values, self-organization, dissemination of professional schooling, which were a prerequisite for the further development of the system of the higher financial and economic as well as cooperative economic education were provided. practical implications. financial and economic as well as cooperative education is becoming an important subject of research for the ukrainian scholars because of the significant gaps in its quality assurance. in spite of the sufficient amounts of trained professional economists, a workforce lack remains in the baltic journal of economic studies 41 vol. 2, no. 2, 2016 areas of financial management, accounting and auditing, insurance, internet commerce, etc. it is quite negative, as the high quality of financial and economic as well as cooperative education has a significant potential positive impact on the economy and business in general. as l. zahlynska and a. lukomska admit, it is revealed in improving the investment efficiency, not only in education but also in other sectors of economy; attracting people to the development of entrepreneurship and acquisition of new enterprise features to increase the number of small and medium enterprises; increasing the number of the self-employed in the national economy sectors; enhancing the competitiveness of ukrainian population on international labor markets, its confidence in the effective employment, actualization of possibilities and desires of each person will contribute, in their turn, to establishing a progressive civil society (zahlynska, 2014). the main objective of the financial and economic as well as cooperative education is realizing the opportunities for the individuals to self-actualize as a financially and economically active member of society who is able to be consciously engaged in financial and economic as well as cooperative life of the country (tovkanets, 2014). therefore, in the context of structural and functional framework, financial and economic as well as cooperative education is intended not only at generating relevant knowledge, but also at applying them for social development. material of the considered article can be used for the preparation of teaching aids, seminars and training courses on financial and economic as well as cooperative issues. value/originality lies in the fact that the subject is not widespread among ukrainian researchers in economics and more often gets the focus of the scholars-pedagogues. we made an attempt to explore this area in the light of financial and economic direction of cooperative education and its need for the ukrainian society on the territory of western ukraine in the end of the xix – the beginning of the xx century as well as the importance of getting education, independence and well-being of the community from an economic point of view. key words: financial and economic as well as cooperative education, territories of western ukraine, economic culture, cooperative movement, vocational schooling, educational associations, galician figures. jel classification: b1, g34, o16 1. introduction prerequisites, state and development of financial and economic as well as cooperative education at the western territories of ukraine in the late xix-the beginning of the xx century are characterized by the specific historical and economic aspects. thus, in the modern sense, during this period, the ukrainian lands were divided between the austrian empire (the lands of eastern galicia and northern bukovyna), kingdom of hungary (transcarpathia) and the russian empire (the majority of the ukrainian lands). correspondingly, in the area of the financial and economic as well as cooperative education in western ukraine at that time there was a significant influence of the polonization policy (eastern galicia), romanization (northern bukovyna), hungarization (transcarpathia) and russification. the abovementioned differences in education were peculiar before the events of the world war i that marked the collapse of austro-hungarian, german, ottoman and russian empires. as it was written by l. and i. potapiuk, in the territories of western ukraine in the end of the xix  – the beginning of the xx century, economic education was characterized by the foundation and the tradition of the community self-help in the housekeeping of the ukrainian people, the emergence of the first consumer societies, credit unions, co-operative movement, their fight against usury and illerateness (tovkanets, 2014). financial and economic as well as cooperative education was often considered as economic culture, which emphasized its social basis, taking into account the interests of others. it is noteworthy to understand that at that time only a very small percentage of galicians were literate. the population, in particularly townsfolk, was subjected to the strict tax collection system that involved a so-called executioner. it was difficult for an inhabitant of that time to understand the need to pay fees and charges without getting the adequate social benefits and development opportunities as we have today. moreover, the end of the nineteenth century was marked by the adaptation of the population to the abolition of serfdom and the actual construction of a new system of relations that are increasingly based on the principles of coherence and minimization of coercion. the period under consideration was an important progressive step for the industry, development engineering, oil and coal mining. therefore, society got a chance to respond to the global and the local progressive challenges, developing the intellectual environment of the local (not always purely ukrainian) origin and develop financial and economic as well as cooperative education. 2. influence of the financial and economic as well as cooperative education to developing the quality and behavior of a nation the review of financial and economic system as well as cooperative education in the territories of the western ukraine in the second half of the xix  – the beginning of the xx century is an important subject of research. this period reveals the features of the situation in the ukrainian territory, which was controlled by austria-hungary and implemented the policy of the more loyal socio-cultural baltic journal of economic studies 42 vol. 2, no. 2, 2016 development than in the russian empire. this made it possible to develop a holistic space that was societal enough to form west ukrainian people’s republic, though it did not exist for a long period of time. for any society, the level of financial and economic as well as cooperative education is a sign of its intelligence and opportunities for the further development. as a rule, the specialists of the financial and economic as well as cooperative area include leading power figures, the active agents of the influence of the financial and economic situation in the country. therefore, a holistic development of the national educational system should focus on the historical features of formation of its economic component, improving positive aspects and leveling negative ones. the relevance of the topic chosen for the study confirms the need for the scientific substantiation of priorities in improving the quality of economic education in ukraine with the understanding of the retrospective foundations of its formation in the context of different time periods. 3. development of financial and economic as well as cooperative education in western ukraine in the second half of the xix – the beginning of the xx century in terms of the specific socio-economic transformations besides, in the second half of the xix  – the beginning of the xx century, the strategically important changes, the development of the financial and economic as well as cooperative education in the western territories of ukraine were ensured in terms of the specific socioeconomic transformations. first, it is a period of cooperative movement, which is an important indicator of economic culture of the population, especially farmers. a prerequisite for the development of cooperatives was the adoption of the austro-hungarian law on the income and economic union in 1873. its purpose was to prevent the bankruptcy of small producers. in fact, this law regulated the obligation of cooperatives development throughout the empire. in this way, the government sought to boost tax revenues to the regional budget. the institutional foundations of economic activity was strengthened by the public education associations «prosvita» (“enlightement”) (founded in 1868), «ridna shkola» (“native school”) (founded in 1881). although these bodies were of even more cultural and educational guidance, and were intended at unification of the ukrainian lands «from the carpathians to the kuban», their activity was important from the perspective of developing certain ideological standards that were necessary to understand the need for financial and economic knowledge, the priorities of the economic and cooperative development of the west ukrainian lands in the unity and the opposition of the colonizers’ areas. these governing bodies included many lawyers, artists, historians, and writers; however, the leaders were teachers. it was an important center of intellectual communication with the formation of their vision on development. «prosvita» was especially significant and in 20 years of activity it has changed its main cultural and educational purpose into educational and economic one and began to pursue financial and economic cooperative activities promoting cooperation intensively (potapiuk, 2015). from 1906 to 1912, its representatives have organized 15 cooperative courses, higher education courses, contributed to the development of schools, including the economic one in ugertsy venyavski (now the village zelenyi hai in lviv region), established a trade school in lviv in 1911 (т. shevchenko). other initiatives of «prosvita» were the following (this list is not complete) (levytsky, russ folk society in lviv, zuliak i. (2010): – the foundation of the “association of mutual cooperation «dniester» in lviv,» which numbered 213,943 policies in 3733 communities totaling 218,043,491 crowns of 2,159,903 crowns of the premium fund and 1,000,000 crowns of the reserve fund, holding thousands in the land agencies at the end of 1907; – the foundation of the mutual credit society «faith» in przemysl, 1894; – the foundation of the «land credit union» in ukraine in 1898, which included 230 members in 1899, and its authorized capital amounted to 11,236,754 crowns, the amount of loans granted to ukrainian institutions was 21,700 crowns; – the foundation of a «land revision union» and «land household and milk production union» in 1904 and 1907 with the center in lviv; – the foundation of the «people’s trade» or «commercial union» in 1908, which had branches in 14 districts and provided an annual one-month training course for 12 trainees; – the foundation of such associations as “farmer” and “rus shchadnytsya” in przemysl in 1904 and 1905 respectively. in general, as i. zuliak admits, at the end of 1908, there were 227 business partnerships supported by «prosvita»; they comprised 168 credit, 21 commercial, 10 industrial, 10 commercial agriculture and 9 milk production associations and 9 associations of other types (zulyak, 2010). the company used the practice of teacher-trainers who traveled to different settlements and promoted leading economic ideas of the time. in the process of their educational and economic as well as financial campaign, the organization became much more active and achieved considerable success. the role in the development of financial and economic as well as cooperative education was played by an economic partnership «audit union of ukrainian cooperatives» (auuc), in particular in its body «people’s trade» (the first ukrainian cooperative), «farmer», «butter production union», «central union», «central bank», etc. it should be noted that «farmers» that was founded in 1899, organized the training of selected galicians abroad. generally, this body was significantly developed after 1909, with a sufficient network of branches and over 25 thousand baltic journal of economic studies 43 vol. 2, no. 2, 2016 of members. this profiling body played a significant role in shaping the economic education of persons who were engaged in agriculture, thereby developing vocational education. in accordance with the researches of l. and i. potapiuk, the scholars, the most important areas of society were the following: the foundation of various industrial and economic unions, promotion of agricultural knowledge among the population, organizing reading rooms, libraries, agricultural and industrial schools; congresses, courses and exhibitions, setting up model farms, experimental stations, mediation in buying land, artificial fertilizers, tools, marketing of agricultural products, publishing weekly «economic journal», brochures in the series «library of a farmer» (potapiuk, 2015). an important functional role was played by the first ukrainian cooperative «people’s trade», established in 1883. during the first year of its activity, the amount of its members increased from 64 to 700 people. membership in such institution was a great opportunity not only for practical application of economic knowledge, but also for their level improvement. as i. franko found out in his economic writings, being well aware of the peculiarities of trade and business activities of the time, the cooperative took the top spot in the galician merchant world and was a quite structurally capable organization, had trade relations with a network of village shops; and this useful body deserves the best possible development (franko, 1985). it is necessary to understand that the operation of these organizational bodies had both direct and indirect impact on the financial and economic as well as cooperative education in the region. on the one hand, they served as the centers of formation of financial and economic as well as cooperative literacy of population, organization of a system of people’s links with the corresponding potential lay-outs. on the other hand, such associations developed educational infrastructure, gave access to economic knowledge for even illiterate population, with the possibility of its use in everyday life and the future in their own economic activity. they also had exceptional institutional values, demonstrated the ability of people to self-develop and adjust to progressive challenges. the high institutional organization of financial and economic as well as cooperative education in the territories of the western ukraine resulted in the first ukrainian educational and economic congress, the main organizer of which was the association «prosvita» in 1909. this congress was held in lviv and counted more than 750 participants from all over ukraine. i. zuliak believes that the main objective of this meeting was the critical reflection and the evaluation of activities, finding the ways and the methods to improve financial and economic state of the ukrainian peasantry; participation in the congress of all population groups showed interest to change the existing social and economic order in rural areas, thus, it made a contribution to a significant economic recovery in eastern galicia and, correspondingly, the increase of the economic welfare of the ukrainians (zulyak, 2010). such measure indicates a sufficient level of economic education of both the entities involved in the related business processes and the willingness of other members of society to develop relevant skills. there is no doubt that this extraordinary event did not remain unnoticed both in the society and at the highest level, and positioned the western lands as active economic agents in the european scale. 4. financial and economic as well as cooperative education in western ukraine in the second half of the xix – the beginning of the xx century was ensured and advocated by numerous academic printed materials and galician figures the development of financial, economic and cooperative education of that time was provided by the numerous academic printed materials. a separate direction that they formed was the idea of cooperative movement. it was advocated in the writings of many galician leaders of the studied period: – augustine voloshyn, who proved the benefits of cooperatives and achieved the introduction of cooperative laws in transcarpathia; they protected transcarpathian contributions of cooperative unions in budapest banks that had been devalued after the joining edge to the czechoslovak republic in the publication «science» and other writings (myshanych, 2002); – denys korenets, who actively promoted and implemented the models of the staged trade and cooperative education, studied relevant international experience, analyzed the economic, socio-cultural, demographic factors and areas of development (hipters); – yulian dzerovych, who was a member of the priestly cooperative «self-help», the publishing cooperative «target», longstanding member of the board of trade inspector-industrial cooperative «delivery» engaged in the production and supply of religious things; yu. dzerovych was well aware of the importance of cooperation for fostering a sense of responsibility and the powers of the national community as once working in co-operation, the average person stops to think only about themselves and thinks about the whole, he/she becomes a citizen (pastushenko, 2011); – karl kobersky, who was a cooperative editor of the «cooperative republic» journal and other publications of auuc; – yulian pavlykovskyy who underscored the valuable role of cooperatives in the ukrainian society, called for the creation of the new cooperative centers in the county and in the region to strengthen the ukrainian element in cities and disengaging from the polish co-operation (potikha, 2011); – stepan smal-stotskyi, who revealed the historical aspects of economic development of bukovyna (in his work «bukovyna rus» in 1897), was an editor of the «russian council» newspaper as well as the co-editor of baltic journal of economic studies 44 vol. 2, no. 2, 2016 the «bukovyna» newspaper and promoted the idea of the cooperative movement; – yevhen khraplyvyi, who was the editor of the «economic and co-operative magazine» journal and other publications of the later period as well as the author of numerous works on the dissemination of agricultural cooperatives; – yevhen olesnytskyy, a member of the editorial board of the “business” magazine, where he often published his articles that covered the professional analysis of economic relations in the region. (pynda, 2015). in general, the analysis of financial, economic, political, psychological, pedagogical literature of the time shows that many homeland philosophers, educators, financiers, economists saw the spiritual and moral aspects of the market economy means not only improve efficiency, but also the moral development of people (hipters, 2011) . 5. the features of the formation of financial, economic and cooperative education in the western territories of ukraine in the period under consideration among the characteristic features of the formation of financial and economic as well as cooperative education in the western territories of the studied period, it is important to focus on the development of the professional (vocational) school system with the expansion of the so-called “bursas”. its impetus was the law on the organization of 1872, which authorized their national separateness; as l. and i.  potapiuk admit, this regulation allowed the establishment of the private schools that directly concerned vocational school system, which promoted various ukrainian economic and cultural as well as educational institutions, societies that made people understand the need for establishing professional schools as a means of salvation poverty (potapiuk, 2015). a common trade school was designed to provide the basic knowledge in different trade areas. positively, in this period, a system of extracurricular trade practices developed. thus, a larger number of young people could decide with their inclinations towards trade and economic affairs. the period of the end of the xix century manifested more in the development of financial, economic and cooperative education at schools. higher studio has not been so powerful yet. for example, in the end of the nineteenth century at lviv university there were only three departments: law, theology and philosophy ones. since 1891, the medicine department was founded. the economics department started its activity only in 1966. however, vocational schooling, institutionalized cooperative movement to support public structures undoubtedly led to an input for the establishment of the high financial and economic as well as cooperative education in galicia and other territories of western ukraine. 6. results in the process of study, we have revealed the general nature of the financial and economic as well as cooperative education and the importance of improving its quality in ukraine, identifying the environmental conditions of economic education in the territory of western ukraine in the end of the xix  – the beginning of the xx century and held characterization of the major public institutions on the formation of economic public education, allocation of the most representative features of the contemporary financial, economic and cooperative education as well as cooperative economic manifestations of culture, vocational schooling, extracurricular trade practices, specialized publishing activity and libraries. 7. conclusions therefore, the transformation processes of financial and economic as well as cooperative education in the western areas of ukraine in the end of the xix – the beginning of the xx century was predetermined by the colonial status of eastern galicia, northern bukovyna and transcarpathia. under the conditions of absence of any state support of educational attainment of the population in the end of the xix – the beginning of the xx century, ukrainian society demonstrated the vital feature of self-organization. the activities of the companies have shown the existence of the ukrainian intellectuals who were capable of combining and distributing the national ideology. significantly, at that time, the characteristic feature of the economic and financial co-operative education was its national principles, which are so lacking nowadays. obviously, this experience should be adjusted to the modern conditions, strengthen the national-patriotic sentiments of modern financiers, economists and cooperators. the conducted research demonstrated that intellectuals, cultural and educational, cooperative leaders and others strongly contributed to the development, establishment and operation of financial, economic and cooperative education in the western territories of ukraine, provided great organizational, practical, educational activities to solve the problem of illiteracy, developed education and improved material welfare of the citizens, protected social, cultural, educational and spiritual needs of ukrainians at the time. baltic journal of economic studies 45 vol. 2, no. 2, 2016 references holubka, m. 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(2014). economic education in the context of investment processes in the area. update of the content, the forms and the methods of training and education in educational institutions, vol. 9, p. 73-76. zulyak, i.(2010). the role of «prosvita» in the dissemination of economic knowledge in eastern galicia (the end of the xix – the beginning of the xx century). ukraine: cultural heritage, national identity, statehood. vol. 19, p. 151-159. михаил голубка трансформационные процессьі развития финансово-экономического и кооперативного образования на западноукраинских землях (вторая половина xix – начало хх века): состояние, особенности, галицкие деятели, просветительские общества, теоретическая методика аннотация. в статье исследованы трансформационные процессы развития финансово-экономического и кооперативного образования на западноукраинских землях во второй половине xix – начале хх в., его состояние, особенности, наука галицких деятелей, просветительские общества и историко экономические аспекты. установлено методологию и общую сущность финансово-экономического и baltic journal of economic studies 46 vol. 2, no. 2, 2016 кооперативного образования, высокую значимость ее качества. указано на значение финансово-экономического и кооперативного образования для понимания возможностей самореализации человека как экономически активного члена нации. целью данного исследования является определение личностей и особенностей развития финансово-экономического и кооперативного образования на западноукраинских землях во второй половине xix – начале хх в. с трансформацией установлених процессов на современные условия развития отечественной образовательной системы. методология. определены характерные черты и трансформационные процессы во второй половине xix – начале хх в. на территории западноукраинских земель, которые определяли в среде условия развития финансово-экономического и кооперативного образования населения. обращено внимание на отождествление финансово-экономического и кооперативного образования с хозяйственной культурой, включая необходимость учета общественных интересов. отмечено очень высокую роль активизации кооперативного движения на западноукраинских территориях, которые были подневольные. проанализировано институциональную основу развития финансово-экономического и кооперативного образования населения, показано ведущую роль в данных процессах институтов самоорганизации и различных просветительских обществ. раскрыто широкую функциональность данных обществ и трансформацию основной цели их деятельности по просветительской на образовательно-финансово-экономическую. описаны основные достижения обществ, сподвижников в плане поддержки создания различных организаций как объединений и с целью коммерческой деятельности, кооперативов, учебных заведений, профессиональных курсов, издательской деятельности, организации профильных мероприятий, финансово-кредитных учреждений. исс ледованы результаты деятельности других институтов, с конкретизацией их основных мер по развитию финансово-экономического и кооперативного образования населения западноукраинских земель во второй половине xix – начале хх в. учитывая значительную роль кооперативного движения для формирования тогдашней финансово-экономического и кооперативного образования населения, упомянуто отдельных экономистов-мыслителей и их наработки относительно преимуществ данной формы организации хозяйственной деятельности. указано на характерные черты развития финансово-экономического и кооперативного образования на западноукраинских землях во второй половине xix – начале хх в. с ориентацией на национальные ценности, самоорганизации, распространение профессиональных школ, что стало предпосылкой для дальнейшего развития системы высшего финансово економического и кооперативного образования. практическое значение. финансово-экономическое и кооперативное образование сегодня становится актуальным предметом исследований украинских ученых в силу значительных пробелов в обеспечении ее качества. при достаточных объемах подготовки специалистов-финансистов-экономистов остается працедефицит профессиональных кадров в области финансового менеджмента, учета и аудита, страхования, интернет-торговли и других. это очень негативно, ведь высокое качество финансово-экономической и кооперативного образования имеет значительный потенциал позитивного влияния на развитие экономики и предпринимательства в целом. как пишут л. заглинська и а. лукомский, он раскрывается в: повышении эффективности инвестиций не только в образовательной, но и в другие отрасли экономики; привлечении трудоспособного населения к развитию предпринимательства и приобретения новых черт предприимчивости в целях увеличения количества предприятий малого и среднего бизнеса; увеличении самозанятых лиц в области и сферах национальной экономики; повышении конкурентоспособности украинского населения на международных рынках труда, его уверенности в эффективной занятости, реализации возможностей и пожеланий каждого человека, будет способствовать, в свою очередь, установлению прогрессивного гражданского общества (zahlynska, 2014). не центровой ли задачей финансово-экономической и кооперативного образования является понимание возможностей самореализации личности как финансово-экономически активного члена общества, способного сознательно приобщаться к финансово-экономического и кооперативного жизни страны ( tovkanets, 2014). таким образом, в структурно-функциональном разрезе финансово  – экономическая и кооперативная образование призвано не только формировать соответствующие знания, но и применять их на развитие общества. материал исследовательской статьи может быть использован для подготовки учебно-методических пособий, семинаров и образовательных курсов по финансово-экономическим и кооперативных вопросов. значение/оригинальность. тематика мало распростраbaltic journal of economic studies 47 vol. 2, no. 2, 2016 ненной среди украинских исследователей экономического профиля и более часто попадает в фокус ученых-педагогов. мы пытались исследовать данное направление через призму финансово-экономического и кооперативного направления образования и ее необходимость для украинского общества на территории западноукраинских земель конца xix – начала хх века и важность в получении образованности, независимости и благосостояния общества с экономической точки зрения. baltic journal of economic studies 67 vol. 5, no. 5, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: kv_mazur@ukr.net orcid: https://orcid.org/0000-0002-1137-3422 2 vinnytsia national agrarian university, ukraine. e-mail: tomashuk.inna@ukr.net orcid: https://orcid.org/0000-0001-6847-3136 doi: https://doi.org/10.30525/2256-0742/2019-5-5-67-78 governance and regulation as an indispensable condition for developing the potential of rural areas kateryna mazur1, inna tomashuk2 abstract. the subject of the study is the rural territories and settlements of the country, which are influenced by the conflicting processes of reforming the economic basis of their development, which increases the uncertainty and causes the emergence of social risks in terms of organization of economic activity and obtaining the required level of labor income and, accordingly, the level and quality of life. the current transformational changes in rural areas, amid the processes of decentralization of the current management system, create new conditions that are more or less conducive to the successful organization of rural residents' livelihoods. the urgent task of today is to study the practical problem of the effective development of rural territories, the insufficiency of its development and the complex tasks of revitalization of rural territories of their resource potential in the context of intra-regional features of rural development, which is the basis for carrying out scientific research in accordance with these topics. the purpose of the study is to explore ways to solve problems of regional development, especially rural development, which has never been neglected by economic science, since sustainable development of the country and its regions is impossible without the social revival of the village. also, a comprehensive theoretical and practical study of issues of management and state regulation of rural development, in particular, the substantiation of socio-economic and environmental problems of the development of the ukrainian village, the isolation of rural areas, the formation of organizational and economic mechanism of state support for their development and implementation of modern state agricultural policy. methodology. the problematic of the development of the potential of rural territories is based on the use of multifaceted scientific methods of knowledge of phenomena and processes. application of statistical methodology in the process of analyzing the dynamics and tendencies of rural development, the effective functioning of agriculture, which is the basis for the study of problems of rural development in general. economic and statistical research is based on specific techniques, their totality forms the methodology of statistics (methods of mass observations, groupings, generalizations, time series, index method, etc.). results. in the conditions of formation of market relations in rural areas, especially in the period of economic instability in the country, the study of preconditions for ensuring balanced potential of rural development on the basis of internally oriented motivational factors, justification of priority types of economic activity of rural territories of the region with observance of ecological requirements becomes extremely relevant. one of the main areas to reform the regional development management mechanism is the development of local initiative. the practical implementation is to use the method of delegation of authority as one way of establishing the competence of local public authorities, which is an important part of the decentralization of the executive power, and is of great importance for all processes of the rule of law and, in particular, for improving the efficiency of the local government system. public authority. the institute of delegation of authority in the current context is important for the functioning of public authority in rural areas. in addition, the introduction of a programmatic targeting method in the budgetary process of rural development will help to ensure transparency of the budgetary process, which will clearly define the goals and objectives for which the budgetary resources of the region are spent, which in turn will increase the level of control over the results of implementation of budgetary programs. this approach will improve the quality of fiscal policy-making, the efficiency of distribution and the baltic journal of economic studies 68 vol. 5, no. 5, 2019 use of budgetary resources in rural areas. value/originality. state policy in ukraine on regulating the potential of land relations should be aimed at solving the organizational and legal problems that have accumulated in recent years and to address the social negatives of land transformation in the countryside. key words: rural areas, development management, reform, state support, decentralization, modernization. jel classification: p25, q14, r11, r58 1. introduction deepening european integration processes require the formation of a new model of rural development, adapted to world standards, which enhances its role in the socio-economic development of ukraine and its regions. thus, the topic discussed in the article, namely governance and state regulation as an indispensable condition for developing the potential of rural territories, is quite relevant. the purpose of the article is to study the existing problematic issues related to the management and state regulation of the development of the resource potential of rural territories and to identify the main directions of its improvement. the purpose of the study is to carry out a comprehensive analysis of the current state and problems of managing the resource potential of rural areas. it is necessary to justify the criteria for optimizing their management, to determine the strategic priorities of their development. dialectical method, scientific abstraction, induction and deduction, historical and logical method, systematic, monographic, analytical and other research methods are used to study the theoretical and methodological bases of managing the development of potential of rural areas. the potential of development of rural territories of ukraine, as well as the state as a whole, can only be discovered and realized if an effective system of public administration is formed. thus, the scientific novelty of the article is to improve public administration in the context of studying the current state of rural development, to increase the efficiency of utilization of the resource potential of rural areas and the economy of ukraine as a whole. in this context, decentralization of power as a component of state regional development policy is one of the defining reforms agenda in ukraine. it has created the groundwork for rooting institutional change, for improving the quality of life of citizens, and for the continuation of sectoral reforms. thanks to the creation of a new system of power distribution between central and local authorities in ukraine, a new system of relations between different branches of power and a new equilibrium of checks and balances are in fact being formed today. 2. classification of rural development facilities and their modernization in a market environment, the problem of priority rural development, including the development of rural territories, becomes particularly relevant, as it implements the socio-economic interests of different age and sex groups, relations between society and human beings, satisfies their material and spiritual needs, creates adequate living conditions (table 1). table 1 classification of rural areas name characteristic i natural – picturesque landscape; – availability and opportunities for the use of natural resources; – low degradation of the natural appearance of the territory. ii geographic – proximity to highways; – proximity to cities and business centers. iii social – development of social capital; – social stability and cohesion; – community activity; – self-government. iv economic – balance of the local labor market; – availability of business prospects; – cost of living; – development of the service infrastructure. v ecological – unique natural environment; – nature reserves; – national natural and regional landscape parks. vi cultural – endogenous cultural specificity; – lifestyle; – development of local crafts; – historical value of the territory. source: generated by the authors according to the study the beginning of the xxi centuryis characterized by the need to implement a strategy and policy of rational structural change and modernization of the ukrainian economy, taking into account the strengthening of endogenous factors that affect the development of rural areas. this strategy should be based on accelerated development of investment and innovation potential as an internal source of qualitative development, provided that a reasonable level of openness of the economy is determined. at the same time, internal resources are shifted to competitive activities that provide relatively stable growth effect while strengthening the position of the national producer (figure 1) (bobrovska, 2014; hazuda, erfan, & hazuda, 2015). baltic journal of economic studies 69 vol. 5, no. 5, 2019 3. information and analytical activity of rural development information and analytical activity, as a special area of information activity related to the detection, processing, storage and dissemination of information mainly in the field of management, political and economic activity, consists of information search and analytical processing of information (table 2) (hazuda, erfan, hazuda, 2015; zinchuk, kutsmus, 2012). emphasizing attention to the particularities of certain rural areas, economist scholars emphasize their uniqueness and outline their fundamental features (figure 2) (hazuda, erfan, & hazuda, 2015; zaiats, 2017). 4. main measures for social adaptation of rural areas for social adaptation of rural areas, a number of measures should be envisaged (figure 3) (hazuda, erfan, & hazuda, 2015; smutchak, 2019). the need for state financial regulation of rural development is due to the fact that for any type of economic system, the main purpose of the state is to provide financial resources to those needs that cannot be met through a market mechanism (zaiats, 2017; chuhunov, pavelko, kanieva, mazaraki, 2015). in this context, the whole set of rural competitiveness factors depending on the preferences (demand) of the growth of material well-being; financial cost effectiveness in the region; formation of factors of economic motivation of subjects of different types of activity to participate in innovative processes of economic development of both residents and authorities. preserving and restoring the integrity of the natural ecosystem; minimizing resources used and revenue generated; preservation of unique natural and industrial complexes; rational structure of the region's economy; economic feasibility of development projects; balanced use and reproduction of natural resources; territorial organization of social work; figure 1. basic principles of development of own economic policy of development of regional rural territories source: generated by the authors according to the study table 2 stages of information retrieval and analytical processing of information to improve the utilization of rural resource potential information search analytical processing of information – data collection and analysis, search and evaluation of information using information and telecommunication technologies and internet capabilities; – identification and systematization of information, its storage; – creation of databases; – information support of training forecasts of development of industries, enterprises of the region; – information support for risky projects; – informational support of research works on problems of development of socio-economic potential of the region. identification, description of problems, trends, alternatives, conflicts and emergencies; – modeling of problems, choice of methods of their solution, estimation of consequences; – information and analytical review of plans, programs, results of examinations; – analysis and forecasting of situations, problems in politics, economics, science, production, business, etc .; – minimization of risk factors; – analytical evaluation of initiatives, innovations, development of proposals for their use; analysis of ratings, credit histories of objects; – information support and analysis of socio-political actions and processes; preparation of analytical and forecast materials. source: generated by the authors according to the study baltic journal of economic studies 70 vol. 5, no. 5, 2019 inability to be exhausted. the provision of rural areas with natural attractions tends to be permanently restricted. baits have an evolutionary property that is acquired over a long period of time. however, at the same time, people can influence the value of rural areas, which, above all, boils down to effective management and rational use, and as a result, to improving the well-being of rural residents; irreversibility. in the process of ensuring human life, there is a growing need for the use of resources, and therefore maintaining or restoring the uniqueness of the territories has a high selling price. first of all, a person can influence processes that are inherently biomorphological (tree growth, wildlife production, steppe vegetation, etc.), rather than geomorphological (tectonic layers, volcanoes, soil structure, etc.), where the processes are very slow; high elasticity of profit from demand. from a theoretical point of view, natural advantages guarantee a high elasticity of income from their use in relation to market demand. it is important that the preserved environment is the property of the rural society as a whole, and not only of private property, which in particular can significantly affect the loss of its sociocultural characteristics by the territory; immobility. natural lures exist as fixed assets of the region. first of all, they are the property of a separate territorial community, which independently makes a dichotomous choice in favor of promoting their own facilities in the external environment, or, conversely, limiting external access to them and using them to enhance their own potential. figure 2. fundamental features of the uniqueness of rural areas source: generated by the authors according to the study і  in-depth social development of infrastructure on the whole; vi rigid definition of statuses for the targeted use of land, especially agricultural land, clarification of compliance, the procedure of land withdrawal until re-privatization, deepening the specifics to the level of land (preventing the breaking of hayfields, pastures and self-conservation of arable land). іі economic incentives for the work of small, especially farmers, flower-growing, horticultural and livestock farming enterprises; ііі organization on the modern technological basis of a system of local processing and marketing structures, consulting, laboratory and monitoring system by type of machine-tractor stations, rolling stations, maintenance stations, etc .; iv development of the system of training (rural schools) and retraining of qualification of agricultural workers in new conditions; v state order for provision of low-skilled rural unemployed of different age groups of land protection, creation of afforestation on degraded and unproductive lands; figure 3. main measures for social adaptation of rural areas source: generated by the authors according to the study baltic journal of economic studies 71 vol. 5, no. 5, 2019 target consumer group can be divided into common and private (hazuda, erfan, hazuda, 2015; zhalilo, shevchenko, romanova, 2019). common factors include the high level of life quality of the population, because of its importance and priority for all consumers. it follows that the life quality is a major competitive advantage of any rural area (table 3). 5. indicators of economic status of rural development the economic status of rural territories (regions) is the aggregate of economic results obtained by the population, institutions located in the territory, over a certain period (year). in analyzing the economic situation and development of regions, such indicator as the gross regional product per capita or unit of labor is widely used (hazuda, erfan, hazuda, 2015; honcharuk, tomashuk, 2018). the main partial indicators of the economic status of rural territories (regions) are proposed to use: monetary income per capita, uah; share of employed population in total,%; production of goods and services per capita, uah; retail turnover per capita, uah; commissioning of housing stock per capita, sq. m. of the total area; volume of investments in housing construction per capita, uah; volume of investments in fixed assets of enterprises per capita, uah. and other. in addition, the assessment of the uniformity of economic development of rural areas in ukraine is table 3 factors of competitiveness of the region depending on the needs of target groups of consumers (markets) consumer groups factors of competitiveness of the region people – political and social stability; crime rate; – level of environmental pollution; infrastructure security; – high level of production and consumption of gross regional product per capita; – effective organization of space; – intellectual, creative and cultural potential of the population of the territory; – cozy and comfortable atmosphere on the territory; – developed institutional environment; quality of life of the population. new residents – positive image of the region; cleanliness and safety of the environment; – developed labor market; high level of income and employment; – migrant adaptation programs; – rehabilitation of the homeless and other persons in difficult situations; – cozy and comfortable atmosphere on the territory; – profile of the region (structure of the economic complex of the territory, reflecting its functional specification); level of life quality. manufacturers of goods and services – local business climate; proximity to consumers and suppliers; – availability and price of basic resources and finances; – labor force (availability, qualification structure, cost, business reputation, reliability); – production facilities (availability, cost); – high domestic market capacity; favorable business climate; – integration with local clusters; high life quality for the population. investors – positive image and prestige of the region; – geopolitical situation, natural-climatic and resource potential of the region; – production and financial potential of the region and the state of its commodity markets; – the level of market infrastructure development; level of development of innovative activity; – qualification level of labor resources; life quality. tourists – convenient geographical location; – unique tourist resources; developed hotel infrastructure; – availability of facilities and exposition areas; positive image of the territory; – attractiveness of the environment and favorable natural and climatic conditions; – developed and accessible system of communications and transport; – developed industry of hospitality and entertainment (availability of areas for culture and recreation, comfortable hotels and motels; cafes and restaurants); – availability of unique monuments of architecture, culture, history; – the life quality of the population. authorities of different levels – positive image and prestige of the region; strategic geopolitical position; – rich natural resource potential; availability of high-tech production; – connected relationships and partnerships with other regions domestically and internationally; – high evaluation of the effectiveness of the authorities; – transparency of the information and institutional environment; – high life quality of the population. source: generated by the authors according to the study baltic journal of economic studies 72 vol. 5, no. 5, 2019 proposed to be carried out by four complex criteria: the rate of economic growth in each region; economic growth in the region to the average in ukraine; economic growth relative to the maximum achieved in the regions of ukraine; uniformity of economic development (hazuda, erfan, & hazuda, 2015; kaletnik, & pryshliak, 2010). particular attention should be paid to the issue of state regulation of environmental safety of rural development. environmental safety is based on the observance of the basic components: the realization that humanity is an integral part of nature, completely dependent on its environment; recognizing the limited and finite nature of the natural resource (ecological) potential of the earth and its individual regions, the need for its qualitative and quantitative inventory; impossibility of artificial expansion of natural resource (ecological) potential beyond natural system constraints; determining the maximum allowable for the extraction of natural resources and changing ecosystems as a living environment; the need to develop preventive environmental bans long before the economic depletion of natural resources or their indirect destruction; the obligation to create a socio-economic mechanism of homeostasis in the system «man – nature» type, i.e. «nature – commodity – money – nature» (similar to the mechanism «commodity – money – commodity»); the need to regulate the number of people, their pressure on the environment at local, regional and global levels; the acceptability of only «green» technologies and techniques in all sectors of the economy; the transition to resource-efficient technologies and miniaturization of products, to safe for nature and people economic receptions; recognition of the law of optimality, and in management the principle of reasonable sufficiency in the use of ways of obtaining vital goods in spatial and temporal specific frameworks (restrictions on environmental, social and economic risk factors) (hazuda, erfan, hazuda, 2015, chuhunov, pavelko, kanieva, mazaraki, 2015); understanding that without an adequate environment (ecosystem integrity) it is impossible to preserve anything alive, including its species (including humans) and the natural systems of the lower level of the hierarchy. 6. current state of functioning of rural territories the present state of functioning of rural territories is reduced to providing the population with foodstuffs, and industry with agricultural raw materials, however, according to a. pavlov (pavlov, 2019), they are able to perform several functions at the same time, which corresponds to their nature as a complex socio-spatial formation. according to the fact that rural areas play a decisive role in life support (food production), livelihoods (living conditions and life quality of rural population), nature management (environmental development) (hazuda, erfan, hazuda, 2015; mazur, kostiuk, 2018), it is possible to distinguish industrialeconomic, health-recreational, environmental and social functions, the effectiveness of which will contribute to the sustainable development of society. in this context, the modern process of formation of united territorial communities, which can be called dynamic, deserves special attention: as of 2015, 159 united territorial communities were formed in ukraine; as of 2016 there were 366; as of 2017 there were 665; and as of march 2019, there were already 884 united communities (zhalilo, shevchenko, romanova, 2019). in addition, it should be emphasized that one of the fundamental principles of a democratic society is the involvement of public in the decision-making process. therefore, an important component of the new stage of decentralization reform will be the drafting and tabling of draft laws on effective mechanisms for public participation in political life in the country (zhalilo, shevchenko, romanova, 2019; zaiats, 2017). studies also confirm the importance and actualization of rural development, which is clearly traced through the basic functions of rural territories based on the generalization of scientific approaches (figure 4). in this context it should be emphasized the interdependence of the development of rural areas multifunctionality of agriculture, which is that its result is the production not only of food, raw materials for food and processing industry, and energy raw materials more recently, but also a number of important public goods, for which demand is growing in the modern world. rural areas are the basis of these benefits (externalities arising from agricultural production) which include (hazuda, erfan, hazuda, 2015, zinchuk, kutsmus, 2012): food security of the country, which is seen as free physical and economic access of all population to safe food in sufficient quantity to meet their needs and preferences in the volumes necessary for a healthy, active life; the impact on the environment (formation and protection of agricultural lands, agrobiological diversity, maintenance of soil fertility, protection of land from negative effects of natural and technogenic character); the maintenance of population in rural areas through the use of their natural resources for economic activity that provides the means to meet the physical, spiritual and social needs (bobrovska, 2014, hazuda, erfan, hazuda, 2015); the reproduction and development of the peasantry (farming) as the bearer of national identity, grain culture and spirituality. 7. factors influencing the effective development of rural areas and their economic evaluation the most appropriate for understanding and identifying the interdependencies of the factors influencing rural development, in our opinion, is the law of unity and the struggle of opposites, which baltic journal of economic studies 73 vol. 5, no. 5, 2019 indicates the source of movement, development of objects, processes and phenomena. in accordance with this law, the most important condition that gives rise to development is a dialectical contradiction characterized by specific forms of this process (figure 5) (bobrovska, 2014; hazuda, erfan, & hazuda, 2015). local economic development is an activity of enterprises, economic entities in the region, authorities recreational organizational and managerial production main functions of rural areas demographic nature conservation social it is b as ed o n en vi ro nm en ta l pr ot ec tio n in ru ra l a re as w he re ec on om ic a nd n at ur al re pr od uc tio n pr oc es se s ar e in te rc on ne ct ed ; d ir ec tly re sp on si bl e fo r re cr ea tio na lth e he al th n ee ds o f b ot h ru ra l an d ur ba n po pu la tio ns , pr ov id in g un iq ue o pp or tu ni tie s fo r r es t a nd re co ve ry o f t he sp ir itu al a nd p hy si ca l f or ce s of th e po pu la tio n of th e co un tr y; c on tr ib ut es to in cr ea si ng th e ef fe ct iv en es s of lo ca l se lf -g ov er nm en t, th e ro le o f t er ri to ri al co m m un iti es in so lv in g th ei r o w n pr ob le m at ic is su es th at a ri se in th e pr oc es s of p ro vi di ng liv el ih oo ds in ru ra l ar ea s; m an if es te d in m ee tin g th e ne ed s of s oc ie ty in fo od a nd ra w m at er ia ls ; it is d ir ec tly re la te d to th e re la tio ns hi ps o f p eo pl e in th e pr oc es s of li fe , w hi le pr es er vi ng th e id en tit y an d hi st or ic al ly fo rm ed cu st om s an d tr ad iti on s of ru ra l r es id en ts ; c om bi ne s th e re pr od uc tio n of th e po pu la tio n of ru ra l a re as an d ru ra l se ttl em en ts ; figure 4. main functions of rural areas source: generated by the authors according to the study objection to the more developed social form of the less developed (objection to the more developed form of economic ownership of the less developed); objections to new, more progressive organizational forms of less developed ones (for example, changing some organizational forms of enterprise management, companies others, more sophisticated ones); the denial of more perfect material forms of development of productive forces is less perfect (qualitative improvement of relations of specialization, cooperation, combining of production, etc.). figure 5. forms of interdependence of factors of influence on rural development source: generated by the authors according to the study baltic journal of economic studies 74 vol. 5, no. 5, 2019 and other interested parties, aimed at increasing the economic resources of the community and obtaining a positive socio-economic effect (honcharuk, tomashuk, 2018). stable local economic development provides employment opportunities for economically active population in the region, is a basis for improving the well-being of local residents, contributes to improving the quality of life throughout the country. the economic assessment of rural development has its own specific features, since it should include the level of development of rural territories as a whole (figure 6) (hazuda, erfan, hazuda, 2015, kaletnik, pryshliak, 2010). 8. impact of agricultural production on the efficiency of rural areas the practice of agricultural management has shown that the management efficiency of the agro-industrial complex depends to a large extent on the availability of timely and high-quality information support. monitoring plays a special role in this process. monitoring (from the latin “monitor” is reminiscent of “the monitor”) is defined in the scientific literature as a specially organized systematic observation of a specific object (bobrovska, 2014; hazuda, erfan, & hazuda, 2015). monitoring any development is the process of providing the management system with information about the compliance of the entity 's performance with the selected criteria. quality monitoring organization of rural capacity development involves observing the factors and trends of development of objects in order to inform the support of operational and strategic decisions, establishing the level of adaptation of the object to the environment, etc. one of the main tools for identifying priority development areas and strategic management, evaluating the complex internal and external factors that affect the development of the territory, is the swot analysis. swot initial letters of the words strengths, weaknesses, opportunities, threats. swot analysis is operation of enterprises located in a certain territory, including in the context of the natural-economic zones of the region; availability and rational use of the natural resource potential of the territory; availability of industrial and social infrastructure, which greatly contributes to the economic growth of the countryside and the effective functioning of the social sphere; favorable natural and climatic conditions for agriculture; rational allocation of productive forces. geopolitical, geo-economic and geostrategic location of the region; figure 6. features of economic assessment of rural development source: generated by the authors according to the study table 4 impact factors and risks of rural development based on agricultural production positive prerequisites risks precautions 1. favorable geographical location customs procedures creation of green corridors, development of transport networks 2. moderate continental climate drought reclamation systems, greenhouses 3. fertile soils exhaustion agrotechnology 4. a large proportion of the rural population is engaged in traditional farming labor migration support programs for single farms 5. growing a wide range of agricultural products market oversaturation with monotonous products pre-orders, cooperation manufacturers 6. the possibility of harvesting two crops violation of permissible standards for the use of mineral fertilizers product quality control system 7. sales of products from the field illiquid balances serving cooperative, logistics source: generated by the authors according to the study baltic journal of economic studies 75 vol. 5, no. 5, 2019 a kind of tool; it does not contain final information for managerial decision-making, but allows streamlining the process of consideration of all available information with their own thoughts and evaluations (hazuda, erfan, hazuda, 2015). implementation of the swot analysis helps to establish relations between the characteristic of regional (rural) development opportunities, threats, strengths (advantages) and disadvantages. as the result of this analysis, it is possible to identify promising directions and to carry out the choice of strategies for rural development (table 4). world experience shows that the successful functioning of the market of agricultural products in rural areas provides marketing planning. for the effective development of rural areas it is expedient to establish an agricultural service cooperative, which will carry out the procurement, storage and preprocessing, and the sale of the product, its transportation and marketing services that will reduce risks and costs for both manufacturer and processor of agricultural products and establish cooperation with dockworkers and retailers. after all, the main vocation of the rural environment is the production of agricultural products, providing the population with food and processing industry with raw materials. 9. sustainable economic growth of rural territories of ukraine in the light of world experience the main task of the present and the following years is to implement a policy of sustainable economic growth and improving the living standards of the rural population (bobrovska, 2014; honcharuk, tomashuk, 2018). world science and practice have accumulated considerable experience in researching sustainable rural development. at the same time, funding for activities of the so-called «green box» containing some types of internal support is increasing (table 5). support for rural development is a further priority of eu policy, driven by the new 2014-2020 programming period. eu rural development priorities have been expanded (four-axis system replaced by six priorities), in particular (figure 7) (hazuda, erfan, hazuda, 2015, honcharuk, tomashuk, 2018). summarizing the above, it is possible to outline the basic principles and directions of using international experience in regulating rural development in ukraine (table 6). 10. impact of government levers on rural development at present, it is important to understand by the state and governmental structures that rural development is a major component of both the economic and national security of the country as a whole, and therefore its support will contribute to ensuring a balanced socioeconomic and environmental development of rural areas. in this context, decentralization is one way to tackle rural poverty (bobrovska, 2014; hazuda, erfan, & hazuda, 2015). in the system of state regulation of rural development, an important role belongs to regional programs of socioeconomic and environmental development, their essence lies in a comprehensive approach to solving the main table 5 the main components of sustainable rural development characteristic і general services such as research funding, pest and disease control, specialist training and retraining, inspection, marketing services and infrastructure support; іі direct payments to producers: income support, not «tied» to production results, income insurance for social programs, payments to producers for losses from crop and animal diseases, retirement programs or for withdrawal of production resources, investment assistance, environmental programs and regional support programs; ііі maintaining food security stocks; iv domestic food assistance. source: generated by the authors according to the study і іі ііі iv v vi pr om ot in g tr an sf er of k no w le dg e an d in no va tio n in a gr ic ul tu re , fo re st ry a nd ru ra l a re as , th ei r c om pe tit iv en es s; in cr ea si ng th e vi ab ili ty o f al l t yp es o f m an ag em en t; pr om ot in g th e or ga ni za tio n of th e fo od su pp ly c ha in a nd ri sk m an ag em en t i n ag ri cu ltu re ; re st or in g, p re se rv in g an d st re ng th en in g ec os ys te m s t ha t d ep en d on a gr ic ul tu re a nd fo re st ry ; pr om ot in g re so ur ce effi ci en cy a nd th e tr an si tio n to a lo w ca rb on a nd c lim at ere si lie nt a gr ic ul tu re , f oo d an d fo re st ry se ct or s; pr om ot in g so ci al in te gr at io n, p ov er ty re du ct io n an d ec on om ic de ve lo pm en t i n ru ra l ar ea s. figure 7. eu rural development priorities source: generated by the authors according to the study baltic journal of economic studies 76 vol. 5, no. 5, 2019 goals and objectives of ensuring a balanced development of the rural environment, namely: ensuring a balanced socio-economic development of the region, in particular the countryside; attraction of investments to priority types of economic activity through creation of special economic zones, joint ventures, etc.; improvement of the structure of the economic complex by conversion, reorientation of certain enterprises of the machinebuilding industry to the production of acute-scarce agricultural machinery and equipment, durable goods for the population, etc.; promotion of rational use of the region's resources (natural, material, labor, financial and others); environmental protection in the region; improving demographics and more; a gradual increase in the standard of living of the region's population as a result of fulfilling these goals and objectives (hazuda, erfan, & hazuda, 2015; pavlov, 2019). regional programs are short-term (up to 1 year), medium-term (1 to 5 years) and long-term (over 5 years) periods. in the process of ensuring the development of rural living environment, regulatory documents with changes and additions that promote the development of individual housing construction in the countryside, the expansion of water, gas, heat supply networks and others are important. in particular, resolutions of the cabinet of ministers of ukraine «on measures to support individual housing construction in the countryside», «on water supply to rural settlements of ukraine», «on gasification of rural settlements and increase of electricity use for rural household needs», «on improvement of investment formation in rural areas, social development of the village and agro-industrial complex» and others. the analysis of conditions of financial resources formation of agricultural enterprises that operate in rural areas and access to external sources of financing demonstrates the need for review of the conceptual bases of state regulation of the economy and enhance the position of the state (kaletnik, pryshliak, 2010). the current situation in ukraine requires new approaches to the implementation of reforms and policy to support rural development. the integrated development strategy of agriculture and rural development 2015-2020 aims to meet this challenge and to comprehensively implement a number of reforms that have been waiting for agricultural producers, agribusiness and the rural population (smutchak, 2019). the development of scientific and practical management approaches to ensure the competitiveness of food production, especially by growing organic, highquality and safe agricultural products, the demand for which is growing, in particular and in the world is noted among the prority tasks of regional management. 11. main aspects of solving economic problems of rural development the rural development is a difficult task. this is reflected in the complexity of the problem, the multiplicity of solutions, the diversity of interests of the subjects. one of the ways to solve it is the introduction of an effective economic mechanism to support the development of rural areas, which are characterized by some aspects to solve this problem (figure 8). modern-oriented model of forming of the motivational factors of the development potential table 6 main principles and directions of regulation of rural development of ukraine taking into account eu experience characteristic 1 legislative support and implementation of the adopted and existing legislative acts on rural development is important; 2 provision of targeted state funding for rural development programs, financing of rural development on a competitive basis; 3 expansion of bank lending to rural business entities, development of investments in priority sectors in rural areas; 4 selective financing of prospective investment projects, in particular in the development of rural infrastructure; 5 stimulating the development of entrepreneurship, the creation of small forms of farming in the agricultural sector and small enterprises in the industries; 6 stimulating the development of organic farming; 7 development of tourist and recreational infrastructure; 8 ordering of roads, development of road infrastructure; 9 enhancing the status of mountain areas (legislative and financial support) and in particular: – investment assistance to mountain areas, granting loans on preferential terms; – creation of a network of small and medium enterprises in the mountains for the production of high-quality goods and services; – expansion of productive meadows and pastures in the structure of agricultural lands of the mountainous terrain, development of animal husbandry in the mountains, especially sheep farming; – stimulating the development of rural green tourism; 10 solving problems of employment of rural population; 11 enhancing self-government and enhancing the role of the community in managing rural development; 12 ensuring systematic monitoring of the implementation of investment projects and rural development programs. source: generated by the authors according to the study baltic journal of economic studies 77 vol. 5, no. 5, 2019 of rural areas provided that its implementation will involve the strengthening of the role of the state in the continuation and completion of effective reforms in the countryside. this is possible through the use of motivational factors that will provide impetus to the tasks of socio-economic development of rural areas. there is also implied a high responsibility of the executive authorities and local self-government bodies on implementation of tasks set out in national and regional policy frameworks development of rural areas to enforce the constitutional rights of man and citizen and the development of local democracy and to promote healthy competitiveness and human development. in addition, to create conditions for ensuring the effectiveness of functioning of industrial enterprises and enterprises of the agrarian sector and to provide vital needs and interests of the rural population. 12. conclusions implementation of the tasks of effective development of rural territories at the expense of state support will contribute to the improvement of rural settlements, increase of income, increase of the level and quality of life of rural residents. in the context of the implementation of rural development tasks, the role of territorial communities in the consideration and resolution of economic and socio-cultural issues of local importance, including the protection of the environment of rural territories, is increasing. the economic policy of rural territories should be based not on the modifications of managerial influence, but on the construction of an economic institute of their own systemic structural and economic shifts, opportunities to use their own potential. the prospect of further development is extremely important to conduct regional diagnostics at the state level, which will include  supporting entrepreneurship and development of small and medium businesses in all types of economic activity in rural areas;  rural infrastructure development (industrial, market, social);  balancing of the market of foodstuffs, production sphere and consumption (structure of the market of foodstuffs and a share of the domestic commodity producer);  promoting priority types of economic activity in rural areas, including the agricultural sector, forestry, recreation, tourism and sanatorium-resort areas;  effective functioning of agriculture, the revival of the peasantry as a class.  implementation of agricultural protectionists’ policy (import restriction, food smuggling);  corruption elimination, lobbying of agricultural producers' own interests;
  sustainable development concept: practical implementation;  support for rural development by regional institutions;  greening of agricultural production, organic farming.  the need to create conditions for rural development, effective functioning of the market mechanism in rural areas (level of profitability of agriculture, land commodity);  state support and guarantees for the sale of agricultural products; figure 8. main aspects of solving economic problems of rural development source: generated by the authors according to the study baltic journal of economic studies 78 vol. 5, no. 5, 2019 assessing the level of development of the region, its specialization and the complexity of the development of productive forces, their effectiveness, as well as the study of regional markets for goods and services, labor, financial structures, levels of investment and innovation. the analysis of population characteristics (demographic indicators, settlement systems, etc.), assessment of natural resource, scientific and production potentials, the level of development and location of infrastructure, environmental security are also important. references: bobrovska, o. yu. 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(in ukrainian) baltic journal of economic studies 105 vol. 6, no. 1, 2020 corresponding author: 1 dniprovskii university of the humanities, ukraine. e-mail: mpv12@i.ua 2 dnipropetrovsk state university of internal affairs, ukraine. e-mail: mpv12@i.ua doi: https://doi.org/10.30525/2256-0742/2020-6-1-105-112 constitutional support of the entrepreneurship legality in ukraine serhii penkov1, maryna voloshyna2 abstract. the article is devoted to the analysis of constitutional support of entrepreneurship legality in ukraine and its functional purpose in the current conditions. the modern state of the constitutional instruments of government support of entrepreneurship in ukraine is analyzed in its entirety; available accounting modes related to the official registration of natural and legal entities as economic agents as well as the prescription of regulatory requirements for conducting business in ukraine are characterized. the authors formulate own view of the concept “entrepreneurship legality in ukraine” taking into account modern development trends in business relations and objective necessity of their regulation through the constitutional means. scholarly approaches to the definition of the concept “legal support of entrepreneurship” are studied. the paper proves that entrepreneurship faces the challenges, and sometimes it is impossible to solve the problems of local, regional, nationwide and global level, which evolve under the influence of non-market factors, independently. in order to resolve the above problems, it is essential to involve the state and provide conformity of the adopted policy in the business sector. the key impact factors and roadmap for further development of entrepreneurial activity are defined. the paper highlights the blocks of regulatory legal acts. certain components of the constitutional support, which will have a favorable effect on entrepreneurial activity, are identified. the article generalizes the ways for improvement of the constitutional support of a business activity that further form four specific measures on effective and overall legal support of the entrepreneurial activity. key words: business activity, government regulation of entrepreneurship, legality, constitutional guarantees, constitutional means, constitutional mode, entrepreneurship, entrepreneurial activity, freedom of enterprise, business entity. jel classification: l31, l32 1. problem statement using a set of legal rules consolidated in the constitution of ukraine, legislative, regulatory legal acts and bylaws, it is established the conduct standards for business entities in the course of their entrepreneurial activities, and responsibilities for violations of these standards are determined. furthermore, the role and significance of public administration authorities are in establishing a regime similar to all business entities in order to create an optimal environment for conducting this type of economic activity, controlling compliance with rules and standards as well as legal requirements in the area under consideration. thus, the constitutional support of entrepreneurship legality in ukraine means a complex of legal rules consolidated in the constitution of ukraine, legislative, statutory and individual acts which set conduct rules of business entities when carrying out economic activities and establish liability for violation of these rules. whereas, the constitutional support of the legality of entrepreneurship in ukraine, on the one hand, protects business entities in terms of obligatory enforcement of their legal rights and interests and, on the other hand, they are subject to the measures of administrative coercion in case of violation of consumer rights, antitrust, tax, environmental legislation. the content of constitutional support of the entrepreneurship legality involves clear, consecutive and precise exercise of powers by central and local authorities regarding the regulation of legal relations, which arise in the area of enjoyment of the constitutional right to entrepreneurial activity and creation of the system of the state guarantees of support and contribution to entrepreneurial activity. the legal support creates that environment, where an entrepreneur acts, guaranteeing him/her state protection of property rights, equality of rights and freedom of enterprise, free and legal competition, government assistance. baltic journal of economic studies 106 vol. 6, no. 1, 2020 both economic researchers and legal scholars have paid much attention to the problems of the study of entrepreneurial activity, clarification of its content and essence, special aspects of the legal regulation of the latter, namely: o.v. bihniak, yu.p. bytiak, v.v. bohutskyi, t.o. kolomoiets, a.t. komziuk, v.k. kolpakov, o.v. kuzmenko, a.s. lastovetskyi, i.d. pastukh, a.s. vasyliev, o.p. podtserkovnyi, v.s. shcherbyna, n.a. saniakhmetova, o.m. vinnyk, v.a. ustymenko, r .a. dzhabrailov, v.m. kamp, v.v. kovtunets, o.d. krupchan, yu.m. frolov, s.v. riznyk, p.p. shliakhtun, yu.o. khorkov, et al. at the same time, a fundamental change in the requirements for the activity of public administration bodies in the updated standards of living of the society and the state necessitates the revision of the existing constitutional means of ensuring legitimate (lawful) entrepreneurial activity in ukraine. moreover, problems of the advance of the government regulation mechanism of entrepreneurial activity under the conditions of intensification of the integration process in the country are top targets and require comprehensive research. there is a need in the separation and generalization of the terminology “public administration” regarding the concept of constitutional support of the legality of entrepreneurial activity in ukraine. 2. means of the constitutional support of the legality of entrepreneurial activity in ukraine the legality (legitimacy) of entrepreneurial activity in ukraine should be comprehended as the legitimization (extension of legal validity) of entrepreneurial activity, which is carried out by duly registered business entities, that is actual procurement of a right to conduct a business by the latter in the manner, which is established relying on the constitutional right of everyone to carry out that kind of economic activity as well as the general principles of economic management defined in art. 6 of the economic code of ukraine (hereinafter referred to as the ec of ukraine). the legitimate nature of entrepreneurial activity ensures the protection of life, health and property of each member of society as well the protection of the environment, economic national security of the state. thus, the legality of entrepreneurial activity directly affects the enhancement of the national economy, the saturation of the domestic market with consumer goods of national production, providing social and property protection of citizens, the conquest of foreign markets, world economic influence, the skilled work of the management apparatus in the area of administrative and legal regulation of the mentioned industry, etc. content analysis of art. 4 of the ec of ukraine, which defines the groups of relations that are beyond the subject-matter of the statutory regulation of this codified act, makes it possible to establish legal relations under the administrative regime in the business area, in particular, in terms of: the use of resources (material, natural, labor, financial); arrangement of carrying on business activity, including entrepreneurial one (payment of remissions and mandatory payments, protection of economic competition, defense of consumer rights, etc.); compliance with special conditions of carrying out particular types of business activity (licensing and permissive conditions); conducting some transactions. in this context, the fixing of the administrative regime, as a set of legal fundamentals and essential organizational management measures, is executed to ensure the procedure for the exercise of rights and obligations by individuals as well as the operating procedure of state bodies that is consistent with public and private interests in the mentioned sphere of public administration (hospodarskyi kodeks ukrainy, 2003). in the course of the abovementioned, we note that it is management functions in different activities (tax, sanitary, environmental etc.) that are formal characteristic for the establishment of administrative regimes. public administration aim means the execution of functions clearly defined by the law. these functions may be formulated in the regulatory regime rules or originated from the regime requirements for the functioning of control systems (artemiev, 2019). regarding the legal regime of entrepreneurial activity as a statutory set of rules on the conduct of natural and legal entities as entrepreneurs and the exercise of their rights and responsibilities in the specified area, it is safe to say that this is a functional regime regulating the economic function peculiar to any system of social, including public, administration. this is because its principles are laid in art. 42 of the constitution of ukraine (konstytutsiia ukrainy, 1996), and its further consolidation is in the core codified act in the system of economic legislation: the economic code of ukraine which provides government control of entrepreneurial activity, and other legislative and subordinate statutory acts. when exercising the regulatory influence on the entrepreneurial activity through relevant legal standards, it is defined the legitimate (lawful) development vector of that sort of activity, including precise and comprehensive principles, limits and procedure for its implementation. this, in turn, ensures the use of legal regulation mechanism focused on creating proper conditions for lawful entrepreneurship and effective management of the economy based on the constructive legal means of regulatory, in particular, the administrative influence of the state on business entities activity. among the legal means, one can name the following: government order, application of standards, limits, scientific and technical, economic, socio-state and regional programs; contracts for works and supplies for state needs; regulation of prices, tariffs, exchange rates, amount of economic sanctions; provision of grants-inaid, compensations, targeted subsidies, credits for the baltic journal of economic studies 107 vol. 6, no. 1, 2020 stimulation of technology modernization, innovation activity, assimilation of new types of products and services; provision of state property (industrial and non-residential premises, inactive and unfinished objects and structures necessary for business activities); provision of tax, compensation and other benefits, etc. certain legislative rules contain legal prescriptions of an administrative nature and, typically, their implementation is impossible without the use of administrative procedures in which, ad hoc, there is a visible specification of the content of a relevant administrative-legal regime in the economic, including business, area. in this context, the regulation of entrepreneurial activity is caught up due to the application of accounting regimes as individual administrative-legal types based on the purposefulness feature which legalize (determine and justify legality and legitimacy) business entities. in other words, they consolidate features of both registration of legal and natural entities and the rulemaking of statutory requirements for the relevant type of business activity. thus, the obligatory legal means of law enforcement of business activity involve as follows: state registration of business entities; licensing and patenting of certain types of business activities; registration of participants of foreign trade activity; allocation of quotas for the export and import; standardization and certification, protection against unfair competition. state registration of legal entities, non-governmental organizations that do not have the status of legal entity and natural persons – entrepreneurs – is an official recognition by state averment of the establishment or termination of the activities of a legal entity, a non-governmental organization, which does not have a legal identity, averment of the relevant status of nongovernmental organization, trade union, its agency or association, political party, employers’ organizations, associations of employers’ organizations and their symbols, evidence of acquisition of the entrepreneur status by a physical entity or its deprivation, changes in the information contained in the united state register of legal entities, individual entrepreneurs and public organizations about a legal entity and an individual – entrepreneur, as well as carrying out other registration actions stipulated by this law. to legitimate the carrying out certain types of entrepreneurial procedures, which influence their security, as well as to protect property interests by the state, the legislator requires of a business entity to acquire approvals. thus, the law of ukraine “on licensing types of business activity” defines the fundamental principles of licensing, types of business activity subject to licensing, the procedure of their licensing, introduces accountability of business entities and licensing authorities for the violation of licensing legislation. according to para. 6 p. 1 of art. 1 of the above law, licensing is a means of government regulation of conducting business activities which are subject to licensing, targeted at supporting the implementation of a unified state licensing policy, protecting economic and social interests of the state, society and individual consumers (pro litsenzuvannia vydiv hospodarskoi diialnosti, 2015). there are particular licensing provisions in art. 14, 43, 128 of the ec of ukraine and part 3 of art. 91 of the civil code of ukraine (hereinafter referred to as the code). the juridical literature has a point according to which the licensing of certain types of business activity is considered from different perspectives: as an element of business entities legitimation; as a condition of conducting certain types of business activity; as a bases for the origin of law to carry out types of business activity which are subject to licensing; as an element of the mechanism for the implementation of the constitutional right to entrepreneurial activity; as a means of government regulation of business activity (vasyliev, 2018). it seems erroneous to separate such aspects as “a bases for the origin of law to carry out types of business activity” and “a condition of conducting certain types of business activity” that are infused with each other because the eligibility to do business is one of the conditions of legal carrying out of that kind of economic activity. such direct ways of administrative non-tariff regulation as quota allocation (quantitative restrictions) and patenting that are currently determined to be the methods of government regulation in the economic sector, which are focused on providing a unified state control in the sector and protecting the economic and social interests of the state, society and individual consumers, are related to the licensing. the essence of quota allocation lies in establishing trade turnover by the state that determines the quantity and nomenclature of importable or exportable goods by a certain number or amount for a definite period. in this context, it is appropriate to present the statement of o.v. havrylchenko, who explains that quota is a quantitative non-tariff restriction on goods’ export or import by a fixed number or amount for a specified period. then, the scholar marks that quotas are the maximum volumes of some goods that can be imported (exported) into the country within a certain period (havrylchenko, 2013). in terms of the legislation, the law of ukraine “on foreign economic activities” (pro zovnishnoekonomichnu diialnist, 1991) stipulates application of the above non-tariff methods as effective means regulating foreign economic activity through setting some requirements for economic entities. the ec of ukraine, in particular, p. 5 of art. 14, clarifies that the state uses quota allocation fixing a critical volume (quotas) of production or trade where it is required. the procedure for quotas of production and / or circulation (including export and import), as well as quotas baltic journal of economic studies 108 vol. 6, no. 1, 2020 distribution, is established by the cabinet of ministers of ukraine under the law. at the same time, the civil code of ukraine consolidates provisions on the agreed economic law institutions: buy-sell, procurement and other exchange forms; general and building contracts, cargo carriage (tsyvilnyi kodeks ukrainy, 2003). the authors note that certain types of business activity require a trade patent. thus, patenting of entrepreneurial activity of business entities may be performed in the areas related to the trade for monetary funds (cash, checks, and use of other payment forms and cash cards in the territory of ukraine), exchange of cash currency values (including transactions with foreign cash means and payment cards), in the area of gambling business and consumer services, other areas ascertained by the law. an official document that entitles a business entity to carry out the activity, which is subject to patenting, is trade patent – state certificate which confirms the right of the business entity to run certain types of entrepreneurial activity within a fixed timeframe (kovach, 2017). such permissible procedures as certification and standardization, which are primarily intended to secure and protect life, health and property of citizens and the environment from the adverse effects of modern scientific and technological development, dishonest manufacturers, authorized representatives, importers and distributors as business entities, and creating the adequate conditions for bona fide competition call for special attention. in particular, legal certification fundamentals are defined by the law of ukraine “on standards, technical regulations and conformity assessment procedures”, which sets legal and organizational principles of conformity of product, quality system, quality control system, environmental management system, human resource management system and focuses on support a unified state technical policy in conformity assessment (pro tekhnichni rehlamenty ta otsinku vidpovidnosti). juridical literature interprets the term “certification” as: the activity of the competent state bodies, institutions, organizations and their officials, which is associated with the issuance and receipt of the relevant certificate by legal or natural entities; as confirmation of compliance of qualitative characteristics of production with specified requirements (standards) or level established by standards (mamatova, 2018). as proof of the conformity (release of compliance document, which is based on the decision about the fulfillment of specified requirements, is proved after the critical examination) of products, processes, services, system or staff by the third party (a person who is independent of the person providing the conformity assessment object and of the person who is interested in the object as a consumer or user), the ukrainian legislator defines the term “certification” in art. 1 of the law of ukraine “on standards, technical regulations and conformity assessment procedures”. however, from the scientific viewpoint, today some scholars consider certification as one of the directions of permitting activities, the essence of which lies in developing and implementing a complex of measures, which are aimed at preventing damage that can be caused to public and state interests, property, personal safety of citizens due to uncontrolled production and sale of products that may be dangerous for the person. it is clear that certification is currently presented in the form of a relevant procedure, which is related to the provision of a permit document for the release, placement into service or introduction on the product market, rendering of services, the determination of the conformity of systems or personnel to certain quality criteria, the statutory requirements fixed in technical regulations, standards, technical specifications or in another way. along with certification as a necessary tool for managing the quality and safety of products, processes, services, systems or company staff, standardization is also a major figure which, according to art. 4 of the law of ukraine “on standards, technical regulations and conformity assessment procedures”, focuses on: compliance of standardization objects with their purpose; diversity management, applicability, compatibility, interchangeability of standardization objects; support of the rational production through the application of designated rules, guidelines and procedures; ensuring health and safety; protection of consumers’ rights and interests; work safety; preserving the environment and saving all kinds of resources; elimination of technical barriers to trade and their prevention, support of the development and international product competitiveness (pro standartyzatsiiu, 2014). in a.m. chorna’s good point, the standards are not intended to permit certain activities, but they are a condition for conducting a business related to manufacturing, processing and other activities that require their application (chorna, 2017). the above confirms that all business entities shall adhere to the special requirements, which are set out for production and its parameters that may threaten health and life of persons, their property or may not correspond to the accuracy and uniformity of measurements, specifications of manufacture and operation. the protection of the establishment of trade and other fair customs of competition when conducting business activities in the context of market relations makes the difference among administrative-legal means ensuring lawful entrepreneurial activity. thus, according to art. 37 of the ec of ukraine, actions defined as unfair business practices entail administrative, civil or criminal liability of the perpetrators – economic entities – as provided for by the law. the law of ukraine “on protection against unfair competition” interprets the concept of “unfair competition” as “any actions in the competition which contrast with rules, trade or other honest practices in business activities” (pro zakhyst vid nedobrosovisnoi baltic journal of economic studies 109 vol. 6, no. 1, 2020 konkurentsii, 1996). p. 1 of art. 32 of the ec of ukraine also contains the above definition, and it is more detailed in p. 2 of the same article as follows: “the unlawful use of the goodwill of a business entity, obstructing business entities in the competitive process and the achievement of unfair advantages in competition, the improper collection, disclosure and use of trade secrets, as well as other competition actions that are contrary to rules, trade and other fair customs in business”. 3. model of the constitutional support of the entrepreneurship legality in ukraine the content of legal support of entrepreneurial activity involves a clear, consecutive and precise exercise of powers by central and local authorities regarding the regulation of legal relations which arise in the area of enjoyment of the constitutional right to entrepreneurship and creation of the system of the state guarantees of support and contribution to business activities. the legal support creates that environment, where an entrepreneur acts, guaranteeing him/her state protection of property rights, equality of rights and freedom of enterprise, free and legal competition, government support. the legal support of entrepreneurship should be a legal strategy of the state, public administration bodies and business entities, which includes the rules, ways and methods of business relations control; consolidation of business law enforcement in the economy; fulfillment of state instructions, treaties conditions, national and regional programs of socio-economic development. laws and other statutory acts ensure the realization of legal regulation and aim to create the conditions for legal managing and effective management of the economy through meaningful legal means. the effectiveness of legal support depends on the degree of perfection and effectiveness of economic legislation (shebanits, rudenko, 2016). at the same time, there are the following negative factors of the legislation: uncertainty of priority of legislative acts on business activity regulation; complexity and extensionality of the regulatory framework; constant changes and amendments to the laws; instability and internal contradictions of legislative acts and their individual norms regarding the regulation of business relations; disproportion in the ratio of laws and subordinate acts, their declamatory nature; the absence of implementation mechanisms in many laws; inappreciation of issues related to the realization of human and civil rights and freedoms guaranteed by the international conventions, which were signed and ratified by ukraine. legal support is intermediated by two directions of entrepreneurial activity control: regulation of the procedure for implementing the right to entrepreneurship guaranteeing its stability and determining the legal status of economic entities, as well as defining the goals, organizational and legal means, methods and practices of influence of the state on ordering relations in the context of conducting business activity (ishchuk, 2018). today, ukraine is at the stage of formation and development of a stable market economy and, therefore, the state faces the task of creating both economic and social preconditions that would allow the effective development of entrepreneurship. studying the evolvement of economic relations, one may state that legislation has ceased to be the groundwork of the legal regulation and does not guarantee the exercise of state, branch and regional programs of the socio-economic development. effective legal support of the entrepreneurial activity should be considered as the availability of the expected result from the introduction of legislation in the specified economic realm in order to achieve the specified goal through implementing the legal means defined by law. in reliance on the above definition, content of the effectiveness of laws on legal support of entrepreneurship is the realization of a complex of professionally elaborated legal means for accomplishing the following goals: enhancement of the national economy, the saturation of the domestic market with consumer goods of national production, providing social protection of citizens, the conquest of foreign markets, world economic influence, the skilled work of the management apparatus in the area of state control of the mentioned industry. for the advancement of entrepreneurship in ukraine, it is necessary to develop an effective legal framework regulating the activity of business entities. the state should elaborate a flexible system of business taxation to create favorable conditions for their stable profit (bavyko, 2017). the state support of entrepreneurs should include their legal protection, the creation of relevant information and advisory base, contribution to the investments attraction in the development of domestic entrepreneurship. the ukrainian business legislation consists of the laws of ukraine and resolutions of the cabinet of ministers regulating business activity, statutory acts of ministries and departments, local self-government bodies, including those state bodies, which carry out entrepreneurship regulation, control and supervise it. business legislation of ukraine can be divided into three blocks of statutory acts: the constitution of ukraine, according to art. 42 every citizen has the right to legal entrepreneurial activity (the right is based on the freedom of entrepreneurship which involves doing a legal business by a person at own discretion and risk to earn a profit; a block of special statutory acts regulating exclusively entrepreneurial activity: laws of ukraine “on business associations”, “on joint stock companies”, “on farming enterprise”, “on state registration of legal entities and individual baltic journal of economic studies 110 vol. 6, no. 1, 2020 entrepreneurs”, “on development and state support of small and medium-sized enterprise in ukraine” and others; regulatory legal acts which are comprised of individual regulatory provisions or their set controlling entrepreneurship: the ec of ukraine, the civil code of ukraine, the tax code of ukraine, laws of ukraine “on licensing of certain types of business activities”, “on consumer rights protection”, “on protection of economic competition”, “on protection against unfair competition”, “on the permit system in the field of economic activity”, “on restoring a debtor’s solvency or recognizing it as bankrupt” and others. major deficiencies in the legal support of entrepreneurship in ukraine are as follows: equivocation, instability and controversial nature of the current legal framework of entrepreneurship; virtually non-functional character of many legal acts, very low operational discipline regarding regulatory documents; the occurrence of many fuzzy legislative rules that can be subject to any interpretation if desired; inconsistency of legal restrictions and requirements contained in the individual legal acts. the promotion of entrepreneurship in ukraine is identified as one of the principal directions of market reforms and is an important task of the state regulatory policy. entrepreneurship and its influence have a great impact on the socio-economic transformations. first of all, it includes additional revenues to the state budget, new jobs, expansion of production of goods and services for both industrial and household purposes, introduction of know-how and other achievements of scientific and technological progress, improvement of welfare of the population, etc. the effective functioning of the entrepreneurial activity is a quite long process which should be performed, taking into account the economic and legal situation in the country, current problems which destabilize enterprises operation. analyzing the domestic legal framework of entrepreneurship, one can argue that, on the one hand, the state has a significant influence on it and, on the other hand, it is insufficient. in view of the above, present conditions require the development and implementation of effective mechanisms of state regulation that would stimulate the promotion of the entrepreneurial activity (mozhaikina, 2017). the following ways may improve the state regulation of entrepreneurship expansion in ukraine: upgrading of current legal acts controlling business activity to eliminate internal legal contradictions and abolishing provisions that hinder entrepreneurial development; further implementation of the state regulatory policy in the economic activity for the creation of a favorable business environment; intensification of financialcredit and investment support of entrepreneurship; contribution to the creation of business development infrastructure; improvement of the tax system, which would ensure a sufficient amount of payments to the budgets of all levels, efficient performance of the domestic economy, fair approach to taxation of all categories of taxpayers; formation of the proper legal environment for the development of innovative and scientific and technical activities, enhancement of the entrepreneur’s motivation for high-yield and highquality activities through advancing the system of economic incentives by amending the tax and customs legislation. the central tasks of the state are all-round stimulation of activity in the area of production, creation of favorable conditions for entrepreneurship, as well as ensuring employment of the population, social care of the most vulnerable strata of society, that is, to provide citizens with a decent standard of living. for this very reason, the state’s role in economic public life is currently increasing. this is manifested in the development of a system of regulatory acts intended to control the market, business, customs rules, banking line, prices and salaries, social protection of the population. therefore, it is legal regulation, which plays a major role in business control because entrepreneurship is a scope of engagement the state and market (baklan, 2011). in general terms, the improvement of legal support of entrepreneurial activity should be performed by the following areas: – the need to establish encouragement through agitation means, persuasion of public opinion since prosperous entrepreneurs are the basis of the material wealth of all other strata of the population; – the need to ensure the functioning of a market economy by providing the legal framework and social atmosphere, which contribute to the successful development of entrepreneurial activity and create conditions for entrepreneurs integration into the overall area of social responsibility and support of the stability of economic reforms and the implementation of programs of socio-economic development; – reforming of regulatory relations between the state and business entities in order to overcome opposition to the course of regulatory and administrative reform and inertia of public administration bodies which are endowed with regulatory policy responsibilities. improvement of the legal support needs updating of: provisions which determine the legal status of business entities in the course of realization of their economic competence and optimization of state regulation; the essence, content and effectiveness of laws; determination and effectiveness of administrative and commercial liability; the legal mechanism for enforcement and protection of economic and social rights and interests of entrepreneurs; legal bases of administrative activity of public administration; legal means to eradicate corruption in the economic and public sectors; the procedure of balancing state and public interests with interests of business entities (public with private); organization of measures for adaptation of the national business legislation to the european legislation; baltic journal of economic studies 111 vol. 6, no. 1, 2020 fundamental provisions on the legal regime of property (adoption of the law on property); economic and legal mechanism of legalization of shadow capital, shadow activity and shadow economy. analyzing the effectiveness of legal support of entrepreneurship, the following measures are proposed: – intensification of the involvement of the business community in a constructive dialogue with public administration bodies regarding decision-making at the state and local levels. civil servants and officials of local government bodies should substantiate the need of taking arbitrary decisions in the open. laws shall have constructive and character and creative nature, be a viable mechanism of the state protection, easily understood for business leaders; – working out draft laws relying on a competent and efficient basis, taking into account their economic feasibility and financial solvency, therefore, the initiation of draft bills should be carried out by experts who have the relevant knowledge and experience in the legal regulation of specific areas of economic activity. parliament’s professionalism is determined by the quality of the content, the productivity and implementing rules. justification of the expected impact of each draft on the interests of entrepreneurs, the population (consumers) and the state should be a mandatory condition; – purification of the economic legislation from unnecessary harmful regulations and bylaws which sometimes, as a funfair mirror, which distort the essence of the law because the executive bodies correct and interpret the essence of the law, replace its main provisions with corporate content transforming state interest in favor of the branch. bylaws become an obstacle to reforming any sector of economy penetrating to the depths of the essence of the law, distorting and twisting its content. bylaws are necessary as a control means which renders the ways of putting a law into execution. it is untenable that a government decree or an order of a ministry or other central executive body determine the conditions for the development of a particular industry. such a government act should be economically feasible, financially backed and efficient. working out its draft, it is important to avoid contradictions, inconsistences and doubling of existing statutory provisions, to balance state and sectoral interests and to control its implementing at the stage of acts execution. – establishing effective parliamentary consideration under full compliance with the legislative requirements for regulatory activity by the officials central and local authorities (in order to prevent the adoption of economically unfeasible and ineffective regulatory acts, to reduce the state interference in the activity of business entities and to eliminate the obstacles to the development of business activity). it is essential to amend the code of ukraine on administrative offenses and the law of ukraine “on the fundamental principles of state regulatory policy in the economic activity” in terms of specification of the administrative responsibility of officials in the area of state regulatory policy. 4. conclusions and further researches directions consequently, from the perspective of public law, in relation to business entities, public administration authorities, on the one hand, undertake and must secure and guarantee legal rights and interests of business entities; protect the inviolability of property and ensure the property rights of the entrepreneur; guarantee equality of their rights to freedom of business activity as well as equal opportunities for access to material-technical, financial, human, information, natural and other resources; protect consumers from the manifestations of unfair competition and monopoly in all business areas, etc. on the other hand, the control of entrepreneurial activity is necessary that the state represented by authorized bodies, officials can monitor those business areas which, first, affect safety provisions, and, second, for the protection of property interests by the state. if business entities violate administrative, tax, environmental legislation, authorized state actors have a right to apply measures of administrative enforcement to them. there is a special focus on the fact that the legislator directly within the basic law (arts. 42, 78, 120, 123, 127, 141, 146 of the constitution of ukraine), codes, and laws of ukraine, other regulatory legal acts, places limitation of a right to entrepreneurship. however, from the standpoint of private law, public administration bodies are not entitled to interfere with the activity of business entities, which is manifested in various forms of their protection and creation of favorable conditions for them to carry out entrepreneurial activities. references: artemiev, o. s. 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(2016). deiaki aspekty suchasnoho stanu pravovoho rehuliuvannia pidpryiemnytskoi diialnosti u svitli realizatsii stratehii staloho rozvytku «ukraina – 2020» [some aspects of the modern state of legal regulation of entrepreneurship in the light of realization of the sustainable development strategy “ukraine – 2020”]. visnyk mariupolskoho derzhavnoho universytetu. seriia : pravo, vol. 12, pp. 130–136. baltic journal of economic studies 28 vol. 6, no. 4, 2020 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: martabarna@ukr.net orcid: https://orcid.org/0000-0001-5248-9774 researcherid: g-9493-2019 2 lviv university of trade and economics, ukraine. e-mail: irinatuckovska@gmail.com orcid: https://orcid.org/0000-0001-6719-2981 researcherid: e-9848-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-4-28-34 international experience of development and support of entrepreneurial activity of inclusive tourism marta barna1, iryna tuchkovska2 abstract. the article considers the state of international tourism for people with disabilities. it has been studied that inclusive tourism area has great potential for development, as more than 15% of the world’s population can be defined as inclusive tourists. the volume of inclusive tourism market development is constantly increasing. taking into account the world experience of development of “tourism for all” and analysis of statistics on the number of people with disabilities and socially disadvantaged people, the prospects for the development of the inclusive tourism market are determined, which is especially important given its social significance. therefore, it has been expedient to analyze the prospects of creating an effective system of inclusive tourism. the purpose of the article is to determine the prospects for the formation of an effective system of public administration for the development of inclusive tourism on the basis of international experience in supporting the entrepreneurial activity of inclusive tourism. the authors propose a system of integrated approach to ensure effective public policy in shaping the conditions for the development of inclusive tourism and creating a barrier-free environment for tourism destinations. harmonization of the mechanisms for improving the effectiveness of public policy in the field of inclusive tourism requires the development of an organizational mechanism for implementing the concepts of “tourism for all” with the identification of practical aspects of its implementation in accordance with international norms and standards. given the limited state funding for tourism in ukraine, the development of inclusive tourism cannot be highly efficient, which is primarily due to the social direction of the area. the international documents and ukrainian normative acts and laws regulating tourist activity for people with disabilities are analyzed and studied. to create an effective system of social protection for all categories of the population, including people with disabilities, it is necessary to take into account the experience of foreign countries, where a resembling system has been operating quite successfully for a long time. from this point of view, firstly, it is necessary to consider the social protection systems that have been introduced in the countries of the european union, where the disabilities rights movement has been launched. in the countries of the european union, social policy and the participation of social partners in its formation have undergone significant transformations, and a fundamentally new supranational and suprastate course of social protection and welfare of citizens has emerged. as a country aspiring to join the european union, ukraine must take into account the best foreign experience of the world’s leading countries in the field of state policy to support persons with disabilities and its implementation. the european and world experience of adaptation of the tourism industry for people with disabilities (on the example of slovenia, israel, spain and the usa) is analyzed. the problems that hinder the development of international tourism for people with disabilities in ukraine and measures to solve them are identified. key words: person with a disability, inclusive tourism, international tourism, world experience, state tourism agency, state support mechanisms. jel classification: f29, i31, l83, o51, o52 baltic journal of economic studies 29 vol. 6, no. 4, 2020 1. introduction the tourism industry has significant potential to increase key performance indicators. global trends indicate a strong development of the industry, statistics from the world tourism organization show steady results in the growth of tourism flows and income from tourism. tourism is a multiplier industry that provides high returns with low investment. therefore, one of the key characteristics of the development of the tourism industry will be high competition, which contributes to the further development of tourism, improvement of the quality of tourism services. recent trends in tourism development indicate the attention of tourism entities to the modernization of inclusive tourism infrastructure, the allocation of inclusive tourism in a particular type of tourist activity, and promotion of its further improvement. since inclusive tourism has emerged as one of the branches of social tourism, it is appropriate to highlight the key role of the state in ensuring its further development in order to ensure the state’s implementation of social guarantees as an important element of nationhood and civil society. thus, the article is devoted to the topical issue of determining the role of public policy in creating favorable conditions for the development of inclusive tourism based on international experience. the international tourism market has undergone many changes in recent years: the segment has attracted people with disabilities, actively creating all the necessary conditions for them and developing special programs of tourism services, taking into account their needs and capabilities. this type of tourism has many titles, for example, “inclusive tourism”, “social tourism”, “barrier-free tourism”, “paratourism”, etc. they all mean the availability of travel for people with disabilities, because this activity integrates this activity integrates this category of population into society, gives them the opportunity to develop, feel healthy, specifically emotionally, and be on par with others. inclusive tourism in ukraine is a fairly new concept and activity. this is due to a number of problems, both social and economic. at present, there are organizations and associations of people with disabilities that provide medical and rehabilitation services throughout the country. certainly, they arrange entertainment activities, as well as excursions, but usually not over long distances due to the underdeveloped infrastructure, which is not designed for people with disabilities. 2. methodology of research worldwide, more than one billion people (23% of the population) suffer from various forms of disability. according to a research conducted by the world health organization, 785 million people aged 15 and older live with disabilities, of whom 110 million suffer from severe disorders. among children aged 0 to 14, these figures are 95 million and 13 million, respectively (international disability statistics, 2018). in ukraine, more than 2.6 million people have the status of a person with a disability, which is 6.25% of the total population. the number of people in this category is growing every year due to many factors, such as environment, living and working conditions (trunina, sosnovska, 2019). tourism for people with disabilities, including the international one, is a fairly new phenomenon, which has a low level of study and publicity, but nevertheless, it is a necessary type of tourism in every country. inclusive tourism is developing rapidly today. experts in this field estimate that 2.5 million people with disabilities travel regularly. the development of inclusive tourism is closely linked to the demand for this type of service. statistics show that in the future such demand will grow, so inclusive tourism has significant potential to increase the flow of tourists (ugodnikova, 2019). according to statistics, more than 2 million people with disabilities live in ukraine nowadays (official website of etan, 2019). there is a tendency to aging of population, i.e. more people move to the categories in need of social protection and inclusive conditions for tourism development. so, inclusive tourism is becoming increasingly important among the population of different countries. there are several definitions of “a person with a disability”, “disability” in the world. each state has its own criteria, according to which it grants a person the status of a person with a disability. there are just some of the reasons why disability indicators are difficult to measure and define globally. understanding the potential of people with disabilities has initiated the emergence of different concepts of their inclusion in the normal life of society. in the recent history of social policy in the united states and europe, several approaches have been developed: integration (from latin: integratio – connection, restoration), inclusion. the same trends can be traced in the domestic social system. different countries have individual interpretations of the concept of “disability”. for example, if a person has a status of a person with a disability in the united states, it does not mean that his or her status will be recognized in china or germany. d. say determines that this is to some extent due to the fact that the world has not reached a consensus and understanding of what disability is. fundamentally different terms can be used to denote people with intellectual disabilities, even in countries where a similar language is used (say, 2013). there are many definitions of tourism for the people with disabilities. after analyzing the latest research and publications, we highlight the following: “inclusive tourism”, “accessible tourism”, “tourism for all”, “barrierbaltic journal of economic studies 30 vol. 6, no. 4, 2020 free tourism”, “tourism for people with disabilities”, “social tourism”. their special feature is the ability of persons with disabilities to travel to various tourism facilities and institutions with an accessible and adapted infrastructure for this category of the population. the functions performed by tourism for people with disabilities are shown in figure 1. according to international documents in the field of tourism, inclusive tourism is defined as a recreational type of tourism for people with special needs. in 1991, the unwto general assembly defined the concept of inclusive tourism, that is a tourism for all in the concept “creating opportunities for tourism for people with disabilities in the 1990s”. the system of national legislation prescribes only the concept of rehabilitation and provision of rehabilitation services to persons with disabilities, which is directly related to recreational and tourist activities, but does not fully cover the range of services and opportunities for the use of tourism. the term “accessible tourism for all” was enshrined in 2009 at the 18th session of the unwto general assembly in astana, kazakhstan, in the “declaration on the facilitation of tourist travel”, which called on unwto member states to make their tourist facilities and institutions accessible to people with disabilities, publish clear and detailed information on the reception services available to them and on the problems they may face when traveling (committee of ministers of the council of europe, 1992; trunina, sosnovska, 2019). in view of the above, it should be noted that today the activities of all national institutions, including public authorities, public associations, etc., should be aimed at creating conditions in which persons with disabilities can lead independent lives and take an active part in all its aspects. 3. results and discussion 3.1. international experience in supporting and developing inclusive tourism there are processes of active institutionalization in the field of tourism for people with disabilities. this is evidenced by the emergence of the international tourism organization sath, which holds annual congresses, publishes a monthly publication, cooperates with governments. sath includes non-profit and public organizations from different countries, as well as organizations from various fields of tourism business. sath is headquartered in new york city, usa, and the number of sath members is growing steadily. today, sath is a member of the world tourism organization, which testifies to the integration of tourism for people with disabilities into the global tourism system (international organizing tourism for people with disabilities). the following elements have been included in the structural components of inclusive tourism by international organizations (official website of etan): – ensuring the implementation of the concepts of barrier-free architecture by creating an inclusive tourism area, inclusive infrastructure, construction of real estate in accordance with the norms and standards of inclusiveness; – accessibility of all types of transport for use by people with disabilities; – providing quality services to accompany tourists by training staff in appropriate qualifications; has an intellectual, educational and psycho-emotional impact on the individual performs scientific and cognitive functions, expands the geocultural space integrates people with disabilities into society establishes social contacts and provides an opportunity to perform various social roles f u n c t i o n s motor activity helps to increase the physical and mental stability of the body figure 1. functions of inclusive tourism source: based on (bulousova, 2017) baltic journal of economic studies 31 vol. 6, no. 4, 2020 – inclusiveness of cultural and entertainment facilities; – inclusive component of marketing activities, in particular the formation of comfortable booking conditions, presentation of tourist offers, etc. at the core of the concept of inclusive tourism, which involves travelling around the world, is a universal design, seven principles of which were formulated and implemented more than 30 years ago under the guidance of wheelchair architect ron mace and colleagues at north carolina state university. these principles underlie social rehabilitation, including the development of an inclusive tourism system in the european, asian and american tourism regions (mabbett, bolderson, 2002). as an example of the organization of international tourism and accessibility of travel for people with disabilities have been taken several countries: slovenia, israel, spain, the usa. in recent years, slovenia's tourism infrastructure has been adapted to meet the needs of people with disabilities. at the entrance to public buildings and sights there is a separate parking area for people with disabilities. almost all shopping centers, public buildings, tourist places are equipped with toilets for people with disabilities. sidewalks of special configuration have been built in many slovenian cities. more and more atms are being installed at a lower level than usual for more convenient access for people with visual impairments using braille. among the slovenian cities that improve accessibility for people with disabilities, ljubljana, maribor, ajdovščina and others should be emphasized. people with disabilities are in most cases entitled to free tourist attractions or discounts. the state tourism corporation of israel, the executive body of the ministry of tourism of israel, has initiated a number of projects in terms of infrastructure, the purpose of which is to make people with disabilities able to visit numerous tourist sites in the country, encourage them to travel in israel. new facilities are being built, and old ones are being reconstructed to suit their needs. for example, masada, a rock with a legendary fortification near the dead sea, has become accessible to people with disabilities up to the very top. part of this most important tourist facility has been arranged so that people with visual impairments can perceive ancient stones to the touch (international experience, 2020). spain is also developing rapidly to meet the needs of inclusive tourists. public transport and the central streets of barcelona are adapted to their needs. the spanish tourism board pays great attention to affordable tourism, and the authorities are also making considerable efforts to involve such people in a full active life. the tourism infrastructure is specially adapted for people with disabilities, specialized catalogs are published, events are held, including the paralympic games. the central streets of the cities are equipped with ramps, all buses are adapted for this category of people, the hotels have special rooms convenient for them. each new metro station has special equipment for people with disabilities. in 2019, a special site “accessible tourism” was created. it contains all the information about the relevant trips to catalonia. on the site you can find detailed information about 19 tourist destinations, where the necessary conditions are created for the reception of people with disabilities. 3.2. determination of state support for entrepreneurial activity for inclusive tourism in ukraine currently, in the world of social policy, one of the most important activities is the integration and social adaptation of people with disabilities, the number of which in ukraine at the beginning of 2018 has been about 2.6 million, almost 80% of them have been of working age. children account a significant share in the structure of people with disabilities: more than 167 thousand (2% of the total child population). however, according to international classifications, this number of people with disabilities is much higher, as disability can be temporary, not necessarily congenital or acquired (vojtovska, 2018). over the last ten years, ukraine has undergone reforms in almost all areas of social security and safety and health protection. at the present stage, ukraine is trying to create an effective system of social protection for all categories of the population, including people with disabilities. in the process of its development the experience of foreign countries, where such a system has been operating quite successfully for a long time, should be taken into account. from this point of view, the system of social protection implemented in the countries of the european union, where the disability rights movement has been launched, may be of concern, especially given ukraine’s interest in the eu membership. in the countries of the european union, social policy and the participation of social partners in its formation have undergone not only a significant transformation, but also a fundamentally new supranational and suprastate course of social protection and welfare (the official website of the world tourism organization). in ukraine, the provision of conditions for the development of inclusive tourism is defined in the following legal documents: the constitution of ukraine; law of ukraine “on state social standards and state social guarantees”; law of ukraine “on the basis of social protection of the people with disabilities in ukraine”; law of ukraine “on social services”; law of ukraine “on rehabilitation of the disabled in ukraine”; “convention on the rights of persons with disabilities”. baltic journal of economic studies 32 vol. 6, no. 4, 2020 these regulations define the main provisions of the state social policy concerning the creation of comfortable living conditions and social security for persons with disabilities. however, there is no separate normative legal act or provisions in the developed documents that would determine the mechanisms of implementation of the functions of state management of the development of an inclusive tourist environment. the law of ukraine “on tourism”, which is the main legal document regulating tourism, does not define the concept of inclusive tourism (law of ukraine “on tourism”, 2017). in ukraine, the quality of life of people with disabilities, as a rule, is lower than of the rest of the population, which is due to the following: lack of humanism and mercy towards people with special needs in our society; underdevelopment and unadaptability of social infrastructure of cities and rural settlements, taking into account the basic needs of people with disabilities; low level of material security and social services, lack of flexibility; low quality or lack of technical means and devices necessary for the service, movement and work of people with disabilities; the presence of significant difficulties in obtaining professional, especially higher education, in meeting spiritual needs (bajda, 2011). recommendation 1185 to the rehabilitation programs of the 44th session of the parliamentary assembly of the council of europe dated may 5, 1992 defines disability as a limitation due to physical, psychological, sensory, social, cultural, legislative and other barriers that prevent a person with a disability from being integrated into society and participate in the life of the family or society on the same grounds as other members of society (ugodnikova, 2019). thus, disability is a social phenomenon that no society can avoid, and therefore each state in accordance with its level of development, priorities and opportunities forms a social and economic policy for people with physical and (or) mental disabilities. sanatorium and resort business for people with special needs in ukraine is based on the current law of ukraine “on resorts”, adopted on october 5, 2000 (the official website of the world tourism organization), and the relevant legal framework governing the activities of this area, ensuring the availability of sanatorium treatment for all citizens, and especially for people with disabilities, children, patients with tuberculosis, etc., economical and rational use of natural healing resources and their protection. the tourism markets for people with special needs today are the first state sanatorium-resort zone. on december 16, 2009, the verkhovna rada adopted the law of ukraine “on ratification of the convention on the rights of persons with disabilities and its optional protocol” (state employment service, 2019). the convention on the rights of persons with disabilities stipulates that member states undertake to ensure and promote the full realization of all human rights and fundamental freedoms by all persons with special disabilities without any discrimination on grounds of disability. to this end, member states are under obligation to take all appropriate measures to eliminate any discrimination against persons with disabilities, and to promote the availability and use of new technologies, including information and communication technologies, mobility aids, equipment and assistive devices convenient for people with disabilities, giving priority to low-cost technologies. thus, inclusive tourism for people with disabilities is a modern type of tourism that allows any person to participate, regardless of his or her physical capabilities, taking into account the peculiarities of his or her physical and psychological condition and it is considered primarily as a powerful means of active rehabilitation, which structurally includes medical, psychological, pedagogical, physical, professional, labor, physical culture and sports, and social activities. 3.3. prospects for the development of inclusive tourism in ukraine analyzing the prospects for the development of tourism for people with disabilities in ukraine, we consider the following measures to increase the availability of infrastructure for such tourists: 1. improvement of the legal and regulatory framework for inclusive rehabilitation and social tourism, consolidating its full functioning. the implementation of this direction will testify to the high social orientation of the state, its care and concern for citizens with disabilities. study of the conditions of free access to tourist infrastructure and tourist attractions for people with disabilities. 2. arrangement of tourist facilities with ramps, call buttons and special markings. 3. information support of projects of public organizations and dissemination of information about opportunities for barrier-free recreation on the territory of ukraine. 4. improving inclusive tourism products such as online tours, development of farmsteads in rural areas. at the regional level, we offer the following practical measures: – publication and dissemination of methodological recommendations on the arrangement of tourist infrastructure facilities in compliance with the requirements and taking into account the needs of persons with disabilities and the staff of tourist institutions, guides and accompanying persons; – assessment of compliance of tourist attractive regional objects with the needs of persons with disabilities; – selection of tourist facilities and attractions in each area, the most interesting and suitable for tourism, recreation of people with disabilities. baltic journal of economic studies 33 vol. 6, no. 4, 2020 thus, today in ukraine, tourism for people with disabilities is in great demand, but it is developing mainly due to the ambitions of caring people. therefore, the most important tasks of the state should be the following: – social adaptation and socialization of persons with disabilities in society, increasing their rehabilitation potential and quality of life, including with the help of tourism; expansion at the legislative level (in particular, in the law of ukraine “on tourism”), the priority areas of state policy in the field of specialized tourism markets for people with special needs; – increasing the profitability of tourism for people with disabilities, encouraging national and foreign investment in the development of this tourism industry, attracting charities and other organizations, sponsors, creating new jobs; – development of tourism for people with disabilities in rural areas, its combination with ecological (green) tourism; creation of favorable conditions for the development of tourism markets for people with special needs by simplifying tax, customs, currency, border and other regulations; expanding international cooperation in the field of tourism for people with disabilities. ukraine, which describes itself as a welfare state, needs specialized tourism markets for people with special needs as a social phenomenon and as a form of rehabilitation and integration of people with disabilities into society, for social adaptation and socialization of these people, to increase their rehabilitation potential and quality of life. 4. conclusions 1. it is investigated that inclusive tourism in the conditions of socialization of economy is a modern “panacea”, which will allow to include in tourist activity any person, irrespective of his or her physical possibilities, taking into account features of his or her physical and psychological condition. inclusive tourism in terms of socialization of the economy is seen as a powerful tool for active rehabilitation, which structurally includes medical, psychological, pedagogical, physical, professional, labor, physical culture and sports, and social activities, which can significantly affect the development of society. meeting public needs will bring the economy to a new level of competitiveness. 2. in the studied countries (slovenia, israel, spain and the usa) there is a well-developed infrastructure that allows people with disabilities to travel with minimal inconvenience, which cannot be applied to ukraine. there has been identified a number of factors that complicate the development of international tourism for people with disabilities in ukraine. to solve the above problems, the following measures can be proposed: a) development of a system of information support on tourism and excursion services that are accessible to people with disabilities; b) support of tourist activity of the low-income population, encouragement of travel together with the person accompanying it, by introduction of system of discounts; c) adoption of a state program for the development of social tourism, accessible to all; d) creation of a separate state department to assist in processing documents and obtaining visas for persons with disabilities; e) creation of a special transport infrastructure for inclusive tourism, taking into account re-equipment of vehicles, construction and improvement of roads, simplification of the ticket sales system; f ) payment for accommodation in hotel establishments in the amount of 50% of the cost, due to the adopted state social programs. we believe that many ukrainian regions are ambitious for the development of inclusive tourism in ukraine, have high economic, social and innovative potential. but on the basis of high economic development, we see a low level of integration and socialization of people with disabilities to a fulfilling life. accessibility, barrier-free design and employment remain among the main problems of regional socialization of people with disabilities. the economic quality of development (efficiency, profitability) of regions should be combined with the social quality of service provision (high level of education, health care, level of well-being and life expectancy, satisfaction with the nature and working conditions, etc.). it is analyzed that the number of people with disabilities in ukraine is increasing every year, only abot 5% of the total number of them travel. this is due to a number of reasons: lack of inclusive tourism; websites are not available, or only partially accessible; lack of adapted vehicles, hotel rooms; lack of professional staff capable of solving accessibility problems; lack of reliable information on the level of specific problems that a disabled person may face; lack of available restaurants, bars, and other facilities, adapted toilets; streets and sidewalks are not accessible. it is substantiated that the solution of these problems is possible by making appropriate amendments to the laws of ukraine “on rehabilitation of the disabled in ukraine”, “on social services” and “on tourism”, by consolidating the full functioning of inclusive tourism as a type of social and physical rehabilitation of people with disabilities. at the regional level, it is necessary to conduct a series of regional training webinars “improvement of inclusive tourism infrastructure as a guarantee of effective economic development of the region”, involving specialists in this field. the implementation of the proposed measures will expand the possibility for travel companies to use and provide inclusive tourism services, such as online tours, the development of farmsteads in rural areas. baltic journal of economic studies 34 vol. 6, no. 4, 2020 references: bajda, l., krasiukova-ens, o., burov, s., azin, v., hrybal's'kyj, ya., & najda, yu. (2011). invalidnist' ta suspil'stvo [invalidity and society]. kyiv. bulousova, n. v. (2017). providing inclusive tourism in the socially-reabilitated system of ukraine. molodiy impressions. chajkovskyj, m. ye. (2016). theory and practice of social-pedagogical work with young people with special needs in conditions of inclusive educational space. extended abstract of doctor`s thesis. starobilsk. committee of ministers of the council of europe (1992). recommendations to member states “on a consistent policy for people with disabilities”. available at: http://zakon2.rada.gov.ua/laws/show/994_128 (accessed 25 july 2020). galitsky, o. m., & grishova, r . v. 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(2008). tourism accessible for all in europe. tourism review. ethical: barrier free tourism, april. mabbett, d., & bolderson, h. (2002). definition of disability in europe. a comparative analysis, european commission: employment & social affairs, brussels, belgium. naumenko, l. yu., et al. (2017). inclusive tourism as a type of rehabilitation: occasional consumerism. ukrainian newsletter of medical and social expertise, vol. 2, pp. 23–26. official website of etan international organization. available at: http://www.etan.org/ (accessed 25 july 2020). romanova, a. a. (2017). see tourism and its classification in the context of current trends in the development of tourism. economics and region, vol. 4(65), pp. 13–19. say, d. (2013). attitudes towards people with disabilities: people's republic of china, japan and india. sociology: theory, methods, marketing, vol. 1, pp. 117–130. state employment service (2019). available at: http://www.dcz.gov.ua/-control/uk/index (accessed 25 july 2020). svarnyk, m. g., grybalskyj, ya. i. et al. (2015). guide for active recreation and tourism for the disabled. lviv: tovarystvo “zelenyj hrest”. the official website of the world tourism organization. available at: http://www.unwto.org/ (accessed 25 july 2020). trunina, i. m., & sosnovska, y. r . (2019). stand of international tourism for people with indispensability in ukraine. modern economics, vol. 15, pp. 191–195. available at: https://modecon.mnau.edu.ua (accessed 25 july 2020). ugodnikova, o. (2019). prospects for the implementation of state policy in the development of inclusive tourism. public administartion aspects, vol. 7(1–2), pp. 37–42. vojtovska, a. i. (2018). features of inclusive tourism. available at: http://tourlib.net/statti_ukr/vojtovska.htm (accessed 25 july 2020). zaiukov, i. v., & stakhov, o. i. (2015). problems and prospects of employment of disabled people in ukraine. visnyk berdians'koho universytetu menedzhmentu i biznesu, vol. 1(29), pp. 127–132. baltic journal of economic studies 25 vol. 6, no. 2, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: berdar-1@ukr.net 2 taras shevchenko national university of kyiv, ukraine. e-mail: evtush5221@i.ua doi: https://doi.org/10.30525/2256-0742/2020-6-2-25-31 innovation activity management of enterprises under self-development marharyta berdar1, olha yevtushevska2 abstract. there are the research directions, determined as relevant, such as the issues of innovation activity management of enterprises, identifying the main causes of low innovation activity of domestic companies, improving the innovation activity management system of industrial institutions, which necessitates the formation of a scientific and methodological basis that can realize the ability to describe the process of innovation activity of the enterprises and mechanisms to manage them. these issues are also relevant because in the context of strengthening the course on european integration, the management of domestic enterprises is tasked with identification of the methodological and practical experience of innovative management of the eu countries as soon as possible and harmonization of their policies in accordance with its provisions. the subject of the study is complex research of management of innovative activity of enterprises under self-development. the purposes of the article are a study of the main directions of operation of innovative-active enterprise under self-development; analysis of key indicators of innovation activity of an enterprise; characteristic of the mechanism of innovation activity management of an enterprise in terms of self-development; definition of directions of policy of strengthening of innovation activity with the purpose of increase of efficiency of development of domestic enterprises. to achieve these purposes the following research methods are used: analysis and generalization of theoretical sources and scientific literature; abstract-logical method in the process of theoretical generalizations and formation of conclusions; prognostic and diagnostic; general scientific methods of analysis and synthesis. results. the article describes the concept of innovation activity of the enterprise and details its main elements. the authors have also formulated the concept of innovative-active enterprise and presented the priority directions of its operation. the basic aspects of improvement of the innovation activity management system of the enterprise under self-development are considered. the key aspects of improving the management system are highlighted: analysis and evaluation of changes in the operation of the enterprise (evaluation of innovation activity); choice of direction of innovative development of the enterprise; development of strategy of innovative operation (definition of priority of directions, their correlation, development of scenarios); control of implementation of the enterprise development strategy. the process of improving the system of management of innovative activity of the enterprise under self-development is presented as a block diagram. the process is considered and the mechanism of innovation activity management is proposed. practical implications. the article presents the process of managing innovation activity according to the degree of selfdevelopment of the enterprise. the proposed mechanism has practical orientation in forming a set of measures for strategic development of the enterprise. in general, the paper outlines the main tasks for improving the innovation activity management system, the solutions of which will improve the effective functioning of the enterprise. key words: innovation activity, self-development, management system, enterprise, innovation operation, development, efficiency. jel classification: o31, m11, h21 1. introduction managing enterprise innovation activity as a complex socio-economic system is increasingly focused on self-development, on the reproduction and mobilization of internal potential, competitive efficiency, systematicity and synergy. the problems of managing the self-development of the enterprise are the subject of numerous theoretical and applied researches. in scientific sources and literature highlighting the successful practice of managing the enterprise's selfbaltic journal of economic studies 26 vol. 6, no. 2, 2020 development, many definitions of self-developing enterprise and approaches to self-development management are offered. from the point of view of the systematic approach, the economic category and the object of management of "innovative self-developing enterprise" are defined by us as the enterprise capable to independently and autonomously reproduce on the innovative basis the organization of new quality, characterized by special integrity, providing it with a stable competitive advantage and strategic readiness in an adequate and timely manner to respond to market challenges. innovative self-development of the company is one of the leading goals to which management efforts should be directed. there are the research directions, determined as relevant, such as the issues of innovation activity management of enterprises, which necessitates the formation of a scientific and methodological basis that can realize the ability to describe the process of innovation activity of the enterprises and mechanisms to manage them. these issues are also relevant because in the context of strengthening the course on european integration, the management of domestic enterprises is tasked with identification of the methodological and practical experience of innovative management of the eu countries as soon as possible and harmonization of their policies in accordance with its provisions. 2. theoretical basis of the research theoretical and practical researches of the innovation activity management of the enterprise are given in the works of many domestic and foreign scientists. for example, in the writings of n.p. boretska, l.v. petrenko the key problems that hinder the implementation of innovation operation of domestic enterprises are identified, the ways and directions of activation of innovation operation of theenterprises in ukraine are suggested. in the works of a.k. andriushko, t.v. hrynko, h.v. yermakova, v.o. kasianenko, s.m. illiashenko, а.yu. reustov, a.s. chernov, j. shumpeter, etc., conceptual bases of innovation development management of the enterprise are considered and theoretical principles and scientific-practical approaches to economic interpretation of process of innovation development management of the enterprise as systematic management of innovative activity are directed, aimed at formation and maintenance of achievement of economic growth through rational use, increase and distribution of innovative and technological innovation potential. the factors and tendencies of innovation activity of the enterprises are investigated, problems and prospects of activation of innovation and scientific and technical operation of the enterprises are determined. the most developed and widely presented topic is the organization of innovation processes. it must be admitted that despite the considerable number of works devoted to solving the problems of the innovation activity management of the enterprise, some of its aspects, including the formation of the innovation activity of the enterprise under self-development, have not received sufficient coverage in scientific research. 3. the main directions of formation of the innovative-active enterprise under self-development in the modern sense of self-development, it is the development of the organizational system of the enterprise at the expense of internal potential and resources in accordance with its own program. selfdevelopment involves the presence of own mechanisms at the enterprise. modern enterprises are able to manage selfdevelopment: from self-development as a condition of survival of the enterprise to innovation selfdevelopment of the enterprise as a condition of sustainable competitive advantage in the market. one of the main indicators of economic development of the country is the level of innovation activity of the enterprises. today, it is widely recognized that innovation is part of an overall enterprise strategy aimed at achieving its relevant position in the industry. this approach is in line with j. schumpeter's view of the dual nature of competition: as an organizing or creative force and as a disorganizing force in the form of "creative destruction" (schumpeter, 1995). as a result, competition as a dynamic process contributes to the emergence of new technical and technological solutions, new products, forms of production organization, and sources of raw materials. in a market economy, firms make strategic decisions about financing research, and bear the risk of the consequences of implementing investment decisions. the degree of innovation activity of enterprises and the nature of innovation are largely determined by the competitive structure of the industry. the latter determines the degree of competition intensity, the presence of entry barriers to the industry, the ability to accumulate financial resources for r&d (research & development), the ratio of autonomy in innovation operation and imitation. the problem of innovation activity of enterprises in the ukrainian market today has another important aspect. the decline in business activity experienced by the domestic economy is usually accompanied by a reduction in the cost of developing innovations. however, an analysis of the performance of large firms, especially in the oligopolistic markets, both high-tech and less technologically advanced, shows that for many of them, investment in r&d remains a priority even in times of adverse economic conditions. this allows to achieve strategic benefits, enter new markets and consolidate your position in the industry after the crisis (kovtunenko, maslennikov, 2017). baltic journal of economic studies 27 vol. 6, no. 2, 2020 an enterprise is considered to be innovative-active if it: constantly improves and updates its products; acquires, develops and uses progressive machinery and advanced equipment; takes advantage of specialization and diversification; updates the raw material base through the use of higher quality and new raw materials; develops and refines the r&d sector; introduces more sophisticated (high) technologies into the production process; introduces changes in the composition of functions, methods of operation of the control apparatus, in particular, applies automated control systems; improves the structure of personnel using highskill work; introduces the latest methods of organization of production and labor; uses new energy sources and energy-saving technologies; improves organizational structure; implements financial innovations; enhances the logistics chain; applies the latest marketing technologies; introduces environmental innovations (andryushko). from the point of view of improving the production process, it is necessary to refer those who take advantage of specialization and diversification to innovativeactive enterprises. in practice, enterprises specialize in the production of products that are in demand. the consumer can express his/her requirements for the product; in this case, production will be based on special orders. enterprises can be transformed into complex multi-purpose complexes characterized by high resilience in the face of changing demand (lohvynenko, kuz’menko, plentiov, 2010). among western economists, there is especially noted the approach of i. ansoff to determine the activity of the organization. based on his research, the scientist argues that the competitive status of the firm in the strategic area of management is determined as a result of the interaction of the following three factors: the effect of the scale of the organization, the competitive strategy, the potential of the organization (organization for economic cooperation and development; reustov, 2011). at the same time, each of the above factors is not potentially possible, but already achieved by the organization as a result of revealed by its employees and leadership activity. thus, according to i. ansoff, the potential competitive status of the organization becomes real only in the case of non-zero activity, which is manifested by the firm (reustov, 2011). the russian researchers (v.p. barancheiev, n.p. maslennikova, v.m. mishyn) give the definition of innovation activity as a complex internal characteristic based on the properties, abilities and competencies of the organization as a consumer and supplier of an innovation product. this group of scientists looks at innovation activity from the standpoint of the so-called "black box" method, on the basis of which they have identified the key characteristics of an organization's innovation activity to which they belong: innovation receptivity, resource availability, quality of organization and communication and innovation competence (hryn’ko, yermakova, 2011). innovation activity is a distinctive feature of dynamic realization of a set of purposeful processes, which, due to the introduction of innovation transformations taking into account the interaction of factors of the external and internal environment, provide enterprise with certain competitive advantages. that is a complex characteristic of the innovation activity in the dynamics (yastrems’ka, 2014). chernova a.s. defines the innovation activity of a firm as a complex characteristic of its innovation operation, the main aspect of which is susceptibility to innovation, based on competence in the issues of progress in this form (chernova, 2015). thus, innovation activity is a dynamic, purposeful operation to create, develop the product, process, organizational and management innovations in the production and market in order to obtain the commercial benefits and competitive advantages of the innovativeactive enterprise. from this point of view, an innovation enterprise is considered an enterprise that develops and uses new or improved products, technological processes and other types of innovation operation. the experience of developed countries shows that the distinguishing feature of innovation from scientific and technical operation performance lies primarily in the resources that need to be allocated to these goals. if, on average, the cost of basic research is taken as one, then the cost of applied research and development work exceeds 10 times. realization of innovations (creation of new or improved product in the industry, development of new technological process and conquering of markets) requires investments in 2 times more that it is. with a united strategic goal, a competitive economy, high quality of life and national security – scientific, technical and innovation policies, differ in strategic objectives and ways of solving them. if the main task in science and technology policy and activity is to create scientific and technical units for the future, in particular long-term, then the task of innovation policy and operation is to use the developed array of knowledge and technologies today (illyashenko, 2019). recently, the level of innovation activity of enterprises remains low. among the factors hampering the implementation of innovations are lack of own funds, insufficient financial support of the state, high costs for innovations, high economic risk. ukraine, abandoning the direct and indirect stimulation and regulation of scientific and technological progress, without defining the development benchmarks for the future and the current moment, without becoming a customer and the main consumer of new (innovation) products of its enterprises, drove them into a dead end of technological backwardness, depriving them financially ensure production upgrades through a sharp reduction in investment in innovation (borets’ka, petrenko, 2019). baltic journal of economic studies 28 vol. 6, no. 2, 2020 today, the own funds of enterprises remain the main source of financing innovations in the ukrainian industry. in 2018, their share was 88.2% of total funding. the predominance of the enterprises' own funds among sources of innovation financing is observed due to insufficient and difficult attraction of other resources (due to unfavorable investment climate, lack of venture capital, etc.). the main source of financing for innovation costs is the own funds of enterprises: 10742.0 mln uah (or 88.2% of total innovation expenditures), compared to 2017, they increased by 3.7%; expenditures for innovations from the state budget amounted to 639.1 mln uah (5.2%), compared to 2017, increased by 2.7%; their total expenditures from the local budget amounted to only 13.4 mln uah (0.1%), compared to 2017, they decreased by 82.2 mln uah (86.0%); loans were used in 2018, compared to 2017, by 120.5 mln uah (20.3%). in 2018, 84.4% of innovative-active industrial enterprises implemented innovations (or 15.6% of surveyed industrial ones). they implemented 3843 innovation products, which is 1456 units more than in 2017, 920 of which are new types of machines, equipment, appliances, apparatus and more. there are 2002 units implemented for the production of new technological processes in 2018 in comparison to 2017, their number increased by 173 (9.3%). in 2018, 739 innovation enterprises sold innovation products for 24.9 bln uah, that is up 7.2 bln uah more than in 2017 (public service of statistics, 2019). in addition, financing of the innovation activity of the enterprises in ukraine is also characterized by low use of credit levers for its expansion. while innovative projects tend to be long-term and require significant investment in implementation, credit is generally provided for short-term and high interest rates (illyashenko, 2019). among the factors, hampering the emergence of a high-tech economy, there is the low level of innovation infrastructure development. firstly, there is no effective legal basis, since the few laws governing scientific and technical activities are inconsistent and contradictory. secondly, the system of state institutions designed to regulate and stimulate innovation development is extremely flawed, as the existing structures duplicate each other, while most of the r&d incentives remain uncovered (zamryha, 2014). there is a need to identify key problems associated with innovation in ukraine. the main problems can be attributed to the imperfection of the legislative framework of ukraine, especially in the sphere of innovation activity and legal protection of its results. the disadvantage of the ukrainian legislation is the lack of co-ordination of legislative acts among themselves and their inconsistency with the difficult economic situation in the country. the legal framework for regulating innovation activity in ukraine is fragmentary, contradictory, which indicates its imperfection. the implementation of the adopted laws in the field of innovation is unsatisfactory. the current legislation is dominated by numerous normative legal acts. the problem is also the theoretical and legal substantiation of the concepts of modernization of the innovation system of ukraine, as well as the definition of approaches and mechanisms for its implementation. restriction of sources of financing, which is related to financial and economic instability in the country, crisis of most enterprises and hostilities in the east of our country. lack of own funds from enterprises for financing innovations is caused by high interest rates, inability to obtain long-term loans, massive bankruptcy of banks, etc. all this is one of the restraining factors for the innovation activity of the ukrainian enterprises (kas’yanenko, 2019). taking into account these problems, it is possible to determine ways and directions of activation of innovation operation in ukraine: – formation of a qualitatively new organization of relations and interaction between all participants of the innovation process, establishment of new functions by the relevant governing bodies both at the state and regional levels; – the creation of an innovation product market, at which an adequate level of intellectual property protection must be ensured; – preferential taxation of innovation companies, full or partial reimbursement of state expenditures for the development of innovations, participation in special state aid programs for the implementation of innovations, state orders for innovative products; – creation of an effective system of innovation lending (application of lending to small innovative enterprises under guarantees of large enterprises, reduction of interest rate on innovation loans); – granting interest-free loans or preferential loans to small enterprises engaged in scientific development; – using the experience of developed countries, where lending and investing of small businesses with so-called "business angels", i.e., entities of small risk capital, hoping for a multiple increase in investment (bilovods’ka, 2018). – expansion of the resource base in the banking system, which will lead to efficient use of credit resources not only for replenishment of working capital, but also for the implementation of innovative projects by small businesses, etc.; – motivation of innovation operation of enterprises by the state in the ways of training of personnel, managers of innovation activity, in the structure of the enterprise of inclusion of innovative-informative centers, introduction of electronic communications, programs of wide involvement of employees with creative thinking; – implementation of, first of all, scientific developments of domestic scientists; – active cooperation of the authorities both among themselves, as well as with the entrepreneurial, scientific baltic journal of economic studies 29 vol. 6, no. 2, 2020 and business education sectors of the national economy (borets’ka, petrenko, 2019). 4. the process of the activity management of the enterprise under self-development improvement of the innovation activity management system is an integral part of the innovation management process as a whole and is a system of management decisions aimed at creating conditions conducive to innovation self-development and a state of components of innovation potential that corresponds to effective innovation activity. the key aspects of improving the management system are highlighted: analysis and evaluation of changes in the operation of the enterprise (evaluation of innovation activity); choice of direction of innovation development of the enterprise; development of strategy of innovation operation (definition of priority of directions, their correlation, development of scenarios); control of implementation of the enterprise development strategy. the process of improving the enterprise innovation management system can be formulated in the form of a block diagram presented in figure 1. consider the process of managing the activity of the enterprise under self-development in accordance with the degree of self-development of the business entity (akatov, 2012; novikova, 2017). the mechanism of the innovation activity management of the enterprise (figure 2). with the purpose of formation of directions of improvement of the innovation activity management system it is possible to distinguish the following stages: analysis of components of the main indicators of innovation activity; assessment of economic development of the enterprise; analysis of the set of technical and technological developments in the field; evaluation of employees' qualifications; assessment of the base for r&d. the main task of management in the field of innovation activity under the enterprise's self-development is the continuous improvement of organizational and managerial potential, which ensures a high level of functioning of the enterprise in a changing external environment. in order to increase organizational and managerial potential, it is necessary to analyze the composition and structure of personnel; identify the areas of training and/or retraining of personnel; strengthen the work on increasing the number of patents, licenses and innovation developments implemented. management in the field of technical and technological potential includes ensuring the maximum compliance of the technical and technological level of production with the requirements of innovation development. to achieve this, it is necessary to: analyze the level of production equipment; to form a supply system; strengthen product quality management; increase the number of innovation developments implemented. the choice of the direction of improvement of the innovation activity management system depends, first of all, on the priority sphere of operation of the enterprise. however, in the real world, there is practically no stable plan of action for enterprises, as it is constantly adjusted as a result of changing environmental needs. development of innovation self-development strategy improvement of the system of the innovation activity management of the enterprise under self-development innovation activity evaluation formation of effective sphere of innovation activity formation of directions of innovation self-development realization of the actions plan on innovation self-development control of the actions plan on innovation self-development figure 1. block diagram of improvement of the activity management of the enterprise under self-development baltic journal of economic studies 30 vol. 6, no. 2, 2020 5. conclusions the rapid development of the innovation sphere encourages enterprises to intensify their innovation activity, first of all, to form and retain competitive advantages and ensure the success of the enterprise. one of the state measures aimed at activating innovation operation in ukraine should be to define this concept in the legislation and to develop indicators that would allow the analysis of innovation activity and identify the most effective directions of innovation development. the best for this, according to the authors, will be the application of the mechanism of the innovation activity management of the enterprise under self-development. in order to improve the innovation activity management system of the enterprise, a number of tasks can distinguish the solutions that will improve their development, such as: – firstly, the focus on continuous innovation selfdevelopment; – secondly, the innovation system management should be implemented as a process of creating innovations while making better use of the creative potential of the company personnel; – third, the process of the innovation activity management should be taken into account when planning business development. given that the modern innovation process is complex, dynamic and global, it requires new indicators to shape effective innovation policy. the conducted researches of innovation activity management of the enterprise in innovation operation very high high average low very low level of selfdevelopment self-developing enterprise enterprise with the potential to selfdevelopment enterprise with no selfdevelopment the subject of management management personnel senior managers top managers methods and tools methods for promoting innovations methods aimed a stimulating innovation activity methods aimed at organization the innovation operation results increase in share of innovation products increase in the level of innovation activity formation of innovation potential effective functioning of the enterprise figure 2. mechanism of the innovation activity management of the enterprise 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(in russian) baltic journal of economic studies 83 vol. 6, no. 5, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: viktoriyagura2016@gmail.com orcid: https://orcid.org/0000-0002-4870-4037 2 university of state fiscal service of ukraine, ukraine. e-mail: vitnov11@gmail.com orcid: https://orcid.org/0000-0003-4072-6941 3 military institute of taras shevchenko national university of kyiv, ukraine. e-mail: alik_sizov@ukr.net orcid: https://orcid.org/0000-0002-6400-3951 doi: https://doi.org/10.30525/2256-0742/2020-6-5-83-88 fintech tools to regulate gray exports of military and dual use goods and technologies viktoriya gura1, vitalii novytskyi2, alim sizov3 abstract. this article reviews challenges of monitoring and regulation of military and dual use goods and technologies in ukraine. these challenges are not new; their different aspects have been analyzed previously by many ukrainian researchers, such as g. androshchuk, o. fradynskyi, i. anokhin, v. davydovskyy and more, but all earlier analyses, while looking into theoretical and practical aspects of military and dual use goods and technologies export per se, left aside economic and financial aspects of this problem, which are in the focus of our investigation. the object of the study is the export of military and dual use goods and technologies. the subject of the study is the fintech tools that can be applied to analysis of export of military and dual use goods and technologies. the aim of the research is to analyze the current situation in export of military and dual use goods and technologies and based on results of analysis to outline the fintech tools that will be useful to evaluate and regulate gray exports of military and dual use goods and technologies. the methodology of research is based on economic analysis in which we have applied an alternative approach to assessing key indicators. firstly, we determined government budget military expenditure and then compared it with the scope of relevant exports. further, we analyzed the black market of military and dual use goods and technologies based on the data obtained from the ministry of internal affairs. this analysis demonstrated that official numbers represent only 10% of the total expected amount of military and dual use goods and technologies export; the balance is shared between the domestic black market and gray exports. as result of the research we propose modern fintech tools, including financial markers and the blockchain technology, as instruments to detect such gray exports. financial markers are specific fintech indicators making banks aware that a transaction involves transfer of military or dual use goods or technologies and therefore requires special attention (to verify whether the company has an appropriate license or whether a license is needed for the transaction etc.) blockchain is the best solution for tracking the financial marker information since it supports storage of information about the whole transaction chain and analysis of this information on any transaction stage. blockchain technology can generate information on possible gray exports automatically and chain breaks (where the end user does not typically use or sell military or dual use goods or technologies but is a vendor of conventional goods or technologies). key words: dual use goods and technologies, military goods and technologies, ukraine, export, cross country trade. jel classification: o23, o33 1. introduction export control of military and dual use goods in the international trade is a problem that is versatile and complex but not new. in the present day ukraine, the study of this subject is focused on analysis of theoretical concepts and basic components of military and dual use goods and technologies export; in the meantime, there has been no economic or financial analysis of this subject based on a key risk and market trend review in application to the ukrainian military industry – this outlines both the focus of our research and its relevance and novelty. the purpose of this study is to assess the real volume of military and dual use goods and technologies export and to develop fintech instruments and mechanisms baltic journal of economic studies 84 vol. 6, no. 5, 2020 for its control. in order to achieve this goal, we need to analyze actual data on military and dual use goods and technologies export, to identify and evaluate alternative indicators of international transfers of such goods that bypass customs, and to find or develop reference points for the government to control export transactions involving military and dual use goods and technologies. method used in this research is to extrapolate data received from the customs regarding methods and scopes of customs and export control evasion, as well as relevant information from other government authorities, on military and dual use goods and technologies export data to assess actual volume of export transactions involving these goods and technologies. literature review below provides analysis of available theoretical framework and reviews studies of the subject by well-known experts. the method section builds on this theoretical background to outline the research methodology used to derive the results of the study. these results are analyzed in the discussion section together with apparent trends and points of influence available to government authorities; the results are further outlined in the conclusions section. 2. literature review as it has been already mentioned in the introduction, export control of dual use and military goods and technologies is not a novel challenge, which makes it neither less complex nor better regulated or explored. the principal difficulty lies in the practical dimension, since essential commodity descriptions making it a dual use or military good are information of technical nature, thus, any inquiry into economic or financial aspects here would be futile. dual use and military services and technologies make situation even more complicated: in case of academic research resulting in a new technology or in respect of a service, a clear distinction can be made based on their military application, however, dual use technologies and services, being intangible, are practically untraceable. nevertheless, academic research in the area of economy or finance, covering the international trade sector in question, exist and generally use corpus of terminology and specific concepts pertaining to national security (and economic security as one of its components) as apply to exports and imports of dual use or military goods and technologies. specifically, according to s. mochernyi (2000), export control is defined as a system of administrative, legal and economic arrangements made by the state to prohibit, restrict or control export of commodities. at the same time, researchers s. galaka, o. gryshutkin, g. perepelytsia and o. siver (2012) believe that “export control is an aggregate of international laws, contractual and political obligations and measures to control international transfers and use of military goods, dual use goods and other goods “sensitive” from security, proliferation or terrorism perspective. the goal of such measures is to mitigate risk of use of military power, proliferation of weapons of mass destruction or their delivery means and to reduce risk of use of “sensitive” goods for terrorist purposes.” o. fradynsky (2013) defines “state export control” as “…a set of measures to control international transfers of goods or their use by legal entities or individuals, implemented by a specially designated executive authority for state export control or other government authorities to protect national security interests and to comply with international obligations of ukraine…”. furthermore, state export control pursuant to the law of ukraine (2003) is “…a set of measures to control international transfers of goods, their use by legal entities or individuals, applied by a central executive authority responsible for implementation of the government policy in the state export control and by other government authorities to protect national security interests and to comply with international obligations of ukraine…”. state export control methods include: – commodity identification that involves matching specific goods intended for international transfer against commodity descriptions on the lists of commodities subject to state export control; – licensing or approval of international commodity transfers or negotiations for such transfers; – customs control and customs clearance of goods in accordance with applicable law; – application of sanctions against business entities who are in conflict with the transfer procedure prescribed by export control laws. i. anokhin and v. davydovskyy (2015), researchers working on certain aspects of the ukrainian export control system structure, have developed a general theory of the export control system structure in ukraine and applied this theory to assess effectiveness of the export control system in controlling export of nuclear material, equipment and technologies from ukraine. at the same time, review of existing sources shows that economic and, particularly, financial aspects of export control over dual use or military goods and technologies remain largely unexplored. this results from a number of factors including indirect sources of information on dual use goods exports, major time gap before disclosure of consolidated data on dual use and military goods and technologies trade operations, lack of extended information on dual use or military technology trade per se, etc. we have performed an economic and financial analysis of this sector on the basis of available indirect data and alternative indicators, that could be extrapolated on dual use and military goods and technologies export transactions, in order to identify points of financial impact by the government. baltic journal of economic studies 85 vol. 6, no. 5, 2020 3. analysis of exports of military and dual use goods and technologies for the purpose of further analysis, the subject matter of our study will be divided into subcategories to include “military goods,” “military technologies,” “dual use goods” and “dual use technologies.” based on information available on export transactions closed between 2013 and 2018, no military technologies have been traded in ukraine. this could signify both low interest of international partners to novel ukrainian military technologies and sufficient level of national security mitigating risk of technology leak. on the other hand, sales of military goods occur on a continuous basis, with new contracts signed every year. according to the state service for export control of ukraine (ssecu) and stockholm international peace research institute (sipri), ukraine is a large exporter of military goods, although 2013-2018 saw a reduction in the scope and value of export transactions from 674 million usd in 2013 to 91 million usd in 2018. as for illegal circulation of military goods in ukraine, the market of weapons, ammunitions and military explosives was between 120 million and 160 million usd in 2018 and surged more than threefold in 2019, which is evidenced by the growth in illegal weapons seizures from 5 thousand units in 2018 to 16 thousand in 2019, according to o. klymchuk (may 2020). the alternative analysis below, based on the state military expenditure, military goods export amount and the size of the shadow market of military goods, will be used to support the above results. according to the data of the state statistics service of ukraine and the state treasury of ukraine concerning state budget expenditure and of sipri concerning official exports of military goods, given in table 1 below, the military expenditure has been growing continuously since 2014 to reach 3.4% of the ukrainian gdp in 2019, making 5.1 billion usd in absolute terms; at the same time, export of military goods has seen continuous decline since 2014. the growing expenditure to provide ukraine’s armed forces with required military goods would seem natural considering ongoing hostilities within the special operations zone in eastern ukraine. however, this hypothesis is not backed by the published reports on new armament deliveries, since no new main combat vehicles (including state-of-the-art oplot battle tanks) were supplied to the armed forces during 2013-2018, and since novel weaponry developed by the local military industry remains too expensive for the ukrainian military. instead, the armed forces receive modernized but still obsolete bulat battle tanks – the upgraded t-64s, according to d. popovych (november, 2019). the diminishing scope of official military goods exports, against the backdrop of growing production of these goods with the substantially lower growth rate of their domestic consumption, signifies the presence of a domestic shadow market of military goods. as a result of the embargo against russia – formerly a strategic importer of ukrainian military goods – active since 2014 (ssecu, 2018), military goods export rates dropped by 45%. this drop was mitigated in subsequent years owing to new markets allowing to earn 41% back. similarly, in absence of new restrictions and given doubled government allocations to the military sector one could have expected an increasing amount of military goods export due to more product offerings and higher science-intensity of these offerings. the moderate growth model below, based on the military sector funding at the rate of 3.1-3.3% of the gdp, shows that the pre-war military goods exports were supposed to recover in 2018 and reach 780-820 million usd at 2019. on the other hand, a chain growth model below provides an alternative estimate of the military goods export in 2019 at the level of 1.1 billion usd. considering that ukraine has still territories out of control of official government, where active hostilities are in progress, the former of the two methods seems more realistic, however, even in its case the real export of military goods is only 15% of the expected level. obviously, the gap unaccounted for indicates the size of the domestic black market and gray exports. the estimated scope of the black market in 2019 was, according to the indirect ministry of interior data, in excess of 360 million usd; thus, the estimated gray export amount exceeds 370 million usd. in the 2020-2021 projection, the moderate growth model shows 980 million usd for 2020 and 1,120 million usd for 2021 and the chain growth model, respectively, 1,580 million usd for 2020 and 1,720 million usd for 2021, however, confidence level of these projections is no more than 10%, therefore it was decided to wait until actual 2019-2020 indicators become available before populating the projection model. the next subcategory is dual use technologies. we will agree with g. androshchuk (2018) in that analysis of patents registered in ukraine is the most effective way table 1 distribution of military expenditures in gdp and value of military goods export in ukraine in 2013-2019 year 2013 2014 2015 2016 2017 2018 2019 military expenditure as a gdp share 1.6% 2.2% 3.3% 3.2% 2.9% 3.2% 3.4% military goods export, mln usd 674 622 343 487 306 195 91 baltic journal of economic studies 86 vol. 6, no. 5, 2020 to investigate the size of exports of dual use technologies developed in ukraine. in this case the most effective way to evaluate the financial side of the exports is from the perspective of investments and international cash flows targeted at companies or individuals who are involved in research activities. as could be seen, both the number of invention and useful model registration applications and the number of patents issued have been sliding down during 2015-2017. at the same time, the bulk of the applications and patents were associated with individuals (from 65% to 80%, depending on the class and the year), which means that most companies involved in r&d register patents in the names of individuals – in this case a technology may be sold under a nonexclusive license or a license with partial transfer of rights in the framework of a works or services contract. the other reason is that an individual submission is y = -2,6481x3 + 65,948x2 354,26x + 992,33 r² = 0,7019 0 100 200 300 400 500 600 700 800 900 2013 2014 2015 2016 2017 2018 2019 figure 1. ukrainian military goods export moderate growth model for 2013-2019, million usd y = 51,964x2 337,41x + 989,8 r² = 0,8334 0 200 400 600 800 1000 1200 1400 2013 2014 2015 2016 2017 2018 2019 figure 2. ukrainian military goods export chain growth model for 2013-2019, million usd table 2 patent applications submitted and patents obtained for inventions and utility models in classes f41 “weapons” and f42 “ammunitions; explosives” 2019 2018 2017 2016 2015 2014 2013 submissions in class f41 69 25 19 52 86 84 66 submissions in class f42 38 32 13 38 39 32 39 patents issued in class f41 14 28 29 71 103 68 66 patents issued in class f42 9 27 25 41 25 42 36 baltic journal of economic studies 87 vol. 6, no. 5, 2020 substantially cheaper than a corporate submission (40 uah or more for individuals versus 600 uah or more for legal entities). furthermore, although the above categories cover military technologies no government control is applied to registration of relevant inventions and useful models by individuals, as opposed to legal entities. on the other hand, there is no control whatsoever of investments in r&d companies who develop military technologies in exchange for research results without ukrainian patent registration, as it is hard to determine in advance whether the prospective technology would qualif y as a military technology. besides, a technology could be easily requalified as a dual use or even non-military technology in the course of research. examples could be found even in the uav remote control technology domain. the ministry of defense of ukraine organized several tenders for the development of both uavs and their control software in the course of 2018-2019. for a bidder technology not selected by the ministry of defense tender commission, it takes a minimum effort to be requalified as a nonmilitary technology: it can be easily adapted for use on civilian quadrotors carrying cameras and sensors. such a technology may be exported in an uncontrolled manner, even though original development was specifically intended for military use. the analysis of direct investments into ukraine shows that academic research and development accounted for 3.2% of the total amount of foreign investments in 2018 (reaching 93.2 million usd) (shtepenko, zaburayeva, 2019). however, as we add r&d funded under innovative programs, this number will increase to 6.8% (according to k . markevych, 2020), or to 198.1 million usd in absolute terms. based on state budget expenditure statistics, the military sector accounted for 15.6% of the ukrainian economy in 2018, whereas the 2018 funding of research and development of new weapons and materiel was 9% of the total defense expenditure in ukraine, which on average was 30% higher than the average percentage in any other economy sector in the same year. extrapolation of this data shows that 15.6% to 18.2% of foreign investments in the ukrainian science was targeted at military or dual use technology research, making 31 to 36 million usd in absolute terms. on the other hand, it is a challenging task to track exports of such technologies: they include back transfers of research results not patented in ukraine, making identification of the real size of export of military of dual use related technologies impracticable. 4. discussion based on research of novel financing technologies and the status of the military and dual use goods and technologies export control we would like to offer a specialized module for the national payment system to track cash flows related to military and dual use technologies. the concept of operation of this financial module is based on the fact that domestic trade operations involving military and dual use goods generate cash flows that will be marked by the module to identify the specific cash flow as being related to military or dual use goods within the payment system. similar markers should be applied to bank accounts of entities who produce goods or provide services having military or dual use and of their business partners (buyers) and all other participants in the sales chain. this financial marker should build on the blockchain technology and should contain either information on parties of all previous military or dual use goods transfers or active links to associated elements of the same military or dual use goods transfer chain allowing instantaneous access to all necessary information. service of such a blockchain network may be imposed on the banks, since such markers are private banking information not disclosed to clients but made available to government controlling authorities (national bank, state fiscal service and ssecu). the bank will apply the marker of a military or dual use good manufacturer based on a standard activity classification code referring to military or dual use goods production and on the ssecu database of export authorizations and licenses issued in respect of military or dual use goods. such financial markers, on the one hand, will make it easy to trace cases where the “military or dual use” category is deliberately removed through multiple purchases and sales or where price of such goods is being manipulated (understated or overstated, depending on expected tax targets). a similar approach is suggested for military or dual use technology exports. special financial markers are to be applied to investments into r&d companies in the areas related to military or dual use technologies. such financial markers will be useful in establishing the real size of investments in the ukrainian scientific sector and in identifying mechanisms by which official export contracts are evaded as military or dual use technologies are transferred out of ukraine. same financial markers should be applied to cash flows generated by scientific hubs and other entities (specifically venture companies) whose registered standard activity classification codes are 84.22 “activity in the defense sector” or class 72 “research and development,” or who act as intermediaries in transfers of scientific technologies. this would substantially facilitate state control over circulation of military and dual use technologies and support credible assessment of research expenditure (and, accordingly, estimated value of a technology) and identification of investment mechanisms used to minimize tax. baltic journal of economic studies 88 vol. 6, no. 5, 2020 5. conclusions we can generally conclude from our research that in the past 5 years ukraine saw a substantial increase in both the government military expenses (a nearly threefold growth) and expenditure for research related to military and dual use technologies (grown almost five times). at the same time, the cost dimension of military and dual use technology exports in the same period has seen substantial decline (from 600 million usd to 90 million usd), although domestic consumption of military and dual use goods has grown only by 70%. this indicates growth in the gray exports of military and dual use goods, the expansion of the domestic black market of military and dual use goods, and the increase of the concealed export of military and dual use technologies. our research suggests that the total amount of the gray market of military and dual use goods exceeds 400 million usd. in order to make this segment transparent we suggest applying fintech tools – blockchain markers – to record information on all counterparts and conditionally affiliated companies related to cash flows from sales of military or dual use goods. similar financial markers are suggested in respect of investments directed into companies or other entities involved in research and development in the area of military or dual use technologies. this approach will enable tracing all stages of military and dual use good and technology transfers and detection of illicit activity related to military and dual use goods and technologies, such as their reclassification as being non-military or non-dual use or manipulations with military or dual use goods prices. references: androshchuk, g. 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(may 2020). illegal weapons in ukraine: numbers and ways of recovery. deutsche welle. available at: https://www.dw.com/uk/ (accessed: 20.07.2020). markevych, k. (2020). who invests in ukraine and how. razumkov center. available at: http://razumkov.org.ua/ statti/khto-i-iak-investuie-v-ukrainu (accessed: 20.07.2020). mochernyi, s. (2000). economic encyclopedia. volume 1. kyiv: academia publishing center. popovych, d. (november 2019). tanks for zelensky: questions risen by president’s visit of kharkov. ukrrudprom. available at: http://www.ukrrudprom.com/digest/tanki_zelenskogo_kakie_voprosi_vizval_ vizit_prezidenta_v_harkov.html (accessed: 20.07.2020). fradinsky, o. (2013). state export control. customs encyclopedia. in two volumes. volume 1. khmelnytsky: pe a. melnyk. shtepenko, k., & zaburayeva, o. (2019). analysis of direct foreign investments in ukrainian economy and need for their attraction. effective economy, vol. 5. doi: 10.32702/2307-2105-2019.5.34 michel, q. (2017). regional rules and policies. legally and politically binding acts: the european union. introduction to international strategic trade control regimes. european studies unit. available at: http://www.esu.ulg.ac.be/49/pdf/iistcr/3_part.pdf (accessed: 19.07.2020). revenko, n. (2016). eternal dilemma: "nonproliferation – competitiveness". 1540 compasss, іssue 10. available at: http://cits.uga.edu/1540compass (accessed: 20.07.2020). ham, p. van (2014). transnational governance and democratic legitimacy, the case of wmd proliferation. eu non proliferation consortium. available at: https://www.nonproliferation.eu/transnational-governance-anddemocratic-legitimacy-the-case-of-wmd-proliferation/ (accessed: 20.07.2020). baltic journal of economic studies 297 vol. 4, no. 5, 2018 corresponding author: 1 odesa national academy of food technologies, ukraine. e-mail: sedikova@rambler.ru 2 odesa national academy of food technologies, ukraine. e-mail: kaf.ml332@gmail.com 3 zaporizhzhia state engineering academy, ukraine. e-mail: lvbojko@yahoo.com doi: https://doi.org/10.30525/2256-0742/2018-4-5-297-304 food security of the black sea lit toral and features of its development iryna sedikova1, ihor savenko2, olena boiko3 abstract. a critical review of the definition of “food security” (fs) in the context of the views of economists was conducted. the main indicators were analysed that make it possible to determine the actual food security level of the country and the region. justified the necessity of establishing food security as a priority goal of state policy. the food security of ukraine was considered as a derivative of anthropogenic loading on the natural environment. the aim of the article. the purpose of this study is a critical review of scientific works on the problems of assessing the food security level, calculation of food security indicators with the established rational norms of food consumption in order to analyse the existing food security system of the ukrainian black sea region and the peculiarities of its development. the subject of the study is theoretical bases, methodological approaches and practical recommendations for the definition of the existing system of indicators of food security and their thresholds for foreign values. methodology. the methodological and theoretical foundations of the research are the scientific positions of economic theory, agro-food complex, planning and forecasting, scientific publications of domestic and foreign scientists in various spheres of economic science. in order to achieve the conceptual integrity of the work, general scientific and special methods were used: analysis and synthesis – for the comprehensive study of food safety processes; systematization – to identify the conditions, factors of providing food security; statistical – for generalization, systematization, and revealing of development tendencies of phenomena and processes connected with food safety of the region; graphic – for the visual display of the regularities of the change of food security indicators. results. the conducted research indicates an improvement of the status of food safety indicators. the negative aspect is the ineffective state regulation of foreign trade, the conditions for the effective development of the food market are not created, and there are no favourable conditions for increasing the production volumes of the main agricultural products types. value/originality. the methodology for determining the indicators for assessing the state of food security, which exist at present, requires new approaches and improvements. the conducted research allowed the authors to combine indicators into groups. the research has shown that for the sake of a comprehensive, complete analysis of the state of food security, it is necessary to take into account the indicators: socio-economic, which take into account such components as level and quality of life, solvency of the population, demographic factor; macroeconomic, such as gross aggregate product, gross domestic product, personal income, because the problem is systemic and related to the development of the country and its individual regions. from the author’s point of view, from the strategic perspective, ukraine should make the transition to the food safety indicators proposed by the committee on world food security (cfs). this will allow an assessment of the real state of food security, which was formed in the regions and in the country as a whole, and urgently take appropriate action to improve it. key words: food security, indicators, consumption, food, region. jel classification: f63, o11, o12 1. introduction in the conditions of a rapidly, alternating world, development brings us not only certain advantages but also new obstacles. mankind has reached such an extent that it is impossible to ignore the threats that humanity faces, and the problem of guaranteeing safe development at this stage becomes the main one. the solution of painful socio-economic problems is impossible without a high level of food security. it is important to consider it as a system that consists baltic journal of economic studies 298 vol. 4, no. 5, 2018 of separate subsystems: the world, national, regional, households, and the individual. the importance of this problem is determined by the fact that the human need for food belongs to the first group, and the degree of gratification is insufficient. since food production and the environment are interrelated, farming using outdated, non-ecological methods will lead to dangerous processes that affect the quantity and quality of natural resources, which directly affect food production, and, as a consequence, food security (adamisin, pukala, chovancova et. al., 2016). food security is a strategic national priority with the active participation of the state, a global problem both for the country as a whole and for individual regions. the international practice of satisfying food needs justifies its sufficient level for all citizens of the world in the amount of 80% or more of the food they consume, which must be carried out by their in-house agrarian sector, which ultimately raises the indicator of the quality of life of the population and, accordingly, its replication. fao notes that to provide humanity, the number of which is projected 9 billion people by 2050, (a 97% increase in population occurs in india, china, pakistan, nigeria, bangladesh, indonesia), agricultural production will need to increase by 70% (world summit on food security, 2009). at the same time, measures should be taken which provide all people with physical, socio-economic access to a sufficient amount of safe food products, focusing on the security of full access for women and children. in 2011, ukraine adopted the law “on food security”, which states that “food security is a socio-economic and environmental situation, in which all social and demographic groups of the population are consistently and guaranteedly provided with safe and high-quality food in the required quantity and assortment required and sufficient for the physical and social development of the individual, ensuring the health of the population of ukraine” (law of ukraine “on food safety of ukraine”, 2011). at the world food summit, the following definition was given: “food security means when a person constantly has physical, social, and economic access to sufficient, safe and healthy foods that provide their needs and food preferences for an active and healthy lifestyle” (world summit on food security, 2009). the position of food security is achieved if sufficient food is provided for the entire population under normal conditions and the minimum necessary under emergency circumstances. 2. analysis of recent research and publications the scientific works of many economists are devoted to state determination question of food security and key indicators, so a. berezin (2002) considers the features of agricultural production, its importance for the formation of food resource flows, proposals for the formation of a national food market v. boyko (2011) consider the issues of the legal mechanism for regulating relations on food security, explore gaps in the current agricultural legislation, pay attention to the provisions on the legislative consolidation of relations on food security as a single legal institution, a. goychuk (2004) examines the theoretical basis for the formation of the “food security” view, examines the growing food risk in the world, analyses current trends and aspects of food security, p. sabluk (2009) reviews the concept of national food security, analyses political and innovative factors, social and mental-psychological factors of the degree of food security, m. khorunzhiy (2003) analyses the causes and factors especially issues and patterns, the issue of food security as a component of international economic security explores the role in the economic system and its place in this structure, a. ulianchenko (2016) substantiates the conceptual aspects of creating a stable food security system of ukraine based on the sustainable formation of the agro-industrial complex, explores the formation of a balanced food market, a. skidan (2006) justifies the need to establish food security as a strategic goal of regional agricultural policy, explores the conceptual foundations of the process of modelling and defining food safety indicators at the regional level, i. irtischeva (2009) considers the activity, based on continuous innovation as the main condition for the socio-economic development, the importance of innovation and the challenges of innovation, focuses on innovation regional agro-food market and development of the region. but many problems to determine the degree of food safety remain important and require more detailed consideration and study. the achievement of sustainable development of the region and ensuring its food security without a realistic assessment of the current situation is extremely difficult. the assessment process itself cannot ensure food security but, in fact, it should encourage regional authorities to plan and implement the necessary measures and help them to take preventive and informed decisions to achieve the aim. 3. food security of ukraine is a derivative of the anthropogenic load on the environment the fundamental principles of the food security concept of fao include: “food security is not food selfsufficiency; a country must produce a sufficient amount of products for its own needs, if it has certain advantages; a country must be able to import the necessary volume and meet the needs of its citizens for it; governments must provide physical and economic access to safe food” (world summit on food security, 2009). fao has established a system of indicators to determine the level of food security in four areas: the availability of food-stuffs; food availability; food security stability; food consumption. baltic journal of economic studies 299 vol. 4, no. 5, 2018 approximately in the same directions, forecasting the level of food security in ukraine is built. however, it should be noted that some of the specific indicators used by fao are not included in the forecasting system in ukraine. so, to characterize food security, fao uses indicators such as the famine index (calculated as the arithmetic average of the proportion of the population that is undernourished, the proportion of children under 5 years of age with underweight and children who die before reaching the age of five) production in terms of the cost per capita, an indicator of import dependence of the country, the proportion of children with growth retardation, anemia, lack of vitamin a, iodine, and an increase in the proportion among the adult population, people who are overweight. table 1 shows the place of ukraine and the countries of the world, calculated on the global food security index. table 1 place of ukraine on the global food security index place country position state global food security index (points) 1 usa 89,3 2 austria 88,4 3 netherlands 87,6 4 norway 85,4 5 singapore 82,1 6 germany 81,7 france 80,9 great britain 79,8 … … 23 czech republic 78,5 … … … 26 poland 77,1 … 29 hungary 69,5 … 47 belarus 60,8 … 52 ukraine 56,4 … … … 57 kazakhstan 53,3 … … … 62 azerbaijan 50,3 source: systematized by the authors (data from the food and agriculture organization of the united nations, 2017) the low amount of government allocations for scientific research in the field of agriculture and the level of gross domestic product per capita, which is twice lower than the world average, is the main determined problem. own resources in sufficient quantity and quality, optimal volume of import operations, level, pace of development, stability of functioning of economic sectors of the country are the key to ensuring food security (bublyk, koval, redkva, 2017). economists have identified two central concepts of “food self-sufficiency” and “food independence”, as well as different vectors and methods for achieving food security. to the first provision is attributed that in order to achieve the desired level it is necessary to provide for themselves fully with all groups of food products that ensure proper reproduction of the population. note that the state ensures its independence from food imports, regardless of the natural conditions that exist, the efficiency of the division of labour within agricultural production. the second view, which the authors share, notes the change in the main paradigm, which should occur due to balanced export-import operations in different commodity groups, can guarantee the public free access not only to their in-house but also to imported food. globalization processes and the increasing influence of transnational companies are shown by countries that fully provide themselves with all the necessary foodstuffs. in general, the degree of their involvement in the exchange of goods is quite high. today, this is a progressive phenomenon in international markets, since, with the right specialization of agricultural production, countries must significantly focus on the most highly efficient sectors and specialize there taking into account climatic-related and resource-related conditions. within this framework, efficiently usage of resources is important, not the requirement of the country’s compulsory self-sustainment with food to form a system. with rational international cooperation, “subsistence farming” is not further the key point at the country level, but the degree of consistency with the system of international division of labour on the most favourable conditions for each state. only in this case, it is possible to ensure the final consumption of the population with the entire necessary “food basket” with the help of imports. scientists, economists acknowledge that the urgent situation of ukraine’s food security does not correspond to the level of a developed country. the main problems of this state are low incomes of the population (18.8 hryvnia, or 60 eurocents – this is the average salary per hour of work in ukraine. according to this indicator, the state occupies the last line in europe) and the rapid increase in food prices (according to the state statistics service, the greatest price increase occurred at eggs – by 53.8%, sugar (+ 10.5%), vegetables (+11, 2%) and fruits (+ 0.3%). it should be noted that the decline in agricultural production in the 90s of the twentieth century took a spontaneous character: the overall figure has decreased over the last decade by 38%, crop production – by 31%, and livestock – by 49%. but in ukraine over the past few years, there have been promising developments in the agro-industrial complex of ukraine, namely, the stable provision of the domestic market with food products, the country has entered the top three leaders in increasing the export potential of grain products. baltic journal of economic studies 300 vol. 4, no. 5, 2018 4. guidance of the economic development of the ukrainian black sea littoral in conditions of food security the economic activity of odesa region is mainly focused on food production. figure 1 shows the main activities in the processing industry according to 2017 statistics. 30 20 10 manufacture of food, beverages and tobacco products production of chemicals and chemical products mechanical engineering figure 1. main activities in the processing industry, 2017 source: systematized by the authors (the main department of statistics in odesa oblast, 2017) in the “strategy of economic and social development of odesa region to the year 2020” there are the following: “... in the food industry, the basic enterprises are concentrated in the oil and fat, meat and dairy, canning and wine-making industries. the main part of the production output is provided by oil and fat enterprises (delta wilmar cis llc, cjsc adm ilyichevsk, bioil universal ukraine llc), canning (aquafrost llc, cjsc po odesa cannery, jv vitmark-ukraine, odesa baby food cannery jsc), wine-making industries (cjsc “odesa brandy factory”, cjsc “odesa champagne wine factory”, odesavinprom cjsc, ptc shabo llc, ovidiopolsky npp niva llc) ”(the main department of statistics in odesa oblast, 2017). “in 2015, there were 6144 agricultural enterprises in the region, among them: 5153 farms, 502 household companies, 311 private enterprises, 112 cooperatives. most of the farms are registered on the territory of tatarbunary (684 units), bolhrad (537 units) and izmail (513 units) districts” (the main department of statistics in odesa oblast, 2017). the leading branches of crop production are grain farming, sunflower and rapeseed cultivation, vegetable growing, viticulture and horticulture. 55% of ukrainian grapes grow in the region. among the livestock industries, the most developed are cattle breeding, pig breeding, poultry farming, sheep breeding. the amount of agricultural products in all categories of farms in recent years has generally tended to increase” (the main department of statistics in odesa oblast, 2017). according to the volume of agricultural production, in particular, grain crops, the leading ones are tarutyne, bilhorod-dnistrovskyi, artsyz, sarata, bolhrad and tatarbunary districts. the leaders in the cultivation of vegetables, fruits and berries are biliaivka district, the most part of all grapes is grown in bilhorod-dnistrovskyi, bolhrad, tarutyne districts of odesa region. the overwhelming volume of livestock products in odesa region is produced by local households. the largest volumes of livestock and poultry sold for slaughter were distinguished by lymanskyi, artsyz and berezivka districts; milk – by berezivka, liubashivka, shyriaieve; eggs – by kiliia, bilhorod-dnistrovskyi, izmail districts of odesa region. “according to the area of farmland, which is in the use of agricultural enterprises and population, odesa region ranks first among other regions. the area under crops increased from 1,772.8 thousand hectares in 2010 to 1,850.0 thousand hectares nowadays. at the same time, the share of acreage under grain and leguminous crops varies at the level of 65%, and under sunflower – 20%” (the main department of statistics in odesa oblast, 2017). in the passport of odesa region, 2017 (the passport of the odesa region 2017), noted that at the end of 2017 in the odesa region grain crops were collected on an area of 1,188.1 thousand hectares. the gross grain harvest amounts to 4,239.6 thousand tons (96.3% of the 2016 level), the yield is 35.7 c/ha, including wheat collected in 2278.8 thousand tons (107.9%), barley 1266.3 thousand tons (84.6%), corn 495.0 thousand tons (81.2%). sunflower harvested on an area of 452.9 thousand hectares. the gross yield is 901.8 thousand tons (89.8% by the year 2016 level), the yield is 19.9 dt/ha. rape is collected on an area of 110.0 thousand hectares. the gross yield is 258.7 thousand tons (340.8%), the yield is 23.5 c/ ha. vegetables are collected in an area of 22.1 thousand hectares. the gross yield is 287.7 thousand tons (82.5%), the yield is 130.4 c/ha. potatoes are harvested in an area of 35.3 thousand hectares. the gross yield is 393.0 thousand tons (72.6%), the yield is 111.5 c/ha (passport of the odesa region, 2017). the formation of strategic directions of achievement a high level of food security of the country has systemically integrated nature, which depends on the macro-, microeconomic indicators of the development of the state and regions. in the research that is being studied, the basic document is the law of ukraine “on food security”. the law of ukraine “on food security” (law of ukraine “on food safety of ukraine”, 2011) noted that “indicators of food security are a characteristic of the level and pattern of consumption of basic foodstuffs by the population, their economic affordability, the capacity of the domestic food market, sufficiency of state food resources and food independence” (law of ukraine “on food safety of ukraine”, 2011). in our opinion, indicators are vectors of development that indicate the border of adverse impacts, signalling to market actors about possible negative segments, a decrease in the global level of food security. baltic journal of economic studies 301 vol. 4, no. 5, 2018 4.1. daily energy value of the human dietary the analysis revealed the following: in 2016, the average daily energy value of consumed products by residents of odesa region was 2283 kcal, which is 10 percent lower than the recommended norm (3000 kcal), which is 1.7 percent less than it was in 2015. the dynamics of the average daily energy value of consumed products by residents of odesa region per person (state statistics of ukraine, 2016) is shown in figure 2. these statistics show that fruits, vegetables, berries, cereals, herbs, nuts, juices make up the bulk of calorie intake and only 30% of the average daily ration is replenished by canned meat, meat-vegetable and fish, cheese, milk and dairy products, children’s products food, margarine, fats, sausages, meat concentrates, it is twice lower than the accepted rate of consumption (56%). further, in table 2, an indicator for ensuring the human dietary of the main types of products is calculated. it is acceptable when the ratio of the real and the established norm is 1. the analysis allows to state that the balance of consumption of basic foodstuffs in the odesa region during 2000–2016, in all groups, is lower than the standards established by the ministry of health of ukraine. the unsatisfactory situation has developed with the consumption of such products as meat, meat products, milk, dairy products, fruits, berries and grapes. it should be emphasized that the actual consumption rate of “bread products” is more than rational, which is the result of unbalanced nutrition of the population, which tries to replenish personal energy needs through cheaper food products. this is a consequence of insufficient agricultural production, low solvency of the population of certain social groups. 0 500 1000 1500 2000 2500 3000 3500 2000 2005 2010 2012 2013 2013 2014 2015 2016 calorisity daily average diet recommended standards of the ministry of health figure 2. dynamics of average daily consumption of food in odesa region per person source: systematized by the authors (state service of statistics of ukraine, 2016) the sufficiency of grain stocks in public resources. the law of ukraine “on state support of agriculture of ukraine” stipulates that “...the state intervention fund must be formed in the amount of not less than 20 percent of domestic consumption” (article 9). in 2016–2017 in ukraine, a record grain har vest of 66 million tons was har vested, which is twice as more than the domestic needs, in particular, the production of wheat is 26 million tons against 9,400,000 tons (2.77 times more than needs). the optimal quantity of grain reser ves in the state reser ve is calculated by the ratio of the volumes of food grains in the state reser ve and the volumes of domestic consumption of bread and bread products converted in grain: opt z cvc z rr= * %100 (1) where optz is the optimal level of food grains in the reserve fund; zrr – the amount of grain in reserve; cvc – the volume of domestic consumption of bread and bread products converted in grain; the critical level of the indicator is its 17% level. the annual demand of odesa region for food grains is 72 thousand tons, including 38.3 thousand tons for the rural population, for baking enterprises of all forms of ownership corresponds to the limit (60 days) and is 6.6 thousand tons. the economic affordability of food is the share of all food expenses in the total result of household expenditures (the critical level of this indicator is 60%). total household spending in odesa region amounted to 8852.2 uah/month (main department of statistics in odesa region, 2017). baltic journal of economic studies 302 vol. 4, no. 5, 2018 table 2 calculation of the indicator of the adequacy of food consumption of the population in odesa region for 2000-2016 name product r ec om m en de d ra te o f m oh , k g 2010 2012 2013 2014 2015 2016 ac tu al ra te su ffi ci en cy in di ca to r ac tu al ra te su ffi ci en cy in di ca to r ac tu al ra te su ffi ci en cy in di ca to r ac tu al ra te su ffi ci en cy in di ca to r ac tu al ra te su ffi ci en cy in di ca to r ac tu al ra te su ffi ci en cy in di ca to r meat and meat products 83 45,0 0,535 46,77 0,555 48,11 0,575 48,90 0,587 45,99 0,548 47,19 0,565 milk and dairy products 380 184,59 0,487 185,35 0,487 192 0,505 205,49 0,537 194,5 0,509 188 0,487 eggs 290 282 0,968 290 0,99 292 1,025 293 1,026 279 0,957 272 0,939 bread products 101 112 1,122 113,11 1,115 108,3 1,057 108,3 1,058 103,5 1,028 103,5 1,029 potatoes 124 101,5 0,814 102,9 0,828 101,9 0,819 115,1 0,925 109 0,878 111 0,901 vegetables and gourds food crops 161 147,6 0,915 171,3 1,058 166,8 1,035 173 1,067 169,5 1,047 161,1 0,99 fruits, berries and grapes 90 58,2 0,647 60,1 0,669 59,9 0,668 58 0,635 60,2 0,669 55 0,609 fish and fish products 20 18,6 0,928 17,7 0,888 17,7 0,888 15,7 0,785 12 0,589 13 0,658 sugar 38 36,1 0,948 37,2 0,978 37,2 0,977 37,2 0,976 37,1 0,978 34,7 0,908 oil 13 15,4 1,178 14,2 1,085 14,1 1,075 14,1 1,078 14,1 1,078 13,2 1,017 calorie of an average daily dietary 3000 2839 0,947 2872 0,958 2843 0,948 2888 0,958 2801 0,924 2723 0,908 source: calculated by the authors (the main department of statistics in odesa oblast, 2016) table 3 the balance of production and usage of grain, thousand tons the balance of grain and leguminous crops in agricultural enterprises in 2016 the balance of grain processing products in agricultural enterprises in 2016 receipt usage receipt usage st oc ks a t t he be gi nn in g of th e ye ar pr od uc ed pu rc ha se d an d ot he r in co m e fo r s ow in g to fe ed for processing im pl em en te d in a ll di re ct io ns st or ag e lo ss re se rv es b y th e en d of y ea r st oc ks a t t he be gi nn in g of th e ye ar pr oc es si ng a nd o th er in co m e to fe ed im pl em en te d in a ll di re ct io ns re se rv es b y th e en d of y ea r fo r fl ou r, ce re al s, et c. fo r c om po un d fe ed st uff ukraine 15288,7 52022,2 6849,9 1705,7 1203,5 1029,3 2352,6 47348,1 305,3 20216,3 72,6 849,5 618,1 210,3 93,7 odesa region 651,9 3319,8 54,1 164,5 73,4 38,3 32,8 2856,2 11,0 849,6 2,8 38,5 21,6 12,4 7,3 source: calculated by the authors (state service of statistics of ukraine, 2017) 25 14 13 meat and meat products milk and dairy products bread and bakery products figure 3. the general structure of the cost of food source: systematized by the authors (state service of statistics of ukraine, 2017) household spending on food is 4892.7 uah/month. the indicator, which is analysed in 2017, was 57 percent. figure 3 shows the overall structure of food expenditure. 4.2. the distribution of the cost of food by social groups in 2017, about twenty percent of households with incomes above the average spent for food 2904.39 uah/month, and twenty percent with lower incomes – 1758.6 uah. the coefficient, which is being investigated, amounted to 1.678 in 2017 and 1.676 in 2016, respectively. the world health organization notes that an able-bodied person should increase consumption of dairy products – by 8%, meat (mainly chicken) – by 20%, fruit – by 61.9%, consumption of confectionery products should be reduced to 1 kg per month. baltic journal of economic studies 303 vol. 4, no. 5, 2018 4.3. the capacity of the domestic market for certain products despite the decrease in population, the capacity of the domestic market for all food groups increased. the research proved that there is an increase in demand for those food groups whose consumption lags behind the optimal norms (meat, dairy, and fish products). 4.4. food independence for certain products providing consumers with a sufficient amount of the main food groups, taking into account their level of solvency, is carried out by producing domestic products. in 2017, imports from european countries amounted $ 413,800,000 (28.2% of the total imports of goods in the region), from other countries $105,210,000, or 71.8% (in 2016 – $350.7 million or 28.1% and $896.3 million or 71.9%, respectively). table 4 commodity structure of import receipts of some foodstuff groups, 2017 product group import volume, mln. $ increase, % plants products 147,6 14,0 fats and oils of animal/vegetable origin 126,9 10,7 fish and fish products 295,7 7 vegetable oil of all kinds 74,36 22 source: systematized by the authors (state service of statistics of ukraine, 2017) the share of fish and fish products imports in the dietary consumption of the population is 73%. according to the “vegetable oil of all kinds” position, a large share of imports is associated with the import of tropical oils (palm oil 90%), which are not typical for production in ukraine but are used for the production of food and non-food items. domestic demand for sunflower oil ukraine is fully provided by its own production. the largest share of imports in 2017, which is more than 70%, of fruits and berries, were such types of fruits: citrus fruits, bananas, dates, pineapples, mangoes, avocados, and so on. 4.5. density of highways the ease and speed of foodstuff delivery to the population depend on the concentration of roads per unit of area. 27 km of roads per 100 km2 s (square) were accounted in ukraine in 2016, this figure is one of the lowest in europe. odesa region is located on the crossing of five international transport corridors: the seventh and ninth cretan corridors, the transport corridor (europecaucasus-asia), the “the baltic sea – the black sea” corridors and the black sea transport ring. 41,600,000 tons of cargo were transported by 2017, which is 5.4% more than in 2016. in 2017, the odesa commercial sea port exceeded 24,136.6 thousand tons of cargo (95.6% of the 2016 result), including: exports – 17,494 thousand tons (8%), imports – 4346 (+ 19%), transit – 2176 thousand tons (-15%). transshipment of dry cargo – 9516 thousand tons (99%), liquid bulk – 2325 thousand tons (899%), packaged ones – 12,295.38 thousand tons (94.5%). in the structure of cargoes, the main share is: grain – 7650 thousand tons (93.3% in comparison with 2016), containers – 6969 thousand tons (104%), ferrous metals – 5170 thousand tons. 5. conclusions the research indicates an improvement in the status of food security indicators. the negative point is the ineffective state regulation of external trade, the conditions for the effective development of the foodstuff market are not created, there are no favourable conditions for increasing the volume of manufacturing of the main types of agricultural products. a necessary condition is to minimize the deviations of actual consumption volumes towards the normative, increasing the level of effective demand by the population. there are two vectors for achieving food security in ukraine: 1) ensuring the supply of food in amounts that guarantee healthy and nourishing food of the population; 2) as well as the support and protection by the state of domestic producers. it can be stated that the optimal approach to understanding the problems of food security should be based not only on creating bases for own food production in the country, but also on the formation of such a balance of domestic and imported food resources, which will ensure a constant level of social stability in society. methods for determining indicators for assessing the state of food security, which are currently used, require new approaches and improvements. the research allowed the authors to calculate individual indicators of food security in selected regions. the research proved that for a comprehensive, complete analysis of the situation, such indicators should be taken into account as : socio-economic factors that take into account such components as the level and quality of life, the solvency of the population, the demographic factor; macroeconomic, such as gross aggregate product, gross domestic product, personal income, because the problem is systemic in nature and is associated with the development, food and economic security of the country, and indeed its individual regions. from the authors’ point of view, from a strategic perspective, it is advisable for ukraine to make a transition to the system of food security indicators proposed by the committee on food security (cfs). this will allow carrying out an evaluation of the real situation of food security in the country and its regions and urgently taking appropriate actions to improve it. baltic journal of economic studies 304 vol. 4, no. 5, 2018 references: adamisin, p., pukala, r ., chovancova, j., novakova, m., bak, t. (2016). fullfilment of environmental goal of the strategy europe 2020. is it realistic? in sgem 2016, bk 2: political sciences, law, finance, economics and tourism conference proceedings. vol ii. stef92 technology. berezin, o. v. (2002). food safety of ukraine. kiev: vyshha shkola. bojko, v. i., kozak, o. a. (2011). on some aspects of food security and global trends in problem solving. 5 international scientific and practical conference. kiev: nncz «iae». (in ukraine) bublyk, m., koval, v., redkva, o. (2017). analysis impact of the structural competition preconditions for ensuring economic security of the machine building complex. marketing and management of innovations, 4, 229-240. doi: 10.21272/mmi.2017.4-20. gojchuk, o. i. (2004). food safety: zhytomyr: polissya. irtyshheva, i. o. (2009). food safety. economy of agroindustrial complex, 9, 39-43. law of ukraine «on food safety of ukraine». 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(n.d.). ukrseeds.org.ua. retrieved from: http://ukrseeds.org.ua (in ukraine) baltic journal of economic studies 156 vol. 6, no. 4, 2020 corresponding author: 1 mukachevo state university, ukraine. e-mail: stegneym@gmail.com orcid: https://orcid.org/0000-0002-4688-6447 2 uzhhorod national university, ukraine. e-mail: maryna.korol@uzhnu.edu.ua orcid: https://orcid.org/0000-0003-4031-0858 doi: https://doi.org/10.30525/2256-0742/2020-6-4-156-167 analysis of the dynamics of the european banking system marianna stehnei1, maryna korol2 abstract. relevance of research. existence of global financial crises points to the fact that in the world there is no perfect banking system and therefore the efficiency of the banking system requires a detailed study, including major performance indicators. the aim of the study is to summarize and characterize the existing trends of banking system evolution in the european union. methodological basis of the study – is based on the analysis of the study of the dynamics of such indicators as the number of banking institutions, the volume of assets and liabilities, asset quality, as well as the profitability of the banking sector of the european union. a systematic analysis of the quantitative and qualitative composition of the above-mentioned banking indicators, synthesis and generalization were used to generalize and formulate conclusions. scientific results. this article is devoted to the study of the dynamics of the main indicators of the european banking system during the period from 2000 to 2019 inclusive. it is argued that the number of commercial banks has decreased over the last decade, including in the european union. bank branches are no exception, the negative dynamics of the number of which was followed by the global financial crisis of 2008-2009. at the same time, it was found that the volume of bank assets shows a positive trend. regarding the geographical distribution of assets, in 2019 the leading position was taken by france, germany, italy and spain. at the same time, the volumes of liabilities of the financial sector of the european union for the studied period also show a positive trend. the structure of loans is characterized and it is emphasized that the vast majority of loans are issued to non-financial corporations and households, which is an evidence of the business orientation of banks to provide loans to the real sector of the economy. it has been established that one of the key problems facing european banks is profitability, which today still could be on a better level than in 2007, the year of the financial surge. this situation distances european banks from competitors in the united states, which have shown positive dynamics of their profits. however, it is encouraging that the quality of assets of the european union banks has significantly improved over the last 4 years. the practical significance of the study is to rate the strengths and weaknesses of the european banking system. significance/originality. the results achieved from an integrated view of the functioning of the banking system of the european union, which will allow the authors to further build a model for verifying the stability of the banking system. key words: banks, european banking system, assets and liabilities of commercial banks, financial sector, distressed loans. jel classіfіcatіon: e51, e59, g21, g34 1. introduction the key to a successful economy in any country is an efficient banking system. after all, it is well-functioning banking systems that are able to mobilize and efficiently allocate resources so that the country’s “blood vessels” function effectively. as hundreds of years ago, today’s bankers seek to expand their activities in all possible aspects, offering both traditional and non-traditional banking services. the growing interest to the financial problems of the european union can be argued by the fact that the european banking system has survived the global financial crisis, which has resulted in significant problems that need to be resolved in order to continue further effective functioning. undoubtedly, the european banking system is extremely important in the world market economy, as its component are the central banks of the european union. baltic journal of economic studies 157 vol. 6, no. 4, 2020 professor mishkin (mishkin, 2008) of columbia university, who studied the impact of monetary policy on financial markets and financial institutions, made a significant contribution to the development of the theory and practice of banking systems, in particular to the study of the banking system of the european union. we share the views of scientists who argue that the european banking markets have become increasingly integrated in recent years, but obstacles to full integration, especially in retail, still remain. european integration can have consequences for systemic risk and can create various challenges for the current supervisory system. it affects competition in banking markets, the nature of long-term borrower-lender relations, as well as the links between ownership structure, technological change and bank efficiency (goddard, molyneux, wilson & tavakoli, 2007). in his work, dermine j. (dermine, 2006) confirms the progress of the european banking integration over the past twenty years and rates the current system of banking supervision and deposit insurance, based on the control of “countries-countries”. the statement by altunbaş y., chakravarty s. (altunbaş, chakravarty, 1998) is оf particular note, it compares the performance of european union banks across national borders involves studying the differences between countries in the institutional structure of the banking system. the works of the above-mentioned scientists and many other works prompted us to study the dynamics of the main indicators of the european banking system in order to further construction of a model of its stability. 2. quantity of banks, assets and liabilities dynamics the downward trend in the number of credit institutions (cis) of the eu-28, which began in 2009, continued in 2018, although at a slower pace, their number decreased to 6,088 (-2.6%) compared to 2017. one in four cis ceased to exist after the 20082009 financial crisis. 2019 was no exception: the number of cis in the eu decreased by 1.8% to 5,982, of which 4,472 were cis in the eurozone. rationalization in the eu banking sector has also affected banking branches. in 2019, their number was 163,265 units, down 6% compared to 2018. it should be noted that before the financial crisis of 2008-2009, there was a positive dynamics of the number of branches, and a negative one after it (figure 2). the downward trend in the number of branches continues to reflect the increasing use of internet banking by consumers, as more than half of the eu users – 54%, used it in 2018, compared to 51% in 2017 and 25% in 2007. the countries that experienced the largest decrease in absolute terms in 2018 were germany (– 2,185 units), italy (– 1,920) and spain (– 1,314). only bulgaria opened new branches (+82 units) (european banking federation, 2019 c, p. 11). the assets volumes of eu banks increased in 2018, amounting to 43.35 trillion eur , 30.9 billion eur of which are in the eurozone and 12.5 billion eur in the non-eurozone. the expansion was mainly due to the growth of total assets in the eurozone countries (1.6%) (european banking federation, 2019 d). figure 1. number of eu credit institutions, 2000-03.2020 source: compiled by authors based on the european central bank, 2000-03.2020 (european central bank, 2020 с) baltic journal of economic studies 158 vol. 6, no. 4, 2020 figure 2. dynamics of the number of branches of the european banking sector, 2001-2019 source: compiled by authors based on the european central bank, 2000-03.2020 (european central bank, 2020 m) figure 3. assets of the banking sector, 2000-03.2020 note: the european banking association (eba) uses data on credit institutions (cis) and monetary financial institutions (mfis) in its reports, however, the ecb does not have “pure” data on banks. as banks account for 75-80% of the entire financial system in the eu, the eba considers it appropriate to analyze the banking sector on the basis of ci and mfi data. credit institution (ci) – any institution that is (i) a business entity that has deposits or funds from individuals (on terms of repayment) and provides loans, or (ii) an enterprise or any other legal entity other than those who comply with subparagraph (i) who issue means of payment in the form of electronic money. monetary financial institutions (mfis) – financial institutions that together form the sector sector which issues money to the eurozone. these include: the eurosystem, resident credit institutions (as defined by the eu legislation) and all other resident financial institutions whose activities are to attract deposits and / or closed substitutes for deposits from entities other than ifis, lending and / or investment in securities (the latter group consists mainly of money market funds). source: compiled by authors based on the european central bank, 2000-03.2020 (european central bank 2020 g , 2020 j, 2020 e) baltic journal of economic studies 159 vol. 6, no. 4, 2020 thus, according to figure 3, 2019 is no exception. the total assets of mfis amounted to 45.52 trillion eur , 32.4 trillion eur of which account for mfis in the euro area and 13.1 trillion eur to the mfis of other eu member states. in general, this indicator continues to show positive dynamics: the volume of total assets increased by 5%. in the geographical distribution in 2018, the highest increase was shown by finland – 176 billion eur (39.1%). among the four largest european countries, only france recorded a significant positive result in terms of assets of the banking sector, which increased by 4.2%, italy and spain – by 1.3% and 2.9%, respectively. the countries with the most significant decrease in assets were cyprus (-13.1%) and latvia (-19.5%) (european banking federation, 2019 d). in 2019, among the eurozone member states, the largest share in the total assets of the banking sector was: france – 29% (9.32 trillion eur), germany – 26% (8.31 trillion eur), italy – 11% (3.72 trillion eur) and spain – 8% (2.68 trillion eur). all the abovementioned countries in 2019 showed a positive trend, the largest increase was in germany – 7%. among the eurozone countries, the largest growth occurred in ireland – 14% (4% of total assets), and a decrease in malta – 9% (0,13% of assets) (european central bank, 2020 g). for the seventh year in a row, hsbc holding plc is the largest bank in europe in terms of assets. at the end of 2018, the uk-based financial institution had assets totaling 2.2 trillion eur . french bnp paribas sa, with 2.04 trillion eur , is the second largest bank, and another french bank, crédit agricole group, ranks third with 1.9 trillion eur . these three occupy the highest positions in the top largest european banks in terms of assets according to s&p global market intelligence (ali, 2020). german flagship bank deutsche bank with assets of 1.6 trillion eur fell from 4th to 5th place with assets of 1.4 trillion eur . the spanish company banco santander sa took this 4th position, but a possible merger between deutsche and its competitor commerzbank ag could lead to the formation of a bank with total assets of 1.8 trillion eur , which will be the fourth largest in europe (ali, 2020). seven of europe’s 50 largest banks are headquartered in germany, and together they have 3.1 trillion eur in assets. in france and the united kingdom, there are six banks in the ranking, which together have 7.6 trillion eur and 6 trillion eur in assets, respectively (ali, 2020). regarding the total liabilities of the financial sector, as of march 2020, they amounted to 30.03 trillion, an increase over the period under review by 41.2%. the importance of bank lending is a specific characteristic of the european economy. proof of this is the positive dynamics of loans. figure 4. top 10 eu banks with the largest assets, 2015-2019 source: compiled by authors based on the european central bank, 2015-2019 (european central bank 2020 h, 2020 f ) baltic journal of economic studies 160 vol. 6, no. 4, 2020 figure 5. structure of liabilities of eurozone mfis (excluding escb) source: compiled by authors based on the oesterreichische nationalbank, european central bank 2000-03.2020 (oesterreichische national bank, 2020, european central bank, 2020 g) figure 6. structure of eu mfi loans (without escb) source: compiled by authors based on the european central bank, 200004.2020 (european central bank, 2020 g) thus, the total amount of loans issued to eu mfis increased by 2.5% in 2018 and reached more than 25.1 trillion eur . the growth was mainly due to the growth of loans to non-financial institutions, without government loans, which increased by 3.4% in year calculations to more than 15.5 trillion eur (european banking federation, 2019 c, p. 19). household loans in the eurozone have been showing positive dynamics for the fourth year in a row, rising by almost 540 billion eur since 2015. loans to nonfinancial corporations (the non-financial corporations sector includes all private and public enterprises that produce goods or provide non-financial services) in the eu increased by 3.8% in 2018 to almost 5.5 trillion eur (this is the highest figure since 2012) (european banking federation, 2019 c, p. 19). if we talk about the structure of the credit line, it can be seen from the following figure that the vast majority baltic journal of economic studies 161 vol. 6, no. 4, 2020 of bank loans are issued to non-financial corporations (nfcs) and households. these figures, in particular, demonstrate the strong business orientation of banks in lending to the real economy. regarding the structure of loans to non-financial corporations, it should be noted that real estate activities, professional, scientific-technical and administrative and support services accounted for more than a third (36.9%) of loans issued at the end of 2018, and more than 30.8% in iv quarter of 2008, in 2019 – 37.6%. production, as well as wholesale and retail trade – 14.1% and 12.9%, respectively (european banking federation, 2019 c, p. 21). as already mentioned, the largest share in issued loans is occupied by loans to households and non-profit figure 7. structure of eurozone mfi loans to non-monetary financial institutions source: compiled by authors based on the european central bank, 2000-04.2020 (european central bank, 2020 a) figure 8. the structure of eurozone mfi loans to non-financial corporations by economic sector source: compiled by authors based on the european central bank, 2003-03.2020 (european central bank, 2020 b) baltic journal of economic studies 162 vol. 6, no. 4, 2020 organizations that serve them. in 2019, this figure in the eurozone was 5.94 trillion eur , of which the lion’s share are loans for housing 4.53 trillion eur , which has been showing positive dynamics since 2015. in 2018, the amount of deposits attracted to the eu banking sector increased by 2.8% and amounted to 23.6 trillion eur . france accounted for more than half of the increase in deposits – 346 billion eur . mfi deposits in france in 2018 increased by almost 185 billion eur . deposits by non-government institutions excluding government increased by 162 billion eur in france, 109 billion eur in figure 9. the structure of eurozone mfi loans (excluding the escb) provided to households and non-profit institutions serving them source: compiled by authors based on the european central bank, 2001-03.2020 (european central bank, 2020 g , european central bank, 2020 d) figure 10. structure of deposits of eu mfis, 2001-03.2020 source: compiled by authors based on the european central bank, 2000-03.2020 (european central bank, 2020 i, european central bank, 2020 k) baltic journal of economic studies 163 vol. 6, no. 4, 2020 germany and 113 billion eur in the uk (european banking federation, 2019 c, p. 18). 3. profitability, quality development of loan portfolios one of the important indicators of the state of the banking system – the return on equity of banks roe – a key indicator for assessing the attractiveness of the banking sector for investors. unfortunately, the profitability of the european banks remains low, which is a consequence of the difficult economic situation in the eu in recent years. in 2008, three eu countries had a negative roe value in the eurozone: belgium – 44.6%, the netherlands – 11.9% and germany – 11.4%. in 2011, the number of countries with a negative value of roe banking systems doubled: cyprus – 102.8%, italy – 14.3%, slovenia – 16.9%, ireland – 15.4%, portugal – 5.4%, greece – 2.1%. of those countries that are not part of the euro area, in 2008, the negative value of roe were in the united kingdom (– 12.2%) and denmark (– 5.0%) (valverde, s., fernández, f, 2018, pp. 19–20). as the ecb maintains its ultra-low interest rates, profitability remains a key challenge facing european banks. the profitability of european banks in 2018 was 6.1% for the eu–28, compared to 5.8% in 2017. although it is still far from the 10.02% registered in the outbreak of the financial crisis, it is the highest since 2007 (european banking federation, 2019 c, p. 27). probably the most common response to the difficulty of increasing profits was to reduce costs. not surprisingly, most major european banking sectors had higher efficiencies (lower cost-to-income ratios) than at the beginning of the crisis. in 2008, spain had the lowest cost-to-income ratio of the analyzed countries, which was also observed in the third quarter of 2017: 51.76%, spanish banks were even more efficient than dutch banks (55.99%) and french (71,70%), german (71.01%) and italian (62.41%) banks (valverde, s., fernández, f, 2018, p. 19–20). given that many of these countries are already experiencing intense reductions in branch numbers and staff reductions, the digitalization phenomenon may require more complex work on this front, requiring banks to maintain even lower cost-to-income ratios. despite rising inflation, the european banks continued to face negative real interest rates. this makes it difficult to profit from the main activity of mediation, in other words, the spread between the profitability of borrowed funds and financing costs. the banking system of the eurozone has entered a coronavirus crisis in a weak state, and the profitability of the sector fell for the first time in three years in 2019, according to the european central bank’s data. thus, the slowdown in economic growth and falling interest rates resulted in the fact that the return on equity in 113 banks controlled by the ecb in 2019 decreased from 6.2% to 5.2%. the least profitable banks by country were german ones, where 21 ecb-controlled banks had an average return on equity of only 0.08%. this was far below the profitability of italian banks, which are generally considered the weakest sector, with an average return on equity of 4.85% last year. the decline in the profitability of eurozone banks distances the european banks from their competitors in the united states, which last year reported on average return on equity more than twice as high. it is also worth noting the growing vulnerability of europe’s banking sector to the economic and financial turmoil caused by measures to contain the coronavirus pandemic, which are forcing a large number of companies and employees to seek government assistance. credit margins in the figure 11. dynamics of the return on equity of the eu banks, 2007-2019 source: compiled by authors based on the european central bank, 2007–2019 (european banking federation, 2019 c) baltic journal of economic studies 164 vol. 6, no. 4, 2020 sector also declined due to lower ecb interest rates to a record low of minus 0.5%. economists predict that the eurozone economy may shrink by about 10% in the second quarter of 2020, as the world faces its deepest recession since the great depression of the 1930s (arnold, 2020). regarding the quality of the eu banks assets, they have improved significantly over the past 4 years. as of june 2019, the weighted average loan loss ratio was 3%, for example, in june 2015 – 6%. this is the lowest indicator since the eba introduced a harmonized definition of this indicator in all european countries in 2014. on average, it improves annually by 0.75 percentage points (european banking federation, 2019 a, p. 8). the total volume of non-performing loans as of june 2019 amounted to 636 billion eur , which is almost 50% less than in june 2015. the decrease in non-performing loans can be explained by the sale and securitization of credit resources. despite the fact that the quality of the loan portfolio is improving in all countries, this figure remains uneven in those with higher starting ratios (from less than 1% in sweden to 39% in greece). italy recorded the largest decrease in non-performing loans (145 billion eur) between june 2015 and june 2019, as well as reductions in spain (81 billion eur), the united kingdom (60 billion eur) and germany (43 billion eur). all four countries recorded a reduction of at least 50%. these countries are followed by ireland (a decrease of 35 billion eur or 80%) and portugal (a decrease of 20 billion eur). greek and cypriot banks, which reported high ratios, reduced non-performing loans by 35 billion eur (–30%) and 17 billion eur (–73%), respectively (european banking federation, 2019 a, p. 15). figure 12 cost-to-income ratio in the european banking sector, 2007–2019 source: compiled by authors based on the european central bank, 2007–2019 (european banking federation, 2019 e) figure 13. weighted average ratio of non-performing loans source: compiled by authors based on the european central bank, 2014-2019 (european banking federation, 2019 b) baltic journal of economic studies 165 vol. 6, no. 4, 2020 this improvement in the quality of the loan portfolio was preceded by the following: – efforts of banks to improve the management of non-performing loans, by improving monitoring and restructuring strategies, by investing in information technology and management; – economic growth, lowering of unemployment level, low interest rates and dynamic development of the real estate market in the eu over the past 4 years. all these factors together increased the interest of investors. in march 2018, the european commission presented a package of measures to overcome the high rates of bad loans. the proposed measures are aimed at accelerating the progress already made in reducing the ratio and preventing its recovery. the package included (european commission, 2019): – a proposal for a resolution on amendments to the regulation of capital requirements and the introduction of general minimum levels of coverage for new loans that become bad. this measure will force banks to allocate funds to cover the risks associated with such problems; – a proposal for a directive on those who service loans and their buyers, as well as on the procedure for collecting collateral. this measure will provide banks with an effective mechanism for out-of-court reimbursement of secured loans and will promote the development of secondary markets, in which banks can offer bad loans, and other specialized credit services to investors. the commission’s working document on the drafting of national asset management companies (amcs) provides guidance to national authorities on how they can set up national asset management companies (amcs) to address bad loans. following the postponement of the national stress test to 2021, the board of supervisors agreed to conduct an additional transparency procedure to provide up-todate information on banking risks and the quality of market participants’ assets. unlike stress tests, this procedure is a pure disclosure, where only data on each bank are published. the spring procedure of 2020 covers 127 banks from 27 countries of the european economic area, and the data are disclosed at the highest level of consolidation as of september 2019 and december 2019 (moody’s analytics, 2020). 4. conclusion thus, summarizing all the above-mentioned facts we can state that the number of credit institutions and their branches in the eu during the study period has a negative trend. at the same time, the total assets of the banking sector have a positive dynamic, and the expansion was mainly due to increased assets in the eurozone. similar to assets, the volume of bank liabilities also has a positive trend, increasing over the period under review by 41.2%. also encouraging is the fact that the quality of assets is improving every year, which indicates a balanced, wellstructured policy of banks and the central bank in general. figure 14. total problem loans of the european banking sector, 2015-2019 billion eur source: compiled by authors based on the european central bank, 2015-2019 (european banking federation, 2019 a) baltic journal of economic studies 166 vol. 6, no. 4, 2020 referenсes: ali, z. 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(in russian) baltic journal of economic studies 178 vol. 5, no. 3, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-3-178-183 agriculture of ukraine under the joint policy of the european union svitlana rogach1, larysa vdovenko2, oleh polishchuk3 abstract. the purpose of this article is to study the experience of financial support of agriculture in the european union in order to adapt it to the agricultural conditions of ukraine. a decisive feature of european financial support to agriculture is the attitude towards it as one of the factors of development of the financial system of the european union. under the conditions when ukraine tries to become a full member of the european union, the author has proved that the modern system of financial support of agriculture in ukraine is on the vector of formation and adaptation, therefore, the substantiation of theoretical and methodological principles and the development of practical recommendations for the improvement of existing and the introduction of progressive, recommended world practice levers and regulatory mechanisms become a determining factor in their further development. methodology. in ukraine, 2017 should only be expected to improve traditional forms of financial support. among the positive points is the reduction of interest rates in uah up to 15%, but with the preservation of monetary stability, one should not expect an increase in terms of lending, in the top, there will be loans up to one year, that is, within the product cycle. results. ukraine is trying to take over the experience of various european countries in relation to agriculture. it relies on the experience of germany, france, great britain. practical implications. the government and the ministry of agrarian policy and food in the budget for 2017 presented a state support reform that creates conditions for the development of small farms and stimulates the production of value-added products, and the main principles of state support should be targeting and transparency. value/originality. in 2017, in support of the development of the livestock sector at the expense of the general fund of the state budget under the budget program “state support of livestock sector”, expenditures are provided to ensure stabilization of livestock, increase its number, and stabilize production. in general, support for the agrarian sector is formal and insignificantly affecting the development of the agricultural sector, as a result of the economic and agricultural development vector declared in the 2017 budget, in the light of economic instability, rising inflation and uncertainty. key words: ukraine, eu, financial support, common agricultural policy, agriculture, demand, supply, budget, farmer, expenses, subsidy, interest rate, adaptation. jel classification: f65, g21, p34, q12 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: tuv@email.ua orcid: https://orcid.org/0000-0001-6940-1935 2 vinnytsia national agrarian university, ukraine. e-mail: vdovenko_larisa@i.ua orcid: https://orcid.org/0000-0002-6283-2385 3 uman national university of horticulture, ukraine. e-mail: 557555@ukr.net orcid: https://orcid.org/0000-0002-9859-9001 1. introduction ukraine is a member of the european union’s eastern partnership program (since 2009). in 2014, ukraine and the european union signed the land of association, which replaced the land of partnership and cooperation between the european communities and ukraine. the european union provides the support of ukraine to ensure a stable, prosperous, and democratic future for all its citizens. in its support, the eu is stubbornly adhering to the principle of territorial integrity and sovereignty of ukraine and considers full implementation of the minsk agreements the basis of a stable political solution to the conflict in the east of the country. in the summer of 2014, the eu has increased its support for economic and political reforms in ukraine. the european union is an important economic partner for ukraine. by 2015, the european union had 34% of ukrainian exports and 41% of ukrainian imports. the modern system of financial support of agriculture in ukraine is on the vector of formation and adaptation baltic journal of economic studies 179 vol. 5, no. 3, 2019 to the conditions of the european union, therefore, the substantiation of theoretical and methodological principles and the development of practical recommendations for the improvement of existing and the introduction of progressive, internationally recommended levers and regulatory mechanisms become the determining factor in their further development. the policy of financial support for agriculture in the european union provides high results in agricultural production, economic and social processes and intensification of rural entrepreneurship. a decisive feature of european financial support to agriculture is the attitude towards it as one of the factors of development of the financial system of the european union. among all the aforesaid, useful for ukraine should be not only the experience regarding financial support of agriculture in the european union but also the recent changes in the common agricultural policy of the european union and the prospects for its development in the near future and hence the efficiency in solving problems. 2. economic crisis effects on consumer behaviour the purpose of the article is to study the experience of financial support of agriculture in the european union in order to adapt it to the agricultural conditions of ukraine. support for agriculture occupied about 70% of the expenditure part of the budget of the european union in the 80s, to 50% – in the 90s, and continues to decline. in 2009, for example, europe spent 57 billion euros on support for agriculture or about 41% of the eu’s 140 billionth budget. in terms of the area of agricultural land in europe, it turns out that state support was about 325 euros per 1 hectare of cultivated land. additionally, eu countries support local producers from national budgets – about 80 euros per hectare of farmland. thus, the total budget support in the eu countries in 2009 was 405 euros per 1 hectare of land. the largest recipients of funds from the eu are france (about 17% of the payments accounted for by the bbc), germany and spain (about 13% each), italy (about 11%), and great britain (about 7%). on average, one farm receives about 12,200 euros of deductible per year but payments per hectare of cultivated land vary from 527 euros in greece to 89 euros in latvia (subsidies for new members of the european union are much smaller). france spent 12.2 billion eur on the agrarian sector and rural development in 2009, of which 5.7 billion eur was from the eu budget. agriculture is one of the most important industrial branches of the european union. in france, it generates 150 billion euros of commodity circulation, in the industry employs 500 000 people. france also exports agricultural products annually by 40 billion euros and the foreign trade balance for food and agricultural raw materials in the country is positive – a surplus of 8 billion euros, although the foreign trade deficit of the country is about 70 billion euros. due to the increasing world demand for food, france wants to meet these needs. therefore, france not only lends its producers (the total amount of loans issued by the state agricultural bank of france exceeded 42 billion euros) but also helps its farmers with the sale of products – for example, at the level of the ministry of agriculture economy has a committee on exports to asia which is now the highest demand for food. the committee is engaged in the regulation of export issues, the harmonization of phytosanitary requirements, and the observance of intellectual property rights. 3. differences in consumer spending behaviour among age groups in 2011, the eu allocated 42.5 billion euros for direct payments to farmers, 3.34 billion euros for interventions and maintenance of prices for some agricultural products, and another 353 million and 254 million euros for the development of veterinary and phytosanitary control. therefore, there was developed a special system of financial and credit provision of agriculture, without which it could not exist. first of all, for agriculture, a preferential loan is required. so in germany, the leading creditors and administrators of the agrarian sector of the economy are: the union of german people’s banks and raiffeisen societies which includes more than 1470 credit societies uniting mainly farmers and other entrepreneurs working in the countryside; system of german savings banks; agricultural rental bank in frankfurt; german mortgage bank in bonn; credit institute for recovery in frankfurt; private mortgage banks. for german farmers involved in the investment incentive program or the general agrarian program, preferential lending is made in the form of a loan of 1% per annum or by reducing the loan interest rate on current loans by 4-7%. the farm rental bank in frankfurt offers farmers preferential lending under the special programs “agriculture” and “young affiliates”. for young farmers, loans are issued at the age of 40 years in the presence of five-year seniority. credits are used as a source of investment for farming, industrial infrastructure, and housing, for the purchase of a leased farm, compensation for the heirs’ expenses when they become legally inherited, stimulating farmers who have deviated from agricultural activity, etc. investments in dairy cattle breeding are funded by keeping up to 120 cows, fattening pigs – with up to 1,700 pig farms and up to 50 thousand laying hens baltic journal of economic studies 180 vol. 5, no. 3, 2019 for fattening poultry. credits are not allocated for the conversion of debts, an additional purchase of means of production and low-value light-weight implements. the village renewal program loans are used to preserve a typical rural landscape by preserving, repairing, and rebuilding farm buildings due to changes in the direction of their use. individuals and legal entities, societies, and organizations, as well as groups that have joined for this purpose, have the right to receive loans under this program. the difference in preferential lending is covered by the rental bank from current profits. one-fifth of the total volume of mediumand long-term loans from a rental bank is spent on financing loans. rabobank, which is the second-largest in the country, plays an important role in agriculture in the netherlands. it is organized as a cooperative to serve the cooperative system of agribusiness of the country and provides about 90% of bank financing and lending to agricultural production. the conditions for issuing loans are established after analysing the activity of each agricultural enterprise and negotiations between the banker and the borrower. the interest rate is very volatile and can be changed during the loan period. however, under all these conditions, the loan is in fact preferential as the bank falls under the legislation on cooperatives, which provides for preferential taxation and controlled by the union of cooperatives. in the uk, due to the peculiarities of the economic and historical past, its credit and banking system is one of the most developed in europe. it is characterized by a high level of division of labour between different financial institutions, broad branching, and a large variety of different types of financial and banking institutions. through commercial banks, there are various state subsidies from the country and the eu, which makes loans in many cases preferential. lloyd bank, midland bank, barclay bank and others carry out the largest lending operations in agriculture. financing of investments in agriculture is carried out mainly on the so-called permanent loan – the banker and the entrepreneur annually discuss the interest rate, the size of the loan, the type of debt, depending on the economic situation of the economy. the central role in the system of agricultural credit in france is played by “crédit agricole”. however, in recent decades, other financial institutions have been connected to the system of preferential lending. the mechanism of action of preferential loans in agriculture of this country is based on the principle of bonification – the state’s repayment by the bank of the difference between the contractual interest rate and the preferential loan rate that was granted to the farmer. the procedure for the calculation of bonification on the basis of the contractual interest rate introduced as a result of the reform of the system of preferential credit. in austria, the most widespread type of preferential credit is investment agricultural loans, the rate of which is calculated based on the rate of the lender’s bank; it is adjusted several times a year by the austrian national bank. the term of the preferential investment loan is 10 years; when purchasing means of mechanization – 6 years. thus, we can speak of the presence in developed european countries of a diverse and largely preferential system of crediting agricultural economy, calculated on real financial needs and opportunities of this industry. a french farmer specializing in raising the blonde d'aquitaine breed in the department sells them for meat at a price of 4.6 euros per 1 kg. the heifer of the blonde d'aquitaine breed weighs 700-800 kg and eats 15 kg of hay per day and 1.5 kg of concentrated feed mixture. this year, the farmer was forced to raise the selling price by 0.30 euros per 1 kilogram (last year he sold carcasses at 4.30 euros per 1 kilogram) – gasoline, fertilizers, film for packaging of stumps and more. after deducting costs after selling meat, his profit is approximately 0,20 euros per 1 kg. the meat is sold by a farmer to a local cooperative, which then sells it. the farmer receives a subsidy of 225 euros per head of cattle (in the calculation of heifers) per year, and per hectare – for the cultivation of feed (he does not name them the amount), but this is not enough for life without mercy. in an economy where there is an average of 200 breeding cows, this farmer works alone and has an assistant. employees cannot deduct them on a permanent basis only for seasonal work during the harvesting and harvesting of feed. in the eu budget for 2012 (its total amount of 144.46 billion euros), 58.58 billion euros were put in support of agriculture and rural development including 40 billion euros on direct payments to farmers and 14 billion euros on the development of rural areas. with the european union spending 1.6 billion euros on transport development, in support of scientific research – 5.4 billion euros, on culture and education – 2.69 billion euros. compared to agriculture spending on the european union is limited to regional development (42 billion euros in 2012) – regional policy, a public investment program to create new jobs, reduce the backlog of less developed regions, develop infrastructure, and attract private investment. during 2007–2013, the european union plans to spend about 347 billion euros on these goals, says the european commission’s website. the european union spending on agriculture continues to decline – already in 2013, their share in the budget has decreased to 33.1% (see table 1), at the same time, the conditions for obtaining direct subsidies also change. since 2013, farmers introducing new more environmentally friendly production technologies will receive additional subsidies. for comparison, in ukraine: in the most difficult period of the development of our economy (2007–2015), baltic journal of economic studies 181 vol. 5, no. 3, 2019 the gdp of the country decreased by almost 20% while agriculture showed a significant growth – about 45%. in essence, the agrarian sector is the only segment of the national economy that is resistant to systemic crisis phenomena. it would seem that the financial channel for using the accumulated in banks liquidity (70-80 billion uah) about which search is said lately. unfortunately, the dynamics of agricultural lending in ukraine proves the opposite: the loan portfolio of banks in the agrarian sector is practically unchanged and amounts to 8-10% of the total that is about 50-60 billion uah. the new lending is mainly due to the proceeds from current loans and the repayment of old debts. and this despite the fact that agrarian loans are the least problematic: part of the problem is 10-11% while the average figure on the system varies within 20-30%. at the same time, despite the substantial potential of the sector, there is no systematic growth of lending as was the case for example in the middle of the 2000s. european farmers also have privileges for loans. for the purchase of new agricultural machinery, they can raise funds at 3-4% per annum, for the purchase of land – at around 7% per annum. it has several thousand ducks on the family farm which are fed to foie gras. in france, subsidies are received for the cultivation of land, for the cultivation of feed, but specifically for the bird – no. foie gras in the local market costs about 30 euros per 1 kg (the liver of one duck weighs 400-500 g), duck meat – about 3 euros per 1 kg. processing greatly raises the selling price – canned foie gras is already 60-90 euros per 1 kg. the number of private farms, family farms in europe is steadily declining – the profitability of small farms is still lower than that of large industrial enterprises and here the state support does not help. the fight for high-quality agricultural products in the european union leads to the fact that the industry has become much overregulated. the farmer must receive a large number of certifications and constantly confirm the compliance with veterinary requirements at all stages of production. the reason is that few farmers sell their products to end users. the product goes through a long chain, in which no link want to assume full responsibility for quality. this leads to such tightening of regulation in the first stage. competition is strong inside the european union. france with its high taxes and a relatively high minimum wage (about 2000 euros without taxation) is not in the same conditions with portugal or greece where social taxes are lower and hired workers are much cheaper. therefore, french farmers are trying to compete not so much in the price field as in quality. therefore, the eu countries are trying to specialize in those segments that can be most effective. 4. survey methodology the government and the ministry of agrarian policy and food in the budget for 2017 presented a state support reform that creates conditions for the development of small farms and stimulates the production of valueadded products and the main principles of state support should be targeting and transparency. in this connection, three strategic directions are envisaged: state support for farmers, rural development and completion of land reform and the five priorities that follow from them. this is the development of markets, organic production, irrigation, and food safety. the corresponding order was approved by the cabinet where the government compensates for potential losses of domestic farmers from the abolition of special vat regime from january 1, 2017. the budget for 2017 identified three sources of support for the ukrainian agrarian sector: budget funds for general and special funds, european development bank loan funds, state guarantees. the share of the agrarian budget in the state budget expenditures is set at 0.96% indicating a levelling of the downward trend in 2015–2016 when it did not exceed 0.37%. however, compared to the 2013 structure, it is only ½. financial support to the agro-sector is a key component of ukraine’s agrarian policy. in practice, having inherited a planned economy in which agriculture was subsidized at the level of 70%, the government is constantly concerned about the formation of the financial balance of the industry traditionally continuing and modifying table 1 budget development programs – expenditures of agricultural commodity producers for 2013–2017, million uah budget classification programs 2013 fact 2014 fact 2015 fact 2016 fact 2017 fact reduction in 2017 vs. 2013,+/reduction in 2017 vs. 2016, % reduction in 2017 vs. 2013, % financial support of measures by cheapening of loans 0,96 290,64 300 300 100 31250 financial support of agribusiness activities 5 60 55 1200 support for gardening 94,79 371,2 40,58 50 210 160 420 29,2 financial support of commodity producers 2973 2973 total 816,75 415,13 331,23 355 3618 3263 1019,2 443 source: formed according to zakon ukrainy baltic journal of economic studies 182 vol. 5, no. 3, 2019 the practice of state support. the basic directions of support are defined – assistance to small business, the formation of stable economic forms, development of organic production, stimulation of value-added chains at all stages of their formation, solving of socio-economic problems of rural areas’ development. in the system of state support, preferential credit occupies a special place. for agricultural enterprises, partial compensation for interest rates on bank loans was introduced in 2000, given the critical state of nonrepayment of loans over the stagnation of production. initially, lending programs were intended to finance production costs. in the future, preferential credit extends to resources, in particular, from 2004 according to the resolution of the cabinet of ministers of ukraine no. 184 as of february 18, 2004, through the mechanism of cheapening short-term and long-term loans. the general tendency of lending to the agrarian sector is confirmed by the industry, for example in the vinnytsia region is shown in figure 1. that is, the state of lending depends on the state of smoothing the conflict of interests of producers, banks, and the volume of the state budget. analysing the indicator of the financial leverage, we observe the proportion of credit claims in the assets of agribusinesses. 5. findings in terms of agricultural development expenditures the budget 2017 is unprecedented compared with the relatively well-off for 2013 it is planned to 4.4 times more and compared to the actual implementation in 2015 – more than 11 times. in support of the development of agricultural enterprises, 3.761 billion uah were foreseen in the following areas: financial support of agricultural producers (new program, per 1 hectare area) – 2.973 million uah (78%); cheaper loans – 300 million uah (8%); livestock support – 210 million uah (6%); support for the laying of and maintenance of young gardens, vineyards, and berries – 75 million uah (2%); support for activities in the agro-industrial complex – 60 million uah (2%) (support of service cooperatives, creation of a reserve stock of seeds, cheapening of insurance premiums). the program of cheapening loans is regulated by the resolution of the cabinet of ministers of ukraine dated april 29, 2015, no. 300 “procedure for using the funds provided for in the state budget for financial support of measures in the agro-industrial complex by reducing the cost of loans” which states that compensations are subject to interest rates on loans borrowed to cover costs associated with the purchase of fuels and lubricants, seeds, fertilizers, plant protection products, feed, raw materials and ingredients for the production of mixed fodders, energy carriers and payment for services related to repairs agricultural and irrigation machinery, works (services) for the preparation and cultivation of soil, sowing, plant protection against diseases and pests, topdressing and signup, harvesting (furtwengler, 2012). in 2017, in support of the development of the livestock sector at the expense of the general fund of the state budget, under the budget program titled “state support for livestock sector” expenditures amounting to 0.210 million uah are foreseen to stabilize livestock, increase its number, and stabilize production. 856,8 695,1 1196,9 327,2 394,6 597 422,3 1084 570,3 962 482,8 202,2 0 200 400 600 800 1000 1200 1400 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * – data for 2017 are given in the half-year figure 1. credit resources of agricultural enterprises of the vinnytsia region, billion uah source: according to the data of the vinnytsia regional state administration baltic journal of economic studies 183 vol. 5, no. 3, 2019 6. conclusions unfortunately, in ukraine in 2017, only the improvement of traditional forms of financial support should be expected. among the positive points is the reduction of interest rates in uah to 15% but with the preservation of monetary stability. don’t expect an increase in lending terms. there will be loans up to one year that is within the product cycle. the base currency is uah, foreign currency loans will be gradually replaced by the market. the prevailing forms of lending will be short-term credit lines and seasonal financing. budget for 2017 is the successor to more programs that operated in 2013–2016 while developing new directions, primarily small business support. it can be stated that it managed to combine the needs of the majority of agricultural producers. however, in general, support for the agrarian sector is formal and insignificantly affecting the development of the agricultural sector, as a result of the economic and agricultural development vector declared in the 2017 budget, in the light of economic instability, rising inflation, and uncertainty. as small commodity producers form rural employment and internal food security and a variety of agricultural products, primarily organic, as well as the requirements of international partners of ukraine and in line with the practice of the common agricultural policy of the european union, which ukraine seeks to join, such a vector of state support for agriculture for a time is justified. references: zakon ukrainy "pro derzhavnij byudzhet ukrainy na 2016 rіk". retrieved from: http://zakon3.rada.gov.ua/laws/ show/928-19 zakon ukrainy "pro derzhavnij byudzhet ukrainy na 2017 rіk". retrieved from: http://zakon5.rada.gov.ua/laws/ show/1801-19 yedina kompleksna strategіya ta plan dіj rozvitku sіlskogo gospodarstva ta sіlskih teritorіj v ukrainі na 2015-2020 roki. retrieved from: http://minagro.gov.ua aleskerova, yu. v. (2009). kredituvannya regіonalnogo apk. zbіrnik naukovih prac. 17(2), 645–648. aleskerova, yu., mulyk, t., fedoryshyna, l. (2018). improving credit protection analysis methods reports of main agricultural enterprises. baltic journal of economic studies, 4(2), 1–7. doi: 10.30525/2256-0742/2018-4-2-1-7 aleskerova, yu., fedoryshyna, l. (2018). analysis of investment activities of enterprises of ukraine. economic system development trends: the experience of countries of eastern europe and prospects of ukraine. aleskerova, yu. v. (2008). analіz stanu ta efektivnostі kreditnogo zabezpechennya vіdtvorennya osnovnikh zasobіv sіlskogospodarskikh pіdpriemstv [analysis of the status and effectiveness of credit support for reproduction of fixed assets of agricultural enterprises]. oblіk і fіnansi apk, 3, 125–129. furtwengler, d. (2012). pricing for profit: how to command higher prices for your products and sendees, new york: american management association. pannozzo, a. (2007). the (ir)relevance of technology: creating a culture of opportunity by design. design management institute review, 18, 18–24. baltic journal of economic studies 148 vol. 6, no. 5, 2020 corresponding author: 1 classical private university, ukraine. e-mail: pokataeva.olga1978@gmail.com 2 classical private university, ukraine. e-mail: m.d.dyachenko@gmail.com 3 classical private university, ukraine. e-mail: kravchenko.vn@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-5-148-154 problem of professional training of future economists for development of national economy under conditions of european integration olga pokatayeva1, mariia diachenko2, volodymyr kravchenko3 abstract. the purpose of the paper is to highlight the scientific discussion on the problem of future economists’ training for the development of national economy in the context of european integration; the disclosure of the peculiarities of ukrainian modern economic processes and provision directions of high-quality economic education for students of the speciality 051 economics. methodology. the survey is based on the analysis of legal and normative base of future economists’ professional training and the ways to form their readiness for the development of national economy under the conditions of european integration. the scientific discussion on the problem of future economists’ training for the development of national economy under the conditions of european integration is covered; the disclosure of peculiarities of ukrainian modern economic processes and the provision directions of high-quality economic education for students of the speciality 051 economics. core competencies for future economists, which they must acquire at the universities in the process of professional training and which they will promote participating in the development of national economy of ukraine, are outlined. professional training of future economists is reviewed as a process of basic economic competence formation, professionally oriented practical skills and students’ abilities, the development of their motivation for economic self-education and continuous self-improvement. emphasis is placed on the educational technology of mathematical training for future economists. it must be admitted that the major feature of it is to ensure the implementation of educational objectives in the field of formation of the professional competence for future economists on the mathematical basis in accordance with the requirements to high economic education. it is emphasized on the importance for students to choose the educational programs, which they need, out of a proposed set. emphasize is placed on the ways to master them, namely individual pace, forms and deadlines for the required reports. the individual educational program of the students is defined as the preliminary plan made by the students with the support of a teacher-mentor, their educational and other activity directed on personal and professional development. moreover, it must be designed taking into account personal, educational and professional interests, needs and inquiries of the students. the principle of choosing an individual educational trajectory is characterized. it declares that every student has the right to conscious and agreed choice with the teacher for the main components of his or her education: content, objectives, pace, forms and methods of teaching, personal content of education, control and evaluation of results. the questionnaire, where each question has 10 possible answers, is represented in order to survey future economists on their satisfaction with the procedure of choosing an individual educational trajectory and the process of supporting the mastery of the educational program. practical implications. the application of the diagnostic complex has confirmed that the pedagogical experiment resulted in quantitative changes in indicators that reflected significant qualitative changes in minds and behavior of future economists. it showed a significant positive dynamics of their readiness for innovative economic activity and the formation of their professional basics. the quantitative indicators of the experimental groups became a statistical confirmation of this: the number of students with high level of professionalism increased from 10.3% to 33.7%. the increase is at 23.4%. the index of sufficient level of future economists’ professionalism formation increased at 20.6%, i.e. from 25.4% to 46.0%. the number of students with the initial level of professionalism decreased at 22.6%. it is from 25.8% to 3.2%. the rate of change of the corresponding baltic journal of economic studies 149 vol. 6, no. 5, 2020 indicators in the control groups is much lower. value/originality. the article provides ways for improving the methods and forms of future economists’ professional training for the development of national economy in the context of european integration. in particular, the introduction of individual educational trajectory of economists with a projection on elective courses and extrapolation into future economic practice is recommended. key words: higher education, european integration, future economist, national economy, development, professional training. jel classification: i23, f15, f63 1. introduction future economic development of the ukrainian state and its competitiveness in the international arena largely depend on the quality of modern professional training of future economists at the universities. after all, in the conditions of constant changes and globalization, economists must realize their role in national economy and their social role in society and understand the professional functions at the modern labor market well. at the same time every economist must be ready for professional competition. in the process of formation of general and special competencies of future economists, it is necessary to pay attention to the fact that the success of their future activity and career depends on their desire and ability to take risks; their readiness to use the opportunities provided by the market; their focus on finding new ways to expand the scope of activities (bubnova, 2018). nowadays ukraine is a young european country that aspires to become a modern and developed social and legal state with strong market economy. considering this, the government develops and implements reforms into political, economic, social, scientific, technological and other spheres. analysis of scientific sources on the issue shows a wide range of works by ukrainian researchers related to the development of the national economy in the context of european integration (h. kovalchuk, ye. yevtushchevskyi, n. tkalenko, v. fedorchenko and others). there is availability of separate scientific researches on the training of future economists in domestic free economic zones (fez) (f. butynets, yu. haiduchenko, n. zolotukhina, m. levochko, o. oliinyk, i. prokopenko, yu. rudiak and others) however, the coverage of the issue of professional training of future economists for the development of national economy in the context of european integration requires additional attention that emphasizes the relevance of the article. the purpose of the article is to highlight the scientific discussion on the problem of professional training of future economists for the development of the national economy in the context of european integration; to disclose features of modern economic processes in ukraine and directions of providing high-quality economic education for students of the speciality 051 economics. 2. the current state of students’ preparation for professional economic activity in the context of european integration according to scientists, the characteristics of the modern labor market in eastern european countries, including ukraine, are of great interest to employers. on the one hand, it affects the competitiveness of the individual at the labor market. on the other hand, it affects the competitiveness of labor market institutions in the struggle for well-prepared, educated and skilled labor resources, judging by the employer (polyezhayev, koval, bezkhlibna, 2018). in this regard, there is a necessity to improve the level of economic education of students, reforming the system of professional training of economists in the following areas: the need for innovative pedagogical technologies; taking into account multifunctional interdisciplinary connections; the strengthening of the role of independent work in the educational process; the establishing of mechanisms for interaction between educators and labor market representatives and employers; the approximation of the obtained results of scientific researches of students and teachers to their practical use under mentioned conditions (kovalchuk, 1999). the law of ukraine “on education” (on education, 2017) states: education is a state priority. it ensures innovative, social, and economic, and cultural development of society. the normative document “standards and guidelines for quality assurance in the european higher education area (esg)” defines a list of competencies of graduates of economic specialities: 1) integrated competence is the ability to solve complex specialized problems and practical problems in the field of economics and in the learning process, which involves the application of theories and methods of economics; 2) general competencies are the ability to abstract thinking. it must be mentioned that it is the analysis and synthesis. it is the ability to apply knowledge in practical situations and understanding of the subject area of professional activity. moreover, it is the ability to communicate orally and in writing in english, skills of using information and communication technologies; ability to search, process and analyze information baltic journal of economic studies 150 vol. 6, no. 5, 2020 from various sources; ability to adapt and act in a new situation; ability to think creatively and critically; ability to make informed decisions; interpersonal skills; ability to show initiative and entrepreneurship; ability to act consciously and socially responsibly on the basis of ethical considerations; 3) special (professional, subject) competencies are the ability to identify patterns of functioning of the modern economy at the micro and macro levels; ability to use normative and legal acts regulating professional activity; understanding of the main features of leading scientific schools and areas of economics; ability to describe economic and social processes and phenomena on the basis of theoretical and applied models, to analyze and meaningfully interpret the obtained results; understanding of the main features of the modern world and national economy, institutional structure, directions of social, economic and foreign economic policy of the state; ability to apply economic and mathematical methods and models to solve economic problems. in addition it is the ability to use computer data processing technologies in order to solve economic problems, to analyze information and prepare analytical reports. moreover, it is the ability to analyze and solve problems in the field of regulation of economic and social relations and the ability to forecast on the basis of standard theoretical and econometric models of social and economic processes. it worth mentioning they are skills of using modern sources of economic, social, managerial, accounting information for the preparation of official documents and analytical reports and the ability to use analytical and methodological tools to justify economic decisions. in addition it is the ability to identify problems of an economic nature in the analysis of specific situations independently and suggest ways to solve them. it must be explained that it is the ability to determine the segmentation of the labor market, the structure of supply and demand, employment and unemployment; ability to analyze the functioning and development of economic entities, the state of functional subsystems of enterprises, organizations and institutions; ability to analyze problems and phenomena in one or more professional areas within the speciality in depth (standards and guidelines for quality assurance in the european higher education area (esg), 2015). the formation of these competencies is extremely important task of professional training of the future economists, because they must use the knowledge gained to study current issues of national economy of ukraine and the world economy in general independently. in our opinion, future economists’ professional training is process of formation of basic knowledge in economics, professionally oriented practical skills and students’ abilities, the development of their motivation for economic self-education and prolongation of selfimprovement. yu. haiduchenko states that it gives them the opportunity to fully realize cognitive activity and form the need for continuous professional self-improvement. therefore, it is necessary to reveal the abilities of each student as an individual, to choose appropriate methods for effective formation of professional competence of the future economists (haiduchenko, 2015) however, according to researchers v. yevtushevskyi (yevtushevskyi, 2002) and n. tkalenko and v. fedorchenko (tkalenko, fedorchenko, 2011), in the system of modern higher education there are problems that have caused negative attitude of students to educational and cognitive activities, low level of their motivation for self-improvement and self-realization. therefore, graduates of economic specialties have difficulties adapting to real working conditions; not all of them have a sufficient level of practical use of economic instruments; some economists do not focus on the establishment of the company, the principles of the tax system and economic analysis, do not know how to put into practice the knowledge gained at the university. this leads to the search for new ways, methods and forms of training the future economists for professional activity and development of the national economy. in addition to compulsory disciplines, in the classical private university, for example, a significant role in the educational process of bachelor students majoring in “business economics” is played by optional disciplines (table 1). the technology of mathematical training of the future economists, the main feature of which is to ensure the implementation in the educational process of goals in the formation of the mathematical basis of professional competence of the future economists according to the logic of higher economic education, is among the effective educational technologies. mathematical training of students-economists contributes to the deepening of the fundamental training of the professional activities of the economist and doing them more pronounced in the process of mastering its content. in the process of professional training of future economists for the development of national economy in the context of european integration and in the context of our scientific research, special attention is paid to the students’ choice of educational programs, which are offered, and the ways to master them. they are the following: individual pace, forms and deadlines for passing them. the students create unique individual educational program with the help of the teachers (tutors). invariant component is educational and professional program, curriculum. we consider the preliminary plan, made by the students with the support of the teacher-mentor, their educational and other activities, aimed at personal and professional development under the individual educational program of the students. we also consider the preliminary plan, which is designed in order to take baltic journal of economic studies 151 vol. 6, no. 5, 2020 into account personal, educational and professional interests, needs and requests of the students. the individual educational route of the student is defined by us as the way drawn by him or her in advance on the basis of the previously created individual educational program; the route clearly defines the time and educational criteria, as well as the phases of training. its construction takes place during the implementation of pedagogical support by the mentor. in the process of pedagogical experiment, the effectiveness of modeling the individual educational trajectory of students was approved. future economist, based on his or her own previous educational experience, has the right to a conscious choice of forms and methods of teaching, personal pace of learning the content of academic disciplines, performing individual tasks, using different types of self-control and evaluation of results. in order to do this in teaching process of curriculum disciplines, it was necessary to provide students with curricula of normative and variable components of the curriculum, the requirements for competencies that are formed in the process of studying theoretical material and performing practical tasks. having the given period of the beginning and end of the discipline teaching, it is necessary to provide an optimal schedule for the study of theoretical material, practical and individual tasks and the preparation of intermediate and final control. based on this information, the student chooses his or her pace of mastering the discipline, independently planning the process of their own education and professional growth. the principle of choosing an individual educational trajectory explains that the student has the right to conscious and agreed with the teacher to choose the main components of their education: content, goals, objectives, pace, forms and methods of teaching, personal content of education, monitoring and evaluation of results. creativity is possible only under the conditions of expression of will in the choice of elements of educational activity. considering all mentioned above, we provide the future economists with the right to choose the aims of the lesson, ways to achieve them, topics of creative work, forms of its implementation and protection. we encourage their own view of the problem, reasoned conclusions and self-assessments. this principle clarifies guidelines of the personal content of education created by the student, including his or her goals, which have the nature of basic educational standards. practically every element of education is provided through the student’s own choice or search. moreover, students can choose the educational components from the available set and create their own structural elements of the educational trajectory (figure 1). the possibility of creative selfexpression and the choice of the educational trajectory of students assume the organizational and technological set of the methodology of their activity. future economists independently create an educational product and receive high-quality educational growth, when they master the basics of creative cognitive activity. we do not only give students a choice, but also equip them with the necessary activity tools. the greater the degree of involvement of future economists in the process of constructing their own education, the more fully their individual creative selfrealization is manifested. in our opinion, the principle of selecting possibility of an individual educational trajectory is applied not only to students, but also to teachers. the discussion of different opinions and points of view at classes, the representation of alternative creative works on one topic teach students a tolerant attitude to other points of view and results and help them to understand the law of diversity of ways for understanding objective reality. in addition, the simultaneous students’ presentation of different works on the same issue creates a special educational rivalry, which encourages the audience to personal movement and heuristic search for a solution. for example, a seminar on the topic is prepared by a student in several versions. the educational process is accompanied by reflexive awareness of its entities. different types of educational reflection are used: oral discussion, written questionnaires, graphical representation of the changes taking place. in order to understand the importance of reflective work for students, we review their points of view, estimate and mark those, whose depth of selfawareness increases. table 1 optional disciplines in the educational process of bachelor students majoring in “business economics” in the classical private university optional disciplines 2nd year 3rd year 4th year “global economics”, “foreign economics”, “commodity market infrastructure”, “national economy”, “social and economic security” “industrial enterprise economics”, “commercial enterprise economics”, “economic and mathematical models in economic management”, “e-commerce", "enterprise reporting", “investing”, “commercial activity”, “decision making methods”, “entrepreneurship and business culture” “analysis of economic activity”, “internal economic mechanism of enterprises”, “enterprise capital: formation and use”, “organizational design of the enterprise”, “tax system”, “forecasting of social and economic processes”, “finances of enterprise”, “management of intellectual capital”, “formation of business model of the enterprise” baltic journal of economic studies 152 vol. 6, no. 5, 2020 reflection is a condition necessary for a student or teacher to have possibility to see the scheme of organization of their own educational activities, to design it in accordance with their goals and programs, to understand and master the methods of heuristic educational activities. thus, learning along an individual educational trajectory takes place in stages. to diagnose the level of satisfaction with the quality of educational services among future economists, we developed a questionnaire, where each question has 10 answers, in order to survey applicants for satisfaction with the procedure of choosing an individual educational trajectory and the process of supporting the educational program at classical private university (zaporizhzhia). the questionnaire consists of the following questions: 1) are you satisfied with the procedure of forming an individual educational trajectory: choice of disciplines of the variable part of the plan, choice of place of internship, topics of course and qualification work? where 1 is completely dissatisfied, 10 is completely satisfied; 2) how much are you overloaded with the volume of theoretical and practical tasks? where 1 is the most overloaded, 10 is not overloaded at all; 3) do you have enough time to do independent work? where 1 is not enough, 10 is completely enough; 4) how difficult is the educational program for your mastering? where 1 is easy to understand, 10 is very difficult to master; 5) are you satisfied with the teaching methods? where 1 is completely dissatisfied, 10 is completely satisfied; 6) are you satisfied with the level of educational support? where 1 is completely dissatisfied, 10 is completely satisfied; 7) are you satisfied with the level of organizational support? where 1 is completely dissatisfied, 10 is completely satisfied; 8) are you satisfied with the level of information support? where 1 is completely dissatisfied, 10 is completely satisfied; 9) are you satisfied with the level of advisory support? where 1 is completely dissatisfied, 10 is completely satisfied; 10) are you satisfied with the level of social support? where 1 is completely dissatisfied, 10 is completely satisfied. provide your remarks and suggestions on the formation of an individual educational trajectory. provide your remarks and suggestions on changes in the content of the educational program. individual educational program individual educational route individual educational trajectory the plan of educational activity made by the student with the help of the teacher (tutor) the way of mastering the educational program, chosen by the student, with fixed time and educational criteria personal path of the student on the chosen route with pedagogical support of the teacher invariant component: educational and professional program, curriculum. variable component: specialization, disciplines of the student's choice development of an individual schedule of the educational process and final control. selection of class schedule and individual tutor consultations selection of technology and method of teaching, the sequence of tasks by modules, their level of complexity, the pace of their implementation, methods of pedagogical interaction with the teacher and students figure 1. levels of design of the undergraduate individual educational trajectory baltic journal of economic studies 153 vol. 6, no. 5, 2020 provide your suggestions for improving the support of applicants in the process of mastering the educational program. the bases of internships for economics students of classical private university are the following state institutions: management of the pension fund of ukraine in voznesenivskyi district of zaporizhzhia; department of foreign relations and foreign economic activity of the zaporizhzhia regional state administration; territorial bodies of the sfs in zaporizhzhia region, etc. the levels of student support in the educational process of the university and industrial practice are given in figure 2. the application of the diagnostic complex confirms that the pedagogical experiment resulted in quantitative changes in indicators that reflected significant qualitative changes in minds and behavior of the future economists. it demonstrates the significant positive dynamics of future economists’ readiness for innovative economic activity and formation of the foundations of professionalism. the quantitative indicators of the experimental groups become the statistical confirmation of this. the number of students with a high level of professionalism has increased from 10.3% to 33.7%. it is an increase by 23.4%. the index of a sufficient level of professionalism of the future economists has increased in 20.6%. it is from 25.4% to 46.0%. the number of students with the initial level of professionalism has decreased in 22.6 %. it is a decrease from 25.8% to 3.2%. the dynamics of the assessing results of the future economists’ readiness for the development of the national economy in terms of european integration is shown in table 2. processing of experimental data is showed using an indicator that integrates data on all four components of professionalism of the future economists: motivational and valuable, innovational and cognitive, productive and reflective ones. figure 2. levels of student support in the educational process of the university table 2 levels of formation of components of future economists’ professionalism, % component levels motivational and valuable innovational and cognitive professional activity effective and reflective еg cg еg cg еg cg еg cg high level statement stage 11.1 12.9 7.9 6.5 9.5 11.3 12.7 14.5 forming stage 36.5 19.4 33.3 16.1 30.2 14.5 34.9 17.7 increase 25.4 6.5 25.4 9.7 20.6 3.2 22.2 3.2 sufficient level statement stage 34.9 32.3 25.4 24.2 19.0 17.7 22.2 24.2 forming stage 47.6 45.2 47.6 45.2 46.0 40.3 42.9 35.5 increase 12.7 12.9 22.2 21.0 27.0 22.6 20.6 11.3 basic level statement stage 38.1 37.1 38.1 38.7 39.7 40.3 38.1 32.3 forming stage 14.3 30.6 15.9 30.6 19.0 33.9 19.0 38.7 increase -23.8 -6.5 -22.2 -8.1 -20.6 -6.5 -19.0 6.5 initial level statement stage 15.9 17.7 28.6 30.6 31.7 30.6 27.0 29.0 forming stage 1.6 4.8 3.2 8.1 4.8 11.3 3.2 8.1 increase -14.3 -12.9 -25.4 -22.6 -27.0 -19.4 -23.8 -21.0 baltic journal of economic studies 154 vol. 6, no. 5, 2020 the rate of change of the corresponding indicators in the control groups is much lower. 3. conclusions thus, special attention is required in order to create conditions for modeling by students, future economists, their individual trajectory of study and the schedule of their movement along this trajectory, which includes: acquaintance with the training program, normative and variable parts of the curriculum, proposed study models: full-time, combined, and distant ones. in accordance with the plan of the experiment, diagnostic tools are proposed in order to test the formation of components of the the future economists’ readiness for the development of the national economy in the context of european integration. it consists of questionnaires on methods tested in research; author’s tests in order to identify the level of educational and professional achievements of the students. their results’ conducting and processing are implemented by means of information technology. the effectiveness of the proposed scientific and methodological support of professional training of future economists for the development of national economy in the context of european integration has been experimentally tested. the application of the diagnostic complex confirmed that the experiment resulted in quantitative changes in indicators that reflected significant qualitative changes in minds and behavior of the future economists. it approves significant positive dynamics of their readiness for innovative economic activity and their readiness to develop the national economy. the quantitative indicators of the experimental groups become its statistical confirmation. the number of students with a high level of professionalism has increased from 10.3% to 33.7% (an increase by 23.4%). the index of a sufficient level of professionalism of the future economists has increased in 20.6% (an increase from 25.4% to 46.0%). the number of students with the initial level of professionalism decreased in 22.6 % (a decrease from 25.8% to 3.2%). the rate of change of the corresponding indicators in the control groups is much lower. references: bielai, s., morozov, i., & tylchyk, v. (2018). the innovative approach to the crisis situations monitoring of the social and economic origin that endanger the security of ukraine. baltic journal of economic studies, vol. 4, no. 3, рр. 15–21. doi: 10.30525/2256-0742/2018-4-3-15-21 bubnova, ju. v. (2018). sushhnost i osobennosti professionalnoj podgotovki budushhih jekonomistov k vzaimodejstviju s inojazychnymi partnerami [еssence and features of professional training of future economists to interact with foreign language partners]. vestnik tgpu, no. 3(192), рр. 14–18. (in russian) haiduchenko, yu. o. (2015). realizatsiia indyvidualnoho pidkhodu do navchannia ta samorealizatsiia studentiv ekonomichnykh spetsialnostei [implementation of an individual approach to learning and self-realization of students of economic specialties]. pedahohika ta psykholohiia, vol. 51, pp. 22–28. (in ukrainian) kovalchuk, h. o. (1999). aktyvizatsiia navchannia v ekonomichnii osviti. navchalnyy posibnyk [intensification of education in economic education. tutorial]. kiev: kneu, 128 р. (in ukrainian) polyezhayev, y., koval, v., & bezkhlibna, а. (2018). communicative competences in enhancing of regional competitiveness in the labour market. baltic journal of economic studies, vol. 4, no. 5, рр. 105–113. standards and guidelines for quality assurance in the european higher education area (esg) (2015). retrieved from: https://enqa.eu/wp-content/uploads/2015/11/esg_2015.pdf (accessed 17 september 2020). tkalenko, n. v., & fedorchenko, v. v. (2011). problemy pidhotovky suchasnykh ekonomistiv u systemi vyshchoyi osvity [problems of training modern economists in the system of higher education]. naukovyy visnyk chdieu, vol. 3(11), рр. 31–35. (in ukrainian) yevtushevskyi, v. a. (2002). ekonomichna osvita u vyshchii shkoli: zdobutky ta perspektyvy formuvannia [economic education in higher education: achievements and prospects of formation]. vyshcha osvita ukrainy, vol. 2, рр. 86–91. (in ukrainian) baltic journal of economic studies 1 vol. 6, no. 5, 2020 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: andrzej.pawlik@ujk.edu.pl orcid: https://orcid.org/0000-0003-2319-6707 researcherid: v-3209-2018 2 jan kochanowski university in kielce, poland. e-mail: pawel.dziekanski@ujk.edu.pl orcid: https://orcid.org/0000-0003-4065-0043 researcherid: h-4658-2016 3 bank spółdzielczy w kielcach, poland. e-mail: urszula.karpinska@bskielce.com.pl orcid: https://orcid.org/0000-0002-4032-8823 doi: https://doi.org/10.30525/2256-0742/2020-6-5-1-7 smart specializations in the strategies of medium-sized cities. experiences of the świętokrzyskie province andrzej pawlik1, paweł dziekański2, urszula karpińska3 abstract. smart specialization strategies, which at the regional level are to serve the implementation of smart growth strategies, are an extremely important tool of innovation policy and strategies. innovation policy should incorporate elements of scientific, technological and industrial policy. in a narrow sense, innovation policy is a set of documents: strategies, programs, directives, reports, measures and assessments that are supposed to shape it. the article formulates the thesis that without improving the key factor – economic, quality of human capital and social constituting their specific potentials – the implementation of the concept of smart specializations is not possible in weak cities and voivodeships. the aim of the study is to present strategic documents and potentials facilitating the process of selecting and developing smart specializations based on the experience of the region and its medium-sized cities. key words: innovation, innovativeness, innovation potential, smart specializations, medium-sized cities. jel сlassification: o18, o31, r11 1. introduction smart specialization strategies are an extremely important tool of innovation policy and strategies, which at the regional level are to serve the implementation of smart growth strategies. innovation policy should involve elements of scientific, technological and industrial policy. in the narrow sense, innovation policy is a set of documents: strategies, programs, directives, reports, measures and assessments to shape it. the article formulates the thesis that the implementation of the concept of smart specializations is not possible in weak cities and voivodeships, without improving the key factors: economic, quality of human capital and social constituting their specific potentials. the purpose of the study is to present strategic documents and potentials facilitating the process of selecting and developing smart specializations using the experience of the region and its medium-sized cities. 2. identifying smart specializations the concept of smart specializations appeared in connection with the long-term programming of cohesion policy in the time horizon for 2014-2020. the europe 2020 strategy [2010] became the opening document and the european commission presented documents describing how regional policy can affect “smart growth”. they are included in two regulations: – establishing common provisions for the structural funds and the cohesion fund [european commission 2012]; – regarding the european regional development fund [european commission 2012]. poland also addressed the issue of smart specializations in program documents regarding the assumptions of socio-economic development. the most important documents include: baltic journal of economic studies 2 vol. 6, no. 5, 2020 – poland 2030. the third wave of modernity. long-term national development strategy [2013]; – national spatial development concept until 2030 [2011]; – national strategy of regional development 2010-2020. regions, cities, rural areas [2010]; – national development strategy 2020: active society, competitive economy, efficient state [2012]. one of three priorities of the europe 2020 strategy is intelligent development, i.e. the development of an economy based on knowledge and innovation as a driving force for europe's socio-economic development. the initiative for improving framework conditions and access to funding for research and innovation – innovation union [european commission 2010] is of key importance for the successful implementation of smart specializations. two other initiatives are complementary to the implementation of the smart development model in the european union: – youth on the move aimed at improving the results of education systems and increasing the attractiveness of european higher education in the international arena; – the digital agenda for europe enabling the spread of high-speed internet and access for households and businesses to benefit from the digital single market. in a special document entitled: regional policy contributing to smart growth in the europe 2020 strategy, the european commission set out how regional policy can contribute to smart economic growth in the eu. the eu assumes that regional policy will support smart growth in all regions, with particular emphasis on science and technology parks as institutions relevant to stimulating innovation and regional development. the document sets out the list of actions that, according to the european commission, allow achieving the goals of smart growth programmed in the europe 2020 strategy. the basic action was the implementation of smart specialization, which is to serve the concentration of resources in the most promising areas of comparative advantages of individual regions. smart specialization is a key concept of regional innovation policy. it promotes effective, efficient and synergistic use of public funds for investments in research and innovation. this means having an innovation-oriented development strategy in the region, which is based on strengths and competitive advantages. this leads to the specialisation of the economy in an intelligent way, based on the resources of the region and determining what specialties can be developed compared to those in other regions. the smart specialization strategy is, according to this document, a multi-annual strategy focused on well-functioning national and regional research and innovation systems. the distinguishing feature of smart specialization strategies is their strong orientation towards the use of global competitive advantages. from the point of view of the issues of smart specialization undertaken by poland in program documents concerning the assumptions of the socioeconomic and spatial development of the country in the perspective of 2030, and in the horizon identical to the programming of the eu financial perspective, i.e. until 2020, integrated strategies are very important: – strategy for sustainable development of rural, agriculture and fisheries for 2012–2020 [2012]; – transport development strategy up to 2020 (with a perspective up to 2030) [2013]; – efficient state strategy 2020 [2013]; – strategy for innovation and efficiency of the economy "dynamic poland 2020" [2013]; – social capital development strategy 2020 [2013]; – strategy for the development of the national security system of the republic of poland 2022 [2013]; – human capital development strategy 2020 [2013]; – energy security and environment 2020 strategy [2012]. the dynamic poland 2020 strategy [2013] stated that the need to identify smart specializations at the national and regional level results from the obligation for poland to fulfill ex ante conditionalities, defined by the european commission is necessary to indicate support for the development of r&d and enterprises from structural funds of the eu for 2014-2020. the documents indicating the national specializations in research and innovation are: – polish road map of research infrastructure. – national research program. – results of foresight projects. the issue of matching smart specializations to the regional development context is presented in the document dynamic poland 2020 indicating three most important sources of inspiration. it is important to support the introduction of innovation not only in the field of new industries but also in the search and implementation of innovative solutions in the areas of traditionally key branches of regional or local economies. however, in the longer term, it is important to achieve a diversified structure of the economy, based on the pillar of modern services and industries and technologies with the highest growth potential. 3. designation of smart specializations the process of determining smart regional specializations was bottom-up, which is why there was a great diversity in the methodology, the process of their emergence and final effects. two approaches to emerging regional smart specializations can be distinguished: industry and process. in the industry approach, the focus is on the selection of specific industries or their groups. the process approach departs from traditionally understood industries and is more focused on the relationships between various regional potentials: economic, institutional, social, etc. baltic journal of economic studies 3 vol. 6, no. 5, 2020 ta bl e 1 sm ar t s pe ci al iz at io ns o f v oi vo de sh ip s vo iv od es hi p ict / multimedia bioeconomy healthy food medicine / health tourism machine and metal industry energy (including renewable energy) chemistry creative industries business services construction logistics and water and civil engineering high quality of life woodworking and furniture industry mining industry manufacture of products from the so-called plastic textile industry / design aviation and space technology gate to the east offshore technologies water economics total sum do ln oś lą sk ie x x x x x x x 7 ku ja w sk opo m or sk ie x x x x x x x 7 lu be ls ki e x x x x 4 lu bu sk ie x x x x x 5 łó dz ki e x x x x x x 6 m ał op ol sk ie x x x x 4 m az ow ie ck ie x x x x 4 op ol sk ie x x x x x 5 po dk ar pa ck ie x x x 3 po dl as ki e x x 2 po m or sk ie x x x x x x x x 8 śl ąs ki e x x x x 4 w ar m iń sk om az ur sk ie x x x 3 w ie lk op ol sk ie x x x x x x 6 za ch od ni op om or sk ie x x x x x 5 św ię to kr zy sk ie x x x x 4 to ta l 9 9 9 9 8 5 4 3 3 4 4 2 2 1 1 1 1 1 1 1 so ur ce : d zi em ia no w ic z et a l. 20 14 , p . 7 4 baltic journal of economic studies 4 vol. 6, no. 5, 2020 discussions on the process of identifying and selecting smart specializations coincided with the process of updating voivodeship development strategies and regional innovation strategies, which, according to the provisions of the act [2006] on the principles of conducting development policy, are subject to public consultation. the issue of regional specializations was an element given to wide consultations. table 1 contains smart specializations of voivodeships, which have been grouped into 20 thematic areas. in individual voivodeships, 2 to 8 smart specializations have been designated and they are the resultant of their potentials. smart specializations are defined both in sectoral, horizontal and multifaceted terms indicating the need for cooperation not only on the economic but also social and institutional levels. the most frequently chosen smart specializations include information and communication technologies, which were selected by 10 voivodeships. they are defined very differently from understanding the ict sector (information processing, multimedia, programming, ict services) to focusing on the computer games industry. choosing ict as a key specialization can mean equalizing the level of regional potential in this area. from a strategic point of view, this is the right way forward, it can mean that the development of the information society in poland has become an important goal of public authorities at the regional level. it should be borne in mind that the voivodeships also reported specializations for which the european commission will allocate the largest financial support. life science, sustainable energy (low carbon economy) and ict have been at the forefront for years. analysis of the number of smart specializations in individual voivodeships leads to the conclusion that most voivodeships base their development on fields related to natural resources: bioeconomy, healthy food, health tourism. there are also voivodeships in which traditional industries will continue to play an important role in regional development, e.g. the metal and construction industries in the świętokrzyskie province. it seems likely that the limitation to a few specializations in the voivodeship was the result of the desire to indicate the actual regional specification and may indicate a mature approach to assessing own potentials. the process of selecting smart specializations in voivodeships is still open, and the monitoring of current smart specializations should contribute to their possible modification. in poland, apart from regional smart specializations, national specializations have been selected. the process of identification and selection of national smart specializations began in 2012. the basic documents constituting the starting point for determining national smart specializations were: technological industry foresight – insight 2030 and the national research program. the national smart specialization is an open document that will be subject to constant verification and updating based on a system of monitoring the occurring socio-economic changes. kis defines economic priorities in the area of r+d+i, the development of which will ensure the creation of innovative socioeconomic solutions, increasing the added value of the economy and increasing its competitiveness on foreign markets. the kis document indicates 18 national smart specializations, which were defined in the following sections: healthy society, agri-food bioeconomy, forestwood and environmental bioeconomy, sustainable energy, natural resources and waste management, innovative technologies and industrial processes. the implementation of kis will take place through the implementation of national programs, e.g. projects, ncb and r , parp, as well as using eu funds under operational programs, mainly poir . in poland, work on smart specializations was carried out at both the national and regional level. it should be emphasized that the work was carried out independently and that no rule was adopted that national smart specializations override the specializations defined at the regional level. identif ying smart national and regional specializations is not a completed process. along with the change of socio-economic conditions in the country and voivodeships and the results of rankings regarding innovation, it may be necessary to update the choices made, which is why national and regional innovation strategies should be constantly monitored. 4. smart specializations in the province and cities various research methods and tools were used innovatively in the work on the regional innovation strategy of the świętokrzyskie voivodeship until 2020. as a result of conducted work, knowledge about the innovation potential of the province was obtained. świętokrzyskie, constituting the basis for building the competitive position of the region, including regional specializations, including smart specializations. when determining them, it was not enough to identify competitive advantages. the relationships between development areas and key technologies for the development of the region had to be determined. they were looking for such industries that, when supported, would activate the voivodeship. many possibilities were analyzed, such as design, which was later rejected, because it was recognized that in many other regions such areas appear, and the potential of the province. świętokrzyskie is too small for this. regional specializations, including smart specializations, are based on endogenous potentials and serve to increase the competitive position of the baltic journal of economic studies 5 vol. 6, no. 5, 2020 region, including sustainability. actions taken in the świętokrzyskie in the area of identification of regional specializations, including smart specializations, have been focused on determining: the unique features and assets of the region, the possibility of gaining competitive advantages and the focusing of regional partners and resources around the vision and challenges of the region. the strategic goal of the ris3 research and innovation strategy is: by 2020, the świętokrzyskie voivodeship will have a culture conducive to innovation, entrepreneurship and competitiveness, which will help create new and sustainable jobs for highly qualified employees and support economic growth that will be faster than the national average. on february 24, 2014, the sejmik of the świętokrzyskie voivodeship unanimously adopted the research and innovation strategy (ris3). from absorption to results – how to stimulate the potential of the świętokrzyskie 2014-2020 +. ris 2014-2020 + is an integral part of the strategic order set out by the development strategy of the świętokrzyskie voivodeship (srwś) until 2020. srwś sets the main directions of the voivo deship's development and points to the existing eco nomic potentials. the purpose of ris3 is to further develop these potentials by choosing smart specializations that will allow to increase the effectiveness of public support granted for the development of innovations related t o new technologies and accelerate the economic development of the voivodeship. currently, four areas of the economy are selected that are smart specializations of the świętokrzyskie province: metal and foundry sector, resource-efficient construction, health tourism, modern agriculture and food processing, which are supported by three horizontal areas: information and communication technologies (ict), sustainable energy development and the trade fair and congress industry (strategy ris3 2014). the choice of smart specializations is to be a way to spend public funds more efficiently to increase the impact of the r&d sector and innovation on existing competitive advantages and contribute to faster development. the development of the ris3 strategy in accordance with the concept of “smart specialization” was a pre-condition (ex ante conditionalities) for receiving eu funding. if these conditions were not met, corrective action would have to be taken in 2014/2015. the świętokrzyskie voivodeship will receive over 1.3 billion eur in the period 2014-2020, from the entire pool reserved for poland in the amount of 72.9 billion eur , including approx. 10 billion eur for innovation support programs at the national and regional level. new eu funds will be introduced to the economy of the voivodeship mainly through the regional operational program (rpo), which is one of the most important instruments within the region's responsibility to dispose of funds for innovation in 2014-2020. the research and innovation strateg y (ris3) is a document indicating general areas that require special intervention by the local government of the świętokrzyskie voivodeship and units implementing or conducting the strateg y's assumptions in the sphere of innovation throughout the region. this document only sets out examples of action lines whose implementation would contribute to the implementation of the operational objectives indicated, which in turn would translate into the strategic goal of ris3. in itself, the strateg y does not assume specific initiatives and undertakings that could be implemented within its framework, and thus does not indicate the location, type and scale of these undertakings that in any way could negatively affect the voivodeship's sustainable development or environmental protection. we are currently witnessing very dynamic socioeconomic and technological changes in which cities play a key role. the demographic boom and dynamic urbanization, strengthened by globalization processes and an unprecedented flow of population, capital and information, mean that cities face unprecedented challenges, needing new development strategies. cities must constantly evolve and adapt to the changing needs of their inhabitants, hence the bastions of innovation were usually cities, which in turn supported the development of their countries (florida, 2015). in polish literature, the concept of a medium-sized city is not explicit. in most cases, a range of 20,000 is given. up to 100,000 residents, as characteristic of this group of urban centers. however, both upper and lower limits of this range raise doubts, changed by the authors depending on research needs. the authors in the conducted research assumed that a medium-sized city is a city with 10,000 to 100,000 inhabitants. residents with a region-forming nature of many connections and being a kind of "relay " of development impulses with a balanced system of socio-economic gravities (labor market, commuting, permanent migrations). analyzing the development strategies of mediumsized cities in the świętokrzyskie voivodeship, it should be stated that there are no references to the smart specializations adopted in the voivodeship. only in busko zdrój's strategy can we find a reference to smart specialization, i.e. health and health tourism. 5. conclusion the proposed specializations of polish voivodeships should be supported by the necessary potentials for their development (the potential of the economy, the potential of science, the potential of technology and innovation, and intellectual potential). to this end, potential deficits and how to make up for them baltic journal of economic studies 6 vol. 6, no. 5, 2020 must be identified. this may result in questioning the advisability of investing in some of the specializations proposed by marshal offices. such likely actions may be important in the context of obtaining funds from operational programs. currently, the ideas of smart specializations are updated by voivodeships, ministries and external institutions that interpret the intentions of various levels of administration. there are probably many smart specializations waiting for a final settlement in the area of number, types, sources of financing or levels of responsibility. the implementation of the concept of smart specializations must be supported by changes in economic structures, the quality of human and social capital in the economically weakest voivodeships, including świętokrzyskie. new challenges are also waiting for medium-sized cities, which, e.g. in the świętokrzyskie province (except busko zdrój) have not chosen and focused on smart specializations. identification of smart specializations in the province medium-sized świętokrzyskie and its cities should provide: – focusing policy and investment support on key regional challenges and needs to ensure knowledgebased development; – economic strength of identified regional assets; – use of strengths, competitive advantage and the potential for excellence of the region; – the possibility of obtaining lasting competitive – identification of research areas in the region; – monitoring according to smart specializations. probably, identification of smart specializations in the province świętokrzyskie and its medium-sized cities will be conducive to the partner system of comanagement for the development of research and innovation at the regional level, contributing to the development of the świętokrzyskie province. table 2 strategies for medium-sized cities town strategy period strategy 's objectives smart specialization reference ostrowiec świętokrzyski 2014-2020 natural and cultural environment. economy and infrastructure. social sphere. none skarżysko – kamienna 2014-2020 revitalizing post-industrial areas and modernizing existing industrial plants. modernization and development of tourist and recreation base. none starachowice 2018-2027 a modern and attractive city with an improved spatial structure. stimulating the development of starachowice based on its economic potential. none sandomierz 2015-2025 creating decent living and development conditions for the inhabitants of the city of sandomierz. developing the royal tourist offer. none końskie 2014-2022 adaptation of technical and spatial infrastructure to development needs. development of human capital and improvement of social infrastructure. none busko-zdroj 2015-2025 development of tourism based on natural resources. increased entrepreneurship and social activity. the increase in the attractiveness of living conditions. there is one referring to pro-health tourism staszów 2015-2025 the development of entrepreneurship and economic activity. identity and social activity development. the increase in the attractiveness of housing and the shaping of public spaces in rural and urban areas. none jędrzejów 2015-2020 developing conditions for creating new jobs, improving infrastructure, and reducing the amount of harmful substances in the air. none pińczów 2015-2022 creating conditions for the development of entrepreneurship and agriculture. increasing the tourist attractiveness of the commune by using its natural values and cultural heritage, building tourist infrastructure facilities and its effective promotion. none włoszczowa 2015-2024 aesthetic and functional public space. attractive offer of recreation, culture and education. increase in economic and social activity. none source: own study based on the development strategy of the above cities, which are annexes to the resolutions of the city councils references: długookresowa strategia rozwoju kraju. polska 2030 (2013). ministerstwo administracji i cyfryzacji, warszawa. dynamiczna polska 2020 (2013). strategia innowacyjności i efektywności gospodarki, mg, warszawa. dziemianowicz, w., szlachta, j., & peszat, k. (2014). potencjały rozwoju i specjalizacje polskich województw. geoprofit, warszawa. europa 2020 (2010). mrr , warszawa. baltic journal of economic studies 7 vol. 6, no. 5, 2020 european commission (2012). connecting smart and sustainable growth through smart specialisations. a practical guide for erdf managing authorities, brussel, november. florida r . (2015). the historic link between cities and innovation, citylab.com. url: http://www.citylab.com/ design/2015/12/the-historic-link-between-cities-and-innovation/422226/ komisja europejska (2010). komunikat komisji do parlamentu europejskiego, rady europejskiego komitetu ekonomiczno-społecznego oraz komitetu regionów, projekt przewodni strategii europa 2020 unia innowacji, sec(2010)1161, bruksela dnia 6.10.2010, com(2010)546 wersja ostateczna. komisja europejska (2012). rozporządzenie parlamentu europejskiego i rady ustanawiające wspólne przepisy dotyczące europejskiego funduszu rozwoju regionalnego, europejskiego funduszu społecznego, funduszu spójności, europejskiego funduszu rolnego na rzecz rozwoju obszarów wiejskich oraz europejskiego funduszu morskiego i rybackiego objętych zakresem wspólnych ram strategicznych oraz ustanawiające przepisy ogólne dotyczące efrr , efs i fs oraz uchylające rozporządzenie rady (we) nr 1083/2006, sec(2011)1141 wersja ostateczna i sec(2011)11142 wersja ostateczna, bruksela, 14.03.2012, com(2011)615. national strategy of regional development 2010-2020. regiony, miasta, obszary wiejskie (2010). mrr , warszawa. koncepcja przestrzennego zagospodarowania kraju do 2030 (2011). mrr , warszawa. nelson, r ., & rosenberg, n. (1993). technical innovation & national system, [w:] national innovation system, r . nelson, n. rosenberg. oxford: oxford university press. okoń-horodyńska, e. (1998). narodowy system innowacji. wyd. ae, katowice. okoń-horodyńska, e. (2015). polityka innowacji w ue: przerost formy nad treścią? [w:] determinanty rozwoju polski. polityka innowacyjna, j. kotowicz-jawor, s. krajewski, e. okoń-horodyńska, (red.). pte, warszawa. pawlik, a. (2014). dystans innowacyjny województw w roku 2016. wyd. uniwersytetu jana kochanowskiego, kielce. strategia bezpieczeństwo energetyczne i środowisko 2020, 2012, ministerstwo gospodarki, warszawa. strategia innowacyjności i efektywności gospodarki „dynamiczna polska 2020” (2013). ministerstwo gospodarki, warszawa. strategia rozwoju kapitału społecznego 2020 (2013). ministerstwo kultury i dziedzictwa narodowego, warszawa. strategia rozwoju systemu bezpieczeństwa narodowego rzeczypospolitej polskiej 2022 (2013). ministerstwo obrony narodowej, warszawa. strategia rozwoju kapitału ludzkiego 2020 (2013). ministerstwo pracy i polityki społecznej, warszawa. strategia zrównoważonego rozwoju wsi, rolnictwa i rybactwa na lata 2012-2020 (2012). mrirw, warszawa. national development strategy 2020: aktywne społeczeństwo, konkurencyjna gospodarka, sprawne państwo (2012). mrr , warszawa. strategia sprawne państwo 2020 (2013). ministerstwo spraw wewnętrznych, warszawa. strategia rozwoju transportu do 2020 roku a perspektywą do 2030 (2013). ministerstwo transportu, budownictwa i gospodarki morskiej, warszawa. strategia badań i innowacyjności ris3. od absorpcji do rezultatów – jak pobudzić potencjał województwa świętokrzyskiego 2014-2020+ (2014). urząd marszałkowski, kielce. uchwały rad miasta: busko-zdrój, jędrzejów, końskie, ostrowiec św., pińczów, sandomierz, skarżysko kam., starachowice, staszów, włoszczowa w sprawie przyjęcia strategii rozwoju. ustawa z 6 grudnia o zasadach prowadzenia polityki rozwoju (2006). dz.u., nr 227, poz. 1658. baltic journal of economic studies 50 vol. 5, no. 3, 2019 corresponding author: 1 national university of food technologies, ukraine. e-mail: gutkevych@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-50-58 investment at tractiveness of industries: features and trends svitlana gutkevych1 abstract. the article shows that the investment attractiveness of the branches of the economy depends on the sources of their investment. the purpose. the purpose of the article is to determine the features and trends of investment attractiveness of industries. results. the volume of budget investments has been reduced, and the state is not the main executor of the investment process and can influence it through the system of taxes, loans, depreciation, privileges, and subsidies. it is determined on the basis of the analysis of sources of investment that self-financing is of paramount importance and the main source of investment is its own resources, first of all, profit. the basic functions that make a profit and the factors affecting it are determined. the considered functions directly result from the development of the enterprise and depend on the adoption of investment decisions. the role of the profit in the adoption of an investment decision depends on its type: short-term expected profit is a complete self-financing, which implies the rapid implementation of investments. profit is the result of the effective operation of any investment object and the basis for making an investment decision. these functions can be considered as classical interdependent because they find content only in the conditions of their existence and contribute to the development of production. the innovation activity of the enterprise determines its potential market opportunities and attractiveness for the investor, and profit growth is ensured mainly due to: production of new products; development of new markets; growth of labour productivity; use of new raw materials. in economically developed countries, the investment process depends on the impact of market conditions, sources and size of investment financing. attracting investments in any form contributes to the development of the economy. value/originality. profit is considered, firstly, as the profit received as a result of production and sales of products or services; and secondly, income in the form of interest or dividends received from the acquisition/investment of securities. in the course of the study, the motivational content of profit as the main source of investment is considered. international experience shows: the volume of foreign investment entering the country’s economy determines its integration into the world community. key words: investment attractiveness, industries, profit, factors, development. jel classification: e22, e27, d24, k23, n50 1. introduction the general and state climate of the state is determined by many factors, including economic and legal ones. in this regard, the question of creating investment attractiveness as the basis for management of the investment process requires in-depth theoretical and practical developments. despite numerous economic developments, the problem of creating investment attractiveness, which is the basis of the investment process, has not been sufficiently comprehensive in the scientific economic literature. in the changed state approach to the country’s economic development, there is a need for in-depth research and development of new theoretical and methodological foundations for the development of the investment process, forms and mechanisms for creating investment attractiveness at the micro and macro levels for the purpose of the most effective capital investments. when making managerial decisions on investment, it is necessary to determine the most priority objects, that is, more efficient investments of capital: in production, securities, real estate, etc. the current stage is the study of market forms and mechanisms of investment attractiveness at the micro and macro levels. the investment process in ukraine has its own guidelines and priorities for investment. the choice of the most effective form of investment begins with the analysis of possible alternative options. at the heart of the comparison are methods for assessing the effectiveness of investment and, above all, indicators of profit, reliability, risk level. ukraine at the present stage is a country with a rather low investment rating that determines its baltic journal of economic studies 51 vol. 5, no. 3, 2019 investment attractiveness, which depends on the level of development of the legislative framework, political situation, efficiency of economic policy, infrastructure development, volumes of direct foreign investment inflow, and a number of other factors. the functions of forming an investment policy and the system of criteria of attractiveness should be performed and provided only by the state. an important foreign policy value for the country is to receive foreign investments since its volume is one of the indicators characterizes the degree of integration of the country into the world community. it is precisely the lack of knowledge of this issue and, on this basis, the lack of scientifically grounded policy in raising the level of investment attractiveness and clarity in determining priority has a negative impact on the attraction of foreign investments, as well as their impressive use. 2. literature review existing researchers in the investment process development in a certain way cover its state in ukraine. in particular: a. pereverzeva (2016) investigated the features of the foreign investments attraction into the ukrainian economy, which, on the one hand, contributes to the development of the national economy in general and, on the other hand, is an indicator of the conditions and incentive for activation of entrepreneurial activity. not only the overall state of the country’s economy but also the business conditions, in particular, the degree of state intervention and the level of corruption, have a significant impact on investment attractiveness. it has been established that the most attractive sectors for foreign investors are the processing industry, financial activity, trade and real estate operations, leasing, engineering and services to entrepreneurs. andre babot (1993) considered various aspects of profit as one of the main indicators of the activity of any enterprise. on the basis of the theoretical study of profit as a category, the functions that it performs in the economic activity of the enterprise are determined. the author points out that the value of profit as a guide for investment decisions and measures in assessing the effectiveness of management is determined everywhere, regardless of the time, the economic and political system. o. kovalenko and k. tymofieieva (2011) investigated the current state of investment activity in ukraine and the priority directions of activation of foreign investments. n. krihovska and g. chernyshova (2017) investigated the essence of the concepts of “investment climate” and “investment attractiveness” and their difference. the structure of direct foreign investments into the economy, dynamics of inflow of foreign capital has been expanded. the main problems of attraction of investments into the domestic economy, the state of investment attractiveness of ukraine according to international rating assessments, as well as directions of increasing the investment attractiveness of the economy were highlighted. however, the problems of creating investment attractiveness as the main factor in the development of investment activities predetermine the necessity for further research. the state approach to ensuring economic development forms the prospects for the development and implementation of new theoretical and methodological bases for the development of the investment process, the development of mechanisms for the formation of investment attractiveness at the macro level for the embedding of the property and intellectual property in objects of entrepreneurial and other activities, with the purpose of creating profits, achievements, social and environmental impact. 3. international experience of investment one of the factors determining the global economic process is the international interweaving of capital. for ukraine, attracting foreign investment is important in the context of structural reforms in the economy. each economically developed country, as an economic system, has its own model of a market economy, which was formed under the influence of historical traditions, level of economic development, social and national conditions. economic literature has different approaches to the analysis of types of economic systems. there is no single standard of models characteristic of economic systems. each state or region has national models of organization of the economy, as countries differ in historical experience, level of economic development, social and national conditions. this is an american model of the economy, swedish, japanese, south korean and other models that differ significantly from each other. their study is of practical importance for the correction of ukraine’s development, taking into account the specific conditions prevailing in the country. in economically developed countries, the investment process depends on the impact of market conditions, sources and size of investment financing. investing in these countries is carried out at the expense of private capital investments, direct investment from the budget; indirect budgetary subsidization of investment shares, i.e. due to investment loans and tax breaks; investments in social objects from social and charitable foundations. the state controls, on a legislative basis, certain activities related to national interests: banking, financial, and tax systems and regulates changes in the balance of payments. world experience has shown that foreign investment has advantages over other forms of financing of economic development. this is in front of all an additional external source of investments in the production of goods and services, which contributes to the development of the baltic journal of economic studies 52 vol. 5, no. 3, 2019 economy, while not affecting the state budget and the external debt of the state. for ukraine, the experience of different states is important, as the influence of foreign investment on the state’s economy in the world is not the same. the analysis of the most important factors influencing the process of attraction of direct foreign investments into the economy of poland, as the country bordering ukraine in the west, was conducted. the main ones are: economic transformation; stabilization of economic policy; growth of gross domestic product; participation in the organization for economic cooperation and development; membership in the european union. about 90% of direct investment in poland comes from the member countries of the organization for economic co-operation and development. the analysis of the investment process showed that, according to the priority of the sectors of the economy, investments come primarily into the production of food, beverages and tobacco products, that is, the food industry, then the machine building sector. when studying foreign investors, investing one third of them outlined five factors that have a positive effect on investment attractiveness and foreign direct investment in poland: a good prospect for economic growth of the country; low labour cost; the volume of the polish market; great supply of labour; the possibility of reducing production costs (pavlovych, 2000). the results of the study indicate that, despite significant progress in many areas of activity, foreign investors are still faced with certain difficulties. when asked about the complexity of starting their business, investors often called the following steps: preparation of the necessary documentation and registration of the company; ensuring the normal technical and organizational conditions for starting a business; the recruitment process of the personnel concerned; obtaining permits for doing business from the relevant authorities; search for business partners. foreign investors positively assessed the infrastructure in poland. the development of spain’s economy as one of the european union countries, which has achieved significant economic success, is characterized by a change in the import of food products by exporting high-quality products, economic protection, a stable legislative system, tax improvements, and investment attractiveness for foreign investment. the development of the economy of spain can be divided into four enlarged stages: the post-war period – the path to selfsufficiency; non-competitive growth; stabilization and openness of the market; the stability of the foundations of legislation; the desire for greater openness and increased competitiveness (fernandes, 1993). thus, france does not allow or restrict foreign investment in certain sectors of the economy, for example, in the exploration of mineral resources, mining, and the pharmaceutical industry. the main feature of british policy regarding foreign capital is the desire of the british government to attract foreign direct investment into the country, primarily in the form of advanced foreign technology. the different attitude to foreign investment is determined by the peculiarities of the political and economic development of each country, which is covered in the legislation. in most western countries, there are no special laws on foreign investment, they are regulated as national investments, based on the norms of the general legislation. the policy and legislation of the countries of europe are influenced by the integration processes, the formation of the european union. in the eighties, the share of foreign investment in total investment amounted to 20%, and the us food industry developed due to the influence on foreign investors’ investment policy. in the same period, to the beginning of the 90s, the annual total investment in the country’s food complex amounted to 70-80 billion dollars and 60-64% – the share of investment. an important feature of the us investment process in the past two decades is an increase in the share of private investment. the investment policy in the agribusiness sector in canada and western europe is significantly different from the united states. this is primarily due to the structural features of these countries. for example, the main area of the us – is all fund-making industries and the system of production and technical maintenance of agriculture. in some western european countries, this area is less developed as a result of regional integration and cooperation, on the basis of which almost entirely meet the needs of farms and the processing industry in logistics. in these countries, the most important statistical indicator of the investment process is the size of capital investments in agriculture and the food industry. the industrial area of canada is characterized by a trend of cyclical current capital investments with absolute and relative real reduction of investments. similar tendencies of investment processes are observed in england, germany, and france. at present, the investment policy is aimed at the development of industrial infrastructure. in japan, funds directed at investments contain a high share of bank loans. the investment policy of the european union defines attractive investment priorities: – the focus of the investment activity to maximize capital and resource efficiency in all spheres of agribusiness; – elimination of imbalances in resource potential; – reduction of commodity deficit of products of the agro-industrial complex on the consumer market. like every country, ukraine will have its own model of a market economy, which should be formed taking into account historical traditions, demographic features, specific conditions of development of the country, based on the rational combination of different forms of ownership and management. baltic journal of economic studies 53 vol. 5, no. 3, 2019 4. regulation of investing the development of industries requires the intensification of investing on the basis of the investments attraction, both domestic and foreign. the dynamics of the investment process in ukraine is characterized by a decrease in investment activity and investment demand. the main factors limiting the inflow of investments are both economic and political significance. investment demand on the part of profitable enterprises is limited due to the low level of the profit rate, high level of taxation, growth of debts and nonpayments. formation of investment attractiveness is a part of the investment management system, which summarizes the set of elements that are in relationships and relationships with each other and form a definite ordering, integrity, unity. like any process, investing requires management and it is implemented through functions taking into account the actions of certain laws and principles. to implement the process, investment resources are required as a set of material, financial, and intellectual resources. on the basis of the analysis, material resources are defined as the share of fixed assets; financial resources as a profit or its share; intellectual resources as the result of intellectual, mental, spiritual, and creative activity related to the intellectual product. the modern investment policy is formed on the basis of previous experience of using and creating sources of financing analysis. investment attractiveness of the industries is connected, first of all, with the sources of investment, the problems of their obtaining, formation of conditions that allow the production of investment resources. there are several sources of investing in enterprises and organizations. each of them has its own peculiarities of formation and some normative and legal conditions of their reception and realization (table 1). the effectiveness of investments depends on a system approach to problem-solving. thus, at the macro level, the management of the investment process is related to the state regulation of the economy (figure 1). for example, for the agrarian sector of ukraine, the activation of investment activity depends on state support. the amount of budget funds in the total amount of investment has been reduced; the state is not the main subject of this process and can influence it through the system of taxes, loans, depreciation policy, privileges, and subsidies. in modern economic relations, budget state investments as a source of investment should be directed to the basic strategic industries and directions, as well as to the development of the social sphere, which provides conditions for the development of production. thus, investing in highly profitable branches of production makes it possible to earn revenues, as these industries are efficient, knowledge-intensive, provide an expanded reproduction process, their products are competitive, which contributes to the economic and social development of the country. ukraine needs financial resources or investments in any form. the development of scientific, technical, table 1 sources of enterprise investment reasons restraining investment flow sources of production investment conditions providing investment in production • lack of control over the targeted use of public investment • state irrecoverable investment • state protectionism • provision of state guarantees of private loans • support for highly profitable production • funding for the social sphere • budget deficit • privileged/non-privileged state loans • combining public investment – share participation of the state • foreign investments • the decrease in depreciation fund and imperfect taxation system • lack of own funds • own accumulated funds • indexing according to the standard depreciation inflation • a tax that should stimulate the production • creating professional associations of commodity producers • banks are disadvantaged due to the lack of guarantees of loans repayment • political and economic instability • commercial loans of banks and other financial structures • state guarantee of loans of commercial banks • growth in the rating the trust of the government • foreign banking investments • non-corporate equity • the infrastructure of the securities market is not developed • distrust of the population to money as a means of accumulation in the form of contributions • lack of stock ownership culture • selling your stocks to physical and partly legal entities • corporate equity • the openness of enterprise information • elimination of the psychological causes of inflation • indexing of population contributions • savings for the accumulation • formation of the right expectations of individuals baltic journal of economic studies 54 vol. 5, no. 3, 2019 and humanitarian potential, in particular, its intellectual component is one of the components of successful reforms in modern countries. scientific and technological progress is becoming more and more financially capacious. investing in the social sphere is due to the qualitative improvement of the organization of production, carried out on an innovative basis, which will stimulate the investment attractiveness of industries. the social assessment of the effectiveness of investments depends and is determined by the system of assessments, which includes indicators of the level and quality of life. one of the defining conceptual methodological aspects of socioeconomic reform in ukraine is the resolution of the question of the relationship between the interests of man, society, and the state in the society, in practice this means that the interests of the person as the main object of investment should become the priority, and the interests of the state should be derivatives from them. it will contribute to the enrichment and effective development of the state, stabilizing its political and economic situation, as the socio-economic situation affects the inflow of investments into the country. when adopting an investment decision, a hierarchical scheme describing the basis of the values of life and society and shaping the image of the country is studied (figure 2). in the world, in the context of integration processes, information and knowledge become strategic goods; therefore, there is a reorientation of investments, first of all, investment of capital into a person. the state of the national economy and the welfare of citizens are determined and depend on the state authorities. formation the conditions that of the social benefits: national security, education, the environment medical care, the possibility of creativity, and others are the function of the state. obtaining state loans is complicated in the conditions of budget deficits. therefore, the priority share of the state in the process of investment is preferred, as well as the state guarantees on the contrary to the private loans. according to foreign economists, who analyse the economic situation in our country, state investments should not be connected with the support of unprofitable production, increasing taxes. thus, the increase in various types of taxes leads to different consequences (table 2). table 2 consequences of taxes rising taxes → consequences for profit → reduced revenue added value → inflation increases selling → production is reduced use of means of production and raw materials → the use of production and raw materials is reduced the investment process allows getting profit by increasing the amount of capital invested and increasing the quality of capital used. extensive development is associated with the amount of capital invested and contributes to the increase in the number of employees in production but does not imply a qualitative return on the operation of projects and is reflected in the dynamics of income received in the future. state regulation of the economy taxes loans depreciation subsidies budget system social sphere regulation of ness foreign economic activity regulatory and legal framework figure 1. the system of state regulators of the investment process baltic journal of economic studies 55 vol. 5, no. 3, 2019 intensive investment involves the improvement of the quality of capital used on the basis of reorganization or technical re-equipment of the enterprise, increasing the level of professionalism of the personnel, creating new jobs, increasing the level of wages during the project. intensive development allows getting additional profit while improving the quality of investment. the increase in the capital should be optimized taking into account the marginal efficiency of investments because when investing more often, less profitable projects are implemented. the main purpose of the investor is to receive profits for the accounting period. the size of profit can be expressed as a percentage of the investment cost, which is called the profitability of the investment or the level of profitability. however, there is a general pattern – with an increase in investment, profitability is declining. thus, the marginal efficiency of investments depends on the level of profitability, the volume of investments, and the quality of their use. there is feedback: the number of investments is increasing – the profitability or the amount of income derived from any activity is reducing. this is due to the effect of economic laws. any company has the opportunity to receive certain benefits from investment activity, which is to increase profits. 5. profit as the main source of investing not the amount of profit but the part that remains at its disposal is important in an investment process for an investor as it is a source of self-financing. an algorithm for financing or investing an object, which may be used by any enterprise or organization, is proposed (figure 3). efficiently operating companies have the opportunity to independently form sources of own investment, which include, first of all, the profit remaining at the disposal of the enterprise, depreciation funds, formed reserve funds. rational use of the sources of investment contributes to the achievement of the effect and is a factor affecting the investment attractiveness and priority. s t a t e citizens (population of the country) state administration (employees of ministries, departments) • social status • health • the possibility of creativity • responsibility • quality of work • pleasure self-expression, self-realization social condition healthcare physiological conditions • stability: political material legal • ecology • self-actualization • education • image • need in a team, • in respect • creation of working conditions • health • demography • food necessity • living conditions • rest figure 2. scheme of the hierarchy of living values baltic journal of economic studies 56 vol. 5, no. 3, 2019 the study of sources of self-financing of an enterprise allows determining profits as the main source of investment of enterprises. profit is the basis of an investment decision and is considered from two positions: • first: the profit received as a result of the production and sales of products (services); • second: profit in the form of interest (dividends) received from the acquisition (contribution) of securities. profitability as a set of features that allow one or another moment to predict the level of company profits is estimated in monetary terms, taking into account such factors as the ability to successfully negotiate the terms of lending; positions on the market; level of technology; quality management; growth of the nominal value of the enterprise. in the course of the study, the factors that generate profit and the functions that make a profit are identified and analysed. factors and functioning meaning of the profit are presented in figure 4. the factors considered are related and not interdependent; therefore, generating profit, they affect the degree of investment attractiveness and the development of the innovation process, being a part of it. innovations as a form of investment are involved in the process of continuous recovery, which includes all the changes that contribute to improving the company’s activity in controlling the profitability of all units. innovation process promotes innovation of the economy, improvement of working conditions; increases the level of mechanization and automation of labour-intensive processes; the professionalism of working people; quality management work, encouraging the development of innovative ideas, as well as the training of employees. no no no no yes risk of repayment of loans a n a l y s i s o f i n v e s t i n g s o u r c e s profit granting loans external investment (including foreign ones) investment potential of the accumulation of citizens elimination of the object of financing yes development state guarantees yes refund of debt yes priority and attractiveness yes figure 3. algorithm for investing an object baltic journal of economic studies 57 vol. 5, no. 3, 2019 investing in an innovation project requires justification and evaluation of its effectiveness. on the basis of system analysis of innovation activity of the enterprise, one can determine its potential market opportunities and attractiveness for the investor, and profit growth is ensured mainly due to: production of new products; development of new markets; growth of labour productivity; use of new raw materials. large-scale enterprises expect higher technical and economic levels, which provide high productivity and level of payment. there is a direct relationship between the growth of the company/enterprise and the reduction of risks and the likelihood of bankruptcy, as large enterprises are more competitive, have the opportunity to diversify production and influence the market. but the factor of increasing the size of the company has a certain limit, as well as the tendency to stabilize the growth of profit or its decline, depending on the industry. factor dependence between profit and market is determined by the fact that the investor prefers the most profitable assets or investment products with the maximum rate of return on invested capital, the enterprise must strive to effectively use its competitive advantages, which provide it with economic stability in market unstable relationships and income generation. depending on the number of enterprises in the region that produces investment goods, the level of competition and the price of sales are determined. predictable, expected profit is determined by calculation as the basis of taxation. the expected level of innovation process risk level enterprise size market capacity inflation level planning coordination development motivation self-financing f a c t o r s expected is a landmark or priority of investing received characterizes management quality f o r m p e r f o r m s p r o f i t f u n c t i o n s figure 4. scheme of factors and functioning meaning of the profit return on investment contributes to their increase and, conversely, decreasing profits decrease the demand for investment goods. the alternative to direct investment is to invest money in the bank in order to obtain an interest rate. profit is influenced by the level of inflation, which reflects an increase in the average price level in the economy, and without state regulation of the inflation process, the profit becomes a mechanism for the redistribution of funds of depositors and taxpayers to traders and bankers. factors that generate profits lead to a number of functions that affect the investment process. based on priorities, the investment and management quality that affects expectations and profits can be distinguished by the following revenue-generating functions: • planning based on the fact that the expected profit is the basis for the investment decision; • coordination is related to the development of investments; • development, since the profit is determined by the success of the activity and the quality of management; • self-financing, due to the fact that a part of the profit received is a source of financing for development or reproduction/reinvestment; • motivation characterizing the profitability of investments related to the purpose of investment activity. these functions can be considered as classical interdependent because they find content only in the conditions of their existence and contribute to the development of production. baltic journal of economic studies 58 vol. 5, no. 3, 2019 the considered functions directly result from the development of the enterprise and depend on the adoption of investment decisions. the role of the profit in the adoption of an investment decision depends on its type: short-term expected profit is a complete selffinancing, which implies the rapid implementation of investments. long-term expected profit is related to the cycle of goods production. the values of profit expected for a number of years are formed under the condition of measurement in identical units, that is, are calculated for the calculation period or discounted. in the developed countries, the only possible criterion for the direction of investment processes is to obtain maximum returns (in the short-term, medium-term, and long-term plans). in the public sector, the criteria for the investment decisions are based on the criterion of the general benefits or benefits of the producer. any field of the economy or economic system cannot exist without the criterion that determines the distribution of investments between industries and enterprises. the investment process should not be limited to forecasting profit because it is necessary to manage the process of obtaining it. 6. conclusions the investment system at all levels of management should include and combine possible sources of investment in production to the internal resources of the business entity. it positively affects the effectiveness of the investment process and, as a result, will increase the welfare of the society, ensure its development in the future on the basis of the vital values. any enterprise has the opportunity to benefit from investment activities, which is to increase profits. in an investment process for an investor, it’s not the amount of profit as such, but the part that remains at its disposal and can be used as a source of self-financing. the state supports the priority sectors of the economy; therefore, profit is distributed unevenly across industries. industry, transport, communications, and banking system have a constant profit, unlike the unprofitable agriculture sector. our country has great scientific, human, and technological potential, rich natural resources for economic development. their contribution to the development of the state is possible through the merger of foreign and domestic investors. reforming the economy through the unification of ukrainian and foreign capital contributes to the national interests of ukraine and makes it more attractive for investment. references: zakon ukrainy vid 18.09.1991 № 1560-xii «pro investytsiinu diialnist», zi zminamy ta dopovnenniamy [law of ukraine dated 18.09.1991 no. 1560-xii "on investment activity ", as amended and supplemented]. retrieved from: http://zakon.rada.gov.ua/go/1560-12 babo anre (1993). prybyl [profit] / prevod s frantsuzkoho. moskva: prohress. postanova kabinetu ministriv ukrainy «pro zatverdzhennia prohramy rozvytku investytsiinoi ta innovatsiinoi diialnosti v ukraini» № 389 vid 02.02.2011 [resolution of the cabinet of ministers of ukraine "on approval of the program for the development of investment and innovation activity in ukraine" no. 389 dated february 2, 2011]. ofitsiinyi visnyk ukrainy. retrieved from: http://zakon. rada.gov.ua/laws/show/389-2011-p pereverzieva, a. v. (2016 ). otsinka suchasnoho stanu zaluchennia inozemnykh investytsii v ekonomiku ukrainy [assessment of the current state of attraction of foreign investments into the ukrainian economy]. retrieved from: http://www.irbis-nbuv.gov.ua/.../cgiirbis_64.exe? leshanych, l. v., hunda, s. v. (2015). rozvytok investytsiinoi pryvablyvosti v ukraini ta shliakhy podolannia investytsiinoi kryzy [development of investment attractiveness in ukraine and ways to overcome the investment crisis]. retrieved from: https://dspace.uzhnu.edu.ua/.../ kovalenko, o. v., tymofieieva, k. (2011). priorytetni napriamky inozemnoho investuvannia v ukraini [priority directions of foreign investment in ukraine]. retrieved from: http://www.zgia.zp.ua/gazeta/evzdia_1_078.pdf krykhivska, n. o., chernyshova, h. m. (2017). investytsiina pryvablyvist ukrainy: osnovni problemy ta shliakhy yikh vyrishennia [investment attracti veness of ukraine: main problems and ways of their solution]. retrieved from: http://www.economyandsociety.in.ua/journal/9_ukr/45.pdf herzanych, v. m. (2014). osnovni nedoliky ta problemy zaluchennia inozemnykh investytsii v ukraini [the main drawbacks and problems of attraction of foreign investments in ukraine]. efektyvna ekonomika. retrieved from: http://www.economy.nayka.com.ua/n=4&y=2014 pavlovych adam (2000). zaluchennia priamykh inozemnykh investytsii v ekonomiku polshchi [attraction of direct foreign investments into the economy of poland]. viden. sait derzhavnoi sluzhby statystyky ukrainy [site of the state statistics service of ukraine]. retrieved from: http://www.ukrstat.gov.ua investytsii zovnishnoekonomichnoi diialnosti ukrainy (2014). statystychnyi zbirnyk derzhavnoi sluzhby ukrainy. fernandes (1996). rol hosudarstva v selskom khoziaistve v ahropromyshlennosty [the role of the state in agriculture and agribusiness]. doklad na semynare verkhovnoho soveta ukrainy. baltic journal of economic studies 90 vol. 5, no. 2, 2019 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: lazarenko.yuliia@gmail.com orcid: http://orcid.org/0000-0003-0337-8239 doi: https://doi.org/10.30525/2256-0742/2019-5-2-90-95 open innovation practice: exploring opportunities and potential risks yuliia lazarenko1 abstract. in modern business reality, given a tendency towards digitalization of the economy, expanding network cooperation and the increasing role of knowledge and technology transfer, the principles of interaction between actors of innovation process are changing drastically. these factors determine a shift from the traditional “closed” innovation model towards open innovation practice. the advantages of open innovation activities are widely discussed, however, a large number of enterprises, involved in such projects face various challenges in managing open innovation. thus, from a managerial perspective, it is essential for modern companies to find the right balance between benefits and potentially negative consequences of the open innovation model. although it is an important issue for innovative enterprises to analyse possible risks and benefits of participation in open innovation projects, appropriate managerial instruments of exploring opportunities and threats of such collaboration are still not sufficiently researched. the purpose of the paper is to improve the typology of a company’s open innovation activities and to explore the opportunities and potential risks of open innovation in modern organizations. methodology. to achieve the above-mentioned purpose of the research, the following scientific methods were used: structural-logical analysis, comparative analysis, systematization, formalization, graphical method. the results of the research show that companies need to develop specific innovation capabilities related to knowledge management in order to provide successful implementation of open innovation: knowledge absorptive capability, knowledge sharing capability and knowledge co-creation capability. a theoretical framework for understanding the linkages between a firm’s organizational capabilities related to knowledge management is offered as a result of the study. the improved typology of a company’s open innovation activities in accordance with the direction of knowledge flows (inbound or outbound) is presented. based on research findings key potential risks of open innovation practice are systematized which include primarily loss of core knowledge and technologies, problems in protecting intellectual property and complexity in managing interactions with collaboration partners. practical implications. from a managerial standpoint as a result of the conducted research, the main opportunities and risks of open innovation are defined, which should be taken into account in order to make the right decision on this type of collaboration. appropriate managerial countermeasures are proposed in the paper to be practically applied to prevent risks of open innovation implementation. value/originality. the improved typology of a company’s open innovation activities in accordance with the direction of knowledge flows (inbound or outbound) is presented, as well as main risks and managerial challenges of open innovation practice are systematized. key words: innovation, innovation performance, innovation management, open innovation, innovation collaboration, risks. jel classification: o31, m10 1. introduction in modern turbulent business reality, given a tendency towards digitalization of the economy, expanding network cooperation and the increasing role of knowledge and technology transfer, the principles of interaction between different actors of innovation process are changing drastically. without dynamic innovation capabilities which refer to an organization’s ability to develop new competencies in order to adapt to changing business environments, modern companies are not able to survive in the market from a long-term perspective. these factors determine a shift from the traditional “closed” innovation model which is mainly focused on internal research and development towards open innovation practice which is based on the principle of structured interaction of multiple partners involved baltic journal of economic studies 91 vol. 5, no. 2, 2019 in a business ecosystem, to jointly develop an innovative product, service or technological solution and provide its commercialization. the advantages and positive aspects of open innovation activities are widely discussed in modern innovation management research. however, a large number of enterprises involved in such collaborative projects have to cope with various challenges in managing open innovation. thus, from a managerial standpoint, it is essential for modern companies to find the right balance between possible benefits and potentially negative consequences of open innovation collaboration. 2. actual scientific research and issues analysis during the past years, many studies have been conducted, which embrace various aspects of open innovation practice. a significant contribution to the development of an open innovation paradigm has been made by the following researchers: g. chesbrough, w. vanhaverbeke, j. west, e. enkel, o. gassmann, k. laursen, a. salter, and others. although it is an important issue for innovative enterprises to analyse potential benefits and risks of participation in open innovation collaborative projects, appropriate methods and managerial instruments of finding a balance between opportunities and threats for such type of cooperation are still not sufficiently researched. previous studies related to open innovation strategies have produced mixed results and many questions posed by authors investigating open innovation implementation remain unresolved. the paper deals with the concept of open innovation, which assumes that modern innovative companies make use of external ideas and knowledge, as well as technological and managerial solutions, instead of relying only on their internal resources for enhancing innovation capabilities. it intends to improve the typology of a company’s open innovation activities in accordance with the direction of knowledge flows (inbound or outbound), as well as to identify main risks of open innovation practice and to provide a set of managerial countermeasures for their prevention. the paper is structured as follows: first main forms of open innovation process are presented, which differ with regard to the direction of knowledge flows. then specific innovation capacities of an organization related to the effective implementation of open innovation tools are identified. as a result, key potential risks of open innovation practice are systematized and appropriate managerial countermeasures to be practically applied for their prevention are proposed. 3. the essence of the open innovation approach in the process of searching for ways to enhance their competitiveness, many companies have to re-invent their business models in response to the market and make use of alternative approaches to innovation management. consequently, an open innovation paradigm is emerging, where business entities strive to exploit internal as well as external flows of information, knowledge, technologies, and paths to market and develop their innovation capabilities. it emerges in place of the “closed innovation” model which emphasizes the importance of internal research and development and views that profitable innovation performance requires organizational control. the integrated definition of the open innovation concept was proposed by henry chesbrough and is most commonly described as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation, respectively” (chesbrough, 2003). while the traditional “closed” model of innovation process is based exclusively on ideas, knowledge, and experience within the company an “open” innovation practice assumes that a firm’s innovation capacity can include also external competencies and assets outside the organization (chesbrough, vanhaverbeke and west, 2006, chesbrough and crowther, 2006). the closed innovation concept has been challenged by various factors, which are related to globalization, digitalization, technology intensity, knowledge transfer, and new emerging business models. in order to succeed in a modern market ecosystem, the company is no longer able to innovate in isolation, it has to scan its business environment, develop its absorptive capacity, motivate the external knowledge acquisition, and integrate it with its own internal innovative activities. therefore, today companies enter a new phase of innovation development where the source of their innovation potential can be discovered outside the organizational structure. the open approach to innovation process fits with the contemporary business environment. the open innovation concept presumes that strategic advantage a company has over its competitors often comes from inbound and outbound open innovation activities. within this model, innovative companies have an opportunity to make use of external ideas, knowledge and technologies in order to foster innovation. complementarily, business entities can open up their own innovation processes so a firm’s unused innovation could be shared and benefit other companies. these benefits can be used, as long as business entities are able to create a reliable ecosystem of open innovation, i.e. a network of customers, suppliers, competitors and other stakeholders which collaborate with a company and contribute to the innovation process. 4. types of an organization’s open innovation activities following the conceptualization of h. chesbrough and o. gassmann and е. enkel, in the context of open innovation, there exist different forms and mechanisms baltic journal of economic studies 92 vol. 5, no. 2, 2019 to overcome a company’s boundaries along its innovation process (chesbrough, 2003; gassmann and enkel, 2004). the “outside-in process” (inbound activities) makes it possible to acquire ideas, knowledge or technologies from external sources such as customers, suppliers, competitors or other actors. under this form of interaction, an organization gets an opportunity to explore and acquire knowledge from outside of the firm according to its internal needs. the “inside-out process” is based on the organization’s knowledge sharing capability and assumes that business entities can use external ways to create profits and facilitate the outgoing knowledge through the exploitation of their internal knowledge or technologies by other companies. in this way, unused inventions developed within the company are made accessible to other partners involved in the open innovation ecosystem. the “coupled process” combines the main features of “outside-in” and “insideout” processes (gassmann and enkel, 2004). the figure below (figure 1) provides a typology of an organization’s open innovation activities and some mechanisms on how to implement them. according to the open innovation practice, knowledge has become the key business resource for modern innovative companies. the open innovation model puts new demands on core organizational competencies. within the open innovation framework, three key organizational capabilities related to knowledge management are essential to enable effective open innovation practice (fig. 1): knowledge absorptive capability, knowledge sharing capability, and knowledge co-creation capability. knowledge absorptive capability relates to a company’s ability to recognize, explore, modify, apply, as well as transform external knowledge. within the open innovation framework, this capability focuses primarily on knowledge acquisition. knowledge sharing capability refers to the firm’s willingness to gain new knowledge, as well as to its ability to prepare and perform the process of transferring knowledge through organizational activities. three main dimensions of a company’s knowledge sharing capability can be distinguished: knowledge sharing readiness, knowledge interchanging richness, and continuous knowledge integration which covers knowledge accumulation, combination, storage, as well as transforming ideas gained from systematic knowledge exchange (kokanuch and tuntrabundit, 2010). in an open innovation context, knowledge cocreation capability deals with collaboration within external networks and can be defined as a company’s innovative organization acquiring new knowledge:  in-licensing;  inward technology and knowledge transfer;  crowdsourcing platforms;  customers / suppliers involving. collaborative knowledge creation:  joint r&d projects;  joint ventures;  co-patenting;  mass customization;  innovation communities. “outside-in” process (knowledge exploration) structured innovation cooperation:  strategic alliances;  innovation networks / clusters;  innovation consortiums;  digital open innovation platforms;  product platforms. “coupled” process knowledge and technology transfer:  out-licensing;  outward technology and knowledge transfer;  selling ip;  outsourcing. forming new organizations:  spin-offs;  corporate ventures;  corporate business incubators. “inside-out” process (knowledge exploitation) knowledge absorptive capability knowledge sharing capability knowledge co-creation capability figure 1. a typology of an organization’s open innovation activities source: developed by the author adapting chesbrough, 2003, chesbrough, vanhaverbeke and west, 2006, chesbrough and crowther, 2006, gassmann and enkel, 2004, hjalmarsson, juell-skielse and johannesson, 2017 baltic journal of economic studies 93 vol. 5, no. 2, 2019 ability to explore, combine, and coordinate different types of competencies and knowledge flows in interorganizational relationships in order to synthesize new knowledge, technologies, and innovative decisions. on this basis, a firm’s open innovation capability can be defined as a dynamic ability to manage its knowledge base by using inbound and outbound information flows and subsequently transform internal and external knowledge and ideas into new products, services, processes, structures or business solutions for the benefit of the firm and its stakeholders. the open approach to innovation shows promising potential of making the innovation process more effective, adaptive, and dynamic. however, it is necessary to emphasize that for an efficient open innovation implementation, all the company’s organizational capabilities related to knowledge management need to be specific and integrated. 5. opportunities and potential risks of open innovation implementation the adoption of open innovation tools by a company is now a matter of strategic choice. a number of studies on open innovation provide the arguments that collaboration with external partners tends to be beneficial to a company’s performance. the results of the study conducted by k. laursen and a. salter reveal a significant relationship between using external knowledge sources and a firm’s innovation performance: the efficiency of the innovation process is positively correlated with a firm’s absorptive capacity (laursen and salter, 2006). with regard to business sectors, effective examples are related to the software industry, where open informational sources and innovation platforms have become an important part of the business model, especially in digital change (chesbrough and crowther, 2006). however, open innovation practices differ across companies due to many reasons: these business entities have various strategic choices, key managerial challenges and techniques as they face different problems and risks in implementing open innovation. according to recent research, the primary reason that drives modern companies to implement the open innovation practice is the search for effective ways to achieve revenue increases and new products development. some empirical studies show that besides the direct impact on a firm’s innovation performance, there are also additional opportunities of open innovation practice, which include access to requisite knowledge, resources, markets or external competences, reduction of product development time and cost, risk sharing and faster market launch (chesbrough and crowther, 2006; ullrich and vladova, 2016). open innovation tools can be used in various phases of the research and development cycle. during the early stages of the innovation process, such techniques can be useful for exploring potential technology options for product application. at the later stages of the innovation process, they could be implemented in order to provide new platforms for product introduction and focus on ready-for-market technologies. however, there are some contradictions in reasoning about open innovation implementation. it needs to be emphasized that despite the expected positive effects, many enterprises still hesitate on a decision whether to open up their innovation processes. the open innovation model has its limitations, therefore, the decision of whether to implement the open innovation model and to what degree the innovation process can be opened to enable effective external collaboration requires a thorough understanding and weighted analysis of the potential opportunities and risks of open innovation. research on open innovation barriers, risks, and difficulties has discovered many organizational factors that influence open innovation implementation. on this basis, we have organized a large number of these factors into four main areas, which can be described as typical difficulties for open innovation in modern organizations: the collaboration challenge, the managerial challenge, the organizational mindset challenge and the knowledge-sharing challenge. some of these challenges refer to difficulties in interorganizational cooperation and arise from the divergent objectives and conflicting interests of actors engaged in open collaborative projects. at the intra-firm level, main challenges in the transition from a closed towards an open innovation model in general could be related to changes in corporate culture, organizational structure, incentive system, and employees’ skills and abilities. the main potential risks of open innovation practice and appropriate managerial countermeasures for their prevention are systematized in table 1. the potential risks of open innovation model implementation include primarily loss of knowledge, technologies and core organizational competencies, technological and market uncertainty, complexities of managing interactions with collaboration partners. besides the high degree of innovation, openness can lead to difficulties for enterprises in protecting intellectual property and appropriating the benefits of innovation. most of the problems in managing open innovation activities relate to coping with a resistance to change from an organizational perspective because established corporate culture often hinders this type of change. unwillingness to change traditional organizational practices, especially when it comes to sharing knowledge and intellectual property with partners outside the organization, also restricts successful open innovation practice. that is why open innovation model calls for a specific type of organizational mindset, which requires the building of a new corporate culture that values outside competence and knowledge and perceives continuous learning as an important part of the company’s routine operations. baltic journal of economic studies 94 vol. 5, no. 2, 2019 6. conclusions the study found that modern companies can open their own innovation processes to provide access to external ideas and to enable better utilization of their hidden innovation potential. however, highly varied and diversified partnerships can lead to increasing complexity and managerial difficulties, thus, it is crucial for companies, especially for small and mediumsized enterprises to select them accurately. to provide successful implementation of open innovation, firms need to develop specific dynamic innovation capabilities related to knowledge management. the development of such capabilities is often connected with strategic organizational changes. central challenges to cope with in shifting from a closed to an open innovation model include, therefore, overcoming employee resistance to change, establishing a new corporate culture and organizational mindset, as well as investment in the building of new innovation competencies. to summarize, participation in open innovation projects for modern companies is nowadays a matter of strategic choice and, in order to make a right decision on this type of collaboration, business entities should carefully weigh up the advantages and the risks of open innovation model. future research can investigate main firm-level characteristics, which may influence the effectiveness of open innovation implementation in the business sector and examine the firms’ pathways to building and strengthening open innovation capabilities. table 1 potential risks of open innovation implementation and managerial countermeasures for their prevention description suggested managerial countermeasures technological risk technological uncertainty in open innovation processes; problems in identifying perspective external technology sources; inability to adapt to technology changes; limiting development of internal skills and technological competencies. formulation of a corporate technology strategy; development of long-term purposes for external technology exploitation decisions; thorough evaluation of the managerial limitations of external technology exploitation. market risk market uncertainty; lack of transparent market information regarding potential collaborative partners, as well as customer needs and expectations. working with different sources of market information to understand potential partners (especially customers) and their expectations; applying open communication. risk of losing intellectual property (ip) risk of losing proprietary knowledge; risk of losing control of ip ownership; abuse of ip by collaborative partners; inadequate ip laws and regulations. implementation of precaution measures for the possibility of information leaks regarding ip, internal “know-how”, inventions and valuable technologies; developing protection agreements; formulation of offensive, as well as defensive corporate ip strategies. knowledge sharing risks insecure disclosure of core market knowledge and a company’s distinctive competencies to its rival organizations, which may lead to information leakage and losing competitive advantages. strategic protecting and continuous development of a firm’s internal knowledge base; involving trustworthy partners; extending existing products with elements, which are difficult for open communities to replicate, especially in collaborations with rival enterprises. collaboration risks conflicting interests and uncooperative behaviour of partners; potential dependence on external partners; the complexity of cooperation that leads to collaboration obstacles; misunderstandings among partners due to lack of trust and poor communication. thorough expertise of potential partners; establishing long-term relationships with external partners to enable mutual trust and effective collaboration; detailed analysis of potential risks and opportunities before deciding on open innovation collaboration. organizational risk employees’ unwillingness to change traditional organizational practices; resistance to change; insufficient expertise and support for open innovation; higher complexity of managing open innovation. foster a corporate culture of open innovation; development of a corporate learning strategy; design suitable incentive system to motivate employees; establishing appropriate organizational structure. source: developed by the author adapting (lichtenthaler, 2010; coras and tantau, 2014; ullrich and vladova, 2016) references: chesbrough, h. (2003). open innovation: the new imperative for creating and profiting from technology. harvard business school press, boston, 272 p. chesbrough, h., crowther, a. k. (2006). beyond high tech: early adopters of open innovation in other industries. r&d management, 36(3), 229–236. chesbrough, h., vanhaverbeke, w. and west, j. (eds.) (2006). open innovation: researching a new paradigm. oxford university press, oxford, 392 p. coras, e. l. and tantau, a. d. (2014). open innovation – the good, the bad, the uncertainties. the usv annals of economics and public administration, 14(1), 38–47. baltic journal of economic studies 95 vol. 5, no. 2, 2019 gassmann, o. and enkel, e. (2004). towards a theory of open innovation: three core process archetypes. in r&d management conference. hjalmarsson, a., juell-skielse, g. and johannesson, p. (2017). open digital innovation: a contest driven approach, springer. kokanuch, a. and tuntrabundit, k. (2010). knowledge sharing capability and organizational performance: a theoretical perspective. the proceedings of 10th international academic conference, the iises, vienna, austria. laursen, k. and salter, a. (2006). open for innovation: the role of openness in explaining innovation performance among u.k. manufacturing firms. strategic management journal, 27(2), 131–150. lichtenthaler, u. (2010). open innovation: potential risks and managerial countermeasures. proceedings of the r&d management conference. lichtenthaler, u. and lichtenthaler, e. (2009). a capability-based framework for open innovation: complementing absorptive capacity. journal of management studies, 46(8), 1315–1338. ullrich, a. and vladova, g. (2016). weighing the pros and cons of engaging in open innovation. technology innovation management review, 6(4), 34–40. westerlund, m. and leminen, s. (2011). managing the challenges of becoming an open innovation company: experiences from living labs. technology innovation management review, october, 19–25. baltic journal of economic studies 1 vol. 5, no. 5, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-5-1-8 the financial situation as a stimulant of the competitive position of rural communes in the świętokrzyskie voivodeship andrzej pawlik1, urszula karpinska2 abstract. market conditions force local governments to take actions directed to the development and improvement of competitiveness. the efficiency of municipalities is determined by the efficiency and dynamics of development of the entire economy. the financial situation is a component of the competitiveness and responsibility of local authorities for the socio-economic development of the commune. the aim of the article is to analyse the spatial disproportions of the financial situation of rural communes in relation to their competitiveness using the topsis synthetic measure. the analysis was conducted in a system of 69 rural communes of the świętokrzyskie province. to assess the financial situation, the following were used: own income, local taxes and fees, income from pit and cit, operating surplus, transfer income and eu funds, property (investment) expenses, as well as interest and debt expenses. the conducted research showed that in the analysed period of 2007–2017 communes were characterized by stable diversification of financial situation and competitiveness. key words: financial situation, competitiveness, rural communes, synthetic measure. jel classification: c38, h71, h76, b41, r10, p25 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: andrzejp1@vp.pl orcid: https://orcid.org/0000-0003-2319-6707 2 bank spółdzielczy in kielce, poland. 1. introduction identifying the level of competitiveness on a local scale becomes difficult because the commune functions and develops as an integral part of a larger whole, i.e. region or country. it uses goods and services from other areas and produces and delivers its products to the environment. communes are service entities whose purpose is to meet the needs of residents. their source of income is mainly local taxes and fees, as well as transfers from the state budget. market conditions force local governments to undertake development-oriented activities (improving competitiveness). the efficiency of municipalities is determined by the efficiency and dynamics of development of the entire economy (standar, 2017). the financial situation is understood as the ability to finance services using the accumulated income in the given socio-economic and institutional conditions and to pay liabilities in a given period. it is a component of the competitiveness and responsibility of local authorities for the socio-economic development of the commune (majchrzak, 2012). it also concerns the level of satisfying the current needs of local communities and undertaking development activities of communes (satoła, 2015). the financial situation of local government is therefore directly related to the access to sources of financial supply and largely conditioned by the possession by the local government unit (lgu) of stable and adequate sources of income (głowickawołoszyn, wysocki, 2016). as indicated by m. stanny and w. strzelczyk, the financial situation is the ability to regulate financial obligations while ensuring continuity in the implementation of statutory tasks of the commune and improving the living conditions of the residents (stanny, strzelczyk, 2018). assessment of the financial situation of municipalities allows determining not only the efficiency of these units, i.e. the ability to meet their obligations, but also the possibility of raising the quality standard of services they provide to local communities (dziekański, 2014). competitiveness of municipalities is the ability to adapt positive trends emerging in the environment, creating internal and external benefits for them, e.g. the development of entrepreneurship or the creation of local development (marciniuk-kluska, 2009). it is a complex phenomenon and difficult to unambiguously and objectively evaluate. it depends on both endogenous and exogenous factors of economic development. the process of the unit’s operation (increasing competitiveness) takes place in a space that is completely filled by the internal and external environment, including natural and economic. baltic journal of economic studies 2 vol. 5, no. 5, 2019 the environment and the economy form a network of interconnectedness and, acting for the benefit of the community, are interdependent and should be considered together (zakrzewska-półtorak, 2011). 2. purpose, method, scope of the study the aim of the article is to analyse the spatial disproportions of the financial situation of rural communes in relation to their competitiveness using the topsis synthetic measure. the analysis was made in the system of 69 rural communes of the świętokrzyskie province. as source material, data from the regional accounting chamber (kielce branch) and local database of the central statistical office for 2007, 2014, and 2017 were used. in the context of competitiveness assessment in rural communes, the following were used: changes in the population, migration balance, unemployment rate, persons employed in communes, entities entered in the register, natural persons conducting the business activity, housing resources, and those using the plumbing and sewage installation. to assess the financial situation, the following were used: own income, local taxes and fees, income from pit and cit, operating surplus, transfer income and eu funds, property (investment) expenses, as well as interest and debt expenses. the analysis preferred variables with relative values (pawlik, 2012; dziekański, pawlik, 2019). statistical features are divided into 4 dimensions: income, expenses, taxation, and debt. in order to determine the measure of synthetic development, the following procedure was performed: 1. from the set of selected variables, those characterized by low spatial variability and high correlation of variables were removed (according to the inverted matrix method) (wysocki, 2010; malina, 2004). 2. variables that were subjected to the procedure were selected zeroed unitarisation using the following formulas: for stimulants z x ij ij i ij i ij i ij = − − � x min x max x min , if x si ∈ (1) for destimulants zij i ij ij i ij i ij = − − � max x x max x min x , if x di ∈ (2) where: s – stimulant, d – determinant; i=1, 2…n; j=1, 2…n, xij – means the value of the j-t feature for the examined unit, max – the maximum value of the j-t feature, min – the minimum value of the j-t feature (wysocki, lira, 2005; kukuła, 2000; młodak, 2006; dziekański, 2017). 3. using the distance of each object element from the pattern and anti-pattern (from the pattern z j + = …( )1 1 1, , ,� � and anti-announcer development z j − = …( )0 0 0, , , ,� � � (walesiak, 2011). euclidean distances were calculated according to the formula: d n z zi j m ij j + = += −( )∑ 1 1 2 � (3) d n z zi j m ij j − = −= −( )∑ 1 1 2 � (4) where n – the number of variables making up the pattern or anti-pattern, zj – denotes the unified value of the characteristic for the unit being tested (wysocki, 2010; zalewski, 2012). 4. the values of the synthetic feature were calculated according to the topsis method for individual objects based on the formula: q d d d when q i ni i i i i= + ≤ ≤ = ∈[ ] − − + � � � � � � � � � � �, , , ,..., ; ; ;0 1 1 2 0 1qi (5) whereby: di − means the distance from the object from the anti-template (from 0), di + means the distance of the object from the template (from 1). topsis method is based on the calculation of the euclidean distances of the assessed object from both the pattern and the developmental anti-pattern, which distinguishes it from the hellwig’s method, which only takes into account the distance from the development pattern. higher values of the qi meter ∈ [0,1] indicate a more favourable financial position of the audited entity (hwang, yoon, 1981; łuczak, wysocki, 2012). 5. the studied area of rural communes in the świętokrzyskie voivodship was divided into 4 quartile groups. the size of the indicator in the first group means a better unit, in the last one the weakest. the mutual compliance of the results obtained was also verified based on the correlation coefficient. a scatter chart with an adjustment line for synthetic measures is also presented (dziekański, 2016; dziekański, wyszkowski, 2018; prus, dziekański, 2019). 3. financial situation and the level of competitiveness satisfying the collective needs of the commune’s inhabitants or increasing its investment attractiveness depends to a large extent on their own and foreign income, as well as the ability to use it effectively. therefore, it is important that systematic analyses of the management of these funds are made by the unit’s bodies. the efficiency and transparency of financial management processes are conditioned by clearly formulated goals and properly run financial management (dylewski, filipiak, szewczyk, 2004). it is worth noting that from the analyses conducted by churski and co-authors (2013) and stanny (2013) it follows that local finance is the most important development factor. hendrick points out that the financial situation cannot be described in onedimensional space (one indicator). the value of a commune’s financial standing can be used as a tool to study how various factors affect it and what its financial policy looks like. income, expenses, taxation, and debt are a complex and multi-dimensional concept with different time frames. related elements must be analysed baltic journal of economic studies 3 vol. 5, no. 5, 2019 and evaluated together (hendrick, 2004). douglas and gaddie (2002) relate their financial situation to the ability to meet their financial obligations in a timely manner and to ensure continuity in providing services to the local community. another index developing the measure of assessing the financial situation of municipalities was presented by mercer and gilbert (1996), who created a comprehensive index of financial condition based on indicators grouped into four dimensions: income, expenses, taxation, and debt of the economy. the financial situation of communes is a component of competitiveness and responsibility of local authorities for the development of the commune and meeting the needs of its inhabitants. the financial situation of municipalities is primarily determined by the size and appropriate matching over time of income and expenditure. it consists of, among others: the level of income, financial independence, the amount of investment expenditure, the ability to raise extrabudgetary funds, the financial result (ossowska, ziemińska, 2010). external determinants, e.g. the level of economic growth, unemployment, inflation rate, the socio-economic situation of neighbouring areas, are not directly influenced by local authorities. in turn, internal conditions of the commune’s financial situation can be shaped to some extent by its authorities, e.g. by using location rent, activating human resources, creating conditions for increasing the economic activity of residents, increasing management efficiency, using natural resources and natural assets (ślusarz, 2005). a. klasik and f. kuźnik define regional development as the sustainable growth of three elements: the economic potential of regions, their competitive strength, and the level and quality of life of residents. the essence of regional development is to ensure functionality and it occurs in three dimensions: economic, social, and territorial. this increases the competitiveness of the area, defined as its advantage or distance in relation to other regions forming a strategic group together from the point of view of the distinguished types of strategic activities. the competitiveness of municipalities is their lasting ability to meet other competitors in their various competitive systems (klasik, kuźnik, 2001). it means the ability to guarantee a social and economic environment supporting economic activity and the process of raising the overall level of productivity and innovation using internal and external human, financial, and material resources. it is identified with its main determinants: the level of economic activity, labour market and human capital, spatial and ict accessibility, and innovation (żbikowski, 2015). 4. a measure of the financial standing of communes in the świętokrzyskie province the świętokrzyskie voivodship is an industrial and agricultural region with a high concentration of industry sectors related to the production and processing of metals, mining and processing of mineral resources, and the production of foodstuffs. the metallurgy, metal, machinery, building materials and food industries dominate in the świętokrzyskie region. the economy of the świętokrzyskie region is based on the mining industry in the field of building materials (limestone, dolomite, marl, gypsum, sandstone). the agricultural south is the base for the production of organic food ( jóźwiak, jóźwiak, strzyż, 2010; profil gospodarczy województwa świętokrzyskiego; raport o sytuacji społeczno-gospodarczej…, 2018). table 1 summarizes the values of synthetic measures of the financial situation and competitiveness in 2007, 2014, 2017 in subsequent quartile groups. group a includes communes with the highest values of topsis indicators, i.e. units in the best financial situation and the highest level of competitiveness, in group d – the weakest units, due to each of the analysed indicators. the value of the synthetic measure allowed dividing the communes of the świętokrzyskie province into 4 groups. small groups in time and space can be observed between the groups. in 2017, the synthetic measure of the financial situation ranged from 0.30 (bliżyn, the weakest unit; skarżyski poviat) to 0.51 (sitkówka-nowiny, the best unit; kielce poviat) and in 2007 from 0.31 (pierzchnica, kielce poviat) to 0.47 (sitkówka-nowiny, kielce poviat). the synthetic measure of competitiveness in 2017 took values from 0.37 (moskorzew, włoszczowski poviat) to 0.51 (masłów, kielce poviat; sitkówka-nowiny, kielce poviat). in 2007, respectively, from 0.35 (bejsce, kazimierz poviat) to 0.48 (sitkówka-nowiny, kielce poviat; miedziana góra, kielce poviat). the best units in the studied area are located in the central part of the province, in the area of impact of kielce (the capital of the region). the best units of sitkówka-nowiny, masłów, szydłów, solec-zdrój (due to the financial situation) and masłów, sitkówka-nowiny, strawczyn, łagów (due to competitiveness) have a developed industrial function (mining and processing of mineral raw materials, production groceries) and tourism. the financial situation of municipalities is correlated with the level of competitiveness and translates into disproportions in the scope of the ability to meet local needs. determinants of financial standing and competitiveness may be shaped by the area (e.g. location and size of local government units, available resources and natural values, investment attractiveness) and may also be independent of it (e.g. economic fluctuations in the country and in the world, the state of public finances, scope of income and expenditure authority of local government units) (dziekański, 2014). the box graph indicates whether the data is symmetrical and how the data is distributed, whether there are outliers in the data set. it also indicates the dispersion of data (the longer the graph, the more spread the data means, that they can take different values) (łuczak, 2007). baltic journal of economic studies 4 vol. 5, no. 5, 2019 as presented in figure 1, the diversity of the measure of synthetic financial situation is smaller in relation to competitiveness. the outliers in terms of financial standing are sitkówka nowiny (with an industrial function developed), smyków and pierzchnica (in 2007). measures of spatial differentiation (table 2) indicate the constant dispersion of municipalities in terms of the financial situation. the standard deviation provides us with the necessary knowledge about whether the results in a given group are similar or different. in 2017, compared to 2007, the results show stability according to the standard deviation for both the financial situation (0.36-0.37) and competitiveness (0.03-0.03). the difference in the value of the 0.21-0.16 range (2017–2007) in the aspect of the financial situation indicates a greater differentiation than in the aspect of competitiveness 0.14-0.13. the lack of differentiation is also indicated by the classic coefficient of variation, which in the analysed period was 0.08-0.06 (2017– 2007) and competitiveness (0.08-0.07) respectively. table 1 classification of rural communes in the świętokrzyskie province according to a synthetic measure, financial situation, and competitiveness for 2007, 2014, 2017 topsis financial situation topsis competitiveness 2007 2014 2017 2007 2014 2017 a sitkówka-nowiny 0.47 smyków 0.45 wojciechowice 0.41 zagnańsk 0.38 sitkówka-nowiny 0.46 tuczępy 0.43 oleśnica 0.41 szydłów 0.40 sitkówka-nowiny 0.51 masłów 0.39 szydłów 0.39 solec-zdrój 0.37 miedziana góra 0.48 sitkówka-nowiny 0.48 krasocin 0.47 górno 0.43 miedziana góra 0.51 strawczyn 0.51 sitkówka-nowiny 0.51 radoszyce 0.44 masłów 0.51 sitkówka-nowiny 0.51 strawczyn 0.51 łagów 0.45 b baćkowice 0.37 bałtów0.37 bejsce 0.37 sadowie 0.37 bogoria 0.39 kije 0.39 masłów (2) 0.39 solec-zdrój (2) 0.36 ruda maleniecka 0.36 sobków 0.36 waśniów 0.36 zagnańsk 0.35 łagów 0.42 łoniów 0.42 oleśnica 0.42 szydłów 0.41 łączna 0.43 nowa słupia 0.43 szydłów 0.43 bałtów 0.42 nowa słupia 0.44 rytwiany 0.44 sobków 0.44 pacanów 0.42 c bieliny 0.36 czarnocin 0.36 gnojno 0.36 wodzisław 0.36 dwikozy 0.35 łoniów 0.35 moskorzew 0.35 zagnańsk 0.34 bałtów 0.34 nowy korczyn 0.34 raków 0.34 rytwiany 0.34 kluczewsko 0.4 mirzec 0.4 opatowiec 0.4 nowa słupia 0.39 dwikozy 0.41 iwaniska 0.41 obrazów 0.41 klimontów 0.4 baćkowice 0.41 iwaniska 0.41 klimontów 0.41 waśniów 0.41 d brody 0.35 dwikozy 0.35 klimontów 0.35 pierzchnica 0.31 bieliny 0.33 górno 0.33 piekoszów 0.33 iwaniska 0.3\ bieliny 0.33 dwikozy 0.33 iwaniska 0.33 bliżyn 0.3 obrazów 0.38 sady 0.38 waśniów 0.38 bejsce 0.35 baćkowice 0.39 michałów 0.39 bejsce 0.38 nagłowice 0.37 dwikozy 0.4 imielno 0.4 michałów 0.4 moskorzew 0.37 sorted by quartile value for the given surveyed year; the table shows the 3 best and the weakest units in the group; the size of the indicator in group a means a better unit, in d – the weakest source: own study based on data from rio o / kielce and bdl cso synthetic measure of the competitive potential median; 25%-75%; inliers range; outliers pierzchnica (2) sitkówka-nowiny (2) smyków (2) sitkówka-nowiny (2) 2007 2014 2017 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 sitkówka-nowiny (2) synthetic measure of the competitive potential median; 25%-75%; inliers range 2007 2014 2017 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 figure 1. graph of dispersion of rural communes in the świętokrzyskie voivodship in the aspect of financial situation and development in 2007, 2014, 2017 source: own study based on data from rio o / kielce and bdl cso baltic journal of economic studies 5 vol. 5, no. 5, 2019 pearson’s correlation coefficient between the value of the measure of the synthetic financial situation in 2007 in relation to 2014 was 0.517 and in 2014 to 2017 – 0.654. for the measure of synthetic competitiveness, it was 0.871 and 0.928, respectively. in both cases, we are dealing with a convergence process. it can be assumed that the spatial diversity of the studied area was quite stable, and the units reacted similarly to changes in the economy. units distinguished in both studied areas are: sitkówka-nowiny, masłów, strawczyn, and miedziana góra characterized by developed industrial function. they provide facilities for the capital of the kielce region. located in the kielce poviat, whose economy is characterized by the mining and processing industry of mineral raw materials and the production of foodstuffs (figure 2). the correlation coefficients presented in table 3 show that the greatest impact on the level of the financial table 2 differentiation of synthetic measure – financial situation and competitiveness topsis financial situation topsis competitiveness 2007 2010 2017 2007 2010 2017 average 0.37 0.36 0.36 0.41 0.42 0.43 median 0.37 0.36 0.35 0.41 0.42 0.42 standard deviation 0.02 0.04 0.03 0.03 0.03 0.03 quarter (quartile) deviation 0.37 0.37 0.36 0.41 0.42 0.43 classic coefficient of variation 0.06 0.11 0.08 0.07 0.08 0.08 positional coefficient of variation 1.00 1.03 1.01 1.00 1.00 1.02 min 0.31 0.28 0.30 0.35 0.36 0.37 max 0.47 0.49 0.51 0.48 0.51 0.51 range 0.16 0.21 0.21 0.13 0.15 0.14 quartile 1 0.36 0.34 0.34 0.39 0.40 0.41 quartile 2 0.37 0.36 0.35 0.41 0.42 0.42 quartile 3 0.38 0.40 0.37 0.43 0.44 0.45 quartile range 0.02 0.06 0.03 0.04 0.04 0.04 skewness 1.58 0.28 2.19 0.41 0.67 0.72 measure of concentration (kurtosis) 6.43 0.26 11.35 0.10 0.41 0.07 source: own study based on data from rio o / kielce and bdl cso situation of rural communes in the świętokrzyskie voivodship had: own revenues, from local taxes and fees, transfer, operating surplus and property (investment) and current expenses. in the analysed period, the level of competitiveness was influenced by: income from pit and cit and also transfer, as well as the number of entities entered into the register and the number of natural persons conducting business activity. the diversity of the financial situation of rural communes and their competitiveness was stable in the analysed years of 2007, 2014, and 2017. the values of pearson’s linear correlation coefficients (table 3) confirm the existence of positive and negative correlations between the indicated elements. the analysed variables can be taken into account when modelling the effectiveness of municipalities. table 3 correlation of a measure of synthetic financial situation and competitiveness with their determinants topsis financial situation topsis competitiveness topsis competitiveness 0.125 1.000 own income 0631 0.097 income from taxes and local fees 0.584 0208 income from pit and cit 0.071 0.547 transfer income -0,533 -0,359 operating surplus 0.505 0.149 property (investment) expenses 0.454 0.094 current expenditure 0.454 -0,098 registered unemployed persons -0,116 0.298 number of persons employed 0.039 0.351 entities entered in the register 0.133 0729 self-employed persons 0.087 0740 linear correlation coefficients for observations from sample 1-207; critical value (at a two-sided 5% critical area) = 0.1364 for n = 207 source: own study based on data from rio o / kielce and bdl cso baltic journal of economic studies 6 vol. 5, no. 5, 2019 regression analysis allows you to create a linear model that lets you check how variables affect a dependent variable. w hen creating a regression model, you should decide which variables will be the explained variable and which will be the explanatory one. the regression model describing the dependence of variables takes the form: f competitiveness topsis = σ (financial situation topsis , eu funds, local taxes and fees, income from pit and cit, transfer income, operating surplus, debt, capital expenditure, current expenditure) the results of the analysis show that the presented regression model explains r = 0.412709 variable variations. the values of the statistics f (17.39263) and the corresponding level of probability p confirm the statistical significance of the linear model. they also confirm that the parameters significantly differ from zero. the value of t-student statistics at the parameter means that all parameters are statistically significant. the value of the determination coefficient (r2 = 0.388980) indicates the fit of the regression model to the data (table 4). 5. conclusion the analysis of spatial data requires a multi-criteria approach, requires knowledge of the degree and specificity of the diversity in space of the features of individual municipalities. local objects are linked together in a dependency network. knowledge and understanding of space structures enable better anticipation of changes and facilitate decisionmaking. the complex nature of municipalities means that its assessment requires the use of measures that comprehensively describe it (economic, financial, infrastructural, environmental, competitiveness, etc.). the financial situation, as well as the competitiveness of communes, are a complex phenomenon and difficult to assess explicitly and objectively. the problem with assessing the operation of municipalities is the relatively large amount of information that creates information noise. this is due to relatively limited access to detailed and homogeneous data delimited at the municipal level. factors of the financial situation and local competitiveness are not immutable in time, which is why they should be subject to continuous and ongoing analysis. sy nthetic measure of the f inancial standing y = 0.1358 + 0.6135*x; r = 0.5171; p = 0.00001; r2 = 0.2674 smy ków (2) 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 2007 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 20 14 sitkówka-nowiny (2) sy nthetic measure of the f inancial standing y = 0.1131 + 0.6712*x; r = 0.6548; p = 0.00000; r2 = 0.4288 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 2014 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 20 17 sitkówka-nowiny (2) tuczępy (2) sy ntethic measure of competitiv eness potential y = 0.0601 + 0.9043*x; r = 0.8715; p = 0.0000; r2 = 0.7596 bałtów (2) bodzechów (2) rytw iany (2) wojciechow ice (2) zagnańsk (2) 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 2007 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 20 14 krasocin (2) miedziana góra (2) sitków ka-nowiny (2) straw czyn (2) sy ntethic measure of competitiv eness potential y = -0.0077 + 1.0208*x; r = 0.9280; p = 0.0000; r2 = 0.8613 masłów (2) skarży sko kościelne (2) strawczy n (2) 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 2014 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 20 17 kluczewsko (2) krasocin (2) miedziana góra (2) sitkówka-nowiny (2) figure 2. scatter chart of synthetic measure – financial situation and competitiveness from 2014 to 2017 source: own study based on data from rio o / kielce and bdl cso baltic journal of economic studies 7 vol. 5, no. 5, 2019 the value of the synthetic measure allowed dividing the communes of the świętokrzyskie province into 4 groups. small groups in time and space can be observed between the groups. in 2017, the synthetic measure of the financial situation ranged from 0.30 (bliżyn) to 0.51 (sitkówka-nowiny) and in 2007 from 0.31 (pierzchnica) to 0.47 (sitkówka-nowiny). the synthetic measure of competitiveness in 2017 ranged from 0.37 (moskorzew) to 0.51 (masłów). in 2007, from 0.35 (bejsce) to 0.48 (sitkówka-nowiny, miedziana góra), respectively. the best units in the studied area are located in the central part of the voivodship, in the area of impact of kielce (the capital of the region); they have a developed industrial function (mining and processing of mineral raw materials, production of food products) and tourism. the greatest impact on the level of the financial situation of rural communes in the świętokrzyskie voivodship had: own revenues, from local taxes and fees, transfer, operating surplus and property (investment) and current expenses. in the analysed period, the level of competitiveness was affected by: income from pit and cit, as well as transfer, as well as the number of entities entered into the register and the number of natural persons conducting business activity. the analysed period of 2007–2017 was characterized by stable diversification of the financial situation of municipalities and their competitiveness. table 4 kmnk estimation (observations 1-207 used; dependent variable: topsis competitiveness) rate standard error student’s tp-value constant 2.19899 1.00943 2.1784 0.03055 ** eu funds 2.85789e-05 1.16367e-05 2.4559 0.01491 ** local charges and taxes 0.171533 0.0882814 1.9430 0.05343 * income from pit and cit 0.62545 0.0926374 6.7516 <0.00001 *** transfer income 0.137251 0.0790459 1.7363 0.08406 * operating surplus 0.18128 0.0465348 3.8956 0.00013 *** indebtedness 1.13349e-05 3.29558e-06 3.4394 0.00071 *** capital expenditure -1.99473 1.00475 -1.9853 0.04849 ** current expenditure -1.98683 1.00365 -1.9796 0.04913 ** arithmetic mean of the dependent variable 0.424203 standard deviation of the dependent variable 0.032861 sum of squared residues 0.130639 residual standard error 0.025686 co. determination (r-squared) 0.412709 corrected r-squared 0.388980 f (8, 198) 17.39263 p-value for the f test 1.65-19 logarithm of credibility 468.8714 akaike inform. crit. -919.7427 crit. bayes. schwarz -889.7483 crit. hannan-quinn -907.6132 source: own study based on data from rio o / kielce and bdl cso references: churski, p., borowczak, a., dolata, m., dominik, j., hauke, j., perdał, r ., & konecka-szydłowska, b. 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(2012). zastosowanie metody topsis do oceny kondycji finansowej spółek dystrybucyjnych energii elektrycznej. ekonomia i zarządzanie, nr 4, pp. 137–145. żbikowski, j. (2015). samorządy i organizacje pozarządowe jako beneficjenci procesu integracji europejskiej, handel wewnętrzny, nr 4(357), pp. 37–46. baltic journal of economic studies 7 vol. 5, no. 4, 2019 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: pdziekan@interia.eu orcid: https://orcid.org/0000-0003-4065-0043 2 scientific and research consortium, poland. doi: https://doi.org/10.30525/2256-0742/2019-5-4-7-16 the financial situation of rural communes and the level of their income in the świętokrzyskie voivodship paweł dziekański1, adrian lipa2 abstract. the commune’s process of development (its development) takes place in a space that is completely filled by the natural and economic environment with their individual characteristics. income and expenditure instruments, which are the basis for the operation of local government units and a condition for carrying out the tasks imposed on them, determine the scope and effectiveness of the impact of local government on local and regional development. the aim of the article is to analyse the spatial disproportions of the financial situation in relation to their income using a synthetic measure. the analysis was made in the system of 69 rural communes of the świętokrzyskie province. as source material, data from the regional accounting chamber and local database of the central statistical office for 2007, 2014, and 2017 were used. local government can carry out its tasks when it is equipped with stable and efficient sources of own income. therefore, finance is the basis for the implementation of public tasks and determines the conditions for local economic development. the indicated areas are characterized primarily by traditional agricultural functions. in 2007, the financial standing measure (topsis) ranged from 0.31 to 0.47, in 2017 from 0.30 to 0.51. in 2007, the financial standing (oe) measure ranged from 0.64 to 0.80, in 2017 from 0.56 to 0.80. areas with a high level of financial standing were located mainly in the central area of the region (sitkówka-nowiny, masłów, strawczyn, zagnańsk, solec-zdrój). the factors determining group membership were favourable location rent, a very good financial situation, and good infrastructure. group entities are characterized by the highest average share of own revenues, as well as local taxes and fees in total revenues. at the other extreme of the distribution were areas with a low level of financial standing, which can be described as peripheral (klimontów, pawłów, radoszyce, bieliny, dwikozy, iwaniska, bliżyn). this peripherality has a geographical dimension, expressed by its location relative to the centre of the region, as well as an economic and well-developed agricultural function. key words: financial situation, competitiveness, rural communes, synthetic measure. jel classification: c38, h71, h76, b41, r10, p25 1. introduction today, communes have become the subjects of economic processes. they pursue the interests of given communities, taking into account local resources. their actions depend on both endogenous and exogenous factors. the commune’s process of activity takes place in a space that is entirely filled by the natural and economic environment, and its specific, individual features of the economy, society, and resources (rynio, 2013). income and expenditure instruments determine the scope and effectiveness of the impact of local government on the local and regional development. they may be held by local authorities depending on the division of competences and powers between the general government and local government institutions (patrzałek, 2010). they form a network of interrelationships and, acting for the benefit of the community, are interdependent and should be considered together (zakrzewskapółtorak, 2011). municipalities are a place of concentration of economic activity. they also play the role of service, educational and industrial centres, generating a network of social and economic connections. each commune has different endogenous resources (natural, economic, infrastructural) that shape conditions and development opportunities. they determine its attractiveness, form the basis of the development process, and affect the financial situation (poczta, 2012; dziekański, shaposhnykov, 2017). the activities of each commune involve the acquisition and expenditure of public funds. baltic journal of economic studies 8 vol. 5, no. 4, 2019 therefore, it is important that systematic analyses of the management of these funds are carried out by local government bodies. financial resources are the basis for the operation of local government units and a condition for carrying out the tasks imposed on them. they determine the development of the commune. through the prism of finance, you can make a comprehensive assessment of the functioning of the commune and its development opportunities (klepacki, kusto). the financial situation of the commune is closely correlated with the level of local development. it is a complex phenomenon. provides the entity with the ability to perform tasks or increase assets. it is shaped by, among others, own income, income from taxes and local fees, investment expenditure, financial independence (sobczyk, 2010). the financial situation is, therefore, directly related to access to sources of financial power and largely conditioned by the possession of stable and adequate sources of income (głowicka-wołoszyn, wysocki, 2016). it determines the ability to implement actions intended by municipalities, which relate to the current needs of local communities and take developmental actions (satoła, 2015). 2. purpose, method, scope of the study the aim of the article is to analyse the spatial disproportions of the financial situation in relation to their own income using a synthetic measure. attempts were made to indicate the spatial distribution of the level of the financial situation of rural communes in the świętokrzyskie voivodship. w hich elements of the financial situation of rural communes explain its level the most? the analysis was made in the system of 69 rural communes of the świętokrzyskie province. as source material, data from the regional accounting chamber (kielce branch) and local database of the central statistical office for 2007, 2014, and 2017 were used. on the first stage of the analysis, variables were selected in accordance with substantive usefulness in assessing the phenomenon under study, and the degree of variability and correlation of variables (kukuła, 2014). from the set of variables, those characterized by low spatial variability (variability index) and high correlation of variables (according to the inverted matrix method) were removed (wysocki, lira, 2005; wysocki, 2010). in the case of taxonomic methods, it is important to determine the nature of the variables describing the financial situation. depending on the influence of variables on the studied phenomenon, stimulants and destimulants are distinguished1. the selected variables were subjected to the procedure of zero unitarisation using the following formulas: for stimulants z x ij ij i ij i ij i ij = − − � x min x max x min when x si ∈ (1), for destimulants zij i ij ij i ij i ij = − − � max x x max x min x when x di ∈ (2), where: s – stimulant, d – destimulant; i = 1, 2... n; j = 1, 2... n, xij – means the value of the j-t feature for the examined unit, max – the maximum value of the j-t feature, min – the minimum value of the j-t feature (dziekański, 2017; młodak, 2006). using the distance of each element of the object from the pattern and anti-pattern, euclidean distances of individual objects from the pattern and anti-pattern were calculated according to the formula: d n z zi j m ij j + = += −( )∑ 1 1 2 (3), d n z zi j m ij j − = −= −( )∑ 1 1 2 (4), where n – is the number of variables making up the pattern or anti-pattern, zij – is the value of the uniformized feature for the tested unit (wysocki, 2010; zalewski, 2012). on the next stage, the values of the synthetic feature were calculated according to the topsis method for individual objects based on the formula: q d d d when q i ni i i i i= + ≤ ≤ = ∈[ ] − − + � � � � � � � � �� � �, , , ,..., ; ; ;0 1 1 2 0 1qi (5) whereby: di− means the distance of the object from the anti-template (from 0), di+ means the distance of the object from the template (from 1). higher values of the qi measure indicate a more favourable financial situation of the commune (łuczak, wysocki, 2012). then, a synthetic measure based on distance in real space was calculated with euclidean metric according to the formula: oe p zit j p ijt= −( ) = ∑� � 1 1 1 2 (6), where i = 1, 2...n; j = 1, 2..., p (n is the number of communal facilities, p – number of features), zij – means the value of the j-t feature for the given unit (wysocki, 1996). the synthetic measure (6) allows measuring reduced to the range [0; 1]. a measure value of 0 means the maximum positive value of each of the units tested (trojak, tokarski, 2013). in order to interpret the obtained measures, the division into quartile groups was used, where the size of the indicator in the first group means a better unit and the lower the group, the units are weaker. the mutual compatibility of the obtained results was also verified based on the correlation coefficient and regression analysis (dziekański, 2016; dziekański, pawlik, 2019). 1 the variables were removed due to the stability of the variables, the low value of the coefficient of variation below 0.10. the inverse correlation matrix shows diagonal values below 10. according to the inverted correlation coefficient matrix method, diagonal elements (over-correlated variables) with values greater than 10 are eliminated from the set of variables (malina, 2004). baltic journal of economic studies 9 vol. 5, no. 4, 2019 3. the financial situation of communes (selected issues) development is an ambiguous and complex concept; it results from the multitude of goals it serves and the variety of activities that shape it. development is a set of changes aimed at increasing the satisfaction of collective and individual needs of local residents (rosner, stanny, 2014, 33). it is a multidimensional process, which involves transforming the factors and resources of the individual into goods and services for the local economy. it is controlled and modified by local authorities. to this end, using endogenous factors: finance, labour, technology, information, and others (prusek, kudełko, 2009). the multidimensional functioning of local government units is demonstrated by the directions of action and the benefits achieved in the spatial, social, economic aspect, etc. these activities are usually focused on goals, among which should be distinguished long-term development, increase in income of residents and the budget, development of entrepreneurship (dziekański, 2018). the analyses conducted by churski and co-authors (2013) and stanny (2013) show that one of the important development factors is local finances. as hendrick (2004) points out, the financial situation cannot be described in one-dimensional space (one indicator). it indicates the local government’s ability to timely fulfil its financial obligations and ensure continuity in providing services to the local community. the value of a commune’s financial standing can be used as a tool to study how various factors affect it, what its financial policy looks like. douglas and gaddie (2002) relate the financial situation to the ability to timely meet financial obligations and ensure continuity in the provision of services to the local community. ritonga (2014) proposes a broad approach to measuring the financial situation of local governments, based on indicators grouped into six dimensions: short-term solvency, long-term solvency, budgetary solvency, financial independence, financial flexibility, and solvency at the level of services. the financial situation of a territorial unit is a component of competitiveness and responsibility of local authorities for the development of the commune and meeting the needs of its inhabitants. the financial situation of the commune is closely correlated with the level of local development, understood as a complex of quantitative and qualitative transformations in a given commune, referring to the living standards of residents and the functioning of economic entities within the commune (sobczyk, 2010; kopyściański, rólczyński, 2014). the financial situation of the commune is the state of its finances within a specified period of time. its level is demonstrated by, among others ability to achieve a budget balance or increase in the commune’s assets, level of commune income, financial independence of the unit, amount of investment expenditure, ability to obtain external financial resources, the financial result achieved by the commune (ossowska, ziemińska 2010). the commune’s financial situation is shaped by a number of conditions, both external and internal – related to the given area. external determinants, e.g. the level of economic growth, unemployment, inflation rate, the socio-economic situation of neighbouring areas, are not directly influenced by local authorities. conditions of the financial situation may be shaped by the area (e.g. location and size of local government units, available resources and natural values, investment attractiveness) and may also be independent of it (e.g. economic fluctuations in the country and in the world, the state of public finances, the scope of income control) (dziekański, 2014). the financial situation can be treated as one of the endogenous factors of socio-economic development, whose relatively high rating translates into improving the quality of life of the local community. the assessment of the financial situation allows you to manage the development of local government, as well as the tasks carried out. it can be prepared both for own needs and for external recipients (filipiak, 2006). it allows determining not only the efficiency of units’ functioning, i.e. the ability to meet their obligations, but also the possibility of raising the quality standard of services they provide to local communities (dziekański, 2014). income, expenses, taxation, and debt are a complex and multi-dimensional concept with different time frames. the elements are related; they must be analysed and evaluated together. 4. the financial situation of rural communes in the świętokrzyskie province (synthetic measure) the świętokrzyskie region has an industrial and agricultural character with a high concentration of industry sectors related to the production and processing of metals, mining and processing of mineral resources and the production of foodstuffs. the main industries of the świętokrzyskie region are: metallurgy, metal, machine, building materials, ceramic, foundry, and food. the economy of the świętokrzyskie region is based on the mining industry in the field of building materials (limestone, dolomite, marl, gypsum, sandstone). the agricultural south is the base for the production of organic food ( jóźwiak, jóźwiak, strzyż, 2010). table 1 summarizes the values of the measure of the synthetic financial situation (topsis) of rural communes in the świętokrzyskie voivodship in 2007, 2014, 2017 in subsequent quartile groups. the first quartile group includes the municipalities with the best financial standing, the last – the weakest. the value of the synthetic measure allowed dividing the communes of the świętokrzyskie province into 4 groups. minor shifts in time and space can be observed between groups. in 2007, the measure of financial standing ranged from baltic journal of economic studies 10 vol. 5, no. 4, 2019 0.31 (pierzchnica, the weakest unit, kielce poviat) to 0.47 (sitkówka-nowiny, the best unit, kielce poviat). in 2017, respectively, from 0.30 (bliżyn, skarżyski poviat) to 0.51 (sitkówka-nowiny). group a communes, in the best financial situation, were also characterized by the highest average share of own income and taxes in the total income of units, developed industrial function. the units in which the traditional agricultural function dominates are in a weaker situation. a synthetic measure based on distance in real space with euclidean metrics allowed the division of rural communes in the świętokrzyskie province into 4 groups. the first quartile group includes the municipalities with the best financial standing (measure closer to 0), the last – the weakest (measure closer to 1). in 2007, the measure of financial standing ranged from 0.64 (sitkówka-nowiny, the best unit, kielce poviat) to 0.80 (tarłów, the weakest unit, opatów poviat). in 2017 – from 0.56 (sitkówka-nowina, kielce poviat) to 0.80 (bliżyn, skarżysko poviat). group a units are characterized by the highest average share of revenues and local taxes and fees in total revenues. regardless of the method of aggregation of synthetic measure (topsis or oe), sitkówka-nowiny, masłów, strawczyn, zagnańsk, solec-zdrój found themselves high. the best units were strongly characterized by the mining and processing industry of mineral raw materials, the production of foodstuffs, agrotourism, spa and well-developed activities of the sme sector. at the other end were klimontów, pawłów, radoszyce, bieliny, dwikozy, iwaniska, and bliżyn. the weakest units were characterized by agriculture, gardening, horticulture, agrotourism, industrial monoculture (cement), and dairy. the financial situation of communes translates into disproportions in the scope of possibilities of satisfying local needs (kopyściański, rólczyński, 2014). it is correlated with the level of local development. understood as a complex of quantitative and qualitative transformations within a given unit, referring to the standard of living of residents and the functioning of economic entities. conditions of the financial situation may be shaped by, e.g. location and size of local government units, available resources and natural values, investment attractiveness, as well as, among others, economic fluctuations in the country and in the world, the state of public finances, the scope of income and expenditure power of local government units (dziekański, 2014). the box graph indicates data dispersion (łuczak, 2007). as shown in figure 1, the variation in the synthetic financial measure is small, similar for the oe and topsis measures. outliers are sitkówka-nowiny (a unit with a strong industrial function, within the influence of the capital of the kielce region, a developed sme sector). measures of spatial diversity indicate the relative stability of the dispersion of rural communes in the świętokrzyskie voivodship in relation to their financial situation. in 2017, compared to 2007, the stability of the examined area according to the standard deviation (0.030.02 for topsis; 0.03-0.03 for oe) can be indicated. the diversity coefficient is also indicated by the classic coefficient of variation, which in the analysed period was table 1 classification of rural communes in the świętokrzyskie province according to a synthetic measure, financial situation, and the level of their income for 2007, 2014, 2017 (topsis) 2007 2014 2017 topsis topsis δ topsis own income / total income1 local taxes and fees / total income1 a sitkówka-nowiny 0.47 smyków 0.45 wojciechowice 0.41 bałtów 0.37 sitkówka-nowiny 0.46 tuczępy 0.43 oleśnica 0.41 miedziana góra gmina. sitkówka-nowiny 0.51 masłów 0.39 strawczyn 0.39 solec-zdrój 0.37 0.20 0.16 b bieliny 0.36 moskorzew 0.36 pacanów 0.36 waśniów 0.36 radoszyce 0.36 secemin 0.36 solec-zdrój 0.36 wiślica 0.35 mirzec 0.36 0.36 obrazów piekoszów 0.36 zagnańsk 0.35 0.15 0.11 c imielno 0.34 iwaniska 0.34 mirzec 0.34 słupia konecka 0.34 klimontów 0.34 nowa słupia 0.34 pacanów 0.34 zagnańsk 0.34 bałtów 0.34 kije 0.34 nowy korczyn 0.34 rytwiany 0.34 0,17 0,12 d górno 0.33 sobków 0.33 tarłów 0.33 pierzchnica 0.31 bieliny 0.33 górno 0.33 piekoszów 0.33 iwaniska 0.3 bieliny 0.33 dwikozy 0.33 iwaniska 0.33 bliżyn 0.3 0,14 0,10 in the first quartile group, there are communes with the highest values of oe and om indicators and the highest values of sk indicator, therefore, in the first quartile group you can find the best units, the last – the weakest ones due to financial situation; (1) is the average value in the quartile group. source: own study based on data from rio o / kielce, bdl cso baltic journal of economic studies 11 vol. 5, no. 4, 2019 table 2 classification of rural communes in the świętokrzyskie province according to a synthetic measure, financial situation, and the level of their income for 2007, 2014, 2017 (topsis) 2007 2014 2017 oe oe δ oe own income / total income1 local taxes and fees / total income1 a sitkówka-nowiny 0.64 smyków 0.69 wojciechowice 0.7 zagnańsk 0.75 sitkówka-nowiny 0.64 tuczępy 0.66 szydłów 0.7 bałtów 0.72 sitkówka-nowiny 0.56 masłów 0.71 strawczyn 0.71 zagnańsk 0.75 0.20 0.16 b baćkowice 0.76 łagów 0.76 nowa słupia 0.76 wilczyce 0.77 miedziana góra 0.73 raków 0.73 wiślica 0.73 zagnańsk 0.75 bałtów 0.76 łagów 0.76 pacanów 0.76 raków 0.76 0.16 0.13 c górno 0.78 pacanów 0.78 solec-zdrój 0.78 waśniów 0.78 klimontów 0.76 kluczewsko 0.76 pacanów 0.76 rytwiany 0.76 górno 0.77 iwaniska 0.77 nowa słupia 0.77 bieliny 0.78 0.14 0.10 d iwaniska 0.79 mniów 0.79 moskorzew 0.79 tarłów 0.8 bieliny 0.77 górno 0.77 wilczyce 0.77 iwaniska 0.8 klimontów 0.79 pawłów 0.79 radoszyce 0.79 bliżyn 0.8 0.11 0.09 in the first quartile group, there are communes with the highest values of oe and om indicators and the highest values of sk indicator, therefore, in the first quartile group you can find the best units, the last – the weakest ones due to financial situation; (1) is the average value in the quartile group. source: own study based on data from rio o / kielce, bdl cso synthetic measure of the financial standing oe mediana; 25%-75%; inliers range; outliers sitkówka-nowiny (2) sitkówka-nowiny (2) 2007 2014 2017 0.54 0.56 0.58 0.60 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 smyków (2) wojciechowice (2) sitkówka-nowiny (2) sy nthetic measure of the f inancial standing topsis mediana; 25%-75%; inliers range; outliers pierzchnica (2) sitkówka-nowiny (2) smy ków (2) sitkówka-nowiny (2) 2007 2014 2017 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 sitkówka-nowiny (2) figure 1. graph of dispersion of rural communes in the świętokrzyskie voivodship in the aspect of financial situation and development and development in 2007, 2014, 2017 source: own study based on data from rio o / kielce, bdl cso 0.08-0.06 (topsis) and 0.04-0.04 (oe), respectively. the range value for the analysed phenomenon indicates a slight increase in diversity (0.21-0.16 – topsis and 0.24-0.16 for oe). the pearson correlation coefficient between the value of the topsis and oe synthetic financial situation measure was in the years of 2014–2007 – 0.526 and in 2017–2014 – 0.582 (for oe) and 0.517 and 0.654 respectively (for topsis). this may indicate a stable spatial diversity of units and a small degree of convergence. tuczępy and sitkówka-nowiny belong to the group of distinctive entities (figure 2). these units are leading areas for the świętokrzyskie province, connected in its central part. the correlation coefficients in the case of the methods used indicate a high similarity of the results obtained in the relation of topsis to oe. in 2007, pearson’s correlation coefficient was -0.861, in 2017 -0.878, which may indicate convergence (figure 3). this proves that each of the economic development indicators analysed indicates a similar classification of voivodships’ development levels, and units could have reacted similarly to market changes. baltic journal of economic studies 12 vol. 5, no. 4, 2019 table 3 differentiation of synthetic measure, financial situation, and competitiveness topsis measure (financial standing) euklides measure – finance 2007 2014 2017 2007 2014 2017 average 0.37 0.36 0.36 0.76 0.74 0.76 median 0.37 0.36 0.35 0.77 0.75 0.76 standard deviation 0.02 0.03 0.03 0.03 0.03 0.03 quartile deviation 0.37 0.36 0.36 0.77 0.74 0.77 classic coefficient of variation 0.06 0.08 0.08 0.04 0.04 0.04 positional coefficient of variation 1 1 1.01 0.99 0.99 1.01 min 0.31 0.3 0.3 0.64 0.64 0.56 max 0.47 0.46 0.51 0.8 0.8 0.8 range 0.16 0.16 0.21 0.16 0.16 0.24 quartile 1 0.36 0.34 0.34 0.75 0.72 0.75 quartile 2 0.37 0.36 0.35 0.77 0.75 0.76 quartile 3 0.38 0.38 0.37 0.78 0.76 0.78 quartile separation 0.02 0.04 0.03 0.03 0.04 0.03 skewness 1.58 0.7 2.19 1.69. 0.71 3.62 measure of concentration-kurtosis 6.43 1.42 11.35 5.15 1.02 20.69 source: own study based on data from rio o / kielce, bdl cso oe synthetic measure of the financial standing y = 0.2979 + 0.5832*x; r = 0.5265; p = 0.00000; r2 = 0.2772 smyków (2) tuczępy (2) 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 2007 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 20 14 sitkówka-nowiny (2) oe synthetic measure of the financial standing y = 0.3005 + 0.6166*x; r = 0.5827; p = 0.00000; r2 = 0.3396 t uczępy (2) 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 2014 0.54 0.56 0.58 0.60 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 20 17 sitkówka-nowiny (2) topsis synthetic measure of the financial standing y = 0.1358 + 0.6135*x; r = 0.5171; p = 0.00001; r2 = 0.2674 smyków (2) 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 2007 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 20 14 sitkówka-nowiny (2) t opsis synthetic measure of the financial standing y = 0.1131 + 0.6712*x; r = 0.6548; p = 0.00000; r2 = 0.4288 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 2014 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 20 17 sitkówka-nowiny (2) t uczępy (2) figure 2. a scatter chart for measuring the synthetic financial situation with the matching line of rural communes in the świętokrzyskie voivodship source: own study based on data from rio o / kielce, bdl cso baltic journal of economic studies 13 vol. 5, no. 4, 2019 when analysing the stability of the spatial diversity of the financial situation of rural communes in 2007–2017, correlation coefficients can be used. its value between the topsis measure and oe was -0.816 (table 4), which may indicate that to a very similar extent they described the diversity of the financial situation of rural communes, and the spatial diversity of the studied phenomenon was stable. the level of the phenomenon under study was affected to the greatest extent by own income, taxes and local fees, as well as transfer and property (investment) expenses. table 4 correlation of a measure of synthetic financial situation and competitiveness with their determinants topsis financial situation oe financial situation financial situation -0.8167 1.0000 eu funds .1254 -0.3963 own income .6307 -0.7548 income from taxes and local fees .5835 -0.6639 income from pit and cit .0711 -0.1743 transfer income -0.5331 .6836 operating surplus .5054 -0.3225 debt -0.3479 -0.1663 property (investment) expenses .4539 -0.6611 current expenditure -0.4537 .6607 observations used 1-207 source: own study based on data from rio o / kielce, bdl cso the linear regression model indicating the explained variable and the explanatory variables takes the form: f financial situation topsis / oe = ∑ (eu funds, own income, local taxes and fees, income from pit and cit, transfer income, operating surplus, debt, property (investment) expenses, current expenses). the results of the analysis for topsis show that the presented regression model allows explaining r = 0.708 (r2 = 701) of variations of variables. high values of f (97.93) statistics and the corresponding level of probability p confirm the statistical significance of the linear model. the t-student statistic value for the p parameter means that all parameters are statistically significant. the value of the determination coefficient (r2) indicates a good fit of the regression model to the data. the results of the analysis for oe allow stating that the presented regression model allows explaining r = 0.929 (r2 = 0.927) of variable variations, indicating a very good fit of the regression model to the data. the high values of f (376.3) statistics and the corresponding level of probability p confirm the statistical significance of the linear model. the value of t-student statistics at the parameter means that all parameters are statistically significant. 5. conclusions in assessing the operation of municipalities, financial management is gaining importance. they shape the economic situation of the local government, the conditions for carrying out tasks, achieving the set goals. the interpretation of their amount and structure in individual years is not clear, e.g. due to loans taken out, eu funds obtained, investments are implemented and settled over several years. the income side determines the expenditure part, which confirms that both streams are related to each other. the analysis of spatial data requires a multi-criteria approach, requires knowledge of the degree and specificity of the space diversity of the features of individual regions. selected variables form territorial capital. it is characteristic for the region, individual for the area, different for individual communes, and should 2007: y = 0.9326 0.7423*x; r = -0.8619; p = 0.0000; r2 = 0.7430 pierzchnica (2) smyków (2) 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 oe 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 to p s is sitkówka-nowiny (2) 2017: y = 0.9506 0.7851*x; r = -0.8788; p = 0.0000; r2 = 0.7723 0.54 0.56 0.58 0.60 0.62 0.64 0.66 0.68 0.70 0.72 0.74 0.76 0.78 0.80 0.82 oe 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 0.52 to p s is sitkówka-nowiny (2) figure 3. scatter chart of the measure of the synthetic financial situation with the matching line of rural communes of the świętokrzyskie voivodship in the relation oe to topsis source: own study based on data from rio o / kielce, bdl cso baltic journal of economic studies 14 vol. 5, no. 4, 2019 not be included in the same mathematical models averaging the variables. local government can carry out its tasks when it is equipped with stable and efficient sources of own income. the level and structure of budget revenues determine the investment activity of the commune. therefore, finance is the basis for the implementation of public tasks and determines the conditions for local economic development. areas with a high level of financial standing were located mainly in the central area of the region and the influence of the region’s capital (sitkówka-nowiny, masłów, strawczyn, zagnańsk, solec-zdrój). the factors determining membership in the group were favourable position rents, very good financial standing and good infrastructure, mining and processing industry, mineral raw materials, food production, agrotourism, and health resorts. at the other extreme of the distribution were areas with a low level of financial standing, which can be described as peripheral (klimontów, pawłów, radoszyce, bieliny, dwikozy, iwaniska, bliżyn). this peripherality has a geographical dimension, expressed by its location relative to the centre of the region, and economic, being a derivative of adverse structural changes, as well as mixed, combining both dimensions. the indicated areas are characterized primarily by traditional agricultural functions. in 2007, the financial standing measure (topsis) ranged from 0.31 to 0.47, in 2017 – from 0.30 to 0.51. in 2007, the financial standing (oe) measure ranged from 0.64 to 0.80, in 2017 – from 0.56 to 0.80. group a units are characterized by the highest average share of own revenues, as well as local taxes and fees in total revenues, developed industrial function. the units in which the traditional agricultural function dominates are in a weaker situation. table 5 kmnk estimation (observations 1-207 used; dependent variable: topsis sf ) rate standard error student’s tp-value constant 0.289073 0.00344703 83.8614 <0.00001 eu funds 6.52791e-06 6.56623e-06 .9942 0.32134 own income 0.109448 0.0265059 4.1292 0.00005 income from taxes and local fees 0.120443 0.0308867 3.8995 0.00013 operating surplus 0.265308 0.0243772 10.8835 <0.00001 property expenses 0.0732006 0.0168209 4.3518 0.00002 arithmetic mean of the dependent variable 0.361159 standard deviation of the dependent variable 0.027139 sum of squared residues 0.044153 residual standard error 0.014821 coefficient of determination r-squared 0.708986 corrected r-squared 0.701747 f (5, 201) 97.93784 p-value for the f test 6.16-52 logarithm of credibility 581.1457 akaike inform. crit. -1150.291 crit. bayes. schwarz -1130.295 crit. hannan-quinn -1142.205 source: own study based on data from rio o / kielce, bdl cso table 6 kmnk estimation (observations 1-207 used; dependent variable: oe_sf) rate standard error student’s tp-value constant 0.679085 0.026747 25.3892 <0.00001 eu funds -2.86753e-05 3.72707e-06 -7.6938 <0.00001 own income -0.0859447 0.0165279 -5.2000 <0.00001 income from taxes and local fees -0.0203953 0.0287534 -0.7093 0.47896 income from pit and cit 0.05996 0.0325459 1.8423 0.06692 transfer income 0.175085 0.0270775 6.4661 <0.00001 operating surplus -0.180623 0.0137868 -13.1012 <0.00001 property expenses -0.134962 0.00951749 -14.1804 <0.00001 arithmetic mean of the dependent variable 0.754010 standard deviation od the dependent variable 0.031047 sum of squared residues 0.013948 residual standard error 0.008372 coefficient of determination r-squared 0.929760 corrected r-squared 0.927289 f (7, 199) 376.3058 p-value for the f test 4.5e-111 log credibility 700.4136 akaike inform. crit. -1384.827 crit. bayes. schwarz -1358.166 crit. hannan-quinn -1374.046 source: own study based on data from rio o / kielce, bdl cso baltic journal of economic studies 15 vol. 5, no. 4, 2019 references: churski, p., borowczak, a., dolata, m., dominik, j., hauke, j., perdał, r ., & konecka-szydłowska, b. 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(2012). zastosowanie metody topsis do oceny kondycji finansowej spółek dystrybucyjnych energii elektrycznej, ekonomia i zarządzanie, 4/2012, pp. 137–145. baltic journal of economic studies 130 vol. 5, no. 4, 2019 corresponding author: 1 black sea research institute of economy and innovation, ukraine. e-mail: k.v.mozharovska@gmail.com 2 black sea research institute of economy and innovation, ukraine. orcid: https://orcid.org/0000-0002-3386-5962 e-mail: lightstarpro@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-4-130-136 traditions and innovations of the concept of administrative law under reform kateryna holovko1, svitlana levchenko2 abstract. the article is devoted to the study of the essence and content of individual transformation processes in the field of administrative law of ukraine under the conditions of administrative and legal reform. attention focuses on the issue of a detailed assessment of the nature of public relations, which are included in the sphere of legal regulation of the field of administrative law. the author concludes that a qualitative and substantial update of the theoretical and methodological basis should be an integral part of administrative and legal reform. the importance of the process of updating the categorical framework, the introduction into the legal circulation of new categories, capable of creating a more solid scientific basis of administrative law, is proved. the positions of leading ukrainian scholars in the field of administrative law on the essence of the category “public administration” are analysed and the reasons for the dualism of approaches to its definition in the ukrainian administrative and legal doctrine are revealed. attention is paid to the basic factors of the shift of the idea of the priority of the rule of law towards the specific relationship between public administration bodies and individuals. the subject matter of the study is the traditions and innovations of the concept of administrative law of ukraine in terms of reform. the purpose is to study the nature and content of transformational changes in the administrative law of ukraine at the present stage. the methodological basis of the study was the set of methods and techniques of scientific knowledge. the methodological construction is based on a systematic analysis that defined its directions. the systematic approach in some issues was supplemented by an axiological (ideological) approach. empirical methods such as observation, description, comparison, and inductive generalization were used to identify trends in the reform of the administrative law of ukraine. the logical and semantic method was used for formulation and in-depth study of the conceptual framework. the dialectical method of cognition made it possible to investigate the problems associated with the definition of the concept of “public administration” in ukrainian administrative and legal doctrine. application of methods of modelling, analysis, synthesis, generalization, and analogy allowed formulating the conclusions of the study. the conclusions of this study are that the author has established that an integral part of the administrative and legal reform of ukraine should be a qualitative and substantial updating of the categorical and terminological framework of the field of administrative law and, above all, the basic category of “public administration”. at the same time, in the context of ukraine’s development as a democratic and legal state, all reform initiatives must be systematic and consistent. special attention also needs to be paid to scientific and analytical monitoring of the state of introduced changes and consequences of the implemented administrative reform measures, which will allow expeditiously identifying and correcting possible mistakes, as well as making recommendations on further prospects of the development of the administrative and legal sector. practical implications. the results of the study will help to better understand the basic aspects of the new concept of administrative law and can be used in the research field for a further in-depth study of the issue of transformational changes in the administrative and legal field. key words: administrative law of ukraine, administrative and legal reform, administrative reform, governance, state-centrism, institutional support, human-centrism, methods of administrative law, subject of administrative law, public administration. jel classification: k19, k23, h76 baltic journal of economic studies 131 vol. 5, no. 4, 2019 1. introduction transformation processes aimed primarily at global reform of all spheres and branches of public life have become objectively conditioned on the path of democratic transformations of ukrainian society and the establishment of ukraine as a powerful european state. in the context of integration processes, the need for systematic changes of the legal tools to solve national and global challenges, as well as to ensure the declared transformation processes, whose quality and compliance with the requirements of the times must become an essential feature, has also become urgent. emphasis should also be placed on the internal factor of ukrainian systemic reforms caused by the rapid development of existing ones and the emergence of a large number of new, previously unregulated public relations, citizens’ dissatisfaction with the quality of institutional support, diminished public confidence in state institutions and the authority of public bodies, the need for the orderliness, organization, and coherence of the development of state institutions in the context of european integration of ukraine at the same time, the basis of the legal arsenal of ensuring the announced systemic reforms is undoubtedly the rules of administrative law, which without special reservations can be recognized as the dominant (“title”) industry in the processes of legal support for the implementation of the internal vector of public policy. despite the fact that an extensive galaxy of scholars and practitioners of the administrative branch studied the nature and content of transformational changes in the administrative law of ukraine in the context of reform, including v. b. averianov, v. m. bevzenko, yu. p. bytiak, h. p. bondarenko, i. p. holosnichenko, ye. v. dodin, s. v. kivalov, v. v. kovalenko, l. v. koval, t. o. kolomoiets, ye. v. kurinnyi, r . s. melnyk, m. s. mikhrovska, s. h. stetsenko, and others, at the present stage, many issues related to particular aspects of the reform of the administrative law of ukraine have a high level of scientific novelty. therefore, the relevance of the issue of traditions and innovations of the concept of administrative law of ukraine in the conditions of reformation, theoretical and practical significance of the chosen topic are not in doubt. the purpose of the article is to investigate the essence and content of transformational changes in the field of administrative law of ukraine at the present stage. the methodological basis of the study was the set of methods and techniques of scientific knowledge. the methodological construction is based on a systematic analysis that defined its directions. the systematic approach in some issues was supplemented by an axiological (ideological) approach. empirical methods such as observation, description, comparison, and inductive generalization were used to identify trends in the reform of the administrative law of ukraine. the logical and semantic method was used for formulation and in-depth study of the conceptual framework. the dialectical method of cognition made it possible to investigate the problems associated with the definition of the concept of “public administration” in ukrainian administrative and legal doctrine. application of methods of modelling, analysis, synthesis, generalization, and analogy allowed formulating the conclusions of the study. 2. transformation of the concept there is no doubt that administrative law has a universal social role – to ensure the realization of various groups of public needs and interests in the basic (fundamental) spheres of public life, which is carried out by means of the functioning of an extensive system of state institutions. which allows suggesting that the said industry holds a special and unique place among the fundamental branches of domestic law. at the same time, with the proclamation of state independence, a new, modern, and effective model of the organization of state power was started, which could sufficiently satisfy the needs of the dynamic development of civil society, formation of a progressive socio-economic system and democratic rule of law. however, the state of administrative legislation, which substantially lags behind the requirements of the present, regulates public relations in a vague and contradictory manner, does not ensure the assertion of the priority of human rights and freedoms in its relations with the state (kovalenko, 2012), the lack of demand for fullfledged administrative and legal instruments, as well as its inept and inefficient use, are still obstacles to the progressive social development, growth of the power of ukraine, and realization of quite real possibilities of comprehensive positive self-realization of its citizens. that is why, given the european vector of development of our country, it was extremely important to increase the institutional capacity of ukraine, to rethink scientific and methodological principles of administrative law as a fundamental branch, to transform the content and system of existing administrative legislation in accordance with the needs of qualitative change of the role of administrative law in regulating the relationship between the state and citizens, to improve the efficiency of public administration in various spheres of public life, to promote the effective use of administrative law as the basis of legal support for administrative reform, undertaken in modern conditions (averianov, 2002). it should be noted that, exploring in its time the main directions of reforming administrative law, its role in regulating the relationship between the state and citizens, s. v. kivalov (2003) noted that acting as an important tool for ensuring the implementation baltic journal of economic studies 132 vol. 5, no. 4, 2019 of the constitutional postulate, “human and citizen’s rights and freedoms and their guarantees determine the content and orientation of the activity of the state,” the public purpose of administrative law is constantly changing and determined based on a combination of the following tasks: regulation of the administrative activity of the executive and local self-government bodies; introduction and regulation of truly democratic relations between these bodies and citizens. therefore, it is not accidental at present to shift towards specific relationships between public administration and individuals the idea of the priority of the rule of law, which consists in the fact that the key characteristics should be not “managerial” but “law enforcement” (related to securing implementation of human rights and freedoms) and “protection” (related to the protection of violated rights) functions. therefore, special attention needs to be given to the creation of proper conditions for the realization of human rights and freedoms, which is connected with the ongoing modernization of domestic administrative law under new, democratic principles (andriiko, nahrebelnyi, kysil, pedko, derets, pukhtetska and kirmach, 2012). at the same time, as s. h. stetsenko (2007) notes, despite the change of the “state-centric” ideology to “human-centric” one, the priority of service to a person by the state (public service activity), public administration in the economic, socio-cultural, administrative and political spheres of society cannot be removed from the administrative law agenda. first of all, because of its importance as a phenomenon in public life. and here is an indicative opinion of k. bondarenko (2016), which states that it should be about filling the category of “public administration” with new content, which can substantially change it so that governance corresponds to the human-centric concept of the state and administrative law as an area of public law, according to which the state declares the postulate of “the priority of realization of constitutional rights of citizens in legal relations with the public administration” regarding the leading role of public bodies. 3. creation of a new theoretical and methodological base however, it is necessary to fully agree with v. b. averianov (2003), who states that a necessary condition for successful reform of administrative law as a fundamental branch of ukrainian law is the creation of a new theoretical and methodological base of administrative law science. it seems that by now it is necessary to give a more detailed assessment of the nature of social relations within the sphere of legal regulation of the administrative law (the common interpretation of which was formed in soviet times as “law of public administration”, “administrative law”). considering the conceptual positions of the new doctrine of ukrainian administrative law, it should be noted that the role of administrative law as a sector in the context of transformational changes has become not purely “administrative” but mainly “serving”, “publicservice” (averianov, 1998). at the same time, the administrative and public (social) value of administrative law was transformed – administrative law began to be considered as the main regulator of harmonious relations between public administration, entities (bodies and officials) of executive power and local selfgovernment and citizens (averianov & pukhtetska, 2008). therefore, in view of the reformatting of the main aspects and key characteristics of the said sector, it can be argued that the managerial nature of relations in the content of the subject of administrative law has ceased to be dominant, and the sphere of administrative relations has narrowed considerably. however, it should be noted that the meaning of the content in terms of the theoretical and legal characteristics of the category “public administration” in the context of practical activity of administrative bodies in ukraine has not changed significantly. in modern conditions of the transformational update of the content of the subject of administrative law, its methods also have changed. thus, at present, the vast majority of special administrative law methods are dispositive, based on the ability to choose the behaviour and use of administrative discretion (e.g., method of coordination, administrative contract, incentive, investment, encouragement, registration). the above allows concluding on changes in the path of democratic changes and integration processes of the very essence of administrative law as a branch (since the subject matter and method of legal regulation have undergone transformational changes). at the same time, as regards the renewal of the categorical framework, the introduction into the legal circulation of new categories capable of creating a more solid scientific basis of administrative law. thus, in the context of integration processes, the concepts of “administrative services”, “public administration”, “subject of public administration” and “public administering” are increasingly being found in the laws and regulations of ukraine and domestic legal literature. however, it should be emphasized that, unfortunately, many recent definitions have not been implemented at the legislative level and have not been fully and thoroughly covered in the work of legal scholars. herewith, the lack of a unified approach to defining the essence and content of the basic categories of modern administrative science, introduced as a result of administrative reform in ukraine, can become a stumbling block in the orderliness, organization, and coherence of the development of state institutions in the context of european integration of ukraine. baltic journal of economic studies 133 vol. 5, no. 4, 2019 for example, the presence of quite different modern scientific approaches to defining the essence and content of the category “public administration” causes difficulties in the process of forming a unified normatively balanced approach to the formation of the system of public administration entities in ukraine, determining their status, a clear delineation of functions, range of powers, and boundaries of responsibility, which is another threat to the effective reform of the administrative law of ukraine. although the introduction of the “public administration” structure was carried out in 2001 (hnydiuk, 2001), it was intended not only to make a symbiosis of concepts of “governance” and “local self-government” but also to give the said structure a qualitatively new content. at the same time, the analysis of sustainable scientific developments, devoted to the concepts of “public administration” and “subject of public administration”, makes it possible to state that the issue of developing a unified approach to determining their essence and content has not yet been resolved in the theoretical plane. in addition, according to some scholars, there are two (possibly more) approaches to defining the essence of public administration in modern legal science, because in european law there are two definitions of the concept of “public administration”: narrow and broad (hnydiuk, 2006). the analysis of the provisions of the current legislation of ukraine for the presence of legislative consolidation of these concepts also does not produce the expected results, although it allows to state that the current legislation of ukraine actively uses these legal categories. turning to the achievements of v. b. averianov (2003), we can conclude that public administration is a set of executive bodies and executive self-government bodies subordinate to political power, which enforce the law and perform other public-management functions. a similar position is supported by n. p. kamenska (2014), who interprets the notion of public administration as a system of executive and local selfgovernment bodies which, in accordance with the law and within the competence, administer public affairs. “narrow” approach in defining the concept of “public administration” is supported by s. s. vitvitskyi (2016), d. o. vlasenko (2017), i. b. koliushko and v. p. tymoshchuk (2005) and others. m. s. mikhrovska (2011) considers public administration the symbiosis of the system of bodies of executive power and local self-government. herewith, according to the author, public administration is a collection of bodies of executive power and local selfgovernment, which are subordinated to public authority, whose activity is aimed at the law enforcement and the implementation of other public-management functions that may be delegated to enterprises, institutions, and organizations and any other subjects carrying out the functions of public administration, which by their activity ensure the rights and freedoms of man and citizen. it should be noted that in the modern domestic administrative law literature, the position has recently become quite established that the structure “public administration” is indeed close in content to the structure of “governance” but does not completely coincide with it (melnyk, 2014). considering the category of “public administration”, v. k. kolpakov notes that public administration is a system of organizational and structural entities that have legitimately acquired the powers to implement them in the public interest (2008). in further scientific research, the author substantiates the view that public administration as a legal category has two dimensions: functional and organizational-structural. at the same time, the functional dimension involves the consideration of public administration as the activity of relevant structural entities in the performance of functions aimed at the realization of public interest, and organizational and structural – the set of bodies formed for the implementation (realization) of public authority (kolpakov, kuzmenko, pastukh, sushchenko, 2012). t. o. karabin notes that the correct understanding of public administration is revealed only in the so-called organizational and structural aspect – as a collection of bodies and officials who exercise public authority through executive-administrative activity (karabin, 2015). in the legal literature, there are reasonably prevailing views on “public administration” as a system of state executive bodies and executive bodies of local selfgovernment, enterprises, institutions, organizations, and other entities vested with administrative and managerial functions acting for the purpose of securing the interests of both the state and society, as well as the totality of these administrative and managerial actions and measures established by law (kravtsova & solonar, 2010). some scholars define public administration as a system of executive bodies and local self-government, enterprises, institutions and organizations in the case if executive authorities and local self-government bodies delegate them a part of their powers and any other entities that perform public-management functions, a set of organizational actions and measures taken by them within the limits set by the law, with the aim of achieving public interest and reliable protection of rights and freedoms of man and citizen (bilozerska, 2007). other scientific views, in their essence, mainly go along with ideas regarding this issue. this indicates that the domestic administrative-legal doctrine has formed several concepts of understanding of the concept of “public administration”, which are sufficiently substantiated and convincing. thus, in the narrow sense, public administration is a system of executive and local self-government bodies which, in accordance with the law and within the competence, administer public affairs. in the broad sense, public administration is the totality of executive bodies, local governments, and other entities that are empowered by baltic journal of economic studies 134 vol. 5, no. 4, 2019 law or administrative contract to perform functions in the public-law sphere (tsvirkun, 2016). it appears that the formation of a dualism of approaches to defining the concept of “public administration” in ukrainian legal doctrine is associated, first of all, with the significant influence of european law, in which the said legal category is widely used and is a pivotal element in administrative law. however, eu regulations also use the “broad” and “narrow” concepts of public administration (kravtsova & solonar, 2010; pukhtetska, 2006). however, quite often in the achievements of european scientists the concept of “public administration” is used to refer to a set of organizational actions, activities, and measures performed by various entities, bodies, and institutions based on the law and within the forms defined by the law to achieve public interest (beno, 2006). at present, the national administrative-legal doctrine does not formulate a single approach to defining the system of subjects of public administration in ukraine. however, studying the theory of public administration as a complex phenomenon and carefully considering the functional and organizational and structural dimensions of public administration, it can be argued that, depending on the scope of public tasks and goals, the system of public administration entities and its constituent elements will have “variational” differences. we must not forget that today’s realities are such that functionally the powers of public administration (i.e. public administering) are exercised not only by the executive and local self-government bodies but also by bodies that do not belong to them (klimova, 2017). taking into account the “broad” concept of interpretation of the essence of public administration, among the constituent elements of the system of legal entities who are responsible for performing the functions of the public administration in ukraine, it is necessary, first of all, to distinguish: bodies of state executive power; executive bodies of local self-government; state institutions, organizations, establishments whose activities are aimed at performing public functions; other entities belonging to the public sector and endowed with public functions. however, only the executive and local self-government bodies are the bodies of public administration in ukraine. although in the system of subjects of public administration of ukraine every entity acts as an element, so the system of legal actors, which are entrusted with the performance of functions of public administration in ukraine, is defined as a system. however, in the systematic characteristics of subjects of public administration in ukraine, one should also consider the internal content of elements of the system. because acting within the framework of a single purpose (satisfaction of public interests), the subjects of public administration of ukraine are organizationally separated, have their own structure, and can be a link of another system. at the same time, the complexities of the public administration system of ukraine are related to the variability of all elements of the system, the links between them, and the environment in which the administration operates. 4. transforming the content of administrative legislation the newly formed concept of administrative law also envisages the improvement of normative legal mediation of the principle of the rule of law in the administrative legislation of ukraine, the analysis of the existing development trends of branch legislation in order to develop practical recommendations for its improvement. in the context of reforming the field of administrative law of ukraine, it should be noted that one of the positive aspects of the modern concept of administrative law is the substantial updating and transformation of the content of administrative legislation. first of all, it is about the adoption of the law of ukraine “on administrative services” as of 06.09.2012 № 5203-vi, the law of ukraine “on prevention of corruption” as of 14.10.2014 № 1700–vіі, the law of ukraine “on civil service” as of 10.12.2015, № 889-viii, etc. at the same time, it seems that there are still many problematic issues related to the elimination of divergences, ambiguities, and duplications of the provisions of the current administrative legislation. 5. conclusions obviously, from the point of view of the development of the ukrainian administrative-legal doctrine, the branch of administrative law is in a state of transformation, which is conditioned by the rethinking of values of the state, the priority of ensuring the constitutional rights of citizens. formation of a fundamentally new theoretical paradigm, the so-called ideology of “humancentrism”, tested by most european countries (the socalled european style of government), does not need to develop its principal alternative but only requires taking into account the peculiarities of ukrainian modernity, which will allow achieving the expected strategic results of realization of various groups of social needs and interests in the basic (fundamental) spheres of public life. because for now, as a social practice of ukraine shows, there are significant obstacles to the introduction of the ideology of “human-centrism” not only in the activity of the government machinery but also in the process of formation of a qualitatively new theory of administrative law of ukraine. it seems that an integral part of the administrative and legal reform of ukraine should be the qualitative and substantial updating of the conceptual and categorical framework and, above all, the basic category of “public administration”, which requires the development of baltic journal of economic studies 135 vol. 5, no. 4, 2019 a unified strategy and algorithm for such updating in order to avoid alogism in the functioning of state institutions in the context of ukraine’s european integration. at the same time, in the context of ukraine’s development as a democratic and legal state, all reform initiatives must be systematic and consistent. special attention also needs to be paid to scientific and analytical monitoring of the state of introduced changes and consequences of the implemented administrative reform measures, which will allow expeditiously identifying and correcting possible mistakes, as well as making recommendations on further prospects of the development of the administrative and legal sector. only this approach will help to ensure the guaranteed progressive social development of ukraine and to bring it to the highest 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(in ukrainian) baltic journal of economic studies 1 vol. 5, no. 1, 2019 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: lute@lute.lviv.ua 2 lviv university of trade and economics, ukraine. e-mail: lute@lute.lviv.ua 3 lviv university of trade and economics, ukraine. e-mail: irena_svidruk@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-1-1-9 the level of knowledge intensity of the country’s economic system grigory bashnyanin1, valentina kutsyk2, irena svidruk3 abstract. the relevance of studying the issues of the knowledge intensity of economic systems has led to the conduct of these studies and determines their scientific and practical significance. the purpose of the study is a multidimensional analysis of the knowledge intensity of the domestic economic system, in particular, its creative potential, the activity of technological modernization of industry, and the creative initiative of economic actors. in the process of research, the ebrd methodology is used to evaluate the development of the knowledge economy, taking into account the specifics of the national organization of official statistical observations. in 2017, more than 1.8 thousand domestic enterprises (in the industrial sector – 1159 enterprises) created and used the latest technologies, innovation proposals, and other objects of intellectual property rights. the highest rates of creative activity were observed steadily among enterprises of information and communication sphere, financial and insurance directions, and also in the field of engineering. the leaders in the production and implementation of technological research and development (r&d) were processing industry, energy, engineering, professional scientific and advertising activities, non-technological – financial, insurance, information, telecommunication, processing enterprises. by types of economic activity, pharmaceutical companies, manufacturers of precise and extremely-precise equipment, chemical industry enterprises steadily occupied the leading positions in the field of creative activity. the analysis of regional dynamics shows the general tendency of reduction in the number of industrial enterprises that created, used or distributed creative developments. in general, during the period of research, the creative activity of enterprises decreased by almost a third, and downward processes are characteristic for almost all regions of ukraine. in 2017, 2387 product innovations were introduced by the objects of industry, including innovative devices, equipment, machines, most of which were new for the relevant market. today, there is a sufficient scientific and practical foundation for the development of creative clusters in hightech sectors. however, these processes are hampered over the lack of budget allocations. there is a tendency of increasing r&d financing by leading industrial enterprises, establishing the practice of their acquisition of hightech equipment and related technologies. in 2016–2017, there was a restructuring of investment flows, which manifested in reducing the costs of r&d intellectual components and reorientation of financial flows towards the acquisition of modern production equipment. in order to implement their own creative and innovative programs, in 2017, enterprises acquired 832 new technologies, most of which were completed with the corresponding equipment. by industrial enterprises, 59 creative technological developments were created and transferred to other entities. total investments in updating domestic industrial enterprises amounted to more than 9.1 billion hryvnias in 2017. by types of economic activity, the leaders were the machinery and equipment industry and the food industry. conclusions. therefore, the significant creative potential of the domestic industry, further enhanced by active cooperation with scientific institutions, can become the basis for structural transformation and a source of scientific and technological “breakthrough” of our state. key words: high-tech sector of economy, creative activity, creative cluster, creative initiative, technological modernization, technological research and development. jel classification: e22, f63, g14, р27 baltic journal of economic studies 2 vol. 5, no. 1, 2019 1. introduction irreversible integration of ukraine in the world economic system extremely actualizes the issue of improvement of knowledge intensity status of the domestic economy because today there is a rather high risk of occupying the place of an exporter of cheap human resources or becoming an agro-raw material supplier for developed countries. at the same time, the current trends in the development of the national economy confirm its steady direction towards the creation of high-tech competitive products with high added value. the degree of conformity of applied technologies and equipment to the requirements of the high-tech environment determines the cost, resource, and energy intensity of production processes. consequently, the value of knowledge intensity of competitive production, which is based on scientific research, relations between scientific knowledge and production processes, continuous self-training of creative personnel, increases. the inadequacy of studying the issues of knowledge intensity of economic systems has led to these studies and determines their scientific and practical significance. the purpose of this study is a multidimensional analysis of the knowledge intensity of the domestic economic system, which is based on the creative potential and technological modernization of industry. in the process of research, the ebrd methodology for evaluating the development of the knowledge economy, taking into account the specifics of the national organization of official statistical observations, is used. 2. development of creative potential in countries of central and eastern europe modern challenges of the rapid development of a globalized society elevate the problems of intensified knowledge management development to higher levels of priority of the world economic community. these trends are conditioned, first of all, by the etiological factors of the formation and development of the knowledge economy, in particular, the rapid growth of knowledge intensity, intellectualization and high technology of production, which entails the need for a significant increase in labour productivity and actualizes the emergence of the newest post-industrial market segments. the economic processes of the countries of central and eastern europe in recent years are characterized by the intensification of knowledge management. one of the recognized leaders in building an information society among them is poland, which recently is actively increasing the potential of the it industry and invested more than 3.5 billion usd in the high-tech sector and attracted more than 500 thousand specialists. an interesting feature of poland’s creative economy is that its subjects are mostly small enterprises. successful informatisation of the society is promoted by state support for the development of high-tech production. in the meantime, despite the significant strengthening of the creative potential of the countries of central and eastern europe in recent years, the main development indicators still do not reach the corresponding indicators of the leading countries (table 1). in particular, the level of expenditures on r&d remains much lower, which negatively affects the dynamics of creative economic development. processes of strengthening the personnel potential of science require intensification that would increase the share of employed in high-tech industries and qualitatively influence other indicators of creative activity, in particular, the processes of scientific and production cooperation and development of high technology industries. in 2013-2017, there was a tendency for expanded involvement of private business representatives in knowledge-intensive and high-tech industrial production, in particular, in the fields of pharmaceuticals, electronics, and communications, which greatly table 1 the level of creative potential of the countries of central and eastern europe in 2017 country the share of science expenditure in gdp, % number of researchers (per 1 million population) the share of high-tech products in commodity exports, %, cooperation of science and business, % the intensity of competition at the local level, % bulgaria 0,53 1586,7 7,9 0,16 0,29 estonia 1,44 3210,3 9,1 0,77 0,80 latvia 0,46 1601,2 7,6 0,60 0,42 lithuania 0,84 2541,1 10,6 0,78 0,54 poland 0,68 1597,6 6,7 0,54 0,73 romania 0,48 894,8 10,9 0,17 0,30 serbia 0,88 1060,1 0,59 0,02 slovakia 0,48 2437,7 7,1 0,46 0,74 slovenia 0,85 3678,8 5,5 0,65 0,64 hungary 1,15 2006 24,2 0,77 0,73 croatia 0,83 1571,3 9,2 0,45 0,17 czech republic 1,52 2754,8 15,3 0,79 0,89 baltic journal of economic studies 3 vol. 5, no. 1, 2019 increased the competitiveness of the corresponding products. however, an indicator of competitive intensity at the local level (one of the indicators of the global innovation index) in central and eastern european countries still does not reach the level of economically advanced countries. the low creative activity of enterprises is conditioned, first of all, by the lack of financial resources for the qualitative disclosure of creative potential. the lack of foreign investment in high-tech sectors of the economy requires an increase in the enterprises’ own resources and the search for opportunities for state support. however, in most countries of central and eastern europe, at the initial stage of economic transformation, there was a separation of state institutions from investing in the scientific and technical sphere. at the next stage, this became one of the reasons for the technological lag behind the leading countries and led to the need to develop appropriate “catching-up development” strategies aimed at the rapid economic growth and technological breakthroughs. in order to implement such strategies, tools for attracting foreign capital, developing export-oriented models of the economy, and concentrating domestic financial resources on hightech production lines are actively used. the adaptation of the national economies of central and eastern european countries to the realities of the post-industrial structure requires a reorientation to the latest development model based on the dominant development of the existing intellectual, creative, and scientific and technical potential. priority is given to the production of original knowledge and technologies, and the corresponding institutional means of stimulating activities in the field of high technologies such as electronics, nanostructured chemicals, energy, and biotechnology are created. correspondingly, diversification of managerial tools for the creation and diffusion of new knowledge and facilitation of access to databases and intelligent systems are envisaged by the state strategic development programs. 3. ukrainian industry’s creative potential in 2013-2017, the share of enterprises that carried out scientific and technological innovations in their activities amounted to 18.4%, of which 11.8% of enterprises declared technological updating, including 5.7% of enterprises created product innovations, 10.3% – introduced process innovations. out of 13.4% of enterprises engaged in non-technological creative developments, 8.7% relate to organizational innovations and 10.2% to market developments (state statistics service of ukraine, 2018). in the service sector, creative and innovative entrepreneurship in ukraine is most often represented by internet entrepreneurs, web-specialists, and creative studios with creative authoring services. these areas are most highly characterized by high flexibility and adaptability, which allows levelling high risks of implementing creative projects and, if necessary, making managerial decisions for the rapid conversion of research programs and diversification of their areas of use. in addition to enterprises of it services, the largest creative and innovative activity in 2013-2017 was shown by large enterprises with a number of attracted personnel of 250 or more persons (an average, 39.6% of all enterprises of this type) while the shares of innovationactive enterprises in the medium and small business were 24.7% and 14.8%, respectively. it is clear that the refusal of the majority of small and medium-sized enterprises from high-tech creative developments indicates, first of all, their efforts to avoid additional risks that can substantially burden already imperfect financial and economic opportunities. at the same time, the low creative activity of powerful industrial enterprises directly indicates the steady orientation of the existing development model of the national economic system to low-tech production and in general significantly reduces competitive positions of the industrial sector (sobkevych, sukhorukov, shevchenko, krupeljnycjka, 2013). alongside with that, the significant creative potential of the domestic industry, further enhanced by active cooperation with scientific institutions, can become the basis for structural transformation and a source of scientific and technological “breakthrough” of our state. 4. technological modernization of ukrainian industrial complex the national industrial sector requires active use of creative management schemes capable of directing the vector of innovation development towards the development of scientific and technological potential. this will contribute to improving the competitiveness of products manufactured by using the latest technology and innovative production equipment. the additional effects of creative and technological modernization of the domestic industrial complex, capable of providing its sectoral restructuring, are the access to new markets (and hence – increase of sales volumes and improvement of financial results) and updating of the scientific and technological base of production (with the corresponding optimization of production processes). in 2017, more than 1.8 thousand domestic enterprises created and used the latest technologies, innovation proposals, and other objects of intellectual property rights; in particular, in the industrial sector of the domestic economy, 1159 enterprises used r&d results (table 2). during 2013-2017, the highest rates of creative activity were observed steadily among enterprises of information and communication sphere (22.1% of all enterprises of this sector), financial and insurance directions (21.7%), and also in the field of engineering (20.1%). baltic journal of economic studies 4 vol. 5, no. 1, 2019 regarding the introduction of technological r&d by the domestic industrial enterprises, the leaders are such branches as processing industry (15.6% of all enterprises of the industry), energy (12.6%), engineering, professional scientific and advertising activities (13.2% each). the leaders in the production and implementation of non-technological innovation in the studied period were financial and insurance enterprises (18.0% of all enterprises of the industry), information and telecommunication (17.3%), and also processing enterprises (15.3%). by types of economic activity in 2013-2017, pharmaceutical companies (53.8% of all enterprises of the industry), vehicle manufacturers (37.1%), manufacturers of electronic and optical products (34.0%), precise and extremely-precise equipment (25.2%), and chemical industry enterprises (25.0%) steadily occupied the leading positions in the field of creative activity. 5. technology transfer sustained trends in the growth of the role of creative potential for innovation in industrial development require adequate managerial regulation in the field of technology transfer from the academic science sector, the creation of effective mechanisms for the r&d commercialization and stakeholder cooperation. for the consolidation of information resources of state and public institutions, innovative enterprises, and scientific organizations in a single network, a pilot project “ukrainian technology transfer network uttn” was created. technology transfer for the purpose of integration into european transfer networks is defined as the institutional purpose of the formation, which involves increasing the efficiency of using the domestic intellectual potential, commercialization of r&d of academic universities and research institutions, reorientation of the industry to the production of high-tech products (novikov, 2015). creation of een-ukraine consortium has defined the businesstechnology cooperation of innovative enterprises and scientific organizations of ukraine and the eu. one should also note transfer activity of the ukrainian institute of scientific and technical expertise and information, which regulates ukraine’s partner relations with the international community and promptly provides business structures and scientific organizations with scientific and technical information through an automated system for the formation of integrated interstate information resources. the general megatrends of a globalized society, which include demographic changes, urbanization on the basis of the fullest possible automation, comprise elements of uncertainty and cause insecurity of the future development of the economic structure, which can be overcome only through persistent creative searches and corresponding infrastructure transformations. the creative planning of strategic directions for future business development allows creating potential technological update scenarios and timely predicting possible obstacles to radical change. in this sense, institutional support for the renewed imperatives and private-public partnership program is extremely important in order to financially support creative initiatives that stimulate the innovative transformation of the industrial sector of the national economic system, contributing to economic growth, environmental responsibility principles, and social progress. the growth of creative activity of enterprises requires the use of new organizational levers to stimulate productivity growth, develop a creative product table 2 distribution of creative active enterprises by industry in 2017 (units) total number of enterprises that created advanced technology used advanced technology used intellectual property objects used innovative suggestions total for ukraine 1835 135 1669 368 203 industry 1159 44 1127 222 75 wholesale and retail trade; repair of motor vehicles 54 2 38 2 27 transport, warehousing, postal and courier activities 218 1 203 24 14 information and telecommunications 112 27 71 34 63 professional, scientific and technical activities 217 36 172 59 14 incl. research and development 91 27 78 43 10 public administration and defence, compulsory social insurance 7 5 1 – 2 education 46 18 39 23 4 health care and social assistance 21 1 18 4 4 provision of other types of services 1 1 – – – baltic journal of economic studies 5 vol. 5, no. 1, 2019 with high added value, and develop high-tech and knowledge-intensive industries (paschenko, 2017). unfortunately, the general trends in the development of the national industrial sector still cannot be considered sufficiently creative. according to the findings of the world economic forum-2018 in davos, the levels of technological effectiveness and energy efficiency of the domestic industry significantly lag behind similar indicators of the european community countries, while the share of hi-tech product in exports remains negligible (world economic forum®, 2018). more than half of the cases of the technological innovation of industrial enterprises took place through the purchase of new equipment and software. the analysis of the dynamics of the regional distribution of industrial enterprises, which used the r&d results in the economic activity in 2013-2017, is presented in table 3 and shows a general tendency of reduction in the number of industrial enterprises that created, used or distributed creative developments. in general, during the study period, the creative activity of enterprises decreased by almost a third, and downward processes are characteristic for almost all regions of ukraine. the worst indicators of dynamics are observed in the luhansk region (reduction by 85.2%), which can be explained by the complex socio-economic situation in the region over the hybrid aggression of the russian federation. among the other outsiders, the worst dynamics are observed in rivne (reduction by 79.5%), chernivtsi (by 66.7%), and donetsk (by 63.5%) regions. three regions in 2017 slightly exceeded similar indicators in 2013, namely, poltava (by 3.0%), kharkiv (by 3.3%), dnipropetrovsk (by 6.0%) regions, and sufficient growth rates of the use of r&d results in economic activity are observed only in volyn (by 21.7%) and vinnytsia (by 21.8%) regions. at the same time, it should be noted that the downward trends of 2013-2017 are mainly determined by the general downturn in 2014-2015, after which positive trends began to recover in the national economy. therefore, in comparison with the previous year, the majority of regions show an increase in the number of creative enterprises (somewhat significant). leaders in this direction are vinnytsia (increase by 45.7%) and volyn (by 40.0%) regions. in 2017, activities above the average in ukraine were demonstrated by enterprises in kharkiv (28.1% of enterprises of the region), ternopil (27.5%), mykolaiv (26.9%) regions and the city of kyiv (20.7%). at the same time, the lowest indicators are observed in khmelnytskyi (5.7% of enterprises of the region), rivne (5.9%), and zakarpattia (9.0%) regions. table 3 the research activity of industrial enterprises of ukraine in 2013-2017 by regions (according to data of the state statistics service of ukraine, 2018) region 2013 2014 2015 2016 2017 2017/ 2016, % 2017/ 2013, % total for ukraine 1715 1609 824 991 1159 117,0 67,6 vinnytsia region 55 46 25 46 67 145,7 121,8 volyn region 23 30 12 20 28 140,0 121,7 dnipropetrovsk region 84 109 63 76 89 117,1 106,0 donetsk region 85 45 28 30 31 105,1 36,5 zhytomyr region 57 48 28 30 31 105,1 54,4 transcarpathian region 15 16 14 13 12 92,3 80,0 zaporizhzhia region 115 108 49 56 62 111,7 53,9 ivano-frankivsk region 87 99 27 32 36 114,3 41,4 kyiv region 68 66 44 41 37 91,4 54,4 kirovohrad region 46 49 25 31 37 119,4 80,4 luhansk region 61 16 9 9 9 100,0 14,8 lviv region 116 129 64 67 69 103,8 59,5 mykolaiv region 81 67 29 31 32 104,9 39,5 odesa region 69 67 36 36 36 100,0 52,2 poltava region 33 33 30 32 34 106,3 103,0 rivne region 39 45 13 11 8 76,2 20,5 sumy region 32 46 23 24 24 102,1 75,0 ternopil region 36 36 16 23 29 128,9 80,6 kharkiv region 182 191 117 153 188 123,3 103,3 kherson region 48 54 19 25 31 124,0 64,6 khmelnytskyi region 58 38 18 24 29 123,4 50,0 cherkasy region 47 37 25 29 32 112,3 68,1 chernivtsi region 30 34 9 10 10 105,3 33,3 chernihiv region 45 32 15 26 36 141,2 80,0 kyiv 142 168 86 124 162 130,6 114,1 baltic journal of economic studies 6 vol. 5, no. 1, 2019 an analysis of the structural content of the activity of introducing the r&d results into practical activity characterizes its certain unevenness. in particular, the latest creative technologies were most actively implemented by enterprises in rivne (19.1% out of all enterprises of the region), kharkiv (18.7%), and kirovohrad (14.7%) regions; the leaders of nontechnological upgrade were innovation enterprises in the city of kyiv (17.8% out of all enterprises), as well as ivano-frankivsk and kyiv regions (15.1% each). 6. a creative initiative of economic entities according to the sustainable development concept, the country’s economic growth in the long run depends, first of all, on intensive factors of expanded reproduction, which necessarily requires the implementation of achievements of the domestic and world academic and applied science and technological re-equipment of production processes in the economic practice. a significant role in these processes belongs to the regulatory socio-economic policy, which mediates institutional functions of regulating the innovation development of industry and develops financial mechanisms for industrial reorganization. however, the main lever of the transformational breakthrough of the economic system in a knowledge economy is the management of the development of the creative initiative of economic entities. the main result of the creative activity of industrial enterprises is the creation, promotion, and transfer of a new product. in total in 2017, 672 industry facilities introduced 2387 product innovations (in 2016 their number was 3136), 751 of which – innovative devices, equipment, machinery. herewith, 80% of the products introduced were new for the relevant market (table 4). 1831 new or improved technological processes were implemented (in 2016 – 1217). leaders of introduction in 2016-2017 are enterprises in kharkiv (12.6% of the total number of technological innovations in 2017 and 17.4% in 2016), sumy (12.3% and 15.2% respectively), and zaporizhzhia (7.8% and 9.4% respectively) regions. industry leaders in 2017 became machine-building enterprises (18.8%), gas-extraction companies (17.7%), and manufactures of finished metal products (13.4%). in 2017, 611 new low-waste and/or resource-saving technologies were introduced in industry, while in 2016 – 458. regional leaders were enterprises in kharkiv table 4 a number of enterprises that implemented the r&d results in 2017, by regionality and types of innovations (according to data of the state statistics service of ukraine, 2018) region total enterprises innovative products innovative processes of all new to the market new for the enterprise of all low-waste, resource-saving total for ukraine 672 358 90 302 456 198 vinnytsia region 15 11 5 10 8 5 volyn region 16 4 1 3 8 5 dnipropetrovsk region 46 18 5 16 40 11 donetsk region 22 12 3 11 19 11 zhytomyr region 23 9 1 8 10 3 transcarpathian region 12 4 − 4 7 6 zaporizhzhia region 37 26 6 22 21 7 ivano-frankivsk region 23 15 − 15 16 10 kyiv region 37 16 4 14 28 4 kirovohrad region 15 12 2 10 9 6 luhansk region 5 3 − 3 4 3 lviv region 47 24 8 20 40 12 mykolaiv region 16 8 3 5 8 2 odesa region 35 15 3 13 28 22 poltava region 23 15 1 14 13 2 rivne region 7 3 − 3 6 2 sumy region 18 17 8 12 8 5 ternopil region 25 7 2 5 23 4 kharkiv region 105 55 17 44 68 38 kherson region 15 11 3 11 11 2 khmelnytskyi region 8 3 − 3 6 2 cherkasy region 31 15 3 13 19 7 chernivtsi region 8 7 − 7 6 4 chernihiv region 10 7 2 5 9 6 kyiv 73 41 13 31 41 19 baltic journal of economic studies 7 vol. 5, no. 1, 2019 (16.6% of all innovative products), zaporizhzhia (13.4%), and lviv (10.3%) regions. 7. the cluster-innovative scenario of ukraine’s economic development the latest trend in the development of creative entrepreneurship is its adaptation to the clusterinnovative scenario of the development of a knowledge economy, in particular, the creation on the basis of large industrial enterprises of the kind of accompanying companies whose main task is the activation of the r&d and the introduction of creative developments. the concept of a creative cluster is considered to be an integral system covering a complete chain of creative development: from the development of a fundamental scientific idea to the production and distribution of a finished innovative product (shovkaljuk, 2016). it should be noted that the majority of domestic clusters are oriented towards traditional industries, while in the eu countries priority is given to innovative clusters that combine high-tech productions into high-tech industries, playing the role of points of creative growth in the economy (alslev christensen, zu kocker, lammergamp, thomsen, olesen, 2011). today in ukraine, there is created a sufficient scientific and practical basis for the development of creative clusters in high-tech sectors. in particular, on the basis of existing industrial parks and technopolises, clusters of biotechnology, electronics, automobile industry etc. can actively develop. however, these processes are hampered by the lack of budget allocations, while in great britain, france, germany, the share of budget investments in technology parks is 65-80%, in belgium – almost 100% (mazur, shovkaljuk, 2015). in addition, an important push for technological modernization of production, investing in high-tech modern equipment in modern conditions is the potential opportunity to engage the enterprise in infrastructure development of the region, which became possible after the introduction of the prozorro unified electronic procurement system. 8. investment maintenance of technological renovation of the economy traditionally, innovation costs in ukraine are mostly financed by enterprises on their own. in 2017, only 8 enterprises were financed from the state budget, and 17 other industrial enterprises were financed from local budgets. only 5 industrial enterprises received funds of domestic investors and 3 – foreign ones, 21 enterprises turned to lending services. despite the lack of significant progress in the innovation activity of the domestic industry, the cost of technological upgrades is steadily increasing. in addition, there is a tendency of increasing r&d financing by leading industrial enterprises, as well as establishing the practice of their acquisition of hightech equipment and related technologies. note that in 2016-2017, there was a restructuring of investment flows in domestic creative entrepreneurship, which manifested in reducing the costs of r&d intellectual components and reorientation of financial flows towards the acquisition of modern production equipment. the dynamics of the investment component of the creative activity of the domestic industrial sector in the regional section is shown in table 5. as we see, the largest activity in the period of 2013-2017 was stably demonstrated by industrial enterprises in zaporizhzhia, dnipropetrovsk, kharkiv regions. however, the dynamic analysis shows negative trends regarding the possibilities of investing in r&d, technological or product updates, which confirms our observations on the impact of general economic instability in the state on the willingness of enterprises to invest extra funds in the system technological upgrade of production. in order to implement their own creative and innovative programs in 2017, 170 enterprises acquired 832 new technologies (of which 129 – import), including 386 technologies (81 – import) were completed with the corresponding equipment. moreover, 305 new technologies were the result of r&d, more than 100 received as an object of intellectual property rights, 10 – under national and international agreements for the acquisition of technology and know-how. in 2017, ukraine’s industrial enterprises also created and transferred 59 creative technological developments to other economic entities, of which two were exported. the highest rates of decline in r&d financing by industrial enterprises are recorded in luhansk (by 94.6% less than in 2013), zhytomyr (by 85.8%), and vinnytsia (by 85.6%) regions. at the same time, some regions show a certain investment “breakthrough”, increasing investment in creative development more than 4 times. undeniable leaders of growth are zaporizhzhia (4.7 times more than in 2013), ternopil (4.5 times), kirovohrad and cherkasy (more than 4.4 times each) regions. compared to 2016, the regional dynamics seems somewhat more balanced, with no significant fluctuations, but the general tendency to reduce investment in r&d and high-tech equipment is noticeable. the worst indicators of rates of change are observed in ternopil (by 76.5% less than in 2016), dnipropetrovsk (by 74.1%), and vinnytsia (by 70.3%) regions. the leaders of growth are zaporizhzhia (by 62.6% more than in 2016), kirovohrad (by 59.6%), and sumy (by 57.3%) regions. total investments in production, technological, and organisational update of domestic industrial enterprises amounted to more than 9.1 billion uah in 2017, where 2.2 billion uah (24.2%) was spent on the development of own and acquisition of foreign r&d and technology, 5.9 billion uah (64.8%) was directed to the purchase of equipment and software, 1.1 billion uah (11.3%) – to other works related baltic journal of economic studies 8 vol. 5, no. 1, 2019 with the generation and transfer of knowledge (in particular, education, projecting, marketing). by types of economic activity, the leaders of investment in the scientific and technical upgrade of industrial enterprises in 2017 were the machinery and equipment industry (1.23 billion uah or 13.5%) and the food industry (1.14 billion uah or 12.6%). 9. intellectual creative activities of ukrainian economic entities the largest volumes of intellectual creative activity and r&d in ukraine traditionally belong to higher education and research establishments. consequently, the implementation of a business creativitization policy requires enterprises to fully develop multifaceted links between science and industry and to take full advantage of opportunities of both scientific infrastructure and such modern tools as clusters and industrial-production zones. in general, over 34.4% of creative enterprises cooperated with scientific institutions, universities, research institutes in the period of 2013-2017. at the same time, in 2017, only 8.4% of such enterprises cooperated with scientific organizations, and their main partners were suppliers of equipment, materials, and information resources (including software). in 2017, in the whole for ukraine, 450 industrial enterprises were engaged in the sale of creative products, and the total sales amounted to 17.7 billion uah. in 2016, these indicators were, respectively, 570 enterprises and 20.4 billion uah, including 5.5 billion uah were export deliveries (in 2016 – 10.8 billion uah). about a third of domestic creative product belongs to software and high technology. the volume of the latest for the corresponding product market was 4.5 billion uah, 41.5% of which was exported (in 2016, respectively, 7.3 billion uah and 58.3%). creative developments of the domestic industry for 2013-2017 show the extraordinary potential of creative cooperation between business and science, which allows confidently asserting the possibility of the technological breakthrough of industrial high-tech and future leadership positions in the system of the sixth technological mode. unfortunately, this indicator has been decreasing more than 2 times in ukraine as a whole, while among the regions during this period only cherkasy (with a slight increase by 2.9% compared to 2013), chernihiv (growth of more than 2.3 times), and zaporizhzhia (more than 2.4 times) regions have shown positive dynamics. the rest of ukraine’s regions in 2017 implemented their own creative product less than in 2013. compared to 2016, the results are table 5 dynamics of industrial enterprises’ expenditures on r&d in 2013-2017, million uah (according to data of the state statistics service of ukraine, 2018) region 2013 2014 2015 2016 2017 2017/ 2016, % 2017/ 2013, % total for ukraine 9562,6 7695,9 13813,7 11465,6 9117,5 79,5 95,3 vinnytsia region 694,9 796,5 575,3 337,9 100,4 29,7 14,4 volyn region 196,3 192,5 65,3 113,7 162,1 142,6 82,6 dnipropetrovsk region 1057,8 825,2 7568,9 4348,1 1127,3 25,9 106,6 donetsk region 930,7 516,1 827,6 776,5 725,3 93,4 77,9 zhytomyr region 73,1 60,6 32,6 21,5 10,4 48,4 14,2 transcarpathian region 25 16,6 22,5 24,4 26,2 107,6 104,8 zaporizhzhia region 298,7 339,9 321 857,2 1393,4 162,6 466,5 ivano-frankivsk region 488,6 95,8 92,2 113,2 134,2 118,6 27,5 kyiv region 104,4 122,1 144,8 217,3 289,7 133,3 277,5 kirovohrad region 114,8 93 127,7 316,0 504,2 159,6 439,2 luhansk region 372,5 35,1 24,3 22,3 20,2 90,8 5,4 lviv region 257,1 219,7 277,8 294,0 310,1 105,5 120,6 mykolaiv region 716,4 606,8 291,6 308,3 324,9 105,4 45,4 odesa region 91 323,9 49,7 99,9 150,1 150,3 164,9 poltava region 212,2 348,5 128,5 98,4 68,2 69,3 32,1 rivne region 21,1 11,4 6,9 7,1 7,3 102,8 34,6 sumy region 281,8 587,7 162,3 380,4 598,5 157,3 212,4 ternopil region 24,2 57,4 14,6 62,2 109,7 176,5 453,3 kharkiv region 642,3 711,1 667 779,0 890,9 114,4 138,7 kherson region 161,4 90,5 70,1 63,1 56,1 88,9 34,8 khmelnytskyi region 113,1 133,1 66,7 45,7 24,6 53,9 21,8 cherkasy region 28,6 30,4 53,5 89,1 124,7 140,0 436,0 chernivtsi region 51,3 68,8 18,8 22,5 26,1 116,3 50,9 chernihiv region 134,1 106,4 35 53,4 71,7 134,4 53,5 kyiv 1921,4 1306,8 2169 2015,1 1861,2 92,4 96,9 baltic journal of economic studies 9 vol. 5, no. 1, 2019 somewhat better, however, in general in ukraine and in most regions in 2017 there is still a decrease in sales by industrial enterprises of their own creative products. industrial objects in vinnytsia (by 40.5% more than in 2016), chernihiv (by 156.5%), and mykolaiv (by 170.8%) regions show the best results of growth. 10. conclusions thus, the creative potential of the domestic economic system is determined by the ability to create high-tech competitive products based on the integrative cooperation of academic and applied science and economic complexes. in 2017, more than 1.8 thousand enterprises created and used the results of r&d, the latest technologies, and objects of intellectual property rights. by types of economic activity, the leaders were pharmaceutical companies, manufacturers of vehicles, electronic and optical products, precise and extremely-precise equipment, and chemical industry enterprises. at the same time, there is a tendency of reduction in the number of enterprises that created creative development and implemented them into specific product innovations. costs for creative projects are mostly financed by own funds of enterprises. structural reconstruction of investment flows manifested itself in reducing the cost of intellectual components of the r&d in favour of the acquisition of modern production equipment. consequently, despite significant problems and complexities, the existing creative potential of the domestic economy allows asserting the possibility of implementing a technological breakthrough of industrial high-tech in ukraine, which will contribute to a faster integration of the national economic system into the world creative community. references: alslev christensen t., zu kocker g., lammer-gamp t., thomsen m., olesen k. (2011). cluster and network policy programmes in europe. retrieved from: http://files.conferencemanager.dk/medialibrary/f13db635-416d4cbc-a465-78f2ff879 6c6/images/cluster_policy_programmes_in_northern_europe_article__2_.pdf mazur, o. a., shovkaljuk, v. s. (2015). tekhnologhichni parky. svitovyj ta ukrajinsjkyj dosvid [technological parks. world and ukrainian experience]. kyiv: brock business. (in ukrainian) novikov, je. a. (2015). suchasni merezhi transferu tekhnologhij i jikh pravovyj status v ukrajini [modern technology transfer networks and their legal status in ukraine]. right and innovative society, 71(3), 32-37. (in ukrainian) paschenko, o. p. (2017). kreatyvnyj menedzhment jak faktor uspishnosti suchasnogho biznesu [creative management as a factor in the success of modern business]. global and national problems of the economy, 17, 406-410. (in ukrainian) shovkaljuk, v. s. (2016). klastery ta innovacijnyj rozvytok ukrajiny [clusters and innovative development of ukraine]. kyiv: state agency for science, innovation and informatization of ukraine. retrieved from: http://www.dknii.gov.ua/images/stories/stvor_ta_funk_klasteriv.pdf (in ukrainian) sobkevych, o. v., sukhorukov, a. i., shevchenko, a. v., krupeljnycjka, t. p. (2013). innovatsiinyi rozvytok promyslovosti yak skladova strukturnoi transformatsii ekonomiky ukrainy [innovative development of industry as a component of the structural transformation of the ukrainian economy]. kyiv: niss. (in ukrainian) state statistics service of ukraine (2018). nauka, tekhnologhiji ta innovaciji [science, technology and innovation]. retrieved from: http://www.ukrstat.gov.ua (in ukrainian) world economic forum (2018). future scenarios and implications for the industry. geneva. retrieved from: https://www.weforum.org/reports/future-scenarios-and-implications-for-the-industry baltic journal of economic studies 51 vol. 6, no. 1, 2020 corresponding author: 1 cherkasy state technological university, ukraine. e-mail: evkolomytseva@gmail.com orcid: https://orcid.org/0000-0002-6769-0590 2 cherkasy state technological university, ukraine. e-mail: annasuray0@gmail.com orcid: https://orcid.org/0000-0002-7496-4035 doi: https://doi.org/10.30525/2256-0742/2020-6-1-51-58 the role of universities in the national innovation system olena kolomytseva1, anna pavlovska2 abstract. the intensification of innovations required system approach, including at the macro level, which resulted in creation of national innovation systems (nis). such systems are designed to support and ensure innovation processes, including creation of favorable conditions for interaction of their different actors (various kinds of business; universities; scientific institutions; state). each of the actors performs its own role in nis, which contributes to the total innovation productivity. methodology. universities playing a specific role in nis are an integral subject of innovative activity. despite considerable attention to this problematics, this role is disclosed in a fragmented manner. therefore, the research is focused on clarification of theoretical and methodological background to study of the role of universities in nis, justification of the evolution of universities and definition of their functions in the nis structure, specification of the key aspects of the disclosure of this role implementation. results. this paper highlights the increasing importance of education in innovation processes and changed requirements to it, which causes respective changes in curricula, organizational models and approaches to external cooperation with science and business. in this context, the paper discloses the key aspects of interaction between universities and entrepreneurial sector, as well as evolution of universities by a number of features (dominant functions of science; universities as knowledge providers; universities as providers of high-skilled employees; universities as mobilizers of entrepreneurs). the major contradictions of the concept of entrepreneurial university are highlighted. practical implications. the paper describes the key functions of universities in nis, including education, r&d, development and promotion of innovations. it is suggested considering the role of universities in nis within the framework of six key aspects: integrators of ecosystem for innovations; providers of innovations for economy; platform for cooperation; concentrators of resources needed for innovations; mechanism for knowledge transfer and source of skills; pillars of the advanced science and providers of new knowledge. in this context, the emphasis is laid on the need to develop resource and infrastructural potential of universities as well as innovation capabilities. value/ originality. when summarzing the functions of universities, it is suggested taking into consideration the impact of university activities on the local economic development (regional, urban economy), and considering their role in interaction with international environment. a number of practical recommendations to improve the efficiency of educational and innovative activities in nis are identified. this will be a basis for future researches. key words: national innovation system, universities, innovative entrepreneurship, ecosystem. jel classification: i20, i23, o30 1. introduction an innovative model of economy based on the rapid development and implementation of innovations is a today’s dominant paradigm of economic development. this model is characterized by the predominance of the innovation-based competition and launch of the large-scale innovation processes, being continuously reproduced and routinized. in this context, the modern economy needed a system approach to intensify the innovative activities, which was evident in creation and improvement of the innovative systems. the development of the concept of such systems started from the definition of national innovation system (nis). this macro-level system is the key one in terms of ensuring the innovative activities within national boundaries, and it combines regional, sectoral, technological and partially corporate innovative systems. baltic journal of economic studies 52 vol. 6, no. 1, 2020 undoubtedly, a human intelligence is the primary basis for creation of innovations. therefore, a human and his/her intellectual activities are the key focus of support in the context of nis. in recent years, there has been marked a strong global trend in the world, which consists in creation of favorable ecosystems (eco-environments) for development and productive intellectual (creative) human activities. this trend sets new areas for improvement of nis. naturally, the role of the education sector has moved to the forefront in the nis’s functional structure and economy of economy. this raises the theoretical problem and a number of scientific-practical problems related to explanation and the full implementation of functions (taking into account their extension and update) in nis. the basis of education sector, being traditionally responsible for development of human potential, consists of universities, which combine scientific researches, creation and development of innovations. global experience demonstrates that universities play a varied and often pivotal role in nis, as well as in creation and development of human potential, r&d and development of innovations. universities more and more penetrate into the innovative sector, generating entrepreneurial projects and supporting the small innovative business, which often grows from the academic environment. today, there is a need to bridge the gaps between the established education system and technological changes. it requires extension of educational functions and, therefore, a new understanding of universities and all aspects of their activities within nis. it is a critical task for science and practice to carry out theoretical study of the role of universities in nis. it is necessary in terms of government support provided to activities of universities, creation of the new effective scientific, educational and innovative structures based on universities as well as further full integration of academic science and innovative business. it corresponds to the understanding of knowledge economy with its specific structure and new prioritization of resource growth, where the intelligence and competences come to the forefront. 2. literature review and investigated parts of general matters defining the relevance of the role of universities in the nis, being considered in this paper, is evidenced from the scientific researches. first of all, it should be said about the stiffer innovation-based competition and race between education and technology (goldin, katz, 2010). against this background, education plays a critical role in the global knowledge economy and innovative systems (marginson, 2010; weber, 2011). by its relevance, education becomes the key factor for development of knowledge economy in the global landscape (polyakov, bilozubenko, korneyev, shevchenko, 2019). it becomes a basis for new practical approaches to nis management (khanin, shevchenko, bilozubenko, korneyev, 2019). at the same time, the emphasis should be laid on the innovative education and its impact on the development and innovative capacity of the enterprises of high-tech industries (huang, 2018). bearing that in mind, the education sector should be considered as an integral part of the structure of innovative macro(nis) and meso-level (regional, sectoral, technological) systems that corresponds to the gradual evolution of the modern concept of system approach to innovations. s. radosevic and m. petraite (2006) emphasize the importance of the broad and varied role of education in nis, particularly in the countries where such nis is being developed. this approach correlates with the current widespread “triple helix” model, m. rangaa and h. etzkowitz (2011) represent the triple helix as the conceptual and analytical construction that describes the specific features of interaction between universities, industry and government in the innovative system (later they identified that the fourth helix is the civil society, and further the fifth one is the natural environment). the role of the higher education in nis is considered in more details in the concept of “knowledge triangle”, which represents a system approach to relationships between research (generation of knowledge), education (dissemination of knowledge) and innovations (transformation and use of knowledge) (m. unger и w. polt, 2017). the knowledge triangle characterizes the relationship of such entities as scientific institutions, educational institutions (universities) and private companies, which creates a new perspective on the functional structure of nis and the processes that take place therein (lassnigg, hartl, unger, schwarzenbacher, 2017). “triple helix” and “knowledge triangle” models draw attention to the role of different entities that, in fact, provides the functionality of nis. universities, the role of which is apparent along with large companies, small and medium-sized business, government and scientific institutions represent one of the most critical entities. in accordance with a modern concept, the roles of every entity should be harmonized. in recent years, the attention to the role of universities in economy has increased (deiaco, hughes, mckelvey, 2012; valero, van reenen, 2016). the innovative and entrepreneurial potential of universities is being taken into consideration more and more (kochetkov, larionova, vukovic, 2017). therefore, more and more attention is paid to the role of universities in nis that is represented in the papers of s. datta, m. saad, d. sarpong (2019); t. bedford, y. kinnaird, r . migueis, e. paolucci, b. wijlands, a. vos (2018); j. katz, r . spence (2008); a. singh, p.-k. wong, y.-p. ho (2015). this is evident by the concepts of academic entrepreneurship (m. de silva, 2014), entrepreneurial university (etzkowitz, germain-alamartine, keel, kumar, nelson smith, albats, 2019), research university (altbach, 2013), and innovative university (christensen, eyring, 2011). baltic journal of economic studies 53 vol. 6, no. 1, 2020 the performed analysis has covered far from all researches that prove the critical role of universities in nis. however, despite a significant attention to this problematics, the practice requires clarification of its role for improvement of institutions, organization structures and government policy in the sphere of innovations. so far there are no holistic approaches to conceptualization of the role of universities at the level of cities, regions and sectors, which block the improvement of methods and techniques for managing the university activities in nis in conditions of knowledge economy. 3. theoretical and empirical base the research objective covers the following tasks: 1) clarification of the theoretical and methodological background to study of the role of universities in nis; 2) justification of the evolution of universities and definition of their functions in the nis structure; 3) specification of the role of universities in the innovative development of cities, regions and sectors. the theoretical and methodological background to study of the role of universities in nis, apart from traditional economic theories of mainstream and institutionalism, is based on the concepts of innovative systems and knowledge economy as well as a number of special models which define modern approaches to organization of nis. the concept of innovative systems is quite well developed today and encompasses, apart from nis, the regional, sectoral, technological and corporate systems. the concept is not just used as a theory, but it also became a real analytical and practical tool for organisation and support of innovative activities. the concept of knowledge economy clarifies a new specifics of the economic structure, intellectualization processes, new priorities in the economic growth resources. this concept is primarily focused on the human capital, which prioritizes not only science and innovative business, but also education. these sectors functionaly integrate within nis, where the processes of knowledge generation, dissemination and usage take place. when highlighting the models which define modern approaches to organization of nis, let us focus on four major ones: triple helix model, quadruple helix model (the role of the society is considered as the final user of innovations), knowledge triangle, smart specialisation (combination of industrial, education and innovation policy; creation of platforms for interaction between business, government structures and knowledge institutions) (rangaa, etzkowitz, 2013; unger, polt, 2017; carayannis, grigoroudis, 2016). these models are based on the understanding of the more important role of university in nis, need to harness their full potential in knowledge economy, which implies change of the function and components, possible hybridization (for example, like in case of entrepreneurial universities). taking into account the expansion of the ecosystem paradigm in support of innovations, probably, the new institutional, social and information formats of university activities are needed. the empirical framework for the research is represented by the statistics of human development index, materials of the world’s leading universities, and international ratings of the most innovative universities (for example, reuters top 100, reuters europe), global rankings of universities (qs world university rankings, world university rankings, etc.). the data of the world’s leading universities corroborates their huge innovative potential (table 1). the strategy of the world’s leading universities proves an increase of their activities at the research and innovative arena. these universities fund and conduct original researches, create efficient technologies and stimulate local and global economy, acting as the players of the global knowledge market. the trend towards creation of special ecosystems for innovations based on universities is also corroborated (for example, white city incubator in imperial college london or pennovation works, created by university of pennsylvania). table 1 data on the world’s top 10 universities r&d expense, million usd academic personnel (faculty), persons number of patent applications massachusetts institute of technology 952.017 2977 425 stanford university 1.110 4478 150 harvard university 1123 4512 274 california institute of technology 400.312 1022 229 oxford university 758.621 6436 188 university of cambridge 687.619 5755 258 swiss federal institute of technology zurich 329.26 2621 90 imperial college london 472.91 3825 125 the university of chicago 433.328 2538 135 london's global university 602.338 6146 95 compiled by the author based on the data of qs quacquarelli symonds limited; national science foundation (the usa); higher education statistics agency; justia patents; massachusetts institute of technology; stanford university; harvard's office of technology development; california institute of technology (caltech); oxford university; university of cambridge; swiss federal institute of technology zurich; imperial college london; university of chicago; london's global university. baltic journal of economic studies 54 vol. 6, no. 1, 2020 4. general explanations scientific researches and education of specialists is a beginning of any innovation process. therefore, science and education are the productive forces of the innovation-based economy. an increase in the level of science and education has become a critical prerequisite for the fourth evolution from the agrarian economy to the industrial one and further to the postindustrial one (knowledge economy). there is a growing demand for science and education due to the increasing needs for new knowledge and specialists. tectonic changes in the labor sphere naturally heighten the importance of education. a convergence of education with the sphere of innovations fundamentally changes the requirements to quality of education, which should become individualized, multidisciplinary, and comprehensive as well as focused on talents and unconventionality. a human should be educated in a fundamentally new way, encompassing the values, beliefs, worldview, creativity and other qualities. it is a great challenge for the existing education systems, which, as before, should play the leading role in facilitating the adaptation of workforce to technological transformations. it should also be noted that education is a critical prerequisite for the development of scientific potential and a part of the mechanism of the strategical management of scientific and technological development of the country. education is particularly important for huge innovations. it enables making the creative destruction to be large-scale, to grow new institutions, to achieve cultural changes. rapid technological, structural and social economic changes as well as high rates and range of emerging innovations necessitate continuous improvement of education system in the innovation economy. therefore, natural conservatism and challenges facing the education require new approaches (curricula, models, units) to make it more flexible and relevant. the need to integrate with science as well as close relationship with business necessitates considering the education in the context of the whole nis. in modern nis, the availability of three elements – science, education and business – is not enough; their close integration, harmonious development and balance are necessary. this trinity starts at the level of universities, which remain the most developed knowledge institution. universities are the basic level where the processes of knowledge generation, accumulation, dissemination and use take place, and conditions for synergies of all components are created. modern universities take a new form. within the framework of the interactive model that prevails today, in complex, they create the required environment (institutions, infrastructure, relationship) for innovative entrepreneurship and various social factors (human capital, culture) that makes them a basis for formation of innovation ecosystems. thereby the universities are represented in different sectors (science, education and partially business) of knowledge economy and subsystems of nis (subsystems of knowledge generation, dissemination and use). universities are also represented as spatial and network centers where the resources, activities and knowledge are concentrated and communities are established, which make them a basis for building nis. moreover, universities act as location where innovations are being initiated and developed, encompassing the whole cycle including organization of r&d. at the same time, universities provide the innovation process with all required resources: human, financial, information, material and technical. in terms of resources, universities are: 1) place of concentration and reallocation of resources; 2) place of creation and involvement innovation sphere of new human and intellectual resources. all this makes the development of universities a focal point of the government innovation policy. one of the major problems of education is to meet the requirements of the innovation economy and labor market in the context of rapid technological changes. in this respect, the considerable attention is paid to cooperation between universities and business (industry), which have common values and interests, and complementary assets. universities and business have a variety of areas of cooperation, including r&d, staff training, obtaining of scientific and technical information and services from scientists. the cooperation of universities and business encompasses multiple types of activities, which are provided by different models of interaction and integration. university-industry relations are being developed quite actively and in a variety of ways; the key mechanisms are: technological platforms, business incubators, research consortiums, etc. the initiatives in the sphere of innovation-driven production lead to emergence of a plethora of new areas of cooperation between universities and industry-specific business. of course, there are a number of problems related to establishment of relationships and partnership. sometimes it is difficult to harmonize the objectives and interests of research and entrepreneurial structures. however, a common vector towards integration of science and industry has no other alternative; business is interested in expanding opportunities for cooperation with scientists and gifted students as well as in assimilation of the advanced research findings. sinergy requires overcoming the administrative barriers, improving the legal framework, planning and organizational bases. in recent years, universities have significantly evolved, which also contributed to the development of the academic entrepreneurship (table 2). in the course of evolution, a new type of university emerged. it plays the initiating, generating, organizing, streamlining and developing role in nis, being more economically active, including in the global arena. baltic journal of economic studies 55 vol. 6, no. 1, 2020 today, it is believed that, despite maintaining the primary mission of education and development of the existing knowledge, universities should also be involved in the sphere of entrepreneurship. the entrepreneurial university combines the role of educational and scientific entities, expands their scopes by means of using knowledge turned into the entrepreneurial resources. apart from transferring the knowledge and technologies to the entrepreneurial sectors, universities independently or in cooperation with business are engaged in development and promotion of innovations. of course, the model of entrepreneurial university triggers certain changes, for example, it requires the higher level of autonomy and financial independence. today, we have various national models that differ by management and funding systems (creation of entrepreneurial structures within university management and funding systems or strengthening of cooperation with private firms). the world continues to search for more harmonious models of such entrepreneurial organization. however, the transformation of university into entrepreneurial structure does not facilitate scientific productivity. research and entrepreneurial activities are combined in favor of the latter that generates new threats. there is a conflict between scientific and commercial values; the capability of performing the primary functions by the university decreases due to focus on the market. therefore, the issue of the relevance of building the entrepreneurial universities is still open. nevertheless, we have to accept the necessity to use entrepreneurial management in certain cases and to develop internal business structures. all kinds of entrepreneurial activities being developed today can be embedded in the updated model of classic university as auxiliary functions, and generation of scientific knowledge and education of students continues to be the primary functions. especially since the financial independence, which enables development with less government support, enhances self-sufficiency and scientific selfadministration, and autonomy in the development strategy. generally speaking, there is a need for such new approaches to organization of classic university activities that would include it into the entrepreneurial sector and, at the same time, would not be a reason for any defects of the existing entrepreneurial activities. thus, it can be internal and external autonomous units that connect university with real economy, venture capital and startups. the most important part explaining the role of universities in nis is to designate their functions. at the primary level, universities combine the functions of science and education. following their mission, universities perform a complex of functions in nis, which are represented below: 1. selection and education of high-skilled specialists within the framework of a certain professional structure. within the framework of this function, universities transform new knowledge into relevant competencies and skills. there is created a special human capital, being not only empowered with knowledge and skills, but also with a holistic worldview, values and beliefs, which also creates the innovation capability. innovation-based competition and technological changes necessitate development of new curricula and education models being closely linked to practice. 2. accumulation of financial, social, intellectual, material and technical resources, which form the innovation capability. universities have a specific management system and operate within the framework of a certain scientific-technical and educational policy, enabling not only concentration, but also use of resources, being focused on priority areas. universities also develop the resources needed for r&d and innovations, and make a part of resources available for business. 3. universities initiate r&d, conduct it and provide with resources, and create the required infrastructure. thereby they generate new knowledge, which is further transferred either to business or to other organizations or it becomes a basis for their own innovative developments. generation, accumulation and transfer of new knowledge are an integral part of university activities, by means of which they implement the process of education. university knowledge has its distinctive features by structure and use, and contains a great table 2 evolution of the modern concept of university feature university 1.0 university 2.0 university 3.0 dominant functions of science educational, cultural cognitive, educational, practical cognitive, practical universities as knowledge providers providing with knowledge directly with firms, assistance in search, focus on theories generation of knowledge together with business, development of innovations, focus on technologies bringing together theory and practice, formation of epistemological communities universities as providers of highskilled employees formation of professional identity, providing with basic knowledge and skills education of personnel capable of working on innovation projects providing access to the increasing amount of knowledge and to epistemological communities universities as mobilizers of entrepreneurs by means of education, provision of assistance, transfer of technology by means of cooperation, service rendering by means of mutual dependence, cooperation, integration baltic journal of economic studies 56 vol. 6, no. 1, 2020 deal of fundamental knowledge. the development of innovations requires inventions at the crossroads of different disciplines. therefore, universities expand their scientific specialization and evolve into scientific centers. being the owners of intellectual property, universities actively deal with commercialization of knowledge on the local, national and global markets. 4. universities are becoming the basis for organization of innovation processes due to government orders, their own projects and cooperation with private companies. owing to this and having their own knowledge resources, universities develop their innovation potential and capacity. with respect to development of innovations, universities become the platform for cooperation of different companies, venture entrepreneurs, and creative communities. at the same time, universities as an intermediate structure have certain advantages. in particular, they rapidly connect and coordinate science and business. in the modern competitive environment, universities should also develop new partnership relations with companies, funds and other scientific institutions. universities can act: а) as partners and providers of knowledge and certain external resources for the company’s innovation processes; b) as intermediaries in cooperation and open innovation processes, thereby forming the respective ecosystem. 5. universities form communities for intensive knowledge sharing. from the very beginning, universities have gathered the leading scientists who deal with fundamental and applied researches in different fields, as well as gifted and motivated students who rapidly develop their skills. in this context, the whole communities (“social cluster”) are established based on the university according to the fields of knowledge, r&d areas and technologies. such a social environment easily produces creative communities, teams and startups. in many aspects, it is well-organized teams together with their ideas and knowledge, who attract business. universities create favorable conditions for emergence of scientific communities, as they instill common views, values, priorities, and coordinate interests and culture. in addition, formal and informal mechanisms for cooperation emerge in universities, for example, consortiums and research (innovation) networks. 6. modern universities have one more distinctive feature: support of entrepreneurship. along with acceleration of inventions and fierce competition, universities view entrepreneurship as a part of academic experience, inspiration, creation of innovative thinking and culture. therefore, the creative communities are strongly supported on the way towards establishment of startups and small companies, which implement the most daring projects, particularly, in social sphere. special centers and incubators are established to support innovation business. universities, first of all, support their own small enterprises. often, startup creation becomes a part of academic career of scientists and students. by supporting small innovative enterprises, universities provide various kinds of support: financial, advisory, educational, organizational, etc. taking into consideration the support functions of innovative entrepreneurship, it should be noted that universities create the ecosystem required for innovations with a focus on human development. at the same time, universities represent and facilitate development of the innovation ecosystems of regional and national level. the role of universities in nis should be considered in six key aspects, as follows: each of these aspects, where the functions of universities become apparent, generates certain effects: resource, communicative, organizational, intellectual, etc. these effects are usable. they should also be used for formation or launch of nis in different countries as well as a factor of processes in the system. in order to enable universities to play the role of a driving force of innovation and economy, the development of their resource and infrastructural potential as well as innovation capacity is required. it affects the quality of the university-based ecosystem as a physical space to generate innovations. the potential of universities considerably depends on the government policy, which should also use them as an engine for development of innovative activities and should strengthen its support. concerning the infrastructural potential as a part of university ecosystem, it should become more unleashed and should focus on development of digital components. the model of the open innovations becomes an integral element of management systems at universities. summarizing the above-stated, the role of universities in nis can be considered within the framework of region and city (local economy). in this context, universities function as a core for formation of innovative clusters, which, in their nature, are increasingly based on science and education. universities are the place where new knowledge is generated and transformed into intellectual assets and innovative products, which create economic productivity of the sectors in local economy (figure 2). in the context of globalization, universities become active actors in the world arena of knowledge. they build and connect to global research (innovative) networks, offer their inventions and r&d services, become providers of educational services; all this demonstrates their role in providing interaction of certain country’s nis with international space. here universities act as attractors of researches and young talents as well as a subject of communication and cooperation. the consideration of the role of universities in nis enables highlighting the following practical recommendations to enhance efficiency of their educational and innovative activities: – to develop programs and infrastructures of online education with engagement of not only the academic staff, but also experts in different fields; baltic journal of economic studies 57 vol. 6, no. 1, 2020 – based on universities, to establish the units which ensure interaction with business and unite students, postgraduate students and academic staff in their work on innovations; – to provide new educational opportunities for students by means of the individual study programs, mentorship, etc.; shift towards developing a talent, human intellectual potential and creativity, a holistic understanding of the world and new worldview that address the present-day challenges; – to diversify organizational forms, curricula and models of study, being adapted for the requirements of various innovative technologies; – to create multidisciplinary curricula, being closely linked to addressing practical problems. 5. conclusion consequently, the science and education become more and more important, making them the productive forces of the knowledge economy that determines their relevance in nis. the modern educational system faces new challenges in the context of economic and technological changes, which require the review of the traditional approaches and search for the new ways to develop education in close connection with nis. universities evolve and their role in nis is gradually expanding and diversifying. in this context, multiple and multifaceted functions of universities in nis have been highlighted. these functions build the effects, which are produced by universities, and it is critical in terms of formation and efficient functioning of nis. the major emphasize should be laid on the innovative potential or capability of universities that should meet the demands of economy. universities become a driver in the innovative development of cities, regions and sectors. when considering the role of universities, the trends and problems of strengthening the relations between entrepreneurship and academic environment could not be ignored. it is expected to be studied in the nearest future. aspects of the consideration of the role of universities in nis 2. pillars of the advanced science and providers of new knowledge 3. knowledge sharing mechanism and source of skills 1. concentrators of resources needed for innovations 5. platform for cooperation 6. providers of innovations for economy 4. integrators of ecosystem for innovations figure 1. key aspects of the consideration of the role of universities in nis institutional environment of government macroeconomic environment territorial economic needs local economy university: scientific school, r&d, funding, business incubation schools, lyceums, colleges business of innovation innovative infrastructure international space figure 2. scheme of the impact of university activities on local economic development baltic journal of economic studies 58 vol. 6, no. 1, 2020 references: altbach, ph. g. 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(2016) quadruple innovation helix and smart specialization: knowledge production and national competitiveness. foresight and sti governance, 10(1), 31–42. baltic journal of economic studies 1 vol. 6, no. 3, 2020 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: pdziekan@interia.eu orcid: https://orcid.org/0000-0003-4065-0043 researcherid: h-4658-2016 2 college of business and entrepreneurship in ostrowiec świętokrzyski, poland. e-mail: bobkiewiczs@gmail.com orcid: https://orcid.org/0000-0001-8496-1375 doi: https://doi.org/10.30525/2256-0742/2020-6-3-1-9 spatial diversity of the financial situation of communes of the świętokrzyskie voivodship in 2007-2017 paweł dziekański1, sebastian bobkiewicz2 abstract. actions taken at the local level should aim, among others, at: supporting development initiatives aimed at improving the quality of life of local communities, supporting the local labor market, building or improving the quality of infrastructure or the state of the natural environment. the financial situation of the commune is closely correlated with the level of local development, understood as a complex of quantitative and qualitative transformations in a given commune. the aim of the article is to analyze the spatial disproportions of the financial situation using a synthetic measure. the analysis was made in the system of rural communes of the świętokrzyskie voivodship. as source material, data from the regional accounting chamber (kielce branch) for 2007 and 2017 were used. the division of communes into classes of units with a similar level of the financial situation allows to state that in the high (i) classes, communes with a developed industrial function dominated, with a developing labor market, with a large number of enterprises in the sme sector, with a disappearing agricultural function. whereas in the lowlevel class (iv), there were units with a traditional agricultural function. the values of the synthetic measure indicate a similar reaction of municipalities to changes in the economy and the spatial stability of the studied phenomenon. in 2007, the measure of the financial standing (oe) of rural communes in the świętokrzyskie voivodship ranged from 0.64 to 0.80, while in 2017 from 0.56 to 0.80; topsis measure in 2007 from 0.31 to 0.47 and in 2017 from 0.30 to 0.51 (topsis). the financial situation was strongly correlated with own revenues, revenues from local taxes and transfers from the state budget, investment and current expenses, the balance of migration or the number of economic entities and natural persons conducting economic activity. key words: financial situation, municipalities, synthetic measure, świętokrzyskie voivodship. jel classification: c38, h70, h71, h77 1. introduction municipalities do not develop evenly, which results, among others, from unequal access to production factors as well as their quality. it should be remembered that development is the result of administration, as well as the activities of enterprises and society. the development conditions are in the local system itself. they result from resources located in a given area, economic potential and favorable environmental and spatial conditions. j. parysek, among the commonly occurring development factors, distinguishes the needs of the community, resources and assets of the natural environment, labor resources, financial resources, existing economic potential, infrastructure resources, the local market and external markets, level of science, techniques, bilateral cooperation (parysek, 2001). public finances are to ensure the efficiency of the entire economy. the most important categories of financing sources for municipalities in poland are: own revenues, taxes and local fees, fees for services provided by local governments, income from assets, dividends and other capital income, rent, sale (samuelson, nordhaus, 2002). the financial situation is the basis for the implementation of public tasks and it determines the conditions for economic development. one of the basic problems of the functioning of local government is the limited financial resources in relation to the scope of ongoing tasks and reported investment needs (gonet, 2013). the financial situation is a complex phenomenon, which is influenced by many factors. despite the difficulty of measuring it, having knowledge about the baltic journal of economic studies 2 vol. 6, no. 3, 2020 current state of finances of local government units is undoubtedly necessary. this knowledge allows local authorities to make comparisons with other entities and is helpful in making financial decisions. the most important feature of the financial situation is the municipality 's ability to meet its own administrative and capital needs, which means maintaining and developing its own assets in line with current and future demand for public services (hendrick, 2004). 2. material and research method the aim of the article is to analyze the spatial disproportions of the financial situation using a synthetic measure. the analysis was made in the system of rural communes of the świętokrzyskie voivodship. the source material was the data from the regional accounting chamber (kielce branch) for 2007 and 2017. in the first stage of the study, variables describing the financial situation were selected. the selected set (table 1) can be presented in the form of an observation matrix xij of the form: x x x x x x x x x x ij m m n n nm = … … … … … … …             � 11 12 1 21 22 2 1 2 (1), where: xij – denotes the values of the j-th feature for the i-th object (i = 1, 2,..., n; j = 1, 2,..., m). from the set of variables, those characterized by low spatial variability (limit value indicator equal to 0.10) and high correlation of variables (according to the inverted matrix method) were removed (malina, 2004). the selected variables were subjected to the procedure of zero unitarization using the following formulas: for stimulants �z x ij ij i ij i ij i ij = − − x min x max x min when � � �x si ∈ (1), for destimulants zij i ij ij i ij i ij = − − � max x x max x min x when �x di ∈ (2), where: s – stimulant, d – destimulant; i = 1, 2... n; j = 1, 2... n, xij – means the value of the j-th feature for the examined unit, max – the maximum value of the j-th feature, min – the minimum value of the j-th feature (wysocki, lira, 2005). as a result of the transformation, a matrix of uniformized values of features was obtained �zij : z z z z z z z z z z ij m m n n nm = … … … … … … …             � 11 12 1 21 22 2 1 2 (4), where: zij xij – the unified value. in the next stage of the study, a synthetic measure was determined based on the topsis method, taking into account the distance of the unit from the pattern (= 1) and antipattern (= 0). then, the euclidean distances of individual objects from the pattern and anti-pattern were determined according to the following formulas: d n z zi j m ij j + = += −( )∑ 1 1 2 � � (5), d n z zi j m ij j − = −= −( )∑ 1 1 2 � � (6), table 1 list of variables describing the financial situation of municipalities variables unit s/d budget surplus / deficit / number of inhabitants (budget solvency assessment) pln s interest / own income (debt service ratio) % d operating surplus / total revenues (budget solvency ratio) % s own income / total income (financial independence indicator) % s share in income from pit and cit / number of inhabitants (fiscal wealth indicator) pln s income from local taxes / population (fiscal wealth indicator) % s local tax revenue / current income (tax autonomy indicator) % s self-financing index % s investment expenditure / total expenditure (investment attractiveness index) % s transfer income / number of inhabitants (state financial interference index) % d expenditures on education and upbringing / number of inhabitants pln s expenditures on housing / population pln s health care expenditure / population pln s expenditures on municipal economy and environment protection / population pln s public safety and fire protection expenditure/ population pln s public administration expenditure / number of inhabitants pln d as – stimulant; d – destimulant source: study based on the availability of cso bdl data, stanny m., strzelczyk w. 2018 kondycja finansowa samorządów lokalnych a rozwój społeczno-gospodarczy obszarów wiejskich; ujęcie przestrzenne, wydawca: instytut rozwoju wsi i rolnictwa pan oraz wydawnictwo naukowe scholar spółka z o.o., warszawa; głowicka-wołoszyn r., wysocki f. 2014 uwarunkowania społeczno-ekonomiczne samodzielności finansowej gmin województwa wielkopolskiego, prace naukowe uniwersytetu ekonomicznego we wrocławiu, nr 346. baltic journal of economic studies 3 vol. 6, no. 3, 2020 where n – is the number of variables that make up the pattern or antipattern, zij – means the unified value of the j-th feature for the unit being tested, z zj j + −, – means the pattern or antipattern (wójcik-leń, leń, mika, kryszk, kotlarz, 2019). the synthetic measure according to the topsis method for individual objects was determined on the basis of the formula: q d d d where q i ni i i i i= + ≤ ≤ = − − + � � � � � � � �, , , ,..., ;0 1 1 2 (7), with: qi ∈ [0; 1]; maxi {qi} – the best object; mini {qi} – the worst object, di − means the distance of the object from the antipattern (from 0), di + means the distance of the object from the pattern (from 1). a higher value of measure indicates a better situation of the individual in the studied area (hwang, yoon, 1981). another synthetic measure was calculated according to the method based on distance in real space with the euclidean metric according to the formula: oe p zit j p ijt= −( ) = ∑� � 1 1 1 2 (8), where i = 1,2...n; j = 1, 2..., p (n is the number of objects (poviats), ap – the number of features); zij – means the value of the j-th feature for the given unit, max – the maximum value of the j-th feature, min – the minimum value of the j-th feature (wysocki, 1996). the higher the indicator value, the worse the situation of the examined unit, the lower the indicator value, the better (tokarski, 2005). in the last stage, the examined area of rural communes in the świętokrzyskie voivodship was divided into 4 quartile groups (using the first, second and third quartiles as threshold values). the size of the indicator in the first group means a better unit, the weakest in the last one. the mutual compliance of the results obtained has been also verified based on the correlation coefficient. a scatter chart with an adjustment line for synthetic measures is also presented (dziekański, wyszkowski, 2018). 3. the financial situation in theoretical terms the implementation of the municipality 's tasks is closely related to finance. the commune performs tasks related to satisfying the needs of the local community, therefore its activities are not focused on economic profit. finances allow for a comprehensive assessment of the operation of a local government unit and its development opportunities (wojciechowski, 2012) or the implementation of public tasks, and determine the conditions of local economic development (zawora, zawora, 2014). good financial standing is the goal of the action and the result of previous decisions and related development opportunities. it is worth noting that the analysis conducted by p. churski, and his co-authors, and m. stanna shows that finance is an important development factor. the indicated authors, in the research, focused on municipal self-government revenues and investment expenditure, emphasizing their significance from the point of view of the potential financing of development-oriented tasks of local governments (stanny, strzelczyk, 2015). j.w. douglas and r .k. gaddie relate the financial situation to the state of finances within a specified period of time and the possibility of timely fulfillment of financial obligations and ensuring continuity in providing services to the local community. emphasizing the context of limited resources in economics (including financial resources) (douglas, gaddie, 2002). as indicated by r . hendrick or r . cabaleiro-casal et al., the financial situation cannot be described by one indicator (cabaleiro-casal, buch-gómez, vaamonde liste, 2013). income and expenses, taxation and debt are a complex and multidimensional concept with different time frames related to each other, therefore, they must be analyzed and evaluated together (hendrick, 2004). the level of financial standing is demonstrated by, among others, ability to achieve a budget balance or increase the commune's assets. for the analysis of the financial situation, among others, there are such parameters as: the level of commune income, the financial independence of the unit, the amount of investment expenditure, the ability to obtain external financial resources, the financial result achieved by the commune (ossowska, ziemińska, 2010). determinants of financial position may be shaped by the area in which the entity operates and may also be independent of it (dziekański, 2017). financial decisions are the element of management because they constitute the implementation of the management right to decide or co-decide on the strategic directions and fundamental objectives of an entity and may affect its financial position. the financial condition achieved should ensure that local authorities provide services at the level desired by the inhabitants of a given unit (groves, 1984). the financial situation of the commune is closely correlated with the level of local development, understood as a complex of quantitative and qualitative transformations in a given commune. it translates into disproportions in the possibilities of satisfying local needs (sobczyk, 2010). 4. diversification of the financial situation of communes in the świętokrzyskie voivodship in 2007, the measure of the financial situation (oe) of rural communes in the świętokrzyskie voivodship ranged from 0.64 (sitkówka-nowiny, the best units) to 0.80 (tarłów, imielno, słupia konecka, sobków, łubnice, the weakest units), and in 2017 from 0.56 (sitkówka-nowiny) to 0.80 (bliżyn). the topsis measure in 2007 took values from 0.31 (pierzchnica, the weakest unit) to 0.47 (sitkówka-nowiny, the best baltic journal of economic studies 4 vol. 6, no. 3, 2020 unit) and in 2017 from 0.30 (bliżyn) to 0.51 (sitkówkanowiny). regardless of the method of determining the synthetic measure, the high ones (in group i) were, among others, sitkówka-nowiny, masłów, strawczyn, baćkowice, miedziana góra, gowarczów, michałów. the weakest group (group iv) included: imielno, klimontów, pawłów, radoszyce, skarżysko kościelne, tarłów, bliżyn, bieliny, dwikozy, and iwaniska (table 2). figure 1 shows the relative stability of the diversity of rural communes by the synthetic measure of the financial situation in 2017 in relation to 2007. the outlier was sitkówka-nowinami. the socio-economic position of the sitkówka-nowiny commune is related to the proximity of kielce, the functioning of the sewage treatment plant (serving e.g. kielce, the largest employer in the region), numerous enterprises from the small and medium sector. the unit has the character of an industrial commune with a small degree of agricultural function. the analysis of the diversity of the measure of the synthetic financial situation indicates that in 2017, compared to 2007, the degree of diversity of communes has been relatively stable. this is evidenced by the standard deviation (0.03-0.03 oe. 0.02-0.03 topsis), the classic coefficient of variation (0.04-0.04 oe, 0.060.08 topsis). the range values show a slight increase in diversity according to the financial situation (0.160.24 oe.0.16-0.21 topsis, table 3). figure 2 presents correlograms describing the relationship of the measure of synthetic financial situation calculated according to the oe and topsis methods. the correlation coefficient was 0.602 (oe) and 0.622 (topsis) – according to the year-to-change ratio, 0.609 (oe) and 0.567 (topsis) – according to the year-to-year ratio and 0.861 (in 2007) and 0.878 (in 2017). these values indicate a similar reaction of communes to changes taking place in the economy and spatial stability of the studied phenomenon. outliers were sitkówka-nowiny (with an industrial function developed) and smyków, wiślica, bliżyn, kije, wojciechowice (with a traditional agricultural function). gunnar myrdal in the theory of cumulative causation referring to the analysis of the interdependence of social, economic and institutional phenomena has proved that every element interacting with another element affects its behavior, and at the same time is modified by the reaction of that element (stanny, strzelczyk, 2018). the financial situation and development were strongly correlated with own revenues, revenues from local taxes table 2 quartile groups of rural communes in the świętokrzyskie voivodship according to the measure of the synthetic financial situation in 2007 and 2017 gr oe financial situation topsis financial situation municipality 2007 municipality 2017 municipality 2007 municipality 2017 i. sitkówka-nowiny 0.64 sitkówka-nowiny 0.56 sitkówka-nowiny 0.47 sitkówka-nowiny 0.51 smyków 0.69 masłów 0.71 smyków 0.45 baćkowice 0.39 wojciechowice 0.7 strawczyn 0.71 wojciechowice 0.41 gowarczów 0.39 wiślica 0.71 baćkowice 0.72 wiślica 0.4 masłów 0.39 kije 0.72 miedziana góra 0.72 tuczępy 0.39 michałów 0.39 ii. bogoria 0.75 bałtów 0.76 obrazów 0.38 bogoria 0.36 brody 0.75 bejsce 0.76 łoniów 0.38 kluczewsko 0.36 łoniów 0.75 bogoria 0.76 zagnańsk 0.38 łubnice 0.36 rytwiany 0.75 brody 0.76 kije 0.38 mirzec 0.36 baćkowice 0.76 lipnik 0.76 rytwiany 0.38 obrazów 0.36 iii. gnojno 0.77 gnojno 0.77 bałtów 0.37 bałtów 0.34 samborzec 0.77 górno 0.77 łagów 0.37 kije 0.34 słupia 0.77 iwaniska 0.77 łączna 0.37 nowy korczyn 0.34 wilczyce 0.77 kije 0.77 bliżyn 0.37 rakow 0.34 bieliny 0.77 łoniów 0.77 czarnocin 0.36 rytwiany 0.34 iv. pawłów 0.78 imielno 0.79 bieliny 0.36 bieliny 0.33 radoszyce 0.78 klimontów 0.79 nagłowice 0.36 dwikozy 0.33 mirzec 0.79 pawłów 0.79 słupia 0.36 imielno 0.33 moskorzew 0.79 radoszyce 0.79 gnojno 0.36 iwaniska 0.33 iwaniska 0.79 skarżysko kościelne 0.79 pawłów 0.36 klimontów 0.33 słupia konecka 0.8 tarłów 0.79 pierzchnica 0.31 bliżyn 0.3 sobków 0.8 bliżyn 0.8 łubnice 0.8 imielno 0.8 tarłów 0.8 source: own study based on data from rio o / kielce baltic journal of economic studies 5 vol. 6, no. 3, 2020 miara oe sytuacja finansowa mediana 25%-75% zakres nieodstających odstające wojciechowice sitkówka-nowiny sitkówka-nowiny 2007 2017 0,54 0,56 0,58 0,60 0,62 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 smyków miara topsis sytuacja finansowa mediana 25%-75% zakres nieodstających odstające pierzchnica sitkówka-nowiny smyków sitkówka-nowiny 2007 2017 0,28 0,30 0,32 0,34 0,36 0,38 0,40 0,42 0,44 0,46 0,48 0,50 0,52 figure 1. dispersion of a measure of the synthetic financial situation of rural communes in the świętokrzyskie voivodship in 2007 and 2017 source: own study based on data from rio o / kielce table 3 dispersion of a measure of the synthetic financial situation of rural communes in the świętokrzyskie voivodship in 2007 and 2017 oe financial situation topsis financial situation 2007 2017 2007 2017 average 0.76 0.76 0.37 0.36 median 0.77 0.76 0.37 0.35 standard deviation 0.03 0.03 0.02 0.03 quarter (quartile) deviation 0.77 0.77 0.37 0.36 classic coefficient of variation 0.04 0.04 0.06 0.08 positional coefficient of variation 0.99 1.01 1.00 1.01 min 0.64 0.56 0.31 0.30 max 0.80 0.80 0.47 0.51 range 0.16 0.24 0.16 0.21 quartile 1 0.75 0.75 0.36 0.34 quartile 2 0.77 0.76 0.37 0.35 quartile 3 0.78 0.78 0.38 0.37 quartile range 0.03 0.03 0.02 0.03 skewness -1.69 -3.62 1.58 2.19 measure of concentration-kurtosis 5.15 20.69 6.43 11.35 source: own study based on data from rio o / kielce and transfers from the state budget, investment and current capital expenditure (table 4). the indicators inform about the possibility of generating income from own sources. this can be an indicator of sustainable development and allows for more flexible spending, including for investment purposes (satoła, 2018, september). the value of the financial situation in terms of socio-economic variables was also influenced by migration, business entities and persons conducting business activity, a synthetic measure of development and entrepreneurship (table 5). 5. conclusion the activities of communes are of a multi-criteria category. they are affected by location rents, finances, economic and infrastructural potential, natural resources, finances, entrepreneurship, etc. rural communes of the świętokrzyskie voivodship have low financial potential. disproportions in assessing the financial situation of municipalities strengthen the phenomenon of peripherality and centralization (myrdal's core-periphery theory). the center can get rich at the expense of peripheral areas (e.g. by attracting human, finance, etc.). the significance of economic and social factors for the fiscal situation of the surveyed rural communes of the świętokrzyskie voivodship is definitely smaller than it results from the research subject described so far in the literature covering the experience of other regions in this field. baltic journal of economic studies 6 vol. 6, no. 3, 2020 miara oe sytuacji finansowej y = -0.5337 + 0.6977*x; r = 0.6026; p = 0.00000; r2 = 0.3631 smyków wiślica 0,54 0,56 0,58 0,60 0,62 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 2017 -0,16 -0,14 -0,12 -0,10 -0,08 -0,06 -0,04 -0,02 0,00 0,02 0,04 0,06 0,08 0,10 0,12 20 17 /2 00 7 sitkówka-nowiny miara topsis sytuacji finansowej y = -0.5358 + 1.4197*x; r = 0.6228; p = 0.00000; r2 = 0.3878 bliżyn smyków wiślica 0,28 0,30 0,32 0,34 0,36 0,38 0,40 0,42 0,44 0,46 0,48 0,50 0,52 2017 -0,25 -0,20 -0,15 -0,10 -0,05 0,00 0,05 0,10 0,15 20 17 /2 00 7 sitkówka-nowiny 2017; miara oe sytuacji finansowej y = 0.214 + 0.7144*x; r = 0.6095; p = 0.00000; r2 = 0.3714 kije sitkówka-nowiny wiślica wojciechowice 0,62 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 2007 0,54 0,56 0,58 0,60 0,62 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 20 17 smyków 2017; miara topsis sytuacji finansowej y = 0.1023 + 0.6894*x; r = 0.5670; p = 0.00000; r2 = 0.3214 smyków wiślica 0,30 0,32 0,34 0,36 0,38 0,40 0,42 0,44 0,46 0,48 2007 0,28 0,30 0,32 0,34 0,36 0,38 0,40 0,42 0,44 0,46 0,48 0,50 0,52 20 17 sitkówka-nowiny 2007; y = 0.9326 0.7423*x; r = -0.8619; p = 0.0000; r2 = 0.7430 pierzchnica sitkówka-nowiny smyków 0,62 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 oe 0,30 0,32 0,34 0,36 0,38 0,40 0,42 0,44 0,46 0,48 t o p s is 2017; y = 0.9506 0.7851*x; r = -0.8788; p = 0.0000; r2 = 0.7723 0,54 0,56 0,58 0,60 0,62 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 oe 0,28 0,30 0,32 0,34 0,36 0,38 0,40 0,42 0,44 0,46 0,48 0,50 0,52 t o p s is sitkówka-nowiny figure 2. map of spatial differentiation of the measure of synthetic situation and financial independence of communes of the świętokrzyskie voivodship in 2009 and 2018 source: own study based on data from rio o / kielce the financial situation was strongly correlated with own revenues, local tax revenues and transfers from the state budget, investment and current property expenses, migrations, business entities and persons conducting business activity, synthetic measures of development and entrepreneurship. the indicators inform about the possibility of generating income from own sources. this can be an indicator of sustainable development and allows for more flexible spending, including for investment purposes. it seems that the main reason for the relatively small impact of economic and social conditions on the financial situation of rural communes is their strong dependence on transfer revenues transferred from the state budget. although this situation guarantees financial security for local governments, it may also baltic journal of economic studies 7 vol. 6, no. 3, 2020 discourage them from pursuing an active development policy in the area of using their own socio-economic potential. low income and expenditure independence of local government units can, therefore, constitute a significant barrier to future local development. the division of communes into classes of units with a similar level of financial standing shows that in the high level (i) classes, communes with a developed industrial function, with a growing group of enterprises (especially smes), located near the capital of the region (kielce), often with vanishing agricultural function. whereas in the low-level class (iv), there were units with a traditional agricultural function. the values of the synthetic measure and their changes indicate a similar reaction of communes to changes taking place in the economy and spatial stability of the studied phenomenon. in 2007, the measure of the financial standing (oe) of rural communes in the świętokrzyskie voivodship ranged from 0.64 to 0.80, while in 2017 from 0.56 to 0.80; topsis measure in 2007 from 0.31 to 0.47 and in 2017 from 0.30 to 0.51 (topsis). regardless of the method of determining the synthetic measure, the high ones (in group i) were, among others, sitkówkanowiny, masłów, strawczyn, baćkowice, miedziana góra, gowarczów, michałów. the weakest group (group iv) included: imielno, klimontów, pawłów, radoszyce, skarżysko kościelne, tarłów, bliżyn, bieliny, dwikozy, and iwaniska. the results of the study give local governments the opportunity to compare their own financial situation with the situation of neighboring municipalities or municipalities with similar economic and social conditions. the conclusions drawn on this basis may allow local authorities to set directions for optimizing the structure of local finances. they may also be helpful for local authorities in assessing the accuracy of past decisions and the effectiveness of regional management instruments used in the past. table 4 correlation between measures of financial standing and financial variables of rural communes in the świętokrzyskie voivodship oe financial situation topsis financial situation topsis financial situation -0.5636 1 oe financial situation 1 -0.5636 own income -0.578 0.6307 income from local taxes -0.5754 0.5835 income from pit and cit -0.2789 0.0711 transfer income 0.5805 -0.5331 operating surplus -0.2031 0.5054 debt level -0.0386 -0.3479 property expenses (investment) -0.2158 0.4539 current expenses 0.216 -0.4537 linear correlation coefficients for observations from sample 1-207 critical value (at a double-sided 5% critical area) = 0.1364 for n = 207 source: own study based on data from rio o / kielce table 5 correlation between measures of the financial situation and socio-economic conditions in rural communes of the świętokrzyskie voivodship oe financial situation topsis financial situation net migration rate -0.2322 0.1544 number of persons employed -0.0563 0.039 entities entered into regon -0.365 0.1328 self-employed persons -0.3223 0.0874 number of unemployed 0.1092 -0.1159 housing stock 0.0668 -0.031 topsis development -0.3605 0.1251 oe development 0.4305 -0,1998 topsis entrepreneurship -0.4416 0.1777 oe entrepreneurship 0.4181 -0.1384 linear correlation coefficients for observations from sample 1-207 critical value (at a double-sided 5% critical area) = 0.1364 for n = 207 source: own study based on data from rio o / kielce baltic journal of economic studies 8 vol. 6, no. 3, 2020 references: aleksandrova-zlatanska, s. k. 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(2014). stan finansów samorządowych u progu nowej perspektywy finansowej unii europejskiej na lata 2014–2020, przedsiębiorstwo i region, nr 6. zeliaś, a., & malina, a. (1997). o budowie taksonomicznej miary jakości życia. syntetyczna miara rozwoju jest narzędziem statystycznej analizy porównawczej, taksonomia z. 4. baltic journal of economic studies 151 vol. 5, no. 5, 2019 corresponding author: 1 classical private university, ukraine. 2 f.g. burchak scientific-research institute of private law and business of the national academy of law sciences of ukraine, ukraine. e-mail: makhinchuk@gestors.com.ua doi: https://doi.org/10.30525/2256-0742/2019-5-5-151-154 priorities for the development of the economy of the usa and some european countries anton stolitnii1, vitalii makhinchuk2 abstract. the purpose of the article is to reveal the newest and priority tendencies towards formation of the directions of encouraging the development of the world economy under globalization. the subject of the research is the priorities for the development of the economy of the usa and some european countries. methodology. on the basis of the scientific literature analysis, the current economic situation of the usa and some european countries was analyzed and the strategic priorities and goals of the world economic development were determined, as well as the dialectical method, the method of scientific abstraction and the method of system analysis were used. the studies have shown that in order to implement foreign experience there is a number of key economic problems, which impede the development of the economy. it was found that a complex structural transformation of the world economy is needed to increase the share of the high-tech and innovative sectors. practical implication. a comprehensive analysis of the status and determinants of economic development of the usa and some european countries from the perspective of the threats and risks associated with crisis situations in the modern world was made. the basic principles of the formation and implementation of the economic development strategy based on the harmonization of strategic priorities and strategic goals of the usa and the eu were determined, as well as the need to reform the economic sector in order to build promising areas of the economy was substantiated. value / originality. the conducted research revealed the state of development of the economic system of the usa and some european countries. key words: economy, economic development, innovative development, foreign experience, priorities. jel classification: f36, f63 1. introduction the development of the world economy takes place against the backdrop of global challenges that affect the functioning of the mechanisms of social reproduction. at present, the world is experiencing significant global changes and transformations. the formation of a sustainable national economy is one of the main long-term goals of public policy, which requires the identification of key factors ensuring resilience that will respond to the current and future global challenges (shtan, 2017). the global and, in particular, the european trends towards transformation of the socioeconomic and political development of the countries on the basis of new, more effective vectors of economic growth are accompanied by profound changes in the national systems of state management of regional economic development (tomareva-patlakhova, 2016). as a result of the changes taking place in society, along with the positive ones, certain negative tendencies are emerging, which are significant barrier to the development of the world economy and cause serious problems for economic stability in the world (mohilevskyi, sevruk, & pavlenko, 2017). numerous examples show that economic development, high competitiveness and productivity under information economy (as opposed to industrial one) is not possible without permanent accumulation of new knowledge and effective work with the relevant information. it should be noted that the interconnection between intellectual activity and material production has become especially close due to the development of information and communication technologies, which provided an opportunity for a person to continuously generate and accumulate new immense knowledge and information (pestova, 2014). 2. presentation of the main material in the recent decades, scientific enquiry is active in the direction of identifying the tools to stimulate the development of the national economy. the ideas of keynesian, under which the system of market relations is not perfect, the economic growth and the maximum baltic journal of economic studies 152 vol. 5, no. 5, 2019 possible employment of resources are ensured by active state intervention in socio-economic processes by the use of governmental tools, are the most important in this sense. these are primarily direct public spending to stimulate efficient demand, as well as the withdrawal of savings by the state through a system of taxes and loans. j. m. keynes considered budget expenditures to be of crucial importance for investment promotion. this should help to create additional demand, which in turn leads to reduction in unemployment and inflation, to achieve full employment (shovkun, 2017; bilousova, 2017). one of the most important parameters for successful implementation of the state’s economic policy is the country’s global competitiveness index and its place in the world. despite its conditionality, this index has many positive points, among which is an adequate level of objectivity, comparability with other countries, annual (regular) publication, constant monitoring by foreign and domestic experts (shtan, 2017). the representatives of the endogenous growth theory school r . lucas (1988) and p. romer (shultz, 1972) point out that the low level of human capital accumulation is the major obstacle to achieve economies of scale with industrialization, i.e. the economists have indicated that human capital is a source of economic growth for industrial era. however, in the context of the establishment of post-industrial society, human and intellectual forms of capital stand out as defining ones and transform into institutional forms of the existence of information or knowledge economy (pestova, 2014). at the current stage of the ukraine’s development as the european state, a set of strategic measures aimed at developing the economy in the context of european integration is being implemented (yunin, sevruk, & pavlenko, 2018). continuing our research, it is necessary to highlight some countries that have achieved significant development in the innovation sector. the united states is a country that has powerful economy, sophisticated political system, defensive and efficient army, and many other benefits. currently, the us financial system has reached a high level of development and has become a fundamental basis of the country’s economy, which provides an opportunity for dynamic development and overcoming crisis phenomena (rudenko & tokar, 2010). the following methods are used as selective and direct ones for stimulating the us economic development: ensuring the availability of financial investment resources; providing technical assistance; improvement of regulation in the area of securities; simplification of registration and licensing procedures; reformation of entrepreneurship regulation schemes; formation of intellectual capital at state universities; formation of industrial clusters; creation of a favorable tax climate; improvement of entrepreneurship education system and their information support; promotion of the prestige of entrepreneurship and entrepreneurial society in general. one of the mechanisms used by the us office of technology policy to ensure industrial advance is the us innovation partnership program, which is aimed to mobilize free financial resources from the us industry, academia, and public authorities at all levels for coordination of policy initiatives in innovative development (moskalenko, 2014). another mechanism used by the aforementioned management in the usa is to monitor the scientific and technological policies of other countries in order to identify the national interests and competitive position of the us industry in the international innovation market and to improve its competitiveness. the main indirect method of stimulating innovation is tax credits and preferential taxation for corporations that perform state or their own r&d programs. venture funds have a special place in research and development funding mechanisms, so government support for venture capital is quite serious. venture funding is closely linked to public-private technology partnership. it is an effective selective method for stimulating the country’s leading industrial development. the developed countries accumulate significant financial resources through the venture funds. for example, the uk has a partnership system, which is essentially a mechanism for co-existing risky knowledge-intensive projects (moskalenko, 2014). today, germany is characterized by economic stability, high standards of living, great achievements in the international banking market and other areas where the country has traditionally been a leader (tkachenko & stusenko, 2011). the republic of france is no less financially developed today. the latter is one of the leading western countries, ranking the seventh among other countries in the world in terms of economic development. the participation of france in the “common market” has revealed pros and cons of its economy, resulting from the fact that the country had been developing in “greenhouse” conditions of customs protectionism and through the exploitation of large colonial possessions for a long period of time (vynohradnia, 2013). in particular, the “strategy for poland” developed by the polish minister of finance g. kolodko (2014) states that the economy should be considered as public, social and market one. to implement the strategy, an economic program of market-building market reforms has been developed. the authors of the reform suggested that the program should have been implemented through the prism of a specific triangle. the first strategic “top” of the economic reform program was the “values”, which are the foundation of society and economic activity. japan’s current position in the world economy is the result of its economic development in the second half of the xx century. the country’s economy is aimed at production and is one of the most powerful in the world and the largest in asia, despite the fact that it is heavily baltic journal of economic studies 153 vol. 5, no. 5, 2019 dependent on supplies of raw materials from other countries due to lack of natural resources. besides, japan created a specific economic model with a unique system of management and organization of the production process, which covers the microand macroeconomic levels of development, which allowed it to move from the feudal system to the highly developed countries in relatively short period of time (ziunkin, 2003). by 2020, there will be an evolution of the european union with the transition from the prevailing territorial enlargement policy to the internal regulation and greater integration policy. the recent enlargement of the eu has led to a significant increase in the heterogeneity of its internal structure, due to the significant increase in differences not only in the levels of socio-economic development but also in the institutional features of the participating countries. understanding of these differences leads to an increase in the rejection of the further expansion of the functions of the eu communitarian bodies and, consequently, to the blocking of the necessary internal institutional reforms. this narrows the field for the further eu enlargement policy objectively, as it could be fatal to the fate of the eu itself under its old institutional mechanisms. in such circumstances, major efforts are directed towards finding the ways to enhance the cooperation between the existing union members. however, even partial disintegration of the eu with the formation of sub-regional integration groups with different levels of intensity of interconnections (model of concentric circles) is possible (on sustainable development strategy “ukraine 2020”). regarding the application of the principle of openness and transparency, it should be noted that the state information technology policy of the european countries includes not only the introduction of information technology into management practice, but also the establishment of cooperation between different public authorities in order to expand the national computer network and to provide information services; improvement of the state information network; implementation of electronic processing of various information flows (consumer declarations, data on export and import of goods, information on markets and industries, etc.); development of information base of local tax services; use of information technologies to control the environmental situation and natural resources, etc. in most countries, special centers responsible for the implementation and improvement of information and telecommunications technologies in the activities of public authorities were established (popovich, 1998), and it is necessary to create special financial police, which would concentrate the functions of the bodies responsible for combating economic offenses, among which there are criminal and administrative offenses, including corruption (drozd, 2014). 3. conclusion thus, the content of the innovation policy of the countries of the world is closely intertwined with the functioning of intellectual capital and property. the illustration of practical experience proves that only active support of the relevant state policy in the area of scientific, technical and innovative activity promotes the growth of human and intellectual capital through the process of intellectualization of labor. international business practice also shows that the creation of appropriate socio-economic conditions for the realization of intellectual capital at the company level and at the national level in general determines their prospects for maintaining international scientific and technological competitiveness. the result of active innovative policy of developing countries aimed at strengthening the national scientific and technical complex, improving the educational level of the population and involving scientific personnel in high-tech production, was the overcoming the technology gap with the developed countries (moskalenko, 2014). among the major factors that have influenced the scale and the nature of the aforementioned global challenges are the volatility in the foreign exchange markets; devaluation of the national currency; increase in the level of public debt; the imbalance of the food market. ukraine’s economy is characterized by susceptibility to global trends and fluctuations in the external markets. the lack of 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(2003). finansove pravo [financial law]. kyiv: maup, 160 p. baltic journal of economic studies 153 vol. 5, no. 2, 2019 corresponding author: 1 chernihiv national university of technology, ukraine. е-mail: olena.parubets@gmail.com orcid: https://orcid.org/0000-0001-5357-7581 2 zaporizhzhia state engineering academy, ukraine. е-mail: lvbojko@yahoo.com orcid: https://orcid.org/0000-0002-4381-8502 3 chernihiv national university of technology, ukraine. е-mail: dmytro.sugonyako@gmail.com orcid: https://orcid.org/0000-0002-5054-7253 doi: https://doi.org/10.30525/2256-0742/2019-5-2-153-157 development of small and medium business in ukraine with funding from the european union olena parubets1, olena boiko2, dmytro suhoniako3 abstract. crisis phenomena in ukraine have led to the reduction in volumes of state financial and credit and investment support for the development of subjects of small and medium-sized business (smb) and, as a consequence, the reduction of their export potential. ukrainian smb receives considerable advisory and technical assistance due to the implementation of projects and programs in the area of the eu and european financial institutions. despite economic expediency of development of financial cooperation with european structures, a situation appears in ukraine that smb entities have no sufficient information about the possibility to participate in european projects and programs or the realization of the latter in full volume is impossible over bureaucratic hurdles. the purpose of the article is to study volumes and directions of smb financing in ukraine at the expense of eu programs, identify problems occurring in the process of obtaining external financial sources, and to develop directions of their solution. in order to achieve the set purpose, the paper solves the following tasks: to study conditions of providing financial and credit assistance to ukrainian smb from the eu and european financial institutions; reveal problems appearing on the way of development of financial cooperation of the smb with the abovementioned institutions; develop recommendations in relation to the improvement of financial support tools of the smb. methods. in the process of the study, general scientific methods are used, namely, economic and statistical, analytical – to analyse the current state of financing of the smb development in terms of eu projects and programs; analysis, synthesis, logical generalization – to reveal problems in the smb external financing and areas for their elimination. results. on the basis of conducted analysis of financial and credit assistance to ukrainian smb provided within the programs and projects of the eu and european financial institutions, their positive influence on the results of enterprise activities was revealed and the main problems of the development of further financial cooperation were identified. for their solution, it is proposed to use new financial instruments providing for the development of co-financing programs, the formation of venture funds, and development of financial relations within the publicand municipal-private partnership. novelty/originality. novelty and originality of the research carried out are in the solution of the scientific and practical problem of external financing of ukrainian smb from the eu and substantiation of recommendations aimed at the intensification of state and local executive authorities’ participation in the development of financial cooperation with european financial institutions. key words: small and medium-sized business, financing, development, financial resources, loans, financial institutions. jel classification: d29, g28 1. introduction the choice of european integration vector by ukraine expands the possibilities of the exit of the smb into the eu market; however, a significant obstacle on this way is the lack of the necessary amount of financial resources for the innovative renewal of their activities, the introduction of modern approaches to management. under the deficit of state and local budgets, inflation fluctuations, and growing interest rate on loans, the access of ukrainian smb to financial resources is limited. acceleration of the integration processes of ukraine’s accession to the single economic space of the eu and baltic journal of economic studies 154 vol. 5, no. 2, 2019 free trade area requires the development of a competitive sector of the smb. the latter plays a decisive role in the financial-economic and social development of the state and expansion of foreign economic activity. bringing the business environment of the smb functioning to the european requirements necessitates the development of effective programs of state financial support. it is noted in the published statistical report within the leadership in economic governance program realized by the support of the united states agency for international development (usaid) that small and medium-sized business development is one of the priorities of state economic policy of ukraine. despite this, small and medium-sized enterprises’ access to financing remains limited. expansion of smb entities’ access to cheap longterm borrowed financial resources is possible due to the participation in eu financing programs, which provide for favourable terms for the provision of funds with minimum requirements for credit security, low-interest rates, and deferred payment of principal. nevertheless, under the development of the digital economy, the absence of single information space of functioning of business environment predetermines the occurrence of the situation when smb entities are not familiar with state development strategies, changes in the regulatory-legislative framework, opportunities of participation in projects and programs financed by the european union. the abovementioned is proved by studies conducted by ukrainian-british consulting company vimesvc, according to which about 30% of ukrainian representatives of the smb are not familiar with the realisation of support programs for their development. according to experts of the company, ukrainian smb needs essential information support, however, requests assistance very seldom. the situation is also worsened by the lack of statistical information, using which it is possible to carry out a comparative analysis of smb development in ukraine and eu countries in order to assess the current state and prospects of joining a free trade area. given this, the study devoted to the analysis of cooperation of ukraine and the eu in the area of financing of smb development programs is relevant and timely. research results will be useful when developing strategic measures for promoting smb development both at the state and local levels and also for the representatives of business structures that are in need of financial resources. 2. literature review problems of external financing of the smb are urgent for many countries of the world, which predetermines a considerable level of scholars’ interest to areas of their solution. studying the influence of financing programs of the european regional development fund (erdf) on the results of activities of romanian smb, c. ciocoiu (ciocoiu, 2015) has come to the conclusion that the volume of financing most correlates with the number of smb staff, to a lesser extent – with gross profit. also, it was concluded on the need to determine priorities when evaluating applications for grants in order to improve financing efficiency. b. geruzel-dudzińska (geruzel-dudzińska, 2016) points to the presence of obstacles for investments in equity of the smb both in poland and other eu countries, the complexity of access to external financing sources, and lack of justice in their distribution. when studying financial risks in serbia’s smb activity, n. stajic (stajic, 2015) points to a low motivation of commercial banks in relation to their lending. this is a consequence of a conservative approach to the practice of smb financing in serbia. the author proposes to speed up the implementation of basel iii standards in the practice of commercial banks’ activity in order to improve access of small and medium enterprises to lending programs. when receiving external financing of smes, there is often gender inequality (rahman et al., 2017) and also the influence of collateral on the decision of banks in relation to credit arrangement. empirical studies show that borrowers don’t want to take out loans from banks when the cost is too high. the existing restrictions in providing an effective demand for the smb sector financing will have substantial effects for general efficiency of economies of both developed and developing countries (harrison & baldock, 2015). state as a party interested in smb development should contribute to the lending of the latter through the system of providing state guarantees, which is important for attracting private investors on terms that that are in line with state goals (cusmano, 2018). according to the author, it is especially relevant for small enterprises, which have more limited access to lending over the insufficient collateral, lack of credit history, low qualification of employees drawing up financial reports. it is a mechanism of the state loan guarantee that is a widely accepted instrument of risk transference to overcome these restrictions. analysis of literary sources allows drawing a conclusion that despite priority of the smb for economic development, smb financing issues remain unresolved in most of the eu countries, as well as in ukraine, which predetermines the relevance of this study. 3. study of smb financing programs in ukraine from the eu and european financial institutions the adopted strategy for the development of small and medium-sized enterprises in ukraine for the period up to 2020 (pro skhvalennia, n.d.) stressed baltic journal of economic studies 155 vol. 5, no. 2, 2019 the necessity of smb development. among the main measures, the approved plan for its implementation points to the application of such financial instruments as the expansion of crediting to small and medium-sized enterprises by commercial banks; intensification of the use of promissory notes and bills of exchange by smb entities; development of crediting by non-bank financial institutions; reducing financing requirement due to the use of factoring, leasing, crowdfunding; attraction of funds of angel investors and use of venture capital. it is quite difficult to implement the above measures in practice without the financial assistance for the smb development from the eu and european financial institutions. according to data of the delegation of the european union to ukraine (delegation of the european, n.d.), about 250 projects are being implemented in our country today. for the last three years, the country has received loans from the eu amounted to 12.8 billion euro, grant assistance – 200 million euro. in accordance with the report of the accounting chamber of ukraine (accounting chamber, n.d.), for the period from 2014 to 01.07.2017, 300 million us dollars and 150 million euros are attracted from the european bank for reconstruction and development (ebrd), 2 075 million euros – from the european investment bank (eib), and 367 million euros – from kreditanstalt für wiederaufbau (kf w) – 367 million euros. from these funds, considerable financial and technical assistance is provided for the smb development. further intensification of economic and financial cooperation on a qualitatively new basis between ukraine and eu countries is possible due to the development of smb enterprises and their joining the free trade area. not only eu countries but also other world countries, which are intended to develop trade relations with the eu through ukraine, are interested in the development of such cooperation. in recent years, the eu is the major trade partner and investor of ukraine. according to statistical data (state statistics, n.d.) following the results of 2017, the export volume of ukraine to the eu amounted to 31.5%, whereas the structure of ukrainian import in the eu was 46.0%. the report by the usaid (usaid ukraine, 2018), according to the results of the first half of 2017, notes that the smb share in the eu countries’ export amounted to 84%, in ukraine – 89%, while the participation of these entities in the value of country’s exports in the eu is at the level of 35%, in ukraine – only 15%. given this, smb entities in ukraine require not only financial resources but also mastering new knowledge, skills, and abilities of business development in accordance with best european practices. in such conditions, ukrainian business representatives can receive a considerable financing volume on the promotion of the development of innovative and export activities for projects and programs realized by the eu together with partners – european financial institutions (table 1). as noted in table 1, eu4business initiative is financed by the eu and implemented with the help of the european bank for reconstruction and development (ebrd), european investment bank (eib), kreditanstalt fur wiederaufbau (kf w), oecd, world bank, and other partners. for the period of 2009–2017, within the implementation of eu4business initiative (eu4business, n.d.), 10 projects out of 43 foreseen by the program for the eastern partnership countries were implemented in ukraine. for the period under analysis, advisory support was provided for 660 enterprises, credit one – for 1043. due to credit support from the eu amounted to 156 million euro, credits totalling 189 million euro were provided. this allowed smb enterprises to create 5887 new workplaces, considerably improve development prospects, increase trading volume, in particular, exports. as for new, ongoing are: 10 projects in the sphere of improving the smb access to financing; table 1 eu programs for smb development support in ukraine name of project/program budget duration eu4business initiative 320 million euro, due to which 1,96 billion euro will be additionally attracted in form of credits provided by partner banks to smb 2009–2020 european fund for southeast europe (efse) 5,1 million euro 2009–2019 competitiveness of enterprises and small and medium-sized enterprises (cosme) 2,3 billion euro (900 million euro for ukraine) 2014–2020 eu4business – ebrd credit line 19,43 million euro 2016–2026 dcfta initiative east 62,74 million euro 2016–2021 women in business programme 5,035 million euro 2016–2022 dcfta sme direct finance facility 10,22 million euro 2014–2026 sme finance facility – phase ii 15,4 million euro 2016–2030 sme finance facility – phase i 15,3 million euro, of which 150 million euro of investments 2010–2020 dcfta project direct finance facility 10 million euro – grant of the european union, 70 million euro of investments 2014–2024 horizon 2020 programme 80 million euro 2014–2020 source: compiled by the authors based on (delegation of the european, n.d.), (eu4business, n.d.). baltic journal of economic studies 156 vol. 5, no. 2, 2019 3 projects aimed at strengthening the regulatory framework; 3 for improving the base of knowledge and business skills of ukrainian entrepreneurs; 1 project directed to improve market access. the main component of cosme is to provide the smb access to external financing through the use of such financial instruments as providing guarantees to financial and credit institutions and support for investment funds. however, delay of resolution at the state level on financing requirements has led to the suspension of implementation of the financial component of the program for ukrainian small and medium-sized business. loss of such a source of financial assistance for the smb development will negatively affect indicators of its competitiveness and limit possibilities of receiving currency earnings from foreign economic activity. in addition to the projects and programs of financial assistance for the smb development which are noted in table 1, european organizations provide essential advisory support on the implementation of: – financial sector institution building and crisis response (2009–2018); – advice for small businesses (2010–2018); – forbiz (2016–2019); – eastern partnership: ready to trade – an eu4business initiative (2017–2020); – eu4business: network of business support centres in ukraine (2016–2020). due to advisory and technical support provided to ukraine within the forbiz project under the eu4business initiative, the strategy for the development of small and medium-sized enterprises in ukraine for the period up to 2020 was developed and adopted. at the level of the ministry of economic development and trade of ukraine, pro platform for effective regulation, better regulation delivery office (brdo) are implemented, the creation of national agency of smb development in ukraine is envisaged. domestic entrepreneurs can get information and advisory support in the area of the search of projects and programs of smb development financing on the following websites and internet portals: – eu – website-guide “european-style business”; – ebrd – advice for small businesses in ukraine; – german-ukrainian fund – support for the financing of small and medium-sized enterprises in ukraine; – european executive agency for small and mediumsized enterprises; – ministry of economic development and trade of ukraine – pro platform for effective regulation; – national platform of small and medium business, etc. in spite of a considerable number of websites, smb representatives are insufficiently informed about the possibilities of participation in lending, investment, and grant programs of the eu, use of new financial instruments in the form of converted loans, crowdfunding over the lack of single information space. this makes innovation and investment development of smb enterprises impossible and leads to borrowing mainly for the needs of replenishment of working capital and financing of investment projects at their own expense. 4. identifying research problems and developing ways to solve them key problems on the way towards the effective introduction and implementation of smb financing programs from the eu and european financial institutions are as follows: – the existence of bureaucratic corruption at the stages of social product distribution; – non-conformity of indicators of financial and economic development of ukraine and smb enterprises with the minimum requirements of european financial institutions; – introduction of temporary currency restrictions by the national bank of ukraine; – delay in carrying out of key reforms, in particular, financial decentralization reform; – protraction of the process of adopting the necessary legislative acts, in particular, in the sphere of promoting the smb crediting development and protecting the rights of creditors and investors; – the absence of developed business and information infrastructure for the support of smb development; – low level of interaction and confidence of smb entities in the banking system, which in most cases serves as a mediator when receiving financing on the part of european funds and programs; – the high share of troubled loans in the total of credits in the total portfolio of ukrainian banks; – non-transparency of the use of funds of financialcredit and grant support by the eu and european financial institutions. based on studying the experience of the eu member states, we propose the following directions to solve smb financing problems: – creation of state and municipal funds for supporting the sme development; – state support for the formation and development of free trade areas, clusters; – development of decentralization processes in the field of state regulation of the smb development financial provision; – strengthening the cooperation of state and local authorities with european financial institutions and organizations, in particular, the german-ukrainian fund in terms of co-financing of smb financing programs; – strengthening the control on the part of public institutions over the timely fulfilment and repayment of debt obligations by smb entities and target use of funds borrowed from european financial institutions. baltic journal of economic studies 157 vol. 5, no. 2, 2019 5. conclusions study of the smb financing programs in ukraine by the eu and european financial institutions allowed revealing not only the positive influence of financial, credit, investment, and grant assistance on performance indicators of smb enterprises but also identifying a number of problems hampering the intensification of development of financial cooperation processes. key among them are corruption, delay in conducting reforms, and adopting laws and regulations, as well as the lack of system and consistent financial support for the smb development on the part of the state, limited access to external financing, absence of banks’ motivation for lending to ukrainian business because of permanent growth of interest rate, increasing level of risks of non-return loans. in total, the abovementioned problems lead to innovative backwardness and reduction of export potential of ukrainian small and medium-sized enterprises. it is the state financial support for the smb that is a guarantee of their further efficient development and improvement of ukraine’s public image in the world. in relation to this, further development of the smb in ukraine requires the development of not only publicprivate but also a municipal-private partnership. taking into account the positive experience of eu countries towards the smb financial support, it is necessary to develop a partnership of state and local authorities and local self-government bodies with the representatives of business structures with the help of applying modern financial instruments. they include conversion loans, the creation of coinvestment institutions, share investment venture funds, crowdfunding. for this purpose, at the state level, it is necessary to provide for the transparency of fund market, stability of the banking system, improvement of investment climate, to refund part of costs of the smb investment projects aimed at their innovative update at the expense of public or municipal funds, providing preferences for the payment of state and local taxes and fees. this will enable to develop and implement transparent and effective mechanisms of financial and credit support for the sme development on the basis of broadening of cooperation of state and local executive authorities and local self-government with business structures and financial institutions of the eu taking into account best european practices. references: accounting chamber of ukraine (n.d.). retrieved august 28, 2018, from: http://www.ac-rada.gov.ua/doccatalog/ document/16753343/zvit_19-7_2017.pdf ?subportal=main basel iii: international regulatory framework for banks. retrieved august 30, 2018, from: http://www.bis.org/bcbs/ ciocoiu, c. (2015). the impact of the european regional development fund on smes – evidence from romania annals of the university of oradea. economic science, 25(1), 525–532. competitiveness small and medium enterprises (2014). retrieved august 28, 2018, from: http://cosme.me.gov.ua/ cusmano, l. (2018). sme and entrepreneurship financing: the role of credit guarantee schemes and mutual guarantee societies in supporting finance for small and medium-sized enterprises. oecd sme and entrepreneurship papers, 1, oecd publishing, paris. doi: 10.1787/35b8fece-en delegation of the european union to ukraine (n.d.). retrieved august 28, 2018, from: https://eeas.europa.eu/ delegations/ukraine_uk eu4business (n.d.). retrieved august 28, 2018, from: http://www.eu4business.eu/uk/about geruzel-dudzińska, b. (2016). financing of fixed asset investment in the small and medium-sized enterprises in poland. contemporary economy, 7(1), 71–80. harrison, r ., baldock, r . (2015). financing sme growth in the uk: meeting the challenges after the global financial crisis. venture capital, 17(1-2), 1–6. doi: 10.1080/13691066.2015.1050241/ rahman, a., rahman, t., belas, j. (2017). determinants of sme finance: evidence from three central european countries. review of economic perspectives, 17(3), 263–285. doi: 10.1515/revecp-2017-0014 rozporiadzhennia “pro skhvalennia stratehii rozvytku maloho i serednoho pidpryiemnytstva v ukraini na period do 2020 roku” [order “strategy for the development of small and medium enterprises in ukraine up to 2020”]. retrieved august 28, 2018, from: http://zakon2.rada.gov.ua/laws/show/504-2017-%d1%80 stajic, n. (2015). corporate strategy of serbia's smes in working capital financial risk management. economics theory and practice, 8(1), 1–15. state statistics committee of ukraine (n.d.). retrieved august 28, 2018, from: http://www.ukrstat.gov.ua usaid ukraine (2018). retrieved august 28, 2018, from: https://www.usaid.gov/uk/ukraine baltic journal of economic studies 67 vol. 6, no. 3, 2020 corresponding author: 1 the apeiron school of public and individual security in krakow, poland. e-mail: wiraszkapiotr@wp.pl orcid: https://orcid.org/0000-0002-0128-5146 2 cooperative bank in kielce, poland. e-mail: urszula.karpinska@bskielce.com.pl orcid: https://orcid.org/0000-0002-4032-8823 doi: https://doi.org/10.30525/2256-0742/2020-6-3-67-75 economic security as an element of the region’s development process on the example of communes of the świętokrzyskie voivodship piotr wiraszka1, urszula karpinska2 abstract. economic security can be described as a process, in which one seeks to achieve a state of calmness and the ability to neutralize emerging threats, in a geographically or culturally defined space, in which an individual, legal entity or territory has a feeling similar to certainty that they have and will have sufficient the amount of resources to cover current needs and that there will be no risky situations that would deprive these entities of their resources. the aim of the article is to assess the diversification of economic security of communes in the świętokrzyskie voivodship in 2009-2018, using a synthetic measure. empirical data were collected in spatial terms for 102 communes of the świętokrzyskie voivodship. the material used was data from the local data bank of the central statistical office and the regional accounting chamber of kielce for 2009-2017. when discussing the activities of local entities in the process of shaping economic security, the first thing to emphasize is the importance of local government units (lgus), the operation of which is key in ensuring the continuity of the development process and striving to ensure an adequate level of security. economic security is expressed primarily in the economy's ability to survive and develop. the greater the economic potential of the national economy is at a higher level of socioeconomic development and shows faster growth dynamics, the more stable and durable its security is considered. the study showed a diversified level of financial security for communes in the świętokrzyskie voivodship. in 2018, the measure of the level of financial security ranged from 0.65 to 0.85, while from 0.69 to 0.87 in 2009. key words: regional development, economic security, commune. jel classification: f52 1. introduction economic security is a concept covering several scientific disciplines and it is multidimensional due to the entity, to which it relates. local economic security can be defined as a process, in which one seeks to achieve a state of calmness and the ability to neutralize emerging threats in the local space, geographically or culturally defined, which aims to ensure stability and security of development for every citizen. the purpose of the article is to identify factors that, in the geographical and social context, affect the level of economic security of the studied region and stimulate its development. the local dimension of security is still gaining importance given the general socio-civilization trends, as well as the increase in the value of the region’s importance in the economic, social aspect, created by the european institutions. the result is the observed increase in the importance of small local communities and the locality, its security and creating development opportunities become a driving force that deserves attention and protection. in local terms, security concerns people, groups of people, various organizations, and formalized, and territorially recognizable administrative and state structures such as commune, poviat and voivodship (kitler, 2010). we can also approach the problem of security in the subject system. then, we are talking about military, political, economic, ecological, social or cultural security (stańczyk, 1996). j. marczak defines security as a state, sense, process, goal, value, need, structure. when discussing the activities of local entities in the process of shaping the development of the region and its security, the first thing to note is the importance of the local government units (lgus), the operation of which is key when it comes to regional development and shaping this development and striving to ensure the security of this development. baltic journal of economic studies 68 vol. 6, no. 3, 2020 2. material and research method the aim of the article is to assess the diversification of economic security of communes in the świętokrzyskie voivodship in 2009-2018, using a synthetic measure. empirical data were collected in spatial terms for 102 communes of the świętokrzyskie voivodship. the material used was data from the local data bank of the central statistical office and the regional accounting chamber of kielce for 2009-2017. in the process of creating a synthetic measure, the following stages can be distinguished (łuczak, wysocki, 2005): i. selection of simple features and their verification in terms of content and statistics (wysocki, 2010). from the selected set of variables (table 1), those with low spatial variability (coefficient of variation less than 0.10) and high correlation of variables (according to the inverse correlation matrix) were removed (malina, 2004). ii. determining the direction of feature preference in relation to the phenomenon under consideration (term destimulant and stimulant). selected destimulants were replaced with a stimulant according to the formula; x x ij ij = � 1 (1). iii. unitarization of features. the selected variables were subjected to the procedure of zero unitarisation using the following formulas: for stimulants z x ij ij i ij i ij i ij = − − � x min x max x min when xsi (2), where: s – stimulant, d – destimulant; i = 1, 2... n; j = 1, 2... n, xij – means the value of the j-th feature for the examined unit, max – the maximum value of the j-th feature, min – the minimum value of the j-th feature (wysocki, lira, 2005). iv. determination of synthetic measure according to the method based on distance in real space with the euclidean metric according to the formula: oe p zit j p ijt= −( ) = ∑� � 1 1 1 2 (3), where i = 1,2...n; j = 1, 2..., p (n is the number of objects (poviats), ap – the number of features); zij – means the value of the j-th feature for the given unit, max – the maximum value of the j-th feature, min – the minimum value of the j-th feature (wysocki, 1996). when the indicator value is equal to 0, the given commune is characterized by the maximum value of each of the examined variables. the higher the value of this indicator, the worse the situation of the commune (tokarski, 2005). v. linear ordering of objects and isolation of typological groups for the entire area of variability of the synthetic feature. the first, second and third quartiles were used as threshold values. the size of the synthetic measure in the first group means a better unit, in the last one the weakest. correlation coefficients and scatter plots with a adjustment line for a synthetic measure were also presented (zeliaś, malina, 1997). 3. the financial situation in theoretical terms economic security is the ability of the economic system of the country (region) to make use of internal development factors that will guarantee its undamaged development (frejtag-mika, kołodziejak, putkiewicz, 1996) and formed the basis for the existential existence and survival of both individuals and wider social structures, local communities and nations (red. m. gębska, kubiak, 2016). table 1 list of variables describing entrepreneurship potential in communes variables s/d total income – total expenditure / number of inhabitants (surplus / budget deficit per capita (assessment of budget solvency) s interest / own income (debt service ratio) d total revenue / total expenditure (budget efficiency) s operating surplus / total revenues (in terms of budget solvency) s own income / total income (financial independence) s investment expenditure / total expenditure (in terms of investment attractiveness) s income from taxes and local fees / total income (s) level of fiscal wealth s total subsidies / total revenues (ratio of financial state interference) d total subsidies / income (financial interference ratio) d transport and communication expenditures / population (s) s expenditures on education and upbringing / population (s) s expenditures on housing / population (s) s expenditure on municipal management and environmental protection / number of inhabitants (s) s health care expenditure / population s expenditure on social policy / population (s) s own debt / own income d as – stimulant; d – destimulant source: study based on data available at the central statistical office of poland (cso) baltic journal of economic studies 69 vol. 6, no. 3, 2020 based on the above statement, it can be said that economic security means a state, in which an individual, legal entity or territory has a feeling similar to certainty that they have and will have sufficient resources to cover their current needs and that there are no risky situations, that they could deprive these entities of their resources. in this dimension, economic security means: – stability of functioning; – ability and potential to achieve goals; – risk mitigation options; – development opportunities, wealth creation; – from the point of view of the funds needed – the possibility of obtaining them, likelihood of risk (almost impossible). the role of public authorities in the responsibility for building and maintaining the economic security of each society is to conduct the appropriate socio-economic policy, making efforts at a basic level to ensure access to goods and services of the basic consumer basket (duczkowska-piasecka, 2017). the essence of the concept of regional development is the issue related to the very concept of development, which is defined as “any long-term process of directional changes in which the following stages of transformation can be correctly distinguished, demonstrating a notable diversity of this object in a given respect” (nowa encyklopedia powszechna pwn, 1996). the essence of development is a permanent quality improvement as a part of the process, which is a progressive action that allows to increase potential. regional development is mainly related to issues connected to increasing the region's potential, but it should be noted that the region as a concept is defined both culturally, as well as administratively and politically, as well as economically (pietrzyk, 2000). regional division is associated with a number of regulations, but it should be noted that regional division applies to both physical and geographical as well as economic and spatial issues (korenik, 2007). the concept of regional development is a concept that is related to the perception of the region and its development within the following definitions (głuszczuk, 2011): – systematic improvement of the competitiveness of business entities and the standard of living of the inhabitants, and an increase in the economic potential of the regions, which contributes to the socio-economic development of the country; – permanent increase in the standard of living of the inhabitants and economic potential in the scale of a given territorial unit; – sustainable growth of three elements: the economic potential of regions and their competitive strength, as well as the level and quality of life of residents, and also contributes to the development of the national community; – sustainable increase in the standard of living of the inhabitants and economic potential in the scale of a given territorial unit, as well as a permanent increase in the economic potential of the regions, their competitive strength, as well as the level and quality of life of the inhabitants; – development is also a process of positive changes in quantitative and qualitative growth associated with the functioning of the region and the supra-local socioterritorial system, which identifies with the specific features of space, economic structure, as well as social ties that result from the shared regional identity. therefore, regional development is largely associated with improving the quality of life of residents and raising the economic level of the region. it is worth pointing out that the technical and technological issue includes a number of changes that are to cause a gradual increase in the quality of goods and services produced, as well as the range of products and production capacity in the region (nowacki, 2016). when identifying the determinants of regional development, it should be pointed out that they are shaped in terms of various sources, as well as a cause and effect relationship, which is associated with further transformations. it is worth pointing out that the multi-faceted nature of regional development allows to distinguish determinants at the economic, social, technical and technological as well as ecological levels (churski, 2015). the division of aspects is presented in table 1, where individual aspects are distinguished and defined in terms of aspects concerning the division into individual categories. determinants of regional development are associated with the application of criteria for the spatial allocation of developmental driving forces, as well as the degree of their controllability and the type of relationship between the issue of development and the phenomenon of development, as well as the reasons for this development. when discussing the activities of local entities in the process of shaping the development of the region providing security, first of all, the importance of territorial self-government units ( jsts), the operation of which is key in terms of economic security of the region, local development and shaping this development, should be pointed out. therefore, it seems necessary to present the importance of local government. the importance of local government is mainly associated with the functioning of the local community, as well as the functioning of the local community as a host in a given area. the self-government is actually a picture of decentralization of public authority, which is related to the performance of independent tasks carried out by a given local government unit, which have specific material resources to carry out specific public tasks (imiołczyk, 2011). according to the european charter of local government adopted in strasbourg on october 15, 1985, ratified by poland in baltic journal of economic studies 70 vol. 6, no. 3, 2020 1993, “local government means the right and ability of local communities, within the limits set by law, to direct and manage an essential part of public affairs on their own responsibility and in their interest residents” (europejska karta samorządu terytorialnego). it has its own independent bodies (included in public administration), operating independently within the limits set by law and subject to supervision and control on the principles set out in law. the essence of its activity is the management of public affairs by the social community being the subject of these tasks. when analyzing the action related to the functioning of local government units, the municipality must be recognized as a key unit, which results from the fact that it is in the case of local government units that key actions regarding social functioning and functions related to the work of the local community are implemented. it is worth noting that, according to the provisions and letter of the act, it is the rights that are not assigned to other jsts that are just assigned to the function of jst. pursuant to the act, the exclusive competences of the jst board include primarily (niewiadomski, siemiński, sosnowski, tetera, 2001): – adopting economic plans and statuses of local government units, as well as budget units reporting to the commune; – determining the composition, as well as electing and dismissing the management boards of local government units as well as municipal companies; – setting the amount and type of local taxes and fees with the restriction resulting from central regulations; – undertaking cooperation with other municipalities; – adopting resolutions regarding jst finances, including incurring liabilities, issuing bonds, selling real estate, etc. table 2 determinants of regional development in the light of its aspects aspects of regional development selected determinants of regional development economical – increasing the regional capital; – changing in the regional labor market quantitatively and qualitatively; – setting favorable trends in the income or profits of regional entities (households, business entities, institutions and local government bodies); – growing intra-regional demand and pro-development changes in its structure; – stimulating and supporting innovation; – increasing the investment outlays within the region (investments of regional units and entities from outside the region); – improving the efficiency of the regional market of goods and services; – setting constant, effective space marketing; – modernizing management; – achieving favorable economic situation in the country; – achieving favorable economic situation on foreign markets; – absorbing aid, including the eu. social – shaping and strengthening regional awareness; – improving the functioning of the local government community; – stimulating and nurturing active social attitudes, including in the field of civic participation in regional and local decision-making processes; – creating and developing entrepreneurial attitudes; – achieving positive shifts in the population age structure; – improving the level of education permanently; – enriching the professional qualifications systematically; – improving intellectual infrastructure; – progressing processes of urbanization, agglomeration and metropolization; – improving social infrastructure and related services; – improving the quality of life of residents (level, conditions and lifestyle). technical data and technological – modernizing and expanding the material structure of the generating apparatus; – improving the quality of production and services; – intensifying research and development activities; – achieving diversification of the region's economic profile, including increasing its share in the economy of the so-called high technology sectors; – supporting and strengthening the processes of implementing product innovations; – improving technical infrastructure. ecological – rationalizing the management of natural resources; – promoting and developing ecological awareness of the region's inhabitants; – implementing of pro-ecological technological solutions. source: d. głuszczuk, 2011, istota rozwoju regionalnego i jego determinanty, [w]: ekonomia, nr 5/2011, wrocław, s. 75. baltic journal of economic studies 71 vol. 6, no. 3, 2020 – adopting the jst budget and ensuring its correct implementation; – determining the directions of the commune head and accepting reports on his or her activities, as well as determining the amount of his or her remuneration; – adopting plans related to the strategy and directions of jst development; – determining the rules and amount of granting scholarships for pupils and students in jst; – granting honorary citizenship of jst. in terms of the functioning of the poviat authority, the issue of jst competences is important because the competences related to the operation of poviats and the operation of communes are to a large extent complementary and permeate, moreover, poviat authorities may outsource some of their own tasks resulting from the obligations related to the operation of poviat authorities, delegate on municipal authorities. at the same time, one cannot ignore the fact that in the case of cities with poviat rights, there is a situation related to the combination of competences related to the obligations arising from the rights of poviats and obligations arising from the rights of local government units. undoubtedly, therefore, regional development is conditioned by the cooperation of a factor related to the cooperation of a political center operating in a given region, enterprises, as well as conditions that cause a given region to develop. conditions such as natural resources or business conditions are extremely important because the access to raw materials as well as to employees is currently a key factor for the development of a given industry sector in a given region. therefore, referring to the definition of local security and economic security being built, one cannot speak only about the fact that it aims to care for the community as a whole, but it should be added that it tends to ensure stability and security for every citizen (wolski, 2018). 4. diversification of the financial situation of communes in the świętokrzyskie voivodship the economic security of the state should be treated as the security of the entire economic system and interpreted as “(...) undisturbed functioning of economies, that is, maintaining basic development indicators (...) at an unchanged or higher level” (księżopolski, 2004). economic security can be understood as “(...) the sum of conditions ensuring stability and prosperity of management processes, both on a microeconomic and macroeconomic scale” (pięta, 2009). economic security is directly connected with the issue of socio-economic development of the state. economic security is constantly changing, which results from the specifics of the market economy, for which, among others, cyclical fluctuations (dworakowska małgorzata magdalena). the financial dimension of economic security is one of the four dimensions of economic security, such as: the raw material and energy dimension, food dimension and access to clean water (por. k. m. księżopolski, 2011). financial security and trends of changes can be determined by the ratio of assets (or liabilities) to the balance sheet total. in financial terms, it is a guarantee of the existence and development of an institution (organization) that arises as a result of daily management efforts to ensure good financial condition. therefore, it refers to all financial decisions we make in relation to property management. financial security is a state (nonrisk) that gives a sense of confidence in the functioning of the entity and a chance for its development, or an intermediate state in building financial independence (dziekański, 2014). the study showed a diversified level of financial security for communes in the świętokrzyskie voivodship. in 2018, the oe measure of financial security ranged from 0.66 (sitkówka-nowiny (2); the best unit) to 0.85 (radków (2), tarłów (2); the weakest units), and from 0.69 (sitkówka-nowiny (2)) to 0.87 (gowarczów (2), mirzec (2), nowy korczyn (2), tarłów (2), wąchock (3), wiślica (2)) in 2009. the range of values adopted by the oe measure in 2009 is slightly higher (range 0.19) than in 2018 (range 0.18). high in 2018 according to the measure of synthetic financial security: sitkówka-nowiny (2), połaniec (3), kielce (1), busko-zdrój (3), morawica (2), ożarów (3), sandomierz (1), masłów (2), starachowice (1), soleczdrój (2) 0,78, końskie (3), ostrowiec świętokrzyski (1) (see figure 1). map of spatial differentiation (figure 2) indicates a distribution model for the synthetic measure of financial security of communes in the świętokrzyskie voivodship. the value of the synthetic measure in 2018 was 0.66 – 0.85, range 0.19, and 0.69-0.87, range 0.19 in 2009. the most numerous range in 2018 was 0.78-0.80 (31 units), while 0.82-0.84 and 0.84-0.86 in 2009 (27 units each), which means that this range is dominant. measures of spatial diversity in the case of a synthetic measure of development in 2018 compared to 2009 show the stability of the studied phenomenon. this is indicated by the values of standard deviation (0.03-0.03), classic coefficient of variation (0.04-0.04), range (0.18-0.19; table 2). the pearson correlation coefficient between the value of the synthetic measure of financial security in 2018 compared to 2009 according to the oe measure was 0.751 (figure 3). outbound units sitkówka-nowiny (2), połaniec (3) and kielce (1) – units with industrial function, raków (2), radków (2), baćkowice (2), mirzec (2) – units with traditional agricultural function. there are significant correlations between the level of financial security measure, own revenues, local tax revenues, share in pit and cit revenues, the measure baltic journal of economic studies 72 vol. 6, no. 3, 2020 figure 1. spatial differentiation of the synthetic measure topsis entrepreneurship of communes of the świętokrzyskie voivodship in 2009 and 2017 source: the author's own development based on bdl gus 2018: n = 102; średnia = 0,8031; odch.std. = 0,0323; maks = 0,85; min = 0,66 1 1 1 3 3 9 31 29 22 2 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 0,84 0,86 0,88 2018 0 5 10 15 20 25 30 35 li cz ba o bs . 2009: n = 102; średnia = 0,8259; odch.std. = 0,0338; maks = 0,87; min = 0,69 1 1 1 3 4 11 21 27 27 6 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 0,84 0,86 0,88 0,90 2009 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 li cz ba o bs . figure 2. map of spatial differentiation of a measure of synthetic financial security for communes in the świętokrzyskie voivodship in 2009 and 2018 source: the author's own development based on bdl gus table 2 differentiation of synthetic measure for communes in the świętokrzyskie voivodship in 2009 and 2018 2009 2018 average 0.83 0.80 median 0.83 0.81 standard deviation 0.03 0.03 classic coefficient of variation 0.04 0.04 min. 0.69 0.66 max 0.87 0.85 range 0.18 0.19 source: the authors’ own development based on bdl gus of financing services, state interference, financing services, the number of unemployed and employed. the number of business entities indicates the level of entrepreneurship in the region. this is one of the indicators showing the economic situation of the region and having an impact on financial security next to financial variables (table 3). regression analysis of the oe measure of financial security of communes in the świętokrzyskie voivodship explains r = 0.516 variable variations. the model indicates the important role of the employed and the unemployed, business entities and natural persons conducting economic activity in the process of shaping the financial security of communes. further increasing baltic journal of economic studies 73 vol. 6, no. 3, 2020 the multidimensionality of the model would cause a slight increase in r2 = 0.4961(table 4). table 3 correlation between measures of financial security and socio-economic variables of rural communes in the świętokrzyskie voivodship oe financial security own income -0.8136 income from local taxes -0.781 revenue share, pit -0.6171 share in cit income -0.7164 capital expenditure -0.4585 measure the budget solvency 0.5759 measure of state interference 0.751 measure the level of financed services 0.6392 number of persons employed -0.6603 number of unemployed 0.1487 economic operators -0.4414 self-employed persons -0.3984 a measure of development 0.6407 a measure of entrepreneurship 0.4974 infrastructure measure 0.3962 a measure of demography 0.4489 measure of the environment -0.106 linear correlation coefficients for observations from sample 1-102 critical value (at a double-sided 5% critical area) = 0.1946 for n = 102 source: the authors’ own development based on bdl gus 2018, y = 0,2098 + 0,7185*x; r = 0,7514; p = 0.0000; r2 = 0,5646 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 0,84 0,86 0,88 2009 0,64 0,66 0,68 0,70 0,72 0,74 0,76 0,78 0,80 0,82 0,84 0,86 20 18 baćkowice (2) fałków (2) kielce (1) mirzec (2) nowy korczyn (2) połaniec (3) radków (2) raków (2) sitkówka-nowiny (2) figure 3. year-to-year relation of the synthetic oe measure of financial security of communes of the świętokrzyskie voivodship in 2009 and 2018. source: the author's own development based on bdl gus 1 skorygowany współczynnik determinacji nie osiągnął 60%. za optymalną wartość uważa się przekroczenie progu determinacji na poziomie 95% 5. conclusion security is generally defined as the absence of threats and risks. however, it is worth noting that “certainty of no threats”, by the way “no threats” is an ideal type, which is a primitive definition of security, would exclude the possibility of the phenomenon of security at all. therefore, such certainty would also preclude the existence of any need to conduct research in a pointless scope (piwowarski, 2018). security, as a complex matter, is universal and ambiguous in nature, as it can relate to many aspects of the functioning of individuals, families, groups, communities as well as the entire society and the entire state. therefore, in order to define its specificity, it is necessary to add an appropriate adjective to it (polcynradomska, 2014). economic security is expressed primarily in the economy’s ability to survive and develop. the greater the economic potential of the national economy, is at a higher level of socio-economic development and shows faster growth dynamics, the more stable and durable its security is considered. the study showed a diversified level of financial security for communes in the świętokrzyskie voivodship. in 2018, the measure of the level of financial security ranged from 0.65 to 0.85, while from 0.69 to 0.87 in 2009. there are significant correlations between the level of financial security measure, own revenues, local tax revenues, share in pit and cit revenues, the measure baltic journal of economic studies 74 vol. 6, no. 3, 2020 of financing services, state interference, financing services, the number of unemployed and employed. outbound units sitkówka-nowiny (2), połaniec (3) table 4 regression analysis of synthetic safety of municipalities in the świętokrzyskie voivodship factor standard error t-student's p-value constant 0.830358 0.00927890 89.49 < 0.0001 number of persons employed -0.000290823 4.19709e-05 -6.929 < 0.0001 number of unemployed 0.000192206 7.15878e-05 2.685 0.0085 economic operators 0.00131541 0.000626777 2.099 0.0384 self-employed persons -0.00169275 0.000680266 -2.488 0.0145 arithmetic mean of the dependent variable 0.803137 standard deviation of the dependent variable 0.032304 sum of residual squares 0.050934 residual standard error 0.022915 determining coefficient r– square 0.516733 corrected r-square 0.496804 f (4.97) 25.92927 p-value for the f test 1.26-14 logarithm of credibility 242.9799 information criteria akaike -475.9597 bayesian, schwarz information criterion 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(1997). o budowie taksonomicznej miary jakości życia. syntetyczna miara rozwoju jest narzędziem statystycznej analizy porównawczej, taksonomia z. 4 ochroną pracy w katowicach, nr 1(14). baltic journal of economic studies 14 vol. 2, no. 2, 2016 the state measures how to improve the use and protection of land planted by protective forest belt valentyna boklag1 classic private university, ukraine abstract. a problem of protective forest belt control expends because with the general deterioration of the existing forest belt is considered this article; a number of measures for the transfering of land plandet by protective forest belt to municipal authority, are suggested village councils. methodоlogy. the study is based on the analysis of modern legislation, which regulates the use of the territories occupied by forest belts. we used statistical data, as well as the work of scientists who have examined the current state, the rational use and the question of the protection land for shelterbelts. the research results showed that at the moment there is no clear (correct) information, which is true for the use of forest plantations, their quantitative and qualitative characteristics. there is a need for reconstruction of the existing and creation of new belts to improve their protective function for the productive land. the practical importance. the results are scientifically substantiating the improvement of the legislative framework to regulate the use of forest windbreaks, as well as the need to transfer the shelterbelts from the state to the municipal property. value/originality. these results provide justification for the adoption of the «transferring program of forest belts from the state to municipal ownership of rural and urban councils». key words: protective afforestation, use and protection of lands, local authorities, municipal land property, land resources. jel classification: q15, q23, q24, r14 1. statement of the problem one of the main problems of land use planted by field protection forest belt in ukraine and other nonagricultural land, was the legal uncertainty of it’s property right fate during land reforms and it’s land division of collective agricultural enterprises. the importance of the problem increases because legal aspects of land use, planted by protective forest belt, techniques of effective of these territory effective control have not sufficiently studied. according to the land code of ukraine field protective forest belt and other protective plantations are classified as non-agricultural land for agricultural purposes. these objects should be owned by village councils. however, the mechanism of such land use is not provided in the current legislation, which means that local governments, as owners, can not manage this property. consequently, it is controlled illegally by other people, who cut down and damage forest belt. state protective forest belt transfer under municipal control as their property is a real way of this problem solution concerning field protective forest belt and other protective plantation future viability. 2. the legal regime of the use protective belts the development of urbanization processes and the growth of world population causes an increase in the material needs of society and the inability of the biosphere in its entirety to ensure their demands causes the intensive using of land and forest resources. in view of the increasing human pressure on land and forest resources, high rate of land plowed, the excessive using of chemicals soil, development of erosion processes, reduced land productivity, development of arable and forest land for construction, mass uncontrolled deforestation issues of rational and ecological using of land and forest resources are extremely important and actual as in a scientific point of view (hordienko, 2010). according to cl. 60 of the law of ukraine «about the environmental protection» shelterbelts natural band is a type of natural areas and a subject to special state protection. however, this law does not contain the definition of these natural areas, as well as their legal regime. though the natural belts usually represented as areas covered with forests, and the relations in it are mainly regulated by the forest legislation. thus, cl. 36 of the forest code, which regulates the division of forests into groups and to classify corresponding author: 1 department of public administration and land management e-mail: val.boklag@yandex.ru baltic journal of economic studies 15 vol. 2, no. 2, 2016 them in categories of protection of environmental and economic importance include windbreak to the first group of forests like those that operate primarily environmental functions. the definition of this category of special protection areas is provided the procedure of division the forests into groups, their reference to the categories of protection and allocation of specially protected land forest fund, approved by the cabinet of ministers of ukraine dated july 27, 1995. belts (windbreak) is artificially created line-type plantings to protect agricultural land (p. 24 of the procedure). these forests are classified as protective forests (next to water protection, hygiene, health and certain other categories of protection, forming forests of the first group). thus, according to p.3 of the procedure the belts in other categories of protection are not defined. field shelters make primarily protective, anti-erosion, climate-and other useful functions. the legal regulation of windbreak is not written in detail. it does not set the standards of the sizes of these bands. some requirements are contained in legislation only in part of the limit the logging of this category (cabinet’s of ministers of ukraine resolution, 2014). hodovanyuk a. j. analyses the current legislative regulating relations associated with the use and protection of belts (hodovanyuk, 2012). he highlighted the main historical stages of their creation and operation in ukraine, formulated the problems caused by the transfer of the ownership and lease of agricultural land, namely the absence of the owner of belts and other plantations became a critical issue of national importance; lack of reliable information about their actual state; the belts were left to fend for themselves after the carve-up and reorganization of collective agricultural enterprises; forestry enterprises strongly against the ideas to transfer belts on their balance, noting that holding inventory, care, work on their reproduction require significant material costs. the solution of these problems, according to him, needs the following legislative changes: p. 22 of the land code of ukraine, where it is said about agricultural land, in paragraph 2-b belts should be deleted from the list of non-agricultural land for the purpose of classifying these and other protective plants to the land for forestry for determining the uncertainty status of the land planted with forest belt plantings. 3. the current state of protective belts in ukraine, there are nearly 450 thousand hectares occupied by belts, but recently very aggravated the problem of their preservation and reproduction. such land is classified as agricultural land and is used to form the environmentally safe agricultural landscapes, land management, land use adjacent agroforestry protection from negative degradation processes (water, wind erosion). the problem with retaining of shelterbelts deepens in connection with the general deterioration of the existing forest belts, restricted funds for their maintenance. therefore there is a need to establish a host of territories occupied shelterbelt forest plantations in order to determine measures for their rational use and protection. in our opinion, today it is not enough to create new shelterbelts to achieve abstract optimum performance, but also to draw attention to the preservation and improvement of the condition of forests and protective plantations, inherited by the present generation as an inheritance. now the work of the forest fund accounting is the inefficient, since the area and forest cover differ, according to the executive body on the issues of land use, state forestry, the state service statistics. in fact, at the moment we do not have information about the actual forest area in the country and its forest cover. before the land reform (1991) work on the creation and maintenance of shelterbelt plantings were in management of the local farms as usual. the bulk of the plantations were founded in 50-60s of the last century due to the «stalin’s plan for the transformation of nature» (1948). this document provides for the formation during 1950-1965’s state forest shelterbelts with total length of 5320 km and an area of forest plantations 117.9 thousand ha (kindyuk, 2011). in the process of transformation of land ownership in 90 years a number of changes was held, namely, 28 million hectares of agricultural land passed into private ownership to 7 million shareholders, the land under the shelterbelt forest plantations transferred to the collective 37 agricultural enterprises formed on the basis of former collective farms and state farms. since windbreak and other shelterbelts planting apply to non-agricultural land, they were relegated to the lands, which are not subject of unitization and in the future could be a part of the stock lands of the reserve fund, the public, or, and still be in the collectively owned (yuhnovskiy, 2009). analysing the materials of the conference of the united nations as for problems of environment and development (2012), the ministerial conference on the protection of forests in europe (2011), the thesis of the forest code of ukraine (forest code of ukraine), the cabinet of ministers of ukraine «on approval of the concept of development of agro-forestry in ukraine «dated september 18, 2013 (popkov, 2011), it should be noted that the management of land and forest resources is an important condition for the creation of environmentally sustainable conditions of nature, which are also relevant for the agricultural regions of ukraine. at the same time one of the main organizational and legal issues of land use of the shelterbelt plantings is to define the forms of ownership to them, due to the transformation process of ownership of the land, which occurred during the land reform. in order to ensure the implementation of urgent measures to accelerate land reform, according to the decree of the president of ukraine «on the order of unitization land transferred into collective ownership of agricultural enterprises and organizations» № 720 from august 08 1995 in the sphere of agricultural production baltic journal of economic studies 16 vol. 2, no. 2, 2016 the farmland which was the subject of unitization was transferred to collective ownership, agricultural enterprises, cooperatives, joint stock companies, including those, that were created on the basis of state farms and other state agricultural enterprises. that is, the document led to the elimination of and reorganization of the majority of collective farms. at the same time, the process of the carve-up of non-agricultural land, including land for shelterbelt plantings, were not included. now there were practical cases that could be in the course of the transformation of collective ownership in the legislative sphere of non-agricultural land, and especial land for belt plantings. consequently, the determination of their legal status is still the current organizational and legal issue, on which depends the rational use of land under the shelterbelt plantings. 4. rationale for further use shelterbelt plantings based on the principles of social and economic policy in the short term, within the framework of public administration of decentralization measures, including land, urgent action must be considered in order to achieve optimal indicators in agricultural production, preservation and improvement of protective plantations, inherited by the present generation as an inheritance. this problem requires a complex solution, which is possible through the use of target program method, ensuring the introduction of advanced technologies, and through a systematic approach to the ecological and economic feasibility of the system shelterbelts, harmonizing their output and requirements for the implementation of agroforestry protection adjacent land uses from negative degradation processes. y. v. onika gives the most actual issue of the legal status of land on which the forest plants of agroforestry are located. the scientist said that today the status of belts and their owner are not identified; there is the problem of the actual provision of agriculture land in permanent use of state and municipal enterprises (onika, 2012). m. popkov analysed several options regarding the maintenance of land for windbreaks, belts and agriculture care of: – the state is interested in the proper accounting, security, maintenance and increasing the area of belts; – owners and tenants of agricultural land usually do not have land for belts consisting of tenure and don’t have to bear the costs of their maintenance; – state forest departments, enterprises are not interested to take the land under the balance of belts in permanent use, because creation and care for them unprofitable and require significant funding; – in terms of lack of funds rural and regional councils do not want to spend local budgets for the maintenance of belts and do not do it, referring to the fact that the windbreak is located outside of the localities and can not be attributed to municipal property (popkov, 2011). taking into account all the views of each subject which uses the belts as well as their positive impact, it is important to consider while developing the transmission mechanism of land in rental and encourage land users in the creation of new belts and maintenance of existing ones. it should also be underscored that the restoration of agronomy structure, which could lead the proper care of the land for belts, is not provided in law. the absence of the owner, which could protect and control the state of these plantations, due to extensive logging, irrational use, placing of natural landfill, could create a national environmental problem in a very short term. large agricultural companies, of course, can ensure the protection of land for belts but all the major agricultural producers work on leased land and the absence of safeguards to renew the lease or purchase of land they do not hurry to make large long-term investments in forestry. moreover, no certainty of further strategy for land reform along with plans to limit the legal arable land in one manufacturer does not allow for strategic planning of land use. furthermore, most of the owners and users of arable land belong to small land users who can not afford create plantations shelter individually, take care of them. they could plant protective plantings on their small plots, but we can hardly expect that such landings will be functional in agroforestry systems. in addition, the legislation ukraine, unlike the eu, does not provide economic incentives for private landowners who provide shelter forest plantations on their lands. if the situation does not change, we do not have to expect that the resources of the landowners who own much of the arable land will be used for forestry. thus, the main problem in using land for belts is that they actually exist as an independent property and at the same time separated from agricultural land, which they must defend, providing their main function of agroforestry. as a result, there was a gap of economic relations: agroforestry rents which is generated in agricultural land use does not support these plantations, due to the positive impact of land for planting shelterbelts, and, conversely, land under plantations shelter left by themselves, form a negative rent if it is viewed only as a woody resources (industrial wood, firewood). 5. recommendations for the efficient use of forest plantations. in our opinion, the solution to the continuing effectiveness of afforestation, restoration of their network in order to improve their protective function for productive lands, it is necessary to transfer them into the ownership of local communities, that is in the municipal property. we offer to solve problems related to the transfer of land from the state and the collective to the municipal property of local communities in rural village councils, through: – determination by transmitting the status of belts through the transferring it in communal ownership of baltic journal of economic studies 17 vol. 2, no. 2, 2016 village councils for appropriate accounting, security, maintenance and increase the area of shelterbelts; – the establishment of the owner to the territories occupied forest belt plantations in order to determine measures for their rational use and protection; – the use of an effective system of qualitative and quantitative accounting and valuation of land for belts for the organization of rational use and protection; – carrying out a complete inventory of land occupied by windbreaks in the region; – demarcation of territories occupied by belts and determination their sizes and areas; – implementation of mapping the territories occupied by belts and village councils; – a survey of the state of shelterbelts, the adjustment of the materials of previous surveys; – prevention of degrading processes of soil, in particular on agricultural land, through the creation of protective forests as an effective means and inherent mechanism of protection and optimization of agricultural ecosystems. despite the imperfection of the legal framework aimed on regulating the future use of the land occupied by shelterbelts, we consider that it is necessary to take on a regional level «the program of transmission the forest belt from the state and municipal property to the collective property of village territories councils». the main aim of which should be: – ensure the efficient use of land resources, creating optimal conditions for a significant increasing in the production potential of land, the growth of its economic value; – maximize the ecological and economic effects of belt plantings as an active regulator of ecological and biological balance; – creating a unique farmland forest agricultural landscape, which will expand the species composition of flora and fauna, and is a factor in the preservation and enrichment of natural soil components, performs sanitaryhygienic, esthetical, recreational, and other functions. – the formation of agricultural landscapes management frameworks using agroforestry techniques and the creation of an optimized network agro systems belt plantings. we consider that the program should include the following measures in the transferring belts to the property: – the development of land use documentation and feasibility studies for transferring of land from the state and the collective to the municipal property; – improving the system of self-control over the use and protection of lands occupied by field protection areas; – conducting scientific justification reconstruction of the existing network of shelterbelt plantings and design of new belts in order to protect the surrounding land uses agroforestry from negative degradation processes. the result of such a program should be a transferring of belts from the state to the municipal property and increasing the efficiency of their use and protection. windbreak plantings are an integral part of a system of measures aimed at increasing the cropping intensity; it is increasing agricultural productivity while reducing its cost. 6. conclusions in our view, to ensure the effective use of land occupied by belts it is needed to determine their legal and transferring the territory to the ownership of territorial communities. the implementation of complex measures on the transferring of land occupied by belts in the municipal property will create an effective mechanism for the preservation and improvement of protective forests. references hodovanyuk a. y. (2012). forest belts for more than twenty years in need of protection. the legal aspect of the problem . collection of papers of actual problems in politics, issue 49, p. 228-327. hordienko v. p. (2010). ecological and economic efficiency of using agricultural land. abstract of phd dissertation. econ. science. “economics of natural resource management and protection environment”. sumy,. 21 p. kindyuk b. v. (2011). organizational and legal basis for implementation of « stalin’s plan of nature transformation « 1948 as for creating growing new forests in the ussr . science journal of national university of life and environmental sciences of ukraine, issue 165, part 2, p. 24-32. forest code of ukraine from 21.01.1994 . № 3852–xii the verkhovna rada of ukraine, № 17, p. 99. onika y. v., (2012) some problems of practical use and protection of agroforestry in ukraine. journal “lawyer in ukraine ”, issue № 4, p. 91-96. openko i. a., yevsiukov t.o., (2014), dales for shelter: modern state, problems, ways of solving. journal of sustainable natural resource management, № 1, p. 125–131. popkov m., (2011) afforestation in ukraine : facts and illusions, electronic source: http://proeco.visti.net/lib/ lesorazvedenie_na_ukraine.pdf. cabinet’s of ministers of ukraine resolution , (2014), “action plan about development of the concept of agroforestry in ukraine” № 582 of 18 june 2014, electronic source: http://www.kmu.gov.ua/control/uk/publish/ article?art_id=247411603&cat_id=244274160. yuhnovskiy v. yu., (2009), solutions to problems of belts afforestation in ukraine, scientific works of forestry academy of sciences of ukraine, issue 7, p. 62–65. baltic journal of economic studies 18 vol. 2, no. 2, 2016 валентина боклаг государственные меры по совершенствованию использования и охраны земель, занятых полезащитными лесными насаждениями аннотация. в статье рассмотрена проблема по содержанию полезащитных лесонасаждений, которая углубляется в связи с общим ухудшением состояния существующих лесополос; предложен комплекс мероприятий по передаче земель занятых полезащитными лесонасаждениями в коммунальную собственность сельских, поселковых советов. методика. исследование основано на анализе современного законодательства, которое регулирует использование территорий занятых защитными лесонасаждениями. использовались статистические данные, а также труды ученных, которые исследовали современное состояние, рациональное использование, а также вопросы охраны земель под лесонасаждениями. результаты исследования показали, что в данный момент отсутствует четкая (правильная) информация, которая соответствует действительности по использованию лесонасаждений, их количественной и качественной характеристики. возникла необходимость реконструкции существующих лесонасаждений и создание новых с целью повышения их защитной функции для продуктивных земель. практическое значение. полученные результаты научно обосновывают усовершенствование законодательной базы по регулированию использования лесозащитных насаждений, а также необходимость передачи полезащитных лесонасаждений из государственной в коммунальную собственность. значение/оригинальность. полученные результаты дают обоснование принятия «программы по передаче полезащитных лесных насаждений из государственной в коммунальную собственность сельских и городских советов». baltic journal of economic studies 209 vol. 6, no. 5, 2020 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: polishchuk@kneu.edu.ua orcid: https://orcid.org/0000-0002-6133-910x researcherid: j-5444-2018 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: alla.ivashchenko@kneu.edu.ua orcid: https://orcid.org/0000-0002-4599-7137 3 kyiv national economic university named after vadym hetman, ukraine. e-mail: anna.kornyliuk@kneu.edu.ua orcid: https://orcid.org/0000-0001-8713-0681 doi: https://doi.org/10.30525/2256-0742/2020-6-5-209-215 regional smart specialization: microbusiness impact yevheniia polishchuk1, alla ivashchenko2, anna kornyliuk3 abstract. smart specialization is a basic approach to the development of regional innovation policy. it involves identifying priority sectors of the local economy with the involvement of key stakeholders. currently, statistics on the development of regions are presented in terms of large business, small and medium. in this context, the generally accepted methodology from the joint research center of the european commission has limited application. because it does not take into account the performance of microbusiness (individual entrepreneurs). for countries with economies in transition, this is critical, as they reach 80% of the business structure. therefore, considering their voice is also necessary. our approach involves a combination of quantitative (assessment of innovation and economic potential of the region) and qualitative (survey of microbusiness representatives) methods to identify priority areas of smart specialization. approbation of the offered method was carried out on the example of the mykolaiv region which is in the south of ukraine. the results of the study have shown that the innovation of microenterprises is at a low level. at the same time, they demonstrate a high level of desire to be involved in the process of smart specialization and innovation of production. key words: innovations, regional development, smart specialization, smes, microbusiness. jel classification: r11, о32, о38 1. introduction in developed countries, a smart specialization is an important tool to overcome regional development imbalances and improve their economic and social situation. the concept of smart specialization provides a set of strategic programs based on the identification of the most promising and innovative industries for each region. that is why when selecting particular core sectors for the implementation of smart specialization, it is critical to take into account the existing and potential level of innovation activities of the business in the region. microbusiness enterprises play a key role in the development of regional smart specialization, as most of them are locally or socially rooted businesses and act as drivers of innovative transformations in the region. at the same time, they perform not only an economic but also an important social function – the creation of jobs for the local community. at the same time, such individual entrepreneurs due to lack of managerial skills and low levels of financial strength experience are under the high level of bankruptcy risk in case of economic crisis, which in turn negatively affects the effectiveness of smart specialization implementation in the region. a key feature of smart specialization is the ability of the regional business community to innovate. unlike the use of aggregated statistical information, the use of survey method allows to obtain detailed information in the context of each microenterprise, which allows to identif y and evaluate the main aspects of innovation activity of such companies in a much detailed way. the article is structured as follows. literature review section analyses papers on smart specialization implementation and the role of main stakeholder in this process. next section provides the methodology of the presented research and describes the main features of the survey. the last section provides the conclusions of the research. baltic journal of economic studies 210 vol. 6, no. 5, 2020 2. literature review a considerable amount of literature has been published on smart specialization. a key aspect of smart specialization is the collaboration between four main stakeholders: business, academic sector, ngos and public authorities. the mutual performance is deeply studied in different papers. there are a lot of papers where a certain country 's process of smart specialization is described. for instance, almeida, afonso and silva (2020) put portugal case in the focus of their research; andryeyeva and tiutiunnyk (2020) assess the innovation and investment potential in ukrainian regions; gedminaitė-raudonė, vidickienė & vilkė (2019) emphasize the unused potential of smart specialization stakeholders in the case of lithuania; some operational issues of smart specialization in finland are shown by kaivo-oja, vähäsantanen, karppinen, & haukioja, t. (2017); the input and output approach in smart specialization analysis is applied on the example of the western balkans countries (2020); mueller-using, urban, & wedemeier (2020) consider smart specialization as an opportunity for better internalization of smes. one more interesting country aspect is examined by martín, orden-cruz, & zergane (2020), where they research islamic finance and halal tourism as a bridge for smart specialization. most studies on smart specialization are conducted within general analysis of regional innovation policies and strategies in the eu countries and their regions (benner, 2020; gebhardt& stanovnik, 2016; lepore & spigarelli, 2020; gifford & mckelvey, 2019). general approach of the eu eastern cooperation is described in the paper of prause (2014). several investigations of smart specialization have shown significant increases in stakeholders’ specifics in this process. it can be explained by the entrepreneurial discovery process which has started recently in the eu countries where stakeholders play a crucial role. for example, farinha et al. (2020) explain how different groups of stakeholders assess the impact of smart specialization on their regional development. jēkabsone (2019) investigates the participation of different actors in policy making in the eu. there are studies about certain groups of stakeholders participation in the smart specialization process. for instance, roman, varga, cvijanovic & reid (2020) regard the role of ngos through the quadruple helix models in the smart specialization process. zubareva, kuramshina, & zavedeev (2020) reveal how smes modernize the regional economies through smart specialization approaches. marinelli & elenaperez (2017) describe the participation of catalonian universities in the entrepreneurial discovery process. another major study relates networks of smart specialization stakeholders with regional productivity (cortinovis & oort, 2018). overall, these studies show the versatility of such phenomena as smart specialization and the role of stakeholders in this process. nevertheless, worth mentioning that such stakeholders as individual entrepreneurs are missed in all regarded studies. for a country such as ukraine, where more than 80% of businesses are individual entrepreneurs, it can cost wrong estimates of smart specialization priorities. the statistics which are used for economic and innovation potential usually represents smes’ performance, but not individual entrepreneurs because there is no appropriate data for smart specialization priority assessment. taking into account such a huge part of individual entrepreneurs and their possible role in this process, there is a need to hear their voice and measure their impact on regional innovation ecosystem development. therefore, the aim of the article is to evaluate the impact of individual entrepreneurs on regional innovation ecosystem development. 3. methods the study investigates the factors that affect the level and efficiency of microbusiness innovation activity on regional level. the survey used web mode through google forms and was conducted among regional microbusiness representatives during july-august 2020. in total 380 individual entrepreneurs participated in the research. the distribution of respondents was as follows: 32% represented the manufacturing sector and 68% of respondents were engaged in various service sectors. the questionnaire was designed by authors in consultation with the researchers from the joint research сentre of european commission and based on close-ended questions of various types: single and multiple-choice, matrix, dropdown. the survey design covers both quantitative data (e.g. number of employees, percentage of turnover that was invested in innovation activities) and qualitative data (e.g. types of introduced innovations, plans for further investments in innovations). data processing was conducted using exploratory analysis techniques. 4. features of microbusiness innovation activity within smart specialization (case of mykolaiv region) the survey of “individual entrepreneurship in the development of innovation potential of mykolaiv region” was conducted in order to identify the main features baltic journal of economic studies 211 vol. 6, no. 5, 2020 of performing innovation activity by microbusiness regarding assessment of regional potential within smart specialization. more than 380 ukrainian individual entrepreneurs were interviewed to reveal problems concerning features of innovation implementation, ways of its funding, barriers and drivers for such activity as well as its possible impact on business kpis. along with this the possible impact of covid-19 pandemic was estimated by interviewed individual entrepreneurs. as the result of the survey some problems related to innovation activity of microbusiness were identified. the distribution of interviewed business representatives was presented by such spheres as light manufacturing/food industry – 16.6 %; trade – 14.5 %; financial consulting/r&d services – 12.5 %; heavy industry – 10. %; services (including educational, law, entertainment, beauty etc.) – 10.4 %; transportation / logistics – 6.2 %; renewable energy / energy efficiency – 5.2 %; construction – 5.2 %; transport repair – 4, 16 %; it – 4.1 %; medical sphere – 3.1 %, tourism – 2 %; other – 1.54 %. more than 45 % of respondents have had positive impact during last 3 years from business activity, namely becoming easier and more attractive for customers to use one of products or services (see figure 1). considering the fact that multiplied choice was used by a lot of surveyed entrepreneurs, equal number of respondents exemplified as 37.4 % improved characteristics of at least one of their products or services as well as improved at least one of their products by changing components and raw materials. about 27.5 % business representatives improved the use of at least one of their products or services. respondents also indicated that 56 % of them did not conduct any research projects, but 44 % did some research, among which some entrepreneurs implemented from 1 to more than 3 research projects (figure 2). according to interview responses in each group a great share of entrepreneurs did not implement any research projects over the last 3 years, which means the low level of microbusiness innovativeness in ukraine. however, respondents noted that 1 research project is the most numerical example of existent innovative activity of interviewed respondents (28 % in avg.) in each group exemplified as completed, rejected or failed and projects in progress. a lot of respondents pointed out that for the last 3 years they implemented 2 projects, in particular: 11.7 % for completed projects, about 12 % for rejected or failed projects and 16.6 % for projects in progress from all received interview responses. more than 3 research projects are typical for completed projects and for projects in progress, which share amounted 10.6 % and 9.4 % respectively. about 33 % of interviewed microbusiness representatives do not consider their activity as innovative one, which means that they have not been implementing innovation during the last 3 years. at the same time 67 % from them conduct innovation activity which could benefit to regional innovation potential which has the great importance in process of industry selection in the context of smart specialization. almost 42 % of them attracted outsourcing services in order to conduct innovation processes. at least almost 41 % of respondents cooperated with other firms and organizations to carry out joint research activity, only 11 % of all interviewed businessman obtained investment sources from international funds and about 21 % of them cooperated with universities over the past 3 years. from the authors’ perspective, all these figures confirm the fact, that the level of cooperation and 27,5% 37,4% 37,4% 46,2% have you improved the use of one of your products or services? have you improved your products by changing components and raw materials? improved the characteristics of one of your products or services? has it become easier and more attractive for customers to use one of your products or services? 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% figure 1. entrepreneurial activity changes during the last 3 years baltic journal of economic studies 212 vol. 6, no. 5, 2020 collaboration between business, academia, other partners and companies is too low and the ability of microbusiness to obtain finance from international funds is very limited. in accordance with interview responses, share of total turnover revenues for innovations were distributed in such way as shown on figure 3 as well as possible impact of innovations on entrepreneurial activity (see figure 4). conducted survey defined, that 67 % of all respondents distributed about 1-10 % of gross revenues to innovations, at the same time 14.3 % of them – 11-20 % and 18.7 % – more than 20 %. so, the main share of interviewed entrepreneurs, who perform innovation activity, do not allocate a lot of funds for innovations. the assessment of innovation impact on business activity shows, that entrepreneurs indicates that innovations effect: 1) attracting new customers (29.7 %); 2) income growth (20.9 %); 3) entering new markets (19.8 %); 4) cost optimization (12.1); 5) wage growth (2.2 %). 15.4 % of business representatives pointed out other reasons how innovations influence their business. 79.1 % of interviewed entrepreneurs have stated that the main sources of their innovation activity are their own sources; 15.4 % of them successfully apply for grants; 11 % get funding from bank loans and 17.6 % consider other sources as the main funding for innovation performance (see figure 5). among the main barriers for innovation development or/and implementation there were 0 10 20 30 40 50 60 completed rejected or failed in progress 1 project 2 projects 3 or more did not implement projects figure 2. number of research projects implemented in the last three years, units 67,0% 14,3% 18,7% 1-10 % 11-20 % more than 20 % 29,7% 19,8% 2,2% 12,1% 20,9% 15,4% attracting new customers entering new markets wage growth cost optimization income growth other figure 3. share of total revenues distributed to innovation projects figure 4. impact of innovation implementation on entrepreneurial activity baltic journal of economic studies 213 vol. 6, no. 5, 2020 considered lack of funding (61.5 %); lack of knowledge and skills (27.5 %); no need of innovation activity (13.2 %) and other reasons (20.9 %). the results obtained from survey also define that only about 19 % of respondents applied for patents in the last three years, which also proves the low innovation activity of microbusiness in ukraine. the low level of microbusiness innovativeness in ukraine was aggravated by covid-19 pandemic crisis. the expectations of microbusiness representatives are shown on figure 7. taking into account survey responses, a lot of microbusiness representatives (34.1 %) expect that covid-19 pandemic will lead to innovation expenses growth, but 27.5 % of them suggest no changes for business activity. at the same time 17.6 % of interviewed respondents indicate that innovation expenses will be reduced and 12.1 % will completely abandon innovation. 14.3 % of respondents indicated other consequences for their business due to covid-19 crisis. so, in the context of regional smart specialization it is essential to promote innovations on regional level, especially in microbusiness which has ability to develop and implement innovation projects and which is not taken into account for official statistics. so, encouragement of cooperation and collaboration with other companies, universities, r&d institutions, outsourcing companies on regional level could enforce the innovativeness level of microbusiness which might become drivers of regional economic development. 5. conclusions smart specialization is impossible without the participation of key stakeholders (business, regional authorities, ngos, academia). they must jointly identif y the priority areas of development of the region. these directions concern the definition of the areas on which the regional innovation policy will be focused. regional authorities should provide 17,6% 11,0% 15,4% 79,1% 0% 20% 40% 60% 80% 100% other bank loan grants company's own resources 20,9% 13,2% 27,5% 61,5% 0% 20% 40% 60% 80% other there was no such need lack of knowledge and skills lack of funding figure 5. sources of innovation funding figure 6. obstacles for developing (implementing) innovations 14,3% 12,1% 17,6% 27,5% 34,1% 0% 5% 10% 15% 20% 25% 30% 35% 40% other the company will completely abandon innovation the expenses on innovation will be reduced the company will work without changes the expenses on innovation will increase figure 7. expectations regarding the impact of covid-19 on the innovative development baltic journal of economic studies 214 vol. 6, no. 5, 2020 references: almeida, a., afonso, ó, & silva, m. 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(2017). smart specialization strategy and its operationalization in the regional policy: case finland. business, management and education, vol. 15(1), pp. 28–41. doi: 10.3846/bme.2017.362 institutional support for smart specialization; nongovernmental organizations should support among civil society, the academic sector should provide research support and support in training necessary for the development of innovative industries; business should support this process financially. creating institutional, financial and organizational preconditions for the implementation of regional innovation policy will help to bring the region to a new level of competitiveness not only at the national level but also globally. correctness in setting priorities is extremely important. the key requirement for the regional strategic planning in the context of smart specialization approach is the as-is analysis and decent design of the business environment and innovation climate monitoring systems in the region in terms of key areas of innovation, cooperation with major stakeholders and sources of innovation projects funding. the proposed in the study approach allows to accurately assess the views of microbusiness on current and forecasted innovative development activities. using newly-obtained data enables to apply an evidence-based approach to smart specialization implementation and adjust it according to the changes in the regional business climate microbusiness views. the survey results show that the level of microbusiness innovativeness in mykolaiv region is extremely low due to the fact that a great share of individual entrepreneurs did not implement innovations at all or had implemented only one innovation project during the last 3 years. taking into account the fact that innovations are mostly financed by own funds of microbusiness representatives and lack of funding is considered as the main constraint for innovation implementation, regional policy should be directed to enhancing innovation potential of individual entrepreneurs as well as their cooperation with other stakeholders. in addition, it should be noted that individual entrepreneurs should be involved in public discussions with other potential stakeholders in the process of priority industry selection within smart specialization because they could be the main drivers of regional innovation development. such surveys should be conducted on a regular basis and can be used as the additional tool of qualitative analysis in order to provide more accurate expertise of regional development specifics identification. baltic journal of economic studies 215 vol. 6, no. 5, 2020 lepore, d., & spigarelli, f. 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(2020). internationalization of smes in the baltic sea region: barriers of cross‐national collaboration considering regional innovation strategies for smart specialization. growth and change. doi: 10.1111/grow.12439 polishchuk, y., kornyliuk, a., & ivashchenko, a. (2020). investor relations tools for business in smart specialization strategy. baltic journal of economic studies, vol. 6, no. 4, pp. 133–140. doi: 10.30525/22560742/2020-6-4-133-140 polishchuk, y., kornyliuk, a., & britchenko, i. (2019). university as a core of e-learning ecosystem. 14th conference on e-learning – unlocking the gate to education around the globe, jun 20–21, pp. 309–319. poponi, s., arcese, g., mosconi, e. m., & trifiletti, m. a. (2020). entrepreneurial drivers for the development of the circular business model: the role of academic spin-off. sustainability, vol. 12(1), p. 423. doi: 10.3390/su12010423 prause, g. (2014). smart specialization and eu eastern innovation cooperation: a conceptual approach. baltic journal of european studies, vol. 4(1), pp. 3–19. doi: 10.2478/bjes-2014-0001 roman, m., varga, h., cvijanovic, v., & reid, a. (2020). quadruple helix models for sustainable regional innovation: engaging and facilitating civil society participation. economies, vol. 8(2), p. 48. doi: 10.3390/ economies8020048 zubareva, l. v., kuramshina, a. v., & zavedeev, e. v. (2020). small and medium-sized businesses in towns of commodity regions as source of diversification and modernization of their economy. revista amazonia investiga, vol. 9(31), pp. 21–35. doi: 10.34069/ai/2020.31.07.2 baltic journal of economic studies 103 vol. 6, no. 4, 2020 corresponding author: 1 kherson state university, ukraine. e-mail: makar0684@gmail.com orcid: http://orcid.org/0000-0001-9929-8967 researcherid: https://publons.com/researcher/1878529/serhii-makarenko/ 2 kherson national technical university, ukraine. e-mail: nat-o@ukr.net orcid: http://orcid.org/0000-0002-1019-5708 3 kherson state university, ukraine. e-mail: yanochka.oleksenko@gmail.com orcid: http://orcid.org/0000-0003-4954-0545 doi: https://doi.org/10.30525/2256-0742/2020-6-4-103-109 improvement of the system of management of professional development of personnel: the case of ukraine serhii makarenko1, nataliia oliinyk2, yana oleksenko3 abstract. theoretical and methodical aspects of rating performance appraisal of sci-entific and pedagogical workers of educational institutions are object of research. the purpose of the article is to study the factors of influence and provide recommendations for improving the system of management of professional development of personnel of educational institutions. the results are obtained through the use of methods: expert method is used to identify the impact of qualitative and quantitative indicators on the efficiency of use of labor resources; economic and mathematical method is performed to determine the integral indicator of the assessment of the efficiency of the use of labor resources; abstract-logical method is executed for theoretical generalization and formulation of conclusions. it has been revealed that the lack of a sound methodological approach to employee rating and appropriate means of motivation for professional development can lead to the loss of existing intellectual potential and competitive positions of educational institutions in the market of educational services in general. it has been found that in order to introduce an effective model of personnel management in educational institutions, it is very important to provide the main criteria for evaluating its effectiveness at the stage of formation. it was found that special attention should be paid to development of substantiated scientific and methodological approaches to the assessment of professional qualifications level of employees in the testing group and in the dynamics, determining the limit load and development model of a motivation model for professional development. when assessing the level of professional qualification of teaching staff, it is proposed to take into account not only their own property to scientific and pedagogical industry, but also the results of their pupils’ work. in determining the integral indicator of the assessment of the efficiency of the use of labor resources, the method of taxonomic analysis was used with additional consideration of the specific weight of influence of each factor on an integral indicator. it is substantiated that the definition of the boundary load will not only establish an effective bonus system, but also increase the level of job satisfaction among subordinates. the mechanism of determining the coefficient of competence of experts involved in the evaluation of staff, taking into account their work experience, the scale of management activity, and the level of education, deserves further study. key words: management, educational institution, labor resources, professional development, integral indicator. jel classification: m12, m54 1. introduction today’s conditions of constant growth of the level of competition between educational institutions are the key part of success for the permanent increase of professional competences of pedagogical and scientific and pedagogical employees as a basis for providing qualitative educational services. research and solutions of current problems, which constraint the staff devel-opment, are one of the most urgent tasks not only for the management of educational institutions, but also for society as a whole. modern economic and social situation in ukraine has not only dramatically changed the ideas and values, but also has given rise to an uncertain, very often groundlessness, baltic journal of economic studies 104 vol. 6, no. 4, 2020 attitude to many values and norms, including the needs for a constant personal development. the most important component of the professional development of staff became the superficial material aspect, according to which the employee is engaged, the improvement of professional skills only in case of urgent need for retention in a position of employment or as component to increase the amount of pay work in the short term perspective. and that is not taking into account the fact that the most important part of professional development is the intellectual personal development and additional professional competencies. only because of the necessary qualification level of pedagogical and scientific and pedagogical worker, he or she will be able to realize himself or herself on labor market as a successful specialist and get a decent salary in budget and private spheres of economic activity in the future. the results of the research conducted by redko s., panchenko a. (2015) show that a significant amount of intangible motivation that leaders of educational institutions have used in the past (awarding certificates, audits, etc.), do not bring the desired changes in significant numbers of teachers today. and if they lead to change, then these changes have a short duration. therefore, the head of the school has to constantly look for new opportunities to intensify the process of improvement of teaching staff, first of all, at the expense of the internal resources of your institution, and build a dynamic and flexible system of motivation of teaching staff on the basis of research peculiarities of their motivational sphere. according to mokin b. i., marymonchyk yu. v. (2004), an effective system of stimulating teaching staff provide the encouragement preparation of highly quali-fied scientific and pedagogical staff (motivation of relations) and achievement of scientific works of various way (process orientation) in the form of a salary supplement. obmok o. h. (2014) proposes to use the rating of results of the work of teaching staff as an element of their motivation to high-performance activities that enhance the collective interest of scientific and pedagogical staff to improve the final results of institutions activities of higher education, obtaining higher positions in intercollegiate ratings. despite the considerable experience, there are questions that need to be addressed to additional scientific analysis, especially with regard to improve the man-agement system for professional development of personality. every head of an educational institution, who is striving to ensure effective functioning in the short and long term prospect, must constantly explain the need for permanent improvement, but some additional measures aimed on encouraging the employees to update their knowledge and improve it professional competence are also required. this is especially true in today’s context of financial and other material resources, insufficient financing of expenses for the maintenance of pedagogical and scientific pedagogical staff. the above is determined by the relevance of the research topic, its tasks and content. the purpose of the article is to study the factors of influence and provide recommendations for improving the system of management of professional development of personnel of educational institutions. 2. research methodology the methodological basis of the research was made by the scientific works of domestic, foreign scientists and leading experts, statistical and analytical materials of public authorities. as a method of data collection for the research the questionnaire was chosen. the survey was conducted among top executives of educational institutions (kherson state university, school of liberal arts), local state executive bodies (department of economic and regional development of kherson regional state administration), kherson regional intersectoral council of trade unions. the results are obtained through the use of methods: expert method is used to identif y the impact of qualitative and quantitative indicators on the efficiency of use of labor resources; economic and mathematical method is performed to determine the integral indicator of the assessment of the efficiency of the use of labor resources; abstract-logical method is executed for theoretical generalization and formulation of conclusions. the following formula was used to transfrom a particular set of indicators with different units of measurement into a single scale of evaluation (tyukhtenko, makarenko, 2016): k j• = xmax xij xmax xmin xij xmin xmax xmini 1 n i 1 n − − + − −= ∑ = ∑ , (1) where кj – the coefficient for each of the indicators characterizing a particular component of activity; xij – the value of the i-th indicator of the j-th group xmax – the maximum value of the i-th indicator in the middle of the testing group; xmin – the minimum value of the i-th indicator in the middle of the examined group. the first part of the formula is used to evaluate indicators, the growth of which has a positive impact, the second part is to evaluate indicators, the increase of which has a negative effect (e.g., number of conflicts, number of absences, etc.). the best is the classroom, the arithmetic mean of the sum of the ratings of which is the lowest. to determine the integral indicator of labor resources competitiveness, the method of taxonomic analysis was used, with additional consideration of the specific impact of each factor on the integral indicator of labor resources competitiveness. this method is to perform baltic journal of economic studies 105 vol. 6, no. 4, 2020 the calculation of the integral evaluation in several stages (makarenko, oliinyk, danko, kaplina, 2020): stage 1 – formation of the system of information space of evaluation – matrix of initial data x=(xij). stage 2 – formation of a matrix of standardized values of attributes by changing the matrix x to the matrix z. the elements of the matrix z are calculated by the formula: z ij x ij x av.j j = − δ , (2) where xav.j – the average value of the j-th indicator; δj – rms deviation of j-th index. stage 3 – formation of “point-standard” with coordinates z01, z02, ..., z0n. stage 4 – euclidean distance (сi0) calculation by the formula: ci0 pj* (zij z0j) 2 j 1 n = − = ∑ , (3) where рj – the share of the impact of the j-th indicator of labor resources com-petitiveness index. the distances obtained are the initial values used in the calculation of the inte-gral index. stage 5 – calculation of values of integral index (di) using the formulas: d i 1 c i0 c 0 = − , (4) where c 0 c av.0 2*s 0 = + , (5) c av.0 1 m* ci0i 1 m = = ∑ , (6) so 1 m (ci0 c av.0 )2 i 1 m = − = ∑ , (7) in determining the specific impact of the j-th indicator on the integral indicator of the competitiveness of labor resources, a survey was conducted among certain in-stitutions of higher education, local government bodies and trade union organizations. given that each of the experts involved in the survey has a different level of qualifications, it was suggested to use the methodological approaches developed by the authors (tyukhtenko, makarenko, 2016; makarenko, oliinyk, kazakova, 2018) with additional consideration of the level of fluctuations of the corresponding qualification competences in the middle of the testing group. 3. features comprehensive evaluation of the results of the testing group professional activity of pedagogical and scientific and pedagogical staff has its own specifics that are directly displayed in the management system of professional development of the personality. one of the basic conditions of increasing the competitiveness of educational institutions is improving the quality of education provided the educational services by ensuring the continuous updating of staff knowledge in an unstable business environment. improvement of the management system of professional development of pedagogical and scientific and pedagogical staff should take into account the modern aspects of the functioning of educational institutions and realize the potential of staff in the relevant market of segment services. special attention should be paid to the development of substantiated scientific and methodological approaches to the assessment of professional qualifications level of staff in the testing group and in the dynamics, determining the capacity limit and development a motivation model for professional development. when assessing the level of professional qualification of teaching staff, it is necessary to consider not only their own property in the scientific and pedagogical branch, but the results of their ward pupils’ work. this is especially true when as-sessing the effectiveness of the teaching staff who is also the form master at the part-time. the methodological approach introduced by the school of liberal arts (kherson, ukraine) is noteworthy; it is determined by the total efficiency of each educational class within each quarter. this approach assumes summation of points results by 12 groups of indicators: image of the class (а1); lack of the school uniforms (а2); sanitary condition of the class (a3); delay (a4); faster, higher, stronger (a5); educational achievements, competitions (a6); participation in thematic weeks (a7); participation in the competitions “spike”, “kangaroo”, “olympus”, “sunflower” / selfgovernment (a8); talented and creative (a9); library: events, rating, reading (a10); theater festival / total number of points of preliminary checks (a11); the success of the quarter (a12) (table 1). the best is the class with the highest score in the testing group. at the same time, the methodological approach does not fully allow to examine the current situation in the class and identify possible changes in the rhythm of preparation of pupils compared to the neighboring classes of a particular group. there are also questions about the objectivity of general evaluation results of the testing classes. this is due to the fact that two groups of indicators a7 and a12 determine the future leading class. at the same time, there are questions arising on the expediency of using the groups of indicators a2, a3, a4, a5, a6, a11, because their impact is almost unremarkable, or has a single character. it should be noticed that the most important task of any technique of evaluation is not only an incentive for the testing group (pupils, students, hearer, pedagogical and scientific and pedagogical staff ) to maximize the results of activity, but also to ensure the maximization to the total of metrics, but not exclusively in two or three groups. baltic journal of economic studies 106 vol. 6, no. 4, 2020 using the formula 1 for the table 2, the complex evaluation of the results of each class was carried out, considering the possible level of fluctuations in the middle of the testing group. the results show that considering the level of oscillation in the middle of the testing groups, there were insignificant changes in the rating. however, for full use of the specified methodological approach in evaluation complex of the performance of each class should be further determined the proportion of the impact of each of the proposed groups of indicators on the overall performance indicator. to evaluate the level of pedagogical professional qualifications of staff in terms of evaluating the results of their pupils’ work it is necessary to determine, how the complex coefficient of the testing group during the course of recent reporting periods has changes. table 3 shows the results of a comprehensive appraisal of grades 6-a (7-a) of the school of liberal arts (kherson, ukraine), based on three reporting periods. the calculations show that maximizing the results of group work of pupils of the study class is observed in the fourth quarter of 2018-2019. deterioration of the complex coefficient based on the results of the ii quarter of 2019-2020 connected to mainly with the hormonal changes that occur at pupils of 12-13 years, and, as a result, their low motivation for self-improvement. also worsening the level of the complex coefficient was the result of personnel changes that occurred in educational and pupil’s educational activities of the educational table 1 the evaluation results of each testing classes (iv quarter of 2018-2019) class groups of indicators amount place а1 а2 а3 а4 а5 а6 а7 а8 а9 а10 а11 а12 5а 40 0 -9 0 0 40 17 7 40 5 0 61 201 4 5b 40 0 -6 0 3 0 48 20 3 48 0 77 233 2 6а 40 -4 -4 0 4 0 59 14 33 23 0 80 245 1 6b 40 -12 -4 0 5 0 0 25 50 5 0 50 159 6 7а 40 0 -6 0 5 30 31 23 15 17 0 48 203 3 7b 40 -6 -13 0 2 0 8 22 9 4 0 35 101 7 8а 40 -12 -10 0 0 0 5 19 0 0 0 26 68 8 8b 40 -2 -14 0 0 0 22 18 40 17 0 42 163 5 source: authors’ own work table 2 comprehensive evaluation of the results of each class, give the possible level of oscillation within the analysis group class metrics group coefficients amount place а1 а2 а3 а4 а5 а6 а7 а8 а9 а10 а11 а12 5а 0 0 0.5 0 1 0 0.712 1 0.2 0.896 0 0.352 4.66 5 5b 0 0 0.2 0 0.4 1 0.186 0.278 0.94 0 0 0.056 3.06 3 6а 0 0.333 0 0 0.2 1 0 0.611 0.34 0.521 0 0 3.005 2 6b 0 1 0 0 0 1 1 0 0 0.896 0 0.556 4.451 4 7а 0 0 0.2 0 0 0.25 0.475 0.111 0.7 0.646 0 0.593 2.974 1 7b 0 0.5 0.9 0 0.6 1 0.864 0.167 0.82 0.917 0 0.833 6.601 7 8а 0 1 0.6 0 1 1 0.915 0.333 1 1 0 1 7.849 8 8b 0 0.167 1 0 1 1 0.627 0.389 0.2 0.646 0 0.704 5.732 6 source: authors’ own work table 3 comprehensive appraisal of grades 6-a (7-a) of the school of liberal arts (kherson, ukraine) reporting periods metrics group coefficients amount а1 а2 а3 а4 а5 а6 а7 а8 а9 а10 а11 а12 ii quarter of 2018-2019 (6-а) 0 0 0 1 1 1 0 0 0.097 0.083 0 0 3.18 іv quarter of 2018-2019 (6-а) 0 0.333 0 0 0.2 1 0 0.611 0.34 0.521 0 0 3.005 іі quarter of 2019-2020 (7-а) 0 0.125 0.667 0.333 1 0.938 0 0.25 0 0.842 0 0 4.155 source: authors’ own work baltic journal of economic studies 107 vol. 6, no. 4, 2020 institution. however, the testing class continues to take first place in the overall grade of 5-8 forms of school of liberal arts. therefore, to formulate more valid conclusions about it is advisable to carry out the results of the work of the form master for the results of the 2019-2020 academic year (adjusted for obliged online education in march-may 2020 in connection with covid-19). 4. assessment of the personal level of professional competence of personnel to assess the personal level of professional competence of the form master of the school of liberal arts mentioned above, formulas 2-7 and the individual integral index of competitiveness were executed using the method taxonomic analysis with additional consideration of the specific influence of each factor to the integral indicator. to identif y the key metrics, on which the realization of an objective assessment of the level of professional qualification of form master is possible, the working group was created, which included the leading experts of the industry (kherson state university, school of liberal arts, department of economic and regional development of the kherson regional state administration, kherson regional intersectoral trade unions council). considering the level of competence of the involved experts, on the basis of the questionnaire conducted, the main indicators and the level of their significance when assessing the level of professional competence of the form master of school of liberal arts were identified, namely: average number of students, persons (b1, significance – 10%); hours of classroom workload, hours / week (b2, 25%); preparation of competition winners, points (b3, 15%); publication of educational and methodical works, other sheets (b4, 10%); individual consultations during off-hours, hours / week (b5, 22%); organizational and administrative work, hours / week (b6, 18%). table 4 presents the general system of information for calculation of the inte-gral index of competitiveness of the form master of testing class of the school of liberal arts. table 5 shows the calculation of the mean value and standard deviation for the group of indicators characterizing the level of competitiveness. standardized values of indicators, intermediate values of point-standard, eu-clidean distance and integral indicator are shown in table 6. the obtained results of calculation of the integral index of the competitiveness of the form master of the school of liberal arts in table 6 show that efficiency of his ore her work during 2017-2018 and 2018-2019 academic years significantly in-creased compared to the table 6 standardized values of indicators, intermediate values of point-standard, eu-clidean distance and integral index indicators weight ratio academic years point of reference c0 s0 c0 2016-2017 2017-2018 2018-2019 в1 0.1 -1.298 0.162 1.136 1.136 в2 0.25 -1.1 1.32 -0.22 1.32 в3 0.15 -1.367 0.368 0.999 0.999 в4 0.1 1.393 -0.488 -0.906 1.393 в5 0.22 -1.225 1.225 0 1.225 в6 0.18 0 -1.225 1.225 1.225 euclidean distance 2.118 1.260 1.205 1.528 0.418 2.363 competitive capacity integral indicator 0.1 0.47 0.49 source: authors’ own work table 4 information space system for calculating the integral indicator of competitive-ness assessment indicator academic years 2016-2017 2017-2018 2018-2019 в1 15 18 20 в2 36 47 40 в3 44 55 59 в4 1.7 1.25 1.15 в5 12 18 15 в6 4 3 5 source: authors’ own work table 5 calculation of mean and standard deviation indicators academic years a δ20162017 20172018 20182019 в1 15 18 20 17.67 2.055 в2 36 47 40 41.00 4.546 в3 44 55 59 52.67 6.342 в4 1.7 1.25 1.15 1.37 0.239 в5 12 18 15 15.00 2.449 в6 4 3 5 4.00 0.816 source: authors’ own work baltic journal of economic studies 108 vol. 6, no. 4, 2020 2016-2017 academic year. notation is also confirmed by the results of an earlier study on comprehensive evaluation of the results of work of 6-a form on the results of ii and iv quarters of the 2018-2019 academic year. at the same time, there is a decrease of scientific and research activity of the subject, more than 60 hours for a week the specific form master spends on the implementation of the assigned functional responsibilities. at the same time, the management of educational institutions should consider that essential increasing of workloads during working hours and out of work hours can lead to professional burnout of pedagogical worker and decrease the level of sat-isfaction with the fulfillment of functional duties and the desire to professional im-provement. this is partially confirmed by the decrease of efficiency of the testing class for the results of the ii quarter 2019-2020 academic year by 1.15 conditional units, which may be associated with a decrease of educational workload, the duration of individual consultations in out of work-hours and increasing volume of organizational and administrative work for a form master. the developed model of stimulation to professional improvement should pro-vide that the pedagogical staff will be provided payroll the cash back up to 50% if the planned targets of scientific and pedagogical activities in the out of work-hours are achieved. this will allow to view the load level of pedagogical staff in terms of reducing the amount of additional organizational and administrative work, and devote free time to relaxation and personal needs. during the development of evaluation indicators and implementation of the appropriate model of staff incentives for professional development should also be taken into account that the permanent labor activity and the fulfillment of the set tasks will contribute to the formation of the justification of the chosen life and pedagogical activities in the personality, eliminating the negative thoughts and increasing levels of satisfaction and happiness from the chosen activity. 5. conclusions and recommendations for further research the results of the research indicate the need of improvement of the system of management of professional development of pedagogical and scientific and pedagogical workers, taking into account modern functioning aspects of educational institutions. special attention should be emphasized on the development of scientific and methodological approaches to assessment of the level of professional qualification of employees in the testing group and in dynamics, determination of limit load and development of motivation model to professional improvement. rating the level of professional qualification of teaching staff it is proposed to take into account not only their own heritage to scientific and pedagogical industry, but also the results of their ward pupil’s work. the above is particularly relevant in assessing the effectiveness of teaching staff who are concurrently form masters. given that the most important task of any evaluation methodology is not only the motivation of the testing group (pupils, students, hearer, teaching staff ) to maximize the results, but also providing the specified maximization for the whole set of indicators is proposed to carry out the complex assessment of the results of the activity of the educational forms from the considering possible level of oscillation in the amidst of the testing group. the management of educational institutions should consider that significant growth of workloads during working hours and out of work hours can lead to professional burnout of pedagogical worker and decrease the level of satisfaction with fulfillment of functional duties and desire to professional improve. this is partially confirmed by the decrease of performance activities of the testing class of school of liberal arts according to the results of the ii quarter 2019-2020 academic year at 1.15 conventional unit of measure, that may be associated with a decrease of educational load, duration of individual consultations during out of work hours and increasing organizational and administrative work with a form master. during the development of evaluation indicators and implementation of the appropriate model of staff stimulating to professional development should be taken into account that continuous labor activity and the fulfillment set of tasks will facilitate the formation in the personality of the validity of the chosen life and pedagogical activities, eliminating the negative thoughts and increasing the levels of satisfaction and happiness from chosen activity. the mechanism of determining the coefficient of competence of experts in-volved in the evaluation of staff, taking into account their work experience, the scale of management activity, and the level of education, deserves further study. this will maximize the effectiveness of the rating and coordinate the efforts and resources of employees to improve defined and relevant for the educational institutions. references: derkach, a. a., zazykyn, v. h., & markova, a. k. 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(2014). accounting of the rating assessment results of the activities of academic staff. visnyk ahrarnoi nauky prychornomoria, vol. 3, no. 80, pp. 83–90. redko, s., & panchenko, a. (2015). research of pedagogical workers’ motivation sources as factors of success of secondary school. the pedagogical process: theory and practice, vol. 3–4(48–49), pp. 29–34. tyukhtenko, n. a., & makarenko, s. m. (2016). economic and mathematic models for staff planning at enterprises of all ownership forms. actual problems of economics, vol. 1, no. 175, pp. 435–442. zachosova, n. (2019). innovative approach in the estimatology of financial institutions economic security: possibilities of use in management and regulatory activity within the means of provision of the state financial security. baltic journal of economic studies, vol. 5, no. 2, pp. 45–56. doi: 10.30525/2256-0742/2019-5-2-45-56 baltic journal of economic studies 59 vol. 5, no. 4, 2019 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: m.vilgushynskyi@ukr.net 2 yaroslav mudryi national law university, ukraine. e-mail: moskvichlida@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-59-73 the right of the public on publicly heard and open criminal proceedings in the context of preventing corruption and economic crime by judicial power mykhailo vilhushynskyi1, lidiia moskvych2 abstract. the purpose of the paper is the system analysis of legal, organizational, and procedural mechanisms of the realization of the right of the public and mass media on their participation in transparent and open criminal proceedings in the context of preventing corruption and economic crimes within the system of judicial power, as well as the development of scientifically substantiated recommendations for the improvement of the current legislation of ukraine on the judicial system taking into account the most advanced international practices. the interconnectedness of effective implementation of the principles of transparency and openness of criminal proceedings with the restoration of trust in the judicial system from the side of civil society has been substantiated. methodology. to solve the tasks set in the dissertation, the authors have used a complex of general and special scientific methods. logical and cognitive methods (analysis, synthesis, induction, and deduction) made it possible to study general conditions for the organization and procedure of the implementation of the principles of transparency and openness during the cassation appeal of decisions in criminal proceedings. the system and structural method has assisted to determine the essential and content characteristics of the principles of transparency and openness within criminal proceedings, as well as to reveal their significance and correlation while ensuring the judiciary by the cassation court. the formal and legal method made it possible to reveal the proper legal procedure for implementing the principles of transparency and openness during the criminal proceedings by the cassation court. modelling method allowed determining the ways to improve the legislation on the judiciary and criminal procedural legislation in part to more effective implementation of the principles of transparency and openness in the criminal procedure of ukraine. the comparative and legal method was used in clarifying the relationship between the levels of domestic and international legal regulation of the implementation of the principles of transparency and openness of criminal proceedings. experimental methods were used to construct grounded theoretical and applied provisions that adequately reflect the features and interrelations of the processes of implementing the principles of transparency and openness within criminal proceedings, confirmation or refutation of certain concepts, views, their examination by means of thought or subject experimentation based on practice criteria. result of solving this purpose is to form the author’s understanding that members of the public (the general public) and mass media cannot be holders of jurisdictional rights, that is, those rights that are exercised in the course of court proceedings by involved persons as a result of their criminal procedural status (parties and other participants in criminal proceedings). that is, members of the public and the general public, as well as members of mass media, who are not entitled to the right for public court proceedings but are subjects to the right to obtain information about public court proceedings, the administration of transparent and open justice. practical implications. ensuring reliable public control over the judiciary through the widespread use of mass media will effectively prevent corruption and commission of economic crimes by the judges. value/originality. amendments and alterations to the national legislation on the judiciary and the criminal procedural code have been offered, which would facilitate the more effective implementation of the right to transparent and open court proceedings by the public and mass media, ensure public control over the judiciary in the exercise of its procedural activities, and guarantee the right of every one to obtain information on the administration of justice in line with european standards. key words: publicity principle, transparency principle, corruption, economic crimes, criminal judicial system, criminal procedure. jel classification: k13, k14, d73 baltic journal of economic studies 60 vol. 5, no. 4, 2019 1. introduction forming the general idea of the role and place of the public in implementing the principles of transparency and openness in the provision of criminal justice, one must proceed from the assumption that the right to public justice, as well as the constitutional right to judicial protection, to its immediate implementation, exists as a general relationship between the state and individuals and is the constitutional and legal relationship. the content of this relation is the state’s duty to create the necessary conditions for the transparent and open court proceedings, which include: adoption of legislation, which forms the basis for the implementation of the principles of transparency and openness, including the consolidation of the right of any person to be present at an open court hearing; elaboration of courts acts, which determine the procedure of unimpeded access of any person to an open court hearing; the possibility for citizens to receive objective and reliable information about the activity of specific courts and the functioning of the judicial system in the whole; creation and improvement of the system of placing court decisions in the internet network and ensuring the access of a wide range of people to these decisions; placement of courts in buildings that meet modern requirements for the execution of justice and provide the opportunity for all those wishing to be present at an open court hearing (tatsii, hroshevyi, kaplina, shylo, 2013). according to sociological surveys, in particular, the global corruption barometer from transparency international and the gallup international association, ukrainians consider judicial power to be the most corrupted area (66 percent). similar results have been repeatedly confirmed by the studies conducted by the ukrainian centre for economic and political studies named after oleksander razumkov: ukrainians consider judicial power to be the most corrupt, and about 50 percent of those polled believe that corruption covered everything within judicial power. and according to the world justice project (rule of law index), ukraine in the field of “lack of corruption” in the judicial system constantly occupies the last place among the analysed countries. according to the court index defined by the european business association, judicial power discredited itself among the business environment, since the estimate of judicial proceedings in ukraine is negative according to all the components of the index (fluri and badrak, 2016). one of the main causes for the destruction of the judicial power, according to which ukraine is not able to recover by this time, is judicial reform unsuccessfully implemented in 2010: the adoption of the law of ukraine “on the judiciary and status of judges” negatively affected the agencies of judicial selfgovernment – they became completely dependent on political power. the political principles of the formation of the supreme council of justice and unambiguously formulated grounds for bringing to disciplinary liability have led to the fact that judges have actually lost the guarantees of independence of their activities. the mechanism of selecting judges was characterized by abuses by the authorities responsible for this procedure (fluri and badrak, 2016). therefore, the first step in reforming the judicial power was the adoption of the law of ukraine “on restoring confidence to the judicial power in ukraine” (law, 2014) on april 8, 2014, which contributed to the creation of legal preconditions for the self-purification of the judicial power with the direct participation of the public. over the past 15 years, after the so-called “small judicial reform”, probably, no other principles of the criminal procedure have undergone such a transformation in ukraine as the principles of transparency and openness of court proceedings and its full recording by technical means. moreover, the main innovations were related not so much to the normative consolidation of the content of these principles of criminal proceedings but with the emergence of new forms of their implementation. in particular, one can agree with the opinion of v. v. korol and distinguish three main stages of modern reform of the principles of transparency and publicity of court proceedings (korol, 2015). the first stage is related to the adoption of the law of ukraine “on access to court decisions” (law, 2005), according to which the state judicial administration of ukraine ensures the maintenance of the unified state register of court decisions. the creation of an official web portal “judicial power” can certainly be considered as the second stage. this portal contains information on the list of cases to be considered; on the list of appeals (cassation) complaints; regarding the stages of court cases and reports on automated distribution, etc. this electronic resource was created based on the regulation on the organization of access to public information held by the state judicial administration of ukraine developed in compliance with the law of ukraine “on access to public information” (order, 2011). the third stage is related to the activities of new nongovernmental organizations of control, in particular, public organizations, whose purpose is to facilitate the speeding up judicial reform, increase the level of transparency of the judiciary and restore the trust of our citizens to the judicial power. the regulatory framework for the activities of such organizations is the laws of ukraine: “on information” (law, 2011), “on restoring trust in the judicial power in ukraine” (law, 2014), “on ensuring the right to a fair trial” (law, 2015), “on the prevention of corruption” (law, 2014), “on the judiciary and the status of judges” as amended on june 2, 2016 (law, 2016). however, it must be admitted that the adoption of new legislation on the judiciary baltic journal of economic studies 61 vol. 5, no. 4, 2019 and the status of judges has not solved the problem of corruption in the judicial system yet. problems of the participation of public and mass media in criminal proceedings, taking into account the principles of transparency and openness, were studied in the scientific works of such national and foreign scholars as: a. d. boikov, l. i. budnikova, d. a. holovanov, yu. a. horinov, i. s. hritsenko, yu. m. hroshevyi, v. v. korol, a. a. levy, z. v. makarova, v. t. maliarenko, o. o. ovsiannikova, a. p. petryshyn, i. l. petrukhin, m. a. pohoretskyi, s. v. praskova, s. v. prylutskyi, p. i. repeshko, a. h. richter, s. v. romanov, yu. s. sida, o. v. smirnov, o. h. yanovska, and others. at the same time, the issue of public control in the courts of all instances and the implementation of the relevant provisions of the law of ukraine “on the judiciary and status of judges” (law, 2016) and the art. 27 of the criminal procedural code (cpc) of ukraine (code, 2012), has not been adequately covered in the special scientific literature yet. 2. public control over the judiciary – an instrument for combating corruption the right to a transparent and open trial in a particular criminal proceeding is transformed into the subjective right of the participants of the process, the realization of which depends on the right of representatives of the public and mass media. at the same time, the right to a public trial, being a subjective reflection of the constitutional principle of publicity of justice, has its own content and subjects of implementation. at the same time, the content of this right is closely linked to the role played by a person in a particular court proceeding – whether it is a party to the process or a representative of the public, an outside listener. therefore, the specificity of the subject structure is due to the fact that, based on the principle of the transparency and openness of court proceedings, the representatives of the public have the right to participate in the process for the purpose of exercising public control over the administration of justice (petryshyn, 2017). at the same time, the paradox is that public representatives, as the main recipients of the principles of transparency and openness, are devoid of the mechanisms for their protection since only the parties and other participants in the criminal process have the right to appeal against court decisions made on the basis of court hearing conducted in violation of these principles. however, the peculiarity of the realization of the right to the transparent and open criminal proceedings is the inability of its carriers to abandon it since this right equally belongs to both parties of the process (petryshyn, 2017). thus, the parties, other participants in the criminal proceedings, representatives of the public, the media in the same trial have different interests and reasons for refusing to the publicly heard trial. the right to a public trial is an important component of the implementation of the principles of transparency and openness of the criminal process, and therefore, is the basis for the realization of the rights of society members, including representatives of mass media, to participate in court proceedings as third-party observers (the general public). that is, the rights of the public to access an open trial are derived from the right of the parties to the public (transparent and open) judicial proceedings. moreover, representatives of the public (the general public) and mass media not being the parties to the criminal process, cannot be the bearers of jurisdictional rights, i.e., those rights that are implemented in the course of judicial proceedings by the persons involved in it as a result of their criminal procedural status (parties and other participants in the criminal proceedings). the principles of transparency and openness for the public are important prerequisites for exercising control over judicial power. in turn, public control is one of the ways for citizens to participate in the state administration. therefore, summarizing the normative requirements of the legislation on the judicial system and the current cpc of ukraine, the publicity and openness of court proceedings for persons who are not participants in the criminal process, include: 1) the right to receive information on the date, time and place of trials; 2) the right to equal access to the court building, the office, the courtroom; 3) the right to attend a public trial, including the right to be present at the announcement of court decisions; 4) the right to get acquainted with court decisions; 5) the right to record the content and progress of the process in writing or by audio recording without special court authorization; 6) the right to disseminate information about events that took place during an open trial to unlimited number of persons, to reproduce legally, with the observance of the law, the materials received, to demonstrate and publish them; 7) the right to public discussion (including in the mass media), criticism of court decisions and actions of the court, carried out in the course of open court proceedings. further improvement of the financial control over the activities of courts and judges is equally important from the point of view of ensuring the openness of the judicial system in ukraine, as rightly pointed out by m. a. pohoretskyi and o. h. yanovska. in particular, they analyse the law of ukraine “on the judiciary and status of judges” dated from july 7, 2010, no. 2453-vi, which provided the mandatory publication of copies of declarations of judges on property, income, expenses, and financial obligations for the last year on the official web portal of judicial power of ukraine (www. court.gov.ua). the above provision should provide unhindered access of the public to the aforementioned baltic journal of economic studies 62 vol. 5, no. 4, 2019 information about the property of a particular judge with the purpose of carrying out independent public control in the field of prevention and counteraction to corruption. however, on april 24, 2012, the said law was amended, according to which judges were no longer obliged to file a declaration on the property, income, expenses, and financial obligations for the last year for publication on the internet. such amendments have led not only to a reduction in the level of financial control over the activities of courts and judges but also virtually destroyed the judicial system of ukraine. therefore, we fully share the thoughts of m. a. pohoretskyi and o. h. yanovska that in spite of objectively existing difficulties, the system of financial control, which continues to be built, should become an effective mechanism for preventing corruption in the judicial system, giving an opportunity to avoid competitive interests and to ensure the transparency of the activities of the courts (pohoretskyi and yanovska, 2013). in this context, one should agree with the position of o. v. smirnov that the restructuring of the judicial system in order to maximally bring it closer to its own people can be a mean of fighting of the most passionate part of citizens against corruption and an effective way of upbringing the state apparatus (smirnov, 2004). this will make it possible to eliminate socio-political tensions in society and to take measures to reform the judicial system in an evolutionary way. in particular, such measures in line with european standards should include: – reduction of the amount of judicial immunity and providing a judge with only functional immunity (immunity from charges of actions committed in the course of performing judicial functions); – settlement of issues concerning the prevention and resolution of competitive interests in the activity of representatives of judicial power; – determination of the peculiarities of conducting a special examination of candidates for a judge’s position; – submission, disclosure (in particular on the internet), and monitoring of the reliability of the data of judges’ declarations on property, income, expenses, and financial obligations; – conduction of periodic training of judges on the matters related to standards of counteraction and prevention of corruption, taking into account them during the certification of judges (fluri and badrak, 2016). the main place among other components of the implementation of the principles of transparency and openness has the right to receive information on the date, time, and place of trials, which follows from paragraph 2 of the art. 11 of the law of ukraine “on the judiciary and status of judges” (law, 2016) and paragraph 1 of the art. 27 of the cpc of ukraine (code, 2012). the transparency and openness of judicial activity are initial components, as noted in the legal literature (leonenko, miller, siryi, chanhuli, 1993). in this case, the message must contain a clear indication for the date and place of the court hearing, that is, the answer to one of the issues to be resolved in regard to the preparation for a trial (korol, 2015). at the same time, the current cpc of ukraine does not fully resolve the issue of the forms for notification about designated criminal proceedings. thus, part 1 of the art. 135 of the cpc of ukraine regulates only the procedure for calling the participants of criminal proceedings: “a person is called to an investigator, a prosecutor, an investigative judge, a court by handing the call for a summons, sending it by mail, e-mail or facsimile, making a call by telephone or by a telegram”. a similar provision is contained in clause 16.3 of the instruction on record-keeping in local general courts, appellate courts of regions, appellate courts of kyiv and sevastopol, the court of appeal of the autonomous republic of crimea, and the supreme specialized court of ukraine for the consideration of civil and criminal cases, approved by the order of the state judicial administration of ukraine dated december 17, 2013, no. 173 (order, 2013). however, neither the cpc of ukraine nor the abovementioned instruction on the record-keeping stipulates the procedure for notifying citizens who are not participants in criminal proceedings, about the time and place of a trial. therefore, we fully support the suggestion of v. v. korol that the content of notification on criminal proceedings, intended for the court hearing of the relevant instance requires filling of such a gap and its legislative affirmation in the cpc of ukraine (korol, 2015). an innovative step in achieving transparency and openness of court proceedings is that citizens who want to familiarize themselves with criminal proceedings that are to be heard in court, in a matter of minutes, without leaving their home, can find out the date, place and time of the court hearing on the official web portal “judiciary of ukraine”. such a network information resource greatly enhances the possibility of implementing the principles of transparency and openness in the field of criminal justice since nowadays a significant part of ukrainian citizens have access to the internet. the provisions of part 1 of the art. 27 of the cpc of ukraine to provide information about the time and place of a trial are realized through the web portal “judiciary of ukraine”. therefore, we fully agree with the idea that the content of such notifications, as well as the procedure of their placement on the web portal (through the automated system of court documents), should be regulated at the level of law (korol, 2015). this allows obtaining the necessary information about trials in criminal proceedings at any time convenient for citizens but not only during the court hours. for example, the information on the list of criminal proceedings (cases) for consideration in the cassation criminal court is available at: https://supreme.court. baltic journal of economic studies 63 vol. 5, no. 4, 2019 gov.ua/supreme/gromadyanam/kks/ and by calling the contact centre 0-800-501-492. besides, the official electronic address of the cassation criminal court – ksk@supreme.court.gov.ua – operates for the purpose of sending correspondence. however, there is a need in the printed version of the list of cases for consideration, which is posted in the court building for the participants of the criminal proceedings and other persons who wish to be present at the trial. the legal literature repeatedly puts forward propositions that we fully support, about the need to post an announcement (lists of criminal proceedings) from the outside of the court building (boikov, 1989; korol, 2015; makarova, 1993; petrukhin, 1981; shushanashvili, 1969). according to v. t. maliarenko, the open nature of a trial on criminal proceedings in the courts of all instances also means that all procedural actions must be carried out by the court at open doors, except for the meeting of judges while deciding a sentence or making some decisions (maliarenko, 1998). therefore, for the proper implementation of the principles of transparency and openness of litigation, the rule that a judgment is publicly proclaimed (part 7 of the art. 27, and part 1 of the art. 376 of the criminal procedural code of ukraine) is of paramount importance. in terms of open trial, the abovementioned norm provides the disclosure of the results of the court’s work, which takes place in the counselling room, and hence the integrity of the trial for accessible perception by all those present in the courtroom (korol, 2015). therefore, the activity of the court for the administration of justice, due to its transparent and open nature, is under the control of public opinion, the public. public opinion assesses the verdict and the internal conviction of judges in terms of their compliance with the requirements of the law, norms of morality (korol, 2003). that is why, according to yu. m. hroshevyi, approving the verdict of the court, considering it to be fair, public opinion strengthens the educational effect of criminal proceedings (hroshevyi, 1972). the legal basis for access to court decisions is the laws of ukraine “on access to court decisions” (law, 2006) and “on implementation of judgments and practices of the european court of human rights” (law, 2006). in accordance with the provisions establishing the availability of court decisions, everyone has the right to have access to court decisions in accordance with the procedure established by the law. the state judicial administration of ukraine ensures the maintenance of the unified state register of court decisions in order to have access to court decisions of the courts of general jurisdiction. thus, the procedure for maintaining the unified state register of court decisions was approved by the decision of the supreme council of justice dated april 19, 2018, no. 1200/0/15-18 (decision, 2018). court decisions registered in this register are open for free round-the-clock access on the official web portal of the judicial power of ukraine. the opinion of o. o. ovsiannikova is quite right, in the context of the subject matter of the research, who emphasizes that only those decisions that have come into force have legal effect to be published in the register. the text of such a decision should indicate whether an appeal or cassation was filed against this decision, what the grounds are and what decision was taken by a higher court. regarding the inclusion of all intermediate acts of the judicial power into the register, such acts cannot be of interest to users of the register since they do not affect the results of the trial and judicial statistics, and therefore, there is no need for it. at the same time, the issue about the terms of preserving court decisions in the register remains relevant (ovsiannikova, 2009). at the same time, one should admit that the register is rather inconvenient to use since in order to find a solution, it is necessary to know precisely the court that passed it, the date of the decision or the registration number in court or the article of the criminal code of ukraine, according to which a person was convinced. the lists provided by the search system do not specify a category of the case. if it is necessary to get acquainted with the court practice of a certain category, users (both a judge and a regular citizen) are forced to search through all the decisions. considering the number of courts in ukraine and the amount of cases they consider daily, it becomes unrealistic. obviously, it will be necessary to classify the decisions in the register, to improve the technical possibilities of their search according to different criteria. a separate procedure for ensuring the availability of court decisions has been established in relation to decisions of the european court of human rights in the case against ukraine, which found violations of the convention for the protection of human rights and fundamental freedoms (convention, 1950), decisions on just satisfaction in cases against ukraine, decisions on final settlement agreement in cases against ukraine. one of the most striking examples of effective public control in the field of legal proceedings is the activity of the public organization “open court”. its members (activists) on a voluntary basis carry out video and audio recordings in the courts, professional processing and installation of recorded material, as well as its analysis and review. the implementation of this project became possible only since march 28, 2015 – with the entry into force of the new law of ukraine “on ensuring the right to a fair trial” (zakon ukrainy vid 12 liutoho 2015 roku № 192-viii), which guarantees the possibility of taking photos, video and audio recordings in the courtroom using a portable video, audio equipment without obtaining a separate court authorization. the material shot is broadcast on the website of the “open court” video channel, where the video file is formed and the analysis and provision of legal assessment of court cases are realized, to the professional level of participants in baltic journal of economic studies 64 vol. 5, no. 4, 2019 a trial (a judge, a prosecutor, a lawyer). the purpose of this project was to increase the trust of citizens and strengthen the authority of the court, increase the professional level of judges, lawyers and prosecutors (korol, 2015). it is also important that this organization can work on citizens’ requests for assistance provided on a royaltyfree basis. the public initiative of the “open court” is expressed, in particular, in the creation of versatile special projects, namely: “open court reporter”, “loud deed”, “judicial raid”, “judge-antihero”. the uniqueness of this project is underlined by the fact that no other european state has the same practice. ukraine is actually a kind of experimental site in this area. the project partners from the european union and the united states regard the “open court” activity as a key element in combating corruption and injustice in the courts and believe that ukraine’s success can serve as an example for the application of such a mechanism in other countries of the world. many ngos and projects are based on international support and assistance. one such project in the field of interaction between the public and the judiciary is the “fair justice” project, funded by the united states agency for international development (usaid), and has been operating in ukraine since october 2011. the project aims to improve legislation, complete judicial reform and improve judicial practice. improving judicial practice means raising the transparency of the court and the trust of the community. the main task of the project is the implementation of the laws of ukraine: “on purification of power” (law, 2014) and “on restoring confidence in the judiciary” (law, 2014). in particular, the “fair justice” organization is one of the founders of the internet platform “electronic court” (korol, 2015). the public council for integrity is a very effective project of public control over the activities of courts and judges in ukraine. in january 2019, this council approved the indicators for determining the inconsistency of judges (candidates for a position of a judge) with the criteria of integrity and professional ethics. the press release of the council states that the document was developed based on the best international practices in the field of judicial integrity and ethics, as set out in the bangalore principles of judicial conduct, their comments, recommendations of the committee of ministers of the council of europe, the conclusions of the venice commission and the advisory council of european judges, and also taking into account the provisions of the code of judicial ethics, the guidelines of the public council of international experts on the assessment of the integrity, knowledge and practical skills of candidates for positions of judges of the supreme anticorruption court (the center for training judges, 2019). indicators are also based on previous practice of the public council of integrity and take into account the results of their agreement with the high qualifications commission of judges of ukraine. the content of the document takes into account the views of experts from the council of europe, the european union, and the usaid “fair justice” program. this list of indicators of compliance with the criteria of integrity is indicative and cannot be interpreted as exhaustive (in particular, the criteria of integrity include: independence, impartiality, honesty and integrity, ethical standards, equality, and diligence). the list of indicators will be replenished during the work of the public council of integrity. the public council of integrity will also rely on the practice of the public council of international experts. we should distinguish the following several indicators demonstrating discrepancy to the criterion of honesty and integrity of a judge (candidate for a judge’s position) and can testify to corruption: – a judge (candidate for a judge’s position) deliberately or as a result of obviously negligent attitude towards the performance of his duties has reported unreliable (including incomplete) information in the declaration of integrity, for example, concealed information about the offense, manifestation of unfair behaviour, interference with the activity of a judge, etc.; – a judge (candidate for a judge’s position) deliberately or as a result of obviously negligent attitude towards the performance of his duties has reported unreliable (including incomplete) information in the declaration of family ties, for example, concealed a family member, a close relative or a person with whom there were competitive interests or who made dubious gifts or who received significant income from a dubious origin with the participation of the declarant or has a property relationship with the declarant or a person and the declarant have mutual existing obligations, etc.; – a judge (candidate for a judge’s position) did not report the existence of competitive interests and/or did not take other measures to prevent it (smirnov). at the same time, “transparency of justice” is a special problem since it has not only legal but also, above all, political character. the state and civil society have not become equal partners yet, but only intend to become them. therefore, we are fully convinced of the correctness of the position of i. s. hrytsenko and s. v. prylutskyi, that the judiciary is not fully prepared for such a perception of the tasks of justice yet (hrytsenko and prylutskyi, 2015). publicity or openness of justice is a much deeper concept than a mere public and open trial or public announcement of a sentence. essentially, it is the priority of civil society over the state in legal proceedings (smirnov, 2003). it is the search for a balance between the state and civil society that encourages such mechanisms of organization of judicial power that will reflect their joint compromise. we believe that such a compromise between the state and civil society in matters of baltic journal of economic studies 65 vol. 5, no. 4, 2019 organization of judicial power and the administration of justice can be realized, first of all, in the form of active civilian control. legal and social practices have developed certain forms of control of the society over justice: publicity of the procedure of legal proceedings; democratic procedure for the formation of the judicial system and the judiciary; public awareness about the mechanism of functioning of the judiciary, the decisions it has made, the purpose and personal qualities of its representatives, as well as the publicity and openness of all these issues in the framework of public discussion (tatsii, hroshevyi, kaplina, shylo, 2013). thus, public control over the judiciary should be carried out through the openness of the justice process (transparency and openness of legal proceedings), the availability of mass media to judicial information and its objective coverage. taken together, this forms openness and transparency of justice. therefore, as o. o. ovsiannikova rightly focuses, the transparency of judicial power is a necessary condition for effective public control (ovsiannikova, 2008). the duty of the court to notify the case in this aspect is relevant, and the open nature of the court proceedings must be enshrined in the procedural law of ukraine in accordance with clause 1 of the art. 6 of the convention for the protection of human rights and fundamental freedoms (convention, 1950; ovsiannikova, 2009). the new wording of part 4 of the art. 11 of the law of ukraine “on the judiciary and status of judges” (law, 2016) stipulates that the participants of the trial, other persons present in the courtroom, representatives of mass media may hold a photo, video, and audio recording in the courtroom with the use of portable video and audio technical means without obtaining a separate permission of the court but taking into account restrictions established by the law. the broadcast of the court hearing is carried out with the permission of the court. conduction in the courtroom of photographing, video recording, and broadcasting of court hearing should be carried out without hindering the conduct of the proceedings and the implementation of their procedural rights by the participants in the court proceedings (code, 2012). by introducing the novel about the use of portable video equipment without the permission of a judge, the legislator significantly expanded the scope of the implementation and the principle of publicity of criminal proceedings. at the same time, part 6 of the art. 27 of the cpc of ukraine states that everyone who is present in the courtroom can conduct a transcript, make notes, use portable audio recorders. conduction in the courtroom of photographing, video recording, broadcasting of court hearing on radio and television, as well as performing sound recording with the use of stationary equipment, shall be allowed on the basis of a court order, which is made taking into account the opinion of the parties and the possibility of conducting such actions without prejudice to judicial proceedings. consequently, there is a legal conflict, as the cpc of ukraine explicitly foresees the use of only portable audio recorders without the permission of a judge. therefore, in practice, there were often situations where judges denied citizens the right to conduct video filming, referring to procedural law. and representatives of the public project “open court” argued about the illegality of such court decisions, referring to the fact that the law on the right to a fair trial “allows video recording without additional authorization of the court” (korol, 2015). therefore, it would be logical to introduce norms that would oblige the court to fully record the trial by technical means, even in the absence of petitions from the parties in this regard. moreover, the mentioned novel of the law of ukraine “on the judiciary and status of judges” and certain directions of activity of the public project “open court” generate a number of problematic aspects. one of these aspects, according to v. v. korol, is the psychological readiness of both judges and other participants of criminal proceedings for video shooting. thus, the participants in the criminal proceedings actually become “stars” of the television and the internet, and not everyone can cope with such a peculiar psychological pressure. it is worthy of attention a wellknown example of the judge r . v. kyrieiev in the socalled “gas case” of yu. v. tymoshenko (korol, 2015). this issue was raised during the soviet period, and it was already emphasized that everyone was individually concerned with the fact that he was taken to the camera: there were judges whose video was distracting from the process, did not make it possible to concentrate all the attention on the trial and made them think only of how they looked like (levi, 1983). only in 2014, the national school of judges of ukraine began the work on the professional psychological training of candidates for the position of a judge, as well as acting judges (there was the course “professional psychological adaptation to judicial activity”). therefore, we fully share the opinions of some scholars who consider it necessary to pay particular attention to the training of judges to cooperate with mass media representatives and their (judges) psychological adaptation in order to be in the focus of journalists and video cameras (hrytsenko and prylutskyi, 2015; korol, 2015). in addition, the presence of people with video cameras (including journalists) during the court hearing may be the cause of the closed behaviour of a witness, a victim, an accused, and other participants in the proceedings. this is due to both the psychological characteristics of a particular participant in the proceedings, and his reluctance to widely publicize certain information (leonenko, miller, siryi, chanhuli, 1993; korol, 2015; makarova, 1993). thus, such practically unlimited possibilities for all those present in open court to freely pursue photography, video and audio recordings using portable video and audio equipment can negatively affect the establishment of truth in the case. baltic journal of economic studies 66 vol. 5, no. 4, 2019 another aspect concerns the organization of placement of the public, members of public organizations and media representatives in the courtroom. thus, art. 27 of the cpc of ukraine states that the court is obliged to allow all those who wish to be at the hearing, and this possibility is limited only to the number of places available to the public. for example, there are four courtrooms in the cassation criminal court within the supreme court with the required number of seats, three of which are equipped with videoconferencing and two of them have places for the custody of the accused (defendants) and convicts. however, there is the question: does this act itself create obstacles to an open court process? equally important is the determination of the number of media representatives allowed for a court hearing. therefore, we completely share the warnings of v. v. korol that “excessive attention” of journalists can adversely affect the organization of judicial review, create obstacles in the implementation of the procedural rights and obligations by the parties of the proceedings (korol, 2015). 3. the role of mass media in ensuring transparent and fair justice finally, the media plays an important role in the relations between judicial power and civil society, as well as have a great influence on the formation of public consciousness, public opinion on certain socio-political phenomena or processes. according to yu. s. sida, the media carry out a socio-judicial role, that is, one way or another, assign a function of open reflection on certain aspects of the activity of the court from the point of view of rights of judgment (sida, 2005). at the same time, the media form a public opinion on the activity of judicial power. and such a public discussion is an embodiment of the constitutional principle of freedom of thought and speech and must meet the requirements of the art. 34 of the constitution of ukraine (constitution, 1996). in this sense, the idea of i. s. hrytsenko and s. v. prylutskyi looks thoughtful that the freedom of the media may be limited in order to prevent the abuse of freedom of speech, while not introducing any censorship (hrytsenko and prylutskyi, 2015). for more meaningful communication between judicial power and the public, the use of such social technologies as polling of public opinion is required; organization and conduction of meetings with the public; tv performances by “first persons” representing judicial power of ukraine; conduction of tv debates; information impact on citizens through the internet, etc. therefore, we are quite convinced that the ideas of yu. s. sida that the application of these technologies should enable judicial power to strengthen the system of state power, increase its authority, support the principle of public relations (sida, 2005). however, in today’s conditions, there is mutual distrust and suspicion in relations between the media and judges in our country. this distrust on the part of judges can also be explained by the hypertrophied sense of professional sovereignty, an attack on which is considered inadmissible. in turn, journalists, endowed with the right to free review and coverage of social processes in the mass media, cannot tolerate the restrictions imposed on them in relation to realizing the right to freely collect and disseminate information and to have unrestricted access to them (hrytsenko and prylutskyi, 2015). therefore, there should be a special emphasis among other things on such a category of subjects as journalists and media representatives since they are endowed with wider rights stipulated to freedom of search, receipt, and dissemination of information. therefore, international documents and practice of the european court of human rights emphasize that the media have both the right to provide information and are obliged to do so in the context of realizing the right of citizens to receive publicly relevant information. it is believed that in this case, it is not a matter of duty as a measure of proper conduct, where there is legal liability for its failure, but about the moral and political responsibility of journalists in a democratic state, conditioned on their professional duty. thus, as yu. s. sida correctly notes, there is the transformation of journalists’ freedom in public power, which is perceived by the court as an attack on the immunity of the judiciary (sida, 2005). at the same time, it is difficult to agree with the position of those scholars who do not include the principles of transparency and openness in the content of the broad public and especially of the media representatives to inform the public of all that is happening in the courtroom. thus, s. v. praskova notes that “such powers characterize the movement of information in the middle of civil society, but on the contrary, it is the element of the general social phenomenon of publicity, but not the openness of justice” (praskova, 2004). we firmly believe that it is difficult to imagine the implementation of the principle of transparency of justice outside the “circulation of information about justice” in society. the purpose and essence of the principle of publicity are devoid of any meaning without informing the broad (unlimited) range of persons about the functioning of judicial power, bringing the information (including information about events taking place during the trial) to representatives of ukrainian society. and openness makes it possible to transfer information from those who “first hand” (directly, while being in the court) received it, to others, especially important for the media. therefore, will justice be transparent and open, is it possible to consider these principles implemented, if the information does not “come” to society? we believe baltic journal of economic studies 67 vol. 5, no. 4, 2019 that the answer is obvious to this question since it is difficult to imagine the observance of the principles of transparency and openness of justice outside of the proper circulation of information about the administration of justice in society. and in this sense, the opinion of o. p. petryshyn looks convincing, who noted that the very dissemination of information through the media activates (stimulates) the implementation of the principles of transparency and openness, creates the necessary conditions for the implementation of public control over justice (petryshyn, 2017). effective access to information held by judicial authorities and other subjects is an important prerequisite for preventing corruption, detecting and stopping corrupt practices. information that is of public interest has particular importance, namely, information on the use of public funds, the disposal of state or municipal property, personal income, property, expenses, and financial obligations of judges and other public officials of judicial power. access to information is a necessary tool for conducting journalistic investigations, stimulating civic activity in the anticorruption area (fluri and badrak, 2016). the law of ukraine “on access to public information” has been in force in ukraine since may 2011, which has been recognized as one of the best in the world in terms of the regulation (law, 2011). at the same time, the state of practical implementation of the new provisions on access to information remains unsatisfactory since the real opportunities for access to information are too limited. there are cases of unjustified refusal for access to information on an initiative basis; there is no effective state control over the exercise of the right on the access to public information. it should be noted that there is a widespread practice of covering the activities of courts on the internet in the countries of the european union. so, according to the british guardian, the british supreme court officially allowed journalists to use twitter’s microblogging service to convey messages from court hearings. now, journalists can apply for coverage of hearings in such an expeditious manner. they are also allowed to send messages from their mobile phones and use e-mail. for the first time, the public was informed through instant messaging from mobile phones about the events taking place in the courtroom during hearings in the case of julian assange. previously, the united kingdom was not allowed to use social networks in the courtroom, as well as prohibiting photographs and video during litigation. journalists could use dictators only in exceptional cases. liability for disrespect to the court imposed by the court itself was provided for the violation of these rules. the council of europe pays particular importance to this issue, which introduced a number of principles relating to obtaining information through mass media on criminal proceedings. thus, recommendations no. r (2003) 13 of the committee of ministers of the council of europe to member states on the procedure for providing information on criminal proceedings through the mass media dated from june 10, 2003, stated that “since society should receive information on the activities of judicial power and the police through media, journalists should be able to freely talk and comment on the activities of the judicial system” (recommendations, 2003). these recommendations the rights of journalists and correspondent to them responsibilities of the state, including the judicial authorities, establish as the principles. therefore, these requirements encourage the creation of an effective system of interaction of courts with the media and can be recognized as one of the priority directions of the democratization of modern ukraine. at the same time, one of the guarantees of keeping legality, objectivity and transparency in the administration of justice is to inform the society through the mass media about the activity of both the judicial system in the whole and individual judges. the coverage of these issues through the media forms legal awareness and legal culture in society, defines the level of its respect and trust in judicial power. in this context, it should be noted that nowadays the interaction of the supreme court with ukrainian and foreign mass media, including social media, electronic internet resources takes place in accordance with the order of interaction of the supreme court with representatives of the mass media, approved by the order of the supreme court dated from november 7, 2018, no. 173-оd. according to this procedure, the organization of work on the interaction of the supreme court with the media is carried out by the head of the department on information and communication activities (press centre) (order, 2018). however, in practice, there may be cases where publications in the media both do not increase the authority of judicial power and do not contribute to the growth of confidence but, on the contrary, diminish its credibility or generally harm it. such publications can be posted in newspapers, on websites, in news agency and in tv and radio programs. therefore, as i. s. hrytsenko and s. v. prylutskyi rightly note in their works, criticism of the judge’s actions in media publications is an ambiguous issue (hrytsenko and prylutskyi, 2015). it is worth remembering that, according to the judgment of the european court of human rights in the case of de gaès and giensels v. belgium (1997), the court found that “judges should be protected from destructive cases by mass media having no actual basis.” at the same time, if criticism of judicial problems or individual judges is based on “proper and thorough journalistic investigations, which are part of a public discussion of important social needs,” there is no reason to restrict freedom of the media. of great significance is another conclusion of the european court: “judges must exercise prudence, which does not allow them (unlike, baltic journal of economic studies 68 vol. 5, no. 4, 2019 for example, politicians) to respond to sharp criticism” (council of judges of ukraine, the center for training judges, association of judges of ukraine, 2009). in accordance with the recommendation cm / rec (2010), 12 of the committee of ministers of the council of europe to the member states in regard to judges: independence, efficiency and responsibilities of litigation and issues related to the administration of justice are of public interest. however, the right to receive information on judicial matters should be carried out in the light of the restrictions established in view of the independence of judicial power. in this regard, the creation of positions of the courts’ counsellors or the press and public relations departments in the area of the responsibility of the courts or the councils of judges or other independent authorities is approved. judges should exercise restraint in relations with the media. at the same time, judges cannot effectively administer justice without public confidence, as they are part of the society they serve to. they should be aware of the public expectations of the judicial system and complaints about its functioning. this could be facilitated by the availability of permanent mechanisms for obtaining such information, by created councils of judges or other independent agencies (recommendation, 2010). thus, the main objective in relations between judicial power and the media is the achievement of the “golden mean”, so that a judge is protected from the pressure of public opinion inspired by the conclusions of the media in the case being considered or will be considered. at the same time, society should have free access to the courtroom through mass media. as the president of the constitutional tribunal of poland, professor m. safian, rightly pointed out, the courts should not be afraid of public opinion and should not be released from criticism of the media. the legal force and the final nature of the sentences do not exclude the possibility of such criticism since justice is one of the most important players in a public game in a democratic, rule-of-law state. it is also impossible to build the authority of the courts on prohibitions and lack of access to information. as a rule, this has a reciprocal effect (hrytsenko and prylutskyi, 2015; safian, 2007). therefore, an important condition for the openness of judicial power to the community is the availability for courtrooms and court decisions as a legal procedure that ensures the openness of the courts, predictability of court decisions and promotes the equal application of law and judicial practice. thus, the access of mass media representatives to the public area of the supreme court premises and courtrooms (including the cassation criminal court), where cases are heard in the open access, is carried out on general basis, taking into account the instruction on the execution of state protection of the supreme court and the procedure for admitting to the object of protection, approved by the office of the state protection of ukraine dated from december 13, 2017, and approved by the chairman of the supreme court on december 14, 2017. in this case, the presence of media representatives at court hearings of the supreme court takes place without prior accreditation upon presentation of a person’s identity document, except cases of conducting closed court hearings in accordance with the procedural law (order, 2018). thus, journalists have the right to be present at all open court hearings and public announcements of court decisions without prior accreditation. nevertheless, holding of photographing, video recording, broadcasting on radio and television in the courtroom during the hearings, as well as sound recording with the use of stationary equipment is allowed on the basis of a court order, which is made taking into account the opinion of the parties and the possibility of conducting such actions without prejudice to the trial (part 6 of the art. 27 of the cpc of ukraine). all court decisions are publicly announced. consequently, the presence of journalists at court hearings provides a real opportunity to get acquainted with court decisions. the right to receive a copy of a court decision under procedural law is granted only to the parties to the case. the article 9 of the law of ukraine “on access to court decisions” stipulates that persons who did not take part in the case may apply to the relevant court apparatus with a written application for the receipt of a copy of the decision or familiarization with it in full, if the court decision directly concerns their rights, freedoms, interests or responsibilities (law, 2005). the law defines a certain procedure for filing and considering such applications. the decision is then taken by the appropriate official of the court apparatus. the existence of such a procedure for obtaining access to court decisions creates the formal grounds for a refusal to satisfy the mass media’s request for access to such decisions. therefore, it is worth agreeing with i. s. hrytsenko and s.v. prylutskyi that legislative reasons are incompatible with the general principles of openness of information and the principle of public (transparent and open) proclamation of a decision, even despite the official disclosure of court decisions, which is due to their placement on the web portal of judicial power of ukraine in the unified state register of judgments (www.court.gov.ua or at the direct address www.reyestr.court.gov.ua) (hrytsenko and prylutskyi, 2015). at the same time, there are still problematic issues such as the determination of the priority of the admission of mass media representatives who perform their direct professional functions during the court hearing; the possibility of coverage and discussion (assessment) of judicial activity in the media before a judgement enter into force. our legislator in these cases does not impose any restrictions or criteria for the legality of such actions. the issue of the priority of access of mass media representatives to court hearings does not arise at all in the vast majority of court proceedings. however, baltic journal of economic studies 69 vol. 5, no. 4, 2019 litigation in the so-called “high-profile matters”, which cause increased public interest, requires a solution to this issue. therefore, according to v. v. korol, thanks to the accreditation institution of media representatives in the courts, we can in a civilized manner, and not by the principle of “who came first” to decide on the issue of the access of journalists to the courtroom, reservation for them of a certain percentage of seats in the courtroom, which are intended for the public (korol, 2015). however, the accreditation institution itself should not in any way narrow the rights of journalists, provided to them by the law. in this sense, the opinions of scholars have a diametrically opposite nature of the negative attitude to the procedure of accreditation (rikhter, 2003) until its approval (romanov and holovanov, 2008). therefore, sharing the opinion of v. v. korol in general, regarding the legislative definition of the procedure for the admission of journalists and media representatives to the court hearings, but we believe that this procedure should be exclusively conciliatory in nature. hence, the legal position of the supreme court regarding the accreditation of media representatives is entirely logical in the activities that are organized and not related to its procedural activities (order, 2018). as for another problematic issue within the professional and ethical plane, which is associated with coverage and discussion (providing evaluation) of judicial activity in the media before a judgement enters into force, then in this case, we completely share the arguments of v. v. korol, who delineates this issue into two separate components: coverage and discussion (evaluation) in the media of the procedural activity of the court. regarding the coverage of court proceedings within the criminal judiciary, there are no special reservations before judgement enters into force. certain reservations arise precisely in connection with the possibility of discussing and assessing judicial activity within criminal proceedings. thus, one of the tools for achieving the objective of a public project “open court” is “to provide an objective assessment of the actions of a judge, a prosecutor, a lawyer, to the level of professionalism and ethical standards by specialists with a recognized business reputation” (korol, 2015). based on such an “objective assessment”, the project envisages the creation of a professional record of thousands of judges, prosecutors, and lawyers, exposing unprofessional activity, knowingly unlawful acts and corruption in the courts to the detriment of the interests of the state, citizens, and businesses. in particular, some “experts” of the project provide a public assessment of judges, the selection procedure of whom remains not enough clear and public. the assessment becomes available to the general public, which clearly affects the formation of public opinion both in relation to a particular judge and in the proceedings he is considering (korol, 2015). therefore, we are convinced of the correctness of some opinions of the scholars, who consider that the publications before the end of a trial and the decision and proclamation in the court decision should contain only the informative orientation of the actual nature (budnikova, 1999; repeshko, 2009). finally, the positive experience of european countries should be applied to establish fruitful relations between domestic media and judges: to introduce a set of measures that will allow media representatives and judges to establish fruitful cooperation and ensure the transparency of the activities of court agencies. in particular, it is justified: (a) the introduction of the press service and staff press secretaries in the courts; (b) the establishment of such effective forms of interaction between the judiciary and the media, such as: holding press conferences, round tables, joint conferences and seminars, contests, the allocation of special sections for speeches of court employees, the creation of public and editorial councils, holding open doors days for the media; (c) the introduction of the institute of accreditation on professional attributes; (d) specialization of journalists; (e) establishing the liability of journalists for discrediting judicial power and its officials (ovsiannikova, 2009). 4. findings the authors have elaborated recommendations on amendments and alterations to the law of ukraine “on judiciary and status of judges” and the current criminal procedural code of ukraine, which are aimed at ensuring the right of a person to defence in the transparent and open criminal proceedings. therefore, the authors have offered to supplement part 1 of the art. 11 of the law of ukraine “on the judiciary and status of judges” with the provisions on guaranteeing the right of everyone to receive information on the administration of justice and other information on judicial power in the volume, forms, and from sources provided by the law. in the absence of legally established restrictions on the provision of this information, the state is obliged to provide it to any person who such an interest. moreover, it is expedient to determine in part 3 of the art. 11 of the law of ukraine “on the judiciary and status of judges” the mechanism of free access and participation of representatives of mass media in court proceedings, which is carried out in an open court hearing without any discrimination and preliminary accreditation. in this case, the specified legislative amendments must be synchronized with part 1 of the art. 27 of the cpc of ukraine by amending the last sentence, which reads as follows: “no one shall be restricted in the right to receive information in the court about the date, time and place of a trial, which must be made public on the official web portal of the judicial power of ukraine and about the court decisions made therein, except in cases established by the law”. baltic journal of economic studies 70 vol. 5, no. 4, 2019 the said will promote the more effective realization of the right on transparent and open court proceedings by public and media representatives, provide public control over judicial power while executing its procedural activities, and guarantee the right of everyone to receive information on the administration of justice in line with european standards. 5. conclusions consequently, we can state the interconnectedness of the effective implementation of the principles of transparency and openness of criminal proceedings and the restoration of trust in the judicial system by civil society. the principles of transparency and openness, for the public, are an important prerequisite for exercising control over the judiciary and an effective tool for preventing corruption, detecting and stopping corrupt practices. in turn, public control is one of the ways for citizens to participate in the state administration. access to information circulating in the judicial system and the administration of justice is a necessary tool for conducting journalistic investigations and encouraging civic activism in the anti-corruption area. notice of scheduled court hearings in courts of all instances, indictments, and other information related to legal issues should be made available to the public and journalists at the simple request of the competent authority within the prescribed time limit unless the provision of such information is feasible. at the same time, journalists, media representatives should be allowed to make or receive copies of publicly announced decisions on equal terms. they should be able to distribute or announce such decisions to the public. at the same time, the right to receive information on litigation should be carried out in regard to the restrictions imposed by the independence of the judiciary. due to the analogy of the use of the institution of accreditation of media representatives and journalists in the courts, it is possible to solve the issue of their access to the courtroom in a civilizational manner, reserving for them a certain percentage of seats in the courtroom, which are intended for the public. a detailed procedure for admitting journalists, media employees in the courts should be regulated in the legislation on the judicial system. it is also expedient to pay special attention, among the measures to counteract corruption and illegal enrichment within the judiciary, to the selection of candidates for positions of judges. this procedure should be carried out in accordance with the list of indicators for determining the inconsistency of judges with criteria of integrity and professional ethics developed and approved by the public council of integrity. however, a number of issues within the subject of the research remains unresolved. in particular, art. 3682 of the criminal code of ukraine (illegal enrichment) (code, 2001), which may be an effective mechanism for the deprivation of illegally acquired property from offenders in judicial robes, should comply with the art. 20 of the united nations convention against corruption (convention, 2003). simultaneously with criminal and legal instruments for bringing to liability for the illegal enrichment of 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(2016). antykoruptsiini zakhody v ukraini pislia revoliutsii hidnosti : kliuchovi zakonodavchi aspekty [anticorruption measures in ukraine after the revolution of dignity : key legislative aspects]. kyiv. shushanashvili, a. a. (1969). glasnost v sovetskom ugolovnom processe [publicity within soviet criminal procedure]. tbilisi. baltic journal of economic studies 108 vol. 5, no. 3, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-3-108-115 transformational aspects of the european union strategy for the danube region yurii maslov1 abstract. the attention of the supranational level to transboundary regions increased with the development of regional policy. the reform of the european structural funds, the concepts of equalization and identification of the endogenous potential of regions led to the intensification of cross-border cooperation. of course, this is not only the merit of the european union; the growth of euroregions stimulated financial support, and this led to a new round of growth of euroregions in the eu territories. the purpose of the article is to determine problems of transformational aspects for elaborating and improving the european union strategy for the danube region up to the condition of its possible implementation, as well as propose specific measures for its step-by-step implementation until 2020. the european grouping for territorial cooperation (egtc) is another initiative created in the zonal field of euroregions for greater cohesion with the supranational level. most of the egtc members are located in eastern and southern europe. moreover, if on the early stages egtc were projects for the implementation of exclusively cross-border cooperation, then since 2012 they began to be created as platforms for cooperation between cities of different eu member states. eu regions are very diverse from a cultural and historical point of view and have different levels of socio-economic development. in the danube region over the past two decades, fundamental changes have occurred, taking this into account, the article highlights several strategic directions of development. 1) geographical association of europe and the east. there is a huge potential for the development of existing transport and trade links. 2) the developed infrastructural architecture of the education system. including different universities, but the quality of training varies. education and training should be linked to the needs of the labour market, along with supporting student mobility throughout the entire danube region. 3) the presence of millennial traditions of cultural, ethnic, and natural diversity. the presence of large cities and world heritage sites, including the concentration of capitals and cultural centres. this requires a modern approach to tourism offers and infrastructure so that both the guest and the host can get profit from this activity. 4) the ability to optimize and improve the use of renewable energy sources, such as water, wind biomass, thermal springs. there are also wide opportunities for improving energy efficiency by enhancing the efficiency of energy demand management and modernizing building and logistics. these measures will facilitate the transition to a low-carbon economy. 5) availability of natural wealth: unique fauna and flora, the most valuable water resources and unique landscapes (for example, the danube delta, the carpathians). they must be in constant preservation and recovery. each designated area contains priority recommendations in various fields of activity. the transformational optimization strategy proposed by the author provides a stable framework for the policy of integration and cohesive development of the danube region. it establishes priority areas aimed at creating the eu region of the 21st century. key words: regional policy, european union, egtc, lower danube euroregion, european integration, transformational strategy. jel classification: r11, r38, r50, l51, f60 corresponding author: 1 odessa national economic university, ukraine. 1. introduction the attention of the supranational level to transboundary regions increased with the development of regional policy. the reform of the european structural funds, the concepts of equalization and identification of the endogenous potential of regions led to the intensification of cross-border cooperation. of course, this is not only the merit of the european union; the growth of euroregions stimulated financial support, and this led to a new round of growth of euroregions in the eu territories. one of the aspects of the eu’s financial approach to the development of cross-border cooperation is interreg – the program of interstate creation of a pan-european home at the micro level. in 1988, the eu commission approved the euregio model as the baltic journal of economic studies 109 vol. 5, no. 3, 2019 best practical interreg manager (perkmann, 2002). however, the real value of euroregions for integration was assessed after the decision to expand, and the last round of the program contributed to the export of the euregio model throughout europe (including beyond the external borders of the european union). therefore, in terms of organization, euroregions can be considered the guides of european power outside the eu. the european grouping for territorial cooperation (egtc) – another initiative created in the zonal field of euroregions for greater cohesion with the supranational level. the egtc is a stable legal structure with an autonomous legal personality but that exists within the legal framework of each member state. at the same time, the egtc includes representatives of regional authorities, which contributes to the deepening of crossborder cooperation and creates conditions for building a more flexible management system. at the same time, eu intervention is not always positively perceived by national states (zonova, 2012). in addition to the financial aspect, which helps to integrate national and subnational actors with integration links, it is worth mentioning the activity of cross-border regions in facilitating the introduction of the principle of subsidiarity for protection against excessive bureaucratization, promotion of solutions to local problems directly in the place of origin, which can directly influence the european political landscape. in europe, considerable experience has been gained in the implementation of regional policy. taking into account the complexity and heterogeneity of such a formation as the eu, we can talk about a multi-level regional policy aimed at the development of specific regions within national states and the economic consolidation of territories at the international level. this is necessary from the viewpoint of the qualitative development of the integration movement and its deepening. the instrument of such cohesion is the european groupings for territorial cooperation, which mainly arise where cooperation on the basis of common strategies and specific projects has been conducted for a long time and successfully. in terms of increasing global competition and aggravating socio-economic problems within the european union, in the regional policy programs for the period of 2014–2020, great attention is paid to the policy of cohesion, including territorial. moreover, the strengthening of territorial unity and territorial cooperation is planned to be achieved by increasing financial resources (up to 30%) to support all types of territorial cooperation and stimulate the creation of egtc. 2. the methodology of research eu regions are very diverse from a cultural and historical point of view and have different levels of socioeconomic development. in europe, problem areas are identified (primarily the regions of eastern europe, in which we observe the dramatic consequences of the transformation of the economic structure during the transition from a command-administrative to a market system, old industrial and rural regions). regional policy is one of the most important spheres of socio-economic policy in the eu. today, it represents not only the regional policy of each individual member state of the integration association but the cohesion policy pursued at the supranational level with the help of various financial, legal, and socio-political instruments (perkmann, 2013). the elimination of economic and political barriers within the eu (the creation of a common domestic market and the adoption of the schengen agreements) stimulated the formation of economic regions with a common labour market in the border areas of the eu member states. this caused changes in the regional policy of the integration association. since 1990, the eu has been implementing the interreg community initiative program, the main goal of which is to overcome the dividing influence of borders and ensure the functioning of the common european market. interreg iii (2000–2006) was aimed at the development of socioeconomic relations within the eu by stimulating transnational and interregional cooperation and balanced development of the territories of the union (application and effects of the espd, 2007). along with that, a number of documents were adopted on spatial planning at the pan-european level. one of the main documents, which is based on the recognition of cooperation between all territorial levels (vertical integration) and all sectors of the economy (horizontal integration), is the european spatial development perspective (esdp) (euregio presentation, 2016). also, since 2002, the european spatial planning observation network (espon) has been implemented, in which much attention is paid to efficiency, cohesion, i.e. balanced and stable development that stimulates competitiveness and reduces structural disparities between regions and countries, as well as environmental issues (bannikov, 2014). the period of program-organizational transformations of regional development for 2007–2013 is characterized by the following priorities: support for innovations, creation of new jobs and ensuring economic growth in all regions of the union, which is a structural part of the overall economic development strategy of the integration association. regional policy focuses on the achievement of three key goals (euregio presentation, 2016): 1) convergence (cohesion), i.e. supporting economic growth and increasing the level of employment in the least developed regions by investing in human capital, developing transport and energy infrastructure, innovation, improving the efficiency of the administrative machinery of regions; baltic journal of economic studies 110 vol. 5, no. 3, 2019 2) regional competitiveness and employment, i.e. creating new jobs, increasing the competitiveness of regions by encouraging innovation, developing environmental protection measures, and developing regional labour markets; 3) european territorial cooperation, i.e. supporting all types of territorial cooperation and territorial cohesion between regions within the eu by promoting the integrated development of territories (regional policy – inforegio, 2013). within the framework of territorial cooperation in the period of 2007–2013, three types of programs have been adopted: 1) border cooperation projects between certain territories of eu member states; 2) transnational projects aimed at organizing cooperation in large regions (for example, the baltic sea, danube, alpine, and mediterranean regions); 3) interregional projects (interreg ivc, urbact ii, interact ii, espon), which cover 28 eu member states. in the seven-year period (2014–2020), the eu’s regional policy has focused on rallying the territories by providing support to all regions according to common rules (for all european structural and investment funds), simplifying the rules (clear requirements, using digital technologies (e-cohesion), simplifying reporting rules), linking financial support with the final result. the next important change is the strengthening of territorial unity and territorial cooperation through the facilitation of conditions for the creation of european groupings of territorial cooperation (egtc group) (regional policy – inforegio, 2013). tendencies to strengthening territorial cooperation at the regional and cross-border levels in europe are manifested in the creation of the egtc, which are a tool to increase the efficiency of cooperation among regions and their economic and social cohesion. at the moment, associations have been established in 18 eu member states (table 1). in the period of 2008– 2010, 18 egtc project groups were founded. egtc are legal entities, and their members also have the status of legal entities, which allows government agencies of various countries participating in such an association to provide joint services without requiring the conclusion of preliminary international agreements signed and ratified by national parliaments. the egtc must include representatives of at least two eu countries (bannikov, 2014). most of the egtc members are located in eastern and southern europe. moreover, if on the early stages egtc were projects for the implementation of exclusively cross-border cooperation, then since 2012 they began to be created as platforms for cooperation between cities of different eu member states. the functioning of the egtc is based on agreements between national, regional or local authorities, as well as any other government agencies or associations (european union – committee of the regions. what is the egtc (2017)). the agreement on the organization of egtc establishes the goals and objectives of the association, its structure and management system (table 2), and decisionmaking mechanisms, legal address, financing issues, duration of an agreement and its termination conditions. in addition, the organizers must inform the eu member states and the committee of the regions about the egtc creation. the composition of participants is determined in accordance with the goals and objectives of the association. table 1 european groupings of territorial cooperation № regions member states founded in 2011 1 euroregion tirol-südtirol/alto adige-trentino austria – italy 2 eurorégion aquitaine-euskadi france – spain 3 arrabona hungary – slovakia 4 pirineus-cerdanya france – spain 5 espacio portalet spain – france 6 egtc “territory of municipalities: gorizia, mestna občina nova gorica and občina šempeter-vrtojba” italy – slovenia 7 linieland van waas en hulst belgium –the netherlands 8 rába-duna-vág (rdv) hungary – slovakia founded in 2012 9 bodrogközi hungary – slovakia 10 gate to europe egtc ltd. hungary – romania 11 pannon hungary – slovenia 12 novohrad – nógrád' hungary – slovakia 13 efxini poli – network of european cities for sustainable development greece – cyprus – bulgaria 14 european urban knowledge network (eukn) cyprus – belgium – the czech republic – france – germany – hungary – luxembourg – the netherlands. spain acts as an observer source: compiled by the author based on: regional policy – inforegio (2013), euregio presentation (2016) (at the beginning of 2015) baltic journal of economic studies 111 vol. 5, no. 3, 2019 the egtc tasks are very diverse and can be to solve a specific problem or to develop a platform for the development of decision-making mechanisms for regional development as a whole. creating egtc can be associated with: 1) management of cross-border cooperation programs; 2) implementation of border cooperation projects at the regional and local levels; 3) other ways of cooperation, with or without eu financial support (for example, support for cross-border transport associations or bilateral municipal initiatives (building hospitals, waste recycling)). in the first case, we are talking about egtc as the legal representatives of the euroregions in the international councils and committees. the objectives of the egtc are very extensive and, above all, related to supporting economic, social, historical, and cultural links between the population of the regions through cooperation in various fields, such as energy, environment, transport, healthcare, education, research and innovation (growing regions, 2008). an example of such symbiosis is the egtc “euroregion ‘tirol-alto-adige-trentino’”. this association was founded in september 2011, although cooperation between its member regions has several decades, and the euroregion as a platform for crossborder cooperation has existed since may 1998. in the second case, the egtc, acting at the local (less often at the regional) level, contributes to the implementation of the “bottom-up” principle when implementing programs of cross-border cooperation. for example, the egtc saar-moselle eurodistrict was founded in 2007 in order to strengthen the competitiveness of the region, conduct joint regional marketing activities for the saar/moselle region, and solve common problems. as an illustration, let’s call the launch of an electric train running on two energy sources between the cities of saarbrücken and sarreguemines (kuzmin, 2014). in the third case, egtc is created to solve any specific problems in a particular area. an example of such a highly specialized association is the hospital de cerdanya egtc on the french-spanish border, established in may 2010 for the purpose of enhancing cross-border healthcare cooperation. within this association, support is being provided for the construction of a hospital, the services of which will be available to both about 17 thousand residents of the region of cerdanya in the catalan pyrenees and about 13 thousand residents of the regions of cerdan and capcir (kodric m., 2011) (hospital de la cerdanya). thus, working together with all interested parties within specific regions, the egtc makes it possible to implement an integrated approach to strengthening territorial cohesion by developing common measures to improve the socio-economic situation. taking into account that the associations include actors from all political levels of neighbouring countries, this contributes to the achievement of the goal of the economic, political, social, and cultural unity of the eu. moreover, the egtc is a practical implementation of the concept of multi-level management, allowing different hierarchical levels of management to cooperate in one cooperative structure, which, in turn, allows regional and local authorities to directly participate in shaping the eu regional policy. 3. results and discussion in the danube region over the past two decades, fundamental changes have occurred. the first transformational aspect is the wave-like expansion of the eu in 2004 and 2007 (application and effects, 2007). the major part of the world’s most multi-ethnic river basin is currently located in the european union (eu) area. there are new opportunities for solving problems and realizing the potential, especially for intensifying its efforts to overcome the economic crisis, taking into account future needs. socio-economic development, competitiveness, natural resource management, and increasing resource efficiency can be improved, and security and transport corridors can be modernized. the danube could open the eu to its closest neighbours, the region of the black sea, the south caucasus, and central asia. the eu strategy for the danube region can contribute to the implementation of the eu objectives, giving new strength to the main eu political initiatives, especially the europe 2020 strategy. the danube region is a functional area defined by its own river basin. collaborating organizations, such as the danube commission and the international commission for the protection of the danube river, deal with specific issues. the strategy extends the specified approach in order to set priorities from the viewpoint of integration. geographically, this applies primarily and not only to: within the eu – germany (baden-württemberg and bavaria), austria, the slovak republic, the czech republic, hungary, slovenia, romania, and bulgaria, as well as beyond its borders – croatia, serbia, bosnia and herzegovina, montenegro, the republic of moldova, and ukraine (regions along table 2 egtc obligatory authorities authority assembly (representation of all egtc members) director functions making/approving decisions representation of egtc at regional/national/ supranational levels source: compiled by the author based on: european union – committee of the regions. what is the egtc (2017) baltic journal of economic studies 112 vol. 5, no. 3, 2019 the danube and its tributaries). the strategy remains open to other partners in the region. since the danube flows into the black sea, it must be linked to the development prospects for the black sea. with a total population of over 100 million people, the fifth largest territory of the eu is of great interest to europe. bringing together people, their ideas and needs in the danube region is a serious and deep task. transport links should be modernized. energy resources can be made cheaper and safer by strengthening links and alternative sources. development can be balanced in environmental protection, in the framework of a sustainable development approach and in accordance with the environmental acquis communautaire (the totality of all eu regulations), where applicable. in order to minimize risks and disasters, such as floods, droughts, and industrial accidents, joint work is needed. through the creation of certain research and innovation perspectives, the danube region will be able to take a leading position in trade and entrepreneurship in the eu. the disparity in education and employment can be overcome. the danube region can become a safe and protected area where issues of conflict, marginalization, and crime are properly solved. by 2020, all citizens of the region should have the best prospects for higher education, employment, and wealth improvement at the place of residence. the danube european integration strategy suggests a zonal transformation to the high-tech standards of the 21st century, according to the concept of sustainable development, one of the most attractive in europe (otocan, 2011). for a serious elaboration of problems and creation of an optimal association strategy, extensive consultations were held with interested organizations and their suggestions were heard. the governing bodies, including those from non-eu countries, also participated through the national coordination offices. the main institutional participants were the services of the european commission, the european investment bank, and other regional authorities (perkmann, 2013). the danube region has historically been under the special influence of an unstable situation, accompanied by a series of conflicts, population migration, and antidemocratic regimes; nevertheless, the fall of the iron curtain together with the eu expansion has given hope for the future. the above means the necessity to take into account the main problems (regional cohesion and competition in the age of globalization, 2000). mobility. the danube river is the main corridor of the ten-t. its potential, however, is not fully utilized. the share of cargo is only 10%-20% of the volume transported along the rhine. since inland water transport has important advantages in terms of environmental protection and economic efficiency, its potential must be exploited on an ongoing basis. there is a particular need to develop multimodality, in the best interconnection with other river basins, in a modernized and developed infrastructure of transport hubs, such as inland ports; energy. prices in the region, in relative terms, are higher. fragmented markets lead to higher costs and reduced competition. dependence on a too limited number of external suppliers increases vulnerability, as evidenced by periodic winter crises. a wider range of supplies made through interconnections and natural regional markets will increase energy security. the crucial point is to increase economic efficiency, including the use of energy-saving and more renewable energy sources. environment. the danube region is the main international hydrological basin and ecological corridor. this requires a regional approach to nature conservation, spatial planning, and natural resource management. pollution does not recognize state borders. major problems, such as untreated sewage, fertilizer and soil ingress into the river, heavily pollute the danube. also, the following should be taken into account: the impact of transport links on the environment, the development of tourism and new energy generation facilities. environmental risks. there are quite often cases of large floods, droughts, and industrial pollution. prevention, readiness, and effective response require a high degree of cooperation and information sharing. socio-economic aspects. the region is characterized by very large differences. it includes both one of the most successful and one of the poorest regions of the eu. in particular, there is a lack of contacts and cooperation in both financial and institutional terms. enterprises do not fully use the international scope of marketing, innovation, and research. the share of the population with higher education in the danube region is lower than the average in 27 eu countries, which is again accompanied by a pronounced division. usually, the best-skilled workers leave the country. security, serious crimes, and organized crime. there are also serious problems in this area. human trafficking, smuggling of goods are particularly acute problems in a number of countries. corruption undermines public confidence and hinders development. these problems are best solved together, determining priorities, coordinating and implementing actions. for example, developers and environmental organizations must find innovative solutions in the interests of the entire region, solving the most complex issues together. at the same time, the danube region has broad prospects. it has a rich ethnocultural history, culture, cross-cultural traditions, and it is also rich in natural and balneological landscape uniqueness. there are huge development potential, many-sided creative one, availability of a skilled workforce, and powerful intellectual potential. let us distinguish strategic development areas (yurasova, 2013; martunyuk, 2017). baltic journal of economic studies 113 vol. 5, no. 3, 2019 1) geographical association of europe and the east. there is a huge potential for the development of existing transport and trade links (for example, through the traceca transport network connecting the eu through the black sea region to the caucasus and central asia). 2) the developed infrastructural architecture of the education system. including different universities, but the quality of training varies. education and training should be linked to the needs of the labour market, along with supporting student mobility throughout the entire danube region. 3) the presence of millennial traditions of cultural, ethnic, and natural diversity. the presence of large cities and world heritage sites, including the concentration of capitals and cultural centres. this requires a modern approach to tourism offers and infrastructure so that both the guest and the host can get profit from this activity. 4) the ability to optimize and improve the use of renewable energy sources, such as water, wind biomass, thermal springs. there are also wide opportunities for improving energy efficiency by enhancing the efficiency of energy demand management and modernizing building and logistics. these measures will facilitate the transition to a low-carbon economy. 5) availability of natural wealth: unique fauna and flora, the most valuable water resources, and unique landscapes (for example, the danube delta, the carpathians). they must be in constant preservation and recovery. the fullest use of these opportunities also requires the expansion of cooperation, planning, joint investment, and the development of key links. the indicated areas are examples of the transformational optimization of the danube strategy towards egtc. obviously, the proposed transformational transition plan is a recommendation, with obligatory adjustment options. four key directions will allow harmoniously interacting and developing in accordance with the concept of sustainable development. each direction contains priority recommendations in various fields of activity. і. association of the danube region. 1.1. improved mobility and multimodality. modernization of inland waterways. activation of road, rail, and air traffic. 1.2. promoting more sustainable energy. 1.3. support for culture and tourism, the interaction between people. for this, the following strategic objectives can be set (european union, 2017): – by 2020, increase river freight by 20% compared with 2010; – elimination by 2020 of existing bottlenecks that impede navigation on the river, which should take into account ensuring the passage of class vib vessels throughout the year; – reduced travel time for competitive rail passenger services between major cities; – planned for three or five years, the implementation of the program “four railway freight corridors crossing the danube region”; – development of effective multimodal terminals in danube river ports by 2020 for connection of inland waterways with rail and road transport; – achievement of national goals based on climate and energy objectives defined in europe 2020. іі. environmental protection in the danube region 2.1. restoration and preservation of water resources quality. 2.2. environmental risk management. 2.3. conservation of biodiversity, landscapes, and air and soil quality. for this, the following strategic objectives can be set (european union, 2017): – achieving goals in the field of environmental protection and river basin management; – reduction of nutrient levels in the danube river in order to enable the black sea ecosystems to recover to conditions similar to 1960; – the introduction of extensive flood risk management plans for the danube (should have been submitted in 2015 based on the floods directive), which should include a significant reduction in flood risk by 2021, taking into account the possible effects of climate change; – ensuring by 2020 the protection of viable populations of danube sturgeon fish and other fish species inhabiting the basin, fighting invasive species; – reduction by 25% of the zone prone to erosion with soil washout of more than 10 tons per hectare by 2020. iii. creating a prosperous danube region 3.1. dissemination of knowledge in society through the introduction of research, educational, and information technologies. 3.2. supporting the competitiveness of enterprises, including cluster development. 3.3. investing in human resources and training. for this, the following strategic objectives can be set (european union, 2017): – investing 3% of gdp in research and development by 2020; – wide access for all eu citizens to the region by 2020; – increase in the number of patents obtained in the region by 50% by 2021; – increase in the share of the eu population who have reached 30-34 years old, having higher or equivalent to higher education, by 40% up to 2022. iv. strengthening of the danube region. 4.1. the building of institutional capacity and collaboration. 4.2. joint work to solve security issues and the fight against organized crime and serious crimes. baltic journal of economic studies 114 vol. 5, no. 3, 2019 for this, the following strategic objectives can be set: – improving the e-government platform by 2020 and reducing the bloated bureaucracy; – achieving a maximum of 3 weeks for obtaining permission to go into business by 2020; – ensuring fruitful cooperation among certain law enforcement units by 2020 for an effective system of information exchange between certain departments in order to improve security and fight organized crime and serious crimes in 14 countries. 4. conclusions in europe, considerable experience has been gained in the implementation of regional policy. taking into account the complexity and heterogeneity of such a formation as the eu, we can talk about a multi-level regional policy aimed at the development of specific regions within the framework of national states and the economic consolidation of territories at the international level. this is necessary from the viewpoint of the qualitative development of the integration movement and its deepening. the instrument of such cohesion is the european groupings for territorial cooperation, which mainly arise where cooperation has been conducted on the basis of common strategies and specific projects for a long time and successfully. in terms of increasing global competition and aggravating socio-economic problems within the european union, in the regional policy programs for the period of 2014–2020, great attention is paid to the policy of cohesion, including territorial. moreover, the strengthening of territorial unity and territorial cooperation is planned to be achieved by increasing financial resources (up to 30%) to support all types of territorial cooperation and stimulate the egtc creation. the further success and actors capacity building of the euroregions, their movement along the path of “privatization” of worldwide policy will depend on the fulfilment of several basic local tasks, namely, to determine the field of common interests; bring people together; create suitable institutions; develop joint projects; provide funding and control; demonstrate benefits of cooperation to citizens; guarantee transparency and awareness. this will have a serious impact on the eu and its adjacent territories. established links, both internal and those with other regions of europe and the world, play a key role in the danube region. transport and energy infrastructures have many gaps and weaknesses over insufficient carrying capacity, quality, or poor service. more reliable connections between people, especially through culture and tourism, are also necessary. effective improvements require coordinated planning, funding, and implementation. the market collapse caused by external factors is strikingly evident in the lack of investment across borders. large projects should be identified and implemented on a sustainable and costeffective basis, with the distribution of costs and profits. the more users, the more effective the investments become, and the larger the scale, the greater the savings. the transformational optimization strategy proposed by the author provides a stable framework for the policy of integration and cohesive development of the danube region. it establishes priority areas aimed at creating the eu region of the 21st century. not only regulatory and information support but also real particular actions for interaction and cooperation are necessary in order to ensure a wide popularization of the strategy’s tasks. references: application and effects (2007). application and effects of the espd in the member states – espon project 2.3.1, third and final 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(2012). paradiplomatia european regions. all of europe. retrieved from: http://www.alleuropa.ru/ para-diplomatiya-evropeyskich-regionov baltic journal of economic studies 249 vol. 5, no. 2, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. national scientific center “institute of agrarian economics”, ukraine. e-mail: shpykuliak@ukr.net orcid: http://orcid.org/0000-0001-5257-5517 2 vinnytsia national agrarian university, ukraine. e-mail: i.bilokinna@gmail.com orcid: http://orcid.org/0000-0001-5816-1067 doi: https://doi.org/10.30525/2256-0742/2019-5-2-249-255 “green” cooperatives in the formation of an institutional mechanism of development of alternative power engineering in the agrarian sector of the economy oleksandr shpykuliak1, ilona bilokinna2 abstract. the essence of energy cooperatives and their value in a power system of the country is investigated in this article. the aim of this article is to investigate the role of “green” cooperatives in the institutional mechanism of alternative energy development in the agrarian sector of the ukrainian economy. the object of the study is the green cooperatives of alternative energy in ukraine. the subject of the study is green cooperatives and their role in the development of the alternative energy in ukraine’s agrarian sector. the methodology of this study is to use the institutional approach in the study of green energy cooperatives as an integral part of the institutional mechanism for the development of alternative energy in the agrarian sector. the basic concept “cooperation” and derivative “power cooperative” from the point of view of various authors are studied and our own explanation of the term “green power cooperative” is given. the condition of the development of alternative power engineering in ukraine is investigated. production and use of alternative energy sources in ukraine have begun since 2007. in ukraine, there operate 432 objects of the renewable power industry in ukraine, to which the green tariff with a general power of 1534 mw is established. the most energy consumed is biofuel and waste, while the second place is the consumption of hydropower and the third is the consumption of wind and solar energy. the agrarian sector of the ukrainian economy has considerable potential for the development of renewable power as a rather developed branch of poultry farming and livestock production is favourable for the development of bioenergetics. researches have shown that at this stage of development, it is possible to construct 1425 biogas installations on livestock and poultry-farming farms. for the last few years, there is an active construction of solar power stations. the biggest number of solar power stations is in the kyiv, dnipropetrovsk, and ternopil regions. in this article, the institutional mechanism for the development of alternative power engineering is investigated. the main normative legal acts known as formal institutes which regulate renewable power in the country, namely laws, orders, strategy are considered. such elements of the institutional mechanism as the organizations controlling and structuring the development of alternative energy sources, including the agrarian sphere of the national economy are analysed. the need for creation of green power cooperatives is proved and also an example of the successful experience of foreign countries in green power cooperation, namely such countries as great britain and germany, is given. in ukraine, such a form of the organization of activity as green power cooperation only begins to develop. in difficult economic and ecological conditions and conditions of the volatility of creation of green power cooperatives, it will allow solving a number of problems which are present now, including in the agrarian sector. however, there are barriers of institutional character which don’t allow the population to create power cooperatives fully. in this case, only the state due to the creation of the effective institutional mechanism can help solve a difficult situation. besides, there is a need for simplifying the process of creation of green power cooperatives and releasing from the statement of a lot of tariffs. increase in the number of green power cooperatives in the agrarian sphere is a basis for overcoming volatility of the population in rural areas, increases in their profitability and reduction of expenses. conclusions. green cooperatives play a major role in shaping the institutional mechanism of alternative energy development in the agrarian sector of the ukrainian baltic journal of economic studies 250 vol. 5, no. 2, 2019 economy. because rural people are only able to ensure their energy independence through the creation of green cooperatives, reduce the cost of purchasing energy resources, and also earn money selling produced energy and fuel. this will help not only increase the production and use of alternative energy sources in the agricultural sector of the country but will also greatly affect the development of rural areas. key words: green energy cooperative, institutional mechanism, renewable energy sources, agrarian sector, institution. jel classification: o13, o17, q19, q20, q42 1. introduction many ukrainian communities now face the challenge of securely providing themselves with energy. the growth of prices for traditional energy sources, as well as the difficult social situation, makes the ukrainian population unlike the usual ways to look for alternative energy resources. in addition, the energy resources of the monopolists are too expensive and of poor quality. in addition, in foreign countries, there is a tendency towards a more distributed production of energy, when more and more energy is produced near its place of consumption, including energy consumers themselves. world practice shows that this tendency is quite beneficial for the ukrainian population. the urgency of the research topic is that it is a dream of every ukrainian entrepreneur, and especially agrarian, that they have their own energy infrastructure and do not depend on the state and power generating monopolists, besides the ukrainian agrarian sector is quite energy intensive. it is expensive to switch to alternative energy sources or to implement energy efficiency measures; therefore, it is necessary to pay attention to such a form of cooperation as green energy cooperatives. the purpose of this article is to investigate the role of green energy cooperatives in the institutional mechanism of alternative energy development in the agricultural sector of ukraine. according to the research goal, the following tasks must be performed: to define the essence of the concept of green energy cooperatives; to study the state of development of alternative energy in the agrarian sector of ukraine; identify the most promising alternative energy sources for ukraine; investigate the institutional mechanism for the creation and operation of green energy cooperatives; to study the role of green energy cooperatives in the development of the alternative energy sector in the agrarian sector. ukraine ratified the paris agreement (paris, december 12, 2015) at the xxi conference of the parties of the united nations framework convention on climate change in 2016, which will come into force after 2020 upon termination of kyoto protocol, defining its future direction of development ecologically safe. thus, it has confirmed the transition from exhaustible to renewable natural resources. there is a constant informal organization in ukraine that the monopolist who often abuses the situation can only be the producer and the supplier of energy. it is difficult for the population to realize that at this stage of development, each citizen, farmer, any subject of managing can become the producer of energy for their own consumption and not only their own. selforganization of the population will help to break down this stereotype and solve a number of problems in many developed countries (for example, germany, austria, the usa, etc.) the number of such producers of energy as power cooperatives increases quickly. they occupy a considerable share in the power balance of these countries. in the institutional mechanism of alternative energy development in the agrarian sector, green energy cooperatives play a role which will be defined in the course of this study. 2. what are the green power cooperatives? at the beginning of this century, a concept of ecologically safe and socially fair economic growth providing stage-by-stage formation of a new type of economy, that in foreign and, for quite some time now, in domestic practice is known under the name “green economy” becomes popular. this direction of ecologically balanced development is followed by growth of a share of investments in ecologically safe and energy saving technologies (khodakivska, shpykuliak, suprun, 2017). the concept of green economy aims at economic transformation to foster improvement of social welfare and justice, at the same time, considerably reducing environmental threats and ecological deficiencies (kasztelan, 2017). alternative power engineering is one of the bases of functioning bases of “green economy,” including the agrarian sector. and green power cooperatives are an important element of the development of alternative power engineering. exploring the category of green energy cooperatives, it is first necessary to study its main component, namely, what is meant by the word “cooperation.” according to m. tugan-baranovsky, “cooperation should be recognized by an organization with certain class features” (tugan-baranovsky, bulochnikov, sorvina, subbotina, 1989). another modern scientist believes that cooperation leads to the emergence of baltic journal of economic studies 251 vol. 5, no. 2, 2019 a new productive force that far exceeds the productivity of its separate components (gorbonos, pavlonchik, 2013). in our opinion, this is the main characteristic of cooperation, that is, when there is an association of citizens with a common goal, they become stronger and more likely to achieve the goal than each of them alone. the phenomenon of energy cooperatives is a new and young model in ukraine, through which citizens are looking for ways to optimize their energy expenses and/ or generate revenue in the field of energy production. that is, energy cooperatives are an association of people for the benefit of the consumption and production of electricity (aliyeva, zhitnikovskaya, brill, 2017). energy cooperatives (german – energie genossenschaften) are associations of citizens, enterprises, and organizations whose goal is, as a rule, the implementation of various local projects in the field of renewable energy. often, such associations focus their efforts on decentralized, environmentally friendly and energy-independent companies and concerns. they are a form of so-called public participation/activity (german – bürgerbeteiligung), i.e. citizens’ participation in certain political processes and policy decisions, mainly at the regional and communal levels (financial and economic analysis office in the vru, 2016). we agree that “... cooperation in market conditions, including in rural areas, can only take place due to the commonality of the individual economic interests of individuals, which are realized through the mechanism of market self-organization, including the merger of their private property, that in society there are necessary institutional conditions – corresponding statutory support and rules of customary law” (borschevsky, kulish, tsimbalist, kravtsev, 2017). in our opinion, green energy cooperatives are associations of citizens and other economic entities for the purpose of manufacturing, consuming, and selling environmentally friendly energy from renewable sources. for ukraine, the creation of green energy cooperatives in the agrarian sector of the economy is a rather promising idea. since a significant part of the ukrainian economy is occupied by the agrarian sector, which needs cheap ecologically safe energy resources. good cooperative support is important for proper institutional provision, that is, appropriate formal institutions and initiated, equally important, informal institutions should be created at the state level. that is, there are a number of informal institutions that promote cooperation, including the creation of green energy cooperatives, “...the main informal institutions connected with the processes of cooperation should include: traditions of self-organization of the population, the culture of entrepreneurship, social capital, legal awareness, individual responsibility, self-education and self-development, social communication, moral norms and spiritual values, etc.” (borschevsky, kulish, tsimbalist, kravtsev, 2017). 3. the current state of development of alternative energy in ukraine in pursuance of the october 2012 decision of the council of ministers of the energy community d/2012/04/mc-enc “on the implementation of the directive 2009/28/ec on the promotion of energy from renewable sources,” which amends further directives 2001/77/ec and 2003/30/ec are being repealed, ukraine has committed to bring the energy produced from renewable energy sources in the overall energy consumption structure to 11% by 2020 (scientific and project center for the development of the unioned energy systems of ukraine, 2016). in recent years, ukraine has made a significant step towards increasing the share of production and consumption of energy from renewable sources. visually energy-based renewable energy sources can be seen in figure 1. in recent years, energy consumption from renewable sources has the largest volumes of biofuel and waste figure 1. renewable energy consumption for 2007–2016* *2014–2016 without taking into account the temporarily occupied territory of the autonomous republic of crimea and the city of sevastopol and part of the ato zone source: http://www.ukrstat.gov.ua/ baltic journal of economic studies 252 vol. 5, no. 2, 2019 energy consumption and in 2016 it has reached almost 3000 tons of oil equivalent. a steady increase occurs in the consumption of wind and solar power, and the consumption of hydropower in 2015 reached the lowest level since 2007, although in the next 2016 there was an increase. the analysis of statistical data for livestock and poultry enterprises in ukraine shows that at least 370 biogas plants (total capacity of 27 mw) can be built on pig farms in the power range of 30-190 kw, on farms with a capacity range up to 300 kw – 965 of these plants (in general at 75 mw) and 90 more (with a total capacity of 5 mw) in poultry farms – in the range of power 15-110 kw (ukrainian farms show interest in biogas plants, 2017). in an analytical report by the international finance corporation, it has been estimated that even with the use of 20 million tons of waste for energy production, ukraine will cover 25% of annual electricity demand, which will allow over 8 billion cubic meters of natural gas to be replaced. that is, the use of only agricultural residues in full gives the opportunity to refuse to import natural gas by 75-80% (“green” reserve – annual results of alternative energy in the agro-industrial complex and plans for 2018, 2018). the main instrument in ukraine, with the help of which the state encourages business entities to produce energy from renewable sources, is the “green” tariff, which is one of the highest in europe. as of the end of the 1st quarter of 2018, 432 renewable energy companies operate in ukraine, which have a green tariff, with a total capacity of 1534 mw, of which: 235 ses with a total capacity of 841 mw; 24 wind power plants with a total capacity of 512 mw; 138 mps with a total capacity of 96 mw; 7 biomass power plants with a total capacity of 44 mw; 28 biomass power plants with a total capacity of 41 mw (state agency on energy efficiency and energy saving of ukraine, 2018) (figure 2). as figure 2 shows, such a type of renewable energy as solar has been actively developing in recent years since it is fast moving compared to others and with the highest green tariff (15-euro cents per kwh). the tendency to increase the number of solar power stations not only among large and medium business entities but also small, private households is quite important. in ukraine, the number of solar power stations in private households increased significantly during the first quarter of 2018 (figure 3). this tendency is especially important for the agrarian sector, that is, for those who are in rural areas, they have difficulty with power supply and therefore, setting up the ses with the capacity up to 30 mw has the opportunity to become non-volatile. the largest number of solar power plants is in the kyiv (517), dnipropetrovsk (362), and ternopil (261) regions. however, the most active construction of solar power plants in the first three months of 2018 took place in the kirovohrad region, the number of facilities built during this period was 67. this indicates that the favourable institutional environment for the development of solar energy is gradually being created. thus, in comparison with other countries, the development of alternative energy in ukraine is at an initial stage. however, we already see some positive results, and the performance is improving every year. 4. the role of green energy cooperatives in the development of alternative energy at this stage of development, ukraine remains energy dependent on imports of energy resources. the situation can only be remedied by increasing the production of alternative energy sources, as the country’s potential allows the development of all types of renewable energy. it is only necessary to create the right institutional mechanism that would push the citizens not only to realize the call parties of the consumption of alternative energy but also to personal production of energy from renewable sources. solar power plants wind power plants small hydroelectric power stations biomass power plants biogas power plants figure 2. power of renewable energy objects as of 31.03.2018 source: formed by the author on the basis of (state agency on energy efficiency and energy saving of ukraine, 2018 baltic journal of economic studies 253 vol. 5, no. 2, 2019 as already mentioned, the use and production of renewable energy sources are of great importance for our country, including the agrarian sector. a number of formal institutions for the development of alternative energy have been established in ukraine, namely, the law of ukraine “on alternative fuels”, the law of ukraine “on alternative energy sources”, the law of ukraine “on combined production of thermal and electric energy (cogeneration) and utilization of waste energy potentials”, the law of ukraine “on amending certain laws of ukraine regarding the promotion of the production and use of biological fuels”, the decree of the cabinet of ministers of ukraine dated 01.10.14 № 902-p “on the national action plan for renewable energy for the period up to 2020”, the energy strategy of ukraine for the period up to 2030, etc. europeans have already understood the need to move to clean energy sources and increase the pace, actively using the cooperative form of organization of activities. therefore, in the uk, there are about 5 thousand cooperatives, mainly involved in solar and wind generation. in germany, energy cooperatives have now become rivals of energy holdings, generating up to 30% of renewable energy. therefore, the clean energy for all europeans energy package in the eu already limits the preferences for the primary connection of energy cooperatives to the network (energy cooperatives, 2018). in ukraine, this form of organization of activities is only beginning to develop. in complex economic and ecological conditions and conditions of energy dependence, the creation of green energy cooperatives will solve a number of problems that are currently present, including in the agricultural sector. however, there are barriers of an institutional nature that prevent the population from the free creation of energy cooperatives. under the current legislation, a cooperative engaged in both the production and supply of energy for its members must obtain three licenses and approve three tariffs – for the production, transportation, and supply of electricity, and must abide by the conditions imposed on natural monopolies. it makes the organization of the cooperative more expensive and makes it dependent on local self-government (energy cooperatives will promote the development of green energy and the solution of systemic problems, 2018). the process of creating green energy cooperatives needs to be simplified and exempted from the approval of many tariffs. but, unfortunately, in ukraine, there is currently no legally established institution that would change this situation and promote energy cooperation in the agrarian sector. the institutional mechanism for the development of alternative energy in the agrarian sector of ukraine includes an effectively interconnected work of state and local authorities and public organizations that play a major role in creating the necessary regulatory and legal framework and, in the future, in creating the appropriate informal institutions. the state authorities that control the development of renewable energy, including in the agrarian sector, consist of: the ministry of energy and coal industry, state agency on energy efficiency and energy saving of ukraine, the national agency for the efficient use of energy resources, the state inspection on the operation of electric power plants and networks, state committee of ukraine on energy saving, etc. public organizations that fulfil the role of self-regulatory alternative energy organizations to a certain extent are the agency for renewable energy, the association of alternative fuel and energy market participants in ukraine, the bioenergy association of ukraine, the public organization “econovation”, the ukrainian association for renewable energy, etc. in the institutional mechanism of alternative energy development, including in the agrarian sector, one of the main roles of green energy cooperatives can be mentioned. ukrainian peasant feels a significant lack figure 3. number of solar power plants of private households as of 31.03.2018 *(+х) – installed in q1 2018 source: “green” reserve – annual results of alternative energy in the agro-industrial complex and plans for 2018, 2018 baltic journal of economic studies 254 vol. 5, no. 2, 2019 of energy resources, which are quite expensive. it is possible to reduce energy dependence and energy and fuel costs by using renewable energy sources, as well as independently producing them. however, the cost of technology and equipment for installing a solar power plant on the roof of a building or the installation of a biogas plant based on agricultural waste is high and a separate peasant cannot afford to buy such. therefore, it is advantageous for a ukrainian peasant to join green energy cooperatives and to personally produce energy and fuel from alternative sources for the lighting of warehouses, for the operation of their cars, tractors, combines, for personal consumption, etc. in the green energy cooperatives, as several peasants, so the whole rural community can be united. it is positive that the peasants will be able not only to provide themselves with energy and fuel but also to sell and earn from it. as a result, if the peasants see the financial benefits of green energy cooperation, they will actively join forces for energy independence, reducing their costs and increasing profits. the result will be an increase in the use of alternative energy sources in the agricultural sector, that is, green energy cooperatives are a new element of the institutional mechanism for the development of alternative energy in the agrarian sector. a sufficient institutional barrier to the formation of green energy cooperatives is the unwillingness of citizens to unite. however, as noted above, the main thing is to start and that the citizens see a real example of the economic benefits of energy cooperation. the first green energy cooperative in ukraine was created in the kharkiv region in 2016. the experts of the institute for sustainable development asked twenty agricultural entrepreneurs to join a biofuel cooperative for their own needs, but eight of them refused. the organization received a un grant for procurement of equipment (money for environmental innovations: where is choose fees for “green” initiatives, 2017). a year after the creation of this energy cooperative, 20 tons of diesel fuel was produced, which was enough for the needs of the members of the cooperative, namely for harvesting and subsequent sowing. however, nowadays there is more than one energy cooperative. another example of the green energy cooperative is two cooperatives in losiatyn village, kremenets district, ternopil region. the initial purpose of their creation was to grow raspberries and strawberries. but later, the members of the cooperatives began to use stalks of raspberries, which were cut every autumn, as fuel for their homes. thanks to funding from undp and the eu, yahidnyi krai cooperative bought and launched a briquetting line (peasants heat up their homes by briquettes from the waste of raspberry of own production in ternopil region, 2018). thus, raspberry stalks turn into fuel briquettes and save on the use of gas. despite the imperfection of legislation that overly regulates the work of energy cooperatives, thousands of ukrainian communities can repeat the experience of the losiatyn community and reduce heating costs (peasants heat up their homes by briquettes from the waste of raspberry of own production in ternopil region, 2018). this is another proof that the creation of green energy cooperatives will increase the share of renewable energy in the agricultural sector, will significantly reduce the cost of the rural population and make them energy independent. 5. conclusions summarizing the above said, one can draw the following conclusions: 1. alternative energy is one of the foundations for the functioning of the green economy, including in the agricultural sector. green energy cooperatives are an important element in the development of alternative energy. 2. examining the category of green energy cooperatives, it is first necessary to study its main component, namely, what is meant by the word “cooperation.” there is a great deal of thought about the definition of “cooperation.” however, the simplest and most understandable definition sounds like this, cooperation is an association of citizens with a common goal, which leads to an increase in their force and accelerates the goal achievement. 3. from the basic concept of “cooperation” it follows that green energy cooperatives are associations of citizens and other economic entities for the purpose of manufacturing, consumption, and sale of environmentally friendly energy from renewable sources. 4. proper institutional provision is important for encouraging cooperation, that is, appropriate formal institutions should be subsequently formed, as well as informal institutions should be created at the state level. 5. in recent years, there has been a steady increase in the use of alternative energy sources in all sectors of the economy, but biofuels and wastes are the most used. this is evidenced by the fact that in 2016, the use of this kind of energy reached almost 3000 tons of oil equivalent. 6. the domestic agricultural sector has sufficient potential for the further development of bioenergy out of biomass and waste. biogas plants can be built near livestock and poultry farms, which will eliminate a number of problems. such installations will enable both farms and the nearest settlement heating, as well as all waste from this production, will be processed. 7. ukraine has the highest green tariff throughout europe. this is a factor in encouraging the production of alternative energy, as well as the creation of green energy cooperatives, especially among the rural population. 8. solar power is at its fastest pace of development, and in the first three months of 2018, the most active construction of solar power plants was in the kirovohrad region (67 objects). quite often, green baltic journal of economic studies 255 vol. 5, no. 2, 2019 power cooperatives are created for the construction of solar power plants since this type of energy is relatively fast. 9. the institutional mechanism of alternative energy development in the agrarian sector of ukraine includes effective work of state and local authorities, as well as public organizations. and now, this mechanism also includes green energy cooperatives, which greatly enhances the 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(2013). restructuring the economic space of a rural territorial unit as a basis for the development of cooperation. proceedings of the all-ukrainian scientific and practical conference april 4-6, 2013. zhytomyr: zhytomyr national agroecological university. "green" reserve – annual results of alternative energy in the agro-industrial complex and plans for 2018 (2018). retrieved august 06, 2018, from: https://agropolit.com/spetsproekty/396-zeleniy-rezerv--richni-pidsumkialternativnoyi-energetiki-v-apk-ta-plani-na-2018 kasztelan, a. (2017). green growth, green economy and sustainable development: terminological and relational discourse. prague economic papers, 26(4), 487–499. doi: https://doi.org/10.18267/j.pep.626 khodakivska, o. v., shpykuliak, o. g., suprun, o. m. (2017). institutes of the "green economy " in ensuring the sustainable development of the agricultural sector: the theoretical dimension. business inform, 7, 13–18. money for environmental innovations: where is choose fees for "green" initiatives (2017). retrieved august 16, 2018, from: www.umoloda.kiev.ua/number/3250/159/118668/ peasants heat up their homes by briquettes from the waste of raspberry of own production in ternopil region (2018). retrieved august 16, 2018, from: https://agroreview.com/news/na-ternopilshchyni-selyany-opalyuyutsvoyi-domivky-bryketamy-z-vidhodiv-malyny-vlasnoho-vyrobnyctva scientific and project center for the development of the unioned energy systems of ukraine (2016). status and prospects of development of small hydropower, solar, wind and other sources of renewable energy of foreign countries and ukraine. retrieved august 22, 2018, from: https://ua.energy/wp-content/uploads/2018/01/ 4.-stan-i-perspektyvy-rozvytku-pde.pdf ukrainian farms show interest in biogas plants (2017). retrieved august 16, 2018, from: http://biowatt.com.ua/ trends/ukrainskie-fermy-proyavlyayut-interes-k-biogazovym-ustanovkam/ state agency on energy efficiency and energy saving of ukraine (2018). information on capacity and volumes of electricity production by renewable energy companies which have a "green" fare. retrieved august 07, 2018, from: http://saee.gov.ua/sites/default/files/information%20res%20in%20ukraine%20%20q1%202018.pdf tugan-baranovsky, m. i., bulochnikova, l. a., sorvina, g. n., subbotina, t. p. (1989). the social basis of cooperation. mykolayiv: economy. verkhovna rada of ukraine (2016). law of ukraine "about ratification of the paris agreement". retrieved from: http://zakon5.rada.gov.ua/laws/show/1469-19 baltic journal of economic studies 17 vol. 5, no. 4, 2019 corresponding author: 1 vytautas magnus university, lithuania. e-mail: lina.pileliene@vdu.lt 2 vytautas magnus university, lithuania. e-mail: viktorija.grigaliunaite@vdu.lt doi: https://doi.org/10.30525/2256-0742/2019-5-4-17-24 elaboration of holistic tourist satisfaction index model for lithuania lina pilelienė1, viktorija grigaliūnaitė2 abstract. as the importance of tourism managements is becoming recognized worldwide, many scholars start talking about tourist satisfaction as the main driver of the tourism sector. satisfaction measurement and determination of its antecedents has become a field for tourism research and scientific discussion. tourist satisfaction indices were started to elaborate for many countries (e.g., malaysia, mexico, hong kong, croatia, etc.); however, considering satisfaction as a multifaceted construct, every single case has to be viewed and assessed separately. achieving to complement to the body of knowledge, this manuscript proposes a holistic tourist satisfaction index model for lithuania. the paper aims to aggregate the previously approved tourist satisfaction indices in a framework of lithuania into a holistic model to be applied regarding the existing circumstances. the proposed model is a final step of the numerous previous researches, aggregating their results and proposing guidelines for tourist satisfaction improvement and loyalty assurance in a bundle of possible tourism-related situations regarding lithuania as a place. the proposed holistic tourist satisfaction index model encompasses six previously elaborated models: inbound tourist satisfaction index model; emigrants’ satisfaction index model; outbound tourist satisfaction index model; the model of lithuanian tourist satisfaction with european summer holiday destinations index; local tourist satisfaction index model; and rural tourist satisfaction index model; therefore, guidelines for any tourismrelated situation, whether it was domestic (local), inbound, or outbound tourism, are provided. moreover, as in every situation, different antecedents of tourist satisfaction were determined; the holistic model stops practitioners, as well as scholars from taking unavailing decisions. key words: lithuania, satisfaction model, tourism loyalty, tourism satisfaction. jel classification: l83, z32, z33 1. introduction tourism plays a significant role in every state’s or region’s economy (cobb, 2003): it can be viewed as the industry of high importance because of its ability to create a space for employment and attract foreign money (choovanichchannon, 2015). castellano et al. (2019) emphasize that tourism development in a destination is often induced by tourist satisfaction. furthermore, tourist satisfaction is often measured in order to assess the overall performance of tourism management in a destination (song et al., 2011). substantiating the benefits of tourist satisfaction, saayman et al. (2018) emphasize that satisfied tourists bring a bundle of benefits to a destination, and tourist satisfaction is a determinant of consumption of products and services presently and in the future (castellano et al., 2019). despite the number of methods for tourist satisfaction assessment found in the scientific literature, song et al. (2011) emphasize that there are still a number of issues in the field to be resolved. emphasizing the multidimensional nature of tourist satisfaction, castellano et al. (2019) argue that every single attribute of tourist satisfaction plays a role in an overall picture; therefore, a composite understanding of the phenomenon is needed. in order to thoroughly assess tourist satisfaction, a worldwide trend of elaborating tourist satisfaction indices can be observed. substantiating the creation of such indices, song et al. (2012) state: ‘the development of a consumerbased system for evaluating tourism service performance that focuses on tourist satisfaction is of great importance for tourist destination management.’ therefore, this manuscript will contribute to the body of knowledge in the field by proposing a holistic tourist satisfaction index model for lithuania. accordingly, the goal of current research is to aggregate the previously approved tourist satisfaction indices in a framework of lithuania into a holistic model to be applied regarding the existing circumstances. baltic journal of economic studies 18 vol. 5, no. 4, 2019 achieving to elaborate the holistic tourist satisfaction index model for lithuania, previously elaborated index models (i.e. inbound tourist satisfaction index model; emigrants’ satisfaction index model; outbound tourist satisfaction index model; the model of lithuanian tourist satisfaction with european summer holiday destinations index; local tourist satisfaction index model; rural tourist satisfaction index model) are aggregated and combined to form a complete background for tourist satisfaction assessment in all the possible situations regarding lithuanian tourism. to form the research logic, the manuscript is divided into introduction, four parts (sections 2nd to 5th), and conclusions. in order to highlight the topicality of the paper, in section 2, the multidimensional conception of tourist satisfaction is disclosed; in section 3, the determinants of tourist satisfaction forming the index models are provided; in section 4, loyalty as the main consequence of tourist satisfaction is analysed; and finally, the holistic model is constructed in section 5. 2. the conception of tourist satisfaction during the past several decades, customer satisfaction has become a topic of interest for many scholars and marketers (song et al., 2011). tourist satisfaction, therefore, can be viewed as a form of customer satisfaction in a field of tourism. according to castellano et al. (2019), ‘tourist satisfaction is a multifaceted phenomenon, the understanding of which requires fully integrated and multidimensional interpretative frameworks.’ substantiating the necessity for tourist satisfaction assessment, song et al. (2011) emphasize its impact on the reputation of tourist destination, as well as on companies operating in it. oviedo-garcía et al. (2019) emphasize that in line with tourist satisfaction goes tourist perceived value; and both have to be viewed as principle elements of tourist experience shaping. analysing tourist satisfaction, oviedo-garcía et al. (2019) point out that satisfaction is shaped by tourist experience, which is combined of different inputs. according to song et al. (2011), tourism has to be viewed as a system composed of a number of components (e.g. accommodation and catering) forming experience as a whole; therefore, satisfaction with ever y single component will result in the overall satisfaction with the destination. accordingly, tourist satisfaction measurement is often based on an assessment of multiple destination-related attributes (saayman et al., 2018); such attributes as quality of ser vices, price level at a destination, cleanliness and infrastructure of the environment often contribute to tourist’s perception and experience of the destination and make an impact on overall satisfaction with it. 3. determinants of tourist satisfaction being multifaceted in its nature, tourism satisfaction is often assessed as a consequence of a bundle of its determinants. despite a longevous practice in the field of tourist satisfaction assessment, the consensus regarding its determinants still hasn’t been reached. assessing tourist satisfaction in china, song et al. (2011) provide four its antecedents: tourist characteristics; perceived performance; assessed value, and expectations. latter factors affect overall satisfaction with a tourism-related experience. however, a year later, the same authors (song et al., 2012) provided hong kong tourist satisfaction index already composing six determinants: attractions, hotels, immigration, restaurants, retail shops, and transportation. martin, saayman and du plessis (2019) name only four determinants of international tourist satisfaction: accommodation, attraction, food and beverages, and immigration, comprising aggregate service satisfaction having an impact on the overall destination satisfaction. creating the index of destination attractiveness for croatia, krešic and prebežac (2011) provided six determinants of tourist satisfaction: accommodation and catering facilities; activities in the destination; natural features; destination aesthetics; environmental preservation; and destination marketing. kalantari, sembada, and gholipour (2019) used six dimensions (i.e. nature, physical activities, novelty/learning, mundane, social, and ego/status) in the questionnaire to measure the relationship between tourist motivation and participation. also, other tourist satisfaction with different touristic places indices composed by various determinants can be named and analysed (e.g., international tourists satisfaction with jordan by al-majali (2012); indian tourists’ satisfaction of bangkok, thailand by siri et al. (2012); etc.); however, the diversity of elements used implies that despite the differences in their naming, the determinants are also very similar. after a thorough evaluation of various indices of tourism satisfaction in a framework of different countries, the typology of tourism-related aspects to be included into the index as the determinants of satisfaction provided by krešic and prebežac (2011) was considered to be the most reflecting and suitable to be applied in all the tourism-related situations. 4. loyalty as a consequence of tourist satisfaction song et al. (2011) emphasize that well-managed tourist satisfaction results in the increase of customer loyalty, which in turn can be observed in lower price sensitivity, a reduced future transaction costs, and also better awareness of a destination. substantiating their tourist loyalty index, cossío-silva, revilla-camacho, and vega-vázquez (2019) emphasize that ‘the usefulness baltic journal of economic studies 19 vol. 5, no. 4, 2019 of measuring loyalty lies in being able to apply strategies which enable improving it.’ substantiating the necessity of loyalty management, song et al. (2011) detected a positive link between tourist satisfaction and loyalty: a higher level of satisfaction resulted in increased loyalty. akhoondnejad (2018) emphasizes that in a context of consumption loyalty primarily was viewed as a behavioural manifestation repurchase, consumption, consumer relationship, or a mixture of them regarding the same vendor; whereas attitudinal loyalty resulted in consumer intentions to recommend or repurchase. therefore, in the case of tourism, behavioural loyalty results in intention to revisit a place; and attitudinal in intention to recommend it. consequently, while elaborating the index of tourist satisfaction, loyalty has to be included as its main antecedent. 5. holistic tourist satisfaction index model for lithuania determining the satisfaction of international tourists, martin, saayman, and du plessis (2019) emphasize that tourist satisfaction is often being assessed within the framework of five constraints: 1) a destination being an object of tourist satisfaction; 2) the population which evaluates their satisfaction with the destination; 3) the scale being used for the assessment; 4) theoretical approach directing the measured items; 5) the model used for the research. in this manuscript, the destination chosen for the index creation is lithuania – a country of the european union being located in central europe. while deciding on the population for the research, the tourists depending on their traveling purposes in relation to lithuania were chosen. to be more precise: tourists were chosen regarding tourism classification. as it can be found in the scientific literature (e.g. dwyer et al, 2016; huang, weiler, 2010; etc.), tourism can be classified into inbound, outbound, and domestic or local. furthermore, inbound tourism can be further classified into inbound and emigrants’ tourism; local tourism can be further classified into local and rural tourism and outbound tourism can be further classified based on the specific criteria, e.g. purpose of tourism – leisure or business, where further tourism classifications can be made for each of the mentioned purpose based on many criteria. for example, leisure tourism can be further classified based on holiday destinations (e.g. summer holiday destinations, winter holiday destinations, etc.) and business tourism can be further classified based on the industry classification (e.g., medical tourism (borg, ljungbo, 2018); food tourism (robinson, getz, dolnicar, 2018); shopping tourism (choi, law, heo, 2018); etc.) (figure 1). regarding the three final constraints of tourist satisfaction assessment (the scale; the measured figure 1. tourism classification baltic journal of economic studies 20 vol. 5, no. 4, 2019 items; and the model), the holistic lithuanian tourist satisfaction index model is being created based on data from six previously elaborated models regarding different research populations and their relation to lithuania: 1) inbound tourist satisfaction index model (pilelienė, grigaliūnaitė, 2016); 2) emigrants’ satisfaction index model (grigaliūnaitė, pilelienė, 2019a); 3) outbound tourist satisfaction index model (pilelienė, grigaliūnaitė, 2014a); 4) the model of lithuanian tourist satisfaction with european summer holiday destinations index (pilelienė, grigaliūnaitė, 2018); 5) local tourism satisfaction index model (grigaliūnaitė, pilelienė, 2019b); 6) rural tourism satisfaction index model (pilelienė, grigaliūnaitė, 2014b). inbound tourist satisfaction index model, revealing factors affecting tourist satisfaction with lithuania, is presented in figure 2 below. as can be seen, tourist satisfaction with lithuania is influenced by accommodation and catering, destination aesthetics, destination marketing, and activities in the destination and influences tourist loyalty. the model of lithuanian emigrants’ satisfaction with their holiday in lithuania index is presented in figure 3. figure 2. inbound tourist satisfaction index model source: pilelienė, grigaliūnaitė (2016) figure 3. emigrants’ satisfaction index model source: grigaliūnaitė, pilelienė (2019a) baltic journal of economic studies 21 vol. 5, no. 4, 2019 as can be seen, accommodation and catering influence inbound tourist satisfaction with lithuania in general case and in the case of emigrants’ satisfaction. nevertheless, in latter case emigrants’ satisfaction is influenced by environmental preservation, which is not relevant in the general case of inbound tourist satisfaction with lithuania. moreover, emigrants’ satisfaction is not influenced by destination aesthetics, destination marketing, and activities in destination, which are relevant factors in the general case of inbound tourist satisfaction with lithuania. outbound tourist satisfaction index model revealing factors affecting lithuanian tourist satisfaction in the general case of outbound tourism is presented below in figure 4. as can be seen, outbound tourist satisfaction is influenced by activities in destination, destination marketing, environmental preservation, and natural features. when compared to the inbound tourist satisfaction index model, it can be seen that two variables differ: in the case of inbound tourism, accommodation and catering and destination aesthetics influence satisfaction, while in the case of outbound tourism, instead of latter factors, natural features and environmental preservation influence satisfaction. in the specific case of lithuanian tourist satisfaction with european summer holiday destinations as a part of outbound tourism, factors affecting lithuanian tourist satisfaction differ from the general case. as can be seen from figure 5, in the case of lithuanian tourist satisfaction with european summer holiday destinations, environmental preservation is not a relevant factor for tourist satisfaction. instead, accommodation and catering is the factor influencing tourist satisfaction. local tourist satisfaction index model is presented in figure 6 below. as can be seen, tourist satisfaction is influenced by accommodation and catering, destination aesthetics, destination marketing, and environmental preservation. consequently, it could be stated that latter figure 4. outbound tourist satisfaction index model source: pilelienė, grigaliūnaitė (2014a) figure 5. the model of lithuanian tourist satisfaction with european summer holiday destinations index source: pilelienė, grigaliūnaitė (2018) baltic journal of economic studies 22 vol. 5, no. 4, 2019 figure 6. local tourist satisfaction index model source: grigaliūnaitė, pilelienė (2019b) figure 7. rural tourism satisfaction index model source: pilelienė, grigaliūnaitė (2014b) model is very similar to the inbound tourist satisfaction index model, except for the one factor – environmental preservation, which is relevant in the case of outbound tourist satisfaction index model. in the specific case of local tourism – rural tourism, factors affecting tourist satisfaction are presented in the elaborated rural tourist satisfaction index model provided below in figure 7. as can be seen, tourist satisfaction in the case of rural tourism is influenced by the same four factors that influence local tourist satisfaction in the general case – accommodation and catering, destination aesthetics, destination marketing, and environmental preservation. despite this, in the case of rural tourism, tourist satisfaction is influenced by the additional factor – perceived value. based on all elaborated models, the holistic lithuanian tourist satisfaction index model is composed and provided in figure 8. based on the elaborated model, when seeking to enhance the level of inbound tourism in lithuania, destination aesthetics, destination marketing, activities in destination, and accommodation and catering in the destination should be properly managed. baltic journal of economic studies 23 vol. 5, no. 4, 2019 figure 8. holistic lithuanian tourist satisfaction index model in the specific case of inbound tourism, when seeking to attract more emigrants to the homeland for holiday, environmental preservation and accommodation and catering as well should be properly managed. when seeking to enhance the level of outbound tourism in lithuania, destination marketing, activities in destination, natural features, and environmental preservation are the factors that must be taken into consideration. in the specific case of outbound tourism, when seeking to attract more lithuanian tourists to the european summer holiday destinations, destination marketing, activities in destination, natural features, and accommodation and catering should be properly managed. finally, when seeking to enhance the level of local tourism in lithuania, accommodation and catering, destination marketing, destination aesthetics, and environmental preservation are the factors that must be taken into consideration. moreover, in the specific case of local tourism, when seeking to enhance the level of rural tourism, not only the abovementioned factors should be managed properly but the new factor – perceived value – should be taken into consideration as well. 6. conclusions the paper aimed to aggregate the previously approved tourist satisfaction indices in a framework of lithuania into a holistic model to be applied regarding the existing circumstances. therefore, the holistic tourist satisfaction index model for lithuania was composed. based on the analysis of scientific literature in a field of tourist satisfaction, it can be stated that the scholars agree on the importance of tourist satisfaction measurement and on its tremendous impact on the economy. moreover, all the analysed indices of tourist satisfaction used tourist loyalty as the main antecedent manifesting in behavioural or attitudinal (of a mixture of both) way. however, despite the consensus regarding the importance of tourist satisfaction and loyalty, the determinants of tourist satisfaction remain under discussion. after analysing various tourist satisfaction indices (china, hong kong, croatia, thailand, etc.), it can be concluded that the analysed determinants varied by country. however, being different they can also be grouped into several categories reflecting overall tourist experience. based on the essence of determinants included into tourist satisfaction indices, six categories can be named as encompassing most: accommodation and catering facilities; activities in the destination; natural features; destination aesthetics; environmental preservation; and destination marketing. the proposed determinants, as well as customer loyalty as a consequence of the tourist satisfaction, were combined into tourist satisfaction index, which baltic journal of economic studies 24 vol. 5, no. 4, 2019 was verified in different situations regarding lithuanian tourism. the obtained results indicate that the antecedentrelated part of the index is not only country-specific but also situation-specific. therefore, it is recommended for tourism practitioners, as well as scholars working in the field, to consider provided guidelines in order to enhance tourist satisfaction and achieve loyalty. considering research limitations, they can be viewed in line with further research directions. the general tourist satisfaction index can be tested regarding different holiday or pleasure-related situations, e.g.: winter holiday, pacific holiday, etc. moreover, the model can obtain a different composition in a framework of different industries, e.g.: culinary tourism, shopping tourism, etc. based on the research results, it can be assumed that the model might work differently in a situation regarding different country. therefore, a field for further scientific as well as empiric research can be envisioned. references: akhoondnejad, a. 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(2012). the hong kong tourist satisfaction index. annals of tourism research, vol. 39, issue 1, pр. 459–479. doi: 10.1016/j.annals.2011.06.001 baltic journal of economic studies 54 vol. 6, no. 2, 2020 corresponding author: 1 baltic international academy, latvia. e-mail: i.stecenko@yahoo.com orcid: http://orcid.org/0000-0002-0277-286x doi: https://doi.org/10.30525/2256-0742/2020-6-2-54-60 assessment of the prospects for the development of trade relations of the baltic countries and southeast asia inna stecenko1 abstract. in the presented article, the author conducts research of export – import operations between the baltic countries and the countries of southeast asia from 2016 to 2018, since the goal for the eu countries is to deepen economic relations between the countries of asia; however, there has been no serious analysis of the potential of trade relations between the regions. based on empirical studies, the countries of southeast asia are identified by the volume of export – import, which is significant in the economy of states. it has been revealed that the baltic countries import more products from the countries of southeast asia; however, the increase in the competitiveness of the industries is related to the volume of exports as well. to strengthen trade relations between the regions of asia and the eu, the implementation of the adopted un resolution on the transformation of our world: the 2030 agenda for sustainable development, the national programs on the development of the economy of countries, the author identified the potential for exports of the baltic countries to the corresponding countries of southeast asia. the analysis of the number of tourists from the countries of southeast asia is carried out, the results of which show the potential for the growth of this industry and the strengthening of trade relations between countries. taking into account the volume of trade between the baltic regions and the countries of southeast asia, the role of small and medium-sized enterprises is shown. the author carries out the analysis of the conditions for the registration of smes in the baltic countries, the number of employees in smes. key words: the baltic countries, countries of southeast asia, export-import operations, tourism, small and medium – sized enterprises. jel classification: f10, f20, m29 1. introduction the modern development of economic and trade relations between countries is based on a number of important documents, thus the need to strengthen the relationship between asian and european countries was identified by resolution adopted by the general assembly in september 2015. at the general assembly, the united nations adopted one of the most important documents of the united nations summit: the transformation of our world: the 2030 agenda for sustainable development. seventeen goals were developed in this document in the field of sustainable development of the world and 169 tasks were declared as the future development program of the countries of the world. the new goals and objectives entered into force on january 1, 2016. the countries will be guided by them for making decisions over the next 15 years in implementing the economic policy. within the framework of the research presented on the development of export-import operations of the baltic countries and the countries of southeast asia, we rely on the implementation of the eighth and ninth goals of this document. thus, goal 8 is formulated as “promote inclusive and sustainable economic growth, employment and decent work for all” (тhe sustainable development goals). undoubtedly, trade has been and is the basis for the growth of welfare and prosperity of states for many millennia, along with that, under the conditions of industrialization of states and the support of innovative activity, an additional impetus is being created to increase trade operations between states. the goal of the research presented is to find directions for strengthening trade relations between the baltic countries and southeast asia. to achieve this goal, the author performs the following tasks: the analysis of the export-import operations of the baltic countries and southeast asia is carried out, the volume of operations in the total export-import is calculated; the leaders of the southeast asian countries in trade with the baltic countries in both export and import are identified, the baltic journal of economic studies 55 vol. 6, no. 2, 2020 development of related industries of economy, tourism to the baltic countries, is shown and the analysis of the registration of smes in the baltic countries is registered. the research methodology is based on the use of quantitative and qualitative research methods: a content analysis of literary resources on the topic research, comparison and evaluation of the results obtained in them; methods of statistical analysis used to assess the dynamics of absolute indicators, identifications of their relationships; a graphical method that ensures the visibility of the economic relations of the participants of trade operations analyzed by the states. 2. previous research review almost two and a half centuries have passed since the time of a. smith and his theory of absolute advantage, as before, the topic of building trade relations is relevant for states.the theory of comparative advantages of d. ricardo and d. smill., the heckscher-ohlin theorem, leontief paradox,the theory of product’s life cycle, which was put forward and substantiated by r . verna, c. kindleberger and l. wales, m. porter’s theory, rybchinsky 's theorem, as well as theory of samuelson and stolper, explained and clarified the laws of trade between countries. in early 1980s, p. krugman, k. lancaster and several other economists suggested an alternative to the classical explanation of international trade, based on the so-called economies of scale. further, an analysis of the factors of the international division of labor was complemented by the neo-technological concept of i. b. kreivis. according to kreivis, each country imports goods that it is either not able to produce on its own or can produce in limited quantities whose supply is elastic, while at the same time exports goods with highly elastic and superior local production requirements. as a result, the country’s foreign trade is determined by the comparative level of elasticity of the national and foreign supply of goods, as well as by the higher rates of technological progress in export sectors. 3. methodology and preliminary analysis analysis of export-import operations of the baltic countries and southeast asia. thus, this research is aimed at analyzing and assessing the potential for the development of trade operations between the baltic countries and the countries of southeast asia. it should be noted that support of trade relations between the european countries and southeast asian countries is carried out at the level of both the eu and asean ministries. on march 3, 2016, the asean economic ministers (aem) and the eu trade commissioner held their fourteenth consultations in chiang mai, thailand. on may 2015,the high representative of the european union for foreign affairs and security policy and the european commission adopted the joint communication: "the eu and asean: a partnership with a strategic purpose". the joint communication puts forward concrete ideas for taking eu-asean (the association of southeast asian nations) relations to the next level by providing a more coherent framework for sectoral cooperation. let us consider how export-import operations between the eu and asean have been developing in 2016-2018 (figure 1). as you can see from the data presented in the diagram, in general, imports from asean countries exceed exports, with the difference from 29.1% in 2016 to 31% in 2018. a positive trend should be noted by the linear growth of both imports and the eu exports to asean countries. thus, the object of our research is the baltic countries. let us carry out the analysis of the most important economic indicators of states (table 1). as you can see from the table represented, the largest population of the baltic countries is 2.81 million in lithuania, 1.93 million in latvia and 1.32 million people in estonia. countries are characterized by low population density: about 30 people per km2 in estonia and latvia, but 43 people per km in lithuania. about 19 000 eur gdp per capita in estonia, 16 793.25 eur 121,5 135,6 140,3 86,1 91,7 97 0 20 40 60 80 100 120 140 160 2016 2017 2018 eu imports eu exports linear (eu imports) linear (eu exports) figure 1. eu-asean (the association of southeast asian nations): trade in goods, bln eur in 2016-2018, calculated by the author baltic journal of economic studies 56 vol. 6, no. 2, 2020 in lithuania and 15 553.33 eur in latvia. taking into account the territorial and cultural proximity, historical similarity, the economies of states are identical to a great extent. as it is indicated in the eu report, “three countries – one economy”. however, to achieve the stated goal, let us consider how export-import operations with the countries of southeast asia are distributed across the baltic countries. to carry out an analysis, we selected those countries of southeast asia with which the baltic countries have any significant trade operations. thus, an insignificant share or practically no trading operations of the baltic countries with indonesia, malaysia, brunei and vietnam. 4. results thus, let us carry out an analysis of the export-import operations of the baltic countries, which is represented in table 2. thus, for the studied year 2017, the share of asian countries in the total volume of trade operations of the baltic states is a significant part (figure 2). on the chart calculated by the author, it is clearly seen that the largest volume of imports from southeast asian countries in estonia is 2416.37 mln usd, which in nominal terms is equal to the sum of imports from southeast asian countries in latvia and lithuania. the volume of imports from southeast asian countries to estonia is 16.6% of the total imports to the country, 3.77% of the total operations in latvia in 2017 and 3.7% in lithuania. it should be noted that the role of the countries examined in trade operations not only in the baltic countries, but also in the european union as a whole is great, thus, according to the european commission: china is now the eu's second largest trading partner behind the united states and the eu is china is the largest trading partner; the eu exports of services to south korea increased by 82%, compared to 66% for the eu imports from the country from 2010 to 2017. the eu had a 5.6 bln eur trade in services surplus with south korea in 2017. singapore is the eu's 14th largest trade in goods partner and the eu's largest trading partner in the association of southeast asian nations (asean). the eu is taiwan's fourth trade partner after china, the usa and japan. in 2018, taiwan was the eu's seventh largest trading partner in asia. the eu exports to taiwan of semi-finished products, machinery and transport equipment confirm the eu's position as an important industrial supplier for taiwan's industry. japan is the eu’s second biggest trading partner in asia after china. together the eu and japan account for about a quarter of the world's gdp. hong kong was the eu's 20th largest trading partner in goods in 2018 and ranked as the eu's 8th trading partner in asia. the eu is hong kong's second major trade partner after china. further, let us carry out an analysis of the share of the export operations of the baltic countries to the countries of southeast asia (figure 3). from the presented diagram of figure 2, it can be seen that estonia’s export operations to the countries of southeast asia in 2017 amounted to 3.38%, 2.13% in latvia and 2.50% in lithuania. it should be pointed out that lithuania holds the first place in total export operations, with the country’s exports amounted to 684.71 mln usd, estonia is in the second place table 1 analysis of the economic indicators of the baltic countries, developed by the author (latvijas centrālās statistikas pārvalde; the lithuanian department of statistics (statistics lithuania); the statistics estonia) indicators estonia latvia lithuania number of inhabitants, mln 2018 1.32 1.93 2.81 number of inhabitants, people/km² 28 29.95 43 gdp per capita, eur , 2018 18 977.39 15 553.33 16 793.25 net salary, eur , 2018 1325 1004 921 source: own study based on data of the nationals statistics data bases table 2 export-import operations of the baltic countries and southeast asian countries in 2017, usd, developed by the author country estonia latvia lithuania import export import export import export prc 1.47 b 248.47 м 439.89 м 42.63м 929.4 м 203.01m hong kong 6.77 м 26.16 м 15.82м 29.9 м 18.55м 38.44 м japan 258.38 м 79.65 м 22.3 м 50.5m 43.73м 133.73 м south korea 73.88 м 25.71м 61.8m 204.68м 93.53 м singapore 10.99 м 60.04 м 10.76 м 16.8m 2.06м 216.00 м taiwan 96.394m 23.524m 83.47 м 5.2 m 119.816m 22.437m total 14546.17m 14428.9 м 15832 м 11 647м 32328.1м 27330.0m source: report of trading economics (report of trading economics) baltic journal of economic studies 57 vol. 6, no. 2, 2020 with 488.2 mln usd and latvia is in the third place with 288.47 mln usd, which is 2.7 times less than in lithuania and 2 times less than in estonia. the relevance of this research is determined by the low rates of latvia’s export operations. as the author presented in table 1 and illustrated in figure 1, the volume of imports of southeast asian countries exceeds the volume of exports of the baltic countries, and this is the reason for the study of the growth potential of export operations of the baltic countries. thus, in 2017 estonia exported goods to the people’s republic of china in the amount of 248.47 mln usd, in the second place is japan with 79 mln usd, 65 mln usd and south korea slightly inferior to japan in 2017, where the export volume amounted to 73.88 mln usd. singapore with 60.04 mln usd, a small share – 26.16 mln usd exports to hong kong and 23.524 mln usd to taiwan. further, let us consider the level of imports of estonia in southeast asia, figure 4. the main importer from southeast asia in estonia is the people’s republic of china (china), the import volume of which is 1.47 bln usd. it should be noted that china’s share is 60.8% of the total volume of imports of southeast asian countries with the baltic countries. the next important importing country in 2017 is japan with 258.38 mln usd and taiwan with 96 394 mln usd is in the third place in the countries of importers of southeast asia. the next baltic country is latvia, an analysis of latvia’s export-import operations with the countries of southeast asia (figure 5). as we can see from the diagram calculated by the author, latvia’s exports to the countries of southeast asia takes up insignificant volume. thus, south korea is the leader in latvian exports from south asia with a volume of transactions of 61.8 mln usd, japan ranks 2416,37 597,95 1198,42 14546,17 15832 32328,1 estonia latvia lithuania s-e asia total figure 2. import of southeast asian countries to the baltic countries in 2017, mln usd, developed by the author 14428,9 11647 27330 488,2 248,47 684,71 estonia latvia lithuania total export to south asia figure 3. the volume of export of the baltic countries to southeast asia in 2017, mln usd, developed by the author baltic journal of economic studies 58 vol. 6, no. 2, 2020 second place with 50.5 mln usd and china ranked the third place in 2017 with 42.6 mln usd. an insignificant share belongs to singapore and taiwan with 16.8 mln usd and 5.2 mln usd respectively. the diagram clearly demonstrates that the level of imports to latvia of asian countries significantly exceeds the level of exports. thus, the leader among the examined states is china with 439.89 mln usd, the second place belongs to taiwan with 83.47 mln usd, south korea and japan import goods to latvia for 25.71 and 22.3 mln usd, respectively, and the share of hong kong in latvian imports in 2017 amounted to 15.82 mln usd. thus, lithuania is not an exception from the baltic countries: import operations are the main operations with the countries of southeast asia. the leader in imports among the countries analyzed is prc, the second place belongs to south korea with 204.68 mln usd and the third place to taiwan with 119.816 mln usd, a small share falls to hong kong with 18.55 mln usd and singapore with 2.06 mln usd in 2017. however, in lithuania, export operations with singapore, japan and hong kong show a positive trade balance: lithuania’s exports to singapore amounted to 216 mln usd in 2017, which is almost 10 times more than imports in the research year, exports to japan are 3 times more than imports and amounted to 133 mln usd and exports to hong kong are 18 times more than imports and equal to 38.44 mln usd. lithuania’s export operations in the prc are 4 times less than imports and amounted to 203 mln usd, while exports to south korea are almost 2 times less than imports and amounted to 93.53 mln usd in 2017. lithuanian export operations to taiwan are more than 5 times higher than imports from taiwan and amounted to only 22.437 mln usd. it should also be noted that the growth of trade operations between countries leads to an increase in the number of tourists in the countries. it should be noted that there has been an increase in tourists from china, japan and south korea over the past 3 years from 2016 to 2018, table 3. figure 4. export – import of estonia into the countries of southeast asia in 2017, mln usd, calculated by the author 42,63 61,8 61,8 50,5 29,9 16,8 0 50 100 150 200 250 300 350 400 450 500 latvia import latvia export figure 5. latvia’s export – imports to countries of southeast asia in 2017, mln usd, calculated by the author 1470 258,38 10,99 6,77 96,394 0 200 400 600 800 1000 1200 1400 1600 estonia, import estonia, export baltic journal of economic studies 59 vol. 6, no. 2, 2020 table 3 dynamics of the number of tourists from southeast asia to latvia from 2016 to 2018 country 2016 2017 2018 japan 23 191 24 576 29 534 china 20 549 22 724 22 000 the republic of korea 5 296 7 056 6 953 source: developed by the author based on the latvijas centrālās statistikas pārvalde as you can see from the data presented in table 3, the leaders among the countries of southeast asia in latvia’s inbound tourism are japan with 29534 people in 2018, china is in second place with 22 000 people and the third place belongs to the republic of korea with 6953 people in 2018. undoubtedly, the increase in imports to latvia also leads to an increase in the number of tourists to the country. however, an increase in latvia’s exports to the countries of southeast asia will increase the number of tourists from latvia. further, we will carry out an analysis of the number of tourists to the other baltic countries – estonia and lithuania (table 4). table 4 dynamics of the number of tourists to estonia from south-east asia country 2016 2017 2018 japan 23 953 28 831 31 786 china 14 167 19 698 20 381 the republic of korea 14 024 16 275 14 997 source: developed by the author based on the statistics estonia the data in table 4 show that the maximum number of tourists to estonia from japan is 23 953 people in 2016, 28831 people in 2017 and 31786 people in 2018, although japan ranks the second place among the countries of southeast asia in terms of imports to estonia. as indicated by the author above, the leader in terms of exports and imports to estonia is china, but the chinese are second to inbound tourists to estonia. thus, the dynamics of tourists from china: 20 381 people in 2018, 19 698 people in 2017 and 14 167 people in 2016, almost 30% less than tourists form japan. south korea ranks third in the volume of trade operations with estonia, among south countries of east asia, tourists from south korea are also in third place. thus, the carried out analysis of the export-import operations of the baltic countries to the countries of south-east asia has shown that the baltic countries have the potential for growth in export operations. according to the author, the volumes of export indicated that the import operations of the baltic countries are of interest to small and medium-sized businesses what the economy of the eu countries, including the baltic states, is based on. in the baltic countries, the following quantitative criteria exist for clasifying enterprises as small businesses: in latvia, the enterprises, where the number of employees does not exceed 25 people, a turnover is not more than 40 mln eur , a book value of fixed assets is no more than 27 mln eur; in lithuania, the enterprises with the number of employees no more than 250 people and a turnover of no more than 40 mln eur; in estonia, the enterprises with the number of employees no more than 80 people with a turnover of no more than 40 mln eur . the procedure for registering a small business in latvia is 1 business day, in lithuania is 2 business days, in estonia is 13.5 hours. the average registration fee for a start-up entrepreneur in estonia is 183 eur . there is an additional charge (190 eur) for expedited service. in latvia, expedited services are services for registration of changes, registration of branches, liquidation of a company. according to a study of the international business registers report (2018), 203 93,53 133,73 38,44 216 22,437 0 100 200 300 400 500 600 700 800 900 1000 import lithuania export lithuania figure 6. export – import operations of the countries of south-east asia and lithuania in 2017, mln usd calculated by the author baltic journal of economic studies 60 vol. 6, no. 2, 2020 entrepreneurs of the baltic countries noted that the use of artificial intelligence technologies in the form of chat bot positively affected the quality and speed of the small business registration process (international business registers report 2018). 5. conclusions thus, the fulfillment of the set goals of sustainable development, enshrined in the un program “transformation of our world: the 2030 agenda for sustainable development” is possible to increase trade operations between regions. the analysis carried out by the author of trade operations between the baltic countries and southeast asia showed that the main partners are prc, hong kong, taiwan, singapore, japan and south korea. the volume of imports from the countries mentioned to the baltic countries significantly exceeds the volume of exports and, according to the author’s opinion, this is a potential for growth in exports of the baltic countries. the analysis has shown that prc is the leader in exports and imports to the baltic countries, in estonia; the second place belongs to japan and third to south korea in terms of export volume. in latvia, taiwan ranks second in terms of export volume, south korea is the third strategic partner, but in lithuania the second place in export operations to countries in southeast asia belongs to singapore and the third place belongs to japan. it should be noted that the presented three countries of the prc, japan and south korea are the leaders in the tourism industry of the baltic countries. however, the championship belongs to japanese tourists in all the baltic countries, tourists from china are in second place and tourists from south korea are in the third place. thus, the carried out research allowed identifying the growth potential of export operations of the baltic countries to the region of south-east asia that will lead to an increase in the turnover of the tourism industry of trading states, including. the research has shown that the expansion of trade relations between the baltic countries and southeast asia is possible through the creation of joint ventures of smes, the formation of which in the baltic countries is estimated by international experts to be very short in time and not costly. references: charles, p. (1986). kindleberger the world in depression, 1929-1939 the history of the world economy in the twentieth century series, university of california press. chien-peng chung (2013). china and japan in “asean plus” multilateral arrangements: raining on the other guy’s parade, asian survey. vol. 53, pp. 801–824. doi: 10.1525/as.2013.53.5.801 eu and china agree on scope of the future investment deal, brussels, 15 january 2016. retrieved from: https://trade.ec.europa.eu/doclib/press/index.cfm?id=1435 alice landau (2004). the international trade system. routledge. new york. nguyen huua, deniz dilan karaman örsal (2019). a new and benign hegemon on the hoizon? the chinese century and growth in the global south economics. retrieved from: http://www.economics-ejournal.org/ economics/discussionpapers/2019-60 nori katagiri (2015). strategy and grand strategy for the future of asia, asian survey. vol. 55, no. 6 (november/ december), pp. 1170–1192, university of california press. retrieved from: https://www.jstor.org/stable/26364331 paul krugman (1996). pop internationalism. new york. l. lancaster (1991). the bowyer ledgers hardcover, oxford university press. lancaster, kelvin j. 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(1978). leontief essays in economics: theories, facts and policies, v. 2, taylor & francis inc. united nations, transforming our world: the 2030 agenda for sustainable development, resolution adopted by the general assembly on 25 september 2015. retrieved from: https://www.un.org/en/development/desa/ population/migration/generalassembly/docs/globalcompact/a_res_70_1_e.pdf the statistics estonia. retrieved from: https://www.stat.ee/en central statistical bureau of latvia. retrieved from: www.csb.gov.lv the lithuanian department of statistics. retrieved from: https://www.stat.gov.lt/en eurostat. retrieved from: www.eurostat.eu baltic journal of economic studies 143 vol. 6, no. 3, 2020 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: sv.tkalenko@gmail.com orcid: https://orcid.org/0000-0003-0385-846x researcherid: https://publons.com/researcher/1924024/svitlana-tkalenko/ 2 kyiv national university of trade and economics, ukraine. e-mail: t.melnyk@knute.edu.ua orcid: http://orcid.org/0000-0002-3839-6018 researcherid: https://publons.com/researcher/1673478/tetiana-melnyk/ 3 kyiv national university of trade and economics, ukraine. e-mail: l.kudyrko@knute.edu.ua orcid: http://orcid.org/0000-0002-9089-7223 researcherid: https://publons.com/researcher/1688352/liudmyla-kudyrko/ doi: https://doi.org/10.30525/2256-0742/2020-6-3-143-155 macroeconomic factors influencing the development of ukraine’s foreign trade svitlana tkalenko1, tetyana melnyk2, liudmyla kudyrko3 abstract. the purpose of the study is to assess the relationship between ukraine's foreign trade and its major macroeconomic indicators in the context of deepening globalization processes and increasing dependence of national economic development on exogenous determinants. in order to achieve this goal, the most important factors of influence of macro level on the scale of foreign trade turnover have been selected, the interval of observations has covered 1999-2018. authors used the method of economic and mathematical modeling based on the e-views software. a multifactor regression model has been constructed, tested for autocorrelation and heteroskedasticity; causal effects have been identified between foreign trade and the main macroeconomic indicators of combinatorial nature (both exogenous and endogenous), ukraine’s foreign trade volumes has been forecasted up to 2023. methodology. the study is based on the analyzed macroeconomic indicators for the period of 1999-2018, which made it possible to select those that showed up greatest impact on foreign trade. the results of the conducted modeling showed: high level achievement of foreign trade dynamics of ukraine over the mentioned years, which exceeded similar indicators of dynamics of global trade; strong link between foreign trade, foreign direct investment and employment; revealing of a significant influence upon foreign trade of innovative activity of national business in industry as a dominant segment of the foreign sector of the country. as conclusions, the authors formulated a thesis on the need to strengthen institutional support for innovation and investment activities of national enterprises as a driver for scale-up and improvement of quality of ukraine's trade relations with the entire world. it is determined that the multiplicative interaction of innovation and investment would diversify and complicate the commodity structure of exports, increase the level of its technological and innovative nature, and thus it is to allow to get rid of the established attitude to ukraine on the trading map of the world as a supplier of low-tech raw materials. practical implications. the main theoretical propositions, the authors’ conclusions presented in the article, are supposed to form a methodological basis for expert evaluation in substantiating the priorities of the state policy modernization regarding conditions and factors promoting the export-oriented sectors of the national economy. value/originality. prospects for further research in this sphere may be to assumed onto making an assess on risks (threats) and macroeconomic effects of foreign trade deterioration in the context of declining economic activity regarding importing countries of their domestic products, especially in the eu and the prc, further weakening of external channels of investment and reducing the ability of businesses to innovate in deepening recessionary processes on the global and national levels. key words: effect of foreign trade, foreign direct investment, innovation, export-import, trade policy, economic growth. jel classifications: f12, f17, f42, f43 baltic journal of economic studies 144 vol. 6, no. 3, 2020 1. introduction the link between foreign trade and economic growth has been and still remains the subject of intense scientific debate, and the effects of foreign trade, both in the scientific and expert environment, are recognized as ambiguous and unpredictable. thus, for a long time, some theoretical assumptions about the impact of international trade on the well-being and economic growth of countries have been unquestionably confirmed in the numerous empirical studies of some particular researchers and international institutions. currently, the experts’ conclusions of international organizations are more prudent and cautious. according to the figurative statement of experts from the imf and the world bank, “studying the relationship between global trade and income is like analyzing the behavior of a drunk and his puppy dog: neither is walking in a straight line, but we nevertheless expect them to remain fairly close to each other” (constantinescu, cristina, aaditya mattoo, and michele ruta, 2014). the novelty of the study presented in this article is to substantiate and econometrically testify functional links between foreign sector of the country in terms of its trade component and important indicators of the development of national economy of the open type, reflecting endogenous and exogenous determinants (labor, capital, innovations). such an approach will allow to gain more objective understanding of the interdependencies between the external and internal factors of development of the ukrainian economy and, also, it is to build a fundamental methodological basis for expert evaluation in substantiating the priorities of state policy modernization regarding the conditions and factors contributing to the export-oriented sectors of national economy in conditions of global challenges of the 21st century. the issues raised in the article are of extremely acute touch regarding realities of modern ukraine. thus, during the years of observation chosen by the authors of the time interval, the dynamism of ukraine’s foreign trade obviously exceeded similar indicators in the world: if the growth rate of global trade in 2018 compared to 2000 was about 310 % (unctad), this indicator was more impressive in ukraine and it reached almost 345% (unctad). while global trade and production slowed down by a positive percentage in the aftermath of the 2007-2008 global crisis, ukraine’s shrinking demand in foreign markets was just reflected as for the catastrophic european 15% of gdp (unctad) decline. subsequently, since 2014, ukraine has lost one third of its export potential caused by the russian aggression. within the time period the article was being written, the world and the national economy were on the verge of the next economic crisis, requiring new understanding for determinants of economic development, and in the context of clear reduction of both external and internal sources of financing, the selection of those channels of foreign trade stimulation that proved to be the most sensitive and effective. the issues raised are not limited to the national economy, effects and interdependence between foreign trade and individual macroeconomic indicators have an ambiguous and mixed effect onto some other economies of the world. despite the fact that econometric testing and development of a model on the ukrainian statistics has become a direct research task for the authors, it should also serve to analyze external sector of other countries involved into the global trade. 2. scientific literature review effects and interconnections of foreign trade have very often been exemplified in the scientific literature by one single country or region. although, there is no particular theory that clearly links effects of trade with economic growth, evidence of trade’s positive effects on economic growth is available in some countries. thus, studies concerning the effect of foreign trade, taking developed countries samples into account, prove the statement that the correlation between foreign trade and economic growth may be both negative or positive. it depends on the stage (period) of economic development of the country and interaction of a number of other factors in the context of globalization (sookyen, lee and chin mui-yin, 2018). in particular, the united states scientists consider such an aspect of the problem as the consequences and impact of trade openness onto changeable trading conditions, the inflow of investment, their cyclicality from the point of view on economies spreading out (razin, sadka, & coury, 2003). in this study, to evaluate the exact link between economic growth and trade, including its openness, the vectoral auto-regressive (var) model method is used. some other researchers note that the internal market openness index is a key element of the globalization process, since tariff and quota withdrawal increases international trade; so, china, which manipulates the latent regulators of foreign trade, is determined to be the biggest trading fraud (ceyhun akarsu, 2018). in the focus of the authors’ attention, studies on the impact of trade openness on economic growth in transition economies were fully justified. in particular, studies have been conducted in a number of countries, including balkan countries, such as albania, bosnia and herzegovina, croatia, bulgaria, macedonia, romania, slovenia, montenegro, greece and serbia, have confirmed the positive effect of foreign trade (eglantina, oltiana, 2016; engjëll pere & eniel ninka, 2017). at the same time, these kinds of outlined approaches adaptive to some scientific researches bearing in mind specifics of ukraine do not give the opportunity to focus on the formation of risks of large-scale imports, which causes an increase in external public debt, increase in inflation baltic journal of economic studies 145 vol. 6, no. 3, 2020 and, as a consequence – insufficient (lack of ) attraction of foreign investment, including export-oriented industries. in our opinion, the conclusions of the national researcher are of fundamental importance that in terms of integration of ukraine into the system of international trade relations, where, along with the increase in size of a trading partner, the volumes of small economies trade, which is being the economy of ukraine, are more sensitive to the magnitude of income from export (chugayev, 2016). indeed, it is a matter of fact that having priority partners of the powerful counterparties (the eu and the prc), the ukrainian economy through additional trade channel with them entails additional risks. however, the country size factor cannot be considered as an autonomous and dominant one when explaining the effects of trade. in this sense, the approach proposed by the authors to account for a complex of factors of influence is more prudent. the study of the effect of foreign trade in developing countries, showing factors that have both positive and negative effects on trade, cannot be overlooked. in particular, public debt and the exchange rate have either negative effect on trade, and liberalization measures in developing countries have become determinants of the positive effect of foreign trade (nwosa p., saibu  m., fakunle o., 2012; ejike, d., arinze a. s. & chidi o. f., 2018; agbeyegbe t., stotsk, j. g. & wolde mariam a. 2004). scholars say that in these countries, the main challenges are institutional and structural changes that have been aimed at promoting trade and export activity. considering importance of these investigations, we believe that this approach focuses more on the trade-related effects of the regulatory component (public finances, monetary policy, foreign trade regulation), but does not provide answers and explanations for fundamental factors from the sphere of real sector. the newly introduced emphasis of foreign trade effect as for measuring the variability of trade policy and production as well as marketing cooperation with other countries is presented in the worked-out issues on the impact of international competition upon the efficiency of national production and consumption conditions (alessia campolmi, harald fadinger, chiara forlati, 2014). at the same time, the authors of this article are convinced that this approach needs clarification, since the competitiveness of the state’s foreign sector business integrated into the system of international cooperative relations is conditioned not only by trade regulations (yanikkaya, 2003), but should cover over its issues on innovation strength and investment attractiveness. in our opinion, the study on the effects of regional trade agreements drafting is meaningful and profound (world bank policy research working paper, 2007). such studies point out onto the ambiguous effects of trade agreements, especially for developing countries. however, it should be noted that appealing to regional aspects of foreign trade only, a certain investigational entrapment is turning out: this is the different effectiveness as for trade agreements consequences influencing economies of the same member-countries, being a part of various integration unions, that are located on the same continent. our attention has also been drawn to developments, in which the effect of foreign trade is viewed through the formation of export-oriented strategies both on the state level and also for some particular companies. the authors argue in favor of this thesis. firstly, the increase in production and trade is going to lead to productivity gains on through increased economies of within the export sector volume, and positive external effects. secondly, exports contribute to more efficient allocation of resources through the specialization and manufacture of the most competitive merchandise. thirdly, enhancing the effectiveness of foreign trade also contributes to more efficient managerial process and increases overall economic productivity (mahadevan, 2007). these studies typically reveal the relationship between exports and economic growth (marilyne huchet, chantal le mouel, mariana vijil, 2018). however, the issue of the import component and its role in economic growth remains sometimes beyond attention. 3. methodology the study is based on the analyzed macroeconomic indicators, in particular, gdp (measuring scales of economic activity domestically), lm (the number of employed population, which reflects endogenous personnel resource of the national economy (labor)); si (expenses for innovation of legal entities and their units engaged into industrial activities (internal resource, innovation)); fdi (foreign direct investment involved into the ukrainian economy (external resource, capital)). the authors constructed a multifactorial regression model, namely: the hypothesis of significant impact of macroeconomic factors of endogenous and exogenous origin onto foreign trade have been tested (ft) as for national economy using the e-views software. the use of e-views by authors is due to the fact that it is currently one of the most powerful packages for the construction of econometric models. by virtue of this, there would be possible to solve a number of important research problems like the analysis of scientific information; macroeconomic forecasting; modeling of economic processes; forecasting market conditions and many more. therefore, selecting a software product is relevant in terms of instrumental capabilities to the tasks positioned by the authors. the general appearance of the ft model illustrating the relationship of the selected variables can be described by the following equation: baltic journal of economic studies 146 vol. 6, no. 3, 2020 ft = f (gdp, fdi, lm, si), where, ft – foreign trade of goods and services of ukraine, mln. usd (export, import); gdp – ukraine’s gdp, mln. usd; fdi – foreign direct investment in ukraine, mln. usd; lm – employed population, mln. of people; si – innovation costs, mln. usd. a correlation matrix was constructed to analyze the model, which explains the relationship between the variables. the results of multivariate regression estimation have been analyzed. the model is adequate if the rules of the functioning process of the real economic system have been reflected. the constructed model was tested for autocorrelation and heteroskedasticity, which was tested on for verifying classical assumptions and for checking predictive quality of the regression model. the investigated results of these tests proved the adequacy of the model. the cause and effect relationships between the selected variables and the ft were investigated using the granger test. the high quality of the model was proved, and, therefore, foreign trade forecast up to 2023 was made on that basis. 4. research results the role and place of any country on the world economy in general, and world trade as its component in particular, depends on many factors, the main of which the authors consider to be the dynamics of development of the national economy, the degree of its openness and involvement into international division of labor, its ability to adapt to the turbulent conditions of international economic life. an important indicator of the intensity of inter-country economic ties is the share of their mutual trade within the volume of trade with all countries of the world, because this indicator reflects general level of technical and economic development of partner countries, the extent of investment exchange, the state of industrial cooperation of enterprises, as well as other directions for integration of their economies indeed. the main indicators of the ukrainian economy in terms of international economic relations are given below (table 1). the authors conducted statistical and empirical analysis of the development of the economy of ukraine over the period that allowed to reveal certain regularities. firstly, foreign trade tends to grow steadily in both absolute and relative terms, including such periods as the global economic crisis (2008) and the period of russian aggression in eastern ukraine (2014-2018). ukraine’s situation, namely the loss of one third of its export potential due to events in the east, has negative impact on economic development and its economic security: in the first year after the loss of territories (2015), the loss of foreign trade has been 28.1%, outflow of foreign capital calculated minus 24.2%, and almost 30% drop in gdp. ukraine’s foreign trade operations have been conducted within 173 countries (as of 2019). traditionally, the main partner-countries in export are the countries of the european union, namely poland, table 1 some indicators of the intensity of the ukrainian economy year export of goods, mln. usd import of goods, mln. usd export of service, mln. usd import of services, mln. usd growth rate of foreign trade, % fdi, mln. usd growth rate of fdi, % 1999 11581.6 11846.1 3613.9 1113.2 2810.7 2000 14572.5 13956 3655.1 1151 18.4 3281.8 16.8 2001 16264.7 15775.1 3731.9 1147.6 10.8 3875 18.1 2002 17957.1 16976.8 4303.8 1194.9 9.5 4555.3 17.6 2003 23066.8 23020.1 4524.9 1465.3 28.8 5471.8 20.1 2004 32666.1 28996.8 5612.7 2062.9 33.1 6794.4 24.2 2005 34228.4 36136.3 6443.2 2941.8 15.0 9047 33.2 2006 38368 45038.6 7791.8 3730.6 19.0 16890 86.7 2007 49296.1 60618 9435.1 4995.5 31.0 21607.3 27.9 2008 66967.3 85535.3 12260.1 6481.5 37.7 29542.7 36.7 2009 39695.7 45433.1 10129.7 5186.4 -41.3 35723.4 20.9 2010 51405.2 60742.2 12324.2 5467.2 29.4 38992.9 9.2 2011 68394.2 82608.2 11936.3 5421.6 29.6 45370 16.4 2012 68830.4 84717.6 14180.3 6214.2 3.3 48197.6 6.2 2013 63320.7 76986.8 14096.2 6650.1 -7.4 51705.3 7.3 2014 53901.7 54428.7 14233.2 7523 -19.2 53704 3.9 2015 38127.1 37516.4 11520.8 6373.1 -28.1 40725.4 -24.2 2016 36361.7 39249.8 9736.6 5523 -2.9 36154.5 -11.2 2017 43264.7 49607.2 9868 5326.5 18.9 39144 8.3 2018 47335 57187.6 10714.3 5476.1 11.7 40020.9 2.2 source: authors baltic journal of economic studies 147 vol. 6, no. 3, 2020 germany, the netherlands, italy, hungary, as well as china, turkey and the russian federation. deliveries for these countries, including russia, accounted for more than half of ukraine’s total exports. the main partner countries in import are still the countries of the european union, china and the russian federation. to improve trade and economic cooperation with some particular countries or groups of countries, ukraine uses a kind of instrument like free trade agreements covering over issues on the whole merchandise (industrial, agricultural, fish and marine products, etc.), services and dispute settlement, which is prominent and effective method for promoting export growth through the liberalization of goods and services access to foreign markets (ministry for development of economy, trade and agriculture of ukraine, 2020). such agreements help to stimulate foreign trade, scientific, technical and trade-economic cooperation, promote innovation, investment, new technologies, and generally they increase the competitiveness of export-oriented industries. let us examine empirically the way the important factors chosen affect ukraine’s foreign trade. 5. empirical results the investigations of statistical databases through the period of 1999 to 2018 were conducted. the results of the authors’ study made it possible to explain the relationship between the selected variables using the e-views software. correlation matrix was constructed to explain the relationship between the selected variables (see table 2). the above correlation coefficient matrix shows strong correlation between foreign trade in goods and services and fdi of 84% with sufficiently strong correlation with expenses on innovation – 71%, negative correlation between foreign trade and level employment. if there is negative correlation, decreasing value of one variable causes the other variable to increase. acceptable result of correlation between variables confirms the success of this model. the results of multivariate regression are shown in the table 3. r2 shows the extent to which the selected variables and their level explain the extent of exports and imports of goods and services in ukraine, i. e., selected variables with a high probability of 94.4% reflect the outlined links. strong enough link shows correlation coefficient of 92.9%; f-statistic = 0.000000, the probability of accepting null hypothesis confirms the need to take an alternative hypothesis, which attests to the significance of equation in the whole. according to fisher’s f-statistics, all coefficients of regression equation are not equal to 0 (p-value <0.05). in our equation, foreign direct investment and innovation costs are less than 5-10%; the smaller the prob., the better is the equation: fdi = 0%, si = 0.01%. we check the equation for autocorrelation using the durbin-watson test. this durbin-watson criterion is d = 1.90. from the durbin-watson statistics table, we determine significant points dl and du. for the number of observations of 20 to 4 variables when the level of significance is α = 1% dl = 0,68 and du = 1,57; and when 5% significance level dl = 0, 9 and du = 1,83. in our case, dw> du, which means absence of autocorrelation. table 3 the results of multi-factor regression of foreign trade dependent variable: ft method: least squares sample: 1999 2018 included observations: 20 variable coefficient std. error t-statistic prob. gdp 0.025464 0.028886 0.881513 0.3919 fdi 1.906067 0.266206 7.160129 0.0000 lm 1997.054 2967.122 0.673061 0.5111 si 3661,292 717.3296 5.104058 0.0001 c -27467.91 58209.35 -0.471881 0.6438 r-squared 0.944150 mean dependent var 100377.0 adjusted r-squared 0.929256 s.d. dependent var 47440.08 s.e. of regression 12617.96 akaike info criterion 21.93595 sum squared resid 2.39e+09 schwarz criterion 22.18488 log likelihood -214.3595 hannan-quinn criter. 21.98454 f-statistic 63.39378 durbin-watson stat 1.909408 prob(f-statistic) 0.000000 source: authors table 2 the correlation coefficients matrix ft gdp fdi lm si ft 1 0.2662 0.8395 -0.2014 0.7103 gdp 0.2662 1 0.1447 0.0520 0.2201 fdi 0.8395 0.1447 1 -0.5928 0.2950 lm -0.2014 0.0520 -0.5928 1 0.3588 si 0.7103 0.2201 0.2950 0.3588 1 source: authors baltic journal of economic studies 148 vol. 6, no. 3, 2020 we test the model for heteroskedasticity using the white, breusch-pagan-godfrey, harvey, glejser, arch tests. the first white test is the most widely used in practice. using the white test, regression of model residuals from variables is constructed. by the value of the probability of acceptance of the null hypothesis, we observe that almost all variables are not statistically significant, since the presence of the null hypothesis is more than 5%. according to the presence of regression value in full 17%, which is also higher than of 5% peg, respectively, we can accept the null hypothesis, and this confirms that in our model there is no heteroskedasticity (i.e., the residuals of the model have constant variance) (table 4). the breusch-pagan-godfrey test checks the linear dependence of the variance of random errors upon some set of variables. the regression is not significant, the probability of accepting the null hypothesis is 0.2040 (20%), which is more than 5% and confirms the absence in the model of heteroskedasticity (table 5). the next heteroskedasticity test is the harvey test, which is similar to the breusch-pagan-godfrey test, and it is to check the hypothesis of the persistence of the variance of residues, and has an alternative hypothesis that the heteroskedasticity of type is observed (table 6). in other words, exponential dependence is manifested here. the results of this test show that the probability of accepting null hypothesis is 0.3317 (33.1%), which is more than 5% and confirms the absence of heteroskedasticity in the model. the glejser test evaluates the regression dependence of the deviation modules. the presence of regression significance on the level of f-statistic = 13.92% and r2 = 13% is higher than the value of 10% peg, that is the model has no heteroskedasticity (table 7). by varying k it is possible to construct different regression equations. another heteroskedasticity test is arch. the results of the test are shown in table 8. the arch test also indicates that there is no heteroskedasticity in the model, the probability of accepting null hypothesis is 0.3152 (31.5%), which is more than 5%. with the help of all the tests for heteroskedasticity checking, we affirm that null hypothesis can be accepted. in all tests for heteroskedasticity, the null hypothesis means absence of heteroskedasticity, but alternative presence. we accepted null hypothesis because the table 4 the heteroskedasticity test: white f-statistic 2.400485 prob. f(14,5) 0.1705 obs*r-squared 17.40978 prob. chi-square(14) 0.2350 scaled explained ss 6.509242 prob. chi-square(14) 0.9520 test equation: dependent variable: resid^2 method: least squares sample: 1999 2018 included observations: 20 variable coefficient std. error t-statistic prob. c 4.41e+10 1.79e+10 2.455777 0.0575 gdp 146092.4 55345.59 2.639639 0.0460 gdp^2 0.049553 0.027166 1.824091 0.1277 gdp*fdi -0.355067 0.232084 -1.529910 0.1866 gdp*lm -9026.934 3329.963 -2.710821 0.0422 gdp*si 1731.845 926.4326 1.869370 0.1205 fdi -579009.4 215521.8 -2.686546 0.0435 fdi^2 0.838512 0.754526 1.111309 0.3170 fdi*lm 32562.57 10795.56 3.016293 0.0295 fdi*si -4148.114 2233.976 -1.856831 0.1225 lm -4.49e+09 1.76e+09 -2.542114 0.0518 lm^2 1.15e+08 43614625 2.631054 0.0465 lm*si 15020699 17893209 0.839464 0.4395 si -1.27e+08 3.02e+08 -0.419243 0.6924 si^2 -8967791. 4798838. -1.868742 0.1206 r-squared 0.870489 mean dependent var 1.19e+08 adjusted r-squared 0.507859 s.d. dependent var 1.41e+08 s.e. of regression 99093547 akaike info criterion 39.77473 sum squared resid 4.91e+16 schwarz criterion 40.52153 log likelihood -382.7473 hannan-quinn criter. 39.92052 f-statistic 2.400485 durbin-watson stat 2.799546 prob(f-statistic) 0.170488 source: authors baltic journal of economic studies 149 vol. 6, no. 3, 2020 table 5 heteroskedasticity test: breusch-pagan-godfrey f-statistic 1.692383 prob. f(4,15) 0.2040 obs*r-squared 6.219271 prob. chi-square(4) 0.1834 scaled explained ss 2.325287 prob. chi-square(4) 0.6762 test equation: dependent variable: resid^2 method: least squares sample: 1999 2018 included observations: 20 variable coefficient std. error t-statistic prob. c 1.13e+09 6.09e+08 1.850533 0.0840 gdp -70.10122 302.1019 -0.232045 0.8196 fdi -612.5624 2784.073 -0.220024 0.8288 lm -54868254 31031217 -1.768163 0.0974 si 7916346. 7502087. 1.055219 0.3080 r-squared 0.310964 mean dependent var 1.19e+08 adjusted r-squared 0.127220 s.d. dependent var 1.41e+08 s.e. of regression 1.32e+08 akaike info criterion 40.44626 sum squared resid 2.61e+17 schwarz criterion 40.69519 log likelihood -399.4626 hannan-quinn criter. 40.49486 f-statistic 1.692383 durbin-watson stat 2.122781 prob(f-statistic) 0.203963 source: authors table 6 heteroskedasticity test: harvey f-statistic 1.251663 prob. f(4,15) 0.3317 obs*r-squared 5.004987 prob. chi-square(4) 0.2868 scaled explained ss 3.805318 prob. chi-square(4) 0.4330 test equation: dependent variable: lresid2 method: least squares sample: 1999 2018 included observations: 20 variable coefficient std. error t-statistic prob. c 31.48558 8.934291 3.524127 0.0031 gdp 1.30e-06 4.43e-06 0.292969 0.7736 fdi -1.80e-05 4.09e-05 -0.440702 0.6657 lm -0.768098 0.455410 -1.686606 0.1124 si 0.106464 0.110100 0.966980 0.3489 r-squared 0.250249 mean dependent var 17.39416 adjusted r-squared 0.050316 s.d. dependent var 1.987317 s.e. of regression 1.936675 akaike info criterion 4.372140 sum squared resid 56.26063 schwarz criterion 4.621073 log likelihood -38.72140 hannan-quinn criter. 4.420734 f-statistic 1.251663 durbin-watson stat 2.155326 prob(f-statistic) 0.331739 source: authors probability of accepting the hypothesis is much above 5% significance level. we also test the model for predictive quality. we pay attention to mape, which is equal to 9.35, i. e., being high accuracy of the forecast, and therefore high quality of the forecast (figure 1). we test the model for explanatory ability. figure 2 shows how the model we built clearly reflects foreign trade by the factors we choose: a graph where the modeled values (fitted) accurately represent actual values (actual), so by this criterion the model is completely acceptable. we used the granger test to investigate the causeand-effect relationships between the selected variables and the ft. the idea of test is as follows: if a change in variable x1 causes a change in x2, then change x1 precedes change x2; that is, we check whether x1 or x2 has been primal. the tests were performed for lags 2, 3, 4. the test results are shown in table 9. baltic journal of economic studies 150 vol. 6, no. 3, 2020 the granger test results can be summarized. if lag = 2, so foreign trade reveals a cause-and-effect dependence on the employed citizens, namely, foreign trade is the reason for the increase in the number of employed population: the higher the volume of exports and imports (especially intermediate consumption products, which need further processing) is, the greater the need for the labor force is, and thus the higher the employment rate in the countries is. also, the more foreign investment is attracted, which usually contributes to production and gdp growth, the more people are going to be employed, so the employment rate will increase. the descriptive characteristics of the variables are shown in table 10. external trade, gdp and fdi, have the highest standard deviation, which confirms their general tendency for volatility and means that both external and internal factors influence these variables. the external environment directly influences ukraine’s foreign trade and its economic development in general. manufacturing, exporting and importing, attracting investment in our model demonstrate close connection with the employed population. the skewness coefficients are insignificant in terms of foreign trade and fdi. let us analyze the kurtosis index , which shows the amplitude of the deviations of the variables. if the kurtosis rate is table 7 heteroskedasticity test: glejser f-statistic 2.046543 prob. f(4,15) 0.1392 obs*r-squared 7.061254 prob. chi-square(4) 0.1327 scaled explained ss 5.186355 prob. chi-square(4) 0.2687 test equation: dependent variable: aresid method: least squares sample: 1999 2018 included observations: 20 variable coefficient std. error t-statistic prob. c 62466.58 27929.56 2.236576 0.0409 gdp -0.000665 0.013860 -0.048007 0.9623 fdi -0.054478 0.127729 -0.426511 0.6758 lm -2939.249 1423.662 -2.064570 0.0567 si 468.4373 344.1835 1.361010 0.1936 r-squared 0.353063 mean dependent var 8770.205 adjusted r-squared 0.180546 s.d. dependent var 6688.032 s.e. of regression 6054.254 akaike info criterion 20.46723 sum squared resid 5.50e+08 schwarz criterion 20.71616 log likelihood -199.6723 hannan-quinn criter. 20.51582 f-statistic 2.046543 durbin-watson stat 2.100809 prob(f-statistic) 0.139161 source: authors table 8 heteroskedasticity test: arch f-statistic 1.071150 prob. f(1,17) 0.3152 obs*r-squared 1.126207 prob. chi-square(1) 0.2886 test equation: dependent variable: resid^2 method: least squares sample (adjusted): 2000 2018 included observations: 19 after adjustments variable coefficient std. error t-statistic prob. c 97105137 42443928 2.287845 0.0352 resid^2(-1) 0.264514 0.255578 1.034964 0.3152 r-squared 0.059274 mean dependent var 1.25e+08 adjusted r-squared 0.003937 s.d. dependent var 1.43e+08 s.e. of regression 1.42e+08 akaike info criterion 40.48598 sum squared resid 3.45e+17 schwarz criterion 40.58540 log likelihood -382.6168 hannan-quinn criter. 40.50281 f-statistic 1.071150 durbin-watson stat 1.948456 prob(f-statistic) 0.315185 source: authors baltic journal of economic studies 151 vol. 6, no. 3, 2020 greater than 0, then the sharp-pointed distribution and the amplitude are considered to be significant, but if the kurtosis factor is less than 0, then the distribution is considered to be planar (flat-topped) and the amplitude is considered insignificant. in our model, all indices of kurtosis are greater than 0, so the distribution is acute-vertex . the null hypothesis of all variables except gdp has normal distribution on the level of 5%. the standard deviation indicates on small coefficient of variation. the results of the dickey-fuller stationarity test showed that all the data were stationar y (stable). taking into account all the indicators of high quality, according to actual data, we make a forecast of foreign trade up to 2023 (figure 3). with the dynamics of the selected factors, we predict the probability of exports and imports growth for goods and services at certain intervals. the equation is statistically significant with a high coefficient of determination. the general view of the model on the dependence of foreign trade upon independent variables can be described by the following equation: substituted coefficients: ft = 0.0254 x gdp + 1.9060 x fdi + 1997.0540 x x lm + 3661.2918 x si – 27467.9050 at the same time, considering the newest aspects of the pandemic course of the coronavirus and the response of countries and the world economy in the whole, predicting on high probability, we consider achieving ukraine’s foreign trade parameters in accordance with the pessimistic forecasting scenario. 0 40,000 80,000 120,000 160,000 200,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 ftf ± 2 s.e. forecast: ftf actual: ft forecast sample: 1999 2018 included observations: 20 root mean squared error 10927.48 mean absolute error 8770.205 mean abs. percent error 9.354834 theil inequality coefficient 0.049560 bias proportion 0.000000 variance proportion 0.014367 covariance proportion 0.985633 figure 1. forecast of models source: authors -30,000 -20,000 -10,000 0 10,000 20,000 0 40,000 80,000 120,000 160,000 200,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 residual actual fitted figure 2. explanatory ability of the model source: authors baltic journal of economic studies 152 vol. 6, no. 3, 2020 table 9 pairwise granger causality test on all the variables, 1999-2018 null hypothesis lag 2 lag 3 lag 4 f-statistic prob. conclusion f-statistic prob. f-statistic prob. 1 gdp does not granger cause ft 0.01291 0.9872 accept 0.02041 0.9958 0.11204 0.9743 ft does not granger cause gdp 0.14939 0.8627 accept 0.12958 0.9403 0.66341 0.6370 2 fdi does not granger cause ft 0.32717 0.7267 accept 0.45132 0.7220 0.44222 0.7754 ft does not granger cause fdi 2.62583 0.1102 accept 1.98435 0.1803 0.82629 0.5483 3 lm does not granger cause ft 0.03434 0.9663 accept 0.18901 0.9015 0.19686 0.9323 ft does not granger cause lm 6.49481 0.0111 reject 3.13873 0.0740 3.11128 0.0907 4 si does not granger cause ft 0.34038 0.7177 accept 0.97783 0.4414 0.67693 0.6292 ft does not granger cause si 0.15701 0.8563 accept 0.91816 0.4668 0.44691 0.7723 5 fdi does not granger cause gdp 0.22118 0.8045 accept 0.25065 0.8591 0.97391 0.4785 gdp does not granger cause fdi 0.04224 0.9588 accept 0.31484 0.8144 0.19337 0.9342 6 lm does not granger cause gdp 0.72114 0.5047 accept 0.38752 0.7645 1.96462 0.2046 gdp does not granger cause lm 0.23584 0.7932 accept 0.09995 0.9582 0.03817 0.9965 7 si does not granger cause gdp 0.27676 0.7626 accept 0.10781 0.9536 0.07468 0.9877 gdp does not granger cause si 0.02660 0.9738 accept 0.00687 0.9992 0.65658 0.6410 8 lm does not granger cause fdi 1.95134 0.1815 accept 2.09072 0.1651 1.66109 0.2616 fdi does not granger cause lm 3.97883 0.0449 reject 6.04163 0.0129 4.32586 0.0448 9 si does not granger cause fdi 3.23497 0.0724 accept 2.92802 0.0862 1.70795 0.2516 fdi does not granger cause si 0.38398 0.6886 accept 1.94271 0.1867 1.42455 0.3197 10 si does not granger cause lm 3.71458 0.0530 accept 1.24627 0.3442 1.36608 0.3364 lm does not granger cause si 1.15774 0.3446 accept 1.64475 0.2410 0.73026 0.5991 source: authors table 10 characteristics of variables ft gdp fdi lm si mean 100377.0 132006.1 26680.71 19.27385 9.597000 median 97686.95 117591.5 32633.05 20.03135 8.805000 maximum 173942.5 513315.0 53704.00 21.00370 22.77000 minimum 28154.80 31580.90 2810.700 16.15640 2.940000 std. dev. 47440.08 103301.3 18403.89 1.684786 5.889824 skewness 0.032692 2.548740 -0.091876 -0.924753 0.888673 kurtosis 1.909492 10.47516 1.445950 2.406134 2.897351 jarque-bera 0.994569 68.21865 2.040696 3.144456 2.641249 probability 0.608180 0.000000 0.360470 0.207582 0.266969 sum 2007539. 2640122. 533614.1 385.4769 191.9400 sum sq. dev. 4.28e+10 2.03e+11 6.44e+09 53.93157 659.1104 observations 20 20 20 20 20 source: authors 6. implications the conducted investigation and literature review proved the relevance of the foreign trade effect research direction through the action of determinants of exogenous and endogenous origin. justifying the priority of institutional changes as a prerequisite for further support of foreign trade, it should be pointed out that at present day on the level of the state the implementation of the export strategy of ukraine (“road map” of strategic trade development) for 2017-2021 is aimed at geospatial diversification of exports and import, the increase of high-tech innovative products export by the criteria of sustainable development, seeking for new sales markets as well (ukraine’s export strategy, 2020). the results of the obtained econometric model allow us to determine the necessary focus of public policy onto the basis of selective approach, taking into account the variability of foreign investment factors, employment level, economic activity in the country in the whole and innovative activity of business engaged into foreign economic operations. baltic journal of economic studies 153 vol. 6, no. 3, 2020 the model showed higher level of trade sensitivity upon the level of employment and modernization of the industrial sector, which underpin innovation. the level of employment and its distribution across sectors of the economy are important, first of all, as for the sectoral specific nature of labor resource demand. considering the fact that the level of automation and technical supply within the first five commodity groups for export is rather low, so the fluctuation of employment level in the outlined sectors is to imply significant affect upon the export opportunities of ukraine all in all. in this context, large-scale labor migration from ukraine during last ten years is clearly a destructive factor. the emphasis on stimulating innovation in industry and other sectors of the economy is also justified, since this ensures diversification of exports and enhances the competitiveness of companies, in particular small and medium-sized ones, integrated into international trade. proposals to complicate the structure of foreign trade and increase its level of adaptability and innovation are fully justified and urgent: as for 2019, the export structure in ukraine remains of raw nature. almost 70% of exports are from agricultural products, metallurgical and chemical industries, mineral products, wood, and raw materials for light industry (ukraine’s export strategy, 2018). the situation is complicated by the fact that the dominance of the raw material component makes ukraine’s economy vulnerable from the worldwide unstable market conditions of agricultural, metal, chemical raw materials and energy engineering. these sectors are the first to respond to the recessionary processes in the world economy. the coronavirus outbreak in 2020 is a major challenge for both global and foreign trade in ukraine, where export markets (the eu, the prc) have been impacted badly by the pandemic. additional destructive influence is exerted state of relations between ukraine and the russian federation. trade relations of ukraine with the russian federation have declined substantially, restrictive measures on export deliveries are in force through some other cis and asian countries. increasing technological level of exports, some experts quite truly connect the involvement of small and medium-sized businesses into international production networks of multinational companies (duginets g., koval v., plekhanova o., antonov a., petrova m., 2019). however, it should be borne in mind that, as a rule, such cooperation is being in the format of contractual rather than investment relations, and the localization is carried out by low-tech processes and operations. accordingly, there is no significant shift towards modernizing industrial sector and increasing level of tech-adaptability of the economy and the external sector. 7. conclusions resulting on the modelling simulation it has been found, that: – high level achievement in foreign trade dynamics of ukraine over the years, which exceeded similar indicators of dynamics within global trade; – existing strong link between foreign trade, foreign direct investment and employment rates, and which is less dense – in terms of overall economic activity of the country that is manifested through gdp; – higher levels of trade sensitivity than employment and modernization of the industrial sector. employment fluctuations across sectors that provide priority export groups (agro-industrial complex, metallurgy, machinebuilding) which may seriously affect entire ukraine’s export potential; – strengthening of institutional support for innovation and investment activities of national enterprises that should be considered within the potential of scale-up and improvement of ukraine’s trade relations quality with the whole world; – animated interaction of innovations and investments is to provide diversification and complication of -500,000 -250,000 0 250,000 500,000 750,000 1,000,000 1,250,000 1,500,000 00 02 04 06 08 10 12 14 16 18 20 22 ftf ± 2 s.e. forecast: ftf actual: ft forecast sample: 1999 2023 included observations: 20 root mean squared error 10927.48 mean abs olute error 8770.205 mean abs . percent error 9.354834 theil inequality coefficient 0.049560 bias proportion 0.000000 variance proportion 0.014367 covariance proportion 0.985633 figure 3. forecast: ftf source: authors baltic journal of economic studies 154 vol. 6, no. 3, 2020 merchandise export structure, to increase its level of tech-adaptability and innovativeness, and thus allow to get rid of the established attitude to ukraine on the world trade map as to a supplier of raw low-tech products. prospects for further research in this area may be the estimation of risks and macroeconomic effects of foreign trade deterioration in the context of declining economic activity in the importing countries of domestic products, especially in the eu and the prc, further weakening the external channels of investment and reducing the ability of businesses to innovate in deepening recessionary processes on global and national levels. through the timing period of the represented study, the s&p international agency downgraded the global rating of indicators, including ukraine, as well. in particular, ukraine’s real gdp growth is projected to decline down to the level of 2.5% to 3.0% in 2020, and it is to stabilize on the 3% level in 2022-2023 (rating: ukraine; telegraf, 2020). all in all, the forecasts based on the developed foreign trade model do not contradict the forecasts of the s&p international agency: ukraine’s foreign trade is to increase; however, the effects of foreign trade will be determined not just by institutional, but rather through factorial endogenous and exogenous preconditions. 8. acknowledgements the article is prepared within the framework of the scientific research work "the potential of import substitution in ukraine on conditions of post-industrial economy formation" (state registration number 0119u100625). references: constantinescu, cristina, aaditya mattoo and michele ruta (2014). global trade slowdown: cyclical or structural? imf working paper, january 2015. retrieved 15 march, 2020 from: https://www.imf.org/external/ pubs/ft/wp/2015/wp1506.pdf economic trends / trade trends / exports and imports of total 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(2004). trade liberalization, exchange rate changes and tax revenue in sub-saharan africa. imf working paper wp/04/178. doi: 10.5089/9781451858983.001 alessia campolmi, harald fadinger, & chiara forlati (2014). trade policy: home market effect versus terms-of-trade externality. journal of international economics, elsevier, vol. 93(1), p. 92–107. doi: 10.1016/ j.jinteco.2013.12.010 yanikkaya, halit (2003). trade openness and economic growth: a cross-country empirical investigation. journal of development economics, 72: 57–89. doi: 10.1016/s0304-3878(03)00068-3 evaluating the trade effect of developing regional trade agreements: a semi-parametric approach. world bank policy research working paper, may, 2007. doi: 10.1596/1813-9450-4220 baltic journal of economic studies 155 vol. 6, no. 3, 2020 mahadeva, r . (2007). new evidence on the export-led growth nexus: a case study of malaysia. world economy, 30(7), p. 1069–1083, july. doi: 10.1111/j.1467-9701.2007.01030.x marilyne huchet, chantal le mouel, mariana vijil (2018). the relationship between trade openness and economy growth: some new insights on the openness measurement issue. the world economy, wiley, 2018, 41(1), pp. 59–76. retrieved 15 march, 2020 from: https://hal.archives-ouvertes.fr/hal-01987393/document economic trends / national accounts/ gross domestic product: total and per capita, current and constant (2010) prices, annual. retrieved 10 march, 2020 from: https://unctadstat.unctad.org/wds/tableviewer/tableview.aspx ministry for development of economy / trade and agriculture of ukraine (2020). free trade agreements. retrieved 10 march, 2020 from: https://www.me.gov.ua/documents/detail?lang=uk-ua&id=9538dee1-a00d4b82-8a8d-ccfaee253185&title=ugodiprovilnutorgivliu duginets, g., koval, v., plekhanova, o., antonov, a., &petrova, m. (2019). on the supranational and national level of global value chain management. entrepreneurship and sustainability issues, vol. 6, nо. 4 ( june), pp. 1922–1937. doi: 10.9770/jesi.2019.6.4(27) rating: ukraine credit rating (2020). retrieved 06 march, 2020 from: https://countryeconomy.com/ratings/ ukraine reitynhovoe ahenstvo prohnozyruet zamedlenye ekonomyky ukrainy (2020). retrieved 12 march, 2020 from: https://telegraf.com.ua/biznes/ekonomika/5394490-reytingovoe-agenstvo-prognoziruet-zamedlenie-ekonomiki-ukrainyi.html baltic journal of economic studies 113 vol. 6, no. 1, 2020 corresponding author: 1 university of the state fiscal service of ukraine, ukraine. e-mail: pudrik.nusta@ukr.net 2 lviv polytechnic national university, ukraine. e-mail: yaryna_bohiv@ukr.net 3 university of the state fiscal service of ukraine, ukraine. e-mail: shpak2006@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-1-113-117 anti-corruption agenda for state geocadastre of ukraine by 2030 in the context of transparency of public finance denys pudryk1, yaryna bohiv2, nataliia shpak3 «corruption is hidden where there is no transparency of finances. and while there is even the slightest opportunity to bypass the system, it will be used…». jose ugaz, a former prosecutor for peru who chaired transparency international in 2014–2016, board member of ti ukraine abstract. the present article concentrates on analyzing the ways of increasing efficiency of transparency of public finances reduced of broader significance: from the analysis of the quality of the state and local management in the social, environmental sphere. in this article, we discuss interlinkages between corruption, transparency of public finances, and the value of technological developments in the context of the 2030 agenda for sustainable development. the main purpose of this article is to characterize the legal and economic basis for ensuring transparency of public finances to monitor the effectiveness of their distribution, which becomes crucial for the success of the reform process in all areas of the national economy. the authors emphasized the importance of the impact of trends in the political-legal environment, the economic and financial sphere on the transformation of the state anti-corruption strategy. a review of gaps in anti-corruption legislation is essential for effective practices combating corruption. present status and theoretical results of the formation and implementation of sdg 16 in the legislation of the state anti-corruption strategy contradictory are summarized. the practical significance of the research results is to formulate a hypothesis, the essence of which lies in the new knowledge about overcoming corruption in the process of dynamic transformation through the integration of sdg 16 into the national anticorruption strategy and enhancing transparency of public finances by digital technologies as a prerequisite for achieving all other development goals on the 2030 agenda for sustainable development. this hypothesis aims to change the strategic directions and directions in economic policy-making in order to neutralize the harmful processes of corruption. the value of the results obtained in contemporary research is driven by the transnational nature of the phenomenon of corruption and its relation to other harmful processes that are produced in the economic space and lead to the institutionalization of the global economic crisis. methodology. a holistic approach is used to analyze both the extent and causes of corruption in ukraine by looking at the system of checks and balances and institutional pillars that form a society, including the executive, legislature, judiciary, and civil society. key words: corruption, increasing efficiency, transparency, public finances, illicit financial flows, the 2030 agenda for sustainable development, national economy. jel classification: r52, d73 1. introduction despite the high level of corruption in ukraine, the ability to manage large data sets in the field of public finance is designed to identify conflicts of interest, potential, current, and cases of inefficient allocation of resources. at the same time, transparency of public finances comes not more from the analysis of budget indicators, but in a broader sense: from the analysis of the quality of government management and local government in the social, cultural, environmental sphere. corruption is the biggest obstacle to achieving the sustainable development goals (sdgs) in ukraine. baltic journal of economic studies 114 vol. 6, no. 1, 2020 ukraine, like the other un member states, joined the global process of sustainable development. the process of adaptation of the sdgs, initiated to create a strategic basis for ukraine's national development for the period up to 2030, was initiated (sustainable development strategy for ukraine by 2030, draft, 2017). corruption exacerbates inequality and limits participation and representation of vulnerable groups in decision-making processes at all levels. not only exclusion and discrimination violate human rights, but it also causes outrage and hostility, and can lead to violence. anti-corruption strategies that empower vulnerable and marginalized groups to access information, promote merit-based recruitment and promotion and facilitate equal participation at all levels, not only promote inclusion but also allow people to express concern and demand accountability (tylchyk v., tylchyk о., 2019). corruption undermines the ability of the justice sector to remain independent, integral and accessible. this means that conflicts remain unresolved and people cannot receive protection. institutions that do not function in accordance with legal laws are prone to arbitrariness and abuse of power and are less able to provide public services to anyone. strengthening transparency, accountability and integrity in the justice sector and relevant institutions can thus enable these agencies to legally perform their functions and gain public confidence. corruption destroys trust in government agencies, undermines the rule of law and impairs the system of checks and balances. they have a strong influence and pose a serious threat to peace and security. corruption helps to create a climate for conflict to flourish. the links between corruption, human rights abuses, violent extremism, impunity, trafficking in human beings and illicit financial flows have repeatedly been recognized by the un security council and the general assembly as serious challenges to achieving sustainable development, peace and security. thus, there is a growing understanding that challenges to corruption and governance must be addressed as an integral part of conflict situations, from prevention to peacebuilding, and failure to do so will lead to further risks of conflict and instability. 2. understanding aspects of sustainable development five critical aspects are at the heart of the 2030 agenda, people, prosperity, the planet, partnership, and peace. traditionally, it is due to the prism of three key elements: social inclusion, economic growth, and the environment, but the concept of sustainable development becomes more important with the adoption of the 2030 agenda, based on the traditional approach, adding two critical components: partnership and peace. real sustainability lies in these five dimensions. the 2030 agenda inspires us to think creatively, use innovative approaches, and critically rethink how we approach today 's challenges. the sustainable development goals are comprehensive, complex and interconnected. due to their synergistic nature, the implementation of the 2030 agenda for sustainable development renewed interest in national development strategies. however, most national strategies detail how they will be funded. mobilizing sufficient resources remains a key challenge. member states of the united nations have recognized this challenge in the addis ababa action agenda. they decided to create integrated national funding frameworks to support their sustainable development strategies. such country-specific funding frameworks integrate funding and related policies that are most relevant to addressing country financing issues. they look at the full range of funding and non-financial resources available to countries and have developed a financing strategy to attract resources, manage risk and achieve sustainable development priorities. in short, the integrated national funding framework is a tool for the implementation of the addis ababa action agenda at the national level. there are several advantages to an integrated approach. combining funding and related policy with long-term goals, integrated funding frameworks can help overcome short-term-focused solutions. adopting integrated national funding mechanisms is challenging. in many countries, opportunities are limited and policy reform is expensive; long "tasks": therefore, the lists of necessary reforms will not help. existing funding policies can be biased due to serious political constraints that cannot be ignored. however, there are many elements that countries can rely on. all countries have different fiscal policies. if they have already embarked on a national sustainable development strategy, they should also create governance and coordination mechanisms. an integrated funding structure will not have to reinvent the wheel; it is a tool for identifying and implementing targeted policies and reforms to improve their effectiveness, coherence, and relevance to sustainable development. obviously, there is an opportunity to do this in both developed and developing countries. each global task was considered taking into account the specifics of national development. national sdgs will form the basis for joint efforts to ensure economic growth, social justice, and environmental management. the sustainable financing report (2019), is intended to guide the member states in developing and implementing integrated national financing mechanisms. the four main blocks of their practical implementation are presented: evaluation and diagnostics; development of financing strategy; monitoring, review and accountability mechanisms; and management and coordination mechanisms. baltic journal of economic studies 115 vol. 6, no. 1, 2020 as an interest in more integrated and strategic approaches to sustainable development financing will become more detailed lessons for their development and implementation. these lessons form the basis of the analysis suggested in this chapter and will serve as a guide for the inter-agency task force on financing for development (iatf) as it continues to refine its methodology and work in this area, such as further developing the policy tools that are most relevant and useful for different countries (sustainable development financing report, 2019). 3. solutions for financial stability the obvious weakness of the state is tax evasion and theft; less trust in government, state institute; lower income for the state; poor quality of public services: education, health care, public transport, etc. the imf financial transparency code (code) is the international standard for disclosure of public finances. the 2014 code includes a set of principles based on four fundamental principles: fiscal reporting (component i). fiscal reporting should include a comprehensive, up-to-date, timely and reliable overview of the financial position and performance of the government. fiscal forecasting and budgeting (component ii). budgets and related budget forecasts must contain a clear statement of the government's budgetary goals and political intentions, as well as comprehensive, timely and accurate public finance forecasts. fiscal risk analysis and management (component iii). governments should identify, analyze and manage risks to public finances and ensure effective coordination of public sector budget decisions. resource revenue management (component iv). governments must provide a transparent framework for ownership, contracting, taxation and use of natural resources (budget transparency tool, 2014). to implement the 2030 agenda for sustainable development and fulfil the commitments of "not leaving anyone behind", the collection, processing, analysis and dissemination of outstanding volumes of data, including general data, for effective policy development, as well as for monitoring and assessment of progress, are performed. on the agenda, it was decided to ensure international cooperation, including through technical and financial support, to further strengthen the capacity of national statistical offices and national statistical systems. given the growing need for shared data, as well as the opportunities and challenges faced by unconventional data sources, providers should strengthen their support for the statistical systems of developing countries by improving the capacity building. national strategies for the development of statistics (nsds) provide a common vision for the development of national statistical systems and solve problems related to the integration and use of data from various sources, as well as the development of statistical potential. to ensure compliance with national priorities, statistical strategies should be closely linked to national sustainable development strategies and connected with an integrated financial framework. big data is an opportunity to complement traditional sources of statistical information to measure progress towards the sustainable development goals (sdgs) and to increase focus on political efforts but it presents new risks and challenges. the international community should work to develop technical standards that adequately govern data access, data privacy, and security while continuing to comply with applicable statistical quality standards. efforts are continuing to improve the collection and dissemination of financial sector data and financial vulnerability. at the second stage of the g20 gap initiative, progress was made in monitoring shadow banks, reporting on globally important systems and improving the coverage, timeliness, and frequency of work of sector banks. accounts. it is important to provide adequate resources to support the necessary access and data infrastructure and to further service the newly created dgi datasets. to address the negative impact of corruption on human rights, a human rights-based strategy places international human rights and claims (of copyright holders) and relevant government bonds ("tariffs") at the centre of the discussion on corruption and efforts at all levels. it also brings together international principles in the field of human rights, including nondiscrimination and equality, participation, inclusion, accountability, transparency, etc. illegal financial flows describe the movement of money that was illegally acquired, transferred or spent across borders. the sources of these cross-border transfers come in three forms: corruption, such as bribery and theft of government officials; criminal acts, such as drug trafficking, human trafficking, illegal sale of weapons, etc. and tax evasion and unjustified transfers. the world economic forum estimates that 2 trillion usd spent on corruption each year can eliminate hunger (116 billion usd), eliminate malaria (8.5 billion usd in 7 years), bridge the global infrastructure gap (1 trillion usd) and provide basic education for all children (26 billion usd). effective anti-corruption measures can help open up significant levels of development funding (thomson, 2017). the volume of illegal financial flows is huge. they have a major impact on the global economy, destroying poor countries and have a clear link to corruption. confidentiality plays an important role in obtaining illicit financial flows. governments should establish compulsory public records that reveal beneficial ownership of trust funds and companies in order to more easily track illicit financial flows and make it easier baltic journal of economic studies 116 vol. 6, no. 1, 2020 for people to earn income from corruption and criminal proceeds. this framework was developed by transparency international and is useful for assessing a country 's strengths and weaknesses and for developing an anticorruption strategy. developing democracies, such as ukraine, can benefit from the best practices of developed countries. for example, according to steinmo (2018), sweden, which has become a strong tax bracket, is not because it has more economic resources than in other countries, but through the process of experimentation and adaptation of innovative means of resource extraction. inventory and population registers formed the basis for sweden's monitoring capabilities, which included tax benefits. the development of the twentieth century strengthened but did not create the main forces that served the state. improving monitoring capabilities has been the latest in a long history of innovation when the state needed to provide the information necessary to tackle collective tax measures. the welfare state, which was created to provide services in exchange for high taxes, continued the tradition of a robust vertical tax treaty between the state and citizens. the current state of taxation in sweden is as exceptional as in the previous current state of taxation. the modern tax state supports high fiscal monitoring potential and strong vertical and horizontal fiscal agreements. although it is no longer controlled mainly by war, the current tax situation has won and continued its financial alienation. digital technologies provide innovative tools for tracking government money in real-time, as technologies become key in the fight against corruption. new technologies and big data open up new perspectives for oversight by government and stakeholders and help control prevention methods and even predict corruption. this has been hidden in the past through paper-based nontransparent practice. in particular, after possible decisions by manal found and other (2019), the following technical developments can be considered: – the distributed core technology, for example, blockchain, for proper design and processing, allows you to safely and openly store personal information and transaction information. they can increase accountability and reduce vulnerability to corruption in government operations by increasing the integrity of data records and the reliability of publicly available information; – an increasing number of countries provide open access to government agency data in a machine-readable format, allowing users to research, analyze and reuse it. this can increase transparency and accountability, for example, by showing where and how public money is spent. big datasets can also be analyzed to help identify patterns of potential corruption; – machine learning and artificial intelligence (ai) can reveal patterns and practices that are too complex for humans to detect. ai can process large amounts of data and quickly identify patterns that may indicate potentially corrupt behavior. 4. conclusion to counter this negative phenomenon (corruption), it is necessary to include sdg 16 in the ukrainian national anti-corruption strategy as a prerequisite for achieving all other development goals on the 2030 agenda for sustainable development. it will provide a framework for demanding better governance and increased accountability. the need to urgently create the 2030 anti-corruption agenda for sustainable development in the 21st century world imperatives, with many of these goods already in danger of exhaustion or irreversible degradation or generating disasters and calamities (expansion of the desert areas, following massive deforestation, expansion of agricultural areas, at the cost of irreversibly damaging the ecosystems of tropical forests, resources of drinking water, air quality in great industrialized cities, transborder pollution of the great rivers or lakes, lessening and pollution of aquatic food resources (species of fish), pollution of the marine and oceanic ecosystems, endangering biodiversity, massive and uncontrolled flooding of the great watercourses, on account of the massive deforestation and land mafia, etc.). the connection between the objectives of durable development at a global level and environmental protection must be a priority in terms of the nature and size of the duties assumed by these institutions. thus, they must take into consideration the protection of natural resources, for their optimal use by the future generations, ensuring a global framework for living, with improved standards, in comparison to standards of the 20th century, ensuring the development of material and spiritual values, the necessity to ensure the preservation and protection of natural ecosystems, the need for rational, moderate use of natural resources, the need to change the civilization model (from an industrial one to a model of green and renewable energy), the need to maintain the biodiversity and to prevent the various forms of trans-border pollution, to prevent the negative effects of the natural phenomena, to adopt non-polluting technologies at a large scale, up to a global level of use, to recover and recycle usable residual substances, to encourage cooperation in multiple domains, among the states and the non-state actors transnational corporations, in particular, to protect the environment. promote land use planning and efficient spatial concentration: the spatial concentration of urban areas is a unique characteristic that enables the real scale of economies, efficient delivery of services, and effective use of amenities. baltic journal of economic studies 117 vol. 6, no. 1, 2020 in ukraine, the problem of interoperability of open databases still not solve. thus, there is a necessity to compare spatial data with data from taxpayers and 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(2018). the innovative approach to the crisis situations monitoring of the social and economic origin that endanger the security of ukraine. baltic journal of economic studies, vol. 4, no. 3, pp. 15–21. doi: 10.30525/2256-0742/2018-4-3-15-21 jankovska, l., tylchyk, v., & khomyshyn, i. (2018). national economic security: an economic and legal framework for ensuring in the conditions of the european integration. baltic journal of economic studies, vol. 4, no. 1, pp. 350–357. doi: 10.30525/2256-0742/2018-4-1-350-357 tylchyk, o., pluhatar, t., & kotukha, o. (2018).  determinants of shadowing of the economy: the genesis of economic and legal doctrines. baltic journal of economic studies, vol. 4, no. 3, pp. 302–308. doi: 10.30525/22560742/2018-4-3-302-308 tylchyk, o., dragan, o., & nazymko, o. (2018). establishing the ratio of concepts of counteraction to legalization (laundering) of illegally-obtained income and counteraction to the shadow economy: the importance for determining performance indicators of the european integration processes. baltic journal of economic studies, vol. 4, no. 4, pp. 341–346. doi: 10.30525/2256-0742/2018-4-4-341-345 baltic journal of economic studies 123 vol. 2, no. 2, 2016 corresponding author: 1 department of human resources management and labour economics, odessa national economic university. e-mail: saloiana35@gmail.com the analysis of the state and development prospects of the middle class in ukraine yana salo1 odessa national economic university, ukraine abstract. the purpose of the paper is to study and represent the current state of the middle class in ukraine, the problems of its formation and development prospects in the future with the definition of the complementary set of internal and external factors of its formation. methodology. the survey is based on statistical data from open official sources, which makes it possible to confirm the thesis of the critical proportion of the middle class in ukraine. besides, the data are obtained from electronic sources, the state statistics service of ukraine. during the study, the paper uses analytical articles on the economic development of the middle class in ukraine. the results of the survey shows that the middle class is critically low for stable functioning of ukraine’s modern economy. one of the main problems of the middle class development is the absence of state support of small and medium-sized businesses. the government with the repressive model of the economy in relation to business-oriented monopolization was formed in ukraine. the distribution of the «shadow» model of social and economic relations leads to the limitation of legal opportunities of employment and income. besides, it complicates the development of small and mediumsized businesses. as a consequence, the number of entrepreneurs and small business owners are constantly increasing, but due to the absence of a favorable business climate a significant number of small businesses were forced to move into the shadow. the peculiarity of the formation of the middle class in ukraine is that its social basis in contrast to western europe is not the owners, but employees. we have a unique situation, when most of the highly skilled workers (the representatives of the spheres of education, health, public administration), which should be the core of the middle class, in terms of income are on the verge or below the poverty line. the level of wages of such specialists does not even correspond to the national average. practical implications. on the way to the successful modernization of ukraine in the short and long-term priority business and investment climate is favorable. this, in its turn, cannot be implemented without the improvement of the state management system in the field of entrepreneurship. policies to promote the formation of the middle class in ukraine should rely on the support of the working population, providing outstripping wage growth, strengthening the position of highly skilled workforce, as well as supporting entrepreneurship. the formation of the middle class in ukrainian society must be realized not through the creation of principally new social grouping, but through the gradual transformation of corresponding social groups and their way of functioning. value/originality. the survey is conducted to clarify the concept of the status of the middle class in ukraine. the reasons for the low level of the middle class in ukraine are identified on the basis of the data obtained. the resulting research findings make it possible to propose measures for the development of the middle class in ukraine, namely – the development of small and medium-sized enterprises and the support of working population, considering the interests of the middle class. key words: middle class, economic development, small and medium-sized business, society, ukrainian economy, jel classification: j23, j38 1. introduction class differentiation of society is typical for any country. the gradation of social communities is a positive factor for the country developing. at the same time this factor is an indicator of progress, defining thereby the level of economic and social level of citizens. over the long time ukrainian analysts have been disputing over the reasons of class division and conditions of formation and increase of the middle class in ukraine. academic-theoretical and applied interest to conduct the research of this subject is the ambiguity of the middle class positions and its place in ukrainian modern society. the middle class is an objective term for functioning of strong and stable society and consequently of the state. many analysts consider this class as a guarantee of politic and economic stability in society. baltic journal of economic studies 124 vol. 2, no. 2, 2016 as a rule the middle class includes representatives of small and medium-sized businesses as well as representatives of middle and lower structural units of management, creative occupations, advocates, qualified specialists, educationalists, doctors etc. these categories of population are the most active and predicted part of society. in comparison to richer and poorer classes, the action of the middle class is rational on the market. at the present stage the middle class is supposed to be the basis of the society in developed and democratic countries. one of the main ideas of ukrainian political views is the predominance of the middle class in our country. but the most important is the state of current class struggle in ukraine and the probability of the middle class winning. the relevance of this research work consists in the prolonged crisis of political and socio-economic systems, which has lasted during recent years. the purpose of this analysis is the classification and description of the middle class formation and development peculiarities in ukraine. to reach the stated purpose the following task was determined: • to synthesize the results of the middle class researches in ukrainian society. the following ukrainian analysts dedicated their works to theoretical and applied problems of the middle class research: kutsenko o., libanova e., holovakha  y., makieiev  s., shanhina l., yakuba o., dovbnia o., kaspruk v., aleksandrova o., medvedenko i., kovtunenko  v., vasyliev  y., mikhel d., lysenko l. and others. research works by ukrainian analysts emphasize the criteria of social stratification of the middle class both quantitative economic indexes, for instance income level and its distribution, and qualitative characteristics of the middle class division, nature and content of labor, lifestyle, and stabilization role of the middle class in society dynamics. nevertheless it is necessary to notice that presently there are not many systematic researches regarding formation and development of the middle class in ukraine. 2. middle class in developed countries the notion of the middle class was used in research works of analysts from the west countries for defining the government officials and servicemen, teachers and professors, doctors, engineers, farmers, qualified workers of industrial sector that featured relatively high level of their life and social mobility in comparison to the working class. later, the class of top managers was added to the middle class category. the middle class in developed countries is able to realize its targets and bring them politically. because of its strength, the middle class can prevail in a law system, political and religion organizations. as a result it mostly forms moral standards of society. it is needed to be mentioned that the middle class fulfills the row of separate functions. among them the following basic functions should be stated: regulation and stabilization function, function of economic donor and defining the character and structure of the consumer market. within present conception the middle class representatives use all civil rights, owe the relative income, do not conceal it and pay all the taxes. furthermore, the financial stability of the middle class facilitates the national economic development, since the most representatives of this class keep their savings on bank’s deposit accounts, buy shares, invest money etc. social stability of the middle class representatives depends on prestigious education and professional job, as well as perspective of career ladder or own businesses. on the whole, it can be asserted that the middle class representatives get their income owing to the higher education and working experience in professional field, further training that is also the reason they differ by stability. the system of living priorities of the middle class in developed countries is built up due to the scheme «education job income status». in developed countries the middle class is characterized not only due to its income level, but also lifestyle and separate consuming standards. the middle class takes the leading place in political and economic development in democratic society. the middle class number was quickly increasing before the financial crisis, but stopped after 2007 (credit suisse global wealth report, 2015). due to the credit suisse methodology the middle class number in west countries amounts to 35-65% of population (table 1). table 1 middle-class share of all adults (%), 2015, by country and region middle class belgium 62.1 italy 59.7 united kingdom 57.4 spain 55.8 netherlands 54.1 france 49.2 canada 47.8 switzerland 44.5 austria 44.0 germany 42.4 denmark 39.5 sweden 39.4 usa 37.7 source: (davies, lluberas, shorrocks, 2015) 3. current state of the middle class in ukraine after the soviet union disintegrated on the first stage of reforming the birth of the powerful middle class, which would be able to perform its traditional functions, was forecasted in ukraine. baltic journal of economic studies 125 vol. 2, no. 2, 2016 the society system transformation processes resulted into the drastic differentiation of the incomes of population and society stratification on the basis of social features. the very processes drew ukrainian analysts’ attention to the problem of finding out the resistant basics of the society social structure. an advent of the powerful middle class, which is believed to fulfil the economic donor and society stabilization functions, is considered by many analysts as the criteria of reform effectiveness and pledge of economic and social development. the systematic financial and economic crisis that started in 2007 affected all countries of the world, but ukraine suffered the most. the period from 2014 till 2015 was marked as the peak of economic recession for ukraine. in 2015 the economy state in ukraine did not change because of the political crisis and military actions started at the end of 2013. in 2014 gdp declined by 6,8%, and rate of inflation amounted to 24,9% (state statistics service of ukraine «gross domestic product», 2014). in 2015 gdp decreased by 9%, and the rate of inflation  – 46%. in accordance with the sssu date , in summer of 2015 in comparison to spring, gdp of ukraine rose by symbolic 0,7% (state statistics service of ukraine «change in the gross domestic product by 2015», 2015). two years ago it was the last time when economy of ukraine showed the positive dynamics. it was in summer of 2013. imf prognoses, that the planned positive dynamics in economy will bring the slight increase in 2016. according to the government and imf evaluations, gdp of ukraine will rise to 2%, inflation will decrease up to 12%, state fiscal deficit will be 3,7% of gdp. experts claim that in accordance with two main criteria, namely the level of living and education, the middle class amounts to about 10% of population. if one more defining characteristic is taken into account, namely the political views and activity, then the ukrainian middle class will lose up to 5%. taking into account the basic criterion of the middle class, its income, it has no sense to talk about this class in ukraine. the annual wages of residents in modern ukraine, who refer themselves to the middle level accordingly to the sociological researches, are around 60-100 thousand hryvnias per year (and that is in view of non-official wages) (public organization «development of the middle class», 2015). the income, the basic part of which is wage, is one of the main indicators of living level of the population. its amount depends on many activities characterizing the current state of economy in a country. at present days the economy of ukraine is in a poor condition because of the military actions within its territories. it is necessary to say that the analysis of nominal and real wages dynamics is very important. it should be noted that economy of ukraine in 2014 tended to decrease nominal and real wages by 1,9% and 14,7% accordingly (fig. 1). it is connected with the beginning of military actions on the territory of ukraine, annexation of ukrainian territories and political crisis in 2014. it is important to mention that in 2015 the level of nominal wage grew up to 14,5%, since the real wage level had decline (by 13,7%). 0,0% 20,0% 40,0% 60,0% 80,0% 100,0% 120,0% 140,0% 2010 2011 2012 2013 2014 2015 nominal wage dynamics real wage dynamics fig. 1. dynamics of wages during 2010–2015 source: (state statistics service of ukraine «growth rates of nominal and real wages», 2010-2015) it should be mentioned that particularly this period appeared to be crucial for ukraine in its historical development. ukrainian state, being under the influence of destabilizing external factors and destructive internal agents, is submerged into hazardous zone of instability. it prevents formation of the full middle social stratum. the biggest part of ukrainians that refer themselves to the middle class has their yearly income below 6000 dollars per year. that is an official established by u.n.o. breadline of inhabitants of europe. in fact accordingly to the income level these people belong to the poorest social layers of the ukrainian society. daily they have to think not about cultural and intellectual development, but how to provide sustenance, and minimum of the needed for family. the process of the middle class formation, which would meet the property status and personal incomes criteria of the developed countries, is on the initial stage. the reason is mainly the low living level of population. furthermore, many people, who are not far from the middle class status, get the considerable part of incomes unofficially and do not pay taxes. it leads them to contradictory relations with the state, and consequently to difficulties on the way of social function realization, namely to be the basis of social stability. one of the fundamental social problems of ukraine consists in the absence of the developed civil society’s ability to vindicate the interests of ukrainian majority. the power is in hands of the oligarchic capital representatives. financial and industrial groups perform unbalanced redistribution of the national product through the controlled political parties. the very activity caused the increasing of shadow economy by means of the tax overpressure of representatives of the small and middlescale businesses. thus there are two simultaneous processes: enrichment of individuals and impoverishment of the most people. financial and industrial groups prevent the competitiveness and equal terms of management. this system needs revolutionary changes. without them it has no sense to talk about formation of adequate social politics in the field of building the sturdy social structure, where the middle class will prevail. now ukraine is the state with repressive model of economy concerning business, which is oriented on baltic journal of economic studies 126 vol. 2, no. 2, 2016 monopoly. the main features of the repressive and monopolistic character of economy are: crippling taxes, excessive regulation and extensive control of entrepreneurship, existing of financial and industrial groups almost in every branch and sphere of economy, which together with the authority, control business as well as budgetary state and local funds, and redistribute for its own benefit the property and financial resources. spread of the «shadow» model of social and economic relationships resulted in limitation of legal employment and income possibilities, complicated development of the small-scale and middle businesses. as a result, the national middle class is factually deprived of one of the main statute features  – possibility of protection the democratic rights and liberties, what led to narrowing of channels for the public politics realization. the amount of employers (natural persons) and owners of small businesses is constantly increasing. however, due to the unfavorable enterprising climate, the considerable part of small businesses has to shade. it will not succeed in building adequate civil society, taking part in political and social life of state and able to control the authority, without adequate middle class in ukraine. it is vital for ukraine to have the capable middle class, representatives of which would take the most active part in social life, facilitate the development of the institutions of civil society, which are not dependent on direct intrusion of government. owing to these institutions it will be possible to defend interests and influence on the state policy. the specific feature of forming of the middle class in ukraine is that, compared to the west-european countries, its basis is not owners, but specialists – employees, demand for which is the strongest in frames of innovative model of economy development. from the point of home experts’ view, in ukraine the export-oriented economy, which can be competitive on the foreign markets mostly due to the cheap workforce, has been forming during the long period of time because of various reasons. hence we have the unique situation when the biggest part of highly-qualified workers, who have to be the core of the middle class, are on the poverty verge or beyond it accordingly to the income level. the level of wages of such experts is even lower of middle through the country (table 2). one of the attributive characteristics of the middle class is high level of civil movement, which shows itself in different forms  – from participation in elections of representative bodies and local authorities to amateur association with the purpose to protect the violated human as well as resident rights and liberties. the middle class can be considered as a social basis of civil society acting exactly as the subject of civil activity. showing of citizen’s membership in political parties and civic organizations is an important indicator in analyzing the middle class development. at the same time these activities in ukraine do not meet the standards of the european union countries: by 10 thousand of population there are 11 registered organizations in ukraine, since in estonia – 201 organizations, in croatia – 85 (the national institute for strategic studies, 2012). 4. ways of solving among the most important strategic priorities of successful modernization of ukraine in near-term and longterm outlooks the forming of favorable entrepreneurial and investment climate can be singled out. at the same time it cannot be provided without improvement of government system in the sphere of entrepreneurship. the following steps should be included into the basic strategic course of successful modernization of ukraine: • formation of the favorable entrepreneurial and investment climate. • review of the regulatory and tax politics. • providing fair competition. • activation of innovative functioning of small and middle-scale enterprises. • deregulation of small-scale business. • lowering the taxation pressure upon small-sized business and population. • increasing the living level of ukrainians. to develop the small-scale business it is needed to contribute to the whole economy. concerning the smallsized, middle and big business an adequate economic policy is required. the main advantage of small and middle business is rather solving the employment problems and simultaneous providing steady income for workers, than paying taxes. it is important for the government to realize that taxes for small and big business cannot be equal. it is gibberish. taxes must be different; they should be collected and withheld in different ways. the only condition  – there must be the right system of transition from the fixed taxes or simplified taxation system to the system, which would stimulate the change to pay significant taxes in case of business growth. this system must be flexible in order to incite the rise from low to middle and then to high level. table 2 average wage in accordance with economic activities per month in 20161,2 (per one member of staff, hrn.) type of activity january total 4362 education 3178 care of public health and medical aid providing 2878 national administration and defense; compulsory social insurance 4258 1 excluding temporary occupancy of the autonomous republic of crimea territories, of sevastopol and some zones of anti-terrorist operations. 2 data are cited about judicial persons and separated subdivisions of judicial persons with number of employees 10 and more persons. source: (state statistics service of ukraine «average monthly wages by economic activity since the beginning of the year 2016», 2016) baltic journal of economic studies 127 vol. 2, no. 2, 2016 policy of facilitation of the middle class building-up in ukraine has to rely on the support of working population, providing a great increase of wage, protection of intellectual property and reinforcement on these grounds the position of highly-qualified workforce as well as on support of the entrepreneurship. the formation of the middle class in ukrainian society must be realized not through the creation of principally new social grouping, but through the gradual transformation of corresponding social groups and their way of functioning (latik, 2008). when considering the specialists as a basis of the ukrainian middle class future, it is necessary to stress the significant role of the social politics. this group has the row of adequate important features, typical for the middle class of european type. all that is needed to provide the principle of social justice is to regenerate the occupational prestige through considerable wage rise. 5. conclusions the process of forming the middle class in ukraine is characterized by contradictory tendencies. the positive conceptions of the middle class of ukrainian citizens are tied up with their confidence that social and economic policy of government is not directed at its forming and support. the unformed state of the middle class complicates the process of the formation of full-value civil society. it can be traced in low quantitative and qualitative indicators of the development of the latter and not high level of civil activity. whereas in countries of the west the middle class question basically confines to the political stability and effectiveness of democracy, in ukraine it is also an indicator of society welfare. small number of the middle class is caused by the absence of innovative productions, which could give people the prestigious, highly-qualified and well-paid workplaces. another reason consists in an uncompromising hostility of government to the small-sized and middle business, which is the potential source of wide self-employment. reducing the middle class together with increasing the poor is quite a symptomatic tendency and requires the emergency measures as well as super efforts for reforming the economic model of the country. clannish-oligarchical regime, which has been formed in ukraine, does not facilitate the establishment of small and middle class. having excluded the acceptable conditions of business management, the governments, ignoring numerous legislative acts, made many ukrainian businessmen break the law. that is why the politics of facilitating the formation of considerable advances and authoritative middle class in ukraine have to base on the change of the strategy of social and economic improvement, creation of conditions for free entrepreneurship. entrepreneurial activity in forms of the small and middle business structures has a considerable potential for the middle class formation in ukraine. provided the gradual improvement of mechanisms of the state regulation, rise of the management level and professionalism in conducting the entrepreneurial activity, this potential can be transformed in realities. it is confirmed by the experience of developed countries with market economy. the effectiveness of overcoming the economic crisis consequences, further promotion of the country in a way of social and economic progress, european integration and strengthening its global competitiveness  – all largely depend on the level of small and middle class development, the result of partner relationships between the government and business, consideration in full the interests of both sides. the formation of the middle class with the help of state social policy must be implemented through the following priority directions: • building the system of social protection; • the organization of the institution of the middle class support; • providing employment; • increase of the human potential; • formation of the labor potential. the basis of the middle class must also be specialists  – representatives of the sphere of education, medicine, public management. nowadays these groups pretend to be included into the middle class (by the education level, identification with the middle class), although the level of their material security does not correspond to their contribution into the state development. thus, the priority directions of the state policy concerning the formation of the middle class in ukraine must be the strengthening of financial conditions by means of providing sufficient level of wages for specialists and highly-qualified workforce as well as supporting small and middle-scale business. in case of the middle class development in ukrainian society the conflict will be eradicated, which is typical for the bipolar social systems, and ukraine will organically enter into the european community. if the amount of the middle class in society reduces, ukraine can lose the basis of democratic development and social stability. references credit suisse global wealth report (2015).  – [electronic resource].  – retrieved from: https:// publications.credit-suisse.com/tasks/render/file/?fileid=f2425415-dca7-80b8-ead989af9341d47e james davies, rodrigo lluberas and anthony shorrocks, credit suisse global wealth databook (2015). latik ,v. (2008). peredumova demokratychnoyi perspektyvy. suchasnist́ , №12. public organization «development of the middle class» manifest the middle class.  – [electronic resource].  – retrieved from: http://www.middleclass.org.ua/sredniy-klass-v-ukraine-tseli-i-zadachi/ baltic journal of economic studies 128 vol. 2, no. 2, 2016 state statistics service of ukraine «average monthly wages by economic activity since the beginning of the year 2016».  – [electronic resource]. –– retrieved from: http://ukrstat.gov.ua/operativ/operativ2016/gdn/zarp_ ek_p/zpp2016_u.htm state statistics service of ukraine «change in the gross domestic product by 2015».  – [electronic resource].  – retrieved from: http://ukrstat.gov.ua/operativ/operativ2015/vvp/ind_vvp/ind_2015_u_n.htm state statistics service of ukraine «gross domestic product».  – [electronic resource].  – retrieved from: http://www.ukrstat.gov.ua/operativ/operativ2005/vvp/vvp_ric/vvp_u.htm state statistics service of ukraine «growth rates of nominal and real wages». – [electronic resource]. – retrieved from: http://www.ukrstat.gov.ua/operativ/operativ2005/gdn/tznr/tznr_u/tznr_u_bez.htm the national institute for strategic studies «the problems of the middle class as the foundation of civil society in ukraine». – [electronic resource]. – retrieved from: http://www.niss.gov.ua/articles/265/ яна сало анализ состояния и перспективы развития среднего класса в украине аннотация. целью работы является исследование современного состояния среднего класса в украине, проблемы его становления и перспективы развития в будущем с определением взаимодополняющего комплекса внутренних и внешних факторов его формирования. методика. исследование основано на статистической информации из открытых официальных источников, которая даёт возможность подтвердить тезис о критической доли среднего класса в украине. данные также были получены из электронных источников государственной службы статистики украины. во время исследования вопроса также использовались аналитические экономические статьи по вопросам развития среднего класса в украине. результаты исследования показали, что в современной украине численность среднего класса является критически низкой для стабильного функционирования экономики. одной из главных проблем развития среднего класса является отсутствие государственного содействия развитию малого и среднего бизнеса. в украине сформировано государство с репрессивной моделью экономики в отношении бизнеса, ориентированной на монополизацию. распространение «теневой» модели общественно-экономических отношений приводит к ограниченности легальных возможностей занятости и доходов, осложняет развитие малого и среднего бизнеса. как следствие, количество предпринимателей и владельцев малых предприятий постоянно растёт, но из-за отсутствия благоприятного предпринимательского климата значительная часть малых предприятий вынужденно переходит в тень. особенностью формирования среднего класса в украине является то, что его социальной основой, в отличие от западноевропейских стран, является не владельцы, а специалисты – наемные работники. имеем уникальную ситуацию, когда большая часть высококвалифицированных работающих (представителей сферы образования, здравоохранения, государственного управления), которые должны составлять ядро среднего класса, по уровню доходов находятся на грани или за чертой бедности. уровень заработной платы таких специалистов даже не является средним по стране. практическое значение. на пути к успешной модернизации украины в краткосрочной и долгосрочной перспективе важнейшими приоритетами является благоприятный предпринимательский и инвестиционный климат. это, в свою очередь, невозможно осуществить без усовершенствования системы государственного управления в сфере предпринимательской деятельности. политика содействия формированию среднего класса в украине должна опираться на поддержку работающего населения, обеспечение опережающего роста зарплаты, укрепление положения высококвалифицированной рабочей силы, а также на поддержку предпринимательства. становление среднего класса в украинском обществе должно происходить не путем создания принципиально новой социальной группы, а с помощью постепенной трансформации соответствующих социальных групп и способа их жизни. значение/оригинальность. исследование было проведено для более четкого понятия состояния среднего класса в украине. были выделены причины столь низкого уровня среднего класса в украине на основе полученных данных. полученные в результате исследования выводы дают возможность предложить мероприятия для развития среднего класса в украине, а именно развитие малого и среднего бизнеса и поддержка работающего населения с учётом интересов представителей среднего класса. baltic journal of economic studies 96 vol. 2, no. 1, 2016 corresponding author: 1 department of administrative management and alternative energy sources, vinnytsia national agrarian university. e-mail: pronkol@ukr.net 2 department of administrative management and alternative energy sources, vinnytsia national agrarian university. e-mail: sergej.kolesnik@gmail.com decentralization of public and local authorities in ukraine lyudmila pron’ko1, tatyana kolesnik2, vinnytsia national agrarian university, ukraine abstract. the purpose of research is to examine the purpose of a modern system of local government in ukraine, scientific analysis of the feasibility and benefits of implemented reforms for decentralization and subsidiary of local authorities, decentralization of public power and public control, and the need to strengthen the political status of local governments. methodology. the methodological base for research on decentralization and local government reforms to strengthen the political status of local government and decentralization of public power is the constitution of ukraine, laws of ukraine, decrees of the president of ukraine, as well as publications on these issues of domestic and foreign authors. as a result (results) study determined that according to article 5 of the law of ukraine “on local government in ukraine” the elements of local government are: local community; village, town, city council; village, town, city mayor; executive bodies of village, town and city councils; district (in the city) council, created in cities with district division by the decision of the territorial community, or city council; district and regional councils, which represent common interests of territorial communities of villages, towns and cities; bsp; system of government in ukraine is not fulfilling the role assigned to it, because there is twofold subordination and uncertainty powers of representative and executive bodies. today there is a three-level administrative division: basic level (village, town or city), district level and level area. there is a local government council and executive body (all the decisions and programs approved by the regional council performed by rsa, those public authorities). thus there is a need for continued reform of local government on the principles of decentralization and subsidiary principle because they are building the foundation of the state; one of the hallmarks of a modern democratic society has become political decentralization, the function of which is the implementation of a public authority independent of the state entities unrelated relationship of subordination. the degree of autonomy is determined that they belong to a relatively independent of the type of public authority – local government. practical implication. proposal reforms to decentralize power on the ground are that the three-tiered structure remains, but unlike the current situation where at district and area is under state administration and state administration, through amendments to the constitution should be established district and regional executive bodies. exist and district administration and state administration, which appointed the president of the government’s submissions. this reform should take place through changes in the constitution; inclusion in the consideration of the bill “on public control”, which will affect local governments and utility companies; strengthening political status of local governments. value/originality. systematic reforms in terms of priority must be given a new constitution that guarantees enhanced political status and european standards of local government. key words: local government, decentralization, public authority’s reform, local community, public control of local governments. jel classification: p2, p25, r1, r13, r5, r51, r58 1. introduction decentralization of power and an effective system of local government is the most important aspect of the modern state. at present proper local government is an important factor in the democratization of public life, decentralization and a prerequisite of civil society. as the example of the european union’s democratic and effective governance, ukraine should build a viable democratic state, the legal framework which meets eu legal framework and the rule of law. for example, as the base of decentralization in france, germany and poland is territorial reform and decentralization, which are based on the principles of the baltic journal of economic studies 97 vol. 2, no. 1, 2016 charter and the draft charter on regional self-government. thus, the system of local government in ukraine needs drastic changes, regulatory, at first, material and financial, logistical and information support. the aim of the study is to examine the current system of local government in ukraine, scientific analysis of the feasibility and benefits of implemented reforms for decentralization and subsidiary of local authorities, decentralization of public power and public control, and the need to strengthen the political status of local governments. 2. elements of the current system of local government the basic laws which maintain a system of government in ukraine is the constitution of ukraine, the law of ukraine “on local government” (law of ukraine, 1997), which passed on the basis of the “european charter of local self-government” (law of ukraine, 2006). according to the article 5 of the law of ukraine “on local government in ukraine” the elements of local government are: local community; village, town, city council; village, town, city mayor; executive bodies of village, town and city councils; district (in the city) council, created in cities with district division by the decision of the territorial community, or city council; district and regional councils, which represent common interests of territorial communities of villages, towns and cities; bsp. according to the law, local community residents are united within living permanent villages, towns, cities that are independent administrative territorial units, or a voluntary association of residents of several villages with a single administrative centre. in other words, the territorial community may include not only the citizens of ukraine, but also foreigners and stateless persons resident within the village, town and are, according to the article 26 of the constitution of ukraine, the same rights and freedom, and perform the same duties that citizens of ukraine, with the exceptions established by current legislation. in paragraph 1 of the article 6 of the act clearly stipulates the fundamental provisions on the status of the local community. in particular, it is mentioned that territorial communities of villages, settlements, cities first is subject to local government, the main carrier of its functions and powers, which to date, unfortunately, has not acquired its actual status. all this shows the inadequacy of current public policies of local government, which should include the interests of the state, the local community and the individual. 3. introduction of reforms to decentralize local government the system of government in ukraine is not fulfilling the role assigned to it, because there is twofold subordination and uncertainty powers of representative and executive bodies. today there is a three-level administrative division: basic level (village, town or city), district level and level area. there is a local government council and executive body (all the decisions and programs approved by the regional council performed by rsa, those public authorities). on the one hand, the council is formed in the general election; on the other hand there is executive body – the state administration. thus, there is a conflict between appointed and elected government. the situation is similar at the district level, where all the heads of administration by the constitution (law of ukraine, 1997) are appointed by the president. by 28 december 2014 baseline had the resources to fulfil their mandate (resources coming from the state budget through the area). thus there is a need for continued reform of local government on the principles of decentralization and subsidiary principle (reform concept, 2014), as they are the foundation for building the state. the basis of this principle is the understanding and acceptance of the fact that all problems should be solved at a basic level, the central government can play a subsidiary, the subsidiary, not a subordinated role, and should give the regions the opportunity to make decisions. as you know, the regions of our country developing unevenly: someone has minerals, others – developed industry, someone – agriculture and others. so the state should allow them to find their path of development and thus, at the community level, to decide how they want to develop further. each unit of government is a legal entity, has property rights and powers delegated by the state. for which it shall have sufficient financial resources, and the state owes most of these resources to leave the field. currently, the law provides (law of ukraine, 2006), which is based on state regional program area should adopt their own local programs. each approved program will receive regional development fund (totalling three billion uah) funds, 80% of which will be distributed evenly, and 20%, respectively, to those who can no longer finance its part. thus, the distribution mechanism regional development fund becomes transparent and understandable. previously the government determines to which region and on financing coming today law provides for the interdepartmental commission, which will be the body that coordinates the execution and implementation of programs. locally created regional development agencies with osa on the basis of public-private partnership (these belong to representatives of the chamber of commerce, ngos, and local authorities). for example, in the eu (hungary, slovakia and poland) to promote regional development created a separate executive agency. now, for the regional development of our country, the eu has allocated 55 million euro, will implement a number of small programs. if these funds are used wisely, next year you can expect a much larger amount to half a billion usd. proposal reforms to decentralize power on the ground are that the three-tiered structure remains, but unlike the current situation where at district and area is under baltic journal of economic studies 98 vol. 2, no. 1, 2016 state administration and state administration, through amendments to the constitution should be established district and regional executive bodies. for example, the state council approves the executive committee during the session, as the district council will form its executive committee. exist and district administration and state administration, which appointed the president of the government’s submissions. this reform should take place through changes in the constitution. as a result, local authorities will lose their atypical features – such as enforcement of regional or district council. they were left alone control function and implementation of government programs, as head of the local administration appointed by the president on the proposal of the government. also, the administration will coordinate the activities of executive bodies in the regions (for example, pension funds, prosecutors, and police). rather than carry out the decisions of local governments, the administration will carry out overall control and supervision of regional and district councils. thus, the powers of local state administrations can be divided into: own – exercise executive functions in certain areas (software protection, orphans, etc.); coordination – coordination of territorial bodies of central executive bodies within the area and the region; control – for control of the legality of acts of local government and the quality of local government public services. and to the office of the district are: maintenance of common property territorial community area; transport infrastructure of regional importance; education and training of children in boarding schools, youth sports school; provision of secondary health care (medical centres, hospitals, maternity homes, etc.) (pron’ko, 2016). 4. features of decentralization of public administration reform one of the hallmarks of a modern democratic society has become political decentralization, the function of which is the implementation of a public authority which is independent of the state entities unrelated relationship of subordination (lupenko, 2015). the degree of autonomy is determined that they belong to a relatively independent of the type of public authority – local government. thus, decentralization of public power implies exclusion of a self-governing part of the government formation with fixing this exclusion as in the constitution, so (mostly) and current legislation. the people’s deputies identify the legal and organizational basis of the right of territorial communities to participate in public control over the implementation of their rights. public control will affect local governments and utilities. the corresponding proposal contains a draft law “on public control”. the bill provides that public control – is the work of public control, such as full members of the territorial community, local departments of public associations and political parties, community organizations and mps of supervision, inspection and evaluation of: local governments; public enterprises, institutions and organizations; educational and health care, culture and social protection; legal and physical persons – service providers in the relevant community. also, this project concerns legal and physical persons that receive the local budget, as well as those whose work affects the interests of the local communities in terms of environmental pollution, fire safety, sanitaryepidemiological and radiological situation of food safety. the activities of the mentioned bodies will be tested on the compliance of such activities with the laws of ukraine and the interests of the local community. the procedure for the implementation of public control should take place in a sociological and statistical research, public monitoring, assessment and verification, reporting on the work of public control, preparation and submission of proposals to local authorities on the results of public control, discussing the subject of public scrutiny at public meetings. reports subjects of public control of the work are available to the public without fail by their publication or public hearing. thus, this law will increase the openness and transparency of local government, enterprises, institutions and organizations. thus, the specificity of decentralization alienation of government necessitates the division of socially important needs and interests to those whose satisfaction is a function only of the state, and those, the implementation of which can be transferred to other entities. only because of this clear separation of state may transfer to other entities of significant secondary for themselves but socially necessary functions (lupenko, 2015). dismissal states from these features contribute to the stabilization of the government as the practical implementation of a number of socially necessary functions close to the consumer of public services and state removed from responsibility for certain functions. however, incorrect distribution of functions without regard to their social significance, the exercise of those or other entities to ensure implementation of the necessary resources and responsibilities may adversely affect the ordering of public life. however, one should take into account aspects under which the centralization policy is seen as the only constructive consolidating and stabilizing society. 5. the need for reforms to strengthen the political status of local government the need to strengthen the political status of local government as a junior public authorities have in many scientific studies. but, clearly, this is backed up not baltic journal of economic studies 99 vol. 2, no. 1, 2016 only referring to the generally recognized principles of democracy and european standards, but more real facts that emphasize the effectiveness of management of decentralized power. the most convincing of these are: 1. the decentralized power provides a more efficient allocation of resources in the sector of public goods. this fact is based on the notion that these kinds of benefits depends on the needs and interests of people living in a particular area. as a result, the institutional system, in which political decisions taken at local and regional levels to make those resources, is making public option more accurate. as a result, rational policy supports particularly those development programs which promote the growth of the prestige and increase the chances of winning the next election. thus public choice at the local level allows better meet the needs of the population in public goods and services without increasing the volume of resources. 2. decentralization enhances the controllability of the public authorities of the local communities, as the link between taxes paid and the provision of public goods is more direct and transparent. local politicians are more difficult to hide the inefficiency of public spending, forcing them to be more responsible in developing and implementing local policies. 3. availability of own competence of local public authorities in forming the local tax base and the disposal of local budgets, availability of appropriate material and financial resources enables them to form an independent policy development of local communities, encourages them to reduce unjustified costs in the public sector. thus, hover facts make it possible to assert that the reform of local self-government and territorial organization of power in ukraine is impossible without political will, which would contribute to the adoption of a significant number of laws and the will of local communities to unite. after the process of decentralization and reform of administrative and territorial structure in many european countries lasted more than 5 years, so you cannot expect instant results by adopting the necessary laws. 6. research methodology the methodological base for research on decentralization and local government reforms to strengthen the political status of local government and decentralization of public power is the constitution of ukraine, laws of ukraine, decrees of the president of ukraine, as well as publications on these issues of domestic and foreign authors. in this direction domestic scientists have taken a number of important steps, including the study of the theoretical foundations of government, constitutional principles of its implementation, the history of government in ukraine, features contemporary national governments. restructuring local government in ukraine and poland’s experience in reforming local government investigated many ukrainian scientists in 2013, 2014, 2015, respectively. 7. findings systematic reforms in terms of priority must be given a new constitution that guarantees enhanced political status and european standards of local government. international experience and practice show that the reform process must start building the foundation of territorial authorities to build economically capable community to reform the administrative and territorial structure. 8. conclusions so, update the constitution makes sense only if the implementation of new constitutional provisions will open the prospect of the adoption of laws necessary for optimization of the public authorities, the territorial organization of power in ukraine, improving local governance. the implementation of these tasks is the essence of true reforms in decentralization of power and development of local self-government. they should create institutional preconditions for the implementation of various sectoral reforms. according to many experts, the reform for ukraine should take place in two phases: voluntary and systematic. at the current stage of voluntary adopted the law “on voluntary association of communities”, “on cooperation of local communities”, “on principles of regional policy.” systemic step is to amend the constitution, the adoption of new laws “on local government”, “on local state administrations” (that they were not executive bodies and supervised and coordinated state policy), “on service in local government” (to finally determine who is a civil servant in the city council). references kropyvko m.f., & malik m.j. (2015). integration and self-organization of the agricultural business in the decentralization of power: monograph. k.: nnc iae, 447 p. on ratification of the european social charter (revised): law of ukraine of 14.09.2006. number 137-v. retrieved from: http://zakon.rada.gov.ua on local government in ukraine: the law of ukraine of 21.05.1997 p. number 280/97-vr . retrieved from: http://zakon.rada.gov.ua on cooperation of communities: law of ukraine of 06.17.2014 p. number 1508-vii. retrieved from: http://zakon.rada.gov.ua pron’ko l. (2016). decentralization of power and the beginning of local government reform in ukraine. economy in the context of innovation development: state and prospects: materials of international scientific-practical conference (12-13 february). uzhgorod, p. 163-166. baltic journal of economic studies 100 vol. 2, no. 1, 2016 the reform concept of local self-government and territorial organization of power in ukraine cabinet of ministers of ukraine of 01.04.2014 p. number 333-p. retrieved from: http://zakon4.rada.gov.ua/laws/show/333-2014 the constitution of ukraine. 28.06.1996 p. retrieved from: http://zakon.rada.gov.ua людмила пронько, татьяна колесник децентрализация публичной и местной власти в украине аннотация. целью работы является исследование современной системы местного самоуправления в украине, научный анализ целесообразности и преимуществ введенных реформ по децентрализации и субсидиарности местной власти, децентрализации публичной власти и публичного контроля, а также необходимость усиления политического статуса органов местного самоуправления. методика. методологической базой для исследования вопросов децентрализации местного самоуправления и проведения реформ по усилению политического статуса органов местного самоуправления и децентрализации публичной власти является конституция украины, законы украины, указы президента украины, а также публикации по этим вопросам отечественных и зарубежных авторов. в результате исследования определено: что согласно ст.5 закона украины «о местном самоуправлении в украине» к элементам системы местного самоуправления относятся: территориальная община; сельский, поселковый, городской совет; сельский, поселковый, городской голова; исполнительные органы сельского, поселкового, городского советов; районные (в городе) совета, которые создаются в городах с районным делением по решению территориальной общины или городского совета; районные и областные советы, которые представляют общие интересы территориальных общин сел, поселков, городов; органы самоорганизации населения. система самоуправления в украине не выполняет возложенной на нее роли, поскольку существует двойственный характер подчинения и неопределенность полномочий органов представительной и исполнительной власти. сегодня существует трехуровневая административно-территориальная система: базовый уровень (село, поселок или город), уровень района и уровень области. есть орган местного самоуправления облсовет и исполнительный орган (все решения и программы, утвержденные облсоветом выполняются ога, то есть государственной властью). таким образом возникает необходимость продолжения реформирования системы местного самоуправления на основе децентрализации и принципа субсидиарности, поскольку они являются фундаментом строительства государства. одной из характерных черт развития современного демократического общества стала политическая децентрализация, функцией которой является реализация определенной части публичной власти самостоятельными от государства субъектами, не связанными отношениями подчинения. степень самостоятельности определяется тем, что они относятся к органам относительно самостоятельного вида публичной власти  – местного самоуправления. практическое значение. предложение реформы по децентрализации власти на местах заключается в том, что трехуровневый устройство остается, но в отличие от современной ситуации, когда на уровне района и области являются соответственно райгосадминистрации и облгосадминистрации, из-за изменений в конституцию должны создаваться районные и областные исполнительные органы. будут существовать и райгосадминистрации и облгосадминистрации, как представители государственной власти. эта реформа должна состояться через изменения в конституции. следующим шагом есть внесения к рассмотрению законопроекта «о публичном контроле», который будет касаться органов местного самоуправления и коммунальных предприятий и усиление политического статуса органов местного самоуправления. значение/оригинальность. систематизация реформ с точки зрения приоритетности должна быть задана обновленной конституции, которая бы гарантировала повышенный политический статус и европейские стандарты местного самоуправления. baltic journal of economic studies 57 vol. 7, no. 1, 2021 corresponding author: 1 institute of market problems and economic&ecological research of the national academy of sciences of ukraine, ukraine. e-mail: alexlayko@gmail.com orcid: https://orcid.org/0000-0001-7082-0862 researcherid: d-8293-2018 2 institute of market problems and economic&ecological research of the national academy of sciences of ukraine, ukraine. e-mail: burkinskij@nas.gov.ua orcid: https://orcid.org/0000-0001-9303-0898 researcherid: u-9714-2017 doi: https://doi.org/10.30525/2256-0742/2021-7-1-57-68 methodology of investment system research in the aspect of unproductive capital outflow: example of ukraine and international dimension oleksandr laiko1, borys burkynskyi2 abstract. the relevance of the topic of development of theoretical and methodological approaches to investment system regulation under influence of unproductive capital outflow is justified by significance of financial capital movements from groups of countries to others, caused by inappropriate institutional support for strategic investments. aim of the proposed research is the development of methodological approaches to study and regulation of investment system development that allow to provide analysis of actual modern tendencies of investment system development, to estimate the influence of capital outflow on financial provision of investment process and to design regulating framework for shortening of unproductive financial capital outflow. the work is dedicated to research of theoretical, methodological and applicable basis of investment system development regulation in aspect of reducing of unproductive financial capital outflow with calculation of possible effect from involvement of reduced volumes of capital outflow into investment process. the research methodology, which is based on sustainable development and principle of balance of the stakeholders’ interests, includes approaches of system, theoretical and empirical analysis that allows us to identify the sense and structure of investment system in a sample of ukraine and other 11 countries. due to the statistical and econometric methods the estimation of the dynamics and regularities of capital investments are explored and the role of financial capital outflow in economic development of the country is estimated as percentage of gdp and as potential implicit resource that can be involved in investment process. the authors propose the methodology of investment system research and regulating from positions of institutional support embittering for renewal of invested capital and for attraction of new strategic investors. the provided systematization of theoretical positions in the sphere of investments and capital migration allows to obtain the definition of sense of investment system, to discover the regularities of its development and to identify the phenomenon of unproductive outflow of financial capital. it is found that the main criteria of unproductivity of capital outflow is excess of losses and expenses for national economy, caused by such migration of resources, under possible benefits. conclusion. the hypothesis of existence of direct positive dependence of unproductive outflow of financial capital from growth of the national economic is proved in a sample of ukraine due to the use of empirical statistical study method. it is identified that the key factor that provokes capital outflow is inappropriate institutional support for strategic investments. the proposed model of estimation of correlation between capital investments and value added allows to calculate the possible economic, social, and budgetary effect from involving into economy of ukraine investments saved from outflow, that can result in more than 22.6 bln usd of value added growth. key words: investment system, capital outflow, illicit financial flows, reinvestments, reproduction of capital. jel classification: e22, f21, f38 baltic journal of economic studies 58 vol. 7, no. 1, 2021 1. introduction the relevance of the proposed research, which is dedicated to development of actual methodological approaches to the regulation of investment system transformation, is justified by the importance of investments for economic development of ukraine and other countries due to the powerful influence of invested capital on the structure of economic systems in sectoral, spatial and other dimensions. the modern tendencies of investment system transformation in direction of predominance of reinvestments in the total structure of investments make the question of effective turnover of invested resources relevant in the aspect of the provision of appropriate conditions for reinvestments of financial resources without abnormal withdrawals of capital and unproductive outflow abroad. the phenomenon of capital outflow that takes place in the ukrainian economy and economies of other countries is characterized by the significant volumes, which in some cases are equivalent to the total capital investments. the fact that capital outflow as powerful factor influencing on transformation of investment system is poorly studied justifies the urgency of the proposed research and allows us to formulate the main issues of the study. the aim of the research is to develop theoretical and methodological approaches to investment system regulation in aspect of reduction of unproductive capital outflow based on means of creation of appropriate conditions for strategic investments involvement in national economy and improving the regulatory framework in investment sphere that is conceptually based on realization of economic, social, governmental and other interests of stakeholders. the tasks of the research include: formulation of the actual methodo logy of investment system development research based on principles of renewal of invested resources, prevention of ineffective capital outflow, diversification of sources, sustainability of investment processes, balance of stakeholders interests and others; improvement of terminological basis in the sphere of financial capital outflow; design of the scope of methodical approaches to estimation of efficiency of investment system functioning in national and international dimensions, the evaluation method of volumes of unproductive capital outflow, method of the analysis of the significance of capital outflow influence on economic system; detection of strategic directions for the regulation of investment system development; methodic approach to the calculation of the possible sustainable effect of proposed regulation means implementation, that is based on the use of an econometric model. the novelty of the results obtained in the research consists of classification of types of financial capital movement according to the degree of legality; scope of principles of investment system development, designed according to directions of modern institutional framework in ukraine and the eu countries, in aspect of capital outflow reduction; methodology of investment system transformation regulation ,which unlike others, is based on balance of economic, social, and budgetary interests of the stakeholders; mechanisms of regulation of investment system on national level that include institutional, financial, credit, economic, administrative means; methodic approach to calculation of complex effect from the involving into the national investment process of volumes of capital outflow saved from unproductive withdrawal. the research findings are characterized by theoretical and applied value because they can be used not only in scientific sphere but also in sector of governance of economic development. possible restrictions of the research include lack of constant sources of data concerning some types of capital outflow, namely data of volumes of financial resources transferred abroad as payments for reinsurance operations are not always available on official sites of ukrainian authorities and statistical agencies but it is not critical option for the research because of its relatively small share in total capital outflow. 2. overview of the relevant publications scientific works by scott davis and eric van wincoop (2018) are dedicated to the research of the correlation between capital inflows and outflows in a sample of 127 advanced and developing countries. the authors justified that in the most countries there is strong, increasing correlation between capital inflows and outflows but the character of this link is changeable. the results obtained by the authors due to the modelling of correlation between capital flows and financial globalization discovers the tendency of decrease of volumes of financial capital inflows caused by factor of financial globalization. but authors have not described the character and the main factors of the influence of capital inflows on capital outflows. the solution of this problem may be set as one of the tasks of our research because we put forward the hypothesis of direct positive dependence of capital outflow volumes from the level of economic growth and activity in the country that may be expressed with the help of indicators of gdp, gross value added or financial capital inflow. heiets (2016) argues that the economy of ukraine and the economic systems of the most developing countries are characterized by contradictory trends of investments dynamics caused by influence of different internal and external factors, the impact of which is able by reason of institutional insolvency of national transitional economy that also causes the illicit financial flows of capital but direct correlation between institutional state of investment sphere in the national economy and dynamics of illicit financial flows is not researched by the author. paskhaver (2007) conducted a detailed analysis of the genesis, essence, structure and causes of capital baltic journal of economic studies 59 vol. 7, no. 1, 2021 formation in ukraine, calling his research: “…study of the anatomy of ukrainian capital” (paskhaver, 2007, p. 23). the author puts for ward and proves the hypothesis of imperfection and immaturity of institutional support to attracting of long-term strategic investments in ukraine. continuing the author’s opinion, in this study we try to confirm the hypothesis that the absence of institutional investors support makes large amounts of financial capital earned in the national economy to be exported to the economic systems of other countries with reliable conditions for storage or investments. lunina, bilousova, & frolova (2020) analyze investment drivers as means of stimulation of economic system development and explore the role of tax reforms in creation of attractive investment climate that can prevent financial resources outflow. ilyina (2017) proposes methodology of investment climate evaluation as an effective research method of business climate of the national economic system that can describe the level of activity of foreign and internal investors and highlight possible negative impacts on country’s development. holz (2020) considers investment statistics as source of estimation of productivity level of national economic system, on example of chinese economy. the author examines the key definitions in investment sphere, considers an aspect of data availability, and technical issues of the investment data of the people’s republic of china (prc). he also explores relationship between fixed asset investment and gross fixed capital formation, tries to highlight the problem of investments data falsification in prc and the author indirectly approaches to research of the question of illicit flows of capital. the methods for research of investment sphere in economy of ukraine proposed by vartsaba and leshuk (2017) are based on development of evaluation indicators for providing of the estimation of investment attractiveness of regions in ukraine. kazuo ueda (1990) has provided thorough theoretical and empirical research of japanese capital outflows for the period of the 1980s and tried to discover the driving forces of this phenomena and its role in the economic development of the country. dhar (2021) has provided research that is dedicated to identification of extreme capital flows in emerging markets in a sample of 36 economies. the analyzed scientific works of various authors, which are devoted to the study of capital outflows, are thorough, comprehensive with a powerful scientific apparatus, but they do not take into account issues of a theoretical nature, namely: lack of terminological constancy in sphere of capital outflow research; formulation of a modern methodology for studying of the investment system on basis of invested capital renewal, in the context of the implementation of the model of sustainable development and in the aspect of influence of unproductive capital outflow. a key applied issue is represented by the development of organizational and economic mechanism for regulating of the investment system at the national level in terms of improving its social efficiency, ensuring returns for all stakeholder groups, increasing institutional strength and creating favorable conditions for investments reproduction and for the reducing of unproductive capital outflow abroad. 3. research methods the research is aimed at the design of the methodology of investment system study and regulation in context of modern conditions of domination of reinvestment operations in total structure of the investments and under influence of unproductive capital outflow. the following methods are used in the research: method of system analysis and synthesis (determining the sense and structure of investment system, identifying the dominant driving force of the modern investment process, design of classification of types of capital outflow); theoretical and empirical analysis (formation of scope of principles that are actual for modern investment system development, estimation of the role of capital outflow in the investment process); method of institutional analysis (study of regulatory documents, international and national policies in investment sphere); method of comparison and scientific abstraction (estimation of significance of capital outflow for economic systems of different countries), statistical and logical analysis methods (dynamic series and structure analysis of investments and capital flows, averages, shares, per capita indices, grouping of investments according to financial sources, comparisons of total and per capita investments, capital outflow data in different countries), graphical methods (schemes and diagrams of investments and unproductive capital trends), method of modelling (estimation of the dependence of gross value added from capital investments for the purpose of calculation of sustainable effect from involving into the investment process of capital that is saved from unproductive withdrawal abroad), methods of regulation means and policy design (formation of strategic directions for the regulation of investment system development, design of economic and organizational mechanisms for improvement of institutional framework in investment sphere with the aim of strategic investments stimulating). the methodical toolkit of the research is used for verification of the main scientific hypothesis that is formulated as follows: the investment system development of any modern country is highly dependent on reinvestment operations and sustainable effective functioning of the investment system is possible with the help of appropriate institutional support that facilitates baltic journal of economic studies 60 vol. 7, no. 1, 2021 strategic investments, otherwise the growth of business activity in the national economy, expressed by gdp indicator increase, leads to progressing unproductive capital outflow. 4. results of the research despite numerous studies of outstanding scientists in the field of investment activity in ukraine and in the regions (heiets, 2006), unresolved issues remain the implementation of priorities for the development of the investment system with proper impact on the national economy in the form of organizing hightech competitive industries, maximizing the created added value based on deep processing of domestic raw materials, which will contribute to effective economic transformation in the context of integration into eu markets and participation in the international division of labor. the key category that characterizes all the features and components of the investment process in the country is the investment system, which is represented by a combined set of all elements and components of the investment process to convert resources into capital and produce reproduction cycles. the results of the conducted research (burkynskyi, laiko & talpa, 2018) show that in the national economy and on a global scale, investment has acquired the signs of consistency, expanded its classical boundaries, including such stages as attracting, investing resources, reproduction and reinvestment or withdrawal from circulation, and has become an integral part of social production. for the modern economic system, the processes of reproduction of invested capital as a source of renewal of investment resources are important, as since the global financial crisis, the importance of reinvestment processes in most countries of the world has increased significantly, and the use of own funds of enterprises and business entities as a source for investment has become a key feature of the investment process (figure 1). the tendencies of reinvestments domination and the importance of stable conditions for renewal of invested resources are also highlighted in agenda and conclusions of the sixth world investment forum (2018). the investment process in ukraine for the entire period of independence is characterized by the use mainly of own funds of enterprises and organizations as the main source of capital investment (from 50% to almost 70%). therefore, the investment process and components of the investment system should be studied in the context of the stages of attracting resources and making capital investments, reproducing capital and using the resulting effect (reinvesting or extracting growth on invested capital), while assessing the ability of the country ’s economy to contribute to the reproduction and increase of capital attracted to economic turnover, since this ability automatically becomes an indicator of the overall ability to attract investment resources. the formation of the methodology and priorities for research and regulating the development of the investment system of ukraine (figure 2) is determined in accordance with the current features of the functioning of the national economy and challenges, that are discovered in previous researches (burkynskyi, laiko & talpa, 2018), and require immediate solutions, namely: bank loans in ukraine, % in the most of developed countries, % 52 attracting new capital 14 35 13 budget funds 65 22 own funds of enterprises and organizations foreign investments personal funds other sources 10.3 12.7 59.3 69.9 17.9 5.3 3.0 1.4 7.8 7.8 1.8 2.9 2007 2017 reinvested earnings other sources 2007 2017 14.0 65.4 10.8 0.7 5.28 3.9 2019 20 65 15 2019 figure 1. dynamics of the structure of sources of financial support of the investment process in ukraine and in the most of the developed countries of the world source: concluded according to the official data of the state statistics service of ukraine (2019) and unctad global investment trends monitor (2019) baltic journal of economic studies 61 vol. 7, no. 1, 2021 1) hidden decrease in overall investment activity in the national economy, expressed by an increase in the quantitative indicators of the investment process achieved due to the impact of inflation, and a drop in real investment volumes in terms of usd equivalent or purchasing power parity; 2) absence of a positive modifying effect of investment, which leads to a raw material type of development of the national economy, deep deindustrialization is developing; 3) consistency of investment quality characteristics without significant changes; 4) progressive outflow of financial capital abroad and the dominance of incomplete investment process cycles, lack of strategic foreign investment; 5) non-compliance of institutional support with the real needs of investment system development; 6) lack of institutional support for strategic investment at the project level; 7) lack of levers of influence on improving the level of well-being in territorial economic subsystems (at regional and basic levels); 8) need for compliance and consistency with the provisions of international investment policy and domestic strategic documents in order to participate more effectively in international economic exchange. according to the results of the analysis of the dynamics and structure of the investment process in ukraine in recent years, a number of negative processes become identified as hidden, but with impact on the state of the national economic system. these processes include: 1) a positive change in the volume of capital investment, which is clearly linked to inflationary processes and the growth of consumer prices, but differs from real tendencies of capital investments decrease in constant prices in usd can be seen on figure 3. thus, the growth of capital investment in ukraine in current prices occurred from 2006 to 2019 from 149 billion uah up to 624 billion uah at the same time, the inflation with an average annual index value of 112.1% and an accumulated value of 416.6% for 2006–2019 led to an incorrect determination of the the purpose of research and regulation of the transformation of the investment system is to ensure a high level of prosperity and economic growth by stimulating of strategic investments, reproduction of capital and reduction of its outflow on the basis of sustainability and balance of stakeholders interests key idea – comprehensive impact on all stages of the investment process with an emphasis on the reproduction of capital and reduction of its outflow balance of interests of stakeholders renewal of invested resources prevention of ineffective capital outflow diversification of sources outflow sustainability of investment processes cyclical development and renewal purposefulness and priority openness and transparency adaptability and flexibility validity, objectivity special theoretical and conceptual block commonprinciples estimation of strategic directions for regulating of investment system development methodical block implementation and evaluation block approaches to estimation of efficiency of investment system functioning the evaluation method of volumes of unproductive capital outflow method of the analysis of the significance of capital outflow influence on economic system methodic approach to calculation of possible sustainable effect of implementation of proposed regulation means, that is based on the use of an econometric model analysis of institutional support for investment system development mechanisms of strategic investments support and reducing of capital outflow (including economic, financial, tax, information, organizing, administrative means) feedback and correction of the aim and tasks figure 2. methodology of research and regulation of investment system development in aspect of unproductive capital outflow reduction baltic journal of economic studies 62 vol. 7, no. 1, 2021 real amount of capital investment and a hidden drop in investment activity (table 1). the decline in investment volumes in terms of usd equivalent occurred from 29.5 bln usd (in 2006) to 23.2 bln usd (in 2019). that is, there has been no real increase in the volume of capital investment in the ukrainian economy during the study period, but an imaginary increase in current prices has taken place due to the fact that the increase in the inflation index and the fall in the national currency exchange rate against usd occurred at a faster pace than the decrease in the volume of capital investment in fixed prices and in a stable currency equivalent. the introduction of the values of the capital investment indicator for the first half of 2020 into the calculations made it possible to demonstrate a general trend towards a drop in investment activity due to the covid-19 pandemic. despite the fact that the value of the capital investment indicator in 2020 is taken for a six-month period, its value in both current and fixed prices, according to official statistics (the state statistics service of ukraine, 2020), is 65.1% compared to the corresponding period of the previous year (i.e., the first half of 2019). 0 100 200 300 400 500 2006 2008 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 і half year 2020 in current prices, national currency in constant prices, usd % figure 3. indices of capital investments in economy of ukraine source: concluded according to the official data of the state statistics service of ukraine (2019), the national bank of ukraine (2019) table 1 dynamics of capital investment in the ukrainian economy: the impact of inflationary phenomena and changes in the exchange rate capital investment: 2006 2008 2010 2012 2014 2015 2016 2017 2018 2019 1st half of 2020 in current prices, bln uah 149 272.1 180.6 273.3 219.4 273.1 359.2 412.8 578.7 624 163.8 in comparable prices, bln usd 29.5 35.3 22.7 34.2 13.9 11.4 13.2 14.7 19.4 23.2 6.0 average annual exchange rate, uah/ usd 5.05 7.7 7.96 7.99 15.77 24 27.19 28.06 27.2 25.85 26.71 inflation index, % (accumulated value for the period from 2006 to 2019 is 416.6%, average value for the period is 112.16%) 111.6 122.3 109.1 99.8 124.9 143.3 112.4 113.7 109.8 104.1 102 source: concluded according to the data of the state statistics service of ukraine (2020), the national bank of ukraine (2020) 2) the constancy of the structure of sources of financial support for capital investment in ukraine and their non-diversification with a constant dominance of own funds of enterprises and organizations. minor changes in the structure of sources of financing for capital investments in ukraine occurred due to the decentralization reform and the redistribution of budget powers, which allowed territorial communities to invest a large amount of financial resources in their own development, that resulted in the increase of investment, financed by local budgets from 5.7 billion uah up to 56.5 billion uah, according to the data of the state statistics service of ukraine (2020). 3) the absence of significant changes in the structure of capital investment by type of economic activity, where the stable leader is industrial production, mainly extractive industry, and agriculture (the state statistics service of ukraine, 2020). however, the amount of capital investment in these activities is not characterized by the rapid growth necessary for the renewal of production capacity, and the existing, even, drop in investment volumes in dollar terms, despite the fact that most of the production equipment today is purchased by import and, in fact, represents compensation for baltic journal of economic studies 63 vol. 7, no. 1, 2021 the added value created abroad, that is, there is an unproductive outflow of financial capital. 4) low activity of strategic foreign investors. thus, foreign direct investment annually covers only 1.5%-3% of the country’s total investment demand, in 2019 year – only 0.7%, while operations of withdrawal and receipt of previously invested capital are characterized by a large order of magnitude and depend on macroeconomic and political stability. in 2014 and 2015, there was a rapid withdrawal of capital previously invested in ukraine by other countries in the amount of 13 billion usd, according to our own calculations (laiko, 2015, p.205) and 4,570.9 million usd according to global financial integrity data (2020). strategic investment has almost no place at all, since the main suppliers of imported capital are offshore countries, which are also the largest consumers of the national investment resource. 5. role of financial capital outflow in development of investment system: international and national aspects characteristic of the national investment system is the phenomenon of unproductive outflow of financial capital, which is significant in its volume but still insufficiently systematically studied (figure 4). a significant problem in diagnosing and regulating the process of unproductive outflow of financial capital is the lack of a well-established methodological approach. to date, there is still no normative gradation of definitions that characterize the movement of financial capital and methods for calculating capital outflows. guided by the approaches of semantic system analysis, the scientists of the institute of market problems, and economic and ecological research of nas of ukraine proposed a classification of definitions in the field of export of financial capital abroad, and also developed a methodological approach to calculating the volume of unproductive outflow of financial capital from the national economy and from certain regions of ukraine. the significance of the negative impact of the phenomenon of unproductive outflow of financial capital is manifested in the deprivation of significant investment resources in the national economy (table 2). given in table 2 volumes of unproductive export of financial capital determined according to the methodology developed by institute of market problems and economic-ecological research of the nas of ukraine (laiko, 2014, p. 205). according to global financial integrity methods (2020), with illegal capital withdrawal volumes in the amount of 11,676 billion usd every year, ukraine was ranked 14th out of 150 countries in the world (the rating was compiled in 2017). the methodological approach to determining the volume of illegal export of financial capital used by global financial integrity (gfi), although informative, is not objective enough due to the different scale of the countries being compared, their area and population. if we calculate the volume of unproductive leakage of financial capital per 1 person (in per capita dimension), then in ukraine this amount is 259.47 usd per year and it exceeds similar indicators of countries such as china (211.76 usd per 1 inhabitant), india (29.9 usd), but is less than in mexico (505.7 usd per 1 inhabitant) and movement (export) of financial capital the unproductive outflow of financial capital is the legal export of capital, defined: – according to the balance of payments (the amount of negative balances on items of current transactions, financial transactions, capital transactions, the negative value of the item “errors and omissions”); – according to the balance of payments and official statistics as the sum of indicators (investments abroad, losses from reinsurance operations, other financial and offshore transactions, the growth of foreign currency presence in national economy (as mean of savings), a negative value of item “errors and omissions”; – use of other legal ways for capital export, such as tax rates differences in reinsurance operations in ukraine and abroad; escape of capital – the export of financial resources by unauthorized methods, but without violating of criminal law leak of capital – criminal export of financial resources estimated according to customs statistics, indirect methods of the cia, gfi, the method of “hot money” estimated according to balance of payments data with key criteria of unproductivity illicit financial flow s figure 4. classification of types of financial capital export and definition of capital outflow baltic journal of economic studies 64 vol. 7, no. 1, 2021 in the russian federation (297.3 usd per 1 inhabitant). the phenomenon of unproductive outflow of financial capital is quite serious problem for the national economies of 11 other counties, which we have analyzed with the use of gfi methodology (table 3). as it is seen from table 3, the influence of capital outflow (illicit financial flows) on the economic development of different countries is quite significant. the strongest impact is identified on economies of relatively small european countries such as hungary, poland, and romania, which are characterized with transit geographical location, and mexico where the level of shadow economy is quite high. it is also worth taking into account the powerful influence of unofficial institutional support in the implementation of the investment process, according to which illegally or semi-legally withdrawn financial resources from abroad can actually be investments aimed at expanding the country’s spheres of influence abroad (opening new production facilities or representative offices of national producers in other countries, using local resources of other countries to create national added value, to create an economic basis for the development of settlements of citizens in other countries, etc.). unfortunately, for ukraine, such positive aspects from the withdrawal of financial capital are not typical and almost all the facts of the withdrawal of financial resources abroad are manifestations of unproductive withdrawal of capital. the dynamics of financial capital outflow is closely linked to transformational changes in society, behaving both as a factor of influence on the investment process and as an indicator of economic and political events (figure 5). as it is seen from the linear graphics of figure 5, there is a quite strong correlation between dynamics of unproductive outflow of financial capital and gdp in ukraine. the visually detected correlation allows us to prove the hypothesis of existence of strong positive dependence of capital outflow volumes from gdp growth caused by the conditions of lack of institutional support of strategic investments. one of the most significant components of the indicator of unproductive outflow of financial capital in ukraine is operations of export of raw materials and export of high-tech products, despite the fact that objective prerequisites for the preservation and formation of new production facilities with a high degree of processing and significant added value of final products in ukraine are available. the conducted studies of prices for export and import of food products in ukraine (laiko, 2014, p. 320) allowed us to determine the pattern of excess prices for imports to ukraine in comparison with exports from 1.6 to 14 times (table 4), which is a consequence of deindustrialization, trends in the export of raw materials and imports of goods with a high degree of processing and added value. the presence of an outflow of financial capital in the implementation of foreign trade is also indicated by the negative balance of payments of ukraine, which in terms of operations with goods has a consistently table 2 significance of the amount of financial capital export from the economy of ukraine, bln usd indicators 2006 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019 1st half of 2020 capital outflow* 2.7 2.4 -2.99 8.7 -1.8 -3.2 -0.6 6.1 11.6 11.7 12.1 12.3 -0.8 investments 29.5 35.3 29.7 22.7 34.2 31.3 13.9 11.4 13.2 14.7 21.4 23.1 6.06 capital outflow, % to investments 9.2 6.8 x 38.3 x x x 53.5 87.9 79.6 56.5 53.2 x gdp 112 129 121 135 176 183 101 82.9 87.7 106 132 141.5 32.1 capital outflow, % to gdp 2.4 1.9 x 6.4 x x x 7.4 13.2 11.0 9.2 8.7 x * – data with “-” – capital inflow source: calculated according to the data of the state statistics service of ukraine (2020) and the national bank of ukraine (2020) table 3 significance of the amount of financial capital outflow (illicit financial flows) from the national economies of different countries russia belarus poland china turkey india mexico brazil hungary romania moldova capital outflow (illicit financial flows), bln usd 42.93 1.08 52 296.0 24.75 40.9 64.52 20.80 21.57 10.49 0.21 popula-tion, mln. persons 144.4 9.47 37.98 1398 83.43 1366 127.58 211.1 9.77 19.36 2.66 gdp, bln usd 1670 60.03 587 13895 771.4 2713 1221 1885 157.88 241.6 11.46 capital outflow, % to gdp 2.57 1.79 8.86 2.13 3.21 1.51 5.28 1.10 13.66 4.34 1.82 capital outflow per capita, usd/ 1 person 297.3 114.04 1369.1 211.8 296.7 29.9 505.68 98.56 2207.5 541.8 78.63 source: calculated according to the data of the global financial integrity (2020) and the world bank (2020) baltic journal of economic studies 65 vol. 7, no. 1, 2021 negative value over the past decade from 6 to 22 billion usd (the national bank of ukraine, 2020). 6. strategic directions of investment system development regulation and modeling of possible effects from unproductive capital outflow reduction transformation processes that occur in the national economy and affect changes in the investment system are caused by improper organization and insufficiently effective institutional support for the investment process. because of the fact that the main emphasis in regulatory documents of an investment nature in recent years was placed on attracting foreign capital, control over stimulating reproduction processes in strategic economic activities was lost. the prospects for regulating the development of the investment system in ukraine determined as a result of the conducted research are mainly in the plane of institutional transformations, since this aspect is one of the most significant and problematic for the national economy. according to actual state of economic development in ukraine, the following strategic directions aimed to the decrease of -20 -15 -10 -5 0 5 10 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 capital outflow, bln usd gdp annual growth, % capital inflow and gdp fall area capital outflow and gdp growth area figure 5. dynamics of unproductive outflow of financial capital and gdp in ukraine source: calculated according to the author’s methodology based on the official data of the world bank (2020), the state statistics service of ukraine (2020) & the national bank of ukraine (2020) table 4 the average price of 1 ton of food exports and imports from ukraine to countries eu and eastern europe in (average value 2006-2019) indicators eu-28 eastern europe total export, th of tones 6,918.7 3,837.1 total export, bln usd 1.5 4.3 average price of 1 ton of export, usd 215.5 1,131.7 total import, th of tones 821.3 687.7 total import, bln usd 2.5 1.3 average price of 1 ton of import, usd 3,066.61 1,844.1 prices ratio 14.2 1.6 source: calculations are based on the balance of payments data (the national bank of ukraine, 2020) unproductive capital outflow are to be proposed in the following forms: – to improve the regulatory framework in investment sphere; – to stimulate strategic investments; – to improve the level of investments protection; – to increase the proposal for investments into the national economy; – to foster the capital turnover in economic system; – to create protective framework for national economy and for investments avoiding breaking of law and international agreements. the most powerful regulative impact on investment system in aspect of capital outflow reduction may be caused by economic and tax mechanisms. results of our previous researches (burkynskyi, laiko & talpa, 2018) show that during the first year of regulation it is possible to prevent the outflow of at least of the 3rd part of financial capital from the total annual volume. the calculation of the financial performance of the proposed regulatory measures, which is carried out on the basis of an interpretation of the principles of sustainable development, indicates the appropriateness of stimulating reinvestment processes, since this should bring returns in such dimensions: baltic journal of economic studies 66 vol. 7, no. 1, 2021 – economic dimension (increase in value added and profit for investors); – budget dimension (increase in taxes and fees); – social dimension (increase in employee benefits, social benefits, fees). to calculate the estimated significant effect obtained from reducing unproductive capital outflows and directing such financial flows to support the investment process in the country, it is proposed to develop a model of the dependence of gross value added on capital investment. using official statistics on the volume of gross value added and capital investment in ukraine, we have concluded such a model using a step function as such, which allows us to obtain the greatest approximation to the simulation of the real relationship between gross value added and capital investment, formally justified by the maximum value of the coefficient of determination (figure 6) the equation that describes dependence of value added (va) from capital investments (ci) has the following form: va = 11,694*ci0,7233 according to the model and to the data of unproductive financial capital outflow we make the following suggestion: the reduction of even the 3rd (2.5 bln usd) part of unproductive outflow of financial capital as of 2018 – 2019 years and reinvestment of this volume in economic turnover allows to obtain an estimated increase of: – gross value added to 22.69 bln usd (612.6 bln uah); – tax incomes to budgets of various levels (corporate income tax, personal income tax, value added tax) 5.84 bln usd (157.7 bln uah); – social benefits of 5.54 bln usd (149.5 bln uah), including wages of 4.54 bln usd (122.6 bln uah), social deductions to the wage fund of 0.998 bln usd (26.95 bln uah). calculations of possible effects from the involving into the investment process of additional financial resources saved from outflow are provided with the following assumptions: – the main taxes that are to be obtained include corporate income tax (18% of net profit), personal income tax (18% of wages), value added tax (20%); – share of wages in gross value added is 20%, share of profit in gross value added is 12% (according to the data of our calculations of average rate of salaries and profit in gross value added); – the rate of social deductions (the signal social fee in ukraine is 22%). possible growth of gross value added due to the use of proposed means of investment system regulation and capital outflow reduction is 22.69 bln usd or 20.4% of present value of this indicator as of 2019. 7. conclusions the methodology of investment system development regulation that is designed in the research include improved terminological basis, actual conceptual approach that meets modern requirements of international and national investment policies, blocks of common and special principles, namely: principles of renewal of invested resources, prevention of ineffective capital outflow, diversification of sources, sustainability of investment processes, balance of stakeholders interests and others; scope of methodological approaches to estimation and regulation of efficiency of investment y = 3,085x + 41,263 r² = 0,6678 y = 11,694x0,7233 r² = 0,7514 y = 46,525e0,0353x r² = 0,601 y = 59,027ln(x) 66,787 r² = 0,7299 y = -0,0913x2 + 7,0109x + 6,7095 r² = 0,6993 0 20 40 60 80 100 120 140 160 180 0 5 10 15 20 25 30 35 40 figure 6. dependence graphs of value added from capital investments in ukraine, identified for the period 2006–2019 source: calculated according to the data of the state statistics service of ukraine (2020) and the world bank (2020) baltic journal of economic studies 67 vol. 7, no. 1, 2021 system functioning in aspect of unproductive capital outflow reduction. one of the main theoretical goals obtained in the research – is the identification of actual definitions of investment system and of unproductive capital outflow with impact on renewal processes importance for institutional support of strategic investments. the phenomenon of unproductive capital outflow is identified in total system of classification of types of financial capital movement as completely legal way of capital transfer abroad with key characteristic of unproductivity that expressed as excess of losses and expenses caused by investment resources transfer abroad under possible and real economic benefits. the importance of research of unproductive capital outflow in comparison with other ways of capital export (namely illicit financial flows) is empirically proved due to the statistical data synthesis, according to which the ratio of the capital outflow to gdp, average during the last 5 years, in ukraine is more than 9%, in china – 2%, in india – 1.5 %, in poland – 8.9%, in the russian federation – 2.57%, in hungary – 13.7%, in romania – 4.34%. it is proved the significance of capital outflow for such european countries as hungary, poland, romania, and for mexico where volumes of export of financial capital per capita reached levels of 550-2200 usd per 1 person. due to this data, new regularity of capital export is empirically discovered and is explained by the impact of geographical location factor with highly developed transborder communications and influence of illegal aspects. but more in-depth examine of this problem is to be provided in future researches. according to provided analysis of dynamics of unproductive capital outflow, it is confirmed the hypothesis of direct positive dependency of capital outflow from level of economic activity, expressed by indicators of gdp volume and gross value added growth. such dependence caused by inefficiency of institutional support of strategic investments in economy of ukraine and results of this situation can be described by the following formula: the more profit in national economy is gained, the more risk of unproductive outflow and the more resources are available for withdrawal abroad. the regulatory framework proposed in the research is aimed on stimulation of strategic investments, on the improving of the level of investments protection, on the increase of the proposal for investments, on the fostering of the capital turnover in economic system. it is stated that the most powerful regulative impact on investment system in aspect of capital outflow reduction can be yield with help of economic and tax mechanisms. results of provided researches dedicated to potential effect estimation of the implementation of proposed means of capital outflow reduction demonstrate possible growth of gross value on 20.4% of present value of this indicator as of 2019 year in a sample of economy of ukraine. 8. acknowledgements this publication was prepared within the framework of the scientific project “development of the ukrainian investment system on the basis of capital outflow reduction” 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the analysis of kleptocratic economy in the context of europeanization robert pustoviit1, oleg kuklin2, mykhailo kryvoruchko3 abstract. relevance. kleptocratic economy, as an institutional system, is oriented towards a key function that involves gaining wealth by the ruling elite through the introduction of non-market transaction costs for companies and households, which is based on administrative, bureaucratic, and political violence. for this purpose, the kleptocratic states create such systems of state institutional management that give the authorities the possibility of rent-oriented behaviour, which impedes the functioning of the real sector of the economy and encourages the shadow one. under such circumstances, transaction costs are redirected to administrative intervention into the market mechanism, rather than aimed at increasing its efficiency; property rights are not clearly specified; the level of uncertainty about rules and norms of economic behaviour increases, and the motivational system of business activity is distorted. as a result, on the one hand, inefficient allocation of resources and slow economic growth (decline) are observed, and on the other hand, there is the redistribution of income in favour of the ruling elite and its excessive enrichment, that is detrimental to the welfare of the majority of the population. the aim of the article is to analyse the political-economic formation of a kleptocratic basis, which in the future transforms the state and its economy into kleptocratic formations; defining ways of counteraction and institutional capacity for transformations in the direction of ukraine’s aspirations for european integration. methodological basis. the methodological basis of the research is the work of domestic and foreign scientists in the field of institutionalism and kleptocratic economy. the models of the development of a kleptocratic state and the influence of kleptocratic factors on the socio-economic processes in the country have been studied with the application of the method of analysis, systematization, and generalization. results. it is determined that in order to liquidate the grounds of kleptocratic economy, it is of primary necessity to eliminate institutional obstacles that interfere with the unification of the legal and shadow sectors of the economy and ensure their institutional formalization. this requires the introduction of effective ways of restraining the ruling elite in order to restrict corruption abuses of the government and its close reigning coalition with special privileges and bureaucracies and form an institutional structure, in which firms and households have clearly defined property rights and also have the possibility to protect contractual rights provided by formal institutes. particular attention should be paid to the ways of civil society’s monitoring the state information policy and methods of adopting laws, which is, the institutional foundation that guarantees the openness of information as to the actions of government institutions. according to the results of the study, definite measures are proposed, the implementation of which will ensure the opportunities for europeanization, particularly in ukraine. the emphasis is placed on the fact that the important factors of counteracting the kleptocratic economy are the wage reform and the “transparent” selection of employees in the public administration sector on the basis of their professional qualities only. key words: kleptocratic economy, corruption, institutional environment, formal and informal institutions, european integration process. jel classification: b52, d73, f20 baltic journal of economic studies 204 vol. 5, no. 4, 2019 1. introduction the kleptocratic economy as an institutional system is oriented to the key function, which is associated with the gaining of wealth by the ruling elite through the introduction of non-market transaction costs for firms and households, which is based on administrative, bureaucratic, and political violence. for this purpose, kleptocratic states create such systems of state institutional governance, which give those who are in power the possibility of rent-oriented behaviour, which impede the functioning of the real sector of the economy and encourage the shadow one. under such circumstances, transaction costs are redirected to administrative intervention into the market mechanism, rather than to increase of its efficiency; property rights are not clearly specified, the level of uncertainty about rules and norms of economic behaviour increases, and the motivational system of business activity is distorted. as a result, on the one hand, inefficient allocation of resources and slow economic growth (decline) are observed, and on the other hand, the redistribution of income in favour of the ruling elite and its excessive enrichment, detrimental to the welfare of the majority of the population. it should be emphasized that the obstacles of the kleptocratic character, first of all, corruption and the oligarchic nature of the economy, cannot be eliminated in the short term and are the key barriers for europeanization of postsoviet countries, including ukraine’s accession to the eu and its accelerated economic growth. actually, the issue of kleptocratic factors and their negative impact on economic development is being widely researched by ukrainian scholars and foreign scientists. for example, in the works of v. predborsjkyj and m. fomina, the critical influence of corruption on the state’s economy, in particular, the domestic one, and the danger of shadowing of its socio-economic processes are analysed (predborsjkyj, 2005; fomina, prykhodjko, kapturenko, 2012); o. dlughopoljsjkyj investigated the minimization of the negative influence of corruption on the ukrainian economy (dlughopoljsjkyj, 2012). regarding foreign publications, in the context of the proposed article, particular attention should be paid to the works that focus on kleptocratic aspects, namely, scientific publications: d. acemoglu (acemoglu, robincon, verdier, 2004), s. rouz-ekerman (rouz (edmund, 2004), j. campos (campos and pradhan, 2007), j. labsdorff (lambsdorff, 2007), b. bloom (vloom, 2014). with regard to perspectives and challenges to european integration processes in ukraine, l. danilenko, v. polishchuk (danylenko and polishhuk, 2013), i. rafaljsjkyj (see rafaljsjkyj, 2011), o. yunin (yunin, 2018) actively work in this field of science. 2. research objectives and methodology regardless of the volume of research work done towards analysing kleptocracy, there is a need for systematizing and institutional specification of the kleptocratic economy. of particular importance in the context of this problem is the possibility of employing the institutional approach that allows investigation of the kleptocratic factor, which acquires an exceptional negative significance for the europeanization processes, both within and outside the eu. particular attention should be paid to the analysis of the correlation between kleptocracy and economic development in ukrainian in the light of european integration. therefore, the aim of the article is to analyse the political and economic formation of the kleptocratic basis, which further turns the state and its economy into the kleptocratic one, to define methods of counterwork and institutional capacity to make transformations in the direction of ukraine’s aspirations for european integration. in order to attain the abovementioned aim, the following research objectives should be reached within the scope of this study: 1. to define kleptocracy as a phenomenon. 2. to provide an overview of the anti-corruption area in the european union with regard to differences between older member states and the new ones with the post-socialist past. 3. to analyse kleptocracy in ukraine in the light of european integration. 4. to apply an institutional approach to the analysis of kleptocratic economy in a broad sense. 5. to develop a theoretical concept of a path of fighting against kleptocracy in the context of europeanization based on an institutional approach. the methodological basis of the research is the work of domestic and foreign scientists in the field of institutionalism and kleptocratic economy. the models of the development of a kleptocratic state and the influence of kleptocratic factors on the socio-economic processes in the country have been studied with the application of the method of analysis, systematization, and generalization. 3. defining kleptocracy according to experts’ viewpoint, the main obstacles to ukraine’s accession to the european union are corruption and slow reforms, as evidenced by a sociological survey conducted by the democratic initiatives foundation named after iljko kucheriv (interfaks ukraine, 2015). in its turn, corruption is defined as a destructive, in relation to the formal institutes and actual generally accepted moral rules in the country, a system of socio-economic relations, characterized by the use of official authority powers to obtain material and (or) intangible benefits (geveling, 2001). there are different kinds, types, and forms of corruption. its economic component is the most dangerous for the sustainable development of the country. it is defined as unlawful use by government baltic journal of economic studies 205 vol. 5, no. 4, 2019 officials of their authority to specify property rights for their personal mercenary purposes. for example, a bribe for granting permission for business or for expediting the passage of customs procedures can be qualified as the appropriation of assets officially owned by the state. obviously, bureaucratic services provided by government officials should be carried out not for self-enrichment of an official, but for giving economic entities the opportunity to implement economic activity as efficiently as possible. however, licenses, permits, quotas – all that necessitates compliance with formally written laws and regulations and outlines private economic activity – can be used by government officials at their own discretion to receive bribes. the final configuration of corruption is the “seizure of the state” (nisnevich, 2012), in which state power is privatized by ruling political-economic groups, powercoercive authorities and administrative resources are directed to the seizure of natural resources and land, the main flows of financial resources, state and private property, and estates of the most profitable economic assets (both in the public and private sectors), as well as the most influential means of disseminating information. in the “seized” state, which is defined as a state with kleptocratic economy, political and economic corruption turns to be systematic and becomes the basis for the functioning of the state, superseding competition, and contributing to the formation of monopolies subordinated to the ruling group in the political, economic, informational, and other spheres of activity of society and state. 4. an overview of the anti-corruption area in the european union kleptocracy issues are directly related to corruption. the eu as a strategic partner of ukraine attracts much attention in the light of high standards in socio-economic development, governance, and rule of law. at the same time, the issue of corruption within eu member states cannot be omitted within the framework of this study. the report prepared by the greens/european free alliance group in european parliament (the greens/ efa) in 2018 provides data on losses of european and national gdp from corruption. the report authors have estimated the total loss of gdp from corruption at the level of 904 billion euro annually that includes indirect effects of corruption such as losses in tax revenue and decreased foreign investment. the greens/efa report authors conclude that such amount of funds could be used to solve some global problems, e.g. ending world hunger, eliminating malaria, providing universal safe water and sanitation, etc. (the greens/efa, 2018). official report on anti-corruption policy prepared by the european commission in 2014 was based on eurobarometer surveys. the report data allows one making a conclusion on the high level of significance of the issues related to the perception of corruption among eu citizens. for instance, three-quarters of respondents think that corruption is widespread in their countries (especially in greece, italy, lithuania, spain, and the czech republic); a quarter of europeans consider their daily lives are directly affected by corruption (especially in spain, greece, cyprus, romania, croatia). the report data shows a similar picture of corruption in a business environment. that is to say, around 50% of european companies consider corruption to be a serious problem, especially in construction and telecom/it sectors. the countries, in which the businesses suffer from corruption the most, are the czech republic, portugal, greece, and slovakia (european commission, 2014). therefore, corruption causes serious losses for socio-economic development in the european union. regardless of the initial intention of the european commission to publish the eu anti-corruption report every two years after 2014, the eu anti-corruption report was not published in 2016 (see nielsen 2017). in addition, the european commission has limited public access to the content of the 2016 eu anti-corruption report (darbishire, 2017). carl dolan, director of transparency international eu, delivered a comprehensive summary on the progress of eu anti-corruption policy, implemented by the european commission. mr. dolan in his speech in the european parliament’s workshop “how to better combat fraud? follow up of the commission’s anti-corruption experience sharing programme” has concluded on the absence of significant progress in anticorruption policy (dolan, 2018). therefore, there should be formulated a conclusion on stating the fact that corruption is a serious issue and challenge within eu countries. regardless of a significant volume of analytical work done towards researching corruption, the eu governing bodies have not reached feasible progress in anti-corruption policy, as well as abolished public access to data on this policy after the publication of the first and the only eu anticorruption report in 2014. the study on corruption in the selected eu countries, conducted by the european parliament research service in 2017, allows comparing anti-corruption policy progress in the eu members both who had and did not have a socialism experience in their history (eprs, 2017). particularly, the research focused on finland, the united kingdom, france, germany, italy, croatia, romania, and bulgaria. the three post-socialist countries – bulgaria, croatia, and romania – have made a harmonization of their national legislative framework in the area of anticorruption policy according to respective european legislation. during the process of these countries’ accession to the eu, their anti-corruption legislative frameworks were recognized as adequate. however, compared to finland, germany, uk, france, and italy, baltic journal of economic studies 206 vol. 5, no. 4, 2019 these post-socialist countries are at the bottom in the anti-corruption rating list across the eu. an interesting conclusion that could be drawn from the considered study on corruption is related to the irrelevance of a functioning/non-functioning of a specialized anticorruption authority to the level of corruption (finland and germany do not have one, while other considered countries do). another important conclusion from the considered study is that croatia, bulgaria, and romania are highly centralized countries comparing to highly or relatively decentralized finland, germany, france, italy, and the uk. therefore, a high level of centralization could be noted as one of the factors sustaining a favourable ground for corruption in the eu countries that have a socialist past. 5. kleptocracy in ukraine in the light of european integration for ukraine as a whole, corruption factors are characterized as system-forming, which make it possible to characterize the ukrainian economy as kleptocratic one (acemoglu, robincon, verdier, 2004), when the institutional basis of kleptocratic economy is the corrupt foundation of the power structure and, identical to it, socio-political elite whose members dangerously violate public formal institutions, use their powers to quickly enrich and strengthen key positions in society. the terms “kleptocracy” and “elite” correlate to some extent, and it is due to the fact that the community of high-ranking corrupt officials acquires some of the features of the latter, although in reality it functions as a “kleptocratic quasi-elite” (geveling, 2001). it is the kleptocratic system that directly affects the level of economic development of ukraine, which is extremely low (table 1). table 1 main macroeconomic indicators of ukraine in 2017 (knoema, world data atlas) 1. gdp, bln usd 109,32 2. gdp on ppp, bln usd 368,78 3. gdp per capita, usd 2 583 4. gdp on ppp per capita, usd 8 713 5. consumer price index, % 14,4 6. unemployment rate, % 9,4 7. current account balance, bln usd -4 8. total state debt, % 75,6 according to the data of table 1, in 2017, ukraine’s gdp per capita amounted to 8713 usd (taking into account purchasing power parity – ppp), that is almost 4 times less than the average european index. at the same time, according to the current eu rules, if gdp per capita of a member-state is below 90% of the average european level and gdp of some regions does not reach 75% of this level, then the country as a whole and (or) separate regions have the right for subsidies that are intended to pull up their revenues to the average european index. the amount of subsidies should be significant: not less than the size of all grants received by all countries of central and eastern europe after their accession to the eu. consequently, the current state of ukraine’s economy is such that the country, if adopted in the eu, would be an unacceptably heavy financial burden on the overall budget of the association. this conclusion is in line with public opinion in the countries of western europe, the main donors of the eu budget (bazhan, 2015). let’s add that in 2014, a significant deterioration of the economic situation was caused by military operations in the east of ukraine, which caused a chain reaction of imbalance in macroeconomic indicators. among the main factors that determine the economic trends in 2015 were: low external and domestic demand due to the deceleration of economic growth; reduction of the purchasing power of the population due to a decrease of real incomes; outflow of investments. the lack of appropriate measures aimed at stabilizing the situation has led to an intensification of the economic downturn. although according to analysts’ assessment, since 2017, the ukrainian economy has continued recovering from a slight positive growth in 2016, which led to an increase in the gross domestic product by about 1.5% (yunin, 2018). at the same time, the crisis has shown the danger of focusing on the export-raw material model of development and the use of benefits associated with the relatively low labour cost. overcoming of crisis and transition to sustainable economic growth depend on the effectiveness of cooperation between the state and business, increasing the efficiency of use of innovations and attracting investments. at the same time, the key obstacle to all mentioned above are corruption and the lack of public confidence in state institutions, the judiciary, and the law enforcement system. it should be noted that the barriers of an economic nature can be eliminated in the medium term as a result of the outstripping pace of economic growth in ukraine. however, the latter is possible only with favourable changes in the institutional character, first of all, in the field of counteracting kleptocratic factors in the economy. at the same time, attention should be drawn to the conclusions made by imf experts, who in 2016 prepared a separate report on the correlation between the level of corruption and the state of the economy in the country. according to the global competitiveness report, while in 2013–2014 business representatives named corruption the second biggest problem in ukraine, in 2016–2017 this problem came in the first place, whereas political instability was the second stated position. by comparing data of transparency international and world economic outlook, imf experts came to the conclusion that there is a significant correlation baltic journal of economic studies 207 vol. 5, no. 4, 2019 between the level of corruption and the rate of economic growth (table 2). according to the calculations of the fund, improvement of ukraine’s performance in the international rating of corruption risks even on one position will lead to an increase in income growth per capita by 1.35% and investments – by 4%. therefore, if the level of corruption in ukraine remains unchanged, by 2040, ukrainian incomes will still be only about 30% of the eu average index (zanuda, 2017). we also emphasize that the association agreement between ukraine and the european union in section “financial cooperation” presupposes that the eu undertakes to provide assistance to ukraine within the framework of the relevant financial instruments. at the same time, assistance will be provided in accordance with the principles of expedient financial management and implies the effective prevention of fraud, corruption, and other abuses. to achieve this, ukraine must implement the relevant provisions of the european union legislation and reach a certain level of coherence of the ukrainian legislation with the legal norms of the european union. the convergence of ukrainian legislation with the modern european legal system will ensure the development of political, entrepreneurial, social, cultural activity of ukrainian citizens, economic development of the state within the framework of the eu and will promote the gradual growth of the welfare of citizens, bringing it to the level the eu member-states have developed (rafaljsjkyj, 2011). 6. an institutional approach to the analysis of the kleptocratic economy it must be recognized that corruption is widespread in the world. in some countries in africa and south america, such as nigeria or colombia, as well as in the countries of the former soviet union, incomes from corruption are likely to account for a significant proportion of the gross national product. from time to time, corruption cases also become public in developed countries; in particular, the most widespread are unlawful government spending on military orders or the use of private funds for an election campaign. however, economic studies of corruption are rather local. generally, they focus on the institutional model of the “principal – agent” that analyses the relationship between the higher levels of government officials (principals) and the agent – an official who receives corrupt benefits from individuals who are interested in certain government preferences. under the conditions stated above, the concepts of the institutional economy can be used to study the institutions that are able to counteract the genesis of the kleptocratic economy. at the same time, the formal and informal institutions deserving priority are those whose research allows us to understand the institutional motives that create conditions for the undemocratic power of the kleptocratic quasi-elite and provide opportunities for eradicating corruption in the economy. unlike “insignificant” (“everyday”) forms of corruption, “large-scale corruption” as the basis of the kleptocratic economy is deeply rooted in government structures, leads to illegitimate appropriation of tremendous assets, undermines legitimacy, and preserves socio-economic backwardness (vloom, 2014). thus, “large-scale corruption” differs from the “household” one in terms of involvement of high-level officials in corruption structures on the grounds of abuse of state power and the appropriation of significant amounts of social wealth. at the same time, it should be noted that according to the scientific approach of h.-j. lauth (lauth, 2000), formal and informal institutions do not antagonize but demonstrate a kind of coexistence, which leads to the situation when preserving the formal shell, the institutions that seem to guarantee democracy and supremacy of law, either collapse from inside, or even, turn into their opposites. it is the impact of such table 2 the ranking of central and eastern european countries by the corruption perceptions index and gdp per capita in 2017 (knoema world data atlas) country corruption perceptions index place in the world ranking gdp per capita, at constant prices in 2010, usd place in the world ranking poland 60 35 15761 48 lithuania 59 37 16793 44 latvia 58 39 15553 50 czech republic 57 43 22779 39 slovakia 50 53 19897 42 romania 48 58 10932 62 hungary 45 65 15648 49 belarus 44 67 6376 89 bulgaria 43 71 8312 75 ukraine 30 133 2992 123 russia 29 134 11411 61 baltic journal of economic studies 208 vol. 5, no. 4, 2019 “subversive institutions” that causes negative effects, and the process of “informal institutionalization” should be considered as a systemic “distortion” of the institutional environment during institutional transformation and subsequent degradation. hence, the prospects for institutional analysis of the kleptocratic economy require intense attention to the fundamental aspects of the functioning of the so-called “subversive institutions” that affect the processes of informal state governing. ideal models of both formal institutes (constitutions and laws) and informal ones (particularly, traditions), can be represented in the form of equilibrium, which is characterized as a selfsupporting system and conditioned by limiting effects. in the case of the predominance of “subversive” institutions, we observe partial equilibrium that can be broken without excessive efforts under the influence of exogenous factors. therefore, with the predominance of “subversive institutions” in the kleptocratic economy, there is no chance for lengthening but, on the contrary, the reduction of the possible term of the elite’s stay in power, which stimulates it to revitalize the rent-oriented behaviour, on the one hand, and deprives the incentives to change the existing situation, on the other hand (gelman, 2010). these conditions require considering such partial equilibrium of “subversive institutions” as a precedent of an “institutional trap”. therefore, in order to withstand the kleptocratic factors in the economy, it is necessary to create an institutional environment that will counteract the corrupt economic ordering, eliminate barriers that lawabiding business faces, provide legitimate guarantees to entrepreneurship, and give responsibility and initiative that has been monopolized by the state bureaucracy to private hands. to do this, first of all, it is necessary to solve such institutional problems as eliminating obstacles that prevent the consolidation of the legal and shadow sectors of the economy and ensure their institutional formalization. this requires the introduction of effective ways of restraining the ruling elite in order to curb corruption abuses of the government and its close coalition with special privileges and bureaucracy, and to form an institutional structure, in which firms and households have clearly defined property rights, as well as have the possibility to protect contractual rights, provided by formal institutes. in addition to the above considerations, there is a theory “divide and rule”, which explains how the kleptocratic economic system can be relatively stable in the long-term equilibrium (chen, 2010). under such a system, only a very small number of economic individuals can benefit from discriminatory redistributive policies implemented by corrupt authorities, while the vast majority of households are victims of kleptocracy. factors that can help limit the effectiveness of the “divide and rule” strategy, as well as destroy the kleptocracy itself, are as follows: increasing positive expectations of rising prosperity as a result of elimination of the kleptocratic regime can contribute to counteracting it on behalf of the part of civil society, which will force the kleptocratic power to resign. at the same time, the elimination of the kleptocratic regime will be more impressive if different groups of citizens are directly bound by a common goal and common interests. the confrontation between social groups creates prerequisites for subordinating even more economic and political resources to corruption. at the same time, in order for groups of interests to have a significant impact on regulatory policy, they should: firstly, have a strong influence on election results; secondly, legislators should constantly feel the danger of losing support of interest groups that brought them to power; thirdly, the services of the “police patrol” and the “fire guard” (mccubbins and schwartz, 1984) should be effective in controlling the legislators, so that the corruption policy they carry out does not deviate from the outlined oligarchic groups (zaostrovtsev, 2009). in this sense, the methods of economic policy that strengthen the economic influence of already dominating groups or weaken the counteracting groups are likely to upset the existing balance of political forces and cause unintended destructive effects on the economy of the country. in addition, economic reforms that do not take into account the most important political and institutional sources of inefficiency, but only superficially affect its symptoms, can cause a “reverse” movement, as they violate the “political principle of incentive compatibility” and eventually ruin the existing political equilibrium of the kleptocratic system and actual corrupt coalitions. the foregoing is explained by the existence of two types of public order inherent in economic development (north, wallis, weingast, 2011). the “open access” order is characterized by economic development, democracy, prosperous and dynamic civil society with numerous organizations and an extensive system of impersonal social relations, which include the rule of law and the secure protection of property rights. in turn, the public order of “restricted access”, on the contrary, is characterized by slow economic growth, small number of public organizations, heterogeneity of social relations, built on the principle of personal privilege, restriction of competition, selective execution of laws, vulnerability of property rights and kleptocratic groups striving to create corruption rent. as a result, society is plunged into a noncompetitive economy, disorder and violence, while the illegal economy is gaining momentum. kleptocratic authorities only sometimes think about the positive or negative consequences of their decisions for society as a whole. they focus mainly on personal covetous interests, encouraging those who get corrupt rents for them, redistributing resources in their favour with the help of “obedient” law enforcement and judicial systems. baltic journal of economic studies 209 vol. 5, no. 4, 2019 7. institutionalization as a path of fighting against kleptocracy in the context of europeanization it should be noted that the west’s interest in establishing democratic principles of governance in the post-socialist part of europe and in opening up new markets for itself is the motivational basis that led the eu to the policy of europeanization. but the realization of its own interests in the region does not necessarily have to lead to the full institutional integration of the countries of central and eastern europe into the european union and could well be limited to a close association within the framework of the european economic area formed for this purpose. at the same time, taking into consideration the abovementioned problems in ukraine, the peculiarity of the “reinforcement strategy through remuneration”, which was largely followed by the eu in the process of expansion to the east, is to avoid the risks of “moral responsibility” for partner’s actions: the governments of the countries concerned cannot count on the eu’s assistance only because they need it, not taking into account the requirements put forward by the eu. after all, the formula of the balance between national interests and motivation of the eu candidate country for integration is derived: the government adopts eu rules if the benefits from its rewards exceed the internal costs of accepting these rules (rafaljsjkyj, 2011). the dynamics of the institutionalization process should be understood without leaving out of sight counteraction to the kleptocratic factors in the economy when various socio-economic processes transform their interactions into an institutional system, whose elements become common practice, which has remained unchanged for several generations and been confirmed in the real behaviour of people. therefore, the role of institutionalization lies in the fact that it is a factor of reducing uncertainty and the basis for predicting the behaviour of economic entities. creating institutions society establishes certain types of social interaction, changes them to permanent and mandatory ones. further, on this basis, a system of sanctions is developed. creation of a clear institutional and role structure of interests in accordance with the norms and rules, that is approved by the majority of participants in the socio-economic process, can be considered the final stage of institutionalization of interests (loginova, 2008). this means that institutionalization causes the creation of a set of norms and rules that define the context of existence and interaction of entities and is accompanied by the creation of organizations and institutions that ensure the stability of the functioning of the institution, its management, and control of activities. the process of institutionalization during the period of reforms in georgia (aliyev, 2014) can be cited as an example, when the government managed to achieve positive results in the elimination of the so-called “georgian criminal world” and counteract the factors of the kleptocratic economy. in terms of institutional economics, the state assumed the functions of protection of property rights, which were characteristic for informal institutions – the proximate participants of the shadow economy. at the same time, opportunities for the potential of corruption were substantially limited, as the process of relations between the authorities and business became as deindividualized and automated as possible. 8. conclusions thus, in order to eliminate the underlying cause of the kleptocratic economy, it is necessary first and foremost to eliminate institutional obstacles that interfere with the unification of the legal and shadow sectors of the economy and ensure their institutional formalization. this requires the introduction of effective ways of restraining the ruling elite in order to curb corruption abuses by the government and its close reigning coalition with special privileges and bureaucracies and form an institutional structure, in which companies and households have clearly defined property rights and also have the possibility to protect contractual rights, provided by formal institutes. particular attention should also be paid to the ways of civil society’s control over state information policy and the ways of laws adoption, that is, the institutional foundation that guarantees the openness of information about the actions of government institutions. in turn, the europeanization process presupposes making the necessary efforts to combat the kleptocratic economy; the struggle against certain individuals at power who are involved in corrupt acts; the provision of equality before the law, regardless of the position and property status, when the budget expenditures are carried out reasonably and in the interests of the society (eeas, 2018), rather than separate kleptocratic clans. the specification of the above conclusion is the implementation in the social and economic policy of measures that will provide opportunities for european integration processes in ukraine, in particular: – political parties are financed transparently and consistently follow their defined political strategy and election promises; – parliament and other elected bodies are formed under a transparent electoral system and reflect the interests of all people; – state policy presupposes resignation of the officials responsible for the continuation of the kleptocratic policy of officials and imposing on them appropriate sanctions, including criminal ones; – administrative services should be accessible and convenient for business and should not create corruption opportunities; baltic journal of economic studies 210 vol. 5, no. 4, 2019 – selection of civil servants should be competitive and transparent, based on their professionalism; – ownership right is inviolable and guaranteed by effective protection mechanisms; – corruption is not encouraged by imperfect legislation, and all known manifestations of it are punishable, regardless of the influence of a person who committed the crime; – justice is fair and accessible; the rule of law is respected in the country. other important factors in counteracting the kleptocratic economy that restrain the european integration processes in ukraine are the wage reform and the transparent selection of employees in the public administration sector on the basis of their professional qualities. at the same time, there should be introduced such a system of stimuli that personifies the effectiveness of employees in the field of remuneration and penalties, depending on their productivity. synchronously, a key deterrent to the corruption intentions of civil servants is a reliable and unbiased system of continuous monitoring of their incomes and expenditures, which implies the inevitability of severe punishment for corruption. finalizing this study, one should say that the institutional approach allows developing a concept of institutionalization as a path of fighting against kleptocracy in the light of europeanization. while european integration is a comprehensive process, the key issue is progress in anticorruption policy. based on the experience of the former socialist republics, which joined the eu (croatia, bulgaria, and romania), the state officials, civil society, and the general public should be aware of the correlation between a high level of centralization (inherited from the socialist past) and the level of corruption. further development of this research line could take a form of study (studies) on comparing the anticorruption policy progress between all eu member states with a socialist past, as well as between the eu members without such past. understanding of common past and historical differences will enable to develop and formulate an institutional approach to the analysis of the kleptocratic economy and overcoming it. references: acemoglu, d., robinson, j., & verdier, t. 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(in russian) baltic journal of economic studies 191 vol. 5, no. 2, 2019 corresponding author: 1 national technical university “kharkiv polytechnic institute”, ukraine. e-mail: diana.raiko2016@gmail.com orcid: http://orcid.org/0000-0002-9307-103x 2 national technical university “kharkiv polytechnic institute”, ukraine. e-mail: vitcherepanova@gmail.com orcid: https://orcid.org/0000-0002-0294-1678 doi: https://doi.org/10.30525/2256-0742/2019-5-2-191-205 creation of the image and brand of the enterprise on the basis of marketing as a philosophy of management diana raiko1, viktoriia cherepanova2 abstract. the modern development of an enterprise is possible only on the basis of marketing since the enterprise is effective only in case of its usefulness for consumers, the relation with which is one of the main marketing functions, i.e., marketing is a philosophy of management. the purpose of the paper is to study the theoretical background and practice of interaction of image and brand of an enterprise on the basis of marketing as a philosophy of management. methodology. approbation of the results is presented on the example of business projects for 2017 and 2018 of enterprises with different business scales in kharkiv and kharkiv region of ukraine: small – the centre for child development “cute kids”, medium – association of confectionery enterprises “solodkyi svit” (“sweet world”), large – turboatom jsc, by means of research methods: theoretical generalization, system approach, expert estimation method. results. the work results are the development of methodological approach to evaluating the effectiveness of the marketing department in the process of business management at the enterprise, taking into account the enterprise value and brand value for large industrial enterprises, the peculiarity of which is the ability to investigate the relationship between the effectiveness of the development of the marketing department (organizational and managerial aspect) and the performance of its divisions (economic aspect) and take into account the identified causal relationships in the process of enterprise activity. the system for evaluating the performance of the marketing department, taking into account enterprise value and brand value, involves two levels of assessment: the first one allows determining its performance in general, that is, the effectiveness of its development, the second one takes into account the specifics of divisions of this department of the enterprise and allows determining their performance according to individual results, that is, the effectiveness of divisions, which is reflected in the basic social and economic performance indicators of the enterprise. the effectiveness of the development of the marketing department is evaluated using the following indicators: development trend ratio, marketing efficiency ratio, management process productivity ratio, division productivity ratio, and executive efficiency ratio. the calculation is based on individual indicators: an integral indicator of the effectiveness of the development of the marketing department, which is calculated by the normalized part of the indicators for additive convolution, taking into account their ratios of significance, and by performance indicators of marketing research division (sales volume, market share, building market strength), the work of the business development division is evaluated using indicators (“corporate image”, “enterprise competitiveness”, “profit”, “consumer readiness”, “partner’s business attractiveness”), communication division (trade turnover, information base update, development of partner relations, brand value), which are interrelated, interdependent, reveal the essence of determining the performance of the marketing department at different angles, allow justifying the adjustment of certain aspects of marketing development at the enterprise, and are calculated as arithmetic mean values of performance indicators of the divisions. conclusions. practical approbation of the proposed approach is presented on the example of large industrial enterprise named turboatom jsc and confirms the practical value of the worked out approach to evaluating the performance of the marketing department in the process of managing the activities of an industrial enterprise, taking into account enterprise value and brand value. key words: image, brand, marketing, enterprise, evaluation of performance of marketing department. jel classification: м30, м31 baltic journal of economic studies 192 vol. 5, no. 2, 2019 1. introduction in modern conditions, successful creation and conduct of business are impossible without constant adaptation to changes in market conditions, which are characterized by its dynamism and, often, unpredictability. at the same time, the main means of adapting to changes in the market environment is the use by an enterprise of marketing management concept, which among other elements includes information and emotional impact on target consumer audiences, which is the basis for the interrelation of the brand and the image of the enterprise. when choosing an enterprise product or a service, the consumer has to be guided mainly by the enterprise image because, in order to make a decision about the purchase, its use does not almost allow getting a clear understanding of the quality and competitive advantages. in terms of modern economy, enterprise competitiveness largely depends on the maintenance of an effective functioning organizational structure of marketing. all this, in its turn, determines the need for organizational transformations, the creation of new marketing organizational structures, which to the greatest extent meet the enterprise goals, requirements, business forms, and market. the image cannot be considered without the developed brand because a well-designed brand is not only the external attributes of the enterprise and the product; it is a conceptual policy that is the key to building a strong image of the enterprise in the market. an important factor in working on the image is both informational and emotional, and also the evaluativevalue position of influence on the target audience of consumers in order to determine the enterprise competitiveness. while studying the image and brand of the enterprise, little attention is paid to the study of their relationship. in addition, the concepts of “image” and “brand” are often confused in practice, which necessitates the further detailed study of these concepts and their interconnection. this explains the choice of the topic of this work, emphasizes its relevance, practical importance. the purpose of the paper is to study theory and practice of interaction of image and brand of an enterprise on the basis of marketing as a philosophy of management on the example of enterprises with different business scales: small, medium, and large, and to substantiate practical recommendations for ensuring economic development in the current economic environment. in particular, to determine interrelation of image, brand; enterprise image as an integral part of brand with the help of a complex of marketing communications; develop methodological provision for performance evaluation of the marketing department in the process of management of activities on the example of a large enterprise taking into account corporate image, enterprise value, brand value according to organizational and managerial and also economic aspects by two levels of assessment: the first one allows determining its performance in general, that is, the effectiveness of its development, the second takes into account the specifics of divisions of this department of the enterprise and allows determining their performance according to individual results, that is, the performance of divisions. practical implementation of research results is presented on the example of business projects of enterprises with different business scales in kharkiv and kharkiv region of ukraine: small – the centre for child development “cute kids”, medium-sized – association of confectionery enterprises “solodkyi svit” (“sweet world”), and large – turboatom jsc. 2. literature review both domestic and foreign scientists have contributed to the study of the essence of the enterprise image and brand. thus, b. gardner considered the image as a collection of knowledge, representations, and predictions of a person about the object and its environment (gardner, levy, 1955), c. sandage seemed image as a portrait fixed on the brand, as important as any appreciable characteristics of the product, if not more (sandage, 2001). d. ogilvy wrote that image of a product means a unique composition of qualities that are firmly rooted in the thoughts and feelings of people (ogilvy, 2003). s. oliver believed that image is a mental picture; an idea, generated by imagination, or a personality in the representations of man, organization (oliver, 2003). i. v. aleshina distinguishes corporate image – it is the image of the organization in the presentation of social groups (aleshina, 1998). v. ya. zaruba described the concept “image” as a specially designed, based on the peculiarities of activity, patterns, properties, advantages, qualities, and characteristics of the image of a certain object, which is purposefully introduced (fixed, entangled) in the consciousness of target audiences with the help of marketing communications mix (zaruba, shasha, 2001). interbrand company describes brand as “name, concept, sign, symbol, design, or a combination of the above properties intended to identify goods or services offered by the seller, as well as to distinguish them from the goods and services of competitors, and as a set of all explicit and implicit characteristics that make the offer unique” (interbrand world’s most valuable brands 2001 methodology). peter doyle said about brand that it is a product set that satisfies the functional needs of consumers and an added value that prompts the consumer to enjoy the fact that the chosen brand is better suited to him because he has advantages over competitors (doyle, 1999). g. r . dowling says that a brand – a collection of names baltic journal of economic studies 193 vol. 5, no. 2, 2019 and other characters and a “promise” that is given to the buyer (dowling, 2006). j. jones looks at a brand as a product that meets the functional needs of some users and gives them some added value, contributing to the satisfaction of psychological needs and encouraging the purchase ( jones, 2005). o. v. dobrianska considers a brand as a trademark that has reached a certain level of reputation (dobrianska, 2001). m. kupchynska proposed a brand as “product + name + associations + emotions” (kupchynska, 2004). o. v. zozulov believes that a brand is a well-differentiated trademark, that is, which in the minds of consumers is associated with certain advantages or benefits, clearly distinguished from among the brands of competitors and is characterized by a high level of loyalty from consumers (zozulov, 2003; zozulov, 2002; zozulov, pysarenko, 2004). laureate of the nobel prize in economics r . thaler considered brand and image of the behavioural economy as a set of emotions caused by the product and company (posylannia na dzherelo premii shvedskoho natsionalnoho banku z ekonomichnykh nauk pamiati alfreda nobelia). however, despite a large number of works devoted to these issues, the problems of studying the image, the brand of the enterprise remain relevant and need further search for solutions. 3. marketing as a philosophy of enterprise management an open socio-economic system, the example of which is an enterprise, falling under the influence of various positive and negative factors of the external environment, gradually changes its qualitative state, which is accompanied by the transformation of its internal and external relations, and as a result the development of a complex socio-economic system, which requires continuous and quality management. such management of enterprise development as a socioeconomic system is provided exclusively by marketing activity. therefore, modern enterprise development is possible only on the basis of marketing activity, and marketing – management philosophy. 4. image and brand of the enterprise as factors of competitive struggle in a context of tight market competition between enterprises that offer identical goods and services, the issue of penetrating a market and attracting a potential client is exacerbated. one of the key factors of competition is the positive image of the enterprise formed in the minds of consumers (figure 1), which is a means of achieving competitive advantage (raiko, 2010). the analysis of existing literary sources allowed us to propose an own definition of the essence of concepts of the image and the brand of the enterprise (figure 2, 3). image of the enterprise is a certain prevailing view of the target audience of consumers about the enterprise, which is based on a consistent increase in knowledge about it and the enhancement of its emotional perception; the image is interrelated with the components of the enterprise activity and depends on a certain set of measures that are implemented in order to maintain and increase it. brand of the enterprise – reflection of the individuality of the given enterprise, its competitiveness, advantages of goods or services using the means of informational and emotional impact on consumers, which is a combination of functional and emotional characteristics existing in the minds of consumers and prompting them to choose the goods or services of this enterprise. the theoretical analysis of the existing ones allows drawing the following conclusions: enterprise image and brand play an equally important role in the context of the competitiveness of enterprises in terms of diversification of business activities; image improvement and brand promotion of the enterprise are carried out by means of marketing communications mix; enterprise image is a part of enterprise brand. 5. practical realization of theoretical studies on the interaction of the brand and image is represented on the example of business projects of enterprises with different business scales in kharkiv and kharkiv region of ukraine: small – the centre for child development “cute kids”, medium – association of confectionery enterprises “solodkyi svit”, and large – turboatom jsc small business. according to the results of conducted marketing studies in the market for child development centres in kharkiv and services, one can draw conclusions that target consumer audience is interested in the satisfaction of the following: caring for children, quality teaching; the comprehensive development of children, the availability of “family” classes, interest and satisfaction of children. name “cute kids” and brand are proposed, and the logo, presented in figure 4, is developed, which reproduces the main mission of the centre – the formation of comprehensive development of children from the very early age. medium-sized business. according to the results of marketing studies in the confectionery market, the creation of a new brand of a commodity group of premium class for consumers is proposed – a series of sweets in a box under one brand, which will include 4 types of sweets (different tastes) with attachments: an insert card with traditions of celebrating ukrainian holidays. as a result of the study, based on the focus group, the name “patria” – fatherland, native land is proposed, slogan: “patria” – sweet patriotism; a complex system of visual identification of the corporate style is developed baltic journal of economic studies 194 vol. 5, no. 2, 2019 competitiveness indicators factors of the external environment factors of the internal environment factors of the macroenvironment factors of the microenvironment innovations економічні geographical socio-cultural natural-ecological factors of an international nature technical and technological (stp) institutional financial market structure. competitive environment investments workforce economic information flows barriers to market entry/exit political-legal partners suppliers consumers substitute products enterprise resources financial fixed assets technical and technological (stp) workforce information management activity resource saving trends competitive ness of products quality price design packaging service performance characteristics strategic management marketing assortment policy distribution channels investment attractiveness efficient production and economic activity enterprise value enterprise image rating number of consumers degree of consumer satisfactioncomparative advantages adaptation capabilities figure 1. factors of competitiveness in relation to forming a positive image in consumers’ consciousness source: developed by the authors (logo, packaging), which affects the formation of a positive image of the company and enhances the effectiveness of its customer contacts, and also increases the trust of partners and affects the growth of the company’s reputation in the market (figure 5). figure 6 represents the package design. there are proposed 4 types of sweets in the box “patria”, comparable with the seasons, and in figure 7, the associative names of sweets in the box are given. in accordance with the season, various flavours of sweets are offered: “patria warm of hearts” – adding champagne, “patria tenderness of feelings” – cream filling, “patria fruit flavour” – mixed fruit. to determine the cost of creating a brand name, costing method of cost calculation is used: the first cost item – the search for a name. search for a name can be implemented either by the state of the company-manufacturer (for example, by the method of “brainstorming”) or with the involvement of specialists. it is very difficult to estimate costs. in any case, the name variants that have passed the initial baltic journal of economic studies 195 vol. 5, no. 2, 2019 strategic positioning enterprise image enterprise brand marketing communications mix (mcm) a set of measures to improve enterprise image staff measures marketing measures customer measures productive-economic measuresmeasures to enhance corporate culture quality improvement development and improvement of personnel policy formation of personnel loyalty to the organization, provision of social guarantees production incentive, personnel motivation competition planning measures provision of reliable and adequate information product promotion measures developing an optimal pricing policy performance of contractual obligations to clients support services provision introduction of innovative technologies attraction of financial investments improvement of production efficiency development of measures of informational and emotional influence on target groups internal image measures of informational and emotional influence on target consumer audiences external image components of enterprise activity (and their interrelation) social communications interaction with contractors productive-economic tasks human resources management product policy in te rn al en vi ro nm en t e xternal environm entorganization of production sales of products price policy sales policy communication policy marketing instruments figure 2. enterprise image, measures of informational and emotional influence on target consumer audiences source: developed by the authors selection in the company should be tested on potential consumers of the product. the cost of the test, carried out by the specialized company, will be 1-10 thousand currency units depending on the type of research. the development and testing of the brand name “patria” cost 2 thousand c.u. the second cost item is a graphical image of the name. the cost of developing a logo will be from 150 to 2500 c.u. the logo should also be thoroughly tested and then registered (300-1000 c.u.). in our case, the logo cost 400 c.u. the third cost item – the creation of a package for the product under a new name (1-10 thousand c.u.). the development of packaging of sweets in the box “patria” cost 2 thousand c.u. the total cost of creating a brand name was 4.4 thousand c.u. baltic journal of economic studies 196 vol. 5, no. 2, 2019 strategic positioning enterprise image enterprise brand marketing communications mix (mcm) classic elements of marketing communications measures of informational and emotional influence on target consumer audiences the attraction of internet technologies and social media marketing main internet advertising sales promotion direct marketing outdoor indoor transport tv radio competitions, lotteries bonuses cash refund offer loyalty programs creating a corporate site website’s seo display advertising (banners, rich media, text ads) contextual advertising promotional websites (photo galleries, interactive flash presentations, promo videos, multimedia) e-mail (correspondence, information support of consumers) advertising spots mobile networks gamification pr telephone conversations correspondence feedback system organization of own events sponsorship pr texts, press conferences, media relations, presentations social networks blogs microblogs photo and video services social tabs social news podcasts internet forums geosocial networksprinting products souvenirs production and distribution of samples exhibitions, sponsorship corporate style exposures at points of purchase synthetic social media marketing (smm) collateral figure 3. enterprise brand, measures of informational and emotional influence on target consumer audiences source: developed by the authors 6. a methodological approach to evaluating the effectiveness of the marketing department for large industrial enterprises in the process of business management at the enterprise, taking into account enterprise value and brand value the paper distinguishes the following approaches to evaluating the performance of the marketing department on the example of industrial enterprises of ukraine and proposes a generalized system of performance indicators for the marketing department, which is represented in figure 8. the system for evaluating the performance of the marketing department, taking into account enterprise value and brand value, involves two levels of assessment: the first one allows evaluating baltic journal of economic studies 197 vol. 5, no. 2, 2019 its performance in general (results of development of the marketing department), the second level takes into consideration the specifics of divisions of this department of the enterprise and allows determining their performance according to individual results, which are reflected in the basic social and economic performance indicators of the enterprise (figure 9). the effectiveness of the development of the marketing department (first level of evaluation) is evaluated using the following indicators: development trend ratio, marketing efficiency ra tio, management process productivity ratio, divi sion productivity ratio, and executive efficiency ratio. table 1 represents a system of indicators for evaluating the performance of the marketing department of the first level taking into account enterprise value and brand value. in order to determine indicators of the second level of evaluation, on the basis of the survey of employees and senior managers of a high strategic level of machine building enterprises and the specifics of this study, a system of performance indicators of the marketing department by divisions under the functional principle is formed, taking into consideration enterprise value, corporate image, and brand value (table 2). enterprise image as an attribute of the enterprise is formed in different ways for different groups of the public. so, for partners, important are reliability and constructivity of the enterprise, goodwill (compliance with ethical business practices in the entrepreneurial activity), business partner loyalty, transparency, business activity of the enterprise. consumers consider enterprise image from the viewpoint of unique characteristics that in their view the enterprise products have: quality, brand awareness, support services and discount system provided by the enterprise, product price, consumer’s vision of “warm of hearts” «ніжність почуттів» “fruit flavour” patria winter springsummer autumn “tenderness of feelings” “generous gifts” figure 4. the logo of the centre for child development “cute kids” source: developed by the authors figure 5. logo of the brand “patria” source: developed by the authors figure 6. package design source: developed by the authors figure 7. seasonal names of sweets in the box “patria” source: developed by the authors appearance of the package direction of opening location of sweets inside the stated mission and strategies of the enterprise, corporate style, etc. moreover, there is the staff ’s vision of their enterprise and its management. in such a way, it is appropriate to use the concept of a corporate image – a vision of an enterprise by various social groups. enterprise corporate image evaluation should baltic journal of economic studies 198 vol. 5, no. 2, 2019 − enterprise profit, income − product profitability − trade turnover − inventory turnover − sales volume − output of products performance of marketing department (md) economic performances of the enterprise social performance enterprise value − reduction of unemployment − creative work efficiency − work efficiency − labour productivity − partnership relations, customer communications − customer loyalty − information level, the quality of internal relations at the enterprise − information base update − market share, coverage − enterprise image − competitive advantages, competitiveness − sales of products in new markets, capturing new consumer segments − product quality (from the perspective of consumers) − investment cost − brand, trademark value − stock value − costs of marketing − sales, distribution, logistics − duration of marketing functions − development and sales of new products − efficiency of an individual marketing operation marketing activity management process evaluation − operational efficiency of managerial apparatus − quality of managerial functions − span of management − economical efficiency of managerial apparatus − reliability of operation of managerial apparatus (executive efficiency) − coverage by managerial function − productivity of managerial apparatus − informativity of managerial apparatus − managerial style market power of the enterprise figure 8. performance indicators of the marketing department at the industrial enterprise, taking into account corporate image and enterprise value source: developed by the authors be made in an assumption that image as an instrument of influence on the external environment should approximate to positive. in order to determine the corporate image of the enterprise, experts (by social groups) are proposed to evaluate the degree of conformity of each evaluation parameter of the image with positive – give marks: “5” – if this parameter fully corresponds to the positive image; “4” – if this parameter corresponds to the positive image not in full; “3” – if this parameter weakly corresponds to the positive image; “2” – if this parameter does not correspond to the positive image. baltic journal of economic studies 199 vol. 5, no. 2, 2019 performance of marketing department (md) efficiency of md development − development trend ratio − marketing efficiency ratio − management process productivity ratio − division productivity ratio − executive efficiency ratio performance of md divisions − building market strength − sales volume − market share − enterprise’s corporate image − profit − enterprise competitiveness − consumer readiness − business attractiveness of a partner − information base update − development of partnership relations − trade turnover − brand value performance of marketing research division performance of business development division performance of communication division figure 9. the system of indicators of performance evaluation of the marketing department taking into account corporate image and brand value source: developed by the authors table 1 performance indicators of the marketing department (md) by divisions in accordance with core objectives of machine building enterprises, taking into account enterprise value, corporate image, and brand value (based on classification features given in figure 9) md division functions evaluation component (by fig. 9) performance indicators marketing research division conducting research on the internal and external environment, recommendations for pricing and assortment policy economic performances of the enterprise sales volume the market power of the enterprise market share building market strength business development division strategic analysis of business environment, plan development, coordination of the implementation of marketing programs, monitoring the implementation of marketing plans, strategic management of marketing activities development the market power of the enterprise corporate image enterprise competitiveness economic performances of the enterprise profit social performance consumer readiness business attractiveness of a partner communication division information support, development of communications mix economic performances of the enterprise trade turnover social performance information base update development of partnership relations enterprise value brand value source: developed by the authors baltic journal of economic studies 200 vol. 5, no. 2, 2019 table 2 the system of indicators for performance evaluation of the marketing department (first level) № indicator calculation formula symbols and explanations note 1 2 3 4 5 1 development trend ratio (based on changes trend ratio proposed by informles consulting) і í îá ×ä ñê ñï = ⋅ ⋅ ⋅ і – the final score of the direction of change (may be in the range from 0 to +∞, but practically rarely exceeds 2); н – the level of desire for the development of the marketing department as the basis for the enterprise development (measured by the evaluation of the share of employees who have a desire to change something in the organization – a range from 0 to 1) об – the level of unity of representations of employees of the enterprise about its future development direction (measured by the assessment of the share of convergent opinions of employees about the future of the organization; a range from 0 to 1); чд – the level of unity in employees’ representations about the actions that ensure the development of the marketing department (measured by the evaluation of the share of convergent opinions about the planned actions, relationships, expected results, a range from 0 to 1); ск – the level of resistance to change from the leaders of the organization (measured by the assessment of the share of heads of the organization, for whom changes can lead to an unwanted increase in load and decrease in status; a range from 0 to 1); сп – the level of resistance to change from subordinate employees (measured by the evaluation of the share of employees of the organization, for whom changes can cause an unwanted increase in load; a range from 0 to 1). changes are successful and purposeful, if і > 1, and lead to destabilization of the state of the organization and decrease its efficiency, if і < 1. 2 marketing efficiency ratio å ìâ ìà ìä = емд – efficiency of marketing activity at the enterprise; мв – marketing contribution for a period that is defined as the difference between sales volume, marketing costs, and variable costs, hryvnias; ма – marketing assets, hryvnias. the main marketing costs include: advertising costs; costs associated with sales promotion; costs related to the organization of sales, including premises and intermediaries; marketing research costs; the shortfall in profits over discounts; costs for preventing bad debts. marketing assets (ma) include: stocks of finished products; accounts receivable; vehicles used to organize sales and distribution of goods. the growth of the ratio (in dynamics) indicates the correct marketing strategy, and its reduction is a signal for its revision in order to improve 3 management process productivity ratio evaluates the cost-effectiveness of the management process ê ìâ â ïð àó 1 = кпр1 – management process productivity ratio; мв – marketing contribution for a period, hryvnias; bay – costs of operation of the md managerial apparatus, hryvnias. the higher the ratio, the higher the md management process productivity 4 division productivity ratio evaluates the performance of the managerial apparatus of the marketing department ê ìâ â â ïð àó ìì 2 = + кпр2 – the division’s managerial apparatus productivity ratio; мв – marketing contribution for a period, hryvnias; bay – costs of operation of the md managerial apparatus, hryvnias; вмм – marketing costs. the higher the ratio, the higher the md productivity 5 executive efficiency ratio characterizes the adequate response of the managerial apparatus to market needs ê ì ì âä â÷ ïë = квд – executive efficiency ratio; мвч – the number of marketing activities conducted on time, units; мпл – the number of marketing activities to be implemented in the reporting period according to the plan, units. the value of the ratio can range from 0 to 1; the closer it is to 1, the higher is the level of performance discipline, hence the level of quality of division management source: developed by the authors baltic journal of economic studies 201 vol. 5, no. 2, 2019 evaluation of the enterprise corporate image and each its component is determined as mean value: b mn b i m j n ij= = = ∑∑ 1 1 1 , (1) where bij – score of the j-th expert of the degree of correspondence of the і-th parameter with the positive image; n – the number of experts; m – the number of parameters under consideration. on the basis of mean value obtained, conclusions are made on the degree of correspondence of the real enterprise image with the positive one according to the scale presented in the work (shkardun, 2001). indicator “building market strength” is evaluated from the viewpoint of the emergence of new markets and capturing new consumer segments. indicator value can be identified with the help of production volume indicator through the ratio of actual production volume to the planned one at the moment of the study. in order to evaluate information base update, it is proposed to use the following scoring system: “1” – “information base is updated regularly”; “0.5” – “information base is updated on request”; “0.25” – “information base is not updated at all.” development of partnership relations can be evaluated as follows: “1” – partnership relations are evaluated positively, are stable, constructive, constantly renewed with constant partners; “0.5” – partnership relations extend – new partners are attracted; “0.25” – partnership relations worsen – contracts are broken. the results obtained allow drawing a conclusion that the formation of the marketing department at the industrial enterprise allowed improving the efficiency of marketing activity at the enterprise because values of indicators have a positive trend. for determining the generalized quantitative evaluation of the development of the marketing department, it is proposed to calculate integrated development indicator of the marketing department as a sum of the ratio of marketing department’s performance evaluation indicators, considered in dynamics, multiplied by their weighting coefficients: r k a a j jt jtj n = ⋅ += ∑ 11 , (2) where r – integrated development indicator of the marketing department; n – number of indicators of performance evaluation of the marketing department; ajt – standardized value of the j-th ratio in the period t; ajt −1 – standardized value of the j-th ratio in the period (t+1); kj – weighting coefficient of the j-th ratio, which values are relevant for the period [t; t+1] (weighting coefficients are distributed by experts (management or a person who conduct research) depending on the set objectives of the marketing department for an estimated period in each case separately). since the ratios of performance evaluation of the marketing department are stimulators, let us apply standardization of data by using the following formula: p q q j j j = max , (3) where qj – the value of the j-th ratio of performance evaluation of the marketing department; qj max – the maximum value of the j-th ratio of performance evaluation of the marketing department. interpretation of values of integrated development indicator of the marketing department r is carried out as follows (developed on the basis of harrington’s scale): 0≤r≤0,37 – marketing department development is unsatisfactory, marketing management system at the enterprise is ineffective, which requires changes in the system of enterprise management and improvement of components of strategic management of marketing activity development; 0,38≤r≤0,64 – positive development trend of the marketing department is observed, however, there is a need to develop individual measures for improving the operation of the marketing department – to increase the motivation of employees, explanatory work related to informing workers about the course of development, optimization of marketing costs, etc.; 0,64≤r≤1 – development of the marketing department can be characterized as successful, effective, and purposeful. large business. table 3 presents indicators of the effectiveness of development of the marketing department through the example of a large enterprise named turboatom jsc for the second half of 2017 and the first half of 2018 (first level of evaluation according to table 1), and also presents weighing coefficients of indicators determined on the basis of thoughts of senior management of this enterprise depending on the set objectives. let us calculate the integrated development indicator of the marketing department of turboatom jsc: table 3 initial data for calculating integrated development indicator of the marketing department ratio name ratio value ( july-december 2017) ratio value ( january-june 2018) standardized value of the ratio ( julydecember 2017)* standardized value of the ratio ( julydecember 2017) weighing coefficient development trend ratio 1,72 1,76 0,977 1 0,3 marketing efficiency ratio 2,08 2,31 0,9 1 0,45 management process productivity ratio 1921,9 2040,18 0,942 1 0,15 division productivity ratio 11,44 14,57 0,785 1 0,05 executive efficiency ratio 0,73 0,95 0,768 1 0,05 note. * in this case, for qi max the highest value of the indicator for the period under consideration was taken. baltic journal of economic studies 202 vol. 5, no. 2, 2019 r = ⋅ + ⋅ + ⋅ + ⋅ + ⋅0 3 0 977 1 0 45 0 9 1 0 15 0 942 1 0 05 0 785 1 0 05 0 768 1 , , , , , , , , , , =0,92. the second level under the principle of correlation of the result to the set goal of the enterprise. evaluation of corporate image was carried out with the help of an anonymous survey of consumers of the production of turboatom jsc, its business partners, and employees of the enterprise. table 5 shows the results obtained. so, the development of the marketing department at the industrial enterprise named turboatom jsc taking into consideration enterprise value and brand value in general can be characterized as successful and purposeful. table 4 presents the results of analysis of performance evaluation indicators of the marketing department by table 4 performance evaluation of divisions of the marketing department indicator method indicator value enterprise goal (at the end of 2018) 2017 2018 sales volume comparison in dynamics 552 million hryvnias 720 million hryvnias increase sales volume by 30% market share comparison in dynamics 57% 57% keep the market share at the level of 2018 profit comparison in dynamics 145,383 million hryvnias 125,74 million hryvnias increase profit by 3% trade turnover comparison in dynamics 1,2 billion hryvnias 1,5 billion hryvnias increase the indicator by 10% building market strength (through the indicator of production volume) actual value/planned level 30 production units 32 production units increase the indicator by 5% enterprise competitiveness ∑ = = n i ii dxi 1 ˆ , where і – integral estimation of competitiveness of industrial enterprise; ∑ = = n i ii dxi 1 ˆ – standardized estimation of the і-th indicator of a component of competitiveness of the internal and external environment of the enterprise; di – weighing coefficient of the і-th indicator of a component of competitiveness of the internal and external environment of the enterprise; n – the number of indicators for assessing the competitiveness by the internal and external environment of the enterprise (raiko, d. v. (2010), enterprise, partner, consumer: theory and practice of interaction : monograph [pidpryiemstvo, partner, spozhyvach: teoriia ta praktyka vzaiemodii : monohrafiia]. kharkiv : ynzhek) 0,3265 0,3174 increase the level of competitiveness by 0,15 consumer readiness i y dj j j k = ⋅ = ∑ 1 , where і – an indicator of business attractiveness of a partner by resource and organizational-managerial aspects; yj – standardized estimation of the j-th indicator of a component of business attractiveness of a partner; 0,9736 0,9701 increase consumer readiness by 0,017 points baltic journal of economic studies 203 vol. 5, no. 2, 2019 indicator method indicator value enterprise goal (at the end of 2018) 2017 2018 dj – weighing coefficient of the j-th indicator of a component of business attractiveness of a partner; k – the number of indicators of business attractiveness of a partner. business attractiveness of a partner i y dj j k j= ⋅ = ∑ 1 , where і – an indicator of consumer readiness by components such as marketing loyalty, economic performances of the enterprise, and organization of enterprise operation; yj – standardized estimation of the j-th indicator of a component of consumer readiness; dj – weighing coefficient of the j-th indicator of a component of consumer readiness; k – the number of indicators of consumer readiness. 0,62 0,54 increase business attractiveness of a partner by 0,1 point information base update scale: “1” – “information base is updated regularly”; “0.5” – “information base is updated on request”; “0.25” – “information base is not updated at all.” 0,5 1 support for information base that is updated regularly development of partnership relations scale: “1” – partnership relations are evaluated positively, are stable, constructive, constantly renewed with constant partners; “0.5” – partnership relations extend – new partners are attracted; “0.25” – partnership relations worsen – contracts are broken. 0,5 0,5 extension of partnership relations – signing of a contract with china about the supply of turbines brand value comparison in dynamics increase brand value by 5% (end of table 1) the main goal of turboatom jsc at the studied moment of time was to form a corporate image of the enterprise that corresponds to the positive image. depending on how the goals have been achieved (to what extent), we assess the performance indicators of the divisions of the marketing department on the following scale: “1” – the actual level of the indicator is equal to the planned one; “0.75” – the actual level of the indicator does not correspond to the planned, exceeds the expected level, indicating that there are disadvantages in activity planning; “0.5” – the actual level of the indicator does not correspond to the planned, is lower than the expected level, indicating inefficiency of activities and the presence of shortcomings in the business management; “0.25” – the actual level of the indicator does not correspond to the planned level but satisfies the senior management (the result is considered without reference to the set goals, which is caused by force majeure circumstances). also, it is proposed to calculate integrated performance indicator by divisions of the marketing department of the industrial enterprise using a formula, approbation of results is given in table 6. p a n j i i n = = ∑ 1 where pj – integrated performance indicator of the j-th division of the marketing department; ai – a score of the і-th indicator of the j-th division of the marketing department; n – the number of indicators for evaluating the j-th division of the marketing department. the obtained value of the indicator pj allows characterizing the division performance of the marketing department. thus, if the value of pj is within the range. baltic journal of economic studies 204 vol. 5, no. 2, 2019 table 5 evaluation of the corporate image of turboatom jsc component of evaluation evaluation parameter correspondence conclusion on the performance of the business development division 1 2 3 4 enterprise image among consumers quality, characteristics of production fully corresponds the enterprise image is formed such that doesn’t fully correspond to the positive one, first of all, by virtue of the lack of consumers’ vision of the firm’s mission and strategies. more attention should be paid to solving this issue. brand awareness corresponds not in full service corresponds not in full discount system corresponds not in full price corresponds not in full consumers’ vision of the stated mission and strategies of the enterprise weakly corresponds corporate style of the enterprise corresponds not in full enterprise image among partners level of loyalty to business partners fully corresponds business partners’ visions of the enterprise don’t correspond in full to the positive image, which is determined by inefficient transparency of the enterprise. it is necessary to improve the quality of information link with partners. enterprise reliability corresponds not in full level of the prestige of the enterprise corresponds not in full business partners’ vision of the stated mission and strategies of the enterprise corresponds not in full enterprise transparency weakly corresponds an internal image of the enterprise level of executive management loyalty to personnel corresponds not in full image among the employees is not close enough to the positive one over the weak transparency of leadership, unestablished system of moral and material incentives for personnel, and unclear employees’ vision of missions and tasks solved by the firm, which requires renewed approaches to management and work organization. level of transparency of executive management weakly corresponds provided social guarantees corresponds not in full career prospects corresponds not in full the system of wages and moral incentives weakly corresponds level of the prestige of the firm weakly corresponds the moral environment at the enterprise corresponds not in full staff ’s vision of the stated mission and strategies of the enterprise corresponds not in full table 6 evaluation of performance of divisions of the marketing department at turboatom jsc md division performance indicators indicator score (scale) integrated indicator marketing research division sales volume 1 p1 1 1 0 75 3 0 92= + + = , ,market share 1 building market strength 0,75 business development division corporate image 0,5 p2 0 5 0 5 0 5 0 5 0 5 5 0 5= + + + + = , , , , , , enterprise competitiveness 0,5 profit 0,5 consumer readiness 0,5 business attractiveness of a partner 0,5 communication division trade turnover 0,75 p3 0 75 1 1 0 5 4 0 81= + + + = , , , information base update 1 development of partnership relations 1 brand value 0,5 on the basis of the research results, the conclusion was made on the satisfactory work of all divisions of the marketing department, which provides in general the corporate image, the enterprise value, and the brand value on the example of the industrial enterprise named turboatom jsc. 7. conclusions this work is devoted to studying the theory of interaction of image, brand of an enterprise based on marketing as a philosophy of management, where it is identified that enterprise image is an integral part of enterprise brand, and their interaction is taking place through marketing communications mix and implementation practices on the example of business projects of enterprises with different levels of business activity in kharkiv and kharkiv region of ukraine: small, medium-sized, and large business (small – the centre for child development “cute kids”, medium – association of confectionery enterprises “solodkyi svit”, large – turboatom jsc). baltic journal of economic studies 205 vol. 5, no. 2, 2019 the work results are the development of methodological approach to evaluating the effectiveness of the marketing department in the process of business management at the enterprise, taking into account the enterprise value and brand value for large industrial enterprises, the peculiarity of which is the ability to investigate the relationship between the effectiveness of the development of the marketing department (organizational and managerial aspect) and the operating results of its divisions (economic aspect) and take into account the identified causal relationships in the process of enterprise activity. the system for evaluating the performance of the marketing department, taking into account enterprise value and brand value, involves two levels of assessment: the first one – to determine its performance in general, that is, the effectiveness of its development, the second – takes into account the specifics of divisions of this department of the enterprise and allows determining their performance according to individual results, that is, the effectiveness of divisions, which is reflected in the basic social and economic performance indicators of the enterprise. the calculation is proposed by the following indicators: an integral indicator of the effectiveness of the development of the marketing department, and by performance indicators of marketing research division (sales volume, market share, strengthening of market positions), the work of the business development division (“corporate image”, “enterprise competitiveness”, “profit”, “consumer readiness”, “partner’s business attractiveness”), communication division (trade turnover, updating of the information base, development of partnership relations, brand value). the approbation of the developed methodological approach is made on the example of the large industrial enterprise named turboatom jsc that confirms its practical importance. references: aleshina, i. v. 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(2002). brendynh ta antybrendynh: shcho vybraty v ukraini [branding and anti-branding: what to choose in ukraine]. marketynh v ukraini, 4, 26–29. zozulov, o. v., pysarenko, n. l. (2004). rynkove pozytsionuvannia: z choho pochynaietsia stvorennia uspishnykh brendiv [market positioning: how to begin building successful brands]. kyiv: znannia-pres. baltic journal of economic studies 89 vol. 6, no. 5, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: ignatyuk@ukr.net orcid: https://orcid.org/0000-0002-9103-6943 researcherid: https://www.researchgate.net/profile/anzhela_ignatyuk 2 taras shevchenko national university of kyiv, ukraine. e-mail: inna.goncharuk2016@gmail.com orcid: https://orcid.org/0000-0002-2129-6037 researcherid: https://www.researchgate.net/profile/inna_honcharuk3 3 taras shevchenko national university of kyiv, ukraine. e-mail: bogdan.yakymchuk@gmail.com researcherid: https://www.researchgate.net/profile/bogdan_yakymchuk doi: https://doi.org/10.30525/2256-0742/2020-6-5-89-95 price optimization model for platform’s goods and services in multi-sided markets anzhela ignatyuk1, inna honcharuk2, bohdan yakymchuk3 abstract. purpose. the study is aimed at defining the nature of platforms in multi-sided markets in order to find the price optimization model for platform’s goods and services. methodology. the article used general scientific and special research methods. the generalization of the main methodological approaches to the study of the essence of multi-sided markets, the identification of factors affecting the platform’s pricing strategy were based on the methods of dialectics, scientific abstraction, and systemic analysis. the basis of the study of the essence of “platforms” was laid on the use of the following methods: analysis and synthesis, induction and deduction, generalization. economic and mathematical modeling, scientific abstraction, systemic structural analysis contributed to the development of our own model of the optimal strategy for choosing the price of goods and services by platforms. findings. the article defines factors that affect the pricing of platform’s goods and services. an economic and mathematical model has also been developed to determine an optimal strategy for choosing the price in terms of nash equilibrium. there have been identified three main factors, which produce the most significant impact on the price of goods and services of platforms: marginal costs; rate of return of another product is being implemented by the platform; elasticity of demand and price. practical implications. in the conclusions, not only the advantages but also the limitations of the proposed economic and mathematical model have been pointed out, which can be addressed in further studies and implemented into specific living model of economic decisions while price optimization model for platform’s goods and services in multi-sided markets. originality/value. the article is generalizing the previous experience within the niche of price optimization model. also authors have developed their own economic and mathematical model of the optimal strategy for choosing the price for the platform’s products or services, which enabled us to identify its dependence on 3 main factors: marginal costs, rates of profitability of other products sold by the platform, elasticity of demand and price. these results can be overcome in future studies. the results and conclusions have been done by the authors and are totally original. key words: multi-sided markets, optimization-pricing model, platforms, pricing factors, maximizing profits. jel classification: l11, l16, c50, c61 1. introduction the service sector is becoming increasingly important the multi-sided markets, trends and inconsistencies of their formation and development being even more relevant in the context of the forward-going information technology. intermediary services are taking on a dimension by implementing the exchange process. strengthening of globalization processes of the world economy leads to the interdependence of business entities of different countries and the expansion of international trade, which, in turn, eventuates in the emergence of new intermediaries – platforms. platforms not only provide buyers and sellers with the opportunity to interact, increase the efficiency of the exchange process between entities of market relations, minimize transaction costs, expand the product and geographical boundaries of markets, but also transform the market structure, generating a new baltic journal of economic studies 90 vol. 6, no. 5, 2020 form – a multi-sided market. such markets as the social media market, advertising, retail, taxi service, and rental housing markets have been subject to transformation due to the constant development of technology. facebook, google, amazon, airbnb, uber and others are prominent examples of such platforms. despite the fact that the concept of "multi-sided market" has arose recently, this issue, however, has already become the subject of scientific debate among representatives of european and american economic schools. the economic justification of the markets that are formed as a result of the platforms was carried out by the well-known contemporary economists j. tirole and j. rochet (2003) in their article “platform competition in two-sided markets”, where the main subject is the platform, and the term “two-sided market” was used for the first time. in this work the scientists analyzed the essence of two-sided markets, which “are characterized by the presence of two distinct sides whose ultimate benefit stems from interacting through a common platform”. note that although the name of the category “two-sided market” used by j. tirole and j. rochet (2003) coincides with the name of the phenomenon, which was studied by d. gale and l. shapley (1964), they are different in subjective composition and economic content, so they should not be identified. the economic value of the studies by j. tirole and j. rochet (2006) is that they have identified new key characteristics inherent in two-sided markets by the development of information technologies, in particular, platforms as structure forming entities, as well as their impact on market relations and the economy as a whole. in the works by j. tirole and j. rochet (2006), the platform is a key market participant because it has the role of the so-called intermediary, which combines groups of market participants, each having its own goals, which may be achieved as long as they interact via this platform. one of the main features of such markets is that the price that must be paid for direct access to the platform may differ for each of the groups; however, it is the price discrimination that ensures common welfare. the determination of the access price depends on the degree of difficulty of attracting a group to the platform, i.e. one group of participants can partially or fully subsidize others. given the price discrimination, the problem of regulating such markets arises, since, according to traditional practice, subsidizing in the market is considered as a monopoly influence on price formation. j. tirole (2003) recommends the development of specific methods for regulating such markets owing to the fact that price discrimination in multi-sided markets does not reduce, but rather increases the general welfare of all participants. m. armstrong and j. wright (2007) were among the first to explore price competition in multi-sided markets. their main contribution was the introduction of the term “multi-home” and the development of a model for maximizing platform profits in a situation where consumers can simultaneously use competitors’ digital networks. an important element to the study of price methods for platform competition is the publications by the russian scientists, in particular, a. shastitko, a. parshina (2016) and a. kovalenko (2017). researchers substantiate the need to improve the mechanism of their state regulation to ensure conditions for the development of competition through the prism of correlation of research results in the field of multi-sided markets, product and geographical boundaries of the market, market entry barriers and power of market participants. the theoretical analysis of competition in multi-sided markets is provided in the works by i. ruhmer (2010), where, based on the model by m. armstrong (2006) (single addressing model), the probability of collusion in the multi-sided market is considered. according to the model developed by the scientist, the growth of external network has two opposite effects: on the one hand, incentives for collusion are growing, but on the other hand, they are decreasing. with increasing asymmetries in indirect positive network effects, the collusion is harder to maintain. d. evans and r . schmalensee (2006) identified the main anti-competitive strategies of firms in multi-sided markets and, using mathematical modeling, proved the inefficiency of using traditional tools to analyze market competition. b. jullien (2011), h. halaburda and j. yehezkel (2016) supplemented the study of multi-sided markets, considering the behavior of platforms in dynamics. the platform, which occupies a leading position in the market, will always choose safe technology (since the risk of losing market share is quite high), while new or outsider platforms will choose radical technology (the only way to gain market leadership). the main achievement of this study is the substantiation of dynamism and speed of leadership change in multisided markets compared to classical ones, as well as the intensification of price competition between platform firms due to the constant development of innovations. however, these findings are valuable for some types of multi-sided markets, as there are markets where the monopoly maximizes public welfare and the platforms hold leadership positions for a long period. despite the large number of publications devoted to the problems of the formation and effective functioning of multi-sided markets, the essence of platforms as key subjects of these markets, the researchers have rather superficially analyzed pricing issues given the novelty of the scientific direction at the current stage, in particular, the criteria for choosing a pricing strategy for goods and services by using platforms. one of the first studies on platform pricing is the study of a group of scientists led by m. agrawal (2005). baltic journal of economic studies 91 vol. 6, no. 5, 2020 the scientists tried to develop a formula for determining the platform’s profit when setting optimal prices with the help of the computer simulation method. the mathematical model proposed by scientists provides an estimate of costs based on the transaction costs theory. as a result, several criteria for effective pricing by platform firms have been identified: – the price level for each group of participants, which ensures maximum profit, depends on the level of costs of changing participants in groups (consumers between suppliers and suppliers between consumers) – the rate of outdated information about market conditions for each group about another. analyzing studies of the platform pricing criteria, it is impossible to overlook the work by e. weyl (2010), which combines the development of the mathematical model with visualization of real situations. in this work, the author develops a platform pricing model, analyzes the influence of factors such as customer loyalty to the services provided by the platform, the elasticity of the tendency to use a digital network at a price. according to the given patterns, this model makes it possible to compare the market power of various groups of platform participants with a view to developing an appropriate pricing policy. using the example of interaction of a periodical with readers and advertisers, e. weyl (2010) determines the following pattern: the more regular readers there are, the more profitable for a publication to lower prices for them and raise prices for advertisers, as well as limit the amount of advertisements placed, and vice versa – the smaller the percentage of regular readers is, the more profitable it is to raise prices for them and lower prices for advertisers while increasing the number of advertisements placed. d. parker, t. eisenmann, and m. van alstyne (2011) developed several pricing models for platforms. the first of these joint studies concerned the pricing of goods and services offered by the platform, taking into account the following factors: the ability to take advantage of cross-side network effects; user sensitivity to the price and quality of goods and services; production costs. another work is “platform coverage” (2018), which concerns cross-platform interactions and the choice of an appropriate pricing strategy. depending on the economic connection of the platforms (“complement platforms”, “substitute platforms” or unrelated platforms), the authors developed an appropriate pricing strategy. if the platforms provide services that are complementary, then the price should depend on the possibility of a combination of users of these firms. this can be achieved by establishing free access to the new platform, providing additional services or concluding exclusive contracts. if the platforms provide services that are interchangeable, then the pricing strategy should depend on the differentiation of services. if there is no functional connection between them, the possibility of saving on diversity will be minimal, which limits the use of different pricing strategies, since they will not be able to significantly affect the preferences of potential users. the above mentioned studies became the blueprint for new ones devoted to determining the equilibrium price in multi-sided markets, in particular s. sato’s (2016) “freemium as optimal menu pricing”; g. tan and c. zhou’s (2017) “price competition in multisided markets”; f. chen and d. zhu’s (2018) “price strategy and network-size allocation strategy in a twosided monopoly market” and others. for example, in their article, g. tan, c. zhou (2017) developed a model of price competition between platforms offering differentiated services in multi-sided markets. taking into account direct and cross network effects, the authors improved the discrete choice model in order to maximize the utility of each of the groups of participants. in a symmetrical environment with full market coverage, there is a symmetric equilibrium of prices and it is determined for each group of participants according to the following rule: price is equal to costs plus markup due to product differentiation minus subsidies from cross-effects. 2. results and discussion 2.1. what is a platform? platforms not only transform the economic behavior of business entities and end consumers, complicate economic relations between them, but also serve as a structural element of a new type of market – the multisided market. the platform is not a new phenomenon. the main idea of its emergence is to combine groups of participants in market relations with different needs and interests. platforms include newspapers, magazines, fairs, hospitals and the like. however, in the context of the development of digital economy, their character is getting more complicated, while their importance is increasing. they not only provide buyers and sellers with the opportunity to interact, but also can reduce the price of goods, speed up the exchange process, and expand the geographical and product boundaries of the market by enhancing positive network effects and increasing returns to scale. in the scientific literature there is no single approach to determining the economic nature of these categories. j. tirole and j. rochet (2003) are considered the founders of studies of modern platforms, because of all the economists they have been among the first to propose a new approach to determining their essence, based on the significance of network effects. the scientists have identified the category of “platform” and “multi-sided market” and defined it as a trading platform that provides for an interaction between end users and tries to keep them “on board”, determining the market entry price for each group of participants. the studies of j. tirole and j. rochet have been further developed baltic journal of economic studies 92 vol. 6, no. 5, 2020 in the works by m. armstrong, d. evans, j. parker, a. kovalenko and others. for example, d. evans and r . schmalensee (2013) note that the platform should be understood as a technology that minimizes transaction costs or creates value, ensures operations that are impossible to implement without this technology. in turn, j. parker (2016) claims that the platform is a company that provides for “mutually beneficial interactions between third-party manufacturers and consumers. it provides participants with an open infrastructure and sets the rules. the main objective of the platform is to create connections between users and facilitate the exchange of goods or social currency, thereby contributing to the creation of value by all participants”. in his writings, russian researcher a. kovalenko (2017) adheres to the approach that the platform is “a special type of business model, offers a marketplace for market interaction of several user groups. at the same time, the entire dynamics of the exponential growth of multi-sided platforms is ensured by a double cross network effect”. the french national digital council has determined that the platform is a service that acts as an intermediary in accessing information, content, services or products published or provided by third parties. in addition to its technical interface, it organizes and prioritizes content for demonstration and communication with end users. researchers of the theory of multi-sided markets today have not reached consensus with regard to the definition of their essence and have proposed various options to designate this phenomenon: “business platform”, “digital platform”, “online platform”, “multisided platform”, “platform company”. in our opinion, each of them is an interpretation of the same concept and focuses on a specific peculiarity or a feature. from the standpoint of the economics of industry markets and economic theory, the use of the name “platform” is most relevant, since it is comprehensive and helps to analyze this category as a subject of a multi-sided market. the analysis of scientific economic literature made it possible to group the following approaches to determining the essence of a platform company: a business model, an intermediary, a trading platform, a technological system. in our opinion, the platform is a company that uses a special resource – a digital network (technology platform) to ensure the interaction between sellers and buyers via the internet and enhance network effects. therefore, for the economic analysis of this phenomenon, it is advisable to use the term “platform”, which reveals its essence. platforms are structure forming entities of multisided markets, since they create the opportunity for sellers and buyers to enter the market, i.e. they create a platform for the emergence of the market. the main differences between platforms and classical intermediaries are: strong positive network effects, increasing returns to scale, the use of a specific resource – a digital network, the ownership of the goods remains with the manufacturer (or seller), lack of tangible assets (shops, warehouses, bases, etc.), the formation of a new value – databases, price discrimination for various groups of entities and others. markets that were formed due to the emergence of platforms were called multi-sided. a multi-sided market is a set of economic relations between sellers, buyers and intermediaries (platform firms), which are characterized by having positive network effects. 2.2. factors influencing on pricing for platform’s goods and services price is the main indicator that directly affects the performance of firms. a considerable amount of foreign publications is devoted to the issue of platform pricing; however, the issue of optimal pricing strategy for platform products and services is not fully covered due to the novelty of the scientific direction. analyzing the scientific literature, we have identified the following factors that determine the pricing strategy of platform companies: – positive direct and cross network effects; – price elasticity of demand; – user sensitivity to price and quality; – number of product groups; – platform costs; – single or multiple addressing; – innovation; – number of platforms on the market. the choice of pricing mechanism also depends on the type of platforms. l. philistracci classified platforms into transactional and non-transactional ones. non-transactional platforms charge for advertising revenue and the cost of access to the platform for end users is 0 (such as google, facebook, and others). transaction platforms charge for each successful transaction. sellers or manufacturers usually include a fee in the price of the item. according to the conditions set by the platform company, entry fees may also be charged. however, this approach is not used in the current context, since the establishment of the platform access fee for entities with the highest price elasticity does not overcome the "chicken and egg problem". to date, the most effective way to attract and retain an end consumer is to set a zero price for access to the platform, and sometimes even a negative one, where competition between platforms is quite intense (promotions, raffles, additional fees for attracting new users, etc.). for example, the booking platform has developed a "join friend" incentive system where a participant receives a certain amount of money when joining each new end customer. this tendency is common not only in the hotel services market but also baltic journal of economic studies 93 vol. 6, no. 5, 2020 in the social networking market (sometimes called as an instant messaging market), search engines and others. all platforms in these markets offer zero-cost access to the market and enhance engagement by establishing additional benefits upon joining. 2.3. model based on our research, we have developed an economic and mathematical model for determining the optimal nash equilibrium strategy for pricing products and services of platforms in multi-sided markets. suppose that a platform x m1 ∈ ( m is plurality l platforms) offers nk a products in k ma=1, product segments and competes with other platforms in x m∈ each of them for different product groups. the market is represented by the plurality � n of competing goods, k n k m k x m xi m x i x = = ∈ ∈ ∑ 1 � � , x mi x∈� where it represents a common set of goods within a certain common product category (i.e. goods are interchangeable, ∂ ∂ ≥ q p i x i m x 1 1 0 \ ). accordingly, the demand for product i on platform x1 will be constantly changing over time τ∈t , depending on the level of royalties (commissions) that the platform and the corresponding adjusted price pi x τ 1, the vector of prices for the similar product on other platforms pi m x\ 1{ } τ and the aggregate supply p x mn i x \ :∀ ∈{ }τ are required for each transaction: q f p p q x mi x i x i m x n i x τ τ τ τ 1 1 1= { } ∀ ∈{ }( , , : )\ \� (3.1) the connections between the components are as follows: – price increases for similar products, offered by other platform companies m x\ 1, have a positive effect on the sales of this company x1: ∂ ∂ ≥ q p i x i m x 1 1 0 \ ; – the rise in prices for goods within the platform x1 reduces the demand: ∂ ∂ < q p i x i x 1 1 0 – the growth in demand for aggregate commodities, placed on the platform x1, will affect a gradual decline in prices on the platform itself (royalties), in turn reducing the demand for the platforms m x\ 1: � � ∂ ∂ > q q i x n i x 1 1 0 \ . let the marginal cost of the platform for the placement of product i at the moment τ be equal ci xi τ > 0, and the fixed costs fx1 not depend on the time range. a condition for maximizing the discounted continuous flow of earnings pfi τ( ): pf ex x r1 1 0 τ π τ ττ( ) = ( ) ∂ ∞ −∫ , (3.2) where r > 0 is the discount rate. then the platform maximizes its own flow if: pf q p c e fx i k i x i x i x r x1 1 1 1 1 1 0 τ τ τ τ ττ( ) = ( )⋅ ( )− ( ) ∂ − = ∞ −∑∫( ( ) ) (3.3) consider the optimal platform strategy for a short period of time τ →( )0 such that the company profits: pf q p c f q p c fx i k i x i x i x x x t x x x1 1 1 1 1 1 1 1 1 1 = ⋅ −( ) − = −( )− = ∑( ) , (3.4) where q q q q p p p p c cx x x k x x x x k x x x1 1 1 1 1 1 1 1 1 1 1 2 1 2 1= …( ) = …( ) =, , ., , , , ., ,� � ,, , .,c cx kx2 1 1…( ) q q q q p p p p c cx x x k x x x x k x x x1 1 1 1 1 1 1 1 1 1 1 2 1 2 1= …( ) = …( ) =, , ., , , , ., ,� � ,, , .,c cx kx2 1 1…( ) are, respectively, demand, price and marginal cost vectors of the platform x1. when all platforms are interoperable, the optimal nash equilibrium price maximizing strategy is described by p pf p p pf p p p px x x i m x x x i m x x x1 1 1 1 1 1 1 1 1: , , ,/ /� � � � � �( ) ≥ ( ) ∀ ≠ p pf p p pf p p p px x x i m x x x i m x x x1 1 1 1 1 1 1 1 1: , , ,/ /� � � � � �( ) ≥ ( ) ∀ ≠ (3.5) this is explained by the strategic involvement of all players in the market when any platform maximizes profit: pf f p p q x m p c f x i k i x i m x n i x i x i x xj j j j j= { } ∀ ∈{ } ⋅ −( ) − = ∑ 1 ( ( , , : ) ) / \ τ τ jj, pf f p p q x m p c f x i k i x i m x n i x i x i x xj j j j j= { } ∀ ∈{ } ⋅ −( ) − = ∑ 1 ( ( , , : ) ) / \ τ τ jj (3.6) where in turn q f p p p x m j ln i x x x x j j l \ , , , , , ,= …( ) ∈ =1 2 1� � � � � � (3.7) after a series of transformations, the optimization equation will look like: 0 = + −( )⋅∂ ∂ + −( )⋅ ∂ ∂∈{ } ∑q p c q p p c q p i x i x i x i x i x k n i i x i x k x j j j j j j j j � \ ii x j � (3.8) arising from the illustrated above, we have: p c p c q q q q p i x i x k n i i x i x k x i x i x i x p x j j j j j j j j i j = − −( )⋅ ∂ ∂ − ∂ ∂∈{ } ∑ \ ( / )) \ / = − −( )⋅ ∂ ∂ − ∈{ } ∑c p c q q p e i x k n i i x i x k x i x i x q p x j j j j j j i i j � p c p c q q q q p i x i x k n i i x i x k x i x i x i x p x j j j j j j j j i j = − −( )⋅ ∂ ∂ − ∂ ∂∈{ } ∑ \ ( / )) \ / = − −( )⋅ ∂ ∂ − ∈{ } ∑c p c q q p e i x k n i i x i x k x i x i x q p x j j j j j j i i j � (3.9) where eq x i pi j / is the price elasticity of demand. thus, we get the decomposition of the platform price by the optimal nash strategy at some point �τ : p c p c q q e i x i x k n i i x i x k x i x q p x j j j j j j i i j = − −( )⋅ ∂ ∂ +( ) ∈{ }∑ \ //1 1 , (3.10) demonstrating the dependence on 3 major factors: – marginal costs ci x j ; – rates of profitability of other products of the platform x j: k n i i x i x k x i x p c q q j j j j ∈{ } ∑ −( )⋅ ∂ ∂\ ; – and price elasticity of demand baltic journal of economic studies 94 vol. 6, no. 5, 2020 e p c p c q q p q p x i x i x k n i i x i x k x i x i x i i j j j j j j j j / \ = − −( )⋅ ∂ ∂ − ∈{ }∑� � � � . (3.11) 3. conclusion this paper deals with the scientific economic literature on the study of the formation and development of multi-sided markets, features of the functioning of platforms, as well as describes the works, dedicated to the platform pricing in multisided markets. based on the conducted research, we have formulated our own definition of the platform as a company that uses a special resource – digital network (technology platform) to ensure interaction between sellers and buyers through the internet and enhance network effects. it is also determined that the differences between platforms and classic intermediaries are as follows: strong positive network effects; increasing returns to scale; using a specific resource – a digital network; ownership of the product remains with the manufacturer (or seller); lack of tangible assets (shops, warehouses, bases and etc.); the formation of the new value – databases; price discrimination for different groups of entities and others. the markets that have been created from the emergence of platforms were called multi-sided. a multi-sided market is a set of economic relationships references: agrawal, m., hariharan, g., kishore, r ., & rao, h. 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(2010). a price theory of multi-sided platforms. amer. econom. rev., 100(4), 1642–1672. baltic journal of economic studies 5 vol. 2, no. 2, 2016 financial audit as a part of state administration in ukraine: condition and public need sergey bardash1, yurii baraniuk2 kyiv national university of trade and economics, ukraine abstract. economic development of countries leads to the need improving the quality of public administration, the results of which provide economic growth, social prosperity and are facilitating to solve global problems that are facing humanity. to improve the efficiency of public administration should be effective monitoring system that can detect deviations from the planned strategic development goals, unseemly level of its operation determines the target of work, which is to establish the condition of the state financial audit in ukraine and the definition of new uncontrollable earlier objects which are managed the state apparatus, the identification of which will improve the functionality of the system of state financial audit in ukraine. in order to achieve the goals you need to solve the following tasks. first, should set a condition of the state economic management in ukraine and determine the public authorities, which are subjects to implementing control functions of public administration. second, determine the resources that have the public interest and should be controlled by the state. third, determine the composition of objects and install a condition of government auditing system in order to improve the efficiency of these next control measures of the accounting chamber of ukraine and the state audit service of ukraine. the methodological basis of the study is the dialectical method, which is to implement research of financial audit in public administration, its relationship with other forms of control exercised by the state; systematic analysis of financial and economic processes, which is carrying out researching of the state financial audit in the system of relations arising between economic entities of the public and private sectors; methods of retrospective and comparative analysis of experience within the objective focus in the organization of state financial audit on the territory of ukraine; evaluation and generalization which consists of summarize the results and development proposals of improvement of financial audit system. scientific results of the study is to establish the condition of the state management of economy of ukraine, which needs reform, which will can ensure the growth of socio-economic development indicators. determined the public authorities that are subjects to implementing control functions of public administration and the resources that have the public interest and should be controlled by the state. besides were identified the composition of objects and established the condition of functioning state government auditing system, which helped determine the content of the concept of transformation of public audit, which unlike existing is accounted a full list of its facilities and is based on scientific principles of realization. practical meaning. the lack of an effective and efficient system of public audit as a management function does not provide the growth of social and economic standards, deepens economic crisis, which is reflected in the reduction in real incomes and economic decline of the state as a whole. determining the condition to calculate the required amount of public financial resources as an object of state financial audit is a key condition, which allows for a fresh look at the activities of bodies which are empowered to monitor compliance with financial discipline of economic entities in ukraine. value/originality. received data to determine the condition of state financial audit and management, state audit objects, components of public finances and their confrontation in order to compare and identify differences in the volume under control and actual financial resources makes it possible to assess the working results of supreme audit institutions in ukraine. key words: audit of public finance, public finance, public authorities, public interest, state and local budgets. jel classification: е01, н61, н83, l38, m48 corresponding author: 1 department of financial audit, kyiv national university of trade and economics. e-mail: serg.bardash@gmail.com 2 department of financial audit department, kyiv national university of trade and economics. e-mail: baraniukyurii@gmail.com baltic journal of economic studies 6 vol. 2, no. 2, 2016 1. introduction the relevance of the study includes the need for information that reflects the degree of effectiveness the state management of financial assets. any capital owner, including the state, has an objective need for the transition from the familiar control which is mostly carried out by the results of financial and economic activities to a qualitatively new continuous control, the need to implement is determined by socio-economic factors. rational management of public financial resources, accompanied by the effective control, is the key to economic stability, providing economic growth and improving social welfare. however, the current shortcomings in the national economy, including a large share of the shadow economy, corruption at the higher levels of government, composing scarce public budgets, theft and inefficient use of state property and funds, mostly can be explaining by the extremely poor condition of state financial control, the main cause of which is artificial inhibition of its scientifically justified development. the novelty of research is the scientific hypothesis that consists of the assumption of incomprehension the potential and the results of carrying out the state financial audit. the study aims to determine the condition of operation the state’s financial audit system in ukraine and the search for new objects that are at the disposal of the state management apparatus and their audit is necessary requisition for further development of society. goals achievement will allow identifying objects of state’s financial audit in relation to the condition that there is increased public interest. 2. management condition of public finances of ukraine and place of state financial audit in it the democratization of socio-economic development, globalization processes, international economic integration, the formation of civilized market relations significantly affect the economic development of all state institutions, including the state of public administration, causing the growth of public interest in the actions of the authorities. on the other side in the state leadership there is a need for information that reflects the degree of efficiency and legitimacy of the actions with controlling objects, which leads to the emergence of state financial control institutions. timely detection of violations of the budget process will enable to carry out a series of sequential steps that will help to prevent losses of state financial resources. state of public financial management in ukraine, according to international estimates is in unsatisfactory level what can be explained by constant budget deficit and the necessity of external financial assistance. specifically indicator of economic freedom index that is calculated by wall street journal and heritage foundation (ukraine’s economic freedom, 2015), ukraine fell to 162 place out of 179 countries surveyed and draws up 46.9 units. it should be noted that this index, which is less than 50  units, is described the country as despotic. moreover, the components of the index of economic freedom are: 28.0  – for public expenditure; 15.0  – freedom of investment; 30.0  – financial freedom; 20.0  – protection of property rights; 25.0  – freedom from corruption. for such low components of the index of economic freedom, it is difficult to talk about the development of the financial market and the effectiveness of public spending the government of ukraine, which are key elements of public finance management. world bank group is making its assessment of the ease of doing business in the project doing business ukraine (2016) and has evaluated our country on 83 place from 189 countries, indicating the adaptation of the tax system to taxpayer. also proof of that are the high marks of free trade  – 85.8; tax freedom  – 78.7, which are components of the index of economic freedom (ukraine’s economic freedom, 2015). negative trends functioning of public financial management in ukraine can observe from analytical studies that displayed in the reports of international organizations. on the one hand, it can be assessed positively, because a higher position in the ranking of doing business should in theory ensure the flow of foreign investments in ukraine, but the unacceptable performance of corruption, protection of property rights, for us won’t be achievable international cooperation. in order to organize international business and the transformation of ukraine into the center of european trade is essential ensuring the effective functioning of government auditing system. primarily, it is necessary to analyze violations found in previous periods and implement all necessary measures to prevent them in the future. second, there is a need to improve public audit methodology that will identify currently unknown financial fraud schemes. considering results of the international assessments, audit of public finances, in particular revenues and expenditures of the state budget, is particularly necessary to improve efficiency of public finances management, reducing the shadow economy and improve the well-being of society. in our opinion, the most important consequence of the formed modern state of the system of financial audit in ukraine is features of the transition process to market relations with the proclamation of independence. it should be noted that had the need to maintain a certain degree of state intervention in the economy because: «the market and the market economy does not guarantee a balance of economic, political and social development. first, the fundamental structural changes in the economy, solving a number of global problems are possible not on the basis of market incentives, but exclusively at the expense of public programming. second, market regulation of something isn’t often perfectly. in particular, it is unable to solve social problems and the problem of non-production sphere. so anywhere are used embedded controllers that adjust the operation of the market. nowhere in the world there is a baltic journal of economic studies 7 vol. 2, no. 2, 2016 market self-regulation in its pure form, even in a liberalized country like the united states of america. however, in this case it is important not to fall into the other extreme – is the implementation of total state control. so a control should be neither insufficient nor excessive» (bardash, monograph, 2008). the interests of the state in the development of public sector audit of the national economy should be correlated with the actions of the government, the parliament and ensure their development and expansion of the institutional environment with the aim to be covered all financial resources which are controlled by the state. the organization level of state auditing system partly determines economic development, international cooperation and prosperity of society. the system of state financial control and bodies, which are carried out by it, are looked by e.v. mnich (2009), y.b. slobodyanyk (2014), i.a. angelina (2014) and other researchers, but due to the reorganization of certain institutions and organizations the results of their research partly lost its relevance. in ukraine, the system of financial control as a function of state management is represented by the following bodies that have certain supervisory powers (fig. 1). the main specially authorized bodies in public administration, which are empowered to conduct state financial audit is the state audit service of ukraine and the accounting chamber of ukraine. it should be noted that the constant reorganization of government financial control is not conducive to satisfy full control of all state financial resources. as for the parliamentary financial audit, the feature of carrying out is the control of money resources in established list of enterprises, institutions and organizations who are administrators or recipients of budget funds. moreover, quite often the activity of the same entities is becoming an object for simultaneously monitoring by governmental and parliamentary bodies of financial control. the most interesting is that the content types of financial control governmental __________________________ cabinet of ministers of ukraine parliamentary __________________________ supreme council of ukraine presidential _____________________ president of ukraine presidential administration national security and defense council of ukraine committees supreme council of ukraine accounting chamber of ukraine ministry of finance of ukraine state border service of ukraine state fiscal service of ukraine state audit service of ukraine state treasury service of ukraine national bank of ukraine state property fund of ukraine antimonopoly committee of ukraine national commission on securities and stock market national commission for state regulation of financial services markets other ministries and departments of the cabinet of ukraine functions of public administration forecasting and planning organization, coordination and regulation accounting and control subsidiary additional general fig. 1. types of financial control as the functions of state management and authorities that implement them source: developed by the authors baltic journal of economic studies 8 vol. 2, no. 2, 2016 of the audit procedures do not differ significantly, but the results of them are different. thus, the state of public administration in ukraine is in poor condition, due to macroeconomic instability, which is largely caused by external interstate relations that have developed in recent years. it should be noted that along with the impact of external factors there are internal, that have ambiguous nature and cause personnel changes in the system of governance that according affect on the strategy of socio-economic development of ukraine. in order to minimize the impact of internal factors need to increase the quantity and improve the quality of control measures, which are an integral part of public administration. moreover, there should make distinction authorities of monitoring between branches of power, which in turn will improve the performance of audit procedures by the resources growth, which are checked. 3. objects of state financial audit in the development process of the states’ economies, transition to market relations and the weakening role of the state in social relations, there appears a necessary to state regulation of certain sectors of the economy that do not have a supportive environmental for self-sufficiency. lack of support of periodically unprofitable sectors of the economy leads to the «sectoral unemployment», the reduction in amount of consumption and the deepening financial crisis in some countries. public administration should be planned; in particular this is demanded success stories of the most successful countries in a world. the transition to program-oriented method of social management involves a long-term cooperation of public authorities with economic subjects which are regarded to the expenditure of financial funds. rightness, legality and efficiency  – the basic principles that ensure the success of relationships that arise between administrators and recipients of budgetary funds. audit of state finances as a special kind of state financial control is called to ensure compliance with the above principles by conducting audit activities. particularly controversial and unresolved issue is identification objects of the state financial audit. without establishing clear list of objects of state audit causes the detection impossibility a part of the cash flows related to governance. moreover, the strategy chosen by the state audit service of ukraine which lies to reduce the list of companies, organizations and institutions whose activities are subject to public audit and brings about a loss of control over the activities of the state sector of the economy that threatens the future condition of ukraine economy. reducing the number of businesses, organizations and institutions that must be supervised by the state audit service of ukraine weakens the state financial control on the part of the cabinet of ministers of ukraine. on the other hand, a reduction in the number of employees of the accounting chamber of ukraine what is a result of changes adopted in the new law of ukraine «about the accounting chamber of ukraine» (2015). the changes above destroying the system of state financial audit, leading to financial losses of state and prevents real understanding valid and existent financial balance of ukraine. extremely important is establishing a list of objects which must be controlled by the state that have a national interest. problems related to the scientific substantiation object state audit are evident in the works of many homeland scholars. objects of state audit as defined in the work o.y. pushkareva (2009) consist entities of the public sector and other entities that receive funds from the state and local budgets or carry out exploitation of state or municipal property. in our view, the position of o.y. pushkareva (2009) doesn’t fully reveals the components objects of state audit, as it doesn’t contain information that describes the formation of public funds of money. according to j.b. slobodianyk (2013), the objects of state financial audit include economic activities of public authorities and other entities related to the formation, distribution and use of public resources. an interpretation of objects of the state financial audit submitted in labor y.b. slobodianyk (2013) reveals wider the essence of directivity ongoing state audit activities. on mind o.a. scorba (2010), the objects of state financial audit is the activity and function of public authorities, budgetary institutions and organizations  – recipients of public funds, state or municipal property and public sector entities of the economy, and so on. another approach to the separation of objects of the state financial audit is applied by v.f. maksimov (2013), who selected: • financial resources and property of the state, their accounts; • draft laws and regulations; • assessment of the financial results of the budget; • valuation of prognosis and trends of separate industries, regions and the state as a whole. the importance of information and usefulness of the approach, published by v.f. maksimov (2013), is detailing the composition of objects of the state financial audit, but the assessment of financial results of the budget is more likely action as a task that is put before the bodies of state financial audit. a similar approach to the definition of objects of state audit adheres v.p. khomutenko (2011). the author considers such objects: • data of accounting and reporting; • planning documents and commercial contracts; • system of internal financial control; • government loans and borrowings what are given under guaranteed by the government of ukraine; • funds provided from the state budget and local budgets, and (or) target national funds for the implementation of public tasks, implementation of national budget programs; baltic journal of economic studies 9 vol. 2, no. 2, 2016 • state and municipal property, natural resources and other state resources; • activities and functions of public authorities, budgetary institutions and organizations  – recipients of budget funds, state or municipal property and entities in the public sector. we are convinced that an identification of the integrated facility of state financial audit should be applied the approach outlined in the previously published article (s.v.  bardash, 2008), according to which established a clear division between the object and the subject of control and there is substantiated the expediency of allocation integrated facility of state control. analysis of scientific views regarding identification of the state’s financial audit objects indicates the existence of uncertainty concerning the need comprehensive independent review communal ownership of resources. there is a significant amount of resources in the gross domestic product of ukraine. in particular, by final consumption gdp ukraine finance municipal ownership accounted for 12.9 bln. uah or 0.8% of ukraine’s gdp in 2014, compared with total consumption of the state sector – that consumption was 296.2 billion. uah representing 18.7% of ukraine’s gdp in 2014 (state statistics service of ukraine, 2014). in the case of comparison consumption value of public and communal sector utility – the latter was 4.17% of the joint volume in 2014. therefore, without existence single approach to the definition of objects of the state financial audit this makes impossible effective governance and control of financial resources funds. theoretical definitions explanation and determine composition objects of the state financial audit will contribute to assessing the amount of controlled state resources, ensuring herewith the level of confidence to state governance. 4. state audit of public finances in ukraine, its condition and components development of state governance leads to the emergence of public finance in which, in our opinion, should understand the socio-economic relations, arising from the formation, distribution (redistribution) and the use of public funds associated with satisfaction all kinds of public interest and regulated by establish mandatory requirements of state or local governments, which are distributed to the participants of economic relations of all forms of ownership. it is very important to establish components of public finances, since without single approach to classification does not allow goal oriented and object oriented carrying out of the state financial audit. given the characteristics of the organization budgetary system ukraine, in our view, should define the following components of public finances, which must be an object to government audit (fig. 2). the approach also allows to prioritize performance of the state financial audit, as reflects the amount of the main components of the state budget as components of public finance (statistical information were obtained from official data of the law of ukraine «about state budget», 2005, 2010, 2015). public finance as an object of financial government audit includes: 1) public state finances, the amount of which will be equaled the sum of the revenue and expenditure of the state budget of ukraine and the pension fund of ukraine (see figure 2). the funds mentioned in this group of public finances have the most public interest in the process of accumulation, distribution (redistribution) and use; moreover any change in the proportion of components in the budget should be scientifically justified and understandable to the public. for example, the growing share of intergovernmental transfers shows the decentralization processes in ukraine, the growth of economic independence of regions, causing locally increased the volume of financial flows to balance individual budgets. in particular it is possible to notice increasing in the share of current expenditure in the state budget of ukraine, which indicates a lack of strategic development and suggests «eating away the budget»; 2) public private finances (finance small businesses, corporate finance, finance banks, finance non-profit organizations)  – funds of money as an intangible form consequence of relationship that arise between state, local government, private business entities and public organizations in a part of their use, the amount of which will equal the sum of the gross domestic product for the relevant period (see figure 3). public state finance, what are presented cash resources of the state budget consist of revenue and expenditure parts. regarding public private finances, their sum is actually equal to the amount of the gross domestic product for the period. the sum of these components of public finances for the period 2010-2015 for purposes of state financial audit is shown in figure 3. comparing the results of the financial audit activities which are carrying out by the accounting chamber of ukraine and the state audit service of ukraine, it should be noted that their number tends to decrease, whereas the volume of public finance for the purpose of state financial audit is increasing. the data on the figure 3 also show that volume of revealed financial violations ranged from 0.067% to 3.3% relative to the amount of public finance in ukraine during 2010-2014. moreover, there is a large amount of public financial resources which are owned by the state enterprises institutions and organizations, and a term of their exploitation is exceeding one year and which may partly be the elements of above foregoing components of public finances. this primarily applies to a long term capital public procurement of goods and services, which are one of the areas of implementation of public expenditure, but the financial control of the storage and use of public investment into an object is not made. consequently, public finances manifest through the socio-economic relationships that are associated with pleasure of all kinds of public interest and are regulated baltic journal of economic studies 10 vol. 2, no. 2, 2016 name source of income, bln. uah 2005 2010 2015 name source costs, bln. uah 2005 2010 2015 tax revenues 103,1 245 453,7 current expenditures 123,4 347,2 656,4 non-tax revenues 26,2 61,8 130,4 capital expenditures 18,1 30,7 60,2 other 4,3 6,1 9,4 other 0 0 1 total 133,6 312,9 593,5 total 141,5 377,9 717,6 intergovernmental transfers 24,8 85,5 180,6 intergovernmental transfers 24,8 85,5 180,6 pension fund 49,2 159,2 236,1 pension fund 65,5 193,7 255,1 the state (public authorities) state audit state audit management of public resources spending public (local) financial resources formation of state and local budgets basic principles of budgeting:  fullness interior:  tax revenues  non-tax revenues  share premium  loan proceeds  transfers  income from the capital  trust funds external:  income from capital  loan and guarantee income  transfers  trust funds  proceeds from privatization of state property basic principles of spending resources:  appropriate use  effectiveness  legality external:  % costs on loans  humanitarian assistance to other states  lending  purchase products  fines, other interior:  budget financing  investments  state transfers  lending  % borrowing costs fig. 2. the composition of public finances, which should be an object of audit as a function of the government source: developed by the authors * – identified financial resources, only the state audit service of ukraine fig. 3. certain macroeconomic indicators of socio-economic development of ukraine and results of the state financial audit for 2010-2015, in billion uah (compiled from official data of the state audit office ukraine, the accounting chamber of ukraine, the ministry of finance of ukraine, internet project the «price of the state», 2010-2015) 1083 1317 1409 1455 1567 1958 690,8 812,7 934,7 934,4 959,5 1311 59 26,7 15,8 20,3 28,4 2,8 * 0 10 20 30 40 50 60 70 600 800 1000 1200 1400 1600 1800 2000 2010 2011 2012 2013 2014 2015 gross domestic product the consolidated budget (income + expenses) identified deviations by the accounting chamber of ukraine and the state audit service of ukraine baltic journal of economic studies 11 vol. 2, no. 2, 2016 by establishing mandatory requirements of state or local governments that apply to members of economic relations of all forms of ownership in the process of accumulation, distribution, redistribution and use money funds. the main components of public finances, which should be subject to public audit are public state and public private financial funds, which actually consist of revenue and expenditure of the state budget and are the basis of gross domestic product. defining components of public finances, which should be an object to audit as a tool of government, will improve the effectiveness of control measures and will improve the state of public administration in general. 5. conclusions public administration in ukraine is in a difficult transition state, which is affected by influence of external and internal factors. according to international estimates socially-oriented part of state governance is virtually absent, but it created the conditions for the growth of large financial companies. to ensure the prosperity of economy and growth of the national gross domestic product, there is necessary to ensure effective control of public financial management, which should be realized in accordance with state financial policies. in a relatively short period of its activity the accounting chamber of ukraine and the state audit service of ukraine has managed to solve the main task  – to form competent constitutional bodies, to create the basis for developing a new ideology of public, independent state financial control in ukraine and managed to draw public attention to the false system use budget resources, show that the money of state budget  – money is not belong to the government and the ministry of finance, but the taxpayers’ money, public money means a property of every citizen’s of ukraine. the activity of the state financial audit has limited nature, because it does not apply to all financial resources. this is due to the lack of a unified approach to the determination of state auditing objects, which prevents effective governance and doesn’t allow carrying out a control of financial resources funds. given comparative analysis of the views of scientists about the nature of public finance and their composition, we formulated the following conclusions. 1. public finances  – social and economic relations that arise in the process of formation, distribution (redistribution) and the use of public funds that are associated with pleasure of all kinds of public interest and are regulated by establishing mandatory requirements of state or local governments that apply to members of economic relations of all forms of ownership. 2. public finance as an object of state financial audit include: public public finances (funds of the state budget of ukraine and local budgets, loans granted under the state and local guarantee, funds of national bank and other stateowned banks, state trust funds, pension fund and funds of obligatory social insurance, funds of entities management of state and municipal property, which receive them from economic activity); public private finance (finance small businesses, corporate finance, finance banks, finance non-profit organizations)  – funds of money as a substantive materialized form consequence of relationship that arise between state, local government, private business entities and public organizations in a part of their use. the setting out approach to the consideration of public finance as an integrated object state financial audit will improve the efficiency of state management of public finances. references angelina, i.a. (2014). problems and prospects of forming a unified system of state financial control in ukraine. finance, banks, investment: research journal, ukraine, №2, p. 9-14. retrieved from: http://fbi.crimea.edu/ arhiv/2014/nv_2-2014/002angelina.pdf bardash, s.v. (2008). control over activites of business entities: hypotheses and versions of violations. kyiv national university of trade and economics, ukraine: monograph, 312 p. bardash, s.v. (2008). subject and object control as a field of scientific knowledge and practice: relationship between the categories and differences. accounting and auditing, journal, ukraine: number 6, p. 55-61. mnich, e.v., bardash, s.v., nykonovych, m.o., barabash, n.s., nazarova k.a., olendiy o.t. (2009). state financial audit: methodology and organization. kyiv national university of trade and economics, ukraine: monograph, 318 p. maksimov, v.f., slobodyanyk, y.b. (2013). the essence of the state audit. businessinform kharkiv, ukraine: №11, p. 319-323. pushkareva, o.y. (2009). the state financial audit of business entities as a priority activity of the state control and auditing service. the state and the regions, series: economics and business, ukraine, №7, p. 160-164. retrieved from: http://www.nbuv.gov.ua scorba, o.a. (2010). the emergence and development of state financial and economic audit. economy: problems of theory and practice. proceedings of dnipropetrovsk national university, ukraine: issue 261, volume v, p. 1299-1306. slobodyanyk, y.b. (2013). subject and object state audit. bulletin of the odessa national university. ii mechnikov, ukraine, volume 18, issue 2/1, p. 154-159. slobodyanyk, y.b. (2014). formation a system of public audit in ukraine. fop nataluha a., city sumy, ukraine: monograph, 322 p. baltic journal of economic studies 12 vol. 2, no. 2, 2016 homutenko, v.p., homutenko, a.v. (2011). public audit as a form of financial control: the nature and institutional features. odessa bulletin of social and economic research, ukraine: №2 (42), p. 124-130. legal project of the world bank «doing business ukraine» (2015-2016). retrieved from: http://www.doingbusiness.org/data/exploreeconomies/ukraine economic data by the heritage foundation project «ukraine’s economic freedom» (1995-2015). retrieved from: http://www.heritage.org/index/country/ukraine about the accounting chamber: law of ukraine (02.07.2015). №576 / 8-bp. retrieved from: http://zakon4.rada.gov.ua/laws/show/576-19. analysis of the state and dynamics results of the state statistics service of ukraine (2014). retrieved from: http://www.ukrstat.gov.ua about state budget: law of ukraine (2005, 2010, 2015). retrieved from: http://www.ligazakon.ua internet project «state price»: the budget of ukraine (2005, 2010, 2011, 2012, 2013, 2014, 2015). retrieved from: http://cost.ua analysis of the state and dynamics results of the state service of ukraine (2010, 2011, 2012, 2013, 2014, 2015). retrieved from: http://www.dkrs.gov.ua analysis of the state and dynamics results of the accounting chamber of ukraine (2010, 2011, 2012, 2013, 2014). retrieved from: http://www.ac-rada.gov.ua analysis of the dynamics and changes in gross domestic product of ukraine (2010, 2011, 2012, 2013, 2014, 2015). retrieved from: http://www.minfin.gov.ua сергей бардаш, юрий баранюк финансовый аудит как составляющая государственного управления в украине: состояние и публичная необходимость аннотация. развитие экономик стран мира вызывает необходимость улучшения качества государственного управления, результаты которого обеспечивают экономический рост, социальное благополучие и способствуют решению глобальных проблем, стоящие перед человечеством. для повышения эффективности государственного управления должна существовать действенная система контроля, которая сможет выявлять отклонения от плановых стратегических целей развития, ненадлежащий уровень функционирования которой приводит цель работы, которая заключается в установлении состояния государственного финансового аудита в украине и определении новых, учетно-неподконтрольных ранее, объектов, которые находятся в распоряжении аппарата государственного управления, идентификация которых обеспечит повышение функциональности системы государственного финансового аудита в украине. для достижения цели необходимо решить следующие задачи. во-первых, следует установить состояние государственного управления экономикой украины и определить органы государственной власти, которые являются субъектами реализации контрольной функции публичного управления. во-вторых, определить ресурсы, которые имеют публичный интерес и должны быть подконтрольны государству. в-третьих, определить состав объектов и установить состояние функционирования системы аудита государственных финансов с целью повышения эффективности следующих контрольных мероприятий счетной палаты украины и государственной аудиторской службы украины. методологической основой исследования является диалектический метод, который заключается в осуществлении исследования развития финансового аудита в системе государственного управления, его связи с другими формами контроля, осуществляемыми государством; системный анализ финансово-экономических процессов, который заключается в исследовании государственного финансового аудита в системе отношений, которые возникают между экономическими субъектами государственного и частного секторов экономики; методы ретроспективного и сравнительного анализа опыта объективной направленности в организации государственного финансового аудита на территории украины; оценка и обобщение, которое заключается в подготовке результатов и разработке предложений по усовершенствованию функционирования системы государственного финансового аудита. научные результаты исследования заключаются в установлении состояния государственного управления экономикой украины, нуждается в реформировании, что сможет обеспечить рост показателей социально-экономического развития. определены органы государственной власти, которые являются субъектами реализации контрольной функции публичного управления и ресурсы, которые имеют публичный интерес и должны быть контролируемые государством. также определен состав объектов и идентифицировано состояние функционирования системы аудита государственных финансов, что позволило определить содержание концепции трансформации системы государственного аудита, baltic journal of economic studies 13 vol. 2, no. 2, 2016 которая в отличие от существующих учитывает полный перечень его объектов и построена на научных принципах ее проведения. практическое значение. отсутствие действенной и эффективной системы государственного аудита как функции управления не обеспечивает роста социально-экономических стандартов, углубляет экономический кризис, который находит свое отражение в сокращении реальных доходов граждан и экономическом упадке государства в целом. установления состояния для определения необходимого объема финансовых публичных ресурсов как объекта государственного финансового аудита является ключевым условием, которое дает возможность по-новому посмотреть на деятельность органов, которые наделены полномочиями контролировать соблюдение финансовой дисциплины экономическими субъектами в украине. значение/оригинальность. полученные данные по определению состояния государственного финансового аудита и управления, объектов государственного аудита, составляющих публичных финансов и их сопоставление с целью сравнения и выявления разницы в объеме подконтрольных и фактических финансовых ресурсов дает возможность осуществить оценку результатов работы высших органов финансового контроля в украине. baltic journal of economic studies 32 vol. 6, no. 2, 2020 corresponding author: 1 yaroslav mudryi national law university, ukraine; scientific and research institute of providing legal framework for the innovative development of the national academy of legal sciences of ukraine, ukraine. e-mail: omzdch@gmail.com orcid: https://orcid.org/0000-0001-5469-3867 2 institute of law named after volodymyr stashys of the classic private university, ukraine. e-mail: omakukh@gmail.com orcid: https://orcid.org/0000-0001-7410-5081 doi: https://doi.org/10.30525/2256-0742/2020-6-2-32-38 economic principles of taxation: problems of definition and embodiment in the tax legislation of ukraine and the european states olha dmytryk1, oksana makukh2 abstract. today, almost every state feels the impact of the financial crisis and is looking for ways to overcome it. it is obvious that the development of economic relations of any state is influenced by taxation, and through taxes, the state has an impact on the property of individuals and legal entities. at the same time, establishing the optimum level of taxation for both taxpayers and the state is an important factor for economic uplift, ensuring the balance of public and private interests in tax and legal regulation, under which there is a proper financial support for the performance of the tasks and functions by the public authorities with reasonable and justified interference of the state in the right of private ownership of persons by means of the taxes. the construction of the tax system, the amount of taxes and their rates should not depend solely on the funds necessary for the state. this process is also influenced by other factors that find their objectification in the relevant principles, because taxation should be reasonable. the purpose of the article is to characterize certain economic principles, which should be the basis of taxation and which should be defined in tax legislation. this will be performed with the dogmatic method, the methods of analysis and synthesis, the systemic method and the case study method. the basis for building the tax system, determining the amount of taxes, the size of their rates, is in the economic factors, which should be taken into account to ensure the effectiveness of taxation and tax regulation as a whole. they have their reflection in the relevant principles as the initial provisions of taxation, acting as fundamental in regulating tax relations. the range of economic principles, which taxation is based on, and the content of which is currently debated in scientific circles, is as follows: proportionality (taxability), cost-effectiveness of taxation, fiscal sufficiency, economic basis of tax, economic justification for tax. they do not exist in isolation from each other, but constitute a clear system, in which their logical connection and influences are traced. results. proportionality as a principle of taxation is determined by analyzing the payer's financial position, the actual ability to pay taxes, and the economic benefit he/she receives in the course of paying taxes and fees (the economic result of the payer). the principle of cost-effectiveness of taxation means that the establishment of taxes and fees should be such that the amount of revenues from their payment to the budget exceeds public expenditure and leads to effective taxation (the economic result of the state). the principle of tax sufficiency provides a reasonable restriction on those public needs that need to be met through taxpaying, since these needs cannot be absolute. the principle of the economic basis of the tax indicates source for its payment, which is formed by the corresponding taxation of transactions or other taxable objects. the principle of economic justification for the tax determines the set of relevant factors that allow to approach the characteristics of taxation in different ways, taking into account certain economic indicators, by ensuring that the balance of private and public interests in tax and legal regulation is achieved. in fact, it combines an assessment of compliance with the principles of proportionality (taxability), costeffectiveness of taxation, tax sufficiency, and the economic basis of tax. the results obtained are original, they will allow to improve the normative provisions before consolidating the principles of taxation in tax legislation. key words: tax, taxation, principles of taxation, cost-effectiveness of taxation, economic basis of tax, economic justification for tax. jel classification: k34, н20, н30 baltic journal of economic studies 33 vol. 6, no. 2, 2020 1. introduction today, almost every state feels the impact of the financial crisis and is looking for ways to overcome it. it is obvious that the development of economic relations of any state is affected by taxation (macek, 2015; william g. gale, 2014). as stated in art. 1 1 of the first protocol to the convention for the protection of human rights and fundamental freedoms, every individual or legal entity is entitled to the peaceful enjoyment of his/her property. no one shall be deprived of his/her property except in the public interest and subject to the conditions provided for by law and by the general principles of international law. the preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties (protocol of the convention for the protection of human rights and fundamental freedoms, 1997). in fact, through taxes, the state has an impact on the property of individuals and legal entities. thus, taxes are now an attribute of any state, because of their force on the economic activities of the entities, they play a significant role in the economic development of the state. at the same time, establishing the optimum level of taxation for both taxpayers and the state is an important factor for economic uplift, ensuring the balance of public and private interests in tax and legal regulation, under which there is a proper financial support for the performance of the tasks and functions by the public authorities with reasonable and justified interference of the state in the right of private ownership of persons by means of the taxes. the structure of the tax system, the amount of taxes and their rates should not depend solely on the revenue required by the state and territorial communities. obviously, this process is influenced by other factors because taxation should be reasonable. it is a very important and not easy task to mark them. the fact is that the tax is both a legal and economic category. this means that the establishment of taxes must take place on an economic basis, that is, in view of those economic laws in force in society. and here a rather difficult question arises: how and on what economic grounds taxation should be based, and whether such principles can and should be enshrined in tax and legal rules. typically, this is resolved by enshrining in tax law the principles on which taxation should be based. for example, in the tax code of ukraine it is art. 4, entitled "basic principles of tax law" (the tax code of ukraine, 2010). thus, the purpose of the article is the designation and characterization of certain economic principles, which taxation should be based on and which should be defined in tax legislation. this will be done with the dogmatic method, the methods of analysis and synthesis, the systemic method and the case study method. 2. principles applicable in tax and legal regulation the tasks to establish optimum taxation, to mark all the necessary aspects in the tax and legal rules clearly are not easy. it is not by chance that scientists emphasize the complexity of tax law, noting that, like the complexity of the relationship of commerce to which it applies, it is often seen as increasing exponentially, with boosting pressure on taxpayers, tax advisors, and tax administrations (evans, freedman, krever, 2011). in such circumstances, the use of principles constituting ideas, requirements and underlying, basic, and fundamental provisions in regulating relevant relationships, is well justified (pohrebniak, 2008). principles of tax and legal regulation are objectively determined by the economic, social and political structure of the state, the basic principles of the construction and functioning of society, etc. their value is also seen in the fact that they are designed to provide organic communication, unity and systematicity of tax law rules (shaptala, 2012). today, in art. 4 of the tax code of ukraine, the following principles are enshrined, such as: universality of taxation, equality of all taxpayers, prevention of any manifestation of discrimination, inevitability of statutory liability occurrence in case of violation of tax legislation, presumption of lawfulness of decisions of the taxpayer, tax sufficiency, social justice, stability, uniformity and convenience, the only approach to setting taxes and fees (the tax code of ukraine, 2010). the analysis of the stated norm allows to take note that the legislator does not consider it appropriate to group such principles to some extent. at the same time, it is obvious that some of the principles are based on laws that have the logic of the functioning of economic phenomena as their source, that is, they are economic (they are called classic by the academic economists). the other principles are legal (neoclassic). the fact that in the vast majority of taxation principles that determine the ordering of the taxation system, the laws of economic theory are fundamental factors, is unconditional (braslavskyi, 2019). here we give the words of i.i. kucherov, who noted that it is the economic principles of taxation that outline the basic requirements, with which taxes must conform from the point of the economic theory. for example, he cites the principles of economic justification for taxation and proportionality, which make it possible to define approaches to the implementation of mandatory tax payments as a component of the economic system (kucherov, 2009). significantly, it is often stated in the legal and economic literature that the principles of taxation of his time were outlined by a. smith, who referred to them: proportionality is when taxpayers are required to participate in taxation in accordance with their taxability, in proportion to the income received under baltic journal of economic studies 34 vol. 6, no. 2, 2020 the protection of the state; certainty means that the tax must be clearly established and reasoned, and the payment term, method and amount of payment must be accurately pre-determined, justified and known to payers and other taxpayers; convenience is that the time and method of paying taxes should be as convenient as possible for the payer; cost-effectiveness of taxation is understood as the tax must be constructed so that it takes as little as possible out of the payer's pocket what he/she brings to the treasury (smith, 1962). paying great tribute to the scientist, let us point out that the above principles are to some extent the basis of the tax system of many modern states. however, over time, the content of some of them has changed, has taken on a new meaning, and some of the above, on the contrary, have been fixed in essence, while their name has been changed. in addition, such principles as the principle of certainty, convenience only with a certain reservation can be attributed to economic principles. the european court of human rights frequently refers to this principle. for example, in the decision in the case of "n.k.m. v. hungary” dated may 14, 2013, the court notes that the state's interference with the property rights of persons should take into account the “just balance” between the needs of the general interest of society and the requirements of protection of fundamental human rights, which must be justified by the proportionality between the means used and the purpose established (decision of the european court of human rights, 2013). unfortunately, there is no direct embodiment of this basis in the current ukrainian tax legislation. this was done through the construction of the principle of justice of taxation, since in the decision dated march 24, 2005, the constitutional court of ukraine stated that proportionality was an element of the principle of justice (decision of the constitutional court of ukraine, 2005). justice was recognized by the constitutional court of ukraine in its decision dated november 2, 2004 as a fundamental principle for the rule of law, a decisive regulator of social relations, and one of the universal dimensions of law (decision of the constitutional court of ukraine, 2004). as for taxation, it is enshrined in the tax code of ukraine as “social justice”. in our view, justice is a very capacious concept, so defining its content depends on numerous factors of social development. it is logical that the breadth of its content leads to the existence of an approach in which social justice cannot be a simple reconciliation of the size of the tax payment with the solvency of the obliged person. n.k. shaptala rightly notes that the principle of social justice is much broader than the literal connection between the ability to pay taxes and fixing their amounts, because it serves as a systemically important factor, according to the content of which regulation of the law of tax relations, the formation of the entire system of principles of tax law, as well as the process of the enforcement of right should be performed. the content of the principle under consideration in its tax and legal regulation is not only to properly establish the legal status of the taxpayer. justice must ensure the effectiveness of legal remedies for the protection of the rights and interests of taxpayers, as well as the application of proportionate punishment for violations of tax legislation (shaptala, 2012). such an opinion does not raise objections. therefore, the above points to a distinction between the principles of justice and the principle of proportionality related to taxability. at the same time, another problem arises: how exactly should proportionality be assessed; which basis should be for observing this principle. here we give the opinion of s.ye. fedorov, who proposes approaches to assessing the solvency of the payer to form on the basis of economic science, since when determining the solvency of certain groups of population or individuals must take into account the economic indicators. to this end, the scientist points to the need to involve in the development of legal acts in the field of taxation of experts in the economy, who would make calculations based on economic indicators of solvency of taxpayers (fedorov, 2017). the experience of germany, described by sh. rekcigel, can be acceptable here. the scientist writes about the actual ability of the payer to pay the tax, considering it in the context of the analysis of the principle of equality under the law. thus, sh. rekcigel argues that the same or similar factual circumstances should have the same (similar) consequences, which indicates that taxpayers are equally burdened. with regard to taxpayers' taxability, it is specified by the principle of "net income", because taxability arises only when the recipient of income creates for him/herself the conditions of earning and provides the necessary financial guarantees of its existence, while the legislator is not obliged to allow deductions of actually effected expenditures, but may determine their types (incomerelated expenditures are implied) (rekcigel, 2010). such opinions are worthy of support and require that they be to some extent labeled and enshrined in law. therefore, the proportionality is determined by analyzing the payer's property status, the actual ability to pay taxes, and the economic benefits that he/she has in the course of paying taxes and fees must be determined. in other words, we are talking about the economic result that the payer receives and remains with him/her after paying taxes and fees (the economic result of the payer). 3. principles of cost-effectiveness, economic justification for the tax, the economic basis of the tax and tax sufficiency: approaches to differentiation as it seems, in this case it is appropriate to mention the principle of economic justification for the tax, which is also not currently embodied in the tax code of ukraine. baltic journal of economic studies 35 vol. 6, no. 2, 2020 in this case, quite often, this principle is identified with the principles of cost-effectiveness, economic basis of tax, tax sufficiency. let us consider them. thus, the cost-effectiveness of taxation in p. 4.1.7 clause 4.1 art. 4 of the tax code of ukraine is associated with the fact that the imposition of taxes and fees should be such that the amount of revenues from their payment to the budget significantly exceeds the cost of their administration (the tax code of ukraine, 2010). however, as k.o. hetman writes, taxes and fees should be aimed not only at exceeding the costs of administering them, but also at setting up an appropriate fund, at the expense of which numerous needs, financially satisfying the performance of functions of the state or territorial community, must be met (hetman, 2015). indeed, given the content of this principle, it can be argued that it causes the formation at taxation of certain grounds to characterize its effectiveness. the latter will be zero if all funds received from tax revenue are used to administer these payments. therefore, it is important not just the minimal excess of tax revenue (the amount of which must be higher) over the cost of administering it, but a significant difference between them (shaptala, 2012). significantly, in germany, where there is a complex and extensive tax system, one of the principles of its construction is the principle, according to which the value of taxes should correspond to the size of public services, including protection of the citizen and all that the citizen can get from the state (larionova, 2015). we agree with these positions, because taxes, through the exercise of their fiscal function, should ensure the realization of a wide range of public needs, one of which is certainly the administration of taxes. that is why the principle of cost-effectiveness of taxation should be considered as one that determines when taxing the flow of funds to ensure public expenditure and ultimately determines the most effective taxation (the economic result of the state). obviously, following the broad approach to the content of the principle of economical taxation we have proposed, it is necessary to address the question of a reasonable restriction on those public needs that must be met at the expense of tax payments, since these needs cannot be absolute, limitless. in this context, it is necessary to mention the principle of tax sufficiency, which according to clause 4.1.5. art. 4 of the tax code of ukraine means the establishment of taxes and fees, taking into account the need to achieve a balance of budget expenditures with its revenues (the tax code of ukraine, 2010). this principle seems to be interpreted in italy as well, since it means that the level of taxation of the entire enterprise must generally be limited by the sufficiency of the budget's revenue base, which is determined in accordance with the state’s fiscal policy (gandullia, 2012). the analysis of the mentioned provisions shows that taxation is not an end in itself, because it is not just for the formation of revenue parts of the budget, but for ensuring the fulfillment of all tasks and functions of the state and territorial communities. in addition, this principle also provides for some restriction on the arbitrariness of the legislator in setting taxes and fees, since the size and types of the latter may not be infinite, they should only provide the necessary budgetary contributions to different levels. in view of the above, it is possible to note the close relationship between the principles of economy and tax sufficiency. with regard to the principle of economic justification, scientists consider its content in different ways. for example, ye.v. timofieiev argues that this principle means that the tax should be consistent with the task that was originally laid down for it. for example, he cites the following example: if income is taxed within income tax, it means that taxation is income that is determined by the rules of tax legislation. however, in the case where certain costs are not deductible, according to his approach, the principle of economic justification is violated (zubareva, 2009). this approach is unlikely to be constructive for such reasons. firstly, traditionally, the characteristics of taxes are determined not by their tasks but by their functions. the latter reflect their dynamic content, emphasize the focus of tax and legal regulation (kucheryavenko, 2005). these include fiscal, regulatory, controlling, distributive, incentive, cumulative. at present, fiscal function has ceased to be unique, since the development of the state necessitates the use of tax as an effective instrument of redistributive processes, which has an impact on reproduction, stimulating or holding back its pace, enhancing or weakening capital accumulation. as a rule, when paying the tax, the implementation of all these functions is performed, but some function will be leading (for example, fiscal), others (for example, incentive is by providing benefits to a certain category of economic entities) will be additional. thus, the economic justification cannot be based solely on the correspondence to the task, which has been initially included in the tax, its meaning is much wider. secondly, a specialist is likely to mix the economic basis of the tax with its economic justification. in our view, the economic basis of the tax is source for its payment, which is formed by the taxable transactions or other taxable objects. in other words, we should talk about the proper definition of the object of taxation. at the same time, this process should also be found on the economic basis. this means that in the process of selecting and fixing the taxable object, the legislator must proceed from the potential of one or another object to use or generate income in the economic (business) activity of the taxpayer, and to eliminate the unjustified financial burden for that taxpayer (polishchuk, 2018). when considering the economic basis of the tax, one should mark another position that is significantly different from the above. thus, h.b. sereda builds on the characterization of such a framework based on the following considerations: (a) the basis is a necessary, baltic journal of economic studies 36 vol. 6, no. 2, 2020 determining condition for the existence of any phenomenon, which is also its explanation; (b) for this reason, the condition is linked to the imposition of tax and the obligation to pay it; (c) the basis can be considered broadly (as the needs of the state or the benefits of the society) or narrow (the taxpayer's ability to pay, the circumstances and facts that prove the benefits, etc.); (d) there are two groups of foundations: from the standpoint of public interest they serve the public needs, because of the existence and necessity of implementation the use of taxes is explained; from the point of view of the interests of the payer, participation of the state in public life, conditioned by the need of any business entity in obtaining their income. as a result, h.b. sereda states that the general basis of the tax is the economic and legal factors that explain the need to meet state and economic needs in accordance with the requirements of the economy and law (sereda, 2013). in our opinion, the mentioned approach has the right to exist, because all the principles we have talked about are closely related to each other, and the content of a particular principle is determined taking into account the content of another. this suggests that such principles do not exist in isolation from each other, but constitute a clear system in which their logical connection and influences are traced. at the same time, there is a disagreement with the author's position that the reason for the occurrence of a tax liability is not only the existence of the object of taxation, but in general the need of the state in cash. adhering to this approach will make it very difficult to determine the moment when the taxpayer's tax liability arises, which provokes numerous tax disputes. therefore, it is more appropriate to talk about the economic basis of the tax in the context of the availability of those objects that are determined as the taxable. the position of a. blankenagel is quite balanced on that the taxes are economically justified. thus, he differentiates the following criteria for evaluation: (1) taking into account the ability of the payer to pay taxes due to the different levels of income of individuals; (2) the existence of a tax ban on the part of the payer's income that is necessary for him/her to maintain his/her existence; (3) taxation of the taxpayer's net income only (net principle); (4) the existence of a double taxation ban; (5) the ability to achieve the desired goal for the state; (5) reasonable restriction on government spending, promoting economic development (blankenagel, 2010). as we can see, the scientist focuses on a set of characteristics that allow us to talk about the economic justification. there are the similar thoughts of the others when they argue that the economic justification for the tax should include: 1) justification of the concept of a specific tax in relation to the object of taxation, taxpayers and tax carriers; 2) goal setting and development of tax concepts (models); 3) comparative analysis of compliance of the mechanism of tax conception (models); 4) assessment of compliance of tax models with the basic principles of taxation; 5) assessing the compliance of tax models with tax policy objectives (kuzmenko, beskorovaynaya, bagdasaryan, 2013). the view of ya.v. polishchuk, who, given the semantic interpretation of the term "justification" (according to which it is treated as the totality of the facts, the arguments for believing anything, in the presentation of evidence to support any convincing evidence, facts, etc.), connects the economic justification with defining facts, which will be forcible arguments to convince of expedience of the taxation. at the same time, she suggests the following facts: the effectiveness of taxes, their collection and regulatory impact (polishchuk, 2018). the following points of view attest to the fact that the economic justification of the tax is a set of relevant factors that allow, taking into account certain economic indicators, to approach the characteristics of taxation differently by ensuring a balance of private and public interests in tax and legal regulation. this is due to the fact that for the payer, first of all, it will be possible to take into account his/her ability to pay taxes, the presence of the object of taxation and the source of tax. the state, through economic justification, indicates the needs that are necessary to be met at the expense of tax payments, and restricts the right to set taxes, specifies the limit, to which the corresponding public needs are, and the purpose of establishing taxes. 4. conclusions the basis for building the tax system, determining the amount of taxes, the size of their rates, is in the economic factors, which should be taken into account to ensure the effectiveness of taxation and tax regulation as a whole. they have their reflection in the relevant principles as the initial provisions of taxation, acting as fundamental in regulating tax relations. the range of economic principles, on which taxation is based, and the content of which is currently debated in scientific circles, is as follows: proportionality (taxability), costeffectiveness of taxation, tax sufficiency, economic basis of tax, economic justification for tax. they are closely related to each other, and the determination of the content of a particular principle is based on taking into account the meaning of another. this suggests that such principles do not exist in isolation from each other, but constitute a clear system, in which their logical connection and influences are traced. proportionality as a principle of taxation is determined by analyzing the payer's financial position, the actual ability to pay taxes, and the economic benefit he/she receives in the course of paying taxes and fees (the economic result of the payer). the principle of costeffectiveness of taxation means that the establishment of taxes and fees should be such that the amount of revenues from their payment to the budget exceeds baltic journal of economic studies 37 vol. 6, no. 2, 2020 public expenditure and leads to effective taxation (the economic result of the state). the principle of tax sufficiency provides a reasonable restriction on those public needs that must be met at the expense of taxation, since these needs cannot be absolute; taxes are not an end in themselves, they are paid not only for the formation of revenue parts of the budgets, but for the purpose of ensuring the fulfillment of the tasks and functions of the state and territorial communities. the principle of the economic basis of the tax indicates source for its payment, which is formed by the corresponding taxation of transactions or other taxable objects. when marking the object of taxation, the legislator should be guided by the existence of the potential possibility of one or another object to use in the economic (business) activity of the taxpayer or to bring him/her income, and to eliminate the unjustified financial burden for that payer. the principle of economic justification for the tax determines the set of relevant factors that allow to approach the characteristics of taxation in different ways, taking into account certain economic indicators, by ensuring that the balance of private and public interests in tax and legal regulation is achieved. in fact, it combines an assessment of compliance with the principles of proportionality (taxability), costeffectiveness of taxation, tax sufficiency, and the economic basis of tax. through economic justification, the state indicates the needs that are necessary to be met at the expense of tax payments, and restricts the right to set taxes, specifies the limit, to which the corresponding public needs are, and the purpose of establishing taxes. the results obtained will allow to improve the legislative approaches to consolidate the principles of taxation in tax legislation. references: blankenagel, a. 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(2009). printsip ekonomicheskogo osnovaniya nalogov – eto skrytoye oruzhiye nalogoplatelshchika ili deklarativnaya norma [the principle of the economic basis of taxes is a taxpayer’s hidden weapon or declarative norm]. vash nalogovyy advokat – your tax attorney, no. 5. baltic journal of economic studies 9 vol. 5, no. 5, 2019 corresponding author: 1 institute of international relations of kyiv national taras shevchenko university, ukraine. e-mail: aisch@ukr.net orcid: https://orcid.org/0000-0002-2493-4284 researcherid: aab-8575-2019 2 institute of international relations of kyiv national taras shevchenko university, ukraine. e-mail: ritaz@ukr.net orcid: https://orcid.org/0000-0001-7174-8946 researcherid: aab-8632-2019 3 institute of international relations of kyiv national taras shevchenko university, ukraine. e-mail: alxcv@ukr.net orcid: https://orcid.org/0000-0003-3315-2919 researcherid: aab-7820-2019 doi: https://doi.org/10.30525/2256-0742/2019-5-5-9-17 the impact of institutions on services exports of central and eastern european countries oleksandr shnyrkov1, rita zablotska2, oleksii chugaiev3 abstract. besides labor, capital and technology, institutions are another important factor of production and exports. they set a framework of motivation for economic activities and their efficiency. the previous research provided evidence for the effect of institutions on international trade and development. this paper focuses on the effect of institutional progress on export competitiveness of several services sectors in central and eastern europe in the post-crisis period (2011-2017). in the analyzed period the services exports growth turned out to be more stable than the goods exports growth. the multi-country models showed that several types of institutional improvements affected the exports growth in the medium run. excluding outliers, using weighted enlarged sample and alternative method for measuring exports growth were applied to assess robustness of the research results. labor force growth, gdp and gdp per capita were initially used as control variables, but in most cases their effect for exports growth was insignificant in central and eastern europe. sector specific approach to the analysis turned out to be the most effective to understand the transmission mechanism of the effect under the situation of services heterogeneity. monetary freedom (currency stability and market-based prices) stimulates exports of transport services. the rule of law (contract enforcement, property rights, efficiency of police and courts, absence of crime and violence etc.) is important for raising international tourism receipts. information and communication technologies services exports depend primarily on voice and accountability (democratic principles, respects human rights and free media). as for financial and insurance services exports, no significant institutional factor was found. control of corruption, political stability, labor freedom, government integrity, government effectiveness and lower government size also may be important, but their effect is not robust or cannot be distinguished from the effect of the abovesaid factors. it is more likely that fighting corruption may have a positive impact on the services exports than on the goods exports. the latter depend positively on the level of investment freedom. using the selected eu member states in central and eastern europe as a benchmarking level enabled us to estimate a potential effect for services exports in case of ukraine if it reaches their level of institutional development. in particular the institutional progress can boost ukrainian transport, tourism, information and communication technologies services exports by 30-200% or by 10-15% of its gdp. key words: institutions, business regulation, international trade, services exports, central and eastern europe. jel classification: f14, l80, p48 1. introduction the interaction mechanism for exports and institutions can be specified in the following way. development of foreign economic relations is determined by intensiveness of physical and human capital accumulation, and labor productivity growth. the latter depends on technological development and raising production efficiency as a result of participation of a national economy in the international division of labor. technological progress is faster under favorable conditions for economic entities and efficient motivation for innovation and research activities. the stimuli for this depend on institutions existing in a society. therefore competitiveness of domestic producers of goods and services depends baltic journal of economic studies 10 vol. 5, no. 5, 2019 both on traditional factors and institutions constituting a national economic model. more attention is usually paid to formal rules. they determine a range of possible behavioral patterns of economic entities and thus affect a potential for development of a national economy. this paper aims at finding institutional factors which are important for services exports in case of the central and eastern european countries. first, we provide a review of the previous research related to the role of institutional factors for international trade. next, the main trends in services exports of the countries are specified. the section devoted to methodology provides specification of regression models, algorithm for selecting variables and the link to the previous research findings. the dependent variables include services exports growth rate and the exports growth in % of gdp. the independent variables include institutional indicators and several other control variables. the next section describes our multi-country empirical models for the region based on the data after the crisis of 2008-2009. we compare the models for services and goods exports, and the models for various types of services (industry-specific approach). the use of various model specifications and different samples enabled us to assess robustness of research findings and to determine the main institutional factors of services exports. finally we use the regression models to estimate how much the services exports of ukraine can grow if it reaches the institutional development level which is typical for the eu member states in central europe. 2. previous research review researchers of economic development and international trade often consider the role of institutions for the operation of markets. it is widely accepted that national institutions determine growth trends in many countries (acemoglu et al., 2005; perugini et al., 2017; álvarez et al., 2018). well-developed institutions decrease transaction costs of market participants and thus raise the efficiency of the latter. it happens through various channels. in particular, institutions: – decrease information asymmetry because they provide information about market conditions, goods and market participants; – decrease risks because institutions establish and ensure property rights and contracts by specifying who should receive returns, how much and when; – limit the power of politicians and interest groups by ensuring their accountability to the public. in order to assess the quality of institutions, kaufmann et al. (2007) used several indicators: government effectiveness, regulatory quality, rule of law (absence of crime, fairness of judicial process, enforceability of contracts), control of corruption (the latter measures the extent to which public power is exercised for private gain), etc. several other researchers apply other institutional quality indicators in gravity models. anderson et al., (2002) used the survey of opinion of businessmen who participated in the world economic forum. they had been asked about efficiency of contract enforcement and the level of corruption. the finding was that low quality institutions affect trade very negatively. nevertheless, the theoretical analysis of the effect of institutional quality for international trade development is less widespread. some publications emphasize that good institutional environment stimulates bilateral trade in goods and services because it ensures equal competition conditions for economic entities (yushi et al., 2018; araujo et al., 2012). de groot et al. (2004), gómez-herrera (2013) demonstrated that institutional quality and efficient trade policy facilitate bilateral trade relations, while underdeveloped or inadequate institutions can deter trade as much as tariffs do (francois et al., 2013). other researchers also analyze the relationship between foreign trade and efficiency of national institutions. e.g. donaubauer et al., (2015) analyzed how various types of infrastructure affect competitiveness of companies in the world markets. fink et al. (2005) proved that communication costs are more important in case of differentiated products unlike in case of trade in homogeneous and consumers goods. francois et al. (2013) used the bilateral trade data in 1998-2003 to prove the impact of infrastructure and institutions on international trade. the authors considered preferential tariffs and correlation between gdp, infrastructure and institutional development level. exports of developing economies turned out to depend more on infrastructure than on regulatory trade barriers. similarly, djankov et al. (2006) found that inland transport and the related time delays are the main factors that influence competitiveness of exporters. jansen and nordas (2004) analyzed the effects of institutions, trade policy and infrastructure within two approaches. the first one considered the overall foreign trade, while the second approach was based on analyzing structure of trade (gravity models). according to the first approach the institutional variables positively affect trade flows, while domestic trade barriers largely do not influence foreign trade. but the interaction effect between trade barriers and institutions is negative. this means that the effect of lowering barriers for openness is larger under higher quality of institutions. therefore institutions provide a double impact: the direct one on the openness and the indirect one through raising the magnitude of the influence of changes in trade barriers on openness of the economy. it is also worth noting specific types of institutions affecting trade, e.g. low trust in government policy decreases bilateral trade in europe (guiso et al., 2009), while efficient legislation and informal institutions facilitate development of international baltic journal of economic studies 11 vol. 5, no. 5, 2019 trade (beugelsdijk, de haan, 2015). nunn et al. (2013) emphasize interaction between trade and institutions. they provide an evidence for the effect of international trade for domestic institutions, in particular through the value chains within the global production networks and contract enforcement. according to their findings quality of institutions is one of the main sources of benefits from participation in international trade. according to zablotska (2008), rising importance of services at the modern stage of world economy development can be explained by expanding production of services beyond national and regional markets. the current global trends include geographical and functional integration of production, distribution and consumptions by creating comprehensive networks which include flows of raw materials, components and final products, and information, which raises the role of services in managing trade flows. establishment of new institutions takes place. these institutions do not directly participate in production and retail trade, but they are responsible for managing these flows. development of institutions is especially important for the services sector because services are important for production fragmentation (beverelli et al., 2015). regulatory institutions and contract enforcement institutions are supposed to play the key role, because the services sector interacts with other sectors of economy in a more sophisticated way and is more prone to market uncertainty under information asymmetries. amin et al (2006) used regression analysis to study trade flows of 141 countries. they concluded that countries with a more developed institutional structure have a larger and faster growing services sector. fiorini et al. (2018) analyzed services trade liberalization under transformation of regulatory institutions of integration blocs. they claim that efficient liberalization of services trade depends on regulatory quality in the member states of a bloc. enhancing regulatory institutions is a necessary precondition for deeper coverage of services within trade agreements, which can increase benefits from services trade liberalization. 3. modern trends in services exports of the central and eastern european countries the central and eastern european (cee) countries (including the baltic states) experienced various (usually positive) trends in services exports growth in 2011-2017 (see table 1). this growth turned out to be more stable than growth of the goods exports. the latter decreased in some countries due to the falling energy prices and direct or indirect effect of the hybrid war of russia with ukraine and the related sanctions. ukraine was an exception, as both its goods and services exports decreased almost equally. table 1 6-year exports growth in the cee countries, 2011-2017, % country goods services transport services international tourism, receipts ict service exports insurance and financial services albania -6 15 -16 12 -9 -52 armenia 67 47 31 50 108 32 azerbaijan -55 54 26 114 -11 139 belarus -30 40 -1 52 218 51 bosnia and herzegovina 26 11 26 24 22 97 bulgaria 15 19 32 9 54 -44 croatia 22 17 -5 16 51 92 the czech republic 6 10 6 -14 65 -1 estonia -6 22 -7 71 55 13 georgia 11 98 20 178 130 -26 hungary -3 21 36 17 31 32 latvia 11 15 4 40 173 -23 lithuania 8 69 78 20 261 52 moldova 7 25 14 74 5 -31 montenegro -34 25 40 20 33 37 north macedonia 38 12 8 37 19 29 poland 24 44 43 21 147 28 romania 16 94 123 49 158 10 russian federation -31 -1 14 -12 50 2 serbia 41 41 42 48 135 -10 slovak republic 6 43 41 19 142 65 slovenia 10 19 29 0 19 -30 turkey 17 7 37 5 -31 40 ukraine -36 -33 -36 -63 165 -76 sources: world development indicators and authors’ calculations baltic journal of economic studies 12 vol. 5, no. 5, 2019 in the analyzed period various countries were the regional leaders by exports growth: romania (transport services), georgia (tourism services), lithuania (information and communication technologies (ict) services), azerbaijan (financial and insurance services), armenia (goods exports). ict services exports showed the most prominent increase in several countries, especially considering the lower starting base level. in ukraine it was the only services sector that demonstrated exports growth. 4. methodology and preliminary analysis most researchers who analyze the role of institutions for trade use the eurobarometer trust indicators, the world bank institutional indicators and alternative data on institutional quality and governance (de groot et al., 2004; linders et al., 2005; francois and manchin, 2013). we use the institutional indicators provided by the world bank and the heritage foundation. the country-specific models, provided by zablotska (2009), were developed for the cee countries in the period before the crisis in 2008-2009. the depended variable was the absolute value of services exports of each country. besides institutional indicators (regulatory quality, rule of law, control of corruption and economic freedom indices) the independent variables included gdp per capita. institutions turned out to have a different effect in the eu member states and non-member states in the cee region. economic development level significantly influenced services exports in all the analyzed countries. institutional development (in particular better economic freedom and regulatory quality) usually influenced services exports more in the eastern europe (non-member states), where the values of institutional variables were lower. in the central europe (the eu member states), where the values of institutional variables were higher, the regression coefficients varied from negative to positive ones. a possible explanation was the problem of endogeneity related to the gdp per capita variable. e.g. under higher institutional quality institutions could affect economic growth more than they would influence services exports. in this paper we estimated the effect of institutional variables on export competitiveness within a 6-year post-crisis period by using multi-country models and by analyzing a larger set of institutional variables. the initial specification of the tested models was designed to control for several non-institutional variables: exp = b0 + b1labor + b2 ln(gdp) + + b3 ln(gdppc) + σbiδef + σbjδwgi, (1) exp is a 6-year exports growth for services, specific types of services or goods during 2011-2017, %. labor – growth of a total labor force in 201-2017, %. gdp – gross domestic product in 2014, us dollars (current prices, exchange rate method). gdppc – gross domestic product per capita in 2014, us dollars (current prices, exchange rate method). the above-mentioned variables are taken from world development indicators / world bank (2019). ef – a set of economic freedom variables from index of economic freedom / the heritage foundation (2019), score (min 0, max 100). wgi – a set of governance variables from worldwide governance indicators / world bank (2019), score (min -2.5, max 2.5). δ means the increase during the 6-year period in 2011-2017. but according to the correlation analysis results (see table 2), labor force growth was significantly related only to the ict services exports growth (in a sample consisting of the 24 cee countries) and the correlation was negative. no significant correlation was found with the export indicators in a larger sample consisting of the all countries in the world with a published data. neither gdp nor gdp per capita affected exports growth in the cee countries. but if we consider all the countries of the world, larger economies tended to have slower growth of goods exports (significant negative correlation -0.21) and tourism services exports (-0.16). also more advanced economies tended to have lower growth of exports of goods (-0.33) and financial and insurance services (-0.16). the progress by the overall economic freedom index had no impact on exports growth in the world, but it positively affected the ict services exports in the cee countries. inside the group of the cee countries, those countries which were the eu member states tended to have on average 40% faster ict services exports growth during the 6 years period (but the difference is statistically insignificant according to the t-test for difference in the means, and only the mann-whitney u test showed a marginal statistical significance). within the correlation analysis we also applied a robustness check by using a weighted enlarged sample, which included all the countries of the world with available data. weight 7 is assigned to cee countries, weight 1 to the rest of the countries. thus, the values for cee countries (small sample) and for other countries contributed roughly equally to the calculation of the correlations in order to select proper variables for the regression analysis. if the absolute scores for institutional variable are used instead of their increases, a similar check results in marking positive correlations of goods exports growth with investment freedom (0.49); and tourism services growth with (low) government spending (0.40) and with labor freedom (0.42). regression analysis is applied with the selected dependent variables for each of the 6 exports growth indicators. the initial models are calculated for the sample consisting of the 24 cee countries. the robustness check is made by: – excluding outliers (standardized residuals >+/2.5 standard deviations); baltic journal of economic studies 13 vol. 5, no. 5, 2019 – using the aforecited weighted extended sample; – using alternative measurement of the dependent variable based on the formula: y = (exp2017*100% / gdp2017) – – (exp2011*100% / gdp2011), (2) 5. results the table 3 shows that services exports growth depends positively on growth of monetary freedom, rule of law, voice and accountability. better control of corruption also may help to increase exports competitiveness, although its effect may not be distinguished from the improvement of the general rule of law. we further analyze the main components of services exports. export competitiveness of the transport services is positively related only to improvement of monetary freedom (see table 4). the effect is statistically robust, although the transmission mechanism is not very clear in this case. but it is possible to state that transport services can be fostered by a more stable currency and market-determined prices (including lower inflation and avoiding price controls). tourism services exports are positively affected by enhancing the rule of law (see table 5). we assume that the latter may have two possible effects: better safety for tourists, stimulating them to arrive (demand effect) and better legal environment for providers of services (supply effect). several other institutional variables may influence tourism exports competitiveness: smaller size of economy, improvement of political stability and absence of violence / terrorism / wars / social conflicts, decrease in corruption, and better labor freedom (ability of businesses to contract employees freely and to dismiss redundant workers, low wage controls / other labor constraints), but their effect is not robust. growth of voice and accountability (democracy and political freedom) is the main institutional variable affecting competitiveness of ict services exporters (see table 6). several other indicators also may influence it, but their effects are not robust, and therefore additional studies are necessary before making policy recommendations. in particular, ict services exports may be positively affected by improving government integrity (absence of bribery, nepotism, cronyism, embezzlement, excessive regulations etc.), government effectiveness (quality of health and education, infrastructure, public services, civil service, policy implementation etc.) and decreasing government spending. on the other hand, faster growth of the total labor force is correlated with lower ict exports growth. the relationship seems to be contradictory as better supply of labor can provide the ict industry with a cheaper labor. a possible explanation can be table 2 correlation matrix for exports growth and independent variables in the cee countries goods services transport services international tourism, receipts ict service exports insurance and financial services labour -0.14 0.01 0.14 0.08 -0.44* 0.17 ln(gdp) -0.20 -0.14 0.17 -0.39 0.10 0.06 ln(gdppc) -0.13 0.01 0.26 -0.28* 0.13 0.27 economic freedom -0.20 0.17 -0.06 0.30 0.43* -0.03 property rights -0.02 0.10 0.00 0.14 0.00 0.23 government integrity -0.05 0.33 -0.05 0.38 0.47* 0.02 tax burden (lower) -0.24 0.05 0.03 0.13 0.22 -0.01 government spending (lower) -0.10 0.23 -0.05 0.24 0.45* -0.30 business freedom -0.25 -0.33 -0.39 -0.21 0.07 -0.39 labor freedom 0.23 -0.12 0.06 -0.25 0.07 -0.11 monetary freedom 0.24 0.40* 0.53* 0.15 0.19 0.12 trade freedom -0.27 -0.25 -0.28 -0.22 -0.06 -0.34 investment freedom -0.11 -0.14 -0.26 0.06 -0.24 -0.31 financial freedom 0.03 -0.03 -0.08 0.20 -0.22 0.16 voice and accountability 0.01 0.36* -0.15 0.31 0.55* -0.28 political stability and absence of violence / terrorism 0.20 0.24 0.07 0.32* -0.14 0.19 government effectiveness -0.49 0.02 -0.25 0.13 0.33* -0.02 regulatory quality -0.28 0.08 -0.38 0.25 0.41* -0.28 rule of law -0.07 0.49* 0.03 0.52* 0.40* 0.02 control of corruption (low corruption) -0.38* 0.39* -0.17 0.42 0.40* -0.04 notes. institutional variables are measured as increases of score with the higher score meaning improvement of economic freedom or governance. correlations >0.33 are significant at p<0.1, >0.40 at p<0.05. * if significant or marginally significant correlations for the cee countries remain significant at p<0.01 for the weighted enlarged sample. sources: authors’ calculations based on world development indicators, index of economic freedom and worldwide governance indicators. baltic journal of economic studies 14 vol. 5, no. 5, 2019 table 3 models for services exports growth coefficient / sample cee extended cee extended cee, alt. y cee, alt. y cee, alt. y y-intercept 20.5*** (5.5) 27.7 *** (3.0) 25.8*** (5.5) 29.5*** (2.9) 3.0*** (0.51) 3.2*** (0.57) 2.4*** (0.56) monetary freedom 1.47** (0.66) 0.82** (0.33) 1.81** (0.69) 0.94*** (0.33) 0.138* (0.071) 0.146** (0.065) rule of law 69.1** (24.8) 41.5*** (12.7) 8.43***(2.49) voice and accounting 56.9** (23.3) 38.5*** (11.2) 6.10** (2.40) control of corruption 6.58*** (1.94) r2 0.39 0.06 0.35 0.06 0.34 0.30 0.41 p 0.006 0.000 0.011 0.000 0.003 0.025 0.004 n 24 300^ 24 300^ 24 24 24 notes. institutional variables are measured as increases of score unless otherwise specified. b-coefficient significance: * at p<0.1, ** at p<0.05, ** at p<0.01 according to the t-test. ^ means multiple counting of cases because of weighting. sources: authors’ calculations based on world development indicators, index of economic freedom and worldwide governance indicators. table 4 models for transport services exports growth coefficient / sample cee cee excluding romania extended cee, alt. y y-intercept 17.0** (6.2) 14.6** (4.6) 20.5*** (3.0) 0.44* (0.23) monetary freedom 2.22*** (0.77) 1.81*** (0.58) 1.41*** (0.34) 0.066** (0.028) r2 0.28 0.32 0.06 0.20 p 0.008 0.005 0.000 0.028 n 24 23 295^ 24 notes. institutional variables are measured as increases of score unless otherwise specified. b-coefficient significance: * at p<0.1, ** at p<0.05, ** at p<0.01 according to the t-test. ^ means multiple counting of cases because of weighting. sources: authors’ calculations based on world development indicators, index of economic freedom and worldwide governance indicators. table 5 models for tourism services exports growth coefficient / sample cee cee excluding georgia extended cee, alt. y cee, alt. y y-intercept 25.3*** (8.7) 23.4*** (7.3) 132.4** (63.8) 1.2** (0.51) 1.2** (0.53) ln(gdp) -5.35** (2.41) rule of law 119.8*** (42.4) 67.0* (38.9) 50.2** (21.9) 7.13*** (2.49) political stability and absence of violence/terrorism 36.4*** (10.74) labor freedom (score in 2014) 0.658** (0.302) control of corruption 5.28** (2.01) r2 0.27 0.12 0.12 0.27 0.24 p 0.010 0.100 0.000 0.009 0.015 n 24 23 295^ 24 24 notes. institutional variables are measured as increases of score unless otherwise specified. b-coefficient significance: * at p<0.1, ** at p<0.05, ** at p<0.01 according to the t-test. ^ means multiple counting of cases because of weighting. sources: authors’ calculations based on world development indicators, index of economic freedom and worldwide governance indicators. baltic journal of economic studies 15 vol. 5, no. 5, 2019 a development of labor-intensive industries, which can compete for other production factors with the ict services providers. but in any case, the effect is not robust and can be traced only in the extended sample. unlike the previously discussed services, we were not able to find any significant factors affecting export competitiveness of financial and insurance services. therefore, no model is provided for them in this paper. it is also reasonable to compare the influence of institutional variables on trends in exports of goods and services (see table 7). a positive influence of corruption on goods exports growth seems to contradict theoretical assumptions. therefore, additional studies are necessary, especially considering that goods are also a very heterogeneous group, and the effect may mask several industry-specific effects. the next factor is investment freedom (low restrictions on the movement of capital across the border and within a country) affecting goods export positively. other effects are not statistically robust. in particular, there may be a possible effect of improving voice and accountability. and goods exports seem to grow faster in less developed economies. we further use the models to calculate the effect for services exports caused by a potential institutional progress in ukraine (in monetary stability, rule of law and voice and accountability) to the level in poland and latvia used as a benchmark level (see table 8). table 6 models for ict services exports growth coefficient / sample cee cee extended extended extended cee, alt. y y-intercept 90.1*** (13.8) 59.4*** (18.2) 82.3*** (6.4) 63.4*** (5.8) 72.0*** (7.2) 0.68*** (0.11) voice and accountability 194.7*** (62.5) 106.0*** (24.6) 117.4*** (25.1) 1.11** (0.51) labor force growth -1.54*** (0.58) -1.34** (0.60) overall economic freedom index 9.10** (4.11) 4.64*** (1.36) government integrity 117.8*** (24.2) government spending (low) 1.67*** (0.44) government effectiveness 62.5*** (21.2) r2 0.31 0.18 0.19 0.13 0.18 0.18 p 0.005 0.037 0.000 0.000 0.000 0.038 n 24 24 278^ 287^ 278^ 24 notes. institutional variables are measured as increases of score unless otherwise specified. b-coefficient significance: * at p<0.1, ** at p<0.05, ** at p<0.01 according to the t-test. ^ means multiple counting of cases because of weighting. sources: authors’ calculations based on world development indicators, index of economic freedom and worldwide governance indicators. table 7 models for goods exports growth coefficient / sample cee cee excluding armenia extended cee, alt. y y-intercept -36.3* (18.3) -35.2** (14.2) 138.5*** (17.9) 1.8 (1.3) ln(gdppc) -18.4*** (2.1) control of corruption -35.5* (19.3) -46.5*** (15.2) -13.2** (4.9) investment freedom (score in 2014) 0.670** (0.261) 0.622*** (0.203) 0.688*** (0.098) voice and accountability 3.71** (1.65) r2 0.35 0.52 0.23 0.41 p 0.011 0.001 0.000 0.004 n 24 23 301^ 24 notes. institutional variables are measured as increases of score unless otherwise specified. b-coefficient significance: * at p<0.1, ** at p<0.05, ** at p<0.01 according to the t-test. ^ means multiple counting of cases because of weighting. sources: authors’ calculations based on world development indicators, index of economic freedom and worldwide governance indicators. baltic journal of economic studies 16 vol. 5, no. 5, 2019 table 8 institutional variables in the selected cee countries. monetary freedom (min 0, max 100), 2019 rule of law (min-2.5, max 2.5), 2018 voice and accountability (min-2.5, max 2.5), 2018 belarus 67 -0.83 -1.35 czech republic 81.5 1.05 0.93 georgia 76 0.33 0.25 hungary 81.8 0.56 0.32 latvia 81.1 0.96 0.81 moldova 73.5 -0.41 -0.11 poland 82.1 0.43 0.72 romania 82.7 0.33 0.46 russia 65.1 -0.82 -1.06 turkey 70.0 -0.32 -0.83 ukraine 58.6 -0.72 -0.01 sources: index of economic freedom and worldwide governance indicators. raising monetary stability may result in growth of transport services exports of ukraine by additional 31-52% or 1.55% gdp depending on a specification of the models. improving the rule of law can lead to increase of tourism services exports by 58-202% or 8-12% gdp. enhancing voice and accountability may bring about an additional ict services exports growth by 77-160% or 0.8-0.9% gdp. 6. conclusions under transition to a new economic model, the effect of traditional economic growth factors depends on the quality of new institutions and enhancing their influence on motivation. the latter also depends on the development level of political system, which establishes the institutional framework of a new economic model. the central and eastern european countries experienced various trends in services exports growth in 2011-2017, but this growth turned out to be more stable than the goods exports growth. the multi-country models for services export competitiveness showed that institutional improvements may have a positive effect. meanwhile the institutional development level rarely influenced the services exports growth at least in the medium run. there are three main factors affecting competitiveness of services exports from the central and eastern european countries. each of them influences a particular industry. monetary freedom (currency stability and market-based prices) stimulates exports of transport services. the rule of law (including such issues as contract enforcement, property rights, efficiency of police and courts, absence of crime and violence etc.) is important for raising international tourism receipts. ict exports depend primarily on voice and accountability, i.e. the way a country follows democratic principles, respects human rights and has free media. as for financial and insurance services exports, no significant institutional factor was found. thus, industry specific approach accounting for services heterogeneity provides better understanding of the transmission mechanism affecting the competitiveness. several other institutional factors also may be important (control of corruption, political stability, labor freedom, government integrity, government effectiveness and lower government size), but their effect is not robust or cannot be distinguished from the effect of the above said factors. fighting corruption may have positive results for services exports unlike in case of goods exports, although additional studies are necessary to describe the effects. on the other hand, investment freedom is less important for competitiveness of services exports than in case of goods exports. using poland and latvia (two of the eu member states in the cee region) as a benchmarking level and the developed regression models enabled us to estimate a potential effect of institutional progress in ukraine if it implements affordable european institutional standards and practice. in particular, it can boost transport, tourism, information and communication technologies services exports by 30-200% or by 10-15% of its gdp. 7. acknowledgements this publication was prepared with the support of the erasmus+ program of the european 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(in ukrainian) baltic journal of economic studies 155 vol. 6, no. 5, 2020 corresponding author: 1 odessa state environment university, ukraine. e-mail: allamaksim74@gmail.com orcid: https://orcid.org/0000-0001-9420-0019 2 o.s. popov odessa national academy of telecommunications, ukraine. e-mail: verabezrodnaya@gmail.com orcid: https://orcid.org/0000-0002-5602-1930 3 odesa i.i. mechnikov national university, ukraine. e-mail: olyanicogosyan@onu.edu.ua orcid: https://orcid.org/0000-0001-9114-2271 doi: https://doi.org/10.30525/2256-0742/2020-6-5-155-162 digital economy as a factor in the development of a social state alla silenko1, vira bezrodna2, olga nikogosyan3 abstract. the digital economy is becoming a development trend in most modern countries, the basis for sustainable economic growth and living standards of the population. in this regard, it seems relevant to consider the significance of the impact of the digital economy on the welfare state. the purpose of the article is to study the influence of the digital economy on the quality and living conditions of citizens in a welfare state. methodology. the study is based on a systemic approach, within which the digital economy has been viewed as an external phenomenon (input) that has been able to affect the welfare state system (output). results. the hypothesis of the study that the digital economy improves the quality and living conditions of citizens in a welfare state was partially confirmed. however, it became clear that in addition to positive, the digital economy has negative consequences for people. for example, the digital economy improves the ability to solve many social problems, but at the same time creates new problems. for example, it creates new jobs, new professions, as a result of which workers in traditional professions become unclaimed. the digital economy not only solves and creates problems, but also exposes them. so, it has clearly outlined the problem of social inequality in ukraine. undoubtedly, the digitalization of public social services makes life easier for people, but only if they are prepared for this process. digital illiteracy of the population, characteristic of countries lagging behind in technological development, including ukraine, is an obstacle to the introduction of digitalization into the social sphere. at the same time, the state is not ready for the active introduction of digital technologies into the system of social policy yet due to the lack of necessary resources. digitalization will not improve people’s lives until the state has funds for social policy. and yet, some measures are being taken in this direction. key words: digital economy, welfare state, information and communication technologies, social risks, benefits of digitalization. jel classification: о33, о35 1. introduction the digital economy is becoming a development trend in most modern countries, the basis for sustainable economic growth and living standards of the population. in this regard, it seems relevant to consider the significance of the impact of the digital economy on the welfare state. the study of this problem, in addition to its theoretical relevance, is of great practical importance, since in fact we are talking about the real provision of such rights and freedoms of ukrainian citizens as the right to privacy of communication, the right to movement, freedom of speech and information, the right to privacy. for example, the introduction of a face recognition system became a direct threat to the latter. the purpose of the article is to study the impact of the digital economy on the quality and living conditions of citizens in a welfare state. to achieve this goal, it is necessary to solve the following tasks: to determine the degree of development of the problem; to analyze social achievements and risks of the digital economy; to consider the technologies of the digital economy that are used in the social state of ukraine. the hypothesis of the study is that the digital economy improves the quality and living conditions of citizens in a social state, because economic growth baltic journal of economic studies 156 vol. 6, no. 5, 2020 is a condition for social development. and the digital economy, largely due to the it sector, is growing much faster than the traditional economy. thus, the volume of information and communication technologies (ict) in the european economy is 5%. half of all productivity growth in europe is investment in ict (abeliansky and hilbert, 2017). thus, the process of solving social problems receives a new impetus. 2. the degree of development of the problems of the welfare state and the digital economy over the past 20 years, a lot of studies by ukrainian scientists have appeared on various aspects of the development of the social state, “which guarantees all people the realization of their rights and freedoms, equal conditions for the free development of an individual, social protection for those in need, achieving social and political stability by peaceful means and interests of all members of society” (silenko, 2000). scientists have studied the socio-political factors of the welfare state (silenko, 2000), the role of civil society in the formation of the welfare state, the welfare state model (khoma, 2012), the problems of the influence of globalization, political modernization on the welfare state (shulzhenko, 2007) and many others. at the same time, the issues of the impact of digitalization on socio-economic processes have not been sufficiently considered yet. this is due to the fact that the digital economy, which, in the full sense of the word, can change the world, was first discussed in the 90s of the 20th century. it was about a phenomenon that was rapidly penetrating into all spheres of human life. it was then that the first concepts of the digital economy began to appear. in particular, the concept of the internet economy by american economists j.k . mckie-mason and h. varian, as well as l.w. mcknight appeared. in their view, the internet economy is the economy of the internet services (kupchishina, 2018). for objective reasons, the benefits of the digital economy reached ukraine like other post-communist countries more slowly than the economically developed countries. therefore, we can say that research on the digital economy in ukraine is at an early stage. in addition, the digital economy is mainly the subject of research by economists. thus, the formation of the information economy is studied by a. maslov (maslov, 2012). the priority directions of the digital economy development in ukraine are studied by s. veretiuk and v. pilinskyi (veretiuk, pilinskyi, 2016). digital modernization of the ukrainian economy as an opportunity for breakthrough development is studied by v. liashenko and o. vyshnevskyi (liashenko, vyshnevskyi, 2018). theoretical aspects of the digital economy are studied by l. matveichuk (matveichuk, 2018) and others. at the same time, there are practically no studies of the socio-political problems of the digital economy. this explains our interest in this topic. in the post-soviet space, the problems of digital transformation of socio-economic systems are studied by iu. gribanov (gribanov, 2019). the education and development of the educational services market is considered by e. peshchannikova (peshchannikova, 2019). the socio-economic aspects of regional development in the digital economy are analyzed in the dissertation work by v. vilken (vilken, 2020). the concept of “digital economy” was introduced into scientific circulation not so long ago. in 1995, the american scientist nicholas negroponte first used it during a conversation with colleagues about the advantages of the new economic system over the previous one. at the political level, the phenomenon of the digital economy was first discussed at the g20 summit in antalya in 2015. the g20 leaders recognized that the digital economy included both positive and negative factors influencing global growth. they launched the g20 development and cooperation initiative in the digital economy since 2016 (g20 programma po razvitiiu…) in april 2017, the first meeting of g20 ministers was held, which adopted the “ministerial declaration on the digital economy of the g20” (konferentciia g20). it was planned that by 2025 all citizens of these countries would be connected to digital communications. today, the digital economy is discussed by officials and experts, economists and politicians, representatives of the technical and humanitarian professions, businessmen and students. but, as practice shows, they all put different meanings into this concept; for it workers, this is artificial intelligence, robotization, drones, etc. for businessmen, the digital economy is an “on-demand economy ”, that is, consumer-oriented. for physicians, this is telemedicine, which allows them to receive medical services regardless of the time and location of the patient. for civil servants, this is an e-government system. for ordinary citizens, these are electronic salary and pension payment cards, online payments for services and goods, an electronic queue, etc. in our opinion, the meaning of the content of the digital economy is conveyed most fully by the definition of h. karcheva and others, according to which the digital economy is “an innovative dynamic economy, which is based on the active implementation of innovations, and information and communication technologies in all types of economic activities and spheres of life of society, which allows to increase the efficiency and competitiveness of individual companies in the economy and the standard of living of the population” (karcheva, ohorodnia, openko, 2017). baltic journal of economic studies 157 vol. 6, no. 5, 2020 3. social achievements and risks of the digital economy the scientific discussions about the dangers and benefits of the internet have not been completed yet, and disputes about the dangers and benefits of the digital economy are flaring up in the scientific literature. this is not surprising, because everything has its pluses and minuses, and the digital economy is no exception in this sense. the digital economy is a “train that cannot be stopped”; therefore, the tasks of a modern state are, on the one hand, to minimize the risks of digitalization and, on the other hand, to maximize its positive impact on socio-economic development n. romanova points to the most important consequences of the digitalization of the social sphere, such as the growth in the volume of information aimed at the social sphere. it is not only about the spheres of distribution, exchange and consumption of vital goods and services, but also about the social aspects of economic activity, social and spiritual relations that contribute to the formation of human potential; the impact of the digital environment on raising the cultural level of the population (online access to the repositories of museums, library funds, etc.); the growth of the level of digital inequality, elitism of knowledge, the essence of which is that access to knowledge is gained mainly by the elite strata of society; the emergence of new and the disappearance of existing professions (romanova, 2020). olha pishchulina, a leading expert on social and gender programs at the razumkov center, rightly notes that «the impact of digitalization on society and the economy is ambiguous: on the one hand, the economy is developing at a new level of interaction of all its elements, on the other, the old system of production and distribution of goods is being destroyed. in this sense, it is no coincidence that digital technologies are characterized as “disruptive”» (dvi storony tsyfrovykh tekhnolohii…). the digital economy is also transforming such a phenomenon as social inequality, which, in the context of the formation of the information society, has acquired new forms, in particular, information inequality. after all, the benefits of the digital economy cannot be used by people with low incomes, insufficient education, and physical disabilities. this puts them in an unequal position compared to those who can afford to use digital technology to the fullest. also, social inequality is exacerbated by regional differences. in richer regions, people have more income, and thus digital opportunities, than in poor regions. at the same time, information inequality exacerbates social inequality even more. we agree with the researchers who point out that the benefits of the digital economy are unevenly distributed. what is progress for some countries is a threat to development for others. it is already obvious that the digital economy is undermining the foundations of a traditional society, a welfare state. traditional jobs are shrinking, wages are changing, the digital divide is widening, personal security threats are increasing, and much more. so, on the one hand, the digital economy provides a technological basis for socio-economic development, on the other hand, it reformats the structure of human capital. those professions that seemed fantastic yesterday are becoming commonplace today; those professions that seemed eternal yesterday disappear from the labor market today. of course, this primarily applies to technologically advanced countries. for example, the profession of a driver is under threat of extinction in those countries where robotization of road transport is highly developed and in the not too distant future technical problems of auto-driving a car will be solved. several years ago, specialists of the state employment service of ukraine, the authors of the atlas of new professions in ukraine, predicted the disappearance of some professions after 2020, namely conductors, postmen, information bureau operators, cashiers, travel managers, translators, accountants and others (konovalova, svetlevskaia, 2017). here the professions of the future are also indicated: a drone operator, in the medical field – a nanomedicine, bioethics, genetic consultant and others. indeed, today, in 2020, it can be stated that not all, but some of their predictions have come true. so the passenger traffic today is controlled with the help of e-tickets, the purchase of products is carried out through self-service cash desks, a taxi can be called via the internet. however, due to the technological backwardness of ukraine, not all forecasts have come true. in addition, experts cite cheap labor as another reason. if in developed digital economies robotization is being introduced in order to achieve a lower cost of production, then in ukraine the low cost of production is achieved precisely due to cheap labor. therefore, the ukrainian employer has no incentive to introduce the latest digital technologies. in technologically advanced countries, the digital economy opens up new opportunities for high-income employment. this is a space for the following categories of workers: inventors and manufacturers of digital technologies; workers providing the functionality of digital technologies; employees of the digital economy sectors interacting with digital systems as their appendages (operators); workers who lose their jobs as a result of the implementation of digital systems (kolesnik, 2018) of course, it is very difficult to predict what professions will be in demand in the digital economy in 10-15 years, but they will be associated with information. according to available forecasts, 51% of jobs in the european union will be automated by 2030. to reduce baltic journal of economic studies 158 vol. 6, no. 5, 2020 the social costs of this process, the european education system aims to teach the skills that will be required in the context of digital production automation (european commission…). and if everything is more or less clear with the future of professionals in the field of high technologies, the question arises: how much will be in demand in the digital economy for representatives of humanitarian specialties? it seems that analysts with the skills to work with large amounts of data related to the legal sphere, for example, digital intellectual property, will be needed in the digital labor market. considering that digital technologies are already penetrating all humanitarian professions, their representatives have every chance of finding their place in the new reality. there are already examples of successful cooperation between technical and humanitarian universities, the goal of which is to train a new generation of “humanities” with hard skills and “techies” with soft skills (tcifrovaia ekonomika…). the education system that implements distance learning technologies, on the one hand, expands the access of various segments of the population to quality education; on the other hand, the creation of information databases poses a threat to the confidentiality of students and teachers. it should also be borne in mind that the distance learning process is completely dependent on technical means. poor quality of internet connection can interrupt the finest lecture and practice. obtaining an exclusively distance education deprives students and teachers of communicating in an informal student environment, which can be an impetus for new discoveries and inventions. but, as the phrase attributed to socrates says, “the truth is born in dispute.” and even if those who believe that socrates later spoke about dialogue in this way are right, the meaning in our case does not change. remote communication limits the possibilities of non-verbal communication, which is known to be indispensable in an informal setting. nevertheless, it is indisputable that in the near future online courses will be more and more in demand, which is primarily due to the fact that as a result of the disappearance of a number of professions under the influence of digitalization mentioned above people will face the need to retrain several times throughout life. therefore, we can conclude that the principle of the educational strategy “learning throughout life”, which has emerged three decades ago due to unesco and the council of europe, is becoming more relevant. the use of digital technologies in medicine (telemedicine) has many advantages. this is also access to medical services for the population from remote rural areas. it also saves time for patients and doctors. this is an opportunity for family doctors from the same remote areas to receive urgent advice from specialists on the necessary measures to treat patients and much more. at the same time, telemedicine cannot solve all the existing problems of patient care. one of the problems, which are especially important, is that, while distance education services are usually used by young people, there is a large proportion of older people among the recipients of medical services; of these, only a few are digitally literate. according to a recent study of ukraine’s digital divide carried out by the ministry of digital transformation in cooperation with undp, east europe foundation, the edera educational platform and other organizations, only 26% of the older generation considers it important to acquire digital skills (podolannia tsyfrovoho rozryvu…). the same study has concluded that for older people, the most in-demand electronic services are utilities, medical and financial services. digital literacy is the most important factor without which the development of modern society, e-democracy, e-government, political participation, improvement of anti-corruption tools, e-health, and smart cities is impossible. but no “smart” technology can be useful if people are unable or unwilling to use them. thus, the problem of people’s readiness to digitalize their lives arises. according to the ministry of digital transformation of ukraine in 2019, 53% of ukrainians had digital literacy at a level below average. in 2020, the ministry launched a national test for digital literacy “cifrogram” (mintcifry zapustil natcionalnyj test…). it goes without saying that society needs security systems, personal and collective. however, in exchange for security, the state deprives the individual of the confidentiality of personal data. more and more people’s lives are under the control of video surveillance systems, in terms of tracking mobile phones. collecting information about the population is becoming commonplace in many countries. ukraine is also following this path, although not so quickly due to the lack of technological, administrative and financial resources. china has especially “succeeded” in this, which is actively implementing the national program “creating a social credit system” (2014-2020), within the framework of which all residents are monitored online. their reward or punishment depends on the so-called “social credit” of chinese residents. at first glance, this program has good intentions: it helps in solving social problems such as crime, homelessness, corruption, violation of various social rules. amid the coronavirus pandemic, 170 million video cameras in major chinese cities are helping to track those who violate selfisolation. all this speaks of the contradiction between the desire for security and the problem of violation of human rights and freedoms by the state. similar systems of total surveillance under the pretext of combating the coronavirus pandemic are being introduced in russia, iran, europe, and the united states. the difference is that in democracies they will be dismantled after the baltic journal of economic studies 159 vol. 6, no. 5, 2020 pandemic. but as far as countries with non-democratic regimes are concerned, there is a possibility that such systems that violate human rights will continue to be used under various pretexts. 4. digitalization as a tool to combat bureaucracy and corruption in welfare state as you know, one of the restraining factors of the welfare state is bureaucratization and corruption. digitalization is recognized worldwide as a tool that can significantly reduce the level of these social phenomena. it has already become axiomatic that the more transparent and open the public administration system, the lower the corruption risks. the ukrainian government is also making such anti-corruption attempts. “speaking about the implementation of digitalization in all areas of the ukrainian society, the new government means, first of all, electronic document management, digital signatures, open and accessible databases and much more. the main goal is to free ukrainians from paper bureaucracy, endless queues at government agencies and the need to confirm the saying “you won’t go unless you drease”, which has already become a tradition for them (silenko, 2019). it also seems expedient to use foreign experience in the effective use of digital technologies in ukraine for interaction between citizens and the state. for example, in south korea, any citizen has the opportunity to file an online corruption report and track the process of its consideration. the south korean citizen is confident that his or her statement will not pass by the attention of law enforcement agencies. in singapore, due to the introduction of it technologies, the state apparatus was significantly reduced. in public places, citizens can receive electronic services and reference information through special terminals. citizens use their mobile devices to connect to government social service ports. how quickly the sphere of social policy will be digitized will determine how long officials will physically influence the process of solving social problems of citizens. despite the low level of digital literacy of the population and officials, neither one nor the other has doubts about the benefits of digitalization. in favor of the digitalization of the public administration system, including in the social sphere, the following arguments can be made: – public authorities are becoming more sensitive to the needs of citizens, less costly and hierarchical; – the obligation to publish government information strengthens government accountability to citizens; – the work of officials is facilitated, the procedure for their relationship with citizens is improved; – citizens get the opportunity to receive social services as soon as possible without visiting officials; – increasing the level of openness and transparency of the decision-making process improves opportunities for combating corruption; – the introduction of digital technologies into public administration has economic efficiency. some scientists, based on the analysis of research results, conclude that officials, introducing information technologies into the activities of their structures, think, first of all, about the personal benefits. and not in order to make life easier for citizens (solodov, 2008). perhaps it is but citizens, for whom appealing to government bodies becomes less bureaucratic and more effective, do not care about the motivation of officials. indeed, in the context of the introduction of information technologies into public administration, in the so-called e-government, it is no longer so easy for officials to bureaucratize the process of providing citizens with social services. however, their disinterest in the loss of the monopoly on information and transparency of activities leads to the fact that the traditional bureaucracy is being replaced by a new form of bureaucracy – electronic. according to s. kabashov, “a characteristic feature of e-bureaucracy, in contrast to the classical one, is creativity, the transition from one management project to another by attracting our expanding networks and constantly updated knowledge to effectively perform management tasks” (kabashov). officials as well as all citizens are given the opportunity to use the benefits of digitalization for their own purposes. today we can already say that the expectations of those who believed that the bureaucracy in the digital economy would weaken its influence did not come true. moreover, we can say that, on the contrary, the influence of the bureaucracy, now electronic, has increased. in this regard, one of the most famous american political consultants, d. morris, wrote that the executive bureaucracy has only one goal – to maintain its monopoly (morris, 2003). 5. technologies of the digital economy in the social state of ukraine the digital economy emerges from the traditional economy through the process of digital transformation. according to iu. gribanov, “digital transformation is the introduction of modern digital technologies in business processes of socio-economic systems of all levels” (gribanov, 2019) we share the opinion of the researcher that this process includes not only the provision of modern equipment and software, but also new approaches to management, corporate culture, external communications, etc. all this is the key to the success of not only the organization as a whole, but also each employee individually. this is understood by ukrainian business, which is introducing digital technologies into its activities more and more baltic journal of economic studies 160 vol. 6, no. 5, 2020 intensively. but state organizations and institutions are still far behind. therefore, on january 17, 2018, the ukrainian government adopted the concept of the development of the digital economy and society of ukraine for 2018-2020 and approved an action plan for its implementation. with the arrival of the new ukrainian government in 2019, a decisive course was taken towards the digitalization of the country, as evidenced by the creation of the ministry of digital transformation of ukraine (ministry of digital transformation). ambitious goals for the digitalization of ukraine until 2024 have been proclaimed: 100% of public services will be available to citizens and businesses online; 95% of transport infrastructure, settlements and their social facilities will have access to high-speed internet; 6 million ukrainians will be attracted to the digital habits development program; the share of it in the country’s gdp will be 10% (ofitsiinyi sait ministerstva…). however, unfortunately, the website of the ministry does not have a 4-year step-by-step program that will allow to achieve these goals. as noted on the website, the ministry of digital transformation of ukraine is working to ensure that the most vulnerable segments of the population receive social services in a quality and timely manner (ofitsiinyi sait ministerstva…). today, according to the ministry, 37% of hospitals do not have high-quality internet, which means that there are no technical conditions for the development of telemedicine. also, the lack of the internet creates inconvenience for hospital patients. 40% of ukrainian schools lack a high-quality internet connection (ofitsiinyi sait ministerstva…). one of the first steps on the way to the digital economy was the internet application “diia” within the framework of the “state in a smartphone” project, which has been operating in ukraine since february 2020. ukrainians have been able to use government services via the internet. the masterminds and developers of the project plan that in 3-5 years all public services will be digitized. the first state services in digital format, which have been received by the citizens of ukraine, are an electronic driver’s license and a vehicle registration certificate. for this, 6 million driver’s licenses have been digitized in a short time. it should be noted that these are not the first online services for ukrainian citizens. for several years now, an e-government system has been introduced in the country, the purpose of which is to minimize bureaucracy and corruption in the field of public administration. by the time diia internet application was introduced, 125 different electronic services were already available for the population, including the registration of housing subsidies. to implement the reform of social protection and the protection of children’s rights in the process of decentralization, the ministry of digital transformation of ukraine aims to introduce those digital technologies that will bring social support and social protection closer to people. community representatives will have the opportunity to digitally transmit to the relevant executive authorities all appeals from citizens and organizations on social issues. administrative service centers (asc) will be created in each territorial community. local governments will be able to connect to the digital platform “social community” free of charge. convenient and accessible internet services will be provided to citizens in need of social support. according to liudmyla rabchynska, deputy minister of digital transformation of ukraine, “starting from 2021, all ascs will accept applications and documents for assigning social support. this step will significantly increase the effectiveness of social protection of the population. in addition, the ministry of digital development plans to introduce and provide electronic information interaction in the provision of administrative services of a social nature, including through the administrative service centers” (ofitsiinyi sait ministerstva…). on august 5, the ukrainian government approved the state strategy for regional development for 2027. much attention in the document is paid to digital transformation. the strategy plans to implement 60 digital transformation tasks. among them, it is especially important to increase the digital literacy of the population, ensure uninterrupted access to high-speed internet for all settlements (primarily, rural and small towns); receiving electronic services via a smartphone; introduction of electronic document management; development of e-democracy mechanisms, etc. the document also provides for the introduction of a system for electronic receipt of documents and the provision of the possibility of applying for social services through online services and electronic queuing systems. in the field of education, it is planned to create an electronic educational system, introduce modern curricula at all levels of education for the effective formation of modern digital skills and the introduction of new professions. (tsyfrovizatsiia – odyn z holovnykh prioritetiv…). in october 2020, the cabinet of ministers of ukraine adopted a decree “on approval of the strategy for digital transformation of the social sphere”. the goal of a comprehensive digital transformation of the social sphere is “to ensure european standards for the provision of services, strengthen financial stability, increase the transparency of the social sphere, and optimize its administrative costs.” in particular, the provision of social services through outsourcing, automated monitoring and control of all financial flows in the social sphere will allow to optimize administrative costs. it is assumed that the measures taken will make it easier for the population, including for its vulnerable groups, access to social services (kabmin zatverdyv…). baltic journal of economic studies 161 vol. 6, no. 5, 2020 however, we have to state that the level of ukraine’s readiness for digitalization is still low. experts emphasize the relevance of the issue of the readiness of the ukrainian market to purchase it products, noting that “the need for digital products in ukraine, in particular software, is at a low level of 15-16%, while in the world market it is about 60%” (prezentatsiia analitychnoho doslidzhennia…). 6. conclusion an analysis of the degree of development of the problem showed that the issues of the digital economy are mainly in the sphere of interests of scientistseconomists, while the socio-political aspects of the digital economy are not yet fully investigated. in particular, there are still no comprehensive studies of the impact of the digital economy on the development of the welfare state in ukraine. the hypothesis of the study, namely that the digital economy improves the quality and living conditions of citizens in a welfare state, was partially confirmed. however, it became clear that in addition to positive, the digital economy has negative consequences for people. for example, the digital economy improves the ability to solve many social problems, but at the same time creates new problems. for example, it creates new jobs, new professions, as a result of which workers in traditional professions become unclaimed. the digital economy not only solves and creates problems, but also exposes them. so, it clearly outlines the problem of social inequality in ukraine. in addition, it should be recognized that there will be no digitalization and social policy unless sound investments. such a state is doomed to catastrophically lag behind economically developed countries. the use of digital technologies in the social sphere does not eradicate bureaucracy and corruption, but helps to reduce their level. processes for providing public services, conducting public procurement and managing budget funds are becoming more open, transparent, and therefore more honest. undoubtedly, the digitalization of public social services makes life easier for people, but only if they are prepared for this process. digital illiteracy of the population, characteristic of countries lagging behind in technological development, including ukraine, is an obstacle to the introduction of digitalization into the social sphere. at the same time, the state is not ready for the active introduction of digital technologies into the system of social policy due to the lack of necessary resources. no amount of digitalization will improve people’s lives unless the state has funds for social policy. some measures are being taken in this direction. in particular, technologies are being introduced to improve the digital literacy of the population, to ensure uninterrupted access to high-speed internet for all settlements (primarily, rural and small towns); receiving electronic services via a smartphone; introduction of electronic document management; development of e-democracy mechanisms. it is also planned to introduce a system of electronic receipt of documents and ensure the possibility of applying for social services through online services and electronic queue systems, etc. the digital future is not far off and the welfare state must be ready for it. references: abeliansky, a. l., & hilbert, m. 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journal of economic studies 305 vol. 4, no. 5, 2018 corresponding author: 1 ivan franko national university of lviv, ukraine. e-mail: okssenyshyn@gmail.com 2 lviv institute of private joint-stock company “higher educational institution “interregional academy of personnel management”, ukraine. e-mail: antonyaklviv@bigmir.net doi: https://doi.org/10.30525/2256-0742/2018-4-5-305-314 using the world experience of developed countries in the formation of directions for improving the process of development and implementation of government targeted programs for natural environmental protection oksana senyshyn1, marta olikhovska2 abstract. the scientific article deals with the directions of improvement of the process of development and implementation of state targeted programs for protecting the natural environment in ukraine. in particular, state targeted programs of environmental protection in ukraine are the subject of this research. methodology. a set of scientific research methods is used to realize the goals and tasks defined in the scientific article. namely, the comparative method was used to compare the foreign experience of developed countries in the field of state programming of environmental protection and its adaptation to the conditions of ukraine; to compare indicators that determine the level of development and implementation of state target programs of environmental protection in ukraine; economic and statistical method used to investigate the state and trends of the development of the state programming system in ukraine, to identify the main problems and obstacles related to its functioning; graphic interpretation method made it possible to visualize the principal scheme of management of domestic state target programs of environmental protection; the method of theoretical analysis, systemic and analytical methods, method of generalization, methods of grouping contributed to the identification of the main directions of improvement of the processes of development and implementation of state targeted programs for the protection of the natural environment in ukraine. information and reference base of scientific research consists of laws and other legal regulations of ukraine on environmental protection issues, international documents, analytical and statistical materials of the state statistics service of ukraine, reports on the implementation of state target programs for 2010–2016, scientific works of domestic scientists, periodicals, results of the authors’ personal observations. practical implementation. the authors have summarized their research results on the possibility of using the schematic model of managing the state targeted environmental protection program in ukraine for the aspects related to creation and functioning of the coordination council, led by the program manager. the above mentioned coordination council is an advisory (collegial) body that operates on a voluntary basis. it is also substantiated that for ukraine worthy of attention is the experience of the european union countries, which radically changed the system of state management of environmental protection, and revised the balance of competence of different levels of government, through systematic improvement and alignment of the mechanisms of environmental management with international legal, normative-methodical and institutional basis of ecological management and ecological safety. the scientific value of research results. in the form of directions for improving the process of development and implementation of state targeted programs for the protection of the natural environment in ukraine, a set of key recommendations has been proposed for improving the efficiency of functioning of the system of domestic state programming for natural environment protection. key words: state target program of environmental protection, programming, efficiency, state ecological policy, mechanism of state target ecological program management. jel classification: q56, o13, h53 baltic journal of economic studies 306 vol. 4, no. 5, 2018 1. introduction the current practice of state programming of environmental activities shows a low efficiency of state regulation in this area. this is primarily due to the imperfection of the economic, legal, political, social mechanisms of environmental activity, the low level of its implementation in the practice of management, the lack of scientific research in this area, neglecting domestic and foreign best practices. the main feature of the effective implementation of the state targeted programs (stps) of environmental protection in ukraine is their even and proportional financing throughout the implementation period. it requires involving both, budgetary and extrabudgetary funds, under constant and comprehensive control at all stages. the issues related to using the mechanism of state target programs and assessing their effectiveness in the economy of ukraine were investigated in a number of to scientific researches, conducted namely by such economists as v. m. heiets (2008), l. s. hryniv (2010), b. m. danylyshyna (2008), o. s. zarzhytskyi (2012), l. h. melnyk (2003), t. o. moshchytska (2010), o. v. faychuk (2015), l. m. yakushenko (2015), l. d. yatsenko (2015), and others. many publications of foreign scholars have been devoted to the study of theoretical and methodological and applied aspects of state environmental policy, in particular, state programming, such us: c. kolstad (1999), r . macrory (2006), n. stanley (2009), s. wolf (2009) etc. the purpose of the article is to identify the main directions for improving the process of development and implementation of state target programs of environmental protection in ukraine through the prism of the elaborated recommendations aiming to strengthen the control over the implementation of state targeted economic programs of environmental direction. 2. the main problems related to the implementation of state target programs for the protection of the natural environment in ukraine as follows from the recent scientific researches, financing of state target ecological programs can be effective only in case if at least 80% of planned funds are allocated from the budget with their consequent optimization by the method of program-targeted planning. in turn, governmental financing of state target environmental programs in the range of 35–80% of the need may take place, as it generally leads to an improvement in the state of the environment and people’s health. at the same time, if the share of the state financing is less than 35% of the total funds provided it is more likely to lead to misuse of public finances (senyshyn, 2017). in order to elaborate proposals for improving the process of developing these environmental protection programs, it is necessary to indicate a complex of systemic deficiencies in the implementation of state target ecological programs, namely: 1. governmental stakeholders in spite of the requirements of article 8 of the law of ukraine “on state target programs” (verkhovna rada ukrainy, 2004):  do not conduct a proper control over the implementation of activities and tasks of programs;  practically do not participate in conducting an annual analysis of the state of implementation of programs;  do not provide active work towards involving nonbudgetary sources of funding, especially in conditions of budget funds cut down (ministerstvo ekonomiky ukrainy, 2016). 2. the state environmental protection programs have not become an active and effective tool for implementing the state environmental policy, which should provide a solution of the most important environmental problems, individual branches of the economy. they act as a “formal paper with a declaration of intention to do something” (zarzhytskyi, 2012). 3. within the framework of planning and using the state budget funds, the principles of prioritization of the problems’ resolution are not fully respected. financial resources are sprawled. 4. estimated volumes of financial resources of programs, including the state budget, are often not consistent with the real possibilities of their financing. 5. in contradiction to the requirements of the paragraph 29 of the procedure for the development and implementation of state target programs approved by the resolution of the cabinet of ministers of ukraine dated january 31, 2007 no. 106 (hereinafter – the procedure), the programs do not include methods for evaluating the effectiveness of their implementation, with due consideration to the limiting regulation for the use of natural resources, and with the legal emission standards (i.e. maximum permissible emission, maximum allowable discharges, maximum permissible pollution level), which should be developed by the state requisition maker taking into account the specificity of the program and its final results (verkhovna rada ukrainy, 1991). 6. there is no opportunity for public control (paragraph 50 of the order). 7. state requisition makers often use a formal approach to meeting the requirements of the current legislation in the field of development and implementation of state target programs. 8. unsatisfactory reporting by government stakeholders: non-compliance with deadlines, information is not provided in full and not provided by all executives. 9. the expenditures for the financing of state environmental protection programs are represented in the state budget with lack of transparency. baltic journal of economic studies 307 vol. 4, no. 5, 2018 according to the proposals of the ministry of economic development and trade of ukraine, following the results of monitoring of the years 2015-2016 (ministerstvo ekonomiky ukrainy, 2016): the state stakeholders continue ignoring the necessity to comply with the provisions of the legislation in the field of development and implementation of the state targeted programs; has not been ensured elaboration of draft normative legal acts on amendments to the programs in terms of clarification of the results indicators, the amounts of financing program tasks and measures, the timing of their implementation, taking into account the actual amounts of funding and the results achieved; government stakeholders have not developed methods for assessing the effectiveness of the implementation of state target programs, taking into account their specifics and end results. the strategic objectives set out in the “basic principles (strategy) of the state environmental policy of ukraine for the period until 2020” should be the benchmark when prioritizing objectives of state programs of environmental protection, rational use of natural resources and ensuring environmental safety (verkhovna rada ukrainy, 1995). 3. experience of developed countries in the field of state programming of environmental protection and its adaptation to the conditions of ukraine the experience of developed countries shows that due to conducting research works in the sphere of environmental protection, it is possible to achieve significant savings in implementing environmental measures and significantly reduce the damage from pollution and depletion of environmental components (avramenko, kushch, 2016). our scientific research confirmed that the governments of the leading countries of the world pay great attention to the problems of programming of environmental protection and environmental safety not only at the interstate but also at the state and regional levels (hrusheva, 2007). the approach used by the world’s leading countries to address these problems is directly based on the understanding that they must be solved locally, where the economic and social life of society is concentrated. from this point of view, it is worth to explore the experience of state programming in the field of natural environment protection in japan, where a number of administrative measures are widely used, including (kernychna, 2013): introduction of standards for production quality and the state of the environment; ecological expertise; concluding agreements between local authorities and enterprises on pollution control, etc. one of japan’s most effective measures for environmental protection programming is the application of the “polluter pays” principle. also, the country is a leader in using the ecologically friendly technology approach to guaranteeing environmental safety through the development of science. in the united states, as well as in europe, priorities have changed in the fight against atmospheric pollution. the main programs are targeting the creation of environmentally friendly technologies, but not on the improvement of waste and polluting emissions treatment. the us bill “on water resources” provides for the implementation of 16 environmental programs. criminal liability is established for intentional discharge of polluted wastewaters into the natural reservoirs, which threaten the health and life of people. having created the necessary economic mechanism, the americans managed not only to stop further pollution of the natural environment but also to significantly improve its quality. in the united states, environmental protection targets are set by the federal agency for the conservation of nature, and then each state separately proposes concrete measures for their implementation, linking them with their industrial development plans (avramenko, kushch, 2016). since 1973, special conservation programs have been developed in western europe. in these programs, the concept of sustainable development has been commonly recognized, according to which environmental and economic objectives should be aligned in the dynamics. and at the level of the european union, its member states have developed principles and general measures for legislative acts in the field of nature protection. new by the content policy of preservation of the environment is implemented in the form of national programs, which provide for the interaction of public authorities, the private sector, science, financial institutions. in all countries, laws on the protection of the natural environment have been adopted, in which the functions of the state for environmental protection regulation are defined, as well as the rights and obligations of environmental users are identified. for example, among such laws should be mentioned the law “on national environmental policy” (1970) of the united states of america, the law “on addressing environmental pollution” (1967) in japan, the law “on environmental protection” (1969) in sweden. special legislation aimed at preventing and eliminating violations of the quality of individual components of the environment is being implemented. also, the legislative system on environmental protection is based on numerous regulations issued by local authorities, which take into account the natural geographic and socioeconomic specifics of a particular region (avramenko, kushch, 2016). in the 1970s in the united states, a provision was made for mandatory state ecological expertise in all areas of economic activity. the policy in the field of environmental protection and financing of baltic journal of economic studies 308 vol. 4, no. 5, 2018 environmental protection measures are based on the principle of quality standards of the state of the environment. it can be provided by a system of standards on the permissible levels of anthropogenic loading, on the composition of pollution, emissions, discharges, or by the system of taxation of enterprises that allow violations of established requirements of nature use. both principles can be organically interconnected. an effective method of controlling emissions is the introduction by the us environmental protection agency of “permits” on the maximum allowable amount of pollutants that can be emitted into the environment. this measure has enabled firms, whose pollutant emissions are lower than the limit set for them, to sell their rights to other firms. the uk’s environmental policy is based, first of all, on the qualitative characteristics of the environment. it is recognized that it is necessary to carry out an environmental assessment before planning and designing any construction, and in the future – periodic monitoring of the state of the environment should be applied. regarding ecological planning and programming, the initial version of the environmental expertise is compared with other variants of estimates, which allows more optimal determination of the parameters of anthropogenic impact (hrusheva, 2007). in hungary, the management of activities in the field of nature conservation is distributed among different ministries and departments. according to the law “on the protection of atmospheric air”, in bulgaria, only the use of technology that ensures the minimum and allowable emissions of harmful substances into the air is compulsory for enterprises. the use and protection of the environment in poland are regulated by the constitution, laws, and other legislative acts of the state. the state environmental inspectorate monitors compliance with laws and regulations (kernychna, 2013). in foreign countries, numerous economic and regulatory instruments are used. they are quite effective and diverse. as a result, many of the economically developed countries of the world have accumulated considerable experience in using various economic methods and tools for regulating the process of development ecologically friendly entrepreneurship at the macro and macro levels of economic activity. in france, the control of water protection is carried out on the basis of the law adopted in 1964. under this law, six basin administrations operate in the country. in the united kingdom, according to the water resources act (1973), 10 regional water committees monitor the status of the quality of water. in the netherlands, in accordance with the law on surface water pollution, industrial enterprises and municipalities are required to have a waste disposal license (tunytsia, 2006). in germany and the other countries of the european union, the strategy of ecologically oriented management and environmental entrepreneurship is developed and implemented as one of the important areas of environmental modernization. in addition, all german companies are required to pass an environmental audit. most countries have adopted their national standards that regulate environmental audit. thus, in june 1993, the main principles and provisions of environmental accounting in the eu were adopted, which came into force in april 1995. according to estimates of the “german environmental agency in the area of environmental professional training and advanced training of specialists” now professional environmental interests are grouped according to their priority for those who study, as follows: waste management; environmental law; water economy; soil protection; energy saving; environmental protection at enterprises; regional ecological planning and programming; ecological expertise; environmental policy, etc. (salatiuk, 2013). foreign practice shows that active state regulation is the basis of the whole environmental protection system in economically developed countries. in these regulations, significant priorities are given to economic stimulation and support of entrepreneurship that is developing in the direction of developing ecologically friendly social production. thus, social, ecological and economic integration of ukraine should necessarily take into account the foreign experience of the mechanisms of nature use regulation through systematic improvement and alignment with the international legal, normative-methodical and institutional basis of environmental management and environmental safety. the experience of foreign countries in the field of environmental programming demonstrates their readiness to actively participate in solving global environmental problems. this put on the agenda the adoption by ukraine of relevant laws on the implementation of environmental objectives in the national policy and its adaptation to the european ecological space, the harmonization of national environmental requirements, standards and restrictions with corresponding indicators of the leading countries of the world. in particular, the experience of the european union countries would be extremely useful for ukraine, since these countries have radically changed the system of state management of environmental protection, and revised the hierarchy of competences of the various levels of state authorities. 4. modelling the process of management of the state target program of environmental protection in ukraine it is important to note that during the formation of state target environmental protection programs, it is necessary to use a model that would allow certain mobility of financial funds that is required to tenable baltic journal of economic studies 309 vol. 4, no. 5, 2018 equal allocation of financial resources in order to obtain the maximum net environmental protection result (hryniv, 2016). implementation of state target programs for the protection of the natural environment requires considerable funds and it is necessary to carefully approach their formation and involve all possible sources of their financing. in order to determine the strategy of formation and coordination of work on implementation and resource provision of tasks and measures of state targeted programs for the protection of natural environment, a program coordinator is formed by the program’s initiator, which is the consultative (advisory) collegiate body that operates on a voluntary basis. the principal scheme of government targeted environmental protection program is shown in figure 1. summing up the above, it should be emphasized that the effective implementation of state target programs for the protection of the natural environment requires: improvement of the legal and regulatory framework for the process of their formation and implementation; developing appropriate methods for assessing the effectiveness of implementation for each target program, taking into account their specifics and end results; formation of state, regional, and local environmental funds for state target programs for the protection of the natural environment in order to accumulate and use of financial resources in an optimal way; creation of an information support centre of state target programs for the protection of the natural environment; clearly defined and specially authorized bodies of management and control over state target programs within the framework of the program implementation. in addition to the main controlling functions, the management bodies of state target programs for the protection of the natural environment must perform the functions related to: • development and implementation of measures to mobilize financial, credit, material, and other types of resources for the implementation of tasks and activities envisaged by the program; • creation of structural subdivisions and mechanisms for the development and implementation of the program; • preparation of tasks and measures for the program implementation, assessing their effectiveness and determination of the cost of their implementation; • management of scientific and informational services to support state target programs for the protection of the natural environment; • organization of conducting procedures of ecological expertise, independent ecological audit at all stages of implementation of program tasks and measures; • coordination of state target programs for the protection of the natural environment with programs of socio-economic development of the state and regions. therefore, the implementation and dissemination of the use of state target programs for the protection of the natural environment in the system of state regulation of environmental protection, rational use of natural resources and ensuring environmental safety will be effective due to their peculiarities. the most important of them, in our opinion, are: – identification and orientation of all stages of management activity to achieve a clearly specified program goal; the goal should be specified in the relevant qualitative and quantitative indicators rather than in general, such as “improve”, “increase”, “enhance”, etc.; – establishment from the beginning to the completion of the program implementation certain responsibilities main initiator of the state targeted ecological program management of state target ecological program coordination council of the program state body, whose decision approves the program ministry of economic development and trade of ukraine ministry of ecology and natural resources of ukraine 1 2 3 enterprises-performers of the program …. а б ….. regional, municipal departments of ecology and natural resources figure 1. principal scheme of management of state target programs for the protection of natural environment source: compiled by the author baltic journal of economic studies 310 vol. 4, no. 5, 2018 of the target organizational units for the effectiveness of measures and tasks that are carried out both during the period of the program execution and during the process of resource provision; – identification of all types of resources required for the implementation of program tasks and activities with their ranking according to the priority level; – conjunction and coordinating the activities of various sectoral and territorial branches of management, in particular via the program coordinating council; – ensuring the consolidation of inter-sectoral interests in solving territorial problems; – concentration on the results to be obtained; – a clear idea of the result increases the viability of attracting all kinds of resources. 5. recommendations for improving the efficiency of functioning of the system of domestic state programming for the protection of natural environment therefore, in our opinion, the consideration of the following proposals will contribute to the improvement of the process of development of state targeted programs for the protection of the natural environment in ukraine: 1. promotion of innovation activity and research work in the field of monitoring the state of the environment, including: providing sufficient state support to research programs related to assessing the natural resource potential of ukraine, developing and implementing a system of indicators for balanced development and spatial planning methods, the impact of environmental factors on the health of the population, as well as demographic trends; conducting fundamental research on the formation of a new ideology of the life of ukrainian society, aimed at the environmentally friendly economy, production, consumption, politics, education; investigating the ability of natural ecosystems to withstand anthropogenic burden; economic evaluation of the cost of natural resources; promotion of scientific research in the field of effective teaching methods, tools for assessing the balance of development, the formation of lifestyle, attitudes and values. 2. increasing public involvement in the development of state environmental protection projects. 3. transparent information provision and access to reports on the implementation of state programs in the field of environmental protection. 4. establishment of stable bilateral communication and cooperation between the developer of state environmental protection programs and the public environmental organizations and active population. 5. the initiator of the program should ensure constant awareness of the population on the solution of local and national environmental problems and the process of transition to a balanced development with the active involvement of the media. 6. improving the efficiency of management and professionalism of the executors of state programs in the field of environmental protection, including: ensuring the proper training and qualification improvement for persons authorized to perform public functions on balanced development, in particular balanced development planning; ensuring transparent decision-making on the use of natural resources, the implementation of investment projects that affect the quality of life of people, with the involvement of interested persons during their public discussions; compulsory following the legal procedures for decisionmaking in the field of environmental protection; introduction of clear mechanisms of reporting on the results to citizens at all levels; promoting a more complete integration at the vertical level between local and state authorities in the process of decision-making. it is also necessary to change the approach to strategic planning in developing state environmental protection programs, based on the following:  the whole society, not just the state, is responsible for the environmental conditions;  not a fixed plan should be developed, but a system that can be continuously improved;  goals are determined based on an integral and complex approach;  decisions are made transparently;  continuous analysis of the results in order to improve environmental management. 6. development of a schematic model for the effective implementation of the state target program for the protection of the natural environment in ukraine state target programs of environmental protection, rational use of nature (hereinafter – step) is an integrative environmental policy instrument, as well as the most effective and consistent with the principle of state regulation. its successful application enables the most effective addressing of a set of complex problems associated with the environmental issues in ukraine. on the basis of our research, we elaborated proposals aimed at improving the development of state targeted environmental protection programs in ukraine. we believe that the model for the effective implementation of the state target program for the protection of the natural environment should look like this (figure 2). according to the list of state target programs that were implemented within the framework of budget programs in 2015, there were 6 environmental programs against 18 in 2010 (ministerstvo ekonomiky ukrainy, 2016). during 2014-2015, there were positive trends regarding the improvement of the management of the step: baltic journal of economic studies 311 vol. 4, no. 5, 2018 • the share of financing is gradually increasing, for example in 2015, the national target program for the development of the water sector and the environmental rehabilitation of the dnipro river basin for the period up to 2021 was financed by 89.4%; the state target program “forests of ukraine” for the period of 2010–2015 has been financed by 305.7% (verkhovna rada ukrainy, 2012; kabinet ministriv ukrainy, 2009); • certain efforts are made to systematize and integrate programs for a more comprehensive solution to the problems of environmental protection and reproduction. the questions of optimization of state target programs and improving their operational management are considered in the order of the cabinet of ministers of ukraine dated march 23, 2011, no. 223-p, and the resolution of the verkhovna rada of ukraine “on main directions of budget policy for 2012” dated may 13, 2011, no. 3358–iv; • the previous experience of programs’ realization is taken into account: the miscalculations of the implementation of the program of integrated flood protection in the basin of the tysa river in the transcarpathian region for 2002–2006 and the forecast by 2015 are taken into account in the development of the national target program for the development of water management and ecological improvement of the dnipro river basin on the period until 2021 and the national target program “drinking water of ukraine” for 2011–2020 (verkhovna rada ukrainy, 2012, verkhovna rada ukrainy, 2011). 7. conclusions and recommendations however, an analysis of the implementation of environmental target programs in ukraine shows that there are significant miscalculations when applying them as an instrument of environmental policy. 1. the lack of financing of state target programs leads to the dispersal of budget funds and a significant reduction in efficiency. according to the reports of the ministry targeted ecological program making a decision on the creation and approval of the program’s passport identifying the acute environmental problem searching sources of funding (other than public) appointment of responsible executors definition of the terms of realization and payback period creation of an effective body for monitoring the implementation of the program financing of the program and its implementation financing from the state budget funding from other sources execution of state programs amount of financing timing of funding amount of financing terms of financing coordination throughout the funding period direct impact on the successful implementation if all criteria are met, the program is approved figure 2. a descriptive model of effective implementation of the state the target program of environmental protection source: compiled by the author baltic journal of economic studies 312 vol. 4, no. 5, 2018 of ecology and natural resources of ukraine, the state target environmental program for environmental monitoring (2008-2012) in 2010 was actually financed only by 9.2% of the planned annual amount. 2. there are a lot of unresolved fundamental problems of identifying priorities for the formation of state programs, and no effective mechanism for selecting problems. the programs’ measures are orientated to achieve the goal of overcoming the consequences, rather than the implementation of adequate preventive measures. 3. lack of linking the financing of state target programs with the capacity of the state budget during the whole term of the program implementation. “the national program for the development of the ukrainian mineral resources base for the period up to 2030” in 2012 had an actual amount of financing of 52% of the planned amount. it was caused by lower incomes to the state budget from the fees for geological exploration work carried out by naftogaz, which is allowed to postpone its tax liabilities. 4. the low level of programmatic and interprogrammatic coherence on the background of a large number of areas and a significant number of state target programs leads to duplication of tasks and activities of state target programs, which creates the possibility of financing the same activities from the budget funds under various programs. this, in turn, requires an urgent review of government targeted programs in order to exclude duplicate activities. for example, the national program “drinking water of ukraine for 2011-2020” contains some of the measures having been already announced in the national program for the ecological recovery of the dnieper and improvement of the quality of drinking water. 5. the lack of proper monitoring and control over the implementation of state target programs hinders properly conduct and adjust the implementation of the step. this impedes the establishment of reliable control over execution by both the responsible manager of funds and the ministry of finance and the state treasury, complicates the analysis of cost-effectiveness and does not add transparency to budget flows. given a large number of executives of the state program that belong to different executive structures and the need for wider involvement of extrabudgetary funds to finance programs, there is a need to create a coordinating structure at the level of the cabinet of ministers of ukraine. given the complex nature of the step, in order to increase their efficiency and effectiveness, it is necessary not only to improve development standards, approval procedures and implementation mechanisms but also radically revise the system of environmental target programs in ukraine, which has already been developed in order to unify and optimize it. taking into account that the majority of the step is implemented over a sufficiently long time (more than five years), and the state of their implementation due to the abovementioned shortcomings is incomplete, ineffective and non-systematic, a careful revision of existing programs is a priority task. it is also necessary to assess the effectiveness of the implementation and expediency of continuing the implementation of existing programs, on the one hand, on the other hand – to build a sophisticated system for managing the formation and implementation of new integrated programs. in order to increase the efficiency of the state programing of environmental protection, it is necessary to: • improve the regulation of the mechanisms and procedures of the institution of state target programs. for this purpose, the government of ukraine should improve the procedure for the development and implementation of programs, which would regulate: strengthening control over the implementation of state target programs by clarifying the functions of the state customer-coordinator in relation to its responsibility for the preparation and implementation and increasing requirements for state customers regarding the financing of the envisaged measures, the issue of attracting reliable and predictable sources of extrabudgetary funding to ensure a reduction in the share of budget financing and opportunities manoeuvring in case of underfunding of state target programs at the expense of the state budget; • develop and legislatively establish a mechanism for the introduction of expert controlling over the implementation of state target programs, targeted and effective use of funds to identify and remedy shortcomings in the system of state target programs; • resolve the issue of codification of state target programs within the framework of the budget classification to establish operational monitoring of financing of state targeted programs by the ministry of finance and the state treasury and to ensure openness and transparency of procedures for the allocation and directing of budget funds to finance the activities of the step; • optimize the structure of the step by excluding from their list those programs, which do not correspond to the development priorities, which will allow to concentrate funds on solving priority tasks and to match the need for financing programs with real budget possibilities and to ensure full financing of programs within certain time limits; • introduce a scientifically based methodology for assessing the effectiveness of the step, with due consideration of the limitations on the use of natural resources, and with the emission standards (including maximum permissible emission, maximum allowable discharges, maximum permissible pollution level), to ensure methodological and organizational unity in the process of conducting annual audits on the implementation of targeted programs. this methodology should combine the formalized calculation procedure and expert assessments; baltic journal of economic studies 313 vol. 4, no. 5, 2018 in order to strengthen control over the implementation of the step, it is necessary: 1. to clarify the functions of the state initiatorcoordinator regarding his responsibility for the preparation and implementation of the steps, their financing, coordination of activities of state initiators, reporting on the progress of the programs’ implementation and the introduction of personal responsibility for the implementation of the steps, namely, the final results and the purposeful and efficient use of funds; 2. to oblige the initiator before the beginning of the implementation of the step to approve and submit to the ministry of economic development and trade of ukraine the provisions on the management of the implementation of the step, which will determine: • the procedure for forming an organizational and financial plan for the implementation of the state target program; • mechanisms for adjusting program activities and their resource support during the implementation of the state target program; • procedure for ensuring the publicity of monitoring of the implementation of program activities; 3. to increase the requirements to the state initiators regarding the financing of the step activities at the expense of extrabudgetary sources (other sources of funding); 4. to develop a mechanism of compensation in case of under-financing programs at the expense of state budget funds from extrabudgetary sources; 5. to increase the requirements for annual reports from state initiators on the progress of the implementation of the step; 6. to work out the mechanism of expert checks on the progress of the implementation of the step, targeted and effective use of funds to identify shortcomings in the system of state target programs and develop measures for their elimination. for successful implementation of the state target programs, it is expedient to use a new system in the framework of modern management – controlling, which, as according to the experience of the developed countries, enables coordinating and integrating efforts at a higher professional level, as well as independent environmental audit at all stages of the implementation of the program tasks and activities. using a controlling mechanism and environmental audit will increase the effectiveness of program implementation and the level of reaching the program objectives. solving the problem of transforming the system of environmental target programs into an effective tool for implementing medium and long-term state policy is a complex task. to solve this issue, it is required to join efforts of central and local executive authorities, to introduce interconnected and comprehensive changes in the budget sphere, as well as in investment, industry and other types of national 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(in ukraine) baltic journal of economic studies 168 vol. 6, no. 4, 2020 corresponding author: 1 grand chamber, supreme court, ukraine. e-mail: yanovskaya.a@ukr.net orcid: https://orcid.org/0000-0001-8451-3775 2 taras shevchenko national university of kyiv; high specialized court of ukraine for civil and criminal cases, ukraine. e-mail: m.vilgushynskyi@ukr.net orcid: https://orcid.org/0000-0002-0630-9055 3 supreme court, ukraine. e-mail: annybitsay@gmail.com orcid: https://orcid.org/0000-0003-4424-6478 doi: https://doi.org/10.30525/2256-0742/2020-6-4-168-175 protection of property rights: side effects of economic crime investigation oleksandra yanovska1, mykhailo vilhushynskyi2, anna bitsai3 abstract. in the democratic countries, one of the main properties of public policy is to ensure the functioning of a stable economy; it requires special attention to the investigation and prevention of economic crime. however, the economic crime investigation can cause certain side effects, such as restriction or deprivation of property rights of individuals and legal entities. that is why the analysis of the peculiarities of the protection of property rights in the economic crimes investigation is particularly relevant. the purpose of the research is to generalize approaches for understanding the economic crime's nature and structure, analysing effective ways to protect property in the economic crimes investigation, as well as the specifics of releasing property from arrest as a way to protect third party property violated in the economic crimes investigation. materials and methods: a set of general and special scientific methods was used in a study, in particular, the dialectical method; comparative legal method; methods of analysis and synthesis; formal logical (dogmatic) method; statistical method and generalization method. the empirical basis of the study is the cases of the supreme court (ukraine) and the european court of human rights, statistics of the state judicial administration of ukraine for 2017-2019, as well as the authors' own experience as judge of the supreme court and the high specialized court of ukraine for civil and criminal cases. results: there are two main approaches to understanding the essence of the concept of “economic crime” defined, its main features are identified and the system of economic crimes in ukraine is characterized. it is argued that the application of such types of punishment for serious and especially serious profit-motivated crimes as special confiscation and confiscation of property is consistent with the practice of the echr. the case law of the grand chamber of the supreme court on determining the jurisdiction of legal disputes on the release of distrained property, used in the investigation of economic crimes, is summarized. conclusions: for correct protection of the property rights of individuals and legal entities violated during the investigation of economic crimes, the state must ensure the proper functioning of effective legal means of protection of property rights. key words: economic crime, protection of property rights, special confiscation, confiscation of property, seizure of property, release of distrained property. jel classification: k14, k38, d73 1. introduction a stable economy is a fundamental basis for the existence and development of a modern democratic state. that is why one of the most important tasks of the state is to form an effective system of economic relations, resistant to negative external influences and integrated into the international economic space simultaneously. at the same time, economic security can be achieved by combining the development of national and international economic relations and ensuring the systematic economic crime prevention. thus, the economic crime prevention remains one of the priorities of national policy, as the criminalization of the economy slows down the development of entrepreneurship, the formation of a real market environment, as well as affects the filling of state and local budgets. however, the variety of ways to commit crimes in the economic sphere, the use of various technologies and operations baltic journal of economic studies 169 vol. 6, no. 4, 2020 by the criminals, as well as other factors that contribute to the commission of illegal acts in the economic sphere, lead to the fact that the economic crimes investigation may cause certain side effects, such as restriction or deprivation of property rights of individuals and legal entities. this is unacceptable in a democratic state, and, therefore, in the legal system of the respective state, there must be effective mechanisms for the property rights protection of the specified entities. thus, the information mentioned above is of scientific interest and determines the relevance of the chosen topic. the following domestic and foreign scientists devoted their works to the problem of defining the economic crime essence: h. маnnheim (1965), c. мills (1951), v. расkard (1959), herbert a. вlоch and geis gilbert (1962), (1982), а. v. andrushko, s. v. lohin, v. m. popovych and p. a. trachuk (2009), a. m. boyko (2008), b. m. holovkin (2013), a. l. dudnikov (2013), a. p. zakalyuk (2007), ye. v. nevmezhenskyy (2005), o. v. skvortsova (2012) and others. at the same time, the issue of side effects of the economic crimes investigation, in particular, restrictions or deprivation of property rights, and ways to protect the property rights of third parties, violated during the investigation of economic crimes, have not been adequately covered in the specialized scientific literature yet. the purpose of the article is to generalize approaches for understanding the economic crime's nature and structure, analysing effective ways to protect property in the economic crimes investigation, as well as the specifics of releasing of distrained property as a way to protect the property of third parties violated in the economic crimes investigation. to achieve this goal and ensure the scientific validity of the results of the study, there were used the following methods of scientific knowledge: the dialectical method; comparative legal method; methods of analysis and synthesis; formal logical (dogmatic) method; statistical method and generalization method. the empirical basis of the study is the cases of the supreme court (ukraine) and the european court of human rights (hereinafter referred to as echp), statistics of the state judicial administration of ukraine for 2017-2019, as well as the authors' own experience as judge of the supreme court and the high specialized court of ukraine for civil and criminal cases. 2. economic crime: essence and structure due to the lack of a generally accepted concept of “economic crime” in the national legislation of both ukraine and foreign countries, scientific discussions on the essence and structure of this concept in legal doctrine continue to this day. meanwhile, the analysis of professional sources gives grounds to conclude that, as a rule, two main approaches in defining the concept of “economic crime” are used, namely: criminal legal and criminological. for understanding the essence of economic crime, the representatives of the criminal legal approach, first of all, emphasize that the relevant composition of economic crime should be provided by the law on criminal liability. in that way, a. v. andrushko, s. v. lohin, v. m. popovych and p. a. trachuk consider that the economic criminality is a set of the economic crimes under the criminal code of ukraine, committed in the field of civil traffic of things, rights and actions for a certain period of time with the illegal use of legitimate technological and accounting transactions, financial, economic and civil instruments, organizational and regulatory, control and management rights and powers (andrushko, lohin, popovych, trachuk, 2009). however, supporters of the criminological approach emphasize the form and focus of the intent, motive, sphere of commission, subjects of crime and determinants of economic crime. for example, e. v. nevmezhenskyy argues that the economic criminality (crimes in the field of economics) is primarily all acts, in which the direct reason is the economic benefit of the subject, i.e. have a profit motivation, and the purpose of such criminal encroachments is to appropriate the illegal. in order for a crime to be considered economic, it must be longlasting, repeated, and committed systematically and within imprimitive economic or business activities (nevmezhenskyy, 2005). b.m. holovkin defines economic crime as a profit-motivated criminal activity of officials and other participants of economic relations, aimed at causing material damage to enterprises, institutions, organizations of various forms of ownership or business entities (holovkin, 2013). о. v. skvortsova considers crimes in the economic sphere as a type of socially dangerous, illegal, subject to criminal penalties, guilty acts that encroach on homogeneous economic relations, harm the economic interests of the state, protected by law, the interests of individuals and legal entities due to crimes against property, crimes in the economic field, as well as crimes in the sphere of official activity in legal entities of private law and professional activity related to the provision of public services (skvortsova, 2012). investigating the essence of economic crime, it is impossible to avoid the question of the characteristics inherent in this type of crime. research contains many approaches and positions on the typical features of economic crime. at the same time, using the generalization method, we will try to outline the main features. thus, among the main features of economic crime, it is common to highlight (dement'yeva, 1996; holovkin, 2013; zakalyuk, 2007; matusovskiy, 1999; boyko, 2008) the following ones: 1) common generic object of encroachment, i.e. economic relations; 2) the baltic journal of economic studies 170 vol. 6, no. 4, 2020 presence of profit motivation and the goal of obtaining economic benefits of property and non-property nature common for all crimes; 3) determinism by the same social factors that are part of the identifying complex of economic crime; 4) crimes that are committed in the course of professional activity, as a rule within and under the guise of lawful economic activity; 5) crimes which have a selfish character; 6) crimes that are characterized by long-term systematic development and a high degree of latency; 7) for this category, the subjects of committing crimes are most often the following: direct participants in economic activity; persons who do not take part in economic activities but encroach on economic relations; representatives of the regulatory sphere of economic activity, endowed with permitting and control powers; 8) socially dangerous consequences of economic crimes cause material damage to the state and business entities, undermining their business reputation, as well as doing harm to the interests of consumers. given the lack of common approaches to understanding the nature and content of economic crime, at the level of legal doctrine, there is no single approach to the criteria for classifying economic crime. at the same time, having analyzed a number of scientific achievements on this issue, we believe that the most complete and exhaustive system of economic crimes, taking into account the provisions of the current criminal code of ukraine, has been developed by a.l. dudnikov (dudnikov, 2013), who refers to the system of economic crimes as the following types of crimes under the current criminal code of ukraine (hereinafter referred to as the cc of ukraine) (criminal code, 2001): 1) crimes against property (art. 190, 191 of the cc of ukraine); 2) crimes in the field of the financial system (art. 199, 200, 201, 204, 212, 212-1, 222, 224 of the cc of ukraine); 3) crimes in the field of budget execution (art. 210, 211 of the cc of ukraine); 4) crimes in the field of entrepreneurship (art. 203-1, 206, 209, 213, 218-1, 219 of the cc of ukraine); 5) crimes in the field of free competition (art. 229, 231, 232, 232-1 of the cc of ukraine); 6) crimes in the field of privatization (art. 233 of the cc of ukraine); 7) crimes in the field consumer rights (art. 227 of the cc of ukraine); 8) service-related crimes (with material damage) (art. 364, 364-1, 365-2, 367, 368, 368-3, 368-4, 368-5, 369, 369-2, 370 of the cc of ukraine); 9) crimes in the field of computer activity (art. 361, 361-1, 361-2, 362, 363 of the cc of ukraine). 3. special confiscation and confiscation of property as a form of punishment for profitmotivated crimes: the case law of echr most of the crimes mentioned above (in particular, serious and especially serious profit-motivated crimes) are characterized by the use of such types of punishment as special confiscation and confiscation of property. thus, the punishment in the form of confiscation of property is the forced gratuitous confiscation of all or part of the convict's property. however, given the european integration aspirations of ukraine, according to the framework of the study, it is important to note that, in general, the use of such types of punishment as special confiscation and confiscation of property is compliant with the case law of the echr . in particular, the case law of echr has developed a number of procedural safeguards that must be provided by national law and judicial authorities in cases involving confiscation of property, namely: the adversarial and public nature of proceedings (case “grayson and barnham v. the united kingdom”, para. 45, 2008); full and comprehensive access of the party to the relevant proceedings (case “denisova and moiseyeva v. russia”, para. 59, 2010); the right to use the legal assistance of a lawyer chosen at one's own discretion (cases “butler v. the united kingdom”, 2002; “grayson and barnham v. the united kingdom”, para. 45, 2008); reasonable opportunity for the party to present its arguments in the domestic courts (cases “veits v. estonia”, para. 72, 74, 2015; “jokela v. finland”, para. 45, 2002), в including written and oral evidence (case “butler v. the united kingdom”, 2002); a reasonable opportunity for the party to rebut the assumption of the criminal (illegal) nature of the assets (case “geerings v. netherlands”, para. 44, 2007); a discretion of the judge not to apply the assumption if he or she considered that applying it would give rise to a serious risk of injustice (case “phillips v. the united kingdom”, para. 43, 2001). it is also recognized in the decisions of the cases concerning various forms of confiscation or fiscal repression of assets of echr that the assumption of criminal (illegal) nature of assets is in line with article 6 of the convention for the protection of human rights and fundamental freedoms (hereinafter referred to as the convention) (european convention, 1950), namely the presumption of innocence. in particular, the application of the assumption of criminal (illegal) nature of assets, if a party has a real opportunity to rebut that assumption, it is compatible with the assumption of innocence, and conversely, a violation of paragraph 2 article 6 of the convention has been recognized in the case, when the order on the goods' confiscation has been released, although the owner was acquitted in criminal proceedings concerning the crime from which the proceeds allegedly arose (case “geerings v. netherlands”, paras. 43-51, 2007). this approach is applied by echr in the context of presumptive complaints under article 1 protocol 1 to the european convention (protocol, 1952) (case “cacucci and sabatelli v. italy”, para. 43, 2014), as well as under article 6 of the convention on transfer to the applicant of the burden to prove the lawful nature of the acquisition of assets (cases “grayson and barnham baltic journal of economic studies 171 vol. 6, no. 4, 2020 v. the united kingdom”, para. 45, 2008; “phillips v. the united kingdom”, para. 43, 2001). 4. protection of property rights as the basis of economic stability of the state in order to temporarily deprive the right to alienate, dispose of and / or use property that is subject to special confiscation and confiscation of property, the relevant property is seized in criminal proceedings. seizure of property is one of the most common measures to ensure criminal proceedings. in particular, this applies to serious and especially serious profit-motivated crimes committed in the economic sphere. the procedure for imposing and revoking of property seized is regulated by chapter 17 of the criminal procedure code of ukraine (hereinafter referred to as the cpc of ukraine) (criminal procedure code, 2012). however, despite the effectiveness of arrest as a measure of criminal proceedings and confiscation of property as a form of punishment, their use may violate or limit the property rights of third parties (both individuals and legal entities, who are bona fide owners or purchasers of the relevant property). however, property rights are fundamental, guaranteed and protected by the provisions of national law, taking into account the requirements of protocol no. 1 to the convention for the protection of human rights and fundamental freedoms. under article 1 of protocol no. 1 to the convention, every individual or legal entity is entitled to the peaceful enjoyment of his or her possessions. no one shall be deprived of his or her possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. the preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. as a rule, when deciding on various forms of confiscation or fiscal repression, echr is guided by three rules of the provisions of article 1 of protocol no. 1 to the convention: 1) the first rule is general and proclaims the principle of peaceful possession of property; 2) the second rule concerns the deprivation of property and determines certain conditions for recognizing interference with the right to peaceful possession of property as lawful; 3) the third rule recognizes the right of states to control the use of property in the presence of certain conditions (cases “the former king of greece and others v. greece”, para. 50, 2000; “bruncrona v. finland”, para. 65, 2005; “anheuser-busch inc. v. portugal”, para. 62, 2007). the outlined rules are interrelated and should not be applied separately, they should be interpreted in the light of the general principle of peaceful possession of property, however, the second and third rules concern important discretionary powers of the state, namely: the right to seize property in public interest and establish taxation system. in its practice, echr has formulated three main criteria to be taken into account when determining whether an interference with a person's right to peaceful possession of property is compatible with the guarantees of article 1 of protocol no. 1 to the convention, namely: 1) whether it is lawful; 2) whether it is due to the public interest; 3) whether it is proportionate to the defined purposes. if at least one of the above criteria is not met, echr confirms that the state has violated article 1 of protocol no. 1 to the convention. as a general guide, it should also be noted that echr has established the approach that confiscation is defined as control measure over the use of property under rule 2 of article 1 of protocol no. 1 to the convention, although de facto such a sanction involves deprivation of “property” (cases “agosi v. the united kingdom”, para. 51, 1986; “raimondo v. italy”, para. 29, 1994; “silickiene v. lithuania”, para. 62, 2012). therefore, the certain state, including ukraine, is obliged to respect the right of everyone to peaceful possession of property, and its proper and effective legal protection is an important component of the stability of the state economy and one of the fundamentals of democracy. 5. release of distrained property: a matter of jurisdiction in criminal proceedings, one of the most effective ways to protect the property rights of third parties, violated during the investigation of economic crimes, is to appeal to the court to release the distrained property. the effectiveness and efficiency of this method of protection of property rights in criminal proceedings are evidenced by court statistics. hence, in 2017, investigating judges in ukraine considered 16,610 requests to lift the seizure of property, of which 8,147 were satisfied (report, 2017); in 2018, 18,130 requests were considered, of which 9,451 were satisfied (report, 2018); in 2019, considered 22,430 requests, 11,553 of them were satisfied (report, 2019). in practice, there are many problematic issues related to the procedural features of releasing distrained property. in our opinion, one of the most problematic aspects of the release of distrained property is the correct definition of the jurisdiction of legal disputes on the release of distrained property, used in the investigation of economic crimes. accordingly, within the limits of this article we consider it necessary to investigate this problematic aspect. unfortunately, the current legislation of ukraine does not contain a clear answer to this question, unlike case law. in this way, the grand chamber of the baltic journal of economic studies 172 vol. 6, no. 4, 2020 supreme court has developed rules that determine the jurisdiction of legal disputes over the release of distrained property used in the investigation of economic crimes. therefore, in determining the jurisdiction of the legal issues outlined above, the following rules should be followed: 1) the request of a natural person who is not a debtor in enforcement proceedings to lift the seizure of his or her property and to exclude the latter from the act of description and seizure, the court considers the rules of civil proceedings ( judgment of grand chamber of supreme court case № 658/715/16-ц, 22.08.2018); 2) a dispute on the debtor's claim to the body of the state executive service of ukraine on cancellation of the bailiff 's decision on seizure of property and announcement of a ban on the alienation of this property is public law, if the bailiff has issued the mentioned decision in consolidated enforcement proceedings on the enforcement of court decisions of various jurisdictions. the administrative court has jurisdiction to consider this claim even when there is no forced execution of decision made by the rules of administrative legal proceedings in the consolidated enforcement proceedings ( judgment of grand chamber of supreme court case № 808/2265/16, 13.02.2019); 3) appeals against decisions on seizure of property in the execution procedure of the court decision, which satisfied a civil claim in criminal proceedings, must take place according to the rules of the civil procedure code of ukraine ( judgments of grand chamber of supreme court case № 752/14248/18, 27.11.2019; case № 320/247/19, 22.01.2020); 4) if the seizure is imposed on the property of a person who was not a party to the criminal proceedings initiated under the cpc of ukraine dated 1960 and completed in the manner prescribed by law (sentence, decision on the termination of the proceedings), the dispute over the release of distrained law is private law. depending on the parties of this dispute, it should be considered according to the rules of civil or economic proceedings ( judgments of grand chamber of supreme court case № 2-3392/11, 24.04.2019; case № 372/2904/17-ц, 15.05.2019); 5) if the seizure is imposed on the property of a person against whom a criminal case has been initiated under the rules of the cpc of ukraine dated 1960, but further the decision to initiate a criminal case under the same procedural law has been revoked by the court without resolving the issue of termination of the proceedings, the dispute on release of the distrained property should be considered according to the rules of civil procedure ( judgment of grand chamber of supreme court case № 766/21865/17, 12.06.2019); 6) if the seizure is imposed on the property of a person who is not a part of a criminal proceeding initiated during the continuance of the cpc of ukraine dated 1960 and ongoing, and the criminal proceedings are not submitted to court at the time of entry into force of the cpc of ukraine dated 2012, the decision on termination of the property seizure and appeal of relevant actions or inaction of the investigator in criminal proceedings is carried out under the rules of the cpc of ukraine dated 2012 ( judgments of grand chamber of supreme court case № 461/233/1717, 10.2018; case № 296/8586/16-ц, 07.11.2018); 7) if the seizure is imposed on the property of a person who is not a party to criminal proceedings under the rules of the cpc of ukraine dated 2012, the decision to terminate the seizure and appeal the relevant actions or inaction of the investigator in criminal proceedings is carried out under the rules of the cpc of ukraine dated 2012 ( judgments of grand chamber of supreme court case № 202/1452/18, 27.03.2019; case № 504/1306/15-ц, 11.09.2019). 6. conclusions the issue of combating economic criminality and ensuring the effective investigation of the economic crimes has been and remains extremely relevant. as a rule, in defining the concept of "economic crime" two main approaches are used, namely: criminal legal (the relevant composition of economic crime should be provided by the law on criminal liability) and criminological (attention focuses on the form and direction of intent, motive, subjects and determinants of economic crime). according to its structure, economic crime is branched and covers a significant number of corpus delicti, which can be classified depending on the object of criminal activity into the following groups: 1) crimes against property; 2) crimes in the field of the financial system; 3) crimes in the field of budget execution; 4) crimes in the field of entrepreneurial activity; 5) crimes in the field of free competition; 6) crimes in the field of privatization; 7) crimes in the field of consumer rights; 8) servicerelated crimes (in the presence of material damage); 9) crimes in the field of computer activity. however, even a full, comprehensive and objective investigation of economic crimes can cause certain side effects, such as restriction or deprivation of property rights of individuals and legal entities. in criminal proceedings, such restrictions on the right of ownership are due to the seizure of the property, as well as the use of special confiscation and confiscation of property as a form of punishment for serious and especially serious profit-motivated crimes. at the same time, property rights are fundamental and must be guaranteed and protected by the state. after all, proper and effective legal protection of property rights is an important component of the stability of the state economy and one of the democracy 's fundamentals. in ukraine, the system of legal protection of property rights violated baltic journal of economic studies 173 vol. 6, no. 4, 2020 during the investigation of economic crimes includes such effective jurisdictional protection mechanisms as criminal legal, administrative legal and civil legal. in criminal proceedings, one of the most effective ways to protect the property rights of third parties violated during the investigation of economic crimes is to apply to the court for the release the distrained property. thus, in our opinion, the key task of the state within the outlined issues is to create and guarantee the proper functioning of effective legal means of protection of property rights violated during the investigation of economic crimes. references: andrushko, a. v., lohin, s. v., popovych, v. m., & trachuk, p. a. 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(in ukrainian) baltic journal of economic studies 127 vol. 7, no. 1, 2021 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. orcid: https://orcid.org/0000-0001-7897-409x e-mail: mvs161017@gmail.com 2 admiral makarov national university of shipbuilding, ukraine. e-mail: lomakina1616@gmail.com 3 admiral makarov national university of shipbuilding, ukraine. orcid: https://orcid.org/0000-0002-6491-9740 e-mail: shcarnega.lena@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-1-127-133 topical aspects of dcfta implementation in the judicial proceedings mariia sirotkina1, olena lomakina2, olena shkarnega3 abstract. the association agreement between the european union and ukraine is a new format of relations aimed at creating a deep and comprehensive free trade area (dcfta) between ukraine and the eu with the gradual integration of ukraine into the internal market of the european union. focusing on the experience of rule-making of the eu member states, it is necessary to define and implement the legal rules and principles of the national judiciary, taking into account the rules and principles of european law (chornomaz, 2016). in accordance with the strategy of european integration of our country, the adaptation of ukrainian legislation is to approximate it with the modern european legal system, which will ensure the development of the political, entrepreneurial, social, cultural activity of ukrainian citizens, economic development of the state within the eu to facilitate the increase of standards of living of the population. the implementation of the provisions of european legislation provided by the economic part of the association agreement (aa) is extremely important in the context of reforms, as the provisions can and should serve as a basis for a new model of socio-economic development of ukraine. the deepening of the processes of humanization and democratization of ukrainian society, the gradual introduction of principles and rules of european law into the national judiciary through reforms in the field of justice, inter alia, have led to qualitative updating of criminal procedure legislation of ukraine, in particular: use of differentiated approach to legal conflicts between persons who have committed criminal offences, which do not pose a great public danger, and victims; simplification and reduction of the procedure of criminal proceedings; ensuring procedural savings; reduction of the caseload; allowing the parties of the conflict to resolve issues of exemption from criminal liability in case of reconciliation between the offender and the victim independently, the appointment of the negotiated punishment and release from serving with probation, etc. given the specifics of the approach to improving relations with neighbouring countries on a differentiated basis, the eu seeks to identify and base on existing positive sources of sustainability, as well as to monitor and respond to weaknesses with the appropriate set of methods and resources at its disposal. the purpose of the article is to study a theoretical and practical definition of challenges of adaptation of ukrainian legislation to the legislation of the european union, institutional and organizational mechanisms of dcfta implementation in the field of justice and certain norms of the current criminal procedure legislation. ukraine is undergoing the second phase of radical reform of government structures; it has been continuing for 15 years but, unlike other countries, it is much more difficult for ukraine to get rid of the burden of past problems. judicial reform is also underway and domestic legislation is being significantly changed, including the transformation of the judicial proceedings. the topical issue of the development of judicial reforms is an imperfection, and sometimes a contradiction of regulations, which negatively affects the process of realization of rights and responsibilities of all subjects of public relations, slows down the development of ukraine as a state governed by the rule of law. however, the introduction of institutions of concluding agreements, simplified proceedings, probation, and later mediation, into the criminal procedure legislation of ukraine indicates the readiness of our state to change the concept of criminal procedure in accordance with the european standards, which will improve the situation of all parties to criminal proceedings. however, they need further completion and improvement. we are convinced that baltic journal of economic studies 128 vol. 7, no. 1, 2021 the introduction of such institutions will contribute to the legal development of society to achieve the european standards of restorative justice, which will encourage the further introduction of the latter in the legislation of ukraine, resolving criminal conflicts by reaching a compromise between parties in cases specified by law. one of the ways to solve this problem in ukraine is to regulate the process of adoption of regulations by the subjects of rule-making and taking into account the provision that legality as an objective property of law, in general, is the necessary condition and the main principle of the rule-making process. key words: dcfta, implementation of law, the eu judicial proceedings, criminal procedure, justice, eu-ukraine. jel classification: o19, f15, f42, r38, r50 1. introduction ukraine’s external integration into the world economic space plays an important role in the development of the domestic economy, which is why ukraine is interested in a favourable environment that would facilitate access to foreign markets and ensure stable trade flows based on continuous improvement of competitiveness of domestic production. the association agreement between the european union and ukraine is a new format of relations aimed at creating a deep and comprehensive free trade area (dcfta) between ukraine and the eu and the gradual integration of ukraine into the internal market of the european union. focusing on the experience of rule-making of the eu member states, it is necessary to define and implement the legal rules and principles of the national judiciary, taking into account the rules and principles of european law (chornomaz, 2016). in accordance with the strategy of european integration of ukraine, the adaptation of domestic legislation is to approximate it with the modern european legal system, which will ensure the development of the political, entrepreneurial, social, cultural activity of ukrainian citizens, economic development of the state within the eu to facilitate the increase of standards of living of the population. the implementation of the provisions of european legislation provided by the economic part of the association agreement (aa) is of fundamental importance in the context of reforms, as the provisions can and should serve as a basis for a new model of socio-economic development of ukraine. therefore, when developing the concept and programs of sectoral economic reforms, the requirements of the basic eu directives, harmonization with which is provided by the agreement, should be immediately reflected. the deepening of the processes of humanization and democratization of the society of ukraine, the gradual introduction of principles and rules of european law into the national judiciary through reforms in the field of judicial proceedings, inter alia, have led to qualitative updating of criminal procedure legislation of ukraine, in particular: use of differentiated approach to legal conflicts between persons who have committed criminal offences, which do not pose a great public danger, and victims; simplification and reduction of the procedure of criminal proceedings; ensuring procedural savings; reduction of the caseload; allowing the parties of the conflict to resolve issues of exemption from criminal liability in case of reconciliation between the offender and the victim independently, the appointment of the negotiated punishment and release from serving with probation, etc. taking into account the specifics of the approach to improve the relations with neighbouring countries on a differentiated basis, the eu seeks to identify and base on existing positive sources of sustainability, as well as to monitor and respond to weaknesses with the appropriate set of methods and resources at its disposal ( join, 2017). the purpose of the article is to specify a theoretical and practical definition of challenges of adaptation of ukrainian legislation to the legislation of the european union, institutional and organizational mechanisms of dcfta implementation in the field of justice and certain norms of the current criminal procedure legislation. 2. challenges of adaptation of the legislation of ukraine to the legislation of the european union the deep and comprehensive free trade area (dcfta) should be established within ten years of the date aa enters into force. in order for dcfta to become operational, ukraine needs to implement about 200 eu regulations, international treaties and standards. in 2015, it was supposed to prepare and discuss draft laws that harmonize domestic legislation with the basic eu directives governing relations in the main areas of trade (implementatsiia uhody, 2015). to implement european legislation, ukraine should apply the following reforms: – public service reform. a basic reform that will make it possible to modernize the basic tool (public service) needed to ensure the successful implementation of reforms at the administrative level. most reforms will be doomed to sabotage by officials without it; – anti-corruption reform. it stipulates to eliminate conditions and incentives for committing acts of baltic journal of economic studies 129 vol. 7, no. 1, 2021 corruption, ensuring the inevitability of punishment for the crimes, limiting the influence of private money on politics; – deregulation reform. this implies the dismantling of the old regulatory system inherited from soviet times, which is designed to operate in a command and control system, and the creation of a new regulatory system that meets the nature and needs of a market economy. implementing this reform will help improve the investment and business climate; – tax reform. the main emphasis is on significant tax simplification, refusal to apply the system of advance tax payments, reduction of fiscal pressure on the salary fund (chornomaz, 2016). despite numerous scientific studies on the characteristics of various aspects of the convergence of the judiciary of ukraine with international law, we should emphasize that there is still no comprehensive theoretical and legal research. adaptation of ukrainian legislation to the eu legislation is one of the main components of the process of ukraine’s integration into the eu, which is a priority of the foreign policy of our country. this is the process of bringing the laws and other regulatory acts in line with the acquis communautaire (materialy uriadovoho portalu, 2000-2020). according to section ii of the law of ukraine “on the state program for adaptation of ukrainian legislation to the legislation of the european union” dated march 18, 2004, “…acquis communautaire (acquis) is the judiciary of the european union including acts of the european union legislation adopted within the framework of the european community, the common foreign and security policy and cooperation in the field of justice and internal affairs” (pro zahalnoderzhavnu prohramu, 2004). adaptation of national legislation to the legislation of international organizations is carried out by competent public authorities on the principles of law-making, planning, coordination, and control. adaptation is a component of integration processes, a prerequisite for harmonization of national legislation with the legislation of international organizations. this is a consisted process, which is divided into several successive stages; it is necessary to achieve a certain degree of compliance of national legislation with international law and standards at each stage. implementation is the process of transposing legislation, including the creation of order and procedures for their realization (implementation in the narrow sense); this process also includes the interpretation, application, enforcement and execution of legal norms by the public authority (implementation in the broadest sense) (chornomaz, 2016). in international law, it is the actual implementation of international obligations at the national level, as well as one of the ways to realize international law into the national judiciary, subject to the purpose and international norms. methods of implementation are incorporation (international legal norms are reproduced unchanged in the regulations of the state implementing international norms), transformation (international norms are reworked, transposing into national legislation to take into account national characteristics, including legal techniques), and general, private or specific reference (the international regulations are not directly included in the text of the law containing information about them) (chornomaz, 2016). the adaptation process covers all areas of legislation defined in the partnership and cooperation agreement. priority areas include those areas of legislation that are necessary for the strengthening of economic ties between ukraine and eu member states. ukraine has been implementing measures to integrate the state into the european legal space and fulfil its obligations under the partnership and cooperation agreement for a long time. the president of ukraine issued several decrees, in particular: “on ensuring the implementation of the partnership and cooperation agreement between ukraine and the european community ” no. 148 dated february 24, 1998; “on approval of the strategy of ukraine’s integration into the european union” no. 615 dated june 11, 1998; “on measures to improve the rulemaking activities of the executive branch of the government” no. 145 dated february 9, 1999. these regulations laid the foundation for comprehensive support of the process of adaptation (materialy uriadovoho portalu, 2000–2020). in ukraine, the introduction of a special procedure for criminal proceedings on the basis of agreements, simplified proceedings, future mediation (the draft law “on mediation” passed the first reading in july 2020) etc. took place taking into account the recommendations of certain international legal acts, the purpose of which was to unify the legislation of different states in the field of restorative justice, the functioning of the institution of agreements, ensuring respect for human rights and fundamental freedoms. such documents included recommendation no. r (87) 18 of the committee of ministers of the council of europe “concerning the simplification of criminal justice” dated september 17, 1987, recommendation no. r (99) 19 of the committee of ministers of the council of europe to member states concerning mediation in penal matters dated september 15, 1999, framework decision of the council of the eu “on the standing of victims in criminal proceedings” dated march 15, 2001 (materialy uriadovoho portal, 2000–2020), etc. in addition, the national legislation of ukraine took into account the case law of the european court of human rights (hereinafter referred to as the echr). baltic journal of economic studies 130 vol. 7, no. 1, 2021 in particular, part 2 of art. 8 of the criminal procedure code of ukraine (hereinafter referred to as the cpc) states that the principle of the rule of law in criminal proceedings is applied taking into account the practice of the echr , and part 5 of art. 9 of the cpc stipulates that the criminal procedure legislation of ukraine is applied taking into account the practice of the echr [4]. the law of ukraine “on the fulfilment of decisions and application of practice of the european court of human rights” dated february 23, 2006, stipulates the binding nature of echr judgments in cases against ukraine and the need to introduce european standards of human rights protection into ukrainian criminal proceedings (materialy uriadovoho portal, 2000–2020). 3. institutional and organizational mechanisms for dcfta implementation in the field of judicial proceedings and criminal procedure consider the case law on the implementation of association agreements/dcfta. the identified ways of development will not only help assess the level of awareness of national judges about the need to fulfil their country’s contractual obligations with the european union, but it also comes up with an understanding of the level of openness of national courts to apply international law and eu law. even in the case of the constitutional court had not yet declared the direct effect of the association agreement/dcfta in the ukrainian judiciary, it could be asked to rule on the binding nature of decisions taken by the eu-ukraine association council, as well as the obligations of the eu-ukraine joint arbitration commission to comply with the decisions of the european court of justice on the interpretation of the relevant eu’s acquis. the supreme economic court of ukraine has previously recognized the supremacy of the association agreement over conflicting provisions of the national law (emerson, cenușa, 2018). the ongoing reform movement in the justice sector has motivated judges to seek inspiration in ukraine’s international treaty obligations and the decisions of the european court of human rights (petrov, 2018). administrative courts have already used the eu’s acquis and the case law of the european court not as a source of law, but as a “convincing source of references” for “a harmonious interpretation of ukraine’s national legislation with the established eu standards.” according to the supreme administrative court, this practice is justified by the need for effective implementation of the association agreement between the european union and ukraine. in the work by roman petrov, dozens of court decisions dated 2014 were found; in those decisions, general, specialized and high courts referred to the association agreement/dcfta and the eu’s acquis (fundamental principles, secondary legislation and case law of the european court) to strengthen their legal arguments in cases of customs duties, supply and trade in natural gas, determination of the origin of goods (honey) and even the legality of bills of the president of ukraine (petrov, 2018; emerson, kovziridze, 2018). some judges even considered the entry into force of the association agreement/dcfta as an obligation to apply eu common values in ukraine. the latter may manifest itself in future (general or constitutional) case law in cases where new national legislation conflicts with such “essential elements” of the association agreement as freedom of expression (emerson, movchan, 2018). the analysis of the process of approximation of ukrainian legislation to the eu judiciary facilitates identifying problems that need to be urgently addressed and suggesting approaches to increase the efficiency of this process. the adaptation of ukrainian legislation to the eu legislation is taking place simultaneously with the legal reform in ukraine. the state must update the legislation under international principles and standards because its legal framework has not contained these principles and standards. for example, the institution of the victim-perpetrator reconciliation agreement has become important for the criminal justice system of ukraine and other countries and has been included in many international regulations. practitioners have a positive attitude to the institution of the victim-perpetrator reconciliation agreement. according to a survey of investigators, lawyers and judges in zaporizhia, dnipropetrovsk, odesa, kharkiv, kyiv regions, 306 (83.15%) employees of investigative units, 418 (93.72%) court employees, and 436 (76.90%) defenders showed a positive attitude to the institution of reconciliation of the parties in criminal proceedings (hvozdetskyi, liash, 2020). chapter 35 of the cpc of ukraine, which defines the specifics of criminal proceedings based on agreements, does not provide a legal definition of the concept of the victim-suspect/ perpetrator conciliation agreement. the current legal framework of ukraine is contradictory, unstable, and therefore imperfect. however, the eu attaches particular importance to the quality of legal acts. the eu council has taken a special decision on the rules of their preparation, according to which the legal act must: be clear, unambiguous, without excessive use of abbreviations, not contain slang, too long phrases, incomprehensible references to other texts, complications that make it difficult to read. ukraine also needs to take into account the economic, political and social consequences of adopting relevant legislation in compliance with the requirements of eu law. analysing the development of domestic and foreign legal thought, we can identify several goals of baltic journal of economic studies 131 vol. 7, no. 1, 2021 adaptation of ukrainian law to the eu law: acquisition of eu membership; carrying out administrative, quality judicial reform, as well as reform of criminal legislation, establishing the rule of law and democratization of social processes; promoting access of ukrainian enterprises to the eu market; attracting foreign investment; avoiding the undesirable consequences of eu enlargement, etc. 4. strategic dimension of partnership: political dialogue of justice, security and human rights in june 2016, the government launched a multiyear reform of the justice sector with amendments to the constitution and the adoption of new legislation aimed at reorganizing the country’s judicial architecture (by creating a new supreme court and reducing the levels of courts from four to three), strengthening guarantees of judicial independence (for example, by ordering current judges to take exams and submit mandatory electronic asset declarations), and terminating public monopoly on the execution of court decisions (by introducing private executors). details of many of these reforms need to be regulated in implementing acts, but in general, they represent a fundamental change in ukraine’s judiciary and a revolutionary attempt to eradicate widespread corruption in the judiciary (see verification procedure). despite attempts to apply georgian “shock therapy” to the justice sector, law enforcement remains biased, high-ranking officials and wealthy businessmen enjoy low responsibilities and high levels of illegal privileges, and others cannot defend their rights. the situation has improved somewhat under the previous and current governments, but ukraine is still below average in terms of the world justice project rule of law index 2017–2018, where the country ranks 77th. the selection of judges for the new supreme court (completed in november 2017) only partially helped clean up the judiciary, as the public integrity council questioned the integrity, independence and professionalism of about a quarter of the newly appointed judges. efforts to modernize the prosecutor general’s office were ongoing, and the formation of the long-awaited high anti-corruption court was delayed by the authorities. adoption of the necessary legislation to establish hacc was postponed until 2018. after legislation has been adopted, attention is drawn to its implementation. changes in the field of justice are planned to be gradually implemented over the next few years. the initial practice of administrative and economic courts with the implementation of the association agreement between the european union and ukraine brings hope. unfortunately, there is an overall impression that the dynamics of judicial reform has slowed down due to the ruling elite wants to protect its own wealth and power in the name of the progress of an independent judiciary (gabrichidze, 2014). the implementation of the association agreement in the field of justice, freedom, security and human rights contributes to the sustainable development goals 5 “gender equality”, 10 “reduced inequalities”, and 16 “peace, justice and strong institutions” (zvit, 2019). in particular, the implementation of the provisions of the association agreement in 2019 contributed to the implementation of national tasks 16.3. “increase the level of trust in the court and ensure equal access to justice”, 16.6. “reduce corruption” and 16.7 “increase the efficiency of public authorities and the bodies of local self-government”. fight against corruption on september 5, 2019, the high anti-corruption court (hacc) started its work. the president of ukraine signed a decree appointing 38 judges, including judges of trial courts, lawyers, and scholars. hacc consists of a trial court (27 judges) and the appeals chamber (11 judges) (zvit, 2019). the verkhovna rada of ukraine has supported a number of legislative initiatives of the president of ukraine, namely the adoption of the following laws: – “on amendments to certain legislative acts of ukraine concerning the improvement of certain provisions of criminal procedure legislation” (no. 187-ix dated october 4, 2019), which enshrines nabu and sbi the right to autonomously withdraw information from transport and telecommunications networks (so-called “wiretrapping”); – “on amendments to the law of ukraine “on the judiciary and the status of judges” and some laws of ukraine on the activities of judicial self-government” (no. 193-ix dated october 16, 2019), which provides for updating the high qualifications commission of judges of ukraine (hqc) by competitive procedure; – “on amendments to certain legislative acts of ukraine on ensuring the effectiveness of the institutional mechanism for prevention of corruption” (no. 140-ix dated october 2, 2019), the task of which is to replace the management structure of the national agency of corruption prevention (nacp), strengthen capacity and guarantee independence of nacp; – “on amendments to the law of ukraine “on prevention of corruption” concerning whistleblowers” (no. 198-ix dated october 17, 2019), which was developed to determine the legal status of whistleblowers, establish rights, guarantees and mechanisms for protecting such persons and equivalent persons (zvit, 2019). prosecutor’s office reform within the framework of the project of the council of europe “continued support to the criminal justice reform in ukraine”, pwc advisory llc conducted baltic journal of economic studies 132 vol. 7, no. 1, 2021 an organizational analysis of the prosecutor general’s office of ukraine in the period from january 20 to march 16, 2019. on september 19, 2019, the verkhovna rada of ukraine adopted the law of ukraine no. 113-ix “on amendments to certain legislative acts of ukraine concerning priority measures to reform the bodies of prosecutor’s office”; according to the law, the prosecutor general’s office of ukraine was reformed. in the 3rd quarter of 2019, the prosecutors of the former prosecutor general’s office were recertified. out of 1,083 prosecutors, 610 prosecutors (56%) successfully passed it. on january 2, 2020, the reformed prosecutor general’s office started working (zvit, 2019). ratification of the rome statute the ministry of justice developed draft laws of ukraine “on ratification of the rome statute of the international criminal court” and “on amendments to certain legislative acts concerning cooperation with the international criminal court”. on january 9, 2020, the draft laws were sent to the ministry of foreign affairs for further submission to the president of ukraine to introduce to the verkhovna rada of ukraine (zvit, 2019). reform of enforcement of court decisions the key achievement of the reform is the creation of an independent profession of private enforcement officers who can effectively enforce court decisions based on free competition and lack of administrative influence. as of the beginning of january 2020, there are already more than 200 private enforcement officers in ukraine. reform of the penitentiary system and probation one of the key areas of reform is the creation of a unified register of convicts and detained persons and a reintegration system to ensure a proper environment to encourage people to live without crime. the pilot run of the register is currently underway. law enforcement reform law enforcement reform continues in accordance with the development strategy of the ministry of internal affairs of ukraine until 2020. the reform process is also in line with the objectives set by the action plan of the cabinet of ministers of ukraine and is taking place in close cooperation with the eu advisory mission ukraine. ukraine continues to take measures to establish the unified aviation security and civil protection system of the ministry of internal affairs, which has the third largest helicopter fleet in europe (55 airbus helicopters). ukraine participated in the exercise seabreeze 2019. manned aircraft patrolled 40,000 km of the state border. key tasks for 2021–2022 – implementation of the national human rights strategy until 2021 and development of an updated action plan for the implementation of the national strategy; – formalization of processes related to the eu-ukraine agenda on freedom, security and justice (2021–2022). 5. conclusions ukraine is undergoing the second phase of radical reform of government structures; it has been continuing for 15 years but, unlike other countries, it is much more difficult for ukraine to get rid of the burden of past problems. judicial reform is also underway and domestic legislation is being significantly changed, including the transformation of the judicial proceedings. although there are guarantees of due process, in practice persons with financial resources and political influence can avoid prosecution for crimes. the ukrainian government has made progress in meeting domestic and international requirements to investigate and prosecute crimes committed under the rule of viktor yanukovych in late 2013 and early 2014, including the executions of protesters. despite a general legislation boom and the introduction of forwardsighted inspections that have led to a quasi-automatic cleansing of the judiciary, the government’s inability to prosecute large-scale high-level corruption has undermined the government’s popularity and changed reform momentum. the introduction of institutions of concluding agreements, simplified proceedings, probation, and later mediation, into the criminal procedure legislation of ukraine is a positive element that indicates the readiness of our state to change the concept of criminal procedure in accordance with the european standards, which will improve the situation of all parties to criminal proceedings. however, the institutions need further completion and improvement. we are convinced that the introduction of such institutions will contribute to the legal development of society to achieve the european standards of restorative justice, which will encourage the further introduction of the latter in the legislation of ukraine, resolving criminal conflicts by reaching a compromise between parties in cases specified by law. the topical issue of the development of judicial reforms is an imperfection, and sometimes a contradiction of regulations, which negatively affects the process of realization of rights and responsibilities of all subjects of public relations, slows down the development of ukraine as a state governed by the rule of law. one of the ways to solve this issue in ukraine is to regulate the process of adoption of regulations by the subjects of rule-making and taking into account the provision that legality as an objective property of law, in general, is the necessary condition and the main principle of the rule-making process. however, the experience of central (for example, hungary and poland) and south-eastern europe baltic journal of economic studies 133 vol. 7, no. 1, 2021 (for example, bulgaria, croatia, and romania) before and after joining the eu shows that the process of judicial transformation is long and difficult, and it also tends to a possible reverse in the absence of proper use of instruments coercion by the guardians of the eu treaties. this downward trend in the eu’s rule of law creates negative feedback loops for corrupt elites outside the european union and undermines the european commission’s position in fulfilling the obligations taken in the context of the european neighbourhood policy. there are few means of influence outside the suspension of financial support (“less for less”), or actions that may contribute to further delay or refusal to implement judicial reform. rethinking the eu’s approach to creating and maintaining sustainability in the area of the rule of law is a topic that should take into account differences in eu domestic/foreign policy. references: pro zahalnoderzhavnu prohramu adaptatsii zakonodavstva ukrainy do zakonodavstva yevropeiskoho soiuzu [on the state program for adaptation of ukrainian legislation to the legislation of the european union] (2004) [dated] march, 18, 2004. № 1629-iv. available at: http://www.zakon2.rada.gov.ua/laws/show/1629-15 emerson, m. & cenușa, d. 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(mcpd), 43 p. available at: http://www.icps.com.ua join (2017). joint communication from the european commission and the high representative to the european parliament and council, “a strategic approach to resilience in the eu’s external action”, join(2017) 21 final, 7 june 2017, annex 10. joint staff working documents, association implementation report on georgia, brussels, 9 november 2017, swd (2017) 371 final; association implementation report on ukraine, brussels, 14 november 2017. law no. 3524 (2016). “on amendments to the constitution of ukraine” of june 2, 2016 was approved by the venice commission on october 26, 2015. entered into force on september 30, 2016. materialy uriadovoho portalu [materials of the governmental portal] (2000–2020). available at: http://www.kmu.gov.ua swd (2017) 376 final; association implementation report on moldova, 3 april 2018 swd(2018) 94 final. petrov, r . (2018). “the constitutional order of ukraine and its adaptability to the process of european integration”, edited by r . petrov and p. van elsuwege, post-soviet constitutions and challenges of regional integration. adapting to european and eurasian integration projects. london: routledge. zvit (2019). рro vykonaniia uhody pro asotsiatsiiu mizh ukrainoiu ta yes za 2019 rik [report on the implementation of the association agreement between ukraine and the european union for 2019]. available at: https://www.kmu.gov.ua/storage/app/sites/1/55-goeei/ar-aa-implementation-2019-4.pdf van elsuwege, p. (2017). “ukraine’s ban on russian social media: on the edge between national security and freedom of expression”, verf blog, 2017/6/02. baltic journal of economic studies 67 vol. 6, no. 1, 2020 corresponding author: 1 kyiv regional center of the national academy of legal sciences of ukraine, ukraine. e-mail: prof.kuznetsova@gmail.com 2 taras shevchenko national university of kyiv, ukraine. e-mail: lyuda.kot@gmail.com 3 scientific research institute of private law and business of the national academy of law sciences of ukraine, ukraine. e-mail: oleksiy.kot@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-1-67-73 risks of innovative activity: economic and legal analysis nataliia kuznietsova1, liudmyla kot2, oleksii kot3 abstract. as experience in the development of the economy of different countries shows, risk is an integral factor in a market economy. the rapid development of science and technology, the emergence of new technologies, their implementation into production, the increase in the number of innovative projects give rise to new types of risks, which, in turn, complicate social relations. the lack of a unified approach to the scientifically justified definition of risk, its features, classification criteria, as well as the lack of a conceptual and categorical component necessitates the further study of risk in law, which is reflected in the qualitative legal regulation of the relations of participants. the subjects of the research are the economic and legal aspects of innovative activity risks. accordingly, the purpose of the article is a study of the nature of risk, the main classification features, defining the role and place of legal risks, identifying the main approaches to risk management of innovative projects. to achieve this goal, we have used the following research methods: analysis and generalization of theoretical sources and scientific literature; abstractlogical method in the process of theoretical generalizations and formation of conclusions; general scientific methods of analysis and synthesis. in the result of the research conducted it is determined that the risk of an innovative project is a set of risks that combine the elements associated with a particular innovative project, that is, for each specific project and the entity that develops, implements and manages the project will be its own set of risks. a prerequisite for business decision-making is the skills and ability to manage risk, which is to determine its acceptable limits, taking into account the potential negative consequences, which, among other things, will minimize the impact of the risk factor on the planned economic outcome of the introduction of innovation. a crucial factor in ensuring the success of the innovative risk management process is interaction at all stages, in particular during the identification, analysis, evaluation, control, monitoring of risks. engaging and understanding the risk management process and its need for all project participants ensures the effectiveness of structural and organizational risk management measures. effective risk management requires commitment, as well as the conscious behavior of each person. the motivation and interaction of the parties involved in the project ultimately determine the quality of the work and therefore the success of the project. key words: entrepreneurship, risk society, innovative risks, legal risks of innovative business, risk management. jel classification: l26, m20, k10 1. introduction as experience in the economic development of many countries shows, risk is an integral factor in a market economy, regardless of social factors, geopolitical features and the specifics of legal system of any state. limited resources and intensification of competition lead to increased uncertainty in economic conditions. an increase in uncertainty leads to a corresponding increase in risks of trading participants. the problem of risk is of particular importance in entrepreneurial activity. according to art. 42 of the economic code of ukraine, entrepreneurship (entrepreneurial activity) is an independent, initiative, systematic, economic activity carried out at own risk by economic entities (entrepreneurs) with the aim of achieving economic and social results and profit. the essence of entrepreneurship is finding and testing something completely new, something that was not in the structure of production or in a society as such. therefore, it is extremely important for the entrepreneur not so much to prevent the risk, but to be able to predict its occurrence, to correctly identify the risk, to assess the baltic journal of economic studies 68 vol. 6, no. 1, 2020 degree of risk and to manage it in order to reduce the risk to the lowest level, or minimize the risk. 2. literature review and research methodology there is a lot of work on risk issues as this topic is extremely relevant. among foreign scientists there can be distinguished u. beck, s.m. vorobiov, v.m. hranaturov, a. damodaran, m. krui, t.yu. serebriakova, o.s. shapkin, r . schwebler and the ukrainian researchers, as z.s. varnalii, v.a. kravchenko, yu.f. pachkovskyi, v.o. syzonenko, a.o. starostin, d.m. chervanova, etc. to achieve this goal, we have used the following research methods as: analysis and generalization of theoretical sources and scientific literature; abstract-logical method in the process of theoretical generalizations and formation of conclusions; prognostic and diagnostic; general scientific methods of analysis and synthesis. in particular, the method of semantic analysis is used to clarify the nature of the category of "risk"; the method of morphological analysis is used to clarify the composition of the conceptual apparatus, which is directly related to the issues of risk management of innovation activities. 3. theoretical aspects of the study of the "risk" category some researchers emphasize the existence of global risk, which is a consequence of the processes of globalization, the content of which is the growing interconnection and interdependence of national economies, national political and social systems and cultures (mamaeva, 2010). globalization is a decisive factor in both national and international development, which results in the fact that, to date, almost no economic operation can be abstracted from world economic processes. at the same time, such inherent features of globalization as unevenness, asynchrony, disproportionality of development are accompanied by crisis phenomena and processes that are sources of risk. as a consequence, the features of risk at the present stage, such as its totality and comprehensiveness, have led to the assertion that the problem of risk is gaining general economic importance, since risk is perceived as one of the main factors of modern and especially future society. some authors, including robert schwebler, ulrich beck, even see this as the beginning of the process of forming the newest stage of development of society, which is the "risk society ", and claim that humanity has already entered this new phase/stage of development (granaturov, 2010). the reason for this change, according to these authors, is that in the present circumstances, most of the threats and the risks they cause are no longer local in nature, but are becoming global. but the main problem of future economic growth will be not so much in the progressive need for funds to finance new investments, but in the need to reserve capital in order to meet those risks. this approach is reflected in the definition of the so-called "risk society": "risk society is a postindustrial formation, which differs from industrial society in a number of peculiarities, the main difference being that the industrial society was characterized by the distribution of goods, and for the risk society it is the distribution of threats and the resulting risk" (ivanov, oleyinikov, bocharov, 2008). moreover, some researchers of risk theory suggest that further transformation of a "risk society " into a higherlevel society – a risk management society – would be logical in the near term. that is, society will build its economic development strategy not only on the basis of risk, but even on the basis of risk management. there are many different definitions of risk in the literature. some authors define risk as an activity related to overcoming uncertainty in a situation of inevitable choice, in the process of which it is possible to quantitatively and qualitatively assess the likelihood of predictable outcome, failure and deviation from the goal (shapkin, shapkin, 2011). it is also possible to find the definition of risk as the possibility of events occurring that adversely affect the activities of an enterprise or technical system, which is determined by probability and consequences. risk is not the event itself. risk is an opportunity (evstafiev, 2008). however, some scientists define risk as an event or a group of accidental events that cause the loss of an object that is affected by that event. there is a definition of risk as the expectation of negative consequences of economic activity. it is noted that risky activity does not always bring only losses, its result can also be zero or profitable. it is also determined that risk is the conscious activity of an entity to address the uncertainty situation in order to obtain the most acceptable outcome (vorobiov, baldin, 2009) and as a consequence of making decisions in the context of incomplete, inaccurate and (or) questionable information, that is, in uncertainty or incomplete certainty (mamaeva, 2010). under uncertainty one should understand the impossibility of assessing future developments, both in terms of the likelihood of their realization and their impact. uncertainty is something that cannot be assessed, so we will talk about incomplete certainty (risk). the conditions of uncertainty that occur with any type of business activity are due to the fact that economic systems in the course of their operation depend on a number of reasons. accordingly, there can be distinguished economic uncertainty, political uncertainty, natural uncertainty, temporal uncertainty, etc. over time, uncertainties arise into retrospective, current, and prospective ones. the need to take into account the time factor in evaluating the economic baltic journal of economic studies 69 vol. 6, no. 1, 2020 effectiveness of decisions is due to the fact that the levels of the largest cost, but differently distributed over time, provide the same result. uncertainty factors are divided into economic (commercial) and political. natural uncertainty is characterized by a set of factors, among which may be climatic, weather conditions, etc. risk as such is related to the possibility or threat of deviation of the results of specific actions or decisions from the expected ones. thus, the risk can also be manifested in the fact that in a given market or its area a new product may be unrealized in the amounts that were calculated based on the results of marketing research. just like choosing options for pricing strategies to break into new markets, one cannot say with certainty that an enterprise is expecting success because competitors can respond with adequate action. as a consequence, there is a possibility of loss or shortfall in profits. 4. innovative activity and related risks innovative activity, as compared to other activities, is more risk related, since there is virtually no full guarantee of a positive result. as a result, innovative projects are more dependent on the uncertainties that cause the risks. innovative risk is defined as the probability of losses arising from the investment by an entrepreneurial firm into the production of new goods (services), which may not find the expected market demand (ivchenko, 2004). thus, the concept of risky activity is broader and includes the concept of "innovative activity", and innovative risk is a particular type of entrepreneurial risk. the high level of risk in innovative activity is explained by the fact that the introduction of innovations requires considerable costs, but not all innovations bring the expected profit. it is necessary to take into account such peculiarities of implementation of innovative developments as a long period of their implementation and a large number of participants involved in this process, including from different industries and from other countries. the innovative activity of an enterprise is significantly affected by financial risks, i.e. those related to financial activities and arising in the course of financial transactions. the financial risks of innovative projects can be attributed, in particular, the lack of funds necessary for their implementation, the financial condition of the enterprise, the availability of credit resources and others. the innovative activity of an enterprise is also influenced by organizational risks, such as enterprise innovation strategy, efficient organization of innovative business units, choice of marketing strategy for promotion and implementation of innovations, choice of production technology, resource suppliers, contractors, etc. organizational risks should be given a lot of attention, as several start-up businesses with equal access to resources ultimately achieve different performance and this depends, first and foremost, on the proper organization and efficient management of the business. most companies respond to changes in the market successfully, and success depends on the ability to predict and plan the need for future changes, that is, to ensure the continuity of the improvement process. companies that have been able to build a management system that delivers higher results than other companies in the industry have a strong competitive advantage. legal risks play an independent role in transition economies. formation and permanent changes to legislation, lack of a well-established culture of enforcement, a dysfunctional system of state bodies and the judiciary, and other features inherent in such countries, all significantly increase the potential negative consequences of neglecting legal risks. therefore, minimizing this type of risk is an urgent need of any business in transition economies. legal risks in the innovative business need the utmost attention, since legislation often does not only provide the necessary tools to guarantee investors' rights, but also very often does not even provide for primitive regulation of business relations in this field, creating a dangerous legal vacuum. that is why the function of identif ying and assessing the possibilities of minimizing legal risks, as a rule, is delegated to specialists, that is to legal advisers and consultants who are well versed in the specifics of legal regulation of entrepreneurial activity in a particular field. the research of risks affecting the implementation of innovative projects has received considerable attention in the economic literature. in particular, some authors assign these risks to groups such as financial, organizational, marketing, product, and personnel management risks (zhezhuha, 2009). innovative risk can arise both when introducing a cheaper method of manufacturing a product or service compared to what is already being used and when creating a new product or service. however, when manufacturing a new product or service, it must be kept in mind that the new product (service) may not find a buyer or new equipment and technologies will not meet the necessary requirements for the production of the new product (service), or the created equipment will not be sold in case of failure, because it is not suitable for the production of other products (ivchenko, 2004). risks arising in an innovative enterprise can be classified as follows: risks of choosing an innovative project, risks of under-financing of an innovative project, risks of providing the necessary resources, risks of failure of economic contracts, risks of occurrence of unforeseen expenses and reduction of income, risks of realization of project results increased competition and the risks associated with protecting property rights, both as a result and as the innovative project as a whole. baltic journal of economic studies 70 vol. 6, no. 1, 2020 5. features of risk management of innovative activity risk management in innovative activity is a set of practical measures that can reduce the uncertainty of results of innovation, increase the usefulness of development, and reduce the cost of achieving an innovative goal. to manage the risks of innovative activity, it is necessary to identify the possible risks, i.e. to analyze and evaluate the identified potential risks. risk classification is one of the stages of risk analysis, which allows further identification and assessment of risk, as well as developing methods for managing them. classification consists in the distribution of risks by groups according to different classification criteria. there is no single approach to risk classification in the literature. often, risks are classified on the basis of the nature of the consequences and distinguished between pure and speculative. the peculiarity of pure risks (statistical or simple) is that they are almost always a loss for business. such risks may be caused by natural disasters, accidents, other circumstances of force majeure, etc. speculative risks (dynamic or commercial) involve either losses or additional profit for the entrepreneur. the causes of speculative risks may be changes in foreign exchange rates, changes in market conditions, changes in investment conditions, deliveries and others. there are classifications based on differences in activities (financial risks, legal risks, production risks, logistics risks and others). often, risks are classified according to their manifestation areas (political risks, social risks, natural risks and others). classifications are developed depending on the characteristic of the threat (by type of object, by nature of losses, by type of negative consequences), according to the characteristic of the available risk information (by degree of predictability of risk, by type of information, by degree of reliability of information), based on the magnitude of risk (in terms of frequency of losses, size of losses, distribution of losses), as well as many other classification features (kudriyavzev, 2010). in identifying and analyzing risk, information plays a very important role because due to its presence and objectivity that the right decisions can be made in the face of risk and uncertainty. the amount and content of information required depends on the situation, but there are a number of principles that must be met, such as accessibility of information, reliability of information, usefulness of information. risk identification and analysis are essential elements of the risk management process. the main purpose of risk identification and analysis is to develop a holistic risk picture for decision makers, as it enables an effective and productive risk management system to be put in place. risk assessment can be performed due to qualitative and quantitive analysis. qualitative analysis involves identifying and understanding the existence of uncertainty, threat and risk situation, identifying sources of risk and their characteristics, classifying risks, obtaining and analyzing information about each risk, analyzing the causes of risk situations and investigating the consequences of risk decision making. however, it is necessary to analyze both the individual identified risk and the interdependence with other risks, since the impact of one of the risks may be insignificant, but the simultaneous occurrence of several risk situations can have catastrophic consequences for the enterprise. such risks are called mutually reinforcing. conversely, the risks, the simultaneous occurrence of which offset the negative impact of eachof them, are called mutually mitigating (nikonov, 2009). first of all, it is necessary to identify the risks that will lead to the most grave consequences, in particular, to business shutdown. quantitative analysis determines the numerical values of the probability of occurrence of risk situations, assesses the level of risk, as well as the acceptable (critical) limits of the level of risk. the quantitative assessment of risks begins with the collection of information about them, including statistics of past periods, since statistics is the most objective information about the activity of an enterprise. in addition to statistics, sources of information on different types of risks can be organizational chart and decision-making scheme at the enterprise, cash flow, resource and information flows, surveys, questionnaires, company documentation, description of accidents, inspections and examinations (ivanov, oleyinikov, bocharov, 2008). information itself is a key aspect in identifying risks, because having the necessary information allows you to make the right decisions in times of uncertainty and risk. however, in cases where statistics on the activities of economic entities cannot be obtained, mathematical methods become ineffective. the most adequate risk information is historical data on the relevant object, because such data take into account all its specific features. however, very often only inside information is not enough to carry out a risk analysis. therefore, in addition to the inside information, they use information from external sources (one that is not directly related to the activity of the firm). these sources include branch statistics, competitor information, industry innovation information, and more. risk can be assessed by direct and indirect indicators. direct indicators of entrepreneurial risk are the indices of growth of basic economic characteristics (production or sales volume, net profit, etc.). indirect indicators of investment risk include the characteristics of the state of capital (intensity of turnover of assets, the ratio of debt and equity, liquidity of assets and others). in the early stages of decision making, when it is important to get a general idea of the business, it is quite baltic journal of economic studies 71 vol. 6, no. 1, 2020 useful to do break-even analysis. the size of profits and losses of an organization largely depends on the sales volume of its products. with the express aim to find out what the sales volume of the organization's products should be in order to achieve profitability, and a breakeven analysis is conducted. the break-even point characterizes a situation in which the total revenue from the sale of an organization's products fully covers the costs of its production and sale (a situation where the organization receives no profits but no losses). thus, the break-even point shows how many units of products an organization needs to sell in order for its costs to pay off its revenue. the sale of each successive unit of production will bring profit to the organization. on the contrary, lowering the sales volume below the break-even point means that the organization will suffer losses. however, it must be kept in mind that such an analysis is based on a number of assumptions that may or may not be fulfilled in each practical case (prosvetov, 2011): – all costs can be identified and classified as fixed or variable; – all variable costs are directly proportional to sales volume (that is, as sales increases, variable costs also increase); – the quantity of goods is constant, that is, the lack and defect of the goods are not allowed; – break-even analysis is based on accurate cost and revenue forecasts and the entire system is in stable condition. break-even point is the value of the volume or level of sales (operations) at which the aggregate income equals total costs, that is, a point of zero profit or zero loss (the company receives neither profit nor loss). break-even analysis of the project reveals the dependence of the amount of profit on the determining factors: sales volume, changes in the price of products, costs of construction of the enterprise, prices for raw material, etc. this information, given the desired range of values of sales prices, costs of the enterprise and others, can be used to evaluate the investment project and the investment risk. among the methods of risk analysis are statistical method, methods of analogy, score, method of decision tree, expert methods, risk modeling. recently, risk management has shifted towards complication of economic models. the current approach to risk management is based on determining the value of risk value-at-risk (var), which belongs to a class of statistical models, the basic concept in it is probability distribution, which relates all possible magnitudes of changes in market factors with their probabilities (ivanov, oleyinikov, bocharov, 2008). after obtaining an assessment of the possible risks, it is necessary to develop a risk management strategy in case of their occurrence, i.e. to determine ways (methods) of responding to the identified risks. an interesting approach to risk management is that it proposes to apply three main strategies: risk-informed strategies, warning / cautionary and discursive strategies (renn ortwin, 2008; terje aven, 2016). the risk communication strategy includes measures such as risk avoidance, mitigation and transfer. one of the most important aspects of such a strategy is the ability to quickly obtain information about the possibility of serious complications. the main objective of such a strategy is to reduce uncertainty, risks and vulnerabilities. the cautionary strategy is also referred to as the reliability and sustainability strategy. this strategy uses measures such as containment, development of alternatives, calculation and compliance of safety factors, diversification and development of systems of flexible reaction to emergence of situations which can cause risk, improvement and adaptation of systems of emergency management. discursive strategy also uses measures by which it is possible to achieve confidence in the further stable activity of companies by reducing the uncertainty that is achieved by finding out the facts of the implementation of risk events, analysis of accident reports, involvement of injured people, etc. the most common risk response strategies are, first, mitigation of innovative risks, and second, the adoption of innovative risks when analyzing and evaluating the most likely risks and developing a strategy for the enterprise in the event of their occurrence, as well as optimizing the level of impact of innovative risks. choosing a risk management strategy requires the person taking the action to accurately "review" and "evaluate" the situation and scenarios, which may happen in the future. based on this, decisions are made to eliminate all risks and take every opportunity. this means the need to identify all potential risks and circumvent the threat by preventing, eliminating or reducing its negative effects (martin schieg, 2006). also, the choice of a method of risk minimization is determined by such factors as the subject's propensity to take risks, types of risk, etc. moreover, economic viability should remain a prerequisite for such a choice. risk minimization can be done by allocating risks between project participants to make the risk taker responsible for calculating and controlling the risks best, and the most financially sustainable, capable of overcoming the effects of the risks. the ways of risk minimization can include external risk insurance, limit setting, diversification, reserves and inventories, etc. it is possible to minimize the risks through the diversification method. this method allows to reduce risks by distributing investments in different directions, such as different markets, financial instruments, trading strategies, etc. portfolios of risky assets can be formed in such a way that if one of the investment projects turns out to be unprofitable as a result of unforeseen events, then other projects may prove successful and will generate profit. baltic journal of economic studies 72 vol. 6, no. 1, 2020 also, entrepreneurs often use insurance and hedging methods to minimize or optimize their risks. insurance as a system of economic relations involves the formation of a special fund of funds (insurance fund) and its use (distribution and redistribution) to overcome by paying insurance compensation of various losses, losses caused by adverse events (insured events). the company can independently form a reserve fund to cover losses, and can apply to an insurance company. hedging is an effective way to reduce price risk by entering into futures contracts (futures and options). buying and selling fixed-term contracts, the entrepreneur protects himself/herself from fluctuations in prices in the market and thus increases the certainty of the results of his/her production and economic activity. there is a significant difference between insurance and hedging. when hedging, an entity avoids the risk of losses by refusing the opportunity to make a profit. when conducting insurance, the company pays a premium to avoid the risk of loss, but retains the opportunity to make a profit. some authors propose new methods of risk management, in particular the method of total risk management (evstafiev, 2008). the essence of this method is to create a system of corporate activity aimed at the continuity of the improvement process. the methodology of the total risk management method is that the company continuously maintains risk accounting and monitoring. when making any management decisions, a forecast of risks or negative consequences is made, and thus a process of continuous improvement of the company 's management systems is established. the risk is understood as the possibility of an undesirable development of the situation in all processes: from the operation of individual equipment to the implementation of the market strategy of the enterprise. the following rules of risk management must be taken into account for risk decision making: – one cannot take more risks than your equity allows; – it is necessary to think about the consequences of risk; – one cannot risk more for the sake of less (shapkin, shapkin, 2011); – a positive decision is made only in the absence of doubt; – one cannot think that there is only one solution, there may be other solutions. 6. conclusions the need to implement the risk management system as quickly as possible in innovative projects stems from the fact that potential opportunities for risk always exist, at least in its initial form, either before or at the beginning of the project. although such risks have already been identified, their effects and impact on the further development of the project cannot be definitively predicted. for this reason, the risk management process must be implemented and integrated into the entire project implementation process as a permanent management task. at the same time, the identification, analysis and assessment of risks should be focused on both the whole project and the individual aspects of certain stages of the project. a crucial factor in ensuring the success of the innovative risk management process is interaction at all stages, in particular during the identification, analysis, evaluation, control, monitoring of risks. engaging and understanding the risk management process and its need for all project participants ensures the effectiveness of structural and organizational risk management measures. effective risk management, above all economic and legal, requires understanding as well as the conscious behavior of each individual. the motivation and interaction of the parties involved in the project ultimately determine the quality of the work and therefore the success of the project (martin schieg, 2006). thus, the risk of an innovation project is a set of risks that combine elements that are specific to a given innovation project, that is, for each specific project and the entity that produces it, will be its own set of risks. however, it is necessary to be aware that business is not possible without risk. and in order to survive in a market environment, it is necessary to implement new technologies effectively, entrepreneurs need to avoid risk, but to learn and be able to predict events, assess the level of risk, go for risk, but not go beyond acceptable limits. thus, a prerequisite for business decision-making is the skills and ability to manage risk, which is to determine its acceptable limits, taking into account the potential negative consequences, which, among other things, will minimize the impact of the risk factor on the planned economic outcome of the introduction of innovations. references: vorobiov, s. n., 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(2010). upravlinnya finansovymy ryzykamy: navchalnyi posibnyk [financial risk management: tutorial]. кyiv: znannya, 598 p. (in ukrainian) prosvetov, g. i. (2011). upravlenie riskami: zadachi i recheniya: uchebno-prakticheskoe posobie [risk management: tasks and solutions: training and practical guide]. moskow: alpha press publisher, 416 p. (in russian) shapkin, a. s., & shapkin, v. а. (2011). ekonomicheskie i finansovie riski. otsenka, upravlenie, portfel investitsiy [economic and financial risks. valuation, management, investment portfolio]. eight edition. мoskow: dashkov & co publishing and trading corporation, 544 p. (in russian) renn ortwin (2008). risk governance: coping with uncertainty in a complex world earthscan. london, 443 р. terje aven (2016). risk assessment and risk management: review of recent advances on their foundation. european journal of operational research, vol. 253, issue 1, pp. 1–13. doi: 10.1016/j.ejor.2015.12.023 martin schieg (2006). risk management in construction project management, journal of business economics and management, vol. vii, issue 2, pp. 77–83. doi: 10.1080/16111699.2006.9636126 baltic journal of economic studies 35 vol. 6, no. 4, 2020 corresponding author: 1 interagency scientific and research center on problems of combating organized crime under the national security and defense council of ukraine, ukraine. e-mail: lenbusol@gmail.com orcid: https://orcid.org/0000-0002-4713-4546 doi: https://doi.org/10.30525/2256-0742/2020-6-4-35-45 international legal regulations and issues of corrupt assets recovery оlena busol1 abstract. the article is devoted to the issues of international cooperation of the bodies regarding asset recovery and management with a purpose of combating transnational crime. it emphasizes the main provisions of international treaties on combating crime and provides an analysis of foreign legislation in the given sphere. the subject of the study is international legal regulation and problems of corrupt assets recovery, which required the application of interdisciplinary scientific approach in considering its economic, political, philosophical, historical and legal aspects. the purpose of the article is to highlight the main issues that arise when the states try to recover corrupt assets, as well as to provide national governments with appropriate recommendations, taking into account international instruments and best practices. the article considers world practice of conducting criminal proceedings and ex-ecution of court decisions. it covers the features and problems of specialized govern-ment bodies as for the recovery of the assets. the article is based on the application of a set of the following methodologies: philosophical, dialectical and synergetic. the study used the method of systematic analysis, which is the most commonly applied in criminological research to combat corruption. to achieve these purposes, the following research methods are used: analysis of theoretical sources and scientific literature; abstract-logical method in the process of theoretical generalizations and formation of conclusions; prognostic methods. the author applies the comparative method (i.e. the method of comparative jurisprudence) when comparing international documents with the legal norms of other states. results. foreign experience shows that development of a modern and effective system of combating organized corruption in any country is possible subject to application of legal norms that meet international standards, as well as the integrated use of advanced computer information technology. the author emphasize the need for oecd (organization for economic co-operation and development) member states to develop adequate regulations that will allow immediate disclosure and exchange of information on the freeze of assets with foreign jurisdiction, in order to ensure the effectiveness of the asset recovery procedure. conclusions. it is recommended to adopt laws at the na-tional level or to introduce a regulation in the criminal law of the state on illicit en-richment; to develop comprehensive national strategy; as well as to finance measures to recover corrupt assets within the framework of anti-corruption programs at the state level. it emphasizes the need to have a united state register of assets seized in criminal proceedings. in order to recover assets from abroad, states need to have political will and to use the latest technologies. key words: corrupt assets, asset recovery offices (aro), transnational crime, international agreements. jel classification: o10, o17, o50 1. introduction the global spread of modern technologies, such as the internet, mobile communications, and the international banking system has made national borders more vulnerable. information technology is widely used by organized criminal groups as a means of preparing and arranging economic crimes. the latest information technologies give members of transnational criminal organizations the opportunity to ensure their anonymity at risk, as well as to involve more people in criminal activities and never be exposed. the largescale withdrawal of funds by corrupt officials from developing countries has created conditions for budget deficits increase, financial imbalances, depletion of international reserves, deepening internal and external imbalances, and growing social stratification in these countries. corrupt acts and crimes related to abuse of power or official position are usually accompanied by baltic journal of economic studies 36 vol. 6, no. 4, 2020 the withdrawal of acquired funds abroad. the inability or lack of interest of the authorities as for the search of such funds in order to recover them for the benefit of the citizens leads to impunity for corruption. the specifics of corruption crimes imply the need to transfer the criminal proceeds, which is why such crimes often reach international scales, and the recovery of these funds becomes a matter for several states. therefore, international cooperation in the recovery of funds received from corruption crimes and withdrawn from the state becomes so much important. world experience in the recovery of assets lost by states as a result of corruption crimes shows that a successful recovery of assets requires compliance with a number of conditions set by the international center for the recovery of assets of the basel institute on governance, 2014. following the g20 summit in hangzhou, people’s republic of china, on september 4-5, 2016, the heads of states adopted a communiqué (g20 leaders’ communiqué, 2016) agreeing, inter alia, to develop a concept aimed at ensuring sustainable balanced growth of the world economy; to increase cooperation in the fight against corruption, as well as to follow the principles of assistance in the search for corrupt officials and assets recovery. it should be noted that over the past four years, some countries, such as ukraine, have established special bodies to search for and manage assets, but not all of them show high efficiency. therefore, the topic of the article is high on the agenda in the context of identifying certain issues that prevent some states to achieve real results in the assets recovery that were withdrawn from the states by oligarchs. at the same time, it is important to analyze international documents that regulate cooperation between states and the process of corrupt assets recovery, which are not always effective. the novelty of the study is to identify the reasons for the ineffectiveness of the abovementioned process, and provide recommendations for the application of specific practical measures at both national and international levels. 2. legal and practical issues as for recovering corrupt assets in the world criminal-legal issues of illegal enrichment were the subject of research of o. o. knyzhenko, d. g. mykhailenko, v. м. borkov. such scholars as s. chernyavsky, v. nekrasov, a. titko, l. gray, k. hansen, p. recica-kirkbride, l. mills, and others, covered the issues of search for and recovery of corrupt assets in their works. the authors of the article express their sincere gratitude to the scientists and researchers mentioned herein, thanks to whom it became possible to obtain the presented results. however, the problem still has many blind spots. evidence of this is ongoing criminal proceedings as for the illegal withdrawal of corrupt assets from developing countries, which have been reviewing by the jurisdictions of the united states and european countries for decades already. measures aimed at reducing the level of the shadow economy, protecting social infrastructure from criminal encroachment, are applied in most developed eu countries. for example, in 2011, switzerland passed the act federal restitution of illicit assets of politically exposed persons obtained by unlawful means, to overcome a number of barriers that had emerged in high-profile cases (e.g., mobutu, duvalier). it governs the freezing, forfeiture, and restitution of the assets of politically exposed persons (peps) and their close associates in cases where a request for mutual assistance in criminal matters cannot succeed because of the failure of the judicial system in the requesting state. there is no need for a conviction of the pep in his or her jurisdiction of origin, and the law provides for a presumption of the illicit nature of assets in cases where the enrichment of the pep is clearly exorbitant and the degree of corruption of the state or the person in question is notoriously great (larissa gray, kjetil hansen, pranvera recica-kirkbride, linnea mills, 2014). duvalier law has radically changed the situation with the issuance of corrupt politicians’ funds who keep money in swiss banks (antikorruptsioner, 2009). according to duvalier law, the procedure for issuing money from switzerland has been significantly simplified. since then, the account holder, whose money foreign law enforcement agencies require to be issued, must prove the legality of his assets. if the level of corruption in the country of origin of the official is high and the source of his or her income is not established, the swiss authorities can seize his or her accounts and confiscate the money even without a court decision. the new duvalier law was successfully applied in february 2011 against leader and dictator of libya muammar gaddafi incumbent at that time (butusov, 2011). there are already glimpses of hope in the world in counteracting corrupt crimes committed by multinational corporations. as an example, one can recall the uk bribery act of 2011, as well as the foreign corrupt practices act of the usa of 1977 (busol, 2017). this act applies to all companies located and operating in the united kingdom of great britain. all foreign companies doing business in this country (regardless of their place of official registration) also fall under the application of this act. thus, with the entry of the act into force, british and non-british companies conducting commercial transactions in the united kingdom that are located in other states will have to demonstrate adequate anti-corruption procedures that meet the requirements of the act (bribery act, 2010). the experience of states that have dealt with the resonant facts of the withdrawal of assets acquired as a result of abuse of power or commitment of corruption crimes shows that the recovery of such assets is quite baltic journal of economic studies 37 vol. 6, no. 4, 2020 a difficult task. thus, the states of the arab region, which got rid of the dictatorship by holding the socalled arab spring, had high expectations as for recovery of funds gained as the corrupt revenues of these regimes. the data in table 1 illustrate the ratio of withdrawn, frozen and recovered assets in tunisia, egypt and nigeria. table 1 the ratio of withdrawn, frozen and recovered assets of the states of the arab region country and name of the former leader withdrawn assets, billion dollars blocked on accounts in foreign banks, billion dollars recovered assets, billion dollars tunisia, ben ali 5 5 0.3 egypt, hosni mubarak 70 1 2 nigeria, sani abacha 4 0.7 0.7 a matter of organization of the use of these recovered funds has become quite a challenging issue. thus, in nigeria, the funds were returned directly to the state budget of nigeria. at the same time, some of the supporters of the previous government were still in power. therefore, the practice of using corrupt assets remained, while non-governmental organizations did not have a significant impact on the distribution of those funds. as a result, many cases of misuse of recovered funds, purchases from the linked companies, and other abuses were reported. we can recall the experience of recovering assets by formation of non-governmental funds under the control of the international observers. in this way, the assets were recovered in angola and peru. however, the disadvantage of such a system is that it deprives the governments of such states of the opportunity to show political will to recover the money (analytical note, 2019). 3. issues of organization of international cooperation of specialized bodies as for recovery and asset management the following national agencies of the world community on the assets recovery and management derived from corruption and other crimes, cooperate with the network of investigations connected with incomes recovery gained via corrupt or criminal ways, or any other criminal income in general: the stolen asset recovery initiative (star) and the camden asset recovery inter-agency network (carin). one can also single out the asset recovery inter-agency network for southern africa (an informal network of south african police and judicial authorities confiscating proceeds of crime, which acts the same as carin); arab anti-corruption and integrity network; the iberoamerican network of international legal cooperation (information exchange network); the organization of american states oas (verifies and communicates with practitioners through a secure computer system); the european judicial network (representatives of national judicial and prosecutorial bodies being contact persons for mutual legal assistance); eurojust (judges and prosecutors from the eu states assisting national authorities in the investigation and prosecution of serious international crimes (cherniavskyi, nekrasov, tytko, 2017). the intergovernmental authority, which is responsible for developing and promoting a strategy to combat money laundering at both the national and international levels, is the financial action task force (on money laundering) (fatf). the fatf is a strategy formation body. the fatf recommendations are aimed, firstly, at improving the legal system in the country, secondly, at increasing the role of financial and credit institutions in combating money laundering, and thirdly, at intensif ying international cooperation in this sphere. the fatf operates two types of the lists of countries that evade countermeasures to protect the global financial system from money laundering risks, namely the gray and black lists. without active participation in the process of combating money laundering by law enforcement agencies of the states where such a crime has been committed, it is problematic to identify, freeze and confiscate criminal assets. therefore, law enforcement agencies should respond to illegal actions immediately. in order to analyze any situation quickly and accurately, they should have a very large volume of information about crime both locally and internationally (harbovskyi, 2006). in this context, the egmont group, an association of 127 financial intelligence units (fius) from around the world, has agreed to provide financial intelligence to help each other investigate criminal proceedings. if domestic law allows, the law enforcement agencies of the egmont group member state may have recourse to the financial intelligence of another member state of the group through its fiu. available information may include information on bank accounts, questionnaires on the transfer of cash across borders, criminal information and documents stored in public registers. relevant state bodies of financial intelligence of foreign countries are the following: the financial crimes enforcement network (fincen) (usa); financial transaction and report analysis center of canada (fintrac) (canada); zen-tralstelle für verdachtsanzeigen (germany); tracfin (french republic); internal revenue service ncis / ecu (kingdom of great britain), and others. baltic journal of economic studies 38 vol. 6, no. 4, 2020 speaking of the organizational structure of such a body as fincen, it should be noted that in addition to its full-time employees, the following seconded representatives work in the office: the representatives of the customs service, the ministry of finance, the secret service, the federal bureau of investigation, the office for alcohol, tobacco and firearms and explosives, the postal service, the internal revenue service, the bailiff service, the office of drug enforcement, and the us federal reserve. fincen’s annual budget is about 300 million usd. the powerful software of artificial intelligence systems ais fincen allows you to automatically scan 60 government and commercial databases and simultaneously analyze disparate information about one object (i.e. organization, individual), located in different us agencies. in addition to processing the financial database, which has had confidential information for almost the last 25 years, fincen uses artificial intelligence to prepare reports tentatively titled “forms as for criminal activity”. such forms are drawn up in fincen in cases where banks, inspectors of the ministry of finance, the tax service and other supervisors find some suspicious transactions in terms of their legality. fincen capabilities are now actively used by us law enforcement and intelligence agencies (nevdashov, 2016). to further track assets to determine whether an individual or entity or organization has an account with a u.s. financial institution, a foreign jurisdiction may request information from the division of the us financial intelligence unit (fiu) – financial crimes enforcement network (fincen)) – through a procedure known as request 314 (a). upon receipt of request 314 (a), u.s. financial institutions are required to verify their records and determine whether that institution has opened an account or performed a transaction on behalf of an individual or legal entity or organization that is reasonably suspected by law enforcement, based on reliable information, in involvement in significant money laundering activities. to demonstrate the importance of money laundering, fincen requires supporting documents that indicate the following: the decision taken under the case; probable amounts of money withdrawn from the state; country of money origin; type of criminal activity; involvement in a criminal organization and other facts that indicate the importance of the case. the requesting party needs to prove that it cannot obtain relevant information by other traditional methods of investigation and analysis (derzhavnyi departament ssha, 2012). only a court that convicts persons accused of committing a criminal act can declare that the money was acquired as a result of criminal activity. until then, there will be in force a presumption of innocence of a person suspected of embezzlement, money laundering and other financial frauds. 4. system of international agreements on money laundering, search, seizure and confiscation of proceeds of crime analysis of foreign legislation in this sphere allows us to identify more than 50 bilateral international agreements on combating crime, which, in particular, provide for the transfer of property. among them there are the european convention on the extradition (european convention, 1957) and its additional protocols (protocol, 1975) and (protocol, 1978); the european convention on mutual assistance in criminal matters (european convention, 1959) and its additional protocol (protocol, 1978); european convention on the supervision of conditionally sentenced or conditionally released offenders (european convention, 1964); european convention on the transfer of proceedings in criminal matters, 1972; convention on the transfer of sentenced persons (convention, 1983). the recovery of the assets, which have been obtained criminally, to the state is a fundamental principle of the united nations convention against corruption (united nations convention, 2003). the legislation of developed foreign states stipulates that international search, seizure and confiscation of criminally obtained money and property is an act of inter-national legal assistance carried out in accordance with agreements concluded or adopted on the basis of instructions of competent law enforcement agencies or courts of foreign states by identifying and ensuring the safety of confiscated money, valuables and property obtained by criminal means belonging to the accused, as well as proceeds of crime, their transfer to another state for use in criminal proceedings evidence or for damages compensation (harbovskyi, 2006). the convention on laundering, search, seizure and confiscation of the proceeds from crime (convention, 1990) is an international legal instrument aimed at pursuing a common criminal policy against serious crimes. the article 13 of the convention stipulates that a party, which has received a request for confiscation of funds or proceeds situated in its territory, shall enforce a decision of the court of the requesting party to confiscate such funds or proceeds or forward the request to its competent authorities for a decision on confiscation, and in case of receipt of such resolution, shall execute it. pursuant to the article 15, the requested party shall dispose of any confiscated property in accordance with its domestic law, unless the parties concerned agree otherwise. international instruments for counteracting crimes are also such documents as the general assembly resolution 217, according to which everyone has the right to an effective remedy by the competent national tribunals for acts violating the fundamental rights granted to him or her by the constitution or by law baltic journal of economic studies 39 vol. 6, no. 4, 2020 including the protection of the right to own property both individually and together with others; the declaration of basic principles of justice for victims of crime and abuse of power dated november 23, 1985, approved by un general assembly resolution №40/34 (declaration, 1985), which defines what is meant by victims of crime; the rights of victims of crime; the rights of offenders and third parties; the un standard minimum rules for non-prison measures (tokyo rules) adopted by un general assembly resolution 45/110 (1990). un general assembly resolution 45/107 (resolution, 1990) contains recommendations on international cooperation in crime prevention and criminal justice in the context of development and the new international economic order, which empha-size the adoption of necessary legislative and other measures in order to provide vic-tims of crime with effective means of legal influence. the article 13 of the model treaty on extradition, adopted on december 14, 1990 by un general assembly resolution 45/116 (resolution 1990), stipulates that all property found in the requested state which has been acquired as a result of a crime or which may be required as evidence, shall be transferred, at the request of the requested state, if extradition permits so. according to paragraph 2d of the article 1 of the model treaty on mutual assistance in criminal matters of un general assembly resolution 45/117 (resolution, 1990), mutual legal assistance should be provided in the search and seizure of property. the article 17 of the same document recommends that law enforcement authorities, within the limits permitted by national law, shall comply with requests for the search, confiscation and transfer to the requesting state of any material for use as evidence, subject to the rights of bona fide third parties. the given resolution also adopted the optional protocol to the model agreement on mutual legal assistance in criminal matters, which deals with proceeds of crime. the proceeds of crime in paragraph 1 means the property obtained or sold, directly or indirectly, as a result of the offense, or other benefits derived from the offense. paragraph 2 sets out the procedure for implementing the requested party’s requests for the establishment and tracing of such proceeds, according to which the requested state needs to take measures to establish whether the proceeds of the offense are within its jurisdiction. paragraph 4 stipulates the measures permitted by its legislation in order to prevent any transactions, transfer or use of these revenues until the court of the requested state makes a final decision. at the international conference on preventing and controlling money-laundering and the use of the proceeds of crime, held under the auspices of the united nations, june 18-20, 1994 in courmayeur, italy (un document e, 1994) such measures as confiscation sanctions and the disclosure in course of investigation were listed as the most effective in preventing economic crimes. prior to its widespread introduction into practice, it is recommended to expand the practice of confiscation of assets and the possibility of using such temporary measures as freezing or seizure of assets, which should also be allowed as for proceeds from crimes committed abroad. according to the world conference on organized transnational crime, held at ministerial level on november 21-23, 1994 in naples, italy, crimes committed for economic gain can be successfully combated through the confiscation of proceeds or any other property of the involved individuals and organizations. in some legal systems, high importance is attached to the blocking, seizure and confiscation of assets related to illegal activities…; it is necessary that the procedures related to freezing, seizure and confiscation have a wide scope and allow the confiscation of a large number of property of offenders, in order to deprive them of all proceeds of crime; taking into account the existing legal norms and practice of counteracting organized crime, it is expedient to confiscate any property acquired as a result of organized criminal activity and any acquired assets (report, 1994). the analysis of international agreements on money laundering, search, seizure and confiscation of proceeds of crime shows a complex, however, well ordered system that can effectively combat corruption and organized crime in this sphere. according to the point of view of author of the article, the effective application of international treaties in practice in some developing countries is hampered by the peculiarities of national legislation and “crisis-type” crime. in such states, corruption is not just an isolated phenomenon, but an organic consequence (and symptom) of the fundamental social crisis in the state, which is the subject of a separate scientific study. 5. effectiveness of criminal proceedings and issues of execution of court deci-sions taking into account the international agreements concluded by ukraine, when searching for money and property obtained by criminal means, as well as their arrest and collection of related evidence, all types of procedural actions provided by the criminal procedure legislation of ukraine, including seizure and search, may be used. confiscation is carried out on the basis of a court judgment or other court decision and exclusively within the procedures in accordance with the law of the state in the territory of which the property is located. in this case, the party, which confiscated the proceeds or property, shall dispose them in accordance with its national law and administrative procedures. baltic journal of economic studies 40 vol. 6, no. 4, 2020 world practice knows three ways to enforce a foreign court decision. the first method involves the need for a procedure for recognition of a foreign decision, i.e. the so-called “issuance of an exequatur” (french republic). the second approach involves the need to register the decision of a foreign court in a special register (kingdom of great britain). the third method involves checking the correctness of the decision only from a formal point of view and its verification of compliance with the public order of the state of the court (germany, italy, belarus). this method allows the possibility of refusing to recognize the decision of a foreign court. for example, according to the legislation of the republic of belarus, a foreign court decision may not be enforced if it contradicts the sovereignty of the state, threatens its security or contradicts the basic principles of its legislation. in fact, the same grounds are stipulated in paragraph 328 of the civil procedure code of germany. however, the last of these grounds sounds a bit broader, i.e. if “the recognition and enforcement of a foreign judgment may lead to a violation of the basic principles of public order and the protected rights of individuals in the executing country” (huban, 2015). it should be noted that during the recovery of assets obtained as a result of acts of corruption, certain political issues may arise. the states, to which the assets were withdrawn, may be concerned about the possibility of rediversion of assets due to the persistence or resumption of corruption in the requesting state, especially when the official is still in office or has a significant power. also, the requesting state may resist the efforts of the state, to which the assets were transferred, to dictate the terms of use of the confiscated property. in such cases, in order to facilitate the recovery of assets and their monitoring, international organizations and civil society organizations are being involved (tykhonova, 2017). the criminal law of some states does not take into account international norms, which introduces some ambiguity into the issue of adaptability of national legislation. in some countries, the object of confiscation is defined as funds or other property (for example, in ukraine), but property rights are not taken into account, which excludes from the confiscation of the right to claim certain objects. similarly, conditions, under which property is no longer considered to be derived from a crime, may not be envisaged. as a result, certain assets, in particular interest on deposits with foreign banks, will not be subject to confiscation under national law. among the difficulties that arise at the final stage there are the following: the delay of court proceedings by the defendant through the filing of complaints and appeals against court decisions; lack of possibility to obtain evidence due to failure to establish the location of witnesses (analytical note, 2019). 6. the reasons for inefficiency and conditions for the effective functioning of specialized state bodies for assets recovery with regard to the management of seized property, in some states, appropriate specialized bodies have been established (for example, the english soca, the czech uokfk, the french agrasc, and others; and sometimes it is done by units within ordinary bodies (us marshals service within the department of justice). 1 report (2011). application 1. asset recovery offices (aro)1 austria designated the federal criminal police (bundeskriminalamt – referat “vermögensabhöpfung”). belgium designated l’organe central pour la saisie et la confiscation (central office for seizure and confiscation – cosc), established by the law of 26 march 2003. bulgaria designated two aros, the commission for establishing property from criminal activity (cepaca, which subsequently changed its name to cepaia), and the supreme prosecutor’s office. cyprus designated the unit for combating money laundering (mokas-fiu cyprus). the czech republic designated the unit combating corruption and financial crimes (uokfk), international cooperation department, and enacted act no. 273/2008. denmark designated the state prosecutor for serious economic crime (statsadvokaten for særlig økonomisk kriminalitet) estonia designated the v division, investigation department, central criminal police finland designated the national bureau of investigation, criminal intelligence division/communications centre france designated the central directorate for criminal investigations (plateforme d’identification des avoirs criminels – piac). france recently designated another aro, the agency for the management and recovery of the assets seized and confiscated (agrasc). the notification to the commission is under way. germany designated two aros, the federal criminal police (bundeskriminalamt referat so 35 “vermögensabschöpfung”) and the ministry of justice (bundesamt für justiz). greece designated the financial and economic crime unit within the ministry of finance, according to law no. 3842/2010. hungary designated the national investigation office (nemzeti nyomozó iroda). ireland designated the criminal assets bureau, established by the criminal assets bureau act of 2005. latvia designated the economic police department of the central criminal police department of the state police. lithuania designated two aros, the criminal police (lietuvos kriminalines policijos biuras) and the general prosecutor office (lietuvos respublikos generaline prokuratura) luxembourg designated the parquet du tribunal d’arrondissement de luxembourg, section éco-fin. baltic journal of economic studies 41 vol. 6, no. 4, 2020 in some countries, such as ukraine, where corrupt practices are widespread, the biggest problem today is not about finding the corrupt assets but about recovering them, that is, passing a reasonable court verdict in criminal proceedings. moreover, if the recovery is planned to be carried out abroad, it is necessary that the verdict is also recognized by the european court at the place of recovery. so far, reports on seizure of accounts abroad are much more common than reports on requests for seizure of the accounts. in addition, the seizure of assets abroad requires a reasonable request from the ukrainian investigative body, and what is more important – it should be made in accordance with the european standards, not ukrainian ones (shemelin, 2015). indeed, the eu clearly adheres to the presumption of innocence, so the investigator should act very carefully when preparing the relevant evidence before the european court. the property owner usually files a lawsuit to lift the seizure of his or her assets, which can result in the eu deciding to pay large compensation to the state that made the mistake. much depends on whether legislators or local officials understand that if criminal proceedings are instituted against a bank beneficiary in ukraine and an attempt is made to recognize the case abroad, in the country where it is located, it may not always be very effective. the fact is that the european courts are full of criminal cases and the proceedings against the ukrainian offender who withdrew the money can be quite long. for example, a liechtenstein’s court, in agreement with the local prosecutor’s office, unblocked 13 million swiss francs on the accounts of a well-known ukrainian judge because the ukrainian prosecutor’s office failed to provide evidence that the money was illegal (likhachov, 2018). the situation is complicated also by the fact that ukraine has not yet acceded to the international convention on ensuring ukraine’s access to non-residents’ accounts, has not signed or ratified the relevant agreement, which will provide access to ukrainian residents’ accounts in foreign banks. and this happens when 101 states and almost all offshore jurisdictions have already signed the relevant convention, which allows the tax authorities of the signatory states to automatically obtain information from the relevant authorities of other states. along with a large number of banking institutions, there is no unified register of bank accounts in ukraine, which would make it possible to obtain this information promptly until the money are gone in the event of an investigation. however, today such registers have been established and are successfully operating in lithuania, france and germany. in ukraine, the problem of interdepartmental cooperation is acute, since upon receiving requests from law enforcement agencies from other government agencies information is not provided immediately, as it should be. in addition, it should be noted that there are difficulties in internal cooperation between government agencies, as well as the lack of effective mechanisms for cooperation to combat corruption. the activities of interdepartmental working groups on asset recovery are usually complicated by the poor coordination of the various agencies involved in anti-corruption activities. in the context of the study, it is worth mentioning the forensic audit service which is in demand by large and medium-sized organizations in developed countries that helps to expose thieves-managers, as well as search for money stolen by ex-managers. at the same time, all internal accounting is checked and the company’s transaction links are built. as a result, it becomes possible to establish the companies to which funds are transferred by a certain person. the process of providing this ser-vice involves quite a large number the netherlands designated the criminal assets deprivation bureau public prosecution service (bureau ontnemingswetgeving openbaar ministerie – boom). poland designated the assets recovery unit, criminal bureau, general headquarters of police. slovakia designated the financial intelligence unit of the bureau of combating organised crime of the presidium of the police force. spain designated two aros: the intelligence centre against organised crime (cico) and the anti-drugs special prosecution office (fiscalia especial antidrogas) at the ministry of justice. sweden designated two aros: the national criminal intelligence police service and the national economic crimes bureau (ekobrottsmyndigheten). the united kingdom designated two aros: the serious organised crime agency (soca) for england, wales and northern ireland and the scottish crime and drug enforcement agency (scdea) for scotland. the remaining member states provided the following information on their progress towards designation of an aro: malta indicated that the national fraud squad will be designated as the national aro. portugal indicated that a group appointed under the authority of the minister of justice has been given the task of establishing the structure of the future aro. romania indicated that an aro would be established under the responsibility of the ministry of justice. the aro would be multidisciplinary and involve the law enforcement structures that have temporarily acted as the aro. the relevant personnel, including the carin contact point, would be detached to the future aro. slovenia indicated that consideration is being given to establishing an aro under the responsibility of the public prosecution office. italy indicated that consideration is being given to establishing an aro under the responsibility of the ministry of interior. the relevant provisions for internal designation are being drafted. baltic journal of economic studies 42 vol. 6, no. 4, 2020 of staff, namely accountants, detectives, lawyers and economists. it is used in cases where huge amount of money is involved. a forensic auditor should be able not only to find inaccuracies and intentionally formulated errors in transactions, but also to understand the true purpose of the economic transaction. the search is carried out on a computer, in special software, which records and displays a step-by-step scheme of the crime: where the credited money went, to which offshore, where the money goes later to, who stole the money, who currently disposes of it, etc. there is a cross-border search for the recovery of money from abroad, which, in addition to forensic audits, also includes the work of detectives and economic intelligence. if private detectives found out that the suspicions are serious, they, together with a team of lawyers involved in the cross-border search for assets, apply to the pretrial investigation authorities and to the court with claims, requesting information from certain registers. when public authorities try to start this process on their own, they are already sending a signal to the other party that something is already happening. and if the special authorities fail to achieve the result, then, of course, they can hire a private company to search for assets, but time will be lost, the assets might be transferred somewhere, which will make it much more difficult to find them afterwards. assets recovery is a process where each subsequent stage depends much on whether the previous one was carried out properly. limited operational data complicates or even makes it impossible to conduct a successful investigation. that is, the better the implementation of the previous stages, the better the chances of success. the complexity of asset recovery processes and the lack of technical knowledge of the professionals in developing countries are major obstacles to a successful asset recovery process. it needs, first of all, the possibility of the successful search of the assets. when searching for assets, the investigator determines the ways of obtaining them and identifies the location of criminal proceeds (cherniavskyi, nekrasov, tytko, 2017). in the context of addressing this issue, the world bank has made the following recommendations: developed and developing countries should maintain comprehensive statistics on asset recovery cases, including assets frozen or confiscated, repara-tions or restitution ordered, and assets recovered. gaps in the data should be identified and their collection addressed. where possible, countries should gather data on the various means to recover assets, including criminal and non-conviction based confiscation, administrative confiscation, private civil actions, or other forms of direct recovery. statistics on cases and information on laws and results should be publicly available and accessible at a central location such as a website (larissa gray, kjetil hansen, pranvera recica-kirkbride, linnea mills, 2014). for example, in order to partially implement this recommendation, in 2020, the president of ukraine v. zelenskyi submitted to the verkhovna rada of ukraine a bill on “civil confiscation of corrupt assets of officials”, which also provides for the return of criminal liability for illicit enrichment. according to the norms of the bill submitted for consideration, confiscation of illegal assets by court decisions is envisaged in a civil procedure without a conviction. illegal enrichment will be prosecuted if the subject of illicit enrichment is assets in excess of significant amounts, as defined in the united nations convention against corruption (united nations convention, 2003). currently, anticorruption bodies in ukraine deal only with the most significant corruption threats. cases involving less than 380,000 eur but more than 30,000 eur are dealt with in civil proceedings by recovering unjustified assets to the state revenue. the bill on illegal assets of officials will allow the state to confiscate these assets even under the previously opened cases. experts confirm that aid disbursements to the most aid-dependent countries co-incide with significant increases in deposits held in offshore financial centers known for bank secrecy and private wealth management. aid capture by ruling politicians, bureaucrats and their cronies is consistent with the totality of observed patterns: it can explain why aid does not trigger flows to non-havens, why the capital outflows occur precisely in the same quarter as the aid inflows and why the estimated effects are larger for more corrupt countries. other explanations are possible but we find them harder to reconcile with all the patterns in the data. it cannot be ruled out that firms benefiting from aidsponsored spending receive payments in quarters with aid disbursements and deposit the funds with foreign banks; however, this mechanism cannot explain why the money only flows to havens. it seems even less likely that the results reflect profit shifting by multinational firms, the effect of aid on income through aggregate demand and portfolio adjustments by commercial and central banks. world bank estimates suggest a leakage rate of around 7.5% for the average highly aiddependent country ( jоrgen juel andersen, niels johannesen, bob rijkers, 2020). the positive influence of political will is demonstrated by indonesia, the gov-ernment of which after the fall of the sukarno regime (president of indonesia in 1945–1967) embodied in the laws on combating legalization (laundering) of criminal proceeds the best world experience and introduced the codification of court cases to prevent the impact on lawsuits for the recovery of assets withdrawn by sukarno and the persons from among the supporters of this political leader. on the whole, the codification of court cases has had a positive impact on the work of the indonesian judiciary in general and in anti-corruption cases in particular (analytical note, 2019). baltic journal of economic studies 43 vol. 6, no. 4, 2020 7. summary and conclusions the purpose of recovery of the withdrawn funds from the state, on the one hand, is to promote the stabilization of the domestic economy, and on the other – to set a precedent that demonstrates the inevitability of punishment for corruption crimes as for high-ranking officials. our study shows that: 1) the formation of a modern and effective system for combating organized corruption in any country is possible subject to the application of regulations that meet international standards and the integrated use of advanced computer information technology. 2) it is necessary to support the opinion that countries should engage in a do-mestic or international policy debate on how asset returns can be incorporated into settlement agreements in corruption cases and should consider legislative changes necessary to permit the inclusion of third parties in settlement agreements in foreign bribery cases2. 3) in order for the asset recovery procedure to be effective, oecd member countries (organisation for economic co-operation and development, oecd) need to develop adequate regulations that will allow for the immediate disclosure of information and the exchange of information on freezing of accounts by a foreign jurisdiction. 4) the adoption of laws or the introduction of a rule in the criminal law of the state on illicit enrichment will help to overcome the existing barriers in recovery of assets. 5) all countries of the world should have a comprehensive national strategy and to finance at the state level the measures to recover corrupt assets within the framework of anti-corruption programs; the united state register of assets seized in criminal proceedings. 6) to recover assets from abroad, states need to have political will, to use the latest technologies and modern equipment. among media representatives and experts investigating and commenting on the economic crimes of the oligarchic regime, the prevailing opinion is that if stolen property and assets are recovered from abroad, such states as ukraine, for example, practically would not need international financial assistance. however, the recovery of assets is a long process, for example, the case of former prime minister of ukraine p. lazarenko regarding stolen assets, is considered by us courts for more than 10 years already. ukraine is now claiming a refund to the budget of 160 million usd from the former prime minister’s money that he has withdrawn from the country. therefore, the efforts of relevant international organizations should be aimed at developing a mechanism and facilitating the acceleration of such proceedings. 7) there is a need for scientists to clarify the mechanism underlying the direct correlation between the payment of international aid to a particular state and the 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it is the era of new ideas, information society and new technologies. the advent of the internet and computer technology in the universal life of mankind has necessitated the processing of large amounts of information in the shortest possible time and its instantaneous transmission to various parts in the world. changing modern methods of doing business, a new format of the structure of the economy and competitive advantage in the economic and political capabilities of countries that have been baltic journal of economic studies 217 vol. 6, no. 5, 2020 technologically and informational developed – those are the changes that lead to such monetization. active participation in the international technology market is a guarantee of access to advanced knowledge and productivity of economic processes, as well as knowledge of the international technology market, its formation, structure, current status and major trends are an urgent problem in the economy. for ukraine, the it sector is of particular importance because it should contribute to the general economic and political crisis, it can announce this phenomenon through rapid development, as well as ensure the functioning of many related industries. the ukrainian it sphere is an industry that can ensure the development of many components of the national economy, including banking, e-commerce, nanotechnology and many others. it is the it sector that allows the company to be faster and more flexible in making management decisions, justifying strategic objectives and processing performance indicators. today, the rapid growth of information technology has allowed the country to increase the share of gross product in the "it sector". technology is entering our lives so rapidly that the use of personal media has become commonplace in the new century. their influence felt in almost all industrial and scientific fields, in the sphere of social structures, communication between people and much more (savitska, 2004; sitnik, 2001). information technology has many applications in finance. from trading financial instruments to accounting for personal budgets to reporting business profits, computer technology is used daily by financial companies. information technology allows you to quickly calculate financial statistics, as well as make electronic money transfers. 2. the relationship between the financial system and it-technology financial trade was intensified by information technology. some computer systems even trade for users. the system programmed to enter buy and sell orders when the stock or bond price reaches a certain level, and automatically closes the order when the target price or stop loss is reached. computer trading is useful when the trader has a system that allows profitable trading and does not want to enter each order separately (aristova, 2005). information technology provides instant information for stock traders to make decisions and allow them to enter orders that are executed immediately. financial statements also improved through information technology. a language known as xbrl, the extended business reporting language, was used to standardize financial information in the annual reports of state-owned companies. traders can quickly sort records in this format. they can easily find the statistics needed to determine which companies to invest in. xbrl is based on xml, an extensible markup language used to transmit information over the internet (sviderskyi, pustova, & lazariev, 2018). financial data can be easily transferred using information technology. instead of using checks and checking accounts, information technology can instantly clear a transaction. buying a debit or credit card is quickly compared to the balance on the user's account, which allows the bank to decide whether to allow the transaction. information technology allows you to carry out operations on weekends and holidays, when the bank has no staff (pinchuk, 2011). personal finance has been simplified with the help of information technology. banks provide data on check and savings deposits and withdrawals in standardized formats. the customer can download account transactions and save them in records on the home computer. personal finance software includes additional features, such as charts and reports, which show home users what they spend their money on and where their money comes from. information technology is also useful for companies considering financial transactions. computer systems calculate and display the interest and principal amount of a loan and measure the return on investment when a company borrows money to expand its operations. companies can securely transfer data over the internet, and a computer system records all transfers, making it easier to keep accounts. technology helps businesses in many ways, which mainly focus on making things bigger, better, or faster than you could without technology. different industries and companies rely heavily on technology, but some of the benefits of technology in business include improved communications, production optimization, inventory management, and financial record keeping (voitko, 2012; ushakova, plekhanova, 2009). the importance of technology in society and business can be seen in how technology expands the reach and effectiveness of many forms of internal and external communication. for example, sales representatives and technicians no longer have to return to the office to receive assignments. business people who go to work can stay in touch with the office and colleagues, and e-mail allows people to spread messages across geographical boundaries. externally, the technology expands the possibilities of marketing communication. social media, e-mail, mobile phones, and chat features allow companies to communicate faster and more interactively than traditional one-way media options (sandygei, 2014). note, however, that using technology to communicate is not the only solution, and it can be problematic for a business if a certain type of interaction is better facilitated face-to-face. for example, a funeral director baltic journal of economic studies 218 vol. 6, no. 5, 2020 would not want to rely on impersonal text messages because personal contact is critical at this difficult time in their clients’ lives. 3. the relationship between a business and it-technology no matter what your industry, business size or core business, technology provides opportunities to optimize production beyond what you could produce without it. small companies can often compete with large firms in operational efficiency through access to high-tech equipment and tools. manufacturers are constantly striving to upgrade equipment to compete with industry leaders for production efficiency. crm and erp systems are the main types of systems for business management. crm system designed for the orderly collection and storage of customer information. the system manually or automatically records customer contacts along with other information required for the business. one of the main goals is to simplify the work with clients, making it faster and easier. all communication channels and the entire sales history are located at your fingertips in the crm interface. erp system aimed at organizing both work processes and operations within a company. it used to manage labor resources, assets, supply chain and production of the final product, as well as financial management (dikа, 1996). this is more serious and heavyweight software. it intended for use primarily in companies with a complex and multi-level production structure. in the retail business, technology makes the sales and customer service process much more efficient. scanning barcodes at the checkout is faster than fingerprinting numbers at the checkout. also, when items are scanned, companies collect important data for accurate marketing and inventory management. raw material suppliers, manufacturers, wholesalers, retailers and b2b suppliers have all inventory management processes. the technology used for the systematic organization of items in a warehouse or storage. comparing computer information with inventory stores helps partners to gather inventory as quickly as possible. companies can quickly compare inventory when it comes to ordering sizes on a computer screen. many inventory processes are automated. for example, retailers often use vendor-driven approaches when vendors automatically send replenishments, when they warn that there are not enough stocks in the store. organized, effective inventory control helps to minimize inventory costs while meeting consumer demand. small and large companies use advanced software to manage accounting and financial tasks. in fact, companies often use programs that synchronize accounting with point of sale terminals and accounting programs, for example, each purchase and sale transaction is automatically recorded on the accounting platform. the use of financial management technology minimizes manual processes, reduces costs and helps to protect against human error. 4. information technology in the finances of ukraine in the system of the ministry of finance of ukraine, the highest form of organization of information processing related to the formation and implementation of the state budget with the help of computer technology has become an automated system of financial settlements (asfs). precisely the influence of asfs on the integration of databases in the areas is expanding to cover a large number of functions, namely: analysis and audit, control and reporting (fedulova, 2006; fedulova, 2007). the systems of financial settlements were formed as a hierarchy of one of the links of the financial system and cover all its levels – from districts to the ministry of finance of ukraine. the organizational structure corresponds to the number of regions in ukraine. the structure itself has three hierarchies on which calculations are automated: from district financial departments. the next stage is the regional financial departments and the arc. ministry of finance of ukraine provided at national level (vitlinskyi, nakonechnyi, & sharapov, 2008). a common feature for the work of the asfs is the sum of common goals and objectives for the use and management of finances at all levels of the hierarchy. centralization of payments at the national level has an economically feasible definition of the general directions of formation, distribution and redistribution of financial benefits of the country in the case of maintaining certain proportions. it is with the help of decentralization of calculations at the stage of local budgets that it is possible to give the "green light" to the council of people's deputies, taking into account the peculiarities of the design and development of administrative units and their construction. exports of the ukrainian it industry have grown significantly over the past decade and average 20.7% (figure 1.) in 2019, the share of exports in the ict industry amounted to more than 2.5 billion usd, compared to 2.04 over the previous year. in percentage terms, it grew by more than 21.79% over the previous year. the main goal of the it industry is to make a significant contribution to increasing the volume of it products in the country 's economy. the main consumers of ukraine's it services in 2019 remain the eurozone countries, the united states, canada, and israel. in monetary terms, this amounted to almost 2 billion usd (figure 2). baltic journal of economic studies 219 vol. 6, no. 5, 2020 5. conclusions based on our research, various aspects of the use of e-commerce at the macro and micro levels were justified. the efficiency of using the automated system of financial settlements at the level of the ministry of finance of ukraine was investigated. it was justified that the centralization of payments at the national level was economically feasible provided that certain proportions observed. in particular, the automated system of financial settlements at the level of territorial communities, i.e. at the level of local budgets, will allow to optimize budget processes and provide administrative units. at the same time it must exclude the possibility of any corruption. the importance of the development of the it sphere for the ukrainian economy due to dynamics of growth of exports of information services was proved. in particular, the increase in exports of information services in 2019 compared to the previous period increased by more than 21.79%. at the same time, the main consumers of it services in ukraine are the eurozone countries, the united states, canada and israel, providing revenues of about 2 billion usd. it could be concluded that in ukraine there is a significant impetus in the development of the domestic it sector. with the help of financial calculations, it is impossible to imagine today that the it sector does not affect the financial market in the country. ict has created an effective system of financial settlements, and computer systems help in the calculation of financial transactions (karmynskyi, karmynskyi, nesterov & chernykov, 2004; koryst ukrainskoi it-haluzi, 2020). high employment in it leads to a high level of services in this area in the international market. after all, a personal link in 0 500 1000 1500 2000 2500 3000 dynamics of foreign trade in services by types information services computer services telecommunication services figure 1. dynamics of foreign trade of information services by types source: based on (state statistics service of ukraine, 2020) usa 44% great britain 12% switzerland 9% israel 7% malta 7% germany 6% netherlands 5% cyprus 4% france 3% canada 3% top 10 countries-importers of it services in ukraine figure 2. top countries importers of it services in ukraine in 2019 source: based on (state statistics service of ukraine, 2020) baltic journal of economic studies 220 vol. 6, no. 5, 2020 it is also the development of software for finance, accounting, e-commerce and close service and monitoring the quality of services. these problems hinder the development of it enterprises in ukraine. the main directions of their development should be: 1. improving legislation in the field of intellectual property protection and simplifying doing business for the pain of flexible development and attracting additional human resources in it. 2. uniform creation of it enterprises throughout the country, not only in large cities, but also in all regional places, to attract more people to it. 3. development of financial software for servicing small and medium enterprises, for more flexible work with finance and accounting in enterprises. references: aristova, і. 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(2009). informatsiini systemy ta tekhnolohi na pidpryiemstvi [information systems and technologies at the enterprise]. kharkiv: vyd. khneu. baltic journal of economic studies 1 vol. 6, no. 1, 2020 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: natkov@i.ua orcid: https://orcid.org/0000-0002-2877-4302 2 vinnytsia national agrarian university, ukraine. e-mail: 877muha@gmail.com orcid: https://orcid.org/0000-0003-0788-7399 3 khmelnytskyi educational and scientific institute of ternopil national economic university, ukraine. e-mail: zhmyrko_iv@ukr.net orcid: https://orcid.org/0000-0002-5678-6343 doi: https://doi.org/10.30525/2256-0742/2020-6-1-1-8 analysis of economic-financial experience of the world countries in the system of pension insurance natalia koval1, natalia priamuhina2, inna zhmurko3 abstract. the purpose of this article is to analyze the experience of pension insurance systems in europe, asia, north and south america, australia. the defining feature is that the existing pension insurance system in ukraine does not perform its main task properly, since the rate of pension, for the most part, does not make it possible to maintain a decent standard of living for current pensioners. after analyzing the implementation of the pension reform in ukraine, it should be emphasized that during the twelve-year period after the pension reform in the country there remain a number of unresolved issues regarding the pension provision of citizens, namely: aging of the population, which is one of the main factors that prompt the government to a new stage of reforming the pension system; the presence of arrears on contributions to compulsory state pension insurance; lack of proper differentiation of pension payments; shadow wages; lack of sound financial instruments for investing pension assets; unsatisfactory level of legal and financial awareness of the population in matters of pension provision; lack of interest of employers in financing non-state pension programs for employees, lack of confidence in the pension system of non-state pension funds. methods. in most countries of the world, the problems of the pension system, same to what we have in our country, arose. but due to pension reform, they achieved successful results. each country chose its own way of building a pension system based on its own demographic and socioeconomic features. however, despite this, the main task of any pension system is to secure from poverty and provide a pension that could guarantee a decent standard of living for a pensioner. results. ukraine is trying to build the pension insurance system, drawing on the best practice of the countries studied. practical implications. it is found that the most effective and successful model of the pension system is considered to be chilean, since the country has been using cumulative and voluntary pension systems for a long time, which are priority and allow to resolve the pension of their citizens financially, prudent and efficient investing of pension funds with lower rates of public investment income. the same model was taken as the basis in peru, argentina, colombia and kazakhstan. value/originality. analyzing the pension reforms implemented in eastern europe, it should be noted that part of the changes was due to the need to protect pensioners from poverty in the context of a sharp decrease in the rate of pensions because of the reduction of total pension contributions and the inability of the state to finance previous pension obligations. the real way to reduce the financial burden on employers and the state in the context of a solidarity pension system was to develop levels ii and iii of the pension system. it is noteworthy to study the foreign experience of the eastern european country, such as poland, which was one of the first to introduce a compulsory funded pension system. key words: economic-financial experience, ukraine, pension insurance, eurasian countries, north and south america, australia, personal pension insurance, pension insurance systems, foreign experience. jel classification: g22, g23, o57 baltic journal of economic studies 2 vol. 6, no. 1, 2020 1. introduction the existing system of pension insurance in ukraine does not fulfill its main task properly, since the rate of pension, for the most part, does not make it possible to maintain a decent standard of living for current pensioners. after analyzing the implementation of the pension reform in ukraine, it should be emphasized that during the twelve-year period after the pension reform in the country there remain a number of unresolved issues regarding the pension provision of citizens, namely: aging of the population, which is one of the main factors that prompt the government to a new stage of reforming the pension system; the presence of arrears on contributions to compulsory state pension insurance; lack of proper differentiation of pension payments; shadow wages; lack of sound financial instruments for investing pension assets; unsatisfactory level of legal and financial awareness of the population in matters of pension provision; lack of interest of employers in financing non-state pension programs for employees, lack of confidence in the pension system of non-state pension funds. the statement mentioned above undeniably confirms the necessity of reforming the pension system of ukraine. due to the changes in the pension system in the country, the living standards of pensioners will increase, financial stability of the pension system will be ensured, pension insurance arrears will be impossible, a more effective system of administrative management of pensions will be created and the level of social protection of the population will increase. in order to reform the pension system in ukraine successfully and efficiently, it is expedient to consider the foreign experience of pension insurance and analyze the different approaches of the countries to the role of the state in the organization and functioning of pension programs. the analysis of pension systems in different countries performed convinces that in the world practice there are three ways of providing pension benefits to the elderly: through taxes and a solidarity system based on exchanges between generations when current employees pay for pensioners and by saving money (financing scheme), that is employees save some of their income by accumulating them on personal, individual accounts for use after retirement. 2. economic crisis effects on consumer behaviour let us take a closer look at typical approaches to reform pension systems around the world and the corresponding models of pensions that have a number of peculiarities: the eurasian countries (germany, poland, france, russia, latvia, estonia, bulgaria, the united kingdom, kazakhstan, sweden), north and south america (canada, the usa, chile) and australia. the world experience in reforming pension systems shows that the main trend is the transition to a cumulative pension system, the positive side of which is the possibility of increasing investment in the economy and obtaining investment income for persons of retirement age, which makes it possible to make the domestic pension system financially balanced and sustainable. since in order to raise the level of pension benefits for citizens, non-state pension funds in many countries of the world are one of the main instruments. the first countries in the world that introduced compulsory state pension insurance based on the principles of redistribution and solidarity of generations and usage of the multi-level pension model, were the most economically developed countries of western europe, among which we mention germany, france, great britain and sweden. the first full system in the world was introduced by otto von bismarck in germany in 1889, a system of compulsory retirement provision, which was characterized the principle of solidarity of generations and the level of social security of the population. the pension system of this country consisted of three levels: compulsory state pension insurance, industrial pension insurance and private pension insurance. as for private pension insurance, it involves person taking care about his/her old age in a private way. for this purpose, pension schemes of this type of insurance which are voluntary, have been adopted, the rate of pension assets of their participants is determined which depends on the amount of insurance premiums paid and the received investment income. the pension provision of the employed in agriculture is performed regardless of the pensions of workers and employees. unlike pensions for state social insurance, the help of peasants in old age did not provide for their full allowance; funds for the help of old age peasants consisted of equal deductions of agricultural entrepreneurs in general insurance, although in the future it is planned to transit them to the national system of pension insurance. the main feature of the german pension system, which differs from the other eu countries, lies in the fact that it provides more than 85% of all pensions in this country. it should be noted that pension reform in germany was started back in 1992, which adapted the pension system to future demographic and economic conditions. every year the functioning of cumulative pension programs grew in the state, which allowed to form a powerful financial source for replenishing citizens’ incomes when they reached their retirement age (aleskerova, 2018). it should be emphasized that germany 's pension system is considered one of the most effective in europe, it affects the development and formation of pension systems in many countries of the world. baltic journal of economic studies 3 vol. 6, no. 1, 2020 another noteworthy structure is the french pension system, which is based on the model of "otto von bismarck social insurance model", where compulsory state pension insurance, which is based on the principles of redistribution and solidarity of generations, plays a leading role. the pension system of this country is considered one of the most fair in the world and is quite complex and multicomponent because there are over 100 basic and 300 additional types of pensions in france. in general, the pension system consists of 5 components: the main is for hired workers; additional; special is for certain categories of employed; basic is for officially unemployed workers; optional modes. in france, the wage bill was calculated for the entire working period and not for the years with the highest earnings chosen. in the basic scheme of the pension system, early retirement is possible as well as a system of supplements for spouses with at least 3 children and one spouse who provides his/her payroll to the other, who does not have pension. when analyzing the functioning pension system of france one should draw attention to the fact that the country prefers a solidarity system based on the solidarity of generations and operates at the expense of workers and employers who provide payment of pensions from the basic solidarity regime and with regard to cumulative pension funds, then they are voluntary and do not play a significant role in the country (aleskerova, 2018). as in germany, in france there is a separate pension scheme for agricultural producers. the law of the country dated january 17, 1948 consolidated the creation of individual pension schemes for farmers, craftsmen and owners of small enterprises. therefore having analyzed the pension models of germany and france, built on the "the bismarck model" of social insurance, it is worth considering their main characteristics. the positive feature of these pension systems is that they play a major role in compulsory state pension insurance which is based on the principles of redistribution and solidarity of generations which provides approximately 70-80% of the basic pension. the existing high replacement rate of salary wages varies between 60-80% which, on the one hand, is a positive aspect of this model since it provides a high standard of living for pensioners, and, on the other hand, such a high replacement rate leads to a deficit in pension systems in the future. regarding the retirement provision of agricultural workers, pension schemes are being created in these countries which are funded by contributions from the employees themselves and from public funds (polyova, 2017). the next peculiarity of pension provision to be considered is the model performed in the uk , as it is the only country in western europe that was hardly affected by the crisis of pension systems in europe; its pension system has always been solvent and reasonably considered one of the most advanced in the world. the uk pension model is based on three levels, which include basic state pensions, additional state superannuation pension and non-state pension savings. the basic state pensions are at the first level, the rate of which depends on the length of service and the amount of wages and guaranteed by the state to all britons after reaching their retirement age of 60 years for women and 65 years for men, they intend to increase in the future for another 5 years, that is up to 70 years. the basic part of the state pension is 12% of the average wage paid to all citizens. the second level is additional state superannuation pension, the amount of which depends on the amount of pension savings accumulated on individual accounts of a person in the bank and on average amounts to 50% of the employee's salary before retirement. in particular, funds and investment income accumulated in the pension fund are not subject to tax. with regard to the third level, the non-state pension system, there are many ways for accumulating private pensions in the united kingdom. professional pension systems are the most widespread. significant role is played by insurance companies that provide a range of services for additional pension provision of the population. non-state pension funds are most popular among the uk citizens, as they are one of the main tools for raising the level of retirement provision of the population. if comparing the rates of development of the npfs, the uk and ukraine, it should be emphasized that the population of the united kingdom is 100% covered by basic state pensions, 50% by the system of professional pensions and by 25% by the scheme of personal pensions with regard to ukraine's state pensions is also covered 100% of the population and only 7% by the scheme of personal pensions. instead, in the united kingdom, as in many other european countries, pension reform is one of the most important political steps in social policy. after all the government of the state has always encouraged citizens to accumulate funds for old age rather than hoping for a state pre-funded pension system. the negative aspects of the british system should include the inadequate level of pension provision for the entire population as well as the dependence of future retirement benefits on various changes in the economy of both the country and the world, in particular changes in investment income, inflation, economic growth, etc. 3. differences in consumer spending behaviour among age groups the most successful and universal, from a social point of view, is the pension system in sweden with compulsory defined payments, which consists of a labor pension related to the earnings of the additional pension and a national, basic state pension system operating through baltic journal of economic studies 4 vol. 6, no. 1, 2020 a distribution mechanism at the expense of insurance contributions amounting to 18.5% of earnings, 16% of which come to the public service (aleskerova, 2018). the solidarity level of the swedish pension system involves a distributive character, which is shaped by the contributions of currently working citizens, which provide retirement benefits to current pensioners. it contributes to the formation of a wage-dependent pension as well as a guaranteed social pension, which is paid if the pension level does not reach 20% of the average wage in the country. it should be emphasized that the level of future pensions is indexed annually according to the dynamics of the average wage and the general state of the economy of sweden. the second level of the pension model is based on the principles of cumulative retirement insurance which involves the creation of cumulative retirement accounts. pension insurance premiums are collected by the state and managed by a future pensioner in sweden, having the opportunity to invest them in one or more investment funds. these financial institutions offer investment products with different profitability which gives the citizen opportunity to independently choose an investment strategy. if the second level participants do not choose financial instruments for their retirement assets independently, then the assets are on state fund accounts. however, approximately 58% of sweden's population prefers to independently choose financial instruments for their retirement assets (nicoholas, 2002). it should be noted that the structure of the swedish pension system is very similar to that implemented in ukraine, but there are certain differences. in sweden the pension rate is 18% lower than in ukraine where the employer deduct to the pension fund approximately 36.6% of the wage bill, while in sweden it is only 18.5%. of this rate, 16% go to the formation of a distribution pension and the other 2.5% goes to the cumulation account (aleskerova, 2018). summarizing the results of the sur vey on sweden's modern pension system, we would point out that it can be a useful example for most of the countries that are currently reforming pension systems. in virtue of the pension reform, sweden managed to minimize the negative effects of reform and maximally change its pension system in line with those processes taking place in the world, providing financial stability in the future. the analysis of pension systems in economically developed countries has shown that they all have welldeveloped retirement benefits systems for the elderly. from the social point of view, the pension systems of sweden and the great britain are the most acceptable. it is these pension systems, their financial support mechanisms and the social and legal protection of all participants can serve as the example for ukraine in building a new pension system. it should be noted that the countries under research are more reliant on state pension insurance with the exception of the great britain, so it is expedient to analyze the pension systems of those countries based mostly on private pension systems: these are the countries of latin america. it should be noted that such countries, in particular, the usa, canada, chile, have a developed solidarity pension system with large public expenditures on pensions and are economically developed, where a cumulative pension system is implemented, which in the early years of the reform was the main part of pension assets invested in state securities and deposits of banks and only with the development of the corporate securities market diversified investment portfolio of pension funds. thus, in the united states, there is a two-level pension provision model which includes the first level, a solidarity system complemented by other pension programs that enable citizens to save their funds for retirement benefits and the third level, which is a system of voluntary private pension funds that enables citizens who have a desire to receive an even bigger pension and pay large contributions in a long period of work to maintain the desired level of retirement. the second level of compulsory pension funds in the usa pension model is absent. every american has the opportunity to provide three pensions: state, non-state at work and nonstate individual through the opening the personal pension accounts. the aggregate tax rate on the wage fund with the functioning of the american model of the pension system is 15.3%, which is paid in equal installments by the employer and employee with the pension tax having an aggregate rate of 10.7% and paid in equal shares by the employer and employees. the united states was one of the first to solve the problem of "pension" deficits by raising the rate of pension insurance. the usa pension model operates in portugal as well as in some countries of america (rogach, 2019). the model of the usa pension system is based mainly on personal pension insurance of the population. the pension system is based on a distribution pension system and a system of voluntary private pension funds, types of pension programs of which play both a social and an investment role. the positive side of the usa social security system, the experience of which can be used in reforming the pension system in ukraine, is to develop strategic aspects based on forecasts of changes in demographic and economic conditions. in general the anglo-american model of pension insurance has several advantages over the bismarck social security model. first, compulsory state pension insurance does not play such an important role as in continental europe, as it provides social assistance to the most vulnerable groups of the population and baltic journal of economic studies 5 vol. 6, no. 1, 2020 people with high incomes can worry about their pensions on their own. this will have a positive effect on the financial sustainability of pension systems in these countries in the future since they are less dependent on demographic changes in the world. secondly, private pension systems operate efficiently in these countries which not only increase the financial sustainability of the national pension system but also serve as a powerful source of investment in the country 's economy. canada's pension system ranks fourth in the world after the united states, japan and the united kingdom in terms of retirement assets. it consists of three levels: state pension (old-age pension); cumulative labor pension (canada pension plan) and individual pension schemes. in canada, contributions from employers and workers are set at such a rate that in 10 years the supplementary pension insurance was 25% and in some other countries, germany, spain, the great britain, the amount of deductions is calculated on the basis that in 20 years the supplementary pension was not less than 20% of the salary of the employee subject to insurance. only a quarter of the canadian population has its own individual pension schemes which allow them to contribute up to 18% of the income for the previous year. it is possible to make funds until reaching 69 years. all retirement benefits received by a person after reaching the retirement age are subject to tax. the experience of the provision of pensions in eastern europe, the pension systems of which consist of three levels, among which poland, the czech republic, russia, bulgaria, kazakhstan should be noted, is also helpful (plakhtii, 2019). unlike the reform of the pension system in ukraine, which began in 2004, the reform of pension systems in most countries of eastern europe began in the early 90s of the 20th century. when analyzing pension reforms carried out in eastern european countries, it should be noted that part of the change was due to the need to protect pensioners from poverty in the context of a sharp reduction in pensions as a result of a reduction in the total pension contributions and the state's inability to finance previous pension obligations. the real reduction of the financial burden on employers and the state in the conditions of the solidarity pension system was the development of the ii and iii levels of the pension system. poland's pension system is considered the most responsible in the world, since no cases of arrears have been recorded. having examined the new pension system of poland after the pension reform, its main achievements should be named: introduction of personalization of the registration of contributions to the joint-stock system; a clear creation of the legislative framework and administrative infrastructure for the management and regulation of the compulsory accrual system; definition of rules for protecting the rights and interests of participants in the cumulation system; the introduction of a voluntary cumulative system of pension accounts. it should be noted that the reform of the pension system in ukraine should be based on the experience of poland where the cumulated individual pension system was introduced in the late 90s of the last century. the main changes that allowed poland to receive an additional investment resource for the country 's economy are that part of the funds goes to the state social insurance system, which provides pensions to people who did not have time to participate in the cumulation system, and part is on accounts of open pension funds, run by private companies. the pension system in bulgaria today has three levels: state; additional compulsory pension insurance, that is a cumulation system with individual accounts in a professional or universal pension fund; voluntary pension insurance which is carried out through the operation of non-state pension funds. the retirement age for women is 60 years, 63 years for men, and, in the case of insurance periods, 34 and 37 years, respectively. currently, the bulgarian pension system is financially unstable and depends to a large extent on revenues to the state budget. in order to improve the situation in the country, in december 2010, the national assembly of the republic of bulgaria adopted amendments to the basic legislation in the area of pensions of the social insurance code. main reforms: – provisional contributions: an increase in the amount of contributions to the pension fund by 1.8% and from 2017 it is planned to increase the amount of contributions for universal pension funds by 2%; – work experience: during 2012-2020, a gradual increase in the length of service for 4 months is planned for each year until 37 years of service for women and 40 years for men are reached. the introduced formula in bulgaria is an important step towards improving the pension system but at this stage it needs further adjustments. features of building their national pension system is characterized by kazakhstan. its pension system has differences that distinguish it from the russian, baltic and the ukrainian pension model. it is also worth considering the pension systems of the countries of the former soviet union: latvia, estonia and lithuania. latvia introduced a three-level pension system that united the personal interest of every person in ensuring his/her own old age and solidarity of generations. the main principle of the system is: the bigger the social contribution is paid today, the bigger the pension will be tomorrow. the country 's pension system is stable, averaging the demographic and financial risks inherent in each of the levels. the first level (solidarity of generations) already operates and it is based on the principle of providing baltic journal of economic studies 6 vol. 6, no. 1, 2020 social tax deducted from the working population. the social contribution is 35.09% of the salary, the employer pays 24.09% and the employee pays 11%, 20% of which is the pension component. calculations and insurance payments are covered by the state social insurance agency. payment is made from the special state social insurance budget which is separated from the state budget of latvia. notional system provides pensions for people who have worked for at least 10 years and have reached the retirement age: 62 years for men and women. the pension system in estonia consists of three parts: basic pension, which is the same for all and does not depend on earnings; share of work experience, the amount of which is calculated for the period of work before 1998 and the share of insurance: the amount calculated for the work experience after january 1, 1999; 95% of estonian pensioners receive pensions through bank accounts. the social tax is 33%, of which 13% is deducted on medical and 20% is on pension insurance. since january 1, 2002, a compulsory cumulative system has been introduced in the country, the members of which are persons born after 1983. the third level is voluntary and gives the citizen the opportunity to choose between pension insurance and pension funds which provides for tax benefits. in estonia, the retirement age for women is 61 years and 63 years for men. the average pension is 306 euros and the people's pension is 128.45 euros. the right to appoint a national pension in the country has persons who have reached the age of 63 years, provided that they reside in its territory for at least 5 years. the high level of information technology development in estonia has made it possible for the pension system to be simplified and affordable for every estonian. the transparency of the pension system contributed to a high level of trust on the part of its participants and the flexibility of the implemented system provided it with success and viability in the period of political and legislative changes in society. 4. survey methodology in most countries of the world there were the same problems with the pension system as in our state. however, due to pension reform, they have succeeded. each country has chosen its way of building a pension system based on its own demographic and socioeconomic peculiarities of development. however despite this the main tasks of any pension system are protection from poverty and the provision of a pension that could guarantee a decent standard of living for a pensioner. at the current stage of reform, one of the key tasks is the introduction of compulsory cumulative pension insurance. scientists and practitioners discuss this issue, seek out the optimal mechanism for its implementation. therefore, the study and application of the experience of other countries with a developed market economy, where compulsory cumulative pension programs are already functioning for a long period and proved to be effective, may be useful for our state. the ukrainian authorities have decided that a russian-polish model of the pension system will be implemented in our country. today, almost no solidarity and cumulative strategy is used in its pure form since most states are adherents of a mixed strategy. therefore, the ukrainian leadership plans to use a solidaritycumulative model in which all three levels will operate. in many countries pension systems come in exactly three levels. the polish pension system is similar to the ukrainian one but it is advisable to consider its disadvantages and advantages. the main achievements of the polish pension system and useful experience for ukraine are the following: 1) the polish law reflects only one means of legal protection of the assets of participants, guaranteeing participants of private pension funds the safety of their funds. the draft law "on non-state pension funds", prepared in ukraine, does not provide this; 2) implementation of personalized registration of contributions and earnings of all employees in poland is also necessary for ukraine; 3) the participants themselves choose the npf to invest their contributions and in ukraine it is assumed that all assets will be located only in the office of the state. the german concept consisting of elements of distributive and cumulative methods has proven itself in practice. therefore, taking advantage of the german experience, ukraine should pay attention to the benefits of this country 's pension system. the experience of estonia, where since 2001 the compulsory second level has been introduced, is useful for ukraine. the success of estonia's pension reform depended on the cooperation of the public and private sectors. joint actions made it possible to find quick and inexpensive solutions at a low risk level. the experience of kazakhstan can be successfully used in the process of implementation of the system of npp in our state on a voluntary or obligatory basis. according to the study less than 10% of the gdp is spent on pensions by countries such as estonia, latvia, bulgaria, russia and most of the financial expenditures on pensions are in the united states, great britain, chile, australia. taking into account the further negative demographic trends according to the projected calculations by most foreign experts, the aging of the population will continue in the near future, which is why the governments of most countries plan to continue raising the retirement age. baltic journal of economic studies 7 vol. 6, no. 1, 2020 the highest retirement age is expected to be set in the uk: up to 68 years for men and women, the lowest in russia: 60 years for men and 55 years for women, it is not planned to change it in the future. now in the above-mentioned countries, the average retirement age for men is 63.3 years and for women it is 61 years. in the near future, raising the retirement age is planned by germany and australia. non-state pension insurance is becoming widespread in the world which allows citizens to receive high pensions. non-state pension provision begins to occupy an extremely important place in the system of social protection of the working population. it should be noted that the introduction of npp in ukraine later than in most other countries gives a certain advantage to the domestic economy, namely, the opportunity to retrieve the innovations already made in this field in other countries and to use only those developments, which have shown a good result in practice (nicoholas, 2002). summarizing the study on foreign experience in reforming the pension system allows to use a lot of valuable insights for ukraine. a comparative analysis of world experience in reforming pension systems provides an opportunity to draw certain conclusions regarding the assessment of their advantages and disadvantages in order to apply foreign experience in building a full-fledged retirement provision in our country. in modern conditions in most countries of the world individual pension schemes and their combination are used. some countries such as france, germany, italy prefer a solidarity-based system financed by contributions to social security, retirement benefits that depend on past earnings. other countries – great britain, switzerland, denmark – have introduced a system of "fixed rate" which is financed by taxes, which provides the main income, regardless of paid contributions and wages. most highly developed countries such as the united states, great britain operate through two compulsory pension systems that have successfully combined a common solidarity system and a cumulative one. it should be noted that most of the developed european countries, including germany, poland, france, the czech republic, sweden, japan, hungary, also the usa carried out the main important measures that, according to the needs of reforming pension systems included: gradual increase of the retirement age, reduction of the rate of certain types of pensions, increase of insurance premiums and duration of work experience. 5. findings the greatest interest for our country is the implementation of pension reform in the countries of central and eastern europe due to geographical affinity as well as the fact that the reform of their pension systems has taken place recently. in our opinion, the experience of pension reform in poland is most useful, as ukraine has chosen its pension system, since poland and ukraine belong to countries with "old" people and large-scale state pension insurance programs. the experience of the united kingdom and the united states is developmental, as they could reconcile the solidarity pension system with private pension insurance, as well as the experience of latin american countries, that in an economic environment similar to the ukrainian ones, were able to create an effective network of non-state pension provision and become an example for other countries of the world for the development of private pension insurance systems. as far as agricultural workers in these countries are concerned, they are members of the pension system on a general basis (plakhtii, 2019). foreign experience convinces that most countries use a mixed pension system in which redistributable pension models are generally compulsory, while cumulative ones are used in voluntary and obligatory forms. studies show that the prevailing is the redistributive pension system, which accounts for an average of 68% of all retirement benefits in most developed countries, while compulsory cumulative pension systems account for 19% and voluntary cumulative pension schemes is 13%. 6. conclusions thus, summing up the research conducted on the functioning of pension systems in different countries of the world and the main directions of their reform, it would be reasonable to conclude that reforming the national pension system is an extremely complex task in the socio-economic aspect, since there is no single universal model that would satisfy any. the choice of a pension system depends, first of all, on the demographic situation of the country, the level of its economic development (nicoholas, 2002). in the countries of the world different approaches to the solution of pensions of the rural population are chosen. in western europe certain programs have been developed for those employed in agricultural production. in germany and france individual pension schemes have been created for agricultural commodity producers and in the united kingdom and the united states they are part of the national pension system. however, in most countries the state provides financial assistance to the rural population under retirement insurance. therefore, in order to succeed in providing pensions to the population of the state, ukraine needs to improve its own pension system as soon as possible using the experience of foreign countries. baltic journal of economic studies 8 vol. 6, no. 1, 2020 references: aleskerova, yu. v. 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(2005). population ageing and pension reform in a small open economy with non-traded goods. journal of economic dynamics control, no. 6, pp. 265–290. nicoholas george (2002). sweden’s savers are kept pasted on state of their funds. financial times. march 25. oskar cerrangolo (2003). pension reform in latin americconference on «privatisation of public pension systems – forces, experience, prospects». vienna. june 19–21. robert hоlsmann (2003). pension reform in europe: process and progress (paperback). june. baltic journal of economic studies 59 vol. 5, no. 3, 2019 corresponding author: 1 shei “uzhhorod national university”, ukraine. e-mail: belov_dimon@yahoo.com orcid: http://orcid.org/0000-0002-7168-9488 2 shei “uzhhorod national university”, ukraine. e-mail: myroslavabelova@gmail.com orcid: http://orcid.org/0000-0003-2077-2342 doi: https://doi.org/10.30525/2256-0742/2019-5-3-59-66 the basic law of the state: legal and political content dmytro bielov1, myroslava hromovchuk2 abstract. the scientific publication is devoted to highlighting the peculiarities of the legal nature of the constitution. the authors consider the structure and content of the constitution of the state in the context of its functions. the specificity of the content of the newest constitutions in the history of world constitutionalism is considered. the correlation between the constitution and the state policy is established. modern approaches to understanding the nature of the constitution are considered. the legal nature of the constitution of ukraine is determined. proven, the main and still unresolved issue is the ambiguity of what is proposed to adopt: a new constitution, a new version of the current constitution, amendments and additions to the current constitution. although paradoxical, in presidential speeches, these terms are used repeatedly as synonyms. however, legally they are completely different concepts. this terminological confusion carries a great danger of loss of landmarks and prevents a clear statement of the problem in a purely legal area. we believe that the constitutional process is too politicized today. in our opinion, the acutest political struggle is underway for adopting a form of constitution that is convenient for one of the parties. but in fact – for power – everyone wants a maximum of power. including through their constitution enforced in some way. however, the basic law should be adopted not from the conjuncture considerations of political expediency but be a complete legal document, taking into account the achievements of the world jurisprudence, with the strict observance of all the prescribed legal procedures. after all, the constitution should be the main document of the state, at least for a decade. key words: legal content, constitution, basic law, legal status, legal nature, nature of constitution. jel classification: k10, k15, k39 1. introduction constitutionalism as a politico-legal category and doctrinal learning appears after the emergence and establishment of the constitution of the state in the modern sense of this term. it is inseparable and directly derived from the constitution of the state. although not always the fact of the existence of a constitution automatically means the emergence of a particular model of constitutionalism. however, without the appearance (availability) of the constitution itself (in the broad sense of this notion), there is no need to talk about constitutionalism. the substantive basis, the very essence of constitutionalism, according to v. shapoval, is expressed by the formula: “constitutionallegal norm + practice of its implementation” (shapoval, 1997). therefore, a bit strange, in our opinion, when in certain writings, including monographs, there are such statements as “ancient”, “medieval”, “totalitarian” or “soviet constitutionalism”, since at that time the constitution as such (in the modern understanding of this concept) simply did not exist. however, it was precisely in previous times that, in fact, the foundations of the future phenomenon – constitutionalism – were laid (stecjuk, 2004). however, the notion of a constitution cannot be disclosed to the full extent without clarifying the question about not only its legal but also socio-political nature. 2. the constitution of the state in the context of its functions according to m. savchyn, the supremacy of the constitution must be supported by certain institutional and procedural guarantees. only in their totality, they determine the nature of the constitution. institutional and procedural guarantees define certain criteria for the quality of legislation, administrative and judicial practice. thus, baltic journal of economic studies 60 vol. 5, no. 3, 2019 the nature of the constitution and constitutional order are conditioned by the problem of statics and the dynamics of constitutional matter. the definition of the nature of the constitution is also influenced by the social environment since real constitutional relationships are determined by a certain type of society, civilization in general. the nature of the constitution is influenced by the legal tradition, which is based on the paradigm of constitutionalism, constitutional consciousness and culture, national traditions of government, the system of social values. a diversity of approaches to defining the nature of the constitution determines how these components are combined in the process of drafting the constitution and building a constitutional order (savchyn, 2009). the constitution fulfils the function of legitimizing public order. therefore, in the form of constitutional principles, democratic access to positions is determined through democratic elections and fundamental principles of separation of powers, as well as the limitation of power, which are carried out mainly through legal guarantees of human rights and freedoms (cippelius, 2000). from the institutional point of view, the constitution is embodied in ensuring the consolidation of democracy, representation of the people through free and periodic elections, parliamentary regime, and judicial constitutional control. in the normative sense, the constitution includes both the provisions that contain specific regulations, as well as the provisions that determine the general legal principles of intervention in private life. accordingly, the constitution has both a vertical and a horizontal structure. the vertical structure of the constitution relates to its requirements, horizontal one defines a set of principles of law (provisions-principles), which operates both in the sphere of public and private law. thus, the constitution in the normative sense extends to the sphere of public and private law (savchyn, 2009). in its content, the constitution expresses: a) a public consensus on social values provided by legal protection; b) ways of implementing democratic procedures and control of the people over the public authority; c) legitimation of public authority; d) limits of interference of public authority in the private autonomy of a person; e) legal mechanism of international cooperation of the state. thus, the constitution in its content is a certain type of social order that is based on the definition of the legitimate framework of government to ensure the public good (balance of public and private interests). in the formally-legal sense, the constitution is understood as the basic law, which has a constitutive character and has the rule of law. one should agree with m. savchyn that, as a normative legal act, the constitution of ukraine has the following properties (ibidem): a) constitutive nature – the constitution is an act of the constituent power; hence the constitution cannot be considered as a result of the legislative process of the parliament, which is actually established by the constitution and bound by its requirements; b) the main law – the constitution is the core of the legal system, laws and regulations are developed and adopted on its basis, it lays the program, the general direction of law-making work in the state, consolidates the system of sources of national law; c) the highest legal force – any other normative act cannot distort the content of the constitution, it creates such an order when justice and law should not diverge. the constitution of ukraine has the highest position among rules and regulations, which should not contradict it but conform to its basic principles and spirit; d) the horizontal effect – the constitution equally is the basis for the rules of public and private law; such a normative influence of the constitution on the legal system of the country is realized through the specification of constitutional principles and human rights and freedoms at the level of current legislation and constitutional jurisprudence; e) the supremacy of the constitution regarding international treaties submitted to the parliament for the ratification procedure; this provision also applies to international treaties, duly ratified by the parliament; f ) direct action of constitutional norms means the duty of state authorities and local self-government bodies, their officials to apply directly provisions of the constitution in the presence of gaps in law or in the event of a conflict between constitutional provisions and provisions of law; if it is impossible to eliminate such a contradiction during the course of law enforcement, then such a conflict is finally resolved by the constitutional court of ukraine; g) special procedure for adoption – the constitution in the modern sense of this concept is an act that is usually adopted by the people or on behalf of the people. characteristically, the emergence in the xvii century of the very idea of the need for such an act as a constitution was associated precisely with this feature. the demand imposed by the bourgeoisie to restrict the rights of the king and feudal lords to protect their liberties could only be secured through the adoption of an act of supreme authority that embodies the will of the entire nation, of all the people. thus in an unrealizable in practice “people’s agreement” project of cromwell in 1653, the condition for signing it by all the people was provided. the same requirement was put forward later by j. russo. he believed that the constitution requires the consent of all citizens. it should be the result of a unanimous decision, signed by all citizens, and opponents of the constitution should be considered foreigners among citizens. 3. the latest constitutions in the history of the world constitutionalism v. shapoval argues that it is possible to identify common features by the content of the newest constitutions. firstly, they reflect the relatively large baltic journal of economic studies 61 vol. 5, no. 3, 2019 role of the state in the economic sphere; consolidate economic function of the state. secondly, according to the content of the relevant basic laws, the person has been recognized as a priority in its relations with the state. the latest constitutions, of course, contain meaningful provisions on rights and freedoms and fix a number of socio-economic rights. at the same time, quite wide guarantees of the enforcement of rights and freedoms are established and new mechanisms for their protection (ombudsman, constitutional complaint, etc.) are created. thirdly, the newest major laws to a greater extent represent provisions of social orientation, although their meaning and purpose are different. fourthly, relations that arise within the political system of society outside the state organization became the subject of constitutional regulation. this primarily concerns the activities of political parties in their interactions with the state mechanism. finally, fifthly, the sign of the newest constitutions is the presence in their texts of the provisions on foreign political activities of the state and the relation of national and international law (shapoval, 2008). characteristic features of the newest constitutions in one way or another characterize also the basic laws adopted in the post-socialist and post-soviet countries in the 90s years of the last century. it is they that are sometimes distinguished as the constitutions of the fourth “wave” since they were introduced and operate in other socio-political conditions than the constitutions of the third “wave”. the current basic law of ukraine also belongs to the constitutions of the fourth “wave” (todyka, 2000). in the main laws of the fourth wave, the importance of human rights and their guarantees for the society and the state is often emphasized to a greater extent. almost all of them define the state as legal and social, state political, economic, and ideological pluralism, fix certain provisions of the natural-legal content. concerning the construction of the state mechanism for the authors of the main laws adopted in the postsocialist and post-soviet countries, in most cases, the french constitution of 1958, which began the practice of a mixed republican form of government, served as a model (shapoval, 2008). the history of world constitutionalism involves the classification of constitutions as instrumental and social. instrumental constitutions are defined as those whose content is primarily focused on establishing the status of key parts of the state machinery. provisions on the status of the individual play a minor role in these constitutions and the question of social being is generally outside the scope of their regulation. in contrast to the instrumental constitutions, some provisions of social basic laws are addressed to society; in particular, they confirm social and economic rights (prieshkina, 2009). according to v. shapoval, the socialization of the newest constitutions should be distinguished from “sociologization” of the soviet constitutions, which were considered the basic laws of society. the texts of these constitutions were filled with non-legal abstractions, filled with the terminology, which today relates primarily to political science. recognition of soviet constitutions by the basic laws of society and their “sociologization” were not accidental. in the period of existence of the soviet organization of power, there was a desire for the mythologization of social life. in such circumstances, the constitution was considered primarily as one of the tools of ideological influence on the internal and foreign policy environment. moreover, the ideological function attributed to it, which, as a rule, was set at a level or even above the legal function. it is known that any constitution plays a significant socio-regulatory function, and it is in this sense that it can be perceived as the basic law of society. however, even the most socialized constitutions are primarily the main laws of the state. those positions that are outwardly addressed to the public are formulated in a general form, have a fragmentary appearance and, in the end, usually reflect the interaction between society and the state. determination of the constitution as the basic law of the state does not mean the substitution of society by the state, the nationalization of social life. such a definition testifies to the nature of civil society as such, where society and each individual are protected from the full interference of the state, and the latter is an integral part of the political system of society and does not absorb all its essential manifestations (koliushko, kirichenko, 2001). the constitution as the basic law of the state does not create the state but only establishes the foundations of its organization. in this regard, it plays a creative role in the state mechanism, first of all, its most important links – the supreme bodies of the state. the political task of the constitution is to establish the sovereignty of the state, to consolidate the establishment or change of the state system, to ascertain the degree of continuity in the development of the state. no less important is that the constitution as the basic law of the state determines the principles in the field of relations between the state and the person. according to the historically formulated definition based on ideas of natural law, the constitution is a certain system of restrictions of state power in the form of appropriately established rights and freedoms, as well as legal guarantees for their implementation (shapoval, 2008). 4. constitution and state policy today, one of the reasons for the constant tension in relations between the supreme bodies of state power in ukraine is the imperfection of the basic law, the different interpretation of its norms, as well as the fundamental change of the state policy, especially after the 2004–2005 presidential elections. baltic journal of economic studies 62 vol. 5, no. 3, 2019 the constitution has a mixed political and legal nature, as well as to a large extent all constitutional law. constitutional relations that arise based on its provisions can also be characterized as having a dual nature: political and legal at the same time. powerful relations subject to constitutional regulation create prerequisites for the appearance of political issues in constitutional law and politicize it to a certain extent. the political and legal in the constitution are closely intertwined, as well as the implementation of constitutional provisions can have a legal and political dimension. as a. heywood has rightly pointed out, for the vast majority of democratic states, constitutions were traditionally perceived as “precise descriptions of the current system of government” (khejjvud, 2005). consequently, any constitution always carries a certain prognostic-axiological element, which allows foreseeing a further direction of the state development and, accordingly, state policy. it is important to note that the prognostic function of the constitution is directly written by well-known domestic researcher yu. todyka (todyka, 2000). however, we now mean not only one of the possible functions of the constitution but also the fact that at its level the values are laid down that the state is called to provide. the authors of the monograph “politics, law and power in the context of transformation processes in ukraine” characterize state policy as a “system of purposeful measures aimed at solving certain social problems, meeting public interests, ensuring the stability of the constitutional, economic, legal system of the country […] the specificity of which is that it is realized through the power structures that have the authority of the monopoly right of the state to lawful coercion” (kresina, 2006). indeed, the link between the state policy and the constitution is shown by not only the reference to such a concept as “constitutional system”. from the outset, the authors of the abovementioned study establish a clear correlation between the direction of state policy and the process of ensuring social stability and satisfaction of the public interest. it should be borne in mind: the main social interests are always connected with the system of rights and freedoms of citizens of the state, which are not only formally fixed in the constitution but must also be secured by it as a legal act of the highest legal force, which has a sign of direct imperative action (article 8 of the constitution of ukraine) (gladunjak, 2007). the same can be said for a widely used in the modern ukrainian science definition of the state policy by v. tertychka. this author proposes to interpret the state policy in the following way: “relatively stable, organized, and purposeful activity/inactivity of state institutions, carried out by them directly or indirectly on a particular problem or a set of problems that affects the life of society” (kresina, 2006). moreover, justifying the appropriateness of this way of understanding the phenomenon of state policy, he notes that the definition of state policy implicitly implies that it is based on the law and must be legitimate. that is, state policy does not appear, so to speak, solely on its own accord and on own will of those who are currently endowed with state power. on the contrary, in order that this direction of the state’s activity should be systematic and coherent, it is necessary from the very beginning to have a certain set of rules and principles that would indicate: a) the type of political regime; b) the way of organizing state power; c) the main political institutions, the presence of which ensures the normal development of the state mechanism; d) the basic values and tasks that must be implemented during state and social development. these rules should be fixed at the legislative level so that there are no ambiguous political interpretations of the way, in which policy should be implemented and on what grounds (gladunjak, 2007). the universal method of fixing these rules and regulations is the method of constitutional determination. by giving these rules and principles an imperative value, the state acts as the guarantor of the fact that all participants in social and political relations will adhere to them. at the same time, it, as a mechanism of institutionalized coercion, will act under certain standards. therefore, it is quite natural that in all democratically-operated countries, programs for the realization of state policy are always developed and implemented in accordance with the constitution. however, it is necessary to distinguish between the constitution as a legal act and the functions specific to it in the legal field and the constitution as a political document having a certain socio-political content that directly or indirectly affects the entire political system of the country (ibidem). consequently, the relationship between the constitution and politics manifests itself in two main areas. first, in a broad sense, political relations are one of the most important constituent parts of constitutional regulation. constitutional norms set legal boundaries for the political process. they consolidate the foundations of the political system of society, and not only. in modern constitutions, the foundations of the social and spiritual systems of society, which affects the expansion of the object of constitutional regulation at the turn of xx–xxi centuries, are increasingly reflected. as rightly v. chyrkin notes, “constitutional law went beyond a largely formalized approach of the xviii–xix  centuries and spread to the settlement of issues of the social system, the situation of one or another stratum, groups of the population (social, national, age, etc.), socio-economic rights” (chyrkin, 1999). secondly, the constitution itself embodies a certain policy of the state, the desire of the project developers to consolidate certain principles and political values. even k. marx argued that “all legal has in its essence a political nature” (marks, engels, 1991). this thesis on the basic law, according to v. luchyn, becomes of a special baltic journal of economic studies 63 vol. 5, no. 3, 2019 significance. the political orientation of the constitution is one of the most important qualities that determine its special role in the legal system, a special social role in society. however, the idea that a constitution is created by the state to achieve a certain political goal requires some adjustments (luchin, 1997). from the standpoint of democratic constitutionalism and the theory of social contract, both the institutions of public authority and the electoral body participate in the act of constitution creation in one way or another. therefore, official representatives of the state – only one of the subjects of the constitution creation. the constitution should integrate not only state goals of development but also the idea of society about the goals of social progress, to be an indicator of the needs of different social groups, the expression of their expectations and hopes (gladunjak, 2007). interesting is the characteristic of the constitution of the rsfsr of 1918, given by the well-known soviet legal ideologist of the 20s p. stuchka to the twelfth anniversary of the revolution of the state and law. he called it “the civil war constitution”, which is largely justified since it openly supported class positions on the issue of the acquisition and implementation of basic civil and political rights and freedoms (stuchka, 1929). later in the process of the constitutional development of the soviet state, constitutional right gradually cleared itself from the ability to act as a tool of class domination, acquiring the nature of a universal legal regulator (gladunjak, 2007). in the mid-80s, political scientist i. stepanov, reflecting on the relationship between the constitution and politics, expressed the view that politics and law should be represented in the constitution in an organically integral form, “balanced in a coherent unity” (stepanov, 1984). of course, during the soviet period, the study of the constitutional policy was limited by many party-ideological barriers. however, the search for an optimal combination of politics and law in the constitution, constitutional policy, and political law is an important and constantly restored process of democratic development. on the one hand, the tradition of observing constitutional limitations by subjects of political activity and political relations should be developed. on the other hand, constitutional law should not be disconnected from political issues, and constitutionalists should seek to see political aspects in the implementation of constitutional norms. the study of political issues in constitutional law can shed light on the motives for adopting the constitution as a whole or individual constitutional changes, it can serve as an explanation or justification for the constitutionally regulated actions of state bodies and officials. in general, political issues highlight the controversial and problem areas of constitutional and legal development, contribute to the formation of a constitutional paradigm within the legally established normative framework of relations of person, society, and state (kravec, 2003). in the political sphere, functions of the constitution are inextricably linked with its nature. in many respects, its effectiveness in the field of politics depends on the nature of the constitution. after all, the nature of the constitution is its socio-political content. in the national political science, in the soviet era, the class nature of the constitution and its content were distinguished. under class nature, they understood the basic socio-political characteristics of the constitution. it finds its manifestation in its content, principles, properties, and functions, has a decisive influence on its form, defining its fundamental features. the content of the constitution is the specification of its class nature. moreover, the content may vary within a specific nature under the influence of a number of objective and subjective factors. the constitution had a dual meaning – social and legal (yudin, 1987). the point is that this approach was based on a formative theory, according to which the specifics of the nature of the constitution in different countries were tied to a certain socioeconomic formation. throughout the development of soviet constitutions, even in the late period, known as “developed socialism”, dominated the class concept of the nature of the constitution, which was determined by the class (classes) it serves and which type of property it establishes (farberov, 1979). in our opinion, the nature of the constitution derives from its socio-political content, so to speak, in a concentrated form. the legal content of the constitution is determined by the objects of constitutional regulation, in other words, what legal institutes, principles, and provisions are reflected in the text of the constitution and in this regard acquire the constitutional status. given the differences in the legal and socio-political content of the constitution, it is necessary to identify the key elements of its nature, which have a political influence on the functioning of constitutional provisions. these elements can be formulated in the form of theoretical postulates, the answers to which give a general idea of the nature of a specific constitution. these include: 1) the will of which political forces found consolidation in constitutional provisions (whose political will was enshrined in the constitution?); 2) the interests of which social strata are reflected in the constitutional provisions and supported by them (whose interests are reflected and supported by the constitution?); 3) what is the degree of legitimacy of the constitution, which is largely determined by the terms of its project development and the procedure for its adoption (how the chosen procedure for the development and adoption of the constitution influenced the degree of its legitimacy?). baltic journal of economic studies 64 vol. 5, no. 3, 2019 5. the legal nature of the constitution of ukraine in the ukrainian society, which is at the stage of modernization of its political, legal, and economic systems, the attitude to the constitution is a private aspect of the social outlook split by the differentiation of social strata. this attitude reflects the process of a new stratification of the changing society. constitutional development of ukraine in the xx century was accompanied by several fundamental changes in the civilizational foundations of the existence of society and the state. existing constitutions reflected in a different way the balance of political forces and had unequal socio-political content (bielov, 2010). the constitution of 1919 reflected and embodied the political development of revolutionary authoritarianism. its essence lies in the fact that, in general, it is based on a broad democratic basis, in contrast to the census monarchical constitutions of the xix – the beginning of the xx century. the logic of revolutionary authoritarianism came from the principle of salus populi suprema lex est (from latin “the good of the people should be the supreme law”). the constitution consolidated the new political reality of the union of workers and peasants for the growth of the people’s good. v. lenin stressed that the soviet constitution is not invented by any commission, not written off from other constitutions, not drawn up in the offices, but developed based on the experience of the struggle of the working people and the organization of proletarian masses (lenin, 1980). however, the concern for the people’s good was given to the revolutionary avant-garde – the communist party, whose representatives, combining party and state posts, used authoritarian methods of domination. the class approach to the constitution served as a justification for the use of violence against social strata that did not share the goal of a revolutionary transition to a socialist society (bielov, 2010). the logic of revolutionary authoritarianism, as a. galkin and yu. krasin rightly noted, had deep internal contradictions (galkin, krasin, 1995). the fact is that people consist of individuals and social groups that have different interests, hopes, convictions. the constitution can integrate and allow co-existence of all these social strata only with the relatively free regulation of the legal and political space. otherwise, the authoritarian power of the revolutionaries, pretending to be the role of the speaker of the will of the people and the common good, inevitably evolves until the domination of the political minority, which imposes their will on all the citizens. consequently, the constitution of 1919 performed not the function of a limitation of state power, in contrast to the liberal constitutions of the late xviii century, but the function of justification of political power, not limited by law and justice, such as based on revolutionary legitimacy and expediency (bielov, 2010). the political significance of proletariat dictatorship has survived in subsequent constitutions adopted after the formation of the ussr. the provisions on the dictatorship of the proletariat existed in the constitutions of the ussr of 1929 and 1937. in the process of political evolution, the social basis of the proletariat dictatorship gradually expanded. first, the social strata that emerge as a result of the freedom of economic activity, which was prohibited in the soviet state, were eliminated. secondly, through the system of local councils, ordinary people were involved in the state control under the political control of the ruling party of the bolsheviks. thirdly, the social policy of the soviet state contributed to the growth of the welfare of soviet citizens, although the communist party remained the main interpreter of what was considered as “common good”. one can agree that the dictatorship of the proletariat was “intended to enlighten the masses, drawing them into the practical work of building a new society, and then giving way to a people’s power” (lukjanova, 2001). the strategic goal of transforming the dictatorship of the proletariat into a regime of democracy has influenced the development of the concept of the self-government of the working people, which envisaged a widespread replacement of forms of government by forms of public self-government. after the death of j. stalin and the condemnation of a person’s cult during the reign of m. khrushchev, the doctrine of a nation-state that was embodied in the norms of the constitution of 1978 began to form. this doctrine included several elements that reflected both the continuity with the former doctrine of the dictatorship of the proletariat and the novelty of understanding the social activity of the state and tasks of political development. the doctrine of the state of the whole people was intended to show the destruction of class contradictions within the soviet society, which was based, as argued by the official ideology, on the alliance of workers, peasants, and intellectuals. a political alliance of two classes and a stratum (the intelligentsia, in the marxist sense, could not be a class by definition) testified that the soviet constitution had reached its highest level of development and had the widest possible social base. the absence of social strata capable of expressing disagreement or opposing the constitution created the appearance of general agreement and political approval of the social and legal order. expansion of political participation of soviet citizens through the system of councils was accompanied by the preservation of political monism of the party – the state. some weakening of the principle of political monism consisted in the fact that non-party citizens began to be admitted to public positions, and in the elections, with the preservation of non-alternative voting, a single bloc of “communists and non-parties” was to be nominated. the constitution of the state of the whole people preserved traditionally the soviet approach to the ratio of collective and individual. it was mostly collectivist baltic journal of economic studies 65 vol. 5, no. 3, 2019 in nature and set the interests of the state and society above the interests of the individual (selivanov). the constitutional civil and political rights and freedoms, broadly enshrined in the constitutional text, did not have a detailed mechanism of guarantees both at the legislative level and at the level of judicial protection. after august 1991, the collapse of the ussr was inevitable, leading to the cessation of the 1977 constitution of the ussr, with changes and additions. granting the status of a sovereign state to ukraine has transformed the constitution of the ukrainian ssr in 1978 with amendments and additions from the constitution of one of the union republics to the basic law of an independent state. this constitution continued to operate in the transitional period from 1990 to 1996 with changes in the political struggle of reform forces and forces that sought to revive the soviet political system. adopted for a monolithic society in the conditions of the political hegemony of the ruling party, this constitution was not clearly adapted to appease political conflicts by legal means. the changes reflected the multidisciplinary aspirations of various political forces. the constitution failed to put an end to the confrontation between the legislative and executive powers, unable to withstand a change in the balance of political forces and rising socio-political tension. the 1996 constitution of ukraine has a fundamentally different nature, related to new socio-political realities. the nature of the 1996 constitution was largely determined by the political events that took place during its elaboration and on the eve of its adoption. however, the transformations that took place after 1996 in various fields of social and public life, a certain period of validity of constitutional norms indicate a gradual change of sociopolitical content of the constitution of ukraine (ibidem). that is why today the constitutional process in ukraine is gaining momentum and, at the same speed, concerns grow in circles of lawyers about the consequences of the adoption of the basic law. on the one hand, everyone understands that the constitution of 1996 initially contained in its text a lot of inaccuracies, contradictions, insubordination, and references to laws that have not yet been adopted, and their fate is covered with the darkness of ignorance. this was accompanied by changes adopted under the influence of the political moment at the end of 2004. on the other hand, there is an extremely dangerous tendency to politicize the process of drafting and adopting the constitution. instead of lawyers and legal scholars, politicians and political consultants try to deal with this matter. as a result, there is a deadlock situation. the current constitution does not quite satisfy the society, and this is bad, but another option may be even worse. in fact, the ongoing political struggle, which is barely covered by legal clothing, takes place against the backdrop of too low informing the society about its essence and the problems of the constitutional process. 6. conclusions consequently, the main and still unresolved issue is the ambiguity of what is proposed to adopt: a new constitution, a new version of the current constitution, amendments and additions to the current constitution. although paradoxical, in presidential speeches, these terms are used repeatedly as synonyms. however, legally they are completely different concepts. this terminological confusion carries a great danger of loss of landmarks and prevents a clear statement of the problem in a purely legal area. thus, we believe that the constitutional process is too politicized today. in our opinion, the acutest political struggle is underway for adopting a form of constitution that is convenient for one of the parties. but in fact – for power – everyone wants a maximum of power. including through their constitution enforced in some way. however, the basic law should be adopted not from the conjuncture considerations of political expediency but be a complete legal document, taking into account the achievements of the world jurisprudence, with the strict observance of all the prescribed legal procedures. after all, the constitution should be the main document of the state, at least for a decade. references: bielov, d. m. 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(2003). suchhnost konstitucijj i konstitucionnyjj process (dinamika socialno-politicheskogo soderzhanija rossijjskikh konstitucijj) [the essence of constitutions and the constitutional process (the dynamics of the socio-political content of russian constitutions)]. vesnik moskovskogo gosudarstvennogo universiteta, 4, 34–39. (in russian) kresina, i. o. (edited by). (2006). politika, pravo i vlada v konteksti transformacijjnikh procesiv v ukraini [politics, law, and power in the context of transformation processes in ukraine]. kiev: institut derzhavi i prava im. v.m. koreckogo nan ukraini. (in ukrainian) lenin, v. i. (1980). polnoe sobranie sochinenijj [complete works]. vol. xxxvi. moskva: politizdat. (in russian) luchin, v. o. (1997). konstitucionnye normy i pravootnoshenija: uchebnoe posobie [constitutional norms and legal relations: textbook]. moskva: ehksmo. (in russian) luchin, v. o. (2002). konstitutsiya rossijskoj federatsii. problemy realizatsii [the constitution of the russian federation. implementation issues]. moskva: juniti–dana. (in russian) lukjanova, e. a. (2001). znachenie konstitucii sssr 1977 g. v razvitii istochnikov rossijjskogo gosudarstvennogo prava [the value of the 1977 constitution of the ussr in the development of sources of russian state law]. gosudarstvo i pravo, 4, 22–27. (in russian) marks, k., engels f. (1991). sochinenija [works]. vol. i. moskva: politizdat. (in russian) onishhenko, o. v. (2005). konstitucija ukraini jak osnovne dzherelo konstitucijjnogo prava v ukraini [the constitution of ukraine as the main source of constitutional law in ukraine]. kiev: konsum. (in ukrainian) opryshko, v. f. (2000). konstitucija ukraini – osnova sistemi nacionalnogo zakonodavstva [the constitution of ukraine – the basis of the system of national legislation]. kiev: vidavnichijj dim «juridichna kniga». (in ukrainian) prieshkina, o. v. (2009). konstytutsiinyi lad ukraini ta jogo rol u stanovlenni ta rozkvitu miscevogo samovrjaduvannja [the constitutional system of ukraine and its role in the establishment and development of local self-government]. kiev: institut zakonodavstva verkhovnoi radi ukraini. (in ukrainian) redlich, norman, вernard schwartz, and john attanasio (1995). understanding constitutional law. irwin: matthew bender. reiman, jeffrey (1988). “the constitution, rights, the conditions of legitimacy.” in constitutionalism: the philosophical dimension, edited by alan s. rosenbaum, 132–139. new york: greenwood press. sajó, andrás. (1999). limiting government. an introduction to constitutionalism, budapest: central european university press. salygin, e. n. (1999). teokraticheskoe gosudarstvo [a theocratic state]. moskva: juridicheskaja literatura. (in russian) savchyn, m. b. 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(in russian) baltic journal of economic studies 10 vol. 6, no. 3, 2020 corresponding author: 1 odessa state ecological university, ukraine. е-mail: marinaburgaz14@gmail.com orcid: https://orcid.org/0000-0003-1551-6002 2 odessa state ecological university, ukraine. е-mail: olkasobr@gmail.com orcid: https://orcid.org/0000-0003-4065-6242 doi: https://doi.org/10.30525/2256-0742/2020-6-3-10-18 fisheries development and the formation of the fish products market in ukraine and in the central and eastern european countries maryna burhaz1, olha soborova2 abstract. the fishing industry is an important component of the economy not only in ukraine, but also in all central and eastern european countries at the present stage of development. developing and implementing the innovative technologies in fish farming and fish processing require mandatory and constant analysis of the fish market infrastructure. in the fishing industry, trade plays an important role as an employment center, a food supplier, a source of income, a contribution to economic growth and development, and also for food security and nutrition. for many countries and numerous coastal, river, island and inland regions, fish exports are critically important to the economy. the purpose of the study is to find out a current state of the fishing industry in ukraine and in the central and eastern european countries, the prospects for its development and to conduct a research of fish and fish products importexport. the problem of the fisheries economic development in ukraine and in the central and eastern european countries has been considered in the works of many domestic scientists and is reflected in a number of laws of ukraine, state programs and legislative acts, but many issues remain unsolved. methodology. the state of fisheries in ukraine has been researched, the amount of edible fish and fish products per capita by the population of ukraine over the past 10 years has been carried out, and the volume of fish and fish products imports and exports in recent years in ukraine has been analyzed. the catch volumes of fish and fish products in europe in marine areas, inland waters, and the total volume of aquaculture production in the period from 2000 to 2018 in the central and eastern europe countries have been studied. result. since the beginning of the 21st century, ukraine has lost its potential and fishing opportunities in the marine economic zones of other countries, as a result of which the production of aquatic biological resources was reduced to 220 000-250 000 tons per year from 2007 to 2013. as a result of the annexation of the crimean peninsula by the russian federation in 2014, the production of aquatic bioresources in ukraine has further decreased from 225 000 tons in 2013 to 90 000 tons in 2014-2019. all this shows that the ukrainian fishing industry market is not provided at the expense of its own resources. therefore, ukraine constantly imports products from the non-resident partners. today, ukraine imports about 90% of fish. this situation is due to the lack of a specialized fleet, processing industry, quotas in the neutral waters and poaching. in addition, the cost of the ukrainian fish is higher than imported ones, so the products lose their competitiveness. despite significant imports of fish and fish products to ukraine, the country continues to increase its domestic products export. in 2019, export of fish products increased by almost 10% compared to 2018, and the ukrainian producing companies continue to open new sales markets for their products in different countries of the world. due to limited access to the open sea and a relatively small coastline, almost all eastern and central european countries are not among the leaders in fish industry and seafood production. to provide the population with fish and fish products in the countries of central and eastern europe, fish are caught intensively in inland waters, as well as, this region is actively restoring its traditional aquaculture systems. in central and eastern europe, the fish processing industry has made great strides in the quality of fishery products, sanitation, transport and supply chain traceability. practical implications. currently, fish industry in almost all countries of central and eastern europe is going through a problematic time that has developed due to a number of difficulties in the states, namely: financial ones, a breach of economic ties, the deterioration of the ecological status of the inland waters, an insufficient amount baltic journal of economic studies 11 vol. 6, no. 3, 2020 of work to restore fish stocks. this significantly affects the reduction in cultivating and catching the commercial fish in inland waters and in general. the results of the analysis of the economic situation of ukraine in the fishing industry and the tendencies of possible changes indicate that negative patterns in its development will not be overcome in the absence of state support for the industry. to ensure the development of the fishing industry, the state must restructure the tax and customs policy, and its financing should be carried out at the expense of the state budget. funding should also be provided for the organizations engaged in the fish stocks study, conservation and reproduction, as well as for the research organizations that carry out the thematic work of national importance. many transition economies in central and eastern europe have experienced declining in production intensity due to reduced fish farming costs. but in spite of everything, the fisheries of this region continue to grow and develop intensively. key words: fish industry, economic situation, catch, consumption, imports, exports, fish, aquatic bioresources. jel classification: d24, e23, q22 1. introduction one of the most important problems of our time is a problem of providing the planet’s population with protein foods, the most balanced of which is fish protein. the development of world aquaculture objectively indicates an increase in its share in the overall balance of food production. to provide the population in central and eastern europe, including ukraine, with fish and fish products fish are caught intensively in inland waters, as well as, this region is actively restoring its traditional aquaculture systems. aquaculture in almost all eastern and central european countries is characterized by four production systems: pond, hot water, industrial (caged fish farming in heated waters of power plants with closed water supply systems) and fish farming in natural and artificial reservoirs (pasture fish farming). analyzing the total volume of aquaculture production in some countries of eastern and central europe, we can see that all of them have a little but stable production growth. in the fishing industry, trade plays an important role as an employment center, a food supplier, a source of income, a contribution to economic growth and development, and also for food security and nutrition. for many countries and numerous coastal, river, island and inland regions, fish exports are critically important to the economy. fish trade has grown significantly in recent decades, and the fisheries sector is operating in an increasingly globalized environment. fish can be grown in one country, processed in another, and consumed in the third. the fishing industry is an important component of the economy in ukraine, and in the central and eastern european countries at the present stage of the development. developing and implementing the innovative technologies in fish farming and fish processing require mandatory and constant analysis of the fish market infrastructure. 2. fish industry in ukraine industrial fisheries, fishing industry use the world’s natural resources of the oceans, seas, lakes, rivers, reservoirs: various species of fish, marine mammals, shellfish, crustaceans, aquatic vegetation (kolesnikova, 2011). fisheries can be considered as one of the types of nature management, which consists in the production of fish and other seafood. there are industrial, amateur and sport fishing (burhaz, 2019). fisheries are of major social and geopolitical importance to the country (especially in coastal areas, where up to 70% of the industry’s production potential is concentrated). in recent years, the fisheries sector of ukraine has undergone changes, namely the volumes of fish and fish products catch are decreasing every year, the annexation of the territory of the autonomous republic of crimea has been the main reason for this. the state of fisheries in ukraine for the period from 2010 to 2018 is shown in table 1. the data in table 1 show that the greatest increase in catching fish has been observed in the period of 20102013. a significant decline in the total catch of aquatic biological resources has been seen since 2014. the data in table 1 also show that although a little but inland fishing is steadily increasing. thus, in 2018, ukraine caught and produced 86222.5 tons of fish and other aquatic living resources, which was about 2.05 kg per inhabitant. according to international medical standards, the annual consumption of fish and seafood should be 20 kg per person. at the same time, in ukraine, according to the state statistics committee, on january 1, 2019 there were only 14.5 kg of fish and seafood for one person (derzhavna sluzhba statystyky ukrainy). in turn, in recent years, there has been an increase in consumption of fish and fishery products (figure 1) (derzhavna sluzhba statystyky ukrainy). according to data of the state statistics committee of ukraine for catching fish, only 2 kg of the ukrainian fish is per person, therefore, about 86% of baltic journal of economic studies 12 vol. 6, no. 3, 2020 fish consumed by the ukrainians are imported from abroad. according to the state statistics committee, in 2018 compared with 2010 the catch of fish decreased by 39%. this is due to various reasons, the main ones are: the annexation of the autonomous republic of crimea, an unstable political and economic situation in the country, reorientation of the budgetary financial resources into other spheres of the national economy rather than into the fishing industry, etc. compared to 2016, the catch of fish in 2017 increased by 4.3% and the volume of other aquatic living resources extraction amounted to 92645 tons, which was 4.7% more than last year. in 2018, the catch of fish and the production of other aquatic living resources amounted to 86222.5 tons and 64737.9 tons respectively, which was 6.9% and 20.9% less than last year. since the beginning of the 21st century, ukraine has lost its potential and fishing opportunities in the maritime economic zones of other countries, resulting in reducing the production of aquatic bioresources to 220 000 – 250 000 tons per year from 2007 to 2013 (derzhavne ahentstvo rybnoho hospodarstva ukrayiny). as a result of the annexation of the crimean peninsula by the russian federation in 2014, in ukraine the production of aquatic bioresources has further decreased from 225 000 tons in 2013 to 90 000 tons in 2014-2019 (derzhavne ahentstvo rybnoho hospodarstva ukrayiny). in 2019, the total catch of fish and other aquatic bioresources by the ukrainian fisheries enterprises table 1 the state of fisheries in ukraine for the period from 2010 to 2018 (according to the state statistics committee of ukraine) years extraction of aquatic bioresources total including the in-land water bodies including fish catching t % till the previous year t % till the previous year t % till the previous year 2010 218681 85.1 38364 90.9 215017 90.1 2011 211182 96.6 37574 97.9 205285 95.5 2012 203926 96.6 41569 110.6 195490 95.2 2013 225802 110.7 45695 109.9 216354 110.7 20141 91252 109.3 39612 88.3 80958 98.3 20151 88552 97 38507 97.2 73963 91.4 20161 88443 99.9 40754 105.8 78490 106.1 20171 92645 104.7 42176 103.5 81875 104.3 20181 86222.5 93.1 k k 64737.9 79.1 1 – the data are given without taking into account the temporarily occupied territories of the autonomous republic of crimea, the city of sevastopol and a part of the temporarily occupied ter-ritories in the donetsk and luhansk regions. symbol (k) – data are not disclosed to ensure compliance with the requirements of the law of ukraine “on state statistics” on the statistical information confidentiality. figure 1. consumption of fish and fishery products per year, kg (according to the state statistics committee of ukraine) baltic journal of economic studies 13 vol. 6, no. 3, 2020 increased by 9.6% compared to 2018. thus, during 2019, the ukrainian fishermen caught 97.2 thousand tons of fish and other aquatic bioresources. in 2018, the figure was 88.6 thousand tons (figure 2). also, in 2019, 14959 tons of aquaculture products were caught: 13544 tons in ponds, 21.4 tons in fishponds, 527.5 tons in pools, 117.3 tons in aquariums, 749.6 tons in other water bodies (derzhavne ahentstvo rybnoho hospodarstva ukrayiny). in addition, special commodity fisheries, combining elements of aquaculture and industrial fishing (scf), are operating on the lakes and water bodies (parts of them) of ukraine. in 2019, over 8.2 thousand tons of aquatic bioresources were produced, which is 14.7% more than in 2018 (derzhavne ahentstvo rybnoho hospodarstva ukrayiny). it should be noted that poaching and the so-called iuu-fishing (illegal, unreported, unregulated) persist in ukraine and therefore some of the products remain in the shadow without being included into the official statistics. according to various estimates, it could be from 45 000 to 90 000 tons, which could also enter the market. almost every day the state agency for fisheries of ukraine reports about the detention of fish products poachers in the waters of ukraine (derzhavne ahentstvo rybnoho hospodarstva ukrayiny). thus, the real volume of the ukrainian fishery products entering the country’s food market may be around 135 000 – 180 000 tons (derzhavne ahentstvo rybnoho hospodarstva ukrayiny). all this shows that the ukrainian fishing industry market is not provided at the expense of its own resources. therefore, ukraine constantly imports products from the non-resident partners. 3. import and export of fish in ukraine in recent years in 2019, 394 000 tons of fish and seafood were imported by the ukrainian importing companies, totaling 750 million usd. the volumes of fish imports are given in table. 2. comparing the total indicators of imports in tons, compared with 2018, in 2019, imports did not increase significantly by 5% (it was 375 000 tonnes, it became 394 000 tons), but in monetary terms, the increase was much more significant (it was 630 million usd, it became 745 million usd). it should be noted that fish consumption in ukraine is strongly influenced by two key components: the value of the national currency against the dollar and the real income of the population. the relative stability of the hryvnia over the past 3 years and its strengthening at the end of 2019 affected the increase in the consumption of fish products in ukraine, 80% of which were imported. in january-september 2019, the nominal incomes of the population, according to the estimates of the ministry of economy, based on the quarterly state statistics, increased by 15% compared to the corresponding period of 2018. at the same time, the nominal average monthly wage of full-time employees increased by 18.4% to 10 497 uah in 2019, while real wages increased by 9.8%. the increase in an average monthly wage occurred primarily due to the high competition with foreign employers for skilled labor and the high economic activity of business entities as well as in the context of increasing the state social standards, including a minimum wage. to date, ukraine imports about 90% of fish. this situation is due to the lack of a specialized fleet, figure 2. volumes of catching aquatic bioresources in ukraine for 2019 (according to the state agency for fisheries of ukraine) baltic journal of economic studies 14 vol. 6, no. 3, 2020 processing industry, quotas in the neutral waters and poaching. in addition, the cost of ukrainian fish is higher than the imported one, so the products lose their competitiveness (demchuk & dracheva, 2013; shevchenko, 2014; kleshhsvsknj et al., 2017). in total, ukraine imports fish and seafood from 60 countries. norway is the traditional leader in fish imports in ukraine. iceland occupies the second place and the usa is in the third place. they are followed by estonia, latvia, spain, canada, united kingdom, china, vietnam and argentina. the range of fish in ukraine is represented by both domestic and imported products: – domestic products: carp, pike, capelin, mackerel, sprat; – imported products: flounder, perch, pangasius, salmon, oily fish, hake, pollock, capelin, notothenia, herring, mackerel, cod, tuna, tilapia, sea trout, etc. (but, 2017). considering the import by fish species, it should be noted that the oceanic herring accounts for 56%; mackerel – 13%; sardine species – 10%; pollock – 5%. the other 16% of imports are fish species such as salmon, capelin, whiting, hake and others. atlantic herring and mackerel are imported to ukraine from norway. sardines are also imported from norway, the usa, canada, spain and argentina. sprats are mostly baltic. pollock and salmon are imported from russia and norway. the main importers of delicate fish species are france, italy and china (stets, 2017). despite significant imports of fish and fish products to ukraine, the state continues to increase the growth of domestic products exports (v ukraine vyroslo rybnoe proizvodstvo, 2019). the ukrainian fish export volumes are presented in table 3. thus, in 2019, fishery exports have increased by almost 10% compared to 2018 (ukrainskaya ryba zavoevyvaet evropu: komu i skolko prodaem, 2018), and the ukrainian producing companies continue to open new sales markets for their products in different countries of the world (burhaz, 2020). 4. survey methodology the problem of economic development of fisheries in ukraine was considered in the works of many domestic table 2 volumes of fish imports for 2018-2019 (according to the association of ukrainian fish and seafood importers) name of goods import 2018 import 2019 % changes cost, million weight, t cost, million weight, t cost, million weight, t live fish 265 5 267 7 1 40 fresh or chilled fish 107350 15414 140531 22537 31 46 frozen fish 351589 290601 376626 285285 7 -2 fish fillets and other fish meat 44248 24637 65195 32294 47 31 dried, salted, smoked fish 7708 5749 10313 6965 34 21 shellfish 27039 4847 38565 7333 43 51 clams 11305 3175 13023 3604 15 14 water inverte-brates 39 1 38 1 -3 0 prepared or pre-served fish; caviar 53832 23777 71747 28045 33 18 prepared or pre-served crusta-ceans, molluscs 25863 7198 29149 7958 13 11 total 629238 375404 745454 394029 18 5 table 3 the ukrainian fish and fish products exports (according to the association of ukrainian fish and seafood importers) name of goods export 2018 export 2019 changes % cost, million weight, t cost, million weight, t cost, million weight, t live fish 468 383 422 328 -10 -14 fresh or chilled fish 282 65 398 158 41 143 frozen fish 1523 668 1078 398 -29 -40 fish fillets and other fish meat 17333 2722 23148 3707 34 36 dried, salted, smoked fish 3678 467 4234 496 15 6 shellfish 103 14 840 122 716 771 clams 1593 568 3518 1089 121 92 water inverte-brates 2 1 1 1 -50 0 prepared or pre-served fish; caviar 9086 4929 7506 3849 -17 -22 prepared or pre-served crusta-ceans, molluscs 3004 698 5028 1394 67 100 total 37072 10515 46173 11542 25 10 baltic journal of economic studies 15 vol. 6, no. 3, 2020 scientists, such as s.i. alimova, p.p. borshchevskyi, m.s. stasichena, m.a. hvesika, n.m. yarkina and others. it was also reflected in the relevant laws of ukraine, state programs and legislative acts, namely “on fish, other living water resources and food products thereof ”; “on aquaculture”; “on fishery, industrial fishing and the protection of water bioresources”; “on the concept of fisheries development in ukraine”, etc. however, despite the fact that the problems of fisheries development are the subject of much scientific researches, many questions remain unsolved. the purpose of the work is to find out the current state of the ukrainian fishing industry, the prospects for its development and to conduct fish and fish products import-export study. the state of fisheries in ukraine has been researched, the amount of edible fish and fishery products per capita by the population of ukraine over the past 10 years has been carried out, and the volume of imports and exports of fish and fishery products in recent years in ukraine has been analyzed. 5. fisheries and fish market in central and eastern europe due to limited access to the open sea and a relatively small coastline, almost all eastern and central european countries are not among the leaders in the fishing industry and seafood production. to provide the population with fish and fish products in the countries of central and eastern europe, fishing is intensive in inland waters, and, also, this region is actively restoring its traditional aquaculture systems. considering european fishing in marine areas as a whole, it can be noted that in 2011, the catch was 12 988 688 tons, and in 2017 this figure increased to 14 401 435 tons (figure 3). as well as the sea catch, the european catch of fish and fish products in inland waters in the period from 2011 to 2017 increased and amounted to 421 385 tons (figure 4). inland fish farming is a unique activity in the field of fisheries. its main task is to meet people’s needs for fish and fish products which are essential products in the human diet. figure 3. the european fishing in marine areas (according to fao) figure 4. the european catch of fish and fish products in inland waters (according to fao) baltic journal of economic studies 16 vol. 6, no. 3, 2020 aquaculture in almost all countries of eastern and central europe is characterized by four production systems: pond, hot water, industrial (caged fish farming in heated waters of power plants with closed water supply systems), as well as fish farming in natural and artificial reservoirs (pasture fish farming) (aps, 2004). analyzing the total volume of aquaculture production in some countries of eastern and central europe, we can see that all of them have a little but stable growth of production. thus, according to the fao, in belarus, the total volume of aquaculture production in 2018 reached 11 580 tons, 43 361 tons in poland, 3 750 tons in lithuania, 199 505 tons in russia (figure 5) (fao, 2019). although the european union continues to be the largest importer of fish and fish products in the world, a share of the countries in fish imports is growing steadily. according to fao, there has been a significant increase in fish consumption in central and eastern europe due to the growth of purchasing power in the region. regional integration and globalization are challenging the countries of eastern europe. the states need to meet high quality standards for fish products to increase a share of fish exports in the new markets such as the eu. in central and eastern europe, a fish processing industry has made great strides in the quality of fish products, sanitation, transport and supply chain traceability. export-oriented aquaculture plays an important role in the economies of some western european countries, while in the countries of central and eastern europe the main goal of aquaculture production is to meet the demand of local markets. the general picture of fishery products export and import is determined by regulatory documents that operate inside and outside the boarders of different countries of central and eastern europe. the situation becomes even more complicated if we take into account the differences between the countries of the region, which are the members and the non-members of the eu. fish produced in central and eastern europe is exported mainly in live, chilled, quick-frozen, canned, salted and smoked forms. the czech republic, as the largest exporter of carp in europe, exports mainly live fish to the german market (about 40-50%) and to slovakia (about 20%). hungarian live carp export is gradually declining, primarily due to the dominant role of the czech carp aquaculture. the most competitive hungarian products on the european carp market are high-quality repair and breeding herds, and in the field of live fish export it is a silver carp, that is sold to poland for further processing. figure 5. a total volume of aquaculture production in the period from 2000 to 2018 1 – belarus, 2 – russia, 3 – poland, 4 – lithuania baltic journal of economic studies 17 vol. 6, no. 3, 2020 in poland, the main export aquaculture product is rainbow trout. about 25% of trout produced in poland is mainly exported to the german market. most of the exported trout is sold in a processed (smoked) form. despite russia’s huge aquaculture production, the only product of the russian aquaculture sold for export is sturgeon and trout caviar. the main importers of the russian sturgeon caviar are china, greece, germany, the united states and bulgaria, while trout caviar is exported to armenia, belarus, georgia and ukraine. bulgaria also exports significant volumes of aquaculture products, mainly shellfish (46%) and frozen fish (54%) to romania, serbia, montenegro, germany, greece, turkey and japan. imports of aquaculture products are growing in the most central and eastern european countries, especially hungary, bulgaria and romania, where a gap between the number of fish and seafood produced and consumed in the country is filled with imported products. many transition economies in the countries of central and eastern europe have experienced declining production intensity due to reduced fish farming costs. but in spite of everything, the fishing industry of this region continues to grow and develop intensively, and the intensive development of aquaculture and freshwater fisheries, improving the quality of fishery products, including guaranteeing food safety for consumers and the development of science and new technologies will bring a significant progress to the countries of central and eastern europe. 6. conclusions currently, fish industry is going through a problematic time that has developed due to a number of difficulties in the country, namely: financial ones, a breach of economic ties, the deterioration of the ecological status of the inland waters, an insufficient amount of work to restore fish stocks. this significantly affects the reduction in the cultivation and catch of commercial fish in the inland waters and in general. in addition, the following can be distinguished from a wide range of priority tasks that impede the further development of fisheries: the status of reproduction and protection of aquatic bioresources; restoration of functioning of the country’s existing inland waters for their efficient intended use; a state regulation and maintenance of the industry. the annexation of crimea also caused a negative impact on the state of the fishery complex, because of this, ukraine lost fish catches. in particular, after annexation of the crimea, ukraine lost about 2/3 of all fish catches. specific features of the fishing industry require urgent government support to create favorable conditions for lending and investment. the results of the analysis of the economic situation in the fish industry in ukraine, which has developed in the fisheries of the inland water bodies, as well as the tendencies of the possible changes, show that negative regularities in the development of fish industry will not be overcome in the absence of the state support for the industry. to ensure the development of the fishing industry, the state must restructure the tax and customs policy, and its financing should be carried out at the expense of a state budget. funding should also be provided for the organizations engaged in the fish stocks study, conservation and reproduction, as well as for the research organizations that carry out a thematic work of national importance. references: aps, r ., sharp, r ., & kutonova, t. (2004). freshwater fisheries in central & eastern europe: the challenge of sustainability, overview report. warsaw. burhaz, m. i., matvienko, t. i., bezik, k. i., & soborova, o. m. (2019). the current state of fish market in ukraine. ukrainian journal of veterinary and agricultural sciences, vol. 2(3), pp. 6–10. burhaz, м. і., matviienko, т. і., soborova, о. m., bezyk, к. і., & kudelina, о. y. (2019). the current state of fishing and extracting the living aquatic resources in the black sea region of ukraine. ukrainian journal of veterinary and agricultural sciences, vol. 2(3), pp. 23–27. burhaz, m. i., matviienko, t. i., soborova, o. m., bezyk, k. i., kudelina, o. y., & lichna, a. i. (2020). modern state of fish and fishery products export in ukraine. ukrainian journal of veterinary and agricultural sciences, vol. 3(1), pp. 21–26. but, o. 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(2013). sovremennoe sostojanie rybnoj otrjasli i perspektivy razvitija rynka rybnoj produkcii v ukraine. rybne hospodarstvo ukrainy, vol. 5, pp. 47–51. retrieved from: http://nbuv.gov.ua/ ujrn/rgu_2013_5_10 (accessed 01 march 2020). derzhavna sluzhba statystyky ukrainy. retrieved from: http://www.ukrstat.gov.ua (accessed 10 march 2020). derzhavne ahentstvo rybnoho hospodarstva ukrayiny. retrieved from: http://darg.gov.ua/ (accessed 10 march 2020). fao. 2019. fao yearbook. fishery and aquaculture statistics 2017/fao annuaire. rome. retrieved from: http://www.fao.org/3/ca5495t/ca5495t.pdf (accessed 02 june 2020). baltic journal of economic studies 18 vol. 6, no. 3, 2020 kleshhsvsknj, o. n., nikolaeva, m. a., & rjashioіi, o. a. (2017). sovremennoe sostojanie i perspektivy razvitija rynka ryby i rybnyh tovarov v rossii. vestnik kemerovskogo gosudarstvennoju universnіsіa. serija: politicheskie, sociologicheskie i zhonomichsskie nauki, vol. 3, pp. 34–42. retrieved from: https://cyberleninka.ru/article/n/sovremennoe-sostoyaniei-perspektivy-razvitiya-rynka-ryby-i-rybnyh-tovarov-v-rossii/viewer (accessed 01 march 2020). kolesnikova, e. s. (2011). prichernomorskij region: problemy, analiz i razvitie. problemy materialnoj kultury, vol. 212, pp. 39–43. retrieved from: http://dspace.nbuv.gov.ua/handle/123456789/64685 (accessed 01 march 2020). shevchenko, d. (2014). rynok rybnogo hozyajstva ukrainy. retrieved from: https://inventure.com.ua/analytics/ investments/rynok_rybnogo_hozyajstva_ukrainy (accessed 10 march 2020). stets, t. (2017). 85% importu i skorochennia spozhyvannia vtrychi. ukrainska rybna haluz na mezhi znyknennia. retrieved from: http://asn.in.ua/ua/news/publishing/97553-85-importnojj-produkcii-i-sokrashheniepotrebleni.html (accessed 10 march 2020). ukrainskaya ryba zavoevyvaet evropu: komu i skolko prodaem (2018). retrieved from: https://www.segodnya.ua/ economics/business/ukrainskaya-ryba-zavoevyvaet-evropu-komu-i-skolko-prodaem-1200460.html (accessed 10 march 2020). v ukraine vyroslo rybnoe proizvodstvo (2019). retrieved from: https://www.segodnya.ua/economics/enews/ v-ukraine-vyroslo-rybnoe-proizvodstvo-1326288.html (accessed 10 march 2020). baltic journal of economic studies 165 vol. 5, no. 5, 2019 corresponding author: 1 state research institute of ministry of internal affairs of ukraine, ukraine. e-mail: ruslan.sn111@gmail.com 2 lviv polytechnic national university, ukraine. e-mail: bnp1969@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-5-165-169 economic and legal aspects against controlling goods turnover ruslan fyl1, galina luk'yanova2 abstract. the purpose of this article is to describe the content of the economic and legal bases of counteraction to the circulation of counterfeit goods. using systemic and formal-logical methods, the amount of economic losses is outlined and the magnitudes of consequences arising from the circulation of counterfeit goods for the state, patent holders, consumers and manufacturers of counterfeits are outlined. it has been stated that drugs, toys, agrochemicals, and foodstuffs are the most counterfeit at the moment and are not only supported by crime as a crime in the field of intellectual property, but also endanger the lives and healths. considering the market of counterfeit goods described its features, which are that the operation indicated the author but due to factors such as low solvency of the population in developing countries; the inability to sell counterfeit products separately from the original products, due to the fact that the original products are used for masking in the sale of counterfeiting; lack of specialized equipment for establishing counterfeit goods and knowledge of the original; scale and narrow specialization of counterfeit goods market participants; the transnational nature of this market; splicing organized crime with law enforcement agencies; high profitability of counterfeit market. the practical importance of the research is the documentary analysis examines the international legal aspects of counterfeiting of such goods and notes that the rules of the agreement on trade-related aspects of intellectual property rights, trips and the eu customs regulation on intellectual property observance set out measures to combat trafficking in goods that infringes intellectual property rights. consequently, successfully tackling counterfeit goods trafficking requires a constant search for innovative methods of struggle. an effective strategy for overcoming this phenomenon should combine the various measures of its counteraction, all of them should be used in a coordinated and systematic way, complementing each other. therefore, both economic and political management methods must be taken into account to overcome the counterfeit. and only their optimal combination will have the greatest effect in the formation of concepts of counteraction to the circulation of counterfeit goods. and this is definitely worth the effort since the innovative and economic development of the state depends on solving the problem of creating an effective system of protection of intellectual property rights. methodology. a methodological framework of the economic and legal bases of counteraction to the circulation of counterfeit goods is defined by the complex of scientific cognition methods that allow us to look at this problem as a multi-aspect, interdisciplinary phenomenon. on the basis of the system, structural, systemic-functional and other scientific approaches, the idea of counteraction to the circulation of counterfeit goods has formed a complex systemic category covering the theoretical and practical level of economic and legal activity. key words: counterfeit goods, illicit trafficking, infringement of intellectual property rights, copyright holder, consumer, forgery. jel classification: m38, k11, k23 1. introduction in recent years, counterfeiting has become particularly widespread. the possibility of gaining surplus pushes unscrupulous manufacturers of counterfeit goods, importers and exporters for violation of the law. for the sake of profit, they manufacture counterfeit products of global brands, while neglecting quality standards and consumer safety. illicit trafficking in counterfeit goods leads to a decrease in revenues to the state and local budgets, undermines the intellectual capacity of the state and slows down the development of science and culture. therefore, the solution of the problem of creating effective means of combating counterfeit goods depends on the strength of the innovative model baltic journal of economic studies 166 vol. 5, no. 5, 2019 of state development, its modernization, increasing the competitiveness in the world socio-economic system, as well as the creation of jobs in new industries that determine the state of the world economy of the xxi century. this also applies to the creation of a civilized market where developers, manufacturers, and consumers would be reliably protected from unfair competition related to the misuse of intellectual property rights and the production of counterfeit goods. unlike forgery, counterfeit can be of very good quality. forgery items are goods of very low quality, which are given out as the original. however, in any case, this deprives the owners of brand revenue, since the originals are replaced with fakes. sometimes the frequent mention of the brand name dramatically reduces not only the total brand revenue but also is detrimental to quality and image. moreover, most companies in the world suffer from this. all products of well-known brands that are in great demand are forged in export markets. all that can be done is to impose a fine, but most often its size does not cover even 10% of the losses from the very fact that counterfeit appeared on the market of goods and services. legislators are constantly looking for mechanisms to tighten measures for violators, but the way of their performance have not been decided yet. there are dozens of anti-counterfeiting agencies in western europe and the usa that specialize in the area of legal assistance. in ukraine, this area has not been developed yet. despite this, the accumulated experience allows us to offer solutions, the implementation of which is quite possible even for small and medium-sized enterprises. 2. economic losses and consequences from the circulation of counterfeit goods according to the organization for economic cooperation and development (oecd) data, food, medicines, and toys are the most counterfeit today (mapping the economic impact, 2016). the existence of such a market is a socially dangerous phenomenon because it contributes to the flourishing of not only poor quality, but also dangerous products for human life and health. in ukraine, the production and sale of counterfeit goods are observed in almost all segments. light industry (clothing, footwear, bags, etc.), pharmaceutical, chemical, perfumery and cosmetology, food industry (alcohol and tobacco) and construction materials, which are constantly informed by the media, suffer most from counterfeiting. the increasing circulation of counterfeit medicines every year is causing significant losses to the pharmaceutical industry, which is constantly confirmed by the data of international organizations. for example, in 2017, in the result of the annual operation pangea x (2017) (the international week of fighting online sales along with the internet counterfeit, medicines and medical devices), conducted by interpol in cooperation with the public persons, police, healthcare community, and private sector representatives from the pharmaceutical industry from around the world, 25 million counterfeit drugs and illicit drugs worth over 51 mln. usd and medical devices worth about 500 thous. usd were seized. among the removed were: supplements, painkillers, and antiepileptic drugs, drugs for the treatment of erectile dysfunction, antipsychotics, food, dental devices and implants, condoms, syringes, medical test strips, and surgical equipment. according to the oecd report (2016), the global market for counterfeit goods in 2013 was estimated at 461 billion usd. of these, the eu counterfeit and pirated products account for about 7% of its imports, or 121 bln. eur a year. at the same time, from 2011 to 2013 the share of counterfeit goods in imports was 20% for the usa, 15% for italy, 12% for france and switzerland, 8% for japan and germany, 4% for great britain, 3% for luxembourg. for example, in ukraine in 2018, the turnover of counterfeit products, according to the european business association, amounted to about 1 bln. usd, including coffee 40% alcohol 60%, agrochemical products 25%, household appliances, and electronics to certain categories from 50% to 70% (eu-ukraine dialogue on intellectual property rights, 2019). in general, almost 40% of pesticides imported to ukraine are made in china, 20% of which are counterfeit (ukraine business online, 2012). counterfeit pesticides not only violate intellectual property rights, destroy fields, destroy farmers' crops, but also threaten the ecosystem not only of ukraine but also of neighboring countries. therefore, non-compliance with international quality standards in the agrochemical field poses the threat of large-scale man-made disasters. due to the high volume of counterfeit goods, its effects also become significant. for the state, these effects are reflected in the reduction of tax revenues from the patent holders, as the sales of their original goods are reduced in favor of counterfeiting and the allocation of additional funds to counteract the counterfeit or the imposition of penalties due to the high level of counterfeiting in the state. neglecting such a problem, for example, for ukraine 2001 ended with being on the special 301 list and paying 75 mln. usd of annual fines. in 2011 more than 140 commodities were excluded from the international assistance programs for developing countries and the duty-free export of goods to the most developed countries of the world (mapping the economic impact, 2016). consumers can seriously harm their own health and safety by buying counterfeit medicines, toys, spare parts for cars and other counterfeit goods. a. b. plowman ncb notes that customers should realize that by purchasing counterfeit they support crime and endangering the life and health (ukrainians are urged not to buy counterfeit products, baltic journal of economic studies 167 vol. 5, no. 5, 2019 2019). manufacturers of the counterfeitings cause significant harm to the owners of intellectual property, not only because of their failure to pay royalties for the use of the intellectual property rights but the decrease in sales and damage to their image and reputation. 3. features of the market for counterfeit goods the oecd market for counterfeit goods is divided into primary and secondary. the primary market is characterized by the fact that the consumer buys counterfeit products ill-advisedly, and secondary is where the consumer, on the contrary, buys counterfeit deliberately and intentionally. in this context, this market has its own peculiarities. usually, in developing countries, the majority of the population is unable to purchase original goods due to financial insolvency that stimulates the development of counterfeit goods. therefore, the development of the counterfeit market depends directly on the purchasing power of the population. low consumer awareness of the original product and the lack of specialized equipment for detecting counterfeit products also leads to increased production of counterfeit goods worldwide. moreover, the existence of counterfeit in related to the sale is of the impossibility of fake products apart from the original, because the original acts to implement disguise counterfeit. currently, the volume of counterfeit goods at several times the amount of the respective original product. the leader in the people's republic of china, which is 2013, together with its hong kong special administrative region, produced almost 84.5% of the world's counterfeits. a similar situation was repeated in the period of 2011–2012, where the percentage of counterfeit chinese goods on the world market was 77.08% and 83.11% respectively. in addition to china, counterfeit suppliers include emerging economies, including turkey, thailand, singapore, india, the united arab emirates, morocco, suriname, and greece. most often, these countries forge consumer goods: clothing, shoes, accessories, toys, products, and medicines (economics.lb.ua, 2013). these questions are sufficiently described in the work of the professors tylchyk o., tylchyk v. (2018). the existence of the counterfeit goods market is further due to the fact that the counterfeit goods are the result of excess production of the original goods under the license of the customer-right holder. because most of the counterfeit market participants are unaware of the unlawfulness of the actions taken, the way major manufacturing operations are performed at large enterprises within the scope of formal agreements. this market is characterized by its large scale and transnational character. the availability of cheap labor, productive resources, access to minerals and financial instruments now contributes to the full lifecycle of counterfeit goods within a single country. on the contrary, to involve in a number of countries in the implementation of a counterfeit, one of them will be a transit, or producer, or consumer. from the structure of organized crime, which controls the market of counterfeit products in the countries of south and central america, western europe, as well as israel, china, japan, russia, ukraine, has its own peculiarities. recent trends indicate a transformation of the previously established hierarchy of national associations in a flexible transnational network structure which is adapted also for committing economic crimes. in addition, for the proper functioning of the market for counterfeit goods, there is an increase in organized crime with the controlling and law enforcement agencies. in this case, there is a symbiosis in which corruption supports the growth of the shadow economy and economic crime, which, in turn, stimulate its increase. 4. counteraction of counterfeit goods the international legal factors for counteracting counterfeiting are the provisions of the agreement on trade-related aspects of intellectual property rights, trips and the eu regulation no. 608/2013 on customs enforcement of intellectual property rights, terminating the validity of eu council regulation 1383/2003. intellectual property plays an important role in international trade, accounting for about 2% of all world trade, mostly regulated by the world trade organization (wto). one of the most important wto agreements is the trips agreement (2010), the legal rules of which contain requirements for measures to combat the circulation of counterfeit goods. yes, art. 61 of the agreement requires that fair and equitable procedures be established for all intellectual property rights, which will not be unduly burdensome, complex or costly, and will not be limited in time of action. in view of the damage caused by counterfeit goods, which is a manifestation of infringement of intellectual property rights, the trips agreement provides for urgent measures to protect the rights, including preliminary or temporary, without notifying the suspected infringer. the defense procedures, as noted by lonh d., rey p., and others (2007) must be adopted on the basis of the evidence presented by the parties, in addition, to impartial judges. the provisions of the trips agreement (2010) provide for administrative, criminal remedies for counterfeit goods. therefore, in the case of intentional falsification of a trademark or copyright infringement on a commercial scale, member states should ensure that criminal proceedings and penalties are applied. measures the punishment should include imprisonment and/or monetary penalties sufficient to serve as a deterrent to the level of punishment applied in cases of serious crime. in some cases, penalties should also include the arrest, seizure, and destruction of infringing goods and any material or equipment that was used to baltic journal of economic studies 168 vol. 5, no. 5, 2019 a large extent in the commission of the infringement. in addition, the members of this agreement may provide for criminal proceedings and penalties in other cases of infringement of intellectual property rights, especially when committed intentionally and commercially. analyzing the disposition of art. 61 agreement trips, k. d. rapid paradise concludes that effective combating counterfeit goods consist of two main elements: an efficient search and seizure of counterfeit goods without notifying law enforcement agencies offenders (raids); the existence in the legislation of punishment measures that prevent the violation of rights, and their application in practice by the judicial authorities (bystray, 2012). the trips agreement establish these rules and mechanism to combat counterfeit drugs, to protect the economic interests of stakeholders and further encourage pharmaceutical research, but also provide protection from serious health threats arising from the use of counterfeit drugs. the application of administrative procedures at the customs border to prevent the movement of counterfeit goods across the customs border is defined in sec. 4 «specific requirements for border actions» of the trips agreement. this section sets out the legal mechanism for customs protection of intellectual property rights for each wto member country to designate a competent authority that, at the discretion of each member, can be both administrative and judicial, to which the right holder may apply customs procedures for the protection of intellectual property rights. in order to close access to the markets for counterfeit goods, to control illegal trade without harming the legal and customs clearance of counterfeiting, the eu adopted regulation no 608/2013 (2013) which establishes a unified approach to customs protection of intellectual property rights and influences national legislation, the eu legal framework in the field of intellectual property and the laws of the member states governing criminal proceedings. this cannot be said about the amount and type of administrative penalties for violation of customs rules when moving counterfeit goods. this is a question that each country decides on its own. the eu regulation no 608/2013 defines the basic conditions and procedures for action by european customs authorities in the case of the movement of goods that are suspected of infringing intellectual property rights or are subject to customs surveillance or customs control in the customs territory of the eu. 5. conclusions summing up, we come to the conclusion that the created market of counterfeit goods is a set of shadow socio-economic relations that arise as a result of the illicit circulation of products, which is protected by special legislation in the field of intellectual property. the objects of this market can be not only counterfeit goods, falsified products, but also original products made with breach of a license agreement or sold with breach of contract. ignoring counterfeiting of such goods harms not only the owner of the original product, but also consumers who, by purchasing counterfeit goods of poor quality, endanger their lives and health, and the state as a whole, which loses budget revenues from patentees and the imposition of penalties because of the high level of counterfeiting in its territory. in general, in today 's economy, the counterfeit goods market is successfully functioning as a manifestation of the inability of a competitive market for intellectual products. this also indicates that the market for original products can exist only if the state regulates the circulation of counterfeits. also, a significant role in the strategy of counteracting the trafficking of counterfeit goods belongs to the rights holders of the original products, who, using the system of the legal protection of intellectual property rights established by the state, could properly protect their rights and promptly fight against violators of their rights. in addition, manufacturers of legal goods should adhere to the rational pricing of their products, which would really take into account the level of consumer income in the market where the sale of goods occurs. consequently, successfully tackling counterfeit goods trafficking requires a constant search for innovative methods of struggle. an effective strategy for overcoming this phenomenon should combine the various measures of its counteraction, all of which should be used in a coordinated and systematic way, complementing each other. therefore, both economic and political management methods must be taken into account to overcome the counterfeit. and only their optimal combination will have the greatest effect in the formation of concepts of counteraction to the circulation of counterfeit goods. and this is definitely worth the effort since the innovative and economic development of the state depends on solving the problem of creating an effective system of protection of intellectual property rights. references: agreement on trade-related aspects of intellectual property rights of (dated april 15, 1994). official bulletin of ukraine (2010). № 84. p. 503. art. 2989. bystray, k. d. (2012). kryminalʹno-pravova okhorona tovarnoho znaku v mizhnarodnomu pravi [criminal and legal protection of a trademark in international law]. international readings on international law in memory of professor p. kazansky: mater. the third international. sciences. conf. (odesa, 2–3 march). odesa: phoenix, pp. 176–178. (in ukrainian) baltic journal of economic studies 169 vol. 5, no. 5, 2019 lonh, d., rey, p., zharov, v. o., sheveleva, t. m., vasylenko, i. e., and others (2007). zakhyst prav intelektualʹnoyi vlasnosti: normy mizhnarodnoho i natsionalʹnoho zakonodavstva ta yikh pravozastosuvannya: prakt. posib. [protection of intellectual property rights: norms of international and national legislation and their application: pract. textbook]. kyiv: k.i.s, 448 p. (in ukrainian) pangea x: vylucheno blyzko 25 mln kontrafaktnykh likiv na sumu blyzʹko 51 mln dol. ssha (2017). [pangea x: about 25 million counterfeit medicines worth about $ 51 million seized usa]. retrieved from: https://www.apteka.ua/article/427651 (accessed 10 november 2019). (in ukrainian) poteri ekonomiki ukrainy ot kontrafakta ocenili v €1 mlrd (2013). [the losses of the ukrainian economy from the counterfact were estimated at €1 billion]. retrieved from: http://economics.lb.ua/state/2013/04/26/198195_ poteri_ekonomiki_ukraini. html (accessed 10 november 2019). (in russian) pashko, p., tylchyk, o., & kotukha, o. (2018). оntology of scientific cognition of shadow economy and economic shading. baltic journal of economic studies, vol. 4, no. 2, pp. 151–158. doi: 10.30525/2256-0742/2018-4-2-151-158 tylchyk, o., pluhatar, t., & kotukha, o. (2018). determinants of shadowing of the economy: the genesis of economic and legal doctrines. baltic journal of economic studies, vol. 4, no. 3, pp. 302–308. doi: 10.30525/22560742/2018-4-3-302-308 tylchyk, o., dragan, o., & nazymko, o. (2018). establishing the ratio of concepts of counteraction to legalization (laundering) of illegally-obtained income and counteraction to the shadow economy: the importance for determining performance indicators of the european integration processes. baltic journal of economic studies, vol. 4, no. 4, pp. 341–346. doi: 10.30525/2256-0742/2018-4-4-341-345 tylchyk, o. riabchenko, y., & popivniak, o. (2018). management (administrative) activity of the controlling authorities in the area of taxation: essence and types. baltic journal of economic studies, vol. 4, no. 5, pp. 343–351. doi: 10.30525/2256-0742/2018-4-5-343-351 tylchyk, v., bielai, s., & morozov, i. (2018). the innovative approach to the crisis situations monitoring of the social and economic origin that endanger the security of ukraine. baltic journal of economic studies, vol. 4, no. 3, pp. 15–21. doi: 10.30525/2256-0742/2018-4-3-15-21 tylchyk, v., jankovska, l., & khromyshin, i. (2018). national economic security: economic and legal framework for ensuring in the conditions of the european integration. baltic journal of economic studies, vol. 4, no. 1, pp. 47–56. doi: 10.30525/2256-0742/2018-4-1-350-357 regulation (eu) № 608/2013 of the european parliament and of the council of 12 june 2013 concerning customs enforcement of intellectual property rights and repealing council regulation (eu) № 1383/2003. official journal of the european union. 29 june 2013. № l 181, рp. 15–34. trade in counterfeit and pirated goods: mapping the economic impact. retrieved from: http://www.oecd.org/ governance/trade-in-counterfeit-and-pirated-goods-9789264252653-en.htm (accessed 10 november 2019). ukraine, china to combat poor-quality agrochemicals conjointly. ukraine business online (2012). retrieved from: http://www.ukrainebusiness.com.ua/news/4941.html/ (accessed 10 november 2019) ukrayina maye aktyvizuvaty zusyllya shchodo borotʹby z piratstvom ta pidrobkamy − dialoh mizh yes ta ukrayinoyu shchodo prav intelektualʹnoyi vlasnosti [ukraine needs to step up its efforts to combat piracy and counterfeiting – the eu-ukraine dialogue on intellectual property rights]. retrieved from: https://eeas.europa.eu/ delegations/ukraine/64968/ (accessed 10 november 2019). 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(in ukrainian) baltic journal of economic studies 110 vol. 6, no. 4, 2020 corresponding author: 1 classic private university, ukraine. e-mail: kpuinform@gmail.com 2 state fiscal service in zaporozhye region, ukraine. e-mail: kyup75@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-4-110-117 medical reform under decentralization: contemporary problems and prospects for resolution viktor oharenko1, iuliana kozachenko2 abstract. the purpose of the paper is to identify the main prerequisites and ways of the medical reform in ukraine under decentralization, and the emergency of fee-for-service medicine in particular. methodology. the survey is based on the study of legally enforceable enactments which regulate medical sphere and the process of decentralization of power. results. the article outlines the main prerequisites and ways to solve the issue of the implementation of medical reform in ukraine under decentralization, including the emergence of fee-for-service-medicine. the problem related to health care reform in general in order to improve the availability and quality of health care have been identified. statistical data on the main healthcare indicators in ukraine have been presented. national healthcare accounts of ukraine have been presented and healthcare expenditures per capita in other countries of the world has been demonstrated. practical implications. the main steps that are necessary to undertake for implementing changes in the medical field have been determined in the article. they are the following: involvement of communities, development of social infrastructure, transportation of patients and women in labor to hospitals, involvement of social workers, support of medical institutions, and assistance by the communities in public control. it is determined that the biggest challenge for the medical sector is the reorientation to a new level of medical services. the main directions in medicine under decentralization on the implementation of material, organizational and financial conditions to provide local authorities with own and delegated powers have been emphasized. value/originality. an approach to implementing medical reform that meets the needs of the community is developed and its essence has been explained. the complex of actions on introduction of medical reform under decentralization of the power, which has been explained as an increase in powers and financial possibilities of territorial communities has been generalized. key words: community needs, medical facilities, rural physician, medical reform, national health policy. jel classification: м38, і11 1. introduction according to article 3 of the constitution of ukraine, the main priority is a human, his/her life and health, honor and dignity, inviolability and security, which are recognized in ukraine as the highest social value. a significant shift in the medical system of ukraine was the implementation of the decentralization reform. decentralization became the key aspect in the healthcare system reform process in general in order to increase the availability and quality of the medical aid. we should not forget that there are certain imbalances, especially in understanding of the following: “the role of the state in healthcare reform should be moderate and balanced, implementing the needs of the community”. the process of continuing the implementation of changes in medical system of ukraine faces ambiguous challenges, they are the following – attempts are being made to introduce a fee-for-service medicine at the patients’ expense, thus violating the constitutional guarantees on the right for healthcare. ukraine must find means of regulatory influence of the state on the healthcare system, levers of influence on the national healthcare policy under decentralization, revealing the following areas: quality of management (goals, principles, methods, structures, organization); organization of the process of providing medical car and its resource maintenance and provision (materiel and technical (logistics support), methodical, personnel, financial etc.) implementation of the application of the technology. as the issue of medical reform requires is of great interest under decentralization, especially fee-forbaltic journal of economic studies 111 vol. 6, no. 4, 2020 service medicine, special attention should be given to the regulatory influence of the state on the medical activity under decentralization, so the scientific works of the following scientists should be of special attention: a. o. harkusha, z. s. hladun, e. a. hrekov, r . a. maidanyk, a. o. olefir, i. ya. seniuta, s. h. stetsenko and others. theoretical and practical aspects of the problem of financing the medicine are demonstrated in the scientific papers of domestic and foreign scientists: r . bacho, ya. buzduhan, s. honcharuka, v. demianyshyna, d. dolbnievoi, n. karpyshyn, m. lytvynenko, ye. malik, a. mokrytskoi, s. onyshko, h. rozhkova, m. savelievoi, yu. shevchuk and others. the following scientists paid attention to the consideration of theoretical basis of pricing on medical services under reform: a. yiakhovchenko, l. bondareva, v. dolot, b. koretskyi, v. martyniuk, ya. radysh, m. yatsiuk and others. however the issues of medical reform in ukraine under decentralization, especially the existence of fee-for-service medicine, require further research. 2. the current state of healthcare sphere the current state of healthcare sphere in ukraine is unsatisfactory. during the years of independence the medicine has not undergone significant positive changes. only those fee-based medical services have improved. thus, at the end of 2018, the number of doctors of all specialties was 186 thousand people, while in 2010, this indicator was 225 thousand people (it can be explained by not taking into account statistical data on donetsk and luhansk regions and the republic of crimea). however, with regard to the mid-level medical professionals (nursing staff ), there is a significant decrease, even compared to 2014 (34 thousand people less, that is 9% less), which indicates the presence of other factors of influence besides the mentioned above. compared to 2014, the number of hospital beds also significantly decreased (34 thousand beds less that is 10.1 % less), table 1. this state of affairs is associated with the following factors such as general economic crisis, lack of system analysis of medical problems, public expectations. one of the most significant problems, which impede the development of the medical sphere, is lack of funding. it should be noted that ukraine is currently ranked 89th in the world (out of 184 countries) in terms of healthcare expenditures per capita, and 108th in terms of life time (life expectancy). this situation in healthcare threatens national security (hnydiuk, 2015). studies of the national accounts of healthcare of ukraine show that despite the fact that total healthcare expenditures per capita in 2016 in uah increased (compared to 2005 – by 3659 uah, that is 7.04 times more, however, compared to 2012 there is a significant decrease of 6528.3 uah by 91.9 %) (table 2). in 2016, total healthcare expenditure per capita in usd was just 166.9 usd. this indicator is much higher in other countries of the world (figure 1). the lowest level of expenditures is observed in india – 209 usd, but in the developed countries of the world this indicator is ten times higher. thus, in the usa healthcare expenditures per capita are 10 583 usd (which is 63.4 times more than in ukraine), in switzerland – 7317 usd (which is 43.8 times more than in ukraine). as we can see, in the structure of distribution of total expenditures by source of funding in 2016 financing from households prevails (52.8 %), while in 2005 funding by this source was carried out only by 37.8%, while at the expense of state firms – 59.1%. state firms finance 44.8% in 2016 compared to 2005, which is 14.3% less. study of the foreign experience shows that public funding supports healthcare in norway (85 %), great britain (79 %), and canada (68 %), and in the usa (26 %). funding is usually provided by compulsory table 1 basic health care indicators years number of doctors of all specialties, thousand people number of mid-level health professional (nursing staff ) thousand people number of hospitals, thousand units number of hospital beds, thousand units number of outpatient clinics, thousand units 2000 226 541 3.3 466 7.4 2005 224 496 2.9 445 7.8 2010 225 467 2.8 429 9.0 2013 217 441 2.2 398 10.8 2014 186 379 1.8 336 9.8 2015 186 372 1.8 333 10.0 2016 187 367 1.7 315 10.2 2017 186 360 1.7 309 10.4 2018 186 345 1.7 302 10.5 changes (2018/2000) -40 -196 -1.6 -164 +3.1 source: (statistical yearbook of ukraine for 2018, for 2019) baltic journal of economic studies 112 vol. 6, no. 4, 2020 insurance of the citizens: the usa (58 %), japan (75 %), estonia (64 %), poland (59 %), and china (39 %) (figure 2). ukraine has not yet adopted the law on compulsory medical insurance. some countries provide with funding through voluntary insurance china (36 %), brazil (27 %). 3. realization (carrying out) of the medical reform in ukraine concerning the medical field, the decentralization process reflected in changes in the funding system. thus, a number of regulations were issued on concerning the provision of medical subvention from the state budget to local budgets. one of the first regulations was the resolution of the cabinet of ministers of ukraine dated january 23, 2015 “some issues on medical subvention from the state budget to local budgets”, which provided subventions for the payment of current expenditures of the healthcare institutions and programs in this fields (resolution of the cabinet of ministers of ukraine “some issues on medical subvention from the state budget to local budgets”, 2015). in august of the same year, the formulas for allocating the amount of medical subvention from the state table 2 national accounts of healthcare of ukraine 2005 2010 2012 2014 2016 changes (2016-2005) total population, million people 46.9 45.8 45.6 42.9 42.6 –4.3 exchange rate 1 usd to uah 5.12 7.94 7.99 11.89 25.55 +20.43 total healthcare expenditures, million usd 5545.0 10673.1 13635.4 9903.7 7107.1 +1562.1 total healthcare per capita expenditures, uah. 605.3 118.22 $ 1850.3 233.04 $ 2391.7 299.34 $ 2743.0 230.70 $ 4264.3 166.90 $ +3659.0 +48.68 $ total healthcare expenditures, as % from gdp 6.43 7.56 7.47 7.42 7.62 +1.19 distribution of total cost by sources of funding, including: – state firms; – private firms; – households; – donors. 59.1 2.8 37.8 0.3 56.3 2.6 40.8 0.3 57.2 2.4 40.2 0.2 51.7 2.1 46.0 0.2 44.8 1.7 52.8 0.7 –14.3 –1.1 15.0 +0.4 source: (national accounts of healthcare of ukraine in 2016, in 2017) 105867317 6187 5986 5447 4974 4965 4766 4228 4070 3994 3428 3192 3058 2780 2238 2056 1282 1227 688 209 0 2000 4000 6000 8000 10000 12000 usa switzerland norway germany sweden canada france japan finland gb oecd 36 italy south korea czech izrael greece poland brazil turkey china india figure 1. health care protection expenditures per capita in 2018, usd source: (we count other people’s money: where are the cheapest healthcare services and where are the most expensive?, 2019) baltic journal of economic studies 113 vol. 6, no. 4, 2020 budget to local budgets were approved and confirmed. the formulas included the following: the financial standard of the budget provision of the medical subvention for the regional budget; the general indicator of the amount of medical subvention for local budgets for the planned budget period; general indicator of the amount of medical subvention for mountainous populated localities; the coefficient of adjustment of the share of the volume of medical subvention which is applied to determine its volume for emergency medical care (the resolution of the cabinet of ministers of ukraine “on approval the formula for allocating the amount of medical subvention from the state budget to local budgets”, 2015). an important financial document, which made significant adjustments to the funding procedure, was the approval of the concept of the healthcare financing reform. its objectives were the following: introduction of the state-guaranteed package of medical care; creation of a single national customer of medical services; creation of new opportunities for local authorities to carry out their legal power in the field of healthcare; autonomy of healthcare providers (introduction of the principle of “money follows the patient”); development of the contemporary system of medical information management. the concept was supposed to promote: a more effective and fair allocation/distribution of public resources in the healthcare system; the emergence of competition among the suppliers of all types of ownership in the market of medical services; bringing the network of healthcare institutions in line with the population need; improving the quality of medical services (order of the cabinet of ministers of ukraine “on approval of the concept of the healthcare financing reform”, 2016). in order to enable the implementation of modern and efficient procurements of medical products with the framework of the reform of healthcare financing, which is patient-oriented, the concept of healthcare financing reform for the period up to 2020 was approved. such procurement should ensure the following: decrease of corruption risks; rational use of budget funds; reduction of bureaucratic burden; carrying out transparent procurement; patient-oriented approach (order of the cabinet of ministers of ukraine “on approval of the action plan on the implementation of the concept of healthcare financing reform for the period up to 2020”, 2017). a very important normative-legal act, which regulates the medical sphere under decentralization and promotes the regulation of financial relations between medical institutions and patients, is the law of ukraine “on state financial guarantees of medical care of the population”. this law defines: the rights and obligations of patients in the sphere of the state financial guarantees; peculiarities of signing agreements on medical care of the population; procedure for obtaining medical services and medicine under this program; procedure of functioning of healthcare electronic system; obtaining access to the data about a patient contained in the healthcare electronic system; prosecution for violation the legislation on the state financial guarantees on medical care (the law of ukraine “on state financial guarantees of medical care of the population”, 2017). in november 2017, a significant attention was paid to the support of the rural residents in improving the access 85 14 26 11 58 4 9 2 75 13 2 79 16 2 24 64 1 4 37 21 2 68 13 1 15 2 6 59 23 2 36 39 6 27 28 2 2 3 65 8 0% 20% 40% 60% 80% 100% n or w ay u sa ja pa n g b e to ni a o e c d 3 6 c an ad a p ol an d c hi na b ra zi l in di a other direct expenses of patients obligatory insurance optional insurance public funding figure 2. basic financing mechanisms, % source: (we count other people’s money: where are the cheapest healthcare services and where are the most expensive?, 2019) baltic journal of economic studies 114 vol. 6, no. 4, 2020 and quality of medical care, as adopted by the relevant law. this law provided for: promoting development of medical institutions of all types of ownership in rural area; introduction of modern technologies for medical care (performing of appropriate resource allocation for introducing medical care with the use of telemedicine); development and realization of the programs on diagnostics, treatment, rehabilitation and preventive treatment of the population; development of the necessary telecommunication and transport infrastructure; attracting investment into the development of medical care; promoting effective educational work among the population on healthy way of life, active social orientation (the law of ukraine “on improving the availability and quality of medical care in rural areas", 2017). in january 2020, a lot of attention was paid to the issue of the development of the system of emergency medical assistance (medical care). as a result, the relevant concept was approved. the following was provided with the framework of the concept: develop and approve regulations on volunteer activity organization in the system of emergency medical assistance (medical care); the process of interaction of the centers of emergency medical aid and medicine of catastrophes and healthcare institutions, which provide for primary emergency medical assistance; approve criteria for the effectiveness of the network of emergency medical assistance, requirements for the acquisition, storage, and use of medical kits; approval of a united classifier of provisional diagnosis for emergency medical service team, etc. (order of the cabinet of ministers of ukraine “on approval of the action plan for the implementation of the concept of development of the emergency medical assistance system”, 2020). besides, within the framework of the reform national health service of ukraine (nhsu) was created using the british national health service. a number of positive steps were undertaken during the period of its existence: 1. the management of the institutions was given autonomy to make decisions. 2. doctors and nurses started to get a decent level of wages. 3. for patients – this means the improvement of service and quality of medical care. 4. institutions of different types of ownership obtained equal rights and equal conditions of cooperation with the state (hrubliak, chopenko, 2019). it is necessary to understand that while maintaining the budget system of financing and the existing structure of state and local budgets revenues, and under the conditions of absence of the established sectoral interest groups, determining the real impact on the processes of approval of the state budget and interstate transfers is hardly probable. medical insurance is a certain guarantee which should be determined as a healthcare tax; it is possible to define the amount of contribution by law (for example, poland), or it can be defined independently by certain health insurance funds or organizations (for example, germany). health insurance funds are much less subject to political bargaining than budget allocations, and therefore a health care system, which is financed by health insurance contributions can be considered more independent of the political situation and more predictable in terms of cash receipts (aarva, 2020). 4. directions of medical reform realization in ukraine the main direction in medical sphere under decentralization is the implementation of economic, organizational, and what is more important – financial conditions to provide local governments with their own and delegated powers (authorities) (official website of the cabinet of ministers of ukraine). that is why local authorities face new challenges and tasks: regional policy development, realization of the set local programs, and the key issue is provision of services. it is necessary to undertake the following steps in order to make changes in medical sphere: 1. involvement of the community population in the promotion of a healthy lifestyle; creating conditions for the consolidation of medical personnel in rural areas. 2. development of social infrastructure to ensure access to health care services. 3. ensuring the transportation of patients and women in labor to hospitals (or hospital institutions). 4. involvement of social workers in providing assistance to certain vulnerable groups. 5. support the functioning of medical institutions, which are situated on the territory of the community, through the improvement of adjacent territories, support for the work of supporting services. 6. assistance in the organization of control by the population of the community over the observance of the rights of citizens in receiving medical services (danylyshyn, 2014). the main challenge for medicine in ukraine became reorientation to a new level of medical services, which lasts from 2017–2020, and as a result, there is a decrease in the number of hospital beds, optimization of existing infrastructure, the new formation of primary care setting. according the plan of medical reform in 2018 the following was declared: the model of financing according to the principle of “separation of customer and supplier”, selective contracting, and payment for results and autonomy of institutions as well. medical reform undergoes three stages: creation of the basic level at the level of united territorial communities; creation of the network of the second level, which consists in the formation of hospital districts at the level of future baltic journal of economic studies 115 vol. 6, no. 4, 2020 community promotion of healthy life style national policy improvement of territorytransportation of patients social infrastructure rural physicians support of auxiliary services medical reform national health service of ukraine financial guarantees autonomization of medical institutions equal rights for medical institutions for all types of ownership improving service and quality decent level of wages autonomy in decision making selection of funding system mixed system medical insurance budget system of financing local authorities support of auxiliary services work improvement of adjacent territories attraction of social workers transportation of patientssocial infrastructure conditions for medical staff promotion of healthy life style control over the observance of the rights of citizens for medical services directions for improving medical reform contract co-payment by patients queue for hospitalization or an appointment with a specialist regulation of services grant package contractual definition of mutual obligations process of the indicators development documenting of mutual obligations methods of payment for services payment for the treatment of a certain episode of the disease payment for certain medical and diagnostic procedures financing per capita budget transfers integrated service delivery system outpatient treatment availability of an effective communication system adequacy of the prescribed treatment timely appointment of treatment referral for consultation to specialists auxiliary diagnostic teststreatment at the primary level initial examination registration of symptoms and complaints of patients provision of services according to available figure 3. approach to implementing medical reform that meets the needs of the community baltic journal of economic studies 116 vol. 6, no. 4, 2020 enlarged districts; creation of a united medical area at the state level, where a patient can receive a service in any city of ukraine (decentralization). the results of financial decentralization such as annual growth of the resources of local budgets, their share in the structure of the consolidated budget of ukraine, the ability of local authorities to direct and allocate funds to the development and realization of infrastructure projects became one of the important indicators. for example, the growth of own resources of local budgets in 2016 – 146.6 billion uah, and in 2017 – 170.7 billion uah, which is 16% more than in 2016 and 65% more than in 2015. financial resources of local budges allow citizens in the medical reform sphere to organize medical first aid and to finance secondary care (zakhidna, mydlyk, 2017). it is necessary to note that for each contract the doctor will receive a certain amount per year on his account. but, according to yamnenko t. m., even the rigid introduction of treatment protocols and regulatory funding based on them can significantly limit the doctor’s ability to make flexible decisions about patient treatment and turn him or her from a logically thinking specialist to a purely technical executor (yamnenko, 2018). the approach to medical reform implementation which meets the needs of the community is presented in the format of two composite blocks as following (figure 3). the first block contains the current trends in the development of the relation of the authorities to medicine under decentralization which provide modern community needs. such as: local authorities fulfill the following obligations – support of auxiliary services work, improvement of adjacent territories, attraction of social workers, transportation of patients, social infrastructure, conditions for medical staff, promotion of healthy life style, control over the observance of the rights of citizens for medical services; national policy – promotion of healthy life style, improvement of territories, transportation of patients, social infrastructure, medical staff in rural area, support of auxiliary services. the other block is presented as directions for medicine improvement: regulation and standardization of services (co-payment by patients, queue for hospitalization or an appointment with a specialist, guaranteed package), methods of payment for services (payment for the treatment of a certain episode of the disease, payment for certain medical and diagnostic procedures, and financing per capita, budget transfer), integrated service delivery system (outpatient treatment, availability of an effective communication system, adequacy of the prescribed treatment, timely appointment of treatment, referral for consultation to specialists, auxiliary diagnostic tests, treatment at the primary level, initial examination, registration of symptoms and complaints of patients according to the resources available). 5. conclusions thus, the study of the statistical data on the main healthcare indicators in ukraine is presented, which indicates a significant decrease of 6528.3 uah, 91.9 % of total healthcare expenditures per capita in recent years. in the structure of distribution of total expenditures by sources of financing, the advantage of financing at the expense of households (52.8%) has been established. the main steps that are necessary to undertake to implement changes in the medical field are the following: involvement of communities, development of social infrastructure, transportation of patients and women in labor to hospitals, involvement of social workers, support of medical institutions, and assistance by the communities in public control. it is determined that the biggest challenge for the medical sector is the reorientation to a new level of medical services. the main directions in medicine under decentralization on the implementation of material, organizational and financial conditions to provide local authorities with own and delegated powers are emphasized. an approach to implementing medical reform that meets the needs of the community is developed and its essence is explained. the complex of actions on introduction of medical reform under decentralization of the power, which is explained as an increase in powers and financial possibilities of territorial communities, is generalized. references: derzhavna sluzhba statystyky ukrainy (2019). ctatystychnyi shchorichnyk ukrainy za 2018 rik [statistical yearbook of ukraine for 2018]. zhytomyr: tov «buk-druk». available at: http://www.ukrstat.gov.ua/druk/ publicat/kat_u/2019/zb/11/zb_yearbook_2018.pdf (accessed 12 may 2020). hnydiuk, i. v. 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[decentralization of governance in ukraine: where to start?] kontrakty.ua. available at: http://kontrakty.ua (accessed 13 may 2020). (in ukrainian) detsentralizatsiia. available at: http://decentralization.gov.ua zakhidna, o. r ., & mydlyk, yu. i. (2017). medychna reforma v umovakh detsentralizatsii vlady v ukraini [medical reform in the conditions of decentralization of power in ukraine]. molodyi vchenyi, vol. 11(51), pp. 1156–1158. available at: https://financial.lnu.edu.ua/wp-content/uploads/2015/11/278.pdf (accessed 16 may 2020). baltic journal of economic studies 76 vol. 6, no. 3, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: v.lagutin@knute.edu.ua orcid: http://orcid.org/0000-0001-6626-4381 researcherid: n-7693-2016 2 kyiv national university of trade and economics, ukraine. e-mail: alvboyko@gmail.com orcid: http://orcid.org/0000-0003-4136-4081 researcherid: o-2068-2016 3 kyiv national university of trade and economics, ukraine. e-mail: diana.2412y@gmail.com orcid: https://orcid.org/0000-0002-6883-711x researcherid: s-4618-2018 doi: https://doi.org/10.30525/2256-0742/2020-6-3-76-86 institutional conditions for ensuring resilience of national economy: on the example of ukraine vasyl lagutin1, alina boiko2, diana shkuropadska3 abstract. the national economies are closely interconnected in a globalized world. shock impacts spread across the globe from one economy to another instantly. in the same time, national economies are characterized by different levels of resilience and respond differently to shock effects. from a theoretical and practical point of view, there is an important task to study the institutional conditions for ensuring the resilience of the national economy to existing and potential shocks. the purpose of this research is to substantiate and characterize the institutional conditions for ensuring the resilience of the economy on the example of the ukraine’s economy. the theoretical and methodological basis of the research is the scientific works and reports on the methodology of evaluation and determination of mechanisms and conditions for ensuring the resilience of the economy. common scientific methods are used: theoretical generalization, analysis and synthesis, comparative analysis, system method, and criterion approach. results. the research describes institutional conditions that strengthen internal reserves (including financial, material, food) and increase the adaptive potential of the economy to shocks. adaptation of the economy depends on the effective and rational management of the country's resource potential. resource potential is an internal immunity of the economy and increases its level of resilience at all stages of development. the country's resource potential is characterized by available resources and consists of such basic types of potentials as economic, natural, labor, social, financial. in the process of resource management the government should take into account the basic institutional conditions for ensuring resilience of the economy, which are aimed at improving the state's ability to protect property rights, increasing the financial capacity of the insurance market, anti-corruption and economic potential of the country, and institutional capacity of public authorities. practical implications. institutional conditions for ensuring the resilience of the economy are able to reduce the vulnerability of the economic system to shock influences, to facilitate their effective counteraction and to prompt economic recovery after their onset. the development of institutional conditions depends on effective government policies and mechanisms to counteract shock influences. originality. the study focuses on the role of the government in the implementation of institutional conditions. in order to improve certain institutional conditions, government policy instruments have been proposed, the application of which will contribute to the effective development of the entire system of institutional ensuring resilience of the economy. key words: resilience of the economy, institutional conditions, ensuring resilience, shock influences, economic growth. jel classification: e02, e60 baltic journal of economic studies 77 vol. 6, no. 3, 2020 1. introduction resilience of the economy is the ability of the economic system of the country to reduce vulnerability to shock influences, counteract them and quickly recover from their impact. resilience of the national economies began to be actively investigated in connection with the global economic crisis of 2007-2008. in particular, l. briguglio in "economic vulnerability and resilience: concept and measurement", defined resilience as the policy-induced ability of an economy to withstand or recover from the effects of shocks (briguglio, cordina, farrugia, 2009). organization for economic co-operation and development (caldera, rasmussen, rohn, 2015) believes that resilience can be enhanced by implementing policies aimed at mitigating both the risks and consequences of serious crises. to address the risks effectively, it is necessary to identify policy options and mechanisms that can be created in advance to help deal with the effects of a serious recession. however, the benefits of such a policy must be balanced against their costs. n. kotys published the reseach on the assessment of institutional support for the household sector development. the author identified the key institutional factors for resilience: social, psychological, economic, political. the author emphasized that the development of the sector was regulated, on the one hand, by the relevant socio-economic institutions and, on the other, by the activities of the economic entities themselves (kotys, 2016). the european central bank (ecb, 2016) believes that the resilience of the economy is essential to better counteract adverse shocks and reduce the economic costs associated with them. the ecb is exploring the role of institutional settings and political institutions that are able to increase resilience to adverse shocks and reduce the overall crisis. in conditions of shock, a country with weaker economic institutions can suffer on average twice the cost of production compared to a country with advanced institutional settings. similarly, the likelihood of a serious economic crisis is greatly reduced if the country has the most flexible and adaptable institutions. empirical studies of the level of resilience of the ukrainian economy (fm global resilience index, 2019; boiko, 2019) show a low level for the effective functioning and stable development of the economic system in the conditions of shock influences. it is worth noting that a key role in the process of ensuring resilience belongs to the government, which is conditioned by the fulfillment of its defined tasks and functions, which regulate economic processes in the country. this necessitates the establishment of a proper system of institutional support for resilient development of economy. awareness of the important role of institutions in economic policy implementation has led to a significant increase in the interest of scientists in the study of institutions, their functions, composition and properties. among the key publications in this field there are the works of such scholars as coase r . (1990), north d. (1993), beck t., laeven l. (2005), geyets  v. (2005), dutraive v. (2009), mantsurov i. (2011), ferrini l. (2012), kling a. (2013), vitola a., schenfelde  m. (2015), hancke b., white j. (2019). while the institutional conditions of the public administration for ensuring resilience of the economy, as a rule, remain out of the scientists' attention. therefore, the purpose of this research is to substantiate and characterize the institutional conditions for ensuring resilience of the economy on the example of the ukrainian economy. this purpose has been achieved by using common scientific methods: theoretical generalization, analysis and synthesis, comparative analysis, system method, graphic modeling. in the context of institutional theory, the problem of ensuring the resilience of the economy is explored through the institutional conditions that characterize key aspects of the country 's institutional development. under the institutional conditions for ensuring the resilience of the economy, we understand the system of rules and regulations (legal, ethical, economic) and institutions established in the country to reduce the vulnerability of the economic system to shocks, counteract them and quickly restore the economy after their onset. the main sources of resilience of the economy are resources (natural, financial, labor), which jointly form its potential. resource potential is an internal reserve (immunity) that the economy uses to counteract shock influences. in defining the institutional conditions for ensuring the resilience of the economy, we focused on the criterion of resource conservation. that means the rational use of natural, material, financial, labor and other resources. by this approach, we identify the following institutional conditions for ensuring the resilience of the economy: protection of property rights, development of insurance, prevention and counteraction to corruption, protection of national economic interests, development of corporate culture. 2. protection of property rights the economic growth is one of the basic conditions for resilience of the economy. this statement is confirmed by the results of previous empirical studies (macleman, miller, marty, 2017; european commission, 2018; international monetary fund, 2019). among other things, the economic growth in transition economies and developing economies comes from foreign investment. investors value the existence of state guarantees for the protection of property rights. in economics, property characterizes people's attitudes toward appropriation of material goods baltic journal of economic studies 78 vol. 6, no. 3, 2020 created by nature or human labor in the process of production. property is usually revealed through such attributes as ownership (the right to earn income from the good), the right to use and the right to dispose (the right to transfer the good to others, alter it, abandon it, or destroy it). the rules of law establish the content of property relations. they also determine the rights and obligations of subjects of law to certain objects of the material world, including natural resources. as an institutional condition for resilience, we consider the protection of property rights in two directions: 1) protection of property rights for natural resources and 2) protection of private property. firstly, protection of property rights for natural resources plays an important role in stimulating economic growth, ensuring equal opportunities of using natural resources for individuals, and efficient realization of the economic potential. property rights are emphasized as one of the most important institutions of economic growth (coase, 1990). this is due to the fact that state-protected property rights to natural resources stimulate long-term investment, since such resources are protected from expropriation (forced deprivation of property) by the government or influential elite. natural resources shape the national wealth. furthermore, sustainable development goals 2030 are about conserving and restoring natural resources. also the constitution of ukraine states that land, its subsoil, atmospheric air, water and other natural resources are objects of property of the ukrainian people (public property) (the constitution of ukraine 254к/96-вр, 1996). on behalf of the ukrainian people, the owner's rights are exercised by public authorities and local selfgovernment bodies. ukraine has a number of problems related to the violation of this right (shkuropadska, 2018), such as the following: – illegal deforestation to produce wood. for example, in 2018 in the forestry fund of forestry enterprises, which are subordinate to the state forestry agency of ukraine (approximately 2/3 of the country 's forests) over 7000 cases of illegal logging were detected. the total amount of damage caused to the economy was about 6.4 million usd. the timber trade is in high demand in the world market and its value will increase in the conditions of deforestation; – illegal extraction of natural gas in the temporarily occupied territories of donetsk and luhansk oblasts, annexed the autonomous republic of crimea (arc). in particular since march 2014, 7.2 billion cubic meters of natural gas were illegally extracted in arc. the total loss of the state budget of ukraine is above 5 billion usd; – illegal extraction of minerals, including amber. due to the illegal production of amber, the state budget of ukraine underperformed from 1.5 to 3 billion uah (state service of geology and subsoil of ukraine, 2018). secondly, protocol № 1 of the convention for the protection of human rights and fundamental freedoms and the constitution of ukraine guarantee that no one may be unlawfully deprived of his or her property rights. in developed democracies, property rights are the next rights that are protected after the individual rights and freedoms (protocol of the convention for the protection of human rights and fundamental freedoms 994_535, 1997). ukraine does not support the assertion of the inviolability of property rights sufficiently. in particular, public authorities do not act systematically in responding to violations of this right, and the courts make decisions in violation of property rights (ukrainian helsinki human rights union, 2016). to evaluate the development of property rights in ukraine in 2018-2010, we consider the dynamics of the international property rights index, calculated by the property rights alliance in partnership with the foundation for economic freedom (figure 1). international property rights index is fully dedicated to measuring intellectual and physical property rights. the index reflects the results of studies in the areas of legal and political environment, physical property rights and intellectual property rights. it is measured on a tenpoint scale. in 2010-2018 ukraine's property rights index ranged from 3.4 to 4.3 points. this indicates a low level of development of the system of property rights protection in the country. the neglect of private property has been followed in many criminal cases about the seizure of property from illegal possession and recognition of ownership of real estate. raiding in ukraine is a method of illegal takeover and seizure of enterprises, that is, control over them against the will of the owners. this poses a real threat to the national and economic interests of the state. the scale of seizure of private property threatens not only certain sectors of the economy, but also the state as a whole. it provokes a deterioration of the investment climate, the destruction of certain sectors of the economy, the reduction of resource efficiency, as well as contributes to the development of corruption in the executive, judicial and law enforcement agencies. figure 2 shows the dynamics of raider attacks in ukraine in 2013-2018. in the aftermath of the dignity revolution (2013-2018), there have been 1690 raider seizures in ukraine. in 2014-2017, the number of raider hikes has been increasing every year, which is related to the change of political and business elites in the country. raiding spreads to different types of businesses, destroys the entrepreneurial class and destroys the legal foundations of the state. in the conditions of construction boom and active construction of cities, raiders are appropriating construction sites, residential complexes, houses. in 2017, the anti-raid commission under the ministry of justice of ukraine has started its work. baltic journal of economic studies 79 vol. 6, no. 3, 2020 this commission has the right to cancel suspicious registrations out of court promptly and to release "black" registrars with further criminal liability. such powers should be able to block attempts by raiders to seize business and real estate quickly and effectively. one of the key steps to ensure the protection of property rights is the adoption of the law of ukraine "on amendments to certain legislative acts of ukraine on counteracting raiding" no. 340-ix dated december 05, 2019. the main provisions of the law include: termination of the activity of accredited entities; introduction of obligatory notarization of agreements on the alienation of corporate rights; implementation of the principle of simultaneous notarization and state registration of rights; raising responsibility for violation of the relevant registration procedures. also in 2019, the president signed a decree on counteraction measures to protect business owners. the decree involves using the tools to combat raiding. that will give investors more confidence and protect individuals from encroachment on their property. thus, the problem of securing property rights remains one of the most pressing for ukraine at the current stage of economic development. the low level of protection of property rights negatively affects the investment attractiveness of the national economy, impedes the effective development of its industries and sectors. 3. the role of insurance in ensuring resilience the developed insurance market is one of the institutional conditions for minimizing risks in turbulent economy and an uncertain economic climate. this market performs specific and necessary functions to ensure the resilience of the economy, such as: – mobilizes international and national savings for rapid economic growth. in-vestment funds of insurance companies are a stabilizer of the whole economy and the 4,1 4,0 4,0 4,2 4,3 3,9 3,9 3,4 4,2 0 1 2 3 4 5 6 7 8 9 10 2010 2011 2012 2013 2014 2015 2016 2017 2018 points years figure 1. dynamics of the international property rights index of ukraine in 2010-2018 source: based on (property rights alliance, 2018) 340 234 250 310 414 142 0 50 100 150 200 250 300 350 400 450 2013 2014 2015 2016 2017 2018 quantity years figure 2. dynamics of raider attacks in ukraine in 2013-2018 source: based on (opendatabot, 2018) baltic journal of economic studies 80 vol. 6, no. 3, 2020 stock market in particular. at the expense of insurance premiums the funds are formed, which are further invested in economy. institutional development of the national insurance market leads to an increase in the rate of savings and the rate of economic growth; – promotes production and trade, reducing the production costs; – maintains financial stability, ensuring the insured against various risks, and contributes to ensuring the state financial resilience; – promotes the efficient redistribution of financial resources in the economy. insurance provides protection of property interests of individuals (households) and legal entities (enterprises) at occurrence of adverse events (insured events) at the expense of monetary funds formed from insurance premiums. for households, insurance is socially oriented (social protection, preservation of income and savings, protection of consumer interests). for business, property interest insurance (property interest protection, transfer of financial risks, liability insurance) prevails. the level of the insurance market development depends on macroeconomic conditions and political stability, national traditions, insurance and tax legislation. the ratio of insurance premiums to gdp is the main indicator that characterizes development of insurance in the country. figure 3 shows the dynamics of the ratio of insurance premiums to gdp of ukraine and the european union (eu) in 2000-2018. in 2000-2018, the level of insurance premiums in ukraine was twice lower than the average level in the eu. herewith in 2000-2005, the level of insurance premiums increased significantly, which was associated with an increase in the number of insurance companies (in 2004, compared to 2001, their number increased by almost 59 units or 18%). after the global economic crisis of 2008-2009, the parameters of the insurance market development worsened in ukraine. the main reason was the reduction in gross and net insurance payments. compared to the eu average, ukraine lagged far behind the development of insurance market, as was also evidenced by the value of insurance payments in gdp. it is worth emphasizing that the developed insurance market exempts government from additional financial costs caused by adverse events (shock influences). otherwise, the need to compensate for consequences of shock influences falls on the state and local budgets. in the conditions of shock influences, the insurance market provides protection of property rights and interests of legal entities and individuals, supports resilience of the economic development of the country. 4. preventing and combating corruption further we consider preventing and counteracting corruption as an institutional condition for resilience of national economy. annual expenditures on international corruption amount to 3.6 trillion dollars in bribes and stolen money (guterres, 2018). the united nations regards corruption as one of the key obstacles to the sustainable development and resilience of national economies. corruption can take many forms: bribery, squandering, money laundering, tax evasion, fraud. regardless of the form of manifestation, corruption always occurs at someone's expense and leads to a weakening of state institutions, a reduction in employment and a decrease in the well-being of the population, and an economic downturn. corruption is a source of shock influences that weaken the economic potential of the country by: – loss or reduction of money to the state budget; – reduction of the country 's natural resource potential; 3,95 4,26 4,17 3,76 3,96 1,14 2,79 2,03 1,36 1,54 0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 2000 2005 2010 2015 2018 % years average value for the eu ukraine figure 3. the ratio of insurance premiums to gdp of ukraine and the eu in 2000-2018 source: based on (world bank open data, 2018) baltic journal of economic studies 81 vol. 6, no. 3, 2020 – reduction of gdp growth; – decrease in the level of capital productivity. for ukraine, the problem is the lack of receipt of tax revenues to the state budget. according to the center for strategic studies of ukraine, 62% of the ukrainian companies evade taxes and 47% give bribes. one of the reasons for this phenomenon is the reluctance of companies to show their real (high) income, since this can lead to numerous inspections by regulatory authorities. corruption is also a bribe of companies to representatives of regulatory authorities, so that they do not "notice" violations in the process of checking their activities. according to the imf, gdp growth slows down by 2% per year in ukraine due to the high level of corruption. if ukraine were to overcome corruption by effective measures, then the economy would grow by 5% per year. transparency international publishes an annual report on the situation of corruption in the world. according to methodology of rating, the minimum corruption score is 100 points, the maximum is 0 points. table 1 shows the corruption perceptions index and gdp per capita of ukraine in 2012-2018. table 1 the corruption perceptions index and gdp per capita of ukraine in 2012-2018 years the corruption perceptions index (points) gdp per capita (dollars) 2012 26 3856.8 2013 25 4030.3 2014 26 3014.6 2015 27 2115.4 2016 29 2185.9 2017 30 2640.3 2018 32 3095.2 source: based on (ministry of finance of ukraine, 2018; transparency international ukraine, 2018) one of the key forms of corruption in ukraine is an embezzlement of public funds. in other words, this is the intentional misappropriation of someone else's property for personal gain through the use of official position. government bodies, represented by civil servants, carry out the management of state property and control over the use of natural resources. this creates opportunities for the transformation of national wealth into a personal one through the illegal privatization of land, felling of forests, fishing, and mining. it should be emphasized that minerals are nonrenewable natural resources (they include fossil fuels, metals, non-metals, water, etc.) and their irrational use leads to damage to the state, poses a danger to society and the environment. the use of natural resources for personal gain is not a crime against the environment, but against property. according to the state geological survey of ukraine, in 2019, there were more than 30 cases of illegal mining. the total loss of the state budget of ukraine was hundreds of thousands usd. corruption also has the effect of reducing capital productivity. the decrease in capital productivity means that the country produces less with the same amount of invested capital (labor, land, materials). the resources are the same and the return is less. 5. protection of national economic interests in the face of permanent global instability, the protection of national economic interests is one of the key institutional conditions for ensuring the resilience of the economy. the law of the fundamentals of national economic security of ukraine stipulates that the national interests of ukraine are vital interests of the individual, society and state, the realization of which ensures the state sovereignty of ukraine, its progressive democratic development, as well as safe living conditions and well-being of its citizens (law of ukraine 2469-viii, 2018). the realization of national interests means achiving food security; raw material security; financial security; infrastructure security; industrial development; development of entrepreneurship; innovative development; scientific and technical development; social development. the protection of these national economic interests ensures the formation of the internal reserves for economic stabilization. figure 4 provides a diagram of the relationship between resilience of national economy and the protection of national economic interests. the level of resilience of the national economy is the degree of prevention, overcoming and recovery of the economic system from shock influences, which is characterized by quantitative and qualitative indicators. investigating the level of resilience of the national economy should be based on its main sectors or areas (oecd, 2017; boiko, 2019), that will allow to determine the environment for identifying the shock influences that occurred during the period under review and affected the development and level of resilience of the national economy as a whole. depending on the location of the shock influences, they are divided into internal and external (kryuchkova, 2010). internal shock influences are associated with changes in economic conditions, legislation, and governmental actions in a particular country (e.g., aggregate supply and demand shocks, inflationary shocks, monetary shocks, credit shocks). external shock influences occur outside the country and are associated with changes in the global space (e.g., reduced exports, rising costs of imports, outflows of capital). globalization causes changes in economic conditions that can adversely affect the protection of national economic interests. they can be compensated by the baltic journal of economic studies 82 vol. 6, no. 3, 2020 formation of adaptation institutions that ensure the entry of economic entities – carriers of the national economic interests of the country into the global economic space, both macroand meso-level in the form of mixed organizational structures (public-private partnership). 6. development of corporate culture next, we consider the corporate culture of public authorities as an institutional condition for ensuring the resilience of the economy. corporate culture influences the level of achievement of the set goals and fulfillment of tasks. corporate culture means the totality of values, norms, rules formed under the influence of external and internal factors that ensure the development and effective activity of the organizations. external factors include legislation and government measures in relation to the activities of a particular organization (e.g., the most-favored-nation regime, tax exemptions, activity requirements). internal factors are due to the peculiarities of the organization and its internal environment (e.g., personnel policy, organization structure, prevailing leadership style). the quality of these factors determines the type of corporate culture and its trends. there are government organizations that directly or indirectly implement measures for ensuring the resilience of the national economy. it is necessary to maintain mutual coherence and coordination of actions for the effective functioning of such organizations. the main government organizations that take measures to ensure the resilience of the economy of ukraine are: – the financial stability council identifies threats to financial stability and develops recommendations to counteract the impact of threats on the financial system; – the state agency of the reserve of ukraine implements a policy in the field of the state material reserve. the purpose is to provide state support to certain sectors of the national economy, enterprises, institutions and organizations in order to stabilize the economy in case of temporary breaches of the supply timing of important protection of the national economic interests raw material security food security financial security infrastructure security innovative development development of entrepreneurship scientific and technical development industrial development social development internal reserves for stabilizing the economy level of resilience of the national economy internal shock influences the level of resilience of the financial corporations sector the level of resilience of the non-financial corporations sector the level of resilience of the general government sector the level of resilience of the household sector the level of resilience of the external sector external shock influences figure 4. the relationship between resilience of the economy and the protection of the national economic interests source: processed by the authors baltic journal of economic studies 83 vol. 6, no. 3, 2020 raw materials and fuel and energy resources, food supply, imbalances between supply and demand in the domestic market; – the reserve fund of the cabinet of ministers of ukraine is used to make un-foreseen expenditures, which are not permanent and cannot be foreseen when drafting the budget. figure 5 structurally depicts the dependence resilience of the national economy on the corporate culture of public authorities. under the influence of external and internal factors, three levels of corporate culture are formed: the level of artifacts (ethics, customs, traditions), the level of values and the level of ideas (internal organizational norms, rules) that create a model of organizational and professional behavior of civil servants. the model of organizational and professional behavior should correspond to the type of corporate culture. cameron and quinn’s theory of competing values is used to study corporate culture. according to this theory, there are four types of corporate culture based on the competing values framework, namely clan, bureaucratic, market, adhocratic (cameron, quinn, 2005). these types of corporate culture are mostly applied to commercial non-governmental organizations. state managerialism is applied to the civil service. in this case, government, represented by civil servants, seeks to meet the needs of the citizens, which leads to increased trust in the government and reduced social tensions. this is especially important in unstable socio-economic conditions, when people are unable to solve their own problems without the help of the government. however, shock influences are mostly unpredictable and their effects are devastating to the national economy. in such circumstances, it is necessary for public authorities to form (or maintain) signs of a bureaucratic and adhocratic type of corporate culture: – high level of professionalism and responsibility of civil servants; – use of key performance indicators, prevention of facts of non-fulfillment, untimely or poor performance of tasks; – flexible response to the needs of the external environment; – forecasting the future needs of economic development; – ensuring effective coordination of activities with other authorities implementing measures to ensure the resilience of the economy. the type of corporate culture that is reflected in the model of organizational and professional behavior of civil servants depends on the level of achievement of the set goals and accomplished tasks for ensuring the resilience of the national economy. if, according to the results of the monitoring, the corporate culture has not changed in two years, further implementation of the changes is a futile task and a complete staff change is required. it is important to provide monitoring procedure for a corporate culture (at least once every six months) and to form a staff reserve. in ukraine the level of corporate culture development is low. in 2017-2018, ukraine ranked 106th out of 137 countries in terms of ethics and corruption in public authorities. these data were included in the calculation of ukraine's global competitiveness government organizations of ensuring the resilience of the economy model of organizational and professional behavior of a civil servant corporate culture the level of artifacts (ethics, customs, traditions) level of values (organization values) the level of ideas (internal rules) the level of achievement of the set goals and the accomplished tasks in ensuring the resilience of the economy level of resilience of national economy external factors internal factors figure 5. the relationship between the level of resilience of the national economy and the corporate culture of public authorities source: processed by the authors baltic journal of economic studies 84 vol. 6, no. 3, 2020 index as a component characterizing the quality of the institutional environment. the world economic forum, which calculates this index, considers ethics and corruption in one combination and emphasizes that the fight against corruption should become one of the key components of corporate culture of public authorities. since, corruption has a negative impact on the achievement of goals and decision-making in the interests of the state. in terms of the development of ethics and combating corruption in the top five countries are switzerland, usa, singapore, netherlands, germany. a high level of resilience of the economy cannot be achieved without effective activity of the public authorities. the low level of corporate culture is caused by ignoring the fact of corruption in the public authorities of ukraine. in order to eradicate corruption in public authorities, it is necessary that the values and norms of corporate culture include openness and transparency in conducting activities, combating bribery. transforming transparency into the core value of corporate culture is an important and challenging task. the main step in this process should be the regulation of anti-corruption behavior in the documentation of public authorities, and, first of all, in the code of corporate ethics. 7. discussions having analyzed the institutional conditions for ensuring the resilience of the ukrainian economy, we conclude that the main problems of effective implementation of these conditions are the imperfection of the legal framework and public administration system. in order to improve the institutional conditions for ensuring the resilience of the national economy, public authorities should effectively implement such institutional instruments as: 1. state target programs. such programs are implemented using the state budget funds and are coordinated by terms of implementation, composition of executors, and resources. effective implementation of state targeted programs aimed at protecting national economic interests and protecting property rights will enable the state to accelerate economic development and attract investment. 2. subsidies for payment of part of insurance payments (insurance premiums). providing individuals and legal entities with state budget funds in the form of subsidies to pay part of the insurance payment (insurance premium), for certain types of insurance services, would allow to ensure growth of the country's insurance market. 3. anti-corruption programs. compulsory implementation of anti-corruption programs in public authorities ensures the gradual elimination of corruption in their activities. 4. corporate ethics codes. the key goal of implementation of the corporate ethics codes in public authorities is to increase public confidence in government agencies. the serve in public authorities requires constant contact with the public. that needs an active application of ethical rules and standards of conduct in the course of professional activity. government must also address the following issues in order to effectively develop the institutional conditions for ensuring the resilience of the economy: – to distinguish ownership of all types of natural resources; – to strengthen control and accountability for violations of requirements in the field of general environmental management; – to ensure effective fight against corruption as an internal source of permanent negative influences in the economy; – to increase the level of compliance with the requirements of anti-corruption programs; – to increase the transparency of budget funds using within the state target programs; – to adopt at national level a document or prescribe in the existing normative legal acts the generally accepted definition of the national economic interests; – to develop measures for preventing and eliminating the impact of threats and destabilizing factors on the realization of national economic interests; – to ensure that the code of corporate ethics is complied by public authorities and strengthen accountability for violations of its rules. it is worth noting that the key institutional condition for ensuring the resilience of the economy is the prevention and counteraction of corruption, since acts of corruption affect other defined institutional conditions adversely. if the government manages to fight corruption effectively, the problems of irrational and illegal extraction of natural resources, raider seizures, an embezzlement of state property, and misuse of public funds will be solved. 8. conclusions sufficient level of resource potential is one of the key factors for resilient economic development of a country in the conditions of shock influences. the state policy of ukraine in the direction of rational use of resources is insufficient for their increase and formation of a system of reserves. having substantiated the institutional conditions for ensuring resilience of the ukrainian economy, we came to the conclusion that the government lacks the institutional capacity to improve them, as evidenced by: – low level of protection of national economic interests. the lack of an effective mechanism for the conservation and reproduction of natural, and labor resources does not satisfy the needs of society. – low level of development of the system of protection of property rights. besides during 2010–2018, the baltic journal of economic studies 85 vol. 6, no. 3, 2020 dynamics of ukraine's international property rights index did not change significantly. – poorly developed insurance market with almost no insurance segment in the economy. the share of insurance premiums in the countr y 's gdp during the period 2000–2018 ranged from 1.14% to 2.79%. – low level of prevention and counteraction to corruption. the dynamics of the corruption perceptions index of ukraine ranged from 25 to 30 points during 2012-2018. – corporate culture in the public authorities is not developed eunough. the corporate culture of civil servants is closely linked to the manifestations of corruption in the public sector. references: beck, т., & laeven, l. 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mykhailo vilhushynskyi1, andrii chornous2 abstract. the purpose of the article is to scrutinize administrative and legal regulation of information relations of public procurement subjects in the economic sphere. within the framework of the conducted research, the authors note that the system of subjects that carry out administrative and legal regulation of information relations in public procurement consists of general and special public administration subjects. the primary objectives of the article are the following: 1) to determine an exclusive list of public administration subjects that provide administrative and legal regulation of information relations in the field of public procurement; 2) to outline major trends of further development of administrative and legal regulation that relates to information relations of public procurement subjects. methodology. in the course of the article preparation, a set of philosophical and ideological approaches has been used (in particular, the dialectical approach, which is a way of thinking based on the analysis of all available views on disclosure of the content of administrative and legal regulation of information relations of public procurement subjects; analytical approach, which is based on cognitive activity concerning proving or refuting the notion of a public procurement subjects system; hermeneutic that is used to understand the terms related to information relations of public procurement subjects in the economy); general scientific research methods (logical, which is based on “simple to complex” and “abstract to concrete” principles and relates to general characterization of information relations of public procurement subjects in the economic field); special methods (system-structural method when defining organizational structure and legal regulation of public procurement subjects activity, legal comparative analysis when studying foreign countries expertise; formal legal and formal logical approaches). results. according to the results of the research, the authors have classified all public administration subjects that carry out legal administration of information relations in the field of public procurement into four separate organizational and structural levels. the particular article provides authors’ assumptions concerning further development of administrative and legal regulation of information relations of public procurement subjects in the economy, namely, emphasizes the necessity of strengthening preventive control in forms of general (analytical) monitoring, supervision of individual procurement procedures, and further automation of procurement processes; accentuates the tendency of public procurement sphere professionalization by organizing personnel trainings and educating public officials how to work with advanced information technologies; supports the need to continue implementing measures aimed at improving legislation, professionalizing labour resources in the public procurement field, improving international relations, attracting additional investments to integrate advanced technologies and hire field experts with background in managing national information resources and building e-government. practical implications. the authors’ survey results may be used in legislative work related to the legal regulation of information relations of public procurement subjects in the economy. the particular article may also be used in further scientific researches concerning information relations of public procurement subjects in the economic field. moreover, the article might be used in the academic process, in lectures and seminars on information and administrative law. value/originality. the scientific novelty of the article comprises of synthesis of existing normative and doctrinal approaches to understanding information relations of public procurement subjects in the economy; generalization of information concerning public procurement subjects in the economic field; determination of development prospects of administrative and legal regulation of information relations of public procurement subjects in the economic sphere. the authors have articulated development prospects of administrative and legal regulation of information relations of public procurement subjects in the economy, emphasized the necessity of enhancing baltic journal of economic studies 75 vol. 5, no. 4, 2019 preventive control in the form of general (analytical) monitoring, particular procurement procedures supervision, and further automation of the procurement process. moreover, the article focuses on the professionalization of the public procurement sphere through educating qualified personnel to work with modern information systems and technical devices. the authors also support the necessity of continuing the implementation of measures aimed at the legislation improvement, public procurement sphere professionalization, international relations development and proper executions of functions established by the law of ukraine “on public procurement”. key words: economy, public procurement, information relations, information infrastructure, administrative and legal regulation of national information infrastructure. jel classification: k23, h57 1. introduction modern european integration and globalization processes in ukraine are accompanied by drastic changes in all spheres of public life, including economic ones. ukraine, like any other state, constantly faces the problem of public funds rational usage: in order to reduce expenditures and direct cash flows in more efficient way to meet the citizens needs and ensure proper functioning of the state mechanism, to support and enhance economic development, which will enable ukraine to become a full-fledged entity on the international arena. the institute, which is called upon to implement the above components, is public procurement. it should be noted that public procurement is not only a purely economic process but also the authorized public administration authorities’ activity process, which is based on legal norms according to which the public procurement of goods, works, and services takes place. accordingly, taking into account the public (administrative) component of public procurements, it is expedient to examine possible issues related to administrative and legal regulation of information relations of public procurement entities in the economic sphere. after all, modern information technologies are a unique key to harness the public administration potential in the interest of sustainable socio-economic development of ukraine and crisis situations prevention. state development requires the use of modern technologies and procedures that facilitate the adoption of well-motivated political, economic and social decisions in the public procurement field. at the same time, it should be noted that, in view of national and foreign experience, the level of development and accessibility of information and communication infrastructure depends not only on the technological and technical achievements of society. thus, although modern digital technologies create all the necessary prerequisites for a comprehensive, efficient, and innovative development of society and economy, the right to choose the vector for the development of information and communication technologies and their infrastructure still remains the exclusive state prerogative, which, unfortunately, often has political prerequisites. moreover, the public administration reform and the implementation of the relatively new law of ukraine “on public procurement”, which are currently being carried out, urge for a comprehensive and thorough analysis of public administration activities in the sphere of public procurement, including a review of administrative and legal regulation of information relations of the above entities. 2. definition and classification of public procurement subjects the public administration subjects that carry out administrative and legal regulation of information relations in the field of public procurement are, first of all, the subjects of information and legal relations that possess information legal personality, which includes two legal qualities: information legal capacity, which is the ability to have information rights and responsibilities, and information competence – the ability to acquire information rights and create responsibilities through their actions (zaiarnyi, 2015). exactly the very approach of understanding the content of legal personality is considered to be conventional and recognized by the vast majority of scholars. it is also noteworthy that depending on the scope of information rights and obligations, in accordance with article 7 of the law of ukraine “on information”, it is possible to distinguish general and special subjects (law on information, 1992). general subjects of information and legal relations are the state and public administration bodies, except for the bodies with special information competence; natural and legal persons for whom information activity is not the main activity. special entities include authorities with special information competence. accordingly, the administrative and legal regulation of information relations in the field of public procurement (that is, relations between participants and ordering customers) is carried out by both general and special public administration subjects. among public administration subjects, the state as a special subject of information and legal relations plays a key role in defining information policy or in baltic journal of economic studies 76 vol. 5, no. 4, 2019 other words in determining the state’s activity related to information obtainment, usage, dissemination, and storage. the state information policy is commonly developed and implemented by state authorities of general competence, as well as by the bodies of special competence, which also act as information relations subjects. in general, it should be noted that the core areas of national information policy are the following: ensuring citizens access to information; creation of national information and telecommunication systems and networks; improvement of material, technical, financial, organizational, and legal bases of information activity; ensuring efficient use of information; continuous modernization and improvement of national information resources; international cooperation in the field of informatization and information sovereignty of ukraine, etc. among the public authorities of general competence, the following should be outlined: – the verkhovna rada of ukraine (aimed at creating a coherent legal system to ensure the development of information and communication technologies, improvement of tax climate for businesses within the industry of information and communication technologies, creation of parliamentary information space to ensure effective interparliamentary cooperation, etc.); – cabinet of ministers of ukraine (aimed at creating proper conditions for the development of information society, the use of information and communication technologies, telecommunications, reliable information security; the use of information and communication technologies on granted access to information resources to all population segments; ensures equal and unlimited user access to telecommunications services, as well as to the creation of a central executive body that will be in charge of creating and implementing state policy of national information society); – administration of state special communications service of ukraine (intended to promote the conclusion of the self-regulated legal act – public agreement (memorandum) on quality standards of internet access provision in ukraine, its transition to international standards of information security and information security management, etc); – the national council of ukraine on television and radio (intended to ensure maximum coverage of public broadcasting in ukraine etc.) and others. the special subjects (meaning those that regulate national information infrastructure as such regulation is their primary goal) do not currently include any public authorities. furthermore, the cabinet of ministers of ukraine is currently obliged to establish a central executive body that will ensure the formation or/and implementation of state policy in the sphere of information society development, information and communication technologies telecommunications and communications usage. 3. administrative and legal regulation of information relations of public procurement subjects while revealing administrative and legal regulation of information relations of public procurement subjects in the economic sphere, particular attention should be paid to the provisions of the fundamental law of ukraine “on public procurement” (law on public procurements, 2015), which defines the range of relations that arise in the field of public procurement. in general, relations in the public procurement field are mixed in nature, which is caused by a combination of public-law and private-law regulatory methods. this state of affairs is explained by the specificity of relations arising in the field of public procurement, which, on the one hand, are aimed at satisfying public interests and, on the other hand, are characterized by the presence of a number of private legal and regulatory mechanisms (povydysh, 2018). in this regard, it is necessary to mention the point of view n. tsybulnik, who stresses that relations subject to administrative and legal regulation play a pivotal role in the public procurement sphere (tsybulnyk, 2018). thus, the relations arising in the public procurement sphere are primarily characterized by such features as public interest and control. k. husanova, in turn, justifies the necessity of using administrative (public) legal methods within the public procurement sphere with the following circumstances: – the procurement procedure is determined at the legislative level by respective legal acts providing for establishing prescriptions, permits, and prohibitions; – financial regulation of trade and economic relations is a state function; – procurement of goods, works, and services for public funds is done to meet public needs; – regulation of public procurement relations is caused by the state’s obligation to control the cash flow of state and local budgets; – material flows management is being carried out; – expenditures control is ensured (khusanova, 2010). since the very article subject is the administrative and legal regulation of information relations of public procurement subjects in the economic sphere, particular attention should be paid to the respective group of relations. while examining the public administration subjects in the field of public procurement, o. yuditskyi proposes to distinguish two main groups of participants in the public procurement sphere: 1) public procurement subjects, i.e. persons who enter into public procurement procedures; 2) bodies that carry out state regulation and control in the procurement sphere (yuditskyi, 2012). baltic journal of economic studies 77 vol. 5, no. 4, 2019 thus, within the first group of information relations subjects, it is expedient to outline the following public procurement participants: operators of authorized electronic platforms; customers; procurement procedure participants. as regarding the public administration subjects in the field of public procurement, the analysis of the law of ukraine “on public procurement” allows us to identify an authorized public procurement state body (in accordance with the resolution of the cabinet of ministers of ukraine “on matters of the ministry of economic development and trade” dated 20 august 2014 no. 45 (resolution on matters of the ministry of economic development and trade, 2014), the ministry of economic development and trade of ukraine is such an authorised state authority), which using its powers regulates and implements state procurement policy. accordingly, the law of ukraine “on public procurement” imposes a fairly broad list of functions upon the ministry of economic development and trade of ukraine, which can be divided into several groups: – regulatory support of the public procurement sphere. the ministry of economic development and trade of ukraine is authorized to develop and approve legal acts that are crucial for the implementation of the law of ukraine “on public procurement”, develop and approve forms of documents used in public procurement procedures; – organizational, methodological, and informational support of the public procurement sphere. such activity includes studying, summarizing and disseminating global procurement experience, running information resources of the ministry of economic development and trade of ukraine, organizing procurement meetings and seminars, providing general policy advice on the application of procurement law, providing free consultations on the ministry of economic development and trade of ukraine website, developing model educating programs on organizing and managing procurement, raising public awareness of existing public procurement policies and rules; – control and analysis of the state of public procurement system functioning. ministry of economic development and trade of ukraine is the state body that analyses the functioning of the public procurement system, generalizes procurement practice, including experience of international interaction with the public that relates to public procurement system development, cooperates with state authorities and public organizations to tackle corruption; – ensuring proper functioning of electronic procurement system, which is an information and telecommunication system that ensures procurement procedures, creation, placement, publication, and exchange of information and documents in electronic form, which includes the web portal of the ministry of economic development and trade of ukraine and the authorized electronic platforms among which automatic exchange of information and documents is ensured (zakon pro publichni zakupivli, 2015). the procedure of electronic procurement system functioning is regulated by the procedure of functioning of procurement electronic system and carrying out electronic platforms authorization, approved by the resolution of the cabinet of ministers of ukraine decree dated 24 february 2016 no. 166 (resolution on approving the procedure of functioning of the electronic procurement system and carrying out electronic platforms authorization, 2016). another body involved in ensuring proper functioning of electronic procurement system is the specially authorized central executive body that carries out special organization of communications and information protection (according to the law of ukraine “on state service of special communications and information protection of ukraine”, the state service of special communications and information protection of ukraine is the state body that organizes state examinations of complex information protection systems, provides examinations, and verifies proper level of technical and cryptographic data protection while authorizing electronic procurement platforms. along with the ministry of economic development and trade of ukraine, a body of appeal, which is the antimonopoly committee of ukraine, plays a special role in administrative and legal relations in the public procurement field. in fact, the existence of the mechanism of appeal, which is actually an extra-judicial (administrative) procedure for disputes resolution, only emphasizes the administrative and legal nature of relations arising in the public procurement field. in addition to the procurement authority and the appeal body, the bodies responsible for regulating and controlling public procurement should include, in particular, the state treasury service of ukraine, the state audit service of ukraine and the accounting chamber (povydysh, 2018). of course, the existing approach to the public procurement system organization is well-elaborated, but it is not of a systematic nature and does not take into account the constitutional provisions related to the public authorities’ system. in particular, the authors stress that the determination of state regulation subjects’ powers, status, and structure, as well as the formation of the national information infrastructure, in particular in the field of public procurement, should start from the provisions of the constitution of ukraine. noteworthy that such a position is supported by o. baranov, o. oliynyk, and other researchers (baranov, 2010). thus, among the subjects of state regulation and formation of the national information infrastructure, there are four organizational and structural levels. the first level of authority organization includes the verkhovna rada of ukraine, the president of baltic journal of economic studies 78 vol. 5, no. 4, 2019 ukraine, the cabinet of ministers of ukraine, and the national security and defence council of ukraine, as a coordinating and advisory body under the president of ukraine. at the same time, according to o. oliynyk, the central and local executive bodies and other state bodies carrying out special powers should be attributed to the second level of state regulation subjects (oliinyk, 2012). the third level of an organizational and functional system of state regulation and national information infrastructure formation includes enterprises, institutions, and organizations that are of crucial importance for the national level of the information society development, information and telecommunication technologies implementation into the social life, as well as the activities of public administration bodies. the fourth level of organizational and functional regulation and formation of national information infrastructure should include citizens and their associations, as well as public and private media. o. baranov, in turn, classifies subjects of state regulation and formation of national information infrastructure by branches of power (baranov, 2005). thus, according to o. baranov, the state bodies vested with exclusive legislative competence, in accordance with the provisions of article 92 of the constitution of ukraine, only include the verkhovna rada of ukraine, which is the ultimate body authorized to adopt laws, run parliamentary hearings on different information issues, etc. at the same time, a number of verkhovna rada committees directly deal with national information policy issues, in particular, concerning the freedom of speech and information, on transport and communication, on cultural and spiritual issues, on national security and defence. subjects with executive functions, according to o. baranov, include: 1. the president of ukraine who, in accordance with article 106 of the constitution of ukraine, has exclusive powers in the information field (constitution of ukraine, 1996), namely the rights to: protect state independence, national security and, in particular, information security; participate in the formation of members of the cabinet of ministers of ukraine; appoint and dismiss heads of local state administrations based on the respective recommendations of the cabinet of ministers of ukraine; appoint and dismiss half of the members of the national council of ukraine for television and radio broadcasting, etc. 2. the cabinet of ministers of ukraine is the highest institution in the system of executive bodies. the general powers of the cabinet of ministers of ukraine are set out in article 116 of the constitution of ukraine while the specific powers of the cabinet of ministers of ukraine in the information sphere are set out in the law of ukraine “on the cabinet of ministers of ukraine”. according to the law, the cabinet of ministers of ukraine conducts state policy in the field of informatization, promotes the creation of a single information space on the territory of ukraine, manages the systematic implementation of advanced information and communication technologies. 3. the national security and defence council of ukraine is a coordinating body on national security and defence under the president of ukraine, which is responsible for ensuring national information security, protection of national information resources, information and telecommunication systems and databases. 4. the state committee on television and radio broadcasting is the central executive body with a special status, which participates in the formation and implementation of state policy in the information sphere, and its activities are directed and coordinated by the cabinet of ministers of ukraine. the committee’s main tasks are the formation and implementation of state policy in the fields of television and radio broadcasting, information and publishing spheres; creation of a single information space; promoting the development of information society and, in particular, the integration of modern information and communication technologies into the activities of public authorities and local selfgovernment, the development of information resources, information and telecommunication systems. 5. the national television and radio broadcasting council of ukraine is a constitutional, permanent collegiate body whose purpose is to oversee the observance of the laws of ukraine in the field of broadcasting, as well as the exercise of regulatory powers. the strategic importance of this body for the development of the national information society and the construction of the national information infrastructure is explained by the exclusive control and regulatory competence under which the telecommunication service entities, which, in particular, provide the public administration bodies with an adequate volume of information, communication services. 6. the national commission for the state regulation of communications and informatization. the importance of this body for the formation and development of the national information infrastructure is explained by the existing powers on implementation of state policy on national information society development and the autonomy in determining ways how to solve particular problems that arise at the national level. 7. the state service for special communications and information protection of ukraine participates in the formation and implementation of the state policy in the field of telecommunications and use of the radio frequency resource of ukraine, protection of information, state information resources and information and telecommunication systems as key structural elements of the national information infrastructure. baltic journal of economic studies 79 vol. 5, no. 4, 2019 8. the state agency for electronic governance of ukraine is the central executive body, whose activity is directed and coordinated by the cabinet of ministers of ukraine. this body, among other things, is engaged in the introduction of a new form of government based on the widespread use of modern information technologies – e-government, as well as it implements the state policy in the field of informatization, formation, and use of national electronic information resources and development of the information society. 9. the ministry of justice of ukraine is a state executive body that performs state registration of print media and news agencies and is empowered, in particular, with the powers of the central certification body of the national electronic digital signature system, which is important to ensure the security of the national information infrastructure. 10. the ministry of economic development and trade of ukraine is an authorized procurement body that provides regulatory, organizational, methodological, and legal support for the public procurement sphere, controls and analyses the functioning of the public procurement system, ensures the proper functioning of the electronic procurement system. the above approach to classifying public administration bodies that carry out administrative and legal regulation of information relations in the public procurement field is complicated and multi-faceted. at the same time, according to the green paper on e-governance and section 2.1 of the white paper the assessment of state organizational and managerial support of electronic interaction indicates that one of the core issues of public administration authorities, is a lack of coordination of actions between field authorities (the working group on the development of governmental policies on e-governance in ukraine, 2014; vyskuba, 2014). the problem solution involves institutional (structural or/and functional) changes that precede or take place simultaneously with the introduction of electronic interaction. at the same time, the white paper highlights two approaches to the organization of management processes that are inherent in ukraine: – centralized approach, which provides for the creation of a separate state authority within the executive bodies system, for instance, a ministry based on existing central executive bodies with simultaneous formation of new state bodies hierarchy and improvement of existing horizontal links, including elimination of authorities with duplicated powers, as well as integration of clarification and refinement functions into the relevant ministry line; – decentralized (branched) approach whereby the existing distributed structure of central executive bodies, which are responsible for the development of different segments of the public procurement sphere, is enough to regulate information relations of public procurement subjects. meanwhile, particular goals, tasks, functions, horizontal communications, and content of existing state bodies must be specified and one particular central executive body must be chosen as a key coordinator responsible for the creation and implementation of state policies on information society development and information and communication technologies improvement. 4. key tendencies related to administrative and legal regulation development a detailed analysis of the current state of the national information infrastructure shows that the main trends in the development of administrative and legal regulation of information relations of public procurement subjects in the economic sphere are the following: necessity of creating, modernizing, and integrating modern information technologies into the activity of state and municipal authorities; promotion of national technologies, information systems and telecommunication equipment produced by domestic manufacturers; further integration of international and transnational information technologies into the activity of domestic public administration bodies; organization of educational trainings for public administration bodies personnel and teaching them how to work with modern information systems and technical devices. noteworthy that in ukraine there is a plethora of misconceptions and errors in procurement procedures. however, such a situation can be remedied by enhancing preventive control and further automatization of purchasing processes. given the above, the ministry of economic development and trade of ukraine continues implementing measures aimed at improving legislation, professionalization of public procurement, developing international relations, and ensuring the performance of functions established by the law of ukraine “on public procurement” (report containing analysis of the public procurement system functioning and summarized information on implications of control in the procurement sphere, 2018). indeed, it is necessary to further improve the monitoring function of the ministry of economic development and trade of ukraine, which is an important step to further public procurement system reform. in particular, it is appropriate to establish the following types of monitoring: general (analytical) monitoring; monitoring of individual procurement procedures. among further development prospects of administrative and legal regulation of information relations of public procurement subjects in the economic sphere, the authors also underscore the significance of modern information and analytical support of public administration bodies activity, the necessity of organizing national electronic information resources system, creation of a new and improvement of the baltic journal of economic studies 80 vol. 5, no. 4, 2019 current legal framework in the sphere of informatization and harmonization of standards for it products and it services with eu standards, which will become a reliable precondition for creating a progressive national information society and effectively implementing electronic governance (e-government) in ukraine. furthermore, attracting investments for the implementation of modern technologies and involvement of experts with managerial experience in national information resources and e-governance should also become important tendencies of developing administrative and legal regulation of information relations of public procurement subjects in the economic sphere. 5. conclusions therefore, summing all up, it should be noted that despite the dispersion of the state authorities’ system in ukraine, the vast majority thereof in one way or another interact with national information infrastructure of ukraine or at least with one of its structural components (information resources, information and telecommunication systems). however, as of now, the existing system of ukrainian central bodies with executive powers still lack a special body, whose competence would encompass complex regulation of public relations arising in the sphere of information and communication development, communication technologies, national information space, information society, and the national information infrastructure as a proper legal platform for information relations among public administration bodies. as a result, the functions related to the use of information and communication technologies are entrusted to the authorities of general competence, wherein the relevant information and communication powers are subsidiary and additional in nature, and therefore, they cannot be systematically and comprehensively regulated. such a legal loophole has a surprisingly negative impact on the activities of public administration since it, on the one hand, deprives the authorities and their officials of the opportunity to make full and comprehensive use of existing technological capabilities in the world and, on the other hand, limits the opportunities of citizens in their interaction with public (state and municipal) authorities. thus, the above indicates that the existing national legislation related to administrative and legal regulation of information relations of public procurement entities in the economic sphere is insufficient, and currently we are still at the stage of legislative definition of basic concepts and their structural elements. at the same time, the increasing number of scientific works devoted to the study of the above issue clearly indicates the expressed interest of the scientific community and society as a whole in implementing foreign experience in the formation, implementation, and development of national information infrastructure. references: zaiarnyi, o. a. (2015). subiekt administratyvnykh informatsiinykh pravoporushen: poniattia ta osoblyvosti [the subject of administrative information offenses: concepts and features]. administrative law and process, 2(12), 86–104. (in ukrainian) zakon pro informatsiiu (1992). [law on information]. ofitsiynyy sayt verkhovnoyi rady ukrayiny. [the official website of the verkhovna rada of ukraine]. retrieved from: http://zakon2.rada.gov.ua/laws/show/2657-12 (accessed august 03, 2019). (in ukrainian) zakon pro publichni zakupivli (2015). [law on public procurements]. retrieved from: https://zakon.rada.gov.ua/ laws/show/922-19 (accessed august 03, 2019). (in ukrainian) povydysh, v. v. (2018). administratyvno-pravovi vidnosyny u sferi elektronnykh publichnykh zakupivel [administrative and legal relations in the sphere of electronic public procurement]. naukovyi visnyk publichnoho ta pryvatnoho prava, 6, 87–93. (in ukrainian) tsybulnyk, n. y. (2018). administratyvno-pravove zabezpechennia publichnykh zakupivel v ukraini [administrative and legal support of public procurement in ukraine] (phd thesis). zaporizhzhia: zaporizhzhia national university. (in ukrainian) khusanova, k. y. (2010). do pytannia pro osoblyvosti metodu pravovoho rehuliuvannia vidnosyn u sferi derzhavnykh zakupivel [on the peculiarities of the method of legal regulation of relations in the field of public procurement]. chasopys kyivskoho universytetu prava, 1, 117–124. (in ukrainian) yuditskyi, o. l. (2012). vydy ta problemy pravovoho stanovyshcha subiektiv derzhavnykh zakupivel [types and problems of legal status of public procurement subjects]. chasopys kyivskoho universytetu prava, 2, 242–247. (in ukrainian) postanova pro pytannia ministerstva ekonomichnoho rozvytku i torhivli (2014). [resolution on matters of the ministry of economic development and trade]. retrieved from: https://zakon3.rada.gov.ua/laws/show/ 459-2014-%d0%bf (accessed august 03, 2019). (in ukrainian) postanova pro zatverdzhennia poriadku funktsionuvannia elektronnoi systemy zakupivel ta provedennia avtoryzatsii elektronnykh maidanchykiv (2016). [resolution on approving the procedure of functioning of the electronic procurement system and carrying out electronic platforms]. retrieved from: https://zakon.rada.gov.ua/ laws/show/166-2016-п/print (accessed august 03, 2019). (in ukrainian) baltic journal of economic studies 81 vol. 5, no. 4, 2019 baranov, o. a. (2005). informatsiine pravo ukrainy: stan, problemy, perspektyvy [information law of ukraine: state, problems, prospects]. kyiv: soft press. (in ukrainian) oliinyk, o. v. (2012). struktura subiektiv zabezpechennia informatsiinoi bezpeky v ukraini [structure of information security subjects in ukraine]. aktualni problemy derzhavy i prava, 68, 110–117. (in ukrainian) konstytutsiia ukrainy (1996). [constitution of ukraine]. retrieved from: https://zakon.rada.gov.ua/laws/ show/254к/96-вр (accessed august 03, 2019). (in ukrainian) robocha hrupa z rozrobky uriadovoi polityky u sferi rozvytku elektronnoho uriaduvannia ukrainy (2014). [the working group on the development of governmental policies on e-governance in ukraine]. proekt do obhovorennia: zelena knyha z elektronnoho uriaduvannia v ukraini. retrieved from: http://etransformation.org.ua/ 2014/11/17/318 (accessed august 03, 2019). (in ukrainian) vyskuba, o. (ed.) (2014). proekt do obhovorennia: zelena knyha z elektronnoho uriaduvannia v ukraini [electronic interaction. white paper on public policy]. kyiv – dnipropetrovsk. (in ukrainian) ministerstvo ekonomichnoho rozvytku i torhivli (2018). zvit, shcho mistyt analiz funktsionuvannia systemy publichnykh zakupivel ta uzahalnenu informatsiiu pro rezultaty zdiisnennia kontroliu u sferi zakupivel [report containing analysis of the public procurement system functioning and summarized information on implications of control in the procurement sphere]. kyiv: ministry of economic development and trade. (in ukrainian) baltic journal of economic studies 256 vol. 5, no. 2, 2019 doi: https://doi.org/10.30525/2256-0742/2019-5-2-256-261 does investment replace aid as countries become more developed? helga kristjánsdóttir1 abstract. this paper looks at the correlation between aid inflow and foreign direct investment inflow to the heavily indebted poor countries malawi, mozambique and ghana, classified as developing countries. data covers world bank measures for aid and foreign direct investment in these countries. also, crop production index is accounted for, as well as current account balance, and the gross domestic product of the countries analyzed. dataset runs from 1970 through 2004, using a simultaneous equation system to determine the interrelation. due to the occasional small scale of flow, the inverse hyperbolic sine function is used, rather than a logarithmic function. results indicate that when the sample countries experience a higher income per capita, complementary effects diminish at the cost of supplementary effects. therefore, fdi can be considered to replace aid after a certain development has been reached within the developing economies analyzed. the answer to the paper title is yes, investment does replace aid as countries become more developed. key words: foreign direct investment, aid, trade, developing countries. jel classification: f21, f23 corresponding author: 1 university of akureyri, iceland e-mail: helga@unak.is orcid: https://orcid.org/0000-0002-8857-8063 researcher id: s-1349-2018 1. introduction the general belief has historically been that the recipients of foreign direct investment (fdi) from wealthy countries has been poorer countries. however, markusen (2002) showed that the wealthy countries tend to invest in each other, so the flow of investment is primarily between the west and east, rather than from north to south, leaving the poorer african countries in an fdi wasteland. so what happens in the poorer countries? many receive foreign aid, but is it doing its job? does the aid improve the conditions in the countries to the extent that a country becomes able to attract fdi on its own? can self-sufficiency be achieved for these chronic aid recipients? this paper aims to answer these questions, by looking at data from 1970 to 2004 for three african countries that are classified as heavily indebted poor countries (hipc). all three have been receiving aid for the whole period studied, but all three have managed to attract some level of fdi in more recent years. what is the connection between the aid and the fdi? this is a challenging question, given the marginality of fdi inflow for the countries, because most functions to analyze fdi are really only designed for positive values. in this case, the zeros are also interesting and do have meaning, so a zero-friendly function is required. i therefore choose to use the inverse hyperbolic sine functional format so the zeros in the data can be used productively, unlike a logarithmic function that simply ignores them. furthermore, since the fdi and aid are so intertwined, i use the simultaneous equation system in order to explore the interrelation. in the developing countries, fdi investment tends to be greenfield rather than brownfield, meaning that it’s less likely to be in the form of joint ventures or mergers and acquisitions (m&as). this means that fdi data is less convoluted in developing countries and the flow data can be applied directly rather than proxied by affiliate sales figures as done by brainard (1997), ekholm et al. (2003) or markusen (2002). the paper is organized as follows. section 2 sets out the literature and section 3 explains the modelling strategy used and data. in section 4 estimation results are presented. finally, section 5 provides summary and conclusions. 2. literature available literature on fdi in the developing countries often tends to consider the contribution of fdi to growth, as shown in papers by de mello (1997), balasubramanyam et al. (1996) and borensztein et al. (1998). borensztein et al. (1998) suggest that the host country of fdi needs to have a minimum threshold of human capital, to experience higher productivity of fdi (kristjánsdóttir, 2017; kristjánsdóttir et al. 2017; kristjánsdóttir, 2019). some papers have looked at how baltic journal of economic studies 257 vol. 5, no. 2, 2019 fdi affects domestic firms in the local market, these would be papers like aitken and harrison (1999), and aitken et al. (1997). also, a paper by edwards (1990) looks at debt-equity swaps in the developing countries. moreover, when considering aid flows and their contribution to shifting the economy into a higher equilibrium, a paper by dalgaard et al. (2004) provides some interesting insights on how growth is impacted by aid flows, based on literature of some burnside and dollar papers. the variables selected in my paper somewhat correspond to the dalgaard et al. (2004) paper. finding useful way to capture fdi has proven to be a difficult task, and therefore some researchers have chosen to look specifically into issues regarding that. in a paper by lane and milesi-ferretti (2003) the concentration is set on the composition of fdi and possible ways of correcting for m&as in the sample when estimating fdi. in most of the recent literature, affiliate sales are commonly used as a proxy for fdi in a particular host country. with the objective of determining the shift between trade and multinational sales, brainard (1997) analyzes multinational activities. in this wellknown paper, brainard (1997) chooses to capture outward and inward fdi with separate measures as the share of affiliate sales in total exports, or to put it differently, share of overall foreign sales. more specifically, brainard (1997) chooses to apply data on multinational activities in the united states, and countries trading with the united states. in her research, brainard seeks to find ways to determine the willingness multinational enterprises have for entering into export, rather than overcoming the threshold of making foreign direct investment in a particular country. in her analysis, brainard applies the proportion of export volume in overall corporate sales as the dependent variable, and this is measure is applied rather than applying sales of foreign affiliates in overall sales. the findings obtained by brainard indicate that multinationals are more interested in entering into foreign production in the form of foreign direct investment than seeking to export to markets in other countries, following an increase in the cost of transporting and with an increase in barriers to invest. it also stimulates investment when conditions are such that foreign plant scale economies are increasing relative to scale economies of the firm. another more recent example of a share measure can be found in a paper by slaughter (2000). slaughter seeks to proxy foreign direct investment by using the share of majority owned affiliates in the total of investment made by multinationals. on one hand slaughter (2000) uses share of skilled labor in overall wage cost as the dependent variable of the equation, and the other hand he uses share of capital stocks an explanatory variable. 3. model and data when choosing variables for the regressions, i use some of the variables dalgaard et al. (2001) for estimating the connection between aid and growth. since some of the sample data turn out to be negative, these are transformed by the inverse hyperbolic sine (ihs) procedure rather than the logarithm function. a simultaneous equation model is applied here, which allows for simultaneous estimation of aid as function of foreign direct investment and investment as function of aid. more specifically, this procedure allows me to avoid the possible simultaneity which might exist among explanatory variables. i base the choice of variables somewhat on a paper by dalgaard et al. (2004). in their paper dalgaard et al. (2004) use gdp, population, fraction of land in tropic, and budget surplus among other variables when estimating the interaction of aid and growth. aid_inflowi,t = α0 + α1fdi_inflowi,t + α2popi,t (1) + α3gdpi,t + ǫ1,i,t fdi_inflowi,t = α4 + α5aid_inflowi,t + α6cropi,t + α7ca_balancei,t + ǫ2,i,t in equation (1) the endogenous variables aid and fdi are functions of each other, as well as being function of other relevant variables for aid and fdi. the recipient country of fdi or aid, is denoted with (i), with the recipient countries being ghana, malawi and mozambique. since i prefer to estimate the equation in a linear format, and change the notation, i now present it in a log-linear format as show in equation (2). the model specification for the three-stage least-squares regression estimation for systems of simultaneous equations, for a linear regression format, can be presented as follows: sinh−1(aid_inflowi,t) = β0 + β1 sinh−1(fdi_inflowi,t) (2) +β2 sinh−1(popi,t) + β3 sinh−1(gdpi,t) + ζ1,i,t sinh−1(fdi_inflowi,t) = β4 + β5 sinh−1(aid_inflowi,t) + β6 sinh−1(cropi,t) +β7 sinh−1(ca_balancei,t) + ζ2,i,t the simultaneous equation system presents aid inflow to the sample countries over time (t) by (aid_inflowi,t) in equation (2a), and fdi inflow over time (t) by (fdi_inflowi,t) in equation (2b). foreign direct investment is obtained from the world bank (2006b), and these are foreign direct investment data net inflows (bop, current us$). during the period estimated, fdi flows, aid flows and the current account occasionally turn negative, within particular years. this can happen if dividend payment from the host country to the source country is higher than the investments made in a particular year. as to deal with these cases of zeros and negatives, the dependent variables of fdi and aid are estimated by using the so-called inverse hyperbolic sine (ihs) procedure, rather than a logarithm transformation1. generally, fdi is believed to give an indication of the long-term incentives of an investor, and can therefore potentially be considered to be a substitute for the international development association (ida) baltic journal of economic studies 258 vol. 5, no. 2, 2019 loans, which are defined as long-term no interest loans provided to the poorest developing countries. ida has the role of supporting anti-poverty programs. the difference between the two functional forms is clearly visible for zeros and negative values. in this paper the aggregate fdi world bank (2006b) data is used together with ida aid flow data from the world bank (2006b). the other variables are defined by the world bank (2006b) as follows: gdp (current us$), population (total), current account balance (bop, current us$), crop production index (1999-2001 = 100). i use data running from 1970 to 2004. i use world bank data for all the variables estimated, all estimates are received using stata 8.0. 4. estimation results the regression results from estimating level data equation (1a) and equation (1b) simultaneously for aid and fdi, are presented in table 3. the results from estimating equation (1a) first present aid inflow(aid_inflowi,t) to the sample countries (malawi, mozambique and ghana) as function of fdi inflow (fdi_inflowi,t), population (popi,t) and gross domestic product, gdp (gdpi,t). then the results from estimating equation (1b) are presented with fdi inflow as function of aid inflow, crop production and the current account balance. the simultaneous equations for ghana are somewhat as could be expected. taken together, in the case of ghana, fdi and aid are not found to complement each other, that is they are found to be substitutes rather than complements. however, when mozambique and malawi are also included in the sample, fdi flows and aid flows are found to complement, rather than substitute, each other. increase in aid inflows is found to significantly positively affect fdi inflow. these results can be found to support the hypothesis implying that when the hipc countries experience a higher income per capita, as is the case for ghana in comparison with malawi and mozambique1, then complementary effects diminish, while supplementary effect increase with fdi inflows increasingly substituting for aid inflows. furthermore, as the estimates reported in table 3 show, aid inflows are estimated to be positively affected by an increase in population and gdp. fdi is estimated to be positively affected by crop production, however negatively affected by the current account balance, these results are as could be expected. let us next look at the regression results obtained from estimating equation (2), when using an inverse hyperbolic sine functional format (sinh−1) for all the variables. these results are presented in table 4. before interpreting the results for table 4, the historical development of the sample countries ghana, malawi and mozambique deserves more attention. ghana is sometimes viewed by international institutions as having a development success story, whereas mozambique had civil war during the period analyzed, and malawi suffered from dictatorship. in table 4, the logarithm equations represent elasticity coefficients, indicating the percentage change in dependent variable following a one percentage increase table 1 variable definition variable fdii,t the foreign direct investment data net inflows (bop, current usd) into host country (i), over time (t). aidi,t international development association (ida) loans, which are defined as long-term no interest loans provided to the poorest developing countries. ida has the role of supporting anti-poverty programs in the host country (i), over time (t). cropi,t crop production index (1999-2001 = 100) in host country (i), over time (t). cai,t current account balance (bop, current usd) for country (i), over time (t). pi,t population, total in the host country (i), over time (t). gdpi,t gross domestic product, current usd in the host country (i), over time (t). the aid, that is ida financial flows into individual countries are defined by the world bank (2006b) as net financial flows, aid (current us$). world bank (2006b) defines net financial flows as the disbursements of loans and credits less repayments of principal. table 2 summary statistics variable units obs mean std. min max fdi inflowi,t current us$ 35 5.79e+07 6.94e+07 -1.83e+07 2.44e+08 aid inflowi,t current us$ 35 1.11e+08 9.35e+07 2200000 2.45e+08 cropi,t prod. index 35 61.69143 26.97556 32.9 121.2 ca_balancei,t current us$ 30 -1.99e+08 2.35e+08 -9.64e+08 2.55e+08 popi,t total 35 1.46e+07 3975582 8982592 2.17e+07 gdpi,t current us$ 35 4.98e+09 1.76e+09 2.13e+09 8.87e+09 1 1990 ghana had gdp 211, malawi 131 and mozambique 163, and in 2000 ghana had gdp 251, malawi 151 and mozambique 211, these are gdps (constant 2000 us$), world bank (2006b). baltic journal of economic studies 259 vol. 5, no. 2, 2019 in one of the explanatory variables. the main conclusion to be drawn from table 4 is that on the margin, aid inflow appears to complement fdi. also, population is found to have more significant positive effects on aid than gdp, and crop less effect. as for the whole sample, variables are found to be less significant than before. 5. summary and conclusions this research has the objective of determining whether aid flows and fdi inflows in some of the hipc countries can be found to be supplements or complements, when analyzed over a period of time. generally, fdi is believed to give an indication of the long-term incentives of an investor, and can therefore be considered to be substitute for international development association (ida) loans, which are defined as long-term no interest loans to the poorest developing countries. an important issue of concern is whether there is a shift from financial aid flows to fdi flows, when the economies move to a higher equilibrium, as reflected in higher income per capita. estimates are obtained for the hipc countries ghana, malawi and mozambique, with ghana having higher gdp than the other two countries. these countries are estimated together in one sample, and ghana is also estimated individually as to provide a comparison to the other two countries. one of the concerns to be considered in this context is that hipc data may be somewhat troublesome. table 3 empirical findings for the basic model specification regressors ghana ghana, moz., malawi equation 1a equation 1a aid_inflowi,t fdi_inflowi,t −.202 (−0.64) .120 (0.91) popi,t 9.954 (1.49) 6.049** (1.96) gdpi,t .034*** (3.07) .010** (2.25) o bs. 30 77 r-sq. 0.7018 0.4897 χ2 72.75 77.98 equation 1b equation 1b fdi_inflowi,t aid_inflowi,t −.176 (−1.08) .393** (2.15) cropi,t 2041060*** (4.95) 1363558*** (3.43) ca_balancei,t −.1088126** (−2.79) −.154*** (−5.30) obs. 30 77 r-sq. 0.6298 0.5968 χ2 57.06 126.48 note: t-statistics are in parentheses below the coefficients. ***, ** and * denote significance levels of 1%, 5% and 10%, respectively. table 4 inverse hyperbolic sine function estimation regressors ghana ghana, moz., malawi equation 2a equation 2a sinh−1(aid_inflowi,t) sinh−1(fdi_inflowi,t) .067 (1.02) .289 (1.07) sinh−1(popi,t) 2.988 (2.47) −1.430 (−0.34) sinh−1(gdpi,t) .565 (0.86) .307 (0.30) o bs. 30 77 r-sq. 0.6598 -0.3232 χ2 67.43 5.96 equation 2b equation 2b sinh−1(fdi_inflowi,t) sinh−1(aid_inflowi,t) 6.663 (2.53) 5.622 (1.43) sinh−1(cropi,t) −7.485 (−1.29) −2.273 (−0.27) sinh−1(ca_balancei,t) −.382 (−0.52) .302 (0.32) obs. 30 77 r-sq. 0.1528 -1.3301 χ2 12.71 5.16 note: t-statistics are in parentheses below the coefficients. ***, ** and * denote significance levels of 1%, 5% and 10%, respectively. baltic journal of economic studies 260 vol. 5, no. 2, 2019 flows may be zero values, or turn negative. there fore i choose to apply an inverse hyperbolic sine function in order as to deal with these countries, since that functional form allows for estimation of negative flows and zeros. in conclusion, in the case of ghana, fdi and aid are found to substitute, rather than complement each other. however, when mozambique and malawi are included in the sample, fdi flows and aid flows are found to complement each other. overall, the results can be found to support the theory that when the hipc countries experience a higher income per capita, as in the case for ghana in comparison with malawi and mozambique, complementary effects diminish at the cost of supplementary effects. with fdi inflows increasingly substituting for aid flows. appendix a i use the definition by world bank (2006a) on the heavily indebted poor countries (hipc) countries. these countries are: benin bolivia burkina faso burundi cameroon central african republic chad comoros congo, dem. rep. congo, rep. côte d’ivoire ethiopia gambia, the ghana guinea guinea-bissau guyana honduras lao pdr liberia madagascar malawi mali mauritania mozambique myanmar nicaragua niger rwanda são tomé and principe senegal sierra leone somalia sudan tanzania togo uganda zambia. 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"development indicators". downloaded from: http://publications.worldbank.org/ subscriptions/wdi/ april 6th baltic journal of economic studies 158 vol. 5, no. 2, 2019 corresponding author: 1 cherkasy state technological university, ukraine. e-mail: l_petkova@ukr.net 2 cherkasy state technological university, ukraine. e-mail: aegladchenko@i.ua 3 cherkasy state technological university, ukraine. e-mail: yurockv@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-158-170 modern systems for assessing the informatization of countries in the context of global sustainable development lesya petkova1, мichael ryabokon2, yuriy vdovychenko3 abstract. information and communication theories became a major driver of the economic development of countries in a global world. information component plays a key role in the building of competitive potential of countries and the development of international relations. at the national level, the development of innovative technologies enables the countries to take higher ranking positions by the level of progress of information and communication technologies. the assessment is carried out using a number of indicators, calculated with the respective index system and applied for analysis of problem areas in politics, as well as for monitoring of progress in the field of innovative technologies introduction. although, this methodology does not take into consideration the indicators over time. therefore, this paper aims to study the dynamics of networked readiness index as a factor of informatization of global economic development. the authors suggested a methodology to determine the level of informatization of global economic development based on cluster analysis of countries according to the indicators, included in nri, which makes it possible to eliminate this defect. methodology. the methodology of the paper is based on statistical data, forming the analytical database of the research findings and being studied using cluster analysis. the paper reviews a new indicator, which enables considering the informatization of global economic development in a comprehensive manner: in dynamics by a group of countries. results. as a result of the author’s study, it has been established that, according to the level of informatization of global economic development, the countries can be divided into three groups: the countries with sustainable level of informatization, the ones with moderate development and the countries, which are the most backward by the level of informatization. moreover, the paper identifies the countries, which had no data for the period under review, or underwent a transition from one informatization level to another one. practical implications. the presented results make it possible to consider informatization of the global economic development in a comprehensive manner: in dynamics by a group of countries. it enables identification of the countries with a sustainable level of informatization of global economic development. value/originality. as a result of the study, it has been proved that it is more expedient to study the countries, which underwent a transition from one level of informatization to another one during the period under review. the prospects of further studies in the above-stated area are in the search for factors to enable the transition of countries to a higher level of informatization of global economic development. key words: networked readiness index, nri, ict, cluster analysis. jel classification: c38, f62, m38, o30, r11 1. introduction in the modern world, information and communication technologies (ict) are increasingly being adopted in diverse spheres of social life, changing these spheres and providing social and human development with new features, senses, and values. information and communication technologies became the major driver of the economic development of any country in the modern global world, and information component plays the key role in the building of competitive potential of countries and development of international relations. science, technology, and innovations (sti) play the predominant role in the implementation of the goals of sustainable development. the european commission baltic journal of economic studies 159 vol. 5, no. 2, 2019 monitors and provides consulting support to the “new agenda 2030” in the implementation of global policy for sustainable development. the paper determines that sti will become the primary tool for the realization of the agenda for global development as far as it is capable of enhancing the efficiency in economic and ecological components of development, and finding new more comfortable conditions to meet human needs, to extend human rights and opportunities for the future. successful use of the innovative scientific and technological potential will require a shift of the focus to the problem of sustainable development and reorientation from customary transfer of technology towards the formation of innovative space; strengthening of partnership between the countries, having a different level of development, with attraction of all interesting parties, including private sector and individual initiatives; introduction of “walk the talk” – the highest level of coherence between the policies of the participants in order to eliminate defects, provide internal integration, and create opportunities to take advantage from innovative and technological breakthrough (european commission, 2015). multiple studies demonstrate that there is a link between the development of ict and economic prosperity. large-scale deployment of high-speed communication and internet technologies is a catalyst for ict development. it produces a multiplier effect on other sectors of the national economy, facilitates the acceleration of technological progress and the growth of gdp. thus, the development of ict is one of the strategical steps towards modernization of the economy. 2. importance of ict in a highly competitive economy, information and communication technologies determine the speed of response to the variable market environment. reengineering in the information sphere facilitates the enhancement of overall economic system performance. information infrastructure of the country has to provide an opportunity for the realization of intellectual potential in the form of innovations. the parameters, characterizing the innovative process, include access to information resources, the formation of information infrastructure, and training of personnel to work in conditions of the global information society. the experience of foreign countries shows that the formation of information infrastructure and access to information resources is one of the key factors that affect the creation and implementation of innovations in the economy. at the national level, the development of innovative technologies enables a country to take higher ranking positions by the level of information and communication technology development. the assessment is carried out using a number of indicators, calculated with the respective index system and applied for analysis of problem areas in politics, as well as for monitoring of progress in the field of innovative technologies introduction. a selection of the calculation methods primarily depends on priorities of statistical analysis. 3. indices of ict assessment diverse indices are used to assess the level of ict, as follows: 1. ict development index (idi), which has been published annually since 2009, is a composite index that combines 11 indicators into one benchmark measure. it is used to monitor and compare developments in information and communication technology (ict) between countries and over time (international telecommunication union, 2017). 2. the web index, which is designed and produced by the world wide web foundation for measurement of the world wide web’s contribution to social, economic, and political progress in countries across the world (world wide web foundation, 2014). 3. networked readiness index (nri) – determines the propensity for countries towards harnessing the power of information and communication technologies (ict). for the time being, nri is defined for 139 countries based on 53 features (world economic forum, 2016). 4. the knowledge economy index (kei) is an aggregate index that represents the overall level of development of a country or region in the knowledge economy (world bank, 2007). 5. e-government development index (egdi) presents the state of e-government development of the united nations member states. the egdi is a composite measure of three important dimensions of e-government, namely: provision of online services, telecommunication connectivity, and human capacity (united nations, 2018). among the above-stated indexes, idi considers just 11 indicators, the web index is limited by the impact of the internet, kei is focused on the knowledge economy, egdi is calculated once per two years. therefore, further study is focused on the networked readiness index. 4. networked readiness index networked readiness index (nri) is a composite indicator, characterizing the level of information and communication technologies progress in countries throughout the world. it has been developed in 2001. it has been issued by the world economic forum and international business school insead since 2002 within the framework of the annual series of reports on the development of information society in countries throughout the world – the global baltic journal of economic studies 160 vol. 5, no. 2, 2019 information technology report. in 2013, samuel curtis johnson graduate school of management joined the project. at present, the research is considered one of the most critical indicators of the country’s potential and development opportunities. it is assumed that the index should be used by countries to analyse the most critical issues in their policy, as well as to monitor their progress in the area of introducing innovative technologies (worldeconomicforum, 2002–2013). for the years of the report publication, a number of countries have been continuously changing (figure 1). the approaches to assessment of nri have been changing as well. nri is a globally accepted measure in determining the influence of ict on an economy as a whole. using a scale from one to seven, nri is a composite indicator, made up of four main categories (subindexes), 10 subcategories (pillars), and 53 individual indicators distributed across the different pillars (table 1). the four subindexes are (1) environment, (2) readiness, (3) usage, and (4) impact. nri is included in the annual global information technology report, being published by insead and the world economic forum (wef) since 2001 (tugas, 2016). nri helped policymakers and relevant stakeholders to track their economies’ strengths and weaknesses, as well as their progress over time. however, the equalweight framework of the nri methodology has been an issue of controversy. as a possible remedy to the issue, milenkivic and al. presented the multilevel i-distance methodology. the i-distance approach can synthesize many indicators into one single numerical value that represents rank. with this approach, the entities can not only be ranked, but the differences between them are better explored (milenkovic, brajovic, milenkovic, vukmirovic, & jeremic, 2016). however, this methodology does not take into account the change of the indicators over time. this paper is aimed to study the dynamics of the networked readiness index as a factor of informatization of the world economic development. the authors suggested a methodology to determine the level of informatization of the global economic development based on cluster analysis of countries according to the indicators, included in nri, which makes it possible to eliminate this defect. 5. cluster analysis of nri factors the paper suggests grouping the countries in clusters by the criterion of similarity of nri factors, as follows: a.01, a.02, b.03, b.04, b.05, c.06, c.07, c.08, d.09, d.10. as far as all indicators are assessed on the scale from one to seven, in order to ensure comparability, the data for each indicator from table 2.10 has been standardized using the following formula (letser, 2018): x x s i − , (1) where xi – the value of the indicator; x – mean value of the indicator; n – the number of indicators; s – standard deviation: s x x n i n i = −( ) − =∑ 1 2 1 . (2) the missing data is defined as zero. thus, the countries, where no data is submitted, are grouped in a separate cluster. the number of clusters was calculated using the method of k-means. calculated results are shown in figure 2. as you can see in figure 2, it is expedient to divide the countries into 4 clusters. table 2 shows the results of cluster analysis across the indicators a.01, a.02, b.03, b.04, b.05, c.06, c.07, c.08, d.09, d.10. 1 figure 1. a number of countries, taken into consideration while calculating the networked readiness index in 2001–2016 source: world economic forum, 2002–2016 baltic journal of economic studies 161 vol. 5, no. 2, 2019 table 1 the indicators, included in the networked readiness index series code series indicators in series a environment subindex a.01 1st pillar: political and regulatory environment effectiveness of law-making bodies, laws relating to icts, judicial independence, efficiency of legal system in settling disputes, efficiency of legal system in challenging regs, intellectual property protection, software piracy rate, no. procedures to enforce a contract, no. days to enforce a contract a.02 2nd pillar: business and innovation environment availability of the latest technologies, venture capital availability, total tax rate, no. days to start a business, no. procedures to start a business, intensity of local competition, tertiary education gross enrolment rate, quality of management schools, government procurement of advanced tech b readiness subindex b.03 3rd pillar: infrastructure electricity production, mobile network coverage, int’l internet bandwidth, secure internet servers b.04 4th pillar: affordability prepaid mobile cellular tariffs, fixed broadband internet tariffs, internet & telephony competition b.05 5th pillar: skills quality of educational system, quality of math & science education, secondary education gross enrolment rate, adult literacy rate c usage subindex c.06 6th pillar: individual usage mobile phone subscriptions, individuals using internet, households with personal computer, households with internet access, fixed broadband internet, mobile broadband, use of virtual social networks c.07 7th pillar: business usage firm-level technology absorption, capacity for innovation, pct patents, ict use for business-to-business transactions, business-to-consumer internet use, extent of staff training c.08 8th pillar: government usage importance of icts to gov’t vision, government online service index, government success in ict promotion d impact subindex d.09 9th pillar: economic impacts impact of icts on business models, ict pct patents, impact of icts on new organizational models, knowledge-intensive jobs d.10 10th pillar: social impacts impact of icts on access to basic services, internet access in schools, ict use & government efficiency, e-participation index source: world economic forum, 2016 1 0 300 600 900 1200 1500 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 t he s um o f t he s qu ar es w ith in t he g ro up s number of clusters optimal number of clusters 2012 2013 2014 2015 2016 figure 2. calculation of the number of clusters for every year source: calculated by the authors according to the data of (world economic forum, 2016) baltic journal of economic studies 162 vol. 5, no. 2, 2019 country 2012 2013 2014 2015 2016 ago 3 4 3 3 4 alb 2 2 2 2 3 are 2 1 1 1 1 arg 2 2 3 3 3 arm 2 2 2 2 2 aus 1 1 1 1 1 aut 1 1 1 1 1 aze 2 2 2 2 2 bdi 3 3 3 3 3 bel 1 1 1 1 1 ben 3 3 3 4 3 bfa 3 3 3 3 4 bgd 3 3 3 3 3 bgr 2 2 2 2 2 bhr 2 2 2 2 2 bih 2 2 2 4 3 blz 3 4 4 4 4 bol 3 3 3 3 3 bra 2 2 2 2 2 brb 2 2 2 2 4 brn 2 3 2 4 4 btn 4 4 2 2 3 bwa 3 3 3 3 3 can 1 1 1 1 1 che 1 1 1 1 1 chl 2 2 2 2 2 chn 2 2 2 2 2 civ 3 3 3 3 3 cmr 3 3 3 3 3 col 2 2 2 2 2 cpv 2 2 2 2 3 cri 2 2 2 2 2 cyp 2 2 2 2 2 cze 2 2 2 2 2 deu 1 1 1 1 1 dnk 1 1 1 1 1 dom 3 3 2 2 3 dza 3 3 3 2 3 ecu 3 2 2 4 3 egy 2 3 2 2 3 esp 2 2 2 2 2 est 2 1 1 1 1 eth 3 3 3 3 3 fin 1 1 1 1 1 fra 1 1 1 1 1 gab 4 3 3 3 3 gbr 1 1 1 1 1 geo 2 2 2 2 2 gha 3 3 2 3 3 gin 4 3 3 3 3 gmb 3 3 3 3 3 grc 2 2 2 2 2 gtm 3 3 3 3 3 guy 2 3 2 2 3 country 2012 2013 2014 2015 2016 hkg 1 1 1 1 1 hnd 3 3 3 2 3 hrv 2 2 2 2 2 hti 3 3 3 3 3 hun 2 2 2 2 2 idn 2 2 2 2 3 ind 2 2 2 2 3 irl 1 1 1 1 1 irn 3 3 3 2 3 isl 1 1 1 1 1 isr 1 1 1 1 1 ita 2 2 2 2 2 jam 2 2 2 2 3 jor 2 2 2 2 2 jpn 1 1 1 1 1 kaz 2 2 2 2 2 ken 3 3 2 2 3 kgz 3 3 3 2 3 khm 3 3 3 3 3 kor 1 1 1 1 1 kwt 2 2 2 2 2 lao 4 4 3 2 3 lbn 2 2 3 2 2 lbr 4 3 3 4 3 lby 4 3 3 2 4 lka 2 2 2 2 2 lso 3 3 3 3 3 ltu 2 2 2 2 2 lux 1 1 1 1 1 lva 2 2 2 2 2 mar 3 3 2 2 3 mda 2 2 2 2 2 mdg 3 3 3 3 3 mex 2 2 2 2 3 mkd 2 2 2 2 2 mli 3 3 3 3 3 mlt 2 1 1 2 2 mmr 4 4 3 3 3 mne 2 2 2 2 2 mng 2 2 2 2 2 moz 3 3 3 3 3 mrt 3 3 3 3 3 mus 2 2 2 2 2 mwi 3 3 3 3 3 mys 2 2 2 2 2 nam 3 3 3 3 3 nga 3 3 3 3 3 nic 3 3 3 3 3 nld 1 1 1 1 1 nor 1 1 1 1 1 npl 3 3 3 3 3 nzl 1 1 1 1 1 omn 2 2 2 2 2 pak 3 3 3 3 3 table 2 results of cluster analysis for 2012–2016 baltic journal of economic studies 163 vol. 5, no. 2, 2019 table 3 distribution of countries by clusters for the period of 2012–2016 year cluster no data 1 2 3 2012 24 65 53 9 2013 28 57 59 7 2014 28 68 52 3 2015 27 76 40 8 2016 27 48 64 12 source: calculated by the authors according to the data of (world economic forum, 2016) accordingly, figure 3 shows the structure of informatization of the world economic development for the period of 2012–2016. the analysis of countries’ distribution by clusters for the period from 2012 to 2016 makes it possible to identify the following trends. the first cluster includes the countries with sustainable development (24 countries): australia, austria, belgium, canada, switzerland, germany, denmark, finland, france, the united kingdom, hong kong sar , ireland, iceland, israel, japan, rep. korea, luxembourg, netherlands, norway, new zealand, singapore, sweden, taiwan (china), and the united states. the second cluster – the countries with moderate development of informatization (45 countries): armenia, azerbaijan, bulgaria, bahrain, brazil, barbados, chile, china, colombia, costa rica, cyprus, czech republic, georgia, greece, croatia, hungary, italy, jordan, kazakhstan, kuwait, spain, sri lanka, lithuania, latvia, moldova, macedonia fyr , montenegro, mongolia, mauritius, malaysia, oman, panama, poland, portugal, romania, russian federation, saudi arabia, serbia, slovak republic, slovenia, thailand, trinidad and tobago, turkey, ukraine, and uruguay. the third cluster is represented by the countries, which are the most backward by the level of informatization (43 countries): angola, burundi, benin, burkina faso, bangladesh, belize, bolivia, botswana, côte d'ivoire, cameroon, chad, ethiopia, gabon, guinea, the gambia, guatemala, haiti, cambodia, liberia, lesotho, madagascar, mali, myanmar, mozambique, mauritania, malawi, namibia, nigeria, nicaragua, nepal, pakistan, rwanda, senegal, sierra leone, swaziland, syria, tajikistan, timor-leste, tanzania, uganda, yemen, zambia, and zimbabwe. besides the countries, which have been steadily related to a certain cluster for the period of 2012–2016, there are 39 countries, which had no data for the period under review, or underwent transition from one level of informatization to another one, i.e., moved from one cluster to another one (table 4). as you can see in table 4, after 2012 the united arab emirates, estonia, and qatar moved to the first country 2012 2013 2014 2015 2016 pan 2 2 2 2 2 per 3 3 2 2 3 phl 2 2 2 2 3 pol 2 2 2 2 2 pri 2 3 2 2 4 prt 2 2 2 2 2 pry 3 3 3 2 3 qat 2 1 1 1 1 rou 2 2 2 2 2 rus 2 2 2 2 2 rwa 3 3 3 3 3 sau 2 2 2 2 2 sen 3 3 3 3 3 sgp 1 1 1 1 1 sle 4 3 3 4 4 slv 3 3 2 2 3 srb 2 2 2 2 2 sur 3 3 3 2 4 svk 2 2 2 2 2 svn 2 2 2 2 2 swe 1 1 1 1 1 swz 3 3 3 3 3 syc 4 3 2 2 2 syr 3 4 4 4 4 tcd 3 3 3 3 3 tha 2 2 2 2 2 tjk 3 3 4 3 3 tls 3 3 3 3 4 tto 2 2 2 2 2 tun 2 4 2 2 3 tur 2 2 2 2 2 twn 1 1 1 1 1 tza 3 3 3 3 3 uga 3 3 3 3 3 ukr 2 2 2 2 2 ury 2 2 2 2 2 usa 1 1 1 1 1 ven 3 3 3 2 3 vnm 2 2 2 2 3 yem 3 3 3 3 4 zaf 3 3 3 2 2 zmb 3 3 3 3 3 zwe 3 3 3 3 3 source: calculated by the authors according to the data of (world economic forum, 2016) (end of table 2) thus, according to the results of cluster analysis, for the period of 2012–2016 we can single out 4 clusters among 151 countries on the nri factors: 1) countries with sustainable development; 2) countries with moderate development of informatization; 3) countries, which are the most backward by the level of informatization; 4) countries with no data for the period under review. table 3 shows the distribution of countries by clusters. baltic journal of economic studies 164 vol. 5, no. 2, 20191 figure 3. structure of informatization of the world economic development for the period of 2012–2016 source: calculated by the authors according to the data of (world economic forum, 2016) table 4 clustering of the countries, which have an unstable level of informatization country year average 2012 2013 2014 2015 2016 albania 2 2 2 2 3 2.2 algeria 3 3 3 2 3 2.8 argentina 2 2 3 3 3 2.6 bhutan – – 2 2 3 2.3 bosnia and herzegovina 2 2 2 – 3 2.3 brunei darussalam 2 3 2 – – 2.3 cape verde 2 2 2 2 3 2.2 dominican republic 3 3 2 2 3 2.6 ecuador 3 2 2 – 3 2.5 egypt 2 3 2 2 3 2.4 el salvador 3 3 2 2 3 2.6 estonia 2 1 1 1 1 1.2 ghana 3 3 2 3 3 2.8 guyana 2 3 2 2 3 2.4 honduras 3 3 3 2 3 2.8 india 2 2 2 2 3 2.2 indonesia 2 2 2 2 3 2.2 islamic rep. iran 3 3 3 2 3 2.8 jamaica 2 2 2 2 3 2,2 kenya 3 3 2 2 3 2.6 kyrgyz republic 3 3 3 2 3 2.8 lao pdr – – 3 2 3 2.7 lebanon 2 2 3 2 2 2.2 libya – 3 3 2 – 2.7 malta 2 1 1 2 2 1.6 mexico 2 2 2 2 3 2.2 morocco 3 3 2 2 3 2.6 paraguay 3 3 3 2 3 2.8 peru 3 3 2 2 3 2.6 philippines 2 2 2 2 3 2.2 puerto rico 2 3 2 2 – 2.3 qatar 2 1 1 1 1 1.2 seychelles – 3 2 2 2 2.3 baltic journal of economic studies 165 vol. 5, no. 2, 2019 country year average 2012 2013 2014 2015 2016 south africa 3 3 3 2 2 2.6 suriname 3 3 3 2 – 2.8 tunisia 2 – 2 2 3 2.3 united arab emirates 2 1 1 1 1 1.2 venezuela 3 3 3 2 3 2.8 vietnam 2 2 2 2 3 2.2 source: calculated by the authors according to the data of (world economic forum, 2016) (end of table 4) cluster. malta also underwent such transition, but in 2015 this country returned to the second cluster. in 2014, lebanon moved to the third cluster, but the next year this country returned to the second cluster. ghana, on the contrary, in 2014 moved to the second cluster, but the next year this country returned to the third cluster. four countries, namely, dominican republic, kenya, morocco, peru and el salvador, moved to the second cluster in 2014, where in 2015 six more countries joined them, as follows: algeria, honduras, islamic rep. iran, kyrgyz republic, paraguay, and venezuela. however, in 2016, all ten countries returned to the third cluster. in 2016 eight countries moved to the third cluster, as follows: albania, cape verde, indonesia, india, jamaica, mexico, philippines, and vietnam, which were in the second cluster for the period of 2012–2015. three countries, which in 2012 started from the second cluster, stayed in the third cluster at the end of the period under review: argentina, egypt, and guyana. only south africa managed to move from the third cluster to the second one (in 2015) and not to return back. the following countries moved from one cluster to another one but, according to the latest available data, these countries are related to the third cluster: bosnia and herzegovina, bhutan, ecuador, lao pdr , and tunisia. a calculation of the mean value by clusters for every country (table 4) makes it possible to determine the average level of the country’s informatization for the given period, as well as to provide visual results (figure 4). as you can see in figure 4, the countries’ distribution by the level of informatization makes it possible visually to assess the world economic development. table 5 shows a change in the countries’ rating for the whole period of nri calculation. 1 figure 4. clustering of the countries by the level of informatization of the world economic development in 2012–2016 source: calculated by the authors according to the data of (world economic forum, 2016) baltic journal of economic studies 166 vol. 5, no. 2, 2019 table 5 change of the countries’ rating according to nri for the period of 2001–2016 country 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 c lu st er singapore 8 8 3 2 1 2 3 5 4 2 2 2 2 2 1 1 1 finland 3 3 1 3 3 5 4 6 6 6 3 3 1 1 2 2 1 sweden 4 4 4 4 6 8 2 2 2 1 1 1 3 3 3 3 1 norway 5 5 17 8 13 13 10 10 8 10 9 7 5 5 5 4 1 united states 1 1 2 1 5 1 7 4 3 5 5 8 9 7 7 5 1 netherlands 6 6 11 13 16 12 6 7 9 9 11 6 4 4 4 6 1 switzerland 16 16 13 7 9 9 5 3 5 4 4 5 6 6 6 7 1 united kingdom 10 10 7 15 12 10 9 12 15 13 15 10 7 9 8 8 1 luxembourg 27 14 17 26 25 24 21 17 14 21 16 11 9 9 1 japan 21 21 20 12 8 16 14 19 17 21 19 18 21 16 10 10 1 denmark 7 7 8 5 4 3 1 1 1 3 7 4 8 13 15 11 1 hong kong sar 13 13 18 18 7 11 12 11 12 8 12 13 14 8 14 12 1 rep. korea 20 20 14 20 24 14 19 9 11 15 10 12 11 10 12 13 1 canada 12 12 6 6 10 6 11 13 10 7 8 9 12 17 11 14 1 germany 17 17 10 11 14 17 16 16 20 14 13 16 13 12 13 15 1 iceland 2 2 5 10 2 4 8 8 7 12 16 15 17 19 19 16 1 new zealand 11 11 23 23 21 21 22 22 22 19 18 14 20 20 17 17 1 australia 14 14 15 9 11 15 15 14 14 16 17 17 18 18 16 18 1 taiwan, china 15 15 9 17 15 7 13 17 13 11 6 11 10 14 18 19 1 austria 9 9 16 21 19 18 17 15 16 20 21 19 19 22 20 20 1 israel 22 22 12 16 18 19 18 18 25 28 22 20 15 15 21 21 1 belgium 18 18 22 24 26 25 24 25 24 22 23 22 24 27 24 23 1 france 24 24 19 19 20 22 23 21 19 18 20 23 26 25 26 24 1 ireland 19 19 21 22 22 20 21 23 23 24 29 25 27 26 25 25 1 estonia 23 23 24 25 25 23 20 20 18 25 26 24 22 21 22 22 1,2 united arab emirates 23 28 29 29 27 23 24 30 25 24 23 26 1,2 qatar 39 36 32 29 30 25 28 23 23 27 27 1,2 malta 27 28 30 27 27 26 26 27 26 28 28 29 34 1,6 bahrain 33 49 50 45 37 29 30 27 29 29 30 28 2 lithuania 42 42 46 42 43 44 39 33 35 41 42 31 32 31 31 29 2 portugal 27 27 31 31 30 27 28 28 30 33 32 33 33 33 28 30 2 malaysia 36 36 32 26 27 24 26 26 28 27 28 29 30 30 32 31 2 latvia 39 39 38 35 56 51 42 44 48 52 52 41 41 39 33 32 2 saudi arabia 48 40 38 33 34 31 32 35 33 2 spain 26 26 25 29 29 31 32 31 34 34 37 38 38 34 34 35 2 czech republic 28 28 28 33 40 32 34 36 32 36 40 42 42 42 43 36 2 slovenia 29 29 33 30 32 35 30 30 31 31 34 37 37 36 37 37 2 chile 34 34 35 32 35 29 31 34 39 40 39 39 34 35 38 38 2 kazakhstan 60 73 71 73 68 67 55 43 38 40 39 2 cyprus 37 33 43 41 33 32 31 32 35 37 36 40 2 russian federation 61 61 69 63 62 72 70 72 74 80 77 56 54 50 41 41 2 poland 35 35 39 47 72 53 58 62 69 65 62 49 49 54 50 42 2 uruguay 37 37 55 54 64 65 60 65 65 57 45 44 52 56 46 43 2 costa rica 45 45 49 49 61 69 56 60 56 49 46 58 53 53 49 44 2 italy 25 25 26 28 45 42 38 42 45 48 51 48 50 58 55 45 2 macedonia, fyr 75 85 82 81 83 79 73 72 66 67 57 47 46 2 slovak republic 33 33 40 41 48 41 41 43 43 55 69 64 61 59 59 47 2 turkey 41 41 50 56 52 48 52 55 61 69 71 52 45 51 48 48 2 mauritius 51 51 56 43 47 45 51 54 51 53 47 53 55 48 45 49 2 hungary 30 30 30 36 38 38 33 37 41 46 49 43 44 47 53 50 2 montenegro 79 80 74 71 42 44 46 48 52 56 51 2 oman 53 50 50 41 40 40 40 42 52 2 azerbaijan 73 71 67 60 64 70 61 56 49 57 53 2 baltic journal of economic studies 167 vol. 5, no. 2, 2019 country 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 c lu st er croatia 48 48 58 57 46 49 49 51 54 45 51 46 54 54 2 panama 48 48 61 58 69 66 65 64 66 58 60 57 46 43 51 55 2 armenia 86 96 106 114 101 109 94 82 65 58 56 2 mongolia 92 90 87 93 94 85 63 59 61 61 57 2 georgia 91 96 93 91 88 93 98 88 65 60 60 58 2 china 64 64 43 51 41 50 59 57 46 37 36 51 58 62 62 59 2 jordan 49 49 51 46 44 47 57 47 44 44 50 47 47 44 52 60 2 kuwait 46 54 52 57 76 75 62 62 72 72 61 2 thailand 43 43 41 38 36 34 37 40 47 47 59 77 74 67 67 62 2 sri lanka 62 62 54 66 71 83 86 79 72 72 66 71 69 76 65 63 2 ukraine 66 66 70 78 82 76 75 70 62 82 90 75 73 81 71 64 2 romania 65 65 72 61 53 58 55 61 58 59 65 67 75 75 63 66 2 trinidad and tobago 46 46 58 52 59 74 68 82 81 79 63 60 72 71 70 67 2 colombia 57 57 59 60 66 62 64 69 64 60 58 73 66 63 64 68 2 bulgaria 53 53 68 67 73 64 72 68 68 71 68 70 71 73 73 69 2 greece 31 31 42 34 42 43 48 56 55 56 64 59 64 74 66 70 2 moldova 94 92 96 99 97 78 77 77 68 71 2 brazil 38 38 29 39 46 52 53 59 59 61 56 65 60 69 84 72 2 serbia 77 79 80 74 84 84 93 85 87 80 77 75 2 barbados 40 38 36 35 38 35 39 55 39 2 indonesia 59 59 64 73 51 68 62 76 83 67 53 80 76 64 79 73 2,2 mexico 44 44 47 44 60 55 49 58 67 78 78 76 63 79 69 76 2,2 philippines 58 58 62 69 67 70 69 81 85 85 86 86 86 78 76 77 2,2 vietnam 74 74 71 68 68 75 82 73 70 54 55 83 84 84 85 79 2,2 jamaica 56 56 60 53 49 54 45 46 53 66 73 74 85 86 82 83 2,2 albania 106 107 108 105 95 87 68 83 95 92 84 2,2 cape verde 84 81 81 89 87 85 2,2 lebanon 95 95 94 97 99 88 2,2 india 54 54 37 45 39 40 44 50 54 43 48 69 68 83 89 91 2,2 seychelles 79 66 74 74 2,3 tunisia 34 40 31 36 35 35 38 39 35 50 87 81 81 2,3 bhutan 94 88 87 2,3 bosnia and herzegovina 89 97 89 95 106 110 110 84 78 68 97 2,3 puerto rico 39 42 45 43 36 36 41 44 2,3 brunei darussalam 63 63 57 54 57 45 2,3 egypt 60 60 65 65 57 63 77 63 76 70 74 79 80 91 94 96 2,4 guyana 111 98 102 100 100 100 90 100 88 93 100 2,4 ecuador 71 71 75 89 95 107 97 107 116 114 108 96 91 82 82 2,5 south africa 40 40 36 37 34 37 47 51 52 62 61 72 70 70 75 65 2,6 morocco 52 64 54 77 76 74 86 88 83 91 89 99 78 78 2,6 kenya 84 75 91 95 92 97 90 81 93 92 92 86 86 2,6 argentina 32 32 45 50 76 71 63 77 87 91 96 92 99 100 91 89 2,6 peru 52 52 67 70 90 85 78 84 89 92 89 106 103 90 90 90 2,6 el salvador 55 55 63 62 70 59 61 66 78 81 92 103 93 98 80 93 2,6 dominican republic 47 47 57 57 78 89 66 75 75 74 79 87 90 93 95 98 2,6 lao pdr 109 97 104 2,7 libya 105 101 103 126 132 138 131 2,7 islamic rep. iran 101 104 101 104 96 92 2,8 honduras 72 72 81 98 97 100 94 90 95 106 103 99 109 116 100 94 2,8 kyrgyz republic 103 105 114 115 123 116 115 118 118 98 95 2,8 ghana 74 65 61 103 98 99 97 95 96 101 102 2,8 paraguay 63 63 76 91 98 113 114 120 122 127 127 111 104 102 105 105 2,8 venezuela 50 50 66 72 84 81 83 86 96 112 119 107 108 106 103 108 2,8 (continuation of table 5) baltic journal of economic studies 168 vol. 5, no. 2, 2019 country 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 c lu st er algeria 87 80 87 80 88 108 113 117 118 131 129 120 117 2,8 suriname 110 117 117 126 121 117 113 113 2,8 rwanda 82 88 85 83 80 3 namibia 53 59 55 78 85 93 92 89 82 105 111 105 102 99 3 botswana 44 55 50 56 67 78 77 86 91 89 96 103 104 101 3 guatemala 68 68 73 86 88 98 79 80 82 83 94 98 102 101 107 103 3 côte d'ivoire 111 104 113 122 120 122 115 106 3 senegal 81 85 80 75 80 100 107 114 106 107 3 cambodia 104 106 115 126 117 111 108 106 108 110 109 3 pakistan 76 63 67 84 89 98 87 88 102 105 111 112 110 3 bolivia 67 67 78 90 99 109 104 111 128 131 135 127 119 120 111 111 3 bangladesh 73 73 77 93 100 110 118 124 130 118 115 113 114 119 109 112 3 the gambia 82 74 88 101 91 77 76 101 98 107 108 113 3 tajikistan 93 98 104 109 112 114 112 117 114 3 lesotho 116 122 118 107 121 133 138 133 124 115 3 zambia 85 81 112 112 102 97 102 109 115 110 114 116 3 nepal 108 119 127 124 131 128 126 123 118 118 3 nigeria 75 75 74 79 86 90 88 94 90 99 104 112 113 112 119 119 3 ethiopia 101 102 115 119 123 129 122 123 130 128 130 130 120 3 uganda 80 77 79 100 109 120 115 107 110 110 115 116 121 3 zimbabwe 70 70 80 95 94 105 117 125 132 132 132 124 116 117 121 122 3 mozambique 97 96 101 115 121 124 116 106 120 133 137 129 123 3 cameroon 83 99 113 118 123 128 125 125 124 131 126 124 3 gabon 121 128 122 125 3 tanzania 71 83 84 91 100 119 120 118 123 127 125 123 126 3 mali 96 92 95 101 99 107 96 120 126 122 127 127 127 3 benin 108 109 113 121 111 114 117 123 135 128 3 swaziland 134 136 136 126 125 129 3 liberia 97 121 130 3 nicaragua 69 69 79 94 103 112 103 116 125 125 128 131 125 124 128 131 3 malawi 88 93 111 110 119 105 116 129 132 133 132 3 myanmar 146 139 133 3 guinea 140 145 142 134 3 madagascar 92 87 102 102 104 112 121 129 134 137 139 135 135 3 mauritania 87 97 109 102 130 139 135 142 138 136 3 haiti 82 100 142 141 143 137 137 3 burundi 121 126 131 129 137 137 144 147 141 138 3 chad 102 104 114 122 127 134 133 138 138 142 148 143 139 3 burkina faso 99 103 113 108 122 135 130 136 132 3 timor-leste 133 130 136 132 134 141 134 3 yemen 141 139 140 136 3 angola 99 101 120 133 140 144 140 3 sierra leone 143 134 3 belize 119 3 syria 110 94 105 124 129 3 source: calculated by the authors according to the data of (world economic forum, 2002-2016) (world economic forum, 2002) (world economic forum, 2003) (world economic forum, 2004) (world economic forum, 2005) (world economic forum, 2006) (world economic forum, 2007) (world economic forum, 2008) (world economic forum, 2009) (world economic forum, 2010) (world economic forum, 2011) (world economic forum, 2012) (world economic forum, 2013) (world economic forum, 2014) (world economic forum, 2015) (world economic forum, 2016) (end of table 5) as you can see in table 5, the average level of the country’s informatization to a certain extent corresponds to the dynamics of rating according to nri. thus, clustering of countries according to the indicators, being the basis of nri, enables us to take dynamics into consideration and single out similar groups of countries. baltic journal of economic studies 169 vol. 5, no. 2, 2019 6. conclusions therefore, based on the analysis of publicly available data, it has been established that the countries can be divided into three groups by the level of informatization of the world economic development. the first level – the countries with sustainable development. for the period of 2012–2016, 24 countries were steadily related to this cluster, plus the united arab emirates, estonia, and qatar, which joined them in 2013. these are the first 27 countries of nri rating. the second level – the countries with moderate informatization development. for the period of 2012–2016, it steadily included 45 countries. besides, still in 2014 malta moved to the first level but it’s already in 2015 that this country returned to the second level. there also were 17 countries, which left the group during the period of 2012–2016 and thereafter returned to it or moved to the third level. now 63 countries are related to the second level of informatization. the third level – the countries, which are the most backward by the level of informatization. it is 43 countries, which are steadily related to the third level, and 18 countries, which were related to the second level in the period of 2012–2016. totally we have reviewed 151 countries. before 2012, the countries’ rating by nri covers the period from 2001 to 2011. however, due to the advancement of the methodology for calculation of the networked readiness index over the above-stated period and larger dispersion of countries’ coverage than for the last years, it is not expedient to determine the level of informatization of the world economic development in such a way. the results presented enable us to approach informatization of the world economic development comprehensively: in dynamics by groups of countries. it allows singling out the countries with the sustainable level of informatization of the world economic development. although, it is more expedient to study the countries, which moved from one level to another one during the period under review. perspectives of further studies in the above-stated direction consist in search of the factors, which enable the countries’ transition to the higher level of informatization of the world economic development. references: european commission (2015). the role of science, technology and innovation policies to foster the implementation of the sustainable development goals (sdgs). 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(2014). about the web index. retrieved october 30, 2018, from the web index: http://thewebindex.org/about/#about_the_web_index baltic journal of economic studies 15 vol. 6, no. 5, 2020 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: pawel.dziekanski@ujk.edu.pl orcid: https://orcid.org/0000-0003-4065-0043 researcherid: h-4658-2016 2 main specialist in acquiring european funds gorzyce commune office, poland. e-mail: magwronska@o2.pl orcid: https://orcid.org/0000-0001-8368-154x doi: https://doi.org/10.30525/2256-0742/2020-6-5-15-22 diversity of economic safety of rural communes of eastern poland in 2009-2018 paweł dziekański1, magdalena wrońska2 abstract. economic security is of interest to both economics and other social sciences. this is due to the interdisciplinary nature of economic security, but also different research perspectives. economic security is expressed primarily in the economy's ability to survive and develop. the greater the economic potential of the economy, the more secure and stable its economy is. financial resources are the basis for the operation and implementation of current and development tasks. the aim of the article is to assess the diversity of economic security of rural communes using a synthetic measure. empirical data were collected in spatial terms of 484 rural communes of the eastern poland region for 2009-2018. the analysis showed that rural communes of eastern poland are characterized by significant disparities in the field of economic security. it seems that the main reason for the relatively small impact of financial conditions on economic security is their strong dependence on transfer revenues transferred from the state budget and the amount of current expenditure. the above circumstances stiffen and stabilize the financial economy, making it relatively less susceptible to the influence of other factors. the obtained results may constitute an important source of information for local government authorities on the disproportions existing between units, for determining potential directions of optimization of the local finance structure. key words: security, economic security, financial security, commune, synthetic measure. jel classification: d74, d81, f52, f62, h12 1. introduction economic security and development are two basic dimensions of the existence of individuals and entire communities. these two dimensions are mutually conditioning. j. sperling and e. kircher believe that economic security means the ability of the state (region) to defend the social and economic structure of society. it represents the ability of states to regulate the market effectively and maintain the integrity of society, or to cooperate with others to establish an international economic environment (sperling, kircher, 1998). they can be understood as the sum of conditions ensuring stability and prosperity of management processes, both on a microeconomic and macroeconomic scale (pięta, 2009). in studies in the field of social sciences we can find the concept of security as the ability to survive, independence, identity and development. the local dimension of security includes systemic security, social order, personal security, public security, public order, financial security. they include specific to the local community: needs, problems, possibilities and forms of activity. it can be concluded that the standard of meeting the needs of residents on a local scale that forms the basis of their safety (e.g. ensuring public order, access to educational and educational institutions, care for the local labor market, access to social assistance services in crisis situations, ensuring access to services medical (fehler, 2009). in local terms, security concerns people, groups of people, various organizations, and formalized and territorially recognizable administrative and state structures such as commune, powiat, and voivodeship (kitler, 2010; stańczyk, 1996). one of the factors affecting economic security is the state of finances of local government units. communes, powiats and voivodeships perform public tasks on their own behalf and at their own responsibility. this requires local government units to have the necessary funds to carry out the tasks. the aim of the article is to assess the diversity of economic security of rural communes using a synthetic baltic journal of economic studies 16 vol. 6, no. 5, 2020 measure and taking into account financial, economic and social variables. the standard method was used to build synthetic measures. the aggregated value of the synthetic variable facilitates the comparison of objects in multidimensional spaces, but also allows their arrangement due to the studied phenomenon. empirical data were collected in spatial terms of 484 rural communes in the eastern poland region (lubelskie, podlaskie, podkarpackie, świętokrzyskie and warmianmasurian voivodeships). in the case of municipalities, the choice of variables was largely determined by the availability of secondary data collected in a municipal system at the local data bank of the central statistical office (bdl gus) for 2009-2018. 2. methods of research determinants of the economic development of communes are interactive. they are a set of interrelated factors that create a multidimensional space. they should be seen as a set of interdependent variables that occur in the same time and space horizon. the study distinguished the following categories characterizing the economic security of municipalities: entrepreneurship, infrastructural demographic and labor market and the environment. in the process of building a synthetic measure, the following stages can be distinguished: i. selection of variables describing the examined objects and determining the direction of preference for simple variables in relation to the general criterion under consideration, dividing them into stimulants, destimulants. having information about objects at your disposal, you can create a data matrix. it was presented in the form of an observation matrix: x x x x x x x x x xij m m n n nm= … … ………… …[ ]� � � � � � � � � � � � � � � � �11 12 1 21 22 2 1 2 (1) where: xij means the values of j-th variables for the i-th object, i is the object number (i = 1, 2, ..., n), j is the variable number (j = 1, 2, ..., m). the process of verification of variables is aimed at extracting from the extracted variables such that, from the point of view of the analyzed complex phenomenon, bring the largest information and differentiating values in relation to the considered objects. from the set of variables, those characterized by low variability (according to the coefficient of variation, the limit value was adopted at the level of 0.10) (młodak, 2006) and high correlation of variables (according to the inverse correlation matrix method) (malina, 2004) were removed. diagnostic features (measurable, complete and available) are considered to be those, which, in the light of substantive knowledge about the studied phenomenon, are the most important for comparative analysis of objects (panek, 2009). ii. replacement of destimulants with stimulants and standardization of variables (łuczak, wysocki, 2005). variable destimulants were replaced with a stimulant, counting its inverse by formula; x x ij ij ' = � 1 (2). where: xij is the original value of the destimulant, x'ij is the value of the destimulant transformed into a stimulant. diagnostic variables usually have different titers and different ranges of variation, which prevents them from being directly compared and even less added (walesiak, 2005). stimulants were subjected to the unitarisation procedure zeroed according to the formula: for stimulants when z x min x max x min x ij ij i ij i ij i ij = − − � when x si ∈ (3) where: s is stimulant, i = 1, 2 ... n; j = 1, 2 ... m, max xij is the maximum value of j-variable, min xij is the minimum value of j-variable, xij means value of j-trait for the tested unit (kukuła, 2000). the tests were carried out in a dynamic way, determining the min {xij} and max {xij} values for the entire period, i.e. 2009-2018. after the transformation, diagnostic variables are standardized in the range [0; 1], which allows them to be compared (grabiński, wydymus, zeliaś, 1989). as a result of the unitarisation process, the matrix of property values was obtained: z z z z z z z z z zij m m n n nm= … … ………… …[ ]� � � � � � � � � � � � � � � � �11 12 1 21 22 2 1 2 (4) where zij is the unified value of the j-th variable for the i-th object iii. calculation of the synthetic measure using the reference-free method. the value of the synthetic measure is estimated using aggregate functions, whose analytical form can be different. the synthetic measure determined using the standard method is to average the normalized values of simple features, according to the formula: s p z i pi j p ij= = … = ∑ 1 1 2 1 ; , , , ,� � � � where: si is the synthetic measure in the examined period, zij means features of the structure of the synthetic indicator, p is the number of features. the indicator takes the value from the range [0,1]. a value closer to unity means that the object is characterized by a high level of the analyzed phenomenon (dziekański, 2016), whereas when the values are closer to 0 – the object is less developed in the examined respect (trojak, tokarski, 2013). iv. in the last stage, the studied area was divided into typological groups. the first, second and third quartiles were used as threshold values. the size of the synthetic measure in the first group means a better unit, in the last one the weakest. correlation coefficient (pearson) was assessed. a scatter plot with a fit line for synthetic measures was also presented, and a linear regression analysis was performed (trojak, tokarski, 2013). baltic journal of economic studies 17 vol. 6, no. 5, 2020 3. economic safety as a dimension of operation of communes economic security (with its financial, raw material and energy, food) is a very broad concept. it is such a state of reality in which harmonious development of the economy and ensuring an adequate standard of living for citizens through uninterrupted access to raw materials, markets, capital, modern technologies and information are possible (księżopolski, 2011). economic security is an endogenously and exogenously balanced state of the economy 's functioning, in which the occurring risk of imbalance is maintained in designated and acceptable organizational and legal norms as well as principles of social coexistence (raczkowski, 2012). economic security is the ability of the state's economic system to make use of internal development factors and international economic interdependence that will guarantee its undisturbed development (frejtagmika, kołodziejak, putkiewicz, 1996). the notion of economic security reflects not only the compatibility of certain economic figures, but also numerous challenges and threats that must be overcome by the efforts of society as a whole. challenges and threats have their source both in the internal system of a given country and more and more often result from the development and functioning of the global economy. economic security is the result of economic development factors and barriers limiting it, the state of the economy and its structure as well as economic relations enabling effective opposition to negative external actions. therefore, this is the general state of economic dependence determining the degree of external economic interference in internal economic development (stachowiak, 2012). financial security is a state of (non-risk) that gives a sense of certainty in the functioning of the entity and a chance for its development, or an intermediate state in building financial independence. it means no threats in the sphere of public finances, corporate finances, insurance, banking or personal finances of households (bartkowiak, ostaszewski, 2004). the financial security of an entity is determined by its behavior and its financial position. r.i. berne and r. schramm include the main conditions of the financial situation among others local community needs, supply sizes and distribution directions for local public goods and services, wealth of the society, way of conducting financial policy (berne, schramm, 1986). x. wang, l. dennis and y. sen believe that the socioeconomic environment is only one factor that should be taken into account when analyzing the financial situation (wang, dennis, sen, 2007). the financial situation is a relative assessment of the commune's finances, i.e. the possibilities to ensure financial security. this security includes the ability to perform tasks and credibility regarding the ability to pay both current and future obligations (stanny, strzelczyk, 2018). the financial situation cannot be described with one indicator based, for example, on the financial statements or the budget. knowledge of the current state of finances allows local authorities to make comparisons with other entities and is helpful in making financial decisions. the role of communes in the responsibility for building and maintaining the economic security of each society boils down to conducting appropriate socioeconomic policy and making efforts to ensure access to goods and services of the basic consumer basket at a basic level (duczkowska-piasecka, 2017). a commune is a basic territorial unit whose purpose is to meet the basic needs of local communities and to provide appropriate conditions for the activity and development of economic entities operating on its territory or socio-economic development (springer, walkowiak, bernaciak, 2020). adequate financial resources at the disposal of the commune are necessary to implement the development and needs of local communities (prus, dziekanski, 2019). it is pointed out that this development should be based on local resources, including local development factors (korenik, 2003). the commune is forced to constantly adapt to changing environmental conditions, seek competitive advantage in the development process in all aspects of its activity (ryńca, 2009). financial resources are the basis for the operation of local government units, conditioning the implementation of their current and development tasks. their analysis allows not only to assess the structure of the budget itself, but also indirectly provides information on the state of the local economy. finances allow a comprehensive assessment of the operation of municipalities and its development opportunities. 4. results economic security is directly connected with the issue of socio-economic development of the state. economic security is constantly changing, which results from the specifics of the market economy, for which, among others, cyclical fluctuations. the value of myths of synthetic economic security of rural communes in eastern poland in 2018 was from 0.13 (miączyn, the weakest unit) to 0.46 (stawiguda, the best unit), and in 2009 from 0.11 (miączyn) to 0.40 (stawiguda). the range of distribution was in 2018 (range 0.33) higher than in 2007 (range 0.29), which may indicate an increase in the diversity of rural communes in the studied area. the histogram (figure 1) indicates a distribution model for the synthetic measure of development, leftskewed in 2009 and 2018 (average> median; 0.19> 0.18; 0.23> 0.22, table 1). the municipalities have a safety measure below the average value. the most numerous range in 2009 was 0.15-0.20 (232; 48%), while in 2018 0.15-0.20 (177; 37%) and 0.20-0.25 (175; 36%), which means that there is a dominant in this range. baltic journal of economic studies 18 vol. 6, no. 5, 2020 the dispersion analysis (figure 1) of the measure of economic security of rural communes in eastern poland in 2009 and 2018 indicates a slight increase in diversity. this is indicated by the range (0.29-0.33), quartile range (0.05-0.06), standard deviation (0.04-0.05). the phenomenon stability is indicated by a coefficient of variation (0.22-0.22), a quarter deviation (0.03-0.03). the pearson correlation coefficient in 2018 in relation to 2009 between the value of the measure of economic security and the financial situation was 0.473 and 0.584 (figure 2). the ability to generate income from own sources affects sustainable development and allows for more flexible spending on investment purposes. therefore, the good financial condition of municipalities ensures economic security and freedom of action. the synthetic measure of the economic security of rural communes in eastern poland was correlated with own revenues and transfers from the state budget (revenues from subsidies and subsidies). the financial situation relates to the general economic development and the ability of the individual, including to accumulate sufficient financial resources, to provide public services and to manage debt. it indicates the ability to meet your own administrative and investment needs, which means maintaining and developing your own assets in line with current and future public service demand. it 2009 115 24% 232 48% 105 22% 25 5% 6 1% 1 0% 0,05 0,10 0,15 0,20 0,25 0,30 0,35 0,40 0,45 2009 0 20 40 60 80 100 120 140 160 180 200 220 240 260 li cz ba o bs . 2018 11 2% 177 37% 175 36% 86 18% 27 6% 7 1% 1 0% 0,05 0,10 0,15 0,20 0,25 0,30 0,35 0,40 0,45 0,50 2018 0 20 40 60 80 100 120 140 160 180 200 li cz ba o bs . figure 1. synthetic measure of economic security of rural communes eastern poland in 2009 and 2018 source: own study baltic journal of economic studies 19 vol. 6, no. 5, 2020 table 1 statistical characteristics of a synthetic measure security of rural communes eastern poland in 2009 and 2018 2009 2018 min 0.11 0.13 max 0.40 0.46 range 0.29 0.33 average 0.19 0.23 median 0.18 0.22 standard deviation 0.04 0.05 quartile deviation 0.03 0.03 coefficient of variation 0.22 0.22 quartile range 0.05 0.06 quartile 1 0.16 0.19 quartile 2 0.18 0.22 quartile 3 0.21 0.25 asymmetry 1.12 0.88 kurtosis (measure of concentration) 1.75 0.98 source: own study 2009; y = 0,1624 + 0,2472*x; r = 0,4730; p = 0.0000; r2 = 0,2238 0,05 0,10 0,15 0,20 0,25 0,30 0,35 0,40 0,45 miara syntetyczna bepzieczenstwa 0,14 0,16 0,18 0,20 0,22 0,24 0,26 0,28 0,30 0,32 m ia ra s yn te ty cz na s yt ua cj i f in an so w ej 2018; y = 0,1551 + 0,2696*x; r = 0,5849; p = 0.0000; r2 = 0,3421 0,10 0,15 0,20 0,25 0,30 0,35 0,40 0,45 0,50 miara syntetyczna bepzieczenstwa 0,16 0,18 0,20 0,22 0,24 0,26 0,28 0,30 0,32 0,34 0,36 0,38 m ia ra s yn tty cz na s yt ua cj i f in an so w ej figure 2. the relation of the measure of synthetic economic security to the financial situation in rural communes of eastern poland in 2009 and 2018 source: own study also determines the possibilities of the commune and its investment policy. regions located peripherally with respect to the central center are characterized by, among others the effect of leaching social potential (sucking the potential from the periphery to the central center), which is manifested in a negative migration balance. adequate economic potential increases economic security, living standards, better social situation, and greater public security. the commune's potential, resulting from a combination of local conditions, determines its possibilities and development directions. the socio-economic potential factors that were positively correlated with the measure of economic security are presented in table 2. to assess the impact of the variable financial situation of rural communes of eastern poland voivodeships on the diversity of the synthetic measure of economic security (taking into account the values of correlation baltic journal of economic studies 20 vol. 6, no. 5, 2020 measures between selected variables), a regression model was estimated. the model only explains 0.348 variable variations. statistics values f (369.88) and their corresponding probability level p mean that all parameters are statistically significant. further increasing the multidimensionality of the model would not increase the r2 value (0.348; table 3), and statistically insignificant variables could be included in the model. the adjusted determination ratio did not reach 60%. this indicates the situation of extending the ranges of variables with social and economic elements, so as to characterize economic security in a multidimensional way. 5. conclusions security, as a complex matter, is universal and ambiguous in nature, as it can relate to many aspects of the functioning of individuals, families, groups, communities as well as the entire society and the entire state. economic security is expressed primarily in the economy 's ability to survive and develop. the greater the economic potential of the economy, the more secure and stable its economy is. the value of myrrh synthetic synthetic economic security of rural communes in eastern poland in 2018 was from 0.13 to 0.46, while in 2009 from 0.11 to 0.40. the distribution of the assessment of the table 2 correlation between a synthetic measure of economic security and the financial and socio-economic variables of rural communes in eastern poland in 2009 and 2018 measure of economic security synthetic measure of financial security 0.5469 own income / total income 0.5072 transfers from the state budget / total income 0.4394 entities entered in the regon register 0.6429 natural persons conducting business activity 0.6288 % of population using the sewage system 0.8221 % of the population using the gas network 0.4992 balance of migration 0.4500 % of the population using the sewage treatment plant 0.7807 linear correlation coefficients for observations from sample 1-4840critical value (at a 5% bilateral critical area) = 0.0282 for n = 4840 source: own study table 3 results of the regression analysis between the measure of economic security and variables of the financial situation of rural communes in western poland in 2009-2018 coefficient standard error t-student's p-value const 0.0639382 0.00340700 18.77 <0.0001 share in taxes constituting state budget revenues * 0.276699 0.0195643 14.14 <0.0001 local taxes −0.175686 0.00748199 −23.48 <0.0001 transfer income from the state budget 0.0617927 0.00162046 38.13 <0.0001 expenses for education 3.78380e-05 2.34171e-06 16.16 <0.0001 expenses for housing 5.38616e-05 6.34229e-06 8.492 <0.0001 expenses for health 0.000110115 2.88984e-05 3.810 0.0001 expenses for agriculture −2.81324e-05 2.13165e-06 −13.20 <0.0001 arithmetic mean of the dependent variable 0.206884 standard deviation of dependent variable 0.046959 sum of squares residuals 6.947756 residual standard error 0.037919 coefficient of determination r-square 0.348889 adjusted r-square 0.347946 f (7, 4832) 369.8801 p-values for f-test 0.000000 logarithm of credibility 8974.266 inrom.crit. akaike'a −17932.53 crit. bayes.schwarza −17880.65 crit. hannana-quinna −17914.32 *municipalities have a share in the personal income tax (pit) and the corporate tax (cit), pln the basic monetary unit in poland observations 1-4840 used; dependent variable synthetic measure of economic security source: own study baltic journal of economic studies 21 vol. 6, no. 5, 2020 economic security of rural communes of eastern eastern poland was spatially polarized. the results indicate that economic security is associated with a better financial situation. local authorities should first of all improve the economic potential, which will increase the attractiveness of the land and attract new entrepreneurs. it seems that the main reason for the relatively small impact of financial conditions on economic and social development is their strong dependence on transfer revenues transferred from the state budget, a high share of current expenditure legally determined in the structure of budget expenditure. the above circumstances stiffen and stabilize the financial economy, making it relatively less susceptible to the influence of other factors. low independence can therefore constitute a significant barrier to future local development. the results of the study give local governments the opportunity to compare economic security with the situation of neighboring municipalities or municipalities with similar economic and social conditions. the conclusions drawn on this basis may allow local authorities to set out potential directions for optimizing the operation process. references: bartkowiak, r ., & ostaszewski, j. 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(1997). o budowie taksonomicznej miary jakości życia. syntetyczna miara rozwoju jest narzędziem statystycznej analizy porównawczej, taksonomia, z. 4. baltic journal of economic studies 129 vol. 2, no. 2, 2016 the grain products subcomplex of agro industrial complex of ukraine: strategy of value added management olexander svitovyi1 uman national university of horticulture, ukraine abstract. the purpose of the paper is substantiation of ways to improve strategic value added management of grain products subcomplex of ukraine agro-industrial complex. methodology. the study is based on the monographic method and the use of statistical information to confirm the conclusion that the management strategy of value added can be the basis for the development of grain products subcomplex. results showed that one of the strategic objectives of grain products subcomplex is the growth of production through the introduction of resource-saving technologies, as well as the export of products with high added value. within the grain products subcomplex special attention should be paid to vertical and horizontal integration. integration in grain products subcomplex aic of ukraine, so and cooperation, will contribute to increase added value and does not require intermediaries. to achieve greater added value in grain products subcomplex, an important role should play the strategy development at the state level. state regulation of this process should be based on improving tax and customs legislation in relation to the industries of grain products subcomplex, as well as involves: an increase in state support of grain producers and processing industries; increase of government order and stabilizing of purchase prices; partial indemnification and reduction of prices of the purchased resources; expansion of leasing and others like that. practical implication. the correct choice of strategy in value added management in a grain products subcomplex will provide aic of ukraine the intensive development. it will be instrumental in transfer of agro-industrial production from raw material in production with a high value added. value/originality. this study will help to better understand the conditions and factors that influence the increase of value added in the grain products subcomplex aic of ukraine in the strategic aspect. key words: grain products subcomplex, value added, strategic management, grain processing, profit. jel classification: е64, q18, o12 corresponding author: 1 department of management of organizations, uman national university of horticulture. e-mail: svitovyy@rambler.ru 1. introduction to a large extent, the future stable development of the industries of grain products subcomplex aic of ukraine is possible in case of production optimization and achieve maximum of value added. to solve this problem for the long term, you need to choose the right strategy in the management of added value. this problem is insufficiently studied in scientific literature, therefore, requires further research. the aim of this work is substantiation of ways of perfection of strategic value added management of grain products subcomplex aic of ukraine. scientifically research the tasks of this article are the following: to define basic directions of strategic development of grain products subcomplex aic of ukraine in relation to the increase of value added; to analyze the commodity structure of export and import of grain and products of his processing; disclose the functions of strategic management value added. the study is based on monographic method and the use of statistical information to confirm the conclusion that the management strategy value-added can be the basis for the development of grain products subcomplex. the article presentation logic of the studied material determined from the analysis of the current state of development of grain products subcomplex and the correct choice of strategy in the added value management. identified export opportunities of grain products subcomplex. on this basis identified the main directions of improving the strategic management of value added in grain products subcomplex of aic of ukraine. 2. the choice of strategy in the management of value added increase of size of value added in the grain products subcomplex as most subcomplex aic of ukraine is an important task for development of economy of market type. in addition, the maximization of value added in subcomplex provides for the process in the long term. baltic journal of economic studies 130 vol. 2, no. 2, 2016 that is, this requires a corresponding strategy. strategy – the art of manage socio-economic processes, determining the main direction in achieving the final result (zavadsky, 2006). goncharov s. m. and kushnir n. b. have described the strategy as the basic forms and methods promising actions for addressing the main problems with the implementation of strategic programs, achievement of important, future strategic goals (goncharov, 2009). to our opinion, improvement of strategic management of value added in the grain products subcomplex of aic of ukraine will enable achievement of steady increase of its size during the protracted period. this will be a weighty contribution to the development of the grain industry of agriculture and industries, which use in the production of grain and its processing products. choosing the right strategy in the management of value added in the grain products subcomplex will provide agroindustrial complex of ukraine intensive development, the gradual transformation of agricultural production of the raw material in the production of high value added. some domestic scientists assert that ukraine develops not euro-american and not especially latino-american model, but the original own combined model of development of agriculture, for which characteristic both separate lines two models marked higher and own substantial features. scientists notice thus, that although modern and perspective strategy of development of agriculture of the european countries is directed on to development of farms, however is and large-scale companies in these countries to have arisen (andriichuk, 2013). consequently, it is necessary in our country to develop the own model of agro industrial production, including grain products subcomplex. the improvement of strategic management of value added in grain products subcomplex of aic can positively influence on the increase of the productivity of graincrops, improvement of quality of grain, decline of his prime price. ambrosov v. y. noted that the calculations carried out taking into account the basic crop capacity of cereal crops of france and the united states and adapted to conditions of ukraine, the conservation of acreage on the actual level with the growth of productivity will give the opportunity for the gross grain harvest in the country to 108,8 million tonnes, of which up 86.8 million tonnes can be implemented for export. a scientist asserts farther, that motion to 100 million t must be self-weighted, successive, system and complex. on next years it is necessary to create a material and technical base and proper infrastructure for a stable receipt and storage 50-60 million tonnes of grains (ambrosov, 2013). sharing the opinion of the scientist, we, nevertheless, along with the development of infrastructure of grain farming, have defined by the need to increase the power of enterprises for processing of grain and production of finished products. basic directions of strategic development of grain products subcomplex of aic of ukraine in relation to the increase of value added, offered by us, shown in fig. 1. to increase value added in the industries of grain products subcomplex is necessary primarily to identify promising products and to optimize production. here you need to consider what products of subcomplex, which buys the end user should have the greater value added. that is, grain and products of its processing should be realized in the best condition that will maximize the value added. increase the capacity of processing industries of grain products subcomplex will allow producing more semifinished and finished products of grain, which contain higher value added. it is not possible to achieve a greater magnitude of value added without the introduction of resource-saving strategy of development of grain products subcomplex of aic of ukraine in relation to the increase of value added increase the capacity of processing industries optimization of production the introduction of resource-saving technologies exports with high value added cooperation, vertical and horizontal integration development of wholesale and exchange trade improving infrastructure subcomplex improving logistics fig. 1. the main directions of strategic development of grain products subcomplex of ukraine regarding the increase of value added source: own research baltic journal of economic studies 131 vol. 2, no. 2, 2016 technologies and reducing material costs. this requires an appropriate system of machines and the reliable provision of material resources. therefore, the improvement of logistics is an element of achieving greater added value. proper organization of such a provision can facilitate the creation of service cooperatives, and the effective use of logistical resources – production cooperation. the presence in the agrarian sector of economy of ukraine of a large number of farms is a sign of market reforms in the domestic agriculture, but the agricultural enterprises in need of state support and should, in our opinion, better to be cooperative. nelep v. m. suggests that in western europe, farmers voluntarily united in cooperatives (typically industry), with the purpose of providing farmers with cheap and high-quality logistics resources, harvesting, storage, processing and realization of agricultural products and food products. the scientist gives the example of france, where 3,800 cooperatives unite 90 % of the farmers. through these cooperatives, farmers sell about 70-80% of the grains, and they export products (nelep, 2015). thus, cooperation of farmers and other small agricultural enterprises on a sectoral basis will provide an opportunity to reduce the cost of crops by improving logistics, rational use of resources and introduction of advanced technologies. in addition, cooperation in the field of grain processing and realization of grain products to increase of value added by eliminating intermediaries that currently buy from the manufacturers most of the grain. in the framework of grain products subcomplex special attention should be paid to vertical and horizontal integration. vertical integration creates conditions for improving economic ties between grain producers and processing enterprises of the subcomplex and also gives the opportunity to identify potential to increase value added at all stages of its creation. in this case, it is possible creation cross-sectoral associations, in which can to combine as producers of grain so and processing enterprises of grain and the manufacture of finished products. in such associations may enter enterprises for grain storage and wholesale distributors. an example here can serve agriholdings which are composed of the enterprise from production to sales of grain products. such a model of management in grain products subcomplex aic of ukraine, as and cooperation, will promote to increase added value and does not require intermediary structures. of great importance in the increase of value added is a horizontal integration in grain products subcomplex of our country. in this case, the company shall retain legal and economic independence, but agree by the key performance indicators (e.g., production of grain or its processing, channels of sales) to increase and improve product quality. the result of such co-operation a balance is achieved the availability of grain products on the market, removes the threat of overproduction and reduce the selling price, more efficient use of logistical resources, and the result will been increase value added. 3. commodity pattern of exports and imports of grains one of the strategic objectives of grain products subcomplex is also the export of products with high added value. first of all, it will give the opportunity to fill the country 's budget of foreign exchange income, to improve table 1 commodity pattern of exports and imports of ukraine for some groups (mln. usd) 2010 2011 2012 2013 2014 2014 in% to 2010 total of exports 50744,3 67594.1 67779.8 62305.9 53901.7 106.2 ii. plant products 3949,9 5514,5 9173,1 8849,1 8739,1 221,2 in % to total of exports 7,8 8,2 13,5 14,2 16,2 +8,4 р.р. of which: cereals 2447,1 3604,5 6970,4 6351,7 6544,1 267,4 in % to group ii 62,0 65,4 76,0 71,8 74,9 +12,9 р.р. flour-grinding products 80,7 111,0 105,1 137,0 124,4 154,2 in % to group ii 2,0 2,0 1,1 1,5 1,4 -0,6 р.р. iv. finished food industry products 2524,1 2902,0 3474,5 3500,5 3096,3 122,7 of which: preparations of grains 253,9 338,4 394,9 412,3 390,1 153,6 in % to group iv 10,1 11,7 11,4 11,8 12,6 +2,5 р.р. total of imports 60352,0 81040.5 83135.4 75834.6 54428.7 90.2 ii. plant products 1526,9 1774,3 2366,1 2607,6 2031,6 133,1 in % to total of imports 2,5 2,2 2,8 3,4 3,7 +1,2 р.р. of which: cereals 145,4 219,5 248,9 306,5 366,7 252,2 in % to group ii 9,5 12,4 10,5 11,8 18,0 +8,5 р.р. flour-grinding products 27,5 49,6 28,3 26,0 25,1 91,3 in % to group ii 1,8 2,8 1,2 1,0 1,3 -0,5 р.р. iv. finished food industry products 2488,9 3003,8 2938,8 3177,9 2601,8 104,5 of which: preparations of grains 125,8 164,5 170,3 215,2 169,3 134,6 in % to group iv 5,1 5,5 5,8 6,8 6,5 +1,4 р.р. source: calculated by the author using information (the statistical publication, 2015) baltic journal of economic studies 132 vol. 2, no. 2, 2016 to the financial condition of enterprises of grain products subcomplex and to significantly increase national income. at present, our country is increasing rapidly exporting mainly grains, not products. for the period of 2010-2014 sales volume of crops for export has increased by almost 2.7 times. in 2014, the figure was 6544,1 million usa, or 74.9% of exports of all products of plant origin (table 1). but, in 2014, group products of the milling industry in the export made up only 1.4%. the export of finished food products from grain during the study period increased by 1.5 times in 2014 totaled 390,1 million usa, but this figure is still insignificant compared to the export of grain. in turn, imports of grain for 2010-2014 in ukraine also has tendency to increase, and imports of products the milling industry, on the contrary, decreased. against the background of stability of indicators of the imports of finished food products, the export value of finished products of grain for the period 2010-2014 has grown by 34.6% and amounted to 169.3 million dollars usa. thus, ukraine in recent years, increasing grain exports, as raw materials, is higher tempo, than its processed products and finished products of grain. this, of course, increases the value added in absolute value. but the increase in exports of products of processing of grain and products of grain would significantly increase this plan. 4. unity of the functions of strategic management of value added to implement informed us the main directions of strategic development of grain products subcomplex of aic of ukraine regarding the increase of the added value, it is necessary to improve strategic management of this process. we proposed a scheme of process of strategic management value added of grain products subcomplex of aic of ukraine shown in fig. 1. here we consider the strategic management of value added in subcomplex as the process in which the stages of realization of the strategic objectives have a certain sequence. first of all, it is necessary to analyze the current state of affairs on the formation of value added in grain products subcomplex and outline the basic strategy. in our opinion, this should be the strategy of maximizing added value. to implement this strategy you need to choose a few of the purpose and justify the necessary amount strategic management of value added in the grain products subcomplex of aic of ukraine strategic planning strategic organization strategic analysis strategic control strategic targets by maximizing of value added. alternative planning organizational changes in the industry and granting resources for the long term a comprehensive study of the factors influencing the change in added value for the future monitoring and making changes in future plans to increase value added material expenses and services wages production rent interest on capital employed amortization profit the elements of value added, which are included in the cost of production strategy of state regulation fig. 1. scheme of strategic management process of value added in the grain products subcomplex of aic of ukraine source: own research baltic journal of economic studies 133 vol. 2, no. 2, 2016 of resources. these objectives include: optimization of production to meet the needs of other industries in the grain and its processing and external demand; optimization of the structure of added value based on intersectoral concept of formation and so on. to these goals were successfully implemented, you need to build strategic planning. in addition, you need to take into account alternative options. it is also necessary to provide for possible organizational changes in the sectors of the subcomplex and resources in the long term. it is important to outline the development of the necessary infrastructure, capacity expansion of processing industries, expansion of possibilities of the enterprises subcomplex in wholesale trade and export operations. this is a very difficult task, given the fact that the grain products subcomplex is an integral part of agro industrial complex and has production relations with enterprises from many sectors of the economy. that is, the grain products subcomplex can not develop in isolation, without taking into account the general principles and opportunities for the development of the entire economy of the state. permanent strategic control of the process of formation of added value will enable the adoption of timely decisions to adjust the corresponding actions in the direction of increasing added value. however, qualitative strategic control is not possible without adequate strategic analysis. the strategic analysis assumes a comprehensive study of the factors influencing the change in the value of value added for the future. among the internal factors – the growth of production through the introduction of scientifically based resource-saving technologies and sales of products at the most profitable channels, including for export. in addition it is necessary to analyze and external environment, namely: possible changes in the structure of ukrainian economy and its separate branches; the demand for grain products in the domestic market; pricing policy for purchased inputs and for the products of grain products subcomplex; global trends in the production of grain and products of its processing and the demand for these products; export potential of our country in the grain sector. this analysis will provide an opportunity to justify future production and sales of grain products subcomplex and to identify ways of maximizing added value, in particular, and through the optimization of its structure. in our opinion, it is necessary to pay more attention to the formation of such element of value added as wages. we must remember that only when employee connected with the means of production we can obtain the specific product, so it is very important that the employee had sufficient motivation to work. financially motivated employee works more efficiently, therefore increases productivity, product quality, and ultimately increases profit. to achieve greater of added value in grain products subcomplex, an important role plays the strategy development at the state level. state regulation of this process should be based on improving tax and customs legislation in relation to the industries of grain products subcomplex, as well as involves: an increase in state support of grain producers and processing industries; increase of government order and stabilizing of purchase prices; partial indemnification and reduction of prices of the purchased resources; expansion of leasing and others like that. consequently, the combination of strategic planning, organization, analysis and control at the level of enterprises of grain products subcomplex with the strategy of the state regulation will increase the profitability by increasing production and reducing specific material expenses. also it is necessary to reach the rational structure of all elements of added value, which includes cost of production. 5. conclusions consequently, strategic management of value-added in the grain products subcomplex of aic of ukraine should be aimed at increasing production, including high valueadded and its implementation in the domestic and foreign markets. the basic directions of perfection of strategic management of value added in the grain products subcomplex of aic of ukraine we define as the following: 1. strengthening vertical and horizontal integration of enterprises of all industries of grain products subcomplex. thus, improve the control at all stages of added value formation. 2. production cooperation and the creation of service cooperatives will contribute to increase added value and does not require intermediaries. 3. the introduction of resource-saving technologies and lower material costs that will provide to increase the profitability of production and will provide an opportunity to improve workers ' material interest in the outcome. 4. production optimization in the grain products subcomplex tailored to the needs of internal and external market, stimulating the development of other sectors of the economy, which are use the grain. this will provide an opportunity to increase production and expand the range of products that will increase value added. 5. the increase in the share of production and sales of products with high value added, including for export. 6. improving tax and customs legislation, strengthening state support for industries of grain products subcomplex. as a result of this expected reduction of production costs, the additional revenue in the process of implementation of products that have a positive impact on the value added. baltic journal of economic studies 134 vol. 2, no. 2, 2016 references ambrosov, v.y. (2013). the market and the strategy of development of agricultural enterprises. ekonomika apk, 10, р. 72-79. andriichuk, v.g. (2013). new types of agroindustrial formations within the framework of the national agrarian development strategy. ekonomika apk, 1, р. 3-15. goncharov, s. m., kushnir, n. в. (2009). interpretative dictionary of the economist – kiev, centre of educational literature, 264 p. nelep, v.m. (2015). world and ukrainian trends of agricultural development. ekonomika apk, 7, р. 100-105. the statistical publication (2015). "external trade of ukraine in 2010-2014" [electronic resource]. – retrieved from: http://www.ukrstat.gov.ua zavadsky, y.s., osowska, t. v., yushkevich, a. a. (2006). economic dictionary. – kiev, condor, 356 р. александр свитовый зернопродуктовый подкомплекс апк украины: стратегия управления добавленной стоимостью аннотация. целью статьи является обоснование путей усовершенствования стратегического управления добавленной стоимостью в зернопродуктовом подкомплексе апк украины. методика. исследование основано на монографическом методе и использовании статистической информации для подтверждения заключения о том, что стратегия управления добавленной стоимостью может быть основой для развития зернопродуктового подкомплекса. результаты исследования показали, что одной из стратегических задач зернопродуктового подкомплекса есть рост производства на основе внедрения ресурсосберегающих технологий, а также экспорт продукции с высокой добавленной стоимостью. в пределах зернопродуктового подкомплекса особое внимание нужно уделить вертикальной и горизонтальной интеграции. интеграция в зернопродуктовом подкомплекса апк украины, как и кооперация, будет способствовать увеличению добавленной стоимости и не требует посреднических структур, которые отбирают значительную часть прибыли у производителей. в достижении большей добавленной стоимости в зернопродуктовом подкомплексе важную роль должна сыграть выработка соответствующей стратегии и на государственном уровне. государственное регулирование этого процесса должно основываться на совершенствовании налогового и таможенного законодательства по отношению к отраслям зернопродуктового подкомплекса, а также предполагает: рост государственной поддержки производителей зерна и перерабатывающих отраслей; увеличение объемов государственного заказа и стабилизации закупочных цен; частичной компенсации и удешевления покупных ресурсов; расширение лизинга и тому подобное. практическое значение. правильный выбор стратегии в управлении добавленной стоимостью в зернопродуктовом подкомплексе обеспечит апк украины интенсивное развитие. это будет способствовать скорейшему переходу агропромышленного производства с сырьевого в производство с высокой добавленной стоимостью. значение/оригинальность. данное исследование поможет лучше изучить условия и факторы, которые оказывают влияние на увеличение добавленной стоимости в зернопродуктовом подкомплексе апк украины в стратегическом аспекте. baltic journal of economic studies 69 vol. 7, no. 1, 2021 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: t.melnyk@knute.edu.ua orcid: https://orcid.org/0000-0002-3839-6018 researcherid: https://publons.com/researcher/1673478/tetiana-melnyk/ 2 kyiv national university of trade and economics, ukraine. e-mail: n.mazaraki@knute.edu.ua orcid: https://orcid.org/0000-0002-1729-7846 researcherid: https://publons.com/researcher/2224276/nataliia-mazaraki/ 3 kyiv national university of trade and economics, ukraine. e-mail: k.puhachevska@knute.edu.ua orcid: https://orcid.org/0000-0002-0473-3119 researcherid: https://publons.com/researcher/2227037/kateryna-pugachevska/ doi: https://doi.org/10.30525/2256-0742/2021-7-1-69-76 development of national economies in the conditions of pandemics tetiana melnyk1, nataliia mazaraki2, kateryna pugachevska3 abstract. among many global problems of mankind, a special place is occupied by the phenomenon of pandemics. a pandemic has been one of the constant companions of human existence since ancient times. this is evidenced by both the texts of religious and mythological orientation, and recorded events in historical life. pandemic is always an emergency that threatens the very existence of humanity. various circumstances are heard as the causes of pandemics: sacred (violation of divine laws), domestic (unsanitary conditions of existence), civilizational (technocratic human intervention in the environment), political, economic, etc. the purpose of this article is to study the effects of pandemics that have occurred in different historical periods and their impact on the development of society and the economy. based on this goal, the objectives of the article are to study the world economy in a pandemic covid-19; to analyse the trends and forecasts of its further development, including ukrainian economy; to offer an assessment of the main opportunities and risks of the functioning of ukraine’s economy in quarantine. this article reveals the theoretical and practical principles of the pandemics impact on global economic development. the result of the article is the statistical analysis of pandemic impact on the world economy, which leads to the rupture of economic chains and slowing down the economic and social development for several months or even up to one year. as a conclusion it may be noted, that since periodic pandemics have become an integral part of human life, no country in the world is safe from their direct or indirect impact and, as a result, countries must be economically ready to provide strict measures according to the formula “combating the epidemic – minimizing the negative effects in the short, mediumand long-term periods”. practical implications. the main theoretical propositions, the authors’ conclusions presented in the article, are supposed to form a methodological basis in substantiating the priorities of the state support of business in conditions of pandemic and quarantine restrictions. value/originality. the proposed results can be used for modeling and forecasting the impact of quarantine restrictions on the economic development of countries. key words: global economy, pandemic, covid-19, global economy development, national economy, society. jel classification: f12, f13, f41, f43 1. introduction among the many global problems of mankind, a special place is occupied by the phenomenon of pandemics. a pandemic has been one of the constant companions of human existence since ancient times. this is evidenced by both texts of religious and mythological orientation and recorded events in historical life. a pandemic is always an emergency that threatens the very existence of humanity. for example, more than 125 million people died from the plague of justinian, more than 60 million people died from the “ black death” of the 14th century (lukanova, 2019). various circumstances can be considered as causes of pandemics: sacred (violation of divine laws), domestic (unsanitary living conditions), civilizational (technocratic human intervention in the environment), political, economic, etc. this indicates that the pandemic phenomenon needs to be baltic journal of economic studies 70 vol. 7, no. 1, 2021 comprehensively understood. all mentioned above highlights the relevance of study of the problem of the pandemics impact on the global development of society and the economy. among the rather huge range of research sources, the works by s. shah (shah, 2016), n. donthu, a. gustafsson (donthu & gustafsson, 2020), a. auzan (auzan, 2020), and b. cherkasskii (cherkasskii, 2008) deserve special attention. american researcher s. shah in “pandemic” (shah, 2016) provides a large-scale canvas of vision of the origins, development, sociocultural, socio-political, socio-economic circumstances of the dynamics of various pandemics. b. cherkaskii notes: “the epidemic process, as well as any qualitatively isolated material object, is characterized by specific laws of origin, development and termination, which, however, are subject to more general laws of systemic unity of nature and society” (cherkasskii, 2008). he formulates a number of laws of the epidemiological process: the first – the law of unity of biological and social, according to which the system of the epidemic process arises and functions as an interaction of two subsystems – biological and social; the second – the law of the ratio of biological and social functions, where the social subsystem is decisive in their relationship, but the biological is not passive; the third – the law of conformity of the biological subsystem to the social subsystem, which indicates the specificity, singularity of the existence of various epidemic processes, changes in the social subsystem cause changes in the biological; the fourth – the law of correspondence in the system of the epidemic process, according to which the more intense the impact of the epidemic process on society and the economy, the more intense is the feedback of targeted measures to eliminate this impact; the fifth – the law of systemic organization of the epidemic process – systemic unity appears in the regular and constant interaction of all levels, subsystems and elements. in addition, scientists studying the problem of pandemics pay attention to the need to separate the concepts of “epidemic” and “pandemic”. an epidemic is a massive defeat of a large part of the population or its individual contingents by an infectious disease in a certain time and space. the epidemic contains several concepts: epidemic alarm, epidemic threshold, normative indicator of the disease, explosive epidemic, tardive epidemic, quantitative indicators of the epidemic. a pandemic is a global socio-ecological epidemiological system that ensures the preservation and spread of infection on a global scale. thus, a pandemic, in contrast to an epidemic, concerns, firstly, the scale (an epidemic exists within one country, a pandemic covers a number of countries), secondly, temporality (an epidemic occurs more often, than a pandemic), and thirdly, the relationship virus transmission (an epidemic can be formed based on a previous virus, a pandemic occurs as a result of a new variant of the virus), fourthly, the speed of spread (epidemic speed is determined by the development of domestic transport infrastructure, pandemic speed – the scale of international vehicles), fifthly, territoriality (the epidemics, that occurred in some countries give the start of pandemics), sixthly, the level of disease (during pandemics it is much higher, than in epidemics), seventhly, the features of completion (the end of the pandemic does not mean the end of the epidemic); eighth, the mortality rate (during a pandemic, it is higher, than in the epidemic from five to ten times). at the same time, the american researcher j. diamond, in his work “guns, germs, and steel” notes that pandemics and epidemics are the eternal companions of mankind. we coexist forever with viruses on the planet. he compares the advantages of different civilizations, how europeans managed to break out in technological development (diamond, 2018). in fernando braudel’s work, in the first part of “civilization and capitalism”, much attention is paid to the plague epidemic in the 14th century, how it affected europe, in particular france (braudel, 1980). the research materials of the article consist of quantitative indicators on the impact of the pandemic on the development of economies of leading countries and ukraine, publications of scientists, who studies the economic consequences of the pandemic in ukraine and the world, international expert assessments, forecasts etc. a wide range of general scientific and special methods of economic research, including analysis and synthesis, scientific abstraction, generalization, statistical analysis, comparison, systematization is used. 2. pandemic as an economic shock in recent decades, mass infectious diseases (pandemics) have become more frequent, affecting people’s health, social development, and the economies of countries and regions of the world. thus, in 20082009, most countries in the world were affected by swine flu, which escalated into the h1n1/09 pandemic. in 2014–2015, west africa, the united states, and europe were affected by the ebola pandemic. the beginning of 2020 was marked by the fastest and most widespread coverage of almost the entire world community by the coronavirus pandemic. it is obvious, that occurrence of pandemics in this period of time is cyclical with a period of occurrence of approximately five years. in order to analyze the impact of these pandemics on the world economy, the comparison was made on the time axis with the following periodic processes: – 40-50-year economic cycles of n. kondratiev, based on changes in technological systems of society; – 7-11-year cycles of c. juglar, related to the direction of investment in business; baltic journal of economic studies 71 vol. 7, no. 1, 2021 – the dow jones industrial average, which reflects the total capitalization of the 30 largest us companies. in 2020–2021 the downward wave of the 5th kondratiev cycle ends; this, with the transition to the next technological mode, switches to the upward wave of the 6th kondratiev cycle. this indicates the objective conditions for further long-term recovery of the world economy. at the same time, the start of this rise in the period 2020–2021 is significantly weakened by the rupture of traditional economic chains as a result of the coronavirus pandemic, a significant “dispersion” (focus) of investment in various businesses (both obsolete and promising), which leads to the next bottom of the juglar cycle and a fall of 30-40% of the dow jones index. according to juglar, this decline should last for about a year, during which investments will be redirected to the 6th mode technologies. after exceeding the contribution to world gdp by more than 5-7% due to the technologies of the 6th system, the rise of the global economy should begin according to both kondratiev and juglar. similar recessions in the world economy have been observed before. they arose, inter alia, under the influence of pandemics of influenza and swine flu in 2008-2009 and ebola in 2014-2015, respectively. but they had a short-term impact on the world economy (from a few months to a year), after which its objective development continued with elements of renewal and partial elimination of artificial layers (financial bubbles, pyramids, etc.). extrapolating the phenomena of 2008–2009 and 2014–2015 to the current situation with the coronavirus pandemic, we can make a predictive judgment, that the global economic downturn in 2020 will be deeper than the previous crises, but in 2021–2022, after overcoming the new pandemic and getting rid of obsolete and artificial layers, will begin its renewal and growth in accordance with the objective laws of economics. 3. findings according to the world bank research, since 1870 the world economy has experienced 14 global recessions. current forecasts mean, that the global downturn due to covid-19 will be the fourth deepest in this period and the worst since the end of the world war ii. there is expected the decline of gdp and, accordingly, gdp per capita in the vast majority of countries (figure 1). figure 2 confirms the negative effects of the covid-19 pandemic and, in particular, the share of the world’s economies in a recession, defines as an annual reduction in gdp per capita. sample includes 183 economies, though the sample size varies significantly by year. the negative consequences of the coronavirus pandemic have also affected the economy of ukraine (figure 3). in 2020, the gdp level is expected to fall by 3.5%, which is 1.7% less, than the world level (-5.2%). in 2020, compared to the previous decade, there is a negative trend in all regions of the world in the inflow of fdi to countries with growing markets, including ukraine. analysis of quantitative and qualitative changes in the world economy showed that the covid-19 pandemic forced states to introduce quarantine measures – closed state borders, suspended transport links, suspended the activities of a large number of enterprises, introduced restrictive measures for business. as a result, the world economy is plunged into a deep recession – it is projected, that by the end of 2020, the countries with the most stable economies will lose at least 2.4% of their gdp. the forecasts of world gdp growth rates for 2020 have also been reduced from 2.9% to 2.4%. figure 1. growth of world gdp and gdp per capita in 1871–2021, % source: conducted by the authors on the basis of the world bank data baltic journal of economic studies 72 vol. 7, no. 1, 2021 declining consumer demand in the european union and the united states will have a negative impact on imports from developing countries. the economies of all countries will feel the effects of reduced world production, disruption of trade chains, reduced investment. in the current conditions, the quarantine measures in china will have a great impact on the world economy, as the production facilities of many industrial and innovative companies of the world are located on the territory of this country. the closure of plants and factories, as well as a decrease in demand for chinese products will have a negative impact on the profits of such companies (figure 4). the complete or partial shutdown of a number of enterprises also had a negative impact on the global labor market – about 80% of the world’s working population was affected by the covid-19 pandemic (figure 5). according to the international labor organization, in the second quarter of 2020, the total number of man-hours worked is expected to decrease by 6.7%, which is equivalent to the full employment of 195 million people (world data center for geoinformatics and sustainable development, 2020). employees of such industries as arts and entertainment, transport services, hotel and tourism business, real estate trade, and industrial production are figure 2. world economies during the recession (annual reduction in gdp per capita) source: conducted by the authors on the basis of world bank data figure 3. gdp growth rates in the world and in ukraine source: conducted by the authors on the basis of world bank data and state statistics service of ukraine baltic journal of economic studies 73 vol. 7, no. 1, 2021 most at risk of layoffs. while employed in education, health care, agriculture, utilities are less affected by negative trends. as for industries, tourism is one of the most affected industries. the expected reduction in revenues in this area is 116.5 billion usd, the main reason was the restriction of movement between countries. the world travel and tourism council estimates, that covid-19 could cause the loss of about 50 million jobs in the industry. it is noted, that the expected recovery of the industry will take place no earlier than in the iv quarter of 2020 (mckinsey & company, 2020). in an attempt to compensate for the losses, a number of travel companies have already announced the start of online booking of tours for 2021. however, their prices significantly exceed the level of 2019, which, accordingly, has a negative impact on the already low demand for these services. also, significant losses are borne by airlines; the demand for their services has dropped to zero under quarantine. the expected revenue reduction is 252 billion usd, 44% compared to 2019 (international air transport association, 2020), the reason for this fact is the restriction of transport links. in order to minimize losses, airlines introduce a preferential policy to change the date of booking tickets or cancel the reservation. carriers are also reducing the size of the fleet and using aircraft designed for a small number of passengers. crisis phenomena have been noted in the automotive industry, which is due primarily to the fact that about 80% of the world supply chain in figure 4. objects of the 1000 largest companies in the world in quarantine zones source: conducted by the authors on the basis oecd statistics figure 5. reduction of employment in the second quarter of 2020 source: conducted by the authors on the basis of kreston research baltic journal of economic studies 74 vol. 7, no. 1, 2021 this industry, in one way or another, is associated with china. according to counterpoint, global demand for cars is expected to decline by 7%, due to disruptions in the supply of spare parts from china, disruptions in production in europe, the closure of car assembly plants in the united states (counterpoint, 2020). however, not all industries suffer losses – a number of companies have managed to maintain a stable position in the market and to significantly increase their revenues. positive dynamics were discovered in the following directions: 1. e-commerce. under current circumstances, people spend most of their time at home, which has had a corresponding effect on consumer behavior – thus, preference is given to online-shopping. examples of successful companies in this situation are: amazon, ocado, jd.com. 2. pharmaceuticals. the efforts of the world’s leading pharmaceutical companies are focused primarily on the development of a vaccine against covid-19. also an important aspect of their activitiy is the timely supply of the required quantities of drugs, used for the treatment of people affected by the virus. during a pandemic, successful companies in this field are gilead, moderna, roche, fujifilm, pfizer. 3. delivery services. in addition to the existing large players, horeca representatives are increasing their share in this market – restaurants and cafes deliver ready meals to their customers with the help of couriers. the logistics division of alibaba group, cainiao, deliveroo became successful during this period. 4. video communication services. in an environment, where most white collars have to move on to remote working, conferencing services have become very popular. in addition to sales growth, there is also an increase in capitalization of companies in this industry. the most successful representatives are: zoom, webex (cisco), skype (microsoft). 5. entertainment and gaming services. the inability to spend leisure time in cinemas and entertainment centers encourages people to increasingly use similar services online. governments around the world are committed to creating and implementing economic programs (fiscal stimulus) aimed at mitigating the effects of the covid-19 pandemic and stabilizing the economy. the largest one is the program adopted by the us government – its financing amounted to 2.3 trillion usd (about 11% of gdp). additionally, the topfive countries in terms of such economic programs funding include germany, china, canada and australia (counterpoint, 2020). as for the ukrainian economy, analysts estimate the losses accumulated during the month of quarantine restrictions at 120 billion uah, which can be compared with the annual budget for health care for year 2020 (113.3 billion uah). first of all, the losses were carried due to the shutdown of a number of sectors of the economy. according to a survey by the society of ukrainian entrepreneurs, in collaboration with the ukrainian marketing group, a third part of ukrainian companies was forced to suspend their quarantine activities, while 6% closed their businesses completely. if the quarantine in the country lasts more than 3 months, more than 60% of ukrainian companies will be threatened with bankruptcy (ukrainian entrepreneurs union, 2020). ukrainian business, which is still functioning, has also faced a number of difficulties. as a result, the labor market has suffered significantly – according to the chamber of commerce of ukraine, the number of unemployed during the quarantine period has doubled. in the nearest future, ukraine’s economic losses will increase under the influence of declining purchasing power of the population – now more than half of ukrainians have already felt the effects of quarantine measures. from the point of current situation, the government has updated the forecast of key macroeconomic indicators for 2020. according to the forecast made in autumn 2019, the country’s gdp was expected to reach 4.5 trillion uah in 2020. however, the pandemic reduced the anticipated figure to 4 trillion uah. the inflation forecast of 8.7% is estimated by experts as quite pessimistic: economists and analysts tend to believe that the final figure might be at 5%. unemployment is expected to rise by 1.3% but the imf gives a more pessimistic forecast – by the end of the year the figure will be equal to 10.1%. the average level of wages is also expected to decline, but taking inflation into account, it is expected to be close to the level of 2019. possible devaluation of hryvnia is estimated at 11% of last year’s exchange rate, however, if quarantine measures are extended, the exchange rate may reach 35 uah for 1 usd. the covid-19 pandemic will affect all sectors of the economy to varying degree. it is expected, that significant losses will be avoided in industries related to the production and supply of food, pharmaceutical industry, it industry. the most sensitive sectors accumulate about 40% of gdp and employment. moreover, more than half of companies in these industries are provided with means, that allow to operate in quarantine circumstances for no more than 2 months. 5. conclusions the covid-19 pandemic has affected all sectors of the world economy with no exceptions. quarantine restrictions in the context of the covid-19 pandemic have had a negative impact on established global supply chains, and this fact will contribute to the global trend of transition from free foreign trade to protectionist policies. the world’s leading companies baltic journal of economic studies 75 vol. 7, no. 1, 2021 are already thinking about transforming their strategy in terms of supply chain optimization and localization of production with maximum added value. as for migration phenomenon, the spread of viral infection will allow a number of countries to strengthen migration policy. nevertheless, more and more eu leaders are in favor of revising the schengen agreement. as for the united states, even before the pandemic, protecting the american labor market from migrants was identified as an important task set by the us government. restrictions will affect labor mobility, and rising unemployment will not contribute to wage growth. business processes will be maximally digitized, the role of electronic documentation management will grow, as well as software aimed at automatizing the activities. companies will expand their workforce capacity for remote working, which will save on office maintenance. thus, the optimization of organizational structures of companies is expected – part of the management levels will cease. the role of business communication with the help of video communication services (zoom, webex) will increase, in turn, the need in personal meetings will decrease. this will significantly affect the services of passenger air transportation and the hotel industry, as the number of business trips will be significantly reduced. the partnership between business and the state will become more significant. government will become more interested in large investment projects, being involved in the process of business design and planning, because employment growth, stable tax collection and social development of the territory are the main priorities in a crisis. authorities will focus precisely on developing and implementing business support and development programs. currently, the world’s leading companies are directing main forces towards adapting their activities to quarantine-related limitations, saving workplaces and minimizing their losses due to the recession. the ukrainian economy is now experiencing a reduction in gdp, a complete or partial shutdown of enterprises, a sharp rise in unemployment – all these aspects are the consequences of covid-19. therefore, the prospects for further research should focus on creating effective conditions for the functioning and development of the national economy in the postcrisis period. what incentives should be provided to companies for their support by the state? what steps should the country take to accelerate the recovery from the economic crisis that resulted from the covid-19 pandemic? 6. acknowledgements the article is prepared within the framework of the scientific research work “the potential of import substitution in ukraine on conditions of post industrial economy formation” (state registration number 0119u100625) and “trade and economic wars: national and international dimension” (state registration number 0118u000130) references: auzan, a. a. 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economic-impact/recovery-scenarios-2020-economic-impact-from-covid-19 mckinsey & company (2020). retrieved 29 september, 2020 from https://www.mckinsey.com/industries/ travel-logistics-and-transport-infrastructure/our-insights counterpoint (2020). retrieved 27 october, 2020 from ttps://www.counterpointresearch.com/data/ state statistics service of ukraine (2020). retrieved 29 october, 2020 from http://www.ukrstat.gov.ua/ union of ukrainian entrepreneurs (2020). retrieved 29 october, 2020 from https://sup.org.ua/uk the world bank statistics (2020). retrieved 30 october, 2020 from https://www.worldbank.org baltic journal of economic studies 137 vol. 5, no. 4, 2019 corresponding author: 1 admiral makarov national university of shipbuilding, kherson branch, ukraine. e-mail: avloe@gmail.com 2 admiral makarov national university of shipbuilding, kherson branch, ukraine. e-mail: alvirginis@gmail.com 3 admiral makarov national university of shipbuilding, kherson branch, ukraine. e-mail: nira@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-4-137-147 the systematization and classification of socio-economic problems in higher education anatolii lomonosov1, oksana lomonosova2, iryna nadtochii3 abstract. economic, social, demographic, ideological, and political instability in ukraine has become the cause of a whole range of socio-economic problems in higher education. it requires studying their composition, interdependence, and impact on higher education. nowadays different ranges of socio-economic problems in higher education in ukraine are being discussed in the literature. despite a large number of publications, the systematization of socio-economic problems in higher education in ukraine is not given due attention. for a better idea of their composition, interdependence, and focus, it is useful to systematize them and develop their catalogue. the purpose of the study is to identify approaches to systematization and classification of socio-economic problems in higher education in ukraine. methodology. the following theoretical methods of socio-economic phenomena and processes learning as abstract-logical (methods of induction and deduction, analysis and synthesis, analogy, generalization, comparison, system-structural, abstraction), content analysis, empirical research (description and comparison), systematization of scientific knowledge were used in research. to systematize socio-economic problems in higher education, their catalogue was developed, on the basis of which these problems were directly systematized and classified. results. the major socio-economic problems and contradictions in higher education in ukraine, as well as in european countries and the united states, were determined and analysed in the given study. the analysis of the recent studies and publications on socioeconomic problems in higher education showed that there are currently no proposals for the formation of their single system. on the basis of research, the catalogue containing forty-one most important socio-economic problems in higher education in ukraine has been developed. for the visual representation of the system of problems and causal relationships between them, a conceptual map has been proposed. for that, the problems that are directly related to the purpose of the study are selected from the catalogue. as an example, a conceptual map of socio-economic problems caused by inadequate funding for higher education, as well as problems linked with the formation and maintaining its principal resource – academic staff – was developed. to classify the socio-economic problems in higher education in ukraine, a 3×3 matrix is proposed, in which problems in higher education are grouped depending on the place of their manifestation and the place of solution. the places of manifestation and places of the solution are defined as: a sphere of higher education, other spheres, a sphere of higher education, and other spheres simultaneously. it allows us to identify the problems, solution to which society puts on higher education only, and those that require joint efforts. distribution of problems by the determined features identifies their targeting and the degree of responsibility of the higher education system for their solution. the practical relevance of the given study is to provide further research on the state of higher education and problems of its functioning. the approaches proposed to the systematization and classification of socio-economic problems in higher education in ukraine can be applied to other countries as well. key words: higher education, problems in higher education, systematization of problems in higher education, classification of problems in higher education, graphical methods of systematization, graphical methods of classification, conceptual map of the main socio-economic problems in higher education in ukraine. jel classification: h12, i23, o15 baltic journal of economic studies 138 vol. 5, no. 4, 2019 1. introduction the socio-economic, ideological, and political transformations taking place in any society inevitably directly or indirectly affect the state and functioning of its higher education system. thus, the impact of the 2008 global financial crisis (the great recession) on higher education in many countries proved to be longlasting, and its negative consequences persist (see, e.g., mitchell at all, 2017; selingo, 2018; gunn, 2018). in post-soviet countries, including ukraine, the functioning of higher education is significantly obstructed by economic, socio-demographic, ideological, and political instability, which restrains the resolution of accumulated socio-economic problems. nowadays a lot of philosophical, pedagogical, psychological, informational and other problems concerning higher education are widely and thoroughly discussed. but socio-economic problems are the ones that are most often in the spotlight. and although they are paid particular attention, as evidenced by a number of publications; scientists, managers, and practitioners operate diverse ranges of these problems, which differ by their composition, number, focus, relation to certain higher education institution (hei) or to their system in general. in our opinion, to ensure further research on problems and the state of higher education, it is essential to systematize and classify its socio-economic problems. these issues are considered in the example of ukraine, a big country in europe in terms of territory and population, with an industrial-agrarian economy and a favourable geographical location. though precisely its higher education has accumulated a whole complex of socio-economic problems, some of which have become chronic. many of these problems had arisen long before ukraine gained independence, but so far, they have remained unresolved. 2. literature review the analysis of current research and publications concerning socio-economic problems in higher education in ukraine revealed that there is no single system of socio-economic problems in higher education. although the analysis of these problems has always had enough attention (ishchenko, 2014; drobnokhod, 2012 etc.), their totality is represented differently in the studies on these problems in higher education. for example, in the analytical study of the current state, problems, and assignments for the promotion of higher education in ukraine (zhyliaiev at all, 2015), a range of problems, their causes, and possible solutions are thoroughly considered. but the general system of these problems is absent. s. o. sysoieva, analysing in detail the development of education in ukraine in its historical and institutional formation, also outlines a range of problems inherent in higher education. most of them she explains by the fact that ukraine “remains a country with a transition economy, and its society is going through a period of transformation” (sysoieva, 2013). at the same time, the author has not formed an integral system of socioeconomic problems. sometimes the system of problems in higher education is considered too simplified. n. r . stepanova, for instance, considers problems of funding, quality, availability, and graduates’ employment as the most important ones (stepanova, 2013). quite often only some of the problems are considered. in the white book of the national education of ukraine, which is intended “to highlight the most urgent problems (“blank spots”), to determine their causes and to offer the ways of their solving or alleviating,” the attention is focused on the social and pedagogical problems (aleksieienko at all, 2010). socio-economic problems are also observed in the studies (lomonosov, lomonosova, 2007a; lomonosov, lomonosova, 2007b; lomonosova, 2004), but they consider only some of them. there is no systematization of these problems in the abovementioned publications, as well as in many others which analyse socio-economic problems in higher education. the only exception is the classification of social problems in higher education, offered by ye. mykhaliova. it is built on the grouping of problems according to three levels – macro-, meso-, and microlevel. “the first level determines the character and discrepancies of ‘coupling’ of the education systems on the world or regional (in its wide sense, for example, europe as a region) level. the second level is connected with the positioning of higher education in a certain society, and the effective implementation of its social functions. the third level affects social problems of the subjects of education, which are determined by their affiliation to the sphere of higher education” (mikhaileva, 2011). thus, although the analysis of socio-economic problems in higher education is given enough attention, many issues are awaiting their solution. it also concerns the matter of systematization of socio-economic problems in higher education in ukraine, which remains unresolved. 3. the methodology of research the methodological support of further research on socio-economic problems in higher education in ukraine requires, first of all, their systematization and classification. it will help to select them out of the general range of problems in higher education, to determine connections among them, to establish appropriate causal relationships and internal ordering, classify them according to the most significant peculiarities. it is appropriate to systematize socio-economic problems of higher education in ukraine in two stages. baltic journal of economic studies 139 vol. 5, no. 4, 2019 at the first one, it is necessary to compile a catalogue of problems, that is, to form their list. any catalogue (from the greek katálogos – list) is a list of objects, concepts, arranged in a specific order to facilitate their search. in principle, the list of socio-economic problems in higher education may be disorderly. the primary objective at this stage of systematization is the separation of socioeconomic problems from the general range of problems in higher education (social, political, structural, educational, pedagogical, psychological, etc. (vahovich at all, 2014; aktualni problemy, 2016; yurchenko, 2010) and the formation of their maximum possible set. the direct systematization of problems should be the second stage. systematization usually means: the process or mental activity on combining the scattered knowledge about objects (phenomena) into a single scientific system, the establishment of their unity (kostiukevych at all, 2017; systematyzatsiia, 2019); “action (or their consistency), due to a particular range of unattached components becomes a range of connected components” (dutsiak, 2010); “placement of investigated phenomena or objects in a specific order, sequence with the identification of their interconnection and subordination” (savitskaya, 2000; kolchkov, 2015), etc. the task of systematization of socio-economic problems in higher education in ukraine should be the presentation of a system of these problems with a description of the links between them. since the list of problems is numerical, it is necessary to determine at least the main ones and to identify their interconnection and subordination. in addition to systematizing socio-economic problems in higher education in ukraine, their classification is important as well. it should be noted that the latter concept is interpreted in various ways by different authors, and the relationship between systematization and classification is also perceived ambiguously. classification is: an action to classify, that is, divide objects, phenomena or concepts into classes, groups, etc. by commonalities (yakushkin, 2012; a great dictionary, 2001); process consisting of ordering by the arrangement of objects, phenomena or concepts in classes, subclasses, and ranks, depending on their general features (kolchkov, 2015); the distribution of objects, concepts, titles into classes, groups, ranks according to the common features (economic encyclopedia, 2000); a system whose components are linked by subordination ties (subordination of one component to another) and coordination (the relation between a number of components that are subordinate to one component) (dutsiak, 2010), etc. if systematization is perceived as an action, activity, process, then classification, as seen from the above definitions, is also interpreted as action, activity, process, and as a result of this process as a system of distribution of objects, phenomena or concepts into classes, groups, etc. it is necessary to note that sometimes the terms “systematization” and “classification” are used as synonyms (see, for example (yakushkin, 2012; nesterov, 2016). but most often classification is understood as one of the principal, most significant types of systematization (mizherikov, 2004; demina, przhilenskiy, 2017) as “a form of systematization by means of a certain distribution of these objects into groups” (subbotin, 2001). thus, the systematization of socio-economic problems in higher education in ukraine involves their unified system construction, which reflects the set of the considered problems, and also characterizes the relations of subordination and coordination. the main thing here, in our opinion, is the visual representation of problems interrelations and interdependence that can be achieved through the use of graphic methods. it will allow visualizing the range of problems, placing them in a specific order and sequence, that will provide a clear indication of their logical subordination and relationships, as well as determine the impact of the solution of each problem on others. in contrast, the classification of socio-economic problems in higher education in ukraine should provide an opportunity to distribute their entire range on separate grounds. obviously, socio-economic problems in higher education, regardless of their particularity, are an integral part of all socio-economic problems of society. that is why they can be classified according to the same grounds as all the problems (the dependence of problems on their subjects; the role in the society development; the time of action; scale; urgency; the level of understanding; the degree of solvability etc.). but first of all, it is necessary to form groups of problems according to the signs, which are the most relevant for higher education. 4. presentation of the main material 4.1. major socio-economic problems and contradictions in higher education in ukraine currently, in higher education, one of the main problems is the chronic underfunding of hei, which started in the soviet era. the lack of funds leads to the formation of many other problems and contradictions. therefore, this problem and the directly related ones should be given the foremost attention. one of the most significant problems caused by underfunding is the insufficient salary level of the academic staff. since they are the central resource and the main driving force of hei, then, all the socioeconomic problems affecting the lecturers’ activities should be under review in the first place. the insufficient level of remuneration for lecturers leads to the low social status of academic staff and other employees of heis, promotes bribery, brain drain baltic journal of economic studies 140 vol. 5, no. 4, 2019 to large cities of ukraine and abroad. the latter is of particular importance for regional heis, which often face staffing challenges. increasing the salary level for lecturers would enable the most talented youth to be involved in scientific and pedagogical work, which would help to solve the problem of a high average age of the academic staff members. the development of an effective system of evaluation and material stimulation of the academic staff activities, aimed at intensifying their scientific and methodological work, which requires additional funds is essential too. essential economic problems of higher education are: the outdated physical infrastructure, which requires immediate renewal, lack of computer equipment and up-to-date software, the inconsistency of the system of professional development and re-training of lecturers and current requirements. there are difficulties with the coverage of current hei payments. issues in higher education deepen under the influence of adverse factors of the environment, first of all – negative demographic processes, price increase for goods and services in ukraine, hei graduates with a degree in science and technology being unclaimed, refusal of enterprises to fund scientific research due to drop in production level, etc. thus, the demographic crisis has led to a reduction in the number of secondary schools’ leavers, resulting in a decrease in the number of students and a fall in incomes derived from the paid educational services, starting from the 2007–2008 academic year. at the same time, heis face the task of substantial improvement in the quality of the specialists’ training, which also requires increased funding. the shortage of funds prompts heis to introduce a strict austerity regime that only favours their retention, without resolving existing problems. the tight financial situation in ukraine and limited opportunities for the state budget make it challenging and even impossible to resolve these problems. there are several groups of contradictions that are caused by existing problems in higher education nowadays. among the contradictions, first and foremost, it should be noted that the academic staff salary level is inconsistent with the complexity, responsibility, and importance of their work; they have an insufficient material interest to improve the quality of training. solving the problem of insufficient salary level for lecturers is the solution of this contradiction. the second contradiction is that, on the one hand, the constant funding cuts require a strict austerity from hei, including the reduction of labour costs for academic staff, as now in ukrainian heis labour costs with accruals reach 80-85% of the total cost. on the other hand – increasing the interest in the outcome of their work, improving the quality of training, as well as rejuvenation of the staff implies an increase in salary level and, consequently, extra funding. using the limited funds to solve specific problems results in freezing and even deepening of the other ones. for example, targeting the vast majority of funds to a significant increase in salary levels may leave unresolved such problems as the need for equipment modernization, repair of buildings, increased funding for scientific research, organization of fellowship programs for lecturers in the leading heis of ukraine and the world, library collections update, etc. 4.2. major problems in higher education in europe and the usa it should be noted that most of the abovementioned problems are inherent not only in higher education in ukraine. in other countries of the world, one of the principal problems is underfunding too; it associates with the quality of higher education, financial relations with the state authorities. the lack of funds has led to the emergence and spread of economic and social problems in higher education in european countries and the united states. the financing problem has been worsened by the 2008 global crisis, which has reduced both the volume and the share of government funding. the strategy of reducing the support of public colleges and universities has been chosen by many countries in europe as well as by the united states (carpentier, 2015; mitchell at all, 2017, etc.). as a result, a tuition increase made a college education unaffordable to children of middle-class parents in the usa (standler, 2009). at the same time, a discussion about the role and place of public funding has continued for a long time. despite the development and spread of the idea of an entrepreneurial university, many scholars, specialists, and public figures believe that education, including higher education, is primarily a public good (locatelli, 2018; marginson, 2016, and others). understanding higher education as a public good necessitates equitable and equal access to higher education for everyone who has the necessary level of pre-training and regardless of his social and economic status. in terms of higher education, social equity will not be achieved through access to further education alone. in order to fully enjoy the benefits of higher education and to contribute to the society and economy in which they live, individuals need to complete their program of study (trends in global, 2009). in the report of the task force on higher education and society in the developing countries, which was created by the world bank and the united nations organization, there was formed an idea, that higher education “seems to be to combine tolerance at points of entrance with rigor at the point of exit” (world bank, 2000). it requires from each society to insure that all of its young citizens have both the prerequisites (academic and economic) and ongoing support to participate successfully, but the corresponding mechanisms are rarely used (trends in global, 2009). baltic journal of economic studies 141 vol. 5, no. 4, 2019 at that time, economic realities, commercialization of higher education have led to the transformation of modern institutions of higher education into market actors operating in conditions of fierce competition, competing for students, including from those abroad, the best lecturers, accumulation of funds from different sources, support of reputation (competition in international ratings) (mendoza, 2005). here one can add competition in providing the students with a broader range of specializations and specializations, as well as price competition. universities are now very nervous about two things: their public profile and future demand (schuller at all, 2018). reducing public funding leads to that “in a globalized world, universities are increasingly market-driven and market-funded. they operate under the constraints of decreasing public funding both in developed and developing countries. financial restrictions are accompanied by other kinds of restriction on academic freedom and institutional autonomy, and this happens both in liberal democracies and in authoritarian regimes and conflict-affected settings” (selenica, 2018). for decades, increased commercialization of higher education has led to negative consequences and a number of problems. among them: an erosion of quality, freezing new enrolment in programs, overcrowded lecture halls, elimination of distance education centres, reduction of the permanent workforce, including lecturers, and hiring part-time or temporary workers, lack of trained professionals, insufficient or outdated library holdings, computing, and internet connectivity, curriculum that avoids the matter of critical thinking, etc. all that happens simultaneously with increasing tuition fees and insufficient loan and scholarship schemes (trends in global, 2009; mitchell at all, 2015; selenica, 2018). many scholars draw attention to the fact that the condition and development of higher education should be tied to long-term state goals, national economic results and improved management efficiency. here the formation of the strong middle class, the development of entrepreneurship and the training of skilled workforce for a competitive economy, the positive impact of higher education on reducing crime, social activities strengthening, better health, which benefits the communities are given as the positive results (tandberg, laderman, 2018; mitchell at all, 2015; mitchell at all, 2017). cuts and inadequate support for higher education may limit higher education’s ability to support states in accomplishing their goals (tandberg, laderman, 2018). therefore, in the scholarly literature and in the press, the idea of raising the funding level for higher education is expressed. b. johnstone and p. shroff-mehta write that “higher education should continue to require state support”. simultaneously, less expensive forms of higher education have to be created, and financial assistance should be provided for those who require it ( johnstone, shroff-mehta, 2001). j. granados considers that “states must provide the necessary financing so that universities can carry out their public-service function (granados, 2011). j. denham pays attention to the fact that the english government needs to take back control of funding and use it to incentivize universities to provide the diverse courses that students and the economy need (changing the emphasis, 2018). it must be noted that in the vast majority of european countries, except great britain, public funding continues to play a dominant role. it was confirmed by the study of funding profiles in 28 european university systems (pruvot at all, 2015). even after public funding cuts because of the financial crisis its share in the european universities was ¾ (estermann, 2017). in 2013, the share of public financing of the european countries was distributed in this way (table 1). the smallest share of public funding ranged from approximately 40% in england to the biggest 95% in iceland and denmark (pruvot at all, 2015). table 1 distribution of european countries by the share of public funding public funding share, % 51-60 61-70 71-80 81-90 91-100 number of countries 2 4 7 8 2 source: based on (pruvot at all, 2015) lack of funds is felt in economically powerful countries as well. in england, nearly 25% of universities were in deficit last year. the number of universities with operating deficits rose gradually. across the uk, the number of reporting deficits was 10 in 2015-16, in 2017-18 increased to 32, compared with 24 the year before (adams, 2019). in the usa, the state spending on higher education has maintained a fairly steady downward trajectory, indicating that higher education is capturing far fewer funds than it did in the past. the share of state spending for higher education has also declined, with 8.2% in 1990 and only 5.2% in 2017 (tandberg, laderman, 2018). it is clear that in the current circumstances public funding is not enough for universities functioning and development. raising funds from other sources is also necessary. but private funding must be additional rather than substitutive (carpentier, 2015). the problem here is to determine the amount of public funding sufficient for affordable university funding and ensuring equitable access to high-quality higher education. it relates to all countries without exception, including ukraine. emphasizing the importance of public funding and assuming that higher education is a public good, s. bergan focuses on the difficulty in identifying how much public funding is reasonable and on what conditions (bergan, 2005). in his opinion, society believes higher education baltic journal of economic studies 142 vol. 5, no. 4, 2019 is vital to its development, and that a country as a whole should have advanced knowledge of a wide area of disciplines, society should also stimulate its members to seek higher education in as many fields as possible including those where higher education graduates will not have access to more highly paid jobs, e.g. school teachers. ensuring sufficient quality standards of training is the indisputable condition for public funding. though the decision that private institutions and programmes are recognised because they are of sufficient quality should not automatically mean they have a right to receive public funds (bergan, 2005). a significant problem is the employment of graduates, access to more highly paid jobs, study fees for students which are considered, as a rule, in the context of correlation between the costs and benefits of higher education. study fees serve as an investment in human capital, in which both the student and society are interested. among the problems connected with the employment of the higher education graduates in europe, v. kostoglou and. s. paloukis distinguish two major ones. the first is that many of the graduates are obliged to work in jobs not vocationally related to their subject of study. according to their data, in some countries those are more than 50%. another one is the significant rate number of graduates’ unemployment in some countries (kostoglou, paloukis, 2015). 4.3. the systematization of socio-economic problems in higher education in ukraine 4.3.1. the catalogue of socio-economic problems in higher education in ukraine to deepen understanding of the whole range of socio-economic problems and to analyse the state and trends of the higher education system development, it is necessary to have a single catalogue covering the most important of them. an analysis of a large number of publications on the problems in higher education in ukraine has made it possible to identify those of a socio-economic nature. as a result, a catalogue has been composed, which includes forty-one most important socio-economic problems in higher education in ukraine. these problems in another form (in the form of a two-dimensional square matrix used to classify problems) are shown in table 2, which is given below. 4.3.2. the variants of systematization of socioeconomic problems in higher education in ukraine one of the possible variants of the system of essential problems and contradictions in higher education in ukraine can be graphically represented as follows (figure 1). it provides an idea about a totality of issues, describes the principal causal relationships between them. though it must be admitted that the display of only the main problems makes it somewhat limited. thus, the figure shows only eighteen out of forty-one socio-economic problems contained in the catalogue. it is difficult to show in the figure all the complex of socioeconomic problems in higher education in ukraine. therefore, while studying the socio-economic problems in higher education in ukraine, depending on the objectives, it is desirable to select the issues from the catalogue, that are directly related to the purpose of the study. in figure 1, the main problems caused by underfunding of higher education, as well as problems associated with the formation and maintenance of its primary resource – academic staff, were chosen. it is clear that, for example, when studying the socio-economic problems of students, the variety of significant issues looks different. in addition to funding problems, the lack of computer equipment and software, the high average age of lecturers and their inadequate qualifications, it is also necessary to take into account socio-psychological problems of youth related to the students’ adaptation to hei, their socialization, selfaffirmation, formation of social maturity, organizational skills, ability to work in a team, etc., socio-economic problems (scholarships, support for young families), social and pedagogical problems of students related to the individual abilities in learning, problems to spur students to a self-conscious and persistent thirst for knowledge, and so on. similarly, in the analysis and systematization of socioeconomic problems of higher education in a certain country, causal relationships among the problems inherent in this country should be identified. it should be taken into account that, as shown in sections 3.1 and 3.2, the problems in higher education in european countries, the united states and ukraine are practically the same. but their importance and attitudes towards them are different in different countries. for example, such problems as bribery, the lack of real autonomy of heis, the problems of covering running costs, etc. are relevant for post-soviet countries. issues related to the employment of graduates became very serious in the southern part of europe (spain, france, italy). these problems are less obvious in north european countries (kostoglou, paloukis, 2015). to simplify the conceptual map of problems and make it comprehensible insignificant problems may not be displayed. 4.4. the classification of socio-economic problems in higher education in ukraine it is worth noting that systematization does not give the chance to identify the problems that have common characteristics for the most critical features of higher education. in our opinion, for solving socio-economic problems in higher education, the most important baltic journal of economic studies 143 vol. 5, no. 4, 2019 t he n ee d fo r im pr ov in g tr ai ni ng q ua lit y l ac k of c om pu te r eq ui pm en t a nd s of tw ar e t he o ut da te d ph ys ic al in fr as tr uc tu re d ec re as e in m on ey o bt ai ne d fr om th e pa id e du ca tio na l se rv ic es h ig h av er ag e ag e of le ct ur er s d if fi cu lti es in a ttr ac tin g yo un g pe op le to ac ad em ic w or k t he n ee d fo r re du ct io n of le ct ur er s’ re m un er at io n p ri ce in cr ea se fo r go od s an d se rv ic es in u kr ai ne in su ff ic ie nt m at er ia l in te re st o f t he ac ad em ic s ta ff pr ob le m s of c ur re nt pa ym en ts c ov er in g t he n ee d fo r ad di ti on al fi na nc in g fo r so lv in g pr ob le m s t he n ee d fo r ad di ti on al fi na nc in g of re m un er at io n n eg at iv e de m og ra ph ic pr oc es se s t he n ee d fo r co st -s av in g ? ? u nd er st af fi ng o f hi gh ly -q ua lif ie d le ct ur er s r ed uc tio n of th e nu m be r o f s tu de nt s ? t he li m it ed p os si bi lit ie s of th e st at e bu dg et – ch ro ni c un de rf un di ng o f h ig he r ed uc at io n in te rn al en vi ro nm en t o f hi gh er e du ca tio n t he li m it ed p os si bi lit ie s of th e st at e bu dg et – ch ro ni c un de rf un di ng o f h ig he r ed uc at io n e xt er na l en vi ro nm en t o f hi gh er e du ca tio n in su ff ic ie nt tr ai ni ng qu al ity a bs en ce o f t he re al a ut on om y of h e is in co ns is te nc y be tw ee n th e sy st em o f l ec tu re rs ’ a dv an ce d sk ill s tr ai ni ng a nd re tr ai ni ng a nd th e pr es en tda y re qu ir em en ts in su ff ic ie nt s al ar y le ve l o f l ec tu re rs b rib er y in h e is n on -r ec og ni ti on o f d ip lo m as o f th e m os t u kr ai ni an u ni ve rs it ie s in th e w or ld t he p ro bl em o f tr an si tio n to co m pe te nc y pa ra di gm in si gn if ic an t a pp lic at io n of ec on om ic g ov er na nc e in su ff ic ie nt s ca le a nd ef fe ct iv en es s of re se ar ch e xt er na l en vi ro nm en t o f hi gh er e du ca tio n fi gu re 1 . th e co nc ep tu al m ap o f t he m ai n so ci oec on om ic p ro bl em s an d co nt ra di ct io ns in h ig he r ed uc at io n baltic journal of economic studies 144 vol. 5, no. 4, 2019 thing is to distinguish the spheres of their immediate manifestation and their solution, as well as to determine the level of importance for each problem. this is because not all the problems are generated in higher education itself, a significant part of them affects other spheres of society. these problems solutions are in the sphere of higher education and beyond it. therefore, the classification of socio-economic problems according to these two grounds seems to be extremely important. it matters to higher education since it allows determining their own problems or these problems’ expansion onto other spheres of social life, as well as to determine whether their solution depends on higher education or on other spheres. such systematization is practical because it gives the chance to specify the direction vectors of this or that problem, to determine their targeting and the degree of responsibility of higher education for their solution. table 2 classification of socio-economic problems of higher education in ukraine according to the spheres of their manifestation and solution systematization signs spheres of problem solution higher education higher education, other spheres other spheres sp he re s o f d ire ct m an ife st at io n of th e pr ob le m s h ig he r e du ca tio n 1. insignificant application of economic governance 1. absence of real autonomy of heis 2. need to improve the management efficiency of heis 3. insufficient salary level of lecturers 4. insufficient material interest of the academic staff to improve their work 5. inadequate qualification of lecturers 6. the high average age of lecturers 7. inconsistency between the lecturers’ advanced skills training and retraining system and the present-day requirements 8. low social status of the academic staff of hei 9. difficulty in involving young people in education and research work 10. bribery in heis 11. understaffing of highly-qualified lecturers at the regional heis and brain-drain to the big cities of ukraine and abroad 12. poor physical infrastructure 13. lack of computer equipment and software 14. the problem of covering current payments 15. socio-economic problems of students (grants, young families support programs) 1. chronic underfunding of higher education, the need to apply its new forms and models 2. reduction in the number of entrants and students because of the demographic crisis 3. decrease in money obtained from the paid educational services 4. social and pedagogical problems of students, connected with their individual potential of education and upbringing. h ig he r e du ca tio n, o th er sp he re s 1. socio-psychological problems of the young people concerning the adaptation of students at heis, socialization, self-assertion, formation of social maturity, organizational and social skills, team work, etc. 2. stimulating students to conscious self-education and constant thirst for knowledge 3. inadequate upbringing 4. non-recognition of the diplomas of the most ukrainian universities in the world 1. insufficient level of training quality 2. the need for transition to competency paradigm 3. the mass character of higher education, lack of intellectual selection of entrants 4. the low motivation of young people to study 5. insufficient scale and effectiveness of research at heis 6. insufficient integration of education, practice and science 7. insufficient level of humanization in education 1. insufficient level of education accessibility 2. underestimation of heis activities for socio-economic development of the country 3. insignificant financial opportunities of enterprises to fund research 4. the contrariety of enterprises to innovations because of the low level of production base and insufficient innovation culture of society o th er sp he re s 1. obsolete teaching contents, overloaded with pseudoscientific, far from reality material 2. insufficient practical skills of graduates 1. an imbalance between the training of specialists and the needs of the labour market 2. difficulties in finding employment for graduates, insecurity of their first job 3. unequal opportunities to get the desired speciality due to disproportional distribution of heis and licensed quantity of students across the country 4. the need to ensure social mobility of heis’ graduates baltic journal of economic studies 145 vol. 5, no. 4, 2019 all the range of socio-economic issues that are in the catalogue can be presented by a two-dimensional square matrix 3×3 (table 2). the matrix contains three rows and three columns. the problems, given in these three rows are grouped according to the sphere of their manifestation: in the first row one can see those that are clearly manifested only in the sphere of higher education, in the third one – those that do not or rarely appear in the heis activities. they appear in other spheres of public life. the second row contains problems that are manifested simultaneously (although with varying intensity) both in higher education and in other spheres. in the matrix columns, socio-economic problems are distributed according to the spheres of their solution: in the first one there are those that can be solved in the higher education system, in the second one – those whose solution depends not only on higher education but also on other spheres. the third column contains problems whose solution does not depend on higher education, although it can be initiated by it. therefore, the proposed matrix contains nine squares. in the first one, there are problems that are manifested directly in higher education. they must be resolved in this sphere as well. the second square contains the majority of problems that are directly manifested in higher education. but at the same time, their solution depends not only on higher education but also on other spheres. the third square includes problems that are manifested in higher education but the latter has virtually no impact on them and they have to be resolved outside it. not referring to the problems included in other squares, the given matrix cannot be considered as a completely formed one. it includes socio-economic problems in higher education in ukraine, which are most often discussed. the inclusion of some problems in these or those squares can give rise to doubts. in addition, the situation may change over time. all this requires adjusting the matrix. 5. conclusions according to the results of the ukrainian economic and other literature sources analysis, the catalogue containing forty-one most important socio-economic problems in higher education in ukraine has been formed. it creates the primary basis for further research, including the systematization and classification of the considered issues. the systematization of socio-economic issues in higher education in ukraine should be carried out on the basis of the developed catalogue. at the same time, depending on the purpose of the study, it is necessary to choose the range of problems from the catalogue, which will form a system, reflecting interconnections and subordination of problems. the classification of socio-economic problems in higher education in ukraine can be carried out on various grounds. in our opinion, the classification of problems according to the spheres of their direct manifestation and the spheres of their solution is the most important now. graphically, it is appropriate to present such a classification in the form of a twodimensional square matrix of 3×3, which clearly shows where exactly (in higher education, in higher education and in other spheres or only in other spheres) there are problems. in this classification, there have been determined the problems, whose solution our society relates only to higher education, and those that require joint efforts of different spheres of our society for their resolving, and the ones which higher education cannot resolve. the approaches proposed to the systematization and classification of socio-economic problems in higher education in ukraine can be applied to other countries. further research must include an expert assessment of the importance of each problem and determining the impact of its solution 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(2017). trends in university funding in europe and the impact on universities and management. eua. adams, r . (2019, thu 21 mar). nearly 25 % of english universities in deficit last year, figures show. the guardian. retrieved from: https://www.theguardian.com/education/2019/mar/21/england-universities-in-deficit-figuresfinancial-pressure bergan, s. (2005). «higher education as a public good and public responsibility”: what does it mean?» in l. weber and s. bergan (eds). the public responsibility for higher education and research, council of europe higher education series, no. 2, council of europe publishing, strasbourg. kostoglou, v., & paloukis, s. (2015). graduates’ employment in european union. retrieved from: https://aetos.it.teithe.gr/vkostogl/files/publications/dimosieuseis_e26.pdf baltic journal of economic studies 116 vol. 5, no. 3, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: melnikknteu998@gmail.com orcid: http://orcid.org/0000-0002-3839-6018 2 kyiv national university of trade and economics, ukraine. e-mail: l.kudirko@ukr.net 3 kyiv national university of trade and economics, ukraine. e-mail: samsonova.lilija.gov.ua@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-116-124 contractual relations in the new economic competition strategies of tncs tetiana melnik1, liudmyla kudyrko2, liliia samsonova3 abstract. the purpose of the paper is to summarize theoretical studies in the field of contractual relations implementation in the modern strategies of tncs economic competition on international product and resource markets, as well as to assess the impact of certain contractual relations types on the macroeconomic dynamics of countries integrated into the global value chains of tncs. methodology. based on the world bank open data and unctadstat, there was made the assessment of indirect socio-economic and innovative effects of contract production on the macroeconomic indicators of the individual countries development by means of the correlationregression method. results. the influence of institutional, political, and economic restrictions that restrain the investment activity of international corporations on the international markets of finished and intermediate products is disclosed. a trend that complicates the forms and methods of external expansion in terms of more flexible latent forms, in particular, through contractual relations (subordinate production, licensing, franchising, contract management) is identified. the role of international contractual relations in measuring nonlinear formats of the externalization of tnc business is revealed. exogenous (related to the institutional environment of the host-countries) and endogenous factors (the sphere of activity, corporate strategy, formed competencies and competitive advantages of the companies) that allow tncs to obtain competitive advantages from the use of contractual relations in multi-level network structures with coordination mechanisms and management regimes are determined. practical implications consist in the improvement of a theoretical and methodical approach to assessing international contractual relationships from the positions of microeconomic analysis (means tnc’s management strategies) and taking into account macroeconomic effects (means their influence on the macroeconomic development of the contracting and implementing parties is proposed). value/originality. the article points on problems of expanding the practice of international contractual relations: optimization of taxation, predatory exploitation of human, technological and natural resources of host countries by tncs, “freezing” of national subcontractors on the stages with low value added, distortion of export capabilities of host countries by products export imitation created by means of the foreign suppliers’ give-and-take raw materials and, as a result, the distortion of the balance of payments. key words: international contractual relations, contract manufacturing, transnational companies, economic competition, international management. jel classification: f01, f02, f14, f23 1. introduction the intensification of economic rivalry between the subjects of the global economy for not only goods but also resources of international markets leads to the search for answers to new challenges of international production and distribution management, and first of all, for transnational companies (tncs). in the last decade, the traditional format of foreign expansion through investment has begun to be complemented by more flexible, latent forms of external expansion. international companies are increasingly using the methods of organizing their own international production, which is an alternative to direct investment and are determined by unctad experts as an activity that is not mediated by the investment flow and is not related to the equity nature of the interaction. such a new baltic journal of economic studies 117 vol. 5, no. 3, 2019 format of foreign expansion implies a contractual form of market transactions between companies of homecountries (usually tncs from developed countries) and companies of host countries (usually small and medium enterprises from developing countries and countries with transitional economies). the sales under contractual relations as of 2015 exceeded 2 trillion usd and captured about 10% of global exports (unctad, 2011). now contractual relations are an integral complex system of global tncs’ supply chains management and are actively supported by the governments of the host-countries with the aim to increase localization of international production on their territory and integrate the national business into the system of global value-added chains. at the same time, international practice demonstrates the extremely controversial impact of contractual relations on the country development of both executing countries and countries of origin, considering its socio-economic and innovation risks. in the mentioned conditions, the actual scientific and practical task is to reveal the peculiarities of tncs’ economic rivalry strategies modernization through contractual relations and to assess the macroeconomic effects of their development. 2. unsolved issues that are a part of the overall problem the problem of the factors and mechanisms of the tncs activities externalization within their global production systems with the participation both affiliated and independent companies was disclosed in the works of s. barrientos, j. gereffi, and a. rossi (barrientos, 2011). in the studies of peter j. buckley and mark c. casson, it was made a comparison of the advantages and risks of internationalization and externalization of international companies (buckley& casson, 2009). in the studies of s. dinc and i. erel, there were assessed expenditures on cross-border activities internationalization, including multivariate and multicurrency operations, which are increasing along with the strengthening of sociocultural and political differences between countries (dinc & erel, 2012). the generalized results of empirical studies dedicated to the assessment of the macroeconomic effects created by countries’ inclusion in the global value chains through contractual relation are presented in the works of s. miroudot, r . lanz, and a. ragoussis (miroudot & lanz, 2009). sectoral peculiarities of the international business development through modern contractual forms are disclosed in the works of g. duhinets (duhinets, 2016), a. mazaraki, s. melnichenko (mazaraki, 2018), o. rohach (rohach, 2013) the estimation of the potential growth of global production and distribution networks was carried out in r . baldwin’s works (baldwin, 2013). the majority of scientific publications consider the problems of tncs’ economic rivalry in terms of modifying investment formats, and the development of cross-border contractual relations is identified as a minor thing and not relevant to important issues for national economic development. at the same time, the statistics of international organizations and national statistical services confirm an increase in operations amount under international contracts and other types of crossborder contractual agreements. moreover, a number of problems associated with the latent optimization of tnc fiscal payments through various types of international contractual operations (franchising, licensing, contract management), and the predatory exploitation of host country resources without providing investment resources support; “freezing” national subcontractors at low value-added production stages; distortion of the country export opportunities and the suchlike are becoming barefaced. therefore, issues related to the analysis of the contractual relations place and its role in the tncs’ economic rivalry strategies modernization and the assessment of macroeconomic effects from the national open economies incorporation into global reproduction processes through the contractual relations require in-depth analysis. 3. approaches to tncs’ global networks management the global business environment of the first decade of the xxi century is characterized by the transformation of an organization established forms of production, trade and logistics companies from linear hierarchical structures to network structures, which leads to the formation of global cooperation networks. therefore, more and more countries and regions of the world with varying intensity are becoming participants in the global reproduction system. the objective basis for strengthening international cooperation is the fundamental changes in the driving forces of the international labour division. at the end of the twentieth century, the term “new international labour division” is being introduced by researchers with an emphasis not so much on the macro level as on the micro level, on the features of the global tnc production strategy. in the context of globalization shifts, transnational companies optimize the distribution of production operations in countries that ensure the resources optimization from the crossborder allocation. the post-industrial stage of development, at which the developed countries are characterized, is marked out by deepening, variability, and complication of production and commercial interrelations at both national and international levels. first of all, it applies to tnc; therefore, in the conditions of transformation of the organizational, economic, and technological background, there is a need to improve their development strategies. baltic journal of economic studies 118 vol. 5, no. 3, 2019 it is complicated to identify the role of contractual relations in the tncs modern strategies and the mechanisms of their influence on international cooperation. after all, the “channels” of social and economic ties and the separation of powers (hodgson, 1988; derevynskyi, 2011) between the levels and components of the tnc network, and not only within the corporate systems, in particular, by the j. hodgson’s definition, become not just “bundles” of property rights but also control over information, management and planning relations, complex “pyramid” of internal and external financial control, administrative and other noneconomic regulation, personal union, psychological and cultural climate, and even ideology of the company; market relations (for example, transfer prices) within these sophisticated complexes play a subordinate rather than a key role. these processes and relations can no longer be described as exclusively intra-company relations or management itself: within and around them exists a complex of economic (resource allocation, income and property relations, reproduction proportions, organization and motivation of labour), social (intracorporate “classes”, lifestyle, values, interpersonal relations and relations between social groups, stratification) and forceful relations, which constitute one of the key aspects of real socio-economic life of the modern world (belousov, 2012). new formats of cross-border relations are increasingly acquiring a resilience nature, are distinguished by a certain hierarchy and focus, which allows identifying them as a system of international cooperation. considering the transformations that occur in international business, it will be logical to recognize tncs not just a company with many branches abroad but a full-fledged economy, which has a significant impact on the development of economic relations in the world. the research vector of the international cooperation system is shifting precisely to the plane of tnc activity, and the concept of production and distribution cooperation is closely intertwined with global production networks. this statement was also reflected in the works of r . kashbrasiyev, who reveals this aspect of global production networks as a modern form of international cooperation based on competition (kashbrazyev, 2017). global production networks in terms of cooperation issues are sequential chains or complex networks that have been formed due to the production processes fragmentation and division of production operations (and/or business functions) between different countries, both on the basis of direct ownership and in the form of contractual relations. tncs manage global production networks through a complex system of relationships with suppliers and various forms of administration. now tncs are increasingly differentiating their activities within the production network, placing individual processes in the most favourable locations, both in the home region and abroad. it is inherent for companies with a significantly fragmented organizational structure or configuration of global production networks. it may include multiple operations and tasks; numerous affiliates, contract partners and trade or a combination of these forms. the managerial component also concerns the geography of the operations distribution, production spheres, and forms of cooperation (babek, 2015). in such global production networks, tncs should manage the fragmented, geographically dispersed production process, trade and investment flows, while at the same time ensuring that these actions are fully consistent with the company’s strategic goals (unctad, 2011). based on the generalization of the leading tncs practices, scientists s. altomonte and a. rungi emphasize on the fact that they coordinate global production networks using complex coordination mechanisms between suppliers and various management modes: from direct ownership of foreign assets to contractual relationships (in the case of international production, not related to equity) and trade. these management regimes and hierarchical structures in the global production networks through which they manifest, significantly affect the distribution of economic benefits and long-term incentives for development (altomonte, 2013). the tncs decision on where to invest and with whom to maintain a partnership, based on the factors of global production networks location, depends on the segment, goals or the specifics of tnc activities. 4. assessment of tncs’ contractual relations influence considering to the point of contractual relations in the newest management strategies of tncs from the view of micro-level would be incomplete if we did not pay attention to the macroeconomic dimension of their implementation at the country level integrated into the system of international cooperation through contractual relations. of course, the interests of contractors at the level of performers and customers differ. in particular, for the home-countries, it is about minimizing production costs, access to unique production and technological resources, overcoming trade barriers. also, companies from developed countries can use the contractual mechanism to optimize (both in money and in time) in the process of building their international value chains and then spreading the range of external expansion. on the other hand, developing countries use contractual relationships to include their business in the value chains; others use them for the purpose of technical and technological improvement of production processes and the subsequent creation of their own product, brand or trademark. baltic journal of economic studies 119 vol. 5, no. 3, 2019 for a number of countries in the context of ultra-high political risks, including restrictions on the investment activities of non-resident companies, contractual relationships serve as the determining mechanism for the inclusion of individual sectors of the economy in international trade. these countries mainly embrace transitive economies, some of the developing countries, countries in the african and asian regions, and a group of latin american countries. considering the fact that international contractual relations are the relatively new and complex object of research both in accounting and identification methodology, empirical work of both domestic and foreign scientists regarding them has a rather selective manifestation. nowadays, statistics on world trade and production volumes, mediated by contractual relations, is incomplete, moreover due to their impact on national and global economic development. we propose to evaluate their indirect effects (socio-economic and innovative) on the macroeconomic indicators of individual countries and draw conclusions about their significance. next section shows the results of the calculation of correlation indicators describing the nature and intensity of the relationship between contractual relations and socio-economic and innovation processes in the countries. 5. the results of the calculation for calculations, there were used the statistical databases world bank open data and unctadstat (world bank; unctad). indicators that directly or indirectly characterize socioeconomic and innovative processes, in particular, are the following socioeconomic: gdp per capita (usd), unemployment rate (unemp, % of people of working age), the level of economy openness (ecop, the share of exports in gdp in %), foreign direct investment inflows (fdi, usd million) and innovative ones: exports of lowskilled and technologically intensive production (ls&ti, thousand usd), exports of labour-intensive and resource-intensive production (li&ri, thousand usd), export of modern technology and technologyintensive production (mt&ti, thousand usd), exports of highly qualified and technologically intensive production (hq&ti, thousand usd). according to available statistical data, the correlation coefficients were calculated for contractual production (export and import flows) for 2005–2016. table 1 shows the correlation between exports of contract production services and indicators of socio-economic and innovation development of individual economies. table 2 presents the correlation between imports of contract manufacturing services and indicators of socioeconomic and innovation development of individual countries. in the case of contract manufacturing services import (table 2), we note that the number of countries in which international organizations provide statistical data is much smaller. 6. description of results mentioned in table 1 the data in table 1 show that the export of contract manufacturing services with different sighs affects the gdp per capita for the different countries. the negative impact on the growth of this indicator can be explained by the fact that the added value created during the processing of tolling raw materials is exported abroad and stays in the home country. this condition of affairs may indicate that in countries with a negative relationship between the indicators, almost all finished products produced on the basis of toll-free raw materials are returned to customers and do not consume it in the national market. in addition, in many countries of the world, services on the processing of toll-free raw materials are subject to preferential tax treatment, where the vat itself is exempted for the finished products and the cost of processing services. in other words, releasing this type of activity from vat and increasing its exports, countries are facing the situation of value-added outflow abroad, which, in turn, negatively affects the economic growth of the exporting country. countries with is a negative interdependence are: armenia, australia, bangladesh, belarus, belize, bolivia, macao (china), costa rica, czech republic, denmark, dominican republic, estonia, fiji, greece, iceland, republic of ireland, romania, samoa, palestine. it is important to note that despite the fact that countries with a different level of development have been affected by the negative relationship between exports of contracted production services and the gdp per capita, however, for developed countries, its significance is small from 0.01 to 0.11; another situation for developing countries – an average is 70 cases out of 100. in the case where there is a positive and significant relationship between the previously mentioned indicators, it can be argued that: first, the country sells a part of the produced products in the domestic market; and secondly, countries take over the technology of production and, within building up of production potential, already create their own goods; thirdly, this type of activity is appropriately taxed and contributes to the country budget; fourthly, the use of contract production launches the work of complementary and linked industries which produce value added in the country. significant influence is observed for the following countries: albania, belgium, bosnia and herzegovina, croatia, germany, honduras, italy, korea, malaysia, nicaragua, poland, moldova, serbia, slovakia, slovenia, switzerland, macedonia, and ukraine. for a significant number of countries, the export of contract manufacturing services has a positive impact baltic journal of economic studies 120 vol. 5, no. 3, 2019 table 1 correlation between exports of contract production services and indicators of socio-economic and innovation development of individual economies № individual economies gdp per capita unemp ls&ti li&ri mt&ti hq&ti fdi ecop 1 albania 0,74 0,25 0,46 -0,01 0,06 -0,22 0,51 -0,14 2 armenia -0,73 -0,05 0,72 -0,54 -0,22 -0,01 -0,68 0,81 3 australia -0,01 0,03 -0,36 -0,29 -0,33 0,28 0,26 -0,10 4 austria 0,49 0,10 -0,08 -0,15 0,18 0,56 -0,56 0,59 5 azerbaijan 0,19 0,05 0,59 -0,36 0,51 0,76 0,74 -0,46 6 bangladesh -0,64 -0,37 -0,21 0,27 0,73 0,52 0,92 0,49 7 belarus -0,05 0,35 0,02 -0,34 -0,32 0,05 -0,03 0,04 8 belgium 0,73 -0,34 -0,01 -0,34 -0,06 0,27 -0,54 0,82 9 belize -0,75 -0,33 0,21 -0,35 -0,26 -0,43 -0,20 -0,23 10 bermuda 0,07 н/д -0,14 -0,41 0,13 0,26 -0,13 0,10 11 bolivia -0,80 0,26 -0,58 0,20 -0,30 0,45 0,35 -0,08 12 bosnia and herzegovina 0,86 0,02 0,36 -0,10 0,54 0,73 -0,46 0,08 13 bulgaria 0,15 -0,72 0,20 -0,15 0,50 0,62 -0,56 0,71 14 burkina faso 0,70 0,16 -0,27 -0,01 0,53 0,39 0,71 0,27 15 cape verde 0,23 -0,73 -0,13 0,34 0,16 0,75 -0,38 -0,54 16 china 0,42 0,39 -0,14 -0,43 -0,77 -0,82 -0,83 0,76 17 china, macao sar -0,79 0,83 -0,18 -0,19 -0,04 0,62 0,56 -0,57 18 costa rica -0,14 0,21 0,04 0,91 0,84 -0,15 0,81 -0,75 19 cote d'ivoire -0,49 -0,37 0,09 -0,18 0,68 -0,08 0,63 -0,75 20 croatia 0,60 -0,80 0,39 -0,43 0,65 0,73 -0,52 0,62 21 cyprus 0,16 0,47 0,25 -0,41 0,08 0,51 0,22 0,65 22 czech republic -0,22 -0,57 0,43 0,06 0,65 0,45 -0,36 0,95 23 denmark -0,08 -0,04 -0,16 -0,49 0,22 0,01 -0,16 0,63 24 dominican republic -0,91 -0,62 0,22 -0,11 0,25 0,84 0,39 -0,46 25 el salvador 0,22 0,17 0,44 0,27 0,77 0,07 -0,20 -0,17 26 estonia -0,16 -0,66 -0,10 -0,28 0,25 0,53 -0,77 0,83 27 fiji -0,47 -0,82 0,01 0,13 0,67 0,68 -0,06 -0,1 4 28 finland 0,49 -0,76 -0,29 -0,50 -0,37 -0,68 0,02 -0,33 29 france 0,34 0,68 0,03 -0,54 -0,38 0,47 -0,23 0,86 30 georgia н/д -0,53 0,21 -0,12 0,05 0,65 0,47 0,92 31 germany 0,52 -0,22 -0,06 -0,16 0,32 0,48 -0,61 0,81 32 greece -0,01 -0,33 -0,38 -0,46 -0,16 0,26 -0,03 0,84 33 honduras 0,79 0,88 0,21 0,81 0,67 0,80 0,57 -0,80 34 hungary 0,18 -0,28 0,31 0,20 0,77 -0,30 -0,42 0,77 35 iceland -0,11 0,28 -0,34 -0,05 0,03 -0,56 -0,43 0,81 36 ireland -0,08 0,78 0,28 0,51 0,04 0,22 0,60 0,81 37 italy 0,76 -0,68 -0,14 -0,41 0,11 0,54 -0,10 0,67 38 japan 0,54 н/д -0,11 -0,55 -0,17 -0,68 -0,13 0,51 39 republic of korea 0,88 -0,33 0,37 0,24 -0,35 -0,54 0,16 -0,38 40 latvia 0,02 -0,82 0,11 -0,30 0,41 0,79 -0,35 0,87 41 lebanon 0,14 0,30 -0,38 -0,39 -0,11 -0,02 -0,77 -0,76 42 lithuania 0,11 -0,54 0,22 0,14 0,40 0,64 -0,59 0,90 43 luxembourg 0,35 -0,63 -0,47 -0,56 -0,41 -0,60 0,19 0,76 44 malaysia 0,88 0,49 0,50 0,17 0,61 0,34 0,55 -0,83 45 morocco 0,17 0,57 -0,15 -0,29 0,14 -0,14 0,49 0,32 46 myanmar 0,39 -0,33 0,13 -0,17 0,10 0,31 0,02 0,47 47 nicaragua 0,95 н/д 0,79 -0,17 0,86 -0,51 0,80 0,66 48 paraguay 0,49 -0,48 0,12 0,47 0,80 0,56 0,20 -0,87 49 poland 0,58 -0,17 0,72 0,42 0,70 0,77 -0,19 0,93 50 portugal 0,06 0,16 0,19 0,08 0,35 0,37 0,16 0,89 51 republic of moldova 0,94 -0,73 0,33 -0,51 0,50 0,53 -0,45 -0,51 52 romania -0,55 -0,54 0,19 -0,37 0,68 0,30 -0,45 0,73 53 russian federation 0,46 -0,12 -0,04 -0,56 0,20 0,32 -0,30 -0,69 54 samoa -0,56 -0,03 -0,03 -0,28 -0,62 0,24 0,13 -0,47 55 serbia 0,98 -0,34 0,38 0,15 -0,61 0,27 0,12 0,79 56 slovakia 0,90 -0,05 0,15 -0,11 0,60 0,47 -0,71 0,84 57 slovenia 0,73 -0,35 0,41 0,13 0,53 0,69 0,28 0,82 58 the state of palestine -0,46 н/д 0,38 0,56 0,72 0,36 0,08 н/д 59 switzerland 0,85 0,59 -0,28 0,07 0,01 0,73 -0,15 0,67 60 tajikistan 0,49 -0,22 0,35 -0,24 0,28 0,56 0,29 -0,63 61 macedonia 0,80 -0,69 0,02 -0,35 0,95 0,85 -0,25 0,71 62 ukraine 0,81 -0,17 0,19 -0,37 -0,40 -0,61 -0,57 0,14 63 united kingdom 0,07 0,59 0,22 -0,50 0,42 0,17 -0,28 0,74 source: developed by the authors on the basis of world bank; unctad baltic journal of economic studies 121 vol. 5, no. 3, 2019 on the level of unemployment (it is decreasing). this is logical, after all, the larger volumes of orders from foreign partners are, then more productive capacities of the country are involved and the more workers are required to service the industries. however, there are also some countries that are negatively affected: albania, australia, austria, azerbaijan, belarus, bolivia, bosnia and herzegovina, china, cyprus, france, honduras, iceland, ireland, lebanon, malaysia, morocco, portugal, switzerland, and united kingdom. what’s interesting is that for developed countries, the influence is not significant, while for developing countries is noted significant interconnection. the fact that the increase in exports of contract manufacturing services has a positive effect on the unemployment rate may indicate that a significant part of this sector experiences shadow (hidden) employment. the most significant negative impact on the unemployment rate is discovered for the following countries: bulgaria, capo verde, croatia, czech republic, estonia, fiji, finland, georgia, italy, latvia, lithuania, luxembourg, romania, and macedonia. investigating the correlation between the export of contract manufacturing services and fdi inflows, it has been found that both contractual relations and direct foreign investment can be considered as alternatives (in the case of negative interconnection) and complement each other (in the case of positive interconnection). in the first case, with the increase of contractual manufacturing export, the fdi inflows are decreasing; these countries include: armenia, austria, belgium, belize, bosnia and herzegovina, bulgaria, china, croatia, czech republic, estonia, germany, hungary, lebanon, lithuania, moldova, romania, slovakia, and ukraine. countries, where contract manufacturing and foreign investment complement each other, include albania, azerbaijan, bangladesh, macao, costa rica, georgia, honduras, ireland, malaysia, and nicaragua. it is worth noting that the use of contract formats can be a preamble to more serious cooperation in the form of foreign investment, the creation of joint ventures and other types of cooperation with a foreign investor. taking into account the export of labour-intensive and resource-intensive production, we see that for countries such as albania, armenia, azerbaijan, belize, bosnia and herzegovina, bulgaria, croatia, cyprus, czech republic, el salvador, georgia, honduras, table 2 correlation between imports of contract manufacturing services and indicators of socio-economic and innovation development of individual countries № individual economies gdp per capita unemp ls&ti li&ri mt&ti hq&ti fdi ecop 1 austria 0,55 0,51 -0,27 0,06 0,26 0,65 -0,46 0,60 2 belgium 0,46 -0,08 -0,30 -0,32 0,18 0,36 -0,38 0,78 3 bulgaria 0,03 -0,51 0,16 -0,18 0,74 0,77 -0,62 0,63 4 burkina faso 0,75 -0,13 -0,42 0,21 0,53 0,37 0,69 0,27 5 china 0,84 0,43 0,49 0,54 0,77 0,78 0,82 -0,83 6 china, macao -0,79 -0,27 -0,24 -0,22 -0,11 0,59 0,39 -0,63 7 croatia 0,35 -0,02 0,51 -0,57 0,70 0,65 -0,56 0,40 8 czech republic 0,39 -0,56 0,44 0,19 0,72 0,54 -0,43 0,89 9 denmark 0,16 0,09 -0,33 -0,42 0,29 -0,01 0,04 0,52 10 estonia 0,87 -0,17 -0,20 -0,20 0,39 0,71 -0,80 0,87 11 finland 0,22 0,30 -0,68 -0,60 -0,38 -0,77 -0,01 -0,37 12 france 0,17 0,48 -0,19 -0,57 -0,38 0,61 -0,26 0,78 13 georgia -0,04 -0,46 0,33 0,10 0,26 0,84 0,42 0,88 14 germany 0,11 -0,38 -0,14 0,03 0,44 0,59 -0,48 0,81 15 greece 0,78 0,26 -0,61 -0,49 -0,12 0,24 -0,13 0,73 16 hungary 0,30 -0,55 0,27 0,38 0,82 -0,28 -0,22 0,79 17 ireland н/д -0,12 0,23 0,64 0,19 0,06 0,50 0,86 18 italy 0,87 0,29 -0,22 -0,31 0,20 0,64 0,02 0,62 19 japan 0,58 -0,43 -0,31 -0,58 -0,16 -0,52 -0,27 0,41 20 republic of korea 0,69 -0,34 -0,01 0,10 -0,65 -0,74 0,21 -0,54 21 lithuania 0,46 -0,12 0,30 0,34 0,54 0,76 -0,58 0,93 22 luxembourg -0,67 -0,18 -0,64 -0,59 -0,40 -0,69 0,17 0,66 23 poland 0,49 -0,06 0,49 0,39 0,65 0,75 -0,17 0,90 24 portugal 0,36 -0,37 0,21 0,34 0,48 0,40 0,25 0,79 25 moldova -0,01 -0,36 0,19 -0,47 0,64 0,70 -0,46 -0,59 26 romania 0,87 0,02 0,15 -0,08 0,78 0,32 -0,59 0,77 27 the russian federation 0,35 -0,15 0,28 -0,45 0,52 0,68 -0,19 -0,79 28 united kingdom 0,11 0,16 0,35 -0,35 0,55 0,13 -0,37 0,86 source: developed by the authors on the basis of world bank; unctad baltic journal of economic studies 122 vol. 5, no. 3, 2019 hungary, ireland, paraguay, poland, an increase in the export of production under contract leads to an increase in the above indicator. this testifies to the fact that the contractual relations use has been found in industries and spheres of activity, in which labour-intensive products are produced, which does not require specific knowledge and skills and does not require high-capacity or even average production capacity. typically, the intensive use of contract manufacturing under the order of non-resident companies in such industries is “frizzing” the country in low-tech processes and links in the global value-added chains. on the contrary, if an increase in the export of production under contract creates an increase in the export of high-tech products, this indicates that contract relations are used in industries with specific competencies where highly qualified workers are needed and where greater value added is created. countries with this status include: australia, austria, azerbaijan, bangladesh, belgium, bolivia, bosnia and herzegovina, bulgaria, macao, croatia, cyprus, czech republic, dominican republic, estonia, fiji, france, georgia, germany, honduras, latvia, lithuania, paraguay, poland, moldova, slovakia, slovenia, switzerland, tajikistan, and macedonia. in our view, it is important to assess the impact of contract production on the level of national economies openness, which reflects the degree of their integration into globalization processes. if the government aims to strengthen its participation in international trade or involve national business in the global value-added chains, it can use contractual relations through the complex of institutional levers, including contract production as an instrument for achieving this goal. table 1 shows that significant exports of contract manufacturing services have a significant positive impact on the openness of the following countries: armenia, austria, bangladesh, belgium, bulgaria, china, croatia, cyprus, czech republic, denmark, estonia, france, georgia, germany, greece, hungary, iceland, ireland, italy, japan, latvia, lithuania, luxembourg, poland, portugal, moldova, serbia, slovakia, slovenia, and tajikistan. 7. description of results mentioned in table 2 another interesting observation is that in the majority of the sample there are developed countries and member countries of the g7, which is confirmed by the fact that the customers are advanced economies. however, there is a negative trend for such countries: by off-shoring, certain processes they generate unemployment in their country. such a situation is applicable to: austria, china, finland, france, greece, and italy. in other cases, an increase in the contract manufacturing services import is associated with a decrease in unemployment. this can be explained by the fact that contracting is usually only one stage during the value creation process of an international company, and therefore, the increase in production generates job growth at other stages, such as r&d, design, marketing, finance, logistics, and others. for almost all researched countries, the import of contract manufacturing services has a positive impact on the gdp per capita, as evidence of the fact that the main value added falls on the territory of the customer’s country, usually the jurisdictions of the tncs. also, in most cases, the import of contract manufacturing services positively affects the openness of the economy. for some countries, such as china, macao (china), finland, korea, moldova, and the russian federation, there is a negative correlation between indicators. at the same time, unctad experts point out that around 18-21 million employees worldwide are officially employed on the contract base in selected industries and value-added chain segments. most jobs are created through contract manufacturing, outsourcing services, and franchising. about 80% of jobs created through contractual forms of international business are in emerging and transition economies; especially in contract manufacturing and, to a lesser extent, outsourcing services. in addition, significant indirect impact on employment also affects other types of contractual relations, including contract farming. the jobs created are skilled and unskilled, depending on sector factors (unctad, 2011). the impact of contract manufacturing on employment in low-tech industries such as apparel and footwear is important for developing countries. most major brand companies, such as nike, adidas, h&m, gap, puma, and hugo boss use a large quantity of contract manufacturers based in different developing countries to produce their branded products. for example, all nike shoes are manufactured by subcontractors outside the united states – about 600 plants in 33 countries, including argentina, brazil, cambodia, china, el salvador, india, indonesia, mexico, sri lanka, thailand, turkey, and vietnam, which involves more than 800,000 employees. similarly, puma has concluded production agreements with approximately 350 factories, most of which are located in developing countries, which employ 300,000 workers. contract farming creates a large number of workplaces for small farmers; its implications for employment and poverty reduction are usually considered positively. the total number of contracting farmers is uncertain; however, individual projects may have several hundreds of thousands of farmer participants at the same time. for example, ptp group, a joint venture between asia timber products (singapore) and the local government in leshan, china, involves 400,000 forest workers in the production of woodfibre boards. similarly, nestlé (switzerland) employs more than 550,000 farmers worldwide, supplying them with products for their food and drink (oecd, 2013). in mozambique, around 400,000 contractor farmers are involved in global production networks. on a smaller baltic journal of economic studies 123 vol. 5, no. 3, 2019 scale but, nevertheless, significant for the countries and the segment of global production networks, cocacola/sabmiller employed 3,741 people in zambia and 4,244 in el salvador in 2008, mainly on contractual arrangements (gereffi, 2011). the direct impact of contract production under the order of non-resident companies on the localization of value added may be significant; at the same time, indirect effects are differentiated of the contractual relationships’ variety, the structure of the global production network of tncs and the capacity of the local firms used. according to unctad estimates, the creation of local value added of contract manufacturing and other formats of international contractual relations ranges from 400-500 billion usd annually. the largest (of this amount) influence have contract manufacturing and outsourcing services, they account about 200 billion usd. transboundary franchising accounts for roughly 150 billion usd of value-added worldwide. although the global value added of contractual relations reflects less than 1% of world gdp, in some developing countries it represents a significant share of economic activity. measuring macroeconomic effects from the development of international contractual relations as a modern strategy for the external expansion of tncs and the countries they present, does not allow fully assessing the magnitude of a range of socio-cultural and political problems and opportunities arising from its development. in particular, this applies to a large number of host-countries belonging to a group of developing countries. the matter concerns indirect external influences such as changing patterns of consumption and cultural values. thus, the implementation of international franchising in the national environment can influence socio-cultural norms, contributing to increased consumption, increased use of imported resources, as well as the development and strengthening of commercial values and standards (rykova, 2011). in this context, although there are many economic benefits that arise from the expansion of local business on the basis of international franchising, international practice also reveals the appearance of institutional conflicts due to the conflict between the elements of “modernization” that involves the implementation of contractual relations, as well as components of traditional identity. 8. conclusions the study leads to the following generalizations: – the intensification of competition in international markets and the increase of the institutional, political, and economic risks associated with the investment of tncs lead to the hybridization and the complexity of their external expansion forms, in particular, in the case of the non-linear forms of business development by the international contractual relations; – the latest trend in the transformation of the production networks of tncs architectonics is the formation of multi-level networks operating through complex coordination mechanisms between suppliers and different management modes: from direct ownership to contractual relationships and trade; – taking into account the multidimensional nature of international contractual relations, they can be identified both from the positions of microeconomic analysis and from the perspective of macroeconomic aspects; – the assessment of the indirect (socio-economic and innovative) effects of contract manufacturing services of non-resident companies on the macroeconomic indicators of the individual countries development has shown contradictory effect, which is conditioned by the status of the country (exporter or importer), sector specificity, specialization in relevant business processes or global production network links. prospects for further developments in this area are related to a more in-depth analysis of the mechanisms of fiscal optimization of tncs through various types of international contractual operations (franchising, licensing, contract management) and institutional instruments for counteracting it. gratitude. the preparation and writing of the article became possible with the support and funding of the ministry of education and science of ukraine in the research topic “the potential of import substitution in ukraine in the conditions of the post-industrial economy establishment”, which was carried out at the international economic relations department of knute in 2019 (state registration number 0119u100625). references: altomonte, s., rungi, a. 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(in russian) site of oecd. interconnected economies: benefiting from global value chains. retrieved from: http://www.oecd.orgjstijindjinterconnected-economies-gvcs-synthesis.pdf site of united nations conference on trade and development. unctadstat data center: services (bpm6): exports and imports by service-category and by trade-partner. retrieved from: http://unctadstat.unctad.org/wds/ reportfolders/reportfolders.aspx site of united nations conference on trade and development. world investment report 2011: non-equity modes of international production and development. retrieved from: http://unctad.org/en/pages/publicationwebflyer. aspx?publicationid=84 site of world bank open data. world development indicators. retrieved from: http://databank.worldbank.org/ data/home.aspx baltic journal of economic studies 79 vol. 5, no. 5, 2019 corresponding author: 1 odessa national academy of food technologies, ukraine. e-mail: melikh@gmail.com 2 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 3 admiral makarov national university of shipbuilding, ukraine. e-mail: bogatyrev@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-5-79-83 organizational and economic fundamentals of development of sports tourism in the system of management of sports and health activities olena melikh1, inna irtyshcheva2, konstantin bogatyrev3 abstract. the article highlights the approaches to the development of sports and health activities and sports tourism in various spheres of society. it is proved that the current standard of quality of life in ukraine is characterized as not satisfactory. many factors affect the quality of life: lifestyle, genetic and environmental factors. however, one of the main issues remains the underfunding of development. the work investigates the state of financial support for health care, which is closely related to the level of low healthy life expectancy. it is determined that in modern conditions physical culture and sports are a necessary element of life of every ukrainian. it is justified that grant programs are the main financial source for the development of physical culture and sports. it is proved that the state and non-state policy of development of physical education and sports should be built on creation of the corresponding concept for the next five years, which will include the appropriate strategy and program of development of physical culture and sports. the purpose of the article is a study of the peculiarities of organizing sports and health activities in different spheres of society and mechanisms of financing physical culture and sports in ukraine. to achieve this goal, the following tasks are solved: to reveal the role and importance of organizing sports and health activities in different spheres of society; to conduct an analysis of the current state of financing of health care, physical education and sports; outline strategic guidelines for improving state and nongovernmental policies on financial provision for physical education and sports. subject and object of study. the subject of the research is theoretical and practical aspects of organization of sports and health activities in different spheres of society. the object of the research is the process of managing sports and health activities in different spheres of society. research methods. for a comprehensive study of the necessary information the basic methods of information research in management were used. in the study of the current state of financing the health care, physical education and sports the methods of statics and dynamics were used. the dynamic method was used to analyze health care expenditures in percentage terms to gdp and total expenditures, average life expectancy at birth in ukraine, transition from one equilibrium state to another for the period from 1995 to 2017. the static method involved a comparison of the amount of annual funding from the state targeted social program for the development of physical culture and sports and the actually allocated funds. an economic model of the dynamics of health care expenditures in percentage terms to gdp and total expenditures, average life expectancy at birth in ukraine in the form of a graph is constructed. key words: sports tourism, health activity, physical culture, sports, management of sports and wellness activities. jel classіfіcatіon: z21, z23 1. introduction human health is a socially significant phenomenon, the level and condition of which can assess the wellbeing of society. the higher the level of the culture of health of the whole society, the higher the level of culture of healthy lifestyles of each person. the world experience shows that motion activity of a person throughout life prevents disease and improves health. it is physical culture as a component of the general culture, the social manifestations of which is physical education and popular sport, is an essential factor in healthy lifestyles, prevention of diseases, organization of meaningful leisure and creation of conditions for comprehensive harmonious development of a person. in recent years, ukraine has begun to pay more attention to the development of recreation and health, baltic journal of economic studies 80 vol. 5, no. 5, 2019 i.e. sports tourism. sports tourism is an integral part of the national system of physical culture and sports. it aims at promoting health, developing the physical, moral and volitional and intellectual abilities of a person by engaging in participation in sports trips of various complexity and competitions in the technique of sports tourism. sports tourism performs a variety of sports, health, recreational, informative, educational, economic and other functions. however, due to a number of factors, the level of their realization does not correspond to the potential opportunities of the tourism and sports movement in ukraine. the main feature of sports tourism is that, unlike most other types of tourism and sports, it does not require relatively large material costs. firstly, it develops in the existing natural environment and does not require significant investment for the preparation and holding of tourist and sports mass events and the installation of special facilities for their holding. secondly, the logistical and organizational support of these measures is largely carried out by the forces and means of the tourists themselves. thirdly, a public system of training and promotion of personnel has been established and is in operation, which can continue to function effectively with minimal expenditures by the state. however, today, despite the potential for great opportunities, its social and economic importance, sports tourism in ukraine is underdeveloped. the difficulties that sports tourism has encountered in its development are, first and foremost, related to the economic problems of social development, as well as to the almost complete lack of state and public support for this sport. that is, the development of sports tourism should be viewed through the prism of the system of management of sports and health activities. 2. management in the sports industry the current situation in the field of physical culture and sports in ukraine is caused by the following factors: inconsistency of the legal framework in the field of physical culture and sports with modern requirements; inconsistency of the infrastructure of physical culture and health activity in the production, educational and social sphere to the needs of the citizens; imperfection of the system of centralized training of national teams, low level of financial and logistical support of children and youth and reserve sports; low level of scientific support for the development of physical culture and sports, underfunding for research; insufficient promotion of healthy lifestyles, children and youth and reserve sports; unsatisfactory condition of the material and technical base. the level of providing the population in ukraine with gyms (per 10 thousand people) is 2-3 times lower than in the leading states, for swimming pools it is 30 times lower. more than 80% of sports fields do not meet modern requirements; insufficient budget financing (from the state budget an average of 0.6% is allocated; 2% of their expenditures from the local budgets), inefficient attraction of extrabudgetary funds, a small amount of investments; the activities of launching and conducting state sports lotteries, which is one of the main sources of funding for sport in many european countries, are not carried out; imbalance in the system of education and advanced training of specialists, low wages, insufficient number of instructors in the field of fitness and health activity (1 employee of physical culture per 600 ukrainians) (horbenko, 2009). the development of physical culture and sports is not only an indicator of social progress, but also one of the conditions for the growth of labor productivity, along with factors such as scientific and technological progress, advanced training and organization of work. strategic management of the development of physical culture and sports is based on the use of a systematic approach, which is implemented through a systematic and situational analysis of the state of activity of organizations of physical and sports orientation. as the field of physical culture and sport is positioned as an open socio-economic system, strategy development should be based on a deep analysis of external and internal factors that affect the performance of the sphere as a whole: the external factors are macroenvironment, the world experience of physical culture and sports; the microeconomic factors are the state of development of scientific research, the quality of methodological recommendations and developments, the characterization of personnel potential, the quantitative and qualitative aspects of material and technical support, the efficiency of use of financial instruments, the quality of preparation of sports reserves and institutional and management structure at all levels of management. increasingly relevant are the issues of improving the knowledge and skills of the members of management and retaining highly qualified personnel; discretionary actions of the state and further personification of the duties of civil servants; motivation of actions of senior officials in favor of the public interest. the practice of functioning of the system of physical training confirms the expediency of allocating the optimal number of general functions, which corresponds to the principle of sufficiency in terms of their practical use. the main tasks of sports and health activity are: promotion and preservation of health; comprehensive development of physical abilities; deepening of the cultural knowledge necessary for using in everyday life; formation of conscious motivation for systematic physical education. the management of sports and recreational activities is becoming more significant in the global economic space every year, as the overall volume of the global sports industry market is constantly increasing. in addition, it is important to involve different groups of the population in health and recreational motor activity and baltic journal of economic studies 81 vol. 5, no. 5, 2019 the introduction of effective management, i.e. to create motivation, to select qualified specialists, to design an area of economic comfort. as a result, the demand for managers in the field of physical education and sports is increasing every year. therefore, there is an urgent need to train high-level specialists with modern management thinking, a system of specialized knowledge in the field of sports facilities management, who have fundamental and practical skills in managing sports and health activities and are able to apply them. in addition, scientific works in the field of sports and health activities are designed to identify talented, purposeful students and will help to develop and maintain the health of the younger generation. this will create a scientific basis for sports and wellness activities, increase prestige, contribute to reducing morbidity, improving the demographic situation, economic growth of ukraine and the social climate. 3. features of financing of physical culture and sports in ukraine financing is a major factor in the sustainable development of any state. the welfare of the population depends on financial investments in any sphere of the national economy. research of the current state of government funding in such areas as health care, physical education and sports is a major prerequisite for their further development. identifying promising sources of funding for physical culture and sports will ensure their future development. an analysis of the current state of government support, through a targeted social program for the development of physical culture and sports for the period until 2020, will reveal the problems of financing and the imperfection of the respective system. all this creates the specifics of financial security and determines the prospects of the study. according to nikitenko s.v., the financing of physical culture and sports should be through the improvement of the national level, which requires: – elaboration of a new strategy of the state policy of development of physical culture and sports in new socio-economic conditions; – ensuring the implementation of the main provisions of the targeted program of development of physical culture and sports in ukraine for the future; – cross-sectoral coordination and functional regulation in the field of physical culture and sports; – further development of the regulatory legal framework to support the fitness and sports movement, professional sports, including the participation of local units in the development of draft laws; – creation of an adequate scientifically sound system of rehabilitation and physical education of the population; – development and implementation of cross-sectoral targeted programs on physical culture and sports development; – training and retraining of highly qualified personnel; – methodical, financial, organizational support of preparation and performances of national teams at international competitions; – creation of conditions for development of the sports industry in the country to attract investments in the field of physical culture and sports; – carrying out all necessary works on mandatory certification of products and services in the field of physical culture and sports (nikitenko, 2016). kononovych v.h. noted that there was a need for a clear definition and delineation of the strategic tasks of state and public organizations in the development of physical culture and sports. the low growth rates of extrabudgetary financial flows and their small share in the overall structure indicate the need for economic regulation of the bases for the creation of a favorable investment climate in the industry, both at the level of individual administrative units and the state as a whole (kononovych, 2018). organizational basis for the development of physical culture and sports in ukraine should be presented as an extensive network of sports clubs and centers of different ownership and orientation: health, for sports interests, from certain sports, etc. the state should take measures to create appropriate conditions for the functioning of such clubs and centers in educational institutions, enterprises, institutions and organizations, at the place of residence and mass recreation of the population. economic activity in the field of physical culture and sports should be aimed at meeting the growing needs of the population of ukraine in highquality fitness and sports services and contribute to the growth of business activity of subjects of all sectors of this sphere, harmonization of their economic relations with other entities (zhurylo, 2017). it is necessary to agree with the opinion of lednov v.o., as he notes that “modern sport is a dynamically developing industry, a new investment attractive sector of the economy. business is increasingly cooperating with sports, many large companies are partners of the international and national federations for sports, professional leagues and clubs, as well as organizers of sports competitions. sports for business is a very effective channel for promoting its products and services” (lednov, 2010). according to the ukrainian institute for strategic studies of the ministry of health of ukraine, the current health condition of the ukrainian population is estimated as unsatisfactory, which is related to: – a high rate of overall mortality, which is steadily increasing. according to the european health for all database, the higher than in ukraine standardized mortality rates are recorded only in russia, kazakhstan and moldova; – low life expectancy levels (71.31 years, lower only in russia, kazakhstan, turkmenistan); baltic journal of economic studies 82 vol. 5, no. 5, 2019 – low length of life (59.2 years); – one of the highest natural depopulation in the european region. the main prerequisites for a high mortality rate are risk factors such as smoking, excessive alcohol consumption, lack of exercise and excess weight. doctors recommend treating sports and physical activity not as entertainment but as a compulsory element of every ukrainian’s life. if the situation does not change, in 2040 every second ukrainian will complain of increased pressure and overweight. general global trends in increasing the incidence of residents are observed due to the passive lifestyle and the transfer of a significant percentage of business activity in the virtual space. the negative factor of health care financing in ukraine is a reduction in the consolidated budget expenditures to gdp from 4.8% in 1995 to 3.4% in 2017, or 1.4 p.p. during the study period by 1 p.p. there was a reduction in health care expenditures in percentage terms of total expenditures. as the amount of health care expenditures decreases, the same is observed in the field of physical education and sports. however, as it is noted above, physical education and sports are a major driving force in promotion and preservation of the human health, and therefore there is a need to analyze modern financial support and find alternative sources of funding. in ukraine, the concept of the state targeted social program for the development of physical culture and sports for the period to 2020 is adopted and currently operates. its purpose is to give physical culture and sports in ukraine a leading role as an important factor in a healthy lifestyle, disease prevention, the formation of humanistic values, the creation conditions for comprehensive harmonious development of the person, promotion of achievement of physical and spiritual perfection of the person, identification of reserve possibilities of an organism, formation of patriotic feelings in citizens and positive image of the state in the world community. kononovych v.h. notes that today there is no register of public organizations of physical and sports orientation in ukraine. however, they can be divided into specific groups: – national sports associations; – fitness and sports associations; – fitness and sports public organizations (federations, associations, unions, etc.) of a particular sport or group of sports; – fitness and sports associations of social groups; – sports clubs of different organizational and legal forms; – teams of physical culture (kononovych, 2018). most public and non-profit organizations can be involved today in the development of grant applications aimed at updating the material and technical resources of sports facilities, the development of educational and methodological recommendations for improving physical activity and healthy lifestyle. today, two projects have been developed in ukraine: “the strategy for the development of physical education and sports among the school-age youth until 2025” and “the strategy for the development of physical education and sports among the student youth until 2025”. the purpose of the two strategies is to create conditions for healthy physical activity and healthy lifestyles, to ensure the accessibility of sports for project strategy for the development of physical education and sports among the student youth until 2025 project strategy for the development of physical education and sports for schoolage youth until 2025 state targeted social program for the development of physical culture and sports for the period up to 2020 developed and implemented the concept of development of physical education and sports among the population of ukraine until 2025 strategy of development of physical education and sports among the population of ukraine until 2025 state program for the development of physical education and sports for the population of ukraine until 2025 proposition figure 1. improvement of the state policy on the development of physical education and sports in ukraine baltic journal of economic studies 83 vol. 5, no. 5, 2019 children, school-age youth, students to engage them in physical education and sports and to shape the health of citizens as the highest social value in the country. having analyzed both strategies, we see similarities between them, so it is proposed to improve and create a general concept of development of physical education and sports among the population of ukraine until 2025. we consider it necessary to pay special attention to the development of the concept of development of physical education and sports among the population of ukraine until 2025 (figure 1). the concept sets out the foundations of public policy to support the proper level of development of physical education and sport, namely: the totality of the goals of the development of physical education and sport, the system of national interests in this field and the priorities of state policy for ensuring the national security of the country. at the same time, the strategy for the development of physical education and sports should specify and define a strategy for the implementation of the main provisions of the concept of development of physical education and sports among the population of ukraine until 2025 as the basis of the state policy towards ensuring the national security of the country and the proper financial provision for physical education, sports and health care. in general, the proposed measures to improve the state and non-state policies in the field of physical education and sports development will make it possible to increase the standard of living of the population. 4. conclusion imptovement of the public health is one of the priorities of the present time. the state attaches particular importance to the substantiality of organization of sports and recreational activities in different spheres of society, according to the peculiarities of each of them. today, ukraine is lagging behind the standard of living of the european countries, ranking 150th among 223 countries in the world and 122nd among the un members in terms of average length of life. the main factor leading to the deterioration of the development of the respective industry is the low funding. an analysis of the current state of health financing indicates a low level of security, from the so-called consolidated budget to gdp declined from 4.8% in 1995 to 3.4% in 2017, or 1.4 p.p. it is proved that in connection with the limitation of public financial resources the question regarding the search for alternatives arises. a promising source is grants, which are funds that are provided on a nonprofit basis to non-profit organizations or individuals for the implementation of social projects, charitable programs, research, training, and other socially useful purposes. it is justified that the current state policy on the development of physical culture and sports is imperfect. it is proposed to improve the state targeted social program and draft strategies for the development of physical culture and sports, by creating a new concept for the development of physical education and sports among the population of ukraine until 2025, which will be a new strategy and program. references: zhurylo, o. m. (2017). derzhavne finansuvannia fizychnoi kultury ta sportu v ukraini [state funding for physical culture and sports in ukraine]. ekonomichnyj visnyk universytetu, 17/2, 261–264. (in ukrainian) kononovych, v. h. (2018). udoskonalennia derzhavnoho upravlinnia u sferi fizychnoi kultury i sportu pry oriientatsii na yevropeiskyi vektor rozvytku [improvement of public administration in the field of physical culture and sport with a focus on the european vector of development]. aktualni problemy derzhavnogo finansuvannya, 1(43), 426–431. (in ukrainian) nikitenko, s. v. (2016). osoblyvosti finansuvannia fizychnoi kultury ta sportu v ukraini [features of financing of physical culture and sports in ukraine]. derzhava ta regiony, 1(53), 103–106. (in ukrainian) lednev, v. a. (2010). industriya sporta kak arena konkurentnoy borbyi [sports industry as an arena of competition]. «naukovedenye». (in russian) pro skhvalennia kontseptsii derzhavnoi tsilovoi sotsialnoi prohramy rozvytku fizychnoi kultury i sportu na period do 2020 roku vid 09.12.2015 № 1320-2015-r [on approval of the concept of the state target social program for the development of physical culture and sports for the period up to 2020 dated 09.12.2015 № 1320-2015-р]. retrived from: https://zakon2.rada.gov.ua/laws/show/1320-2015-%d1%80 horbenko, o. v., & korniienko, i. h. (2009). orhanizatsiino-upravlinski rezervy profesiino-oriientatsiinoi roboty vnz haluzi fizychnoi kultury i sportu iz zahalnoosvitnimy shkolamy [organizational and managerial reserves of vocational orientation work of heis in the field of physical culture and sports with secondary schools]. mykolaiv: nuk. (in ukrainian) tymoshenko, l. o., & labartkava, k. v. (2012). sportyvnyi turyzm: navchalnyi posibnyk [sport tourism: a textbook]. lviv: ldufk. (in ukrainian) kysil, t., kolodka, a., & rosokhata, a. (2014). import substitution as a means of image forming: prospects forecast of industrial enterprises in ukraine. economics & sociology, 7(2), 123–135. baltic journal of economic studies 118 vol. 6, no. 1, 2020 corresponding author: 1 uman national university of horticulture, ukraine. e-mail: sakovska_lena@ukr.net orcid: https://orcid.org/0000-0003-2676-6170 doi: https://doi.org/10.30525/2256-0742/2020-6-1-118-124 agricultural cooperation: experience of foreign countries for ukraine olena sakovska1 abstract. the purpose of this article is to analyze the experience of agricultural cooperation in foreign countries, such as sweden, norway, finland, japan and apply it in ukraine. the defining feature is that the existing agricultural cooperation in ukraine is not backed up by proper legislation to integrate with the european countries. analyzing the state of agricultural cooperation in ukraine in comparison with foreign countries, the country remains a number of unresolved issues regarding its normal functioning, namely: the activation of international economic cooperation of ukraine involving the development of a strategy for the effective functioning of agricultural cooperation, which is the basis for ensuring the various areas of rural development employment of rural population. in addition, agricultural cooperation stimulates the development of agrarian market infrastructure, plays an exceptional role in strengthening the economic potential, competitiveness and social status of agricultural producers, improving economic conditions and creating incentives for the growth of commodity products. however, so far its development is at a low level, the main reasons being the underestimation in the process of economic reforms of cooperative forms of economic activity, general unfavorable conditions for agricultural production, psychological unwillingness of peasants to cooperate and insufficient knowledge of the rural population about the benefits of cooperation, weak state support for small businesses in agribusiness and agricultural cooperatives. methods. the countries of the west in every way stimulate the development of cooperation: by appropriate laws, privileges, subsidies. ukraine needs to take the example from these countries in order to develop the cooperative movement, which will stimulate rural development. results. ukraine is trying to build on the experience of different countries in the field of agricultural cooperation, backing up on the best of the countries studied. practical implications. studies have shown that world experience convinces that cooperation has contributed to the development of many countries in the world. in europe, for example, cooperatives are an important part of economic life and industry. value/originality. analyzing the activities of agricultural cooperatives operating in the world, we point out that the main advantage of combining agricultural producers in cooperatives is a grower group (union or cooperative) is considered as the only powerful organization that is able to buy large volumes of products and services and realize large volumes of production. key words: sweden, norway, finland, japan, agricultural cooperation, foreign experience, legislation, ukraine. jel classification: d73, h70, h72, h77, r50 1. introduction throughout the developed world, the efficiency of small and medium-sized agricultural producers is achieved by combining them for the purpose of joint production, access to financial and material resources and the promotion of their products. in turn, agricultural cooperatives are one of the most common and effective forms of such an integration, the share of which in the eu agricultural market is 40-50% and up to 70% in individual countries and sectors. the annual turnover of the 10 largest farmer cooperatives in the eu is over 93 billion usd, almost equal to the annual gdp of ukraine. the situation with the development of agricultural cooperation in ukraine is quite different. the share of production agricultural cooperatives in the total volume of agricultural production in ukraine is less than 1%, and the number of individuals-members of agricultural service cooperatives is less than 30,000 people, that is, less than 0.2% of the rural population of ukraine. this is despite the fact, that a lot of resources have been invested in the development of agricultural cooperation in recent years, both by the state and by international technical assistance projects. the experts analyzed the reasons, hampering the development of agricultural cooperatives, and finally concluded, that the main of them is the imperfection of the current legislation and without its significant updating, some significant progress in the development of rural cooperation will not be possible. baltic journal of economic studies 119 vol. 6, no. 1, 2020 2. economic crisis effects on consumer behaviour cooperative organizations are an integral part of the economic systems of the member states of the european union. their role in the agrarian sector of these states is especially prominent. the activity of the eu cooperatives, based on the principles of democracy, transparency and solidarity, opens up access for farmers to financial and logistical resources, internal and external markets, and promotes the social and economic development of rural areas. in the context of the european integration tendencies, which currently permeated the agrarian sector of the ukrainian economy, the study of the experience of cooperation between farmers of the european countries can be useful both from the point of view of its adaptation to domestic realities and of the most significant mistakes and miscalculations in the development of the cooperative movement of these countries. the key problem of the post-war europe was starvation. for a long time, the main efforts of european states have been directed at its solution. the agrarian sector has begun to play a leading role in the context of food security of these countries. the treaty of rome establishing the european economic community, signed on march 25, 1957, contained the most important framework positions of the common agricultural policy (cap), aimed at solving hunger problems on the european continent. 3. differences in consumer spending behaviour among age groups the activities of cooperatives in the eu countries are based on the principles of economic democracy, transparency and solidarity with each other and with local rural communities. they play a vital role in the promoting the products of their members directly to consumers and improving their position in the markets, promote the production of environmentally friendly products; actively participate in the economic and social development of rural areas. today, there are about 14 million farms and other agricultural production units directly involved in agriculture in the eu. the average farm size in the eu is less than 13 hectares. the largest farm sizes are in denmark (about 59.7 hectares), in the united kingdom (about 53.8 hectares), in france (over 52.1 hectares). on average, over 40% of farms are covered by cooperatives in eu countries. the largest number of agricultural cooperative organizations operates in italy (5834 units), in spain (3844 units), in france and in germany (2400 units each). at the same time, the largest number of members (1 440 600 people) are attracted to the german (1 179 323 people) and spanish cooperatives. the highest annual sales turnover in 2017 were received by the french (84 350 million eur) and by german (67 502 million eur) cooperators. agricultural cooperatives in almost all the european countries are widely supported by the state. most eu member states have created "specific legislation" for cooperatives, which gives them some freedom. in particular, the legislation, generally, does not provide for a standard cooperative management procedure, although, in most cases, cooperators adhere to the principle of "one member – one vote". a number of european countries do not set a minimum number of members in cooperatives (denmark, lithuania, croatia and the netherlands), however, some countries regulate such restrictions (belgium, italy, france). in most eu countries, cooperatives are subject to a common system of taxation without any exceptions or special rules (austria, belgium, croatia, the czech republic, denmark, finland, france, germany, latvia and romania). however, in france, cooperatives are subject to special tax arrangements, paying only corporate tax, regional fees and real estate tax. the greek cooperatives are also exempt from multiple taxes. in the netherlands, the law contributes to the reduction of taxable profits, resulting from economic transactions between members of a cooperative. portugal has specific tax benefits for cooperatives. 4. survey methodology ukraine's integration into the world economy is accompanied by the dependence of the national economy on the economies of the world. the ukrainian cooperatives need the experience of developed and transition economies sphere of consumer cooperation. in the process of ukraine's integration into the world cooperative movement, there is an opportunity to gain experience of cooperative activities abroad. the cooperative movement of the countries of the european region during the 1920s was marked by organizational heterogeneity. for example, if in hungary it was not only integrated into a national cooperative center, the hungarian cooperative union, but also structured in consolidated organizations of consumer, credit and other forms of cooperation, then in czechoslovakia and poland the processes of integration of the cooperative movement continued during this period. this was determined by the peculiarities of the formation of their territories and the national composition of the population. in particular, poland indicated the long entry of its territories to the three neighboring empires (the russian, austrohungarian and german), which underwent the processes of the genesis of the cooperative movement in the late 19th century. as a result, in poland there were separate interdependent centers of all types of cooperation, and in czechoslovakia there were separate national associations of agricultural and consumer cooperatives. the processes of consolidation baltic journal of economic studies 120 vol. 6, no. 1, 2020 of the cooperative movement ran into political and ideological contradictions between the political forces that controlled the centers. for this reason, the fragmentation of the polish agricultural cooperative was overcome more slowly than the czechoslovakian one. this was due not only to the lack of unity of local agrarianism, but also to the struggle for influence in a possible single center, which is the central union of agricultural cooperatives (plakhtii, 2019). the exacerbation of the conflict between the communists and the moderate representation of the european cooperative society was also reflected in the work of the ica. this is clearly reflected in the experience of czechoslovakia. it is there the communists had the strongest positions in the early 20s of the 20th century among the cooperative movements of all european countries. the communist party of czechoslovakia created one of the first cooperative sections in europe. in the slavic part of the consumer movement, communists gained up to half their seats in cooperative congresses in the early 1920s, an unprecedented result among all capitalist cooperative centers. the official organ of the cooperative section of the comintern journal of international cooperation in early 1925 acknowledged that: "czechoslovakia is the only country in which our influence has spread to the broad masses of cooperative workers." the economic systems of the countries of central and eastern europe are most similar to the ukrainian ones, so the positive tendencies in the cooperative movement of these countries can be applied to ukraine. development of the cooperative sector in transition economies, namely in the countries of central and eastern europe the cooperative activity of the eu countries is characterized by: – high competitiveness of cooperative enterprises, due to the effect of scale and concentration of economic activity; – high volume of operations (annual turnover ranges from 3.6 billion eur in portugal to 23.7 billion eur in denmark); – state incentives for different types of cooperation; – diversification and industrialization of traditional cooperatives; – high level of integration of cooperatives from different branches of activity; – an increase in tertiary sector cooperatives (banking, insurance, consumer cooperatives, retailers and credit unions) and service cooperatives, especially in the tourism sector; – expansion of cooperatives by combining functions of production, logistics, marketing and service; – implementation of innovations in cooperative activities; – deepening the international integration of cooperatives. in order to support and develop joint (pan-european) cooperative enterprises (organizations), a european cooperative union (eco) was established in the eu. it includes 6 european cooperative associations and 171 national cooperative organizations from different countries of the european union. the cooperative associations that joined the eco operate in all major sectors of the economy: agriculture, industry, banking, construction and maintenance of social housing, services, pharmacy, retail. these cooperatives unite 163 million members, have 267 thousand cooperative enterprises with a number of employees of 5.4 million. the intensification of ukraine's international economic cooperation provides the development of a strategy for the effective functioning of agricultural cooperation, which is the basis for ensuring the integrated development of rural territories and various forms of employment for rural populations. in addition, agricultural cooperation stimulates the development of infrastructure of agrarian market, plays an exceptional role in strengthening the economic potential, competitiveness and social status of agricultural producers, improving economic conditions and creating incentives for the growth of commodity products. but, so far its development is at a low level, the main reasons for these are the underestimation of cooperative forms of economic activity in the process of economic reforms, general unfavorable conditions for agricultural production, psychological unwillingness of peasants to cooperate and insufficient level of knowledge of rural population about the benefits of cooperation, weak state support of small forms of farming in agro-industrial complex and agricultural cooperatives. under such conditions, studying and applying the best practices of formation and functioning of foreign cooperative organizations is extremely important and relevant for ukraine in the current conditions. in addition, international experience has shown, that cooperation has contributed to the development of many countries in the world. in europe, for example, cooperatives are an important part of economic life and industry. a well-developed cooperative in japan, where farmer cooperatives (8038 agricultural cooperatives, 3898 of which are multifunctional), process and market about 90% of all agricultural production in the country (including almost 100% of total grain, 95% of potatoes, vegetables, fruits and milk, 85-90% of pork, eggs and poultry) and supply farmers with up to 80% of the production they need. japan's complex primary cooperatives at the level of trade unions are combined into federations, different for their functions: mutual aid federations, economic and credit federations, as well as agricultural cooperative boards. the prefectural federations are in turn members of the all-japan federations. in other words, a centralized cooperative system is set up in the country, the task of which is to baltic journal of economic studies 121 vol. 6, no. 1, 2020 protect the interests of agricultural producers from monopoly capital. it is quite autonomous with respect to the state. in japan, as well as in sweden, norway and finland, government representatives, together with agricultural cooperatives, monitor the negotiations of producers and address issues such as the level of prices for agricultural products, budget allocations to agriculture, bank interest rates on credit (in japan they are in 2-3 times lower than commercial ones), export subsidies, and more. 5. findings thus, it is important today to try on foreign experience for agricultural cooperation in ukraine. that is why the ministry of finance of ukraine considered the letter of the state fiscal service of ukraine no. 1835/4/9999-15-02-02-13 dated july 10, 2019 on the issue of the lawfulness of presence of serving cooperatives, including agricultural serving cooperatives, in the register of nonprofit institutions and organizations. law of ukraine no. 1087-iv dated july 10, 2003 "on cooperation" (further – law no. 1087) defines legal, organizational, economic and social bases of functioning of cooperation in ukraine. according to the tasks and the nature of the activity, cooperatives are divided into production, serving and consumer, which according to the directions of their activity may be agricultural, housing, gardening, garage, trade, transport, educational, tourist, medical, etc. (art. 6 of the law no. 1087). article 2 of the law no. 1087 defines, in particular, the term "service cooperative", which identifies a cooperative, formed by combining individuals and/ or legal entities to provide services mainly to members of the cooperative, as well as to other persons for conducting their business activities. besides, it is arranged, that service cooperatives provide services to other persons in volumes, not exceeding 20 percent of the cooperative's total turnover. at the same time, this law determines that cooperatives have the right to carry out any economic activity, provided for in the charter and not prohibited by law (article 23 of the law no. 1087). however, the law of ukraine no. 469/97-bp dated july 17, 1997 "on agricultural cooperation" (further the law no. 469) defined the legal, organizational, economic and financial features of the formation and activity of agricultural cooperatives. therefore, the law no. 469 specifies the term "agricultural cooperative" and defines the division of agricultural cooperatives into production and service ones. an agricultural service cooperative is an agricultural cooperative, formed by combining natural and/or legal persons, which are producers of agricultural products, to organize services, aimed at reducing costs and/or increasing the income of the members of the cooperative during their agricultural activities and protection of their economic interests (articles 1, 3 of the law no. 469). article 2, paragraph 2 of the law no. 469 also sets out that the general principles, concepts and norms of formation, ensuring of functioning, management and liquidation of an agricultural cooperative and cooperative associations, control over their activities, rights and duties of their members, formation of property, funds, prices and tariffs for products and services, as well as labor relations in such cooperatives and associations are regulated by the law of ukraine no. 1087. besides, article 4 of the law no. 469 defines, that the charter of an agricultural cooperative is developed in accordance with the requirements of article 8 of the law no. 1087, according to which the statute of any cooperative is a legal document, governing its activity and must contain information, in particular, about the order in which its income is distributed, and coverage of losses. it is also provided, that the statute may contain other positions, related to the cooperative's activities, which are not contrary to the law. it should be noted that paragraph 1 of article 9 of the law no. 469 regulates the peculiarities of economic activity of agricultural service cooperatives, namely: such cooperatives provide services to their membersproducers of agricultural products, without any purpose of profit, and such cooperatives are non-profit organizations. the profitability of agricultural service cooperatives is determined on the basis of the following features: – the cooperative provides services only to its members; – the members of the cooperative are responsible for the obligations, undertaken before the cooperative regarding their participation in the economic activities of the cooperative; – the services are provided in order to reduce costs and/ or increase the income of the cooperative members. in addition, paragraph 5 of article 9 of the law no. 469 determines, that after fulfilling the obligations of an agricultural servicing cooperative and recovering the losses in previous periods, the balance of the cooperative's financial result is distributed by general meeting in the form of contributions to the cooperative's funds, cooperative payments to its members, payments in units to the members of the cooperative, including associated. the term "cooperative payments in an agricultural servicing cooperative" is defined as the return to the members of a cooperative of a part of the pre-paid value of services, rendered by a cooperative in relation to their actual value, distributed according to the results of the financial year between its members (paragraph 1 of article 1 of the law no. 469). at the same time, the term "cooperative payments" is given in article 26 of the law no. 1087, which defines the portion of income, distributed on the results of the baltic journal of economic studies 122 vol. 6, no. 1, 2020 financial year between the members of a cooperative in proportion to their participation in the cooperative's economic activities in accordance with the decision of the higher management body of the cooperative. it is also stated, that the rule of the law no. 1087 does not apply to agricultural service cooperatives. in addition, article 26 of the law no. 1087 defines the term "payments in shares", which defines the payment of part of the cooperative's income to the units of a cooperative member. at the same time, article 25 of the law no. 1087 defines, that the income of a cooperative is formed from the income from economic activities after covering the material and related costs and expenses for the wages of employees and is divided into, in particular, cooperative payments and payments in shares. in accordance to subparagraph 133, paragraph 133.4.1, of article 133 of the tax code of ukraine (further – code), non-profit enterprises, institutions and organizations (further – non-profit organizations), meeting the requirements, specified in this subparagraph of the code, among which there is the prohibition of the distribution of the income (profits) or a part of them among the founders (participants) and the determination in the constituent documents of the nonprofit organization the procedure for transferring assets in the case of termination of the non-profit organization as a legal entity. these requirements were introduced in connection with the change of the concept of taxation of the nonprofit organizations with the entry into force of the law of ukraine of n 652-viii dated july 17, 2015 "on amendments to the tax code of ukraine on taxation of non-profit organizations", which consists in exemption from taxation income, that they may derive from their business activities, using the revenue generated entirely to finance the maintaining of such a non-profit organization, as well as for the realization of the purpose (goals, objectives), defined by its constituent documents. the conducted research has proved that the agricultural cooperation of the european union is an economically conditioned ideology of survival of the farmer in the harsh economic conditions, the possibility of ensuring equality in business for farmers, regardless of the size, shape, types or directions of management. the ukrainian agrarian sector, as well as the european one, is characterized by multifaceted and small-scale production. therefore, the spread of cooperation in the agrarian sector of the ukrainian economy should be based on the european principles of democracy, transparency and solidarity, based on comprehensive state support. thus, summarizing the experience of the developed countries of the world, it should be noted that the main advantages of combining agricultural producers in cooperatives are (clutton-brock, 2002): 1. the individual producer is not able to influence the price level of both the purchase and the sale of manufactured goods to processing enterprises. the grower group (union or cooperative) is seen as the only powerful organization capable of purchasing large volumes of goods and services and selling large volumes of production. 2. a significant advantage of cooperative associations is the ability to exchange experience between farmers on the effectiveness of farming, as well as the desire to work as a part of association, groups rather than on their own. 3. due to the joining of farmers' efforts in a single organization, as well as the existence of purchasing raw materials and selling products, the level of profitability of the production increases, and the generated profit is distributed evenly between each participant of the cooperative. at the same time, the cooperative union introduces a unified accounting, as well as a unified system for calculating the cost of production, which reduces its cost by reducing the cost of fixed charge in the enterprise as a whole. 4. uniting into cooperatives, farmers have the opportunity to increase production by obtaining a loan for their own development, as well as by using the means of production, leased from other members of the cooperative. 6. officially registered cooperative associations have the opportunity to obtain a preferential loan for investments in agricultural production, processing of production and provision of production services. 7. the cooperative may receive tax exemption or reduction of the tax rate for the construction of new ones, as well as the reconstruction of existing structures, modernization of the material and technical base used within the activity, which is defined by the charter of the enterprise for a period of up to 5 years from the date of entering the cooperative in the state register of groups of agricultural producers. 8. formally registered cooperatives, both producer groups and farmers association members may receive both logistical and organizational information support from the state. this support includes professional training, farm modernization, certification of products according to the requirements of food quality system, information and promotion activities for farmers, economic, legal support and advisory services for farmers, diversification of economic activities in the field of development of green tourism, etc. therefore, taking into account the above mentioned, the possibility of distributing the income (profits) or a part of them between the members of the service cooperatives through the making of cooperative payments and payments in shares is performed by the provisions of the law no. 1087 (articles 25, 26). similarly, agricultural service cooperatives, in accordance with the provisions of article 26 of the law no. 1087, paragraphs 1, 5 of article 9 of the law no. 469, may make payments to units as a distribution of a part of the cooperative's income, that may be obtained by an agricultural service cooperative from the provision of services. baltic journal of economic studies 123 vol. 6, no. 1, 2020 with regard to the order of liquidation of serving cooperatives and agricultural serving cooperatives, it should be noted, that the order of liquidation, defined by article 29 of the law no. 1087 does not agree with the provisions of subparagraph 133.4.1 of paragraph 133.4 of article 133 of the code in the case of transfer of assets in case of termination of a cooperative as a legal entity, as the paragraph 8 of article 29 of the law no. 1087 provides, that the property of the cooperative, which is left after satisfying the requirements of the cooperative's creditors, payments to the members of the cooperative, and payments to the shares, cooperative payments, wages, payments to the cooperative association of which it is distributed between the members in the manner, specified by charter. in addition, the property of the undivided fund is not subject to division between its members and is transferred by the decision of the liquidation commission to the other cooperative organization (cooperative organizations) or credited to the budget income. however, the existence of these legislative grounds to distribute income to cooperatives, including in the event of their elimination, cannot be a mandatory purpose establishment and operation of service cooperatives and agricultural service cooperatives. therefore, the above does not exclude the possibility of bringing service cooperatives and agricultural service cooperatives to bring the provisions of the constituent documents in accordance with the requirements of the code, which would prohibit the distribution of income (profits) or parts thereof, including the elimination of such cooperatives for inclusion in the register of nonprofit institutions and organizations. thus, taking into account the above, service cooperatives and agricultural service cooperatives may be in the register of non-profit institutions and organizations, provided that their constituent documents comply with the requirements of subparagraph 133.4.1 of clause 133.4 of article 133 of the code and compliance in the course of business activities the requirements of subparagraph 133.4.2, the same paragraph of the code, according to which the income (profits) of a non-profit organization is used solely to finance the expenses for the maintenance of such non-profit organization, realization of the purpose (goals, objectives) and directions of activity, defined by its constituent documents. at the same time, it should be noted, that subparagraph 133.4.4 of paragraph 134.4 of article 134 of the code provides for the powers of supervisory authorities to carry out audits of a non-profit organization in order to identify the facts of the use of income (profits) for purposes other than those specified in subparagraph 133.4.2 of paragraph 134.4 134 of the code by a non-profit organization, and the exclusion of such an organization from the register of nonprofit institutions and organizations and accrual of tax liability on corporate income tax, penalties and fine in accordance with the norms of the code. 6. conclusions therefore, some foreign experience of developed countries and countries with transition economies on the formation and activity of organizational and economic mechanisms in the creation and operation of cooperative structures, (in particular the statutory provisions related to the determination of unit participation of members of cooperatives, the formation of funds, distribution of economic activities, etc.) can serve as a well-proven source of useful information. foreign experience of consumer cooperation development can be successfully used in determining the directions, forms and types of implementation of cooperative processes in ukraine. comparison of the world practice of creation and functioning of cooperative structures with real possibilities of cooperative activity in ukraine shows that in the country this process is in the early stage. such a state of development of the ukrainian cooperation is caused mainly by excessive liberalization of economic and social relations. during the years of transformations, old social conquests have 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(2002). breeding together: kin selection and mutualism in cooperative vertebrates. science, vol. 296(5565), pp. 69–72. doi: 10.1126/science.296.5565.69 baltic journal of economic studies 206 vol. 5, no. 2, 2019 corresponding author: 1 pereiaslav-khmelnytskyi hryhorii skovoroda state pedagogical university, ukraine. e-mail: devko89@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-2-206-213 business in modern conditions of management svitlana sliusar1 abstract. the paper’s purpose is to provide recommendations for carrying out theoretical bases of existence, the analysis of the current state and the prospects of development of business in ukraine. methodology. during the writing of the article, the following research methods were used: the search for available methodological and scientific literature, comparison, clarification of causal relationships, systematization, analysis of documentation and results of researchers’ work on the problem of the conducted research and expert evaluation. results. business development is very difficult and multidimensional, and the influence of many factors on small and medium business entities and is ambiguous and, therefore, demands further complex evidence-based analysis. it concerns such aspects of a research as: a research of positive processes in the conditions of making shifts in infrastructure, which cause the accelerated development of small and medium business entities and its social and economic consequences; deeper determination of regularities of formation and development of small business as one of structure-forming factors of market economy of ukraine; improvement of the organizational and economic mechanism of the state support of small and medium business in ukraine and also in its certain regions and spheres of action. practical implications. it is noticed, there are positive shifts in the course of improvement of conditions of business because of the reduction of a number of permitting documents and licensing types, simplification of procedures for obtaining licenses and permissions, reduction of the controlling pressure upon business, improvement of the sphere of providing administrative services, strengthening of responsibility for violation of the legislation in the sphere of economic activity. value/originality. in the article, the latest statistical data are used according to the analysis of the current state of functioning of business in ukraine, problems and the directions of development of small and medium business in ukraine are selected. key words: entrepreneurship, small business, medium business, economy, gross domestic product, development. jel classification: e22, l11, m11, o20 1. introduction at the present stage of development of ukraine, support of formation and development of business is one of the defining priorities of public policy from first years of economic reforms. today ukraine is one of those countries having the difficult system of taxation; therefore, some businessmen pass into the shadow sector of the economy. but in order to prevent this phenomenon of a hidden economy, it is necessary to reduce the quantity of taxes, to simplify the process of registration of firm and the reporting, and also to improve the tax code of ukraine, adapting it for modern conditions of management and international experience. the significant role of small and medium-sized enterprises in providing the competitive environment, the flexibility of the national economy, employment and the income of the population received great value at all levels and found the manifestation in the implementation of special measures of public policy for support of business development in ukraine. therefore, the creation of a model of economic development, which would provide the greatest possible distribution of positive tendencies of economic dynamics on all components of the economic system, remains among the main tasks of the state economic strategy so far. respectively, the relevance of business development is caused, in particular, by the fact that today small and medium-sized enterprises create the main part of the gross domestic product in the countries with the developed market economy, among which ukraine; therefore, this sector requires the greatest attention from researchers and reformers. 2. research and literature analysis with the development of market economy, the role of business amplifies, and it involves domestic researchers in whose works these or those aspects of the business are considered. the modern theory of business is the result of the scientific thought of many scientists. this problem was studied by r . kantilyon, a. marshall, baltic journal of economic studies 207 vol. 5, no. 2, 2019 s. simsodi, j. schumpeter, etc. a number of scientific works of such scientists as s. varnaly, g. vasin, l. vorotin, m. nizhny, a. danilenko, m. kozoriz, s. mocherny, v. pavlov, and others are in recent years published. according to scientists, illumination of tools for own business, marketing orientation of entrepreneurial activity, business planning and use of the principles of management was essential. they sought to create, the researches, future experts of economic specialties have systems of knowledge directed to optimization of management, activation of entrepreneurial activity in ukraine, the transformation of business into the independent leading sector of the economy in the conditions of sustainable development of the country. their doctrine captured all range of application of the modern theory of business: the analysis and identification of enterprise strategy and the direction of its realization, marketing orientation of entrepreneurial activity, and means of introduction of management in its organization. scientists considered various aspects of business development in ukraine, a role and value of this sector in the industrial states and developing states, in particular, with a transitional economy. at the same time, the lack of the deep analysis and rather clear understanding of the place and a role of business in modern model of market economy do not allow formulating accurately the concept of the mechanism of support of business development in ukraine. 3. statement of a problem in ukraine, business as the independent social and economic phenomenon develops in difficult conditions and faces various problems. high level of corruption, excessive bureaucracy and control from public authorities are characteristic of ukraine, a large number of unscheduled inspections. in eu countries, there is created an extensive network of the organizations, which are engaged in regulation and support of business development, but among public authorities, responsibilities for business development are distributed between several ministries or between special departments (bekh, 2012). it is possible to say that small and medium business includes more than 90% of the companies registered in ukraine, however, a real contribution of these enterprises to gdp – about 11% (derenko, 2014). small business does not play that significant role in the national economy as in developed countries where it provides 60-70% of gdp. therefore, special attention should be paid to the creation of effective and efficient mechanisms of support and protection of small business from the state and to stimulate its development. for this purpose, it is necessary to reduce the tax load and to grant soft loans. one of the most common forms of stimulation of development of the sector of small business in developed countries of europe is the creation of preferences for them in the taxation by the introduction of special tax rules (france) or application of the general rules on separate privileges for small enterprises (great britain). though in ukraine, the simplified tax system also works but, for the improvement of small business development, it is necessary to consider the international practice of application of the simplified (special) tax treatments (klochko et al., 2016). with the acceptance in 2012 of the law of ukraine “on development and state support of small and medium enterprises in ukraine” changes are made to the commercial code of ukraine regarding the definition of concepts of large, small, and medium business entities, brought into accord with the eu classification. in 2012, the share of small and medium business entities made 99.96% of the total of economic entities that in general conform to the european standards. 4. structure of economic entities according to the current legislation of ukraine according to state statistics service of ukraine as of 01.01.2017 in ukraine, there were 1 600 127 economic entities from which 698 entities of a large business, 20 550 entities of medium business and 1 578 879 – small business entities. during 2013–2017, reduction of a number of small and medium business entities was observed. in the structure of economic entities, the share of medium business entities increased from 1.24% of a total of economic entities in 2013 to 1.29% in 2017 due to the reduction of a number of small business entities (state statistics service of ukraine). according to the current legislation of ukraine, legal entities and individuals can be participants of the economic relations. for the beginning of 2017 in ukraine, economic activity was carried out by 364 935 legal entities from which 20 189 – mediumsized enterprises and 344 048 – small enterprises, and 1 235 192 – individual entrepreneurs. the tendency to proliferation was characteristic only of the individual entrepreneurs who are carrying out the activity in the sphere of medium business. in the structure of domestic business by the size of the enterprises as of 01.01.2017, the share of small enterprises was 94.3%, medium – 5.5% and large – 0.2% (figure 1). as well as in previous years, the overwhelming number of medium-sized and small enterprises of ukraine was concentrated in the dnipropetrovsk, kyiv, lviv, odesa, kharkiv regions and in the city of kyiv. the smallest quantitative indices of medium-sized and small enterprises are shown by the volyn, zakarpattia, ivanofrankivsk, rivne, ternopil, chernivtsi regions. by results of 2016, quantitative indices of mediumsized and small enterprises per 10 000 population of ukraine, in comparison with 2015, decreased from baltic journal of economic studies 208 vol. 5, no. 2, 2019 5 to 4 units for medium-sized enterprise and from 77 to 76 units for small enterprises per 10 000 people of an actual population of ukraine. in a regional section, the best indicators of a number of small enterprises per 10 000 people of the population of ukraine are in the city of kyiv, and odesa, kyiv, and kharkiv regions. the lowest indicators of a number of small enterprises per 10 000 population of ukraine are in the ternopil, sumy, zakarpattia, chernivtsi, and rivne regions (figure 2). as of 01.01.2017, the total number of individual entrepreneurs per 10 000 population of ukraine is figure 1. the number of enterprises by their size in % to a total of the enterprises as of 01.01.2017 source: statistical information of the state statistics service of ukraine, built by the author using the ms excel package figure 2. the number of small enterprises per 10 000 population of ukraine by regions (units) source: statistical information of the state statistics service of ukraine, built by the author using the ms excel package baltic journal of economic studies 209 vol. 5, no. 2, 2019 271 units, which is 6.6% less than for the reporting period of the last year. the best this indicator is in the khmelnytskyi, kyiv, mykolaiv, and odesa regions, and the worst – in the kirovohrad, rivne, volyn, ternopil, and lviv regions (figure 3) (state statistics service of ukraine). by the end of 2017, 7,5 million people were engaged in the sector of small and medium business who make 40% of an occupied population of working-age. in comparison with 2016, the number of busy workers at small and medium business entities decreased by 3%. at the same time, 2017 was characterized by a delay in the rate of reduction of a number of employed in this sphere as in 2016 this indicator decreased by 8%, in comparison with 2015. delay happened due to a significant increase (more than twice) in the number of those engaged in individual entrepreneurship carrying out the activity in the sphere of medium business. the number of individual entrepreneurs taking into account hired workers as of 01.01.2017 made 2,3 million people (state statistics service of ukraine). in the structure of employment of the population at enterprises for 2015–2017, there were minor changes in favour of large enterprises at the expense of mediumsized enterprises. so, in 2015 at large enterprises, 30% of an occupied population worked at the enterprises and at medium-sized enterprises – 43% of an occupied population at the enterprises, and in 2016 – 32% and 41% of an occupied population at the enterprises respectively. in the sphere of small and medium business by results of 2016, 6,1 million people from whom 51% of hired workers worked at medium-sized enterprises, 3% – at small enterprises, and 17% of workers were employed by individual entrepreneurs. according to state statistics service of ukraine as of 01.01.2017, the total amount of the sold products (goods, services) by business entities was 4 460,0 billion hryvnias, that is 6% more in comparison with 2015. figure 3. the number of individual entrepreneurs per 10 000 people of the available population in ukraine by regions (units) source: statistical information of the state statistics service of ukraine, built by the author using the ms excel package baltic journal of economic studies 210 vol. 5, no. 2, 2019 in 2016, the volume of the sold products (goods, services) of small and medium business entities grew by 11.2% in comparison with the previous year and was 2 698,7 billion hryvnias. at the same time, the gain was observed both for small and for medium business. small and medium business entities for 2016 realized 60.5% of the total amount of the products (goods, services) sold in ukraine, from them 39.7% are realized by medium-sized enterprises, 15.1% – small enterprises and 5.7% – individual entrepreneurs (figure 4) (state statistics service of ukraine). in distribution by types of economic activity, trade and service trade, which share in the total amount of the sold products (goods, services) is totally more than 60% remain priority spheres of action of small and medium business entities. much less are industry indicators (20.3%), agricultural industry (5.5%), and construction (5.4%) (figure 5) (state statistics service of ukraine). in 2016, 111 382,9 million ukrainian hryvnias of capital investments from which 75 247,4 million hryvnias – medium-sized enterprises and 36 135,5 million hryvnias – small enterprises, were attracted with small and medium-sized enterprises. figure 4. the share of enterprises in the volume of the sold products for 2017 source: statistical information of the state statistics service of ukraine, built by the author using the ms excel package figure 5. specific weight of small and medium business entities in volumes of product sales by types of economic activity for 2016 source: statistical information of the state statistics service of ukraine, built by the author using the ms excel package baltic journal of economic studies 211 vol. 5, no. 2, 2019 in comparison with 2015, the volume of the involved capital investments increased by 11 193,2 million hryvnias. in 2016, there were changes in the structure of the attraction of capital investments due to the increase in investments into large enterprises. so, 50% of capital investments were directed to large enterprises, 34% – to medium-sized enterprises and 16% – to small enterprises. 5. financial result before the taxation of economic entities own means of the enterprises and organizations and also the credits of banks and other loans still remain the main source of financing of capital investments. such structure of sources of financing of capital investments, namely domination in it of payments for the account of own means of the enterprises, puts into dependence enterprises’ development and their investment activity on their profitability (pikhnyak). as of 01.01.2017 the financial result before the taxation of the enterprises which got profit was 248 035,9 million hryvnias. for medium-sized enterprises, this indicator was 111 313,2 million hryvnias that as a percentage to a total of the enterprises makes 66.2%, and for small enterprises – 39 794,1 million hryvnias that as a percentage to a total of the enterprises makes 64.4%. before the taxation, the small and medium-sized enterprises which are carrying out the activity in the following spheres had the greatest value of financial result: rural, forest and fishery; wholesale and home shopping service; industry; operations with a fast estate. slowly fiscal charges from small and medium business entities in budgets of all levels grow. so, 289 319,0 million hryvnias came to the consolidated budget for 2016 from small and medium business entities that is 8.6% more than for the reporting period of the last year [9]. dynamics of changes of a position of ukraine in the rating of business conditions are given for 2013–2017 (see figure 6) (economy under firing). dynamics of changes in ukraine’s position in the rating of business conditions are given in table 1. following the results of the world bank’s doing business-2016 rating, ukraine rose by the 28th position in comparison with last year’s rating and took the 112th place. ukraine is recognized as the country, which achieved the best results on the improvement of the regulatory environment of all countries of the world in 2013–2017. table 1 dynamics of changes in ukraine’s position in the rating of business conditions categories doing business-2015 doing business-2016 place of rating 140 112 registration of the enterprises 50 +3 47 obtaining construction licenses 186 +145 41 connection to power supply 170 -2 172 registration of property 158 +61 97 crediting 24 +11 13 protection of investors 127 -1 128 taxation 168 +4 164 international trade 148 = 148 efficiency of judicial system at the decision of commercial disputes 45 = 45 solution of insolvency (liquidation of the enterprises) 157 -5 162 figure 6. dynamics of changes in ukraine’s position in the rating of business conditions for 2013–2017 (economy under firing) baltic journal of economic studies 212 vol. 5, no. 2, 2019 6. the results of the study the world bank noted carr ying out reforms in ukraine in eight directions from ten, investigates the r ating of business conditions. moreover, ukraine headed the list from ten states, which achieved the greatest progress in the improvement of conditions for business. ukraine made the greatest progress by such criteria as obtaining permissions in construction – 41 steps against 186 in the r ating – 2015, registration of property – 97 against 158, access to crediting – 13 against 24 (state statistics ser vice of ukraine). about 65% of the general indicator in raising the country in the rating of business conditions was made by the construction branch. respectively, the introduction of the law of ukraine “on regulation of town-planning activity” allowed simplifying considerably permitting procedures in construction: – the number of the documents necessary to start construction is reduced; – the order of acceptance of the constructed objects in operation and reduced term is simplified; – date of receipt of documents is significantly reduced; – registration of the new real estate unit is improved, the number of necessary procedures and their terms is reduced. the number of procedures decreased from 20 to 10. time of obtaining permitting documents decreased more than by 5 times. the cost of paperwork decreased twice (klochko, 2017). improvement of a position of ukraine on category “registration of property” happened due to the reduction of registration procedures from 10 to 8. the process of registration of property was reduced by 25 days (from 70 to 45 days). the cost of expenses for the execution of all necessary documents and passing procedures decreased almost twice. in the last report, specialists of the world bank placed emphasis on category “taxation” – the 164th place (+ 4 positions). reduction of documentation, reduction of the reporting, acceleration of formalities, development of electronic services – all this allows the payer to save time and, respectively, creates operating business conditions in ukraine comfortable. so, time expenditure on the observance of requirements of the tax legislation was reduced by 101 hours (last year the taxpayer spent for tax procedures 491 hours a year, for june 1 of 2017 – 390 hours). reduction of time became possible due to the simplification of declarations for payment of the vat and usc and also improvement of the electronic reporting system. by research estimates, in a year the tax rate in ukraine decreased from 55.4% to 54.9%, the number of payments remained at the level of last year – 28 (zhalila, 2016). also, the improvement of customs administration after the introduction of the new customs code is noted. ukraine made international trade simpler due to faster execution of customs declarations and reduction of a number of physical surveys of goods. in particular, the time necessary for the import of goods to ukraine is reduced from 33 to 28 days, for export – from 30 to 29 days. registration of export requires 6 documents, import – 8 documents (zhalila, 2016). 7. conclusions positive shifts in process of improvement of business conditions – all this contributed to the achievement of notable progressing in different spheres received a positive estimate from the organizations and experts. in particular, according to the world bank’s ease of doing business rating for ukraine, in 2016 ukraine took the 112th place, improved its position by 28 points. however, changes which happened did not provide an increase in a number of small business entities yet, the number of the individual entrepreneurs who are carrying out the activity in the sphere of medium business only slightly increased. the analysis of domestic business structure, both across ukraine in general and its regions, shows that it remains invariable in recent years and the lion’s share is made by small enterprises (94.3%). own means (59.2%) remain the main source of investment for economic entities, and the budgetary and credit mechanisms of business support are not effective. thus, development of investment activity of business entities depends on their profitability. overcoming the factors constraining the development of business is possible by the implementation of the new state business development strategy in ukraine, in particular, within the nationwide small and medium business development program for 2024, which is directed to creating favourable conditions of activity of small enterprises and supports its development on the basis of the introduction of innovative technologies, instruments of cooperation of small, medium, and large business entities. it is also necessary to continue work in the sphere of deregulation in the direction of facilitation of the creation and termination of entrepreneurial activity by the establishment of the principle of implementation without application of seals, the introduction of amendments to acts concerning the improvement of business liquidation procedures; improvement of licensing procedures and obtaining permits. also, improvement of the legislation concerning the state supervision (control) in the sphere of economic activity, in particular, increase in the level of responsibility of public officials of appropriate authorities is relevant. baltic journal of economic studies 213 vol. 5, no. 2, 2019 references: bekh, n. 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(2014). mizhnarodnyy dosvid derzhavnoho rehulyuvannya ta pidtrymky pidpryyemnytstva [international experience of state regulation and business]. biznesinform, 5, 95–9.7 (in ukrainian) ekonomika pid obstrilom. yak viyna na skhodi vplyvaye na narodne hospodarstvo [economy under firing. as war in the east influences the national economy]. state statistical service of ukraine. retrieved from: http://tyzhden.ua/ economics/115190 (in ukrainian) pikhnyak, t. a. svitovyy dosvid derzhavnoho upravlinnya rozvytkom maloho pidpryyemnytstva i mozhlyvosti yoho adaptatsiyi v ukrainy [international experience of public administration by development of small business and a possibility of its adaptation in ukraine]. retrieved from: http://intkonf.org/pihnyak-ta-svitoviy-dosvid-derzhavnogoupravlinnya-rozvitkom-malogo-pidpriemnitstva-i-mozhlivosti-yogo-adaptatsiyi-v-ukrayini/ (in ukrainian) zhyrko, s. o. problemy rozvytku maloho ta serednoho pidpryyemnytstva v ukrayini [problems of development of small and average business in ukraine]. retrieved from: http://www.kbuapa.kharkov.ua/e-book/db/2007-1-2/ doc/2/25.pdf (in ukrainian) samotoyenkova, o. v. 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(2017). malyy ta seredniy biznes v ukrayini: startovi mozhlyvosti, nynishni realiyi, stsenariyi na maybutnye [small and medium business in ukraine: starting opportunities, present realities, scenarios on the future]. materialy vseukrayinskoyi konferentsiyi «baryery ta mozhlyvosti maloho ta serednoho biznesu v ukrayini». (in ukrainian) honey, g. a. (2009). short guide to reputation risk. farnham: gower publishing. strategy that works – harvard business review press. retrieved from: http://www.pwc.com/ua/uk/survey/ 2016/strategy-that-works.html frank j. fabozzi (2002). the handbook of financial instruments: handbook – hoboken, new jersey: john wiley & sons inc. michael e. porter (2008). the five competitive forces that shape strategy. harvard business review, january. baltic journal of economic studies 61 vol. 6, no. 2, 2020 corresponding author: 1 vadym hetman kyiv national economic university, ukraine. e-mail: corfinua@ukr.net orcid: https://orcid.org/0000-0001-8808-1383 2 vadym hetman kyiv national economic university, ukraine. e-mail: nataliia.babiak@kneu.edu.ua orcid: https://orcid.org/0000-0002-3210-4045 doi: https://doi.org/10.30525/2256-0742/2020-6-2-61-68 causality of risks, cost of equity and shading of the enterprise income oleh tereshchenko1, nataliia babiak2 abstract. the scandals with concealment of income by large companies in tax havens, the unresolved problem of estimating the size of the shadow economy, and its high share in emerging markets (em) make issues of the methodology for calculating the shadow income of enterprises relevant for today. the aim of the study is to substantiate the method for calculating the scope of shadowing of legal business income based on the method of shadow rates of costs on invested (equity) capital. the authors construct a two-factor linear regression, which enables to test the hypothesis of the effect of the expected rate of return and return on equity at the shadow economy level. the regression analysis confirms a negative correlation between roe and the shadow economy level. there is a positive correlation between the risks of investing in equity, which are reflected in the expected rate of return on capital, and the total income shadowing. the regression-correlation analysis of the dependence of the shadow income of enterprises on these factors confirms a similar pattern. comparison of the obtained values of the shadow income of enterprises in ukraine with alternative estimates of the shadow economy reveals a higher sensitivity of the proposed method to changes in country risks, as well as to decisions aimed at improving business conditions. it is confirmed that the exacerbation of risks automatically reflects on the expectations regarding the return on investment and on the official declaration of income. therefore, the shadow economy reduction is related directly to a set of measures aimed at minimizing the risks of business activities. key words: shadow income, cost of equity, shadow rate of cost of equity, risk premium, interest rates, return on equity. jel classification: d24, d81, e26 1. introduction the high-profile scandals surrounding the concealment of enterprises and their owners' incomes are a constant challenge for researchers of the shadow economy issues. for example, the so-called panama papers or the largescale tax evasion of a number of well-known companies in the world (halliburton, netflix, ibm, delta air lines, chevron, general motors). in 2018, 60 fortune 500 companies were not subject to corporate taxation, with a total revenue of approximately 80 billion usd. quite eloquent is the situation with amazon, which has generated 10 billion usd income, and then claimed tax rebate (gardner, wamhoff, martellotta & roque, 2019). nine out of ten global companies own at least one subsidiary registered in tax havens. developing countries lose 100 billion usd annually as a result of tax evasion in the usa (oxfam deutschland, 2019). according to j. e. stiglitz and m. pieth (2016), tax havens contribute to the development of the shadow side of globalization. therefore, the world community has the right to recognize them as evil that must be overcome. income shadowing is a result of not only the high level of taxation or over-regulation of the economy. shadowing drivers also include psychological and mental factors, macroand microeconomic risks, and a corruption component. due to the specificity of factors that influence the growth (or decrease) of a particular component of shadow activity, it is heterogeneous in composition and structure across countries and groups of countries. in most developed countries, shadow activity is associated with illegal employment, respectively, with the shadow wages that entail tax and social payments avoidance. in em countries, the main forms of its manifestation are the concealment of items subject to taxation by enterprises, the circumvention of official rules on capital movements and currency regulation. baltic journal of economic studies 62 vol. 6, no. 2, 2020 the development of tools for minimizing the informal sector requires to clearly identify the components of the shadow economy, their scopes and causes. according to established views, shadow business creates additional risks that affect the cost of equity of enterprises towards its growth. the proposed study presents a number of alternative hypotheses regarding the causality of the cost of investment capital and the risks of the shadow economy. the study presents a number of alternative hypotheses regarding the causality of the price of investment capital and the risks of the shadow economy. the article reveals that the complex of local risks of business activities leads, on the one hand, to an increase in the cost of raising capital and on the other hand, to the need for withdrawal of income and the shadow sector. the complex chain of reasons explains the escape into the shadows as a means of reducing the risks of business. according to empirical data, in times of recession and crisis, growing uncertainty leads to an increase in the shadow activity. in the presence of causal links between the shadow activity of enterprises and the cost of equity, the latter should be considered as a variable to calculate the scope of undeclared income of enterprises as the largest segment of the shadow economy. in the article, the level of enterprise income shadowing on the basis of the expected income for investment in the equity is estimated in the context of ukraine. 2. previous research review in the study of the informal economy in developed countries, the main emphasis is on the issues of tax evasion by large corporations and undeclared income from shadow employment. for example, f. schneider and b. boockmann (2018) distinguish legal and illegal activities, monetary and non-monetary transactions in the shadow economy. undeclared business income, hidden assets, and employee salaries are all assessed in one unit. however, the nature of individual types of shadow activity is different. a unified approach to their estimation leads to a high probability of error, since the question remains about the final evaluation object. the need for a differentiated estimation of individual components of the shadow economy, in particular, undeclared incomes of enterprises and employees is explained both by the different nature of their occurrence and by the different instruments of minimization. for example, t. putnins and a. sauka (2015) apply such structuring in the process of estimating the size of the informal sector in the baltic countries. depending on the interpretation of the shadow economy components, a number of direct and indirect methods are used to estimate its size, but they are not flawless. direct methods relate to statistical surveys of business representatives and the detection of shadow transactions at enterprises. for example, t. putnins and a. sauka use surveys of company responsible executives and managers to estimate the size of the shadow economy. from their perspective, the total shadow economy is estimated by components as follows: undeclared corporate incomes, unregistered workers, and undeclared wages. due to the possible respondents' manipulation, the survey method is characterized by a high level of subjectivity. its data and objectivity are rather ambiguous. given the variety of schemes and forms of shadowing the cost of equity, as well as the extreme cost of control, it is unrealistic mission to determine the actual cost of equity by direct methods. the analysis of detecting undeclared incomes is time-consuming and selective. the complexity of studying the processes in the shadow economy is related to the lack of empirical data. for any business, the shadow activity is the most secret information that is accessible to a very limited number of people. the facts of shadow transactions are rare and information about them is unsystematic and statistically irrelevant. that is why most of the shadow economy valuations are focused on the analysis of cause and effect factors and the estimation of the shadow activity by indirect methods. indirect methods are based on the comparison of household income and expenditure, the analysis of individual macroeconomic and monetary indicators, the study of the causal relationships between technological indicators and gdp, and so on. the most well-known indirect way of estimating the size of the shadow economy is the mimic (multiple indicators multiple causes) method, which is based on the analysis of multiple impact factors and multiple indicators of the size of the shadow economy. in 2018, the imf published the results of a study by l. medina and f. schneider (2018) that used mimis to estimate the shadow economy in 158 countries over the period of 1991–2015. multiple impact factors included variables as follows: trade openness index, gdp per capita, unemployment rate, government scale and stability indices, fiscal freedom and rule of law indicators, level of corruption control. in addition, the following indicators were used: the level of the economically active population, the currency’s stability and the per capita gdp growth. according to t. breusch (2005), the bottleneck of the method is the doubtful notion that only the size of the shadow economy can be regarded as a latent change that co-integrates causal variables and indicators. in addition, the results of the evaluation are too sensitive to the units in which the variables are measured. another drawback of the approach is its lack of sensitivity to current country risks. given the issues of structuring and estimating the shadow economy, this study focuses on developing a fundamentally new approach to estimating the largest component of the shadow economy that is the size of incomes undeclared by enterprises. according to our hypothesis, the total annual incomes that "flow" into the shadow sector is equal to the amount of hidden (implicit) costs of capital. the largest share of the baltic journal of economic studies 63 vol. 6, no. 2, 2020 shadow economy 's income is generated through the concealment of equity costs. the cost of equity for companies operating on em is largely implicit (hidden or shadow). it is about undeclared incomes that are either incomplete or missing in the official reporting. the scientific task is to justify the instruments for estimating the amount of the cost of capital output in the shadow sector, as well as to develop recommendations on the anti-shadowing of capital expenditures. the aim of the study is to substantiate the method of calculating the shadowing of legal business income on the basis of the method of the shadow cost rate of invested (equity) capital. 3. results and discussion the proposed approach to the calculation of the size of shadow income is based on determining the expectations of economic entities on the return on investment and their motivation for shadow transactions. this requires structuring the components of the shadow economy and examine them at the angle of the classic risk/return ratio. the size of the shadow economy and the amount of output of the shadow sector directly depend on the set of macro and microeconomic risks that accompany the financial and economic activities of enterprises. the risk indicator of investing in an asset is the interest rate at which equity is invested. interest rates reflect employment and wages, prices, investment and business activity. high local risks lead to a high expected market risk premium that cannot be realized by fully operating within the formal sector. the consequence of this is the shadowing of the cost of capital (above all equity). a specificity of financing a business in developing markets is equity raising on non-market terms. in the context of this study, non-market terms for raising capital arise in the case of shadow cost of equity resulting from a discrepancy between the official capital charge and the actual costs. the shadow cost of equity is transformed into revenues of the shadow economy and generate the vast majority. the transfer of the cost of equity to the shadow sector is primarily related to tax evasion, which in one way or another violates the market terms for raising and servicing capital. in countries with a distorted financial market, there are well-established schemes for transferring cost of equity to the shadow sector. for these purposes, big business primarily uses offshore zones, and small business uses private entrepreneurs, various forms of providing bogus services or making bogus costs. the proposed approach to estimating the size of the shadow sector requires utilising information on the total official payments within the framework of the cost of equity in terms of its individual categories and the rate of return expected by capitalists. the source of the official cost of equity is reported net income, and the channels of remuneration are dividends and gains in the market value of corporate rights. the latter is the result of income hoarding and increase in market value of the enterprise. therefore, the cost of equity, recorded in the financial statements, will be consistent with the return on equity invested in the enterprise. according to our hypothesis, the size of the shadow cost of equity (the additional shadow interest rate) corresponds to the difference between the rate determined by indirect methods and cost of capital officially reported. the latter correspond to the officially declared net profit of the enterprise. other assumptions underlying the study are as follows: – shadowing of the enterprise's income is carried out with the knowledge of its key shareholders; – undeclared corporate income is almost entirely used as a payment to the shareholders for equity; – enterprises generate value using legally invested capital; – economic agents have no incentive to manipulate the value of assets and the amount of invested capital; – the total amount of official and the shadow cost of equity correspond to the expected market interest rate, which is determined by one of the capm modifications for developing markets. we assume that income shadowing is a business response to the additional risks and threats to it. the shadow economy component of income shadowing is suggested to be determined on the basis of the transformation of the shadow rate of cost of equity into the absolute amount of undeclared income. the shadow rate of cost of equity is calculated as the difference between the expected market rate of cost of equity and the return on equity invested that is determined according to official reporting. it is of importance to ground the key parameters of the model of calculating the expected cost of equity capital totally in the corporate sector of the economy. according to the well-known capm model, investors' expected rate of return on investment depends on the risk-free rate of return, the average rate of return on the capital market and the systematic risk of investing in a specific asset. given calculating model parameters for underdeveloped countries, additional difficulties arise due to the lack of a credible database, the high volatility of the local stock market or its illiquidity, legal and macroeconomic uncertainty, and a number of other circumstances. under these factors, an average em enterprise, for example in ukraine, is at greater risk than a similar enterprise operating in developed markets. according to capm, these additional risks are diversified and therefore, they are non-systematic and do not affect the valuation of investments and assets. from a theoretical point of view, it is appropriate to consider diversified risks in the monetary flow forecasting process (copeland, koller & murrin, 2000). for non-systematic risks, the market does not pay an additional risk premium. in this case, the allowance baltic journal of economic studies 64 vol. 6, no. 2, 2020 (or discount) for the additional risk premium should not be considered as the relevant risks are properly taken into account in determining the beta and market risk premium (mrp). however, theoretically perfect сарм is based on far-fetched assumptions (tereshenko, voloshanyk & savchuk, 2019). in practice, an approach, which takes at least some of the diversified risks into the rate of cost of equity, is applied. considering the neoclassical capm and a. damodaran's recommendations regarding the need to take into account specific local risks (country risks), the expected market rate of cost of equity (rem) includes risk-free rate of return (rfg )), global market risk premium (mrg), beta factor and country risk premium (crp). the proposed model for calculating the average expected market rate of cost of equity is as follows: r rfem g= + +mrp crpg � (1) given the impossibility to calculate objectively the risk-free rate of return and the lack of credible information from the local stock market, ukraine should accept a global risk-free rate, a global risk premium and minimization of domestic stock market data as an information base. model 1 does not contain a beta factor, as it aims to calculate the average market rate of return that corresponds to a beta factor at the unit level. therefore, this factor cannot be taken into account in the calculations. table 1 shows the calculations of the expected market return on equity investments of ukrainian enterprises. the results from the application of model (1) are expressed in usd. in order to translate the expected rate of return into the local national currency, the value of inflation in ukraine and the usa for the respective years should be adjusted. the well-known i. fisher algorithm is used to describe the relationship between inflation rate, nominal and real interest rates. in reality, the impact of factors behind the growth (or decrease) of the shadow economy manifests itself over a certain period. we assume that some businesses respond to risk factors during the period of their manifestation and immediately transform their income into a shadow, using the existing shadow economy infrastructure. however, a number of economic agents can act ahead of the curve by shifting their earnings into the shadows, projecting exacerbations of risk factors. other entities, on the contrary, need time to become aware of the risk factors involved and to develop revenue-minimizing shadow schemes. if, as a result of risk exacerbation, the market expects an abnormally high shadow rate of return for a certain period, it does not mean that it will be realized by all entities during that period. temporal displacement can occur both before and after the occurrence of factors (risks). the situation is the same in case of risk improvement. businesses do not immediately take income from the shadows in response to government decisions aimed at reducing risk and reducing taxation. therefore, the estimation of the shadow economy level requires the utilization of the smoothed time-series values of the expected risk premium. the simplest algorithm for averaging time series values is used for smoothing. as the data averaging interval is of three periods, the calculations do not show smoothed figures for 2008–2009. the results of the calculation of the paired correlation coefficients revealed that among the numerous factors influencing the size of the shadow economy, it is advisable to choose the two most representative: the expected market return (rem) and return on equity (roe). table 2 shows the basic information to construct a two-factor regression, which will test the hypothesis of the influence of these factors and the level of the shadow economy. evidently, the expected rate of return on equity and the income of the shadow sector are rising in line with the rising risks and the crp parameter mentioned above. high risks lead to a decrease in income officially reported. the average return on equity of the ukrainian enterprises during the period under analysis was negative or was at a minimal positive level. the less country’s risk premium is the less shadow interest rate table 1 the calculation of the expected market return on equity investments of enterprises in ukraine, 2008–2018 year rf r crp equity risk premium expected market return (rem), usd inflation rate, us inflation rate, ua expected market return, ua expected market return, ua (smoothed) 2008 2.2 5.25 10.04 12.24 103.84 125.23 35.4 *** 2009 4.04 9.75 14.75 18.79 -100.36 115.9 38.2 *** 2010 3.3 8.25 12.75 16.05 101.6 109.4 25.0 32.8 2011 1.9 7.5 12.5 14.4 103.2 108 19.7 27.6 2012 1.8 7.5 13.5 15.3 102.1 100.6 13.6 19.4 2013 2.9 9 14.8 17.7 101.46 -100.2 15.8 16.4 2014 2.2 11.25 16.25 18.45 101.62 112.1 30.7 20.0 2015 2.3 15 20.75 23.05 100.12 148.7 82.8 43.1 2016 2.4 14.9 20.9 23.3 101.26 113.9 38.7 50.7 2017 2.4 14.21 19.9 22.3 102.13 114.4 37.0 52.8 2018 2.7 10.38 15.46 18.16 102.44 110.9 27.9 34.5 baltic journal of economic studies 65 vol. 6, no. 2, 2020 on invested capital and the size of the total shadow sector will be. processing the relevant data results into the following two-factor regression equation, which enables to find the estimated values (ye) of the shadow economy: ye = 34,7 – 0,25355 x1 + 0,004919 x2 (2) regression model 2 confirms that roe and the shadow economy are negatively correlated while the risks of investing in equity, reflected in the expected return on equity, and the total shadow income correlate positively. this linear multiple regression is adequate to the initial data, which is confirmed by the similar dynamics of the given and estimated levels of the shadow economy. this is evident in the diagram (figure 1). in addition, the results of comparing the actual and the table value of the fisher coefficient confirm the adequacy of the model. significant excess of factual (18.04) over ftable (2.36) indicates the statistical significance of the model. we prove the significant influence of the factors of return on equity and expected rate of return on the total size of the shadow economy, the main component of which is the shadow (undeclared) income of enterprises. therefore, this approach should be applied to calculate the shadow interest rate on equity as the difference between the expected return on modified capm and the official roe. the estimated absolute amount of the shadow income of enterprises is found by applying the shadow interest rate to the average annual amount of equity of enterprises. table 3 shows the results of calculating the value of undeclared income based on the shadow rate of cost of equity. the data in table 3 enable to construct a linear regression that describes the dependence of the shadow income of enterprises on the size of official roe and expected market profitability: ye = 8,68 – 1,03741 x1 + 0,7683 x2 (3) regression model 3 confirms that, similarly to the case of the total shadow economy, the roe correlates negatively with the level of the corporate shadow income, while the expected rate of return on equity table 2 the calculation of factors of the influence on the level of the size of the shadow economy in ukraine, 2010–2018 year roe (х1) expected market return, smoothed (х2) shadow economy, percent of gdp (y)* shadow economy, percent of gdp, estimated (ye) 2010 1.0 32.8 38 35 2011 4.5 27.6 34 34 2012 2.0 19.4 34 34 2013 -1.2 16.4 35 35 2014 -36.1 20.0 43 44 2015 -18.2 43.1 40 40 2016 1.2 50.7 35 35 2017 7.0 52.8 32 33 2018 11.2 34.5 30 32 source: calculations of the ministry of economic development of ukraine, 2019 0 5 10 15 20 25 30 35 40 45 50 2010 2011 2012 2013 2014 2015 2016 2017 2018 t he le ve l o ft he s ha do w ec on om y, in % o fg d p y ye figure 1. dynamics of given and estimated levels of the shadow economy of ukraine baltic journal of economic studies 66 vol. 6, no. 2, 2020 correlates positively with the value of undeclared incomes. this linear multiple regression is adequate to the initial data, which is confirmed by the dynamics of the specified and estimated levels of shadow income (figure 2). comparison of the actual and table value of the fisher coefficient (factual = 41,86; ftable = 2,36) shows the high statistical significance of the model. before interpreting the results of the shadow economy analysis using the hidden cost of equity method, it should be emphasized that undeclared business income is just one (albeit the largest) component of the shadow economy, along with undeclared wages and hidden employment income. applying the approach of t. putnins and a. sauka (2015), the kyiv international institute of sociology (kiis), based on surveys of 800 executives and top managers of companies, estimated the shadow economy of ukraine in 2017– 2018. the level of the shadow economy in 2018 made up 47.2% of total gdp and 46.8% in 2017. the largest share of the shadow economy is hidden business income (about 57–60%) (the results of the study under the project shadow h2020, 2019). the rest is the concealment of employee income (the income of unregistered workers and undeclared wages). according to this approach, the shadow income of enterprises is about a quarter of gdp (2018). therefore, the range of estimates of the shadow economy level in ukraine, depending on the chosen method of determination, is quite varied: from 47% (zbruch, 2015) to 23.8% of gdp (national bank of ukraine, 2020). our estimates of 2018 are near the lower limit of the range. in general, compared to alternative calculations, for example the ministry of economic development, the proposed method is more sensitive to risks, as well as to decisions aimed at improving business conditions. evidently, the exacerbation of risks automatically reflects on the expectations about the return on investment and the official declaration of income. table 3 shows that, over the years of relatively stable economic conditions, shadow income estimates are approximately the same according to both the shadow return method and alternative approaches. in times of crisis (2014–2016) and increased risks, an abnormally high level of shadowing occurs. at first glance, the figures of this period are too high. however, the analysis of the enterprises’ official reporting data, as well as the level table 3 calculation of the shadow income of enterprises in ukraine based on the shadow cost of equity, 2010–2018 year roe (х1) expected market return, smoothed (х2) shadow cost of equity, % equity, bln. uah shadow income, bln. uah gdp, bln. uah shadow income, percent of gdp (y) shadow income, percent of gdp, estimated (ye) 2010 1.0 32.8 31.8 1339 425.8 1079.3 39 33 2011 4.5 27.6 23.1 1510 348.8 1299.9 27 25 2012 2.0 19.4 17.4 1780 309.7 1404.7 22 22 2013 -1.2 16.4 17.6 1932 340.0 1465.2 23 22 2014 -36.1 20.0 56.1 1633 916.1 1586.9 58 62 2015 -18.2 43.1 61.3 2049 1256.0 1988.5 63 61 2016 1.2 50.7 49.5 2396 1186.0 2383.2 50 46 2017 7.0 52.8 45.8 2423 1109.7 2982.9 37 42 2018 11.2 34.5 23.3 2564 597.4 3558.7 17 24 0 10 20 30 40 50 60 70 2010 2011 2012 2013 2014 2015 2016 2017 2018 th e sh ad ow in co m e, in % o f g d p y ye figure 2. dynamics of the given and estimated level of shadow income of enterprises baltic journal of economic studies 67 vol. 6, no. 2, 2020 of inflation, sovereign ratings of the country and gdp collapse, reveals that the estimates of income shadowing are the most realistic. other methods of valuation are not so risk-sensitive, and therefore, demonstrate a more optimistic picture. for most businesses, income shadowing is a major offset for increased risks and a way of ensuring a high expected return on investment. for example, costs of equity of the average ukrainian enterprise is 2–2.5 times higher than the corresponding indicator of enterprises operating in developed markets. the main sources of profit (high risk premium) for owners (investors) are: – high prices for products (services); – staff cost savings (low salaries and unofficial salaries); – counterfeiting and use of low-quality materials, products, services; – savings from the use of different tax evasion schemes; – other sources, such as low recourse usage fees, low rental costs, and more. table 4 summarizes the results of the survey on sources of profit (high risk premium) for owners (investors) in ukraine as of 2018. the results of the study revealed that the most significant sources of ensuring an additional risk premium for investing in ukraine are low staff costs and savings from tax evasion schemes. tax evasion is a source of offsetting additional risks for 75% of large and 95% of small and medium-sized enterprises. staff cost savings are the main source of generating added costs for owners of 90% of large and 85% of the ukrainian smes that participated in the survey. high costs of equity, in particular, their shadow component is one of the reasons for low wages in ukraine and their shadowing. according to kiis survey, 32% of company employees in 2018 were not formally employed, 45% were paid informally (the results of the study under the project shadow h2020, 2019). such results correlate with the results of empirical analysis, which have revealed no significant relationship between the country 's level of risk (in emerging markets) and unemployment (tereshchenko, 2017). this means that one of additional risks offsets is the wage shadowing. in addition, low wages counterbalances substantially the effect of dismissal of employees due to rising risks. as a result, in ukraine, the share of wage costs in the cost structure and in relation to gdp is substantially lower than in developed countries. the study of the causality of risks, the cost of attracting capital and the size of income shadowing, implies that in order to minimize the shadow economy the risks of enterprise activity, especially macroeconomic, corruption, criminal risks and risks of low property protection should be reduced. 4. conclusion empirical data confirm that the higher the local risks, the greater the size of the shadow economy, and concealment of income relatively. in times of crisis and recession, an increase in shadow activity occurs. in the presence of causal relations between the shadow activity of enterprises and the cost of equity, the latter should be considered as a variable to calculate the amount of undeclared income of enterprises as the largest segment of the shadow economy. given the high risks of doing business on em, particularly in ukraine, investors (owners) expect an excessively high risk premium. for super profit, businesses in such countries use minimizing staff costs, tax evasion, reducing the quality of finished goods (services), or counterfeit goods. most of cost of investing capital in these countries flows into the shadow sector. therefore, a vicious circle occur: high risks force companies to use shadow schemes and sources of payment of an additional risk premium to investors; on table 4 sources of additional risk premium for investing in an enterprise’s equity, an example of ukraine (data from tereshenko, voloshanyk & savchuk, 2019) characteristics large enterprises small and medium-sized enterprises amount % amount % total enterprises surveyed 20 100 20 100 enterprises that have paid official dividends over the past five years 3 15 1 5 enterprises that have paid income to owners over the past five years 20 100 20 100 sources of additional risk premium compensation – high prices for products (services): – staff cost savings (low salaries and unofficial salaries); – counterfeiting and use of low-quality materials, products, services; – revenue shading savings; – other sources. 5 18 6 15 8 25 90 30 75 40 1 17 15 19 5 5 85 75 95 25 shadow schemes of income payments to owners (investors): – moving profits to tax havens (offshore zones); – fictious expenses through missing trader; – manipulation of the tax benefits; – payment of inflated royalties, interest, commissions, agency fees, etc. 9 8 6 4 45 40 30 20 3 15 7 2 15 75 35 10 baltic journal of economic studies 68 vol. 6, no. 2, 2020 the other hand, the shadow economy is a risk factor of an inflated premium. the key parameters of a calculation model for the expected cost of equity capital throughout the entire corporate sector in countries related to em are substantiated: risk-free rate of return, global market risk premium, country risk premium. the beta factor is omitted in the model because it is aimed at calculating the average market rate of return. the estimation of the shadow income of enterprises requires utilisation of the smoothed values of the expected risk premium. this is due to the fact that some enterprises respond to risk factors in the period of their manifestation, the other act outstripping, and some entities need time to understand the risk factors and develop income shadowing schemes. the shadow economy component, formed by shadowing the income of enterprises, is proposed to determine according to the rate of the shadow cost of equity. the latter is calculated as the difference between the expected market rate of cost of equity and the return on equity invested, determined on the basis of official reporting indicators. the approximate value of the absolute amount of the shadowed income is derived from the application of the shadow rate of cost of equity to the value of the assets of enterprises financed by equity. the regression-correlation analysis confirms the presence of a negative correlation between the roe and the level of the shadow economy. the risks of investing in equity, reflected in the expected return on equity, and the total shadow income correlate positively. the analysis of the dependence of the shadow income of enterprises on these factors confirms a similar pattern. comparison of the obtained values of the shadow income of enterprises in ukraine with alternative estimates of the shadow economy reveals a higher sensitivity of the proposed method to changes in country risks, as well as to decisions aimed at improving business conditions. for example, the abnormally high values of the shadowing of corporate income in 2014–2015 is the result of a sharp downgrades of the country 's credit and investment ratings, extremely high inflation and other threats. obviously, under such conditions, most of the business has transformed its incomes into the shadow. this was reflected in both the sharp decline in official gdp and the negative values of financial results. since 2017, the size of shadow incomes has been decreasing sharply, as a result of an improvement in the ease of doing business index in ukraine, a decrease in inflation and a gradual decrease in the risk premium. the consequence is an increase in official incomes of enterprises and gdp of the country. it is confirmed that the exacerbation of risks automatically reflects on the expectations regarding the return on investment and on the official declaration of income. therefore, the shadow economy reduction is related directly to a set of measures aimed at minimizing the risks of business activities. references: gardner, m., wamhoff, s., martellotta, m., & roque, l. (2019). corporate tax avoidance remains rampant under new tax law. institute on taxation and economic policy (itep). retrieved from: https://itep.org/wp-content/ uploads/04119-corporate-tax-avoidance-remains-rampant-under-new-tax-law_itep.pdf oxfam deutschland e.v. (2019). retrieved from: https://www.oxfam.de/ stiglitz, j. e., & pieth, m. (2016). overcoming the shadow economy. series: international policy analysis. published by friedrich elbert stiftung. schneider, f. und boockmann, b. (2018). die größe der schattenwirtschaft – methodik und berechnungen für das jahr 2018. linz; tübingen. retrieved from: http://www.iaw.edu/index.php/‐288/member/222 putnins, t., & sauka, a. (2015). measuring the shadow economy using company managers. journal of comparative economics, vol. 43, issue 2, pp. 471–490. medina, l., & schneider, f. (2018). shadow economies around the world: what did we learn over the last 20 years? imf working paper, wp/18/17. retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3124402 breusch, t. (2005). estimating the underground economy using mimic models. working paper 2005, canberra, australia. retrieved from: http://econwpa.wustl.edu/eps/em/papers/0507/0507003.pdf copeland, t., koller, t. and murrin, j. (2000). valuation–measuring and managing the values of companies. john wiley sons, new york. tereshenko, о., voloshanyk, n., & savchuk, d. (2019). rate of cost on investment capital in emerging markets. sosiety, integration, education. proceedings of the international scientific conference. rezekne. volume 6, pp. 665–674. shadow economy in ukraine. results of researh of 2019 in the framework of the project shadow h2020. retrieved from: http://kiis.com.ua/materials/pr/20191107_shadow/shadow_ua.pdf combined method of e&y, mastercard. research of shadow economy in ukraine. retrieved from: https://bank.gov.ua/news tereshchenko, o., & voloshanyuk, n. (2017). capital implicit expenses in the shadow economic revenue. pnap, no 6, pp. 85–94. zbruch (2015). the level of the shadow economy has grown to 47%. retrieved from: https://zbruc.eu/ node/40301?theme=zbruc&page=211 baltic journal of economic studies 101 vol. 2, no. 1, 2016 corresponding author: 1 department of social and humanitarian disciplines, nizhyn agrotechnical institute, national university of life and environmental sciences of ukraine. e-mail: v.v.85@mail.ru economy competitiveness and modern pedagogics definitions correlation svetlana tolochko1, nizhyn agrotechnical institute, national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the paper is to understand and explain economy competitiveness and modern pedagogic definition correlation. education for entrepreneurship or economic development, and education for environmental sustainability, or sustainable development are seen as arguing goals in education reforms. teachers today also encounter a number of other and equally important challenges in their work, such as educating youth for insecurity, tolerance, new technologies, peace and active citizenship, to mention but a few. national economic competitiveness is linked to intellectual and capital and is driven by knowledge, and innovation. sustainable development requires an understanding of the complexity of the global ecosystem and of creative problem-solving the solutions searching to ‘wicked problems’ such as that of reconciling economic activity with a sustainable environment. methodology. it is used the data from publications and reports of the european commission, oecd, world bank, world economic forum, unesco, international journals in economics and pedagogic: american economic review, journal of education policy, journal of education change, european journal of education. in the article the descriptive analysis, supported by the quantitative analysis is applied. results. it was defined that national economic competitiveness is linked to capital driven by knowledge and innovation. it was analysed the formation of global competitiveness index (gci) which is made up of over 110 variables. according to the gci switzerland is the most competitive economy in the world in 2015. it is highlighted the following overarching needs to: give a higher profile to the notion of interdependence: how closely one part of an ecosystem is linked to and depends upon another; making humanity more aware of its own fragility on this planet; highlight the role of cooperation: problems faced will only be resolved by international cooperation; develop the notion of a global public good: environmental sustainability can only be achieved by trans ceding particular national or individual needs. practical implication. the results of the investigation may be used in teaching programs of ukrainian universities, institutes and schools. value/originality. received conclusions will help ukrainian pedagogues to understand the importance of new conception of knowledge, innovation and intellectual capital. key words: economy competitiveness, pedagogic approaches, global competitiveness index, knowledge-based economy, intellectual capital. jel classification: a13, i25, o34 1. introduction there are two change forces affecting education today. firstly, raising the quality of education that is driving human potential is seen as imperatives in knowledge societies that aim for sustainable economic growth and prosperity. secondly, education is also viewed as one of the instruments for raising the level of understanding of the fragility of the global ecological situation. education for entrepreneurship or economic development, and education for environmental sustainability, or sustainable development are seen as arguing goals in education reforms. teachers today also encounter a number of other and equally important challenges in their work, such as educating youth for insecurity, tolerance, new technologies, peace and active citizenship, to mention but a few. in order to educate young people to play a role in both future economic competitiveness and environmental sustainability, education policies have to be based on a proper understanding of these key concepts. in any knowledge-based economy people need to be able to work with knowledge, collaborate with other people and adapt to unpredictably changing situations. national economic competitiveness is linked to intellectual and capital and is driven by knowledge, and innovation. sustainable development requires an understanding of the complexity of the global ecosystem and of baltic journal of economic studies 102 vol. 2, no. 1, 2016 creative problem-solving to solutions searching to ‘wicked problems’ (murgatroyd, 2010) such as that of reconciling economic activity with a sustainable environment. 2. importance of economic competitiveness in educational policies competitiveness and sustainability have become buzz words in the discourse on global prosperity and development strategies. one popular indicator used in ranking the performance of nations is their ability to compete in world markets. position in the international rankings of national economic competitiveness has indeed become a pretext for economic and labour market reforms in many economies. national education policies aim at helping their economies to become more competitive. competitiveness as one aspect of the twin challenge of nations is, however, not a clear concept for either policy-makers or education practitioners. sometimes it refers to competitiveness in education which means the effectiveness and efficiency of a national education system vis-à-vis other education systems (sahlberg, 2006; west, 1993). in other cases, education for competitiveness implies a certain kind of education that will increase employability and productivity in national and world markets. this is closely linked to the ‘competitiveness of education’ interpretation since better education improves employment opportunities because of its positive impact on knowledge development and hence on productivity. in this paper, we look at education as one of the main drivers of human capital development and thereby of national economic competitiveness. again, it means better quality of, broader access to and more mobility within education. but it also means considering what type of education is needed to cultivate those qualities that are necessary in a sustainable knowledge-based society. all democratic nations wish sustainable economic development and prosperity for the well-being of their inhabitants. according to porter et al. (2008), prosperity is driven by the productivity of an economy which, in turn, depends on the value of goods and services produced per unit of national human capital and national resources including those derived from ‘natural capital’. both the value of a nation’s products and services and the efficiency with which they are produced determine productivity. competitiveness is measured by productivity. contemporary economic theories and empirical evidence suggest that many things matter for competitiveness (porter et al., 2004; 2008). the new global competitiveness index (gci) framework designed by the world economic forum (wef) that covers more than 130 economic systems incorporates a complex set of these factors in order to help policymakers to explain the strengths and weaknesses of productivity in their economies and to craft policies accordingly (table 1). table 1 global competitiveness index 2015 rank economy value 1 switzerland 5,8 2 singapore 5,7 3 usa 5,6 4 germany 5,5 5 netherlands 5,5 6 japan 5,5 7 hong kong sar 5,5 8 finland 5,5 9 sweden 5,4 10 united kingdom 5,4 made by the author according to: (competitiveness ranking , 2016) according to the table above switzerland is the most competitiveness economy in 2015. the global competitiveness index (gci) is made up of over 110 variables, of which two thirds come from the executive opinion survey, and one third comes from publicly available sources such as the united nations. the variables are organized into twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness (the global competitiveness report, 2012). the new gci aims to reveal the underlying causes of productivity. three domains influence national economic competitiveness in this framework: endowments, macroeconomic competitiveness, and micro-economic competitiveness. endowments affect productivity through geographic location, natural resources, or size of the domestic market. micro-economic factors operate on firms and hence drive productivity. it is the macroeconomic domain that, through its indirect influence on productivity of firms in an economy, becomes relevant for education policies. macro-economic competitiveness consists of two distinct areas: macro-economic policy, and social infrastructure and political institutions. the latter, as described in contemporary literature, includes basic human capital, i.e. well-educated and skilled people, quality of political institutions, and the rule of law. empirical research on economic growth has found social infrastructure and political institutions to be the most important factors for long-term differences in prosperity (bils & klenow, 2000; glaeser et al., 2004). the new gci as a measure includes enrolment rates in primary, secondary and tertiary education and the quality of the education system in general and of mathematics and science education in particular. these aspects of human capital fall into the province of national policies. although, economic competitiveness determined by the new gci and other global indices, does not suggest any directions for pedagogies in the schools of competitive knowledge societies. another element of the twin challenge facing nations is the global ecological threat. after three decades of mounting concern about global environmental problems, baltic journal of economic studies 103 vol. 2, no. 1, 2016 the united nations proclaimed a decade of education for sustainable development in 2005 to highlight the fact that ‘education and learning lie at the heart of approaches to sustainable development, a powerful concept that could ignite the interests of people around the world to shape a more sustainable future’ (unesco, 2005, p. 26). five years into the lisbon strategy, economic competitiveness became closely tied to the challenge of preparing the next generation of students to deal with global threats to the future sustainability of our economic, political and social systems and the ecological systems upon which it depends. these threats arise from the demographic and technological overload of the planet. the priority given to increasing national economic competitiveness is seen by many as contributing to rather than solving the problem of ensuring a sustainable global environment (rees, 2003; steffen et al., 2007). this ‘vast campaign’ seems to have started in the last ten years. it is generating a new vocabulary that include ‘global social-ecological system’, ‘tipping points’, ‘population overshoot’, ‘global warming’, ‘rising sea levels’, ‘fossil fuel over-dependence’, ‘carbon footprints’, ‘resource conflicts’ and others. however, schools are slow to incorporate new scientific, social and environmental problems into pedagogy. the inter-disciplinary study of the interaction between complex social and ecological global systems has made progress in research communities but there is still what doppelt (2008) calls widespread ‘systems blindness’ among economists, politicians, businesses and education communities that must be addressed urgently. the resilience of the global financial system has been challenged by the impact of excessive credit mismanaged by reputable banks and fraudulent traders. but coverage of the disturbance in the financial system is not linked to the long-term systemic pathologies that arise from the interaction of human and ecological systems. 3. traditional pedagogy methodology and different learning objectives fortunately, the qualities and the pedagogies that prepare young people to make a creative and collaborative contribution to national competitiveness and address global ecological challenges for a sustainable future are similar. teaching and learning for uncertainty, risk-taking, ingenuity, collaboration and creativity are means that can focus on the different ends of economic competitiveness on the one hand and on global social and ecological sustainability on the other. in curricular terms, whether the ‘subject’ to be studied is entrepreneurship or sustainable development the most appropriate pedagogies will have much in common. both require a high level of ingenuity, creativity and problem-solving. the scientists, policy-makers and consumers of the 2000s now being prepared in formal education institutions will meet unprecedented economic and ecological system challenges in their adult professional lives that will require concerted action at every level, from local to global. many see the ends of competitiveness and sustainability as conflicting. manteaw (2008), for example, discusses education for sustainable development and social responsibility as emergent discourses that need conscious efforts to align their ideals. if education for sustainable development is to make a significant contribution to educational thinking, he claims, it does so recognizing that the current market-oriented agenda related to formal schooling contradicts the ideals of education for sustainable development. in an analysis of the role of education in promoting a sustainable society, bottery (2008) challenges an unquestioning commitment to economic competitiveness by highlighting the following overarching needs to: give a higher profile to the notion of interdependence: how closely one part of an ecosystem is linked to and depends upon another; making humanity more aware of its own fragility on this planet; highlight the role of cooperation: problems faced will only be resolved by international cooperation; develop the notion of a global public good: environmental sustainability can only be achieved by trans ceding particular national or individual needs. he advocates a ‘sustainable school’ in which longer impact horizons, environmental sustainability, an awareness of global fragility, ecological interdependence, global cooperation and a concept of a public good are embedded. this contrasts with the core values of economic growth and global competitiveness in the lisbon strategy, but it is a vision that needs a similar creative and innovative pedagogy for collaboration and arguably for a particular and targeted form of competitiveness if it is to be pursued. for example, competitiveness and creative ingenuity can promote the growth of sustainable technologies as well as high-carbon emitting technologies that produce nonessential consumer and luxury goods. competitiveness and ingenuity will also be needed to create strategies that re-stabilize global systems and stimulate peoples’ will to change to a morality, mindset and lifestyle implied by the ‘overarching needs’ spelt out by bottery (2008). it is important to realize the sheer scale of the challenge of turning educational policy into practice at the key interface between millions of learners and hundreds of thousands of their formal teachers. it is also important to understand the intensification of teachers’ work and raised expectations of their performance arising from the greater demands for accountability in recent years. only if new priorities are signalled at the political level can the necessary context be provided to move towards pedagogies that are appropriate for the decades ahead. both pedagogy and curriculum must be seen within the overall values and goals of a given education system. entrepreneurship refers to an individual’s ability to turn ideas into action. it includes creativity, innovation and risk baltic journal of economic studies 104 vol. 2, no. 1, 2016 taking, as well as the ability to plan and manage projects in order to achieve goals. this supports everyone in dayto-day life at home and in society, makes employees more aware of the context of their work and better able to seize opportunities, and provides a foundation for entrepreneurs establishing a social or commercial activity. risk-taking, creativity and innovation are, as expressed in the quotation above, often seen as features of a special form of curriculum, in this case entrepreneurship education. but this discourse needs to be extended to all areas of education. even more importantly, ingenuity and creativity should also be woven into the culture of schooling. 4. importance of education, innovation and cooperation new conception of knowledge. formal education, especially at pre-tertiary level, has long been criticized for static conceptions of knowledge and learning (lehtinen, 2004). traditionally, the foundation of knowledge was based on a positivist scientific method. therefore knowledge was viewed as objective and knowledge-formation as a linear, cumulative process free from subjective values and interpretations. knowledge is nowadays understood differently in economics, mathematics, natural sciences, neuroscience, cognitive sciences and information technologies. it is seen as relativistic and diverse in terms of its interpretations. furthermore, according to capra (2002), it is created through multiple processes, including hermeneutic and subjective ‘scientific’ methods alongside the systems analytical advances in understanding nonlinear dynamics of complex life, and human and ecological systems. this shift in the paradigm of knowledge has created a challenge for education. teaching and learning in schools should concentrate not only on mastering the basics and achieving predetermined learning standards but also on coming up with alternative perspectives, new ways of constructing knowledge and creating ideas that have value. innovation importance. innovation involves the extraction of economic and social value from knowledge. it puts ideas, knowledge and technology to work in a manner that brings about a significant improvement in performance. it needs not just an idea but rather an idea that has been made to work. this means that innovation and entrepreneurship are closely interdependent. therefore, living in and working for a world of innovations requires different attitudes, knowledge and skills from the citizens. technological adaptation and innovation have been the main drivers of economic growth in developed countries since world war ii and are also proving to be important factors in many developing countries. innovative models of wealth creation, referred to as ‘natural capitalism’, are emerging in the business world. they illustrate how environmental responsibility can be highly profitable. in order to be able to contribute successfully to the development of innovation in the sustainable knowledge economy, education systems also need policies that encourage working with and learning from innovations. intellectual capital. success in the world of work and living in a world of global risks require different knowledge and skills. coping with increasing amounts of knowledge has changed the ways we think about education and schools. individual performance and inventions created by one person only have given way to collective intelligence, shared knowledge and team-based problem-solving. successful economies and highly creative communities are based on the idea of strategic alliances rather than raw competition for markets and clients. indeed, sustainable development and economic competitiveness require a stronger focus on the development of interpersonal skills and intellectual capital throughout the cycle of education. more specific intellectual capital that is necessary in productive group processes, whether in or out of school, is becoming more important in the schools of those countries that are genuinely concerned about their economic competitiveness and sustainable development. competition and collaboration are central concerns in an exploration of global economic and environmental futures and related pedagogies. both collaboration and competition confer evolutionary advantage. in-group collaboration to give comparative advantage to one group over another is a key to economic as well as political success in market-based democratic societies. it also advantages individuals within the groups who benefit from a sense of identity and belonging. increasingly at the local level of schooling, the creation of collaborative cultures in schools is seen as offering competitive advantage in the quasi-market that sets schools in competition for parental choice; even within classrooms modern pedagogy based on constructivist principles of learning is increasingly characterized by collaborative table 2 the models of learning molels of learning cooperation competition individualistic interdependence positive negative none interaction pattern mutual encouragement oppositional none outcome 1 high effort to achive by all low effort to achive by many low effort to achive by many outcome 2 positive relationships negative relationships no relationships outcome 3 psychological health psychological illness psychological pathology source: (johnson d. & johnson r., 1989) baltic journal of economic studies 105 vol. 2, no. 1, 2016 student projects and problem-solving activities. creativity in the classroom has long stressed the efficacy of such activities both for motivating learners and for promoting ‘21 st century skills’ needed for labour and enterprise in the knowledge economy. every school population and every classroom group are an ‘in-group’ and if school leaders and teachers are skilful in creating a positive culture they can provide individual pupils with the security that comes from a sense of identity and belonging. excessive in-group competition and emphasis on winlose relationships can obviously damage such benefits, particularly for the losers. in their seminal work on cooperative learning, johnson and johnson (1989) summarize the differences between three forms of social interdependence (table 2), stressing the intrinsic benefits of cooperative learning and the negative effects of the other two. research evidence shows the broad range of educational benefits of cooperative learning that is based on the social interdependency theory. together with academic gains, students are also able to improve their ‘soft’ skills, such as helping behaviours and problem solving, and experience safety and mutual trust. 5. conclusions during the investigation it was defined that national economic competitiveness is linked to capital driven by knowledge and innovation. it was analyzed the formation of global competitiveness index (gci) which is made up of over 110 variables, of which two thirds come from the executive opinion survey, and one third comes from publicly available sources such as the united nations. the variables are organized into twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness. according to the gci switzerland is the most competitive economy in the world in 2015. the new gci includes enrolment rates in primary, secondary and tertiary education and the quality of the education system in general and of mathematics and science education in particular. these aspects of human capital fall into the province of national policies. it is highlighted the following overarching needs to: give a higher profile to the notion of interdependence: how closely one part of an ecosystem is linked to and depends upon another; making humanity more aware of its own fragility on this planet; highlight the role of cooperation: problems faced will only be resolved by international cooperation; develop the notion of a global public good: environmental sustainability can only be achieved by trans ceding particular national or individual needs. it is defined three main factors of economy competitiveness rising: new conception of knowledge; innovation; intellectual capital. understanding importance of facts above will help pedagogues to change their approaches according to modern economy needs and challenges. references bils, m. & klenow, p. (2000). does schooling cause growth? american economic review, 90, p. 328–335. bottery, m. (2008). redefining the focus of educational leadership: the case forenvironmental sustainability (unpublished manuscript). competitiveness ranking. retrieved january 10, 2016 from http://reports.weforum.org/global-competitivenessreport-2015-2016/competitiveness-rankings/ doppelt, b. (2008). the power of sustainable thinking (london, earthscan publishing). glaeser, e., la porta, r ., lopez-de -silanes, f. & shleife, a. (2004). do institutions cause growth? nber working paper no. 10568 (cambridge,national bureau of economic research). unesco, 2005, p. 26. hargreaves, a. & shirley, d. (2009). the fourth way: the inspiring future for educational change. – new york, sage. johnson, d. & johnson, r . (1989). co-operation and competition: theory and research (minneapolis, interaction book company). lehtinen, e. (2004). koulutusjärjestelmä suomalaisen yhteiskunnan muutoksessa [education system in changing finnish society], in: artikkelikokoelma tutkimushankkeesta ‘sosiaaliset innovaatiot, yhteiskunnan uudistumiskyky ja taloudellinen menestys’ (helsinki, sitra), p. 520–590. manteaw, b. o. (2008). when businesses go to school: neo-liberalism and education for sustainable development, journal of education for sustainable development, 2, p. 119–126. murgatroyd, s. (2010). ‘wicked problems’ and the work of the school, european journal of education, 45, p. 259–279. porter, m., delgado, m., ketels, c. & stern, s. (2008). moving to a new global competitiveness index, in: m. porter & k. schwab (eds). the global competitiveness report 2008–2009 (geneva, world economic forum) p. 43–64. porter, m., schwab, k., sala -i-martin, x. & lopez -claros, a. (eds) (2004). the global competitiveness report 2004–2005 (new york, oxford university press). rees, m. (2003). our final century (london, heinemann). sahlberg, p. (2006). education reform for raising economic competitiveness, journal of educational change, 7, p. 259–287. steffen, w., crutzen, p. j. & mcneill, j. r . (2007). the anthropocene: are humans now overwhelming the great forces of nature? ambio, 36, p. 614–621. baltic journal of economic studies 106 vol. 2, no. 1, 2016 sahlberg, p. (2009). learning first: school accountability for a sustainable society, in: j. c. couture, k. d. gariepy & b. spencer (eds) educational accountability: professional voices from the field (rotterdam, sense publishing) p. 1–22. the global competitiveness report 2011–2012. retrieved january 8, 2016 from http://www3.weforum.org/ docs/wef_gcr_report_2011-12.pdf west, e. (1993). education and competitiveness. discussion paper no. 93-02 (toronto, government and competitiveness school of policy studies, queens university). светлана толочко корреляция понятий конкурентоспособности экономики и современной педагогики аннотация. цель статьи состоит в определении корреляции между понятиями конкурентоспособности экономики и современной педагогики. система образования, которая готовит специалистов в области экономического развития и предпринимательства, отличается от образования, целью которого является достижение устойчивого развития и экологической стабильности. на сегодняшний день современные преподаватели имеют богатый инструментарий, который способствует развитию толерантности, надежности, ответственности и т.д. что касается национальной конкурентоспособности страны, она взаимосвязана с интеллектуальным капиталом, в основе которого лежат знания и инновации. стабильное развитие требует понимания сложности глобальных экосистем и разработки комплекса мероприятий по решению проблем, связанных с экономическим развитием. методика. для проведения исследования проанализированы публикации и отчеты европейской комиссии, оэср, всемирного банка, всемирного экономического форума, юнеско, международных журналов по педагогике и экономике. в работе были использованы методы описательного и количественного анализа. результаты. в результате проведенного исследования было определено, что национальная конкурентоспособность экономики связана с капиталом, в основе которого лежат знания и инновации. проанализирован глобальный экономический индекс, состоящий из 110 переменных. в соответствии с данной методикой в 2015 году швейцария признана наиболее конкурентоспособной страной. предложены следующие рекомендации: повысить уровень взаимозависимости понятий конкурентоспособности экономики и современных методов обучения; развить понятие глобальной общественной продукции; способствовать кооперации педагогической и экономической сфер. практическое значение. результаты исследования могут быть использованы в образовательных программах украинских университетов, институтов и школ. значение/оригинальность. полученные выводы помогут украинским педагогам понять важность новой концепции знаний, инноваций и интеллектуального капитала. baltic journal of economic studies 134 vol. 7, no. 1, 2021 corresponding author: 1 university of the state fiscal service of ukraine, ukraine. e-mail: tilchikvv@ukr.net orcid: https://orcid.org/0000-0001-5964-3439 2 university of the state fiscal service of ukraine, ukraine. e-mail: o.v.tilchik@ukr.net orcid: https://orcid.org/0000-0002-7604-7660 doi: https://doi.org/10.30525/2256-0742/2021-7-1-134-138 guarantees of legality of public administration activity: from concept to practical implementation vyacheslav tylchyk1, olha tylchyk2 abstract. the purpose of the article is an attempt to consider guarantees of the legality of public administration through rethinking the existing system of appeal, taking into account the novelties of domestic science and practice, and the preconditions for the formation of administrative procedural law, in which the central place belongs to the category of “dispute in public relations”. the analysis of subsystems of dispute resolution through administrative proceedings and pre-trial appeals from the standpoint of efficiency and the dialectical connection is carried out. it is stated that to ensure the effectiveness of the generally accepted system of dispute resolution as a guarantee of legality, the activities of public administration entities today are the priority of absolutely all legal countries. significant obstacles on gradual and systematic activities such as those caused by an acute exacerbation of social tension in society, external aggression, especially the development of legal doctrine and legislation that includes an ambiguous position. today, most scholars agree that the issues of guarantees of the legality of public administration are directly related to the ability to present a model for appealing decisions, actions, inactions and determine its levels. scientific support of the processes of formation of a legal and socially-oriented state is closely connected with the need to strengthen the methodological armament of legal science, its departure from outdated scientific dogmas, and the search for forms of manifestation and enforcement. the solution of the goal set in the publication is achieved using the cognitive potential of the system of philosophical, general scientific, and special methods. analysis and synthesis allowed to determine the features of the concepts of “appeal” and “dispute” within the administrative appeal. methods of review of grammar and interpretation of the law helped identify gaps and other shortcomings of legislation problems introducing mediation in the judicial administrative process as of alternative that will act as a separate stage of proceedings litigation, making suggestions for improvement. practical implications. the formulated proposals for the development of legal support for appealing decisions, actions, the inaction of public administration, along with the functioning of administrative proceedings as a procedural form of administrative justice, acts as a guarantor of public administration in the relationship between citizen and state and is an integral part of this model. key words: guarantees of legality, public administration, the dispute in the field of public law relations, appeals, administrative proceedings, administrative process, mediation. jel classification: k10, k40, k41 1. introduction formation of the socially-oriented state that declares a person’s life, honor, dignity, and health of the highest value, pointing it in the basic law, means that ensuring the welfare and opportunities to meet the needs of every single individual cause creation and functioning of all entities, which have recently been called public administration. legal guarantees concerning the activities of public administration are the necessary means (methods, measures, conditions) for its effective, proper implementation. characterizing any phenomenon, it is logical to address the lexical meaning of the constituent concepts that make it up. thus, the word “guarantee” is understood in the following ways: guarantee something, provide whatever; an obligation provided by law or a certain agreement, under which a legal or natural person is liable to the relevant persons in case of non-fulfillment baltic journal of economic studies 135 vol. 7, no. 1, 2021 of its obligations. guarantees of legality: due to the laws of social development system of conditions and means that ensure the process of legality and thus form such an order of social relations, which contributes to the country’s movement towards democracy and the rule of law (zaichuk, 2013). public administration today will be defined as a system of organizational and structural entities that has legally acquired the power to exercise public authority through the implementation of applicable regulations and other actions in the public interest, which are recognized by the state and provided by law, i.e. have legal registration and established forms of legal implementation. their satisfaction is a guarantee of the harmonious existence and integrated development of the state and civil society, systematically structured by the citizens of local selfgovernment. public administration as a legal category has two dimensions: functional and organizationalstructural. the functional approach is the activity of relevant structural entities to perform functions aimed at realizing the public interest. the sphere of responsibility of public administration is objectified by the institution of appealing against decisions, actions, or inaction of its subjects in court and administratively (halunko, 2020). the essence, content, and significance of appeal and dispute, both in the praxeological and in the axiological sense, were developed by such scholars as v. b. averianov, yu. p. bytiak, o. f. andriiko, t. o. kolomoiets, d. v. luchenko, o. p. riabchenko, o. v. konstantyi, etc. although the study of the concept of dispute in public relations has received much attention from the scientific community, in particular, formulated a doctrinal vector of intensification of scientific research in this area, there is a deep rethinking of existing views on the essence and content of such a concept and recognition of its independent nature along with related legal categories. 2. the relationship between the concepts of appeal and dispute in administrative law the main issues addressed in the plane of the task are the study of the essence, content, and delimitation of the concepts of “administrative legal dispute” and “public-legal dispute”. this issue is raised, in particular, in a comprehensive study “institute of appeal in administrative law” by d. v. luchenko, which substantiates the position on the use of the term “administrative legal dispute” as a type of public law. denoting the concept of “administrative legal dispute” relations that develop in the process of pre-trial and judicial appeal, the scientist concludes its main feature, which is the material precondition of the appeal. in the context of the latter category, it is determined that for the resolution of administrative legal disputes there are the administrative procedure and judicial procedure, which determine the existence of appropriate procedural forms of administrative complaints and administrative claims (luchenko, 2017). this logically determines the existence of a procedural form of consideration of administrative complaints (administrative appeal), a claim procedural form (court appeal), a procedural form of indirect appeal (appeal to the authorities empowered to initiate an appeal against a decision, action, or inaction of a public authority) (luchenko, 2017). however, the question of the relationship between the categories of “appeal” and “dispute” within the administrative appeal was left out of consideration, because under the chosen approach these categories will coincide and cannot be assessed as derivative of each other (accordingly, the question of expediency and the validity of their simultaneous use in the simultaneous impossibility of choosing one of them as a generalization). the procedure for filing a complaint to enterprises, institutions, organizations of all forms of ownership is regulated by the basic law of ukraine “on citizens’ appeals”, in the text of which there is no term “dispute”. referring to the dictionary and reference literature, an appeal is a notice of review to state bodies and local governments, associations of citizens about the illegality or unfoundedness of decisions, actions (inaction) of officials (great encyclopedic legal dictionary, 2012). the code of administrative procedure of ukraine (hereafter referred to as the cap of ukraine) article 12 “forms and administrative justice”, in particular the fourth part, states that cases in dispute following the claim and reduced the proceedings dealt against decisions, actions, and omissions (code of administrative procedure of ukraine, 2005) respective subobjects. thus, the approach to the derivative nature of the dispute (statement of the material basis of the appeal) may be correct when it comes to the appeal as an institution to protect the rights, freedoms, and legitimate interests of individuals, rights, and interests of legal entities in a material, static sense. however, from the standpoint of the dynamics of the dispute, the appeal can be both a prerequisite for the dispute and its procedural component. the steps towards the allocation of administrative procedural law in a separate area are significant for this statement, in which the “dispute” will occupy a central place, and the process of its resolution by administrative courts will be characterized as an administrative process. given this situation, which determines the relationship between the concepts of “appeal” and “dispute”, an updated line of research will be formed in connection with the obvious need to substantiate these concepts as an independent. by the way, in the science of administrative law, they are considered (loshytskyi, 2015). it is clear that in the future the subject area of the dispute and appeal will coincide. under such conditions, to characterize the appeal as a system, it will be possible baltic journal of economic studies 136 vol. 7, no. 1, 2021 to select its levels, and in such a system, the dispute will be one of them. this statement is mediated by the development of the institute of administrative justice in ukraine. in most works of domestic and foreign scholars, the issue of unification of administrative appeal procedures is considered through the prism of their autonomy. the so-called “separation” of judicial and extrajudicial appeals, as noted by d. v. luchenko, is explained by the provisions of the constitution of ukraine, which separately enshrines the right to appeal to public authorities, local self-government bodies and officials of these bodies (article 40 of the constitution of ukraine), which includes the right to complain and the right to appeal in court against decisions, actions or omissions of public authorities, local self-government bodies and officials (article 55 of the constitution of ukraine). this distinction is explained by legal and ideological reasons, namely the need (given the soviet past) to establish the constitutional level of the possibility of judicial review of administrative acts (luchenko, 2012). agreeing with the above statement about the need to consider the appeal in the dialectical relationship of its internal elements (which still need to be determined), it is worth noting that despite this desire, scholars still oppose the methods of appeal (pre-trial and judicial), especially when it comes to determining its effectiveness. moreover, all attempts to unify procedures (methods, forms) are reduced to the characteristics of the proceedings within a certain group of relations (procedural, tort, judicial). 3. prerequisites for the formation of the appeal system in the context of the category “dispute in the field of public relations” given the peculiarities of legal support, the polycentric nature of the subject of administrative law does not allow to unify such proceedings, and even more, to outline the place of proceedings for disputes in the field of public relations among them. additional complexity in determining the nature and content of the appeal in administrative law is introduced, in particular, by the new, so-called “alternative”, form (method) of protection – mediation. an attempt to comprehensively characterize the appeal in administrative law was made by d. v. luchenko, who determined that the use of the appeal mechanism indicated the emergence of a dispute over substantive law. the administrative and legal dispute is a material precondition for an appeal (luchenko, 2017). it should be noted that the use of the term “dispute” as a material precondition for an appeal logically leads to reflections on the procedural component of such activities. it is known that to resolve a dispute that has arisen between entities whose legal status is not equal, there must be a third party – the court, mediator, another entity endowed with sufficient authority to resolve it. otherwise, to characterize the relationship that arises in the appeal process as controversial, is unlikely to succeed, at least given the inequality of the parties, which is constantly emphasized in scientific journalistic sources. o. v. konstantyi (2015) points out that filing a procedural (judicial) complaint is a way to exercise the dispositive right of a party to initiate an appellate and cassation review of court decisions in administrative, commercial, criminal, and civil proceedings. the scientist emphasizes that the current model of administrative proceedings in ukraine, even though in the early 2000s during the development of the draft code, designed to implement it, is not a complaint procedure, which provided for in the provisions of subsection “b” of section iii (chapter 29 – 32) of the civil procedure code of ukraine of 1963, and is a claim. this approach of the legislator is quite justified, because the administrative claim, unlike the complaint, allows it to claim not only the invalidation of the contested decision, action, or inaction of the subject of power but also compensation for material damage. therefore, according to the scientist, it is a more effective procedural means of protecting subjective rights and freedoms or interests in the field of public relations, in particular in litigation based on adversarial and binding court decisions. instead, to effectively resolve disputes, it is now appropriate to create a slightly different organizational structure in the institutional environment within the existing units. thus, in the scientific literature, there are a large number of proposals for the creation of “quasi-jurisdictional” bodies, but in conditions of a state budget deficit, these transformations are extremely costly. thus, the issue of the organizational component of the conceptual (even doctrinal) vision of dispute resolution as a component of the procedural part of the pre-trial appeal can be achieved through a “one-tier system”. this means a system that would ensure that complaints are dealt with on an equal footing. this can be achieved by establishing an equal set of procedural rights and responsibilities of the parties to the case with the participation of the staff (structural unit) of the central executive body or the highest body in the institutional system that would decide on the dispute. the decision of the staff would be appealed in the procedure of litigation in administrative courts. this would provide opportunities for effective internal control over the legality of regional or local units, timely correction of mistakes made in the process of administrative rule-making, communicate the position of the executive branch, adjust their activities based on service guidelines and significantly increase public confidence in the institution. baltic journal of economic studies 137 vol. 7, no. 1, 2021 this direction of reformatting the activities of units authorized to consider complaints (other appeals, objections, etc.) should solve the problem of excessive delay and abuse of the right to appeal, which is emphasized in almost every scientific work of domestic scientists in the context of this issue. currently, the grievance system is two-tier, and the main feature of its operation is the lack of existing regulations to take into account the materials of the complaint by a lower-body in the central executive body and, in particular, the procedure for participation in such a complaint (authorized unit) of the central executive body at the level of the complainant. it is also worth paying attention to certain categories of cases for which a special procedure has been established. thus, paragraph 56.23 of article 56 of the tax code of ukraine establishes the procedure for appealing the decision to refuse to register a tax invoice/calculation of adjustments in the unified register of tax invoices, and subparagraphs 56.23.1 – 56.23.4 determine the features of such complaints by the central executive body implementing the state tax and state customs policy (tax code of ukraine, 2010). there are many similar examples in the practice of legislative regulation of such special procedures. accordingly, the existence of such special procedures for reviewing complaints makes it possible to raise the issue of resolving the issue of mandatory pre-trial dispute resolution. however, in this case, the procedure for filing a complaint to the central executive body (its staff ) will lose its signs of independence, as it will be dialectically (normatively) related to the resolution of the dispute through administrative proceedings. only disputes that would be resolved by the staff of the central executive body were recognized as a pre-trial procedure for reviewing a complaint against decisions, actions (inaction) of a regional and/or its local structural unit. 4. conclusions despite the presence in regulations-instructions on the possibility of mandatory pre-trial settlement of disputes, in particular, article 124 of the constitution of ukraine, article 17 of the cap of ukraine “basic provisions of pre-trial settlement of disputes” and other articles in public law, such provisions are difficult to implement, since, taking into account the provisions of the second part of article 19 of the constitution of ukraine, public authorities and local self-government bodies, their officials are obliged to act only on the basis, within the powers and in the manner prescribed by the constitution and laws of ukraine (constitution of ukraine, 1996). this provision of the constitution of ukraine allows for the introduction of mediation in public law relations only in part and if the scope of discretionary powers of the subjects exercising power management functions is clearly defined. much attention is paid to the issue of mediation in the administrative process. in particular, one of the progressive provisions is the approach based on which a judge of an administrative court can act as a mediator. without aiming at a thorough study of mediation in judicial administrative proceedings, it should be noted that this alternative method will be a separate stage of the proceedings on the judicial settlement of the dispute. since, first, the judge (court) implements (performs) the function of justice in the procedural form determined by the cap of ukraine, other regulations, therefore, it seems unclear what exactly is the alternative (what are the means of resolving the dispute). pre-trial the provisions of the draft law of ukraine “on mediation”, registered in 2015, will duplicate the provisions of the above articles of the cap of ukraine. if the bill defines a special procedure for consideration of the appeal, there will be a problem of mandatory implementation of the mediator’s decisions. thus, ukraine risks receiving an additional inefficient complaint procedure (appeals, disputes, etc.), which will have little to do with “appeals”. thus, the first level of appeal can be determined by the criterion of binding execution of the decision (pre-trial settlement of the dispute, under the conditions described above, and mediation as an alternative way of resolving such disputes in the pre-trial procedure). the highest level of appeal is the resolution of disputes in the field of public relations by administrative courts. references: halunko, v. (2020). velyka ukrainska yurydychna entsyklopediia u 20 tomakh (termin “publichna administratsiia”) [large ukrainian legal encyclopedia in 20 volumes (term “public administration”], vol. 5. administrative law, publishing house law. (in ukrainian) konstantyi, o. v. (2015). problemy zakhystu v administratyvnomu sudochynstvi subiektyvnykh prav, svobod ta zakonnykh interesiv [problems of protection in administrative proceedings of subjective rights, freedoms and legitimate interests]: monograph. kyiv: istina. (in ukrainian) konstytutsiia ukrainy [constitution of ukraine] (1996). details of the verkhovna rada of ukraine, no. 30, art. 141. available at: https://zakon.rada.gov.ua/laws/show/254к/96-вр#text loshytskyi, m. v. (2015). administratyvne oskarzhennia yak sposib zakhystu prav hromadian u diialnosti orhaniv publichnoi administratsii [administrative appeal as a way to protect the rights of citizens in the activities of public administration]. scientific bulletin of uzhhorod national university. series “law”, vol. 31, no. 2, pp. 146–150. baltic journal of economic studies 138 vol. 7, no. 1, 2021 luchenko, d. v. (2017). instytut oskarzhennia v administratyvnomu pravi [institute of appeal in administrative law]. the dissertation of doctor of juridical sciences: 12.00.07. yaroslav mudryi national law university. kharkiv. (in ukrainian) luchenko, d. v. (2012). pro teoretychni ta praktychni problemy rozvytku instytutu oskarzhennia v administratyvnomu pravi [on theoretical and practical problems of development of the institute of appeal in administrative law]. state building and self-government, vol. 23, pp. 238–250. podatkovyi kodeks ukrainy [tax code of ukraine]. verkhovna rada of ukraine. available at: https://zakon.rada.gov.ua/laws/show/2755-17 pro mediatsiiu [about mediation: draft of law of ukraine]. available at: http://w1.c1.rada.gov.ua/pls/zweb2/ webproc4_1?pf3511=68877 shemshuchenko, yu. s. (2012). velykyi entsyklopedychnyi yurydychnyi slovnyk [large encyclopedic legal dictionary] / ed. acad. nap of ukraine. 2 ed., reworked. and expanded. kyiv: yurydychna dumka publishing house. (in ukrainian) kodeks administratyvnoho sudochynstva ukrayiny (2005) [code of administrative procedure of ukraine]. information supreme the verkhovna rada of ukraine, number 35-36, number 37, p. 446. available at: https://zakon.rada.gov.ua/laws/show/2747-15#text zaichuk, o. v., kopylenko, o. l., kovalskyi, v. s and others (2013). suchasna pravova entsyklopediia [modern legal encyclopedia]. institute of legislation of the verkhovna rada of ukraine. 2-nd ed. kyiv: jurinkom inter. (in ukrainian) baltic journal of economic studies 212 vol. 5, no. 4, 2019 corresponding author: 1 national university "odesa law academy ", ukraine. e-mail: safonchyk.oksana@gmail.com 2 graduate school of public service training centre for masters of public administration and professional judges national university “odessa academy of law”, ukraine. e-mail: knwittman@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-212-220 prospects of corporate social responsibility development in the eu in sustainable development oksana safonchyk1, konstiantyn vitman2 abstract. in the world practice, corporate social responsibility (csr) is recognized an important component of sustainable development strategy, for which reason governments of many countries pay considerable attention to the promotion of csr ideas at the national level, creating favourable conditions for socially responsible behaviour of national and foreign enterprises. the author aims to analyse the experience of regulation of corporate social responsibility policy in the eu member states, to show the practice of national governments of the eu member states in the field of csr, and to determine prospects of corporate social responsibility at the modern development stage in view of implementing the concept of sustainable development. summarizing approaches to the definition of csr, it can be emphasized that csr should positively influence society, in which the enterprise operates. it is a free choice in favour of increasing the welfare and moral and ethical values of society through appropriate approaches to doing business. relations between enterprises both in the european union and in other countries are increasingly based on the principles of csr. compliance with these principles becomes an important prerequisite for attracting foreign investment and obtaining government orders. in the international context, csr is an efficient instrument to develop partnership and cooperation of countries in the context of achieving the millennium development goals, to control the negative influence of the industrial sector on ecology, to prevent social crises, as a consequence, to ensure sustainable development of the world civilisation. among the european institutions, the european commission’s committees play a key role in disseminating the idea of csr. one of the main factors in strengthening the eu economy is considered precisely the stable growth based on the rational use of resources, ecology, and competition. plans of the strategy for 2012–2015–2020 clearly show that the european union intends to strengthen control over economic management and “voluntarily oblige” the business to follow the rules of csr. the goal of a new csr strategy is to create conditions favourable for sustainable development, responsible business conduct, and permanent employment in the medium and long term. key changes in comparison with the policy for 2010 – definition of corporate social responsibility as “responsibility of enterprises for their impact on society” and rejection of the principle of voluntariness: “the european commission recognizes that some regulations stimulate csr, therefore, public authorities should support the csr development by applying a mix of voluntary and regulatory policies”. as the study showed, the governments of the eu countries are actively engaged in the development and promotion of corporate social responsibility. the role of the state is manifested in the implementation of the following key functions: the state as a legislator and a controlling authority; the state as an employer; the state as a consumer and a buyer; the state as a partner; the state as an institutional investor; the state as a participant in international relations. the most significant results have been achieved by those eu member states that use the systemic approach to csr development. in these countries, responsible state structures have been formed that coordinate work in all areas. the approach to the choice of instruments is individual and is selected taking into account the priorities of the country’s socio-economic development and the importance of economic, environmental, and social aspects. an example of great britain, france, belgium, estonia, and spain shows the possibility of successful csr development. key words: corporate social responsibility (csr), sustainable development, social policy of government, state regulation, eu policy, europe 2020 strategy, social strategy, csr instruments. jel classification: m14, j24, d30, h70 baltic journal of economic studies 213 vol. 5, no. 4, 2019 1. introduction in the world practice, corporate social responsibility (csr) is recognized an important component of sustainable development strategy, for which reason governments of many countries pay considerable attention to the promotion of csr ideas at the national level, creating favourable conditions for socially responsible behaviour of national and foreign enterprises. the introduction of csr principles in constant business practices creates new opportunities and benefits for the country’s socioeconomic development, including for the competitiveness of the economy, investment attractiveness, the fight against corruption, environmental and regional development, as well as strengthening social capital and information activities of the state and companies. corporate social responsibility has become widespread in the european union, where companies incur voluntary obligations in the field of labour protection, waste management, business ethics while specifying similar requirements to their foreign units and partners. implementation of international quality standards and environmental safety management in business activity became a mandatory condition for the exit and work in the european market (shevchenko, 2014). the issue of csr has become the subject of numerous foreign studies. modern scientific research is preceded by fundamental works on social responsibility of business in the second half of the xx century by such authors as h. bowen (1953), k. davis (1960), m. friedman (1970), a. carroll (1979), e. freeman, who, in turn, rely on classical ideas put forward by p. joule, j. locke, a. smith, m. weber, t. parsons, and others. today, the csr theme is distinguished as a separate interdisciplinary scientific direction. attempts to study the area of social responsibility development within companies and at the level of government regulation have been made by т. hoskins (2007), d. detomasi (2005), a. crane, d. matten, j. c. moon (2008) in their recent works, focused on defining the role of csr in the international development and ways of implementing it, depending on the existing legislative framework, on the example of countries of the european union. the author aims to analyse the experience of regulation of corporate social responsibility policy in the eu member states, to show the practice of national governments of the eu member states in the field of csr, and to determine prospects of corporate social responsibility at the modern development stage in view of implementing the concept of sustainable development. 2. the methodology of research 2.1. the emergence of the concept of a paradigm the birth of corporate responsibility took place in the united states of america. since the xvii century, social philanthropy was an important component of american society, but by the fifties of the xx century, this activity was conducted by individuals, not companies. legal boundaries and unwritten rules restricted the participation of business companies in public life (abramov, 2005). during the 60s and 70s of the twentieth century, corporate philanthropy was recognized as a separate component of companies’ activities. this period was characterized by charitable contributions that were aimed at improving the general state of social development of society. including: donations to universities, local hospitals, cultural institutions, and support for other socially useful affairs. this activity contributed to the creation of the first corporate funds of companies. the distinction of this stage was the disinterestedness of philanthropy, without the economic benefits for the company (kulyeshova, 2013). with the beginning of the 80s, the views on philanthropy have changed a little. at this stage, the first attempts have been made to combine two opposing public views on corporate social philanthropy, in particular, its relationship with the company’s overall goals. the key events of this period were the reduction of the influence of the authorities and the transfer of private power to the private sector within the policy of ronald reagan, who was elected president of the united states in 1980–1988. companies with headquarters in the usa, canada, and western europe began to actively develop corporate philanthropy programs in eastern europe, africa, asia, the pacific, etc. the experience of these companies has shown that there is a close relationship between economic growth and the development of human potential, social protection, environmental sustainability, as well as a stable and productive business environment (sardak, haslenko, 2017). at the beginning of 2000, an important argument was put forward in favour of a new approach to corporate social responsibility. it testified that the economic and social goals of companies do not conflict but combine. many economic investments benefit society, and many social investments are profitable economically. in the modern world, socially responsible business activity is a generally accepted rule, which is followed by a lot of large, medium, and even small companies around the world. given the extraordinary social and economic benefits that the social responsibility of business include, the issues of its development are of particular importance to the public authorities of many countries in the world and leading international organizations. the manifestation of this is the development of csr standards and measures to promote the business to carry out socially responsible activities (vorobee, 2005). in most eu countries, state programs for supporting and promoting csr have been developed and implemented in different forms. due to these programs, the state determines the desired behaviour for business, engages companies of the private and public sectors baltic journal of economic studies 214 vol. 5, no. 4, 2019 in the joint fulfilment of socially important tasks, and materially stimulates business to socially responsible activities, etc. 2.2. the genesis of the social responsibility concept in scientific literature, social responsibility is considered as a practice of responsible business that benefits both business and society and favours social, economic, and environmental sustainable development through the maximization of the positive influence of business on society and minimization of the negative one (kotler, 2005). according to other definitions, social responsibility of business means the achievement of commercial success by ways appreciating the moral and ethical principles of community and environment (mazurenko, 2011). social responsibility of business can be also defined as a free choice of a company in favour of increasing the welfare of society due to relevant approaches to doing business and providing corporate resources. in the general sense, corporate social responsibility is all the company’s actions that have a positive impact on society (faydor, 2008). in a broader sense, social responsibility should mean the responsible attitude of any company towards its product or service, consumers, employees, partners, an active social position of the company, which is harmonious coexistence, interaction and constant dialogue with the society, participation in solving the most acute social problems (baffett, 2008). so, for today, there is no single scientific approach to the interpretation of the category of “social responsibility of business”. that is why, in our opinion, it is advisable to agree with the scientific approach (fursa, 2012), in which it is noted that the fundamental principle of studying the phenomenon of social responsibility should be the understanding of it as a form of comprehension by the subject of its social essence and conscious activity, which is adequate to this. various approaches to the definition of csr are presented in table 1. according to european practice, csr covers seven main areas (khamidova, 2017): respect for human rights; compliance with legislative requirements; business and corporate ethics; environmental protection; cooperation with stakeholders: employees, consumers, shareholders, community, business entities; compliance with international standards of conduct; transparency and accountability. summarizing approaches to the definition of csr , it can be emphasized that csr should positively influence society, in which the enterprise operates. it is a free choice in favour of increasing the welfare and moral and ethical values of society through appropriate approaches to doing business. 3. results and discussion 3.1. the main theoretical results of the study relations between enterprises both in the european union and in other countries are increasingly based on the principles of csr . compliance with these principles becomes an important prerequisite for attracting foreign investment and obtaining government orders. in the international context, csr is an efficient instrument to develop partnership and cooperation of countries in the context of achieving the millennium development goals, to control the negative influence of the industrial sector on ecology, to prevent social crises, as a consequence, to ensure sustainable development of the world civilisation. among the european institutions, the european commission’s committees play a key role in disseminating the idea of csr . the promotion of csr principles in europe began with the creation in 1995 of the european business network (csr europe), which was engaged in the dissemination and promotion of the principles of csr . officially, the csr principles were presented at the european summit in lisbon in march 2000. according to heads of eu states, using the csr mechanism “will transform the eu economy into the most competitive and dynamic in the world, which will be characterized by economic growth, increasing the number and quality of jobs, and great social cohesion” (kulyeshova, 2013). as experience shows, eu governments are active in promoting csr . the main document of these countries is green paper, adopted in 2001, which presents a european framework for csr , according to which the table 1 approaches to the definition of corporate social responsibility countries using different approaches essential characteristics of an approach usa volunteer programs for company workers and charity (vorobee, 2005) european countries doing business in a socially responsible manner (lazorenko, kolyshko, 2008) world business council for sustainable development the long-term commitment of companies to behave ethically and promote economic development while improving the quality of life of workers and their families, communities, and society in general (lazorenko, kolyshko, 2008) responsible business forum the responsible attitude of any company to its product or service, to consumers, employees, partners; the active social position of the company, consisting of harmonious coexistence, interaction, and constant dialogue with the society, participation in solving the most acute social problems (berezina, 2010) baltic journal of economic studies 215 vol. 5, no. 4, 2019 government is developing a national policy, including mechanisms and tools to support best practices and innovative ideas. in addition to this, documents were developed, which the european union countries use for the development of national csr policies. they include (shevchenko, 2014): – eu environmental action plan, which sets the main directions of activity of the states of the european union in the field of environmental protection; – integrated product policy (ipp), designed to monitor the extent of the environmental impact of production processes and stimulate the introduction of the most effective methods of production; – eco-management and audit scheme (emas), which recommends a system of assessment and reporting on csr and aims to introduce environmentally friendly management in the company; – european eco-efficiency initiative (eeei), developed by the world business council for sustainable development, the european partners for the environment, and the european commission, aims to integrate the principles of environmental performance into industrial and economic strategic plans of companies; – resolution of the european parliament “eu standards for european enterprises operating in developing countries: towards a european code of conduct” proposes the creation of a european model corporate code of conduct; – europe 2020 strategy: a strategy for smart, sustainable, and inclusive growth” (adopted on october 25, 2011), which presents new directions for csr development in the eu (shevchenko, 2014). one of the main factors in strengthening the eu economy is considered precisely the stable growth based on the rational use of resources, ecology, and competition. plans of the strategy for 2012–2015– 2020 clearly indicate that the european union intends to strengthen control over economic management and “voluntarily oblige” the business to follow the rules of csr . the goal of a new csr strategy is to create conditions favourable for sustainable development, responsible business conduct, and permanent employment in the medium and long term. key changes in comparison with the policy for 2015 – definition of corporate social responsibility as “responsibility of enterprises for their impact on society” and rejection of the principle of voluntariness: “the european commission recognizes that some regulations stimulate csr , therefore, public authorities should support the csr development by applying a mix of voluntary and regulatory policies” (social corporate, 2015). 3.2. formation of the conceptual foundations of the model the basic postulate of state regulation of any socioeconomic phenomenon is the application of it only in the event that the market mechanism is unable to solve such a task. state regulation of csr should be carried out with varying intensity in accordance with the stage of the economic cycle and the effectiveness of market regulation. at the same time, different priorities of state regulation of csr should be established (figure 1). consequently, csr at different stages becomes different in nature and significance. it is able to change under the influence of factors of market and state regulation. their reasonable combination in accordance with the stage of the economic cycle and the depth of social problems of society is necessary. today, the main task of a business is to find a “golden mean” between its economic and social goals and try to combine them so that, through greater economic achievements, they promote the development of social programs. an illustrative example of the active role of the state in promoting csr is great britain, which has achieved significant results in this area. the latter is associated, first revival, upturn crisis, depression priorities of state regulation sphere of labour relations; quality policy; pricing policy; environmental policy; banking regulation and supervision; entrepreneurship policy; introduction of social accounting. antimonopoly policy; civil society development; information policy; innovation policy; investment policy; modernization of equipment; charity. figure 1. priorities of state regulation of csr in the context of sustainable development source: (vorona, 2010; kulyeshova, 2013) baltic journal of economic studies 216 vol. 5, no. 4, 2019 of all, with the fact that csr has become an independent sphere of government that is coordinated by the central government. since 2001, the post of corporate social responsibility minister has been established in great britain, state resources have been allocated for the creation of csr academy and the preparation of information and methodological support; more than 12 ministries and departments are involved in promoting csr at the sectoral level, using various tools of motivation and stimulation (bodnaruk, 2016). among the areas of british csr policy are: support for innovative approaches and demonstrative practices of stakeholders and companies; definition of a minimum level of csr , for example, on such fundamental issues as healthcare, safety, and equal opportunities; business support that brings social and environmental benefits to society. the government participates in many international projects, develops financial mechanisms and incentives, implements csr in the public procurement system, creates programs for increasing the transparency of a number of sectors of the economy, expands the scope of corporate reporting, standardizes the contribution of companies to sustainable development, creates reputational incentives, stimulates the public dialogue with csr , as well as applies various measures to promote csr , including by using the authority of political leaders and internet resources. it is important to mention the companies act 2006, which introduced regular reporting – business review that requires companies to disclose general information on environmental issues, employee relations policies, and interaction with the local community (bodnaruk, 2016). almost at the same time, parliament has adopted tax incentives for investments in the social sphere. the community investment tax relief (citr) encourages private investment through the community development finance institutions (cdfis) as nonprofit and profit institutions that are located in disadvantaged regions and are in difficult financial situations. in accordance with certain conditions, citr is designed for both individuals and legal entities, offering to invest by way of loan-purchase of securities or share participation in institutions accredited by the cdfi. incentives (up to 25%) depend on the volume of investments and reduce the income tax for investors and corporate tax liabilities. in addition to the citr , the government also proposes tax incentives to encourage corporate support for money, equipment, and other material assistance to volunteers and local communities, including remittances to the wage bill and gift aid. equally important are additional initiatives of the british government. they include measures for the implementation of international and national standards, such as iso 14001 and bs 8555, the development in 2006 of the world’s first sustainable management standard, bs 8900, which determines the results of sustainability of organizations that they must achieve and which are the main measure of their progress, issue of the “environmental reporting guidelines”, etc. (social corporate, 2015). the belgian government takes an active role and favours the promotion of csr. belgium has adopted special legislation on regulation and promotion of csr. within the framework of the federal coordinating policy on sustainable development, the government has prepared a document entitled “recommendation basis: corporate social responsibility in belgium”, which is the basis for csr for government agencies, businesses, and other participants (social corporate, 2015). specific measures to implement the concept of csr are formulated in the federal csr plans. the state commission for the regulation of banking, financial and insurance services together with the federation of industrial enterprises has prepared the corporate governance code. schemes of social and eco-labels have become widespread. the belgian social label certified by the belgian government confirms that the certified company adheres to the eight fundamental principles of the world trade organization convention. the system of eco-labels, developed by the brussels institute of natural resources management, demonstrates the application by certified companies of quality management systems, international standards that meet the requirements in the field of environmental protection. in order to promote and assist in the implementation of the csr principles in practice, the belgian government has opened two special information centres. in france, the development and regulation of csr have also been distinguished in a separate area of national and local government work. in this country, the development and regulation of csr take place within the framework of the national sustainable development strategy, which was adopted by the french government in 2003 for 5 years and updated in 2006. the main direction of the strategy is the voluntary formation of csr commitments by large businesses in the field of csr through the work with industry associations of employers (commitments to improve carbon dioxide emissions, safety conditions, energy management and water consumption, waste management and access to innovation, and so on) (shevchenko, 2014). for estonia, the concept of csr is relatively new and is at the development stage. there is no special legislation. many aspects of csr are regulated by sectoral legislation – labour, trade, tax, and environmental protection. there are a number of environmental labels in estonia, such as clean environment, green energy, green key, certificate of real and interesting estonia, myald mark, human’s green label, eco, eu ecolabel, environmentally friendly product. for enterprises with some of these environmental certificates, the government of estonia applies tax incentives. enterprises are also exempted from paying taxes on gifts and donations to non-governmental organizations and funds that are baltic journal of economic studies 217 vol. 5, no. 4, 2019 included in the special list of exempted organizations. each year, the state organizes a competition, in which the best companies in nominations “best developer of modern technologies of the year”, “the most important contribution to the development of society” are awarded certificates of honour and awards (shevchenko, 2014; bodnaruk, 2016). in spain, there is currently no special legislation on csr but the issue of adopting a csr law is on the government’s agenda. spain’s sectoral legislation regulates many csr issues such as: labour conditions, labour contracts, health and safety, rights of disabled people, consumer rights, environmental protection, and others. the government of spain has formally approved and recommended the use of the guidelines for multinational enterprises developed by the organization for economic cooperation and development. the ministry of economics has an open information centre to provide consulting assistance for using the guidance and collecting information about national experiences. the spanish association for standardization and certification (aenor) is involved in developing international standards for corporate ethics and social management. aragon’s authorities (northeastern spain) provide tax incentives to companies that make charitable assistance (social corporate, 2015). 4. research results. integration of corporate social responsibility into management strategy by encouraging business, population, and civil society to socially responsible behaviour, the european union uses a variety of incentive tools and incentives, from mild forms of regulation and motivation to strictly defined requirements of the law. today the following areas of the european union policy in the field of csr are distinguished (the basis of business philosophy, 2016; bodnaruk, 2016; shevchenko, 2014): – informing the public about the role of csr in the development of society and the best practices of socially responsible business. european governments create special information centres, call the media for propaganda, discuss issues, inform the readers about the best national and foreign csr practices. – with the support of the government, brochures, reference materials on various aspects of csr are published and conferences, forums, seminars, and round tables are held. – encouraging and supporting additional voluntary csr business initiatives. in order to stimulate and promote the ethical conduct of csr business, eu member states are the initiators and take an active part in the development and implementation of sectoral and corporate codes of conduct, which establish the basic principles of ethical business conduct. one of the popular tools is the introduction of the mechanism of social and eco-labels. – training, research, and methodological support. the eu contributes to the large-scale growth of local csr capacities: csr workshops and trainings for civil servants, business representatives, members of public/ trade unions, which continue to serve as catalysts for csr promotion, are practiced. – involving the parties concerned (stakeholders) in csr issues. the development of this area of government policy involves facilitating dialogue and partnership between the state, the business community, professional and community associations, and other stakeholders in implementing csr to consolidate resources and achieve more meaningful results. the opinion of stakeholders is always taken into account when developing the csr development policy documents. – international cooperation on csr . the development of corporate social responsibility is an idea that has captured most countries in the world. in order to join forces and promote the international principles of csr , governments in all ways support the initiatives of international organizations, in particular, the un global compact initiative, sign conventions, conclude agreements, and participate in international forums. – in order to achieve the results, the eu promotes the development of a system of international standards of management, reporting indicators, csr audit, stimulates the certification of products and enterprises in accordance with international standards, which, in turn, provides national companies with access to world markets, promotes the system of international social and environmental labelling to ensure equal rights of trade in different countries. recently, socially responsible investment (sri) is gaining in popularity, which is based on taking into account when making investment decisions the social and environmental consequences of investments. – implementation of csr assessment and reporting systems. with the state support, the methodical guidance on reporting is being developed, and special structural units are created to assist in the preparation of non-financial reports. in some european countries, the inclusion of information on compliance with csr in regular audit reports is mandatory. this is especially widely practiced in those industries whose activities can cause damage to the environment, for example, in the chemical or metallurgical industries. – use of tax and investment instruments. creating favourable conditions in which socially responsible behaviour of companies is rewarded through the provision of tax incentives, preferences, and subsidies. income from social expenditures, charitable donations, targeted deductions to non-profit organizations, and funds in most european countries are not taxed. – funds are not taxed in most european countries. the state is involved in co-financing of socially significant projects. the most important non-tax preference for socially responsible business is the inclusion of baltic journal of economic studies 218 vol. 5, no. 4, 2019 csr in the selection of enterprises for the execution of state orders. – special csr legislation. in some european countries, special legislation is created, which takes into account the abovementioned tools of stimulation and regulation of corporate social responsibility of enterprises. the european union has done enormous efforts to promote the principles of csr in the business practice of strategic management. all eu member states successfully apply csr in solving the priority tasks of socio-economic development through the development of a national agenda on corporate social responsibility standards. in the european union countries, the powers of csr implementation and management are delegated to a number of ministries and departments (bodnaruk, 2016; ramazanov, 2007). 5. conclusions in the economically developed countries of the world, since the 50s of the xx century, the concept of corporate social responsibility has become widespread, consisting in the conscious attitude of business entities to the requirements of social necessity, social tasks, moral and ethical norms and values, understanding of the consequences of their own activities for society, state, consumers, business partners, and employees. this concept has gained its development and definitive consolidation in the concept of sustainable development, which was formed in 2012 at the rio summit. in practice, corporate social responsibility involves business’s compliance with the following principles: providing consumers with products and services of high quality; creating decent working conditions, timely payment of wages, investing in further professional development of employees; strict compliance with financial, labour, and environmental legislation; building good-faith and honest relationships with all partners; attention to social expectations of society and observance of generally accepted ethical norms in business practice; participation in the development of civil society through the implementation of partnership programs and projects aimed at the development of regions and local communities. as the study showed, the governments of the eu countries are actively engaged in the development and promotion of corporate social responsibility. the role of the state is manifested in the implementation of the following key functions: the state as a legislator and a controlling authority; the state as an employer; the state as a consumer and a buyer; the state as a partner; the state as an institutional investor; the state as a participant in international relations. the most significant results have been achieved by those eu member states that use the systemic approach to csr development. in these countries, responsible state structures have been formed that coordinate activities in all areas. the approach to the choice of instruments is individual and is selected taking into account the priorities of the country’s socio-economic development and the importance of economic, environmental, and social aspects. an example of great britain, france, belgium, estonia, and spain shows the possibility of successful csr development. consequently, at the modern stage, in order to step up processes in the area of social responsibility in ukraine, first of all, it is necessary to (reznyk, 2014): change the public consciousness in relation to understanding the meaning, significance of social responsibility for the development of a socially oriented state, and among the entrepreneurs themselves – the strategic importance of a socially responsible position for strengthening the competitiveness of companies in the market and long-term sustainable development; form a legislative framework that will ensure business interest in the implementation of social programs, as well as regulatory acts that stimulate the development of social responsibility; create an affiliate network, in which participants get wide opportunities for promoting corporate image at the regional and macroeconomic levels; introduce methodological bases of assistance in planning and implementation of specific social projects 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(in ukrainian) stratehiya spryyannya (2012). stratehiya spryyannya rozvytku sotsialnoyi vidpovidalnosti biznesu v ukrayini [strategy for promoting the development of corporate social responsibility in ukraine]. retrieved from: http://www.svb.org.ua/ sites/default/files/201309_strategiya_spriyannya_rozvitku_svb_v_ukrayini.pdf (in ukrainian) united nations global compact. retrieved from: http://www.unglobalcompact.org./participants/search vorobee, v. (2005). corporate social responsibility or benefit? kyiv: kyiv-mohyla business studio, №10. retrieved from: http://www.management.com.ua/cm/cm037 vorona, o. (2010). praktyka realizatsiyi sotsialnoyi vidpovidalnosti biznesu v yevropi ta v ukrayini [practice of realization of social responsibility of business in europe and in ukraine]. retrieved from: http://www.rusnauka.com/ 10_npe_2010/economics/62028.doc.htm (in ukrainian) baltic journal of economic studies 48 vol. 2, no. 2, 2016 corresponding author: 1 department of banking, ukrainian academy of banking. e-mail: iryna.dydenko@mail.ru 2 department of banking, ukrainian academy of banking. e-mail: s.d.bogma@gmail.com research of competition in deposit market of ukraine based on the panzar-rosse model iryna didenko1, serhii bohma2 ukrainian academy of banking, ukraine abstract. the problem in an adequate assessment of the level of competition in the banking market has prompted researchers to search constantly some new methods. the most famous of them were later successfully adapted to the banking market, are a models of bresnahan, panzar-rosse, bertrand, iwat, monti-klein-modesto barros and others. in ukraine, the process of assessing the level of competition in the banking sector is very relevant, in line with the recent reforms of particular relevance and distribution. regarding the domestic deposit market, there is a shortage of qualitative analysis of this issue, unlike foreign practice. therefore this study we try to solve this problem. the key goal of researchers in this study is in a detailed analysis to identify the important factors which make influence on the allocated markets, in particular on lending and deposit rates. based on these factors there could be implemented internal adjustment processes taking place in the markets. the purpose of the article is to determine the level of competition in the deposit market of ukraine in 2006-2015 basing on nonstructural panzarrosse model and identify key factors that affect this level. methodology. to research the level of competition in the deposit market of ukraine the panzar-rosse model was used, in which separate 11 models were built using the integrated tool “multiple regression” in the software package of statistics analysis statistica. the input data in the model was presented with the information on financial performance of ukrainian banks during ten years from 01.01.2005 till 01.01.2015. results of this research showed that in ukrainian deposit market there is a monopolistic competition, as proved by the calculated values of h-statistics index. the year of 2008, in the context of the global economic crisis, was marked as an unbalanced period for deposit market of ukraine. practical implications. knowing the current state of competition level in the market, a number of phenomena that occur in it can be explained and a number of effective measures for its control can be designed. value/originality. in ukraine, the process of assessing competition in the banking sector, in line with the recent reforms, is becoming more popular and relevant. as for the domestic deposit market, there is a shortage of qualitative analysis of this issue, unlike the foreign practice. so this research will help to solve the problem. key words: banking system, competition, deposit market, panzar-rosse model, h-staistics index. jel classification: c30, g10, g21 1. introduction in terms of the selected by ukraine vector of european integration and in the context of globalization processes taking place in the modern world economy, the requirements to domestic business are becoming tougher and higher. now in the forefront there are not the quantitative indicators of economic subjects, but the quality of the products and services provided by them in the market. therefore the struggle in all economic sectors becomes more aggravated and the banking system is not an exception. the deposit market as an integral part of the banking sector is also a subject to competitive processes both from the side of the banks and of the clients. the conjuncture of any market means not just the interaction between supply and demand on it, but also the level of competition, which is a key factor in establishing the equilibrium price in the market. as for the deposit market – it is the equilibrium deposit interest rate. besides, knowing the current competitive situation in the market, we can introduce the use of certain regulatory measures from external or internal regulator. the problem of adequate assessment of the competition level in the market of banking services incited researchers to continually look for new approaches to do this. the most famous of them, which were successfully adapted later to the banking market, are the models of bresnahan, panzarrosse, iwata, bertrand, monti-klein, barros-modesto and others. in ukraine the process of assessing the level of competition in the banking sector, in line with the recent baltic journal of economic studies 49 vol. 2, no. 2, 2016 reforms, becomes topical and spreading. concerning the domestic deposit market, there is some shortage of qualitative analysis of this issue, unlike the foreign practice. so this research is aimed at solving this problem. 2. literature review the competition is an integral part of market relations. a set of important points such as existing market risks, presence / absence of barriers for new institutions to entry the market, establishing the equilibrium market price, policy measures of market regulator, presence of systemically important institutions, market concentration et al. depends on the type of competition in the market (monopoly, oligopoly, monopolistic or perfect). that’s why, from the half of xx century various researchers were interested in the question whether it is needed to know the level of competition in a particular market, how it can be measured and if the relationship between competition and other components of the market can be traced. thus, xavier vives (xavier, 2001) investigates the main trends of interdependence between the level of competition and regulation of the banking system, the banking market concentration degree and type of competition on it. basing on the results of analysis, xavier vives states that the current market of banking services is too diverse that it needs to be researched individually for every segment. accordingly the optimal level of competition will depend on institutional characteristics of the market and other internal and external factors. for each country there is its own optimal level of competition: for developed countries with a high level of information publicity and low social costs a high level of competition is common, and for developing countries and countries with low economic level competition is insignificant. the problem of qualitative aspects of competition among banks was also studied by nicola cetorelli (cetorelli, 2001). he considered the approaches of different authors on the positive and negative qualities of different types of competition in the banking environment. the key thesis of this study was that in any case, whether it is monopoly or perfect banking competition, it will have the same positive and negative effects on aspects of banking activity. therefore the ideal situation is to look for a certain compromise between market participants which would set the optimal level of competitive environment. nicola cetorelli also notes that while regulating the situation in the banking sector the impact of institutions from other sectors of the economy must be considered. besides mentioned authors the problem of competition in the banking sector was researched by other researchers: o. y. hirna (hirna, 2014), s. v. leonov (leonov, 2009), s. drobyshevskyi (drobyshevskyi, 2006), m. e. mamonov (mamonov, 2010), j. barth (barth, 2000), s. shaffer (shaffer, 1998) and others. having defined the fact that detecting and calculating the level of competition is important, approaches and methods of its assessment began to appear. totally there are two big groups of approaches to assess the level of competition: structural and non-structural (moiseev, 2007). structural approaches are based mainly on the assumption that market competition is influenced by its structure, i.e. a set of indicators that includes a number of subjects of particular industry, size of firm, the level of product differentiation and size of barriers to market entry (goddard et al., 2001). within the structural approach two key hypotheses are standing. the first hypothesis “structure-conduct-result” (scr) or as it is called harvard paradigm was proposed in 50s of xx  century (bain, 1951) implies dependence of competition level in the market on the share of a particular market sector, number of market participants (concentration). therefore, to assess competition within the first hypothesis concentration coefficients (herfindahl-hirschman index), entropy indexes and ginny coefficients are used. in twenty years later within the structural approach another important hypothesis was put forward – “efficient structure” (es) (demsetz, 1973). the content of the second hypothesis is different from the previous one and brings on the first place the effectiveness of the activities of market participant. the more effective are participants, the higher the level of their concentration, and therefore profit and prices. when using structural approaches to assess competition level several disadvantages were found. one of them is that structural methods don’t allow detecting influence of hidden factors. in addition, high concentration level cannot guarantee the availability of market power. in this regard, in the 80s non-structural methods of assessing the level of market competition appeared. they allowed assessing the level of competition in the market basing on the behavior of market participant and a number of other factors. the main non-structural models include models of barros-modesto (barros, 1999), bresnahan (bresnahan, 1982), iwata (iwata, 1974), lau (lau, 1982), panzarrosse (panzar and rosse, 1987) and others. 3. overview of ukraine’s banking system and its deposit market the banking system of ukraine in modern conditions of development is going through a very complex and unstable period. structural economic changes that had been taken place after crisis years of 2008-2009, and the political crisis in ukraine, which had begun in the end of 2013 and continues to this day originated the beginning of the “reset” phase of banking. according to the strategy of sustainable development “ukraine-2020” within the signed international legal acts, in particular about association agreement between ukraine and the eu (agreement, 2015) and the memorandum of cooperation with the international monetary fund (memorandum, 2015), financial sector general reformation is conducting, within which the processes of transformation of the banking system are also taking baltic journal of economic studies 50 vol. 2, no. 2, 2016 place as well. more detailed information about the major reforms which are carried out in the banking system of ukraine can be found on the official website of national council of reforms (reforms). the current head of the national bank of ukraine (nbu) valeriya gontareva during the last meeting of the finance committee of the verkhovna rada in april 2015 (verkhovna rada, 2015) noted that the banking system of ukraine is going through three key stages of reformation: cleaning, rebooting and ensuring sustainable development of the banking system. thus, she noted that cleaning of domestic banking system had been successfully finished and ended in june 2015. the main results of this stage are: extra capitalization of 35 largest banks that have successfully passed the stress tests in 2014 and reduction in the total number of banks at the expense of the third and fourth groups. as of the end of 2015 the number of banks with banking license was 120, that is 43 less than at the beginning of the year. such policy of the nbu was a result of banking sector general assessment, where 85 % of main banking operations are provided by the first 35 banks. in addition, the committee on supervision and regulation of banks` activity, supervision of payment systems the nbu published information about that three banks at the moment to date are systemically important (pjsc “privatbank”, pjsc “oschadbank” and jsc “ukreximbank”), which creates a reason to keep attentive oversight of their activities (nbu). according to the next stage of reformation of the banking system of ukraine, that is “reboot”, v. gontareva notes that it needs time for implementation, in particular, for the gradual liberalization of restrictions on the foreign exchange market and the market of retail deposits, strengthening the role of corporate governance in ukrainian banks and risk management to attract depositors` confidence. the third stage of establishing sustainable development of the banking system is scheduled for the last years of the strategy “ukraine-2020”. a key thesis on this stage is to achieve an inflation level at 5% and provide country`s economy with available resources for further economic growth. in addition to mentioned facts, we can point out the following main statistical changes in the banking system of ukraine during the last year (according to the national rating agency “rurik” (rurik, 2015): – reducing the nbu discount rate from 30% to 22%; – during 9 months of 2015 the net assets of banks in ukraine reduced by 8,2% and as of 01.10.2015 were 1208,88 billion grn., which was caused by a reduction of the general number of banks and outflow of depositors` money because of mass panic among population (provoked by the loss of confidence in the banking system and the devaluation of the national currency (uah)). at this time, there was a slight increase of foreign currency assets – since the beginning of the year till october 2015 the share of foreign currency assets increased from 43,7% to 47,71%; – the amount of the loan portfolio also decreased by 9,47% and as of 01.10.2015 was 911,02 billion grn., while the biggest part in it (55%) was occupied by foreign currency loans; – for the first 9 months of activity of the banking system of ukraine in 2015 it received a negative financial result – net loss of 51530 million grn. this situation is explained by reduction of asset quality of banks and the lack of reserves of the banking system. concerning the deposit sector of the domestic banking system, there is a tendency of reducing the number of long-term deposits, meanwhile the average interest rate on deposits in the national currency as of 01.10.2015 51,1 54,2 56,1 57,0 57,3 58,1 57,6 56,2 56,8 57,6 57,1 55,5 56,2 58,8 60,2 61,2 62,9 56,4 57,6 57,7 54,0 49,9 51,8 52,6 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 – 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 і quar 2010 іі quar 2010 ііі quar 2010 іv quar 2010 і quar 2011 іі quar 2011 ііі quar 2011 іv quar 2011 і quar 2012 іі quar 2012 ііі quar 2012 іv quar 2012 і quar 2013 іі quar 2013 ііі quar 2013 іv quar 2013 і quar 2014 іі quar 2014 ііі quar 2014 іv quar 2014 і quar 2015 іі quar 2015 ііі quar 2015 іv quar 2015 deposits in the national currency, mln grn deposits in the foreign currency, mln grn the share of deposits in the national currency, % fig. 1. dynamics of deposits in national and foreign currencies in 2010-2015 baltic journal of economic studies 51 vol. 2, no. 2, 2016 relatively to beginning of the year increased from 12,8% to 15,2%, and in foreign currency decreased from 8,6% to 7,3%. general picture of deposits in national and foreign currencies is as follows (fig. 1). as we can see the share of deposits in the national currency is bigger than the half of all deposits of clients during 2010-2015. the only exception is the second quarter of 2015, when the share of deposits in national currency decreased from 54% to 49,9%, that can be explained by the devaluation of the hryvnia against foreign currencies (including the dollar and euro) and the unstable economic situation in the country. generally within 5 years there is a positive dynamics of total amount of deposits. as for the concentration of attracted funds, according to the analytical resource bankografo (bankografo) the distribution of deposits between acting banks as of 01.10.2015 is following: “privatbank”  – 34,3%, “oschadbank”  – 12,0%, “ukreximbank”  – 6,3%, “raiffeisen bank aval”  – 4,2%, “fuib” – 3,5%. so we can see that over 60% of all attracted funds are concentrated in 5 largest banks of ukraine which allows assuming that ukrainian deposit market is highly concentrated. the main problem here may be the fact that according to the latest news published on the website of the nbu regarding systemically important banks, 3 of 5, namely “privatbank”, “oschadbank” and “ukreximbank” are systemically important for the whole economy. this, in turn, endangers safety of deposit market. 4. the model of panzar-rosse the panzar-rosse model was first proposed over the public in 1987 by two american scientists j. panzar and j. rosse (panzar and rosse, 1987), in whose honor this model was named. also, often referring to this model, the term “h-statistics” is used. this is the indicator that is calculated to assess the level of competition. from the beginning, this model was used to assess the level of competition in the real sector of the economy, and only later gained popularity in the banking sector. today the model of panzar-rosse has gained popularity and is used to assess the level of competition in the banking system in many countries: the usa, latin america, the european union, southeast europe, africa (kenya, nigeria, south africa, uganda, tanzania, zambia, etc.), india, persian gulf countries, turkey and others (moiseev, 2007). this model has gained such popularity in the world by some of its advantages over other non-structural models: – is a universal tool for assessing the level of competition in different countries (with different levels of economic development), that allows comparing results between each other and make inter-regional analysis; – allows evaluating the level of competition as both on a separate segment and the whole market in general; – aimed at maximizing profits in a competitive environment; – when using this model usually there is no problem with incoming information that is publicly presented. one more important feature of the panzar-rosse model is that it considers banking system in a state of long equilibrium, that is why calculated index of h-statistics is considered reliable including this condition. the general empirical form (specification) of panzar-rosse model for assessing the level of competition of the whole banking system is as follows (bikker et al., 2007): εαααα +⋅+⋅+⋅+= )ln()ln()ln()ln( 3210 tabsffippr , εααααα +⋅+⋅+⋅+⋅+= )ln()ln(re)ln()ln()ln( 43210 bsfsefficliqpr , (4) 321 ααα ++=hstat hstat ≤0, perfect monopoly or short oligopoly hstat =0, perfect competition or natural monopoly on the market with perfect competition 0< hstat <1, monopolistic competition with free-entry equilibrium 21 αα +=hstat , (1) where α0  – constant, free term in a model; α1, α2, α3 – model coefficients; pr – interest income of the bank; fip  – variable, which reflects the prices on factors of production; bsf – variable, which describes the specific bank factors; ta – total assets; ε  – the value of random error. the value of h-statistics index is defined as the sum of coefficients in the model for the first two variables fip and bsf: εαααα +⋅+⋅+⋅+= )ln()ln()ln()ln( 3210 tabsffippr , εααααα +⋅+⋅+⋅+⋅+= )ln()ln(re)ln()ln()ln( 43210 bsfsefficliqpr , (4) 321 ααα ++=hstat hstat ≤0, perfect monopoly or short oligopoly hstat =0, perfect competition or natural monopoly on the market with perfect competition 0< hstat <1, monopolistic competition with free-entry equilibrium 21 αα +=hstat , (2) the interpretation of the values of h-statistics can be done in the following way: εαααα +⋅+⋅+⋅+= )ln()ln()ln()ln( 3210 tabsffippr , εααααα +⋅+⋅+⋅+⋅+= )ln()ln(re)ln()ln()ln( 43210 bsfsefficliqpr , (4) 321 ααα ++=hstat hstat ≤0, perfect monopoly or short oligopoly hstat =0, perfect competition or natural monopoly on the market with perfect competition 0< hstat <1, monopolistic competition with free-entry equilibrium 21 αα +=hstat . (3) but the condition (3) should also be a little supplemented since using h-statistics index we can also determine the degree of equilibrium in the market. if this figure is not equal to and bigger than 0, then we can assume that there is a market equilibrium, if it is equal to and less than 0, then accordingly the market is unbalanced. 5. results during the studying the level of competition in the deposit market of ukraine we used the specification of panzar-rosse model as stated above (1). however, we have changed the composition variables, focusing on those which, in our opinion, define the level of competition in the deposit market. as a result we got the following view of the panzar-rosse model for the deposit market of ukraine: εαααα +⋅+⋅+⋅+= )ln()ln()ln()ln( 3210 tabsffippr , εααααα +⋅+⋅+⋅+⋅+= )ln()ln(re)ln()ln()ln( 43210 bsfsefficliqpr , (4) 321 ααα ++=hstat hstat ≤0, perfect monopoly or short oligopoly hstat =0, perfect competition or natural monopoly on the market with perfect competition 0< hstat <1, monopolistic competition with free-entry equilibrium 21 αα +=hstat εαααα +⋅+⋅+⋅+= )ln()ln()ln()ln( 3210 tabsffippr , εααααα +⋅+⋅+⋅+⋅+= )ln()ln(re)ln()ln()ln( 43210 bsfsefficliqpr , (4) 321 ααα ++=hstat hstat ≤0, perfect monopoly or short oligopoly hstat =0, perfect competition or natural monopoly on the market with perfect competition 0< hstat <1, monopolistic competition with free-entry equilibrium 21 αα +=hstat , (4) where α0 – constant, free term in a model; α1, α2, α3, α4, – model coefficients; pr – interest income of the bank; liq – variable that characterizes the bank`s liquidity (the ratio of bank assets to bank liabilities, %); effic – variable that describes the effectiveness of passive operations of the bank (the ratio of interest costs of the bank to attracted funds); res – variable that describes ratio of the share of reserves for debt on bank loans to its total assets; baltic journal of economic studies 52 vol. 2, no. 2, 2016 bsf – variable that describes specific bank factors; ε – the value of random error. thus, in the formula (4) we are dealing with an aggregate variable bsf, which reflects specific bank factors that we believe are essential in assessing the level of competition in the deposit market. these indicators include: the ratio of the bank`s equity, customer deposits, unpaid assets, administrative expenses to its total assets and ratio of paid bank assets to its paid liabilities. from our point of view, basing on the presented model (4), we assume that the level of competition in the deposit market of ukraine, that is h-statistics index, is calculated as the sum of found coefficients of the model α1, α2, α3 (5): εαααα +⋅+⋅+⋅+= )ln()ln()ln()ln( 3210 tabsffippr , εααααα +⋅+⋅+⋅+⋅+= )ln()ln(re)ln()ln()ln( 43210 bsfsefficliqpr , (4) 321 ααα ++=hstat hstat ≤0, perfect monopoly or short oligopoly hstat =0, perfect competition or natural monopoly on the market with perfect competition 0< hstat <1, monopolistic competition with free-entry equilibrium 21 αα +=hstat , (5) as input data for our model we used information on financial results of banks in ukraine in the period of 01.01.2005-01.01.2015 (nbu). we found the logarithm of left and right sides of the equation (4), built 11 models using the integrated tool “multiple regression” in the software package of statistics analysis statistica. the values of coefficients are statistically significant, and the coefficient of determination r2 for all models is bigger than 0,5, that indicates the adequacy of the results. the values of calculated h-statistics index for the deposit market of ukraine over the period are presented in table 1. as we can see from the results, during the period in deposit market of ukraine, as in the banking system as a whole, there is monopolistic competition. by the way, this trend is inherent in the european union. we should pay attention on the values of h-statistics index as of 01.01.2009, which is less than 0 – hstat = -0,549. this shows not just the presence of perfect monopoly on the market, but also the conjuncture changes in the structure of the market, which led to its imbalance. in fact the same situation is observed during crisis events in 2008-2009, that left its negative effects on the domestic banking sector. let`s follow the correlation between h-statistics index and the number of banks that were carrying out its activities during the analyzed period (fig. 2). basing on the presented figure 2 we can say that the crisis years of 2008 and 2009 were characterized by significant increase in the total number of banks presented in the market. the maximum number of them actually in 2008 and 2009 is characterized by low level of competition in the system. the situation in ukraine’s banking sector and in the economy as a whole (as of 01.01.2009) was generally unbalanced, that proves the sharp fall in values of h-statistics index. 6. conclusions 1. since the middle of xx century the question of assessing competition was under active discussion by scientists. in this case, the main assessment methods were combined into two groups: structural and non-structural. after series of studies of different scientists strengths and weaknesses of both approaches have been identified. however, modern scientists give priority to nonstructural approach that leads to an active development fig. 2. dynamics of the level of competition (h-statistics index) in deposit market of ukraine regarding to the total number of banks during 2005-2015 0,229 0,127 0,128 0,057 -0,549 0,396 0,289 0,41 0,363 0,432 0,186 -0,6 -0,4 -0,2 0 0,2 0,4 0,6 145 150 155 160 165 170 175 180 185 190 the number of banks h-stat table 1  calculated values of h-statistics index for the deposit market of ukraine over the period of 01.01.2005-01.01.2015. № year hstat 1 01.01.2005 0,229 2 01.01.2006 0,127 3 01.01.2007 0,128 4 01.01.2008 0,057 5 01.01.2009 -0,549 6 01.01.2010 0,396 7 01.01.2011 0,289 8 01.01.2012 0,41 9 01.01.2013 0,363 10 01.01.2014 0,432 11 01.01.2015 0,186 baltic journal of economic studies 53 vol. 2, no. 2, 2016 of appropriate models. the panzar-rosse model is one of these models, which today is a leading one in assessing the level of competition in different countries. therefore, we chose this model in our study. 2. an active process of reforming all sectors of ukraine is clearly described in the financial sector too, including the deposit market. therefore, the relevance of assessing the level of competition is of particular importance for its further regulation. 3. as a result we found that the deposit market of ukraine is inherent in monopolistic competition, as evidenced by the calculated values of the h-statistics index. in 2008, in the context of the global economic crisis, there was present an unbalanced situation in the deposit market of ukraine. there is no clear link between the number of banks and the level of competition. but this research should be continued, since 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(2007). misspecification of the panzarrosse model: assessing competition in the banking industry. dnb working papers, 114: 30. dani finansovoi zvitnosti bankiv ukrainy [electronic resource].  – retrieved from: http://www.bank.gov.ua/ control/uk/publish/category?cat_id=64097. baltic journal of economic studies 54 vol. 2, no. 2, 2016 ирина диденко, сергей богма исследование конкуренции на депозитном рынке украины на основе модели панзара-росса аннотация. проблема в адекватной оценке уровня конкуренции на рынке банковских услуг побудила исследователей постоянно искать какие-то новые научные методы. самыми известными из них на сегодня, которые впоследствии были успешно адаптированы на банковском рынке, являются модели бреснахана, панзара-росса, бертрана, ивата, монти-кляйна, барроса-модесто и др. в украине процесс оценки уровня конкуренции в банковском секторе является очень актуальной темой, особенно в соответствии с последними реформами в данном направлении. что касается внутреннего рынка депозитов, существует дефицит качественного анализа этого вопроса, в отличие от зарубежной практики. поэтому в данном исследовании мы пытаемся решить эту проблему. основная цель мировых ученых в данном вопросе является подробный анализ рынка, чтобы выявить важные факторы, которые существуют на выделенных рынках, и влияют в частности на ставки по кредитам и депозитам. исходя из этих факторов, не может быть реализованы процессы внутренней перестройки, происходящие на рынках. целью данной статьи является определение уровня конкуренции на депозитном рынке украины в 2006-2015 гг базированной на неструктурной модели панзара-росса и определение ключевых факторов, которые влияют на этот уровень. для исследования уровня конкуренции на депозитном рынке украины была использована модель панзараросса, в которой с помощью встроенного инструмента «множественная регрессия» в пакете программного обеспечения для анализа статистики statistica были построены отдельные 11 моделей. в качестве входных данных в модели была представлена информация о результатах финансовой деятельности украинских банков в течение десяти лет с 01.01.2005 года до 01.01.2015 года. результаты исследования показали, что на украинском рынке депозитов есть монополистическая конкуренция, что подтверждается расчетными значениями индекса h-статистики. 2008 год, в контексте глобального экономического кризиса, был отмечен как неуравновешенный период для рынка депозитов украины. зная текущее состояние уровня конкуренции на рынке, можно объяснить ряд явлений, которые происходят на нем и при этом может быть разработано целый ряд эффективных мер по контролю за ними. в украине процесс оценки конкуренции в банковском секторе, в соответствии с последними реформами, становится все более популярным и актуальным. что касается внутреннего рынка депозитов, как уже говорилось, сегодня существует дефицит качественного анализа этого вопроса, в отличие от зарубежной практики. таким образом, это исследование поможет решить данную проблему. baltic journal of economic studies 19 vol. 2, no. 2, 2016 educational production as a determining factor in society development tetiana vlasyuk1 academic institute of contemporary technologies, kyiv national university of technologies and design, ukraine abstract. a new paradigm for economic development of higher educational institutions of ukraine requires appropriate institutional support. the reality of domestic transients is the imperfection of institutions, which corresponds to the mixed economy of market type and adequately represents the norms and stereotypes of behavior in the spheres of income distribution regulation, employment, social security, health, education. the purpose of the paper is to study the role of educational production as a determining factor in economic development of society. methodology. in the researching process general scientific and special methods of the studying processes and facts were used in their correlation and development. among them: monographic – in the forming of the research subject and object; induction and deduction – in the determining of the means, objects of the labour and factor of educational production; the method of the systematic studying the business processes  – in the determining of the interaction of the main components of the educational production. results. the cause of any production is needs availability. to meet his needs the person should enter into business relations with other people that is the basis of market relations. a key resource of the economy, the main engine of development perform is the knowledge which is also an important criterion for successful adaptation of a man in society. accordingly, in society, the role of education as a sphere of production, exchange, consumption of knowledge is increasing. the received knowledge, skills and other competences by the individual is the end result of educational process. knowledge is one of the main elements of intellectual property and intellectual capital, and it contributes to the development of the macroenvironment, namely, labor and scientific potential of the state. each high school, its scientific and innovative activity, its financial bases of development, depends on the efficiency of using new knowledge. value/originality. it is established that the main components of educational process are: at the macro level  – the needs of society, state, educational environment and resources; at the micro level – activities in the field of education and science, individual, scientific and pedagogical workers, the interaction of whom leads to the transmission, assimilation, augmentation and use of knowledge, skills and other competencies. key words: knowledge, education, manufacturing, educational process, educational results, educational production components. jel classification: i 121, i 123, i 125, p 41 corresponding author: 1 department of accounting and auditing, academic institute of contemporary technologies, kyiv national university of technologies and design. e-mail: vlasuk@bk.ru 1. problem statement the active process of market relations formation in ukraine is radically changing economic environment. economic entities operate in the new sphere; the key characteristics (competitive, financial, tax, etc.) are in the process of market formation. the activities of economic entities acquire dynamic character, characterized by competition, responsibility for the results, initiative, risk, etc. in such circumstances, the activity of not only the manufacturing sector enterprises is changing, but many of social institutions are as well (padalka & kalenyuk, 2012). the effective functioning of the education sector requires the introduction of responsibility elements for the results of their activities, the flexibility and adaptability of educational institutions as for the changing conditions of the labour market, competition and the like. a new paradigm for economic development of higher educational institutions of ukraine requires appropriate institutional support. the reality of domestic transients is the imperfection of institutions, which correspond to the mixed economy of market type and adequately represent the norms and stereotypes of behavior in the spheres of income distribution regulation, employment, social security, health, education. therefore, the study of educational production as an institutional factor of national economy innovative development is relevant. baltic journal of economic studies 20 vol. 2, no. 2, 2016 2. review of recent publications a significant contribution to the study of economic aspects of higher education development in ukraine was made by such national scientists as e. agababian, p.  drucker, l. fedulova, a. gazaliev, i. hryshchenko, i. kaleniuk, o. padalka, y. pak, o. pashchenko, a. toffler, h. toffler, l. yakovenko and other. the analysis and generalization of literary sources and special scientific research has shown that scholars have devoted attention to the development strategies of higher education in their writings. at the same time there are issues in economic literature that are not sufficiently covered, they are connected with the study of education as a process of educational production. the necessity of studying this problem at the appropriate level and taking into account the specifics and peculiarities of the economic situation in ukraine led to the theme of the article and identified its purpose and goals. 3. key research findings as the result of social production process is the creation of tangible and intangible products, so structurally it is divided into two major areas: material (industry; agriculture and forestry; construction; personal services; and utilities and service that are providing financial services; transport; communications; trade) and nonmaterial production (health, education, science, culture, art, sports, tourism, spiritual production). the cause of any production is needs availability. needs are objective conditions of human existence, the basis of their physiological, social, intellectual and spiritual reproduction. to meet his needs the person should enter into business relations with other people that is the basis of market relations. the researchers claim that at a certain stage of development the material production began to demand a qualitatively new source of economic growth in the form of scientific progress, which in its turn ensures the production of intelligent products (yakovenko & pashchenko, 2011). a key resource of the economy, the main engine of development perform is the knowledge which is also an important criterion for successful adaptation of a man in society. accordingly, in society, the role of education as a sphere of production, exchange, consumption of knowledge is increasing, but also it is becoming a center of material and spiritual culture. traditionally the main features, properties and characteristics of knowledge are highlighted in the literature. in particular, a. toffler in his work «revolutionary wealth» sufficiently gives inherent features of knowledge, stressing their fundamental difference from other resources involved in the creation of wealth (toffler, 2008): – knowledge in its essence is not an object of competition, that’s why many people use the same knowledge, volume of which is not reduced. on the contrary, the more people use the knowledge, the higher the probability is that someone will develop new knowledge based on them; – knowledge is intangible, it is impossible to touch, but they can be used; – knowledge is non-linear, even a single discovery may make a huge effect; – knowledge is relative, for even a single fragment acquires a meaning only in the context of other fragments, creating a context; – knowledge is combined with other knowledge; the more knowledge, the more varied and useful their combinations; – knowledge as the most mobile product can instantly be broadcast over vast distances; – knowledge can be compressed into symbols and abstractions, on contrary from any material object; – knowledge can be stored in the smallest cells. a. toffler noted that economists found out themselves face to face with the system of wealth that, for decades, has lost their dependence on resources that are exhausted, making its way to the main factor of its growth – knowledge (toffler, 2008). p. drucker argues that in the new economy, knowledge is the only resource that has sense amongst the traditional factors of production (labour, land and capital) (drucker, 2007). l. fedulova defines such forms of knowledge: 1) individual (subjective) knowledge as the system of acquired or developed concepts that mediate the relationship of a man to reality; 2) codified knowledge, which is represented in a symbolic form or in the form of symbols (verbal or written test, formulas, drawings); 3) objective knowledge as an intellectual model, embodied in the objective form of activities processes, its tools and results (fedulova, 2009). so, if we analyze the knowledge on the grounds above, it becomes clear that we are dealing with what is not consumed and not spent in the conventional sense. the dynamic nature of the educational production gives it the characteristics of the process; so we are talking here about the process of educational production. the process is a set of sequential actions to achieve certain goals and results, in which there is a change or transformation of the surrounding world, activity ordering, etc. the educational process is an intellectual, creative activity in the field of higher education and science, which is carried out in a higher educational institution (scientific institution) via the system of scientific-methodical and pedagogical activities and is aimed at the transfer, assimilation, multiplication and use of knowledge, skills and other competences of people who are studying, as well as the formation of a harmoniously developed personality (law of ukraine «about the higher education», 2014). it is possible to show the schematic process of educational production (figure 1). that is the result of learning is the combination of knowledge, skills, abilities, and other qualities acquired by the person during the learning process in certain educational and professional or educational and scientific baltic journal of economic studies 21 vol. 2, no. 2, 2016 program which can identify, quantify and measure (law of ukraine «about the higher education», 2014). in education, the main factor stimulating changes is a rapidly increasing flow of information. this requires ongoing changes to the content of the educational process. the period of time over which the volume of knowledge doubles is significantly reduced: since 1900 for 50 years, since 1950  – 10 years, since 1970  – every year, since 1990 every year. in the context of globalization, every worker to maintain the level of preparedness in accordance with the requirements of society and the labour market needs to replenish his intellectual potential. such activity is called education for life and is a purposeful process of mastering the professional competences that allow the person to remain functional throughout his life. earlier the share of such people among the economically active population was negligible, but today lifelong learning is a necessary attribute of a modern society based on knowledge (gazaliev & pak, 2016). that is, an educational production has the following features: a high proportion of intellectual work of creative nature, a certain degree of novelty generating useful effect, the conditionality of the last interaction of the object and the subject of activity, direct impact on consumers of intellectual products, the ability to be accumulated in various forms of spiritual wealth (agababian, 2003). thus, the subjects of educational process are the educational institutions and separate research and teaching staff, and objects – separate individuals (education applicants), who are users of the educational production results. we believe that the educational production should be viewed as the process of creating educational products in the process of interaction of subject and object of the educational environment expressed by the acquired knowledge, skills and other competencies of the individual that lead to beneficial effects. in the process of educational production there is an interaction of means and objects of the labour that fit into the classical scheme of the production: 1) the object of labour is an individual; 2) the means of production are educational programs and services, provided by financial, logistical, informational and educational resources; 3) goods are acquired knowledge, skills and other competencies; 4) additional services are culturalconsumer services (dorms, canteens, gyms, printing center, medical center, the centers of culture and arts). any educational product is created as a result of the conversion of economic resources (factors of production). in economic theory labour, land and capital are generally considered to be the main economic factors (marx, 1954). the labour is primarily a process that occurs between a teacher and a student during learning. the labour in its educational process includes, first of all, the work of teachers. the teacher is the central figure of the educational process, he has to affect the real educational condition of educational process at universities and take the measures necessary to improve the economic efficiency of the educational process. another educational factor of production is land, as an economic category. the term «land» includes all natural resources that are used to produce educational products. the land is used for academic buildings, structures, buildings, housing for teachers, stadiums, sports facilities, transport infrastructure, recreation areas, etc, acts as the development of human capital, public and individual welfare. to ensure the functioning of educational institutions we need the necessary logistical tools that make up the group of the resource economic capital (capital and current assets). these assets include buildings, computer equipment, furniture, laboratory equipment, library fund, etc. they are necessary for the functioning of higher education institutions and supporting the educational process (gryshchenko, 2016). the process of educational production is dependent on the development of the educational environment in which each educational institution operates separately. the micro level of the educational environment includes educational institutions, families, direct communication; macro-level – social, cultural, ideological, economic, technological, political, legal, religious, and ethnic factors. educational production has also its own specifics, connected with state intervention and regulation activities through the development and implementation of complex fig. 1. the process of educational production source: developed by the authors individual knowledge, skills, competence activities in the field of higher education and science the system of scientificmethodical and pedagogical activities production of information educational result mastering, multiplication and use of knowledge, skills and other competences baltic journal of economic studies 22 vol. 2, no. 2, 2016 public policies that take into account the legitimate rights and interests of the individual and society. therefore, the interaction of the main components of the educational production can be represented as follows (figure 2). educational production begins with the development of individual needs, the level of which is influenced by the development of the state and educational environment; the educational environment development depends on the availability of resources and societal needs; available resources are influenced by innovative development of the educational environment and public policy; and correspondingly the development of a state is influenced by available resources and the society needs. the microenvironment of educational process is formed by the interaction of individuals (objects of the educational production) and activities in the field of education and science (education subject), expressed in the educational process, the result of which is to obtain certain competencies. the results of the activity are also research and innovation developments done by scientists of the high institutions, and are used to produce a useful effect and contribute to the development of the state. that is, the process of educational production can be expressed with one of the dialectics laws, the continuous in-depth knowledge, which suggests that the process of disclosing new aspects of development should be viewed as an infinite learning from a phenomenon to an essence, that has been steadily increasing, from a less profound essence to a more profound one, as the repetition at the highest stage of the known characteristics and properties of the upper stage, that is, negation of negation. the law unites analysis and synthesis as major components of the cognition. educational production is a chain of dialectical negations, each of which not only negates the previously accumulated experience, but also preserves the positive aspects in it, increasingly concentrating wealth development in general. 4. conclusions in recent years, the volume of knowledge in society doubles every year, that significantly increases the importance of the education production, which is a key resource for the society development. that is, education is ready to prepare the new generation of professionally knowledgeable people. in this case the dominant process is the growing intensity of knowledge that contributes to the transformation of the world into a world without borders. the received knowledge, skills and other competences by the individual are the end result of educational process. knowledge is one of the main elements of intellectual property and intellectual capital, and it contributes to the development of the macroenvironment, namely, labor and scientific potential of the state. each high school, its scientific and innovative activity, its financial bases of fig. 2. the interaction of the main components of the educational production source: developed by the authors state educational environment resources activities in the field of higher education and science society needs academic staff individual educational process knowledge competences intellectual consumption baltic journal of economic studies 23 vol. 2, no. 2, 2016 development, depends on the efficiency of using new knowledge. the educational production process largely depends on the level of economic development of separate components of university activities, therefore in further studies it is appropriate to focus on the development of the analysis methodology and regulation of this activity in higher education. references of higher education: the law of ukraine dated 01.07.2014 № 1556-vii / zakon3.rada.gov.ua/laws/show/1556-18 agababian, e. (1985). global economy of intellectual services: status, trends and regulation. problems of theory and management practice, 6: 25-30. gazaliev, a. m. & pak, y. n. (2016). innovative potential of higher school in the context of globalization of education. bulletin of higher school «alma mater», 2: 16-22. gryshchenko, i. m. (2016). factors of increasing efficiency of educational activity at higher educational establishments of ukraine. actual problems of economy, 3: 134-141. drucker, p. f. (2007). age of discontinuity: guidelines to our changing society. moscow: williams, i. d. marx, k. (1954). capital. critique of political economy. the process of production of capital. kiev: state... ussr . padalka, o. s. & kalenyuk, i. s. (2012). economics of education and management. kiev: pedagogical thought. toffler, a. & toffler, h. (2008). revolutionary wealth: how it will be created and how it will change our lives. moscow: ast moscow: profizdat. fedulova, l. i. (2009). economy of knowledge. kiev: nas of ukraine, institute of economics and forecasting of nas of ukraine. yakovenko, l. i. & pashchenko, o. v. (2011). economic framework for the modernisation of higher education in terms of knowledge economy. poltava: scitec. татьяна власюк образовательное производство как определяющий фактор развития общества аннотация. новая парадигма экономического развития высших учебных заведений украины требует соответствующей институциональной поддержки. реальностью же национальных переходных процессов является несовершенство институтов, которые соответствуют смешанной экономике рыночного типа и адекватно представляют нормы и стереотипы поведения в сфере регулирования распределения доходов, занятости, социального обеспечения, здравоохранения, образования. целью исследования является изучение роли образовательного производства как определяющего фактора в экономическом развитии общества. методика. в процессе исследования были использованы общенаучные и специальные методы процессов и фактов в их взаимосвязи и развития. среди них: монографический  – при формировании предмета исследования и объекта; индукции и дедукции  – при определении средств, предметов труда и фактора образовательного производства; метод систематического изучения бизнес-процессов  – при определении взаимодействия основных компонентов образовательного производства. результаты. причиной любого производства является наличие потребностей. для удовлетворения своих потребностей человек вступает в деловые отношения с другими людьми, что является основой рыночных отношений. ключевым ресурсом экономики, основным двигателем развития являются знания, которое также выступают важным критерием для успешной адаптации человека в обществе. соответственно в обществе, роль образования как сферы производства, обмена, потребления знаний постоянно растет. полученные знания, навыки и другие компетенции отдельного индивида является конечным результатом образовательного процесса. знание  – основой элемент интеллектуальной собственности и интеллектуального капитала, и это вносит свой вклад в развитие макросреды, а именно, труда и научного потенциала государства. каждое учебное заведение, его научная и инновационная деятельности, его финансовая основа развития, зависит от эффективности использования новых знаний. значение/оригинальность. установлено, что основными составляющими образовательного процесса являются: на макроуровне – потребности общества, государство, образовательная среда и ресурсы; на микроуровне  – деятельность в области образования и науки, отдельный индивид, научно-педагогический работник, взаимодействие которых приводит к передаче, ассимиляции, увеличении и использовании знаний, навыков и других компетентностей. baltic journal of economic studies 156 vol. 6, no. 3, 2020 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: svitlana-tsv@ukr.net 2 zhytomyr national agroecological university, ukraine. e-mail: natali-21@ukr.net 3 national pedagogical drahomanov university, ukraine. e-mail: knysh_sumy@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-3-156-165 transversal competencies of innovative entrepreneurship professionals in lifelong education svіtlana tolochko1, nataliia bordiug2, inna knysh3 abstract. for the effective development of ukraine in the conditions of global changes (political, economic, social, educational) the priority should be transition to a new economy – knowledge economy. the basis of knowledge economy will be the professional development of specialists in innovative business structures through lifelong learning, in particular formation of their transversal competencies. these qualitatively new specialists will be able to ensure the transition of companies to innovative forms of organization of production activities. the purpose of the article is to reveal the importance of transversal competencies formation among specialists of innovative business structures in lifelong learning to ensure competitiveness of ukrainian companies at the international level. methodology. to achieve the goal, general scientific and special research methods were used: comparative analysis and generalization – to study the international experience of innovative business structures; synthesis of theoretical and empirical data – to characterize ukrainian companies according to the innovation index; structural-functional and system analysis – to study the features of knowledge economy and form hard, soft and business skills. results. in formation of business structures, ukraine still uses traditional criteria, while in the world there are innovative approaches – companies "gazelles", clusters, etc. characteristic features and problems of gazelle companies functioning are analyzed, in particular concerning the personnel component. it is proposed to consider successful enterprises as centers of new economic zones, around which related enterprises, promotion infrastructure, clusters should be purposefully built. it is determined that national economic competitiveness is associated with knowledge and innovation driven capital. two approaches to the management of business structures are analyzed. the first is based on implementation of subject-subject relationships, development of innovative transversal competencies in order to expand managers' “breadth of management skills" through lll-education. the second is the experience of innovative enterprises, where management is transformed into information management with its inherent impersonal post / non / management. formation of the phenomenon of transversal competencies on the basis of lll-education is analyzed. this is ensured by changes in hard skills, acquisition of new soft skills and integrated business skills, which contributes to the creation of a new generation of professionals. it is determined that business skills are integrated from soft skills, which accumulate intellectual property knowledge, investment and financial literacy, sales skills, presentations and business negotiations, event management, project management, people, their work and time, etc. emphasis is placed on the importance of forming knowledge economy based on the intellectual potential of society, in which the main levers are the processes of accumulation and use of information and its transformation into knowledge, which depends on the economic progress of the country. it is determined that on the basis of formation of scientific and educational clusters, introduction of crowd technologies, crowdsourcing in education during life the professional development of experts of innovative business structures will be provided. practical importance. the results of the research can be used in the creation of training programs, retraining, reskilling and changing types of work in the modern production space, which include provisions of knowledge economy for professional development of innovative business structures through lifelong learning. the basic postulates of research can be useful for managers whose companies implement innovative approaches to management, the latest technologies in production activities and promote mobility in retraining in accordance with sociel needs. correlation/ originality. conclusions reached baltic journal of economic studies 157 vol. 6, no. 3, 2020 will help economists, politologists, social scientists and lll learning educators to understand the importance of innovative concepts in development business structures and formation transverse competencies based on hard, soft and business skills. key words: lifelong learning education, innovative entrepreneurship structure, scientific and educational technologies, hard and soft skills, transversal competencies. jel classification: a13, i25, o34 1. introduction modern globalized world needs political, economic and social changes, but in close interdependence with education, because neglect of them will lead to regression of almost all spheres of human life. as for ukraine itself, it is currently in a transitional (from industrial to informational) stage of its development, during which an individualized society was formed with an increased tendency to movement and displacement (nomadization). however, given the global changes taking place in the field of education, it is necessary to improve the quality of knowledge, skills development in lifelong learning. it is necessary to focus on international experience, innovative production technologies and their integration into national production and management strategy of the state as a whole and individual enterprises. under such conditions, the value of lifelong learning (lll – education) should be focused on stabilizing social tensions, optimizing the interaction between tradition and innovation (voitovska, tolochko, bordyug, 2018). thus, on the basis of basic education, a person will further decide when, how and where he will study, what quantity and quality of information he will need, that is he will be engaged in self-education and self-development. observing the growing role of uncontrolled forces and tendencies, which increase insecurity and uncertainty, deepen disorientation, limitations and helplessness, there is a desire to flee from reality, seeking refuge not in the real but in the virtual world, suppress those manifestations of the human spirit, which inspired social, economic and political transformations, are flattened. at the same time there was an opportunity for changes in all spheres of human life. amidst virtualization, in particular, one of the interdisciplinary areas appears – "information management" as a "new era in management", based on two principles: subjectsubject relationships and subjectless post / non / management. the urgency of this issue in scientific circles is determined by many factors, primarily the fact that in modern society there has been a change in management priorities – from production of goods (industrial society) through consumption (post-industrial) to the the society of production and service (information). therefore, there is a good opportunity to review management mechanisms, focusing on: 1) interdisciplinary researches in lifelong learning, which allows specialists of innovative business organizations to acquire innovative business structures "breadth of skills" of formulation, formation, management and modernization of system competencies; 2) changes in management that have occurred recently from industrial (the limits of routine and monotonous movements and human actions) to a globalized society (technology and the limit of space-time restriction of a person) and led to a new interdisciplinary phenomenon – information management, i.e subjectless post / non / management. thanks to interdisciplinary researches, there is a need for new understanding, correction and improvement of lifelong learning for the professional development of professionals in innovative business structures capable of operating in today 's and future society. 2. analysis of the activities of innovative business organizations american economist david birch in the 80s of the twentieth century noted that jobs and innovative ideas in the economy are created by small and mediumsized businesses, which then grow and become large corporations. he called gazelles enterprises and firms whose revenues have been increasing by at least 20% for at least four consecutive years and considered them to be points of economic growth. according to david birch's calculations, dynamic companies account for a small share of the us economy (about 3%), but account for 50 to 70% of gdp growth and employment (birch, 1979). bruce kirchhoff, developing a dynamic classification of firms by david birch, proposed, in addition to growth index, to take into account the pace of innovation. among other things bruce kirchhoff singled out four types of firms: "core"; "ambitious"; «glamorous»; “constrained” (kirchhoff, 1994). bruce kirchhoff traced the fate of 814,190 firms organized in 1977-1978 – by 1984 there were 312,662 left. studies have shown that 17% of highly innovative (gazelle firms) and 9% of low-innovation firms achieve "spectacular" and "ambitious" statuses, respectively. however, the latter create four times more new jobs. these two groups of firms are real "creative destroyers". luke soete (1979) showed that innovation baltic journal of economic studies 158 vol. 6, no. 3, 2020 is related to the size of companies, and raphael kaplinsky (kaplinsky, 1983) found that this relationship is dynamic in nature and depends on the phase of the business cycle. at the same time, david birch's method alone is not enough to analyze companies in changing business conditions. fast gazelle firms are also called entrepreneurial, because their growth rates are largely determined not by markets, not by external conditions, but by internal factors, namely the innovative potential of both management and employees. such firms influence the external socio-economic environment, set an example for other enterprises, and are a "trigger" mechanism when creating entire networks of interconnected and complementary structures – clusters. the main condition for the formation of a cluster is to learn to respond to the competitive advantages of rivals by creating their own advantages. unlike oligarchic groups, the firms of the "new economy " grew and prospered on their own. introducing innovative researches and development, they continue to bring to market more and more new products, without attracting large infusions from investors, without access to cheap credit resources, without special attention from the state and so on. at the same time, there was their significant growth – 20-30% of profits annually, and now their average age is about 20 years. they are characterized by: exponential growth; conducting active research activities; focus on market success; important role of a leader in the company. unfortunately, the activities of innovative business structures operating in the world are almost not studied in domestic economics, and therefore there is a need to study the domestic business market in ukraine and move to professional development and establishment of a new formation of entrepreneurs through lifelong learning, using opportunities for retraining and reskilling and changing types of work in the modern production space. for this purpose, a special project mind (2019) was created together with the open innovation platform re:actor, company kpmg in ukraine and with the support of asbis, they presented the first in ukraine "index of innovation of ukrainian companies". it answers the questions of what innovations are currently being introduced by the biggest players in key sectors of the ukrainian economy, how these innovations affect business, and whether today 's leaders are ready for the challenges of the future. the study covered 50 companies in 10 sectors of the ukrainian economy. banks, metallurgy, energy, agro-industrial complex, transport, telecommunications, pharmaceutics, retail, consumer markets, real estate – according to kpmg experts in ukraine, these industries will be most prone to change in the coming years. new players, modern business models, new rules that affect the distribution of forces in the market are already appearing there. in general, the index of innovation of ukrainian companies showed that in each industry, even within the top 5 largest companies, there are both market drivers who change the rules of the game and outsiders – clumsy companies with many bureaucratic procedures that continue to benefit from past years and do not create almost nothing new. in only five of the ten industries did companies overcome the 75-point threshold , which allowed them to gain innovation status. this indicates low competition and ample opportunities for players who will be able to create new value and bring it to the market (table 1). thus, the weakest point of ukrainian companies was the use of traditional business models with the inclusion of new elements: a combination of classic and online forms. however, the share of large companies that dare to break their own established principles of making money remains quite low in ukraine. however, at the beginning of the xxi century introduction of ict in all spheres of society has led to the invention, creation, production, dissemination, assimilation, accumulation, storage and disposal of information, as well as the appearance of a new phenomenon – neo-tribals, which led to the understanding of society as a complex new type of education – information (knysh, 2018). that is why the leading and top priority are investments in human capacity building and the formation on this basis of society’s intellectual potential – a qualitatively new "innovation enclave" of the world – diverse specialists of innovative business structures in lifelong learning. 3. formation of skills of specialists in innovative business structures in science, there is a transition to human-dimensional objects, which are complex systems (self-organized, nonlinear, unbalanced and open). it is also expressed in the possibility of independent choice of educational technologies, according to the individual needs of the psyche. therefore, in the process of lifelong learning it is necessary to individually approach the choice of teaching methods, tools, technologies in order to stimulate the consciousness of the specialist to selfeducation, self-development and self-improvement, and forming motivation for professional development (voitovska, tolochko, 2019). it should be noted that notable features of specialists of innovative business structures as leaders in traditional, pre-industrial societies were strong-willed and charismatic (full conviction in what he says and thinks, vision of prospects, ability to make others be interested in your ideas , ability to charge others with their positive energy, etc.) quality. a notable feature of such managers is the direct involvement in the production process. instead, now, especially in information societies, there is a search for baltic journal of economic studies 159 vol. 6, no. 3, 2020 table 1 mind innovation index 2019 name of the company, vote threshold characteristic of company’s activity main innovation evaluation of the innovation regarding the future agro agroprosperies, 78, net profit 2018 .: 16 billion uan provides goods and services for the cultivation of cereals and oilseeds, as well as storage and sale abroad. it annually exports more than 2.5 million tons of grain to north africa, the middle east and asia. innovative methods of educating farmers through games, conducting business trainings, innovative model of cooperation with farmers, going beyond the industry with its own bank for lending to farmers, selling it products for farmers the management sees the future of agricultural holdings in providing related services for small and mediumsized farmers who are more efficient in working on the land and solving local issues. therefore, the company cooperates with farmers in the supply chain on a partnership basis: providing them with grain, fertilizers, access to finance and helping with exports. it also sells it products for farmers: smart agri for business process planning and ap agronomist for resource management and field work. banking privatbank, 83, net worth, 01.01.2019 р.: 282 billion uan the largest bank in the country, whose services in 2019 were used by 55.3% of the population of ukraine for over 16 years. the privat24 service has almost 10 million users. according to the british the banker, privatbank is among the top 10 successful financial institutions in the world. in the first nine months of 2019, the bank increased its income to uah 27.4 billion. in 2019, privatbank showed an atm with face recognition, introduced an updated application privat24 with the function of personalization of the interface, the first in the world launched a unique card design through the application, one of the first in the region – biometric payment using face recognition facepay24 by the end of the year, the bank plans to introduce passive biometrics. together with mastercard launched a pilot project "cashless village" in the village. voloska, is working on business solutions. privatbank has the largest it department among the country 's banks, and the function of internal innovations is transferred to a separate unit. еnergy dtek, 73, net profit, 2018 .: 51,2 billion uan the largest energy holding in ukraine. in 2018, net income amounted to uah 51.2 billion. the structure includes enterprises for coal and gas production, as well as production and sale of electricity. coal importer and the leader in the number of green energy companies in ukraine launched the first innovation hub and training program for employees to work with innovations. in 2018, dtek invested about uah 20 billion in the modernization of its enterprises. the company also invests in green energy and innovation, some of which it initiates on its own and some of which it receives from technology teams around the world. in ukraine, it searches for innovations using the re:actor platform, as well as the accelerator of energy startups based on radar tech. теlecom kyivstar, 75, net profit, 2018 .: 18,7 billion uan the largest mobile operator in ukraine (26 million subscribers) is also in the top 3 in terms of the number of fixed internet subscribers (about 1 million). in addition, it provides digital television services (up to 147 channels) and financial services through its subsidiary smart money. both the subscriber base of users and the volume of traffic consumption are growing. bigdata analytics, financial services, business solutions. kyivstar's big data solutions are used in the analysis of transport flows of cities and airports, as well as longdistance communication, scoring of microfinance organizations, development of retail networks and banks, etc. kyivstar runs an accelerator program for radar tech startups. for private users, the operator develops the direction of financial and content services. for business – such services as electronic document management, crm-system, mobileid, m2m and iot-connection, virtual pbx and others. since 2015, the company has been developing big data, cooperating with the state, business and international donors, and training specialists at big data school. baltic journal of economic studies 160 vol. 6, no. 3, 2020 a rational scheme of leadership and professionalism, optimization of the interaction of financial and material flows. the defining personal qualities of a professional leader should be: intelligence, ability to calculate the situation, and at the highest level – not so much to manage as to negotiate, ability to work in a team, reflexivity, responsibility for their own choice, sociability, mobility and more. in fact, the manager is no longer required to know either the production or the people employed in the production process. with only a rough idea of these things, he "manages" the contours of various economic relations. thus, in the information society there should be a radical rethinking of the priorities and qualitative characteristics of a leader. and in this process the leading role should belong, in our opinion, to the development of leader’s, specialist’s transversal competencies. therefore, it is necessary to focus on the formation of intellectual potential of specialists of innovative business structures, because they will in the future form and ensure innovation-friendly regulation of companies. modern technoscience, as well as humanitarian technologies focused on human transformation and empowerment, are becoming the engine of economic growth through the introduction of interdisciplinary researches. this is how specific outsourcing is formed – a new way of life, new habits, needs, interests, values appear, i.e. the very social environment of a person changes; the volume and number of services / responsibilities (caring for animals, raising children, repairing an accomodation, a vehicle, household appliances, etc.) that he transfers to others, increases. all this causes a person to change and reorient their basic skills and abilities. thus, with the change of ontological, economic, political components in society, others also change (epistemological, ideological, axiological, etc.). and one of the leading roles in this, in our opinion, should belong to lll-education. now there is an urgent need to change the priorities of the education sector in order to train a specialist whose knowledge will not be limited only once and for all by hard skills in the field of formalized technologies (finance, auditing, logistics, marketing, etc.) to be able to perceive changes, influence them, as well as to change oneself, i.e. to acquire new skills and abilities – soft skills, less formalized, necessary in any profession (table 2). the marketing and management system, constantly changing quantitatively and qualitatively, forms a demand for qualitative (against the background of reducing quantitative, including staff reductions) staffing indicators for all specialties (new requirements for soft skills). in order to determine which skills are relevant in today 's society, microsoft (2013) conducted a study of the required competencies for the top-60 highest paid professions that contribute to the creation of new value of professionals (figure 1). at the top of the list of the top 60 highest paid professions were public speaking and communication skills, computer competence and a high level of selforganization. the british e-learning platform skillsyouneed complements them with personal skills (time name of the company, vote threshold characteristic of company’s activity main innovation evaluation of the innovation regarding the future transport and logistics nova poshta, 76, net profit , 2018.: 10,8 billion uan the largest private logistics operator in ukraine by the number of branches, now more than 5,000. last year, nova poshta processed 174 million items, which is almost 20% more than in 2017. as of october 2019, the mobile application of np has more than 5 million downloads launch of innovative terminals for mail processing, launch of international delivery np shopping, going beyond the industry – financial services. last year, np opened a new automated sorting terminal in kyiv. and in the spring of this year – a similar object in the khmelnytsky region. the company intends to build similar sorting centers in kharkiv, lviv and dnipro. in addition to it solutions and production automation, the company implements a number of social and environmental projects. for example, since 2014, the humanitarian post has been delivering goods to volunteers, introducing the collection of recyclables in its branches and terminals. from april 2019, the state of emergency is gradually moving to a new type of packaging: instead of foam, they began to use recycled paper. source: made by the author according to: (mind innovation index, 2019) (end of table 1) baltic journal of economic studies 161 vol. 6, no. 3, 2020 management, self-development, emotion management and even nutrition, body care, sports training, effective sleep) and interpersonal skills (communication, teamwork, negotiation, conflict management). forbes believes that interpersonal skills are the most important, it adds creativity, ability to work in a team and ability to "re-engineering" – willingness to do familiar things in a new way, i.e. ability to constructive interpersonal interactions. business skills are integrated into soft skills in the modern world, they accumulate knowledge of intellectual property, investment and financial literacy, table 2 comparative table hard skills and soft skills hard skills soft skills highly specialized competencies interprofessioan, universal competencies expertise – operate within a specific profession, sustainable conditions and a formalized work process values – useful for any activity technical knowledge, qualification behavioral pattern relevant to actions critical in the short term critical in the long run development is faster, effective for solving typical problems specific to one area of activity development is slower,it is allowed to adapt to new conditions quickly, change the field of employment, solve non-standard problems implementation with less effort and guaranteed results (subject to compliance with basic criteria: motivation, ability to learn, etc.) implementation with great effort, achieving the required level is not guaranteed ("limit" of competencies, deep integration into the personality structure, etc.) virtually not prone to reversal in specific conditions – prone to reversal development figure 1. idc study: top skills comparison 2013 source: indicates communication, integration, or presentation skill; source: idc, based on wanted analytics and u.s. bureau of labor statistics data, october 2013 baltic journal of economic studies 162 vol. 6, no. 3, 2020 sales skills, presentations and business negotiations, event management, project management, people, their work and time and more. the ability to work in a team, reflexivity, responsibility for one's own choice, sociability, mobility are the transversal competencies that, in our opinion, should be formed by the new educational paradigm through the introduction of interdisciplinary research. they also include leadership, critical thinking, reflective thinking, creativity, the ability to take responsibility and work in critical conditions, communication skills, cooperation. communication, inter– and intrapersonal skills should be dominated by teamwork, collegiality, adjusting conflicts, ability to compromise, empathy, time management, self-discipline, self-esteem, abikity to overcome a crisis, emotion and stress modulation, understanding the importance of deadlines, etc. thus, in a globalized world, the mere ability to produce something is not enough, the main factor is the ability to increase the value of goods and work for the success of the company. apparently, there is a shift towards the increasing importance of branches which lester thurow calls "brain" (thurow, 1996) – biotechnology, media and computer programming, as they are the only reliable bet in the global economic game. cheap labor, which is abundant in the world, without these branches is not able to produce new complex products, in addition, these products can be cheaper than now, because when the product is already developed, the cost of its production becomes minimal. as a result, the professions related to operations and management, especially marketing and management, become a priority. specialists in these fields are able to provide additional value for products and services through global networks, creative skills, financial insight and effective advertising. representatives of these professions work in conditions of constant change, and their main feature is flexibility, the ability to adapt to countless new situations. thanks to mainly lll-education and interdisciplinary research, the information worker always has the ability to re-certify himself, he is sensitive to the latest challenges in his field, closely monitors market fluctuations, changes in public sentiment, and therefore can always improve the product. a modern marketer or manager does not want to keep a permanent position in a solid corporate bureaucracy, but prefers to move from project to project, concluding short-term consulting contracts and constantly updating their knowledge to effectively solve a certain task. he creates his own career, his own "portfolio", and does not take it from the hands of the corporate bureaucracy (handy, 1995). the tendency to subject-subject integrations of transversal competencies into education is being actualized due to the introduction of a new educational paradigm of lll-education. if an employee has previously mastered a set of techniques once and for all, in the information society he must be constantly ready to acquire new skills and abilities as new (or programmed) technologies and interdisciplinary research are introduced. this "breadth of skills" (block, 1990) means that a worker will grow professionally throughout life, using the opportunities for retraining, reskilling and changing the types of work in the modern production space. alvin toffler presented an analysis of the process of global socio-economic development in the concept of the "third wave" (toffler, 2000) (table 3). post-industrial society is a society dominated by an innovative sector of the economy with a highly productive industry, knowledge industry, high share in gdp of high quality and innovative services, competition in all economic and other activities, as well as a higher share of the population employed in services than in industrial production. knowledge and the availability of information have become the symbolic capitals that determine the place of every society in the world system. the united states and western europe have crossed the line where the main factor in economic prosperity is no longer material production or even the market for services, but the market for information. the emergence of new science-intensive technology, reorganization of production on the basis of introduction of the latest advances in science and technology have set in motion the "third wave" of civilization. therefore, the personality of the future cannot be depicted in terms of the previous civilization, because it is a revolution in the whole inner world of man, which will affect his consciousness and subconscious. the conclusion of the report "the future of jobs" (2016) of the world economic forum (wef) in davos states that the fourth industrial revolution, table 3 civilizational changes are characteristic of the three waves (according to e. toffler) spheres first wave second wave third wave type of civilization agrarian industrial superindustrial family big small мала patriarchal nuclear nonnuclear education in family, individual factory type, mass inforsphere, demasified trade on a by-order basis mass mass on a by-order basis employment agricultural factory, office electronic college mass media local mass demassification of mass media information baltic journal of economic studies 163 vol. 6, no. 3, 2020 which includes developments in previously untapped areas such as artificial intelligence and mechanical engineering, robotics, nanotechnology, 3-d printing and genetics, biotechnology, will change and update not only business models but also labor markets over the next five years. the emergence of new professions is forecasted: 3d-designers; neuroimplantation technicians, specialists in neurorobotology engineering; consultants on improving cognitive abilities, ethics of genetic modification, digital detectives, defenders of confidentiality, compilers of technological laws, etc. exploring the modern world order and digital technologies, nobel peace prize winner and international relations expert henry alfred kissinger put forward the idea of an old order that is constantly changing herewith the form, that is intended to replace it, is still uncertain. (kissinger, 2015). another researcher, emanuel fress, a digital business and social media consultant, notes that the digital age is an age “where there are no boundaries, but there is a collaborative approach to problem solving, global business vision, speed as a key to success, the process of continuous testing. and education ... ”(fress, 2014) throughout a person's life. 4. creation and development of knowledge economy as the managerial attitude acquires the features of a purely technological, turning into programming: manual → computer → machine, there is a new interdisciplinary phenomenon – "information management" as " a new era in management" – impersonal post / non / management, and we lack no knowledge, but the will to perform, the power to selfgovernment (kutyrev, 2009). therefore, we will try to analyze the creation of a management system that is reduced to a purely technological programming. it proves to be effective in terms of methods and fruitful in terms of results, aimed at training a new generation of staff and creating a basis for tactics of impersonal post / non / management. there is a transition to a new economy – knowledge economy, where the determinants are due to interdisciplinary research on the accumulation and use of information and its transformation into knowledge, which, along with labor, finance and natural resources, depends on economic progress. knowledge economy is based on the intellectual potential of society, which is a set of scientific and everyday knowledge embodied in technology, culture, production, environment and everyday life through the nomadic practices of lll-education. in the book "shock of the future" (toffler, 2000), alvin toffler defined the structure of technological innovation, which consists of 3 stages: 1) a creative idea that can be implemented; 2) traditional and innovative practice; 3) distribution in society (marketing practices). the main thing is that the introduced innovations must be accepted by the society. they allow completely new ways of solving social, philosophical, economic, political and even personal and interpersonal problems and change everything intellectually: human environment and its worldview, cognitive abilities, value system, needs and interests and more. according to the futurist, if technology is considered as a large engine, a powerful accelerator, then information and knowledge should be considered as its fuel. education from the system (one for all) turns into an educational network (all for all). the main thought – for creators of ideas, practitioners, marketers and managers need mostly lll-education in the formation of intellectual potential. in order to be successful in the professional sphere in the context of global change, it is necessary to have different competencies. it is sustainable development and economic competitiveness in the process of lifelong learning which focus on the formation of professionals’ intellectual potential, the development of interpersonal skills (tolochko, 2016). this should be useful for the creation and development of knowledge economy through finding and implementation of synchronicities in all scientific fields: scientific and educational clusters (cluster formations that unite research institutions and educational establishments with a strong scientific and educational base and a high level of intellectual potential) that are able to produce, push forward and promote practical implementation and dissemination of innovations; to solve complex socio-economic, technical and other problems at the request of authorities and business structures; develop relationships and cooperate with existing enterprises in order to create bases for production practice and testing the results of research (pyatnytska, 2015). the key task is: training and retraining of qualified personnel in accordance with the needs of the world market through the introduction of continuing lll-education; crowd technologies designed to rediscover the process of communication: on the one hand, the subject is affected by information that arises, is formed and runs through the network, on the other – a subject in a virtual environment interacts with other subjects (mobile, or users), forming communities (pulsating organizations (iliashenko, 2016), and objects (mobile devices), forming homomobilis, or cyberphysical systems (melnyk, 2016)) (without human intervention / involvement) kateryna poltorak suggests using a twotier communication model from the traditional “one-tomany communication model” to the innovative “manyto-many communication model” (poltorak, 2015); crowdsourcing as a process of transferring certain production functions to an indefinite circle of people (the term was first coined by writer jeff howie and " wired” editor mark robinson (2006).) amateurs baltic journal of economic studies 164 vol. 6, no. 3, 2020 gained an additional market to reveal their abilities, and businesses gained ways to use hidden talent of a crowd. this is free or low-paid work, which adds to the efficiency of full-time employees. it's not outsourcing, it's crowdsourcing "(howe, 2006), it's a part of what american economist eric von hippel calls "user-centric innovation". innovations are fast becoming democratic. with the advancement of computer and communication technologies, users are increasingly able to develop their own new products and services. innovations of users – both individuals and companies – often become open and freely available, which initiates the creation of information communities and a lot of intellectual property (hippel, 2005). this technology has not only a number of advantages (interacting with the manufacturer, a consumer receives a product created to his wishes, but also feels involved in the brand; huge free marketing research and advertising; crowd psychology works for the benefit of a manufacturer: a crowd does the work – a manufacturer makes a profit) and a number of disadvantages and limitations: involvement of a wide range of participants involves the loss of their own time and effort to participate in public discussion of the problem, generating ideas and proposals, which raises the question of motivation of project participants; in the process of public search for innovations it is necessary to provide for the allocation of resources and identify methods to solve the problem of the need for highquality analytical processing of incoming proposals. lll education has to spread these ideas. according to the concept of american analysts, currently only a few countries are in transit and are able in the next 15-20 years to move from five to six technology mode. as for ukraine, it is between the fourth and fifth mode. the structure of our country 's economy is a symbiosis of industrial and post-industrial sectors of the economy. ukraine has significant achievements in the military and space spheres, develops such industries as nano– and biotechnology, but the main export product remains metallurgy and chemical products. it should be noted that compared to our western neighbours, ukraine is technologically higher, as poland, hungary, slovakia, and the czech republic are just taking the first steps to move from the era of industrialism to the era of "knowledge and information technology." the main thing, as pointed out by e. toffler (toffler, 2002), is to prepare the country for a big leap, as well as to reduce the negative consequences of facing the "shock of the future". 5. conclusions an analysis of international experience in the creation of innovative business structures – from companies "gazelles" to clusters that play a leading role in economic development. however, ukraine is in a transitional stage of development, characterized by the growing role of trends uncontrolled by people, that motivate them to social changes in all areas, including economy. the main large companies in various sectors of economy are characterized by the innovation index. two approaches to the management of business structures are analyzed. the first is based on the implementation of subject-subject relationships, the development of innovative transversal competencies in order to expand managers' breadth of "management skills" through lll-education. the second is the experience of innovative enterprises, where management is transformed into information management with its inherent impersonal post / non / management. formation of transversal specialists’ of innovative business structures competencies is provided by changes in hard skills, acquisition of new soft skills and integrated business skills, which contributes to the creation of a new generation of specialists. it is determined that the intellectual potential of society is a set of scientific and everyday knowledge embodied in technology, culture, production, everyday life, the environment and so on. it is important to move to a new economy – the knowledge economy, which is based on the intellectual potential of society, in which the main levers are the processes of accumulation and use of information and its transformation into knowledge, which influense economic progress. the development of knowledge economy is based on formation of scientific and educational clusters, introduction of crowdfunding technologies, crowdsourcing in lifelong learning, which provides professional development of specialists in innovative business structures. for the effective development of ukraine, it is necessary to conduct research on innovative entrepreneurial activity in the country, implement cluster policy and start training specialistsentrepreneurs, taking into account the experience of other countries on the basis of lll-education. references: accommodating soft skills in software project management. retrieved from: https://www.researchgate.net/ publication/320655984_accommodating_soft_skills_in_software_project_management birch, d. l. 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(2019). lifelong learning as the future human need. іnternational society of philosophy and cosmology (ispc), vol. 22, pp. 144–151. baltic journal of economic studies 67 vol. 5, no. 3, 2019 corresponding author: 1 uzhhorod national university, ukraine. 2 v.i. vernadsky taurida national university, ukraine. 3 flight academy of the national aviation university, ukraine. e-mail: chumak@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-67-70 economic development: prospects for grow th and today’s realities oksana yoltukhovska1, yulia grudtsyna2, oleksandr chumak3 abstract. the aim of the article is to analyse the current state of the economy, to review positive and negative trends for further economic growth, and to determine an effective strategy for the development of the economy on this basis. the subject of the study is economic development, prospects for development and the realities of the present. methodology. the analysis of scientific literature enables to analyse the current economic status and to determine strategic priorities and goals of economic development; in addition, the dialectical method, scientific abstraction, methods of system analysis are used. the results of the study reveal that the implementation of foreign experience during the development of the national economy enables to solve a number of key economic problems that hinder the development of the national economy. the main positive stages of economic development over the last five years are outlined. the study states that an increase in the share of high-tech and innovation sector requires a complex structural transformation of the economy at present. practical implications. moreover, the status and determining trends of economic development, considering threats and risks associated with crisis processes in the modern world, are analysed. the main principles of the formation and implementation of the economic development strategy based on the coordination of strategic priorities and strategic objectives of the eu, as well as the need to reform the economic sector to improve promising spheres of the economy, are determined. relevance/ originality. the study reveals the state of affairs in the economic system, as well as promising trends of the economy, are identified and further developed. key words: economy, economic development, innovation development, european integration, foreign experience. jel classification: f63, o31 1. introduction due to social changes, both positive and individual negative trends occur which to a large extent obstruct the development of ukraine’s statehood. a serious concern is the problem of economic stability (mohilevskyi, sevruk, pavlenko, 2017). in modern realities, ukraine’s economy faces challenges, such as the ato, uncertainty in the system of political processes, the economic crisis and other factors, which are obstacles to its development. accordingly, problems that hinder national economic development should be solved (melnykova et al. 2011). therefore, the radical socioeconomic transformations over the last decade have caused both positive and negative changes in modern ukrainian society (pavlenko, sevruk, kobko, 2017). therefore, nowadays, ukraine has declared european integration as a key priority of economic policy. the integration strategy of ukraine should be developed due to our state intention to meet the requirements of the modern world economic system, it is a way of modernizing the economy, overcoming technological backwardness, attracting foreign investments and new technologies, creating jobs, increasing the competitiveness of domestic producers, entering the world markets (bahaterenko, 2013). during the 28 years of ukraine’s independence, many reforms, in most cases ineffective and unproductive, have been carried out. therefore, in view of the current state of affairs, clearer and more diplomatic approach to the issue of the country’s economic growth is required, considering past inaccuracies, as well as innovation and ukraine’s economic potential introduction, should be further developed in view of foreign experience to stabilize the economy. 2. literature review the theoretical and practical aspects of contemporary economic development of ukraine are studied in the works of scientists such as o. a. bahaterenko, n. h. bazavluk, m. i. zvieriakov, h. kalachova, o. s. kvasha, ye. v. kobko, i. v. lutsykiv, a. mazaraki, baltic journal of economic studies 68 vol. 5, no. 3, 2019 t. melnyk, v. i. melnykova, s. o. pavlenko, v. v. ruden, a. v. syniakov, v. h. sevruk, a. v. todoshchuk, o. v. shkurupii, o. yunin. the aim of the article is to analyse the current state of the economy of ukraine, to review positive and negative trends for further economic growth, and to determine an effective strategy for the development of the ukrainian economy on this basis. 3. presentation of the main material the ukrainian economic status, transformations and processes in the past, and especially in recent years, testify convincingly that the solution of socio-economic development problems has become strategic and global, as well as one of the most important in the state. to overcome crisis phenomena, to respond to global financial crisis consequences, to transfer to sustainable economic growth require the further elaboration of the economic regulation mechanisms both at the state and at the regional level (ruden). accordingly, the development of the world economy up to 2020 will be noticeable due to a number of factors and megatrends, which will lead to significant changes in the overall picture of the world economy and the modification of its organizational forms. considering the place of ukraine on the brink of western european and eastern european christian civilization, the formation of a new global architecture makes ukraine face serious geopolitical, geostrategic, and geo-economic challenges, which it should respond up to 2020. at the present formation stage of ukraine as a european state, a set of strategic measures aimed at economic development in the context of european integration is being implemented (yunin, sevruk, pavlenko, 2018). therefore, the internal obstacles to the movement of ukraine to the eu should be highlighted: first, slow implementation of economic reforms, the absence of noticeable results of domestic socioeconomic transformations; second, the alarming level of corruption and economic crime; third, the lack of consensus regarding the european choice among the population; fourth, a shortage of experienced specialists in european integration, especially among the political elite and public servants of ukraine (vidnosyny mizh yes ta ukrainoiu: informatsiina dovidka); fifth, a huge gap in the levels of economic development of ukraine and european countries; sixth, a significant difference in living standards; seventh, inconsistency of legal systems (kvasha, syniakova, 2019). therefore, it should be noted that in the context of social and socio-economic relation globalization, the worldwide economic crisis has led to a reorientation of key values in the world and the european union countries’ search for an acceptable model of economic development to ensure national competitiveness and to empower the national economy of each country for a long-term growth. consequently, a model of innovation development has become this model, as well as the foundation that determines the economic strength of the country and its prospects on the world market (lutsykiv, 2010). economic disadvantages should be noted, namely: low level of gdp and per capita income; loss of competitiveness of certain economic sectors; insufficient level of fulfilling the demand of the domestic market for domestic goods; uncompetitive products on the foreign market; the complexity of transition to the european level of prices; allocating quotas to certain types of goods; outflow of skilled labour (todoshchuk; kvasha, syniakova, 2019). accordingly, economic advantages should be noted: macroeconomic stability; technological modernization; free access to the latest technologies, capital, information; grant of subsidies to agriculture; attraction of foreign investments and the newest technologies in the ukrainian economy; creation of jobs; common customs tariffs; anti-dumping policy; protectionism and export control (todoshchuk; kvasha, syniakova, 2019). therefore, according to the strategy for sustainable development “ukraine 2020,” ukraine identifies strategic indicators for implementing the strategy. implementation of the strategy involves achieving key indicators that assess the performance of reforms and programs: 1) in the world bank’s doing business rating, ukraine will be among the first 30 positions; 2) ukraine’s credit rating, that is, rating on liabilities in foreign currency, according to the scale of the rating agency standard & poor’s, will not be lower than the investment category bbb; 3) according to the global competitiveness index by the world economic forum (wef), ukraine will be among the top 40 countries in the world; 4) the gross domestic product (at purchasing power parity) per capita, calculated by the world bank, will rise up to 16,000 usd; 5) according to the world bank, net income from foreign direct investment in 2015–2020 will be more than 40 billion usd; 6) according to the international monetary fund, the maximum ratio of the state budget deficit to the gross domestic product will not exceed 3 percent; 7) according to the international monetary fund’s estimations, the maximum ratio of the total amount of public debt and the government-guaranteed debt to the gross domestic product will not exceed 60 percent (according to the maastricht convergence criteria); 8) according to the international energy agency, the gross domestic product energy intensity will be 0.2 tons of oil equivalent per 1000 usd of the gross domestic product; 9) the national security and defence budget will be at least 3 percent of the gross domestic product; 10) according to the stockholm international peace research institute, the number of professional soldiers baltic journal of economic studies 69 vol. 5, no. 3, 2019 per 1,000 of the population will increase from 2.8 to 5.6 persons; 11) according to transparency international’s corruption perception index, ukraine will enter the top 50 countries of the world; 12) according to the survey, the level of confidence of experts (attorneys, lawyers) in court will be 70 percent; 13) according to a national survey, the level of public confidence in the law enforcement bodies will be 70 percent; 14) the renewal rate of the personnel of public servants in law enforcement bodies, courts and other state bodies will be up to 70 percent; 15) the limited share of one supplier in total purchases of any energy resource will be no more than 30 percent; 16) according to the world bank, the average life expectancy of a person will increase by 3 years; 17) the share of local budgets will be at least 65 percent in the consolidated state budget; 18) according to the world bank, the share of internet broadband penetration will be 25 subscribers per 100 people; 19) 75 percent of graduates of secondary education establishments will know at least two foreign languages, which will be confirmed by international certificates; 20) ukraine will join in the international student assessment, pisa, and will be included in the top 50 state-members of the assessment; 21) ukraine, together with the world bank, will develop a welfare indicator for citizens, determine its target values, and monitor the changes in this indicator; 22) according to a nationwide poll, 90 percent of ukrainian citizens will be proud of their state; 23) in the xxxii summer olympic games, ukraine will win at least 35 medals; 24) according to the global talent competitiveness index by one of the world’s leading business schools insead, ukraine will enter the top 30 countries in the world; 25) 20 films of ukrainian production will be released in 2020 (pro stratehiiu staloho rozvytku "ukraina – 2020"). therefore, it should be underlined that the economic prospect of ukraine is: ensuring the development of small and medium-sized businesses; introduction of eu standards in production; energy price unification; transportation within the member countries; access to the eu market; increase of domestic commodity producer competitiveness; advanced training of the labour force; awarding priory to intellectual investments in high technology; use of eu regional development funds to accelerate the entry into the higher level of economic development in relation to the countries of the european union (todoshchuk; kvasha, syniakova, 2019). along with the economic prospects of ukraine, economic threats should be considered: moving harmful industries to ukraine; use of cheap raw material resources of ukraine; reduction of the total traditional ukrainian exports to the eu; use of cheap labour of ukraine; crowding-out of domestic producers from the domestic market; high european prices (todoshchuk; kvasha, syniakova, 2019). moreover, predictive scenarios for the development of the ukrainian economy and the macroeconomic guidelines to calculate the state budget for the next year should be highlighted. the first scenario involves reforms and preservation of favourable conditions in world markets. the scenario implies a moderate reaction of the economy to reforms. according to this scenario, gdp growth will be 3% in 2019, 3.8% in 2020, and 4.1% in 2021. this scenario coincides with the imf estimates; besides medt proposes to form the budget for the next year on the basis of these estimates (kalachova). the second scenario involves the implementation of complex reforms, such as land and tax, in the part of enterprise income tax (introduction of a tax on withdrawn capital). the external environment will be favourable. according to this scenario, in 2019, gdp growth will be 4.1%; in 2020, 5%; in 2021, 5.4% (kalachova). the third scenario is pessimistic. it suggests that negative trends in the external environment will weaken the possibility to implement reforms, first of all, in the financial sector. slow economic development and the loss of confidence of foreign investors will exacerbate the problem of ukraine’s debt payment. in this scenario, gdp growth will be 1.1% in 2019; in 2020, 1.6%; in 2021, 2.1% (kalachova). the national economy of any state is a complex economic, social, organizational, scientific, and technological system. it has total economic potential, such as natural resource, industrial, labour, scientific, and technical. considering the specificities of the modern period of national development, associated with the occurrence of deep political contradictions, not only those measures, which are connected with the elimination of critical gaps, become extremely important for ukraine. more than ever before, it is important to implement reasonable and timely actions, related to ensuring the country’s competitive advantages, as well as strengthening control over the processes and phenomena in the context of potential threats, which are not critical at the moment (shkurupii, 2014). in such conditions, the goals and objectives of economic development for ukraine are transformed substantially, while the main problem, that is to create an economy of catching-up modernization, not only remains but gets even more complicated by the exacerbation of socioeconomic issues previously unresolved. in comparison with the average gdp growth rates of neighbouring countries (poland, romania, turkey) for 2011–2014, ukraine has a twofold lag behind this indicator. according to expert estimates, to catch up with its neighbours by 2030, ukraine’s gdp growth rates should average at 7% per year during the period. under the current socioeconomic conditions, this is unlikely (zvieriakov, 2015). baltic journal of economic studies 70 vol. 5, no. 3, 2019 despite all of the above, conditions for the successful reformation of ukraine’s national economy should be created. therefore, it is necessary: to form a real idea of national development; to have a single transformation program, political will and a team of reformers; to implement rapid (as soon as possible) reform; to liberalize economy (from the old bureaucratic system to transparent market relations) and to have a capable government; to unite and consolidate the entire society; to ensure the equivalence of the ukrainian economy with the external economic environment; to ensure high social welfare and social protection of the population; to provide the ecological balance of the national economy; to introduce an innovative model for the development of the national economy as soon as possible (mazaraki, melnyk, 2011). 4. conclusion the young ukrainian state faces extremely complex and significant challenges in the field of the economy. our progress towards a civilized life depends on their solution to a large extent. therefore, the realization of the economic program of the newest ukrainian state should become a concern of every citizen of the country. accordingly, in order to achieve high social standards, the ukrainian economy needs some changes. the economic policy of ukraine should be aimed at the economic growth, an increase of incomes and quality of life as a whole through the transformation of the remuneration system, diversification of the economy due to the creation of attractive investment climate, optimization of the tax system. therefore, considering the impact of integration factors on the political, economic, and social spheres of the state, ukraine’s accession to the european union remains considerably more promising; moreover, the country has already made a lot of efforts towards this and will be improved in order to become a member of the eu in the near future (kvasha, syniakova, 2019). thus, today, as never 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(in ukrainian) baltic journal of economic studies 163 vol. 6, no. 5, 2020 corresponding author: 1 classical private university, ukraine. e-mail: olgagaltsova67@gmail.com orcid: https://orcid.org/0000-0003-0012-0371 2 “zaporizhzhia polytеhniс” national university, ukraine. e-mail: pulinatv@ukr.net orcid: https://orcid.org/0000-0001-9159-5094 3 black sea research institute of economy and innovation, ukraine. e-mail: o.p.golovko@gmail.com orcid: https://orcid.org/0000-0003-0841-4534 doi: https://doi.org/10.30525/2256-0742/2020-6-5-163-170 the use of swot analysis methodology for complex evaluation of enterprises’ cluster association development under globalization olga galtsova1, tеtіana pulina2, oleh holovko3 abstract. the article grounds the use of swot analysis methodology for complex evaluation of conditions for enterprises’ cluster association development. it determines the factors that affect significantly food enterprises’ cluster association development: the legal basis and norms regulating the activities of enterprises’ cluster; attractiveness of the field and the level of competition in the sphere cluster enterprises belong to; benefits and threats from foreign environment regarding the cluster’s activity; strengths and weaknesses of cluster association’s member enterprises, their competitive opportunities; the availability of cluster structure development strategy; corporate culture type. it suggests the coefficient of level of swot analysis matrix margins influence on enterprises’ cluster association activities. the research results state that the level of swot analysis “so” matrix margin influence on dairy industry cluster association is 0.73. it proves a significant level of this quadrant impact on enterprises’ cluster. the level of swot analysis st matrix margin influence on dairy field cluster association is 0.34. it proves that there is an average level of this quadrant impact on enterprises’ cluster. the level of swot analysis “wo” matrix margin influence on dairy field cluster association is 0.09. it underlines an insignificant level of this quadrant influence on enterprises’ cluster. yet, the level of swot analysis wt matrix margin influence on dairy industry cluster association (-0.39) is of great importance and emphasizes the threatening influence of this quadrant on enterprises’ cluster. the results of the conducted research due to swot analysis method are taken into account while developing the strategy of food enterprises’ cluster association development. the strategy of concentrated growth is chosen for dairy field cluster, in particular the strategy of strengthening positions in the market and the strategy of market development. key words: swot analysis, cluster association of the enterprises, enterprises of the food industry. jel classification: c38, p13 1. introduction in the context of globalization, the national economies of most industrialized countries have been transferred to cluster development models. in the food industry, cluster associations of enterprises have been established in many countries around the world. the most famous of these operate in the northeastern united states, canada and western europe. in the post-soviet territories, the creation of clusters in the food industry is given considerable attention at the state level. state programs for the development of cluster initiatives, including in the food industry, have been created in ukraine, russia, and kazakhstan. however, despite state support, the development of cluster structures is to some extent hindered by the lack of a unified approach to a complex evaluation of the conditions for the enterprises’ cluster association development and, as a result, many cluster projects remain unrealized. 2. actual scientific researches and issues analysis and the research objective certain issues of creation and functioning of enterprises cluster associations are covered in the works by ukrainian and foreign scientists, in particular, м. voinarenko, о. pietukhova, м. porter, т. toguzaev etc. (voinarenko, 2011; pietukhova, 2012; porter, baltic journal of economic studies 164 vol. 6, no. 5, 2020 1993; toguzaev, 2009). these reasearches are of great scientific value but they cover only the issues of individual functions and components of the creation and development of cluster associations of enterprises. however, systemic research for complex evaluation of the conditions for the development of cluster associations of food industry enterprises has not been carried out. the purpose of the study is to justify the use of swot analysis methodology for complex evaluation of conditions of enterprises’ cluster association development. 3. cluster development tools at the regional level the development of market relations, the globalization of the world economy and the growth of competition, the creation of new forms of integration of enterprises, namely enterprises’ cluster associations, revealed a number of theoretical and practical problems associated with the formation and selection of effective ways to develop new entities of organizational and economic relations. among the factors that significantly affect the development of cluster associations of food industry enterprises, the following should be noted: – legal framework and regulations governing the activities of cluster enterprises; – attractiveness and level of competition in the industry to which the production enterprises of the cluster belong; – opportunities and threats from the external environment regarding the cluster activities; – strengths and weaknesses of cluster enterprises, their competitive advantages; – the presence of a strategy for the development of the cluster structure (pulina, 2013). we consider the prerequisites for the development of a cluster association of enterprises in the dairy subindustry of the food industry of zaporizhzhia region. in ukraine, there are two documents regulating the creation and operation of clusters: “draft concept of the national strategy for the formation and development of cross-border clusters”, approved by the board of the ministry of regional development and construction of ukraine no. 46 dated september 17, 2009 (rishennia kolehii ministerstva rehionalnoho rozvytku ta budivnytstva ukrainy), and resolution of the presidium of nas of ukraine “on the formation and functioning of innovation clusters in ukraine” no. 220 dated july 8, 2009 (postanova prezydii nan “pro formuvannia ta funktsionuvannia innovatsiinykh klasteriv v ukraini”). the strategic goal of the development of food industry enterprises in zaporizhzhia region is to form a structure that would meet the available natural resources and production potentials, as well as meet the needs of the population in food. however, the current legislation of ukraine does not provide for effective measures to support local producers (lack of tax benefits or tax holidays, lack of access to financial and credit resources, preferential lending rates, and complex licensing system) and increase consumer motivation to buy local products. the strengths of the development of production and processing in the zaporizhzhia region are: high level of natural resource potential and raw material base; branched industry structure; high level of urbanization, industrialization and per capita income as a prerequisite for increasing the capacity of the domestic market (shmygol, galtsova, varlamova, 2018). the weaknesses are: disproportions between raw materials and processing industries of the region; insufficient funding, limited logistics and inadequate technological renewal of enterprises in the industry; excessive share in the structure of production of certain types of foodstuff, including beverages; belonging of the region to the zone of extreme agriculture, associated with a negative moisture balance, periodic (every 3-4 years) droughts and frequent dust storms; the severity of the problem of preservation and restoration of the natural fertile layer of arable land; employment of a significant number of employees of the industry in conditions that do not meet sanitary and hygienic standards (1317 people, or 7.64% of the registered number of full-time employees of the food industry and processing of agricultural products in 2019). at present in zaporizhzhia region there are the following opportunities for the development of agroindustrial complex: increasing the productivity and efficiency of the regional agro-industrial complex; growth of the pace and expanding the vectors of attracting foreign investment; improvement of investment activity of enterprises; providing state support to privatized enterprises; development of separate enterprises of the food industry by means of the state target programs; expansion of export opportunities of enterprises of the food industry at the expense of growth of manufacture of the products, on the average on one person, at the level of world standards. expansion of the domestic market of the industry in the region is possible in the presence of a high level of industrialization (the share of industry in the structure of gross value added of the region in 2019 is 41.9%); high level of urbanization (share of urban population in 2019 – 79.4%); high level of average wages of industrial workers (in 2019 – 13649 uah, third place in ukraine) (statystychnyi shchorichnyk zaporizkoi oblasti za 2019 rik). threats to the development of the industry in the region are: unprofitable activities of private enterprises; reducing the profitability of agricultural enterprises; baltic journal of economic studies 165 vol. 6, no. 5, 2020 underdeveloped infrastructure of agricultural and food markets; imperfection of the food sales system; significant tax pressure; low rates of innovative restructuring of enterprises in the industry. a necessary condition for the development of a cluster association of food industry enterprises in the long run is the presence of an effective development strategy. ansoff i. argues that strategy is a set of rules for decision-making, which the organization is guided in its activities (ansoff, 1989). according to vykhanskyi o.s., reference business development strategies include: – concentrated growth strategies related to product change and (or) market; – integrated growth strategies related to the expansion of the organization by adding new structures; – diversification growth strategies are recommended in situations where the organization can no longer develop in this market with this product within this industry; – reduction strategies, which are used in situations where the organization ceases operations, restructures the boundaries of doing business or increases efficiency (vikhanskii, 2002). 4. evaluation of the enterprises’ cluster association using the methodology of swot analysis to justify the choice of the optimal strategy for the development of the enterprises’ cluster project associations in the dairy industry of zaporizhzhia region, we use the method of comprehensive analysis of the strengths and weaknesses of enterprises’ cluster associations, their competitive opportunities and threats from the external environment using swot analysis (vikhanskii, 2002; holovko, sahova, 2002; mishchenko, 2004; redchenko, 2003; saienko, 2006; thompson, strickland, 1998). table 1 shows coefficients of the level of impact of the matrix fields of swot analysis on the activities of enterprises cluster associations. by means of swot-analysis it is established that the project of cluster association in the dairy industry of zaporizhzhia region has a number of strengths and opportunities in this market. we can offer specific strategies with the positioning of these parties and opportunities, taking into account and limiting the impact of weaknesses and threats, which will provide competitive advantages to the enterprises’ cluster association. analysis of interrelations between opportunities and strengths cluster association project in the dairy industry of zaporizhzhia region (so field) allows to determine that for the effective use of such opportunities as the existing legal base of business, development of certain types of food industry by means of the state target programs, average rates of innovative reorganization of the enterprises of the industry, it is necessary to involve organizational structure adequate to cluster association purposes, the availability of certain opportunities in key activity, the developed production technology, a stable financial position of the cluster enterprises and significant sales volumes. in addition, the emergence of opportunities of external environment, such as increasing social needs, reorientation of life values, speed of change and adaptation of innovative technologies, new technological solutions in food production, improving the quality of existing food, increasing the pace and expanding areas of foreign investment, will provide additional benefits in the presence of such strengths of the cluster association as a highly professional team of employees, low employee turnover, a wide range of products, the ability to respond quickly to changes in consumer demand in general, as well as specific orders. it should be noted that such strengths as highly qualified employees, incentive pay plan, stable and table 1 method of calculating the coefficients of the impact of matrix fields of swot analysis on the activities of enterprises’ cluster associations opportunities (о) threats (т) strengths (s) cso = ±( ) ⋅ = ∑ d m so i m 1 18 cst = ±( ) ⋅ = ∑ d m st i m 1 18 weak nesses (w) cwo = ±( ) ⋅ = ∑ d m wo i m 1 18 cwt = ±( ) ⋅ = ∑ d m wt i m 1 18 where: d is evaluation of the matrix cell; m is the number of cells in one matrix field; the value of the coefficient of impact is positive: from 0 to 0.35 means a slight impact, from 0.35 to 0.60 is an average impact, from 0.60 to 1.00 is a significant impact. the value of the coefficient of impact is negative: from 0 to 0.35 is a negative impact, from 0.35 to 0.60 is a threatening impact, from 0.60 to 1.00 is a destructive impact. baltic journal of economic studies 166 vol. 6, no. 5, 2020 long-term relationships with suppliers, high customer service culture and efficient business will allow you to take advantage of such opportunities as the desired level of customer loyalty to the products of the enterprises of association, high sensitivity of buyers to advertising, favorable attitude of buyers to innovative decisions of the enterprises of association, long cooperation with suppliers, granting forms of payment and conditions of deliveries best for the enterprises of association, increasing control over separate suppliers. at the same time, such strengths of the enterprises’ cluster association as the presence of own production in the cluster enterprises, the positive image of the enterprises of the cluster association among the residents and region of a city and region, significant sales volumes, proven technology of product distribution, low trade margin (compared to competitors), the use of modern means of consumer incentives contribute to the use of such opportunities as limited ability of buyers to choose other sellers, high average wages of employees in zaporizhzhia region, growing demand for foodstuff, increasing the financial capacity of the population and the share spent on food, low marketing activity of competitors and a significant barrier to entry into the target market. the study of pairs located in the “ wo” field leads to the following assumptions: weaknesses such as lack of development strategy, bureaucratic organizational culture, inefficient cost management, lack of funding for cluster development are related to the lack of strategic management of cluster development. in order to eliminate the above weaknesses, it is advisable to develop a cluster development strategy and use the following opportunities: effective legal framework for entrepreneurship, innovative development of certain food industries by means of state target programs, average rates of innovation restructuring, increasing the pace and expansion of foreign investment, speed changes and adaptations of new technologies. undoubtedly, such weaknesses as the lack of marketing department, insignificant use of modern methods of analysis and forecasting, insufficient provision of equipment of trade enterprises in the cluster in terms of number of modern requirements of retail sales, imperfect customer relationship management system, are associated with low marketing activities. to eliminate the above weaknesses, it is necessary to improve the management of marketing activities, justify the marketing strategy and use the following opportunities: new technological solutions in food production; improving the quality of existing foodstuff; favorable attitude of buyers to innovative solutions of business associations; low marketing activity of competitors; high level of average wages of employees in zaporizhzhia region. high degree of commitment of buyers to products of the enterprises’ association, growth of the level of social needs of the population, reorientation of vital values, limited possibility of buyers in a choice of other sellers, growth of demand of the population for foodstuff, high sensitivity of buyers to advertising, insignificant entrance barrier to the target market contribute to the improvement of financing the development of cluster enterprises, gathering information for a comprehensive analysis and survey, purchase of modern software, provision of trade equipment of commercial enterprises in the cluster in the respective number and modern requirements of retail sales. weaknesses, such as the lack of necessary raw materials at cluster enterprises due to shortcomings in work with suppliers, imperfect customer relationship management system, violations of storage conditions and quality of raw materials, can be improved by using opportunities such as long-term cooperation with suppliers, provision of forms of payment and terms of delivery, increasing control over the conditions of storage of raw materials and over individual suppliers. if the pair is in the “st” field, the strategy should involve the use of organizational force to eliminate threats. the analysis of the correlation between the company’s strengths and threats to the environment leads to the introduction of the following recommendations. the presence of such strengths as an adequate organizational structure, the availability of certain skills in key areas, proper training of employees, a highly professional team, will help to reduce the impact of threats such as political instability in ukraine, slowing economic reforms, constant changes in legislation, tough tax policy, lack of control over compliance with antitrust laws. positive image of the enterprises of cluster association among the residents of city and region, a wide range of products, the ability to respond quickly to changes in consumer demand in general and specific orders in particular, proven product distribution technology, low staff turnover, incentive pay plan will help to avoid or reduce the impact of threats such as budget deficits, high inflation, reduced birth rate, growing supplier prices and reducing the number of suppliers who provide the necessary products for enterprises, increase in the number of active competitors. the presence of such strengths as stable and long-term relationships with suppliers, stable financial position of cluster enterprises, increased profits, significant sales will help to avoid or reduce the impact of such threats as low customer satisfaction with products (services) of the enterprises’ cluster association, increase in prices of suppliers, reducing the number of suppliers who provide the necessary products for enterprises and increasing the number of active competitors. the impact of such factors as high unemployment, deteriorating demographic situation in the country, declining working population of ukraine, reducing baltic journal of economic studies 167 vol. 6, no. 5, 2020 birth rate, low living standards, rising unemployment can be avoided due to the presence of own production in cluster enterprises, waste technology, low trade margin (as compared to competitors) and the use of modern means of consumer incentives. for pairs in the “wt” field, the company must develop a strategy that eliminates weaknesses and prevents threats. for pairs in the “wt” field, it should be noted that the risk of adverse external conditions may be exacerbated by the weakness of the relevant internal characteristics of the enterprises’ cluster association. the enterprises’ cluster association can be negatively affected by a combination of such weaknesses as lack of development strategy, bureaucratic organizational culture, lack of necessary raw materials at cluster enterprises due to lack of work with suppliers, inadequate technological renewal of enterprises, lack of information for comprehensive analysis and survey threats such as the instability of the political situation in ukraine, the slowdown in economic reforms, constant changes in legislation, budget deficits, low customer satisfaction with products (services) of the association, the emergence of new, stronger food companies in the cluster specialization. in addition, the combination of threats such as increased supplier prices, reduced number of suppliers providing raw materials and goods necessary for cluster enterprises, increased number of active competitors, low living standards, with such weaknesses as lack of modern software, violation of storage conditions and quality of raw materials, inefficient cost management, improper use of modern methods of analysis and forecasting, is worthy of special attention. in addition, it is worth paying attention to the combination of such threats that affect the enterprises’ cluster association, as tough tax policy, lack of control over compliance with antitrust laws, inflation rate of 3–3.5%, high unemployment rate of 2.4%, trend reduction of the working population of ukraine, reduction of birth rate, increase of unemployment, and such weaknesses as insufficient provision of equipment of trade enterprises in the cluster by number and modern requirements of retail sales, insufficient financing of cluster enterprises development, lack of marketing department and imperfect consumer relations management system (statystychnyi shchorichnyk zaporizkoi oblasti za 2019 rik). that is why the management of the enterprises’ cluster association should monitor and avoid threats with the help of existing strengths or, best of all, seek to get rid of weaknesses that may have a critical impact in the event of the above threats. therefore, to reduce the impact of threats from the external environment and strengthen weaknesses, it is necessary to form a clear strategy for clustering companies, develop targeted product range policies, improve the organization of marketing activities and increase marketing budget. quantitative assessment of strengths and weaknesses, as well as threats and opportunities of clustering for each pair of the swot analysis matrix is possible from -18 to +18. this interval is divided into six groups of values: (from -18 to -12); (from -11 to -6); (from -5 to 0); (from 1 to 5); (from 6 to 11); (from 12 to 18). it is expedient to carry out the estimates of the impact of one pair of the swot matrix on the enterprises’ association in zaporizhzhia region on the following scale of values: – if the estimates of interaction are (from -18 to -12) and (from 12 to 18 such a pair has a significant negative or positive impact and these pairs should be given special attention; – pairs of the swot analysis matrix according to the interaction estimates (from -11 to -6) and (from 6 to 11) show an average impact on the activity of the enterprises’ association. according to the interaction estimates (from -5 to 0) and (from 1 to 5), pairs have a slight effect. the final stage of estimating the factors of the impact of four fields of the swot analysis matrix on the cluster association is proposed to be carried out with the help of generalizing indicators – coefficients of influence of the fields of the swot analysis matrix on enterprises’ associations. cso is the coefficient of influence of the “so” field of the swot analysis matrix on the enterprises’ association, which is formed by the strengths of the cluster and opportunities from the external environment. the coefficient for the “so” field cso is calculated by formula (1): c so so = ±( ) ⋅ = ∑ d m i m 1 18 ; (1) where dso is the value of estimates of the strength of the cluster and opportunities from the external environment for each cell of the swot analysis matrix on the enterprises’ association of zaporizhzhia region; m is the number of cells in one field of the swot analysis matrix of the enterprises’ associations. c so= ⋅ 5857 18 440 =0,74 cwo the coefficient of the impact of the ”so” field of the swot analysis matrix on the enterprises’ association, which is formed by the strengths of the cluster and opportunities from the external environment. the coefficient for the “wo” field cwo is calculated by formula (2): c wo= ±( ) ⋅ = ∑ d m wo i m 1 18 ; (2) where dwo is the value of estimates of the weaknesses of the cluster and opportunities from the external baltic journal of economic studies 168 vol. 6, no. 5, 2020 environment for each cell of the swot analysis matrix on the enterprises’ association; m is the number of cells in one field of the swot analysis matrix of the enterprises’ associations. c wo= ⋅ = 520 18 299 010, cst is the coefficient of influence of the “st” field of the swot analysis matrix on the enterprises’ association, which is formed by the strengths of the cluster and threats from the external environment. the coefficient for the “st” field cst is calculated by formula (3): c st st = ±( ) ⋅ = ∑ d m i m 1 18 ; (3) where dst is the value of estimates of the strengths of the cluster and threats from the external environment for each cell of the swot analysis matrix on the enterprises’ association; m is the number of cells in one field of the swot analysis matrix of the enterprises’ associations. c st= ⋅ = 2333 18 360 0 36, the coefficient for the “wt” field cwt is calculated by formula (4): c wt= ±( ) ⋅ = ∑ d m wt i m 1 18 ; (4) where dwt is the value of estimates of the weaknesses of the cluster and threats from the external environment for each cell of the swot analysis matrix on the enterprises’ association; m the number of cells in one field of the swot analysis matrix of the enterprises’ associations. c wt= − ⋅ = − 892 18 134 0 37, it is expedient to carry out evaluation of the level of influence of the fields of the swot analysis matrix on the enterprises association of zaporizhzhia region on such scale of coefficient values. the value of the coefficient of impact is positive: from 0 to 0.35 – a slight impact, from 0.35 to 0.60 – an average impact, from 0.60 to 1.00 – a significant impact. the value of the coefficient of the impact of the swot analysis matrix fields is negative: from 0 to 0.35 – a negative impact, from 0.35 to 0.60 – a threatening impact, from 0.50 to 1.00 – a destructive impact. the analysis has shown that the impact of the “so” field of the swot analysis matrix on the cluster association of the dairy industry is 0.73. this indicates a significant level of influence of this quadrant on the enterprises’ associations. the impact of the “st” field of the swot analysis matrix on the cluster association of the dairy industry is 0.34, which indicates the average impact of this quadrant on the association of enterprises. the level of influence of the “ wo” field of the swot analysis matrix on the cluster association of the dairy industry is 0.09, which confirms the slight impact of this quadrant on the association of enterprises. however, the level of influence of the “ w t” field on the cluster association of the dairy industry (-0.39) is negative and indicates the threatening impact of this quadrant on the enterprises’ association of the dairy industry. the results of the analysis by the swot method are taken into account when creating strategies for the development of the project of the enterprises’ association in the dairy industry of zaporizhia region. 5. strategic goals the strategy is seen as a model to which the cluster association seeks to approach. most often, a thriving cluster is taken as a sample, its positive aspects of activity are analyzed and attempts are made to use its experience. the strategy development process begins with the proclamation of the mission and goals of the enterprises’ cluster association in the dairy industry of zaporizhzhia region. there are a number of actors that influence the mission of a cluster association: – founders of the cluster association; – employees of enterprises that are part of the cluster association (the realization of goals depends on the level of their qualification); – consumers (the mission is focused on them, they determine the demand of goods and services); – partnership relations among the members of the cluster association. a mission is proposed to unite enterprises in the dairy industry of zaporizhzhia region “we make the lives of our consumers better”. the most universal approach to the formulation of goals provides the principle of their establishment in accordance with internal functions (marketing, finance, production, personnel, structure). this, the main objectives of the enterprises’ cluster association in the dairy industry of zaporizhzhia region meet the requirements of goal setting: – to take on 75% of the regional dairy market in the next five years; – to reduce the cost of production of enterprises of the cluster association due to the use of advanced equipment in the field of management and strategic marketing; – to adhere to the motivational policy when working with the enterprises’ employees, to involve highly qualified employees to work at the enterprises of the cluster association. defining short-term periods (5 years) for achievement of certain purposes and specification of ways to achieve the purposes characterize the purposes of the baltic journal of economic studies 169 vol. 6, no. 5, 2020 enterprises’ cluster association of the food industry of zaporizhzhia region as both dynamic and optimal. for the cluster of dairy industry the concentrated growth strategies are selected: market position strengthening strategy and market development strategy. the market position strengthening strategy requires significant marketing efforts in the field of product management, advertising, pricing and quality customer service. if the market position strengthening strategy is followed, the enterprises of the cluster association try to improve their products or start producing new ones without changing the industry. as for the market development strategy, the cluster association is looking for opportunities to improve its position in the existing market or transition to a new market. 6. conclusions according to the results of research, the factors that significantly affect the development of the food industry enterprises’ cluster association are defined and the use of swot analysis methodology for complex evaluation of conditions of the enterprises’ cluster association development is justified. the coefficients of impact of the swot analysis matrix fields of the activities of the enterprises’ cluster association are suggested. based on the values of the coefficients of impact of the swot analysis matrix fields of the activities of the enterprises’ cluster association, the choice of project development strategy for cluster structure in the dairy industry is justified, namely, strategies of concentrated growth: market position strengthening strategy and market development strategy. the implementation of the market position strengthening strategy requires significant marketing efforts in the field of product management, advertising, pricing, quality customer service. however, a long-term strategy cannot envisage all options for the development of the market situation, and competitive strategies need to be advanced to adjust the directions of development strategy implementation. references: voinarenko, m. p. 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(1998). strategicheskii menedzhment. iskusstvo razrabotki i realizatcii strategii: uchebnik dlia vuzov [translated from english]. мoskva: banki i birzhi, uniti, 576 p. baltic journal of economic studies 184 vol. 5, no. 3, 2019 corresponding author: 1 south ukrainian national pedagogical university named after k. d. ushynsky, ukraine. e-mail: svitlanarost@gmail.com 2 south ukrainian national pedagogical university named after k. d. ushynsky, ukraine. e-mail: svetlana.naumkina@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-3-184-192 paradigms of european integration processes in the eu, visegrád group, and ukraine svitlana rostetska1, svetlana naumkina2 abstract. the scientific interest of the development of the theory and practice of cooperation of central european countries of the visegrád group in the context of modern european integration processes is important for developing and implementing the strategy of foreign and domestic policy in european countries and ukraine at the modern stage. at the beginning of the xxi century, under the changes in the geopolitical situation on the european continent, the countries of central europe (full members of the european union) build a new operating system of international relations and accordingly continue to delegate some of their powers to suprastate institutions of the eu. the purpose of this scientific study is to determine paradigmatic aspects of european integration processes, modern threats arising in the eu, prospects for the interaction of eu countries, and to form a new format of cooperation of ukraine and countries of the visegrád group. the aim of the creation of the alliance of the visegrád group (1991) was the desire to contribute to the construction of european security architecture and economic cooperation through the effective cooperation within european institutions. the whole activity of the visegrád group is aimed at strengthening stability in the central european region. risks in the economic sphere and strengthening of euroscepticism are considered traditional for the eu functioning. in view of signing the rome declaration in 2017, the eu threats and challenges for the short-term (2018–2020) include: hybrid consequences of the aggression of the russian federation in ukraine, european migrant crisis, a series of terrorist acts in european cities, unpredictable policy of the newly elected us president d. trump in relation to the european security system, strengthening the position of far-left and far-right political forces in european states, brexit and its consequences, in particular, risk of domino effect in other member countries of the union. therefore, we consider it appropriate to carry out system analysis of key relevant challenges and threats to the eu for 2018–2020 and to consider interconditionality and interdependence of problems that may affect the eu future. given the defined trends, development and economic stability of each state are strategically important, however, special attention in this context should be paid to the analysis of the development of large countries of the european union, such as poland, czech republic, slovakia, and hungary. v4 countries are characterized by sustainable economic growth. if to analyse the visegrád four as a single national state, then the visegrád group is the fifth largest economy in europe and the 12th in the world. the authors consider it too simplistic to define the essence of the visegrád alliance only as a consolidation of the efforts of central european countries for the sake of “returning to europe” through euro-atlantic integration. in the modern dimension of events, the interaction format v4 + ukraine is much more complex and more promising than it appears. since joining nato and the european union in 1999 and 2004 by the visegrád group (i.e. central european countries) geopolitically changes the status of the central european region, transforms bilateral and multilateral relations of central european countries – full members of the eu with ukraine. moreover, this changes the system of relations within the visegrád four, as well as with other member states of the european union. key words: visegrád group, european integration risks, modern threats of the eu, brexit, migration, terrorism, rome declaration 2017, v4 development, ukrainian cooperation. jel classification: f60, o10, o57, r19 baltic journal of economic studies 185 vol. 5, no. 3, 2019 1. introduction the scientific interest of the development of the theory and practice of cooperation of central european countries of the visegrád group in the context of modern european integration processes is important for developing and implementing the strategy of foreign and domestic policy in european countries and ukraine at the modern stage. at the beginning of the xxi  century, under the changes in the geopolitical situation on the european continent, the countries of central europe (full members of the european union) build a new operating system of international relations and accordingly continue to delegate some of their powers to supra-state institutions of the eu. the narrowing of the format of bilateral and multilateral relations of central european countries – the countries of the visegrád alliance with the “outside world” – does not exclude ukraine’s active position in the central european region. the relevance of the issue of international relations of the visegrád group at the regional level is determined by the prospects and logic of the european integration development because an important component of their foreign policy should be the intensification of relations at a new level, the dynamic transformation of the regional system of international cooperation in the new geopolitical conditions on the european continent. the purpose of this scientific study is to determine paradigmatic aspects of european integration processes, modern threats facing the eu, prospects for the interaction of eu countries, and to form a new format of cooperation of ukraine and countries of the visegrád group. 2. the methodology of research the key goal of the creation of the visegrád alliance by the central european countries as of 15 february 1991 (visegrád – the hungarian city, where it was founded) was to join efforts of three (at that moment) countries – poland, hungary, and czechoslovakia to exit the sphere of influence of the ussr, as a confrontation with possible attempts to restore the previous political regimes. it is important to emphasize that the visegrád alliance was not created as an alternative to european integration – and, please note, this is always emphasized by the leaders of at first three ones, and since 1993 – already by official representatives of the four countries of the visegrád block (poland, hungary, czech republic, and slovakia). more and more studies are devoted to the issues of development and interaction of countries of the visegrád four (v4), their analysis requires a special article, so we will consider the most important ones. monograph “visegrád: possibilities and constraints of central european cooperation” edited by czech scholar jiří vykoukal is devoted to the consideration of evolutionary trends and historical retrospectives of the establishment and development of cooperation of v4 countries ( jiří vykoukal, 2012), the author of the article yeva kish “central europe in the modern system of european regional integration” considers trends of development and harmonization of interests of european countries and conditions of modern realia (kish, 2008). therefore, in our research, there is a need to study central european region from the viewpoint of the present time, to identify problems of interaction and ways to solve them, activation of the foreign policy of european countries and ukraine in the eu region and visegrád countries. an important contribution in the study of the visegrád group is made by domestic and foreign scientists, such as s. i. rostetska, s. l. shvets, h. m. perepelytsia, ya. turchyn, i. mudriievska (mudriievska, 2014) (relations of ukraine and countries of the visegrád group in various sectors, for example, political, military, energy, humanitarian, and possibilities for cooperation v4 + ukraine in the xx-xxi century). i. artomov (artomov, 2013) investigates the establishment of the visegrád group and the relationship of ukraine and the visegrád group at the regional level. the article uses data from the official website of the visegrád group, mfa of ukraine, and other official institutions. the aim of the creation of the alliance of the visegrád group was and remains the desire to contribute to the construction of european security architecture and economic cooperation through the effective cooperation within european institutions. the whole activity of the visegrád group is aimed at strengthening stability in the central european region (vezel, saakov, 2017). member countries are: hungary (since 1991); poland (since 1991); slovakia (since 1993), and the czech republic (1993). all the countries of the visegrád group are countries with high-income level and very high human development index. five key provisions clearly defined the purpose of the visegrád alliance of central european countries (artomov, 2013): restoration of state independence, democracy, and freedom; the elimination of the remnants of the totalitarian regime in all spheres of life of society; the formation of parliamentary democracy and a modern state of law along with observance of fundamental human rights and freedoms; creation of a modern market economy; full integration into european political, economic, and legal systems in the format of safe development. recent geopolitical and geoeconomic events of the xxi century have completely transformed internal political situation in the european union (eu) and in general in the euro-atlantic space. there are enough forecasts as regards to its further deterioration. global, regional, and local trends of global development affect the functioning of the european union in various ways. it has long been thought that the eu should act as a guarantor of stability on the european continent, but baltic journal of economic studies 186 vol. 5, no. 3, 2019 today, this integration structure is under the pressure of a number of systemic risks that destabilize the integration processes within the union and hinder its sustainable development. risks in the economic sphere and strengthening of euroscepticism are considered traditional for the eu functioning. nevertheless, classic interpretations of threats to the eu functioning in the shortand middleterm are supplemented by migration problems, issues of hybrid influences, and other challenges that were not relevant a few years ago. therefore, we consider it appropriate to carry out system analysis of key relevant challenges and threats to the eu for 2018–2020, namely, to consider interconditionality and interdependence of economic problems, security problems and threats (hybrid nature of modern conflicts and terrorism), institutional, social, and other internal and external problems that may affect the eu future. and one of the insider ways to solve the defined problems, as the authors consider, is interaction and cooperation with ukraine as a key integrator of pooling of economic, political, environmental, socio-cultural, and other interests. four levels of realization of european regional cooperation are distinguished (artomov, 2013): – international level: realization of the policy of paneuropean interests, coordination of national regional policies to participate in the balanced development of the european space; – state level: development of a national policy for the development of european regional cooperation and harmonization of national interests with pan-european ones, as well as the harmonization of national and regional goals; – regional level: implementation of european regional cooperation policy taking into account interests of the state and local authorities, coordination among the regions of neighbouring countries; – local level: coordination of development plans of local authorities with considerable attention to regional and national interests, particular cooperation between subjects of border areas. cooperation between various countries and ukraine has evolved both bilaterally and in the visegrád four format. however, in some areas, cooperation with the countries of the visegrád group resumed in 1998, after the accession of the v4 countries to the european union. it is known that european regional level of integration is based on the commonality of the territorial boundaries of the integrating states, on the same historical development paths and is supplemented by the natural, economic, transport and communication, scientific and technical potential, the commonality of economic problems, foreign political and geopolitical interests. taking into account the practice of cooperation of the visegrád four in ukraine, european regional cooperation is intensifying in many directions. application of the practice of interaction of partner countries within the visegrád strategy of mechanisms and forms of cooperation will allow optimally forming integration strategy of ukraine and searching for additional levers that could affect the deepening of relations between the state and the european union and our closest states. 3. results and discussion famous events of the last decade of the xxi century have significantly aggravated, in particular, changes in the internal political situation in the european union (eu) and in the euro-atlantic space; there are many forecasts about their further deterioration. global, regional, and local trends of global development affect the functioning of the european union in various ways. despite the fact that basic functions of the eu are to act as a guarantor of stability on the european continent, today, this integration structure is under the pressure of a number of system risks that destabilize the integration processes within the union and hinder its sustainable development. by systematizing key threats and challenges to the eu functioning, it is necessary to distinguish between their internal and external nature and their interdependence. mostly internal problem of the eu should include the institutional crisis (brexit problem and the formation of a new future for the eu); economic challenges, which are partly caused by external factors (dorosh, ivasechko, 2017). key external threats include strengthening of the challenges and threats, in the form of the newest hybrid conflicts in the region, the migration crisis, the coming to power of d. trump in the usa, terrorism as a way to destabilize the internal situation in the eu member states. therefore, traditional economic challenges within the internal development of the european union for 2018–2020 remain relevant but not so critical as compared to the newest threats and social challenges. according to the results of 2017, analysts record a certain improvement in the economic situation and minimal positive dynamics of key macroeconomic indicators in most eu member states. meanwhile, a number of system economic problems caused by unaddressed consequences of the global economic crisis, the slow pace of economic growth in the post-crisis period, the presence of considerable budget deficits and debt obligations in some countries, high unemployment, etc., remain unsolved (dorosh, ivasechko, 2017). the internal institutional crisis of the eu and the exit of great britain from the eu (brexit) have become traditional over the last few years. in our view, the european union is experiencing a critical period of its history and, during the period of 2017–2018, this challenge will greatly affect future integration baltic journal of economic studies 187 vol. 5, no. 3, 2019 processes. undoubtedly, brexit has become a shock to the european union and the west as a whole, the consequences of which are extremely difficult to predict: if some experts believe that it will be the beginning of the end of the eu, then the others see it as an important step for unification: europe will have to consolidate to preserve unity. therefore, it is obvious that the exit of great britain from the eu will have both traditional consequences and those that are difficult to predict today (g20: brexit, 2016). despite the fact that brexit is usually considered as a negative phenomenon, any crisis is a chance for eu development. for example, the eu will be able to revise past agreements concluded based on the “special position” of great britain, making them more profitable for the continental states of europe. it is also clear that the exit of great britain from the eu and further consolidation of other members of the union will suspend the admission of new members. problems of brexit and separatist mood are determined by the spread of efferent trends in eu development. it is about the desire to weaken the efferent trends within the eu, that is, to pause/stop the transformation of the eu into a “supra-state” with centralized management, and to put in force a peculiar “eu-light”, where member states would receive back a significant share of their state prerogatives that they delegate brussels at the entrance. this is favoured by the netherlands, italy, belgium, and the visegrád countries (poland, czech republic, slovakia, and hungary). however, the pre-accession countries (serbia, moldova, and ukraine) do not lose their desire to join the eu and support the necessary conditions. therefore, relevant internal challenges in 2018– 2020 should include the threat of domino effect and strengthening of the eu exit trends by other states. the event of brexit may provoke a chain reaction, as the union without great britain becomes less attractive to liberal wealthy northern states such as denmark and the netherlands, where the demands for a similar referendum can increasingly be heard. an exit from the eu makes sense if the state is guaranteed more effective economic development. however, if the british example will show the opposite, then the number of those who want to separate will sharply decrease (g20: brexit, 2016). in the organizational and economic, and also institutional sphere, a general internal threat to the eu functioning is the inability of member states to conduct a coordinated common internal and external policy (the split reaction to the hybrid policy of russia is a vivid example). when considering key foreign challenges, one should note that the hybrid war of the russian federation towards ukraine and the annexation of ukrainian territories occupy the priority positions for eu and member state leaders. researchers predict that in the near future, the eu states will devise the following variants of development of interactions of security threats in the context of this problem (g20: brexit, 2016; dorosh, ivasechko, 2017): – the threat of the russian federation will force most eu member states to continue to increase defence financing after the years of spending cuts; – the eu will intensify variants of diversification of energy supply sources in order to get rid of dependence on russian gas and generally reduce economic dependence on russia; – eu sanctions against the russian federation will continue, despite the fact that they negatively affect not only russia but also on the unstable economy of western european states. analysts assert that for the european union, such a state of relations with the russian federation was not a surprise, and the understanding that putin carries out his own strategy in europe has become inevitable (gogan, 2017; kermach, 2015). the validity of eu sanctions against russia will continue until summer 2019. countries such as hungary, italy, and austria are hoping to resume economic cooperation with russia, seek to lift these restrictive measures. however, prolonged hostilities in the donbas during 2014– 2018 show that the rf and separatist forces in the east of ukraine will continue not to comply with the minsk accords. so, the reasonableness and compliance with commitments by the eu in relation to aggression in ukraine and policy towards russia in general will become one of the strength tests for the unity of europe (vezel, saakov, 2017; frolov, 2018). another one urgent external threat that will not lose its significance in 2018–2020 is a continuous influx of migrants to europe due to problems in north africa and the middle east and ukraine. during 2015, as a result of the war in syria, 1,3 million migrants have requested asylum in the eu, which significantly exceeds the figures of previous years. european migrant crisis started in 2015 is interpreted today as “humanitarian catastrophe” caused by a massive flow of migrants from africa and the middle east, who left their homes with a hope for a peaceful life and comparable prosperity in the eu states. it is clear that a lot of eu member states were not prepared for a major migrant crisis and, as a result, felt the negative effects of this process on such important systems of social response to emergencies as housing, education, and healthcare. as a consequence of the uncontrolled flow of refugees, states are forced to direct the financial and program priorities of social integration for the temporary custody of migrants with the possible reduction of social guarantees for citizens of the european presidency (yevropejska bezpeka, 2016). the additional costs for meeting the social needs of refugees, as it was demanded in germany and austria, can lead to a significant “political backlash” or even a tough reaction, as happened between local politicians baltic journal of economic studies 188 vol. 5, no. 3, 2019 in cologne. at the same time, migration flows contribute to the rapid growth of european civil society activities to meet the basic needs of refugees, such as clothing or first aid and thus opens up new horizons to ensure european prosperity (gogan, 2017). the migration crisis undoubtedly affects the internal functioning of the eu. so, it first questioned the unity of european countries and the validity of the schengen agreements, one of the main priorities of european integration, which ensures freedom of movement within the eu, especially for those countries that have become part of the transit route of migrants from the middle east. in addition, there is a lack of unity in the issue of immigrants’ rights to claim social benefits in eu states. already today in the eu, there is a practice of restoration of control at internal borders over the danger of a migration crisis. the relevant right is enshrined in art. 23 of the schengen borders code. germany restored control on the land border with austria for the period from february 11 to may 11, 2017; austria – with slovenia and hungary; denmark will check sea ports with ferry connections to germany and the boundaries of land borders. france, in turn, has restored control at all internal borders for a period from february 27 to july 15, 2017, due to a constant terrorist threat (yevropejska bezpeka, 2016; pit dzh., 2017). along with the migrant crisis, terrorism remains the key destabilizing external factor for the eu. a potential danger to eu member states, in particular, such leading ones as france and germany, whose migration policy is extremely imperfect and overfull by double standards, is a great number of muslim migrant among their populations who can become an instrument for implementing extremist plans in europe (solodko, fitisova, 2016; dorosh, ivasechko, 2017). the terrorist attacks in paris in november 2015 and in 2017, in brussels – in march 2016, in istanbul – in june 2016 and in 2018, in nice – in july 2016 highlighted the scale of the threat of the spread of terrorism, in particular, through the activities of branched islamist networks in western countries, formed over the past decades. they demonstrated that terrorist attacks on unprotected places of mass concentration of people and infrastructural facilities turn into a permanent factor of european reality and influence decision-making within the eu (yevropejska bezpeka, 2016; knipp, 2016). a lot of foreign experts explain this by the inefficiency of the eu security policy, which is caused by a number of factors. among the key ones, the following can be distinguished: the excessive self-esteem of the intelligence services of some eu member states in relation to the ability to provide national security on its own; too high levels of democracy and liberalism in the states; unprofessionalism and failure of the special services of certain states and special services of the european union to resist terrorist activity in europe; ignoring the causes and consequences of previous terrorist acts in european cities and the lack of strategic cooperation with the special services of other european states in the context of the fight against terrorism, etc. (dorosh, ivasechko, 2017; gogan, 2017; yevropejska bezpeka, 2016; pit dzh., 2017). for a real fight against terrorism at the internal level, it is necessary to intensify the potential of national security and to review the eu counter-terrorism policy (vonsovych, 2016). a key challenge to the eu in the near future is the new format of relations between the usa and the russian federation. as a result, nato and eu defence officials warn the newly elected us president, d. trump, about improving relations with russian president vladimir putin. it is about the fact that the eu calls the usa to remain an outpost of european security, especially in the context of defence against russia’s hybrid challenges. therefore, the further development of the european security system and the placement of forces in the international arena depend on the position of d. trump. in order to solve urgent problems and both internal and external threats, as well as for the purpose of their possible prevention, the leaders of european countries in march 2017 (on the eve of the exit of great britain from the union) adopted the rome declaration, which identified key areas of work for the next decade (rymska deklaraciya eu, 2017). they include: economic development, security and leadership in the world arena. the declaration signed by leaders of 27 countries (without great britain), leaders of the european parliament, european commission, and european council, includes four key items, which will be given attention in the coming years and which are answers to current challenges in the near future. a safe and secure europe. the declaration defines priorities of security of all citizens, in the fight against terrorism and organized crime; free movement within secure external borders. emphasizes the need to develop and implement an efficient, responsible, and sustainable migration policy while respecting international norms and rules. a prosperous and sustainable europe. it is about the eu development that guarantees economic growth, competition and innovation, where the common market operates efficiently, conditions are created for investment and job creation, priority is given to technological transformations, structural reforms, and especially to the security and availability of energy, a clean and safe environment. a social europe. in the eu, priorities are determined as economic and social progress taking into account the diversity of national systems and the key role of social partners, trade unions, ensuring equality between women and men, as well as rights and equal opportunities for all, in particular, in the field of education. a stronger europe on the global scene. the declaration proclaims that decisive are the further baltic journal of economic studies 189 vol. 5, no. 3, 2019 developing existing partnerships and building new ones; strengthening its common security and defence, in particular, in cooperation and complementarity with nato and the un; especially on the values and protection of human rights, promoting free and fair trade and a positive global climate policy (rymska deklaraciya eu, 2017). given the defined trends, development and economic stability of each state are strategically important, however, special attention in this context should be paid to the analysis of the development of large countries of the european union, such as poland, czech republic, slovakia, and hungary. v4 countries are characterized by sustainable economic growth (hotova, 2012). if to analyse the visegrád four as a single national state, then the visegrád group is the fifth largest economy in europe and the 12th in the world (dorosh, ivasechko, 2017). analysing gdp per capita indicators for 2017, we see that the highest indicator is determined in the czech republic, followed by slovakia and poland (table 1) (palinchak, prykhodko, steblak, savka, 2017). the average gdp in 2016 for the whole group was 25 797 usd. poland has the largest economy in the region (gdp (ppp) totalling 1004,5 billion usd, takes 23rd place in the world). according to the data of the united nations and the world bank, this is a high-income economy (“v4”, 2014; palinchak, prykhodko, steblak, savka, 2017), with a high quality of life, and very high living standards. the polish economy is the sixth largest in the eu and one of the fastest growing european economies (paweł dziekański, 2017). the main industries are mining, machine building (cars, buses, accessories), metallurgy, chemical, electrotechnical, textile, and food industries. high technology and the it sector are also growing due to investors such as google, toshiba, dell, ge, lg, and sharp. the economy of the czech republic is the second largest (gdp (ppp) is generally fifth in the world) in the group. today, the czech republic is an industrialized country and, according to the world bank, one of the thirty most developed countries in the world. the main problem it faces is the inequality between the regions (“v4”, 2014; palinchak, prykhodko, steblak, savka, 2017). the main branches of industry in the czech republic are chemicals, machinery, food industry, and metallurgy. other important industries – energy, construction. industry accounts for 35% of the czech economy. the czech republic produces the largest number of cars per capita. major manufacturers are skoda auto, peugeot-citroen, toyota, і hyundai. other large companies – cez skoda, panasonic, tatra, arcelor mittal, ppf, pilsner urquell, aero, and many others. hungary has the third-largest economy in the group (the total gdp – 255,254 billion dollars, 57th place in the world). the main branches of industry are machine building, (cars, buses), chemical, electrotechnical, textile, and food industries (“v4”, 2014; palinchak, prykhodko, steblak, savka, 2017). the service sector accounts for a large part of the budget, and its role in the hungarian economy is steadily increasing. hungary is located in the heart of central europe; its strategic position plays a significant role in the growth of the service sector. the central position of the country makes it suitable for investment. slovakia has a rather powerful economy (gdp is 158,428 billion usd, 70th place in the world) (palinchak, prykhodko, steblak, savka, 2017). today, slovakia is an advanced industrial state. the automotive industry is of vital importance to the economy of slovakia. major car companies such as volkswagen, psa peugeot-citroen, kia (and since 2018 – jaguar-land rover) have assembly lines in the country. according to the results of 2016, slovakia ranks 13th in terms of bilateral trade in goods between ukraine and european countries with a share of 2.8% of the total (visegrád group, 2018). ukraine occupies one of the prominent places in the cooperation of the visegrád group with the eastern european partners (martynyuk, 2015). cooperation is held annually in various forms, such as intergovernmental contacts, various events in the format v4 + ukraine in the political, legal, military, energy, socio-cultural, managerial, and regional spheres. an analysis of the genesis of relations in each of these spheres will make it possible to determine the effectiveness of this cooperation. poland, the czech republic, slovakia, and hungary have close relations and actively cooperate in the economic sphere with ukraine. the activity table 1 dynamics of gdp per capita in the countries of the visegrád group country indicator 2014 2015 2016 2017 czech republic purchasing power parity gdp per capita** 27 200,051 28 086,483 29 115,997 30 261,345 hungary purchasing power parity gdp per capita 20 065,084 20 817,433 21 597,298 22 422,366 poland purchasing power parity gdp per capita 21 214,302 22 201,121 23 339,843 24 581,780 slovakia purchasing power parity gdp per capita 24 605,348 25 524,656 26 710,975 28 137,028 source: formed by the author based on (world economic outlook database, april 2017) ** czech republic: gross domestic product based on purchasing-power-parity (ppp) per capita gdp (current international dollar) *** developed based on data of the international monetary fund (state statistic service; visegrád group) baltic journal of economic studies 190 vol. 5, no. 3, 2019 of v4 covered all areas of cooperation – security, political, economic, socio-cultural, and so on. according to the declaration adopted on may 12, 2004, cooperation in the framework of v4 was foreseen in 41 directions. poland’s cooperation with ukraine is at a high-quality level. as of 31 december 2016, the volume of polish investments in ukraine amounted to 785,9 million usd, which is 1.8% of the total volume of foreign investment in ukraine. since the beginning of 2016, polish investments have shrunk by 45,3 million usd. the most important polish investments in ukraine are the building ceramics factory “cersanit”, parquet factory “barlinek”, furniture factory “nowy styl”, packing factory “can-pack” and others (“v4”, 2014; visegrád group, 2018). the dynamics of the share of the countries of the visegrád group in the foreign goods trade of ukraine is given in table 2 (petrova, malyuta, berezhnyuk, 2018). table 2 shows that poland is the undisputed leader in exports and imports because an average share in exports is 14.76% and imports – 14.44%. peak shares in the foreign trade of ukraine with poland are observed in 2012, 2014, and 2016 in exports and in 2012 and 2016 in imports. the largest share in both export and import of poland was recorded in 2016, which is explained by the implementation of the free trade agreement with the eu. hungary has a significant share in the exports and imports of ukraine because the share of exports to hungary is 7.89%, hungary’s imports to ukraine – 5.44%. peaks in exports were observed in 2013, and in imports – in 2015. after the reduction of the share in 2013, ukrainian exports to hungary started to increase only in 2016. however, whether it is a certain tendency or only an accidental growth can be determined only after an analysis of the share of ukraine’s exports to hungary in the next years. slovakia and the czech republic have almost the same share in foreign trade with ukraine. the share of exports of these countries is almost the same. the czech republic, in comparison with slovakia, has a bigger share in imports, despite the fact that ukraine and the czech republic do not have common borders and euroregions. the analysis of the commodity structure of imports from the visegrád group countries to ukraine indicates that the structure of imports of the visegrád countries is more rational than the structure of ukraine’s exports to these countries. in the import of the visegrád countries in ukraine, there are many products with a large share of value added and investment goods, namely, electric cars are present in the import of poland (an average of 8.87%), hungary (an average of 20.84%), the czech republic (an average of 13.11%); nuclear boilers are present in the import of poland (an average of 7.83%), the czech republic (an average of 13.11%), nuclear reactors are in hungary’s imports (an average of 6.70%); land transport means are in the import of poland (an average of 3.52%), slovakia (an average of 21.25%), the czech republic (an average of 13.11%) (petrova, malyuta, berezhnyuk, 2018). the visegrád four, like ukraine, attaches great importance to the development of regional and cross-border cooperation. it is extremely profitable economically because it is primarily about the need to establish a proper border infrastructure (including technical modernization of crossing points on the ukrainian border with poland, slovakia, and hungary), the development of beneficial economic cooperation between the border regions of ukraine and neighbouring countries, and the labour movement. it is also necessary to intensify joint actions at the regional level in order to solve environmental problems, problems of employment, etc. (frolov, 2018). 4. conclusions as a result of radical socio-political transformations at the end of the xx century, at the beginning of the xxi, in the central european countries, there has been a radical change in the domestic political system and table 2 dynamics of the share of the countries of the visegrád group in the foreign goods trade of ukraine country 2008 2009 2010 2011 2012 2013 2014 2015 2016 export, % poland 12,89 12,71 13,69 15,54 15,81 15,20 15,55 15,19 16,30 slovakia 5,02 4,53 4,35 4,68 3,93 4,49 3,94 3,59 3,49 hungary 7,54 7,68 6,58 7,46 8,84 9,29 8,88 6,98 7,80 czech republic 3,10 3,58 4,79 4,68 4,13 4,91 4,54 4,15 4,15 import, % poland 14,82 14,09 14,60 12,36 13,63 15,06 14,57 15,15 15,71 slovakia 2,57 1,98 2,31 2,34 2,24 2,45 2,02 2,25 2,53 hungary 4,44 4,40 6,35 2,15 4,43 5,17 6,94 10,49 4,67 czech republic 4,76 4,04 3,91 4,58 4,76 3,69 3,26 3,12 3,82 source: compiled by the authors based on (data of the international monetary fund and state statistic service of ukraine (state statistic service; visegrád group)) baltic journal of economic studies 191 vol. 5, no. 3, 2019 the foreign policy of the countries and the basic radical transformation of the system of international relations at both the global and regional levels. firstly, as a result of the collapse of the bipolar system of international relations, the status of the central european region and each of the central european countries has changed significantly. secondly, all the countries of central europe were at the beginning of the period of systemic socioeconomic transformations, the priority in this context was given to foreign-economic relations aimed at the west. foreign-policy security priorities were somewhat different in different countries. however, during 2000–2017, the euro-atlantic dimension has become a major direction for the development and strengthening of the european security system in the region. thirdly, the central european countries consider the “overcoming” of the geopolitical vacuum in the central european region on the basis of general instability as an accession to powerful international and regional economic and security structures, in particular, the euro-atlantic course and the accession to the european union were identified as a priority for the visegrád group. the strategy of the foreign policy of poland, hungary, and the czech republic was clearly directed, focused on the “ west”. that is, the formation of the visegrád alliance itself did not serve as an alternative to their earliest entry into the eu and nato. nevertheless, we consider it too simplistic to define the essence of the visegrád alliance only as a consolidation of the efforts of central european countries in order to “return to europe” through euroatlantic integration. in the modern dimension of events, the interaction format v4 + ukraine is much more complex and more promising than it appears. since joining nato and the european union in 1999 and 2004 by the visegrád group (and they, on our deep conviction, are the countries of central europe) actually geopolitically changes the status of the central european region, transforms bilateral and multilateral relations of central european countries – full eu members with ukraine. moreover, this changes the system of relations within the visegrád four, as well as with other member states of the european union. therefore, a number of internal and external threats facing the european union today (including the russian federation’s aggression in ukraine, european migrant crisis, a series of terrorist acts in european cities, d. trump’s unpredictable policy in relation to the european security system, strengthening the position of far-left and far-right political forces in european states, brexit and its consequences, in particular, risk of domino effect in other member countries of the union) induced the leaders of european countries to be more consolidated in terms of a common vision of the future of the european union and, consequently, to incur obligations as regards to promising directions for the eu development. the rome declaration of 2017 may become a document, the implementation of which will not only become a strategic basis for the formation of an adequate response to the urgent internal challenges of the eu development but will also strengthen the position of the unification of countries in the international arena, consolidate the states of europe in the fight against external threats. therefore, research on the development of the interaction of european countries with ukraine for combating internal and external threats and the consolidation positions of political elites and public opinion in the eu member states regarding the future of this integration structure should be considered promising. the foreign trade of ukraine with the countries of the visegrád group is extremely uneven. so, the main partners are poland and hungary. in terms of trade security indicators, trade with slovakia is most promising. the commodity structure of ukrainian trade with the visegrád countries is highly irrational. the main exports items are commodities of the raw material group. ukraine is energy dependent on these countries. at the same time, ukraine’s exports to hungary include a significant share of innovative goods. nevertheless, in our opinion, the cooperation of the visegrád group with ukraine is beneficial. firstly, it is an increase in sales markets, the number of consumers of products and services; secondly, it is the expansion of business ties, and thirdly, cheap labour, skilled workers, cooperation in the field of tourism, investment in certain profitable areas, and so on. for ukraine, such cooperation can also be defined by a number of advantages. firstly, it is new investments and financial flows in various sectors, secondly, multilateral tourism development, and thirdly, the development of enterprises in the region because, through small national markets, the surrounding business environment can be modernized in such a way as to stimulate the development of local enterprises and attract foreign investors. despite the creation of the internal market, there are still many practical difficulties for trade in goods and services, and there are also formal barriers that hinder cooperation. but the joint activities of the visegrád group and ukraine can bring great benefits to both the v4 countries and ukraine in various spheres. also, extremely important is the visegrád group’s assistance to ukraine, its representation as a democratic country in the arena of international relations, help in conducting reforms, and support in the aspiration to join the european union. baltic journal of economic studies 192 vol. 5, no. 3, 2019 references: artyomova, i. v., vashchuk, o. m., rudenko, o. m. 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https://doi.org/10.30525/2256-0742/2020-6-1-59-66 new quality of financial institutions and business management nataliia kraus1, kateryna kraus2, valerii osetskyi3 abstract. economic processes in the world are characterized by a high level of dynamism, change and innovative approaches to addressing key issues in nowadays. in a context of globalization and european integration of ukraine into a high-tech competitive environment in order to financing innovative projects, it is necessary to use blockchain technology as an effective tool for digital economy. purpose of scientific research is to find out key priorities and functionalities of blockchain’s application for solving business and government tasks. the object of scientific research is the latest financial technology blockchain and a system of cult-technologies: crowdsourcing, crowdfunding, crowdinvesting. methodology. in the process of research, the following methods are used: generalization is used in studying the nature, preconditions and principles of blockchain technologies; formalization is used when comparing characteristics of the latest forms of financing, such as crowdsourcing, crowdfunding, crowdinvesting. in the course of scientific research, key qualitative characteristics of digital economy are described and the dominant components of its development are investigated. the result of the article. the priorities, new principles of business management and possibilities of blockchain technology as an effective digital economy tool for solving business and government tasks are revealed. future prospects from the implementation of crowd-technologies as an effective management tool in progress for solving the problems of innovative business are substantiated. interconnection in the latest financial institution of creative initiatives realization is presented. the comparative analysis of management of new institutes of innovative development for ukrainian economy in the course of doing business is carried out. the result of the research is presentation of the relationship in the latest financial institution implementing creative initiatives and a comparative analysis of new institutes of innovative development in the sphere of finance for the ukrainian economy. practical implications. the components of digital economy identified by the authors in the article are accelerators of the socio-economic life of ukrainian society in the modern world and are capable of rapidly increasing ukraine’s gdp. the described new forms of financing of ukrainian startups (crowdsourcing, crowdfunding, crowdinvesting) are today quite interesting and effective tool for solving business problems in the financial, economic, innovative and marketing spheres. value/originality. blockchain technology, as an effective tool for ukraine’s digital economy, is able to address the challenges of business and government, uncover the relationship between crowdsourcing, crowdfunding, crowdinvesting, and explain the content of innovative financial institutions for ukraine’s economy. key words: innovations, imperative of management, blockchain technology, crowdfunding, crowdsourcing, crowdinvesting, fintech projects. jel classification: b15, b25, o15, o32 1. introduction we live in times of enormous transformation. all aspects of the habitual life are radically changing. the world is becoming unrecognizable and needs new approaches to the problems of development and economic growth. not only new strategies of the state and business are needed, but also a new way of financial thinking of the modern generation and another level of education and science (palchuk, 2013). baltic journal of economic studies 60 vol. 6, no. 1, 2020 for example, the volume of investments in fintech projects in the world is increasing. therefore, in 2016, it grew by 11 %, compared with 2015 and amounted to 17.4 billion usd. the giants of on-line commerce, retail and other industries have long understood the fact that customers choose leaders with a strong fintech component. alibaba, amazon, auchan, apple, samsung have already made their own payment services an important part of their business ecosystems. in asia, bank card payments are the last stage, people pay for goods and services through installed on the smartphones alipay or wechat. in the future, the purpose of the smartphone will be to make payments. they will be paid for the purchase of products in a supermarket, will be billed in cafes, hotels, taxi and other transport. we are convinced that with the help of the latest financial technologies, cus-tomers can be returned to the center of the financial ecosystem and, at the same time, ensure that banks provide important services that support the foundation of society. the relationship between small and medium-sized businesses and consumers of retail banking services will be a key element in this issue. whether due to payments or the loyalty system, the client must be sure that the value fintech suggestions are directed, first of all, to it. the processes of the european integration of ukraine into a high-tech competitive environment have led to the necessity of forming an innovative model of development and business management, in which role of the main source of long-term economic growth are playing scientific achievements and their technological application and new forms of financing of innovative business projects. science and innovations are considered not only as a foundation and an instrument for improving competitiveness and financial and economic security, but also as a basic element of a new type of society, based on knowledge, ideas, creative abilities of innovators (zatonatskaya, 2011). the purpose of the article is to study the priorities and possibilities of functioning of blockchain technology as an effective digital economy management tool for solving business and government tasks, disclosing the relationship between crowdsourcing, crowdfunding, crowdinvesting, and an explanation of the content of new innovative enterprises for business economy of ukraine such as fintech in the course of doing business. information basis of the article are scientific works of ukrainian and foreign scientists, materials of periodicals and internet resources. in the research process, the following methods are used: generalization is performed in studying the nature, preconditions and principles of blockchain technologies; formalization is used when comparing characteristics of the latest forms of financing, such as crowdsourcing, crowdfunding, crowdinvesting. 2. literature review scientific thought of modernity is aimed at substantiating the mechanisms of formation and tools of development of a socially oriented state and business economy, which is practically impossible to construct using traditional theories and teachings. however, issues regarding the development and implementation of digital business-economy are insufficiently researched. modern technological transformations in the direction of the formation of digital economy also transform the institutional basis of behavioural motives of researchers/ innovators, scientists and business entities. it is noted that in the theory of scientific research the categories of “paradigm” and “imperative” are interdependent. the imperative comes from the latin “imperativus”, i.e. imperious, which is interpreted as a command, a mandatory requirement, an order, a law, an unconditional principle of conduct, bringing to a certain order (imperative, 2017). the purpose of the imperative is to determine the dominant scientific direction in the specific historical conditions of the socio-cultural space. regarding the paradigm, its problems under study researchers interpret as a basic conceptual scheme (example, sample) (arner, barberis & ross, 2015), a model for setting problems of the formation of digital economy and their solution, methods of research that are ruling, relevant and predominate in science today. we share the opinion of h. zhavoronkova and v. zhavoronkova in the question of main characteristics of paradigms (zhavoronkova, 2015), which they attributed to the following: functionality, prevalence, adaptability, dynamism, multivariate, manageability. according to the leading ukrainian scientist o. zavgorodnia, “the most active and fruitful searches are localized at the mega and micro levels of the course of innovative business processes (zatonatskaya, 2011). in particular, modern economists consider digital technology as an attribute of a new business economy, regardless of which epithet is using as its criterion” (cassar, heath & micallef, 2018). we share the views of l. antonyuk on the identified barriers to the development of high-tech innovative enterprises, but the scholar highlights the ability of their further prosperity, we call them inexhaustible and those that require significant revision. considerable attention in contemporary scientific literature is devoted to the development of the model of innovative management of enterprises, to find out the causes of problems of their modernization and the establishment of development priorities and barriers to effective management, as well as the implications of introducing financial innovations into economic activity (lerner, tufano, 2011). 3. determinants of digital business economy under the ability to be considered a digital business economy, it is necessary to understand the property baltic journal of economic studies 61 vol. 6, no. 1, 2020 of the economic system, which manifests itself in the ability to generate digital technologies and innovations of all types, in the context of different levels of economic aggregation, while providing exclusively an intensive type of development and business management. in addition, digital economy bases on the latest technology and all sorts of managerial innovation. we are convinced that due to this economy a new, high quality and special, not known to date, world order that organizes the work of internet society. key determinants of digital business economy are: – security of documentation through an automatic digital management solution, without the need for clients to contact the branches of the bank; – ability to use blockchain technology, with its advanced services, while pursuing the goal of increasing and facilitating the business process of digitalization. in addition, the change in the data “pre-number” when used blockchain technology becomes impossible; – qualitatively new standard of living and quality of life (nature and conditions of work, education, features of leisure, living conditions, socio-psychological climate at enterprises, etc.); – new quality of interconnections and management interaction between enterprises, society and the state (the principle of the most complete and timely performance of duties to each other, the possibility of providing new services); – emergence of disruptive innovation (as a category used not only to refer a product or process at a certain fixed point, but as a process of their evolution in business for a certain time, characterizing their subversive nature through the path of retreat from the mainstream (christensen, raynor & mcdonald, 2015)). innovative entrepreneurs tend to focus on getting an effective business model, not just a product, with business model based on digital innovations significantly different from traditional ones; – saving free time of individuals because of functioning of this economy (“softening” the load on individuals, increasing the level of mechanization and automation of production, systematic and complex modernization and reforming health care management system and the ukrainian education, etc.). 4. blockchain technology digital economy is an accelerator of the socioeconomic life of society in modern world and is capable of rapidly increasing the gdp of the country. ukraine was the first in the world to launch a state electronic auction based on blockchain cryptographic technology. blockchain is a way of storing data or a digital registry of transactions, agreements, contracts. when using digital recordings are combined into blocks, which are then cryptographically bind and chronologically in a chain by using complex mathematical algorithms. the encryption process is performed by a large number of different computers running on the same network. as soon as the registry is updated and a new block is created, it cannot be changed anymore. thus, it is impossible to fake it. any user of this network has free access to the current version of the registry (today, 2017). this technology provides for decentralized storage and protection of infor-mation and can lead to the replacement of classical business functions of banks, notaries, even state-owned, to eradicate corruption, to ensure the full transparency of all business processes and to give a huge competitive advantage to the country (hroisman, 2017). blockchain is capable of providing transparency, security, speed of operations and data protection. today, a number of companies and the government of ukraine are experimenting with technology in the hope of reducing corruption and the ineffectiveness of their business processes (the largest bank..., 2017). 5. foreign experience in using blockchain technology blockchain is a pilot project that has become breakthrough and innovative around the world to ensure full business transparency of the largest state auction in ukraine (over 4.5 billion uah of assets sold). at the first stage of the introduction of blockchain technology into the system of auctions, information is provided only on the rates, their sequence and size. at the second stage, the application is fixed and all the information that can be contained in the system is entered. it is possible to check the information provided about yourself and view information about other auction participants (today, 2017). world trends in 2017 indicate the active use of blockchain technology. so, the energy company eneres, with the support of japanese authorities, is testing the capabilities of blockchain technology with the purpose of building digital economy of joint use in the field of energy. developers argue that due to blockchain technology, business households, who use the energy generated by the solar panels, will be able to share surpluses of this energy with other members of the network for a certain reward (gromyko, 2012; blockchain technology…, 2017). about 1 thousand households from fukushima, aizuwakamatsu and other cities of fukushima prefecture take part in the test project. developers pose high hopes for this business project, which they say can “create an entirely new system of energy supply”. within the framework of the business project, eneres will work with the developer of the software based on the aizuwakamatsu and provide record of transaction data made on the blockchain network. no virtual currency will be involved in testing, but if the test is successful, then it will demonstrate that households can buy and sell electricity using virtual currencies. in theory, baltic journal of economic studies 62 vol. 6, no. 1, 2020 blockchain technology will integrate all households involved in this process into a “virtual power plant” ( japan will use blockchain…, 2017). in addition, the cryptographic products, such as bitcoin, based on the blockchain technology, are introducing into the car market and car sharing. according to reuters, ey, an ernst & young global consulting firm, on august 30, 2017 announced the launch of a special blockchain system that would make car sharing more efficient and easy for companies and/or individuals. ey noted that the system, called tesseract, would be launched together with the partner company by the end of 2017. using tesseract, users can record ownership of a car, schedule of use of the vehicle, and calculate insurance quotes, etc. ey is not the only company that intends to introduce blockchain technology to the automotive market. toyota research institute along with the massachusetts institute of technology, is working on a number of common blockchain projects. moreover, toyota is exploring the use of blockchain in the area of “smart insurance” (blockchain technology…, 2017). in zug (switzerland), known for the highly developed ecosystem of crypto exchange startup, launching digital services of identity based on ethereum. government officials said that starting september 2017, they would offer a digital service of identification through a new application that unifies the identity and crypto address of user. local residents will be able to register and pass a check by the city authorities. in terms of technology support, the application will run on the basis of the uport identity platform, which was created by consensys, the startup ti&m and lucerne university of economics (digital passport…, 2017). authoritative jury of the first specialized competition of financial startups fintech master selected among 9 finalists a module for expressly evaluating the financial stability of the counterparty finscore from youcontrol. fintech master open data incubator is the first specialized competition in ukraine. the purpose of the competition is to develop new startups based on data from the national bank and mastercard, which were the general partners of the competition. it should be noted that youcontrol is an analytical system that generates dossiers from each of ukraine’s companies based on open data from more than 40 sources, monitors changes in state registries, and visualizes relationships between affiliates. the unique technology of youcontrol allows you to get the actual information (on request time) about a company or a fop (individual entrepreneur) for a moment. the monitoring function reports daily changes in accordance with data from official sources. the main business task of finscore is a quick analysis of the financial strength of the counterparty, which helps to decide quickly on how to work with the counterparty taking into account financial risks. thus, finscore determines financial stability and probability of bankruptcy of the company. the uniqueness of the method lies in the fact that finscore was created specifically for the analysis of companies in the ukrainian market. from now on, any company in ukraine, using youcontrol, has access to a more convenient financial analysis. and for the independent adoption of such a business decision requires a staff of financial analysts within the company. the key competence and, possibly, the resources owned by existing banks are the structure supported by the strictest provisions of financial regulation (lerner & tufano, 2011). accreditation will always be a challenging business-task for financial technologies and competing banks. however, it is in this context that cooperation between technology innovators and existing banks can help to improve the financial business services delivery system. 6. finance hackathon an indication of the fact that our country “keeps up to date” is the presence of interesting and beyond doubt the perspective innovative business projects and the latest forms of their financing. therefore, the ukrainian startup corezoid is a developer of a service that allows you to share access to a bank card, ranked second in the money 20/20 hackathon in las vegas. this startup became only representative of europe in the world’s largest financial hackathon (basilenko, 2016). we consider it necessary to point out that fintech is a sector of companies, that are using advanced technologies to improve financial business services, and hackathon is virtual meeting events, during which a large number of specialists innovators in the field of software development of financial sector intensively and cohesively working on solving the actual problem or creating a new application or service. more than 600 developers from 106 teams took part in the competition. during the 24-hour work the teams presented their vision of the future of payment instruments and the financial market. team corezoid wins the nomination visa challenge and one of the prize places of global finance hackathon has brought share. creditcard service, which allows users to share access to their bank card with each other. with the mobile app, share.creditcard users can easily share access to money, so friends and relatives will get a quick temporary access to a payment card to pay for a purchase in non-contact pos terminals or withdraw cash in atms with nfc support. the corezoid system is an open-source modular design with cloud-based data storage, which is based on the theory of finite automata using programming methods. corezoid implements the concept of postit, in which software is not created from scratch, but is going to be a designer that can accelerate the launch of new products, reduce costs of supporting the existing it infrastructure, and strengthen control of business processes within companies. baltic journal of economic studies 63 vol. 6, no. 1, 2020 7. fintech’s business trends latest technology on basis of which a number of directions of fintech in business are developing is presented in figure 1. the ukrainian startups in the business process of implementing their successful projects are using the latest forms of their financing, namely, the crowdfunding platforms. it should be noted that crowdfunding means that investor should be given part of the company, and sponsors are only rewarded with public funding. crowdfunding is considered one of the leading instruments of financing and supporting innovative business, especially in the consumer market, in postindustrial countries. there are also micro-businesses, for which the crowdfunding platform for fundraising acts as advertising platform and a sales channel for financial products or hand-goods products (crowdfunding, 2018). an alternative to crowdfunding is crowdinvesting, or joint stock spread founding. it represents an alternative financial tool for attracting capital to startups and small business enterprises from a wide range of microinvestors. in 2013, the crowdinvesting market was estimated at $ 400 million, of which the usa accounted for about 50 % (crowdinvesting, 2018). 8. interconnection in the latest financial institution of course, if there is a collective financing of an innovation business project, then there is a right to collective use of resources, which is crowdsourcing, which is transfer of certain production functions to an uncertain circle of persons (on the basis of a public offer, without an employment contract). in general, crowd-technologies (crowdsourcing, crowdfunding) are an interesting and effective tool for solving business problems (crowdsourcing, 2018). ukraine has all the opportunities to apply crowdtechnologies in financial, economic, innovation, marketing, sales activities of enterprises. interconnection in the latest financial institution of creative initiatives is presented in figure 2. types of raising funds for the implementation of startup business projects and the peculiarities of management of innovative entrepreneurship through the crowdfunding platforms are given in table 1 and table 2. the latest technology on the basis of which fintech is developing payments and infrastructure (mobile payments, money transfer services) regtech (regulatory technologies) personal finance management and welfare (wealth tech) operational and risk management (pre-crisis, post-crisis) digitization (financing) insurtech (technology in insurance) finance and investing (alternative financing (crowdfunding, р2р, р2в) customer interface data security (analytics, security) figure 1. the latest technology based on fintech’s business trends source: development of authors crowdsourcing crowdfunding crowdinvesting internet figure 2. interconnection in the latest financial institution of the implementation of creative initiatives source: development of authors baltic journal of economic studies 64 vol. 6, no. 1, 2020 table 1 types of attraction funds and their examples types of raising funds through crowdfunding features of raising funds in the form of a species fintech compa-nies amount of funding 1 2 3 4 gratuitous or charitable raising money for non-profit projects, no reward kickstarter, the usa, 2009 146 847 projects were successfully funded for a total of $ 3,800 million crowdinvesting investments in the company are attracted in exchange for its shares, and the funds raised are directed towards development of the enterprise circle up, the usa, 2012 225 start-ups were assembled with a platform of $ 390 million factoring investors buy unregulated busi-ness discount invoices, and the seller uses unpaid bills as a pledge to quickly get funding seedrs, the uk, 2012 successfully funded 650 projects totaling £ 392 million debtor funds are collected to finance individualsconsumers and busi-ness on the basis of the loan, with interest rates usually lower, and the investor can choose the degree of permissible risk crowdcube, the uk, 2011 successfully funded projects totaling £ 335 million pounds at the end of q1 2018 with reward involves obtaining non-financial benefits in the form of goods, works and works of art when collecting funds for creative, cultural, sports projects usually on the principle of “all or nothing” indiegogo, the usa, 2011 more than 650 thou-sand projects re-ceived funding for a total amount of more than $ 1 billion source: compiled by authors on the basis of (angel, 2018; arner, barberis & ross, 2015; holovatyuk, 2012) table 2 types of attraction funds and peculiarities of management of innovative business through crowdfunding platforms types of raising funds through crowdfunding features of fundraising and its man-agement specialization 1 2 3 gratuitous or charitable project financing does not involve mon-etary compensation, but it gives project sponsors the opportunity to use the ser-vice or to obtain the goods created as a result of project implementation funds are provided by individual investors to projects that fall into one of the following categories: art, crafts, design, food, fashion, cine-ma, journalism, comics, games, music, photography, theatre jour-nalism, technology crowdinvesting financing terms: the format of receiving funds “all or nothing”; the investor’s participation in the project involves receiving a corresponding share of pre-ferred shares (less commonly – ordinary shares or convertible bonds) in a funded company; the company applying for financing pays a fee for the listing pro-cedure financing of newly created and growing companies in the field of consumer goods and retail factoring project sponsors receive a stake in the company or convert it into a discount for future investments; the minimum investment amount is £ 10; payment processing fee – 0,5 %, and for adminis-trative costs of the platform – £ 2 500 financing of start-ups and growing companies of various fields at the expense of investors from 94 coun-tries of the world debtor minimum investment amount is £ 10; investor’s participation involves one of two models, namely, corporatization (acquisition of a stake in a company) and a fixed income model (purchase of fixed rate bonds) financing start-ups, newly created and growing companies in various fields of business with reward maximum collection time is 60 days; platform commission – 5 % (for charity projects – 0 %); payment processing fee – 3 % + $ 0,03 per each contribution; the format of receiving funds is chosen between “everything or nothing” and getting as much as it was able to collect it, media and entertainment, soft-ware, green technologies, mobile communication, social sphere, games source: compiled by authors on the basis of (angel, 2018; lerner & tufano, 2011; the pulse of fintech q3 2017) baltic journal of economic studies 65 vol. 6, no. 1, 2020 it is worth noting that crowdfunding and crowdsourcing involve the attraction of financial resources through the internet. institutions that are presented in figure 1 are influence of incentives, formal and informal financial rules and principles of conduct of all participants in the financial space, imposing restrictions on them while formulating a financial order, but the institutional “limits” of financial players on fintech hackathons are rather “blurred” and virtualized (goloborodko, 2018). another mechanism for supporting startups may be creation of a so-called fund of funds. the purpose of creating such a fund and participation of the state is to support the it industry itself. something similar is realized in the field of film industry in ukraine. state allocates funds to the ukrainian state film agency, which in turn participates in the co-financing of ukrainian films along with private companies. fund of funds is an investment in professional funds, which in turn invests in other start-ups. the government is a coinvestor to help raise the necessary funds. 9. conclusions today, we are witnessing the emergence of new digital business reality with quality financial institutions inherent in it and effective management of them. technologies such as blockchain, crowdfunding platforms, fintech are the leading qualitative financial instruments without which an innovative future is difficult to imagine. institutions of this kind form an innovative financial ecosystem, underpinning the digital future of the economy. new financial institutions may be similar to existing/ traditional institutions, as they are grown on their basis, and they also contain elements inherited from past ones that were already in operation. the higher quality of new financial institutions, the deeper the economy is digitized and the higher level of financial management. new quality institutions that provide economic entities with appropriate incentives for financial activities can be considered effective, determine their desired behavior in terms of following the specific directions of innovation and digital transformation. it is necessary to form the newest financial institutions on the new socio-economic basis, having created a new institutional mechanism that ensures the effectiveness of social reproduction management symmetry in accordance with the new tasks set by the government of ukraine. new financial institutions allow to improve quality of management through decentralized storage and protection of information and change the usual business functions of banks for us, provide complete transparency of business processes and save the free time of business entities that use digital financial institutions in their activities, new quality of administrative interaction between state institutions, society and enterprises. a financial institution such as crowdfunding is today deservedly considered one of the highest quality tools for financing and effectively supporting innovative business processes. this is due to the fact that crowdfunding platforms act both as an advertising platform and as a marketing channel for financial products/services. as a result, it should be noted that the peculiarity of modern innovation-digital economic business development is the fact that the latest technologies, scientific potential of the sphere of innovation are the basic determinants that determine the formation of all possible foreign direct investment flows. ukraine has significant scientific potential and it would be advisable to involve it more actively in the formation of investment flows into the national economy. the described experience of developed countries of the world shows that further research should be carried out in the direction of developing a concept of digital economy in the ukrainian realities. references: angel, l. 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(in ukrainian) baltic journal of economic studies 1 vol. 6, no. 4, 2020 corresponding author: 1 jan kochanowski university in kielce, poland. orcid: https://orcid.org/0000-0003-4065-0043 e-mail: pdziekan@interia.eu researcherid: h-4658-2016 2 scientific and educational consortium in kielce, poland. orcid: https://orcid.org/0000-0001-7949-3044 e-mail: adrianlipa@konsorcjum.edu.pl 3 national university of ostroh academy, ukraine. orcid: https://orcid.org/0000-0003-2992-5237 e-mail: anna.novoseletska@oa.edu.ua doi: https://doi.org/10.30525/2256-0742/2020-6-4-1-8 spatial diversity of entrepreneurship in communes of the świętokrzyskie voivodship in 2009-2017 paweł dziekański1, adrian lipa2, anna novoseletska3 abstract. the region includes a part of the economic space separated from the environment that is developed by a given community and interrelated economic entities. owned territorial capital means that regions differ in the scale of entrepreneurship. the purpose of the article is to analyze and evaluate the spatial diversity of entrepreneurship in municipalities using a synthetic measure. the analysis was made in the system of 102 rural communes of the świętokrzyskie voivodship. the source material was data from the local database of the central statistical office for 2009-2017. in analyzing the diversity of entrepreneurship in communes of the świętokrzyskie voivodship, synthetic measure based on the topsis method was used. in 2017, topsis's synthetic measure of entrepreneurship ranged from 0.39 (waśniów (2)) to 0.81 (kielce (1)). the best group includes units with an industrial function and a developing labor market, a developed tourist or spa function. the group of kielce (1), sandomierz (1), skarżyskokamienna (1) and ostrowiec świętokrzyski (1), as the leading units in the analyzed period, is also indicated by gravity analysis (indicating the concentration of the phenomenon in the central region of the region). as a result of the analysis, it has been established that the condition for creating growth is the creation of permanent spatial systems resulting from the activities of enterprises. in the short term, enterprises generate local economic growth. key words: synthetic measure, entrepreneurship, municipalities, świętokrzyskie voivodship. jel classification: c38, h76, l26, m19, o12 1. introduction the region is a social and economic system comprising a separate part of the economic space developed by a given community and functioning of the various interrelated economic entities (huczek, 2016). the development possibilities of the regions are determined by their endogenous (territorial) capital and exogenous environment. a. klasik and f. kuźnik define regional development as a long-term increase in the economic potential of regions, their competitive strength and the quality of life of residents. the essence of regional development is to ensure cohesion in its three dimensions: economic, social and territorial (klasik, kuźnik, 2001). the structural features of regions and their territorial capital strengthen regional diversity and the scale of entrepreneurial activity. factors creating or blocking entrepreneurship in the region include: demographic region, regional labor market, quality of human capital, entrepreneurship of the region, housing resources, infrastructure equipment. entrepreneurship is an interdisciplinary, multifaceted and complex concept. it is important for social and economic development. entrepreneurship is considered in terms of process, set of features, innovation and as a factor influences regional development (miłek, kantarek, 2017). entrepreneurship, as e. skawińska indicates, plays an important role in the efficient allocation of existing resources of the region. it concerns the actions of people in the process of seeking innovation and detecting new relationships in the economic and social system (skawińska, 2009). a. klasik indicates that entrepreneurship is the basis of the attractiveness of the regional economies and their communities. it is a socially conditioned process of creating opportunities for creating wealth, using financial and material resources as well as human capital in an innovative way (klasik, 2006). baltic journal of economic studies 2 vol. 6, no. 4, 2020 2. material and research method the purpose of the article is to analyze and evaluate the spatial diversity of entrepreneurship in municipalities using a synthetic measure. the analysis was made in the system of 102 rural communes of the świętokrzyskie voivodship. the material used was the data from the local data bank of the central statistical office for 2009–2017. in analyzing the diversity of entrepreneurship in communes of the świętokrzyskie voivodship, a synthetic measure based on the topsis method was used. the following stages were used in the conducted research: i. the stimulant and destimulant sets were determined and presented in the form of an observation matrix �xij: x x x x x x x x x x ij m m n n nm = … … … … … … …             � 11 12 1 21 22 2 1 2 (1), where xij – denotes the values of the j-th feature for the i-th object (i = 1, 2, ..., n; j = 1, 2, ..., m). from the set of variables, those with low spatial variability (coefficient of variation less than 0.10) and high correlation of variables (according to the inverse correlation matrix) were removed (malina, 2004). the set of variables selected for analysis is presented in table 1. table 1 list of variables describing entrepreneurship potential in communes variables s/d entities entered into regon register s newly registered units in the regon register s units removed from the regon register d self-employed persons s net migration rate s registered unemployed persons d employed in communes s as – stimulant; d – destimulant source: study based on data available at the central statistical office of poland (cso) ii. selected destimulants were replaced with a stimulant according to the formula; x x ij ij = � 1 (2). iii. stimulants were subjected to the unitarization procedure zeroed according to the formula: for stimulants z x ij ij i ij i ij i ij = − − � x min x max x min when x si ∈ (3) where: s – stimulant, d – destimulant; i = 1, 2... n; j = 1, 2... n, xij – means the value of the j-th feature for the examined unit, max – the maximum value of the j-th feature, min – the minimum value of the j-th feature (wysocki, lira, 2005; kukuła, 2000; młodak, 2006). as a result of the unitarisation process, the matrix of property values was obtained zij : z z z z z z z z z z ij m m n n nm = … … … … … … …             � 11 12 1 21 22 2 1 2 (4), where zij is the unified value of xij. iv. the measure of entrepreneurship was determined based on the topsis method. as part of the method, euclidean distances of communes from the pattern (= 1) and antipattern (= 0) were determined, according to the following formulas: d n z zi j m ij j + = += −( )∑ 1 1 2 � (5) d n z zi j m ij j − = −= −( )∑ 1 1 2 � (6) where n – stands for the number of variables making up the synthetic measure, zij – stands for the unified value of the j-th feature for the tested unit, z zj j + −, – stands for the pattern or antipattern object (wójcik-leń, leń, mika, kryszk, kotlarz, 2019; behzadian, khanmohammadi otaghsara, yazdani, ignatius, 2012; zalewski, 2012). the synthetic measure (topsis) was determined for municipalities based on the formula: q d d d where q i ni i i i i= + ≤ ≤ = − − + � � � � � � � �, , , ,..., ;0 1 1 2 (7) with: qi ∈ [0; 1]; di − means the distance of the object from the antipattern (from 0), di + means the distance of the object from the pattern(from 1). a higher value of measure indicates a better situation of the individual in the studied area1. v. finally, the study area was divided into 4 quartile groups. the first, second and third quartiles were used as threshold values. the size of the synthetic measure in the first group means a better unit, the weakest in the last one. the mutual compliance of the results obtained was also verified based on the correlation coefficient. a scatter chart with an adjustment line for synthetic measures is also presented (zeliaś, malina, 1997). 3. entrepreneurship and regional development municipalities do not develop evenly. this is due to uneven access to factors of production. the endogenous 1 c.l. hwang, k. yoon, 1981, multiple attribute decision making. methods and applications, springer, berlin, for: a. bieniasz, z. gołaś, a. łuczak, 2013, zróżnicowanie kondycji finansowej gospodarstw rolnych wyspecjalizowanych w chowie owiec i kóz w krajach unii europejskiej, roczniki ekonomii rolnictwa i rozwoju obszarów wiejskich, t. 100, z. 1; m.b. pietrzak, 2016, the problem of the inclusion of spatial dependence within the topsis method. montenegrin journal of economics, vol. 12(3), p. 69–86. baltic journal of economic studies 3 vol. 6, no. 4, 2020 potential of the individual, the potential inherent in people and local entrepreneurship is also important. it should be remembered that development is not only the effect of the activities of the administration but also of the simultaneous operation of enterprises. according to j. paryska, local development is a long-term process of social and economic development, using local development factors (parysek, 2001). r . brol defines local development as the activity of the local community, local authority and business entities operating in the commune. their activities are aimed at creating new and improving the existing utility and competitive values of the commune and creating favorable conditions for the local economy (brol, 1998). the development of communes can be considered on its three main planes: social, ecological and economic. a characteristic feature of development is the relatively low mobility of major development factors. these include, among others: the state of infrastructure, qualifications of the workforce, social structure, branch structure of the local economy. there are dependencies between external and internal factors of development. these relationships are an important driving force for development. internal and external factors (entrepreneurship, economic, social, spatial, political and ecological, unique to the local system) can interact with different strength and character (korenik, 1999). r . brol indicates that entrepreneurship should be treated as an endogenous factor in the development of the regional economy (brol, 2006). in addition to the economic function, it carries out a social, economic and ecological function. t. markowski indicates that entrepreneurship is an attribute of social capital (markowski, 2008). w. kosiedowski emphasizes the economic dimension of entrepreneurship in shaping regional development (kosiedowski, 2008). in order for entrepreneurship to have a real impact on the development of the region, favorable economic, mental, legal and institutional conditions must exist (kolabezka, 2010) in it. factors affecting the level of entrepreneurship include: demographics of the region, labor market, economic structures of the region, human capital, housing resources, infrastructure equipment. the development of entrepreneurship should be considered in the broader context of the elements constituting local development. these elements are: environment, culture, community, economy and power. entrepreneurship plays an important role in the process of economic development of the region. it provides an opportunity to increase development potential. it enables the effective use of endogenous resources of the region and obtaining exogenous ones. creating the right conditions for the development of local entrepreneurship is one of the main tasks of local government. in this respect, municipalities have, among others, shortand long-term financial instruments and technical infrastructure, with the help of which they can influence local economic life. there are many entrepreneurship development barriers and their rank is different. some of them have the nature of macroeconomic restrictions related to solutions resulting from the socio-economic policy of the state, the economic system and formal and legal solutions (zarębski, 2002). others regarding the amount of taxes, as well as fees provided for by law, lack of suitably qualified employees, waiting time for payment from a contractor, barriers to innovation and access to information. 4. diversification of entrepreneurship in rural communes of the świętokrzyskie voivodship the świętokrzyskie voivodship is located in the southeastern part of poland. the area of the świętokrzyskie voivodship is 11691.05 km2, 66% of the area of the voivodship is the protected area. świętokrzyskie has an industrial and agricultural character2. the main industries of the świętokrzyskie voivodship are: metallurgical (ostrowiec świętokrzyski), metal (skarżysko-kamienna), machine (starachowice), construction materials (kielce), ceramic, foundry (końskie), food (pińczów, kielce). the economy of the świętokrzyskie region is based on the mining industry in the field of construction materials (limestone, dolomites, marls, gypsum, sandstone), due to which the voivodship has gained the name of the capital of the polish construction. the agricultural south is the base for the production of organic food ( jóźwiak, jóźwiak, strzyż, 2010). in 2017, the synthetic measure of topsis entrepreneurship ranged from 0.39 (waśniów (2); ostrowiecki county) to 0.81 (kielce (1), regional capital). the best group a includes units with an industrial function (kielce (1), sandomierz (1), skarżysko-kamienna (1), ostrowiec świętokrzyski – cities of the region) and a developing (developed) labor market, developed tourist or spa function (e.g. busko-zdrój (3). in the weakest group d and units with an agricultural function (e.g. działoszyce (3), klimontów (2), koprzywnica (3), michałów (2), ruda maleniecka (2), waśniów (2), iwaniska (2), nowy korczyn (2)3, the process of human capital leaching and the weak market work (see figure 1). the dispersion analysis (figure 2) of the measure of synthetic entrepreneurship in communes of the świętokrzyskie voivodship in 2009 and 2017 indicates a slight increase in diversity. outliers were kielce 2 charakterystyka dotyczy przewagi danego rodzaju działalności w regionie: przemysłowa północ i rolnicze południe. 3 (1) gminy miejskie, (2) gminy wiejskie, (3) gminy miejsko-wiejskie baltic journal of economic studies 4 vol. 6, no. 4, 2020 (1), sandomierz (1), skarżysko-kamienna (1), masłów (2), busko-zdrój (3), ostrowiec świętokrzyski (1), miedziana góra (2), końskie (3). these are units located in the central part of the region with a developed industrial function and a developing labor market. measures of spatial differentiation indicate the relative stability of communes in the aspect of entrepreneurship measure (table 2). in 2017, compared to 2009, the results show stability according to the standard deviation (0.06-0.06), the classic coefficient of variation (0.13-0.13), the quarterly range (0.05-0.05). the range of 0.33-0.41 indicates an increase in diversity (small changes in the area under study). pearson’s correlation coefficient between the value of the synthetic entrepreneurship measure in 2017 in relation to 0.953 in 2009 (figure 3). it can be assumed that the spatial diversity of the studied area was quite stable, and the units reacted similarly to changes in the economy. outstanding units are: kielce (1), sandomierz figure 1. spatial differentiation of the synthetic measure topsis entrepreneurship of communes of the świętokrzyskie voivodship in 2009 and 2017 source: the author's own development based on bdl gus t opsis przedsiębiorczość mediana 25%-75% zakres nieodstających odstające 2009 2017 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 busko-zdrój (3) końskie (3) masłów (2) suchedniów (3) kielce (1) ostrowiec świętokrzyski (1) sandomierz (1) skarżysko-kamienna (1) busko-zdrój (3) końskie (3) masłów (2) miedziana góra (2) ostrowiec świętokrzyski (1) skarżysko-kamienna (1) kielce (1) sandomierz (1) figure 2. dissipation of the synthetic measure of entrepreneurship topsis of communes of the świętokrzyskie voivodship in 2009 and 2017 source: the author's own development based on bdl gus baltic journal of economic studies 5 vol. 6, no. 4, 2020 (1), ostrowiec świętokrzyski (1). these are cities that have a developed industrial function. the gravitational effect, indicating the effect of concentration of the phenomenon, connecting two communes is directly proportional to the product of the competitive potential of these communes and inversely proportional to the square of the geographical distance separating these units. municipalities with high development potential located close to each other have a stronger impact than those located far apart (filipowicz, tokarski, 2015). the first group (figure 4) for the topsis measure consists of central municipalities (26; units with an industrial, tourist, spa, developing labor market; among others, kielce (1), masłów (2), daleszyce (3), morawica (2), miedziana góra (2), sitkówkanowiny (2), zagnańsk (2), bieliny (2), busko zdrój (3), suchedniów (3), skarżysko-kamienna (1), starachowice (1), chęciny (3), bodzentyn (3), staszów (3)). the second and third groups are 25 and 27 units. the weakest group is 24 units with a peripheral character (units with an agricultural function, a process table 2 dissipation of the synthetic measure of entrepreneurship topsis of communes of the świętokrzyskie voivodship in 2009 and 2017 2009 2017 average 0.44 0.47 median 0.42 0.45 standard deviation 0.06 0.06 quarter (quartile) deviation 0.43 0.45 classic coefficient of variation 0.13 0.13 positional coefficient of variation 1.01 1.01 min. 0.37 0.39 max 0,70 0.81 range 0.33 0.41 quartile 1 0.41 0.43 quartile 2 0.42 0.45 quartile 3 0.45 0.48 quartile range 0.05 0.05 skewness 2.04 2.51 measure concentration kurtosis 5.23 10.36 source: the author's own development based on bdl gus topsis przedsiębiorczość y = 0.0285 + 0.8874*x; r = 0.9537; p = 0.0000; r2 = 0.9095 kielce (1) ostrowiec świętokrzyski (1) sandomierz (1) 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 2017 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 20 09 figure 3. year-to-year ratio of synthetic measures – entrepreneurship topsis of communes of the świętokrzyskie voivodship in 2009 and 2017 source: the authors’ own development based on bdl gus baltic journal of economic studies 6 vol. 6, no. 4, 2020 of human capital leaching and a weak labor market; among others, łoniów (2), samborzec (2), ożarów (3), wojciechowice (2), koprzywnica (3), włoszczowa (3), bałtów (2), dwikozy (2), tarłów (2), zawichost (3)). the level of entrepreneurship in communes of the świętokrzyskie voivodship was influenced by: the number of the unemployed and employed, entities conducting economic activity, micro-entities (employing from 0 to 9), macro-entities (10-49) and medium (50-249), newly registered and entities removed from the register economic entities and natural persons conducting economic activity. to assess the impact of selected elements of endogenous potentials of communes on the spatial diversity of the measure of synthetic entrepreneurship, a regression model describing the dependence of variables has been estimated taking the form: f (topsis entrepreneurship) = = ∑ (topsis development, registered unemployed persons, employed in communes, own income, investment expenditures, population in the working-age, migration balance). the regression analysis of the entrepreneurship measure versus selected endogenous potentials of communes in the świętokrzyskie voivodship explains r = 0.781 variable variations (at r2 = 0.780; the interpretation value of this model turns out to be satisfactory4). the statistics values f (7, 910) 466.31 and the corresponding probability level p mean that all parameters are statistically significant. further increasing the multidimensionality of the model would cause a slight increase in r2. the model could include statistically insignificant variables. 5. conclusion the condition of the enterprises determines the economic situation of the region. the situation of enterprises operating in a given region should be of interest to both residents and entities making legal, economic and social decisions regarding the region. an attempt to apply a synthetic enterprise measure seems justified. economic potential is one of the most important factors for the development of municipalities. the high level of economic development creates positive conditions enabling the increase in the standard of living of the inhabitants or the development of enterprises. an analysis of the dispersion of the measure of synthetic entrepreneurship in communes of the świętokrzyskie voivodship indicates a slight increase in diversity. the level of entrepreneurship in communes of the świętokrzyskie voivodship was influenced by: the number of the unemployed and employed, entities conducting economic activity, micro entities (employing from 0 to 9), macro entities (10-49) and medium (50-249), newly registered and entities removed from the register economic entities and natural persons conducting economic activity. in 2017, the synthetic measure of topsis entrepreneurship ranged from 0.39 (waśniów (2); ostrowiecki county) to 0.81 (kielce (1), regional capital). the best group a includes units with an figure 4. result of the gravity analysis (concentration) for the synthetic measure topsis entrepreneurship of communes of the świętokrzyskie voivodship in 2009 and 2017 source: the author's own development based on bdl gus 4 skorygowany współczynnik determinacji nie osiągnął 60%. za optymalną wartość uważa się przekroczenie progu determinacji na poziomie 95%. baltic journal of economic studies 7 vol. 6, no. 4, 2020 industrial function and a developed labor market, a developed tourist or spa function. the group of kielce (1), sandomierz (1), skarżysko-kamienna (1), ostrowiec świętokrzyski (1), as the leading units in the analyzed period is indicated by gravity analysis (indicating the concentration of the phenomenon in the central region of the region). the results of the study give local governments the opportunity to compare their own situation with the situation of neighboring municipalities or municipalities with similar economic and social conditions. the conclusions drawn on this basis may allow local authorities to set out potential directions for optimizing their economic policy. table 3 estimation of synthetic entrepreneurship and selected endogenous potentials of communes in the świętokrzyskie province rate standard error t-student's p-value const 0.152815 0.0328855 4.647 < 0.0001 topsis development 1.02534 0.0354469 28.93 <0.0001 registered unemployed 3.86181e-06 2.10744e-06 1.832 0.0672 working in communes 2.08307e-06 3.25707e-07 6.396 < 0.0001 own income -4.50888e-06 2.32033e-06 -1.943 0.0523 investment expenses -1.55529e-05 1.85079e-06 -8.403 < 0.0001 working age population -0.00235618 0.000613920 -3.838 0.0001 net migration rate 0.00100655 0.000273999 3,674 0.0003 arithmetic mean of the dependent variable 0.451427 standard deviation of the dependent variable 0.055337 sum of residual squares 0.612168 residual standard error 0.025937 determining coefficient rsquare 0.781994 corrected r-square 0.780317 f (7, 910) 466.3134 p-value for the f-test 7.3e-296 logarithm of credibility 2054.057 akaike's information criterion -4.092.113 bayesian, schwarz information criterion -4053.536 hannan-quinn criterion -4077.390 observations used 1-918; dependent variable topsis entrepreneurship source: the authors’ own development based on bdl gus references: behzadian, m., khanmohammadi otaghsara, s., yazdani, m., & ignatius, j. 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(2019). studies regarding correct selection of statistical methods for the needs of increasing the efficiency of identification of land for consolidation – a case study in poland. land use policy. wysocki, f., & lira, j. (2005). statystyka opisowa, wyd. ar , poznań. zalewski, w. (2012). zastosowanie metody topsis do oceny kondycji finansowej spółek dystrybucyjnych energii elektrycznej, ekonomia i zarządzanie, 4. zarębski, m. (2002). czynniki rozwoju małych i średnich przedsiębiorstw na obszarach wiejskich, in: przedsiębiorstwo i jego otoczenie w warunkach integracji europejskiej, uniwersytet warmińsko-mazurski, olsztyn. zeliaś, a., & malina, a., (1997). o budowie taksonomicznej miary jakości życia. syntetyczna miara rozwoju jest narzędziem statystycznej analizy porównawczej, taksonomia z. 4. baltic journal of economic studies 18 vol. 5, no. 5, 2019 corresponding author: 1 national university «odessa law academy», ukraine. e-mail: irinavivalmarine@gmail.com orcid: https://orcid.org/0000-0002-5950-9907 2 national university «odessa law academy», ukraine. e-mail: alinabon1712@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-5-18-27 models of administrative and legal regulation of sponsorship and patronage in the eu iryna antoshyna1, alina bondarenko2 abstract. today, patronage is the key source of non-governmental support of the socio-cultural advancement of the state because, as the world’s practice shows, the state funding is often not enough for conserving and developing the national and cultural heritage. across the world and europe, increasing attention is paid to the traditions of charity, corporate philanthropy is in progress, and business ethics are growing. in developed countries, the pursuit of charity activity is caused by a high level of social responsibility of business entities. both large corporations and wealthy people establish charitable funds or provide a good deal of money for relevant purposes. the problems of patronage or sponsorship as means for guaranteeing the realization of socio-cultural programmes, research initiatives and continual activity of not-for-profit organizations are topical and need an extension study in terms of conditions and prospects for the development. the purpose of the article is the analysis of the experience of administrative regulation of patronage and sponsorship in different countries and its growth potential in ukraine in the context of international integration and scientific and technological progress. the situation is complicated by the fact that this regulatory scope has originated more recently in the world’s practice, and many problems remain unsettled. for example, let’s consider some forms of financial rewards used in the rest of the world. in the developed countries, there are models of cooperation with a private fund in the social, cultural, academic and other spheres of social life. they are as follows: the state as a leader; private fund as a leader; partnership and functional division of labour between the state and capital. in social practices, they usually co-exist with a dominant one of them. the first model prevails in france and italy, the second – in the usa, the third – in the federal republic of germany. recently, there has been a gradual transition to the third model, which will become dominant in western countries. compared to western europe, there has been no moral rehabilitation of wealth in ukraine, which has affected the motivation of charity. it is noteworthy that in the last decade, especially in european countries, state and state-social funds, which are financed using budget funds and the contributions of patrons, have been created. in general, analyzing various forms of patronage and sponsorship in the field of culture of the countries of the european region, it can be argued that in modern western countries there is a sweeping trend to decrease direct state support of culture by indirect. the attraction of funds of entrepreneurs and non-governmental organizations in various forms is purposefully stimulated by state cultural policy, laws on patronage. in ukraine, state intervention in the charity area is minimal. it is limited to the statutory regulation of charity activity, registration and accounting of charity organizations. at the same time, some specific normalization of patronage and sponsorship is next to none because it is distinguished among other charity activities mostly by patrons, sponsors, and mass media. key words: sponsorship, administration model, legal regulation, private fund, art market, social development. jel classification: m14, j24, d30, h70 1. introduction today, patronage is the key source of non-governmental support of the socio-cultural advancement of the state because, as the world’s practice shows, the state funding is often not enough for conserving and developing the national and cultural heritage. across the world and europe, increasing attention is paid to the traditions of charity, corporate philanthropy is in progress, and business ethics are growing. in developed countries, the pursuit of charity activity is caused by a high level of social responsibility of business entities. both large corporations and wealthy people establish charitable funds or provide a good deal of money for relevant purposes. thus, warren edward buffett, one of the most successful magnates in the world, transferred more than $ 30 billion in the bill & melinda gates foundation. baltic journal of economic studies 19 vol. 5, no. 5, 2019 conservation and development of ukrainian culture and art, the issues of culture and education remain the priorities of the state policy, and their implementation is interfered by the lack of proper legal regulation, facilitating mechanism, and underfinancing (as a residual). endeavours for resolving the above problems are carried out at the different levels, in particular by the non-governmental organisations, public communities, private entrepreneurs, philanthropists and sponsors. the problems of patronage or sponsorship as means for guaranteeing the realization of socio-cultural programmes, research initiatives and continual activity of not-for-profit organizations are topical and need an extension study in terms of conditions and prospects for the development. the purpose of the article is the analysis of the experience of administrative regulation of patronage and sponsorship in different countries and its growth potential in ukraine in the context of international integration and scientific and technological progress. 2. establishment and development of the institution of charity and patronage the contemporary concept of charity has a broad meaning (from a common financial aid to patronage and sponsorship), which involves both high moral values and public awareness of the need to implement social rehabilitation programs for the population categories who request help (slaboshpytskyi, 2001). traditions, which have been formed over the years, have not lost their significance till the present day when it is extremely urgent to improve the functions of government agencies that will conduct an effective regulation of patronage and sponsorship. on the one hand, government authorities should turn their activities to the creation of conditions and promotion of public respect for patrons, philanthropists, sponsors that they chose civilized methods of activities and boost their financial resources be fair and legal means; on the other hand – support their drives to improve the society they live in, in particular through charity, patronage and sponsorship. the government regulation is a system of measures of legislative, executive and control nature, which are exercised by relevant state bodies and non-governmental organisations for settling and adjusting of the available system to the dynamic environment (demeshko, 2018). in order to improve public relations in the area of public administration of patronage and sponsorship, ones apply the methods of legal regulation through which executive bodies carry out actions in public management. legal regulation is a method of public administration that has a legal impact on the social and legal aspects regarding charity and its specific elements in the process of harmonising social relations (pasichnyk, 2005). government regulation of patronage and sponsorship is characterized by normalizing relations between the state and patrons through the use of economic controls, development of the moral factor of charity and norms of legal social responsibility, as well as the stimulation of legal functioning of patrons and sponsors. thus, in the last decade of the xx century, given the dramatic economic changes which caused the formation of private funds and, as a consequence, the stratification of the population, the issue of charity in ukraine has become relevant again. for this very reason, the issue of administrative regulation of the development and activities of the charity organisations belonging to the so-called third, non-profit, sector is critically important and problematic for ukraine. exclusively public, commercial and non-profit sectors can together ensure the existence of a stable, democratic and rule-of-law state and civil society. majority of modern philanthropists, patrons and sponsors with moral persuasions also calculate both the amount of tax cuts and the public and commercial effect of their charitable actions. 3. formation of administrative regulation of corporate sponsorship in ukraine based on comparative analysis modern ukrainian entrepreneurship is characterized by the continuation of ukrainian patronage traditions, which have been based on secret, non-official charity “from hand to hand”; moreover, at the current stage, ukrainian legislation hasn’t developed a system of tax benefits for philanthropists, patrons and sponsors (demeshko, 2018). ukrainian legislation, which regulates the forms of non-governmental support of the development of culture, arts, science and education, is marked, on the one hand, by legislative acts of different level and lack of consistency between the acts and, on the other hand, – by non-conformity of legal norms with needs of participants of legal relations. the situation is complicated by the fact that this regulatory scope has originated more recently in the world’s practice, and many problems remain unsettled. for example, let’s consider some forms of financial rewards used in foreign countries: – the uk doesn’t have limits on the amount of charity benefits – companies can channel up to 100% of their income to charitable contributions without paying income tax; in the case of a donation in cash, the taxpayer may receive a refund of the balance between the basic and maximum income tax rates from the budget calculated for the donation amount; in the case of non-monetary donations, taxable income is reduced by the market value of such donations; – in the usa, the amount of charity benefits – up to 10% of company revenue; for cash donations, one can baltic journal of economic studies 20 vol. 5, no. 5, 2019 receive tax deduction within 50% of annual revenue and 20–30% – for non-monetary donations (tulchynskii, shekova, 2007). in the context of research line, the law of ukraine “on charity work and charity organizations” dated july 5, 2012, no 5073-vi belongs to the fundamental legislative acts specifically adopted for the regulation of charity process. according to the above law, one of the forms of charity activity is patronage, which is a philanthropic activity in education, culture and arts, cultural heritage conservation, science and research conducted in the way established by the law under consideration and other laws of ukraine (zakon ukrainy "pro blahodiinu diialnist ta blahodiini orhanizatsii", 2012). part 1 art. 10 of the law marks that patronage is the preparation or support of charitable events related to the creation, reproduction or use of pieces and other objects of intellectual property as prescribed by law, including charitable touring activity providing free access (zakon ukrainy "pro blahodiinu diialnist ta blahodiini orhanizatsii", 2012). it doesn’t involve initiatives associated with the advertisement (except psa), election campaigning as well as the presentation or use of commercial (brand) names, trademarks (marks for goods and services) and industrial designs protected as required by law. however, the law doesn’t provide any tax and other benefits, but it proclaims their provision. specific forms of moral incentives are not included, and those individuals and legal entities that carry out charity without mediation, that is, private sponsors and patrons, don’t gain substantial motivation. ineffective and non-purpose use of patronage funding is a major problem. to resolve the problem, it is necessary to establish a special patronage commission empowered with the functions towards determining the recipient of patronage support, priority social sectors to provide patronage assistance in the implementation of social policy, coordination of patrons activity, registration of the contract between the benefactor and beneficiaries, control over the proper fulfillment of contractual obligations between the benefactors and beneficiaries, protection of legal rights and interests of benefactors and beneficiaries. in 2017, it was promulgated two bills of ukraine on a narrower focus – “on patronage in physical education and sports” dated july 19, 2017, no 6770 and “on patronage in physical education and sports” dated august 1, 2017, no 6770-1, (proekt zakonu ukrainy "pro metsenatstvo u sferi fizychnoi kultury ta sportu", 2017). explanatory notes to the bills don’t present satisfactory arguments, which would call for the adoption of an individual legislative act on patronage in physical culture and sports. for this very reason, head office for research and evaluation of the verkhovna rada of ukraine expressed some comments on both bills and marked that best practices contained in the bills can be drawn up in the form of alterations and amendments to the current legislation of ukraine regulating the relevant social relations, in particular: the laws of ukraine “on charity work and charity organizations”, “on advertising” and “on physical education and sports”. government intervention in charity is minimal in ukraine. it is limited to the statutory regulation of charity activity, registration and accounting of charity organizations. at the same time, some specific normalization of patronage and sponsorship is next to none because it is distinguished among other charity activities mostly by patrons, sponsors, and mass media. 4. interaction models of private funding with the social sectors in the developed countries, there are models of cooperation with a private fund in the social, cultural, academic and other spheres of social life. they are as follows: the state as a leader; private fund as a leader; partnership and functional division of labour between the state and capital. in social practices, they usually co-exist with a dominant one of them. the first model prevails in france and italy, the second – in the usa, the third – in the federal republic of germany. however, recently there has been a gradual transition to the third model that obviously will be dominant in the western world (demeshko, 2018). the activity of j.m. keynes, mathematics and economist, is an example of charity and patronage in europe in the early xx century. due to j.m. keynes, charity and patronage are the most important features of the image of most european companies and firms. americans had had the feeling of social responsibility, the desire of helping people long before the usa advent. the deduction of tax donations, which was introduced by abraham lincoln, was an impetus for patronage, especially among wealthy people. but at that time it was just a short-run measure, it became permanent in the xx century. andrew carnegie laid the foundation for modern american patronage. he believed that wealthy people should spend their money during life and die poor because it is a shame to die rich (baumol, bowen, 1966). john rockefeller, who founded a giant charity fund in 1891, heeded carnegie’s advice. after world war i, the u.s. congress adopted a law on tax relief for philanthropists, who donate to charity, for supporting economic growth. in 1921, donations in the usa totaled $ 1 billion 700 million. there are now about a million tax-exempt charity organizations. religious services obtain most donations – 35%, and universities, colleges, private schools – 14%, etc. (sirotin, 2005). the u.s. state system rewards those who run philanthropy and make charity economically sound. the basic motive of interest in patronage in the usa is the ability of tax deduction for charitable donations. over the last baltic journal of economic studies 21 vol. 5, no. 5, 2019 40 years, the amount of annual donations has reached two percent of the country’s gross domestic product. in 1990, u.s. citizens donated $ 111.5 billion to charity and $ 151 billion in 1996 (yurchenko, 2016). unlike western europe, there was no moral rehabilitation of wealth in ukraine that affected the motivation of charity. charity activity in ukraine was based exclusively on moral and ethical principles. moreover, ukraine’s entrepreneurial background had social nature mainly composed not of urban citizens but peasants who had gained freedom due to the abolition of serfdom. at the moment, when solving the problem of optimization of the socio-cultural sphere, ukrainian theorists often reach out to the national charity mentality and strong ukrainian tradition of entrepreneurial charity and philanthropy, which was formed in the xix century. the lack of similar mental prerequisites also explains the unsatisfactory situation of charity and patronage in contemporary ukraine. it is significant that in the last decade, especially in european countries, state and state-social funds have been established financed by the budget and the contributions of patrons. in western europe and the usa, about a third of social programs are implemented by private charitable foundations, which accumulate significant funds of patrons. according to the statistics, in the usa, it was registered about 40 thousand such organizations, and in europe, their number ranges from 80 to 100 thousand (shveda, 2018). tax benefits are a key reason for the worldwide prevalence of charity funds, particularly corporate ones. the legislation of many countries allows the use of income share of business entities for charitable purposes instead of paying the relevant taxes. the arguments through the government prism are obvious: charity funds contribute to the financing of social programs and projects, that is, partly take on the role of government authorities: the assistance to disabled people, low-income individuals, and the work with children and youth, education of citizens. american financier george soros was known to the world, not due to the results of his business activity but the network of his charity funds that is represented in ukraine by the international renaissance foundation and many other charity organizations. the legislation of most developed countries stipulates that the amount of charitable contributions is deducted from the income of the patron (taxpayer) before it reaches the area of profit control. the u.s. legislation is developed in such a way as to promote any kind of charity activity regardless of its focus. the state acts as the central regulator of financial relations, which it uses as a motivation for philanthropic efforts, in particular, patronage. at the same time, the prevalence of private initiatives is conditioned by the stimulation at all levels. it became an element of psychology, which is manifested in politics speech: “i applaud any organization that proves what private charity can do without state mandates or interference” (congressman ron paul, 14th district of texas, 1962). thus, after world war i, the u.s. congress adopted a law on tax relief for benefactors-enterprises for supporting economic growth. in 1921, donations in the usa totaled $ 1 billion 700 million, and the amount of annual donations significantly increased to over $ 200 billion at the end of the xx century (number of public charities in the united states, 2010). by 2018, there were about one million tax-exempt charitable organizations in the country. private charity organizations are a premier source of financing science, arts and culture in the usa. however, there is the national foundation on the arts and the humanities, which coordinates affairs in the area under consideration (demeshko, 2018). that kind of policy enables citizens to define an area of charity, which is the most interesting for them, independently. as for philanthropy in the narrower sense, the traditional concept of assisting artists and cultural representatives, the system (according to statistics for 2010) allowed it to be third in the ranking of philanthropic efforts. according to the national centre for charitable statistics (nccs), charity initiatives in arts, culture and humanities are inferior to educational programmes and religion-based charity (number of public charities in the united states, 2010). if one considers patronage more broadly, combining the development of culture, art and education, it is the dominant form of charity. in the united states of america, patronage (both charity and philanthropy) in art in the xx century reached the character of a national tradition based on the mentality of that component of the upper social class, which belongs to the business community. apart from the altruistic motives and mercenary interests related to the features of the u.s. tax system beneficial to philanthropists, the prestige aspect plays an important role in the area concerned. the philanthropist, who is a funder for non-profit creative organizations or projects, in such a way manifests his affiliation with the elite community. in accordance with american charity traditions, the participation in philanthropic activities in arts, membership in the board of directors or trustees of non-profit creative organizations, providing them with financial, organizational and other assistance is a characteristic that determines the affiliation of a benefactor with the upper social class in the public eye, confirmation of a subtle aesthetic sense, class and intellectualism. at the same time, mass media plays a big part in covering that sort of positioning for a wide audience (united nations global compact, 2017). it is also worth mentioning that in the usa, the government support for culture is represented in the form of grants, not subsidies. the core funding is ensured by sponsorship and the philanthropy baltic journal of economic studies 22 vol. 5, no. 5, 2019 mechanism. the state creates conditions for effective interaction of business with culture. own income (revenue from ticket sales, advertising, contributions of members of professional associations, etc.) is provided by american cultural organizations with the necessary funds by approximately 55%, another 25% of budgets are generated through grants from private and corporate funds, donations from individuals and companies, 12% give investments in securities, and about 9% of expenses are covered by the public sector (analytics, 2017). this is the most liberal model. here the culture is developed based on the private initiatives, and the state plays an indirect, supplementary role, in particular, provides various tax benefits and actively uses administrative resources to encourage private initiatives and philanthropists. as a result, the amount of charitable contributions in the usa is very large: in 2018, about $ 200 billion was donated within the country, and 75.6 % is the contributions of individuals (demeshko, 2018). in the uk, the state acts as a patron. it is remote from culture and has no ownership of cultural institutions, distributes government subsidies through parastatal, quasi-public non-profit organizations. the uk has pioneered the use of a variety of public-private partnership mechanisms in the field of culture known as “private finance initiative”. public-private partnership means that the state is responsible for project assurance and the responsibility for its financing and implementation is allocated between private business and non-governmental organisations (sofiyenko, 2012). in 2003, france developed the tax system which offers 60% reduction in taxes for corporates, if they provide patronage assistance. thus, in france, until the middle 1980s, the state was the only source of culture funding, but the needs of the latter were covered by 30%. as a result, it was elaborated new forms of culture funding, which are based on the complete revision of the relationship between the cultural sector and business world, the all-round encouragement of industrial philanthropy which leads to the fundraising of large enterprises in the non-profit sector. patronage organizations began to emerge in the country, and the high patronage council was formed whose key task is to establish cooperation between the state and business for the implementation of cultural programs. most european countries have national sponsor associations that regulate the relationship between sponsors and beneficiary institutions. admical (association for the promotion of trade and industrial patronage), which coordinates the private and public activities of entrepreneurs to support and contribute to the culture, plays that sort of role in france (tulchynskii, shekova, 2007). increasing interest in industrial philanthropy is one of the aspects of a more general tendency in the cultural life of french society – the decentralization of cultural activity which has become relevant in modern ukraine. in france, an enterprise may be engaged either within the framework of the special fund or their institutions, which focus towards the public (for example, the fund of french company “gaz de france”). the head motive of business patronage is to create a positive image of the company, but not to advertise their production or ensure sales growth. the country also has large non-governmental foundations, in particular, french fund, institut de france etc., which support the establishment of the socalled “satellite funds” where the assets of an enterprise are accumulated. subsequently, french fund or institut de france uses the assets to conduct an event in agreement with the donor company. another type of french philanthropy has a centennial timeline and is associated with the assistance to modern talented writers (literary awards). france has about 3 thousand different literary awards. the most prestigious are french academy award, prix goncourt, prix femina, prix médicis, internals, kléber edens, novembre, etc. (demeshko, 2018). in modern italy, the concepts “patronage” and “sponsorship” are considered to be nearly similar. however, in recent times, sponsorship has been prioritized. in terms of culture, the phenomenon became widespread in the 1980s. its influence was specifically significant in sports, which in italy belongs to the cultural sector. other spheres are also covered. it is confirmed by two laws on tax exemptions in culture sponsorship which were adopted in the 1980s. they significantly promote the involvement of private funds in the cultural sector. the 1982 law provides for unlimited cost reductions on restoration and preservation of historic monuments and cultural facilities as well as the financing of various exhibitions. the 1985 law reduces the amount of tax payment for music, theater and cine products received as a gift, as well as for capital investments in the theaters and cinemas restoration, with a limit of 2% of annual income. at the same time, italy has some difficulties related to patronage and charity. one of the key problems is the lack of considerable coordination between the state and private sponsors. the matter is that private entrepreneurs are not aimed at caring the public welfare but at the maximum benefit of all the initiatives for culture sponsorship. for this reason, businesses are competing for the right to invest in the most prestigious monuments, exhibitions, while creativity areas remain in the background (volkov, korniichuk, 2008). in italy, only government and private organizations, which have the government’s confidence, can donate to exhibitions organization, acquisitions and restoration of artistic values. greece permits allocating 30% to patronage and german – 33.2% (demeshko, 2018). the study of the model of administrative regulation of charity, philanthropy and sponsorship in modern germany is of great scientific interest, since its baltic journal of economic studies 23 vol. 5, no. 5, 2019 development has been going on for many decades, and the results achieved by germany in the area concerned can be taken into account in the arrangement of charity activities in other countries of the world, including ukraine. in 1962, germany introduced social care (sozialhilfe). 500 thousand people, 1% of the population, were beneficiaries of different grants-in-aid and assistance. in the last decade, the goal of social care is to promote the achievement of a decent standard of living for the beneficiaries (it includes providing a person with food, shelter, clothing, hygienic means, household goods, as well as enabling him/her to participate fully in cultural life). care assistance should contribute to the beneficiary’s acquisition of financial independence, and he/she is obliged to facilitate it according to his/her efforts. in the 1970s of the xx century, germany carried out a wide-scale reform of social legislation. since 2001, the framework law is “federal act on the granting of social assistance” (bundessozialhilfegesetz), which regulates the right and duties both of social care receivers and welfare service as well as types of assistance and relationships of the mentioned service with others. as from 1975, it was used 10 books of social codes (sozialgesetzbuch) governing different legal situations and procedures. it is necessary to point out that “german reunification treaty” (einigungsvertrag) stipulates special circumstances for new lands (except berlin) by which operation of the provisions set out in the book of social codes is limited by available funds: lack of funds at the municipal budget of any of the new lands causes the payment of social assistance in a reduced form (demeshko, 2018). according to the current legislation, the national social service (sozialamt) is obliged to assist any person who seeks the help provided that he/ she is registered in germany. therefore, the following categories of citizens may be the beneficiary of charity that is non-state social assistance: – people who do not have a registered place of residence (homeless people). there are about 30,000 of them in the country per 82 million of the population; – receivers of the government social assistance during settling an apartment. they are favored in the purchase of furniture, electrical appliances (cooker, refrigerator, washing machine, vacuum cleaner, tv); it is paid only pre-owned stuff dealt through buying up or bought at the warehouses of charity organizations; – people who were rejected in assistance by the government social services for any reason, or people who need urgent aid. therefore, in german, the representatives of the abovementioned demographic groups compose a theoretical register of potential beneficiaries. charity organizations keep a register of people secured assistance (shveda, 2018). five subjects are the most significance for the charity activity in the modern germany, and three of them are large non-governmental organisations – arbeiterwohlfart, caritas, diakonisches werk (analytics, 2017). as it proceeds from the above, the policy objectives of the first organisation (arbeiterwohlfart) is charitable assistance for workers and their family members, other two help people in need according to their confession. the latter two subjects comprise charity funds and volunteering activities. in the activities of charity funds, it is essential to draw attention to the mechanism of generating and spending the funding, in particular, the use of interest on capital assets for charitable purpose but not the capital itself. the volunteering activities are characterized by the active participation of senior citizens. the experience of foreign countries has shown that the involvement of private fund in the philanthropic financing of arts and culture is not a spontaneous process but regulated by state policy, which is based on system scientific research of charity issue. the legislation of foreign countries demonstrates its effectiveness in practice since it stipulates the following: the amount of charitable contributions is deducted from the income of the benefactor – the taxpayer even before that income gets into the area of profit control. taking into account the positive nature of the above experience, ukraine should develop national fundamentals of charity and charitable activities which will be consolidated at the legislative level nationwide. 5. key trends of the development of the global art market according to the data of benchmark reports of the art market prepared by arts economics through the request of swiss bank ubs and the international art fair art basel, the volume of the global art market was $ 63.7 billion in 2017 that is up by 12% than in 2016. it is worth noting that the market started to grow after two years of decline (-7% in 2015 and -11% in 2016), despite political risks and the continued slowdown in the global economy. however, the current rate is lower than historical peak in 2014 ($ 68.2 billion). the dynamics of the global art market in 2016-2017 are represented at figure 1 (analytics, 2017), arts economics and art basel, 2019). in general, the return of market growth was possible due to the increased sales in the post-war and contemporary art segments, positive dynamics in asian markets, and soaring sales of the old masters’ segment. in this context, it should be pointed out that sales in the segment of top-priced artworks (over $ 1 million) accounted for more than 50% of total sales and less than 2% of all transactions. thus, the sale of leonardo da vinci’s salvator mundi, which was brought to the hammer at christie’s in 2017 for $ 450 million, set a record in sales. among examples of million-plus items in 2018, there is a painting “masterpiece” of roy lichtenstein, an american pop artist, which was sold for $ 165 million. that sort of baltic journal of economic studies 24 vol. 5, no. 5, 2019 situation is typical for art market (arts economics and art basel, 2019). after analyzing the results of studies of the contemporary art market, one can identify some trends that are specific to this creative area. in particular, it is observed the following processes: 1. globalisation and decentralization of the art market. the unification of ways for regulating relations between sellers and buyers gradually takes place. art fairs are held around the world, not just in key cultural centers. there is an increase in the mobility of all participants in the art market. moreover, state support is prominent in this case. thus, for example, the government has contributed to a tremendous upgrowth of the chinese art market. uae doled out $ 1 billion to create world-class museums of contemporary art. morocco and oman also allocate funds for the construction of museums. qatar actively buys pieces of the acknowledge masters by auctions. however, “traditional” states-players (usa, western european countries) still have a major impact on the market. moreover, due to the limits established by the government of some countries, a specific list of masterpieces can’t be exported outside national borders. 2. art market digitalization. according to the data of analytical agencies, there has been a significant increase in the rate of online art sales in the world over recent years – it accounted for 8.4% of the global art market (+ 14% on 2016 level) in 2017. in 2019, the figure was down to 6.6%, but it is caused by the market growth due to the sale of million-plus items through the traditional bidding (arts economics and art basel, 2019). there is a rapid growth among specialized electronic trading platforms, which were also created in partnership with the world’s leading auction houses. using blockchain technology, it is expected to solve a key problem in the art market related to transaction transparency and items authenticity. the style of digital arts has been originated and is actively developing in which approaches non-traditional for the art market can be used (for example, advertising in the social media account of a digital designer etc.) 3. fusion of different creative areas (design, fashion, computer games etc.). today, major fashion houses and designers actively collaborate with contemporary artists, engaging them to create collections and objets d’art, organize art events. for example, such exhibitions as beauté congo presented at the fondation cartier (2015) or art/afrique at the fondation louis vuitton (2017) were designed to support creative activities of african artists. fashion houses also establish own museums: for example, punta della dogana belongs to gucci and christie’s. computer games segment, which constantly requires a high-quality and extraordinary design, is booming. 4. change of the key business-models on the market. auction houses have begun to conclude many private agreements not only within the framework of the art institutes but also through buying art galleries. thus, sotheby’s bought a dutch gallery noortman master painting focused on the old masters’ pieces in 2006. today, auction houses compose 40% of sources of art objects for resale to art dealers (arts economics and art basel, 2019). figure 1. the dynamics of the global art market in 2006-2017 1 column – volume of the global art market (billion dollars) 2 column – number of transactions (million pieces) source: arts economics and art basel, 2019 baltic journal of economic studies 25 vol. 5, no. 5, 2019 5. despite a specific nature of the industry, art markets center around the customization of services provided. thus, for example, sotheby’s acquired information and technologic assets in wholesale numbers in 2016-2017. in particular, the auction house bought: – an advisory firm art agency, partners for a large address database of potential clients; – mei moses indices which make it possible to estimate an investment attractiveness of some goods and artists. now they are called sotheby’s mei moses; – an american start-up thread genius, which identify artistic objects and then recommend some objects which satisfy the buyer’s mind and budget (arts economics and art basel, 2019). 6. auction houses also carry out charitable educational activities mainly intended to teach collectors. the main objective of that kind of policy is to “bring up” a loyal audience. 7. promotion of the availability of art objects. according to the data of analytical agencies, in most countries around the world, the middle class is gradually transiting from intellectual consumption of art (contemplating exhibit items in museums, reading arts books on art, etc.) to buying or renting it, including modern art. in the estimation of skate’s, the segment of available art for charity or sponsorship is currently about 25% of the global art market (arts economics and art basel, 2019). confirmation of the fact that the above is a powerful trend is the strategic reorientation of the world’s largest auction house christie’s. nowadays, it is focused upon the service geared towards the potentials of the middle class and online sale of art items of any price range. sotheby’s target audience remains the same – uhnwi and hnwi. 8. the emergence of modern tools for renting and leasing of art pieces whose use is gradually becoming a global trend. moreover, the rental cost is moderate (for example, from 10% of the official value of the item per month in the usa, or 10-15l per month in the uk). any legal or natural person can become a tenant of an art object. due to the promotion of new financial models in arts, there is a worldwide practice of art index institutes, which have the right to carry out renting and leasing operations at the legislative level including some related services (insurance, transportation of art objects, etc.), has become popular (arts economics and art basel, 2019). 6. conclusions in western countries, the state actively supports the development of charity and patronage by creating favorable conditions. belgium and the uk provide incentives for sponsorship through deducting the amount spent on advertising and marketing from the taxable value. in austria and france, sponsorship is interpreted is as marketing expenses of a company for non-taxable advertising. the u.s. legislation is developed in such a way as to promote any kind of charity activity regardless of its focus. the state acts as the central regulator of financial relations, which it uses as a motivation for philanthropic efforts, in particular, patronage. at the same time, the prevalence of private initiatives is conditioned by the stimulation at all levels. in general, analyzing various forms of patronage and sponsorship in the cultural sector of the countries of the european region, it can be argued that in modern western countries there is a sweeping trend to decrease direct state support of culture by indirect. the attraction of funds of entrepreneurs and non-governmental organizations in various forms is purposefully stimulated by state cultural policy, laws on patronage. in ukraine, state intervention in the charity area is minimal. it is limited to the statutory regulation of charity activity, registration and accounting of charity organizations. at the same time, some specific normalization of patronage and sponsorship is next to none because it is distinguished among other philanthropic activities mostly by patrons, sponsors, mass media, experts of non-governmental organizations and people affiliated with a charity. in our opinion, the current law of ukraine “on charity work and charity organizations” has some deficiencies: – it doesn’t define the concept of tax exemption for patrons because a patron has already contributed personal funds to perform tasks of nationwide scale; – there are no moral incentives for patrons; – it doesn’t include social incentives for the development of patron activities; – it doesn’t cover the issue of division of powers that is extremely important in the context of administrative reform targets etc. thus, the strategic goal of the development of ukrainian society and the need for a system approach to the legal regulation of cultural activities, the lack of budget financing, as well as the existing gaps in the current branch legislation cause the need to govern certain issues in an individual legal act. the law of ukraine “on patronage” would promote the development of culture, art, education and science under the conditions of an inadequate level of patronage in ukraine. to advance patron activity and its encouragement on the part of the state, in particular for the assignment of tax benefits, it is required the legislative consolidation of the institute through amending the law of ukraine “on charity work and charity organizations” dated july 5, 2012 № 5073-vi (zakon ukrainy "pro blahodiinu diialnist ta blahodiini orhanizatsii", 2012). ukrainian legislation regulating the mentioned relations has been improved over recent decades. however, there is no consistent differentiation by baltic journal of economic studies 26 vol. 5, no. 5, 2019 incorporation forms and operation targets of such organizations. none legislative act currently contains a full list of incorporation forms of the non-profit organization which may operate across the territory of independent ukraine (zakon ukrainy "pro hromadski obiednannia", 2012). the world and domestic practice show that it is not enough to have only government support to preserve cultural heritage and enhance the creative, intellectual potential of society. in order to promote patronage, it is necessary to have favorable legal framework, moral and financial assistance of patrons as well as obligatory response to the change of key trends and models forming the markets and running an art business. after analyzing the results of studies of the contemporary art market, one can identify some trends that are specific to this creative area. in particular, it is observed the following processes: globalisation and decentralization of the art market. art market digitalization. fusion of different creative areas (design, fashion, computer games etc.). change of the key business-models on the market. focus on the customization of services provided. promotion of the availability of art objects and the origin of the segment of charity and sponsor art. the emergence of modern tools for renting and leasing art pieces. nowadays, patronage is an important source for the non-governmental support of the socio-cultural development of every country because, as the world’s practice shows, it is often not enough to have only government support to preserve and develop national and cultural heritage. references: arts econimics и art basel (2019). the art basel and ubs global art market report 2019. retrieved from: https://www.artbasel.com/news/art-market-report analytics (2017). social responsibility of business. information and analytical material. retrieved from: http://www.svb.org.ua baumol, w. j., & bowen, w. g. (1966). performing arts: the economic dilemma. new york: twentieth century fund, 582 p. congressman ron paul, 14th district of texas (1962). in praise of private charity. united states house of representatives. retrieved from: http://paul.house.gov/index.php?option=com_content&view=article&id= 1962:in-praise-of-private-charity&catid=62:texas-straight-talk demeshko, m. (2018). zarubizhnyy dosvid administratyvno-pravovoho rehulyuvannya metsenatstva i sponsorstva [foreign experience of administrative and legal regulation of patronage and sponsorship]. naukovyy visnyk publichnoho ta pryvatnoho prava, 6(1), 242–248. (in ukrainian) demeshko, m. (2018). normatyvno-pravove rehulyuvannya metsenatstva i sponsorstva v ukrayini [legal regulation of patronage and sponsorship in ukraine]. naukovij visnik nacionalnoi akademii vnutrisnih sprav, 4(109), 271–284. (in ukrainian) konstytutsiia ukrainy (1996) vid 28 cherv. 1996 r. no. 254k/96-vr [constitution of ukraine from june 28, 1996, no. 254k/96-vr]. retrieved from: http://zakon5.rada.gov.ua/laws/show/254%d0%ba/96-%d0%b2%d1%80 (in ukrainian) nakaz ministerstva finansiv ukrainy (2013). "pro zatverdzhennia polozhennia pro reiestr neprybutkovykh ustanov ta orhanizatsii": vid 24 sich. 2013 r. no 37 [order of the ministry of finance of ukraine "on approval of the regulation on the register of non-profit institutions and organizations" from january 24, 2013, no 37]. retrieved from: https://zakon.rada.gov.ua/laws/show/z0267-13 (in ukrainian) number of public charities in the united states, (2010). urban institute, national centre for charitable statistics. retrieved from: http://nccsdataweb.urban.org/pubapps/profiledrilldown.php?state=us&rpt=pc pasichnyk, m. s. (2005). istoriia ukrainy: derzhavnytski protsesy, rozvytok kultury ta politychni perspektyvy [history of ukraine: state processes, development of culture and political perspectives]. kyiv: znannia. (in ukrainian) proekt zakonu ukrainy "pro metsenatstvo u sferi fizychnoi kultury ta sportu" (2017) vid 1 serp. 2017 r. no 6770-1 [draft law of ukraine "about patronage in the field of physical culture and sports" from august 1, 2017, no 6770-1]. retrieved from: http://search.ligazakon.ua/l_doc2.nsf/link1/jh5821aa.html (in ukrainian) shveda, d. (2018). dosvid zarubizhnykh krayin u sferi derzhavnoho rehulyuvannya metsenatskoyi diyalnosti [experience of foreign countries in the sphere of state regulation of patronage activity]. retrieved from: http://libfor.com/index.php?newsid=318 (in ukrainian) venglovskiy, a. (2005). dary svyshe [gifts from above]. biznes, 43, 86–90. (in russian) slaboshpytskyi, m. (2001). ukrainski metsenaty. narysy z istorii ukrainskoi kultury [ukrainian philanthropists. essays on the history of ukrainian culture]. kyiv: yaroslaviv val. (in ukrainian) sirotin, a. (2005). metsenatstvo v usa [patronage in the usa]. chayka, 2, 2–9. (in ukrainian) smolyak, i. (1996). blahodiynytstvo vdoma i za rubezhem [charity at home and abroad]. polityka i chas, 9, 54–57. (in ukrainian) social responsibility – the basis of business philosophy (2016). retrieved from: www.svb.org.ua/reviews/ sotsialna-vidpovidalnist-osnova-filosofii-biznesu sofiyenko, a.v. (2012). sotsialʹna vidpovidalʹnistʹ biznesu: rozuminnya ta suchasni tendentsiyi [social responsibility of business: understanding and current trends. economic innovation]. ekonomichni innovatsiyi, 47, 297–301. (in ukrainian) baltic journal of economic studies 27 vol. 5, no. 5, 2019 tulchynskii, g. l., & shekova, e. l. (2007). menedjment v sfere kultury [management in the field of culture] (3rd ed.). spb.: lan; izd-vo planeta muzyki. (in russian) united nations global compact (2017). retrieved from: http://www.unglobalcompact.org./participants/search volkov, v. v., korniichuk, v. p., & khomiak, k. d. (2008). stratehichnyi vystavkovyi menedzhment [strategic exhibition management]. kyiv: mizhnar. ekonom. un-t. (in ukrainian) yurchenko, o. (2016). podatok na mylostynyu [charity tax]. visnyk podatkovoyi sluzhby ukrayiny, 19, 4–7. (in ukrainian) zakon ukrainy (2012). "pro blahodiinu diialnist ta blahodiini orhanizatsii": vid 5 lyp. 2012 r. no 5073-vi [law of ukraine "about the blessing of that kind of blessing of the organization" from july 5, 2012, no 5073-vi]. retrieved from: https://zakon.rada.gov.ua/laws/show/5073-17 (in ukrainian) zakon ukrainy (2012). "pro hromadski obiednannia": vid 22 berez. 2012 r. no 4572-vi [law of ukraine "about a lot of things" from march 13, 2012, no 4572-vi]. retrieved from: https://zakon.rada.gov.ua/laws/show/4572-17 (in ukrainian) baltic journal of economic studies 118 vol. 6, no. 4, 2020 corresponding author: 1 uzhorod national university, ukraine. e-mail: palinchakmm@gmail.com orcid: https://orcid.org/0000-0002-9990-5314 2 uzhorod national university, ukraine. e-mail: olena.zayats@uzhnu.edu.ua orcid: https://orcid.org/0000-0001-9904-8706 3 uzhorod national university, ukraine. e-mail: viktoriya.bokochh@uzhnu.edu.ua orcid: https://orcid.org/0000-0002-0636-2032 doi: https://doi.org/10.30525/2256-0742/2020-6-4-118-124 the apec integrated competitive force index mykola palinchak1, olena zayats2, viktoria bokoch3 abstract. the number of actors that affect the distribution of the competitive force in the global economy is growing, and the spheres of economic competition or cooperation are expanding to build up the competitive force. the article emphasizes the significant impact of international economic integration on the sustainable economic development of the world economy. it also shows that the study of the competitive force of interstate integration groupings is highly relevant today, as international economic integration plays a fundamental role in the development of trade and competitive relations between countries. the paper offers the methodology for competitiveness grouping of member states of the international integration groupings in order to assess the global competitive force of trade and economic groupings in the world economy. the purpose is to investigate the integrated competitive force index of asia-pacific economic cooperation (apec) 2019 in order to analyze the attractiveness of apec in terms of the global competitive force. it is also important to determine the attractiveness of apec competitive environment according to 12 criteria on the basis of the research, which, in turn, allows for a better understanding and ranking of interstate integration groupings according to their competitive forces. result. based on the data of the global competitiveness report 2019 on the competitiveness of asia-pacific economic cooperation member states (apec), the integrated competitive force index of apec as an interstate integration grouping has been calculated. the index will help to assess economic integration or disintegration processes in the global economy. the article proves the necessity of the annual integrated competitive force ranking of international integration groupings. practical implications. the introduction of the new integrated competitive force index of interstate integration groupings will help competition policymakers to decide which processes of economic integration or disintegration should be preferred in order to build up their competitive force in the global economy. key words: the global competitiveness index of a country, apec member states, international economic integration, the competitive force of an interstate integration grouping, the apec competitive status in the global economy. jel сlassіfіcatіon: f00, f01, f02, f15 1. introduction the competitiveness of commodity, enterprise, industry, country and geographical regions of the world economy has been given wide coverage in the contemporary international economic literature. however, when examining the competitiveness of participants in global competition, we noticed that the issues of the integrated competitive force of international integration groupings are not covered at all by modern scholars. there is no definition of the competitiveness of interstate integration groupings. the integrated competitive force index of these groupings, which would characterize and evaluate the state, effectiveness of cooperation between the member states and dynamics of economic integration and disintegration processes, has not been calculated. in our view, it is necessary to investigate the competitive force of international integration groupings, since they are important actors of the global economy and significantly affect the international competitive environment and the results obtained will have theoretical and practical value. this study will enhance knowledge in this field of economics by grouping the 21 apec member states’ global competitiveness indices according to 12 criteria and identifying the new quantitative and qualitative integrated competitive force index of an international integration grouping. to reach this objective, we will baltic journal of economic studies 119 vol. 6, no. 4, 2020 define the integrated competitive force index as the average of the individual points of apec member states in 2019. 2. identification of unexplored parts of the general problem despite considerable attention of scholars (porter, 1990; krugman, 1994, 1996; aiginger, 2006, 2015; hellwig, 2019; wolf, 2020), governments (council on competitiveness usa, 2020), international and nongovernmental organizations (world economic forum, 2019; world bank group, 2020; international institute for management development – imd, 2020) and a variety of the competitive force criteria and indices for ranking national economies, the existing studies consider only the indices of the global competitive force in terms of countries and geographical regions. however, they do not calculate the index of the global competitive force of international integration groupings. meanwhile, it is extremely relevant given the current globalization processes in competitive relations between all actors in the world economy. the novelty of our study lies in the comparative analysis of the five largest interstate integration groupings from the perspective of their competitive force. 3. results 3.1. competitive force of an international integration grouping given the development of contemporary globalization, transnationalization, regionalization, it could be argued that the interstate borders are becoming more transparent. american theorist r . folk (1999) says that states, under the influence of border blurring, will no longer be the dominant force on the world stage. n. reznikova (2013), after a thorough analysis, proves that globalization brings about a new version of reality, in which countries gradually lose the right to determine their place in the economic arena, being prisoners of ready-made rules that are coordinated by international economic organizations and institutions initiated by the world’s leading powers. globalization as an economic process involves all national economies and international integration groupings. not only countries but also regional integration groupings play a leading role in the globalization processes (eu, usmca, apec, аsean, mercosur etc.). this is attributed to the fact that the globalization of the economic activity requires the reduction or elimination of restrictions on international trade, foreign investment and international financial transactions. interstate integration groupings were established primarily at the initiative of the most powerful countries in the world, in order to increase their economic and competitive power and force in the global economy. therefore, the competitive force of interstate integration groupings in the current context of globalization of competitive relations gains a great theoretical and practical significance. understanding the role of an international integration grouping in competition on the international market will be equally valuable both for the member state of the interstate integration grouping and for the competition policy of the respective grouping as a whole, since it would determine how the competitive force of an international integration grouping is established and maintained. the strengthening of the competitive position of the international integration groupings was relatively recent. however, today they not only mediate relations between member states and interstate economic relations, but also act as full actors of the global economy. in this regard, it is necessary to emphasize the significant changes in the global competitive environment of the world economy, which is directly related to the transformational nature of today’s driving competitive processes. we argue that the study of the competitive force limiting to a country in the global economy does not fully correspond to the current development of the world economy, its challenges and trends. it is necessary to measure the competitive force of international integration groupings, as international economic integration has historically helped countries to achieve common goals. through cooperation, countries enhanced the integration of the economy and changed their competitive force in the global economy. today, many countries view themselves as outsiders and face uncertainty about economic integration or disintegration. others doubt whether they can meet the goals of sustainable economic development of interstate integration groupings. the current market economy is accompanied by building up the competitive force, which is one of the main goals not only of individual entities, countries, but also of the international integration groupings. why we focus on the competitive force of the largest international integration groupings? because they unite countries and jointly cooperate with the global competitive forces of member states. they also play an important role in shaping the global economy and international competition, intensively affect the development of the world economic relations both among the member states of the international integration groupings and among the groupings as a whole and countries that are not members of international integration groupings. the use of the term “global competitive force” regarding the interstate integration grouping is related to its perception as a subject of the world market environment; therefore, the national competitive force of a member state is an object. we consider the asymmetric distribution of the competitive potential of the member states as the source of the global competitive force of the interstate integration groupings. baltic journal of economic studies 120 vol. 6, no. 4, 2020 the competitive force of an international integration grouping is the main criterion of its economic efficiency as a subject of a global competitive economy, which is provided by the joint competitive advantages of member states in the struggle for markets, resources, for a place in the world market, customers, and for profit, which determines the output growth and the ability to develop on an innovative basis and win in global competition. the competitive force of an international integration grouping can act as an impetus to increase the global competitive force of a country that is planning to integrate into the grouping. in each case, the timely response of a global competitor to changes will be important for the competition policy of the country or interstate integration grouping. the challenges of the economic turbulence of 2020 caused by the covid-19 pandemic are likely to shake the foundations of global economic structures and national economies will undergo significant changes. under such conditions, almost all actors in the global economy face a fundamental question: will the covid-19 pandemic affect economic and competitive reforms in international integration groupings, which in turn may lead to changes of the world’s facade? currently, interstate integration groupings are regaining their resilience and continue to be geoeconomic leaders. through joint activities of member states, they work to strengthen cooperation and develop joint strategies for the recovery of both national economies and the economies of international integration groupings; therefore, they significantly affect the global competitive environment. in our view, the special role of international integration groupings in the process of distribution of global competitive force between countries and, accordingly, their positioning in international rankings cannot be disputed. it highlights the need to monitor and rank interstate integration groupings according to the competitive force the same way as national economies of individual countries. 3.2. the global competitive force of apec member states before proceeding directly to the calculation of the apec integrated competitive force index, we need to consider the place of the member states in the global competitiveness ranking according to the world economic forum 2019. we will calculate the apec integrated competitive force index based on the member states data of the global competitiveness report 2019 (table 1). the table shows that apec member states differ significantly in terms of global competitive forces. it should be noted that the best results in terms of the competitiveness of all member states are presented according to the criterion of macroeconomic stability. according to this indicator, their points are virtually identical, and are closer to the maximum than most of all the criteria of the global competitive force. if we consider the indicators of the global competitiveness index of the apec member states in general, the member states are placed in the following order: singapore – 1 (1/141), the united states – 2 (2/141), hong kong, china – 3 (3/141), japan – 4 (6/141), taiwan, china – 5 (12/141), republic of korea – 6 (13/141), canada – 7 (14/141), australia – 8 (16/141), new zealand – 9 (19/141), malaysia – 10 (27/141), china – 11 (28/141), chile – 12 (33/141), thailand – 13 (40/141), russia – 14 (43/141), mexico – 15 (48/141), indonesia – 16 (50/141), brunei darussalam – 17 (56/141), the philippines – 18 (64/141), peru – 19 (65/141), viet nam – 20 (67/141), papua new guinea – 21 (122/141). among the countries of the said international integration grouping there are world leaders: singapore, which tops the ranking, and the united states, which in 2019 ranked second, although in 2018 the united states topped the ranking of competitive economic development of the world economy. it should be noted that the difference between the positions of the united states and singapore is insignificant: singapore – 84.8 points, the usa – 83.7 points. in 2018, the united states (85.6) ranked first among 140 countries, and singapore (83.5) ranked second (world economic forum 2018, 2019). no country in the world is competitive in all sectors of the economy. cooperation of countries within international integration groupings contributes to the differentiation of the global competitive force of member states, as we can see in the case of apec. in this regard, it is possible to assert that assessment of the competitive force is relevant for determining the development areas of member states of the international integration grouping’s member states, the establishment of common competition policy and initiating the interstate and interunion dialogue. basing research on member states’ global competitiveness index of the international integration groupings, there are possible risks of taking the wrong path. on the other hand, we consider that such an approach will deepen the understanding of international economic integration. 3.3. the apec integrated competitive force index the development of the integrated competitive force index of international integration groupings will provide a basis for the establishment of the competition policy of the international integration groupings and will identify their further actions to build up the competitive force of the grouping as well as strategic decisions of member states regarding participation in the international economic integration and disintegration. baltic journal of economic studies 121 vol. 6, no. 4, 2020 table 1 apec memberstates in st itu tio ns in fr as tr uc tu re ic t a do pt io n m ac ro ec on om ic st ab ili ty h ea lth sk ill s pr od uc t m ar ke t l ab ou r m ar ke t fi na nc ia l s ys te m m ar ke t s iz e b us in es s dy na m is m in no va tio n ca pa bi lit y o ve ra ll sc or e australia 74 78 73 100 99 81 70 69 86 72 75 70 79 brunei darussalam 58 71 76 74 86 66 61 64 51 37 59 34 61 canada 75 81 69 100 97 81 65 77 86 77 76 75 80 chile 64 75 61 100 93 70 68 63 80 63 64 41 70 china 55 78 71 98 87 64 57 59 72 100 65 64 73 hong kong, china 77 94 88 100 100 77 79 74 90 71 75 62 82 indonesia 58 67 61 90 72 64 58 58 64 82 69 37 65 japan 71 91 87 94 100 74 73 71 86 87 76 79 82 republic of korea 66 92 93 100 99 74 56 63 84 79 70 79 80 malaysia 69 78 72 100 81 73 65 70 85 73 75 55 75 mexico 48 72 55 98 82 58 58 56 62 81 66 44 65 new zealand 79 76 78 100 91 82 72 77 77 54 76 61 77 papua new guinea 46 42 29 66 40 37 55 57 54 36 58 35 46 peru 49 62 46 100 95 60 57 59 61 62 56 33 62 philippines 50 58 50 90 66 64 58 65 68 71 66 38 62 russia 53 74 77 90 69 68 53 61 56 84 63 53 67 singapore 80 95 87 100 100 79 81 81 91 72 76 75 85 taiwan, china 69 87 82 100 94 76 66 73 88 75 73 80 80 thailand 55 68 60 90 89 62 53 63 85 76 72 44 68 united states 71 88 74 100 83 82 69 78 91 100 84 84 84 viet nam 50 66 69 75 81 57 54 58 64 72 57 37 62 source: compiled by the author based on the global competitiveness report 2019 by the world economic forum to calculate the apec integrated competitive force index, we will analyze the member states according to 12 global competitive force criteria. the value of the integrated competitive force index of the interstate integration grouping will be defined as the average value of individual points of apec 2019 member states. despite the methodological simplicity, the proposed calculation of the competitive force of international integration groupings is a comprehensive assessment of the results of the member states’ international economic integration. according to our calculations, the apec integrated competitive force index is 72 points out of 100 possible (figure 1). the results of a comprehensive integrated assessment of the competitive force of 21 apec member states demonstrate a high overall competitive force index of the grouping, indicating the apec’s impact on global competitive processes. the apec integrated competitive force index can be used both as an indicator of the separate international integration grouping’s development and as a global criterion for the effectiveness of interstate integration groupings in the transformation of international competitive relations. 3.4. apec in the ranking of the largest interstate integration groupings according to their competitive force. the proposed method of measuring the competitive force of international integration groupings points to the obvious need to form a rating of trade and competitive groupings on its basis to compare them in terms of the competitive force. we believe that the quantitative assessment of the integrated competitive force of integration groupings should be determined annually for the purpose of monitoring and analyzing the processes of economic integration and disintegration. given the diversity and uniqueness of each international integration grouping, finding a universal comparison indicator that would cover all factors, criteria and the degree of their impact on the competitive force of an international integration grouping is simply not possible. the ranking of the integrated competitive force of the largest integration groupings will be based on a comparison of the integrated competitive force indices of usmca, eu, арес, asean and mercosur . thus, it will be appropriate to compare not only the general assessment of competitive force, but also to assess in terms of the ranking criteria of countries and, accordingly, the interstate integration groupings that unite them (table 2). the best results of all five international integration groupings are presented according to the criterion of macroeconomic stability; on this indicator, their points are closer to the maximum than all criteria of the competitive force. the table shows that international baltic journal of economic studies 122 vol. 6, no. 4, 2020 72 63 76 69 94 86 69 63 66 75 73 69 56 o ve ra l in st itu tio ns in fr as tr uc tu re ic t a do pt io n m ac ro -e co no m ic s ta bi lit y h ea lth sk ill s pr od uc t m ar ke t l ab ou r m ar ke t fi na nc ia l s ys te m m ar ke t s iz e b us in es s dy na m is m in no va tio n ca pa bi lit y overal score enabling environment human capital markets innovation ecosystem figure 1. the apec integrated competitive force index, 2019 source: calculated by the author based on the global competitiveness report 2019 by the world economic forum table 2 competitive force of international integration groupings, 2019 integration grouping usmca eu аpec аsean mercosur rank 2019 score rank 2019 score rank 2019 score rank 2019 score rank 2019 score enabling environment institutions 2 64 1 65 3 63 5 51 4 56 infrastructure 2 80 1 82 3 76 5 66 4 69 ict adoption 3 66 1 72 2 69 5 60 4 63 macro-economic stability 1 99 2 96 3 94 5 66 4 85 human capital health 2 88 1 90 3 86 4 82 5 77 skills 2 74 1 75 3 69 4 62 5 62 markets product market 1 64 3 61 2 63 5 51 4 59 labour market 1 70 2 66 3 66 5 55 4 64 financial system 1 80 3 70 2 75 5 58 4 69 market size 1 86 5 61 2 73 3 73 4 64 innovation ecosystem business dynamism 1 76 3 66 2 69 5 57 4 62 innovation capability 1 67 2 59 3 56 5 38 4 43 global competitiveness index 2019 2019 1 76 2 72 3 72 4 65 5 59 source: calculated by the author based on the global competitiveness report 2019 by the world economic forum baltic journal of economic studies 123 vol. 6, no. 4, 2020 integration groupings differ in their level of the competitive force. it should be noted that a comparison of the assessments of the integrated competitive force of usmca, the european union, the association of southeast asian nations, apec and mercosur gives us ground to conclude that usmca is a leader among interstate integration groupings in the global economy in terms of the competitive force. however, according to the criteria of the institution, infrastructure, implementation of information technologies, health and qualifications, the european union has the highest points compared to usmca, apec, asean and mercosur . thus, usmca has the highest overall points, but not by all criteria of the competitive force. apec, the association of southeast asian nations and mercosur do not hold leadership positions by any of the criteria. the data of the integrated competitive force index in general show that interstate integration groupings are placed in the following order: usmca – ranks first among 5 groupings, eu – 2/5, apec – 3/5, asean – 4/5 and mercosur – 5/5 (figure 2). 4. conclusions firstly, at the present stage of development of the world economy it is insufficient to measure the global competitive force only in terms of a country and geographical region. despite the variety of methods of intercountry comparisons according to the level of the global competitive force, there is no distinguishing of competitive forces of other equally important actors of the global economy, such as interstate integration groupings. as of 2020, the scholars do not single out or measure the competitive force of interstate integration groupings. secondly, by identifying the objective and most compelling reasons for the necessity to calculate the integrated competitive force index of interstate integration groupings, we quantified the competitive force of asia-pacific economic cooperation, and compared the data in terms of 12 criteria. thirdly, according to the integrated competitive force index, the world leader among the investigated interstate integration groupings is usmca – 76 out of 100 possible points; eu – 72/100; apec – 72/100; asean – 65/100; mercosur – 59/100. 0 20 40 60 80 100 institutions infrastructure ict adoption macroeconomic stability healh skills product market labour market financial system market size business dynamism innovation capability integrated competitive force index usmca eu mercosur аsean figure 2. integrated competitive force index usmca, eu, арес, asean, mercosur source: calculated by the author based on the global competitiveness report 2019 by the world economic forum baltic journal of economic studies 124 vol. 6, no. 4, 2020 references: aiginger, k. 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martynova1 v. dahl east ukrainian national university, ukraine abstract. the purpose of article is determination of economic content of risks, their classification and methods of management, research of influence of major factors of risk on results of economic activity of the agro-industrial complex enterprises on possible degree of their controllability, and also justification of the choice of the most optimum methods of management of economic risks at the enterprises of agrarian sector of economy. methodology. data for research have been taken from scientific publications and legislative base. methods of general scientific knowledge, and also the structural analysis and content analysis are used. results. on the basis of synthesis of approaches to definition of category of «economic risk» by the author own definition of this category is offered, the scheme of distribution of risk factors of economic activity of the enterprises of agro-industrial complex depending on main types of business processes on possible degree of their controllability is offered, and also the author offers the direction of classification of methods of management of risks from positions of their distribution or transfer, besides practical aspects of the choice of methods of economic risks management at the enterprises of agrarian sector of economy are considered. practical implication. streamlining of subject domain of risk management of economic activity and the offered structurization of risk factors create prerequisites for increase of system effectiveness of management at the enterprise due to reduction of negative influence of risk factors, increase of level of validity of administrative decisions in the short-term and long-term periods. value/originality. on the basis of the conducted research it is proved that a perspective form of diversification of risks in the sphere of agro-industrial complex is creation of regional clusters. key words: risk of economical activity, risk factors, classification of risk, business process, management of risks, methods of management risks, classification of methods of management risks, diversification, hedging, futures, option, limiting, insurance, cluster. jel classification: o13, q01, q19 1. introduction in the conditions of instability of the surrounding economic environment and the general crisis state of economy, influence of negative risk factors on activity of the enterprises of agro-industrial complex increases. sources of emergence of risks in this sphere have the features. it is connected with the fact that on results of economic activity of the enterprises of agro-industrial complex together with factors which cause an economic situation in the country considerable impact is exerted by a climatic factor. in such conditions requirements to an enterprise management system raise, one of the most important links of which there is a subsystem of risk management of economic activity. the market environment which is characterized by variability and uncertainty promotes objective emergence of risky situations in activity of the enterprises which, in turn, induce the management of the enterprise to consider, estimate in due time risks and to make adaptive decisions concerning reduction of their negative influence on results of economic activity. therefore the tools of risk management at the enterprises of agro-industrial complex have to consider features of this field of economy. in this regard, special relevance is acquired by scientific researches on questions of economic maintenance of risks, negative influence of major factors of risk on results of economic activity of the enterprises of agro-industrial complex and the directions of its reduction, and also the choice of effective methods of management of economic risks at the enterprises of agro-industrial complex. 2. economic content of risk emergence of risk as economic category is identified with emergence in the society of the commodity-money relations when the risk was considered as loss of property owing to overseas travel, attacks of robbers and other force majeure circumstances. baltic journal of economic studies 97 vol. 2, no. 2, 2016 it is considered that for the first time scientific determination of economic content of risk has been made by the mathematician yogan tetens (xviii century). his scientific researches have found practical application in life insurance though bases of scientific researches on questions of maintenance of risks and their classification have been put in works of scientists d. graunt, ja. witt, e. galley in the xvii century. with further development of scientific and technical progress the risk has ceased to be identified only with loss of means for existence. from the insurance sphere this concept has gradually passed and has captured all spheres of life of society, having extended also to the economic theory. in the period of the soviet union attention to a risk problem in researches of economists it was limited as the planned centralized economy provided compensation of losses which arose in her separate branches, at the expense of other branches which number, for example, the branch on production and export of oil and gas treated. the modern understanding of economic content of risk is connected with consideration of risk not only as the loss received as a result of the made administrative decision but also as a deviation from the planned result. the analysis of sources of scientific economic literature has allowed allocating three main directions of scientific researches in the sphere of problems of management of table 1 characteristic of interpretations of economic essence of the category «risk» № direction of the scientific researches author definition of category of risk 1 the direction of scientific researches which covers problems of the theory, an assessment and risk analysis from a probability theory position. i.t. balabanov in the general understanding defines risk as «probable danger of losses» (balabanov, 1996 p.13) p.g grabova, s.ya. petrov, k.g. romanov «probability of loss by the enterprise of part of the resources, shortreception of the income or emergence of additional expenses as a result of implementation of a certain production and financial activity» (donets and other, 2012, p. 91) n.v. khokhlov «the event or group of similar casual events which cause a loss to object which owns this risk». that is risk as a separate event according to the above definition is inherent two properties: probability and loss (khokhlov, 2001, p. 11) a.v. skripnik «the probability of emergence of damage or short-reception have arrived in comparison with the predicted (expected) option» or «damage size on the set significance value (with the set probability)» (skripnik & shevchuk, 2011, pp. 101-108). the author develops methodology of an assessment of risk of decision-making at the level of separately taken agrarian enterprise for data of supervision of accounting reports 2 the direction of scientific researches which considers theoretical and practical problems of application of economic-mathematical methods of the analysis for the purpose of identification of the actual deviations from the planned results s.m. illyashenko «an opportunity or threat of a results deviation of concrete decisions or actions from expected» (illyashenko, 2004, p.10) v.k. zbarsky, a.i. lipovyakmelkozyorova «possible deviation from the purposes which are set before themselves by subjects of economic activity» (zbarsky & lipovyak-melkozyorova, 2011, p. 62) v.v. vitlinsky, l.l. makhanets «economic category which displays characteristics of perception the interested subjects of the economic relations in the conditions of objectively available uncertainty and situations of the conflict which are inherent in processes of establishment of the purposes, managements, decision-making, estimations which are burdened by possible threats and unused opportunities» (donets and other, 2012, p. 91) 3 the third direction – considers the separate theoretical directions of research of risks and offers application of techniques of high-quality and quantitative measurement of risk factors. v.v. chepurko the author has proved the generalized definition of category of economic risk as investigated at inexhaustible uncertainty of the relations between reality of economic system and opportunities of its transformation in some future reality identified by the subject which can arise from interactions of causes and effects, casual and necessary, internal and external conditions (chepurko, 2000). in the scientific works he develops tools of quantitative identification, an assessment and hedging of economic risks of the agro-industrial enterprises. o.o. alshanova the author investigates economic risks as objects of insurance and fruitfully develops risk management methodology by insurance of the grown-up crops (alshanova, 2010, pp. 86-91) e.m. krylatykh the author offers the concept of multifunctionality of research of the nature of economic risk as one of major factors of overcoming of an economic crisis and its consequences in agro-industrial sector of economy of ukraine (krylatykh, 2010, рр. 162-165) baltic journal of economic studies 98 vol. 2, no. 2, 2016 ta bl e 2 d is tr ib ut io n of r is k fa ct or s of e co no m ic a ct iv it y of th e en te rp ri se s of a gr oin du st ri al c om pl ex d ep en di ng on m ai n ty pe s of b us in es s pr oc es se s an d po ss ib le d eg re e of th ei r co nt ro lla bi li ty t yp e of ri sk d ep en di ng o n bu si ne ss p ro ce ss a n op po rt un ity to o pe ra te ri sk fa ct or s ( to tr ac e an d re du ce th ei r i nfl ue nc e on re su lts o f e co no m ic a ct iv ity ) r is k fa ct or s w hi ch c an b e op er at ed r is k fa ct or s w hi ch c an b e op er at ed p ar tia lly r is k fa ct or s w hi ch c an ’t be o pe ra te d r is k of p la nn in g an d an al ys is of e co no m ic a ct iv ity in co rr ec t e co no m ic a ss es sm en t o f t ec hn ic al so lu tio ns an d co st o f a gr ic ul tu ra l m at er ia ls , w or ks a nd se rv ic es r is k of d el iv er y sh or ta ge o f fl oo r s pa ce s g ro w th o f c os t o f a gr ic ul tu ra l p ro du ct s, de liv er y of ag ri cu ltu ra l p ro du ct s o f i na pp ro pr ia te q ua lit y, d am ag e of ag ri cu ltu ra l m at er ia ls a s a re su lt of n on -c om pl ia nc e w ith co nd iti on s o f t he ir st or ag e or lo ad in g an d un lo ad in g w or ks g ro w th o f c os t o f e ne rg y re so ur ce s a t t he le gi sl at iv e le ve l pr od uc tio n ri sk in co rr ec t p la nn in g of p ro du ct io n, e m er ge nc e of « bo tt le ne ck s» fa ilu re o f t he p ro du ct io n pr og ra m a cc id en ts , i nc id en ts , a cc id en ts m ar ke tin g ri sk d ec re as e in le ve l o f d em an d on p ro du ct io n em er ge nc e of p ro du ct s – su bs tit ut es , i nt ro du ct io n of le gi sl at iv el y in te rf er in g ac tio ns fo r e xp or t o f e nd ag ri cu ltu ra l p ro du ct s, gr ow th o f v ol um es o f i m po rt pr od uc tio n r is k of in ve st m en t a ct iv ity l ow le ve l o f i nt eg ra tio n of n ew u ni ts a nd te ch no lo gi es in p ro du ct io n d ep re ci at io n of a p or tf ol io o f s ec ur iti es , u np la nn ed g ro w th of c os t o f a ss et s w hi ch a re g ot r es tr ic tio n of th e st at e su pp or t, ba nk ru pt cy o f is su er s a nd b an ks , t he st at e ri sk a nd fe at ur es o f t he or ga ni za tio n of a gr ar ia n se ct or fr om p os iti on s o f ap pe al o f i ts in ve st m en t r is k of h um an re so ur ce m an ag em en t d is cr ep an cy o f r es po ns ib ili ty a nd p ow er s, co nfl ic t o f in te re st s o f s tr uc tu ra l d iv is io ns , d ec re as e in a sk ill le ve l of p er so nn el , v io la tio n of re qu ire m en ts o f t he la bo r le gi sl at io n sh or ta ge o f p er so nn el , i n th at c as e of w or ke rs o f s ep ar at e sp ec ia lti es d ea th o f w or ke rs , g ro w th o f s oc ia l t en si on in th e st at e r is k of m an ag em en t o f tr an sp or t in co rr ec t c re at io n of lo gi st ic s g ro w th o f c os t o f t ra ns po rt se rv ic es a cc id en ts in th e co ur se o f t ra ns po rt at io n of fi ni sh ed go od s a nd m at er ia ls l eg al ri sk v io la tio n of re qu ire m en ts o f t he le gi sl at io n, n on pe rf or m an ce o f d ut ie s f ro m th e en te rp ri se c la im s a nd c la im s f ro m c on tr ac to rs , t he go ve rn m en t a nd su pe rv is or y au th or iti es , n on pe rf or m an ce o f d ut ie s b y co nt ra ct or s pu bl ic re la tio ns d et er io ra tio n in im ag e of th e en te rp ri se st at em en ts w hi ch d is cr ed it im ag e of th e en te rp ri se , c la im s fr om sh ar eh ol de rs o rd er s f ro m th e go ve rn m en t a nd su pe rv is or y au th or iti es m an ag em en t o f l ab or pr ot ec tio n an d in du st ri al sa fe ty v io la tio n of re qu ire m en ts o f t he le gi sl at io n in th e sp he re o f l ab or p ro te ct io n an d in du st ri al sa fe ty a cc id en ts , n at ur al d is as te rs , a cc id en ts m an ag em en t o f en vi ro nm en ta l p ro te ct io n v io la tio n of re qu ire m en ts o f t he le gi sl at io n in th e sp he re o f t he n at ur e pr ot ec tio n le gi sl at io n, en vi ro nm en ta l p ol lu tio n m an ag em en t o f c om pl ex sa fe ty v io la tio n of re qu ire m en ts o f t he le gi sl at io n in th e sp he re o f p ro te ct io n th e co nfi de nt ia l d at a, lo ss o f in fo rm at io n w hi ch is a tr ad e se cr et th eft s, m as s r io ts , d et er io ra tio n in a c ri m in og en ic si tu at io n in th e co un tr y, th re at o f a ct s o f t er ro ri sm an d pr ov oc at io ns , t ec hn og en ic c at as tr op he s, sp on ta ne ou s a nd d is as te rs baltic journal of economic studies 99 vol. 2, no. 2, 2016 economic risks of the enterprises. the specified directions, their certain representatives and definitions of the category «risk» are provided in table 1. systematizing a wide variety of scientific thoughts of the ukrainian and foreign scientists, it is possible to allocate keywords which characterize the content of the category «economic risk», namely: loss, danger, failure, damage; probability of emergence in economic activity of subjects of losses, dangers, failures, damage; need of the choice and adoption of a certain economic decision. from here, in our opinion, it is possible to allocate such basic elements of economic content of category of economic risk as: – probability of emergence of unplanned losses of resources as a result of decision-making; – a deviation of financial and economic results of activity from planned; – existence of alternatives of adoption of administrative decisions concerning reduction of negative influence of risk factors. on the basis of synthesis of approaches to definition of category of «economic risk» by the author her following definition is offered: the economic risk is a difficult objective and subjective category which is characterized by a situation of probability of any loss of resources and/or a deviation of financial and economic results of activity from the available alternatives planned in the conditions of adoption of the administrative decision from the available alternatives. 3. classification of risk factors the separate attention is deserved by research of a problem of structurization of economic risks. despite wide-ranging studies in the sphere of a risk management, in economic literature absent the uniform coordinated structurization of economic risks at the enterprises of agro-industrial complex that is connected with the problem field of formation of risks and various levels of their controllability. it is connected with the fact that, the risk is the difficult multidimensional phenomenon which quite difficult is exposed to structurization, in the theory and practice approaches to his classification vary according to the directions and the purpose of researches. the insufficient readiness of a perspective of management of economic risks in the sphere of agro-industrial complex is connected also with system ignoring of risk factors in the current legislation of ukraine and quite limited application in practical economic and administrative activities of the enterprises both in the sphere of agrarian sector, and in other branches of economy. it is possible to allocate two main approaches to classification of risks of economic activity: the first approach is connected with development of universal classifications of risks which can be applied in any sphere of economy; the second is connected with development of classifications which are applied in concrete branch of economy, a type of business activity or at the concrete enterprise. on the basis of systematization of the most known classifications of risks and their design on economic activity of the enterprises of agro-industrial complex by the author distribution of risk factors of economic activity of the enterprise depending on main types of business processes and possible degree of their controllability (tab. 2) is carried out. it should be noted that risks understand a possibility of tracking as controllability degree of management of the table 3 the generalized classification of methods of management of economic risks at the enterprises of agro-industrial complex (donets and other, 2012, pp. 193-197; kachalov, 2002, p. 91; vasin & shutov, 2010, pp. 88-110; zakharchenko & osipov, 2010, pp. 153-165) № classification directions methods contents 1 ways of influence on risk decrease risk exception, decrease in probability of emergence of risk, decrease in opportunities of a loss preservation without financing, self-financing, attraction of external sources (grants, loan) transfer insurance, receiving financial guarantees, risk transfer 2 methods of decrease in risk deviation from risk refusal of implementation of economic operations, of the bank credits, of any investment policy, of import raw materials supply, etc. in case risk excessively big and burdening for the enterprise acceptance of risk acceptance of all risk or its part on responsibility of the enterprise prevention of risk implementation by the enterprise of certain measures and actions which are directed to prevention of risky situations due to obtaining additional information, increase of validity of administrative decisions, etc. decrease in risk by economic methods: creation of special reserve fund or self-insurance it is created due to assignments from profit of the enterprise on a case of emergence of unforeseen risky situations or damage for the purpose of ensuring neutralization of their negative financial consequences in development of the enterprise, and also in expeditious overcoming of temporary difficulties of financial and economic activity baltic journal of economic studies 100 vol. 2, no. 2, 2016 2 methods of decrease in risk creation of an insurance stock of goods or means it is created according to the purpose of compensation of fluctuations of demand for goods for a possibility of normal functioning in the conditions of non-performance of schedules of supply and excessive demand for goods: or for the purpose of compensation of fluctuations of receipts and use of enterprise assets. development and introductions of system of penalties it is used only by those types of risk which probability of emergence depends on contractors of the enterprise insurance insurance companies provide protection against risks by attraction of financial resources of insurers and their use for compensation suffered by these insurers of damage hedging activity of the enterprise for decrease in price and inflationary risks by signing of future agreements – agreements on delivery (purchase) to the term of a certain quantity of goods determined in the future at the existing price 3 forms of prevention of risks avoidance of risk development of actions which entirely exclude a concrete type of enterprise risk due to refusal of implementation of economic operations when risk level excessively big and doesn’t answer the purposes of financial policy of the enterprise; decrease in part of borrowed funds in economic circulation, etc. diversification process of distribution of the capital between different objects of an investment which are directly not connected among themselves. diversifications are subject different types of activity, suppliers of goods, the product ranges, a deposit portfolio and a portfolio of securities. limitation establishment of a limit (extreme sums) of expenses, volumes of realization, credit, etc. 4 evasion from risk refusal of unreliable partners, innovative projects, some types of economic activity insurance search of «guarantors» 5 localization of risk allocation of «economically dangerous» sites in structural or financially independent divisions these methods are based on identification of such sites of activity of the enterprise where there is rather high concentration of factors of economic risk, for the purpose of their isolation in independent registration – financial or organizational and legal structure formation of the venture enterprises consecutive disaggregation of activity 6 dissipation of risk diversification of kinds of activity, sales markets and zones of managing, investment portfolio of the enterprise, etc. these methods consist in distribution of the revealed risk factors between participants of production and by that in an exception of excessive concentration of risk at any one producer. integration distribution of responsibility between partners in production distribution of risk behind work stages (behind time) 7 compensation of risk creation of reserve funds at the enterprise these methods are based on formation of the mechanism of the warning action which provide development and realization of preventive analytical, organizational and other actions on decrease in level of economic risk introduction of strategic planning at the enterprise forecasting of an external economic situation in the country, the region and \or area of managing active purposeful («aggressive») marketing at the enterprise lobbying of bills which neutralize or is compensated by risk factors fight against industrial and economic espionage baltic journal of economic studies 101 vol. 2, no. 2, 2016 enterprise of their major factors and elimination of negative influence of these factors on results of economic activity on the basis of adoption of the relevant administrative decision. except that the approach stated above gives an opportunity to connect major factors of risks with the most widespread business – processes of economic activity of the enterprises of agro-industrial complex, it will also give the chance to the enterprises most thoroughly to build process of management of risks at a stage of making decision on such questions: whether it is expedient to accept this risk, to operate it, to transfer to the third parties (for example, to insurance companies) or to refuse it? 4. methods of management of risks the choice of methods of management of economic risks at the enterprises of agrarian sector of economy is one of key stages of process of management of risks. in the general understanding, risk management in economy represents set of the processes connected with identification, risk analysis and decision-making which provide maximizing positive and minimization of negative consequences of approach of risky events (urodovskikh, 2010). methods of management of economic risks include receptions and ways of actions which are directed to achievement of a main objective on management of economic risk. main objective of management of risk in agro-industrial complex is elimination or minimization of its negative influence on results of economic activity of the enterprise, on the basis of forecasting of a risky event and realization of actions for management of risk. the choice of methods of management of economic risks in agro-industrial complex is carried out taking into account seasonality of agricultural production, influence of the risk caused by action of weather conditions, and rather slow turnover of the capital in comparison with other branches of economy. on the basis of research of sources of scientific literature by the author the generalized classification of methods of management of economic risks at the enterprises of agroindustrial complex (tab. 3) is developed. apparently from table 3 some methods of management of risks belong to the different classification directions. for example, such most widespread method of management of risk as insurance is classified as: a way of influence on risk, decrease in risk, evasion from risk. the method of diversification of risks is carried to the direction of prevention of risks and to the direction of dissipation of risks. authors classify creation of reserve funds (means, goods, stocks, etc.) as reception of decrease and as reception of compensation of risk. at the same time approaches to structurization of methods of management of risks vary according to research objectives. thus, the category of economic risk has the difficult multidimensional nature therefore the tools of management of risk are considered from different positions according to the chosen context of interpretation of essence of economic risk. in our opinion, all variety of methods of management of risks from positions of distribution or transfer of risks can be marked out in two main directions which are specified in tab. 4. table 4 classification of the main methods of management of economic risks at the enterprises of agrarian and industrial complex methods of management of economic risks methods of minimization of risks at the expense of own resources of the enterprise methods of division and \or transfer of risks to the third parties refusal of unreliable partners, innovative projects, some types of economic activity hedging creation of reserve funds external insurance self-insurance diversification limitation business planning obtaining additional information methods of minimization of risks at the expense of own resources of the enterprise belong to the first direction. refusal of unreliable partners, investment projects which efficiency of introduction has doubtful character is quite widespread method of avoidance (prevention) of economic risk. as a rule, such tactics observe those subjects of managing which have got used to work for certain, without risking. such tactics renders assistance to continuous development of the agro-industrial enterprise, nevertheless, when its intensive development given a method of management of risk becomes a main objective of the enterprise isn’t effective. effective method of management of economic risks is creations of reserve fund of money by assignment of percent from net profit on a case of emergence of unforeseen situations. for the purpose of management of economic risk in agrarian sector are subject to reservation not only money, but also stocks of raw materials, materials and accessories and etc. at the same time it is expedient to create as intraeconomic reserve funds (reserve funds of money, compound feeds, fuel, etc.), and centralized (the state reserve reserves of grain, seeds, etc.). method of prevention (minimization) of influence of economic risks of the enterprises of agrarian sector of economy is business planning which sets heads of the enterprises thinking of problem sites («bottlenecks») in economic activity and to find ways of elimination of negative manifestations of risk factors or their neutralization. as the accompanying method of management of economic risk when planning economic activity obtaining additional information of rather future events or contractors of baltic journal of economic studies 102 vol. 2, no. 2, 2016 economic activity for the purpose of elimination of uncertainty concerning emergence of adverse situations which appear as a result of influence of factors of external and internal environment of the sphere of managing can act. having additional information of rather future events and risk factors, the management of the enterprise can make the relevant decisions concerning neutralization or full elimination of risk factors according to the level of their danger to economic activity of the enterprise. limitation as a method of management of economic risks consists in establishment of limits (the extreme sums) of expenses of means, purchases or sales of stock, capture of obligations of the credit and etc. this method is effective in a situation when the enterprise has limited resources. effective method of management of economic risk is self-insurance. it is expedient to apply this method in a case when the cost of property which is insured, is small in comparison with financial losses of all business or when there is a probability of damage. as a rule, self-insurance is carried out by the enterprise at the expense of means of reserve fund and renders assistance to economy of enterprise assets due to refusal of payment of insurance premiums to other person – insurance company. methods of division and/or transfer of risks to the third parties belong to the second group of management of economic risks. the most widespread and effective method of management of economic risk in agrarian sector is agricultural insurance. it is a complex type of insurance which includes insurance of crops, animal, capital assets of agricultural producers. the leading role in agricultural insurance in ukraine is assigned to the state which at the legislative level provides insurance of risks of agricultural producers and carries out thereby a number of the major functions (zakharchenko & osipov, 2010): – risky function which essence consists in redistribution of a monetary form of cost among participants of insurance of consequences of casual insurance events. according to art. 11 of the law on the state support of agriculture of ukraine by the public specialized institution which is created for granting insurance subsidies to producers of agricultural production, it is the fund of agrarian insurance subsidies of ukraine (fais). the income of fais is formed for the account: obligatory assignments by insurers from the sum of the insurance premiums got owing to obligatory or voluntary insurance of separate types of agricultural production; primary contribution from the state budget; credits of the state budget; – precautionary function which is directed to financing at the expense of part of means of insurance fund of actions for reduction of insurance risk; – investment function consists in attraction of investments into real sector of economy. effective method of decrease in price and inflationary risks for the enterprises of the agrarian sphere of economy is hedging which is carried out by drawing up such forms of exchange contracts as futures and options. the future is a contract for delivery (purchase) to the term of a certain quantity of goods determined in the future at the price existing nowadays (vasin & shutov, 2010). the option is an agreement under which the buyer acquires the right for purchase (sale) of goods at in advance agreed price. it should be noted that the main difference between an option and the future is that delivery according to the future is obligatory whereas on an option it has probable character. in other words, signing the contract an option, the enterprise can refuse him, having lost only a sum of guarantee providing (award). so, for example, the agricultural producer, having signed the contract concerning sale of a certain quantity of the harvest (which at the time of signing of the contract hasn’t ripened yet) at determined price, insures itself against adverse fluctuation in prices of his production. to the contrary, for the purpose of decrease in risk from increase in prices for resources (fuel, fertilizers, forages, equipment, spare parts, seeds, etc.) the same agricultural producer can sign urgent agreements on purchase of these resources through some period of time at the price existing nowadays. thus, the agricultural producer is hedged. at hedging operations the agricultural producer reports the risk to other person – the exchange speculator. in ukraine the state acts as such main exchange speculator, buying risk from agricultural producers and not allowing sharp fluctuation in prices of agricultural products. such activity of the state leads to shift of consumption in time: buying agricultural products in fruitful years, the state sells them in years of a crop failure (zakharchenko & osipov, 2010). so, for the purpose of the solution of a situation of uncertainty and minimization of economic risks the law on grain and the market of grain which main objective according to art. 2 is ensuring food security of the state with way acts on the market of grain in ukraine: formations of investment, credit, tax, customs policy, favorable for market of grain; optimization of structure and efficiency of grain production taking into account the potential of climatic conditions and market conditions; ensuring functioning of the market of grain on the basis of association of free competition and state regulation for the purpose of balancing of interests of subjects of managing and the state; establishment of the state control of quality of grain, products of its processing and high-quality seeds; stabilization of market resources of grain; building of an export potential of the market of grain; recognition of priority of development of the market of grain; application of the mode state purchases; implementation of the state agrarian intervention; definition of an order of export and import of grain and products of its processing according to international treaties (the law of ukraine «about grain and the market of grain in ukraine», 2002). baltic journal of economic studies 103 vol. 2, no. 2, 2016 regulation of fluctuation in prices of agricultural products is regulated by the law of ukraine «about the state support of agriculture of ukraine» from 06/24/2004 no. 1877-iv. in article 3 of this law the rules of price regulation on separate types of agricultural products are defined, namely: the state represented by agrarian fund of the state interventions carries out regulation of the group prices of separate types of agricultural production, establishing the minimum and maximum intervention prices within the agrarian market of ukraine. in our opinion, the most perspective method of management of economic risk in the agrarian sphere of economy is the diversification method. diversification is the most reasonable and rather less expensive way of decrease in risk which allows spreading the general risk by association with other participants who are interested in success of common cause. i.e. the enterprise has an opportunity to reduce the level of own risk, attracting to the solution of common problems as partners other enterprises. the method of diversification of economic risks in the sphere of agro-industrial complex can be applied in case of creation of regional clusters by association of resources of participants of a cluster and distribution of risks between them. the regional cluster is a spatial agglomeration of similar and economically connected kinds of activity which forms a basis of the local environment due to dissemination of knowledge and skills, and also renders assistance and stimulates different forms of education and adaptations. such clusters, as usual, consist of small and medium-sized enterprises which basis of success is made by the saved-up capital and geographical proximity (zakharchenko & osipov, 2010). when forming regional agro-industrial clusters in ukraine it is worth to remember about a role of the state in this process which has to emphasize in every possible way importance of creation of the most perspective business projects, attracting investments to their development and to be ready to share risks at all stages of implementation of this project. considering the aforesaid, it is possible to draw the following conclusions: – among methods of minimization of risks at the expense of own resources of the enterprises of the agrarian sphere of economy an effective method of management is the limitation method; – among methods of division and \or transfer of risks to the third parties of special attention insurance in agriculture, the leading role in which is assigned to the state, deserves; – a perspective method of management of risks in the sphere of agro-industrial complex is the method of diversification of risks which effective form of implementation there is a creation of territorial clusters. it should be noted that use of levers of state regulation of risks of agro-industrial complex has to be the integral component of a rational risk management of the agroindustrial enterprise. 5. conclusions thus, by results of the conducted research the economic content of risk by definition of its basic elements has been specified, the concept of economic risk and the scheme of distribution of risk factors of economic activity of the enterprises of agro-industrial complex depending on main types of business processes and possible degree of their controllability is offered. besides, the economic essence of process of management of economic risks at the enterprises of agro-industrial complex, feature of classification of methods of management of economic risks has been defined. streamlining of subject domain of risk management of economic activity and the offered structurization of risk factors create prerequisites for increase of system effectiveness of management at the enterprise due to reduction of negative influence of risk factors, increase of level of validity of administrative decisions in short-term and long-term the periods. the direction of classification of methods of management of risks from positions of their distribution or transfer is offered by the author, and also practical aspects of the choice of methods of management of economic risks at the enterprises of agrarian sector of economy are considered. on the basis of the conducted research it is proved that a perspective form of diversification of risks in the sphere of agro-industrial complex is creation of regional clusters. references alshanova, o.o. (2010). insurance in risk management of cultivation of crops. economy of agrarian and industrial complex, 10, 86-91. balabanov i.t. (1996). risk management. moscow: finance and statistics, 191 р. chepurko, v.v. (2000). economic risk of agrarian production: автореф. yew. … doctors of icons. sciences: 08.07.02. kiev: nan of ukraine. institute of economy, 33 p. donets, l.i., shepelenko, o.v., barantsev s.m., sergeyev o.v. & veremeychik o.f. (2012). justification of economic decisions and estimation of risks. kiev: center of educational literature, 472 p. illyashenko, s.m. (2004). economic risk: manual. kiev: center of educational literature, 220 p. kachalov, r .m. (2002). management of economic risk. moscow: science, 192 p. khokhlov, n.v.(2001). management of risk: studies. a grant for higher education institutions. moscow: unity-danna, 239 p. baltic journal of economic studies 104 vol. 2, no. 2, 2016 krylatykh, e.n. (2010). agrofood sector: multifunctionality, development factors, risks. economy of agrarian and industrial complex, 2: 162-165. skripnik, a.v. & shevchuk, yu.v. (2011). methodology of an assessment of risks of the agrarian enterprise. economy of agrarian and industrial complex, 10: 101-108. the law of ukraine «about grain and the market of grain in ukraine» (2002). sheets of the verkhovna rada of ukraine., 35, st. 258. retrieved from: http://zakon5.rada.gov.ua/laws/show/ 37-15 the law of ukraine «about the state support of agriculture of ukraine» (2004). sheets of the verkhovna rada of ukraine, 49, st. 527. retrieved from: http://zakon4.rada.gov.ua/laws/show/ 1877-15 urodovskikh, v.n. (2010). risk management of the enterprise: manual. moscow: high school textbook: infra-m, 168 p. vasin, s.m. & shutov, v.s. (2010). risk management at the enterprise: manual. moscow: knorus, 304 p. zakharchenko, v.i. & osipov, v.n. (2010). the cluster form of the territorial and production organization – p. 1. – economic clusters as a new form of the organization of production in the region. odessa: «favourite» – «the printing house», 122 p. zbarsky, v.k. & lipovyak-melkozyorova a.i. (2011). nature of risk, his sources, criteria and assessment. economy of agrarian and industrial complex, 8: 61-65. лилия мартынова риск: экономическое содержание, факторы и методы управления аннотация. целью статьи является определение экономического содержания рисков, их классификации и методов управления, исследование влияния основных факторов риска на результаты хозяйственной деятельности предприятий агропромышленного комплекса по возможной степени их управляемости, а также обоснование выбора наиболее оптимальных методов управления хозяйственными рисками на предприятиях аграрного сектора экономики. методология. данные для исследования были взяты из научных публикаций и законодательной базы. использованы методы общенаучного познания, а также структурного анализа и контент-анализа. результаты. на основе обобщения подходов к определению категории «экономического риска» автором предложено собственное определение этой категории, предложена схема распределения факторов риска хозяйственной деятельности предприятий агропромышленного комплекса в зависимости от основных видов бизнес-процессов по возможной степени их управляемости, а также автором предложено направление классификации методов управления рисками с позиций их распределения или передачи, кроме того рассмотрены практические аспекты выбора методов управления хозяйственными рисками на предприятиях аграрного сектора экономики. практическое значение. упорядочение предметной области управления рисками хозяйственной деятельности и предложенная структуризация факторов риска создают предпосылки для повышения эффективности системы управления на предприятии за счет уменьшения отрицательного влияния факторов риска, повышения уровня обоснованности управленческих решений в краткосрочном и долгосрочном периодах. значение/оригинальность. на основе проведенного исследования обосновано, что перспективной формой диверсификации рисков в сфере агропромышленного комплекса является создание региональных кластеров. baltic journal of economic studies 46 vol. 6, no. 4, 2020 corresponding author: 1 uzhhorod national university, ukraine. e-mail: vira.vartsaba@gmail.com orcid: https://orcid.org/0000-0001-8693-8726 researcherid: https://publons.com/researcher/aaq-8840-2020 2 uzhhorod national university, ukraine. e-mail: o.i.zaslavska@gmail.com orcid: https://orcid.org/0000-0002-6418-9514 researcherid: https://publons.com/researcher/f-6924-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-4-46-55 fintech industry in ukraine: problems and prospects for the implementation of innovative solutions vira vartsaba1, olha zaslavska2 abstract. the article considers the issues of development of the financial technology market, its opportunities and obstacles, as well as the need and inevitability of the introduction of fintech solutions in the financial and credit spheres. the main purpose of the research is to determine the role of fintech services in the state economy, the prospects for their development, as well as to substantiate the trends of adaptation of classical credit institutions and consumers of financial services to new financial technologies at different stages of their development. systematization of literature sources and approaches to solving the problem of intensifying activities in the field of innovative finance has shown that fintech is a specific cross-sectoral industry, which lies on the border of financial and it spheres, consists of companies that use technology to improve the efficiency of financial services and encompasses digital innovations and programs that facilitate the creation and implementation of financial products. the urgency of solving this scientific problem is that the market of financial technologies is one of the fastest growing. that is why it highlights the need for traditional financial institutions to digitize their activities through a radical change in the business model in order to strengthen competitive positions and provide strategic advantages. the research of the implementation of financial technologies in the article is carried out in the following logical sequence: systematization of stages of development of the fintech industry; assessment of the development of the fintech sphere in ukraine in the context of the transition to the stage of integration with the banking system; study of the strengths and weaknesses of domestic banks and fintech companies, outlining obstacles and necessary changes for further digitization of the financial and credit system; research of the process of implementation of fintech services on the example of the technology life cycle model; assessment of the relationship between the level of financial and digital literacy of the population and the depth of promotion of innovative fintech products; identifying ways to increase the financial and digital inclusion of the population of ukraine. methods of the empirical, experimental and theoretical levels became the methodological tools of the conducted research. the results were evaluated and analyzed on the basis of surveys conducted in 2017-2019 by the ukrainian association of fintech and innovative companies, the ministry of digital transformation of ukraine, the ukrainian division of the british audit and consulting company ernst & young, and the us agency for international development. the article presents the results of an empirical analysis of the relations and interdependence of classical and innovative financial institutions, which showed the inevitability of the processes of digitization of financial services. the study empirically confirms and theoretically proves that the favorable development of the fintech industry is based on the following: the level of public awareness in the field of finance and information technology; the level of innovative development of financial institutions and the degree of penetration of the fintech companies in the financial market of the country; completeness of the legal framework. key words: market of innovative technologies, fintech, fintech services, digitization, technology adoption lifecycle, financial literacy, digital literacy, financial in-clusion. jel classification: g21, g29, g53, o33 baltic journal of economic studies 47 vol. 6, no. 4, 2020 1. introduction digital technology is an integral part of modern life and the financial market is no exception. over the past twenty years, the world has seen a rapid rise in the development of new models of financial services, including in the sectors of consumer banking and payments, insurance, asset management and more. the need for the development of non-physical service channels, implementation of operational solutions and development of new methods of establishing contacts with potential customers, attracting new and retaining existing clients, is becoming urgent. the market of financial technologies is one of the fastest growing; it occupies a leading position in the dynamics of its development both in financial terms and in terms of end-user coverage. the revolution in the field of finance is caused by new waves of high-tech startups that work better, faster and cheaper in the areas of lend-ing, payments, capital management compared to traditional banks. the development of the fintech sector promotes the emergence of new financial products that provide more opportunities and convenience for users and require the introduction of new models of functioning and interaction of all participants in financial relations. the aim of the article is to determine the role of fintech services in the state economy, the prospects for their development, as well as to substantiate the trends of adaptation of classical credit institutions and consumers of financial services to new financial technologies at different stages of their development. nowadays, the collaboration of banks and it-sphere is a key condition for further effective development of the credit system. digital technologies give the modern economy new essential features, such as open communications, cooperation and constant updating. this highlights the need for traditional financial institutions to digitize their activities through a radical change in the business model in order to strengthen competitive positions and provide strategic advantages. the research was conducted at the empirical and theoretical levels. in particu-lar, at the empirical level, the main function was the descriptive characterization of phenomena, and its result was a set of scientific facts and empirical generalizations. in turn, at the theoretical level, the task of revealing the essential causes and connec-tions between phenomena and their rational cognition prevailed. in order to conduct the main part of the research, we have put forward the fol-lowing initial hypotheses: h1. the speed of distribution and implementation of fintech services depends on the level of financial and technical literacy of consumers and their perception of innovation. h2. the speed of distribution and implementation of fintech services depends on the level of development of the state’s financial system and hr potential. in our opinion, an important feature of different scientific researches is their versatility, i.e. the ability to solve problems by different methods and ways. therefore, the development of hypotheses, their refutation or proof is based on a system of methods and approaches to the study of phenomena and patterns of nature, society and thinking. in order to study the development of financial technologies, we used the historical method of cognition. this method made it possible to study the formation of the fintech industry in chronological order. in addition, the systematization of the stages of fintech development is based on the analysis and synthesis of the essential features of this system. since the methods of analysis and synthesis are interconnected and embody the unity of opposites, we used such types as: direct method – in order to identify individual stages of development of financial technologies; elemental and theoretical method – for selection of causal relations between stages; structural and genetic method – in order to identify the main factors that have created a decisive influence on the formation of the modern sphere of fi-nancial technologies. the article assesses the development of the fintech sector in ukraine, focusing on cooperation and future integration with the banking system. the dialectical and materialist method of cognition was used in this study. in particular, it showed the connection, and interdependence of classical and innovative financial institutions. in the same context, the method of comparison was used to identify differences and characteristics of the ukrainian fintech companies and banks. the above techniques belong to the methods of the empirical level, which are used at the stage of formation of a scientific hypothesis. another group of methods are techniques of experimental and theoretical level. they help to identify certain reliable facts, carry out their accumulation and cross-check. this group includes methods of induction and deduction. thus, the inductive method of research made it possible to establish general principles for the existence of all phenomena of a particular area on individual facts. during the deduction, a final conclusion was drawn from several initial statements based on certain patterns. in particular, these methods were used to study the life cycle curve of innovation (in their general sense) and its use in order to implement in the field of financial technology; as well as identifying barriers to the spread of fintech services among potential users. thus, induction made it possible to prepare the ground for deduction and provide knowledge of factual material, and deduction, in turn, allowed expanding the scope of this knowledge. the article also uses descriptive research methods, which include question-naires, surveys and recording of results, in particular, the attitude of the population to baltic journal of economic studies 48 vol. 6, no. 4, 2020 the introduction of fintech innovations in everyday life, as well as the state of banks and fintech companies in the context of their cooperation and vision of financial technology industry in ukraine. the results were evaluated and analyzed based on the surveys conducted by the ukrainian association of fintech and innovative companies (ukrainian association of fintech and innovative companies, 2019), the ministry of digital transformation of ukraine (ministry of digital transformation of ukraine, 2019), the ukrainian division of the british audit and consulting company ernst & young (ernst & young, 2019), and the us agency for international development (usaid, 2019). 2. literature review a significant contribution to the study of the features of implementation of fintech solutions in financial and banking systems was made by foreign scholars, including: p. schueffel (schueffel, 2016), g. dorfleitner, l. hornuf, m. schmitt and m. weber (dorfleitner et al., 2016), k. leong and a. sang (leong and sang, 2018), r . teigland, c. ingram, k, kallstrand and n. wesley-james (teigland et al., 2015), n. morozko and v. didenko (morozko and didenko, 2017), s. chishti and j. barberis (chishti and barberis, 2016). the issues of the emergence and functioning of the financial technology industry are reflected in the works of such ukrainian scientists as: a. mazaraki and s. volosovych (mazaraki and volosovych, 2018), v. mishchenko (mishchenko et al., 2018), m. tarasyuk and o. koshcheev (tarasyuk and koshcheev, 2017), l. dudynets (dudynets, 2018), m. dyba and ye. osadchyy (dyba and osadchyy, 2018), h. pochenchuk (pochenchuk, 2018). thorough researches in the fintech industry is carried out by the international institute for management development (iimd, 2019), the international association of insurance supervisors (kawai, 2016), ernst & young (ernst & young, 2019), deloitte (deloitte, 2017), the united states agency for international development (usaid, 2019), etc. financial technology or fintech is a symbiosis of finance and new technologies using mobile applications and algorithms. the concept of “fintech” is not new, but only in recent years, this kind of business has begun to acquire the features of a separate industry. at the same time, financial technologies are changing extremely rapidly under the influence of different social needs, what causes an ambiguity in the understanding of this concept. currently, there is no generally accepted interpretation of the term “fintech”. the international association of insurance supervisors, represented by its secretary general y. kawai (kawai, 2016), provides the following definition: fintech can be described as technologically enabled financial innovation, that is giving rise to new business models, applications, processes and products, which can have a material effect on financial markets, institutions and the provision of financial services. another approach to the interpretation of this concept is demonstrated by the board of governors of the us federal reserve system (us federal reserve, 2016). according to their opinion, fintech is an industry composed of companies that use technology to make financial systems and the delivery of financial services more ef-ficient. german scientists, authors of the report “the fintech market in germany” (dorfleitner et al., 2016) believe that it is impossible to define the term “fintech” from a legislative point of view. fintech companies are subject to differing kinds of legal and regulatory obligations due to their highly various business models and the extremely diverse products and services they offer. in a general sense, fintech en-compasses companies that simply provide the technology and software solutions to financial service providers. in order to generalize the understanding of fintech, british scientists k. leong and a. sung (leong and sung, 2018) define it as a cross-disciplinary subject that combines finance, technology management and innovation management. according to them, financial technologies are any innovative ideas that improve financial ser-vice processes by proposing technology solutions according to different business sit-uations, while the ideas could also lead to new business models. r . teigland (teigland et al., 2015), a researcher at the stockholm school of economics, believes that fintech is a rather complex category to define. based on the name, it is a space where technology is used in the financial industry. this definition is very broad and encompasses the entire finance industry since every area uses technology in some way: from swift as the basis of the global digital transfer system to retail banks operating digital portals to stock exchanges and clearinghouses. russian scholars n. morozko and v. didenko (morozko and didenko, 2017) believe that financial technology space is an industry that includes technologies for banking and corporate finance, capital markets, financial analytics, payments, personal management finance, private and venture capital. according to the ukrainian scientists a. mazaraki and s. volosovych (mazaraki and volosovych, 2018), in the general sense, fintech is an innovative technology used by financial institutions, government agencies, trade organizations to meet the needs of consumers of financial, administrative services and goods in conditions of development of the consumer economy. thus, the term “fintech” is used to describe a wide range of innovations in the financial sector. an analysis of the scientific literature allows us to conclude that several approaches should be applied to the interpretation of this concept. baltic journal of economic studies 49 vol. 6, no. 4, 2020 firstly, fintech is a branch of the economy that consists of companies (mostly startups) that use technology to provide financial services more efficiently. secondly, fintech is a set of institutions that implement innovative business models and technologies for expansion and distribution of financial services. thirdly, fintech can be defined as computer programs, applications, and other technologies used to support or provide banking and financial services. and, fourthly, fintech is a service provided by technology companies using special software and focused on the financial needs of customers. thus, in our opinion, fintech is a specific cross-sectoral industry, which lies on the border of financial and it spheres, consists of companies that use technology to improve the efficiency of financial services and encompasses digital innovations and programs that facilitate the creation and implementation of financial products. 3. stages of development of the fintech industry financial technology (fintech) is a relatively new industry. according to vari-ous estimates, there are more than 20 000 fintech startups in the world, 40 % of which appeared in 2019. this area is the most dynamic in terms of development speed. in particular, fintech investments amounted to 111 billion usd in 2019 (statista, 2020). the increasing popularity of financial technologies and the number of fintech startups are due to the fact that they are a cheaper alternative to banks in the financial market. the development of financial technologies has been particularly noticeable over the last ten years. the key factors are the following: – the loss of customer confidence in the traditional banking sector during the global financial crisis of 20082009; – the growing expectations of society for the provided services, including financial ones. nowadays consumers are focused on continuous updating and speeding up of processes, higher availability of technology and convenience of services; – the spread of mobile internet and social networks. this leads to the fact that the focus of the strategy of attracting bank customers is shifting from the expansion of the branch network to the creation of online services; – the desire for innovations, the increased requirements for the ease of use of services, the quality and speed of information acquisition which are the features of the largest generation – the millennials (born between 1980 and 2000); – the success of technology companies in other sectors of the economy (trade in goods, entertainment industry, etc.). the first stage in the evolution of the fintech-industry is closely related to the development of infrastructure and the emergence of the first technological solutions. at the beginning of its history, this field remained analogous for a long time. it means that all transceivers used signals that could be transmitted by cable or radio. therefore, this period is associated with the creation of the telegraph in 1816, which allowed the transmission of text information over a considerable distance and defined the whole era of financial technology. one of the first users to introduce such communications were the brokerage offices, which made it possible to accelerate the transfer of data between commodity and stock exchanges in different cities and to increase the liquidity of trading (ferderer, 2008). the next stage is characterized by the creation and implementation of the first computers. in the late 1960s, the development of computer technology gave an impetus to the transformation of the financial sector from analogue to digital industry. in particular, the first electronic payment systems appeared, and the rapid growth in the volume of financial transactions between counterparties of different countries became the driver of the creation of a society for worldwide interbank financial telecommunications (swift). in 1967, the british bank barclays established the first atm to provide access to liquidity during off-hours. with the development of the internet technologies in the early 1990s, many large financial institutions began to advertise their products online. in 1995, an american multinational financial services company wells fargo added the ability to manage and order online banking services to its site. later its example was followed by other financial intermediaries (trunin et al., 2019). the beginning of the new millennium (2000-2010) can be characterized as the next stage in the evolution of financial technologies. the starting point of a new era of development were two crises at the beginning of the 21st century: the crisis of the dotcoms (the companies whose business models are fully based on the internet), and the global financial crisis of 2008-2009. the latter, in particular, has undermined the credibility of traditional financial institutions, which suffered severe restrictive measures by regulators. this was the beginning of a new stage in the development of financial technologies, characterized by the emergence of a significant number of startup companies (arner et al., 2015). the fourth stage of the development of the fintech industry was in the last decade: 2010-2020. for this period, it was typical to provide financial products and services to individuals and legal entities directly by startups. the introduction of innovative financial technologies led to the formation of a fundamentally new model of banking business, which is accompanied by intensification of the processes of replacement of banking offices by computer programs. during this period, bank-funded innovation centers began to emerge. gradually, the fintech products began to move from a category of products focused on a narrow baltic journal of economic studies 50 vol. 6, no. 4, 2020 circle of technologically competent customers to society as a whole. in the future, the fintech industry will have two more stages: partnership with the credit system and integration. in the coming years, there will be a transition from competition to partnership between classic banking institutions and fintech companies. such a development strategy will allow both of them to cooperate mutually. banks with many years of experience and positive image enjoy loyalty among customers, but they do not always have time to implement the latest technologies. on the other hand, fintech startups have useful services and products that are difficult for newcomers to promote in the market. one of the major collaboration platforms is open banking. it refers to banks opening up their application programming interfaces to third party providers (tpps), so that the tpps and fintech providers have access to their data and, based on that, can build new applications and services or create new services together with financial institutions. based on this open data, startups can create new solutions for banking customers. the final period – the integration phase – foresees that open marketplaces, api (application programming interface) and complex analytics will emerge in the future. all this will result in the final merger of credit institutions and fintech com-panies. 4. cooperation between banks and fintech companies in this context, it is important to assess the development of the fintech sphere in ukraine, focusing on cooperation and future integration with the banking system. first of all, it should be noted that more than 70 new fintech companies have appeared in the domestic market during 2019, representing almost 40 % of their total. in general, at the beginning of 2020, there were 180 entities in the fintech industry in ukraine that is 2.5 times the number of existing banks. figure 1 presents the survey results of the most technological banks in ukraine regarding their partnership with the fintech system. among the surveyed ukrainian banks, 73 % of institutions have joint projects with fintech companies, which is much simpler and cheaper than maintaining their own teams of software developers. the same number of banks has their own innovation centers. at the same time, most institutions do not have platforms for incubation and acceleration of fintech projects. many of such projects are implemented with the help of fintech companies, which enables banks to reduce investment costs and minimize risks. financing is still a pain point for fintech companies. as we can see, 100 % of the studied banking institutions do not invest in fintech companies. usually, new technological projects in the world are funded by outside capital and, above all, by banking resources. however, in ukraine, 61 % of fintech companies are fully funded from their own sources. in our opinion, banks and fintech companies are interested in a mutually beneficial partnership, as each has its own strengths and weaknesses. banks have significant amounts of financial resources and a customer base. but not all of them are willing to invest their own financial, time and human resources in developing innovative products. in addition, the activities of banks are tightly regulated by the central bank. therefore, they may not always be able to adapt quickly to the growing needs of customers, as this requires an appropriate regulatory framework. the strength of fintech companies is the high level of qualification and innovative potential of employees. in addition, they have much more information about their potential customers’ needs by tracking their activity on social networks, and navigating through geolocation applications. the disadvantage of fintech 9% 18% 55% 100% 18% 9% 27% 73% 73% 18% 0% 20% 40% 60% 80% 100% own innovation development joint projects investments in startups own startup incubators / accelerators no cooperation cooperation is planned cooperation figure 1. involvement of the ukrainian banks in cooperation with fintech companies source: built by authors based on (ukrainian association of fintech and innovative companies, 2019) baltic journal of economic studies 51 vol. 6, no. 4, 2020 companies is that they mainly specialize in a narrow range of operations. besides they do not always have enough funding to implement their ideas, as well as the time needed to win customers’ trust. therefore, both for banks and for fintech companies, the smartest strategy is not to compete, but to look for mutually beneficial ways of partnership (financial pulse, n.d.). the options for cooperation between banks and fintech companies can vary from simple use of the services of fintech providers to a full-fledged partnership, investments in the implementation of new systems or the acquisition of implemented projects. in particular, priority areas for cooperation are digital banking, electronic payments, car and travel insurance, p2p lending and b2p lending. table 1 presents the perspectives for the development of the fintech industry in ukraine, the main barriers and the necessary legislative changes in terms of banks and fintech companies. the above-mentioned rating highlights the obvious differences between the moods of fintech providers and banks. this is due to the fact that only 57 % of all domestic fintech companies operate exclusively in ukraine. moreover, more than 70 % of them plan to enter foreign markets. the reason for this is a weak domestic market with low demand and disposable income within the country [catalog]. that is why a considerable number of companies are influenced by global trends of market changes, which are not felt so strongly in ukraine. however, both fintech companies and banks emphasize the need for remote identification of customers, in particular, banks. therefore, they believe that availability of a legal framework for remote customer identification is a necessary factor in the development of the industry. in general, the problem of outdated and unfavorable legislation is a key issue for both groups of institutions. it is also worth noting that fintech companies and banks see significant potential in future of the financial services for individuals who do not have bank accounts. this niche is considered potentially profitable for startups as well as classic credit institutions (usaid, 2019). however, the biggest problem in ukraine in this area is the low levels of financial inclusivity and literacy of the population, as well as the rejection of the latest technologies by elders. according to a study by the united states agency for international development (usaid), which took into account the level of financial knowledge, behavior and attitude, the overall index of financial literacy of the ukrainians was 55 %. this is the lowest rate among the 30 countries of the organization for economic co-operation and development (oecd). by the way, the average index among oecd countries is 63 % (usaid, 2019). 5. lifecycle curve of innovation adoption one of the most topical issues in the activities of fintech companies is the spread of innovations among potential users. this problem was started in the 1960s. in particular, the american scientist everett rogers developed a theory of innovation diffusion that explains how, why, and at what speed new ideas and technologies are distributed to different consumer groups (rogers, 2003). in 1992, this theory was developed by geoffrey moore, an american organizational theorist, management consultant and author, known for his work “crossing the chasm: marketing and selling high-tech products to mainstream customers” (moore, 2014). g. moore’s theory is called the technology adoption lifecycle, which is based on the division of consumers into five categories. the highlighted approach is still being taken as a basis for promoting innovative solutions, and in the fintech industry as well. from table 1 rating of key aspects of the fintech industry development in ukraine implementation of non-represented or underrepresented fintech services № in terms of fintech companies in terms of banks 1 cross-border payments for individuals and small and mediumsized businesses online payments directly from a bank account 2 providing digital financial services to individuals who do not have traditional bank accounts providing digital financial services to individuals who do not have traditional bank accounts 3 electronic invoicing online shopping lending major obstacles to financial technology development 1 outdated and unfavorable legislation the cost of digital transformation 2 partnership problems with classic credit institutions complexity of core business processes 3 low level of financial literacy of the population outdated and unfavorable legislation legislative reviews required for fintech industry development 1 remote customer identification remote customer identification 2 electronic money digital payments from government agencies and in their favor 3 licensing ais (account information services) and pis (payment initiation services) p2p lending regulation source: built by authors based on (usaid, 2019) baltic journal of economic studies 52 vol. 6, no. 4, 2020 this point of view, we believe that this approach quite logically describes the stages of promotion of innovative solutions in the fintech industry (figure 2). there are two types of innovations: discontinuous, which require society to change habits, and continuous, which upgrade products but does not change the usual course of action. in the study of the global fintech adoption index 2019, it is proposed to distinguish two types of fintech services: transformed and invented. thus, in order to provide the first type of services, which are traditionally offered by classic financial institutions, fintech providers use technology to transform these services, offering consumers a more attractive ones (extended capabilities, greater efficiency, lower rates, etc.). invented services have not existed before, but they have become possible due to technology (p2p-lending, e-wallets, mobile payments, etc.) (ernst & young, 2019). the chasm theory concerns discontinuous innovations and invented services. fintech providers have to fight the inertia of potential buyers to convince the majority to change their usual way of life. as we can see, society’s acceptance of technological innovations takes time. due to different attitudes to innovation, this process takes place in stages, moving from one category of consumers to another. therefore, the first to accept new products are technical enthusiasts or innova-tors for whom fintech is a hobby or part of doing business. later, visionaries or early adopters join, who are interested in the competitive advantages of an innovative product. consumers of the first two groups form a small primary market, the audience of which is up to 16 % of all potential customers. if a product or service proves its effectiveness, enthusiasts and visionaries are joined by pragmatists (“the early majority”), who make up approximately a third of the market. unlike previous categories of consumers, they do not seek significant changes, but need stable benefits of an innovative product. for fintech companies, pragmatists are able to become extremely loyal customers. so by enlisting their support, fintech providers gain access to long-term market dominance. the fourth group – conservatives or “the late majority” – is similar in market coverage to the previous one, but consumers in this segment are suspicious of high technology. they prefer simple and high-quality goods and services, so they are pes-simistic about the benefits that technology will bring them. eventually, conservatives bring fintech products to their lives because they realize that technological innovations are becoming an integral part of life and business and can pass them by. the last group of consumers is skeptics, who occupy a small market segment that is resistant to the influence of new technologies. fintech companies often do not take this category into account as customers; on the other hand, they are the biggest critics of innovations and can answer why the product does not meet their expectations (moore, 2014). the gap that exists between visionaries and pragmatists is due to innovations that require significant behavioral changes from the consumer. such products and services fall into the so-called “chasm” that separates the early and main markets. pragmatists seek consistency and productivity, but try to avoid global innovations. therefore, the gap arises when an innovative product, from their point of view, can-not be used as something significantly useful that expands opportunities and simpli-fies life, but is positioned only as a fundamentally new and high-tech product. as a result, the chasm may lead to a refusal to adopt the technology at all. another obstacle may be the crack between pragmatists and conservatives. it arises primarily due to insufficient technical and financial literacy of the latter. there-fore, when a product reaches the highest point of development on the market, its application should be as simple as possible so that it continues to be successful among less competent consumers of fintech services. otherwise, the transition to conservatives may not happen at all (moore, 2014). in this context, it is necessary to consider the attitude to innovation of the ukrainian society through the a do pt io n time c h a sme nt hu si as ts v is io na ri es p ra gm at is ts sk ep ti cs c on se rv at iv es 3, 5 % 16 % 12 ,5 % 34 % 34 % c r a c k figure 2. lifecycle curve of innovation adoption source: built by authors based on (moore, 2014) baltic journal of economic studies 53 vol. 6, no. 4, 2020 prism of the general level of financial and digital literacy of different groups (figure 3). as you can see, the diagram in figure 3 is similar to the curve of the life cycle of innovation (figure 2). this confirms the relation between the level of financial and digital literacy and the depth of promotion of innovative fintech products among users. according to the results of the research, the vast majority of the ukrainians have only basic knowledge and skills in the financial field and information technology, which allows them to use the simplest services, including payments and settlements. domestic users do not feel comfortable interacting with financial institutions and are only interested in issues that are of personal importance. the greatest influence on financial behavior in ukraine has age and property status of the population. in particular, young people aged 18-34 feel most free in the world of finance and latest technologies. it is important for this group of consumers to be able to obtain reliable information about a financial institution or service in the mode of instant access. young people will be glad to use any personal financial management tools, if only there was an application for modern gadgets and platforms. middle-aged ukrainians are the most experienced users of financial services; they are a socially active category and are used to overcome various difficulties. they are the target audience for the promotion of financial products aimed at long-term planning. as for the older generation, the online space causes them fear. the life experience of consumers in this group has taught them not to trust financial institutions, and being among the victims of internet frauds increases this distrust and leads to the rejection of even the simplest digital services (usaid, 2019). in addition, ukraine is currently experiencing infrastructural unpreparedness to improve the digital skills of the population. the most noticeable is the disparity between cities and villages, which is expressed in unequal access to financial and telecommunications services. thus, the study proves that a favorable environment for the development of the financial sector of any country is largely based on four main components: 1) level of public awareness in the field of finance and information technology, as well as their trust in financial institutions; 2) level of development of financial and credit institutions, their innovativity and qualifications of employees and managers; 3) level of development of fintech companies and the degree of their penetration into the financial market of the country; 4) completeness of the legislative, regulatory and supervisory framework. 6. conclusions sustainable development of the state and society is the development at the crossing of economic, social and technological efficiency. financial technologies are a key tool for sustainable development, as they are able not only to increase the efficiency of the financial sector, but also to contribute to the implementation of the strategy of comprehensive development of the state. in our opinion, the hypotheses put forward at the beginning cannot be refuted or confirmed separately. the study found that the speed of distribution and implementation of fintech services in ukraine is influenced by many factors, it depends on the level of development of 4% 16% 46% 25% 7% 25% 22% 38% 15% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% excellent financial literacy / above average level of digital skills good financial literacy / intermediate level of digital skills satisfactory financial literacy / low level of digital skills poor financial literacy / no digital skills zero level of financial literacy self-assessment of financial literacy level of digital skills figure 3. the level of financial and digital literacy of the population of ukraine source: built by authors based on (usaid, 2019; ministry of digital transformation of ukraine, 2019) baltic journal of economic studies 54 vol. 6, no. 4, 2020 the country in a range of aspects such as: financial and digital literacy, innovativity of financial institutions, preparedness of financial markets and communication technologies to promote fintech services and the availability of appropriate legal framework. considering the conducted research and in order to achieve the goal of developing the fintech industry in ukraine and increase financial and digital inclusion of the population, the main ways to overcome existing barriers are the following: – adaptation of communication strategy and digitization to the socio-demographic structure of the population of ukraine. in particular, if the focus is mainly on online information channels, the level of accessibility to older groups and people living in rural and mountainous areas is reduced. therefore, it is necessary to actively involve offline channels (television, screens in social institutions and transport) to broadcast short videos about the essence and benefits of fintech ser-vices for ordinary citizens; – improvement of the quality of technical support of government agencies. often, institutions of social, educational, medical, cultural spheres are the drivers of digital change and habits of society. that is why a sufficient level of hardware and software of such institutions is important; – permanent and systematic formation of demand for digital skills among the population. the message should focus on convenience, time savings, and ease of use of the latest technologies in the financial sector, as well as the inevitability of the transition of most processes to the virtual space and automation of various services; – creation of a platform for digital skills training and its advertising support. such training platforms should be simple, clear, secure and based on intuitive use. un-der such conditions, the potential consumer will not only be able to learn how to use online services, but also receive information about the product, its safety and ease of use. as a result, we should note that the effectiveness of the policy of improvement the level of financial literacy and digital skills of the population depends on the integrated implementation of various learning mechanisms. therefore, in order to deepen existing knowledge, emphasis should be placed on online learning. when developing basic skills, offline support at the place of residence is the main one. at the same time, the infrastructural resource here can be libraries, clubs, educational institutions, local governments, social protection institutions, pension funds, etc. nowadays the importance of this issue has come to the fore, as the covid-19 pandemic forced the world to move into the virtual reality of communication, education, financial services, health care and more. the current situation makes it clear that there is a need to accelerate as much as possible all the processes that will contribute to the development of the fintech industry. unprecedented conditions in all areas of activity have shown that in the forefront now there are the businesses that have been the first ones to move into the digital space. taking into account the study, we can note the trend towards the development of virtual customer service channels, implementation of operational solutions and the development of new methods of establishing contacts with potential consumers of financial services. this phenomenon also characterizes the ukrainian financial system, which leads to the regular implementation of new solutions in the areas of innovation and the development of strategies to overcome obstacles along the way. in general, under the condition of qualitative and quantitative development, the fintech industry in ukraine is able to radically change the existing organizational and institutional structure of the financial and credit system in the future. in conclusion, it should be noted that the stabilization of the economy, updating the legal framework and implementation of new technologies in the activities of traditional credit institutions can have a beneficial effect on the rapid growth of financial technology, which already surpasses any other high-tech industry in ukraine. references: ancri, c. 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(2019). kompleksnyy analiz razvitiya mirovogo rynka finansovykh tekhnologiy (fintekh) [comprehensive analysis of the development of the global financial technology market (fintech)]. available at: https://ssrn.com/abstract=3360922; doi: http://dx.doi.org/ 10.2139/ssrn.3360922 ukrainian association of fintech and innovative companies (2019). the ukrainian fintech catalog – 2019. available at: https://map.fintechua.org international institute for management development (2019). world digital competitiveness ranking – 2019. available at: https://www.imd.org/globalassets/wcc/docs/release-2019/digital/imd-world-digital-competitivenessrankings-2019.pdf deloitte (2017). fintech by the numbers. incumbents, startups, investors adapt to maturing ecosystem. available at: https://www2.deloitte.com/content/dam/deloitte/tr/documents/financial-services/dcfs-fintech-by-the-numbers.pdf baltic journal of economic studies 1 vol. 5, no. 3, 2019 corresponding author: 1 jan kochanowski university in kielce, poland. 2 jan kochanowski university in kielce, poland. doi: https://doi.org/10.30525/2256-0742/2019-5-3-1-8 intraregional diversification of the level of the financial situation of the poviats of eastern poland in relation to the development potential paweł dziekański1, andrzej pawlik2 abstract. territorial self-government is an independent entity that has a certain scope of freedom in deciding on the path of development of the subordinate area, common property, and implementation of public tasks. the aim of the study is to assess the intra-regional diagnosis of the level of the poviat’s financial situation relative to the development potential. the data used to conduct the study refer to the years of 2009 and 2016; they come from the local data bank and cover 101 poviats of eastern poland. the poviat can carry out its tasks when it is equipped with stable and efficient sources of income. the level and structure of budget revenues determine investment activity. the socio-economic space of the poviat’s activity is a multi-element system. it achieves different levels of development depending on the structure, equipment elements, as well as the quality and complexity of the links between them. the ability of a poviat to operate can be seen as a set of factors that are mutually related to each other. these factors include: technical infrastructure, knowledge, innovation, regional product, eco-development, geographical location, finances. these factors depend on the potential inherent in the region, activity in the sphere of planning and implementation of regional policy by regional self-government authorities, the state’s economic policy, and the standards of structural policy and eu cohesion policy. these factors are not unchangeable over time; therefore, they should be subjected to continuous and ongoing analysis. the synthetic measure of the financial situation according to the average value of the 2007–2016 years was in the range from 0.24 to 0.49. poviats with a higher rate of the synthetic financial situation are better in terms of the measure of development. the level of the indicator is influenced by: the economic character of the entity and the function of the area, economic potential, financial situation, quality of the natural environment and infrastructure. the management of financial resources is of special importance in the functioning of poviats. they affect the economic situation of the local government, the conditions for the implementation of tasks. financial resources are the basis for the operation of individuals and a condition for the implementation of the tasks imposed on them, they determine development and are an expression of the potential for economic development. the situation of the surveyed units varied. the ranking of cities in the ranking did not change substantially in the subsequent years. it was confirmed that financial resources are the basis for the operation of individuals and a condition for carrying out the tasks imposed on them, determine development, and reflect the potential for economic development. key words: financial situation, development, eastern poland, poviat, synthetic measure. jel classification: c38, h71, h76, b41, r10, p25 1. introduction territorial self-government is an independent entity that has a certain scope of freedom in deciding on the path of development of the subordinate area, common property, and implementation of public tasks. its local resources (economic, financial, social, as well as information resources) determine the level of development. therefore, the effective operation requires proper shaping of resources and rules of operation and then setting goals and ways to achieve them. this is difficult due to limited access to detailed, homogeneous information for all surveyed units (dziekański, 2018; dziekański, 2018a). diversified development of individual regions is a natural problem of each country. geographical and natural conditions mean that individual regions are characterized by a different economic situation and level of development (marcysiak, prus, 2017). we should strive to make the most of the economic potential of the regions and improve their competitiveness. this is to safeguard the regions against the process of marginalization. their effects in the territorial systems are polarization and baltic journal of economic studies 2 vol. 5, no. 3, 2019 divergence processes. they can lead to depopulation and degradation of some areas (michoń, 2017). according to gorzelak (2003), regional diversification deepens and becomes excessive due to the instability of regional systems and cumulative processes. in the light of myrdal’s cumulative causality theory, regional systems appear as long-term structures, in which developed regions (centres) maintain the previously achieved advantage, and the development of less developed regions is inhibited by the effects of leaching (domański, 2010). spatial diversity of resources in the process of specialization and division of labour causes economic and social inequalities in regions. it is worth emphasizing that analyses carried out by churski and co-authors (2013) and stanny (2013), dziekański (2018) show that the most important development factor, next to the location in the socioeconomic space, are the local finances. the financial situation includes not only the financial position but also the ability of the local government to continue providing services and repaying liabilities, both the long and short-term (governmental accounting standards board). the financial situation is shaped, among others by: income level, financial independence, investment expenditure, ability to raise extra-budgetary resources, the financial result (ossowska and ziemińska, 2010). other conditions may be shaped by, for example, the location and size of local government units (lgs), available resources and natural assets, investment attractiveness, economic fluctuations in the country and around the world, the condition of public finances, scope of income and expenditure authority (dziekański, 2014; dziekański, 2016). poviat as an intermediate level realizes tasks related to the following areas: education, healthcare, social assistance, tourism and collective transport, environmental protection and water management (olejniczak-szałowska, 2000). the scope and quality of public goods and services provided, increasing the investment attractiveness of the local government depend largely on the income, both own and foreign, and the ability to use them effectively, which in practice translates into the financial situation of the unit (bieniasz et al., 2013). 2. the aim, method, and research material the aim of the study is to assess the recognition of intra-regional differentiation of the poviat’s financial situation with respect to development potential. the analysis was made on the basis of a synthetic measure and selected diagnostic variables of 101 poviats of eastern poland. the data used to conduct the study relate to the years 2009 and 2016 and come from the local data bank. a set of variables included a description of, among others, financial situation, economic potential, demographic and infrastructure potential, as well as income from pit and cit, own, property expenses. the choice of variables was guided by the substantive usefulness in the assessment of the studied phenomenon and the degree of variability and correlation of variables (kukuła, 2014; kukuła, 2000; malina, 2004)1. in the case of taxonomic methods, it is important to determine the nature of variables describing the studied phenomenon. depending on the influence of stimulants and destimulants on the studied phenomenon, which were subjected to the standardization procedure using the zero uniformization method according to the formula (1) and (2), i.e.: z x ij ij i ij i ij i ij = − − � x min x max x min , if x si ∈ (1); zij i ij ij i ij i ij = − − � max x x max x min x , if x di ∈ (2); where: s – stimulant, d – destimulant; i=1,2,…n; j=1,2,…,p (n is the number of objects (municipalities), and p – the number of features); xij – means the value of the jth characteristic for the given unit, max – the maximum value of the jth feature, min – the minimal value of the jth feature (wysocki, lira, 2005). the synthetic measure of development and financial situation was determined using the topsis method. the calculated measures are included in the area (0.1), which ensures the comparability of results. the value of the synthetic measure for individual examined objects was determined on the basis of formula (3): q d d d where q i ni i i i i= + ≤ ≤ = − − + � � � � � � � �, , , ,..., ;0 1 1 2 (3), where: di− – means the distance from the anti-clock, di + – distance from the pattern (wysocki, 2010, 156157). a higher value of the indicator (closeness of the tense) means a more favourable situation of the object, a lower (near zero) lower value (zalewski, 2012; łuczak, wysocki, 2012). the studied area of the poviats of eastern poland was finally divided into 4 quartile groups. the size of the indicator in the first group means the better unit, the last one being the weakest. the cross-compliance of the results obtained was also verified based on the correlation coefficient. a scatter plot with a fit line and regression analysis is also presented (dziekański, wyszkowski, 2018; wysocki, lira, 2005). 3. development and financial situation the poviat can carry out its tasks when it is equipped with stable and efficient sources of income. the level and structure of budget revenues determine investment activity. the socio-economic space of the poviat’s activity is a multi-element system. it achieves different levels of development depending on the structure, equipment 1 variables characterized by low spatial variability (coefficient of variation below 0.10) and high correlating variables were removed from the further research process. baltic journal of economic studies 3 vol. 5, no. 3, 2019 elements, as well as the quality and complexity of the links between them. local development is a complex phenomenon, which results from many factors that shape it. the pressure on constant local development and provision of high-quality public services with simultaneous multidirectional activities means that the financial resources are far from sufficient (hok, 2016). the functioning and development of territorial self-government depend on social, economic, and environmental factors. they determine the spatial diversification of social and economic development of territorial communities (prus, drzazdzyńska, 2017). at the same time, they are generated both by the needs of the local community and the level of local resources (satoła, standar, kozera, 2019). the financial situation is an element of the local authorities’ responsibility for the development of the individual and meeting the needs of its residents. the assessment of the financial situation allows determining the efficiency of these units’ functioning, the ability to meet their obligations, and the possibility of increasing the quality standard of services provided to local communities (dziekański, 2014). as cabaleiro-casal et al. (2013) note, the financial situation cannot be described by means of one-dimensional space (one indicator). the value of the financial situation measure can be used as a tool to investigate how various factors affect it, how the implemented financial policy looks. the financial situation is a complex phenomenon. it is shaped by income, financial independence, the size of investment expenditures, the ability to raise extrabudgetary resources, and financial results (ossowska, ziemińska, 2010). the limited financial resources in relation to the scope of ongoing tasks and reported investment needs are one of the basic problems of the functioning of local self-government (gonet, 2013). the financial situation is shaped both by financial variables and by a number of conditions related to a given area. external determinants include the level of unemployment, the inflation rate, the social and economic situation of neighbouring areas. in turn, the internal conditions of the financial situation may be shaped by local authorities (e.g. through the use of disability pensions, activation of human resources, increasing management efficiency) (ślusarz, 2005). 4. spatial differentiation of the financial situation of the counties of eastern poland eastern poland is an area comprising five voivodships: lubelskie, podkarpackie, podlaskie, świętokrzyskie, and warmińsko-mazurskie. it constitutes the area with the lowest level of economic development in poland. problems adversely affecting the economic situation and development prospects to a large extent have a structural dimension resulting from historical conditions. they are reinforced by the effects of peripheral location on the external border of the european union, low innovation and infrastructural problems and the labour market (operational program eastern poland). the lower efficiency of work in eastern poland is the effect of the poorer supply of voivodships with regional assets, such as infrastructure, technological and innovative potential, as well as infrastructure. eastern poland is characterized by a distinct specificity in the field of industry’s industrial structure (development strategy of eastern poland, 2020). the synthetic measure of the financial situation according to the average value of years 2009 and 2016 was in the range of 0.24 (poviat gołdapski – warmińskomazurskie voivodeship; kazimierski – świętokrzyskie; hrubieszowski – lubelskie) to 0.49 (poviat białostocki – podlaskie). poviats of eastern poland were divided into four quartile groups. the best and weakest units in groups are presented in table 1. poviats with a higher degree of the synthetic financial situation are at the same time better in terms of the measure of development. the obtained measures indicate spatial disproportions in the examined aspect. the level of the indicator is influenced by: the economic character of the unit and the function of the area (industrial, tourist, residential), economic potential, financial situation, quality of the natural environment and infrastructure (attractiveness of the location, rent of location). among the non-natural factors, the most important are: the neighbourhood of cities, as well as proximity to transport hubs (głowickawołoszyn, satoła, 2018). the existence of areas with a low level of the financial situation between territorial units means a loss of development potential. intraregional diversification is shown in table 2. the weakest unit in terms of the financial situation in 2009 turned out to be the kazimierski poviat (0.20, świętokrzyskie voivodeship, a poviat with a strong agricultural function), the best unit was the staszowski poviat (0.51, świętokrzyskie voivodeship; industrial). in 2016, the best unit was the białostocki poviat (0.60, podlaskie voivodeship), the poorest poviat units: gołdapski (warmińskomazurskie, 0.27) and hrubieszowski (lubelskie, 027). in the analysed years, the average value of the financial situation measure was the best in group i, which had 22 and 24 units. the smallest group was iv. the analysis of the measure of development contained in table 3 indicates the spatial disproportions of poviats of eastern poland. the group a poviats were in the best situation (average value of 0.39 (23 units in 2009) and 0.41 (24 units in 2016)), the weakest – in group d, respectively 0.27 (20) and 0.29 (22). in 2009, the poorest units were poviats: janowski, zamojski (lubelskie) moniecki (podlaskie) – 0,25, najlepszymi stalowowolski (podkarpackie) ostrowiecki (świętokrzyskie) – 0,44, in 2016, respectively hrubieszowski, krasnostawski (lubelskie) – 0,27 and mielecki (podkarpackie) – 0,48. baltic journal of economic studies 4 vol. 5, no. 3, 2019 table 1 the synthetic measure of the financial situation of counties of eastern poland in 2009 and 2016 group measure financial situation the average value of the financial situation measure (2007–2016) measure synthetic development 2009 2016 2009 2016 i białostocki (b) 0,48 0,6 0,49 0,39 0,43 ostrowiecki (t) 0,40 0,40 0,37 0,44 0,41 ii ropczycko-sędziszowski (r) 0,34 0,41 0,36 0,32 0,36 tarnobrzeski(r) 0,30 0,40 0,33 0,32 0,36 iii włodawski (l) 0,28 0,36 0,32 0,28 0,28 ostródzki (n) 0,31 0,35 0,30 0,40 0,44 iv leżajski (r) 0,29 0,32 0,29 0,32 0,33 hrubieszowski (l) 0,21 0,27 0,24 0,27 0,27 kazimierski (t) 0,20 0,30 0,24 0,27 0,31 gołdapski (n) 0,23 0,27 0,24 0,33 0,33 sorted by average measure value; the best and the weakest unit in the group i – very good, ii – good, iii – poor, iv – bad; voivodeship: b – podlaskie, t – świętokrzyskie; r – podkarpackie; l – lubelskie; n – warmińsko -mazurskie source: own study based on data of bdl, gus 2009, 2016 table 2 a number of territorial units assigned according to the measure of synthetic financial situation to quarterly groups in 2009 and 2016 2009 2016 i ii iii iv i ii iii iv lubelskie 20 2 3 8 7 7 5 5 3 podkarpackie 21 5 7 7 2 7 4 6 4 podlaskie 14 4 7 3 0 3 4 4 3 świętokrzyskie 13 6 3 1 3 3 4 4 2 warmińsko-mazurskie 19 5 3 6 5 4 8 3 4 number of units 22 23 25 17 24 25 22 16 average 0,40 0,34 0,30 0,25 0,45 0,39 0,35 0,31 min kazimierski (t) 0,20 hrubieszowski (l) gołdapski (n) 0,27 max staszowski (t) 0,51 białostocki (b) 0,60 b – podlaskie, t – świętokrzyskie; r – podkarpackie; l – lubelskie; n – warmińsko -mazurskie source: own study based on cso bdl data table 3 a number of territorial units assigned according to development measure to quarterly groups in 2009 and 2016 2009 2016 i ii iii iv i ii iii iv lubelskie 20 3 3 4 10 3 3 4 8 podkarpackie 21 8 6 3 4 10 7 1 3 podlaskie 14 1 3 5 5 1 3 4 6 świętokrzyskie 13 5 3 4 1 5 3 4 1 warmińsko-mazurskie 19 6 6 7 0 5 7 3 4 number of units 23 21 23 20 24 23 18 22 average 0,39 0,33 0,3 0,27 0,41 0,35 0,31 0,29 min janowski, zamojski (l) moniecki (b) 0,25 hrubieszowski, krasnostawski (l) 0,27 max stalowowolski (r) ostrowiecki (t) 0,44 mielecki (r) 0,48 b – podlaskie, t – świętokrzyskie; r – podkarpackie; l – lubelskie; n – warmińsko -mazurskie source: own study based on cso bdl data baltic journal of economic studies 5 vol. 5, no. 3, 2019 the pearson correlation coefficients in the ratio of synthetic measures in 2009 r = 0.441 / r2 = 0.194 and in 2016 r = 0.519 / r2 = 0.269. the obtained measures indicate a convergence process, a similar classification of poviat levels, and a small spatial diversification of operational effectiveness. figure 1 indicates the bipolarity of changes, and the following poviats are distinctive: zamojski, białostocki, olsztyński, mielecki, kielecki, rzeszowski, stalowowolski. regression analysis allows creating a linear (or logarithmic) model, thanks to which it is possible to check how variables affect the dependent variable. when creating a regression model, it should be decided which variables will be an explanatory variable (a measure of financial situation), and which explanatory one. the regression model describing the dependence of variables takes the form: ftopsis = f(f, r , g, i, dp, dc, dn, dw, wm, p, o, pr, s): f – a measure of the synthetic financial situation, r – a measure of synthetic development potential, g – a measure of synthetic economic potential, i – a measure of the synthetic infrastructure potential, dp – income from personal income tax, dc – income from corporation tax, dn – operating surplus, dw – own income, wm – property expenses, p – total business entities, o – natural persons conducting the business activity, pr – total employees, s – the unemployment rate. the results of the analysis for oe allow stating that the presented regression model allows explaining r2 = 0.59 (estimation of the classic method of least squares) and 0.86 (logistic estimation). the high values of statistics f (10,250) 37.49 (7.254) and 236.09 respectively) and the corresponding probability level p (<0.00001) confirm the statistical significance of the linear and logarithmic model. they also confirm that the parameters are significantly different from zero. the value of t-student’s statistics at parameter p (<0.00001) means that all parameters are statistically significant. r2 coefficient of determination measures how much of the overall volatility of a dependent variable is explained by linear regression. in our example, this value is r2 0.59 (estimation of the classic method of least squares) and 0.86 (logistic estimation). r2 equal to 1 is a perfect match, while r2 equal 0 means no relationship between variables. the corrected r2 (0.58 estimation of the classic least squares method, 0.86 logistic estimation) tells us how well our regression equation would fit into a different sample from the same population (table 4 and 5). table 6 presents the correlation coefficients between the measure of financial situation and development and the economic and financial elements describing the poviats of eastern poland. the pit and cit incomes influenced the researched phenomena in the indicated period, the level of development in the case of financial situation and economic potential, economic entities and natural persons conducting economic activity in the case of development measure. 5. conclusion the activities of poviats have the character of a multicriteria category. they are affected by disability benefits, finances, economic and infrastructure potential, and natural resources. they form the basis for the operation of local government units and the condition for carrying out the tasks imposed on them. the balance of the region constituting the basis for the assessment of development is the sum of factors forming integrated order. the directions of the poviat’s activity as a system of interdependent and 2009; y = 0.152 + 0.5309*x; r = 0.4413; p = 0.00002; r2 = 0.1948 0.24 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 miara rozowju 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 m ia ra s yt ua cj i f in an so w ej 2016; y = 0.185 + 0.5784*x; r = 0.5192; p = 0.00000; r2 = 0.2696 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 miara rozwoju 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 m ia ra s yt ua cj i f in an so w ej 2009; y = 0.152 + 0.5309*x; r = 0.4413; p = 0.00002; r2 = 0.1948 0.24 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 miara rozowju 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 m ia ra s yt ua cj i f in an so w ej 2016; y = 0.185 + 0.5784*x; r = 0.5192; p = 0.00000; r2 = 0.2696 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 0.50 miara rozwoju 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 m ia ra s yt ua cj i f in an so w ej figure 1. the regression graph with the line matching the relationship between the measure of synaptic finance and development in 2009 and 2016 source: own study based on cso bdl data baltic journal of economic studies 6 vol. 5, no. 3, 2019 table 4 estimation of the classic least squares method, used observations 1-261 (variable dependent on the financial situation) factor stand. error tstudent’s value p oe development 0.513419 0.0609128 8.4288 <0.00001 *** oe infrastructure -0.130396 0.0525967 -2.4792 0.01383 ** total economic entities 0.00402577 0.000841751 4.7826 <0.00001 *** natural persons conducting economic activity -0.0048145 0.00101445 -4.7459 <0.00001 *** income from corporation tax 0.00360305 0.00100693 3.5782 0.00042 *** operating surplus 0.000211474 7.43514e-05 2.8443 0.00482 *** own income 0.571685 0.0497548 11.4901 <0.00001 *** property expenses 0.0643387 0.0328986 1.9557 0.05162 * working total -0.000221889 9.78966e-05 -2.2666 0.02427 ** unemployment rate -0.00264038 0.00090117 -2.9300 0.00370 *** the arithmetic mean of the dependent variable 0.341916 standard deviation of a dependent variable 0.063308 the sum of residual squares 0.416822 standard error of residues 0.040832 co determines r squared 0.599995 adjusted r-square 0.583995 f (10, 250) 37.49919 the p value for the f test 2.64e-44 logarithm of credibility 470.0269 akaike inform. crit. -918.0538 schwarz-bayesian crit. -878.8441 hannan-quinn inform. crit. -902.2928 oe synthetic measure source: own study based on cso bdl data table 5 logistic estimation, used observations 1-261 (variable dependent on the financial situation) factor stand. error tstudent’s value p oe infrastructure -0.981554 0.321612 -3.0520 0.00251 *** natural persons conducting economic activity -0.00600326 0.00208234 -2.8829 0.00428 *** income from personal income tax 0.00382073 0.000849536 4.4974 0.00001 *** income from corporation tax 0.0275006 0.00637221 4.3157 0.00002 *** own income 0.619357 0.313647 1.9747 0.04939 ** working total -0.00264057 0.000597913 -4.4163 0.00001 *** unemployment rate -0.032394 0.00482607 -6.7123 <0.00001 *** basic statistics for transformed data: the sum of residual squares 18.25171 standard error of residues 0.268062 co determines r squared 0.866781 adjusted r-square 0.863634 f (7, 254) 236.0914 the p value for the f test 2.6e-107 logarithm of credibility -23.17879 akaike inform. crit. 60.35759 schwarz-bayesian crit. 85.30923 hannan-quinn inform. crit. 70.38734 basic statistics for original data: the arithmetic mean of the dependent variable 0.341916 standard deviation of a dependent variable 0.063308 the sum of residual squares 0.894773 standard error of residues 0.059353 source: own study based on cso bdl data related financial, economic, social, infrastructural, and natural factors testify to the multidimensional character of the development process. they affect the economic situation of the local government, the conditions for the implementation of tasks. poviats are the centres of economic, social and cultural life. they focus on economic and social activities, in which there are disproportions. the synthetic measure enables the evaluation of a multidimensional phenomenon, as well as the linear ordering of the examined units. it can be a helpful tool for authorities to assess the accuracy of decisions taken in the past and the effectiveness of instruments used in the past. it gives a comparative image between objects subject to analysis; it allows indicating weaker and better areas of the unit’s operation. baltic journal of economic studies 7 vol. 5, no. 3, 2019 the income situation and financial independence of communes were related to the economic situation of the region. the financial situation of the poviat is the source of information on the potential of the individual’s economic development. it affects the quality of life of residents. information about the state of finances of cities with poviat rights forms the basis for a comprehensive assessment of the activities of the local government, and the expenses implemented indicate the development opportunities of these units. the situation of the surveyed units varied. the ranking of cities in the ranking did not change substantially in the subsequent years. it was confirmed that financial resources are the basis for the operation of individuals and a condition for carrying out the tasks imposed on them, determine development, and reflect the potential for economic development. table 6 correlation of the synthetic measure and its variable structure in 2009 and 2016 2009 2016 oe financial situation oe development potential oe financial situation oe development potential oe financial situation 1,0000 0,4413 1,0000 0,5192 oe development potential 0,4413 1,0000 0,5192 1,0000 oe economic potential 0,2826 0,7295 0,4058 0,7622 total business entities 0,2029 0,6082 0,3298 0,5312 natural persons conducting business activity 0,2518 0,6092 0,3901 0,5632 own income 0,7763 0,3971 0,6489 0,2405 income from personal income tax 0,4456 0,7649 0,6138 0,6770 income from corporation tax 0,4729 0,4027 0,3349 0,4243 linear correlation coefficients for observations from sample 1-87; 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(2010). metody taksonomiczne w rozpoznawaniu typów ekonomicznych rolnictwa i obszarów wiejskich. uniwersytet przyrodniczy w poznaniu, poznań. wysocki, f., lira, j. (2005). statystyka opisowa. poznań: wydawnictwo uniwersytetu przyrodniczego w poznaniu. zalewski, w. (2012). zastosowanie metody topsis do oceny kondycji finansowej spółek dystrybucyjnych energii elektrycznej ekonomia i zarządzanie, 4. baltic journal of economic studies 84 vol. 5, no. 5, 2019 corresponding author: 1 alfred nobel university, ukraine. 2 international university of business and law, ukraine. 3 admiral makarov national university of shipbuilding, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-5-84-89 aquacultural integration in recreational tourism: features of development and management of coastal territories taras melikh1, dmytro voit2, dariia archybisova3 abstract. tourism has been growing and diversifying in recent years to become one of the fastest growing sectors of the economy in the world. modern tourism is closely linked to economic development and is embracing an increasing number of new destinations. such dynamics have transformed tourism into a key driver of socioeconomic progress. as for recreational tourism as one of the key species, it not only covers most of the related industries directly or indirectly, including transport, construction, trade, catering, agriculture, housing and communal services, culture, art, sports, etc., but also stimulates their development. the focus of recreational tourism on the sea and ocean coasts has expanded the range of tourism services. aquaculture, which is becoming more relevant in the context of ecosystem conservation, is one of these areas of activity. since aquaculture and tourism require certain requirements for water quality and the environment, there is an inevitable conflict of interest between entrepreneurs. and as research has shown, such conflicts have arisen in many countries. it has been found that solving this issue may not be the same for everyone. only individual management, strategic planning and continuous monitoring will allow the effective development of coastal areas and profit for the country. independent research conducted by the scottish research forum found no evidence of a negative relationship between aquaculture and recreation. in many cases, aqua farms are of cognitive and gastronomic interest to tourists. the study also does not consider the development of aquaculture to be incompatible with tourism, but on the contrary it is an integrating process. both industries are important to the economies of the countries, so in every territory where aquaculture and recreation can be mutually beneficial, a balance must be struck between them. the aim of the study is to analyze the specific aspects of aquaculture in ukraine and in the world. the main objectives of our research are: to explore the role and importance of aspects of the introduction of recreational tourism in aquaculture; to analyze the current state of tourism in the world and its economic indicators; to identify the problems of intensification of recreational tourism in the coastal regions of the world; to offer the own vision of the prospects of integrating aquaculture into recreational tourism. research methods. to achieve this goal there are used general scientific and special research methods in the work, such as: statistical method is for systematizing economic and statistical information on the development of tourism and aquaculture; methods of analysis and synthesis are for studying the functioning of aquaculture in general and its individual aspects; regional method is for studying the functioning of the industry in regional development; method of economic analysis is implemented in identifying trends, patterns and prospects of tourism and aquaculture. key words: tourism, recreation, recreational services, aquaculture, coastal management, development of the region. jel classification: z32, q22, r11 1. introduction every year, tourism in the world reaches a leading position in the structure of gdp and significantly outperforms other branches of intangible production. the decisive role of tourism is its tangible contribution to the development of the country's economy. active travel tourism has a great impact on geographical space, this effect is evident on all elements located in a certain territory and has certain effects that can be economic, social and environmental. the latter are at the forefront of discussion today as there are acute problems with the conservation of terrestrial and aquatic ecosystems. therefore, the main focus of tourism for the previous five years has become recreational. recreation in an increasingly global development is becoming increasingly important. it is a leading form of economic growth for many countries and the improvement of the baltic journal of economic studies 85 vol. 5, no. 5, 2019 lives of local communities. recreational areas near water bodies are one of the most important opportunities to meet the growing demand for recreation. the following statistics show the extent of recreation: –20%, that is, 1/5 of the entire population of the world, annually takes part in recreational activities and trips; –40-55% of the population of major cities in the world travel outside cities for recreational purposes on weekends; – recreational spending in economically developed countries is 2.3 times higher than spending on clothing and footwear and 18% higher than the cost of purchasing food products (pokolodna, 2012). in recent years, about 51% of international tourist trips are made for leisure and recreation, with business and professional purposes accounting for 15%, and 27% for specific purposes: visiting friends and relatives, pilgrimage, medical treatment and more. recreational tourism development has a leading role in the management of recreational resources, especially in the coastal areas where a new branch of agriculture – aquaculture – has been developing recently. on the one hand, recreation is a competitor in aquaculture, and on the other hand, it can become a driver of production development. the development of tourism in the context of enhancing aquaculture will create additional economic, social and environmental value and will be a facilitator of the multifaceted use of coastal zones. 2. analysis of the economic and ecological effect of tourism on coastal aquaculture there are 15 countries in the world that specialize in travel services, where tourism revenues often exceed in many times the export of goods, and in 45 countries, tourism revenue exceeds 1/4 of exports. the functioning of business entities in the field of tourism is closely linked to the development of the economy, or affects the development of 32 branches of the national economy. today 's preview from howmuch.net highlights the countries where tourists spend the most money. the location has been changed based on the costs that come from the latest world tourism organization data (figure 1) (global report on food tourism). as we can see, the top is headed by countries that have access to the seas or oceans (table 1). figure 1. top countries by tourist spending (mapped: top countries by tourist spending) baltic journal of economic studies 86 vol. 5, no. 5, 2019 the countries of western europe are distinguished in the world by the highest level of exploitation of recreational resources, their most efficient use and provision of recreational ser vices. the countries of europe are the most recreationally attractive in the world. about 60% of all tourists on our planet are involved in its natural, cultural, historical and ethnic diversity. europe is like a whole world in miniature. traditional leaders in terms of tourist visits to europe are france (74.5 million people), spain (53.6 million people), and italy (41.2 million people), the united kingdom (24.9 million people), germany (18.9 million people), greece (12.5 million people), which together account for 78% of the world's revenue. at the same time, we can see that the proportion of less developed and developing countries is gradually increasing ever y year. on average, one tourist brings about $ 870 to the countr y, however, each countr y as an agent of the world recreational market has its own specificity (global report on food tourism). each coastal country has the exclusive economic zones (eezs) that can extend up to 200 km offshore. legal mechanisms and investment incentives are often introduced in these regions to privatize and develop these marine areas for aquaculture and other industrial purposes. the geography of aquaculture concentration is shown in figure 2. this commercial exploitation will go beyond sub-national (state or provincial) regulation. the world tourism organization reports that in the first half of 2019 the number of international tourists from january to june in the world amounted to 671 million people. it is noted that this figure is 30 million more than in the same period in 2018, which is an increase of 4.4%. the flow of tourists to the middle east countries increased by 8%, by 6% to asia and the pacific region. tourists arrived in the european table 1 the most popular tourist destinations by country (global report on food tourism) country 2018 spending 2018 arrivals country 2017 spending 2017 arrivals 1. the usa $214.5b 79.6m 1. the usa $210.7b 74.8m 2. spain $73.8b 82.8m 2. spain $68b 81.8m 2. france $67.4b 89.4m 3. france $60.7b 86.9m 4. thailand $63b 38.3m 4. thailand $57.5b 35.4m 5. uk $51.9b 36.3m 5. uk 51.2b 37.7m 6. italy $49.3b 62.1m 6. italy $44.2b 58.3m 7. australia $45b 9.2m 7. australia $41.7b 8.8m 8. germany $43b 38.9m 8. germany $39.8b 37.5m 9. japan $41.1b 31.2m 9. macao (sar) $35.6b 17m 10. china $40.4b 62.9m 10. japan $34.1b 28.6m figure 2. global aquaculture and fisheries map (fishing & aquaculture) baltic journal of economic studies 87 vol. 5, no. 5, 2019 countries in the first six months of this year by 4% more than in the same period in 2018. north america has seen a 2% increase in tourists and 1% in central america. in south america, the number of tourists decreased by 5%, including due to a decrease in outbound trips from argentina, which affected neighboring destinations. in africa, the number of international arrivals increased by 3%. at the same time, north africa (+ 9%) continues to show steady results, while the arrival of sub-saharan arrivals is close to zero. in the middle east in 2019 there was recorded growth of +8%. these statistics show the direct and overall economic impact of travel and tourism on the world economy from 2006 to 2018. the direct economic contribution of travel and tourism was about $ 2.75 trillion in 2018 (figure 3) (the global report on food tourism). but the constant movement of tourists has negative consequences, especially for coastal regions. as for water resources, high synergies between tourism and industrial aquaculture can be expected. in addition, the regular stay of tourists in controlled areas (aqua farms) can help to reduce or eliminate poachers and facilitate the detection of illegal fishing. on the other hand, inexperienced tourists can cause significant degradation of the region's biosystem environment. for example, many studies have pointed to the damage done by divers in sensitive coral reef areas. preventing this harm can be achieved by setting the maximum number of tourists for the area and ensuring that diving masters and nonprofessional divers are properly trained in best practices and possible harms related to this activity. 3. experience of advanced countries of the world of activation of recreational tourism in the context of the development of aquaculture in coastal territories and the possibility of its application in ukraine degradation of ocean ecosystems driven by human activities has led to an increased global interest in the establishment of ocean protected areas. one type of protected area, where all forms of fishing are prohibited, is known as a “marine reserve”. much of the interest in marine reserves is driven by their success in recovering important habitats and increasing species biomass and diversity within the reserve’s boundaries. although reserves can fail to reach their full potential because of the lack of resources for monitoring and enforcement, they are a globally important conservation tool. in addition to these clear conservation benefits, the increases in species population size within reserves can also generate important economic benefits. for example, fisheries benefits can arise through the spillover of adults and/or the export of larvae to surrounding fished areas (viana, halpern, gaines, 2017). benefits from tourism can in many cases be far greater than the opportunity cost of foregone fishing. for example, in the great barrier reef annual revenue from tourism is 36 times greater than income from commercial fishing. in the medes islands marine reserve (spain) annual revenue from tourism is about 20 times greater than fishing revenue. potential tourism revenue from marine reserves can be generated directly through user fees or by boosting the tourism economy in the region. marine reserves can potentially increase value of all figure 3. the economic contribution of travel and tourism to gdp worldwide 2006-2018 (global no.1 business data platform) baltic journal of economic studies 88 vol. 5, no. 5, 2019 business associated with tourism (e.g. hotels, restaurants), especially those dependent on underwater activities (e.g. dive centers). these benefits depend on the location of the reserve as well as the biomass of fish in the water. reserves located near coastal areas with intense tourism activity and other tourist attractions are likely to have high visitation rates quickly after reserve creation. in such situations, the marine reserve may not be the main draw to the area and often does not require high levels of biomass to attract divers. by contrast, locations where there are no other coastal attractions other than the marine reserve may only attract more experienced divers that are drawn by high levels of fish biomass and diversity. these areas may need to be more spectacular and tied with marketing strategies to attract large numbers of divers, since the reserves will often be competing with diverse diving options around the globe (viana, halpern, gaines, 2017). in spite of the above data on the economic benefits associated with tourism activities in marine reserves, most spatial planning models consider only fishing and / or environmental benefits, but ignore the tourist benefits. to incorporate the potential benefits of tourism, a bioeconomic model was developed (viana, halpern, gaines, 2017). the model is designed to simulate different designs of marine reserves and their projected impact on fisheries and tourism revenues: bt,i=bt−1,i+g*bt−1,i*(1−bt−1,iki)−fi*bt−1,i−et,i+it,i where bt,i is the biomass in year t and patch i, g is the intrinsic growth rate, ki is the carrying capacity, fi is the harvest fraction, et,i is the emigration from patch i and it,i is the immigration to patch i from all other patches. this model may reflect the potential benefits of both services in different tourism and fisheries management scenarios to understand under what conditions marine reserves are part of the optimal solution that maximizes economic benefits. we then analyze the potential tradeoffs between fisheries and tourism's economic benefits to understand the incentives that stakeholders face and situations where conflicts may arise. the expected trade-offs between fisheries and tourism services vary according to different management scenarios. fisheries revenues are declining with the increase of marine areas. in such cases, if tourist value is ignored, marine reserves are not part of the optimal economic solution. thus, with perfect fisheries management, it is necessary to introduce tourism services to ensure that marine reserves are part of an optimal economic solution. the development of tourism in reserves preserves huge costs for infrastructure maintenance and measures for the conservation of natural complexes and objects at the expense of budgetary funds. without it, it is impossible to talk about the environmental friendliness of tourism. thus, studies conducted in the great barrier reef national park (australia) have shown that the cost of conserving natural complexes is increasing at the same rate as their degree of exploitation. the park administration lacks $ 15 million per year, which is paid by tour operators, to eliminate and prevent threats to the nature of the reef, so the state is forced to allocate additional funds. the us economy receives about $ 3 billion annually from tourism related to visiting national parks, but a significant portion of the costs of maintaining their regime and compensating for environmental damage are still borne by the us state budget. tourism in most protected areas makes one of the major contributions to the growth of national economies in these countries. thus, tourism is of the utmost importance for the governing bodies of the reserves to fulfill the tasks they have set to meet the requests and interests of the visitors. ontario's recreational sector is a major generator of job creation, tax revenue and capital exports. thus, only tourism in ontario is the fifth largest export industry, generating сa $ 7.1 billion in provinces. the contribution of tourism to the province's gdp reached ca $ 7.2 billion, exceeding the share of agriculture, mining and forestry. in ontario, taxes on the hotel sector now include a retail tax, which is a consumption tax and is included in the retail price of most goods. currently, most of the rooms that are rented out like hotels, motels and rooms for rent are subject to a 5% tax. most goods and services sold and provided in canada are subject to a 7% national tax. in montreal, laval, vancouver, british columbia, st. john's, newfoundland and ontario, a 3% hotel tax is charged. a tax increase from 4% to 7% is expected in olas, kansas. the collected taxes in timmys are at the disposal of the hotel owners and are distributed quarterly by the subcommittee of the corporate economic development corporation (cert) through a special account organized by the municipality. the revenues from the tourist tax are distributed according to the main directions of tourism development in the city in order to promote the marketing of the city as a tourist center and the future capital construction in it (marinig). the experience of developed countries undoubtedly shows that the provision of recreational services is extremely important for the development of the economy, and it is a topical and perspective issue of the coastal regions of ukraine. through the synergy of aquaculture and tourism, new quality of economic growth, social security, improving the well-being of citizens and positive financial, economic and socio-psychological effects can be ensured. in particular, the success of the development of recreation and the process of providing recreational services as a sphere of economic activity is determined in three main directions: economic, social and environmental. economic success can be measured by the share of recreational services provided in the country's gdp, in terms of exports and in the number of jobs created. social success is determined by employment, share of personal income from recreational services, etc. the environmental success of recreational services is linked to the application of general and area-specific environmental standards. world experience proves that the recreational sphere naturally and harmoniously combines all opportunities baltic journal of economic studies 89 vol. 5, no. 5, 2019 of global and national development of human and society on the basis of existing regional resources. ukraine has significant potential for tourism development in the context of various destinations. therefore, attracting investment in the tourism industry of the country should take on one of the most relevant values, since it will enable to attract more tourists and, accordingly, increase the volume of services provided. in general, the tourism industry in ukraine has many imperfections in functioning, management and supervision, which require a separate, immediate and systemic solution. 4. conclusion the study shows that tourism has a leading place in the economies of the world leading countries and accounts for a significant share of gdp. but this is not the highest level. the number of tourists in the world is expected to increase by an average of 3.3 percent a year from 2010 to 2030. in absolute terms, international tourist arrivals will increase by approximately 43 million per year, compared to an average increase of 28 million per year from 1995 to 2010, reaching 1,400 million by 2020 and 1,800 million by 2030 (unwto 2014). countries in regions with ocean or sea access must prepare for upgrading their infrastructure and facilities to cope with the significant increase, as coastal visitation is and will continue to trend. increasing the recreational potential of nature's coastal territories is one of the priorities of each country. ensuring the development of artificial cultivation of bioresources and improvement of coastal infrastructure will allow not only to preserve the natural potential of the regions by optimizing the recreational load on natural systems, but also to increase the revenues of a certain area by expanding tourist services. at the same time, the formation of aquaculture tourism infrastructure will allow more full use of the recreational potential of the region's uniqueness, which will entail the development of a complex of related services in the fields of transport, hotel business, catering, sports, and trade. the conducted research shows that demonstrative for ukraine in the organization of provision of recreational services by municipal authorities in cities are: decentralization, delegation of powers to local authorities, establishment of organizational relations between subjects of recreational activity, local population, municipal authorities; creation of political, economic, environmental, institutional conditions for the functioning of recreational activities; introduction of incentive mechanisms for recreationists to constantly improve the quality of recreational services; strengthening the role of municipalities in planning, financing and organizing the provision of recreational services; improvement of the legal and methodological base for ensuring the functioning of the recreational services system, as well as creating organizational conditions for the development of recreational services, etc. there are all the necessary prerequisites for the development of the recreational aquaculture services market in the black sea area of ukraine. the market for these services is currently emerging and is in high demand (for example, the creation of several aqua farms). analysis and forecast of aggregate demand in the tourist market showed that the number of tourists is increasing every year, and the tendency to increase tourist flow in the near future will continue. this is what makes the question of finding new ways of tourism development in ukraine especially urgent. references: pokolodna, m. m. (2012). konspekt lektsij z dystsypliny “rekreatsijni kompleksy svitu (v tomu chysli turresursy ukrainy) [lecture on the subject "recreational complex world (including tourist resources of ukraine)]. kharkiv: kharkiv national academy of municipal economy. (in ukrainian) global report on food tourism. world tourism organization (unwto), madrid, spain, 2012. mapped: top countries by tourist spending. retrieved from: https://www.visualcapitalist.com/map-countriesby-tourist-spending/ levtsov, s. v. (2015). zarubizhnyy dosvid orhanizatsiyi nadannya rekreatsiynykh posluh ta yoho implementatsiya v ukrayini [foreign experience of recreational service organization organizations and its implementation in ukraine]. dnipropetrovsk state agrarian and economic university. retrieved from: http://www.dy.nayka.com.ua/?op=1&z=889 fishing & aquaculture. retrieved from: https://www.theglobaleducationproject.org/earth/fisheries-and-aquaculture.php global no.1 business data platform. retrieved from: https://www.statista.com/statistics/233223/travel-andtourism--total-economic-contribution-worldwide/ viana, d. f., halpern, b. s., & gaines, s. d. (2017). accounting for tourism benefits in marine reserve design. retrieved from: https://www.ncbi.nlm.nih.gov/pmc/articles/pmc5739484/ marinig, k. perspektivy nalogooblozheniya turizma na munitsipal'nom urovne (na primere goroda timminsa) [prospects for tourism taxation at the municipal level (on the example of the city of timmins)]. retrieved from: http://citystrategy.leontief.ru./world/marinig.htm (in russian) stehnei, m. irtyshcheva, i., boiko, y., rogatina, l., & khaustova, k. (2018). conceptual approaches to the formation of regional food security strategy in the context of sustainable development. problems and perspectives in management, vol. 16(4), pp. 42–50. doi: http://dx.doi.org/10.21511/ppm.16(4).2018.04 stehnei, m., irtyshcheva, i., & gurina, o. (2018). financial mechanism of the socio-oriented economic development of the black sea region. baltic journal of economic studies, vol. 4, no. 4, pp. 202–208. doi: 10.30525/2256-0742/2018-4-4-202-208 baltic journal of economic studies 125 vol. 6, no. 1, 2020 corresponding author: 1 m.s. bokarius kharkiv research institute of forensic examinations, ukraine. e-mail: sviderskyi_o@ukr.net 2 m.s. bokarius kharkiv research institute of forensic examinations, ukraine. e-mail: andriivlub@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-1-125-129 the impact of corruption on the development of legal and economic systems of state oleksandr sviderskyi1, andrii lubentsov2 abstract. the purpose of the article is to examine the impact of corruption on the development of legal and economic systems of state. the subject of the research is the impact of corruption on the development of legal and economic systems of states. methodology. research methods are chosen based on the object, subject and purpose of the study. the study used general scientific and special methods of legal science. thus, the analysis and synthesis method as well as the logical method were used to formulate a holistic view on corruption, its features, aspects as well as the ways in which it can be manifested. the logical-semantic method was used to establish the meaning of the term “corruption”, “informal sector”, “legal system”. the comparative method was used when analyzing scientific categories, definitions and approaches. the legal modeling method has been applied to develop proposals for improving anti-corruption regulatory framework. results. the article generalizes scientific views on the interpretation of the concept of corruption, on the basis of which the authors’ view on this category is proposed. psychological and sociological aspects of corruption are explored. the scientific opinion that corruption is a negative phenomenon that impedes the proper functioning of social, economic and legal systems of state is substantiated. practical implication. particular attention is paid to the fact that corruption is directly related to the informal sector. therefore, it is emphasized that the legislator should create all the necessary organizational and legal conditions in order to minimize the risks of corruption in state. value/originality. there is a need to raise legal awareness of citizens as an important factor in counteracting corruption and its manifestations in society, because nowadays corruption is treated with higher tolerance, is being taken for granted, that is, it is becoming a norm in modern society. key words: corruption, social sphere, economic system, legal system, legislation, counteraction. jel classification: p49, z19 1. introduction the phenomenon of corruption has a long history, as, according to historical sources, it arose at the same time as establishment and development of power and monetary relations in society. the first mention of corruption, as a negative form of civil service, is contained in the oldest historical monuments known to humankind: in the archive of ancient babylon, dating from the second half of the 24th century b.c. e. in the sumerian and semitic era, king lagash (an ancient citystate in sumer on the territory of modern iraq) reformed government to stop abuses of officials and judges, as well as to reduce illegal remuneration of temple staff by royal administration, to reduce and streamline the payments for rituals (beliavskii et al., 1956). over the centuries, corruption has been constantly evolving, changing, taking on new forms. this has led to the fact that today it affects the economies of virtually every country in the world. it should be noted that corruption, as a negative economic and legal phenomenon, not only obstructs the effective functioning of state and public processes in it, but it also poses a threat to the national security of the country, undermining it both internally and externally. however, the worst, in our opinion, is the fact that corruption is now being taken for granted, that is, it is becoming a norm in modern society and this cannot but be a cause of concern both for the legislature and for the representatives of the academic community. 2. presentation of the main material it must be noted that to date, the issue of corruption and the ways to counter it were considered by the experts from different countries. it was considered from a legal, economic, philosophical, social, political perspective. besides, the issue of combating corruption has been repeatedly addressed in various international baltic journal of economic studies 126 vol. 6, no. 1, 2020 forums, conferences, etc. all this has led to the development of various concepts, programs, etc. at the intergovernmental level, aimed at counteracting this negative phenomenon. it should also be noted that legal scholars, justifying the feasibility of conducting research on the issue of combating corruption, pay attention to the versatility of this issue, as well as to the fact that it has a negative impact on all spheres of public life. however, notwithstanding the above, today there is still no consensus on the kind of impact that corruption has on the development of legal and economic systems of state. therefore, the presented article will work on this issue. when starting the scientific research, we should first find out, which is a corruption. in roman law, the definition of “corrumpere” was interpreted as damaging, breaking, destroying, bribing and signifying unlawful acts in judicial practice, in particular, impeding the normal proceedings or the process of managing public affairs (stashys, 2001). for the first time definition of corruption in its modern usage was given in 1425, and was determined as the “deviation from righteousness and loyalty in the performance of duties” (robertson, 2006). today, the concept of corruption has been interpreted both in the reference literature and at the doctrinal level. thus, according to the explanatory dictionary of the modern ukrainian language, “corruption” should be interpreted as: 1) the activity of persons authorized to perform the functions of the state, aimed at the unlawful use of their powers to obtain material goods, services and other benefits; 2) direct use by the official of his (her) position for personal enrichment; 3) venality of government officials and public figures (busel, 2003). in the international police encyclopedia, corruption is defined as activities of persons, authorized to perform the functions of the state, aimed at unlawful use of their powers to obtain material goods, services, privileges or other benefits. corruptive acts are: a) unlawful receipt of material goods, services, privileges or other advantages, in particular the acceptance or receipt of items (services) through the acquisition at a price (tariff ), which is substantially lower than their actual (true) value by a person authorized to perform the functions of the state when performing such functions; b) obtaining by a person authorized to perform the functions of the state, credits or loans, purchase of securities, real estate or other property with the use of privileges or advantages, which are not provided by the legislation (kovalenko et al., 2001). in the anti-corruption plain language guide (transparency international, 2009) corruption is also interpreted as the abuse of entrusted power for private gain. corruption can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs. petty corruption is everyday abuse of entrusted power by public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies. grand corruption is the abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society. it often goes unpunished. political corruption is manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth (soloviov, 2011). v.d. hvozdetskyi (2012) notes that corruption is a complex and multidimensional social phenomenon (legal, economic, political, moral and psychological). the social essence of corruption is manifested in several ways: it is socially constructed (is a product of social life); has social cost that society pays for corruption, has a significant impact on the most important social processes; has historical origins and global character; it is legal, economic, political, psychological and moral phenomenon; it an ability to adapt to social realities, constantly reflecting and changing. the specific manifestations of this social phenomenon receive legal and moral appreciation from the state and society, reflecting the social essence of corruption. corruption characterizes the main social processes occurring in state and society, in which the most significant problems for state and society are reflected. v.i. popov (1996) defines corruption as a set of various acts (acts or omissions) expressed in the unlawful receipt of property, services or privileges by a person authorized to perform public functions, in the unlawful provision of property, services or privileges, in the mediation or incitement to such actions from the interested person. s.m. klimova and t.v. kovalova (2012) characterize corruption as a complex social phenomenon, which consists in the use of official position for personal gain, adversely affecting all aspects of political and socioeconomic life and development of society and state. thus, based on the views discussed above, it can be stated that corruption, as the activity, is the use of the powers by authorized entities to gain undue benefits (in the form of financial or material remuneration). in turn, defining the concept of corruption as a phenomenon, scientists agree that it primarily has a negative social aspect. therefore, before determining the impact of corruption on legal and economic systems of state, it is necessary to determine its social as well as psychological aspects. the psychological aspects of corruption take the following forms (types): misuse of power or office, abuse of power or office, other official crimes committed for selfish or other personal interests or to serve the interests of the others; theft of state, collective or private property using official position; unlawful receipt of material or other goods, benefits and other privileges; obtaining credits, loans, assistance, purchase of securities, real estate or other property using benefits or privileges, which are not provided by law or to which baltic journal of economic studies 127 vol. 6, no. 1, 2020 the person is not entitled; bribery; running business directly and through the intermediaries or subordinates using official powers, as well as related opportunities; assistance to natural and legal persons in running business using official position in order to obtain material and other benefits; undue interference in the activities of other state bodies or officials using official position in order to hinder the performance of their professional duties or to make them to issue unlawful judgments; the use of information obtained in the course of duty for selfish or other personal interests, unjustified refusal to provide relevant information or its untimely provision, or the provision of unreliable or incomplete official information; providing unjustified benefits to natural or legal persons through the preparation and adoption of regulatory acts or management decisions; protection of selfish or other personal interests in the appointment of the person who has no professional and business qualities that would give him (her) advantages over other candidates (akimov, 2014). as for the sociological aspect of corruption, m.i. melnik (2002) notes that the social essence of corruption is manifested in several ways: it is socially constructed (is a product of social life); has social cost that society pays for corruption, has a significant impact on the most important social processes; has historical origins and global character; it is legal, economic, political, psychological and moral phenomenon; is an ability to adapt to social realities, constantly reflecting and changing. it is primarily manifested in the fact that it has social conditioning (is a product of social life), has a social price that society pays for corruption; significantly influences the most important social processes; has historical origins and global character; is an economic, political, legal, psychological and moral phenomenon; has the property of adapting to social realities, constantly changing. therefore, it is certainly the fact that when investigating corruption it is necessary to pay attention to the social consequences of corruption manifestations, since it leads to a significant difference between declared and real values, which creates a “double standard” of morality and behavior at the public macro-level, and the phenomenon of “institutional duality” at the macrostructures level. it is through corruption that the civilized social regulators of human behavior (norms of morality, law, religion, public opinion) are devalued and destroyed; e. durkheim called this process “value anomie”. in general, it is a state of society, in which a significant part of its members, knowing about the existence of binding rules, treat them negatively or indifferently. corruption discredits law as the main instrument for regulating life of state and society, as well as the state as the main public institution (official web site of solomianskyi district state administration, 2014). thus, corruption should be considered as one of the most negative phenomenon that has a devastating impact on society. it is because of this that the level of public confidence in public authorities in particular and in the state in general decreases. as a result, citizens are suspended from the problems of state and society, which in turn leads to the loss of a sense of social solidarity, justice, etc. we are convinced that it is precisely because of the existence of corruption in society that the value of the profession of a civil servant is declining, and honor, dignity and high status of persons who carry out their activities on behalf of the state are diminished. therefore, it can be said that corruption “consumes” society of the center, hinders not only its social development, but also the formation of legal and economic systems of state. another area, which is adversely affected by corruption, is the economic one. the economic sphere is the environment, for which an official becomes involved in corruption relations, where corruption is powered and where profits are the greatest. therefore, the reverse impact of corruption on the economy is especially dangerous, because it reduces the effectiveness of the economic policy of the state, forces the private business to move into informal sector, which entails breach of legislation, misrepresentation of tax system and the rules of business activity, forces the entrepreneurs to resolve their problems outside the legal framework (dzhuzha, 2010). the most negative effects of corruption on the economy include: – the expansion of informal sector. this leads to the reduction of the tax inflow to the budget; – the violation of the competitive mechanisms of the market because often the winner is not the one, who is competitive, but the one, who is able to gain the benefits illegally. this leads to a decrease in market efficiency and a discrediting of competition ideas; – the emergence of efficient private owners is slowing down, primarily due to privatization violations and artificial bankruptcies, usually connected with corruption of officials; – the inefficient use of budget funds, in particular when allocating state procurement and benefits. this exacerbates the budgetary problems of the country; – the increase of prices at the expense of “corruption costs”. as a result, the consumer suffers; – the lack of agents’ confidence in the ability of the authorities to establish, control and adhere to fair market rules; – the deterioration of the investment climate, resulting in failure to overcome the downturn and update fixed capital; – the expansion of the scale of corruption in nongovernmental organizations (firms, enterprises, social organizations). this leads to a decrease in the efficiency of their work and, accordingly, the efficiency of the country’s economy as a whole (dzhuzha, 2010). in our opinion, particular attention should be paid to the point that corruption is directly related to the informal sector. the informal sector is an economic baltic journal of economic studies 128 vol. 6, no. 1, 2020 activity, the entities of which avoid official accounting and tax payments. three types of informal sector are usually identified by the nature of activity and the sources of income: 1) informal economy is the legalized (permitted) economic activities, the subjects of which avoid official accounting and justify their actions by the situational need for physical survival. it is the largest segment of the informal sector, represented by various types of small-scale production of goods and services (for example, music or photography services at weddings, associated transportation of passengers or cargo, tutoring, repair and construction works under the contract with individuals, selling products from household plots in “floating” markets) (blank, 2016). the activity, which is caused by the latest technological advancements and is not subject to current legislation yet, which is too difficult to evaluate for taxation due to its virtual nature (for example, so-called home office, when it is possible to earn money without leaving home) is being added to the above activities; 2) hidden economy is legal economic activity, the subject of which are usually entrepreneurs, who fare involved in various organizational and financial manipulations for obtaining super-profits (for example, artificial fragmentation of big business for obtaining tax preferences for small business, using barter deals for profit, informal payments to employees to deceive the state (envelope salaries).this economy is also called the gray economy, as the expenses are still legal and the income is illegal; 3) the criminal economy is illegal (criminal) activities in the form of financial fraud, theft, smuggling, corruption, drug trafficking, pimping, racketeering, human trafficking and so on. such an economy is called the black economy, because its income and expenses are illegal (blank & batrakova, 2016). taking into account the above, the negative impact of corruption on the economy is not in doubt. we are convinced that there is a direct link between corruption and the state of the economy, as evidenced by relevant statistics. in particular, even a superficial analysis of the existing indicators makes it possible to note that it is obvious and undisputed that the higher the level of corruption in a country, the lower its economic development. thus, corruption, combined with other social and political factors, significantly slows down the pace of economic development of the country, reduces financial activity of domestic and foreign investors, as well as ordinary citizens. and the last aspect we will pay attention to is the impact of corruption on legal system of state. in general, the legal system can be considered from two perspectives: 1) in a broad sense as a set of interconnected uniform legal means (phenomenon), by which the authorities exert stabilizing, regulatory and managerial influence on social relations (by securing, specific or general regulation, authorization, obligation, prohibition, persuasion and enforcement, warning, imposition of sanctions, etc.); 2) in a narrow sense, the legal system is the unity of legal norms of national law and legislation, which consist of the central part (constitution), offshore (sectoral) and complex (intersectoral) laws (kondratiev, 2004). in this context, the negative impact of corruption is quite broad and vast, and covers a wide range of relationships. particular attention should be paid to the fact that today corruption has a direct impact on the formation of legislation in states. after all, the subjects, which are empowered to make laws and to adopt them, are using their positions to form a system of legislation taking into account the wishes of private business, thereby creating all the necessary conditions for the development of the activity of particular business entity, hampering the work of the others. therefore, it is corruption in legal system of state that creates a peculiar basis for the further “development” of this phenomenon and its penetration into all other spheres of public life. 3. conclusion corruption is a very destructive phenomenon, which influences all spheres of public life. concluding the presented scientific research, it is safe to state that corruption is a “disease” of modern society, which hinders its normal development. we noted that corruption has a negative impact on social, economic and legal systems of state, which is confirmed by masses of statistical data and scientific researches of the specialists. the most negative effects of corruption on the economy are: 1. expanding the shadow economy. 2. the competitive mechanisms of the market are violated because often the winner is not the one, who is competitive, but the one, who is able to gain the benefits illegally. 3. the emergence of efficient private owners is slowing down, primarily due to privatization violations and artificial bankruptcies, usually connected with corruption of officials. 4. budget funds are inefficiently used, in particular when allocating state procurement and benefits. 5. prices are rising at the expense of “corruption costs”. 6. agents have a lack of confidence in the ability of the authorities to establish, control and adhere to fair market rules. 7. the investment climate is deteriorating, resulting in failure to overcome the downturn and update fixed capital. 8. the scale of corruption in non-governmental organizations (firms, enterprises, social organizations) is expanding. success in the fight against corruption depends, on a large extent, on how well and deeply its social essence is understood. determining the social and legal nature of corruption, its essential features, formulating a scientific baltic journal of economic studies 129 vol. 6, no. 1, 2020 definition of the concept of “corruption", establishing relationships with other legal phenomena is fundamental both for the study of the legal nature of corruption and for practical activities in the area of combating corruption. it is also very important to adopt effective normative framework for regulating this issue. it is necessary to determine, which acts should be considered as corruption, which categories of offenses they belong to and what legal assessment they should receive. therefore, it is the responsibility of any modern democratic and socially-oriented state to create all the necessary organizational, legal and economic conditions to counteract corruption and any of its manifestation. however, in our opinion, it is not enough to pay attention only to the above mentioned aspects, it is important to raise the level of legal consciousness of the population, to teach the citizens to respect law, state and society. references: akimov, o. o. (2014). psykholohichni aspekty proiaviv koruptsii v derzhavnomu upravlinni [psychological aspects of manifestations of corruption in public administration]. public administration: theory and practice, 1, 181–188. (in ukrainian) beliavskii et al. (1956). vsemirnaia istoriia. entsyklopediia [world history. encyclopedia]. moskow: state publishing house of political literature. (in russian) blank, m. e., & batrakova, t. i. (2016). vplyv koruptsii na ekonomiku ukrainy [impact of corruption on the economy of ukraine]. scientific bulletin of uzhgorod national university, 7, part 1, 25–28. (in ukrainian) busel, v. t. (2003). velykyi tlumachnyi slovnyk suchasnoi movy [a great dictionary of modern language]. kyiv: vtf perun. (in ukrainian) dzhuzha, o. m. (2010). ekonomichna bezpeka [economic security]. kyiv: alerta; knt: center for educational literature. (in ukrainian) hvozdetskyi, v. d. (2012). koruptsiia – yak sotsialne, psykholohichne i moralne yavyshche [corruption as a social, psychological and moral phenomenon]. law, 3, 161–167. (in ukrainian) klimova, s. m., & kovalova, t. v. (2012). orhanizatsiia zapobihannia ta protydii koruptsii v ukraini [organization of prevention and countering corruption in ukraine]. kharkiv: kharri nadu “mahistr”. (in ukrainian) kondratiev, y. (2004). slovnyk spetsialnykh terminiv pravookhoronnoi diialnosti [dictionary of special terminology of law enforcement activities]. kyiv: national academy of internal affairs of ukraine. (in ukrainian) kovalenko, v. et al. (2011). mizhnarodna politseiska entsyklopediia [international police encyclopedia]. vol. vii: administrative and legal support of police activity. kyiv: ataka. (in ukrainian) melnik, m. i. (2002). kryminolohichni ta kryminalno-pravovi problemy protydii koruptsii [criminological and criminal-law problems of combating corruption]. doctor of legal sciences dissertation. kyiv. (in ukrainian) official web site of solomianskyi district state administration (2014). pravova storinka: koruptsiia [legal page: corruption]. retrieved from: http://www.solor.gov.ua/info/19/7246 (accessed december 30, 2019). (in ukrainian) popov, v. i. (1996). korruptsiia v rossii: sostoianie y problemy [corruption in russia: the state and problems]. proceedings of the research and practical conference (moskow, march 26–27). (in russian) robertson, a. (2006). misunderstanding corruption, anthropology today, 22(2), 8–9. soloviov, v. m. (2011). “pobutova koruptsiia”: sutnist, geneza ta suchasni tendentsii v ukraini [household corruption: essence, genesis, and modern trends in ukraine]. fighting organized crime and corruption (theory and practice), 25–26, 173–182. (in ukrainian) stashys, v. (2001). problemy borotby z orhanizovanoiu zlochynnistiu i koruptsiieiu v ukraini [the problems of countering organized crime and corruption in ukraine]. bulletin of the academy of legal sciences of ukraine, 2, 163–168. (in ukrainian) transparency international (2009). the anti-corruption plain language guide. germany: berlin, international secretariat. baltic journal of economic studies 221 vol. 6, no. 5, 2020 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: tnshkoda@ukr.net orcid: https://orcid.org/0000-0003-1016-4853 researcherid: m-1847-2013 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: maria_6.11@kneu.edu.ua orcid: https://orcid.org/0000-0001-6823-336х researcherid: k-4029-2018 3 kyiv national economic university named after vadym hetman, ukraine. e-mail: michael_p_s@ukr.net orcid: https://orcid.org/0000-0001-6526-1170 researcherid: e-7777-2018 doi: https://doi.org/10.30525/2256-0742/2020-6-5-221-232 intellectual potential management in forming strategic partnership of science-business-education tetiana shkoda1, mariia tepliuk2, mykhailo sahaidak3 abstract. the purpose of the paper is to identify the components of the enterprise intellectual potential, which are promising areas of intellectual potential management that is the basis of a strategic partnership between business, science and education in the brewing industry of ukraine. the novelty of the research is represented by the created theoretical model disclosing the specific advantages of such partnership for business, science and education in the context of intellectual potential management. the object of the scientific research is the process of the intellectual potential management and its role in forming strategic partnership of science-business-education. the research method includes the method of structural-logical analysis, the method of analysis and synthesis, the method of comparative analysis, statistical data and information analysis etc. the proposed algorithm for estimating the enterprise intellectual potential at the appropriate level of management includes ten stages, performing of which allows to get the calculated use level of the intellectual potential and its components: 1) providing the definition of generalized components of the enterprise’s potential and its important subspecies; 2) selecting and calculating the list of the indicators for defining the relative efficiency; 3) calculating the relative coefficients’ values for each enterprise considering average values in dependence of the type of activity; 4) aligning the contribution of the each subspecies of the potential; 5) calculating the efficiency coefficient of the consolidated relative use for each subspecies; 6) rationing the consolidated relative efficiency coefficient depending on their product; 7) calculating the potential share of each subspecies in the total value; 8) redistributing the obtained results by the components of the potential; 9) calculating the realized value of intellectual potential; 10) calculating the use level of intellectual potential and its components. the research is based on the ukrainian brewing industry’s data for the period of 2016-2019. the obtained results highlight the most problematic components of the intellectual resources of the brewing companies in ukraine such as "human resources", "technological resources" and "management resources". these components are recommended to be considered as the most promising areas of the intellectual potential development of the brewing enterprises in strategic partnership with educational and scientific institutions. the practical value of the proposed instruments for the brewing enterprises is in the use of the adapted graphanalytical model, which gives the opportunity to assess the structural components of intellectual potential of the enterprise and define the strategic directions of perspective partnership. key words: intellectual resources, estimation algorithm, intellectual potential, management, strategic partnership, brewing enterprises. jel classification: i23, j16, j71 1. introduction the modern business environment is in a constant turbulent state, which encourages the development of economics and the formation of new paradigms that update new resource combinations, strategic vectors of development fundamentally, which in turn ensures the baltic journal of economic studies 222 vol. 6, no. 5, 2020 investment attractiveness of enterprises. in the current conditions of functioning and dynamic development, the business environment is characterized by the attraction of traditional and intellectual resources, which are the basis of business activity. effective management of a modern enterprise, which is based on the process of creating and maximizing value for owners and other stakeholders, involves, first of all, managing its potential. however, the world economy, especially the economies of developed countries, is qualitatively different from their state a century ago. there is a need to form modern concepts of enterprise management, taking into account a new priority source of value creation – intellectual potential. in the process of intellectual potential management of the enterprise, the strategic partnership of science-business-education is formed. intellectualization, innovation, professionalism, competence are the unifying components of the strategic partnership of science, education and business (mazur, 2014). in turn, these components have a significant impact in the process of managing the intellectual potential of the enterprise. 2019 was a successful year for the brewing industry in terms of profitability of sales. a characteristic aspect of the development of the beer market is the strong branding policy of most beer producers (beer business, 2019). most beer market leaders, such as ab inbev efes, carlsberg group, pjsc “first private brewery”, jsc “obolon”, maintained their positions in 2019, but are actively in need of additional tools to strengthen their competitive position. a strategic partnership with scientific and educational institutions can be one of such tools by involving them in the development of intellectual potential of these companies. 2. literature review the founder of the knowledge society concept p. drucker, the author of the famous expression "in the knowledge society managers should be ready to give up everything they know", considered the priority task of managers to manage continuous flows of knowledge (drucker,1993), in turn updates the issues of this research. this trend has become a powerful driver for the formation of a new approach to effective management of intellectual resources – "knowledge workers". many researchers note (powell & snellman, 2004) that the ability to form focus groups, motivate personnel and enable them to enrich their knowledge, in turn will lead to the absolute uniqueness of management, success, business idealism and prolonged competitive advantage. in the context of the modern knowledge concept of k. shannon’s "information theory " (shannon & weaver, 1964) and f. knight’s "profit theory " (knight, 2016), it is noted that "information" is not only an economic resource, but also a means of reducing risk and overcoming uncertainty, which allows the business entity to achieve entrepreneurial success. information as an economic resource differs significantly from other types of company resources. characteristic features are timeliness, ease of distribution, self-growth in the process of use, uniqueness and value. that is, it can be noted that "information" is a powerful tool in competition. however, the use of information as an economic resource to create value occurs in two ways: the commercialization of information and direct impact on economic entities (carayannis, 2004). for modern business structures with long-term orientations for the future it is necessary to optimize resource management taking into account the possibility of ensuring the investment attractiveness of the enterprise. despite the global patterns of market changes taking place in the business environment, the law of "multiplicity of causes and effects" (kuršvietienė, stanevičienė, mongirdienė & bernatonienė, 2016) is becoming increasingly important, the "effect of strategic drift" (harris, dopson, & fitzpatrick, 2009), competition and etc. the corresponding tendency should be reflected in the system approach in management of activity of the enterprise, considering mental features of development of domestic business. that is, a key factor in achieving entrepreneurial success in modern business conditions is the focus on changing the management paradigm, which should be based on the principles of knowledge economy, which polarizes the company 's ability to generate, create and implement product-technological and organizationalmanagerial innovations in symbiosis with companies to form a new product and take responsibility for their implementation. the new management paradigm requires a fundamental update of management methods and principles: the construction of a new functional matrix, the formation of effective mechanisms to enhance personnel behavior. in this regard, the principles of new management should be: diversity, initiative, adaptability, flexible distribution of power, intrinsic motivation and etc. considering the transformation of "resource economy" (hibbard & lurie, 2013) into "open knowledge economy" (peters, besley & araya, 2014), the main factor in achieving success is the capacity and ability of employees to think, make decisions in conditions of increasing uncertainty, be able to use dynamic opportunities, resist global market changes, which in turn requires new approaches in assessment, motivation, control, behavior management. it should be noted that the "open knowledge economy” is an economic formation based on the relationship between the integration processes of the economic system. according to the concept of new management, the development of human potential and its effective use are necessary only if human interests are taken into account (castro, 2012). baltic journal of economic studies 223 vol. 6, no. 5, 2020 it should be noted that scientists are increasingly characterizing the modern business environment as a knowledge economy, although they do not give an unambiguous interpretation of this category. in particular, the scientific position of l. melnyk (2018) is that she defines the knowledge economy as an economy in which everyday knowledge creates added value and ensures its competitiveness. knowledge economy is also considered (stefanita, emelyanenko, shkoda, 2017) as a system, where the leading role is played by the processes of generation, application and dissemination of knowledge in creating tangible, material and intellectual wealth, and generally accepted social values. at the same time, at the level of enterprises, according to the categorical matrix of the theoretical and methodological basis of the knowledge economy, knowledge is represented by technologies. w. powell and k. shellman in their study under this term understand the production of goods and services based on knowledge-intensive activities, which simultaneously accelerates both technological and scientific growth and moral aging (powell, snellman, 2004). r . baker notes that in such conditions enterprises are able to "use unique characteristics of knowledge to form competitive advantages through their storage, distribution and analysis through networks and associations, using new information technologies," that is, transform them into equal economic benefits (baker, 2007). l. emelyanenko and t. shkoda (2016), g. bashnyanin, v. kutsyk and i. svidruk (2019) note the international exchange of technologies and the transfer of intellectual potential as a sign of our time. thus, in modern economic conditions, the management of intellectual potential becomes one of the cornerstones of strategic management of the enterprise, focused on the concept of value maximization. formulation and solution of theoretical and methodological problems of intellectual potential management is based primarily on the analysis of the economic content of this concept. according to this position in the economic aspect, in the authors’ opinion, the economic concept of "intellectual resources" can and should include the characteristics and results of intellectual activity, as well as other elements of intellectual functioning of the enterprise, including culture, relationships, leadership, trust, which provide control of the enterprise, receiving external and internal signals and forming models of appropriate actions (diefenbach, 2006). therefore, the authors tend to use the definition of "intellectual potential", because it not only reflects the features of the studied resources – infinity and intangibility, but also the nature and mechanism of their impact on the enterprise and its success: through a unique process of perception, processing and analysis of external signals, and synthesis based on the obtained results of optimal decision models taking into account the criterion of cost maximization. that is, the intellectual potential should include both direct human resources and functional aspects of their use – marketing, management, innovation, including codified results of intellectual activity in the form of intangible assets (andriushchenko et al., 2018). thus, it can be highlighted the advantages of this scientific position: determining the role of intellectual resources in the business cycle of the enterprise; selection of the classification criterion in view of the functions performed by them; formation of a hierarchical structure, according to which intellectual resources can be divided into those that directly form value and those that indirectly contribute to its creation; the possibility of using alternative management approaches as they complement each other (as in the case of a horizontal structure). one of the main shortcomings of the approach, in the authors’ opinion, is the limited study of only the innovation process at the stage of value release that is focusing exclusively on new elements, while creating value for all stakeholders is also provided by existing "supporting" intellectual resources. another point of discussion is the incomplete disclosure of the essence of the value formation mechanism in the process of intellectual potential management. in the knowledge economy, the process of intellectual potential management is more effective, as it becomes the basis for the formation and development of strategic partnership of science-business-education. after all, all three spheres are represented by certain organizations, for each of which the strategic partnership is a specific model of development (seleznova, 2019), when there is involvement and use of knowledge and skills of third parties from other two spheres to achieve strategic goals and gain or strengthen competitive advantage. in this case, as noted by h. yamnenko (2014), a sign of the strategic nature of the partnership is also the unique contribution of each partner to achieve a common goal. salimova t., vatolina n. and makolov v. (2014) believe that the strategic partnership in education has its own specific. strategic partnership in the field of education is performed on the basis of the appropriate agreement. and the purpose of such partnership is in realizing various innovative and educational targets including the intellectual potential development that let obtaining synergies effects due to interaction. in the authors’ opinion, it can be considered as the example of the unique contribution of the educational institutions in strategic partnership with scientific institutions and business entities. the purpose of the scientific article is to define the components of intellectual potential of the enterprise and justify intellectual potential management as the baltic journal of economic studies 224 vol. 6, no. 5, 2020 basis of a strategic partnership between business, science, and education. 3. methods to achieve the aim of the article, a set of general scientific and special methods of scientific research was used, namely: the method of structural-logical analysis to build the logic and structure of the study; the method of analysis and synthesis in building the model of specific advantages of the strategic partnership of science, education and business; the method of comparative analysis is used in the development of the algorithm for assessing the intellectual potential of the enterprise recommended for use as a tool for managing intellectual potential in the context of a strategic partnership of science, education and business; statistical data and information analysis using computer processing were used to conduct a comprehensive analysis of the assessment of the components of the intellectual potential of brewing enterprises. the research is relied on the data of the financial reports of leading brewing companies in ukraine during the period of 2016-2019 (smida, 2020). to increase the efficiency of intellectual potential management, it is proposed to comprehensively apply estimation methods depending on the level of management and its objectives (table 1). classical methods of estimation (revenue, cost, market) also have their own specificity in application by intellectual potential (saaty, 2017). it is worth noting that at the strategic stage of management it is important to obtain aggregate cost information on the intellectual potential for long-term decisions, while the role of quality indicators is growing at the operational level. it is necessary to assess not just the intellectual resources but the cost they can generate for an enterprise. importantly, because of the significant synergistic effect of determining the aggregate intellectual potential, it can be much easier than its element-by-element assessment. the next step is the formation of an assessment model of intellectual potential, which corresponds to the goals education science business state advantages of strategic partnership: state: real provision of autonomy and financial independence of universities; assistance in creation of the corresponding material and technical base of high school; formation of the state order on the specialities according to real needs of the labour market and the business environment; of business organizations to conduct joint research with universities in priority areas; business: informing the state and universities about the needs of the market in qualified personnel and about promising areas of activity; reorientation from quick profit to long-term results through innovation and development of intellectual resources; introduction and dissemination of the institution of endowment, the conditions for which should be created by the state; universities (education): the establishment of technology parks, innovation firms, venture funds on the basis of universities in order to conduct research; reduction of the bureaucratic component in their activities, which significantly complicates the dialogue between universities and business; active involvement of experts and business representatives in the educational process. scientific institutions (science): support research by scientists and other scholars as part of their broader educational missions, federal agencies and private foundations often provide funding to support researchers, and scientific societies support and promote communication and collaboration between scientists. however, it is easy to forget the role of these support structures and focus just on the scientists who make discoveries figure 1. advantages of the strategic partnership of science-business-education source: developed by the authors baltic journal of economic studies 225 vol. 6, no. 5, 2020 table 1 initial parameters of the algorithm for estimating the magnitude and level of use of the enterprise intellectual potential a significant subspecies of potential coefficient of efficiency �kl n adjusting multiplier �kl n intellectual resources of the main personnel �п1 i labor productivity kl n =1 return on expenses on personnel behind net income share of expenses on personnel in operating expenses of the period intellectual resources of administrative personnel �п2 i 0,5 ∙ return on administrative expenses behind net income share of administrative expenses in operating expenses of the period intangible assets �п3 i return on intangible assets behind net income share of depreciation of intangible assets in operating expenses of the period brand п4 i gainof thecustomerbase gainof thecustomerbase � � � � � � � � ( ) +( ) / / 1 ⋅⋅ ⋅ marketsharecoefficient� � kl n =1 return on distribution costs behind net income share of distribution costs in operating expenses of the period organizational resources �п5 i 0,5 ∙ return on administrative expenses behind net income share of administrative expenses in operating expenses of the period client resources �п6 i 1 1 − +    gainof thecustomerbase gainof thecustomerbase � � � � � � � �  ⋅marketsharecoefficient� � kl n =1 return on distribution costs behind net income share of distribution costs in operating expenses of the period resources of the relations п7 i return on other operating expenses behind net income share of other operating expenses cumulative costs of the period the proposed algorithm uses the following parameters and symbols: п^m,п^f,〖п〗^i are material, financial and intellectual components of potential; п_m^m,п_f^f,п_i^i are its subspecies, for which it is possible to determine the relative share of influence on the overall performance of the enterprise (number of subspecies n=(1,a), a∈n); k_l^n is use-efficiency coefficient of a potential’s subspecies ( for the n-th subspecies l such coefficients can be calculated, l=(1,a),a∈n); r_l^n is the relative efficiency ratio for the indicator k_l^n; k_l^n is the adjusting multiplier (to reconcile income and expenses). determined for relative efficiency ratios; b_l^n are costs associated with a particular subspecies of potential; ar^n is the cumulative relative use-efficiency coefficient of a potential’s subspecies; ar_n^n is the normalized value of use-efficiency coefficient ar^n; w(п_n ) is the share of the n-th subspecies of the potential in its total value; w(п^i) is the share of the intellectual component of the potential; p(п^i) is the level of use of intellectual potential; п_n^i are subspecies of potential that are part of the intellectual component (n=(1,t), t∈n). source: improved by the authors on the basis of boiko (2014) of enterprise management and its strategy. at the same time, intellectual resources have a certain intangible form, that is, their direct manifestation may not get into the focus of the management of the enterprise. accordingly, only part of the available potential is detected, that is, available for use and control. further, in the course of activity, only one is chosen among different variations of combination and consumption of intellectual resources, which produces intellectual potential. that is, the identified potential may be different than realized, as it covers the value that can be generated by resources available to the enterprise, but not involved in operating activities in a particular period of time, as well as the value that could be created with optimal use of resources. in the first case, it may be, for example, codified business processes of the enterprise, which employees do not use, as a result of which the activity is more costly than, with optimal adherence to procedures. the second situation may reflect the alternative use of, for example, an intellectual property object: an enterprise uses the technology alone, even if under market conditions it could obtain a higher value from royalties by transferring the technology license to others. the overall result of the realization of the com-pany 's potential is also characterized by the economic added value of eva tm. that is, the value of eva (bounfur, 2003) allows the researchers to fully assess the effectiveness of the use of intelligent resources. one of the common indicators, which gives a generalized idea of the use of intellectual potential, is an indicator of the calculated intangible value civ (diefenbach, 2006). baltic journal of economic studies 226 vol. 6, no. 5, 2020 to determine the contribution of a particular intellectual resource in the generation of net income further substantiated methodological approaches to assessing the intellectual potential of enterprises, which are the basis of the algorithm for determining its size and level of use. the algorithm is based on the allocation of components of the enterprise potential – material (fixed and working capital), financial and intellectual (human, organizational, relations). the step-by-step logic of determining the share of elements takes into account author's works and suggestions. it should be noted that the algorithm is based on different use efficiency level of enterprises types of potential in a certain area. under the same operating conditions and capacity consumption under the proposed algorithm (figure 2), the shares would be equal for all components and additional analysis would be needed for redistribution. stage 1. provides for the definition of generalized components and significant subspecies of the enterprise’s potential, for which it is possible to determine the relative share of influence on the overall performance of the enterprise. thus, for each structural component of the potential, in the authors’ opinion, it is advisable to identify the main subspecies, between which net income will be distributed as the total value of the potential realized during the period of the enterprise. such significant subspecies can be considered the potential of: fixed and working capital; invested capital; intangible assets, main and administrative personnel, customer and brand, other organizational resources, other relationship resources (grant, 2004). stage 2. selection and calculation of the indicators list kl n , which characterizes the relative efficiency use of the subspecies of the enterprise’s potential; calculation of their absolute value. that is, the comparison of the use effectiveness of a particular element of potential by enterprises engaged in a particular activity is based on the calculation of relevant indicators. a significant number of such indicators for each type of potential gives a higher accuracy of assessment, but requires more complex calculations. however, one or two key coefficients are enough to build an abstract model by t. boiko (2014). stage 3. calculation of relative values of coefficients kl n for each enterprise on average values by type of activity: r k k l n j l n j l n = (3) stage 4. since certain subspecies of potential affect the performance of the enterprise through the implementation of costs, it is advisable to "align" their contribution with those that generate net income. as a correction factor, in the authors’ opinion, the share of certain costs associated with a particular subspecies of capacity in their total value should be used: k b b l n j l n j j = (4) mathematically, kl n =1 , if the calculation of kl n for the corresponding subspecies of potential is associated only with income. stage 5. calculation of the consolidated relative use efficiency coefficient for each subspecies of potential as the product of the corresponding relative efficiency and correction factors: management of intellectual potential science state business education stage 6 stage 9 stage 8 stage 7 stage 4 stage 1 stage 2 stage 3 stage 10 stage 5 figure 2. management of intellectual potential as the basis of forming strategic partnership of science-business-education source: developed by the authors baltic journal of economic studies 227 vol. 6, no. 5, 2020 ar r kj n l a l n j l n j= ⋅ = ∏ 1 (5) stage 6. rationing of the consolidated relative efficiency coefficients by their product: (6) stage 7. calculation of the subspecies’ share of potential in its total value: (7) stage 8. redistribution and grouping of the subspecies’ share of potential by its components. the subspecies’ share of potential is calculated as the sum of the shares of its corresponding subspecies. stage 9. calculation of the realized intellectual potential value: п w п пi i= ( )⋅ (8) the obtained indicative values of the potential components, including intellectual, give an understanding of their impact on the enterprise effectiveness; priority of formation, development and consumption; "gaps" and weaknesses in the process of use; guidelines for building and updating. stage 10. calculation of the intellectual potential use level and its components (for the j-th enterprise): (9) it should be noted that, since it is impossible to accurately determine the available intellectual potential, the level of its use will be conditional, and will be determined in relation to the best performance indicators. full and effective implementation of the intellectual potential management system also involves risk management, which will reduce the likely negative results of the use of intellectual resources. the category of "risk" has various aspects of understanding, but, in the authors’ opinion, in the study of intellectual potential the economic risk should be considered as a specific characteristic of the economic situation deviation from the goals, the desired result, and the loss of the subject. 4. results directly realized intellectual potential has two sections of measurement – as the resulting absolute value and as the net cash flow from resource consumption. to diagnose the use of intellectual potential in the first aspect, it is proposed the authors’ developed algorithm for comparing performance indicators, pre-specifying some of its parameters. it is also taken into account that, first, when distributing the value created between the component of the brand and the resources of customer relations, it is proposed by the authors to allocate the used potential of the brand based on the net growth of the customer base. accordingly, the rest will be set aside for client resources. this approach is due to the fact that in this type of activity, long-term customer loyalty is an element of the relationship potential, while the brand affects the attraction of new customers. the value of the brand may also be manifested in mergers or acquisitions, but for the analyzed companies such events are absent. w hen allocating the potential of other organizational and managerial human resources, it will be optimal to determine equal shares, as there are no objective factors in determining the other relationship, and with such a choice, the shift in one direction or another will be minimal. the adjustment factor for the financial component of the potential should be considered the share of capital investment in assets, which best reflects the possibility of re-involvement of financial resources in business development. the analysis allows to identify the elements of intellectual potential that are used most fully or insufficiently by the brewing industry’s enterprises in ukraine (figure 3). those species that occupy the highest share in the potential used may be at the limit of their capabilities, that is to increase the effectiveness of activities it will need to expand the relevant resource base. on the contrary, low-weight potential components are underused, and it becomes necessary to find reserves for more efficient consumption of available resources. at the same time, the full use of such resources will result in the growth of other elements of capacity. to illustrate and better understand the results obtained, the dynamics of changes is reflected in the share of elements of the potential of brewing industry’s enterprises. analyzing the data it can be seen that the best level of the potential of the "carlsberg ukraine" (organization – 49%, intellectual 48%, relationships – 47%, managerial – 44%, human – 42%, financial – 40%, innovative – 39%, technological – 40 %) and "obolon" (organization – 39%, intellectual – 40%, relationships – 40%, managerial – 42%, human – 40%, financial – 40%, innovative – 37%, technological-39%) for all criteria. the rest of the studied enterprises lag behind the market leaders in terms of their potential level with indicators of okhtyrka brewery (organization – 8%, intellectual 8%, relationships – 8%, managerial – 9%, human – 13%, financial – 15%, innovative – 18%, technological – 16%), ab inbev efes, ukraine (organization – 5%, intellectual 4%, relationships – 5%, managerial – 6%, human – 6%, financial – 6%, innovative – 5%, technological – 39%), beerdrug (organization – 17%, intellectual – 18%, baltic journal of economic studies 228 vol. 6, no. 5, 2020 relationships – 19%, managerial – 23%, human – 22%, financial – 22%, innovative – 21%, technological – 21%), first private brewery (organization – 13%, intellectual 15%, relationships – 17%, managerial – 22%, human – 20%, financial – 21%, innovative – 19%, technological – 20%), cosmopolitan (organization – 10%, intellectual – 13%, relationships – 15%, managerial – 21%, human – 19%, financial – 20%, innovative – 17%, technological – 18%). for all enterprises in the brewing industry there is a steady trend towards a significant impact of the potential of fixed assets and intellectual potential on performance with much less significant potential of working capital and financial resources. this is due, firstly, to the significant capital intensity and lower need for working capital, as there is no production process, and the provision of services requires facilities and equipment. secondly, the stagnation in the industry does not create the need for enterprises to attract additional financial resources (except for the needs of financing enterprises in certain periods). the discrepancy of the trend for pjsc “carlsberg” in terms of financial resources is most likely due to the new policy and strategy of the company after the change of owners. in the context of financial resources, the balance that indicates the economic stability of the industry as a whole is observed. there is a decreased efficiency in the use of traditional resources due to the rupture of economic ties between market participants, lack of raw materials of appropriate quality, high level of depreciation of fixed assets, imperfect pricing and tariff policy. although at the present stage there is a tendency to level the main causes of reduced performance of economic entities and stabilize the situation, in particular among member companies of the association "ukrpyvo". the highest scores are observed in terms of the intellectual component, namely: "consumer resources", have a positive development trend due to the fact that the brewing industry is aimed at the preferences of the end consumer. the brand is directly represented by the name of the company and its business reputation. a successful picture of a package of "organizational resources" is directly related to the mainstream corporate governance, as the key to successful entrepreneurship. there are some differences in management resources, as pjsc suninbev ukraine and pjsc carlsberg ukraine are part of multinational potential "carlsberg ukraine" okhtyrka brewery ab inbev efes, obolon beerdrug first private brewery cosmopolitan organization 49% 8% 5% 39% 17% 13% 10% intellectual 48% 8% 4% 40% 18% 15% 13% relationships 47% 8% 5% 40% 19% 17% 15% managerial 44% 9% 5% 42% 23% 22% 21% human 42% 13% 6% 40% 22% 20% 19% financial 40% 15% 6% 40% 22% 21% 20% innovative 39% 18% 6% 37% 21% 19% 17% technological 40% 16% 5% 39% 21% 20% 18% 0% 10% 20% 30% 40% 50% organization intellectual relationships managerial human financial innovative technological "carlsberg ukraine" okhtyrka brewery ab inbev efes, obolon beerdrug first private brewery cosmopolitan figure 3. indicators of intellectual potential realization elements of brewing industry enterprises in ukraine during 2020 source: calculated by the authors on the basis of (smida, 2020) baltic journal of economic studies 229 vol. 6, no. 5, 2020 companies, so the management system is closely linked to the parent company, which complicates the speed and adaptability of decision-making, as sometimes managerial innovations are detached from the real situation in the country. pjsc "obolon" and pjsc "okhtyrka brewery " are domestic enterprises, so they quickly adapt to the dynamic realities of the market environment due to the experience of the management staff. the beer market is very demanding, which encourages the development of the technological component of economic activity, and is a troublesome production process. the situation with the taste of intoxicating drink is more complicated, because it depends on many factors that are almost impossible to control. regarding pjsc obolon and pjsc saninbev ukraine, they have a separate prescription unit, which controls the taste quality of raw materials and beverages, as well as creates new intoxicating products, which is an important tool of competition. separately, it is necessary to pay attention to the enterprises of llc beerdrug which make craft beer. according to indicators in the field of intellectual resources, have significant advantages. this situation is explained by the speed of decision-making due to the simplified organizational structure, the possibility of rapid implementation of innovative products that meet the latest consumer and stakeholders’ demands. also, the results are atypical for the analyzed period (2016 – 2019), due to both the general economic and political situation in the country and some changes in the use of potential elements by enterprises, which led to a relative modification of indicators for others. in particular, the loss of markets in the temporarily occupied territories affects the overall performance of enterprises and the potential of customer relations. the role of relations with other contractors, in particular suppliers, with government agencies is growing (due to increased payments to the budget, for example, payments for the use of radio frequencies). the value of borrowed capital in ukraine has also changed dramatically due to the increased risk of losing it. three components of intellectual resources remain more problematic: " human resources", "technological resources" and "management resources". the employees’ productive work emphasizes the importance of human resources. it is the driving force to achieve competitive advantage. in this package pjsc "obolon" is the undisputed leader; this is primarily due to the careful selection of specialists and low staff turnover, with a successful motivational program and the introduction of corporate values. in general, breweries are positioned as socially responsible, primarily by involving employees with disabilities and investing in the training of their employees, as well as by developing their cooperation with educational institutions. 5. discussion full use and development of intellectual potential requires an adequate process of assessing its value and impact on the effectiveness of the enterprise. in view of this, one of the objectives of the study was to assess not just intellectual resources but the economic value they can create for the company. to determine the contribution of a single element of potential in the achieved performance of the enterprise for a certain period and measure the level of use of existing intellectual potential, an evaluation algorithm is proposed, which is based on a comparison of general performance indicators. important generalizations on the realization of intellectual potential also allow us to draw indicators of intangible intellectual value of civ and added intellectual value of eva. complete diagnostics, which can serve as an objective, adequate and timely basis for justification and implementation of management decisions to improve the efficiency of the enterprise, also involves determining the effectiveness of the management system of intellectual potential. to do this, it is proposed to use an adapted graph-analytical model in the form of a quadrilateral, which is based on a comparison of enterprises on a selected list of criteria within each area of research. this model allows determining the effectiveness of management by structural elements of intellectual resources, to study their impact on the enterprise as a whole, to assess the level of balance of use and development of intellectual potential, as well as to outline strategic goals and areas for improving its management and possible partnership with educational and scientific institutions, which have a great experience in such improving. theoretical generalizations allow consider the concept of "intellectual potential management" as a complex, subordinated to the strategic intentions and goals of the enterprise, the continuous process of forming and balancing the portfolio of intellectual resources, their consumption in economic activity, and increasing intellectual capacity. particular attention is paid to the essence and content of the principles of intellectual potential management as basic vectors, the application of which allows to achieve the goals, as well as clarifying their essence and content. the proposed classification of management principles into basic and specific is expedient and practically oriented. the basic principles (scientific, purposefulness, objectivity, flexibility and adaptability, efficiency, continuity, economic feasibility and optimality) should be used at all levels of management, as they define the conceptual foundations of intellectual capacity management. specific principles, which include adequacy of resources, availability of prospects for use, interdependence, dynamic equilibrium, reflect the characteristics of intellectual potential as an object of management, in particular, on baltic journal of 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(2014). stretegic pertnership: features and competitive advantages. economy and state, vol. 2, pp. 26–29. available at: http://www.economy.in.ua/pdf/2_2014/7.pdf (accessed 12 september 2020). baltic journal of economic studies 214 vol. 5, no. 2, 2019 corresponding author: 1 sumy national agrarian university, ukraine. e-mail: s.i.terechenko@gmail.com 2 sumy national agrarian university, ukraine. e-mail: ekrynychnaya@yahoo.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-214-220 ukraine’s place and challenges in the eastern european production of chicken eggs svetlana tereschenko1, elena diachenko2 abstract. research subject. this report examines the current situation in poultry egg sector development in countries of eastern europe, features and challenges for ukrainian eggs sector. the aim of the work is to summarize theoretical and practical aspects of improving the economic efficiency of poultry industry enterprises, to analyse the current state of the organization of egg poultry production, to develop and substantiate general recommendations for improving the state of the poultry industry at specialized enterprises. the methodology of the study includes statistical methods and methods of economic and comparative analysis, etc. the article presents the results of research on the dynamics of poultry development in eastern europe and ukraine in particular. the movement of poultry, the level of poultry production and the production of chicken eggs, consumption of poultry products are analysed. the functional and organizational structure of the poultry business in ukraine is developed. the general structure of poultry production allocation is provided, which proves the formation of poultry farming as an industrial business and reduction in the share of poultry keeping in households due to the concentration of production in specialized enterprises. the main producers of poultry products in ukraine are revised. the dynamics of sales prices for chicken eggs and main factors influencing its annual fluctuations are investigated. the export potential of poultry farming is analysed, as well as the main importer countries of ukrainian poultry production. the issue of modern challenges and problem areas of production of the corresponding products is investigated, concerning less manoeuvrability of small poultry farms, their inability to influence the conjuncture of the poultry market. the main threats to the activities of enterprises are named, first of all, by external factors: the economic situation in the country, which affects purchasing power of buyers, the level of egg prices, increased competition from large enterprises and enterprises of eu member states, livestock diseases and the epidemiological situation in the country. the analysis of the possibilities of further development of poultry farms, taking into account the existing potential and modern poultry business problems, is carried out. the main directions for improving production with the aim of improving the efficiency of the poultry industry are determined: improving biotechnological processes, providing a set of measures improving poultry, compliance stocking density of birds in the poultry house, proper nutrition by scientifically grounded norms of consumption of nutrients and elements; improvement of methodological basis of state supervision over the quality and safety of food products and raw materials; creation of modern instrumental analytical framework and quality control and safety of food raw materials and foodstuffs, etc. key words: poultry business, agribusiness, economic efficiency of poultry, poultry subcomplex, export of egg products. jel classification: q10, o13, l23, l66 1. introduction the chicken egg market is one of the foundations for the stable development of eastern european economies. this is primarily due to the fact that eggs, as a food product, are one of the most important products, affordable, nutritious, and necessary. in addition, the particular location of the countries of eastern europe, especially ukraine, their climatic features are favourable for the development of the industry. the current state of the economy of ukraine and countries of eastern europe requires further careful study of improving the enterprise`s efficiency. this includes requirements for improving and monitoring the quality of products, the introduction of modern control systems security products, intensification of production at saving resources, reducing energy consumption and overall cost reduction. it should be understood that all requirements need to be provided baltic journal of economic studies 215 vol. 5, no. 2, 2019 in conditions of not determined pricing policy and instability in the economy. therefore, stability and even survival of the business depends on a balanced solution to minimize costs, improving product quality to eu norms and standards, increasing profitability. especially those issues related to businesses of the agroindustrial complex of ukraine because ukraine has very favourable climatic and geographical conditions for the development of agriculture and this is an industry that can remain the only stable and profitable, ensuring food security in an unstable geopolitical world situation. poultry – one of the areas of agriculture, which is developing rapidly, reaching the best indicators of development since the 90th xx ac, while significantly improving the material and technical conditions, production technology, and so on. in addition, poultry products, filling the domestic market with valuable and, importantly, affordable in price products and raw materials, has excellent opportunities to enter the world market, providing an increase in exports. improving the efficiency of poultry in the current economic environment is an important issue in the development of agriculture. poultry in eastern europe is a traditional agriculture sector, stimulated by appropriate climatic conditions and developed grain farming. poultry is the most quick and effective livestock industry. it provides a population with dietary food products (eggs, chickens meat, turkeys, ducks, etc.), which is relatively cheaper than other kinds of protein products and more accessible to the public. in addition, the poultry industry provides raw materials and has a number of advantages over other livestock sectors, higher weight gain per unit of feed, rapid growth, earliness, etc. 2. literature review the domestic and foreign practice has significant experience in solving problems of market poultry products. the transition of poultry industry to a market economy was a complex process and requires comprehensive research of market structure issues; study the interaction of economic actors and producers of poultry products market, a more sophisticated economic mechanism in the regional market of poultry products. problems of poultry industry development and food security in the vector of meat providing have been studied by leading scientists, such as v. andreychuk, r . buryak, e. wexler, m. demyanenko, t. boyko, v. mesel-veselyak, kirilenko, b. miller, s. mikhailov, v. pryadko, y. riabokon, y. stavska, m. shkliar, f. yaroshenko, conrad caspari, edward oliver, john nganga, mariana ricci, and many others. works of these scientists consider the poultry industry in the forecast of its further development. but the poultry industry requires constant attention and analysis of trends influenced by globalization changes. there is much attention paid on the expansion of poultry production in the world. however, the promotion of the production consumer markets faces significant competition because it requires constant improvement of technology, processing of products, the introduction of modern quality standards, strategic planning, and so on. therefore, the question of improving the efficiency of poultry production does not lose its relevance. there remains the need to analyse the current state, factors that positively and negatively affect the development of poultry farming. as the poultry provide the population with quality and dietary products and animal protein, its development is an important task. to date, poultry popularity ranks second after the pork. experts say that by 2020 poultry takes the first place (ukraine increased the import of poultry meat; fao: world market of poultry). 3. analysis of the dynamics of the poultry industry analysing the production of poultry in eastern europe, some preliminary conclusions can be drawn. first, there is a general tendency of increasing poultry production (figure 1), including an increase in a number of chickens, increase and consolidation of companies engaged in the production of poultry products, including chicken and egg production. food demand for eggs increases from year to year all over the world. however, data indicate that the population of some countries of eastern europe has not yet reached the standards of rational consumption of protein products, including poultry – meat and eggs. in recent years, chicken meat and eggs consumption was up to 75% of the rational norms. poultry business – a part of a unified system of agribusiness, which is based on a unified organizational and economic mechanism of functioning, which is an integrated, open to socio-economic system, developed under the influence of external factors (market) and internal environment, which is mediated by conditions of agribusiness and includes a set of diversified businesses and organizations specifically involved in the production, harvesting, transportation, processing, storage, and final distribution of poultry (afanasyev, ploha, 2007). it is paid much attention to the development of poultry in eastern europe. these are the state programs of development of poultry farming, to stabilize and increase poultry production. a network of breeding poultry farms includes breeding and genetic centres with its subsidiaries, breeding poultry plants reproducers first order, second order reproducers, breeder, breeding herd, breeding farms and so on, which is the production base of poultry and fully meets the need in breeding products in the future. baltic journal of economic studies 216 vol. 5, no. 2, 2019 eu countries produced 12,623.7 thousand tons of poultry meat or 450.8 thousand tons for one country. the leaders are france (13.6%), the uk (12.8%), poland (12.2%), germany (11.3%), italy (10%), spain (9.2%). ukraine according to fao is on the 26th place in the world in the production of poultry meat. the largest egg producer is china with up to 40% of global production, followed by the united states (7%) and india (6%). ukraine by 1991 was a part of a number of countries with high levels of the industry. in historical perspective, the development of the industry was characterized by a decline in production of poultry products from the 1990–1997s, and the revival of production in 1998 and to date (zbarskiy, babiyenko, kulayets, syniavska, khomenko, 2013). production of poultry meat reached 80% of the best indicator 1990. the production of chicken eggs reached 95% of the 1990 figure. structure of poultry species composition is: keeping chicken meat and egg direction – 91%; goose – 2.5%; ducks – 5.3%; turkeys – about 1%, other birds (ostriches, quail, etc.) – 0.5% of the total poultry held on farms of all categories. more than half of poultry products produced on specialized enterprises. it is quite logical and reasonable for poultry – the industry responds positively to the processes of specialization and concentration of production and reaches the highest level of efficiency. therefore, in recent years, we can observe a tendency to increase the number of poultry farms, the figure almost reaches the level of 1991, when the development of poultry in ukraine was the highest. figure 1. development of poultry in eastern europe source: fao stat data base figure 2. dynamics of production of chicken eggs in eastern europe source: fao stat data base baltic journal of economic studies 217 vol. 5, no. 2, 2019 structural characteristics of poultry agribusiness are represented as a block diagram showing the functional and organizational structure of the poultry business (figure 1). now the association “union of poultry breeders of ukraine” represents the interests of the poultry industry. founders are the 78 companies producing up to 83% of broiler meat and up to 78% of eggs in ukraine. association “union of poultry breeders of ukraine” was registered on june 4, 2003. the purpose of the association – participation in the development and implementation of programs and stabilization of poultry in ukraine, raising the competitiveness of domestic producers of poultry products and other activities aimed at the development of the poultry industry. the production link of the poultry business includes: breeding enterprises, suppliers of veterinary services (medicines, vaccines, care, etc.), suppliers of feed, and so on. commodity poultry farms are divided into: poultry farms, poultry factories, integrated-farm enterprises, production associations. in recent years, the situation of poultry production in ukraine negatively affected by the following main factors: ukraine’s loss of some territories and the related military actions in the eastern part of the country, the downturn in some sectors of ukrainian economy; decrease in purchasing power during the years of 2014–2016. constraining factors for poultry industry comprise the rising production costs. even with modern technologies of breeding animals and birds, it is difficult to achieve the desired economic effect. thus, the poultry industry costs largely depend on feed costs (kolos, 2014). those, in turn, depend on the price of grain, protein, vitamin and mineral supplements. in the cost structure, the feed component takes up to 70%. in addition, the total cost is affected by wage growth, significantly higher cost of energy, veterinary medicines, etc. as it turned out, the following environmental factors as fluctuations of the national currency, fluctuating prices for imported goods have to suffice significant impact on the development of poultry in ukraine. today many production facilities, including the production of young, hatching eggs, veterinary medicines and other equipment tied to the price in the dollar, which means that the cost of poultry will grow, especially apply to the fact that medium and small poultry farms are not exporters. those ukrainian companies who receive foreign currency from exports don’t have such serious risks. so we can predict that poultry producers of table figure 3. production of chicken eggs per capita, pieces source: fao stat data base, own calculations figure 4. structure of poultry allocation in ukraine, thousand heads baltic journal of economic studies 218 vol. 5, no. 2, 2019 eggs will have to pay the last money to purchase capital goods or work in a substantial way to reduce production costs (kolos, 2014). political changes in ukraine also affect the work of poultry enterprises. there is a break in ties with big crimean reproducers, the search for new partners, which leads to an increase in the cost of hatching eggs and young birds. an important factor in making a profit of chicken eggs production is the price of their sale. this is a rather difficult predicted value that may have fluctuations both toward the increase and aside to decrease over the year. the fluctuation in the selling price of an egg is affected by many factors: from macroeconomic factors such as the state of ukrainian egg export to the pricing policy of giant companies (avangard, ovostar, etc.) which, due to greater concentration and integration of production, may have more opportunities to reduce their cost, and consequently, a decrease in the selling price during the peak periods of egg collection. seasonal fluctuations in the price of chicken eggs also take place in the ukrainian market (see figure 5). the largest producers of poultry meat in ukraine are mhp, complex agromars, llc “poultry complex ‘dniprovskiy’”, corporation “agro-oven”, jsc “vladimir-volyn poultry farm”. the largest producer of eggs: avangardco ipl, ovostar ltd, gc “interzaporozhye”, avias 2000 tov, pf “krupets”, “poultry factory podillya” llc, ternopilska poultry farm pjsc (karpenko, 2015). among poultry exporting countries, ukraine occupies 8th place in the world. speaking about ukraine’s place among the countries-producers in europe, we occupy the sixth position in the production of poultry, behind such countries as poland, germany, france, britain, and italy. in fact, the volume of exports to the eu for ukraine is limited by the quota of 36 tons of poultry, but companies-producers constantly put this question to the ministry of agrarian policy and food of ukraine in order to increase this quota to 100 tons. however, this question is not easy because it requires approval from all eu countries. in recent years, it observed the tendency of reducing imports of poultry products. the main supplier of chicken meat to the ukrainian market was poland, which accounts for about half the volume of supply. germany takes second place with a share of 28% in the structure of imports. one of the import growth factors is the agreement on free trade zone between ukraine and the eu. it made easier for europe poultry producers to get to our market. meanwhile, there is a recent increase in the production of frozen poultry meat in ukraine, which is mainly exported. this is circumstantial evidence of the attractiveness of production aimed at foreign markets for ukrainian poultry producers. the highest demand for ukrainian poultry is in iraq, kazakhstan, and the netherlands. the main importers of eggs were the uae (by $8.19 million), which bought 8.47 thousand tons of the product. behind them is iraq, which bought 5.38 thousand tons of eggs for $5.19 million. further – qatar with 1.88 thousand tons of eggs for $1.81 million. in recent years, ukraine has significantly increased exports of eggs. for five years, the uae increased imports almost 20 times. according to the forecasts of scientists (fao: world market of poultry), the volume of eggs export to this country in 2017 reached a record level, ukraine plans to supply to the uae more than 34 thousand tons of this product. the share of the uae in the total egg exports in 2017 was 47.6%. it is pleasant to note that in recent years, ukraine develops eggs processing with subsequent export of the finished egg products, which is a very positive trend. development of eggs export does not affect domestic consumption, because at present the production of eggs in ukraine fully meets the needs of domestic consumers. the main importing countries of fresh eggs from ukraine were: iraq (28,277.3 tons), the united arab emirates (19,178.5 tons), moldova (2231.6 tons). figure 5. dynamics of chicken eggs prices in ukraine, uah baltic journal of economic studies 219 vol. 5, no. 2, 2019 figure 6. main countries-importers of poultry from ukraine the main countries-importers of egg and eggs products are the middle east. also, there is expanding the relationship in this regard with the countries of the african continent. ukraine also received a quota for eggs export to the european union. 4. suggestions and conclusions system evaluation of the results leads to the following proposals: there is a need for further formation and development of regional poultry breeding and genetic complex adapted to the conditions and pace of modern innovative development of poultry business. organization of an effective mechanism of renovation bird species composition should include organizational, legal, financial, and regulatory institutions of reproductive subcomplex. to activate the process of formation of the integrated structures in agribusiness, due to the need to ensure figure 7. main countries-importers of fresh bird eggs from ukraine technological, organizational, and economic cohesion and achieving continuous production, storage, processing, and sale of poultry products, it is necessary to solve the problems of institutional changes in the poultry business in terms of involvement of private households in the vertical integration processes (on the basis of contracts or agreements with industry). the efficiency of this interaction is, on the one hand, the increasing commercialization of small forms of agribusiness through the provision of complete feed for all age-sex groups of birds, veterinary and zoo-technical maintenance and purchase of excess poultry. on the other hand, targeting industrial economies, including local processing industries to cheaper raw materials, reduce the costs and reduce risks in an unstable economic environment prevailing in the country. to decrease and gradually eliminate the dependence of food security on poultry imports should resume implementation of the policy of moderate protectionism on domestic producers. in addition, there is a need to baltic journal of economic studies 220 vol. 5, no. 2, 2019 control the importation of breeding birds (parental forms and final hybrids) from abroad, to support the domestic poultry. an analysis of the possibilities of a poultry enterprise to improve the production efficiency under conditions of an unstable economic system can be carried out, for example, by matrix methods (including swot analysis), mathematical, expert methods, etc. the cellular equipment used in most poultry farms in ukraine may become obsolete in the context of associate membership with eu countries, most of which have recently introduced the retention of poultry not in cages, but on the floor. these are specific requirements for the quality of finished products (eggs). flooring requires much larger areas for poultry houses, other equipment, knowledge and practical skills of staff. the change of equipment is considered as having a future perspective. but at the same time, there are some serious threats to the activities of enterprises. first of all, these are external factors: the economic situation in the country, which affects the purchasing power of buyers, the price of eggs, the rate of credit and the opportunity to get a loan. inflation processes make production indeterminate in the context of profit gaining – currency fluctuations can provoke an unpredictable change in the cost of feed components for poultry, and hence the cost of egg production is significantly increasing. the challenges for the company are also increased by competition from large enterprises and from the side of enterprises of eu member states. the threat lies in the fact that the cost of production in integrated associations can be objectively lower than in small poultry farms. also, enterprises with large volumes of commodity products have better opportunities and access to supermarket chains and access to the world market. a serious threat to the poultry farm is a livestock disease that can lead to the fall of the stock and even the death of the bird. some infectious diseases include restrictions on the sale of poultry products. quarantine restrictions may apply even to companies that do not have these diseases but are in the region of a tense epidemiological situation. thus, the main directions of improving production with the aim of improving the efficiency of poultry industry determines: improving biotechnological processes, providing a set of measures improving poultry, compliance stocking density of birds in the poultry house, proper nutrition by scientifically grounded norms of consumption of nutrients and elements; abidance to the basic microclimate parameters, ventilation, illumination indoors, timely disinfection, disease prevention; improving storage of poultry products throughout the movement of raw materials and products from poultry complex to the consumer; the use of poultry by-products to produce valuable fertilizer for livestock; ensuring maximum preservation of nutritional value and quality, adherence to storage conditions and terms of its implementation; improvement of methodological basis of state supervision over the quality and safety of food products and raw materials; creation of modern instrumental analytical framework and quality control and safety of food raw materials and foodstuffs; assistance of state and local government concerning innovation support in agriculture and poultry industry in particular, which requires flows of investment at the state level. a common situation is when the financial resources of the state budget aimed the innovation activities do not spend on modern innovative designs but provide baldly existence of current innovation infrastructure and is not able to build the innovative potential of poultry as one of the priority sectors of agribusiness. further development of poultry in ukraine must come from global trends, as well as with established production capacity and accumulated experience of their own poultry. references: afanasyev, m. v., ploha, o. b. (2007). ekonomika pidpryyemstva. business economics, kharkiv: 320. karpenko, s. n. (2015). state of the industry and prospects of development of poultry in ukraine. report on the xi international conference "poultry – 2015". truskavets. foods and facts, 10(62), 6–7. kolos, n. (2014). from abilities – on request. nashe ptakhivnytstvo, 3(33), 6–9. kolos, n. (2014). under the sign of modernization. nashe ptakhivnytstvo, 2(32), 6–8. zbarskiy, v. k., babiyenko, m. f., kulayets, m. m., syniavska, i. m., khomenko, m. p. (2013). ekonomika silskoho hospodarstva: navch. posib. economy of agriculture: training guidances. news: chicken. retrieved from: http://www.ukrinform.ua/ukr/news/tags/kuryatina?page=1 ukraine increased the import of poultry meat. retrieved from: http://www.ukragroconsult.com/news/ukrainauvelichila-import-myasa-птиці fao: world market of poultry. retrieved from: http://www.fao.org baltic journal of economic studies 24 vol. 1, 2015 practical aspects of osai methodology in assessing the organizational culture of an engineering company aleksandra biletskaya1, khmelnitsky national university, ukraine abstract. this article is intended to generalize and highlight the practical application of certain science-based approaches to assessment of an engineering company’s organizational culture. the osai method application has enabled determining the type of the organizational culture existing within a company and the desirable type thereof, i.e. the one which would produce a positive effect on the competitive status of a company, as well as on the utilization of its human resources. this is important because an appropriate level of the organizational culture within a company would enhance the psychological climate within a company and would provide an opportunity for improving its performance. methodology. in order to attain the goal of our research, it is necessary to diagnose the type of the organizational culture of some selected companies and draw a conclusion as to amendment of their organizational culture. in order to ensure the successful outcome of the corporate organizational culture diagnosing procedure, let us use the osai tool to determine the foundation of such culture. this organizational culture assessment tool helps to define the organizational culture which members of a company are to achieve in order to meet the demands and to respond to the dynamic changes in the business environment. the results showed that the assessment of organizational culture using the method made it possible to determine the osai required type of organizational culture on the test plants. practical implications. definition of recommendation type of organizational culture has enabled the leadership to change the style of his behavior and better motivate the labor collective. pay attention to the existing problems and improve the psychological atmosphere in the team, as well as improve the efficiency of plant personnel. value/originality. the data obtained for the four businesses lead to the conclusion that it is the method of evaluation the optimum procedure for organizational culture assessment. key words: organizational culture, type of culture, method of evaluation, engineering company, level of the organizational culture. jel classification: m14, o14, d23 corresponding author 1 department of international economic relations, khmelnitsky national university. e-mail: aleks-bil86@mail.ru 1. introduction most scholars and analysts, involved in the business organization domain, now realize that the organizational culture produces a dramatic effect on the operating performance and long-term efficiency of a company. the empirical studies (cameron, kim s. and ettington, deborah r ., 1988; denison, daniel, hooijberg, robert, and quinn, robert e., 1995; trice, harrison and beyer, janice, 1993) demonstrate the magnitude of the organizational culture impact on improvement of business performance. one of the publications (kotter, john p. and heskett, james l., 1992) highlights the results of interviewing the reputed financial analysts who were engaged in surveillance over performance of certain businesses. each of the analysts has compared the performance of twelve most prosperous companies with that of ten lower-level companies. although the job of an analyst is somewhat typical by nature inasmuch as it is almost exclusively based on some firmly established data, only one of the seventy five analysts maintains that the culture produces little effect, if any, on business performance. all others confirm that culture is a determining factor in longterm financial well-being of a company. 2. review of recent studies and publications in the course of the studies, it has been found out that organizational culture has a great influence on employees, e.g. their moral stature, commitment, productivity, physical health and emotional state and other things (kozlowski, steve w.j., chao, georgia т., smith, eleanor m., and hedlund, jennifer, 1993). hence, organizational culture is organically associated with personnel behavior. an urgent need for a cultural change in nowadays business arises out of chaotic external fluctuations, which imperil the well-being of a company unless it updates its organizational culture. over the past two decades, a number of various techniques have been suggested to assess the organizational baltic journal of economic studies 25 vol. 1, 2015 culture essential features. a detailed review of research papers on the topic in question can be found in the works of such authors as (cameron, kim s. and ettington, deborah r ., 1988; cameron, kim s., 1997; martin, joanne, 1992; hooijberg, robert and petrock, frank, 1993). some of the measurements, as provided in the literature, are mentioned for illustration only, e.g. in (martin, joanne, 1992), and belong to the authors who maintain that the solidity and consistency of culture are the major definitive attributes thereof. s. albert and d. whetten (alpert, stuart and whetten, david a., 1985) believe that measuring from the purely personal scale up to corporate scale is critical for culture assessment. d.r . arnold and l.m. capella ( propose to evaluate the strong and weak points of organizational culture, as well as to assess its inward-andoutward focus. 3. objective of the article the article sums up the results of research on the sciencebased practices fit for assessment of the organizational culture of an engineering company. 4. basic research material to determine the most important factors that are worth considering, it is necessary to have an acceptable framework, a kind of theoretical foundation that would allow to narrow the scope of search and to focus right on the key factors of organizational culture assessment. obviously, none of assessment frameworks can be found fully compatible, just as it is impossible to prove that any of them are true, while others have no right to exist. . the most acceptable frameworks should base on the empirical proof and allow for integration and arrangement, within its structure, the majority of measurements offered by the science. the key issues that the results of an organizational culture assessment should address are the organizational culture efficiency criteria, organizational efficiency factors, organizational culture indicators, etc. s. robbins (voronkova a., babiak m., 2006) proposes to consider the organizational culture based on the features most valued in the company. i. v. mazhura offers an indicative method to assess the company culture. the indicative assessment procedure used to evaluate the strength of corporate culture has a number of special features. first, such assessment covers the established quality indicators; second, it is based on expert surveys, third, such assessment depends on the personal view of the person involved. the qualitative nature of indicative assessment of the strength of corporate culture brings about certain assessment-related difficulties, for it is not always clear which level of culture (high or low) is shown or testified to by a particular indicator. after establishing the culture indicators, the next necessary step is to formulate the criteria whereby such indicators can tell whether the corporate culture is strong or weak. that is, each of the indicators should have a number of clearly defined criteria that can testify to its level. based on such criteria, it is possible to conduct an indicative assessment of corporate culture elements. obviously, such concept as corporate culture covers all functional areas of a business and relates to each of its employees. for this reason, a group of experts involved in assessment of corporate culture strength, must consist of representatives of different functional groups, in order to avoid any biased result. another approach to evaluating corporate culture has been developed k. cameron and r . quinn (cameron k., quinn r ., 2001). they propose to evaluate corporate culture in two dimensions. the first one characterizes the degree of flexibility within the range from the organizational versatility and plasticity, on the one hand, to the organizational rigidity and durability, on the other. the second dimension differentiates between the inward criteria, which testify to internal orientation, integration and unity and the outward criteria associated with an external focus, differentiation and competitiveness. the two dimensions generate four quadrants, each representing a clear set of organizational performance indicators. the authors define each of the quadrants on the basis of its intrinsic features: clan adhocracy, market and hierarchy. k. cameron and r . quinn offer an organizational culture assessment tool (osai), in the form of a questionnaire, which requires an individual response to six questions (items). this organizational culture assessment tool ensures an effective and thorough diagnosis of those important aspects of a business which define the foundation of its organizational culture. the purpose of the said assessment tool is to assist in identifying the existing corporate culture. moreover, this tool helps to define the organizational culture which members of a company are to achieve in order to meet the demands and to respond to the dynamic changes in the business environment. the tool proposed for assessing the corporate organizational culture focuses on the core features of the organizational culture of a company. the rating score, as given in table, below, implies the predominance of certain types of culture in the company in question. to construct a profile of the current and desirable organizational culture in the company under analysis, one should use the estimates, calculated according to table 2 below. the process of constructing the organizational culture profiles of a company includes the two following phases. phase 1. construction of corporate organizational culture profiles. 1. first, analyze the values under the current state column. apply the average score for each alternative (a, b, c and d) to the diagram pattern (cameron, kim s., 1997). the alternative a value stands for the clan culture. the relevant value of the alternative a is found on the diagonal line stretching upward to the top left quadrant of the pattern. the alternative b value stands for the adhocratic culture. the relevant value of the alternative b is found on the diagonal line going up to the top right quadrant. baltic journal of economic studies 26 vol. 1, 2015 table 1 assessment of major characteristics direction major characteristics novator stateowned company temp jsc ukr elektro aparat jsc krasyliv machine building factory jsc now desirable now desirable now desirable now desirable a the company is unique for its characteristics. it is like a large family. people seem to have much in common 16.7 41.6 7.5 47.5 14.2 33.3 32.5 36.7 b the company is a very dynamic business. people are willing to sacrifice themselves and bear risks 10.8 26.7 27.5 23.3 13.3 35 25.8 27.5 c a result -oriented company. task fulfillment is the primary concern. people focus on competition and goal achievement. 29.2 16.7 30 13.4 31.7 21.7 20 15.8 d a rigidly structured and highly controlled company. as a rule, people follow formal procedures. 43.3 15 35 15.8 40.8 10 21.7 20 total 100 100 100 100 100 100 100 100 the alternative c value stands for the market-oriented culture. the relevant value is found on the diagonal line going down to the lower right quadrant of the pattern. the alternative d value stands for the hierarchal culture. the relevant value is found on the diagonal line going down to the lower left quadrant. connect the points marked in each quadrant together to make up a quadrangle. the resultant profile depicts the existing organizational culture in the company under analysis (the profile of the culture, as perceived by an expert right now). it is more useful for the diagnostic purpose, since the researcher is able to see immediately the strongest and weakest points in the organizational culture of the company in question. 2. having completed the existing organizational culture profile for the company in question, proceed constructing the desirable organizational culture profile according to the score under the desirable state column. apply the average score for each alternative (a, b, c and d) to the diagram pattern. hence, we obtain the desirable organizational culture profile for the company in question. 3. having constructed tye nexisting and desirable organizational culture profiles, analyze the profiles to determine the type-of-culture parameters, to ascertain the strength of the prevailing type of culture, as well as the culture consistency, uniformity, whatever. phase ii. analysis of corporate organizational culture profiles. 2.1. comparison of the current and desirable corporate organizational culture profiles. to analyse the constructed profiles of corporate organizational culture, it is advisable to superpose them within one picture. positioning of the two diagrams within one picture allows to compare how the existing culture conforms to the desirable culure, as well as to determine how the existing culture can be modified to achieve such conformity. by analyzing the areas, where the organizational culture profiles differ most of all, it is possible to identify a kind of road map changes. in order to attain the goal of our research, it is necessary to diagnose the type of the organizational culture of some selected companies and draw a conclusion as to amendment of their organizational culture. in order to ensure the successful outcome of the corporate organizational culture diagnosing procedure, let us use the osai tool to determine the foundation of such culture. one of the most important steps in diagnosing the organizational culture is the choice of experts. in our case, such experts are the ceos of the companies in question. to obtain the results required for the analysis, we have prepared questionnaires containing the questions which require individual answers under six items. we estimate the prevalence, in per cent, of the characteristics in the following areas: the major characteristics of the company; the overall style of leadership in the organization; human resource management; uniting capacity of the organization; strategic goals; success criteria. each of the six questions that are contained in the osai tool suggests four alternative answers. according to the questioning results and using a 100-point scale, we estimate the significance of the four alternatives in the weight ratio, which suits best for the company in question. the alternative that most closely resembles the situation in the company receives the maximum number of points. the maximum number of points along the line a indicates the clan culture; line b the adhocratic culture, line c the market-oriented culture, and line d the hierarchical culture in the company in question (cameron, kim s. and ettington, deborah r., 1988). see an example of the organizational culture type diagnosing in tables 1… 3 below. as is seen from table 1, the respondents believe that the most important characteristics of all analyzed companies have to change. for novator state-owned company, they have to increase along the a and c lines and have to decrease baltic journal of economic studies 27 vol. 1, 2015 table 2 as-it-is estimates clan culture adhocratic culture responses novator stateowned company temp jsc ukr elektro aparat jsc kmbfjsc responses novator stateowned company temp jsc ukr elektro aparat jsc kmbfjsc 1a 20 5 20 35 1b 10 20 5 15 2a 25 10 5 35 2b 5 25 10 25 3a 15 10 10 20 3b 5 15 20 35 4a 20 5 15 40 4b 20 35 30 20 5a 10 10 10 25 5b 15 20 15 40 6a 10 5 5 40 6b 10 30 10 20 total (a responses) 100 45 85 195 total (b responses) 65 165 80 155 average (total divided by 6) 16.7 7.5 14.2 32.5 average (total divided by 6) 10.8 27.5 13.3 25.8 market-oriented culture hierarchical culture 1c 30 20 35 15 1d 40 50 20 25 2c 25 15 30 25 2d 45 25 35 15 3c 30 10 40 20 3d 50 15 50 25 4c 35 25 35 10 4d 25 40 40 10 5c 25 35 25 15 5d 50 15 55 45 6c 30 10 45 35 6d 50 10 50 10 total (c responses) 175 180 190 120 total (d responses) 260 210 245 130 average (total divided by 6) 29.2 30 31.7 20 average (total divided by 6) 43.3 35 40.8 21.7 table 3 desirable estimates clan culture adhocratic culture responses novator stateowned company temp jsc ukr elektro aparat jsc kmbfjsc responses novator stateowned company temp jsc ukr elektro aparat jsc kmbfjsc 1a 40 50 45 35 1b 35 20 45 15 2a 45 45 25 40 2b 25 10 25 35 3a 30 50 15 25 3b 15 35 15 20 4a 25 40 35 10 4b 25 25 35 40 5a 50 50 25 35 5b 10 15 25 25 6a 50 50 25 45 6b 20 5 35 0 total (a responses) 250 285 200 220 total (b responses) 160 140 210 165 average (total divided by 6) 41.6 47.5 33.3 36.7 average (total divided by 6) 26.7 23.3 35 27.5 market-oriented culture hierarchical culture 1c 25 10 35 5 1d 15 25 10 25 2c 15 5 25 15 2d 10 5 10 15 3c 30 10 20 25 3d 10 10 5 20 4c 15 15 15 30 4d 25 15 5 20 5c 10 20 25 5 5d 15 25 10 25 6c 5 25 10 5 6d 20 10 20 15 total (c responses) 100 80 130 95 total (d responses) 90 95 60 120 average (total divided by 6) 16.7 13.4 21.7 15.8 average (total divided by 6) 15 15.8 10 20 baltic journal of economic studies 28 vol. 1, 2015 along the b and d lines. for temp jsc, the most important characteristics along c and d lines should increase in the future; along the line b, in the respondents’ opinion, they should remain where they are; whereas along the line a, they can be somewhat reduced. as to krasyliv machinebuilding factory jsc, the respondents believe that the major characteristics along the lines a, b and c should increase, while along the line d, they should decrease. likewise, organizational culture is diagnosed in other five areas: the overall style of leadership; human resource management; uniting capacity of the organization; strategic goals; success criteria. to ascertain the type of the organizational culture, the resultant data are grouped in tables 2 and 3 below. as a result of the diagnosis carried out by us, we are able to define the existing and the desirable type of the organizational culture in the companies in question. as is clear from table 2, krasyliv machine-building factory jsc has got the adhocratic type of organizational culture where the average score is 32.5, so, in the future, it is desirable to reduce the influence of the adhocratic culture and pay attention to forming the clan culture which can be described as follows: friendly relations between employees, they have much in common; the company looks like a large family; the company leaders and managers are perceived as tutors; the company exists thanks to the dedication and traditions; high responsibility in running the company’s business, focus on the long-term benefits from self-improvement of individuals, high degree of importance is attached to the staff unity and morale; success means a good attitude to customers and care about the welfare of employees; encouraged team work and participation of employees in the company’s business. the fact that the respondents rate the clan culture manifestations in krasyliv machine building factory jsc (kmbf) at 32.5 points (preferably 36.7) shows that, in the future, the current state of the company’s organizational culture needs to change towards the clan culture. the results of the research carried out to ascertain the type of organizational culture existing at ukr elektro aparat jsc testify to the fact that the hierarchical culture prevails there now, its average score being 40.8; however, in the future, it is desirable to start creating the adhocratic type of organizational culture, its average score now being 13.3 (preferably 35). novator state-owned company and temp jsc are the companies where the hierarchical type of culture prevails: 43.3 and 35, respectively. however, the results of the survey demonstrate the need for transition to the clan type of organizational culture, the average score of which is now 41.6 for novator and 47.5 for temp. the said companies have established the hierarchical type of organizational culture, which is characterized by the following features: formalized and structured place of work; the production process is governed by the procedure; the leaders are proud of their being the thinking coordinators and organizers; smooth running business is of utmost importance; the company is united by formal rules and official policy; the company’s long-term needs lie maintaining the stability, smooth running and profitability of its operations; the success is defined in terms of reliability of supply, faultless adherence to calendar schedules and low expenses; the human resources are managed on the basis of guaranteed occupation and long-term predictability. the companies lack the friendly-family atmosphere, which is typical for the clan culture. in general, the companies in question should, in the future, get rid of the prevalence of the hierarchical or clan type of organizational culture and pay more attention to the development of the market-oriented organizational culture, which is characterized by the following features: the company is focused on results, its main concern is to accomplish the pre-planned task; the employees are determined to achieve and compete; the leaders are firm managers and competitors; they do not spare themselves and demand from their subordinates; organization is a unity in its desire to win; good reputation and success is a common concern; the far-reaching strategy focuses on competitiveness, fulfillment of tasks and achievement of goals; the success is defined in terms of secured promotion to the market and increase of the market share; the competitive pricing and market leadership are of primary importance; the style of business is the hard-line competitivenessupgrading policy. the advantages of this method of assessment are as follows. first, it is quite easy to determine the type of organizational structure. second, the research is carried out along a fixed number of trends and performance criteria. third, the offered assessment method makes it possible to find out certain areas where the organizational culture ensues from and where it functions. 5. conclusion findings and suggestions. generally speaking, the method elaborated by the author, as well as its components, tools and suggestions may be taken into consideration in developing a comprehensive technique for assessment of the organizational culture of a company. however, such assessment technique should not wholly rely on the methods and procedures offered by the author, inasmuch as there are some proven practices and methods used to assess corporate organizational culture. therefore, it is advisable to pursue a balanced approach combining the benefits of all existing methods, including this one, in developing the optimum procedure for organizational culture assessment. baltic journal of economic studies 29 vol. 1, 2015 references voronkova, a.e., babiak, m.m., koreniev, ye.n., mazhura, i.v. (2006) corporations: management and culture. monography. – drogobych. "vymir". – 376 p. cameron, k., quinn, r ., “diagnosing and changing organizational culture” / translated from english under the editorship of andreeva. – spb: piter, 2001. – 320 p. alpert, stuart and whetten, david a. (1985) "organizational identity ", research in organizational behavior, 7:263-502. cameron, kim s. and ettington, deborah r . (1988) the conceptual foundations of organizational culture. higher education: handbook of theory and research, p. 356-396. new york: agathon. cameron, kim s. (1997) techniques for making organizations effective: some popular approaches. enhancing organizational performance. washington d.c.: national academy press. denison, daniel, hooijberg, robert, and quinn, robert e. (1995) paradox and performance: toward a theory of behavioral complexity in managerial leadership. organizational science, 6:524-540. kotter, john p. and heskett, james l. (1992) corporate culture and performance // new york: free press. kozlowski, steve w.j., chao, georgia т., smith, eleanor m., and hedlund, jennifer (1993) organizational downsizing: strategies, interventions, and research implications. international review of industrial and organizational psychology, 8:263-332. martin, joanne (1992) cultures in organizations. new york: oxford university press, 1:339-359. hooijberg, robert and petrock, frank (1993) on cultural change: using the competing values framework to help leaders to a transformational strategy. human resource management, 32: 29-51. trice, harrison and beyer, janice (1993) the cultures of work organizations. englewood cliffs, nj: prentice hall. александра билецкая практические аспекты использования методики осаи в оценке организа ционной культуры машиностроительного предприятия аннотация. целью написания статьи является обобщение и практическое применение научных подходов к оценке организационной культуры предприятия, относится к машиностроительного комплекса. используя методику осаи удалось определить имеющийся и желаемый тип организационной культуры, положительно повлияет на повышение конкурентного статуса предприятия, а также на возможность эффективного использования трудового потенциала предприятия. поскольку именно надлежащий уровень организационной культуры предприятия влиять не только на психологический климат в самом предприятии, но и даст возможность повысить эффективность его деятельности. методика. для достижения целей нашего исследования необходимо продиагностировать тип организационной культуры избранных предприятий и сделать выводы по изменению организационной культуры. для успешного проведения диагностики организационной культуры предприятия воспользуемся инструментом оценки осаи для определения ее фундамента. данный инструмент оценки организационной культуры помогает достаточно четко определить организационную культуру, в которой члены предприятия намерены прийти, чтобы соответствовать требованиям и динамичным изменениям внешней среды предприятия. предложенный инструмент для оценки организационной культуры на предприятии фокусирует внимание на стержневых признаках организационной культуры предприятия. результаты исследования показали, что оценка организационной культуры с использованием методики осаи дало возможность определить необходимый тип организационной культуры на исследуемых предприятиях. практическое значение. определение рекомендационного типа организационной культуры дало возможность руководству изменить стиль своего поведения и лучше замотивировать трудовой коллектив. обратить внимание на существующие проблемы и улучшить психологическую обстановку в коллективе, а также повысить эффективность работы персонала предприятия. значение/оригинальность. полученные данные по четырем предприятиям позволяют сделать вывод, что именно данный метод оценки подходит для оптимальной оценки состояния организационной культуры предприятия. baltic journal of economic studies 170 vol. 5, no. 5, 2019 corresponding author: 1 cherkasy state technological university, ukraine. e-mail: finaginaov@gmail.com orcid: http://orcid.org/0000-0002-7305-7441 2 cherkasy state technological university, ukraine. e-mail: annasuray0@gmail.com orcid: https://orcid.org/0000-0002-7496-4035 3 cherkasy state technological university, ukraine. e-mail: s.mylnichenko@chdtu.edu.ua doi: https://doi.org/10.30525/2256-0742/2019-5-5-170-182 methodological bases of assessment of the level of development of the world business environment: global and regional view olesia finahina1, anna pavlovska2, serhii mylnichenko3 abstract. an attempt to offer a methodology for analyzing the business environment as in a global context (of the world) as in regional level (of ukraine), which would come from an empirical base provided by domestic world analytical organizations of the public and private sectors of the economy was made. methodology. as part of the methodology of assessment of the level of development of the world business environment, the author conducted a preliminary analysis of twenty-five indices examined their constituents in order to avoid duplication of index components which would lead to a distortion of research results. as part of the regional methodology, an 8-stage algorithm was proposed for assessing the level of development of the business environment of the regions of ukraine based on 40 selected and reasonable indicators that cover 7 main areas and reflect various aspects of the business environment. results. nine proposed indices that are in complex, its component composition, are not overlapping and complementary, so reflect and provide a quantitative description of each of the multiple facets of this phenomenon as the world business environment. an integral estimation of the business environment of ukraine in a regional context has been carried out; an integral index of the level of development of the business environment of a region has been calculated; both of them can act as the objective quantitative criteria for the formation of regional clusters. objective characteristics of the business climate of a certain territory (in our case, region or group of regions) are obtained. practical implications. following the proposed method, the analysis of the level of development of the business environment of 70 countries in the classification limits introduced by the author in previous studies (european, north american, latin american, african, far eastern, islamic, indian, ocean), in order to further clustering and graphical interpretation of the results. the group of leaders is formed by countries that relate to different models of the business environment. the countries of the european model are germany, great britain, sweden, the netherlands and austria. north american model: canada and the united states of america. representative of the far eastern model is japan, as well as australia which belongs to other models. the group of outsiders include countries that have a poor integrated index of business environment development, they are representatives of the african (angola, congo, chad), islamic (syria, somalia, sudan) and island (polynesia) models. the results of analyzing of the business environment of the regions of ukraine show that in 2017 lviv, kyiv region became a cluster of high development. the index of development the business environment, calculated by us, proves the extremely expressed polarization and unevenness of the processes of development of territories. value/originality. the results obtained with graphical and formulaic interpretation make it possible to understand the сondition, problems, prospects of their overcoming, to outline directions of further development and opportunities to support the business environment in the regional and global context. key words: business environment, regional development, global development, methodology for analyzing the business environment, cluster. jel classification: r11, r58, c02 baltic journal of economic studies 171 vol. 5, no. 5, 2019 1. introduction despite of the globalization of the economy, international relations are still not a dominating character. even in the western european integrated economy national model business environment continues to play a decisive role. in connection with this question an explanation of how the style and culture of business, affecting the system, which operates at a different level, is required. development of methods for analysis of the national business environment has not only theoretical but also highly practical value, and it is associated with the release characteristics of the business environment in different countries and create a complete picture of the business environment regions. features and regularities of the functioning of the business improvement district in different countries are reflected in the works of such foreign scientists (hayek, 1992; lewis, 2007; chukhno, 2008; mazur, 2012; ursula, 2012; voronchak, 2013; scarlett, 2014; finigina, 2018; pankova, 2019). the purpose of the article is to develop a methodology for analyzing the level of development of the business environment of the world countries in a global and regional context and conducting an integrated assessment of the business environment. the results of the assessment will create conditions for regional and global comparison, will justify the results obtained, develop and implement a policy of both regional and state level, corresponding to the specific characteristics of each country, territory or region. 2. the development index of the global business environment: methodological and theoretical aspects statement of the main material of the study. to date, there are about 80 indices, which are calculated by international analytical organizations in the context of the world countries. almost half of them are in one way or another connected with the functioning and development of the business environment of these countries. we analyzed 25 indices, examined their components in order to avoid duplication of the components of the indices, leading to a distortion of the results of the research that we set to carry out. among this grouping, 9 indices were selected that, in a complex, by their component composition, rather than duplicating each other, but complementing, thus reflecting and providing a certain quantitative characteristic of each facet of such a multivariate phenomenon as the business environment: country brand index; democracy index; index of economic freedom; human development index; press freedom index; corruption perceptions index; global city competitiveness index; ease of doing business index; fragile country index. we propose an algorithm for assessing the level of development of the business environment of the world countries which is based on 9 selected and wellgrounded world indices, which is graphically reflected in figure 1. the above methodology can be used to assess the level of development of the business environment in the context of the regions. the main problem in this case may be the lack of some index characteristics in the regional context for ukraine, therefore in the future research the author will propose an adapted methodology for assessing the level of development of the business environment of the regions of ukraine, based on domestic statistics and expert assessments. the analysis uses the index method, the rating method, the cluster and graphical analysis. a complex multi-stage process consisting of 6 steps, which we will describe below. a) critical selection of indices, which in their complex, by their component composition, rather than duplicate each other, but complement, thus reflect and provide a certain quantitative characteristic of each facet of such a multivariate phenomenon as the business environment. b) introduction of information one-pointedness of the selected indeces. all the indices selected by us, reflecting the different facets of the development and functioning of the business environment of the country in order to obtain informational one-pointedness, must be delineated into stimulants and destimulators, thus the link between the level of development of the business environment of the country and the stimulator will be direct, and, accordingly, with destimulators turns out to be inverse. b.1) stimulators are assigned a direct rating (from 1 to 70, where 1 is a sign of a high level of this criterion for the development of the business environment). b.2) destimulators assign a reverse order rating (from 1 to 70, where 1 is a sign of a high level of this criterion for the development of the business environ-ment). b.3) we carry out the calls of the indices, where the stimulants are aimed at bringing them to the form (from 1 to 70, where 70 is a sign of a high level of this criterion for the development of the business environment). c) the construction of indeces to a methodologically joint view for further integration. since the set of indices selected by us for assessing the level of development of the business environment of the country is rather heterogeneous, it contains absolute and relative indicators expressed in natural and value units, as well as in percentage and units (analytical coefficients, specific gravity), to a methodologically joint view for further integration. for this purpose, we use the rating method already described in the previous paragraph of the algorithm. d) calculation of the integral index of the development of the business environment of the country. calculation of the integral index for each of the indices is performed using the multidimensional simple average method: baltic journal of economic studies 172 vol. 5, no. 5, 2019 dsik = 1 1i i σ lik, (1) where dsik – integral index of business climate of the country; i – number of selected indices (in this case 9); k – a specific country for which the index is calculated (in this case from 1 to 70) lik – indicator (ranking) i – index (in this case 1 to 9) for the k-th country. the exact significance of the integral index has no economic interpretation, it is important only for place that belongs to each region on a single scale. e) comparative evaluation and ranking of countries in accordance with the value of the integrated index of business environment development (cluster aspect of the analysis of the business environment of the countries of the world). at this stage, we consider it expedient to use one of the types of cluster analysis. for this purpose, clustering of the level of development of the business environment is carried out on clusters (we offer 7 clusters for countries that demonstrate: the highest, high, medium, sufficient, low, the lowest, initial level of development). moreover, within the framework of cluster analysis, we can not allow simple mathematical division of the interval boundaries of the integral index of the development of the country 's business environment into identical parts. for each individual case, its step and its corresponding interval sections are calculated, which significantly improves the quality of cluster analysis. f) graphical interpretation of the results. it should be noted that all stages of the proposed methodology are carried out with accentuation not only on the countries, but also on their model identity (european, north american, latin american, african, far eastern, islamic, indian, oceanic). let us turn to the second task set by us (b): following the proposed methodology, we will analyze the level of development of the business figure 1. algorithm of assessing level of development of the global business environment source: compiled by the author baltic journal of economic studies 173 vol. 5, no. 5, 2019 environment of the countries of the world within the classification limits introduced by the author (suray, 2016) with the aim of further clustering and graphical interpretation of the results obtained. we will only consider the final result tables, omitting a significant part of the intermediate calculations. as criterial selection of indices, it is assumed at the first stage, we have already substantiated, therefore we proceed to point «в» of the proposed methodology. the stage «в» involves the introduction of information onedirectionality of selected indices produced by differentiating their impact on the business environment of the country, both positive (stimulants) and negative (destimulators). in our case, stimulants are country brand index, democrqacy index, index of economic freedom, human development index, global city competitiveness index, ease of doing business index, press freedom index; destimulators, respectively, corruption perception index and fragile cointry undex. the results of the rating are reflected in table 1. the countries entering the north american model of business environment development remain the leader unchanged throughout the analyzed period. this model has lost the leading position only once, losing the leadership of the european model, takes the stable second place. the countries of the indian and the island models occupy invariably low positions throughout the entire study period, namely 7 and 8 places respectively. at the stage «с», the indices are reduced to a methodically joint view for further integration. for this purpose, we use the rating method already described in the previous paragraph of the algorithm. at the stage «d», the integral index of development of the business environment of the country is calculated. in the framework of the stage «е», a comparative assessment and ranking of countries is carried out in accordance with the value of the integrated business environment development index. in our case, we have a viriable cluster analysis for 2017. to this end, we will organize groupings into 7 zones in increments of 8, covering the following interval boundaries of the integral index of the development of the business environment of the country from 4.33 to 60.44: zone 1 to 12.33; zone 2 from 12.34 to 20.34; zone 3 from 20.35 to 28.35; zone 4 from 28.36 to 36.36; zone 5 from 36.37 to 44.37; zone 6 from 44.38 to 52.38; zone 7 more than 52.39. proceeding from the above mentioned, we proposed 7 clusters for countries that demonstrate: the highest, high, medium, sufficient, low, the lowest, initial levels of business environment development, which are reflected in table 2: thus, the group of leaders is formed by countries that relate to different models of the business environment. the countries of the european model are germany, great britain, sweden, the netherlands and austria. north american model: canada and the united states of america. representative of the far eastern model is japan, as well as australia which belongs to the other models. the group of outsiders include countries that have a poor integrated index of business environment development, they are representatives of the african (angola, congo, chad), islamic (syria, somalia, sudan) and island (polynesia) models. 3. method of analyzing the level of development of the business environment of the regions of ukraine the active and rapid changes in the information support of world markets, the integration and globalization of national and regional markets, the transnationalization of production will require increasing and changes in the assessment of key processes. first of all it concerns the assessment table 1 rating of business environment models according to the business environment development index in 2013–2017 the average business envi-ronment de-velopment index european model north american model latin american model african mod-el far eastern model islamic model indian model island model (oceanian countries) 2013 value 6,43 5 22,54 24,33 12,96 24,15 25,84 31,72 rating 2 1 4 6 3 5 7 8 2014 value 8,04 5,39 22,8 22,74 13,96 24,48 25,84 29,58 rating 2 1 5 4 3 6 7 8 2015 value 8,04 5,39 22,8 22,74 13,96 24,49 25,84 29,58 rating 1 2 5 4 3 6 7 8 2016 value 6,45 5,67 21,87 22 13,47 25,29 26,2 32,33 rating 2 1 4 5 3 6 7 8 2017 value 6,69 4,72 22,13 24,22 12,73 26,13 27,04 32,33 rating 2 1 4 5 3 6 7 8 source: calculated by the author baltic journal of economic studies 174 vol. 5, no. 5, 2019 table 2 groupings of countries into clusters according to the level of business envi-ronment development in 2017 business environment model country the integral index at 2015 rating the level of business environment development north american model canada 4,33 1 the highest european model germany 4,89 2 european model the united kingdom 5,44 3 european model sweden 5,44 4 other models australia 6,00 5 north american model the usa 6,22 6 european model the netherlands 6,33 7 european model austria 10,11 8 far eastern model japan 10,33 9 far eastern model south korea 12,56 10 high european model france 12,67 11 far eastern model singapore 13,67 12 latin american model chile 14,56 13 european model italy 15,22 14 far eastern model taiwan 16,67 15 european model poland 17,78 16 european model spain 20,22 17 latin american model uruguay 21,56 18 average islamic model united arab emi-rates 21,67 19 islamic model qatar 24,67 20 latin american model peru 25,56 21 north american model mexico 26,78 22 african model south africa 27,89 23 african model botswana 28,44 24 sufficient indian model thailand 28,67 25 latin american model colombia 29,00 26 european model turkey 29,22 27 far eastern model mongolia 30,33 28 latin american model brazil 30,44 29 islamic model saudi arabia 30,44 30 far eastern model china 31,22 31 latin american model argentina 32,78 32 indian model india 33,56 33 indian model indonesia 34,22 34 islamic model oman 34,89 35 indian model philippines 35,11 36 other models russia 36,22 37 latin american model paraguay 36,67 38 low other models kazakhstan 37,11 39 european model ukraine 37,33 40 latin american model cuba 38,67 41 latin american model ecuador 39,11 42 indian model sri lanka 39,78 43 indian model vietnam 41,00 44 latin american model bolivia 42,22 45 islamic model algeria 42,22 46 islamic model egypt 43,00 47 islamic model iran 44,56 48 the least islamic model kenya 44,67 49 indian model nepal 46,22 50 islamic model libya 47,56 51 indian model pakistan 47,67 52 african model ethiopia 47,78 53 baltic journal of economic studies 175 vol. 5, no. 5, 2019 of the business environment. at the global level, analytical organizations monitor a significant number of indicators that somehow reflect the characteristics of the functioning and development of the business environment. in the regional context, for ukraine the first attempt to make a corresponding assessment was made just in 2015. this happened within the framework of the usaid leadership in economic management program, which included the development of a special national tool, the annual assessment of the business climate (annual assessment, 2017). the business environment is volatile and requires monitoring, assessing states and constituents from the government agencies in order to adjust regional development policies and directly regional management bodies. attracting a reasonable, collective assessment of private analytical sources, consulting provides the latest quality and increased efficiency in the implementation of management functions. this necessitates the development of a methodology for analyzing the business environment of ukraine, which was better adapted specifically to its economic, social and cultural characteristics, based on official information provided by domestic organizations of the public and private sectors of the economy. such an assessment is impossible without a systematic set of data reflecting the state of the phenomenon being studied and will become the starting point of the analysis. so, based on the data of domestic state and non-state organizations, we propose a range of indicators reflecting the peculiarities of the business environment in the context of ukrainian regions and systematized into seven subsystems (economic, political, legal, social, institutional, informational, environmental) (suray, 2017). the proposed study will be the basis for developing a methodology for analyzing the business environment of a region as a multicomponent phenomenon (suray, 2017). so, the analysis of the business environment of the regions can be made on the basis of official information of the state statistics service of ukraine with a regional transcript and relevant additions. each group of indicators characterizes a specific subsystem of the business environment. official information of the state statistics service of ukraine allows a quantitative assessment of the economic, social, political, legal, institutional, informational and environmental subsystems, as a comprehensive description of the business environment of the region. the dynamics of the statistical data presented on most of the indicators for the studied years (2007, 2012, 2017) makes an assessment of the dynamic level of the business environment in each region and makes it possible to qualify the static nature or variability of the meso-environment. the goal was to cover the maximum number of criteria, it is a systemic form relative to the business environment, therefore, quantitative and qualitative indicators (which will be discussed below) were taken into account, which today remain unformalized. a study of the informativeness of the statistical base for evaluating the components of the business environment indicated that it is advisable to take into account 40 statistical indicators reflecting various aspects of the business and cover the seven main subsystems of the business environment. the indicators are defined as the basis of the proposed methodology for assessing the level of development of the business environment. the assessment methodology consists of eight stages, filled with appropriate actions and analytical procedures, business environment model country the integral index at 2015 rating the level of business environment development island model the hawaii islands 47,89 54 the least indian model myanmar 48,11 55 island model antilles 48,44 56 african model mali 48,56 57 latin american model venezuela 48,67 58 island model easter island 50,22 59 african model niger 50,67 60 islamic model iraq 50,89 61 indian model afghanistan 52,00 62 islamic model yemen 52,11 63 island model polynesia 53,00 64 initial islamic model syria 54,11 65 african model angola 54,44 66 islamic model somalia 55,00 67 islamic model sudan 55,56 68 african model congo 59,67 69 african model chad 60,44 70 source: calculated by the author (end of table 2) baltic journal of economic studies 176 vol. 5, no. 5, 2019 involving the use of the following methods: regressioncorrelation; index; cluster; graphic; rating; expert assessments (pankova, 2019). the sequence of the evaluation procedure is as follows: 1. the criterial selection of indicators, which in the complex, with their component composition, do not duplicate each other, but complement, in this way reflect and provide a certain quantitative characteristic of each of the subsystems of such a multivariate phenomenon as a business environment. forty indicators of seven subsystems of the business environment, providing a complex characteristic of the phenomenon, are proposed. 2. the construction of indicators to methodically cooperative activities. since the set of indicators selected to assess the level of development of a country 's business environment is heterogeneous, it presents absolute and relative indicators expressed in different units of measurement, which requires their reduction to a methodically joint form for further integration. for this purpose, the rating method was used. 3. provision of an informative one-wayness of selected indicators. we classify all indicators that reflect the different facets of the development and functioning of the business environment of the country 's regions into two groups: stimulants and disincentives. thus, while developing a methodology for the information-related conditions of the regions of ukraine we include into the selection all regions without exception that play the role of components in the index method. this will allow to achieve high accuracy of calculations, and consequently, high reliability of conclusions. to this end, we propose to use the technique of the scope of variation ( jyoti, 1992). 3.1. regarding the indicators-stimulators we apply the formula (2) ( jyoti, 1992). dij = aij ajmin ajmax ajmin − − , (2) 3.2. for indicators-destimulators we apply the formula (3) ( jyoti, 1992). dij = ajmax aij ajmax ajmin − − , (3) where dij – standardized value of subaggregates of j in i-region; aij – the measured value of subaggregates of j for the i-region; ajmax, ajmin – maximum and minimum values j of subaggregates. 4. calculation of the integral subscript of the development of seven subsystems of the business environment in a regional context. the calculation of integral subscript, based on the indicators that form the statistical base of the seven subsystems, should be carried out separately for each subsystem and in a regional context. the procedure is carried out using the method of multidimensional simple sig = dikjh, (4) where sig is a overall index of the g subsystems of subaggregates of business environment in the i– region, g= 1 7, and і= 1 27, – pіdеbe, pіdsbe, pіdpbe, pіdlbe, pіdibe, pіdinf be, pіdеbe; pіdеbe – partial index of development economic business environment; pіdsbe – socialhttps://www. multitran.ru/c/m.exe?t=1929543_1_2&s1=%ef%ee %e4%f1%e8%f1%f2%e5%ec%e0; pіdpbe – political; pіdlbe – legal; pіdibe – institutional; pіdinfbe – informational; pіdеbe – ecological business environment; dikjh – standardized value j-subscript g-subsystem in i-region; g – number of subsystem of indicators, g= 1 7, ; mk – number of indicators g-subsystem; j – the j-indicator of the g-subsystem. the obtained intermediate values in the context of regions will be formed into seven groups-subsystems with the aim of further calculating indicators of the level of development of the business environment for each regional subsystem. 5. the determination of the weights for the seven subsystems of the business environment are determined as a result of two successive stages: 5.1. using the method of expert assessments (respondents are representatives of the top management of business structures (small, medium and large businesses) and representatives of state and regional organizations that have regulatory impact on the business environment of the region). 5.2. using the tools of a multi-component prototype of the business environment proposed in the previous section of the study to obtain the weight of each of the subsystems. the total sum of the specific gravity of each subsystem is denoted by ch, for this indicator the fair equation (5) ( jyoti, 1992): ch = g іg = ∑ = 1 1chg , (5) where chg – weighing coefficient g– business environment subsystems of the region, and g= 1 7, and g = 1 27, . 6. the calculation of the integral index of the business environment in the regional context. the integral index of the level of development of the business environment of the і-th region (iilderi) was obtained by using the method of calculating the richly weighted average (6) ( jyoti, 1992): iilderi = chgsig, (6) where chg is the weighted coefficient of the g-subsystem of the business environment of the i-region, g = 1 7, and g= 1 27, ; sig – integral subaggregates of the g-subsystem of the business environment of the i-region, g = 1 7, and g= 1 27, ; baltic journal of economic studies 177 vol. 5, no. 5, 2019 7. comparative assessment, ranking of regions with subsequent clustering according to the value of the integral index of the development of the business environment. at this stage, we consider it appropriate to use the mathematical procedure of cluster analysis. moreover, within the cluster analysis we will not allow a simple mathematical division into intervals of the integral business environment development index of the country into equal parts. for each individual case, we calculate our step and the corresponding interval segments, which significantly improves the quality of cluster analysis. the sturges’ rule is a scientifically recognized method for determining the optimal number of ranges (sturges, 1926). its formulaic interpretation is (7): ∆ = + ⋅( )v lgn/ 1 3 322, , (7) where n – number of elements, n = 27; v – range of values of the integral index of the development of the business environment. 8. graphic interpretation of the results. graphic interpretation will allow to visualize the data obtained, will provide greater visibility of the research results. built in the form of a map of ukraine with the allocation of geographical clusters, differentiated by the level of development of the business environment, can be used to make decisions on regulatory policies at both the state and regional levels. it is advisable to introduce this technology in the framework of the implementation of the «state strategy for regional development for the period up to 2020». the proposed approach to assessing the level of development of the business environment of the regions of ukraine is an effective mechanism: the formalization of the business environment of the regions; creating conditions for conducting a regional comparison of development processes (and not only in the internal evaluation system, comparisons with european regions are possible); accelerate investor decision making; justification of the results obtained, the development and implementation of policies at both regional and state levels, corresponding to the specific characteristics of each territory or region. 4. problems of asymmetry of business environment development in the regions of ukraine: approbation of the methodology the practical value of any research activity is in disclosing its practical value, a description of how the results obtained during the study can be applied. so, the following research tasks are recommended to consider adaptation and testing of the proposed methodology for analyzing the level of development of the business environment of the regions of ukraine to domestic conditions. we will consider only the final result tables, omitting a significant part of the intermediate calculations. 1. criterial selection of indicators. the advantage of the proposed method is that the researcher, adhering to the main stages of its algorithm, can work with a flexible set of input data. let us return to the main subsystems that form a comprehensive view of the business environment and quantitative data (indicators of the state statistics service of ukraine), which in the framework of the study were selected from the official statistical database to reflect the state of these subsystems. all empirical data are distributed respectively on the seven subsystems that form the business environment and consist of forty statistical indicators. we suggest evaluating the economic subsystem of the business environment by the following groups of indicators: 1.1. as constituent indicators for assessing of the commercial component of the economic subsystem of the business environment of the region used: the gross regional product; gross regional product per capita; the number of economically active population; fixed investment; profitability of operating activity. 1.2. the financial subsystem can be evaluated using the following indicators: region’s share of the country 's tax debt in the total amount; staff costs of the subjects of economic activity of the region; number of financial institutions;arrearage in salaries; financial results of activity of subjects of economic activity of the region before taxation. 1.3. the communication subsystem, its state and dynamics can be estimated using the following indicators: mobile (mobile) communication; transported (sent) goods; passed (sent) passengers revenues from postal activity. 1.4. as part of the evaluation of the technologically innovative business environment subsystem, we use statistical data: the number of organizations that are engaged in research and development; number of scientific personnel; volume of performed scientific and technical works; studying expenses; the share of subjects of the economic activity of the region, which have introduced innovations. we characterize the social subsystem using indicators: population size, consumer price index, migration indicators, unemployment rate, population incomes, natural movement of the population. the political subsystem is estimated using indicators: the number of political organizations; the number of persons brought to administrative responsibility. the legal subsystem demonstrates the state of compliance / violation of the law and its impact on the activities of business entities: non-payment of salaries, scholarships, pensions or other statutory payments; misappropriation, embezzlement or seizure of property through abuse of official position; legalization (laundering) of proceeds from crime; abuse of power or official position; corrupt practices. we will characterize the institutional subsystem based on the following indicators: the number of business entities in the region, the number of employed workers in business entities, the volume of products sold (goods, baltic journal of economic studies 178 vol. 5, no. 5, 2019 services). the informative subsystem is estimated by the indicators: income from fixed telephone communication, broadcasting network and radio communication, internet services. the main indicators for assessing the environmental subsystem are: emissions of pollutants into the atmosphere, the amount of neutralized substances polluting the atmosphere. 2. summarizing the indicators to a methodically joint form. at this stage, the construction of empirical data (forty indicators in the context of subsystems for each of the regions of ukraine and taking into account the time trend for the period 2007, 2012, 2017) to a systematically joint form. due to the fact that, since 2014, the official statistical statement do not take into account the data of the autonomous republic of crimea and the city of sevastopol, and to achieve uniformity and comparability of data, it was decided to unify the entire time trend with the exception of data from the specified regions from 2007 and 2012. that is why, these regions are excluded from all tables, where the results of the study will be presented. the main tool for analysis and evaluation is the rating method. 3. ensuring the one-wayness of the information on selected indicators. as it was already noted, the methodology proposed for analyzing the business environment of a particular country (ukraine in our case) is more accurate due to the application of the method of theoretical range of variation. 4. calculation of the subscript of development index of the seven subsystems of the business environment in a regional context: pіdеbe, pіdsbe, pіdpbe, pіdlbe, pіdibe, pіdinf be, pіdеbe. it is important that the analysis is carried out necessarily in the context of the seven subsystems indicated by us, since each of them has its own individual weight in the formation of the final indicator, will provide an idea of the state of development of the region’s business environment in time sections: 2007, 2012 and 2017. at this stage the mathematical multidimensional simple average method was used. 5. the determination of intermediate coefficients for the proposed seven subsystems of the business environment is carried out and based on the results of expert conclusions of scientists, top management of business structures that provided the weight of each of the subsystems (the total weight is 1.0): the economic subsystem is 0.33; social subsystem is 0.25; political subsystem is 0.08; legal subsystem is 0.14; institutional subsystem is 0.08; information subsystem is 0.08; environmental subsystem is 0.04. the most important factor in the formation and development of the business environment, according to the results of the fifth stage of evaluation, are economic and social systems. the smallest role in the formation and development of the business environment belongs to the ecological subsystem. these results indicate a significant role for the economic processes taking place in the business environment, insufficient development of social management in ukraine, low ecological awareness and a culture of doing business. in this way, we obtained the chg indicators, i.e. the weight factors of the g– th subsystem of the business environment, which are necessary for calculating the integral index of the business environment in a regional context. 6. calculation of the integral index of the development of the business environment in a regional context. the previous paragraph provides a general formula for calculating the integral index of business environment development. by transferring this equation to the indicators of each of the subsystems of the business environment, calculated in p.1-5 of the method, we obtain the equation (8): iilderi = ch1*pіdеbe + ch2*pіdsbe + + ch3*pіdpbe + ch4*pіdlbe + ch5*pіdibe + + ch6*pіdinf be + ch7*pіdеbe, (8) where і – the region, і= 1 27, . also, by entering into the equation the specific values of the weights of the seven subsystems of the business environment, we obtain equation (9): iilderi = 0,33* pіdеbe + 0,25* pіdsbe + + 0,08* pіdpbe + 0,14* pіdlbe + 0,08* pіdibe + + 0,08* pіdinf be + 0,05* pіdеbe. (9) the resulting equation was used to determine the level of the integral index of the development of the business environment of twenty-seven territorial units of ukraine for the period 2007, 2012, 2017. in the framework of the proposed methodology, the integral indicator of the level of the region's business environment varies from 0 to 1.0. the closer the indicator is to 1.0, the higher the level of development of the business environment. the result of the calculation of the integral index of the level of development of the business environment of the region is the hierarchically located regions of ukraine, which criterion for differentiating is taken as the value of the integral indicator. the specific value of the integral index (or indices characterizing separate subsystems of the business environment) does not have an economic interpretation, but only the place that belongs to each region on a single scale is important. so, the author has calculated the integral indices of the economic, social, political, legal, institutional, informational and ecological subsystems of the business environment of ukraine. their results allowed us to obtain an integral index of the business environment of the regions of ukraine (table 3). 7. comparative assessment, ranking of regions with subsequent clustering according to the value of the integral index of the development of the business environment. the determination of the optimal number of ranges was carried out in accordance with the sturges’ formula. the calculation is carried out for a sample of baltic journal of economic studies 179 vol. 5, no. 5, 2019 the business environment development indices of the regions separately for each year of 2007, 2012, 2017. the range of variation of the regional business environment development index in 2017 will be equal to (10) (sturges, 1926): v2017 = vmax� 2017 – vmin� 2017 = 0,73-0,25 = 0,48. (10) the range of variation of the regional business environment development index in 2012 will be equal to (11): v2012 = v vmax max� ��2012 2012− = 0,71-0,31 = 0,40. (11) the range of variation of the regional business environment development index in 2007 will be equal to (12): v2007 = v vmax max� ��2007 2007− = 0,75-0,29 = 0,46. (12) to calculate the ranges of the index of development of the business environment of the regions in 2017, there is the equation (13, 14): ∆2017 2017 1 3 322= + ⋅v lgn/ , ;� (13) ∆2017 0 48 1 3 322 27 0 024= + ⋅ =, / , , .lg � (14) to calculate the ranges of the index of development of the business environment of the regions in 2017, there is the equation (15, 16): ∆2012 2012 1 3 322 14= + ⋅ ( )v lgn/ , ;� (15) ∆2012 0 4 1 3 322 27 0 018= + ⋅ =, / , , .lg � (16) to calculate the ranges of the index of development of the business environment of the regions in 2017, there is the equation (17, 18): ∆2007 2007 1 3 322 16= + ⋅ ( )v lgn/ , ;� (17) ∆2012 0 46 1 3 322 27 0 021= + ⋅ =, / , , .lg � (18) the resulting ranges for the three time frames when rounding up to hundredths are reduced to step 0.020. so, for 2007, 2012, 2017, the range values are the same and make up: δ_ (2007; 2012; 2017) = 0.020. we will accomplish groupings with a step of 0.020, into clusters according to the principle of differentiation according to the level of development of the region’s business environment. it covers the interval limits of the investigated time range of the integral coefficient of development of the business environment from 0.730 to 0.250. we received 5 clusters for regions, demonstrating respectively: high, moderate, medium, low, the lowest level of development. the names of clusters proposed by the author do not bear a separate semantic load, but they focus attention on the belonging of a certain region table 3 integral index of development of the business environment of ukraine's regions in 2007, 2012, 2017, calculated according to the author's method the index of development of the business environment of the region region the index of development of the business environment of the region 2007 2012 2017 vinnytsia 0.391 0,387 0.394 volyn 0.397 0.392 0.392 dnipropetrovsk (dnipro) 0,436 0.431 0.402 donetsk 0.414 0,387 0.254 zhytomyr 0,383 0.347 0.367 zakarpattia 0.382 0.36 0.369 zaporizhzhia 0.423 0,353 0.374 ivano-frankivsk 0,371 0.394 0.391 kyiv 0.452 0.437 0.412 kirovograd (kropyvnytskyi) 0.384 0.362 0,383 luhansk 0.297 0.314 0.314 lviv 0,427 0,371 0.417 mykolayiv 0.392 0.368 0,376 odesa 0.401 0.402 0.355 poltava 0.354 0,377 0,378 rivne 0.364 0.343 0.350 sumy 0.368 0.362 0.362 ternopil 0.404 0.381 0.372 kharkiv 0.432 0.439 0.405 kherson 0.395 0.365 0.367 khmelnytskyi 0.385 0,376 0,388 cherkasy 0.373 0.384 0.381 chernivtsi 0.384 0.385 0.396 chernihiv 0,389 0,356 0.333 the city of kyiv 0.754 0.717 0.736 source: calculated by the author baltic journal of economic studies 180 vol. 5, no. 5, 2019 to a group with a similar level of development of the business environment among the general sample: cluster 1 – more than 0.410 – high development of the business environment; cluster 2 – 0.390-0.409 – moderate development of the business environment; cluster 3 – 0.370-0.389 – average development of the business environment; cluster 4 – 0,350-0,369 – low development of the business environment; cluster 5 – less than 0.349 – the lowest development of the business environment. the results of our grouping show that in 2017 lviv, kyiv region and the city of kyiv became a cluster of high development. the cluster of moderate development included kharkiv, dnipropetrovsk, chernivtsi, vinnytsia, volyn and ivano-frankivsk regions. the most common is the cluster of medium development of the business environment covering 7 oblasts: khmelnytskyi, kirovograd, cherkasy, poltava, mykolayiv, zaporizhzhia and ternopil regions. the cluster of low development of the business environment includes zakarpattia, zhytomyr, kherson, sumy, odesa and rivne regions. and the least common was the cluster of the lowest development of the business environment, which included the regions, where the integral index of the development of the business environment was below 0.349, namely: donetsk, luhansk and chernihiv oblasts. the index of development the business environment of the regions of ukraine, calculated by us, proves the extremely expressed polarization and unevenness of the processes of development of territories. among the sam-pling frame, which included the regions with the highest level of development, the range of the integral index is so significant that, because of this, indicators of territories was not included in the cluster of leaders which become expressionless. 8. graphical interpretation of the results obtained. the visualization of the results obtained in the previous stages of the calculation of the integral index and subsequent differentiation into clusters according the level of development (figure 2) is the process of constructing a graphical data icon. we will give results for 2017 in the form of a map of ukraine with a color gradation of legend: zone 1 (white)– high development cluster; zone 2 (light gray)– cluster of moderate development; zone 3 (gray)– medium development cluster; zone 4 (deep gray)– low development cluster; zone 5 (black)– cluster of the lowest development of the business environment zone 6 (stripped)-crimea figure 2. zoning of the regions of ukraine according to the index of development of the business environment 2017 year source: compiled by the author baltic journal of economic studies 181 vol. 5, no. 5, 2019 clusters of regions according to the level of development of the business environment, offered at the preliminary stage of research from white to black color. demonstration of the received parameters of the level of development of the business environment in the form of development zones on the map of ukraine during 2007, 2012, 2017 gives an opportunity to see trends in the development of regions and their mutual decomposition. thus, kyiv(city), kyiv and lviv regions remain absolute and unchanged leaders in the parameters of the business environment. in 2012, the dnipropetrovsk region was among the leaders, and in 2007 the kharkiv, zaporizhzhia and donetsk regions also included in the high-developed cluster. according to the results of 2007, with a small margin from the leaders, ternopil, odesa, dnipropetrovsk, kherson, mykolayiv and vinnytsia regions were located in the zone of moderate development of the business environment. however, in 2012 the situation reversed and this group included only odesa, ivano-frankivsk and volyn regions. in 2017, the cluster expanded again and began to include kharkiv, dnipropetrovsk, chernivtsi, vinnytsia and ivano-frankivsk regions. the cluster of low development of the business environment includes the regions with an index of development of the business environment within the range of 0.350-0.369. in 2007 , such areas were sumy, rivne and poltava regions. in 2012, the number of participants expanded significantly; mykolayiv, zakarpattia, kherson, sumy, kirovograd, chernihiv and zaporizhzhia regions were added to the cluster. in 2017 , the low zone was formed by zakarpattia, zhytomyr, kherson, sumy, odesa and rivne regions. the cluster of the lowest development of the business environment includes the most depressed regions of ukraine. in 2007 , it was only the luhansk region, which, by the way, remained in this zone throughout the investigated period. in 2012 to the list were added zhytomyr and rivne regions, and in 2017 the enumeration was added by chernihiv and donetsk regions. thus, graphical interpretation, which is a tool for visualizing quantitative characteristics, provides greater visibility of the research results. the obtained zoning maps of the regions of ukraine is a graphical interpretation of the comparative assessment and clustering of regions according to the level of development of the business environment. as a result, we received a formative evaluation of the business environment of the regions in a cluster perspective, together with the identification of the zones of greatest conflict. 5. conclusions thus, we can summarize that in our hands there is an effective tool for con-ducting a comprehensive assessment of the level of development of the business environment both at the global and at the regional level. first of all, these are empirical data: indeces described by us, and based on the results of careful selection, we can create as complete a picture of the phenomenon as we can. secondly, a six-step method for processing and interpreting the results obtained using the index, cluster, graphical, and rating methods was proposed. the results of the assessment will create conditions for regional and global comparison, will justify the results obtained, develop and implement a policy of both regional and state level, corresponding to the specific characteristics of each country, territory or region. we have formulated the evaluation parameters of the development of the business environment of the regions of ukraine. it allowed to develop a methodological approach to diagnose the business environment of a region, grounded in the use of interconnected and complementary methods of its assessment based on official statistical information; 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(2013). regional aspects of the development of social responsibility of business in ukraine: methodology and practice of evaluation. economy. management. innovations. retrieved from: http://nbuv.gov.ua/ ujrn/eui_2013_2_17 (accessed 17 november 2019). baltic journal of economic studies 157 vol. 2, no. 2, 2016 corresponding author: 1 economics department, kremenchuk mykhailo ostrohradskyi national university. e-mail: lubkv@yandex.ru conceptual approaches to forming mechanism of investment safety realization vladimir talover1 kremenchuk mykhailo ostrohradskyi national university, ukraine abstract. the purpose of the paper is theoretical justification of theoretical approaches while developing the mechanism of the state investment safety. the tasks of the system of the national economy investment safety are the following: developing investment potential, creating favourable investment climate, forming mechanisms of stable investment activity in the key branches of economy. at the same time, it should also be noted that the complex approach that would allow sufficiently justifying and practically solve the problems of defining indicators, factors of the investment policy and directions of its assurance in realization of the mechanism of investment policy is not sufficiently developed nowadays. this fact determines research topicality. the issue of assuring investment safety is of a special importance in ukraine that has to assure market economy development, to overcome deformations in the economy structure, to renew products and production apparatus in the industry, to master new kinds of activities. methodology. the survey is based on the generalization and development of views of the scientific-economic schools, uses approaches of the international agencies and recommendation and normative materials of ukraine concerning realization of the state investment policy as a totality of interrelated levels and subsystems that allows establishing main functions of the investment safety system. results of the survey shows that the mechanism of investment safety includes some kinds, forms and methods of organizing investment relations and investment activity, ways of their quantitative determination and establishing interdependence. the concept of investment policy is based on the complex approach and includes the blocks which are locally structured in such way that they allow forming adequate system of its indicators and conducting monitoring of their changes under the influence of the determined factors. the peculiarities and elements of realizing investment safety are determined on the basis of the suggested concept. criteria assessment of the national economy investment safety should include assessment of: ratio of the national and foreign investments; assurance of the enlarged recreation; level of economy restructuring and re-equipping; level of accumulated resources; level of financing scientific-technical sphere. low level of investment safety is explained by the lack of wide range of investment objects and imperfection of investment mechanisms, as well as the lack of developed investment market. practical implications. the suggested conceptual statements concerning formation of the mechanism of realizing investment safety determine unity in the system of economic interests and participants of the investment sphere, as well as solving collisions that appear between them. the priority directions of the state policy in assuring investment safety should become the following: creating favourable macroeconomic and entrepreneurial environment, promoting development of business, protecting owners and strengthening efficiency and transparency of the use of state finances. value/originality. the suggested conceptual principles of forming efficient mechanism of investment safety give the reason for forming an appropriate system of indicators and allow determining prospects and threads to the investment safety level in the real time. key words: investor, investment security, investment security concept, investment security mechanism, investment security monitoring, threads to investment safety. jel classification: e22 g31 1. introduction investment policy influencing capital income into the economy development is an integral part of sustainable growth of any civilized functioning economy system. determination, identification and measurement of the risk factors, dangers and threats is one of the most important tasks of assuring economic and investment safety. the favourable investment climate should be created to assure increase of the investment volumes into the real economic sector. however there is no exact program of forming investments that would envisage priority of baltic journal of economic studies 158 vol. 2, no. 2, 2016 developing one or another economy branch in ukraine. in the whole, in current economic conditions the state of investment climate is characterized by a significant investment risk that is to be minimized on microan macro-level to form a well-founded investment policy which would maximally favour solving the issues of forming investment safety system aimed at total improving the investment policy management system. 2. definition of the essence of investment safety a single definition of the essence of the investment safety is absent today. o. baranovskyi thinks the state investment policy is achieving the level of investment that allows optimally meet current investment needs of the national economy in volume and structure with taking into consideration the effective use and return of the costs being invested, optimal ratio between the volumes of inner and outer investments, foreign investments and the country and domestic ones abroad, supporting positive national payment balance (baranovskyi, 2004). according to v. i. kyrylenko the state investment safety is an ability to support industrial savings and capital investments on the level guaranteeing appropriate tempos of broadened recreation, restructuring and technological re-equipment of economy (kyrylenko, 2005). according to o.o. yermak the state investment safety is such a balanced level (volume) of own and foreign investments that will become the basis for long-term positive economy dynamics; will be able to assure sufficient level of financing scientific-technical basis; allows creating and developing innovative processes and mechanisms (yermak, 2012). analysis of theoretic approaches to determination of the category "investment safety " allows establishing two approaches (yurkevych, 2012): 1) determination of the investment safety through the level of investments or the level of economy investing that would assure its broadened recreation, rational restructuring and technological re-equipment; 2) determination of the investment safety through the ability to assure a certain level of investments, capability to create preconditions of the active investment activity or opportunity to save resources or capital investments. 3. concept of investment safety investment safety concept can be built on the basis of a complex methodical approach and include the blocks stated below. 1st block. determining and classifying threads to investment safety. the main threads to investment safety includes: insufficient usage of opportunities of ukrainian companies' entering international capital markets; lack of state investment strategy causing lack of rational assessment of investment risks; non-conformity of the investment into ukrainian economy to the needs of structural rebuilding; insufficiency of access to financial resources and lack of efficient mechanisms of transforming savings of the population into investments; monopolization of strategic branches of ukrainian economy by foreign capital with privatizing strategic enterprises; regional and branch disproportions in the investment income. economic risks of investments comprise the following factors: – risks of technological character connected with the factors influencing technological constituent when realizing the project: level of automatization, reliability of equipment, tempos of modernization technologies and equipment, complexity of manufacturing process, etc.; – political risks determined by factors that directly influence the complex of political constituents when realizing different investment projects: change of political course of the state, elections on different levels, separatism, political pressure, freedom of speech, foreign policy pressure, etc.; – social risks are a totality of factors connected to the social constituent of any investment activity: conducting various social programs, strikes, social tension. social constituent is characterised by aspiration of certain people for helping each other, creating various social relations, as well as their role in the society, material and moral stimuli, official relations, existing and possible conflicts; – risks of legal character: incompleteness, imperfection of the legal bases, lack of arbitration and legal procedure independence, incorrectness of the tax system, legislative guarantees, etc.; – environmental risks that are a totality of factors influencing the state of environment in the region and the activity of investment objects: radiation conditions, environmental pollution, ecological programmes, ecological catastrophes, etc. (kyrylenko, v.i. & kyrylenko, l.m., 2009). 2nd block. determining and grouping objects of investment safety monitoring. the objects of investment safety monitoring are divided into the groups of: investment activity; innovative activity; organizational-structural and legal activity; investment risks; integration of investment activity. the main tasks of investment activity monitoring are organizing continual observation of the monitored object and forming the system of informative indicators; assessing and analysing received information and determining causes of deviation from the pre-planned results; assuring participants of the investment activity with objective information received during the monitoring; forecasting development and providing recommendations on avoiding or reducing negative effects on the monitored objects (orlova, 2015). 3rd block. forming totality of indicators and data basis for investment safety diagnosing. the indicators are divided into to main types. the first type includes indicators of criteria nature. their values baltic journal of economic studies 159 vol. 2, no. 2, 2016 give opportunity to come to conclusion about the state of territorial safety (order of the ministry of economy of ukraine № 69 from march 2, 2007). since these indicators reflect the tendency of the safety state development they are indicators of the threads to investment safety and can be called indicative indices. the other type includes indicators that directly form indicative indices and indicators of leading influences the change of which directly influences indicative indices. 4th block. forming indicative indices and blocks of diagnosing threads to investment safety. indicators of the enterprise investment safety should meet the following criteria: – have a single interpretation for people taking decisions; – have quantitative expression; – not require considerable expenses for collecting information and calculations; – base oneself on the existing system of national statistics; – suitable for forecasting; – have an opportunity of assessment in time dynamics; – reflect changes in strategic policy of the enterprise, etc. the methodology of calculating economic safety of ukraine determines a list of main indicators of the state of economic safety in ukraine, their optimal, threshold and boundary values, as well as methods for calculating integral index of economic safety. 5th block. conducting indicative analysis on each indicative block of the investment safety. from the point of view of investment sufficiency the most important indicator is a fraction of saving in gdp. saving norm is a composite macro-economic indicator reflecting total balance of actions of all economic, legal, institutional and other factors that regulate the volume and structure of the investment activity. according to the methods of calculating the level of economic safety in ukraine the minimum boundary value of gross investments is 25% (order of the ministry of economy of ukraine № 69 from march 2, 2007; order of the ministry of economy of ukraine № 1277 from october 29, 2013). 6th block. developing the concept of monitoring and programme-aimed measures on the scenario of liquidation, neutralization and weakening threads to investment safety. the main threads to investment safety includes (nedashkivskyi, podhorna, 2012): – insufficient usage of opportunities of ukrainian companies' entering international capital markets; – lack of investment strategy leading to the lack of rational assessment of the investment risks; – non-conformity of investing ukrainian economy to the needs of structural rebuilding; – insufficiency of access to financial resources and lack of efficient mechanisms for transforming savings of the population into investments; – monopolization of strategic branches of economy in ukraine by foreign capital with privatization of strategic enterprises; – regional and branch disproportions in investment income. 4. investment safety mechanism the mechanism of investment safety includes some kinds, forms and methods of organizing investment relations and investment activity, ways of their quantitative determination and establishing interdependence. characteristics of the mechanism of investment safety realization as a system in its interaction with other phenomena and processes become apparent in its functions that include: 1) maintaining structural proportions in economy; 2) assuring widened innovative recreation; 3) complying economic interests on the vertical to the structure of national economy on the horizontal; 4) protecting national interests; fig. 1. factors of assuring state investment safety factors of assuring investment safety political: political stability; business legislation; iintegration into the world community; corruption in state administration scientific-technical: innovative state policy; innovative activity administration nature-geographical and environmental: economic-geographical location; nature-resource potential; nature-climatic conditions; environmental pollution; level of making manufacturing complexes ecological economic: branch and territorial structure of business complex; tempos of gdp increase; level of the main fund wear; inflation tempos; national debt; market infrastructure socio-demographic: demographic potential; labour potential; unemployment rate; labour migration; social infrastructure. incomes and expenses of the population baltic journal of economic studies 160 vol. 2, no. 2, 2016 5) assuring socio-political stability in society; 6) guaranteeing socio-economic safety on global, national and regional levels. the mechanism comprises two directions of influencing safety level: – direct influence is conducted when realizing investment process on all its stages and find its expression in direct formation of macro-economic indicators of the investment sphere (indicators of the state economic safety); – indirect influence appearing in the process of investment turnover in different branches of economy and is expressed in the development of neighbouring enterprises, branchessuppliers and branches-consumers, increase of total welfare on its basis, stimulation of structural changes in economy (muntiian, 1999). mechanism of realizing investment safety has two constituents: market mechanism of realization as a subsystem of the market self-regulation and correction of the investment safety; state mechanism of regulating investment processes and administrating investment activity; mechanism of investment partnership as a subsystem of cooperation between the state, businessmen and population (vasenko, danylchenko, 2012). elements of the mechanism of investment safety can be such objects as investors, clients, sub-contractors, users of the objects of capital investments, households as suppliers of investment resources, as well as the state as a regulator of recreational relations and as a immediate participant. investment is conducted according to appropriate limitations and standards established by the investment safety system. the state will regulate investment process due to a store of instruments of the influence on the participants of the investment safety system that include centralized investment resources, tax policy, amortization policy, state guarantees, subsidies, grants, loans, etc. forming the mechanism of economic safety on different levels of the state investment policy depends on a significant number of factors that can be grouped into such directions (fig. 1) (hordiienko, 2012). structurally the mechanism of investment safety includes three interrelated elements: financing investment activity, investing and realization of investments. financing investment activity envisages stable accumulation of investment resources and their transformation into investments. efficient investing envisages stabilization, reduction and reduction of prices of the investment cycle on all levels of business complex when realizing investment policy. the element «realization» is directed onto independent, efficient usage of the results of investment activity in the national economy and out of its boundaries, as well as formation of the resources for financing future investment activity (buzin, 2009). 5. investment safety indicator system investment safety as a constituent of economic safety of the national economy can be assessed with the help of social indicators and assessment criteria. threads and boundary values of these indicators should take into consideration peculiarities of the national economy. the system of indicators of the investment safety should be a special object of analysis on different levels of economy. investment safety of investors is characterized by a high level of its protection from possibility of losing invested costs and failing to receive pre-planned investment profit. the author analyses current tendencies of investmentinnovative security of ukraine with the help of corresponding indicators on the basis of methodical recommendations (table 1) (order of the ministry of economy of ukraine № 69 from march 2, 2007; order of the ministry of economy of ukraine № 1277 from october 29, 2013). gross accumulation of the main capital is characterized by gradual increase in 2010–2012 but its percentage table 1 indicators of innovative-investment safety of ukraine in 2010–2014 (muntiian, 1999) indicator 2010 2011 2012 2013 2014 critical value optimal value gross accumulated main capital, % of gdp 16.98 17.42 19.54 17.63 14.0 18 30 ratio of the costs of innovative main means to the volume of capital investments, % 64.83 56.91 65.02 66.87 68.64 55 85 fraction of products realized on competitive markets of the country, & 48.3 49.8 49.2 45.7 47.5 50 80 ratio of clear growth of fdi to gdp, % 4.22 4.30 4.09 2.23 0.23 4 7 specific weight of the volumes of conducted research and research-technical works in gdp, % 0.83 0.73 0.75 0.77 0.66 0.5 3 ratio of expenses on research and researchtechnical works at expenses of the state budget, % of gdp 0.34 0.29 0.33 0.33 0.26 0.2 1 specific weight of enterprises applying innovations, % 13.9 16.2 17.4 16.8 16.1 5 35 specific weight of the realized innovative products, % 3.8 3.8 3.3 3.3 2.5 3 25 fraction of people using internet, % 22 28.7 35.3 40.8 46.2 20 80 baltic journal of economic studies 161 vol. 2, no. 2, 2016 in gdp is higher than critical level (18%) only in 2012. ratio of the costs of newly applied main means to the volume of capital investments in 2010–2014 ranges from 56 to 66% that corresponds to the dangerous level and is accompanied by the high level of the main means wear. the calculated values of the ratio of clear increase of direct foreign investments to gdp are at critical level 4% in 2010– 2012 and worsen in 2013–2014 that is caused by gradual outflow due to hryvna slump and other destructive factors. specific weight of the volume of conducted research and research-technical works in gdp in 2010–2014 is below 1% that proves critical value of this indicator. the fraction of enterprises applying innovations in the total amount of industrial enterprises is 16% in average in 2010–2014, i.e. is within the ranges of unsatisfactory level. specific weight of the realized innovative production is 3% in average in 2010–2014 that proves critical value of this indicator. ratio of expenses on the research and research-technical works at the expenses of the state budget in 2010–2014 is also at the dangerous level. an important indicator of innovativeinvestment safety is the ratio of the ratio of the number of specialists conducting research-technical works to the total number of employed population. this indicator decreased from 5.7 to 4.9 people per 1,000 people of economically active population during 2010–2013 and is at critical level. the most topical issue is increasing intensity of innovative-investment processes in highly technological sector of economy. in the whole the analysis of indicators of the innovative-investment safety on the current stage proves that different spheres of innovative and investment activity are in the state of crisis and differentiates only by the level of the crisis. despite a great investment potential, readiness of the foreign partners to invest costs into ukrainian economy stays low. 6. findings 1. determination of the conceptual principles of forming efficient mechanism of investment safety is the basis for establishing ways and methods of directed influence on the elements of state investment policy aimed at dicreasing the level of risks, minimizing its consequences, assuring efficient functioning of the national economy. 2. forming the mechanism of economic safety on different levels of the state investment policy depends on a significant number of factors that can be grouped into such directions: political, economic, research-technical, naturegeographical, environmental, and socio-demographic. this mechanism allows uniting all phases of investment cycle into one entity: from forming conditions and sources of investments to gaining profit by investment subjects. 3. the analysis of current tendencies of investment safety in ukraine on the basis of methodical recommendations with the help of appropriate indicators proves worsening of the level of investment safety due to non-conformity of the criteria with such indicators as the level of main means wear and the ratio of clear increase of direct foreign investments to gdp. the suggested system of assessing the level of investment safety as an element of the mechanism of investment safety can be applied when determining efficiency of realization of the state investment policy in the regional-branch aspect. references baranovskyi, o.i. 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(2012). assessing the level of investment safety in ukraine. international economic policy: scientific magazine. ministry of education and science, youth and sports of ukraine, shee «kyiv v. hetman national economic university»; chief editor d.h. lukianenko. special issue: in 2 parts. part 2: 402–407. владимир таловер концептуальные подходы к формированию механизма реализации инвестиционной безопасности аннотация. целью работы является теоретическое обоснование концептуальных подходов при разработке элементов механизма инвестиционной безопасности государства. перед системой инвестиционной безопасности национальной экономики возникают следующие задачи: развитие инвестиционного потенциала, создания благоприятного инвестиционного климата, формирование механизмов стабильной и устойчивой инвестиционной деятельности в ключевых отраслях народного хозяйства. в то же время следует констатировать, что сегодня недостаточно сформирован комплексный подход, который бы позволил достаточно обосновать и практически решить проблемы выявления показателей, факторов инвестиционной безопасности и направлений ее обеспечения в реализации механизма инвестиционной безопасности. это определило актуальность исследования. проблема обеспечения инвестиционной безопасности особенно актуальна для украины, которая должна обеспечить развитие рыночной экономики, преодолеть деформации в структуре экономики, обновить продукцию и производственный аппарат в промышленности, освоить новые для себя виды деятельности. методика. исследование основано на обобщении и развитии взглядов научных экономических школ, использовании подходов международных агентств и рекомендательных, нормативных материалов украины по реализации инвестиционной политики государства как совокупности взаимосвязанных уровней и подсистем, что позволяет определить основные функции системы инвестиционной безопасности. результаты исследования показали, что механизм инвестиционной безопасности включает виды, формы и методы организации инвестиционных отношений и инвестиционной деятельности, способы их количественного определения и установления взаимозависимости. концепция инвестиционной безопасности строится на комплексном подходе и включает блоки, логично структурированные таким образом, что позволяют сформировать адекватную систему ее показателей и осуществлять мониторинг их изменений под влиянием определенных факторов. на базе предлагаемой концепции определены особенности и элементы механизма реализации инвестиционной безопасности. исходная оценка инвестиционной безопасности национальной экономики должна включать оценку: соотношение национальных и иностранных инвестиций; обеспечение расширенного воспроизводства; уровня реструктуризации и перевооружения экономики; уровня накопления ресурсов; уровня финансирования научно-технической сферы. невысокий уровень инвестиционной безопасности объясняется отсутствием широкого круга объектов инвестирования и несовершенством механизмов инвестирования, а также отсутствием развитого инвестиционного рынка. практическое значение. предложенные концептуальные положения к формированию механизма реализации инвестиционной безопасности определяют единство в системе экономических интересов и участников инвестиционной сферы и решения противоречий, между ними возникают. приоритетными направлениями государственной политики в обеспечении инвестиционной безопасности должны стать: создание благоприятной макроэкономической и предпринимательской среды, содействие развитию предпринимательства, защиту владельцев и усиления эффективности и прозрачности использования государственных финансов. значение/оригинальность. предложенные концептуальные основы формирования эффективного и действенного механизма инвестиционной безопасности дают основание для формирования соответствующей системы индикаторов и позволяют в реальном времени определить перспективы и угрозы уровню инвестиционной безопасности. baltic journal of economic studies 148 vol. 5, no. 4, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: melnikknteu998@gmail.com 2 kyiv national university of trade and economics, ukraine. e-mail: melnichenko@knteu.kiev.ua 3 institute of international relations of taras shevchenko national university of kyiv, ukraine. e-mail: reznikovanataliia@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-148-154 the conceptual framework for the operation of financial systems in the context of global structural transformations of business models of banking tetyana melnyk1, svitlana melnychenko2, natalya reznikova3 abstract. the authors reveal fundamental tendencies of banks financial intermediation especially in the sphere of shadow banking and off-balance writes-off. substantial transformations of financial system structure caused by liberalization of financial legislation, invention of brand new financial instruments and special risk-transferring schemes (special purpose entities via special investment vehicles) and the gradual process of banking universalization specifically the approximation of business models conducted by traditional commercial and investment banks created grounds for the review of current approaches to financial systems classification. the objective of the study is to identify operative patterns and specifics of financial systems in the context of global structural transformations of business models in the bank sector. methodology. the methodological basis of the study is formed by theoretical works of foreign and domestic experts on issues related with financial systems worldwide, and the statistical data on the operation of banks in various countries, normative documents of prominent international economic institutions. the general scientific methods of analysis and synthesis, abstraction, quantitative and qualitative comparisons, descriptive analysis, analysis of the current performance of the financial system are used in elaborating theoretical and methodological framework for the typology of national financial systems by position and role played by banks in the financial system. results. the central objective of the financial system is to transfer temporarily free financial resources from its actors that have their surplus to the ones that feel the deficit of funds. national financial systems can, therefore, be classified by the way domestic companies raise funds they need. key words: financial system, market-based financial system, bank-based financial system, liquidity risk, repo agreement, overnight credits, bank balance sheet, currency swap. jel classification: g32, g21, h12 1. introduction economic globalization processes have become a powerful catalyst aggravating financial and overall economic contradictions at the national and global level. liberalization of the financial law in the leading countries of the world has enhanced interlinks and interdependences of financial capitals, thus triggering deep transformations in the financial transaction practices, resulting in the emergence of new financial instruments. “financial revolution” of the last decade considerably strengthened the links between national economies and increased financial flows of shortterm speculative resources, thus turning finance of our time into an unstable segment of the contemporary global economy. the volatility and speculative nature of cross-border financial flows make national governments exposed to international and external shocks. given global structural transformations, financial intermediaries (banks in the first place) are forced to change conventional business models by use of innovative financial instruments, which opens doors to revisions of their functions in the economy. the need of companies in the financial sector to diversify risks resulting from the dissemination of financial innovations is closely linked with the financial system’s capacity to adapt to structural transformations and face external and internal shocks. therefore, the need to determine the impact of the financial system’s structure on the dynamics of economic recovering is becoming even more significant, especially given the diversity of baltic journal of economic studies 149 vol. 5, no. 4, 2019 approaches to analysis and understanding of the essence of the financial system. 2. literature review according to ph. callier, a financial system in a broader sense refers to the practical implementation of methods and mechanisms for financial intermediation within the economic model existing in a country (callier, 1991). specifics of various economic models by a group of countries (anglo-saxon, european, scandinavian, and islamic model) are associated with strong cultural and religious differences reflected in causal links between structural components of financial systems. it follows that a universal interpretation of the financial system has to account for a multiplicity of funds that can be used in various ways depending on economic models of countries and operative specifics of structural components of financial systems. in works of b. karpinskiy, v. kolomoitsev, v. senchagov, a. gryaznova, finance is addressed mostly from the perspective of distribution and redistribution of the domestic gdp (karpinskiy, gerasimenko, 2003; kolomoytsev, 2000; senchagova, archipova, 1999; gryaznovoi, markinoy, 2004). in works of ukrainian authors, this approach is used to classify the models for the organization of financial relations by comparing the level of gdp centralization in countries with the market economy (kravchuk, gorin, yasenovska, 2008; оparin, 2004): – american model: inconsiderable level of budget centralization of gdp (25–30%); – western european model: budget centralization of gdp makes 35–45%; – scandinavian model: high level of budget centralization of gdp (50–60%). a controversial one still remains the issue of determining the components and the correlation of “building” and “structure” of the financial system. we can agree with ukrainian authors n. kravchuk, o. mozgovoi, and v. oparin (kravchuk, gorin, yasenovska, 2008; оparin, 2004; mozgoviy, 2001) who identifies structural components with the internal building of the financial system according to the level, at which economic or financial relations occur. it follows that the structure of financial system should not be identified with its building, as the financial structure is determined, first and foremost, as the model for the organization of the financial system, reflecting the structural hierarchy of its components. the abovegiven vision of the structure of the financial system conforms to the western interpretation, by which the financial structure is the mechanism to administer various segments of financial activities, which, therefore, has the internal hierarchy. in works of ph. callier, b. bossone, and r . schmidt, the financial system is addressed from the perspective of the theory of modern institutionalism (bodie, merton, 2000; bossone, 1998; schmidt, hackethal, tyrell, 2001; schmidt, hryckiewicz, 2006). it is argued that the financial system is a set of institutions, organizational structures, and bodies charged with the administration of financial relations in the economy. finance is treated as a social institute, which principal purpose is to minimize transaction costs in exchanging obligations for real resources over time. g. schinasi and r . schmidt emphasize that each chain of the financial system is its independent component but this independence is relative inside the integrated whole (schmidt, hryckiewicz, 2006; schinasi, 2004). as a result, the financial system is defined as a set of diverse types of financial resources concentrated at the disposal of the government, non-financial sector of the economy (business entities), deposit institutions, financial markets, insurance and pension companies, stock exchanges, payment and clearing systems and population (households), to fulfil their conventional functions and satisfy economic and social needs. the above definition of the financial system is quite common in economic literature but the absence of a single general concept and the diversity of theoretical approaches to the interpretation of finance and financial relations is a vital problem of modern economics. the outlining of core operative specifics of the financial system enables for detailed analysis of its components but its integrative and universal definition has not been given by now (bain, 1996; buckle, thompson, 1998; newman, 1992), as it was apparently difficult to find out economic backgrounds, components, and boundaries (schmidt, hryckiewicz, 2006; aleksandrova, maslova, 2002) in which financial relations take place. besides that, the issue of determining the structure of the financial system of its components needs to be put in focus. as mentioned above, the varying weights of structural components of financial systems give grounds for classifying them in different ways. discussions about the principles for the typology of financial systems by mechanisms of their structural components’ interactions have been on in economic literature for nearly 50 years now (goldsmith, 1969). in a broader sense, the financial system refers to cohered interactions of the financial instruments, markets, and institutes operating by use of financial technologies and rules of the game adopted at a given moment of time (fase, abma, 2003; levine, 1997; levine, 2001). it should be noted that types of financial structures are usually determined by assessing the dependence of enterprises in the real sector on joint-stock or credit sources of financing. today, there are three main approaches to determining the type of financial entities: – mechanisms for raising external funds by enterprises; – mechanisms by which the decision-making at enterprises is influenced; – information disclosure by enterprises. baltic journal of economic studies 150 vol. 5, no. 4, 2019 an analysis of the financial structure by each of these approaches involves the problem of determining quantitative parameters that would lay the basis for the classification of a financial system. we believe that the most effective approach among the above-given ones is a comparison of the raised funds. companies raise funds for investment purposes, which potential sources are: – distributed profit of a firm; – additional emission of shares; – emission of bonds; – borrowing from financial intermediaries (banks). the dependence of domestic companies on one of the abovementioned sources of financing is conventionally believed to lay theoretical and methodological grounds for classif ying the domestic financial system as bank-oriented or market-oriented one. w hen the share of funds raised by the emission of shares and bonds in the domestic gdp is higher than the loans, the financial system can be referred to as market-oriented; in the vice-versa case, it is bank-oriented. the financial systems of the u.s. and u.k . are believed to be classical (reference) cases of the market-oriented system, whereas japanese and german systems are reference ones for bank-oriented financial systems. therefore, in identif ying key parameters of a certain type of financial system, we will pay special attention to retrospective practices of the financial system’s operation in these countries. the characteristics found in various types of financial systems are shown in table 1. we believe that the problem of classifying national financial systems with consideration to the change in fundraising practices in the real and financial sector of the economy is worth attention. we have found that given the current financial and economic instability, the conventional approach of dividing financial systems into market-oriented and bank-oriented ones by comparing the funds raised by stock markets and borrowing of money does not consider for the specifics of international banking. the indicator of the domestic stock market capitalization, given considerably overvalued investment attractiveness of issuers and market prices for shares, cannot be considered as a sufficient criterion of the dependence of corporate sector on the market financing. the loans attracted by companies do not include the loans resold by banks and securitization. we believe that inadequate theoretical justification of the position and functions of banks (commercial and investment ones, first and foremost) in the structure of global finance in our days, limited statistical data on main intermediate transactions and the financial stability of the largest global banks, insufficient interventions of supranational and government bodies of monetary regulation were factors provoking the global financial crisis. banks, including ones operating in market-oriented bank systems, put much more reliance on raising market funds and performing the so-called off-balance transactions, which, we believe, is the main factor of change in the conditions of bank lending. the link of lending conditions to sources of table 1 comparative description of the types of financial systems characteristics market-oriented model bank-oriented model u.s. u.k. germany japan bank system commercial/investment/ saving banks (legal separation before 1999, renewed in 2010, the dodd-frank act, “the volcker rule”) commercial/ investment banks, traditional separation universal banks commercial/investment banks (legal separation since 1978) fund raising mechanisms shares/bonds of enterprises shares/bonds of enterprises bank loans bank loans making business decisions investors investors lenders lenders structure of shareholding investors predominantly investors predominantly lenders predominantly lenders predominantly information disclosure limited limited maximal maximal household assets bonds bonds bank deposits bank deposits sources of fund raising by banks market (investment banks), client deposits (commercial banks) market predominantly client deposits predominantly client deposits predominantly sales of loans by banks market predominantly (financial companies) market predominantly (financial companies) borrowers predominantly (enterprises in real sector/ households) borrowers predominantly (enterprises in real sector/ households) securitization of assets by banks high high medium medium source: constructed by the authors baltic journal of economic studies 151 vol. 5, no. 4, 2019 market financing has a substantial impact on domestic economies, especially given the increasing role of banks (table 2). table 2 overall assets of the largest banks in european countries, % of domestic gdp, 2017 bank country gdp ubs switzerland 332 credit suisse switzerland 268 danske bank denmark 232 ing the netherlands 212 nordea sweden 178 bank of ireland ireland 117 santander spain 114 rabobank the netherlands 111 bnp paribas france 106 source: constructed by the authors by data in (the economist) the reasons for the increased assets in the leading european banks are as follows: the increased investment in bonds, the increased interbank deposits, and increased lending. in overall, the period prior to the crisis of 2008– 2009 was marked by the boosting financial markets in the bank-oriented financial systems in european countries, especially the stock ones (markets of shares, bonds and promissory notes). however, in the u.k. considered as a classic case of anglo-saxon market-oriented financial system, the unprecedented growth in bank lending to the real sector was recorded both in absolute figures and in relation to the rates of growth in stock markets. non-deposit sources of financing are becoming the main source of bank liabilities, whereas off-balance transactions and securitization of default loans are predominantly used by banks to ensure the profitability of own assets. the business model used by banks calls for constant market reselling of granted loans, which help banks decrease the active part of the balance, i.e. to grant new loans with regulatory standards observed, on the one hand, and provides a supplementary source of bank earnings, on the other hand. so, a commercial bank can achieve sufficient capital and liquidity that will be redirected to a borrower be selling granted mortgage loans. basically, revenues/ losses from lending are added to/deducted from the real amount of capital by the banks, decreasing/ increasing in this way their lending capacity. deposits, being a source for the liquidity compensation, are used for lending, thus ensuring “liquidity buffer” for the banks, to cover rapidly growing withdrawals of liquidity. because massive withdrawals of deposits by depositors are not a very common phenomenon, and the prevailing part of banks’ credit transactions are effective, it can be argued that the system of commercial banks is stable in overall. as a result, neither bank assets nor deposits are linked to the market, i.e. they are not conditional on the availability and accessibility of market financing. bank lending conditions can be changed by commercial banks once the list of shareholders is revised, which can be done through the mechanism for additional emission of bonds in the case of the increased number of minority portfolio investors focused on short-term earnings, or through revisions of monetary policy by the national central bank. when the central bank, with intention to regulate the interbank interest rate, purchases or sells public bonds in an open market, changing in this way the profitability of public bonds, the interbank interest rate will change accordingly, as it totally depends on the monetary supply either withdrawn or additionally emitted in the economy by the central bank. if a country has low inflation, high interest rates will be gradually reduced by the central bank to the minimally possible level, which, however, will not help recover lending for the banks with balances overloaded by default loans. although the central banks in the leading countries of the world were keeping discount rates and interbank lending and deposit rates at maximally low levels, commercial banks, hit by the financial and economic crisis, used to change interest rates in a sudden manner, sometimes several times a week. this controversy can be explained by the increasing bank transactions related to the market, i.e. the situation when the real sector of the economy gets funds raised by banks from non-deposit (market or off-balance) sources. the term “market banking” used to denote the socalled “shadow” bank activities. “shadow” bank sector, therefore, used to be a component of the financial system, incorporating non-bank financial institutions (hedge funds, funds of the monetary market, and off-balance financial companies). the financial and economic crisis revealed that a large part of the transactions of classical commercial and all-purpose banks was closely linked with the market conjuncture and realized by means of “shadow” (market) mechanisms. given the global economic instability, banks were forced to sell default loans through the market (sales of loans) or off-balance (special investment vehicle, siv) mechanisms. in the case of siv, funds are raised by the emission of commercial bonds, including ones backed by public mortgages with high credit rating. it means that the operation of “shadow” bank system is enabled by a set of respective institutional mechanisms for market and off-balance clearance of the active part of bank balances, on the one hand, and by the existing of special (special purpose entity, spe and spv) and specialized (investment banks) financial companies, on the other. therefore, we propose to define “shadow” bank system as a component of the financial system, which includes investment, all-purpose, commercial, saving and mortgage banks that perform market offbalance transactions directly or indirectly through respective non-bank institutions that are not subject to financial control by monetary regulatory bodies. baltic journal of economic studies 152 vol. 5, no. 4, 2019 by analysing and investigating the mechanisms for off-balance financing and securitization of assets by investment, saving, mortgage, and commercial banks, we can extend the conventional treatment of the bank margin considering the newly emerged sources for generating bank revenues. by securitizing bank assets, banks are able to not only recover the lending but to secure a stable supply of financial resources that will be re-directed to borrowers whenever the deposits are in deficit. by emitting spe and spv debt obligations backed by granted loans (abcp) and transferring interest payments (cdo) according to the riskiness of a portfolio backing the emitted bond, banks were able to redistribute interest revenues in a way allowing them to insure additionally the portfolio itself through purchasing credit and default swap. the business model used by banks in the conditions of financial and economic instability calls for a comparison of traditional banking and banking oriented on market resources (table 3). traditional banks operate by granting previously attracted deposits to bank borrowers in the form of loans, and risks related with their non-payment are, in fact, not hedged. whenever deposits are massively withdrawn from the bank system, banks will have sufficient financial capacities for the lending of the economy. lending decisions are usually taken in view of the lending reasonability, determined by a bank itself for each lending transaction, and the credit history of an enterprise that is going to be lent. once a lending decision is taken, its successfulness will be conditional on payment of interests by a borrower and by repayment of the loan. in this way, commercial banks fulfil the fundamentally important function: redistribution of temporarily free resources of economic actors. the banking business that is related to financial markets changes the principle for the formation of the price (interest rate) for credit resources. a lending decision here will depend on the market prices for capital, and the success of a credit transaction will depend on whether or not the raised credit resources are cheaper than the ones sold to a borrower. it follows that the conditions of loans to be sold either in capital markets (the market of bank loans) or in interbank markets or through securitization mechanisms are determined by the level of market prices. if this market price involves an interest rate, then it, and not the price fixed on the basis of the respective (including discount) rate of the central bank, will be determined as an interest to be paid by a borrower. if a lender makes a decision to grant a loan but decides to hedge own risks by use of credit and default swap, the price for hedging these risks will determine the lending conditions. in case of the market-oriented bank system, a lender may not be a traditional financial institution: loans are granted by investment banks as well, which may rely on the domestic central bank as the lender of the last instance. if the loans raised by a bank remain on its balance (traditional banking) and not resold in the market, they will need to be serviced, mainly through additionally raised funds. in the traditional banking, the funds are raised through the depositary mechanism that is defined by imf as “related” (international monetary fund), because the lender’s (bank’s) capacity to borrow financial resources for full-scale lending is not questioned. in the market-oriented financial system, these resources are not supplied by deposits; they come from the market, i.e. from other banks or investors. as financial markets determine the feasibility of financing and the price of money, they determine the bank’s capacity for lending by the market price. the capital received in this way is “non-related” or “skittish” rather than “related” or highly reliable because as soon as any kind of negative economic outlooks occurs, loans will become far less accessible in the market and the threat of a loan crisis will occur. the above said allows for the conclusion that market prices for capital are a pro-cyclic factor for financial instability. table 3 comparative description of traditional banking (tb) and market-oriented banking (mb) institutions loans obligations backing granted loans risks on granted loans balance recording of raised loans support of regulatory bodies in times of crisis тb commercial banks reported in the balance client deposits not hedged by selling prices central bank as the lender of the last instance mb commercial banks sold at credit markets, securitized, sold to shadow banks (commercial bonds backed by assets), model “generate and distribute” international financial markets (interbank monetary market and capital market (bond market)) hedged by credit and default swaps market price of fundraising -//investment banks sold in credit markets, securitized, sold to their shadow banks (commercial bonds backed by assets), model “generate and distribute” international financial markets (obligations, repo) hedged by credit and default swaps market price of fundraising none source: constructed by the authors baltic journal of economic studies 153 vol. 5, no. 4, 2019 results of the comparative description of the types of banking allow us to distinguish between three main directions of banking business: – bank obligations not related to the market conjuncture (deposits), which can be used to open short positions in the bank credit market or deposits in other banks, i.e. non-market liabilities finance market assets; – when the amount of granted loans exceed the amount of attracted deposits, it can be said that the attracted market obligations are used to finance non-market assets (loans to the real sector), i.e. market liabilities finance non-market assets. at well-established markets, the increasing lending results from large scopes of attracted market resources but, in emerging markets, banks have to counteract the risks of rapidly decreasing accessible loans that are offered through the market mechanism by other banks that are more sensitive to crisis phenomena in the economy than depositors. – backing market assets by market liabilities, based on the assumption that banks can finance long-term assets (granted loans) through raising funds in international monetary markets and investing in short-term instruments of the monetary market, which can be sold in the market when necessary. we think that the fallacy of this assumption proved to be an essential factor for the financial crisis of 2008–2009. the above given comparative description of traditional and market-oriented banking, along with the analysis of main market mechanisms, enables for the theoretical elaboration of the distinctions between bank transactions practices in traditional commercial banks and investment banks in our days. practically, commercial banks are often engaged in market intermediation and traditional intermediation. they have increased the activity in investment banking, especially in trade in bonds. investment banks, apart from consulting on investment in certain categories of shares and intermediation in mergers and acquisitions, have increased considerably the active part of the balance by way of lending. this has resulted in the creation of all-purpose banks offering a wide range of financial services to clients. 3. discussion the main criterion for distinguishing between traditional banking and market-oriented bank-oriented financial system should be the reliance of banks on the availability and accessibility of credit resources. to assess the dependence of banks on market resources for financing, t. adrian, h. s. shin (adrian, shin, 2010) propose to pay due attention to the analysis of assets and liabilities in balance reports of commercial banks, with consideration to the specifics of “shadow” banking, namely: – bank assets are assessed by market prices (in current market prices) that determine the profitability of lending decisions. their increase/decrease increases/ decreases the profitability, thus increasing/decreasing the capabilities for using the revenues to increase the bank capital and increasing/decreasing the capability to raise new capital through the impact of profitable transactions on the prices of shares; – bank assets are sold by the use of diverse financial mechanisms – asset-backed securities and special investment vehicle, designed to raise funds in the markets. as a result of this practice, banks are required to keep the small amount of capital, which enables to increase lending, but this practice can be used only if the financial market resources are accessible. the occurrence of “market shocks” makes all the assets return to the bank balance, resulting in limited lending capacities; – loans recorded at the bank balance (bank liabilities) are financed to the increasingly higher extent by market sources rather than client deposits; – the increasing share of bank loans is not recorded at the bank balance; they are either sold in the market by market prices or securitized by use of the bank model of “generate and distribute”. 4. conclusions our study of a theoretical and methodological framework for the classification of financial systems with the account to the nature, scopes, and significance of market transactions performed by banks allow us to modify their existing typology according to our approach. the financial systems in u.s., u.k., belgium, and the netherlands can be considered as market-oriented bank systems, and the systems in japan, greece, italy, spain, and france – as traditional ones. the bank system in germany has an intermediate position, remaining in the group of traditional bank systems but having the highest rates of engagement in financial markets in its group. our analysis allows for the conclusion that financial systems should be divided by the scope of bank market transactions and off-balance transactions by traditional systems and market-based financial systems. it can also be argued that further studies of financial systems in various countries of the world can lay the grounds for extending the proposed typology in view of the following considerations: first, the classification of financial systems by comparing the funds raised by companies in non-financial sector is outdated theoretically, whereas the role of banks as key actors in financial markets is not sufficiently elaborated, mainly due to the existing contradictions between theoretical approaches to the classification of bank system models and the real practice of financial intermediation in market-oriented and bank-oriented financial systems. second, the need for elaborating new conceptual approaches to the identification of financial systems by bank sector engagement in financial intermediation in international financial markets is confirmed by the existing specifics of various types of national financial systems. as radically changed conditions of bank baltic journal of economic studies 154 vol. 5, no. 4, 2019 lending seem to be the most important feature of global structural transformations caused by universalization of banking, applications of innovative financial instruments and liberalization of financial and bank regulation, we propose that financial systems should be differentiated as specialized market-oriented systems, market-oriented systems, and traditional bank systems. third, the conventional interpretation of the bank margin can be considerably extended on account of the newly emerged sources for generating bank revenues; the definition of specialized and “shadow” bank systems can be revised considering the specifics of transactions performed by classic commercial banks that proved to be reliant on the market conjuncture in the conditions of financial crisis. fourth, the analysis of tendencies in the operation of investment and commercial banks confirms that securitization of assets and raising of off-balance funds are important components of bank balances, especially in market-oriented bank systems, which can be used for quantitative assessment of their dependence on financial markets. fifth, the reliance of bank systems in leading countries on financial markets and the use of bank model “generate and distribute” have a direct impact on the character of bank decisions on lending. the overall tendency to re-orientation of the leading banks of the world from deposit to market sources of financing causes the dependence of interest rates on the market conjuncture and the demand in international credit markets, i.e. the prices for loans, depending on the market situation, are a pro-cyclic factor of economic instability. references: callier, ph. (1991). financial sector adjustment and management / edi working paper n 340/050. washington d. c.: world bank. karpinskiy, b. a., & gerasimenko, о. v. (2003). finansova systema: navch. posibnyk [financial system: study guide]. kyiv: cnl. (in ukrainian) kolomoytsev, v. e. (2000). universalniy slovar economicheskih terminov [universal dictionary of economic terms]. kyiv: molod. (in russian) senchagova, v. a., & archipova, a. i. (1999). finansy, denezhnoe obraschenie i kredit: uchebnik [finance, money circulation and credit: textbook]. мoskva: prospekt. (in russian) gryaznovoi, а. g., & markinoy, e. v. (2004). finansy: uchebnik [finance: textbook]. мoskva : finansy i statistika. (in russian) kravchuk, n. ya., gorin, v. p., & yasenovska, т. v. (2008). finansy: navch.-metod. posibnyk [finance: study guide]. ternopil: еconomichna dumka. (in ukrainian) оparin, v. m. (2004). finansy (zagalna teoriya): navch. posibnyk [finance (general theory): study guide]. kyiv: kntu. 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(1998). the uk financial system. theory and practice. 3-rd ed. manchester univ. press. newman, p. (1992). new palgrave dictionary of money and finance. london: macmillan. aleksandrova, m. m., & maslova, s. о. (2002). groshi. finansy. kredit: navchalno-metodichnyi posibnyk [money. finance. credit: study guide]. kyiv: cul. (in ukrainian) goldsmith, r . (1969). financial structure and development. new haven, connecticut: yale univ. press. fase, m., & abma, r . (2003). financial environment and economic growth in selected asian countries. journal of asian economics. levine, r . (1997). financial development and economic growth: views and agenda. journal of economic literature, vol. xxxv (№ 2). levine, r. (2001). international financial liberalization and economic growth. review of international economic, no 9. the economist. report on international banking, may 14, 2018. international monetary fund. global financial stability report 2011. access mode: http://www.imf.org/external/ pubs/ft/gfsr/2011/02/pdf/text.pdf adrian, t., & shin, h. s. (2010). the changing nature of financial intermediation and the financial crisis of 2007-09 / federal reserve bank of new york staff reports № 439. new york: frs. baltic journal of economic studies 82 vol. 5, no. 4, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: volosovich_sv@ukr.net orcid: https://orcid.org/0000-0003-3143-7582 researcherid: n-2394-2016 2 kyiv national university of trade and economics, ukraine. e-mail: baraniukyurii@gmail.com orcid: https://orcid.org/0000-0003-1289-2248 researcherid: j-5726-2018 doi: https://doi.org/10.30525/2256-0742/2019-5-4-82-91 state financial control in terms of digitalization of the institutional environment svitlana volosovych1, yurii baraniuk2 abstract. the purpose of the study is to substantiate the benchmarks of digitization of the institutional environment of state financial control in ukraine based on foreign experience. the methods of qualitative, quantitative, and correlation analysis, graphical modelling, causality tests, comparisons and generalizations were used. results. the essence of the institutional environment of the state financial control is determined and its contradictions are revealed. it is established that in order to overcome the contradictions of the institutional environment of state financial control, it is necessary to resolve the issue of intensifying its digitalization since the use of financial technologies affects the state of governance. directions of the digitization of the institutional environment of the state financial control were examined through the prism of relations “control-state”, “control-enterprise”, “controlsociety”, and “control-european community”, with the justification of proposals that should be implemented in the context of isolated components. practical importance. the digitalization of the institutional environment of state financial control should be based on electronic democracy, parameterization of annual reports of controlling bodies, blockchain interoperability, automation of control measures, use of artificial intelligence and cloud computing technologies, services based on open data, interactive methods of information sharing (social networks, television programs, and video blogs), and electronic tax fraud identification services in international trade. value/ originality. the level of digitalization of the external institutional environment of the state financial control is higher than the level of digitalization of the internal environment. this creates the basis for the development of the theory of state financial control, as well as the practice of its implementation, which requires appropriate innovative and technological transformations. key words: state financial control, digitalization, institutional environment, shadow economy, blockchain, big data, cloud technology. jel classification: e44, e62, g18 1. introduction nowadays, the system of state financial control is undergoing significant changes over the influence of various factors, among which digitization occupies the leading place. at the same time, both the internal institutional environment of the state financial control and the external one are subject to transformation. the introduction of financial technologies into the activities of controlling bodies and controlled entities necessitates the creation of services based on open data, the use of interactive methods of information exchange. this raises the problem of creating conditions for the use of financial technologies, products, and services between state financial control institutions. as a result, the organization of relations between the controlling bodies changes, on the one hand, with taxpayers, budget spending units, consumers of financial services, and on the other, with the whole of society as a whole. the purpose of the study is to substantiate the benchmarks of digitization of the institutional environment of state financial control in ukraine based on foreign experience. based on the stated purpose, the following research tasks are solved in the article: – determine the essence of the institutional environment of state financial control and identify its contradictions; – substantiate the impact of financial technologies as a component of innovation on the state of governance; baltic journal of economic studies 83 vol. 5, no. 4, 2019 – outline and disclose the main areas of digitization of the institutional environment of state financial control in ukraine. based on the determined essence of the institutional environment of the state financial control, its contradictions were revealed and it was proved that the basis for the formation of the optimal institutional environment of the studied system is the harmonization of interests of the subjects of all its institutions. it is established that in order to overcome the contradictions of the institutional environment of state financial control, it is necessary to resolve the issue of intensifying its digitalization since the use of financial technologies affects the state of governance. directions of digitization of the institutional environment of the state financial control were examined through the prism of relations “control-state”, “control-enterprise”, “control-society”, and “control-european community”, with the justification of proposals that should be implemented in the context of isolated components and taking into account best practices. research papers of scientists and practitioners, published in ukraine and abroad, are the information base of the study. the article uses materials of foreign and domestic bodies of state financial control, state authority, transnational corporations, and media enterprises. the methods of qualitative, quantitative, and correlation analysis, graphical modelling, causality tests, comparisons and generalizations were used in the study. to identify the impact of innovation, technology, investment, crime, and terrorism on the level of corruption, a high level of which indicates the lack of proper functioning of the system of state financial control, we analysed the relationship between the studied components, which were compared based on indicators of international indices. to establish the relationship between the indices, we used the granger causality test that allows identifying the null hypothesis “x is not the cause of y”. the criterion for acceptability of the hypothesis is the p-value. granger tests were performed for one lag. granger causality was calculated in eviews 7. the obtained data that showed causality was verified using pearson’s correlation coefficient in ms excel, which allowed revealing the density and direction of communication. 2. theoretical basis studies of both scientists and practitioners in the fields of business, public administration, finance, and innovation are devoted to the problems of digitization of the economy and the development of financial technologies. according to prof. lang franz (2018), digitization now requires transformations in production organization, social systems, and public administration, which will predetermine change in the role of the state since society will be based mainly on self-organization and individual self-realization. this will allow increasing the demand for the use of innovative technologies in public financial control. prof. anatolii mazaraki (2018) argues that the development of financial technologies will result in evolutionary changes in the financial sector that will lead to transformational processes in the economy. this also applies to state financial control, the institutional environment of which is transformed due to the spread of financial technology (baranovskyi, 2018). in our view, there are restrictive, reproductive, activity, and structural approaches to understanding the institutional environment. the basis of the restrictive approach is the theory of constraints. its representatives consider the institutional environment as an orderly set of institutions that determine the constraints of economic entities (chupryna, 2011). but this is somewhat contrary to the theory of constraints, as it is important not only to identify these constraints but also to effectively manage them. the basis of the reproductive approach (oxley, 1999) is the value of a set of political, economic, social, and legal agreements to establish the grounds for production and exchange as phases of social reproduction. it does not mention such important components of social reproduction as distribution and consumption. the activity approach (davis & north, 1970) focuses on the importance of fundamental political, social, and basic legal norms for regulating the economic and political activity. the structural approach to understanding the institutional environment is the most commonly used that it involves the separation of its various components (lifanova, 2018). based on restrictive and reproductive approaches, we define the institutional environment of state financial control as a set of political, economic, social, and legal agreements to identify the constraints on the implementation of control measures and their effective management during the mobilization, distribution, and use of public financial resources. restrictions on the implementation of control measures should be determined first and foremost on the basis of legal agreements, but currently in ukraine, there is no regulation of digitization processes at the national level, there are no defined directions of their development, which does not facilitate the formation of a single information space between business and public financial control bodies. at the same time, already for the last five years, digitization for business has been considered one of the main competitive advantages (yaremko, 2013). the results of research on the use of information technology in the state financial control obtained by n. shyshkova (2018) show that there are opportunities to apply control measures to control objects that are currently inaccessible, there are services, tools, and technologies in the it-sphere which are consistent with existing requirements (blockchain, hashgraph, baltic journal of economic studies 84 vol. 5, no. 4, 2019 otonomos, boardroom, colony, paperless), the introduction of which will allow accelerating the processes of digitization of the institutional environment of the studied system. herewith, there are considerations that the separate technological and computer modernization of the state financial control will lead to the fact that in the future, combining them to create a unified state information base will be practically impossible or will require considerable expenses (pikhotskyi, 2015). thus, the directions of digitization of the institutional environment of state financial control in ukraine should be justified, which is based on the formation of digital information infrastructures. 3. results 3.1. the institutional environment of state financial control: components, contradictions of interaction, and influence of digital innovations and technologies on its development the institutional environment of state financial control is favourable, provided that the interests of the subjects of all its institutions, in particular, the institute of state financial audit, banking supervision, tax, customs, market, economic, and municipal control, financial monitoring, are coordinated. among the main contradictions of the institutional environment of state financial control in ukraine are the following: its insufficient density; the time gap between the implementation of the control measure and the business operation; limited access of controlling bodies to controlled objects; outstripping rates of introduction of digital technologies by controlled entities in comparison with controlling bodies, which leads to incompatibility of software products during the control event; duplication of control functions by different bodies of state financial control. solving these contradictions will ensure effective interaction of all entities of state financial control and harmonization of their interests. the contradictions that arise both within the individual institute and within the institutional environment as a whole are the basis for its modernization, which is to a certain extent facilitated by the institute of innovative development, which includes financial technology. the purpose of the digitization of the institutional environment of state financial control is to increase the efficiency of its implementation through the use of financial technology tools. based on this purpose, its tasks can be defined, which are to harmonize software products used by controlling bodies and controlled entities; increase the transparency of the information of the controlled entities; create a unified state information base; provide cybersecurity when using financial technology tools. the resolution of these tasks will help to overcome the contradictions of the institutional environment of state financial control. digitization should be understood not only as the introduction or increase of the use of digital and computer technologies by organizations in a particular industry or country but also as the use of such technologies and data that change or transform economic processes, create an appropriate environment for their implementation. digitization is carried out with the help of instruments of financial and digital technologies, in particular, big data, the internet, blockchain. financial technologies are the basis for introducing innovations in economic systems while the expansion of the use of their instruments in public administration, an important component of which is state financial control, involves the achievement of goals such as strengthening public confidence in governments, combating corruption, protecting sensitive data in public databases, reducing public spending and increasing the efficiency of their use. in case of misuse of financial technologies in public administration bodies, there is an imbalance, which currently exists in the internal institutional environment of state financial control in ukraine, characterized by the lack of interaction with the external environment, which to a certain extent predetermines a high level of the shadow economy, inability to reduce the level of public debt and causes a slowdown in the growth rate of gross domestic product (hereinafter – gdp), figure 1. since 2014, there has been a trend in ukraine in which the amount of public debt and the level of the shadow economy exceed gdp in total. this indicator is alarming for the domestic economy. it is quite difficult to ensure ukraine’s economic growth under these conditions, and a major instrument capable of overcoming the situation that has arisen should be the activisation of public financial control institutions to remove a part of the shadow economy from the tax-free zone. as can be seen in figure 1, violations found by the accounting chamber of ukraine and the state audit service of ukraine, which are the highest bodies of control by the parliament and the government in the country, are unable to solve national problems. if in 2010 the volume of violations identified by these bodies was 7.8% of gdp, then during 2011–2018 this figure was only 1-2%, which actualizes the need to modernize the activities of these institutions. the consequences of imbalances in the institutional environment of state financial control are related to the increase in the level of the shadow economy, which causes a decrease in budget revenues, failure to implement socio-economic development programs, a decline in gdp, and an increase in borrowing. these negative trends lead to an increase in corruption and crime, deterioration of indicators of financial technology, innovation, and investment attractiveness. herewith, isolated consequences occur not only in the domestic economy but also in many foreign ones. thus, application of the granger causality test made it possible to establish a cause-and-effect baltic journal of economic studies 85 vol. 5, no. 4, 2019 relationship between the corruption index (y) and the investment attractiveness index (x1), the financial (state) technology index (x2), the crime and terrorism index (x3), and the innovation index (x4) in denmark, new zealand, finland, singapore, sweden, united kingdom, lithuania, latvia, estonia, poland, usa , brazil, ukraine, india, china, canada, australia, belarus, bahrain, and kuwait during 2014–2018. the countries were selected based on expectations to find a correlation in the surveyed indices, and bahrain and kuwait were selected because of the highest volatility of the corruption index in the analysed period (table 1). the results disprove the notion that intensification of technology adoption causes reducing corruption. out of the twenty countries, this statement is confirmed only in ukraine. in china, by contrast, the decline in corruption has led to a rise in technology during 2014–2018. at the same time, in estonia, the slowdown in the introduction of innovations, which include financial technology, has led to a decline in corruption, which has taken place amidst the intensification of the public debt of ukraine, % to gdp the level of the shadow economy in ukraine, % to gdp index of change of nominal gdp, expressed in usd, % to the previous year violations found by the accounting chamber and state audit service of ukraine, % to gdp -35 16 20 8 4 -28 -31 3 20 15 -46 -45 -44 -49 -57 -65 -60 -56 -55 -55 -33 -39 -35 -35 -38 -69 -79 -81 -72 -63 4,7 7,8 2,1 1,1 1,4 1,9 1,3 0,8 0,8 1,1 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 -180 -130 -80 -30 20 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 figure 1. found violations of the state financial control bodies and some macroeconomic development indicators of ukraine for 2009–2018 source: compiled by the authors based on data of the ministry of economic development and trade of ukraine (2019), accounting chamber of ukraine (2010-2019), state audit office of ukraine (2010-2019), and minfin media (2019) table 1 countries that have a relationship between the corruption, investment attractiveness, financial (state) technology, crime and terrorism, and innovation indices in 2014–2018 country cause result correlation coefficient relationship between indicators ukraine growth of the financial (state) technology index growth of the corruption index (reducing corruption) 0.9041 high, direct denmark growth of the corruption index (reducing corruption) decrease in the financial (state) technology index 0.8089 high, inverse china growth of the corruption index (reducing corruption) growth of the financial (state) technology index 0.6218 high, direct belarus growth of the crime and terrorism index (reduction of the phenomenon) decrease in the corruption index (the growth of corruption) 0.9082 high, inverse estonia decrease in the innovation index growth of the corruption index (reducing corruption) 0.6793 high, inverse sweden decrease in the innovation index growth of the corruption index (reducing corruption) 0.5682 high, inverse new zealand decrease in the corruption index (the growth of corruption) decrease in the innovation index 0.9554 high, direct source: compiled and built by the authors based on data of transparency international (2019), e-government development (2019), vision of humanity (2019), global innovation (2019) & investment attractiveness (2019) baltic journal of economic studies 86 vol. 5, no. 4, 2019 e-government in the country. in sweden, a decline in innovation has led to a decline in corruption, and in new zealand, a rise in corruption has led to a decline in innovation. an interesting result was found in belarus, where the growth of corruption was greatly influenced by the reduction of crime rather than the growth of technology or innovation. in denmark, a decline in corruption affected a decline in technology. the results show that a decrease in the innovation index in two countries out of twenty has led to a decrease in corruption, and in one country growth of technology has reduced corruption. the corruption decline in two countries has differently affected the change in financial technology, and in one country the growth of corruption has led to a decline in innovation. in view of the obtained results, let us consider the digitization of the institutional environment of the state financial control through the interaction of its internal with the external environment, the main components of which are: – “control-state” (interaction of public financial control bodies with each other and with other public authorities); – “control-enterprise” (interaction of public financial control authorities with economic entities and households); – “control-society” (interaction of public financial control bodies with the public); – “control-european community” (interaction of public financial control bodies with organizations and governments of european union countries). consider the isolated blocks of digitization of the institutional environment of state financial control in more detail. 3.2. digitization of state financial control in the direction of “control-state”: electronic democracy, parameterization of annual reports of controlling bodies, and blockchain interoperability the state of digitization of the institutional environment of state financial control in the direction of “control-state” in ukraine is unsatisfactory, in particular, in the conditions of deterioration of technical means, lack of new software in the control bodies, the issues of their updating are not considered. as the foreign experience shows, the provision of public services over the internet strengthens the credibility of governments and reduces the level of corruption. in particular, uruguay wants to initiate the provision of public services via the internet, argentina wants to become a paperless government, panama is developing a program to place 450 key services on the internet. in brazil, the public spending observatory uses extensive analytical tools to identify potential procurement fraud. so, in 2015, over 120,000 contracts were reviewed, of which violations of 104 million usd were identified in more than 7,500 cases (moreno, 2017). considering that the corruption index for ukraine is high (transparency international, 2019), digitization will to some extent contribute to overcoming this negative phenomenon. an important tool in the fight against corruption and the loss of budgetary resources is the digitization of payments from the budget, including social assistance, pensions, and healthcare payments. this is relevant against the background of the fact that physical payments from budgets in developing countries result in the loss of more than 110 billion usd annually. so, the government of india has saved almost 9 billion usd has for less than four years on social welfare payments through electronic transfers of direct payments. in france, within a program designed to combat tax fraud, a permit to use tax revenue data is approved (wald, 2018). use of payment data helps to identify suspicious and fraudulent transactions, inconsistency between revenue and expenses, which can reduce budget losses. in ukraine, according to the concept of e-governance development, approved by the cabinet of ministers of ukraine, by 2020 the government should switch to electronic interaction with citizens and business and provide them with 100 administrative services through the internet. however, online help is only available if there is an electronic digital signature that is currently received by less than 5% of the population. the online subsidy application used by every tenth ukrainian remains the most popular service in ukraine (segodnya, 2018). in terms of economic digitization, the issue of confidentiality of personal data that is accumulated, processed, shared, or stored becomes relevant. therefore, data breaches are becoming a problem not only for the non-public sector but also for the public one. for example, in 2017, in the usa, data of 143 million americans was stolen from the equifax database, and in 2015, data of more than 20 million public employees was stolen from the hr database (boeding, czerwinski & mcconkie, 2019). the path to the digitalization of state financial control in the direction of “control-state” should lie through the use of information and communication and digital technologies to create a single digital system for accumulation, storage, and exchange of data. the basis of such a system should be an electronic register, which will be formed by the results of control measures and will contain information about the controlled objects and bodies of control. in ukraine, the better regulation delivery office has developed a pilot module for the state oversight (control) system to launch its integrated automated system. herewith, from january 1, 2019, only those controllers who have check-lists of risks of the company’s activity in case of unscheduled inspections can come to the enterprises, and scheduled inspections are carried out in accordance with the baltic journal of economic studies 87 vol. 5, no. 4, 2019 annual schedule, which is published on the website of the inspection portal of the state regulatory service of ukraine, which allows economic entities to find out which control bodies and at what time period will carry out appropriate control measures (hroisman, 2018). the development of e-democracy in the institutional environment of state financial control allows for the annual reports of control bodies to be produced in a single, defined format, which is not happening in ukraine yet. implementation of the reports of the control bodies in a unified defined format will allow them to be checked and evaluated by a higher control body, contribute to strengthening information interaction between the control bodies, and allow for joint planning of further control measures. a promising direction for the development of state financial control in ukraine is the formation of a single information system based on blockchain technology. blockchain interoperability enables automation of state financial control over the reflection of business transactions in accounting systems. to do this, it is necessary to identify all possible financial transactions in the context of the chart of accounts, separately for the budget sector, banking institutions, private business entities, and public organizations. this will allow matching the displayed transaction by both buyer and seller. as a result, reliable accounting records between counterparties will make the process of state financial control more transparent, shorten the time of its carrying out, and allow exchanging information between public financial control bodies and other state institutions. 3.3. digitization of state financial control in the direction of “control-enterprise”: automation of control measures, use of artificial intelligence technologies and cloud computing the content of the digitization of state financial control through the prism of “control-enterprise” is to create an information environment capable of ensuring that the control measures cover the controlled objects. however, this is not possible today, one of the reasons is the lack of updated software in the public financial control authorities, as well as outdated equipment. according to a report by the accounting chamber of ukraine for 2017, information technologies and systems in use were introduced in 2004, only 17% of computer equipment can be classified as modern and 46% is wornout (accounting chamber of ukraine, 2018). from this, it follows that the lack of updated software and equipment in the public financial control bodies results in a decrease in the level of their interaction with the business environment. according to the ministry of economic development and trade of ukraine, there have been a number of changes in the “control-enterprise” environment that would have a positive impact on their interaction. in particular, electronic-digital documents were introduced in the civil circulation, conditions for the functioning of the institute of authorized economic operators were created, tools for online registration of enterprises as taxpayers were developed (ministry of economic development and trade of ukraine, 2018). the state fiscal service of ukraine has taken a course on information automation of relations with taxpayers. for this purpose, electronic services have been introduced, which simplify tax and customs procedures and improve business conditions. among them: “electronic cabinet”, which contains information about the status of payments with budgets; “registry information”, which discloses taxpayer records; “customs statistics”; “know more about your business partner”; “electronic reporting”; “electronic customs”; “citizens’ declaration”; others. the state treasury service of ukraine for the digitization of relations in the “control-enterprise” system has introduced remote electronic reporting systems for managers and recipients of budget funds “client of the treasury – treasury” and as “e-reporting”. new systems of cryptographic security and electronic keys have already been implemented, in particular, “securetoken-337к”, “cryptocard-337”, “almaz-1к”, “krystal-1”. in 2018, the state service of export control of ukraine received a release version of the electronic system for state export control, which was developed with the assistance and funding of the export control and related border security program of the united states department of state and the ministry of foreign affairs of estonia. this system enables economic entities to apply electronically to the state service of export control for administrative services. for the state service of export control, this is a real opportunity to carry out state financial control online, to establish constant communication with customs authorities, to provide automation of the mechanism of reporting control. recently, cloud-based services, online file storage, database hosting, virtual accounting and financial applications are gaining in popularity at enterprises. this indicates that the business is looking for ways to digitize its business processes. the number of enterprises providing electronic invoices is increasing, so in 2017 their share was 65.5% of the number of enterprises using computer equipment (state statistics service of ukraine, 2019). currently, the institutionalization of the institutional environment of state financial control in ukraine is gradually progressing, as evidenced by the still low rates of purchase of cloud computing services by domestic enterprises, their value in 2017 amounted to 10.3% (state statistics service of ukraine, 2019). at that time, in the european union, in 2018, the average volume of enterprises used cloud computing services – baltic journal of economic studies 88 vol. 5, no. 4, 2019 27%. according to eurostat (2018), the largest share of enterprises purchasing them is in finland (65%), sweden (58%), denmark (56%), and the least is used in romania (12%), turkey (11%), and bulgaria (9%). in view of the gap between ukraine and the eu countries in the share of enterprises that have started using cloud computing technologies, it is necessary to give impetus on the part of the state financial control authorities to use them, to offer services that will require connection to such technologies. regarding the future “control-enterprise” digitization, it should be noted that the main technologies used by business entities to which the activities of public financial control bodies need to adapt are software products for big data analytics and processing, applications in clouds, internet stuff, next-generation mobile applications, artificial intelligence (dell technologies, 2019). artificial intelligence technology is important for public financial control authorities. it is so because in the context of decentralization reforms, the digitization of state financial control becomes even more urgent, as it is necessary to ensure scaling, that is, to enable control measures to be carried out regardless of the geography of the controlled entities. the introduction of artificial intelligence technologies in state financial control will allow assessing the compliance of a controlled entity and accounting data without the physical presence of the auditor. 3.4. digitization of state financial control in the direction of “control-society”: services based on open data, use of interactive methods of information exchange (social networks, television programs, and video blogs) the digitization of state financial control in the direction of “control-society” requires systematic changes since single facts of the detection of abuses occurring in the mass media or on the websites of individual control bodies do not ensure bringing the detected violations to their elimination, and as a result, the funds are not compensated. an analysis of the digitization of the institutional environment of state financial control in the direction of “control-society” showed that the state service of export control of ukraine has not yet filled the resource on the page created on the social network facebook. however, all public financial control authorities have websites that provide information on financial irregularities identified and publish an annual report. in the conditions of functioning of at least 15 bodies of state financial control, as represented by prof. sergey bardash (2016), a single platform that summarizes information about their activities as a whole has not yet created. now, there is a real problem with the lack of access to the data that needs to be open. a striking example of how businesses and public authorities have found one of the ways to improve efficiency through access to open data – a public procurement system prozorro is created. the practice of the countries of the european union shows that public financial control bodies apply different methods of communication with the public. the state audit office of latvia started work on new public relations initiatives in 2015 and launched a video blog on youtube aimed at informing the public about financial irregularities. through the blog, the findings are disseminated in a professional news format at the same time as the report of the control measure. this form of informing is gaining popularity in the community and making reports understandable to citizens (state audit office of latvia, 2015). another direction of establishing public relations, already in lithuania, is to cover the results of control measures by leading television news channels on regional channels, which enhances the authority of public financial control bodies and helps to gain a high level of public recognition (eurosai innovations, 2015). it is quite difficult to implement the initiative to cover the results of control measures by presenters of television news in ukraine in conditions when the law does not allow photo and video fixation of the process of implementation of state financial control measures. however, a bill in the verkhovna rada of ukraine (2018) has already been registered that will confer this right. in addition to granting the state financial control authorities the photo and video fixation of the control process, it is proposed to introduce access to automated information and reference systems, registers and databases, which are held by public authorities, which will allow the control authorities to obtain information about the controlled object and expand their capabilities. 3.5. digitization of state financial control in the “control-european community” direction: electronic tax fraud identification services in international trade digital technologies are changing the environment of state financial control, and now it is necessary to create a single information space not only within ukraine but also in all european union countries and countries with which the association agreement is signed. in both the european union and ukraine, today there is a gap between online and offline public financial control environments. this gap is manifested, for example, in the impossibility to exercise state financial control over the growing volumes of e-commerce. the european commission has already adopted the digital market strategy, which contains provisions to improve access to digital goods and services, to create an information environment in which digital networks can develop, and to develop digital technologies as a driving force for progress. baltic journal of economic studies 89 vol. 5, no. 4, 2019 at the same time, it is important to ensure access to electronic trading platforms of public financial control authorities for the identification of tax-free zones. the development of digital technologies should help bring the economy out of the shadows and eliminate tax fraud that eu governments are fighting. currently, the most common frauds in the eu are related to value-added tax. according to the european commission, losses in the eu member states amounted to 147.1 billion euros in 2016, which is 12.3% of the total expected revenue from this tax. value-added tax gap in the eu member states ranged from 0.85% in luxembourg to 35.88% in romania (taxation and customs union, 2019). in terms of the development of ukraine’s trade relations with eu countries, it is necessary to start actively introducing innovative tax control instruments. participation in the fiscalis 2020 program, which is an eu cooperation program that creates an environment for the exchange of information and experience among member states’ control systems, should be a promising area of interaction of the system of state financial control of ukraine. the ministry of economic development and trade of ukraine has already identified this need but participation has not yet taken place. important achievements throughout the operation of the previous fiscalis programs are the provision of access to a common european information systems communication network to identify tax fraud. this program is important not only for the further development of the system of state financial control in individual countries but also for the institutional development of eurosai. in ukraine, in 2015, a system of electronic administration of value-added tax was introduced to combat tax fraud. some eu countries such as italy, romania, and poland are introducing a mechanism for the distribution of vat payments. at the same time, unlike the ukrainian system of electronic administration of value-added tax, the funds that will be on the vat accounts in the polish banks are charged with interest for their use. in order to combat tax fraud in the eu, information exchange procedures between taxpayers and regulatory authorities are used, including: kyc (know your counterparty), kyt (know your taxpayer). it is worth noting that the kyc and kyt procedures are not standardized and may differ depending on the type of taxpayer, their activity, the cost of transactions, and so on. in ukraine, the state fiscal service of ukraine has launched similar electronic services, which allow finding out additional information about counterparties, but a promising direction should be the centralization of information systems in the eu countries, which will accumulate all data from the member states, including ukraine. 4. discussion the transformation of the institutional environment of state financial control towards digitization has its strengths and weaknesses, opportunities and threats. strengths of digitization of the institutional environment of state financial control are combating corruption, increasing public access to administrative services, counteracting tax evasion, and reducing public administration costs. the weaknesses of the study are the loss of social taxes by the state in the automation of processes due to the release of labour, the inability to use online administrative services to individuals who do not have access to the internet. the possibilities of digitization of state financial control are the provision of free access to information on the results of control measures, transformation of tax administration based on automatic calculation and real-time tax payment, strengthening public control over public spending and its participation in budgeting programs, development of interconnection between the processes of taxation, supply, and marketing. threats are increasing cybercrime risks, reducing the number of public and municipal finance employees, insufficiency of personal and corporate data protection. 5. conclusions 1. based on restrictive and reproducible approaches to understanding the institutional environment, it is determined that the institutional environment of state financial control is a set of political, economic, social, and legal agreements to identify the constraints on the implementation of control measures and their effective management during mobilization, distribution, and use of public financial resources. 2. reconciling the interests of subjects of public financial control institutions is the basis for shaping its optimal institutional environment. for this purpose, in ukraine, it is necessary to overcome the contradictions of the institutional environment of state financial control, in particular, and to resolve the issue of intensifying its digitization since the proper use of financial technologies affects the state of governance and contributes to the reduction of the level of the shadow economy, leads to strengthening of citizens’ confidence in the government, counteracting corruption, protecting sensitive data in government databases, reducing government spending and increasing their efficiency. 3. directions of the digitization of the institutional environment of the state financial control were examined through the prism of relations “control-state”, “control-enterprise”, “control-society”, and “controleuropean community”. 4. the digitization of relations in the direction of “control-state” should be based on electronic democracy, the content of which is the coherence of control powers baltic journal of economic studies 90 vol. 5, no. 4, 2019 between the branches of state power and public financial control bodies. e-democracy should ensure that the annual reports of control bodies are drafted in a single, defined format that is understandable to the public and allows the results of various control bodies to be compared. blockchain is a technology capable of ensuring the functioning of the public financial control system, the interoperability of which will enable the interaction of the components of its institutional environment. 5. the directions of the digitization of the institutional environment of the state financial control through the prism of the “control-enterprise” relations are the automation of control measures, the use of artificial intelligence technologies and cloud computing. artificial intelligence technology will allow establishing compliance of a controlled entity and accounting data on a remote basis, and the increasing popularity and practicality of cloud computing at enterprises create the conditions for the use of this technology by control bodies. 6. the introduction of digital technologies in the institutional environment of state financial control in the direction of “control-society” reveals the need to create services based on open data, use of interactive methods of information exchange (social networks, television programs, and video blogs). 7. digitization of state financial control should be carried out in the direction of “control-european community” through electronic services of identification of tax fraud in international trade. to achieve this goal, it is necessary to start actively introducing innovative tax control instruments; the eu countries’ experience of using these instruments should be adopted. participation in the fiscalis 2020 program, which is the eu’s cooperation program, should be a promising area of interaction of the system of state financial control of ukraine. the development of the institutional environment of state financial control takes place in conditions where the digitization of business, society, individual public authorities or international organizations is faster than domestic control bodies. these results create the prerequisites for the development of the theory of state financial control, as well as the practice of its implementation, which requires appropriate innovative and technological changes. 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(in ukrainian) baltic journal of economic studies 96 vol. 6, no. 5, 2020 corresponding author: 1 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: ykvach@ukr.net orcid: https://orcid.org/0000-0002-8076-3520 2 mukachevo state university, ukraine. e-mail: ivanka.kitten@gmail.com orcid: https://orcid.org/0000-0001-9810-3961 3 odessa institute of trade and economics of kyiv national university of trade and economics, ukraine. e-mail: victor-koval@ukr.net orcid: https://orcid.org/0000-0003-2562-4373 doi: https://doi.org/10.30525/2256-0742/2020-6-5-96-105 management of sustainable entrepreneurship adaptation to tax changes in environmental investment yaroslav kvach1, nataliia piatka2, viktor koval3 abstract. the article highlights the problem of management of sustainable entrepreneurship adaptation to tax changes in environmental investment and substantiation of the conceptual basis for assessing the efficiency of environmental investment in terms of ukraine’s integration processes into european community that involves introduction of sustainable economic development and mechanisms of “green” economy. methods. a study of the peculiarities of environmental financing in ukraine has been conducted. the theoretical bases of investment management have been examined by means of the following methods: semantic analysis of interaction of the basic elements of environmental investment process for sustainable entrepreneurship development. with the use of a comparative analysis of environmental investment, efficiency and effectiveness of environmental tax collection in ukraine and the eu countries, the expedience of using environmental taxation as a means of stimulating domestic environmental investment has been substantiated and the need to assess the efficiency of environmental investment has been defined. results. a study of the peculiarities of domestic environmental taxation in order to establish its efficiency has been carried out. the experience of using taxes as a means of stimulating environmental investment in the eu countries has been under consideration. this research has shown that the efficiency of environmental taxes is ensured by their high rates, which encourage companies to innovate and make appropriate environmental investments. a number of shortcomings in the domestic environmental policy have been identified. it has proven the low efficiency of its instruments, in particular, related to assessing the efficiency of environmental investment. a study of the peculiarities of environmental financing in ukraine has been conducted. the current tendencies of investment in environmental activities with the identification of causal relationships to substantiate management decisions to improve the use of financial resources for environmental purposes have been highlighted. key words: sustainable entrepreneurship, taxes, taxation, assessing efficiency, adaptation to tax changes, environmental investment. jel classification: h23 j11, q01, q56 1. introduction permanent climate changes emphasize the importance of developing sustainable entrepreneurship in ensuring the social responsibility of business for the impact on the environment caused by the results of production activities with the purpose to improve the financial position of enterprises. improving the financial state of enterprises is possible through investment that also contributes to ensuring sustainable development of the national economy and competitiveness of enterprises. however, having the lack of own sources of funding, the national economy is in demand of investments, which will be one of the most important means to achieve sustainable socio-economic growth, technological re-equipment and greening of manufacturing. european integration processes stimulated creating the preconditions and opportunities for environmental baltic journal of economic studies 97 vol. 6, no. 5, 2020 management reform in ukraine, and mainly increased the possibility to solve effectively environmental problems that is the basis for achieving the goals of sustainable development and providing environmental and social guarantees for all entities of national economy (kostetska et al., 2020). increasing of investment amounts into the environmental projects can be a key factor to ensuring economic benefits for businesses and opportunities to obtain positive social and environmental results for the state. therefore, there is a growing need for intensive investment in environmentally friendly innovations that requires an optimal distribution of available environmental funds, ensuring a maximum effect with the minimum possible financial costs. achieving the set goals is related to determining the indicators of environmental investment efficiency and level of taxation, which will serve as a basis for making appropriate management decisions. the necessity of linking the taxation policies to the investment programs for sustainable development and focus of investment development on the needs of sustainable development requires a further study of the management of sustainable entrepreneurship adaptation to tax changes in environmental investment. 2. literature review the growth of research works on sustainable entrepreneurship and the appearance of various definitions of this term have caused a significant difference in its interpretation. according to cohen, winn (2007), schaltegger, wagner (2011) and stubbs (2017), the study of sustainable entrepreneurship involves the analysis of fundamental processes and mechanisms of sustainable development that is directly related to the social development, economics and ecology. the application of different approaches to the essence of sustainable development of an enterprise does not allow to determine the essential features of this concept, because there is an interdependence between sustainable entrepreneurship and investment processes. investing in sustainable development provides the growth of “environmental investment”, which means all types of property including intellectual property invested in business and other activities in order to reduce (or avoid) eco-destructive impact on the environment and prevent future income shortfalls from the lost resources that allow moving towards sustainable development (weidinger, 2014). the research of environmental investments and their characteristics in order to obtain economic effect and adherence to the principle of prevention within the framework of sustainable development, avoiding eco-destructive effects from production activity have been investigated by klassen, vachon (2003), higgins, hajkowicz, bui (2008), bostian, färe, grosskopf, lundgren,(2016), testa et.al. (2016), mahmood, furqan, bagais (2019). the intensification of environmental investment in the national economy to ensure sustainable development has been considered under various approaches, one of which is taxation (fullerton, kim, 2006; zhao, zhou, kuang, 2019; hassan, oueslati, rousselière, 2020). according to the analysed researches, the environmental tax acts as an instrument of environmental protection, however, the efficiency of environmental financing will increase in the case of decentralization of taxation that will bring the priorities of financing as close as possible to the specific environmental problems of certain areas. the aim is to study the management of the sustainable entrepreneurship adaptation to changes in environmental taxation and substantiation of the conceptual bases for assessing the efficiency of environmental investment in terms of ukraine’s integration processes into the european community that involves introduction of sustainable economic development and mechanisms of “green” economy. 3. environmental taxation as an instrument for financing environmental measures environmental investments increase the prospects and importance in ensuring the development of the circular economy, as the implementation of environmental investment will solve a number of important problems and ensure a positive outcome for the environment (gubanova et al., 2019). the instruments for regulating environmental financing include not only administrative methods of influence (environmental subsidies and benefits; deposit systems of reimbursement and subsidies), but also environmental taxes that are considered to be not only a part of the fiscal policy, but also a part of the environmental policy. the need for cooperation between ukraine and the eu in the field of environmental policy is indisputable, not only in terms of integration processes, but primarily in order to reduce the environmental pollution. in contrast, the european union (eu) countries use environmental taxes as a means of impact on the behavior of business entities, regardless of their belonging either to producers or consumers of certain goods. the collection of data on environmental taxes according to the types of economic activity is a part of regulation (eu) no 691/2011 of the european parliament and of the council of 6 july 2011 on european environmental economic accounts, which provides a basis for developing different types of environmental accounts (piatka, kovshun, 2019). the experience of the eu countries has shown the efficiency of the financial instrument for the environmental policy, which includes additional funding for those companies that have reduced the amount of harmful emissions. baltic journal of economic studies 98 vol. 6, no. 5, 2020 a special role of product taxes in regulating the level of environmental safety in the eu countries should be noted. environmental taxes on a product include taxes levied on a unit of a ready-made product that, at one stage of its life cycle, leads to environmental pollution, besides, they may also include: a tax on water pollution, carbon dioxide emissions in the air and others. every country uses different regulatory mechanisms, financial and economic mechanisms for solving environmental problems. the main methods and mechanisms for environmental protection used in foreign countries are systematized in table 1. apart from the transport taxes, which exist in the eu countries and are absent in ukraine, we can mark the absence of noise pollution taxes and food taxes in the state tax system of ukraine. that is why there are some difficulties in comparing amounts, dynamics and correlation with the main macroeconomic indicators of the eu environmental taxes and environmental taxes in ukraine. to consider the problem in detail, we are going to analyze the international data on the amount of environmental tax revenues in the eu, its share in total tax revenues and correlation with gross domestic product (gdp) (table 2). in 2018, about 368796 million eur of environmental tax was collected in the eu that amounted to 5.97 % of the total revenues from taxes and fees and is 2.4 % comparing to eu gdp. thus, the total amount of environmental tax in the eu during the period under study shows a steady upward trend, although some fluctuations were marked, but in general it increased by 21.3 % in 2018 in comparison with 2011. when analyzing the fiscal function of the environmental tax, its share in gdp and in the total amount of tax revenues is important. despite the general trend of the total eu environmental tax increasing in 2018 up to 368796 million eur , we should note that it is only 5.72 % of all tax payments and social contributions (figure 1). the share of funds from the payment of the eu environmental tax for the analyzed period of time ranges from 5.97 % to 6.18 % for the eu-28 and from 5.72 % to 5.89 %; for the eurozone (19 countries) that, on the one hand, characterizes not high profitability but, on the other hand, testifies to stability of the environmental tax payment. it should be noted that this is an average value, as for eurozone countries, the dynamics is slightly different. thus, latvia has the largest share (11.2 %), table 1 main financial mechanisms for environmental protection taxes, fees and charges countries canada finland france germany italy japan sweden great britain usa pollution fee: atmospheric air; + + water; + + + waste; + noise + + + + + payments for waste collecting and recycling + + + + + + + + + environmental tax on the product included in the production price + + + + + + administrative fees (licenses) + + + + + + + + subsidies + + + + + + + environmental insurance + + + + + + source: compiled by the author on the basis of eurostat (2018), oecd/eea (2019) table 2 indicators of environmental taxation in the eu for 2011-2018 indicators year 2011 2012 2013 2014 2015 2016 2017 2018 total environmental taxes, million euro eu – 28 304063 317127 327511 332668 344119 360146 364780 368796 eurozone (19 countries) 217602 229557 235135 240130 245751 251161 259858 265579 total amount of tax revenues (%) eu – 28 6.17 6.18 6.16 6.13 6.14 6.13 6.11 5.97 eurozone 5.81 5.89 5.86 5.84 5.84 5.79 5.83 5.72 gross domestic product (%) eu – 28 2.37 2.4 2.43 2.45 2.45 2.43 2.44 2.4 eurozone 2.28 2.34 2.39 2.41 2.42 2.38 2.4 2.37 source: compiled on the basis of eurostat data (2018) baltic journal of economic studies 99 vol. 6, no. 5, 2020 slovenia and greece have 10.2 % (both), and such countries as: luxembourg (4.4 %), germany (4.6 %), france and belgium (both 5 %) have the least funds of environmental tax (eurostat, 2018). thus, the funds from the environmental tax payment to the consolidated budget of ukraine are only 0.50 – 1.31% of the total tax revenues, in the state budget of ukraine the figures vary between 0.27 – 1.29 %, in local budgets – 0.92 – 2.29 %; that characterizes the scarcity of contributions and shows that the environmental tax in ukraine is not a budget-forming tax, as its share in total tax revenues remains insignificant and tends to decrease. an important indicator of the analysis of environmental payments in the eu is its fiscal efficiency, which is determined by the share of tax in macroeconomic indicators, i.e. the ratio of revenue from the environmental tax and gdp (figure 2). overall, throughout the entire period of study, environmental taxes to gdp (%), amount from 2.37 % to 2.45%, and in terms of the eu countries, these figures vary from 1.7 % to 3.97 %. however, in ukraine throughout the period of study these figures vary from 0.14 % to 0.30 %. it should be noted that in 2018 the amount was 0.14 %, it is the lowest value for the period 5,81 5,89 5,86 5,84 5,84 5,79 5,83 5,72 5,6 5,65 5,7 5,75 5,8 5,85 5,9 5,95 0 50000 100000 150000 200000 250000 300000 350000 400000 2011 2012 2013 2014 2015 2016 2017 2018 total environmental taxes eu-28, million euro share of environmental tax revenues in total tax revenues (%) figure 1. dynamics of the share of environmental tax revenues in tax revenues of eu countries source: compiled on the basis of eurostat data (2018) 2,37 2,4 2,43 2,45 2,45 2,43 2,44 2,4 2,3 2,35 2,4 2,45 2,5 2,55 2,6 0 50000 100000 150000 200000 250000 300000 350000 400000 2011 2012 2013 2014 2015 2016 2017 2018 total environmental taxes eu-28, million euro share of environmental tax revenues in gdp (%) figure 2. dynamics of the share of environmental tax revenues in the gdp of eu countries source: compiled on the basis of eurostat data (2018) baltic journal of economic studies 100 vol. 6, no. 5, 2020 of study. throughout the period of study from 2011 to 2018, the share of environmental payments has not changed dramatically, although over the past three years a downward trend has been fixed. the share of environmental taxes in gdp in ukraine remains very low. certainly, the amount of revenue increases every year, but in terms of both gdp and total tax revenue, the share of environmental payments remains low. in the eu countries, the share of this tax is much higher, that allows it acting as an instrument for financing environmental measures (figure 3). a comparative analysis of revenues from environmental taxes has shown that in ukraine their share is not more than 0.3 % of gdp (ranging from 0.14 % to 0.3 %), and in the eu an average figure is 2.4 % (ranging from 2.37 % to 2.45 %). this confirms ineffectiveness of domestic environmental policy and its instruments. a successful combination of principles and means of regulation in the eu provides positive changes in the system of environmental protection. since its introduction, the environmental tax has been distributed between the levels of the budget system, according to the law, one part of the environmental tax (except for radioactive waste) is distributed between local and state budgets, another part of environmental tax connected with radioactive wastes is fully directed to the state budget. the constant increase in environmental tax revenues can be explained by the growth of environmental tax rates, which have been constantly increasing throughout the period of the tax existence. the results of the study of the fiscal function of environmental taxation indicate a low fiscal efficiency of the environmental tax, as the low level of the environmental tax does not encourage investing in expensive environmental equipment. today, the environmental tax could be considered as a financial instrument for environmental activities, but the current system of payments to compensate for the negative impact on the environment in ukraine does not fully meet its fiscal and incentive goals. therefore, at present, the environmental tax that does not even perform its primary incentive function and is not aimed at achieving specific environmental goals acts as a kind of payment for the use of the natural environment. the eu countries’ experience shows that increasing the efficiency of the environmental taxation system can be achieved by means of the targeted use of accumulated funds and tax benefits, as the revenues from environmental taxation are directed to the development of environmental infrastructure, introduction of environmentally friendly technologies and processes, etc. in addition, in the vast majority of countries, there are effective preferential mechanisms of the taxation and incentives to improve the environmental performance of businesses. environmental taxes are increasingly used to influence the economic behavior of business entities, as these taxes generate income, which is used later to create programs aimed at promoting the further development of environmental protection. 2,16 2,16 2,15 2,13 2,07 2,04 2,06 2,06 1,37 1,41 1,34 1,38 1,24 1,36 1,06 0,97 2,37 2,4 2,43 2,45 2,45 2,43 2,44 2,4 0,17 0,19 0,26 0,30 0,14 0,21 0,16 0,14 0,00 0,50 1,00 1,50 2,00 2,50 3,00 0 1000 2000 3000 4000 5000 6000 7000 8000 2011 2012 2013 2014 2015 2016 2017 2018 emissions of pollutants eu-28, thousands of tons emissions of pollutants in ukraine, thousands of tons share of total environmental expenditure in eu-28, to gdp (%) share of total environmental expenditure in ukraine, to gdp (%) share of environmental tax in eu-28, to gdp (%) figure 3. dynamics of the main indicators characterizing the efficiency of environmental taxation as an instrument for financing environmental measures source: compiled on the basis of eurostat data (2018) baltic journal of economic studies 101 vol. 6, no. 5, 2020 a foreign experience also shows a conditional division of environmental costs into: mandatory costs regulated by the state and voluntary costs of enterprises and citizens for environmental measures. today in ukraine, the environmental tax is not actually used to stimulate investment and innovation in the field of ecology. that is why the economy of ukraine needs to intensify the processes of environmental investment and increase its scale, as well as raise the efficiency of environmental expenditures. in all successful countries, environmental taxation is an effective financial instrument to stimulate investment and innovation in the field of environmental protection that contributes to improving environmental safety and spreading the innovative technologies. ukraine should adopt the experience of the countries whose growth is connected with the transfer and commercialization of innovative technologies and creation of financial and economic preconditions for the diffusion of environmental innovations. consequently, we should state that it is necessary to change the strategy of environmental investment in ukraine. in particular, it is necessary to improve the environmental taxation system, to apply the system of tax benefits to business entities that have a positive dynamics in minimizing pollution; in the context of decentralization, it is necessary to review the functions of local environmental funds to intensify environmental investment. 4. systematization of international experience of environmental investment in the context of current aggravation of ecological contradictions both on global and national scales, development of modern methods concerning rationalizing the use of natural resources is getting a vital importance. as the world practice shows, it is possible to achieve breakthrough results in slowing down the degradation processes in the field of nature management by involving natural resources in the reproduction process. moreover, a special mechanism for managing environmental funds should be formed. it would take into account the fundamental principles of tax regulation of the use of natural resources and environmental protection, and forms / methods of financing capital investments and current expenditures in reproduction and environmental protection processes. measuring the financial and economic obligations to protect the environment helps to assess how environmental expenditures affect international competitiveness and to assess the application of the “polluter pays” principle and the cost-effectiveness of the environmental control mechanism (nazarova et al., 2019). in the process of ukraine’s integration into the eu, it is extremely important to study the current state of environmental investment in the eu. in foreign countries, the environmental measures have gradually been changing from pollution clean-up to pollution prevention policies, increasing the internationalization of corporations environmental measures by modifying industrial processes that coincide with the growing demand for “cleaner” products. currently, the environmental protection measures are aimed at fighting against climate change, reducing air pollution and preserving biodiversity (oecd / eea, 2019). in the eu countries, funding for environmental measures is provided from the following sources, such as: public administration (direct funding for measures), households (establishment of an alternative energy source for self-consumption by a separate stakeholder group), producers of environmental services, corporations – business representatives (grant support in the field of environmental protection). according to the data of eurostat (2018), in 2018 the national expenditures of the eu-28 on environmental protection amounted to 316 billion eur that is considered to be 23.5 % more than in 2006, i.e. there was a steady increase by an average of 2 % each year (figure 4). examining the amount of national expenditure on the environmental protection in terms of institutional sectors, it should be noted that the largest contribution to the amount of costs was made by corporations. it accounted for 54 % of total eu expenditure on the environmental protection in 2018. at the same time, the expenditures of general governmental and non-profit institutions serving households amount only 24 %, and the expenditures of households amount 22 % of the eu total national expenditure on the environmental protection in 2018. during the period of study, the share of the eu national environmental expenditure (as a percentage to gross domestic product) remained relatively stable and ranged from 1.86 % to 2.07 %. in 2006, the share of the eu national environmental expenditure in gdp was 1.98 %, with a slight increase to 2.7 % in 2009; it mainly occurred as a result of large gdp reduction during the financial crisis and economic downturn. since 2009, there has been a tendency to reduce the share of the eu national environmental expenditure in gdp. in 2018 it reduced even to 1.87 %. overall, during the period under review we have observed an increase in the total amount of expenditures on environmental protection. it is worth mentioning that in 2006 the expenditures on environmental protection have been carried out equally at the expense of both governmental and non-profit institutions that serve households and the households themselves, but since 2007 there has been an annual increase in household expenditures and a decrease in governmental expenditures. a comparative analysis of the share of environmental expenditures in gdp in the eu and ukraine through a certain time period (2006-2018) will be conducted (figure 5). baltic journal of economic studies 102 vol. 6, no. 5, 2020 after a slight increase in 2009 to 2.07 % of gdp, mainly due to a significant reduction in gdp during the financial crisis and the economic downturn, the correlation of environmental expenditures (eu-28) to gdp slowly decreased, reaching 2.04 % in 2015. but during the last two years it has shown a constant indicator at the level of 2.06 %. the share of domestic environmental expenditures in gdp for the period under review ranged within 1 %. thus, we can state that in ukraine the share of total environmental expenditures is actually twice less than in the eu (eu-28). and the revealed tendency characterizes recklessness and unreasonableness of funding for environmental expenditures. it should be noted that due to the significant impact of ecology on the economy, such minimal costs for environmental protection does not lead to increased material well-being and high quality of life. from the standpoint of sustainable development, which embraces environmental, social and economic aspects, the optimal cost is 10 % of gdp (drahan, 2011). thus, during the research, the sufficient nonconformities were revealed. they were fixed between the components and main tendencies as 1,98 1,88 1,99 2,07 2,04 2,01 2,00 1,97 1,97 1,91 1,86 1,89 1,87 0,0 0,5 1,0 1,5 2,0 2,5 3,0 0 50 000 100 000 150 000 200 000 250 000 300 000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 eu national expenditures on environmental protection (eu-28), million euro in gdp (%) (m ln .e ur o) (% g d p ) figure 4. dynamics of the eu national expenditures on environmental protection and their share in gdp source: compiled on the basis of eurostat data (2018) 1,98 1,88 1,99 2,07 2,04 2,01 2,00 1,97 1,97 1,91 1,86 1,89 1,87 1,35 1,34 1,28 1,21 1,21 1,40 1,46 1,40 1,40 1,24 1,36 1,06 0,97 0,00 0,50 1,00 1,50 2,00 2,50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 share of total environmental expenditures in eu-28, in gdp (%) share of total environmental expenditures in ukraine, in gdp (%) figure 5. share of total environmental expenditures in ukraine and the eu in gdp (%) source: compiled on the basis of eurostat data (2018) baltic journal of economic studies 103 vol. 6, no. 5, 2020 for development of expenditures on environmental protection in the eu countries and ukraine. the analysis of the investment component of environmental expenditures will be conducted (yankovyi et al., 2020). according to eurostat (2018), the investment expenditures include: the corporations and public administration expenditures on construction of infrastructure, acquisition of land and equipment necessary for the provision of environmental services. these investment expenditures include, for example, expenditures on waste water treatment plants, waste transport vehicles and acquisition of land to create a nature reserve or of cleaner production equipment with lower polluting emissions (eurostat, 2018). in 2018, the majority of the eu investments was directed to the main assets for the provision of environmental services or to the so-called “cleaner technologies” (63%) which were fulfilled by corporations as specialized providers of environmental services (private waste collecting and recycling companies, as well as sewerage companies) and other corporations, investing in technology and equipment, reducing the harmful impact on the environment that appears due to the production processes of these companies (for example, investing in equipment that reduces emissions) (oecd / eea (2019). corporate investment expenditures in 2018 amounted to 37 billion eur , compared to 27 billion eur spent by public administration bodies and social service organizations, herewith the investment amounting was more than 63 billion eur (table 3). however, during the period from 2006 to 2018, investment amounts in the corporation environmental protection decreased by 8.4 %, while investment amounts in environmental protection of the public administration sector remained relatively stable. from 2006 to 2018, the share of investments in environmental protection within the total eu investment amounts had an average decrease of 1.1 %. the share of investments in environmental protection of governmental and non-profit institutions within the total eu investments ranged from 5.77 % to 6.83 %. the share of investments in corporate environmental protection within the total investments is relatively low; in 2018 it was 1.79 %, having a reduction by 0.77 percentage points since 2006. the equivalent share in the public administrative sector is higher and amounted to 5.92 % in 2018, having a reduction by 0.91 percentage points since 2006. source is compiled on the basis of eurostat data (2018). to obtain the comparable data on ukrainian and the eu environmental investment it is necessary to conduct a study of specific features of environmental investment in these countries, by comparing the expenditures on environmental protection and dynamics of capital investment to identify the link between environmental investment and the state of the environment. a graphical comparative analysis of the dynamics of the share of investment in environmental protection within the total capital investment in ukraine and the eu (figure 6) has been conducted. it has shown that the share of investment in the environmental protection within the total capital investment of the eu-28 during the period under review has certainly changed. however, its fluctuations have not been as sharp as in ukraine. the share of investment in the environmental protection within the total capital investment of the eu-28 ranges from 2.48 % to 3.40 % and the average value for the period under study is 2.99 %. the average value for ukraine is 2.25 %. considering the share of investment within the total expenditures on environmental protection in the eu table 3 the eu environmental investment year governmental and non-profit institutions that serve households corporations total environmental investment, million euro growth rate (%)investment amounts, million euro a share of total investment, % investment amounts, million euro a share of total investment, % 2006 26 296 6.83 40 379 2.56 66 675 2007 25 892 6.26 40 026 2.32 65 918 -1.14 2008 28 258 6.36 40 046 2.33 68 304 3.62 2009 26 977 5.88 36 959 2.60 63 936 -6.39 2010 25 707 5.77 36 825 2.50 62 532 -2.20 2011 25 321 5.89 36 281 2.31 61 602 -1.49 2012 25 932 6.31 36 364 2.25 62 296 1.13 2013 25 120 6.30 34 674 2.17 59 794 -4.02 2014 25 498 6.25 34 175 2.02 59 673 -0.20 2015 28 239 6.61 38 530 2.08 66 769 11.89 2016 23 153 5.77 34 076 1.78 57 229 -14.29 2017 26 102 6.16 36 612 1.84 62 714 9.58 2018 26 726 5.92 36 991 1.79 63 717 1.60 source: compiled on the basis of eurostat data (2018), oecd/eea (2019) baltic journal of economic studies 104 vol. 6, no. 5, 2020 and ukraine, it should be noted that in ukraine this figure is much higher. in ukraine, a share of capital investment in the environmental protection within the total environmental expenditures is higher than in europe. thus, the conducted analysis of the environmental protection expenditures and investments shows that in ukraine the share of these indicators is higher, however, the efficiency of their use does not allow to ensure a favourable state of the environment that determines the need to intensify greening processes not only by increasing the scale of environmental investment, but by increasing the efficiency of its use, i.e. the introduction of stimulating levers of influence (figure 7). the conducted analysis has shown that the economic instruments used to control the environmental pollution 3,40 3,08 3,16 3,40 3,26 3,08 3,08 3,00 2,84 2,93 2,48 2,60 2,53 1,47 1,38 1,37 1,58 1,53 2,67 2,41 2,42 3,63 2,81 3,73 2,46 1,74 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 share of environmental investment in total eu-28 capital investment, % share of environmental investment in total ukraine capital investment, % figure 6. share of environmental investment in total ukraine and the eu capital investment, % source: compiled on the basis of eurostat data (2018), oecd/eea (2019) 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 0 1000 2000 3000 4000 5000 6000 7000 8000 2011 2012 2013 2014 2015 2016 2017 2018 emissions of pollutants eu-28, thousands of tons emissions of pollutants in ukraine, thousands of tons share of total environmental expenditure in eu-28, to gdp (%) share of total environmental expenditure in ukraine, to gdp (%) share of environmental investment in total eu-28 capital investment, % figure 7. dynamics of the main indicators that characterize the efficiency of environmental investments source: compiled on the basis of eurostat data (2018), oecd/eea (2019), state statistics service of ukraine (2019) baltic journal of economic studies 105 vol. 6, no. 5, 2020 and rational use of natural resources, play an important role in the eu’s environmental policy. a set of instruments and methods of influencing the producers and consumers is quite wide. it includes: environmental taxes, fees and mandatory payments; trade permits and quotas; environmental subsidies and benefits; deposit systems of reimbursement and subsidies; various schemes of liability and compensation. 5. conclusions the conducted analysis has shown that the environmental taxes are used in the eu countries as a means of influencing the behavior of economic entities. the main function is to regulate their activities and to give opportunities for sustainable entrepreneurship. the experience gained by foreign countries can be effectively used in ukraine to create an incentive system to intensify the environmental investment into the national economy to ensure sustainable development. the effectiveness of environmental financing will increase in case of increasing the share of environmental tax deductions and rent fees for the special use of natural resources to local government budgets that will bring the funding priorities as close as possible to the specific environmental problems of the certain areas. references: bostian, m., färe, r ., grosskopf, s., & lundgren, t. 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(2014). sustainable entrepreneurship business success through sustainability. springer. yankovyi, o., koval, v., trokhymets, o., karpenko, m., & matskevich, y. (2020). economic assessment of investment on the basis of production functions. turismo: estudos &práticas. zhao, y., zhou, j., & kuang, h. (2019). environmental tax on directed technological innovation in a green growth model. environmental engineering & management journal, 18(9), 2045–2054. baltic journal of economic studies 23 vol. 6, no. 5, 2020 corresponding author: 1 jan kochanowski university in kielce, poland. e-mail: pdziekan@interia.eu orcid: https://orcid.org/0000-0003-4065-0043 researcherid: h-4658-2016 doi: https://doi.org/10.30525/2256-0742/2020-6-5-23-32 spatial diversity of infrastructure and its impact on the development process of rural communes in eastern poland in 2009-2018 paweł dziekański1 abstract. local government units are developing in an increasingly complex environment that is a place of concentration of economic activity and is a creator of local and regional development. their activities target all types of resources, i.e., financial, human, material and information. the aim of the article is to rating the diversity of infrastructure of rural communes of eastern poland in relation to development. the measurements were carried out using a synthetic measure in a system of 484 communes. data from the local data bank for 2009-2018 was used as the source material. development is a general process, multi-dimensional process, covering economic, social, environmental, political and cultural aspects. regions with a high level of infrastructure development are areas recognized by investors and residents as attractive places for doing business and living. the level of infrastructure development in a given local system in terms of its structure, location, quality and accessibility has a very strong impact on its development. in 2018, the infrastructure measure ranged from 0.23 (best unit) to 0.91 (the weakest unit), and from 0.35 to 0.91 in 2009. in 2018, the measure of development ranged from 0.43 to 0.82, while it ranged from 0.52 to 0.84 in 2009. this indicates a similar range of unit diversity and similar actions undertaken in the economy. units in the aspect of the measure of development and infrastructure differed the least in the aspect of entrepreneurship, demography and labor market as well as the financial situation, and the most in the aspect of infrastructure and development. the level of infrastructure of eastern polish rural communes was shaped primarily by the development process and financial situation but also by the number of people costing from libraries, sewage system and water supply as well as housing resources. key words: infrastructure, development, synthetic measure, rural communes. jel classification: h54, j58, o10, r11 1. introduction local government units are developing in an increasingly complex environment, which is a place of concentration of economic activity and is a creator of local and regional development. their activities target at all types of resources, i.e., financial, human, material and information (dworakowska, 2013). factors differentiating the manner of performing individual tasks are the financial capabilities of the commune and the actual needs of residents and business entities operating on its territory. the endogenous potential of the individual is important for development. it causes diversity in the level of socio-economic development of local government units (heffner, 2002). socio-economic development is a set of changes aimed at increasing the satisfaction of the collective and individual needs of local residents (rosner, stanny, 2014). it is an ambiguous and complex concept, it results from the multitude of goals it is to serve and the variety of activities that shape it (wojtasiewicz, 1996). infrastructure plays a particularly important role in regional development processes. its importance is primarily due to the fact that the level of land use with infrastructure elements is one of the basic conditions for economic development. infrastructure is a decisive element in the standard of living of residents and makes them more or less attractive to potential residents and investors or the location of economic activity (dolata, 2014). appropriate equipment with technical and social infrastructure is a prerequisite for economic activation. development requires greater saturation of areas with infrastructure. the level of infrastructure is directly related to the development of entrepreneurship. the right infrastructure reduces the cost of the project, baltic journal of economic studies 24 vol. 6, no. 5, 2020 determines its effectiveness and the ability to meet the requirements of residents or tourists (pięcek, 2002). 2. materials and methods the aim of the article is to rating the diversity of infrastructure of rural communes of eastern poland in relation to development. the measurements were carried out using a synthetic measure in a system of 484 communes. data from the local data bank for 2009-2018 was used as the source material. in the first stage of research, variables were selected for analysis. it resulted from substantive and statistical premises and data availability (table 1). after selecting the variable, the nature of each variable was examined, i.e., it was determined whether the variable was a stimulant or a destimulant. from the set of variables, those characterized by low variability (according to the coefficient of variation, the threshold value was adopted at the level of 0.10) and high correlation of variables (according to the inverted matrix method) were removed (malina, 2004). the stimulant and destimulant sets were determined and presented in the form of an observation matrix �xij: x x x x x x x x x xij m m n n nm= … … ………… …[ ]� � � � � � � � � � � � � � � � �11 12 1 21 22 2 1 2 (1), where xij denotes the values of the j-th feature for the i-th object (i = 1, 2, ..., n; j = 1, 2, ..., m). variable destimulants were transformed into stimulants according to the formula (kolenda, 2003): x x ij ij = � 1 (2). in the next stage, selected variables were subjected to the procedure of zeroed unitarisation using the following formula: z x min x max x min x ij ij i ij i ij i ij = − − � , when x si ∈ (3), where: s is stimulant, d is destimulant; i = 1, 2... n; j = 1, 2... n, xij means the value of the j-th feature for the examined unit, max is the maximum value of the j-th feature, min is the minimum value of the jfeature (wysocki, lira, 2005). as a result of the unitarisation process, the matrix of property values was obtained zij: z z z z z z z z z zij m m n n nm= … … ………… …[ ]� � � � � � � � � � � � � � � � �11 12 1 21 22 2 1 2 (4), where zij is the unified value of xij. the synthetic measure was calculated according to the method based on distance in real space with the euclidean metric according to the formula: oe p zit j p ijt= −( ) = ∑� � 1 1 1 2 (5), when i = 1,2...n; j = 1, 2..., p (n is the number of objects (powiats), ap is the number of features); zij means the value of the j-th feature for the given unit, max – the maximum value of the j-th feature, min is the minimum value of the j-th feature (wysocki, 1996). when the indicator value is equal to 0, the given commune is characterized by the maximum value of each of the examined variables. the higher the value of table 1 list of variables describing the infrastructure situation and development potential infrastructural potential unit s/d population per 1 library (person) person s population using the sewage network person s population using the water supply network (person) person s housing stock per 1000 inhabitants s development potential of the region change in population per 1000 inhabitants person s population growth per 1000 inhabitants person s migration rate per 1000 inhabitants person s unemployed persons registered by sex in communes / person person d employed persons in communes by sex / person person s demographic dependency ratio for the elderly d housing stock per 1000 inhabitants person s population per 1 library (person) person s population using the sewage network person s population using the water supply network (person) person s entities entered into regon register person s self-employed persons person s foundations, associations and social organizations person s own income / total income % s investment expenses / total expenses % s asstimulant; d – destimulant source: own study based on the availability of data at the central statistical office of poland baltic journal of economic studies 25 vol. 6, no. 5, 2020 this indicator, the worse the situation of the commune (tokarski, 2005). in the last stage of analyses, in order to interpret the obtained measures, the division into quartile groups was used, where the size of the indicator in the first group means a better unit and in subsequent groups it means weaker units. the mutual compliance of the obtained results was also verified based on the correlation coefficient and the synthetic measure scatter chart was presented (dziekański, wyszkowski, 2018). 3. development vs infrastructure level – selected issues the commune is a self-government community of inhabitants living in a given territory. their main goal is to provide residents with the highest standard of living. the quality of life of the inhabitants depends on the public services provided by the commune (milczarek, 1999). infrastructure, financial and social capital, etc. are important for the development of municipalities’ potential. an important issue for the functioning of municipalities is the diagnosis and assessment of resources, followed by the implementation of measures to maintain a high level of development or change its unfavorable direction in time (heffner, 2002). municipalities do not develop evenly. the reasons for this can be seen in access to factors of production, land and capital. the potential of people is also important. the development is not only the result of the administration, but also simultaneous activity in a specific area of enterprises, as well as citizens. development is the entirety of the socio-economic changes taking place in a given territory (krajowy raport o rozwoju społecznym, polska 2012, rozwój regionalny i lokalny). a. sztando emphasizes that local development is a process of multidimensional changes in the numerous set of various elements that make up modern society, the economy and the environment, as well as even more numerous connections between these elements (sztando, 2013). development is associated with two priorities: optimal use of endogenous resources and building social, economic and territorial cohesion (capello, nijkamp, 2011). it occurs more dynamically in more developed areas, characterized by favorable geographical location, developed infrastructure, favorable conditions for creating and accumulating innovations, and values of the natural and cultural environment (karwińska, 2006). at the same time, this situation contributes to further marginalization of problem areas. determinants identifying development include relations between the environment and the commune, endogenous resources, geographical location, infrastructure resources, human capital, etc. internal factors include local resources. they are made up of, among others, property resources, natural environment resources and demographic resources, infrastructure, financial resources. they should not be seen as individual isolated variables. the resources owned are the basis for operation and a condition for the entity to carry out statutory tasks (prus, sadowski, 2012). in the case of external factors, first of all, the state policy is analyzed, with particular emphasis on social issues, the quality of life of residents, and the close and distant environment (waśniewsk, 2015). financial resources are an element necessary for the effective implementation of the units’ objectives in terms of current or development tasks. there is feedback between socioeconomic and financial variables (dennis, 2004). finances allow for a comprehensive assessment of the operation of a local government unit and its development opportunities. j.w. douglas and r .k. gaddie relate the financial situation to the possibility of timely fulfillment of financial obligations and ensuring continuity in the provision of services (douglas, gaddie, 2002). natural conditions (natural environment) are a primary and at the same time passive growth factor. the very fact of the existence of favorable natural conditions in a given area does not prejudge the structure of its economy or the level of its development. the degree and directions of use of natural resources depend on human activities. natural resources include: natural resources, natural forces and environmental qualities that determine the quality of human life (dennis, 2004). equipping a given area with social and economic infrastructure facilities is one of the factors and determinants of investment attractiveness and development. it affects the quality of life of residents by meeting the collective needs of the local community and business entities. it contributes to the development of existing companies and is an incentive for external investment (busłowska, 2011). according to k. kuciński (busłowska, 2011), infrastructure is a set of devices, facilities and institutions that support and connect spatial systems into one unit. b. pięcek emphasizes that infrastructure is a necessary condition, but not a factor in the development of economic activity (pięcek, 2002). according to a. gałązka, wherever socio-economic transformations take place in ordinary, average environmental conditions, maintaining development processes requires infrastructural support. the initiation of positive socio-economic transformations in areas with weak development factors is even more dependent on the availability of municipal infrastructure (gałązka, 2003). in the process of development, infrastructure is one of the elements of creating a business, determining its scope, structure and spatial distribution. the level of infrastructure may determine the opportunities or barriers to its further development. infrastructure as a factor activating socio-economic progress is also one of the important determinants of the living conditions baltic journal of economic studies 26 vol. 6, no. 5, 2020 of the population. this is particularly important in the conditions of scarcity and inheritance of a regionally diverse infrastructure system. this, in turn, leads to a deepening of the competitive advantage of areas more economically developed and characterized by relatively high development dynamics so far. in poland, this problem is particularly evident in the so-called rural problem areas, where significant shortages in equipment with technical infrastructure can significantly reduce the future development prospects (rosner, 2000). 4. development and the level of infrastructure of rural communes in eastern poland in 2018, the infrastructure measure ranged from 0.23 (białowieża, podlasie, the best units, group a) to 0.91 (dynów, podkarpackie, the weakest unit, group d, figure 1), and from 0.35 (białowieża, podlasie) to 0.91 (dynów, podkarpackie) in 2009. the range of values adopted by the infrastructure measure was slightly higher in 2018 (range 0.68) than in 2009 (range 0.56, table 3). in 2018, białowieża, radków, terespol, łukta, lutowiska, and rejowiec fabryczny found themselves high. in 2018, the measure of development ranged from 0.43 (stawiguda, warmińsko-mazurskie, best units, group a) to 0.82 (nozdrzec, podkarpackie, the weakest unit, group d, figure 2), and from 0.52 (stawiguda, warmińsko-mazurskie voivodeship) to 0.84 (miączyn, lubelskie) in 2009. the range of values adopted by the measure of development was slightly higher in 2018 (range 0.39) than in 2009 (range 0.32, table 3). in 2018, they were high in the development aspect: stawiguda, lutowiska, juchnowiec kościelny, puchaczów, sitkówka-nowiny. by far the highest level of infrastructure characterized in 2018, according to the synthetic measure, were the rural communes of the lubelskie voivodeship (40; 24.24% of the communes of the voivodeship), podlasie (28; 35.89%) and warmińsko-mazurskie (22; 32.83%), and according to the measures of lublin (37; 22.42%), podkarpackie (39; 36.11), świętokrzyskie (28; 42.42%) and warmińsko-mazurskie voivodeship (28; 41.79%) (table 2). figure 3 shows the increase in the diversity of rural communes by infrastructure measure and a slight decrease by development measure in 2018 compared to 2009. outliers in this respect were dynów, brzyska, figure 1. groups of quartile measures of synthetic infrastructure (oe) of rural communes of eastern poland voivodeships in 2009 and 2018 the first, second and third quartiles were used as the thresholds for the groups; black craft top; white color is the urban and urban-rural commune not covered by the study. source: own development based on the data from the local data bank of statistics poland and central statistical office baltic journal of economic studies 27 vol. 6, no. 5, 2020 figure 2. quartile groups measure of synthetic development (oe) of rural communes in eastern poland voivodeships in 2009 and 2018 the first, second and third quartiles were used as the thresholds for the groups; black craft top; white color is the urban and urban-rural commune not covered by the study. source: own development based on the data from the local data bank of statistics poland and central statistical office table 2 groups by commune belonging to the eastern poland voivodeship by synthetic infrastructure and development measure in 2009 and 2018 infrastructure measure 2009 2018 a b c d a b c d lubelskie 165 47 26 43 49 40 38 41 46 podkarpackie 108 21 25 22 40 18 28 27 35 podlaskie 78 32 20 17 9 28 22 13 15 świętokrzyskie 66 16 18 22 10 18 25 17 6 warmińsko-mazurskie 67 24 18 17 8 22 20 16 9 number of units 484 140 107 121 116 126 133 114 111 average 0.57 0.65 0.70 0.74 0.49 0.58 0.65 0.73 range 0.17 0.24 measure of development 2009 2018 a b c d a b c d lubelskie 165 19 53 46 47 37 38 60 30 podkarpackie 108 34 33 16 25 39 25 25 19 podlaskie 78 23 29 18 8 23 14 26 15 świętokrzyskie 66 19 22 19 6 28 17 17 4 warmińsko-mazurskie 67 27 20 12 8 28 10 21 8 number of units 484 122 157 111 94 155 104 149 76 average 0.67 0.74 0.77 0.79 0.66 0.70 0.73 0.76 range 0.12 0.10 source: own development based on the data from the local data bank of statistics poland and central statistical office baltic journal of economic studies 28 vol. 6, no. 5, 2020 czeremcha, białowieża – in terms of infrastructure; nozdrzec, lutowiska, dywity, głusk, giżycko, suwałki, solina, jankowo, cisna, sitkówka-nowiny, and stawiguda – in terms of development. analysis of the diversity of the measure of synthetic infrastructure indicates that in 2018, compared to 2009, the degree of diversity of communes was higher. this is evidenced by the values of standard deviation (0.09-0.10), classic coefficient of variation (0.13-0.16) and range (0.56-0.68). analysis of the development measure indicates the relative stability of diversity over the period under consideration, as evidenced by the standard deviation (0.04-0.04), the classic coefficient of variation (0.06-0.06) and the range (0.05-0.05; table 3). figure 4 presents correlograms describing the year-to-year relationship of measure of synthetic infrastructure and development. the correlation coefficient has been 0.552 (in 2018) and 0.589 (in 2009). this confirms a similar reaction of communes to changes in the economy and spatial stability of the studied phenomenon. outliers were kraśniczyn, czeremcha, białowieża, dywity, stawiguda (in 2018). analysis of figure 5 shows that the best and weakest units in terms of development and infrastructure measures differ the least in terms of oe (e) entrepreneurship; oe (d) demography and labor market; oe (f ) financial situation, and their greatest differentiation concerned oe (d) development; oe (i) infrastructure; miara oe potencjału infrastrukturalnego mediana 25%-75% zakres nieodstających odstające 2009 2018 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 dynów (2) gródek (2) białowieża (2) czeremcha (2) dubicze cerkiewne (2) hajnówka (2) brzyska (2) dynów (2) białowieża (2) czeremcha (2) miara oe potencjału rozwoju mediana 25%-75% zakres nieodstających odstające 2009 2018 0,40 0,45 0,50 0,55 0,60 0,65 0,70 0,75 0,80 0,85 0,90 głusk (2) puchaczów (2) lutowiska (2) solina (2) juchnowiec kościelny (2) białowieża (2) sitkówka-nowiny (2) dywity (2) gietrzwałd (2) jonkowo (2) cisna (2) stawiguda (2) głusk (2) puchaczów (2) lutowiska (2) nozdrzec (2) trzebownisko (2) cisna (2) solina (2) dobrzyniewo duże (2) juchnowiec kościelny (2) białowieża (2) suwałki (2) sitkówka-nowiny (2) giżycko (2) kruklanki (2) dywity (2) gietrzwałd (2) jonkowo (2) stawiguda (2) figure 3. dispersion of the measure of synthetic infrastructure and development of rural communes in eastern poland voivodeships in 2009 and 2018 (2) means of rural communes source: own development based on the data from the local data bank of statistics poland and central statistical office table 3 dispersion of the measure of synthetic infrastructure and development of rural communes in eastern poland voivodeships in 2009 and 2018 oe infrastructure oe development 2009 2018 2009 2018 average 0.67 0.61 0.74 0.71 median 0.67 0.61 0.75 0.71 standard deviation 0.09 0.10 0.04 0.04 quarter (quartile) deviation 0.68 0.61 0.75 0.72 classic coefficient of variation 0.13 0.16 0.06 0.06 positional coefficient of variation 1.01 0.99 0.99 1.01 min 0.35 0.23 0.52 0.43 max 0.91 0.91 0.84 0.82 range 0.56 0.68 0.32 0.39 quartile 1 0.62 0.54 0.72 0.69 quartile 2 0.67 0.61 0.75 0.71 quartile 3 0.73 0.67 0.77 0.74 quartile range 0.11 0.13 0.05 0.05 skewness -0.16 -0.13 -1.31 -1.34 measure of concentration-kurtosis 0.10 0.43 3.68 4.43 source: own development based on the data from the local data bank of statistics poland and central statistical office baltic journal of economic studies 29 vol. 6, no. 5, 2020 gunnar myrdal in the theory of cumulative causation referring to the analysis of the interdependence of social, economic and institutional phenomena has proved that every element interacting with another element affects its behavior, and at the same time it is modified by the reaction of that element (stanny, strzelczyk, 2018). the level of infrastructure of rural municipalities in poland was shaped primarily by the development process and financial situation (table 4), but also by the number of people using libraries, sewage and water supply systems and housing resources (table 5). to assess the impact of endogenous potentials of communes on the spatial differentiation of infrastructure measures, a regression model describing the dependence of variables was estimated taking the form: f (infrastructure measure) = ∑ (oe (r) development; oe (p) entrepreneurship; oe (d) demography and labor market; oe (f ) financial situation). miara potencjału infrastrukturalnego y = -0,0375 + 0,9589*x; r = 0,8805; p = 0.0000; r2 = 0,7753 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 2009 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 20 18 terespol (2) łabunie (2) nielisz (2) nozdrzec (2) brzyska (2) dynów (2) białowieża (2) czeremcha (2) moskorzew (2) radków (2) górowo iławeckie (2) grunwald (2) jedwabno (2) 2009, y = 0,5608 + 0,2713*x; r = 0,5895; p = 0.0000; r2 = 0,3475 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 miara potencjału infrastrukturalnego 0,50 0,55 0,60 0,65 0,70 0,75 0,80 0,85 0,90 m ia ra p ot en cj ał u ro zo w oj u lutowiska (2) cisna (2) olszanica (2) orla (2) białowieża (2) czeremcha (2) dubicze cerkiewne (2) nowy dwór (2) dywity (2) gietrzwałd (2) jonkowo (2) stawiguda (2) miara potencjału rozwoju y = 0,0063 + 0,9425*x; r = 0,8749; p = 0.0000; r2 = 0,7655 0,50 0,55 0,60 0,65 0,70 0,75 0,80 0,85 0,90 2009 0,40 0,45 0,50 0,55 0,60 0,65 0,70 0,75 0,80 0,85 20 18 drelów (2) głusk (2) puchaczów (2) lutowiska (2) jasienica rosielna (2) nozdrzec (2) osiek jasielski (2) krasne (2) cisna (2) solina (2) płaska (2) dobrzyniewo duże (2) juchnowiec kościelny (2) białowieża (2) mały płock (2) sitkówka-nowiny (2) dywity (2) gietrzwałd (2) jonkowo (2) stawiguda (2) 2018, y = 0,5542 + 0,2514*x; r = 0,5520; p = 0.0000; r2 = 0,3047 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 miara potencjału infrastrukturalnego 0,40 0,45 0,50 0,55 0,60 0,65 0,70 0,75 0,80 0,85 m ia ra p ot en cj ał u ro zo w ju kraśniczyn (2) białowieża (2) czeremcha (2) dywity (2) stawiguda (2) figure 4. a scatter chart with a line matching the synthetic infrastructure measure and development of rural communes of eastern poland voivodeships in 2009 and 2018 source: own development based on the data from the local data bank of statistics poland and central statistical office table 4 correlation between the measure of infrastructure and development of rural communes in eastern poland voivodeships in 2009 and 2018 oe infrastructure 2009 2018 synthetic measure of development 0.5895 0.554 a synthetic measure of entrepreneurship 0.0773 0.0204 a synthetic measure of demographic and the labor market 0.024 -0.0014 a synthetic measure of the financial situation 0.1248 0.1593 linear correlation coefficients for observations from sample 1-484; critical value (at a 5% bilateral critical area) = 0.0891 for n = 484 source: own development based on the data from the local data bank of statistics poland and central statistical office baltic journal of economic studies 30 vol. 6, no. 5, 2020 by infrastructure measure by development measure by infrastructure measure by development measure figure 5. the weakest and best units by infrastructure and development measure of rural communes in eastern poland voivodeships in 2009 and 2018 oe (d) development; oe (i) infrastructure; oe (e) entrepreneurship; oe (d) demography and labor market; oe ( f ) financial situation source: own development based on the data from the local data bank of statistics poland and central statistical office regression analysis of a measure of synthetic infrastructure versus endogenous potentials of municipalities that the presented regression model allows explaining r = 0.809 variable variations (at r2 = 0.807). the statistics values f (4.478) 507.4195 and the corresponding level of probability p mean that all parameters are statistically significant (table 6). table 5 correlation between the measure of infrastructure and elements describing it, rural communes of eastern poland voivodeships in 2009 and 2018 oe infrastructure 2009 2018 population per 1 library (person) -0.5909 -0.5672 population using the sewage network -0.526 -0.4789 population using the water supply system -0.5139 -0.4564 housing stock -0.4225 -0.4286 linear correlation coefficients for observations from sample 1-484; critical value (at a 5% bilateral critical area) = 0.0891 for n = 484 source: own development based on the data from the local data bank of statistics poland and central statistical office 5. conclusions local development is a process of changes taking place in a given local system, taking into account the resources (territorial capital) appropriate for this system. development is a general process, multidimensional process, covering economic, social, environmental, political and cultural aspects. regions with a high level of infrastructure development are areas recognized by investors and residents as attractive places for doing business and living. the level of infrastructure development in a given local system in terms of its structure, location, quality and accessibility has a very strong impact on its development. the condition of the infrastructure (poor concentration in rural areas) in eastern poland is very diverse. the better the infrastructure is developed, the better and more attractive are the areas for the settlement and life of residents and the economic development of the region. the level of infrastructure determines development opportunities and barriers due to, among others, for their functions (location, integration, activation) or features (durability, relationship with the area, universality of access). baltic journal of economic studies 31 vol. 6, no. 5, 2020 table 6 model regression measure of synthetic infrastructure and socio-economic measures of rural communes in eastern poland voivodeships in 2018 rate standard error t-student’s p-value const 1.53566 0.0853103 18.00 < 0.0001 synthetic measure of development 3.48871 0.0790483 44.13 < 0.0001 synthetic measure of entrepreneurship -0.935703 0.0443394 -21.10 < 0.0001 synthetic measure of demography −1.65347 0.0769187 −21.50 < 0.0001 synthetic measure of the financial situation −1.74753 0.124013 −14.09 < 0.0001 arithmetic mean of the dependent variable 0.606605 standard deviation of the dependent variable 0.097853 sum of residual squares 0.879730 residual standard error 0.042900 determining coefficient rsquare 0.809385 corrected r-square 0.807790 f (4, 478) 507.4195 p-value for the f test 1,8e-170 logarithm of credibility 838.0724 information criteria akaike -1,666.145 bayesian, schwarz information criterion -1,645.245 hannan-quinn criterion -1,657.932 knk estimation, observations 1-484 used, dependent variable (y): infrastructure18 source: own development based on the data from the local data bank of statistics poland and central statistical office in 2018, the infrastructure measure ranged from 0.23 (best unit) to 0.91 (the weakest unit), and from 0.35 to 0.91 in 2009. in 2018, the measure of development ranged from 0.43 to 0.82, while from 0.52 to 0.84 in 2009. this indicates a similar range of unit diversity and similar actions undertaken in the economy. regardless of the researched areas (infrastructure, development), białowieża, radków, terespol, łukta, lutowiska, rejowiec fabryczny, stawiguda, juchnowiec kościelny, puchaczów and sitkówkanowiny were high. a more favorable situation was in units with developed industrial functions (e.g. sitkówka-nowiny), which strengthened their investment financing 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(2005). statystyka opisowa, wyd. ar , poznań. baltic journal of economic studies 30 vol. 1, 2015 contemporary prospects for the railway engineering industry in ukraine in the view of economic crisis artem bilous1, institute of international relations of taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to explore the current state of the railway engineering industry in ukraine, the prospects of its development, current threats and possibilities; to propose incentives for the railway industry development. methodology. the research was based on open sources of statistical information which was compared by years in relation to events in political and economic spheres. data was also received from producers’ web-sites. analytical economic articles have been also used to obtaine the full scope of information regarding the railway industry in ukraine. results of the research showed that today ukraine had a grea demand for the rolling stock as the current rolling stock is obsolete and 98% of it reached their lifecycle end. currently ukraine has six car building plans and two plans for construction of locomotives and they offer a variety of units of the rolling stock. the main customer for all those plants is the state railway administration of ukraine “ukrzaliznytsya”, that, for recent years, almost had not ordered new rolling stock. the problem is that ukrzaliznytsya does not have own funds to pay for the rolling stock renewal, and credit funds are almost unachievable due to economic crisis and structural reorganization of the railway operator. that’s why the plants went abroad with their products, and russia became the main customer abroad. due to the events of 2013-2015, russia closed its market for ukrainian rolling stock by non-issuance of technical certificates for the rolling stock. however, in the period of political and economic instability, together with the recent cancellation of import duties to the eu countries, ukrainian rolling stock producers have now a real chance to diversify their customers and explore new markets. practical implications. thus, to overcome the current difficulties, ukrainian government has to introduce a special program to renew the rolling stock, to encourage governmental-private enterprise, and the producers should explore new markets as they have products to offer in europe and other regions. value / originality. the received data show that the ukrainian railway industry has perspectives in case of finding new markets for its products. the technical level of the produced rolling stock is on the high level and can be easily improved. key words: railway engineering industry, rolling stock, renewal, ukrzaliznytsya, production, crisis, state regulation. jel classification: e23, l62, m11, o18 corresponding author 1 department of international business, institute of international relations of taras shevchenko national university of kyiv. e-mail: bilousartem@ukr.net 1. introduction analysis of the current state of the field of railway engineering in ukraine gives grounds to say that, despite negative trends in the economy of ukraine and the market of railway services, railway engineering in ukraine is developing. the absence of a deliberate governmental strategy of procurement of new rolling stock has led to the fact that most businesses of engineering complex appeared in conditions of necessity of self-financing and independent search for new markets outside ukraine. the result was a significant aging of rolling stock and loss of competitive positions compared to the railway companies of neighboring countries. the result was the partial stagnation of industry and outflow of qualified personnel, moral and physical aging of technologies and equipment. reorientation of national railway engineering to intensive, faster way of development involves the necessity to resolve a complex of problems, interconnected and interdependent in the legislative, regulatory, financial, economic, educational, personnel and other areas. that is what necessitates studying the state of machine-building of ukraine and its governmental regulation. 2. general view of railway industry transport infrastructure occupies an important place among the factors of economic development in the past years and today. transport delivers cargo and carries people, and the largest volumes of transportation by land transport are carried out by railway. at the time when the first railways appeared, towns sometimes came into conflict through which one the railway will pass because at that time a new mode of transport gave a significant boost to economic development. there were even cases where during the laying of the first transatlantic railway inhabitants of towns in the united states could even move baltic journal of economic studies 31 vol. 1, 2015 their homes to railway. however, the railway was not only conducive to economic development, but also had great importance in the logistical chain of military campaigns, since it was the best way to quickly change the deployment of military equipment and personnel. to prevent this, spoils of the railroad tracks took place and the trains were blown up. however, the role of railways in peacetime far outstrips the notional damage during the hostilities. in the world there is a situation when there is no single standard of width of railway track; track width from 600 to 1676 mm is used in the world. the most common of them are "standard" or "stephenson" width of 1435 mm and "russian" of 1520 mm. the first is used almost all over europe, the usa, china and other countries. the second one is in the former soviet union, mongolia, finland. thus there is a situation when trains can not travel freely, for example, between ukraine and europe, this requires replacement of cars’ boggies. this, in turn, does not promote economic cooperation of the cis and eu countries. railway engineering sector in ukraine appeared in the nineteenth century from construction of plants for the construction of locomotives and cars and repair workshops. later, in soviet times, new factories appeared for building cars and locomotives. today in ukraine there are six wagon building plants in kremenchuk, mariupol, krivoy rog, stakhanov, kharkiv (excluding carriage repair) and two plants for the production of locomotives in luhansk and dnipropetrovsk (without locomotive repairing). production of emu and dmu (electric multiple unit and diesel multiple unit) is carried out at two factories that are among these. in 2015, there is a planned construction of the plant for production of electric locomotives at zaporozhye electo locomotives repairing plant. the project is to be implemented in partnership with skoda transportation (czech republic). the author considers it appropriate to review prospects of wagons and locomotives construction in ukraine separately (kindzerskyi yu. v., mykytenko v. v., yakubovskyi m. m. and others, 2009). 3. car-building construction of railway cars, namely freight cars, has the largest volume of production in ukraine and export abroad. in 2013, due to reduced purchases by russia, production decreased twice. according to experts, neither ukrainian nor any other of the markets will be able to load the capacities of our plants. everything leads to the fact that production figures this year will fall lower than at the crisis times of 2009, when only 13 thousand of cars were released. meanwhile, prospects in key market continued to narrow. with a view to the economic integration, the countries of the customs union in august 2014 transferred to rail safety evaluation of products, including freight cars, according to the requirements of technical regulations. today, the industry in russia seriously at odds with ukrainian standards in assessing safety. new standards for ukrainian factories will have more serious negative factor in the russian market than single limits of rostransnadzor. theoretically, the supply of cars for the domestic market could help ukrainian car-producers survive. according to analysts of cts-consulting, annually in the period 2014-2020 7,9-10,5 thousand of cars will be charged, 70% of which is park of "ukrzaliznytsya". however, the state monopoly does not have money for rolling stock renewing. within 2010-2014 just 2.1 thousand of freight cars were purchased, this year it is planned to buy another 1.5 thousand. in mid-march 2014, minister of infrastructure of ukraine said that the purchase of railway rolling stock preference will be given to domestic producers and considered all possible financing schemes, leasing, credit offers, including credit lines of the ebrd. much will depend on how much money and on which schemes will be attracted by "ukrzaliznytsya" during upgrades. private ukrainian companies buy cars in small quantities. for example, the largest private freight transportation company "lemtrans", in 2014, bought 645 cars of domestic production, this year it plans to buy another 3 thousand. according to the company "lemtrans" representatives, domestic producers offer the best combination of price, quality and delivery terms, as the company is cooperating with ukrainian enterprises. the company "ferrexpo", which owns poltava gok, last year, bought in stakhanov railcar plant 267 cars, this year there are plans to supply another 300 units. the need for ukraine in the new grain cars is 6.7 thousand units. but a severe shortage of this type of cars has not yet led to a boom in its production. purchase of such a number of grain cars, according to the state food and grain corporation of ukraine (dpzku) required an investment of 600 million us dollars, and farmers do not have the money. this leads to the fact that last year dpzku seriously wondered about the purchase of 2 thousand of chinese grain cars on the chinese loan. the main market for domestic cars has traditionally been in russia, which imported about 85% of ukrainian production. however, the last two years russia reduces purchases of ukrainian cars. in 2013, the production of cars in ukraine dropped by half – to 23.8 thousand. units, and as reduced exports to russia up to 14 thousand units. the reduction of exports is primarily due to the surplus of rolling stock in russia, which is about 120-130 thousand units (around 10% rolling stock). the important fact was that russia suspended the certificates of ukrainian carbuilding enterprises in late september-october 2013. among russian and ukrainian markets, our carproducers still can count on delivery of their products to the markets of "space 1520", where there is the similar train track width. primarily, these are kazakhstan, belarus and the baltic states. but for all machine builders, there is not enough volume of market. since kazakhstan and belarus are part of the customs union, the delivery of our cars to these countries may be limited after russia, in the case of usage by the latter some restrictions. according to experts, about 2-3 thousand of cars can be sold to the baltic states, which are also located in the "space 1520". however, baltic journal of economic studies 32 vol. 1, 2015 last year the supply of ukrainian cars in that region also declined. during 10 months of 2013, only 1.13 thousand of cars were sent for export that is twice lower than in 2012. supply of cars to central asia also decreased. export supplies last year to these countries were 3.6 thousand units, which is 60% less than in 2012. in addition, the structure of production has changed: the rate of gondola fell for tanks. according to experts, domestic car producers can send a total of about 5 thousand cars a year to counries of "space 1520" (except russia). to make a break-through to the eu market, there are some obstacles for ukrainian car producers. firstly, ukraine produces cars for the railways with a width of 1520 mm, while the european countries (except the baltic states) adopted a different standard. secondly, the european market in its capacity is several times lower than the russian, as the share of railway transport in cargo transportation is only 20%. thirdly, in the next five years, analysts predict a drop in sales of new freight cars in europe. in europe and the us, consumers choose cars with the largest capacity that may be associated with the load on the axle, number of axles, the cost of repair and overhaul mileage, convenience and speed of unloading of a car, car’s versatility under various loads. last year the head of the supervisory board kryukov car works (kvsz) said that for the transition to european standards the company needs about 150 mln euro of which more than 40 million should be spent on implementing the european environmental standards and more than 100 million for the purchase of new equipment and development of new products. he also said that the plant has no such resources, and without that the company would not be able to break through the eu. however, the regulatory framework for the supply of products to the european market, the company has. kvsz has european quality certificate iso, american aaa certificate and certificate for the right to teach employees the requirements of iris  – international railway industry standard. stakhanov railcar plant also is considering certification for compliance with iris, since the presence of such a certificate is a prerequisite for entering the european market. in the current situation, car producers pay attention even to distant markets. for example, in 2012 kvsz agreed with kenya to supply about 1 thousand of cars of different types, accessories and spare parts for rolling stock worth about 60 mln usd. it was planned that in kenya there will be equipment and final cleaning of cars established. agreement on the supply of ukrainian cars to kenya amounted to 7% of annual income of kvsz. this company has provided significant discounts to kenyans to enter this new market. markets in countries such as kenya, where there is an established domestic production of cars, are promising for ukrainian car producers, as products of ukrainian companies are much cheaper than from the british and japanese companies, where the cost of cars is about 30% higher. one should consider passenger car building in ukraine separately. it is presented by three plants in kremenchug, luhansk and kharkiv, the first two of which build cars in full cycle, and the latter makes the overhaul with the prolongation of cars. the leader of the industry is kryukov cars works, which produces cars of distant following, interregional cars and high-speed trains. to date, the plant built and delivered to customers more than 500 units of passenger rolling stock since 2002. the largest number of cars was delivered to uz, although the last 3 years there was hardly buying of cars by national carrier. in this connection, the manufacturer switched to a more active development of foreign markets. today these are belarus (a joint venture with gomel car plant), kazakhstan, tajikistan. the plant has mastered the production and received permission of inter-sectoral commission to produce passenger cars of dimension ric (regolamento internazionale delle carrozze – an international agreement with the requirements for railway rolling stock that can be used on the railways of countries participating in the agreement; this includes all european states), which is less than the accepted clearance for "space 1520". thus, the company discovered the way to the european market, which can eased by the abolition of restrictions on the import of ukrainian goods to the eu. as for the russian market, the situation is complicated by the existence of a strong competitor such as jsc "tver car works," which produces a similar range of products of passenger car building as the does kvsz. recently, there was almost no upgrade of motor-wagon rolling stock (emu and dmu). speaking of suburban trains (excluding purchase of 10 trains hyundai rotem), the latter train was acquired in 2008, and in 2013 one dmu was purchased (domestic production). overall, 50 emu trains were delivered to ukrainian railways, with the oldest of those currently on the balance, maintained since the beginning of the 60es of xx century. all domestic electric and diesel trains were manufactured at the plant "luhansktplovoz." it should be noted that their technological level, unfortunately, is far from corresponding to the current level. the plant itself is more focused on production of diesel locomotives and electric locomotives, that’s why the production of commuter trains there in the near future is not going to renew. but soon, in stabilizing the political and economic situation in ukraine, kvsz intends to present their vision of suburban electric train made on a modern technological level. 4. locomotive-building the park of uz locomotives consists of diesel locomotives (passenger, freight and shunting) and electric locomotives (passenger and cargo; 3 kv dc and 25 kv ac current, dual-system  – designed for both currents). today in ukraine there are two factories that can produce locomotives: dnepropetrovsk electric locomotives building plant (devz) and luganskteplovoz, which actually deals with the production at present time. it produceы all kinds of diesel locomotives and freight electric dc and ac locomotives. the latter are of russian baltic journal of economic studies 33 vol. 1, 2015 electric series 2es4k and 2es5k that actually, changing some nodes are ukrainian electric locomotives series 2el4 and 2el5 respectively. the plant itself is owned by the russian "transmashholding", and so depends on ukrainerussia relations. that is, given the events of early 2014, ukraine can not fully plan to replenish its own locomotive fleet by lugansk locomotives. an alternative could be dnepropetrovsk electric locomotives building plant that already in the independent ukraine produced 40 electric freight dc locomotives and 18 passenger ac locomotives. in general, these amounts are meager renovation of rolling stock, moreover, most locomotives had some design flaws that, to some extent, prevented the further release. in 2013, an agreement was signed to establish a joint enterprise on the basis of zaporizhzhya electric locomotives repairing plant (zerz) with the company skoda transportation. the project involves the construction of new premises for the full release of electric locomotives by the following structure: 50 passenger dual-system, 330 singlesystem passengers, 100 dual-system freight locomotives. with the procurement of freight single-system locomotives from luganskteplovoz, this should provide ukraine with a new generation of electric locomotives. with diesel locomotives, the situation is the opposite. when there is a possibility in ukraine to produce all types of diesel locomotives (luganskteplovoz), there is no need for them now in ukraine. this is related to electrification of particularly loaded areas (released locomotives) and with rising prices for fuel and lubricants, which increase the cost of transportation by diesel locomotives. today, all diesel locomotives that are produced in ukraine (cargo only) are exported, priorly to the russian federation, ojsc "russian railways", which has a monopoly of rail transportation and is state-controlled. unfortunately, the production of locomotives in recent years is hardly updated, and in case of strengthening economic war between russia and ukraine, documentation for locomotives can be exported to russia for the organization of production on its territory. it should be added that during the last 20 years 4 passenger diesel locomotives and a shunting one of own development were released for uz. the promising areas of "luganskteplovoz" are the following: replacement of old main locomotives on non-electrified areas; replacement of obsolete two-piece series 2m62 diesel locomotives used on lviv and south-west railways in passenger traffic with modern diesel locomotives tep150; production of main cargo electric locomotives; production of shunting locomotives series tem103 used to replace current shunting locomotives; adapting diesel locomotive tep150 to the requirements of other countries, including eu member states, with a view to export (locomotive corresponds to the "euro clearance"); improving existing dmu del02 and arrangement of its supplies to ukrzaliznytsia and other countries. regarding devz, the production main electric locomotives is not planned there it in the near future. in fact, the plant returned to what from it began, to the production of industrial quarry and mine electric locomotives. devz has the potential to enter the new markets of the middle east, asia and africa. equipment, operating in developed countries such as the eu or the us, is under higher pressure of strict requirements than those that the manufacturer can perform even soon. of course, the russian market is available for the plant, but the risks are the same as for other companies  – organization of production of machinery in russia and the rejection of ukrainian counterparts. 5. conclusions thus, having considered the present state of sphere of railway engineering in ukraine, the following conclusions can be reached. 1. the technological level of railway transport of ukrainian production is acceptable but needs updating to modern technical standards and market requirements. 2. the basis for the support and development of national railway engineering should be a state program for rolling stock reneval that should not be declarative, but real. also the author considers it necessary to legislatively regulate the participation of private carriers with their own rolling stock, which could at their own expense buy rolling stock, preferring the most appropriate offers. it should stimulate domestic producers to increase the competitiveness of their products. also the author draws attention to the need to implement public-private partnership in the production of rolling stock. 3. producers should independently seek new markets except russia. the signing of the economic part of the association agreement with the eu should facilitate the access of producers to the european market. one should focus on the countries of the former warsaw pact (the soviet union has supplied rolling stock there of own production) and not very wealthy eu countries such as serbia, croatia, greece and others. references carriage of ric clearance is an adequate addition to production listof passenger cars of kvsz.  – web source. http://www.kvsz.com/index.php?option=com_content&view=article&id=562%3a-ric-&catid=1%3ae&itemid= 105&lang=ru czech company skoda transportation purchased share in zaporozye enterprise.  – web source. http://day.zp.ua/news/37887.html kindzerskyi, yu. v., mykytenko, v. v., yakubovskyi, m. m. and others. (2009). potential of national industry: goals and mechanisms of effective development. edited by kinzerskyi yu. v. kyiv: nan ukrainy; in-t ekonom. and prognostication. baltic journal of economic studies 34 vol. 1, 2015 kriukov car-building plant keeps on production reducing.  – web source. http://delo.ua/business/krjukovskijvagonzavod-prodolzhaet-sokraschat-proizvodstvo-232691/ kuzmin, o.ye., kniaz, s.v., hnylianska, l.y., zinkevych, d.k. (2010). innovative programs of machine-building enterprises: creative solutions and models of their transferting. lviv: spolom. kvsz may provide kenia with discount for carriages.  – web source. http://www.kremenchug.ua/news/ business/17136-kvsz-mozhet-predostavit-kenii-skidki-na-vagony.html kvsz produced and provided to customers 500 units of passenger rolling stock. – web source. http://www.kvsz.com/ index.php?option=com_content&view=article&id=585%3a-----500----&catid=1%3ae&itemid=105&lang=ru kvsz was the first in ukraine to work under conditions of iris standard. – web source. http://www.kvsz.com/ index.php?option=com_content&view=article&id=597%3a-iris&catid=1%3ae&itemid=105&lang=ru list of car-building plants. web source: http://made.in.ua/index.php?cat=60&subcat=728 malashchuk, d.v. (2005). the competitiveness of ukrainian machine-building complex in case of globalization of international markets: author’s thesis for phd grade: 08.05.01 „world economy and international economic relations”. kyiv: ukr. akad. zovnish. torhivli. need in renewal of park for passenger transportation is 500 cars annually. – web source. http://www.magistral-uz.com.ua/ news/potreba-v-onovlenni-parku-dlja-pasazhirskih-perevezen---500-vagoniv-worichno.html tarasova, n.v., kalinichenko, i.s., romanesko, v.a. and others. (2007). machine-building in ukraine: trends, problems, perspectives. nizhyn: tov "vydavnytstvo "aspekt-polihraf ". ukrainian car producers reduced export to russia by 40%, but increased the supplies of special cars. «azovskiy mashynostroitel» #3, 1.02.2014. – web source. http://www.azovmash.info/print.php?id_new=5083&id_num=460 ukrainian cars come back to markets. – web source. http://poslezavtra.com.ua/ukrainskie-vagony-vozvrashhayutrynki/ артем билоус современные перспективы отрасли железнодорожного машиностроения в украине в условиях экономического кризиса аннотация. целью работы является исследовать современное состояние отрасли железнодорожного машиностроения в украине, перспективы его развития, текущие угрозы и возможности; предложить пути развития отрасли железнодорожного машиностроения. методика. исследование основано на статистической информации из открытых источников, которая сравнивается по годам в привязке к событиям в политической и экономической сферах. данные также были получены с веб-сайтов производителей. также, при исследовании вопроса использовались аналитические экономические статьи по вопросам развития отрасли железнодорожного машиностроения в украине. результаты исследования показали, что сегодня в украине существует огромный спрос на подвижной состав, так как 98% ныне эксплуатируемого приблизились к граничному сроку своей эксплуатации. на сегодняшний день в украине имеется шесть заводов по производству вагонов и два – по производству локомотивов. основным заказчиком всех заводов является государственная администрация железнодорожного транспорта украины «укрзализныця», которая в течение последних нескольких лет практически не обновляла подвижной состав. проблема заключается в том, что у укрзализныци нет своих средств на покупку подвижного состава, а кредитные средства по большей части недоступны из-за экономического кризиса в стране и структурных преобразований, которые сейчас происходят на укрзализныце. поэтому заводы вышли на внешние рынки, а россия стала основным заграничным потребителем. из-за событий, имевших место в украине в период 2013-2015 гг., россия закрыла внутренний рынок для подвижного состава из украины путем отказа в продлении сертификатов на поставку продукции. в то же время, в период политической и экономическо нестабильности, в то время, когда упрощается выход на европейский рынок, украинские производители получили реальный шанс диверсифицировать рынки сбыта. практическое значение. для того, чтобы преодолеть текущие сложности, правительство украины должно внедрить специальную программу по обновлению подвижного состава, поощрять государственно-частное партнерство, а производители должны осваивать новые рынки, поскольку у них есть продукция, которую можно предложить в европе и других странах. поскольку в европе используются другие железнодорожные стандарты, производители должны адаптировать под них свою продукцию. в то же время, на украинских предприятиях уже готовы образцы продукции, соответствующей европейским требованиям. значение/оригинальность. полученные данные показывают, что украинская отрасль железнодорожного машиностроения имеет перспективы в случае нахождения новых рынков для своей продукции. среди таких рынков могут быть как страны с аналогичными стандартами железных дорог, так и страны с отличающимися стандартами. технический уровень выпускаемого украинскими предприятиями подвижного состава находится на высоком уровне, хотя и может быть легко повышен. baltic journal of economic studies 166 vol. 6, no. 3, 2020 corresponding author: 1 educational and scientific institute of law, university of the state fiscal service of ukraine, ukraine. e-mail: tv1959@ukr.net orcid: https://orcid.org/0000-0002-1726-9028 2 investigation department of state fiscal service in kyiv city, ukraine. e-mail: zabarnyimaksym@gmail.com orcid: https://orcid.org/0000-0002-8772-9149 3 university of the state fiscal service of ukraine, ukraine. e-mail: natali.lugina7@gmail.com orcid: https://orcid.org/0000-0001-6005-2943 doi: https://doi.org/10.30525/2256-0742/2020-6-3-166-170 application of the method of swot-analysis as a means of strategic planning during the investigation of criminal cases in the field of economics in borders vasyl topchiy1, maksym zabarniy2, nataliya lugina3 abstract. a cooperation between states in criminal cases is carried out in order to achieve the goals of justice and may exist at the stage of pre-trial investigation, trial, as well as after the entry into force of a court decision (sentence, ruling). forms of international cooperation in the investigation of criminal cases are quite diverse. the main ones are: providing legal assistance, which consists in carrying out procedural actions, because during the investigation and trial of criminal cases there is often a need to gather evidence abroad by questioning defendants, victims, witnesses, experts, conducting searches, examinations, court inspections, seizure and transfer of items, delivery, and forwarding of documents, etc.; extradition of persons for criminal prosecution or for the execution of a court sentence; arrest, search and confiscation of proceeds of crime (states undertake to cooperate in the investigation of money laundering; assist in the investigation and take appropriate measures: to freeze bank accounts, seize property to prevent its concealment; confiscate proceeds of crime or property, value of which corresponds to the value of income, etc.). the normative basis for the international cooperation in the investigation of criminal cases is the european convention on mutual assistance in criminal matters dated april 20, 1959; the criminal procedural code of ukraine; methodical recommendations of the general prosecutor’s office of ukraine; order no. 223 “on the organization of the work of the prosecutor’s office of ukraine in the field of international legal cooperation” dated september 18, 2015. the legal basis for international cooperation in criminal matters is the current bilateral and multilateral international treaties of ukraine, the binding nature of which has been approved by the verkhovna rada of ukraine. among the multilateral international agreements, there should be noted the european conventions on criminal justice: the european convention on the extradition with two additional protocols to it, the european convention on mutual assistance in criminal matters with an additional protocol to it, the european convention on the transfer of proceedings in criminal matters, the convention on the transfer of sentenced persons with an additional protocol, the european convention on the supervision of conditionally sentenced or conditionally released offenders, the convention on laundering, search, seizure, and confiscation of the proceeds from crime and the european convention on the international validity of criminal judgements. in addition, the commonwealth of independent states has the 1993 convention on legal assistance and legal relations in civil, family and criminal matters and its 1997 protocol; within the framework of the united nations, there is the convention on transnational crime of 2000, together with two protocols thereto. these multilateral international agreements establish a uniform sphere of cooperation between law enforcement and judicial authorities in relation to all european countries. today, the most effective is the method of “swot-analysis”, which is currently recognized in the scientific community as one of the most popular tools in strategic planning of social processes, including in the investigation of criminal cases. although the type of analysis is still considered by most scientists as bohomolova ye., (2004) a method of marketing research of enterprises in the market in the context of business practice, the object of “swot-analysis” can baltic journal of economic studies 167 vol. 6, no. 3, 2020 be as legislation, the practice of its application and prospects of their improvement, and materials of criminal cases. methodology. achieving the purpose of this publication is ensured by the use of cognitive philosophical, general scientific and special methods, among which the main are analysis and synthesis, comparative law method, which allow to identify prospects for the use in criminal cases of the method of “swot-analysis”, which is currently recognized in the scientific community as one of the most popular tools in strategic planning of social processes. methods of grammatical review and interpretation of legal norms have helped to identify gaps in the legislation governing the investigation of criminal cases, in particular in the field of economics, and to develop proposals for its improvement. practical importance. international cooperation in criminal proceedings is an organizationally complex process, which requires the use of effective and efficient methods to perform the tasks of criminal proceedings, respect for the rights and freedoms of all participants in the process, including not violating a reasonable time in the investigation. to date, science has developed many methods of analyzing the law, the practice of their application, and identifying ways to improve legislation, taking into account the results of forecasting the prospects for society and the state. to ensure a high level of quality of criminal investigations in the framework of international cooperation, it is necessary to choose the one that will give the most effective results and allow to formulate the most optimal proposals in a particular criminal case and the practice of their application. an attempt to solve this problem is presented in this study. key words: criminal investigation; international cooperation during the investigation, application of the swotanalysis method; means of strategic planning during the investigation; legal regulation of international cooperation. jel classification: k14, k33 1. introduction for bilateral international agreements, these include agreements on legal assistance in criminal matters (which include the full range of issues related to the cooperation of competent authorities in criminal matters). such agreements have mostly been concluded since time immemorial soviet union, some of them remain in force today. at the same time, the practice of concluding international agreements today is based on their conclusion on certain types of legal assistance: on legal assistance in criminal cases, on the extradition of offenders, on the transfer of convicted persons. today, the general base of current international treaties of ukraine is 18 multilateral and 37 bilateral treaties in the field of criminal justice. it should be noted that the legislation of ukraine defines two central bodies for the implementation of the above european conventions in the field of criminal justice: the general prosecutor’s office of ukraine – at the stage of pre-trial investigation and the ministry of justice of ukraine – at the stage of criminal proceedings. in addition, the ministry of justice of ukraine acts as the central body for the implementation of the european convention on the international validity of criminal sentences, the european convention on the supervision of conditionally sentenced or conditionally released offenders, and the convention on the transfer of sentenced persons and its protocol. the term swot was proposed in 1963 by professor kenneth andrews. in this concept, he included knowledge about the existing situation and trends in its development (swot-analiz, 2020). the essence of the method “swot-analysis” in criminal cases in the framework of international cooperation can be defined as strategic planning (strategy design) of the investigation, which consists in identifying factors of the internal and external environment of criminal cases and dividing these factors into four categories: strengths; weaknesses; opportunities; threats. the application of the “swot-analysis” method will be expedient and logical in the investigation of criminal cases within the framework of international cooperation, which contains a lot of information. this list includes categories of cases relating to crimes against the foundations of national security (articles 109-114 of the criminal code of ukraine), crimes in the sphere of economic activity (articles 199-233 of the criminal code of ukraine), crimes against public safety (articles 255-270 of the criminal code of ukraine), crimes in the sphere of official activity (articles 364-370 of the criminal code of ukraine), crimes against peace, the security of humanity and international law and order (articles 436-447 of the criminal code of ukraine). the method of “swot-analysis” aims to identify the strengths and weaknesses of internal and external factors in order to get a clear idea of the main directions of the investigation of a criminal case in the framework of international cooperation. it should be noted that “swot-analysis” is the most common method of situational analysis and can be carried out both for the investigation of certain types of crimes and for the development of methods for a specific criminal case. its results are further used to develop general action plans for the investigation of criminal cases in the framework of international cooperation, and for each criminal case in particular. if “swot-analysis” is used to develop general plans of investigative measures, it is a matter of choosing an investigation strategy based on this method. if a specific baltic journal of economic studies 168 vol. 6, no. 3, 2020 criminal case is taken into account, then on the basis of the “swot-analysis”, specific measures are developed to achieve the goal of criminal proceedings. at the same time, even the strategic plans of the investigation may contain measures designed for a fairly short period of time. therefore, when applying the “swot-analysis” to its implementation, it is necessary to establish a planning limit, for which opportunities and threats are identified. strengths and weaknesses, in any case, are identified by performance over the previous period (for example, a year). 2. conditions for the use of “swot-analysis” in the investigation of criminal cases ismailov k. (2017) offers to take into account “swot-analysis” in the investigation of criminal cases. let us consider each of them in more detail. 1. before applying the method, it is necessary to gather as much information as possible about the criminal case. information can be collected open and cover methods from various sources in the territory of the states where the criminal case is being investigated within the framework of international cooperation. sources of data collection may be persons who have direct access to information that may be relevant to the resolution of a criminal case; penetration of fictitious persons into criminal groups in order to obtain data on their illegal activities; data from previous investigation materials; application of legal instruments to persons who do not wish to cooperate with the investigation; use of evidence that has already been collected and stored in the criminal case file; secret surveillance of a person’s activities with the use of technical means; information from the media, etc. 2. the number of participants in the “swot-analysis” must be at least four. this stage is carried out on the basis of the same rules that are used in solving other problems using expert methods. participants in the internal analysis of a criminal case, in addition to intuitive, can use a variety of methods to analyze the strengths and weaknesses of the case, identify opportunities and potential threats. the group of participants can involve not only investigators but also operatives, experts (specialists), and even analysts. 3. it is necessary to prepare visual material (board, stickers, visualization tools, etc.). this material will be useful to properly assess the data collected, including the reliability of the source of information, the reliability and veracity of its content; to organize information to ensure prompt and accurate access to it; describe the data and analyze the relationships between the subjects of the criminal case; draw up a visual sequence of actions to illustrate the chronological relationship between interrelated events (possibly in different countries). 4. all subjects involved in the swot-analysis should be well acquainted with the materials of the criminal case and take an active part in the application of the method. after separation of all components of the method, it is necessary to make a logical justification of all its provisions. it is a mental process for extracting specific data from existing facts. in this case, the analysis should not be limited to the available facts. it is allowed to build several hypotheses for solving a criminal case in order to further test each of them and find the truth. the logical conclusion of the “swot-analysis” will be the formation of conclusions and forecasts in order to achieve the goal in a criminal case. thus, the conditions of application of “swotanalysis” already existing in the scientific literature have been listed and analyzed above. we propose to expand this list, namely, supplement it with the following provisions: 1. it is advisable to conduct a study of the internal side of the criminal case in terms of strengths and weaknesses. the concept of the internal side of a criminal case has several components. each of them includes a set of indicators, the volume of which together determines the potential and the capabilities of the investigator in this criminal case. the main source of information necessary for the analysis of the internal side of the criminal case is the existing evidence base. if there are too many materials and the highlighted strengths and weaknesses of the internal side of the criminal case are chaotic, it is advisable to move on to the next stage. 2. in order to reduce the number of strengths and weaknesses that will be used in the future in the “swotanalysis”, it is advisable to filter them. in order to determine which of them will be dominant, it is necessary to establish the limit of minimum assessments of strengths and weaknesses at the subjective level. establishing such a limit depends on the possibility of using the strengths in developing a plan for the investigation of a criminal case and reducing the negative manifestations of weaknesses. 3. it is necessary to identify and analyze environmental factors that may be sources of potential opportunities and threats. opportunities and threats are identified, both those that already exist and potential ones that may arise within the procedural time limits in the criminal case, on which the “swot-analysis” is conducted. at this stage, if possible, it is necessary to make the most complete list of factors that will be filtered in the next stages of “swot-analysis”. 4. then, the preliminary result of the “swot-analysis” is formed, where strategies of further investigation of the criminal case are formulated on the basis of four components. these strategies should be formulated by all participants in the analysis through collective discussion. 5. then, there is an in-depth study of the proposed investigation strategies and the selection of the most effective from their list. as strategies can be quite general and their choice is not supported by sufficient evidence, it is necessary to provide as many facts and justifications in favor of one or another option as possible. baltic journal of economic studies 169 vol. 6, no. 3, 2020 3. basic rules of “swot-analysis” in the investigation of criminal cases in the framework of international cooperation there are basic rules of “swot-analysis” in the investigation of criminal cases in the framework of international cooperation according to ismailov  k. (2017): any criticism of the ideas expressed is prohibited; free flight of thought and “surprise” of ideas are encouraged; it is necessary to put forward as many ideas as possible; all ideas must be recorded; identification of a rational basis in each analyzed idea. each of these rules is based on the above-proposed conditions for the application of “swot-analysis” and is quite justified. we consider it expedient and necessary to add to this list such a rule as the obligatory discussion of the participants of the “swot-analysis” of a criminal case within the framework of international cooperation of theses, provisions, and opinions. after all, it is during discussions that information may emerge that will be useful for making procedural decisions that may be important and decisive for a criminal case. the success of the participant of the “swot-analysis” in proving his or her version, a clear demonstration of the degree of probability of the conclusion, which is supported by facts and evidence, will depend on the way of presenting his or her idea, conclusion. in addition, a discussion of a specific issue that arises when using the method of “swotanalysis” has a number of advantages. first, it is saving time, as the person presenting their thoughts and ideas is able to share other information with other members of the group in a short period of time. secondly, direct contact between group members provides an opportunity to ask each other questions about data sources, assess their reliability, the relationship with other similar information. third, the discussion makes it possible to quickly change the information under discussion, which cannot be achieved through a written report (korystin, albul, kholostenko, zaiets, ismailov, teteriatnyk, horbanov, 2016). based on the above material, we have the opportunity to describe the algorithm for applying the method of “swot-analysis” in criminal cases in the framework of international cooperation. first of all, it is necessary to choose a place, namely, an office that will meet all the requirements (technical, methodological, the requirements of the regime object, if necessary) and carry out the measures we have described in the rules and conditions of “swotanalysis”. the next stage is the division of the board into four parts, each of which will correspond to one of the categories of “swot-analysis”: strengths, weaknesses, opportunities, threats. then, in each part of the board all the information without resorting to its evaluation should be entered. the strengths of a criminal case are determined by describing the basic objectives of the criminal case or its episode and finding out the reasons. in order to describe the strengths of a criminal investigation in the framework of international cooperation, it is necessary to answer the following questions according to ismailov k. (2017): what powerful technologies and tools do we have in the tactics and methods of investigation? what are the benefits of our investigators? what is special about our investigative unit? what brings the best results in an investigation? what enables us to maintain positive dynamics in the investigation of a criminal case? the answers to the following questions identify the weaknesses of the investigation: what is the obstacle to a more expeditious investigation? what prevents the implementation of innovative techniques, tactics, tools, technologies? what are the disadvantages of our work? which techniques, tactics, tools, and technologies should be improved? what are the gaps in the legislation on this issue? what mistakes do we make? the next step is to group the results obtained during the answers to the questions and give each group a name. as mentioned above, each result obtained should be discussed and certain conclusions are drawn. to identify threats to a criminal investigation in the framework of international cooperation, it is advisable to answer the following questions, according to ismailov k. (2017): what are the risks arising from existing weaknesses? what could be an obstacle to the investigation? what is the position of the defense? what circumstances may adversely affect the investigation? what strategies need to be prepared to remove barriers? the last, fourth part of the board should be filled with an element as opportunities. to identify them, maximum attention should be paid to the strengths and, as a result of their analysis, the following questions should be answered, according to ismailov k. (2017): how can the strengths help the investigation? what if what is happening during the pre-trial investigation of a criminal case in the framework of international cooperation will allow us to achieve the main goal, which is to resolve the case on the merits? what other opportunities can be used to achieve the main goal? how can risks be transformed into opportunities? after completing all four squares of the board, the team of professionals working on it should re-analyze and discuss the information and think about what else can be transferred from risk to opportunity; to discuss the seriousness of the risks posed by the investigation and whether it is possible to do something to minimize their negative impact on the outcome of the investigation and criminal proceedings, as well as to prepare for any negative factors that may arise in the course of their proceedings. after performing the whole algorithm of actions of the “swot-analysis” method, a report must be prepared on the basis of the obtained results. baltic journal of economic studies 170 vol. 6, no. 3, 2020 4. conclusions thus, having analyzed the possibilities and procedures for applying the method of “swot-analysis” in the investigation of a criminal case in the framework of international cooperation, we can conclude that this method has both advantages and disadvantages. among the positive aspects of this method, it is that due to its help the investigator can identify the internal strengths of the criminal case or as a result of discussion and advice from other experts to focus on the benefits of their own strategy and focus on this area of investigation. an important point is that the investigation using the method of “swot-analysis” can involve an unlimited number of specialists from different fields (mainly to have at least four), which will have an extremely important impact on the quality of criminal investigations in international cooperation. another extremely positive aspect of the method is that it is based on data analysis, which allows participants working with it in a particular criminal case to explore the archives of similar criminal cases of previous years, to consult on this or that issue with investigators proceeding such cases, it also provides an opportunity to consult with scientific institutions that deal with the necessary issues for the investigation. all these actions will contribute to the achievement of the desired goal of criminal proceedings and will positively affect the course of the criminal investigation. also with the help of the “swot-analysis” method, investigators have the opportunity to clearly see the weaknesses of the criminal case, can discuss them with specialists involved in this area, which will correct such weaknesses and try to transform them into strengths as one from the components of the method of “swot-analysis”. this method makes it possible to identify the most favorable tactics and methods of a criminal investigation, that is, to find the maximum opportunities for the investigator in his or her work. another very important advantage of the “swot-analysis” method is the ability of investigative bodies to know all the threats that may arise when working on a criminal case in the framework of international cooperation and be strategically ready to neutralize any threat. however, among the significant advantages of the method of “swot-analysis”, there are certain disadvantages that can not be ignored. “swot-analysis” is only a method by which you can get systematic information, its results will not contain clear tactics of investigation or answers to questions about achieving the ultimate goal of criminal proceedings. conclusions based on this method, their completeness, and correctness, will depend on the professional qualifications of the participants who will be part of the group working on the development of this method. similarly, working with these findings will depend on the skills and abilities to work 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(2017). aktualni problemy kryminalʹnoho prava ta protsesu. materialy iii vseukrayinskoyi naukovopraktychnoyi konferentsiyi (m. kryvyy rih, 16 chervnya 2017 roku) [current issues of criminal law and procedure. proceedings of the iii all-ukrainian scientific-practical conference (kryvyi rih, june 16, 2017)]. ed. count: volobuyeva o., oderiy o., loskutov t., politova a. kryvyy rih: polihrafichna kompaniya «helios-prynt». baltic journal of economic studies 221 vol. 5, no. 4, 2019 corresponding author: 1 odessa regional institute for public administration of the national academy for public administration under the president of ukraine, ukraine. e-mail: andrii.falkovskiu@gmail.com 2 odessa national polytechnic university, ukraine. e-mail: dzhezhik_olga@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-4-221-226 formation of the modern concept of europe in the context of social neo-institutionalism andrii falkovskyi1, olga dzhezhik2 abstract. in the scientific discourse of the xxi century, the concept of modern europe is being reformed under the influence of reforming the activities of the european union. scientific publications and research are conducted based on a study of the policies of the european union countries, eu institutions and structural elements, and the problems that arise in the process of activity and development. the concept of modern europe is a general term that embraces european values, the european standard of living, european policy, and european priorities, giving the concept of european studies a stable association with the european union. in this context, the main causes and consequences for the scientific discourse, political practice, and future development of european countries must be considered. neoinstitutionalists have attempted to analyse institutions based on atomistic methodology. institutional transformations, processes of intra-european integration and enlargement of the eu, discussions on membership and exit from the eu raise issues of identity and development of governance in europe. europeanisation can be seen as a discourse, governance, and institutionalisation. the first interpretation emphasizes that modern europe is a discourse, not only ideological but also administrative. in this sense, europeanisation can be a means of expression of institutional globalization through domestic policy. in the article, the hypothesis is put forward and proved that the interpretation of the concept of modern europe directly correlates with the future development of the european union and its members. the dissemination of exclusive practices will help to spread the ideas of radical “eurosceptics”, which could lead to the collapse of the european union. the inclusive aspect of the concept of europe is represented by the ideas of “europeists” who, based on the common history, culture, mentality of the peoples of europe, substantiate the positive influence on the state development of integration, non-state cooperation, and extrapolation of eu norms and principles into the new territories of europe. there are three main reasons for shaping the concept of europe as the boundaries of eu policy: the consolidation of political positions of the european union and its growing role as an actor in world politics; essence of the eu enlargement concepts; features of development within the european community. the modern concept of europe is considered in the context of a modern multi-level governance model. therefore, europeanisation is the interaction of different layers of interests, including structures of regional, multi-level governance, legitimacy of domestic and foreign policy. the impact of the multi-level governance system on the functioning of public administration systems in the member states and neighbouring countries is considered. four approaches are identified based on the analysis of relationships between different levels of governance. the necessity of formulating new theoretical paradigms defining the relations between the member states and the technocratic institutions of the eu, as well as between the europeanised system of national agencies and the ministries overseeing their activities, has been proved. key words: neoinstitutionalism, decentralisation, multi-level governance, europeanisation, social institution, social system. jel classification: d72, f11, f20, h77 1. introduction in the scientific discourse of the xxi century, the concept of modern europe is being reformed under the influence of reforming the activities of the european union. scientific publications and research are conducted based on a study of the policies of the european union countries, eu institutions and structural elements, and the problems that arise in baltic journal of economic studies 222 vol. 5, no. 4, 2019 the process of activity and development. the concept of modern europe is a general term that embraces european values, the european standard of living, european policy, and european priorities, giving the concept of european studies a stable association with the european union. in this context, the main causes and consequences for the scientific discourse, political practice, and future development of european countries must be considered. political associations, unions, and alliances have been formed in europe for a long time, with the aim of promoting peace and prosperity in the european countries. after the signing of the schuman declaration, a new political project was launched, based on the ideological gains of socio-political thought and leading socio-political concepts. the present-day european union (eu) is the result of a series of political, economic, and cultural associations. do not having all the attributes of the state, covering most (but not all) european countries, the eu not only became a major actor in world politics but also assumed the role of representative of the interests of entire europe (altvater, mahnkopf, 2007). the purpose of the article is to identify the possibilities of using neoinstitutionalism tools to predict the impact of the eu’s multi-level governance system on the member states and neighbouring countries. this understanding of europe implies the need to determine the relationship between the concept of europe and the future of the eu in world politics, given the ideological foundations of the policy tools, the use of which is postulated and which are actually applied in specific political situations. 2. the methodology of research 2.1. analysis of modern theories of institutionalism in the process of institutional theory development, both internal and external factors play an important role in the scientific knowledge itself. the definition of these factors is caused by the need to explain the features of the methodology of neoinstitutionalism and to clarify its structure. neoinstitutionalists have attempted to analyse institutions based on atomistic methodology. the internal prerequisites of neoinstitutionalism are: justification of the possibility of introducing non-economic constraints (institutions) into the economic analysis; consistent implementation of the principle of methodological atomism in the analysis of institutions; the enrichment of theoretical tools of institutionalism by game theory; greater effectiveness of neoinstitutionalism in the implementation of the predictive function. neoinstitutional theory of rational choice, the theory of transaction costs, the economic theory of property rights by g. simon (1992) correspond to it as theoretical tools. atomistic methodology, as the basis for building institutionalism, defines the use of abstract modelling as a method for constructing theories, which makes it possible to create models of sufficiently high predictable power (martynyuk, 2019). at the same time, abstract models replace a real object with an ideal object, thus reducing the value of the empirical base. this methodology is effective enough for conducting general theoretical and applied research of socio-economic systems with a stable market economy, individualistic behavioural attitudes of the population, developed and highly specified system of property rights. the new institutional economy continues the atomistic (individualistic) tradition, corrects the “protective belt” of the research program of neoclassical and neoinstitutional theory, supplements it with the concept of bounded rationality (comp. s. ross, 1973). it proposes a more extensive, coherent, and instrumental methodology, which results in its increasing popularity in foreign and domestic science, and claims to be the main focus of modern economic theory. the concept of “institution” is basic to the theory of institutionalism and denotes a certain custom, the order adopted in society, and their consolidation in the form of law or organization. ideologists of institutionalism referred to institutions as social and political, so economic phenomena: state, family, private property, corporations, currency system, and so on. herewith, the concept of “institution” had a corresponding ideological meaning: it meant the desire to expand the subject of economic science, to include non-economic phenomena in the analysis (lazor, 2010). institutionalization is also considered as an important part of the process of modernizing social systems and social relations. the term “institutionalization” has also been used in the political sphere and reflects the phenomena associated with the creation and organization of government agencies or individual bodies responsible for policy making and implementation. the most commonly used meaning of the term “social institutions” is associated with the characteristic of ordering, formalizing, and standardizing public relations and relationships. also, the very process of ordering, formalizing, and standardizing social relations and relationships was called “institutionalization”, which explains: the process of forming stable patterns of social interaction based on formalized rules, laws, customs, and rituals; legal and organizational consolidation of behaviour patterns and relations formed in society; establishment of the institution (petroe, 2012). the definition of “social institutions”, which integrates with contemporary social, political, and economic theories, means: 1) historically conditioned forms of organization and regulation of social life that ensure the fulfilment of functions that are vital for society, include a set of norms, roles, prescriptions, behaviour patterns, special institutions, control system; baltic journal of economic studies 223 vol. 5, no. 4, 2019 2) orderly and to a certain extent well-established social entities, which include social organizations, maintain officially and conventionally adopted rules governing social behaviour in a particular sphere of public life based on the forced or voluntary consent of most members of society to the availability of these rules and organizations; 3) a stable set of formal and informal norms, principles, guidelines governing various spheres of human activity – economic, political, spiritual and, in fact, the social sphere (petroe, 2012). europeanisation can be seen as discourse, governance, and institutionalisation. the first interpretation emphasizes that modern europe is a discourse, not only ideological but also administrative. in this sense, europeanisation can be a means of expression of institutional globalization through domestic policy. the modern concept of europe is considered in the context of a modern multi-level governance model. therefore, europeanisation is the interaction of different layers of interests, including structures of regional, multi-level governance, legitimacy of domestic and foreign policy. institutionalisation itself is understood as the emergence of characteristic structures of governance. institutionalisation is based on the assertion that the most important factor of domestic change is the divergence, inconsistency of the eu and member states’ political institutions. these three theoretical approaches to europeanisation are certainly not mutually exclusive but rather complementary (bretherton, vogler, 2006). 3. development of european neoinstitutionalism the eu acts as an open project based on changing the foundations of the neighbourhood policy. the concept of europe emerges as a project to legitimize the foreign and domestic policy of the european union, as it reflects some of the characteristics of all european countries. there are three main reasons for shaping the concept of europe as the boundaries of eu policy: 1. the consolidation of the political positions of the european union and its growing role as an actor in world politics. 2. the essence of the eu enlargement concepts. 3. features of scientific discourse within the european community. considering each of these reasons in more detail, it can be argued that the first one emerges as political in substance since the european union’s foreign and domestic policies are aimed at strengthening the eu’s role both in europe and worldwide. there are no alternative political actors and integration entities in europe equal to or more powerful than the eu. using an instrument such as the european neighbourhood policy (enp) and its main components, the european union extends its influence to neighbouring countries. the eu seeks to influence and control the socio-political, economic, cultural processes in europe (davis, 2006). second, the essence of the concepts of european union development and integration is characterized by the application of joseph nye’s concept of “force” to the european union, and concepts derived from it, such as the “normative power of europe”, “ethical power of europe” and others. thus, europe can be studied as one that falls within the concept of the modern type of empires. the third group of reasons is characterized by the fact that basic scientific research is initiated and carried out in the most economically and politically developed countries in europe, which have formed the “core” of not only the eu but europe as a whole. after the founding of the european union, the active creation of european studies began, with the aim of substantiating eu policy towards the member states, neighbouring countries, and other global actors, and the possible future development, conducted in the context of the formation and possible enlargement of the european union (munchler, 2007). the following three basic theoretical approaches to the formation of the modern concept of europe can be distinguished (telo, 2006). state-centric paradigm – the state in europe will always be the main democratic representative of political interests, and the dominance of one or a group of states in inter-state associations will ensure the welfare of all members of the cooperation. the “neo-medieval” theoretical school points to the “retreat” of the state, caused by the growing role of tncs and the deterritorialization of power, the emergence of supranational technocratic power and non-territorial communities. this leads to the disappearance of a single centre in the global system and the emergence of different levels of governance that are intertwined. neoinstitutionalism allows analysing the multilevel interaction in the domestic and foreign political arenas of europe of different institutions that correlate the interests of states with the political will of other actors. all three of these views on the place of the state in contemporary europe have manifestations in political life and characterize the main tendencies of changing the role of the state and regions. understanding europe through identity makes it possible to speak of it as “an inclusive or exclusive concept, which for some served as evidence that they are absolutely guaranteed to belong to europe while others were thus pushed beyond the european borders” (kurth, 2003). inclusive concept of europe (from eng. inclusion) is based on common human values that shape the identity of the community, in particular, respect for human and civil rights. it is the inclusive notion of europe and the european union that “reflects a long, probably dominant, discourse that is actively supported within baltic journal of economic studies 224 vol. 5, no. 4, 2019 the union” (bretherton, vogler, 2006). inclusive european identity implies communication and interaction with other political-territorial and cultural entities. this can set the conditions for accepting/ rejecting other communities in the circle of europeans. those who openly demonstrate a commitment to proclaimed common european values define their commitment to the foundations of european social cohesion and become a part of europe. instead, exclusive identity (from eng. exclusion) reflects europe’s interaction with the external environment. it is the understanding of europe as a “fortress” that is formed based on a common market and tight control over external migration. such a concept – a way of identifying a community in a negative way, that is, by contrasting itself with other communities. one of the ways of such a definition of europe is to differentiate between “friends” and “foes”, the definition of “european”, “almost european”, and “non-european” peoples. yes, the “foe” is considered not as another but a stranger who embodies own negative traits and those characteristics that pose a significant threat to “friends”. therefore, exclusive identity implies the expulsion of others from europe, thereby identifying “friends” (moravcsik, 1993). given the inclusive and exclusive interpretations of the concept of europe, it is worth considering possible variations on the concept of europe in the future, those factors that will influence its change, the consequences for eu policy, and its future existence as a political entity. the main reason for the debate on the eu is its attitude to the enlargement of the eu’s borders, the admission of new members, and the softening of visa policy with other countries. according to the original definition of europe as a political project and conditional construct, the content of the concept of europe will continue to be determined in the near future by the european union, provided that its actual integrity and influence in world politics are preserved (majone, 2005). instead, further discussions on the enlargement of the european union, ethno-cultural conflicts in europe, increased influence of nationalist movements, dissatisfaction with the political balance among eu countries on the part of both old and new members may threaten with the reformation of the union, its collapse, or vice versa, strengthening centralization and unification. 4. results and discussion 4.1. formation of the modern concept of europe unfortunately, the uniqueness and unprecedented nature of the european integration project do not make it possible to fully apply instruments of comparative analysis. however, the eu as a flagship of good governance practices provides the basis for the birth of new theories of the formation of a new concept of development and interaction of countries and the formation of a system of governance. thus, the process of transformation of the implemented legislation is not limited exclusively to its use in administrative practice in this member state but may lead to adequate legal changes due to the ability to affect the lawmaking process at the european level. therefore, it is appropriate to consider the system of multi-level governance established in the eu through the prism of neoinstitutionalism of limited rational choice, in order to find out its potential impact on the formation of the institutional environment for decisionmaking and implementation of decisions within the eu. the eu’s multi-level governance system is based on several levels: supranational (european commission, european parliament, european court of justice, european central bank, chamber of auditors), interstate (european council, eu council), national (member states), regional. at the same time, eu citizens who delegate their powers to the european parliament and national parliaments remain somewhat out of the question. in the case of transfer of functions from the national level to the interstate or supranational, there is a concentration of functions in these institutions. when it comes to subsidiary devolution of authority from supranational, intergovernmental to the national or regional level, or from national to regional, we are dealing with decentralization (hutton, 2004). in a multi-level governance system, the principal may be collective (as in the case of member states) or individual (eu institution). a collective and individual principal can create not only one agent but even several agents. as the practice of european integration shows, it is the creation of new institutions rather than the choice of existing agents. following the concept of trust management, supranational european institutions are increasingly becoming quasi-principals for member state majority institutions. moreover, the regulatory bodies of a member state participating in the european system of agencies are also evolving and taking on a new role of quasi-principal in relation to national institutions at the national level. all this suggests that the current state of bilateral relations between member states and eu technocratic institutions, as well as between the europeanised system of national agencies and the ministries that oversee their activities, casts doubt on the arsenal of tools of the agent-principal theory. perhaps it is time to formulate new theoretical paradigms that would define these relations (everson, 1995). at the same time, delegation of state functions to autonomous institutions in virtually all european countries has created a twofold mechanism that, on the one hand, weakens democracy by reducing the competencies of public institutions and their level of support in society, baltic journal of economic studies 225 vol. 5, no. 4, 2019 and on the other, reduces the deficit of democratic legitimacy of eu institutions. the development of these processes may be related to the tendency to move away from intergovernmental management logic in the european union in favour of management logic based on the autonomy of european technocratic institutions and the development of functional policy networks (thatcher, stone sweet, 2002). the principal-agent theory model quite clearly defines the essence of the state-administrative mechanisms in the relations between the main actors. however, further theoretical research would be more appropriate to concentrate on the issue of discontinuation arising from the two-step decision-making and implementation in the eu law system when, in the context of high political dynamics, the decisions made by the previous government have to be implemented by another government (pollack, 2003). institutionalism as a methodological basis creates conditions for intensification of various studies of social systems, provides tracking of institutional quantitative and qualitative changes and transformations of different social institutions, analysis of institutional factors – a set of fundamental historical prerequisites, political, economic, legal, social and spiritual (cultural) rules and norms that determine the framework conditions for the functioning and development of social systems as objects of public administration. 5. conclusions according to neoinstitutionalism, not only economic problems but also social, political, ethical, legal, and other problems are the basis of the analysis. while evolving, institutionalism has gained new features, its place has changed, its ideas have affected the views of many economists, and its importance is constantly growing. spreading the ideas of radical eurosceptics can dramatically change the interpretation of the concept of europe from its positive and progressive meaning to the negative, threatening, and outdated. an example would be the 2017 referendum on the withdrawal of the uk from the eu. such an example can be the 2017 referendum on the withdrawal of the uk from the eu. as noted by sarah hobolt, a researcher at the london school of economics and political science, “while the eu may well be able to outrun britain’s exit – always a rebellious member state – it is most worrisome that it can cause a domino effect with referendums in other countries” (hobolt, 2016). the notion of the modern concept of europe can be seen as synonymous with political, economic, cultural unification, which leads to the degeneration of nations and the mixing of cultures. in an inclusive aspect, the future of the european union is to further involve all new regions, states, and territories in european practices, further integrate and enlarge the european union. the so-called “eurooptimists” or “europhiles” positively perceive the development trends of the european union and consider the european project a unique political-territorial entity, which has every opportunity for further expansion and increase of its influence. the most influential scientific and political current in this context is europeanism. within europeanism, it is recognized that the peoples of europe have common values, a common history, and a common future. the politics, economy, culture of europe must come from an understanding of the common identity of the european peoples. integration into the eu is considered as a logical and appropriate step by all european countries, which should be promoted both by the union itself and by non-member countries. the leading theory of the inclusive aspect of interpreting the future development of the eu is federalism as one of the oldest ideas for the integration of the european space. at its core, federalism involves the creation of an eu state with a federal territorial system. instead, in today’s interpretation, federalism in europe implies the integration but not the assimilation of all spheres of socio-political life. so, belgian politician and researcher guy verhofstadt in the paper titled “the united states of europe: manifesto for a new europe” (2005), based on growing public distrust of eu political institutions, proposes joint coordination of eu economies and centralized protection of the european social model (verhofstadt, 2007). a more moderate vision of the future of europe is the theory of preserving stability and all the political and economic achievements and best practices of the european union that it has in the first decade of the xxi century. the key ideas of the theory were developed by stanley hoffmann within the framework of the theory of intergovernmentalism, adopting and developing which andrew moravcsik formulated the theory of liberal intergovernmentalism, under which “the most influential in the foreign policy of the identity of important social groups, the nature of their interests, and their relative influence on the domestic policy” (moravcsik, 1993). following s. hoffmann, he proposed to consider the actions of national governments at two levels: the national one, where direct interaction with the electorate takes place, and the european one, at which supranational organizations encourage governments to reach compromises and implement agreements. being influential political ideas, federalism and intergovernmentalism, if further propagated and embodied in european policy, will lead to an even closer association of the concept of europe with the european union, since the localization of europeanness in the eu will take place. in addition, in an inclusive aspect, one can consider the modern concept of “a europe of regions”, which baltic journal of economic studies 226 vol. 5, no. 4, 2019 includes the possibility of transition of european policy from the state and national to the regional level, which is implemented by public organizations and civil society movements. regional governance will gradually dominate, in which case the existence of rigid or flexible borders of the eu does not play a significant role, on the contrary, the union is not seen as a major political actor in europe since all cooperation takes place between similar actors interested in the development of common policies. however, such a concept does not take into account the facts that, first of all, the implementation of the concept of “europe of regions” will be implemented by the eu institutions, which makes it politically dependent. secondly, it is not profitable for eu elites to abandon national policies in favour of the regional policy, as they will lose their influence and authority both locally and in the international arena. references: altvater, е., & mahnkopf, в. 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(2002). theory and practice of delegation to non-majoritarian institutions. west european politics, 25(1). baltic journal of economic studies 28 vol. 5, no. 5, 2019 corresponding author: 1 yaroslav mudryi national law university, ukraine. e-mail: dmytro.bilinskyi@gmail.com orcid: https://orcid.org/0000-0001-5694-9352 researcherid: f-6099-2019 2 yaroslav mudryi national law university, ukraine. e-mail: m.damirchiev@gmail.com orcid: https://orcid.org/0000-0002-9734-7988 researcherid: f-7030-2019 doi: https://doi.org/10.30525/2256-0742/2019-5-5-28-31 international economic standards of medical provision: legal characteristics and problems of implementation in ukraine dmytro bilinskyi1, mushfik damirchyiev2 abstract. the purpose of the paper is to analyze the current legislation on medical reform in the context of harmonization with international standards. in the conditions of social state building in ukraine, the thesis is axiomatic regarding that the state should show concern for their citizens, including for the protection of their health. in this context, it is relevant to study the implementation of medical reform in ukraine, since its content and the degree to which the proclaimed provisions are enforced depend on the ability of each person to access quality health care. methodology. the article is based on international legal acts, laws and by-laws of ukraine in the field of legal regulation of medical care. both general scientific and special methodology were used for the research. methods of analysis and synthesis, method of description, method of induction, method of deduction, method of correlation, etc. were applied. results. the article defines the directions for harmonization of the legislation of ukraine on health protection in accordance with international standards. based on the echr practice, proposals have been formulated to improve the legislation of ukraine. conclusions. the echr has repeatedly concluded that the right to health is complex and includes: the right to information about one's health and the confidentiality of such information; the right to health care; the right to choose the doctor and the remedies freely; the right to a safe environment that affects health and so on. the state does not cover all aspects of providing medical care to citizens, but resorts to limited funding, since the state budget funds are only one of the types of sources of financing. practical implications. we have formulated the following tasks: to analyze ukraine's international legal obligations regarding health care; to identify major changes in health care financing and health care delivery in line with health care reform standards in ukraine; to identify major health care funding issues. key words: health and economic development, international law, government expenditures and health. jel classification: h51, i15, k33 1. introduction it is the duty of the state to provide medical assistance to all those in need as it is enshrined in the international covenant on economic social and cultural rights (article 12, international covenant on economic, social and cultural rights, 1976), the universal declaration of human rights (article 25, universal declaration of human rights, 1948); the state's obligation to provide children with the highest quality medical care as enshrined in the un convention on the rights of the child (article 24, convention on the rights of the child, 1989); the obligation to provide health care to protected persons within the limits necessary to restore normal health is provided for in the european code of social security (articles 7-12, european social charter, 1996) and the european social charter (article 11, european social charter, 1996). in order to cover the topics chosen, one should focus on the case law of the european court of human rights in the context of ensuring the right to life and health. the european convention for the protection of human rights and fundamental freedoms of 1950 provided for a mechanism for the protection and enjoyment of entrenched rights and freedoms through an application to the european court of human rights (hereinafter referred to as echr) (convention for the protection of human rights and fundamental freedoms,1950). the protection of the right to health directly by the baltic journal of economic studies 29 vol. 5, no. 5, 2019 1950 convention, like other socio-economic rights, is not envisaged, but the protection of this right is possible in accordance with the protection of the right to life. prior to opening the city of individual echr decisions, emphasis should be placed. first, the echr has not developed a large body of case law on the protection of medical human rights. this is because the echr interprets the issue of medicine not on its own but in the context of the universal right to life. second, the echr does not give human health a separate interpretation in isolation from the life of the individual and the environment in which he/she lives. third, the echr makes individual interpretations and clarifications in each case, which we will outline below. 2. the right to health is complex the echr has repeatedly concluded that the right to health is complex and includes: the right to information about one's health and the confidentiality of such information; the right to health care; the right to choose the doctor and the remedies freely; the right to a safe environment that affects health and so on. the realization of the right to life is not possible without the exercise of the right to health which the echr interprets as an indispensable part of the right to life. the right to life is protected in art. 2 of the convention. violation of this right is also a cause of harm to health, even if such damage did not cause his/her death, but posed a serious threat to his/her life (senyuta, i, 2015). the positive obligation of the state is the protection of human life and the existence of an effective independent forensic system, which allows to determine the death causes, if it occurred at the hospital or if the patient was under constant and effective medical control, and the degree of responsibility of medical staff. art. 2 of the convention provides for minimum procedural requirements whereby in cases where the state or its representatives are potentially liable for the death of a person, the suspected circumstances should be the subject of effective investigation or thorough examination to bring the facts to the public attention (end of life and the european convention on human rights). the echr has taken the position that cases concerning the deaths of patients in healthcare facilities should be resolved as quickly as possible. the case of byrzhykowski v. poland, where the court emphasized the need for a speedy resolution of cases concerning the death of a person in medical institutions, is of prime importance for disclosing the content of this legal position. mistakes made during health and medical care provision must be resolved quickly. further, this information should be immediately disseminated to the echr , indicating that we need to comply with the standards of article 2 of the convention as regards the development of experience and medical practice in order to reduce patient mortality. considering the convention for the protection of human rights and fundamental freedoms as a source of medical law, it should be kept in mind that it is not intended to provide material guarantees for state medical guarantees (boyle, 2004). that is, a state's failure to comply with national health standards does not justify applying to the echr . it is possible to understand the echr's legal approaches in this area when examining its decision in the case of popov v. the russian federation dated 13 july 2006, where the court noted that under art. 3 of the convention, the state is obliged to ensure that the person is in conditions compatible with respect for human dignity, and the mechanisms and instruments for the implementation of these requirements should not cause stress in a person, humiliate him, disturb him or suffer. it is possible to apply to the echr only in the event of a violation of article 2 of the convention and not of national legal guarantees. 3. the protection of the right to health cannot be exercised without the right to a fair trial the echr's legal position in the case of f.e. against france is aimed at ensuring the judicial protection of human rights in the context of its inadequate medical care (de salvia, 2004). the decision chosen to summarize the echr decision is significant because of the court's instruction to combine the specifics of medical relationships with the general prescriptions of the convention for the protection of human rights and fundamental freedoms. other rights that are also part of the right to health must be mentioned. in its practice, the echr includes in this category the right to physical and moral integrity, the right to information and confidentiality of information about one's health, the right to a favorable ecological environment. the echr has repeatedly emphasized the responsibility of the state and society for the organization of a medical system capable of providing everyone with the right to life and health. as the norms of the constitution of ukraine have the highest legal force in the country, and the national legislation of ukraine under the vienna convention on the law of treaties cannot contradict its international agreements, it can be concluded that financial relations in the context of medical reform should be regulated in accordance with the following principles: – everyone's unconditional right to health; – the state's obligation to provide medical assistance to those in need; – financing health programs for the least protected categories of the population; – creating conditions for the free development of healthcare facilities by the state, regardless of ownership; – free of charge medical care and medical care in cases stipulated by law. baltic journal of economic studies 30 vol. 5, no. 5, 2019 we will now pay attention to the implementation of these principles at the level of sectoral legislation. in line with the healthcare financing reform concept, the principle of combining different sources of funding for health care is introduced. in particular, funding for the implementation of the concept is carried out at the expense of state and local budgets, other sources, as well as through international technical and financial assistance (order of the cabinet of ministers of ukraine on approving the health care financing reform concept, 2016). 4. the state does not cover all aspects of providing medical care to citizens from the above provision, it follows that the state does not cover all aspects of providing medical care to citizens, but resorts to limited funding, since the state budget funds are only one of the types of sources of financing. let us find out where the public finances will be spent on medical reform. according to article 3 of the law of ukraine, "on state financial guarantees of medical services to the population in ukraine", the state guarantees full payment according to the tariff at the expense of the state budget of ukraine for providing citizens with the necessary medical services and medicines provided by the program of medical guarantees (the law of ukraine on state financial guarantees of medical services for the population, 2017). as the state and municipal health care establishments operate in accordance with article 19 of the constitution of ukraine, according to which they are allowed only what is explicitly provided by law, it can be concluded that the program of medical guarantees does not restrict the right to free medical care for the population, but specifies it is a right, increasing the level of legal certainty in the relationship between the patient and the healthcare facility. state funding for medical reform by subjective criterion needs to be considered in two aspects: financing of state and municipal health care institutions and similar private property institutions. on the whole, the state develops financial policy in the direction from centralized financing of a wide network of health care institutions, to the purchase of medical services from these institutions, in order to provide medical care to the least protected categories of the population of ukraine. according to the healthcare financing reform concept, the new principle of "money follows the patient" is proclaimed to finance health care activities. this means that health care facilities should be transformed into autonomous business entities, which will be paid for the results of their activities, which are measured by the volume and content of the care provided to patients. in addition, given the need for the gradual introduction of new rules for the financing of health care in the transition period, over the period 2018-2019, there will be a parallel instrument for financing the primary health care unit through the medical subvention mechanism through the allocation of additional funds from the state or local budgets. by 2020, all health care institutions, regardless of the level of care and health care delivery, should move to a new funding system through contracting by an authorized entity. the autonomy of health care institutions envisaged within the framework of medical reform will result in the state actually shifting responsibility for all financial risks in the sphere of medical activity. repeatedly mentioned in the work of the law of ukraine "on state financial guarantees of medical services for the population" in article 8 provides for such an instrument of distribution of state financial resources between the subjects of medical care provision, as an agreement on public health services. the parties to this agreement are the authorized executive body and the medical institution, regardless of the form of ownership. the content of the agreement is that the healthcare institution provides services to the public for free according to the program of medical guarantees, and the client of medical services pays their costs at the expense of public funds, in accordance with a uniform system of tariff rates and correction coefficients. 5. conclusions financing health care is a necessary component of the effectiveness of health care reform, as cash is the resource through which the necessary medicines and equipment can be purchased to provide medical care. that is why, in many cases, the prospect of practical implementation of medical reform prescriptions depends on the planning and coherence of the system of financing medical activities. based on the work done, we have drawn the following conclusions: – health care financing reform aims at improving the efficiency of budget spending and improving the conditions for the state to fulfill its constitutional obligation to a person in the protection of their health; – there is a shift of the state from centralized financing of medical activity to autonomization of medical institutions and differentiation of volumes of financial receipts, depending on the quantity of patients of the respective institution. – the state limits its financial participation in the activities of medical institutions only by providing cash infusions within the framework of the program of medical guarantees for the population; – since the medical reform of its implementation plan will only be completed in 2020, it is still too early to speak of its effectiveness. a prospective study will be conducted by the institute for the financing of medical assistance to the population after its use. baltic journal of economic studies 31 vol. 5, no. 5, 2019 references: boyle, k. (2004). the right to life under the european convention on human rights (article 2). in european convention on human rights: fundamentals, practice, ukrainian context. kyiv: vipol. (in ukrainian) convention for the protection of human rights and fundamental freedoms (1950, november, 4). url: http://zakon1.rada.gov.ua/laws/show/995_004 convention on the rights of the child. url: http://zakon.rada.gov.ua/laws/show/995_021 de salvia, m. (2004). european convention on human rights. guidelines for case law relating to the european convention for the protection of human rights and fundamental freedoms. case law from 1960 to 2002. st. petersburg: law. press center. (in russian) end of life and the european convention on human rights. url: http://www.echr.coe.int/documents/ fs_euthanasia_eng.pdf european social charter. url: http://zakon.rada.gov.ua/laws/show/994_06 european code of social security. url: http://zakon.rada.gov.ua/laws/show/994_329 (in ukrainian) international covenant on economic, social and cultural rights. url: http://zakon.rada.gov.ua/laws/ show/995_042 order of the cabinet of ministers of ukraine on approving the health care financing reform concept. url: http://zakon3.rada.gov.ua/laws/show/1013-2016-р senyuta, i. ya. (2015). health and human rights: a resource guide. lviv: publishing house lobf "medicine and law". (in ukrainian) the law of ukraine on state financial guarantees of medical services for the population. url: http://zakon.rada.gov.ua/ laws/show/2168-19 universal declaration of human rights. url: http://zakon.rada.gov.ua/laws/show/995_015 baltic journal of economic studies 77 vol. 7, no. 1, 2021 corresponding author: 1 military institute of taras shevchenko national university of kyiv, ukraine. e-mail: 3mad@ukr.net orcid: https://orcid.org/0000-0001-8818-0509 2 academician stepan demianchuk international university of economics and humanities, ukraine. e-mail: romanovad@ukr.net orcid: https://orcid.org/0000-0002-5825-4738 doi: https://doi.org/10.30525/2256-0742/2021-7-1-77-83 investments in human capital development and wages: relationships and problems in lower-middle-income countries myroslava olievska1, arthur romanov2 abstract. the purposes of the article are to assess the impact of financing of education and health to human capital development, to consider the relationship among wages and investment in human capital, to establish directions of improvement of the investments in human capital development in ukraine and other lower-middle-income countries. methodology. methodological basis of the research is the study of the dynamics of such indicators as the human capital index 2020, wages, gni per capita, education expenditure, government expenditure, financing of health, the wages of full-time employees. to solve the problems arising from the purpose of the study, systemic method (when analyzing the relationship of the investments in human capital development and wages), statistical methods of comparisons, economic analysis (when processing statistics), historical method (in the study of the evolution of human capital index, expenditures on health and education), empirical and correlation-regression analysis (in the analysis of the practice of investments in human capital development) have been used. results. the human capital is a central driver of sustainable growth and poverty reduction. the article proves that high-income countries can better finance the development of human capital; they are the leaders of the ukraine index 2020, more human capital in high-income countries is associated with higher earnings for people, higher income for countries, and stronger cohesion in societies. at the same time, the article substantiates that the low level of gni per capita (3370 usd in ukraine) and insufficient level of education and health expenditure negatively affect formation of human capital (the 53rd place in the human capital index 2020). on the basis of the study of government and non-government expenditure on education and health, it has been concluded that investments in human capital are the effective tool to increase of the wages of full-time employees. practical implications. today human capital gains in many countries are at risk, especially in lower-middle-income countries. features of the current socioeconomic situation require strengthening of investments in human capital development. the main steps that are necessary to undertake for implementing changes in the investments in human capital development have been determined in the article. they are the following: optimization of state financing of human capital; creation of fiscal space; creation of regional funds for financing human capital development; creation of strategic alliances and partnerships; supporting the demand for education and health care from households. value/originality. the relationships between investments in human capital development and wages in the lower-middle-income countries are analytically proved. the complex of actions on optimization of financing of human capital has been generalized. key words: human capital, investments in human capital development, wages, lower-middle-income countries, expenditure on education, expenditure on health, public expenditure on education, public expenditure on health. jel classification: j24, i15, i18, i22, i25, q01 1. introduction human capital is the key to overcoming poverty and hunger, ensuring decent work and economic growth, reducing inequality, and achieving gender equality. after all, knowledge, skills, and abilities, as well as health and other human capital assets, can influence the income of both human capital carriers and bring benefits to its consumers through development and financing. for decades, international organizations, scholars, and experts have been trying to explain the relationship baltic journal of economic studies 78 vol. 7, no. 1, 2021 between investment in human capital development, economic (wages, profits, gross national income), and non-economic benefits. the emerging interest of the world community in the human capital can also be justified by the fact that the needs of all economic actors are constantly growing, the nature of work is changing, new challenges are arising (including the potential impact of the covid-19 pandemic on human capital development and the economy as a whole (covid-19 and human capital, 2020)), and threats to achieving the global sustainable development goals (transforming our world: the 2030 agenda for sustainable development, 2015), as a result, the role of investment in the development of human capital is growing. increased attention to the development of human capital and its financing is clearly confirmed by the world bank study. firstly, the experts divided the world economies into four groups: low-income countries, lower-middle-income countries, upper-middleincome countries, and high-income countries (new world bank country classifications by income level, 2020); secondly, they conducted significant analytical work on the use of human capital and calculated the human capital index 2020 based on the latest data on health and education (the human capital index 2020 update, 2020). a comparison of these studies suggests that the leaders of the human capital index 2020 are high-income countries (singapore, hong kong, japan, the republic of korea, canada, china, finland, sweden, ireland, the netherlands), outsiders are low-income countries (liberia, mali, niger, south sudan, chad, the central african republic). ukraine is ranked 53rd in terms of human capital development and has a score of 0.63, which is typical for most other lower-middle-income countries. this level of human capital development in ukraine may indicate significant shortcomings in human capital financing (lack of financial resources, inefficient use of mobilized resources, lack of motivational component), which encourages research on human capital financing trends in ukraine and the relationship between human capital costs and wages as an economic benefit from the use of human capital. 2. brief literature review awareness of the important role of human capital has led to a significant increase in the interest of scientists in studying the impact of education and experience on wages. at one time, a. smith noted that wages should cover the costs associated with training and acquiring additional skills. later, j. mincer proved that vocational training affected the individual distribution of income among the population, analyzing the distribution of earnings depending on the distribution of knowledge and skills; in essence, this was the first attempt to create a theory of human capital (mincer, 1958). g. becker argued that rational subjects would invest in human capital development only if the expected flow of future benefits exceeded the short-term costs associated with the acquisition of knowledge and skills, and even derived the trajectory of lifelong earnings (becker, 1993). christian dustmann, costas meghir called benefits in the form of wages the main indicator of the level of education, knowledge, and skills of human capital; accordingly, the source of wage growth was the development of general, unique, and specific human capital (christian dustmann, 2005). herrendorf, berthold, and todd schoellman used a structural approach to explain different levels of human capital development and labor incomes in agriculture and other sectors of the economy (herrendorf, berthold, and todd schoellman, 2018). we share the views of scholars who argue that the propensity of human capitalists to invest in education and the human capital they have accumulated depend on the expected benefits in the form of wages; such studies provide a deeper understanding of the processes of human capital development, its role in shaping family incomes and economic inequality. however, in our opinion, the question of how investments in human capital affect income growth and poverty reduction in countries with different levels of economic development is insufficiently studied. in particular, the relationship between the costs of human capital development and wages is poorly studied in lower-middle income countries (for example, in ukraine), which determines the relevance and purpose of the study. 3. purpose of the paper based on the above, we consider it appropriate to determine the relationship between the level of human capital and wages in lower-middle income countries. accordingly, the purpose of the article is to assess the impact of education and health care financing on human capital development; to study the relationship between investment in human capital and wages, which will serve as a basis for substantiation of proposals for optimizing investment in human capital development in ukraine and other lower-middle-income countries. 4. financing of human capital development in ukraine: trends and problems given that human capital is a central driver of sustainable growth and poverty reduction, the priority of ukraine's national interests and national security is, among other things, social development and, above all, human capital development through modernization of education and science, health, culture, and social protection (pro stratehiiu natsionalnoi bezpeky baltic journal of economic studies 79 vol. 7, no. 1, 2021 ukrainy, 2020). in our opinion, it is important to identify measures to reform the education system and bring educational standards to the needs of social development and to the best world standards, to create jobs, to ensure people's rights to health care, in particular, the promotion of a healthy lifestyle, to eliminate all inequalities and discrimination, but those steps are insufficient for the development and accumulation of human capital in ukraine, as evidenced by the world bank. in particular, according to the level of gni per capita, ukraine is among the lower-middle-income countries (new world bank country classifications by income level, 2020). according to the human capital index 2020 (hci), a child born in 2020 in ukraine will be only 63% as productive as he or she can be in the future due to a number of educational and health restrictions (while in countries with a high level of income, this figure is about 80-82%, and the average for all countries is 56%). in addition, a child who starts school at the age of 4 can expect to finish 12.9 years of study before the age of 18; ukrainian students score 478 points, while 625 points mean advanced and 300 points are minimum achievements; the expected duration of training is only 9.9 years, taking into account the level of training; in ukraine, hci for girls is higher than for boys – 0.68 and 0.59, respectively. in ukraine, 28% (2007) of 10-year-olds cannot read and understand a simple text until the end of primary school, which indicates poor quality education and a significant lag behind european countries in this indicator (11%). the coverage ratio for preschool education is 84% (2013), it is 85% in european countries; in countries with incomes below the average – 49%; 56% of adults aged 30-34 have higher education. most health indicators are worse than in other countries. in particular, in ukraine, the probability of death from cardiovascular disease, cancer, diabetes, or chronic respiratory diseases between the ages of 30 and 70 significantly exceeds that of other countries and is 25% (2016). in addition, 32% (2015) of the population over the age of 18 have hypertension; 6% (2019) of the population aged 20-79 suffer from type 1 or 2 diabetes. the universal health coverage index in ukraine is 68 (2017), while it is 75 in european countries; it is 56 in lower-middle-income countries (insights from disaggregating the human capital index, 2020). regarding the financing of education and health care, public expenditure on health care is 3.1% of gdp (2017), which is below average in europe and central asia (4.9%), but above average for lower-middleincome-countries (2.8%); public expenditure on education – 5.4% of gdp (2017), which exceeds both averages in europe and central asia (4.6%) and lowermiddle-income countries (4.5%). thus, the obvious achievements of human capital accumulation in ukraine are the indicators of coverage of preschool education, the level of adult education. however, wages and human capital utilization are low. for example, 65% of the economically active population is employed in european countries; in lower-middle-income countries, this level reaches 54%; in ukraine, it is 58% (2013) (insights from disaggregating the human capital index, 2020). comparison of achievements and expenditures on education and health care may indicate inefficient use of taxpayers' funds, low level of participation of the corporate sector in human capital development, etc. that is why we consider it appropriate to dwell on the study of the relationship between the costs of human capital development (expenditures on education and health care at the expense of state and local budgets; funds of the legal entities and individuals, ngos, and foundations) and ukraine's position in the human capital index ranking. it should be noted at once that the rating value of ukraine in the world bank study did not change significantly and was 0.63 in 2010, 0.65 in 2017 and 0.64 in 2018, 0.63 in 2020 (the human capital index 0 50 100 150 200 250 300 0 50 100 150 200 250 e xp en di tu re s on h ea lth c ar e expenditures on education figure 1. distribution of expenditures on education and health care in ukraine in 2007–2018 source: based on (derzhavna sluzhba statystyky ukrainy, 2020) baltic journal of economic studies 80 vol. 7, no. 1, 2021 2020 update, 2020), at the same time, there were directly proportional changes in funding for education and health care (figure 1). in the financing of education, the share of public expenditure is dominant, it is increasing annually and amounting to 88.5% in 2018; in the structure of health care expenditure, public and private expenditure have approximately the same share with a variable slight dominance. at the same time, more than 95% of nongovernment expenditure are made by households. correlation analysis between the value of hci and the amount of funding for education and health care in ukraine has shown that public expenditure on education is more related to the formation of human capital than private expenditure (table 1). the correlation coefficient of public expenditure on education and hci is 0.7262, coefficient of private expenditure is 0.5974, and health care expenditure are 0.7144 and 0.7103, respectively. due to additional research on the structure of education expenditure by funding organizations and educational functions, it has been found and analytically proved that: 1) private firms and corporations are almost not involved in financing education in ukraine; business share in financing education services is less than 1% (0.97% in 2010 and 0.67% in 2018); 2) there is a strong inverse correlation between hci and expenditure of households on other educational services (food, administrative services, inventory, textbooks); therefore, it is advisable to increase the share of the state in financing education. correlation and regression analysis of education funding by educational level and the number of students has shown the presence of correlation of the number of students enrolled in vocational and higher education to the corresponding funding. however, statistically significant dependencies in these cases are also not observed; we can suggest that the acquisition of vocational and higher education (and, hence, the formation of human capital) in ukraine is due not so much to its funding as to other factors such as internal motivation, incentives, regional features. in the structure of expenditure on health care, the highest correlations of hci to expenditure from the social insurance fund (0.9819), private expenditure on health insurance funds (-0.8660), and other nonstate expenditure (worldwide, -0.8660), the lowest correlation is to the private expenditure on voluntary insurance (0.5410) (table 2). additional calculations of the relationship between hci and health care funding by type of health care have shown strong correlations of hci to inpatient costs, ancillary services for medical treatment, and the table 1 correlation matrix between hci, education, and health expenditures indicators hci public expenditure on education private expenditures on education public expenditure on health care private expenditure on health care hci 1 public expenditure on education 0.726158198 1 private expenditures on education 0.598382302 0.9853747 1 public expenditure on health care 0.714461737 0.9998578 0.988107982 1 private expenditure on health care 0.710346357 0.9997417 0.988992694 0.9999828 1 source: based on (derzhavna sluzhba statystyky ukrainy, 2020) table 2 correlation matrix between hci, expenditures on education and health h c i c en tr al g ov er nm en t m un ic ip al g ov er nm en t so ci al in su ra nc e fu nd s o th er p ri va te op tio na l in su ra nc e h ou se ho ld ex pe nd itu re n on -p ro fit or ga ni sa tio ns pr iv at e fir m s a nd co rp or at io ns h ea lth in su ra nc e fu nd s r es t o f w or ld hci 1 central govern-ment 0.7023 1 municipal government 0.7147 0.9998 1 social insurance funds 0.9819 0.5554 0.5696 1 other private optional insurance 0.5410 0.9786 0.9748 0.37236 1 household expenditure 0.7136 0.9998 0.9999 0.56844 0.97522 1 non-profit organisations 0 0.7118 0.6994 -0.189 0.841 0.70047 1 private firms and corporations 0.8170 0.9842 0.9872 0.69338 0.92694 0.98698 0.57656 1 health insurance funds -0.866 -0.9642 -0.9687 -0.7559 -0.8891 -0.9683 -0.5 -0.9959 1 rest of world 0.86603 0.9641 0.9686 0.75593 0.88905 0.9683 0.5 0.99587 1 1 source: based on (derzhavna sluzhba statystyky ukrainy, 2020) baltic journal of economic studies 81 vol. 7, no. 1, 2021 provision of medical supplies to outpatients. additional calculations of the relationship between hci and health care funding by type of health care have shown strong correlations of hci to inpatient costs, ancillary services for medical treatment, and the provision of medical supplies to outpatients. instead, the analysis between hci and provider costs showed strong correlations of hci to the general health management and health insurance costs; in our opinion, such results of the analysis show that the reproduction of human capital is not due to the actual medical services, but due to health policy and health insurance. thus, summarizing all the above facts, we can state that in the financing of education in ukraine the leading role is played by public sector funds; expenditure of households predominate in the expenditure structure of the private sector. regarding health care, expenditures on general health care and health insurance have had a positive impact on hci 2020, which indicates the need to introduce compulsory health insurance as a separate type of insurance or as part of the human capital development fund in ukraine. 5. relationship between the cost of human capital development and wages given the motivational function, let us check whether wages are an indicator of the effectiveness of financing human capital development, using regression and correlation analysis of the dependence of average wages of full-time employees (y) on the amount of funding for education and health care by funding sources (table 3): public expenditure of the central government on education (х1) and health care (х2), local budget expenditures on education (х3) and health care (х4), private expenditures of houdeholds on education (х5) and health care (х6), expenditure of private firms and corporations on education (х7), expenditure of social insurance funds on health care (х8), other nongovernment expenditures on health care (х9). the results of the analysis have shown that all sources of human capital funding have a significant impact on the average salary. at the same time, the connection between all indicators, except for the financing of health care at the expense of health insurance funds, is direct. the initial regression model, which takes into account the impact of all sources of funding on the average salary, is too cumbersome and inadequate, and therefore it has been simplified by consistently eliminating the least statistically significant factors, especially in public funding, which is aimed, inter alia, to cover expenditure on wages for education and health workers. the result is a model that explains 99% of the variation of the independent variable and is adequate by fisher's criterion and with statistically significant variables by student's criterion. the average coefficients of elasticity of the factors of the resulting model are, respectively: e x yx3 3112 0 5773= =, ,* , e x yx6 11 56 0 1896= =, * , , e x yx9 416 87 0 4099= =, * , the variable х3 has the greatest influence on the resulting factor (y), the smallest – х6. thus, the formation of human capital is influenced by various sources of funding. in particular, the size of the average wage is affected by the expenditure of local budgets on education, private expenditure of households and other table 3 economic and mathematical models of the impact of changes in the volume of human capital financing on the average salary of full-time employees r es ul tin g in di ca to r ( у) number of factors equation parameters correlation coefficient, r determination coefficient, r2 f fact, fcrit = 2,7963 (р = 0,95) t-fact, t-crit = 3,1824 a ve ra ge sa la ry o f f ul l-t im e em pl oy ee s 9 у = 51.76х1+230.54х2+14.03х319.92х4+73.82х5+8.16х6-2537.28х729.62х8+318.34х9-1710.82 0.9999 0.9999 2947.24 х1 = 1.78 х2 = 1.95 х3 = 1.72 х4 = 1.37 х5 = 1.89 х6 = 2.35 х7 = 1.88 х8 = 1.93 х9 = 3.98 3 у=31.13х3+11.56х6+416.87х9 -659.85 0.9998 0.9996 f fact = 7282.66, fcrit = 3.4903 (р = 0.95) t-crit = 2.2622 х3 = 15.13 х6 = 5.77 х9 = 11.31 source: based on (derzhavna sluzhba statystyky ukrainy, 2020) baltic journal of economic studies 82 vol. 7, no. 1, 2021 non-government expenditures on health care. thus, an increase in local budget expenditure on education by 1% (variable х3) may lead to an increase in the average salary of full-time employees by 0.577%; an increase in private expenditure of households on health by 1% may lead to an increase in the average wage by 0.189%, and with an increase in the share of other non-government expenditure on health care by 1%, the average wage will increase by 0.409%. thus, it is analytically proven that wages are the main and generalizing indicator of the effectiveness of expenditures on education and health care. other indicators (employment of graduates of educational institutions, hours worked, morbidity) due to the lack of correlation and causation cannot characterize the effectiveness of education and health care financing comprehensively and reliably. 6. financial instruments for human capital development implementation of structural reforms and systemic transformations in the context of achieving sustainable development of ukraine requires high-quality human capital, the development and use of which involves the financing of education and lifelong learning. given the interdependence of wages (therefore, opportunities to reduce poverty, improve the quality of life of citizens and achieve sustainable development goals) and expenditures on education, training and health care, as well as a number of constraints (such as income, change of types of work) and threats (military conflict, pandemic, migration of human resources), it is advisable to implement structural reforms and systemic transformations aimed at optimizing the financing of education, training and health care in ukraine. the main financial instruments that need to be used for making changes in education and health are: 1) optimization of public funding of human capital, taking into account the results of research by reputable international organizations and a reliable evidence base (the human capital index 2020 update, 2020); 2) creation of fiscal space for financing the development of human capital by involving the whole society, identifying intersectoral synergies, and implementing cost-effective state interventions in the processes of human capital reproduction; 3) creation of regional funds for financing human capital development and establishment of a tax on human capital development in the amount of 1-5%; 4) creation of strategic alliances and partnerships involving financial and credit institutions; participation of educational institutions in joint projects with the corporate sector; 5) stimulation of the corporate sector to finance human capital development and promote its accumulation (olievska, 2019); 6) supporting the demand for education and health care from households by means of targeted cash transfers and job retention (the human capital index 2020 update, 2020). as a result, it is necessary to ensure stable funding for education and health care, regardless of existing and new challenges, as the development and accumulation of human capital is a national priority in ukraine (as in the other lower-middle-income countries). however, the effectiveness and efficiency of the above tools depend on: firstly, the modernization of preschool and complete general secondary education, vocational, and higher education, bringing educational standards to the needs of social development and the best world standards; secondly, the availability of efficient jobs in ukraine; thirdly, ensuring equal opportunities for men and women; fourthly, ensuring human rights to health care, including the promotion of healthy lifestyle, disease prevention, early diagnosis, quality comprehensive treatment, rehabilitation from the first days of the disease, palliative care, transplantation development, adequate medical care, implementing standards of affordable and quality medical services, etc. (pro stratehiiu natsionalnoi bezpeky ukrainy, 2020). in our opinion, the inclusion of such tasks in the national security strategy is the right, but not the only sufficient step towards the development of human capital in ukraine in the near future. execution of tasks and achievement of goals depends on the close interaction of financial and non-financial instruments. 7. conclusions education and health care systems in ukraine have both strengths (years of study, level of education of the population) and weaknesses (limited access to educational and medical services, quality of services, the amount of public expenditures on education, low use of accumulated human capital), which makes them vulnerable to new challenges and inevitable changes. based on the study, the following conclusions can be drawn: firstly, human capital development depends on the financial capabilities and organizational decisions of the governments; high-income countries have higher human capital development rates; secondly, ukraine belongs to the lower-middle-income countries and does not fully use its domestic potential for human capital development; thirdly, the study of the dynamics and structure of expenditures on education and health care shows a high level of public expenditure on education and almost no expenditure of households; in the structure of distribution of health care expenditure it is established that the expenditures are carried out proportionally at the expense of both government and non-government sectors; fourthly, it is analytically proven that the cost of human capital development affects the size of wages. baltic journal of economic studies 83 vol. 7, no. 1, 2021 the main steps required for changes in the financing of human capital development are as follows: optimization of public funding of human capital; creation of fiscal space; creation of regional funds for financing human capital development; creation of strategic alliances and partnerships; stimulation of the corporate sector; supporting the demand for education and health care from households. carrying out reforms in education and health care in lower-middle-income countries requires: modernization of education and health care systems; elimination of gender inequalities; creation of effective jobs with a reasonable level of wages. references: avitabile, ciro; d’souza, ritika; gatti, roberta v.; chapman, emily weedon (2020). insights from disaggregating the human capital index (english). washington, d.c. : world bank group. available at: http://documents. worldbank.org/curated/en/306651578290912072/insights-from-disaggregating-the-human-capital-index (accessed 20 january 2021). becker gary (1993) [1964]. human capital: a theoretical and empirical analysis, with special reference to education (3rd ed.). chicago: the university of chicago press. christian dustmann, costas meghir, wages, experience and seniority, the review of economic studies, vol. 72, issue 1, january 2005, рр. 77–108. derzhavna sluzhba statystyky ukrainy (2020). available at: http://www.ukrstat.gov.ua/ (accessed 9 january 2021). herrendorf, berthold, and todd schoellman (2018). ” wages, human capital, and barriers to structural transformation.” american economic journal: macroeconomics, vol. 10(2), pp. 1–23. mincer jacob. “investment in human capital and personal income distribution,” journal of political economy, august 1958. new world bank country classifications by income level: 2020-2021. available at: https://blogs.worldbank.org/ opendata/new-world-bank-country-classifications-income-level-2020-2021 (accessed 20 january 2021). olievska, m. (2019). liudskyi capital u konteksti dosiahnennia tsilei staloho rozvytku. finansy ukrainy, vol. 12, pp. 32–43. pro stratehiiu natsionalnoi bezpeky ukrainy: available at: https://www.president.gov.ua/documents/ 3922020-35037 (accessed 17 january 2021). world bank (2020). “covid-19 and human capital” europe and central asia economic update (fall), washington, dc: world bank. doi: 10.1596/978-1-4648-1643-7. license: creative commons attribution cc by 3.0 igo (accessed 17 january 2021). world bank (2020). the human capital index 2020 update : human capital in the time of covid-19. world bank, washington, dc. © world bank. available at: https://openknowledge.worldbank.org/handle/ 10986/34432 (accessed 9 january 2021). united nations (2015, september 25). transforming our world: the 2030 agenda for sustainable development (n.d.). available at: http://www.un.org/ga/search/view_doc.asp?symbol=a/70/l.1&lang=e baltic journal of economic studies 125 vol. 5, no. 3, 2019 corresponding author: 1 odesa national academy of food technologies, ukraine. e-mail: 9701080@ukr.net 2 odesa i.i. mechnikov national university, ukraine. e-mail: truba-v@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-125-134 the conceptual orientation of the system of regulation of industrial development yuriy melnyk1, vyacheslav truba2 abstract. the industrial sector is the most important segment of the macroeconomic environment of the country, the performance of which depends on its functioning and development in the global economic environment. the development of industry in the national macroeconomic environment is possible at the expense of an effective regulatory system, which should have modern instrumental support that corresponds to modern trends in the development of global economic systems. the article is based on the theoretical and methodological foundations of the formation of a system for regulating the development of industry and defining its conceptual benchmarks in the conditions of transformation changes in the economy. methodology. legislative and normative documents, materials of periodicals, statistical data, and internet resources were the information base of the study. the paper uses general scientific and special methods: monographic examination, generalization, systematization, economicstatistical analysis, and modelling. this allowed investigating the current state and possibilities of regulating the development of industry in different models of the regulatory system and the forms of its implementation, substantiating the conceptual foundations and directions of the transformation of the system of regulation of the development of the domestic industrial sector and criteria for evaluating its effectiveness. results. it is proved that the process of regulating the development of industry in the national economy should be considered from the point of view of a systemic approach in the macroeconomic environment, where the basic elements of a defined system are the purpose, strategic guidelines and objectives, principles and limitations, regulatory functions, institutional actors that influence on industry and its structural units with the help of well-grounded tools. the expediency of assessing the system of regulation of industrial development based on the criteria of rationality, regulation, management, and efficiency is proved, and models of the corresponding analytical indicators are proposed. it is proved that the formation of the most perspective and effective mechanism of regulating the development of the industry is to find the optimal combination of vectors of rationality and efficiency in the implementation of all large-scale transformations in the system of regulation in the national macroeconomic environment. the alternative development options in the domestic industrial sector and the relevant conceptual guidelines for the regulation of the development of industry in the national macroeconomic environment are determined. practical meaning. the introduction of these results in order to change the system of regulation of industrial development will contribute to ensuring the role of the industrial sector as the main driver of innovation and investment development of the country’s economy. value/оriginality. the author’s definition of the process of regulating the development of industry from the standpoint of the system approach, proposed methodological approaches to the assessment of the effectiveness of the development regulation system according to criteria and indicators of rationality and manageability, is aimed at the further formation of system measures to create favourable conditions for the development of industry in the national macroeconomic environment. key words: industry, development, regulation, system, efficiency, national macroeconomic environment. jel classification: e20, e60, l50, l60, o10, o38 1. introduction the industrial sector is the most important segment of the macroeconomic environment of the country, which creates a national product to meet the needs of society in the domestic and foreign markets. the current period of development of the industrial segment of the national economy can be characterized as unstable, as it is associated with significant risk factors, constant changes, losses, and crises. baltic journal of economic studies 126 vol. 5, no. 3, 2019 industry in the structure of the national economy creates a gross domestic product over 32%, gross value added – 21%, the number of jobs – 20%. the industrial sector of the national economy includes almost 42 thousand subjects of different forms of ownership. industry is the aggregate of mining enterprises engaged in the extraction of raw materials and materials for the purpose of their further processing, and enterprises of the processing industry, raw materials, materials, products obtained in industry or produced in agriculture, and the production of tools for others sectors of the economy, and for the needs of the industry itself (strategy for the development of the industrial complex of ukraine for the period until 2025, 2018). the highest share in the structure of the domestic industry is: extractive industry and quarry development; processing industry; power engineering. the system of its functioning depends on the performance of the industrial segment of the national macroeconomic environment. the structure of the industry, indices and growth rates, management results and business activity of the industry formulate analytical tools that show quantitative and qualitative characteristics of the development of the national macroeconomic environment of the country. the development of industry should be understood structural changes in the industry to form effective resource proportions of industrial production and qualitative improvement of the components of industrial progress and industrial potential in the national macroeconomic environment. macroeconomic development processes of the industry should be guided by ensuring a stable and balanced growth of industrial production, provided that the functional full-fledged extended reproduction is restored, which involves not only an increase in the output of industrial products but also the ability of the subjects of the industry to produce innovationinvestment orientation in the macroeconomic environment of the country (stigler, 1971). the development of industry in the national macroeconomic environment is possible due to an effective regulatory system, which should have modern tooling that meets modern trends in the development of economic systems. it updates theoretical and applied research in this field. 2. theoretical foundations of the industrial development regulation system regulating the development of industry includes regulatory, organizational, production, innovationinvestment, and socio-economic aspects. in the opinion of the authors (national economy, 2011), the purpose of regulating the development of industry in the national environment is to create a modern, integrated industrial complex in the world capable of solving the main tasks of social and economic development and consolidating ukraine as a high-tech state in the conditions of integration and globalization. this involves realizing the tasks of activating the transformational-institutional and innovation-investment activity of the industry with a positive impact on its volume and structure of production, accelerating the integration of the industrial complex into world production. the strategic aim of regulating the development of industry in a transformational environment and the aggressive policy of the external environment is ensuring sustainable economic growth, raising socioeconomic standards, and ensuring the national security of ukraine. taking into account certain aspects, the study of theoretical and methodological issues of regulation of the development of the industry of the national economy is an urgent and necessary task. the questions of the regulation of the development of the national economy and its structural elements are devoted to the works of ukrainian and foreign scientists: o. amoshi, b. andrushkiv, h. amstroung, y. bajala, b. birenberaga, s. vaskova, o. veklych, o. vovchak, o. galytsova, l. didkovskaya, p. druckera, v. heyetsa, m. kovalenko, a. epiphanova, e. libanova, g. grigoryeva, a. kruglyak, l. shwaika, a. maddisona, v. margasova, v. muntiana, i. myshusyuka, a. nikiforova, i. rosupatenko, yu. safonov, e. maslennikova, j. stiglitsa, n. nizhni kova, m. tymchuka, r . fathundinova, k. shaposhnikova, r . hailbrona, s. ilyppovoyi, and others. some theoretical and methodological aspects of the foundation of the system of regulation of transformational processes in the national macroeconomic environment are reflected in the works: v. apopia, m. barney, b. burkinsky, m. doleshny, a. galchinsky, o. kuzmin, e. kuznetsov, o. kovalenko, m. merkulov, b. mizyuk, b. semak, o. poberezhets, and others. the scientific works of the listed researchers confirm that regulation is an indirect effect of the subject of regulation of objects on regulation in order to influence their condition, behaviour or spatial and temporal movement in the macroeconomic environment (figure 1). an important requirement of this system is the possibility of the independent existence of objects regulation from the regulatory system to the actual process of regulation. the control system consists of three levels. adoption of strategic decisions on the operation of industry and development of market structure is carried out at the first level; development and adoption of executive decisions on the current and mid-term functioning of industry and its structural segment elements – on the second; the development of regulatory signals and a command for a regulated system – at the third level. the adjustable system is the implementation of regulatory signals and commands on regulatory objects, including the perception of the transformation of regulatory decisions and commands. baltic journal of economic studies 127 vol. 5, no. 3, 2019 regulation of industry in the national macroeconomic environment is a system of appropriate measures that provide supportive, compensatory, and regulatory influential industrial production in order to create optimal conditions for the effective functioning of the industry. regulation of industry has the following meaning: a) is identified with institutional interference in industrial production; b) administrative legal regulation of economic activity in the industry. regulation (from the latin regulare), in the broadest sense, means subordination to a certain principle order. thus, state regulation of industry – a complex of targeted measures of state institutions, which are aimed at directing the behaviour of subjects of the industrial sector in the direction necessary for solving the tasks of the system of state regulation of the national economy. effectiveness of state regulation – as a combination of the effects of management decisions at the level of central and municipal authorities that implement regulatory policy, can be considered the final result of meeting the needs (requirements) of the society, taking into account legitimacy and legality, in the conditions of resource constraints, which is being implemented in order to achieve strategic goals of public administration. the effectiveness of state regulation of industrial production in ukraine is the result of solving problems and making decisions on further development of industries in all spheres of activity within the framework of the current legislation, powers and competence of state authorities at local, regional, and national levels, in the conditions of resource constraints, uncertainty and conflict of economic the interests that are being achieved in the process of implementing strategic goals (wenzha, 2015). 3. models of the system of regulating the development of industry and tools for their evaluation the ministry of economic development and trade of ukraine, with the aim of regulating the development of industry in the national macroeconomic environment, developed the strategy for the development of the industrial complex ukraine for the period up to 2025. ensuring the formation of a strategic state industrial policy is a priority factor in restoring the role of the country’s industry in stimulating macroeconomic growth and enhancing the competitiveness of the national economy in the international global environment. it should be noted that the insufficient consideration of competition requirements in the global international markets for industrial products, current trends in the diversification of production in the industrial sector, export potential, and lack of resource support slow down the processes of structural transformation in the industrial sector of the country’s national macroeconomic environment. current target indicators, strategic priorities, and specific tools for industrial development in the national macroeconomic environment require a systematic program approach that will ensure socio-economic growth and development in the industrial sector of the country. according to the analytical data of the state statistics service of ukraine (table 1), in 2018, compared to 2013, the index of industrial output amounted to 101.6% and 95.7%, and shows positive dynamics in the last two years, indicating a gradual recovery of the industry. in the mining industry and the development of quarries, in 2018 the index of industrial output amounted to 102.4, in the processing industry – 101.1%, in the energy segment – 102.8%. indices of industrial output by main industrial groups are presented in table 2. indicators of january-february 2019, unfortunately, show a negative sign, therefore, it is necessary to focus on the reasons that influenced the reduction of these indicators. it should be remembered that industry is a systemforming component in the national macroeconomic environment, which forms the added value, resource support, satisfies the needs of society in the goods needed for existence. from the experience of industrialized countries, it is known that industrial policy should be an integral part of the state policy of development of the national economy. the system of regulation of the development of industry country relies on the following program documents: − the law of ukraine dated july 1, 2010, no. 2411-vi “on the principles of internal and foreign policy”; regulatory system (development and adoption of strategic decisions and regulatory influences) adjustable system (implementation of regulating signals and commands on objects of regulation) subjects of regulation objects of regulation figure 1. typical scheme of the industrial regulation system baltic journal of economic studies 128 vol. 5, no. 3, 2019 table 1 indices of industrial production by main types of activity industrial sector years 2013 2014 2015 2016 2017 2018 industry 95,7 89,9 87,0 102,8 100,4 101,6 mining and processing industry 95,2 89,3 86,9 102,9 101,6 101,5 mining and quarrying 100,8 86,3 85,8 99,8 94,3 102,4 mining of stone and brown coal 97,6 69,5 61,9 104,8 83,7 104 extraction of crude oil and natural gas 96,3 98,3 95,0 97,4 100,2 103,1 extraction of metal ores 104,6 93,4 95,0 97,9 93,7 102,5 manufacturing industry 92,7 90,7 87,4 104,3 104,8 101,1 manufacture of food products, drinks and tobacco products 95,0 102,5 89,3 104,4 102,9 98,5 textile production, clothing, leather, leather goods and other materials 94,1 98,6 92,0 102,2 107,2 96,8 manufacture of wood products, paper production and printing activities 102,7 96,0 88,9 102,0 105,8 102,5 production of coke and refined products 89,2 78,7 80,9 108,7 85,2 103,5 production of chemicals and chemical products 80,7 85,8 84,8 101,1 118,4 117,4 manufacture of basic pharmaceutical products and pharmaceuticals 111,8 101,9 92,4 104,4 106,9 101,1 manufacture of rubber and plastic products, other nonmetallic mineral products 97,4 91,2 92,8 108,5 108,2 99,5 metallurgical production, production of finished metal products, except machinery and equipment 94,7 85,5 83,9 106,8 100,2 100,6 machine-building, except for repair and installation of machinery and equipment 86,4 79,4 85,9 102,0 107,9 101,6 production of computers, electronic and optical products 86,0 77,9 71,3 124,2 109,2 99,7 production of elerical equipment 91,1 100,9 89,8 100,9 97,5 82,5 manufacture of machinery and equipment not attributed to other groups 93,5 88,7 87,5 102,3 106,6 103,3 production of motor vehicles, trailers and semi-trailers and other vehicles 79,8 64,3 85,0 98,4 115,5 109,8 production of furniture, other products; repair and installation of machinery and equipment 90,9 93,0 84,5 101,3 111,1 105,6 supply of electricity, gas, steam and air conditioning 98,9 93,4 88,0 102,5 93,5 102,8 table 2 indices of industrial production by main industrial groups indexes years 2014 2015 2016 2017 2018 industry 89,9 87,0 102,8 100,4 101,6 intermediate consumption goods 91,6 90,6 102,7 100,2 100,6 investment goods 79,7 85,3 101,7 110,6 106,3 consumer goods of short-term use 101,7 89,0 104,4 104,0 99,0 consumer goods of durable use 88,7 80,8 99,7 113,9 100,2 energy 85,5 81,8 102,4 92,3 103,2 − the law of ukraine as of 19.06.2003 № 964-iv “on the fundamentals of national security of ukraine”; – the decree of the president of ukraine “on the strategy of sustainable development ‘ukraine-2020’” (on the strategy of sustainable development ‘ukraine 2020’”, 2013); – order of the cabinet of ministers of ukraine dated april 3, 2017, no. 275-p “on approval of the mediumterm plan for priority actions of the government by 2020”; − national report 2017 “sustainable development goals: ukraine”. during all years of our country’s independence, a large number of documents were developed and put into operation, which, however, were, unfortunately, only declarative. in the opinion of the authors of the study, in the transformational conditions, the basic condition for the regulation of the development of the industry is to increase the rationality of the regulatory model of baltic journal of economic studies 129 vol. 5, no. 3, 2019 regulation, mainly in future periods of its functioning in the macroeconomic environment. typical regulatory model of regulation: the mission of the industrial sector; a system of regulation and restrictions of the environment; composition, scale, and quality of resource support; the algorithm for regulation and management of available resources. the main mission of the rational regulatory model of regulation in the industry is the formulation of goals, principles, priority tasks, functions of processes regulation, as well as ways to solve them effectively, with the proposed regulatory model of methods and tools of the regulatory system. corresponding failures in the system of regulation of industrial development under unconditional compliance with the normative model are allowed only in the event of errors in the stages of planning or construction. it is offered the degree of rationality of the regulatory system to determine the indicator of its rationality: ir rs rn = (1) where rs – the results of the profile industry in the standard model regulation with the use of optimal methods’ regulation; rn – the results of the profile of the industry in the normative model of regulation. the proposed indicator may be a criterion for assessing the value of unused reserves in industry. the greater the value of the indicator ir, the more urgent problem issues and measures for its rationalization, that is, improvement. significantly problematic is the definition of a standard model of regulation and the results obtained in its application. it should be noted that this is rather conditional concept, which is based on theoretical and methodological developments of the construction of the most promising and recognizable measure of ideal but practically inaccessible system regulation, the very approximation to which can already promise the industry a number of tangible benefits and benefits in the macroeconomic environment, to the generalized experience of functioning and the development of industry in industrially developed countries with an evolutionary and well-adjusted environment. in assessing regulatory models of regulation and its segmental components, provide a synergistic effect of modern and future system regulation. the industry is conditionally allowed assuming that all the requirements of comparable models are met, but in reality, these requirements are not always met in the conditions of transformation. thus, another criterion and, at the same, time condition for the development of industry, including the regulatory model of regulation is its performance or practical application, the basic characteristic of which is the category of regulation. if the rationality of the regulatory system is evaluated by the ability to develop and adopt a set of effective regulatory decisions, then the settlement is determined by the completeness and accuracy of the implementation of any regulatory decisions, regardless of the consequences of the industry. the degree of controllability of the industrial development regulation system can be assessed as follows: kr re rr = (2) where kr – conversion coefficient; re – regulation of the regulatory model, provided all the parameters of the normative model and the resulting set of decisions, regulating signals or commands formed on its basis; rr – regulation result for a real model, taking into account deviations from the normative model for all levels, tasks, processes, and other parameters. a large number of scientists and practitioners consider the reasons for the rejection of the real model of relative communication with the imperfection of the latter. under present conditions, the study of objective reasons deviation from the real model from the normative serves as a starting point for constant adjustment and improvement of the regulatory model of regulation in a legitimate way in the macroeconomic environment of the country. european vector of development of the national macroeconomic environment requires a critical revision of legal and socio-economic regulations regulation in order to achieve their dynamic equilibrium, balancing the level of development in the industry of productive forces with industrial relations. it is known that correcting the imperfection of laws imperfection of their implementation in a priori is impossible, because the loss of respect to any form of law and order and it is difficult to find objective or practically justified parameters of utility deviations from the officially legal principles of operation, since the benefit for the initiators of such unplanned deviations does not always turn around its consequences for the utility of the regulatory system in the macroeconomic environment. in this regard, any deviation from the regulatory model must include the costs of controllability of the regulatory system in the macroeconomic environment. the result of unplanned deviations of the real model from the regulatory is not only a reduction in the overall or systemic effect, as well as the creation of an informal regulatory structure in the macroeconomic environment. the informal structure of regulation is based on intuition, national traditions, subjective experience, individual knowledge, customs, forecasts, etc. the basic reasons for the formation of an informal structure regulation: a) sufficient uncertainty of the regulatory model of regulation in non-standard baltic journal of economic studies 130 vol. 5, no. 3, 2019 situations; b) unsystematic discrepancy of the conservative normative model, more dynamic object regulation in the conditions of its growing complexity in changing conditions. it should also be noted that the regulatory legal framework allows either a sufficiently significant degree of uncertainty or lack of information about the processes and phenomena that are important from the decisionmaking in the activities of subjects of the industrial industry of the national economy. for example, the current classifier of industrial products, standards or certificates in many cases does not reflect all the necessary for regulation or management characteristics and parameters. in such cases, subjective practical experience, intuition, knowledge, etc. complement the official information that provides informal influence on the nature of regulation of managerial decisions in the industrial sector, and in some cases, and correct errors in the regulatory model of regulation in the macroeconomic environment. the main reasons for the deviations in the normative model are: − weakening regulatory influence, including positive and negative regulatory incentives, caused by the weakening of the control function, change socioeconomic settings, etc.; − change of political conditions that affect the regulatory system in the national macroeconomic environment; − change of socio-economic conditions and components of the system of regulation – criteria, parameters, a system of restrictions, etc.; – aggressive behaviour of the external environment, temporary occupation of the national territory and military actions, which objectively requires the change of objectives, principles, functions, and tasks of regulation; − the emergence of a national macroeconomic environment organized by the shadow and even criminal structures that replace the system of regulatory regulation. − the informal structure can be divided into two aspects: − part of a positive informal structure, which is subject to formalization, structuring, transpose ability, objectification, and legalization, followed by the introduction of a revised regulatory model of regulation; − part of the negative informal structure, which is to be eliminated, as a negative obstacle in regulating the system, which reduces its efficiency in the macroeconomic environment. thus, the convergence of normative and real models regulation in the macroeconomic environment is achieved through their counter-correction and development, which provides increased efficiency of the regulation system. the convergence of normative and real models of regulation in the macroeconomic environment by reducing to an objectively necessary minimum of the informal structure is achieved as an improvement of the self-standard model by formalizing and legalizing the informal structure, and by improving the systems of regulatory influences through positive or negative incentives in the macroeconomic the environment of the country. 4. forms of implementation of the regulation of development in industry: preconditions and guidelines for implementation the implementation of regulation of the development of industry in the national economy should be carried out by means of appropriate forms that are reasonably systematized according to certain features, parameters, filled with separate tools of strategic influence and represent a general direction of the influence of subjects on the corresponding objects of regulation in the industrial sector of the national macroeconomic environment. the process of regulating the development of industry in the national economy in the form of implementation has the following types: priory regulation of the development of industry – implemented in the form of targeted programming and designed to address the strategic objectives of the industry (growth of industrial production, improvement of productive forces, the use of innovations, etc.); pastoral regulation of industrial development – is implemented at the expense of various measures and tools of market-oriented nature and is intended primarily to maintain the balance of industrial production in the macroeconomic environment; combined regulation of industrial development – is implemented at the expense of certain socio-economic programs aimed at maintaining the balance of growth in economic performance in the industrial sector of the national economy. it must be remembered that it is not necessary to reduce the manageability of a holistic system before the actual implementation of decisions of the management systems of different levels of the hierarchy of integral regulation systems in the macroeconomic environment. thus, for example, the decision of state institutions in the form of codes, laws, decrees, regulations, orders, plans, forecasts, programs, tasks, etc., which are systemwide guidelines on the scale and strength of their influence, the legal competence of their sources, socioeconomic consequences, etc., cannot and do not have to specify the level of signals and commands in the system of regulating the development of industry, to require from them unconditionally executed. institutional regulation of the development of industry, even at the widest possible limits, substantiation, scale, and radical forms of rational and even optimal management in the industrial sector baltic journal of economic studies 131 vol. 5, no. 3, 2019 should provide a high degree of uncertainty, that is, limitation of content, tasks, and requirements. the application of certain forms of regulation of the development of industry in the national economy depends on the conditions of the functioning of the national macroeconomic environment, the set strategic objectives, and the international situation. basic regulation of industrial development in the national economy: − indicative planning of the growth of economic results in the industrial sector; − forecasting the development of the domestic and external market of industrial products; − realization of integrated programs of industrial production; − state institutional support industrial production. an important feature of the development of subjects of the industrial industry and the regulatory system is their ability to correctly identify and evaluate the effects of decisions taken and implemented (codes, laws, decrees, regulations, orders, plans, forecasts, programs, tasks, etc.), as well as the principles established on their basis of functioning in the national macroeconomic environment, with the help of reliable indicators and feedback with the realms of market environment development. effective market mechanism of selfregulation should ensure the development of the industrial sector of the national economy. rationality and efficiency of the system of regulation of industry development can have both the same and opposite vectors direction in relation to the total component of these vector effectiveness of the system regulation in the national macroeconomic environment. for example, increasing the degree of rationality of the system of regulation of industrial development by converting the normative model of regulation to its optimal option can simultaneously improve the efficiency of the regulatory system in the national macroeconomic environment. this can happen, firstly, if you direct a part of the systemic effect from optimizing the regulatory process to stimulate industrial activity, and secondly – because of the greater degree of complexity of the regulatory system of the facility and the correct selection of the necessary regulatory influences – incentives and the creation of a complex administrative, organizational, economic, and social preconditions, which in turn increases the degree of efficiency of the system of regulation in the national macroeconomic environment. in many cases, the rationality of the regulatory system comes into conflict with its ability to work in a macroeconomic environment. the historical process of the development of the regulatory system shows that the implementation of independent targeted programs reforming the system in relation to improving the parameters of rationality and workability can only be to a certain limit, which the resulting indicator of the efficiency of the system of regulation of industrial development begins rather sharply decrease. since rationality in the industrial sector is more closely related to the objective properties and requirements of the national economy and society, and efficiency – to the basic essential characteristics of commoditymoney relations in the market environment, then the formation of the most promising and effective mechanism for regulating the development of industry and its main core, in the form of a synthesis strategic plan and market competition, is to find the optimal combination of vectors of rationality and efficiency when implemented and all major changes in the socioeconomic relations and, above all, in the regulation of the national macroeconomic environment. the search for an optimal combination of vectors of rationality and efficiency in the implementation of all large-scale transformations in the macroeconomic environment occurs on the intuitive-empirical level of representations, trial method, error, and the principle of a pendulum when the preference is given to rationality or efficiency, or vice versa. the multi-vector relationship of rationalization and efficiency in the regulatory system allows us to conclude that the nature of the modern industrial development potential under conditions of rapid and rapid change, contradictory and unpredictable processes, international integration and globalization, increased competition provides a refusal to seek and use a universal, single means or formulas for regulating the development of industry and its structural units in the national macroeconomic environment. therefore, it is necessary to combine not only different but also mutually exclusive positions to carry out a balanced combination of components of the process of regulating the development of industry, based on adequate requirements of reality and long-term strategic efficiency of the functioning of the subjects of the national economy. the strategic opportunity of such a productive combination is contained in all the real options or alternatives to the development of industry, provided the optimal basis of the combination is found. alternative development options in the industrial sector: – internationalization with the use of insuring, which provides self-sufficiency of internal resources of the industrial industry and the extermination as a pool of competences of the subjects of the macroeconomic environment within the relationship of partnership and interdependence; – centralization and decentralization of controlled segments of the industrial sector; – development of associative intra-industry and interbranch associations; – the nature and extent of institutional intervention in the formation, operation, and development of the industrial sector and its structural units; baltic journal of economic studies 132 vol. 5, no. 3, 2019 – application of the system integrator of industrial infrastructure development; – the optimal ratio of innovation-investment approach in the development of the industrial sector. the development of industry in the national macroeconomic environment should deviate from the raw material-oriented model, and be guided by the model of maximum value added. the results of management in the industry are characterized by the following instrumental provision: added value, profitability and sectoral cumulative income, which determine and confirm the competitiveness of the industry and its subjects, their potential development and business activity. analytical information on the formation of a net financial result in the industry for five years is presented in table 3. the trend in recent years has shown the resumption of positive results in the industrial sector. with an increase in the net income from the sale of industrial products in 2.87 times in 2017 in relation to 2013, the net financial result increased 14.47 times. the financial and economic outcomes of the industry in the country are far from indifferent to the relevant institutions of the national macroeconomic environment in terms of the ability of its subjects to pay in full their obligations on taxes and fees. in turn, the share of subjects of the industrial sector, which received losses is constantly decreasing, and profit – is increasing, which indicates the dynamic growth of economic performance in the industry and the potential for its effective development. the main analytical tool that shows the effectiveness of business results in the industrial sector is profitability. the profitability of operating activities in the industry by type of economic activity for 2013–2018 is presented in table 4. the total profitability of the main activities of the industrial sector shows the positive dynamics of the last five years, indicating a gradual recovery of the potential for its development. profitability from 1.6% (2013) to 7.0% (2018) is a confirmation. an increase in profitability, with a negative net financial result in 2014–2016, shows a significant impact on the results of management in the industrial sector of income and expenditure from the investment and financial activities of its subjects. the profitability of the industry is its profitability and the tool for evaluating the economic efficiency of the activity. analytical indicator of profitability comprehensively reflects the degree of efficiency of using financial, material and labour resources in the industry. indicators of profitability of operational activity in the industry by types of industrial activity indicate the diverse efficiency of their work. the highest profitability is observed in the extractive industry and the development of quarries (40.9%), while the lowest, negative – water supply, sewage, waste management (-5.9%). dynamic analysis of sources and structure of financing of innovative activity of the industrial sector of the national economy of ukraine for the period of 2000–2018 reflects the minimum share of the state in its financing. it should also be noted that the innovation and investment capacity in the industry is primarily due to the financial potential of its subjects, which is noticeably increasing, the evidence of which in recent years is the dynamics of capital investment in industry (figure 2). table 3 formation of net financial result in the industry (uah million) indexes years 2013 2014 2015 2016 2017 net income from sales and net earned insurance premiums 962468,6 1488759,1 1854656,7 2249905,6 2760386,3 other operating income 104483,4 193102,8 280319,6 180307,0 156979,2 other income 16983,0 50131,5 135957,8 106274,6 61777,9 operating expenses 1033853,9 1655055,5 2116227,4 2332869,4 2730516,9 other expenses 38768,3 243351,8 336067,5 211187,3 161164,8 cost of sold products (goods, works, services) 943865,7 1243362,8 1544980,2 1881663,1 2273216,3 net financial result 3670,6 -178730,9 -188267,9 -24724,7 56124,0 table 4 cost-effectiveness of operating activities in the industry (%) industrial sector years 2013 2014 2015 2016 2017 2018* industry -3,0 1,6 0,9 4,2 6,8 7,0 mining and quarrying 12,5 21,4 6,4 16,7 34 40,9 manufacturing industry 2,1 -0,6 0,7 3,0 4,6 3,4 supply of electricity, gas, steam and air conditioning 1,3 -0,1 -0,8 2,1 1,5 2,4 water supply; sewage, waste management -6,6 -4,9 -5,7 -8,0 -3,0 -5,9 baltic journal of economic studies 133 vol. 5, no. 3, 2019 the main factors that in recent times have a significant impact on industrial development: political instability, partial annexation of the country’s territory, sectoral problems in the national macroeconomic environment, and others. the main problem areas of regulation development of industry in the national macroeconomic environment should include the following: – political instability and hostilities in the eastern part of the country; – absence of a single innovation-investment development strategy in the national macroeconomic environment; – a significant outflow of skilled labour necessary for the development of the industry; – high dependence on the export of raw materials; – prevalence of subjects of the industry with low added value; – a significant level of import of industrial products; – disproportionate regional concentration of subjects and objects of the industrial sector; – insufficient resource efficiency in the industrial sector; – not systematic environmental measures and a high level of pollution; – lack of synchronization of all processes in the national macroeconomic environment, taking into account the vectorial orientation of the country’s development. the analysis of the goals of national development and the expected contribution of industrial policy to their achievement, as well as the search for ways to solve the key problems of industrial development, has allowed to distinguish the following tasks of the industrial development strategies, which can be defined as intersectoral priorities of the industrial policy of the country in the medium-term perspective: modernization and growth of industrial production; regional development of industry; increase of resource efficiency of industry (strategy of development of the industrial complex of ukraine for the period till 2025, 2018). 0 20000 40000 60000 80000 100000 120000 140000 160000 2011 2012 2013 2014 2015 2016 2017 u a n m ln . years figure 2. dynamics of capital investments in industry for the period of 2011–2017 (uah million) (built on the data of the state statistics service of ukraine) 5. conclusions the main functions of regulating the development of the industrial sector are: comprehensive support and development of competition in the industrial market; adequate antimonopoly regulation; protection of the rights of industry and consumers of their products; support for the effective functioning of the subjects of the industrial industry and their structural units. the conceptual guidelines for the regulation of industrial development should include the following: the study of the existing components of the industrial development environment in the national economy; identification and isolation of weaknesses in the components of the institutional regulatory environment that influence the effectiveness of socio-economic development of the subjects of the industrial sector; the formation of systemic measures to create favourable conditions for the development of industry in the national macroeconomic environment; development of intra-industry and inter-sectoral regional and national programs to promote the effective development of industry; calculation of expenses for the implementation of the proposed program and its expected efficiency; formation of alternative development programs. effective regulation of the development of industry in the national economy is to create a favourable institutional environment for qualitative development in accordance with the stated goal, strategic goals and tasks at the national and regional level. thus, the main goal of regulating the development of industry in the national economy is to adhere to the priority line of growth of positive results of industrial activities that will ensure socio-economic development of the sector and macroeconomic indicators of the country. the application of certain forms of regulation of the development of industry in the national economy depends on the conditions of the functioning of the baltic journal of economic studies 134 vol. 5, no. 3, 2019 national macroeconomic environment, the set strategic goals, and the international situation. the rationality and efficiency of the industrial development regulation system can have both the same and opposite vectors of direction relative to the total component of these vectors of the effectiveness of the regulatory system in the national macroeconomic environment. the process of regulating the development of industry in the national economy operates primarily as an ordered system; therefore, it is expedient to consider the regulation of industrial development in terms of a systemic approach in the macroeconomic environment. the basic elements of a particular system are the purpose, strategic objectives and objectives, principles and constraints, regulatory functions, as well as institutional actors that have an impact on industry and its structural units, with the help of wellgrounded tools, taking into account relevant factors and guided by the corresponding result of the national development of the country: sustainable economic development in the national space; social stability and a rise in living standards in a national society; ensuring an adequate level of national security. as a result, the industrial sector should become the main driver of innovation and investment development in the national macroeconomic environment of the country. references: concept of the national target economic program of development of industry for the period up to 2020: order of the cabinet of ministers of ukraine dated july 17, 2013, no. 603-p. date updated: 12/25/2013. retrieved from: https://zakon.rada.gov.ua/laws/show/603-2013-%d1%80 (accessed 12 june 2019). melnik, a. f., vasina, a. yu., zhyluk, t. l., popovich, t. m. (2011). national economy: teaching. manual / ed. a. f. miller. kyiv: knowledge. retrieved from: https://idruchniki.com/1212012441817/economics/ derzhavne_regulyuvannya (accessed 12 june 2019). official website of the state statistics service of ukraine. retrieved from: http://ukrstat.gov.ua (accessed 12 june 2019). strategy for the development of the industrial complex of ukraine for the period up to 2025. project. official text dated april 17, 2014. retrieved from: http://search.ligazakon.ua/l_doc2.nsf/link1/nt4284.html (accessed 12 june 2019). stigler george, j. (1971). the theory of economic regulation. the bell journal of economics and management science, 2(1), 3–21. trebing harry, m. (1987). regulation of industry: an institutionalist approach. journal of economic issues, 21, 1707–1737. vengega, d. i. (2015). strategic directions of increasing the efficiency of state regulation of industrial production in ukraine. global and national problems of the economy, 6, 112–118. retrieved from: http://global-national.in.ua/ archive/6-2015/24.pdf (accessed 12 june 2019). baltic journal of economic studies 67 vol. 2, no. 2, 2016 measures of the state for introduction deoffshorization in stock market of ukraine oksana kiktenko1 classical private university, ukraine abstract. the purpose of the article is to improve monitoring and control in the system of state regulation of the stock market and to develop practical recommendations for an integrated mechanism, which is aimed at stabilizing and improving the functioning of its state regulators. methodology. the following research methods were used: analysis and synthesis – to identify the most important factors affecting the operation of the stock market, consolidation of trends and evaluation the effectiveness of individual measures of government regulation; statistical analysis, comparison and generalization – to study the effectiveness of the regulatory bodies of the stock market in ukraine. results. it’s necessary to introduce deoffshorization, which is a tool of economic mechanism of the development of state regulation of the stock market and optimal combination of the tax burden, comfortable business environment and the country’s stock market capitalization. practical significance. practical recommendations on the need to introduce deoffshorization in the stock market of ukraine are seen as a tool of economic mechanism for further state regulation development of the stock market, used in the formation of proposals to introduce deoffshorization in the stock market in the regulations of the national commission on securities and stock market. value/originality. implementation of the deoffshorization in the stock market will allow the state to strengthen the protection of investors’ rights, it is a strategic goal of ukraine, as well as to strengthen the local stock market and increase its credibility among the population. key words: state regulation, participants of stock market, regulators of the markets, efficiency, integration, listing, self-regulation. jel classification: g15, g18, e 44 corresponding author: 1 department of public administration and land registry, classical private university. e-mail: kiktenko_@list.ru 1. introduction the by lack of a common the position of stock market separate establishments interferes with development of effective policy deoffshorization of it’s. it is necessary to introduce restrictions for transactions in this market between state structures and the commercial organizations in which shareholders or executives are close relatives of heads of the respective government institutions; to check and carry out monitoring of the companies with the state participation regarding the existence of corruption schemes and money laundering through the offshores. 2. the problems of deoffshorization in stock market the problems how of increase the level of stock market transparency are investigated. advantages liquidity of stock market increase are considered. the priority directions of process of deregulation and liberalization are suggested, etc. reduction of direct state intervention. in general it is possible to point out various problems of deoffshorization in stock market. concerning export of the capitals to the offshore received illegally, rather negative availability the consolidated position which completely corresponds to the international trends of anti-offshore. however the illegal capital most often is transformed by means of offshore financial policy into legal. concerning rather aggressive minimization of the taxation corporate sector with use of offshore networks use. the uniform point of view isn’t available. this position rather debatable. along with opponents of such policy encouragement there are their obvious supporters, who claim, that the application of the taxation minimization schemes is conventional for the international practice, they increase stock market competitiveness. besides, the use of the offshore serves as protection of property against raider captures by law enforcement agencies and criminals. in offshore jurisdictions there is an independent judicial system, clear and convenient laws for doing business, bigger trust to foreign banks and other investors. at last, one more argument of offshore supporters is the statement that the earned capital can’t be effectively used in economy today. baltic journal of economic studies 68 vol. 2, no. 2, 2016 currently ukraine can not do without use of offshore so far, but such an opinion is lobbied by shadow structures. such point of view is expressed by part of business and wealthy and it has to force public authorities to begin solving more actively the deoffshorization problems in stock market. however it should be noted that supporters of the offshore use seek to create a tax oasis (for example, investment companies, innovative funds, etc.) which would allow partly to compensating investment climate of ukraine. 3. the state programs soft deoffshorization deoffshore structures in stock market are first of all, the centers of getting profits which, they have to receive in ukraine and hide from taxation. the state programs soft deoffshorization are made under the influenced of a pro-offshore view out also some official. they assume the cancellation of all bans and development of the capital market, which to place of the companies shares during the privatization in the market, providing thereby enables liquidity, stimulation of long-term insurance and voluntary pension savings, its infrastructure improvement of the financial markets, etc. it will promote the return of business to ukraine. thanks to these measures until the number of the companies in national market to 2016 has to increase from 6 to 100%, the amount of securities trading of the ukrainian companies in stock market has account for than 90% instead of 50%, and the amount of the pension savings invested in shares in the ukrainian stock market had to approach up to 50%. at the same time, unlikely these offers can be considered as just deoffshore as they don’t include the use of offshore financial networks. the main directions of deoffshorization policy can become as the measures promoting the offshore as well as the measures which motivate business to refuse to export assets in these jurisdictions. at the same time, the priority is given to stimulate the stock market measures. among them the expansion of tax benefits for private investors is offered, for example, introduction of privileges for investments into securities (christofields, 2003). disproportions of national stock market, which need adjustments, the following: diagnostics of the main stages of stock market monitoring; essential prevalence of unorganized stock market over organized, and external investors – over internal; domination corporate control in stock market and investment limitation of his secondary segment; high specific weight of the enterprises of key branches of economy in the general capitalization and in a pool of national «blue chips»; considerable concentration of the market (domination of small group of issuers) both on trade volumes, and on capitalization indicators; underestimation of many companies of issuers by the market owing to incomplete insufficient of information about results of their activity and investment intentions (federation of european securities exchanges statistics methodology, 2010). the monitoring diagnostics of stock market has to be carried out during monitoring procedure and stability monitoring of stock market. financial monitoring of stock market is part of supervising functions of the government. his main objective is to provide bodies of stock market with information, reflecting results of activity in this market and influence of the factors, defining stability of a banking system. the main objectives of monitoring are: collecting and accumulation of information which reflects the main indicators of economic development of the country in the context of dynamic development of stock market; analysis and forecast of financial stability indicators of stock market; assessment of system of stock market risks; identification and assessment extent of influence of government departments, which define the stability of stock market; assessment of efficiency of the actions, extent which are carried out within the state of stock market regulation (polishchuk, 2013). 4. methodology the comparisons and generalization based on recent experience of the last years, efficiency of the state tools use in overcoming of stock market crisis depends on the purposes coherence with tasks and mechanisms of structural, institutional and tax reforms. considering destructive impact of system crises, it is necessary not only to fight against consequences of their action, but also to foresee them. the use of the state tools for deoffshorization introduction in stock market is appropriate at the following levels: – deoffshorization at the macroeconomic level – use of financial instruments; – deoffshorization at a microeconomic level – use of operational tools; – deoffshorization which is characterized by full-scale budgetary and financial stabilization of stock market, which leads to stabilization of inflation with the use of structural tools. the acceptance of similar measures would certainly an important step for the saving of the capitals in ukraine. however, these measures won’t become a turning point for reorientation of the investor to the ukrainian jurisdiction, where, at least, serious reasons remain attract which the ukrainian capitals to offshores. besides, for the realization of these actions it is necessary to make essential changes into the current legislation wich is also a difficult task. a number of the legislative initiatives aimed at deoffshorization of economy, are prepared be separate departments. for example, legislators offered to create certain conditions of the foreign economic agent for those firms which use foreign jurisdiction. the obligatory requirement to the offshore companies is offered to introduce to show all the beneficiaries and to explain, why they are registered in low-tax jurisdictions, baltic journal of economic studies 69 vol. 2, no. 2, 2016 certain restrictions access to any kind off budget money, to participation in competitions of state procurements. it is necessary to provide competent authorities with access information about participants of stock market in all cases, which identifies founders, trustees and beneficiaries of foreign trusts, control of which is exercised in ukraine or trustees of which are residents, as well availability of the international standards of an exchange and protection of tax information. the deoffshorization policy has fragmentary not always consecutive and very often declarative character. it is proved the above mentioned analysis (rebrik, 2012). therefore we offer a system of measures on deoffshorization in stock market which contains several original offers which can significantly weaken the level of degree deoffshorization, and it also supplements and develops some proposition. at the same time it will be a question generally about the deoffshorization connected with legal use of the offshore although. the proposed measures should also weaken «illegal offshore economy». the deoffshorization program in stock market has to be based on several system actions: – cardinal improvement of conditions for implementation of the state supervision, including institutional and political reforms; – tax maneuver due to the revision of the tax system with transfer of the center of gravity of investors’ tax incentives into the ukrainian jurisdiction; – strengthening the level of responsibility for the violation of the tax laws, which complies with the international practice; improvement of the international cooperation regarding an exchange of tax information and that of fiscal violations investigations. the important direction of stock market state regulation of ukraine is systematic questions of the central depositary, in particular, the definition of the consolidating structure based on the state national depositary of ukraine. the universal practice shows that, as a rule, there is a single depositary in the developed countries, which usually is a private property. so in eu countries there are separate cases of the organization of central securities depositories. so, the czech republic has three depositaries (two private – for corporate securities, one – is a property of the central bank for the state securities). spain has four private depositaries (for corporate and state securities at the same time) where the central bank’s share accounts for 5% (roxburgh, lund, 2010). there are different models of the organization of central securities depositories in some countries. so, four countries of the cis have a single central depositary for corporate and state securities: in georgia and moldova the central depositary is 100% private, in kazakhstan is 51% private (49% is a property of the central bank), in belarus – 100% state ownership. as for the other developing countries such as argentina, brazil, chile and south korea, they have a single 100% private central depositary. it is important to point out the advantages of a single depositary, which results in cost-effectiveness at the expense of large scales because of a great number of transactions and creating positive conditions for consolidation of administrative divisions functions of securities market (depreciation), as well as consolidations of depositary and clearing functions, which enables to reduce risks. the transparency of stock market is thought to be a necessary condition of its development in ukraine. there are problems of regulation and information disclosures in the stock market of ukraine: the investment public does not always have full access to necessary information and does not always receive it on time; participants of the stock market do not understand the importance of the systematic and complex publication of information, which results in regular, reliable, full and actual information in the market. 5. findings for the purpose of improvement of stock market information transparency of ukraine, it is provided: practical introduction of the electronic document flow with the application of a digital signature by the participants of the stock market in their activities and reports; obligatory disclosure of the securities by issuers who have made their public placement and information about the results of the activities according to the standards; toughening of requirements as to disclosure of information by issuers, first of all, by those whose securities have undergone the procedure of listing or are speculated in the stock exchanges; legislative regulation improvement of questions what information must be referred to as to insider, definition of persons who are considered insiders, as well as the responsibility for the use (disclosure) of insider information. the stock market of ukraine by the level of maturity and risks is related to the markets which are at an initial stage of its development. because of considerable currency, price and credit risks which specify the stock market of our country, foreign investors’ interests in operations of the ukrainian securities purchase and sale have been gradually decreasing. the ukrainian stock market has to compete for volumes of investment resources with other stock markets. the increase of competitiveness and civilized integration with the international capital markets have to be priorities of stock market state regulation in ukraine. the equal opportunities for participants on conditions of fair competition, more favorable state policy of regulation and taxation than in other countries have to be provided. in the longer term, the ukrainian dealers of securities have to transform into full-function, financially steady investment institutes, which will provide their clients with a wider and better range of financial services and products. the stock market of ukraine has to become part the world market of financial resources, providing foreign investors with the reliable mechanism for implementation of portfolio investments into the economy of ukraine. baltic journal of economic studies 70 vol. 2, no. 2, 2016 the insufficient level of population’s involvement into the financial area is explained, in particular, by the low level of publicity and trust to financial instruments. for the increase of information transparency in the stock market, it is provided: the definition of target audience for carrying out the actions aimed at the involvement of the population in the stock market, as well as development of methodical recommendations for each of target groups; the preparation and realization of the actions aimed at promoting information among citizens on their rights and opportunities in the stock market for personal savings investments; introduction of educational programs for heads of local councils and public administrations, jointstock companies and potential issuers. 6. conclusions regulators should control additionally a number of indicators of such operations demonstrating the increase of transparency of the stock market: liquidities, placement costs, a ratio between expenses of placement and the attracted financial resources, etc. also, the state has to control in some cases the volume of the raised funds according to the ipo programs, especially concerning the placement of a big portfolio of securities of the enterprise, strategically important for ukraine. the increase in liquidity of the stock market assumes unloadings of the its built-up system problems, in particular: ensuring stabilization of functioning, the increase liquidity level of securities market and expansion of a potential investors circle (insurance companies, pension funds, legal entities); the development of innovative financial instruments of the securities market, application of technologies of securitization; introduction of mortgage securities to economic circulation which can be issued directly by mortgage creditors or mortgage institutions of the second level. the regulation of stock market is currently undergoing the process of deregulation and liberalization, that is the reduction of direct state intervention. however, the process of deregulation doesn’t mean full refusal by the state to regulate the stock market and consolidate the exchanges, but gradual transition from administrative to indirect methods of regulation and transfer of part of the regulating powers to market systems of regulation, including self-regulatory organizations. thus, the creation of one or the other mechanism of stock market regulation is influenced by the integrated set with institutional, national historical and macroeconomic background. therefore, the requirements which the system of stock market state regulation has to correspond to, including a transition period, have historical nature. they depend on the power of the state and maturity of participants, as well as the objectives which we set up when the mechanism of stock market state regulation was defined. references christofields ch. (2003). the link between adherence to international standards of good practice, foreign exchange spreads, and ratings. imf working paper, (74): 31–37. federation of european securities exchanges statistics methodology (2010). version 5.2. (1) : 25 – retrieved from: http://www.fese.eu/_lib/files /fese_statistics_methodology_5_2_january10_final.pdf. polishchuk v. (2013). topical issues of the organization of the external state financial control: the world experience and the present situation in ukraine. innovations, (12): 104–106. progress in the implementation of the g 20 recommendations for strengthening financial stability: report of the financial stability board to g 20 finance ministers and central bank governors 10 april 2011. [electronic resource]. – retrieved from: http://www. financialstabilityboard.org/publications/ r_110415a.pdf. rebrik y. (2012). methodical aspects of stress testing of the bank’s liquidity, taking into account the standards of basel iii. finances of ukraine, (4): 89–97. roxburgh ch., lund s. (2010) global capital markets: entering a new era. mckinsey global institute : 31–38. retrieved from: http://www.-mckinsey.com/mgi /publications/fifth_annual_report_executive_ summary.asp u.s. securities and exchange commision. – mode of access: http://www.sec. gov/ world federation of exchanges: statistics; statistics definitions. – retrieved from: http://www.world-exchanges.org/ statistics/statistics-definitions. оксана киктенко меры государства по внедрению деофшоризации на фондовом рынке украины аннотация. целью роботы является совершенствование мониторинга и контроля в системе государственного регулирования фондового рынка и разработка практических рекомендаций по комплексному механизму, направленному на стабилизацию и повышение эффективности функционирования его государственных регуляторов. методика исследования. были использованы следующие методы исследования: анализ и baltic journal of economic studies 71 vol. 2, no. 2, 2016 синтез – выявить наиболее важные факторы, влияющие на работу на фондовом рынке, консолидацию тенденций и оценки эффективности отдельных мер государственного регулирования; статистический анализ, сравнение и обобщение – для изучения эффективности регулирующих органов фондового рынка в украине. результаты исследования. необходимость внедрения деофшоризации, что представляет собой инструмент экономического механизма обеспечения развития государственного регулирования фондового рынка, оптимальную комбинацию налоговой нагрузки, удобных условий для ведения бизнеса и капитализации фондового рынка страны практическое значение. практические рекомендации о необходимости внедрения деофшоризации на фондовом рынке украины, представляет собой инструмент экономического механизма для обеспечения дальнейшего развития государственного регулирования фондового рынка, использованные при формировании предложения о введении деофшоризацию на фондовом рынке в положении о национальной комиссии по ценным бумагам и фондовом рынке. значение/оригинальность. внедрение деофшоризации на фондовом рынке позволит государству усилить защиту прав инвесторов, что является стратегической задачей украины, а также поможет укрепить отечественный фондовый рынок и повысить уровень доверия к нему со стороны населения. baltic journal of economic studies 171 vol. 6, no. 5, 2020 corresponding author: 1 kyiv national university of technologies and design, ukraine. e-mail: 105534165p@gmail.com orcid: https://orcid.org/0000-0002-6050-6500 doi: https://doi.org/10.30525/2256-0742/2020-6-5-171-177 foreign currency refinancing as a new element of stimulating the economic development of transition economies andrii hrona1 abstract. transition economies require finding and implementing new elements to stimulate their development, especially with regard to the economic systems of the former soviet countries (ukraine and belarus). under these conditions, it is important to use the experience of other transition economies, which includes the use of foreign currency refinancing. purpose. substantiation of the introduction of foreign currency refinancing as a new element of stimulating the economic development of transition economies through assessment of the development of the mentioned economies in belarus and ukraine. design/methodology/approach. the study employed a quantitative analysis of statistical data to assess the development of transit economies in ukraine and belarus over the 21-year period. correlation and regression analysis was also involved to identify key areas of impact of foreign currency refinancing on transitive economic systems. in this case, it was proposed to use five regression functions (linear; exponential; polynomial; logarithmic; power). it was separately proposed to determine the correlation ratio between the key areas of impact of foreign currency refinancing on the transition economy and the volume of foreign exchange refinancing using three methods: the determination factor; checking the correlation coefficient on the chaddock’s scale; comparison of the correlation coefficient with the critical correlation coefficient. findings. the article analyses the development of the transition economies of ukraine and belarus over the 21-year period (from 1999 to 2019) and emphasises that since 2008 the development of economic systems of the countries selected for the study has almost stopped despite activities (tools) used to stimulate the growth of national economies. the authors prove the importance of finding and using new elements to stimulate the economic development of the economies of belarus and ukraine. the use of foreign currency refinancing as a new element of stimulating the development of economic systems of ukraine and belarus is justified. the mechanism, beneficial and negative impacts of the use of foreign currency refinancing for transition economies selected for the study are identified. the key areas of influence of foreign currency refinancing on the economic systems of belarus and ukraine are identified, where the size of lending; revenues of budgets of different levels, business entities, households are the main ones. at the same time, the authors managed to refute the possibility of a significant negative impact of currency refinancing on the growth of the monetary base, inflation and devaluation processes in the countries selected for the study. practical implications: the conducted research is important for ensuring the long-term development of transition economies, primarily in ukraine and belarus. originality/value: the study will allow to identify key areas of impact of foreign currency refinancing on transitive economic systems, and revealing its beneficial and negative impacts for economies of this type on the example of ukraine and belarus. key words: foreign currency refinancing, the economy of belarus, the economy of ukraine, economic development, key areas of influence, transitional economies. jel classification: e51, e52, e58 1. introduction economies in transition have significant economic growth potential (lyasnikov, usmanov, magaramov, omarova, 2019). significant industrial and social bases, including a quality system of education and employee training, allow them to ensure high rates of economic development over long periods of time, and move to the list of developing countries with high incomes, providing their population with living standards and economic opportunities no worse than in a number of economically developed countries (tsaurai, ndou, 2019). poland, the czech republic, lithuania, and baltic journal of economic studies 172 vol. 6, no. 5, 2020 latvia (dombi, 2013; iradian, 2014) can be called examples of successful development of transition economies. at the same time, we note significant problems in the development of transition economies in the postsoviet space, which include ukraine and belarus. being geographically close to successful transition economies and having even greater economic potential than the above-mentioned countries of central and eastern europe, these countries have not been able to fully realize it (benešová, et al, 2017; alexiou, vogiazas, solovev, 2020). we note a set of modern economic and social problems that hinder the effective development of economic systems of ukraine and belarus. the main problems include a large number of “institutional traps”, corruption, shadow market size, loss of competition in domestic and foreign markets, ineffective state support for small and mediumsized businesses, low innovation of the economy and production, inefficient social support system, critical shortage of investment and credit resources (ghedrovici, et al., 2013; benešová, smutka, 2016). one of the key problems of the economies of ukraine and belarus is the problem of attracting investment and credit funds, both in terms of size and cost of funding (khamutovska, 2013; adarov, et al, 2016). under these circumstances, countries need to find new ways to attract credit resources, where it is possible to use the crisis and post-crisis experience of south korea, hungary, poland and the philippines to use foreign currency refinancing of the country’s banks by the central bank to stimulate their lending activity and reduce credit costs (mihaljek, subelyte, 2011). given the above, we consider it appropriate to determine the research objective as follows: the rationale for the introduction of foreign exchange refinancing as a new element to stimulate the economic development of transition economies based on the assessment of those economies in belarus and ukraine. this objective requires confirmation or refutation of the following hypotheses: – economic systems of belarus and ukraine have accumulating development problems; – foreign currency refinancing will have both positive and negative effects on transition economies; – foreign currency refinancing has a limited number of key areas of influence on transition economies. 2. literature review we note a significant scientific interest in the development of transitional economies, including through the use of monetary policy instruments. it is possible to distinguish two major areas of research in this direction: revealing the problems of the development of transitive economies, where one of the ways to stimulate the economy is monetary policy; research of various aspects of refinancing in the context of stimulating the development of transitive economic systems. regarding the first direction of research, the following works are worth noting: – gorynia m. and wolniak r . (2002), who try to reveal the advantages and disadvantages of globalization for countries of this type on the example of the transitive economy of poland; – a team of scholars led by durčáková j. (2002), who reveal the impact of monetary policy on the development of transition economies through the establishment and regulation of the exchange rate and its impact on inflation in countries of this type; – fries s. and taci a. (2002), who study the impact of banking reforms and banking activities on the development of transition economies; – dowling m., wignaraja g. (2006), which reveal the problems of economic development of the central asian countries that were part of the former soviet union, including the impact of the monetary policy and its instruments on the transition economy of these countries; – directorate-general for economic and financial affairs, european commission (2009), which examines the economic development of the western balkan countries (albania, bosnia and herzegovina, croatia, macedonia, montenegro, serbia, kosovo), including the problematic issues of monetary policy implementation with an emphasis on attracting loans and investments; – melnyk l., kubatko o. and pysarenko s. (2014), who assessed the impact of foreign direct investment on the economic development of countries with transition economies; – a group of scholars led by v.a. arsenyeva (2016), who focused on the impact of innovation on the development of transition economies on the example of the situation in the russian federation. the following scholars studied the issue of refinancing in the context of stimulating the development of transitive economic systems: – de melo m., denizer c. (1997), who, based on a study of the monetary policy of twenty-six countries in europe and central asia with transition economies, identified the features of their development and assessed the impact of refinancing on the development; – berglof e., roland g. (1998), who focused on budget constraints and refinancing within the interaction of banks and borrowers in transition economies; – camen u. (2006), who examines vietnam’s monetary policy, focuses on the tools to be used to increase its effectiveness in the country’s integration into the world economic community. the author also studies in detail the features of macro-level refinancing transactions in the vietnam’s economy; – park a., shen m. (2008), who focused on studies of china’s monetary policy, and justified the need baltic journal of economic studies 173 vol. 6, no. 5, 2020 to decentralize and liberalize its banking system, in particular when improving the efficiency of refinancing to increase the loan performance of chinese banks; – mihaljek d. and subelyte a. (2011), who studied the practice of application of monetary policy instruments by central banks of the countries, including transition economies, in the context of their effectiveness in stimulating the recovery of national economies of these countries. the issues of refinancing and attraction of foreign currency resources as alternative instruments of monetary policy, as well as conducting refinancing transactions by central banks were separately covered. – eichenbaum, m., rebelo, s., wong, a. (2018), who focused on the impact of monetary policy on the country’s economy through mortgage refinancing, and investigated the impact of low interest rates on the functioning of the economic system. this study can be fully used for transition economies; – bonizzi b., laskaridis c. and griffths j. (2020), who tried to study private lending and debt risks in the context of the development of the countries building their economic systems, which include transition economies. the instruments of monetary policy, including refinancing, are also studied. despite a large number of scientific papers on the issue of stimulating the development of transit economies, we note the need for a detailed study of introducing alternative instruments of monetary policy of central banks, especially foreign currency refinancing with a focus on countries in need of accelerated economic development, in particular belarus and ukraine. 3. materials and methods the study was based on the data and an empirical analysis of the development of the economic systems of the two former soviet countries with economies in transition (belarus, ukraine) for 1999 to 2019. we took statistics from the databases of the state statistics service of ukraine, the national statistical committee of the republic of belarus, and the world bank. the study used a quantitative analysis of statistics to assess the development of transit economies of ukraine and belarus over a period of twenty-one years. we also used a correlation and regression analysis to identify key areas of impact of foreign currency refinancing on transitive economic systems. for this purpose, we proposed to use five regression functions: – linear: у = b0 + b1xit; – exponential: y= b0eb1хit; – polynomial: y= b0 + b1xit + b2xit2; – logarithmic: y= b0 + b1ln(xit); – power: y= b0xitb1; where у is a key area of impact of foreign currency refinancing on the transition economy; x means foreign currency refinancing volumes, monetary units; b0 is a constant; b1 is the regression coefficient; i is a country under research (in our case, ukraine and belarus); t is the time period of the study (in our case, the 21-year period from 1999 to 2019). based on the works of v. r . baraz (2005) and s. tsoneva (2020), we separately proposed to determine the correlation ratio between the key areas of impact of foreign currency refinancing on the transition economy and foreign currency refinancing volume using three methods: determination factor (r2); checking the correlation coefficient (re) on the chaddock’s scale; comparison of the correlation coefficient (re) with the critical correlation coefficient (rc) for the significance level (α) equal to 0.01 and the degree of freedom (f ) equal to 20 (the difference between the time interval (21 years) and the number of indicators of the model (1)). to select the key areas of impact of foreign currency refinancing on transitive economic systems, we proposed to choose those with two of the three methods to assess the correlation ratio indicate a strong or very strong correlation between the indicators of the model. 4. results 4.1. assessment of the development of economic systems of ukraine and belarus since gaining independence in 1991, the economies of ukraine and belarus have been actively transformed in the context of the development and introduction of market mechanisms. at the same time, while ukraine uses a model where the state mostly performs regulatory functions, having a fairly low impact on the economy through state-owned enterprises, belarus focuses on the development of the public sector (alexiou, vogiazas, solovev, 2020). we can also emphasize the export-oriented economic systems of both countries (benešová, smutka, 2016). in this context, it is important to analyse the development of the economies of ukraine and belarus since 1999, when the countries recovered from the structural economic crisis caused by the transition from a command to a market economy (table 1). analysis of the development of economic systems of ukraine and belarus allows drawing the following conclusions: – despite the chosen models of development, the economies of belarus and ukraine had almost identical trends, taking into account that economic system of belarus is smaller in quantitative terms than the economic system of ukraine; – two crises (2008-2009 and 2014-2015) had a negative impact on the economies of ukraine and belarus, but belarus went through these periods somewhat more smoothly and showed a higher pace of economic system development, but the difference was not critically significant; baltic journal of economic studies 174 vol. 6, no. 5, 2020 – we note significant problems of ukraine and belarus with export activities in 2017-2019, despite the significant national currency depreciation, especially with regard to ukraine. this situation indicates the loss of competition in foreign markets by manufacturers of countries selected for research; – we note the high level of inflation almost the entire period of the study, which has a mostly negative impact on the economic systems of ukraine and belarus and indicates the low stability of national economies. summing up the analysis, we note the need for ukraine and belarus to find effective tools to stimulate economic development in terms of increasing number of problems in the economic systems of these countries. 4.2. foreign currency refinancing in the context of stimulating the development of transition economies given the problems of the economies of ukraine and belarus and the lack of their development (as ukraine did not reach 2008 key economic indicators at the end of 2019, and belarus did not significantly exceed them (see table 1)), countries need to find ways to stimulate their economic systems. at the same time, it should be noted that belarus and ukraine either tried to implement a significant number of tools to stimulate economic development without much success, or are implementing those tools under current conditions of functioning of their economic systems (benešová, et al., 2017; alexiou, vogiazas, solovev, 2020). let us note that the critical problem that hinders the development of the economies of belarus and ukraine is the insufficient investment and credit support for business. ukraine receives investment in two main ways: – from domestic investors, which generates critically low and insufficient investment in the ukrainian economic system because most households moved away from investment activity almost completely and because of significant problems in corporate governance of ukrainian economic entities; this is especially true for investment support of small (micro-) and mediumsized business; – from foreign investors, which, in the context of distrust of this type of investors to the ukrainian market and their constant oppression by state institutions and ukrainian partners, leads to critically low investment support of the country’s economy, where resources flow in the economic system from the shadow market under the guise of foreign investment (melnyk, kubatko, pysarenko, 2014). while attracting investment, belarus emphasizes state support of the economy, which in the absence of significant financial opportunities in state institutions, as well as low efficiency of such investment leads to significant restrictions on investment in the country’s economic system. domestic private and foreign investment in belarus is limited due to a number of economic, social and political reasons (hrechyshkina, samakhavets, 2019). as regards credit resources, they are available in ukraine only to a small number of enterprises due to the requirements of banking institutions and the cost of raising and servicing, while in belarus mostly state-owned enterprises can count on affordable credit (gattini, borysko, 2018; volshunov, riabushka, bielova, 2019). given these issues, belarus and ukraine need to introduce new tools to stimulate their economic table 1 analysis of the development of the economies of ukraine and belarus for 1999-2019 indicators countries 1999 2005 2008 2009 2013 2017 2018 2019 gdp, billion usd ukraine 31.6 86.1 179.8 117.0 183.0 112.2 130.9 153.8 belarus 12.1 30.8 60.8 50.9 75.5 54.7 60.0 63.1 growth rates before 1999, % ukraine 0 272.5 569.0 370.3 579.1 355.1 414.2 486.7 belarus 0 254.5 502.5 420.7 624.0 452.1 495.9 521.5 gdp per capita, usd ukraine 636 1827 3887 2543 4030 2641 3100 3656 belarus 1210 3126 6377 5351 7979 5762 6330 6663 growth rates before 1999, % ukraine 0 212.8 139.2 220.6 144.6 169.7 200.1 212.8 belarus 0 204.0 171.2 255.2 184.3 202.5 213.1 204.0 exports, billion usd ukraine 11.6 34.2 67.0 40.0 63.3 43.4 47.3 50.1 belarus 5.9 16.0 32.6 21.3 37.2 29.2 33.7 32.9 growth rates before 1999, % ukraine 0 294.8 577.6 344.8 545.7 374.1 407.8 431.9 belarus 0 271.2 552.5 361.0 630.5 494.9 571.2 557.6 inflation, % ukraine 19.2 10.3 22.3 12.3 0.5 13.7 9.8 4.1 belarus 293.7 10.3 14.8 12.9 18.3 6.0 4.9 4.7 national currency devaluation, % ukraine 0.4 -4.9 52.5 3.4 0.0 3.2 -1.4 -15.9 belarus 64 -0.8 2.3 30.1 11.0 0.5 9.7 -2.8 * – developed by the authors based on the sources (the state statistics service of ukraine, 2020; the national statistical committee of the republic of belarus, 2020; the world bank, 2020) baltic journal of economic studies 175 vol. 6, no. 5, 2020 systems by increasing the opportunities for credit support to businesses at affordable prices, including small and medium-sized businesses. under these conditions, foreign currency refinancing can be such an instrument. the mechanism for using this instrument will be as follows: public institutions identify priority areas to stimulate economic development; the authorized banks that will provide loans are determined; borrowing companies apply for a loan; the authorized bank considers it and upon approval of the loans receives refinancing in foreign currency from the central bank; having received foreign currency credit resources through the authorized bank, the borrower sells them to the central bank and receives the national currency; when repaying the loan, the borrower buys currency in the foreign exchange market through the authorized bank, or if it is an exporter – uses its own foreign exchange earnings and closes the loan agreement; the bank gives foreign exchange resources to the central bank, which increases its gold and foreign exchange reserves. the use of this instrument has significant advantages for transition economies selected for the study of states, which include: – growth of credit support for the economic system; – growth of gold and foreign exchange reserves of central banks; – decreasing demand for currency during the loan repayment period in case the borrower is an exporter; – stimulating the development of priority sectors and industries for national economies; – increasing the number of small and medium-sized enterprises; – reducing the cost of credit resources for business; – stimulating the banking system development; – increasing business activity in the country, due to the synergy effect among other things; – growth of tax and other revenues of the state and local self-government; – increasing the income level of business entities; – increasing the household income; – reducing the unemployment; – acts as an additional instrument of the central bank as part of the currency policy. the use of a new element of stimulating the economy may, however, adversely affect the growth of the monetary base, inflation and devaluation processes in the countries selected for the study, which requires the identification of key determinants of the impact of its application. 4.3. key areas of impact of foreign currency refinancing in transition economies the above study allowed to identify possible key areas of impact of foreign exchange refinancing on the economic systems of the countries selected for the study, which should include: real gdp (gdpr); loan portfolio size (lps); budget revenues of different levels (br); income of business entities (ibe); household income (hi); monetary base size (mh); inflation (i); national currency rate (ncr). we consider it appropriate to distinguish those areas that are really key and have a high correlation with the size of foreign currency refinancing through correlation and regression analysis. to do this, we will use the regression functions and evaluate the correlation ratio of the determinants according to the three verification methods proposed by s. tsoneva (2020). table 2 shows the data obtained. in view of the above evaluation, we can note the following: – the impact of foreign currency refinancing on real gdp will be noticeable, but this factor will be one of many influencing the country’s gross domestic product (only one of the three methods of verification included foreign exchange refinancing among the key factors influencing real gdp); – foreign currency refinancing will have a strong impact on the size of lending in transition economies, as well as revenues of budgets of different levels, businesses, households (two of the three methods of verification have confirmed this); – foreign currency refinancing will have a negligible impact on the monetary base size, inflation and the national currency exchange rate (only one of the verification methods indicated a high correlation). thus, based on the results of verification of the areas of impact of foreign currency refinancing on transition table 2 identifying key areas of impact of foreign currency refinancing on transition economies factor regression model r2 rе rс rе (>, <) rс gdpr power 0.344 0.587 0.537 > lps logarithmic 0.725 0.852 0.537 > br linear 0.623 0.789 0.537 > ibe power 0.519 0.720 0.537 > hi exponential 0.677 0.823 0.537 > mh linear 0.346 0.588 0.537 < i logarithmic 0.415 0.644 0.537 > ncr power 0.390 0.625 0.537 > source: developed by the author baltic journal of economic studies 176 vol. 6, no. 5, 2020 economies on the example of ukraine and belarus, we can say that it will have the key impact on: the size of lending; revenues of budgets of different levels, business entities, households. at the same time, we can refute the possibility of a significant negative impact of foreign currency refinancing on the monetary base growth, inflation and devaluation processes in the countries selected for the study. 5. discussion transition economies need to find new ways and instruments to stimulate their economic development. at the same time, special attention should be paid to the instruments to increase the volume and reduce the cost of lending to businesses. foreign currency refinancing may be one of those instruments for the economic systems of ukraine and belarus. it is necessary to test several hypotheses. analysis of the development of the economies of belarus and ukraine for 1999 to 2019 showed that since 2008 there has been almost no growth due to the accumulating problems. thus, the first hypothesis of the study is confirmed. the study of foreign currency refinancing as one of the possible elements of stimulating the economic development of the economic systems of ukraine and belarus showed that it has a mostly positive impact on the economies of the countries selected for the study. thus, the second hypothesis is partially confirmed. the correlation and regression analysis revealed that foreign currency refinancing has a limited number of key areas of influence on the economies of ukraine and belarus, and refuted its negative impact on the monetary base growth, inflation processes and national currency devaluation. this allowed to confirm the third hypothesis of the study. given the above, we can note that the we achieved the purpose of the study set at the beginning of the work. the key value of this article is the substantiation of the use of foreign currency refinancing as one of the new elements of stimulating the development of transition economies of ukraine and belarus. in this regard, we can identify some limitations in the application of the results of this article, namely: the need to test the proposed element for other transition economies; assessment of the introduction of foreign currency refinancing on economic systems, taking into account the comparative assessment of the monetary aggregates, both in transition and developed national economies. at the same time, the said restrictions do not reduce the scientific and practical value of this article, and rather describe the prospects for further research. 6. conclusion transition economies, including the economic systems of ukraine and belarus, need to find new ways (elements) to ensure their long-term growth under the current conditions of the international and world economic systems. the intensification of business activity due to increased credit support for business entities becomes especially important, which can be achieved by introducing foreign currency refinancing of the country’s banking system by the central bank for these purposes. this makes it important and appropriate to study both the introduction of foreign currency refinancing in transition economies and its impact on economic systems of this type on the example of ukraine and belarus. the study will allow to identify key areas of impact of foreign currency refinancing on transition economic systems, reveal its pros and cons for economies of this type on the example of ukraine and belarus. the practical implementation of the proposals and conclusions of this article should be considered in the context of their importance to ensure the long-term development of transition economies, especially in ukraine and belarus. prospects for further research based on the scientific results of this study include: assessing the use of foreign currency refinancing to stimulate the economic development of transitive economic systems of countries other than ukraine and belarus; 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(2020). identification of factors influencing the influx of fdi and spillover effects from their attraction to the economy of the russian federation. american journal of economics, vol. 10(6), рр. 311–324. baltic journal of economic studies 74 vol. 6, no. 1, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: v.lagutin@knute.edu.ua orcid: https://orcid.org/0000-0001-6626-4381 researcherid: n-7693-2016 2 kyiv national university of trade and economics, ukraine. е-mail: y.yasko@knute.edu.ua orcid: https://orcid.org/0000-0002-8756-4612 researcherid: b-9894-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-1-74-79 institutional determinants of innovative development in the economy of the xxi century vasyl lagutin1, yuliya yasko2 abstract. the article analyzed the problem of institutional determinants of innovative development in the 21st century, which is not yet sufficiently understood in a scientific sense. it is established that poor quality and inconsistency of institutions with macro– and microeconomic mechanisms exacerbates the problem of institutional determinants of providing innovative development in the economy of the 21st century. the subject of the research is the institutional determinants (a set of formal and informal rules and regulations, incentives and mechanisms) that determine the provision of innovative development. economic development implies a progressive change in the institutional environment of the national innovation system. in the context of the above, it is proved that the peculiarities of the content of institutional determinants of innovative development in ukraine are characterized by complication of interconnections and forms of manifestation, strengthening of transformational tendencies. it is determined that the effect of institutional determinants is manifested through the influence of three types of institutions: primary (basic) market institutions (protection of property rights and investments, observance of rights and obligations, fixed by the contract system, freedom competition); development institutes (regulatory environment, business climate, regulatory business opportunities, judicial independence); institutes of efficiency (developed human and social capital, effective legislative support, impartiality of judges, reliability of law enforcement agencies. the research methodology is based on the methods of a holistic systematic approach to institutional analysis, interconnections and the logic of institutional determinants of innovation development. it is crucial to build holistic logical constructs (based on a model of innovative behavior) that allow a full analysis of existing institutional relationships. the purpose of the research is to analyze the institutional determinants of innovation development in the economy of the 21st century, to evaluate possible directions for more effective innovation management. regulation of scientific aspects of institutes and institutional determinants allowed to re-evaluate traditional problems of innovative development. the main conclusions of the research relate to the justification of the set of institutional determinants that ensure the effective interdependence of institutional and innovation dynamics. it is argued that the institutional determinants of innovative change cannot be considered outside the interconnections. it is determined that the most problematic issues of readiness for innovation are: a small proportion of firms that are able to perceive and implement innovative technologies, lack of sufficient resources, low interest in purchasing new technological products. it is established that the effective use of institutional determinants of innovative development is possible only on the basis of the formation and effective implementation of the mechanism for managing the institutional stimulation of relevant innovation changes. it has been shown that scientific clarification of institutional determinants is a prerequisite for a deeper analysis of the effective development of the national innovation system. only effective institutions can provide the necessary opportunities for innovative development. in this context, there is a need to further expand the institutional research of the innovation system. key words: institutes, institutional determinants, institutional stimulation, innovations, innovative system, innovative development. jel classification: e02, о12, о30 baltic journal of economic studies 75 vol. 6, no. 1, 2020 1. introduction the interconnection of institutional transformation and innovative development is evident that in various aspects is revealed in the economic literature: conceptual – a. greif (2006), d. north (1990), j. schumpeter (1942/2003); socioeconomic – d. acemoglu, s. johnson, j. robinson (2004), w. baumol (2002), d. rodrik (2007); historical and economic – m. kreuzer (2001); economic and technological – k. schwab (2018), m. guerrero, d. urbano (2019), n. carvalho, z. yordanova (2018), r . malaquias, a. albertin (2018); program-target – unctad (2018), world economic forum (2019). the low quality of institutions and their inconsistency with macro– and microeconomic mechanisms exacerbates the problem of institutional determinants of innovative development in the 21st century economy. the problem of scientific identification of institutional determinants (causes and factors) of innovation development is relevant and significant today. first of all, it is about the relevance of the research of the content of institutional rules and mechanisms for ensuring their compliance, structural and essential characteristics of institutional constraints, as well as the forms of their evolution in the process of institutional management of the new information economy. all of the above conditioned the relevance of the following scientific tasks of the research: theoretical and methodological assessment of the content of institutional determinants of innovative development, identification of features of the system of institutional determinants of information economy. the need to solve problems involved with the innovative development of the 21st century economy will require the use of new stimulating institutional determinants in management theory and practice. these tasks determined the logic of submission of the material under study. based on a systematic understanding of the interconnection and interaction between institutional and information-network transformations, prospects are opened for developing important provisions of the institutional theory of innovative development, which allows to explain both traditional tendencies and patterns, and new, not actually studied, issues of improvement of economic institutions. 2. theoretical characteristics of institutional determinants of innovative development institutionalism in this article is considered in a broad enough methodological sense, including all the main areas of modern neo-institutional theory in the context of a broad interpretation of various patterns of social (collective) forms of existence. institutional determinants will be understood to mean those factors (a set of rules and regulations, as well as mechanisms of implementation), by which the relations and interactions between entities of the innovation market are institutionally structured and the conditions for innovation development are provided. it is important not only to identify the relevant institutional determinants, but also to show: in what cases and how do they interact to maximize the positive effects? in order to the potential institutional determinants of innovative development to work, the respective institutions must be compatible in their content and form, and adequate organizations in the economy and public authorities should be capable of interaction (coordination). innovative development can only be achieved through effective institutions. existing institutions are embedded in an economy that they simultaneously reflect and shape. institutions should be embedded in relevant business practices. higher quality institutions contribute to innovative development, while poor quality ones have a negative impact on this process. institutions arise on the basis of a complex interaction of economic and socio-political factors, endogenous and exogenous circumstances, determined by mental socio-cultural factors, beliefs and customs of a given society. it is obvious that economic institutions are closely intertwined with political, legal, social and ethical standards. under these conditions, institutional theory cannot but be based on an integrated approach and analysis of the mutual penetration of these norms. in this respect, it is obvious that the influence of institutional determinants on the dynamics and perspectives of innovative development is largely determined by the specificity of civic culture and the level of development of human and social capital. a kind of stabilization framework for the innovative development of the national economy is the balance of the multi-level system of interests of economic entities. the effect of institutional determinants is manifested through the influence of three types of institutions: primary (basic) market institutions (protection of property rights and investments, observance of rights and obligations fixed by the contract system, freedom of competition); development institutes (regulatory environment, business climate, normative business opportunities, judicial independence); institutes of efficiency (developed human and social capital, effective legislative support, impartiality of judges, reliability of law enforcement agencies). the proper functionality, reliability and efficiency of the creation and systematic functioning of these institutions are the necessary conditions for ensuring the innovation of the xxi century economy. outside the holistic interaction of basic market institutes, development institutes and efficiency institutes, it is impossible to ensure innovative development in such perspectives in the 21st century areas such as: artificial intelligence, automation of robotic processes, intelligent transport systems, blockchain, intellectual things (including the internet of things), quantum and cloud computing, baltic journal of economic studies 76 vol. 6, no. 1, 2020 nanotechnology, biotechnology, fintech technology, digital ecosystems, etc. with regard to ukraine, under the current conditions, the threats of innovative development are caused by the influence of a number of destructive determinants – both external (unfavorable geopolitical situation, currency and financial instability, excessive dependence on world commodity markets), and internal (high level of corruption, oligarchization of economy, shadowing, acute structural imbalances). innovative development will be severely curtailed if there are no structural reforms adequate for fiscal and monetary policy. if earlier it seemed that the tendency of low level of innovative development in the economy of ukraine is temporary and will be overcome in the near future without much institutional effort, today it becomes more and more clear that the situation is much more complicated. a long-term trend is a violation of the natural mechanism of creative destruction (according to j. schumpeter). this is, in our opinion, the main institutional reason for the lack of incentives for the ukrainian business to innovate development. 3. model of innovative behavioral companies (formalization of tasks) despite the large inertia, firms' response to technological and innovation challenges can generally be considered satisfactory. however, questions about the effectiveness of innovation institutions, the use of incentives to promote innovation, the volume and structure of funding remain. is innovative development possible in the absence of a full-fledged innovation market and technology transfer in ukraine, poor quality and insufficient institutional determinants of innovative development? to answer these questions, at least in the first approximation, we formulate the simplest model of innovative behavior of a modern firm on the basis of adaptive management. let � �i id dn1 denote the institutional determinants (one of three types of stimulating, disincentive, neutral) that influence innovation ií( ), which should be implemented at the basic level of impact i0( ). these types of institutional determinants under specific socio-economic conditions are not alternative or mutually exclusive. in fact, the complex effect of institutional determinants of innovation development can often be explained only within the limits of all these interpretations. the general statement of the control problem in this case involves the selection of the control object – ií, the dynamics of which depend on managerial influence – id. after increasing the level of influence of the institutions � i0( ), for example, by 10 pp. (0,1) institutional incentives for innovative development, all things being equal, are increasing at i i0 00 1+( ), / � times. in this case, the external impact is determined by the amount of resources or investment costs that depend on the discount rate – δ. thus, the equation of operation of the control object will look like: � � �і i i ií t d( ) = +( )δ 0 00 1, / (1) where: t – is a certain point in time. let as a result of strengthening of stimulating influence of institutional determinants firm increases production output by 1 +( )q times. then the investment costs can be offset by increasing the income from innovation. suppose that revenue from innovation increases in proportion to output. in this case, the economic impact of the innovative activity yjt( ) will be: � �y qi i ijt í t= +( )( ) 0 00 1, / (2) where: i ií 0 0 1+( ), – innovations that the firm would introduce in enhancing the incentive effect of institutional determinants and previous output; j – kind of innovation. formulas (1) and (2) hold, first and foremost, for institutional determinants. thus, by expanding the use of innovative technologies and ensuring output growth, the firm thus creates the conditions for maximizing the economic impact of innovative development. let this increase in economic effect also occur in proportion to the change in output. in this case, the task of maximizing the economic impact of innovative development will look like: j n jty çàóìîâè = →∑ 1 � � �max j n kj j ka i s k m ij j n = ∑ ≤ = ≥ = 1 1 0 1� � � �, , , , , ,  (3) where: akj – the amount of resources spent to implement j-type innovation; sk − given volumes of resources; ij – the impact of institutional determinants on achieving the proper effect of j-type innovation. if ij (incentive and neutral determinants) is negative, this task is solvable and the total effect of implementation of innovation can be expressed by the amount of resources expended. of course, the assumption of direct proportion dependence the effect on innovation and output is simplification. the effect of implementing each type of innovation is calculated on the basis of its own compensation base. generally, their values are nonlinearly related to production. but in substantiating the conceptual scheme of our model we will proceed from the fact that the proportions between the studied indicators are constant and do not change with the implementation of this or that type of innovation. 4. specificity of institutional determinants of innovative development in ukraine in the 1990s, primary (basic) market institutes and organizations were formed in ukraine: private property, entrepreneurship, investment institute, infrastructure baltic journal of economic studies 77 vol. 6, no. 1, 2020 institutes (banks, exchanges), institute of business reputation, self-regulatory organizations. it is another matter that their content immediately turned perverted, and since the early 2000s all these basic market institutes have started to work for the interests of oligarchs and corrupt bureaucracy. for development institutions, the costs of their formation and engagement will not be excessive if the benefits of operating these institutions outweigh the costs associated with their underperformance. in the context of the above, it can be said that the process of formation of innovative development institutes in ukraine can be accelerated by identifying and supporting groups of economic entities that are in demand for these new institutions. in the 21st century, there is a larger and more complex task of establishing efficiency institutes. efficiency institutes provide an opportunity to maintain the necessary institutional environment to ensure a higher level of innovative development. these tasks in ukraine are still being addressed in a far ineffective manner with the mass of institutional distortions and strains. as a result, a true institutional archaic with its administrative and market principles was formed. formation of positive innovative expectations in ukraine is fraught with many difficulties. thus, the role of opportunism in the economic behavior of firms, the bureaucratic and corruptive constraints of innovation is too important. so far, the institutes formed in ukraine do not induce effective innovative development, and the organizations formed on their basis have no motivation to create more stimulating economic rules. the performance of institutional determinants of innovative development in terms of underdeveloped institutions is worsening. the quality of the institutional determinants of innovative development can be assessed by comparing the institutional components of international rankings. consider as an example the global innovation index, which is one of the most famous indices in the world. on this basis, a comparative assessment of a number of institutional determinants of innovative development is carried out: political position, regulatory and business environment, level of trade and competition, business experience, etc. in the 2018 global innovation index, jointly prepared by cornell university, the insead business school and the world intellectual property organization, ukraine ranked 43rd in 2018 (50th in 2017), ahead of the russian federation was 46th, moldova was 48th, kazakhstan was 74th, belarus was 86th (the global innovation index, 2017). the basis of ukraine's innovative competitiveness is human capital and research, as well as the knowledge and results of scientific research. at the same time, the ranking of ukraine is low according to the subindex "innovative capacity " in 2018, it is 58th place, and the subindex "implementation of ict" is 77th place (the global innovation index, 2017). ukraine has a rather low ranking of institutions and the institutional environment of innovation in the global space. in 2018, ukraine ranked 107th in the institution sub-index (2017 – 101), including in terms of the political environment – 122nd (122nd place in 2017), regulatory – 78th (82nd in 2017), as of business environment – 100th (78th place in 2017). market indicators of ukraine are estimated at 42.7 points, which corresponds to 89th place in the rating (81st place in 2017), incl. on loans – 84th place, investments – 115th, level of trade and competition – 45th. according to business experience, ukraine took 46th place (in terms of the number of intellectual workers it was 41st place, innovation relations – 63rd, perception of knowledge – 75th) (the global competitiveness report, 2016-2018). in the 2018 global competitiveness index, ukraine ranks 103rd in terms efficiency of legislative support in dispute resolution, 107th in the effectiveness of legislative support in appealing against decisions, 107th in social capital, 109th in corruption coverage, organized crime – 111th place, protection of intellectual property rights – 114th place, government orientation for the future – 115th place, independence of judges – 117th place, auditing and reporting standards – 120th place, property right – 129th place (the global competitiveness report, 2016-2018). the indicators of such institutional determinants are low: the legal system and protection of property rights, communications and entrepreneurship, market and regulatory opportunities, the independence of the judiciary, the reliability of law enforcement, and the impartiality of judges. the lack of a proper institutional environment in ukraine can be considered as one of the most serious barriers to innovative progress. an acute problem is the lack of sufficient resources to fund innovation and their inefficient structure. if in 2016 the volume of financing of innovative activity in the economy of ukraine amounted to 23.2 bln uah (4.6% of gross value added in industry), it was smaller in other years. the only exception was 2015 with 13.8 bln uah (3.5%) and 2011 with 14.3 bln uah (4.8%). the volume of financing for innovation activity in 2017 was very small – only 9.1 bln uah (1.4%), 2014 – 7.4 bln uah (2.4%), 2013 – 9.6 bln uah (3.2%), 2012 – 11.5 bln uah (3.7%) (ukristei, 2019). an unfavorable factor for innovative development is the almost absolute predominance in the sources of financing innovative costs in the industry of ukraine of the own funds of enterprises: 2012 – 63.9%, 2013 – 72.9%, 2014 – 85.0%, 2015 – up to 97.2%, 2016 – 94.9%, 2017 – 84.5%. the underdeveloped banking system and stock market institutions cause for a very low share of loans and funds domestic and foreign investors in financing innovation: 2012 – 0.2% and 21.0%, 2013 – 1.6% and 6.6%, 2014 – 0.1% and 7.3%, 2015 – 0.3% and 0.8%, 2016 – 0.4% and 2.7%, 2017 – 1.0% and 6.5% (ukristei, 2019). baltic journal of economic studies 78 vol. 6, no. 1, 2020 5. institutional stimulation of innovative development (managerial aspect) institutional stimulation of innovation is of paramount importance today. this means that adaptive management orientation must be combined with a gradual transition to active innovation management. it is important to base non-discretionary rules based on institutional management of innovative development: their development, use for influencing innovative behavior, management of these rules. the modern mechanism for managing innovative development is based on the connection and interconnection between state regulation, innovative business and its institutional environment (institutional determinants) in the field of modern technologies of industry 4.0. the content and logic of managing the institutional stimulation of innovative development is dictated by the specific economic situation of the firm. institutional management of innovation development is based on human capital, intellectual assets, the activities of innovator workers, research programs, financial support for innovation, investment growth, effective communication and entrepreneurship. all this enhances the innovative potential of the company. the most problematic issues of readiness for innovation are: a small proportion of firms that are able to adopt and implement innovative technologies, lack of sufficient resources, low interest in purchasing new technological products. innovative development is inseparable from enhancing the dynamism of a firm that applies self-organization principles based on its attractiveness to investors. the innovative development management system is designed to ensure that the goal is met to the fullest extent possible and to maximize the use of the incentive potential of the existing institutional determinants. in this regard, the three main management units can be considered: opportunities (innovation potential), innovation activity of the firm, the result of innovative development. there are two ways of managing innovation development modes: mode of fast development and mode of slow development. the most difficult of all aspects of innovative development regimes is the mode of fast development, especially in the context of increasing uncertainty in the making and decision making. the mode of slow innovation development is usually one of the stages of implementation of crisis management. mode of slow development is characteristic of the limited resources that a firm is able to allocate to support innovative development. increasing investment is necessary to ensure innovative development. a proper investment effect can only be achieved if effective institutions are in place. by analyzing the external institutional environment constantly, firms concentrate resources and investments on the most useful and profitable areas of innovative development. without reliable institutions for innovative development, economic mechanisms for attracting investment will not work. going beyond these limits with existing institutional determinants will only discourage innovative development. the paradox of the situation often lies in the fact that a significant increase in investment can, in our view, significantly increase the risk of destabilization of existing institutions, which are not able to ensure the proper effectiveness of innovative activity. when development and efficiency institutes are in their infancy, they cannot give proper effect as institutional determinants of investment in innovative technologies. it is considered that the resources of internal institutional sectors should become a real and adequate source of investment resources formation. improving the quality of financial market institutions is required to put this innovative development factor into practice. in the current context, the lack of institutions of capital inflows and securitization discourages investment and innovation development. financial institutional determinants must be able to fulfill their functions of effectively redistributing resources and risks to innovation. in practice, only those innovations that will be realistically capitalized and promising in terms of winning a better competitive place in the market make sense. the firm must effectively perceive market changes, responding to them faster and more accurately. this will be facilitated, in particular, by the online capabilities of networking technologies, making new market information available anywhere and in real time. the system of institutional determinants of innovative development adequate to the new conditions can be formed only on the basis of effective management. innovative modernization will be the result of successful development management. 6. conclusions the analysis makes the following conclusions. the basis of innovative development is a viable institutional system that delivers innovation when appropriate institutional determinants are in place. in the case of unsatisfactory institutional determinants, the main parameters of innovation activity remain low. when determining the effectiveness of institutional determinants of innovation development, it is correct to compare the quality of institutions with the effect obtained (result). the complex effective use of institutional determinants of innovative development is possible only on the basis of the formation and effective implementation of the mechanism for managing the institutional stimulation of relevant innovation changes. in discussing the innovative challenges facing firms in the 21st century, one should rethink the traditional role of the institutional environment, taking into account baltic journal of economic studies 79 vol. 6, no. 1, 2020 the contemporary characteristics of the institutional dynamics of the world's leading countries. it is on this basis that the scale and versatility of innovation, which is a feature of industry 4.0, will be ensured. even today, and even more so in the future, innovations will have no socio-economic sense outside the information network. any innovation should "enter" into network structures, become an element of the interactive network. the identification and use of institutional determinants of innovative development is often very difficult. to overcome them, there is a need for a coherent management approach that would ensure the efficiency of the operating, financial and innovationinvestment processes of firms as elements of the socioeconomic system. in this case, additional research is required. references: acemoglu, d., johnson, s., & robinson, j. (2004). institutionals as the fundamental cause of long-run growth. in: aghion ph., durlauf st. (eds.). handbook of economic growth. north holland, pp. 386–472. baumol, w. j. (2002). the free-market innovation machine: analyzing the growth miracle of capitalism. princeton university press, 336 p. carvalho, n., & yordanova, z. (2018). why say no to innovation? evidence from industrial smes in european union. journal of technology management and innovation. vol. 13, no 2, pp. 43–56. greif, a. (2006). institutions and the path to the modern economy. new york: cambridge university press, 526 p. guerrero, m., & urbano, d. (2019). effectiveness of technology transfer policies and legislation in fostering entrepreneurial innovations across continents: an overview. the journal of technology transfer. vol. 44, no 5, pp. 1347–1366. kreuzer, m. (2001). institutions and innovation: voters, parties, and interest groups in the consolidation of democracy – france and germany, 1870-1939. ann arbor: university of michigan press, 224 p. malaquias, r., & albertin, a. (2018). the value of being innovative in information technology. journal of technology management and innovation. vol. 13, no 1, pp. 3–10. north, d. c. (1990). institutions, institutional change, and economic performance. new york: cambridge university press, 152 p. rodrik, d. (2007). one economics, many recipes: globalization, institutions, and economic growth. princeton university press, 280 p. schumpeter, j. a. (1942/2003). capitalism, socialism and democracy. london and new york: stockholm university, 460 p. schwab, k. (2018). shaping the fourth industrial revolution. world economic forum. geneva, 274 p. the global innovation index (2017). url: https://www.globalinnovationindex.org/gii-2017-report; the global innovation index 2018. url: https://www.globalinnovationindex.org/gii-2018-report (accessed april, 7, 2019). the global competitiveness report. world economic forum (2016–2018). url: http://www3.weforum.org/ docs/wef_theglobalcompetitivenessreport (accessed april, 7, 2019). ukrintei (2019). stan innovacijnoji dijaljnosti ta dijaljnosti u sferi transferu tekhnologhij v ukrajini u 2018 roci: analitychna dovidka. kyiv: ukrintei, 80 p. unctad (2018). world investment report 2018. investment and new industrial policies. united nations publications, 213 p. baltic journal of economic studies 87 vol. 6, no. 3, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: melnikknteu998@gmail.com 2 institute of international relations of taras shevchenko national university of kyiv, ukraine. e-mail: reznikovanataliia@gmail.com 3 national academy of statistics, accounting and audit, ukraine. e-mail: oi.nasoa@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-3-87-98 problems of statistical study of “green economics” and green grow th potentials in the sustainable development context tetyana melnyk1, nataliia reznikova2, oksana ivashchenko3 abstract. the purpose of the research. the research subject purpose is theoretical and practical aspects of the statistical assessment of the green economy potential in the sustainable development context. the methods. the article is based on the categories of theoretical (hypothesis, concept, theory, problem) and empirical (facts, empirical summarizations, empirical dependences) level of the issue, distinctive features of which are: objectivity; categorical character; rationality; testability; high level of generalization; universality and use of special tools and methods of cognition. general scientific and special methods of research are used to achieve the article’s purpose and solve its problems, namely: methods of analysis, abstraction and synthesis, induction and deduction, and system structuring method; hypothetico-deductive method; method of historical and logical integrity; method of idealization; methods of classification and system generalization; statistical methods. considering that further “greening” of socio-economic indicators constitutes a vital problem remaining on the agenda of global and national institutes of development, the article’s objective is to develop an integral approach to the revision of the system of environmental-economic accounting (seea) built by the un approach, through comparing existing approaches to the statistical assessment of the green economy state and the green growth potential, taking into account the proposed energy indices and indicators. results. it is demonstrated that because none of the integral indicators of “green economy” development has been widely adopted by now, national and international statistics have no grounds for separating green goods and services as a specific sector of the national economy. practical implications. the system of environmentaleconomic accounting (seea) has been adopted as a basic tool for the assessment of indicators reflecting the causal links between the economy and the environment. it is substantiated that most part of the data for measuring green growth processes has to be possibly collected by seea. value/originality. the importance of the assessment of the dynamics of national economy greening is demonstrated, because this type of analysis enables one to assess the change in the environmental impact of the new economic model by analyzing the factors and identifying most effective methods for decreasing environmental pressures of economic activities. the advantage of such assessment is that it can be made on the basis of the available statistical data. considering that energy indices and indicators are widely used in many international reporting systems to assess the state of green economy and the potential of green growth in the sustainable development context, we made an attempt to systematize all the indicators by the two main groups: direct and indirect. it is revealed that international organizations (оеср, unep and the world bank) attempt to unify the existing approaches in constructing their own algorithms for the assessment of “green growth”, in particular with the indicators of sustainable development goals. at the same time, national statistical agencies attempt to build a set of statistical indicators for the assessment of green economy development as indicators of demand for green products. it is demonstrated that harmonized definitions of economic activities concerned with the green industry and green jobs and comparable key indicators, if used internationally, will enable for the statistical assessment of the green economic development in space and time. key words: green economics, green growth, sustainable development, key indicators, system of environmentaleconomic accounting. jel classifications: a12, b49, с18, o10 baltic journal of economic studies 88 vol. 6, no. 3, 2020 1. introduction issues of “green growth” to some extent overlap the notion of sustainable development. the notion of sustainable development is clearly defined and, importantly, has the methodological framework elaborated by the un. besides that, the sustainable development framework offers indicators defined worldwide, known to us from the definition of sustainable development goals. the methodology of “green growth” is, to a large extent, scattered and can be traced in several approaches of international organizations such as oecd, unep and the word bank. the definition of green economy is essentially close to one of the sustainable development. at the same time, the concept of green growth offers the way to achieve the sustainable development through the effective use of natural resources in economic activities. the policy of green economy is pursued in two key dimensions: “greening” of economic growth and seeking for the potentials resulting from the implementation of green economy principles. the definitions of the notions “green economics” and “green growth”, proposed by various international organizations, show lack of coherence in the approaches to their interpretation. green economics is primarily about “use-value”, not “exchange-value” or money. it is about quality, not quantity; it is about regeneration of individuals, communities and ecosystems, not about accumulation of either money or material (milani, 2005). the green economics institute is the world’s leading think tank and development incubator for green economics and the green economy (green economics institute, 2018). it examined the roots of green economics, which are extremely eclectic and diverse. ecological economics recognize the interdependencies of the economic, social and ecological spheres, with the market being brought in only after equity and sustainability considerations are met, and only as a facilitator of the efficient allocation of resources (kennet, heinemann, 2006). according to the unep approach, green economy is a clean, environmentally friendly economy that promotes health, wealth, and well-being (unep, 2012), or is one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities (eea, 2016). according to the oecd methodology, green growth is not a replacement for sustainable development. it rather provides a practical and flexible approach for achieving concise, measurable progress across its economic and environmental pillars, while taking full account of the social consequences of greening the growth dynamic of economies. the focus of green growth strategies is ensuring that natural assets can deliver their full economic potential on a sustainable basis. that potential includes the provision of critical life support services, i.e., clean air and water, and the resilient biodiversity needed to support food production and human health. natural assets are not infinitely substitutable and green growth policies take this into account (oecd, 2018). however, oecd experts clarify that green growth means fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies (oecd, 2018). the world bank, as one of the influential institutes, defines green growth as the growth that is efficient in its use of natural resources, clean in that it minimizes pollution and environmental impacts, and resilient in that it accounts for natural hazards and the role of environmental management and natural capital in preventing physical disasters (bowen, 2012). the green growth approach adopted by the ministerial declaration (the seoul initiative network on green growth) and a regional implementation plan for sustainable development sought to harmonize economic growth with environmental sustainability, while improving the eco-efficiency of economic growth and enhancing the synergies between environment and economy. as with green economy, green growth attracted significant attention as a way out of today’s economic doldrums in the aftermath of the 2008 financial crisis (sdgs, 2013). according to the approach of the economic and social commission for asia and the pacific (escap), green growth, or environmentally sustainable economic growth, is a strategy of sustaining economic growth and job creation necessary to reduce poverty in the face of worsening resource constraints and climate crisis (escap, 2012). summing up the above given interpretations of “green economics” and “green growth”, we are going to propose our definition: green economics is the economics leading to the increased welfare of people and the assured social justice along with the reduced environmental risks due to the sustainable economic growth, which includes elaboration of political decisions on the implementation of energy-saving technologies and “clean production” methods. the indicators for green economics assessment need to meet the overall criteria applied to statistical indicators, to make the data comparable in time and space and conforming to oecd criteria, so that they could be used in the policy making process. it means that the statistical indicators need to be authentic, measurable, comparable, politically relevant, acceptable in terms of costs for collection, processing and dissemination of information, and useful in communications (comprehensible both for target users and broader public). some of the indicators proposed by international organizations cannot be computed today due to high costs for statistical data collection and processing. finding of necessary directions for the statistical information development can act as a stimulus for improving data collection and processing. baltic journal of economic studies 89 vol. 6, no. 3, 2020 the assessment of developments in green economics, trade in green products and creation of green jobs is an important part of the green economics studies. in spite of broad discussions of these issues in the research community, a single definition of the categories of green industry and green jobs has not existed by now. the first work on issues of the assessment of production of ecological goods and services was published by oecd in collaboration with eurostat in 1999. the principles for defining green economics and the first set of data for some european countries were elaborated and released by eurostat in 2010. but it is not sufficient for constructing a system for the assessment of the green economics development. the dynamic assessment of ecological goods, services and technologies at company and sectoral level covers two aspects: the assessment of green business as a source of innovation and a source of economic capabilities for green growth. the indicators of nature protection activities in business sector reflect the potential of green economics as a source of innovation, whereas the indicators of employment in green economics assess its social potential. it needs to be noted the “algorithms” of green growth assessment constructed by the above-mentioned organizations (оеср, unep and the word bank) are focused on the comparison of domestic indicators with international ones, in particular sustainable development indicators. we are going to elaborate on how the approaches to the definition of “green growth” are implemented by these organizations. 2. further “greening” of socio-economic development indicators: the importance of the problem further “greening” of the socio-economic indicators is a vital objective remaining in the agenda of global and national institutes of development. national statistical agencies attempt to construct a set of statistical indicators for the assessment of green economics development as indicators of demand for green products. international organizations such as unep (green economy initiative), the un statistical office, the united nations economic commission for europe (unece or ece), oecd recommend to use the system of environmental-economic accounting (seea) as the underlying instrument enabling to assess the indicators reflecting the causal link between economics and environment; a major part of the data for the measurement of the processes involved in green growth need to be collected as far as possible in conformity with seea (oecd, 2011). as mentioned in the oecd green growth studies, the seea central framework is a multi-purpose, statistical framework that describes the interactions between the economy and the environment, and changes in stocks of environmental assets. it uses concepts, definitions, classifications and accounting principles that are in line with those of the system of national accounts (sna). this makes the seea a valuable tool for deriving indicators that monitor the interactions between the economy and the environment. by applying the seea table 1 overview of selected indicator types and relevant seea accounts topic or issue indicator examples examples of relevant seea accounts environmental efficiency pollutant emission or waste generation intensities and productivity ratios, relating the generation of residuals to economic output: – carbon productivity and air emission intensities – waste generation intensities – nutrient balance intensities – physical flow accounts for water – physical flow accounts for materials: product flows, air emissions (including greenhouse gases), pollutant emissions to water resource efficiency resource use intensities and productivity ratios, relating resource inputs to economic output: – energy productivity – material productivity – water productivity – physical flow accounts for materials: solid waste accounts, economy-wide material flow accounts – physical flow accounts for water – physical flow accounts for energy natural assets – intensity of use of natural resource stocks, relating resource extraction to available stocks: water, minerals, energy, timber, fish – index of natural resources – land use and cover changes – soil productivity asset accounts for: – water resources – mineral and energy resources; timber resources; aquatic resources – land and soil resources seea experimental ecosystem accounts environmentallyrelated activities and instruments – share of environmentally-related activities in the economy: output, investments, trade, employment – level and composition of environmental expenditure – environment related tax rate and revenue structure – environment-related support measures, e.g. fossil fuel subsidies – environmental activity accounts and statistics: environmental protection and resource management expenditure, environmental goods and services – accounts for other transactions related to the environment: payments, transfers sources: compiled by the authors baltic journal of economic studies 90 vol. 6, no. 3, 2020 framework, monetary and physical data can easily be combined in a consistent format, for example for calculating intensity and productivity ratios. and macrolevel, indicators can be broken down by economic sector and by industry, to show structural changes over time, to analyze environmental pressures exerted by different industries, and to distinguish government responses from those of the business sector or private households. this is important when the indicators address both the environmental effectiveness and the economic efficiency of policies, or when they are to support structural policy analyses (oecd, 2015). it is the new seea system that enables to proceed to the computation of new global indicators, which, with exception of the capital produced by human labor, account for the nature capital, its depletion and effects for the environmental quality. apart from non-renewable resources, the nature capital includes renewable resources (such as forests) and ecological services (oecd, 2014). the distinction of “green” accounts from the traditional economic indicators is caused mainly by two estimates: the cost estimate of the depletion of natural resources and the environmental-economic damage from pollution. as the whole set of indicators is subject to permanent methodological refinement, the indicators’ titles and computation methods can often be changed, thus complicating their use for correct crosscountry assessments and comparisons. the elaborated framework for the statistical assessment of “green economics” has special importance in setting up the directions for the statistical reporting development in seea. in view of the requirement of data comparability in time and space, the method for computation of indicators needs to be harmonized internationally. there are various international databases enabling to cohere parts of the overall picture, such as database of the international energy agency (iеа), fao statistical program of work on land use, water use and agricultural production, and the database of the united nations framework convention on climate change, unfccc. at the same time, there are statistical databases constructed by various research teams, which may often be without official status but can be used in indicative planning. there still remain many unsolved problems related with valuating nature assets and ecological services, which raises the importance of the problem of the comprehensive assessment of green economy. eurostat computes a group of indicators entitled “sustainable development indicators” on the basis of 17 sustainable development goals (sdgs, 2018). goal 7 “ensure access to affordable, reliable, sustainable and modern energy for all” covers 8 indicators: primary energy consumption, final energy consumption, final energy consumption in households per capita, energy productivity, share of renewable energy in gross final energy consumption by sector, energy dependence by product, population unable to keep home adequately warm by poverty status, greenhouse gas emissions intensity of energy consumption. the “energy productivity” indicator is worth mentioning, which measures the output per unit of gross internal energy consumption. the gross internal energy consumption covers the consumption of primary energy plus energy carriers used for non-energy purposes (eurostat, 2018). energy efficiency is an important issue for the eu. the primary importance of energy issues is caused by the eu intention to decrease energy expenditures and reduce the dependence from energy suppliers. the targets for 2020 and 2030 have been set to achieve this goal. 20 % reduction of energy use is set till 2020, which is equivalent to the closure of 400 power plants. the goal set in 2016 is to achieve 30 % reduction of energy use till the year of 2030. the european commission prepares and releases the annual report with indicating the progress towards these goals (ec, 2018). the biggest success is achieved by oecp of the abovementioned institutions (the world bank, unep, оеср and global green growth institute). this organization has constructed its own system for the measurement of “green growth”. the system covers main characteristics of “green growth”, the underlying principles of reporting and the model of pressure-state-response (psr). the indicators constructed by oecd can also be used for the analysis of sustainable development goals, in particular goal 6 “ensure access to water and sanitation for all” and goal 12 “ensure sustainable consumption and production patterns”. as it is emphasized in report “towards green growth: monitoring progress: oecd indicators”, the main purpose of the conceptual framework is to organize thinking about indicators and to identify relevant, succinct and measurable statistics. the framework is not an alternative to international guidelines on which the underlying data series should be based, in particular the system of integrated environmental and economic accounting (seea). rather the conceptual framework has to build on definitions and accounting conventions such as those provided by the seea. the seea is currently being revised. when finalized and implemented, many indicators described in the present document such as environmental productivity are best derived from the seea accounting framework (oecd, 2011). apart from this, оеср in collaboration with the european environmental agency, unece, unep, is working on the implementation of the shared environmental information system (seis), in order to improve collection, exchange and dissemination of information about the environment in the paneuropean region. summing it up, “green growth” indicators of oecd consist of the following four groups: 1) environmental and resource productivity; 2) the natural asset base; 3) environmental quality of life; 4) economic opportunities and policies. 25 to 30 indicators were set within these 4 directions (oecd, 2016). baltic journal of economic studies 91 vol. 6, no. 3, 2020 table 2 indicator groups and topics covered 1 the environmental and resource productivity of the economy – carbon and energy productivity – resource productivity: materials, nutrients, water – multi-factor productivity 2 the natural asset base – renewable stocks: water, forest, fish resources – non-renewable stocks: mineral resources – biodiversity and ecosystems 3 the environmental dimension of quality of life – environmental health and risks – environmental services and amenities 4 economic opportunities and policy responses – technology and innovation – environmental goods & services – international financial flows – prices and transfers – skills and training – regulations and management approaches 5 socio-economic context and characteristics of growth – economic growth and structure – productivity and trade – labour markets, education and income – socio-demographic patterns sources: compiled by the authors 23 priority indicators were set in 2011 (oecd, 2011). table 3 overview of the proposed indicator groups and topics covered main indicator groups topics covered related oecd work the socio-economic context and characteristics of growth economic growth, productivity and competitiveness labour markets, education and income economic growth and structure productivity and trade inflation and commodity prices labour markets (employment / unemployment) socio-demographic patterns of income and education economic outlook, economic surveys going for growth national accounts, productivity database employment outlook education at a glance health at a glance society at a glance environmental and resource productivity carbon and energy productivity resource productivity multi-factor productivity 1. co2 productivity (demand-based, productionbased) 2. energy productivity 3. material productivity (demand-based, production-based) non-energy materials, waste materials, nutrients 4. water productivity 5. multi-factor productivity reflecting environmental services iea scoreboard co2 emissions database oecd input-output tables environmental indicators environmental reviews environmental outlook material flows & resource productivity agri-environmental indicators productivity database natural asset base renewable stocks non-renewable stocks biodiversity and ecosystems 6. freshwater resources 7. forest resources 8. fish resources 9. mineral resources 10. land resources 11. soil resources 12. wildlife resources environmental indicators environmental reviews measuring progress material flows & resource productivity environmental outlook agri-environmental indicators environmental quality of life environmental health and risks environmental services and amenities 13. environmentally induced health problems and related costs 14. exposure to natural or industrial risks and related economic losses 15. access to sewage treatment and drinking water measuring progress -how’s life? environmental indicators environmental reviews environmental outlook baltic journal of economic studies 92 vol. 6, no. 3, 2020 main indicator groups topics covered related oecd work economic opportunities and policy responses technology and innovation environmental goods and services international financial flows prices and transfers 16. r&d of importance to gg 17. patents of importance to gg 18. environment related innovation 19. production of environmental goods and services 20. international financial flows of importance to gg 21. environmentally related taxation 22. energy pricing 23. water pricing and cost recovery innovation strategy science, technology & industry scoreboard patent database r&d database aid activity database database on environmental policy instruments agri-environmental indicators regulations & management approaches training & skill development indicators to be developed sources: compiled by the authors the information base for the computation of these indicators is supposed to be too large and multidimensional. in its framework, oecd cooperates with other organizations and initiatives. table 4 relevant oecd work for monitoring progress towards green growth the indicators needed to measure progress with green growth are founded on existing oecd work that is being refined to suit the green growth strategy. continued co-operation is taking place with other international organizations, such as unep, the european commission, and international institutes measuring environmental performance and resource productivity the oecd has developed several sets of environmental indicators to support policy analysis and country reviews: key and core environmental indicators to track environmental progress; sectoral environmental indicators to monitor policy integration; and indicators to measure the decoupling of environmental pressures from economic growth. the indicators are supplemented with environmental data, including on environmentally related taxes and expenditure. recent work has been focusing on the measurement of material flows and resource productivity in support of an oecd council recommendation and of the g8 kobe 3r action plan. monitoring trends in energy use and efficiency the iea maintains several databases, including energy balances, energy statistics, energy prices and taxes, and publishes various types of energy indicators. recent work has been focusing on the measurement of energy efficiency in support of the g8 gleneagles plan of action for climate change, clean energy and sustainable development and on improving mandatory reporting of energy efficiency-related data. monitoring technology developments and innovation the oecd maintains several databases and indicator sets keeping track of developments in technology and industrial performance: main science and technology indicators; indicators on the information economy, globalization, and entrepreneurship; international patent database, input-output tables and estimates of carbon embedded in trade. recent work has been focusing on indicators in support of the oecd innovation strategy, and on an indicator toolkit to promote and monitor sustainable manufacturing at corporate level. measuring the environmental performance of agriculture the economic and environmental performance of agriculture is monitored through a set of agrienvironmental indicators, supported with the measurement of agricultural producer support. monitoring international transfers the oecd maintains two major databases monitoring international monetary transfers: international investment flows and official development assistance. recent work aims at developing indicators of “green” foreign direct investment flows and at mapping relevant international investment flows by country and sector of destination. measuring sustainable development the oecd has been promoting the development of indicators and coherent approaches to measure sustainable development. recent work has been focusing on improving the measurement of different types of capital with emphasis on human and social capital. measuring well-being and progress the oecd promotes the development of better measures and indicators of people’s well-being and societal progress, to be used alongside standard economic measures such as gdp. recent work aims at implementing the recommendations of the stiglitz – sen – fitoussi commission with emphasis on wellbeing and sustainability. other relevant work to underpin its socio-economic analysis, the oecd further maintains databases on a wide range of other topics that are important to characterize economic growth and its outcomes. examples include: national accounts, international trade, balance of payments, prices and taxes, productivity, government debt, employment, education, health, etc. sources: compiled by the authors (end of table 2) baltic journal of economic studies 93 vol. 6, no. 3, 2020 however, in the report “green growth indicators 2014” (oecd, 2014), it was emphasized that once oecd attempts to derive and define a single indicator were abandoned, 6 headline indicators for “green growth” measurement were set. the number of indicators was reduced due to complications in the aggregation of data. these 6 headline indicators need to meet 4 criteria: 1) cover economic and ecological dimensions; 2) be easily understood and disseminated; 3) match the principles of “green growth” concept of оесd; 4) be internationally comparable. 3. green economy vs green growth in the focus of unep in 2014, unep released the document “a guidance manual for green economy indicators” (unep, table 5 overview of proposed headline indicators environmental and resource productivity carbon productivity 1. co2 productivity resource productivity 2. non-energy material productivity multifactor productivity 3. multifactor productivity including environmental services the natural asset base renewable and non-renewable stocks 4. natural resource index biodiversity and ecosystems 5. changes in land use and cover environmental quality of life environmental health and risks 6. air pollution (population exposure to pm 2.5) economic opportunities and policy responses technology and innovation, environmental goods and services, prices and transfers, etc. placeholder – no indicator specified sources: compiled by the authors table 6 indicators for issue identification unep cross-cutting thematic priorities possible issues of concern indicators climate change – country contribution to anthropogenic climate change – increased frequency/intensity of storm surges – greenhouse gas emissions (kt of co2 equivalent/year) – rainfall (mm/year) and evaporation – storm-related damages (usd/year) ecosystem management – deforestation – loss of critical ecosystem services – forest cover (ha) – extent of land and marine conservation areas (ha) resource efficiency – falling groundwater tables – low efficiency of nonrenewable energy sources – water intensity or productivity (m3/usd) – coal consumption intensity (tonnes/gdp) chemicals and waste management – air pollution – soil contamination – sulphur oxide (sox) emissions (kg/ywr) – waste recycling and reuse (%) – toxic heavy metal concentration, e.g., hg, cd, pb, cr. (mg/kg) sources: compiled by the authors table 7 indicators for policy formulation police indicator green investment – r&d investment (% of gdp) – egss investment (usd / year) green fiscal reform – fossil fuel, water and fishery subsidies (usd or %) – renewable energy incentive (usd or %) pricing externalities and valuing ecosystem service – carbon price (usd / ton) – value of ecosystem service (e.g. water provision) green procurement – expenditure in sustainable procurement (usd / year and %) – co2 productivity of government operations (ton / usd) green job skill training – training expenditure (usd / year and % of gdp) – number of people trained (person / year) sources: compiled by the authors baltic journal of economic studies 94 vol. 6, no. 3, 2020 2014), containing references to some works of oecd, but not mentioning a cooperation on line of “green growth”. thus, unep relies upon the oecd logics when formulating the requirements to indicators. unep methodology covers 4 aspects: 1) issue identification and agenda setting (indicators for issue identification are instruments that help decision makers identif y and prioritize problems and set the agenda for policy interventions). four spheres are defined in setting the problems with priority status for “green economics” with the respective indicators: 1) climate change; 2) ecosystem management; 3) reso-urce efficiency; 4) chemicals and waste management. 2) policy formulation (indicators that allow to evaluate the adequacy of the interventions analyzed, taking into account their repercussions on the key actors in the economy and impacts across sectors). 3) policy assessment (indicators that support the estimation and evaluation of policy impacts across sectors, with a more marked focus on indicators for socio-economic impacts and well-being). 4) policy monitoring and evaluation (indicators for policy monitoring and evaluation support the assessment of the performance of the intervention implemented). 4. measurement of potential benefits from “green growth” policies in 2012, the world bank released the report “inclusive green growth”. it is focused on the methodology for the measurement of potential benefits from “green growth” policies. three types of benefits are defined: 1) environmental benefits; 2) economic benefits; 3) social benefits. in spite of the above-mentioned approaches of three different organizations to constructing indicators of green economics and “green growth”, all of them announced collaborative work to have the approaches harmonized. table 8 indicators for policy assessment well-being and equity indicators employment – construction (person, %) – gini coefficient total wealth – value of natural resource stocks (usd) – net annual value addition / removal (usd / year) access to resources – access to modern energy (%) – access to sanitation (%) health – level of harmful chemicals in drinking water (g / litre) – number of people hospitalized due to air pollution (person) sources: compiled by the authors table 9 framework for measuring potential benefits from green growth policies type of benefit channels examples of indicators environmental improved environment indicators specifically developed for the domain in question (for example, reduction in greenhouse gas emissions, natural area protected from development, air or water quality) economic increase in factors of production (physical capital, human capital, and natural capital) measured by the additional production from increased capital (potentially measured by the value of ecosystems or renewable resources), or by the value of additional capital accelerated innovation, through correction of market failures in knowledge measured by productivity indicators (for example, efficiency of photovoltaic panels used to produce electricity) or dissemination indicators (for example, the fraction of the population with access to photovoltaic electricity) enhanced efficiency, through correction of nonenvironmental market failures measured by indicators for resource efficiency (for example, the material or energy intensity of production, reduction in the value of time lost from congestion), or by additional production social increased resilience to natural disasters, commodity price volatility, and economic crises measured by metrics related to the project, from avoided disaster losses (in monetary terms) or number of people at risk from floods to a measure of the vulnerability to oil price volatility job creation and poverty reduction measured by the number of jobs created or an indicator of the impact on the poor (for example, reduction in the number of people without access to drinking water and sanitation) sources: compiled by the authors baltic journal of economic studies 95 vol. 6, no. 3, 2020 it was informed on the world bank web-site in 2013 that the world bank, unep, оесd and global green growth institute were working in collaboration on constructing indicators measuring “green growth” (the world bank, 2013). it was noted that the following indicators were headline in the study of the progress of “green economics”: the ecological and resource productivity and innovation; the nature assets (including biodiversity) and their management; the “ecological” quality of life (including the access to basic necessities such as clean water); relevant policies of “green growth”, the economic capabilities and the social context of “green growth”; monitoring of sustainable development, overall economic development, by comprehensive measurement of welfare. thus, a section of оесd “green growth indicators 2014” (“international cooperation on monitoring progress towards green growth”) is devoted to the issue of oecd cooperation with other organizations in harmonization of the sustainable development methodology. reference is also made on other publications and initiatives in this field. the partners involved include the united nations environment program, the world bank, the global green growth institute, the green growth knowledge platform, the inclusive wealth report 2012, the roadmap to a resource sufficient europe, the european commission’s grow green assessment framework (unep, 2014). 5. analysis and discussion of results an extended model of economic growth needs to consider for the potential change in indicators of material welfare, such as net income accounting for change in nature assets. the indicator of net national income is intended for the assessment of material welfare of individuals and households. this indicator accounts for depreciation of fixed assets and intangible assets, and income flows between the country residents and the rest of the world. another important indicator is real income of population, because it reflects the change in the conditions of trade, the dynamics of export prices compared with import ones. the world bank has performed a study on the measurement of wealth in combination with respective macroeconomic indicators. the indicator of adjusted net saving (ans) is used by the world bank to measure the sustainability of economic development. measurement of adjusted net saving (ans) is based on standard national accounting concepts. adjusted net saving is obtained using the following identity: gross national saving – consumption of fixed capital = net national saving + education expenditure – energy depletion – mineral depletion – net forest depletion – damage from carbon dioxide emissions – damage from particulate emissions = adjusted net saving. negative values of ans signal that an existing social development model is non-sustainable. its positive values can be a proxy of sustainable development due to the changed degree of interoperability of various forms of capital, resulting from science and technology advancement. also, the world bank gives the estimate of adjusted national income computed as the difference between the net national income and the use of natural resources, with pointing out that this indicator can be an estimate of “greening” of the economy (ggkp, 2013). from the perspective of energy factor, the indicator of genuine savings is the most elaborated one with rather good international statistical database. the main components required for the computation of adjusted net savings (genuine savings) can be found in national account systems and the world bank reports. all these components, namely, gross savings, consumption of fixed capital, education expenditures, depletion of energy resources, mineral depletion, net forest depletion, damage from carbon dioxide emissions, damage from particulate emissions, have the single computation methodology at global and country level. the computation of “genuine savings” indicators is performed by the world bank for more than 100 countries, but the computations demonstrate a large gap between traditional economic indicators and ecologically adjusted ones. negative values of ana cannot be explained only by depletion of energy and mineral resources. the global practices show that advanced eu countries compensate the depletion of mineral resources by expenditures on education and r&d. the structure of demand from business enterprises, households and government forms the structure of domestic and external supply and determines the overall structure economic growth in a country. there are many political instruments, such as taxes, subsidies or legal regulation, with effects for the consumer’s behavior, changing the structure of demand. the scopes and structure of government consumption is an important factor of “greening” of the economy. therefore, the indicators describing a model of households’ behavior and government consumption, such as consumption of organically pure products and relative prices for such goods, can be used as proxies of green economics trends. the main indicators that help in assessing the consumer behavior are the level of consumer awareness and education, the availability and quality of information about ecologically clean technologies. the weakness of these indicators is limited data for international comparisons. a major part of ecological problems, such as climate change, the aggravated environmental performance or the reduced biodiversity, can be explained by the overlooking external environmental effects from economic activities in economic management. in order to have these effects included in the computation of production cost or in planning of baltic journal of economic studies 96 vol. 6, no. 3, 2020 new development strategies at company, regional or country level, researchers propose to give a definition to ecological services, i. e., the services rendered by the environment as a separate resource that can be depleted in case of its non-sustainable use. two approaches to defining ecological services exist today. on the one hand, it can be said that a production facility, when polluting greenhouse gases, uses an ecological service, namely, the capability of the air to absorb greenhouse gases. on the other hand, these pollutions can be treated as a negative production output. the national accounts system includes ecological services related with use of land, mineral and energy resources, certain types of biological and water resources in case of a monetary benefit for their owner. because change in the multifactor productivity is measured as the difference between change in the production output and change in the scopes of resources required for the output, an increase in unaccounted ecological services is reflected in computations as an increase in the multifactor productivity. it follows that the inclusion of key ecological services in an empirical analysis will help define the factors of economic growth and economic “greening” more accurately. oecd defines the services that need to be included in the computation as ones with effects for the sustainable use of nature capital; it means that the indicator of carbon productivity of the production will be included in the set of indicators, because its dynamics is important for the assessment of the green economics development, whereas the indicator of use of solar energy per unit of production will not be included. the cost of ecological services can be estimated from the estimate of expenditures for reduction of the intensity of environmental pollution. the inclusion of energy factors in the set of environmental-economic indicators is a rapidly expanding global tendency of sustainable development. energy standards have been tightened drastically in developed countries in the recent years as part of implementing the sustainable development goals. the fuel and energy complex (fec) as such is the largest environment polluter, accounting for 48% of the hazardous substances polluted in the country ’s air, 27% of the polluted water sources, more than 30% of the solid production wastes and nearly 70% of the total volume of gases creating the greenhouse effect. but because the energy generated by fec is delivered to other industries, each joule received by industries (productions) has an equivalent of hazardous pollutions depending on the technologies used. in fact, the energy efficiency indicators are environmental-economic indicators, because they reflect the ecological sustainability of a territory; they allow for assessing the change in the energy capacity resulting from the purposeful actions, the change resulting from other factors (climatic, geographical, structure change in the economy), for identif ying the elements with the largest impact on the change in energy consumption in various sectors of the economy. the indicators of energy efficiency (energy capacity) and ecological sustainability appeared as equal problems of the economy of development in the un documents in 2000. the ecological sustainability is associated with the energy efficiency, i.e., the reduced energy capacity of national economies in “millennium development goals”. the millennium development goals set target parameters of indicators such as energy capacity of gdp and co2 pollutions. the processes involved in extraction of primary energy resources, their processing and consumption, with the accompanying losses and pollutions of со2, are components of the resource utilization chain. the indicators of energy efficiency (energy capacity) and со2 pollutions allow for the assessment of processes occurring in the resource utilization chain. at regional and national level, energy indicators allow for: exercising control over implementation of programs on energy efficiency and reduction of co2 pollution; assessing implemented programs on energy efficiency; planning future actions, predicting change with consideration to the need for energy resources. the global indicators of the world bank include the most important groups of energy and ecological indicators. in the world bank reports, all the indicators of energy efficiency are divided into direct and indirect ones. the direct indicators include: gdp per unit of energy use (constant 2011 ppp $ per kg of oil equivalent); electric power consumption (kwh per capita); energy use (kg of oil equivalent per capita); energy use (kg of oil equivalent); alternative and nuclear energy (% of total energy use); combustible renewables and waste (% of total energy); fossil fuel energy consumption (% of total); investment in energy with private participation (current usd); value lost due to electrical outages (% of sales for affected firms); energy production (kt of oil equivalent). the indirect ones include: co2 emissions (kt); co2 emissions (metric tons per capita); road sector energy consumption (% of total energy consumption); research and development expenditure (% of gdp); other greenhouse gas emissions, hfc, pfc and sf6 (thousand metric tons of co2 equivalent); methane emissions (kt of co2 equivalent); nitrous oxide emissions (thousand metric tons of co2 equivalent); industry (including construction), value added (% of gdp); access to electricity (% of population). at international level, the indicators under study lay the ground for cross-country comparisons, which is the critical element in the framework of international negotiations on climate change. baltic journal of economic studies 97 vol. 6, no. 3, 2020 the indicators of energy efficiency (energy capacity) have become important in “green” accounts at macrolevel. the most common ones are: energy capacity of gdp on energy resources consumption (energy resources consumption / gdp); energy efficiency (an indicator reverse to energy capacity); specific indicators of gdp efficiency (electric capacity, heat capacity, oil capacity, gas capacity etc.). energy capacity on consumption is the most widespread indicator in the world. the indicator of electric capacity, widely used in combination with the indicator of energy capacity, measures the consumption of fuel in energy generation at various categories of energy plants. this indicator is intended for comparisons of technologies used in the main fuel consuming industr y. 6. conclusion as neither of the “green economy” development indicators has been widely accepted by now, at the current phase of the national and international statistics development, there is no need in extracting the green products sector from the national economy. yet, the dynamic assessment of the national economy greening is important, as its enables to measure the change in the environmental impact of the new model of the economy, to analyze the factors and find out the most effective methods to reduce environmental pressures from economic activities. an advantage of this assessment is its feasibility on the basis of the available statistical data. a single international standard for typology of economic activities related with production of ecological goods and services has not existed by now. this standard can be elaborated as part of the un environmentaleconomic accounting system. data about the output of ecological goods and services have been supplied by eurostat for selected european countries, and data on the employment in main ecological industries have been provided by oecd. unfortunately, the existing classification of goods and services does not include information about the purpose of goods that are produced. the most probable method for selecting such information is a sample questioning of buyers, which is incapable to provide reliable data for analyses of green economics development and policy making. although energy indices and indicators are widely used in many international accounting systems, the selection of a universal set of indicators constitutes a difficult problem. we tried to break all the indicators by two main groups: direct and indirect ones. the direct indicators allow for the direct assessment of change in the intensity and efficiency of processes involved in energy use. the indirect indicators can measure energy use in indirect ways: by indicators measuring the environmental burden, by indicators measuring r&d expenditures, number of cars per capita etc. in view of the inclusion of energy factors, the most acceptable one in the “green” accounting practice seems to be the indicator of adjusted net savings (genuine savings), often used in assessment, as mentioned by various researchers. the indicator of genuine savings can be an economic proxy for the notion of system’s sustainability because, apart from nature resources, it includes other components required to ensure a range of options for future generations, equal to the options of the living generation. net adjusted savings are computed as the change of this cumulative wealth in a period of time, for example in a year. it should be noted that the methodology for computation of the indicators used in the monitoring of the world bank can be often changed. the main drawback of the indicator of genuine savings is a high probability of incorrect or even missing data. adjustments for the environment’s degradation and the drastically shrinking biodiversity are recorded as a mere formality. emissions are confined to a limited range of polluting substances, of which the most important one is co2 pollutions. depletions of underground waters or fishing areas, degradations of soils and so on and so forth are not included in the computations. but for the items that are included a serious problem still remains to be lack of correct methods for estimation of prices. all the above gives evidence of the need for constructing a database on sustainable development. however, in spite of the weak sides, the new environmental-economic indicators under study signal the excessive consumption of natural resources and the apparent insufficiency of reinvestments of incomes from exploitations of renewable natural resources in non-renewable ones. further “greening” of the socio-economic advancement indicators constitutes a vital problem and remains in the agenda of global and national institutes of development. to have the assessment of green economics development performed, all the countries need to coordinate their effort in implementing accounting system on the basis of the system proposed by the un at international level, in using harmonized typologies of economic activities pertaining to the green industry and green jobs, in using comparable key indicators, which enables for the statistical assessment of green economics development in time and space. to be widely used by policy makers, mass media, business communities and broader public, the system of “green economics” development indicators of needs to be based on freely available data, to have clear specification and the elaborated methodology for data collection. baltic journal of economic studies 98 vol. 6, no. 3, 2020 references: bowen, a. 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from: http://www.un-page.org/ files/public/content-page/unep_indicators_ge_for_web.pdf (accessed 12 january 2020). baltic journal of economic studies 19 vol. 6, no. 3, 2020 corresponding author: 1 faculty of business administration, university of akureyri, iceland. e-mail: helga@unak.is orcid: https://orcid.org/0000-0002-8857-8063 2 faculty of political science, university of iceland, iceland. e-mail: stefosk@hi.is orcid: https://orcid.org/0000-0003-3554-1512 * paul krugman presentation during imf conference in iceland provided incentive for this research. helpful comments received on imf conference in iceland are highly appreciated doi: https://doi.org/10.30525/2256-0742/2020-6-3-19-23 eu-country and non-eu-country at the time of crisis: foreign direct investment* helga kristjánsdóttir1, stefanía óskarsdóttir2 abstract. the global financial crisis affected the flows of foreign direct investment (fdi). this study focuses on two countries in the midst of the financial crisis: iceland with imf backup, and ireland with ecb backup. the research focus is on the situation from the broad perspective of international economics and political atmosphere, combining government decisions with economic consequences. we analyze inward foreign direct investment, incorporating factors like economic size and stock market firms, receiving portfolio investment, rather than fdi. our findings indicate that before the crisis the economic wealth in the domestic market to have positive effects on fdi, and firms receiving portfolio investment on the stock market are competing with fdi. this is the case for both ireland and iceland. however, after the crisis, these factors have insignificant impact on fdi. key words: european union, efta, ireland, iceland, global financial crisis, international trade, foreign direct investment (fdi). jel classifications: f14, f21, f23 1. introduction “the song of ice and ire” was the international monetary fund (2020) presentation title by the nobel prize winner paul krugman (2011), discussing the european union (2020), the european central bank (2020), the international monetary fund (2018), as well as the eu-country ireland (european union, 2020), and the non-eu-country iceland (european free trade association, 2020). at the time of the economic crash, ireland had the euro – but iceland did not. ireland had the european central bank (ecb) as the lender of last resort, and iceland sought help from the international monetary fund (imf survey, 2015). during the crisis, public debt in iceland surged up to 95% of gdp, and imf imposed capital controls in iceland providing an intensive rescue program “the imf-supported program of $2.1 billion remains among the largest relative to the size of the economy – 18 percent of iceland's gdp, or 1,190 percent of iceland's quota in the imf” (international monetary fund, 2018). how much did the backing of the ecb and the imf matter in putting ireland and iceland on the path of recovery? does it add legitimacy that helps with political stability, or at least the perception of it? this current research seeks to answer these questions along the lines of previous research (davies and kristjánsdóttir, 2010; davies, ionascu and kristjánsdóttir, 2008). the objective of this research is to focus on the impact of the financial crisis on iceland and ireland, ireland with ecb backup, and iceland with imf backup. we look into the implication of the eu membership, considering ireland and iceland. the issue of individual country endowments is also relevant in the discussion of economic recovery, which country is more attractive for foreign direct investment (fdi) as reflection on the confidence of the global economic and political community in the countries; we measure fdi to the two countries applying trade modelling (bergstrand 1985; carr markusen and maskus 2001; markusen 2004). two economies went through extreme economic crashes (international monetary fund, 2018), being no strangers to difficult economic conditions throughout history. this has tested their tolerance and shaped their cultures (hofstede, 1980, 2001; kristjánsdóttir, 2016a, 2019a, 2020; kristjánsdóttir, guðlaugsson, guðmundsdóttir and aðalsteinsson, 2017, 2020) accounted for empirically in this research. after world baltic journal of economic studies 20 vol. 6, no. 3, 2020 war i and world war ii, iceland and ireland have remained primarily based economies with limited economic diversification, relying on agriculture and fisheries. fdi has not been a significant factor for either country for very long. measurement only started in the 1970s (imf, 2016), giving a chance to explore a maturing market from birth to present. small economies like these are only in few different sectors (krugman, 2011), so it is easier to get a picture on what the major economic players are for each country. iceland is geographically more distant (distance calculator, 2020) from the european mainland, and distances itself more by not having the eu membership or the euro. the last fact may actually have helped iceland in adjusting itself better to the current economic situation. our data account for the eu membership, and we seek to analyze whether the eu or non-eu membership affect the way these countries tackle crisis. this paper focuses on iceland and ireland, providing analysis on the impact of the financial crisis. both have small domestic markets and are therefore highly dependent on foreign trade and investment, ireland has eu membership, iceland is not a member country. has the eu turned out to be a partnership for success, helping countries in their time of need, or is it imposing needlessly harsh rules that in actuality restrict the ability of a struggling nation to find its own way back to prosperity? now that we have established some potential factors for research, the question becomes, how did the global economic crisis affect fdi in two different countries? to answer that, the analysis includes variables accounting for political instability and government reaction (kristjánsdóttir, 2016b). how did these countries work it out, and what might come next? what can we take away from the experience of these countries in the past decade, which can be used to make a more informed decision about the future? we study fdi in ireland and iceland, considering (everett, kelly and mccann, 2015; blonigen, davies, and waddell, 2007) finding conventional explanation for fdi and spatial interdependence to be affected by the choice of sample countries. our application of data in the model is similar to davies (2008). earlier studies indicate that fdi flows from the united states increased as result of the formation of the european community. some recent studies give mixed results (hoeller, girouard and colecchia, 1998). 2. model setup our estimation for iceland and ireland involves usage of other variables, introduced in table 1. 3. data total of 25 european countries are accounted for in this current research, these are: austria, belgium, the czech republic, denmark, estonia, finland, france, germany, greece, hungary, iceland, ireland, israel, italy, luxembourg, the netherlands, norway, poland, portugal, the slovak republic, slovenia, spain, sweden, switzerland, the united kingdom. data runs from 1990 through 2010, and covers investment from individual countries to iceland and ireland in particular years. we apply foreign direct investment, inward position (fdi) data from oecd (2020). these are fdi series of bop and iip aggregates, inward position at year-end in millions usd. the fdi data application here is in similar manner as data application in previous research (kristjánsdóttir, 2010, 2012b, 2013, 2017, 2019b). foreign direct investment, net inflows (bop, current usd). obtained from world bank (2020). foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. it is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. this series shows net inflows table 1 variable definition fdi stock j,t fdi series of bop and iip aggregates. inward position at year-end usd, millions in host country (j), over time (t). oecd (2020). portfolio equity j,t portfolio equity, net inflows (bop, current us$): portfolio equity includes net inflows from equity securities other than those recorded as direct investment and including shares, stocks, depository receipts (american or global), and direct purchases of shares in local stock markets by foreign investors. data are in current usd. world bank (2020). trade j,t merchandise trade (% of gdp). world bank (2020). nr of firms j,t listed domestic companies on the host country stock market, total. world bank (2020). gdp j,t gross domestic product (gdp) current usd, in host country (j). running over time (t). world bank (2020). gov pol j,t adaptability of government policy to changes in the economy is high (imd wcy executive survey based on an index from 0 to 10). imd (2020). trans j,t transparency of government policy is satisfactory (updated: may 2011, imd wcy executive survey based on an index from 0 to 10). imd (2020). risk premium j,t risk premium on lending (lending rate minus treasury bill rate, %). world bank (2020). baltic journal of economic studies 21 vol. 6, no. 3, 2020 (new investment inflows less disinvestment) in the reporting economy from foreign investors. data are in current usd. portfolio equity, net inflows (bop, current usd) are obtained from world bank (2019). portfolio equity includes net inflows from equity securities other than those recorded as direct investment and including shares, stocks, depository receipts (american or global), and direct purchases of shares in local stock markets by foreign investors. data are in current usd. merchandise trade (percentage of gdp). merchandise trade as a share of gdp is the sum of merchandise exports and imports divided by the value of gdp, all in current usd world bank (2020). listed domestic companies are the domestically incorporated companies listed on the country’s stock exchanges at the end of the year. this indicator does not include investment companies, mutual funds, or other collective investment vehicles. data is from the world bank (2020). risk premium on lending (lending rate minus treasury bill rate, %). risk premium on lending is the interest rate charged by banks on loans to private sector customers minus the “risk free” treasury bill interest rate at which short-term government securities are issued or traded in the market. in some countries this spread may be negative, indicating that the market considers its best corporate clients to be lower risk than the government. the terms and conditions attached to lending rates differ by country, however, limiting their comparability. risk premium data is from the world bank (2020) not reported by the following countries: austria, denmark, estonia, finland, luxembourg, nor way, and the slovak republic. adaptability of government policy to changes in the economy is high (imd wcy executive survey based on an index from zero to 10), imd data (2020). transparency of government policy is satisfactory (imd wcy executive survey based on an index from zero to 10), imd data (2020). the data on the gross domestic product (gdp) measure comes from the world bank (2020). gross domestic product reported in gdp current usd. 4. regression results we present regression results in table 2 for both iceland and ireland before and after the crisis. 1990-2007 iceland estimates: gdp has significant positive effects on fdi stock, as well as transparency of government policy. however, it is significantly negatively affected by the number of firms and the risk premium. trade and government policy do not have significant effects on fdi. 2008-2010 iceland estimates: trade, number of firms, gdp, government policy, transparency, and risk premium do not significantly affect fdi. 1990-2007 ireland estimates: gdp has positive effects on fdi. number of firms has negative effects on fdi stocks. however, trade, government policy, transparency of government policy, and risk premium do not have significant effects on fdi. 2008-2010 ireland estimates: trade, number of firms, gdp, government policy, transparency, and risk premium do not have significant effects on fdi. table 2 determinants of fdi in iceland and ireland 1990-2007 iceland 2008-2010 iceland 1990-2007 ireland 2008-2010 ireland regressors fdi stock j,t fdi stock j,t fdi stock j,t fdi stock j,t trade j,t 0.32 (0.98) 0.22 (0.28) -9.62 (-0.72) -8.13 (-0.16) nr of firms j,t -0.06*** (-3.40) 0.06 (1.17) -1.64* (-1.76) -2.08 (-0.66) gdp j,t 6.43e-11*** (7.34) 9.53e-12 (0.50) 7.84e-10* (1.94) -1.73e-10 (-0.16) gov pol j,t -12.33 (-0.94) -22.50 (-0.56) -81.91 (-0.11) -1278.08 (-0.54) trans j,t 32.63*** (2.94) 46.76 (1.42) 82.55 (0.16) 306.16 (0.15) risk premium j,t -28.67*** (-3.79) 15.85 (0.88) -42.52 (-0.12) -1035.26 (-0.92) constant -37.45 (-0.62) -174.10 (-1.31) 890.46 (0.33) 10415.40 (1.30) r-sq 0.734 0.651 0.088 0.353 obs 64 23 63 19 robust t-statistics reported in parentheses. *** significant at the 1 percent level. ** significant at the 5 percent level. * significant at the 10 percent level. baltic journal of economic studies 22 vol. 6, no. 3, 2020 5. summary and conclusions the objective of this research is to capture how iceland and ireland were affected by the global financial crisis. to capture this, we analyze the foreign direct investment (fdi) going into iceland and ireland, before and after the crisis. we find that only in the period before the crisis, both in ireland and iceland, economic wealth in the domestic market have positive effects on fdi, however the number of listed firms to have negative effects on fdi. this indicates that before the crisis, investment to go to these countries based on growth and prosperity in the economy, making them attractive to foreigners. however, after the crisis the economic slowdown makes them less feasible for foreign direct investment, making economic wealth insignificant for fdi. moreover, we find number of listed firms in the stock market to have negative effect on fdi before the crisis in both countries. this indicates that the more the stock market grows with portfolio investment, the less fdi, which is understandable. however, after the crisis, these effects are insignificant, and fdi is not competing with portfolio investment anymore. in addition, before the crisis gdp and transparency have positive effects for iceland, but risk premium negative effects. after the crisis, the financial factors applied do not have any effects in either ireland or iceland. overall estimates indicate when analyzing fdi in ireland and iceland, there is only competition between 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(2010). gravity equations: workhorse or trojan horse in explaining trade and fdi patterns across time and space? international business review. 19(1):102–115. baltic journal of economic studies 9 vol. 6, no. 1, 2020 corresponding author: 1 shei «uzhhorod national university», ukraine. e-mail: belov_dimon@yahoo.com orcid: https://orcid.org/0000-0002-7168-9488 2 yaroslav mudryi national law university, ukraine. e-mail: sydorenko1200@gmail.com orcid: https://orcid.org/0000-0003-0485-6431 doi: https://doi.org/10.30525/2256-0742/2020-6-1-9-17 boundaries of constitutional and legal regulation of economic relations dmytro bielov1, olga sidorenko2 abstract. it is found that the constitutional and legal norms undoubtedly have a significant impact on the economic system of any state. models of the world's economic systems are established and guaranteed by a system of legal means, which, in turn, are subject to the constitutional and legal framework. it is specified that the sphere of constitutional and legal regulation of economic relations has been repeatedly explored in scientific research, however, the consensus on the scope of economic issues that should be subject to constitutional entrenchment has not been reached yet. the analysis of the world constitutional practice shows a tendency of strengthening the regulation of those relations that concern the economic organization of public life. this topic is relevant since not only the legal theory but also political practice enters into a heated debate over the above-mentioned issue. the authors argue that: 1) constitutional law regulates the place of the state in the political system of society and defines the principles of relations between the state and its non-state elements including the ways of resolving conflicts between them, limits of interference or even limits of its activity; 2) the boundaries of constitutional and legal regulation of economic relations should be determined, first of all, on the basis of considering fundamental relations for the economic system of the state, that is, the limits of constitutional regulation depend on the system of relations that are included in the concept of economic relations; 3) the system of relations that require constitutional and legal regulation should also include the establishment of an effective pricing mechanism, the exercise of control over monetary policy, the cancellation of restrictions on foreign trade activities, the development of an effective tax and budgetary system, regulation of financial reporting, etc. key words: economic system, economic relations, constitutional law, public life, state, political system. jel classification: p10, p26, p43 1. introduction the destructive processes observed today in all spheres of public life in the vast majority of economies in the world have greatly raised the question of mechanisms capable of delivering sufficient growth rates both in individual countries and in the global economy as a whole. therefore, it is necessary to look at the problem of development of the economy and society from a fundamental point of view, since the functioning of any system must be based on the basic principles that are manifested in all areas of our lives. therefore, the study of the constitutional principles of the functioning of the economic system of ukraine is an outstanding scientific problem and an interesting practical task. it should be noted that this topic is equally relevant from both theoretical and practical point of view. at the same time, these processes are influenced by the socio-economic, political and other consequences of the current global financial and economic crisis, which has an objective nature and a number of interrelated prerequisites. the consequences of the current economic recession prompt us to revise existing "classical" theories or doctrines, and, perhaps, abandon them. last but not least, this concerns issues related to the perennial state-market or power-to-business controversy. it is in this context that the constitutional foundations of the economic system of ukraine's transformational economy should be considered. constitutional and legal norms undoubtedly have a significant impact on the economic system of any state. models of the world economic systems are established and guaranteed by a system of legal means, which, in turn, are subject to the constitutional and legal framework. the sphere of constitutional and legal regulation of economic relations has been repeatedly explored in scientific research, however, the consensus baltic journal of economic studies 10 vol. 6, no. 1, 2020 on the scope of economic issues that should be subject to constitutional entrenchment has not been reached yet. the analysis of the world constitutional practice shows a tendency of strengthening the regulation of those relations that concern the economic organization of public life. this topic is relevant since not only the legal theory but also political practice enters into a heated debate over the above-mentioned issue. 2. property as a basic category of constitutional and legal regulation of economic relations research of historical facts testifies to the fact that the property relations constitute the basis of the economic system of any social formation. for this reason, they are among the first to be documentarily enshrined. the development of society also entails the development of various forms of property – from tribal and communal to the private one. constitutional regulation of property relations is one of the types of legal regulation of property, the basic one for the modern legislation of any country. the science of constitutional law includes a certain set of property conceptions that are specific to it. the analysis of this set of ideas allows scholars to interpret property as one of the most crucial constitutional and legal institutions (shershun, 2016). the development of both the economic and legal systems of the european countries has had its impact on the processes of forming an understanding of property; the legal regulation of property as a universal institution has also developed and changed. a characteristic feature of the early historical period of the world civilization was the fragmentation of the institute of property into special types of relations of property ownership, use and disposal with respect to individual subjects and objects. there was the so-called “domination” of the collective property of communities, coupled with the restriction of turnover between such communities. thus, while the circulation of goods was quite simple and based on existing customs within a community, outside it – between communities – this exchange was rather infrequent and could concern only deficit things. lifestyle and limited needs did not encourage community members to a constant search. historically, the dominance of individual forms of property has always been a priority. for instance, the policy of the soviet authorities was aimed at eradicating private property as such. this is evidenced by the fact that on december 8, 1961, the supreme soviet of the ussr approved the fundamentals of civil legislation of the ussr and the union republics, which emphasized that the soviet state is the owner of all state property. the 1977 ussr constitution enshrined the dominance of socialist property; thus article 10 stipulated that: “the basis of the economic system of the ussr is the socialist ownership of the production means in the form of state (public) and collective farm-cooperative ownership”. a clear list of personal property objects was documented: household items, personal consumption and utility household items, a residential house and labor savings. the obvious weaknesses in the economy spurred the expansion of the rights of enterprises and increased private citizen initiative. the necessity arose to legalize property other than “state” one but also does not fall under the classification of “private” property. the basic law “on property in the ussr”, adopted in 1990, and subsequent amendments to the constitution contain a waiver of the priority of state property. various variants appeared: property of soviet citizens; collective property represented by rental, collective enterprises, cooperatives, joint-stock companies, etc.; state property (gluhova, 2012). the 1990 law “on property in the rsfsr” envisaged division of property into private, state, municipal and public associations (organizations). the permissible “size” of private property was not limited, although certain restrictions were also stipulated (e.g., the private property of land). with the dissolution of the ussr, the influence of the private property institution on the economic system increased. thus, after the soviet rule of state property, the economy gradually began to be absorbed by private property. a drastic step towards introducing market economy principles was the privatization of state property. r.a. dzhabrailov writes: “perhaps the state expected to get some synergetic effect from the appearance of private property rights in the structure of objects, which consisted in attracting investments into modernization of production, construction of new objects, improvement of the quality of enterprise employees’ social security”. however, as we can observe, those events did not bring the expected results. the idea that the market economy and private property were guaranteed to ensure the welfare and prosperity of the people became a de facto dogma. on the contrary to this, the financial crisis of 2008 forced the world to draw other conclusions, in particular, to abandon the thesis that it is possible to provide a systematic and balanced economy of any state with exclusive self-regulation of the market, which is deprived of state guardianship (ustimenko, 2011). 3. main functions of the state and its involvement in the economic system walter eucken, the founder of the school of ordoliberalism, believed that “social justice should be sought through the creation of a cumulative functional order... it must be understood that private property can cause disruption, the collective property must cause disruption” (nureev, 2007). that is, w. eucken believed that all forms of property should be involved to ensure the full economic development of the state. in his works, eucken harshly criticized the so-called laissez-faire: the principle of state non-interference in baltic journal of economic studies 11 vol. 6, no. 1, 2020 the economy. it was the laissez-faire policy that, in his opinion, caused a significant strengthening of power structures in the economy. w. eucken believed that the laissez-faire principle underestimates the danger that an individual interest may turn against a common interest. the freedom to conclude contracts within the framework of the liberal order, in his opinion, leads to the denial of the basic principle of the competitive order. an individual interest, as he noted, is realized not only in the economic process but also in forming a position in the market in a certain form. acquiring positions of power on the market comes into conflict with the common interest. in fact, “the more power is in the hands of individuals, the greater the danger that there will be a conflict between individual and public interests” (dementev, 2003). scholars’ research on the system of power in the social and economic system allows drawing a conclusion that the latter includes the following basic institutions as state power, user power and industrial power (corporate power). state power in the economic system has the following construction logic. the constitution of ukraine, in particular, paragraph 2 of the article 5, establishes the provisions that people are the bearers of sovereignty and the only source of power in ukraine. the people exercise power directly and through state and local authorities. in the scientific literature, there is a definition of the state as an organization with a comparable advantage in terms of using violence and extends to a geographical territory the boundaries of which are defined by the authorities of that organization to tax people who reside there (eggertsson, 2001). the state embodies a deliberately created, organized and consciously controlled power (hajek, 2001). formalization of the notion of “state power” is associated with a certain range of substantive problems. by its nature, the power of the state is delegated, such power acting on the basis of a social contract enshrined in the constitution and other legislative acts. the main functions of the state, which should ensure the effective operation of the economic system, include integrative, motivational, social control, regulatory, unifying, repressive, stabilizing functions (chehovich, 2005). based on the analysis of these functions, it can be concluded that the potential of state power is based on control over violence resources, ownership of economic resources (budget, state property) and ideological influence, while the power potential of the state is fixed in normative acts in the form of rights of power in relation to citizens and legal entities (shershun, 2016). some scientists, in particular, v.v. dementev believe that the power exercised by the state can be divided, firstly, into an arbitration power, the essence of which is to protect rights and freedoms of some citizens from arbitrariness on the part of others (i.e. protection of property rights and contracts), secondly, into hierarchical (administrative) power, based on the right of the state to issue prescriptions (norms) regulating public conduct and the right of control over their implementation, and thirdly, into economic power, which is to dispose of economic resources of the state. a state is an organization that exercises authority countrywide. the state exercises power through the so-called mechanism of the state: the system of bodies and institutions that constitute its organizational and political, organizational and economic basis, that is, through public authorities, social institutions, as well as through the budget system, banking, monetary and other economic structures. the boundaries of state power for various objects of power are regulated by legal norms (dementev, 2003). the state guarantees the exclusive property rights of individuals, groups and organizations, establishes fundamental rules of economic activity, creates and ensures observance of economic and civil rights (including those of state bodies). the constitution of ukraine stipulates that the state ensures the protection of the rights of all property rights holders and subjects of economic activity and the economy social orientation. all subjects of property rights are equal under the law. it should be noted that in the domestic scientific literature, the issue of state regulation of the economy has traditionally been considered through the prism of state functions, in particular, such as economic and organizational, regulation of labor and consumption. scientists note that it is possible to interpret the state functions not only as directions of its activity but also as a mechanism of influence on social processes (melnikov, 2011). for example, according to n. salishcheva, it was not taken into account in the process of reforms that “when proclaiming the freedom of private property, the state should have taken care of the protection of private production and property, of a reasonable system of taxation, of effective legal regulation” (bachilo, 2001). а. komarov understands the state regulation of the economy as the system of economic, legal, organizational measures of the state, through which it influences the socio-economic development of the country and conducts socio-economic public policy through the system of government agencies and officials (komarov, 2000). n.i. bazilev mentions the following economic functions of the state: improvement of the system of socio-economic relations; forecasting of development; demographic management; orientation of production on the final results; elaboration of development programs; increasing the role of labour collectives; coordination of interests of subjects; promotion of economic activity; ensuring intellectual development, protection of life and human rights and freedoms; regulation of international integration processes. v.i. kushlin offers the following list of economic functions of the state: legal support of economic activity; baltic journal of economic studies 12 vol. 6, no. 1, 2020 organization of monetary circulation; production of public goods and services; minimization of transaction costs; minimization of externalities; realization of national interests in the world economy; regional and social policy implementation (karetnikov, 1998). i.l. sokolova notes that the economic function of the state can be defined as the directions of state activity in the economic sphere aimed at ensuring economic growth, the stability of the national economy, foreign economic stability, means and ways of state influence (sokolova, 2005). r . savatier introduced the notion of “economic public order” into the scientific community: “public order is aimed at solving three tasks: firstly, to protect individual freedom, then to ensure the sovereignty of the state and the strength of the family, and finally to observe the general rules of morality” (savatier, 1972). as a result of a significant expansion of public authority functions, two new areas of public policy application emerged: social public policy aimed at mitigating class inequality and economic public policy aimed at creating a controllable economy. based on the aforementioned material, we have come to the conclusion that the economy of any country needs state regulation to some extent. 4. the norms of the constitution and the content of the state economics regulation constitutional and legal regulation defines the boundaries and content of state regulation of the economy. the content of constitutional and legal regulation of the system of certain social relations is determined by the circle of relations enshrined in the basic law of the state. economic relations encompass a wide range of social relations, and primarily concern property relations. the notion of the right of private property found its fixation in the articles of the constitution of ukraine. in particular, paragraph 3 of the article 13 states that: “property entails responsibility. property shall not be used to the detriment of the person and society”. this thesis is true, since despite a rather rigid definition of the concept of property right adopted as a basis in the civil code of ukraine: the ownership right is the right of an individual in a thing (property) that he/she enjoys in compliance with the effective legislation on his/her own will irrespective of the will of the third persons; the legislator understands the importance of excessive absolutization of individual person's property right. m. andreeva writes that: “during the 20th century, the idea of the social function of private property was spread and further developed in the countries of western democracy and states oriented towards them” (andreeva, 2009). the justification for this pheno-menon was first provided by the french lawyer l. duguit.he believed that the state appropriates property, which should perform a social function. l. duguit argued that property is socialized and ceases to be an absolute right and is transformed for the owner into a social debt. the theory of social functions in no way endeavours to neutralize certain rights of the owner. l. duguit noted that: “...the right of the owner is justified and at the same time is limited by the social mission that lies upon him/her by virtue of the special situation in which he/she is placed” (ustimenko, 2011). the development of the theory of the social function of property in tandem with the development of information technologies had a huge impact on the development of constitutional regulation of property. they gave rise to changes in the range of relations of constitutional regulation and the inclusion of a large number of objects of intellectual property rights. in 1960, the ideas of the social functions of property were embodied by nationalizing the most profitable enterprises. the development of the concept of bolivarianism, the so-called socialism of the xxi  century, also made its corrections in the constitutional and legal regulation of property relations. according to this conception, private property was subject to even harsher restrictions, and broad nationalization was implemented (this applied mainly to oil production facilities). such ideas have given the world the constitution of venezuela and other latin american countries. nevertheless, the modern constitutional regulation includes the imprints of the historical development of the concept of property. a number of countries have provisions in their constitutions that enshrine different types of property of different origins. however, the majority of home scholars pay attention to the norms that relate exclusively to the legal regulation of private property, its protection from illegal encroachments and provisions on the exclusive property of the state. the analysis of the world’s constitutions shows that property not only provides rights, but also entails responsibilities. thus, for example, article 14 of the german constitution stipulates: “property entails obligations. its use shall also serve the public good”. as we have noted earlier, the constitution of ukraine also contains a norm about the obligatory nature of property. however, it is not clear to what obligations it exactly entails. thus, v.a. ustymenko writes that: “ownership binds all subjects of law irrespective of their legal status and the scope of their powers. the obligation to align their actions and aspirations with the principles of civil society and the interests of the people is equally important for both the private and public owner” (ustimenko, 2011). it is impossible to disagree with this thesis, since only in this way the idea of social functions of property and social orientation of economy, enshrined in the constitution of ukraine, can be embodied. baltic journal of economic studies 13 vol. 6, no. 1, 2020 returning to the problem of the necessity of the economy state regulation, it should be noted that many scientists, in particular, v.v. melnikov believes that the complex constitutional regulation of the state’s economic role is an exception rather than a general rule in the world practice of constitutionalism (melnikov, 2011). thus, in addition to general social formulas, real economic objectives must be established in order to achieve the goal. the spanish constitution, for instance, contains provisions according to which wealth of the whole country is subject to the general interests of the country. the italian constitution states that private economic initiative is free. it may not be exercised in contradiction with the public interest or at the expense of security, freedom, human dignity. the law defines programmes of activities and control through which public and private economic activities can be directed and coordinated for social purposes. the law defines measures and control programmes through which public and private economic activities can be directed and coordinated for social purposes (shershun, 2016). in the world’s modern constitutions, it became necessary to establish norms regulating the limits of nationalization of citizens’ property as well as compensation of the latter. these provisions are considered to a greater extent as a safeguard against illegal expropriation of the property of a law-abiding owner. thus, for example, article 21 of the constitution of georgia stipulates: “the restriction of the rights shall be permissible for the purpose of the pressing social need in the cases determined by law and in accordance with a procedure established by law. deprivation of property for the purpose of the pressing social need shall be permissible ... only with appropriate compensation”. part 2 of the article 21 of the polish constitution provides as follows: “expropriation may be allowed solely for public purposes and for just compensation”. the constitutions of individual countries stipulate in great detail the issues of property expropriation. thus, the basic law of greece directly defines not only the possibility of the state to expropriate property in the public interest, but also details the procedural process for recovering its value: “no one shall be deprived of his/her property except for public benefit which must be duly proven, when and as specified by statute and always following full compensation corresponding to the value of the expropriated property at the time of the court hearing on the provisional determination of compensation. in cases in which a request for the final determination of compensation is made, the value at the time of the court hearing of the request shall be considered” (konstituciya, 1975). any change in the value of expropriated property occurring after publication of the act of expropriation and resulting exclusively there from shall not be taken into account. compensation is determined by the competent courts, such compensation may also be determined provisionally by the court after hearing or summoning the beneficiary, who may be obliged, at the discretion of the court, to furnish a commensurate guarantee in order to collect the compensation, as provided by the law. there is also a very important provision for the alienation of property in compensation: “prior to payment of the final or provisional compensation, all rights of the owner shall remain intact and occupation of the property shall not be allowed”. in other words, the legislator at the constitutional level guarantees the inviolability of the right to private property and provides the owners with the means of its protection. compensation in the amount determined by the court must in all cases be paid within one year and a half at the latest from the date of publication of the decision regarding provisional determination of compensation payable, and in cases of a direct request for the final determination of compensation, from the date of publication of the court ruling, otherwise the expropriation shall be revoked ipso jure. the compensation as such is exempt from any taxes, deductions or fees. constitutions of post-soviet states usually do not regulate this issue in such detail. thus, paragraph 3 of the article 25 of the constitution of the russian federation states that no one may be deprived of property otherwise than by court decision. forced confiscation of property for state needs may be carried out only on the proviso of preliminary and complete compensation. in contrast to the greek constitution, the issue of compensation for expropriated property is not regulated by the basic law of the russian federation, and therefore it is necessary to resort to the federal legislation of the country for its solution. в. melnikov writes that a person's deprivation of his/her property by court decision (in the form of a sentence or resolution) can only take place in the cases provided by law (melnikov, 2011). an exclusive list of the grounds for compulsory expropriation of property from its rightful owner is contained in paragraph 2 of the article 235 of the civil code of the russian federation. in particular, so far, the grounds include: the turning of the penalty onto the property by the obligations; the alienation of the property, which by force of the law may not be owned by the given person; the alienation of immovable property in connection with withdrawal of a land plot because of its improper use; the alienation of an incomplete construction object in connection with termination of the validity term of an agreement on lease of a land plot which is under state or municipal ownership; the alienation of immovable property in connection with compulsory alienation of a land plot for state or municipal needs (withdrawal of a land plot for state or municipal needs; the redemption of the mismanaged cultural values and of domestic animals; the requisition; the confiscation; appropriation on the baltic journal of economic studies 14 vol. 6, no. 1, 2020 basis of a court decision by the russian federation of the property in respect of which any evidence proving its acquisition with the use of lawful income are not presented in compliance with the anticorruption legislation of the russian federation; appropriation on the basis of a court decision by the russian federation of the monetary assets, valuables, other property and the income derived from them in respect of which in compliance with the legislation of the russian federation on counteracting terrorism a person has not presented data proving the legality of their acquisition (melnikov, 2011). in addition to the above-mentioned issues, the texts of foreign constitutions have many other provisions regarding the regulation of property relations. these are, in particular, the regulations on the protection of the country 's cultural heritage and nature, the regulations on the right of ownership of land, water and other natural resources, on the rights of public organizations, on guarantees of the right of ownership in legal proceedings (objects of ownership of individuals and legal entities); on freedom of conscience and the rights of religious organizations (objects of property rights of religious organizations), the legal status of foreigners, the protection of intellectual property, the right of ownership of the mass media, separate “forms” of ownership, the division of competencies of the federation and the subjects on property issues, the competencies of municipalities on property issues, special regulation of property based on the status of indigenous peoples, etc. nevertheless, these norms are not comprehensive, they have limitations that define the limits of this study (shershun, 2016). paragraph 5 of the article 41 of the constitution of ukraine contains a provision stating that the expropriation of objects of the right of private property may be applied only as an exception for reasons of social necessity, on the grounds of and by the procedure established by law, and on the condition of advance and complete compensation of their value. the expropriation of such objects with subsequent complete compensation of their value is permitted only under conditions of martial law or a state of emergency. therefore, based on the practice of foreign countries, the ukrainian legislator defined clear boundaries of such expropriation and enshrined guarantees of property rights. the legislation of ukraine provides for such types of forcible alienation as requisition (art. 353 of the civil code of ukraine) and confiscation (art. 354 of the civil code of ukraine). with regard to the concept of nationalization, the current civil code of ukraine does not contain any provisions addressing this issue; only paragraph 3 of the article 397 of the economic code of ukraine specifies that foreign investments in ukraine are not subject to nationalization. types of forcible alienation of private property are a measure of influence of the state on economic activity within the framework of market mechanism. defining the boundaries of this action is a topical discussion issue in scientific literature. в. chirkin writes that economic theories and views cannot be established by the state as state or obligatory, and the state cannot declare marxism or economic liberalism as state economic ideology (chirkin, 2001). the state must perform its functions through universally recognized values, basic goals of development, democracy and the rule of law. b.n. topornin expressed the opinion that the constitution should define the “system of coordinates” in which the state “plays its economic function”, pointing out also that the constitution may provide instruments of state regulation, including the budget, taxes, export and import privileges (topornin, 1992). 5. the scope of constitutional and legal regulation of economic relations the sphere of constitutional and legal regulation of economic relations has been repeatedly subjected to scientific research, but there is still no consensus as to which economic issues should be subject to constitutionalizing. not only legal theory, but also political practice enters into heated debate over the above-mentioned issue. as we have mentioned earlier, modern constitutions of foreign countries to a greater extent contain regulations on the economic sphere. these are, in particular, provisions on nationalization of socially important sectors of the economy, state monopoly, agrarian reform, economic planning, social justice, fair distribution of public products, etc. all constitutions of the twentieth century are characterized by a drastic increase in the range of regulations devoted to numerous economic issues, including: forms of the state’s participation in economic activity, public restrictions on the freedom of economic activity, etc. such approach testifies to the growing role of constitutional regulation of economic relations, however, it caused scientists to seek an answer to the question concerning the reason for the increase in the number of constitutional and legal norms of economic content (shershun, 2016). the study of the content of constitutions led the researchers to classify the so-called economic norms according to their content. in particular, m. andreeva, having studied the issue of the scope and content of constitutional and legal regulation of the economy in foreign countries, suggests classifying the constitutional and legal norms regulating economic relations into four groups: the economic basis of individual freedom; the boundaries of individual freedom in the economic sphere; ways of solving social conflicts in the sphere of entrepreneurship; the role of the state, its economic baltic journal of economic studies 15 vol. 6, no. 1, 2020 policy and competence of state bodies in the sphere of economy (andreeva, 1991). in addition, v.e. chirkin singles out economic relations that are subject to constitutional and legal regulation including property relations, the role of the state in regulating the economy, etc. the main lever is prognostication. along with the prognostication, v.e. chirkin notes that many other levers are used to regulate the economy. they include redistribution of the budget, direct stateization (nationalization) of a number of the economy sectors, tax and credit policy, government intervention in labour relations (legal regulation of working hours, vacations, etc.), the creation of special departments and various kinds of mixed companies with the participation of state capital, where government officials and heads of monopolies together resolve issues of economic regulation, etc. (chirkin, 2001). v.e. chirkin is a supporter of the notion of economy socialization. economic socialization is a link in the general process of socialization, it “finds its expression in the formation and development of a trend, and subsequently a pattern, according to which under the influence of the producer’s needs, the process of assimilation and use of a specific system of knowledge, norms and values necessary for the successful functioning of the national economy, social and economic relations, society as a whole, is accelerated”. according to other interpretations, socialization is the development and strengthening of social orientation in the development of economic systems, in which a certain part of net monetary income is used to meet the social, material and social and spiritual needs of the main subject of the economy: the individual. s. mochernij presents socialization of economy as “a process of gradual evolutionary filling of subsystems and elements of the economic system of capitalism with socialist content, formation and development of the basis of socialism” (mochernij, 2007). i.a. alebastrova writes in her studies that constitutions of the 20th century are characterized not only by socialization, but also by expansion of the circle of constitutional regulation. according to the scholar, the constitutions “began to regulate not only the foundations of the state’s structure, but also the foundations of the construction of civil society, to formulate the objectives and principles of state action in the social sphere, and to regulate, in addition to personal and political rights, economic, social and cultural rights of man and citizen”. it is obvious that the new social conditions, which necessitate a broader entrenchment of economic institutions in the basic laws of the state, demonstrate the bond between the constitution and the economy that had emerged long before such entrenchment was necessary (alebastrova, 2000). constitutional and legal regulation of economic relations is a dynamic legal phenomenon, which should become an expression of reaction to the processes occurring in the economic system of the state. the economic system of the state, based on its connection with the constitution, has several key definitions. thus, d.l. zlatopolskij writes, “the state’s economic system is the most important element of the social order. it is explained by the fact that the concept of “the state’s economic system” includes forms of ownership, constitutes the actual basis of social relations, the foundation of life activity of any state” (zlatopolskij, 2000). the boundaries of constitutional regulation are also established by determining the degree of importance of certain public relations in the respective public sphere. thus, e.i. kozlova refers to the subject of constitutional law in the sphere of economic life of society only those relations that characterize the basic principles of the economy, forms of ownership, indicating that the full legal regulation of economic relations is implemented by civil, economic, financial and a number of other branches of law (kozlova, 2003). a broad approach to identifying regulatory links between the constitution and the economic sphere has allowed us to view the economy as an integral element of civil society. the establishment of civil society in ukraine has to address a two-fold issue: on the one hand, to provide a real opportunity for citizens through various forms of associations to exercise effective influence on the state. on the other hand, the awareness of their responsibility for the formation and implementation of public policy. the idea of b. topornin regarding the definition of constitutional limits of economic regulation is very interesting. thus, the scholar writes that it is necessary to speak only about the most important and essential issues in the constitution, leaving concretization and development of the proclaimed principles to the branch legislation. in b. topornin’s opinion, the importance of constitutional regulation of economic issues is conditioned by the interests of relations optimization between the state and society and determination of limits of admissible state interference into economy. according to b. topornin, “replacing the constitution with the current legislation on such issues in terms of both theory and practice would be as vulnerable as replacing the current legislation with the constitution” (topornin, 1992). in the scientific literature there is also a discussion about the theory put forward by o.e. kutafin, namely: “the most important component of the subject of constitutional law is the group of relations formed in the process of implementation of the main features of state organization of society”. besides, he came to the following conclusion: “the subject of the constitutional law of any state cannot be given once and for all. it depends on the content of the constitution or other fundamental documents in effect in the state at a certain stage of its development. thus, the discussion that has baltic journal of economic studies 16 vol. 6, no. 1, 2020 been held for many years on the scope of relations that constitute the subject of constitutional law has no grounds, as their scope does not depend on the identification of certain social relations that constitute the subject of constitutional law, but, as mentioned above, on the will of the state, which gives them a fundamental character” (kutafin, 2001). however, some researchers do not support this view. for example, a.e. kozlova writes that the constitutional law does not enshrine the state leadership in society in one form. society is independent of the state and stands above it. the relationship between society and the state should be based on the recognition of human freedom and civil society institutions (kozlova, 2003). 6. conclusions 1. constitutional law regulates the place of the state in the political system of society and defines the principles of relations between the state and its non-state elements including the ways of resolving conflicts between them, limits of interference or even limits of its activity. 2. the boundaries of constitutional regulation of economic relations should be determined first of all on the basis of considering fundamental relations for the economic system of the state. that is, the limits of constitutional regulation depend on the system of relations that are included in the concept of economic relations. since no single point of view regarding the definition of “economic relations” exists in the scientific literature, we believe that the basic relations in this sphere, which require constitutional and legal regulation are: freedom of economic activity and its limits; economic space, free movement of goods, services and financial resources; basic provisions for the organization of market economy; property relations, including the fixation of their forms; guarantees and restrictions in relations between economic entities and public authorities. the above-mentioned provisions cannot be considered separately from each other, because their exclusively complex development will lead to the harmonious functioning of the state economic system. these provisions should be characterized by complementarity, and the lack of regulation of some items will lead to a significant limitation of the content of others. thus, for example, it is impossible to exercise freedom of economic activity without constitutional regulation of types of ownership or in the absence of a clear mechanism of restrictions on the interference of public authorities in the freedom of economic activity subjects. 3. the system of relations that require legal regulation should also include the establishment of an effective pricing mechanism, the exercise of control over monetary policy, the cancellation of restrictions on foreign trade activities, the development of an effective tax and budgetary system, regulation of financial reporting, etc. references: alebastrova, y. a. (2000). konstytutsyonnoe (hosudarstvennoe) pravo zarubezhnikh stran [constitutional (state) law of foreign countries]. moskow: yurysprudentsyia. (in russian) andreeva, g. n. (1991). konstituciya i ekonomika v zarubezhnyh stranah: osnovnye parametry reglamentacii. sovremennoe konstitucionnoe pravo zarubezhnyh stran [the constitution and economy in foreign countries: the main parameters of regulation. modern constitutional law of foreign countries]. мoskow: inion – myui. part. 2. (in russian) andreeva, g. n. (2009). institut sobstvennosti v konstituciyah zarubezhnyh stran i konstitucii rossijskoj federacii [the institute of property in the constitutions of foreign countries and the constitution of the russian federation]. moskow: norma. (in russian) bachilo, i. l., & hamaneva, n. yu. 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(in russian) baltic journal of economic studies 69 vol. 6, no. 2, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: anton_filipenko@ukr.net orcid: https://orcid.org/0000-0001-8458-2770 2 taras shevchenko national university of kyiv, ukraine. e-mail: elena12042010@gmail.com orcid: https://orcid.org/0000-0003-3197-8426 3 taras shevchenko national university of kyiv, ukraine. e-mail: roman.stakanov@gmail.com orcid: https://orcid.org/0000-0003-3412-8451 doi: https://doi.org/10.30525/2256-0742/2020-6-2-69-80 economic sanctions: theory, policy, mechanisms anton filipenko1, olena bazhenova2, roman stakanov3 abstract. the purpose of the article is to analyze the theory and practice of international economic sanctions. the application of international economic sanctions and debate about their effectiveness and scale of losses are now at the centre of international politics. analysis of key factors, mechanisms and socio-economic consequences of economic sanctions in the world economy need a conceptual understanding. the subject of the research is international economic sanctions. according to known practice, economic sanctions policy is based largely on the discretionary approach of using, as required, a policy of rigid rules, which is clearly reflected in the mechanisms, means and instruments of its practical implementation. economic sanctions are the integral part of international economic policy, implemented through the theory of public (rational) choice, structural theory (cost-issue model), decision-making theory, the theory of coordination and cooperative games, etc. the hierarchical nature of the mechanism for the application of sanctions is available in three main levels: global, regional and national. there are three types of economic sanctions: trade, investment or financial ones, and so-called targeted sanctions or “smart” sanctions (transportation and communications restrictions). the case of introduction of economic sanctions, especially by supranational bodies of international integration organisations, namely the eu, is of particular importance for economic policy coordination. the specific consequences of imposing economic sanctions take on various socio-economic dimensions, the main ones of them indeed being the economic growth rates. the economic sanctions demonstrate how the individual countries, regional and international organizations react on huge violations of human rights, sovereignty of countries, international law in general. methodological basis of the research comprise the list of theoretical and empirical methods of research; in article, the analysis of recent research publications subject under the discussion has been provided, the results obtaining with statistical data have been compared, the practical recommendations, received on the base of survey results have been suggested. to examine how the iranian economy responds to sanctions imposed by the us and other countries we have constructed vector autoregression model. to test the variables of the model for unit root we have used augmented dickey-fuller, phillips-perron and kwiatkowski–phillips–schmidt–shin criteria, which have shown that almost half of the indicators are first-order integrated, with the rate of inflation and investment, in relation to gdp, gdp growth rate, imports of goods and services and oil rent are stationary, that is zero-order integrated. the us sanctions have increased oil price fluctuations in the middle east region. the results of the study have shown that economic sanctions nowadays are a comprehensive tool in global economic wars, which effectiveness largely depends on the ratio of the economic power of the sanction imposing country to the sanctioned one. key words: economic sanctions, world economy, gdp, usa, iran. jel classification: c43, f13, f51 1. introduction the processes of world economic globalization causes the activation of new economic mechanisms in international relations system to influence the policy and behaviour of a particular governments or group of states acting in the interests of public security. the application of international economic sanctions and debate about their effectiveness and scale of losses are now at the centre of international politics. in today 's globalized and interdependent world with national baltic journal of economic studies 70 vol. 6, no. 2, 2020 economic interests, sometimes diametrically opposed, complex measures are increasingly used to change the economic or political strategy pursued by states. the widespread use of international economic sanctions in the early 21st century adds particular relevance to this problem. world economic science does not reveal sufficiently the theoretical basis and methodology of the international economic sanctions study. usually, the imposition of sanctions is not an ordinary but an exceptional measure of foreign economic policy aimed at achieving certain political goals. it can be argued that sanctions are the antithesis of normal foreign economic policy. the imposition of sanctions has many negative consequences associated with the slowdown in gdp growth, the development of the business sector, and the loss of jobs. economic sanctions in combination with other measures (such as military and political ones) can have a destabilizing effect on the government system of the sanctioned country. the analysis of the main factors, mechanisms and socio-economic consequences of economic sanctions in the world economy need conceptual reflection. analysis of key factors, mechanisms and socioeconomic consequences of economic sanctions in the world economy need a conceptual understanding. particular attention should be paid to the use of an interdisciplinary research methodology of the economic sanctions models in the world economy, since its causes and consequences go far beyond the realm of economic sphere. the authors have attempted to contribute to the development of theoretical principles of analysis and study of the practical aspects of international economic sanctions mechanisms of modern global economy. 2. literature review theoretical aspects of economic policy of the second half of the 20th century have been discussed in the works of v. eucken (eucken, 1952), j. tinbergen (tinbergen, 1956), k. boulding (boulding, 1958) and others. sanctions are a weapon of the rich and powerful (economides, 2001), and smaller and weaker countries find it harder to achieve the effect of sanctions, unless participating in collective sanctions. according to g. hufbauer, j. schott, and k . elliott, sanctions are usually successful against small countries (the median ratio of gdp of the initiating country to the target country was 105) (hufbauer et al., 2007). the use of economic sanctions may not achieve the economic goals set by an economic power or lead to losses, as it may alter economic decisions. sanctions can lead to an enrichment of the elites that control the shadow market (cronin, 2009). third-country intermediaries can be used to circumvent sanctions. as k . elliott points out, market forces weaken the effect of trade sanctions but increase the effect of financial sanctions (hufbauer et al., 2007). the consequences of sanctions are transformational (due to changes in regulation and redirection of trade flows) and additional transaction costs (growth of formal and informal trade barriers), primarily for the target country, but also for the initiator of sanctions and third countries. j. frank suggests that comprehensive sanctions are not used against important trading partners. sanctions, at least moderate, reduce trade between countries (typically on 6-10%) (frank, 2017). in terms of interdependence, increasing problems in the force object may adversely affect the force subject (narrowing the market, reducing the return on investment abroad, the readiness of the force to respond more radically, etc.). sanctions are often difficult to target, so innocent citizens may suffer for the policies pursued by the ruling elite. it can worsen the reputation of a country that implements sanctions (büthe, 2009). financial and combined trade-financial sanctions increase the income inequality of the population. mostly poor people suffer from the suspension of international assistance, restrictions in the activity of international organizations. purely trade sanctions (especially import sanctions), on the contrary, reduce such inequality (afesorgbor, 2016). sanctions also have a negative effect on neighbour countries, increasing the regional economic crisis possibility (baluev, 2014). r . pape argues that not all sanctions identified as successful can be considered as such: the achievement of goals has been promoted not by sanctions, but by military actions or other factors (pape, 1997). however, economic sanctions are still used because of their relative lower cost than the cost of warfare (kunz, 1994), including reputational losses. the ideological and theoretical origins of realism are associated with the works of n. machiavelli, t. hobbes, f. list, and others. this area has been called “horizontal informal system”, which is founded on three main assumptions. the first assumption. sovereign states are the dominant actors in the international economic policy and main units of analysis. the second assumption. sovereign states are the maximisers of power that urges them to continuously increase economic, political and military potential. the third assumption. sovereign states are rational actors. they analyze costs and outcome to maximize their power. the state has a priority over the markets, political actor shapes market relations. as karl polanyi stated back in the day: “economic history reveals that the emergence of national markets has been in no way the result of the gradual and spontaneous emancipation of the economic sphere from governmental control. on the contrary, the market has been the outcome of a conscious and often violent intervention on the part of government which imposed the market organisation on society for noneconomic ends” (polanyi, 2002). baltic journal of economic studies 71 vol. 6, no. 2, 2020 3. theory of international economic sanctions in the context of functional differentiation and decision-making, there are two main concepts of economic sanctions policy: realism and liberalism and two derivatives: cosmopolitanism (within the framework of liberal conception) and hegemonism (as a derivative of realism). some authors refer to the latter as constructivism. the public choice theory is a liberal one and is used as an important applied mechanism for calculating the socio-economic consequences of sanctions in trade, investment, finance, etc. according to the tenets of realism, there are no uniform rules in the international economic system, anarchy reigns here, states are sovereign, act at their own discretion as the highest-level entities, and are subject to all other actors governed by their own laws. therefore, according to realists, international economic policy is formed primarily as a result of the rational actions of the states in the struggle for power and wealth. zero-sum game prevails in relations between states, when the victory of one entity necessarily implies the loss of another, which inevitably gives rise to conflicts and economic wars. the priority claim to sanctions lies not with international organisations, but with states; economic sanctions are not a mean of coercion of abiding by the law, but a foreign policy tool; economic sanctions do not reduce the amount of deviant actions in the international community, but they force the opponent to do what the sender country requires. the liberal trend in international economic policy traditionally advocates the free trade and free markets, based on the neoclassical paradigm. the key position is the one on the need to achieve the fundamental harmony of interests between states as a result of free exchange of goods and services between them, the deepening of cooperation. the cornerstone of liberalism is to focus on the behaviour of individuals, firms and countries (horizontal formal system). according to liberalists, given the receipt by countries of maximum benefits, the free trade does not create any economic grounds for international conflicts and wars. the liberal concept also implies the need to manage the international economic relations by a country through: – establishment of appropriate trade regimes; – adoption of rules, norms and standards to ensure; – equivalent exchange between countries; – prevention of unfair competition, etc. the liberal approach rests on the assumption of the existence of rights and norms for the imposition of sanctions. according to the liberal paradigm, sanctions are an impossibility without common rules or legal provisions governing deviant behaviour. the liberal paradigm emphasizes the difference between coercion and sanctions. sanctions are an act of coercion, but not all coercive acts are sanctions. norms and law should precede the imposition of sanctions since they work as constitutive rules that determine the practice of legislative coercion (i.e. sanctions). the essence of the liberal paradigm-driven public choice policy is that both the endogenous (internal) consequences of sanctions for different interest groups (parties, trade unions, business associations, etc.) and the socio-economic and political consequences for target countries are assessed. this indicates that economic loss is not a key position in determining the nature (essence) of a sanction package for another country. the simplified constructivist theory comes down to the existence in the world system of a hegemonic power centre, which uses its economic, political, technological, military power, imposes its rules of play in the system of international relations, including the policy of sanctions (vertical informal system). at the same time, constructivism focuses on the social aspects of sanctions policy. the conceptual basis for international economic policy coordination lies in the theories of public choice and of games, including the prisoner’s dilemma. the public choice theory establishes the basis for the collective decisions analysis. the main ones here are k. arrow’s “impossibility theorem” and prospect theory of kahnemann and tversky. the key elements of the arrow’s theorem are the social welfare function, aggregation methods, axiomatic methods, welfareevaluation methods and voting methods. according to the theorems and axioms, the social welfare function, the main criterion for international economic policy coordination, must satisfy the following four conditions: 1. the pareto criterion for efficiency is valid; if each actor prefers c to b, then society at large would prefer c to b. 2. no individual should determine the collective decision (non-dictatorship); citizens are not allowed to sell their right to vote (no-market condition). 3. independence: the choice between two options is independent of irrelevant alternatives (social choice under the existence of other alternatives should depend only on the choice (preference) of these alternatives). 4. unrestricted domain (a requirement that all logical preference-orderings are allowed, ordered, definitively formulated and embodied understandable individual choices) (keizer p., 2015). impossibility theorem claims that it is impossible to meet all conditions at once. at the same time, combined with other similar exploratory studies (harsanyi’s utilitarian theorem, condorcet's jury theorem, median voter theorem, etc.), important scientific and practical deliverables are achieved in the system of public choice, including on the level, mechanisms, and scope of economic sanctions. the rational choice focuses on individual choice under uncertainty and is dominant in today’s economic mainstream (neo-classics, postneoclassics). its essence is to maximize utility on the baltic journal of economic studies 72 vol. 6, no. 2, 2020 basis of the excess of benefits over cost. in this case, the well-known cost-benefit analysis can be used to impose sanctions. monetary as well as political, moral and other elements may serve as units of measurement. an upgraded version of the theory of rational choice lately takes shapes of concepts of experimental economics and neuroeconomics. the principles of the prisoner’s dilemma model are widely used in the analysis of international economic policy coordination. this is in no way attest to the fact that formal cooperation is always necessary. the rule here is that if one player does not adhere to cooperative behaviour, the other may not adhere to it in the next round (tit-for-tat strategy, or retaliation strategy). in general, the strategy of reciprocal actions is based on four principles: – clarity; – niceness; – retaliation; – forgiveness. the constellation of coordination games also includes the battle of the sexes, median action games, weakest link games, the stag hunt, sequential game, repetitive games, arrangement games, universal signal game, the trust game, the ultimatum game and the dictator game (dhami, 2016). there are two main types of economic policy used in international economic relations. the first is premised on the strict observance and enforcement of applicable legal and economic rules. the second involves arbitrary interpretation of the rules depending on the economic and political situation (discretion approach; ‘discretion’ means a free choice). advocates for rigid rules based approach substantiate their position with four basic arguments. firstly, it is a possibility of establishing the best options for the goals, objects and mechanisms of international economic policy coordination. secondly, the rules are seen as the only viable mechanism for imposing discipline on top officials who can manipulate economic policy instruments for their own ends. thirdly, the rules are considered as ones that enhance the predictability of policy actions and, thus, improve the ability of the private sector to make informed decisions about resource allocation. fourthly, the rules have a significant advantage over how the economy works during destabilization processes. “fine tuning” allows you to design economic policy measures in accordance with the nature of fluctuations in the economic environment. the discretionary approach (deviation from the rules) emphasizes on: – unpredictability; – stochasticity of economic processes; – volatility of modern financial and economic systems; – imperfection of existing macroeconomic and geoeconomic models based on rigid rules; – fundamental uncertainty (post-keynesian paradigm). at the same time, deviation from the rules should not be detrimental to national economic interests. according to known practice, economic sanctions policy is based largely on the discretionary approach of using, as required, a policy of rigid rules, which is clearly reflected in the mechanisms, means and instruments of its practical implementation. there are three types of economic sanctions: trade, investment or financial ones, and so-called targeted sanctions or “smart” sanctions (transportation and communications restrictions). types of economic sanctions and means of reflecting and encouraging cooperation between countries are shown in table 1. table 1 types of economic sanctions positive sanctions negative sanction existing or promised gains existing or threatening penalties trade sanctions: – tariff reduction – tariff elimination – partial embargo – absolute embargo investment or financial sanctions: – financial or investment assistance from various institutions such as the imf, the wb or from countries – reduction of capital flows (lending reduction or suspension) – forced disinvestment – reduction in international payments – assets freezing targeted sanctions: – humanitarian aid – transport and communications ban – travel ban – technology transfer ban, ipr transfer ban the political and economic interpretation of the economic sanctions of the institutional content is given in table 2. table 2 economic sanctions system functional differentiation / decision-making procedure horizontal informal realism states formal liberalism states and international organisations when determining the content, nature and types of economic sanctions, the main areas of their application should be taken into account (table 3). the case of introduction of economic sanctions, especially by supranational bodies of international integration organisations, namely the eu, is of particular importance for economic policy coordination. international economic policy coordination is the process of joint adjustment of measures and instruments of national economic policy with the parties concerned within the framework of bilateral relations or within regional and global associations. the baltic journal of economic studies 73 vol. 6, no. 2, 2020 problem of international policy coordination is driven by the ever-increasing interdependence of different countries, resulting in the economic policies of one country affecting the economic situation and principles of economic policies of other countries. coordination may relate to the exchange of information between governments, coordination of economic and political activities of different countries, including the possible delegation of powers to supranational authorities (the eu single monetary, commercial and agricultural policy). objectives of the economic policy, its scope and timeframe, alternative options, information on forecasts, structural changes and other macroeconomic indicators are to be coordinated as well. coordination, therefore, involves major changes in domestic policy, taking into account international interdependence. the main tasks and prerequisites for coordination are: – increase in public benefits, growth of national welfare and consumption; – consideration of external causes and factors associated with changes in international trade and business conditions; – diversity of government approaches to the principles, objectives and mechanisms of economic policy implementation; – maintaining macroeconomic equilibrium, especially in times of regional and global economic and financial crises. upon imposing sanctions the sanctioning unit behaviour can be analysed from two standpoints: the interest group theory and the rational actor methodology. these two concepts are not inevitably inconsistent with each other. rather, they focus on different questions. according to the interest group theory, observed policies in international relations and their implications are perceived as outcomes of the set-ups of domestic interest group politics within sender and target countries. in other words, it expresses how national policy choices mirror the interests of constituency groups within the polity. in this approach, embargo’s objective and more generally sanctions’ objective are to serve the interests of pressure groups within the sender country. national governments are considered as arbiters of competing domestic interest groups, acting in a more or less impartial manner. while some pressure groups might derive pecuniary benefits (income effects) from the implementation of economic sanctions, others get utility directly from taking a moral stance against a target country’s deviant policy. the first situation is expressed as the instrumental motive while the second case is well-known as the expressive motive developed by per lundborg (1987) and johan galtung (1959) (kaempfer and lowenberg, 1988). the public choice approach is based on the fact that policy markets exist. both sender and target states owe such markets. interest groups play a decisive role in national policy decisions by constituting the political market. they seek maximum net gain from implementing the relevant public policy. even if these groups are defined by commonality of interests, each member of the group sees its political participation tempered by a propensity to free ride, as it stems out from the arrow's impossibility theorem (kaempfer and lowenberg, 1988). the basic narrative says that the government of the sender country supplies economic statecraft for an amount greater than zero. this is due to the fact that the sender country’s interest groups demand sanctions, bidding up what they are willing to pay. on the one hand, the price reflects the cost of engaging the government to take action. on the other hand, the quantity constitutes the level of action that the government is willing to undertake. target countries face the same policy market. however, as the target government supplies deviant policy that it knows, will spark off economic sanctions as a reaction, it engages in that policy with an expected cost. this expected cost is an imported cost that needs to be added to the domestically produced policy cost resulting of supplying the deviant policy of the target country. the specific consequences of imposing economic sanctions take on various socio-economic dimensions, the main ones of them indeed being the economic growth rates. for example, when it comes to trade sanctions, as is known from classic and neoclassical models, foreign trade has a direct impact on the wellbeing of the population and on the dynamics of economic development. a gravity model is used to calculate the impact of sanctions on trade. it takes into account gdp, population of countries, distance and size of sanctions: lntradeijt = β0 + β1ln gdpit + β2ln gdpjt + + β3lnpopit + β4lnpopjt + β5lndistij + (1) + β6sanctionit + uijt. table 3 primary areas for imposing sanctions 1. culture and sports suspension of exchanges 2. diplomacy reduction or closure of diplomatic missions. expulsion from international organisations. prohibition of taking office. 3. transportation prohibition of air and sea communications. suspension of railway and road transport. 4. communications suspension of postal and telecommunication services 5. development cooperation termination of financial and technical assistance 6. military issues termination of military cooperation 7. finances external assets freezing prohibition of financial transfers 8. trade boycott embargo 9. criminal justice international tribunal baltic journal of economic studies 74 vol. 6, no. 2, 2020 the model in question produces four results for understanding the success of economic sanctions and issue linkage. the first result, a player’s preferences for the issue under dispute and the imposition of sanctions are critically important to understanding the sanctions game. the second result, threatening sanctions is a priority. a decision-theoretic model shows that the choice between the use of sanctions, incentives, or a combination of them depends on the level of interdependence between target and sender. imposing sanctions is a strategy in international disputes. when sanctions are likely to be successful, it is the threat, not the imposition, of sanctions that changes a target state’s behaviour. the third result, states that ignore the threat of sanctions are unlikely to change their behaviour after sanctions are imposed. the fourth result, sanctions that do not change a target’s behaviour may still be successful by enhancing the coercer’s reputation as a resolute player, improving its political rating. when both collective and individual sanctions are to be imposed, modern macroeconomic models can be used to determine the socio-economic consequences for both parties. structural models are based on leontief ’s “input-output” theoretical concepts and on extensive econometric tools (hashimzade and thornton, 2013). they allow assessing of structural changes in the economic, demographic, technological, political and other areas, occurring as a result of the introduction of sanctions policy. the basis of the analysis is the general theory of economic interdependence, improved and expanded by v. pareto (leontief, 2006). threshold vector autoregression (var) econometric models are used to determine the threshold effects of economic sanctions policy in the context of swot analysis (strengths, weaknesses, opportunity, threat, constraints, behaviour of the sanctioned countries, etc.) (hashimzade and thornton, 2013). structural instability, an outdated economic structure, and a raw material orientation (venezuela, the dprk, cuba, iran, russia) are commonly observed in targeted countries. econometric tests of such economic systems include three main types of instability: – parameter breaks; – other parameter instabilities; – model instabilities. the first category of tests, parameter breaks, focuses on sudden parameter changes. the time of change is called break-point in econometrics and change-point in statistics. the said parameters are considered both known and unknown. however, methods for detecting multiple break-points are applied as well in the break models. other parameter instabilities tests are based on the state of the art tests for threshold models, smooth transition models and markov-switching models. the third category of tests, model instabilities, stipulates for a change in a functional form of the model after a known or unknown break (hashimzade and thornton, 2013). the first test is implemented via generalized method of moments (gmm), when estimating and calculating the optimal way to evaluate the economic model parameters, in particular the financial state of the economy as a result of the application of sanctions policy; rational expectations parameters in the macroeconomic model; business cycle models, exchange rates, land relations, demand for labour and etc. (hashimzade and thornton, 2013). tests for multiple break-points can be primarily estimated via ordinary least squares (ols), two-stage least squares (2sls) and nonlinear least squares (nls). the multiple break-points strategy based on leastsquares is the most popular one. this strategy includes three types of tests: 1) testing no breaks versus a known number of breaks; 2) testing no breaks against an unknown number of breaks up to a fixed upper bound; 3) testing against +1 breaks. tests of other change parameters, as mentioned above, is carried out by using threshold and smooth (homogenous) transition models (hashimzade and thornton, 2013). the mechanism of economic sanctions is formed within the instrumental paradigm, since it involves the use of various instruments of influence on the target country in order to inflict economic losses on it. its content and structure are multidisciplinary in nature, reflecting the interaction of economics, politics, law, etc. the mechanism of economic sanctions has a threetier, hierarchical nature: global, regional and national (state). a comprehensive, single document on the mechanism of economic sanctions at the un level has not been established yet. international law experts provide examples of collective sanctions being imposed within the league of nations related to the possibility of hostilities by individual states. in particular, trade, financial and other sanctions were spelled out in articles 12, 13 and 15 of the covenant of the league of nations. global level of sanctions. at the un level, the security council regularly sets up sanctions committees as auxiliary bodies. they are composed of representatives of all members of the council and their job is to interpret and enforce the sanctions regime. finally, the security council may use regional agencies (chapter viii), such as the organisation for security and co-operation in europe, nato, and the international security assistance force, to implement sanctions. at the same time, there are proposals to increase the effectiveness of the un security council in terms of both the introduction and implementation of economic and other sanctions. firstly, it is proposed to abolish the right of veto that does not live up to present-day developments. secondly, the number of security council members needs to be extended. thirdly, the council should be more transparent and allow emerging baltic journal of economic studies 75 vol. 6, no. 2, 2020 markets countries and small states to exercise their right and influence in the security council. separate parts of imposing sanctions mechanism are set out in a number of international instruments. in particular, the general economic part without explicit mentioning of the sanctions is laid down in the charter of economic rights and duties of states of 1974. the economic sanction mechanism provides for restrictive measures of an economic nature applied by a country or group of countries to another country or group of countries to coerce the governments of those countries to change their policy. the system of international sanctions encompasses the prohibition for aircraft to land and make transit flights; prohibition or suspension of road, rail, water or sea transit; tourism ban, telephone ban, telegraph and communications ban, etc. economic sanctions are also embargoes, boycotts, blockades. black lists of businesses or traders dealing with the offending country may be introduced, which generally corresponds to the widespread view of sanctions. wto dispute settlement body may impose sanctions under articles xxi gatt 1994 and xiv gats in the event of a disruption of trade that causes damage to a partner (unfair competition, dumping, etc.). the eu sanctions are implemented under the common foreign and security policy (cfsp). title iv: restrictive measures, article 215 of the treaty on the functioning of the european union lays down formal grounds for imposing sanctions. the european external action service, together with the european commission, implements the imposing of sanctions approved by the european council. the consent of the european parliament is not applicable. national laws of countries, including ukraine, have their own legal basis for both the imposition of sanctions and the mechanisms and means of responding to sanctions imposed by other states or international organisations. how do the eu sanctions work? the first document is the basic principles for the use of restrictive measures (sanctions) (hereinafter – the “basic principles”) approved by the political and security committee (psc) in june, 2004. in addition, an appeal was made to the eu council to develop a policy framework for more effective use of sanctions. the basic principles argue that the eu shall impose sanctions in accordance with the un charter, as well as autonomously, when it is necessary to achieve the eu’s objectives. that document established the basis for the application of targeted sanctions and the second and third documents were adopted to achieve the same. the second document is the guide to the implementation and evaluation of restrictive measures (sanctions) under the common foreign and security policy of the eu (hereinafter – the “guide”), adopted in 2003 and updated in 2005, 2009 and 2012, containing definitions and directives on the design and implementation of restrictive measures, as well as important information on the various types of restrictions that may be imposed and how to measure their impact. finally, the eu best practices for the effective implementation of restrictive measures (hereinafter – the “best practices”), approved in 2008, provide relevant information on how to properly identify individuals or organisations, as well as the administrative conditions for asset freezing and product bans, including the procedure for granting exceptions to such measures (giumelli, 2013). 4. mechanism of international economic sanctions the logic and type of the eu sanctions (regional sanctions level). dominant logic of sanctions in the eu covers coercing, signalling and constraining ones. experience shows that coercive dimension is not the dominant one in the vast majority of cases. each sanction case can have its own dynamic and some cases go on for much longer than others. in order to describe the different characteristics of how sanctions can change over time, the concept of episode has been used. any sanction case can be sub-divided in “episodes”, with each episode corresponding to a different phase of the case. a new episode begins when a relevant element of the sanctions case changes, for instance when the purpose changes or when other foreign policy instruments are used with sanctions. as mentioned above, the three logics are not mutually exclusive, as they identify how power is exercised through sanctions, which means that different logics can be at work at the same time. additionally, the advent of targeted sanctions has allowed senders to include multiple targets in the list, some of which are intended to be coerced, while others constrained and signalled. what should be improved in the eu sanctioning policy? the adoption of the three purpose approach can yield important advantages in each sanctioning phase, from designing to monitoring and implementing. there should be three priorities for the immediate future: preassessment phase, monitoring and policy coherence. firstly, the eu council needs to run thorough preassessment evaluations of the effects that sanctions are expected to have. this phase can be overseen by the security division of the eeas, which can trigger a process of institutionalisation of memory, while the discussion on this point is conducted by the member states in the relex meeting or in any other relevant committee (the psc for instance). these actions can improve the reputation of sanctions in foreign policy because the imposition of sanctions is often coupled with unclear expectations rather than a careful evaluation of what sanctions can actually cause. the focus on the logic of baltic journal of economic studies 76 vol. 6, no. 2, 2020 sanctions can narrow the gap between what the council wants to achieve and what sanctions can achieve. secondly, the eu institutions need to be empowered when it comes to implementing and monitoring the eu restrictive measures. in fact, since the entry into force of the treaty of lisbon, the eu council has taken over the implementing powers that used to be exercised by the commission, de facto returning powers from the eu institutions to the member states. instead, the eu institutions (the eu commission or the eeas) should be given the capacity to investigate and monitor what happens after sanctions are decided by the council. a proposal in this direction could be that of following the example of the security council and establishing panels of experts that would collect information on how states operate and how target countries attempt to evade sanctions. this would create a positive spiral as member states would have an incentive to strengthen cooperation and knowledge would be institutionalised on evasion strategies and techniques. finally, sanctions cannot be disconnected from other foreign policy tools. in fact, sanctions should be devised and designed to complement other decisions linked to foreign assistance, use of force and diplomatic activity. with regard to this aspect, the eeas should be the key institution in bringing together the knowledge available on each case and coordinate actively the strategy to be undertaken towards crises. national level of sanctions (the ukrainian case). the third national (state) hierarchical level of imposing sanctions is clearly embodied in the law of ukraine “on sanctions”, which regulates the process of imposing, cancellation and amendment of sanctions in the logical order as follows. 1. proposals for imposing, cancellation and amendment of sanctions shall be submitted for consideration of the national security and defence council of ukraine by the verkhovna rada of ukraine, the president of ukraine, the cabinet of ministers of ukraine, the national bank of ukraine, and the security service of ukraine. 2. a decision on imposing, cancellation and amendment of sanctions against a foreign state or an undefined group of people engaged in carrying out certain activity (sectoral sanctions) provided for in article 4 part 1 paragraphs 1-5, 13-15, 17-19, 25 of this law, shall be adopted by the national security and defence council of ukraine, enacted by a decree of the president of ukraine and approved by a resolution of the verkhovna rada of ukraine within 48 hours from the day of the decree issued by the president of ukraine. the respective decision becomes effective from the moment the resolution of the verkhovna rada of ukraine is issued and is legally binding. 3. decisions on imposing, cancellation and amendment of sanctions against a separate foreign legal entities, legal entities controlled by foreign entities or non-resident individuals, foreign individuals, stateless individuals, as well as other persons exercising terroristic activity (personal sanctions) provided for in article 4 part 1 paragraphs 1-21, 23-25 of this law shall be adopted by the national security and defence council of ukraine and enacted by a decree of the president of ukraine. the respective decision becomes effective from the moment the decree of the president of ukraine is issued and is legally binding. 4. termination of international treaties ratified by the verkhovna rada of ukraine as a sanction pursuant to this law is implemented by the verkhovna rada of ukraine on the recommendation of the president of ukraine or other subject of legislative initiative. 5. decision on imposing of sanctions shall have a timeframe for their application excluding the sanctions that imply suspension of rights or other sanctions that cannot be applied temporarily due to their nature. 6. a decision on amendment of sanctions shall be taken by the same authority that has made the decision on imposing the sanctions pursuant to this law at its own initiative or based on proposals from other state authorities set forth in part 1 of this article. 7. a decision on cancellation of sanctions shall be taken by the same authority that has made the decision on imposing the sanctions pursuant to this law if the sanctions have achieved their objective (verkhovna rada, 2020). therefore, economic sanctions are an integral part of international economic policy implemented through the theory of public (rational) choice, structural theory (input-output model), decision theory, theory of coordination and cooperative games, etc. the hierarchical nature of the mechanism for the application of sanctions lies in the existence of three main levels: global, regional (integration) and national. the us-iran sanctions case. to test the economic impact of sanctions, we examine the impact of us sanctions on iran's economy. iran is a country of great strategic importance to the united states. first of all, it is one of the largest oil producing countries in the world, able to affect the dynamics of world energy prices directly, which shapes the political climate in the region. due to its geopolitical location, iran is able to control the strait of hormuz in the persian gulf and, under certain circumstances, block all tanker communications from the region, which provides for almost a quarter of the world's oil production, thus triggering a global energy crisis if necessary. in this context, the us-iran relations are a political and economic barometer that largely determines the us status in the international arena and influences their internal political agenda. let us examine how the iranian economy responds to sanctions imposed by the us and other countries. the study uses statistical data from world development indicators (the world bank, 2020), international financial statistics (international monetary fund, 2020a) and primary commodity prices (international monetary fund, 2020b) for the 1960-2018 periods. baltic journal of economic studies 77 vol. 6, no. 2, 2020 the following macroeconomic iran indexes have been selected for modelling: cpi_gr – growth rate of consumer price index, in %; dubai_crude_inx – dubai crude oil price index, used as a reference for oil produced in the gulf countries and exported to asian countries; exp_gdp – exports of goods and services, in % of gdp; fdi_ni_gdp – fdi inflow, in % of gdp; gcf_gdp – investments, in % of gdp; gdp_gr – gdp growth rate, in %; hh_fcs – expenditures of households and non-profit institutions serving them on final consumption, in % of gdp; imp_gdp – imports of goods and services, in % of gdp; oil_rents_gdp – oil rent, in % of gdp; sanctions – dummy variable that reflects the periods of sanctions imposition on iran; unr – unemployment rate, % of labour force; ex_rate_usd – iranian rial exchange rate to usd. some indicators, such as fuel exports as a % of merchandise exports, were not included in the model due to insufficient data. sanctions is dummy variable and has value "0" for 1960-1978 and in 2016, 2017, and "1" for 1979-2015 and in 2018. testing of selected variables for the presence of a unit root by the augmented dickey-fuller test and the phillips-perron and kwiatkowski–phillips– schmidt–shin criteria have showed that almost half of the indicators are first-order integrated, with the rate of inflation and investment, in relation to gdp, gdp growth rate, imports of goods and services and oil rent are stationary, that is zero-order integrated (table 4). therefore, the model considered the growth of these variables, although the exchange rate of the national currency to the usd was excluded due to second-order integration. in general, constructed first order vector autoregression model can be represented as follows: d gdp d cpi gr d crude ind d fdi ni gdp d gcf gdp t t t t t (exp ) ( ) ( ) ( ) ( _ _ _ _ _ _ )) ( ) ( ) ( ) ( ) d gdp gr d hh fcs d imp gdp d oil rents gdp sanction t t t t _ _ _ _ _ ss d unr a a d t t( ) (exp                                    = +0 1 _ggdp d cpi gr d crude ind d fdi ni gdp d gcf g t t t t − − − − 1 1 1 1 ) ( ) ( ) ( ) ( _ _ _ _ _ ddp d gdp gr d hh fcs d imp gdp d oil rents gd t t t t − − − − 1 1 1 1 ) ( ) ( ) ( ) ( _ _ _ _ _ pp sanctions d unr t t t − − −                                1 1 1 ) ( )      + �t , (2) where a0 – vector of constants, a1 – the coefficient matrix with dimension 11х11, εt – vector of perturbations. -1.5 -1.0 -0.5 0.0 0.5 1.0 2 4 6 8 10 12 14 16 18 20 response of d( exp_gdp) to sanctions -10 0 10 20 2 4 6 8 10 12 14 16 18 20 response of d(crude_ind) to sanctions -3 -2 -1 0 1 2 3 2 4 6 8 10 12 14 16 18 20 response of d(cpi_gr) to sanctions -.3 -.2 -.1 .0 .1 .2 2 4 6 8 10 12 14 16 18 20 response of d(fdi_ni_gdp) to sanctions -1.5 -1.0 -0.5 0.0 0.5 1.0 2 4 6 8 10 12 14 16 18 20 response of d(gcf_gdp) to sanctions -3 -2 -1 0 1 2 2 4 6 8 10 12 14 16 18 20 response of d(gdp_gr) to sanctions -1.0 -0.5 0.0 0.5 1.0 1.5 2 4 6 8 10 12 14 16 18 20 response of d(hh_fcs) to sanctions -1.5 -1.0 -0.5 0.0 0.5 2 4 6 8 10 12 14 16 18 20 response of d( imp_gdp) to sanctions -3 -2 -1 0 1 2 3 2 4 6 8 10 12 14 16 18 20 response of d( oil_rents_gdp) to sanctions response to cholesky one s.d. innovations± 2 s.e. figure 1. impulse functions of key macroeconomic indicators in response to sanctions imposed on iran’s economy baltic journal of economic studies 78 vol. 6, no. 2, 2020 table 4 the results of testing the model’s variables for the presence of a unit root augmented dickey fuller test statistic phillips-perron test statistic kwiatkowski-phillips-schmidtshin test statistic cpi_gr level -3.708724* -3.656835* 0.203741 1st differences -7.853263 -15.08554 0.500000 crude_inx level -1.885313 -1.885313 0.096219 1st differences -4.394222* -4.364545* 0.089777 exp_gdp level -2.213141 -2.459382 0.083980 1st differences -6.841613* -6.847534* 0.051996 fdi_ni_gdp level -3.163795** -3.296171 0.127850 1st differences -8.661010* -10.62144* 0.149100 gcf_gdp level -3.695595* -3.649480** 0.087524 1st differences -7.896751 -11.29626 0.211821 gdp_gr level -4.786256* -4.809914* 0.263138 1st differences -7.995384 -15.71650 0.103352 hh_fcs level -2.035934 -2.331047 0.080224 1st differences -6.924034* -7.088053* 0.133884 imp_gdp level -3.155543** -3.155543** 0.088792 1st differences -7.128431* -7.119012* 0.032772 oil_rents_gdp level -2.984599** -3.072106** 0.089013 1st differences -7.429237* -7.562084* 0.062878 sanctions level -2.481996 -2.439001 0.211876 1st differences -7.684869* -8.311252* 0.618091 unr level -3.012489 -3.126613 0.060872 1st differences -5.071538* -5.185183* 0.063159 ex_rate_usd level 3.831934 8.046119 0.233758 1st differences -2.200124 -2.412342 0.694881 * significance at 1% ** significance at 5% *** significance at 10% the var model is stationary with lag 1 that has been chosen using schwarz, akaike and hannan-quinn information criteria. commenting the simulation results, it should be noted that the imposition of sanctions on iran leads to an increase in the turbulence of its economy, in particular, there is deteriorating of some macroeconomic indicators and fluctuations of others, which is also confirmed by the input data dynamics (figure 1). firstly, the imposition of sanctions results in a decrease of exports and imports of the country (which will offset only over the next eight years), a fall in the foreign direct investment inflows observed within four years, a slight decrease in investment in the economy within five years, and reduction of oil rent. secondly, sanctions lead to increased oil price volatility in the region, which could trigger turbulence in middle east oil exporting countries and fluctuations in iran's economic growth rate. from our point of view, for instance, volatility of gdp growth in the first three periods after shock caused by sanctions imposing could be explained by inertia of this indicator (table 5). however, despite the fact that these fluctuations are significant, they are temporary because the effects of the shock are gradually smoothed out over a period of four to eight years. the results of variance decomposition of gdp growth demonstrate that volatility of gdp is mainly caused by oil price, sanctions and oil rent (table 5). these factors constitute almost 50% of gdp growth volatility from baltic journal of economic studies 79 vol. 6, no. 2, 2020 period 4. in addition, changes in oil price are the most influential drivers of fluctuations in gross domestic product in iran. however, approximately 37% of its volatility is due to own fluctuations. 5. conclusions economic sanctions are an integral part of international economic policy, implemented through the theory of public (rational) choice, structural theory (cost-issue model), decision-making theory, the theory of coordination and cooperative games, etc. the hierarchical nature of the mechanism for the application of sanctions is available in three main levels: global, regional and national. despite its moderate effectiveness, the use of economic sanctions may also be appropriate for the following reasons: 1) infringer countries should not function in equal economic conditions with others, which is a signal to all countries, sanctions are an attempt to align the rules and reduce the level of unpredictability of actors in the sphere of international relations; 2) involvement in a confrontation with a sanctioned initiator may also mean the need to incur additional costs for the target country to support or increase its own military forces and reputational losses (if the sanctioned initiator has sufficient soft power level to convince third parties); 3) sanctions are often a deviation from the principle of individual responsibility when it is difficult to influence the perpetrators directly, but the introduction of smart sanctions against the perpetrators and those who support them directly, instead of the all the country population, may solve this problem only partially; 4) economic sanctions can serve as an auxiliary tool or a tool for rapid application or prevention. the effectiveness of economic sanctions is determined by their role in the forms of countries and international organizations reaction on major violation of human rights, sovereignty of countries, international law in general. our modelling of the economic sanctions effectiveness on the example of te us actions against iran has shown that imposing sanctions on iran leads to growth instability of iranian economy, decline of budgetary, commercial and monetary indices, including foreign trade decrease (which will balance in the next eight years, at other equal conditions), falling fdi, reduction in oil rent, etc. the us sanctions increased oil price fluctuations in the middle east region. the simulation results have shown that the iranian gdp decreased is mainly caused by oil price drop and the us sanctions, but approximately 37% of its volatility is caused by internal reasons. however, these fluctuations are temporary, as the shock effect gradually negates in the period from four to eight years. overall, regardless of how scientists determine and evaluate economic sanctions, we believe that economic sanctions should now be seen as a comprehensive tool in modern global economic wars. table 5 variance decomposition of gdp growth rate period d(exp_ gdp) d(dubai_ crude_ ind) d(cpi_ gr) d(fdi_ ni_gdp) d(gcf_ gdp) d(gdp_ gr) d(hh_ fcs) d(imp_ gdp) d(oil_ rents_ gdp) d(sanctions) d(unr) 1 3.44 1.57 0.00 0.00 0.00 93.77 0.00 0.00 1.12 0.09 0.00 2 2.30 24.15 3.47 1.71 0.80 53.81 0.05 0.15 2.34 11.11 0.10 3 2.87 26.52 3.32 3.01 1.27 40.96 0.12 0.22 6.74 14.40 0.58 4 2.75 27.91 3.03 4.21 1.70 37.72 0.30 0.22 7.53 14.02 0.61 5 2.72 27.87 3.33 4.19 1.73 37.52 0.31 0.21 7.52 13.97 0.63 6 2.72 28.10 3.49 4.16 1.73 36.97 0.31 0.22 7.42 14.12 0.76 7 2.71 28.04 3.49 4.15 1.74 37.01 0.31 0.22 7.43 14.11 0.78 8 2.77 28.09 3.48 4.15 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(1994). when money counts and doesn't. diplomatic history. vol. 18, № 4, pp. 451–462. baltic journal of economic studies 193 vol. 5, no. 3, 2019 corresponding author: 1 national university "odesa law academy " e-mail: safonchyk.oksana@gmail.com 2 odessa forensic research institute (ondise) of ministry of justice of ukraine, ukraine. e-mail: ripenko@ukr.net orcid: https://orcid.org/0000-0003-4197-4840 doi: https://doi.org/10.30525/2256-0742/2019-5-3-193-202 government administration as the main prerequisite for narrowing the corruption space oksana safonchyk1, artem ripenko2 abstract. political corruption as a social phenomenon exists in virtually all countries of the world, including those that most researchers consider as “benchmarks” in terms of the development of democracy. at the same time, there is a steady tendency towards the growth of political corruption and the evolution of corruption practices in developed democratic countries. problems of political corruption in the professional literature are given a lot of attention but the issues related to the peculiarities of the experience of fighting political corruption in the eu in the context of the introduction of appropriate practices in ukraine remain insufficiently researched. in the context of reforming the modern ukrainian society, the study of problems of preventing and counteracting corruption is extremely relevant for a number of reasons: firstly, corrupt practices in the government machinery are the main obstacle to the implementation of any reforms; secondly, the high level of corruption in society, as evidenced by the results of the world cpi corruption perception index 2015, decreases public confidence in the government; thirdly, it is necessary to implement the anti-corruption recommendations of the action plan on visa liberalization from the european union (eu); fourthly, the reduction of corruption would contribute to attracting international investment, and so on. the purpose of the article is to identify features of counteraction to corruption in the countries of the european union and to analyse the formation of government administration as the main precondition for narrowing the corruption space. to achieve this purpose, the following goals were set: to determine the level of implementation of international anti-corruption standards in the government practice of ukraine; to investigate the formation and development of anti-corruption institutions; to analyse the experience of anti-corruption institutions in the eu; to investigate the formation of informational transparency of government space; to analyse the ratings of ukraine regarding data openness; to find out the features of e-declaration models as an element of public control of anti-corruption institutions in the system of public administration. reaffirming its european aspirations, during 2001–2018, ukraine ratified several laws in relation to the formation of anti-corruption standards: a) general and on liability for corruption offenses and offenses related to corruption; b) documents on the activities of specialized agencies for fighting corruption; c) documents on ethical rules, anti-corruption restrictions and prohibitions for certain officials and on the prevention of political corruption; d) documents on the prevention of corruption in the economy and sports; e) documents on access to information. this allows asserting that in general the legislative framework for the prevention of corruption in ukraine has already been established. despite the adoption of many laws, out of 200 anti-corruption measures, which, according to the state program for the implementation of the anticorruption strategy, had to be implemented by state bodies by the end of 2018, about 35% had not been implemented. anticorruption strategy for 2019 and subsequent years and the state program for its implementation do not exist. many important anti-corruption laws, which would help to further improve the ukrainian economy, finance, the system of social protection of the population, and so on, were not adopted. many of the problems that prevent effective use of the data obtained still need to be resolved. it is also necessary to find solutions for defining the electronic declaration of anti-corruption crusaders. key words: government administration, corruption, anti-corruption bodies, anti-corruption measures, prozorro, e-declaration. jel classification: o17, f42, h11, d73, r10, к32 baltic journal of economic studies 194 vol. 5, no. 3, 2019 1. introduction political corruption as a social phenomenon exists in virtually all countries of the world, including those that most researchers consider as “benchmarks” in terms of the development of democracy. so, according to italian researchers d. della porta and a. vannucci, the highly corrupted countries of the world are belgium, greece, spain, italy, and the “intermediate” countries – austria, the usa, france, and japan (della porta, 2006). at the same time, there is a steady tendency towards the growth of political corruption and the evolution of corruption practices in developed democratic countries (official website, 2019). at the same time, political corruption takes on a particular significance in transitive societies, one of the features of which is the excessive politicization of the state administrative apparatus, which largely represents not so much the interests of the state and society but of specific political groups, which, in turn, are closely linked with big capital. the problems of government corruption have long been in view of scientists, the problems of political corruption in transitional countries are considered by c. wallace, c. haerpfer, k. h. pedersen, l. johansen, r . hislope, a. sajó, s. kotkin, m. philp, q. reed, and others. the issues of political corruption in the professional literature are given a lot of attention but the issues related to the peculiarities of the experience of fighting political corruption in the eu in the context of the introduction of relevant practices in ukraine remain insufficiently researched. in the context of reforming the modern ukrainian society, the study of problems of preventing and counteracting corruption is extremely relevant for a number of reasons: firstly, corrupt practices in the government machinery are the main obstacle to the implementation of any reforms; secondly, the high level of corruption in society, as evidenced by the results of the world cpi corruption perception index 2015, decreases public confidence in the government; thirdly, it is necessary to implement the anti-corruption recommendations of the action plan on visa liberalization from the european union (eu). moreover, in conditions of deepening the sociopolitical and financial and economic crisis in ukraine, corruption is a serious threat to the national security of the state. it has become one of the negative factors that significantly affect the effectiveness of the public administration system as a whole (romaniuk, 2009). recently, certain legislative and organizational changes were made that could reduce the level of corruption in ukraine, but the bodies and agencies created, as well as the anti-corruption legislation adopted, have not yet been properly implemented. the purpose of the article is to identify features of counteraction to corruption in the countries of the european union and to analyse the formation of government administration as the main precondition for narrowing the corruption space. to achieve this purpose, the following goals were set: to determine the level of implementation of international anti-corruption standards in the government practice of ukraine; to investigate the formation and development of anticorruption institutions; to analyse the experience of anti-corruption institutions in the eu; to investigate the formation of informational transparency of government space; to analyse the ratings of ukraine regarding data openness; to find out the features of e-declaration models as an element of public control of anti-corruption institutions in the system of public administration. 2. the methodology of research 2.1. implementation of international anti-corruption standards in government practice of ukraine the formation of an effective apparatus for combating political corruption in the system of public administration in the member states of the eu also has a number of serious problems. the main thing is the heterogeneity of legislation regulating relations in this area, which is conditioned by national traditions and history. the anti-corruption legislation in most states is quite new and, in many cases, insufficiently worked out. some provisions in the eu states are enshrined at the constitutional level, and in some countries – in legislative acts (official website, 2019). as a consequence, the approaches of the states to the implementation of the institutional mechanism also differ. there are several models of anti-corruption institutions operating in the eu, differing in form, functions, and tasks, with certain national characteristics and peculiarities. in particular, there are distinguished (bocharnykov, 2018; official website, 2019): – multipurpose bodies that have the powers of law enforcement bodies, as well as fulfil preventive functions; – specialized services, agencies and/or departments for combating corruption in the system of law enforcement agencies; – institutions for the prevention of corruption, policy development, and coordination. all this directly affects the effectiveness of information, education, and political mechanisms in various states of the union. the formation of the national base of ukraine in the fight against corruption is based on the relevant international anti-corruption conventions, other international legal instruments containing clear internationally accepted definitions of what actions should be considered corruptive offenses, which actors should be responsible for them, which sanctions and other criminal-legal measures should be imposed, etc. baltic journal of economic studies 195 vol. 5, no. 3, 2019 confirming its european integration aspirations, during 2001–2018, ukraine ratified the council of europe criminal law convention on combating corruption as of january 27, 1999, the united nations civil law convention against corruption as of november 4, 1999, the united nations convention against corruption as of december 11, 2003, the council of europe convention on laundering, search, seizure and confiscation of the proceeds from crime and on the financing of terrorism, the united nations convention against transnational organized crime as of 15 november, 2000, and the council of europe convention on the manipulation of sports competitions as of september 18, 2014. ratification of the council of europe’s civil law convention on corruption allowed ukraine to join the group of states against corruption (greco) (official website, 2019). based on the anti-corruption standards specified in these and other international documents, laws were adopted: a) general and on liability for corruption offenses and offenses related to corruption: “on the principles of state anti-corruption policy in ukraine (anticorruption strategy) for 2014–2017”, “on prevention of corruption”, “on the power purge”, certain provisions of the criminal, criminal procedure, civil, civil procedure codes of ukraine, the code of ukraine on administrative offenses, and the code of administrative justice of ukraine; b) documents on the activities of specialized agencies for fighting corruption: “on the national anticorruption bureau of ukraine”, “on the prosecutor’s office”, “on the national police”, “on the state bureau of investigation”, “on the security service of ukraine”, “on operative investigation activity”, “on the organizational and legal foundations of combating organized crime”; c) documents on ethical rules, anti-corruption restrictions and prohibitions for certain officials and on the prevention of political corruption: “on civil service”, “on the judicial system and status of judges”, “on political parties in ukraine”, “on election of the president of ukraine”, “on election of people’s deputies of ukraine”, certain provisions of the labour code of ukraine, etc.; d) documents on the prevention of corruption in the economy and sports: “on public procurement”, “on protection of economic competition”, certain provisions of the commercial and commercial procedure codes of ukraine, “on prevention of the influence of corruption offenses on the results of official sports competitions”, etc.; e) documents on access to information: certain provisions of the civil, commercial, budgetary, and land codes of ukraine, laws “on the national agency of ukraine on detection, investigation and asset management of corruption and other crimes”, “on state registration of legal entities, individual entrepreneurs and public formations”, “on state registration of property rights to real estate and their encumbrances”, “on road traffic”, “on state land cadastre”, “on television and radio broadcasting”, “on openness of use of public funds”, “on information”, “on access to public information”, “on access to court decisions”, etc. this allows asserting that in general the legislative framework for the prevention of corruption in ukraine has already been established. despite the adoption of many laws, out of 200 anti-corruption measures, which, according to the state program for the implementation of the anticorruption strategy, had to be implemented by state bodies by the end of 2018, about 35% had not been implemented. anticorruption strategy for 2019 and subsequent years and the state program for its implementation do not exist. many important anticorruption laws, which would help to further improve the ukrainian economy, finance, the system of social protection of the population, and so on, were not adopted. 2.2. formation and development of anti-corruption institutions the effectiveness of the application of provisions of the criminal law in general and to corruption acts in particular depends directly on the availability of specialized (that is, professional) politically independent law enforcement bodies entrusted with proper authority and resources, as provided by the existing anti-corruption conventions and other international legal instruments. in 2015–2018, there were several such bodies in ukraine: the national anti-corruption bureau of ukraine (hereinafter – nabu) and the specialized anti-corruption prosecutor’s office (sapo), as an independent structural unit within the structure of the general prosecutor’s office, as well as the state bureau of investigation (hereinafter – the sbi) and the national agency on corruption prevention (nacp). the ukrainian parliament also adopted the longawaited anti-corruption law, and ukraine “came close up” to the creation of this anti-corruption institute (https://data.gov.ua). newly created institutions have the authority to fight corruption. in the future, there should also be created special units (divisions) of the criminal police that will investigate corruption offenses in accordance with the cpc, as well as a special pre-trial investigation body within the ministry of finance. unfortunately, the development of the political situation in the first half of 2019 proved that the activities of the newly formed bodies are not yet in line with the public request. in our opinion, this is related both to the functional weakness of the specialized anti-corruption baltic journal of economic studies 196 vol. 5, no. 3, 2019 institutions and to the unreformed judicial system (and in many cases, direct opposition). for example, the introduction of an e-declaration. theoretically, this is an effective g2c and g2b interaction tool that has not been fully operational. during 2015–2017, only eight people were convicted in ukraine for knowingly false declarations or avoidance, with two persons being released from punishment. no person was convicted of illegal enrichment. in fact, these two articles, specifically introduced in the criminal code of ukraine for the better prevention of corruption, have practically not worked so far (ukrainian open data portal, https://data.gov.ua). 2.3. the experience of the establishment of anti-corruption institutions in the eu the experience of creating special anti-corruption institutions and their first steps indicate that the process of their formation will require time and a whole series of politically complex measures. among them, first of all, should be called: – ensuring the real political independence of anticorruption law enforcement bodies. obviously, solving this problem is very difficult without the real consensus of the main political forces on the country’s anti-corruption agenda. in practice, this means that the principle of the independence of anti-corruption institutions should determine the legislative and resource provision of their activities by the state; – an urgent problem is ensuring effective coordination of anti-corruption bodies. to this end, the nacp must finally become a state body that defines anticorruption policy, coordinates the implementation by all state bodies of the anti-corruption strategy and relevant international obligations of ukraine, identifies corruption risks in the activities of these bodies and eliminates them, detects offenses related to corruption, etc.; – priorities for the further development of anticorruption legislation should be “closure” of the possibilities of avoiding punishment for corruption acts, coherence of relevant legislative and regulatory documents, clarification of the powers of anticorruption bodies, in particular, in terms of operationalsearch activities, etc. there is a need to introduce a single transparent system of criminal statistics, without which it is impossible to adequately assess the relevant trends; – the creation of the anti-corruption court is and remains the top priority of anticorruption reform; – it is critically important to introduce a system of automatic verification of electronic declarations; – successful reformation of the criminal justice system, the priorities of which should be to reduce the discretion of judges, prosecutors, investigators, increase their control and responsibility, primarily disciplinary, with the participation of the public in disciplinary proceedings. without such measures, “simple” replacement in the course of judicial reform of some judges or prosecutors in other and ordinary courts on specialized anti-corruption courts cannot substantially change something in the criminal justice system. one of the key prerequisites for the successful formation and establishment of the institutional framework for combating corruption is the large-scale and effective cooperation between reformers and civil society. first of all, it is about countering the active attempts of interested parties to use the fight against corruption in their own narrow political and economic interests and thereby discredit the anticorruption reform. 3. results and discussion 3.1. formation of informational transparency of government space access to most state registers and other data at the disposal of government agencies is actually monopolized by the relevant government agencies. by the end of 2013, there were only single registers open for public use (for example, the unified state register of legal entities and individual entrepreneurs) (ukrainian open data portal, https://data.gov.ua). the receipt of many types of information (including from the registers) was accompanied by the need for appeals to government agencies, and the data of most registries remained publicly closed, which contributed to the existence of shadow schemes for their use. for example, information about registered rights to real estate has always been available only for owners and authorities themselves. this situation has contributed to fraud with real estate, in particular when buying and selling the property, because it was difficult to verify the real belonging of trade objects. at the same time, by shielding the argument about the protection of private life of citizens, the authorities restricted the public’s ability to control the authorities and identify corruption cases (state register of real property rights to real estate, 2019). corrupt schemes also involved the use of public registers in the interests of commercial entities. the scandal with the electronic registries of the ministry of justice, the administration and management of which for many years was carried out by two private entities, became the most widely publicized. the state bought the relevant services without an open tender and promised not only to pay for registry service but also to pay additional monthly royalties for each appeal to the registry programs (cmu resolution dated 21.10.2015). thus, powerful corruption schemes were created around the registers of civil legal relations, which allowed private entities and their counterparts to make royalties more than the cost of these registers (butusov, 2013). in the period from 2006 to 2013, the amount of baltic journal of economic studies 197 vol. 5, no. 3, 2019 royalties for private companies exceeded 760 million uah. and only in 2014, the ministry was able to stop payments under fictitious contracts (ukrainian open data portal, https://data.gov.ua). for years, information on public finances remained closed. separate aggregated figures on the fulfilment of state and local budgets were published by the state treasury and the ministry of finance. however, the detailed information on the financing of certain budget items at the state level was traditionally lacking. data on the implementation of individual local budgets was even less accessible, which allowed the authorities to inefficiently use public funds and obtain additional benefits for themselves. closure of procurement information generated and fuelled corruption schemes in this area. the spread of open data has become today one of the main tools for fighting corruption in the world, which emphasizes the importance of ukrainian reforms in this area. in 2015, the governments of the g20 agreed on the g20 anti-corruption open data principles. their content is simple – in order to stop corruption, important information should be public. such openness is a prerequisite for the formation of an effective anticorruption policy aimed at overcoming bribery and nepotism (open data, 2019). the dissemination of information was identified as one of the priority actions under the anticorruption strategy for 2014–2017, which was approved in the form of a law on october 2014. according to it, access to information that constitutes a public interest is recognized as “a necessary tool for conducting journalistic investigations, stimulating civic activity in the anti-corruption sphere.” the anti-corruption strategy envisaged the implementation of a number of measures: changes to the legislation, inventory of public registers, dissemination of information on a single state open data portal, and participation of ukraine in international initiatives (vru portal). in april 2015, the verkhovna rada of ukraine (vru) adopted amendments to the law of ukraine “on access to public information”. according to it, public information officers are obliged to publish and regularly update it on a single public open data portal and on their websites. in july 2015, the law “on amendments to certain legislative acts of ukraine on enhancing transparency in the sphere of property relations for the prevention of corruption” was adopted, which opened access to the registers of property rights and land cadastre. as a result, at the year-end 2015, the opening of state registries was recognized as the most successful reform, as it expanded the scope for combating corruption (bilan, 2016). the placement of registry data on the internet should have eliminated corruption around access to such information. besides, open registries made it easier for corrupt officials to be searched for, as it is now harder to hide property that could have been acquired for proceeds of corruption (state web portal, 2017–2019). in june 2014, the cmu also created an institution responsible for disseminating open data. under the government’s decision, the state agency for science, innovation and informatization of ukraine was transformed into the state agency for e-governance in ukraine. the new central executive authority was entrusted with the functions of implementing state policy in the field of informatization, e-governance, the formation and use of national information resources, the development of an information society (vru portal). in april 2014, the unified state open data portal (http://data.gov.ua), created on the basis of similar internet resources of other countries (for example, the data.gov portal in the usa created in 2009), was launched. as of january 2018, the portal hosts more than 28,000 data sets from about 2,000 information administrators. all data is divided into 15 categories: construction, state, ecology, economy, land, youth and sports, education and culture, healthcare, taxes, agriculture, social protection, standards, transport, finance, justice. in december 2016, the number of data sets was only 8.5 thousand (from almost a thousand administrators), which may indicate a rapid filling of the portal. special attention should be paid to specialized open-source data portals that have been created for three years. first and foremost, it is the unified webportal for public funds use, in which information is published in accordance with the law of ukraine “on the openness of the use of public funds” (adopted in february 2015) (vru portal). in september 2015, the ministry presented the e-data portal (https://spending.gov.ua), which is an important tool for combating corruption. access to information on the use of funds by the main spending units, the pension fund bodies, and the compulsory state social insurance funds is free and free of charge, which allows for monitoring and evaluation of the efficiency of the use of public funds. since september 15, 2017, all public funds’ spending units must necessarily publish the necessary information on the portal (vru portal). work is ongoing on the integration of the public finance portal, the state treasury service, and the prozorro system, which will allow tracking the flow of funds from tender to payment (open data, 2019). the openness of prozorro’s public procurements allows monitoring and evaluating their effectiveness, as well as identifying possible schemes and corruption risks. to evaluate procurement data, a public procurement module was launched (https://bi.prozorro.org). an example of anticorruption direction is the disclosure of data on end-beneficiaries of ukrainian companies for public access (open data, 2019). ukraine was one of the first countries to introduce the latest baltic journal of economic studies 198 vol. 5, no. 3, 2019 fatf requirements for beneficiary owners. as early as october 2014, the vru passed a law that included the term “final beneficiary” and disclosure requirements for end-owners (svintsytskyi, 2018). as of the beginning of february 2018, only about 17 thousand companies in ukraine did not provide information about their beneficiaries (vru portal). ukraine became the first country to join the global beneficial ownership register. according to the open government’s international multilateral initiative, such a change is “a great victory for the implementation of the principles of transparency and accountability” (open data, 2019). also, in the efforts to increase the effectiveness of the national bank of ukraine’s supervision over banks, the verkhovna rada on march 2015 increased the responsibility of shareholders and bank management, which establish criminal liability of persons connected with the bank for any actions that led to the attribution of the bank to categories of insolvency, if this has caused material damage to the state or the lender. the chart allows analysing the rating of the organizers in terms of the number of tenders, and the total savings made by the organizer for which the corresponding rating was awarded. in april 2016, the nbu completed the main stage of work on disclosure of the ownership structure of ukrainian banks, which resulted in identifying the actual controllers of each bank, and applied measures of influence within the limits of legislation to some banks (ukraine opened, 2017). according to some experts, disclosure of information about beneficiary owners is a rare case where ukrainian legislation is ahead of world standards of transparency (ukraine opened, 2017). the introduction of the relevant changes into ukrainian laws has somewhat outpaced the eu money laundering directive, which introduced a requirement for the establishment of a register of end-owners in the member states (adopted in may 2015) (vru portal). at the same time, unlike in ukraine, access to such information in the eu may be limited to online registration, payment of administrative fees, and the need to provide evidence of the legitimate interest of the requesting persons. in the usa, such legislative initiatives are still in the process of discussion (svintsytskyi, 2018). however, in ukraine, there is a lack of tools for verifying beneficiary owners, which is an important prerequisite for transforming existing information into a genuine anti-corruption tool. it should be noted that open data not only enhances the possibilities of combating corruption but generally contributes to economic growth. according to some estimates, in 2018, open data has already brought 700 million usd to the ukrainian economy. herewith, if the pace of development of this sphere is maintained, this indicator can grow to 1.4 billion usd (0.92% of gdp) by 2025 (open data, 2019). 3.2. ukraine’s ratings regarding data openness the progress of ukraine in the reform of the field of open data has been reflected in the improvement of the relevant international ratings. according to the results of the study by the open data barometer (made by the international non-governmental organization world wide web foundation) in 2016, ukraine took 44th place, which is 18 steps higher than in 2015 (the open data barometer, 2016). the organization’s experts highly appreciated the introduction of open data in spheres such as business registration, primary and secondary education, criminal statistics, and the state budget (the open data barometer, 2016). however, serious problems remain concerning the openness of data on land ownership, geographic maps, the work of the healthcare system, and a number of other spheres. the progress of ukrainian reforms in the field of open data was recorded in the global open data index (godi) rating (methodology. the global open data index, 2016). according to it, ukraine in 2014 took 63rd place, in 2015 – 54th place, in 2016 it took 31st place and is one of the world leaders by the possibilities of open data use (places, 2018). godi includes an assessment of 15 categories of data (state budget, state statistics, purchases, etc.). in several spheres (state budget, national legislation, company registration), ukraine occupied the first position since it provided for the free use of the specified data. besides, ukraine is ahead of the vast majority of countries in the dissemination of open data on draft laws (7th place), public procurement (11th place), and state statistics (38th place). at the same time, there are serious gaps in some fields (air and water quality, geographic maps, government expenditures) (places, 2018). thus, future reform efforts should be aimed at the industries, which identified the greatest problems with data openness, which will allow ukraine to rise further in international rankings and improve its international image. table 1 analysis of operations in the prozorro system for 2018–2019 in the odesa region number of tenders 105,11 thousand people expected cost 62,01 billion number of organizers 1,56 thousand savings 1,16 billion. number of participants 16,23 thousand tenders 2,43 source: compiled by the author (https://bi.prozorro.org) baltic journal of economic studies 199 vol. 5, no. 3, 2019 3.3. e-declaration as an element of public control one of the key innovations in the anti-corruption system was the creation of a unified state register of declarations of persons authorized to perform functions of the state or local governments. previously, the system of declaring incomes of officials also existed in paper form (khomenko, 2016). paper declarations were submitted to the personnel service of the state authority, where the employee worked, and also kept there. validation of declarations was carried out by the tax service; however, for obvious reasons, the effectiveness of this work was rather low. in addition, ukrainian legislation did not criminalize the submission of knowingly false data, which led to the concealment of property and incomes of officials. given these and other circumstances, the anticorruption strategy for 2014–2017 determined the need for the introduction of an electronic declaration system and a single electronic database of declarations as one of the priorities (vru portal (anticorruption strategy) for 2014–2017). the new format of declarations has considerably expanded the categories of assets that need to be declared. if the paper declaration previously had 6 chapters, now it has 16. the electronic format of declarations and the creation of a unified portal have expanded public access to information on the income of government officials, which is an important anti-corruption tool. the work of the registry began in august 2016 under the law of 254608 128691 99724 122448 85641 66265 58603 67982 44152 43882 41534 53940 43472 41686 35769 37821 43585 35772 44150 36847 34571 26309 26793 22323 44401 29999 20065 26112 25043 22740 37821 27565 20189 0 50000 100000 150000 200000 250000 300000 kcsa (kyiv city state administration) ministry of education and science of ukraine ministry of internal affairs of ukraine ministry of infrastructure of ukraine dnipropetrovsk rsa vinnytsia rsa ministry of defense of ukraine mariupol city council kharkiv rsa zhytomyr rsa ministry of health of ukraine dnipro rsa chernihiv rsa zaporizhzhia rsa poltava rsa cherkasy rsa ministry of energy and coal industry of ukraine kyiv rsa ministry of economic development and trade of… lviv rsa luhansk rsa zakarpattia rsa khmelnytskyi rsa kryvyi rih rsa donetsk rsa odesa rsa kherson rsa mykolaiv rsa kropyvnytskyi rsa sumy rsa cherkasy rsa rivne rsa chernivtsi rsa figure 1. organizers rating in the prozorro system (2018–2019) source: https://bi.prozorro.org/sense/app/fba3f2f2-cf55-40a0-a79f-b74f5ce947c2 baltic journal of economic studies 200 vol. 5, no. 3, 2019 ukraine “on prevention of corruption” (vru portal). responsibilities for keeping the register were entrusted to the national agency on corruption prevention (nacp), the central executive authority, which ensures the formation and implementation of anti-corruption policy. the nacp was created on march 2015, and its work was launched in march 2016, when a sufficient number of members of the agency had already been appointed (nacp). in spite of technical problems, in september-october 2016, the first stage of submission of e-declarations for 2015 took place. according to the register, more than 118 thousand people had to submit documents (nacp). at the same time, since january 1, 2017, the circle of subjects of e-declaration has been substantially expanded (radio liberty, 2016). as a result, in 2017 almost 1.5 million electronic documents came to the usr , including 1.2 million of annual ones. as of april 2018, the number of uploaded documents already exceeds 2.6 million declarations and clarifications to declarations. it should be noted that in march 2017, the verkhovna rada voted to amend the law “on prevention of corruption”, which obliged anti-corruption activists to submit e-declarations. such changes caused criticism of these activists and international partners of ukraine. bills that proposed to cancel electronic declaration for anticorruption crusaders or change it have already been submitted to the parliament. however, ukrainian parliamentarians did not resolve this issue until the end of the period of electronic declaration (by april 1, 2018) (nacp, 2016–2019). 4. conclusions the formation of an effective apparatus for combating political corruption in the system of public administration in the eu member states also has a number of serious problems. the main thing is the heterogeneity of legislation regulating relations in this area, which is conditioned by national traditions and history. there are several models of anti-corruption institutions operating in the eu, differing in form, functions, and tasks, with certain national characteristics and peculiarities. in particular, there are distinguished: multipurpose bodies that have the powers of law enforcement bodies, as well as carry out preventive functions; specialized services, agencies and/or departments for combating corruption in the system of law enforcement bodies; institutions for the prevention of corruption, policy development, and coordination. reaffirming its european aspirations, during 2001–2018, ukraine ratified a number of laws in relation to the formation of anti-corruption standards: a) general and on liability for corruption offenses and offenses related to corruption; b) documents on the activities of specialized agencies for fighting corruption; c) documents on ethical rules, anti-corruption restrictions and prohibitions for certain officials and on the prevention of political corruption; d) documents on the prevention of corruption in the economy and sports; e) documents on access to information. this allows asserting that in general the legislative framework for the prevention of corruption in ukraine has already been established. despite the adoption of many laws, out of 200 anti-corruption measures, which, according to the state program for the implementation of the anticorruption strategy, had to be implemented by state bodies by the end of 2018, about 35% had not been implemented. anticorruption strategy for 2019 and subsequent years and the state program for its implementation do not exist. many important anticorruption laws, which would help to further improve the ukrainian economy, finance, the system of social protection of the population, and so on, were not adopted. many of the problems that prevent effective use of the data still need to be resolved. it is also necessary to find solutions for defining the electronic declaration of anticorruption crusaders. the main proposals for further development. according to the anti-corruption strategy for 2014–2018, providing open access to publicly-important information was identified as one of the priority areas for action in the field of corruption prevention. the necessary legislation was adopted, an open data portal was created, and access to several information bases was opened. such changes have been reflected in the improvement of ukraine in a number of international ratings. however, in order to protect these achievements and further progress in ensuring information openness, the pace of reforms must be preserved. open data should remain one of the priorities of the anti-corruption policy, in particular, should be included in the new anticorruption strategic documents. it should be noted that the draft anti-corruption strategy for 2018–2020, issued on september 2017, no longer included measures to ensure access to information, although reforms in this area are still far from done. we propose the following steps, the formation and development of government administration as a prerequisite for narrowing the corruption space, which in our opinion will be interesting for eu countries too. 1. to make legislative changes in order to create guarantees of the proper quality of open data and access to them. in particular, it is necessary to solve the problem of duplication of the functions of registries and to increase the responsibility for non-compliance with the requirements of the relevant legislation. 2. monitor the dynamics of international ratings (open data barometer and global open data index) to determine the priority changes concerning data openness. in certain spheres (state budget, national legislation, company registration), ukraine is the world leader in baltic journal of economic studies 201 vol. 5, no. 3, 2019 providing access to information, but it lags significantly behind in other spheres (environmental data, geographic maps, healthcare). solving social problems should be a priority to maintain transparency in governance. in some cases, this requires legislative changes and the creation of appropriate infrastructure; properly provide (financially and technically) state registries, which should help to increase the volume and quality of data. today, some state registries are incomplete, which makes it difficult to work with them. for example, only 7% of the monuments are displayed in the state register of immovable monuments of ukraine. 3. creation of appropriate information analysis tools that will allow the effective use of large volumes of open data, which became available as a result of the reform. in addition, it is necessary to ensure the integration of databases, which will improve the possibilities to analyse information. references: analytical portal (2016-2019). qlik sense hub. retrieved from: https://bi.prozorro.org/sense/app/fba3f2f2cf55-40a0-a79f-b74f5ce947c2 bocharnikov i.v. 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(2018). disclosure of beneficiary owners: formalities on formalities, ligazakon. retrieved from: http://uz.ligazakon.ua/ua/magazine_article/ea007997 state register of real rights to real estate (2019). retrieved from: http://kmp.ua/uk/analytics/exclusive/vidkrittyaderzhavnogo-restru-rechovih-prav/ the only public web portal for open data. retrieved from: http://data.gov.ua baltic journal of economic studies 202 vol. 5, no. 3, 2019 the open data barometer (2016). retrieved from: http://opendatabarometer.org/?_year=2016&indicator=odb the state register of declarations. retrieved from: https://public.nazk.gov.ua ukrainian open data portal. retrieved from: https://data.gov.ua ukraine against corruption (2018). ukraine against corruption: economic front. economic evaluation of anti-corruption measures in 2014-2018 – dnipro: serednyak t. retrieved from: http://www.ier.com.ua/files/ publications/policy_papers/ier/2018/anticorruption_%20report_ukr_.pdf uniform state register of legal entities, individual entrepreneurs and public associations. retrieved from: http://data.gov.ua/passport/73cfe78e-89ef-4f06-b3ab-eb5f16aea237 ukraine opened (2017). ukraine opened up its beneficial ownership data: why it matters and how your country can be next, open government partnership, june 08.2017. retrieved from: https://www.opengovpartnership.org/ stories/ukraine-opened-its-beneficial-ownership-data-why-it-matters-and-how-your-country-can-be-next baltic journal of economic studies 71 vol. 5, no. 3, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: nnnasta@ukr.net orcid: https://orcid.org/0000-0002-6374-7078 doi: https://doi.org/10.30525/2256-0742/2019-5-3-71-81 construction of technology parks as a means of resolving conflicts of interest bet ween the subjects of the investment process anastasiya ilyina1 abstract. the purpose of this paper is to determine the ways of improving the work of technology parks in ukraine. methodology. in the paper, there were used the following methods: the dialectical method (consideration of the theoretical foundations of the construction of technology parks in the context of the close interconnection of their functioning with a high-quality education system); scientific abstraction, theoretical and empirical analysis (study of the need for establishing the relations between the subjects of the investment process, the activities of which are carried out at the technology park area and its impact on the development of an innovation infrastructure in the country and also standard of living of the population); the method of modelling (studying the structure of the technology park, the process of its functioning and development); statistical methods (grouping, comparison, dynamic series), used during the comparative and statistical analysis of activities of technology parks in ukraine. results of the research study showed that each model of the construction of technology parks (american, japanese, european) based on the principles of their operations has corresponding disadvantages, which to a large extent would negatively affect their work. the comparative analysis of the activities of ukrainian technology parks has shown the imperfection of their functioning due to significant differences of interest among the participants in the implementation of innovation projects since each individual technology park prefers to carry out its activities according to a separate model of developed countries of the world, without taking into account the underdevelopment of the education and industrial complex in ukraine. in addition, due to unresolved relations between state authorities and local self-government bodies, there was not enough development of any targeted program for the implementation of technology parks’ projects at both the state and local levels. as the statistical analysis showed, it has suspended the work of technology parks in ukraine due to the lack of state incentives for their innovation and investment activities. all of this made it possible to conclude that the improvement of the work of existing technology parks, which could become a successful prospect for the construction of new ones, requires the resolving conflicts of interest among all the subjects of the investment process. practical implications. an improved model for the construction of technology parks is needed for the effective interconnection of the main elements of the government system, namely: state, science, business, and population in order to create harmonious relations between all the subjects of the investment process. it will contribute to the strengthening of public confidence in the authorities, harmonization between state authorities and local self-government bodies, and also improvement of the process of providing administrative services to the population. all of this will give an opportunity for innovation-active enterprises to realize the innovative products and, thus, to expand the innovation infrastructure, paving the way for a bright future in the creation of the effective e-government system in the country. value/originality. a harmonious interaction between state authorities and local self-government bodies contributes to the development and approval of targeted programs for the implementation of technology parks projects, and also other innovation projects concerning the development of information and telecommunication infrastructure. in this case, the research centres, operating on the basis of the universities, at the expense of student fee, conduct research on the impact of the realized innovation project on the economic and social development, and also grant students scholarships, leading to the expansion of technopolises and, thus, variety of services for the population. key words: technology park, innovation project, innovation and investment activities, investment process, subject of investment process, state support, targeted program. jel classification: o32, o31, h54 baltic journal of economic studies 72 vol. 5, no. 3, 2019 1. introduction the subject of the investment process can be any natural or artificial person, resident or non-resident who has an opportunity to invest in one or another investment object. it means any material (construction/ reconstruction of real estate; production of transport vehicles, luxury goods), financial (establishment/ development of banks, credit unions, acquisition of securities, property rights) and intellectual (production and commercialization of intellectual property: knowhow, utility models, computer technique, etc.) value. so, financial resources play a support role for the material and technical base development, material resources are the basis for conducting research, intellectual resources create conditions for increasing employees’ human capital and also replenishment of budget revenues. that is why the construction of technology parks, activities of which combine all three types of investment, will lead to the establishment of relations between the subjects of the investment process. the problems of providing information services are of concern to the ukrainian population for many years. the practical experience shows that during the whole period of ukraine’s independence, the problems in most cases concerned reliable information when advertising goods or providing certain types of services. any technology park is constructed with the purpose to commercialize the scientific-technical and innovation developments aimed at satisfying the needs of the population by specialists engaged in various spheres of activities (industry, transport and communications, housing and communal services, healthcare, etc.). in this case, the construction of technology parks will allow producers to constantly cooperate with scientific institutions that conduct researches on production facilities and, accordingly, receive reliable information regarding their technical and economic opportunities. it will result not only in the improvement of the innovative production process but also be an attractive factor for consumers at the expense of skills of specialists to apply publicity-related receptions. the question of the construction and development of technology parks was studied by a number of ukrainian and foreign scientists. so, ukrainian researchers, such as y. h. kozak, o. a. yermakova and t. sporek (2016), n. v. krasnokutska (2003) addressed in the overwhelming majority the theoretical issues of the construction of technology parks. meanwhile, the scholars y. m. moiseyenko (2016), r . l. navrotskyy (2017), s. v. voloshina, d. r . kalinichenko and n. i. logvynenko (2017) devoted their works to the study of the problems of technology parks’ construction in ukraine in comparison with the experience of foreign countries. the foreign scientists, in particular, m. castells and p. hall (1994), a. n. link and j. t. scott (2015), a. rodriguez-pose and d. hardy (2014) studied the relationships between public authorities, private enterprises and scientific institutions in joint activities at the technology park area. at the same time, s. musterd and a. murie (2010), b. m. naik and w. s. kandlikar (2010), j. m. spector and s. w. park (2018) focused on the discussion of the issue how to develop a high-quality system of education in the country as a major source in the expansion of the number of research centres and, hence, technology park area. despite the in-depth researches of many scientists on various issues concerning the work of technology parks, no attention is paid to the study of disadvantages of modelling the process of the construction of technology parks, where the important role is played by resolving the conflicts of interest between public authorities, scientific institutions, and enterprises. accordingly, the development of an improved model of technology parks’ construction can serve as a benchmark for ukraine in establishing relations between all the subjects of the investment process and, subsequently, state authorities and local self-government bodies. in the future, it will be an incentive for the development of mutually agreed state and local targeted programs in the field of innovation development and, of course, implementation of technology parks’ projects. 2. theoretical foundations for the construction of technology parks the technology park is a united territorially separated complex of enterprises, establishments and organizations, the activities of which are connected with the provision of telecommunication, information, environmental, and other types of services. in addition, it is a complex founded on the basis of the leading university in order to implement the innovation cycle “research (science) => development (production) => introduction (consumption)” where the primary source is the introduction into the process of an education of a high-quality education system, which has long been considered the driving force of the innovation and investment development, and also scientific and technological progress. so, at the discretion of some foreign scholars, in particular, s. musterd and a. murie (2010), b. m. naik and w. s. kandlikar (2010), j. m. spector and s. w. park (2018), the quality system of preparation of future graduates of primary and secondary education institutions (schools, gymnasiums, colleges) needs to be improved. so, in addition to the school curriculum for basic disciplines, containing theoretical positions (chemistry, physics, mathematics), it would be worthwhile to introduce additional professional disciplines of a practical nature (draftsmanship, apprenticeship, applied economics) in conjunction with aesthetic disciplines (fine arts, labour training), which would enable pupils to apply their theoretical knowledge in practice, and also encourage baltic journal of economic studies 73 vol. 5, no. 3, 2019 young people to generate as many new ideas as possible on the implementation of innovation projects. in this case, the relevant changes will increase the development of the higher education system, as graduates of schools will be oriented primarily to enter higher education institutions in order to obtain a specialty that will become a necessary factor in economic and social development. speaking about the quality of education system in higher education institutions, in particular at universities, it would be necessary to introduce changes to the curriculum based on the implementation of the vast majority of specialized disciplines in the specialty related to the knowledge of information and telecommunication technologies. it will enable future specialists not only to produce high-quality products and/or perform one or another work on the provision of relevant services but also involve as many interested customers as possible through the effective use of public relations. an achievement of such a goal needs acquisition of perfect knowledge of technical and economic parameters of some product/service, the functional features of which would create its positive image in the eyes of the population. all of this will contribute to increasing the workplaces of specialists in various fields of activities. they could play the role of both potential investors by making investments in the development of innovation infrastructure and recipients of investments by implementing infrastructure projects of the appropriate direction at the expense of investors’ funds. these projects are primarily related to the construction of new and/or improvement of existing technology parks. taking into account the abovementioned, the construction of technology parks on the basis of scientific and educational institutions would determine the settlement of relations between investors, recipients of investments, and public authorities because of increasing the number of workplaces, and hence volumes of various sources of financing at the expense of potential investors, such as public and private institutions, financial and credit organizations and also representatives of some groups of the population. it, accordingly, will enable manufacturers to produce high-quality products with involving a large number of consumers by applying the publicity-related receptions, and also potential investors who invest in certain infrastructure projects would have a high probability of obtaining high profits and low risk of losses from investment activities. as we know, the innovation projects of technology parks are long-term projects, when financial capital is represented in the form of venture capital intended for financing newly created enterprises (clusters, business incubators, etc.), according to which the investor is highly likely to receive a significant amount of profit but has a rather high level of risk to suffer losses. however, in this case, the level of risk is relatively lower compared to other venture financings, in particular, in the construction of industrial parks. despite the fact that industrial parks promote the development of an efficient industry in the country, the activities of technology parks have a number of significant financial benefits. so, in industrial parks, the responsibility for investment in infrastructure projects in selected territories of special (free) economic zones (sezs) is assumed by private persons with the state support in the form of individual economic privileges (and, for the most part, for foreign investors). within the technology park area, all the participants in the implementation of innovation projects not only receive economic privileges from the state but also have more opportunities to invest in the corresponding projects thanks to state investment support (kozak et al., 2016; krasnokutska, 2003; link, scott, 2015; rodriguez-pose, hardy, 2014). consequently, the financial benefits of technology parks’ activities are due to various factors. so, firstly, the financing of most of the innovation projects of technology parks is carried out at the expense of the state and local budgets (for example, the united kingdom – 62%, germany – 78%, netherlands – 70%, france – 74%) on the basis of the development and approval of state/local targeted programs for the development of an innovation infrastructure, when it is known that, through the state support, the investor invests much smaller amounts, and thus fewer risks to incur financial losses (krasnokutska, 2003; navrotskyy, 2017). secondly, financing of technology parks’ projects is carried out at the expense of various sources of financing, where investors can act as institutions functioning within the technology park area (banks, industrial enterprises, state institutions, universities, etc.), with which the investor is able to maintain a direct interconnection. thirdly, the investor has an opportunity to receive the economic benefits provided by the state in the form of exemption from payment of income tax, value-added tax (vat), import duty and privileges related to the exemption from the mandatory sale of funds received in foreign currency from sales of goods (castells, hall, 1994; kozak et al., 2016; rodriguez-pose, hardy, 2014). thus, the projects of technology parks are the perfect impetus for building a great future for the country since their work is connected not only with conducting the innovation and investment activities in a separate territory but also is accompanied by the expansion of achievements in science and technology throughout the country. however, if we analyse the works of some ukrainian and foreign researchers, in particular, m. castells and p. hall (1994), y. h. kozak, o. a. yermakova, t. sporek (2016), y. m. moiseyenko (2016), technology parks in the whole world are constructed by imperfect models since each of three models of the developed countries has certain disadvantages. baltic journal of economic studies 74 vol. 5, no. 3, 2019 so, the american model (usa, uk) identifies the technology park exclusively with a science park, that is, a complex of organizations carrying out research exclusively with no particular type of production (e.g. “stanford”, “heriot-watt”). meanwhile, the innovation products during the implementation of innovation projects are produced by representatives out of the technology park area. it may cause an inconvenience in making an investment agreement between the subjects of the investment process that often slowdowns passing through its process. at the same time, financing of technology parks’ projects on the basis of the state support is provided at the expense of government subsidies. in this case, the participants of the implementation of innovation projects rarely maintain relations with local authorities and, consequently, the local population, which may cause conflicts of interest between the state and latter. the japanese model ( japan), on the contrary, does not focus much on the theoretical study of the idea of practical implementation of technology parks’ projects. it involves carrying out a scienceintensive industrial production with the assumption of the construction of technopolises (e.g. science and technology centre “tsukuba”). thus, the activity of technology parks complicates the situation with environmental safety, because an excessive expansion of technological complexes without a thorough study of their environmental impact in the future may lead to negative environmental effects. moreover, central authorities consider it necessary not to develop a program for funding the projects of technology parks but only provide incentives for participants in projects’ implementation. despite it gives them more rights to dispose of their own funds locally, the volume of state funding of these projects is rather insignificant, which increases the risk level of institutions with non-state capital to suffer losses. the most optimal model is european model (france, germany). in this variant, the technology park is merged into the whole city, which involves various scientific and educational centres, and also enterprises, institutions, and organizations, which have close cooperation among themselves by providing services to the population in different spheres of activities (technology, electronics, biology, chemistry, pharmacology, etc.). at the same time, the financing of projects of technology parks functioning on such a model is carried out at the expense of both the state and local budgets in accordance with the implementation of state/local targeted programs without taking into account the own funds of subjects of investment process (for example, “sophia-antipolis”). however, the overwhelming majority of works are aimed at rendering services within the framework of already realized technology parks’ projects, when the research activities (american model) and construction of technopolises ( japanese model) are conducted insufficiently. in this case, the work of the technology park will be tantamount to work as a maximum of technopolis (city). that’s because its territory will not be expanded due to the creation of new technopolises, which will also serve as a cause of poor research facilities and opportunities to undertake research of projects’ capabilities. in this situation, despite the constant increase in the number of newly created technology parks, the improvement of their functioning will be rather limited. 3. comparative analysis of activities of technology parks in ukraine in ukraine, the model of the construction of technology parks is rather uncertain since such an issue was raised only in 1999 after the adoption of the law of ukraine no. 991-xiv “on special regime of innovation activity of technology parks” dated 16 july 1999. according to this law, the state support of innovation activity of technology parks is carried out through the state financial support and targeted subsidization of technology parks’ projects (supreme council of ukraine, 1999). in ukraine, there are 16 technology parks, whose status of activity and process of registration can be observed in the period from 2000 to 2017 (table 1). despite the activities of technology parks are rather closed, as for results of monitoring of platform liga:zakon (n.d.), the abovementioned table gives an opportunity to identify the level of innovativeness of each of them. so, the innovation activity of the technology park “e. o. paton electric welding institute” is connected with the research and experimental development in the field of natural and technical sciences, including metallurgy, metal processing, welding, machinery and equipment manufacturing. in this case, the activity of the technology park is directed primarily to manufacturing while scientific researches of the peculiarities of its projects are carried out in insufficient volume. and this is a big risk for both investors and recipients of investments – producers of innovative products to receive losses from the implementation of technology park projects. the technology park “institute of single crystals” conducts an interdisciplinary research in many priority areas of modern material science, physics, chemistry, biology, and medicine and carries out a full cycle of scientific developments – from the idea and fundamental research to the creation of different types of unique intellectual materials and technologies, including those that have no analogues in the world. but here, on the contrary, much attention is paid to the research of the very idea of scientific development, while the production of relevant materials did not appear to be a major innovation breakthrough in the world practice because of time stretching when conducting research. baltic journal of economic studies 75 vol. 5, no. 3, 2019 the work of ukrainian technology park “semiconductor technologies and materials, optoelectronics and sensor technique” is unique, as it is aimed at manufacturing various materials and components (raw, conductive, and multilayer materials, semiconductors and so on) which are necessary for manufacturing the custom-made innovation technologies (sensor-equipped devices, machines and so on) with the purpose of resource-saving monitoring and control for technological processes and manufactures in different spheres of activities (mechanical and power engineering, metallurgy, rocket and space technology, oil and gas industry, agro-industrial complex, etc.). in this case, there is a similar issue of time stretching during the research and development process. here, the participants of projects’ implementation try to conduct in-depth researches of raw materials and components, that is, a lot of time is devoted to pre-design work that is why the process of the relevant project implementation proceeds at a slower pace. as a result, such extensive research did not bring many benefits to industrial enterprises but only slowed down their innovation activity. thus, the registration of this technology park is at the stage of termination. the activity of the technology park “vuglemash” is aimed at the creation and introduction of new and modernization of existing technology for the development of fuel and energy and agro-industrial complex in various fields of activities (industry, transport, rehabilitation of public health, machine manufacturing and so on). however, there is an insufficient volume of research in the work of its technology park. it is connected, firstly, with the structure of raw materials and components that may cause problems in the technical functioning and, secondly, pre-design works devoted to the examination of the purpose of the implementation of innovation projects that affects the population demand on implemented projects. and since the activity of such a technology park is connected with the provision of services, on which in most cases the population’s standard of living depends, in this case, its functioning can become quite risky for people using these services. the work of the technology park “institute of technical thermal physics” is connected with the development, production, and implementation of modern energy equipment for heat and power engineering (energy and resource-saving nanotechnologies), and also environmental monitoring in the energy sector (equipment for reducing emissions of harmful substances). but as for scientific research, it is carried out precisely during the production process (innovation audit), as opposed to the pre-project planning. it significantly slows down the process of projects’ implementation since the detection of inaccuracies in pre-project developments during the innovation audit requires continuous improvement of materials in order to make innovative products more competitive. in the technology park “ukrainian information and telecommunication technologies” there is the work conducted at the development of information and telecommunication technologies, which is based on the production of telecommunication equipment and upgrading of communication facilities. but, despite the thorough researches of its technical components during the performance of the relevant works, this technology park does not carry out the work on the production of advanced technologies. accordingly, the purchase of manufactured equipment serves consumers only as an auxiliary means for replacing certain components of obsolete equipment that is not relevant to the process of updating fixed assets table 1 the status of technology parks in ukraine (2000–2017) si. no. status the name of technology park place of registration process of registration 1 fu nc tio ni ng e. o. paton electric welding institute kyiv registered 2 institute for single crystals kharkiv registered 3 semiconductor technologies and materials, optoelectronics and sensor technique kyiv in termination 4 vuglemash donetsk registered 5 institute of technical thermal physics kyiv registered 6 ukrainian information and telecommunication technologies kyiv registered 7 kyiv polytechnic kyiv registered 8 yavoriv lviv region registered 9 n on -f un ct io ni ng intellectual information technologies kyiv registered 10 agrotechnopark kyiv registered 11 textile kherson registered 12 machine building technologies dnipropetrovsk registered 13 ukrainian microbiological center for synthesis and new technologies odesa registered 14 eco-ukraine donetsk suspended 15 scientific and educational devices sumy not registered 16 resources of donbass donetsk registered source: own elaboration based at liga:zakon (n.d.) baltic journal of economic studies 76 vol. 5, no. 3, 2019 by recipients of investments. it may reduce the level of its attractiveness in the eyes of consumers. as for the technology park “kyivska politekhnika”, its functioning is unique in that it is associated with the provision of various types of services in the fields of computer programming, informational consulting, and also conducting research and experimental development in the social sciences and humanities. it provides an opportunity to create high-intellectual products, and also provide scientific and personnel support for its industrial output and market take-up. but despite the harmonious relations between scientists, manufacturers, and local authorities, the research works of this technology park are insufficient for the effective production of innovative products. this has to do with the fact that the activities of the technology park are aimed mainly at providing consulting services because of the lack of university rights to create new innovationactive institutions. it discourages manufacturers to increase the number of new products and technologies and, accordingly, scientists to conduct the research on pre-project proposals for the implementation of new infrastructure projects. the technology park “yavoriv” is engaged in the production of new scientific and technological products providing services related to legal, marketing, commercial, and expert support for the implementation of innovation projects, coordination of activities of scientific, industrial, and financial institutions, and also the creation of investment-attractive territories for foreign investors. however, despite the activities of this technology park are rather extensive since it includes various fields (engineering, information technologies, biotechnologies, innovation culture development, environmental protection and so on), it is aimed mainly at the commercialization of scientific and technological development within the technology park as a separate attraction area, not contributing to the expansion of its territory due to the creation of new research centres and industrial enterprises. this technology park also acts mainly as a coordinator of activities of innovation and financial institutions operating out of the technology park area contributing to the creation of an effective system of mobilization of the financing of innovation projects. in this case, supporting the leading position among other institutional associations, the technology park leaves out of attention the conducting of effective researches of innovation projects by the establishments operating within the technology park area. it significantly complicates the process of passing through the stages of innovation projects’ implementation and also requires additional state financial resources, which can cause a “crowding-out” effect. as we can see, none of the functioning ukrainian technology parks is adapted to the models of technology parks of developed countries of the world. if some technology parks prefer to conduct the pre-project in-depth research under manufacturing innovations, trying to act in accordance with american model (“institute of single crystals”, “semiconductor technologies and materials, optoelectronics and sensor technique”, “institute of technical thermal physics”, “ukrinfotech”), there is a lack of state funds for conducting relevant researches in ukraine. this situation contributes significantly to the slowdown of the investment process in these technology parks. speaking about the technology parks carrying out their activities close to japanese model in preference to manufacturing innovative products under conducting pre-project researches (“e. o. paton electric welding institute”, “vuglemash”), here the situation is rather complicated. so, due to the underdeveloped decentralized governing system in ukraine, the local state institutions and selfgovernment bodies have no right to independently solve the issues of the creation of technopolises at the expense of local budgets while negotiations with central authorities require a lot of time. because of this, the activities of the relevant technology parks put at risk both the participants in the implementation of innovation projects and the local population. as for technology parks functioning like european model, which unify their activities by providing different types of services (“kyiv polytechnic”, “yavoriv”), they are forced to diversify their activities by providing the relevant services in the form of consultations on how to use, as a rule, only certain components and materials for the repair of outdated equipment and also other types of advertising services. thus, because of the lack of own funds to finance the innovation and technology development in a particular industry, advisory work is not enough to introduce innovative technologies into the investment process. such a situation complicates the process of conducting pre-project studies of innovation projects since in many cases the replacement of individual components requires more funds than the purchase of new technologies, which is not beneficial for both investors and recipients of investments. commenting on the situation with the technology parks, which since the beginning of the registration did not produce any innovation products, including those whose registration is suspended (“eco-ukraine”) and only started (“scientific and educational devices”), it once again confirms the practical absence of the state incentives for their work at the expense of budget support of innovation projects, the implementation of which will be reflected to a large extent on the economic and social development of the country. thus, the lack of activity of the technology parks “intellectual information technologies”, “ukrainian microbiological center for synthesis and new technologies”, “eco-ukraine”, “scientific and educational devices”, whose powers include the research and experimental development in the field of natural and technical sciences, is a significant factor of slowing baltic journal of economic studies 77 vol. 5, no. 3, 2019 down of the scientific and technological progress of some particular branches of physics, chemistry, biology, medicine, ecology, and other similar sciences. thus, the lack of implemented innovation projects for the production of new informational technologies and improvement of existing ones became a cause of the low quality of education in the training of qualified specialists at a practical level. it prevents specialists in respective scopes of the work from being able to provide reliable information to their customers (for example, during the environmental assessment, medical checkup, astronomical forecast, repair work, etc.) and leads to a decrease in living standards of the population, presenting social discord and conflict. at the same time, the activity of registered technology parks in certain sectors also leaves much to be desired. thus, the technology park “agrotechnopark” did not sufficiently implement any of the relevant projects of production of food technologies. despite the agrarian sector in ukraine is one of the most influential in strengthening the national economy, there are not enough modern economic mechanisms for regulating agricultural markets, due to which there is no developed by its technology park program of special certification and standardization procedure met international requirements. this situation can lead to excessive country’s dependence on imports that jeopardizes its domestic market. the work of the technology park “textile” envisaged the implementation of the main project for the construction of an experimental line of the cotton-cleaning plant in order to develop technologies (universal equipment, modular complexes) for the production of new competitive textile materials and conducting researches based on an automated control system. however, its practical inactivity has become a significant factor in the gradual decline of the cotton industry due to increased country’s import dependence, which led to an increase in the cost of fabric production. as for the technology parks “machine-building technologies”, whose powers include providing financial support to automobile associations, and “donbas resources”, whose activities are related to the wholesale trade in high-tech components to automobiles, they also did not produce any of innovation products. this in some way has slowed the process of technological change in the fields of machine and automobile industries, which often causes the rapid depreciation of vehicles and, as a result, increases the number of road traffic accidents. 4. statistical analysis of activities of technology parks in ukraine the activities of ukrainian technology parks were particularly developed in 2000–2003. however, after the adoption of the law of ukraine no. 3333iv “on amendments to the law of ukraine ‘on special regime of innovation activity of technology parks’ and other laws of ukraine” dated 12 january 2006 (supreme council of ukraine, 2006) and, finally, tax code of ukraine no. 2755-vi dated 02 december 2010 (supreme council of ukraine, 2010), when almost all privileges for each category of taxpayers carrying out their activities within the technology park area were cancelled, the actual work of technology parks was almost stopped (figure 1). as illustrated by figure 1, it is evident that the innovation and investment activities of technology parks and industrial enterprises in ukraine are closely interconnected. thus, during the period from 15 32 3 1 94 84 22 84 7 74 16 39 78 31 52 24 08 25 26 24 46 26 85 24 08 32 38 34 03 31 38 36 61 31 36 41 39 23 87 60 29 11 8 0 0 2 6 4 0 0 0 0 0 0 0 0 0 10 20 30 40 50 60 70 0 5000 10000 15000 20000 25000 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 pr oj ec ts n am es the mastered production of new types of products of industrial enterprises the accepted projects of technology parks figure 1. dynamics of the innovation and investment activities of technology parks related to industrial enterprises in ukraine during the period from 2000 to 2017 source: own elaboration based at website state statistics service of ukraine; voloshyna, kalinichenko & lohvynenko (2017) baltic journal of economic studies 78 vol. 5, no. 3, 2019 2000 to 2001, there were implemented 60 projects of technology parks, when from 2000 to 2002 the process of development of new types of products by industrial enterprises sharply accelerated (from 15323 to 22847 names, respectively). however, by the end of 2005, one can observe the opposite situation, when the number of accepted projects of technology parks was gradually decreasing. in 2005 it reached zero, while in 2006 the situation remained unchanged. at the same time, from 2003 to 2006, there was a decline in the process of mastering new types of products, which were decreased to 2408 items. in 2007, two projects of technology parks were implemented and the number of developed new types of products for manufacturing increased to 2685 names. however, in 2008, despite the increasing number of accepted projects of technology parks (to 6 projects), the number of developed innovation products decreased to 2446 names. in 2009, under the conditions of mastering the production of new types of products in 2685 names, 4 projects of technology parks were accepted before the implementation. it is due to the onset of the crisis, when there were not enough funds for the development of innovative production by industrial enterprises, and also when the state support for the implementation of innovation projects of technology parks was stopped. it served as a practical termination of their work, starting from 2010 until the end of the analysed period. subsequently, industrial enterprises of ukraine began to perform their activities at max conserve and master innovation products, relying on their own funds and other sources of financing, including bank loans, foreign investments, state and local budgets. thus, during the period from 2010 to 2017, in the process of mastering the production of new types of products, moderate fluctuations took place at a rather low level, and in 2017, the number of these products decreased to 2387 names, compared with 2016 (4139 names). and finally, this figure became the smallest indicator for the whole analysed period. this shows that the infrastructure development level is falling. as we can see, the activities of technology parks in ukraine do not correspond to any of the models of developed countries of the world since their work is oriented mainly on the industrial potential of industrial enterprises and scientific opportunities of scientific institutions without the state support. this is explained by the fact that during the whole period of the work of technology parks in ukraine, there was not developed any state and local target program for the implementation of projects of any technology park. in this case, the subjects of investment process were disoriented in terms and conditions, making constant changes in technical and economic parameters of investment proposals for projects of technology parks. this situation eventually caused the delaying of the process of passing through all the stages of acceptation of new projects of technology parks for the implementation. all of this led to a lack of funds for investing in technological, innovation, and investment activities of technology parks and, eventually, gradual suspension of their work. as for the data of the state statistics service of ukraine, it was also reflected in the innovation activity of industrial enterprises, when during the period from 2000 to 2017, the share of the innovation product sold in industrial output was gradually decreasing (from 9.4% to 0.7%, respectively). however, as for the information from the official website of newly constructed in kyiv ukrainian technology park “unit city” (unit.city, n.d.), the initial stage of its work illustrated that ukraine has a high technological potential and opportunities to move away from the raw material economy to the economy of the development of national income. however, these changes require the creation of certain conditions for resolving conflicts of interest between the subjects of investment process since there are unresolved issues regarding the acceptation of some innovation projects for the implementation between the state, industrial enterprises, and scientific institutions, despite the potential of the latter. all of this greatly complicates having to go through all the steps in the investment process. 5. improvement of technology parks’ construction by modelling method the research of comparative and statistical analyses illustrated the imperfection in activities of ukrainian technology parks. despite the high productive capacity of industrial enterprises and strong desire of scientific institutions to conduct in-depth studies of pre-project proposals since the technology parks try to work only in selected models of developed countries of the world, the conflicts of interest of participants in the implementation of technology parks’ projects remain unresolved. thus, there are no harmonious relations between scientific institutions whose research activities require additional funds, industrial enterprises, whose activities are constantly in need of renewal of fixed assets, other establishments, whose profitability, and therefore, investment potential depends on the quality of providing certain types of services, and also financial organizations, which along with the state carry out additional financial support for innovation projects. and, given that each of such a model has a number of shortcomings, there is no competitive environment between the technological parks, which also generates stagnation in their work and thus often causes the formation of monopolies. so, let’s suggest a step-by-step mixed model of construction of new technology parks and improvement of existing ones covering all three models of developed countries (figure 2). as we see, first of all, the innovation and investment activities of technology parks needed the state support, baltic journal of economic studies 79 vol. 5, no. 3, 2019 which should be based on the development and approval of state/local targeted programs for the implementation of the projects of technology parks. however, in this case, the relevant programs should be agreed upon by the state both at the central (ministries, departments) and local (regional, city, and district administrations) levels. so, the targeted programs developed at the local level should be approved in an established manner. here, the local state authorities, by conducting joint meetings with local self-government bodies and, accordingly, representatives of territorial communities, should make an agreement on the need for the implementation of certain projects within created technology park area (construction and/or reconstruction of innovation infrastructure objects), which are then added to the relevant target program. at the same time, central state authorities approve the elaborated target program only if it is agreed upon with local state authorities after holding a meeting with local self-government bodies. if the target program has been developed at the state level, the implementation of the program projects should include funds aimed at the development of higher education, in the formation of which the universities, closely cooperating with research centres, plays a major role. these centres, at the expense of students’ tuition fees at universities, carry out the research on various processes and phenomena that should be applied in practice by both private enterprises (industrial enterprises, service centres, communication centres, etc.) and public institutions (institutions of primary and secondary education, healthcare, culture, sports, utilities, etc.) during the manufacturing of innovation products and provision of various types of social services. meanwhile, the implementation of innovation projects in accordance with the local targeted program includes funds for the development and operation of research centres, at the expense of which the corresponding centres pay students scholarship grants. and students, in turn, have an opportunity not only to work in separate private enterprises or public institutions but also to act as investors, making investment support by spending a part of their funds on the construction of technopolises. these innovation centres can be modern cities with developed infrastructure, lives of which are concentrated on providing educational, scientific, industrial, technical, transport, residential, and other services aimed at satisfying the needs of the population. thus, the improved mixed model of the construction of technology parks involves, firstly, the decentralization of authority since the close cooperation of local state authorities with local self-government bodies will give more rights to the population to be formed in the territorial communities, and therefore, to solve common issues concerning the implementation of a particular investment project, including at the state level, since these issues are always aligned between the central authorities and local administrations. secondly, the development of a high-quality education system, as any technology park is always constructed on the basis of a particular university, which is interested in training future professionals in relevant specialties. thirdly, state authorities local selfgovernment bodies universities research centers technology park su pp or t fr om lo ca l bu dg et s su pp or t fr om s ta te bu dg et fe e fo r st ud en ts research centers c on du ct in g sc ie nt if ic re se ar ch alignment of state/local targeted programs st ud en t gr an ts public and private establishments public and private establishments c re at io n of te ch no po lis es technopolises provision of services for population figure 2. an improved mixed model of the construction of technology parks source: formalised by the author baltic journal of economic studies 80 vol. 5, no. 3, 2019 an increase in the number of newly created organizations carrying out the research and development, and hence the number of scholars and people with scientific degrees that will serve as a factor not only in improving the quality management system for providing educational services in higher education institutions but also in the development of an innovation infrastructure in the whole country. fourthly, the involvement of students to research, methodological and practical activities in one or another specialty with providing an opportunity to increase workplaces for future graduates of higher education institutions. fifthly, the expansion of the technology park area not only on the city level but also on the region and country level by increasing the number of technopolises and expanding the scope of services providing by government agencies and public/ private enterprises. 6. conclusion in spite of the potential of ukrainian industrial enterprises and scientific institutions, due to the constant emergence of conflicts of interest between the subjects of the investment process, the work of technology parks in ukraine was suspended temporarily. it is confirmed by the absence of developed and approved state/local targeted programs for the implementation of the projects of technology parks. moreover, the eight ukrainian technology parks function according to the principles of certain models of the developed countries of the world, without taking into account all their shortcomings, due to which the issue of establishing relations between the subjects of the investment process in technology parks remains problematic. meanwhile, the innovation activity of another eight technology parks, as a very important factor in the country’s economic, social, and technological development, has not yet begun, and the process of registration of some of them has been suspended or frozen. all of this led to the phasing out of the activity concerned the implementation of innovation projects of technology parks because of the lack of state support. thus, to manage conflicts of interest of all the subjects of the investment process, it is necessary to develop a new improved mixed model of technology parks at the world level that would cover all the benefits of developed american, japanese, and european models of technology parks. firstly, it requires the government to amend the budget legislation (in ukraine – the budget code of ukraine), basing on paying special attention to the branch of education during the budget formation for the next year, and tax legislation (in ukraine – the tax code of ukraine), with the purpose of introduction of tax privileges for a separate category of workers performing their work within the technology park area. secondly, there must be resolved the relations between managers and subordinates in public/private enterprises, institutions, organizations that would have an opportunity to create competent management of the entrepreneurial activity. thirdly, it is necessary to solve the conflicts between the state authorities and local self-government bodies, which will allow accelerating the pace of transition to decentralized decision-making and thus give more rights to the local population to agree on the implementation of one or another innovation-investment project. all of this will allow the subjects of the investment process to develop proposals for projects, the implementation of which will be a step towards the development of adjacent infrastructure, making the gradual transition to an improved model of technology parks. references: castells, m., hall, p. (1994). technopoles of the world: the making of 21st century industrial complexes. new york: routledge, 275 p. retrieved from: https://books.google.com.ua/ kozak, y. h., yermakova, o. a., sporek, t. (2016). osnovy zovnishnoekonomichnoyi diyalnosti [fundamentals of foreign economic activity]. kyiv-katovitse: tsentr uchbovoyi literatury, 325 p. retrieved from: https://pidruchniki.com/2015101166727/ekonomika/tehnoparki_osoblivosti_rozvitku (in ukrainian) krasnokutska, n. v. (2003). innovatsiynyy menedzhment [innovation management]. kyiv: kneu, 504 p. retrieved from: http://library.if.ua/book/4/511.html (in ukrainian) liga:zakon (n.d.). contr agent. retrieved from: https://ca.ligazakon.net/search link, a. n., scot, j. t. (2015). research, science and technology parks: vehicles for technology transfer. the chicago handbook of university, technology transfer and academic entrepreneurship. chicago, london: the university of chicago press, ch. 6, pp. 168–187. retrieved from: https://books.google.com.ua/ moiseyenko, y. m. (2016). upravlinnya tekhnoparkom u systemi upravlinnya rynkom intelektualnoyi vlasnosti (na prykladi natsionalnoyi nanotekhnolohichnoyi sitky) [management of the technopark in the system of management of the market of intellectual property (on the example of the national nanotechnology network)]. bulletin of dnipropetrovsk university. series economics, vol. 24, no. 10(1), pp. 17–26. musterd, s., murie, a. (2010). making competitive cities. oxford, ames: wiley-blackwell, 360 p. retrieved from: https://books.google.com.ua/ naik, b. m., kandlikar, w. s. 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(2018). motivation, learning and technology: embodied educational motivation (third avenue). new york: routledge, 216 p. state statistics service of ukraine. economic statistics / science, technology and innovation / research and development activity (1995-2016). retrieved from: http://www.ukrstat.gov.ua/operativ/operativ2005/ni/ind_rik/ ind_u/2002.html supreme council of ukraine (2010). podatkovyy kodeks ukrayiny [tax code of ukraine]. code of ukraine, adopted on 2010, december, 02, no. 2755-vi. retrieved from: http://zakon3.rada.gov.ua/laws/show/2755-17 supreme council of ukraine (1999). pro spetsialnyy rezhym innovatsiynoyi diyalnosti tekhnolohichnykh parkiv [on special regime of innovation activity of technology parks]. law of ukraine, adopted on 1999, july, 16, no. 991-xiv. retrieved from: http://zakon2.rada.gov.ua/laws/show/991-14 supreme council of ukraine (2006). pro vnesennya zmin do zakonu ukrayiny “pro spetsialnyy rezhym innovatsiynoyi diyalnosti tekhnolohichnykh parkiv” ta inshykh zakoniv ukrayiny [on amendments to the law of ukraine “on special regime of innovation activity of technology parks” and other laws of ukraine]. law of ukraine, adopted on 2006, january, 12, no. 3333-iv. retrieved from: http://zakon4.rada.gov.ua/laws/show/3333-15 unit.city (n.d.). the first ukrainian innovation park – the gate to ua tech scene. retrieved from: https://unit.city/ en/home/ voloshyna, s. v., kalinichenko, d. r ., logvynenko, n. i. (2017). rozvytok tekhnoparkiv yak osnova formuvannya innovatsiynoyi ekonomiky z konkurentospromozhnym lyudskym kapitalom [the development of technology parks as the basis for the formation of an innovation economy with a competitive human capital]. innovation economy: scientific and production journal, 11–12, 40–47. baltic journal of economic studies 130 vol. 6, no. 1, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: chugunov055@gmail.com orcid: http://orcid.org/0000-0003-4915-1267 2 kyiv national university of trade and economics, ukraine. e-mail: makvknteu@gmail.com orcid: http://orcid.org/0000-0002-2331-8455 doi: https://doi.org/10.30525/2256-0742/2020-6-1-130-135 budgetary projection in the system of financial and economic regulation of social processes* igor chugunov1, valentina makohon2 abstract. the purpose of the article is to reveal the role of budgetary projection in the system of financial and economic regulation of social processes within the framework of improving the efficiency of fiscal policy intended to macroeconomic stability maintenance in both countries with transformational and advanced economies. the comparative and factorial methods allowed to developthe features of the institutional environment of the budgetary progection methodology, to identify approaches for its improvement. methodology. substantiation of the role of budget forecasting in the system of financial and economic regulation of social processes, determination of provisions for improving its methodology is based on generalized and systematic approaches that are applied in both developed and transformational economies. an analysis of the stages of the process and the budgetary projection methods evaluation, that are used in different countries, have been carried out. results showed that the efficient budgetary projection methodology is the basis for sound fiscal policy. the development of realistic budgetary projections facilitates justified management decisions aimed at ensuring the country financial firmness. devia-tions from budget revenues from the projected indicators do not make it possible to achieve certain fiscal policy outcomes and, accordingly, cause a budget cut. in order to develop realistic budgetary projections, a welldesigned and coherent database is needed for all time series, necessary to analyze and project budget revenues. time series of key determinants affecting the budget revenues level should be available at different frequencies (monthly, quarterly, annually). where data reflecting similar economic processes by different revenue sources are available, any differences between them shall be determined by reference to their coverage and methodology. practical implications. budgetary projections are the basis for the formation of effective fiscal policy and the benchmark of the reproduction process. adequate level of justification for budget projection will help to provide a dynamic balance of budgetary indicators and the budgetary system stability. institutional changes to the budgetary projection methodology should be made on the basis of taking into account the dynamic interrelation of budgetary and macroeconomic indicators. the remarkable task here is the development of an economic and mathematical model based on the assessment of the national economy capabilities by reference to the assessment of macroeconomic proportions and the corresponding social and economic conditions of social production. value/ originality. developing the budgetary projection approaches in the context of improvement of the fiscal policy efficiency is an important precondition for ensuring macroeconomic stability. in order to increase the budget projection justifiability, it is advisable to make institutional changes to its methodology. based on the methioned above, the article reveals the essence and role of the budgetary projection in the system of financial and economic regulation of social processes in the context of improving the fiscal policy effectiveness aimed at macroeconomic stability maintenance; approaches to improving the budgetary projection methodology have been identified, and it has been determined that the soundness and feasibility of budgetary projection are the basis for effective fiscal policy. the predictability of budgetary criteria, budgetary architectonics contribute to improving the efficiency of transformations in the public finance system. key words: budget, budgetary projection, fiscal policy, budgetary system, budgetary architectonics. jel classification: е62, н60, н68 * the article is prepared on the basis of the scientific research work "financial and budgetary strategy of economic growth" (number of state registration of work 0119u100577). baltic journal of economic studies 131 vol. 6, no. 1, 2020 1. introduction the development of social relations has led to the creation of new social and economic conditions intended to the effective organization of the public finance management system and its components on the basis of sound and feasible financial and budgetary projections, which take into account both economic and political priorities, that makes it possible to ensure budgetary balance, integrated reciprocity of the state governance measures for social and economic processes in the short-, mediumand long-term. budgetary projection indicators, acting as benchmarks for fiscal policy making, determine to a certain extent the national economy functioning conditions and the living standards. since budgetary expenditures and their sources of funding are mutually agreed in the process of budgetary projections design, the possibilities of the public administration bodies to perform their functions are determined and the level of tax burden is justified. therefore, the enhancement of the budgetary projection methodology, improvement of scientific justification and feasibility of the projection indicators are a precondition to ensure the effective social and economic development of the country. developing the efficient projection models based on institutional changes in the financial and economic environment will permit to respond to the endogenous and exogenous factors impact, while preserving the parameters of holistic development of the budgetary system and budgetary balance in the context of economic transformations. the mentioned above indicates the relevance and timeliness of this study. thus, the problem of the study is as following: what is the role of the budgetary ptojection in the system of financial and economic regulation of social processes, what course of the budgetary projection methodology changes will ameliorate the level of the budgetary parameters feasibility and the dynamic balance of the budgetary system accordingly? this article aims to expose the role of budgetary projection in the system of financial and economic regulation of public processes in the context of improving the fiscal policy efficiency, to summarize and justify the approaches to improve the budgetary projection methodology. 2. approaches to the essence and role of the budgetary projection in the system of financial and economic regulation of social processes projection is a method that uses both past experience and current assumptions about the future to determine it (heyets, 2008); the process of obtaining scientifically justified probabilistic assessments of possible ways and outcomes of the system development, as well as the resources and organizational measures required for this purpose (encyclopedic dictionary of public administration, 2010); scientifically justified forecast on directions of the country development, separate branches of economy or separate administrative divisions, possible state of economy and social sphere in the future, as well as alternative ways and terms of achievement of economic and social development parameters (law "on state forecasting and development of programs of economic and social development of ukraine"); system of scientifically justified notions of course, criteria, principles, goals and priorities of the social and economic development of the country for the relevant period, indicating the main projected indicators, benchmarks and measures to ensure their achievement (law "on state forecasting and programs of socio-economic development of the republic of belarus", 1998). thus, the forecasting process determines the level of influence of exogenous and endogenous factors, possible contradictions and disproportions, as well as assesses trends and vectors of the object of forecasting. accordingly, forecasting is the basis for making sound planning decisions, generating vectors of probable development of the forecasting object on the basis of possible directions of state regulation of socio-economic processes. the essence of the budget projection is: to develop the main indicators of the state budget for the future, projection of the most important budget revenues and expenditures (klets, 2007); the real calculations, assumptions about the budget development course, possible states of its income and expenses in the future, ways and terms of reaching these states (financial and credit encyclopedic dictionary, 2004). in scientific research it is hypothesized that the budgetary projection level depends on political, institutional and economic determinants (boukari, joséveiga, 2018). therefore, raising the justification level of the budgetary projection comprises an assessment of possible changes in the relevant determinants. the importance of the budgetary projection developing is reflected in the strategic documents of socio-economic development of the countries. in particular, it is determined that a sound income policy aimed at achieving and maintaining their maximum consideration amount should meet a number of criteria: ensuring predictability and stability; long-term vision, i.e. a five-year forecast horizon is the least acceptable; systematic i.e. the regulation of any institutional entity kind of income should be accompanied by an assessment of the consequences of this decision for all other entities and the economy as a whole; ensuring effective monitoring and projection of risks associated with the state-owned enterprises activities, since their financial results determine the probability of these threats and the amount of additional debt pressure on the budget (on internal and external situation of ukraine in 2017). the annual socio-economic development projection is the starting basis for drafting republican and local baltic journal of economic studies 132 vol. 6, no. 1, 2020 budgets and for developing major areas of monetary and exchange policy. herewith, several scenarios of projection are developed taking into account different influence trajectories of internal and external political, socio-economic and other factors (on state forecasting and programs of socio-economic development of the republic of belarus, law dated may 05, 1998, no. 157-з.). under the stability and development pact (nicolae, 2013), the european union countries are required to develop long-range budget plans containing the profection indicators of revenue sources. in accordance with european community 's council directive (2011/85/eu, 2011), the countries of the european union define a medium-term budgetary framework that includes prospective estimates based on the assumption that fiscal policy will remain unchanged. 3. basic principles for developing budgetary projection models the budgetary projection process in both advanced and transformational economies consists of several stages, in particular: monitoring and analysis of data; the collection of basic data required for projection, including the forecast development of the approximate values of the original tax base and components of the macroeconomic projection; forming fiscal policy and economic assumptions for the projection periods; projection and its evaluation process, including the development or improvement of projection models, the collection of expert evaluations, the combination of alternative forecasts, the projection evaluation; internal adjustment of the projection results combined with assessment of the fiscal policy changes impact; refinement of the projection on the basis of internal adjustment; publication of a report on estimated budget revenues. at the same time, there is a considerable range of budgetary projection methods used in both advanced and transformational economies. in particular, according to "manual on fiscal transparency, 2007", the following basic budgeting methods include: effective tax rates; projection models using macroeconomic variables, including flexibility to macroeconomic indicators, autoregressivemoving-average models, vector autoregression, drawback mainyenance vector model, holt-winters exponential smoothing; microimitation models. when applying the effective tax method, the forecast for each tax is made by multiplying the tax base forecast by the corresponding effective tax rate: level of tax revenuesβ = effective tax rateβ * proxy tax baseβ, where β means the projection value of the relevant indicator, effective tax rate, proxy tax base means a data series equal in value or close to the relevant tax base. the effective tax rate is calculated by dividing the revenue amount from a particular tax for the previous period by the estimated tax base or its approximate value: effective tax rate ṫ = level of tax revenues ṫ / proxy tax base ṫ thus, the calculation of the potential tax base for each tax leads to an effective assessment of the legislation on tax objects. however, the same economic assumptions are required for all tax base forecasts, and any changes to the tax base due to policy changes should be made separately. projection by models using macroeconomic variables is widely used to project the budget revenues. the following methods are based on the interrelations between the certain microeconomic variables dynamic, notably the feasible gdp and the budget revenues rate of growth. there is a trade-off between the complexity of the model and the quality of the forecast. there may be situations where the use of simple models provides accurate projections and requires less effort based on the level of resources and time involved. more sophisticated general equilibrium models allow us to assess the dynamic linkages between fiscal variables and macroeconomic parameters, as well as to assess the impact of changes in fiscal policy, but developing such models requires stable structural linkages in the economy, substantial data volumes, and effortless application. of these methods in countries with transformational economies. micro-simulation models are based on modeling tax revenue for typical taxpayers or their operations. accordingly, the use of these models implies the availability of microlevel data on tax revenues and features of economic activity of taxpayers, consolidated material balance. this method requires significant amounts of time and data, but can be effective in calculating the impact of tax changes on the level of budget revenues and assessing the distributional effects of changes in fiscal policy. at the same time, the most efficient budgetary projection methodology is deemed to be the combination of different projection methods, that ameliorates the projection accuracy level. accordingly, with a high level of uncertainty about the future situation, it is advisable to combine forecasting methods, using different weighting coefficients obtained from different models. the combination is well-handed by averaging, whether there are no remarkable evidences of one method is more effective than others. it is important to note that at this stage of social development, in many countries, mediumand longterm budgetary planning is in place, which accordingly involves the development of mediumand long-term projections that can capture the long-term interrelations between budget revenues and the factors of their determination. baltic journal of economic studies 133 vol. 6, no. 1, 2020 at the same time, the continuation of the time horizon of budget projection changes its content and role in the system of financial and economic regulation of social processes. for instance, the short-term forecasts are developed for the term up to one year and do not contain the fiscal and planning features. the previous budget revenue indicators are used to develop the one-dimensional autoregressive models, is there are the time series of high frequency data, particularly, at least 50 oversights. due to moderate data requirements (mostly only tax revenue data are needed) and high accuracy of short-term forecasting, arima, var and other models, based on an estimate of general trends in a particular industry, are used to forecast budget revenues in both advanced and transformational economies. developed by modeling the future public revenues and expenditures under the demographic, macroeconomic and other predications, the long-term projections are the tools for influence on the public relations evolution. on this basis, the principles of public administration are justified to ensure macroeconomic stability and sustainable economic development. at the same time, long-term projections are based on the assumption that there is a strong link between tax revenues and the potential tax base. according to the forecasting methodology, the regression of time series in many countries is performed respectively to the certain tax base or its approximation and the other variables that are considered to affect the final revenue indicators (including slack variables for tax changes, complience of the tax legislation, number of taxpayers, seasonal factors, etc.). if there are constraints imposed by the data obtained, a number of macroeconomic indicators, in particular gdp, can be used as a tax base. if the model is directly proportional and the tax base is adjusted according to changes in the taxation regulations over time, an assessment of tax elasticity is made, it can be used to calculate tax revenue growth in the next period then, when the tax mechanism is stable. also, when developing long-term budgetary projections, considerable attention is paid to taking into account economic cyclicality by calculating the structural balance. 4. approaches to budget revenues projections in ukraine the simulation objects in budgetary projection in ukraine are mainly budget-forming taxes: value added tax (the share in the consolidated budget revenue for 2009-2018 is 30.17%); personal income tax (the share in the consolidated budget revenue for 20092018 is 16.64%); corporate income tax (the share in the consolidated budget revenue for 2009-2018 is 10.24%). the main factors that are taken into account when projecting value added tax revenues are: dynamics of growth of retail trade turnover of enterprises and export of goods; changes in conjuction of the gross added value in economic activities; volume of services realization; the level of gross capital formation. the peculiarity of the projection model of value added tax is: in determination of the estimated tax base on the indicators of socio-economic development of the country and the real tax rate; taking into account the estimation of value added tax on goods (works, services) produced in ukraine, including the budgetary compensation of the impact of the dynamics of goods export and the average annual exchange rate of hryvnia to the us dollar on the budgetary compensation of the tax and the impact of dynamics and changes in the situation of domestic tax demand. at the same time, improving the administration efficiency of this tax and its forecast model determines the necessarity to create a mechanism that will ensure its recompence. the development of the value added tax projection is based on the determination of the estimated tax base of this tax and the real tax rate: vatt tbt t= * /er 100 , where, vatt is the value added tax revenues projection; tbt is the tax base; ert is the effective tax rate; t is the time period index. the effective tax rate reflects the actualtax level that has evolved with respect to the tax base: ert vatt tbt− = − −( )1 1 1 100/ * the projection model of personal income tax includes projections of income from this tax for all types of income: employees; individuals engaged in independent professional activity; fixed tax and other types of income reduced by the amount of tax on personal income from tax rebate: pit pit rd pit ipaft pitoi pittr= + + −� � � � , where pit rd� is the income tax on employees; pit ipaft� is the income tax from on individuals engaged in independent professional activity, the fixed tax; pitoi� is the tax from other types of income; pittr� is the estimated amount of tax refund from the tax rebate received by the payers. in the process of projection of the personal income tax, the following are taken into account: the dynamics of the wage costs growth; dynamics of income growth in connection with the increase of the social protection floor; increase in mixed household incomes due to intensification of individual entrepreneurial activity; legalization of payment of wages; raising the subsistence level and minimum wage. the main factors that affect the corporate tax income include: the dynamics of income tax, the financial result of enterprises before tax; tax reporting indicators baltic journal of economic studies 134 vol. 6, no. 1, 2020 according to the consolidated income tax return for the preprojection period; performance indicators for the administration of income tax; income of profitable enterprises in previous periods. development of the corporate income tax projection is based on the definition of: the tax object of the corporate income tax: to i fc oe= − − , where to is the tax object; i is the income included when calculating the tax object; fc is the flat cost of goods sold, works performed, services provided; oe is the other costs. insufficient quality levels and relatively short time series of macroeconomic and budgetary data in ukraine, combined with unstable economic and political situation, complicate the development of structurally complex, dynamic budgetary projection models. limited technical capabilities narrow down the range of methods that can be applied in budgetary projection. thus, the use of simple multidimensional models on a macroeconomic basis, where tax revenues are expressed as a function of the tax base approximate value the and additional instrumental variables that take into account seasonal changes, the general trend in the industry, economic and political disruptions, as well as one-dimensional models of arima are a good starting point to review a limited amount of data. 5. areas for improvement of the budgetary projection methodology the process of budget revenues projection should be based on clear organizational principles to obtain reliable projections, regardless of political interference. although it is difficult to obtain high-precision income projections in countries with a transformational economy, given the high macroeconomic volatility, low reliability of economic data of tax series and a large number of changes to the tax regime in a relatively short period of time, it is important to introduce a reliable and transparent forecasting system, equipped with specialized and qualified staff, relevant databases and up-to-date software, as well as internal and external mechanism a list of revenue estimates. in transformational economies, as the technical base develops and the volume of data grows, the range of forecasting methods can be extended to more complex models. intel alia, var , vecm and micro-simulation models. the use of these models can provide a qualitative analysis of the impact of changes in the tax regime on future revenues, but there are significant limitations to the development of such models in transformational economies, ranging from the cost of resources (the need for comprehensive data, time expenditures) to legal restrictions on the handling of confidential information of the taxpayer and insufficient compliance with tax law and incompleteness of information on the taxpayers activities. however, the micro-simulation approach as a tool for tax revenues projection from the large key enterprises may be used in the future. gathering sets of reliable data with the right level of disaggregation is a necessary step in budget revenues projection. at the same time, the quality of certain model-based projections is highly dependent on the quality and volume of the initial data. it is also important to collect information on all possible determinants of budget revenues, including reliable data on the tax base approximate values and major macroeconomic variables, quantitative estimates of changes in the tax regime, the impact of economic shocks that can help build sound projection models. the budgetary projection should be based on an official macroeconomic projection developed by the relevant government bodies. taking the official macroeconomic projection parameters as the initial data for development the revenue projections, devided on different revenue sources. involving different government agencies in the projection process requires effective coordination between them to achieve a holistic macroeconomic vision, which will be used as information for projection revenues. the absence of a statutory procedure and algorithm for the revenue projection process makes the current projection process non-trnsparent and vulnerable to political interference. considering the peculiarities of the development of public relations, a significant task is the legislative consolidation of rules on the use of external expertise in the process of budget revenues projection, which will improve the accuracy of the validity of the projection based on a critical assessment of the main assumptions and sources of information used to make budgetary projection. 6. conclusions an effective budgetary forecasting methodology is the basis for sound fiscal policy-making. the development of realistic budgetary projections facilitates justified management decisions aimed at ensuring the fiscal balance and country financial firmness at a whole. deviations of budget revenues from the projected indicators do not make it possible to achieve certain fiscal policy outcomes and, accordingly, cause a budget cut. in order to develop more accurate budgetary projections, a detailed analysis of the country 's financial and economic environment is required to identify regular trends in the dynamics of macroeconomic indicators. time series of key determinants affecting the budget revenues level should be available at different frequencies (monthly, quarterly, annually). baltic journal of economic studies 135 vol. 6, no. 1, 2020 where data reflecting similar economic processes by different revenue sources are available, any differences between them shall be determined by reference to their coverage and methodology. institutional changes to the budgetary projection methodology should be made on the basis of taking into account the dynamic interrelation of budgetary and macroeconomic indicators. the remarkable task here is the development of an economic and mathematical model based on the assessment of the national economy capabilities by reference to the assessment of macroeconomic proportions and the corresponding social and economic conditions of social production. at this stage of social development, issues of improvement are gaining importance in developed and transformational economies, full implementation of medium-term budgetary planning and projection in the budget process is based on macroeconomic strategies. the level of validity and feasibility of the projected budgetary indicators depends on the degree of coherence of the political and economic component. the importance of further research on these issues is due to the expediency of improving the budgetary projection methodology based on the development of approaches that will take into account both the cyclicality and the dynamics of economic processes. references: heyets, v. m. (2008). modeli i metody socialno-economichnoho prohnozuvannia [models and methods of socioeconomic planning]. kharkiv: ph “inzhek”, 396 p. surmin, yu. p., bakumenko, v. d., mihnenko, a. m. and etc. (2010). entsyklopedychnyi slovnyk z derzhavnoho upravlinnia [encyclopedic dictionary of public administration]. kyiv: nadu, 820 p. pro derzhavne prohnozuvannia ta rozroblennia prohram ekonomichnoho i sotsialnoho rozvytku ukrainy [on state forecasting and development of programs of economic and social development of ukraine]. law of ukraine dated 03.03.2000 no. 1602-iii. o gosudarstvennom prognozirovanii i programmah sotsyalno-ekonomicheskogo razvitiia respubliki belarus [on state forecasting and programs of socio-economic development of the republic of belarus]. the law of the republic of belarus dated may 5, 1998 no. 157-3. klets, l. (2007). biudzhetnyi menedzhment [budget management]. center for educational literature, 640 p. gryaznova, a. g. (ed.) (2007). finansovo-creditnyi encyclopedicheskiy slovar [financial and credit encyclopedic dictionary]. moscow: finance and statistics, 1165 p. boukari, m., & josé veiga, f. (2018). disentangling political and institutional determinants of budget forecast errors: a comparative approach journal of comparative economics, volume 46, issue 4, pp. 1030–1045. pro vnutrishnie i zovnishnie stanovyshche ukrainy na 2017 rik [on internal and external situation of ukraine in 2017]. message from the president of ukraine to the verkhovna rada of ukraine. retrieved from https://zakon. rada.gov.ua nicolae, p. v. (2013). the financial and budgetary discipline in romania – the arrears of local public authorities. annals – economy series, vol. 2, pp. 221–226. council directive 2011/85 / eu of 8 november 2011 on requirements for budgetary frameworks of the member states (2011). official journal. l 306. 41–47. manual on fiscal transparency (2007). international monetary fund. retrieved from: https://www.imf.org/ external/np/pp/2007/eng/051507m.pdf baltic journal of economic studies 221 vol. 5, no. 2, 2019 corresponding author: 1 kyiv national university of culture and arts, ukraine. e-mail: etymoshenko@i.ua 2 classic private university, ukraine. e-mail: yelena.trohim@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-2-221-225 mechanism of behavioural economics olena tymoshenko1, оlena trokhymets2 abstract. the purpose of the article. the article covers the mechanisms of behavioural economics introducing into the state policy of the country. this problem becomes especially relevant in modern conditions as people tend to make unreasonable economic decisions. the purpose of this paper is to research the irrational motives of individuals’ behaviour in making economic decisions and to determine the measures for introducing the mechanisms of behavioural economics in the state policy of ukraine. methodology. the survey is based on the analysis of the scientific papers of the following scientists in economics: a. smith, k. marks, j. bentham, m. weber, j. schumpeter, a. marshall, j. keynes, h. simon, h. becker, v. smith, d. kahneman, a. tversky, richard h. thaler, g. akerlof, r. shiller; on the empirical analysis and on the analysis of the behaviour economic instruments. the objective of the article is the survey of irrational motives of human behaviour during the decision-making process in economic conditions, to determine the influence of the irrational motives on social and economic development and to develop measures and activities for implementation of behavioural economics mechanisms in the state policy. the subject of the article is theoretical and methodological aspects of the behavioural economics mechanisms in the state policy. the results. the research in the article shows and explains the main trends of the behavioural studies in the modern condition, in particular: behavioural finance, behavioural game theory, the problem of making a choice in time, prospect theory. one of the examples of herding behaviour shown in the article is the peculiarities of behavioural aspects of financial markets. special attention is given to the “nudge theory” used by the leading countries. behavioural economics possess the instruments, which maintain the decent living of the population and sustainable social and economic situation in the society. the results of research represent that the behavioural peculiarities of the society together with the interaction with the state policy result in the distrust of the society to the authority’s representatives. besides, the low-income level of the population leads to the predominance of survival values in the society, while in the highly developed countries, the values of self-expression dominate. it is proposed to implement behavioural economics mechanisms in state policy of ukraine while making economic decisions. conclusions. due to the new trends in economic development such as informatization, and digitalization, new ways of the economic behaviour of the population take place. one of the key aspects is the psychological approach to the decision-making process in the economic environment. thus, behavioural economics becomes of great importance in modern society. key words: behavioural economics, mechanisms, state policy, society, government effectiveness. jel classification: e71, h12, h30 1. introduction social and economic transformation and global challenges require appropriate changes in the system of interaction among economic relations, state and society. the study of behavioural characteristics of people is of particular relevance, and irrational motives for making economic decisions in conditions of uncertainty are in the centre of attention. the key thesis (concept) of behavioural theory is that the quality of economic theory increases as a whole on the bases of realism of the psychological components of economic analysis. it doesn’t mean that one should abandon the main principles of the neoclassical theory, in particular, the concepts of optimization of utility, general economic equilibrium, etc. on the contrary, it is generally accepted that economic science is a combination of various scientific fields that solve the same problem. theoretical and methodological aspects of behavioural economics are taught at universities of leading countries while training of highly trained professionals. departments of behavioural economics were organized and opened in most universities of the usa. in this context, the main trend in the system of future professionals in finance and economics training in baltic journal of economic studies 222 vol. 5, no. 2, 2019 ukraine is the necessity to introduce an interdisciplinary approach to strengthening the interaction of economics and psychology. besides, according to the decree of the cabinet of ministers of ukraine “on approval on the subject areas under which students of higher education are trained” economics is referred to the subject area of “behavioural and social sciences”. in the conditions of macroeconomic reality, it is very important for ukrainian society to implement basic methods, instruments, consecutive stages of behavioural economics in the process of ukrainian state policy realization and to increase the trust of the population in socially providing institutions (non-state pension funds, medical insurance), as well as the formation of an ideology of rational use of limited natural and economic resources. the mentioned above facts are of particular importance in the context of insufficient financing of the ukrainian economy. 2. assessment of behavioural research research of irrational motives of human behaviour while making economic decisions were first observed in the scientific papers of the classic representatives of economic thought – a. smith, k. marks, j. bentham, m. weber, j. schumpeter and were developed in the research of a. marshall, j. keynes, h. simon, h. becker, v. smith, d. kahneman, a. tversky, richard h. thaler, g. akerlof, r . shiller. in the xviii century, a. smith formed a concept of an “economic human” and “natural order” and studied human behaviour with its motives and desire for personal benefit. according to a. smith (1776), “natural order” – is market relations where a person uses behaviour in his/her personal and selfish interest, the sum of which forms interests of society. j. schumpeter (1911) was the first one to introduce the term “irrational behaviour of the entrepreneur.” j. keynes (1936) thought that economic processes were influenced by optimistic and pessimistic actions of economic subjects. he was the first one to introduce the term, which described irrational human behaviour – animal spirits. nowadays, irrational behaviour exists in four areas: 1) personal financial security, 2) macroeconomic stability, 3) personal health, 4) quality of governance. in the context of quality of governance, shiller & akerlof (2015) reported “the winning electoral strategy with phishable voters is threefold: 1. publicly, proclaim policies that will appeal to the typical voter on issues that are salient to her, and where she will be well informed. 2. but on other issues, where the typical voter is ill informed, but where potential campaign donors are well informed, take the stance that appeals to donors. publicize this stance to would-be contributors, without broadcasting it widely to the general public. 3. use the contributions from these ‘special-interest groups’ for campaigning that increases popularity among the regular run of voters, who are more likely to vote for someone who ‘mows their lawn on tv.’” the founders of economic psychology as a scientific trend could be considered scientists a. tversky, d. kahneman (2001), who studied individual characteristics of human behaviour in the decision-making process. it’s a very interesting fact that d. kahneman, a nobel prize winner in economics, is not an economist at all, but a specialist in psychology, his concept denies fundamental economic postulates, such as: the model of an economic person and the rationality of the subject of economic activity. the main idea, presented in the early studies of d. kahneman and a. tversky, is that human behaviour in a market economy is irrational and is determined by such basic directions as: frames (mental image, anchoring effect); heuristics (prospect theory, start-loss, selfish prejudice, monetary illusion, disappointment); anomalies (effect of benefits, ownership effect, mutual benefit, intermediate consumption, advantage of current consumption, impulsive investment, dividend trap, stock return mystery, etc.). the newest wave of economic research is based on a combination of psychology and economics and proves the inability of classic economic laws to explain human behaviour in crisis and stressful situations and in the conditions of uncertainty. for example, the 2013 sveriges riksbank prize in economic sciences in memory of alfred nobel, awarded for empirical analysis of asset prices, was unforgettably exciting for financial economists. the 2013 laureates, eugene fama, lars peter hansen, and robert shiller, are giants of finance and architects of the intellectual structure, within which all contemporary research in asset pricing is conducted. the results of their research were critically analysed by campbell, john (2014). in 2017, the award was given to american economist r. thaler, a wellknown theoretician of behavioural economics. the aim of this article is to analyse irrational motives of human behaviour while making economic decisions, determine their influence on social and economic development, and to develop activities for implementation of mechanisms of behavioural economics in the state policy in ukraine. our research is based on an empirical analysis of the behaviour of economic actors in the context of adopting macroeconomic decisions. the methodological basis of the research serves the views of the scientists-economists and their studies of the individuals’ behaviour. the article shows that j. schumpeter was the first to introduce the concept of “irrational behaviour of an entrepreneur.” a. tversky and d. kahneman, the founders of economic psychology, studied individual peculiarities of people during the decision-making process. in the article, we have conducted a comparative analysis of the main trends of the behavioural studies in the modern condition, in particular: behavioural finance, behavioural game theory, the problem of making a choice in time, prospect theory, and phishing. baltic journal of economic studies 223 vol. 5, no. 2, 2019 3. implementation of behaviour economic instruments the phenomenon of herding behaviour is observed while making decisions on investing, forecasting profits, operations with securities in stock markets, operations with crypto-currency (digital currency), etc. behavioural phenomenon, presented in the prospect theory, are common and present in other spheres of economic activity, but mostly in financial markets: 1) extremely high rate on return on equity comparing to return on investments in government bonds and assets that are less risky; 2) effect of placement (of shares); 3) asymmetrical price elasticity; 4) bad news unacceptance; 5) re-evaluation of possible losses and benefits. the herding behaviour is mostly widespread in financial markets functioning, especially during the peak and crisis phases. behavioural aspects of financial markets identified in r. shiller’s theory of “financial bubbles” (shiller, 2008). in the present conditions, this is confirmed by the behaviour of actors in cryptocurrency exchange (oleshko, tymoshenko, trokhymets, 2018). bitcoin quote at cryptocurrency exchange are volatile, and transactions with cryptocurrency are of high risk. when speculative transactions reach their peak, all entities in the financial market receive the same information and formulate the same expectations. such behaviour creates panic, which results in a smaller number of subjects bear the market during peak increase of listing quotes (financial assets). thus, during the period of the greatest growth of the bitcoin rate (2017), the number of cryptocurrency transactions in its purchase increased significantly, which caused a shortage of cryptocurrency (due to the limited possibilities of rapid mining) and its further growth to 20 thousand dollars per bitcoin. after the bitcoin rate crash at the end of 2017, panic in the stock markets gave rise to a wave of transactions for their sale, resulting in a much lower bitcoin rate crash. according to the fact that in 2009 the maximum price was 1309 bitcoin per one dollar, and the maximum rate of one bitcoin in 2017 reached 20 thousand usd. conceptual principles of behavioural economics such as “nudge theory” are actively used by the leading countries of the world when developing strategic directions of socio-economic development. for example, the government of singapore organized information companies and acquired special significance for social projects that were designed to create a sense of national identity in a multicultural nation. the main initiatives of the government of singapore were also: the development of measures to take care of the environment; family planning to increase fertility; the formation of culture on timely payment of taxes as an integral part of the formation of state resources. tools of behavioural economics are important in the formation of stabilization imperatives of the state tax policy (oleshko, 2016). an interesting example was the experiment, which was precisely described in the work of r. thaler and c. sunstein (2008) in identifying the factors that influence the change in the behaviour of taxpayers the most. thus, the first group of taxpayers was informed that due to tax revenues the state provided national defence capability, environmental protection, health care financing, etc.; another group of taxpayers – threatened with serious penal sanctions; the third group was offered assistance in completing the tax declarations and the last group was reported that 90% of tax agents had already fulfilled their obligations to the state. just the last “nudge” influenced the change in behaviour the most and lead to tax revenues. this method was used by the british tax service, which sent out a paper using its data base of addresses with information that most taxpayers were performing their duties on time; the initiative worked instantly and brought positive results. and in the letters to the richest people who still had tax liabilities, the information was about how their money could help improve utilities. on the whole, the experience of great britain in introducing behavioural interventions was the most effective. the main instruments of behavioural economics, which contribute to the decent level of savings of the population, formation of savings in pension funds, are the following: organization of training of financial education literacy programs at the enterprise level (free educational programs without tuition fee); automatically joining employees to retirement plans with a simultaneous increase in both the level of their payments and the level of savings. the role of the government in this situation – “stay aside and reduce barriers for confirming these programs” (thaler, 2015). symbolic instruments provide that a person is endogenously motivated and with the help of the aforementioned directions one can stimulate the desired behaviour by manipulating the symbols and influencing the values (schneider & ingram, 1990). in the direction of stabilization and improvement of the environment, those who support the “behavioural economics” propose to strengthen the role of ecological tax and apply penalties for those who pollute the environment. the second approach, proposed by those who support the “behavioural economics,” is called “the system of limit and emission credits trade” (the cap-and-trade system). the outlined directions based on the reinforcement (provision of incentives) system will suppress the operational regulation with rigid state interference and in general, will positively influence the formation of an environmentally balanced system of nature use. this direction will be appropriate for the effective development of the ukrainian economy, considering the tendency of ukrainian society to unjustified exhaustion and irrational use of natural resources (energy, forest, water). the experts of the world bank (2015) published innovative studies on behaviour management, which provides three principles of thinking on the base of which people make decisions: 1) automation of thinking – is antagonistic to conscious thinking, gives an incomplete idea of political processes baltic journal of economic studies 224 vol. 5, no. 2, 2019 and false assumptions and associations, which distort the general vision of the processes that take place; 2) social thinking – the population is influenced by social preferences, social networks, social selfdetermination, and social norms. for the majority of people, it’s important what other people are doing and whether they fit into certain social groups; 3) thinking based on mental models – people use concepts, categories, identification characteristics, prototypes, stereotypes, causal relationships, and views on the world formed in the community where they live. 4. behavioural features of ukrainian society behavioural peculiarities of the ukrainian society in its interaction with the state (governmental) policy are defined by the lack of trust to the authority’s representatives, the prevalence and dominance of the “kleptocratic economy” and the high level of corruption in society. comparison of the level of indicators “government effectiveness” and “corruption in society” in ukraine with the leading countries of the world show that today ukraine remains one of the most corrupt countries in the world, and corruption is perceived as a part of life and commonplace of the ukrainian people. the government effectiveness in ukraine (max = 100%) over the past 16 years did not exceed 40%, while the control of corruption was 20% (table 1). in highly developed countries, control over corruption is a prevailing factor in ensuring government effectiveness. for example, in germany, the efficiency of the government is 94.2% and control over the level of corruption in society is 93.8% (table 2). table 2 “government effectiveness” and “control over the level of corruption in society” in highly developed countries countries government effectiveness, % control over the level of corruption in society, % belgium 86.5 92.3 germany 94.2 93.8 italy 71.6 59.6 sweden 94.7 98.6 great britain 92.8 94.2 poland 73.6 91.3 usa 76.4 89.9 source: generalized for the data of transparency international reduction of the level of control over the level of corruption invalidates the role of the state in the implementation of regulatory functions, promotes the consolidation of the clan-hereditary form of government, and transforms the system of power into the system of servicing power personalities. ukrainian society possesses the following characteristic features: stereotype thinking, attitude with prejudice towards representatives of other cultures, lack of experience in building an effective cross-cultural communication system, and lack of incentives for the development and self-realization of ukrainian youth. besides, the lowincome level of the population leads to the predominance of survival values in ukrainian society, while in highly developed countries, the values of self-expression dominate. then phishing transactions and manipulative technology influence financial decisions of the lowincome population (shiller, akerlof, 2015). levelling of irrational behavioural mechanisms and actions against manipulative phishing transactions are achieved through the state policy of popularizing financial literacy and teaching elements of rational consumer behaviour. in general, the mechanisms of behavioural economics are of the first priority for the ukrainian society and are implemented in the following way: formation of a civic position and national-patriotic consciousness of ukrainian youth, formation of mutual respect in society, pride for their own state through the introduction of social advertising, informational and educational activity among youth; the gradual transformation of the mental peculiarities of corruption, distrust of power and low tax consciousness of the population and business; introduction of financial incentives and motivational mechanisms for the planning of the ukrainian family; the popularization of ecological and energy culture. the low level of resource efficiency generates high energy consumption of the ukrainian economy (ukraine’s gdp energy consumption is the highest in europe, in 2015 it was 0.310 kg of fuel/usd, which is almost three times the same indicator for eu membercountries) and inappropriate use of natural resources; table 1 dynamics of indicators “government effectiveness” and “control over the level of corruption in society” for 2002–2016 in ukraine year government effectiveness, % control over the level of corruption in society, % 2002 30.1 11.6 2003 32.1 16.2 2004 32.5 16.6 2005 32.4 25.9 2006 36.6 24.9 2007 29.1 21.4 2008 27.2 19.9 2009 21.5 15.8 2010 24.4 16.2 2011 21.3 15.6 2012 32.3 12.8 2013 31.3 11.4 2014 39.9 14.9 2015 34.6 14.9 2016 31.7 19.7 source: generalized for the data of transparency international ukraine baltic journal of economic studies 225 vol. 5, no. 2, 2019 organization of activities on the dissemination of financial literacy in the direction of information work on the savings, lending, rational consumption of the population, its participation in pension programs, etc. consideration of the basic behavioural (mental) peculiarities of ukrainian society in the implementation of state policy in ukraine can have a positive effect. the major findings resulted from an analysis of the above show the necessity of using the theoretical and empirical results of behavioural science in making government decisions. we guess that the selective tools of the behavioural economics are an organization of the educational process with the free of the tuition fee academic programs on financial literacy on the enterprise level; automatic introduction to the employees to the retirement plans with the high level of payment and savings. the role of the government, in this case, is “stay aside and minimize the barriers for accepting and confirming these programs.” the behavioural peculiarities of the ukrainian society together with the interaction with the state policy result in the distrust of the society to the authority’s representatives. ukrainian society possesses stereotype thinking, prejudices towards representatives of other cultures, lack of experience in building an effective crosscultural communication system, and lack of incentives for the development and self-realization of ukrainian youth. besides, the low-income level of the population leads to the predominance of survival values in ukrainian society, while in the highly developed countries the values of self-expression dominate. thus, psychological aspects while making economic decisions are some of the most influential and have a number of factors. the question of introducing the mechanisms of behavioural economics into the state policy of ukraine becomes especially relevant in modern conditions as people tend to make unreasonable economic decisions. it is worth noting that the behavioural economy considers the role of psychological analysis, which, in turn, increases the role and significance of economic theory in general. within the conditions of a new and modern macroeconomic situation in the society, it is important to introduce mechanisms of behavioural economics for making the most economicallyrational decisions by the majority of the population. 5. conclusion in the conditions of informatization and digitalization of society, the economy is becoming more and more guided by new methods of influencing human consciousness, which requires a fundamentally new philosophy, financial and economic relations between the population, the state, and business. psychological aspects while making economic decisions are considered as the most important components of the modern economy. the mechanisms of behavioural economy and finance explain the gaps in the struggle against corruption, the insufficient level of pensions, the lack of an effective system of health insurance, the lack of self-control in the implementation of unreasonable expenses of the ukrainian citizens, and the low level of financial literacy of the poor population. for the scientific explanation of the implementation of the main tools of behavioural economics and finance, it is necessary to take into account the behavioural and mental characteristics of the ukrainian society, the specifics of its social thinking in the process of developing a state policy of ukraine. references: campbell, john y. 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(2008). nudge: improving decisions about health, wealth and happiness. london: yale university press. the world bank (2015). world development report "thinking, society and behaviour". retrieved from: https://openknowledge.worldbank.org/ baltic journal of economic studies 9 vol. 5, no. 3, 2019 corresponding author: 1 dnipro state agrarian and economic university, ukraine. e-mail: igorvinichenko@i.ua orcid: https://orcid.org/0000-0002-9527-1625 2 dnipro state agrarian and economic university, ukraine. e-mail: tat_shutko@ukr.net orcid: https://orcid.org/0000-0001-8690-9001 doi: https://doi.org/10.30525/2256-0742/2019-5-3-9-16 the matrix model for assessing the investment at tractiveness of agricultural enterprises ihor vinichenko1, tetiana shutko2 abstract. the purpose of the paper is concerned with the relevant problem of regional development – the development of methodological instruments for assessing the investment attractiveness of agricultural enterprises. the article discusses the concept of “investment attractiveness” and justifies the author’s position of its content. it has been established that the enterprise is an open system, so its appeal includes both internal and external environment, so the analysis of investment attractiveness of the enterprise is proposed to be carried out in stages, revealing its real and potential opportunities and threats at every economic level. methodology. the analysis of existing domestic and foreign approaches to assessing the investment attractiveness of agricultural enterprises was carried out and the use of an integrated approach in conducting this investigation was argued. the algorithm of forming an integral indicator for assessing the investment attractiveness of an agricultural enterprise is substantiated. results. the authors have proposed a methodical approach, the peculiarity of which is the construction of a matrix model for assessing the investment attractiveness of agricultural enterprises on the basis of a generalized indicator of quantitative and qualitative criteria for evaluating their production and financial position and investment potential. methodical research instruments include mathematical methods of statistical data processing and expert evaluation using the weighing coefficient theory. practical implications. approbation of the methodological instruments was carried out on the example of agricultural enterprises of the dnipropetrovsk region, as a result of which the most acceptable forms of attracting investment capital were proposed. those companies can expect investments that have high investment attractiveness, which is 10.5% of the investigated producers. enterprises of the first group are the most preferred for all types of investors: the largest land and labour potential, high results of economic activity. agricultural enterprises of the second group have significant resource potential and provide 48.6% of gross output; they can be attributed to “strong middle peasants.” agricultural enterprises with low investment attractiveness can also count on investment funds. we believe that the most acceptable form of their attraction is the creation basis of unprofitable farms of enterprises with the participation of domestic and foreign capital. key words: economic efficiency, investments, investment attractiveness, matrix model, research methods, agricultural enterprises. jel classification: e22, q14 1. introduction the investment process is one of the generalized characteristics of the socioeconomic situation in the country. stabilization and development of production are of great importance for its economy, and hereon an increase in the volume of investments in economically attractive branches. one of the problems of investment policy is the determination of the most effective and priority sectors of investment. at the present stage of development of the national economy, investments should be directed to those sectors and branches in which the market infrastructure is established and functions and the main prerequisite for attracting investments is economic and legal stability in the regions, the size of local markets. for ukraine, agricultural production should be a priority for investment. as the latter provides more than a third of the gross domestic product, the employment of almost a third of the working population, the production of about 75% of consumer goods, and contains 17 million people of the rural population (meselj-veseljak, 2016). due to the prolonged economic crisis, the material and resource potential of the agricultural sector of the economy baltic journal of economic studies 10 vol. 5, no. 3, 2019 has significantly decreased, the number of tractors, combine harvesters, other agricultural machines and implements has almost halved, which led to a sharp decline in the production of agricultural products and a decrease in its efficiency (rossokha, 2017). for the country’s economy, the relevant problem is the choice for investing in agricultural enterprises that have the best prospects for economic development and will be able to ensure high efficiency of invested capital, that is, they are investment-attractive. in order to solve this problem, it is necessary to develop an objective model for assessing the investment attractiveness of individual enterprises – potential investment objects. 2. interpretation of the concept of “investment attractiveness” agriculture is an investment-attractive industry for domestic and foreign investors but they do not risk investing significant means due to low profitability and high risks in the industry. however, in recent years, the country’s agriculture industry has shown a tendency to increase the volume of investments in farms of all forms of ownership, but their volume and level of efficiency are insufficient (state statistics committee of ukraine, 2018). the problem of the development of the investment process is currently assuming great importance for agriculture industry surmounting the crisis and the provision of competitive food production. the debt capacity of agricultural production requires the active attraction of borrowed funds, in particular, loans from commercial banks, joint-stock and industrial capital. the use of loans is typical for agricultural enterprises that do not have sufficient amounts of their own financial resources to implement investment projects. one of the main tasks facing the investor is the choice of enterprises that have the best development prospects and can ensure the highest efficiency of investments. the basis of this choice is the assessment of their investment attractiveness (blank, 2001; gitman, 1997; vinichenko, 2010, 2000; pravyk, 2007). most of the existing definitions of the concept of “investment attractiveness” of enterprises consider it as the final stage of studying the investment market (bocharov, 2002; myljnyk, 2002; pravyk, 2007; khobta, 2005). in modern literature, the definitions of this concept are interpreted insufficiently clearly, or very narrowly, focusing only on certain essential aspects. for example, it is considered an important feature of the attractiveness of the enterprise: the quantity and quality of its economic resources, which attract investors (tatarenko, 2000). some authors propose to use the ratio analysis to assess the investment attractiveness of the enterprise: solvency ratio, business solvency, business activity, earning power ( jastremsjka, 2006). other authors propose to conduct a phased analysis of the investment attractiveness of the enterprise: first of all, identifying the stages of the enterprise lifecycle, then analysing the performance of the enterprise in the dynamics, the last step in determining the attractiveness of the enterprise is to conduct a detailed financial analysis of the enterprise (ghajducjkyj, 2004; krylov, 2001). 3. analysis and assessment of the investment attractiveness of the enterprise we believe that an enterprise is an open system, therefore, its attractiveness covers both the internal and external environment, thus, we suggest analysing the investment attractiveness of the enterprise in stages, identifying its real and potential opportunities and threats at each economic level. at the first stage of the analysis of the investment attractiveness of the enterprise, swot analysis of the external environment investment decision-making … … … …x1 x6 x7 x14 purpose definition information support figure 1. algorithm of forming an integral indicator for assessing the investment attractiveness of agricultural enterprises baltic journal of economic studies 11 vol. 5, no. 3, 2019 is carried out in order to identify the opportunities and threats of the enterprise at macro and microeconomic taxonomic levels. at the second stage, when analysing the internal environment, we suggest using a multi-level process of forming an integral indicator of a quantitative assessment of the economic and financial activities of agricultural enterprises (figure 1). according to the figure, the purpose of the investment challenge and the content of its solution are determined at the initial level. at the second level, information support is provided, which is necessary for solving the investment challenge. for this purpose, the open information of the financial and statistical reporting of the enterprise is used. at the third level, a set of criteria is formed, which allow assessing the investment attractiveness of the enterprise. such a set of criteria provides for the analysis of indicators of the production and financial position of the enterprise f x x1 1 6( ... ) and its investment potential f x x2 7 14( ... ), which will help to carry out the assessment process in a comprehensive manner. so, the components of the indicator f x x1 1 6( ... ) are: f x( )1 – an indicator determining the security of the enterprise with production assets; f x( )2 – an indicator which is used to determine the liquidity of the enterprise assets; f x( )3 – an indicator determining the business solvency of the enterprise; f x( )4 – an indicator that allows analysing asset turnover of the enterprise; f x( )5 – an indicator, which is used to determine the effectiveness of the economic activity of the enterprise; f x( )6 – an indicator that determines the profitability of assets used. f x x2 7 14( ... ) – an indicator characterizing the qualitative characteristics of the assessment of the investment attractiveness of the enterprise. its components are indicators f x( )7 , f x( )8 , f x( )9 , f x( )10 , f x( )11 , f x( )12 and f x( )14 . it should be noted that f x( )7 is a branch affiliation of the enterprise, and the main indicator of the investment attractiveness of branches of the agricultural enterprise can be the level of profitability of using assets; f x( )8 – regional investment attractiveness; f x( )9 – stage of the enterprise lifecycle; f x( )10 – ecological condition of the enterprise; f x( )11 – calculations of the enterprise for loans according to the balance of the enterprise; f x( )12 – the enterprise settlements with personnel; f x( )13 – information about the professional skills of the management; f x( )14 – information about the good faith of the enterprise’s head as a partner. in order to form a generalized indicator f x x1 1 14( ... ), it is necessary to prioritize and streamline decision options in a certain methodological sequence. in order to reflect this indicator, a matrix form is used, which provides convenience in interpreting the results. according to figure 1, in order to make a decision on the investment attractiveness of the enterprise, it is necessary to form a generalized indicator f x x1 1 14( ... ) that takes into account the indicators of investment attractiveness, and with its help makes the appropriate decision. this indicator should be quantitative and adequately reflect the production and financial position of the enterprise. accounting for indicators of production and financial position is proposed to be carried out by drawing up a final matrix e n m( )× , the number of lines of which is determined by the number of quantitative indicators evaluating the production and financial position of the enterprise (for our case n = 6), and the number of matrix columns – by the number of components that ensure the correct determination of the corresponding quantitative indicators (for our case m = 3). thus, the matrix e has the form: e e e e e e e e e e e e e e e e e e e =   11 12 13 21 22 23 31 32 33 41 42 43 51 52 53 61 62 63                   (1) we define the methodological rules for the formation of elements of the matrix. the elements of the first line ( )e i1 ( , )i = 1 3 of the matrix (1) characterize the security of the enterprise with production assets (x11, x12, x13). in particular, the power equipment х11 should have a tendency to increase, if this condition is met, e11 = 1, if not – e11 = 0. the degree of depreciation of fixed assets x12 should have a tendency to decrease. if this condition is met, e12 = 1, if not – e12 = 0. the capital-labour ratio x13 should have a tendency to increase. if this condition is met, e13 = 1, if not – e13 = 0. therefore, if: х11 => increase => е11 = 1, х12 => decrease => е12 = 1, (2) х13 => increase => е13 = 1. the elements of the second line are determined using liquidity indicators (х21, х22, х23), where x21 is the absolute liquidity ratio (the recommended value for this indicator is x21 > 0.2). if this condition is met, we assume that e21 = 1, if not, we assume that e21 = 0. the element of the matrix e22 is calculated using the value x22 – the liquid solvency ratio (coverage ratio, the recommended value of the indicator is x22 > 1). if this condition is met, we assume that e22 = 1; if not, we assume that e22 = 0. the element e23 of the matrix (1) is calculated using the quick assessment ratio (the recommended value of this indicator is x23 > 0.7-0.8). if this condition is met, we assume that e23 = 1, if not, we assume that e23 = 0. therefore, if: x e x e x e 21 21 22 22 23 23 0 2 1 1 1 0 7 0 8 1 ⊃ ⇒ = ⊃ ⇒ = ⊇ − ⇒ = , , , , , . (3) in order to assess the investment attractiveness of agricultural enterprises, an important indicator is the baltic journal of economic studies 12 vol. 5, no. 3, 2019 indicator of business solvency of the enterprise, which is proposed to be identified using the elements of the third line of the matrix (1). the elements of this line are determined using the solvency factors of the financial position of the company (х31, х32, х33), where x31 is the coefficient of financial autonomy, which shows to what extent the enterprise uses the assets formed at the expense of its own capital. so, the recommended value of the indicator x31> 0.5, if this condition is met, then e31 = 1, if not, then e31 = 0. x32 is the current assets to equity ratio. the recommended value of x32> 0.5, if this condition is met, then e32 = 1, if not, e32 = 0. x33 is the debt ratio. the recommended value is x33 <1, if this condition is met, e33 = 1, if not – e33 = 0. therefore, if: x e x e x e 31 31 32 32 33 33 0 5 1 0 5 1 1 1 ⊇ ⇒ = ⊇ ⇒ = ⊆ ⇒ = , , , , . (4) the elements of the fourth line of the matrix (1) characterize the turnover of assets of the enterprise, they are calculated using three ratio. in particular, the asset turnover ratio x41 should tend to increase, if this condition is met, e41 = 1, if not – e41 = 0. the ratio x42 is the duration of the turnover of all assets, should tend to decrease. if this condition is met, e42 = 1, if not – e42 = 0. the ratio x43 characterizes the turnover of current assets and should have a tendency to increase. if this condition is met, e43 = 1, if not – e43 = 0. therefore, if: х 41 => increase => е41 = 1, х 42 => decrease => е42 = 1, х 43 => increase => е43 = 1. (5) the elements of the fifth line include the most important indicators for assessing the production activities of agricultural enterprises (x51, x52, x53). in particular, capital productivity ratio x51 should tend to increase, if this condition is met, e51 = 1, if not – e51 = 0. annual labour productivity x52 should tend to increase. if this condition is met, e52 = 1, if not – e52 = 0. the level of profitability x53 should also tend to increase. if this condition is met, e53 = 1, if not – e53 = 0. therefore, if: х 51 => increase => е51 = 1, х 52 => decrease => е52 = 1, (6) х 53 => increase => е53 = 1. the elements of the sixth line of the matrix e (1) estimate the profitability of investment capital; they are determined using indicators (x61, x62, x63). x61 is the amount of investment per 1 production unit, uah. the value of this indicator should tend to increase. if this condition is met, e61 = 1, if not – e61 = 0. x62 is the level of profitability of innovations. it characterizes the level of return on investment capital, which is invested in the enterprise. the recommended value of this indicator should tend to increase. if this condition is ensured, e62 = 1, if not – e62 = 0. x63 is a productive investment ratio. it should tend to increase. if this condition is met, e63 = 1, otherwise e63 = 0. therefore, if: х61 => increase => е61 = 1, х62 => increase => е62 = 1, (7) х63 => increase => е63 = 1. indicators (2) – (7) allow algorithmizing the process of finding the values of the elements of the matrix e (1), which is used for the overall assessment of quantitative indicators to assess the investment attractiveness of agricultural enterprises. in accordance with it, it is necessary to consider an investment attractive enterprise with a stable financial position, that is, if the matrix e looks like: 111 111 111 111 111 110 111 111 111 110 110 10                   ,or 00                   , (8) that is, the sum of the elements of all six lines of the matrix e must be 17 or 14. if the sum of the elements of the matrix e is less than 14, we can conclude that the enterprise is not as attractive as an investment object. the critical position is given by the matrix e of the following form: å =                   111 111 110 110 110 100 . (9) the crisis position of enterprises is characterized by the majority of zero elements of the matrix e. considering (1) we will form a general indicator characterizing all indicators of the production and financial position of the enterprise. for this purpose, we calculate the sum of all elements of the matrix e. we denote such a sum êï as an indicator of the production and financial characteristics of the investment attractiveness of agricultural enterprises. it is necessary to take into account all possible options and the fact that a prerequisite for determining the financial position is the presence in the matrix (1) 17 or at least 14 units. if we consider all the options, we will be able to determine the financial position of agricultural enterprises as investment objects. table 1 shows the weighting coefficients of the financial position of the enterprise table 1 determination of the financial position of the agricultural enterprise crisis financial position financial uncertainty stable financial position if êï ⊆ 2, then р11 = 0 if êï ⊆ 13, then р12 = 0 if 14 17⊆ ⊆êï , then р13 = 0 baltic journal of economic studies 13 vol. 5, no. 3, 2019 p, which have the appropriate values, depending on the stability of the financial position. it is proposed to carry out the determination of the investment potential of f2 (х5…х11) by conducting a detailed analytical work by an expert method, using the weighting coefficient theory. we will provide each of the corresponding quality indicators with weighting coefficients – ki (і = 5.11) (table 2). the list of basic professional skills of the management and the corresponding weighting coefficients ki prof (і = 1.5) are set as follows: the level of special knowledge and education k1 prof = 0.25; competence – k2 prof = 0.25; analytical thinking – k3 prof = 0.2; efficiency – k4 prof = 0.2; sociability – k5 prof = 0.1. if we use the proposed list of professional skills of the management of enterprises by weighting coefficients, then we can determine the appropriate level of professional skills of the management (table 3). to calculate the weighting coefficient of the index f (x10) according to the data of table 3, the following ratios are used: êprof iprof i = = ∑ 1 5 (10) when calculating the indicator f2 (x7 ... x14), we take into account the weighting coefficients of only those quality indicators that can most significantly characterize the investment attractiveness of enterprises. such qualitative indicators as the stage of the enterprise lifecycle, the calculations of the enterprise for loans and the ecological condition of the enterprise must be taken into account, therefore, they have the highest weighting coefficients. based on the calculations, we can compile a table of the rating of the enterprise as an investment object. its basis is a set of corresponding coefficients, which receive an assessment in points and depend on the value of this coefficient as an assessment criterion and the corresponding weight value. the sum of points for all coefficients gives the basis to refer the enterprise to one level or another. in order to solve this challenge, we will compile the corresponding tables of rating levels for n = 2 (table 4 and table 5) and for a larger number of ranking economic indicators (coefficients). table 4 rating levels (n = 2) combination of ranks criteria total points rating level 3,5 0,5 high 3,6 0,45 high 3,4 0,4 average 4,5 0,4 average 4,6 0,35 low 1,6 0,25 low table 5 rating levels (n > 2) combination of ranks criteria total points rating level 3,5,6 0,7 high 3,4,5 0,65 high 3,4,6 0,6 average 2,3,5 0,55 average 2,3,6 0,5 average 1,2,3 0,35 low 2,3,7 0,35 low after analysing the obtained rating levels for n = 2 and n > 2, we obtain a general table for optional n (table 6). table 2 weighting coefficients of qualitative indicators for assessing the investment attractiveness of agricultural enterprises indicator name indicator variation interval of weighting coefficients 1. branch affiliation f x( )7 0 0 057⊂ ⊆k , 2. regional affiliation f x( )8 0 0 058⊂ ⊆k , 3. stage of the enterprise lifecycle f x( )9 0 0 29⊂ ⊆k , 4. ecological condition of the enterprise f x( )10 0 0 29⊂ ⊆k , 5. the enterprise’s settlements with personnel f x( )11 0 0 1510⊂ ⊆k , 6. the enterprise’s settlements with creditors f x( )12 0 0 211⊂ ⊆k , 7. professional skills of the management f x( )13 0 0 112⊂ ⊆k , 8. the good faith of the enterprise as a partner f x( )14 0 0 0513⊂ ⊆k , table 3 the level of professional skills in the management of agricultural enterprises levels low level average level high level variation interval of weighting coefficients 0 0 4⊂ ⊆kprof , 0 4 0 6, ,⊂ ⊆kprof 0 6 1, ⊂ ⊆kprof corresponding weighting coefficient к15 = 0 к25 = 0,1 к35 = 0,2 baltic journal of economic studies 14 vol. 5, no. 3, 2019 then, if we analyse the data in tables 3 and 6, we can suggest a ratio that will allow to estimate the total allowable rating level of investment attractiveness of the agricultural enterprise (in our figure 1 is presented as a generalized indicator f (x1 ... x14)), and which should be carried out in the fourth model level. k25 + kadi (x1…x14) ⊆ k35 + kmax (11) where k25 + kadi = 0,1 + 0,5 = 0,6 (12) this sum is denoted by f2min(х7…х14). к35 + kmax = 0,2 +1 = 1,2 , (13) which is denoted by f2max(х7…х14). taking into account expressions (11) – (13), we get: f2min(х7…х14) ⊂ f (x7…x14) ⊆ f2max(х7…х14) (14) the formation of a generalized indicator for assessing the investment attractiveness of agricultural enterprises is carried out by summing up its components. taking into account (14), as well as the value of р12 and р13 from table 1, we obtain an expression for estimating the allowable level of investment attractiveness of agricultural enterprises: fmin(х7…х14) + р12 ⊂ f (x1…x14) ⊆ fmax(х7…х14) + р13 (15) therefore, enterprises will be investment attractive if: 1,1 ⊂ f (x1…x14) ⊆ 2,2 (16) according to the proposed methodology, the method of standardization is used for ranking and dividing into investment attractiveness groups, the methodological basis of which is to reduce various types of indicators to comparability. based on the calculated indicators of the economic and financial activities of agricultural enterprises of dnipropetrovsk region f x( )1 – f x( )14 a standard enterprise is formed with the best indicators of the current year. then, the rating of the proximity of the entire set of indicators of a particular enterprise with the standard indicators is determined. comprehensive comparative rating assessment is used to determine the location of the farm among agricultural enterprises of the region, and their distribution into groups. 4. approbation of results for agricultural enterprises of the dnipropetrovsk region in 2017, according to the results of the assessment, four groups of agricultural enterprises were distinguished by the level of investment attractiveness of dnipropetrovsk region (table 7). the first group includes enterprises that are developing dynamically, have high production indicators, the most stable financial position and low risk of debt repayment. the second group includes enterprises with relatively good production indicators, a stable financial position, and a relatively low level of risk of debt repayment. the third group includes enterprises of the region with finance uncertainty with production indicators below average and a relatively high level of risk of debt repayment. and the fourth group includes enterprises with critical financial position, low production rates, and a very high risk of debt repayment. certainly, the enterprises of the first group are most preferable for all types of investors, but most of all for large ones. they are characterized by the greatest land and labour potential, high results of economic activities. at other enterprises, it is necessary to take measures to improve it. enterprises that have the highest investment attractiveness can count on the flow of financial resources; this is only 10.5% of all the studied producers. agricultural enterprises that form the second group can be classified as “strong average producers.” they have significant resource potential and provide 48.6% of gross output. agricultural enterprises with low investment attractiveness can also rely on investment funds. we believe that the most acceptable form of their attraction is the creation on the basis of unprofitable farms of enterprises with the participation of domestic and foreign capital. 5. conclusion thus, the proposed method of constructing a matrix model for assessing the investment attractiveness of agricultural enterprises based on a generalized indicator makes it possible to take into account quantitative and qualitative criteria for assessing their production and financial position, allows for the integration of various economic indicators, and making an appropriate investment decision that significantly reduces the risk of an investor. and: 1. analysis of investment attractiveness should be carried out, covering both the internal and external environment, identifying its real and potential opportunities and threats. 2. in order to assess the investment attractiveness of agricultural enterprises, the main indicator is their financial stability. 3. indicators of investment attractiveness must be calculated taking into account weighting coefficients. 4. agricultural enterprises can count on investment funds as a generalized coefficient of investment attractiveness, which is higher than 1. table 6 general table for optional n low level of quality indicators average level of quality indicators high level of quality indicators 0 3 0 5, ,⊆ ⊆k 0 5 0 6, ,⊂ ⊆k 0 6 1, ⊂ ⊆k kmin kadi kmax baltic journal of economic studies 15 vol. 5, no. 3, 2019 table 7 production characteristics of groups on the investment attractiveness of agricultural enterprises of the dnipropetrovsk region indicators groups of enterprises on investment attractiveness level 1 2 3 4 number of enterprises 109 190 258 122 area of agricultural land, ths. ha 544,2 564,1 767,5 336,2 yield of cereals and legumes, c 23,9 22,2 20,3 20,2 sunflower yield, c 7,5 7,4 6,2 6,1 vegetable yield, c 6,1 6,0 5,1 4,2 milk production per 1 ha of agriculture lands, c 0,7 0,6 0,3 0,3 production of increase in live weight of animals per 1 ha of agricultural lands, c 0,5 0,2 0,2 0,1 gross output, ths. uah for: 1 ha of agriculture lands 2,0 1,8 1,7 1,5 power equipment of the enterprise, hp 129,8 105,4 88,3 94,0 degree of depreciation of fixed assets, % 33,6 49,8 54,3 87,6 capital-labour ratio, ths. uah 345,0 311,4 218,0 105,5 absolute liquidity ratio 0,23 0,19 0,11 0,09 liquid solvency ratio 1,09 1,07 0,94 0,54 quick assessment ration 0,81 0,79 0,34 0,23 financial autonomy ratio 0,67 0,61 0,24 0,36 current assets to equity ratio 0,54 0,48 0,29 0,12 debt ratio 0,67 1,04 1,21 1,43 assets turnover ratio 2,18 2,02 1,31 1,12 duration of the turnover of all assets, days 167,4 180,7 278,6 325,9 current assets turnover 3,74 2,96 1,47 1,32 capital productivity ratio 1,04 0,97 0,81 0,62 annual labour productivity, ths. uah 98,9 71,1 57,8 53,7 level of profitability of production, % 55,7 43,8 53,4 8,1 volume of investment into 1 uah of manufactured products, uah 0,87 0,81 0,4 0,27 level of profitability of innovation, % 10,0 7,5 4,6 1,36 investment ratio 0,89 0, 83 54,7 0,45 generalized coefficient of investment attractiveness 2,13 1,14 0,89 0,67 references: blank, i. a. 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(2017). the financial architecture of the corporation: the essence and components. collection of scientific works of scientists and post-graduate students «economic herald of the university», 33/2, 370–374. baltic journal of economic studies 155 vol. 5, no. 4, 2019 corresponding author: 1 donetsk law institute of mia of ukraine, ukraine. e-mail: nazumuch01@gmail.com 2 donetsk law institute of mia of ukraine, ukraine. e-mail: nazymkoov@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-155-159 obligation to support disabled persons in compliance with the present international legal norms and other international provisions ehor nazymko1, olena nazymko2 abstract. one of the fundamental social, socio-forming institutions, which are strictly protected, including through the relevant rules of the current law, is the longstanding institute of support for persons who are unable to provide for themselves through the special disability or incapacity at all. a very important socio-institutional and socio-regulatory component of such an institution is a social consensus about the support of people with physical disabilities, which is constantly reproduced and permanently required by social communities. among many components of the mentioned consensus, of great importance was also the indispensable obligation to carry out the full, decent or at least minimally necessary financial and material and other such support, provided by law and moral and ethical tradition, first by the parents of their young and minor children, and then, in turn, by adult, legally capable children of their older persons, including disabled, socially vulnerable parents. in spite of the necessity of careful treatment by society towards the disabled, in each country, this obligation is regulated in different ways. therefore, it seems appropriate to analyse the obligation to keep disabled persons within the meaning of current international law and other international provisions. methodology. the goal is solved using the cognitive potential of the system of philosophical, scientific, and special methods. the analysis and synthesis made it possible to identify the signs of incapacity for work and the specifics of the responsibilities for the maintenance of disabled persons. the methods of grammatical consideration and interpretation of legal norms have contributed to the identification of universal legal constructs that can be used in the national legislation of any sovereign country of the world. the comparative-legal method allowed determining the directions of development of national legislation of sovereign countries in order to bring them into conformity with generally accepted international standards. practical implications. the peculiarities of the social and legal status of disabled persons require scientists to develop consistent measures of the proper legal protection of their rights. this requires establishing a clear contentspectral relationship between the concepts of such vulnerable, helpless social-group categories as “older persons”, “persons with disabilities”, and “mentally retarded persons”, which implies a broad socio-physical contextual concept of “disabled person”. the national legislation of each sovereign country should provide for a mechanism developed at the international level for collecting funds for the benefit of certain socially vulnerable persons, including the disabled. key words: financial support, disabled parents, aged persons, invalid persons, mentally retarded persons, present international law, subject-matter, special un law sources, un instruments. jel classification: k14, k15, k33 1. introduction originating from the earliest times of human history, the duty of able-bodied members of society to carry out decent or at least minimally acceptable and tolerable financial maintenance of incapacitated members of society is an extremely important humanistic normative component of modern international and national law. within the subject-oriented, specialized sources of the current international law and many other international instruments of a different purpose character, the fundamental social right of a number of objectively disabled persons, in particular, the aged disabled parents, to receive the necessary material, i.e. financial or any other similar support by persons defined by law is quite clearly stated and up-to-date. the relevant rules of the current international law also clearly point to a grave social danger of action, which is the evasion or outright criminal refusal to make regular baltic journal of economic studies 156 vol. 5, no. 4, 2019 payments of the funds necessary for the normal life of persons who are recognized as objectively unable to earn the money they need on their own. direct tragic consequences of the evasion of legally identified persons from monetary and other such material support of certain categories of disabled persons may be the death of such persons due to illness, failure to receive medical treatment, suffering from hunger, etc. the most up-to-date and important is the new, thorough, comprehensive, and detailed scientific understanding of norms of the current international law and international declarative, advisory, and moralethical provisions, which together state the duty of adult, legally capable and able-bodied children to provide financial or other similar material maintenance for their disabled parents. some of the issues outlined were researched by such scientists as g. szmukler, m. bach (szmukler, bach, 2015), y. basson (basson, 2017), see j-f. durieux, j. mcadam (durieux, mcadam, 2004). the purpose of this article, therefore, is the proper presentation, review, broad characterization, detailed analysis, and necessary scientific and research actualization of the content of both mandatory international legal norms and international declarative, advisory, and moral and ethical provisions that collectively state the obligation of adult, legally capable, and able-bodied members of society to provide financial or any other similar material maintenance of disabled persons. the gradual and successful achievement of the stated purpose of this article has been accomplished by the proper and necessary appeal to the sources of the current un law and other un documents, presented in the official ukrainian and russian versions. 2. conceptualization of the obligation to support disabled persons in international legal acts since the second half of the xx century, that is, since the founding of the un, within a variety of branch sources of international law and international documents of purely declarative, advisory, orienting, moral-ethical, and other purpose character, i.e. within a number of international universal and subject-oriented, specialized conventions, declarations, principles, standard rules, and action programs, the basic social law of a number of specific categories of disabled, physically and socially vulnerable, socially helpless persons to be on regular financial or other similar material support of other persons determined by the content of the relevant norms of the national branch legislation is regularized and actualized. such socially vulnerable, socially helpless persons who freely use the said social law, which is extremely important to them, have been identified in the relevant sources of contemporary international law and other un documents, in addition to minor children and parties to official marriage, the older persons, persons with disabilities, and mentally retarded persons; it is extremely important, natural, and probable that any of the categories listed above may also include elderly incapacitated parents. first of all, it should be noted that the relevant paragraphs and articles of the declaration on social progress and development on 11 december 1969 (paragraph “c”, art. xi), (declaration on social progress and development, 1969), declaration on the rights of mentally retarded persons on 20 december 1971 (paragraph 3) (declaration on the rights of mentally retarded persons, 1971), and declaration on the rights of disabled persons on 9 december 1975 (paragraph 7) (declaration on the rights of disabled persons, 1975) collectively state the general social right of both mentally retarded persons and persons with disabilities to material or, in other words, socio-economic security, a satisfactory standard of living, and well-being. the specific components of these general concepts, in particular, the concept of “a sufficient standard of living,” which indicate one of the quite important aspects of the life of any person, are, for example, set out in the universal declaration of human rights as of 10 december 1948 (art. 25) (universal declaration of human rights, 1948), international covenant on economic, social and cultural rights as of 16 december 1966 (paragraphs 1 and 2, art. 11) (international covenant on economic, social and cultural rights, 1966), and convention on the rights of persons with disabilities as of 13 december 2006 (convention on the rights of persons with disabilities, 2006). thus, the specific components of the concept of “the right of everyone to an adequate standard of living” that is “necessary to maintain health and well-being for himself and his family” are “food, clothing, housing, medical care, and necessary social services” (universal declaration of human rights), or “adequate food, clothing and housing, and to the continuous improvement of living conditions” (international covenant on economic, social and cultural rights and convention on the rights of persons with disabilities). paragraph 1 of the “independence” section of the united nations principles for older persons on december 16, 1991, provides, in turn, not only the fundamental socio-economic right of older persons as such but also their right to legitimately receive the abovementioned vital material benefits, including money, from their relatives, family members, communities, etc. (provided from the original source): “1. older persons should have access to adequate food, water, shelter, clothing and health care through the provision of income, family (emphasis added) and baltic journal of economic studies 157 vol. 5, no. 4, 2019 community support and self-help” (united nations principles for older persons, 1991). thus, it should be noted that, despite the fact that the right of certain categories of disabled persons, in particular, aged incapacitated parents, to be on regular financial or related support of other persons determined by the content of the relevant rules of branch national legislation is, so to speak, their specific right, the exercise of which is conditioned by the existence of certain fundamental circumstances of a social and purely physical nature, this right is clearly stipulated, in turn, by the universal, fundamental right of any person to a decent socio-economic security and a decent level of satisfaction of vital material needs without discrimination based on racial, ethnic, national, religious-confessional, sexual, and socio-property class affiliation. 3. the interrelationship of the social-group categories of “older persons”, “persons with disabilities”, and “mentally retarded persons” within the framework of the aforementioned sources of the current un law and another un documents, in our opinion, the natural and undeniable substantivespectral correlation between the above concepts of such vulnerable, helpless social-group categories as “older persons”, “persons with disabilities”, and “mentally retarded persons” is clear enough. despite the extraordinary weight, importance of a common factor of social roles, in particular, despite the sufficiently well-grounded by scholars and actualized in modern international law subjectivity and artificiality of the difference between the social roles of disabled persons and the social roles of non-disabled persons, within a purely conceptual approach, one should focus on the content and significance of certain objective factors and traits inherent in these socially vulnerable categories. thus, in our view, the substantive-spectral correlation between the concepts of “older persons”, “persons with disabilities”, and “mentally retarded persons” is sufficiently clearly and concisely stated in the declaration on the rights of disabled persons (presented from the original source): “1. the term “disabled person” means any person unable to ensure by himself or herself, wholly or partly, the necessities of a normal individual and/ or social life, as a result of deficiency, either congenital or not, in his or her physical or mental capabilities” (declaration on the rights of disabled persons, 1975). thus, in our view, the question arises, on the one hand, about a sufficiently broad meaningful interpretation of such concepts as “disabled person” and “mentally retarded person”, and on the other, about a certain direct and indirect connection of these supposedly narrow, conventional concepts with the concept of “older incapacitated person”. firstly, it should be noted that the concept of “a person with disabilities”, as we see, meaningfully implies both a separate presence of factors of a significant lack of physical or mental abilities of a person, and their combination. secondly, the disability, that is, in this context, a congenital or acquired defect or a limited physical and/or mental capacity of a person, is often inherent in the elderly who thus can objectively be declared incapacitated. thirdly, the “necessities of individual life” should be understood as a wide range of regular vital human needs: food, clothing, other goods, medical services, leisure activities, etc. the problem of meeting these needs is also known to face disabled persons, in particular, aged incapacitated parents. fourthly, the content of the very essence of the above disability concept, which is, for example, is acquired, and not congenital, should be interpreted, in our view, in an extremely broad, not only physical but also, above all, socio-physical sense. “inability to ensure by himself or herself, wholly or partly, the necessities of a normal individual life” is sufficiently inherent in older disabled parents who, over their age and naturally impaired health, which, in turn, may objectively not meet strictly specific, limited, including international criteria for the concept of “disability”, are unable to provide sufficient financial or other material support for themselves. on the other hand, the incapacity of the elderly parents, their “inability to ensure by himself or herself, wholly or partly, the necessities of a normal individual life”, on the contrary, is often not the consequence of their natural age, which causes the natural limitation of their health, but the consequences of their severe, both congenital and acquired within the scope of their work experience, physical and psychological injuries that cause their disability in a narrow, generally accepted sense of the term. it should also be mentioned that within the framework of certain un documents of a recommendation, declaratory, indicative, and other similar nature, there is a general, rather inaccurate or even sometimes contradictory definition of the term “disability”. for example, paragraph 18 of the standard rules on the equalization of opportunities for persons with disabilities as of 20 december 1993 states the following (provided from the original source): “18. the term “handicap” means the loss or limitation of opportunities to take part in the life of the community on an equal level with others” (standard rules on the equalization of opportunities for persons with disabilities, 1993). in our opinion, “the loss or limitation of opportunities to take part in the life of the community on an equal level with others” cannot but include or imply the complete incapability or substantially limited ability of disabled persons, in particular, older incapacitated parents, to carry out the necessary financial support for themselves, which implies, in turn, the natural baltic journal of economic studies 158 vol. 5, no. 4, 2019 reproduction of a socially important institution of the obligation of adult, legally capable, and able-bodied persons, including adult children, in accordance with the law, to provide financial or related support of the above socially-vulnerable, socially helpless persons. the defined combined concept of a disabled person who is not only a disabled person in the abovementioned broader socio-physical contextual understanding, that is, a person who may have the characteristics of just an older incapacitated person, and at the same time, a person with a disability in a narrow, generally accepted and understandable term, and a retarded person, but also a person who in connection with the above lawfully uses fundamental social right to be on regular financial or other related support of other persons determined by the content of the relevant rules of national branch legislation, is given in paragraph (f ) of art. 3 “definition” of the convention on the international recovery of child support and other forms of family maintenance as of 23 november 2007 (hereinafter referred to as the convention on the international recovery) (provided from the original source): “(f ) “vulnerable person” means a person who, by reason of an impairment or insufficiency of his or her personal faculties, is not able to support him or herself ” (convention on the international recovery of child support and other forms of family maintenance, 2007). 4. legal institutionalization of obligation to maintain disabled persons specific normative-institutional or, more precisely, normatively-personified, important components of a modern institute of obligation to carry out financial or other material maintenance of certain disabled persons, including aged disabled parents, as well as components of a potential or actual violation of the norms of this institute, are clearly reproduced by the presence of necessary definitions of “creditor” and “debtor” in paragraphs a) and b) of the convention on the international recovery (provided from the original source): “a) “creditor” means an individual to whom maintenance is owed or is alleged to be owed; b) “debtor” means an individual who owes or who is alleged to owe maintenance” (convention on the international recovery of child support and other forms of family maintenance, 2007). it is important to note that the main, basic field of application of the convention on the international recovery is the necessary promotion of the recognition and proper fulfilment of obligations by certain persons who are in one country to provide for the financial maintenance namely of minors and one of the parties to an official marriage, who, in turn, are in the territory of another state. however, paragraph 3 of art. 2 “scope” also states the following (provided from the original source): “any contracting state may declare that it will extend the application of the whole or any part of the convention to any maintenance obligation arising from a family relationship, parentage, marriage or affinity, including in particular obligations in respect of vulnerable persons” (convention on the international recovery of child support and other forms of family maintenance, 2007). thus, as we can see, the relatively obvious subjectobject goal of the convention on the international recovery to protect the aforementioned right of disabled persons, including disabled parents, is reproduced, first of all, through fundamental institutional and family factors of family and affinity relations, secondly, this goal is reproduced by the obvious actualization of the factor of physical and social vulnerability of such persons. under paragraph 1 of art. 4 “designation of central authorities” of the convention on the international recovery, a contracting state designates its own central authority to discharge the duties/functions that are imposed by the convention on such an authority. among the numerous detailed general and specific functions of such central authorities of individual states-parties to the convention on the international recovery, in accordance with paragraphs 1 and 2 of article 6 “specific functions of central authorities”, the key ones should be noted: 1) to receive and transmit to each other the applications of legality and necessity of collecting the maintenance payments and appropriate mutual processing of such applications; 2) to initiate or facilitate the institution of proceedings, either criminal or administrative, in respect of such applications; 3) to encourage amicable solutions with a view to obtaining voluntary payment of maintenance, where suitable by use of mediation, conciliation or similar processes; 4) to facilitate the ongoing enforcement of maintenance decisions, including any arrears; 5) to facilitate the collection and expeditious transfer of maintenance payments (convention on the international recovery of child support and other forms of family maintenance, 2007). the extremely important paragraph 2 of art. 34 of the convention on the international recovery also clearly sets out measures that are sufficiently effective, accessible, and widely tested in the world practice to enforce specific decisions under the provisions of this convention, i.e. measures to enforce the collection of the necessary funds from the offender (provided from the original source): “a) wage withholding; b) garnishment from bank accounts and other sources; c) deductions from social security payments; d) lien on or forced sale of property; e) tax refund withholding; f ) withholding or attachment of pension benefits; g) credit bureau reporting; h) denial, suspension or revocation of various licenses (for example, driving licenses); i) the use of mediation, conciliation or similar processes to bring about voluntary compliance” (convention on the international recovery of child support and other forms of family maintenance, 2007). baltic journal of economic studies 159 vol. 5, no. 4, 2019 however, as for the possibility of criminal liability, then returning to the content of paragraph 2 of art. 6 “specific functions of central authorities” of the convention on the international recovery, which accordingly provides for the initiation or promotion by the central authorities of the initiation of proceedings in respect of claims for evasion of maintenance, it is evident that the possibility of initiating criminal proceedings against offenders depends on what kind of liability for committing the offense is provided for by the content of the national law of a particular state-party to the convention on the international recovery. 5. conclusions therefore, relevant norms of the current international law, i.e. mandatory provisions of various sources of modern un law, as well as provisions of international documents of the un of purely declarative, advisory, orienting, moral and other purpose character, within a number of international universal and subjectoriented, specialized conventions, declarations, principles, standard rules, and action programs, clearly affirm and actualize the fundamental, universal socioeconomic right of any person to receive financial, socioeconomic security, a satisfactory standard of living and well-being. this right, in turn, stipulates the legitimate social, extremely important right of a number of the above clearly defined categories of disabled, socially-vulnerable persons to be on regular financial or other similar material maintenance of other persons determined by the content of the relevant norms of national branch legislation. in the context of this article, we have established a relatively clear substantive-spectral correlation between the concepts of such vulnerable, helpless social-group categories as “older persons”, “persons with disabilities”, and “mentally retarded persons”, which causes the presence of a broad socio-physical contextual concept of a disabled person. the rules of the current international law provide for a clear mechanism for the international recovery of funds for the benefit of certain socially-vulnerable persons, for example, disabled relatives and, in particular, incapacitated parents. references: declaration on social progress and development on december 11, 1969. retrieved from: http://www.un.org/ru/ documents/decl_conv/declarations/socdev.shtml (accessed 22 may 2019). declaration on the rights of mentally retarded persons on december 20, 1971 retrieved from: http://www.un.org/ru/documents/decl_conv/declarations/retarded.shtml (accessed 10 may 2019). declaration on the rights of disabled persons on december 9, 1975. retrieved from: http://www.un.org/ru/ documents/decl_conv/declarations/disabled.shtml (accessed 05 may 2019). universal declaration of human rights as of 10 december 1948. retrieved from: http://zakon4.rada.gov.ua/ laws/show/995_015 (accessed 12 june 2019). international covenant on economic, social and cultural rights as of 16 december 1966. retrieved from: http://zakon2.rada.gov.ua/laws/show/995_042 (accessed 04 june 2019). convention on the rights of persons with disabilities on december 13, 2006. retrieved from: http://zakon4.rada.gov.ua/laws/show/995_g71 (accessed 12 june 2019). united nations principles for older persons on december 16, 1991. retrieved from: http://www.un.org/ru/ documents/decl_conv/conventions/oldprinc.shtml.g71 (accessed 17 june 2019). standard rules on the equalization of opportunities for persons with disabilities as of december 20 1993. retrieved from: http://www.un.org/ru/documents/decl_conv/conventions/disabled_intro.shtml (accessed 25 may 2019). convention on the international recovery of child support and other forms of family maintenance on november 23, 2007. retrieved from: http://zakon5.rada.gov.ua/laws/show/995_l12 (accessed 27 may 2019). szmukler, g., & bach, m. (2015). mental health disabilities and human rights protections. glob ment health (camb), 2, 20. basson, y. (2017). state obligations in international law related to the right to an adequate standard of living for persons with disabilities. law democracy & development, 21, 68–83. durieux see, j-f., & mcadam, j. (2004). non-refoulement through time: the case for a derogation clause to the refugee convention in mass influx emergencies. international journal of refugee law, 164, 13. baltic journal of economic studies 125 vol. 6, no. 4, 2020 corresponding author: 1 stepan gzhytskyi national university of veterinary medicine and biotechnologies lviv, ukraine. e-mail: parubchak_io@ukr.net orcid: https://orcid.org/0000-0002-7664-5062 2 stepan gzhytskyi national university of veterinary medicine and biotechnologies lviv, ukraine. e-mail: halynahrynyshyn0802@gmail.com orcid: https://orcid.org/0000-0001-5224-9631 doi: https://doi.org/10.30525/2256-0742/2020-6-4-125-132 features of public administration in shaping strategy of venture investment of business enterprises ivan parubchak1, halyna hrynyshyn2 abstract. the purpose of this study is to define the content of the category “venture investment”, and to establish the relationship between the concepts of “venture investment” and “venture capital”, to analyze the state of venture investment in ukraine and determine its role in innovative development of the economy, to systematize international experience consider the possibility of its adaptation in ukraine. object of research: venture capital in the system of financing innovation processes in the modern economy. the methodological basis of the study is a set of general scientific and special methods of cognition. methods of analysis and synthesis, generalization and scientific abstraction were used in the formation of the conceptual and categorical apparatus. the analysis of approaches to understanding the essence of venture investment, its components was carried out using dialectical and systemic-structural methods. the application of the historical and logical method, induction and deduction made it possible to study the genesis of the theory of economics and enterprise management, the factors of the strategy of development of venture investment of business entities. within the framework of the study of the current state of venture investment, calculation and analytical methods of observation, measurement, analysis and comparison are used. conclusions. based on the above study, we can assume that venture capital is a combination of financial, human and intellectual resources, which with a high level of risk is invested in the development and implementation of high-tech products of companies that are in their infancy and initial development and are not listed on the stock market and in case of success brings its owner a profit that is much higher than the industry average. despite the riskiness of investments, venture investments have a number of attractive prospects and advantages. as world experience shows, venture-backed companies are better prepared to innovate, grow faster and create more jobs in the future. key words: venture investment, venture capital, innovations, investment fund, investments, association, financial institutions, company, startups. jel classification: e22, g24, h83 1. introduction a characteristic feature of the modern economic space of ukraine is the formation of a multi-stage model of innovation. its structuring and institutionalization with the separation of functions, tasks between different business entities allows to reflect the attitude of different types of people to the risk and activities associated with it. the construction of this model and its application in the system of public administration is an urgent and important task today. it is quite difficult for an innovative business entity to function and develop in conditions of turbulence (uncertainty), much more difficult than in a developed market economy. increasingly, the use of modern innovation management brings a huge economic effect to the business entity at relatively minimal cost. but the potential of science and the possibility of its practical implementation are completely different things. economic conditions in ukraine today differ from those of developed economies, so the use of the potential of innovation management should take into account the characteristics, traditions and specifics of the country as a whole, each region or individual entity. in the conditions of unstable macroeconomic and political situation, and as a result, strengthening of deficit of investment resources, which would allow baltic journal of economic studies 126 vol. 6, no. 4, 2020 to increase indicators of efficiency of activity of the enterprises of ukraine, one of long-term tools of realization of financial mechanisms could become venture investment providing financing of new, risky projects or unprofitable companies in order to increase their capitalization. a significant contribution to the development of theoretical and practical principles of venture capital, the functioning of venture capital and its forms, corporate finance was made by foreign scientists: o. ardishvili, d. arom, v. benevolensky, o. dagaev, p. drucker, r . clark, a. karzhauv, e. lebedeva, j. rivkina, o. rogova, i. rudakova, e. ruzavina, o. tkachenko, e. fiaxel, d. frear, r . hofat, n. shekhovtsova and others. world economic studies the problems of venture capital in a developed market economy, particularly, the knowledge economy. in ukraine, the conditions for the development of venture capital are just being formed. theoretical and methodological problems of its formation are reflected in the works of famous domestic economists, among which there are the works of v. andriychuk, o. amosov, v. bondarenko, o. borodina, o. bugrov, m. butko, v. varena, i. goncharenko, i. grishova, a. guley, a. dagaeva, m. demyanenko, i. dvorak, o. zalotov, v. onegina, i. dakhno, o. ivanytska, o. krasnorutsky, m. klapkiv, y. lupenko, o. mityai, v. martynenko, v. margasova, l. naumova, a. peresada, p. sabluk, o. ulyanchenko, o. chechelyuk, l. chernyuk, s. shkarlet and others. however, the problems of formation and use of venture investment in the process of transition of processing enterprises to investment and innovation model of development require further research and finding ways to solve them. 2. research of the content of the category “venture investment”, by establishing the interdependencies between the concepts of “venture investment”, “venture capital” the term “venture” means “risk”, “risky business”, “dare”, in general, all its definitions are somehow related to courage and adventure. the concept of venture capital can be interpreted in different ways. some understand it as only a high-risk investment aimed at financing risky innovative high-yield projects in promising industries for an average of 3 to 5 years or even business ideas. others prefer a broader interpretation, which includes any financing for the company’s rapid growth. thus, in this case, venture capital finances not only the formation of start-up capital, but also the next stages of formation of an innovative enterprise. venture capital is a link between investment and innovation as components of economic growth, a source of capital for companies whose rapid growth and development constantly requires additional foreign investment (usually small and medium-sized enterprises). the main difference from traditional investing is that financial assets are provided to the company without any guarantee of provision of movable or immovable property or savings. the only guarantee is the relevant part of the shares, less than the controlling stake of the existing or just created company, scilicet venture capital is provided to the company for a promising idea. internal venture refers to specialized units created by large corporations, whose function is to select and implement risky ideas and projects. the purpose of an internal venture is to find new ideas, technologies, objects and inventions. the corporation, as a rule, gives internal ventures legal and budgetary independence, the right to form staff (vashchenko, kuzmich, syzov, 2010). an external venture is considered to be small independent science-intensive firms founded by the authors of the idea – scientists, engineers, inventors – and a venture entrepreneur who try to implement new advances in science and technology with the expectation of material gain (velyka, 2012). the peculiarity of venture investing, which distinguishes it from other strategic investors, is also that the venture capitalist does not seek to acquire a controlling stake in the company, and therefore does not seek to control the company that falls within his or her interests. the venture investor hopes that the company will use his or her money as a financial instrument to ensure the rapid growth and development of the business, realizing that the implementation of science-intensive projects for various reasons does not always end with the expected end results. wellknown venture capitalist tim draper noted: “venture business is when 10 companies invest, half of them go bankrupt, three return, one gives a 10-fold increase, and another profit is 100 times higher than the investment” (zinchenko, ilchuk, et al., 2004). the expectation of making very high profits also forces the venture capitalist to take exorbitant economic risks. by studying the economic literature, one can obtain numerical definitions of venture capital. each author gives his or her own interpretation of this concept, the term “venture capital” in each country has its own characteristics, associated primarily with the lack of strict state regulation of venture capital. venture capital, as defined by the european private equity and venture capital association (evca), is equity capital provided by professional financial companies that is invested in start-up innovative enterprises that develop and demonstrate the potential for significant growth (the bvca private equity and venture capital report on investment activity, 2012). the canadian venture capital and private equity association (cvca) proposes the following definition: “private equity” is a general term that reflects the totality of all forms of equity and quasi-equity investments in the market. in a mature (developed) equity market, baltic journal of economic studies 127 vol. 6, no. 4, 2020 there are usually three main segments: buyout capital, mezzanine capital and venture capital. in turn, venture capital is defined as a specialized form of private equity, which is characterized mainly by high-risk investments in new or young companies seeking to grow in technology and other industries that create high added value (weiss, 2000). the australian private equity and venture capital association limited (avcal) interprets the concept of venture capital as capital that has independent management and is invested in private companies with high growth rates. experts of the british private equity and venture capital association justify the essence of venture capital as an investment in the share capital of unregistered companies, which are in both initial and later stages of development, when the acquisition of the company requires significant financial resources. the russian federal agency for science and innovation believes that venture capital is a long-term investment, which is realized during the sale of its share in the company through an ipo (initial public offering of shares on the stock market), scilicet the main thing to increase the price of the newly created company and sell it profitably in 3-5 years (all about marketing, 2000). i. dvorak, j. kochyshova and p. prokhazka emphasize the orientation of venture capital to high risk and the implementation of scientific and technological innovations, based on empirical analysis of venture capital in the anglo-saxon model countries (the usa, canada, the uk) and innovation-oriented capital in western europe (krasovskaya, 2013). a. lapko reviewed the role and functions of venture capital in solving problems of formation of infrastructure of innovative economy and the acceleration of structural changes in favor of high-tech industries, paying special attention to the peculiarities of the establishment and functioning of venture companies in ukraine and factors that hinder its development, justified ways to speed up the formation of venture capital (lapko, 1999). based on the above study, we can assume that venture capital is a combination of financial, human and intellectual resources, which with a high level of risk is invested in the development and implementation of high-tech products of companies that are in their infancy and initial development and are not listed on the stock market and in case of success brings its owner a profit that is much higher than the industry average. like any activity related to stocks, venture capital investments carry a certain risk, which is manifested, first of all, in the following: 1. this type of investment is directed to enterprises whose shares are not listed on the stock exchange. that is, investments are not directed to those companies that are already profitable in the market, having a certain customer base, and young but promising companies that are potentially able to increase the money invested in them. 2. venture capital investments are invested for a long time, and the investor has no opportunity to return their money before its completion. 3. typically, such investments are directed to companies that have some “highlight”, an innovation that will either bring a profit, or fail miserably. despite the riskiness of investments, venture investments have a number of attractive prospects and advantages. according to world experience, venturebacked companies are better prepared to innovate, grow faster and create more jobs in the future. 3. trends in venture business development in ukraine, its dynamic characteristics in order to establish an innovative model of economic development and ensure the expanded reproduction of innovation processes, systemic problems must be solved, including those related to the financial support of innovation processes, a key place among which should be occupied by venture investments and venture capital market development. according to the decree of the president of ukraine “on investment funds and investment companies” dated february 19, 1994, the first domestic venture fund was the ukraine fund, managed by claflin capital management (boston, usa). a large share of investment in this fund was made by the european bank for reconstruction and development. since the beginning of its activity in ukraine, the bank has invested more than 22.5 million usd in 31 ukrainian enterprises. it was formed for 10 years in the amount of 40 million usd especially for investments in ukraine. among the largest investors of the fund there have been ebrd, ifs, bankboston, commercial capital-athens, creditanstalt-vienna. the fund invests in private enterprises operating in the field of production of consumer goods and services in the domestic market. the investment strategy provides an initial contribution of 250-400 thousand dollars with an increase in investment, if successful, to 1 million usd. the return on investment in the fund is about 40% per annum (public administration, 2002). the beginning of international venture investment in ukraine is considered to be 1993, when the tokyo summit between the governments of the g7 and the european union adopted an agreement to support newly privatized enterprises under the state program of mass privatization, under which about 15,000 small and medium enterprises worked. the creation of venture funds in ukraine can be divided into several stages. the first period is considered to be 1992-2001, which is characterized by the creation and operation of 7 venture funds in ukraine through foreign investment. for the period up to 2004, the total baltic journal of economic studies 128 vol. 6, no. 4, 2020 investments of these funds amounted to more than 127.5 million usd in more than 106 companies. in 1994, mass privatization began in ukraine. to service this process, investment companies and funds were actively created, which, according to the decree of the president of ukraine “on investment funds and investment companies”, could attract only privatization property certificates, which were later invested in auctions of the state property fund of ukraine. 1994 is considered the beginning of the development of mutual investment institutions. since 1994, another venture fund “western nis enterprise fund” with a capital of 150 million usd has been operating in ukraine, and in 1998, it began to operate on the black sea fund. these two funds are still operating successfully. a large share of funding from these funds is provided by the european bank for reconstruction and development. in the same year, evroventures ukraine (capitalization 30 million usd) was established and began operations in 1999. between 1994 and 1996, 11 regional venture funds were gradually established in partnership with the european bank for reconstruction and development (ebrd), which provided 310 million usd. us equity financing in kyiv, and donor countries (france, germany, italy, japan, usa, finland, norway and sweden), which provided 207 million usd in unpaid loans. thus, in ukraine until 2005, only three financial institutions (western nis enterprise fund, euroventures, and ukraine fund) operated on a permanent basis in the field of venture financing, which almost completely ruled out the possibility of competition between them. venture funds in ukraine became more active after the adoption of the law of ukraine “on joint investment institutions” by the verkhovna rada in 2001. the second stage of development of venture funds is considered to be 2001. according to the ukrainian investment business association, in 2004-2010, the number of venture funds increased 13.9 times and the value of net assets increased 63.1 times, the growth rate of these indicators slowed more than 2 times during this period, the largest slowdown was observed after the global financial crisis in 2008. the concept of “venture business” is included in the laws and acts of ukraine, namely – in the decisions of the state commission on securities and stock market no. 8 and 9 dated january 8, 2002, in the resolution of the verkhovna rada “on compliance with legislation on scientific and technical development potential and innovation activity in ukraine” dated june 16, 2006, however, the essence, functions, principles of activity of venture funds and venture firms have not been defined yet. relations in this area are also partially regulated by the laws of ukraine “on investment activity”, “on innovation activity”, “on scientific and scientific technical activity”, “on scientific and scientific technical expertise”. in december 2005, draper fisher jurvetson (dfj), which includes 20 funds with a total investment capital of more than 3 billion usd, opened the dfj nexus technology venture fund in ukraine. over the next 10 years, the fund plans to raise from 50 to 100 million usd for the development of high-tech companies in the countries of the former ussr . we consider the period up to 2008 to be the third stage of venture business development in ukraine. in 2008, the state agency for investment developed a draft law of ukraine “on venture funds for innovative development”. for the first time in ukraine, the bill attempts to define the legal basis for the creation of a new financial instrument that would ensure the direction of investment flows into innovative sectors of the economy. this document states the following: the founders and participants (shareholders) of the venture fund of innovative development may be individuals and legal entities, residents and non-residents, as well as the state and local communities; venture capital funds can invest in corporate rights and debt obligations of innovative enterprises; joint ventures established to implement technology parks and science parks; venture capital assets of innovative development may consist of corporate rights, debt obligations, real estate and intellectual property rights; venture funds of innovative development invest in innovative programs and projects, new knowledge and intellectual products, production equipment and processes, infrastructure of production and entrepreneurship, etc. the fourth stage is the post-crisis year of 2009, which is characterized by a slowdown in the growth rate of join investment institution assets. the next period of venture investment development from 2010 to 2013 was unfavorable for the ukrainian stock market and asset management activities. the realities were the general deterioration of the investment climate in the country, the lack of clear and stable rules of the game, the shortage of reliable financial instruments, unequal conditions for taxation of investment funds and bank deposits, tighter regulations and increased fiscal pressure. 2014 was one of the most difficult years for the ukrainian sector of asset management of institutional investors, as well as for the whole country, in the previous history, political instability, annexation of crimea, military actions in the east, devaluation of assets, numerous attempts to fill the budget and change mechanisms for taxing the activities of collective investment institutions, the outflow of investors, but even such negative factors were not as destructive as might be expected. at the end of 2014, the assets of venture companies amounted to 202.85 billion uah. baltic journal of economic studies 129 vol. 6, no. 4, 2020 since 2014, the ukrainian venture and private capital association (uvca) has been creating a positive image of ukraine in the world and promoting ukrainian startups, uniting about 50 venture funds, direct investment funds, accelerators, incubators and non-profit institutions. the next stage of venture business development is 2017, which became a record in the history of ukrainian venture business – startups raised 258.6 million usd, which is three times more than in 2016. this confirms the fact that ukrainian startups create highly competitive products that can meet the needs of consumers around the world. a striking example is the grammarly application, an online grammar checker service that raised 110 million usd. it should be noted that in 2017, the venture market had 16 sales, while in 2016 there were only 6. this is a positive sign for investors. in recent years, we have seen a steady growth of the ukrainian investment market. although the covid-19 outbreak has made some adjustments to investor plans and startup development, understanding the trends of 2019 will be useful for investment market players to manage expectations, support and grow their business in the new reality. for the first time, the volume of investments in ukrainian startups and it companies reached half a billion a year. the total amount of venture investments in ukrainian it companies reached 510 million usd, which is one and a half times higher than the maximum in 2018. the number of transactions in 2019 was almost the same as in 2018: 111 transactions compared to 115 in 2018. in 2019, the volume of m&a operations (mergers and acquisitions) increased 18 times. 15 m&a deals amounted to 460 million usd, while in 2018 there were 7 deals worth 25.2 million usd. despite the fact that in 2019 the country went through elections, investment in a number of industries continued to grow. in particular, in areas related to software development, hardware products and online services. and although 2020 makes its adjustments, the report shows that ukraine really has significant potential for investment. as soon as the economic situation in the world stabilizes, ukraine will be able to boast of new investment growth. the analysis of venture activity of the abovementioned foreign companies in ukraine showed that, firstly, they do not adhere to the main goal of venture business – investing in the search and implementation of “new, innovative idea”, but reduce their activities to investing in profitable and almost risk-free economy. secondly, all possible surplus profits created in ukraine are outside it, because there is not even a share of ukrainian money in these funds (deineko, tsymbalyuk, romanchyk, 2000). in ukraine, there are a number of factors that can contribute to the development of venture capital, namely – the availability of cheap highly qualified and creative staff; convenient geographical location; large reserves of raw materials; powerful assets abroad owned by residents of ukraine, etc. even the best of the investment projects offered in ukraine today are not ready for venture investment. attracting funds from ukrainian sources is extremely difficult. looking at traditional sources, we can note either a very weak development of this sector of the economy, or unfavorable legislation and lack of commercial interest due to high risk. 4. evaluation of international experience in developing, supporting and stimulating venture investment and the possibility of its adaptation to the conditions of the ukrainian economy venture capital is one of the oldest types of capital. it comes from the moment when a person who came up with an innovative business idea asked his or her relatives or friends to invest a certain amount of money in his or her business, offering part of the profits in the future. americans jokingly say that “sources of investment in a new business can be three “f ”: family, friends, fools (oliver, 1996). significant venture capital has been used to finance high-risk projects since the middle ages. during the great geographical discoveries, the owners of large capitals provided money to travelers and resourceful entrepreneurs. today there are 2 markets for venture capital: the first – the us and canadian markets, the second – europe. of course, the european market is understood as the market of western europe. the markets of southeast asia, israel, brazil, india and australia are also considered promising. experts differ on china’s potential, but we believe it is promising and needs more in-depth analysis and research. their differences can be traced in the following areas: first of all, in the role of the state in innovation processes; by sectors of the economy in which venture funds invest; by venture capital objects. in europe, venture entrepreneurship began to develop actively in the early 80s of the twentieth century, although, of course, the practice of risky investing in european countries existed before. the dynamic development of this industry is largely due to the presence of more than twenty years of experience in american venture business. in particular, the main stages of infrastructural development of the european venture business largely repeat the american experience. in europe, the state takes an active position in the venture business, it is expressed in the following: the state acts as a direct investor in small venture companies; with the help of tax policy instruments a favorable climate is created for the operation of venture firms. thus, in the uk for venture firms reduce income tax (25%), there is a system of insurance, written off the baltic journal of economic studies 130 vol. 6, no. 4, 2020 cost of research and development work on the cost of production (in any amount). in germany, there is a tax rebate on private investment in research and development (up to 7.5%). in france, funds invested in risky projects are not taxed. financing of scientific and technical works was carried out at the expense of the state budget at the level of 0.74% of the gross domestic product in 2010. for comparison, in ukraine the funding of scientific and scientific-technical works is about twice less, which is only 0.34% of gross domestic product (european venture capital assosiation). in europe, venture financing emerged in the 1970s and 1980s and, with rare exceptions, is a purely national phenomenon. only british venture capital funds have branch networks across europe. other european venture capital funds that have opened offices outside their home country consider it appropriate to work with either the united states or asia. the european venture capital association (eaoc), established in 1983, publishes annual reports describing the activities of national venture capital in different countries. venture capital in europe, based on ewc data, is most developed in the united kingdom, germany and france. quantitative data on a slight decrease in venture capital due to the saturation of the internet market. in the uk, several regimes of tax benefits have been developed (nvca yearbook, 2016): – the enterprise investment scheme provides for a reduction in the investor’s income tax by an amount equivalent to 20.0% of the investment. the company must be paid at least 500.0 gbp, and the maximum amount of investment, for which a tax benefit is possible, which is 500.0 thousand gbp. income from the sale of shares or stakes in the company is also not subject to capital gains tax. there is a tax mechanism to compensate for investor losses. income from the sale of shares after the expiration of five years is also not taxable; – reinvestment relief (reinvestment tax benefits) – deferrals of tax payments are provided subject to reinvestment of income received by the investor within three years from the date of investing in shares of companies not listed on stock exchanges; – regional venture capital funds (rvcf) – providing small and medium enterprises with venture financing in the amount of up to 500.0 thousand gbp on a commercial basis. each such fund is managed by a management company that has experience in the private sector and has been rigorously selected. the volume of funds averages 30.0 million gbp. about 50.0% of the funds of each regional fund belong to the state or the european investment fund (a division of the european investment bank). regarding payments, the “first victim” rule applies in favor of the fund’s private investor. in finland, the catalyst for the development of venture capital was the state seed investment fund sitra . the average annual investment is 30.0 million eur . there is also a “fund of funds” finnish industry investment in finland. the catalyst for the development of venture capital in israel was the state fund yozma, which co-invested in privatestate venture funds under the management of private management companies (usually foreign). yozma’s share in the fund reaches 40.0%. in 1995, germany developed a scheme called beteiligungskapital fur kleine technologieunternehmen, which financed small firms producing innovative products or services together with private sector companies. austria is also setting up an “investment innovation fund” to increase funding for start-ups by providing funds to private funds. the european investment fund, established in 1994 with the financial support of the european commission, invests in stocks of small and medium-sized enterprises with high growth potential. loans offered by governments, often unavailable from other sources, are often provided on more attractive terms than private loans. they may have lower interest rates or longer payback periods. they can even be irreversible. the governmentfunded vaekstfonden (business development credit financing program) in denmark, for example, provides loans to small firms to develop technology-oriented projects. in this case, in case of failure, the cancellation of debts is provided. in the netherlands, the technical development credit scheme provides for the issuance of ten-year loans to small companies, which may not be repaid in the event of technical or commercial failure. in sweden, the government is the largest shareholder in almiforetagspartner ab, which provides 6-10-year interest-free loans to start-ups for the first two years. in the european countries, the state is the driving force of venture business and a stimulus, in contrast to private capital, which dominates in north america. currently, the venture financing mechanism is the most developed in the united states, due to the large number of small high-tech firms in this country and the development of the stock market. an important feature of venture investment in the united states is that significant amounts of money are invested in the development of high-tech companies in the early stages of development (up to 30%), while in europe this figure is twice lower. it is worth noting that a characteristic feature of business in the united states is its focus on innovative enterprises in the field of high technology. statistics show that suppliers of more than 60% of major innovations of the 20th century are venture firms. this is how the personal laptop, color photo paper, electrography, vacuum lamps, microprocessor, etc. appeared. the world leaders in the computer industry – microsoft, intel, apple computers, compaq – gained their current position largely due to venture capital in the early stages of its development. baltic journal of economic studies 131 vol. 6, no. 4, 2020 in the united states, at the initial stage of development of the national venture system, specialized small business investment companies (sbic) were established. sbic’s private investors have been given significant tax breaks, as well as certain government guarantees and relatively cheap loans. several billion dollars are received annually in “sowing” projects under the state support programs sbir and sttr . in the american model of venture financing, the main purpose of the state is to integrate and promote the interaction of industrial and scientific sectors. the state is assigned the role of a “night watchman”, which does not significantly interfere in the promotion of the venture project and performs legislative regulation of venture processes, as well as stimulates the development of the venture industry. consider the main means of stimulating the development of venture business in the united states: 1) preferential taxation of venture firms; 2) no rental tax; 3) guaranteed return of private capital invested in venture business by the small business administration; 4) mandatory involvement of venture firms in the implementation of major innovation projects in accordance with us law. obviously, the venture capital industry in europe differs from its american counterpart in two main respects. firstly, unlike the united states, which invests in venture capital in new technologies, in europe, venture capital is invested mainly in developed industries, transport and communications. secondly, the main institutional investors in the european venture capital (excluding the united kingdom and poland) are banks. and in the united states – it is the pension funds, insurance companies, sponsors and individuals. in the regional aspect, the ratio of venture capital in the us and western europe is about the same. however, western europe is represented by 17 countries with a population one and a half times the population of the united states, and if we compare the two regions in terms of venture capital per capita, the leadership of the united states is unconditional. there is an urgent need for ukraine to develop a competent state policy to stimulate venture business, taking into account the leading foreign experience. the state should share the risks of innovation with business and improve legislation to stimulate innovation, modes of operation of technology parks, the autonomy of the ukrainian universities. today, the development of the venture industry in ukraine is constrained by a weak legal framework, underdeveloped stock market, nontransparency of financial activities of companies, lack of guarantees for investors. while the decisive role in the development of the venture industry in the united states and europe was played by public policy measures to create favorable conditions for the development of venture funds. it makes sense for the state to actively promote the development of venture business, because the benefits that society receives from venture capital support programs are not limited to the profits of venture investors. venture investments: 1) contribute to the development of new leading scientific and technical developments to create competitive high-tech products and technologies; 2) create new jobs, helping to reduce unemployment and increase welfare in society, which is of strategic importance for long-term growth of the national economy. 5. conclusions analysis of the main trends of venture investment, as well as the study of the current state of venture processes in ukraine and in the world provides an opportunity to draw meaningful conclusions. venture capital investment plays a special role in ensuring the attraction of long-term, high-risk capital, which has a predominant focus on the intensification of scientific, technical and innovative activities, which is the key to economic development of the country. for ukraine, the development of venture investment is an opportunity not only to stabilize the economy, but also to provide it with significant growth rates. ukraine has rather low volumes of investment, which is caused by the lack of trust in investment funds in the population, the instability of the economic situation, in which it is very difficult to predict the future outcome of investment. systematization of venture capital functions allowed to highlight the following features of its formation in ukraine: 1) the need to accumulate financial resources, which allows to attract sufficient investment in knowledgeintensive innovative entrepreneurs and promising innovative projects that, according to the venture investor, will pay for itself investment; 2) increasing the rate of return in the venture business compared to the average in the economy allows to attract foreign venture capital in this area, which acts more prudently and aggressively, helping selected innovative enterprises to increase capitalization and create a positive image in the market; 3) the formation of a more progressive production structure by increasing the share of enterprises with a high level of value added, and, accordingly, additional revenues to the budget; 4) providing financial resources to small and medium-sized innovative enterprises, which in the current geopolitical situation is necessary and vital, because, given the severe budget deficit and lack of own funds to develop and implement their results, access to other sources of financial resources for them almost impossible. prominent examples for the country are the united states and europe, where this type of financing for enterprise development is very common. the united states is characterized by a growing trend of venture capital investment in the economy, and in this sector there are many types of investors and investment objects. baltic journal of economic studies 132 vol. 6, no. 4, 2020 references: vashchenko, i. v., kuzmich, o. i., & syzov, a. i. 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(1996). benchmarking product development. working paper, judge institute of management studies, university of cambridge. european venture capital assosiation. available at: http://www.evca.org nvca yearbook (2016). national venture capital association. available at: http://nvca.org/research/statsstudies baltic journal of economic studies 183 vol. 5, no. 5, 2019 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. e-mail: chaplynska_yu@ukr.net 2 odessa national maritime university, ukraine. e-mail: piterskavarvara@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-5-183-188 some economic aspects of franchising in the usa yuliia chaplynska1, varvara piterska2 abstract. the purpose of the article is to study the economic aspects of franchising in the usa. the subject of the study is some economic features of franchising activity in the usa. research methodology. the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method allowed us to investigate the definition of franchising in the usa. comparative legal method was used to compare legislative approaches to this issue. the statistical method was used to establish data that reflects the effectiveness of franchising activities. the method of system analysis helped to find out in which areas of economic activity franchising is most demanded. interpretation of the content of the us legal acts governing issues related to franchising was realized with the help of the normative-dogmatic method. the system-structural method was used to study franchising in the usa as a single entity (system) with the coordinated functioning of all its elements. methods of analysis and synthesis helped to study some economic aspects of the studied category to formulate further conclusions. practical application. the positive experience of the usa in regulating issues related to franchising can be used for making appropriate changes to the ukrainian legislation. since franchising had originated and developed in this country, it is advisable to identify the key economic and some legal features of this area of business activity. correlation/originality. this scientific work is the first research in ukraine devoted not only to the general issues of franchising activity regulation, but specifically to the economic features of franchise activity in a separate country (in the usa). key words: franchising, economic indicators, franchisor, franchisee, pre-contractual disclose of information, the ftc franchise rule, fdd. jel classification: f23, m21 1. introduction the beginning of the 21st century is marked by a rapid development of information technology, which inevitably has caused the emergence of new institutions (drozd, inshin & mogilevskiy, 2018). one of these institutions is franchising as the new prospective area of business activity. franchising, as a way of doing business, takes international forms in various industries. today, many large enterprises create franchising companies in many countries. in just a few years, the franchise market has increased by several times. in many countries, this technology has given impetus to the development of the economy. the rapid growth of such sectors of the economy as food industry, electronics, automotive industry clearly demonstrates the effectiveness of franchising. the international franchise system creates favorable conditions for companies to enter the domestic markets of other countries by introducing their products through franchise firms. franchising has become one of the main distribution channels for products and services in developed economies, where the image and reputation can determine the market share. franchising is found in a wide variety of industries, such as fast food chains, retail sales of computer equipment, real estate services, car rental and maintenance stations, and these are just a few of the examples. the usa remains a leader in the global franchising industry. franchising and distribution continue to make up a large part of the united states economy. according to the franchise times, the top 200 largest franchise systems on its rankings had total annual sales in 2013 of $590 billion. among these systems are the likes of mcdonald’s, kentucky fried chicken, 7-eleven, subway, burger king, pizza hut, and hertz. w hile these systems dominate the franchise landscape within the united states, they are part of the united states’ larger franchise industry, which is estimated to consist of over 2,500 franchisors and, in 2014, nearly 770,000 franchise establishments. this size and breadth place the franchise industry as one of the united states’ largest consumers and purchasers of baltic journal of economic studies 184 vol. 5, no. 5, 2019 commodities, sellers of other brand-name products, and employers. the franchise industry within the united states shows no signs of slowing down. since the recession years of 2007–2008, the franchise industry in the united states has continued to grow in a number of economic categories. in its recent franchise business economic outlook for 2015, the international franchise association (ifa), one of the leading franchise industry’s trade associations, noted the consistent growth of the franchise industry since 2011 and projected that the growth of the output of franchise businesses would accelerate to 5.4% in 2015 and that the franchise sector’s gross domestic product would increase by 5.1% and exceed the growth of the united states’ gross domestic product. as recently as february 2015, the united states reportedly added 29,000 franchise jobs across various industries (märzheuser-wood & baggott, 2015). 2. literature review and research methodology the research is based on the use of general scientific and special-scientific methods and techniques of scientific knowledge. the dialectical method allowed us to investigate the definition of franchising in the usa. comparative legal method was used to compare legislative approaches to this issue. the statistical method was used to establish data that reflects the effectiveness of franchising activities. the method of system analysis helped to find out in which areas of economic activity franchising is most demanded. interpretation of the content of the us legal acts governing issues related to franchising was realized with the help of the normativedogmatic method. the system-structural method was used to study franchising in usa as a single entity (system) with the coordinated functioning of all its elements. methods of analysis and synthesis helped to study some economic aspects of the studied category to formulate further conclusions. the study of franchising as a type of international business was undertaken by n. v. bezrukova, l. v. voroniak, t. m. hryhorenko, n. m. hrushchynska, o. m. kolodiziev, o. ye. kuzmin, a. m. mahomedova, v. ye. sakharov, v. s. tatarinov, t. m. tsyhankova, a. v. tsyrat, i. m. shkola and others. however, this would be the first study in ukraine devoted to franchising in the usa, and in particular, to the economic features of franchising in this country. the concept of franchising is quite new for ukraine, since it is not very common way of doing business in our country. this is due to the fact that the amendments to the commercial code of ukraine, which enshrined the concept of commercial concession agreement (franchising), had been introduced only in 2015. there is no separate law that would regulate the issue of franchising in ukraine, accordingly, everyone understands this concept in their own way, and therefore the possibility of making mistakes and inaccuracies when concluding franchise agreements is not excluded. consequently, the purpose of this article is to study the economic aspects of franchising in the usa: the country, which is the undisputed leader in the international franchise sector. 3. presentation of the main material the first franchise of the model, which is currently in use appeared in the united states in 1850 by the aid of singer sewing machine company, which set up a sewing machine maintenance network. the first franchise agreement was also concluded in the u.s. by howard johnson, who in 1932 decided to create a chain of his corporate restaurants. by the end of 1936 the number of such restaurants was 41. in 1950s the interest in franchising was growing significantly, its concept was taken over by an increasing number of enterprises in various sectors of the economy. for example, mcdonald’s, which is probably the largest franchisor in the world, was founded in california in 1948. in 1954, it sold its first franchise, and now has more than 30,000 restaurants of this brand in 118 countries. in 1960 the international franchising association (ifa) was established in washington to protect and promote the interests of the franchise industry. this association has adopted its own code of ethics, the main purpose of which is to regulate the relations, which arise in the franchising activities, as well as to introduce best practices for their regulation. although the code is not specifically designed to deal with each situation, it contains general rules, which will help to avoid problems or to resolve conflicts. membership in the ifa is optional but desirable; the majority franchisors are the members of this organization. ifa provides its members with up-to-date information on franchising activities, including the latest legal developments, information on the opportunities and benefits of this kind of business activity. many franchisees and franchisee associations are members of the american association of franchisees and dealers (the “aafd”). the aafd is organized by the formation of exclusive trademark chapters representing all of the franchised systems for which we have a significant number of members. the association’s trademark chapters provide a crucial service of helping franchise systems throughout the united states develop consensus decisions within their franchise systems and to promote more equitable franchise relationships which exhibit the aafd’s goal of total quality franchising. the aafd has formed our exclusive trademark chapters for more than 60 franchise systems, with the goal of having an affiliated chapter for every franchise system in the usa (american association of franchisees and dealers). in 1996 the aafd unveiled the first ever balanced standards of fair franchising practices for the baltic journal of economic studies 185 vol. 5, no. 5, 2019 franchising community. franchise buyers now have objective criteria by which to judge a franchise opportunity. the aafd’s fair franchising standards also serve as the basis for accrediting forward thinking franchisors who recognize that aafd endorsement of their franchising practices can pay enormous dividends in the franchising marketplace. over the past 16 years the aafd has promulgated over 140 fair franchising standards and commentary to give guidance to fair and balanced franchise agreements and relationships. the aafd fair franchising standards are now published in both print and kindle editions and are available worldwide (american association of franchisees and dealers). nowadays united states franchised business directly accounts for more than 733,000 establishments that support nearly 7.6 million direct jobs, $674.3 billion of economic output for the u.s. economy and 3 percent of gross domestic product. franchising had not only emerged in the usa, but has found success across virtually every culture on earth. because america is the world’s most mature and sophisticated franchise market, use of the franchise model internationally is a competitive advantage for u.s. exports, agriculture, manufacturing, and supply chains. according to the u.s. bureau of economic analysis, franchise fees have an overwhelmingly (34 to 1) positive impact on america’s trade balance. the international growth of franchises acts as a significant export multiplier, with many other u.s. goods and services flowing through the door opened by the franchise agreements and further driving the u.s. employment (u.s. commercial service, 2018). the issue of franchising in the usa is regulated at both the federal and state levels. at the federal level, the issue under study is regulated by the ftc franchise rule 16 cfr part 436. the franchise rule gives prospective purchasers of franchises the material information they need in order to weigh the risks and benefits of such an investment. the rule requires franchisors to provide all potential franchisees with a disclosure document containing 23 specific items of information about the offered franchise, its officers, and other franchisees. according to paragraph (h) of §436.1 “definitions” franchise means any continuing commercial relationship or arrangement, whatever it may be called, in which the terms of the offer or contract specify, or the franchise seller promises or represents, orally or in writing, that: (1) the franchisee will obtain the right to operate a business that is identified or associated with the franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark; (2) the franchisor will exert or has authority to exert a significant degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation; and (3) as a condition of obtaining or commencing operation of the franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate (the franchise rule). by virtue of the supremacy clause in the united states constitution, the ftc rule, which is focused primarily on disclosure of material facts, applies in each of the 50 states, the district of columbia, and all u.s. territories. in addition to the ftc rule, 24 states have their own franchise disclosure and relationship laws (märzheuser-wood & baggott, 2015). at the state level, there is no uniform legal definition of a “franchise”. rather, the states define “franchise” in several different ways. for example, in california, illinois, indiana, iowa, maryland, michigan, north dakota, oregon, rhode island, virginia, washington, and wisconsin, a business arrangement qualifies as a “franchise” if, under the terms of the agreement: (1) a franchisee is granted the right to offer, sell, or distribute goods or services, under a marketing plan or system prescribed or suggested in substantial part by a franchisor; (2) the operation of the franchisee’s business pursuant to such plan or system is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and (3) the person granted the right to engage in such business is required to pay to the franchisor or an affiliate of the franchisor, directly or indirectly, a franchise fee of $500 or more. a second group of states vary from the model by identifying a “community of interest” as an element rather than a “marketing plan” (e.g., hawaii, minnesota, mississippi, nebraska and south dakota follow this model). a “community of interest” means a continuing financial interest between the franchisor and franchisee in the operation of the franchise business. a third group of states, including connecticut, missouri, new york and new jersey, use “two-pronged” definitions of a “franchise” (contrast this with the “three-pronged” federal definition) (rosen, salis & karol, 2019). the law does not impose any restrictions on the franchisor’s organizational form, but the most widespread organizational form in the usa are the corporation and the limited liability company (“llc”). the choice depends on the legal, financial and tax requirements of the franchisor. however, a limited liability company is currently the preferred form of business because it offers franchisors a number of benefits. for example, there are fewer formalities in management, flexibility in revenue sharing and the ability to transfer assets from a legal entity. unlike corporations, llcs: (1) can have an unlimited number of domestic or foreign members with different classes of ownership and who can (if they elect so) baltic journal of economic studies 186 vol. 5, no. 5, 2019 manage the llc’s business affairs; and (2) are not subject to strict corporate governance requirements, such as scheduling regular owners’ meetings and maintaining corporate minute books. for taxation purposes, llcs are treated as pass-through entities, unless they elect to be taxed as a c corporation. therefore, all the profits and losses of the llc pass through the business to the llc members. the members report these profits and losses on their personal tax returns; thus, the llc does not pay federal income taxes; however, some states do charge the llc itself a tax. therefore, double taxation is avoided (rosen et al., 2018). us franchisors typically use a base unit franchise structure in which the franchisor grants the franchisee one franchise agreement for each franchised unit. franchisors can combine the unit franchise structure with a multi-unit structure, most typically an area development or area representation structure. many us franchisors use master franchise agreements when expanding internationally. they contract with a local entity (master franchisee) to develop the franchisor’s brand in a particular geographic area according to an agreed schedule, through unit franchise agreements entered into between the master franchisee and its affiliates or third parties (woods & hurwitz, 2018). there is a statutory obligation to disclose information before concluding a franchise agreement in the usa. thus, in accordance with paragraph (d) of §436.1 of the franchise rule “disclose” means to present all material facts accurately, clearly, concisely, and legibly in plain english. all information to be provided should be arranged in a single document, which is called “franchise disclose document”. this document is provided at least 14 calendar-days before signing a binding agreement with or making any payment to the franchisor or an affiliate in connection with the proposed franchise sale. the fdd contains 23 specific items, which the franchisor should disclose to the potential franchisee: item 1: the franchisor and any parents, predecessors and affiliates. this section provides a description of the company and its history. item 2: business experience. this section provides biographical and professional information about the franchisors and its officers, directors, and executives. item 3: litigation. this section provides relevant current and past criminal and civil litigation for the franchisor and its management. item 4: bankruptcy. this section provides information about the franchisor and any management who have gone through a bankruptcy. item 5: initial fees. this section provides information about the initial fees and the range and factors that determine the amount of the fees. item 6: other fees. this item provides a description of all other recurring fees or payments that must be made. item 7: initial investment. this item is presented in table format and includes all the expenditures required by the franchisee to make to establish the franchise. item 8: restriction on sources of products and services. this section includes the restrictions that franchisor has established regarding the source of products or services. item 9: franchisee’s obligations. this item provides a reference table that indicates where in the franchise agreement franchisees can find the obligations they have agreed to. item 10: financing. this item describes the terms and conditions of any financing arrangements offered by the franchisor. item 11: franchisor’s assistance, advertising. computer systems and training. this section describes the services that the franchisor will provide to the franchisee. item 12: territory. this section provides the description of any exclusive territory and whether territories will be modified. item 13: trademarks. this section provides information about the franchisor’s trademarks, service and trade names. item 14: patents, copyrights and proprietary information. this section gives information about how the patents and copyrights can be used by the franchisee. item 15: obligation to participate in the actual operation of the franchise business. this section describes the obligation of the franchisee to participate in the actual operation of the business. item 16: restrictions on what the franchisee may sell. this section deals with any restrictions on the goods and services that the franchisee may offer its customers. item 17: renewal, termination, transfer, and dispute resolution. this section tells you when and whether your franchise can be renewed or terminated and what your rights and restrictions are when you have disagreements with your franchisor. item 18: public figures. if the franchisor uses public figures (celebrities or public persons), the amount the person is paid is revealed in this section. item 19: financial performance representations. here the franchisor is allowed, but not required, to provide information on unit financial performance. item 20: outlets and franchisee information. this section provides locations and contact information of existing franchises. item 21: financial statements. audited financial statements for the past three years are included in this section. item 22: contracts. this item provides of all the agreements that the franchisee will be required to sign. item 23: receipts. prospective franchisees are required to sign a receipt that they received the fdd (§436.4 of the franchise rule). the information should be disclosed clearly, legibly, concisely in a single document using plain english and respond fully to each disclosure item. the disclosures must be in a form that permits each prospective franchisee to store, download, print, or otherwise maintain the document for future reference. all information in the disclosure document shall be current as of the close of the franchisor’s most recent fiscal year. after the close of the fiscal year, the franchisor shall, within 120 days, prepare a revised disclosure document, after which a franchise seller may distribute only the revised document and no other disclosure document. baltic journal of economic studies 187 vol. 5, no. 5, 2019 under the us law, a franchisor cannot sell a franchise until it provides the potential franchisee with the document containing all information concerning its activity (fdd). besides, 14 states require franchisors to register their fdd documents in the relevant state depertment, or notify them in advance of a franchise offer to a potential franchisee before starting any franchising activity within the state. any unfair or deceptive act or practice in violation of pre-disclose requirement imposed by the franchise rule is a violation of the us federal trade commission act, which was adopted in 1914 to give the us government a full complement of legal tools to use against anticompetitive, unfair, and deceptive practices in the marketplace (federal trade commission act). section 5 of the trade commission act provides responsibility for unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce. under the franchise rule ftc is provided with the right to bring an action against franchisors who violate the rule in federal court and to seek any or all of the following remedies: (1) civil penalties of up to $11,000 per violation; (2) injunctive relief with respect to violations of the ftc franchise rule, including barring franchise sales in the united states; and (3) restitution, rescission, or damages on behalf of the affected franchisees. however, the franchise rule does not apply to all franchise agreements. thus, §436.8 of this act contains seven exemptions, when the provisions of part 436 shall not apply: (1) the total of the required payments, or commitments to make a required payment, to the franchisor or an affiliate that are made any time prior to or within six months after commencing operation of the franchisee’s business is less than $570. (2) the franchise relationship is a fractional franchise. fractional franchise means a franchise relationship that satisfies the following criteria when the relationship is created: (a) the franchisee, any of the franchisee’s current directors or officers, or any current directors or officers of a parent or affiliate, has more than two years of experience in the same type of business; and (b) the parties have a reasonable basis to anticipate that the sales arising from the relationship will not exceed 20% of the franchisee’s total dollar volume in sales during the first year of operation. (3) the franchise relationship is a leased department. leased department means an arrangement whereby a retailer licenses or otherwise permits a seller to conduct business from the retailer’s location where the seller purchases no goods, services, or commodities directly or indirectly from the retailer, a person the retailer requires the seller to do business with, or a retailer-affiliate if the retailer advises the seller to do business with the affiliate. (4) the franchise relationship is covered by the petroleum marketing practices act, 15 u.s.c. 2801. (5) (a) the franchisee’s initial investment, excluding any financing received from the franchisor or an affiliate and excluding the cost of unimproved land, totals at least $1,143,100 and the prospective franchisee signs an acknowledgment verifying the grounds for the exemption. (b) the franchisee (or its parent or any affiliates) is an entity that has been in business for at least five years and has a net worth of at least $5,715,500. (6) one or more purchasers of at least a 50% ownership interest in the franchise: within 60 days of the sale, has been, for at least two years, an officer, director, general partner, individual with management responsibility for the offer and sale of the franchisor's franchises or the administrator of the franchised network; or within 60 days of the sale, has been, for at least two years, an owner of at least a 25% interest in the franchisor. (7) there is no written document that describes any material term or aspect of the relationship or arrangement. under the franchise agreement or the franchisor’s practice, the franchisor has the right to bind the franchisee to purchase or lease goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, real estate, or comparable items related to establishing or operating the franchised business either from the franchisor, its designee, or suppliers approved by the franchisor, or under the franchisor’s specifications. franchisees can challenge a sourcing requirement as an illegal tie under the anti-trust laws. under a tying arrangement, the seller conditions the sale of one product (tying product) on a requirement that the buyer also purchase another unwanted product (tied product) from the seller. in franchising, the tying product is typically alleged to be the franchise itself and the tied product is the item that the franchisor requires the franchisee to purchase (woods & hurwitz, 2018). the franchisor receives for franchise selling a fee from the franchisor, which, in accordance with the franchise rule, may be in the form of initial fee (the fee paid to the franchisor in exchange for establishing the franchise relationship, along with the provision of some initial services; this fee is paid in a lump sum to the franchisor when a franchise agreement is signed) and other fee (royalties, and fees for lease negotiations, construction, remodeling, additional training or assistance, advertising, advertising cooperatives, purchasing cooperatives, audits, accounting, inventory, transfers, and renewals). these fees usually include: (1) an initial franchise fee; (2) an ongoing royalty fee; and (3) advertising fund contributions. typically, the initial fee is paid up front simultaneously upon the execution of the franchise agreement. the royalty fees are typically paid on a monthly basis, for the ongoing use of the franchisor’s trademarks and for the services that the franchisor provides. the typical range for royalties may be from 4 percents to 8 percents of the franchisee’s gross revenues, although sometimes flat-rate fees are baltic journal of economic studies 188 vol. 5, no. 5, 2019 charged. as many franchisors in the us create a national advertising fund (or sometimes a regional advertising fund), franchisees are often required to make regular contributions to the fund. the typical range of these fees is from 1 percent to 3 percents of the franchisee’s gross revenues, with 2 percents being fairly common (rosen et al., 2018). 4. conclusion the usa is the world’s largest “franchise country”, characterized by the highest level of development of special franchise legislation, abundant jurisprudence on franchising, and an extensive franchise legal theory. much longer history of franchising in the united states has allowed the public and all branches of government at all its levels to identify the advantages and disadvantages of franchising better than it was done in other countries. 40% of the total turnover in the usa is generated by the companies created under the franchising system, and their number is constantly growing. for comparison, in europe, the share of such enterprises in the market is varying from 5% to 30%. franchising had not only originated in the usa; today, the u.s. franchise system is the largest in the world. if we analyze the dynamics of the development of franchising in the united states, we can conclude that historically franchising here is one of the most advanced and successful forms of organizing and developing business. the centuries of experience in the existence of franchising in the united states proved its stability and ensured its popularity. in the usa, franchising is governed by federal and state laws. the most important legal act that regulates the implementation of franchise activities is the ftc franchise rule, which operates both at the federal and state levels. all information that the franchisee should obtain before concluding the franchise agreement is arranged into one document – the “franchise disclose document” (fdd). the purpose of this document is to provide potential franchisee with the information about the franchisor, the franchise system and the agreements that must be signed so that the franchisee could take a balanced decision in the future. most us franchise systems, in addition to lumpsum payments, require the franchisee to pay regular contributions (royalties), as well as advertising fund contributions. references: american association of franchisees and dealers. fair franchising standards. retrieved from: https://www.aafd.org/fairness-initiatives/fair-franchising-standards/ american association of franchisees and dealers. fairness initiatives – “your center for total quality franchising”. retrieved from: https://www.aafd.org/fairness-initiatives/ drozd, o. y., inshin, m. i., & mogilevskiy, l. v. (2018). the issue of cryptocurrency legal regulation in ukraine and all over the world: comparative analysis. baltic journal of economic studies, vol. 4, no. 1, pp. 169–174. doi: 10.30525/2256-0742/2018-4-1-169-174 federal trade commission act [chapter 311 of the 63rd congress, 38 stat. 717, september 26, 1914 as amended through public law 111–203, enacted july 21, 2010]. retrieved from: https://legcounsel.house.gov/comps/ federal%20trade%20commission%20act.pdf franchise rule 16 cfr part 436 as of november 27, 2019. electronic code of federal regulations. retrieved from: https://www.ecfr.gov/cgi-bin/text-idx?sid=e37d3cd088c6b4724a389338f9c3e141&mc=true& tpl=/ecfrbrowse/title16/16cfr436_main_02.tpl märzheuser-wood, b., & baggott, b. (2015). franchise law in the united states. dentons. retrieved from: https://www.dentons.com/en/insights/articles/2015/june/12/franchise-law-in-the-united-states rosen, r . et al. (2018). united states. in m. abell (ed.) the franshise law review. edition 5. london: law business research ltd., pp. 621–661. rosen, r ., salis, l., & karol, j. usa: franchise 2020. retrieved from: https://iclg.com/practice-areas/franchiselaws-and-regulations/usa u.s. commercial service (2018). franchising industry a reference for u.s. exporters. retrieved from: https://www.franchise.org/sites/default/files/2019-05/uscs_franchising_resource_guide_2018.pdf woods, w., & hurwitz, a. (2018). domestic and international franchising, master franchising, and regulation of franchise agreements in the united states: overview. thomson reuters practical law. retrieved from: https://uk.practicallaw.thomsonreuters.com/8-631-2421?transitiontype=default&contextdata=(sc.default) &firstpage=true&bhcp=1 baltic journal of economic studies 113 vol. 6, no. 5, 2020 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: hanna.yefimova@nuos.edu.ua orcid: https://orcid.org/0000-0001-5271-2913 2 admiral makarov national university of shipbuilding, ukraine. e-mail: andreynuk@gmail.com orcid: https://orcid.org/0000-0003-0026-0817 3 admiral makarov national university of shipbuilding, ukraine. e-mail: oleksiy.pashchenko@nuos.edu.ua orcid: https://orcid.org/0000-0001-9513-8632 doi: https://doi.org/10.30525/2256-0742/2020-6-5-113-117 methodical support of assessment of the development of economic security of the region ganna iefimova1, andrey labartkava2, oleksiy pashchenko3 abstract. the subject of research is actual problems of diagnostics of threats and risks of regional development, factors of economic safety, methodological support of its estimation. the aim is to formulate a methodological framework for assessing the economic security of the regions development. the formation of the research methodology is carried out on the basis of theoretical and methodological platform for the development of rating method for assessing the economic security of the region. the use of the matrix method for describing the initial state of the system has been justified; the method of normalized values has been used for bringing various indices. factors influencing the level of investment activity and economic security of the region have been identified. all factors that change the level of economic security are divided into four groups depending on the macroeconomic indicators, the level of which they take into account. it is proposed to divide them into two groups – direct action factors that increase the level of safety and reverse action factors that reduce it. indicators characterizing the economic development of the region have been grouped by factors of economic security. for each group, the significance of the impact of indicators of individual groups for evaluation of the economic security of the region development has been determined. to estimate the economic security of the regions' development, it was proposed to use an integral indicator based on the state of general economic development, investment activity in the region and demographic indicators of economic development. depending on the influence of individual factors, the rank of each region is determined first for each group of factors, and then the integral. according to the results of the assessment of the economic security of regions' development by individual groups of factors and the calculated integral indicator, the place of each region has been determined by the level of economic security. the result of the study is classification of the regions according to certain criteria on the basis of the integral index of economic security of the regions' development, which will allow not only to compare the level of economic security, but also to formulate a nationally balanced regional development strategy and identify priority investment areas. key words: economic security, economic development, region, risk, threat. jel classification: o10, r13, g32 1. introduction the economic security of the socio-economic system can be characterized as a state of stability, when this system can do its activity by saving the balance and the general direction of the development in the conditions of the environment, which is transforming dynamically, including in the conditions of the active and increased influence of the destabilizing factors (filipova, voloshchuk, cherkasova, 2015). the most important value in the complex of the ways to form the system of the economic security is to develop the methodology of the analysis and the diagnostics of the threats and the risks, which destabilize the system activity (dykan, 2017; iefimova, marushchak, 2017; van thanh do, 2019). the modern conditions of the reforms of decentralization in the post-soviet countries stipulate the necessity of the theoretical and practical baltic journal of economic studies 114 vol. 6, no. 5, 2020 developments for support of the development of economic security of the regions. the unfavorable investment climate comparing with the countries of central and eastern europe and low volumes of the foreign investments shows the low level of the economic security of the countries in whole. inside the countries the conditions for the activity of the agents of the economic management have the essential differences. it is known the cases when the enterprises go out of business in one region and at the same time they extend activity in others. the serious confirmation of the nonuniformity of the investment climate of the regions is the character of the territorial division of the investments into the national economics (dykan, 2017). the problem of development of the economic security assessment in whole and in the regional aspect has been considered many times in the economic literature. today the scientists and the experts consider the problems very often. they are connected with the peculiarities of the economic development risks appearance (hrinchenko, 2017; varnalii, 2018; van thanh do, 2019; wimbush, tsereteli, 2008; yapatake, thales, shan li jin, 2018). in spite of it, the most points concerning the questions of the economic development management at the regional level are too one-sided. the efficiency of the economic processes in the modern conditions of the development of national economy is connected inseparably with the assessment of the current position and the identification of the main tendencies of the business activity development. the process of the study of economic development consists of the assessment and the forecast of the enterprises activity which are the subjects of the economics and the assessment of the economic security in the separate regions like the external conditions of the enterprises functioning. the aim of this study is to formulate the methodical support of the development of economic security of the regions. 2. methods of describing the initial state and reduction of indicators for the assessment of the economic security of the development of the regions, it is appropriate to use the rating method, which is based on the calculation of the integral index of the economic security of development of the regions. for its calculation, it is necessary to analyze the factual indices of the economic development of the regions and compare them with the standardized values which allow to compare the influence of the different factors into the generalized index of the economic security. we suppose that i is the number of regions and each of them is characterized by many j factors.then each considered region can be introduced like the point of j-dimensional space with the coordinates which are equal to the values of each j factor. the matrix of the researches is formed at the initial stage of the analysis of the regional investment risk. it consists of the complete characteristics of the analyzed regions: x x x x x x x x x x i i j j ji = 11 12 1 21 22 2 1 2 ... ... ... ... ... ... ... (1) where i is the number of the analyzed regions; j is the number of factors ; xji is the value of the factor j for the region i. the lines of x matrix are in accordance with the analyzed regions, and the columns are in accordance with the factors, the matrix of them includes the most characterized marks of the development of regions. because the factors of the matrix x characterize the different qualities of the analyzed objects, they are nonuniform and differ by units of the measurement. for the calculation of the index of development of the economic security of the region, it is necessary to execute the transformation of the matrix x for the standardization of the factor indices.we will form the matrix z: z z z z z z z z z z i i j j ji = 11 12 1 21 22 2 1 2 ... ... ... ... ... ... ... (2) the elements of the matrix z are calculated by use of the following method: z x x x x ij ij j j j = − − − + − (3) where zij is the standard value of the factor j for region i; xj − is the minimal value of the factor j; xj + is the maximum value of the factor j. then the calculation of the group indices of development of economic security of the region is executed, which are the synthetic value of many factors. they characterize the object of the analysis of this group. the calculation of these indices allows to order the elements of the set – the analyzed regions – up to the definite standard. in accordance with each factor of the matrix z the minimal value (for the factor indices, their increase decreases the level of the economic security) or maximum value (for the factor indices, the increase of them increases this level) is calculated, which allows to calculate so called standard, i.e. the highest level of the economic security. the errors of the real indices of the economic security of the analyzed objects from standard are calculated using this method: r z z i mi ij j j 0 0 2 1 1= −( ) =∑ , , (4) baltic journal of economic studies 115 vol. 6, no. 5, 2020 the received error is the base for the calculation of the group indices of the development of economic security of the region: d r r i i= 0 0 (5) where r r i i0 0= { }max . the group indices of the region development economic security have been interpreted: the value of the index di is closer to 1, than it is safer the i-th region. 3. systematization of factors and indicators of economic security of the region for the comparison of the level of economic security of the region the system of the factors, which effect into this level, has been formed. such main factors should be separated out between set of the factors which stipulate the difference in the levels of development of economic security of the region: 1) the level of the general economic development of the region; 2) the level of the investment activity in the region; 3) the level of the development of the enterprise activity and the investment infrastructure; 4) the demographic characteristics of the region. all these factors have the same direction of activity, i.e. the positive dynamics of the indices, which characterizes them should support the increase of the economic security and the decrease of the risk of the region development. the assessment of the economic security has been executed on the base of the indices which characterize the achieved level of economic development of the region. this assessment can consider the objective because the achieved parameters have been considered so that they characterize, on the one hand, the definite level of the economic development and, on the other hand, the preconditions of the further activity. due to the stability of many regional development factors the results of the assessment of the economic security are usually not inclined to the sharp changes and the results of the executed assessment can be used at the design of the strategy of the region development or at its longterm forecast. for the assessment of development of economic security of the regions should calculate and extend the results of the influence of the separated factors. the influence of each of them is calculated by line of indices, the level and the dynamics of which determine the change of the climate and the risk of the economic activity in the region. for the characteristics of the economic security of the regions development it is proposed to calculate and study the specific analytical indices, which are grouped in accordance with the factors of the economic security. the level of the general economic development of the region is calculated on the base of such indices: – the gross additional value – it shows the final result of the activity of the economic management agents and it is the measure of the economic activity efficiency; – the volume of export-import (the balance) characterizes the result of the foreign economic activity of the enterprises; – the index of the consumption prices is the index of change of the general level of price and tariff it shows the level of inflation, which is one of the main factors for the deterrence of development of the region’s economy; – the obligations of the banks concerning money, which have been borrowed at the accounts of the natural persons, show the change of capital which has been accumulated in the bank field. the level of the investment activity in the region has been valued on the base of the following analytical indices: – the total sum of the investments characterizes the development and the regional structure of the investment activity in the country and it is the main index which shows the level of the investment activity and the stage of the economic security; – the rate of the increase of investments during last year characterizes the dynamics of the investment activity in the regions and shows the change of risk of the investment from the investors point of view; – the implementation of the new main ways shows the use of the investments in the fixed capital like the result of the investment process; – the direct foreign investments in the regions characterize the relation of the foreign investors to the investment climate in the regions and their assessment of the economic risk. the level of the development of the enterprise activity and the investment infrastructure is characterized by the following main indices: – the number of the created enterprises shows the enterprise activity in the region, which is the result and, at the same time, the precondition of its development; – the number of small enterprises characterizes the level of the development of the small business, like one of the main parameters of the economic increase; – the structure of the credit debt is one of the main indices of the enterprises financial state which shows the level of the accounts risk into their activity; – the requirements of the banks concerning the credits, which have been given into the economics, characterize the volume of the investments, received in the real sector of the economics in the bank field. the demographical characteristics of the region are calculated on the basis of the following indices: – the quantity of the population; – the quantity of the worked population; – the average level of the salary; – the migration increase of the population. baltic journal of economic studies 116 vol. 6, no. 5, 2020 these four indices in whole characterize the level of support by the human resources of the regions and their cost, which is one of the determinative indices of the result of the region economics and the source of its development. but not all factors have the same influence into risk of the investment activity in the region. so, it is proposed to establish such value of the weightiness of the influence of the separate groups of the indices for the assessment of development of economic security of the region, it is proposed to use the following value of the specific elements: – the level of the general economic development – 35%; – the level of the investment activity in the regions – 25%; – the level of the development of the enterprise activity and the investment infrastructure – 25%; – the demographical characteristics of the region – 15%. 4. method of assessing the economic security of the region the calculation of the integral indice of development of economic security of the regions has been executed by use of this formula: d d d d di i i i i= × + × + × + ×1 1 2 2 3 3 4 4ν ν ν ν (6) where d1, d2, d3, d4 are the indices of the economic security development of i-th region in accordance with four factors, which have been determined by assessment of the appropriate groups of indices; ν1, ν2, ν3, ν4 are the weight of the appropriate element in the general assessment of the region, it is expressed like decimal fraction. in accordance with the results of the assessment of the integral indices of the economic security by use of the specific factors and the calculated integral indice of the economic security of the regions, the place of each region in accordance with the level of security of development has been determined. it is proposed to define three groups of the regions: – the first group includes the regions with high level of the economic security; – the second group contains the regions with the average level of the economic security; – the third group consists of the regions with low level of the economic security. the criterion for the assessment is the integral indice of the economic security of the development, which generalizes the rate of the region in accordance with each group of factors: – for the regions with low level of the economic security the integral indice is di≤0.65; – for the regions with average level of security the integral indice is 0.65>di≥0.8; – for the regions with high level of security the integral indice is 0.8>di≥1. in accordance with the integral indice of the economic security of the region development the absolute level of the economic security has been valued up to the standard. the comparative security of development should be determined with the aim to form the national policy of the economic development and the risk of the investment into the economics of the different regions. on the base of such assessment the most favorable regions should be marked for the investment with minimal risk. the perspectives of the regions development are characterized by the socioeconomic potential, the technical level of the industry and the level of urbanization of the population and the provision by the qualified staff. the regions are valued by the availability of the consumer goods and the factors of production. 5. conclusions for the assessment of development of economic security of the regions, the integral index has been used, which is based on the calculation of the general economic development state, the investment activity in the region and the demographic indices of the economic development. the rate of each region is determined in accordance with the influence of the specific factors for each group of factors and the integral. the study identified factors that affect the level of economic security and the degree of risk of economic activity in the region. all the factors that change the economic security in a particular region have been divided into four groups depending on the macroeconomic indicators they take into account. of course, not all factors have the same course of action, which was taken into account when assessing the level of economic security in the region. therefore, it is proposed to divide them into two groups: direct action factors that increase the level of safety, and reverse action factors that reduce it. it is also determined that not all factors have the same degree of impact on the risks and threats that exist in the regional economy. the significance of each group of factors was taken into account, taking into account the impact it has on the level of economic security of the region. in accordance with the results of the assessment of the indices of the economic security development of the regions on the specific groups of factors and the calculated integral indice, the place of each region is determined in accordance with the level of the economic security. on the base of the integral indice of development of economic security of the regions, the typification of the regions is executed in accordance with the determined criterion, which allows to compare the levels of the security, to form national balanced strategy of the regions development and to determine the priority directions of the investment. baltic journal of economic studies 117 vol. 6, no. 5, 2020 references: hrinchenko, ye. (2017). tekhnolohiia dovhostrokovoho prohnozuvannia pry upravlinni rozvytkom rehionalnykh makroekonomichnykh system na osnovi imitatsiinoi modeli [technology of the long-term forecast at the management of the development of the regional macroeconomic systems on the base of the simulation model]. visnyk natsionalnogo universytetu tsivilnogo zahystu ukrainy (seriia: dergavne upravlinnia), vol. 6, pp. 271–280. (in ukrainian) varnalii, z. (2018). regional aspect of investment security of ukraine. economics and region, vol. 4(71), pp. 5–30. dykan, v. (2017). mekhanizm zabezpechennia ekonomichnoi bezpeky rehionu: sutnist, skladovi, napriamy dii [mechanism of the region economic security support: the core, the components, the directions of the activity]. visnyk ekonomiky transportu i promyslovosti, vol. 58, pp. 18–25. (in ukrainian) filipova, s., voloshchuk, l., & cherkasova, s. (2015). ekonomichna bezpeka pidpryiemstv realnoho sektoru ekonomiky v umovakh vartisno-oriientovanoho upravlinnia [economic security of the enterprises in the real sector of economics in the conditions of the cost-oriented management]: the monography, under main edition of s. philipova. edit by m. bondarenko. (in ukrainian) iefimova, h., & marushchak, s. (2017). modeling of the enterprise economic security. mechanisms of interaction between competitiveness and innovation in modern international economic relations: collective monograph. isma university. “landmark” sia. vol. 4, pp. 36–45. mamoon, d. (2012). economic security, well functioning courts and a good government. international journal of social economics, vol. 39.8, pp. 587–611. van thanh do (2019). macro-econometric model for medium-term socio-economic development planning in vietnam. part 1: structure of the model. economy of region, vol. 1.1, pp. 121–136. wimbush, s. e., & tsereteli, m. (2008). economic security and national security: connected in georgia. asia-caucasus analyst, bi-weekly briefing, vol. 10.2, p. 23. yapatake, k., thales, p., & shan li jin (2018). economic security and the political governance crisis in central african republic. african development review, vol. 30.4, pp. 462–477. baltic journal of economic studies 163 vol. 2, no. 2, 2016 corresponding author: 1 department of economic security, national institute for strategic studies. e-mail: us@niss.gov.ua particular aspects of the wto mechanisms application to protect the national economic interests of ukraine ivan us1 national institute for strategic studies, ukraine abstracts. the purpose of the paper is to analyze the issue of applying by ukraine of mechanisms developed in the legal framework by the world trade organization to protect the internal market in order to prepare appropriate recommendations to state power authorities empowered to carry out trade policy. methodology. the study is based on studying the experience of ukraine to revise its commitments on tariff lines for the first three-year period after the accession to the wto, as well as on the analysis of the most resonant steps to protect the internal market taken by ukraine and the consequences of these steps. result. the issue of applying by ukraine of tools developed by the world trade organization to protect the interests of national producers has been described in this article. the situation of the use by ukraine of a right to review the conditions of membership in the wto has been reviewed step by step starting from the studying of this issue within the country and to the statements by the government not to use this feature. all the stages of the process of using the possibility to revise the conditions of membership in the wto have been analyzed as well as the mistakes that led to the absence of the desired result in the end. also, the basic tools of protection of the domestic market in the wto system, such as anti-dumping investigation and the investigation concerning the subsidized imports has been considered the dynamics of the use of such investigations by all wto member countries since the establishment of the wto, with particular emphasis on the period of the financial and economic crisis of 2008-2010 has been reviewed. the number of successful investigations led to the application of certain protective measures also has been determined. the risks that arise in the absence of the government of ukraine steps to improve the efficiency of representation of interests in the wto have been analyzed. recommendations improving the use of wto mechanisms to protect domestic producers have been offered. changes in the legislative framework of ukraine, which will help to improve the practice of defending the interests of national producers in compliance with wto rules, have been proposed. special attention is paid to the issues under discussion by wto committees and the impact that will have the decisions taken in these committees on the wto member countries. the main objectives of participation of wto member countries in the work of these committees have been systemized and the main benefits of active participation in their work have been indicated. the practical significance. the data obtained can be used by public authorities of both ukraine and other countries that have recently acceded to the wto in order to improve the use of institutions and mechanisms created by this organization for the realization of their national economic interests. the same analysis of the experience of the first attempts to revise by ukraine of its commitments to the wto will be useful during the second revision of the conditions which, according to the rules of the wto, occurs every three years. key words: world trade organization, domestic producers, the protection of national economic interests, tariff regulation, the revision of the conditions for membership in the wto, the protection of intellectual property rights. jel classification: f13, f53 1. introduction accession of ukraine to the world trade organization (wto) on may 16, 2008 was actually joining the existing system of rights and obligations, much of which concerns the protection of national economic interests of ukraine. preserving the right to protect its national economic interests, the country is obliged to do so under the rules and procedures established by the wto. however, in addition to the legal framework established by the wto, there is also the aspect of presenting by a country of its interests in this organization. in the case of introduction by a separate country of protective measures, other organization members expect the trading partner not only to clear by implementation the relevant regulations, but also to take into account the broader context of the interaction of the member states, especially when it comes to initiatives to baltic journal of economic studies 164 vol. 2, no. 2, 2016 review the conditions for membership in the organization. the need to comply with the rules and practices on the one hand and the need to protect the interests of the country on the other hand, causes finding a balance between this two aspects. 2. implementation of national economic interests in the wto the balance between national economic interests and wto membership was always in the spotlight of scholars. some of them stated that the wto provides greater certainty in relations between states and constrains what might otherwise be a chaotic and self-defeating pursuit of national interest (birkbeck, 2009). the other scholars pay attention on fact, that wto mechanisms, especially anti-dumping procedures, were rather used by developed countries for promoting there interests. a growing body of information indicates that antidumping law is more about extending anti-competitive behavior at home than about resisting such behavior from abroad. messerlin (1990) presented evidence that the european chemicals industry in the 1980s used the antidumping law to support european cartel. hindley and messerlin (1996) carried this analysis farther and found that in several industries use of antidumping against competitors had become a normal part of business strategy. kelly and morkre (2002, 8-9) review additional evidence that firms use antidumping to create or support collusive arrangements. the legal framework of the wto provides a number of tools to protect the interests of domestic producers both on the domestic and foreign markets. thus, among the protective measures in the domestic market the main are the following: tariff regulation; technical regulations and standards; sanitary and phytosanitary measures; internal taxes; protection of intellectual property rights; the use of trade defense instruments (anti-dumping, countervailing and special safeguard measures and general defensive measures) and others. protection on foreign markets is carried out by use of dispute settlement, which operates in the wto: complaints; initiation of the investigation concerning protective measures against domestic producers made by other wto member countries; initiation of bilateral and multilateral consultations, participation of the government in the negotiation process within the framework of the wto with the purpose to develop new regulations and wto rules. in this article we analyzed some of them, which are the most relevant for ukraine in the context of improving the efficiency of its participation in the world trade organization. 3. revision of the conditions of ukrainian membership at the wto thus, the most common mechanism for protecting national producers on the domestic market is review (upward) of the protective duties on imported goods. in particular, the wto rules do not prohibit changing the commitments agreed by the countries accession to the wto, especially if the country has reserved such a right (which was made by ukraine during joining the wto). according to article xxviii of gatt obligations revision can be made no earlier than 3 years after accession to the wto, under certain conditions. the basic principle of change of tariff concessions is that in case of negotiations on changes of fixed dimensions of tariff rates, which were recorded in the schedules of tariff commitments, stakeholders should strive to make compensatory adjustment with respect to other products in order to maintain a general level of reciprocal and mutually beneficial concessions. a wto member that intends to change or withdraw the concession should hold talks with the parties that have priority negotiating rights and are greatly interested in the concession. under the terms of ukraine's accession to the wto, the maximum level of its customs protection rate was fixed at a much lower level than that of the majority of its trading partners. it is therefore logical that after acquiring some experience of participation in the wto and the manifestation of certain negative effects of the current tariff regulation, ukraine declared its intention to exercise the right to change the tariff lines. however, as it can be seen from the reaction of trade partners, ukraine's position before the negotiations on the revision of tariffs turned out to be weak due to a number of errors. guided by paragraph 5 of xxviii article of the general agreement on tariffs and trade 1994, on the october 27, 2011, ukraine has reserved the right to review the concessions set forth in the schedule of concessions and ukraine's commitments under the wto agreements in the next three-year period that began on january 1, 2012 (wto document g/ma/262 of 09.11.2011). according to this decision and after studying the needs in implementing additional protective measures ukraine has expressed its intention to enter into negotiations and consultations with wto members to modify the obligations relating to tariffs, providing a relevant list of tariff lines. the interagency working group to study the issue of amending the rates of import duty under the wto agreements, composed of representatives of central executive bodies, the federation of employers of ukraine, some industry brunch associations of domestic producers and academic institutions was created by the order of the ministry of economic development and trade of ukraine. however, the meetings of the working group did not have a public character, contrary to practice established by the wto. in addition, the agenda for these meetings baltic journal of economic studies 165 vol. 2, no. 2, 2016 did not include all issues that were late included into the notification, which caped the wto members informed of ukraine's intention to make some modification bound rates of tariffs. on the september 12, 2012, this document was circulated by the wto secretariat. the notification includes 371 tariff lines, accounting for 3% of the total number of headings in the customs tariff of ukraine (at 10 characters hs2007), including certain types of products: meat and offal from beef, pork and poultry; flowers; vegetables and fruits; sausage; household appliances; agricultural machinery; cars; furniture etc. there are 371 tariff lines, 224 of them cover agricultural products (61% of tariff lines listed in the document wto), 147 – industrial products (39%). meanwhile, according to information from public sources, ukraine did not submit proposals to the desired level of tariff rates. note that from a legal standpoint article xxviii of the gatt 1994 does not limit the number of tariff lines that can be modified. however, the number of tariff lines proposed by ukraine, according to estimates of authorized representatives of the trade partners of ukraine is unprecedented. in the past, other wto member countries used this article to making small technical changes to the tariff plan, and not for the broad revision of tariff lines. this practice is determined by the need for careful calculation of potential losses of interested partner countries to export to the country that initiates the revision of tariff rates. shortly after analyzing the possible losses from the introduction of protective measures the interested parties carry out compensatory measures concessions with the purpose of reaching consensual solution. but if ukraine puts forward a request for reviewing of the level of protected tariffs in respect relating to these tariff lines, but does not declare their volume, the use of traditional legal procedures for the ukrainian proposal is problematic because the talks are usually intended to reach a consensus, which has primarily financial dimension. the international reaction to the ukraine's proposal was quite tough. this move caused dissatisfaction in major trading partners and within the wto: ukraine was accused of undermining the world trading system. on november 26th, 2012 australia introduced a joint statement made by 23 delegations to the wto, which called for ukraine in the interests of the multilateral trading system and the global economy, to withdraw its notice to revise tariffs for a grate variety of products (wto documents g/c/w/678). this statement indicates that the ukraine’s notification under article xxviii of the general agreement on tariffs and trade 1994 goes beyond the volume negotiations on the revision of tariffs. it was also noted that it was not clear to what extent ukraine would be able to compensate the losses of the other members through their proposed tariffs, as stipulated by this provision. in addition, the wto members have expressed concern over the lack of transparency in this matter from ukraine. this statement was supported by egypt, uruguay, el salvador, israel, china, dominican republic, peru and pakistan. in march 2013 the us embassy in ukraine stated that more than 100 wto members expressed concern about the actions of ukraine. also in march 2013 the eu representation indicated that article xxviii of the general agreement on tariffs and trade did not provide for review of such a large number of absolutely or all of conditions of accession to the wto, and there was no precedent for such a serious review. the eu also noted the difficulty in resolving the issue was caused by the refusal of ukraine to provide the complete information about the claims. in particular, by the fact that ukraine has provided information about 371 tariff lines, which it would like to change, but has not provided information about what new tariffs to be offered and countervailing measures to wto members states. on july 11, 2013 us urged ukraine to listen to many members of the wto and to reject the reviewing of its bound tariffs. concerns over the negative impact of ukraine's intention to review the tariff commitments on the predictability of the multilateral trading system were expressed by singapore (on behalf of asean), the european union, turkey, canada, japan, mexico, guatemala, el salvador, colombia, chile, israel, south korea, new zealand iceland, australia, norway, china and hong kong. however, despite the criticism of the ukrainian position, most countries have used their right to submit a request to ukraine. in accordance with the established procedure within 90 days from the date of the spread of notification the ministry of economic development and trade of ukraine received requests from 31 wto member countries. these requests were processed by the ministry of economic development and trade of ukraine for the relevant rights and in cooperation with the ministry of agrarian policy and food of ukraine, ministry of finance of ukraine, state customs service of ukraine a common position was developed on the modification of import duties on goods and compensatory concessions. however, within the period provided to it ukraine has not reached a consensus regarding the modification of tariff import taxes on goods and compensatory adjustment. on the one hand this demonstrated the lack of sufficient flexibility to use this option, on the other hand it’s showed the country 's readiness to be a predictable trading partner (ukraine fixed the terms of its membership in the wto admission in 2008 and does not clamed to change these global commitments). 4. the most popular methods of protection in the wto the introduction of extraordinary measures to protect the internal market is another relatively simple and common way of protecting, which is often resorted too by countries. particularly widespread extraordinary measures to protect the domestic market gained during the deployment of the baltic journal of economic studies 166 vol. 2, no. 2, 2016 global economic crisis. thus, in october 2008 – october 2009 governments of wto member countries launched 223 anti-dumping investigations, 30 investigations on countervailing measures and 35 investigations on safeguard measures. during this period india initiated 63 anti-dumping investigations, china – 26, usa – 21. although in 2010 during the recovery from the crisis the activity in the sphere of using emergency measures wto countries has decreased, there is a real possibility of its renewal in case of the deployment of a second wave of the global crisis. the most common of the wto emergency mechanism of protection is anti-dumping duties. the process by which the scope of anti-dumping was expanded is examined in finger (1993). during the period of 1995-2014, 4757 anti-dumping investigations were initiated. but it is not always that these investigations are completed with the introduction of anti-dumping duties. from all antidumping investigations launched during this period only 3058 (64%) resulted in the introduction of appropriate measures. the effects of anti-dumping measures can be compared with those of the introduction of import tariffs, namely they increase the price competitiveness of domestic producers on the internal market, help to increase payments to the budget (though not always), but raise the cost of imports for domestic consumers. however, the effects of anti-dumping measures have their own characteristics. anti-dumping duties do not apply to all sources of imports, which increases the possibility of growing of imports from other countries, along with a decrease in imports from the countries to which such measures apply. but anti-dumping duties may not lead to a significant reduction of the presence of imports in the market. often countries resolve to compensatory protective measures. theoretically the countervailing duty amount should just exactly not follow the negative effects that are created by subsidizing in the country 's exports of the product. in practice this is not always easy to achieve. consequently, the compensatory measures fully protect domestic producers from competition created imported products. the import of goods is considered to be the subject of compensatory measures if the imported goods should benefit from illegitimate subsidy (a subsidy is considered specific, namely illegitimate when access to the relevant public authority or law under which it operates, is provided only to certain enterprises). since the system of subsidizing agriculture in the eu, us and other developed countries does not fall within the definition of specific, or illegitimate, wto members may apply countervailing measures against these subsidized their agricultural products only in limited cases. according to the data of the wto committee on subsidies and countervailing measures, the recent widespread use is significantly lover than that of the antidumping measures. totally during the period from 1995 to 2014 wto members initiated 380 investigations of compensation and safeguards and applied 202 protective measures. the use of protective measures aimed at creating fair competition for groups of goods in the internal market irrespective of the country of import. meanwhile, often the initiative to introduce protective measures is a result of political lobbying, so the attitude to such initiatives from trading partners is ambiguous. to avoid a negative reaction from the international community, the country initiated the introduction of protective measures, at a minimum, should provide the necessary evidence base that would convince trading partners in the absence of facts of unfair competition. 5. legislative barriers to protect the domestic market ukraine as a member of the wto, which has recently joined this organization, should use the experience of developed countries and on this basis creates the relevant institutional environment and acquires its own experience on using the emergency protective measures. combined with an active policy of stimulating domestic producers, protection measures create conditions for the effective import substitution on the relevant product markets and for improving the trade balance of the country. protection of the internal market is provided by a number of wto agreements, which on the one hand, include restrictions on their use, on the other hand – provide countries, at a proper understanding of these transactions, with sufficient tools to implement there opportunities. meanwhile, justifying of the facts of dumping, illegitimate subsidies etc. requires involvement to the investigations materials of authoritative expert opinions (including those that relate to prices on the domestic market of the exporting country that born the basis which reviling the fact of dumping) and customs statistics of foreign countries with regard to separate codes. at the same time obtaining of this information for majority of countries is not free, therefore ukrainian companies suffering from dumped, subsidized and growing imports, often complain of the lack of adequate financial resources. the legal framework of the wto clearly regulates the initiation of the investigation. paragraph 5.1 of article 5 of the agreement on implementation of article vi of the gatt 1994 (antidumping agreement) states that an investigation can be initiated only following the written submission directly from the domestic industry branch or representatives on their behalf. paragraph 5.5 of article 5 states that the government should avoid initiatives about beginning of the anti-dumping investigation. however, by paragraph 5.6 of article 5 of the agreement, the government is entitled, under special circumstances, to decide to initiate an investigation without receiving a written submission from the domestic industry directly or representatives on their behalf to initiate such an investigation. such an investigation should be carrying baltic journal of economic studies 167 vol. 2, no. 2, 2016 out only if there is sufficient evidence, as stipulated by paragraph 5.2 of this article. the ukrainian legislation does not allow the government to initiate anti-dumping investigations, providing eligible domestic producers, there representatives and trade unions of employees of enterprises of national producers (article 12 of the law of ukraine "on protection of domestic producers from dumped imports"). as a foreign trade information in full is often inaccessible to domestic producers, and requires specially trained personnel, that is to scarce away domestic producers, the probability of absence of complaints, and thus of the beginning antidumping investigation is quite significant. 6. ukraine controversial steps to protect their producers however, it should be noted that the violation of any investigation or reviewing of existing obligations is a procedure carried out in accordance with the requirements of such laws and wto agreements, in particular, according to the list of information that must contain complaint (application) about launching the investigation. based on information contained in the complaint (statement), the evidence is considered sufficient and such that gives rise to the initiation of the investigation. failure to observe these requirements may result in illegitimacy of the entire process of investigation and its results, which in turn can cause claims to ukraine from other countries, including the relevant bodies of the wto. in addition, there is a probable of relevant actions from other wto members in other branches of economy. thus creating favourable conditions for one sector, through the use of instruments of protection, can lead to deterioration in other sectors. the risks of such a situation arouse following the introduction by ukraine on april 14, 2013 of special duties on imports of new cars, which led simultaneously to a negative reaction among other wto member states and to act in response. on the 11 of july, 2013 at a meeting of the wto counsel on trade with goods the trade representative of japan expressed his serious concern over the introduction in ukraine of special protective duties on cars, which, he stated, seriously affected japanese exporters. he questioned the basis for action, adding that ukraine did not provide sufficient opportunities for prior consultation in accordance with the requirements of the legal framework of the wto. japan's position was supported by representatives of australia, south korea, european union, russia and turkey. along with public condemnation and image losses, rising on duties on cars resulted in actions in responses. in particular, on july 12, 2013 the decision made by the government of turkey june 25, 2013 came into force, to introduce an additional duty in the amount of 23% on imports from ukraine walnuts. ultimately the duty for this type of product was 66.2%. considering that the duty on imports of walnuts from other countries with which ukraine competes in this market has remained at the same level, and the duty on walnuts from bosnia and herzegovina is set to zero, ukraine risks to lose this market, its total import amount being almost 150 million usd annually. in a notification sent to the wto secretariat, turkey stated that it had introduced additional duties on ukrainian walnuts on 12 july 2013 in accordance with article 8.2 of the safeguards agreement of the wto as a response to restrictions imposed by ukraine on import of cars. article allows the resort to countervailing duties providing that requirements of wto consultations with stakeholders on additional safeguards measures have been violated. according to bloomberg bna, this was the first case of application of this article in the wto history. 7. wto committees protection of domestic producers can be carried out on the basis of active participation in the institutions created by the wto. the committee on technical barriers to trade (tbt) established in the wto framework provides members the opportunity to get advice on any matters relating to the functioning of the tbt agreement or the realization of its objectives. nearly a third of the tbt committee meetings are dedicated to discussion of concrete problems of trade facing wto membersstates, particularly on technical regulations, standards and conformity assessment procedures used by member countries of the wto. in the majority of cases issues are raised in relation to the provision of further information and clarification of the measures considered under the tbt committee, as well as installing unnecessary barriers in trade. most protective measures discussed within the committee on tbt implemented by wto members to ensure the health and safety of life, the protection of consumers and their information, food safety, fair trade, trade facilitation, protection of the environment. the major activity at the meetings of the tbt committee is shown by such industrially advanced countries as the eu, usa, japan, south korea, which through the effective use of tools and mechanisms laid down in the tbt agreement, on the one hand, protect their markets and citizens from unsafe products, and on the other hand do not allow to the other countries to impose unjustified technical barriers to access of their products to the markets of these countries. in addition to technical barriers to limit imports the member countries of the wto are using sanitary and phytosanitary standards. according to the wto agreement on the application of sanitary and phytosanitary measures, countries are eligible to apply such measures to protect the life or health of humans, animals or plants, based on scientifically grounded reasons and without creating unjustifiable discrimination or a disguised restriction on trade. however, in practice, countries often abuse the use of tbt. an example of such baltic journal of economic studies 168 vol. 2, no. 2, 2016 actions can be considered the introduction of sanctions by the russian federation against the ukrainian manufacturer of confectionery product – the company roshen. however, for such cases, the wto rules also provided some tools of appealing the imposed restrictions that can be made use of by ukraine. 8. the conclusion and recommendations of this study 1. based on the analysis of international experience, we should acknowledge that the current practice of representation of national interests of ukrainian producers in the wto does not meet the needs of external economic vector of development of the national economy. in particular, in the course of exercising of the right to revise tariff rates in accordance with paragraph 5 of article xxviii of the general agreement on tariffs and trade, ukraine showed its unreadiness to fully use the opportunities of wto legislation. declaring its intention to review 371 tariff lines, ukraine has not offered any concrete proposals on how it should change these tariff lines and that compensation will be provided to wto members states. 2. by submitting unproperly prepared proposal to the wto ukraine not only failed to introduce effectively its national interests in the wto, but also sustained serious image losses that potentially reduce the investment attractiveness of ukrainian projects. the lack of a full package of proposals negatively affected the attitude to ukraine as a partner. in addition, this has led to a delay of the process of tariff lines change being indefinite, but rather a considerable time period. 3. in future, if ukraine does not significantly increase the efficiency of representation of its national interests in the wto, a chain of negative consequences, can be expected such as: restrictive sanctions (tariff and non-tariff nature) against the ukrainian products; increased pressure to use compensatory mechanisms by ukraine, such as reducing tariffs on other goods, that would be represent interest for certain wto members; lack of partner countries' intentions to make concessions in the negotiations; escalation of trade disputes with ukraine, initiation of disputes in international courts; increase of the volume of trade claims against ukraine – in compliance with in the number of countries participating in dispute and the amount of financial claims; positioning of ukraine in the international arena as a country that violates its obligations; complication of relations with trade partners in other spheres: foreign economy, finance, etc. 4. in order to minimize the possible negative consequences in the future and to accelerate the process of achieving a consensual solution with trade partners is reasonable to approve the decision optimizing of the applications for review of ukraine's tariff commitments, leaving only those positions on which ukraine can present to the wto secretariat the evidence base necessary for changing the tariff lines. in addition, the evidence must justify the proposed new value. also the offer tariff adjustment should be based on a forecast of the possibility and acceptability for ukraine of introducing compensatory measures in the interests of the countries concerned. 5. to effectively use such the wto tool as "extraordinary measures", it is necessary to create an appropriate institutional environment. the experience accumulated by the wto members on using these safeguards mechanism enable to minimizes risks introducing unpredictable volume in response to sanctions from trading partners. in this context, it seems appropriate to develop and implement appropriate legislation provisions for special circumstances under which the ministry of economic development and trade would have the right initiating anti-dumping investigations without waiting for receipt of complaints from domestic producers. this might a significant simplification of procedures for launching investigations that would increase the efficiency of executive power and would improve the protection of domestic producers from dumped imports. therefore, we consider it appropriate to reflect clearly the specific conditions in the law of ukraine "on protection of national producer against dumped imports", under which the government would get the right to initiate an antidumping investigation while granting it (only if there is a government initiative on anti-dumping investigation) right to collect information to the start of the investigation. 6. ukraine as a new member of the wto must participate more actively in the meetings of the committee on technical barriers to trade on a regular basis. with regard that tbt is one of the key measures of protection that practiced by developed countries, the purpose of such participation might be: studying the experience of developed countries on the use of technical barriers; expanding the tools to overcome technical barriers in the process of expanding markets for ukrainian products; improving the efficiency of protection of domestic producers of the markets of countries that widely used technical barriers on trade; a possibility to avoid mistakes and prevent possible trade sanctions in case of misuse of technical barriers to protect domestic markets. 7. in the context of improving the practice of using technical barriers to protect domestic market it is necessary to provide regular preparation and transfer to the wto committee on tbt of notifications, concerning the adoption by ukraine scientifically grounded appropriate measures in standardization and conformity assessment, which may affect trade. 8. according to the experience of many wto members may be appropriate to examine the possibility of opening the specialized office of ukraine in the wto baltic journal of economic studies 169 vol. 2, no. 2, 2016 secretariat for the operational work on the protection of national interests on the access of ukrainian goods to the markets of member countries of the wto, fitting it with highly qualified specialists in the sphere of wto trade agreements. 9. in general, to improve the use of wto mechanisms to protect domestic producers, the following purposes have to be achieved: transparency in state decision-making that affects the foreign trade activity of ukraine; promoting diversification of exports of goods and services both in terms of their range and geography, in order to minimize the risks that arise as a result of responses to the protective measures imposed by ukraine; ensuring coordination mechanism for the formation of a national position on the mode of access of goods and services to domestic and foreign markets; observing during the term of an application of wto established rules and principles of appropriate decisions to avoid lawsuits from other wto members, or their use of discriminatory measures in response; providing the economic justification for the proposals to protect domestic industries. development of forecasts of the effects of possible countermeasures against other industries should be an integral part of such substantiation; the creation of a permanent mechanism of conducting seminars on the use of trade protecting instruments with involvement of foreign experts; providing financing of receiving information of national and international information, analytical and research centers, provided for a fee, with the purpose of protecting the interests of domestic producers under anti-dumping, countervailing and special safeguard investigations in domestic and foreign markets. overall, it should be noted that the wto legislation base is constantly being upgraded, that’s creating new opportunities for countries to protect their producers. this raises the problem of its constant monitoring for both from the practical side (development of appropriate recommendations of the state policy) and scientific aspects (analysis of the impact of such changes on the development of ideas of free trade, etc.). references birkbeck, carolyn deere and catherine monagle (2009), strengthening multilateralism: a mapping of proposals on wto reform and global trade governance. geneva: international centre for trade and sustainable development. finger, j. michael (1993). antidumping: how it works and who gets hurt, ann arbor, university of michigan press. hindley, brian and patrick a. messerlin (1996). antidumping industrial policy: legalized protectionism in the wto and what to do about it, washington, dc, american enterprise institute press. kelly, kenneth h and morris e. morkre (2002) quantifying causes of injury to us industries competing with unfairly traded imports: 1989 to 1994, washington, dc, bureau of economics, federal trade commission. messerlin, patrick a. (1990) antidumping regulation or pro-cartel law? world economy, 13 (4): 465-492. иван ус отдельные аспекты использования механизмов вто для защиты национальных экономических интересов украины аннотация. целью работы является анализ использования украиной предоставляемых правовой базой всемирной торговой организации механизмов защиты внутреннего рынка с целью подготовки соответствующих рекомендаций органам государственной власти, уполномоченным на проведение торговой политики. методика. исследование основано на изучении опыта украины по пересмотру своих обязательств по тарифным линиям в первый трёхлетний период после присоединения к вто, а также на анализе наиболее резонансных шагов по защите внутреннего рынка, предпринятых украиной и последствии этих шагов. результат. в статье рассмотрены вопросы использования украиной созданного всемирной торговой организацией инструментария по защите интересов национальных товаропроизводителей. пошагово изучена ситуация по использованию украиной права на пересмотр условий членства в вто начиная от стадии изучения данного вопроса внутри страны и до заявления правительства об отказе от использования данной возможности. проанализированы все стадии процесса использования возможности по пересмотру условий членства в вто и определены ошибки, которые привели к отсутствию ожидаемого результата в конечном итоге. также рассмотрены основные инструменты защиты внутреннего рынка в системе вто, такие как антидемпинговые расследования и расследования касательно субсидируемого импорта. изучена динамика использования таких расследований всеми странами-участниками вто с момента создания вто с особым акцентом на периоде финансово-экономического кризиса 2008-2010 годов. также определено количество результативных расследований приведших к применению определённых защитных мер. проанализированы риски, которые возникнут в случае отсутствия со стороны правительства украины baltic journal of economic studies 170 vol. 2, no. 2, 2016 шагов по повышению эффективности представления интересов в вто. даны рекомендации улучшения использования механизмов вто для защиты отечественных товаропроизводителей. предложены изменения в законодательную базу украины, которые будут способствовать улучшению практики отстаивания интересов национальных товаропроизводителей при соблюдении правил вто. отдельное внимание в статье обращено на вопросы, находящиеся на обсуждении комитетов составляющих вто и влиянии, которое будут иметь решения, принимаемые в этих комитетах, на страны-участницы вто. таким образом, систематизированы основные цели участия стран-участниц вто в работе таких комитетов и определены основные выгоды от активного участия в их работе. практическое значение. полученные данные могут быть использованы органами государственной власти как украины, так и других стран, которые недавно присоединились к вто, для улучшения использования институтов и механизмов созданных этой организаций для реализации своих национальных экономических интересов. также анализ опыта первой попытки пересмотра украиной своих обязательств перед вто будет полезен при повторном пересмотре условий, который, согласно правилам вто, происходит каждые три года. baltic journal of economic studies 10 vol. 7, no. 1, 2021 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: d.vasilieva@yahoo.co.uk orcid: https://orcid.org/0000-0001-8190-3321 researcherid: https://publons.com/researcher/4225041/dariia-vasylieva/ doi: https://doi.org/10.30525/2256-0742/2021-7-1-10-18 corporate bond markets in eastern europe: trends and prospects dariia vasylieva1 abstract. the purpose of the paper is to analyze the process of the corporate bond market formation in eastern europe and to determine the prospects for development in ukraine. methodology. it is justified that the main variables that affect corporate bond issues are loans granted to financial corporations (excluding banks) and non-financial corporations, share issues and equity. the empirical basis of the study is the reports of the national securities and stock market commission (on the amount of shares and bonds), the national bank of ukraine (on the amount of loans to corporations) and the state statistics service of ukraine (on the amount of corporate equity). the study covers 20 years: from 2000 to 2019. based on these data, a vector autoregressive model (var) was constructed. the forecast error variance decomposition (vdc) technique was used to identify the most influential variables in the corporate bond issuance process. based on the var model, the forecast levels of model variables for 2021–2024 were obtained, which should have been achieved under the condition of planned development of the corporate bond market in ukraine. it has been suggested that the economic shock of the covid-19 has led to a decrease in the expected level of variables in 2020. therefore, seven scenarios for the development of the corporate bond market are considered: a – reduction of equity amount; b – decrease in the amount of shares issued; c – decrease in the amount of loans to corporations; a + b; a + c; b + c; a + b + c. the results of the vdc technique have allowed to establish that the issue of corporate bonds in ukraine largely depends on the amount of bank loans granted to corporations. based on the var model and scenario forecasting, it was determined that the most favorable for the development of the corporate bond market of ukraine is the scenario, in which corporations’ equity will be reduced by 10% due to increased uncovered loss but such a reduction will not lead to liquidation, and hence the cessation of circulation of their shares. practical implications. forecasting the amount of corporate bonds, shares and loans to corporations based on the proposed model allows companies to develop effective strategic plans, and investors – to decide on the allocation of their own financial resources. value/originality. the proposed model of corporate bond market development in ukraine includes internal and external sources of financing of enterprises, and allows to quantify the relationship between financial instruments (corporate bonds, loans and shares). key words: bank loans, corporate bond market, corporate bonds, equity, shares, var analysis. jel classification: c32, g17, g30 1. introduction in a dynamic environment, businesses are constantly facing with the need to raise additional capital to ensure current and future goals. the sources of capital acquisition by enterprises have long been one of the most important research topics and problems in economic practice. the financial market and, more broadly, the financial system play an extremely important role in raising capital for all enterprises. formation and maintenance of competitive positions in the modern conditions is practically impossible without financing the needs of enterprises from external sources. one such source is the issuance of corporate bonds. therefore, ensuring that you have sufficient financial resources is important at every stage of the company’s life cycle. corporate bonds have become increasingly popular in recent decades due to their diversification and higher reliability for investors compared to other debt instruments. nevertheless, the possibility of active use of this financial instrument in the activities of enterprises, as well as its availability to investors largely depends on the current state of the national corporate bond market. the development of the corporate debt securities market can create an alternative to bank lending. however, at present in most eastern european countries, the corporate debt market, as well as the securities baltic journal of economic studies 11 vol. 7, no. 1, 2021 market in general, is in its infancy. the indicators of the development of the corporate debt securities market are far from the level not only of bank lending, but also of the government securities market. in ukraine, the corporate bond market is under development, but many decisions are being made at the regulatory level to ensure its dynamic development. this study focuses on the main trends in the development of the corporate bond market in ukraine, as well as the establishment of dependence on equity, stocks, and bank loans as sources of enterprise financing. the development of the corporate bond market in eastern europe is the subject of research by many scholars, including: haiss p., marin s. (haiss, 2003), gozzi j., levine r ., peria m. (gozzi, 2015), ayala pena d., nedeljkovic m., saborowski c. (ayala pena, 2017), kubiczek j. (kubiczek, 2020). in addition, trends and prospects for the development of corporate bond markets in certain countries are disclosed in the reports of the international capital market association (icma, 2020), the international organization of securities commissions (iosco, 2020), the organization for economic co-operation and development (oecd, 2020), and the european commission expert group (european commission expert group, 2017). 2. the analysis of corporate bond markets in eastern europe given that this study focuses on attracting financial resources to the activities of enterprises based on the issuance of corporate bonds, it is advisable to analyze the balance sheet of corporations in eastern europe, namely the volume of corporate bonds and credit resources in the balance sheet liabilities and relevant financial operations (transactions). therefore, we propose to conduct a comparative analysis of raising funds based on these two sources in the corporate sector during 2014-2020 in eastern european countries such as bulgaria, poland, romania, slovakia, slovenia, hungary, croatia, and the czech republic. the volume of lending to the corporate sector was chosen as a comparative indicator for the analysis, as corporate bonds are the financial instrument that displaces bank loans due to their progressiveness and efficiency. the dynamics of the debt burden on corporations from bonds and loans in these countries is shown in figure 1. in bulgaria, romania, and croatia, over the past seven years, there has been an inversely proportional trend between loan payments and bond payments. therefore, during periods of accumulation of financial resources from the sale of corporate bonds, there are predominant payments on bank loans, and vice versa. for poland, slovakia and the czech republic, 2014–2019 is a period of active attraction of financial resources both through the sale of bonds and through bank lending, as the difference between borrowed funds and debt repayment costs is positive throughout the period. exceptions are: poland corporations in 2018 carried out more financial transactions for the payment of interest on bonds than for the sale of bonds; in slovakia (2014) with predominant financial transactions on debt repayment on loans and 2020 – on corporate bonds; in the czech republic (2015) with predominant financial transactions to repay debt on loans, and 2020 – for corporate bonds. in hungary and slovenia, the periods of accumulation and repayment of the investigated debt instruments coincide. it is worth noting that in hungary, transactions to raise financial resources exceed transactions in the payment of interest from 2017, and in slovenia – from 2020. the circulation of corporate bonds in 2020 was complicated by the shock of the coronavirus pandemic. as uncertainty increased during the first weeks of march 2020 due to downgrades, potential defaults and withdrawals from corporate bond funds, dealers were reluctant to stockpile on their balance sheets. as a result, dealers tried to shift certain activities from the main to the agency trade, and also demanded a much higher price for intermediary activities. after the intervention of securities regulators, liquidity conditions improved, although not to the levels observed before the shocks caused by covid-19 (kargar, 2020). 3. the main trends of the corporate bond market in ukraine the main period of the corporate bond market development in ukraine is the period of activation (from 2002 to 2007). thus, the dynamic growth of the corporate bond market during 2002–2007 coincides with the general trends in the domestic market: growth of the market confidence level; increase in number of financial intermediaries; the market becomes important as an investment environment for the accumulation and distribution of financial resources; the necessary conditions for its functioning are created (kuzheliev, 2019). during 2012–2019, there was a decline in the dynamics of indicators: if in 2012 the total issue of corporate bonds amounted to 51.39 billion uah (3.66% of gdp), in 2019 – 11.21 billion uah (0.28% of gdp). thus, the annual amount of issues decreased 7.5% (figure 2). the national commission on securities and stock market report for october 2020 makes it possible to state that the volume of the corporate bond market in ukraine is currently growing, as 74 corporate bonds worth 29.35 billion uah were issued in ten months, which is higher than in 2014. this, in turn, is 1.63% of gdp, which almost reaches the level of 2014. it should be noted that these issues were made by enterprises baltic journal of economic studies 12 vol. 7, no. 1, 2021 corporate bonds, million eur loans, million eur corporate bonds, million eur loans, million eur 1 49 7 1 47 0 2 17 1 2 14 8 1 78 8 1 83 3 2 17 8 46 0 88 42 0 56 41 2 59 41 5 58 42 4 38 43 5 74 5 2 41 6 0 10000 20000 30000 40000 50000 2014 2016 2018 2020* bulgaria 23 12 5 23 95 8 25 96 2 29 50 1 26 81 1 28 10 7 70 17 7 18 62 73 19 49 17 20 48 78 21 21 54 22 12 05 23 01 87 26 51 01 0 50000 100000 150000 200000 250000 2014 2016 2018 2020* poland 74 0 88 8 53 2 69 6 41 4 80 0 17 22 71 22 6 68 74 9 67 71 4 70 01 5 71 26 3 76 13 3 76 53 7 0 50000 100000 2014 2016 2018 2020* romania 90 64 94 17 98 53 11 99 9 12 18 2 15 02 7 16 83 1 33 38 3 35 28 4 41 69 7 46 06 8 46 92 3 47 76 8 59 27 3 0 15000 30000 45000 60000 75000 2014 2016 2018 2020* slovakia 20 53 18 35 12 83 12 03 10 80 11 49 16 55 29 00 6 25 31 3 22 99 1 21 71 5 21 58 3 21 08 9 25 60 1 0 5000 10000 15000 20000 25000 30000 2014 2016 2018 2020* slovenia 59 81 49 97 41 49 34 00 36 16 52 79 12 29 3 10 43 71 98 84 7 95 78 9 91 78 1 10 03 91 10 01 16 18 69 60 0 35000 70000 105000 140000 175000 210000 2014 2016 2018 2020* hungary 20 43 22 40 23 67 18 16 18 33 30 35 30 84 36 14 8 34 31 0 33 54 4 33 09 2 32 80 4 31 25 9 48 06 5 0 10000 20000 30000 40000 50000 60000 2014 2016 2018 2020* croatia 17 23 7 21 00 1 24 64 0 30 88 3 32 56 4 37 14 8 48 16 1 77 88 6 78 44 5 86 69 2 10 23 18 10 97 81 11 31 24 13 27 07 0 20000 40000 60000 80000 100000 120000 140000 2014 2016 2018 2020* czechia figure 1. debt burden on eastern european corporations (eurostat, 2020) excluding banks and insurance companies, and the largest volume of output was in may 2020. as a result of the analysis of the corporate bond market in ukraine during 2014–2020, positive changes in the institutional environment were revealed, which consist in a sequel state policy towards foreign investors, growth of corporate governance culture, ensuring transparent financial reporting of enterprises. these shifts are the key factors that will contribute to the development of ukraine’s corporate bond market in the future. 4. var analysis determining the prospects for the development of the corporate bond market in ukraine requires the construction of a dynamic model. when assessing the development of the corporate bond market in ukraine, kuzheliev m. and yurova d. relied on indicators of bond trade in the secondary market (kuzheliev, 2011). however, we consider this indicator to be secondary, as it directly depends on the available amount of corporate bonds. in the study of iorhachova m. and kotsiurubenko h. the main indicator, by which the market development baltic journal of economic studies 13 vol. 7, no. 1, 2021 can be traced, is the amount of corporate bond issued (iorhachova, 2016). it characterizes the current state of the market, and its increase indicates development. this statement is based on the fact that the availability of a certain amount of the relevant financial instrument determines the volume of trade in the secondary securities market. the formation of the corporate bond market depends on the markets of other debt instruments. corporate bonds are seen as a progressive alternative to bank loans. thus, we assume that reducing the availability of bank loans to the corporate sector will help increase bond issues. equity is opposed to corporate bonds source of investment. investors decide to invest in stocks and bonds, given the state of the economic situation and market conditions. many authors note a tendency to increase the attractiveness of bonds as opposed to stocks during the crisis (mustafa, 2015). the investor seeks to invest with less risk during such a market phenomenon, which is caused by a high level of uncertainty about the long-term prospects of equity issuers. given the distribution of investment resources between the stock market and the bond market, it can be argued that the development of the stock market affects the development of the corporate bond market. another aspect that affects the growth of the corporate bond market is the amount of own financial resources, which determines the need to attract debt or equity financial instruments. in this aspect, it is advisable to allocate equity, which depends on the ability of enterprises to normal economic activity and development. atanasii o., klymenko s. and shapovalova a. note that the issue of corporate bonds is one of the ways to optimize the capital structure of the enterprise, i.e. to supplement equity debt (atanasii, 2019). this indicates the relationship between the level of available equity and the required level of debt capital, which form the amount of financial resources of the enterprise, which is necessary to achieve economic efficiency. therefore, we propose to build a vector autoregressive model (var) with such variables: the amount of issued corporate bonds, the amount of loans to financial corporations (excluding banks) and nonfinancial corporations, the amount of issued shares and the amount of equity. vector autoregression (var) has become a working model for macroeconomic forecasting. the popularity stems in part from the relative simplicity, flexibility, and ability to match data, but also from success as a prediction device. in practice, var is a system of regression models that considers all variables as endogenous and allows each of them to depend on t – n lag values of itself and all other variables in the system. the data for the model are given in table 1. in order to form the most reliable model, the coefficients of the equations for different time lags were compared. therefore, the most accurate is the model with a time lag of one and two years. as a result of calculations, the following system of equations (1) was obtained. 0 1 2 3 4 5 6 7 0,00 10,00 20,00 30,00 40,00 50,00 60,00 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 corporate bonds, billion uah share in gdp,% figure 2. corporate bond market in ukraine and its share in gdp, 2000–2019 (national commission on securities and stock market, 2005–2020; state statistics service of ukraine, 2020) ⎩ ⎪ ⎪ ⎪ ⎨ ⎪ ⎪ ⎪ ⎧ 𝑦𝑦𝑦𝑦 = 9.644 + 0.861 ∙ 𝑦𝑦𝑦𝑦−1 − 0.814 ∙ 𝑦𝑦𝑦𝑦−2 + 0.028 ∙ 𝑥𝑥𝑥𝑥1−1 − 0.017 ∙ 𝑥𝑥𝑥𝑥1−2 −0.045 ∙ 𝑥𝑥𝑥𝑥2−1 − 0.1 ∙ 𝑥𝑥𝑥𝑥2−2 + 0.018 ∙ 𝑥𝑥𝑥𝑥3−1 − 0.002 ∙ 𝑥𝑥𝑥𝑥3−2; 𝑥𝑥𝑥𝑥1 = 11.231 + 2.407 ∙ 𝑦𝑦𝑦𝑦−1 + 0.421 ∙ 𝑦𝑦𝑦𝑦−2 + 0.684 ∙ 𝑥𝑥𝑥𝑥1−1 + 0.045 ∙ 𝑥𝑥𝑥𝑥1−2 +0.292 ∙ 𝑥𝑥𝑥𝑥2−1 − 0.106 ∙ 𝑥𝑥𝑥𝑥2−2 + 0.185 ∙ 𝑥𝑥𝑥𝑥3−1 − 0.08 ∙ 𝑥𝑥𝑥𝑥3−2; 𝑥𝑥𝑥𝑥2 = −8.567 − 4.426 ∙ 𝑦𝑦𝑦𝑦−1 + 0.937 ∙ 𝑦𝑦𝑦𝑦−2 + 0.526 ∙ 𝑥𝑥𝑥𝑥1−1 − 0.632 ∙ 𝑥𝑥𝑥𝑥1−2 −0.424 ∙ 𝑥𝑥𝑥𝑥2−1 − 0.553 ∙ 𝑥𝑥𝑥𝑥2−2 + 0.282 ∙ 𝑥𝑥𝑥𝑥3−1 + 0.027 ∙ 𝑥𝑥𝑥𝑥3−2; 𝑥𝑥𝑥𝑥3 = 256.617 + 4.356 ∙ 𝑦𝑦𝑦𝑦−1 − 6.881 ∙ 𝑦𝑦𝑦𝑦−2 + 2.645 ∙ 𝑥𝑥𝑥𝑥1−1 − 0.022 ∙ 𝑥𝑥𝑥𝑥1−2 +0.205 ∙ 𝑥𝑥𝑥𝑥2−1 − 0.23 ∙ 𝑥𝑥𝑥𝑥2−2 + 0.007 ∙ 𝑥𝑥𝑥𝑥3−1 − 0.769 ∙ 𝑥𝑥𝑥𝑥3−2; ; (1) baltic journal of economic studies 14 vol. 7, no. 1, 2021 this system (1) allows to develop a forecast of indicators. the dynamics of the model assumes that the current level of each indicator depends on the level of y, x1, x2 and x3 in the t – 1 period and t – 2 period. therefore, forecast indicators were obtained for the amount of corporate bonds, shares, equity and loans to the corporate sector for the period from 2020 to 2024 (figure 3). in general, the nominal value of the available pool of resources from these sources of financing is expected to increase by 3.4% annually, which, given the inflation rate, indicates the lack of dynamism of the financial market. according to the results of the model, the corporate bond market of ukraine is expected to increase by 2021, in which the issued corporate bonds will amount to 41.59 billion uah, after which the market is expected to narrow by 9.4 billion uah, 5.02 billion uah and 1.98 billion uah. the decomposition of the corporate bonds amount shows that the indicator largely depends on the amount of issued shares. given that the development of the corporate bond market depends on changes in other markets of the financial system, we believe that the declining dynamics is due to the specifics of the formation of other indicators in previous periods. thus, in 2020, corporations’ equity is expected to amount to 1,244.98 billion uah, and during 2021–2024 its average annual growth rate will be 4.17%. according to the model, the amount of issued shares will be 173.34 billion uah in 2020, and the average annual growth rate of 26.9% is expected in 2021–2024. the amount of loans to corporations will be 763.07 billion uah (with 5.03% of the annual growth rate during 2021–2024). 5. scenarios for development of the corporate bond market in ukraine we consider the results of the var model to be a potential level of indicators that would be achieved under the condition of systematic development of the world and national economy. given the fact that the table 1 data for var model corporate bonds loans to corporations shares equity y x1 x2 x3 billion uah billion uah billion uah billion uah 2000 0.07 18.47 15.49 95.52 2001 0.69 26.78 21.92 128.38 2002 4.27 38.33 12.80 144.30 2003 4.24 57.89 18.02 184.62 2004 4.11 72.43 28.34 275.31 2005 12.75 107.74 24.81 315.05 2006 22.07 163.19 43.54 426.58 2007 44.48 266.41 50.00 628.16 2008 31.35 453.45 46.14 691.50 2009 10.11 476.23 101.07 774.42 2010 9.49 514.39 40.59 870.29 2011 35.91 591.99 58.16 967.63 2012 51.39 621.65 15.84 1162.01 2013 42.47 711.22 64.23 1189.73 2014 29.01 804.42 144.35 903.20 2015 11.42 803.36 122.30 1396.13 2016 5.52 833.70 199.36 1491.94 2017 8.35 840.87 324.84 1499.70 2018 15.46 868.96 22.28 1231.14 2019 11.21 754.22 63.54 1329.42 1 10 100 1000 10000 100000 1000000 10000000 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 corporate bonds loans to corporations shares equity mln uah figure 3. forecast of corporate bond market development in ukraine for 2020–2024 baltic journal of economic studies 15 vol. 7, no. 1, 2021 ukrainian economy is currently in a state of shock due to the deployment of the global coronavirus pandemic covid-19, there is a need to identify possible scenarios for the development of the corporate bond market. we propose to estimate the changes in the indicators used in the model, provided that their level decreases in 2020 by 10% compared to the expected level obtained as a result of the var model. therefore, the development of the corporate bond market in ukraine will be analyzed for each of the following scenarios: – scenario a – decrease in the amount of equity; – scenario b – decrease in the amount of issued shares; – scenario b – decrease in the amount of loans to corporations; – scenario a + b – decrease in the amount of equity and issued shares; – scenario a + c – decrease in the amount of equity and loans to corporations; – scenario b + c – decrease in the amount of issued shares and loans to corporations; – scenario a + b + c – decrease in the amount of equity, issued shares and loans to corporations. each of the scenarios provides different results for the development of the corporate bond market. consider them in more detail. according to scenario a, the amount of equity will decrease, which will significantly affect the corporate bond market. as you know, one of the sources of equity formation of enterprises is retained earnings (ivchenko, 2016). accordingly, if as a result of economic activity on the balance sheet of the enterprise remained uncovered loss, the amount of equity is reduced by this amount. the data set “main forecast indicators of economic and social development of ukraine for 2020-2021” states that in 2020 the profits of profitable enterprises are expected to grow by 1.4-12.6% compared to 2019, which indicates positive prospects for the development of national economy (tsykun, 2020). however, the forecast does not take into account companies without profit. according to fedulova i. and dzulai m., the main consequences of covid-19 for ukrainian enterprises are the realization of the following risks: change in consumer preferences and consumer demand, reduce of export, purchasing power, production and sales, cessation of production for certain enterprises, unpreparedness for alternative ways to meet demand, the destruction of supply chains (fedulova, 2020). the peculiarity of these risks is their impact on both smes and large enterprises, which indicates a high probability of reducing the amount of equity in the corporate sector. therefore, a decrease in equity by 10% of the potential level will lead to the following changes in the var model: 1. the amount of equity will be higher than the potential level by 0.31% in 2021, 11.83% in 2023 and 3.12% in 2024, and lower by 6.12% in 2022. the average annual rate of decline in corporate equity will be 3.41%; 2. the amount of issued shares will be significantly higher than the potential level. during 2021–2024, there will be an average annual increase by 142.1%; 3. the amount of loans to the corporate sector will also be higher than the potential level by 7.3% annually. the average annual growth rate of loans to corporations during 2021-2024 will be 5.19%; 4. the amount of issued corporate bond will exceed the potential level in 2021 and 2022 by 25.6% and 11.5%, respectively. however, in 2023 and 2024 there will be a smaller amount of corporate bonds compared to the potential level by 75.8% and 33.7% respectively. the average annual growth rate of the corporate bond market during 2021–2024 will be 28.4%. scenario b assumes a decrease in issued shares, which may be due to a number of reasons, but the main one to pay attention to in a global pandemic is the liquidation of enterprises, which may be the result of bankruptcy. therefore, the deployment of this scenario involves the following results: 1. minor changes in the amount of equity of the corporate sector, i.e. failure to reach the potential level in 2021-2022 (by 0.3%) and a slight excess of potential in 2023-2024 (by 0.12-0.6%). the average annual growth rate of the indicator during the period will be 4.18%. 2. the amount of issued shares will exceed the potential level in 2021 and 2024 by 10.3% and 5.7%, and in 2022 and 2023 will not reach the potential level by 1.1% and 4.5%, respectively. the average annual growth rate of issued shares will be 26.23%. 3. the amount of loans to the corporate sector will hardly change compared to the potential level: a slight negative deviation in 2021 (by 0.6%) and a positive deviation during 2022-2024 (by 0.2-0.5%). the average annual growth rate of loans will be 5.15%. 4. the amount of issued corporate bond during 2021–2023 will exceed the potential level by 1.2–5.8%, and in 2024 will not reach the potential level by 2.1%. the average annual rate of decrease for corporate bonds during 2021–2024 will be 2.36%. the next course of events involves a decrease in lending to the corporate sector. scenario c is quite realistic in a coronavirus pandemic. according to o. hlushchenko’s research, credit quality can deteriorate rapidly, especially in the industries or geographical regions that have suffered the most. this may override existing models of current expected credit losses, which will require more resources to assess the impact of changes in market conditions. markets can be very volatile for some time, which will be an obstacle in the process of setting interest rates. rapid changes in liquidity and a sudden drop in demand are already causing some difficulties for market participants who need a “vision” of prices. similarly, volatility and related dislocations may baltic journal of economic studies 16 vol. 7, no. 1, 2021 limit the effectiveness of hedging relationships (hlushchenko, 2020). from the point of view of financial institutions, the conditions caused by the covid-19 crisis have specific implications for credit risk management and mitigation. as a result, there is a problem of increasing interest rates on the loan, and thus reducing its availability to businesses. thus, a decrease in corporate lending by 10% from the potential level will affect the prospects of the financial market as follows: 1. the amount of equity of the corporate sector will not reach the potential level during 2021-2024 by 6.3-15.3%. the average annual growth rate will be 2.73%. 2. the amount of issued shares will be lower by 56.2% in 2021, by 15.6% in 2022 and by 12.7% in 2023. the amount is expected to exceed the potential level by 1.6% only in 2024. nevertheless, the average annual growth rate of shares will be 46.6%. 3. the amount of loans to the corporate sector during 2021-2024 will not reach the potential level by 8.9%. it should be noted that this will not affect the trend of annual increase in lending, the average growth rate of which will be 5.53%. 4. the amount of corporate bonds issues by analogy with the stock market will not reach the potential level during 2021-2023 by an average of 7.5%, and in 2024 will exceed the potential level by 7.2%. during the study period, there will be a slight average annual decrease of 0.58%. the combination of scenarios a and b is possibly provided that the total equity of corporations decreases, which occurs against the background of the liquidation of certain corporations and the receipt of uncovered loss by others. it should be noted that the reduction of total equity of corporations by 10% and the amount of share issues by 10% implies that the uncovered loss of corporations in 2020 will be 10% of the difference between equity and authorized capital. according to the issue of the state statistics service of ukraine (august 25, 2020), the amount of pre-tax profit of large and medium enterprises for january – june 2020 is 89.9% of the corresponding period of 2019, and the loss – 316.4%. in addition, the share of unprofitable enterprises increased by 11.7%, which indicates a high probability of scenario a + b (state statistics service of ukraine, 2020). therefore, the forecast indicators of the var model will change as follows: 1. the amount of equity will not differ from the potential level in 2021, will be lower by 6.4% in 2022, and in 2023 and 2024 will exceed the potential level by 12.4% and 3.2%, respectively. nevertheless, there will be a trend towards an annual decline (the rate of decline will be 3.32% annually). 2. the amount of issued shares will significantly exceed the potential level in 2021 (3.4 times) and in 2024 (2.3 times), but in 2022 and 2023 the indicator will not reach the potential level by 71.7% and 67.6%. the latter will not significantly affect the overall dynamics of the stock market growth over a given period of time, as the average annual growth rate will be 156.6%. 3. the dynamics of the loans to the corporate sector will be positive both in comparison with the potential level (exceed by 5.2–12.9%) and in terms of the average annual growth rate (5.28%). 4. the amount of corporate bond issues will exceed the potential level in 2021 and 2022 (by 27.5% and 17.3%), in 2023 and 2024 it will not reach the potential level (by 74.6% and 35.8%). the average annual growth rate of the corporate bond market during this period will be 24.74%. scenario a + c assumes that the decrease in equity due to the accumulation of losses by corporates will lead to high interest rates on bank loans, which will make them less affordable. therefore, to meet the market demand for financial resources, the volume of the corporate bond market will increase. in this case, the forecast of the model will have the following dynamics: 1. despite the fact that in 2021, 2022 and 2024 the amount of equity will not reach the potential level by 15%, 17.3% and 3.2%, in 2023 the indicator will exceed the potential level by 5.5%. in addition, the average annual rate of decline in equity will be 3.24%. 2. the amount of issued shares will significantly exceed the potential level in 2021 and 2024, but in 2022 and 2023 will not significantly reach the potential level. nevertheless, over the forecast period it will exceed the potential level by 35.9%, and will have a significant annual growth rate (232%). 3. the amount of loans to the corporate sector will exceed the potential level by 7.1% and 1.1% in 2021 and 2022, but in 2023 and 2024 will not reach the potential level by 5.1% and 9.4%, respectively. the average growth rate will be 5.84%. 4. the amount of corporate bond issues will significantly exceed the potential level in 2021 (by 20.4%), and in 2022, 2023 and 2024 will not reach the potential level by 0.6%, 80.9% and 26.5%, respectively. nevertheless, it is during this course of events that the highest average annual growth rate of registered corporate bond issues in ukraine during 2021–2024 will be noted, namely 45.6%. scenario b + c indicates a decrease in demand for bank lending due to the liquidation of a certain share of corporations. it also explains the decrease in total equity. this combination of factors will lead to the following changes: 1. reducing the availability of these two sources of financing for enterprise development may lead to a significant shortfall in equity during 2021–2024. it is assumed that the amount of equity will not reach the potential level of 5.7-15.6%. nevertheless, the average annual growth rate will be 2.77%. 2. the amount of issued shares will also not reach the potential level not only in 2020 but also during 2021–2023 (by 16.7-45.9%), but in 2024 it will exceed baltic journal of economic studies 17 vol. 7, no. 1, 2021 the potential level by 7.4%. even given the lower indicators compared to the potential level, the annual growth rate will be 39.18%. 3. the amount of loans to the corporate sector during 2021-2024 will not reach the potential level by 8.8%, but the annual growth rate will be 5.64%. 4. regarding the amount of corporate bond issues, this scenario is one of the worst, as the annual rate of decline will be 12.3% for 2021–2024. moreover, the corporate bond market will not reach the potential level in 2021–2023 by 4.5%, and only in 2024 will exceed the potential level by 5.1%. another probable scenario is a combination of negative trends in the three indicators, i.e. a decrease in equity, issued shares and loans to corporations (scenario a + b + c). it should be noted that the probability of this scenario is quite high, because equity, shares, loans and bonds are elements of the financial market, i.e. are characterized by interdependence. therefore, a change in even one indicator can immediately affect the change in the rest. this scenario assumes the following forecast of indicators: 1. the amount of equity will not reach the potential level in 2021, 2022 and 2024 by 15.3%, 17.6% and 3.1% respectively. in 2023, it will exceed the potential level by 6.1%. given this, the annual rate of decline will be 3.12%. 2. the amount of issued shares will significantly exceed the potential level in 2021 and 2024 by 2.87 times and 2.34 times, respectively. in 2022 and 2023, the amount will be 12.7% and 19.7% of the potential level. the given scenario will guarantee a significant growth rate of the indicator during the forecast period (by 264% annually). 3. the amount of loans to the corporate sector will exceed the potential level in 2021 and 2022 (by 6.4% and 1.3%), but in 2023 and 2024 will not reach the potential level (by 4.6% and 8.9%). the average growth rate will be 5.92%. 4. the annual growth rate of corporate bond issues will be the second highest in all scenarios and will be 36.3%, namely: 67.8% in 2021, -33.5% in 2022, -83.7% in 2023 and 226.1% in 2024. in addition, the potential level will exceed during 2021–2022 (by 22.3% and 5.2%) and the level will be shortened in 2023 and 2024 (by 79.7% and 28.6%). based on the above, the most favorable for the development of the corporate bond market in ukraine is scenario a + b, in which corporations’ equity will be reduced by 10% due to an increase in uncovered loss, but such a reduction will not lead to liquidation of corporations. this scenario assumes the highest annual growth rate of the corporate bond market (45.6%), namely: -36.1% in 2021, -83.8% in 2022, 256.6% in 2023 and 45.6% in 2024. 6. conclusions in recent decades, eastern european countries, which have made the most progress in market reforms, have developed the stock market and one of its most important segments (the corporate bond market) to such a level that it is gradually beginning to perform its main function of allocating financial resources and cross-sectoral capital flows. the corporate bond markets of hungary, slovakia, poland and the czech republic, which rely on a solid legal framework, infrastructure, and an efficient regulatory system, have become attractive to foreign investors, whose rights are secure. currently, the corporate bond market of ukraine is under the influence of positive changes in the institutional environment towards ensuring a consistent government policy regarding foreign investors, growing a culture of corporate governance, ensuring transparent financial reporting of enterprises. the implementation of the eu best practices in regulating the financial market in ukraine will promote the growth and development of the corporate securities market, and thus allow domestic companies to simplify the process of attracting financial resources from external sources. according to the dynamic var model of corporate bond market development in ukraine based on data for 2000–2019, by 2021 the corporate bond market of ukraine is expected to increase to 41.59 billion uah. during 2022–2024, the annual market is expected to decline by an average of 5.47 billion uah. given the fact that the deployment of the covid-19 coronavirus pandemic has significantly changed the state of the global and national financial market, adjustments were made to the indicators of equity, issued shares and loans to corporations in 2020. with the help of scenario forecasting it was found that the most favorable for the corporate bond market of ukraine is the course of events, in which the amount of equity and loans to corporates in the current year will not reach 10% of the potential level set by the var estimation. references: atanasii, o. v., klymenko, s. o., & shapovalova, a. a. 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(2020). osnovni prohnozni pokaznyky ekonomichnoho i sotsialnoho rozvytku ukrainy na 2020–2021 roky [the main forecast indicators of economic and social development of ukraine for 2020–2021]. retrieved october 28, 2020, from https://data.gov.ua/dataset/68b7399d-feb8-4f56-9155-bae3e49ed02f baltic journal of economic studies 92 vol. 5, no. 4, 2019 corresponding author: 1 donetsk university of economics and law, ukraine. e-mail: holovach753@gmail.com 2 dnipropetrovsk state university of internal affairs, ukraine. e-mail: pryputendmytrii@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-92-96 innovative approaches in the economic sphere andrii holovach1, dmytro pryputen2 abstract. the purpose of the article is to analyse the current state of the economy, to consider the positive and negative tendencies that stand in the way of further economic growth, and to determine on this basis an effective strategy of economic development in the innovation sphere. the subject of scientific research is innovative approaches in the economic sphere. methodology. based on the scientific literature analysis of the current economic situation, strategic priorities and goals of economic development were determined, as well as the dialectical method, method of scientific abstraction, methods of system analysis were used. the results of the research showed that there are a number of key economic problems that slow down the development of the national economy for the implementation of international experience in the development of the national economy. at the same time, ukraine is trying to overcome the negative trends of the economic crisis by carrying out reforms and adopting appropriate strategies for joining the eu. it has now been found that a complex structural transformation of the economy is needed in order to increase the specific gravity of the high-tech and innovative sectors. practical implications. the complex analyses of the state and the determinant tendencies of economic development according to the threats and risks including the crisis processes in the modern world were carried out. determination of the basic principles for formulating and implementing economic development strategy based on coordination of strategic priorities and strategic goals of the eu and the necessity to reform the economic sector in order to develop longterm economic spheres. value/originality. the realized research revealed the state of development of the economic system, as well as further development of identifying perspective trends of the economy, was received. key words: economy, economic development, innovative development, european integration, foreign experience. jel classification: o10, o16, o19 1. introduction at the present stage of becoming ukraine as a european state, a set of strategic measures directed to developing the economy in the context of european integration is being implemented (yunin et al., 2018). thus, the economic development of ukraine more than ever needs today reasonable and prudent macroeconomic policies aimed at further stabilization. radical social and economic changes that have occurred over the past decade have caused both positive and negative changes in ukrainian society (pavlenko et al., 2017). the development of the world economy in the period until 2020 will be marked by the influence of a number of factors and megatrends, which will lead to significant changes in the common picture of the world economy and modification of its organization. according to the place of ukraine at the turning point of western and eastern european christian civilization, the formation of a new global architecture puts ukraine to severe geopolitical, geostrategic, and geoeconomic challenges, the answers to which ukraine will have to find until 2020. in this context, innovation is a defining characteristic of modern scientific and technological, industrial, socioeconomic, and all social processes. the fate of ukraine depends on the mastering innovative development mechanisms: whether it will move towards joining the developed countries or whether it will remain a stagnant country on the sidelines of scientific, technological, and social progress. this is due to the general patterns of social development that make the transition from a predominantly reproductive to an innovative type of development in the world. those who understood this in time and built their own economic system in accordance with this historical imperative have success, respect and glory, who didn’t so – there are problems, failures, and hopelessness. innovation is not only the key to dynamic development, prosperity, personal success, but also a means of ensuring the country’s sovereignty and its competitiveness in today’s highly complex world (vasin et al., 2017). these circumstances – corresponding to the fact that ukraine, according to the indicators of the baltic journal of economic studies 93 vol. 5, no. 4, 2019 eu innovation scoreboard, is an innovator which is just being developed (heitz et al., 2015) – were the objective basis that determines the relevance of the chosen topic of research. 2. analysis of recent research and publications the research of theoretical and practical aspects of the current state of the ukrainian economy is devoted to the scientific works of such scientists as: v. m. heitz, m. kondratenko, a. mazaraki, s. m. makukha, t. melnyk, l. v. mogilevsky, s. o. pavlenko, v. v. pavlov, v. g. sevruk, v. v. ruden, i. v. tkachenko, and o. s. yunin. the purpose of the article is to analyse the current state of the ukrainian economy, to consider the positive and negative trends and the main factors that stand in the way of further economic growth, and to determine on this basis an effective strategy for the development of the ukrainian economy. 3. presentation of the main material as a result of the changes taking place in society along with the positive ones, some negative tendencies are emerging, which significantly impede the development of statehood in ukraine. the problems of economic stability are of great concern (mohilevskyi et al., 2017). the state of the ukrainian economy, the transformations and processes that took place in the past and especially recently clearly show that the solution to the problem of socio-economic development has become one of the most important aims in the country. overcoming the crisis, the fight against the global financial crisis, the transition to sustainable economic growth require the further elaboration of mechanisms for regulating the economy at both national and regional levels (ruden, 2015). the gradual spread of global trends of the regulation of financial and economic relations is a significant factor of the dependence of the ukrainian financial sector on the global one, which in turn necessitates a rethinking of domestic experience in this aspect. the development of an innovative environment in modern conditions requires the coordination of actions of individual economic entities with the state in order to obtain the optimal combination of competitive advantages, which will contribute to the implementation of the national strategy of innovation development as much as possible (pavlov, 2019). an important factor in the formation of an innovative economy in the country is the introduction of the latest technologies. in 2013 ukraine sub-index for “technological readiness” took 94th place down in the ranking by 13 points compared to 2012 (81st). sweden, luxembourg, norway, the united kingdom, and denmark rank first in the overall technological readiness rating of the countries. finland, sweden, norway, switzerland, and the united kingdom have the highest level of access to the latest technologies. ukraine ranks last by the components of the subindex for “technological readiness”: the availability of new technologies – 106th place, for technology development at the company level – 100th place, the movement of fdi and technology – 131st place. better indicators of technological readiness ukraine showed in terms of access to the global internet: in terms of number of people using the internet – 93rd place, in terms of broadband internet subscribers per 100 population – 71st place, in terms of internet traffic (kb per user) – 84th place, in terms of mobile internet users per 100 people – 94th place (world economic forum, 2014). the indicators affirm a low level of technology development in ukraine. an indicator of the innovative and intellectual development of the country is the high level of business competitiveness. in ukraine among the components of the business competitiveness sub-index, six indicators belong to potential threats and three indicators belong to critical laggings, there are no relative competitive advantages at all. among the critical laggings are the following: the low level of the state support for the cluster development – 136th place, the nature of the competitive advantage – 112th place (basing of the competitive advantage of the country on cheap labour and cheap natural resources), the willingness to delegate the authority – 124th. the result of ukraine is rather low in terms of the quantity (81st) and the quality (73rd) of the local suppliers network, the presence of companies in the chain of the creating of value (87th place), the control of domestic companies over the distribution channels (60th place), the complexity of the industrial processes (97th place), the use of marketing complex (77th place) (world economic forum, 2014). thus, the products produced by domestic companies are mostly labour-intensive, based on outdated technology, cheap labour and natural resources. it should be emphasized that the development of the ukrainian economy in recent years shows the unstable dynamics, which confirms the different adaptation of its industries to the challenges of today and has the consequence of reducing the level of the investmentinnovation activity and competitiveness. in addition, ukraine is consistently ranked among the most corrupt countries (kondratenko, 2018). the corruption is one of the main problems that have a negative impact on the innovative economic development of ukraine. at the end of the twentieth century, the international community has recognized that corruption is a global problem in every country and this problem should be solved. the result was the adoption of a whole set of international mandatory and recommendatory legal acts, which was prepared and adopted by the united nations, the organization for economic cooperation baltic journal of economic studies 94 vol. 5, no. 4, 2019 and development, the organization of american states, the council of europe, the european union, the african union. the international legal instruments were different in scope but the establishment of the common standards for combating corruption by enforcement of anticorruption laws at the national level was the main purpose of all of them (sevruk, 2014). despite all of this, it is necessary to create conditions that will ensure the successful reformation of the national economy of ukraine. the formation of a real idea of national development; the existence of a unified program of transformation, political will and a team of reformers; the rapid (as far as possible) reformation; the economic liberalization (from the old bureaucratic system to transparent market relations) and a capable government; the unity and the consolidation of the whole society; ensuring the equivalence of the ukrainian economy according to the external economic environment; ensuring the high social welfare and social protection of the population; the necessity of the ecological balance of the national economy; the implementation of an innovative model of the national economy development as soon as possible are necessary for this purpose (mazaraki, 2011). according to our research, it is necessary to distinguish some states that have achieved significant development in the innovation sector. the united states is a country with a strong economy, a perfect political system, capable of defending and with an effective army and a number of other advantages. nowadays the us financial system reached a high degree of the development and has become fundamental to the economy providing the opportunity for the dynamic development and overcoming the crisis (rudenko & tokar, 2010). today germany is characterized by economic stability, a high standard of living and great achievements in the international banking market and in all other areas where the country traditionally holds a leading position (tkachenko & stusenko, 2011). the republic of france is no less financially developed today. it is one of the western leading countries ranking seventh among other countries in the world in terms of economic development. the participation of france in the “common market” has opened the strengths and weaknesses of its economy, which showed that the country has long developed under the “hothouse” conditions of the customs protectionism and due to the exploitation of large colonial possessions (vynohradnia, 2013). the current position of japan in the world economy is the result of its economic development in the second half of the twentieth century. the economy of the country is focused on manufacturing and it is one of the most powerful economic systems in the world and the biggest one in asia in spite of its high dependence on the supply of raw materials from the other countries due to the lack of its own natural resources. moreover, japan has created a specific economic model with a unique system of management and organization of the production process, which covers the micro and macroeconomic levels of development that has allowed japan to turn from a state with a feudal system into the highly developed country in a short period of time (ziunkin, 2003). the evolution of the european union with the transition from the predominance of territorial enlargement policy to internal policy and deepening integration will take place by 2020. the recent enlargement of the eu has led to a significant increase in the heterogeneity of its internal structure, which was the result of a significant increase in differences not only in the levels of socio-economic development but also in the institutional features of the participating countries. the analysis of these differences leads to the increased rejection of the further enlargement of the power of the eu communitarian authorities and to the blocking of the internal institutional reforms, which are required to exist in the expanded composition. this objectively narrows the field for further eu enlargement policy as it could be fatal for the future of the european union within the limits of the eu old institutional mechanisms. under such conditions, major efforts will be directed towards finding ways to enhance the cooperation of existing union members. moreover, even partial disintegration of the european union with the formation of the subregional integration groups with varying degrees of intensity of the interconnections is possible (a model of the concentric circles). it is important for ukraine to reduce as soon as possible its gap with the eu countries in institutional and innovative development and also in standards of living (strategy for sustainable development "ukraine – 2020"). thus, it should be noted that according to the strategy for sustainable development “ukraine – 2020”, ukraine has identified the following strategic indicators for the implementation of the strategy. the implementation of the strategy envisages the achievement of 25 key indicators that assess the progress of reforms and programs: 1) in the doing business ranking of the world bank, ukraine will rank among the first 30 positions; 2) the credit rating of ukraine – rating on liabilities in the foreign currency according to the scale of the rating agency standard and poor’s – will be not below the investment category “bbb”; 3) according to the global competitiveness index, which is calculated by the world economic forum (wef), ukraine will be among the 40 best countries in the world; 4) the gross domestic product (by purchasing power parity) per capita which is calculated by the world bank will increase to $16,000; 5) net fdi inflows for the period of 2015–2020 according to the world bank will amount to over usd 40 billion; baltic journal of economic studies 95 vol. 5, no. 4, 2019 6) the maximum ratio of the state budget deficit to the gross domestic product which is calculated by the international monetary fund will not exceed 3 percent; 7) the maximum ratio of the total public debt and the government-guaranteed debt to the gross domestic product which is calculated by the international monetary fund will not exceed 60 percent (according to the maastricht convergence criteria); 8) energy intensity of gross domestic product will be 0.2 tons of oil equivalent per $1000 of the gross domestic product according to the information of the international energy agency; 9) the expenses on the national security and defence will amount to at least 3 percent of the gross domestic product; 10) the number of professional army per 1,000 population will increase from 2.8 to 5.6 persons according to the information of the stockholm international peace research institute; 11) according to transparency international’s corruption perceptions index, ukraine will be ranked in the top 50 countries in the world; 12) according to the results of the survey, the level of confidence of the expert community (lawyers) to the court will be 70 percent; 13) according to the results of a national poll, the level of public trust in law enforcement agencies will be 70 percent; 14) updating the staff of the public servants in law enforcement agencies, courts and other state bodies by 70 percent; 15) the limit of one supplier’s share in the total procurement of any of the energy resources will be no more than 30 percent; 16) the average life expectancy according to the world bank estimates will increase for 3 years; 17) the specific gravity of the local budgets will be at least 65 percent in the consolidated state budget; 18) broadband internet penetration according to the data of the world bank will be 25 subscribers per 100 people; 19) 75 percent of graduates of secondary schools will be able to speak at least two foreign languages that will be confirmed by international certificates; 20) ukraine will participate in the international pisa education quality survey and will be in the top 50 participating countries; 21) ukraine together with the world bank will develop an indicator of welfare of citizens and after determining its target value the state will conduct monitoring changes of the index; 22) 90 percent of ukrainian citizens will feel proud of their country as a result of a nationwide poll; 23) ukraine will win at least 35 medals at the xxxii summer olympic games; 24) ukraine will be among the 30 best countries in the world according to the global competitiveness index in the fight for talent calculated by one of the leading insead world business schools; 25) 20 ukrainian films will be widely released in 2020 (strategy for sustainable development “ukraine – 2020”). therefore, the most important task of the economic development for the coming years for our country should be considered a decisive complex structural transformation of the economy in order to increase the specific gravity of the high-tech innovative sector. the sustainable and long-term economic development requires creating the innovative technology sector first and only then to integrate economically. and such integration should be with equal economies but not with those whose levels of development are much higher. furthermore, the goals of the economic development of ukraine nowadays require binding government intervention in the domination of the industrial and knowledge-intensive sectors rather than the raw materials and food sectors (makukha, 2015). 4. conclusion thereby it is necessary for today to analyse in detail the existing legislative framework, which regulates the innovation activity, and also to analyse the implementation of the effective proposals of changing this framework taking into account the tasks of economic modernization, which is based on innovation (minasyan, 2017). it should be supposed that for today it is necessary to pay special attention to the development of innovations in ukraine. one of the most important factors in the competitiveness of the economy is the innovativeness of the country. the only relative competitive advantage of ukraine under this criterion according to which it ranks 46th among 148 countries in obedience to wef is the availability of scientists and engineers. the rating of ukraine in terms of quality of the research institutions is relatively high – 69th place, with the cooperation of universities and enterprises in the field of research and development – 77th place, with the number of patents per million population – 52nd place. the worst result ukraine demonstrates in terms of its ability to innovate – 100th place, expenses of companies for research and development – 112th place, state purchases of advanced technological products – 118th place (world economic forum, 2014). therefore, summarizing the conducted comparative analysis of innovative approaches in the economic sphere of foreign countries and ukraine leads us to the conclusion that in many respects the foreign experience is more acceptable and effective than the national one because all the countries examined are the world leaders of economic development nowadays. undoubtedly in each case, we are talking about the specific aspects of historical and political evolution where each of them has its own impact on the economic sector of a country. baltic journal of economic studies 96 vol. 5, no. 4, 2019 therefore, the “european choice” which lies in the effective implementation of profound economic, social, and political reforms, the consolidation of democracy and the basic principles of the civil society is the foundation of the economic growth strategy (laperche, 2012). accordingly, the ukrainian economy needs some changes in order to achieve high social standards. ukraine’s economic policy should be directed towards the economic growth, the increase in incomes and the quality of life in general through the transformation of the system of the labour compensation, the diversification of the economy through the creation of an attractive investment climate, the optimization of the tax system, the development of a “green economy” and innovative approaches. references: yunin, o., sevruk, v., & pavlenko, s. (2018). priorities of economic development of ukraine in the context of european integration. baltic journal of economic studies, 4(3), 358–365. doi: 10.30525/2256-0742/2018-4-3-358-365 pavlenko, s. o., sevruk, v. g., & kobko, ye. v. (2017). training police officers in the conditions of reforming the system of education of the ministry of internal affairs of ukraine in accordance with european standards. science and education, 6, 142–150. heitz, v. m., and others (2015). innovative ukraine 2020: national report. nas of ukraine. kyiv. mohilevskyi, l. v., sevruk, v. g., & pavlenko, s. o. (2017). psycho-pedagogical training of operating unit workers of the national police of ukraine. science and education, 11, 120–132. ruden, v. v. perspectives and priorities of development of socio-economic system of ukraine. url: http://intkonf.org/ ruden-vv-perspektivi-taprioriteti-rozvitku-sotsialno-ekonomichnoyi-sistemi-ukrayini/ pavlov, v. v. (2019). encouraging the development of the innovative environment of ukraine through the publicprivate partnership activation. innovative economic mechanisms for development of enterprises, regions and countries: proceedings of the international scientific and practical conference, kyiv, february 15–16. kyiv: taurida national university by the name of v. i. vernadsky. the global competitiveness report 2013–2014. url: http://www3.weforum.org/docs/wef_ globalcompetitivenessreport_2013-14.pdf kondratenko, m. (2018). the current state of the economic sphere in ukraine february 1. url: https://uamodna.com/ articles/suchasnyy-stan-ekonomichnoyi-sfery-v-ukrayini/. sevruk, v. g. (2014). world experience in preventing and combating corruption: ukraine's integration into the eu. use of special knowledge in investigating corruption offenses: round table materials (kyiv, november 20). kyiv: nat. acad. inside. cases. mazaraki, a., & melnyk, t. (2011). modern trends and factors of development of foreign trade of ukraine. bulletin of the kyiv national university of trade and economics, 2, 5–14. rudenko, yu. m., & tokar, v. v. (2010). financial systems of foreign countries [finansovi systemy zarubizhnykh krain]. kyiv: kneu. tkachenko, i. v., & stusenko, l. a. (2011). budget and financial system of japan [biudzhetno-finansova systema yaponii]. visnyk chernivetskoho torhovelno-ekonomichnoho instytutu. ekonomichni nauky, 2(1), 92–96. vynohradnia, v. m. (2013). features of functioning of financial systems in the countries with market economy. ekonomichnyi visnyk universytetu, 20(1), 199–205. ziunkin, a. h. (2003). financial law [finance law]. kyiv: maup. on the strategy for sustainable development "ukraine – 2020". url: http://zakon.rada.gov.ua/laws/show/5/2015 makukha, s. m. (2015). priorities of economic development of ukraine. problems of development of economic theory in modern conditions. proceedings of the xi all-ukrainian scientific-practical conference "pokritanovsky readings" (odessa, december 2). minasyan, g. g. (2017). project management in the sphere of innovations: interdisciplinary approach. vestnik vguit, 79(4), 289–296. doi: 10.20914/2310-1202-2017-4-289-296 blandine laperche (2012). general presentation innovation processes: why institutions matter. journal of innovation economics & management, 1(9), 3–11. vasin, s. m., gamidullaeva, l. a., & rostovskaya, t. k. (2017). the challenge of social innovation: approaches and key mechanisms of development. european research studies journal, xx(2b), 25–45. baltic journal of economic studies 90 vol. 5, no. 5, 2019 corresponding author: 1 national academy of statistics, accounting and auditing, ukraine. e-mail: natasha_shevchuk_2012@ukr.net orcid: https://orcid.org/0000-0001-9410-3614 researcherid: h-2935-2018 2 national academy of statistics, accounting and auditing, ukraine. e-mail: zalyubovskaya@bigmir.net orcid: https://orcid.org/0000-0001-5651-8165 researcherid: k-6235-2018 doi: https://doi.org/10.30525/2256-0742/2019-5-5-90-99 conceptual approach to understanding budget management in the public regulation system nataliia melnychuk1, svitlana zalyubovska2 abstract. based on the generalization of existing conceptual approaches to the budget management understanding in the public regulation system, a conceptual approach «entity-relationship-result» management is proposed, which made it possible to reveal the main trends in the budget management development in the public regulation system, determine its structural elements, deepen the budget management essence, characterize scientific approaches to understanding the components and principles of budget management, state your own vision of its methods and classification features. from this, a conceptual semantic model of the budget management understanding in the public regulation system is developed reflecting the list of budget management components in the public regulation system, their close relationship and coherence. the purpose of the article is the development of a conceptual approach to the budget management development in the public regulation system. theoretical and methodological principles of the budget management development in the public regulation system is a subject of investigation. research design. within the article, a set of general scientific and special research methods is used. when forming the conceptual categorical apparatus, methods of analysis and synthesis, generalization and scientific abstraction were used. abstract-logical method was used for the generalization of theoretical foundations of budget management; system analysis was used to characterize the main components, functions, principles, techniques and budget management methods; historical-logical method, the method of induction and deduction allowed to explore the conceptual approach to understanding the importance of budget management in the public regulation system; graphical method was used to visualize the results of the study. conclusions. therefore, budget management is one of the tools to overcome problems, which arise in the process of formation and use of budget funds in the conditions of their scarcity. the matter of justification of optimal and effective methods and tools of effective budgetary management is important not only for ukraine but also for other states, in particular the post-soviet space. at the same time, the global experience does not give universal decisions on the budget management organization, since each state has its own budgetary system, peculiarities of building a budgetary system and its conceptual management approaches that can be used in the budgetary sphere (new public management, good governance, multi-level governance, network management and e-government). it is proved that, although budget management is widely used in financial science, a conceptual approach to its understanding has not been formed yet. critical analysis of the literature has made it possible to substantiate that in the study of budget management, conceptual approaches of public administration are used, which do not allow revealing all its peculiarities in full. we have offered our own conceptual approach «entity-relationship-result» management, which made it possible to reveal the main trends in the budget management development in the public regulation system; determine its structural elements, deepen the budget management essence (a complex of interrelated functions, principles, methods, techniques and procedures used by the authorized bodies and aimed at the development and implementation of management decisions in drawing up, reviewing, approving, executing the state budget and the budgets of its territorial and administrative units to ensure efficient use of budgetary funds), offer scientific approaches to understanding the components and principles of budget management, state your own vision of its methods and classification features. this helped to build a conceptual semantic model of understanding budget management baltic journal of economic studies 91 vol. 5, no. 5, 2019 in the public regulation system. the proposed model reflects the list of budget management components in the public regulation system, their close relationship and coherence, and which are aimed at ensuring the functions performance of public authorities and local self-government bodies. key words: budget management, budget, state regulation, public finances, budgetary funds, public regulation. jel classification: h73, h79 1. introduction the problem of finding optimal and efficient methods and instruments on effective management of public finances is urgent not only for ukraine, but also for practically all countries of the world. at the same time, the global experience does not give universal decisions on such management, since in each state, there are its own individual budgetary system, peculiarities of budgetary system construction, resources of all levels of government, methods and mechanisms of management. creating a new type of economy and pursuing structural reforms that would improve the quality of life in recent years by market economy foundations, the budget system stability (bogolib, 2015) and improving the management effectiveness are required. reforming the national economy necessitates a modification of budget management, causing, in particular, the change of its subjects in the direction of expanding their competence and placing greater responsibility on them. activity of any public authority should be productive and transparent. providing quality services with optimal costs, as well as transparent activity and clear accountability should be their main goal for the population (babinova, 2007). this issue is attracting the attention of experts from around the world. budget management in the public regulation system is investigated by leading economists and scientists, in particular: bogolib т., demyanyshyn v., klets l., mykhailenko s., oparin v., hokayema j., kairouzb a., juncos a., pomorska k., marks g., and others. however, despite the continued focus on research by scientists and practitioners alike, nevertheless, conceptual approaches to the budget management development in the public regulation system have not yet been formed and its place in the development of strategic principles of budgetary policy has not been clarified. dependence of the country’s social and economic development on budget management is complex and ambiguous. when forming the state budget, it is necessary to develop approaches that take into consideration the balance of different public interests. the purpose of the article is the development of a conceptual approach to the budget management development in the public regulation system. in accordance with the stated goal the following tasks were solved: investigate the legislative framework for the budget management development; study the essence of the economic concept «budget management»; determine the purpose of budget management; investigate the object and subjects of budget management; identify the main components of budget management; justify budget management functions; study principles of methods, procedures and techniques of budget management; offer classification features of budget management; develop own conceptual approach in the study of budget management in the public regulation system. theoretical and methodological principles of the budget management development in the public regulation system is a subject of investigation. within the article, a set of general scientific and special research methods is used. the methods of analysis and synthesis, generalization and scientific abstraction in the formation of the conceptualcategorical apparatus were used. abstract-logical method was used for the generalization of theoretical foundations of budget management; the method of system analysis was used to characterize the main components, functions, principles, techniques and methods of budget management; historical-logical method, the method of induction and deduction allowed exploring the conceptual approach to understanding the importance of budget management in the public regulation system; graphical method was used to visualize the results of the study. the novelty of scientific results is specified in the following provisions: – a conceptual approach «entity-relationship-result» management has been first proposed, on its basis, accordingly, a conceptual semantic model of budget management understanding in the public regulation system is developed, which includes regulatory support, functions, principles and complex of effective tools (methods, techniques, procedures), that will enhance the role of budget management in the development of strategic principles of budgetary policy and ensure functions fulfillment of public authorities and local selfgovernment bodies; – a scientific approach to establishing classification features of budget management, reflecting its division by governing bodies, assigned tasks, content, management level, transparency degree, timing, term, performance level, implementation stage are proposed. it allowed to deepen the economic content of budget management, to find out its necessity, specificity and characteristics in the public regulation system. baltic journal of economic studies 92 vol. 5, no. 5, 2019 2. research of existing concepts of public administration budget management is one of the directions of the state’s management activity, a condition that ensures the synergy of the financial management system. as a kind of the state’s management activity, budget management is designed to pierce its directions, ensuring their implementation and coherence in achieving the country 's financial goals. within the framework of budget management, there is a process of budgetary funds management, which management actors of all levels participate in. today, budget management is widely used in financial science. however, in ukraine the conceptual approach to budget management understanding in the public regulation system has not been formed yet. in addition, its place in the strategic principles development of budgetary policy has not been clarified. all the mentioned above affects the overall effectiveness of budget management in the formation and use of budgetary funds and the social and economic development of the country as a whole. therefore, we propose to study budget management from the point of view of the world experience in the framework of the concepts implementation of public administration, and on their basis form a conceptual approach to understanding budget management in the public regulation system. there are various conceptual approaches to management in the world that are used in the public sector, the most common of which are new public management, good governance, multi-level governance, network management і e-government. new public management (npm) is the art of managing the overall well-being of the nation-state as a whole (hokayema, kairouz, 2014). its development began in the late 1970s and early 1980s. for the first time, this conceptual approach was used by the british prime minister margaret thatcher (guttentag, herring, 1984). more than 70 countries in the world are implementing npm-based reforms. the essence of npm is to introduce all the best theories and practices used in business to the public management. there is no specific standard model of governance that would work in all countries. the most important parameters of the npm conceptual approach are the transition from (matei, 2006) politics to management; process management to result oriented management; collective provision of government or social services to flexible provision of specific services; centralized management to decentralized one; the traditional theory of public management to the up-todate one that responds to contemporary challenges and realities; rigid control methods to the flexible, resultoriented ones; selective management to a complex, ethically based one. good governance (gg) involves close cooperation between the state, business and citizens, focusing on partnerships. the definition of good governance was introduced in 1992 for the first time (1992). the purpose of gg is to exacerbate the level of social inequality, reduce the role of the state in public relations. the main parameters of the gg are the right of all citizens to participate in management decisions; ensuring transparency in the management process; equality in managerial decision-making; ensuring efficiency and effectiveness in the management process; government accountability to citizens. multi-level governance (mlg) was established in the 1920s (marks, 1993). this conceptual approach involves not only the vertical subordination of public authorities, but also interaction with other entities. under this approach, peculiarities of constructing multi-level management structures are investigated and perspective directions for their development are determined ( juncos, pomorska, 2010). network management (nm) provides management based on the formation of a new strategy of relations between the state and society, public and private spheres. this management is opposed to the monocentric system of public administration and the polycentric system of market competition. nm was founded in 1963 by two prominent austrians f. paul and o. morgenstern (peterson, 2003). the term «network» is often used to describe different clusters in management, that are related to one another in political, social or economic life. such networks may be freely structured, but they still disseminate information (peterson, o'toole, 2001). under such management, the main aspect is the network of its members, each of them is of interest and able to help, thus determining success or failure (peterson, jone, 1999). according to nm, the state is inferior to the leading position in the regulation of managerial relations and an equal agent of interaction in network management (peterson, 2003). е-government (e-government) is the concept of public administration, its essence is to use modern ict to ensure the efficiency and transparency of government, as well as public control over it. this conceptual approach not only provides information about public authorities, but also allows the population to take certain actions for which it had previously been forced to visit public institutions. in most countries of the world when developing their own budget management concepts, these five conceptual approaches are combined through the selective adaptation of individual parameters of each of them, taking into consideration peculiarities of the budget system construction of each country, resource support of all levels of management, methods and mechanism of budgetary funds management. we would like to propose our own conceptual approach to understanding budget management in the public regulation system «entityrelationship-result» management. this approach will allow us to identify causal linkages inherent in budget baltic journal of economic studies 93 vol. 5, no. 5, 2019 management in the public regulation system, and the place of budget management in the development of strategic principles of budgetary policy. 3. analysis of the proposed conceptual approach to the understanding of budget management in the state regulation system in modern ukraine, there is no legislative document designed to regulate the principles of budget management. that is why the current state and local self-government bodies, when managing budget funds, rely on the following legislative and regulatory documents: the constitution of ukraine; the budget code of ukraine; the law of ukraine on the state budget; other laws governing budget relations; regulations of the cabinet of ministers of ukraine; regulatory legal acts of central executive bodies; decisions of the authorities of the autonomous republic of crimea, local state administrations, bodies of local selfgovernment. insufficient management regulation impairs the quality of budget discipline, and the lack of proper regulatory support for budget management does not guarantee the elimination of identified offenses and the management focus on preventing them. the management action should start from the moment of the draft budget development and terminate at the end of the reporting period. in the process of budget management, its subjects should be useв as a set of methods and techniques that will continue to ensure a gradual transition from one type of management to another depending on the stage of the budget process when providing the budget management and how it is subject. today, there are different views on the essence of the economic concept of the «budget management», which differ from one another significantly. different interpretation of the studied economic concept by scientists shows that they understand different tools of budget management, and therefore use different scientific approaches. lack of theoretical guidance of the budget management impedes its adequate scientific understanding and does not contribute to the proper effectiveness of this phenomenon in practice. therefore, we consider it necessary to analyze the scientific approaches we know to the essence of the economic concept of the «budget management» and propose our own approach to its vision. let’s divide the assertions under consideration in accordance with their scientific approaches. о. borovykova (borovykova, 2008), v. oparin (oparin, safonova, 1998) and і. tymchenko (tymchenko, 2013) use an evolutionary scientific approach. it provides an opportunity to consider budget management from the point of view of its gradual development in society, that is, in the long-term retrospective, but not in the medium or short term, necessary for reforming the public sector or forecasting it. functional scientific approach was used by l. timirkhanova (timirkhanova, 2007) and v. fedosov (fedosov, 2004), who primarily focus on management functions related to budgeting and budgetary funds use. in turn, т. myronova (myronova, dobrovolska, protsai, kolodiy, 2006), v. demyanyshyn (demyanyshyn, 2008), s. mykhailenko (mykhailenko, 2010), and і. аvetisian (аvetisian, 2016) apply a systematic scientific approach, which involves the study of the phenomenon based on the principles of systematic approach, i.e. integrity, hierarchy, structuring, plurality, etc. we believe that this approach can be developed taking into consideration the emergence of new requirements for the budget process, i.e. complexity, publicity, transparency, complementarity, efficiency, etc. one of the types of systematic scientific approaches – comprehensive – was used in the study of the budget management nature by а. baskakov (baskakov, 2016), n. yashyna (yashyna, 2004).their works are based on a comprehensive approach, which makes it possible to study all elements of the phenomenon. т. kovaliova, а. buriachenko and ye. malik (malik, 2012) apply a standardization scientific approach when studying the essence of the economic concept of «budget management». it emphasizes the role of the phenomenon under study in achieving stability of the social and economic development of the country. at the same time, this scientific approach is insufficient in the context of the need to reform the budgetary sphere, as it is today in ukraine. normative scientific approach was used by а. premchand (premchand, 1993) in understanding budget management as a set of actions related to the funds mobilization, setting priorities for government programs, effective funds management, control over their formation and use within the budget process in accordance with the current legislation. we believe that the normative approach must be complemented by the positive scientific approach, which involves the study of the actual state of the phenomenon under consideration. v. fedosov, v. oparin and l. safonova (fedosov, 2004) propose to characterize budget management from the standpoint of a logical scientific approach, which enabled them to distinguish the subjects, object and topic of the studied economic concept. in our view, their approach should be considered as a variation of the above systemic scientific approach. l. pankevych, m. zvarych and p. mogyliak (pankevych, zvarych, mogyliak, 2006), а. indutenko (imdutenko, 2007) consider the essence of budget management based on an integrated scientific approach. this made it possible to distinguish the mechanism of its action, which deepens, on the one hand, the interaction of management entities and on the other hand the interconnections between the components of budget management. process scientific approach was used by o. yermakova (yermakova, 2010). it enabled her to interpret budget management as a process of managing budgetary flows using scientifically sound market forms and decisionmaking methods in the area of management of budgetary baltic journal of economic studies 94 vol. 5, no. 5, 2019 assets, liabilities and budgetary risks. from our point of view, the process approach can be supplemented by a procedural scientific approach that allows detailing the rationale of management decisions in the public sector and giving them greater efficiency. against this background, we consider it fundamental to treat budget management as a set of interrelated functions, principles, methods, techniques and procedures used by the authorized bodies and are directed to the development and implementation of management decisions in drawing up, reviewing, approving, executing the budget of the state and the budgets of its territorial-administrative units to ensure efficient use of budgetary funds. the budget management is an important instrument of state regulation of the public authorities’ activity. the main goal of budget management is to increase the efficiency of budgeting and use of budgetary funds in accordance with the strategic objectives of social and economic development of the country. the object of budget management is budgetary funds, and subjects are the bodies of representative, legislative and executive power, which are vested with relevant rights and powers. currently there is no single approach to the study of the main components of budget management. however, most modern scholars agree with its features distinguished by v. fedosov, v. oparin and l. safonova, who relate to them: managing the budget process, which includes budget planning and organization of budget fulfillment; accounting of budget fulfillment; control over budget fulfillment (fedosov, 2004). similar scientific approach is proposed by v. demyanyshyn, who also focuses on budget planning, budget fulfillment, budget accounting and budget control (demyanyshyn, 2008). having considered the mentioned above approaches to the components of budget management and considering that budget management is a complex, multilevel system, we propose our own approach to distinguishing its main components, i.e. budget projection, budget planning, accounting of budget fulfillment, reporting of budget fulfillment, budget control and budget support. in our opinion, budget support should include information, organizational, methodological and regulatory support. we believe that information budget support provides a meaningful, reliable and operational information base that serves as a basis for making optimal management decisions about the formation and use of budgetary funds. for organizational budget support of the corresponding process, a set of internal structural services and units is created, which develop and make management decisions about the formation and use of budgetary funds and are responsible for their results. methodological budget support means a set of approaches, methods, means, techniques and procedures that are used in the course of managing budgetary funds to achieve the primary objective of budget management. in turn, regulatory budget support is a set of legal acts regulating budgetary relations in ukraine regarding the effective formation of revenues and the efficient use of funds in the public sector. the basis for the budget management development is its functions, principles and methods. today, due to the lack of a separate document at the legislative level that would determine the peculiarities of budget management, the main managers use the narrow range of functions inherent in financial management in general, i.e. projection, planning, organization, analysis and control. nevertheless, in fact, some of them are done formally. therefore, it is necessary to investigate the known scientific approaches of domestic scientists that reveal the functions of budget management. the budget management functions refer to the types of management activities in the formation and use of budget funds, as well as control over their movement. v. fedosov, v. oparin and l. safonova distinguish the following functions of budget management: strategic planning, planning the implementation of strategies, organization of the developed plans implementation, accounting and control (fedosov, 2004). similar functions are generalized by v. demyanyshyn (demyanyshyn, 2007), v. panteleyev (panteleyev, 2013). in turn, l. klets focuses on distributive, regulatory, stimulating, controlling and social functions (кlets, 2007). v. venger proposes to separate the following functions: distribution (redistribution), regulative and control (venger, 2009). his scientific approach is supported by s. mykhailenko, who states that through the distributive (redistributive) function, distribution and redistribution of certain economic goods (national wealth, gdp, national income, value) is implemented in society. due to the manifestation of the regulating function, the organizational and managerial mechanism of the state’s influence on various social and economic phenomena and processes is created and formed. the control function allows carrying out analyticalmonitoring and control-audit procedures in the sphere of public finances (mykhailenko, 2011). summarizing the views of scientists on the budget management functions, we distinguish the following: projection, planning, organization, accounting, analysis, control and regulation. the budget management is also based on certain principles. l. pankevych, m. zvarych, p. mogyliak and b. khomichak, by studying the principles of budget management, identified the principles of the budgetary system defined in the budget code of ukraine (pankevych, zvarych, mogyliak, 2006). v. fedosov, v. oparin, and l. safonova have proposed the following list of principles to be studied (fedosov, 2004): ensuring full and timely revenue generation as a whole and at each source separately; financing activities within the limits of the amounts approved in the budgets and during the fiscal year; proportionality when financed baltic journal of economic studies 95 vol. 5, no. 5, 2019 from the budget; legal entities financing solely from the budget; ensuring effective control over the proper use of budgetary resources; compliance with financial discipline at enterprises and organizations in the public sector. in turn, s. mykhailenko separates the following principles of budget management (mykhailenko, 2011): scientific, systematic, unity, economy and efficiency, targeted use of budgetary funds, fairness, the combination of rights, duties and responsibilities, publicity and transparency. in her view, it is these principles that define the general rules of the process organization of budget management at all its milestones and stages, allowing to expand the scientific heritage of budget management. in our opinion, this approach is quite interesting. the above scientific approaches, which reveal the principles of budget management, point to the lack of a unified approach, which would characterize general requirements for the theory construction of budget management. therefore, we consider it necessary to supplement the existing principles with others that will reveal the primary underlying management of budget formation and use. we propose to include the below principles of budget management as follows: legality (definition and adherence to the main principles of budgetary funds management in accordance with the current legislation of ukraine); continuity (continuity of management on formation and use of budgetary funds in accordance with strategic tasks of the social and economic development of the state); accessibility (public access to budget management results); responsibility (responsibility of state and local self-government bodies within the limits of the powers assigned to them for managing budgetary funds within the current legislation); completeness (budgetary funds management using the available tools in full according to the legislation of ukraine); coherence (coordinated interaction of public authorities and local self-government bodies in the direction of ensuring effective management of budgetary funds); timeliness (the ability to identify gaps in the budget process in a timely manner, which may further affect the state of formation and use of budgetary funds); consistency (step-by-step budget funds management in accordance with the methodology and legislation in force in ukraine); coordination (elimination of procedures duplication in managing the formation and use of budgetary funds); integrity (ensuring interconnection between public authorities and local governments, as well as between previous and current budget management results); reality (management that reflects the real results of managing the formation and use of budgetary resources); prudence (a degree of caution in formulating the conclusions necessary to make judgments on the budget management results without the existence of appropriate supporting facts). the analysis of existing approaches to the consideration of the peculiarities of the budget management development revealed that scientists paid little attention to the budget management methods, which are an integral part of it. most scientists associate management methods with control methods. we consider this approach debatable, since control is a function of management. therefore, it is advisable to distinguish exactly the methods that are inherent in budget management. we propose to relate to them such methods: normative (based on the use of rules and regulations, according to which budgetary funds are managed); monitoring (provides for monitoring the formation and use of consolidated, state and local budgets, on the basis of which it is possible to determine the level of management effectiveness); functional (implies defining functional responsibilities of budget entities in relation to the management entity); supervision (involves management, which is built on collecting the necessary information about the state of formation and use of budgetary funds); regulatory (means setting limits to the management of budgetary funds in accordance with applicable law); survey (involves collecting information about the object and subjects of management during direct communication by registering responses). the economic term «procedure» means an officially established or customary procedure for the implementation of anything. against this background, the budget management process should be understood as an officially established procedure for managing budgetary funds, which presupposes a certain sequence of management actions in accordance with current legislation. by techniques, communication is understood as a means of transmitting something. therefore, the methods of budget management are recognized as a set of connections between entities and management object, based on which some affect the others. today, in science, not enough researchers are paying attention to the classification features of budget management. using own scientific developments (melnychuk, 2016), we offer an enhanced proprietary approach with nine classification features, that allow you to explore budget management in all its manifestations: by governing bodies, assigned tasks, content, governance level, transparency degree, timing, term, performance level, implementation stage. by governing bodies, we propose to separate state, departmental, internal economic and public budget management. state budget management should be understood as the management exercised by central government bodies in the course of the budget process, as well as to address other issues of national importance regarding the formation, distribution and use of budgetary funds. departmental budget management involves the management carried out by the agencies for the formation and use of funds in the public sector. in-house budget management is characterized by the management within the institutions, organizations and other associations by relevant bodies within the budgeting, formation and use of budgets. in turn, public budget management involves a form of public baltic journal of economic studies 96 vol. 5, no. 5, 2019 participation in budget management, which is based on the accountability of public authorities and local selfgovernment bodies to citizens. by assigned tasks, the budget management can be divided into strategic, tactical and operational. strategic budget management aims to achieve long-term goals in the area of budget management, is provided for up to five years and is enshrined in the country's economic and social development budget programs. tactical budget management ensures that medium-term budgetary goals and objectives are met within one fiscal year. in addition, operational budget management aims to achieve current budget management goals within one calendar month or quarter, consistent with minimum management periods. by the content, we suggest dividing budget management into a comprehensive and organizational one. comprehensive budget management aims to increase the efficiency of budgeting and budgetary funds use, as well as to identify deficiencies, violations, abuses in the budget system and to remedy them. organizational budget management is intended to focus on budget management methodologies and creating prerequisites for its use by management entities based on the choice of forms of its organization, definition and distribution of functions between individual participants in the management process, ensuring the necessary coordination and recruitment, capable of practically fulfilling the functions and tasks of management as defined by applicable law. by the governance level, we propose to distinguish such types of budget management as national and local ones. national budget management means the management of the formation and use of budgetary funds, carried out by public authorities. local budget management involves managing the formation and use of budgetary funds by local governments. by transparency level, budget management should be divided into transparent and non-transparent. transparent budget management means informing the public about the ongoing activities of public authorities and local governments, explanation of certain management decisions in terms of their expediency to the population. in turn, non-transparent budget management involves management that is incapable of preventing corruption in the formation and use of budgetary funds and is not based on managerial organizational measures, which provide for procedures that do not allow for variations in the budget process. by timing, we suggest separating the preliminary, current, periodic and subsequent budget management. preliminary budget management involves management, which is carried out before the processes of planning, drafting, review and approving the budget in the direction of negative phenomena elimination, which may result in a decrease in budgetary revenue or misuse of budgetary funds. current budget management is the constant development of concrete measures that give the state and local self-government bodies the ability to form effectively budgetary funds and use them efficiently in order to ensure the social and economic development of the country and meet the needs of society. periodic budget management should be understood as management, which requires the authorities to find out how effective the formation and use of funds in the public sector take place in a given period. subsequent budget management is performed after the financial operations are completed, when the budget period is over, which main purpose is to establish the correctness, legality and economic feasibility of the formation and use of funds in the public sector. by terms, budget management should be divided into urgent and non-urgent. urgent budget management is a type of the budget management, which requires general government to complete the tasks assigned to them promptly and effectively. non-urgent budget management implies a type of budget management that requires general government to perform their tasks effectively over a period of time. by the performance level, budget management should be divided into effective and ineffective. effective budget management means ensuring the efficiency of budgeting and use of budgetary funds in accordance with the strategic objectives of the state’s social and economic development. in turn, ineffective budget management involves certain measures implemented by general government, which summarize results under which the effectiveness of the formation and use of budgetary funds is not ensured. by the implementation stage, the following types of budget management as legislative, regulatory, implementation and subsequent should be distinguished. legislative budget management envisages management, which aims to check the compliance of the state authorities with the basic legislation on the terms of submission, registration of the draft law of ukraine «on the state budget of ukraine» and its adoption. regulatory budget management is carried out during the review and approval of the budget in accordance with the established parliamentary regulations. authorized bodies, agencies and the parliament carry out implementation budget management at the stages of the budget implementation and revision. subsequent budget management implies the use by the special bodies or parliamentary committees of a set of methods and techniques in auditing the financial statements of budget execution. the proposed approaches to establishing classification features of the budget management make it possible to deepen the economic content of budget management, find out its necessity, specificity and characteristics in the system of state regulation and structural elements. the study of theoretical bases of the budget management development in the public regulation system based on the conceptual approach has allowed revealing the basic regularities of the budget management development in the public regulation system and defining its structural baltic journal of economic studies 97 vol. 5, no. 5, 2019 legislative component constituti on of ukraine budget code of ukraine law of ukraine on the state budget other laws governing budget relations regulatory acts of the cabinet of ministers of ukraine purpose: increase of efficiency on formation and use of budgetary funds in accordance with strategic tasks of social and economic development of the state subjects: a system of bodies of representative, legislative and executive power, which are endowed with the relevant rights and powers a system of bodies of representative, legislative and executive power, which are endowed with the relevant rights and powers object: budgetary funds functions: projection; planning; organization; accounting; analysis; control; regulation components: budget projection: budget planning; accounting on budget fulfillment; reporting on budget fulfillment; budget control; budget provision (informational, organizational, methodological and regulatory) principles: legality; continuity; accessibility; responsibility; completeness; consistency; timeliness; succession; coordination; integrity; reality; prudence procedures and techniques types: state; departmental; domestic; public; strategic; tactical; operative; complex; organizational; nationwide; local level; transparent; non-transparent; previous; current; periodic; urgent; non-urgent; lawmaking; regulatory; subsequent methods: normative; monitoring; functional; supervision; regulatory; survey coverage level: centralized (state budget); decentralized (local budgets) mechanism of budget management regulato ry and legal acts of central executive bodies analysis of the management results development of strategic principles of the budgetary policy conceptual semantic model of the budget management understanding in the public regulation sector decisions of the authorities of ar of crimea, local governments figure 1. conceptual semantic model of the budget management understanding in the public regulation system source: proposed and compiled by authors baltic journal of economic studies 98 vol. 5, no. 5, 2019 elements. this contributed to the construction of a conceptual semantic model of the budget management understanding in the public regulation system, which explores it holistically (figure 1). this approach deepens the theoretical understanding of budget management and determines its place in the development of strategic principles of budgetary policy. the proposed model reflects the list of components of budget management in the public regulation system, their close relationship and consistency, and aimed at ensuring the performance of the function of public authorities and local self-government bodies. thus, the purpose of governance depends on the legislative component, which is the basis of public regulation of budget management. the same can be said about the purpose of management, which determines the main list of effective tools used by the entities when influencing a management object to achieve the desired result. methods, techniques, procedures of budget management are the effective tools by which management is directed towards achievement of strategic principles of budgetary policy. thus, the conducted research made it possible to offer a conceptual approach «entity-relationship-result» management, which allowed to reveal the main trends in the budget management development in the public regulation system, investigate its structural components holistically and on its basis to develop a conceptual semantic model of the budget management understanding in the public regulation system, reflecting the list of the budget management components in the public regulation system, their close relationship and coherence. thus, it is proved that, although budget management is widely used in financial science, a conceptual approach to its understanding has not been formed yet. critical analysis of the literature has made it possible to substantiate that conceptual approaches are used in the study of budget management, which do not allow revealing all its peculiarities fully. 4. conclusions therefore, budget management is one of the tools to overcome problems, which arise in the process of formation and use of budget funds in the conditions of their scarcity. the matter of justification of optimal and effective methods and tools of effective budgetary management is important not only for ukraine but also for other states, particularly in the post-soviet space. at the same time, the global experience does not give universal decisions on the budget management organization, since each state has its own budgetary system, peculiarities of building a budgetary system and its conceptual management approaches that can be used in the budgetary sphere (new public management, good governance, multi-level governance, network management and e-government). we have proposed our own conceptual approach «entity-relationship-result» management, which made it possible to reveal the main trends in the budget management development in the public regulation system, identify its structural elements, deepen the essence of budget management (a set of interrelated functions, principles, methods, techniques and procedures used by the authorized bodies and aimed at the development and implementation of management decisions in drawing up, reviewing, approving, executing the budget of the state and the budgets of its territorialadministrative units to ensure efficient use of budgetary funds), offer scientific approaches to understanding the components, principles of budget management, state own vision of its methods and classification features. this helped to build a conceptual semantic model of the budget management understanding in the public regulation system. the proposed model reflects the list of the budget management components in the public regulations system, their close interconnection and coherence, which are aimed at ensuring the functions performance of public authorities and local selfgovernment bodies. references: avetisian, i. a. 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(1993). public expendimre management. washington: imf. world bank governance for sustainable human development (1992). proceedings of the world bank annual conference on development economics. baltic journal of economic studies 56 vol. 6, no. 4, 2020 corresponding author: 1 o.m. beketov national university of urban economy in kharkiv, ukraine. e-mail: hcsms.07@gmail.com orcid: https://orcid.org/0000-0002-0282-368х 2 o.m. beketov national university of urban economy in kharkiv, ukraine. e-mail: grytskov@kh.gov.ua orcid: https://orcid.org/0000-0003-4766-7155 3 o.m. beketov national university of urban economy in kharkiv, ukraine. e-mail: prunenkod@rambler.ru orcid: https://orcid.org/0000-0001-7322-9998 doi: https://doi.org/10.30525/2256-0742/2020-6-4-56-65 economic and mathematical modeling of investment at tractiveness of construction enterprises in the system of stakeholder relations volodymyr velychko1, evgeniy grytskov2, dmytriy prunenko3 abstract. the relevance of the process of implementation of economic and mathematical model of investment attractiveness of the construction enterprise in the stakeholder relation system is proved. the results of the analysis of the theoretical provisions for determining investment attractiveness and stakeholders of construction enterprises are presented. an economic and mathematical model for the formation of stakeholder groups in the system of relations with construction enterprises is proposed. a system of information and analytical support for an integrated assessment of the level of stakeholder relations and investment attractiveness of construction enterprises has been formed, which creates the basis for economic and mathematical modeling. the directions, methods, and models for assessing investment attractiveness and the level of stakeholder relations of construction enterprises are proposed. the practical aspects of their implementation are determined. the results of economic and mathematical modeling of the investment attractiveness of construction enterprises in the system of stakeholder relations are presented. the subject of the research is the directions of formation and realization of economic and mathematical modeling of investment attractiveness of enterprises in the system of stakeholder relations. the formation of the research methodology is carried out on the basis of the theoretical and methodological platform for determining the investment attractiveness of enterprises and stakeholders that interact in the relevant field. in addition, a set of methods is used to conduct the study: analytical (to determine indicators of investment attractiveness); expert assessments (to determine the index of stakeholder relations); method of analysis of hierarchies (to assess the importance of the impact of stakeholders (customers of construction products; workers of construction enterprises; top management; managers of various levels of construction enterprises; owners of construction enterprises; government bodies influencing the formation and level of interaction of stakeholders with construction enterprises; public organizations influencing activities in construction and architecture; corporate governance bodies of construction enterprises; the bodies of internal and external control interacting in the construction industry; the competitors of construction enterprises; the suppliers of inventories interacting with construction enterprises; stakeholders interacting in the formation and use of spatial, urban, environmental information and creating investment attractiveness of construction enterprises; the design organizations; other stakeholders interacting with construction enterprises) at the level of stakeholders from noses of enterprises); economic and mathematical modeling (to establish causal links between the level of stakeholder relations and the index of investment attractiveness of enterprises); generalization and systematization (to obtain and interpret research results). the aim of the study is to establish causal relationships between the factors that shape the level of stakeholder relations and investment attractiveness of construction companies based on economic and mathematical tools. the result of the study is the formation of a quantitative basis for making sound management decisions in the system of stakeholder relations of construction companies to increase their investment attractiveness. key words: investment attractiveness, level of stakeholder relations, construction enterprises, economic and mathematical modeling, adequacy criteria, model. jel classification: e62, h20, h50 baltic journal of economic studies 57 vol. 6, no. 4, 2020 1. introduction in current conditions, the functioning of the construction sector companies affects the development of the state economy and ensures the activity of other areas. in particular, enterprises in the construction sector determine the directions of more than 30 areas. in the international practice, the importance of areas of interaction between stakeholders that affect the functioning of companies that ensure their investment attractiveness and development is growing. in particular, the areas and features of interaction with stakeholders, their importance in the system of functioning of companies are formed and presented in the danish civil code (1907), the swiss code of obligations (1911), normative legal documents on collective bargaining regulation of labor relations in germany (1918), finland (1924), “the freedom of association and protection of the right to organise convention” (1948, no. 87), the right to organise and collective bargaining convention (1949, no. 98), collective agreements recommendation (1951, no. 91), cooperation at the level of the undertaking recommendation, (1952, no. 94), collective bargaining convention, (1981, no. 154), etc. therefore, the determination of the influence of stakeholders on the activities of construction enterprises and their investment attractiveness is of particular importance. this study aims to determine the processes of economic and mathematical modeling of investment attractiveness of construction enterprises through the formation and implementation of stakeholder relations by determining the relationship between the integrated systemic of investment attractiveness and the generalizing factor of the level of stakeholder relations based on the application of the method of correlation and regression analysis and model adequacy criteria. this approach allows to develop strategic directions, to determine the promising contours of the construction enterprises development, to carry out their forecasting, considering the types and characteristics of interaction with stakeholders. in recent years, more and more attention has been focused on ensuring the investment attractiveness of companies and accounting for stakeholder relationships, as in many other areas of the economy. in (parmar et al., 2010; donaldson and preston, 1997; preston, 2004; d’anselmi, 2011), the directions and peculiarities of stakeholder interaction in the process of enterprise functioning are defined. the importance of determining the investment attractiveness of enterprises is indicated in (dearden, 1987; post et al., 2002; krylova et al., 2003; sabluk et al., 2005). section 2 of the study summarizes the scientific developments to determine the investment attractiveness of construction enterprises and stakeholders that affect them. section 3 provides information and analytical support for the implementation of economic and mathematical modeling of investment attractiveness in the system of stakeholder relations, presents the results of the integrated assessment of investment attractiveness and level of stakeholder relations of enterprises in the construction sector. in section 4, the methods and directions of economic and mathematical modeling are substantiated, the criteria of adequacy are defined. section 5 is devoted to the results of economic and mathematical modeling of the systemic factor influence of the stakeholder relations level on the investment attractiveness integrated index for construction enterprises. section 6 presents the results of the study. 2. literature review existing scientific approaches are characterized by various aspects of determining the investment attractiveness of enterprises. in particular, valinurova and kazakova (2005) and krylova et al. (2003) assess investment attractiveness based on indicators of efficiency and effectiveness and form the resulting approach. in developing the presented method, sabluk et al. (2005) consider the investment attractiveness in terms of its integrated criteria for the validity of investment conditions, which ensure the personal interest of investors to invest capital in multiplying it or obtaining social effect. burkovets (2012) defines investment attractiveness from the socio-economic feasibility of funding based on the coordination of the interests and capabilities of the investor and the recipient of investments, ensuring the achievement of the goals of each of them with the accepted level of return and investment risk. a similar approach is presented in (duka, 2008). in contrast to the previous approach, korotkova (2013) considers investment attractiveness from the point of view of factors forming and influencing it: external (industry affiliation; geographical position; availability and accessibility of natural resources ecological situation; culture and education of the population; environmental sustainability; sociopolitical stability; legal and regulatory framework; information field; incentives for investors; developed infrastructure; economic freedom of the enterprise; position in the world market; controlling state bodies in the area of investment; inflation rate; export opportunity; population income level; industry competition); internal (production program; marketing activities; management accounting and controlling; corporative management; staffing potential; legal activity; production technologies; development strategy; competitiveness; the uniqueness of the object; duration of the investment program; company rating in the industry; payment discipline; condition of property and financial resources; expenses; capital structure (duka, 2008). a similar approach is developed in (budnikova, 2011; kuntsevich, 2005; ovdiy et al., baltic journal of economic studies 58 vol. 6, no. 4, 2020 2009). representatives of the factor approach (shportko et al., 2014) distinguish the following groups of factors: – financial condition (debt to equity ratio, current liquidity, asset turnover, return on equity on net income, return on sales on net income); – market environment (the investment climate in the region, the investment attractiveness of the industry, the geographic market for the enterprise, the stages of the product life cycle, the degree of competition in the market, the environmental burden on the environment, the development of transport infrastructure); – corporate governance (government influence on business management, the proportion of shares in free circulation on the secondary market, the amount of remuneration to the board members, financial transparency and disclosure of information, the rights of shareholders, the level of dividend payment) (ovdiy et al., 2009). in the framework of the factor approach, factors that form the investment attractiveness of the enterprises are determined (bilyak, 2006; yuriy and hubanova, 2005; mayorova, 2004; orlykovsky, 2007; shiyan and strochenko, 2003; vovchak, 2006; maidanevich, 2004). a comprehensive approach to determining investment attractiveness has been developed in (rud, 2006; dudka and lysenko, 1999; savchuk et al., 1999; leshchenko, 2001; florko, 2003), which is characterized by financial indicators, market features and characteristics, internal and external factors. some authors define the following features and characteristics of the investment attractiveness of the enterprise: its general characteristics, directions and features of the formation and use of the production and technical base, production and economic potential, types, and nomenclature, characteristics of the management system, the company’s place in the industry, financial condition, interaction with owners (malova and silverstova, 2003). the representative of the sophisticated approach is kostyuk (2005), who considers the investment attractiveness in terms of its system characteristics, which are determined by a set of rules and conditions for investing resources in a particular object at a specific time. laiko (2005) characterizes investment attractiveness as a complex of production and financial quantitative and qualitative conditions and criteria, which characterize their potential opportunities and economic advantages in comparison with other objects of investment. when implementing an integrated approach, stalinskaya (2003) defines the investment attractiveness as an integrated indicator that combines complex formalized and non-formalized criteria characterizing the advisability of investing in the analyzed potential object of investment. chervanev (2003) characterizes investment attractiveness as a set of indicators of the financial and economic condition of an enterprise, based on which a potential investor can make a managerial decision on the feasibility of investing free funds in the development of this enterprise without significant risk of loss or non-receipt of the expected return on invested capital. thus, while sharing the provisions of the integrated approach, the study proposed the concept of investment attractiveness of enterprises as a systemic category, which is determined by a combination of factors, characteristics, and features, which define potential opportunities, investment, and economic advantages, form a quantitative basis for making informed management decisions and ensuring the development of enterprises. based on the scientific provisions (vlasova and bezginova, 2006; kolchkova, 2011; pilyushenko and shkrobak, 2000; state statistics service of ukraine, 2011; zhuvagina, 2013), it is proposed to evaluate the level of investment attractiveness of the enterprises based on an integrated approach. as a result of the systematization of existing scientific approaches (yukhimchuk and suprun, 2003; zyatkovsky, 2003; ackoff, 1972; ackoff and emery, 2005; cleland, 2004), the definition of stakeholders of construction enterprises was proposed. stakeholders are characterized as individuals and (or) legal entities or groups of individuals who interact in the construction sector based on strategic circuits and social trends and are defined by functional, resultant, structural, process, strategic and complex features. the relationships of stakeholders have a certain level of risk and threats, which allows to form contractual relations in capital construction, carry out architectural control, relevant calculations, which are provided by project documentation, material, and labor resources. the formed groups of stakeholders of construction enterprises as follows: – customers of construction products (s1); – workers of construction enterprises (s2); – top management (s3); – managers of various levels of construction enterprises (s4); – owners of construction enterprises (s5); – government bodies influencing the formation and level of interaction of stakeholders with construction enterprises (s6); – public organizations influencing activities in construction and architecture (s7); – corporate governance bodies of construction enterprises (s8); – the bodies of internal and external control interacting in the construction industry (s9); – the competitors of construction enterprises (s10); – the suppliers of inventories interacting with construction enterprises (s11); – stakeholders interacting in the formation and use of spatial, urban, environmental information and creating investment attractiveness of construction enterprises; – the design organizations (s13); baltic journal of economic studies 59 vol. 6, no. 4, 2020 – other stakeholders interacting with construction enterprises (s14). the economic and mathematical model on the formation of stakeholders in the system of relations with construction enterprises is proposed: s f sj= ( ), j = �114, , (1) where f is the factor of formation of stakeholder groups interacting with construction enterprises; j is the number of types of stakeholders. 3. data and unit root tests to conduct the research, a system of information and analytical support for the integrated assessment of the level of stakeholder relations and investment attractiveness of construction enterprises based on accounting and financial reporting, data on contractual obligations, results of strategic management, use of production facilities, technologies and workers, peculiarities of formation and application of material and technical base, directions of relationships between different groups of stakeholders is formed. this provides the opportunity to generate complete and high-quality technical and economic information used in the construction industry and provides the basis for economic and mathematical modeling. within the framework of information and analytical support, a system of factors is being formed that affects the level of stakeholder relations and the formation of investment attractiveness of construction enterprises, ensuring the development of a multi-level system of indicators. for the creation of information and analytical support and determination of factors, groups of stakeholders are selected based on the implementation of the following steps: 1. formation of the total number of experts. the study identified 50 people (nt = 50). 2. definition of criteria (kі) for the selection of experts. these include: 2.1. the level of theoretical training of experts on the interaction of stakeholders of construction enterprises (k1). 2.2. educational qualification level of experts (k2). 2.3. experience in working with various stakeholder groups (k3). 2.4. experience in the construction industry (k4). 2.5. experience in expert groups (k5). 2.6. the experience of experts in advancing development programs for construction enterprises (k6). 2.7. specialized education of experts (k7). 3. formation of scale for the assessment criteria for the selection of experts and their characteristics. the scale value ranges from 0 to 10. 4. construction of a questionnaire for assessing the quality of experts on a specific scale, assessing the average value according to established criteria. 5. the adoption of the decision on the selection of experts from the average value. the expert remains if the average value by the criteria is equal to or more than 5 (meets or exceeds a moderate level). 6. determination of the minimum number of experts (кmin) necessary for the study by the model: n dk t t min .= +      0 5 3 5 . (2) the minimum number of experts required for the study is set at level 3. as a result of the study, 38 experts were identified through the application of the proper steps, the opinions of which will be taken into account to determine the stakeholder indicators and the level of investment attractiveness of construction enterprises. 4. empirical specification and method taking into account the results of systematization of theoretical and methodological provisions, information and analytical, normative and legal provision for determining investment attractiveness, the directions for estimation of its level are proposed: 1. formation of information and analytical support for determining the investment attractiveness of construction enterprises. 2. determination of local factors that form the investment attractiveness of construction enterprises. 3. formation of systemic factors for determining the investment attractiveness of construction enterprises. 4. development of a multi-level system of indicators of investment attractiveness assessment. 5. assessment of local factors in the formation of investment attractiveness of construction enterprises. 6. assessment of systemic factors for determining investment attractiveness. 7. building an integrated model for assessing the investment attractiveness of construction enterprises. 8. determination of weight coefficients characterizing the influence of systemic factors on the integrated indicator of investment attractiveness. 9. assessment of the integrated indicator of investment attractiveness of construction enterprises. 10. interpretation of the results. according to the proposed stages, an integrated economic and mathematical model has been built (3): ia k xia k xia k xia k xia k xia k xia kia ia ia ia ia ia= + + + + + +1 2 3 4 5 61 2 3 4 5 6 iia xia7 7 ia k xia k xia k xia k xia k xia k xia kia ia ia ia ia ia= + + + + + +1 2 3 4 5 61 2 3 4 5 6 iia xia7 7 , (3) where ia is an integrated indicator of the investment attractiveness level of construction enterprises, rel. units; іа1, іа2, іа3, іа4, іа5, іа6, іа7 are systemic indicators of the level of investment attractiveness of construction enterprises, rel. units; kia1, kia2, kia3, kia4, kia5, kia6, kia7 are weighting factors that determine the influence of external market factors, internal factors, factors of wealth, baltic journal of economic studies 60 vol. 6, no. 4, 2020 financial stability, liquidity, business activity, the level of investment activity of construction enterprises on the formation of their investment attractiveness, rel. units. the characteristics of the integrated indicator values of the investment attractiveness of construction enterprises are presented in table 1. table 1 the characteristics of the integrated indicator values of investment attractiveness, rel. units the value of the integrated indicator characteristic 0 no investment attractiveness of construction enterprises 0.01 – 1 insignificant 1.01 – 2 low 2.01 – 3 relatively low 3.01 – 7 moderate 7.01 – 8 relatively high 8.01 – 9 high 9.01 – 9.99 significant 10 and more absolute for an integrated assessment of the level of stakeholder relations of construction enterprises, a methodological approach scheme has been developed (figure 1), which includes: – formation of information and analytical support for providing an integrated assessment of the level of stakeholder relations; – building an analytical and diagnostic system of indicators for the integrated assessment of the level of stakeholder relations; – determination of factors of the third level in the integrated assessment system; – development of models for determining systemic factors of second level; – assessment of systemic factors of the second level of a multi-level system; – building an integrated assessment model; – assessment of weighting coefficients of mutual influence and the impact of systemic factors on an integrated indicator of stakeholder relations level; – determination of the integrated indicator of stakeholder relations level; – development of conclusions based on the assessment of stakeholder relations level in the context of the formation of a stakeholder-oriented strategy for managing construction enterprises using economic and mathematical modeling. it should be noted that the analytical and diagnostic system of indicators for integrated assessment of stakeholder relations includes three levels: level 3: includes local factors that are determined by analytical and expert methods; level 2: formed from systemic factors that are determined by the models presented in the previous section. in general, systemic factors of second level are determined by: s1 = 〈s11, s12, ω〉, (4) s2 = 〈s21, s22, …, s214, ω〉, (5) s3 = 〈s31, s32, …, s38, ω〉,(6) s4 = 〈s41, s42, …, s4103, ω〉,(7) s5 = 〈s51, s52, …, s571, ω〉,(8) s6 = 〈s61, s62, …, s632, ω〉,(9) where s1 is the systemic factor of quality and level of contractual obligations fulfillment, rel. units; s2 is the systemic factor of the interaction level of the investigated construction enterprises with different groups of stakeholders, rel. units; s3 is the systemic factor of formation and realization of corporate management of construction enterprises for ensuring interaction with stakeholders, rel. units; s4 is a systemic factor, which provides stakeholder engagement in the context of the formation and implementation of strategic directions for the construction enterprises operation, rel. units; s5 is the systemic factor that determines the socio-economic and innovative level of construction enterprises, which are provided through the interaction of stakeholders, rel. units; s6 is the systemic factor of the strategic condition of construction enterprises, rel. units.; ω is a set of relationships and links between factors, which influence the level of formation and implementation of stakeholder relationships. level 1: determines the integral indicator of the level of stakeholder relations (is), which is formed based on systemic factors. in general, models for determining the systemic factors influencing the level of formation and implementation of stakeholder relations and the model for determining the integrated factor of the stakeholder relations level are presented in figure 1. the scale of integrated factor values for the stakeholder relations level is presented in table 2. table 2 the scale of integrated factor values for the stakeholder relations level, rel. units the value of the integrated indicator level 0 there are no stakeholder relations at construction companies 0.01 – 1 insignificant 1.01 – 2 low 2.01 – 3 relatively low 3.01 – 7 moderate 7.01 – 8 relatively high 8.01 – 9 high 9.01 – 9.99 significant 10 and more absolute baltic journal of economic studies 61 vol. 6, no. 4, 2020 a multi-level analytical and diagnostic system of indicators for integrated assessment of stakeholder relations level allows to determine the relationship between indicators, to make the transition from local factors to systemic ones, and makes it possible to consider a significant number of features and characteristics, which affect stakeholder relations. at the same time, a multi-level system of indicators creates the basis for the formation of a quantitative basis for a stakeholderoriented strategy for managing construction enterprises. thus, a methodological approach to an integrated assessment of the level of stakeholder relations of 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 = 〈𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, ω〉 formation of information and analytical support for providing integrated assessment of the level of stakeholder relations: building an analytical and diagnostic system of indicators for integrated assessment of the level of stakeholder relations determination of factors of the third level in the integrated assessment system by analytical and expert assessments methods 𝑆𝑆𝑆𝑆𝑖𝑖𝑖𝑖 = ��𝑆𝑆𝑆𝑆𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 1 𝑖𝑖𝑖𝑖=0 𝑛𝑛𝑛𝑛 development of models for determining systemic factors of second level: assessment of systemic factors of the second level 𝑆𝑆𝑆𝑆𝑠𝑠𝑠𝑠 = 𝑘𝑘𝑘𝑘𝑠𝑠𝑠𝑠1𝑥𝑥𝑥𝑥𝑆𝑆𝑆𝑆1 + 𝑘𝑘𝑘𝑘𝑠𝑠𝑠𝑠2𝑥𝑥𝑥𝑥𝑆𝑆𝑆𝑆2 + 𝑘𝑘𝑘𝑘𝑠𝑠𝑠𝑠3𝑥𝑥𝑥𝑥𝑆𝑆𝑆𝑆3 + 𝑘𝑘𝑘𝑘𝑠𝑠𝑠𝑠4𝑥𝑥𝑥𝑥𝑆𝑆𝑆𝑆4 + 𝑘𝑘𝑘𝑘𝑠𝑠𝑠𝑠5𝑥𝑥𝑥𝑥𝑆𝑆𝑆𝑆5 + 𝑘𝑘𝑘𝑘𝑠𝑠𝑠𝑠6𝑥𝑥𝑥𝑥𝑆𝑆𝑆𝑆6 building an integrated assessment model: 𝑘𝑘𝑘𝑘𝑆𝑆𝑆𝑆𝑖𝑖𝑖𝑖 = 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖𝑖𝑖 ∑ 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑖𝑖𝑖𝑖 𝑛𝑛𝑛𝑛 𝑖𝑖𝑖𝑖=0 assessment of weighting coefficients of mutual influence and the impact of systemic factors on an integrated indicator of stakeholder relations level by the method of hierarchy analysis: development of conclusions based on the assessment of stakeholder relations level in the context of the formation of a stakeholder-oriented strategy for managing construction enterprises using economic and mathematical modeling figure 1. scheme of methodological approach development for integrated assessment of the stakeholder relations level baltic journal of economic studies 62 vol. 6, no. 4, 2020 construction enterprises has been proposed. this creates a quantitative basis for developing a stakeholder-oriented strategy for construction enterprise management and making managerial decisions aimed at increasing investment attractiveness. the methodological approach includes a system of factors, which consider the quality and level of contractual obligations fulfillment, directions and peculiarities of investigated construction enterprises interaction with different groups of stakeholders, formation, and implementation of corporate management of construction enterprises to ensure interaction with interested parties, strategic directions of their functioning, socio-economic and innovative level of construction enterprises. to form a quantitative basis for making managerial decisions, it is proposed to establish causal relationships between the integrated indicators of investment attractiveness and the level of stakeholder relations of construction enterprises by constructing an economic and mathematical model. at the same time, criteria for the adequacy of this model, which determines the causal relationships between the integrated indicators of investment attractiveness and the level of stakeholder relations of construction enterprises, are proposed, the characteristics of which are presented in table 3. the correlation and determination coefficient defines the level of influence of the independent variable x (the integrated indicator of stakeholder relations level) on the dependent factor y (the integrated indicator of investment attractiveness). the student’s t-test determines the feasibility of the established links between the integrated indicators of stakeholder relations level and the investment attractiveness of construction enterprises. fisher’s f-test criterion determines the level of materiality and significance of the established relationships between integral indicators. the criteria of homo or heteroskedasticity determine the homogeneity degree of the residual indicators of the economic and mathematical model. durbin-watson test (dw) criterion is used to determine the autocorrelation of residuals. the phenomenon of multicollinearity leads to a shift in estimates of the economic and mathematical modeling results, which reduces the effectiveness of the study. the level of multicollinearity is as follows: the correlation coefficient between the independent variables is 0 – no multicollinearity; 0.01 – 0.2 – low multicollinearity; 0.201 – 0.4 – insignificant; 0.401 – 0.6 – moderate; 0.601 – 0.8 – significant; 0.801 – 0.99 – high; 1 – absolute. table 3 criteria for the adequacy of the economic and mathematical model, rel. units adequacy criterion model the correlation coefficient (r) r x x x y y x x x y y i n i i i n i i n i = −( ) −( ) −( ) −( ) = = = ∑ ∑ ∑ � 1 1 2 1 2 , where xi , yi are the values between which relationships are established (an integrated indicator of investment attractiveness and an integrated indicator of the level of stakeholder relations of construction enterprises); x , y are the average values of integrated indicators determination coefficient ( r2 ) r r2 = student’s t-test t m m m m = − + � 1 2 1 2 2 2 , where m1 , m 2 are the arithmetic average values of integrated indicators of the level of stakeholder relations and investment attractiveness of construction enterprises; m1 , m2 are the values of statistical errors of integrated indicator arithmetic average fisher’s f-test f r r x n m m = − − −( ) � � 2 21 1 , where n is the number of observations regarding integrated indicators of stakeholder relations and investment attractiveness levels homo or heteroskedasticity test criteria are determined by goldfeld-quandt, glacier models, by μ-criterion durbin-watson test (dw) the durbin-watson test is determined (dw): dw e e e i i i = ∑ −( ) ∑ −1 2 2 , where e ei i, � −1 are the remains of integrated indicators of the of stakeholder relations and investment attractiveness levels multicollinearity test criteria the level of influence of one independent variable on another independent variable is estimated by the corresponding pair correlation coefficient baltic journal of economic studies 63 vol. 6, no. 4, 2020 5. empirical results the results of the integral indicator estimation of the investment attractiveness level are presented in table 4. table 4 the results of the integrated indicator estimation of the investment attractiveness level, rel. units. construction enterprises the value of the integrated indicator of the investment attractiveness level jsc “kyivmiskbud” 2.57 brovarsky plant of building structures 3.12 jsc “kdbk” 2.44 pjsc “trust zhitlobud-1” 2.82 llc construction company “miskzhitlobud” 2.07 pjsc “capital real estate” 4.5 jsc “zhitlobud-2” 1.87 ukrainian state building corporation “ukrbud” 1.61 construction group “fundament” 1.82 based on the study, the groups of construction companies have been identified by the level of investment attractiveness: 1. low: jsc “zhitlobud-2”, ukrainian state building corporation “ukrbud”, construction group “fundament”. 2. insignificant: jsc “kyivmiskbud”, jsc “kdbk”, pjsc “trust zhitlobud-1”, llc construction company “miskzhitlobud”. 3. moderate: brovarsky plant of building structures, pjsc “capital real estate”. a quantitative basis for determining the investment attractiveness of construction enterprises has been formed, which allows to make justified management decisions aimed at its growth. the results of the study indicate a low or insignificant level of investment attractiveness of most construction enterprises. moderate values of the integrated indicator approach the limit of an insignificant level. this requires the formation and implementation of systemic actions to increase investment attractiveness by increasing the effectiveness of interaction with stakeholders of construction enterprises as part of a stakeholderoriented strategy for their management. as a result of applying the methodological approach to the integrated assessment of stakeholder relations level, the corresponding integral factor is determined: jsc “kyivmiskbud”: is = 5.84; brovarsky plant of building structures: is = 4.85; jsc “kdbk”: is = 4.97; pjsc “trust zhitlobud-1”: is = 4.96; llc construction company “miskzhitlobud”: is = 4.39; pjsc “capital real estate”: is = 4.8; jsc “zhitlobud-2”: is = 4.82; ukrainian state building corporation “ukrbud”: is = 4.9; construction group “fundament”: is = 4.82. thus, as a result of the assessment, an integral indicator of stakeholder relations level has been determined, which allows to stablish that jsc “kyivmiskbud” has been characterized by the highest value of this criterion. however, as at other construction enterprises, it has been determined by a moderate level, which indicates the inconsistency of measures to form and implement contractual obligations, the interaction of stakeholders in the areas of functioning of construction enterprises, the formation and implementation of corporate governance in the system of relationships between interested parties, strategic areas, unsystemic formation and implementation of socio-economic and innovative directions when interacting with interested parties, the lack of a system for the formation and determination of the strategic state indicators of construction enterprises, and ensuring their permanent monitoring. using information and analytical support, the economic and mathematical model for the relationship between the generalizing factor of stakeholder relations level and the integral indicator of construction enterprises investment attractiveness has been developed: ia xi xis s=− + −� � � �0 47 5 06 10 99 2. . . . (9) the indicators that determine the degree of relationship between the indicators are as follows: r = 0.004, r2 = 0.02. the values of the correlation and determination coefficients indicate their low interconnection, the generalizing factor of stakeholder relations level determines the change in the integrated indicator of investment attractiveness of construction enterprises only by 2%. the criteria for the adequacy of the economic and mathematical model of the relationship between the generalizing factor of the level of stakeholder relations of construction enterprises and the integral indicator of their investment attractiveness are presented in table 5. table 5 the results of determining the criteria for the adequacy of the economic and mathematical model, rel. units criterion calculated values normative values fisher’s f-test (f) fis = 3.6 fн = 3.44 (at the level of significance = 0.05) student’s t-test (t) tis = 2.62 tp = 2.37 tн = 2.31 (at the level of significance = 0.05) homo or heteroskedasticity test criteria μcalc = 1.74 μnorm = 2.36 durbin-watson test (dw) dwcalc = 0.16 dwu = 0.68 multicollinearity test criteria – – baltic journal of economic studies 64 vol. 6, no. 4, 2020 the interpretation of the economic and mathematical modeling results indicates the ambiguity of the influence of the generalizing factor of stakeholder relations level on the integral indicator of construction enterprise investment attractiveness. in particular, it was established that most of the adequacy criteria indicate the reliability of the established relationships and the appropriateness of the developed economic and mathematical model. at the same time, as indicated by the value of the calculated durbin-watson test, the heterogeneity of the residues is observed. the low level of connection between the generalizing factor of stakeholder relations level and the integral indicator of construction enterprises investment attractiveness indicates the insufficient focus of these enterprises on ensuring effective interaction with stakeholders. therefore, there is a need to develop and implement a stakeholder-oriented strategy for managing construction enterprises to ensure the growth of their investment attractiveness. 6. conclusion as a result of the study, the conceptual apparatus of economic science has been improved, in particular, the concept of “stakeholders of construction enterprises” has been introduced into the functional field of effective enterprise management, which, unlike the established ones, is determined by a combination of operational, resulting, structural, process, strategic and complex features. the relationships of stakeholders have a certain level of risk and threats, form strategic directions and ensure the efficiency of construction enterprises, form contractual relations in capital construction, carry out architectural control, relevant calculations, which are provided by project documentation, material, and labor resources. the created topological foundations for the determination of stakeholder groups of construction enterprises based on the essential characteristics of customers of construction products, workers, top management, owners, government bodies, corporate governance bodies, design organizations, other stakeholders, which, unlike the existing ones, allows to form an analytic and diagnostic system of stakeholder indicators for development and implementation of a methodology for the integrated assessment of stakeholder relations level. the processes of economic and mathematical modeling of the investment attractiveness of construction enterprises through the formation and implementation of stakeholder relations are substantiated by determining the relationship between the investment attractiveness integrated indicator and the generalizing factor of stake holder relations level based on the application of correlation and regression analysis methods, model adequacy criteria, which allows to develop strategic directions for the development of construction enterprises. references: ackoff, r . 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(in ukrainian) baltic journal of economic studies 1 vol. 6, no. 2, 2020 corresponding author: 1 nicolaus copernicus university, poland. orcid: https://orcid.org/0000-0002-4201-8028 2 nicolaus copernicus university, poland. orcid: https://orcid.org/0000-0002-9897-3139 doi: https://doi.org/10.30525/2256-0742/2020-6-2-1-8 the implementation of the sustainable development goals at the local level. the case of the districts of kuyavian-pomeranian province joanna marszałek-kawa1, piotr siemiątkowski2 abstract. the aim of the paper is to provide the objective assessment of progress in the implementation of the goals of the local sustainable development strategy by the districts of kuyavian-pomeranian province. in order to achieve our aim, we have devised, using methods of taxonomic analysis, the synthetic indicator (taking a lot of different measures of sustainable development into account), which shows the degree of the accomplishment of goals adopted in the sustainable development goals. in the collective of units under study, there is a significant differentiation of the level of indicators analyzed within the framework of the sustainable development strategy. it must be emphasized that there are as many as 12 districts in the lower quartile of the distribution of the synthetic measure, i.e., its level was below 0.25. 11 self-government units were in the second quartile of the distribution, i.e., in range between 0.25 and 0.5 of the synthetic indicator. relatively big taxonomic distances between synthetic measures for individual districts, with quite a large set of features, show significant differentiation among these parts of kuyavian-pomeranian province in terms of local sustainable development. despite the fact that the examined objects belong to the same administrative unit, which would appear to be relatively coherent, they do not develop at the same pace. moreover, given a broad set of indicators, they differ significantly when it comes to the rate of their sustainable development. the findings of this paper highlight the use of multidimensional taxonomic analysis for measuring the progress of local units in the degree of the accomplishment of the sustainable development goals. first of all, it helps to show differences in the implementation of the development strategies across districts. what is more, it shows these differences on the basis of the complete set of diverse features rather than single parameters (e.g., pace of growth). thus, the multidimensional approach is a lot more precise when it comes to showing differences among the examined objects. key words: sustainable development, synthetic measure, taxonomic analysis, local development. jel classification: q01, h76 1. introduction the principle of sustainable development must be considered “a pattern of development that meets the needs of present generations, without compromising the rights of future generations to fulfil their needs” (brundtland, 2019, p. xv). this pattern should serve as a set of guidelines for governments and international and non-government organizations, supported by selfgovernments, entrepreneurs and society. in order to put this idea – expressed by former norwegian prime minister – into practice, we should consistently and regularly undertake extensive activities in the area of politics and legislation that will be in line with the following targets: “1. strengthening human well-being and capabilities; 2. shifting towards sustainable and just economies; 3. building sustainable food systems and healthy nutrition patterns; 4. achieving energy decarbonization and universal access to energy; 5. promoting sustainable urban and peri-urban development; 6. securing the global environmental commons” (brundtland, 2019, p. xvi). there is no doubt that it is not an easy task to design solutions that will help to accomplish the above plans or implement the existing international and eu regulations and programmes (alberti, 1996). however, “development issues must be seen as crucial by the political leaders who feel that their countries have reached a plateau towards which other nations must strive” (united nations, p. 14; see also: williamson, radford, bennetts, 2003, p. 16). the principle of sustainable development is particularly important in developing societies. in order baltic journal of economic studies 2 vol. 6, no. 2, 2020 to implement this principle at the local level effectively, a development strategy must be drawn up. it should involve spheres such as economic welfare, social balance and healthy living environment. what is as important as the pursuit of the sustainable development goals is how they are measured. as the issue has a variety of aspects, it is difficult to assess the progress of specific countries or their administrative parts. in this paper, we address the following research problems: p1: how should the level of local sustainable development be measured given the multitude of the goals of the sustainable development strategy and of the goal indicators? p2: do the districts of kuyavian-pomeranian province maintain the same pace in implementing the assumptions of the sustainable development strategy? the research process required the adoption of the following hypotheses: h1: the examined objects exhibit significant differences in taxonomic distances between the synthetic measure of development, which justifies the use of multidimensional analysis for measuring the level of local sustainable development. h2: individual districts under study significantly differ in the level of sustainable development despite the fact that they are parts of the same province. the aim of the paper is to provide the objective assessment of progress in the implementation of the goals of the local sustainable development strategy by the districts of kuyavian-pomeranian province. the term “objective” means here that progress in the implementation of all goals should be measured by a single, synthetic indicator. this means that we evaluate the level of local sustainable development in particular districts by analyzing a variety of aspects of this development at the same time. in order to achieve our aim, we have devised, using methods of taxonomic analysis, the synthetic indicator (taking a lot of different measures of sustainable development into account), which shows the degree of the accomplishment of goals adopted in the sustainable development goals. the values of the indicator have allowed us to come up with the ranking of all districts of kuyavian-pomeranian province according to the level of progress in the implementation of sustainable development goals. 2. literature review the principle of sustainable development should be one of the most important priorities defining governments’ action plans both at the national and local level. this concept, as indicated by yigitcanlar, dur and dizdaroglu, “plays a key role in a critical role in securing prosperity of our cities and societies” (yigitcanlar, dur, dizdaroglu, 2015). the concept of sustainable development has been the subject of studies conducted by representatives of many natural, social and economic sciences. however, the notion has not been defined in a uniform, comprehensive way yet (bukowski, 2012). bujak-szwaczka and kolas pointed out that its principal objective is “to reach prosperity, justice (intraand intergenerational) and security” (bujak-szwaczka, kolas, 2010). it will be impossible to attain sustainable development without ensuring: economic growth, social inclusion and environmental protection (united nations information centre in warsaw, 2015). pawłowski defines that “the concept of sustainable development, referring to the fulfilment of rights and needs of future generations is considered mainly in three dimensions: ecological, social and economic” (pawłowski, 2009). rakoczy points out that “the principle of sustainable development focuses on finding normative solutions which will take into account legally protected conflicting values, at the same time having regard for the needs of future generations” (rakoczy, 2015). in his study, sekuła argues that the implementation of the concept of sustainable development, which involves taking care of the natural environment and the respect of social equality, brings about a number of positive results of a qualitative character. it helps to reduce the negative consequences of the scientific-technological development or to prevent conflicts in the field of spatial management (including environmental degradation). it also shows that, at the local level, the principle of sustainable development is implemented with the use of many specialized instruments, such as the model of the simulation of pollution spread in a commune, environmental reliefs, or the construction of bicycle paths (sekuła, 2002). the concept of sustainable development should be perceived as a process of change in which the use of resources, investment direction, technological progress and institutional changes are in line with present and future needs (united nations, general assembly, 1987). considering all these aspects, olejarczyk has stated that the principle of sustainable development is currently a political idea rather than a plan serving the purpose of drawing up a broad economic project reflected in the state’s policy. sustainable development leads to positive qualitative and quantitative changes in a given area, while respecting the environmental values and the principle of social equality. it follows from the pursuit of the development which, firstly, reduces the negative consequences of the scientific-technological revolution, and, secondly, prevents conflicts in space management reflected mainly in environmental degradation (olejarczyk, 2016). in the document transforming our world: the 2030 agenda for sustainable development, signed by 193 member states, the united nations defined 17 major sustainable development goals: baltic journal of economic studies 3 vol. 6, no. 2, 2020 – goal 1. end poverty in all its forms everywhere; – goal 2. end hunger, achieve food security and improved nutrition and promote sustainable agriculture; – goal 3. ensure healthy lives and promote well-being for all at all ages; – goal 4. ensure inclusive and equitable quality education and promote lifelong learning opportunities for all; – goal 5. achieve gender equality and empower all women and girls; – goal 6. ensure availability and sustainable management of water and sanitation for all; – goal 7. ensure access to affordable, reliable, sustainable and modern energy for all; – goal 8. promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all; – goal 9. build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation; – goal 10. reduce inequality within and among countries; – goal 11. make cities and human settlements inclusive, safe, resilient and sustainable; – goal 12. ensure sustainable consumption and production patterns; – goal 13. take urgent action to combat climate change and its impacts; – goal 14. conserve and sustainably use the oceans, seas and marine resources for sustainable development; – goal 15. protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss; – goal 16. promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels; – goal 17. strengthen the means of implementation and revitalize the global partnership for sustainable development (united nations, general assembly, 2015). dhingra and chattopadhyay (2016), later emphasized by trindade, hinnig, da costa et al. (2017), have found that it is possible to attain sustainable development at the local level by way of accomplishing the following goals: improve the quality of life of citizens; ensure economic growth with more opportunities for employment; increase the prosperity of citizens by securing access to social and community services; establish an environmentally responsible and sustainable approach to development; guarantee the efficient delivery of basic services and infrastructure, such as public transportation, water supply and sanitation, telecommunication and other utilities; be able to address climate change and environmental issues; and establish the efficient regulatory and local government mechanism ensuring equitable policies (dhingra, chattopadhyay, 2016). according to pope, annandale and morrisonsaunders, the progress of the implementation of the principle of sustainable development is assessed by analyzing not only the initiatives and proposals under preparation, but also current policies, programmes and plans, binding law, real practice and actions taken (pope, annandale, morrison-saunders, 2004). 3. methods the evaluation of the degree of the accomplishment of the local sustainable development goals according to the gus (główny urząd statystyczny – main statistical office) methodology, which is consistent with the international methodology, consists of 22 groups of indicators (corresponding to four main areas), such as: demographic change, public health, consumption patterns, adequacy, income in the old age, health determinants, crime, road accidents, economic growth, participation in transportation, climate change, energy, air protection, biodiversity, waste management, openness and participation, and economic instruments. within this framework, almost 180 various indicators were defined to follow the progress of a territorial unit (a state or its part) in the implementation of the idea of sustainable development. it is extremely difficult to compare this progress as a whole, given the multitude of indicators. on the other hand, if we compare territorial units with the use of one or a few selected indicators, we will not get a clear answer to the question which districts are quicker and which are slower in the implementation of the sustainable development goals. in such a case, the socalled multidimensional analyses come to the aid. in this paper, we conduct the taxonomic study of the local sustainable development of the districts of kuyavian-pomeranian province in four areas: social order, economic order, environmental order and institutional-political order. to this end, we applied the method of linear ordering, used for assessing the level of diversification of objects with the application of a closed set of statistical features (grabiński, wydymus, zielaś, 1989). we presented the adopted method in detail in other studies, so there is no need to discuss it any further. (siemiątkowski, 2015; siemiątkowski, 2017; siemiątkowski, tomaszewski, 2018; siemiątkowski, jankowska, 2020). it should only be noted here that we standardized features based on model methods, which assume that there exists the reference model object in relation to which the taxonomic distances of the examined objects were determined. the synthetic measure was calculated according to hellwig’s method, based on the formula: d d d i i= −1 0 0 where: di0 – the euclidean distance of object xi from reference object x0 , baltic journal of economic studies 4 vol. 6, no. 2, 2020 d0 – the critical distance of a given unit from the reference object (ostasiewicz, 1998). it should also be pointed out that we have already conducted empirical studies concerning the selected aspects of sustainable development involving a significant number of inhabitants of kuyavianpomeranian province (research sample of approximately 4,500 people). some findings of these studies have already been published (siemiątkowski, tomaszewski, jurgilewicz, & poplavska, 2019), while the others will be published in a monograph which is in print (siemiątkowski, tomaszewski, 2020). 4. research results in order to carry out the taxonomic study of the progress in the implementation of the sustainable development goals of the districts of kuyavianpomeranian province, using the database of the main statistical office, we preliminarily selected 89 features of objects (districts). it must be emphasized here that the list of indicators considered when building the synthetic measure is limited by the very assumptions of the sustainable development strategy. this means that we did not include here features other than those indicated in the gus statistics, consistent with international recommendations concerning the sustainable development goals. social governance: x1t – birth rate per 1,000 of population, x2t – the rate of migration for a permanent stay of people in working age per 10,000 of working age population, x3t – post-working age population per 100 of working age population, x4t – non-working age population per 100 of working age population, x5t – post-working age population per 100 of postworking population, x6t – infant mortality rate per 1,000 live births, x7t – deaths caused by cardiovascular diseases in percent of the total number of deaths, x8t – deaths caused by cancer in percent of the total number of deaths, x9t – deaths caused by respiratory diseases in percent of the total number of deaths, x10t – number of deaths of people under 65 years of age per 1,000 of population in this age, x11t – number of people in households benefiting from social welfare in percent of total population, x12t – average monthly gross salary (business entities with more than nine people), x13t – average usable floor area of a flat per one person, x14t – kindergarten children in percent of the total number of children in the age of three to five, x15t – kindergarten children in percent of the total number of children in the age of three to five in rural areas, x16t – pass rate of final examinations in vocational high schools, x17t – pass rate of final examinations in high schools, x18t – the long-term unemployed (longer than one year) in percent of the total number of the unemployed, x19t – the registered unemployed in percent of the total working age population (as of december 31) – unemployed – women, x20t – number of the registered unemployed in percent of the total working age population (as of december 31), the unemployed with a university degree, x21t – job offers for people with disability per 1,000 unemployed with disability, x22t – graduates (previously non-working) in percent of the total number of people unemployed, x23t – graduates (previously non-working) in percent of the total number of people unemployed, female graduates, x24t – registered unemployment rate, x25t – number of passenger cars per 1,000 of population, x26t – consumption of utilities in households over a year per person – electricity, x27t – consumption of utilities in households over a year per person – gas, x28t – consumption of utilities in households over a year per person – water, x29t – the registered long-term unemployed (more than one year) in the age 55-64 in percent of the total number of people unemployed in the age 55-64, x30t – people in post-working age in households benefiting from social welfare in percent of the total number of people in this age, x31t – people injured in industrial accidents per 1,000 of working population, x32t – health clinics per 10,000 of population, x33t – detection rate of offences discovered by the police, x34t – offences discovered by the police per 1,000 of population, x35t – criminal offences discovered by the police per 1,000 of population, x36t – economic offences discovered by the police per 1,000 of population x37t – road traffic offences discovered by the police per 1,000 of population, x38t – offences against life and health discovered by the police per 1,000 of population, x39t – offences against property discovered by the police per 1,000 of population, x40t – road accident victims per 100,000 of registered vehicles – injured, x41t – road accident victims per 100,000 of registered vehicles – fatal accidents. economic governance x42t – capital expenditure in enterprises (current prices; without business entities with up to nine employees) per one person of working age, baltic journal of economic studies 5 vol. 6, no. 2, 2020 x43t – entities of the national economy newly registered in regon (national business registry) per 10,000 of working age population, x44t – value of the foreign capital of companies per person of working age, x45t – capital expenditure according to pkd (polish classification of activity) in percent of the total capital expenditure of enterprises (without business entities with up to nine employees) – agriculture, forestry, hunting and fishery, x46t – capital expenditure according to pkd (polish classification of activity) in percent of the total capital expenditure of enterprises (without business entities with up to nine employees) – industry and construction, x47t – capital expenditure according to pkd (polish classification of activity) in percent of the total capital expenditure of enterprises (without business entities with up to nine employees) – commerce, vehicle repair, transportation and warehousing, accommodation and catering, information and communication technology, x48t – capital expenditure according to pkd (polish classification of activity) in percent of the total capital expenditure of enterprises (without business entities with up to nine employees) – financial and insurance activity, real estate activities, x49t – capital expenditure according to pkd (polish classification of activity) in percent of the total capital expenditure of enterprises (without business entities with up to nine employees) – other services, x50t – natural persons conducting business activity per 100 of working age population, x51t – entities of the national economy registered in regon according to size per 10,000 of working age population – total, x52t – entities of the national economy registered in regon according to size per 10,000 of working age population – micro (up to nine employees), x53t – entities of the national economy registered in regon according to size per 10,000 of working age population – small (from 10 to 49 employees), x54t – entities of the national economy registered in regon according to size per 10,000 of working age population – medium (from 50 to 249 employees), x55t – entities of the national economy registered in regon according to size per 10,000 of working age population – large (over 250 employees), x56t – length of bicycle paths per 10,000 sq km, x57t – length of bicycle paths per 10,000 of population, x58t – length of local public roads per 100 sq km – paved surface, x59t – length of local public roads per 100 sq km – dirt roads, x60t – communes’ expenditure on public roads in percent of their total expenditure, x61t – districts’ expenditure on public roads in percent of their total expenditure. environmental governance: x62t – carbon dioxide emissions from plants especially noxious to air purity, x63t – communes’ expenditure on the protection of air and climate per person, x64t – consumption of electricity per person – total, x65t – consumption of electricity per person – urban areas, x66t – consumption of electricity per person – rural areas, x67t – emissions of air pollutants from plants especially noxious to air purity — gases, x68t – emissions of air pollutants from plants especially noxious to air purity — particulates, x69t – pollutants retained or neutralized in pollutant reduction systems in plants especially noxious to air purity in percent of pollutants generated – gases without carbon dioxide, x70t – pollutants retained or neutralized in pollutant reduction systems in plants especially noxious to air purity in percent of pollutants generated – particulates, x71t – forest cover, x72t – degree of afforestation, x73t – legally protected land in percent of the total area, x74t – green areas in percent of the total area, x75t – amount of mixed municipal waste of household collected during the year per one inhabitant, x76t – amount of municipal and industrial waste water after treatment in percent of the total amount of waste water to be treated, x77t – number of domestic biological waste water treatment plants, x78t – uncontrolled dumping sites (number per 100 sq km), x79t – uncontrolled dumping sites (area per 100 sq km). institutional and political governance: x80t – number of registered foundations, associations and social organizations per 10,000 of population, x81t – voter turnout in self-government elections – first round, x82t – voter turnout in self-government elections – second round x83t – councilwomen and councilpersons with higher education in percent of the legislative organs of communes and districts – women, x84t – councilwomen and councilpersons with higher education in percent of the legislative organs of communes and districts – people with higher education, x85t – revenues to communes’ budgets from service charges per person, x86t – the european union funds for financing eu programmes and projects obtained by communes and districts per person, x87t – expenditure from the budgets of communes and districts on servicing public debt per 1,000 pln of the total budget income of communes and districts (the total of communes and districts combined), baltic journal of economic studies 6 vol. 6, no. 2, 2020 x88t – capital expenditure of communes and districts in percent of the total expenditure (communes and districts combined), x89t – area of land covered by local spatial development plans in percent of the total area. when choosing features for the construction of the synthetic measure of the sustainable development of districts, we had to select them carefully. as the features had to meet the requirements of the completeness of statistical data and of the unified methodology of data gathering, some of the indicators mentioned above could not be qualified to the subsequent stages of the construction of the synthetic measure. the main problems were the incompleteness of statistical data, their heterogeneity for different districts, the lack of any data, and the lack of information about ways of collecting data by authorized entities. among the features that met the above requirements, 35 were recognized as stimulants, while 24 were deemed destimulants (see: table 1). the remaining features failed to fulfil strict methodological requirements typical of synthetic taxonomic measures. the features selected for further procedure did not show an excessive degree of correlation towards each other; thus, they were all included in the synthetic indicator. table 1 the selection of features of particular districts governance stimulants destimulants social x1t, x12t, x13t, x14t, x16t, x17t, x25t, x32t x3t, x4t, x5t, x7t, x8t, x9t, x10t, x11t, x18t, x19t, x20t, x22t, x23t, x24t, x26t, x28t, x29t, x30t, x31t economic x42t, x43t, x44t, x45t, x46t, x47t, x48t, x49t, x50t, x51t, x52t, x53t, x54t, x55t, x56t, x57t, x58t, x59t, x60t environmental x71t, x73t, x77t x64t, x65t, x75t, x76t institutional-political x80t, x83t, x84t, x88t, x89t x87t source: authors’ own work 0 0.1 0.2 0.3 0.4 0.5 żniński świecki sępoleński tucholski mogileński nakielski radziejowski inowrocławski lipnowski włocławski rypiński grudziądz włocławek grudziądzki brodnicki golubsko-dobrzyński chełmiński wąbrzeski toruń bydgoski aleksandrowski toruński bydgoszcz 0.0622 0.0706 0.0831 0.0885 0.1155 0.1370 0.1528 0.1912 0.1982 0.2033 0.2486 0.2489 0.2560 0.2726 0.2755 0.2790 0.3303 0.3318 0.3617 0.3988 0.4478 0.4495 0.4787 figure 1. the synthetic measure of sustainable development of the districts of kuyavian-pomeranian province source: authors’ own work baltic journal of economic studies 7 vol. 6, no. 2, 2020 having carried out all necessary procedures (among others, the choice of the reference model, the standardization of features), we calculated the values of the synthetic measure of sustainable development, which were presented in figure 1. the ranking presented in figure 1 shows significant taxonomic distances between the synthetic measures of particular districts. the difference between the best and the worst district as expressed in the value of a synthetic measure was as much as 0.4165. this shows considerable disparities in the implementation of sustainable development strategies across individual districts. another conclusion refers to the level of sustainable development in the districts of kuyavian-pomeranian province. the maximum value of the synthetic indicator was nearly 0.48. this means that all the examined districts are below the second quartile of the distribution of the indicator value. this may be interpreted as the low and very low level of sustainable development. the districts of the city of bydgoszcz and toruński were at the top of the ranking. they are both highly urbanized areas. aleksandrowski district was also ranked high, although it does not significantly distinguish itself with high indicator values. the following positions were occupied by other strongly urbanized districts: bydgoski and the city of toruń. at the bottom of the ranking, we find peripheral districts: żniński, świecki, sępoleński and tucholski. it should be pointed out that the ranking covered a significant number of features so, basically, it is reliable. further in-depth study is required to find the cause for which these districts were ranked on the lowest positions of the ranking. it would help to identify which of the four most important areas of sustainable development weighs on their result. 5. conclusion the use of multidimensional taxonomic analysis for measuring the progress of local units in the degree of the accomplishment of the sustainable development goals has undeniable advantages. first of all, it helps to show differences in the implementation of the development strategies across districts. what is more, it shows these differences on the basis of the complete set of diverse features rather than single parameters (e.g., pace of growth). thus, the multidimensional approach is a lot more precise when it comes to showing differences between the examined objects. in the collective of units under study, there is significant differentiation of the level of indicators analyzed within the framework of the sustainable development strategy. it must be emphasized that there are as many as 12 districts in the lower quartile of the distribution of the synthetic measure, i.e., its level has been below 0.25. 11 self-government units were in the second quartile of the distribution, i.e., in range between 0.25 and 0.5 of the synthetic indicator. relatively big 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(2003). zasada zrównoważonego rozwoju. zasada konstytucyjna czy zasada polityki społecznoekonomicznej w zakresie ochrony środowiska? zeszyty naukowe wyższej szkoły informatyki, zarządzania i administracji w warszawie, 1, 7–18. yigitcanlar, t., dur, f., & dizdaroglu, d. (2015). towards prosperous sustainable cities: a multiscalar urban sustainability assessment approach. habitat international, 45, 36–46. retrieved from: https://core.ac.uk/ download/pdf/52923327.pdf baltic journal of economic studies 25 vol. 5, no. 4, 2019 corresponding author: 1 yaroslav mudryi national law university, ukraine. e-mail: abbakumova.d@gmail.com researcherid: h-2525-2019 doi: https://doi.org/10.30525/2256-0742/2019-5-4-25-33 the role of the world bank and the imf in the international financial system and the human rights sphere daryna abbakumova1 abstract. the main purpose of the article is to provide legal analysis of the activities of the world bank and the international monetary fund, as well as to clarify their role in the international financial system and the peculiarities of the correlation with the sphere of human rights. methodology. to achieve the scientific objectivity of the results, the entire complex of general scientific and special research methods, which are widely used in the modern science of public international law and international economic law in particular, were used. thus, the method of objectivity was used to determine the probability and completeness of the information that was used in the research process. the dialectical method was useful in studying the development of the organizational structure and powers of the world bank and the imf. the special legal method allowed analysing the provisions of the constituent documents of these international organizations, and system-structural – to determine their place in the international financial system. the comparative legal method has become useful in defining the features of supranationality of international organizations. the results of the study revealed that the world bank and the international monetary fund continue to occupy key positions in the international monetary and financial system, despite the fact that they were created in the middle of the last century. it has been found that in recent years, the world bank and the imf have somewhat changed their position in providing financial assistance to the states. their position has become more rigid than the one they followed at the beginning of their activity. it is established that this is manifested, first of all, in the application of the principle of good governance, when considering the issue of the allocation of money. this principle, which became fundamental in the activity of these international financial institutions, helps to determine whether the government of the state is fair and honest enough for using the provided assistance for the right purposes, not for the corrupt schemes, and whether these funds would not be stolen by the government in the future. the main practical impact of such research is to identify the link between the functioning of the world bank and the imf, which are fully focused on monetary and financial operations, and such completely remote from them area as human rights. clarification of the relationship between the activities of these financial institutions and the field of human rights allows us to find ways to protect people, whose rights have been violated during the realization of the projects funded by the world bank and the imf. value/originality. the main features that international intergovernmental organizations must have to be regarded as those who have supranational nature are investigated. on this basis, it was established that the world bank and the imf do not have supranational features, and the only organization possessing such features remains the european union. key words: international financial institutions, world bank, international monetary fund, international bank for reconstruction and development, financial system, human rights. jel classification: f33, k33, k38, f53 1. introduction it is difficult to imagine modern international economic relations without the work of international organizations. since the middle of the nineteenth century, they gradually turned from small, narrow-profile associations to full-fledged subjects of international law, which we used to see now. international organizations have a significant impact not only on the political, social, and cultural spheres but also on the economic sphere as well. a striking example of this is the world bank and the international monetary fund, which are the most powerful international financial institutions created by the bretton woods conference in 1944. their functioning is the basis of the modern international baltic journal of economic studies 26 vol. 5, no. 4, 2019 economic order that considers the removal of barriers in international trade and financial transactions as the main element in promoting the high level of employment, increasing economic prosperity and financial stability in the world. and as a result of this, achieving sustainable economic growth (malanczuk, 2000). the strengthening of the political and economic interdependence of states, as well as the active processes of globalization, put international monetary and financial organizations at a sufficiently high level in the system of international economic relations. they ensure the continuous functioning of the monetary and financial system, effective intergovernmental economic cooperation, which is one of the factors of guaranteeing security and political stability not only at the universal but also at the regional and state levels as well. therefore, the research of the legal status and peculiarities of the functioning of such international financial institutions as the world bank and the imf is of particular importance, as they are exactly those institutions on which the whole current international financial system is kept. the purpose of the paper is to analyse the activities of the world bank and the imf, as well as to clarify their role in the international financial system and their relationship with the human rights sphere. 2. literature review activities of international financial organizations have always attracted the attention of many scientists. both ukrainian and foreign scholars were engaged in the study of the legal status and functioning of the world bank and the imf. considering the legal status of international financial institutions, some scholars point out that they have the features of supranationality. so, l. lazebnik notes that “the elements of supranationality in these organizations have received a new development and are manifested in adapted to international relations form” (lazebnik, 2008). the scientist argues the supranational nature of the world bank and the imf, among other things, by their activity on regulating debt problems of member states, as these organizations play a key role in the international strategy for settling a foreign debt of the states. o. dunas (2010) considers that the necessity of creating international organizations with elements of supranationality is caused by the growing interdependence of states in order to solve global problems, as well as the need to create and guarantee the abidance by mandatory rules of conduct. the scholar also tends to think of the presence of supranational elements in the activities of international financial institutions, which manifests itself in their broad and rigorous competence in the field of credit, financial, and monetary matters. v. shumilov (2014) under the international financial organization understands such an organization, which is endowed by its members with the competence to carry out activities in the monetary and financial sphere, and which is to one extent or another involved in the functioning of the international financial system. in his view, some powers of the imf have supranational features, such as defining the policy of the member states in the field of parity of national currencies in accordance with art. iv of the articles of agreement of the imf. m. ravallion refers to the world bank as to the “knowledge bank”, but at the same time, he argues that the past attitude toward him as a “knowledge bank” did not correspond to reality. in his opinion, the world bank, as an institution, which “explicitly committed to global poverty reduction – should be more heavily invested in knowing what is needed in its client countries, as well as in international coordination” (ravallion, 2016). mac darrow (2006) considers that the examination of such financial institutions as the world bank and the imf together is a natural and inevitable process, because of their historical formation. but at the same time, he stresses that they are two different types of organizations with different powers, responsibilities and benefits. particular attention is paid to the role of international human rights law when these financial institutions realize different programs. mac darrow argues that the systematic appeal to human rights by the imf as to a “social issues” or “social concerns” “is itself alarming, ignoring human rights’ very obvious ‘economic’ aspects, and consigning them by this definition to macro-economic irrelevance” (mac darrow, 2006). d. gartner (2013) examines the world bank and the imf in terms of transparency since, within the framework of international law, the institutional transparency is viewed as a key element in ensuring greater accountability within international organizations. comparing these two financial institutions, the author concludes that the level of transparency of the world bank is much higher compared to the imf, which is reflected in its public disclosure policy, which promotes public access to previously closed information. a. feibelman (2013) focuses on the interactions and correlations between the imf and the eurozone countries. feibelman states that “the fund sits at a central location within the architecture of the international monetary system and plays a uniquely important role in the regulation of that system” (feibelman, 2013). c. manger-nestler stresses that “the global financial system has always been characterized by a plurality of subjects, a coexistence of actors and a variety of controlling instruments” (manger-nestler, 2011). the author argues that the current financial architecture is based more on the coexistence rather than the cooperation of several international actors. baltic journal of economic studies 27 vol. 5, no. 4, 2019 3. legal status and peculiarities of the functioning of the world bank and the imf according to foreign scholars, the characteristic feature of modern international law is the progressive “cosmopolitanization” of international law, the departure from the legal system in which states are the only subjects of international law and in which the national is firmly isolated from the international one, and the transition to a transnational legal order that destroys the traditional boundaries between what is “inside” and “outside” (reus-smit, 2004). international financial institutions have considerable importance in this process. by uniting a large number of states and concluding multilateral treaties within their framework, they create unique legal standards in certain areas of international law, which are subsequently implemented into domestic law and transformed into provisions of national legislation. there is a unification of the legal systems of states, which promotes a closer connection between them, and between domestic and international law. at the same time, there is a significant difference between the functioning of international organizations and states. the last is not required to approve or justify each time their existence, referring to the fulfilment of certain functions. the existence of international organizations, including financial ones, is, on the contrary, directly related to the fulfilment of certain functions. this, in turn, requires an organizational structure, a clearly defined competence and an obligation to fulfil the functions entrusted to the international organization by the member states (schermers & blokker, 2011). thus, international financial organizations and their permanent bodies are the instruments, which are used by the states to establish cooperation among themselves in certain areas. the basis of modern international economic order is a system created by the bretton woods conference in 1944. its creation took place after the end of the second world war and was provoked by many reasons. as it is known, after the war the economy of most countries was in decline, the state budgets of the countries had chronic deficits, and the monetary circulation was inflationary. the consequences of the war have greatly changed the balance of economic forces on the world map. the economy of germany and japan was completely destroyed by military actions, the economy of great britain and france was significantly weakened, and the united states became the strongest state of the world and sought to maintain this leadership. all countries of the world were interested in creating international financial institutions that would be able to regulate the post-war international monetary and financial relations. increased interaction between legal entities of different states, the dependence of the world market and national economies, as well as the growth of the movement of capital, goods, and services, reinforced the need for the international legal regulation of these relations. thus, the crisis in international credit and monetary relations during and after the second world war, as well as the desire of the governments of the most countries to solve these problems, taking into account the interests of each state, have become one of the main reasons for the establishment of a stable postwar monetary order and the creation of international financial organizations, which would support it. at the same time, many scholars and experts argue that the bretton woods agreement of 1944 was based on the hidden inequality of the countries and, in certain matters, infringed their interests. this appears in the fact that the united states and the united kingdom have played an important role in the drafting of this agreement, and thus in the creation of the imf and the world bank. one can see that the interests of these countries were in line with the work of these international institutions. the united states wanted to have more influence on the economies of less developed countries, but did not want to do so openly, but wanted to act covertly. to a greater extent, they have succeeded because they were able to put national currencies of the imf member countries in dependence of the national currencies of the most developed countries such as the united states (dollar) and the united kingdom (pounds sterling). this is not surprising, as the project of the imf’s and the world bank’s creation is owned by us and uk economists, namely senior u.s. treasury department official harry dexter white and british economist john maynard keynes. according to a. labunska, the united states has almost managed to achieve its goal since “the system of the gold standard has become a dollar standard” (labunska, 2015). however, despite the different views on the influence of certain countries on the formation and functioning of the bretton woods international monetary and financial system, the indisputable fact remains that the basis of its activities have been and remain the two international financial institutions, namely the imf and the international bank for reconstruction and development (one of the main institutions that compose the world bank group, and which most scientists and lawyers call the world bank). as i. kudas emphasizes, these two mutually interconnected organizations take a central place in providing the institutional mechanism for the functioning of the modern international banking system (kudas, 2015). considering the imf and the ibrd as leading financial institutions, it should be noted that their activities are based on characteristic features of classical international organizations. according to the majority of scholars, these features are: the establishment of the organization based on an international treaty; permanent internal organizational structure; the presence of a specific purpose; establishment in accordance with international baltic journal of economic studies 28 vol. 5, no. 4, 2019 law (schermers & blokker, 2011; klabbers, 2002; shibaeva & potochnyy, 1988). it is worth dwelling on these features, taking into account the specific functioning of the imf and the ibrd. when we are speaking about the legal nature of the imf and the ibrd, it must be said that they were created on a contractual basis, as the foundation of their activities is international agreements, which are at the same time the charters of these institutions (these are the articles of agreement of the imf and ibrd articles of agreement). they were signed by 189 countries, which testifies to the interstate nature of these organizations. it is an interesting fact that according to section 1 of art. 2 of the ibrd articles of agreement (hereinafter referred to as the ibrd charter) the member of the ibrd can be only the state that is the member of the imf. this means that each ibrd member country must first become a member of the international monetary fund. at the same time, only those countries that are members of the ibrd may be members of other organizations that compose the world bank group. the legal basis for the existence and activities of the international organization, as have already been mentioned, is a multilateral treaty between member states, which is usually called a charter or a statute. as v. moravetskiy points out, “the main role of the charter of an international organization – to bring into the framework of legal norms the process of its bodies' activities” (moravetskiy, 1976). in his opinion, the degree of restriction of the freedom of action of organs depends on the accuracy of the formulation of statutory norms. in addition to the contractual basis, one of the features inherent in international organizations is the presence of permanent bodies. this feature has become decisive in the process of the formation of international organizations as a separate subject of international law, which, unlike multilateral conferences, administrative and trade unions, has a permanent internal organizational structure, permanent membership composition, contractual basis and, of course, legal personality (abbakumova, 2016). the organizational structure of the ibrd and the imf is quite similar but there are some differences. the main body of the ibrd is a board of governors, which consists of representatives of all member countries. its competence includes solving all issues related to the development of the bank. there is also a board of directors consisting of 25 executive directors. it is formed based on two principles: the largest financial contribution and equitable geographical representation. the principle of the largest financial contribution consists in the fact that the five states with the largest amount of invested funds expressed in the quota have the right to appoint their permanent director in the board of directors, and the principle of equitable geographical representation is exercised when choosing temporary directors (boshchytskyi, 2015). the ibrd president is elected by the board of executive directors for a term of five years. as for the imf, its governing body is also a board of governors, to which each member state sends its representative. this imf body makes basic decisions on the fund’s activities. in addition, there is also an executive board consisting of 24 directors. it is responsible for conducting current affairs of the imf, which include a wide range of political, operational, and administrative issues. the executive board has the authority to elect a managing director for a fiveyear term, who heads the staff of the fund. as well as in the ibrd, the directors of the executive board of the imf are appointed depending on the amount of financial contributions of the state. there is also the development committee, which is a joint imf and ibrd body dealing with issues of providing funds to developing countries. it examines and analyses medium and long-term prospects of economic development in these countries and gives analytical reports and recommendations concerning these countries to the imf and the ibrd board of governors. another feature of international organizations, including financial ones, is the existence of the aim. the purposes of both organizations are clearly defined in their charters. the purpose of the imf is defined in art. 1 of the articles of agreement of the imf. this is, in particular, the promotion of international monetary cooperation, the expansion and balanced growth of international trade, the stability of currencies and the equilibrium in the external balances of payments of member states. it also provides short-term loans to member states of the fund to cover the temporary deficit of their balance of payments and provides advisory assistance on financial and monetary issues. as for the ibrd, its purposes are also defined in its charter. according to art. 1 of the charter, the main purposes of ibrd are: to assist member countries in economic development by providing them with longterm loans and credits; encouraging foreign investment by providing guarantees or participating in loans and other private creditors’ investments; encouraging long-term balanced growth of international economy and trade, and maintaining of equilibrium in balances of payments by stimulating international investment for the development of the productive resources of member states. at the time of the creation of the ibrd in 1945, its main objective was to restore the economy of europe, which was destroyed and devastated after the second world war. thus, in art. 1 of the ibrd charter among other purposes, the first is exactly “to assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by war, the reconversion of productive facilities to peacetime baltic journal of economic studies 29 vol. 5, no. 4, 2019 needs and the encouragement of the development of productive facilities and resources in less developed countries.” after western european countries have gained economic stability, the ibrd focused mainly on providing assistance and long-term loans to the poorest countries in the world. to achieve these goals, the imf and the ibrd have a certain status and have certain rights, powers, and responsibilities endowed by the founding states, that is, both institutions have international legal personality. the charters of both organizations stipulate that both the imf and the ibrd have the full status of a legal entity (section 2 of art. ix of the imf charter and section 2 of art. vii of the ibrd charter). this appears in the fact that they can enter into contractual commitments and conclude contracts; acquire movable and immovable property, and as its owners to dispose of it; institute legal proceedings. taking into account the analysis of rights and obligations of the imf and the ibrd, it can be noted that, in addition to the status of a legal entity, they also have international legal personality. in addition to this, it should be mentioned that the international legal personality of the fund and the bank is derived from the legal personality of the states that have created them. states acquire legal personality from the moment they occur, and the imf and the ibrd are endowed with the legal personality by the states and, therefore, it is limited since it is carried out only in a certain area of international legal relations. at the same time, as rightly noted by o. shibaeva and m. potochnyy, the will of organizations is not identical to the state’s will, it is independent. in their opinion, the fact that international organization has an international legal personality shows that there is an independent will of the organization. according to o. shibaeva and m. potochnyy, “the independent will of an international organization is a result of the harmonization (and not merge) of the will of the member states, which exists in parallel with their will (and not above it) and manifests itself in the various actions of the international organization carried out by the appropriate bodies, which implement the will of the organization” (shibaeva & potochnyy, 1988). decisions that are taken by the bodies of the organization on certain issues of its activities also contain the independent will of the organization itself, not of the states. therefore, resolutions bind states not as subjects that participated in their adoption but as members of the organization. this also affects differences in the consequences of failure to comply with such acts. if the manner in which acts of international conferences and bilateral acts are implemented can be characterized as voluntary, the implementation of acts of international organizations, in particular, the imf and the ibrd, depends on the obligations defined in the charters of the organizations, the provisions of which member states must comply with. examining the legal nature of international financial organizations, it is worthwhile to focus on such a concept as “supranationality”. many scholars argue that organizations such as the imf and the ibrd have features of supranationality (dunas, 2010; palii, 2009; shumilov, 2014). although this concept meets quite often, however, a clear definition of what is an international supranational organization does not exist. thus, european scholars, schermers and blokker, point out 6 main features that the organization must possess in order to be supranational (schermers & blokker, 2011). firstly, they indicate the possibility for the organization to make decisions that will be binding on member states. the second feature is that the decision-making bodies of the organization should not depend on the cooperation of all member states. that is, decisions must be taken by a majority of votes, or the decision-making body should consist of independent persons (who act in their personal capacity and not as representatives of the state). the third feature is the ability of the organization to make decisions that are directly binding on the citizens of the member states. speaking of the fourth feature, scientists emphasize that the organization should have the power to enforce its decisions in the member states. the fifth feature is the financial independence of the supranational organization. and finally, the sixth feature is the impossibility of unilateral withdrawal from the organization. in the opinion of scientists in a supranational organization, member states do not even have the right to terminate its activities or change its powers without consent and cooperation with supranational bodies of the organization (schermers & blokker, 2011). at the same time, while pointing out all these features, the authors argue that currently there is no such international supranational organization. even the european union, having many supranational features, is not, in their view, such an organization but rather depends on the cooperation between its member states. considering the above mentioned, it cannot be said that the imf and the ibrd have features of supranationality. some scholars point out that the imf has elements of supranationality since it has the authority to define national currency parities, to impose currency restrictions, to regulate currency devaluation and revaluation. thus, by giving it such powers, member states transferred the imf some of their sovereign rights regarding the implementation of monetary and financial policies (dunas, 2010). however, we should not forget the fact that by the jamaican currency agreement of april 01, 1978, the imf charter was amended, the essence of which was that member states were entitled to independently determine the rate of their currency. consequently, it should be noted that although the imf had some supranational powers in the time of its creation, the changes that were made to its charter in the 1970s deprived it of those powers (shperun, 2012). baltic journal of economic studies 30 vol. 5, no. 4, 2019 in our opinion, the only international organization that has supranational features is the eu. this is manifested in the fact that, firstly, eu law is supreme over the national law of its member states. secondly, eu law operates throughout the union and has a direct effect in national legal systems. the principle of direct effect means that eu law grants subjective rights and obligations not only to member states but also directly to individuals and legal entities that can defend their rights guaranteed by eu law by submitting claims to the courts of the member states (i.e. within the framework of the national legal system). thirdly, decisions in the eu can be taken not unanimously but by a majority of votes contrary to the position of individual member states. fourthly, the eu has supranational institutions that are formed by international officials, who are independent of the government of the country that nominated them. in addition, the doctrine of eu law highlights the principle of direct application of eu law, according to which eu law becomes automatically, without any implementation procedures a part of the national law of the member states. however, this principle, as well as the principle of the direct effect of eu law, does not apply to all sources of eu law. thus, considering the issue of “supranationality” of international financial organization, one should take into account many aspects that will form the basis of this concept. if the manifestation of supranationality in the european union can be followed by the abovelisted features, the existence of supranationality in the imf and the ibrd is questionable. therefore, speaking of international financial organizations, it is necessary, nevertheless, to lean towards their intergovernmental character, rather than supranational. 4. the imf, the ibrd, and human rights when we talk about international financial organizations, the first concepts we mention are economic relations, credit and currency transactions, the balance of payments, devaluation, currency restrictions, etc. almost never among these concepts you will find a mention of such usual one, but at the same time, far from the finance sphere, as human rights. and here comes the right question: what are human rights doing here? how does the imf and the ibrd relate to this area since they are not involved in the protection of human rights? even charters of these institutions do not contain any reference to human rights. indeed, it is difficult to imagine the activities of financial institutions aimed at protecting the rights of national minorities or combating xenophobia and racial discrimination. the answer to such seemingly easy questions lies in the internal features of the functioning and the legal status of the imf and the ibrd. this is manifested, first of all, in the principles on which the activities of these organizations are based. one of such important principles is the principle of sustainable development and the principle of good governance. moreover, an important role is played by the fact that the imf and the ibrd are specialized agencies of the united nations that imposes certain obligations on them. it is necessary to begin an examination of these organizations as specialized agencies of the united nations, because in this lies the reason for their correlation with human rights and their need to comply with human rights. according to un general assembly resolution 124 (ii) as of november 15, 1947, the ibrd and the imf are un specialized agencies, which were the subject of appropriate agreements between these institutions. this means that they must comply with the provisions of the un charter, which are binding on them and have a force higher than their constituent documents (papandreou, 2013; horta, 2002). at the same time, the ibrd and the imf, as specialized agencies, have been endowed, in accordance with art. 57 of the un charter, with wide international responsibility in the field of economic, social, cultural, educational, healthcare, and other related fields. it seems necessary to look through articles 59 and 55 of the un charter in terms of considering the correlation of the ibrd and the imf activities with human rights protection. in accordance with art. 59 of the un charter, specialized agencies are created “for the accomplishment of the purposes set forth in article 55 of the charter”. in art. 55 of the un charter, among other purposes paragraph “c” refers to “universal respect for and observance of human rights and fundamental freedoms for all without distinction as to race, sex, language, and religion.” moreover, if we look at the purposes and principles of the united nations, which are enshrined in article 1 of the un charter, there in part 3, we can also see the focus on “promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion.” hereby, it can be seen that un specialized agencies, such as the ibrd and the imf, in their activities must also respect human rights, as explicitly stated in the un charter. some authors (papandreou, 2013) argue that the imf and the ibrd are bound by the provisions of the universal declaration of human rights, and although it is not legally binding, because it is adopted in the form of a resolution of the un general assembly but it is a source of customary international law. this in turn “creates an indirect obligation on the world bank and the imf to assist their member states with fulfilling their obligations stemming from the udhr” (papandreou, 2013). since the rules of customary international law are applied to all subjects of international law, consequently, these financial institutions must also respect the rights and freedoms set forth in the universal declaration of human rights. speaking of other documents in the field of human rights such as, for example, the international covenant on civil and political rights (iccpr) and the international baltic journal of economic studies 31 vol. 5, no. 4, 2019 covenant on economic, social and cultural rights (icescr), it should be noted that the ibrd and the imf are also not parties to these treaties but they must do everything possible to ensure that the states they help do not violate the provisions of these documents. in addition, they must ensure that their activities do not have a negative impact on human rights (klein, 1999). the obligation to respect human rights implies the necessity for the world bank to abandon projects that violate human rights or harm the local population. as dana l. clark notes, such processes should be viewed as “a natural outcome of moving toward sustainable development: projects that are inherently unsustainable will no longer be supported or subsidized by the public” (clark, 2002). protection of human rights, among other things, means that not only the ibrd and the imf will not violate human rights but that they will take all appropriate measures to prevent such violations from the third parties, such as governments or private companies. this means preventing the financing of authoritarian regimes, corrupt governments, and governments that systematically violate human rights. it is worth noting that the ibrd has often been accused of financial assistance precisely of such regimes that violated social, political, and economic rights of citizens of their countries. in this aspect, dana l. clark points out that the bank has been repeatedly criticized for providing “an aura of legitimacy to regimes that are known to have committed serious violations of human rights or that have a reputation for corruption” (clark, 2002). these problems were of special importance both for the ibrd and for the imf, as these financial organizations had to understand how they would act in a situation where the government of the country in practice did not implement a policy that would promote the development of the country and would not violate the human rights. the solution of this problem was to establish minimum standards for the proper execution by the government of the country of its powers. this was reflected in the application by the ibrd and the imf in their activities the principle of good governance. now, this principle is one of the fundamental standards of international economic law, because it has changed the policy of assisting the developing countries (vitzthum, 2015). for a long time, this principle was formed within the framework of the ibrd and the imf during the realization of their individual projects. the essence of this principle is the transparent and responsible management of human, economic, and financial resources, and their use for balanced and sustainable development. good governance includes not only transparency and responsibility of state bodies but also such concepts as equality, rule of law, efficiency and effectiveness, consensus-based orientation, accountability, the fight against corruption, and the presence of civil society (karpen, 2010; vitzthum, 2015). in particular, the rule of law consists in the existence of fair legislation and impartial law enforcement, which in turn requires independent courts, impartial and incorruptible police force. it also requires the observance and protection of human rights. such an important feature as transparency means that decisions in the state are taken in accordance with the established rules and norms that should not be concealed from the public. this feature is manifested in providing information about decisions made and their implementation in an accessible and understandable form. thus, we see that the use of the principle of good governance promotes the ibrd and the imf in achieving the goals set out in their charters. the amount of aid to states already depends not only on macroeconomic indicators or social factors but also on the existence of effective state institutions. in countries where there are serious problems with this, the likelihood of receiving support from financial institutions significantly reduces. so, there has been an expansion of criteria on the basis of which the effectiveness of the use of the world bank funds by states is determined. since 1998, the ibrd in the framework of the country policy and institutional assessments takes into account not only economic goals but also the availability of effective state institutions necessary for achieving these goals (vitzthum, 2015). in 1997, the executive board of the imf adopted guidelines on the role of the imf in governance issues, in which particular attention was also focused on the role of good governance in the imf’s activities. in 2018, these guidelines were revised, because despite the progress made in this direction, the executive board noted that “there remained several areas in which the imf’s engagement on governance and corruption issues could be strengthened”. in addition to these principles, which help the world bank deal with the current state of affairs in the member states, the inspection panel was created within the bank, which is a peculiar mechanism for protecting the rights of persons, who have been affected or may be affected by ibrd’s projects. the essence of its activity is that every person or community, whose rights or interests have been violated, as a result of projects funded by the world bank, may file a complaint about a violation to the inspection panel. it is an independent body that provides accountability at the world bank, which enables affected people to protect their rights and recover damages when warranted. the inspection panel was established in 1993 by the resolution of the ibrd and the international development association. it can be said that the ibrd then made an unprecedented step since the inspection panel has become “the first institutional mechanism to allow non-state actors to directly hold an international organization responsible for its actions” (passoni, rosenbaum, vermunt, 2017). what this means is, it has become one of those instruments that baltic journal of economic studies 32 vol. 5, no. 4, 2019 protect the rights and interests of people affected by ibrd’s activities. thus, the main financial organizations of the world are increasingly beginning to take human rights into account when realizing their projects. it is very important that the ibrd and the imf have left in the past their “incoherent, counterproductive and unsustainable approach on human rights by integrating human rights due diligence into its policies and practices, embedding it in its technical advice, as well as its budget support and project lending” (evans, 2016). 5. conclusions having reviewed the peculiarities of the legal status and functioning of the imf and the ibrd, it should be emphasized that from the moment of their establishment in 1944 and until this time they continue to be the main financial institutions that ensure the stability of the international monetary and financial system. although they have sufficiently broad powers in accordance with their charters, it cannot be said that they have supranational nature. this conclusion can be drawn on the basis of the features of supranational organizations. this is, first of all, the ability of the organization to make decisions that are directly binding not only for member states, but also for citizens of member states, the ability to take decisions by a majority of votes, and the presence in the organizational structure of bodies that are completely independent of member states governments. the imf and the ibrd do not currently have such features. the only international organization that has the features of supranationality is the european union. at the present stage of functioning, the ibrd and the imf are beginning to focus more and more on the field of human rights protection. this is evidenced, in particular, by the activities of the inspection panel within the ibrd, established back in 1993. as it deals with individual complaints about violations of rights or interests by projects funded by the ibrd, it can be regarded as a kind of “a human rights monitoring mechanism”. the inspection panel provides an opportunity to examine independently and impartially violations that have been committed, and therefore, look from the side on the ibrd’s activities, and on whether the bank’s policy concerning the respect of rights of citizens of the member states is correct. speaking about the activities of the ibrd and the imf, it should be emphasized that they use the principle of good governance. it plays a key role in resolving the issue of providing financial assistance to states that can only be provided to a transparent and accountable government, which is free of corruption and will use money allocated to it for the intended purpose. therefore, the functioning of these financial institutions is not only related to monetary, financial, and credit operations but it also affects seemingly such a far from them spheres as the protection of human rights and the fight against corruption. references: abbakumova, d. v. 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(in russian) baltic journal of economic studies 203 vol. 5, no. 3, 2019 corresponding author: 1 lviv polytechnic national university, ukraine. e-mail: myroslava55m@gmail.com 2 lviv polytechnic national university, ukraine. e-mail: parutaolena@ukr.net 3 lviv polytechnic national university, ukraine. e-mail: aip2604@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-3-203-206 legal regulation of public property in the conditions of economic transformation miroslava sirant1, olena paruta2, iryna andrusyak3 abstract. the purpose of the article is to characterize the legal regulation of relations in the field of public ownership, which is an important economic resource for the fulfilment of tasks and functions assigned to the state. approaches to understanding public ownership as an economic and social category are analysed, its relationship with property in the general sense is clarified. it is stated that public property is one of the most important categories in our lives because we use it every day, regardless of our desire. at the same time, the level of vital activity and improvement of the population in each state depends, first of all, on how much it provides its citizens with the property of the commons, that is, that property which every person can use, regardless of status, age, sex, religion or any other characteristics. special attention is paid to the features of legal regulation of public property relations in the conditions of the transformation of the economy. general and special features of public property are identified. some features of the formation of concepts concerning the understanding of public property in foreign countries and the experience of legal regulation of public property relations are revealed. it is proved that the existing legal acts on control over public property necessitate us to conclude on the unsatisfactory state of legal regulation in this sphere. the main directions for solving this problem are: transfer of legal regulation to the legislative level, as well as the systematization and partial abolition of departmental acts; clear definition of control objects; establishment of a system of control subjects and principles for the division of competences between them; differentiated consolidation of content and control procedures depending on the type of public property, legal regime of its use, and other factors (control over the legality, the efficiency of the property use, its preservation, etc.). practical importance of scientific results of the study is the clarification of concepts of “public ownership”, “public property” in the context of legal regulation, which is important for the successful socio-economic development of the state and promotes the identification of those factors hampering the development of the economy, the development and further improvement of the legal framework, which regulates the economy and affects the development of an effective economic crisis exit strategy. the public property of the state is not only one of the most important elements in ensuring the fulfilment of state functions but also the basic, decisive condition for the observance and realization of national interests. in view of this, scientific research in this area is relevant and timely in the period of the search for the priorities of the state economic policy. methodology. the methodological basis of the study of public ownership is determined a set of methods of scientific knowledge that allow considering this problem as a multidimensional, interdisciplinary phenomenon. on the basis of system-structural, system-functional, and other scientific approaches, the concept of public ownership as a complex system category, covering the theoretical and practical level of economic activity of the state, has developed. key words: property, state property, communal property, legal regulation, economic resource, objects of public property. jel classification: g32, q15, j54 1. introduction in the current conditions of development of the ukrainian state, when the cardinal reconstruction of all spheres of society’s life, in particular economic, the state’s maximum desire to achieve the relevant international standards and entry into the european union became a key point, the issue of improving the legal regulation of relations in the field of public property becomes of paramount importance. baltic journal of economic studies 204 vol. 5, no. 3, 2019 it should be noted that relations in the field of property as a whole are undoubtedly the economic fundamentals of any state and society, regardless of how they are formed and developed. as the well-known law theorist s. alekseev rightly notes, “the modern stage of society’s development, especially its liberal, post-industrial stage when the opportunities and positive qualities of civil society are fully disclosed, requires from certain objects of property, regardless of its form, to be recognized as public” (alekseev, 2010). instead, it must be noted that the formation of the institution of public property rights is still far from its completion, given that in scientific works of economic and legal direction, this issue is still the subject of fierce debate. 2. public property concepts of the continental legal system as v. ustymenko and r. dzhabrailov rightly point, defining general and special features of public property as a subject of scientific research, “the transformations that took place in the global economy during the xx and the beginning of the xxi century, determined the vector of development of property relations. in most countries of the world, there was a revision of the legal fundamentals of the organization of property relations with the provision of important means of ensuring the balance of public and private interests of owners. in addition, it was followed by a new assessment of the existing scientific conclusions obtained earlier based on the consideration of system interconnections of property relations in the conditions of the dominance of the theory of market fundamentalism. new scientific approaches allowed drawing a conclusion on the appearance of previously unexplored or not studied perfectly aspects of the development of property relations in the context of the formation of initial provisions on the priority of values of a mixed socially oriented economy” (ustymenko, dzhabrailov, 2012). instead, it should be noted that many countries in the sphere of public property, first of all, those included in the continental legal system, have taken roman law tradition as the basis, as evidenced by terminology, classification of property, etc. however, there are also some distinctions, which can be traced on the example of some countries such as france and germany. thus, in france, which is reasonably considered to be a country of classical administrative law, there is a division of property owned by the state and other persons of public law into public property (domaine public) regulated by special rules of public law, as well as private property (domaine prive) regulated by civil law. it is believed that first preconditions for distinguishing public property in this state were made in the period of the french revolution while its first clearly enough appearance was in 1804 along with the adoption of the french civil code (godfrin, 2001). however, scientific sources indicate that the theoretical substantiation of the concept of distribution of property in france was laid by j.-m. pardessus (pardessus, 1838) whose scientific views were supported by e.-v. foucart (foucart, 1834). in more details, j.-b.-v. proudhon enshrined the issue of public ownership in his famous work “a treatise on public domain” (proudhon, 2010). starting from the middle of the xx century, not only in the doctrine but also in the judicial practice, the approach began to dominate, according to which public domains are a special type of property, which: 1) is either intended for use directly by the public; 2) or used by the public service on the condition that the relevant facilities are adapted for this due to their natural properties or as a result of special equipment for the needs of the relevant service (aub, bon, auby, 2003). therefore, modern public property doctrine of france is based on another fundamental category – the category of public services (service public), which today is one of the system-making categories in the administrative law of this state. nevertheless, the convergence of public and private property should also be recognized as one of the features of the modern period, which results in a certain evolution of the property management system, aimed at its valorisation, that is, an economic assessment and an increase in profits, in particular: 1) concessions and other tools for investing in public ownership objects are actively used based on the public-private partnership; 2) competition law was extended to the sphere of private property relations; 3) the pan-european principle of transparency is implemented in the provision of public property to private persons, which is a means of forming the common market (aub, bon, auby, 2003). the concept of public property that has been formed in france has significantly influenced the legal systems of other states, including ukraine. but it should be noted that the division of property into objects of public and private property is adopted not in all states of the continental legal system. first of all, it is absent in german law, where an alternative doctrine of “modified private property” (theorie vom modifizierten privateigentum) has been formed for the public property (offentlichen sachen). in scientific sources, such a doctrine is also called the “dualistic” concept of a property right as opposed to the “monistic” concept of france. 3. public property relations as the subjectmatter of administrative property law it is worth noting that in the science of administrative law, public property relations are investigated mainly from more narrow positions – within the framework of issues of management of state and communal property (vynnytskyi, 2005). these traditions were established during the soviet period, and some contemporary authors adhere to them. it is obvious that today, the sphere of administrative legal regulation of state and communal property relations should be approached somewhat broadly, more beyond the issues baltic journal of economic studies 205 vol. 5, no. 3, 2019 of property management. therefore, an administrative legal concept not just proposes changing a narrow approach to the institution of state property management. administrative property law covers all groups of relations and processes associated with the property provision by the public administration to perform state functions and functions of local self-government bodies, in particular: – planning for the public property; – formation of warehouses of public domain, necessary and sufficient for the performance of functions of state or local self-government; – management of the formed warehouses of public property by organizing and ensuring its use within the performance of state or local self-government functions; – accounting and control of the public property. most scholars believe that the subject-matter of legal regulation – the main criterion for the organization of legal matter. such a relatively separate subject of regulation is manifested in the administrative property law since relations regarding the provision of property by the public administration for state and local self-government functions have a certain specificity and, by their material object, they are always more noticeable from among other relations in the field of administrative law. to regulate these relations, the regulatory framework, consisting of many laws and regulations, a significant number of by-laws, is objectively formed and continues to actively develop. relations governed by administrative property law are heterogeneous. their classification can be carried out on different grounds: firstly, based on the content of relations, within which the planning, formation of warehouses of public property, their management, as well as accounting and control, are carried out; secondly, by the intended purpose of the property: relations concerning public domain objects; objects providing the provision of public services, other activities in the public interest; property for the satisfaction of individual economic needs, etc.; thirdly, depending on the natural properties of public domain objects: relations concerning the movable property, property complexes, infrastructural facilities of the real estate, land plots, forest areas, water objects, other natural resources, etc.; fourthly, based on the subject of ownership: relations with the state, regional property and property of local self-government bodies. at the same time, relations governed by administrative and property law have a number of common features: 1) are formed in relation to property that is in the public domain or comes to it; 2) public administration body is an obligatory participant in relations; 3) their content – the powers of administrative bodies in respect of property that is in the public domain or acquired in public ownership, as well as the corresponding rights and obligations of other persons; 4) the exercise of powers by administrative authorities becomes law-enforcement and acquires proceduralprocessual form; 5) are regulated by the general-sector method, subordinated to the general-sector mode. as a result, the relations under consideration can be characterized as organizational and property. 4. control over public property control over the public property – an administrativeprocedural activity that, like accounting, aims to get the corresponding result, is organizational, and has secondary (accompanying) character, providing proper public administration and use of state and communal property. control is the most important type of feedback, in which the authorities receive information about the actual state of affairs, the execution of the decisions made (stetsenko, 2008). according to scholars, it is necessary to talk about state property control, which is carried out by state authorities (both legislative and executive); its object is the activities of organizations on the use of state property; control assessment of such activity is carried out on the basis of the principles and purposes of the use of state property, as well as the goals and objectives of its management (bortnyk, yesimov, 2015). therefore, public administration and the use of state and communal property should be considered as the object of control. when analysing the subjects of control in this area, it is first necessary to distinguish between the administrative and legal control activities of public administration bodies and other control activities. the latter include: 1) control of legislative authorities on the activities of public administration regarding the public property; 2) presidential control over the activities of the public administration on public property; 3) control by the accountancy chamber, other similar bodies over the public administration activities regarding the public property, as well as over the use of this property by other persons; 4) public prosecutor’s supervision of the public administration activities regarding the public property, as well as over its use within the limits and in cases established by law. 5. conclusions analysis of the existing legal acts on control over public property necessitates us to conclude on the not quite satisfactory state of legal regulation in this sphere. first and foremost, it should be improved in the following areas: 1) transfer of legal regulation to the legislative level, as well as the systematization and partial abolition of departmental acts; baltic journal of economic studies 206 vol. 5, no. 3, 2019 2) clear definition of control objects; 3) establishment of a system of control subjects and principles for the division of competences between them; 4) differentiated consolidation of content and control procedures depending on the type of public property, legal regime of its use, and other factors (control over the legality, the efficiency of the property use, its preservation, etc.). references: alekseev, s. s. (2010). property rights. theory problems. 3rd edition, revised and expanded. moskva: norma: infra-m, 240 p. ustymenko, v. a. (2014). public property: problems of theory and practice: monograph. nas of ukraine, institute of economic and legal research. chernihiv: desna polihraf, 308 p. mamutov, v. k. (sc. ed.) at al. (2012). the role of public property in ensuring the socio-economic development of ukraine: materials of the intern. scientific-practical conf., 18 september 2012, donetsk; nas of ukraine, institute of economic and legal research. donetsk: yugo-vostok, 224 p. kremenovska, i. (2012). the future of public ownership. law herald of ukraine. 6–12 oct. (№ 40), 3–6. kremenovska, i. v. the role of public property in ensuring the socio-economic development of ukraine. url: http://www.aprnu.kharkiv.org/news_18092012.html; http://iepd.dn.ua; http://www.hozpravo.com.ua/ news/index.php?element_id=645 ustymenko, v., dzhabrailov, r . (2012). general and special features of public ownership as a subject of scientific research. civil law problems, 4(71), 185–200. godfrin, ph. (2001). droit administrative des biens. 6e ȅd. p.: dalloz, 3–7. pardessus, j.-m. traitȅ des servitudes ou services fonciers. 8e ȅd. p.: nȅve, 1838. foucart, e.-v. elȅments de droit public et administrative ou exposȅ mȅthodique du droit public positif. 3 vol. 1e ȅd. p.: videcoq, 1834–1835. proudhon, j.-b.-v. (2010). traite du domaine public, ou de la distinction des biens consideres principalement par rapport au domaine public. vol. 1 (french edition). nabu press (bibliobazaar / bibliolife). auby, j.-m., bon, p., auby, j.-b. (2003). droit administrative des biens. 4e ed. p.: dalloz, 9, 96–98. vynnytskyi, a. v. (2005). the administrative and legal framework of state property management: thesis for cand. sc. ( jurisprudence). ekaterinburg, 283 p. stetsenko, s. h. (2008). administrative law of ukraine: study guide. kyiv: atika, 624 p. bortnyk, n. p., yesimov, s. s. (2015). principles of financial control in the system of investment and legal policy. herald of lviv polytechnic national university. series: legal sciences, 824, 14–21. baltic journal of economic studies 32 vol. 5, no. 5, 2019 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: yevheniaboiko@gmail.com 2 admiral makarov national university of shipbuilding, ukraine. e-mail: management@nuos.edu.ua 3 admiral makarov national university of shipbuilding, ukraine. e-mail: juliatrushliakova@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-5-32-38 organizational and managerial aspects of economic efficiency of enterprises (for example, seaports) yevhenia boiko1, olena ishchenko2, yuliia barabanova3 abstract. it is established that maritime infrastructure is an important component of the economy of ukraine, the effective functioning of which is a necessary factor of the determination of ukraine as a maritime state, the sustainable development of its transport and road complex. it is proved that the efficiency of ports is of utmost importance for the economy of ukraine, as more than 60% of the ukrainian products are exported by sea. a more detailed analysis of the efficiency of the seaports is important not only from the commercial point of view of ukraine as a whole and one particular seaport, but also from the point of view of economic policy in the port industry. it is proved that there is an urgent need to introduce effective and timely reforms of the maritime economy, based on the identification of a complex of factors influencing the processes of strategic development of seaports of ukraine and aimed at improving the system of management of state-owned enterprises, taking into account world experience, upswinging state regulation of port business, improving the competitiveness of the port business, upgrading the role of maritime transport in using the potential of international transport corridors. the variants of the efficiency criterion of the seaport have been developed, allowing to evaluate the activity of the port in different conditions and to compare the activity of different ports with each other. the efficiency of the criteria is checked, their interrelation is shown and recommendations for their calculation are given. with the help of the offered criteria work efficiency of the ukrainian and foreign ports is compared, ways of development of the ukrainian ports are specified. an analysis of the publications and studies carried out on the topic of evaluating port performance shows that most researchers pay attention to economic evaluation criteria. technical criteria for the port's operational efficiency are considered less frequently and in many cases are not adapted for integral assessment due to the lack of sufficient information. the main aim of the article is to compare the performance of the ukrainian and foreign ports. research objectives: to develop objective in-kind performance indicators for ports, allowing them to evaluate port activities in different conditions and compare the activities of different ports with each other; to check the operability of port performance indicators; to compare the performance of ukrainian and foreign ports with each other using the proposed natural indicators. key words: economic efficiency, efficiency ratio, economic activity, economic result, seaport. jel classification: r12, g24 1. introduction the efficiency of enterprises, including ports, is usually evaluated using economic criteria. the effectiveness of the seaport is measured by an indicator that establishes the relationship between the result of work and the resources expended to achieve this result. work efficiency is usually expressed in relative terms. at the same time, the achieved work result is in the relative numerator and the costs of achieving the work result are in the denominator. a larger value of the indicator in this case corresponds to a greater efficiency (chornopyska, 2008). measurement of costs and the result of the port can be performed in cost or in-kind (technical) indicators. when using cost values, the efficiency indicator is called economic. an example of an economic performance indicator is profitability. when using technical quantities, the efficiency indicator is called natural or technical. the economic performance of the port can be calculated subject to the availability of information on the profit made by the port over a certain period of activity. various factors, including political ones, influence port profit margins. the profit of the baltic journal of economic studies 33 vol. 5, no. 5, 2019 enterprise is connected with the payment of taxes and in some cases, for obvious reasons, information about the profit is provided in a distorted form. to conduct a comparative analysis of port activities in different countries and economic conditions, it seems more appropriate to use in-kind performance indicators. n.k. nikolaeva and a.l. davydova offer the seaport performance factor to calculate taking into account the technical equipment of the port, port adaptability to innovations and environmental conditions (nikolaeva, davydova, 2004). the port's adaptability to innovations and environmental conditions are interconnected, since innovations are often caused by changes in the external environment. for this reason, in the numerator of the formula for calculating the coefficient of efficiency of the seaport, the coefficients of port adaptability to innovations and environmental conditions are summarized. the authors of the study do not indicate how to evaluate the above mentioned adaptability for a port correctly. the coefficient of technical equipment of the port can be calculated if there is detailed information about the technical equipment of the port, which in some cases is difficult or impossible at all. the reference literature on ports provides, at best, information about the crane equipment of the port without specifying the characteristics of warehouse equipment, which affects the port's technical equipment quite strongly. p.e. zhelezkova recommends using the following indicators when assessing the port's operational efficiency: technical equipment, cargo turnover, profitability, liquidity (zhelezkova, 2016). the main indicators of the seaports work, according to the practice of port facilities, are cargo turnover and cargo handling. chornopyska n.v. suggests the integrated use of performance indicators of a logistics company. the author has shown that for the formation of the indicators system of the enterprise’s activity, it is necessary to create a database. after creating a database and the indicators system of the enterprise’s activity, the researcher recommends applying the benchmarking procedure to analyze the enterprise’s activities (chornopyska, 2008). of particular note is the author’s proposal to subdivide the performance indicators of an enterprise into indicators that characterize the enterprise and indicators that reflect the activities of the enterprise. in assessing the effectiveness of the port, this approach may be useful in some cases. 2. a methodological toolkit for assessing the cost-effectiveness of seaports the effectiveness of the seaport is measured by an indicator that establishes the relationship between the result of work and the resources expended to achieve this result. work efficiency is usually expressed in relative terms. at the same time, the achieved work result is in the relative numerator and the costs of achieving the work result are in the denominator. the greater the value of the indicator in this case corresponds to greater work efficiency (chornopyska, 2008). the measurement of costs and the result of work can be performed in value or in-kind (technical) quantities. when using financial variables, it is customary to call the performance indicator economic. an example of an economic performance indicator is profitability. when using technical quantities, it is customary to call the performance indicator natural or technical. let us consider the in-kind (technical) indicators of the seaport. the technical performance indicators of the seaport, in turn, are divided into differential and integral indicators of the seaport performance. differential performance indicators of the seaport contain two values: the achieved result of work and the technical parameter of the port, ensuring the achievement of the result of work. the integrated indicators of the seaport performance in the numerator or denominator contain a number of values characterizing the achieved results and technical parameters of the port. moreover, there are aggregates of quantities reduced to the same dimension in the numerator and denominator of the fraction. differential technical indicators of the seaport performance are inherently separate technical indicators of the seaport performance. let us consider a number of relative values, which from different sides characterize the efficiency of the seaport. the result of the seaport, based on the destination of the port, is the transshipment of goods from one mode of transport to another (from one transport unit to another), storage and sorting of cargo, the formation of freight consignments. in the world practice, when evaluating the port's operational efficiency, it is customary to consider the port's annual cargo turnover as a result of the work (entsiklopediya statisticheskih terminov). as a technical parameter of the port, providing port cargo turnover, one of the following values can be used: length of the berth line, area of the territory, water area, area of storage facilities, total load capacity of the port's cargo devices. the indicator is calculated by the formula: k q l ef1 = � (1) where: q is the annual cargo turnover of the seaport, l is the length of the berth line, area of the territory, water area, area of storage facilities, total capacity of the port's cargo devices. in each case, the indicator can be detailed. for example, when using the length of the berth line, divide the berths into deep-sea and shallow ones, when using the area of the warehouses, divide the berths into open and closed or universal and special. the indicator quantitatively characterizes the cargo turnover of the seaport per unit technical parameter of the port. baltic journal of economic studies 34 vol. 5, no. 5, 2019 a special place is occupied by an indicator determined by the formula: k q q ef p 2 = (2) where: q is the annual cargo turnover of the seaport, qp � is the annual throughput of the port. the indicator quantitatively characterizes the cargo turnover of the seaport, referred to the port capacity. in other words, the indicator characterizes the degree of use of port facilities in the current period. the indicator is useful in assessing the port's ability to urgently increase transshipment. the value of the indicator kef2 for the ports of ukraine is shown in table 1. the only port in ukraine, the port capacity of which is fully loaded, is the port of berdyansk. the remaining ports have capacities that can be quickly deployed without attracting significant investments. however, the capabilities of the transport systems that serve the ports should be further evaluated. thus, railways and roads are often not able to provide cargo flows with the maximum use of port facilities. the above differential indicators of the seaport performance are convenient when analyzing the port model for sensitivity to changes in port technical parameters. the indicators are effective at ports comparable in terms of cargo turnover structure and allow assessing the impact of each parameter on the port cargo turnover separately. integrated indicators of the seaport's operational efficiency allow us to compare the operational efficiency of different ports in terms of cargo turnover. a comprehensive (integral) indicator of the port's operational efficiency is formed by combining individual (differential) indicators. a comprehensive indicator of the seaport's operational efficiency is expressed as a coefficient. the achieved result of the work is in the numerator of the relative value: the annual cargo turnover of the port in physical units. the main technical parameters of the seaport are in the denominator. a comprehensive indicator of the performance of a specialized seaport is different from that for a universal port. comparison of the performance of universal seaports is associated with the need to take into account the structure of cargo handled by ports. therefore, a comprehensive indicator of the efficiency of the seaport should, whenever possible, take into account the specifics of different ports and ensure the compatibility of ports of different specialization and structure. to take into account the specifics of the port, you must have the source data characterizing the port. some of the technical characteristics of the seaport are not reported, some of the characteristics are given in a form that complicates or makes impossible a comparative assessment of the port with other ports. a number of options are proposed for calculating a comprehensive indicator of the seaport performance. a seaport performance indicator that takes into account the area of the berth line and the area of port warehouses is proposed: (3) where: q is the annual cargo turnover of the seaport, l is the length of the berth line of the port, h is the weighted average depth of the berth line of the port, k is the weighted average coefficient of comparability of the berth and warehouse, ssk � is the total area of port warehouses. the weighted average depth of the berth line of the port is determined by the arithmetic mean formula for the depths of the port at the berths, where the length of the berth is the weight to each depth of the berth. table 1 the degree of ukraine ports use № port name cargo turnover, million tons throughput, million tons the length of the berths, km depth, m kef2 1 yuzhny 39.3 61.5 5.9 17.5 0.639 2 odessa 25.3 56 9 14 0.452 3 mykolaiv 22.4 29.6 3.8 11.2 0.757 4 chornomorsk 15.9 64.3 6 14 0.247 5 mariupol 7.6 18.8 3.9 9.75 0.404 6 belgorod dnestrovsky 0.46 1.1 1.1 2.8 0.418 7 berdyansk 3.8 3.7 1.6 8.4 1.027 8 izmail 5.7 9.3 2.6 8 0.613 9 olvia 6.5 1.5 1.5 11.5 0.121 10 reni 0.97 8 3.6 7.5 0.121 11 skadovsk 0.03 1.3 0.8 6 0.023 12 ust-dunaisk 0.03 5 0.15 6 0.006 13 kherson 3.7 8 1.5 9.6 0.463 average 0.450 source: the table is constructed by the authors based on the information (strategy for the development of ukrainian seaports for the period until 2038) baltic journal of economic studies 35 vol. 5, no. 5, 2019 it would be methodologically correct to take into account when calculating the indicator, not the depth at the berth, but the height of the berth wall. however, data on the height of the berth wall in most cases are not available. at the same time, there is a rather close relationship between the depth at the berth and the height of the berth wall. in some cases, instead of the weighted average depth of the port berth line, it is possible to take the greatest depth at the port berth. the distribution of vessels accepted by the port by sediment may turn out to be similar to the distribution of berths by depth, which is explained by a well-thought-out policy for the development of the port. in this case, the port will make maximum use of its capabilities, and the proposed formula will objectively reflect the degree of use of port capabilities. the weighted average coefficient of comparability of the berth and warehouse k takes into account the unevenness of the construction, operation and cost of the berthing and storage facilities. further detailing of the indicator is possible due to the division of port warehouses by categories (open, closed, specialized). in some cases, statistics on port activities are provided separately for cargo turnover in tons and for container transshipment in teu conventional units. in this case, to calculate the coefficient of efficiency of the seaport, the formula is proposed: (4) where: q is the annual cargo turnover of the seaport for cargo other than container cargo, mln tons; qk � is the annual seaport cargo turnover per container cargo, thousand teu; k1 is the weighted average coefficient of comparability of containers and general cargo, million tons / thousand teu; l is the length of the berth line of the port, km; h is the weighted average depth of the berth line of the port, m; k2 is the weighted average coefficient of comparability of the berth and warehouse; ssk � is the total area of port warehouses. the coefficient characterizes the efficiency of the use of berths and warehouses of the port. the achieved result of the port is expressed in port turnover. port cargo turnover consists of traditional cargo and specialized cargo, i.e. containers handled by the port. the port's traditional cargo turnover is measured in tons, and the port container turnover in arbitrary units is teu. to compare the components of the result of the port’s work, a weighted average coefficient of comparability of containers and general cargoes is introduced with a dimension of million tons / thousand teu. for a more detailed account of the storage facilities of the port, the coefficient of the seaport performance is proposed to be calculated by the formula: (5) where: q is the annual cargo turnover of the seaport for cargo other than container, million tons; qk is the annual seaport cargo turnover per container cargo, thousand teu; k1 is the weighted average coefficient of comparability of containers and general cargo, million tons / thousand teu; l is the length of the berth line of the port, km; h is the weighted average depth of the berth line of the port, m; k2 is the weighted average coefficient of comparability of the berth and warehouse, except for the container warehouse; k3 is the weighted average coefficient of comparability of the berth and container warehouse; k4 is the weighted average coefficient of comparability of the berth and capacity for the storage of bulk and / or bulk cargo; ssk is the total area of the port’s warehouses, in addition to container warehouses and containers for storing bulk and / or liquid cargo, thousand m2; sk � is the total area of port container warehouses, thousand m2; v is the total volume of port capacities for the storage of bulk and / or bulk cargo, thousand m3. the coefficient kif3 differs from the coefficient kif2 in that the storage capacity is detailed by dividing the warehouses into warehouses for general and bulk cargoes, warehouses for containerized cargo, warehouses for storing bulk cargoes in containers, warehouses for storing bulk cargoes. further detailing of the indicator is possible due to the division of the port warehouses for general and bulk cargo into open and closed warehouses. let us consider the use of formulas to calculate the coefficient of marine efficiency on the examples of several ports of the southern region of ukraine. the information about ports and the values of the coefficient of efficiency of seaports are given in table 2. for example, taking into account the limited initial information, the variant of the integral coefficient of the seaport's operational efficiency kif1 , is used, which is determined by formula (3). 3. economic diagnostics of efficiency of activity of seaports the results of calculating the efficiency coefficient for the three ports of the southern region are shown in table 2. in accordance with the integrated efficiency coefficient of the seaport kif1 the port of yuzhny was most effectively used in 2017. the indicated result has an explanation: the modern port is not burdened with excess berths and warehouses or is not limited to berths and warehouses. the second place occupied by the port of odessa is explained by a high level of management compared to the port of chornomorsk. the seaport performance factor may be calculated in another way. in the numerator of the formula for calculating the coefficient, the port capacity is substituted instead of the annual cargo turnover of the seaport. in this case, the indicator should be called the maximum coefficient of efficiency of the seaport. baltic journal of economic studies 36 vol. 5, no. 5, 2019 the results of calculating the maximum efficiency coefficient for three seaports of the southern region are given in the table 3. in accordance with the maximum value of the seaport performance coefficient, the port of yuzhny has the greatest prospects for increasing cargo turnover, and the port of odessa has the least prospects. consider the use of formula (4) for calculating the efficiency coefficient of the seaport kif2 using the example of the port of odessa. the values of the efficiency coefficient of the seaport of odessa with and without container transshipment are shown in table 4 (ports of ukraine. odessa seaport). the coefficient characterizes the efficiency of the use of berths and warehouses of the port. the achieved result of the port is expressed by the aggregate, consisting of the cargo turnover of the port and the number of containers overloaded by the port. cargo turnover is measured in tons, and container turnover in conventional units of teu. to compare the components of the result of the work, a weighted average coefficient of comparability of containers and general cargoes is introduced, having a dimension of million tons / thousand. teu. the efficiency coefficient of the seaport kif2 using the example of the port of odessa in 2018 allows us to assess the contribution of the container terminal to the port: (0.182-0.142)/0.182=0.22. using the performance indicators of the seaport kef1 and kif1 we compare a number of ukrainian and foreign ports. for foreign ports, it is not possible to find out the storage area due to lack of data. for this reason, the performance indicators of seaport kef1 and kif3 are calculated in table 5 for ukrainian ports without warehouse area. tables 6, 7, 8 summarize the results of calculating the performance of the seaport kef1 and kif1 for a number of foreign ports. table 9 shows the average values of the port characteristics of ukraine, europe, canada and the usa. for tables 5 to 8, the correlation coefficient between the performance indicators of the seaport kef1 and kif3. the average correlation coefficient for the ports of europe, canada and the usa is 0.93. the high value of the correlation coefficient indicates a close correlation between the performance indicators of seaport kef1 and kif3, which, in the absence of data to calculate the indicator kif3 is sufficiently reliable to use the indicator kef1. for the ports of ukraine such replacement is unacceptable. table 2 data on the ports of the southern region of ukraine № port name q, million tons l, km h, m ssk, thousand m2 k kif1 1 yuzhny 15.07 2.7 14 187.5 0.0143 0.372 2 odessa 25.59 10.2 9.6 485.49 0.0143 0.244 3 chornomorsk 14.57 6 10.75 602 0.0143 0.199 average 0.272 source: the table is built by the authors based on the information (ports of ukraine) table 3 data on the ports of the southern region of ukraine № port name qp, million tons l, km h, m ssk, thousand m2 k kif1max 1 yuzhny 61.5 2.7 14 187.5 0.0143 1.519 2 odessa 56 10.2 9.6 485.49 0.0143 0.534 3 chornomorsk 64.3 6 10.75 602 0.0143 0.880 average 0.978 source: the table is built by the authors based on the information (strategy for the development of ukrainian seaports for the period until 2038) table 4 data on the activities of the odessa sea port in 2018 № port name q, million tons qk, thousands теu l, km h, m ssk, thousand m2 k1 k2 kif2 1 odessa 21.698 598.6 10.2 15 485.49 0.0102 0.0143 0.182 2 odessa* 21.698 0 10.2 15 485.49 0.0102 0.0143 0.142 *note. the second row of the table shows the parameters of the port of odessa without taking into account the results of the container terminal. source: the table is built by the authors based on the information (ports of ukraine. odessa seaport) baltic journal of economic studies 37 vol. 5, no. 5, 2019 table 5 data on ports of ukraine № port name q, million tons l, km h, m kef1 kif1 1 yuzhny 39,3 5,9 17,5 10,42 0,381 2 odessa 25,3 9 14 6,22 0,201 3 mykolaiv 22,4 3,8 11,2 7,79 0,526 4 chornomorsk 15,9 6 14 10,72 0,189 5 mariupol 7,6 3,9 9,75 4,82 0,200 6 berdyansk 3,8 1,6 8,4 2,31 0,283 7 izmail 5,7 2,6 8 3,58 0,274 8 olvia 6,5 1,5 11,5 6,33 0,377 9 kherson 3,7 1,5 9,6 5,33 0,257 average 14,47 3,98 11,55 6,392 0,299 source: the table was built by the authors on the basis of the information (strategy for the development of ukrainian seaports for the period until 2038) table 6 data on european ports № port name q, million tons l, km h, m kef1 kif3 1 antwerp 180 100 11.25 1.80 0.160 2 hamburg 54.5 43 15 1.27 0.084 3 le havre 48.2 27.5 15 1.75 0.117 4 marseille 180 26 15 6.92 0.462 5 rotterdam 433 40 22 10.83 0.492 6 london 50 44 14.5 1.14 0.078 7 liverpool 10.2 40 15.2 0.26 0.017 8 manchester 11.4 17 12.2 0.67 0.055 9 southampton 27.4 17 12.8 1.61 0.126 10 milford haven 30.7 2 20.7 15.35 0.742 average 102.54 35.65 15.37 4.159 0.233 source: the table was built by the authors on the basis of the information (world trade ports) table 7 data on the ports of canada № port name q, million tons l, km h, m kef1 kif3 1 vancouver 45 16 16.8 2.81 0.167 2 halifax 13.5 12 9.3 1.13 0.121 3 quebec 18.1 8 12 2.26 0.189 4 montreal 25 23 10.7 1.09 0.102 average 25.4 14.75 12.2 1.822 0.145 source: the table was built by the authors on the basis of the information (world trade ports) table 8 data on us ports № port name q, million tons l, km h, m kef1 kif3 1 norfolk 59.9 12 13.5 4.99 0.370 2 baltimore 52.4 40 13 1.31 0.101 3 boston 23.5 20 12.8 1.18 0.092 4 long beach 43 14 17 3.07 0.181 5 los angeles 38.7 22 15 1.,76 0.117 6 mobile 54.8 11.5 10.15 4.77 0.469 7 new orleans 177 26 15 6.81 0.454 8 chicago 74 37 9.4 2.00 0.213 average 65.4 22.8 13.23 3.235 0.250 source: the table was built by the authors on the basis of the information (world trade ports) baltic journal of economic studies 38 vol. 5, no. 5, 2019 from the examination of the tables it follows that the ports of ukraine in their cargo turnover are inferior to the ports of the countries with which the comparison is made. the length of the berth line of ukrainian ports and the average depths in the ports are less than in the ports taken for comparison. the relative cargo turnover of ukrainian ports, per unit length of the berth line and per unit area of the berth wall, respectively, is higher than that of the ports taken for comparison. for the further integration of ukraine into the international community, it is necessary to increase the absolute size of ukrainian ports and to deepen the water area of the ports. the high intensity of ukrainian ports operation now gives hope for their competitive ability in the future. 4. conclusions the ukrainian economy is heavily dependent on international trade. at the same time, the seaports of ukraine are an extremely important transport window of ukraine to the world markets, more than 60% of the ukrainian export occur through seaports, that is, by sea. in comparison, more than 80% of the world's trade is by sea. thus, the efficiency of ports is of utmost importance for the ukrainian economy in terms of reducing trade costs. the difficult socio-political situation in the country and the diminishing of the positive image of ukraine as a reliable partner in international relations, annexation of the crimean peninsula have led to the breaking of more or less well-established tendencies in the development of the ukrainian seaports and significantly complicated the assessment of the influence of public administration on this process. there was a dramatic change in the main factors for ensuring the sustainable development of seaports, and economic and political crises came to the fore in the face of hostilities in the east of the country. this significantly affected the volume of cargo turnover, the structure of cargo processing and other indicators. the performance indicators offered in the work allow to evaluate the activity of the port in different conditions and to compare the activity of different ports with each other. for the ports of europe, canada and the usa it is permissible to use the indicator kef1 instead of the integral indicator kif3. for the ports of ukraine such replacement is unacceptable. the comparison with the proposed natural indicators of the ukrainian and foreign ports efficiency among themselves allows to conclude about the weak development of ukrainian port infrastructure. table 9 averaged data on ports in several countries № port name q, million tons l, km h, m kef1 kif3 k(k⊥(ef1) k⊥if3) 1 ukraine 14.47 3.98 11.55 6.392 0.299 0.206 2 europe 102.54 35.65 15.37 4.159 0.233 0.985 3 canada 25.4 14.75 12.2 1.822 0.145 0.871 4 usa 65.4 22.8 13.23 3.235 0.250 0.936 average 51.95 19.3 13.1 3.902 0.232 0.749 6 mobile 54.8 11.5 10.15 4.77 0.469 7 new orleans 177 26 15 6.81 0.454 8 chicago 74 37 9.4 2.00 0.213 average 65.4 22.8 13.23 3.235 0.250 source: the table is built by the authors references: chornopyska, n. v. (2008). metodychni pidkhody otsiniuvannia lohistychnoi diialnosti pidpryiemstva [methodical approaches of estimation of logistic activity of the enterprise]. collection of lviv polytechnic national university, no. 623, pp. 265–271. (in ukrainian) nikolaeva, n. k., & davydova, a. l. (2004). ob otsenke effektivnosti rabotyi morskih portov [on the evaluation of seaports' performance]. fundamentalnyie issledovaniya, no. 3, pp. 147–148. (in russian) zhelezkova p.e. (2016). ekonomicheskaya otsenka urovnya razvitiya portov [economic assessment of port development level]. uspehi sovremennoy nauki, vol. 3, no. 11, pp. 133–136. (in russian) entsiklopediya statisticheskih terminov [encyclopedia of statistical terms]. moskva: federalnaya sluzhba gosudarstvennoy statistiki, 2013. (in russian) strategy for the development of ukrainian seaports for the period until 2038. project. url: https://mtu.gov.ua ports of ukraine. odessa seaport. url: https://ports.com/en world trade ports. url: https://knowledge.allbest.ru world trade ports. url: https://portsinfo.ru trading ports of england. url: https://londonmania.ru baltic journal of economic studies 105 vol. 2, no. 2, 2016 corresponding author: 1 department of finance, taras shevchenko national university of kyiv, ukraine. e-mail: nsmedvedkova@mail.ru directions for improvement of state financial control in ukraine nataliia miedviedkova1 taras shevchenko national university of kyiv, ukraine abstract. the purpose of the paper is to offer the ways of development of the system of state financial control in ukraine. the object of this research is the process of state financial control. methodology. the research methods are systematic approach, groupings and tabular method, structural-functional method. in order to determine the types and elements of financial control it was used systematic approach. to characterize the distribution of financial control for the lima declaration; types end elements of state financial control; types of supreme bodies of state financial control – groupings and tabular method. for disclosure the mechanism of the public financial control system the structural-functional method is used. results of the survey shows, first of all, that recent steps of the government will improve the mechanism of control for the use of public fund. on the other hand, international experience includes the important features of the state financial control, which could be implemented in ukraine. furthermore, in ukraine certain steps in standardization are taken to implement the international standards of control: first of all, strategy modernization of the accounting system in the public sector in 2007-2015 was approved. moreover, in 2013 in ukraine the working meeting with the expert on the twinning fiche projects took place, where the further direction of collaboration aimed at completion of development of the project documentation was presented. nevertheless a lot of questions of the state financial control system standardization remain open. unsystematized standards have negatively affects on their usage, results in an ambiguous interpretation of separate situations which arise during control activity. practical implications. the first thing that needs to be said is that types of state financial control according to the allocation of authorities between the different bodies were considered. another important thing is that directions for improvement of state financial control in ukraine were suggested. in addition to previous practical implications, the important role of standardization in improving of state financial control in ukraine was highlighted, because it has a lot of positive effects on a state financial control: it helps to achieve common aims of transparency and reporting; to plan and conduct audits, and their usage provides for the professionalism and high quality of control results. value/originality. longitudinal analyze of foreign experience helped to provide directions for improvement of state financial control in ukraine. the main areas which should be focused on are: providing by accounting chamber of ukraine to represent the state in legal proceedings; introducing a mechanism to hold officials’ responsible for violations of financial discipline. besides it, standardization is the way in improving of state financial control, because nowadays a correct interpretation of indicators such as state debt and state deficit are important in terms of assistance from international organizations. key words: control, state financial control, preventive control, supreme bodies of state financial control, standardization jel classification: g38, h83 1. introduction an important part of management system that guarantees quality and ensure an effective implementation of governmental activity is control. control as a type of relationship is the attitude of the subject to their own activities or the activities of other subjects in terms of compliance with certain rules. control may be state and public and be used in various structures, including nongovernmental ones. state control is one of the functions of the government of assessing the legality of the object of control and performed by relevant state authorities. therefore the most relevant definition of control is “a function of the state and society, their institutions and structures to the use of different evaluation and supervision mechanisms for the activities of structures, institutions and organizations, and compliance with laws and other rules that may be established by the state”. baltic journal of economic studies 106 vol. 2, no. 2, 2016 there are different types of state control: presidential control, parliamentary control, control of the executive authorities, judicial control. but a special place in the system of the state control belongs to the state financial control. state financial control is an instrument of implementation of financial policies, ensures the formation and effective use of financial resources of the state for achieving its objectives in the field of finance. therefore, the purpose of financial control, followed from this definition, is to identify deviations from the adopted laws, standards, effectiveness, resource management. there are 3 main forms of financial control: preventive control, operational control, retrospective control. operational control is performed during the financial and economic operations, retrospective control − respectively after the reporting period. but the most important one is preventive control which is performed until financial transactions. the assessment of validity of programs and financial forecasts, financial plans based on the analysis of macroeconomic indicators of the state economy are carried out. it is performed to prevent the violation of laws, rational use of financial resources. unfortunately, the accounting chamber doesn’t perform a preventive function of financial control that does not contribute to the development control process in ukraine and increase its effectiveness. according to the budget transparency rating, which was conducted by worldwide network of international budget partnership, ukraine ranked 56 out of 102 countries. compared with previous years, ukraine has been as high as 46 out of 100. it determines the need for improving the state control of budgetary funds. over the last 14 years the following acts have been adopted, such as a concept for the development of public internal financial control until 2017, guidelines for the organization of internal control by managers of government money in its institutions and in subordinate budget institutions, internal audit code of ethics, etc (tkachenko, 2015). among recent steps of the government are the following. first one is the positive changes made to the law «on public procurement» (state financial inspection of ukraine was given a transfer function of monitoring with the ability to restrict of state treasury service of ukraine’s verification powers. in addition, the ministry of economic development and trade of ukraine intends by the end of 2016 to transfer all government procurement in electronic format. second, eu experts in ukraine started a monitoring mission to combat money laundering and terrorist financing. third, the ministry of finance of ukraine presented the official portal which places the information on transactions in the treasury single account in the public domain. from 01.01.2016 the transaction not only of the state treasury will be available, but also all the data of the state budget, including utilities and more. the above measures will improve the mechanism of control for the use of public funds; create its integrity and fairness. it will make more transparent use of public funds. however, international experience includes the important features of the state financial control, which could be implemented in ukraine. 2. types of state financial control discussions on state financial control in ukraine are often reduced to the allocation of powers between the different bodies: state financial inspection of ukraine, accounting chamber of ukraine, state fiscal service, ministry of finance of ukraine, state treasury of ukraine, control and revision units of ministries and departments. internal financial control (control of management) is performed by a state financial inspection and inspection services of central executive bodies which are subordinated to the government. but world practice shows, external financial control considers bodies which are not subject to government and accountable to parliament and the public (they are called supreme bodies of state financial control) (figure 1). government financial control external internal supreme body of state financial control control services of state authorities fig. 1. distribution of financial control for the lima declaration besides the allocation between internal and external financial control, one of the major steps towards european system of public financial control is the development and entry into force of the new budget code of ukraine and especially the new wording of article 26 according to it: compulsory introduction should take place for the basic components of the european model of pifc  – internal control and internal audit. the basic principle of public internal financial control is the separation of internal control and audit. internal financial control is a management instrument that enables the management of state and municipal sectors and checks the status of the relevant tasks to carry out a series of measures to improve the efficiency of institution’s activity. the head of management team of state and municipal sectors is responsible for the establishment and functioning of internal control. internal audit has to define how the implemented internal control is performed. the purpose of internal baltic journal of economic studies 107 vol. 2, no. 2, 2016 audit is to provide independent advice and consultation aimed to improve the work of state and municipal sectors, improving management processes. internal audit can be performed centrally  – state financial inspection  – and decentralized  – authorized independent units, subordinated directly to heads of public or municipal institutions (dikan, synyuhina, deyneko, 2014). world practice shows that the supreme bodies of state financial control play an important role in the control of state financial resources contribute to the effective management of public finances at all (homutenko, homutenko, 2011). the classification of supreme bodies of state financial control is based on the independence of authorities and their powers (figure 2). the accounting chamber of ukraine is the supreme audit institution of ukraine operating since 1996. it acts according to the law “on the accounting chamber”, the budgetary code of ukraine and other by-laws. it acts as a constitutional body of the government’s external financial control mechanism, and as independent authority acting on behalf of parliament of ukraine. it executes control and supervision over revenues and expenditures of the state budget. the activities of accounting chamber of ukraine are audits, provision of expert analyses, monitoring and evaluation. the accounting chamber of ukraine has been performing financial, performance and compliance audits of the entities, institutions, organizations and ministries which utilize state budget funds. the accounting chamber of ukraine develops cooperation with supreme audit institutions and international organizations, concludes agreements on cooperation with them, such as mexico declaration on sai independence (2007), the lima declaration of guidelines on auditing (1977). accounting chamber of ukraine is a membership of international organization of supreme audit institutions (intosai) since 1998, european organization of supreme audit institutions (eurosai) since 1999. terms of state financial control are identified by the lima declaration of guidelines on auditing (adopted in 1977 at the congress of the international organization of supreme audit institutions (intosai)). intosai is one of the most important organizations in the world in the area of state control, which includes supervisory bodies of 130 countries. currently eurosai brings together 48 of supreme audit institutions (sais of 47 european and european court of auditors). according to article 1 of the charter eurosai, the main purpose of the organization – to promote cooperation between the national sais which are part of it as well as the exchange of information and documentation, research on control of public finances, the creation of university departments of public audit and unification of terminology in the area of financial control. the main priorities of international cooperation are maintaining bilateral and multilateral cooperation with foreign supreme audit institution, external auditing, institutional capacity building, and participation in activities of international organization. priorities of the accounting chamber’s bilateral cooperation are exchange of experience and best practices on methodologies and audit procedures, development of cooperation under the terms of agreements on cooperation and implementation of join action plans, development of mutually beneficial relations with foreign sais, carrying out international parallel or coordinated audits. there are several approaches to the types of supreme bodies of state financial control. anyway, these classifications are based on the independence of such bodies and their authority (homutenko, homutenko, 2011). accounting chamber of ukraine is not entrusted with judicial powers (figure 3). according to the new law of ukraine «on the accounting chamber» (2015) the accounting chamber of ukraine is now free from any influence. the chamber is determined as organizationally, functionally and financially independent institution. and on behalf of parliament it monitors not only the usage of the state budget, but also the flow of funds. also, the law states that interference by public authorities, local governments, political parties and public government parliament accounting chamber of ukraine state fiscal service of ukraine state treasury service of ukraine state financial inspection of ukraine ministry of finance of ukraine types of government financial control control and revision units of ministers and departments state property fund of ukraine fig. 2. types end elements of state financial control baltic journal of economic studies 108 vol. 2, no. 2, 2016 associations, enterprises, institutions and organizations in the accounting chamber is prohibited. the chamber on behalf of parliament carries out external state financial control of the use of funds from the state budget performance, audit, examination, analysis and other control measures. it has to submit a quarterly report to parliament on the results of audits and conclusions on the implementation of the law on the state budget and proposals to eliminate deviations and violations. 3. directions for improvement of state financial control in ukraine the main areas which should be focused on are: providing accounting chamber of ukraine to represent the state in legal proceedings; introducing a mechanism to hold officials’ responsible for violations of financial discipline. providing accounting chamber of ukraine to represent the state in legal proceedings. in ukraine, account chamber performs the state financial control function in the part of monitoring of using of the state budget of ukraine and government financial inspection of ukraine within its powers defined by law. however, the accounting chamber of ukraine does not fulfil the preventive functions, but only captures and records violations of budget legislation and inform the police about the committed violations. world experience shows that if the external control body does not perform judicial functions (usa, italy, czech republic), the effectiveness of control goes down because of the additional links in the chain  – a law enforcement agency. in this case the compensation does not exceed 20% of the total disclosed violations. the positive effect is empowering audit of the quasi-judicial functions (france, hungary). introducing a mechanism to hold officials’ responsible for violations of financial discipline. the important sign of readiness to join the eu is to establish procedures for compensation for loss of finance. but today ukrainian legislation does not provide an effective mechanism for compensation of lost budget funds and the responsibility of officials for violations of financial discipline. experience in other countries shows that to deal with cases of abuse by tax officials of their rights there is a widespread practice of recovery of costs and expenses from the tax authority. poland has a disciplinary and financial liability of officials, and if the taxpayer in court proves that he is right, the tax authority returns the amount which was paid plus 13%. 4. standardization as the way in improving of state financial control the underestimation of systemic approach to the development of domestic standards of financial control maximally takes into account the features of the domestic system of state finances, influences its effectiveness and results in unproductive financial and labour charges. standardization is important element for ensuring fiscal transparency and finance information reliability in ukraine. it has a lot of positive effects on a state financial control. firstly it helps to achieve common aims of transparency and reporting. secondly it helps to plan and conduct audits, and their usage provides for the professionalism and high quality of control results, sequence in presenting these results to society. thirdly, standards not only set the correct procedure of state financial control and audit, but also strengthen these functions in the system of democratic institutes of state administration (liubenko, 2015). the results of state financial control and audit must be based on the application of common procedures and methods, and also on sufficient evidences which enable a state inspector or a public accountant to express logical and competent opinions in the report. in ukraine certain steps in standardization are taken to implement the international standards of control. the main direction of accounting reform in the public sector defined by the cabinet of ministers of ukraine of 16 january 2007 №34 on approval strategy modernization of the accounting system in the public sector in 20072015, which reflects objectives, goals, main directions and measures of reform. on december 18, 2013 in the premises of the eu delegation in ukraine the working meeting with the expert on the twinning fiche projects preparation “improvement of the state internal financial accounting in ukraine” and “transposing of the international public sector accounting standards (ipsas) into the system of public audit of ukraine” took place. during the event the twinning fiche projects were presented as well as the issue on cooperation within the framework of the projects were presented, further direction of collaboration aimed at completion of development of the project documentation was approved. however, a lot of questions of the state financial control system standardization remain open. unsystematized standards have negatively affects on their usage, results fig. 3. approaches to the types of supreme bodies of state financial control court of audit france, italy, spain a collegial body which is not entrusted with judgments accounting chamber (russian federation, ukraine) supreme chamber of control (poland) independent accountability office, headed by comptroller general auditor office receives funds from parliament (not from government) (denmark, united kingdom, ireland) control administration within the structure of the government headed by the comptroller general auditor there are two control bodies: one of them is accountable to government, and the second one is to parliament (finland, sweden) baltic journal of economic studies 109 vol. 2, no. 2, 2016 in an ambiguous interpretation of separate situations which arise during control activity. nowadays a correct interpretation of such indicators such as state debt and state deficit are important in terms of assistance from international organizations. 4. conclusion the analysis shows the need to improve a state financial control. a lot of problems should be solved including judicial issues and issues of standardization. the most important judicial issue is to provide accounting chamber of ukraine to represent the state in legal proceedings and to fulfil the preventive functions. in the developed countries financial control is a part of the state regulation in order to detect deviations from the regulations and violations of the principles of legality and efficiency. the standards help to get a common language and common approaches and avoid differences in interpretation of financial statements. it’s important for internal use within an institution, and also for external users. standards not only improve budget transparency rating but also promote trust by international financial organizations. it’s especially necessary for ukraine, considering the need of external funding to implement structural reforms. references strategy of modernization of the accounting system in the public sector in 2007-2015 (cabinet of ministers of ukraine; 16.01.2007 № 34) on the accounting chamber (verkhovna rada of ukraine; law of 02.07.2015 № 576-viii) on public procurement (verkhovna rada of ukraine; law of 10.04.2014 № 1197-vii) сoncept for the development of public internal financial control until 2017 (cabinet of ministers of ukraine; 24.05.2005 №158) guidelines for the organization of internal control by managers of government money in its institutions and in subordinate budget institutions (ministry of finance of ukraine; 14.09.2012 № 995) issai 300 performance audit. (2012). retrieved from: http://www.issai.org/media/69911/issai300-english. pdf. 60 issai executive summaries. (2013). retrieved from: http://www.intosai.org/issai-executive-summaries.html lima declaration. (2012). available at: http://www.issai.org/media/12901/issai_1_e.pdf lyubenko, a. (2015). standartization of state financial control on the basis of system approach. ekonomika / economics, №94(1): 52-60 dikan, l.v., synyuhina, n.v., deyneko, y.v. (2014). internal control under public financial control system reformation: the state of implementation and development prospects. actual problems of economics, vol. 4(154): 446-454 tkachenko, o. (2015). european vector in the development of the system of state financial control. finance control, vol. 2(109): 42-47 homutenko, v.p, homutenko, a.v. (2011). accounting chamber as a body of parliamentary financial control ukraine. socio-economic research bulletin, vol. 2(42): 466-471 наталия медведкова направления совершенствования государственного финансового контроля в украине аннотация. целью данной работы является предложение направлений развития системы государственного финансового контроля в украине. объектом данного исследования является процесс осуществления государственного финансового контроля. методология. методами исследования являются системный подход, группировка, табличный метод, структурно-функциональный метод. с целью определения типов и элементов финансового контроля использован системный подход. для характеристики распределения государственного финансового контроля согласно лимской декларации; видов и элементов государственного финансового контроля; типов высших органов финансового контроля метод группировки и табличный метод. для раскрытия механизма осуществления системы государственного финансового контроля структурнофункциональный метод. результаты исследования показали, что в последнее время правительством сделаны шаги для улучшения механизма контроля за использованием государственных средств. с другой стороны, международный опыт включает в себя важные аспекты государственного финансового контроля, которые могут быть реализованы в украине. кроме того, в украине реализованы определенные шаги по внедрению международных стандартов контроля: в первую очередь, утверждена стратегия модернизации системы бухгалтерского учета в государственном секторе в 2007-2015 годах. кроме того, в 2013 году в украине состоялась рабочая встреча с экспертом twinning fiche projects, где были утверждены дальнейшие baltic journal of economic studies 110 vol. 2, no. 2, 2016 направления сотрудничества, направленного на завершение разработки проектной документации. тем не менее, много вопросов стандартизации системы государственного финансового контроля остаются открытыми. отсутствие систематизации стандартов негативно сказывается на их использовании, приводит к неоднозначной интерпретации отдельных ситуаций, которые возникают в ходе осуществления контрольной деятельности. практическое значение. во-первых, были рассмотрены виды государственного финансового контроля в соответствии с распределением полномочий между различными органами. во-вторых, предложены направления совершенствования государственного финансового контроля в украине. в дополнение к предыдущим практическим значениям была отмечена важная роль стандартизации в улучшении государственного финансового контроля в украине, поскольку она оказывает положительные эффекты на осуществление государственного финансового контроля, а именно: способствует достижению общих целей прозрачности и отчетности; позволяет планировать и проводить проверки, а их использование обеспечивает профессионализм и высокое качество результатов контроля. значение/оригинальность. полученный анализ зарубежного опыта помог разработать направления совершенствования государственного финансового контроля в украине. основные направления должны быть сфокусированы на предоставлении счетной палате украины права представлять государство в судопроизводстве; введение механизма ответственности должностных лиц за нарушения финансовой дисциплины. помимо этого, стандартизация является направлением улучшения государственного финансового контроля, поскольку в настоящее время корректная интерпретация таких показателей как государственный долг и дефицит государственного бюджета имеют важное значение с точки зрения получения финансовой помощи со стороны международных организаций. baltic journal of economic studies 99 vol. 6, no. 3, 2020 corresponding author: 1 classic private university, ukraine. e-mail: kpuinform@gmail.com 2 state fiscal service in zaporizhzhia region, ukraine. e-mail: kyup75@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-3-99-106 state regulation of the education sector under the conditions of decentralization viktor oharenko1, iuliana kozachenko2 abstract. the purpose of the paper is to define general trends and approaches to educational reform under the conditions of decentralization in ukraine. methodology. the survey is based on the analysis of the development of the regulatory framework of ukraine for reforming the education sector under the conditions of decentralization. statistical data on the dynamics of change in the total number of education institutions are studied. the reasons for the decrease in the total number of secondary and vocational education institutions have been identified. the degree of financing of the education sector from the consolidated budget of ukraine by levels of education is considered. results. the article outlines general trends and approaches to educational reform under the conditions of decentralization in ukraine. the problems of the decentralization process, which began in 2014, were emphasized, namely the regional development and unification of territorial communities, which influenced the dynamics of education institutions that gained more autonomy. the dynamics of the total number of education institutions subordinated to the ministry of education and science of ukraine in terms of educational levels is presented. it is determined that the education sector in ukraine is in transition, and an important component of this process is the correct choice of the vector of movement, taking into account the interests of all stakeholders. it is determined that the decentralization reform affects mechanisms of management in education. it is established that decentralization for higher education institutions should be considered as a means of forming managerial relations in the industry and joint responsibility for the management of the educational process. the experience of great britain and the european union (denmark, spain, poland, romania, finland, france) on improving the quality of educational services by strengthening the motivation of teachers using a differentiated payment system is studied and proposed to introduce into the ukrainian education system. practical implications. the possibility of introducing the process of educational / school clustering is considered. it is established that the introduction of decentralization opens the way to changes in creating favorable conditions for the emergence and implementation of intellectual needs of the individual. it is proved that the main task of the government in education in the conditions of decentralization is to coordinate the actions of government agencies, education institutions and the public in order to meet the personal needs of citizens and government demands for intellectual and professional enrichment. value/originality. in the course of the research perspectives for development of education in ukraine at the level of territorial communities, the process of formation of new opportunities in education for users of educational services is formed. key words: state regulation, education, decentralization in education, educational subventions, management of education. jel classification: а20, н52, н75, i28 1. introduction the implementation of the decentralization reform in the education sector is aimed at radical changes in the system of management and financing of the sector through district and regional education authorities. the key step to educational reform in the implementation of decentralization reform is the disappearance of the educational “vertical structure”, namely the regional departments of education and science, which receive requests and tasks from the branch ministry and transfer them to the district (city) education department. the decentralization process for implementation of the regional development measures and unification of territorial communities, which has begun in 2014, has also affected education institutions, which have gained greater autonomy, and at the same time, this process has expanded the powers of the local level. educational reform, first of all, is the issue of baltic journal of economic studies 100 vol. 6, no. 3, 2020 management of the education system, clear division of powers and responsibilities of governing bodies of different levels, ensuring their interaction in the process of transition to decentralized management of education. the implementation of innovations and best practices in education is the main driving force of change and the key to the development of institutions of different levels of education. improving the educational space, first of all, involves democratization and consistent implementation of educational reform, so the approach to the implementation of educational reform is a major factor, which requires further study. the most relevant scientific publications on educational reform in ukraine, in our opinion, are a number of theoretical and analytical works on the issue of decentralization in education of such recognized scientists and practitioners as: l. hrynevych, d. dzvinchuk, h. yelnikova, v. luhovyi, n. protasova, s. krysiuk, etc. scientific works highlight the impact on education of the process of decentralization of power and the formation of amalgamated territorial communities. regarding the problems of reforming the education sector in the process of decentralization of power, the works of such scientists as l. bielov, i. popov and o. yukhou, n. tarasenko, l. yurchuk, etc. are relevant. we should also pay attention to the work of such scientists as e. barsikovskyi, k. bjork, j. wood, k. dyer, p. rose, d. chapman, etc. problems of modernization of the educational process are noted in the scientific works of v. kremen, l. kalinina, o. onats, v. oliinyk, s. sysoieva, o. savchenko, o. pometun, o. topuzova, etc. innovative processes in the search for the relationship between centralized and decentralized management of the system of education institutions are highlighted by the works of such scientists as m. zghurovsky, p. hobzei, t. krystopchuk. therefore, in our opinion, in the presented scientific publication it is worth highlighting the general trends and approaches to educational reform in a decentralized environment. 2. the current state of education under the conditions of decentralization since 2014, there have been changes in local self-government, a reform of decentralization of management is being implemented, accompanied by the formation of a viable primary institution of local self-government – a territorial community – through its amalgamation (amalgamated territorial community). from now on, the bodies of village, settlement, city councils are endowed with their own (self-governing) and delegated powers in the education sector: – management of education institutions owned by territorial communities or transferred to them, organization of their logistical and financial support; – ensuring the acquisition of full general secondary education, creating the necessary conditions for the upbringing of children, youth, development of their abilities, labor training, vocational guidance, productive work of students, promoting the activities of preschool and out-of-school education institutions; – ensuring that education should be available and free in the relevant territory within the given powers; – ensuring the development of all types of education, improvement of the network of education institutions of all forms of ownership in accordance with the law (art. 32 of the law of ukraine “on local selfgovernment in ukraine”, 1997). one of the important stages of reforming education under the conditions of decentralization was the introduction of the new ukrainian school in september 2018. the concept of the “new ukrainian school” is revealed on the basis of a formula that includes the following: a new content of education, based on the formation of competencies necessary for successful self-realization in society; a motivated teacher who has freedom of creativity and develops professionally; a cross-cutting process of education that shapes values; decentralization and effective management, which will give the school real autonomy; pedagogy based on partnership between student, teacher and parents; focus on the needs of the student in the educational process, child-centeredness; a new school structure that allows to master the new content and gain competence for life; fair distribution of public funds, which ensures equal access of all children to quality education; modern educational environment that will provide the necessary conditions, tools and technologies for teaching students, educators, parents not only in the premises of the education institution (ministry of education and science of ukraine, 2018). it should be emphasized that solving the problems of the new ukrainian school affects the development of preschool education, vocational (technical) education, out-of-school education, training and reskilling of teachers in higher pedagogical education institutions. the main vectors of educational reform under the conditions of decentralization should include: the creation of an effective network of education institutions, based on territorial characteristics, demography, ensuring the quality of education, the competitive influence of other countries, etc. figure 1 shows the dynamic pattern in the number of institutions in terms of levels of education, which indicates the relative overall sustainability of the network of education institutions. however, there are some deviations, in particular with regard to preschool institutions; there is a trend of gradual growth since 2015 (by 484 institutions in 2017/2018 compared to the 2015/2016 school year). however, the number of secondary education institutions is gradually decreasing (by 1428 units in 2017/2018 compared to the 2014/2015 academic year, i.e., by 8.8%), such a decrease has also affected baltic journal of economic studies 101 vol. 6, no. 3, 2020 vocational education (from the 2014/2015 academic year, their number has decreased by 58 units, which amounts to 7.7%). such trends are explained by the insufficient completeness of secondary and vocational education institutions due to the demographic and migration crisis. however, according to the legislation of ukraine, the state is obliged to provide general allocations on education in the amount of not less than 7% of gdp from the state, local budgets and other sources of financing not prohibited by law. figure 2 shows the expenditures of the consolidated budget of ukraine by levels of education in 2014–2018, in % of the expenditures of the consolidated budget of ukraine on education. there is a tendency to reduce the share of consolidated budget expenditures of ukraine on education relative to gdp (from 7.4% in 2010 to 5.4% in 2016). however, already from 2017 to 2018, there is a significant increase in expenditures on education, for example, in 2018, the volume of expenditures has been 5.9% of gdp and 16.6% of the total consolidated budget of ukraine in 2018. a study of foreign experience shows that much more money is allocated on education. for example, 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% preschool education secondary education vocational education 15002 17604 814 14813 17337 798 14949 16858 787 15433 16176 756 2014/2015 2015/2016 2016/2017 2017/2018 figure 1. dynamic pattern in the total number of education institutions subordinated to the ministry of education and science of ukraine in terms of levels of education (2014/2015–2017/2018), (education in ukraine: basic indicators, 2018) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% on preschool education on general education on vocational education on higher education on postgraduate education on out-of-school education expenditures on other levels 15,2 42,4 5,9 28,3 0,9 4,4 3 15,9 43,5 5,4 27,1 0,8 4,2 3,1 15,5 43,7 4,8 27,2 0,8 4,2 3,8 15,9 47,4 4,7 21,8 0,8 4,4 5,1 15,5 48 5 20,7 0,8 4,5 5,5 2014 2015 2016 2017 2018 figure 2. expenditures of the consolidated budget of ukraine by levels of education in 2014–2018, % of expenditures of the consolidated budget of ukraine on education (education in ukraine: basic indicators, 2018) baltic journal of economic studies 102 vol. 6, no. 3, 2020 in germany, in 2016, expenditures on education has accounted for 23.43% of total expenditures, and there is an increase (by 1.47 more than in 2014). a significant amount of funds is allocated to finance education in greece (18.72% in 2016), in mexico (17.94% in 2016) (table 1). table 1 expenditures on education in % to total government expenditure state 2014 2015 2016 changes (2016-2014) australia 13.88 14.08 13.77 -0.11 austria 10.41 10.69 10.95 0.54 china 13.39 13.37 13.52 0.13 germany 21.96 24.09 23.43 1.47 greece 18.74 17.80 18.72 -0.02 italy 13.97 14.13 12.89 -1.08 mexico 18.81 19.02 17.94 -0.87 the netherlands 12.15 12.21 12.81 0.66 norway 17.04 15.73 15.97 -1.07 sweden 15.33 15.50 15.73 0.4 switzerland 15.46 15.53 15.51 0.05 the united kingdom 13.67 13.84 13.83 0.16 source: expenditure on education as % of total government expenditure (all sectors), 2020 today, the education center is in transition, an important component of this process is the right vector to move forward, taking into account the interests of all stakeholders. one of the main challenges of educational reform is the situation in secondary school, which has such features as: overload of students at all stages of learning, outdated content of curricula and textbooks, disinterest of recipients of educational services in the end. profiling in secondary school (teaching in the so-called specialized classes) does not give students a thorough knowledge, practical skills and, most importantly, it does not force them to look for additional, effective, interesting and necessary classes outside the education institutions. according to the law “on education”, it is envisaged to obtain specialized secondary education in two areas: – academic, as a specialized education based on a combination of educational content, defined by the state standard of specialized secondary education, together with a combination of in-depth study of certain subjects taking into account the abilities and educational needs of students with a focus on continuing education at its higher levels; – vocational, as market-oriented vocational education based on a combination of educational content, defined by the state standard of specialized secondary education, and professionally-oriented approach to learning, taking into account the abilities and needs of students (seitosmanov, fasolia, marchlewski, 2019). decentralization reform affects management mechanisms in the education sector that provide services to the population, regardless of their affiliation to the place of residence or other characteristics. it should be noted that in centralized management systems, all subsystems of the object of management are carried out by a specific body or managed from one central office. decentralized systems have the following feature: each subsystem is managed by a separate management body, which is responsible for the results of the subsystem. decentralized management in general secondary education provides an opportunity to involve various stakeholders (parents, school board members, teachers, the public, employers, other representatives) in the process of planning, organizing and implementing decisions, planned actions, to assess the results of their implementation. characteristic features in education are: – in the management process, the goals of education customers, students and the goals of the system must coincide, i.e., they should not contradict each other; – in the management of an education institution, the distribution of functions performed in both decentralized and centralized forms must be clearly agreed; – in the decentralized management of a basic education institution, this process is carried out at two levels: internal and external (meleshko, 2018). it is established that decentralization for higher education institutions should be considered as a means of forming managerial relations in the industry and joint responsibility for the management of the educational process. decentralization for hei is a new challenge facing the institutions, academic teaching staff. however, it is worth noting that while innovative changes will build partnerships in the education services market, there will be reductions and destructive potential in some aspects, such as reductions in education sector. therefore, it is necessary to understand at what points the higher education in ukraine is the most conservative (tupchak, 2017). 3. improving the state policy to support the development of education sector at the level of territorial communities in the current context of educational reform, it is advisable to pay attention to the process of implementing education in the form of educational / school clustering (clustering of schools), which is seen as a strategy to pool limited resources and improve access to them. the term “school/educational cluster” means the grouping of neighboring schools to form a cluster or network. clustering is as follows: one school in a cluster is the main (basic) education institution, or a “core”, “center of clusters”, central “institution”. the mechanisms of administrative management are as baltic journal of economic studies 103 vol. 6, no. 3, 2020 follows: clusters are responsible for collecting school statistics, allocating school materials, coordinating staff and curriculum issues. the political aspect of the clustering of education is the involvement of teachers, parents, communities of educators and students in the educational process. the economic aspect is that the school clusters are formed so that schools can share resources and staff. resource sharing is one of the goals of school clustering (so-called “fair allocation of resources”). the main aspect of clustering is the quality of education, which is improved through the professional growth of teachers, curriculum development, pedagogical supervision and support. e. giordano identifies four models of school clusters: the national model of clusters; group of educators (teachers, school principals); network; rural clusters (semeniuk, kolisnychenko, 2019). a study of foreign experience shows that such experience is used, but it has certain features. thus, in finland, there are currently 162 joint medical centers to serve a number of small municipalities, and specialized medicine covers medical districts under the management of joint municipal councils. cooperation is carried out in the sectors of education, recycling of waste, water supply, etc. the main models of intermunicipal cooperation are the “model of the manager municipality”, when one municipality performs a number of functions for a group of municipalities or a contractual cooperation on utilities and education (danylyshyn, pylypiv, 2016). the implementation of decentralization opens the way to changes in creating favorable conditions for the emergence and implementation of intellectual needs of the individual. the main task of the government in education under the conditions of decentralization is to coordinate the actions of government agencies, education institutions and the public in order to meet the personal needs of citizens and government demands for intellectual and professional enrichment (boiko, 2017). it is worth understanding that the division of powers in education is aimed at financial, legal and logistical aspects, as well as responsibility for the content of education and control over the implementation of plans. statistics and information are obtained from the regions, but are not properly processed and taken into account when making administrative and political decisions. strategic plans and regional development programs, other state documents and decisions are not formed in clear tasks to heads and management of education at the city, district level, therefore, fulfillment of tasks of educational policy is not provided: there are not developed means, resources from which the expected results can be obtained (yurchuk, 2009). effective implementation of decentralization is the basis for improving the quality of the educational outcomes and education in general. careful design of the system is needed to reduce the possible negative effects of decentralization, such as regional imbalances, controversial policies and priorities of the elite. having analyzed the reforms in the management of the education sector in a number of countries, l. hrynevych formulates a list of the main tasks of decentralization, which are based on: political motives (in most countries, they are the basis for enthusiasm for increasing public participation in government decisionmaking); financial motives (central governments are unable to provide full financing that meets the requirements of education); motives for efficiency (due to the fact that decision-making at the local level helps to reduce the cost of achieving each individual result) (hrynevych, 2005). figure 3 shows new opportunities for the development of education at the level of territorial communities, which is defined as the main vectors of education development in the conditions of decentralization of power, its key areas are: obtaining greater powers by district, city councils and councils of amalgamated territorial communities, educational opportunities, critical aspects of decentralization in education, school / educational clusters, possible options for financing education, change in approaches in public administration. possible financing options include: the possibility of receiving a scholarship from the school or the state, receiving grants from local authorities, partial financing from the state budget, prospects for financial assistance, intergovernmental transfers from budgets at all levels. the study of foreign experience of decentralization of development of education in the direction of changing the financing system has revealed positive trends in the decentralization process. for example, in poland, thresholds have been set for the education subvention granted to local budgets, the content of which has been to prohibit the allocation of the educational subvention for the next year in a smaller amount than in the previous year (taking into account the inflation rate). at the same time, the share of gminas’ own funds that did not come from the educational subvention gradually increased in the financing of education. despite this allocation, school financing remained stable. powiats spend about as much of their own money on education as they receive on the educational subvention. in addition to stable financing for current school expenditures, the ministry of national education has managed to mobilize additional budget funds for bodies of local self-government on education, depending on needs. this applies to various targeted grant programs: funds for school buses, for partial financing of investments related to the introduction of a new school system, for computer classroom equipment or for annual enrollment of first-graders. the polish education system has a two-tier financing mechanism. the bodies of local self-government receive an educational subvention, and baltic journal of economic studies 104 vol. 6, no. 3, 2020 educational perspectives of the community responsibility of district, city council and atc councils availability of preschool and secondary education implementation of public policy equal conditions for the development of education institutions of all forms of ownership ensuring and financing the transportation of teachers and students development of a network of education institutions perspectives for education institutional education individual education pedagogical support in the workplace (in production) dual education critical aspects of decentralization in education lack of an effective monitoring system lack of experience of management of education activation of teachers in the organization of management of education change the structure of management minimum impact on the quality of education school / educational clusters village clusters network group of educators (teachers, school principals) national model of clusters possible options for financing education scholarship from school or state rants of local and federal authorities financing from the state budget financial assistance intergovernmental transfers funds come from budgets of all levels public administration ministries and agencies of ukraine ministry of education and science of ukraine (mes) departments of education of the regions state attestation commission (sac) departments of education of the districts bodies of local state administration figure 3. perspectives of the development of the sphere of education at the level of territorial communities source: made by the authors baltic journal of economic studies 105 vol. 6, no. 3, 2020 then set the budgets of individual institutions and are fully responsible for the financing (shyian, 2016). in the united kingdom, it is recognized that the main incentives to improve education in the conditions of financial decentralization are the market and competition. the government’s policy on this issue is that education institutions should: be funded by the state under contracts for educational activities and educational services; depend less on public financing and rely more on a variety of sources of income. in addition, to improve the quality of education, the government of the state has proposed a more thorough evaluation of teachers’ work, to introduce differentiated remuneration for this work (teachers’ work should be paid depending on the number of students and the level of education); allow the establishment of differentiated tuition fees depending not only on the status of the education institution, but also on the subjects studied (babichev, 2017). however, with regard to the expediency of encouraging the work of teachers (by providing allowances), this mechanism is also used in the other european countries. thus, almost half of the countries pay allowances related to the geographical location of the school. they are motivational incentives that encourage teachers to work in remote, rural or socially disadvantaged areas and are determined at the central level of government. also, teachers may be paid allowances for work in regions with aboveaverage living standards, such as in the capital. the criteria for such allowances vary considerably from country to country. they can be geographical in nature (remote and isolated areas), which occurs in denmark, spain, cyprus, poland, romania, finland and the united kingdom (scotland). on the other hand, they can be economic (high standard of living), as in france and the united kingdom (england), or social (areas with significant social exclusion, high risk or a large proportion of students representing ethnic or linguistic minorities) as in spain, france and italy (krystopchuk, 2016). this experience should be applied in ukraine in order to increase the motivation of young professionals to get a job in schools located in rural areas. it should be understood that changes due to the implementation of decentralization reform will affect the distribution of powers in financial, resource and administrative terms between all levels of control of the education system of ukraine. the bodies of local self-government are entrusted with a number of powers, for the quality of which they are responsible, such as: ensuring the availability of preschool and secondary education; implementation of state policy at the local level; providing equal conditions for the development of education institutions of all forms of ownership; providing and financing the transportation of teachers and students; development of a network of education institutions. but the critical aspects of the development of education in the conditions of decentralization are: the lack of an effective system for monitoring the quality of education, lack of experience in management of education and activation of teachers in the organization of management of education; change of management structure; minimal impact on the quality of education. 4. conclusions the article outlines general trends and approaches to educational reform in the conditions of decentralization of ukraine. the problems of the decentralization process, which began in 2014, were emphasized, namely the regional development and amalgamation of territorial communities, which influenced the dynamics of education institutions that gained more auto nomy. it is established that the introduction of decentralization opens the way to changes in creating favorable conditions for the emergence and implementation of intellectual needs of the individual. it is proved that the main task of the government in education in the conditions of decentralization is to coordinate the actions of government agencies, education institutions and the public in order to meet the personal needs of citizens and government demands for intellectual and professional enrichment. it is established that decentralization for higher education institutions should be considered as a means of forming managerial relations in the industry and joint responsibility for the management of the educational process. statistical data on the dynamic pattern in the total number of education institutions are studied, in particular, the dynamics of education institutions subordinated to the ministry of education and science of ukraine in terms of educational levels are presented. the reasons for the decrease in the total number of secondary and vocational education institutions are identified. the degree of financing of the education sector from the consolidated budget of ukraine by levels of education is considered. it is determined that the education sector in ukraine is in transition, and an important component of this process is the correct choice of the vector of movement, taking into account the interests of all stakeholders. the experience of the united kingdom and the european union (denmark, spain, poland, romania, finland, france) on improving the quality of educational services by strengthening the motivation of teachers using a differentiated payment system is studied and proposed to introduce into the ukrainian education system. the possibility of introducing the process of educational / school clustering, which can be a strategy for pooling limited resources and improving access to resources, is considered. baltic journal of economic studies 106 vol. 6, no. 3, 2020 references: pro mistseve samovriaduvannia v ukraini: zakon ukrainy vid 21.05.1997 № 280/97-vr / verkhovna rada ukrainy [on local self-government in ukraine: law of ukraine no. 280/97-вр dated may 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(2019). vyznachennia ta osnovni poniattia detsentralizatsii osvity [definitions and basic concepts of decentralization of education]. derzhavne upravlinnia ta mistseve samovriaduvannia, vol. 3(42), pp. 111–120. danylyshyn, b. m., & pylypiv, v. v. (2016). detsentralizatsiia u krainakh yes: uroky dlia ukrainy [decentralization in the eu countries: lessons for ukraine]. rehionalna ekonomika, no. 1, pp. 5–11. url: http://nbuv.gov.ua/ujrn/ regek_2016_1_3 (accessed 16 february 2020). boiko, t. yu. (2017). finansuvannia zakladiv osvity na miskomu rivni v umovakh detsentralizatsii vlady v ukraini [financing of educational institutions at the city level in the context of decentralization of power in ukraine]. naukovyi visnyk khersonskoho derzhavnoho universytetu. seriia: ekonomichni nauky, vol. 27(2), pp. 147–151. iurchuk, l. (2009). tendentsii detsentralizatsii upravlinnia osvitoiu v ukraini [trends in decentralization of education management in ukraine]. visnyk natsionalnoi akademii derzhavnoho upravlinnia pry prezydentovi ukrainy, vol. 4, pp. 276–283. hrynevych, l. (2005). tendentsii detsentralizatsii upravlinnia bazovoiu osvitoiu v suchasnii polshchi: avtoref. dys. kand. ped. nauk [trends in decentralization of basic education management in modern poland]. kyiv. (in ukrainian) shyian, r . (2016). detsentralizatsiia osvity u polshchi: dosvid dlia ukrainy [decentralization of education in poland: experience for ukraine]. kyiv. url: https://decentralization.gov.ua/uploads/library/file/112/2016-0216-poland.pdf (accessed 21 february 2020). babichev, a. v. (2017). zarubizhnyi dosvid iz pytan upravlinnia zminamy v systemi vyshchoi osvity [foreign experience in managing change in the higher education system]. theory and practice of public administration, no. 2(57). url: http://www.kbuapa.kharkov.ua/e-book/tpdu/2017-2/doc/5/03.pdf (accessed 20 march 2020). krystopchuk, t. ye. (2016). osoblyvosti detsentralizatsii upravlinnia osvitoiu: dosvid yevropeiskykh krain [features of decentralization of education management: the experience of the european countries]. psykholoho-pedahohichni osnovy humanizatsii navchalno-vykhovnoho protsesu v shkoli ta vnz, vol. 2, pp. 108–117. url: http://nbuv.gov.ua/ujrn/ppog_2016_2_17 (accessed 19 february 2020). baltic journal of economic studies 227 vol. 5, no. 4, 2019 corresponding author: 1 east european university of economics and management, ukraine. e-mail: iiaandia@ukr.net orcid: https://orcid.org/0000-0001-7759-2372 2 east european university of economics and management, ukraine. e-mail: sukach.o.m@gmail.com orcid: https://orcid.org/0000-0001-7150-0262 researcherid: e-7418-2019 doi: https://doi.org/10.30525/2256-0742/2019-5-4-227-235 modern management approaches to the financial security of the region under budgetary decentralization iіa chudaeva1, olena sukach2 abstract. nowadays, the main target of economic and investment policies of local authorities is to ensure the increase of their own financial resources in order to strengthen the financial capacity to meet the needs of the maximum administrative units and to attract investment in its development. the modern economic crisis has essentially affected financial possibilities of the majority of regions ukraine. in these conditions for working out regional economic policy and increasing its realization efficiency, special attention should be given to the analysis of processes of formation and estimation of financial potential of the region opening financial resources of economic entities, factors and conditions of their involving, and also risks and threats arising in the course of use. the main purpose of the article is to study the definition of “financial capacity” and develop a model for the region’s financial capacity building based on its assessment. the article deals with the nature, content, and approaches to the interpretation of economic category “financial potential of the region,” the importance of financial potential for sustainable economic growth in the region is proved. it is determined that not all financial resources created in the region are used in its territory and, conversely, a part of the financial resources generated in other regions of the country is used here to meet the needs of the region. results. this article reflects the present approach of ideas of the financial potential of a region, singles out its basic elements such as tax, investment, budgetary, and credit potential. the existing methods of the formation of the estimation of the regional potential are presented and basic problems of their estimation are formulated. the implementation stages are presented and the elements of the mechanism of the financial potential management of regional development are described. practical implications. the basic directions of this mechanism implementation to ensure social and economic regional development are proposed. value/originality. the suggested model can be used by local authorities in determining the actual financial capacity of a region and will also make it possible to evaluate financial capacity under declining subsidies from budgets of other levels. key words: region, financial system of region, mechanism of financial potential management of regional economic growth, financial potential of region. jel classification: н71, н72, н77, р24, r13 1. introduction in the context of global transformations and the economic crisis that has engulfed the world economy, the adequate and appropriate financial security of regions will contribute to the efficient use of budget funds, encourage financing of the social sphere, help to solve financial problems of structural units, and enable efficient work of local authorities. the improvement of the existing methodology for assessing the local budgets’ financial security as the main source of strengthening the financial capacity of the region will allow timely and complete identification of the region’s need for financial and material resources, the level of security of minimum expenses requirements, as well as the local government performance according to citizens’ demands. in fact, decentralization in ukraine was limited to a change in government representatives. the provision of financial resources, the implementation of socioeconomic programs for the development of the region, and the distribution of powers between state baltic journal of economic studies 228 vol. 5, no. 4, 2019 authorities and local self-government bodies remained uncoordinated. under these conditions, it is necessary to provide local authorities with greater autonomy to generate revenues and implement development programs, which is undoubtedly related to the level of the financial capacity of the region and the mechanisms for its regulation. hence for working out regional economic policy and increasing its realization efficiency, special attention should be given to the analysis of processes of formation and estimation of the financial potential of the region opening financial resources of economic entities, factors and conditions of their involving, and also risks and threats arising in the course of use. the main purpose of the article is to study the definition of “financial capacity” and develop a model for the region’s financial capacity building based on its assessment. 2. literature review the modern system of regional development of european countries is based on the principles of decentralization, which envisages redistribution of powers and authority among different levels of budget system and government, and ensures efficient provision of public services. thus, in 2014, the government of ukraine adopted the concept of local self-governance and territorial power reforming in ukraine (order of the cabinet of ministers of ukraine, 2014) that provided for the expansion of powers of local authorities in matters of management in such key areas as healthcare, education, and housing and communal services, as well as ensuring the fiscal autonomy of local budgets. fiscal decentralization has set the new rules of taxes and fees allocation to local budgets. a total of 80% of the environmental tax, 100% of the single tax, 100% of the corporate income tax (paid by municipal enterprises and financial institutions), 100% of the property tax (real estate, land, and transport), and 100% of the excise tax were now paid to local budgets. after the issues of administrative services provision were settled it became possible to pay 100% of the state duty, 10% of corporate income tax (into oblast budgets), and 100% of the land fee to local budgets. the results of the implementation of the concept were already visible in 2015, when the amount of local budget revenues increased by 52% (budget price, 2018) however, not all local budgets received substantial tax revenues. thus, the new sources of revenue were mainly concentrated at the level of oblast budgets while the budgets of a basic level of self-government remained subsidized. in addition, previously available substantial tax revenues were withdrawn (budget, 2017) according to i. lunina, the result of the reforms led to the fact that the state has expanded the revenue base of the regions but has never defined the functions and powers of local self-government bodies. consequently, de jure, financially independent regions have become de facto more dependent on subventions from the state budget (lunina, 2016). 3. the role of the financial potential of the region in the context of decentralization financial capacity by its nature is a complex and multifaceted phenomenon, which has significant social and economic value. over the past decade, the concept of financial capacity of the region has been widely used by scientists and practitioners of the world community while its definition, structure, and assessment mechanism still differ significantly. existing approaches used for assessing the efficiency of local authorities’ financial resources management, as well as for determining the level of financial capacity of a region, can be distinguished according to the following criteria: 1. optimal planning of revenues and expenditures of the regional budget aimed at ensuring social guarantees. 2. reduction of fiscal imbalances with the use of budget regulation tools (tax payments, preferential taxation, etc.). 3. granting fiscal autonomy to the regions based on generated own-source revenues. the essence of the financial capacity of the region, its structure, and principles of assessment are investigated in the works of both ukrainian and foreign scholars. for instance, g. wozniak describes financial capacity as an aggregate of financial resources that are at the disposal of regional authorities and are used to ensure sustainable development of the region (vozniak, 2010). l. natchuk defines both actual and expected financial capacity in the context of the following main elements: budgetary capacity, funds of the financial and credit system, financial resources of the population of the region, financial capacity of enterprises and organizations, external investments and borrowings (natchuk, 2007). o. kushkhov (kushkhov, 2002) and yu. korchagin (korchagin, 2006) consider financial capacity of the region as the aggregate of regional money funds, the constituent components, structure and quantitative assessment of which determine the peculiarities of supply and distribution of public goods and services in the region and the possibility of internal financing of all activities of the region. i. chunitskaya identifies the region’s capacity as the ability of the state to attract and efficiently use financial resources in order to ensure economic development. v. boronos (boronos, 2011) highlights the hypothetical ability of a territory to attract, generate, and use financial resources in order to ensure its efficient performance and development. according to g. golodova, financial capacity of a region is the aggregate of the maximum possible financial resources baltic journal of economic studies 229 vol. 5, no. 4, 2019 (golodova, 2010). conditions created by economic entities and local authorities for mobilization, allocation, and accumulation of such resources are also taken into account. the main goal of these activities is to sustain the long-term development of the regions and the achievement of certain financial results. the financial capacity of the region is characterized by its feasibility to attract necessary financial resources by local authorities at a certain stage of time (pasichnyk, 2005). according to o. demyanchuk, the financial capacity of the region is a cumulative ability of local economic entities operating within the framework of sustainable economic relations to attract, distribute, and use actual and expected financial resources efficiently in order to enable local governments to perform their main function, namely to ensure sustainable socio-economic development (demianchuk, 2014). so, among investigated scholars’ approaches towards the definition of the notion of the financial capacity of a region, the resource approach prevails. summarizing of the existing approaches to the definition of the notion of financial capacity of a region made it possible to determine it as the maximum possible amount of accumulated own-source and attracted financial resources of the region that can be used to ensure the sustainable functioning of the structural unit and social guarantees of the population. the study of the definition enabled us to determine components of the financial capacity of a region (figure 1). thus, the resource-generating components of the financial capacity of the region are the budgetary capacity, taxable capacity, and financial capacity of regional infrastructure enterprises, which together reflect the ability of local authorities to generate and mobilize financial resources and use them efficiently. local authorities are encouraged to search for alternative sources of funding for the programs of socio-economic development of the region, which is implemented with the help of innovative, investment, and lending capacity, as well as money incomes of the population of the region. financial capacity of the region, as an economic category, performs the following functions (figure 2). the distributive function displays the process of allocation of financial resources between the state and local authorities in order to determine both actual and expected resources of the region. support function. financial capacity of the region provides for its social and economic development and ensures that the social needs of the population are met. financial capacity of the region taxable capacitybudgetary capacity financial capacity of regional infrastructure enterprises money incomes of the population of the region lending capacityinvestment capacity resourcegenerating innovative capacity accelerating region’s development figure 1. structural components of the financial capacity of the region source: compiled by the authors functions of the financial capacity of the region support functiondistributive function incentive function monitoring function performance function figure 2. functions of the financial capacity of the region source: compiled by the authors baltic journal of economic studies 230 vol. 5, no. 4, 2019 incentive function involves the maximum attraction of resources from all possible sources to encourage regional development. accumulated financial resources, the level of financial capacity of the region, and the social effects achieved are regulated by the monitoring function. this function assesses the performance of the authorities and the implementation of socio-economic development programs; determines extend to which social guarantees are ensured. performance function, which can be measured by the integral performance indicator, determines the ranking of the economic development of the region and local authorities’ performance level. taking into account the diversity of indicators that determine the efficiency of local authorities’ performance in domestic and world practice, a comparative comprehensive and rating assessment method is beneficial (baranova, 2008). r xj ij i n = − → = ∑( ) min1 2 1 (1) where: r – is an integrative indicator of a region that demonstrates the efficiency of budgetary funds utilization (rating of a region); xij – is a performance indicator. the indicator is calculated by comparing each element to the best among the compared in dynamics or regions (the growth of the indicator in dynamics shows an increase in the efficiency of using budgetary funds). it is also possible to compare the best indicator among those compared with each element value (a quantitative decrease indicates an increase in the efficiency of using budgetary funds); j – compared regions or periods; i – indicators of the efficiency of the use of budgetary funds. 4. influence of financial capacity on the level of financial support of regions budget execution at the regional level in ukraine is characterized by relatively unstable profitability of own funds and significant dependence of local budgets on various kinds of subsidies from the state budget. in 2013, a share of consolidated budget revenues in gdp amounted to uah 442.8 billion. the volatility in the domestic and international markets, as well as the financial crisis that affected a large part of europe, required of government authorities to implement certain fiscal activities to generate budget revenues at all levels. in 2017, as a result of the budget reform carried out in 2014, the revenues of the consolidated budget of ukraine amounted to uah 1017.0 billion (table 1). implementation of the principles of decentralization in ukraine had both positive and negative consequences. owing to the expansion of the revenue base of local budgets, the increased share of local budgets in the total consolidated budget of ukraine is observed. the share of local budgets (without intergovernmental transfers) in consolidated budget revenues of ukraine amounted to 22%. nevertheless, local budgets (table 1) play a much smaller role in the redistribution of gdp than the state budget. thus, in 2017 the share of local budget revenues in gdp amounted to 7.5% while the share of state budget revenues in gdp amounted to 26.6%. this indicates a significant centralization of the country’s financial resources in the state budget and the financial dependence of local authorities on the decisions of the central government. it should also be noted that in 2017, the share of transfers from the state budget decreased by 1.9% and amounted to 52.4% of the total revenues of local budgets of ukraine. however, the results of local budget solvency table 1 revenues of consolidated, state and local budgets in ukraine, 2013–2017 2013 2014 2015 2016 2017 rate of growth in 2017 compared to 2015, % the consolidated budget of ukraine, uah billion 442,8 456,1 652 782,9 1017,0 56,0 state budget *, uah billion 337,6 355 531,6 612,1 793,4 49,2 share of state budget revenues in gdp, % 23,2 22,7 26,9 25,7 26,6 -1,1 share of state budget revenues in the consolidated budget, % 76,2 77,8 81,5 78,2 78,0 -4,3 local budgets *, uah billion 105,2 101,1 120,5 170,7 223,6 85,6 share of local budget revenues in gdp, % 7,2 6,5 6,1 7,2 7,5 22,9 share of local budget revenues in the consolidated budget, % 23,8 22,2 18,1 21,8 22,0 19,0 share of transfers from the state budget to local budget revenues, % 52,4 56,4 59,1 53,4 52,4 -1,9 share of transfers from local budgets to state budget revenues, % 0,5 0,6 0,6 0,7 0,7 16,7 source: calculated and compiled by the authors based on data provided by the treasury service of ukraine: url: http://www.treasury.gov.ua/main/ uk/publish/category/22813 and the state statistics service of ukraine: url: http://www.ukrstat.gov.ua/ baltic journal of economic studies 231 vol. 5, no. 4, 2019 show a positive dynamic in certain industries. according to the experts of the association of ukrainian cities, in the years of 2014–2017, the number of treasury loans granted has decreased by 57 times, which undoubtedly shows a strengthening of local budgets’ solvency. in 2017, due to decentralization, the number of subsidized local budgets decreased by 24% while the number of donor budgets increased by 12.5%. that year, the state community development financial support increased 2.2 times (palchuk, 2017). in 2017, the own revenues of the general fund of local budgets of ukraine per resident increased, as compared to 2016, by 19.3% and amounted to 4,488.5 hryvnias. legislative innovations on redistribution of budget revenues sources contributed to the change in the structure of local budget revenues in 2017. in particular, compared to 2014, a significant increase in tax revenues is observed (see figure 3). the main growth factor is the increase in single tax revenues, which, according to the amendments and additions made to the budget and tax codes of ukraine, is credited to a special fund of local budgets. in the reporting period, there was an increase in tax revenues due to personal income tax (+ 0.7%), local taxes and fees (+ 1.0%), and other tax revenues. on the other hand, according to the results of budgets execution in 2016, non-tax revenues dropped by 13.9% while in 2015 they amounted to 18.4%. transformations that are taking place in the budget sphere of ukraine have also changed the approach to the use of regional resources. thus, to support the socio-economic development of the regions, only uah 0.5 billion were allocated from the state budget in 2014, while in 2017, the amount of funds for infrastructure projects increased by almost uah 8.2 billion, which enabled the fulfilment of 5989 projects. as of 1 january 2018, the total budget support amounted to uah 16.1 billion. the main concerns of local budgets are their relatively irregular incomes and significant dependence on state budget transfers. in 2014, subsidies to local budgets amounted to 96.3% while only 3.7% of local budgets donated to the state budget. compared to 2017, the number of local budgets subsidized from the state budget decreased by 23.8%. in turn, the volume of donor budgets grew by 12.5% and amounted to 16.2%. the indicators of local budget revenues generation, presented in table 1 and figure 3, indicate that local budgets still have a very limited level of fiscal autonomy in terms of revenues. according to the principle of autonomy of local budgets, defined by the budget code of ukraine, the amount of own-source revenues should exceed the funds received in the result of redistribution of resources between the budgets, which characterizes the level of the financial potential of the region. we agree with i. lunina (lunina, 2016) that the following indicators are significant in determining the financial capacity of the region: revenue decentralization ratio – the share of local budgets revenues in the consolidated budget, %; financial autonomy ratio – the share of local taxes and fees in local budget revenues, %; leverage ratio – the share of transfers from the state budget of ukraine in local budget revenues, %. the region is considered financially sustainable provided that 60 to 70% of regional budget revenues are its own-source; moderate at 40 to 50%; the unstable state is fixed within 20-30%; crisis state within 5–10%. 12,1 12,3 20,1 21,8 26,0 1,9 1,5 2,1 2,0 2,5 78,4 75,3 98,2 146,9 201,0 92,4 89,0 120,5 170,6 272,6 0 100 200 300 0,0 10,0 20,0 30,0 2013 2014 2015 2016 2017 u a h b ill io n u a h b ill io n non-tax revenues other tax revenues transfers figure 3. dynamics of local budgets revenues of ukraine in terms of revenue generation sources, uah billion source: compiled by the authors based on the data of state treasury service of ukraine: url: http://www.treasury.gov.ua/ main/uk/publish baltic journal of economic studies 232 vol. 5, no. 4, 2019 during 2017 generated revenues of the general fund of local budgets of ukraine (excluding intergovernmental transfers) amounted to uah 192.7 billion, which is by uah 46.0 billion (+ 31%) more than in 2016 (table 2). during the period of financial decentralization implementation revenues of local budgets showed a 2.8-fold increase. this was made possible due to the expansion of powers and growing interest of local authorities in increasing revenues to local budgets, measures taken to attract alternative sources of budgets revenues generation, as well as to improve the efficiency of taxes and fees administration. the results of the calculations showed that starting from 2014, the dependency ratio is permanently decreasing but is still at a critical level (54.4%), which indicates a significant dependence of local budgets on the redistribution of funds and insufficient own financial capacity. the results of decentralization have had some success. so, in 2017, the level of revenues decentralization amounted to 18.9%. the increase in fiscal autonomy has also become positive. namely, single tax and excise duty paid into local budget made it possible to increase the level of the indicator to 10.5%, while in 2013 it was 3.3%. summarizing the results of the study, we can state that the nationwide indicator of the financial sustainability of the regions is at the level of 52-55%, which is the norm. however, not all regions have sustainable sources of revenues. thus, having studied the experience of economically developed countries, considering the assessment of financial security as an indicator of sustainable development of the region, certain discrepancies in approaches to the assessment methods were revealed. an indicator of the overall financial and economic independence of the region can be considered as the main criteria for financial capacity assessment (golodova, 2010). this indicator efficiently determines the level of financial security of the region and is calculated by the following formula: ra = (mp + i) / (cb – pb) (2) where: ra – the level of financial and economic security; mp – total amount of money incomes of the population of the region; i – a profit of enterprises of regional infrastructure; cb – total expenditure of the regional budget; pb – own-source revenues of the regional budget. the main advantage of this indicator is the quantitative measurement of the level of financial and economic security of the region; however, it does not show the level of security of regional territorial units in terms of financial capacity of local authorities. accordingly, when assessing the level of security of the region, it is also expedient to apply the method suggested by t. rassolova, which includes: the calculation of indicators that determine the amount of local taxes and fees; the degree of capacity utilization; revenuesexpenditures balance ratio (davydova, rassolova, 2009). the methodology involves the calculation of the following: 1) the ratio of local own-source revenues to current expenditures; 2) capacity utilization ratio, which is a ratio of the actual capacity to the expected one; 3) the ratio of local budget’s revenues and expenditures equilibrium: r z = (1 – rv)rp (3) according to the calculation of the local budget revenues-expenditures equilibrium ratio, amount of financial assistance from the state budget will be smaller if the value of the indicator decreases and vice versa. as it was mentioned earlier, not all regions of ukraine, as a result of the implemented reform, received a sufficient amount of funds and managed to increase their financial table 2 indicators of the region’s revenues generation 2013 2014 2015 2016 2017 revenues of the consolidated budget of ukraine, uah billion 442,8 456,1 652 782,9 1017,0 own-source revenues of local budgets, uah billion 39,0 68,6 98,2 146,6 192,0 incl. local taxes and fees, uah billion 7,3 8,1 27,0 42,3 52,6 transfers, uah billion 115,8 130,6 174 195,4 272,9 revenues of local budgets (including intergovernmental transfers), uah billion 221 231,7 294,5 366,1 502,1 revenue decentralization ratio 8,8 15,0 15,1 18,7 18,9 leverage ratio 52,4 56,4 59,1 53,4 54,4 financial autonomy ratio 3,3 3,5 9,2 11,6 10,5 share of local taxes and fees in local ownsource revenues, % 18,7 11,8 27,5 28,9 27,4 source: calculated and compiled by the authors according to the treasury service of ukraine data: url: http://www.treasury.gov.ua/main/uk/ publish/category/22813 baltic journal of economic studies 233 vol. 5, no. 4, 2019 capacity. using granberg and rassolova methods, we can assess the level of the financial capacity of a region on the example of the cherkasy region (table 3). the performance of the assessed region indicates a positive impact of the budget reform. thus, during the study period, the region’s own-source revenues increased 3 times, which positively influenced both the actual and expected capacity of the region. the level of financial and economic security declined from 11.91 points in 2013 to 8.77 points in the reporting period, which also indicates a decrease in the dependence of the region on subsidies from the state budget. this is confirmed by the increase in local own-source revenues to current expenditures ratio, as well as in actual capacity to the expected capacity ratio. based on the results of the analysis and findings regarding the provision of local authorities with financial resources, we consider it expedient to create tools for designing a model of the region’s financial capacity. therefore, taking into account the current practice of administration of financial resources in ukraine, we can highlight the following basic conceptual goals of the development of the financial capacity of the region: 1. establish a favourable climate for the economic development of the region in accordance with the priorities of the regional strategy. 2. develop revenue-generating resources to ensure the main activities of local authorities, taking into account social guarantees ensuring. 3. create favourable conditions for attracting investment and increasing the region’s investment attractiveness. 4. enhance sustainability and credit attractiveness of the regional banking system for robust financing of fixed and working capital of business entities and the population of the region, etc. based on the outlined goals, as well as using strategic planning approaches to the socio-economic development of the region, we have designed and proposed a model for the development of the financial potential of the region (figure 4). the suggested model includes: 1. comprehensive analysis of the internal and external factors of socio-economic development of the region, revenues base and performance expenditures as a result of the region’s activities. 2. balancing the revenues and expenditures of the region. this enables identifying the actual and expected financial capacity of the region. 3. prediction of changes in the financial capacity of the region resulting from the risk factors and uncertainties in the implementation of a socio-economic development strategy aimed at assessing the real resources for sustainable regional development. 4. monitoring and timely correction of indicators of the financial capacity of the region. the following main hypotheses have been highlighted based on the suggested model of the regional financial capacity development: 1. financial capacity development involves four main stages: analysis, identifying resource capacities, forecasting and planning of expenditures, and assessment of the final result. 2. construction of the financial and economic system, which is carried out on the basis of a hierarchical principle, means that all elements are coordinated and have their own concepts that are a part of the general one. 3. assessment of financial capacity is a continuous process subject to constant adjustment in order to ensure maximum sustainability of the region. practical application of such a model makes it possible to use budgetary resources in the most efficient table 3 the level of financial capacity security of the region 2013 2014 2015 2016 2017 net profit of regional infrastructure enterprises, uah mln. 159,2 -6177,8 2339,6 6003,5 6373,8 the value of real money incomes of the population of cherkasy region, uah mln. 27353 27329 33642 39992 49754 cherkasy region budget expenditures, uah mln. 2699,3 3149,2 4029,5 5427,1 7590,5 own-source budget revenues of cherkasy region, uah mln. 389,2 500,6 563,8 765,1 1191,1 budget revenues of cherkasy region (including transfers), uah mln. 2698,5 3159,8 4116,3 5439,4 7724,2 expected capacity of the region, uah mln. 33087 38466 50843 59412 68917,9 the actual capacity of the region, uah mln. 31093,2 25198,9 40610,8 51782,9 64186,4 level of financial and economic security 11,91 7,99 10,38 9,87 8,77 the ratio of local own-source revenues to current expenditures 0,14 0,16 0,14 0,14 0,16 capacity utilization ratio 0,94 0,66 0,80 0,87 0,93 revenue-expenditure equilibrium ratio 0,01 0,05 0,03 0,02 0,01 source: compiled by the authors baltic journal of economic studies 234 vol. 5, no. 4, 2019 financial capacity of the region 1 comprehensive analysis of the internal and external factors of socioeconomic development of the region 2 balancing the revenues and expenditures of the region and identifying funds utilization outcome 3 identifying forecasted changes in the capacity of the region resulting from the implementation of socio-economic development programs 4 monitoring and timely management of the financial capacity of the region level based on the results of the relevant budget period figure 4. model of the financial potential of the region’s development source: compiled by the authors and equitable way, as well as to detect improper and inefficient use of financial resources early. moreover, it enables local authorities to promptly adjust the amount of funds allocated for the implementation of various programs and projects, which in turn will help to maintain an appropriate level of financial capacity of the region. 5. conclusions and future prospects the results of the research on ensuring the financial capacity of the regions have revealed a significant dependence of local authorities on the transfers of budgetary funds at the national level, which in turn hinged on the extent to which planned budget revenues have been generated. regarding the revealed trends in local budgets’ revenue generation and their share in state budget revenue, the need for further fiscal reform and greater local authorities’ autonomy become apparent. it has also been determined that, when assessing the level of financial security of the region, analysis of revenues and expenditures of local budgets is crucial. on the other hand, the level of development of the investment sector and credit system, revenues of business entities, use of regional infrastructure facilities, etc. are not taken into account. as a result, we have presented a model for the regional financial capacity development, which is based on a comprehensive analysis of the financial and economic activities of the region and its development priority setting. the suggested model can be used by local authorities in determining the actual financial capacity of a region, and will also make it possible to evaluate financial capacity under declining subsidies from budgets of other levels. references: baranova, i. v. (2008). conducting analytical procedures in the evaluation of budgetary funds use efficiency. siberian financial school, 5, 134–141. boronos, v. g. (2011). methodological fundamentals of management of financial potential of the territory. sumy: sumy state university. budget 2017. url: http://budget2017.info/pages/decentralization budget price: budget revenues. url: http://www.cost.ua/budget/revenue/#29 vozniak, g. v. (2010). financial potential of the region and its problems evaluations. url: www.rusrand.ru/public/ public7.html golodova, zh. g. (2010). formation and management of the region’s financial potential to ensure its economic growth. doctoral dissertation abstract. moscow. granberg, a. g. (еds.) (2000). regional development: experience of russia and european union. moscow. ekonomika. davydova, l. v., & rassolova, t. l. (2009). the budgetary system transformation in modern conditions: monograph. orel: izd-vo orags. demianchuk, o. i. (2014). regions financial potential as a basis of its stable economic development. scientific proceedings of the national university "ostroh academy". series "economics", 27, 73–78. korchagin, yu. a. (2006). regional financial policy and economy. rostov-on-don: feniks publ. kushkhov, o. i. (2002). management by regional budget and its income. spb.: izd-vo spbuef. lunina, i. а. (еds.) (2016). development of the budget decentralization in ukraine: scientific report. kyiv: nas of ukraine, institute for economics and forecasting of nas of ukraine. baltic journal of economic studies 235 vol. 5, no. 4, 2019 natchuk, l. s. (2007). diagnostics of the financial potential of a region: a methodological aspect. actual problems of development of the financial and credit mechanism in innovative economies. materials of the international scientificpractical conference, minsk: bseu. “on approval of the concept of reforming local self-government and territorial organization of power in ukraine”, order of the cabinet of ministers of ukraine of 01.04.2014 № 333-р (2014). ofitsiyniy visnik ukrayini, 30, 831. palchuk, v. (2017). local budgets in conditions of financial decentralization. ukraine: events, facts, comments, 6. url: http://ubuviap.gov.ua./images/ukraine/2017/ukr6.pdf pasichnyk, yu. v. (2005). budget potential for economic growth in ukraine. tov “yuho-vostok, ltd”. donetsk. the state treasury service of ukraine. url: http://www.treasury.gov.ua baltic journal of economic studies 84 vol. 7, no. 1, 2021 corresponding author: 1 national university of water and environmental engineering, ukraine. e-mail: polyakovmaxim77@gmail.com orcid: https://orcid.org/0000-0001-7896-2486 researcherid: v-9971-2018 2 national university of water and environmental engineering, ukraine. e-mail: n.e.kovshun@nuwm.edu.ua orcid: https://orcid.org/0000-0003-0573-2932 researcherid: k-2688-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-1-84-92 diffusion of innovations as a key driver of the digital economy development maxim polyakov1, nataliіa kovshun2 abstract. the research objective includes detailing of the essence and structural changes of the digital economy (de) at the national level; an explanation of the features of digital innovations; the role substantiation of diffusion of innovations (di) as a key driver for de development. the research methodology is based on: structural, institutional, historical, comparative, functional analysis, formalization method. the need to achieve all-encompassing digitalization nature and the systematic use of digital technologies, as well as the transition to digital models of organization through the diffusion of technologies, is taken into account. the research results are the detailing of the essence and structural features of de. de is considered as a new type of economy, characterized by the widespread adoption of digital technologies, cyber-physical systems, intelligent solutions, network technologies. the de nature is revealed from the position of several approaches: technological; structural; component-resource; functional. the de features (network nature, a new type of entrepreneurship, a new class of specialists, new institutions, etc.) are highlighted, as well as the negative consequences of the transition to such an economy; overcoming of these negative consequences requires smart policy with a focus on productivity growth, structural changes and growth incentives. the de structure, including parts of the internet economy (e-commerce, e-health, e-education, e-banking, etc.) and new forms of providing various services, is characterized. the it sector growth is indicated as the de “core”, where new jobs, infrastructure, cost are created, and the technology business is developed. the structural proportions of de are largely determined by technological trends (on-demand economy, sharing economy, internet of things, etc.). digital platforms as new intermediary mechanisms, as well as the big data market, are one of the key structural components of de. the subject and features of digital innovations are highlighted. on this basis, the di role in the de development is substantiated, taking into account the provision of all-encompassing digitalization nature, stimulation of innovations, ensuring the benefits and economic growth, as well as the creation of economies of scale, chain and cumulative effects. practical recommendations on the intensification of di processes in the context of de building include: targeted government support that concerns the it and other sectors; establishment of technology transfer and commercialization centers, technology platforms and technology leadership programs; quality improvement of education and training; infrastructure role expanding of universities; development of research, innovation, entrepreneurial networks, professional communities, industry associations. in this context, it is necessary to strengthen support for small and medium-sized innovative businesses that should become a provider of new technologies. it is advisable to create portals for oriented r&d and adoption of technologies; knowledge management platforms during technology transfer process; industry knowledge bases; portals for experts work activity management for project evaluation. value/originality. the article details the essence and reveals the structural features of de, describes the specifics of digital innovations, as well as presents di as a key driver for the development of such an economy. key words: information technologies, digital economy, digital innovations, diffusion of innovations, digital platforms. jel classification: l86, m15, o14, o32 baltic journal of economic studies 85 vol. 7, no. 1, 2021 1. introduction in recent decades, there has been a rapid progress in computer technologies, the widespread use of information technologies (it) in various areas of activity, the transfer of various processes of communication, exchange and management to the internet. all this has modified the economic organization largely and completely. in particular, the so-called information economy and the internet economy are considered. according to it development, new generations such as digital technologies have appeared, as well as new information systems such as digital platforms. as a result, intensive digitalization of economic processes and digital transformations of the economic complex began, and it led to the new economy type emergence such as digital economy (de). digital transformations affected trade, provision of various services, government activities (digital government), the social services, including medicine and education. cyber-physical systems are being created, artificial intelligence is used, new generations of production technologies are emerging (automated robots, software and computer design complexes), the internet of things is developing on the basis of digitalization. this became the basis for the formation of new chains of production, supply and consumption that is taking place in the framework of the fourth industrial revolution. this leads to structural changes in the economy, the emergence of new industries and markets, types of services and business, including technology, as well as to the expansion and segmentation of the it sector. the full launch of de and the use of its advantages require comprehensive digital changes in all economy sectors, a high level achievement of their technological convergence, the transition to new models of economic organization, as well as other (non-economic) structures in the life of society. this necessitates the full diffusion and adoption of digital technologies. in this regard, the diffusion of innovations (di) should be considered as one of the most important key drivers of de formation and development. the objective nature of technological progress requires special attention to di in order to adapt the economy to new conditions, to overcome structural and social problems, and to obtain general benefits from digital technologies. in this regard, di concerns not only sectors of the economy, but it also has a spatial aspect, contributing to the development of territories and the division of labor. in addition, di deals with human and social development, improving the business environment. considering the above, di in digitalization has a structural significance and it should be an object of strategic management. the intensification of the diffusion processes of new digital technologies, information services and products, should be driven by state innovation policy and it requires the support. 2. literature review discussions about de began a long time ago, in the middle 1990s. it was closely related to the internet economy (choi, whinston, 2000), the intensification of electronic commerce and social communications, which had great economic consequences, followed by social and organizational changes. the internet quickly became global (brynjolfsson, kahin, 2000). the widespread use of it made them as a new infrastructure of the economy, which led to the de identification. digital it became major areas of innovations in the latter half of the 20th century and the beginning of the 21st century. a high focus on innovations has fundamentally changed the traditional ways of doing business, and also created a qualitatively new type of entrepreneurship, making an even greater demand for knowledge, skills and technology. de formation leads to further it sector growth, including specialists: programmers, data processing specialists, managers, economists, venture capitalists and investors. this has created a new social class, a large community that ensures the development and diffusion of new it. on the other hand, the people who widely use it in life have become more receptive to innovations (hevner, gregor, 2020). many digital innovations are not related only to it, but also to the service information systems (is) that provide with the digital services implementation. also, is implement new organizational and communication mechanisms. it and is together make it possible to create new information products (iden, eikebrokk, marrone, 2020). the issue of innovations is a cornerstone of de understanding. compared to the industrial economy, value creation seems to be more difficult because of the saturation, “intangibility”, and more intense competition. in the digital context, the essence, criteria and features of innovation are changing, in particular, the excess of social profit over private. new institutional problems obviously appear, including those ones related to the intellectual property protection (teece, 2018). new digital technologies adaptation is necessary to improve business efficiency and competitiveness (el-haddadeh, 2020). despite the fact that large companies dominate in it and internet sectors (for example, facebook, apple, amazon, microsoft, netflix, and google), de development opens up new opportunities for small and medium-sized enterprises, including in small cities and even in rural areas. this is the case of the development of global, regional and local innovations. these can be information services that make it possible to improve competitiveness, accelerate market exchange and knowledge processing. at the same time, it requires appropriate digital competence (räisänen, tuovinen, 2020). in a de context, companies need digital competencies to develop or master innovations in the context of diffusion. this is described by various theories and baltic journal of economic studies 86 vol. 7, no. 1, 2021 models, for example: expectancy disconfirmation model, model for organization adoption, model of personal computer utilization, task-technology fit model, technology acceptance model, innovation diffusion theory, unified theory of acceptance and use of technology, value-based adoption model, technology continuance theory, technology adoption lifecycle, etc. (lai, 2017; taherdoost, 2018). w hen it comes to the population as a whole, the focus is on readiness to digital technologies using new skills acquisition (benson, 2019). in this regard, consumer resistance to innovations is also considered, as it is an important reason for the rejection of digital innovations, especially technological innovations (talwar, talwar, kaur, dhir, 2020). thereby, there is a delayed (long-term) adoption of digital technologies and products is considered due to the attitude towards them, negative image, user orientations, etc. ( jahanmir, cavadas, 2018). in the context of de building strategies, the issues of diffusion and adoption of digital innovations (technologies) are considered at the national level related to the economic growth and social progress (park, choi, 2019). the diffusion and using of new it can be seen as a separate source of growth, along with new investments, human capital, knowledge, products and services (value). the de formation is extremely uneven, specifically across countries; it is characterized by digital divides at the individual, organizational, sectoral and macro levels. any digital divide overcoming is based, in the first turn, on di, especially technological innovations that are related to other conditions of de (bilozubenko, yatchuk, serediuk, korneyev, 2020). di is closely related to the specifics of innovation processes. first of all, this concerns open innovations that are very common in the it sector and create market demand (for example, the internet of things, big data and artificial intelligence) (park, 2017). in order to understand the de, it is important to note that it is closely intersected with such a major trend as the fourth industrial revolution or industry 4.0 (mubarak, petraite, 2020), which concerned with the implementation of cyber-physical systems in production and service, covering the domestic sphere. cyber-physical technologies connect digital and physical worlds, improving work processes and increasing productivity, changing the nature and environment of work (pereira, romero, 2017). digital technology is an important foundation of industry 4.0, namely, its constituent processes (robotization, automation) and technologies (internet of things, big data, virtual and augmented reality, 3d printing, quantum computing, blockchain, etc.). a complex of different technologies that represent industry 4.0 forms a new technological architecture of production systems, increases productivity, management quality and creates new value for the consumer, shortens the life cycle of goods and services. therefore, industry 4.0 makes conditions for a variety of innovations demand, including digital technologies (it) for industrial, commercial and consumer use, organizational and marketing innovations, and new products and materials on numerous occasions. overall, the pace of innovation is accelerating, requiring continual improvement in both business models, which accelerates di processes. the de building has become one of the most important areas of modernization in recent years, especially for developing countries. it consumption is becoming a development factor, including human development (njoh, 2018). digitalization is considered as a powerful factor in economic growth, which has already been confirmed in developed and developing countries (myovella, karacuka, haucap, 2020). at the same time, the scale of positive economic effects of digitalization depends on the development level of countries that largely determines the speed of it diffusion through network infrastructure, digital skills, public and business demand. this is confirmed by the developed countries experience, for example, the republic of korea, although this requires the consideration of a larger historical, cultural, political and social context (larson, 2017). in this regard, the question of the state policy implementation aimed at the diffusion and widespread adoption of it is raised. at the same time, a key factor in the digital sector development is innovations. the de development caused dramatic changes in entrepreneurship. first of all, it opened up new areas for entrepreneurial activity, in particular innovative, and also led to the emergence of new business models. business digital transformations have specificity in various economy sectors, however, in general, they continue to form a new business environment, change market conditions and economic exchange mechanisms. new opportunities for activity and innovations are opened up for business. however, this requires the development of digital technologies and adaptation to new conditions, in particular, learning how to operate on the basis of digital platforms. in general, de requires new business strategies, more susceptibility to innovations and the development of innovative capabilities, taking into account digitalization (nambisan, wright, feldman, 2019). digital platforms have led to radical changes in many industries, transformed the business models for delivering many services, enabling faster and better service delivery. productivity growth has been accompanied by declining costs; it has been considered as disruptive innovation as well as creating new value for the consumer. this stimulates companies to reconsideration of their strategies (zutshi, grilo, baltic journal of economic studies 87 vol. 7, no. 1, 2021 2019). at the same time, the external condition for the implementation of new strategies is special conditions for digitalization. therefore, business orientation and mode of action critically depend on the quality of digital ecosystems. ecosystems should support innovations, help accumulate and use data, consolidate communities, provide communication between people, provide tools for big data processing (chae, 2019). therefore, different countries declare the need to create an entire digital ecosystem, including institutions, communication and computing network infrastructure, and access to investment resources. the ecosystem approach makes it possible to achieve the integration quality required for de (abuladze, gigauri, 2017). this implies the technological convergence concerned with di. providing of rapid and inclusive digital transformations undoubtedly requires increased government involvement. an appropriate strategy that changes political approaches in different areas in order to enrich the government role in de development, is needed (linkov, trump, poinsatte-jones, florin, 2018). the state should pay special attention to the network infrastructure and population digital skills improving (bukht, heeks, 2018). one of its obligatory areas is di processes support. it is objectively impossible to formation an integral national digital ecosystem that concerns not only the public sector and the social sphere without the government. the state policy of de development is of particular importance in developing countries, where business potential is comparatively lower than in developed ones (foster, azmeh, 2019). in addition, the government contribution to de creation should be implemented in the context of business adaptation and creation of new conditions for it; it is also related to the formation of a new technological base on a national scale (hanna, 2018) where di is of great importance. the government should help overcome the new de challenges concerned with unemployment, rapid structural changes, and social inequality. in the light of the growing speed of digital transformation, governments should invest in education and other programs to realize the benefits of de (amuso, poletti, montibello, 2019). it is also related to di, as it defines the education horizons, as well as the implementation of digital changes in the delivery of public services. in general, di is a very relevant area of de research, which is being neglected. certain works show the research importance of: it innovation diffusion determinants (lei, 2016) patterns and models that depend on the characteristics of innovations; di impact on economic growth (pradhan, arvin, nair, bennett, hall, 2019); social aspects and consequences (ali, mahdi, 2016). 3. the research objective the research objective includes: 1) detailing the essence and structural changes of the de at the national level; 2) clarification of the digital innovation features; 3) substantiation of the di role as a key driver of de development. 4. methodology in order to achieve the set research objective it is necessary, in addition to meta-analysis of previous developments in this area, to use of a number of qualitative analysis methods, including: structural, institutional, historical, comparative, functional analysis, as well as formalization method in relation to de, digital technologies, innovations and di processes. some methodological additions that will be the novelty of this study are required in order to assess the role of di as a key driver for de development. di importance substantiation is based on the fact that it is considered as one of the most critical prerequisites for de formation and development. this takes into account: 1) the need to achieve an all-encompassing nature of digitalization and the systematic application of digital technologies; 2) a hypothetical mechanism for the transition to digital models of organization due to technology diffusion. the empirical basis of the research is the experience and achievements of the developed and most successful developing countries of the world in de building, as well as world indicators of digitalization. the theoretical basis of the di role research in the de development, in addition to the main areas of economic theory, is formed by the concepts of innovation systems, the knowledge economy, digital platforms, the fourth industrial revolution, as well as various works of authorship and analytical reports of international organizations on the formation and development of de. 5. general explanations essence and structural features of de. de is considered as a new type of economy that is characterized by a wide and ubiquitous adoption of digital technologies, cyber-physical systems, intelligent solutions, network and computing technologies. it is not true to completely identify de with the internet economy, although they are strongly related, considering the internet as an infrastructure for communication between people and things. it is necessary to understand that the de is not a sector, but a new structure-forming basis that changes the mechanisms of functioning, interaction, organization models. the complex nature of de requires an explanation of its essence from the position of several approaches, namely: 1) technological approach, that is, taking into account the predominant role of baltic journal of economic studies 88 vol. 7, no. 1, 2021 digital and web technologies; 2) structural approach, that is, the new component for identification of the economic infrastructure, namely the infrastructure of network communication, data storage and processing; 3) component-resource approach, that is, taking into account the importance of data and information resources, material and technical and intellectual resources, including software; 4) functional approach, that is, taking into account new features of the economy functioning, including transactions, exchange operations, market search. naturally, in the context of these approaches, social factors are also important, including digital skills, adaptation to new organizational models through it. besides, it should be taken into account that there is a new technological and virtual-social environment in de, which is complemented by new formal and informal institutions; it affects di. the key features of de are: network character; multilateral markets; a new type of entrepreneurship; a new type of labor and a class of specialists; new institutions; targeted investment. due to the technological progress objectivity, the transition to de is irreversible, but its consequences are ambiguous. in the short term, problems will appear in the field of personal information protection (personal secret disappearance), the formation of ubiquitous behavior control systems, mass behavior manipulation, deintellectualization, job cuts, inequality level increase, the collapse of traditional models of life, family, business, digital isolation growth and other digital threats. in order to overcome these problems it is necessary to conduct a smart policy of eliminating negatives with a focus on the benefits, such as: productivity growth, the emergence of new industries, stimulation of physical barriers, free communication, knowledge processing. the obvious irreversibility of the de transition requires the development of measures aimed at the negative consequences compensation, which is also concerned with di. exactly positive forecasts for the internet development should be taken into account. thus, a steady growth in the number of the internet users is expected during 2018-2023 (bln): 2018 – 3.9, 2019 – 4.2, 2020 – 4.5, 2021 – 4.7, 2022 – 5.0, 2023 – 5.3. the growth in the number of mobile subscribers in the world will have such dynamics (bln subscribers): 2018 – 5.1, 2019 – 5.2, 2020 – 5.3, 2021– 5.5, 2022 – 5.6, 2023 – 5.7. the expected growth in the number of m2m connections will be (bln connections): 2018 – 6.1, 2019 – 7.4, 2020 – 8.9, 2021 – 10.6, 2022 – 12.5, 2023 – 14.7. global mobile m2m connections are also forecast to grow (bln connections): 2018 – 1.2, 2019 – 1.6, 2020 – 2.2, 2021 – 2.8, 2022 – 3.5, 2023 – 4.4 (cisco annual internet report (2018–2023) w hite paper, 2020). growing dynamics confirm the great potential of digital transformation in economic growth that can be estimated at up to 10% of gdp by 2025. digitalization significantly changes the models of economic organization, structure and mechanisms of the economy. this is accompanied by a reduction in the time and cost of searching for information, and reduces transaction costs. the internet and digital technologies have created new models of functioning in many areas, including: e-commerce or e-trade, e-procurement, e-auctions, e-infrastructures, e-logistics, e-agriculture, e-health, e-education, e-banking, e-insurance. consequently, new marketing mechanisms are emerging, the provision of legal, tourism, brokerage, financial services, etc., as well as crowdfunding, crowdsourcing, outsourcing, outstaffing are developing. therefore, the it sector (digital sector) growth is structurally taking place in de; it is considered as the “core” of de. it creates new jobs, infrastructure and value; and technology business develops. around this, digital platforms are formation and then a wide range of other sectors that use digital infrastructure, networks and services. the structural proportions of de are largely determined by global technological trends (in addition to the fourth industrial revolution) that are: circular economy, on-demand economy, sharing economy, internet of things, precision farming, artificial intelligence, blockchain, virtual and augmented reality, sensor networks, etc. the so-called “smart things” (wearable devices, clothes, etc.), “smart home”, “smart transport”, “smart city”, “smart jobs”, “smart grid”, “smart factories”, “smart farms”, “smart warehouses”, “smart infrastructure” are developing. one of the key structural components of de is digital platforms operating on the internet that define new mechanisms for social relations and market exchange. they are information systems connected to production chains, logistics networks, supply chains, acting as an intermediary based on remoteness, hyper-connectivity, decentralization, absence of transaction costs, as well as add intelligent components. platforms unite network communities (for example, suppliers and consumers), collect large amounts of data, regulate access to resources and activity, create media for communication, open up new opportunities for individual and joint actions, provide various operations and management procedures. the rapidly growing internet traffic and the digitalization of historically accumulated data have opened up opportunities for the new direction big data, which is associated with the use of artificial intelligence. the big data market is also a new structural element of de and it is growing rapidly (figure 1). at the same time, big data technologies are widely used in various fields: medicine, media, marketing, retail, energy, construction, mechanical engineering, etc. baltic journal of economic studies 89 vol. 7, no. 1, 2021 features of digital innovations. in general, the de opened up a large new area for innovations and gave impetus to the innovative entrepreneurship activation. the term “digital innovations” began to be widely used in scientific literature, although the explanation of their essence and features is insufficient (such as innovations in the field of production in the j. schumpeter’s theory). digital innovations include: computer technology, software, network equipment (including security), data storage and processing infrastructure (including cloud), solutions for data processing (analysis), parallel computing programs, collaboration platforms, web services, web portals, iot infrastructure, mobile applications. their main subject is transfer, processing and storage of data in digital form, therefore, innovations can be presented as a program code, mathematical methods and other algorithms, hardware devices. it should be noted that due to the fact that it is integrated with “physical” technologies, the digital innovation sphere is very wide and deals with production equipment, transport, and energy. it is the software that is key to the technical functionality of the hardware. therefore, software innovations give birth to innovations in all software intensive systems. software can be considered as both an independent subject of innovation and a subject of innovation combined with technology. a part of digital innovations is related to the provision of new information services and the creation of information products (for example, data collections). the result of digital innovations is new consumer value, speed and quality of information needs satisfaction, new data and the results of their analysis. most digital innovations can be classified as global because they can be applied in almost all countries. they can be focused on business, public administration, science, industry and agriculture, the financial sector, and various social groups and individuals. currently, a large number of innovations are in logistics, medicine, and education. compared to the “material” innovations (product and technological) that are characteristic of the industrial sphere, which j. schumpeter wrote about, digital innovations have a number of important features, such as: “intangibility”; dynamism; continuity; uncertainty of consequences; “disruptive” character; special social orientation, taking into account psychological and behavioral aspects; proximity to human practices and communication (they complement and change the existing models); basing on data; accumulation, addition and change of human experience; predominance of empiricism and heuristics (lack of a scientific basis). the diffusion of digital innovations has a special nature. in order to intensify these processes, in addition to level increase of professional training and attracting talent, it is necessary to: improve digital integration standards, including data infrastructures, and stimulate of innovative entrepreneurship linked to advanced science. the role of diffusion of innovations in digital economy development. innovation appears unevenly across time and space. therefore, the prerequisite for the transition to de is di, that is, the spread of new technologies from the places of their appearance to the places of use, and between economy sectors, between subjects, between or within social groups. di is an objective phenomenon that is the main factor in overall technological progress. this is a social, infrastructural, and geographic process, on which the scale of the innovation adoption and technological base updating depends. as a result of di, the number of users of new technologies increases; this is a prerequisite for de formation. di is realized in a variety of ways, through different channels, including commercial (market) and noncommercial (non-market) channels. j. schumpeter’s views on the diffusion of innovations among manufacturers are generally known. however, in the field of it, diffusion should also include the processes of technology promotion to the end users, since this 122 130,1 149 168,8 189,1 274,3 0 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 2020 2021 2022 r ev en ue , b ln u .s . d ol la rs years revenue, bln u.s. dollars figure 1. revenue from big data and business analytics worldwide from 2015 to 2022 (2019–2022 – forecast) source: statista baltic journal of economic studies 90 vol. 7, no. 1, 2021 forms the technology value. in this regard, the new it imitation also takes place, which in fact is also the diffusion of new technological opportunities. di accompanies digital transformation processes and ultimately forms de scope. because of this, it can be considered as a “lever” that determines the impact of the de on economic growth. therefore, intensification of di processes can be used as a way to build new growth models. it should also be noted that it is di that is largely responsible for the structural changes and leads to the emergence of new industries. that is why it is a prerequisite for the creation of new jobs and, accordingly, overcoming the de challenges concerned with the unemployment growth. di is critical for innovation stimulating through the development of certain innovations by all market participants. this corresponds to j. schumpeter’s theory, who considered di as a process of cumulative increase in the number of subjects who own and use innovation. as innovation diffuses, competition stimulates new achievements. therefore, di is closely interwoven with innovative entrepreneurship and makes it possible to identify the leaders in generating innovations. summarizing the above, it should be noted that di creates: 1) economies of scale, covering all sectors of the economy and social sphere; 2) chain effect, when changes (improvements) in some sectors cause changes in other functionally related industries; 3) cumulative effect, accumulating changes and leading to a further qualitative leap. the natural consequences of di are increase in overall productivity, intensification, and changes in price levels in several related markets. this forms the advantages of de. due to the realizing of di importance as a key driver for de development, it is necessary to support all its forms that are: commercial and non-commercial technology transfer, marketing of new it, oriented r&d. various mechanisms of cooperation in the field of technology transfer, namely consortia, associations, alliances are also important. di can be considered at the levels of the national economy, sectors, regions, enterprises, highlighting the factors corresponding to each level. the specific historical context of di should be taken into account. currently, di leads to the emergence of a future long economic development cycle by providing de formation. 6. practical recommendations based on the results of this study, a number of conceptual recommendations for di processes intensifying can be proposed in the context of constructing de. firstly, the most important prerequisite for ensuring a dynamic di is targeted government support that, among other things, should have regulatory functions. in addition to assistance in the development and implementation of innovative projects, such support can be aimed at providing di, including a wide range of innovation policy methods (targeted grant financing, creation of innovative infrastructure, tax and credit benefits, educational support, etc.), including transfer and development of new technologies, as well as business adaptation to de. this is the case not only of the it sector, but also of other economy sectors that stimulate the new technologies demand. in the field of government support, it is also proposed to form special regulatory regimes, especially for small and medium-sized businesses (as technology recipients) and universities (as technology suppliers). secondly, in order to provide the organizational basis for di, it is necessary to create special institutions (centers of transfer and commercialization of technologies, etc.), technological platforms and programs (of technological leadership and experience exchange) that are focused on it diffusion. such structures can be initiated at the national and regional levels in the context of de development strategy. cluster policy, industrial integration models, expert networks, professional communities, and centers of collective use can be supporting. from an organizational point of view, it is necessary to create new models of targeted network partnerships. it is also advisable to create a national network of laboratories for the development and adoption of new technologies, including those that deal with the same technologies in different locations. thirdly, in view of the need to ensure a balanced technological and social (human) development, education and training that create the necessary (for certain specialists and the general population) level of it skills are of key importance. therefore, it is advisable to expand the role of universities, focusing their educational activities on ensuring the di processes, for example, by special courses conducting in the framework of the large innovative projects implementation. this can be implemented on an interregional basis. in addition, universities can become the basis for the creation of the aforementioned infrastructure, technology platforms and implementation of di supporting programs. fourthly, it is necessary to support the functioning of research, innovations, entrepreneurial networks, professional communities, industry associations, expanding their role in di processes. such networks should become mechanisms of communication in the field of knowledge, practical adoption of technologies, training, etc. in this context, it is necessary to strengthen support for small and medium-sized innovative businesses, which should become a new technologies provider at the appropriate level. fifthly, using the advantages of the it, it is advisable to create special-purpose software, such as: portals for management of oriented r&d, experiments and adoption activities; knowledge management platforms in the context of technology transfer, and for the experience exchange; industry knowledge bases; portals baltic journal of economic studies 91 vol. 7, no. 1, 2021 for experts work activity management for project evaluation. technology consulting and social research can complement this. 7. conclusion thus, taking into account the essential features and structural changes caused by de, orientation of innovation processes and, accordingly, the di should be considered. separately, it is necessary to associate di with global technological trends and take into account the peculiarities of digital innovations as an object of spread. in this regard, the di structure-forming role as a key driver for de development that makes it possible to achieve a comprehensive scale of digital transformations, technological convergence and, as a result of the common digitalization benefits, has been substantiated. in order to intensify di processes, a number of conceptual recommendations has been proposed in the context of de building, including: implementation of targeted government support; creation of special technological platforms, a national network of technological laboratories; and conducting leadership and experience exchange programs, training courses for specialists to adopt innovations; creation of knowledge bases, etc. prospective studies are 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(2016). the cultural impact of diffusion of it innovation in world society. international conference on recent advances in computer systems (racs 2015), saudi arabia. atlantis press, 114–118. doi: 10.2991/racs-15.2016.19 cisco annual internet report (2018–2023). white paper (2020). cisco public. available at: https://www.cisco.com/c/en/us/solutions/collateral/executive-perspectives/annual-internet-report/whitepaper-c11-741490.pdf baltic journal of economic studies 33 vol. 6, no. 5, 2020 corresponding author: 1 lviv university of trade and economics, ukraine. e-mail: martabarna@ukr.net orcid: https://orcid.org/0000-0001-5248-9774 researcherid: g-9493-2019 2 lviv university of trade and economics, ukraine. e-mail: bbsemak@ukr.net orcid: https://orcid.org/0000-0003-2198-3790 researcherid: e-7511-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-5-33-41 main trends of marketing innovations development of international tour operating marta barna1, bohdan semak2 abstract. the article examines the role of the tourism industry in the world economy, reveals the specifics of the innovation process in tourism. the classification of innovations in tourism according to the object of their application is given. the main directions of using innovative marketing technologies in the field of tourism services are considered: release of new types of tourism product, change in the organization of production and consumption, identification and use of new markets, as well as the use of new equipment and technology. factors that accelerate the introduction of marketing innovations are studied. based on the analysis of world experience, several models of regulation of innovative tour operating activities in the eu have been identified. the first direction of formation of the model of the innovations development in tourism is the activity of stimulating innovations in the public and private sectors of tourism with the aim of their transition to a qualitatively new model of touring (similar model is used in greece, italy and portugal). the second direction is defined as the internationalization and opening of new markets (a similar model of stimulating innovative development is typical of spain, romania and partly norway). the third one includes support for entrepreneurship in the field of tourism, stimulation of entrepreneurial initiatives, opening a new tourism business (a similar model of stimulating innovation in tourism is typical of many countries in europe, australia, new zealand). the fourth direction is the promotion of the country, its tourism product, including educational and cultural ones (a similar model is typical of bulgaria, croatia, spain, turkey, thailand). the role of introduction and active development of e-business and marketing technologies is defined, especially in modern conditions. the necessity of development of the newest directions of the internet marketing in the field of tourism, including mobile, internet branding and geomarketing, is proved. the role of innovative marketing technologies as one of the central elements of modern development of activity of tourist firms, the necessity of application of computer technologies and non-standard ways of giving of the information during carrying out modern technical maintenance, are justified. the first group of such technological solutions consists of management technologies, including property management system (pms), aimed at optimization of basic technological operations. the modern hotels and chains are trying to present themselves not only in global distribution system (gds), which has become a powerful advertising tool, but also in alternative distribution system (ads), which is primarily needed by hotels focused on the business segment. global distribution system (gds) is also closely integrated into well-known booking systems such as booking.com, hrs, agoda, travelocity, expedia etc. the next group is for food and beverages inventory management technology (f&b). the group of marketing technologies includes search engine optimization measures (seo and ppc), which allow to raise the hotel site in search engine rankings, e-mail marketing as a means of maintaining constant communication with the client, marketing activities in social media (social media optimization), creation of virtual hotels or illusions of visiting a hotel (second life and virtual hotels conclusion), branding, etc. the last group of technologies are service ones, i.e. technologies for improving hotel products and services. innovative technologies are developing in the direction of ensuring sustainable development (greening of hotel services and activities), inclusion in traditional technological operations of innovative components: electronic concierge terminals, access to hotel services via mobile devices, maximizing internet access, etc. based on the analysis of the activities of large tour operators, regional differences have been identified in turkey, greece, croatia, spain, austria, norway and france. baltic journal of economic studies 34 vol. 6, no. 5, 2020 it is proved that marketing innovations in tourism have a qualitative novelty, which affects the promising areas of tourism development, improvement of existing tourism products, improving the image and competitiveness of the tourism industry. based on the study, it is generalized that the role of marketing innovations in international tourism has been growing every year, and it has become especially relevant in the conditions of the covid-19 crisis. for travel companies, the effect of marketing innovation can be expressed in the qualitatively new changes in the tourism industry, improving the efficiency of tourism infrastructure, management of sustainable operation and development of tourism in the country and the formation, positioning and consumption of tourism services, improving the image and competitiveness of travel companies. key words: international tourism, innovations in tourism, model of tourism development, it-tour operating, е-tourism, tour operating in the eu countries. jel classification: l83, o31, g14 1. introduction at the present stage of development of economic relations, globalization processes have covered all spheres of the world economy, including the tourism industry. today, tourism has become a “phenomenon of the 21st century” because it is one of the most dynamic and profitable sectors of the world economy (davydova, 2015). the global nature of tourism and the priority in the world economy are evidenced by significant revenues from tourism, which account for 8% of world exports and 30% of international trade in services, the annual growth of world tourist flows is by 4-5% (davydova, 2015). certainly, 2020 should not be taken into account as a year of a special crisis related to the covid-19 pandemic, which suspended the activities of the tourism industry for almost 4 months through quarantine measures. by their experience, the most successful tourism innovators prove that the application of innovations in tourism is necessary in the competition, and in conditions of instability, it should be perceived as a condition for survival. taking into account the world experience of application of innovative technologies in tourism, it would be expedient to use them for development of the ukrainian tourism industry to revive development of branch that will lead to increase of quality of rendering of tourism services. modern marketing tools are an integral part of the set of tools for managing the development of tourism enterprises, which is one of the priority industries today and is developing dynamically in most countries. the transition of society from information technology to digital, and, at the same time, the use of artificial intelligence, has opened up new opportunities in solving many management problems in this area, which require sufficient, reliable and relevant information to make informed decisions. first of all, it concerns development of tourism services assortment, for which it is extremely important to assess the state of the market correctly, to clarify the structure of consumer needs and anticipate the possibility of their existing and potential changes in the strategic perspective (halyuk, stadnyk, 2018). ukraine has unique historical monuments and natural resources that are interesting for the development of tourism. that is why it is so important to search for effective mechanisms for the development of the tourism industry constantly, using modern marketing technologies for this purpose, which are an integral part of information support of management decisions. the rapid development of digital technologies destroys traditional marketing methods of influencing consumer behavior, making them more personalized and effective. business entities have the opportunity to receive the necessary information faster and more accurately, as well as to distribute the created tourism product through websites, social media, e-mail, contextual advertising for the internet audience. the use of mobile applications to create virtual reality and form a route via qr-codes, provided their proper use, increase interest in the developed tourism products, saturate them with content that meets the needs of target audiences. all these points have a positive effect on the formation of the tourist potential of ukraine, the promotion of the tourism products from its various regions on the world tourism market (halyuk, stadnyk, 2018). 2. methodology of research modern tourism as a field that meets the needs of people who travel, has become an industry, which is a component of the world economy, a powerful economic complex of national economies, which operates in close contact with the environment, economic system, society as a whole. the tourism industry produces, sells and consumes services related to the organization of trips for people who are temporarily away from their place of permanent residence and do not carry out paid activities in the place of stay. the growth of the competitiveness of enterprises involved in tourism largely depends on their innovative activity. to ensure the proper functioning, travel baltic journal of economic studies 35 vol. 6, no. 5, 2020 companies must constantly use innovations both to combat crises and to develop for surviving in a market of free competition. innovative processes taking place in tourism affect not only travel companies directly, but also a large number of infrastructure organizations (oklander, 2017). among the scientists who study innovation in tourism, we can identify (hjalager, 2010) who has defined five types of innovation: product, process, marketing, managerial, institutional. s. carlisle et al. divide innovations into: products, production methods, sources of supply, new markets and new means of business organization (carlisle s., et al., 2013). according to the classification proposed by i. booyens, c.m. rogerson, there are seven types of innovation in tourism: product, marketing, environmental, organizational, process, structural, social (booyens, rogerson, 2016). some researchers (booyens, rogerson, 2016), jacob m., tintoré j., aguilo e. et al. (2003) in their research adhere to the definition of innovations in tourism and their classification according to the unified international standard for innovation statistics – oslo manual: guidelines for collecting and interpreting innovation data (unw to) (2012), which was developed to study the innovative development of a united europe by experts from the organization for economic co-operation and development (oecd) together with eurostat. this methodological document contains recommendations for the collection and analysis of data on innovation, a single system of concepts, as well as it identifies different types of innovation and related processes, the methodology for measuring them to ensure compliance with indicators (zhukovych, 2017). the development of measures to increase the innovative activity of enterprises in the tourism industry involves identifying the characteristics of innovations and assessing the impact of their implementation. based on the analysis of the views of scientists, the authors have identified the following features of innovations in the tourism industry (zhukovych, 2017): 1. innovations in tourism are characterized by a service nature, they are aimed at improving interaction with the consumer and the maximum satisfaction of customer requests and preferences, which is one of the most important motivating factors for implementing innovation. 2. there is a direct connection between producers and consumers of tourism services, so the quality of service staff becomes an important factor in the implementation of successful innovative activity. 3. in the tourism industry, consumers are involved in the process of providing services, and as a result, the process of production and consumption of services occurs simultaneously. 4. most of the innovations used in the tourism industry are borrowed from other activities and adapted to the field of tourism (for example, computer and internet technologies, medical and health improvement equipment, passenger transportation, etc.). 5. insecurity of innovations by patents and licenses, taking into account their interactivity, makes it possible to copy them from competitors. 6. innovations in tourism have an intangible component aimed at improving the interaction between producer and consumer. 7. innovations in the field of tourism relate not only to tourism companies directly, but also to a wide range of infrastructure organizations. 8. the sign of novelty on a global scale, the so-called radical novelty, is not key in defining innovation in tourism. novelty is determined within the specific company that uses it. various factors have a stimulating effect on marketing innovations in tourism (table 1). the use of innovative marketing technologies in the field of tourism services, as it is noted in the work of miles j., is developing in several areas. the first area is the release of new types of tourism product. the second area is a change in the organization of production and consumption (application of advanced methods of marketing and management). the third area is the identification and use of new markets, as well as the use of new equipment and technology. it is the latter area that deserves special table 1 factors accelerating the introduction of marketing innovations in tourism group of factors directions for accelerating innovation impact economic – development of competition in the tourism market; – high level of integration of tourism into the world economic system; – the emergence of new consumer requirements for the quality of the tourism product; – the desire of companies to strengthen their market positioning. technological – development of information technologies, their accelerated use in tourism and related industries; – expansion of horizontal information flows. legal – support for tourism development by the authorities; – promotion of the state concept of tourism development; – state laws, legal acts that determine the economic and political principles of operation of tourism enterprises. source: compiled on the basis of (bodnaruk, 2019) baltic journal of economic studies 36 vol. 6, no. 5, 2020 attention, because the use of ict has a significant effect on the activities of tourism enterprises (miles, 2011). 3. results and discussion 3.1. formation of models for regulating the innovative activities of tour operating in the eu it is expedient to assess the world experience in the application of innovative technologies by the levels of tourism management – national, regional, the level of specific tourist destinations and enterprises or their associations, as well as by different sectors of the tourism market. one of the countries for the most effective regulation of technological initiatives in the field of tourism is norway, where in the early 2000s national documents have been developed, including the action plan for the tourism industry, which emphasizes the need for government initiatives related to this field of economics, including innovation; government participation in the innovative development of tourism at the local level, especially in rural communities; the need to introduce innovative products and processes to achieve the goals of sustainable development and strengthen the competitiveness of local destinations. the implementation of measures within these documents provided for the achievement of three main tasks: the creation of innovative tourism infrastructure, stimulating innovation in small and medium enterprises, financing and support. the main innovation expectations were placed on private business, while the state took on the function of initiator and founder of cooperation between representatives of private business and local authorities. such a model of stimulating innovation in tourism is typical of many countries in europe, australia and new zealand. one of the most successful european projects of state intervention in the processes of innovative development of tourism can be considered the establishment of the state-owned company for the management of innovation and tourism technologies (segittur) in spain in february 2012 (unwto (2012). the first area of formation of models of regulation of tour operating development can be formed as follows: innovation (r + d + i), which means activity on stimulation of innovations in public and private sectors of tourism for the purpose of their transition to qualitatively new model of tourism (innovation in tourism: a monograph, 2016). currently, several projects are being implemented in this area, including: 1. project to create and support regional tourism clusters in andalusia, galicia, castile, extremadura, basque country, rural spain, balearic and canary islands, madrid, granada, ibiza and – thematic – equestrian, sea, golf, rural, ecological, wine, urban, culinary, educational, emotional tourism. in addition, the project forms clusters to support tourists with disabilities, hotel clusters, associations of enterprises engaged in tourism research (the community innovation survey, 2014). 2. the project “tourism_it”, which has been scheduled to start in early 2019, within this project creates the european information portal for business and tourism, in the development of which holdings planetmedia, gdtur and easpd participate (innovation in tourism: a monograph, 2016). the portal will contain all information on the development of tourism in the eu member states, including the peculiarities of the introduction of tourism business, development of business plans, modern resource management technologies. innovative tools will also be developed to support the evolvement of the tourism companies' strategies; interactive management with business structures in europe. the project has released a catalog of useful tools and sites. the main goal of the project is to increase the competitiveness and efficiency of the european tourism companies, especially small and medium-sized ones, by facilitating access to information through the use of new technologies and optimizing interaction. 3. thinktur project is a technological platform for users to share knowledge and practical experience of using innovative technologies to solve applied problems. it is designed not only for the eu users, but also for those from the countries across europe (unwto, 2012). 4. the projects social tourism european exchanges platform and europe senior tourism are aimed at overcoming the seasonality factor in tourism through technologies to attract certain target segments in the off-season: third-age tourists, youth, people with disabilities and large families (the community innovation survey, 2014). the second area of formation of models of tourism business support and development is defined as internationalization, which is opening of new markets for a tourist product, increasing of its quality and competitiveness through establishment of representations in the countries-suppliers of tourists, rendering of consulting services for foreign businessmen, sale of own technologies and search for the new ones abroad. the third area, in which it is possible to form models for the development of the tourism business in general and tour operating, is the support of entrepreneurship in the field of tourism, stimulation of entrepreneurial initiatives, opening a new tourism business. examples of two projects can be provided in this area. one of them – for young entrepreneurs – includes a set of measures to stimulate the use of innovative business models to increase the profitability and competitiveness of the tourism sector, to support the implementation of innovative projects developed by young people, and provides loans at 5.05%, two-year tax holidays, 5 years of depreciation. baltic journal of economic studies 37 vol. 6, no. 5, 2020 the second project – emprendetur – aims to help tourism companies in the acquisition of innovative developments or results of intellectual work and provides low lending rates for loans related to the development of innovative technologies in tourism. also, within the framework of this project, entrepreneurs can purchase the results of marketing research related to technological innovations (innovation in tourism: a monograph, 2016). the fourth area of forming a model of tourism business development, with the help of the state support, is the promotion of the country, its tourism product, including educational and cultural ones. as a further example, the following existing projects can be cited (innovation in tourism: a monograph, 2016): 1. spain’s advertising campaign (jointly with the spanish institute of tourism) aims to promote spain in the international market through television, in the press and online, including in 24 languages in 32 countries. 2. the travel portal www.spain.info, turespaña, makes the most of the advantages of new information technologies for the development of tourism and marketing of the country. the portal is characterized by practical navigation (simple and intuitive), it offers more than 400,000 different pages of content with more than 18,000 photos, based on specific motivation of tourists; the site contains various interactive tools, it is functional, allowing users to share consulting content in communities and social media like twitter or facebook. using the website, visitors can plan all aspects of the trip, have access to detailed and up-to-date information about accommodation (hotels, boarding houses, campsites, cottages, etc.), links to interesting sites (museums, attractions, resorts, golf courses, ski resorts) or services (transport, streets, tourist offices, embassies). the portal www.spain.info also offers information on flight statuses and the possibility to rent a vehicle. 3. interactive digital brochures for modern tablet equipment, which are increasingly used by tourists (education in the country, the culture of the country). 3.2. formation of a regional tourism system through the innovative development of destinations and e-destinations the next level of application of innovative technologies in tourism is the level of destination. since 2005, the european scientists have been studying the issue of forming a certain level of development of innovative industry systems within the geographical boundaries of a tourism destination. without underestimating the importance of national or regional innovation systems in tourism, the researchers noted that within a certain territorial contour private enterprises, in order to strengthen their market positions, seek to constantly update their product, which leads to closer interac tions in the industry system, the formation of a single economic mechanism from the enterprises located nearby. this allowed the norwegian researcher a. flagestad to suggest that the destination with its borders should be classified as a category of “local innovation system” (united nations conference, 2019). in 2010, a group of the european scientists analyzed ten northern european destinations (ski resort beitostølen, norwat; santa claus village, finland; the locality åre, sweden; tourism clusters the opplev oppdal company, norway; the icehotel corporation, sweden; the siida nature initiative, finland (united nations conference, 2019); the roskilde festival and the sea trout funen, denmark; whale watching and white water rafting; island) and proved that each of the destinations can function on its own as an innovation system, within which a set of regional business initiatives were mobilized (ilyina, 2014). world tourism organization ((wtо). this innovation cluster has the following features (united nations conference, 2019): – a large number of participants-entrepreneurs of different sizes and financial capacity, government agencies and non-governmental organizations; – significant diversification and density of relations between the participants of the innovation process within one destination, including technological, informational, financial relations, joint social and environmental initiatives. the very latest forms of communication make participants feel responsible, support long-term cooperation; – the presence of innovative enterprises with powerful financial and intellectual resources that develop or adapt innovations to tourism or to the internal conditions of the destination; – the presence of mobilizing players, which contribute to the growth of the system and its stabilization. in different destinations, mobilizing players can be either strong stakeholders (hotels or hotel chains, large tour operators or even companies that are not producers of basic goods and services), or non-governmental organizations as coordinators of the local innovation process; – open access to technology, willingness of successful players to share resources and knowledge during specifically organized seminars and workshops. in successful innovation systems, new entrants are invited not only to be involved in the process, but also to fill gaps in the value chain; – the presence of fierce competition for the use of resources and for customers while cooperating on marketing, promotion, other common tasks; maximum assistance of the public sector in the implementation of innovation initiatives. at the same time, researchers stressed the lack of formal public policy, weak links with the education sector, research and development institutions; – entering the global innovation process, which is manifested not only in the inclusion of international reservation systems, sales, etc., but also the establishment of various links with other communities; baltic journal of economic studies 38 vol. 6, no. 5, 2020 – strengthening intersectoral cooperation within the destination. recently, there have also been studies that analyze the so-called e-destinations, i.e. the presentation of real destinations on the world wide web, which can also be considered an innovative technology in tourism. according to the rating compiled on the basis of empirical research by d. bukhalis and r. wagner, who studied internet projections of 30 destinations of different levels (countries and settlements) and their impact on tourists at different stages of decision-making and consumption of tourism products, thailand has the highest level and efficiency of application of relevant technologies, followed by las vegas, montreal, vancouver, hong kong, puerto rico, australia, norway, great britain, melbourne (the community innovation survey, 2014). similar studies were conducted by the eurobank in greece, the experts of which analyzed the relationships between the representation of the coastal destinations of southern europe and turkey on the internet and the distribution of tourist flow between these destinations. according to the results of the research, it was determined that the probability of choosing a destination correlated with the number of its pages on the world wide web and other forms of presentation or mentioning on the internet. accordingly, it was determined that the probability of choosing greece was 5.1%, italy – 12.7%, spain – 10.5%, turkey – 6.4%, portugal 5.3%, bulgaria – 4.6%, romania – 4.5%. thus, the greater popularity of italy compared to spain is due to the fact that the number of tourist web pages of italian destinations is three times higher than the number of the spanish ones (world travel & tourism council, 2020). competition also determines new forms of destination representation. in addition to individual web pages, communication with special internet intermediaries is also important. they appear in the space of the world wide web every year and challenge traditional distributors, such as expedia and lastminute.com. nowadays, those who choose a certain destination for their vacation can turn to the auction sites kelkoo and kayak.com, where the prices of other intermediaries are accumulated; forecast sites such as farecast.com; advisory sites tripadvisor. com, igougo.com, wayn.com (european travel commission) all this requires from destinations flexible and intelligent solutions that will allow customers to plan their trips with minimal wishes, choosing from a wide variety of options. at the level of destinations and individual tourism enterprises, there is also a great need for metadata scree ning. thus, in search of a hotel in any european capital, potential tourists are offered a large number of options. to facilitate this search, special intermediaries such as expedia.com, booking.com are used, they reduce the number of pages viewed. now, "semantic technology " and the semantic web are being replaced by the next wave of the internet technologies, which will optimize the search (world tourism organization (wtо); chernenko, 2016). the research by d. bukhalis and r . wagner also proves that the most promising technologies for the development of destinations are a combination of social networking, location technologies and mobile communications, the so-called solomo, and integrated technology of social media and booking systems, as well as all possible options of search optimization (solomo, 2020). if we consider innovative technologies at the level of specific enterprises in the tourism sector, it becomes clear that they can be divided by their behavioral features, the use of such technologies causes changes in attitudes towards tourists / guests, intermediaries / partners, nature, etc. and forms behavioral standards of employees and certain ideology of the enterprise, technical implementation of which involves updating software, hardware and systems. both types of innovations are interconnected, and their application requires a wide range of knowledge and skills, rapid adaptation to changes in the technological environment. 3.3. development of the information marketing innovations of e-tourism the creation of new tourism products, focused on the european standards of service, also requires the use of modern means of consumer interest in their purchase. modern technologies of marketing activity solve these problems successfully, allowing to be in touch with the consumers, to track their priorities, to form the most interesting proposals. it is important to use the capabilities of these technologies professionally, which means not only to encourage potential consumers to purchase a tour, but also to provide appropriate information support for the implementation of this tour. this will form a positive image of the company, customer loyalty, and, consequently, profit growth. according to most modern researchers, the most powerful providers of innovative technologies in the field of tourism are hotels and hotel groups, so let us consider their technological solutions in detail. the first group of technological e-tourism solutions consists of management technologies, including property management system (pms), aimed at streamlining basic technological operations that use service-oriented architecture and can be adapted to the specialization of the institution. all the systems are extremely customer-oriented, well integrated with other software solutions, they automate all aspects of the hotels operational work from secure payment processing to business planning, control of goods flow, services and online booking baltic journal of economic studies 39 vol. 6, no. 5, 2020 processes, remote registration, etc. opera fidelio and epitome pms are the most common systems in the world today, but market experts believe that the process of expansion and modernization will lead to the diversification of such systems, mainly due to the socalled saas-technologies based on subscription. these technological platforms are closely integrated with marketing, especially with distribution technologies in electronic booking systems, which allow online management of the booking process in various sales channels. so, the modern hotels and chains are trying to present themselves not only in global distribution system (gds), which has become a powerful adver tising tool, but also in alternative distribution system (ads), which is primarily needed by hotels focused on the business segment. global distribution system (gds) is also closely integrated into well-known booking systems such as booking.com, hrs, agoda, travelocity, expedia, etc. no other advertising channel compares in terms of cost/effectiveness (savitska, 2017). the second group of e-tourism information technologies includes customer relationship management (crm) and consumer experience (seo), which focus all hotel systems on the fullest satisfaction of consumers and effective communication with them. the third group of innovative marketing technologies consists of human resource management technologies, including through certain software, such as rex room expeditor to manage hotel staff using apple iphone/ipod mobile devices and the development and implementation of behavioral standards for staff. the fourth group of information technologies that actively influence the development of e-tourism is the food and beverage inventory management technologies (f&b). thus, in 2013, grand hotel europe in st. petersburg began to use the iris f&b application from smarteq and support other similar applications, which allowed customers to use mobile devices instead of the traditional menu. the group of marketing technologies includes search engine optimization measures (seo and ppc), which allow to raise the hotel site in search engine rankings, e-mail marketing as a means of maintaining constant communication with the client, marketing activities in social media (social media optimization), creation of virtual hotels or illusions of visiting a hotel (second life and virtual hotel conclusion), branding (krykhovetsky, 2011). the fifth group of technologies that we have singled out is information service technologies, i.e. technologies for improving hotel products and services. the innovations are developed in the direction of sustainable development (greening of hotel services and activities), inclusion in traditional technological operations of innovative components: displacement of traditional concierges by electronic terminals, access to hotel services via mobile devices, maximizing internet access etc. 3.4. innovative tour operating technologies one of the main directions of international tourism business development is the development of innovative tour operating. it is represented by powerful enterprises, which, due to the wholesale purchase of certain services of manufacturers from different destinations and transport companies, assume the “packaging” of a complete standardized tourist product and the financial risks for its implementation. the current state of the tourism market imposes certain requirements on tour operators, including the mandatory presence of a brand that is easily recognizable, the opportunity for tourists to buy a travel package in “one step”, easy access to specially built agency networks. today, despite the trend towards individualization of demand, a third of traveling europeans and 80% of ukrainians buy package tours from tour operators. however, there are also regional differences: in turkey, greece, croatia, spain, the vast majority of tours sold are packages of tour operators, in austria, norway, france these are only up to 30% (bodnaruk, 2019). the largest tour operators in europe are tui, thomas cook, kuoni, but there are still many companies nationwide. european commission research shows that tour operators now use innovative technologies mainly to maintain electronic communication with travel agencies, reduce their information processing costs, increase the speed of information transfer, create their own booking systems and integrate with existing ones, manage revenues and implement dynamic pricing, quickly form tours, track booking status and productivity of travel agents and other sales channels. as for the internet technologies, tour operators use them to adapt elements of the marketing complex to market conditions, attract niche markets, develop a differentiated tourism product, reduce costs for other types of advertising, better understanding with customers (snyder, witell, gustafsson et. al., 2016). let us consider the main trends in the application of innovative technologies in the tour operating sector of europe. the vertical integration and consolidation of the market, which began among tour operators in the 1960s in the uk and now continues in germany, the nordic countries and the benelux countries, france, italy and spain, has gradually led to the accumulation of funds needed for innovation. tourism market operators are constantly updating their own brands, using various organizational management solutions for integration. in the early 2000s, integration took place through the interpenetration of capital, the acquisition of small airlines operating charter flights, or the creation of its own networks of travel agents. large tour operators have also entered the accommodation market when buying 10-15% in hotels in popular resorts. the market is growing, small players are mastering niche tourism. for large integrated baltic journal of economic studies 40 vol. 6, no. 5, 2020 tour operators, dependence on the introduction of innovative technologies is increasing. thus, in 2010, the ceo of the largest european tour operator tui noted that the competitiveness of the tour operator depended on continuity of training, development of flexible technology platforms, business management culture, introduction of technologies to transfer information to the client online, offline and via social media, facilitation of the process of choosing and buying a tour, renting, developing new sales channels and working with old ones, technical support for tourists and agents in real time, based on the concept of marketing, ensuring customer loyalty. the research of the european commission, including the small business support portal, shows that global small and medium-sized businesses in europe are traditionally using technologies to develop websites and purchase optimized software such as tqm, crm, scm (brahmbhatt, 2014). exacerbating the current situation of small travel agents and operatirs facing a serious threat of extinction, large travel companies have responded to the opportunities offered by the internet and developed their own e-commerce and integration programs for global reservation and distribution networks that connect travel agents and suppliers. however, it should be noted that most small and medium-sized enterprises in the field of tourism have traditionally avoided rather expensive electronic distribution networks and created their own online offices to advertise goods and services. to overcome this situation, the project of the european commission ict & tourism business initiative” was aimed at covering such activities as promoting the use of modern technologies within the technological chains of tourism and providing assistance to small and medium-sized enterprises in tourism at different stages of decision-making. 4. conclusions the key basis for the development of the tourism industry is the creation of a competitive tourism product in the national and international markets that can best meet the needs of tourism, which is impossible without innovation. innovations are heterogeneous, there are significant differences between each other. based on the analysis of world experience, several models of regulation of innovative tour operating activities in the eu have been identified. the first direction of formation of the model of the innovations development in tourism is the activity of supporting innovations in the public and private sectors of tourism with the aim of their transition to a qualitatively new model of tour operating (a similar model is used in greece, italy and portugal). the second direction is defined as the internationalization and opening of new markets (a similar model of stimulating innovative development is tyical of spain, romania and partly norway). the third one includes support for entrepreneurship in the field of tourism, stimulation of entrepreneurial initiatives, opening a new tourism business (a similar model of stimulating innovation in tourism is typical of many countries in europe, australia, new zealand). the fourth direction is the promotion of the country, its tourism product, including educational and cultural ones (a similar model is typical of bulgaria, croatia, spain, turkey, thailand). the role of innovative marketing technologies has significantly strengthened and become one of the central elements of modern development of travel agencies. there are five groups of technologies that enhance the development of tourism business and tour operating. the first group of technologies includes management technologies aimed at streamlining basic technological operations. the second group of e-tourism information technologies includes customer base management (crm) and consumer experience (seo). the third group of innovative marketing technologies is formed by human resource management technologies. the next, fourth, group of information technologies that actively influence the development of e-tourism is the food and beverage inventory management technology (f&b). the fifth group of technologies is information service technologies, i.e. technologies of improvement of products and services in hotels. based on the analysis of the activities of large tour operators, regional differences have been identified in turkey, greece, croatia, spain, austria, norway and france. it is proved that marketing innovations in tourism have a qualitative novelty, which affects the promising areas of tourism development, improvement of existing tourism products, improving the image and competitiveness of the tourism industry. based on the study, it is generalized that the role 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(2003). innovation in the tourism sector: results from a pilot study in the balearic islands. tourism. economics, vol. 9, no. 3, pp. 279–295. the community innovation survey (2014). methodological recommendations. available at: http://epp.eurostat.ec.europa.eu/cache/ity_sdds/en/inn_esms.htm#stat_pres united nations conference on trade and development. information economy report 2019. the development perspective. available at: http://www.unctad.org world travel & tourism council (2020). available at: http://www.wttc.org baltic journal of economic studies 135 vol. 2, no. 2, 2016 corresponding author: 1 department of finance and credit, yurii fedkovich chernivtsy national university. e-mail: v.semenyuk@chnu.edu.ua pragmatics of using a modified capm model for estimating cost of equity on emerging markets vitaliy semenyuk1 yurii fedkovich chernivtsy national university, ukraine abstract. the aim of the work is to forming pragmatic recommendations for the development and implementation the modified capm model in the process of estimating the equity value on emerging markets. original capm model allows estimating the cost of equity on the developed capital markets. at the same time it requires the information received on the market data basis. but, as show recent empirical research, the classical model does not always produce acceptable results of the equity estimation. in addition, capm model in its classical form can’t be used to estimate the cost of equity for countries with emerging markets. this is due with lower efficiency in emerging markets, with lower level of liquidity and capitalization, which makes the information obtained from these markets not entirely reliable. therefore in practice are increasingly using different modification capm models, that allow consider for more specific factors which affect the cost of equity. these factors, which are not considered in the classical capm model, include the size of the corporation and country risk. the first factor is actual for developed and emerging markets and needed to account during the equity estimation and modification the capm model. country risk is associated with differences and peculiarities of the economies different countries and in the first place should be taken into account when estimating the cost of equity in emerging capital markets, which are considered by investors as more risky for investment. this factor should also be taken into account in estimating the cost of equity. methodology in the process of constructing a modified capm model, theoretical and methodological provisions were used, which are set out in the work r. banz, g. bekaert, m. goedhart, r. grabowski, r. grinold, d. vessels, a. damodaran, m. dempsey, j. zhang, r. ibbotson, p. kaplan, t. koller, k. kroner, l. kruschwitz, m. long, a. lofler, g. mandl, m. miller, f. modilyani, k. nunes, d. peterson, s. pratt, l. siegel, y. fama, p. fernandes, k. harvey, d. harrington, s. hassett. results in result of research received a modified capm model, which can be used to determine the cost of equity in developed and emerging capital markets. practical implications received model in result of research may have practical use in the process of estimating the equity value and designed to determine the rate of return required by investors for investing money in equity of corporations on emerging markets. value/originality described modified capm model takes into account the effect of a greater number of factors that determine the cost of capital on emerging markets and ensures a correct estimate of the equity value in absences of reliable information from emerging markets. key words: equity, build-up method, risk-free rate, industry risk premium, equity risk premium, country risk premium, idiosyncratic risk, fundamental measures. jel classification: g10, g11, g12, g13, g15 1. introduction in the modern corporate finances, the numerous approaches to the evaluation of the stock capital cost. the carm model which is widely used by financial analysts in the whole world is the most distributed model. but by the results of recent empirical researches (dempsey, 2013; grabowski, 2015; fernandez, 2015), in practice the classic capm often give not quite correct results. in connection with this question it is updated modifications to better taking into account factors that affect the cost of equity. especially this problem is actual for countries which develop the capital market, and are not always objective market information available. by the way it’s important groundings the approaches for practical using of formed using. in connection with this, the forming of practical recommendations for development and implementation of modified model in evaluation of capm capital assets in the process of assessing the equity value in emerging markets (emerging markets), is the main purpose of the job. for established purpose reaching it’s necessary to give the characteristics to the main components of capm, identify opportunities for baltic journal of economic studies 136 vol. 2, no. 2, 2016 its improvement based on recent research to substantiate the specifics of using the modified model of equity capital evaluation for emerging markets. 2. characteristic of components in original capm model stock capital cost is the important criterion which defines the corporate financial possibilities by the personal capital attraction. from the position of modern corporate finances, the stock capital cost is a profitability, which requires shareholders for investing in the acquisition of shares of a particular corporation. most of the dominant concepts of today the cost of equity are based on the relationship of risk and return. the basis of this relationship is a simple principle: the more risk associated with owning a certain action, the higher profitability will require shareholders on their investment, and accordingly, the cost of equity will increase. in fact, the cost of equity reflects the profitability that an investor expects to receive as a result of an investment of money in a corporation. in assessing, the value of equity need to consider the risks associated with investing in the capital stock of a corporation. all existing methods of stock capital cost evaluation (re) have common structure which consists of non-risk rate of interest (rf) and additional premium for risk (risk premium rp)  – a payment for the risks associated with the shares of the particular corporation. the basic structure allows evaluating stock capital cost may be written in a follow way: re=rf+rp. (1) all existing models differ from each other with approaches, which are used for premium calculation for stock capital risk. capital assets pricing model (carm) is one of the most distributed method in stock capital cost evaluation which allows considering the interconnection of risk and profitability. the classic capm equation is as follows (sharpe, 1964): re=rf+βe×(rm-rf) (2) or re=rf+βe×rpm. (3) the main components of carm model is the nonrisk rate of interest (rf)  – is the profitability rate by the non-risk securities (usually us government securities); beta coefficient (βe)  – the level of riskiness of the stock compared to market risk; market yield securities (rm)  – expected return on a diversified portfolio of common shares. let's move to the more detailed characterization of the individual components in the capm. the basic element of the model is the risk-free interest rate. risk-free interest rate is (rf) on securities, for which the expected return is the same as the actual, such securities are considered riskfree. as the risk-free rate yu. fama (fama, 1967) which proposes to use the rate on long-term us government bonds. in practice, to assess the value of the share capital as a risk-free rate of return is selected rate for 10 or 20 years us treasury bonds (t-bonds), to assess the shortterm investments can be used short-term interest rate on treasury bonds (t-bills). another important component of the model is the capm is the equity risk premium of the share capital (erp). very often in the scientific and practical literature uses the term market risk premium (market rpm). these two categories are interchangeable used to characterize the level of extra yield over the yield of risk-free securities, which investors require a fee for the risk of investing in the market portfolio of common stocks that are included in the base of the stock index. the market risk premium (rpm) in generalized form defined as: rpm=rm-rf. (4) among the theorists and practitioners of corporate finance, there is no common point of view on the methodology for calculating the market risk premium of the share capital. dzh. ravi and v. dzheniu (ravi, zhenyu, 1996) propose to use to assess the market risk premium of equity spread default model (default spread model, dsm). at the heart of this model is the assumption that the longterm average risk premium for equity is a constant, and the reason for deviation from this value is this long-term average volatility of default spread. s. hasset (hasset 2010) contributed to the development of the methodology for calculating the market risk premium; given that on the basis of empirical research, he identified a link between the risk-free interest rate, yield s & p500, real interest rates and real gdp growth relative to s & p500 index over time. during the process of a. damodarian (damodaran, 2010) determination the potential market risk premium first finds the discount rate, which compares the current value of the s & p500 index from the cash flow distribution estimates in future periods. then he takes a rate of return on 10 treasury bonds of the us government per year. in a way the market premium for stock capital risk which may be used in the process of the share capital evaluation. the last and important component of original capm model is the beta coefficient. beta acts as the indicator of market system risk evaluation. systemic risk affects all corporations regardless of size and industry. beta (β) – this is the regression coefficient between the yield of individual stocks and the overall market (stock index). beta ratio serves as a measure of systemic risk, its economic essence lies in the fact those different corporations differently amenable to the influence of the same type of risk. if the coefficient is β<1, so the corporation is amenable to risk, to a lesser extent, if β<1, then the corporations are more risky, the market average value of this ratio is 1, which is equivalent to the average market risk level. it should be noted that in the original capm beta (.beta.) considers only the systematic (market) risk assets, this type of risk can be minimized by diversification. baltic journal of economic studies 137 vol. 2, no. 2, 2016 the beta (β) measures the risk of individual stock relative to the market index, which acts a kind of measure of the market. in this connection, depending on the industryspecific shares of the corporation or the other may be more or less sensitive to the volatility of the market index, which finds its expression in greater or lesser value of the beta coefficient (β). the beta is more for the corporations, the demand for products, which are more dependent on market conditions. conversely, if the production corporation have a stable purchasing power, the shares owned by such corporations lower coefficient beta. in the classic version of the beta coefficient is measured on the basis of stock market data, in particular the volatility of individual security returns and the volatility of the stock market (stock index) as a whole. however, for countries with emerging market capital to use this option for calculating the beta coefficient is not always available, because very often the markets are low liquid and do not reflect the real price situation. one of the more affordable ways to measure the beta coefficient for the countries with developing capital markets  – is to use for this purpose the fundamental indicators of the corporation. a . damodaran (damodaran, 2010) believes that the beta (β) the corporation is determined by the following three factors: the type of activity, the level of operating leverage, financial leverage. the level of operating leverage (operating leverage, ol (lev.)) the corporation is determined by the structure of its costs and is expressed as a ratio between fixed and variable costs. the corporation, in the structure where there is a significant proportion of the costs of fixed costs, has a higher level of operating leverage, resulting in greater volatility in operating profit (operating income, oi.), and a larger beta coefficient (β). the level of financial leverage (financial leverage, f (lev.)) the corporation is determined by the capital structure and is expressed as a ratio between equity and borrowed capital (d/e). the corporation, in which the structure more capital share of debt capital, has a higher level of financial leverage and, as a result, the higher the beta (β). the beta characterizes operating riskiness scope of the corporation depends on the risk associated with financial leverage. financial leverage multiplying the risks associated with the corporation's operations, thus increasing the beta ratio. in the context of the relationship of capital structure (financial leverage) and the beta coefficient is sufficiently valuable r. hamady equation (hamada 1972), which in a. damodarana (damodaran, 2010) has a number of modifications: βl=βu×(1+(1-t)×d/e) (5) – basic modification when βd ratio = 0 (borrowed capital risk-free); βl=βu×(1+d/e) (6)  – a modification which does not take into account the tax effect; βl=βu×(1+(1-t)×d/e)-βd×(1-t)×d/e) (7)  – modification, when the coefficient β_d>0 despite the significant prevalence in practice, the use of a base modification r . hamady equation, it has several drawbacks, since it is based on the provisions of the second law of m. miller and f. mollyani. he involves risk-free nature of corporate debt (i.e., borrowed capital is attracted by the risk-free interest rate) the absence of transaction costs and the availability of taxation. in reality, the borrowed capital is not risk-free, so the neglect of this factor can lead to some inaccuracies in the calculations. from our point of view, the process of evaluating the equity value of more pragmatic in terms of developing the capital market to determine the coefficient betaβl. r . hamady is precisely the equation, since it allows you to take into account the systematic risk inherent to βu corporations whose securities are traded on the capital market development and specific financial risk a private corporation, which is expressed in the d/e ratio. in this regard, the influence of the proportion of contingent define the kind of corporate activity stage 1 to find the similar corporates which participate such type activity. their stocks, which are actual on the developed market capital. to calculate the beta with the help, which it may be, found the average. 𝛽𝛽𝑢𝑢 = 𝛽𝛽𝑎𝑎/(1 + (1 − 𝑡𝑡) × (𝐷𝐷/𝐸𝐸𝑎𝑎) rate average beta coefficient excluding debt burden for this type (𝛽𝛽𝑢𝑢) of the following formula: 𝛽𝛽𝑎𝑎 the average beta coefficient for corporate peers, shares of which turn into the open stock market; 𝐷𝐷/𝐸𝐸𝑎𝑎 is average ratio of debt /equity peers corporations. rate beta coefficient excluding the debt burden for the corporate investigated on the basis of the weighted average 𝛽𝛽𝑢𝑢 for different types of work covered by the corporation, using as weights the share of the cost of each activity. rate the market value of debt and equity and corporate investigated calculated based on the coefficient 𝐷𝐷/𝐸𝐸 of the corporation of the corresponding 𝛽𝛽𝐿𝐿. it’s obtained such a way 𝛽𝛽𝐿𝐿coefficient called "ascending beta coefficient". stage 2 stage 3 stage 4 stage 5 fig. 1. algorithm of βl coefficient calculation baltic journal of economic studies 138 vol. 2, no. 2, 2016 capital increase will be reflected adequately in the model and as a result will increase the cost of equity. we believe that the cost of equity is determined to a greater extent is capital structure, rather than the interest rate at which attract borrowed capital. in this case, all the risks associated with the involvement of borrowed capital, which is adequately reflected in its value. considering the above, for the determination of the coefficient practice βl a.damodaran (damodaran, 2010) suggests the following sequence of actions (figure 1). the thus obtained "upstream betas" in terms a. damodarana perfect in comparison with beta regression coefficients for the following reasons: each regression coefficient β estimated standard error, has a lower standard error of the mean value with a multiple regression coefficients; "bottom-up beta coefficient" can be used to reflect the changes in the activities of the corporation and its assets; "bottom-up beta coefficient" takes into account the current changes in the capital structure of the corporation, which are expressed in changing factor d/e; "rising betas" allow none taking into account the stock prices of corporations. this advantage is especially important for countries, which do not have a developed stock market, but there is a need to assess the value of corporate equity. in practice, the classical model of capm does not always produce correct results is evidenced by a number of empirical studies such as the research m. dempsi (dempsey, 2013), r . grabovski (grabowski, harrington, nunes, 2015) p. fernandes (fernandez, 2015). the main disadvantages of the capm model lie in the theoretical assumptions of functioning models: the absence of transaction costs, the absence of bankruptcy costs, limited corporations in finance, investment portfolio is fully diversified. in addition, the classical model does not take into account a number of risks that affect the cost of equity. these risks include the risk of corporate size (as shown by a recent study investors view small companies as riskier and therefore it leads to an increase in the equity value), specific (non-diversified) risk of a particular corporation, country risk, which expresses the increased riskiness of developing countries. accounting for these types of risks that are not reflected in the classical capm model is the basis for its further modification. particularly relevant is its adaptation to assess equity to emerging market equity. 3. development of modified model сарм some corporate finance theorists hold the thought that the cost of market risk is the remuneration received in excess of the expected rate of return (in excess of the yield, which provide a risk-free securities). however, empirical studies (grabowski, harrington, nunes, 2015) show that the market estimates and other types of risks, one of these risks is a risk-sized corporation. the essence of this type of risk is that investors as more risky in comparison with the major evaluate small corporations. accordingly, investors are buying shares of small corporations will demand compensation for this type of risk in the form of a premium for the size of the corporation (rps). the so-called "size effect" is based on empirical observations, which demonstrate that the corporation smaller investors associated s great risk and therefore have a higher cost of equity. one of the first studies that reflect the relationship between the value of the share capital and the size of the corporation, is a research r . banza (banz, 1981), who analyzed the yield on the nyse stock corporations with low and high capitalization for the period 1926-1975 years. in addition, m. long dzh. zhang (long, zhang, 2004). it’s noted that small corporations have risk characteristics that are different from the risk of large corporations. large corporations have more opportunities in the resource sector, in management, in access to capital markets, making them more resistant to the economic downturn. all these differences lead to the fact that investors demand a higher rate of return for investments in small corporations. this additional yield is expressed in the additional premium for corporate size (rps). the prize for the size of the corporation, which is defined by duff & phelps (grabowski, harrington, nunes, 2015) adapted to the capm model and can be integrated into it as take into account the risks that are not reflected in the beta coefficient (β). the scientific and practical literature devoted to corporate finance can be found two ways of calculating the premium for corporate size: the method of "policy portfolio» (guideline portfolio method) and the method of regression equation (regression equation method). the first method is relevant for corporations whose shares are traded on the open stock market, as it requires information about the company 's capitalization. the second approach is more versatile and can be used for companies whose shares are traded on developed stock market, and corporations do not have a quoted market price is correct. the latter is particularly important for developing capital markets (emerging markets) which include and ukraine. the method of regression equation (regression equation method) allows you to calculate the risk premium corporations which is based on the following indicators that characterize the size of the corporation: the market value of equity (mve), the market value of invested capital (mvic), the book value of equity (bve), the size of the total assets at book value (ta), the average annual net profit for the last 5 years (ni), the average amount of income before interest, depreciation and taxes for the last 5 years (ebitda), net income (ns), number of employees (ne) . this approach allows us to calculate a premium for the size of the corporation as the basis of market information, as well as based on the financial statements. from our point of view, this approach is more versatile and can be applied to companies whose securities are baltic journal of economic studies 139 vol. 2, no. 2, 2016 traded on emerging capital markets. in this situation it is possible to calculate the average premium for the size of the corporation on the basis of six fundamental parameters describing the size of the corporation, obtained on the basis of financial statements of the estimated corporation. r . grabovski, dzh. harrington and k. nyunz to calculate the premium amount for the corporation (rps) offer equation described in (grabowski, harrington, nunes, 2015). with the help of these equations (table 1) it is possible to calculate the additional premium for the size of the corporation, which must be taken into account in the modified capm as an additional additive component. another important element that does not take into account the classical capm model  – is the difference in the level of risk the economies of different countries. according to this approach, the economies of developing countries are considered as more risky for investments in connection with the impact of political, economic, financial and institutional risks. considering this factor a. damodaran (damodaran, 2010) to estimate the cost of equity for countries with developing capital markets (emerging markets), proposes to take into account the risk premium for a particular country (country risk premium, rpc). use of this award as a supplement to the capm model is widely used in practice, although very often the discussion. in particular in the l. krushvitsa, a. loflera and g. mandla (kruschwitz, löffler, mandl, 2012) is subjected to sharp criticism of the concept of the use of the risk premium of the country (country risk premium, rpc) and approaches the whole a. damodarana. indicating the author noted these contradiction prize ideas capm as country risk is weakly correlated with the global systemic risk. this risk can be almost completely minimized by the diversification of the global capital market; with a portfolio, investor should not require additional profitability for it. in other words l. krushvits, a. lofler and g. mandl (kruschwitz, löffler, mandl, 2012) come to the conclusion that eliminates the need for the capm (rpc). in response to that criticism a. damodaran (damodaran, 2012) acknowledges the theoretical weakness of his position. however, at the same time, it notes that the emerging capital markets (emerging markets) objectively, there are additional risks and they should be such as to take into account. in addition, until that time, until a reasonable assessment of the theory of this type of risk it considers it possible to use the premium for country risk (rpc). to calculate the premium for country risk (rpc) a.  damodaran (damodaran, 2010) suggests using two approaches: based on the volatility of the stock market, based on the assessment of default spread (country default spread) on sovereign bonds of the country. the essence of the first approach is the calculation of the premium for the country risk based on the ratio of the volatility of the local stock market volatility in the us stock market, which is multiplied by the historical market risk premium in the united states. the use of this approach is limited to countries with illiquid stock markets, which include ukraine. country risk premium (rpc) using the second approach depends on the credit rating of the country and from the spread of default (default spread) on government bonds. although the risk of default on government bonds are not directly associated with the risk of the share capital, but the country 's credit ratings take into account the many factors that equally affect both government bonds and shares. these factors include political instability, economic recession, high inflation, currency fluctuations, and others. the spread of default is calculated as the difference between the rate of return on government securities in the local market (eg market of ukraine) and the rate of return government securities developed markets (eg us treasuries). as the risk premium is taken the average value of the spread of default for countries with the same credit rating. from our point of view, the most pragmatic approach for the calculation of premiums for country risk (rpc) for countries where the capital market is developing (emerging markets) is an approach that is based on the credit rating of government bonds and the calculation of the spread of default according a.damodarana methodology. to justify the use of this approach has a number of empirical studies and g. bekaerta k. harvi (bekaert, harvey, 2014), which are based on data from emerging capital markets (emerging markets). studies have shown that the movement spread defaulting country government bond yields and equity table 1 the basic equation to calculate the smoothed bonuses for corporate size (rps) № indicator characterizes the corporate calculational equation (rps) 1 market value of equities (mve) rps=12,505%-2,585%×log(mv) 2 balance value of equities (bve) rps=8,469%-1,599%×log(bv) 3 national income by last 5 years (ni) rps=7,428%-1,743×log(ni) 4 market value of invested capital (mvic) rps=11,936%-2,355%×log(mvic) 5 total assets by balanced value (ta) rps=9,690%-1,736%×log(ta) 6 the average amount of income before interest, depreciation and taxes by the last 5 years (abitda) rps=8,239%-1,723%×log(ebitda) 7 net profit (np), rps=8,662%-1,405%×log(s) 8 number of employees (ne). rps=10,011%-1,612%×log(ne) source: calculated by author at the basis of (grabowski, harrington, nunes, 2015) baltic journal of economic studies 140 vol. 2, no. 2, 2016 markets are correlated with each other, which indicates that they have the same source of risk. figure 2 reflects the dynamics of the credit rating, default spreads of government bonds of ukraine and the country risk premium in 2006-2015 (data are given at the beginning of each year). as can be seen from figure 2 the credit rating of bonds of ukraine for 2006-2016 fell significantly, default spread has increased from 400 to 1000 basis points (4.10%), the premium for the country risk has increased from 6% in early 2006 to 14.9 % at the beginning of 2016, which indicates an increase in the riskiness of investing in ukraine as a whole and equity in particular. in order to take into account the country risk premium for the capm model are three possibilities. according to the first approach, the premium for country risk is simply added to the model as an independent variable. the second approach involves the approach that the country risk premium for the market increases the risk premium already obtained value is multiplied by a beta coefficient. the third approach taking into account the premium for country risk in capm model involves the use of a correction factor λ, which reflects the degree of sensitivity of country risk exposure to a particular stock corporation. from our point of view, the most versatile and practical to use a third approach, which takes into account the impact of an individual country risk on shares of the corporation as part of corporations, especially those who work on the global world market are less amenable to the risk of a country. conversely, if the corporate activity is concentrated in only one country, in this case, λ coefficient becomes 1, and means that this corporation completely amenable to country risk. in view of the above, the modified capm model, which can be used to estimate the cost of equity in emerging capital markets should include an additional premium for the size of the corporation (rps) calculated using regression equations developed by financial analysts duff & phelps r . grabovski, j. harrington, k. nyunz (grabowski, harrington, nunes, 2015) and an additional premium for country risk (rps). in this regard, a modified capm model will look like the following: re=rf+βe×rpm+rps+λ×rpc. (8) this model is compared with the classical model takes into account a number of specific risks that are not reflected in the model and are particularly relevant for emerging market capital. therefore, from our point of view, this model has a high explanatory power equity value and can be used in practice as an effective tool to assess the value of equity in emerging capital markets. 4. conclusions in modern conditions there is a need to develop pragmatic models to estimate the cost of equity of corporations whose securities are traded on emerging capital markets. very often, these markets are illiquid and inefficient, and therefore there is no real opportunity to use market data to estimate the value of corporate equity. in order to correctly assess, the value of equity in emerging capital markets need to use the information obtained from the developed capital markets, which is adjusted to the characteristics of individual corporations and the risks that accompany its economic activity. the study received a modified model of the capm, which can be used to determine the cost of equity for both developed and developing capital markets. described in the modified capm model takes into account the effect of a greater number of factors determining the cost of capital in emerging capital markets and ensure a more correct estimate of the cost of equity capital under conditions of lack of reliable information from emerging stock markets. the resulting research model has a practical use in the process of assessing the equity value. 4,00 3,50 3,50 6,50 5,50 5,00 5,00 6,00 7,50 10,00 10,00 6,00 5,25 5,25 9,75 8,25 7,50 7,50 9,00 11,25 15,00 14,90 0,00 2,00 4,00 6,00 8,00 10,00 12,00 14,00 16,00 в1 в1 в1 в1 в2 в2 в2 в3 саа1 саа3 саа3 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 default spred,% rpc (ukraine),% figure 2. credit rating dynamics, spread default (default spread) on government bonds of ukraine and the premium for country risk (rpc) in the years 2006-2016 (damodaran, 2016) baltic journal of economic studies 141 vol. 2, no. 2, 2016 references banz, r .w. (1981). the relationship between return and market value of common stocks. journal of financial economics, 9: 3–18. bekaert, g., harvey, c.r . (2014). emerging equity markets in a globalizing world. rochester, ny: social science research network. retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2344817 damodaran, a. (2010). investicionnaja ocenka: instrumenty i metody ocenki ljubyh aktivov: al'pina pablisherz damodaran, a. (2012). response to damodaran’s country risk premium: a serious critique. business valuation review, 31(2-3): 85–86. damodaran, a. (2016). personal site professor a. damodaran. retrieved from: http://pages.stern.nyu. edu/~adamodar/ dempsey, m. (2013). the capital asset pricing model (capm): the history of a failed revolutionary idea in finance. abacus, 49: 7-23. grabowski, r ., harrington, j., nunes, c. (2015). international valuation handbook: a guide to cost of capital. retrieved from: http://eu.wiley.com/wileycda/wileytitle/productcd-1119070252.html. fama, e.f. (1977). risk-adjusted discount rates and capital budgeting under uncertainty, journal of financial economics, 5(1): 3– 24. fernandez, p. (2015). capm: an absurd model. working paper. retrieved from: http://ssrn.com/abstract=2505597 hamada, r . s. (1972). the effect of the firm’s capital structure on the systematic risk of common stocks. journal of finance, 27: 435–452. hassett, s.d (2010). the rpf model for calculating the equity risk premium and explaining the value of the s&p with two variables, journal of applied corporate finance 22 (2): 118–130. kruschwitz, l., löffler, a., mandl, g. (2012) damodaran’s country risk premium: a serious critique. business valuation review, 31(2): 75–84. long, m. s., zhang, j. (2004). growth options, unwritten call discounts and valuing small firms. efa 2004 maastricht meetings paper no.4057. retrieved from: http://www.ssrn.com/abstract=556203 ravi, j., zhenyu, w. (1996). the default spread model presented herein is based on the conditional capm and the cross-section of expected returns. the journal of finance, 51(1): 3-53. sharpe, w.f. (1964). capital asset prices: a theory of market equilibrium under conditions of risk. the journal of finance, 19(3): 425–442. vitaliy semenyuk pragmatics of using a modified capm model for estimating cost of equity on emerging markets аннотация. целью работы является формирование прагматических рекомендаций для разработки и имплементации модифицированной модели оценки капитальных активов сapm в процесс оценки стоимости акционерного капитала на развивающихся рынках (emerging markets). оригинальная модель сapm позволяет оценить стоимость акционерного капитала на развитых рынках капитала (mutual markets). при этом она требует информации, полученной на основе рыночных данных. но, как показывают последние практические исследования, классическая модель не всегда даёт приемлемые результаты оценки стоимости акционерного капитала. кроме того, в классическом виде модель сapm невозможно использовать для оценки стоимости акционерного капитала для стран, рынок капитала которых развивается. это связано с более низкой эффективностью развивающихся рынков капитала, более низким уровнем ликвидности и капитализации, что делает информацию, полученную с таких рынков, не совсем достоверной. в связи с этим, на практике всё чаще используются разные модификации модели сapm, которые учитывают больше специфических факторов, влияющих на стоимость акционерного капитала. к этим факторам, которые не учитываются в классической модели сapm относят размер корпорации, и страновой риск. первый фактор актуальный как для развитых (mutual markets) так и для развивающихся (emerging markets) рынков капитала и требует учёта во время оценки стоимости акционерного капитала и вследствие модификации модели сарм. страновой риск связан з различиями и особенностями экономик разных стран и в первую очередь должен быть учтён при оценке стоимости акционерного капитала на развивающихся рынках капитала (emerging markets), которые рассматриваются инвесторами как более рисковые для капиталовложений. этот фактор также должен быть учтён в процессе оценки стоимости собственного капитала. методика. в процессе построения модифицированной модели сарм были использованы теоретические и методические положения, которые изложены в работах р. банза, г. бекаерта, м. гоедхарта, р. грабовски, р. гринольда, д. весселса, а. дамодарана, м. демпси, дж. жанга, р. ибботсона, п. каплана, т. коллера, к. кронера, л. крушвица, м. лонга, а. льофлера, baltic journal of economic studies 142 vol. 2, no. 2, 2016 г. мандла, м. миллера, ф. модильяни, к. ньюнз, дж. петерсона, ш. пратта, л. сигела, ю. фамы, п. фернандеса, к. харви, дж. харрингтона, с. хассета. результаты. в результате исследования получена модифицированная модель capm, с помощью которой можно определить стоимость акционерного капитала на развитых и развивающихся рынках капитала. практическое значение. полученная в результате исследования модель может иметь практическое использование в процессе оценки стоимости акционерного капитала и предназначена для определения уровня доходности, требуемого инвесторами за вложение денег в акции корпораций, находящиеся в обращении на развивающихся рынках. значение/оригинальность. описанная в работе гибридная модифицированная модель сарм позволяет учитывать влияние большего числа факторов, определяющих стоимость капитала на развивающихся рынках капитала, и обеспечить более корректную оценку стоимости акционерного капитала в условиях нехватки достоверной информации с развивающихся рынков капитала. baltic journal of economic studies 80 vol. 6, no. 1, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: rector@knute.edu.ua 2 kyiv national university of trade and economics, ukraine. e-mail: fast777@bigmir.net 3 kyiv national university of trade and economics, ukraine. e-mail: s.bay@knute.edu.ua doi: https://doi.org/10.30525/2256-0742/2020-6-1-80-86 theoretical and methodological principles for assessment the readiness of socio-economic systems for changes anatolii mazaraki1, yuliya drozdova2, sergey bay3 abstract.the article is devoted to theoretical and methodological problems of assessing the readiness of socioeconomic systems for changes. the theories of factors that are the mainstay of this study are the interesting section in this study. to complete the study of changes in complex socio-economic systems, along with the approaches of evolutionary universalism, a set of scientific methods was applied, namely: structural-functional analysis, comparative-typological analysis, historical method, methods of induction and deduction. the aim of the article. the main purpose of the study is to develop further theoretical and methodological approaches to scientific substantiation of changes in socio-economic systems in different concepts of evolutionary economics. methodology. the methodological and theoretical foundations of the research are the theories of factors that are the mainstay of this study. to complete the study of changes in complex socio-economic systems, along with the approaches of evolutionary universalism, a set of scientific methods was applied, namely: structural-functional analysis, comparative-typological analysis, historical method, methods of induction and deduction. value/ originality. in particular, we defined methodological requirements for the evaluation process and systematized the formalized methods of different levels of socio-economic systems assessment implementation complexity. we proved scientifically that the trajectory of system movement is determined by achievement a critical point that changes the quality of socio-economic system. at the same time, the value capitalization of the enterprise should be ensured concerning consumers and other stakeholders, participants of the enterprise activity. the levels of socio-economic system readiness for changes are highlighted. key words: socio-economic systems, enterprise, evaluation process, changes. jel classification: f63, o11, o10 1. introduction recently the prospect of changes in socio-economic systems study is indisputable because, under the conditions of increasing economic fluctuations, complex systems take on qualitatively new forms (temporal, spatial, dynamic), change their behavior, and require effective theoretical and methodological tools. according to this thesis scientific frames of changes in socio-economic systems are recognized as a modernist vector for the development of modern economic science and at the same time an applied tool for managing their organizational complexity, devoid of abstract scientific images, and as close as possible to real conditions of economy functioning. modern enterprises, as socio-economic systems, constantly operate under the conditions of limited resources: raw materials, time, finances, information, etc. increasing relationship inside and outside the enterprise extends its freedoms and capabilities, increases the interdependence of all parts and elements in the enterprise, accumulation of organizational complexity at all levels and in all spheres of human activity through a combination of "globally ubiquitous factors" – "changes acceleration in growing uncertainty "(prigogin, 2007). as a result, the entropy increases, and there is an increase in the "substance of enterprise" composed of new nature elements. it is increasingly difficult for executives and managers to orient under such conditions: there are tendencies for disorganization and reduction (or even lose) of controllability. under these conditions, we can observe "fair reassessment of values, which describe what exactly baltic journal of economic studies 81 vol. 6, no. 1, 2020 economic agents do as they learn and interact, good faith reassessment of principles that describe what exactly economic entities do, how they learn and interact" (dosi, winter, 2003). therefore, the consolidation of different views on the internal structure and environment of the enterprise is a very urgent task. naturally, in recent years, studies of internal organizational content are again becoming a priority for both evolutionary, institutional, and management theories. 2. recent research and publications review a critical review of scientific research in the context of changes in socio-economic systems including the problems of their theoretical and methodological support made possible to highlight a strong scientific and practical basis formed in the papers of hurwicz (1996), dosi, winter (2003), kleiner (2002, 2003), rakhaev (2006), izmalkov, sonin, yudkevich (2008) and others. despite the renewed scientific interest to socioeconomic systems, problems of their functioning, in theory and practice, there is a somewhat fragmentary analysis and a selective approach to highlight some aspects of their changes and transformations. as a result, there is an objective need to develop new theoretical generalization approaches to solving the problems of implementing changes in socio-economic systems of varying complexity in the context of their response to exogenous and endogenous challenges. the main purpose of the study is to develop further theoretical and methodological approaches to scientific substantiation of changes in socio-economic systems in different concepts of evolutionary economics. 3. materials and methods the theoretical and methodological basis for the study were: scientific papers of national and foreign economists on the problems of changes in socio-economic systems. thus, bilotserkovets and zavgorodnyastate (2003) wrote: "dialectics, as the underlying theory and methodology of economic science development, ascends to the next level of specifics as a methodological paradigm of global (universal) changes". hence, evolutionary universalism is perhaps the only approach in the scientific arsenal for modern researchers of complex socio-economic process changes, since its theories synthesize elements of the system, reveal their compatibility at the essential level and logical impartiality caused by common dialectical origin. the the theories of factors that are the mainstay of this study are interesting in this section of study. to complete the study of changes in complex socio-economic systems, along with the approaches of evolutionary universalism, a set of scientific methods was applied, namely: structural-functional analysis, comparativetypological analysis, historical method, methods of induction and deduction. 4. results according to the theory of the factors, business entities spend resources that meet the following parameters: "certainty," "proper proportionality," "dependence" to obtain the necessary final results. combining all the resources at the disposal of the business enterprise, or their "impersonation" to sole factors, allows to "formalize and quantify " economic processes at the level of direct economic entities with the output to forecasting and managing them. this is reflected in the production functions of various modifications (koval, slobodianiuk, yankovyi, 2018). methodology and logic of many studies are based precisely on the active use of production function apparatus, which today is considered an adequate tool to study the behavior of organizations, their growth, and is also actively used for forecasting the economy as a whole (shumska, 2007). factors are traditional resources: labor, land, capital in their specific form of a real economic entity (koval et al., 2019). traditionally, the result is the amount of gross output produced by a specific entity over a certain time period, the structure of production, volume of income, level of productivity, etc. (rakhaev et al., 2006). the production function y f k l t= ( , , ) (pf) determines the relationship of the output of product y with the factors of production – capital (k) and labor (l), which may change over time (t). the mechanism of structural shifts is more explicit in terms of traditional factors of economic development, especially highlighting models of factor analysis of r . solow, which relies on the analysis of national savings determining role, population growth, and technological progress. it proceeds from a functional relationship between the amount of product, labor, and capital established by the american scientists cobb and douglas in the early twentieth century. the cobb-douglas production function y ak la b= made it possible to lay the foundations of the process of direct labor substitution by materialized labor. parameters a and b show the proportion in which capital and labor resources affect the output. in particular, as labor costs increase by n, the same increase in product growth may occur, the same may occur with the increase in fixed capital. it was cobb and douglas who first obtained the formula: y k l= 1 01 0 25 0 75, , , . in the solow model, savings (s), which are calculated as gdp minus consumption and public procurement, are at the forefront. from there: y s i= − +( )1 . investment (і), or capital accumulation, directly determine economic growth and structural policy preconditions. in fact, the accumulations indicate an increase in gdp resources, but it must be adjusted for baltic journal of economic studies 82 vol. 6, no. 1, 2020 capital outflows due to physical and moral deterioration. the change in the capital will be equal to the investment minus the disposal of capital. optimal growth of capital accumulation determines the pace of economic and social progress of society (bukanov et al., 2019). economic growth and development is achieved through growth in fixed capital, labor costs, and technological progress. however, the production function must satisfy certain conditions that have an economic interpretation: – in the absence of one of the resources, production is impossible: f l f k( , ) ( , ) ;0 0 0= = (1) – an increase in the costs of any resources with a constant amount of another leads to an increase in output over time: df dk df dl/ , / ;> >0 0 (2) – with an unlimited increase in one of the resources, the output increases over time: f l f k( , ) ( , ) ;+∞ = +∞ = +∞ (3) – as resources grow, the rate of output growth slows; – keeping the output constant can be achieved by partially replacing one factor with the additional use of another; – the function is homogeneous to the degree of p (p> 1). with the increase in production scale in h times the output increases in hp times, i.e. we have an increase in production efficiency due to its increase in scale; – the function is continuous and twice differentiated by the arguments k and l. adequate productive function representation of the real ratio of resource costs and output requires the selection of significant factors and definition of the type of function, as well as the parameterization of the production function, that is, the calculation of parameters quantitative values based on systematic statistics using regression and correlation analysis. the choice of factors allows meaningful interpretation of production function characteristics, which allows us to obtaine meaningful conclusions about the parameters of a production function, identifying periods that are characterized by different behavior of the output, identify turning points (transition boundaries), find out the process timeline. foreign scholars determine the relation between labor and capital on the basis of the concepts of marginal labor productivity and marginal productivity of capital, introduced into the economic analysis by the american economist j.b. clark, developed by e. denison, r . solow, and others. however, this theory has received much criticism, particularly from the cambridge school of left keynesianism, led by j. robinson. in the 1993 system of national accounts, the theory of the factors is not available. overall, economic development is achieved through growth in fixed capital, labor costs, and technological progress. international factors play a significant role, first of all, the balance of trade and the balance of payments, the exchange rate, purchasing power parities, and the proportions of international exchange that depend on them. at the same time, the factor model does not provide a clear answer regarding the financial resources of the structural adjustment. it exogenously states that investment and other resources are available. they just need to be used properly. it should be borne in mind that the enterprise becomes "the only place where the combination of labor, items of labor, production, and labor for the production of products" are combined in a "single holistic object." according to g.kleiner, the definition of factors that "determine the behavior of the enterprise in various areas of its operation" and "establishing a dominant in decision-making and implementation" (kleiner, 2003) are central to the construction of an "individualized theory ". each of the enterprise activity participants in a certain way has own vision, puts forward expectations and requirements, that are the descriptive and normative components of the perception and systematic description of the enterprise for each of them will have a personalized interpretation. despite the fact that, as noted by nobel prize winner j. heckman, micromodels are not very diverse and are sufficiently stable (eliseeva, dmitriev, 2003). discussions on factors of production allowed us to introduce the notion of production dependence, we can use not only absolute but also relative quantities, as well as a large selection of production factors (kleiner, 2002), which must satisfy some logical, economic, and mathematical requirements: – all quantities included in the production function must be measured; – production without resource costs is impossible; – all resources included in the production function are required, in the absence of at least one of them, production being zero; – the arguments of the production function must include all the factors relevant to the production process (the condition is ambiguous); – the resources are interchangeable in one way or another (they may be complementary, that is, in strictly defined proportions); – if the volume of a resource is limited, then the output cannot increase indefinitely; – all quantities should have a clear economic meaning; – the production function should be based on the appropriate statistical base; – the production function must be continuous and differentiated (tereshchenko, 2008). in the modern world, a system-wide combination must be perceived in a one-to-one measurement and evaluation system. nevertheless, understanding the behavior of business entities as probabilistic rather than deterministic baltic journal of economic studies 83 vol. 6, no. 1, 2020 must be dominant. there is a definite relationship between the results of the enterprise's activities and the factors (resources) at its disposal that must be calculated, evaluated, and described. this leads to the transition from the evaluation and description of organizations' behavior by methods of probability theory to the paradigm of nonlinear dynamics (bessonov, 2000). use of this approach allows us to distinguish the main components of the description as fundamentally "static" and "kinetic" features of changing the enterprise parameters, and functioning of the enterprise as a whole, and not any of its subsystems (gontareva, 1975). these are ascending conceptual positions form the "archetype" of enterprise perception. the establishment of boundaries between the enterprise and the external environment, justification of the mechanism for establishing relations between the intentional (target) sphere of the enterprise, and the mode of operation may be particularly important in this regard. believing in the internal organizational processes from these positions, in our opinion, makes it possible to call them the "rules of the game for all occasions," which will guarantee the result expected by the "bona fide maker of the mechanism" every time (rakhaev, 2006). in the age of the information revolution, the organizational mechanism is an extremely complex system involving several groups of relationships. because of this, the mechanism itself is the source of the institutional content of the enterprise, a set of relatively stable norms, traditions, and patterns of behavior that are unique to it. the multidimensionality of the organizational mechanism as a complex system, represented by various relationships, causes the formation of a particular structure and some entities through which these relationships manifest themselves. the organizational mechanism is a component of a more complex, social mechanism. as for the enterprise, it characterizes the expedient set of relationships within the production and management processes, all other phenomena within which the production mechanism and management mechanism are implemented. in this regard, it is more correct to speak of a "family of economic mechanisms than of a specific mechanism" (izmalkov et al., 2008). they form unique institutional space that structures the subjects' rules of conduct, their strategies, management decisions, and performance. in general, this set of interconnections between all elements of organizational relations determines the dynamic state of the management system, which determines the degree of its mobility, susceptibility to changing conditions. particular importance gets the formation of such an economic mechanism, which should provide extended reproduction, and allow the development of each economic entity – because the organizational form of the business itself is not decisive for the development of production and efficiency increase. furthermore, in cases where its "implementation is impossible or linked to prohibited costs, even the most attractive mechanism," says nobel laureate l. hurwitz, "remains a utopia" (hurwicz, 1996). the key in the theory of economic mechanisms is the introduction into the scientific circulation of l. hurwitz's concept of "conditions of inventive compatibility," which can reasonably be considered as "convenient interpretation of economic entities rationality assumption" (tereshchenko, 2008). the main organizational components of the mechanism are the structures that organize industrial relations, as well as tools for managerial influence on the future development of the system in order to develop directions for its improvement. as part of this approach, it is advisable to consider the policy of the enterprise, the economic component of which is focused on improving the efficiency of economic entities production due to a specific set of production realization principles and financial relations between the system links, as well as tools to achieve the parameters of economic efficiency. thus, the main functions of the organizational and economic mechanism are: – realization of the economic potential laid down in each enterprise; – ensuring effective interaction between enterprises as economic entities and other institutional entities; – self-realization and interaction of each economic activity type enterprises in order to ensure efficient organization of production in general; – maintaining the compliance of economic behavior of enterprises concerning self-regulation of the economic system following the requirements for economic laws and resolution of socio-economic contradictions; – maintaining a balance between the economic, organizational, legal, social, environmental areas that ensures the freedom and efficiency of development in general and full development of society and individual, their needs, interests, incentives in particular; – balancing and harmonization of property forms relations realization. at present, there is no single point of view regarding the uniqueness in defining the scheme or model of designing and building an enterprise to create the preconditions for real development. changes in the economy require a revision of the theoretical basis for the search for new mechanisms of behavioral algorithms, which are adequate to the new schemes and models of enterprise management. the acquisition of new knowledge regarding the need to improve the system of real enterprise development through (including) reforming the mechanisms of functioning of economic systems is an integral attribute of ensuring strategic management success. that is, the experience of successful organizational transformation can only be limited to that used in other enterprises and in no way can be universal. baltic journal of economic studies 84 vol. 6, no. 1, 2020 in the management of events related to “taking down events” (izmalkov et al., 2008), the so-called “cognitive parallax” (ruley, 1998) leads to increasing uncertainty. uncertainty will mean the absence, insufficiency, or inaccuracy of information about the state of the system and its environment (ruegg-sturm, 1998). so, there is a need to use such a tool to evaluate the feasibility of conducting transformational activities within a trading enterprise, which would provide the highest efficiency regardless of the level of enterprise development, its format and scale of activity, as well as increase the importance of formation as a means of managing enterprise efficiency and capacity building of its development. in order to be able to successfully achieve this goal, fulfill its functions in the market, maintain its competitive position, the company needs to achieve the necessary competence. the required scope and effectiveness of its implementation depend on the quality of the management system in terms of the ability to fully and adequately reproduce organizational competencies. their functional value description can be expressed in monetary terms, and its variability will cover a certain value range (m). within this range, aggregate consumer value is accumulated, which may be adequate to the value of expected cash flow from the reproduction of organizational development potential per unit of resource consumption per time unit. the institutional function of enterprise reform can be expressed by the formula (reut, 2003): tp f y k l tij t i i i ij= ( , , , )∆ (4) ∆yi – an increase in organizational competence, which may be represented by: ∆y f sp ik il in fin qi = ( , , , , , ) (5) as a function of the harmonization of the operating structure (sp); fixed assets (ir); labor force (il); innovative behavior (in); financial resources (fin); quality management (q;.ki(t) – a function that describes the process of enterprise capitalization; li(t) – function that describes the variability of human potential; tij(t) – function of innovation and technological behavior. according to the concept of economic dysfunction, an enterprise can only function steadily within the defined monetary range of the value range. the boundaries of the monetary range are entirely individual and can be defined for each enterprise. the decrease in the coefficient of return в(t) and the monetary provision of the value range causes the emergence of so-called opportunistic models of functioning and use of a specific resource, which can lead to an overall decrease in the utility of the whole enterprise, its dysfunction (micro or macro-dysfunction) (borisov, 1989). decreasing the impact of development potential as a specific resource will be perceived in practice by the management system as a temporary phenomenon, acquire a qualitative norm, and not be problematic under the law of inertia of behavior. in the process of enterprise development, in particular, by generating a specific development resource, its organizational development potential should be increased. for the enterprise, this is the most successful stage when the potential for development (∏pit÷ ) through new reproduction gets a new value (∏ðіt ′∏ ) and creates the conditions for further increase of its competence. in the conditions of changing the performance of the activity, regardless of what caused it exogenous or endogenous, the actual monetary support for the functioning of the business enterprise increases/ decreases. the enterprise can increase/decrease its competence, i.e., it gains/loses the ability to service itself in the planned parameters. the differential function mi(t)for the i-th enterprise will be: dm a mi li li t a mi ki k t a mi ti ti t dti = ∂ ∂ ∂ ∂ + ∂ ∂ ∂ ∂ + ∂ ∂ ∂ ∂     1 2 3 , (6) m a mi li li t a mi ki k t a mi ti ti t dti i i = ∂ ∂ ∂ ∂ + ∂ ∂ ∂ ∂ + ∂ ∂ ∂ ∂    ∫ 1 2 31 2 . (7) having decided that m i t mi t1 0( ) /= ∂ ∂ = and m i t mi t2 0( ) = ∂ ∂ =/ relativelyмі, we get м1і*and м2і*, with ∂ ∂ > ∂ ∂2 1 2 2 20 2 m t m i ti lo* / , * / , the values of which are beyond the monetary supply of the value range. after substituting ∂ = ∂ ⋅ ∂( )ri dt r dy dy ti i i/ ( / ) / for all elements of the conversion function мі(t), we get the following expression: dmi dy a mi li dli y a mi ki ki y a mi ti ti yi i = ∂ ∂ ∂ + ∂ ∂ ∂ ∂ + ∂ ∂ ∂ ∂1 1 2 3 . (8) for a specific company within a time interval (t1;t2) cash flow changes can be represented as follows: m t m t p t y t p t y ti i ij ij ij i ij j n 2 1 2 2 1 1 ( ) − ( ) = ( ) ( ) − ( ) ( )  = ∑ , (9) n – number of products sold over a period of time t1; t2; pij – selling price; yij – sales volumes of j-th products. with sufficient approximation, the current value of the function will be: m t pij t y ti t j n ij( ) = ( ) ( ) = ∑ 1 , (10) − ∂ ∂ = ( ) ( ) − ( ) ( ) ∑ m y pij t y t pij t y ti i ij ij t 12 2 2 1 1 1 . (11) formula will calculate the parameters that characterize the feasibility of introducing transformations for reform: tr t ïpy t y t ïp t y t m ti ij ij ij j n i t( ) = ( ) ( ) − ( ) ( )  ( ) = ∑ 2 2 1 1 1 / (12) further investigation of the obtained functionals at the extremum, and applying the lagrange method, theoretically establishes the limits of the monetary provision of the value range for each enterprise. increasing disorganization can reach the threshold that can lead to irreversible negative consequences. these consequences may make it impossible to maintain baltic journal of economic studies 85 vol. 6, no. 1, 2020 a manageable enterprise. the onset of such an event will, on the one hand, lead to an objective and irreversible complication of the enterprise, stimulate "creative efforts, provide the impetus for internal restructuring, the discovery of new resources, the establishment of new connections for this purpose" (sukharev, 2002). on the other hand, if the level of organizational reproductive reflection within the timeframe specified by the event is insufficient to compensate for the extent of disorganization, negative consequences can occur, up to termination of activity. in our opinion, for such a situation it is necessary to introduce the concept of enterprise sensory threshold. it can be interpreted as the threshold value of an external (and / or internal) disturbing effect on an entity that triggers a response. we believe that the theory of the enterprise should distinguish between the sensory threshold of the enterprise as the lower limit of sensitivity of the enterprise and the threshold of reaction as an array of individual events, the occurrence of which requires an appropriate response – the sensitivity indicator. accurately measuring the thresholds of the sensory system will require comparing the thresholds of a number of reactions and taking into account the conditions under which this sensitivity was measured. in our opinion, the thresholds of sensitivity are personalized concerning the parameters of each enterprise (operating indicators as empirical values that can characterize its functionality). movement of the enterprise within the range of values and variability of the range limits is ensured by the management system based on the capabilities of the particular business entity. however, the behavior of an enterprise can be complicated by increasing imbalances, which will lead to a rapid loss of development reserves and, as a consequence, degradation of the entire potential of the enterprise. at this stage, labor productivity is significantly reduced as well as effectiveness of managing individual subsystems, insolvency increases, the aging of fixed assets and human capital is accelerated. the enterprise is on the verge of general macrodysfunction. indicators calculated as follows can be used to determine the feasibility of a management system intervention to implement reform measures: dy dt f y tr ti i i= ( ) − ( ) , (13) f yi ( ) – function of enterprise behavior utility; tr ti ( ) – reform function, proportional to the volume of labor costs per unit of output and the volume of sales (table 1). initiative reform is objectively necessary only from stage b, since there are primary symptoms of existing trends of micro-dysfunction transition within the enterprise to macro-dysfunction. for stage c, reform is not an initiative of the management system but is driven by the influence of external institutions and cannot be considered as a planned strategy. the goals are discredited and the pace of development decreases, the real monetary security of the potential decreases, the costs of reproducing the lost positions are objectively increasing, and the resistance to internal and external entropy is reduced (nazarova et al., 2019). on stage d, reform is, in fact, the only means of preventing the transformation of potential component microdysfunctions into general enterprise macro-dysfunction. 5. conclusions increasing relationships inside and outside the enterprise expand its freedom and capabilities. as a consequence, the likelihood of the organizational behavior nature increases, which naturally increases its entropy. thus, there is an increase in "substance of the enterprise," composed of a new nature elements. it is increasingly challenging for executives and managers to orient under such conditions: there are tendencies for disorganization and decrease (or, even, loss of controllability). organizational mechanism is an extremely complex system that involves several groups of relationships, a source of institutional content for the enterprise, a set of relatively stable norms, traditions, and behaviors that are unique to it. for enterprise it characterizes the expedient set of relationships within the production table 1 enterprise reform indicators stage of life absolute value of development potential variability (indicators) level of dysfunction а ïðіj t > 0 dïp dt ij t >0 enterprise is developing with a minimal number of potential component dysfunctions that can be eliminated by operational management в ïðіj t > 0 dïp dt ij t <0; dïp dt ij t =0 slowdown in growth, loss of leverage to overcome emerging dysfunction, unstable equilibrium с ïðіj t < 0 dïp dt ij t >0 sharp growth of enterprise functioning problems d ïðіj t < 0 dïp dt ij t <0 the point of no return when the number of dysfunctions becomes critical, which causes macro-dysfunction baltic journal of economic studies 86 vol. 6, no. 1, 2020 and management processes, all other phenomena implemented within production and management mechanisms. in this regard, we should focus on "a family of economic mechanisms rather than a specific mechanism." they form their unique institutional space that structures the subjects' rules of conduct, their strategies, management decisions, and performance. in general, this set of interconnections between all elements of organizational relations determines the dynamic state of the management system, which determines the degree of its mobility, susceptibility to changing conditions. transformation processes are associated with profound changes in the economic system, encompassing reform of not only the economic sectors as a whole but also all economic management tools, organizational forms of its implementation, production systems, and participants of these processes. reformation is part of a transformation process related to increasing the functionality of the economic system due to renewal of traditional socio-economic forms and development of new structures that meet the requirements of the times. the trajectory of such a system movement is determined by achievement of a critical point that changes the quality of socio-economic formation. at the same time, the value capitalization of the enterprise should be ensured concerning consumers and other stakeholders, participants of the enterprise activity. references: bessonov, v. a. 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(2008). evaluation of the organizational and economic mechanism of the efficiency of agricultural enterprises. economics and mathematical methods, 1, 132–143. baltic journal of economic studies 24 vol. 6, no. 3, 2020 corresponding author: 1 the national university of ostroh academy, ukraine. e-mail: tanya.galetska@oa.edu.ua orcid: https://orcid.org/0000-0002-0795-008x 2 the national university of ostroh academy, ukraine. e-mail: natalya.topishko@oa.edu.ua orcid: https://orcid.org/0000-0001-9823-0805 3 the national university of ostroh academy, ukraine. e-mail: ivan.topishko@oa.edu.ua orcid: https://orcid.org/0000-0001-7066-5583 doi: https://doi.org/10.30525/2256-0742/2020-6-3-24-35 social responsibility of economic enterprises as a social good: practice of the eu and ukraine tetiana galetska1, natalya topishko2, ivan topishko3 abstract. current circumstances are shaping new conditions for the interaction of entities of society. the covid19 coronavirus pandemic tests the partner relationship between government, business and civil society in the system of their social responsibility for the efficiency and morality. the purpose of the study is to reveal the theoretical foundations of the concept of “social responsibility of the state, business, citizen” as a determining factor of formation, self-organization, self-control, modernization of civil society and analysis of the practice of organizing the social responsibility system of economic entities in the eu and in ukraine. the subject of the research is social responsibility as a fundamental value of society and social institute of regulation of relations in society for ensuring stability of living conditions. the methodology of the research is based on the set of methods of scientific analysis. in particular, dialectical (when characterizing the categorical apparatus of the subject of study); systemic (when analyzing the relationship of socio-economic processes); statistical method of comparisons and groupings; economic analysis (when processing statistics); historical (in the study of the evolution of corporate social responsibility (csr) theory and practice); empirical (in the analysis of the practice of forming partnerships between business structures, the state and civil society in the european union and ukraine). conclusions of the study. the concept of “social responsibility” is a fundamental value of society, and the system of social responsibility of its entities is a social good. it can be considered as a social institute of socio-economic relations regulation in order to ensure the stability of society and the development of living conditions. the systematization of scientific approaches to defining the social responsibility of economic entities as a social good made it possible to justify it from the standpoint of a public policy object, a system of ethical values of society, voluntary obligations of business and a way of managing a business entity. features of the current socio-economic situation require strengthening of their socially responsible behavior, introduction and observance of new forms of interaction between business and society on the principles of systematic and longterm. the innovative model of the economy is raising new demands for socially responsible behavior of public relations entities. models of its realization have their own peculiarities in every eu country. they are all stimulated by state institutional mechanisms (privileges in taxation, subsidies, control over compliance with social and environmental standards); international standards of doing business; control by the public (social reporting to stakeholders). such institutional levers stimulate the integration of socially responsible behavior into the development strategy of the business structures. the european experience of forming and provision of social positioning of entrepreneurial activity is being studied in ukraine and is gradually being implemented. the level of transparency of leading companies activities is increasing, especially those, the activities of which are focused on international markets (agribusinesses, energy and metallurgy companies). the lower level of transparency of such information is inherent for mining companies. transnational companies operating in ukraine have a higher level of csr disclosure than domestic organizations. on their websites, twice as often as on websites of the ukrainian companies, issues on human rights, csr programs, policies and goals are covered. as the example of the high level of compliance with the csr principles may serve the activities of the french-ukrainian company “verallia-ukraine” pjsc ”consumers-sklo-zorya” (rivne region, ukraine). many ukrainian business entities have not baltic journal of economic studies 25 vol. 6, no. 3, 2020 yet integrated csr into their company management strategy. further promotion of the csr concept, activation of institutional, economic and social mechanisms for its implementation, evaluation of the effectiveness of its implementation are needed. key words: social responsibility, social good, socially responsible business management, models of corporate social responsibility, social partnership, un global compact, international standards of enterprise social reporting, sustainable development. jel classification: a13, m14 1. introduction the world is on the verge of major change. in addition to the medical aspects, the covid-19 coronavirus pandemic will have a negative impact on both the global economy and practically every country. in such circumstances, all issues related to social responsibility and social protection will become increasingly important and relevant. social responsibility of the individual, the state, business has always been a significant ethical, socioeconomic and managerial component of the system of the national economy regulation. the role of this social institution is particularly important in today’s extremely dynamic environment. the accelerated development of the network (digital, symbolic, high-speed) economy as a new form of social relations significantly transforms the economic and social structure of society, the mechanisms of managing of the national economy, its interaction with the world. the formation of technological paradigm iv and cyber systems creates new technological and socio-economic problems. they affect the employment of the population, its property differentiation, social responsibility of economic entities. structural changes that occur under the influence of scientific and technological revolution, innovative economy, globalization increase the instability of society. social challenges are growing and growing. issues concerning health, well-being, employment; food and energy security; environment and climate changes; creation of integrated transport; development of innovative and secure society etc. are being updated. socio-economic processes are becoming unstable. these processes gained unexpectedly acute manifestation in the context of the covid-19 coronavirus pandemic. in addition to its medical effects, the world is plunged into an economic crisis, with inflation and unemployment rising. attention should be paid to the new trend, both in general in socio-economic development, and in matters of social protection and social responsibility. while there has been a tendency towards universalisation over the past few decades simultaneously with the increasing regulatory role of supranational and supranational institutions, there is now a clear tendency to strengthen the role of nation-states, including manifestations of protectionism. therefore, it is possible to predict the widening differences in models of different countries. therefore, the relevance of this issue will be enhanced. developmental contradictions cannot be solved solely on the basis of market mechanisms. it is important to ensure the regularity of social processes by aligning the interests of economic entities and society, achieving certain priorities to prevent the accumulation of deformities and balance social proportions. in this aspect the problem of social responsibility of all participants of social relations for the formation of a favorable environment of being becomes of particular importance. in revealing the essence of the category “social responsibility”, it is important to emphasize primarily on its characterization as a social good, which ensures the systematic of socioeconomic relations. it is a mechanism of social control and balancing of personal, collective and public interests in order to form normal living conditions of their carriers, stable dynamics of the country's development. 2. evolution and diversity of social market economy concepts the revision of the social doctrine took place gradually under the influence of global competition, liberalization of the economy, migration of capital, introduction of the digital economy, strengthening of the role of transnational corporations, periodic crisis states of national economies. the beginning of this process was laid in the conditions of increased liberalization of the economies of the world’s developed countries in the crisis of the 1970s. at that time, public funding for social programs was falling. the principles of paternalism regarding the social expectations of the population were revised. preference was gradually given to the priority of economic efficiency over the principle of social justice, which had previously dominated in the realization of the “welfare state” concept. the concept of corporate social responsibility was forming. the criteria for its socially responsible behavior were increasing. the parameters of the social component of entrepreneurial activity were determining. changes were made to the system of social and labor relations and the distribution of authorities between the entities of social partnership. realization of these principles in economic practice was aimed at ensuring profit as a result of not only its operating function, but also of expanding the range of duties of ethical and social nature. the achievement baltic journal of economic studies 26 vol. 6, no. 3, 2020 of commercial success of business entities has been increasingly linked to the degree of their participation in solving social problems of society. this has helped to preserve and enhance the degree of coherence of the actions of individuals, business structures and society as a whole in maintaining the living conditions. research of modern systemic shifts has been carried out in the scientific achievements of economists with world-famous names (l. brown, d. henderson, p. ekins, r . norgaard, j. stiglitz, p. hawkins, etc.). representatives of the school of economic sociology (g. tarde, e. durkheim, m. weber, t. parsons, n. smelser) developed the theoretical foundations of the concept of motivated, value-oriented behavior of the entities of society. parsons’ social action theory contributed to the discovery of the so-called “law of functioning of social organizations”, the development of mechanisms for creating conditions for the mutual orientation of partners, regulation of their behavior by ethical values and norms. the significant place was given to behavioral element by m. granovetter, a. etzioni, m. castells, r . swedberg, a. sen, r . hollingsworth, ph. schmitter, w. streeck and other scientists. they analyzed the impact of socioeconomic and cultural factors on the organization of production. eminent political scientists and sociologists devoted their works to the problems of social responsibility, among them there were i. wallerstein, k. popper, t. piketty, d. acemoglu, j. robinson, etc. (feshchenko, 2016). the latest trends in social development are reflected in numerous theories, namely: concepts of “social wellbeing”; “human development”; “social responsibility of business” by m. porter and m. kremer; “expanding the choice” by a. sen; “social flow” and “social space” by m. castells; “risk society” by u. beck and a. giddens; r. florida’s creative class; socio-ecological-economic theory of sustainable development; the concept of a “new global thinking” by j. forrester; j. stiglitz’s “global social justice society”; “the limits to growth” by d. meadows; e. laszlo’s “new humanism”; the theory of “collective action” by m. olson and other scientific studies. the development of scientists has contributed to the evolution of paradigmatic approaches to many notions, in particular, such notions as “entrepreneurship” and “welfare”. the theoretical and methodological foundations of the concept of “national welfare”, its role in socio-economic development are devoted works of p. aghion, r . barro, j. becker, j.galbraith, d. rodrik, s. rosefield, a. sen, r . solow , j. stiglitz, p. todaro, f. fukuyama, and other scholars. well-being is a measure of the quality of life and the form of fulfilling of people needs, the conditions of their inclusion in the system of social production. d. acemoglu and j. robinson, in their study “why nations fail”, emphasized that the condition of its maintaining and grows is efficiency of social and economic institutions of society (mechanisms, rules, rules, regulations, incentives) (acemoglu & robinson, 2016). the effectiveness of such institutions depends on the nature of political institutions that determine the distribution of power and property, the motives of people and business structures. a new institutional evolutionary and cyclical information and innovation paradigm has been adopted as a modern basis for national welfare research. its bases are “three components: quality of population (health and education), self-sufficiency (income and employment), basic environmental / living conditions: natural (degree of pollution) and social (provision of basic services, security, degree of human rights realization etc.)” (kolyadych, 2016). various aspects of the social responsibility of economic entities are considered in the context of the paradigm and strategy of sustainable development as its basis. prominent contributions have been made by such prominent scientists as: f. ackerman, m. albert, р. bauer, s. wartick, d. votaw, d. wood, p. drucker, j. elkington, a. carroll, р. kotler, р. cochran, m. kramer, d. swanson, s. sethi, w. frederick, f. hayek, w. hoyer and others. this issue is being actively developed in ukraine. the formation of its conceptual and holistic foundations, the adaptation of world experience to the realities of the ukrainian economy were facilitated by the works of m. bukovynska, o. hrishnova, a. kolot, a. zinchenko, v. osetskyi, s. mochernyi, m. saprykina, a. chukhno. features of csr implementation by transnational companies were investigated in the scientific publications of v. mazurenko, m. kiriakova, i. iksarova. qualitative and quantitative aspects of this issue were considered in the publications of o. berezina, v. yevtushenko, n. kovalchuk, s. levytska, o. oliynyk, n. tovma. the problems of improving the methodology of planning, accounting, control of measures and means for providing csr were reflected in articles of v. rovenskaya, a. berzhanir, g. chirva. the analysis of the relationship of csr with the general policy of the state was carried out in the scientific works of l. barannyk, l. boyko, m. karlin. the search for new paradigms of social development, the development of tools for the organization and interaction of economic actors remains a relevant topic of research, the practice of its formation and adherence. adaptation in the society of the ideas of social responsibility in business models, development and introduction of new models of social interaction, positive practice of dialogue between business and society becomes a time requirement. 3. theoretical principles of social responsibility as a social good and social institute the category of “social responsibility” is a complex notion that reflects the fundamental values of society. baltic journal of economic studies 27 vol. 6, no. 3, 2020 responsibility is considered in terms of dependence on someone or something, ability and willingness to perform moral and spiritual obligations and legal norms (kolot, 2013). social responsibility is considered to be a “voluntary management paradigm based on the consideration of social and environmental determinants of development” (ovsyanyuk–berdadina, 2019). this remedy and motive for the internal regulation of the activities of public relations entities have always been regarded as a significant social good. the content of the category “social good” reflects the basic principles, the highest values and norms of understanding of human being. the concept of “good” is an ethical category that is used as a determinant and an important methodological tool for analyzing reality. the common good is regarded as the highest moral criterion for evaluating the actions of the entities of society, the system of its values and the hierarchy of goals as a result of its legislative and regulatory organization. in the political and economic spheres, the concept of the “common good” refers to the problem of social goods and the principles of their distribution among citizens. in studies of social problems, l. barannyk says, “scientists often identify the concepts “social” and “public” without defining the differences between them” (barannyk, 2011). first of all, it is necessary to emphasize the multidimensional concept of “social” (barannyk & datsenko, 2019). the term “social” is interpreted broadly and narrowly. in a broad sense, it refers to “society in general as opposed to nature and is synonymous with public”. in the narrow-minded approach, it is “a method of interaction between social groups, strata and individuals as representatives of groups, strata, communities, their position and role in society” (korolova, 2015, p. 53). the concept of “social good” expresses the degree of coherence of actions of individuals, business structures and society as a whole concerning maintaining of living conditions, reducing of the impact adverse factors on them. the categories “social responsibility” and “social good” are interrelated. the moral requirements are their ethical underpinnings. just like the concept of “social good”, the category “social responsibility” is not clearly defined, because it reflects the system of values of society. it is broadly interpreted as a set of different interrelated responsibilities (legal, moral, economic, political, professional, etc.). political scientists’ attention is focused on the social responsibility of the state. economists emphasize on the social responsibility of business for the consequences of economic activity. lawyers insist on legislative regulation of obligations and sanctions for non-compliance with established norms as social regulators. philosophers prefer ethical aspects: freedom, morality, duty, behavior. a narrow approach requires determining the extent, to which the entity accepts the socially important goals of society. the readiness for such actions is manifested in compliance with social norms. it has no clear regulation, it is not a means of coercion, it has arbitrary forms. it can be a motivational and limiting factor of the activity. vital activity of society is multi-faceted. the system of its management must take into account the interdependence of the individual, the state and business structures. mutual responsibility is a social mechanism for reconciling their interests. the content and levels of responsibility depend on the place of society’s entity in its social hierarchy. the citizen is responsible for the consequences of his or her own actions. the state is responsible for the formation of a favorable macroeconomic environment, definition of strategic goals of country’s development. business structures are responsible for the effectiveness of management decisions, their impact on the development of the organization and society. significant influence on this process is carried out by the peculiarities of the enterprise’s sectoral affiliation, goals of its activity, size and location, participation in international business, ethical principles of company owners, etc. the idea of socially responsible behavior of economic entities is gradually becoming the basis of public consciousness. it has become a significant message for business in formulating strategies for its activities. today, as a rule, the concept of “corporate social responsibility” refers to the responsibility of business for all entities of society (partners, consumers, employees of the company, etc.) (kovban & kohut, 2019). the stages of its development and implementation in projects and programs are reflected in the concepts of corporate social responsibility (csr) (kolot, 2013). in 1950-1970s, h. bowen (bowen, 1953), k. davis (davis, 1960), a. carroll (carroll , 1991) developed the basic concept of “corporate social responsibility”. it underpinned the concept of “corporate social responsiveness”, which was formed in 1970-1990s by r . ackerman (ackerman, 1973), a. carroll (carroll, 1991), w. frederick (frederick, 1986). the necessity to meet the requirements of sustainable development is reflected in the concept of “corporate social performance” (csp). significant achievements in its development in the 1980-2000s were made by the works of s. sethi (sethi, 1975), a. carroll carroll (carroll, 1991), s. wartick (wartick, 1985) d. wood (longsdon & wood, 2002), etc. they became the basis for modern theories focused on strengthening of the social mission of business structures: – “corporate accountability” (report on non-financial activities of the organization, social status of labor resources, etc.); – “stakeholders” (employees, buyers, shareholders, suppliers, territorial communities, the public, media, state and district authorities, environmentalists, etc.); – “voluntary” concept (the obligation of the entity to strive to achieve long-term goals, in which society is interested); baltic journal of economic studies 28 vol. 6, no. 3, 2020 – “proactivity” (as a means of responding to contemporary challenges); – “corporate citizenship” (the activity of the organization is related to the realization of the rights and duties of individuals); – “corporate sustainability” (assesses the social and economic impact of the organization on the internal and external environment. new business strategies are developed from the standpoint of sustainable development ideas (the so-called “triple bottom line”: the triple goal of sustainable development for business) by j. elkington (people, planet, profits)” (elkington, 1999); – “blended value”. targeting business methods and goals for both profit and social value and related revenue (transforming our world: the 2030 agenda for sustainable development, p. 42), (zinchuk & levkivskyy, 2019). corporate social responsibility is focused on the internal and external environment (popadyuk & luchyk, 2019). in the internal environment, it is mainly focused on employees, increasing productivity and improving professional standards, protection and safety of work, compliance with the requirements of labor law, the implementation of social programs. it is emphasized on the importance of propely paid taxes and production of quality products. its effectiveness depends on the efficiency of economic activity and the scale of the enterprise, the policy in the sphere of remuneration and the organization of social and labor relations. as a rule, the consequence is to increase the reputation of the company, to create a safe environment, to increase the confidence of stakeholders. the external component of corporate social responsibility concerns compliance with ecological principles of production activity, ensuring quality standards of production, interaction with local communities and assistance in crisis situations, sponsorship and charity, participation in national socioeconomic programs. the result is the formation of a safe environment of being, adherence to international norms and standards of socially responsible behavior, enhancing of the company reputation. the external component is not governed by applicable law. it is clearly vague and therefore contradictory. its features significantly depend on the goals of the organization, its location, the specifics of the industry. the assessment of the effectiveness of the social activity of the company, its monitoring and control is carried out by a system of indicators, which are divided into three groups. the first are indicators of social responsibility to employees: working conditions, remuneration, bonuses, hours worked overtime, staff turnover, training and learning outcomes, gender and age workforce structure, number of workers with disabilities, number of workplace incidents, evaluation of the company by employees. the second are environmental indicators: the impact on the environment and its costs, the use of secondary raw materials, energy consumption and energy efficiency, waste management, the number of penalties for non-compliance with environmental standards. third are indicators of company behavior on the market: customer complaints, complaints about unfair advertising, penalties from the antimonopoly committee, providing consumers with better service, etc. (ivanytska, 2015). therefore, social responsibility has many aspects: political, moral, legal, economic. it has its dimension. it is the degree of fulfillment by the entity of his or her rights and obligations, the acceptance of socially important goals of society by him or her, the recognition of the principles of social justice, the consent to pay high taxes to meet public needs and social protection. adherence to its principles reflects the balance achieved in society with respect to the needs of the population and the agreement of business structures and the state to provide them. other factors also play a significant role. in particular, the degree of state regulation and the perfection of the institutional environment; the development and strength of influence of civil society; state and strategic priorities of socio-economic development of the country; work and business ethics of economic activity; traditions, national and religious values of the society; politics, law, culture; public priorities; management ideology. 4. the european practice of formation and realization of corporate social responsibility depending on the role of the state and the mechanism of interaction between the entities of social relations, the degree of voluntariness to implement social programs is conditionally distinguished three models of social responsibility: the american, european and asian ( japanese). some authors extend their composition to seven or more: american (us), european (continental), british, scandinavian, asian ( japanese), african, brics models, etc. (kovban & kohut, 2019). in the liberal american model (usa, canada, the english-speaking states of africa and latin america), government intervention in the economy is limited. social responsibility is realized mainly in the form of charity, philanthropy, volunteering on a voluntary basis and principles of moral obligation of owners, management of companies. public business activity is encouraged by the government in the form of tax cuts and supported by the public. in the japanese model, the focus is on the internal environment of the company. the role of the state is significant. the policy of equalization of incomes of the population is being implemented. a high level of collectivism is inherent in the solution of socio-economic problems. the european model of social responsibility is embodied in two forms: continental and anglo-saxon. baltic journal of economic studies 29 vol. 6, no. 3, 2020 the model of central europe (austria, germany, france) has a high degree of state regulation of social and labor relations while preserving the broad independence of enterprises and trade unions. the northern european model (belgium, norway, sweden) is based on active state regulation of social and labor relations at all levels (individual, business, state). the economic goals of the company should be in line with the socio-economic and political interests of the stakeholders and the society as a whole. the uk (anglosaxon) model combines elements of the american (high degree of voluntary behavior of companies in this area) and the continental european model (government incentives and regulatory actions to formulate behavioral strategies). the european model focuses on economics, employment and the environment. the dynamic changes of the modern world have contributed to the modification of models of economic activity. they encourage a change in the structure of the economy, governance mechanisms, the development of effective strategies for action and competition. indicators of successful business models and competitive advantages are new production and market entry technologies, new management methods, and highly qualified personnel. at the same time, social risks are increasing. states have limited capacity to ensure a stable socio-economic dynamic. under these conditions, the social dialogue of business and society is given particular weight in developed countries. at the beginning of the 21st century, most european countries had a nearly balanced system of benefitsharing and financial burden-sharing in society. the state retains responsibility for socio-economic development. in europe, socially responsible company behavior is integrated into a coherent socio-economic policy and regulated by the state. the criteria for socially responsible business are honest tax payment; compliance with the requirements of international and national legislation; production of quality products; development of company social programs; participation in social projects of regional and general scale; environmental protection; charity projects etc. adherence to the principles of social responsibility becomes a priority of the individual, the state and business. promotion of the ideas of social responsibility of the european companies was acselareted by creation “the european business network – csr europe” (european business network) in 1995. adopted in 1997, the global reporting initiative to develop standards for corporate social (non-financial) reporting has become a benchmark for csr in europe. its further development was facilitated by the global compact (2000) (un global compact). the global compact sets out ten basic principles of corporate social responsibility. the procedures and practices of conducting socially responsible business (organizational management, human rights, labor relations, ethical operations, environmental protection, consumer protection, development of territorial communities and cooperation with them) are outlined. the forms of preparation of social (non-financial) reporting of the organization are defined. it should reflect the environmental, social, managerial aspects of the company’s activity. they are increasingly integrated into the organization’s management system. the adoption of the “green paper” program (promoting the european structure of csr) in 2001 stimulated the development of its strategies, tools and mechanisms by the eu member states (green paper). appendices to this document were: – the “eu environmental action plan”. in connection with the preparation of the eu budget for 2021-2027, the european commission has proposed an increase of almost 60% of the financing of the eu environmental protection and climate change program – life (5.45 billion eur budget) (eu environmental action plan); – the “general recommendation and audit system” (emas) – recommended csr assessment and reporting system; – the “european eco-efficiency initiative” (eeei) – european expertise and expert institute (integration of environmental performance principles into companies' industrial and economic strategic plans); – the “integrated product policy” (“ipp”) – monitoring the degree of environmental impact of production processes, stimulation the introduction of the most efficient production methods; – the european parliament resolution “eu standards for european enterprises in developing countries: towards a european corporate code of conduct”; – “csr europe 2020” strategy: a strategy for smart, sustainable and inclusive growth (csr europe 2020 strategy); – “csr europe 2030” strategy. five key areas of the sustainable development agenda are identified: promoting high environmental, social and governance standards at the international level; the stability of ecosystems by strengthening local communities; impact and change – the focus of the network; implementation of common csr platforms and value chain; increased transparency and active involvement of stakeholders at all levels (csr europe 2030 strategy). the csr policy of governments is based on a number of key european and international documents, namely: (corporate social responsibility & responsible business conduct) directive 2014/95/ec on nonfinancial reporting; communication from the european commission “europe 2020: a strategy for smart, sustainable and inclusive growth”; human rights and democracy action plan (2015-2019); communication on the next steps towards a sustainable european future; un global compact; un guidelines on business and human rights; un agenda for sustainable baltic journal of economic studies 30 vol. 6, no. 3, 2020 development for 2030; iso 26000 guideline on social responsibility; oecd guidelines for multinational enterprises; oecd guidelines for due diligence for responsible behavior; principles of social policy for multinational enterprises of the international labor organization; oecd guidance on good practice verification procedures (csr ukraine). in the eu, state regulation of this process is combined with an active role in promoting corporate social responsibility of intergovernmental structures, in particular the committees of the european commission (corporate social responsibility, responsible business conduct, and business & human rights: progress overview, 2019). the components of the international mechanism of formation of socially responsible behavior of entities are the code of business ethics, declarations, charters, international standards of social responsibility. these standards are used by transnational corporations, business structures, governments, and civil society. they are based on specific criteria and reflect sustainable development strategies. governments in europe are encouraging economic actors to comply with these standards. large european companies reflect the results of their socially responsible activities (environmental and social performance) in financial and non-financial reporting (petrashko & martynyuk, 2019). information is used by organizational managers and stakeholders to make decisions. the world and european organizations pay particular attention to compliance with the international csr standards as a tool for ensuring the stability of the business environment. the requirements for the set of indicators and the quality of social reporting, the formation of socio-economic and environmental activities of organizations are presented in the gri (global reporting initiative) series. the system of criteria, principles, guidelines for integrating social programs into the activities of companies and reflecting them in social (non-financial) reporting is the standard aa1000 (acount ability). in 2018, a new set of aa1000 (aa1000ar) 2018 accountability, responsibility, reliability, sustainability and integrated stakeholder principles were developed to prioritize and respond to sustainable development issues to improve long-term performance (acountount ability, 2019). iso-9000 (international organization for standardization) standards define the parameters of product quality management. the iso-14000 series (14010, 14011/1, 14012) contains environmental management system standards. the iso 26000 guidelines on social responsibility (iso / dis 26000) recommendations for ensuring the effectiveness of socially responsible behavior of organizations of all types and in different countries are given, and the principles of voluntary compliance are formulated. the sa-8000 (social accountabiliti international) standards are designed to develop and adhere to the ilo's recommended work organization systems. to assess public needs, 100 international corporations are ranked annually. the top ten of such leading companies are listed in table 1. thirty of the fifty internationally socially responsible corporations listed in the “2020 global 100 ranking” are leading european companies (from france, denmark, the netherlands, germany, finland, austria) (global 100 ranking 2020). the methodology for compiling this rating is provided in “the 2020 global 100: overview of corporate knights rating methodology” (the 2020 global 100: overview of corporate knights rating methodology, 2020). according to a. kovban and i. kohut, social responsibility has become a global business concept that defines key ideas and a modern format for entrepreneurship (kovban & kohut, 2019). the current situation with covid-19 is testing the social responsibility policy of all entities of the economy for viability and morality. as practice has table 1 top 10 out of 100 international companies with the best csr (dated of january 21, 2020) rank 2020 rank 2019 company peer group country overall score 1 4 orsted a/s wholesale power denmark 85.20% 2 1 chr. hansen holding a/s food and other chemical agents denmark 83.90% 3 3 neste oyj petroleum refineries finland 83.64% 4 14 cisco systems inc communications equipment united states 83.59% 5 48 autodesk inc software united states 82.84% 6 58 novozymes a/s specialty and performance chemicals denmark 82.70% 7 35 ing groep nv banks netherlands 82.53% 8 enel spa wholesale power italy 81.77% 9 8 banco do brasil sa banks brazil 81.72% 10 algonquin power & utilities corp electric utilities canada 80.89% source: global 100 ranking 2020 baltic journal of economic studies 31 vol. 6, no. 3, 2020 shown, governments and businesses strive to meet the social expectations of citizens. the factors determining the success of the measures taken were the efficiency of the activities of the state structures, their ability at all levels of management quickly execute government decisions and negotiate with the public. also, the effectiveness of the health care system, the ability and willingness of the population to comply with the restrictions, the willingness of business organizations to suffer short-term decline in profitability to comply with the ethical principles of the company, the ability to retain prepared workforce and production, financial support for their employees. rigorous quarantine measures in the long term can lead to significant socio-economic problems (bankruptcy of companies, unemployment, etc.). in order to prevent the total poverty of the population, to support the economy and the solvency of the population, the governments of the countries are taking unprecedented measures. business assistance, payroll, parent payments, cheap loans and tax deferrals are provided at the state expense. as of april 21, 2020, 205 countries and territories were affected by the covid-19 coronavirus. 2481287 cases were reported (khronika koronavirusa v ukraine i mire). to prevent the spread of infection, society is consciously suffering significant economic and social losses. the uk government allocates 39 billion usd to support the most vulnerable categories of population, self-employed persons, the national health system and the economy. the eu allocates 230 million eur to combat the covid-19 pandemic. the italian government is allocating 25 billion eur to overcome the emergency. the eu is channeling 7.5 billion eur to help the hardest hit by covid-19 countries (italy, france, germany). to mitigate the effects of the virus in the affected countries, the imf spends $ 50 billion, the world bank – 12 billion usd. in order to prevent the economic downturn, australia is allocating 11.4 billion usd. canada has set up a 750 million usd response fund to provide provinces and territories with the prevention and impact of the pandemic (italiya vydelit 25 mlrd yevro na bor'bu s koronavirusom; voyna s covid-19). in order to overcome the economic downturn, reducing unemployment, countries are taking anticrisis measures to overcome the recession and minimize the effects of the pandemic. italy offered to issue bonds. the proposal was supported by 11 eu member states, including france and spain. however, germany, austria and the netherlands opposed. for this purpose, estonia has allocated 4 billion usd that can be borrowed from international financial institutions to reduce excise taxes on energy resources, refinance loans, and debt restructuring. latvia allocates 1.5 billion usd to support small and medium-sized businesses, and installed tax exemption for a year. lithuanian government provided 3 billion usd on tax benefits to business entities, provided that their jobs are retained (quarantine on the economy: what anti-crisis measures are taken by other countries?). 5. implementation of social responsibility in the strategy of development of the ukrainian enterprises for ukraine, the experience of the eu countries in coordinating business and civil society action is up-todate and actively studied (yevropeysʹki biznes-praktyky ksv). standards of socially responsible business behavior are gradually being introduced into business practices (saprykina, 2019). csr ukraine, “csr development” center launched a new online course, “non-financial reporting” on impactorium platform in 2020. representatives of the ukrainian companies “nova poshta”, “energoatom”, “auchan”, “astarta”, “coca-cola” provide practical advice on preparation of social (non-financial) reporting. according to a survey conducted by the “csr development” center, in 2018, 13% of the ukrainian companies prepared non-financial reports from 78% of companies globally (csr ukraine). the center “corporate social responsibility development” is operating in ukraine as part of the “capacity building of the national contact point on responsible business conduct” project, supported by the embassy of the netherlands in ukraine. there is also an advisory council for the development of the national concept for the development of corporate social responsibility, the community for corporate social responsibility. a national csr strategy is being developed by the initiative group within the framework of a public platform (120 participants) open to accession. business csr ratings are compiled. the “csr development” center is actively working in this area. the center presents the results of the annual evaluation of the largest ukrainian companies for disclosure of csr on the criteria of the global transparency index (zinchenko, 2017; saprykina, 2019). table 2 shows the overall results of the transparency index for ukrainian companies in 2011-2017. in 2017, the average level of csr disclosure on the ukrainian companies’ sites remained low – 21.7% (2013 – 16.9%; 2014 – 17.1%) (zinchenko, reznik, saprykina, 2018; csr ukraine). according to a 2017 report, out of the 99 companies evaluated, less than half (41 companies) had higher than average disclosure rates. top-10 companies include jsc “myronivsky plant for manufacturing groats and feeds”, dtek, the state enterprise “national nuclear energy generating company “energoatom”, “arcelormittal kryvyi rih”, pc “lifecell”, jsc “naftogaz of ukraine”, pc “nova poshta” scm, pc ”carlsberg ukraine” (csr ukraine). among top-10 – 3 statebaltic journal of economic studies 32 vol. 6, no. 3, 2020 owned companies: jsc “naftogaz of ukraine, the state enterprise “national nuclear energy generating company “energoatom”, and the state enterprise “energoatom”. the average top 10 disclosure rate is 62.3%. out of 10 leading companies, 8 companies have prepared and posted non-financial reports on their sites. the average csr disclosure score was 35.6 out of 55 possible. this is almost three times higher than other companies. in 2017, only 16 ukrainian companies from the top 100 were placed on corporate sites their non-financial reports. two of them are state-owned companies (in 2014 the level of openness of state-owned enterprises was 12.8%. the index of private companies was slightly higher). only five companies have integrated sustainable development goals into their non-financial statements, including pc “carlsberg ukraine”. information on significant aspects of csr disclosed by the ukrainian companies on its corporate sites is insufficient (12.8 out of 55 points). the practice of labor relations, development and support of communities, environmental protection is mainly covered. issues of remuneration to management, programs of csr implementation in the supply chain, responsible marketing policies, and results of csr activities are poorly covered. they are mainly measured only by the companies that prepare the reports. however, they do not always provide this information in the relevant sections of the site. a positive development in csr in ukraine is the increase in companies that develop and implement anti-corruption and compliance policies (compliance with any internal or external requirements or norms), programs of implementation of csr in the supply chain. the level of transparency of activities of agribusinesses, energy and metallurgy companies has increased. the lowest level of transparency was observed in mining companies. public companies, more often than private ones, cover anti-corruption policy (adoption and promulgation of anti-corruption policy is a requirement of the law). private companies are more likely to raise concerns about community development and protection of the environment. international companies have a higher level of csr disclosure. compared to the ukrainian companies, international corporations’ websites are twice as likely to cover issues of human rights, programs and policies for csr implementation in the csr supply chain and csr objectives (zinchenko, reznik, saprykina, 2018; csr ukraine). an example of adherence to csr principles could be the activities of the french-ukrainian company “verallia-ukraine” of private joint stock company “consumers-sklo-zorya” (rivne region, ukraine). it belongs to the french company “saint-gobain”, which is part of the group of one of the world’s largest manufacturers of glass products “saint-gobain packaging” (canada). the company produces glass packaging for food and beverages. it is the market leader in ukraine. the products are shipped to poland, the czech republic, lithuania, romania, germany, france, italy and other countries. the main product market is the european (53% of sales) and ukrainian – 47%. the company is a member of the un global compact and strives to pursue sustainable development goals. in the 2019 report on social responsibility of company (pjsc “consumers-sklo-zorya”), it is emphasized that the mission of the company is in line with verallia's 4 values: customer care, respect for the people, compliance with the law and a careful attitude towards the environment, awareness of responsibility and result orientation, teamwork. accordingly, the company 's commitments under the csr initiative are built around three main areas: promoting environmental protection; table 2 overall results of the ukrainian companies website transparency index name of the company place 2011 place 2012 place 2013 place 2014 place 2017 score 2017 jsc “arcelormittal kryvyi rih” 4 4 2 1 4 71 dtek 1 2 1 2 2 79 scm 5 1 3 3 9 46 jsc “obolon” 3 -in 2011 – 3 4 4 31 25 pc “metinvest” 2 3 5 5 11 46 pc “carlsberg ukraine” -6 6 10 46 jsc “kyivstar” 6 5 7 6 23 28 pc “окко group” (concern galnaftogaz) 10 8 jsc “dneprospetsstal” 8 9 9 kraft foods ukraine (mondelēz international) 31 17 20 10 source: zinchenko, reznik, saprykina, 2018; kovalʹchuk, 2017 baltic journal of economic studies 33 vol. 6, no. 3, 2020 actions on the security and development of its teams; promoting community development. the main directions of its activity in this field are identified. in particular, to set an example for managing the environmental impact of an enterprise; development and protection of the company’s human capital; participation in the economic and social development of the community. the company has formed a fairly high number of competitive advantages. the ethical values of the company are proclaimed as follows: dedication to its business; respect for people; honesty, loyalty, solidarity; compliance with the law; reduction of harmful effects on the environment; observance of the rules of health and safety at work, ensuring the rights of employees; involvement of employees in daily compliance with standards and principles. the company sees its mission as a responsible economic partner in the development of innovative solutions that meet humanity’s global needs for development, energy conservation and ecology. the company's management strives to ensure a high level of both economic performance and human capital development. attention is drawn to the lack of comments on product quality and processing of all production wastes; prevention of all forms of risks, accidents, occupational diseases. the enterprise strategy is based on research and prevention activities. favorable conditions are created for the dissemination of knowledge and professional skills, there are training modules for all categories of employees, programs for upgrading the skills of staff. corporate social responsibility is implemented by the company both internally and externally. the company’s stakeholders are its partners, investors, customers, suppliers, community. since 2012, social networks have been used for communications. “verallia” adheres to international standards of production and quality, in particular, environmental control (iso 14001); quality (iso 9001); energy use (iso 50001); food security (iso 22000), the health and safety of the employees (ohsas 18001). “verallia-ukraine” private joint stock company “consumers-sklo-zorya” carries out permanent charitable activity. arrange it to increase the level of concretization, prompt and transparent implementation of financial transactions. four programs of assistance to children are being implemented: “rozhevi shchichky” (feeding children with health defects in four children’s boarding schools in the village of klevan, rivne district); “sonechko” (provision of boarding schools with heat, clothing, shoes); “viteretsʹ” (funds for children’s health improvement); “veselka” (activities for organizing children’s leisure). “verallia” constantly pays attention to establishing cooperation with the community. it is an example of socially responsible behavior based on the interests of consumers, stakeholders and society. certainly, large enterprises have advantages in the organization of corporate social responsibility. these issues are dealt with by managers. in ukraine, socially responsible business is in its infancy. forms of its manifestation are social partnership, charity, social dialogue. a growing number of companies are gradually and voluntarily integrating social responsibility into a systematic business strategy. for the implementation of social responsibility prevents the lack of unified standards of social responsibility of the company; weak economic position of most business entities in ukraine; confidentiality of information of most business structures; low level of corporate culture; insufficient development of charitable and social activities of state and non-governmental organizations. the situation was complicated by the effects of the covid-19 coronavirus pandemic. 6. conclusions in modern conditions, there is a systemic and profound transformation of socio-economic relations. it is due to the rapid development of scientific and technological progress on the basis of the fourth industrial revolution, the creation of artificial intelligence, an economy of industry 4.0. the technological way of life, the labor market, living space, life of the population, etc. are undergoing changes. a fundamentally new foundation of productive forces is being formed. information and computer technologies have accelerated the process of creating a network economy and network society. in today’s difficult conditions there is a change in the structure of the economy, governance mechanisms, development strategies and competition. these trends are exacerbated by the covid-19 coronavirus pandemic, which has prompted the accelerated transfer of business activity from all economies to the internet. therefore, socio-economic processes need to be considered in three temporal dimensions: before the pandemic, during it and forecasts for the future. although, the choice of a certain behavior of the subjects of society is a form of realization of its social and economic freedom, its regulation by social norms depends on the decisive influence on this process of state institutions, the level of responsibility of socio-economic and political life. therefore, social responsibility is a social good and a complex concept that reflects the fundamental values of society, ensures the system of socio-economic relations, concentrates understanding of social values, ethical principles of behavior of social partners, the strategy of society. the current socio-economic situation with covid-19 actualizes the search for the principles of non-conflict interaction of business, state and society. it is necessary to further 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(2019). ksv vertykalʹno intehrovanykh struktur ahrarnoho biznesu yak umova staloho rozvytku [csr of vertically integrated structures of agrarian business as a condition of sustainable development]. ekonomika apk, vol. 1, pp. 39–49. baltic journal of economic studies 135 vol. 5, no. 3, 2019 corresponding author: 1 zhytomyr state technological university, ukraine. e-mail: novak_os@ukr.net orcid: https://orcid.org/0000-0002-5671-0306 2 kherson state university, ukraine. e-mail: tatiana@osadcha.com orcid: https://orcid.org/0000-0003-4258-0907 3 zhytomyr state technological university, ukraine. e-mail: petruk6@gmail.com orcid: https://orcid.org/0000-0002-5351-5679 doi: https://doi.org/10.30525/2256-0742/2019-5-3-135-144 concept and classification of derivative financial instruments as a methodological precision on their regulation in the financial services market oksana novak1, tetiana osadcha2, oleksandr petruk3 abstract. the urgency of the research topic is caused by the rapid growth of capital markets and the emergence of all new financial instruments, the complexity of their structure and the transition beyond the regulatory influence of supervisory authorities. discussion issues on the identification of derivatives, as well as their certain types, create significant problems with their valuation, the correctness of accounting, and the application of regulatory measures. inconsistency in the interpretation of derivative financial instruments nature and their certain types is also present in domestic legal acts. therefore, until the elimination of these shortcomings, derivative financial instruments create additional risks for their owners – financial institutions, as well as for creditors and depositors. the purpose of the research, conducted in the article, lies in the clarification of derivatives nature and developing an appropriate classification of their types in order to its further use with a view of regulation. the methodological basis of the research. the methodological basis of the study is a dialectical approach to the understanding of the essence of derivative financial instruments; general scientific methods of knowledge of phenomena and processes (monographic, abstract-logical, synthesis, comparison, generalization), analysis of legal acts in the part of treatment of derivatives, derivative financial instruments and derivative securities, methods of grouping systematization and generalization in developing the classification of derivative financial instruments. scientific results. it has been established that in order to maintain the stability of financial markets and their participants, the transformation of regulatory measures should be a permanent development and modification of the financial instruments that are being rotated. various approaches to the interpretation of derivative financial instruments essence in normative legal acts and scientific literature have been analysed in order to improve the regulation of their issuance and circulation. this made it possible to streamline the conceptual apparatus and to group certain types of derivatives according to certain classification grounds. the basis for classification is the concept of “derivative financial instruments” as the broadest, which includes derivative securities and term contracts (derivatives). the concept of derivatives and derivative securities are delimited based on the study of terminology. it was established that derivatives are standard documents that certify the right and/or obligation to purchase or sell future securities, tangible or intangible assets, as well as funds or make payments on terms and conditions specified by them. however, in some cases, derivatives may acquire features of derivative securities, in particular, when issued through emission and freely traded in markets and bring income (losses) to their owner as a result of changes in their market value. the practical significance. the practical value of the research is the possibility of using the developed classification for the needs of emission regulation and the circulation of derivative financial instruments. key words: derivative financial instruments, derivative securities, term contracts, asset securitization instruments, hybrid securities, classification of derivative financial instruments. jel classification: g01, g14, g28 baltic journal of economic studies 136 vol. 5, no. 3, 2019 1. introduction integration and globalization processes contribute to the rapid inclusion of financial institutions in the global financial space. opportunities for access to foreign capital markets, on the one hand, open the broad preconditions for the growth of profitability, but on the other hand, they limit the possibility of the regulatory influence of the state and, therefore, create additional threats. financial institutions do not always work in the interests of clients or national interests. first and foremost, their policy is aimed at protecting their own economic interests by attracting cheaper sources of funding and increasing profitability, including the use of the latest financial technologies: the securitization of assets, conclusion of fixed-term contracts, and use of other derivative financial instruments. at the same time, unlimited growth of the secondary stock market and the number of potentially defaulting financial instruments threatens not only their direct holders and issuers – financial institutions but also their clients. therefore, the issue of regulating the issuance and circulation of derivative financial instruments in the financial services market becomes particularly relevant in the post-crisis period. the use of adequate regulatory measures at the national level needs to streamline both – the conceptual apparatus of derivative financial instruments and the systematization, and further classification of their types in order to identify their potential risks as for the issuer, as for the investor. therefore, the purpose of the article is to study the essence of derivative financial instruments and to develop a classification of their types for the purpose of its further use for regulatory purposes. in order to achieve this goal, it is necessary to review the scientific literature on the issues of regulation of derivative financial instruments, to study approaches to the essence interpretation of the derivative financial instruments in legal acts and scientific works, to identify the characteristic features of derivative securities and term contracts, and to determine their place in classification of derivative financial instruments. the methodological basis of the study is a dialectical approach to the understanding of the essence of derivative financial instruments; general scientific methods of knowledge (monographic, abstract-logical, synthesis, comparison, generalization), analysis of legal acts in the part of treatment of derivatives, derivative financial instruments and derivative securities, methods of grouping systematization and generalization in developing the classification of derivative financial instruments. 2. literature review since derivative financial instruments have become widespread in financial markets relatively recently, and continue to grow and become more complicated, most of the works of both foreign and domestic scholars are mainly concerned with their essence and circulation. in particular, varieties of derivative financial instruments were considered in their writings by f. j. fabozzi (fabozzi, 2007), jan job de vries robbe and paul u ali ( jan job de vries robbe, ali paul, 2008), a. b. feldman (feldman, 2003), joseph sinkey (sinkey, 2007), h. p. bär (bär, hans peter, 2006), l. prymostka (prymostka, 2001), s. z. moshenskyi (moshenskyi, 2018), o. v. dziubliuk (dziubliuk, 2009), l. v. kuznetsova (kuznetsova, abramova, 2016) and others. at the same time, the conceptual framework for regulating the issue and circulation of derivative financial instruments in the financial services market has not yet been developed. the root causes of the lack of thorough research on the above issues are the lack of common approaches to the interpretation of derivative financial instruments and the systematization of their types. in addition, it should be noted that one of the main ideas for the creation of most derivative financial instruments (especially credit) was the desire of financial institutions to circumvent the requirements of legislation on the minimum size of capital. in the work “securitization and law” (written before the financial crisis of 2008), the authors deal with certain aspects of banking regulation, however, regulating nonissuance processes and the circulation of securitization and credit derivative instruments, and their use to avoid the requirements of the basel committee regarding capital adequacy. in particular, researchers note that the build-up of equity or the formation of reserves for credit operations leads to a decline in the profitability of a commercial bank. prior to the adoption of the basel accords, the strengthening of regulatory measures by the states on domestic markets led to the outflow of capital in countries, where there were milder capital adequacy requirements ( jan job de vries robbe, ali paul, 2008). in current conditions, when most countries backed the basel accord on capital adequacy, the chaotic capital outflow was stopped, but financial institutions began to develop other methods that would allow circumventing restrictions and raising profitability. these methods are presented in the financial markets by instruments of classical and synthetic securitization, as well as by credit derivatives that enable to write off long-term assets with high risks or transfer risk assets to other market entities, which reduces reserves and increase profitability by investing funds released into new loans. however, jan job de vries robbe and ali paul in their book stressed that “derivatives, as risk insurance instruments, are also the source of new risks in the operations in the global financial market. the main trouble of derivatives is that their operations, by allowing the use of relatively small amounts of liquid assets, generate not just a great income, but losses (leverage) as well ( jan job de vries robbe, ali paul, 2008). for example, the authors show the bankruptcy in 1995 of the investment barings bank, whose history extends back 233 years of activity. the reason for bankruptcy was that baltic journal of economic studies 137 vol. 5, no. 3, 2019 a trader of singaporean bank branch nick leeson lost in a very short time in the futures and options contracts on the index “nikkei 225” 1,3 billion dollars ( jan job de vries robbe, ali paul, 2008). considering the issue of regulating the treatment of derivatives and other derivative financial instruments, j. sinkey jr., even mentioning about the bankruptcy of barings bank, notes that both buyers and sellers of derivatives should use mechanisms for adequate internal control. the researcher draws attention to the fact that since “most derivative transactions are ‘zerosum games’, the crises of 1994 and 1995 did not require government intervention or regulators. internal control and external market monitoring in such cases are better than interference by regulators,” – sums up the author (sinkey, 2007). however, the financial crisis of the 2008 year showed all the disadvantages of overly liberal approaches in regulating speculative transactions with derivative financial instruments. in the monograph “chaos and synergy. the securities market of the post-industrial era” s. z. moshenskyi describes in detail the crisis of 2007–2009 and the bankruptcy of the largest financial institutions that went bankrupt mainly because of derivative financial instruments. in particular, the author mentions the unprecedented case of the allocation of financial assistance from frs to the investment bank bear stearns, one of the major participants in the market of credit default swaps, issued for “toxic” assets that have been burdening the balance sheets of other banks. subsequently, with the assistance of the frs, the financial conglomerate bank of america absorbed the virtually bankrupt merrill lynch investment bank (the reason for financial turmoil was the excessive emission of cdos that fell in price). when banks formed troubled loan assets, it was unprofitable to take them into account on the balance sheet, as it is necessary to create additional reserves in order to maintain the permissible ratio of equity and risk assets. therefore, banks did not take into account portfolios of mortgage loans on their own balance sheets but transferred to the balance sheets of their non-banking structured investment vehicles (siv), which were not subject to bank capital requirements. in such companies, mortgage bonds were also kept for very large sums, which banks united in a pool with the emission of cdo. however, full siv revenue was then transferred to banks (moshenskyi, 2018). the first in the us history was also the case of nationalization of the life insurance company aig, whose leadership until the collapse of the real estate market has opened a long position in credit default swaps by 50 billion of the us dollars; the total amount of loans provided by the us government to aig amounted up to 223 billion of the us dollars (moshenskyi, 2018). the crisis of 2007–2009 has caused a number of defaults not only in the usa but also in countries of europe and asia, as financial institutions in search of high incomes willingly invest in high-risk but undervalued derivative financial instruments: cdo and cds. some scholars even nowadays adhere to the principles of liberalizing financial markets, as the cause of the crisis is seen in over-the-counter derivative financial instruments. in particular, the problem of managing the risks of trading in derivative financial instruments is considered in his work by peter norman. in his study, the author analyses the bankruptcy of major financial institutions in 2008 and recognizes the high risks of otc credit derivatives that caused them. however, p. norman considers sufficient measures to prevent further crises – the transfer of otc trading in credit derivatives clearing the participation of central counterparties (acting buyers to sellers and sellers to buyers at the specific agreement and can ensure closing position traders formed reserves) and standardization of most forms of credit derivatives (norman, 2013). however, as shown, even partial closing of open positions in risky derivatives central counterparties not warned of large-scale defaults, and could not be, because the size of the reserves for the open position is often at a minimum – 10% of the potential deal. is there the threat of a global financial crisis today? obviously, there is such a threat because, although, the volumes of derivative financial instruments stopped their rapid growth, nevertheless, the tendency of growth and approximation of their volumes to precrisis indicators remains. in addition, statistics show the imbalance of commodity and financial markets. in particular, the volume of gross world product is 123 trillion of the us dollars (poodwaddle world clock, 2018) and the volumes of global market capitalization of derivatives (excluding traditional securities and structured securities) as of october 2017 amounted to about 544 trillion, which is 4 times more than the amount of assets, for which they are issued (desjardins jeff, 2017). in addition, in recent years, new financial asset markets have emerged, namely, the crypt market with high levels of volatility. and already in december 2017, the chicago stock exchange opened its first futures trading on the bitcoin – one of the most risky derivative financial instruments. in our opinion, taking into account the peculiarities of the domestic financial system, it is inappropriate and risky to adhere to overly liberal approaches to regulating transactions of financial institutions in the derivative financial instruments markets. in particular, the domestic banking system differs from the american type, namely, there are no investment banks in ukraine in the traditional sense and, based on the current legislation, all commercial banks have the right to raise funds on deposit accounts, and therefore, carrying out risky investments or other operations, they mainly take a risk of losing attracted funds. in addition, a funded pension system is being created in ukraine, which will give impetus to significant revenues from public funds baltic journal of economic studies 138 vol. 5, no. 3, 2019 to non-state pension funds and investment funds that, in search of high incomes, may resort to risky investments. in such circumstances, it is necessary to develop national approaches to regulating transactions of financial institutions with derivative financial instruments. at this stage, there are clear tasks: first, to determine the essence of derivative financial instruments (even in the legislation, there are no common approaches to interpretation and classification); and secondly, to develop a classification of derivative financial instruments, which will enable them to be grouped at risk level and further define approaches to their assessment and application of regulatory measures. 3. analysis of the regulatory framework for the interpretation of the essence of derivative financial instruments nowadays, there is no single approach to the interpretation of the concept of “derivative financial instruments” in the economic literature. quite often, this concept is identified with the notions of “derivative securities”, “secondary securities”, “derivatives”, “hybrid financial instruments”, and “hybrid securities”. thus, in the literature, the discussion on the definition of these concepts is still ongoing, as specific types of complex financial instruments undergo new modifications and acquire properties that are not characteristic of such instruments in their previous version. such modifications of financial instruments allow them to go beyond the legal regulation and regulatory influence of supervisory financial authorities. at the same time, the interchange of concepts leads to the practical problems of identifying a particular derivative financial instrument, the order of its assessment and reflection in the accounting system, as well as the order of formation of appropriate reserves to cover risks for it. since the international community seeks to unify the accounting and reporting system, and ukraine is actively involved in this process, it is advisable to consider the interpretation of conceptual concepts in ias and ifrs. the key concept in international standards is the notion of “financial instrument”, which means “...any contract that results in a financial asset from one entity and a financial liability or equity instrument from another entity” (verkhovna rada ukrajiny, ias 32, 2012). based on the essence of the concept, it includes term contracts (derivatives), as well as traditional securities, since both of them lead to the emergence of a financial asset of one entity and financial liability of another one. ifrs 9 financial instruments defines the term “derivative”, which is defined as “...a financial instrument or another contract within the scope of this standard, which has all three of the following characteristics: a) its value varies in response to changes in a specific interest rate, financial instrument price, commodity price, exchange rate, price or interest rate index, credit rating or credibility index, or another variable, provided that in the case of a non-financial variable, this variable is not specific to a to the contracting party (sometimes called the base one); b) which does not require initial net investment or initial net investment less, than what would be required for other types of contracts that are expected to have a similar response to changes in market factors; c) to be repaid on a future date” (verkhovna rada ukrajiny, ifrs 9, 2012). it should also be noted, that there are no definitions of “derivative securities”, “hybrid securities” and “fixed-term contracts” in the international accounting standards and financial reporting standards. so, for further differentiation between the concepts of “derivative financial instruments”, “derivative securities” and “derivatives”, we will analyse the norms of domestic legislation, regarding the interpretation of the above concepts. the law of ukraine “on securities and the stock market” defines several key concepts that allow distinguishing between financial instruments, securities, and derivative securities. in particular, financial instruments in the law “on securities and the stock market” are interpreted as “...securities, term contracts (futures), interest rate contracts (forwarders), term contracts for exchange (for a certain date in the future) in case of prices dependence from the interest rate, the exchange rate or the stock index (interest, exchange rate or index swaps), options that give the right to purchase or sell any of these financial instruments, including those that provide monetary form of payment (exchange rate and interest options)” (vidomosti verkhovnoji rady ukrajiny, 2006). so, domestic legislation gives a list of financial instruments, which include both securities and term contracts. however, a security is perceived as “a document established form with relevant details that certifies monetary or other proprietary right, defines the relationship between the issuer of securities (the person, who issued the security) and the person, who has the right to security, and provides performance obligations related to such securities and the possibility of transferring rights for security for other individuals” (vidomosti verkhovnoji rady ukrajiny, 2006). thus, securities in ukraine may include those financial instruments that are issued on the basis of emission, certify monetary or other property rights. it means that such a derivative financial instrument, as a forward contract, cannot be a security. in addition, the law also treats the concept of “derivative securities”, which refers to securities, whose issue and circulation mechanisms are related to the right to purchase or sell securities, other financial and/ or commodity resources within the term established by the agreement (vidomosti verkhovnoji rady ukrajiny, 2006). the law of ukraine “on securities and the stock market” does not define the term “derivative” baltic journal of economic studies 139 vol. 5, no. 3, 2019 but this term is defined in the tax code of ukraine and is interpreted as: “...standard document, certifying the right and/or obligation to purchase or sell future securities, tangible or intangible assets, as well as funds on the terms specified by it. the procedure for issuance and circulation of derivatives is established by law. the standard (typical) form of derivatives is approved by the cabinet of ministers of ukraine” (vidomosti verkhovnoji rady ukrajiny, 2010). derivatives, in accordance with the tax code of ukraine, include: swap, option, forward contract and futures contract. at the same time, the determining factor is the fact, that there are no identifying derivatives with security in the definitions. in particular, the swap is defined as a “civil agreement...”; the option is treated as a “civil-law agreement...”; forward contract – as “standardized civil contract...”, and a futures contract (futures) – as a “standardized term contract...” (vidomosti verkhovnoji rady ukrajiny, 2010). the analysed approaches to the interpretation of “derivative financial instruments”, “derivative securities” and “derivatives” indicate, on the one hand, the inconsistency of the interpretations in various legal acts and the lack of a common approach, and on the other hand, the significant differences between derivatives and securities, which do not allow them to be equated. 4. disclosure of concept of derivative financial instruments in scientific literature if we analyse the reference literature, then the great dictionary of modern ukrainian determines the “derivative” as “…created, derived, etc. from another similar (size, form, category, etc.).” in this case, derivative securities are treated as “...securities, whose release mechanism is linked to the right to purchase or sell financial and/or commodity resources” (busel, 2005). the etymology of the term “derivatives” was explored by feldman, who points out that the term “derivatives” originates from latin origin word “derivatus” and means “a derivative, created from something existing earlier.” the derivative is based on the movement (time change) of the level (profitability) and the mass of income (profit, margin) for current and future cash flows, directly or indirectly dependent on the movement (change) of income or other types, kinds, methods of cash investments (cash flows). there are hidden links in these dependencies, which are determined by a large number of circumstances (objective and exogenous, subjective and endogenous) in relation to financial markets. under the direct or indirect dependence, it is necessary to understand the features of the realization of the derivation (with a basis in the form of a trade item, in the form of an abstract calculated value based on the price of the underlying asset, etc.). in this case, the scientist includes futures, options, swaps, as well as their combinations that realize the synergistic effect, to derivatives of financial products-tools (financial contracts) (feldman, 2003). o. o. kvaktun identifies the concept of “derivatives” and “derivative securities”. in particular, the scientist states that: “...the derivative should be considered, first of all, as a contract for a term, an agreement between two persons, which has (or may) be fulfilled in the future. derivatives are precisely derivative securities because, being the assets themselves, they fix an agreement on other assets. there is no derivative without a reference asset. the issuance of derivatives is always secondary to the basic asset, lying in their basis” (kvaktun, 2014). a. n. burenin adheres to an opposite approach to the derivatives’ interpretation. the scientist introduces the concept of “term contract”, which he understands as an agreement on the future supply of the contract subject (burenin, 1998). at the same time, the author specifies that term contracts have another title, namely, “derivative assets” but argues that derivative assets (fixed-term contracts) and derivative securities perform different functions, and therefore, they are not identical concepts. the author substantiates his opinion as follows: “first, the valuable paper is the title of the property for certain property or debt capital. a term contract is only the right or obligation to put or buy in the future base asset. it serves as an organizational delivery tool. secondly, the main function of the stock market is to mobilize cash. the function of the term market is to hedge the price risks and to agree on future business plans. thirdly, securities typically generate income in the form of dividends or interest; there are no such types of income on fixed-term contracts” (burenin, 1998). researchers v. sheludko and v. virchenko consider derivatives of the international market, which include futures, options, forwards, swaps, agreements on forward interest rates, etc. they coincide with the same instruments that are in circulation on national markets, by title and content, but their issue and circulation is not a subject to the regulation of any country but is regulated by agreements, instructions, contracts, and other documents, existing in the international market (sheludjko, virchenko, 2014). thus, academics combine futures, options, forwards, swaps, forward interest rate agreements, and others under the generic term “derivative financial instruments.” belarusian scientists l. m. rikova and p. v. viktorovich considered the necessity of regulating the derivative market. researchers emphasize that the volume of derivatives in 10 times exceeded world gdp in 2008, and in the daily volume of foreign exchange operations in the world foreign exchange market (2 trillion usd) only 5-7% of this amount is related to the real economy, another part – to speculative dealings, which necessitates a clear understanding of the concept “derivatives” and the development of effective mechanisms of influence on their number. the researchers point out that the primary purpose of derivatives is to minimize risks, and baltic journal of economic studies 140 vol. 5, no. 3, 2019 the derivative itself is a derivative instrument in the form of a financial contract, the price of which depends on the price of the assets, laid down on its basis or financial indicators (futures, swaps, options, forwarders, and others) (rykova, viktorovich, 2009). in addition, researchers attribute the classification of derivatives to the degree of derivativeness of the traditional asset: first-order financial derivatives, second-order financial derivatives, and third-order financial derivatives. first-order financial derivatives include bonds derived from loans, that is, mbs (mortgage-backed securities, bonds secured by mortgages) and abs (asset-backed securities, bonds provided with other assets). second-order financial derivatives include cdo (collateralized debt obligation, actual derivatives of first-order derivatives). cdo is a debt secured bond and is derived from mbs and abs. the basis of mbs and abs is the payment of the corresponding loans, and cdo – payments for mbs and abs. thirdorder derivatives are represented by the cdo, based on the cash flows of other cdos, that is, the cdo can be the third, fourth, and subsequent orders. as a conclusion, the researchers point out that in general such operations are called securitization of banking assets through the transformation of the loan portfolio in traded securities (derivatives) (rykova, viktorovich, 2009). thus, this approach identifies derivative financial instruments, derivatives, and asset securitization instruments. however, it has a significant disadvantage: the classification of derivatives by the degree of derivation from the traditional asset does not include traditional term contracts: futures, swaps, options, forwards, which the researchers also attributed to derivatives, but have not included to the classification. that is, traditional term contracts have not been reflected in the classification of derivatives by the degree of derivation from a traditional asset since they have a slightly different nature, different from asset securitization instruments, and therefore, they cannot be identified. on this occasion, t. v. makshanova and o. g. kovalenko note that any security is a financial instrument, but not every financial instrument is security (makshanova, kovalenko, 2013). in addition to this opinion, it should be noted that the concept of “financial instrument” is broader in its content compared with the concept of “security” and includes the last one, therefore, quite often in the economic literature these concepts are used as synonyms. however, for derivative financial instruments and derivatives, there must be clear separation, including futures, forward, option and swap contracts – these are derivative financial instruments, and futures, forward, option and swap, traded on the market, as a separate asset, are derivative securities. moreover, researchers raise an important issue related to the separation or identification of the concepts of “derivative securities” and “secondary securities”. based on the interpretation of the concepts of “derivative” and “secondary”, the researchers argue that the concept of “derivative securities” and “secondary securities” are synonyms and include convertible bonds, warrants, depositary receipts, certificates of shares (makshanova, kovalenko, 2013). in the economic literature, there are also views that identify derivatives and derivative financial instruments: “derivative financial instruments are called derivatives. these include the following transactions: currency swap, credit default swap, option, futures, etc.” (loginov, loginova, 2012) scientists also explain that financial agreements are called derivatives because their conditions are based on the relevant parameters of another financial instrument, which is a basic one. thus, the main purpose of acquiring a derivative is not to obtain a base asset but to obtain a profit (income) from a change in its price. in addition, the authors point out that derivatives are defined as fixed-term contracts since their obligations arise at a specific time. derivatives are the basis of structured financial products (securities) (loginov, loginova, 2012). tony rice and brian coyle share options, as well as stock and futures contracts, based on stock indexes, refer to derivatives of the capital market instruments. scientists point out that they are not a source of capital and are not issued by companies but allow investors to manage investment risks by reducing the likelihood of adverse changes in stock prices and also allow speculation on positive changes in prices at relatively low cost. the authors include stock options, stock quotes options, stock-based futures, and index-futures options to derivative financial instruments. in addition, scholars are considering hybrid financial instruments (convertible bonds, bonds with warrants and preferred shares) that mean securities, which have features as of common stock, as of loan instruments at the same time. at the same time, the authors argue that, in the broad sense, hybrid financial instruments include any instrument that combines signs of two or more types of securities (tony rice, brian coyle, 1995). rice’s and coyle’s approach to hybrid securities and the feature that they laid the foundation for their identification is quite successful, but it needs to be substantiated. in particular, the great interpretative dictionary defines the adjective “hybrid” in two aspects: the derivation of hybridization, as well as hybrid securities, is securities in the form of bonds, which can simultaneously be used as preferred cumulative shares. (busel, 2005). also, the term “hybridization” is defined in the dictionary – the crossing of different species of animals and plants in order to obtain qualitatively new, better descendants (busel, 2005). if we depart from the biological aspect of hybridization and translate it into the prism of financial instruments, then it can be interpreted as a combination of different types of securities to obtain a qualitatively new financial instrument (security). therefore, hybrid securities must be classified, as securities that contain, at the same time, signs of two or more traditional securities. baltic journal of economic studies 141 vol. 5, no. 3, 2019 5. findings based on the results of the analysis, it can be noted that the broad concept among the researchers is the concept of “derivative financial instruments.” sufficiently successful interpretation of “derivative financial instruments”, with reference to ifrs 13 financial instruments, is given in the glossary of nbu terminology, namely: “derivative financial instruments (derivatives) – financial contracts or financial instruments, based on other financial instruments that are called base instruments. the basis for such a financial instrument (contract) may be assets (for example, goods, stocks, residential collateral, real estate, bonds, loans), indices (interest rates, exchange rates, stock indices, consumer price indices) or other conditions. credit derivatives originate from loans, bonds or other forms of lending” (nacionaljnyj bank ukrajiny, 2018). however, the results of the research do not allow extending the term of derivatives to all types of derivative securities. therefore, it is necessary to eliminate in the legislation the interchangeability of the terms “derivative financial instruments” and “derivatives” but to include the last notion in the list of financial instruments. in this case, derivatives should be understood, as term contracts in the form of a standard document certifying the right and/or obligation to purchase or sell future securities, tangible or intangible assets, as well as funds on the terms, specified therein or the obligation to make payments in result of a credit event. thus, the basis of the classification is the broadest concept of “derivative financial instruments”, which, in turn, are divided into derivative securities and term contracts (derivatives) (figure 1). in this case, hybrid securities and securitization instruments, which are presented in figure 1 as structured securities and secured derivative securities, should be classified as derivative securities. the main features of derivatives securities are the following: 1) their release is made on the basis of emission; 2) they certify the right to other securities (hybrid) or the right to receive income generating their provision (securitization instruments); 3) provide for the regular receipt of fixed income and/ or income from changes in their market value (income in the form of exchange differences). as a rule, structured securities are issued in the course of classical assets securitization, when there is a real sale of the last to a special financial intermediary that issues them. such securities in practice receive high ratings, as they are separated from the activities of their primary owner (usually a commercial bank) and have their own security, generating regular income. direct distribution structures are characterized by a higher level of risk, as the core of these instruments is quite simple: the primary owner receives payments on loans from borrowers and redirects them to a special financial intermediary, which at the expense of these funds makes regular payments on securities issued by the financial intermediary on the basis of direct distribution. increase the reliability of direct distribution structures by creating additional reserves, dividing emissions into tranches with different levels of credit risk and yield, and by incorporating credit derivatives into these structures. payment management structures from the very beginning are characterized by a lower level of risk compared to direct distribution structures. the essence of the payment management structures is that not all funds received by a special financial intermediary from the previous owner of securitized assets are immediately paid out on issued securities but only a portion of income or nominal value is paid, and the other part of the funds special financial intermediary invests in the most reliable assets (for example, government bonds) and receives additional income; so, in case of defaults on assets acquired through the securitization, a special financial intermediary always has a reserve to cover such losses. falseness of the risk assessment, both through direct distribution structures and payments management structures, on the eve of the financial crisis of 2007– 2009, consisted in the full confidence of leading rating agencies that provided such structures with ratings higher than those of initial owners of securitized assets and even ratings of the country of their formation. the maladdiction of the assessments was that the primary owners of assets (loan portfolios), from the outset with the aim of selling these assets, issued loans knowingly to insolvent borrowers on the mortgage purchased in real estate loans. while prices on real estate markets grew, loan collateral allowed it to be fully repaid. portfolios of loans were sold by special financial intermediaries, whose founders were the banks themselves – the owners of these loan portfolios, so there were no special comments on the quality of these assets in special financial intermediaries. high ratings for debt securities of special financial intermediaries, secured by loan repayments, were assigned by separating these loan portfolios from the risks of the activities of their primary owners – banks and, since the special financial intermediary did not engage in activities other than the issuance of secured debt obligations, the risks of its activities were equal to zero. in addition, discussed securities due to high ratings were willingly insured by credit derivatives, which, in turn, increased their ratings even higher. the crisis began with falling prices in real estate markets, which significantly reduced the cost of collateral for loans, non-creditworthy borrowers stopped to make payments on loans, which in turn led to a significant fall in the ratings of secured securities, which was, in essence, regarded as a default and demanded payments on credit derivatives. the banks, founders of special financial intermediaries, were forced to recognize and cover the losses of these separated companies by court decisions, which led to financial problems in banks. baltic journal of economic studies 142 vol. 5, no. 3, 2019 secured derivative securities (synthetic securitization instruments) are characterized by the fact that their issuer is directly the owner of the loan portfolio, but in the prospectus of their issue, it is indicated that the payment for these securities, secured by the proceeds, is generated by the loan portfolio. thus, unlike conventional bonds, synthetic securitization instruments have their own security and, in case of default, the issuer will be repaid precisely at the expense of its specific assets. however, the credit rating of synthetic securitization instruments will depend on the issuer’s credit rating. the increase in the rating of synthetic securitization instruments is carried out mainly by embedding into their structure of credit derivatives. some scholars also consider the credit derivatives themselves as synthetic securitization instruments since the main purpose is the transfer of credit risk. however, based on the research, credit derivatives should be classified in a separate group. in particular, a credit derivative, for example, a credit default swap does not have any evidence of security until it starts trading on the market as a separate instrument; in this case, it has a credit rating and can generate income as a result of changing its market price. if, however, the credit derivative is not traded on the market, then it represents a term contract, the terms of which protect the buyer of protection against credit risks by structured securities. derivative securities structured securities (classic securitization of assets) asset-backed derivative securities (synthetic securitization of assets) direct distribution structures payment management structures cleos cars mpts apts ppts strips po-strips tacs cards abcps smos pacs credit-default swaps (cds) total return swaps (trs) io-strips wbo basket default swaps (bds) discrete default swaps (dds) recovery default swaps (rds) credit spread swaps (css) constant maturity default swaps (cmds) credit linked note (cln) credit options credit derivatives collateralized debt obligation (cdо) collateralized loan obligation (clо) collateralized bond obligation (cbо) obligation, collateralized by credit derivatives obligation, collateralized by structured financial products collateralized insurance obligation commercial real estate collateralized obligation obligation, collateralized by tranches issued by other secured debt obligations collateralized credit-default swap obligation derivative financial instruments fixed-term contracts (derivatives) -futures; -forwards; -options; -swaps; combinations of the above derivatives. traditional derivatives hybrid securities convertible bonds preferred stocks bonds with warrants depositary receipts figure 1. classification of derivative financial instruments baltic journal of economic studies 143 vol. 5, no. 3, 2019 hybrid securities are characterized by the fact that they combine the properties of the two securities simultaneously, they have a longer history of functioning in comparison with instruments of assets securitization and credit derivatives. most types of hybrid securities are characterized by a change in the status of their owner during the term of the treatment or at its completion. such securities do not have hidden risks in the form of artificially inflated ratings and depend exclusively on the rating of their issuer. as for other traditional derivatives (futures, options, swaps), their affiliation with securities or financial instruments will be determined depending on whether they are traded on the market and what the purpose have: if to get the income from the fluctuation of their value in the market – then they should be classified as derivative securities, but if the main objective is to minimize risk, and not by issuing, then it should be attributed to fixed-term contracts (derivatives). detailing of certain types of structured securities, derivative securities, and credit derivatives, presented in fig. 1, was implemented earlier and reflected in the paper “instruments of asset securitization and their use prospects in ukraine” (novak, 2012). 6. conclusions the conducted research has made it possible to streamline the conceptual apparatus in relation to derivative financial instruments and group their separate types according to certain classification grounds. the classification is based on the broadest concept of “derivative financial instruments”, which is understood as financial contracts or financial instruments derived from (based on) other financial instruments that are called base instruments, and may be assets (for example, goods, mortgage, real estate, bonds, loans), indices (interest rates, exchange rates, stock indices, consumer price indices) or other conditions, in particular, credit derivatives come from loans, bonds or other forms of lending. in the developed classification of derivative financial instruments, based on terminology research, it is proposed to distinguish “derivatives” and “derivative securities”, and substantiated their significant differences. it is established that derivatives are standard documents that certify the right and/or obligation to purchase or sell securities in the future, tangible or intangible assets, as well as funds, or make payments on terms and conditions, specified by it. in some cases, derivatives may acquire features of derivative securities, in particular, when issued through emission and freely traded in markets and bring income (loss) to their owner as a result of changes in their market value. in order to regulate emissions and investments in derivative financial instruments, financial institutions (primarily those, involving public funds: commercial banks, non-state pension funds, and life insurance companies) need to analyse selected groups of derivative financial instruments for hidden risks that, previously, were not taken into account during evaluation. in particular, for all instruments of assets securitization and credit derivatives, the risk of changes in the price of collateral for credits was not taken into account, which, in fact, led to the financial crisis of 2007–2009 years. further research should be focused on identifying and detailing hidden risks in the context of each instrument, as well as developing a methodology for assessing these risks. references: bär, hans peter (2006). sekyuritizatsiya aktivov: sekyuritizatsiya finansovykh aktivov – innovatsionnaya tekhnika finansirovaniya bankov [asset securitization: securitization of financial assets – innovative technique for financing banks]. moskva: volters kluver. 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(in russian) baltic journal of economic studies 18 vol. 6, no. 1, 2020 corresponding author: 1 academician f.h. burchak scientific research institute of private law and entrepreneurship of the national academy of legal sciences of ukraine, ukraine. e-mail: irynaberestova.prof.cl@gmail.com 2 the constitution court of ukraine, ukraine. e-mail: galina_yurovskaya@ua.fm doi: https://doi.org/10.30525/2256-0742/2020-6-1-18-25 the constitutional court in the mechanism of domestic remedies in states with direct access to constitutional justice: operational and economic aspects iryna berestova1, galyna yurovska2 abstract. this article studies the legal status and the performance of the constitutional court (hereinafter referred to as the cc). the experience of states with direct access to a body of constitutional jurisdiction enables to distinguish the cc's position in the system of state jurisdictions (with particular economic justification of its activity) and to substantiate its role in the mechanism of domestic remedies. the aim of the article is to reveal the cc's place in the mechanism of domestic remedies of states with centralized constitutional review and direct access to constitutional justice on the part of effective protection of the applicants’ rights and the state budget in the formation of judicial remedies. methodology. the leading methods of the article are correlation, comparativelegal, dialectical and technical logic methods of research, etc. they enable to compare and contrast international standards in the field of legislation of different european states, to reveal the nature of constitutional and legal conflicts and specifics of the constitutional procedure for the cc’s cases. these problems are also investigated using the method of synthesis of financial justification of the activities of the bodies of constitutional jurisdiction and the effectiveness of the results of their activities in the protection of rights and freedoms of an individual and a citizen. this enables to formulate further development and suggestions for improving the legal regulation of the cc’s activities in the states that have recently begun to implement this instrument of protecting constitutional human rights and freedoms. the key results of the study. it is proven that the cc is a specific body that is the last at the national level to exercise exceptional special powers aimed at protecting human rights and fundamental freedoms. the role of the cc in the system of domestic remedies is revealed. the cc is an autonomous body of constitutional jurisdiction with a constitutional status, independent of the executive and legislative branches. it is substantiated that the cc is factually affiliated to the judicial authorities engaged in jurisdiction. it is proven that the cc's activities are characterized by judicial independence, combined with the powers of the cc judges to decide legal matters within its constitutional jurisdiction. cases are judicial in nature, and the cc considers them on the rule of law. the decisions adopted shall be mandatory (binding) and shall not be altered by other branches of government. the main functions of the body of constitutional jurisdiction are distinguished into quasi-judicial, cognitive and evaluative, harmonizing. the consistent universal approach of the european court of human rights (hereinafter referred to as echr) states that the notion of "court" does not necessarily mean classical jurisdiction, integrated into the judicial system of the state. finally, the article proves the requirement of recognizing the cc as a “court established by law” essentially and functionally. consistent approaches and criteria for defining the notion of "court established by law" formulated by the un committee on human rights and the echr's case-law prove that the cc can be identified as the last mandatory domestic remedy before applying to international judicial institutions, subject to the criterion of an effective remedy, formulated by the echr's caselaw during proceedings in the cc. key words: constitutional court, “court established by law,” jurisdictional body, judicial body, jurisdictional activity, constitutional review, domestic remedy, the right to a fair trial, socio-economic efficiency. jel classification: k13, k19 baltic journal of economic studies 19 vol. 6, no. 1, 2020 1. introduction the constitutional state requires the existence of institutions capable of constant review and monitoring of the effective protection of human and citizen's rights and freedoms against any violation, including due to the adoption of legislation contrary to the constitution. moreover, this mechanism should provide a sound act system that eliminates the possibility of applying unconstitutional laws. however, countries under constant reforms of public institutions of all kinds and areas (transition countries) daily overcome the initial side effects of implementing any systemic reform. in the legal sector, it is to ensure the judicial protection of human and citizen's rights and freedoms by the legal and procedural instruments of the state during transition. the judiciary is no exception. namely, it is a natural and obligatory period for the adaptation of society to innovations initiated by the state: from changes in the general course of the state and transformations of certain institutions in this regard, to judicial protection of individual human and citizen's fundamental rights and freedoms. state-level reforms in the field of justice are often also concerned with reforming the body of constitutional jurisdiction. the strategic priority of any democratic state policy is to assert the right to a fair trial as a real guarantee of the protection of human rights and fundamental freedoms and to restore public confidence in courts, which requires comprehensive judicial reform at the constitutional, legislative and organizational levels (shcherbaniuk, 2016). the issue of the role of the constitutional justice body in the human rights protection mechanism depends, among other things, on the construction of the judicial system. if the cc belongs to the judiciary, the mechanisms for the protection of fundamental rights and freedoms are sufficiently clear. however, as a rule, the bodies of constitutional jurisdiction are outside the judicial system. this requires clarifying their place in the general system of jurisdictions (both national and supranational jurisdictions). this issue is relevant to all modern democratic states that recognize a specialized institute of constitutional review. with regards to specific options for solving the problem, both general approaches of international legal significance and national specific approaches, related to the specificities of the construction and functioning of the national judicial system, as well as its constitutional and regulatory bodies, are possible. the historical, sociocultural characteristics of the state legal systems should be taken into account (bondar, 2017). in the article, the formation of the theoretical concept of judicial constitutional review and the place of a single body of constitutional jurisdiction in the system of jurisdictional bodies is considered in continuity with the practical realities of today. it should be noted that the mission of the judiciary, the cc and the legislature is to constantly improve and optimize the judicial processes for the protection of the freedoms of persons in compliance with the requirements of efficiency, economy and effectiveness. domestic and foreign experience assures that this problem can be solved in several ways, the most effective of which is the appeal of persons not only to one court, but also to the cc. that is, the effectiveness of the protection of rights is enhanced by means of the appeal of persons to several jurisdictions. in the context of constitutional proceedings, the requirement to ensure and observe the guarantees of the fair constitutional review of a case, to ensure direct access of citizens to constitutional justice should be considered. in this article, we emphasize that the cc plays an extremely important role in the mechanism of the protection of basic (fundamental, constitutional) human rights. this is proven by a doctrinal comparison of the activities of the cc in european countries with direct access to constitutional justice. moreover, we prove that the cc could be the last mandatory domestic remedy (subject to the criterion of an effective remedy) for an individual to apply to protect rights before applying to international judicial institutions. 2. the constitutional court in the system of state jurisdictional bodies the essence of a centralized form of constitutional review is that a special court (often outside the ordinary court system) has the power to consider the constitutionality of legal regulations. according to this model, the cc exercises constitutional review as a competent authority. review takes the form of both indirect and direct access. the first is available in general proceedings. the ordinary judge is obliged to suspend the case before him/her in the event of a question of constitutionality of the law applicable to that case and submit a preliminary request to the cc (conclusion venice, 2010). the second case involves the submission of an individual constitutional complaint to the cc (usually after all other remedies have been exhausted). examples of countries with a centralized model of access to constitutional justice include: albania, algeria, andorra, armenia, austria, azerbaijan, belgium, belarus, croatia, the czech republic, france, georgia, germany, hungary, italy, south korea, latvia, latvia, lithuania, luxembourg, montenegro, moldova, poland, romania, russia, serbia, slovakia, slovenia, spain, the former yugoslav republic of macedonia, turkey (conclusion venice, 2010) and ukraine, which combined direct and indirect access to justice in recent amendments to the constitution regarding justice and procedural law in 2017. the cc in different states with centralized constitutional review and direct access to constitutional baltic journal of economic studies 20 vol. 6, no. 1, 2020 justice (the concept of constitutional complaint) may be in the judiciary. frequently, they are not integrated into the judiciary as a constitutional justice body. however, these bodies are involved in considering constitutional cases, which are judicial. the question naturally arises whether the cc can be recognized by court, the court established by law. this question is of considerable practical importance, since its solution affects the legal procedure and proceedings for the protection of fundamental human rights and freedoms at the national and international levels. we argue that the cc belongs to these authorities and the following example confirms this. on july 5, 2018, the echr adopted the mendrei v. hungary (no. 54927/15) decision. in this regard, dr. daniel a. karsai, attorney at law, emphasized that in this very important decision the echr had fundamentally changed the understanding of the role of constitutional courts in the system of domestic remedies and the required level of protection of convention rights. in this case, in particular, the echr accepted a legal avenue of making a binding appeal to the hungarian cc and further considering mendrei's constitutional complaint to be an effective remedy. moreover, in this case, the echr changed the burden of proof previously vested on the government of the country regarding the effectiveness of remedies. last but not least, the impartiality of the proceedings can be seriously questioned (karsai, 2018). therefore, mr mendrei was a hungarian teacher and a chairman of a teachers’ trade union. according to the amendment of the national public educational act, most the vast majority of the hungarian teachers ipso iure became members of the new national teachers’ chamber. mr mendrei claimed that the compulsory membership to this chamber infringed his rights under articles 10 and 14 of the convention. however, mr mendrei did not challenge the impugned regulation before the hungarian constitutional court under the special constitutional complaint procedure governed by subparagraph 2 of section 26 of the constitutional court act. the echr declared mendrei’s complaint inadmissible for the non-exhaustion of domestic remedies. the echr stated that the applicant should have challenged the regulation before the cc of hungary since this procedure was an accessible remedy offering a reasonable prospect of success (paragraph 20) (mendrei against hungary, 2018). this decision by the echr suggests that in countries with centralized constitutional review, the cc is implemented into the mechanism for the protection of fundamental human rights and freedoms. for example, in montenegro a constitutional complaint is an essential remedy in ensuring the protection of human rights and freedoms. a constitutional complaint was initiated into the constitutional system of the country only ten years ago. it was successful enough. this is supported by the following findings: (1) the constitutional complaint is in practice an easy remedy widely available; (2) the constitutional complaint has come into force in terms of the standards of the convention; (3) the cc protects not only constitutional rights and freedoms, but also rights and freedoms guaranteed by the echr and other international conventions that montenegro has undertaken to comply with; (4) the cc's decisions on constitutional complaints have expanded the scope of legal protection of guaranteed rights and freedoms; (5) overall, the level of protection of certain constitutional rights in the cc’s decisions on constitutional complaints is slowly raised following the standards and the caselaw of the echr; (6) deciding on priority cases in the proceedings on constitutional complaints is becoming more efficient; (7) the extent of enforcement of the cc’s decisions rendered in the proceedings on constitutional complaints is increasing over the course of time. moreover, direct protection of human rights and freedoms by the cc, in the proceedings on constitutional complaints, increases the impact of this court, primarily on the exercise of judicial power, primary function of which is the protection of human rights and freedoms (analysis, 2019). in fact, the cc stands for another state-level judicial body with a constitutional status that promotes the protection of human and citizen's rights and freedoms and provides an opportunity to counter the dangerous regulatory expansion of the state in general. moreover, we emphasize that, essentially and functionally in the mechanism of judicial protection of human rights and fundamental freedoms and in some cases of legal entities, the cc performs according to all the principles, elements, steps, stages and attributes of judicial law-application activities. in addition, the cc activities end in the adoption of decisions mandatory for other bodies in accordance with the requirements of the basic law. the cc's human rights function is a direct and indirect manifestation, based on the legal nature of constitutional review, which can be abstract and specific. in the course of a specific constitutional review, human and citizen’s rights and freedoms are protected by the cc during proceedings on specific cases on constitutional complaints. the arguments for recognizing the cc as a full-fledged judicial body are as follows. the cc's role in the system of separation of powers is organically interrelated with other characteristics of the constitutional jurisdictional process, as well as the scope of powers and the legal nature of its acts as the final legal form of constitutional review. the cc has a significant impact on the entire legal system. it operates on the principles of the rule of law, independence, collegiality, transparency, validity and binding nature of its decisions. moreover, statutory procedure for jurisdictional activities shall be complied with all typical principles, elements, steps, stages and baltic journal of economic studies 21 vol. 6, no. 1, 2020 attributes of judicial law-application activities. doubts that the cc is a full-fledged judicial body, attempts to view it as a "quasi-court" relate primarily to independent constitutional regulation of its activities. in many countries with centralized constitutional review, the cc is not part of the judiciary, but is institutionally outside the judiciary. 3. key functions of the body of constitutional jurisdiction in current constitutional systems, the "soft" model of separation of powers becomes more prevalent, suggesting the partial fulfilment of "organic" or "titular" functions of one branch of power by the other as an element of the system of checks and balances. numerous state bodies empowered to perform quasi-legislative (law-making) and quasi-judicial functions occur. from this perspective regarding the principle of separation of powers, judicial law-making is not forbidden, but rather permissible in order to seek justice and guarantee human freedom, including political (shevchuk, 2007). in the activities of the cc, a cognitive function is clearly traced. its essence is that the cc studies deeply and comprehends the meaning of the constitution in the context of mobile social relations and interprets constitutional provisions officially. in addition, it identifies and establishes the conformity of sectoral standards with the constitutional and legal content, affects the development of legal doctrine, law-making process, and law-application practice, including the protection of human and citizen's rights and freedoms. for example, the absence of a dispute about law, the "loss of meaningful content" of the principle of competition and equality of parties, the impossibility to establish legal facts, etc. differ constitutional proceedings from ordinary proceedings in the courts of the judicial system (chekryigova, 2010). furthermore, methods used by the cc and general courts in proceedings are different. for example, in the course of interpreting the provisions of the constitution, the cc does not act as a legislator, creating new rules, but reveals the meaning and sense of the existing provisions of the basic law. considering constitutional requests and constitutional complaints, this body assesses specific law provisions as the matters of appeals for compliance with the provisions of the basic law. meanwhile, the cc does not study factual circumstances of the case and does not resolve a specific dispute regarding the resolution of an issue of law that falls within the jurisdiction of the courts of the judicial system. at the same time, the cc is empowered to address issues that are not subject to regulation by the constitution, but within the legislator’s competence, from the perspective of a "negative" legislator, that is, to disqualify a specific legislative provision. in some countries (e.g. lithuania, ukraine, montenegro and others), the cc is authorized at the same time to indicate the constitutional method of applying such a provision. moreover, the cc is empowered to mandate specific authorities to execute the cc's decision and to specify the manner of such execution and the timeframe in the decision. however, we disagree that no legal dispute exists within the framework of constitutional provision review. this approach contradicts the purpose and logic of the constitutional and judicial proceeding in relation to the resolution of constitutional legal cases on constitutional complaints. as a rule, constitutional proceedings do not arise other than on the basis of a conflict of interests and legal positions (bondar, 2017). constitutional proceedings provide relevant information on the terms of disagreement (collision, conflict) in a procedure where its subjects seek to convince the cc of the validity of their position on the matter raised. due to this, constitutional jurisdictional review is traditionally regarded as a mechanism or method of resolving public law disputes, manifested in the discrepancy regarding the constitutionality of legal regulations. and this discrepancy is caused, inter alia, by these regulations’ violations of constitutional human and citizen’s rights and freedoms, for example in the case of a constitutional complaint. the relations between the cc and other branches of power are characterized by a harmonizing function. the meaning of this function is to coordinate the activities of public authorities by different interpreting methods, assessment of provisions of the constitution that enable to achieve constitutionally positive results, to form legal positions, to ensure preservation of constitutional principles, values that determine the basis of the constitutional order (polyanskiy, 2013). in this context, the constitutional analysis of interrelations between constitutional proceedings and politics is not limited to technical legal aspects. access to socio-political, socio-cultural, historically specific, nationally specific and other aspects of the constitution in its interrelations with laws, performance of constitutional justice bodies is inevitable and absolutely required, which is usually unattainable for the courts of other jurisdictions. therefore, a constitutional legal maxim should be formulated: interrelation between the constitutional jurisdictional process and politics should be based on constitutionalizing politics rather than subordinating constitutional proceedings to politics and politicization of the constitutional and legal sphere (bondar, 2017). the cc plays a significant role in the establishment and development of modern constitutionalism, the basic law and constitutional legislation, and accordingly, sectoral legislation. it should be emphasized that the cc’s practices, and ultimately the constitutional jurisdictional process, impact on the law-making process. objectively, due to its activities baltic journal of economic studies 22 vol. 6, no. 1, 2020 and the specific legal force of decisions taken, the cc is progressively approaching the normative and legal practice, law-making. in modern democracies, lawmaking by constitutional courts is closely related to their powers regarding judicial review of the conformity of legal regulations (laws) with the constitution, as well as official interpretation and protection of constitutional rights and freedoms in strict accordance with the constitution. it should be emphasized that this is a quasi-judicial and human rights function of the cc, which remains an independent body of constitutional jurisdiction with an independent position in the national system of separation of powers (fish, 2017). the cc's human rights function involves a direct and indirect manifestation and is based on the legal nature of abstract and specific constitutional review. a specific constitutional review provides protection of constitutional human rights and freedoms in proceedings on constitutional complaints, and its decisions are binding. the general binding nature of the cc’s decisions performs the specific regulatory and corrective function of the cc. the specificity of the cc’s decisions is in their content that discloses, clarifies the highest abstract normative values, that is, general principles of law, constitutional values and principles, further implemented in all areas of law. therefore, the main specificity of the cc’s decisions is that they combine normativity and doctrinal principles, determining the integral quality of these decisions and their special impact on the judicial system and the legal system in general. this should also explain their dual purpose in the system of sources of law. the cc’s decision is a source of constitutional law, aimed at constitutional regulation by virtue of its own characteristics, regardless of the subject of constitutional review and is always combined with the basic law, a constitutional source of law. the cc regulations have particular, quite specific features of sources of law due to their inherent constitutional and legal specificities. decisions of the constitutional jurisdiction body are always connected with the content of the constitution, and therefore they adhere to the constitution and form with it a special type of constitutional sources of law, which exists in parallel with laws, by-laws, court practice, and other types of sources of law. the casual interpretation of the constitutional provisions of ukraine in constitutional proceedings is more important than their interpretation by any other body, including the ordinary court (bondar, 2017). it should be emphasized that these features of the cc’s decisions testify their fundamental impact on other branches of law. they should be considered derivative to other types of litigation. the regulatory unity is formed in the decisions of the cc, due to the intersection of constitutional and other sectoral legal relationships that has been identified in proceedings. that is, the ccu's decisions reflect a consistent relation between constitutional provisions and sectoral legislative provisions. moreover, the constitutionally significant regulatory doctrinal nature of the cc’s decisions is in a higher legal value than legal regulations subject to review. statutory interpretation is inseparable from the provision to be interpreted. furthermore, casual interpretation is inextricably connected with a particular case (incident), and in other cases may play the role of only a specific supporting example, not a general categorical interpretation. in the course of analysing compliance of legislative provisions with the basic law of ukraine, the cc discloses the content of the provisions, but using research methods in terms of disclosing the conformity/inconsistency of its content with the constitution of ukraine and the possibility of enshrining the procedure for its application in a separate part of the cc’s decision. that is, in essence, the cc still interprets provisions of the laws, but from the perspective of their constitutional and legal interpretation. the cc finds out the meaning, not the literal content of the provision in a particular case, in the light of specific factual circumstances. therefore, two independent state jurisdictions, the cc and ordinary courts, are organically interrelated. it should be emphasized that constitutional proceedings are characterized by features of a judicial jurisdiction procedure with significant specificities, but this does not automatically confirm the ccu's status as a judicial body. 4. the constitutional court as the "court established by law" it should be emphasized that for protecting constitutional human rights subject to conventional protection, it is advisable for a person to apply before a body of constitutional jurisdiction as the last domestic remedy before appealing to international courts or relevant international organizations where a specific state with a centralized constitutional review is a member or party (subject to the criterion of an effective remedy). the issue of exhaustion of all domestic remedies is a practical component of exercising the right to a fair trial guaranteed by article 6 of the convention for the protection of human rights and fundamental freedoms, “in the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law” (convention, 1950). in this context, the exhaustion of all domestic remedies and the timing of an application are important. the crucial issue is a probable recognition of this application inadmissible before the echr if a person has not applied to the cc with a constitutional complaint as baltic journal of economic studies 23 vol. 6, no. 1, 2020 the last domestic remedy when a violated constitutional right subject to conventional protection. the practical importance of recognizing the cc as the last domestic remedy is a reasonable timeframe for dispute resolution and the procedure for calculating procedural time limits. article 14, paragraph 1 of the international covenant on civil and political rights (hereinafter referred to as iccpr) (covenant, 1966), article 6, paragraph 1 of the convention provide for that in the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by an independent and impartial tribunal established by law. article 14, paragraph 1 of the iccpr provides for that this court shall be “competent” (compendium of laws, 2013). the human rights committee determines that the notion of a “tribunal” designates a body, regardless of its denomination, that is established by law, is independent of the executive and legislative branches of government or enjoys in specific cases judicial independence in deciding legal matters in proceedings that are judicial in nature (general comment, 2007). having analysed substantively the notion of "court" (sramek v austria, 1984), the echr explained that the court does not need to be understood as a jurisdiction of the classical type integrated into the judicial system of the state (campbell and fell v the united kingdom, 1984). according to article 6 of the convention, the main feature of the notion under consideration, is its power to make compulsory (binding) decisions that cannot be altered by non-judicial authorities (findlay v the united kingdom, 1997), in combination with a mandate to determine matters within its competence “on the basis of rules of law and after proceedings conducted in a prescribed manner.” the function of a court or tribunal is to decide cases within their competent jurisdiction (sramek v austria, 1984). this means that the court should be able to make legally binding decisions that cannot be changed by any nonjudicial body to the detriment of any party (van de hurk v the netherlands, 1994). the echr describes this requirement as an integral element of the notion of court (morris v the united kingdom, 2002). the right to a fair and public hearing by an independent and impartial tribunal established by law contains three fundamental elements. first, the court is formed on the basis of law. thus, according to art. 6 of the convention, criminal and civil cases should be considered by a "court established by law." according to the case-law of the echr , this requirement implements the principle of the rule of law, inherent in the convention and its protocols. any other body established otherwise than from the will of people, enshrined in law, would lack the legitimacy required in a democratic society to hear individual cases (lavents v latvia, 2002). the concept of "established by law" is not defined in the convention, but it has two basic requirements: 1) that this judicial system (a body that enjoys judicial independence) is established and subject to law by parliament; 2) that each court for all hearings be established in compliance with the legal requirements for its establishment (compendium of laws, 2013). in other words, the phrase “established by law” applies not only to the legal basis for the existence of a court, but also to its composition in each individual case, including the circumstances under which judges are replaced (within the scope of recusal or self-recusal) (posokhov v russia, 2003). it should be emphasized that this is the second fundamental element: court established by law shall be competent. generally, the competence implies that a particular court is staffed with competent judges with sufficient qualifications and experience to enable them to perform the duties of a judge, in particular as regards binding decisions in accordance with the rules of a particular jurisdiction. the third element of a court established by law is that this court shall be independent and impartial. the requirement of independence means, in general terms, that tribunals should be free from any form of direct or indirect influence, whether this comes from the government, from the parties in the proceedings or from third parties, such as the media (general comment, 2007). impartiality is a guarantee that is linked to the principle of equality before courts and tribunals, as well as involves the idea that everyone should be treated the same. it requires that judges exercise their function without prejudice and in a manner that offers sufficient guarantees to exclude any legitimate doubt of their impartiality. the requirement of independence and impartiality apply to juries as well as judges (compendium of laws, 2013). the human rights committee considers the requirements for competence, independence and impartiality of courts to be absolute, i.e. with no exceptions (general comment, 2007). we emphasize that recognised approaches and criteria for defining the notion of "court established by law" formulated by the un human rights committee and the case-law of the echr do not even require adaptation to the nature of a central body of constitutional jurisdiction with direct access to the cc. these approaches are fully in line with the functional purpose of the cc and its competence in determining cases on the protection of constitutional rights, subject to conventional protection. 5. conclusion in this article, the analysis of the experience of states with centralized constitutional review and direct access to constitutional justice enable to identify the cc's place in the domestic remedy mechanism. we emphasize that in the states with centralized constitutional review and direct access to constitutional justice, the cc can be recognized a court established baltic journal of economic studies 24 vol. 6, no. 1, 2020 by law in the substantive content of the notion under consideration, and taking into account the functional purpose of the cc. the basis for this conclusion is criteria for the activity of a body of constitutional jurisdiction as follows: (1) the cc is a body of constitutional jurisdiction with constitutional status, independent of other branches of government; (2) the cc has a unique, significant, exclusive competence with respect to ensuring a constitutional order that no other governmental and (or) nongovernmental body has. the cc determines the conformity of legal regulations with the basic law of ukraine, officially interprets the constitution of ukraine, as well as exercises other unique competences exclusively in accordance with the constitution; (3) the cc carries out specific jurisdictional activity on the basis of the rule of law, independence, collegiality, transparency, openness, complete and comprehensive consideration of legal matters, validity and binding nature of its decisions and conclusions; (4) this cc activity is enshrined in the basic law, special laws on the activity of the body of constitutional jurisdiction of states, as well as regulation of by-laws (the cc regulation) is permitted; (5) the cases are judicial in nature, initiated by persons on the basis of a conflict of constitutional interests and legal positions and subject exclusively to the constitutional competence of the cc; (6) the cc's jurisdictional activities have a clear procedure (opening of proceedings, authorized composition of judges in proceedings on constitutional cases (panels, chambers, grand chamber, etc.), oral and written hearings, broadcasting of plenary and other hearings, etc.). that is, the cc’s activities are characterized by all the principles, elements, steps, stages, and attributes of judicial law-application activity; (7) the decisions of this body are compulsory (binding), as a rule final, and cannot be appealed in almost all states with centralized constitutional review, etc. it is proven that factually the cc should be recognized as another jurisdictional body with the constitutional status that protects the fundamental human and citizen's rights and freedoms as the last public body, mandated for this at the national level. although the cc is not normally integrated into the judicial system of the state, we emphasize the advisability of appealing to the cc in the case of the protection of the constitutional rights of persons that are both conventional rights and subject to conventional protection. in these cases, the cc should be recognized as "court established by law." this conclusion is based on the constitutional purpose and unique functions of the cc regarding establishment of the constitutional legal order. it could be highlighted that the cc is the last mandatory national remedy (subject to the criterion of an effective remedy, formulated by the echr's case-law when considering a case in the cc) before applying to international judicial institutions. references: analysis of the constitutional court work targeting legal certainty and the right to a final decision concluding observations. concluding observations (2019). url: https://rm.coe.int/analysis-of-the-constitutional-courtwork-concluding-remarks-eng/168093f4a0 belilos v switzerland. european court of human rights (1988). url: https://hudoc.echr.coe.int bondar, n. s. (2017). konstitutsionnyiy sud v sisteme yurisdiktsionnyih organov (o «bogougodnyih grehah» konstitutsionnogo pravosudiya) [constitutional court in the system of jurisdictional bodies (on the “pious sins” of constitutional justice)]. zhurnal zarubezhnogo zakonodatelstva i sravnitelnogo pravovedeniya, no. 1, pp. 27–30. campbell and fell v the united kingdom (1984). european court of human rights. no 8, p. 76. url: https://hudoc.echr.coe.int chekryigova, m. a. (2010). k voprosu o statuse konstitutsionnogo suda rossiyskoy federatsii [on the status of the constitutional court of the russian federation]. bulletin of the south ural state university, no 10, pp. 103–104. constitutional of ukraine. law of 28.06.1996. url: https://zakon.rada.gov.ua/laws/show/254%d0%ba/ 96-%d0%b2%d1%80/ed19960628 convention for the protection of human rights and fundamental freedoms. rome, 4.xi.1950. url: https://www.echr.coe.int/documents/convention_eng.pdf dániel a. karsai (2018). role of the constitutional courts in the system of the effective domestic remedies – a new approach on the horizon? criticism of the mendrei v. hungary  decision. url: https://strasbourgobservers.com/ 218/10/15/role-of-the-constitutional-courts-in-the-system-of-the-effective-domestic-remedies-a-new-approachon-the-horizon-criticism-of-the-mendrei-v-hungary-decision/ fish, e. s. 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(2017). teoretyko-pravovi ta prakseolohichni zasady sudovoi reformy v ukraini [theoretical, legal and practical principles of judicial reform in ukraine. the dissertation of doctor of science of laws]: dys. ... d-ra yuryd. nauk : 12.00.10. kyiv. lavents v latvia (2002). european court of human rights. no. 786, p. 114. url: https://hudoc.echr.coe.int le compte, van leuven and de meyere v belgium (1981). european court of human rights. no. 3, p.  55. url: https://hudoc.echr.coe.int mendrei against hungary (2018). european court of human rights. url: https://hudoc.echr.coe.int/eng?i=001184612 morris v the united kingdom (2002). european court of human rights. no. 162, p. 73. url: https://hudoc.echr.coe.int/ eng?i=001-68224 polyanskiy, v. v. (2013) garmoniziruyuschaya funktsiya konstitutsionnogo suda rossiyskoy federatsii (konstitutsionnoe soderzhanie i perspektivyi realizatsii) [harmonizing function of the constitutional court of the russian federation (constitutional content and implementation prospects)]. legal world, no. 12, p. 23. posokhov v russia (2003). european court of human rights. no. 17, p. 39. url: https://hudoc.exec.coe.int/ eng?i=001-56383. ringeisen v austria (1971). european court of human rights. no. 2, p. 95. url: https://opil.ouplaw.com/ view/10.1093/law:ihrl/8echr71.case.1/law-ihrl-8echr71 shcherbaniuk, o. (2016). udoskonalennia normatyvno-pravovoho zabezpechennia diialnosti konstytutsiinoho sud ukrainy yak shliakh do formuvannia yevropeiskoi modeli konstytutsiinoho sudochynstva [improvement of regulatory support for the activity of the constitutional court of ukraine as a way to form the european model of constitutional justice.]. visnyk konstytutsiinoho sudu ukrainy, no. 6, p. 187. shevchuk, s. v. (2007). sudova pravotvorchist: svitovyi dosvid i perspektyvy v ukraini [sudova lawmaking: retailers and prospects in ukraine]. kyiv. spravedlivoe sudebnoe razbiratelstvo v mezhdunarodnom prave: yuridicheskiy sbornik (2013). [fair trial in international law: a compendium of laws]. сompilation. warsaw. homework. sramek v austria (1984). european court of human rights. no. 12, pp. 36, 64. url: https://opil.ouplaw.com/view/10.1093/law:ihrl/ 8echr71.case.1/law-ihrl-8echr71 study on individual access to constitutional justice (venice, 17-18 december 2010). cdl-ad(2010)039rev. strasbourg, 27 january 2011. p.  16. url: https://www.venice.coe.int/webforms/documents/default.aspx? pdffile=cdl-ad(2010)039rev-e van de hurk v the netherlands (1994). european court of human rights. no. 14, p. 45. url: https://hudoc. echr.coe.int/eng#{%22itemid%22:[%22001-57878.%22]} baltic journal of economic studies 171 vol. 6, no. 3, 2020 corresponding author: 1 dnipro state agrarian and economic university, ukraine. e-mail: skhalatur@gmail.com orcid: https://orcid.org/0000-0001-8331-3341 researcherid: t-7645-2019 2 dnipro state agrarian and economic university, ukraine. e-mail: stim2007@ukr.net orcid: https://orcid.org/0000-0002-7490-3523 3 dnipro state agrarian and economic university, ukraine. e-mail: masterbilding80@gmail.com orcid: https://orcid.org/0000-0003-3791-9435 doi: https://doi.org/10.30525/2256-0742/2020-6-3-171-182 world experience adaptation of anti-crisis management of enterprises in the conditions of national economy’s transformation svitlana khalatur1, lesia kriuchko2, anna sirko3 abstract. the purpose of the article is to systematize and generalize the experience of leading countries to form and implement an effective crisis management system; to clarify the role of the state in the formation and implementation of anti-crisis regulation strategy of the real sector of the economy, as well as to substantiate the main methodological provisions of its formation. the subject-matter of the study is the methodological and conceptual foundations of the process of the effective crisis management system of the usa, china, japan, the eu and ukraine. methodology. the research is based on the set of well-known general scientific and special methods of research in economics. in particular, the dialectical method, the method of scientific abstraction, the method of systematic analysis, economic and mathematical modeling has been used in the article. conclusion. the world experience of solving the problems of enterprise bankruptcy is generalized. the experience of the usa, japan, china, the countries of the european union is considered. the econometric model taking into account the heteroskedasticity of the residues shows that an increase of 1% central government debt, bank capital to assets ratio, expense, exports of goods and services, foreign direct investment, net inflows will increase gdp by 2.41%, 1.53%, 1.23%, 2.03%, and 1.19% respectively in the studied countries. examining the experience in the field of crisis management, it should be noted that in europe there is a selective approach aimed at stimulating the activities of specific companies; public sector priorities are education, health care, pensions, and the labor market. in addition, in some countries in order to find innovative structures of enterprises, increase their competitiveness and efficiency, out of the crisis, the development of privatization programs is used, which in each country have their own characteristics. world experience shows that the models of anti-crisis management constructed in different countries of the world provide various potential opportunities for progressive socio-economic changes. however, none of them can be used in its pure form in the formation of anti-crisis management policy in ukraine. this is due to the conditions of accumulation of this experience by countries, the formation of mechanisms and institutions in a balanced economy, differences in the construction of financial and credit mechanisms, and so on. the use of positive experience should be the first step towards reforming the crisis management system. key words: anti-crisis management, financial and economic problems, state anti-crisis management, crisis, cooperatives, international experience, financial security. jel classification: c51, f43, o11 1. introduction every country must ensure sustainable economic development. to maintain stability in the economy, various instruments of monetary regulation are used, the choice of which is a complex process. the anticrisis management has a special role in ensuring the economic growth of the state. ukraine, in its efforts and aspiration to be a market economy country, is facing problems related to the crises inherent in countries operating within a market model of development. therefore, the paper examines the anti-crisis management of other countries and baltic journal of economic studies 172 vol. 6, no. 3, 2020 the experience that ukraine can learn to improve governance in times of crisis. the dynamics of overcoming the crisis and further economic growth depend on the sovereignty of the state, its ability to encourage the development of institutional forms, adequate time. anti-crisis regulation can be considered both at the macro, meso, and micro level. the implementation of anti-crisis procedures in relation to the functioning of the industry is called the anticrisis process. world experience shows that this process is manageable and includes two blocks of procedures: crisis management and crisis management, which serve a common purpose at different (micro-, mesoand macroeconomic) levels. at the micro level, anti-crisis regulation in the economic literature is considered as anti-crisis management in relation to a particular business entity. at the meso level, crisis management provides a system of measures for groups of enterprises in a particular industry. the goals of crisis management can be achieved by solving the following tasks: diagnosing the financial condition and assessing the prospects for the development of potential production of enterprises in the industry; development of a plan for financial recovery of enterprises; assessment of the depth of the financial and economic crisis of enterprises and the effectiveness of measures for their financial recovery; selection and implementation of anti-crisis procedures. however, effective anti-crisis management of the industry should be facilitated by government regulation. the content of anti-crisis regulation – the category of macroeconomic – is the measures of state organizational and economic and regulatory action on enterprises and industries at the stages of prevention, response and study of crises. 2. literature review both domestic economists and foreign scientists are interested in the problems of theory and practice of crisis management and crisis regulation. today, the world has accumulated considerable experience in implementing crisis management and forecasting of crisis phenomena of economic entities. thus, bohdan danylyshyn, ivan bohdan (2020) study the global nature of restrictive measures and declining aggregate demand during a coronavirus pandemic, affecting both multinational corporations and small businesses operating exclusively in the domestic market. the synchronous economic downturn in many countries, the imbalance of commodity and financial markets in response to the spread of the epidemic again after the global crisis of 2008-2009, revealed systemic shortcomings in the model of economic liberalism and minimizing state influence on social processes. kseniia kotliarevska (2019) argues that the european course opens up a unique opportunity for ukraine to reach a qualitatively higher level of development of society and the state, giving each of its citizens a chance to unleash their own potential. to reap the benefits of joining the united europe, ukraine needs to master modern models of economic growth, aimed at ensuring stable and high indicators of socio-economic development in the long run. mykhailo bril (2018) writes that at the present stage in ukraine the study of the causes of uneven economic development and factors stabilizing further economic development have become widespread. ukraine’s economy faces significant structural imbalances in the production and economic systems. valeria dykan and oleksandr pakharenko (2019) write that the rapid development of information technology, internationalization of economic processes, increasing the level of unpredictability of the world economic space require business structures maximum concentration on management processes, implementation of innovative principles in all areas, rapid adaptation to economic change . the study elok sri utami (2017) aims to examine the impact of the financial crisis of 2008 on the performance of companies in the field of ownership listed on the indonesian stock exchange. the property sector is an attractive and promising business sector for many investors because as the population grows, the demand for housing grows. george drogalas, iordanis eleftheriadis, michail pazarskis and evgenia anagnostopoulou (2017) study risk management, which is widely recognized as an important tool for identifying, assessing and overcoming various risks of enterprises. today, the fact that companies operate in an uncertain environment makes it extremely important to implement procedures that allow them to manage risks in a timely and effective manner. rostyslav slaviuk and nataliia slaviuk (2018) write that the financial crisis of 2008-2009 has caused a rapid increase in public debt around the world. this is a common element of the economic crisis: the economic slowdown is causing budget deficits and countries are forced to borrow in domestic and foreign markets. oleksii liulov (2017) examines the impact of public finances on the country’s macroeconomic stability indicators, which is based on an assessment of the time series of instability of four economic variables: inflation, the ratio of budget deficit to gdp growth, external debt and exchange rate deviations. vitalina babenko, maryna pasmor, yuliia pankova, mykhailo sidorov (2017) study the socio-economic and political processes taking place in ukraine, the implementation of approaches to integration into the world economic space, in particular on the basis of international integration processes of scenario forecasting. liudmyla tranchenko, nataliia petrenko, liliia kustrich, nataliia parubok and oleksandr tranchenko baltic journal of economic studies 173 vol. 6, no. 3, 2020 (2018) believe that the current stage of transition to another model of national economy at the regional level should be characterized by the formation of long-term development priorities aimed at overcoming modern challenges and identifying promising directions. the remoteness and universality of a long-term forecast and the limited ability to take into account the impact of a variety of economic factors require detailed and accurate forecast results. however, despite the significant amount of research on the nature and tools of crisis management, as well as the increasing relevance and practical significance of this problem in recent times, it still remains unresolved. a set of questions concerning the possibility of using crisis management tools used in the leading countries of the world needs thorough research. this determines the relevance and need for further study of this problem. 3. the purpose and objectives of the study based on the scientific and practical relevance of the topic and based on the results of studying some aspects of it in the world and national economic literature, the aim of the article is to systematize and generalize the experience of leading countries to form and implement an effective crisis management system. the purpose of the article is to clarify the role of the state in the formation and implementation of anti-crisis regulation strategy of the real sector of the economy, as well as to substantiate the main methodological provisions of its formation. to achieve this goal, the following tasks are outlined: 1) to consider the approaches and priorities of the world in the implementation of anti-crisis measures; 2) to develop an economic and mathematical model 4. research of world experience of anti-crisis management and analysis of macroeconomic indicators influencing anti-crisis activity of countries stable state and crisis are constant antagonisms in the development of any system. based on this, crisis management can be considered as a system of measures to diagnose, prevent, neutralize and overcome crisis phenomena and their causes at all levels of the economy. anti-crisis public administration in countries with developed market economies is expressed in various forms. thus, in particular, the development of agricultural cooperation allows taking advantage of large-scale commodity production and taking into account the interests of rural producers, contributing to the revival of the peasant as the owner of production, the real owner of means of production and products. the cooperative movement is the most massive in the world. it unites almost 800 million people. and this is not accidental, because cooperation performs a number of much-needed economic and social functions. it widely uses small forms of management, actively supports small and medium-sized enterprises, it is the basis for the formation and operation of appropriate organizational and legal structures of vertical and horizontal types. due to the social use of technical and economic resources of individual owners, cooperation makes production large-scale and on the basis of joint work and combination of efforts and resources of all its participants provides a maximum cost per unit of final product. all this makes cooperation a significant phenomenon and determines its objective necessity in the field of agribusiness. cooperation as a form of cooperation is inherent in almost every country, regardless of its existing socioeconomic formation. it arose from the needs of various producers (especially small ones) and received largescale development in almost all countries, regardless of their social structure. at the same time, the level of development of cooperation is to some extent determined by the mechanism of economic laws, the state of the economy of enterprises, the legal framework of each individual country and so on. in times of economic instability, economic downturn or crisis, the governments of the united states and western european countries are trying to change the situation by increasing government intervention in the economy. this is not typical of a country in normal economic conditions, because, usually, public policy is aimed only at broad government support for private enterprise and the market. intervention in the economy leads to increased government spending and an increase in the share of gnp that is redistributed through the budget. this concept certainly leads to increased costs of economic management, accompanied by the formation of budget deficits and public debt. but the government resorted to such anti-crisis measures only as a last resort. japan is a country with a long tradition of state intervention in the economy, including through indicative planning. analyzing the directions of state intervention in japan today, we note that it is observed in many areas: economic growth and its rate; structure of industrial production; education and science; employment; credit and money circulation; pricing; foreign economic relations; industry structure; location of productions; investment incentives. however, despite the active state intervention in the economy, the country is developing both large and small businesses. this is due to the fact that economic difficulties are overcome with the active support of the state. it is the state, through fiscal and credit and financial policy, as well as measures of direct administrative influence, contributes to solving the problems of economic entities. examining the experience of the european union in the field of crisis management, it should be noted that it is baltic journal of economic studies 174 vol. 6, no. 3, 2020 dominated by a selective approach aimed at stimulating the activities of specific companies. it is believed that only private business can effectively address the rise of depressed regions and businesses by creating small and medium-sized enterprises in advanced industries. however, each country of the european union has its own characteristics. thus, the main feature of the economy of industrialized france is that the public sector dominates in the basic industries, although the degree of state participation in them may vary. state-owned companies operate mainly in the automotive, aerospace, chemical and oil and gas industries, and ferrous metallurgy. when considering issues of state regulation in the scandinavian countries, it is necessary to pay attention to two concepts. these are state property and the public sector. the share of state ownership is significant only in finland, as the public sector is significant in all scandinavian countries. employment in the public sector of the scandinavian economy is highest among developed countries: sweden – 32%; norway and denmark – about 30%, finland – 25%. the priorities of the scandinavian public sector are education, health care, pensions, the labor market, etc. in addition to the direct participation of the state in the economy, there are indirect methods of regulation through measures of credit and financial policy. thus, in countries with developed market economies, rich experience has been accumulated in both preventing and overcoming crises at the macro and micro levels. of course, the conditions for the emergence and development of different types of crises in ukraine and other countries are different. but this fact does not detract from the need for careful study of experience and thoughtful, creative approach to its application in the process of crisis management. it should be noted that bankruptcy is one of the few institutions in the formation of which all countries of the world participate. crisis management measures are implemented at two levels. carrying out of the state anti-crisis measures is caused by necessity of increase of a technological level and growth of competitiveness of production of the national commodity producer in the world market. at the level of economic entities, the solution of financial and economic problems is carried out within the framework of crisis management and bankruptcy procedures using organizational and managerial methods. in this study, the first level of crisis management is considered in more detail. as part of anti-crisis policy, the united states used a tool to regulate the dollar exchange rate. in particular, they limited the growth of the national currency by stimulating exports and curbing inflation. in addition, certain measures were aimed at reducing borrowing. to this end, asset prices rose. as a result, income increased in the category of the population that had these assets at its disposal. this was aimed at stimulating aggregate demand, which in turn reduced inflationary pressures. for a more detailed disclosure of the research topic, we will analyze some indicators of anti-crisis functioning of the united states, japan, china, 27 countries of the european union and ukraine; and the impact of these indicators on the anti-crisis development of the national economy. thus, we compare the indicators related to crisis management in the united states, japan, the european union and ukraine, in particular, the following indicators will be analyzed: bank capital to assets ratio (%); bank liquid reserves to bank assets ratio (%); profit tax (% of commercial profits); central government debt, total (% of gdp); claims on central government, etc. (% gdp); claims on other sectors of the domestic economy (% of gdp); current account balance (% of gdp); depositors with commercial banks (per 1,000 adults); domestic credit provided by financial sector (% of gdp); expense (% of gdp); gini index (the world bank estimate); exports of goods and services (% of gdp); imports of goods and services (% of gdp); foreign direct investment, net inflows (% of gdp); foreign direct investment, net outflows (% of gdp); gdp growth (annual%); general government final consumption expenditure (% of gdp). analyzing table 1, we can draw the following conclusions. bank capital to assets ratio is the largest in ireland (14.86%) and the smallest one is in sweden (6.18%). a country with a long tradition of state intervention in the economy is japan. analyzing the state intervention in japan today, i would like to note that it is observed in many areas: economic growth and its rate; structure of industrial production; education and science; employment; credit and money circulation; pricing; foreign economic relations; industry structure; location of productions; investment incentives. however, despite the active state intervention in the economy, the country is developing both large and small businesses. this is due to the fact that economic difficulties are overcome with the active support of the state. it is the state, through fiscal, and credit, and financial policy, as well as measures of direct administrative influence, helps to solve the problems of economic entities. continuation of the analysis of indicators of anti-crisis functioning of the usa, japan, china, the eu countries and ukraine is shown in table 2. analyzing the data of the deposit interest rate, we can say that the more a country is economically resilient to crises, the lower its deposit interest rate. examining the experience of the european union in the direction of crisis management, we can say that it has a selective approach aimed at stimulating the activities of specific companies. it is believed that only private business can effectively address the rise of depressed regions and businesses by creating small and medium-sized enterprises in advanced industries. baltic journal of economic studies 175 vol. 6, no. 3, 2020 table 1 average value of anti-crisis functioning indicators of the usa, japan, china, eu countries and ukraine for the period 2005-2019 country name bank capital to assets ratio (%) bank liquid reserves to bank assets ratio (%) profit tax (% of commercial profits) central government debt, total (% of gdp) claims on central government, etc. (% gdp) current account balance (% of gdp) the usa 11.69 9.70 27.9 96.84 35.69 -2.38 japan --31.57 24.7 194.43 141.92 3.51 china 9.07 ---10.9 ---24.96 1.61 austria 7.71 ---16.86 ---12.22 1.74 belgium 7.61 -8.50 ---21.22 1.23 bulgaria 10.82 18.11 5.19 ---1.05 3.29 croatia 13.90 28.44 0.00 ---16.15 2.21 cyprus 8.22 ---8.78 ---23.67 -4.27 czech republic 6.54 37.27 5.60 ---7.18 0.35 denmark 6.97 3.83 20.84 ----3.88 6.96 estonia 12.08 --8.58 ----3.05 1.67 finland 9.30 ---14.65 ---9.12 -1.39 france 6.52 ---4.37 ---17.65 -0.68 germany 6.47 ---22.06 ---8.72 7.42 greece 10.72 ---17.54 ---13.64 -2.86 hungary ---13.47 10.17 96.18 17.76 2.23 ireland 14.86 ----12.15 84.83 16.41 4.77 italy 6.33 ----23.06 ---48.42 2.58 latvia 9.74 ----6.27 ---2.49 1.43 lithuania 9.61 ---6.47 ---2.64 1.53 luxembourg 7.44 ---4.32 ---0.14 5.21 malta 8.40 ---31.16 ---15.19 8.77 netherlands 6.21 ---20.4 ---14.43 10.84 poland 9.77 11.47 15.05 ---11.18 -0.52 portugal 7.04 ---12.5 ---24.75 1.38 romania 9.34 21.83 11.61 ---4.97 -4.38 slovak republic 10.45 ----8.38 ---15.49 -2.61 slovenia 10.69 ----13.74 ---15.46 5.69 spain 7.55 ---15.75 104.57 26.35 1.92 sweden 6.18 3.89 15.07 ---3.24 3.86 ukraine 13.51 11.16 11.17 71.81 20.26 -3.34 world --17.71 15.97 ---26.08 ---source: compiled by authors based on world bank data world experience shows that the models of anticrisis management constructed in different countries of the world provide various potential opportunities for progressive socio-economic changes. however, none of them can be used in its pure form in the formation of anti-crisis management policy in ukraine. this is due to the conditions of accumulation of this experience by countries, the formation of mechanisms and institutions in a balanced economy, differences in the construction of financial and credit mechanisms. the use of positive experience should be the first step towards reforming the crisis management system in ukraine. next, we analyze the value of exports of goods and services in the studied countries. table 3 shows that the largest exports during the study period were observed in belgium, ireland, luxembourg, malta and the netherlands. for countries with the largest exports, we analyze the dynamics of foreign direct investment, net inflows (figure 1). analyzing the dynamics of foreign direct investment, net inflows, we can observe a significant decrease in this indicator in 2009, i.e., after the crisis of 2008. in 2018, there is a slight increase in this indicator. figure 2 analyzes the dynamics of gdp growth by selected countries. analysis of figure 2 also shows the significant impact of the 2008 crisis on gdp growth, as in 2008 and 2009 this indicator was negative. after conducting this study, we can conclude that the most resilient to macroeconomic crises among the eu is the netherlands. so, let us compare five countries in more detail: the united states, japan, china, the netherlands and ukraine. baltic journal of economic studies 176 vol. 6, no. 3, 2020 table 2 average value of anti-crisis functioning indicators of the usa, japan, china, the eu countries and ukraine for the period 2005-2019 country name deposit interest rate (%) imports of goods and services (% of gdp) domestic credit provided by financial sector (% of gdp) expense (% of gdp) gini index (world bank estimate) the usa ---15.32 106.83 22.33 41.40 japan 0.42 18.19 271.73 17.77 32.90 china 1.50 18.73 194.27 ---39.70 austria ---49.33 128.37 45.04 30.27 belgium --80.92 134.04 40.97 28.43 bulgaria 0.61 63.57 60.29 32.61 35.47 croatia 1.52 46.52 87.29 39.91 32.14 cyprus ---67.70 255.57 42.65 32.62 czech republic 0.52 72.20 66.82 32.96 26.42 denmark ---48.14 213.60 40.44 26.70 estonia ---72.86 74.34 36.34 33.25 finland ---37.57 155.49 39.55 27.56 france 0.89 30.85 147.41 47.78 32.09 germany --40.29 134.19 28.22 30.85 greece ---34.01 134.50 47.76 34.64 hungary 0.58 80.56 60.28 43.49 29.79 ireland ---84.85 160.68 34.86 32.62 italy ---26.70 169.19 43.27 34.40 latvia ---61.48 57.17 43.46 36.03 lithuania ---71.22 51.91 32.79 35.50 luxembourg ---175.54 190.11 38.22 31.61 malta ---128.55 143.92 36.91 29.11 netherlands 2,44 69.33 207.17 40.95 28.21 poland ---48.16 73.44 34.26 33.88 portugal ---43.44 173.76 43.76 35.51 romania 3.02 43.59 37.89 33.21 36.58 slovak republic ---90.78 72.88 40.63 26.73 slovenia --69.42 68.54 43.35 24.95 spain ---29.89 194.27 19.79 34.54 sweden ---41.23 154.13 33.14 27.42 ukraine 11.77 53.81 74.35 37.37 26.50 world ---29.35 132.43 27.32 ---source: compiled by authors based on world bank data table 3 exports of goods and services,% of gdp country name 2005 2014 2015 2016 2017 2018 2019 ratio 2019 tо 2005 the usa 10.01 13.54 12.44 11.87 12.09 12.22 13.54 135.28 japan 14.01 17.54 17.61 16.25 17.77 18.45 15.92 113.58 china 33.83 23.59 21.44 19.75 19.96 19.51 24.60 72.71 austria 48.62 53.39 53.09 52.45 54.04 55.76 53.44 109.92 belgium 74.28 79.80 77.81 79.38 82.31 82.58 79.32 106.79 bulgaria 42.86 64.90 64.54 64.73 68.15 66.94 64.88 151.36 croatia 36.73 43.30 46.38 47.63 50.03 50.52 40.43 110.09 cyprus 55.69 66.11 70.33 70.75 73.02 73.07 61.36 110.18 czech republic 62.18 82.55 81.05 79.56 79.73 78.39 76.87 123.62 denmark 47.45 54.61 55.42 53.43 55.14 55.64 54.83 115.55 estonia 65.47 81.33 76.87 77.45 76.14 74.26 84.02 128.33 finland 40.27 36.48 35.39 34.82 37.68 38.56 38.02 94.40 france 27.03 29.67 30.59 30.25 30.82 31.34 29.36 108.63 baltic journal of economic studies 177 vol. 6, no. 3, 2020 country name 2005 2014 2015 2016 2017 2018 2019 ratio 2019 tо 2005 germany 38.06 45,62 46.85 46.02 47.40 47.42 45.42 119.34 greece 21.31 32.37 31.55 30.06 32.99 36.13 30.35 142.42 hungary 62.64 87.42 87.98 87.15 87.14 84.94 85.58 136.62 ireland 79.58 110.03 121.97 120.82 121.04 122.33 103.66 130.26 italy 24.60 29.11 29.72 29.33 30.84 31.45 28.63 116.39 latvia 43.21 61.20 60.72 60.40 62.13 61.30 60.26 139.46 lithuania 53.84 72.34 68.82 67.58 73.61 75.62 78.79 146.34 luxembourg 161.68 212.61 221.20 213.04 217.62 211.56 190.63 117.91 malta 104.37 148.85 153.77 151.90 149.77 144.87 156.98 150.41 netherlands 65.63 80.58 82.66 79.54 83.39 84.32 79.88 121.71 poland 34.61 47.57 49.50 52.19 54.35 55.59 46.32 133.83 portugal 27.08 40.22 40.62 40.21 42.72 43.52 39.61 146.23 romania 24.54 41.16 41.02 41.19 41.47 41.64 39.87 162.51 slovak republic 72.30 91.52 92.02 93.73 95.11 96.09 93.62 129.48 slovenia 59.81 76.15 77.15 77.97 83.17 85.38 74.22 124.08 spain 24.98 33.48 33.63 33.88 35.18 35.12 32.96 131.96 sweden 45.05 43.57 44.29 43.26 44.43 45.79 42.80 95.01 ukraine 48.75 48.59 52.60 49.30 48.01 45.21 42.96 88.12 world 28.64 30.18 29.31 28.46 29.43 30.11 30.40 106.14 source: compiled by authors based on world bank data (end of table 3) -100,00 0,00 100,00 200,00 300,00 400,00 500,00 600,00 700,00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 belgium ireland malta netherlands luxembourg ukraine -15,00 -10,00 -5,00 0,00 5,00 10,00 15,00 20,00 25,00 30,00 belgium luxembourg malta ireland netherlands ukraine figure 1. foreign direct investment, net inflows, % of gdp figure 2. gdp growth, annual % baltic journal of economic studies 178 vol. 6, no. 3, 2020 table 4 general government final consumption expenditure, % of gdp country name 2005 2014 2015 2016 2017 2018 2019 ratio 2019 to 2005 the usa 15.06 14.64 14.36 14.28 14.15 14.14 15.53 103.18 japan 18.12 20.15 19.82 19.88 19.67 19.75 20.25 111.79 china 14.00 13.38 14.04 14.39 14.52 14.68 13.48 96.29 austria 19.35 19.80 19.76 19.67 19.49 19.32 19.86 102.66 belgium 22.09 24.23 23.62 23.24 23.07 23.07 24.30 110.00 bulgaria 18.30 16.91 16.27 15.79 15.84 16.72 15.91 86.94 croatia 18.49 20.75 20.11 19.59 19.53 19.45 20.57 111.29 cyprus 16.51 16.81 16.41 15.30 14.98 14.90 18.81 113.93 czech republic 20.68 19.68 19.22 19.27 19.19 19.97 19.81 95.77 denmark 24.50 25.79 25.47 24.87 24.62 24.35 26.47 108.05 estonia 16.96 19.09 19.98 20.36 19.87 19.62 18.52 109.19 finland 21.41 24.51 24.37 23.66 22.81 22.66 24.10 112.54 france 23.07 24.13 23.81 23.73 23.68 23.41 23.95 103.83 germany 18.78 19.59 19.56 19.78 19.86 19.90 19.28 102.67 greece 20.02 20.28 20.30 20.06 19.81 19.14 21.74 108.58 hungary 22.17 20.06 19.82 20.13 20.34 19.70 20.06 90.49 ireland 16.03 16.05 12.25 12.31 11.98 11.90 17.68 110.28 italy 19.61 19.54 19.11 19.03 18.82 19.02 19.81 100.99 latvia 17.90 17.53 18.08 18.05 18.11 17.79 17.40 97.17 lithuania 18.50 16.63 17.22 17.00 16.31 16.49 17.50 94.55 luxembourg 17.15 16.74 16.50 15.92 16.43 16.66 17.41 101.52 malta 18.11 18.86 17.49 16.11 15.37 16.27 20.21 111.59 netherlands 22.28 25.68 24.98 24.68 24.32 24.24 26.03 116.82 poland 18.30 18.18 18.04 17.90 17.69 17.80 17.93 97.99 portugal 20.99 18.40 17.85 17.59 17.18 16.96 18.34 87.37 romania 16.24 14.23 13.74 15.09 15.71 16.61 14.53 89.44 slovak republic 18.48 18,36 18.62 18.92 18.91 18.61 17.74 95.97 slovenia 18.91 18.89 18.82 19.11 18.43 18.35 20.36 107.65 spain 17.33 19.64 19.48 19.06 18.62 18.62 19.98 115.26 sweden 25.05 26.16 25.81 26.38 26.07 26.02 25.82 103.07 ukraine 17.36 18.67 18.92 18.60 20.67 20.76 18.65 107.40 world 16.43 17.01 17.06 17.06 16.92 16.94 17.17 104.49 source: compiled by authors based on world bank data table 5 general indicators of the national economies development of the studied countries on average for 2005-2019 indicator the usa japan china netherlands ukraine population, total 326687501 126529100 1392730000 17231624 44622516 land area (sq. km) 9147420 364560 9388210 33690 579290 foreign direct investment, net inflows (% of gdp) 1.26 0.49 3.03 28.57 1.89 gdp growth (annual %) 2.22 1.92 6.76 1.95 3.34 inflation, gdp deflator (annual %) 1.90 -0.22 2.93 1.26 15.41 interest payments (% of expense) 11.77 9.35 ---3.56 9.78 trade (% of gdp) 28.79 36.64 45.07 148.85 99.02 net acquisition of financial assets (% of gdp) 0.98 0.69 ------2.89 researchers in r&d (per million people) 4090.87 5304.13 1089.19 4776.84 994.08 military expenditure (% of gdp) 3.81 0.95 1.92 1.33 3.02 research and development expenditure (% of gdp) 2.78 3.21 2.06 1.92 0.76 short-term debt (% of total external debt) ------62.12 ---23.35 total natural resources rents (% of gdp) 0.82 0.03 4.15 1.29 6.74 unemployment, total (% of total labor force) (national estimate) 5.78 3.61 4.11 6.87 9.41 source: compiled by authors based on world bank data baltic journal of economic studies 179 vol. 6, no. 3, 2020 thus, the role of the state in the formation and implementation of anti-crisis management and economic regulation is not simply to expand the state’s presence in the economy, but to increase the effectiveness of long-term public policy and concrete actions to improve the economy, improve social status. the goal of the anti-crisis strategy of ukraine’s economy should be to increase the technological structure of production to create a larger share of value added in the country. the movement in this direction requires the inclusion in the anti-crisis strategy of three key points: it is necessary to consistently develop a system of market institutions; determining the role of the state in the economic process should be based on the fact that in all modern developed countries, the economy is mixed in nature, i.e. the state performs many coordination functions, as well as makes some direct regulatory decisions. in critical periods for the economy, the role of the state is growing. removing the state from the management of a market economy is absolutely unacceptable. for a more detailed disclosure of the research topic, the dependence of gdp growth (annual %) and central government debt, total (% of gdp) is further studied; bank capital to assets ratio (%); expense (% of gdp); exports of goods and services (% of gdp); foreign direct investment, net inflows (% of gdp) the sign of heteroskedasticity in each case is difficult to detect, because it is necessary to know the values σεi for each fixed value x xi= . in practice, as a rule, for each specific value x xi= we have only one value of the dependent variable y yi= , and not a number of distributions. this does not allow us to estimate the variance of a random variable y at a fixed value x xi= . there are proven tests that can detect heteroskedasticity. and, as practice shows, their use has positive consequences. these are the glaser and goldfeld-quandt tests. glaser and goldfeldt-quandt tests can detect the presence of a sign of heteroskedasticity in the model only in the case of violation of the condition σεi const 2 = , ie, when the variances of the residues εi are not constant values. when the condition σεi const 2 = is fulfilled, and at the same time cov( , )ε εi j ≠ 0, it is impossible to detect this violation of the condition of homoskedasticity by the above tests. in this case, we are dealing with a linear model with a violation of the sign of homoskedasticity, which belongs to the second group. this situation arises when studying models with a sign of autocorrelation. thus, consider the relationship between gdp growth (y, annual%) and central government debt, total (x1,% of gdp); bank capital to assets ratio (x2,%); expense (x3,% of gdp); exports of goods and services (x4,% of gdp); foreign direct investment, net inflows (x5,% of gdp). it is required: 1) to calculate the estimates of the parameters of the model by the method of least squares, check the significance of the relationship in the model and the statistical significance of the calculated estimates of the parameters of the model; 2) to analyze the feasibility of applying the method of least squares, checking the tests of goldfeld-quandt and glaser the presence of heteroskedastic residues; 3) to calculate estimates of the model parameters taking into account the results of tests for the presence of heteroskedastic residues. 1. construction of the model for mnc, verification of the model and its parameters for statistical significance. the linear econometric model, the parameters of which are found by the method of least squares for sample data, has the form: y x õ õ õ õi * , , , ,= + + + + +-2,366 0,219 1 0 12 2 0 23 3 0 23 4 0 19 5 the coefficient of determination of this model r2 = 0.854, between the resulting variable y and the regressor x, the pairwise correlation coefficient rxy = 0.924. let us check the statistical significance of the pairwise correlation coefficient according to student’s criterion: tñï * , ( ) , ,= ⋅ − − − = 0 854 30 1 1 1 0 854 12 779 . at the significance level α=0.05 and the degrees of freedom k=n-m-1=28 the tabular value of the student’s criterion ′′t kêð( , ) α 2 =2,048, therefore, tñï* > ′′t kêð( , ) α 2 , the relationship in the model between y and x is significant. the standard errors of parameter estimates and the corresponding values of the t-test are equal to: s s t t β β β β 0 1 0 1 0 848 0 017* * * * , ; , ; ; . = = = − =2,789 12,779 t t β β0 1 2 048 2 048* *, , ; ,∉ −[ ] , this allows us to conclude that the calculated estimates of the model parameters differ significantly from zero. 2. check for the presence of heteroskedastic residues. we use the goldfeld-quandt test to check the presence of heteroskedastic residues. the test tests the basic hypothesis h0 σ σ σε ε ε1 2 2 2 2= = =... ò : according to fisher’s test: in the alternative hypothesis hα: not h0. to do this, we arrange the input data in descending order of the values of the explanatory variable xi. we discard c n = ⋅ = 4 15 8 ( i = 12 19, ) the average observations (second subsample), assuming that the variance of the residues for them is constant. by the method of least squares, we find the parameter estimates first for the first model (subsample 1) with n n c 1 2 30 8 2 11= − = − = the largest values of the regressor xі, then for the second – with n3 11= the lowest values xі (third subsample). find the values yi * and ei for both the first and second models and check baltic journal of economic studies 180 vol. 6, no. 3, 2020 the presence of heteroskedastic residues based on the goldfeld-quandt test. to do this, calculate the sums of the squares of the residuals s ei i n 1 2 1 1 = = ∑ і s ei i n 3 2 1 2 = = ∑ and calculate the valuefñï*: f s n s n if s s s n s n if s s ñï * , ; , . = > >            3 3 1 1 3 1 1 1 3 3 1 3 the calculated value fñï* , , = = 126 243 2 285 55,253 is compared with the tabular value f k kêð( , , )α 1 2 =3.18 with degrees of freedom k1=11-1-1=9 and k2=11-1-1=9 at a significance level of α=0.05. since fñï* > f k kêð( , , )α 1 2 , hypothesis h0 about the lack of heteroskedasticity of the residues is rejected. let us analyze the presence of heteroskedasticity according to the glaser test. for model (1), calculate the values of the residuals and write them down in absolute terms. the coefficient of determination of the model r2 = 0.628, between ei and x the coefficient of pair correlation r = 0.792. the standard errors of parameter estimates and the corresponding values of the t-test are equal to: s s t t α α α α 0 1 0 1 0 008* * * * ; , ; ; . = = = − = 0,403 2,604 6,874 at the level of significance α=0.05 and degrees of freedom k=n-m-1=28 the tabular value of the student's criterion ′′t kêð( , ) α 2 tα/2,k=2,048. compare the calculated values t jα * with the table: t t α α0 1 2 048 2 048* *, , ; ,∉ −[ ] . therefore, we accept the glaser test hypothesis of the presence of heteroskedastic residues. 3. we apply the weighted least squares method to find estimates of the model parameters with heteroskedastic regression residues. based on the goldfeld-quandt and glaser test, we assume that σ σεi xi 2 2 2= . it is received   β∗ ∗ ∗ − ∗ ∗= ( )′ ⋅      ⋅ ( ) ′ ⋅x x x y 1 , where y y x y x y x * ... ;=                       1 1 2 2 30 30 x x x x * ... ... =                       1 1 1 1 1 1 1 1 2 30 ,  β β β * * * =       0 1 . based on the data, we find that  β* , , = −      3 194 0 241 . to determine sβ0 and sβ1 the formula is used: cov( ( ) ) (( ) )* * * *   β β ε⋅ ′ = ′ ⋅ −s x x2 1 , where and (( ) ) , , , , * *x x′ ⋅ = − −       −1 0 131 3 063 3 063 96 328 . here n-m-1=30-1-1=28. thus, it is obtained s s β β0 1 0 310 0 011* *, ; ,= = . let us check the statistical significance of parameter estimates based on the t-test: t t β β0 1 * *; .= =10,311 21,146 at the level of significance α=0,05 and degrees of freedom k=n-m-1=28 tabular value of the student’s criterion ′′t kêð( , ) α 2 =2,048. t t β β0 1 2 048 2 048* *, , ; ,∉ −[ ], the calculated estimates of the model parameters differ significantly from zero. compared with the model, the root mean square errors of the parameter estimates decreased with a corresponding increase in the value t jβ * . therefore, the econometric model taking into account the heteroskedasticity of the residues has the following form: y x õ õ õ õi * , , , ,= + + + + +-3,123 0,241 1 0 153 2 0 123 3 0 203 4 0 119 5 y x õ õ õ õi * , , , ,= + + + + +-3,123 0,241 1 0 153 2 0 123 3 0 203 4 0 119 5 i.e., an increase of 1% central government debt, bank capital to assets ratio, expense, exports of goods and services, foreign direct investment, net inflows will increase gdp by 2.41%, 1.53%, 1.23%, 2.03%, and 1.19% respectively. 5. discussion rostyslav slaviuk and nataliia slaviuk (2018) argue that government borrowing can be an important source of investment for economic development and increase their competitiveness, although in the event of recovery from the crisis and the existence of high levels of public debt, most public debt is used to current needs and to refinance existing debt. research by george drogalas, iordanis eleftheriadis, michail pazarskis and evgenia anagnostopoulou (2017) suggests that the effective use of specific internal audit factors can increase the effectiveness of risk management. in particular, it provides a better understanding of how internal audit participation, management and risk-oriented internal audit can increase the effectiveness of risk management. the study by elok sri utami (2017) shows that there was no difference in the system of performance baltic journal of economic studies 181 vol. 6, no. 3, 2020 of the current ratio of total assets and net income during the study period between and before the global financial crisis of 2008. the debt ratio and return on equity have a significant difference before and after the crisis. bohdan danylyshyn, ivan bohdan (2020) note that the main task of economies during crises is to preserve economic potential, social capital and create on their basis the preconditions for further economic recovery and progressive socio-economic development. kseniia kotliarevska (2019) argues that the best results in ensuring the sustainability of economic growth are achieved by countries that manage to combine economic efficiency with social performance through the establishment of economic mechanisms and optimization of social institutions that act as a way to reconcile interests and goals. therefore, during strategic planning at the enterprise it is necessary to be guided by the principles of social responsibility. mykhailo bril (2018) developed a simulation model for detecting macroeconomic imbalances, which allowed to identify existing problems, and the forecast made on its basis: to identify potential threats. 6. conclusions the results of the study indicate that anti-crisis public administration in countries with developed market economies is expressed in various forms. in most countries, it is implemented through improved employment legislation, increased jobs, especially for young people, coordination of the efforts of various government agencies to develop and conduct economic policy, by strengthening government intervention in the economy. examining the experience in the field of crisis management, it should be noted that in europe there is a selective approach aimed at stimulating the activities of specific companies; public sector priorities are education, health care, pensions, and the labor market. in addition, in some countries in order to find innovative structures of enterprises, increase their competitiveness and efficiency, out of the crisis, the development of privatization programs is used, which in each country have their own characteristics. examining the world experience of solving the problem of corporate bankruptcy, we can distinguish two approaches to this problem. world experience shows that the models of anti-crisis management constructed in different countries of the world provide various potential opportunities for progressive socioeconomic changes. however, none of them can be used in its pure form in the formation of anti-crisis management policy in ukraine. this is due to the conditions of accumulation of this experience by countries, the formation of mechanisms and institutions in a balanced economy, differences in the construction of financial and credit mechanisms, and so on. the use of positive experience should be the first step towards reforming the crisis management system. it is believed that based on world experience, the following measures of crisis management can be used, namely: – implementation of anti-crisis management policy through the improvement of legislation; – improvement of anti-crisis management methods; – stimulation of the activities of companies; – strengthening of the program of budgetary discipline and the program of support and development of competitiveness of businessmen; – drawing up 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(2016). fiscal state as a factor international ukraine competitiveness and regions: evaluation and improving ways. problems and prospects of economics and management, no. 4(8), pp. 159–167. baltic journal of economic studies 133 vol. 6, no. 4, 2020 corresponding author: 1 kyiv national economic university named after vadym hetman, ukraine. e-mail: yivga_83@ukr.net orcid: https://orcid.org/0000-0002-6133-910x researcherid: j-5444-2018 2 kyiv national economic university named after vadym hetman, ukraine. e-mail: alla.ivaschenko@kneu.edu.ua orcid: https://orcid.org/0000-0001-8713-0681 3 kyiv national economic university named after vadym hetman, ukraine. e-mail: anna.kornyliuk@kneu.edu.ua orcid: https://orcid.org/0000-0002-4599-7137 doi: https://doi.org/10.30525/2256-0742/2020-6-4-133-140 investor relations tools for business in smart specialization strategy yevheniia polishchuk1, anna kornyliuk2, alla ivashchenko3 abstract. communication with investors is an important component in the activities of smes and large companies. facing the new changes (development of digital technologies, covid-19, smart specialization) the search for optimal tools of communication with investors becomes a priority for all key stakeholders of the investment process (business, academia, civil society, local authorities). the aim of the article is to identify effective communication tools for business and develop recommendations for their use in the context of smart specialization. subject of research: investor relations of large, medium and small companies in the context of smart specialization. the main research methods are systemic (to build a system of investor relations tools) and analytical (to determine the ir tools among the studied companies; to analyze the tools of investor relations by using social media). as a result of the study, it is determined that the promotion of the ukrainian companies through social networks is inactive (facebook – 13%, instagram and twitter – 4%, youtube – 5% and linkedin – 1%). more than half of the surveyed companies indicate that the most common investor relations tools are news releases and presentations (71.4%), answers to questions (61.1%) and annual reports (52.7%). in this article, smart specialization is considered as a common tool for communication between key stakeholders. it was determined that in the conditions of covid19, they used the following tools: online dialogues, online conferences, online sessions, online workshops, online presentations, world cafes, annual lectures, online consultations, webinars (partner webinars). this study set out to explore investor relations tools in the context of smart specialization. in addition, such global tendencies were revealed as: ir boosting startups’ transformation into large companies; increasing both the investors’ interest to the companies and the requirements to corporate transparency promote using of ir tools; investor meetings via online platforms; impact of regional specifics on choosing ir tools of different companies. the results of the investigation show that ukrainian companies have different ir politics. the main reasons why they use ir tools actively are their own internal requirements to the quality management and the need in external funding. moreover, new legislation demands to the super advisory boards of public companies are reflected in using ir tools. key words: investor relations, smart specialization, large business, ipo, smes. jel classification: g02, g11, m31 1. introduction the smart specialization approach involves the active communication of key participants in the innovation process: representatives of business, academia, civil society and local authorities. the implementation of the regional strategy, which is built on the principles of smart specialization, can bring the region to a new, more competitive level on a global scale. smart specialization helps to connect the interests of investors who are focused on finding and implementing innovations with representatives of business and academia, which are essentially the main producers of innovation. the problem of effective communication between these stakeholders is important and need to be solved immediately. very often investors cannot find attractive projects in the regions, businesses and academics are not able to properly present baltic journal of economic studies 134 vol. 6, no. 4, 2020 their projects and also their performance in general. representatives of civil society can also do effective promotion of their localities. effective communication with investors is also needed while public-private partnerships, where key players are local authorities and investors. the need for ir research in the context of smart specialization is sharp to the rapid development of digital technologies as well. this helps to speed up communication processes and attract more investors and full the economy with additional financial resources. the situation around covid-19 also forces to find the latest methods of communication. they are aimed not only at finding new investors, but also strengthening partnerships with other investors. all this is a prerequisite for researching investor relations, identifying best practices and applying their tools to promote different companies (big business and smes) at the regional, national and global levels. the aim of the article is to identify effective communication tools for business and develop recommendations for their use in the context of smart specialization. research questions are formulated around the issue of smart specialization and effective communication with various stakeholders in the regional context. 2. literature review ir is considered as a component of corporate transparency (esterhuyse, 2019) and it is indissolubly related to online performance with company’s investors. here the author proposes to use legitimacy theory and voluntary disclosure theory in order to improve relations between investors and the enterprise. it is also proved on the example of regression analysis of islamic banks in the united arab emirates that actors with the higher index of information transparency have better indicators of operation activities (tabash, 2019). at the same time the paper does not answer the question so long as it is possible to apply this methodology to the countries with emergency markets. in the other paper it is assumed that effective ir via internet resources leads to the optimal stock prices and increasing liquidity (esterhuyse & wingard, 2016), while it needs to be specified what exact instruments should be used for reaching the mentioned indicators. alves & silva (2020) regarded corporative communications via ir and related it to abnormal returns of the portuguese companies. very similar idea is in the article of klagge b., greiner c., greven d., & nwekeeze c. (2020), where they stress on importance of ir between investors and communities on the examples of kenia. they prove that such relationship may enforce the utility of public-private partnership projects. in furtherance of the cross-country peculiarities there is also research on ir in indo-nepal region (taneja, prakash, bimal, garg, & roy, 2020), where authors claim about friendly and warm relationship between indian and nepali business. however, there is no reason to generalize all the relationship between companies and investors, because problems happen in every business. some researchers consider financial reporting documents as a formal ir tools, in addition, they reveal non-formal financial tools (grigoraș-ichim et al., 2018). some studies on ir are related to corporate social responsibility. for instance, murashima (2020) finds that csr-related news influence investors’ behaviors differently based on their goals, ability and access information. other research tends to conclude that ir domain is the specifics of ipo process as a large business peculiarity (chahine, colak, hasan, & mazboudi, 2020). moreover, shkarlet & dubyna (2017) relate financial trust to investor attractiveness of the companies at different levels (micro-, meso-, macro). nel & brummer (2016) designed a methodic, which allows to measure ir strategy and its effectiveness, was proved by assessment of the listed companies. then they continue to research ir issues (nel, smit and brummer, 2018) and confirm that there is a correlation between well-designed internet ir strategy and decreasing of financial asymmetry. later, the scientists considering the data of the johannesburg stock exchange reveal the correlation between implemented ir strategy and the cost of capital (nel, smit and brummer, 2019). a relationship exists between using of ir resources by traders of the stock market and the likelihood of contract conclusion (upton, 2018), at the same time author sums up that ir companies make an impact on market reactions, and their presence can lengthen the process of m&a. there is a certain number of researches where modern skills and knowledge for ir-managers are regarded. it is revealed that today ir manager is considered as a person who builds confidential relations between investors and companies, sets up two-way communication, responds to requested information, ensures adjusting the interests and expectations of investors (hašček, 2017). in additions, the researcher claims that modern ir manager should have knowledge in finance, law and marketing area. the attention is also paid to the issue of social media usage (twitter and fb), whereas the ir instruments, which should be used, are slightly mentioned. continuing the topic of the ir professional skills there is a need to mention the paper of camiciottoli (2020). the author proves the importance of good command of english in international business. here she measures the effectiveness of such ir specialists on the finance international deals. karolyi, kim & liao (2020) studied a set of companies from different countries and revealed other additional ir functions (the firm’s interactions with brokers and investors, the formulation of its disclosure policies, and its global outreach efforts). baltic journal of economic studies 135 vol. 6, no. 4, 2020 from recent time ir is considered on communicational approach in modern economy (gackowski, 2017). the idea of mentioned research is to represent reputational approach of ir , which includes financial and non-financial features. despite the theoretical character of the article, the author describes the difference between investor relations and public relations, but the study should be filled up by the empirical data. the opportunities, risks, and tensions of ir are regarded by scientists in pr and finance (doan and mckie, 2018). here the authors offer to regard ir as an instrument of risk management during equity crowdfunding (ecf). they state obvious to begin to work with ir-instruments, however it is not enough to satisfy the information requirements of investors and they admit the increasing potential of ir in order to improve corporate dialog between investors and companies. among scientific research in ir area, the attention should be paid to the paper, where four-dimensional framework is offered to evaluate the extent of ir on the web (halim, basiruddin and ali, 2015). at the same time, the paper suffers from the lack of explanation how they propose to improve the communication with investors using integrated platform. 3. methods and data research the research strategy is related to examining of ir specifics of the ukrainian companies and its applicability for business in the context of smart specialization. the systemic and analytical methods are used for building investor relations system tools and to reveal the most often used tools of ir in the ukrainian companies. research was conducted based on the latest studies and processes taking place in the field of investment over the last 3 years. the base of the issuers was selected as the basis for research. analysis of securities issuers according to data published by the national commission on securities and stock market of ukraine was provided. then every chosen issuer’s ir online tools were studied. as a result, the base of issuers with the most popular ir tools was formed. ir goals: strengthening shareholder involvement; improving information disclosure and company reliability; providing up-to-date compliance and corporate governance; reaching optimal valuation and enhance market capitalization as well as liquidity; increasing company performance transparency and research coverage. ir activities: company events for shareholders as well as special investor days with announcement of quarter/annual company results; relevant web-site management as well as social media including financial and non-financial content; communication with investors through mailing, calls including video; other events for investors: conferences, roundtables, competitions; interdepartmental connectivity. ir principles: commitment (dedicating responsibility of top management to ir department); coherence (communication policy regardless the level of company profitability); credibility (ir department should be authorized representative of company both for investors as well as for internal departments); transparency and clarity (communication messages, strategy and key point should be accurate and accessible); two-way communication (minimization of information asymmetry). ir challenges: effective investors engagement and clarification of investment case details successfully; carrying out strategic option of company as well as crisis management; compliance both in financial and regulation aspects; having to meet expectations of management; not effective budget allocation for ir department. benefits of ir for company: conducting negotiations regarding creating group of company supporters and adherents; providing fair company valuation on the market; raising capital through equity markets; providing stability of share price, decisionmaking in order to avoid its volatility; conducting strategic planning on the basis of company valuation forecasts; simplification of access to finance at a lower price. figure 1. ir as interface between company and financial market source: based on crockett, t. (2011), nel, g. f., & brummer, l. m. (2016), hoffmann, c. p., tietz, s., & hammann, k. (2018) baltic journal of economic studies 136 vol. 6, no. 4, 2020 key ir instruments • ir website with proper navigation; • social media; • e-mail notifications for different investor groups (institutional, value, growth, income, retail investors); • conference calls; • webinars; • investor days and other events • interactive q&a section& requirements to ir web-site: • availability to wide audience, including people with different types of impairment, • easy navigation as well as intuitive usage, • timeless correspondence (up-to-date information), • company storytelling (history, vision/mission, products/services, etc.), • financial information disclosure (relevancy and reliability: financial reports, presentations, archive materials), • up-to-date news (from stock exchange, company releases, etc.), • investment case (precise strategy, incl. industry indicators, company profile, investment offer, etc.), • information about corporate governance, • messages about activities regarding corporate social responsibility. measures: • understand & foresee (forecast market indicators, know your investor, define investor decision-making reasons, predict risks and opportunities); • measure (assess communication strategy impact, gauge investor behavior changes, track changes in shareholder structure); • communicate (communication policy with external and internal investors as well as board and management on share price changes on regular basis) 4. results 4.1. investor relations enabler as mediation between company and investors investor relations (ir) could be considered as the specified channel aimed at providing two-way interaction between a company and financial markets as well as providing feedback loop from investors regarding company performance, strategic priorities, prospects, etc., which could be beneficial to decision-making processes and their adaptation to the market conditions and responses as well as improving communication effectiveness. it should be emphasized that ir is not similar to public relations (pr) and marketing with aim to make company presentation in as such a positive way as possible, while ir is directed to strengthen investors understanding the specifics of business and some strategic and financial indicators as well as to provide fair awareness about company to all investor groups. the fundamentals of effective ir policy with detailed explanation of the main goals, principles, conducted activities, possible benefits and challenges could be faced, are analyzed in figure 1. it is understood from figure 1 that ir is a system and a huge instrument, which helps to struggle with different challenges face to modern companies. therefore, the company receives some benefits from using of the ir toolkit. essential tools for effective ir regarding information disclosure are shown on figure 2. there are formal and informal requirements to disclosure of a company performance information. those described at figure 2 are commonly recognized and used by the companies. it is worth mentioning that these tools are suitable for large corporations and smes as well. at the same time, large companies websites have more functions (data base, analytics, webinars possibilities), however, smes look like digital visit-card and is more simply in using and searching information. 4.2. global trend and a place for development of ir in ukraine in the context of smart specialization due to the research of consulting organizations, there are several modern global trends in ir: investor relations help to develop not only big business, as it was before, but also startups and smes. thus, startups actively use investor relations tools when entering an ipo. mifid 2 increases the burden on investor departments, as the role of intermediaries (brokers) is eroded. investors are increasingly expressing a desire to figure 2. ir toolkit for company performance disclosure source: based on crockett, t. (2011), nel, g. f., & brummer, l. m. (2016), hoffmann, c. p., tietz, s., & hammann, k. (2018) baltic journal of economic studies 137 vol. 6, no. 4, 2020 communicate directly with investors. because of this, the role of investor relations office is growing. there is a need to develop digital tools (robo-advising); there are digital platforms for meetings with investors. in recent years, there has been an increasing interest in investor relations in ukraine. it is very important for ukraine to develop investor relation and attract investments for financing perspective industry because ukraine is a ground floor investment opportunity located in europe, offering a highly skilled and productive workforce, low-cost manufacturing platforms and attractive entry valuations. ukraine, located at the european union’s frontier, has a pro-western, probusiness government focused on implementing reforms and strengthening the national economy and institutions. it is on its way to becoming an economic turnaround success account. there are a few published researches on investor relations in ukraine. however, with the educational system’s strong focus on technical disciplines, ukraine is home to the largest it engineering force in cee. international companies operating and expanding in ukraine demand highly skilled workers and set high standards for the entire labour market. over the last 10 years, use of english language has become more widespread, becoming an integral part of the education system and a key focus for the individual personal development. however, there is the ukrainian association of investor relations that develops investor relation in ukraine. the main goals of the association are: – formation and development of the investor relations market in ukraine; – introduction of the world practice of investor communication in the ukrainian companies; – harmonization of the ukrainian and international corporate disclosure standards; – assistance to the ukrainian companies in obtaining foreign and domestic investments; – promoting professional development of ir professionals in ukraine. for a detailed analysis of ir trends among the ukrainian companies, a sample of 262 non-financial companies was selected and grouped according to the ownership criterion. the state-owned group includes companies whose ultimate beneficiary is the government. holdings group includes companies that are part of the large domestic holdings. the domestic ownership group consists of companies owned by local owners. the foreign ownership group includes companies that have foreign investments or are subsidiaries of international corporations. the distribution of the sample is presented in figure 3. in addition, 9 ir tools were identified and used in analysis: 1. news releases and presentations. 2. meetings with investors. 3. annual report on the website. 4. responding to queries. 5. investor roadshow. 6. informal meetings with analysts & journalists. 7. analytic days, trip to the factories. 8. conference participation. 9. separate subpage on investor relations. 10. data source: sites of the surveyed companies. figure 3. companies distribution in the sample baltic journal of economic studies 138 vol. 6, no. 4, 2020 the study of the popularity of ir instruments among the ukrainian-based companies was conducted in two directions. firstly, the identification of the most popular tools among the 4 groups of companies. secondly, determining the completeness used ir tools. an analysis of the distribution of ir tools shows that the most widespread are mainly information-oriented ones: publishing news about the company and responding to inquiries. only a third part of companies have a separate page on the investor relations website. the data from figure 4 show that two groups of companies pay the most attention to ir: state-owned companies and companies that are part of domestic holdings. for example, they lead in publishing annual reports and responding to queries. local private companies, which have a limited number of owners, tend to disclose the least information. significant attention to ir tools by state-owned companies can be explained by the recent reform of corporate governance in the public sector, which was designed to make the work of such companies more transparent to society. the obtained results are additional evidence of the success of this reform. holding companies are either ipo companies or tend to attract resources from foreign financial markets through the issuing bonds or attracting debt from ifis. accordingly, the transparency of such companies will directly affect the cost and volume of financing obtained. since local private companies often have only a few owners, therefore, their relationship with the final beneficiaries is mostly non-public. the same is with foreign companies. as they mainly report to the parent company abroad, the disclosure requirements in the country of operating activities are not high (table 1). on average, the company uses only 4 of the 9 ir tools (table 2). at the same time, local private companies and foreign companies are the least diversified: for them, the figure 4. distribution of ir tools among the studied companies table 1 distribution of ir tools among the studied companies type of ownership news releases and presentations meetings with investors annual report, website responding to queries investor roadshow informal meetings with analysts & journalists analytic days, trip to the factories conference participation separate sub page on investor relations state owned 75.0% 39.3% 75.0% 64.3% 25.0% 50.0% 42.9% 64.3% 39.3% domestic holdings 65.3% 44.9% 65.3% 59.2% 26.5% 51.0% 49.0% 44.9% 49.0% domestic private ownership 66.7% 27.8% 53.7% 61.1% 22.2% 42.6% 33.3% 27.8% 18.5% foreign ownership 74.8% 31.3% 42.7% 61.1% 23.7% 45.0% 33.6% 42.7% 31.3% sample 71.4% 34.0% 52.7% 61.1% 24.0% 46.2% 37.4% 42.4% 32.8% baltic journal of economic studies 139 vol. 6, no. 4, 2020 median values are 3.5 and 3, respectively. the median value for state-owned companies is 5. among the most used social networks are: facebook – 13%, instagram and twitter – 4%, youtube – 5% and linkedin – 1%. on average, social networks use only 25% of the total sample. 4.3. smart specialization and investor relations for the effectiveness of communications between different stakeholders involved in the investment process, you can use different tools of investor relations. smart specialization, providing various communication activities promotes cooperation between the above participants in the investment process. analyzing the data of the european commission on activities that take place in the framework of smart specialization, we can identify the following key tools investor relations: online dialogues, online conferences, online sessions, online workshops, online presentations, world cafes, annual lectures, online consultations, webinars (partner webinars). it should be noted that the organizers of such meetings are either local authorities or representatives of civil society (this determines their role in the investment process). smart specialization activities are essentially table 2 distribution of ir tools used type of ownership number of ir instruments used 0 1 2 3 4 5 6 7 8 9 state owned 17.9% 14.3% 0.0% 3.6% 3.6% 17.9% 14.3% 21.4% 3.6% 3.6% domestic holdings 16.3% 6.1% 2.0% 12.2% 20.4% 6.1% 6.1% 14.3% 6.1% 10.2% domestic private ownership 14.8% 7.4% 13.0% 14.8% 20.4% 7.4% 9.3% 5.6% 3.7% 3.7% foreign ownership 16.0% 9.9% 13.0% 13.0% 16.8% 7.6% 6.9% 7.6% 5.3% 3.8% sample 16.0% 9.2% 9.5% 12.2% 16.8% 8.4% 8.0% 9.9% 5.0% 5.0% communication platforms for innovative businesses and inventors. 5. conclusions the research shows that there are several global trends in investor relations: 1) investor relations contribute to the transformation of startups and smes into large companies; 2) growing interest on the part of investors in direct communication with business, where they will invest (the institution of intermediation has weakened); 3) the emergence of online platforms for meetings with investors; 4) growing demand for alternative data from institutional investors (credit card sales, web scraping, web traffic, email scraping, social sentiment, satellite data); 5) increasing requirements for transparency of companies by investors, as well as the environmental and social components of their activities; 6) regional specifics and types of investors play huge role in choosing of investor relations tools. the analysis of individual companies in ukraine shows that different groups of companies apply investor relations policies differently. in our opinion, the determining factors of this process are the quality of corporate governance, the need for access to external financing markets and the number of shareholders. thus, the recent reform of public sector enterprises has led to the strengthening of their supervisory boards, increased transparency, which is reflected in the strengthening of ir . on the other hand, companies that have one (or only several) owners do not need to increase ir . although investor relations of different companies are different, but the methods and tools of policy are the same. smart specialization of regions, acting as a meeting place for investors, is also a tool for investor relations. and here it operates as a common tool for all key stakeholders involved in this process. further research should focus on different communication tools with different stakeholders. facebook 13% instagram 4% twitter 4% youtube 5%linkedin 1%do not use 73% figure 5. distribution of companies by using social media references: alves, c. f., & silva, a. l. 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(2018). investor relations role in merger and acquisition activity. quarterly journal of finance, 08(02), 1850006. doi: 10.1142/s2010139218500064 baltic journal of economic studies 226 vol. 5, no. 2, 2019 corresponding author: 1 rzeszow university of technology, poland. e-mail: tkach_aa@prz.edu.pl orcid: https://orcid.org/0000-0002-7207-117x 2 dnipropetrovsk national university of railway transport named after academician v. lazaryan, ukraine. e-mail: vik2005vik@meta.ua orcid: https://orcid.org/0000-0003-3427-8986 3 classic private university, ukraine. e-mail: ra_va@ukr.net orcid: https://orcid.org/0000-0003-2288-3388 doi: https://doi.org/10.30525/2256-0742/2019-5-2-226-233 institutional platforms of the transformation of the economy anatoliy tkach1, viktoriia kolomiiets2, maryna radieva3 abstract. institutional transformations in economies of countries are considered as the basis of their civilizational development. the concept was put forward that in order to ensure transformations in the economy, it is necessary to promote the formation of a specific set of institutional platforms – new institutes and institutions that will create an environment for the formation and development of a socially oriented market economic system of society. the main controversial components of the institutional platform include: institutional changes in the economy, the creation of the corporate sector, the development of human capital institutions. the purpose of the paper. the purpose of the study is to promote and reveal the essence of the formation of institutional platforms to ensure reforms of various components of a transformational economy. methodology. formation of institutional platforms of the transformational economy is investigated on the basis of the theory of institutional changes and such institutions of a market economy as property rights, the corporate sector, and human capital. results. institutional platforms of transformations are presented as continuous informal changes that are fixed in the formal institutional system of society in the form of legal acts, codes of conduct, and institutions designed to enforce them. it is substantiated that in order to ensure institutional transformations in the economy, it is necessary to form a dynamic institutional platform that determines the system of basic institutions. the process of formation and effective use of the institute of human capital is analysed, which becomes a priority for the economic development of the country’s potential. the presence of mature human capital predetermines the country’s economic potential and its strategic growth. the main content of the new economy is that human capital turns from a resource to the essence of development itself. an approach to developing an institutional platform for the development of human capital as a process of natural accumulation or the forced introduction of basic institutions capable of ensuring the emergence of new institutions or significantly modernizing existing rules is proposed. it is proved that transnational capital erases economic, political, and cultural national differences, forms a favourable global infrastructure, ensures the development of countries that define the basis of the world corporate economy. it is substantiated that, institutionally, a corporation creates a new type of economic relations, which are reflected in the rules and code of corporate behaviour. institutional analysis created the conditions for developing a new approach to designing the trajectory of the development of the national economy on the grounds that the formation of a certain institutional system determines the trajectory of the further development of the state and world economy. practical implications. theoretical research should be the foundation of state policy in the management of the process of creating formal institutions as the basis of an institutional platform. this requires certain clarifications regarding the possible gap between the rules declared by the legislation and the mechanism for ensuring their observance, the basis for further research. value/originality. the theoretical study is carried out personally by the authors of this scientific article. key words: institutes, institutions, institutional transformations, institutional platform, corporate sector, human capital. jel classification: е20, р26, е14, g30, е24 baltic journal of economic studies 227 vol. 5, no. 2, 2019 1. introduction processes that are not able to change are doomed to extinction. the slowdown of reforms in the economy first reduces its growth rates and then leads to stagnation and crisis. therefore, the process of institutional transformations is presented as continuous informal changes that are fixed in the formal institutional system of society in the form of legal acts and relevant codes of behaviour and organizations (institutions) designed to control their observance. institutional changes mean both a gradual evolutionary replacement of rules and norms that gradually modify the economic system of society, as well as their fundamental transformation. the choice of the nature of institutional changes in countries with a transformational economy determines the trajectory of the development of their economic structure. the uncertainty of such a choice gives rise to a protracted crisis in the reform of the entire social system. in addition, the creation of the necessary formal institutional framework in the form of a constitution and legal acts regulating economic activity did not ensure their implementation. this is caused, first of all, by a more significant, than it was supposed earlier, dependence on the trajectory of the previous development stage. inertia, the psychology of behaviour of all sectors of society, significantly lags behind the needs of market transformation. in addition, the institutions of control were not ready to fulfil their new functions or were corrupt. obviously, the formation of institutional platforms that would target business, employees, and the power to form and comply with new rules and standards of economic activity is required, as well as the need to create institutions (organizations) and mechanisms capable of monitoring compliance with the new rules. the nature of institutional changes in the economic system comes down to this. the new institutional paradigm of economic theory should explain the real processes in real economies that operate on the principles of complex systems of synergistic nature (dudchenko, vitman, 2018). the founders of the theory of institutional change are considered r . coase, d. north, as well as j. commons, w. mitchell, e. furubotn. institutional changes lead to the emergence of new and the disappearance of old rules of behaviour (north, 1981) and appropriate mechanisms to ensure their transformation. there are also changes in the structure and nature of economic relations within the existing rules for their participants. such an approach to the definition of institutional changes takes into account that the existing rules mean not only the emergence of new installations but also new mechanisms that ensure their observance by subjects of newly emerging and already existing installations. obviously, it concerns, above all, informal rules. in the literature, the concept of transformation and change is defined somewhat differently. transformation is seen as a more complex concept but also narrower than the concept of change. therefore, it can be said that all transformations are changes, but not every change will be a transformation. for example, r . lipinski defines a change as any noticeable modification of any element of reality (lipiński, 2017). meanwhile, the transformation should be understood as a non-trivial and deliberate process of changing one fragment of the environment, carried out at a given time, which is intended to create a new and, above all, a permanent environment. j. szczepański represents transformation as one of the three main ways of changing reality: reform, revolution, transformation (szczepański, 1999). transformation – a process that changes the state of objects in the real world; a change that transforms the nature or essence of something, which aims to change the existing order (ratusz, olszyńska). in order to modernize the economy and political system in countries with a transformational economy, a fundamental study of the experience of stably and dynamically functioning countries is probably required. unfortunately, this experience is little studied and, most importantly, is not sufficiently taken into account in the activities of government bodies of countries with transformational economies. therefore, they fail to avoid serious mistakes in creating conditions for the transition to a market economy. to reform such economies, the copenhagen criteria for the selection of new members of the european union remain very relevant: the creation of stable institutions that guarantee democracy, the rule of law, human rights, and the protection of minorities; ensuring the functioning of a market economy capable of influencing competition and market forces in the european union; harmonization of domestic legislation with european union legislation. the greatest volume of new rules’ developments is required precisely by a transformational economy, in which an institutional platform must be created for the transition to new economic relations. 2. methodology to form institutional platforms for the transformation of the economy to ensure institutional transformations in the economy, it is necessary to form a dynamic institutional platform. this platform is a process of natural accumulation or forced introduction of basic institutions capable of ensuring the emergence of new rules and regulations. it is first of all about reforming property rights. the right of the private property first arises in the form of separate elements on the basis of privatization, and then its supremacy baltic journal of economic studies 228 vol. 5, no. 2, 2019 in the economic system of society is established. the predominance of the latter is an integral part of the institutional platform that ensures the creation of new economic relations. in transition economies, there are both discrete and continuous changes. discrete changes have certain common features with discontinuous evolutionary changes. rapid changes in formal norms create only conditions for the formation of basic informal rules. the experience of transformational economies testifies that formal rules change quickly, and informal restrictions cannot change quickly, because they rely on ingrained cultural heritage, stable thinking patterns and ways of action. it is appropriate to refer the following to the basic institutional rules and norms of the formation and development of institutional platforms of the transformational economy (tkach, 2013): specification of all property rights; legal support of regulation and management of economic processes; creation of conditions for competition; synergistic effect of reforming; information support; free flow of resources and capital. the formation of an institutional platform in countries with transition economies takes place in two parallel ways. on the one hand, the authorities carry out reforms, which are based on the development and implementation of formal rules. on the other hand, the existing traditions and customs serve as the institutional basis for the preservation of traditional relations, which are based on the usual system of values and the motivation of individuals. with a sharp breakdown of existing formal rules and norms and the creation of new ones, “scissors” of inconsistencies are formed between existing traditions and new formal institutions. in this connection, the problem of overcoming the existing contradiction arises, which can be solved only through the creation of an effective institutional platform for a transformational society. the institutional platform should be based on certain principles that ensure the formation of civilized economic relations in society, give impetus to economic growth, and improve the welfare of the population. these principles include: – ensuring the unalienable rights and liberties of the individual; – creation of incentives for the growth of production efficiency; – equal conditions for the growth of living standards of all social groups; – effective control over the observance of existing and new formal rules that regulate socio-economic relations of the individual and society with the application of sanctions provided for by law to all violators. 3. transformation of ownership regimes the most important condition for creating an institutional platform for economic transformation is a change in the regimes for the use of property rights. regimes of ownership can be changed through nationalization and privatization. the establishment of a private property regime transforms the state property regime. if privatization is carried out with the help of a change in real lawfulness with permanent formal, then it is called spontaneous privatization (for example, the use of the state-owned property by government employees for personal purposes). indeed, in real life, depending on the conditions, there can be a significant difference between de jure and de facto state-owned property. in other words, formally the resources are in state property, and in fact – in the mode of free access, in a communal or private property. the expression of these tendencies is bribery, extortion, illegal commercialization of activities, corruption, the use of violence for personal purposes, and so on. legal support of regulation and management of the processes of forming an institutional platform can occur through the development of a mixed economy. in this regard, it is necessary to determine the economic and legal mechanisms of their interaction and complementarity, which are able to create equal conditions for all activities. this is ensured by the flexibility of the tax mechanism, financial and credit leverage, pricing policy. the complementarity of market and non-market institutions of the economy is that the supremacy of the market mechanism does not fully serve the needs of the economy, so it is also necessary to maximally use non-market forms of management. it is impossible to immediately and finally go to the opposite economic system. in addition, modern economic systems are mixed, in which there are various economic structures. the synergistic effect of the modern economy is that its individual components create their own effect in the “launching” and functioning of the market mechanism. but since the market form of management is an integral part of a mixed economic system, then in the complex it provides an integral effect, which many times exceeds the simple sum of various structures, which is a consequence of the interaction of all its structural parts as separate elements. this is explained by the fact that the market economy, as a whole, functions completely differently and more efficiently than its elements, taken separately, when each link operates in its own mode and direction. an integral part of the institutional platform for the transformation of the economy is the creation of a competitive environment. in contrast to the antimonopoly legislation that is widespread in most post-socialist countries, in reality, it does not deny monopolism and even allows it, if this is not an obstacle baltic journal of economic studies 229 vol. 5, no. 2, 2019 to economic development. this is especially important at a stage when unreasoned measures of fight against monopolism can directly or indirectly lead to the strengthening of the monopolistic nature of individual economic units. and conversely, concentration processes can contribute to the development of competition, entrepreneurship, and private initiative, the establishment of affordable prices, free market access, etc. therefore, the basis of this principle is economic equality for all participants that operate in the market space of the economy, promoting the observance of the “rules of the game” by all economic entities. to ensure the influence of the institutional platform on the economic transformation, information support should be created. information security is aimed at ensuring that market structures, entrepreneurial, managerial, regulating the activities of economic agents can be successfully implemented only in a single information space. informational support of the market should be carried out timely and efficiently by economic information services at any level of management, thereby realizing their infrastructure role, creating a unified information environment. such an environment must have set parameters. one of them – the adequacy of information support or information resource endowment. the availability of reliable and qualified information in sufficient volume – an indispensable condition for the effective operation of any organization. the institutional platform also includes the principle of the free flow of resources and capital, which is one of the main conditions for the functioning of a market economy. this principle provides the flexibility of the system self-adjustment mechanism, which contributes to structural changes in the economy, the implementation of anti-crisis protective measures, and so on. the process of allocation of resources (financial, investment, intellectual, innovative, human capital) is realized with the help of relevant institutions. it is with their help that it is possible to ensure the most efficient and optimal allocation of resources in accordance with the real needs of the economic system. speculative inquiries of firms, responding to the accumulated structural contradictions, find an appropriate market niche, indicating the direction of capital flow. the application of these institutional rules and norms in the formation and development of the institutional platform of a market economy creates favourable conditions for the development of a system of economic relations. the modern institutional theory does not give a definite answer to the question of how underdeveloped economies become prosperous. however, knowledge of the fundamental characteristics of institutions, the laws governing the formation of institutional matrices of economic systems’ development trajectories proposed by evolutionary theory allows certain generalizations to be made: – the basic condition for sustainable economic development – a flexible institutional matrix that adapts to technological and demographic changes, as well as to the breakdown of social systems. its essential characteristic is the creation of a stable constitutional structure of society, complemented by informal norms; – the formation of a modern market economy objectively provides for the creation of new institutional entities (associations, concerns, consortia, corporations, etc.) that fill the “vacuum” between government institutions and the market (tkach, 2013). in order to determine what an institutional change is, it is convenient to use the “formula” of the description of any rule: – a description of the situation, describing the conditions of the supplement to the norm and determining how an individual should act in accordance with this rule; – characteristic of the individual or the addressee of the norm, which allows determining which types of individuals should adhere to the rule; – definition of a specific action or content of the norm, indicating which of them can or should not be carried out by the addressees of the rule in appropriate situations; – a description of the sanction for non-compliance with the rule, which allows the addressee of the norm to determine what expenses he will incur without completing the established action; – characteristic of the guarantor of the norm, that is, the subject applying sanctions to the violator of the rule; this feature allows the addressee of the norm to more accurately determine the expected costs of breaking the rule and make a more reasoned decision (tkach, 2013). institutional changes, in general, can be summarized as follows: the constant interaction of institutions and organizations, which, given the rarity of economic resources, generates competition, which leads to institutional changes; competition forces organizations that seek to survive, invest in knowledge and skills. knowledge and skills acquired by individuals and their organizations provide empowerment, and the latter, gradually, change institutions; the institutional framework forms the types of knowledge and skills that allow obtaining the maximum gain; the perception of opportunities arises from the mental models of players; the economy of scale, the effects of additions and mutual influence with the external structures of the institutional matrix make institutional changes extremely slow and dependent on the trajectory of the previous development. thus, a rule change – not a change in behaviour that can be caused by a variety of reasons, including random, but a change in the content of the rule components, allowing individuals to decide on their actions. baltic journal of economic studies 230 vol. 5, no. 2, 2019 4. creating an institutional platform for the corporate sector of the economy the processes of emergence and development of the institutional platform of the corporate economy can be explained by the evolutionary principle of natural selection at the expense of changing the economic institutions and the diversity of their forms. global changes in the economic situation stimulate modern corporations to look for ways to increase their own stability (smerichevskyi, kryvoviaziuk, raicheva, 2018). the structure of modern corporate theory reflects the main stages of the evolution of the theory of economic relations, first of all, property relations. the methodological basis for the study of the development of the corporate sector of the economy is based on traditional and specific tools of institutional analysis. the latter include: transaction costs and assets specifics as conditions for making integration decisions; coordination institutions as a means of overcoming the unsatisfactory distributional consequences of the possession of rights-rules; residual rights of control as a tool for managing human capital; stimulating alignment as a way to overcome opportunistic behaviour; incentive contracts designed to ensure an acceptable level of compliance with the interests of regulators and owners; informal (codes of conduct) and formal (legislative restrictions) institutions as motives and conditions for enforcing contracts; corporate culture as a tool for adapting agents to the intended changes. the institutional platform of a transformational economy characterizes a corporation as a basic, systemforming element of a modern market economy, the accumulated capital of which becomes the source of the institutional transformation of economic system components: property, power, management, labour. the corporation has the ingenious ability to combine capital and, accordingly, the economic potential of an unlimited number of people (bakan, 2007), accumulates significant financial and other resources necessary for modern volumes of the economy (yevtushevskyy, kovalska, butenko, 2007). thus, the corporation resolves the contradictions between the need for capital accumulation and the limited size of individual capital (sirko, 2007), uses the mechanisms of intra-industry, inter-industry, and intra-company flow of capital. the institutional platform of the corporate economy is formed as a set of powerful structures, within which a concentration of industrial, financial, and human capital, investment and innovation resources is achieved, which is a necessary prerequisite for the transformation of the economy. economic models of corporate development determine the behaviour of economic agents and capital allocation depending on the presence and dynamics of institutions. the institutional evolutionary theory identifies two levels of economic dynamics – the level of institutes and the level of institutions that determine, respectively, two types of evolution – the evolution of institutional rules and the evolution of organizational (institutional) structures. the specificity of structural changes in terms of systemic transformation lies in the obvious subordination of organizational changes to institutional transformations. a corporation is a consistent adaptation of the form and structure of an institution in accordance with the evolution of institutes as a result of the interaction and mutual influence of processes of evolutionary transformation of the economy and the concentration of capital to meet the needs of effective management. corporate dynamics is determined by the institutional framework and depends on the direction of institutional change. in developed countries, it can be represented as a sequential change of informal rules, which entails a change in formal rules. the corporate form of entrepreneurship meets the most important principle of institutional development – ensuring a sufficient diversity of institutional forms based on the use of comparative advantages. adaptation of economic agents to the consequences of institutional changes occurs through the differentiation of corporate structures. the motive for the creation and development of corporations is the reduction of transaction costs due to integration, and the criterion for inventing the optimal size of a corporation – their minimization. an increase in the size of a corporation occurs as long as the transaction costs of the corporation exceed the market transaction costs. the need to increase the adaptive capacities of the corporation and reduce the impact of the instability of the external environment on it has become the main systemic reasons for the development of the corporate economy. the motive for corporatization is the search for ways to increase profitability, which is achieved by reducing transaction costs, taking advantage of market monopolization, multiplier effects, and diversification. another factor in the development of corporations is the need to attract investment and accumulate capital to finance innovation, the accumulation of which is carried out in accordance with the logic of the industrial development of society. the development of property rights in the form of corporate rights forms the links of economic appropriation in the field of direct production, distribution, exchange, and consumption, which characteristics are reflected in the laws of economic property such as laws of property centralization, trends in the rate of profit to decrease, diminishing returns, rising costs, savings and over-savings. the objective function of entrepreneurial activity can be realized only under the condition of constant accumulation of capital. minority owners of small capitals combine the desire to make money with the desire not to be burdened by business problems. the termination of property control baltic journal of economic studies 231 vol. 5, no. 2, 2019 allows making no effort to exercise own powers and to receive capital income. at the same time, the majority owners of capital seek to maximize the functioning capital to gain a competitive advantage through scientific and technological advance and economy of scale. institutional shifts in the economy are determined by changes in the property system. the institutional basis for the creation and development of the corporate economy was the replacement of individual property by communal property. transformations of the private-ownership economic system into a corporate one are determined by the needs to invest in the development of industrial production, the need to overcome contradictions between the limited nature of individual funds of individual entrepreneurs and the rising cost of industrial production (due to the growth of the production infrastructure, technologies, equipment, raw materials, and materials). it was the corporation that provided the opportunity to increase capital by the organizational association of individual capitals, satisfying the owner’s main interest in reimbursement and capital increase. the concentration of capital contributed to the rapid development of mass production and infrastructure facilities. at the same time, the shareholder form of capital provided the possibility of a constant flexible redistribution of funds between enterprises, regions, industries, and countries in accordance with changes in the efficiency of objects. the dynamics of corporate development processes are influenced by scientific and technological advance and innovations, market competition, the objective function of business activity, the sectoral distribution of profit margins, the interests and motives of participants in corporate relations, the processes of globalization, sectoral and regional consolidation, the territorial redistribution of world monopolies, the institutional function of a corporation, influence and energy of individuals. the accumulation of capital transforms the market economy with personalized capital and smallscale production into a system with a high level of capital concentration and production, changing the organizational and legal form of enterprise operation. the transformation of the production system based on the principles of production and capital concentration under the influence of scientific and technological advance, the increasing influence of non-market forms of competition led to the emergence of corporate enterprises as a form of integration of production and capital, which contributed to the assimilation of new, progressive technologies, the growth of mass and rate of return on aggregate capital, and significant increase in competitiveness. the process of creating corporate structures between vertical integration and internationalization changes the set of elements available to the company (types of production, industries, regions, countries). the need to compete for the achievement of a monopoly, the impossibility of ending the competition and, at the same time, monopolizing the market predetermine the use of such forms of production and capital concentration at the intersectoral level as integration and diversification. at the first stages, a separate type of production is monopolized, an industry (horizontal corporation) or series-connected productions (vertical corporation). in terms of capital accumulation, the search for ways to profitably use capital has given rise to a complex form of production concentration – a conglomerate corporation. in addition, in the conditions of increasing competition, reverse diversification processes acquire development: exemption from non-core industries, asset sales, and concentration of efforts on one type of activity. the interweaving of two contradictory trends – the subordination of the world economy to the interests of corporate capital and the competition of national economies – creates a unique institutional environment in each individual country. directions for the development of economic competition should ensure the solution of two, at first glance, opposite tasks: integration into the global economy since excessive protection provokes lagging and loss of competitive advantages, and protection of national interests, sovereignty through the correction of rules of transnational capital in the domestic market. 5. formation and development of the institutional platform of human capital the elaboration and development of an institutional platform for human capital should be viewed as a process of natural accumulation or the forced introduction of basic institutions capable of ensuring the emergence of new institutions of human capital or substantially modernizing existing rules in this area. human capital has become one of the most important non-material factors (boronos, plikus, aleksandrov, 2016). economic progress and social development depend on the level of intellectualization of life of the population of countries, on the degree of accumulation of national human capital (radyeva, 2017). the new turn of the economy – the knowledge economy necessitates the formation of human capital on a new institutional platform (tkach, 2017). the methodological basis for creating an institutional platform is the process of exploring the possibilities of transition to a new paradigm for the development of human capital. when the conditions of people’s economic activity change, there is a need to change standard concepts of the processes – that is, a paradigm shift. the extinction of obsolete and the emergence of new institutions, a change in the institutional environment, and substantial changes in the structure of institutions require a new paradigm for the development of human capital. this is related to the need to use baltic journal of economic studies 232 vol. 5, no. 2, 2019 human capital as a new tool for market development of the economy and the potential of both wealthy and developing countries (rekun, 2015). paradigm is also defined as content. disclosure of content is impossible without determining its structural elements and place in the metaparadigm: general ideological principles, value paradigms, nature of the interaction between object and subject, the object of cognition, holistic theory, way of thinking, research method, and system of social values. the institutional paradigm of human capital development can be considered as the main part of the modern institutional metaparadigm. the institutional paradigm analyses agents’ actions not in a free market environment but in a social space consisting of various institutions. the skeleton of the scientific paradigm is formed by two components: the basic categories of the subject and methodology, the theoretical tool of its cognition (tkach, 2013). human capital is limited in its actions by the institutional structure of society (golovkova, 2017). the formation of an institutional platform for the development of human capital is based on such vectors as the emphasizing of existing and the formation of new institutes and institutions for the development of human capital; search for effective mechanisms favouring the development of human capital. the motives of human capital as an agent of the institutional environment are no longer those outdated views, in which only personal interests were prevalent and ensured. at the same time, the factor of increasing the elderly human capital becomes important (krajňaková, 2017). there is a striving for compliance of actions and human behaviour with institutional norms and rules for improving one’s own position in the institutional environment. in the new institutional paradigm, the object is no longer an agent but an institute. and the object of cognition is the correspondence of agent actions to existing institutes. the development of human capital institutes is determined by the system of stimulants but, at the same time, is constrained by a system of restrictions, controls, and penalties. creating an institutional platform leads to the evolution of society by replacing some institutes with others. the institutional content of human capital is determined within the new institutional paradigm. it includes such components as the institutional configuration of human capital development, its institutional structure, institutional components, their interaction and influence on the formation of human capital. the institutional platform of human capital can be effective if certain mechanisms work. therefore, an integral component that links other content parts and ensures their interaction is the conceptual mechanisms of the institutional platform for the development of human capital. 6. conclusions 1. the formation of an institutional platform is a process of accumulating basic elements that can ensure the emergence of new or substantial modernization of already existing institutes. 2. institutional platforms of transformations should develop as continuous informal changes that are fixed in the formal institutional system of society in the form of legal acts, codes of conduct, and institutions (organizations) that are intended to enforce them. 3. the concept of an institutional platform allows developing a new approach to designing development trajectories of the national economy on the grounds that the formation of a certain institutional system determines the trajectory of the further development of the state and world economy. 4. the institutional platform for the development of human capital as a process of natural accumulation or the forced introduction of basic institutes capable of ensuring the emergence of new institutes or significantly modernizing existing rules. 5. the institutional paradigm of human capital must be developed as the main part of the metaparadigm. 6. corporate dynamics is limited to institutional frameworks and depends on the direction of institutional change. the institutional basis for the creation and development of the corporate economy has become the replacement of individual property by communal property. the process of creating corporate structures within the vertical integration and internationalization changes the set of elements available to the corporation. 7. the basic rules and norms for the formation and development of institutional platforms for a transformational economy should include: the specification of all property rights, legal support for the settlement and controllability of economic processes, the creation of conditions for competition, the synergistic effect of reform, information security, and 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(in russian) baltic journal of economic studies 32 vol. 2, no. 2, 2016 corresponding author: 1 department of finance, national university of «kyiv-mohyla academy». email: gluschenkosv@ukma.edu.ua 2 department of european integration, kyiv national economic university vadym hetman. email: sv.tkalenko@gmail.com threats and benefits of exchange rate regimes for ukraine in terms of european integration svitlana glushchenko1 national university of «kyiv-mohyla academy», ukraine svitlana tkalenko2 kyiv national economic university vadym hetman, ukraine abstract. the purpose of the paper is to determine threats and benefits of exchange rate regimes in terms of the integration of ukraine into the european community. emphasizing features of the manifestation of currency exchange rate in ukrainian practice is a precondition for choosing the optimal exchange rate regime for ukraine, which, in its turn, will provide an opportunity to reduce inflation and implement effective tools of monetary and fiscal policies to promote further economic growth and competitiveness of the country. the uses of free-floating exchange rate and «currency board» regimes have either positive effects for ukraine or certain threats. methodology. this research is based on a synthesis of data on the uses of exchange rate regimes in ukraine as an independent. it is considered angular regimes, which are by far the most suitable for ukraine in terms of the european vector of its development. peculiarities of using these regimes are revealed and their major threats to the domestic economy are pointed out. this article analyzes the dynamics of the trade balance of payments of ukraine, the dynamics of the commodity structure of ukraine`s exports and imports and the external debt of ukraine. results. taking into account the experience of countries, which were in crisis situations, they show the necessity of the uses of freefloating exchange rate regime and possibilities of «currency board» regime, despite threats that they may have. world experience testifies the implementation of structural reforms, effective monetary policy, fiscal policy and discipline of the government. thorough preparation of ukraine’s transition to the «currency board» regime can justify itself in conditions of crisis and provide impetus to ukrainian economy benefits. the paper defines conditions under which the success of a new model of exchange rate policy will be achieved. practical implications. the study accents attention on the specifics of the uses of the free-floating exchange rate and «currency board» regimes in the current recessionary economic and political conditions, and the declared strategy on sustainable development «ukraine–2020» in terms of european integration. moreover, advantages and threats of the most favorable exchange rate regimes were identified to overcome the economic crisis, and accordingly create conditions for further economic growth and increase competitiveness of the country. this article provides an opportunity to identify the conditions for success of a new model of exchange rate policy to achieve economic stabilization and the beginning of economic growth. value/originality. despite the existing studies in the field of exchange regulation at present, there are no comprehensive concepts and a common approach to the uses of an exchange rate regime in ukraine to stabilize the economy, create conditions for long-term economic growth and increase the competitiveness of the economy. it identifies the need to conduct this study, focuses the attention on the conceptual basis of freefloating exchange rate and «currency board» regimes, and deepen scientific and methodological research base of the studying exchange rate regimes particularly those that would help ukraine to overcome the crisis. this paper reveals the authors’ views on the uses of the new model of exchange rate policy, the success of which depends primarily on the government. key words: currency regulation, monetary policy, currency exchange rate regime, free-floating exchange rate regime, currency board, inflation. jel classification: e14, e52, g20 baltic journal of economic studies 33 vol. 2, no. 2, 2016 1. introduction new threats and challenges of the current stage of the world economy development require adapting economies to new geopolitical realities. first of all, these changes relate to international relations, in particular to international monetary relations. nowadays, ukraine has consciously chosen the perspective and priority vector of the european integration of its development, which will enable affirmation of ukraine as an independent state. the economic realities grow faster than any political; thereby the economy of ukraine in today’s conditions (military operations in the east) requires decisive and concerted actions at the political level. the strategy on sustainable development «ukraine – 2020» was adopted at the beginning of 2015 and the aim of it is the implementation in ukraine of european standards of living and appear ukraine on leading position in the world; the strategy envisages implementation of 62 reforms and development program of the state, including reforms of the monetary policy, financial sector and others (decree of president of ukraine, 2015). reforms in the monetary and credit regulations relate primarily to the nbu as a body responsible for the conducting monetary policy and effective levers of influence on the implementation of monetary policy, regulation indicators of monetary market and a number of other measures. 2. genesis of exchange rate regimes in ukraine during the development period of independence of ukraine in ukrainian practice applied different exchange rate regimes (table 1). however, over the past twenty years, the devaluation of the hryvnia has been continuing in ukraine and this indicator reached a level of 147% for the last two years (2014-2015). this situation demonstrates that the monetary policy and the selected exchange rate regimes by the nbu do not give the expected positive effects for the ukrainian economy and ukrainian national currency. the lack of results is also reinforced by the macroeconomic situation in ukraine, namely economic decline and stagflation, economic helplessness of government regulation and martial law. table 1 exchange rate regimes in ukraine period exchange rate regime 1993 pure float 1993 – 1996 fixed peg 1993 – 1996 fixed peg 1996 – 2000 fixed band 2000 – 2008 de jure: crawling band. de facto: fixed peg 2008 – 2014 de jure: managed float. de facto: fixed band 2014 – today managed float therefore, we consider in more detail angular exchange rate regimes, which are suitable for ukraine and identify their advantages and threats that undermine the expected positive effects of the currency channel influence on the ukrainian economy. these angular exchange rate regimes, which are appropriate for ukraine, are: – free-floating exchange rate regime; – «currency board» regime. 3. free-floating exchange rate regime the nbu has identified the main monetary inflation targeting strategy along with free-floating exchange rate regime in current development conditions of the economy of ukraine (the nbu monetary strategy for 2016-2020). the free-floating exchange rate regime is inherent to the usa, eu, japan; an inflation targeting with the free-floating exchange rate regime is in countries such as poland, the czech republic, great britain, norway, canada and others. thus, experience shows that the inflation targeting with the free-floating exchange rate regime is generally accepted in the countries with developed market relations. in current ukrainian realities, the transition can be complicated due to underdeveloped markets, unstable fiscal situation, war and so on. however, it is considered that the benefits of such regime will outweigh losses associated with temporary instability in the long term perspective. the most important benefits include: the intervention in the system of functioning of the foreign exchange market only in case of the exclusivity (this is possible when the imf provides reliable information that such interventions do not exceed three times over the past 6 months, and the length of it was not more than three days). at the same time, we should single out a number of threats of the implementation of such regime in ukraine that explain why in modern format this monetary policy does not bring the expected positive effects in ukraine. the most important threats include: firstly, multicurrency cash flows in the economy (dollarization shocks); secondly, disproportions in the structure of the economy, including high import dependency, debt bondage in public and private sectors and economic recession; thirdly, a currency exchange rate regimes contradiction between de jure and de facto (such as foreign exchange restrictions on the officially proclaimed free-floating exchange rate). it can be noted that ukraine belongs to countries where unofficial dollarization has gained considerable spread, namely an indicator of the dollarization level of the ukrainian economy, according to the methodology of the imf, was 29.1% in 2014. moreover, it is characteristic for ukraine both real dollarization (foreign currency uses in operations of purchase and sale within the country) and financial dollarization (foreign currency is a saving instrument). the financial dollarization is confirmed by ratios of foreign currency deposits to total bank deposits, the dollarization level for this indicator is quite high and it was 42,2% in 2014. functions of money in the ukrainian baltic journal of economic studies 34 vol. 2, no. 2, 2016 economic circulation are fulfilled only partially with hryvnia. it includes the unit of account function, the medium of exchange and payment function and the store of value function (table 2). the high level of dollarization in the economy (table 2) causes the presence of a constant demand for foreign exchange. this dependence on foreign exchange of the majority ukrainian economy entities and the chronic situation for ukraine concerning exceeding demand for foreign exchange over its supply can become the additional factors that will put pressure on the exchange rate and further enhance its growth trend in favor of foreign exchange, and therefore, provoke instability in the sphere of circulation, consumption, storing, etc. as a result, in the absence of sources for increasing foreign exchange supply or reducing dependence on it (it is the trend of recent years in ukraine) and aforesaid will threaten the growth of the exchange rate or instability situation, the hryvnia devaluation, inflation and other economic shocks. except multicurrency cash flows, disproportions in the domestic economy may also provoke distortions of the currency channel impact on the economy within freefloating exchange rate. firstly, the negative balance of export-import trade operations within the balance of payments (table 3) determines the shortage of currency in the country and consequently provokes additional pressure on the demand for foreign currency and exchange rates fluctuations (not in favor of the national currency) and economic shocks. secondly, a situation where the country exports raw materials (products with low added value), and imports final high-tech products (products with high added value), determines the availability of substitution effect in the economy, as foreign exchange earnings from the export of raw materials is lower than foreign exchange costs for procurement (import) of high-tech products. it can also cause the shortage of currency in the country and therefore provoke further pressure on the demand for foreign table 2 execution of functions of money in foreign currency in the ukrainian economy functions of money private use state use unit of account currency of prices in foreign trade transactions determining prices of the imported goods (electronics, appliances, cars) – informal guide of the domestic real estate market and land anchor currency medium of exchange and payment currency of payment in foreign trade; internal circulation of other countries (while traveling abroad); foreign exchange transactions crediting currency interventions; payments on foreign loans store of value private investments deposits of legal entities and individuals reserve currency of the nbu table 3 dynamics of the trade balance of payments of ukraine, usd million (nbu, 2016) balance of payments items 2006 2007 2008 2009 2010 2011 2012 2013 2014 goods balance -6 046 -11 585 -17 452 -5 343 -9 597 -18 031 -21 846 -22 128 -7 128 exports of goods 36 174 46 168 63 188 37 134 47 299 62 383 64 427 59 106 50 552 imports of goods 42 220 57 753 80 640 42 477 56 896 80 414 86 273 81 234 57 680 table 4 dynamics of the commodity structure of ukraine`s exports, % (nbu, 2016) name of product groups 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 total, % 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 food products and raw materials for their production 13,2 13,0 13,3 16,7 25,6 21,0 20,5 27,8 28,8 33,0 mineral products 12,9 9,4 8,0 8,8 8,2 10,7 11,1 9,8 10,7 10,5 products of the chemical or allied industries 10,5 11,1 10,7 10,1 8,9 8,5 9,7 9,4 8,6 7,4 wood material and wood products 2,5 2,7 2,8 2,2 3,1 3,1 3,0 2,9 3,4 3,9 industrial goods 1,2 1,3 1,4 1,2 1,3 1,3 1,3 1,3 1,4 1,4 ferrous and non-ferrous metals and articles thereof 42,8 45,0 44,5 43,2 33,9 36,0 35,0 28,7 28,4 29,6 machinery, equipment, vehicles and devices 13,4 14,1 16,4 15,6 16,2 18,0 17,2 17,4 14,4 10,7 other 3,4 3,4 2,9 2,2 2,7 1,3 2,2 2,8 4,2 3,6 baltic journal of economic studies 35 vol. 2, no. 2, 2016 currency and exchange rates fluctuations (not in favor of the national currency) and economic shocks (nbu, 2016; babenko v., shooting j., mastylo a., 2016). in 2014, raw materials in the ukrainian structure of exports amounted to more than 50% (metals, wood, mineral products, food raw materials), whereas the share of industrial products was equal to 1,4%, and machinery, equipment and vehicles group was 10,7%. in general, this trend was observed in the last 10 years (table 4). on the other hand, on the contrary, industrial products group accounts 4,5%, and machinery, equipment and vehicles group accounts 18,6% in the structure of imports (table 5). thirdly, the public external debt and its growing dynamics (or a significant amount) cause the increased demand for foreign currency by the state to repay its debts. there is an existing trend of increasing of the external public debt in ukraine (table 6, figure 1). if the country is characterized by dollarization, the negative balance of payment and other negative trends in this field, so that there is a temptation for the state as an economic agent to use various exchange restrictions in order to concentrate the currency in its own possession. at the same, the idea of the free exchange rate formation and the free circulation of currency in the country is distorted, and the supply of currency in circulation is more reduced, it may respectively provoke an additional pressure on the demand for foreign currency and currency exchange rates fluctuations (not in favor of the national currency) and economic shocks. an additional factor that can neutralize effects of influence of the exchange channel at the free-floating exchange rate, is discrepancy between officially (legally) established and actually operating exchange rate formation regimes. this discrepancy can occur, for example, when the country officially defined the table 5 dynamics of the commodity structure of ukraine`s imports, % (nbu, 2016) name of product groups 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 total, % 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 food products and raw materials for their production 7,7 7,3 6,8 7,7 11,6 10,1 7,9 8,7 10,1 10,4 mineral products 28,9 26,4 25,6 27,5 33,7 33,8 33,0 30,6 26,1 26,4 products of the chemical or allied industries 14,8 15,3 15,2 14,4 18,8 17,8 15,6 15,2 16,1 17,9 wood material and wood products 3,3 3,2 3,1 2,8 3,6 3,3 2,6 2,4 2,7 2,5 industrial goods 4,8 4,4 3,7 4,2 4,5 5,1 3,7 4,6 4,8 4,5 ferrous and non-ferrous metals and articles thereof 7,0 7,7 8,1 7,8 6,1 7,0 6,9 5,9 5,6 5,6 machinery, equipment, vehicles and devices 28,8 31,7 33,0 32,1 19,9 20,7 23,9 24,4 22,3 18,6 other 4,8 3,9 4,6 3,6 1,9 2,2 6,6 8,1 12,4 14,0 table 6 external debt of ukraine (at the beginning of the respective year), usd billion borrowers 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 general government sector 10,51 10,92 11,88 11,96 17,81 24,98 25,87 27,33 29,92 32,88 authorities of monetary regulation 1,25 0,88 0,46 4,73 6,21 7,51 7,49 4,85 1,78 2,18 0 5 10 15 20 25 30 35 40 45 2008 2015 bi lli on d ol ar s years 40,4 12,3 figure 1. public sector external debt (government and nbu) for 2008-2015 (at the beginning of the period), usd billion (pynzenyk viktor, 2016) baltic journal of economic studies 36 vol. 2, no. 2, 2016 free-floating exchange rates, but in fact bodies of the state regulation (including nbu) use administrative restrictions on foreign exchange markets. as a result of it, the effect of this dual regulatory policy is the inadequacy of the official exchange rate in relation to the real exchange rate, the spread of black markets, currency speculations and etc. it leads to lack of currency and provokes currency exchange rates fluctuations (not in favor of the national currency) and economic shocks. moreover, various types of exchange restrictions (including «hidden»), with a shortage of supply of currency, provoke an even greater lack of it, an additional pressure on increasing and formation the exchange rate and increasing the amount of informal («black») exchange markets. it even more enhances exchange fluctuations with a tendency to the growth of foreign exchange rates and determines the need for government inter vention in the currency exchange rate formation. in other words, the idea of the free-floating exchange rate is disturbed. the threat of the leveling effects of the exchange channel at the free-floating exchange rate due to discrepancy between formally (legally) established and actually operating exchange rate formation regimes at the current stage of economic development for ukraine is confirmed by a number of administrative restrictions on the foreign exchange market of ukraine in 2014, which, inter alia, include: – to require the mandatory sale in the interbank market of ukraine of proceeds in foreign currency as received from abroad including direct sale to the national bank of ukraine, at a rate of 75 per cent; – to limit currency exchange transactions, in particular, it was allowed to carry out operations on sale of foreign currency to one person in one business (working) day in an amount not exceeding the equivalent of 3000 uah within the same banking institution; – to restrict transferable currency transactions when on behalf of individuals outside ukraine permitted to transfer foreign currency at the current exchange non-commercial operations for an amount not exceeding the equivalent of 15000 uah in one business (working) day; – to restrict withdrawals of foreign currency deposits up to equivalent of 15000 uah per day and per customer based on the national bank of ukraine official exchange rate (unian, 2014; nbu, 2014; rudenko, 2015). after selecting benefits and threats to the current regime in ukraine, the free-floating exchange rate regime, it is also important to describe benefits and threats of the opposite exchange rate regime, namely the «currency board» regime. its proponents suggest that it is too early to implement the floating exchange rate regime in ukraine and the «currency board» regime is the most favorable under conditions of the internal crisis situations in ukraine`s unstable economy. it can provide lower inflation and relatively stable conditions for the foreign trade activity. 4. «currency board» regime: pros and cons in april 2014, the us republican senators ted cruz and marko rubio expressed the view, that the «currency board» regime can only help the ukrainian economy. they proposed to the united states department of the treasury to collaborate with the imf in creation of the currency board for ukraine on its path of european integration, which will not waste financial assistance of the imf and other organizations (ukrinform, 2014). such an option was offered not only ukraine, but also member countries of the eastern caribbean currency union (eccu), on june 6, 2014, the executive board of the imf concluded the 2014 discussion on the common policies of member countries of the eccu. limited fiscal space and excessive public debt, financial sector stress, and weak external competiveness continue to hold back economic recovery in these countries (imf, 2014). generally, this regime is used to stabilizing the economy and restoring currency convertibility in crisis situations. the «currency board» regime had been used in 60th years, and then it was revived in 80th, and today it is also used to stabilize the economy. the «currency board» regime essence is that the national currency is tightly tied to the reserve currency; emissions of national banknotes and coins should be fully equipped with a foreign reserve currency and converted into the reserve currency at a fixed rate on the first request. some flexibility may occur depending on tough requirements, which are set by the «currency board». the main factor affecting the choice of reserve currency (anchor currency) is a high degree of trade and investment links with the country issuing of the anchor currency. thus, the country imports confidence in the currency, which is chosen as the anchor currency. there are the key features of the «currency board» regime: – national currency is maintained at a fixed rate to the anchor currency by law; – full convertibility of the national currency in foreign is maintained (i.e., the right to exchange the national currency at a fixed rate at any time); – monetary base should be more than 100% coverage of gold and currency reserves of the central bank; – changes in the monetary base occur only as a result of changes in international assets; – the central bank cannot be the lender of last resort for commercial banks; – the central bank is not able to conduct their own monetary policy and lend to the government. the «currency board» regime should contribute to reducing inflation, namely approaching country’s inflation rate to anchor currency and monetary stability. to ensure such credibility, three conditions have to be met: sufficient backing of base money (that is, the central bank has to hold sufficient foreign exchange reserves to cover its entire monetary liabilities); a sufficiently restrictive fiscal policy (this in turn requires broad political support – lack of such support could result in a self-fulfilling speculative baltic journal of economic studies 37 vol. 2, no. 2, 2016 attack); and a reasonably healthy financial system (or the willingness to let weak banks fail). (anne-marie guide, juha kahkonen, and peter keller, 2000: 5). the most significant advantages of using the «currency board» regime in ukraine are the following: 1) to remove from the agenda the issue on money emission; 2) to stop the devaluation of the hryvnia in the future, namely the appreciation of the national currency; 3) to reduce inflation and interest rates to a level that is close to an appropriate level of anchor currency country; 4) to improve the ukrainian investment climate – boost foreign trade and foreign investment flows; 5) to increase the positive balance of payment and increasing the monetary base in circulation; 6) to strengthen ukraine`s ties with the financial system of the country issuing of anchor currency; 7) there is a possibility of repeating the positive experience of the baltic countries for which the «currency board» regime was the transition to full monetary integration with the european union; 8) government is no longer credited by the central bank, but there is the ability to receive the share premium from the placement of foreign exchange reserves in international markets and to finance the government. in general, the «currency board» for ukraine is the option to stabilize the economy in the short period and form the preconditions for further economic growth. this regime was proposed and introduced by the imf in bulgaria in 1997 as the mechanism of stabilization, restoring the convertibility of the currency in crisis situations and as a tool for restoring the fiscal discipline; it was a successful example of the monetary stabilization. this exchange rate regime in bulgaria has contributed to economic growth, the increase of export-import operations, and as a result, to the increase of the competitiveness of the national economy. in italy, the institutional transformations were performed for the effective use of the «currency board» regime, namely, creating the italian foreign exchange office for the exchange controls. the «currency board» regime has contributed to effective transition from a centrally planned to market economies in estonia and lithuania; arresting hyperinflation (argentina, bulgaria), restoring exchange rate stability after a political and banking crisis (hong kong), and providing a stable institutional framework in post-conflict reconstruction (bosnia (anne-marie guide, juha kahkonen, and peter keller, 2000: 4, 10). however, it is worth mentioning that the implementation of the «currency board» regime in argentina also led to the collapse of the financial system in a few years (sharov, 2014). the «currency board» regime is not universal remedy, especially for countries with weak banking system and countries, which are prone to asymmetric shocks. thus, we define a number of implementation threats of this regime in ukraine, which include the following points: – availability of dilemma in choosing an anchor currency: the euro or the dollar. on the one hand, ukraine is oriented towards integration into the eu. on the other hand, the share of the european currency floats at the level of 15.6% in the calculations, while the share of transactions with the us dollar is about 71% (nbu, 2015); – inelasticity of the money supply, and as a result, the limitation of the liquidity in the banking system – shock for economic entities and population due to the limitation of the money supply at the first phase of the regime; – lack of economic growth, the increase of the export capacity etc. because of the limitation of the money supply at the first phase of the regime; – lack of a sufficient amount of reserves in the nbu to ensure 100% cover of the monetary base. however, the gold and currency reserves ensured 92,65% cover of the monetary base on january 01, 2016 (official exchange rate of hryvnia against us dollar = 2340,8386 uah for 100 us dollar, the international reserves = 13300,03 million us dollars, the monetary base = 336,0 billion uah) (nbu bulletin, 2015); – process of the adjustment of high inflation rate in ukraine and the difference between prices is prolonged for several years. the threat of imported inflation; – speculative attacks on a currency, which can exhaust the nbu`s foreign exchange reserves. despite the fact, that in the long term perspective tradeoff between inflation and growth is not positive, failure to conduct permissive financial policy may be an advantage. 5. conclusions current conditions, both economic and political, in which ukraine found itself today, are quite complex and hence it is difficult to choice the applying of further exchange rate regime that would meet current realities and contribute to the economic growth of the economy. the exchange rate regime certainly affects all sectors of the domestic economy, particularly affecting the interests of foreign economic activity entities. world experience shows that the change of the exchange rate regime requires an effective monetary policy and the availability of relevant macroeconomic conditions in the country. our analysis on the possibility of using the appropriate exchange rate regimes, namely the free-floating exchange rate and the «currency board» regimes, demonstrated that ukraine did not overcome the economic crisis and many macroeconomic issues and it has chosen a strategy of transition to floating exchange rate too rapidly. the «currency board» regime should be practically transparent, and have a coherent strategy that would require the government to conduct appropriate monetary and fiscal policies and structural reforms (i.e., government should be disciplined and reformatory). therefore, we consider that thorough preparation for this transition (it was not in ukraine) increases the probability that transition of the strategy will be successful. baltic journal of economic studies 38 vol. 2, no. 2, 2016 the «currency board» regime can justify itself in the current crisis, but also can provide intangible benefits to the economy of ukraine. the success of the new model of exchange rate policy is possible under the following conditions: 1. to search own modifications and combinations of exchange rate regimes and instruments of influence on the correlation between currencies. 2. to implement economic reforms of non-monetary nature (demonopolization, deregulation, energy, judicial, banking, institutional and educational reforms, fighting corruption, public and private investment in its own production, etc.). 3. to combine monetar y and credit measures with other measures of the state influence on the economy. references anne-marie guide, juha kähkönen, and peter keller (2000). pros and cons of currency board arrangements in the lead-up to elf accession and participation in the euro zone. inf policy discussion paper, january: 26. babenko v., shooting j., mastylo a. (2016). primitive economy. as ukraine has become a raw material appendage. the economic truth, january 9. retried from: http://www.epravda.com.ua/publications/2016/01/9/575732/ decree president of ukraine (2015). sustainable development strategy «ukraine – 2020». retried from: http:// zakon4.rada.gov.ua/laws/show/5/2015 imf (2014) executive board concludes. discussion on common policies of member countries of the eastern caribbean currency union. press release no. 14/291 june 19. retried from: http://www.imf.org/external/np/ sec/pr/2014/pr14291.htm nbu (2014). the nbu «on settlement of the situation in the money and foreign exchange markets ukraine», №758. retried from: http://zakon0.rada.gov.ua/laws/show/v0758500-14 nbu (2015). the currency structure of settlements with the current account balance. retried from: http://www. bank.gov.ua/control/uk/publish/article?art_id=65613 nbu (2016). the balance of payments of ukraine’s, gross external debt of ukraine’s, foreign trade. – statistics of the external sector. retried from: http://bank.gov.ua/control/uk/publish/article?showhidden=1&art_ id=65613&cat_id=44446 nbu bulletin (2015). retried from http://www.bank.gov.ua/control/uk/publish/category?cat_id=57897 pynzenyk viktor (2016). the debt of the ukraine. retried from: http://www.pynzenyk.com.ua/analytic/list. php?section_id=82 rudenko, v (2015). foreign exchange restrictions. what has simplified national bank, december 8. retried from: http://www.epravda.com.ua/publications/2015/12/8/571340/ sharov, a. (2014). next bretton-woods: the logic of the international monetary system. bulletin of the national bank of ukraine, august: 19-25 ukrinform (2014). us senators offer a «tie» the hryvnia to the dollar. retried from: http://www.ukrinform.ua/ rubric-economics/1651098-amerikanski_senatori_proponuyut_privyazati_grivnyu_do_dolara_1930950.html unian (2014). nbu has introduced temporary restrictions on the withdrawal of foreign currency deposits. retried from: http://www.epravda.com.ua/news/2014/02/28/423213/ светлана глущенко, светлана ткаленко угрозы и преимущества валютных режимов для украины в условиях евроинтеграции аннотация. целью данной статьи является определение угроз и преимуществ валютных режимов в условиях интеграции украины в европейское сообщество. выделение особенностей проявления валютного курсообразования в украинской практике может выступать основой выбора оптимальных валютных режимов для украины, а это, в свою очередь, позволит снизить инфляцию, внедрить и использовать эффективные инструменты монетарной и фискальной политик, способствовать в дальнейшем экономическому росту и повышению конкурентоспособности страны. применение режима свободноплавающих валютных курсов и режима «валютного бюро» имеют как положительные эффекты для украины, так и несут определенные угрозы. методология. это исследование основано на синтезе данных по применению валютных режимов в независимой украине. рассмотрены наиболее подходящие режимы для украины на сегодняшний день в условиях европейского вектора развития. раскрыты особенности применения этих режимов, выделенные преимущества их и самые большие угрозы для отечественной экономики. в данной статье проанализирована динамика товарных операций платежного баланса украины, динамика товарной структуры экспорта и импорта, внешний долг украины. результаты статьи, учитывая опыт стран, которые находились в кризисном состоянии, показывают необходимость применения режима свободноплавающего валютного курса и возможности режима «валютного бюро», несмотря на те угрозы, которые они могут иметь. мировой baltic journal of economic studies 39 vol. 2, no. 2, 2016 опыт показывает необходимость проведение структурных реформ, эффективной монетарной политики, фискальной политики, и, дисциплинированности правительства. тщательная подготовка перехода украины к режиму «валютного бюро» может себя оправдать в условиях кризиса и дать новый импульс преимуществ украинской экономики. в статье определены условия, при которых возможен успех новой модели валютнокурсовой политики. практическое значение. в исследование акцентируется внимание на специфике применения режима свободноплавающего валютного курса и режима «валютного бюро» в современных кризисных экономических и политических условиях, и провозглашенной стратегии устойчивого развития «украина–2020» в условиях европейского интеграционного вектора развития. кроме этого выявлены преимущества и угрозы наиболее благоприятных валютных режимов для преодоления экономического кризиса, и соответственно создание предпосылок для дальнейшего экономического роста и повышения конкурентоспособности страны. эта статья дала возможность выявить условия успеха новой модели валютно-курсовой политики для достижения стабилизации экономики и начала экономического роста. значение/оригинальность. несмотря на наличие существующих исследований в области валютного регулирования на сегодняшний день не существует комплексного виденья и единого подхода по применению того или иного валютного режима в украине, который стабилизирует экономику, создаст предпосылки на перспективу экономического роста отечественной экономики, и повысит ее конкурентоспособность. это и определяет потребность в проведении данного исследования, акцентирование внимания на концептуальных основах режима свободноплавающего валютного курса и режима «валютного бюро», углубления научнометодологической базы исследования валютных режимов, в том числе тех, которые бы способствовали выходу украины из кризиса. эта статьи раскрывает мысли авторов по применению новой модели валютнокурсовой политики, успех которой в первую очередь зависит от правительства. baltic journal of economic studies 66 vol. 6, no. 4, 2020 corresponding author: 1 center of advanced training, institute of postgraduate education, taras shevchenko national university of kyiv, ukraine. e-mail: drozdirina@ukr.net orcid: https://orcid.org/0000-0002-1930-2522 2 flying academy of national aviation university, ukraine. e-mail: mari.pismennaya.83@ukr.net orcid: https://orcid.org/0000-0003-4509-8147 3 scientific institute of public and space law, ukraine. e-mail: volkovvv2@ukr.net orcid: https://orcid.org/0000-0001-8419-9878 doi: https://doi.org/10.30525/2256-0742/2020-6-4-66-71 management of ethical behavior of auditors iryna drozd1, mariia pysmenna2, vladlen volkov3 abstract. the purpose and tasks of the paper are to develop effective tools for the internal control at audit firms, including monitoring and self-assessment, to improve the quality of professional performance. the relevance of this study is determined by the high expectations of society to the quality of audit opinions. the information quality according to the results of the audit is achieved by adhering to strict professional standards and ethical conduct. audit companies organize control over the implementation of ethical principles, which requires addressing issues of monitoring and self-assessment in the management of ethics. methodology. the authors used deductive and empirical methods. the material for the development of conclusions on the organization of monitoring is collected upon the results of a survey of 150 auditors, accountants and managers of companies. 96 full responses (64% of all respondents) were evaluated by five experts. the questions in the survey are designed to identify the audit experience of the ethics internal control organization in audit companies, and the results of its compliance assessment. automated application capabilities of analysis and modeling of the program “1-c accounting 8.0” were used for data processing. results. the authors propose the auditors’ compliance with ethical testing standards and calculations of the effectiveness indicators of the ethical values compliance as tools for assessing. the authors see the organization of such an element of internal control in the need to formulate clear ultimate goals for auditors. as goals need to be measured, the following criteria for assessing their achievement are proposed: ethical values are known and adhered to; senior management is aware of the ethical foundations and they serve as an example; staff understands and adheres to the code of conduct; active promotion of ethical principles by senior management. the authors conclude that ensuring leadership of senior management, both by example and in behavior is an important component of the implementation of organizational measures for ethical behavior. if such an ethical manner in the behavior of the company’s management is achieved, it is an important positive contribution to the organization of the ethical behavior management: employees trust and feel confident in management decisions. practical implications. achieving the goals of managing ethical behavior of senior management can be recognized by the following criteria: senior management is recognized by co-workers as an example of high standards of behavior, willingness of senior management to be leaders in these issues and take action on misconduct, understanding individual and collective responsibility for compliance with high ethical standards. the implementation of objectives and organizational measures will achieve the defined criteria by monitoring the behavior of auditors on compliance with ethical standards. taking into account the experience of audit companies, revealed during the survey, the authors propose to organize the monitoring of ethical behavior as an open, honest and transparent process. the awareness of all employees and ensuring confidence in its conclusions and results are the conditions for its establishment. according to the authors, the abovementioned is achieved through the availability of annual reports, regular assessment of the strengths and weaknesses of audit behavior, dissemination of information on the example of senior management in ethical behavior, staff awareness of the value of monitoring ethical behavior and their participation in annual surveys. value/originality. the authors propose criteria for monitoring and self-assessment: incentives for all employees for good conduct, application of incentives and sanctions to overcome immoral acts, informing employees, effectiveness of incentives taking into account the specifics of baltic journal of economic studies 67 vol. 6, no. 4, 2020 high ethical culture of the audit company. the proposed measures will strengthen the elements of the internal quality control system and can be used in external evaluation of the quality of the audit company’s activities. implementation of proposals can lead to the organization of audit work on a high quality, responsible basis, which can increase the trust of users in the results of audit activity. key words: ethical principles, monitoring of ethical behavior, self-scoring of compliance with ethical norms, internal control of ethical rules, effectiveness of ethical behavior management. jel classification: m14, m42 1. introduction promoting public confidence in auditors and audit firms is based on the introduction of ethical conduct by auditors. it is determined by ethical principles and professional values. they reflect the model of personal development formulated taking into account the requirements of the international financial reporting standards (ifrs) in the framework of the national policy (gazabon, cantillo & alvarez, 2017). professional ethics is consistent with the values of mankind. the evolution of ethics in the new environment (lachmann, 2013) requires adjustment of ethical values management in the professional field. public reporting is based on public trust. it is developed by users in the community based on regulatory requirements defined by the ethics code of the auditor (code, 2012). reliability is deeply based on the independence, impartiality and moral integrity of auditors, who must act in accordance with values and moral principles. therefore, the audit firm must ensure that the described ethical standards are recognized as professional standards of conduct and are observed in the course of performing audit activities (bondar, 2017). in most cases, standards require auditors to act in accordance with the principles of honesty, independence, objectivity, impartiality, confidentiality and competence (shvets & pavlik, 2018). the organizational side of their implementation is based on the following. each audit company that declares compliance with international standards on auditing, which are recognized in ukraine as national, has the responsibility and obligation: – to develop their own internal rules of ethics, clarifying ethical concepts based on the principles set out in the international code of ethics; – ethical requirements are mandatory for auditors in the performance of their professional duties and in their personal lives; – all auditors should be familiar with ethical values and principles; – active promotion of the ethical conduct in the entire audit firm; – actions of the top management of the audit firm should be an example of ethical behavior; – audit firm must be governed by appropriate policies and procedures that guarantee its independence. – the company’s management should ensure the reduction of employees’ conflicts of interests in the audit practices; – prevent the internal conflicts of interest and corruption. these aspects of ethical issues have aroused considerable interest among researchers (nubia & díaz ortega, 2018) and the search for conflict resolution. 2. materials and methods the key research question is a comprehensive study of the purpose and mechanisms of the influence of ethical principles on the quality of professional duties and the interaction of monitoring tools, self-assessment in the internal control system of the audit company. thus, a deductive approach is applied that is suitable for this type of conceptual research. the literature review was performed using the primary sources, by querying the databases of leading scientific journals via applied methods of analysis, synthesis, generalization and comparison. the empirical method of data collection was the dominant research method by processing individually written answers to questions in the survey developed by the authors of this study. the questionnaire was evaluated by 5 audit experts. the survey of auditors was conducted in 2018-2019 during the advanced professional training of auditors, state accountants, managers at taras shevchenko national university of kyiv. the purpose of the survey was to study and analyze the existing experience of auditing ethics to develop proposals for the organization of ethical behavior management, methodology and reporting. the questions were aimed at assessing the situation with ethics management in audit companies, the results of the assessment of compliance with ethical principles. 96 out of 150 respondents (64%) provided written answers to the questionnaire, guided by ideas, values and their own professional experience. the minimum sample size for analysis should be around 90 to 140 respondents (volkova & emelyanov, 2012). data processing was performed using the application program analysis and modeling in the audit “1-c accounting 8.0”. 3. theoretical prerequisites of the study strengthening auditors’ accountability for their findings is not just about strengthening their control baltic journal of economic studies 68 vol. 6, no. 4, 2020 over professional standards and in-depth knowledge. here, the task of managing an audit firm includes strengthening, streamlining and consolidating management systems for ethics of business behavior with the development of realistic and practically implemented mechanisms of ethical control. these actions should be supported by auditors in their day to-day operations (sunyoto, lely & agus, 2019). the essence of professional ethics, although used by most auditors on a daily basis, is usually featuring a rather vague category of behavior in practice (montaner & perozo, 2008). a high level of ethics in auditing can help to prevent biased evaluations in audits and enhancing the reputation among stakeholders and society as a whole. ethics audit is a useful means of internal control of the audit firm compliance with ethical requirements, which ensures the implementation of the responsibility principle for honest and objective conclusions (bakhtiari & azimifar, 2013). however, in domestic auditing practice, ethical conduct is not the norm yet, despite the auditors’ declaration of compliance with the ethical principles set out in the international standards on auditing. internal rules and practices in audit firms regarding the management of auditors’ ethical values have not become widespread yet. some authors (bondar, 2017) believe that the control of ethical values should be provided by: – effective legal framework that sets basic standards for ethical conduct; – effective accountability mechanisms, such as internal control and external audit during quality control; – law enforcement procedures and mechanisms for implementing and maintaining compliance with ethical standards; – informing colleagues of the audit company about the facts of response to non-compliance with ethical standards. another group of authors (shvets & pavlik, 2018) believes that ethics is a conscious choice of a model of behavior that corresponds to certain values and principles. this is confirmed by the code of ethics of auditors (code, 2012). it declares a system of values and principles that guide the daily work of controllers (auditors). there are researchers who distinguish the key (basic) ethical principle among all others (peña & bastidas, 2007). they believe that honesty is at the heart of all values of any code of ethics. honesty is measured in terms of accuracy and fairness. honesty requires auditors to adhere to standards of control and principles of professional ethics both in terms of form and substance. and the internal honesty of auditors is an important aspect, which is understood as not overstepping the authority to make management decisions when consulting the auditee. important circumstances of honesty include refusing to accept gifts or tokens of gratitude, avoiding relationships with responsible officials of the control object, not using own official position in personal interests, avoiding relationships that may involve the risk of corruption, not using and not disseminating information, received for the performance of their official duties, in order to obtain benefits for themselves or others. however, the auditor’s compliance with such behavior without internal beliefs, but only due to external circumstances is a rather difficult task (szafran, 2014). therefore, the search for tools that would provide constant monitoring of compliance with ethical values in the system of internal control is an important area of looking into the theory and practice of ethical standards in auditing. 4. results and extended opportunities for systematic assessment organizational measures to implement this task are as follows: – strengthening, streamlining and consolidating the ethics management systems for business conduct in an audit company with the development of realistic and practically implemented mechanisms for ethical control; – measures of the audit regulatory bodies to promote the ethics of business behavior at enterprises and institutions. the audit community is to ensure that the ethical principles described in the national law are recognized, respected and play an essential role in the quality of the work of auditors and audit firms. in this context, it is widely accepted that each audit entity is responsible for: – establishment and development of norms of ethical behavior; – familiarization of auditors with the values and principles contained in the code; – organizing the ethics in the company to ensure that senior management and employees act according to ethical standards; – implementation of policies and practices in accordance with the code of ethics; – the adoption of policies and procedures that guarantee independence; – consideration of written applications in order to confirm compliance with ethical requirements; – prevention of internal conflicts of interest and corruption; – implementation of procedures allowing to report of violations of ethical norms timely, as well as taking appropriate measures to resolve them. the study of ethical behavior management was based on a survey of auditors working in audit firms and in baltic journal of economic studies 69 vol. 6, no. 4, 2020 their practical work to comply with ethical standards. the information received is designed to develop recommendations in action planning to identify ethical frameworks and practices, define best practices, use and disseminate them during ethics training. in addition to answering the questions posed, auditors provided important information about the experience of managing ethical behavior. the percentages indicated in the following analytical survey results were calculated based on the responses provided by 96 auditors (100%). among other documents (question 3), which specify the duties of auditors to comply with ethical principles in audit companies, they mention the declaration on financial interests and assets, obligations after termination of office (for the management), the use of official resources and equipment (for the management of the audit company). the formalization of the obligation to comply with ethical principles (question 4) is implemented in auditing companies in the form of signing the following documents by the auditors: declarations of the code of ethics, declarations of compliance with ethical principles, guidance on ethical obligations on a regular basis. as shown by the survey (question 5), only a small percentage of companies (11.5%) have a special unit table 1 survey results on auditors about situation in the ethical behavior management no questions result number % 1 what documents contain approved ethical values in your audit company? a) general legal norms b) specific legal norms (in relation to auditors) c) general code of ethics (applicable to all auditors) d) code of ethics e) strategic documents of the company e) rules of conduct g) other 75 63 48 47 51 33 13 78.1 65.6 50.0 48.9 53.1 34.4 13.5 2 the documents/provisions mentioned in question 1 include: a) statements about values and principles b) explanation of the expected behavior c) examples of dilemmas and complex situations d) tools to be used e) provisions on unlawful actions e) specific provisions for managers g) other 93 61 32 44 89 27 15 96.8 63.5 33.3 45.8 92.7 28.1 15.6 3 these documents/provisions cover the following issues: a) conflicts of interest b) gifts and hospitality c) professional secrecy d) sexual or moral harassment e) other 93 93 93 29 34 96.8 96.8 96.8 30.2 35.4 4 auditors and/or employees formally sign a commitment to comply with the ethical principles of the audit firm yes no no answer 52 43 1 54.2 44.7 1.1 5 does an ethics committee/person/consultant work in your audit firm? yes no 11 85 11.5 88.5 6 are there any tools in your auditing company that auditors can use for self-assessment of their ethical values and principles, or to address their ethical dilemmas? yes no no answer 4 91 1 4.2 94.7 1.1 7 are there any (other) ethical issues that are important for an audit firm to manage ethical behavior? if so, please name them. no, all questions are presented in the questionnaire yes, there are other important issues 77 19 80.2 19.8 8 do you represent an audit company or work as an individual auditor (individual entrepreneur)? a) an audit company b) an individual auditor 93 3 96.8 3.2 source: developed by the authors baltic journal of economic studies 70 vol. 6, no. 4, 2020 or person to provide recommendations and managers of ethical dilemmas and behavior, examples include the ethics committee, ethics director, coordinator, audit adviser, whose mandate is to consider ethical issues. most of the auditors (94.7%) acknowledge that they do not have tools for self-assessment related to ethical behavior (question 6). those who really have such tools include them in the code of ethics and consider such work in the context of personal consultants. although only 19% of the surveyed auditors referred to additional topics related to ethical behavior management that were not mentioned in the survey, but they are quite important: specific areas where ethical principles are exposed to higher risks, recruitment, responses to illegal use of enterprise resources, including with elements of fraud, risk management, transparency and accountability for effective management, and ensuring responsibility, division of duties, policies and management procedures in the company as a whole. these topics were used by the authors in developing proposals for organizing the management of ethical conduct of auditors. as the study showed, there is a solid progress among practitioners and scholars on tools for implementing ethical values in the company. these tools include: plans for working meetings with employees, training in ethics, recruitment based on criteria for ethical conduct. however, we propose to take into account two other mandatory tools, such as testing and performance indicators for ethical conduct and methods for collecting data on compliance with ethical values. the latter tools will be easier to implement if the clear goals for auditors are being set. therefore, the first stage in the implementation of the tools for ethical behavior is the clear definition of standards of conduct that would be known and understood by all employees of the audit company. the criteria for assessing achievement of goals are the following: – ethical values are known and respected; – senior management is aware of ethical foundations and serves as an example; – the staff understands and complies with the code of conduct; – active promotion of ethical principles by senior management. as evident from these goals, an important part of the implementation of organizational measures for ethical behavior is to provide leadership in these issues of senior management, both in examples and in behavior. if such an ethical tone is achieved in the company’s senior officials, then it is an important positive contribution to the management of ethical behavior: employees trust and feel confident in managerial decisions. achieving the goals of managing ethical behavior of senior officials can be recognized by the following criteria: – senior officials are recognized by staff as an example of high standards of conduct; – the willingness of senior officials to be leaders in these issues and take measures for incompliance. – understanding the ethical code of individual and collective responsibility for maintaining high ethical standards. the implementation of goals and organizational measures will achieve the identified goals through monitoring the behavior of auditors and their compliance with ethical standards. the condition for monitoring is an open, honest and transparent process, in which all employees are informed and have confidence in its findings and outcomes. this can be achieved through the following steps: – annual reports are available to all employees; – the strengths and weaknesses of the auditor’s behavior are regularly evaluated and measured; – the role of senior officials in matters of ethical behavior is known and understood; – the staff understands the value of monitoring ethical behavior and participates in annual surveys. the consequences of organizing internal control on compliance with ethical principles are also the components of the overall process of managing ethical behavior. it was then that the mechanisms of influence on auditors that allowed deviations from ethical principles were perceived as just and efficient, and the rewards system for exemplary behavior was fully understood and recognized. therefore, the result of management of ethical behavior can be estimated through the criteria: – good standards of behavior are encouraged by all employees; – incentives and sanctions are used to overcome violence and immoral acts; – incentives and sanctions are known and understood by all employees; – incentives and sanctions are effective in developing a high ethical culture of the audit firm. 5. conclusion increasing the public and users’ confidence in the audit findings regarding the accuracy of financial transactions and reporting of businesses is based on the auditors’ compliance with high ethical professional standards. they are the guarantors of independence, objectivity, honesty during the audit activity. organization of ethical behavior management involves not only the existence of ethics regulations, but also the monitoring and evaluation of tools for their implementation. the survey conducted by the authors of the study showed that awareness of the need to comply with ethical standards and appropriate ethical behavior is largely implemented in the activities of the audit companies. the practices baltic journal of economic studies 71 vol. 6, no. 4, 2020 of most of them requires organizational measures to monitor and control the ultimate goals of compliance with ethical behavior, lack of conflict of interest, and other unethical cases in audit activities. we suggest the goals, monitoring criteria, self-assessment control tools as part of internal audit quality measures. the implementation of the proposals will help to direct the audit work organization on a qualitative, responsible basis, which will increase the users’ confidence in the results of the audit activity. further research is aimed at identifying quality control tools that would facilitate the implementation of the results of internal control of compliance with ethical principles to enhance the reliability of auditors. references: bakhtiari, m., & azimifar, m. 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(2017). ethics and social responsibility of accountants facing the international financial reporting standards (ifrs) in colombia. a prospective analysis. revista espacios, vol. 38(37), p. 14. retrieved may 12, 2020 from: https://www.revistaespacios.com/a17v38n37/17383714.html kodeks etyky profesijnyx buxgalteriv [code of ethics for professional accountants] (2012). retrieved may 12, 2020 from: http://195.78.68.18/minfin/document/81073/d6.pdf lachmann, p. (2013). ethics evolve. european review, vol. 21 (s1), p. 109–113. doi: https://doi.org/10.1017/ s1062798713000161 montaner, j., & perozo, j. (2008). formación ética del contador público. caso: facultad de ciencias económicas y sociales de la universidad del zulia. revista de ciencias sociales (rcs), vol. xiv (2), pp. 379–387. nubia, i. & díaz ortega (2018). bibliometric review on the ethics of the public accountant: contributions and opportunities of research. revista espacios, vol. 39, p. 34. retrieved from: may 12, 2020 http://www.revistaespacios.com/ a18v39n39/18393934.html peña, a. e., & bastidas, m. c. (2007). la ética: fundamento en la adopción de las normas internacionales de contabilidad. actualidad contable faces, vol. 10(14), pp. 118–128. retrieved may 12, 2020 from: http://www.revencyt.ula.ve/storage/repo/archivodocumento/acon/v10n14/articulo10.pdf shvets, v. & pavlik, і. (2018). formation of the basic principles of ethics for specialists of accounting and analytical sciences in modern information economics. bulletin of zhstu, vol. 2(84), p. 41. sunyoto, y., lely, n., & agus, a. (2019). the influence of experience, motivation and professional commitment on employee performance and job satisfaction at the audit firm in indonesia. revista espacios, vol. 40(27), p. 25. retrieved may 12, 2020 from: http://www.revistaespacios.com/a19v40n27/a19v40n27p25.pdf szafran, j. (2014). przestrzeganie kodeksu etyki audytora wewnętrznego w świetle badań ankietowych. zeszyty naukowe uniwersytetu szczecińskiego, vol. 833, num. 72, pp. 195–209. retrieved from: http://www.wneiz.univ.szczecin.pl/nauka_wneiz/frfu/72-2014/frfu-72-195.pdf volkova, v. n., & emelyanov, a. a. (2006). teoriya sistem i sistemnyj analiz v upravlenii organizaciyami: spravochnik [systems theory and systems analysis in organization management: handbook]. moskow: finance and statistics. baltic journal of economic studies 82 vol. 5, no. 3, 2019 corresponding author: 1 national university "odessa maritime academy ", ukraine. e-mail: a.kovban@gmail.com orcid: https://orcid.org/0000-0002-0272-1798 researcherid: h-4297-2016 2 odesa state agrarian university, ukraine. e-mail: innakogut10@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-3-82-90 formation of a corporate social responsibility strategy of companies in eu countries andrii kovban1, inna kohut2 abstract. business cannot act in isolation from society since it itself is a part of society. the fact that corporate social responsibility (hereinafter – csr) has become a global business concept that defines key ideas and a modern format for entrepreneurship is no longer questionable. every year, more and more companies are joining the initiative of non-financial reporting, which acts as a “business card of a social image.” the presence of social and ethical business standards greatly contributes to the formation of a positive business image and increases corporate competitiveness. at the same time, the growth of social, environmental, and economic problems of a global scale raises public expectations and, therefore, requirements for socially responsible activities of companies, inducing them to continuously improve the quality of csr practices, finding innovative approaches to solving socially important problems, which is reflected in the global development trends of socially responsible business. the formation of models of state regulation of corporate social responsibility (csr) in developed countries took place over several decades and, at the present stage, they are characterized by a high degree of development. the author aims to study the genesis of development of models of state regulation of corporate social responsibility, analyse principles of the formation of social responsibility strategy, and propose areas for improving csr for companies operating in the european business space at the modern development stage in view of implementing the concept of sustainable development. after analysing the national models of csr state regulation, we note that in the research of scientists, there from three (american, european, asian) to seven models: american (us), european (continental), british, scandinavian, asian (japanese), african, model of brics countries or more. but, of course, the us model of csr, formed in the specific conditions of the free market, is the largest. key conclusions of the involvement of european companies in the implementation of the csr strategy are as follows: involvement depends on the size of the company (csr policy is applied by 48% of small and 65% of medium-sized companies); the implementation of the csr policy does not depend on the company’s field, but there was a geographical discrepancy (for example, 33% of the sme in france and 83% in finland); among all companies, 50% use the csr strategy; only 8% of the eu company receive privileges or subsidies from the state for implementing the csr policy; more than 75% of sme representatives among respondents can determine the benefits of corporate social responsibility. in the majority of the eu countries, state programs of support and stimulation of the abovementioned processes, in which the state defines socially responsible behaviour for business, engages private and public sector companies in the joint fulfilment of socially important tasks, stimulates business to socially responsible activity, are developed and operate. on the basis of determining the factors influencing the formation of social responsibility strategy and matrix of the appropriateness of srb introduction, areas for improving strategic management based on social responsibility standards were formed. csr – corporate social responsibility; srb – social responsibility of business; sr – social responsibility. key words: corporate social responsibility (csr), national models of csr, social business strategy, sustainable development, matrix of appropriateness, csr strategy directions. jel classification: m14, j24, d30, h70 baltic journal of economic studies 83 vol. 5, no. 3, 2019 1. introduction business cannot act in isolation from society since it itself is a part of society. the fact that corporate social responsibility (hereinafter – csr) has become a global business concept that defines key ideas and a modern format for entrepreneurship is no longer questionable. every year, more and more companies are joining the initiative of nonfinancial reporting, which acts as a “business card of a social image”. the presence of social and ethical standards of a business greatly contributes to the formation of a positive business image and increases corporate competitiveness. at the same time, the growth of social, environmental, and economic problems of a global scale raises public expectations and, therefore, requirements for socially responsible activities of companies, inducing them to continuously improve the quality of csr practices, finding innovative approaches to solving socially important problems, which is reflected in the global development trends of socially responsible business. the formation of models of state regulation of corporate social responsibility (csr) in developed countries took place over several decades and, at the present stage, they are characterized by a high degree of development. in world literature, the most famous publications on csr are works by m. albert, p. drucker, a. carroll, p. kotler, m. porter, w. hoyer, f. hayek, m. friedman, and others. it should be noted that there is no consensus on the reasons for the emergence of the srb phenomenon in professional research. among the most commonly mentioned preconditions are the general tendency towards labour humanization, the development of the trade union and consumer movements, and the personal initiative of such prominent entrepreneurs as andrew carnegie, john d. rockefeller, nathan rothschild, and others. however, it is undoubtedly that the direct driving force of srb development was the concentration of capital, which provided the business with sufficient material, financial, intellectual resources, as well as socio-political weight to influence the socio-economic processes in the appropriate country (voronchak, 2018). the author aims to study the genesis of development of models of state regulation of corporate social responsibility, analyse principles of the formation of social responsibility strategy, and propose areas for improving csr for companies operating in the european business space at the modern development stage in view of implementing the concept of sustainable development. 2. the methodology of research formation and development of csr models in the world the term “corporate social responsibility” is borrowed from english-language scientific literature. in this context, a corporation is considered as any legal entity whose main purpose is profit-making (zhmay, 2015). today, there are many variants of interpretation of the definition of csr , but they all agree that corporate social responsibility is the responsibility of business to all components of society (they can include partners, consumers, employees of the company, etc.). p. kotler’s definition is considered a classic: “corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources” (kotler, li, 2005). since the early 90s of the xx century, there has been a steady increase in the number of companies that systematically publish social reports, thus demonstrating their commitment to csr policies. if in 1993 non-financial reports were released only by about 12% of business representatives, then in 2013 this indicator increased almost 6 times and accounted for 71% of the largest companies in 41 countries of the world (zhmay, 2015). after analysing the national models of csr state regulation, we note that in the research of scientists, there from three (american, european, asian) to seven models: american (us), european (continental), british, scandinavian, asian ( japanese), african, model of brics countries or more (olijnik, 2015). but, of course, the us model of srb, formed in the specific conditions of the free market, is the largest. the main features of the american model are: focus on specific issues, focus on philanthropy and volunteering, partnerships with nonprofit organizations and leaders of local communities. an important element of the american model of srb – the developed infrastructure of business participation in social support of society: a significant number of corporate funds focused on solving social problems at the expense of business (education, medicine, environmental projects). the role of the state is to encourage social initiatives of companies through a system of tax incentives (voronchak, 2018). the european srb model can be characterized as a mechanism for companies to achieve their own business goals under rough conditions of state/ public regulation and control. typical objects of social investment: human capital, social insurance, human rights, development of science and education, environmental activity (voronchak, 2018). a key feature of srb practice is its established institutional support, both at the level of individual countries and the eu as a whole. state regulation is carried out by permanent government structures on the basis of special legislation. social reporting, certification according to international csr standards, contractual relations with trade unions and state/municipal institutions are widespread. the british srb model is mostly characterized as a symbiosis of american and continental (european) approaches, which combines business initiative in the selection of srb fields with the active participation of baltic journal of economic studies 84 vol. 5, no. 3, 2019 the state and civil society institutions in corporate social investment. its features are: attention of the financial sector to srb (development of socially responsible investment funds), the significant role of mass media, dissemination of srb training courses in the system of business education, developed system of cooperation with stakeholders (olijnik, 2015). srb in japan is based on the specific labour relations and traditions of the country where the company is perceived as a “production family”, employment is practiced under “lifelong employment”, and the business purpose is to ensure the harmony of the interests of owners, workers, and society. the main directions of srb in the asian model are: ecology (climate change, ecosystem conservation) and labour relations (housing payment for employees, their training, childbirth assistance, corporate pensions), which ensures the stability of human resources, creating an atmosphere of participation and shared responsibility (bodnaruk, 2016). the active role of the state in strategic planning and standardization of srb is supplemented by activities of national and sectoral business associations that form their own social and environmental standards. therefore, ant national model of srb can be analysed in the two-dimensional coordinate system (scale of response to social needs; the degree of state regulation of business participation in social development) (voronchak, 2018). this approach, appropriate for a general comparison of srb models, has a limited value in terms of their characteristics. for such purposes, it is more appropriate to compare national srb models by a definite list of their main features (table 1). it is obvious that in each case, the set of characteristics is not random but was formed in the process of developing the model as a consequence of a specific combination of external and internal factors. in central europe, corporate social responsibility is being promoted by public authorities. so, in italy, the ministry of labour and social policies is monitoring the process of csr development and social reporting. in spain, the left-wing parties actively contributed to the adoption of the csr law by the parliament in 2003. spain has a state expert technical commission for csr , whose mission is to “help businesses combine economic activity with activities for the benefit of society” (socialna vidpovidalnist biznesu, 2017). lithuania has developed a csr strategy for 2006–2008, the implementation of which allowed improving the country’s position during 2006–2008. in poland, the ministry of labour created a csr working group, which included representatives of many departments whose activities contributed to a more or less stable position of this country during 2004–2010 in the world ranking of social philanthropy (voronchak, 2018). a certain combination of the models described is the situation with srb in great britain. along with the high voluntary activity of businesses in the field of social responsibility and sustainable development, there are also serious government initiatives (for example, the creation of public-private partnerships, the introduction of tax incentives for responsible companies, etc.). governments of different countries sanction social responsibility, for example, when applying the requirement for mandatory reporting to companies when they are obliged to apply environmental management systems, etc. as soon as these obligations, norms, and rules underlying them become formally fixed, they become “regulated srb”. table 1 comparative characteristics of the main national srb models key feature country of origin of the srb model usa european countries great britain japan the initiator of the introduction of srb standards business state, institutes of civil society business, institutes of civil society big business the role of the state in srb minimum regulation, tax privileges regulation by means of laws and standards development of social and environmental standards the state is a customer, a controller, and an srb beneficiary the perception of business in society lack of traditions of confrontation and conflicts in the labour sphere, the insignificance and conformism of trade unions search for a social compromise between labour and hired capital awareness of the economic, social, and environmental role of business, trade union traditions perception of the company as a “big family”, recognition of the social role of business key stakeholders shareholders, consumers, mass media, local communities, poor people consumers, employees, state, public organizations consumers, business partners, trade unions, mass media employees, consumers, local communities social values and cultural features individualism, persistent work, leadership, competition, prosperity, citizen activism pragmatism, the priority of personal and family interests, solidarity, wellbeing economic rationality, individualism, traditionalism collectivism, paternalism, modesty, respect for traditions, mutual help source: bodnaruk, 2016; voronchak, 2018; zhmay, 2015 baltic journal of economic studies 85 vol. 5, no. 3, 2019 such a trend has become dominant in many european countries in recent years. relations between companies both in the european union and in other countries are increasingly based on the principles of csr. adherence to these principles becomes an important prerequisite for attracting foreign investment and obtaining government orders. among the european institutions, the european commission’s committees play a key role in disseminating the idea of csr. 3. results and discussion 3.1. key theoretical research results in order to compare the level of csr development in different countries, a matrix that was developed by kpmg can be applied (figure 1). the countries included in the leaders quadrant are characterized by high csr standards, which are steadily followed by most companies, and also well-established communication channels. c om m un ic at io n ac tiv ity le ve l high populists: japan usa canada brazil slovakia leaders: great britain france germany sweden austria australia taiwan low beginners south africa romania bulgaria ukraine conservatives china south korea low high degree of csr system formedness figure 1. matrix of countries’ positioning by the level of csr development, developed by kpmg source: the kmpg reporting , 2013; kulyeshova, 2013; bodnaruk, 2016 this allows for a two-way dialogue between corporations and stakeholders. these include britain, germany, france, sweden, switzerland, the netherlands, spain, italy, portugal, australia, india, and taiwan. the populists quadrant covers countries where most companies demonstrate a high level of communication activity by disseminating information about their own principles, goals and ideas of social orientation, but lose as compared with “leaders” in the quality and completeness of the practical implementation of publicly proclaimed commitments. an example of such countries is japan, the usa, canada, brazil, slovakia, israel, and others. the countries that are a part of the conservatives quadrant are the cell of corporations that, at a sufficiently high level of development of csr systems, publish a rather limited array of information on achievements in this area. first and foremost, “conservatives” include china and south korea. the beginners quadrant includes countries whose companies differ both by the low degree of formation of csr systems and the low level of communication activity. these countries are south africa, romania, bulgaria, russia, ukraine, and others. according to the memorandum on corporate social responsibility in ukraine, the definition of “social responsibility of business” should be understood as the responsible attitude of any company towards its product or service, consumers, employees, partners, active social position of the company, which consists in harmonious coexistence, interaction, and constant dialogue with society, participation in solving the most acute social problems. based on a study conducted by the european commission’s directorate-general for enterprise and industry and aimed at identifying european companies involved in the process of implementing csr , the main findings are (shevchenko, 2014; bodnaruk, 2016; voronchak, 2018): – involvement depends on the company size (48% of small and 65% of medium companies apply csr policy); – the implementation of the csr policy does not depend on the company sector, but there was a geographical discrepancy (for example, 33% of the sme in france and 83% in finland); – among all the companies surveyed, half is involved in csr; – only 8% of the companies receive benefits or subsidies from the state for implementing csr policies; – more than 75% of sme representatives among respondents can identify the benefits of corporate social responsibility. 3.2. formation of conceptual fundamentals of the csr strategy an analysis of the practice of adherence to the principles of social responsibility of business has enabled us to determine the factors affecting the effective functioning of its strategy. 1. the basic condition for socially responsible business is the implementation of conscientious business practice in relation to the main groups of stakeholders. on the one hand, such a practice implies the timely fulfilment of tax obligations in full, which directly influences the formation of the revenue part of the budget, the financing of state social programs. on the other hand, it involves transparency of business operations, including disclosure of information on financial and social issues and the verification of the corresponding reporting by independent auditing companies, which, in turn, contributes to the gradual reduction of the shadow economy in the country and the overcoming of the budget deficit. baltic journal of economic studies 86 vol. 5, no. 3, 2019 in the majority of the eu countries, state programs of support and stimulation of the abovementioned processes, in which the state defines socially responsible behaviour for business, engages private and public sector companies in the joint fulfilment of socially important tasks, stimulates business to socially responsible activity, are developed and operate (martynyuk, 2015). the theoretical and methodological basis for the integration of social responsibility into the strategy of company management is formed by a system-logical approach, according to which the integration of the mechanism of social responsibility into the strategy of company management – a long-term multistage process of developing a set of key elements and their alignment with the key elements of the company’s strategy (filipova, 2017). in order to achieve positive results from integration, goals, tasks, tools, management processes, levels of responsibility, and expected results need to be coordinated, as well as ways of integration need to be selected. it is proposed to coordinate strategic integration tools by three levels of management (strategic, tactical, operational) in the relevant groups: strategic, tactical, operational. for this, it is expedient to distinguish three levels of responsibility: i. strategic-target (economic, legal, environmental) that is sufficient for the introduction of sr . ii. for information provided to the public (its transparency and accountability). iii. for companies’ fulfilment of obligations to the environment, investors, future generations. from the standpoint of sustainable development, the formation of an integration strategy can bring the following results: – economic (growth of financial indicators and labour productivity, reduction of risks, an increase of capitalization, investment attractiveness and competitiveness of products, development of innovations); – social: creating a positive image, strengthening trust in the company, etc. (sukhoterina, filyppova, 2015). relations between social responsibility and strategic management can be integrated through a process in the following main areas: – formation of clear representations of company leaders about the content of social responsibility as a social phenomenon, in the development of which the company must participate; – the transition from social program administration to the development of cost-effective communications between the company and the state and local communities; – strengthening of the company’s relations with nonprofit organizations in determining sr priorities; – improving the quality of business culture, the importance of ethical standards in public relations; – increasing the degree of information openness, developing new channels of communication with various social groups (filipova, 2017). according to the model of m. porter and m. kramer, there are two types of social responsibility: reactive and strategic, of which the company can choose (porter, 2007): 1. reactive type of sr , aimed at reducing existing problems and negative consequences of the company’s business. 2. strategic type of sr , which involves integrating the mechanism of social responsibility into the company’s strategy and focus on creating long-term competitive advantages. this type changes the sr accent and means the transition from “social costs” to “social investment”. implementation of the sr mechanism in the company’s management strategy requires compliance with certain principles, methods and the development of appropriate management tools. let’s consider them in details. principles of sr integration. formation of the sr system is based on a number of principles, which are proposed on the basis of the analysis of regulatory documents and best practices of the company (antoshko, krush, tyulenyeva, 2013; tretyak, 2014; filipova, 2017): – voluntary social responsibility, as it is its fundamental principle, and regulatory documents and international standards create conditions for the development of socially responsible business; – accountability, because it provides the company with a regulatory basis for determining its role in social development and the impact of its activities on society and the environment; – the rule of law, since the strict observance of the law is, firstly, the second universally accepted fundamental principle of sr , and secondly, provides for the clarity of rights and responsibilities of sr; – transparency, which creates opportunities for clear disclosure in a truthful manner of information about policies, decisions, and activities the company is responsible for. transparency is limited to commercial secrets, therefore, does not imply disclosure of official information that is protected in accordance with the laws or may lead to a breach of legal obligations; – ethical principle, it contains three main components: a) ethical behaviour, allowing to adopt and apply standards of ethical conduct of the company sector; b) adherence to international standards of conduct that will facilitate the seizure of new global markets; c) respect for human rights, which will allow for the enforcement of human rights; – interaction with stakeholders, it will allow to take into account the interests of all parties and interact with them, avoid the benefits of such situations. their pressure affects the content and character of the company’s sr strategy. guided by these principles, the company can further develop its own principles in the sr strategy in order to familiarize the personnel and all parties concerned with them. baltic journal of economic studies 87 vol. 5, no. 3, 2019 4. research results integration of corporate social responsibility standards into management strategy one of the biggest problems in the company’s approach to social responsibility is the lack of integration of individual sr programs into the company’s management strategy, as well as the “residual” principle of including socially responsible activities in the core one. this is because the company believes that the problems of society do not affect its activities. a more mature approach to socially responsible behaviour requires the integration of social programs and environmental issues into the management strategy of the company (martynyuk, 2015). a strategic approach to social responsibility involves expanding social responsibility beyond the scope of the solution of short-term, internal to the company’s productive and social tasks. it is aimed at solving internal and external social, environmental, and economic problems that directly affect their core business activities in line with its strategic interests, with a view to longterm improving business sustainability. in order to distinguish the main advantages of implementing the csr standards in the management strategy, let’s consider the matrix developed by sustain ability on the basis of an analysis of the activities of companies in central and eastern europe (table 3). since the social responsibility of business – awareness of the need for sustainable development, the matrix helps to identify key elements of the feasibility of the socially responsible business. the matrix is based on two groups of factors: on the one hand – factors of business success, on the other – factors related to sustainable development. where the factors of sustainable development and business success factors converge, there is the possibility of defining a clear srb feasibility condition. improving corporate governance helps to improve access to capitals, increase revenues, and ensure the company’s productivity growth. work on improving environmental processes directly affects revenue and productivity growth and cost reduction. effective human resource management helps to improve productivity (dziekański paweł, 2017). taking table 2 factors influencing the srb strategy formation external factors internal factors by groups market structure immaterial resources of a company values stakeholder needs competition human capital social component of the company’s ideology personnel market concentration social capital strategy suppliers stage of product/service lifecycle goodwill corporate image customers market differentiation level stakeholder involvement national/global local companies growth rate intangible capital intangible assets investors barriers to entry the market inconsistency of the strategy with the social requirements of a particular market or its segment state and society source: voronchak, 2018; filipova, 2017 table 3 matrix of the appropriateness of srb introduction b us in es s su cc es s fa ct or s corporate activity environmental factors socio-economic development corporate management activity of influence groups improvement of ecological processes ecological products and services environmental development of the area social development human resources management growth of income, access to the market 1 2 3 4 5 6 7 reducing costs on productivity 8 9 10 11 12 13 14 access to capital 15 16 17 18 19 20 21 risk management 22 23 24 25 26 27 28 human capital 29 30 31 32 33 34 35 company image 36 37 38 39 40 41 42 matrix’s legend. insignificant influence of conditions of the appropriateness of srb introduction there is no evidence of the appropriateness of srb introduction significant influence of the conditions of srb appropriateness source: romanykha, 2016 baltic journal of economic studies 88 vol. 5, no. 3, 2019 into account all of the above, the following directions of improvement of the company’s strategic management on the basis of social responsibility standards can be proposed. upon that, the mechanism of corporate social responsibility management is changing and differs from the known ones, which is defined differently. in particular, as a “set of interconnected functions of planning and analysis, motivation, control, as well as organizational and informational support, which create the basis for the continuous process of interaction of personnel, management of the organization, business owners (shareholders), local communities and the state” (shevchenko, 2014). 5. conclusions therefore, the social responsibility of business has important consequences for all economic and social agents of the business environment, as well as for state authorities that should take them into account when determining their own actions. if the state supports csr and stimulates its development by creating a favourable socially safe environment for the activity of entrepreneurs, then the rates of development of the social activity of the company in the country are significantly increasing. the growth of social responsibility of business is a relevant problem of modernizing the economy and improving the sociolabour relations in each country in the modern period of global socio-economic development. the formation of a national srb model is not the copying of successful models but the use of the best world experience of each country, which should be objectively combined with the local traditions, mentality, and peculiarities of the requirements of local stakeholders for business. the main tool for creating an effective srb model is the open dialogue of all stakeholders, social partnership, and the dissemination of knowledge about srb, weighted state policy on entrepreneurship development. crisis phenomena observed in society have led many companies to strive for isolation in solving social responsibility issues in the period of economic instability. this is a false position because it arises as a result of the underdeveloped mechanisms of the formation and functioning of civil society and the low level of awareness of the company that it is only by building an effective dialogue with society and government they can get an effective result – sustainable development. also, integration of sr will allow the company to: create a positive image; improve goodwill; create a stable business environment; reduce non-financial risks; increase investment attractiveness; accelerate capitalization of the company in the long run. the considered ways and approaches to the integration of the mechanism of social responsibility into the company’s management strategy allow developing a strategy aimed at achieving both economic results and long-term social and responsible interaction with the external environment. they become the basis for table 4 areas of improvement of strategic management on the basis of social responsibility standards areas of development of srb strategic management characteristics of improvement measures 1 determination of sr priorities formation of clear representations of business, company executives about the content of sr as a social phenomenon, in the development of which they must participate inclusion of local community development into the system of strategic goals calculation of the inevitability of changes in the economic situation improving the quality of business culture, the importance of ethical standards 2 overcoming social nihilism the transition from administering social programs to the development of cost-effective ties between the business, state, and local communities 3 building relations of business and society strengthening the company’s relations with nonprofit organizations increasing the degree of information openness, preserving the structure of the addressees of the sr , developing new channels of communication with various social groups 4 development of internal standards and documents on strategic management ensure mutual understanding and interaction with owners attracting minority shareholders to the procedure of approval to add solutions to specific social problems in the field of labour relations to the company’s economic development programs 5 development of srb programs development of a document containing directions for the development of social relations inside and outside the company (provisions on social programs). 6 formation of a complex of csr measures participation in activities carried out by the authorities and management of different levels development of measures to disclose information about the company’s activities for the media and the public of the local community, region, country strengthening the relationship between the quality of products and services, the company’s image improvement of the company’s goodwill and target tasks (stable business environment; growth of investment attractiveness or long-term capitalization of the company; reduction of non-financial risks) baltic journal of economic studies 89 vol. 5, no. 3, 2019 further research into the applicability and integrity of the integration tools. in order to accelerate social responsibility development trends, it is required to develop national csr 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(2015). corporate social outlook: perspectives and motivation for the small business in ukraine. market economy: modern management theory and practice. vol. 14. issue 2(30). retrieved from: http://rinek.onu.edu.ua/ article/view/61700 baltic journal of economic studies 81 vol. 6, no. 2, 2020 corresponding author: 1 dnipro state agrarian and economic university, ukraine. e-mail: skhalatur@gmail.com orcid: https://orcid.org/0000-0001-8331-3341 researcherid: t-7645-2019 2 classic private university, ukraine. e-mail: yelena.trohim@gmail.com orcid: https://orcid.org/0000-0001-7587-7948 researcherid: o-2591-2018 3 dnipro state agrarian and economic university, ukraine. e-mail: k80504949768@gmail.com orcid: https://orcid.org/0000-0002-9369-7972 researcherid: t-7645-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-2-81-92 conceptual basis of tax policy formation in the globalization conditions svitlana khalatur1, olena trokhymets2, oleksandr karamushka3 abstract. the purpose of the article is to analyze the tax systems of the countries of the european union and ukraine, the impact of individual indicators of the tax system on the economies development, study the possibility of applying the accumulated experience. the subject-matter of the study is the methodological and conceptual foundations of the tax policy-making process of the eu and ukraine. methodology. based on the analyzed scientific literature on tax policy formulation of countries, the methodological principles of this study provide for the joint application of a set of well-known general scientific and special methods of research in economics. in particular, the dialectical method, the method of scientific abstraction, the method of systematic analysis, economic and mathematical modeling were used. results. the article analyzes the individual indicators of the tax system functioning of 28 countries of the european union and ukraine; and the impact of these indicators on the economy development. in particular, the following indicators were studied: customs and other import duties, firms expected to give gifts in meetings with tax officials; firms that do not report all sales for tax purposes; firms visited or required meetings with tax officials; labor tax and contributions; net taxes on products; other taxes; other taxes payable by businesses; profit tax; tax payments; tax revenue; taxes on exports; taxes on goods and services; taxes on income, profits and capital gains; taxes on income, profits and capital gains; taxes on international trade; time to prepare and pay taxes; total tax rate. the dependence of foreign direct investment on profit tax, tax revenue; taxes on income, profits and capital gains; time to prepare and pay taxes and total tax rate have been studied. the study shows that, on average, tax revenue affects foreign direct investment, net inflows with the same strength as time to prepare and pay taxes, but almost twice as much as taxes on income, profits and capital gains. practical implications. the article contains a set of tools and rules for reviewing approaches, guidelines and criteria for the effectiveness of ukraine's tax policy in line with the global development concept. value / originality. the conceptual criteria for the formation and implementation of the tax policy of the state are determined, it is carried out the comparative analysis of the tax policy of ukraine and the eu countries within the framework of the european economic integration, which occurs simultaneously with the globalization of the world economy. key words: tax, labor tax, tax rate, profit tax, tax revenue. jel classification: c51, e62, f63 1. intrоduction being a coherent system, the economic system of a country combines the various, often conflicting interests of its members. at the same time, the process of tax regulation is also free of conflicts, since the interests and local goals of its participants do not coincide. exacerbation of conflicts arising in the process of tax policy development of the state occurs during periods of downturn, increased competition and in times of economic crisis. this fact necessitates the search for the concept of the tax policy of the state aimed at the maximum reduction of conflict situations in order to baltic journal of economic studies 82 vol. 6, no. 2, 2020 preserve the stability and integrity of society, reduce social tension. european economic integration, which occurs at the same time as the globalization of the world economy, updates tax policy studies not only at the level of the state, which, in particular, seeks to reap the benefits of engaging in global economic ties and participation in integration processes, but also at the level of integration (supranational level). moreover, these two tax policy makers develop it to achieve positive shifts in socio-economic development, but set different goals depending on their priorities for functioning and development. a taxpayer state aims primarily to pursue its own national interests under specific internal and external socio-economic and institutional conditions (including, depending on whether it seeks to improve the functioning of its economy as one of the world leaders in terms of economic development) , is geared to growing economic development by reducing the gap between world leaders). at the same time, the tax policy of integration education presupposes balancing of often conflicting national interests in order to create favorable conditions for the development of integration education as a whole and its participants in particular. sometimes this requires the latter's consent to the deterioration of certain economic conditions for other benefits in the near future as well as in the future. the aim of the article is to analyze the tax systems of the countries of the european union and ukraine, the impact of individual indicators of the tax system on the economies development, to study the possibility of applying the learned lessons. 2. previous research review naidenko o. (2019) writes that the socio-economic processes that take place in the country affect the welfare of the population. rating estimates of recent years indicate deterioration in the level of well-being, human and social development of the population in ukraine, global wealth. hrysenko m., pryiatelchuk o. and shvorak l. (2019) argue that the social market economy is the dominant economic system for industrialized countries. in addition to creating economic and technological conditions, the active participation of the state is a key factor in the effective functioning and sustainable development of the economy. glushchenko j. and kozhalina n. (2019) consider local taxation, its problematic aspects and trends. economic independence of any community is not possible without sufficient financial resources, relative independence of tax and other mandatory payments. uwuigbe o. r., omoyiola a., uwuigbe u., lanre n. and ajetunmobi o. (2019) write that taxation is a very important tool in any country. it is a macroeconomic tool, very necessary for the functioning of the state. oladipo  o.  a., iyoha f., fakile a., asaleye a.j. and eluyela  d.  f. (2019) rightly argue that taxation is a sustainable and genuine source of government revenue, a tool for macroeconomic policy and fiscal management. 3. modern trends in tax policies of ukraine and the european countries conceptual criteria for the formation and implementation of state tax policy are the following: 1. compromise. it is necessary to balance the interests of the state, business sector and citizens, so that all subjects of redistribution relations are satisfied with the results of redistribution approximately equally. government expenditures should ensure the optimal combination of social measures and measures to promote gdp growth. 2. complementarity of tax changes. tax innovations should be well coordinated with other legislation, provide for measures to influence the informal level of the institutional environment, and be positively assessed by society. 3. rejection of radical tax initiatives. significant changes in taxation are often associated not so much with the positive economic effect and expansion of the tax base, but with the fiscal losses that have to be offset by government borrowing. 4. stability and flexibility. the tax policy should, on the one hand, correspond to the directions of modification of the tax system and the system of contributions to state social funds defined in its concept, and on the other hand, to respond to changes in the reproductive and fiscal processes quickly. for a more detailed explanation of the study topic, let us analyze the individual indicators of the tax system functioning of 28 countries of the european union and ukraine; and the impact of these indicators on the economy development. thus, let us compare the indicators related to the tax system in the eu countries and ukraine, in particular the following indicators will be analyzed: customs and other import duties (% of tax revenue); firms expected to give gifts in meetings with tax officials (% of firms); firms that do not report all sales for tax purposes (% of firms); firms visited or required meetings with tax officials (% of firms); labor tax and contributions (% of commercial profits); net taxes on products (current us$); other taxes (% of revenue); other taxes payable by businesses (% of commercial profits); profit tax (% of commercial profits); tax payments (number); tax revenue (% of gdp); taxes on exports (% of tax revenue); taxes on goods and services (% of revenue); taxes on goods and services (% value added of industry and services); taxes on income, profits and capital gains (% of revenue); taxes on income, profits and capital gains (% of total taxes); taxes on international trade (% of revenue); time to prepare and pay taxes (hours); total tax rate (% of commercial profits). baltic journal of economic studies 83 vol. 6, no. 2, 2020 having analyzed table 1, we can draw the following conclusions. labor tax and contributions is highest in france (51.82% of commercial profits), in belgium (48.55% of commercial profits), in italy (41.52% of commercial profits); and the lowest one is in denmark (3.11% of commercial profits), in malta (10.84% of commercial profits), in the united kingdom (11.16% of commercial profits). in ukraine, this figure is at 40.57% of commercial profits. in terms of other taxes payable by businesses (% of commercial profits), it can be said that the highest level is in france (10.49%), the lowest one is in norway (0.03%), and in ukraine it is 0.91%. tax revenue refers to compulsory transfers to central government for public purposes. tax revenue in% of gdp is the lowest in germany (11.22%), the highest one is in malta (38.43%), and in ukraine it averages to 16.96%. taxes on goods and services include general sales and turnover or value added taxes, selective excise taxes on goods, selective taxes on services, taxes on the use of goods or property, and some others. taxes on goods and services in% of revenue is highest in croatia (46.25%), lowest one is in italy (22.79%); in ukraine this indicator is at the level of 32.98%. the continuation of the analysis of the tax system functioning indicators of the eu and ukraine is shown in table 2. after analyzing such indicators: customs and other import duties (% of tax revenue), firms expected to give gifts in tax officials meetings (% of firms), firms that do not report all sales for tax purposes (% of firms), firms visited or required meetings with tax officials (% of firms), it can be said that in many studied countries this data is missing. in ukraine, they are at 6.43; 46.65; 31.90; 59.15 respectively. the highest value of the first indicator was recorded in slovenia (2.22); the lowest one was in greece (0.02). the second indicator, firms expected to give gifts in meetings with tax officials (% of firms) ranges from 28.80 in greece to 0.30 in sweden. firms that do not report all sales for tax purposes (% of firms) range from 53.19 in greece to 18.33 in spain. firms visited or required meetings with tax officials (% of firms): the highest one was in bulgaria (64.77) and the lowest one was in sweden (8.90). table 1 the average value of the tax system functioning of the eu and ukraine for the period of 2001-2019 country name labor tax and contributions (% of commercial profits) other taxes (% of revenue) profit tax (% of commercial profits) tax payments (number) tax revenue (% of gdp) taxes on goods and services (% of revenue) austria 34.41 3.93 16.86 12.00 26.01 27.18 belgium 48.55 0.50 8.50 11.00 25.02 25.08 bulgaria 23.24 0.16 5.19 16.33 19.67 44.42 croatia 19.11 0.74 0.00 24.93 20.73 46.25 cyprus 12.37 4.85 8.78 27.83 31.57 35.02 the czech republic 38.77 0.14 5.60 10.60 14.44 28.50 denmark 3.11 4.56 20.84 10.00 32.84 37.84 estonia 38.79 – 8.58 7.67 20.14 36.24 finland 26.09 0.79 14.65 11.20 20.82 36.38 france 51.82 4.26 4.37 11.40 22.63 23.36 germany 21.68 – 22.06 10.40 11.22 23.37 greece 30.58 2.99 17.54 10.20 22.21 31.39 hungary 35.47 1.09 10.17 12.33 21.89 35.97 ireland 12.13 2.01 12.15 9.00 22.64 34.41 italy 41.52 5.01 23.06 13.80 22.35 22.79 latvia 27.05 0.47 6.27 8.47 21.24 41.00 lithuania 35.17 0.24 6.47 11.07 17.87 34.07 luxembourg 15.44 2.09 4.32 23.00 25.02 30.45 malta 10.84 0.57 31.16 7.44 38.43 35.45 norway 15.90 0.51 23.91 4.13 25.94 25.16 poland 25.15 0.73 15.05 23.80 16.49 35.82 romania 29.81 0.17 11.61 62.67 17.21 36.26 the slovak republic 39.65 0.06 8.38 22.20 16.62 30.10 slovenia 19.41 1.79 13.74 15.33 19.22 35.36 spain 35.55 0.19 15.75 8.80 14.25 43.37 sweden 35.81 29.75 15.07 6.00 27.05 37.26 ukraine 40.57 -0.01 11.17 72.73 16.96 32.98 the united kingdom 11.16 5.38 20.71 8.07 25.12 32.34 source: compiled by authors based on world bank data baltic journal of economic studies 84 vol. 6, no. 2, 2020 taxes on income, profit and capital gains are deducted from the actual or projected net income of individuals, from the profits of corporations and enterprises, as well as from capital gains. taxes on income, profits and capital gains in% of revenue are the highest in denmark (40.81%) and the lowest are in croatia (7.87%). in ukraine this indicator is at the level of 12,90%. taxes on income, profits and capital gains in% of total taxes are the highest in 58.35%, the lowest are in croatia 14.14%. in ukraine this indicator is at the level of 26.28%. gini index (world bank estimate) is the highest in romania (36.58); the lowest one is in slovenia (24.95); in ukraine this indicator is at the level of 26.50. next, it was analyzed the profit tax in the eu and ukraine. this is the amount of business income taxes paid. in table 3, it is shown that profit tax decreased in many countries in 2019 compared to 2005. a slight increase in profit tax is observed in belgium, germany, greece, hungary, ireland, latvia, lithuania, and the slovak republic. in ukraine, profit tax in% of commercial profits decreased from 12.3 to 10.2%, which is a positive trend. enterprise tax payments are the total amount of taxes paid by businesses, including the submission of electronic materials. the tax is considered paid once a year, even if it is more frequent. tax payments number, according to table 4, decreased by 2-3 times in 2019 compared to 2005 in the countries of bulgaria, croatia, the czech republic, finland, france, greece, latvia, poland, romania, the slovak republic, slovenia. this decrease is considered a positive trend. in ukraine, tax payments number decreased from 147 in 2005 to 5 in 2019. this is a very significant decrease. tax preparation and payment time is the time in hours per year for which you need to prepare, file and pay three main types of taxes: corporate income tax, value added tax or sales tax, and labor taxes. a very significant decrease in time to prepare and pay taxes is observed in ukraine more than five times, from 2085 hours in 2005 to 327 hours in 2019. this is a positive trend. the surveyed eu countries also show a decrease in this indicator. table 2 the average value of the tax system functioning of the eu and ukraine for the period 2001-2019 country name taxes on income, profits and capital gains (% of revenue) taxes on income, profits and capital gains (% of total taxes) taxes on international trade (% of revenue) time to prepare and pay taxes (hours) gini index (world bank estimate) total tax and contribution rate (% of profit) austria 27.61 47.01 0.00 154.13 30.27 51.87 belgium 35.84 58.35 – 141.53 28.43 57.73 bulgaria 15.56 25.59 0.41 508.73 35.47 30.73 croatia 7.87 14.14 1.48 202.53 32.14 20.55 cyprus 24.99 38.10 0.63 139.75 32.62 22.17 the czech republic 15.98 35.63 0.95 412.47 26.42 46.57 denmark 40.81 48.98 – 133.27 26.70 26.73 estonia 20.36 35.93 0.08 73.13 33.25 50.57 finland 17.87 32.35 0.00 159.53 27.56 41.95 france 25.07 47.58 -0.01 134.87 32.09 66.67 germany 15.97 40.58 – 209.93 30.85 47.88 greece 18.97 35.57 0.01 216.07 34.64 48.87 hungary 18.68 33.22 0.66 296.67 29.79 49.78 ireland 38.66 51.53 – 77.83 32.62 25.72 italy 32.39 53.81 – 283.20 34.40 65.87 latvia 10.92 20.59 0.36 219.20 36.03 36.32 lithuania 20.72 36.88 0.76 156.42 35.50 44.25 luxembourg 28.81 46.96 – 57.00 31.61 20.29 malta 30.40 45.14 1.40 139.00 29.11 42.54 norway 28.55 52.26 0.20 84.60 27.22 39.85 poland 12.98 26.05 0,56 334.67 33.88 41.40 romania 18.62 33.35 0.86 189.67 36.58 42.65 slovak republic 17.17 36.23 0.20 241.47 26.73 49.03 slovenia 12.62 25.05 1.07 234.27 24.95 33.62 spain 39.20 47.18 – 198.57 34.54 52.06 sweden 14.36 17.62 – 122.00 27.42 51.51 ukraine 12.90 26.28 3.58 804.60 26.50 52.64 the united kingdom 35.84 48.71 – 104.27 34.11 33.51 source: compiled by authors based on world bank data baltic journal of economic studies 85 vol. 6, no. 2, 2020 table 3 profit tax, % of commercial profits country name 2005 2014 2015 2016 2017 2018 2019 2019 to 2005 ratio austria 21.2 16.8 16.8 16.9 17 17.1 17.1 80.66 belgium 9.8 8.3 8.4 9.1 10.3 10.9 10.3 105.10 bulgaria 7 5 5 5 5 4.9 4.9 70.00 croatia 0 0 0 0 0 0 0 cyprus .. 9.5 9.3 9.6 8.1 8.1 8.3 the czech republic 7.2 5.6 5.6 5.1 5.1 5.2 5.2 72.22 denmark 27.9 19.6 18.1 18.4 17.1 17.1 17.1 61.29 estonia 11.2 8.2 8.2 7.8 7.8 7.8 7.7 68.75 finland 19.1 14.6 11.8 11.7 11.7 11.9 12.1 63.35 france 6.8 5.4 -0.2 0.2 1 0.3 0.2 2.94 germany 21.4 23.3 23.2 23.2 23.2 23.2 23.2 108.41 greece 21.5 19 19.7 22.4 23 23 23 106.98 hungary 5.9 11.8 11.8 9.9 9.9 9.1 9.4 159.32 ireland 11.9 12.4 12.4 12.4 12.4 12.4 12.4 104.20 italy 30.6 19.9 19.5 17 23.3 16.8 14.6 47.71 latvia 6.8 4.9 6.3 6.3 6.3 6.4 7.8 114.71 lithuania 5.7 5.9 5.9 5.9 5.9 5.9 5.9 103.51 luxembourg .. 4.6 4.6 4.6 4.2 4.2 4.2 malta .. 30.2 30.2 32.4 32.3 32.3 32.3 norway 25.2 24.5 23.6 23.6 21.8 20.8 20 79.37 poland 14.8 14.5 14.5 14.5 14.5 14.5 14.5 97.97 romania 17.2 10.7 10.9 12.3 12.3 12.3 15.6 90.70 the slovak republic 8 8.4 9.4 9.5 9.5 9.1 9.1 113.75 slovenia 14.3 12.7 12.7 12.7 12.7 12.7 12.7 88.81 spain 23.4 21.7 13.4 12.5 10.6 10.6 10.6 45.30 sweden 16.6 13.1 13.1 13.1 13.1 13.1 13.1 78.92 ukraine 12.3 9.5 9 8.7 11.9 11 10.2 82.93 the united kingdom 21.8 20.6 19.2 18.3 18.1 17.3 16.6 76.15 source: compiled by authors based on world bank data table 4 tax payments, number country name 2005 2013 2014 2015 2016 2017 2018 2019 2019 to 2005 ratio austria 12 12 12 12 12 12 12 12 100.00 belgium 11 11 11 11 11 11 11 11 100.00 bulgaria 29 14 14 14 14 14 14 14 48.28 croatia 40 12 12 12 13 13 12 12 30.00 cyprus .. 31 30 28 28 28 27 16 the czech republic 27 8 8 8 8 8 8 8 29.63 denmark 10 10 10 10 10 10 10 10 100.00 estonia 7 8 8 8 8 8 8 8 114.29 finland 20 8 8 8 8 8 8 8 40.00 france 21 9 9 9 9 9 9 9 42.86 germany 12 9 9 9 9 9 9 9 75.00 greece 19 8 8 8 8 8 8 8 42.11 hungary 13 12 11 11 11 11 11 11 84.62 ireland 9 9 9 9 9 9 9 9 100.00 italy 14 13 13 14 14 14 14 14 100.00 latvia 29 7 7 7 7 7 7 7 24.14 lithuania 11 11 11 11 11 11 10 10 90.91 luxembourg .. 23 23 23 23 23 23 23 malta .. 7 7 7 8 8 8 8 baltic journal of economic studies 86 vol. 6, no. 2, 2020 (end of table 4) country name 2005 2013 2014 2015 2016 2017 2018 2019 2019 to 2005 ratio norway 4 4 4 4 4 4 5 5 125.00 poland 41 19 19 7 7 7 7 7 17.07 romania 108 39 14 14 14 14 14 14 12.96 the slovak republic 32 22 22 11 8 8 8 8 25.00 slovenia 22 10 10 10 10 10 10 10 45.45 spain 8 9 9 9 8 9 9 9 112.50 sweden 6 6 6 6 6 6 6 6 100.00 ukraine 147 28 5 5 5 5 5 5 3.40 the united kingdom 8 8 8 8 8 8 8 9 112.50 source: compiled by authors based on world bank data table 5 time to prepare and pay taxes, hours country name 2005 2012 2013 2014 2015 2016 2017 2018 2019 2019 to 2005 ratio austria 170 170 166 131 131 131 131 131 131 77.06 belgium 156 131 135 135 136 136 136 136 136 87.18 bulgaria 598 436 436 436 453 453 453 453 441 73.75 croatia 232 196 196 208 206 206 206 206 206 88.79 cyprus .. 146 146 146 145 127 127 122 119 the czech republic 866 230 230 230 222 222 236 230 230 26.56 denmark 135 130 132 132 132 132 132 132 132 97.78 estonia 81 81 81 81 81 56 50 50 50 61.73 finland 269 93 93 93 93 93 93 90 90 33.46 france 132 132 137 137 137 139 139 139 139 105.30 germany 196 207 218 218 218 218 218 218 218 111.22 greece 264 202 193 193 193 193 193 193 193 73.11 hungary 340 277 277 277 277 277 277 277 277 81.47 ireland 75 79 79 79 81 81 81 81 81,5 108.67 italy 340 269 269 269 269 240 238 238 238 70.00 latvia 280 224 224 193 193 168 168 168 168 60.18 lithuania 166 175 175 171 171 171 109 99 95 57.23 luxembourg .. 59 55 55 55 55 55 55 55 malta .. 139 139 139 139 139 139 139 139 norway 87 87 83 83 83 83 83 79 79 90.80 poland 420 286 286 286 269 269 258 334 334 79.52 romania 192 218 202 161 161 161 163 163 163 84.90 the slovak republic 325 207 207 207 188 192 192 192 192 59.08 slovenia 248 233 233 233 233 233 233 233 233 93.95 spain 298 167 167 167 158 152 152 147 143 47.99 sweden 122 122 122 122 122 122 122 122 122 100.00 ukraine 2085 488 386 346 346 355 327 327 327 15.71 the united kingdom 100 105 105 105 105 105 105 105 114 114.00 source: compiled by authors based on world bank data the gini index measures the extent to which the distribution of income among individuals or households within the economy deviates from a uniform distribution. thus, the gini index of 0 represents perfect equality, while the index of 100 indicates perfect inequality. according to the gini index (figure 1), ukraine ranks the 26th in the 2005-2019 average compared to the eu countries. according to the un, more than 60% of the population lives below the poverty line in ukraine, but according to the world bank, the figure is 25%). one of the areas that needs to be improved is tax policy, since tax revenues form a large revenue part of the state budget. the total tax rate measures the amount of taxes and mandatory contributions paid by businesses after accounting for allowable deductions as a proportion of commercial income. let us compare in more detail three countries of approximately the same area: ukraine (579290 sq. km), spain (499564 sq. km), and france (547557 sq. km). baltic journal of economic studies 87 vol. 6, no. 2, 2020 table 6 total tax and contribution rate, % of profit country name 2005 2013 2014 2015 2016 2017 2018 2019 2019 to 2005 ratio austria 57.2 51.9 51.7 51.7 51.6 51.8 51.5 51.4 89.86 belgium 60.1 58 58.4 58.4 58.7 57.1 57.7 55.4 92.18 bulgaria 45.2 27 27 27 27 27.1 27.7 28.3 62.61 croatia 20.8 19.3 18.4 20 20.9 20.6 20.5 20.5 98.56 cyprus .. 21.9 22.5 24 24.2 22.7 22.2 22.4 the czech republic 48.7 45.6 46.5 46.5 46.1 46.1 46.1 46.1 94.66 denmark 32.6 25.6 25.4 23.9 24.4 23.8 23.8 23.8 73.01 estonia 50.4 49.6 49.2 49.2 48.5 48.5 48.5 47.8 94.84 finland 49.5 39.9 40.1 37.9 38.1 38.4 37.3 36.6 73.94 france 68.3 69.8 71.3 64.9 64.1 62.6 60.4 60.7 88.87 germany 47.7 49.1 48.8 48.8 48.9 48.9 49 48.8 102.31 greece 54 44 50.7 49.6 50.7 51.7 51.9 51.9 96.11 hungary 53.6 49.2 47.9 48.2 46.3 46.4 40.3 37.9 70.71 ireland 25.4 25.9 26 26 26 26 26 26.1 102.76 italy 76.7 65.6 65.2 64.8 62 48 53.1 59.1 77.05 latvia 36.2 35 35 35.9 35.9 35.9 36 38.1 105.25 lithuania 51.2 42.9 42.4 42.6 42.6 42.7 42.6 42.6 83.20 luxembourg .. 20.4 20.6 20.6 20.8 20.5 20.5 20.4 malta .. 41.4 41.5 41.5 43.8 43.9 44 44 norway 41.1 40.7 40.4 39.5 39.5 37.7 37 36.2 88.08 poland 43.2 40.1 40.1 40.3 40.4 40.5 40.7 40.8 94.44 romania 55.8 43.2 43.2 42 40 40 40 20 35.84 the slovak republic 50 48.7 49.4 50.4 50.1 50.1 49.7 49.7 99.40 slovenia 39.2 31.4 31 31 31 31 31 31 79.08 spain 60.4 56.9 57.9 49.8 48.7 46.9 47 47 77.81 sweden 54.1 52.1 49.1 49.1 49.1 49.1 49.1 49.1 90.76 ukraine 57.3 54.4 52.7 52.2 52.3 37.8 41.7 45.2 78.88 the united kingdom 34.7 34.7 33.5 32 30.9 30.7 30 30.6 88.18 source: compiled by authors based on world bank data figure 1. gini index of the eu countries and ukraine source: compiled by authors based on world bank data baltic journal of economic studies 88 vol. 6, no. 2, 2020 therefore, ukraine needs further tax reform, which should emphasize: 1) simplification of tax legislation, elimination of contradictions and shortcomings in it; 2) simplification and automatization of tax administration, improving the system of risk-oriented tax control (including the introduction of indirect tax control methods), improving relations between tax authorities and taxpayers, taking into account the experience of the eu countries. with the shift in socio-economic development, the shading of economic relations and the further resolution of fiscal problems in ukraine, tax policy of the eu and its member states should increasingly be taken into account. therefore, considering the tax system of the european countries, it can be noted that the tax system of each country has its own features that can and should be taken into account when reforming the tax system of ukraine. it is advisable to use the experience of other countries. research on the performance of the tax system in dynamics should be used to create an effective tax system to prevent mistakes and miscalculations that adversely affect the economic development of states. 4. results next, there was studied the dependence of foreign direct investment, net inflows (% of gdp) (y) on profit tax (% of commercial profits) (x1), tax revenue (% of gdp) (x2); taxes on income, profits and capital gains (% of revenue) (x3); time to prepare and pay taxes (hours) (x4) and total tax rate (% of commercial profits) (x5). in order to test the hypotheses, data from three countries for 2001-2019 were obtained by the sampling method. table 7 general indicators of the economies development of the studied countries on average for 2001-2019 indicator spain france ukraine population, total 46723749 66987244 44622516 land area (sq. km) 499564 547557 579290 foreign direct investment, net inflows (% of gdp) 3.15 2.15 1.89 gdp growth (annual %) 2.35 1.72 3.34 inflation, gdp deflator (annual %) 1.09 0.79 15.41 interest payments (% of expense) 12.10 3.63 9.78 trade (% of gdp) 67.52 66.45 99.02 net acquisition of financial assets (% of gdp) 2.59 4.62 2.89 imports of goods and services (% of gdp) 32.40 32.11 53.81 exports of goods and services (% of gdp) 35.12 31.34 45.21 researchers in r&d (per million people) 2873.41 4441.07 994.08 source: compiled by authors based on world bank data figure 2 dynamics of change “time to prepare and pay taxes” indicator in three studied countries, hours baltic journal of economic studies 89 vol. 6, no. 2, 2020 several equations can be used to describe the regression, the most important of which is the fisher’s criterion. the fisher’s test is used for verification of different hypotheses. if the hypothesis about the significance of the chosen regression model is tested, its empirical value is calculated: where m is the number of factor features of the model. the multiple regression model should include factors that are strongly correlated with the resultant variable and not strongly correlated with each other. multicollinearity is an undesirable phenomenon. for the selection of factors to be included in the regression model, all elements of the matrix of paired correlation coefficients are calculated. the matrix of double correlation coefficients is symmetric: the values of the correlation coefficients above and below the principal diagonal (ie r r12 21= etc.). the values of the elements on the main diagonal of the matrix are always equal to one. the results of the calculations of the coefficients are given in table 8. the analysis of the matrix shows that there is a strong internal correlation between the factor variables x1 і x2 and the correlation coefficient is 0.96268. of these, the factor variable x 2 (correlation coefficient 0.97342) has a slightly stronger effect on the resultant indicator. therefore, we exclude the factor variable x1 from further consideration. the matrix of paired correlation coefficients for the remaining variables is as follows (table 9). there are no factor variables in this matrix, which are closely related with a correlation coefficient of more than 0.8. thus, to further investigate the impact on foreign direct investment, net inflows y( ) , it should be left four factor variables: tax revenue (% of gdp) x 2( ) ; taxes on income, profits and capital gains (% of revenue) x 3( ); time to prepare and pay taxes (hours) x 4( ) , and total tax rate (% of commercial profits) x 5( ) . the multivariate correlation analysis evaluates the link strength of the investigated variables and the multiple regression model to describe the factor link it is selected a multivariate statistical model. it is necessary to build a linear regression model with m independent (factor) variables: ŷt = a0 xi0 + a1 xi1 + a2 xi2 + am xim +εi , where xij – are the factor variables observed on the ith object; i – number in the order of the object under study, i n= 1 2, ,..., ;; εi – a random error that has a mathematical reading of 0 and a variance σ2 ; xi0 is a dummy variable equal to 1 in all observations. the parameters aij to be evaluated are unknown in this model. on the basis of the previous paired correlationregression analysis, it is established the dependence of foreign direct investment, net inflows y( ) on four indicators: tax revenue (% of gdp) x 2( ) ; taxes on income, profits and capital gains (% of revenue) x 3( ) ; time to prepare and pay taxes (hours) x 4( ) та total tax rate (% of commercial profits) x 5( ) . all factor variables have not multi-linear relationships. the multivariate regression model is assumed to be linear: ŷt = a0 x0 + a1 x1 + a2 x2 + a3 x3 + a4 x4 + a5 x5, to estimate the parameters, we use data previously considered for three countries without a factor x1 . the output to estimate the regression model parameters is supplemented by a dummy variable x 0 . it is found the vector of the regression model parameters table 8 the original matrix of paired correlation coefficients variables y x1 x2 x3 x4 x5 y 1.00000 x1 0.97185 1.00000 x2 0.97342 0.96268 1.00000 x3 0.59370 0.40481 0.56789 1.00000 x4 0.72654 0.74487 0.77043 0.06234 1.00000 x5 0.84128 0.86542 0.66342 0.78329 0.70376 1.00000 table 9 the reduced matrix of paired correlation coefficients variables y x2 x3 x4 x5 y 1.00000 x1 0.97342 1.00000 x2 0.59370 0.56789 1.00000 x3 0.72654 0.77043 0.06234 1.00000 x4 0.84128 0.66342 0.78329 0.70376 1.00000 x5 baltic journal of economic studies 90 vol. 6, no. 2, 2020 it was written the regression model using the numerical values of the regression parameters ŷt = – 2,341+4,1598xi2 – 1,9615xi3 – 1,7167xi4 + +1,3401 xi5 and it is defined the area of factor variables change 4,56 ≤ хі2 ≤ 2,099 0,93074 ≤ хі3 ≤ 1,69878 2,29698 ≤ хі4 ≤ 3,54427 2,35746 ≤ хі5 ≤ 5,41386 positive signs of model parameters indicate that an increase in the relevant factors leads to an increase in the performance indicator, and negative signs of the model parameters indicate that an increase in the corresponding factors leads to a decrease in the performance indicator. thus, in the research above, increases in tax revenue (% of gdp) xi2( ) and total tax rate (% of commercial profits) xi5( ) cause an increase in the resultant variable, whereas growth in taxes on income, profits and capital gains (xi3 ) and time to prepare and pay taxes (hours) xi4( ) cause a decrease in the output variable: foreign direct investment, net inflows (% of gdp). the nature of the impact on fdi of the last two variables is contrary to economic content. however, this is due to the fact that, within the linear regression model, we have roughly replaced the nonlinear relationship between taxes on income, profits and capital gains (xi3 ) and time to prepare and pay taxes (hours) xi4( ) with the magnitude of fdi, which is one of the reasons for the appearance of a minus sign in the regression parameters for these variables. the magnitude of each parameter in the model indicates how much the value of the resulting variable will change by increasing or decreasing the relevant factor by one unit. thus, in a study with a 1% increase in the factor variable xi2 , the resultant variable (foreign direct investment, net inflows) will increase by 4.1598%, and with the 1% increase in the factor variable xi5 by 1.3401%. an increase in the other two factor variables leads to a decrease in the resultant variable. the degree of influence of factor variables on the outcome variable can be detected in two ways: 1) by analyzing the parameters of the regression model; 2) by analyzing the private correlation coefficients. in this paper the first method was used, which was the least time consuming and simple. the estimation of the factors influence degree by analyzing the parameters (coefficients) of the regression model can be performed in two ways: – using beta coefficients; – using the coefficients of elasticity. a direct comparison of regression coefficients in the multiple regression equation gives an idea of the factor influence degree traits on the outcome variable only when they are expressed in identical units and have approximately the same fluctuations. normalized regression coefficients βj are used to make the regression coefficients comparable. the coefficient βj shows the magnitude of the change in the result factor in the values of the root mean square error when changing the factor sign xj by one standard error: βj = aj (σxi /σy), where aj is the regression coefficient at the x j factor, j m= 1 2, ,..., . the βj coefficients that characterize the impact of tax revenue β2( ) , taxes on income, profits and capital gains β3( ) , time to prepare and pay taxes β4( ) and total tax rate β5( ) on foreign direct investment, net inflows in the model are calculated: ŷt = – 2,341+4,1598xi2 – 1,9615 xi3 – 1,7167 xi4 + +1,3401 xi5 mean square deviations of the variables: σy = −2 447 1, , ; σx2 448 6= , ; σx3 0 2023531= , ; σx4 0 360497= − , ; σx5 0 7440662= , . to calculate beta coefficients we use the formula β σ σj j x y a i=       . we obtain the following values: β2 0 76242= , β3 0 16221= , β4 0 02524= , β5 0 407687= , from here it was seen that the most significant impact on foreign direct investment, net inflows is made by tax revenue β2 0 76242= , , total tax rate β5 0 407687= , . in doing so, tax revenue affects foreign direct investment, net inflows in 1.9 times (0.76242 / 0.407687) stronger than total tax rate. also, temporary elasticity coefficients ej are used to estimate the degree of influence of factor traits, relative xj. or å a x y j j j ≈ ⋅ , where is a derivative of a regression on a variable xj. the coefficient ej shows how many percent the result will change if the factor is changed by one percent when a x x x yt t= ( ) ⋅ = − − −1 233 664552 0 004414 165 980835 88 326984 61 16 , , , , , 77152 0 004414 61 167152 0 00001 0 000729 0 002651 44 , ... , , ... , , ...− − ,, , ... , , ... , , 437166 0 00169 23 459449 0 000729 16 730803 106890 0 − − • 1160603392 0 159030 0 313010 1 463580 1 2014 2994 4 1598 1961 , , , , , , = − − ,, , , 5899 171 3482 1340 8085 − baltic journal of economic studies 91 vol. 6, no. 2, 2020 the values of other factors are fixed at any level. the coefficients of elasticity åj that characterize the impact of tax revenue å2( ) , taxes on income, profits and capital gains å3( ) , time to prepare and pay taxes å4( ) and total tax rate å5( ) on foreign direct investment, net inflows in the model are calculated ŷt = – 20,341+4,1598xi2 – 1,9615 xi3 – 1,7167 xi4 + +1,3401 xi5 under these conditions, the coefficients of elasticity are as follows: å2 0 9768= , å3 0 5041= , å4 0 0857= , å5 0 9612= , comparison of the coefficients shows that on average tax revenue affects foreign direct investment, net inflows with the same strength as time to prepare and pay taxes ( , ;å2 0 9768= å5 0 9612= , ), but almost twice as much as taxes on income, profits and capital gains ( , )å3 0 5041= . this conclusion does not coincide with the conclusion obtained using beta coefficients. it is accepted that a more accurate conclusion is the use of beta coefficients. however, elasticity coefficients have a better economic interpretation. thus, using a correlation-regression analysis, a regression equation is constructed that can be applied in calculating the projected value of foreign direct investment into the country. 5. conclusions therefore, tax policy and its tasks within a systematic approach can be formulated as a concept of "economic development priority ", which implies in the conflict situations the search and implementation of those solutions that are optimal for most participants in economic relations. the concept of "economic development priority " is based on the laws of interaction between the part and the whole, and takes into account the concept and methods of forming optimal decisions in order to increase efficiency. in the article it is examined the dependence of foreign direct investment, net inflows (% of gdp) (y) on profit tax (% of commercial profits) (x1), tax revenue (% of gdp) (x2); taxes on income, profits and capital gains (% of revenue) (x3); time to prepare and pay taxes (hours) (x4) and total tax rate (% of commercial profits) (x5). thus, in a study with a 1% increase in the factor variable xi2 , the foreign variable investment (net inflows) will increase by 4,1598%, and with the 1% increase in the factor variable xi5 the foreign variable investment will increase by 1,3401%. an increase in the other two factor variables leads to a decrease in the resultant variable. the coefficients of elasticity that characterize the impact of tax revenue, taxes on income, profits and capital gains, time to prepare and pay taxes, and time to prepare and pay taxes on foreign direct investment, net inflows in the model have been calculated. comparison of ratios shows that on average tax revenue affects foreign direct investment, net inflows with the same strength as time to prepare and pay taxes ( , ;å2 0 9768= å5 0 9612= , ), but almost twice as much as taxes on income, profits and capital gains ( , )å3 0 5041= . thus, using a correlationregression analysis, a regression equation is 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(2017). logistical modelling of managerial decisions in social and marketing business systems. journal of international studies, vol. 10(3), pp. 206–219. doi: 10.14254/2071-8330.2017/10-3/15 baltic journal of economic studies 106 vol. 6, no. 5, 2020 corresponding author: 1 zaporizhzhia national university, ukraine. e-mail: t_deputy@ukr.net 2 zaporizhzhia national university, ukraine. e-mail: almak17@ukr.net 3 zaporizhzhia national university, ukraine. e-mail: georgesamoil1976@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-5-106-112 "quality" of standardization of admission to municipal passenger transportation as a corruption risk "filter" in activity of public servants tetiana kolomoiets1, oleksii makarenkov2, georgiy samoylenko3 abstract. relevance. in terms of revising the provisions of legal regulation of relations in the field of transport with the borrowing of competitive principles of the european institutes to ensure the integration of transport into european and world transport area, with revision of models of relations between relevant public administration entities and private entities, ensuring balance of their interests , including in the context of national and supranational threats and focus on expanding the implementation of rights, freedoms and legitimate interests of the latter in the field of transport, strengthening of the principles of decentralization of power in the system of public authorities occurs, resulting in a significant increase in the number and diversity of regulatory and legal acts aimed at settling the above relations. unfortunately, at the same time the processes of "growth" and a variety of forms of corruption in the activities of public servants, whose professional sphere is directly related to transport relations with the involvement of municipal transport, are also active. analysis of law enforcement activities of anti-corruption entities in all its manifestations shows a fairly steady trend towards an increase in the number of detected acts of corruption committed by public servants directly related to the exercise of their authority over the procedure for admission to municipal passenger transportation. the specifics of the legislative regulation of the latter presupposes the presence of many "defects", which create the basis for variable manifestations, including illegal, of the activities of public servants with a subjective arbitrary interpretation of the latest provisions of the law. "low-quality" regulation of the provisions of the activity of public servants to exercise power over the admission to municipal passenger transportation has a negative impact not only on the implementation of passenger rights (of various categories), but also provision of the public interest, and contributes to the formation of a national threat with a "corrosive" sign of power within administrative and territorial units, especially the country in general. an integrated approach to clarifying the problems of "municipal passenger transportation" with an emphasis on eliminating corruption risks in the activities of public servants at the stage of exercising their power to admit to transportation, which will contribute to the "quality" of such entities and will form an effective regulatory framework for the relevant component of transport in general, its effective existence, the realization of the public interest and its correlation with the interests of individuals. the purpose of the paper is the justification of the relationship of the "quality" of standardization of the procedure for admission of entities to municipal passenger transportation and corruption risks in the professional activities of public servants, which is related to this area, formulating proposals for their multi-balance ratio to minimize these risks and "qualitative" standardization of the relevant component of passenger transportation and transport relations in general based on the analysis of various sources. the objects of the article are public relations directly related to municipal passenger transportation. the subject of the article is the "quality" of standardization of relations in admission to municipal passenger transportation and its connection with corruption risks in activity of public servants connected with the specified sphere of relations. methods of research. both general legal and special methods of scientific cognition were used in research. as the basis, the dialectic method was used, which allowed to reveal problematic issues in dynamics; juridical and logical method allowed to form options for borrowing positive and avoiding negative experience of relevant rulemaking and law enforcement in foreign countries; forecasting and modeling were used for making proposals to baltic journal of economic studies 107 vol. 6, no. 5, 2020 strengthen "quality" of standardization of the procedure of admission to municipal passenger transportation in order to eliminate corruption risks in the activities of public servants. results. admission to municipal passenger transportation should be considered as a form of public procedure, the subjects of which are servants of local public authorities. given the specifics of municipal transport in general, any activity associated with its use, objectively anticipates the risks of possible, including illegal, priority satisfaction of private interests of public servants and the interests of relatives during the exercise of the public authority, which causes "corrosion" of public authority. the procedure of admission to the relevant transportation, the "corruption freedom" of which depends on the "quality" of normalization of its provisions, is not an exception. the relationship between the "quality" of legislation and the "corruption risk" of professional activity of public servants, which is associated with the procedure of admission to the services mentioned, is interdependent (the lower the quality of legislation, the higher the risks of "corrosion" of professional activity of public servants and vice versa). in order to improve the "quality" of standardization of the procedure for admission to the transportation and minimize corruption risks in the professional activities of public servants associated with the above procedure, it is appropriate to strengthen the provisions of certainty of the content of relevant legislation, their systematization (including in the form of codification), streamlining the thematic definition series, meaningful consolidation of the principles of transparency, publicity, participation, public-private partnership, guarantee of all elements and admission procedures in general. key words: "quality", legislation, municipal passenger transportation, public procedure, public interest, public servants, corruption, corruption risks, transport of general use, improvement, model. jel classification: d73, l91 1. introduction in terms of revising the provisions of legal regulation of relations in the field of transport with the borrowing of competitive principles of the european institutes to ensure the integration of transport into european and world transport area, with revision of models of relations between relevant public administration entities and private entities, ensuring balance of their interests , including in the context of national and supranational threats and focus on expanding the implementation of rights, freedoms and legitimate interests of the latter in the field of transport, strengthening of the principles of decentralization of power in the system of public authorities occurs, resulting in a significant increase in the number and diversity of regulatory and legal acts aimed at settling the above relations. unfortunately, at the same time the processes of "growth" and a variety of forms of corruption in the activities of public servants, whose professional sphere is directly related to transport relations with the involvement of municipal transport, are also active. analysis of law enforcement activities of anti-corruption entities in all its manifestations shows a fairly steady trend towards an increase in the number of detected acts of corruption committed by public servants directly related to the exercise of their authority over the procedure for admission to municipal passenger transportation. the specifics of the legislative regulation of the latter presupposes the presence of many "defects", which create the basis for variable manifestations, including illegal, of the activities of public servants with a subjective arbitrary interpretation of the latest provisions of the law. "low-quality " regulation of the provisions of the activity of public servants to exercise power over the admission to municipal passenger transportation has a negative impact not only on the implementation of passenger rights (of various categories), but also provision of the public interest, and contributes to the formation of a national threat with a "corrosive" sign of power within administrative and territorial units, especially the country in general. an integrated approach to clarifying the problems of "municipal passenger transportation" with an emphasis on eliminating corruption risks in the activities of public servants at the stage of exercising their power to admit to transportation, which will contribute to the "quality " of such entities and will form an effective regulatory framework for the relevant component of transport in general, its effective existence, the realization of the public interest and its correlation with the interests of individuals. 2. analysis of recent topical resources the interest of legal scholars can be divided into several topic-specific areas in the general scientific search for optimal models of forming a scientific basis for the regulation of social relations directly related to municipal passenger transportation. the specificity of the subject of research determines the focus of scientists from different scientific fields, different branches of legal science, however, with increasing specialization of research in various aspects. thus, among the most common aspects of the subject of research there is the phenomenon of a contract of carriage of passengers by municipal transport of general use, which is undoubtedly the prerogative of civilists (for example, the works by а. yanovytska, о. dzera, v. borysova, о. belianevych, baltic journal of economic studies 108 vol. 6, no. 5, 2020 а. dovhert, і. zelenskyi, о. sadikov, ye. kharytonova, v. yarotskyi, etc.), including in the context of the analysis of the issue of contract law in general. representatives of administrative law and municipal law sciences are of no less interest, focusing on the issues of legal regulation of public administration in this area of transport relations, including in the context of decentralization of power (for example, the works by v. beschastnyi, d. malyshko, т. hurzhii, м. stotska, т. cherniavska, а. prysiazhniuk, s. moskalenko, v. kharytonova, т. koliada, v. ilchuk, n. bortnyk, etc.). some aspects of the legal regulation of municipal passenger transportation are analyzed by representatives of financial and legal science with an emphasis on the formation and use of local budgets (for example, v. chernadchuk, n. huberska, etc.), labor and social law – the implementation of the right to transportation for the categories of persons entitled to "benefits", the science of economic law – business in the transport sector, etc. studies of the problems of transport, including municipal passenger transportation, its legal regulation as an integral element of the subject of transport law, become increasingly prevalent, especially in the conditions of the upgraded vision of the system of law (for example, the works by м. shelukhin, yu. zaika, b. derevianko, s. hrudnytska, l. herasymchuk, о. antoniuk, v. vyshnevetska, etc.). it is the admission to the relevant transportation, the definition of its principles, standardization are analyzed, albeit in fragments, by representatives of various areas of public law, which is quite justified, as the specifics of transport determines its presence under any circumstances in the field of public law regulation, orientation for the realization of public interest. however, given the availability of papers directly focused on procedural issues (public procedures, administrative procedures, municipal procedures), specialized scientific works with an emphasis on the peculiarity of these procedures in relation to municipal passenger transportation (admission criteria, conditions of admission, quotas of categories of passengers entitled to benefits subject to transportation, service under certain administrative law etc.), there are quite a few of them and even the existing ones cover the mentioned issues without focusing on the "quality " of standardization and the presence of corruption risks in the professional activity of public servants, which is associated with admission to transportation (for example, the works by d. malyshko, а. sobakar, s. moskalenko, n. bortnyk, etc.). at the same time, there is a significant number of works by representatives of administrative law, criminal law science on combating corruption in general, some of its manifestations in the activities of public servants (for example, the works by о. dudorov, м. khavroniuk, т. kolomoiets, s. kushnir, о. mykolenko, v. kolpakov, v. harashchuk, etc.). unfortunately, there is no work to cover the issue of corruption risks in the activity of public servants, which is related to the field of municipal passenger transportation, including admission to them during the implementation of procedures regulated by law, which causes a gap in the scientific framework of relevant rule-making focused on improving the provisions of current legislation to enhance the "quality " of the normative principles of the above relations, which should result in order, unification of law enforcement with the elimination of preconditions for corruption by public servants. 3. admission to municipal passenger transportation as a type of public procedure transport is a unique phenomenon that directly "permeates" the existence of the state, society, individual, ensuring both the realization of the interests of the latter (for example, freedom of movement) and the realization of public interest (transportation of persons, property, strategic connection of administrative and territorial units etc). it is "vital for everyone, and with the right mix of solutions, sustainable transport will help us to realise a better future by helping to reduce poverty while protecting the planet and driving economic growth" (activity, 2016). due to its polystructural, integrative nature, this specificity is inherent in all phenomena that are "related" to it, including "municipal passenger transportation". a detailed analysis of the proposed phrase contains an indication of several components of its unique resource, namely: "what", "with what", "what mode of transport". accordingly, we can talk about: a) transportation (i.e. a certain process, and therefore about the standardized, planned, targeted, resource-provided, safe, etc. process ("what?")); b) passengers ("who?") as persons in respect of whom such transportation is carried out (different categories, including those with special needs, different ages, at different times, etc.); c) transport ("with what?"), while the title itself contains clarifications, namely "municipal transport", which simultaneously clarifies the administrative and territorial boundaries of its use, its subordination, as well as its purpose – for public use, to realize the public interest. we should also add the fact that transport is a source of increased danger, and therefore its use, and particularly for the "interests of all", for the public interest necessarily requires the presence of public law regulatory influence. under such conditions, the subject of public authority, including local, is a monopolist in the settlement of relations directly related to the use of transport as a strategic resource, must provide such transportation independently ("light version", monopolized, typical of administrative model of regulation), or to delegate such powers to a certain subject (in "mini version", the model of mutual relations and the actual subject of transportations as close as possible on the status to the subject of public authority, or the subject linearly subordinated to it, or otherwise a dependent entity, are defined), or finally "appeal to the market", providing baltic journal of economic studies 109 vol. 6, no. 5, 2020 a specific approach to free access by private carriers ("hard version", which requires standardization of requirements for vehicles, carriers, transportation rules, as well as admission to such transportation). we can find another options for defining such models of relations with the participation of public authorities for the organization of municipal passenger transportation, namely: a) "communal" (prague, bucharest); b) "scandinavian" (london), "competitive contracting of routes" (london, stockholm, copenhagen, gifhorn); c) "french", "competitive contracting of route networks" (some cities of france, italy, spain, sweden); d) "subsidiarily unregulated", "free market" with minimal public interference (malyshko, 2017). in a market economy, competitive principles of relations in general, the latest "version" of the legal regulation of municipal passenger transport seems fair, relevant, focused on providing "the best for less". and this is quite justified only if there are "quality" standardization (clear, transparent, defined, with no grounds for discretion, for arbitrary, subjective interpretation of the law and its application) of the procedure for admission to such transportations and compliance with the relevant requirements during transportation. on the one hand, the first two "versions" are "traditional", "ordinary", "stable", "less comfortable" in the context of the public interest in transportation, but on the other hand, they indicate "more corruption riskiness" because they eliminate any initiative, participativity, transparency, "the desire to offer better, comfortable with lower costs", they can be called conditionally "cliched". admission to transportation under such "versions" is conditional, formal, "cliched" and more "collision" (the subject carries out, controls, reports and in case of deviations – hides independently). the last "version" is dynamic, "live", "flexible", "mixed", provides "external" influence, and therefore more transparent, with the possibility to modify individual elements, variable in the implementation process and so on. admitting individuals or anyone in general to tender for transportation actually regularizes competition, the pursuit of "better quality", which certainly deserves approval and implementation, but at the same time requires detailed standardization of the definition of the "best" carrier and its admission to transportation. when introducing tender for admission of persons to the relevant transportation (as the most common procedure in the world), the subject of public authority should be aware of the following elements: the expediency of its detailed standardization (to eliminate "defects" of interpretation and application of legal requirements by entities with different levels of legal culture, legal education); target orientation (the "best" carrier, effective realization of public interest), as "ensuring the realization of the rights of persons and preventing their violation" (administratyvna protsedura, p. 7), the occurrence of "external" consequences that violate the rights and responsibilities of persons who are "outside the system of public administration" (administratyvna protsedura, p. 7); by-law explicitation (local rule-making taking into account the peculiarities of the administrative and territorial unit, population, migration processes, etc.); security; legal means support, formal consolidation of the result (as a kind of administrative act); urgent burden (limited in time because it requires realization of public interest); indisputability (solution of the "positive" case). the presence of these features, typical for the public procedure, suggests that the procedure for admission to municipal passenger transportation is one of the varieties of such a procedure. 4. corruption risks for public servants during the procedure of admission to municipal passenger transportation the relevant admission procedure should be considered with an emphasis on the presence of corruption risks for public servants when using any of the above "versions" of the relationship. however, for the first two there will be many of them, they will be "more relief " because they provide direct "immersion" of subjects in purely public relations, minimization of "external" intervention, expanded opportunities for less detailed internal regulation of principles, increased latency of possible violations and their consequences, intrasystemic subjective "opposite" unity, etc. however, the third "version", although provides for the introduction of competitive principles, expands the grounds for "external" intervention, public participation, transparency, etc., also does not eliminate corruption risks in the activities of public servants whose professional field is related to the admission procedure to the transportation mentioned. despite the prevalence of such a procedure in many countries around the world, it is the "quality " of standardization of its principles that determines the "corruption riskiness" of the activities of public servants in this area of rela tions and the development of this area in general. summarizing the relevant experience, we can conditionally identify several "basic" corruption risks, the presence or absence of which is directly related to the "quality " of legislation. among them there are: a) collision in regulation of the principles of implementation of the powers of local public authorities to admit persons to these transportations in the legislation on transport, modes of transport and the legal status of these public authorities. the model with a detailed list of powers in both the "basic" legislation on local public authorities and the "basic" legislation on transport ("duplication" of provisions) is the "perfect" one. such a model is typical for most european countries, but there is also a model with fixing the principles of discretionary powers of these entities in the relevant field and different provisions on the powers of these bodies in this area (for example, ukraine), which is a prerequisite for baltic journal of economic studies 110 vol. 6, no. 5, 2020 subjective approach to the arbitrary interpretation of the provisions of the law or different solutions to the collision of legal requirements. describing discretion as a "corruption risk" in the activities of any public servant, cesar queiroz and alex visser, referring to the work by robert e. klitgaard, reasonably defined their place in the formation of corruption, namely: "corruption = = monopoly + discretion – accountability " (klitgard, 1988), (corruption, 2001), which was justified for the scope of these transportation and the activities of public servants directly related to the latter. absolute standardization of the relevant powers of local public authorities in legislative acts that determine their status, as well as in transport legislation, the provisions of which duplicate these powers, eliminate the preconditions for "corrosive" interpretation and application of relevant provisions; b) a somewhat formal and residual approach to the use of tender as a procedure for admis sion to these services, which should be considered as a kind of "comprehensive" basis for possible acts of corruption of public servants in the exercise of their powers. unfortunately, the analysis of the legislation of different countries of the world shows different approaches to settling the principles of this tender procedure: from the most detailed (for example, germany, poland, france), detailed (for example, the czech republic, hungary) and settled in general (for example, ukraine), with commensurate "corrosion" threats to local public authorities. among the "problematic" issues of procedure regulation there can be distinguished: 1) defects of the subject element, namely the absent or generalized approach to determining the composition of the tender commission (working body), which "accompanies" such a procedure, makes the final decision on which the act of governance is issued. most of the provisions on "public admission", "public participation", but the criteria for selecting members of the tender commission, including members of the public are "normatively indefinite". in particular, in ukraine, it is envisaged that at least 50% of the tender commission should be formed by representatives of public organizations whose activities are related to the field of transport (postanova, 2008). at first glance, the provision is logical, reasonable, it fixes the principles of public participation. unfortunately, the analysis of law enforcement practice shows the "defects in content" of this provision, because it is unclear which public organizations can form the composition of the tender commission, because the concept of "transport" is too broad, and therefore there can be different public organizations, including those concerning different modes of transport. public servants "involved" in the formation of the tender commission, in fact, have "ample opportunities" to adjust its composition, interpret these regulations differently. in addition, it is unclear why the "public" element of the tender commission should be equal to "50% +" given that the commission should include representatives of many bodies authorized to exercise special powers in the field of urban passenger transportation (traffic safety, environmental safety, resource provision, etc.). the ratio should be justified so that the result of the admission is effective, and transportation – high-performance, can promote the realization of the public interest, including in the face of extreme threats. that is why in order to eliminate any arbitrary manifestations of interpretation and application of its provisions, participation of "fake", "one-day " public organizations, agreements between business entities on the distribution of "procedures for admission to the transport sector", the ratio of participants, as well as the criteria for their selection, should be clearly defined in legislation. 2) defects in the standardization of the admission procedure itself, because both the monopoly of the public authority on the organization of the relevant transportation, and a purely "commercial", "private" subjective element of service have threats to the efficiency and effectiveness of such transportation (kenny, 2009), including due to the "redistribution of the transport sphere between several entities" (sieber). it is logical to establish the principles of mandatory involvement of both private and public entities for the organization of such transportation, the introduction of "mixed" municipal passenger transportation (for example, the experience of spain, sweden, germany, australia) (germa bel, jordi rosell), the role and importance of which significantly increase in the context of national, supranational threats (for example, in the context of the covid-2019 pandemic). it is important to ensure transparency, accessibility, certainty and clarity of the terms of the tender, the procedure of the tender, its result, guaranteed implementation of the latter. under such conditions, it is necessary to realize that it is the "defect" of the standardization of these provisions that provides the maximum grounds for possible illegal action by a public servant whose professional activity is related to transport including with admission to the above transportation. niklas sieber rightly draws attention to the need to ensure "independent audit of the terms of the tender, transparency of information about the event, accessibility, clarity of information, free access to it, free circulation of information, control, reporting" (sieber). charles kenny singles out almost similar problems, noting that their elimination will help to overcome "corruption in transport", and therefore among the important prevention tools there are: public orientation, control, transparency through public participation in tenders and public control of tender documents, independent audit and public-private anticorruption cooperation" (kenny, 2009). the specified provisions are acceptable to eliminate "corrosion" in the procedure of admission to municipal passenger transportation in different countries, because there is: the practice of "formal" admission to the tender baltic journal of economic studies 111 vol. 6, no. 5, 2020 without an independent audit of its conditions (mainly in eastern european countries), limited informing (for example, release of information only in the print media (sometimes even without specifying media) (for example, in latin american countries) but not on the official websites of authorized bodies), untimely informing about the stages of the procedure, "closed" mode of the tender commission and stretched period to sign the protocol of its meeting and submit to the subject of public authority to adopt an act of governance (for example, in the countries of south asia, africa); all this creates "barriers" to control both the procedure and its result. in fact, the "red flags" (kenny, 2009), or identifiers of corruption risks in the public activity of employees, which is related to the admission to municipal passenger transportation, are outlined: а) the absence (limitation) of public admission to the tender information; b) nontransparency (discrimination) of criteria for selection of members of the tender commission; c) incomplete information about the procedure, its elements; d) lack of independent audit of tender conditions; e) non-transparency (barrier) of public participation; f ) "closed" tender procedure and final decisionmaking; g) the absence of "barriers" for the monopoly participation of several entities; h) long terms for registration of the decision of the tender commission, announcement of results and acceptance of the act of governance. the "defect" of enshrining these provisions actually forms the preconditions for possible arbitrary, subjectively justified actions of public servants, whose professional activity is associated with admission to municipal passenger transportation, taking into account the priority of the realization of their private interests, the interests of their relatives, which threatens the realization and protection of public interests, contributes to the "corrosion" of public authority. elimination of such identifiers of corruption risks will facilitate the improvement of the procedure of admission to the specified transportations, its transparency, certainty, "target purity " of participation of subjects, with gradual normative consolidation of iso 37001: 2016 procedures (iso 37001:2016. anti-bribery management system – requirements with guidance for use) (antibribery, 2016), but also solving a range of other issues, taking into account the specifics of the sphere of relations, such as: environmental safety through "environmentally friendly " vehicles, transportation of passengers with special needs, freedom of movement, which must be facilitated by public authorities, taking into account the relevant categories of persons, the popularity of municipal passenger routes, financial revenues to local budgets from this type of activity with the maximum implementation of automated systems, modernization of transport infrastructure with increased comfort, attractiveness, simplification of use, providing municipal passenger transportation adhering to the requirements of national and supranational threats, etc. 5. "quality" of standardization of the principles of admission to municipal passenger transportation as an effective condition for preventing corruption in the professional activity of public servants the "quality " of standardization is traditionally considered in legal science in terms of "quality of rule-making" as an activity focused on "development, consideration, adoption and official promulgation of regulations determined by a certain procedure" (zahalna, 2020) and as the "quality of the result of such rule-making" or "quality of legislation" in the broadest sense, covering all regulations designed for the relevant sphere of public relations (parkhomenko, 2008). in this paper, the "quality " of the legislation should be defined as already existing legislation that regulates the sphere of relations directly related to the admission to transportation with participation of public servants. the specificity of the sphere determines the specificity of the legislation (especially taking into account the peculiarities of the administrative and territorial division of the country, territorial organization of power), and hence the requirements for "quality ", mainly in the context of growth and diversification of "external" threats which affects its interpretation and application, further forming the basis for the "corrosion" of public authority. the subject of research is no exception. in order to prevent these negative phenomena, their consequences, it is appropriate: а) to systematize regulations that define the powers of all public entities in the field of transport, including those on admission to municipal transportation, in a single codified legal act (for example, the transport code as in the usa); b) to coordinate the provisions of this act with the content of legislative (possibly systematized) acts fixing the legal status of local public authorities; c) to enshrine the provisions in the section "procedures in the activity of management entities in the field of transport" of the above codified legal act and to define the admission as a kind of public procedure; d) to detail the procedural principles of admission to the maximum using absolutely defined rules (without evaluative provisions, "open" lists, etc.); e) to fix the provisions on the formation of the tender commission with mandatory representation of not less than 40% of the personnel of public organizations whose statutory activities are directly related to the specified type of activity of the relevant mode of transport in the administrative and territorial unit; to provide mandatory external audit of tender conditions; to ensure mandatory participation of public and private entities in the tender providing public-private partnership in various forms (adopting the experience of great britain and portugal); to release the terms of the competition, its stages, results on the official website of the public authority, whose powers include the organization and implementation of the admission procedure; to baltic journal of economic studies 112 vol. 6, no. 5, 2020 conduct an open tender and cover its results promptly, to prepare the act of governance; to control over the implementation of the result of admission and response in case of deviations from these requirements. the "quality " of the standardization will help to minimize the subjective arbitrary manifestation of the will of the public servant regarding the admission to the specified transportations, and hence his or her opportunities for any, including illegal, actions focused on the priority of satisfying their private interests and the interests of their relatives, and hence the "corrosion" of public authority. 6. conclusions admission to municipal passenger transportation should be considered as a form of public procedure, the subjects of which are servants of local public authorities. given the specifics of municipal transport, any activity associated with its use, objectively anticipates the risks of possible, including illegal, priority satisfaction of private interests of public servants and their relatives causing the "corrosion" of public authority in the exercise of the public powers provided. the procedure of admission to the transportation, the "corruption freedom" of which depends on the "quality " of normalization of its provisions, is not an exception. the relationship between the "quality " of legislation and the "corruption risk" of professional activity of public servants, which is related to the procedure of admission to the services mentioned, is interdependent (the lower the quality of legislation, the higher the risks of "corrosion" of professional activity of public servants and vice versa). in order to improve the "quality " of standardization of the procedure for admission to the transportation and minimize corruption risks in the professional activities of public servants associated with the above procedure, it is appropriate to strengthen the provisions of certainty of the content of relevant legislation, their systematization (including in the form of codification), streamlining the thematic definition series, meaningful consolidation of the principles of transparency, publicity, participation, public-private partnership, guarantee of all elements and admission procedures in general. references: activity report 2014 and 2015/ international association of public transport. bruxelles: uitp. 2016, 60 p. malyshko, d. v. (2017). administratyvno-pravove rehuliuvannia u haluzi munitsypalnoho transportu v ukraini: dysertatsiia k.yu.n.: 12.00.07 [administrative and legal regulation in the sphere of municipal transport in ukraine: dissertation of the cand.sc. (law): 12.00.07]. zaporizhzhia: znu. boiko, і. v., zyma, о. т., & soloviova, о. м. (2017). administratyvna protsedura: konspekt lektsii [administrative procedure: lecture notes]. kharkiv: pravo. klitgaard, robert e. (1988). controlling corruption. berkeley: university of california press. corruption, transport infrastructure stock and economic development by cesar queiroz and alex visser. world bank. infrastructure forum. washington, d.c. may 2-11, 2001. available at: http://citeseerx.ist.psu.edu/viewdoc/ download?doi=10.1.1.582.3165lrep=rep1itype=pdf pro zatverdzhennia poriadku provedennia konkursu z perevezennia pasazhyriv na avtobusnomy marshruti zahalnoho korystuvannia: postanova kabinetu ministriv ukrainy vid 03 hrudnia 2008 roku № 1081 [on approval of the tender procedure for passenger transportation using bus route of general use: resolution of the cabinet of ministers of ukraine no 1081 dated december 03, 2008]. available at: http://zakon.rada.gov.ua/laws/ show/1081-2008-%do%bf#test kenny, charles (2009). transport construction, corruption and developing countries, transport reviews, 29:1, 21–41. sieber, niklas. fighting corruption in road transport sector. 10. lessons for developing countries sustainable urban transport technical document №10. available at: http://www.researchgate.net/publication/301232311corruption-in-transport germa bel and jordi rosell. the role of transaction cost on mixed delivery analysis: evidence from the barcelone local bus system. available at: http://dialnet.unirioja.es/descarda/articulo/5187615.pdf kenny, c. (2006). measuring and reducing the impact of corruption in infrastructure. world bank policy research working paper. № 4099. washington dc. iso 37001:2016. anti-bribery management system – requirements with guidance for use. available at: http://www.iso.org/standard/65034/html petryshyn, о. v., lukianov, d. v., maksymov, s. і., smorodynskyi, v. s. et al. (2020). zahalna teoriia prava: pidruchnyk [general theory of law: textbook]. kharkiv: pravo. parkhomenko, n. m. (2008). dzherela prava: problem teorii ta metodolohii [sources of law: problems of theory and methodology]. kyiv: tov vydavnytstvo "iurydychna dumka". baltic journal of economic studies 136 vol. 5, no. 5, 2019 corresponding author: 1 kirovohrad flight academy of national aviation university, ukraine. e-mail: mari.pismennaya.83@ukr.net orcid: https://orcid.org/0000-0003-4509-8147 2 taras shevchenko national university of kyiv, ukraine. e-mail: nataliapohribna@knu.ua orcid: https://orcid.org/0000-0003-3867-9701 3 uzhgorod national university, ukraine. e-mail: kma2000@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-5-136-144 assessment system of the public procurement efficiency mariia pysmenna1, nataliia pohribna2, maryna kalnytska3 abstract. the purpose of the paper is to set out the in-depth study of how the public procurement performance can be determined through a system that considers the criteria for determining the best (ideal) supplier and the main elements of the assessment of tenders. in order to achieve the goals of the article the following tasks were set: 1) to analyze the development of scientific opinion in the field of public procurement performance assessment; 2) to provide the author’s methodology for determining the criteria of the best (ideal) supplier; 3) to structure the elements of the public procurement procedures assessment system based on the criteria for selecting the best supplier. the paper addresses the need to achieve public spending efficiency by improving the public procurement assessment procedures to determine the best (ideal) provider. methodology. the study is based on a careful analysis of the criteria for assessing the public procurement effectiveness under the evolution of scientific thought and practice of their implementation. scientific literature expresses different and opposite views on the criteria, methods of assessment of the public procurement effectiveness by the functioning of customers. limited research has been identified in the assessment of the procurement proposals at the stage of tendering and determining the best supplier. results. the paper proposes a system for assessment of the most economically advantageous public procurement offer, taking into account the criterion of selecting the best supplier. this approach involves the unity of five stages of the procurement performance assessment. the characteristics of sequential execution of the assessment in five stages are given as follows: establishment of criteria for the ideal participant of public procurement, development of observations matrices for characteristics of the public procurement participants offers, determination of the vector-standard characteristics of the most economically advantageous proposal, calculation of distances between the characteristics values of the individual participants’ offers and the ideal public procurement offer, the ranking of public procurement bidders, the economic advantage of the offer and the choice of its greatest advantage. the paper provides an opportunity to focus on a systematic approach to determining the public procurement effectiveness. this valuation approach provides a deeper justification for the choice of the procurement vendor, which allows expecting higher procurement performance. practical implications. the assessment system for public procurement offers, including five stages of the use of procurement performance criteria, can be used by experts to determine the best supplier, regardless of the procurement regulation terms, as its elements provide a comprehensive description of the price and non-price criteria to achieve the effectiveness of procurement procedures. value/originality. the paper suggests that the selection of public procurement performance indicators to be made within a criteria system based on the selection of the best (ideal) procurement provider. the authors presented their own vision of the components of the public procurement performance assessment system. key words: analysis, public procurement, assessment of procurement effectiveness, assessment criteria, procurement supplier. jel classification: h57, h59 baltic journal of economic studies 137 vol. 5, no. 5, 2019 1. introduction the expectations of countries’ citizens concerning the governments being able to provide them with a high social and economic standard of living are at odds because of the significant level of budget deficits. mckinsey (mckinsey, 2017) estimates the deficit to be close to $ 4 trillion a year, so the need of using limited budget resources effectively requires a search for a solution. the task of improving the ability of the public sector to use resources to achieve not only economic but also social outcomes requires productive public procurement procedures. the effectiveness of public funds being used for vital purposes needs to be measured reliably in order to spread innovation in the public sector and improve the economy. there has been limited progress in public procurement performance assessments to date. basically, tools have been created to analyze the use of public funds in result of procurement procedures, and to test the effectiveness and efficiency of public spending. the deepening of the assessments of the expediency and productivity of public procurement, taking into account the assessments of the correct supplier selection at the stage of tendering procedures will allow achieving a considerable increase of productivity without increasing the expenses for these purposes. thus, generalizing the scientific thought and practice of procurement regulation to analyze the public funds performance can potentially save, according to mckinsey (mckinsey, 2017), up to $ 3.5 trillion per year by 2021, which is equivalent to the entire global budget gap. the rational organization of public procurement is directly dependent on ensuring the smooth functioning of enterprises and institutions, that is, customers of public procurement. in contemporary market there is a significant number of suppliers similar in quality properties and products characteristics, so it is important to make a reasonable choice of supplier. in such circumstances, of all possible alternatives, the supplier whose offer meets the specific needs of the consumer best should be preferred. public procurement accounts for a large part of government spending, the amount of which depends on the standardized cases of compulsory procurement in accordance with the tender procedures. public procurement in the eu countries averages between 34.8% and 20.3% of gdp per year, with a higher proportion in developed countries (44.5% in the netherlands) and the lowest in ukraine: 5.9%. therefore, the issue of improving the productivity and efficiency assessment of the public funds usage for the needs of procurement of goods, works (services) needs to be addressed. 2. research methodology the main research question is a comprehensive study of public procurement performance indicators and the interaction of analysis tools in the context of regulatory regulation in this area. for this purpose, a deductive approach is used, which is suitable for this type of conceptual study. the dominant research methods in the literature review were analysis, synthesis, generalization and comparison. the literature review was conducted on the basis of primary sources, by querying journals from scopus and the web of science. the term “public procurement performance” was used as a query keyword as it explored data sources and documents in the google scholar search engine. the method of component selection was used to systematize the structural relationships between the elements of public procurement, the price method was used to identify the qualitative characteristics of the assessment of procurement procedures, as well as the method of comparisons, procedures of ranking indicators, normalization of quantitative values of criteria, conversion of qualitative parameters into a numerical system of favors, matrix method. the method of taxonomic analysis was applied in determining the distances of the tender participants’ characteristics from the vector-standard of the ideal proposal of the procurement object. the results of the study were visualized using a graphical method. it allowed taking into account the multidimensionality of the public procurement performance indicators, to ensure the principle of theoretical and empirical unity. 3. theoretical prerequisites of the study the economic literature presents a variety of techniques and approaches to assessing the public procurement effectiveness. methodology of the efficiency estimation (methodology, 2008) by calculation of indicators of absolute and relative effect from placing the state order by comparison of the prices in carrying out separately taken competition and the lapin method (lapin, 2016) are focused on the procurement activity assessment. in our opinion, these approaches are limited in view of the importance of the social function of public procurement in the country. ivanova o.v. (ivanova, 2010) suggests a sectoral approach by determining the cost savings of public procurement, but the cost savings are calculated using the market price. and this is quite problematic in terms of access to information about signed identical agreements with homogeneous goods, works or services. in our opinion, the main disadvantage of public procurement performance assessment methods is their justification for price alone. thus, the quality characteristics of goods, works and services purchased on a competitive basis are ignored, and, therefore, the sense of holding such a competition is lost. moreover, the assessment of public procurement performance is not taken into account at all. the latter is only about determining money efficiency. baltic journal of economic studies 138 vol. 5, no. 5, 2019 coglianese c. (coglianese, 2012), arykbaev r .k. (arykbaev, 2010), and perov k.a. (perov, 2007) are the supporters of a slightly different position, who propose using the criteria of cost-effectiveness, resource efficiency, taking into account the time factor, with a thorough analysis of the type, conditions and completeness of contracts, including public procurement, to assess the effectiveness of public procurement and the fulfillment of the planned public procurement indicators, which allows determining the degree of achievement for the set goals. the methodology for assessing public procurement systems (maps) is valuable in scientific terms. this methodology takes into account the oecd council recommendations on public procurement (oecd, 2015) and reflects the leading international fundamentals of such procurement, in particular the united nations model law on public trade (uncitral) on public procurement (un, 2011), and the directive 2014/24/eu (eu parliament, 2014). however, such approaches only consider the assessment from the point of view of the purchaser, not taking into account the procurement procedure as a two-way process between the procuring entity and selecting a potential supplier. kumar a., nair a., and piecha j. (kumar et al, 2015) emphasized this point but did not make any specific suggestions. currently, the public procurement effectiveness studies are focused on the study of intangible effects, such as reducing social tension in society. in order to fulfill the tasks of productive use of public funds aimed at the procurement of goods, works (services), we suggest analyzing the supplier effectiveness in the complex of bidding procedures on price and non-price criteria, in order to take into account all components of procurement and to be able to perform their assessment. 4. the extended opportunities for systematic assessment an analysis of the definition of “public procurement effectiveness” indicated the need to study the criteria for assessment of the bids of potential suppliers during the procurement process. today, the main method of choosing the procurement item supplier is the offer price assessment method. so, in the first stage of the analysis, one can identify a better price offer and decide to cooperate with a specific supplier, which offers a lower price. however, all things being equal, and given the need for other assessment criteria to be taken into account, an in-depth analysis of the entire diversity of proposals is necessary, making it possible to formulate and make the final decision in the most objective way. therefore, all the above points to the need to develop a methodology for assessment of the competitive bids and selecting the best bid and supplier. we analyzed the development of the methodology and criteria for assessment of the bidders’ proposals, depending on legislative changes in ukraine (table 1). the analysis of the normative regulation of the price and non-price criteria for determining the successful bidder revealed the existing contradiction in the table 1 evolution of assessment criteria for bidders in ukraine period, year assessment criteria price weight, % 2000-2005 lowest price; delivery time (execution); quality, aesthetic and functional characteristics, ecological cleanliness; after-sales service; terms of payments; the possibility of economic benefits arising from the tender offer; operating costs associated with the use of the completed facility; technology transfer and training of management, scientific and production personnel, including the use of local resources, the means of production, manpower and materials for the production of goods, performance of works, services offered by the contractor. 70 2006-2008 lowest price. the criterion for “rating of participant in the register of the procurement procedures participants” was introduced. the list includes participants on the basis of their request in accordance with the rating, depending on the number of procurement procedures, where the participant participated, the number of wins in the procurement procedures, the number of completed on time and in full volume public procurement contracts, other criteria. 70 2008-2010 lowest price; delivery time of goods, performance of works, provision of services quality and functional characteristics, ecological cleanliness; after-sales service; terms of payments; operational expenses; technology transfer and training of management, scientific and production personnel, including the use of local resources, production facilities, labor and materials for the production of goods, performance of works, provision of services offered by the participant. 70 2010-2016 lowest price, quality of work, services, payment terms, terms of service, warranty service, operating costs, technology transfer and training of managerial, scientific and production personnel, including the use of local resources, including means of production, labor and materials for production of goods, performance of works, provision of services offered by the participant. 50 2016 – till present lowest price, payment terms, term of service, warranty service, operating costs, technology transfer and training of managerial, scientific and production personnel. this is carried out automatically by the electronic purchasing system. 70 source: developed by the authors using the materials of regulatory documents in the field of public procurement of ukraine baltic journal of economic studies 139 vol. 5, no. 5, 2019 assessment of the most economically advantageous proposal of the bidders. thus, the successful tenderer is the supplier who has offered the minimum price, in spite of the bid determined best by the results of the assessment of tenders. such a paradox is conditioned by the desire of the state to provide maximum cost savings when conducting public procurement. requirements for the subject of procurement, for which the selection of tenders is carried out, are reflected in the tender documentation. in particular, tender documentation for public procurement contains the technical, qualitative and functional characteristics of the procurement subject. it can set requirements for the efficiency, environmental friendliness and safety of products, their quality and design, the features of testing to assess compliance with the marking, packaging, etc. in order to take into account the criteria for the procurement subject other than price, the tender documents determine (if possible) their value equivalent or the proportion of those criteria as a percentage of the overall assessment of the tender proposal, as shown in table 1. this percentage varies depending on the state’s desire to promote greater efficiency in the use of public funds through the regulatory influence on determining the procurement winner. the customer is obliged to establish one or more of the following qualifying criteria for the participants: 1) availability of equipment and material base; 2) availability of appropriately qualified workers, who have the necessary knowledge and experience; 3) the existence of a documented experience of performing a similar contract. in determining qualification requirements, the customer should avoid establishing unreasonable requirements that restrict competition and discriminate against participants, in particular: the availability of own production base, the number of own personnel, confirmation of the declared volume of goods in the warehouse of the participant, the availability of experience with budget organizations, and more. we have found that the assessment of bids by participants in the european public procurement practices uses price and non-price criteria. the latter are used when public procurement is characterized by complexity or specificity in terms of, for example, procurement of consultancy services, research, experiments or development, and more. the share of the criterion “price” must be no lower than 70%. accordingly, the maximum share of all price criteria cannot exceed 30% (figure 1). the unjustified narrowing of the grounds for the application of non-price assessment criteria (only for complex purchases) prohibits their application to purchases of goods, services or works that have a permanent market. this leads to the risk of identifying unscrupulous suppliers with products of poor quality. at the same time, the problem with identifying procurement items that have a constantly functioning market and the lack of legislation to identify the complex or specialized nature of procurement remains. we consider that the application of non-price criteria is of the utmost importance, since other criteria for the assessment of bidders than the price, in the legislation is provided in order to maximize the approximation of the assessment method to the procurement subject, taking into account its qualitative and quantitative characteristics, as well as the needs of the customer. if, in addition to the price, other assessment criteria are used to determine the most economically advantageous tender, then the quoted price is the price indicated by the tenderer and calculated with reference to other assessment criteria according to the formula specified by the contracting authority in the tender documentation, namely: tcoefficiencorrectionbidpriceequotedpric /= , (1) the correction coefficient is calculated by the formula: , (2) where, cc – is the correction coefficient; c1…cn – value of each non-price criterion selected by the participant; pw – the weight of the “price” criterion. unlike in ukraine, the concept of value-for-money (vf m), which is used to assess the public administration effectiveness, is quite common in internationally. the emergence of this concept is linked to public sector reform processes and the budget process towards implementing the new public management ideology. the term “value-for-money” includes the optimal use of resources to achieve the outlined results. under these conditions, it is not intended to produce the greatest savings, but to achieve the best possible result, given the existing constraints, the consistency of the costs incurred and the results obtained. according to the value for money, the final contract price cannot be the main criterion for selecting suppliers. moreover, there are a variety of other factors that influence the decision to implement a particular contract, namely: the offer’s risks and the experience of potential suppliers, financial conditions, including the volume of costs throughout the procurement cycle, contract flexibility, the availability of various alternatives to the latter, etc. directive 2014/24/eu allows setting of performance and functionality requirements as an alternative to technical specifications. such specifications describe the functions and functional characteristics, the consumer properties of the equipment, the results of works and services. the eu is now showing a tendency of rejection the lowest price indicator as the sole criterion for selecting the best tender. the most economically advantageous offer is determined not only by price, but also by such non-price criteria as: life cycle cost of goods, quality, baltic journal of economic studies 140 vol. 5, no. 5, 2019 including technical advantages, aesthetic and functional characteristics, accessibility for all categories of users, social, environmental and innovative characteristics; the qualification and experience of contractors if it has an impact on the level of contract performance; inservice maintenance and technical assistance, delivery conditions. it is important that contracting authorities are entitled to reject tenders if the price offered is abnormally low compared to others and such tenderer cannot support the price. in addition to the “quoted price” method, in combination with price and non-price selection criteria, international practices also apply the point method. the latter is based on the selection of a defined set of points to assessment the selection criteria for suppliers. considering the importance of each selection criterion, the supplier who received the highest score is recognized as the winner. in this case, linear scoring is used, for which all criteria with defined weights are added both to obtain an overall score and to score points on a parabolic scale: pp pmin pi x= ( )/ 100 , (3) where pp – the price point; pmin – the minimum bid price (the bid of the bidder who submits the minimum bid is awarded 100 points); pi – the price of the bidder's bid. it is worth noting that it is also possible to combine scoring and rating methods for assessment of the tender proposal, namely: ra p p p i max i max = − ⋅100 , (4) where, rai – is the rating of the criterion application; pmax – initial price; pi – the price of the bidder. the degree of importance or significance of the selection criteria is taken into account for determining the integral assessment where non-price criteria are used. to this end, a specific gravity coefficient is determined for each criterion, reflecting the relative importance of the tender assessment criterion. in doing so, the coefficients of the specific gravity of the criteria are selected taking into account the possibility of meeting specific goals and objectives of competitive procurement of resources. in this regard, the proportions of the specific gravity ratios of the various criteria may vary. thus, when determining the proportion of the grounds for the non-price criteria application review and assessment of bids criteria for bids assessment price price, along with other assessment criteria: payment terms, term of service, warranty service, operating costs, technology transfer, and management, scientific and production personnel training in the case of procurement of goods, works and services that are produced or provided not on a separately developed specification (technical description) for which there is a constantly active market in the case of procurement of a complex or specialized nature (including consultancy, research, experimentation or development, research and development). the specific weight of the price criterion may not be lower than 70 percent, except in the case of competitive dialogue procedure figure 1. grounds for application of non-price criteria for assessment of bids of bidders source: developed by the authors according to directive 2004/18/eu and directive 2014/24/eu baltic journal of economic studies 141 vol. 5, no. 5, 2019 criteria, we compare the significance of the criteria included in the comprehensive assessment using the procedures summarized in table 2. after normalized values are determined for each criterion value for all participants of the competition, their calculation is carried out taking into account the established coefficients of the specific gravity of such criteria. then, the values obtained are summed up by all the assessment criteria for each participant. thus, the integral assessment of the bid of the i-th participant is determined by the formula: , (5) where, zi – integral assessment of the bid of the i-th participant; bj – the specific gravity of the j-th criterion; nij – the normalized value of the j-th assessment criterion of the i-th participant; n – is the number of criteria to be assessed. in view of the above, the participant who received the highest integrated rating and took first place in the rating is recognized as the winner. a striking example of the use of the point method of tender selection is the application of the criteria for assessing the participants’ goodwill in public procurement, identified in figure 2. considerable advantage of the european practices of qualifying participants is the establishment of requirements for their financial capacity. financial ability is usually understood as an enterprise having sufficient financial resources to execute a contract. smyrichinsky v.v. (smyrichinsky, 2002) connects establishing such requirements with the need to have confidence that during the term of the contract the enterprise will not be liquidated, will have sufficient resources to fulfill the contract and other obligations. according to directive 2014/24/eu, a tenderer must confirm that there is a turnover twice the estimated value of the contract. financial ability can also be measured by the ratio of assets to liabilities. in such cases, customers are required to determine the method of calculation. otherwise, if participants were allowed to make calculations on their own principles, setting a minimum allowable level would not make sense. in our opinion, in an unstable financial and economic situation, assessing the financial capacity of participants is an important criterion for their qualification selection. in view of the above, we suggest using a set of debt to equity ratio, table 2 features of the assessment criteria significance for the competitive bids criterion feature ranking assessment criteria are ordered on decreasing importance assessment weighting of criteria according to their importance paired comparison comparison of the criteria with one another in order to be able to clarify their ranking and give them a specific weight sequential comparisons including ranking operations, formulating the requirements for the criterion that is the first in the ranking, the highest specific gravity, and quantifying the weight of the following criteria, comparing them with the first. source: developed by the authors rating of counterparty’s business reputation point 1 completeness of the delivered products, works or services point 2 point 3 point 4 fulfillment of terms of delivery of products, works or services quality of delivered products, works or services compliance with the terms of payment for products, works or × weight of point 1 × weight of point 2 × weight of point 3 × weight of point 4 score points (choice of one of four components) figure 2. the set of criteria for assessing the goodwill of participants in public procurement source: developed by the authors under the supplier assessment system baltic journal of economic studies 142 vol. 5, no. 5, 2019 debt / ebitda ratio, current ratio, interest coverage ratio (icr) when selecting participants. generalizations of the criteria described in the tender offer assessment allow them to be applied to identify the most economically advantageous (ideal) bid of the tenderer. it comes down to determining the quantitative and qualitative characteristics of the ideal offer of the public procurement participant, after which the offer of each participant is compared with the developed ideal. accordingly, winning the tender will belong to the bid of the tenderer whose characteristics are most closely related to the characteristics of the ideal bid. the logical scheme of the public procurement performance assessment system is shown in figure 3. note that the approximation of the features of the public procurement participants to the ideal participant is suggested to be determined using the taxonomic method of analysis (krisak, 2014). thus, the first stage of the logic scheme in figure 3 is the stage of establishing the criteria for an ideal participant in public procurement. at this stage, the selection of the most important criteria for the assessment of participants is made, the relative importance of each assessment parameter is determined and the method of assessment of results is selected. it is important to take into account the objectivity and quantifiability of the tender assessment criteria. in the case of non-quantitative criteria, the opinion of experts should be used in accordance with the rules and procedures required to implement the expert methods (the expert commission establishment, outlining the expert questionnaire procedure, processing the expert information, algorithm for constructing the general assessment). the second stage of the system is the stage of developing the observations matrices for the proposals features of participants of public procurement: , (6) where, i – is the order number of the bid assessment indicator (1 to m); j – is the order number of the proposal (from 1 to n); xij is the value of the coefficient i for the proposal j. given that all the criteria have different dimensions, when developing the observation matrix, it is necessary to normalize the values of indicators: 1) among the indicators for which the minimum value is optimal, the unit is assigned to the minimum indicator and the rest is calculated by dividing the value of the minimum indicator by the corresponding indicator; 2) among the indicators for which the maximum value is best, the unit is assigned to the maximum value and the rest is determined by dividing their value by the maximum value. for quality features, we suggest using harrington’s desirability function. the basis of its construction is the transformation of the natural values of the stages/features first establishing criteria for the ideal participant in public procurement second development of observations features matrices for the public procurement participants’ offers third definition of the vectorstandard characteristics of the most economically advantageous offer fourth calculating the distances between the values of the offers features of individual participants and the vector of features of the ideal proposal for public procurement fifth rating of public procurement participants by aggregate economic profitability of the proposition and choosing its highest profitability figure 3. public procurement performance assessment system based on the criterion of selecting the most economically advantageous tender source: authors’ development baltic journal of economic studies 143 vol. 5, no. 5, 2019 partial parameters to a single dimensionless scale of desirability, while using standard estimates on the scale of desirability (shutyak, 2010). after normalization of indicators’ values the observation matrix takes the following form: , (7) in the third stage, using the taxonomic method, it is necessary to develop a vector-standard of characteristics of the most economically advantageous offer: , (8) the fourth stage of selecting the most economically advantageous public procurement offer involves calculating the distances between the values of the characteristics of the individual participants’ proposals and the vector-standard ci0, based on the application of the euclidean distance function: , (9) calculating the average distance between observations c0, the standard deviation of this distance σ0, the maximum possible deviation from the standard c0, which makes it possible to determine the distance of each set of observations from the standard, and summarize the economic value of the proposals of participant’s τi: , (10) , (11) , (12) , (13) where: 0 ≤ τi ≤ 1. hence, the public procurement participant’s rating is higher; the closer τi is to 1. by designing alternative scenarios for the procurement of goods, works, services, contracting authorities should analyze the benefits and losses of centralized procurement, whereby several government contracting entities can pool procurement to achieve economies of scale. the fifth stage allows us summarizing all the performed calculations and rank the bidders based not only on the price but also on the quality indicators of their offers. in general, the public procurement efficiency system covers the stage of tendering taking into account the criteria for the selection of the best offer. 5. findings thus, summing up the results of the research, we can determine the main components of public procurement effectiveness through a step-by-step assessment system: stage 1 is establishing the criteria for an ideal public procurement participant, stage 2 is developing the observation matrices of the tenderers’ proposals features, stage 3 is the determination of the vector-standard characteristics of the most economically advantageous proposal, stage 4 calculates the distance between the values of the characteristics of the proposals of individual participants and the vector-standard features of ideal offer in public procurement, stage 5 involves ranking the participants of government procurement and selection of the most advantageous offer. 6. conclusions the presented authors’ view of the procurement performance assessment system will allow customers and other interested users to provide the comprehensive assessment of the major components that influence the decision on the best offer in the tendering process to select the successful bidder. this approach provides the possibility of productive use of public funds, taking into account the social demands and expectations of the citizens of the country. in general, the performance of public spending on public procurement is largely determined by the effectiveness of the public procurement mechanism, in particular in the assessment of the proper fulfillment of procurement obligations, which will be addressed in future studies. references: arykbaev, r. k., & gadzhieva, v. t. 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(in ukrainian) supplier assessment system (2015). retrieved from: http://images.myshared.ru/9/925647/slide_1.jpg baltic journal of economic studies 17 vol. 5, no. 3, 2019 corresponding author: 1 national university of ostroh academy, ukraine. e-mail: tanya.galetska@oa.edu.ua 2 national university of ostroh academy, ukraine. e-mail: natalya.topishko@oa.edu.ua 3 national university of ostroh academy, ukraine. e-mail: ivan.topishko@oa.edu.ua doi: https://doi.org/10.30525/2256-0742/2019-5-3-17-24 corporate social activities in germany: the experience of companies tetiana galetska1, natalia topishko2, ivan topishko3 abstract. the purpose of the article is to study the european experience of the formation and regulation of socially responsible behaviour of economic entities; distinguishing the dominant drivers of corporate social responsibility in germany and strategic priorities for its implementation. its contents are interpreted in the expanded and narrow sense. expanded approach insists that csr is a set of interrelated types of responsibility (legal, economic, professional, moral, political, etc.) that reflect the system of values of society. narrow interpretation foresees the definition of the degree (measure) of adoption by the subject of socially significant goals of society, the fulfilment of mutual rights and responsibilities, observance of social norms. the research subject – the peculiarities of the functioning of the european model of socially responsible entrepreneurship, the practice of its implementation in germany. the methodology of the research is based on the definition of general principles of constructing the system of corporate social responsibility, disclosure the essence of the categorical apparatus, considering its main theoretical concepts. in the process of research, a set of methods of scientific cognition were used: analysis, synthesis, generalization (for the disclosure of the conceptual-categorical apparatus of the subject of the research); statistical method, grouping, empirical approach (while analysing the practice of distributing social responsibility among the subjects of social partnership in the eu for ensuring social protection of the population, and differences between the eu countries on the level of such responsibility of the subjects of the social process, depending on the model of socio-economic development). conclusion. under the influence of the challenges of globalization and the 4th industrial revolution, aggravation of competition, the conditions of the economy are changing. the need for business models on the basis of the strategy of sustainable development, socially responsible behaviour of business structures on the basis of systemic and long-term is growing. this situation actualizes the problem of creating mechanisms for maintaining social compromise in society. system of ensuring responsibility of the subjects of society for the formation of normal living conditions of society is one of the institutional mechanisms of social control and creating conditions for balancing personal, collective and social interests. institutional support for the functioning of the mechanism for supporting social compromise regarding the formation of normal living conditions is based on the levers of state regulation (subsidies, preferential taxation, economic incentives, and compliance with the standards of activity); institute of entrepreneurship (international and national standards for doing business); institute of the public (the system of social reporting of enterprises, work with territorial communities). compliance with product quality standards, with obligations to stakeholders, social reporting and progress reporting (including its environmental parameters), transparent business promotes the implementation of socio-stabilizing functions of entrepreneurial activity both on national and on a world scale. experience of european (in particular, german) companies proves the need to adherence to the principles of social responsibility in entrepreneurship and the possibility of their use as a competitive advantage. key words: corporate social responsibility, sustainable development, germany, international standards, social reporting, un global compact, corporate social responsibility models. jel classification: a13, m14 baltic journal of economic studies 18 vol. 5, no. 3, 2019 1. introduction in nowadays difficult conditions, there is a change in the structure of the economy, mechanisms of management, development strategies and competition. the economic and political role of corporations is growing. capital is actively migrating abroad. this reduces the tax base and the fullness of the state budget of the countries. modern processes increase social risks, limit the state’s ability to regulate socio-economic processes and maintain its stable dynamics, and to finance social commitments. the state sector in the social sphere reduces. the social doctrine of the state is revised. social responsibility between actors of social partnership is redistributed. it emphasizes on the necessity to strengthen the social and environmental components of entrepreneurial activity. the development of entrepreneurship is stimulated in the context of the concept of sustainable development. at the world economic forum davos-2012 (the theme of the forum “the great transformation: shaping new models”), models of growth and employment, leadership and innovation, resilience and resource utilization, social and technological models were discussed (world economic forum annual meeting, 2012). the focus was on the need for a global transformation that should begin with a renewed sense of social responsibility around the world. the problems of the formation of new world order, the 4th industrial revolution, the transformation of entire production and management systems, and the enhancement of social challenges were also discussed at davos-2017 and defined by the theme of davos 2018 discussions (world economic forum annual meeting, 2017). such tendencies actualize the problem of mechanisms for achieving social compromise in society, social control over the business. the object of the research is the processes of formation and implementation of socially responsible behaviour of business entities. the research subject – the peculiarities of the functioning of the european model of socially responsible entrepreneurship, the practice of its implementation in germany. the purpose of the article is to analyse theoretical and methodological approaches to studying the european experience in the formation and regulation of socially responsible behaviour of economic entities; distinguish the dominant drivers of corporate social responsibility in germany and strategic priorities for its implementation. objectives of the study: to find out the evolution of theoretical views and methodical foundations of the concept of social responsibility of business as an effective form of realization of its social component; determine the instruments of institutional influence of the state on compliance with the principles of socially responsible behaviour by business entities; find out the manifestation of the synergistic effect of the relationship of social responsibility of leading corporations in germany and adherence to the principles of sustainable development in their activities. the following research methods were used in the paper: analysis, synthesis, and generalization method (for the disclosure of the conceptual and categorical framework of the subject of research); comparativehistorical method (when analysing the social function of the enterprise and the evolution of scientific views on its content); system method (in identifying institutional levers of state influence on compliance with the principles of socially responsible business of the business environment); statistical method (when processing data on the practice of the european union regarding the distribution of fundamental rights and responsibilities between the actors of social partnership (citizens, employers and the state) in society regarding responsibility for ensuring social protection of the population). theoretical and practical aspects of corporate social responsibility (hereinafter – csr) are well developed in the scientific literature. in particular, in works of d. baden, j. becker, h. bowen, l. brown, d. henderson, r . jenkins, a. carroll, r . norgaard, t. hoskins, a. scherer, and other prominent scholars. most of the studies are dedicated to the definition of evaluation criteria and standards of socially responsible business behaviour. relevant social practices have acquired certain forms of institutionalization. taking into account the impact of extremely dynamic processes of the present, various aspects of this subject require further research. in this perspective, it is unquestioningly important and interesting to study the european experience in the implementation of the principles of corporate social responsibility. 2. theoretical foundations of corporate social responsibility as a social institution csr is implemented in corporate governance certain type of social commitment (mostly voluntary) to employees, partners, the state, institutions of civil society, and society as a whole (kolot, 2013). social responsibility of the business is its “voluntary contribution to the development of society in the social, economic, and environmental spheres; is related to the main activity of the company and that goes beyond the legal minimum” (corporate philanthropy. international dimension). the idea of “social responsibility” has no clear definition. its contents are interpreted in the expanded and narrow sense. expanded approach insists that csr is a set of interrelated types of responsibility (legal, economic, professional, moral, political, etc.) that reflect the system of values of society. narrow interpretation foresees the definition of the degree (measure) of adoption by the subject of socially significant goals of society, the fulfilment of mutual baltic journal of economic studies 19 vol. 5, no. 3, 2019 rights and responsibilities, observance of social norms. social responsibility is arbitrary; it is not a means of coercion. it can both motivate and limit the activities of the subject (topishko, topishko, galetska, 2016). the theoretical basis of corporate social responsibility as a model of economic activity was laid in the 50 years of the twentieth century by h. bowen in the work “social responsibilities of the businessman” (bowen, 1953). in the 90-s of the xx century, there was a widespread introduction of these principles into business practice in order to obtain competitive advantages. the necessity to ensure sustainable development of both business structures and society as a whole is reflected in the evolution of this term. in the formation of the theoretical foundation of csr as a social institution, the following stages are distinguished (kolot, 2013): the basic concept of corporate social responsibility (1950s-1970s). developers: h. bowen, k. davis, a. carroll, m. schwartz; the concept of corporate social responsiveness (1970s-1990s). a significant contribution was made by k. ackerman, a. bauer, d. votaw, s. sethi, a. carroll, w. frederick; corporate social performance (csp) (1980s-2000s). it was developed in the works of s. sethi, a. carroll, s. wartick, p. cochran, d. wood, d. swanson, and others. the further development of the conceptual provisions of csr took place in modern theories: • “stakeholders” (which include employees, suppliers, buyers, shareholders, local community, media, shareholders, state and district authorities, the public, environmental advocates, government organizations, etc.); • “corporate accountability” (reporting on nonfinancial activities of the organization, social status of labour resources, etc.); • “proactivity” (as a means of responding to modern challenges); • “voluntary” (commitment of the subject to achieve long-term goals in which society is interested); • “corporate citizenship” (the organization’s activities associated with the realization of rights and obligations of individuals); • “corporate sustainability” (assesses the social and economic impacts of the organization on the internal and external environment; new business strategies are developed from the standpoint of sustainable development (the so-called “the triple bottom line” of elkington’s sustainability (people, planet, profit)), etc.). 3. models of csr and the main conditions for its implementation in the european union companies should coordinate their business activities with the principles of the concept of sustainable development in social, economic, and environmental spheres. unlike philanthropy, charity and sponsorship as types of socially responsible business behaviour, this should be a “strategic approach to building relationships between firm and employees, partners and the public” (mykhailina, 2015). in most countries, csr is mainly implemented by external pressure and more or less is encouraged/ regulated by the state. formation of socially responsible behaviour of business entities occurs gradually. in the beginning, this is a warning, prophylactic measures, prevention of negative external externalities, compliance with social obligations. further voluntary participation in solving social, environmental and other important social problems is encouraged. economic, legal, and social responsibility to society becomes the highest level. csr focuses on the internal environment (mainly on employees) and external (other “stakeholders”: consumers, lenders, local communities, media, etc.). compliance with its principles has both positive consequences for business and negative (distracts funds and staff for non-economic goals). it is important that the goal of csr should include not only increasing of profits, promotion of the brand, improving of the image, growth of the value of the company’s shares (“corporate selfishness”) but also its compliance on a long-term basis (“reasonable egoism”), taking into account all aspects of influence on “stakeholders” and society in general (“corporate altruism”). the conceptually elaborated social need for the observance of socially responsible behaviour by the agents of the economy has been practically implemented in its models. depending on the role of the state and the mechanism of interaction between the subjects of social relations (the degree of its voluntary implementation), researchers conditionally point out such models of crs as european, american, and japanese. in the liberal american model (usa, canada, english-speaking countries of africa and latin america), state intervention in the economy is limited. social responsibility is realized mainly in the form of philanthropy, patronage, volunteering. it is voluntary and is considered to be the moral responsibility of the organization’s leadership. this model is encouraged by the government in the form of tax reduction. it is supported by society. in the japanese model, attention is directed to the company’s internal environment. although the role of the state is significant. a policy of equalizing households’ incomes is being implemented. high level of collectivism is inherent to the social and economic problem-solving. in a socially-oriented model of a market economy, social responsibility is an integral part of economic activity. the development and active implementation of social programs and social activity of the business are considered as a competitive advantage, conditions for a stable increase of living standards and minimization of social disproportions, the element of the mechanism of environmental management. in europe, there are three basic models of social responsibility (kolosok, 2015): baltic journal of economic studies 20 vol. 5, no. 3, 2019 central europe (austria, germany, france). the high degree of state regulation of social and labour relations is consistent with the preservation of the broad autonomy of enterprises and trade unions; northern europe (belgium, norway, sweden). the state actively regulates social and labour relations at all three levels (person, business, state); great britain. it combines elements of the american and continental european model. the features of the model depend on the national and religious values of society, the peculiarities of the state policy, legal culture, traditions, priorities of the society, predominant ideological settings, ethics of economic activity (primarily labour and entrepreneurship relations). a significant influence on the model have also such impacts, as branch affiliation of the enterprise; the activity objectives and the specifics of the markets in which it operates; size and location; ethical principles of company owners; the degree of participation in international business, etc. statistical data, presented in table 1, reflect the practice of distributing social responsibility among the subjects of social partnership in the eu for ensuring social protection of the population. stability and progress of society are the results of economic efficiency and social compromise; achievement of a balance between the responsibility of the state to guarantee the socially normal conditions of reproduction of the workforce; the responsibility of the individual for the level and quality of life as a result of its own economic activity; the responsibility of the business for the results of its activities. as we see, the eu countries differ in the level of such responsibility of the subjects of the social process, depending on the model of socioeconomic development. a characteristic feature of csr in the european union is the considerable information and certain financial support of business structures at the national and regional levels (kirilyuk, 2015). in european law, the rules and regulations of socially responsible business behaviour are clearly prescribed and controlled by the state, such behaviour is one of the main features of a socially oriented model of development of the market economy. they regulate the economic, ecological, social activities of economic entities. the economic responsibility to the “stakeholders” is based on compulsory legal liability to the state and on the control over the economic activity of enterprises by public organizations. the social sphere is regulated on the basis of the social chapter of the maastricht treaty of 1992 (communication, safety, and health of workers, rights and working table 1 distribution of responsibilities between social partners in some european union countries for the payment of insurance premiums in 1997–2015 (percentage of total receipts) indicator years countries b el gi um b ul ga ri a g er m an y e st on ia ir el an d g re ec e sp ai n fr an ce it al y l at vi a h un ga ry n et he rla nd s a us tr ia po la nd sw ed en u ni te d k in gd om n or w ay employers’ social contribution 1997 46.8 : 37.6 : 23.1 37.7 51.6 46.6 51.0 51.8 : 20.6 39.5 : 39.2 26.1 23.8 2000 45.5 : 38.0 79.2 25.6 38.2 52.5 46.0 42.0 49.1 47.0 29.4 39.5 41.4 40.5 29.9 24.4 2005 43.7 42.3 35.1 79.0 26.9 35.4 49.4 44.7 41.3 46.3 42.0 33.3 37.9 39.6 40.7 34.8 31.0 2010 41.7 30.8 33.0 77.4 22.2 31.9 43.2 43.0 38.0 36.4 30.5 33.2 37.1 43.9 37.5 34.3 32.7 2015 40.6 31.4 34.3 78.3 30.2 32.3 41.4 42.0 34.6 41.2 40.3 30.1 36.2 : 37.7 25.8 31.5 social contribution paid by the employees 1997 22.1 : 29.2 : 13.9 23.2 17.3 26.4 17.2 16.3 : 43.7 27.3 : 7.8 25.1 14.5 2000 22.4 : 27.6 0.0 12.3 22.6 15.0 19.9 15.3 15.7 12.8 38.1 27.4 24.8 9.4 22.5 14.0 2005 22.0 18.6 27.8 0.4 13.3 22.9 14.1 20.9 15.1 16.5 15.9 34.5 27.4 22.4 8.8 14.0 14.0 2010 20.3 16.1 28.5 2.7 11.5 21.1 12.2 20.8 14.9 12.8 19.6 33.0 26.4 17.3 9.4 12.6 14.7 2015 15.2 15.3 22.9 1.1 7.9 18.0 8.0 12.6 8.4 16.9 23.8 32.0 20.9 : 8.5 10.1 15.4 general government contribution 1997 27.3 : 30.3 : 62.9 29.6 27.9 23.9 29.8 32.0 : 16.5 32.2 : 46.3 48.0 60.8 2000 29.1 : 32.1 20.6 60.8 29.2 29.9 30.4 40.7 35.2 31.6 14.4 31.8 21.6 45.8 46.4 60.5 2005 32.0 35.9 35.2 20.5 54.9 30.6 34.3 30.6 42.0 36.6 34.8 20.0 33.2 21.4 48.3 49.6 54.1 2010 35.6 51.3 36.7 19.7 63.1 35.6 43.6 34.1 45.5 48.6 37.4 26.0 34.8 18.3 51.2 45.6 52.8 2015 37.5 47.4 33.5 20.6 57.9 39.6 43.8 35.7 48.5 41.5 36.4 23.4 36.3 : 50.7 58.3 53.0 other receipts 1997 3.7 : 2.9 : 0.2 9.6 3.2 3.1 2.0 0.01 : 19.2 1.1 : 6.7 0.8 1.0 2000 3.0 : 2.3 0.2 0.3 10.0 2.7 3.8 2.0 0.01 8.7 18.1 1.3 12.2 4.3 1.2 1.1 2005 2.3 3.2 2.0 0.1 4.9 11.1 2.2 3.8 1.6 0.7 7.3 12.2 1.5 16.7 2.2 1.6 0.04 2010 2.4 1.8 1.8 0.2 3.2 11.3 1.1 2.1 1.6 2.2 12.2 7.8 1.8 20.5 2.0 7.5 0.04 2015 2.2 1.8 1.8 0.1 2.9 5.7 1.9 3.1 1.9 0.4 0.1 14.2 1.2 : 2.1 1.6 0.1 source: social protection receipts by type (2018). retrieved from: https://ec.europa.eu/eurostat/web/products-datasets/-/tps00108 baltic journal of economic studies 21 vol. 5, no. 3, 2019 conditions). environmental aspects of csr have been taken into account in many legislative documents that are fundamental to government programs. for example, environmental impact assessment (eia), environmental management and audit scheme (emas), integrated product policy (ipp), etc. in 1996, the european business network for corporate social responsibility (csr europe) was created. the main conditions for the implementation of csr in europe are set out in the green paper (2001) entitled “promoting a european framework for corporate social responsibility”. csr is defined as a system that serves as a basis for companies that voluntarily integrate social and environmental issues into their business activities and interact with “stakeholders”. the green paper sets out the goals, ideas, and ten main csr principles, which are outlined in the global compact (the ten principles and the global compact). it is also outlined in this document the procedures and practices of conducting socially responsible business (organizational management, human rights, labour relations, ethical operational activities, environmental protection, protection of consumer rights, development of territorial communities, and cooperation with them). 4. the practice of public stimulation of csr in germany germany supports the widespread initiative of the european union’s csr . the state encourages the implementation of social programs for the interaction of companies with local communities on a strategic basis (csr in deutschland). in 2009, the national csr forum was launched, the task of which is to develop a csr strategy. in 2010, the national csr action plan was adopted. various ministries and government organizations contribute to the implementation of the national csr strategy. its realization is coordinated by the federal ministry of labour and social affairs (bmas) (bundesministerium für arbeit und soziales (bmas)). federal government csr bonus is an effective incentive to adhere to principles of socially responsible business, to integrate social and environmental commitments into the corporate culture. in 2017, award “csr . made in germany” of the federal government for adhering socially responsible business on a long-term basis received in different categories: up to 300 people: the company “gundlach bau und immobilien” (sphere of activity – construction, modernization, leasing of real estate, property management) for practical achievements in integrating social and environmental commitment into the corporate culture; up to 1000 people: “rapunzel naturkost” (agrarian sector) for successful strategic corporate governance based on the principles of sustainable development (social values, ecology and culture); over 1000 people – the international company “grohe ag” (sanitary technologies) for a socially, environmentally and economically responsible corporate governance (csr . csr-preis, 2017). the list of companies that most successfully adhere to the principles of csr in their business activity is systematically posted in the media (herausragende praxisbeispiele für soziale verantwortung der unternehmen – csr). germany is a member of the european sustainable and responsible investment forum, created with the purpose of promoting sustainable development and responsible social investment in europe (the european sustainable and responsible investment forum). since 2016, mandatory reporting on csr has been implemented for some enterprises. it is an integral part of financial reports (facts about germany: foreign policy, society, science, economy, culture, 2015, p. 58). social (non-financial) report combines environmental, social, managerial aspects of the company’s activities. its standards are a system of criteria, principles, methodological recommendations for measuring the performance of companies from the social and ethical positions. this system is a basis of the international aa-1000 (accountability) and developed by the institute of social and ethical accountability – “accountability”) (accountability). according to the law “on social report”, it is implemented regular reporting by companies with more than 300 employees regarding the relationship with employees and with the local community. these reports are compulsory for companies, which trade in stocks in the stock market. non-financial reporting of economic entities is taken into consideration by savings and pension funds in their investment process. social audit of economic entities includes the analysis of the composition of the employees; working-time and rest time; compensation to employees and its accordance with the average level of the region; sanitary conditions; compliance with the international standards of the quality system of products (iso 9000), the level of health and professional safety of employees (ohsas 18001), environmental standards (iso 14000), etc. the sa-8000 series of standards are based on the ethical principles of the ilo conventions, the universal declaration of human rights and other documents, which regulate human rights. in 2010, the international standard iso 26000 social responsibility guide (iso / dis 26000: guidance on social responsibility) was implemented. it stresses on the necessity of achievement of socially responsible behaviour of organizations of all types in different countries. the principles of its observance are declared on a voluntary basis. an integral element of the concept of socially responsible business behaviour is corporate social insurance as a component of the social package. it not baltic journal of economic studies 22 vol. 5, no. 3, 2019 only protects workers from life’s troubles but also creates the company’s positive image as a socially responsible entity, serves as an additional motivational factor for staff (barannik, 2011). for european companies, patronage, as a form of csr , is not a leading one. charity activity is regulated legally. in case of the implementation of such activities, german companies obtain a special certificate, according to which the organization can reduce their tax base by the amount spent. the task is to modernize the processes of charity in order to reduce the cost of administration. as an example of socially responsible behaviour of actors of globalization serve social reports of a large number of huge european corporations, in particular, german ones. it is published in the special annual edition “giving in numbers” cecp (the ceo force for good). the experience in the social strategy of global leaders and improvement of social dialogue for creating favourable conditions of society livelihood are summarized. in 2016 editions were published the results of the research on how corporate social programs of collaboration with employees contributed to the financial success of the 272 world’s leading companies (giving in numbers, 2016). in the 2017 report (cecp / giving in numbers: 2017 edition), there is an analysis of the corporate philanthropy profile and the main trends of corporate social investment of 258 transnational companies (giving in numbers, 2017). international corporations must adhere to the ilo labour standards, the provisions of the un global compact, and the oecd guiding principles. companies must meet the expectations of “stakeholders” regarding economic, social, environmental responsibility in both shortand long-term periods. in its international activities, german concerns must adhere to the 17 goals of sustainable development outlined in the action plan 2030 at the 70th general assembly of the united nations in 2015. this document expanded the millennium development goals (mdgs) of the united nations, which determined the development of new industrialized and developing countries for the period from 2000 to 2015 (facts about germany: foreign policy, society, science, economy, culture, 2015, p. 58). 5. the experience of german transnational corporations in using csr as a competitive advantage an example of changing the role of business in a society based on the formation of a new consciousness, the inclusion of social and environmental initiatives on a long-term basis in the strategic goals of the organization, their coordination with economic activity, taking into account the interests of “stakeholders” can serve large corporations in germany. the public, company investors, and other stakeholders can expect responsible actions and sustainable solutions from them. one of the first german companies that used csr as a competitive advantage and commercial success was the large pharmaceutical company betapharm. in the 90s of the xx century, the company has increased sales in the country’s highly saturated pharmaceutical market and has succeeded thanks to implementing a strategic social program for families with chronically ill children. the transnational german chemical concern basf, headquartered in ludwigshafen (rhineland-palatinate), specializes in the production of a wide range of products (plastic, paint, cosmetics, food additives, technical and building chemicals, fine chemicals, agricultural products, etc.) (basf online report, 2016; csr in unternehmen beispiele). the company focuses on achieving high economic efficiency, adherence to the principles of social responsibility, environmental protection. the company’s management identified six core values that became a part of the organization’s goals: security, health, environmental protection, mutual respect, open dialogue and integrity. taking into account the specifics of production processes, the organization carries out special measures for the safety and health of workers. considering basf’s international status, its social commitments are focused on supporting the education of the younger generation in the regions of the world where consolidated subsidiaries of the concern are located; cooperation with local communities, institutions, associations; humanitarian cooperation. in particular, it promotes the study of german among young children, school sponsorship in the region, and projects aimed at increasing the interest of children in scientific disciplines. own day centres were organized for children in order to improve for their parents compatibility for family and work. publication of annual social reports on compliance by the company with the model of strategic csr allows it to position itself as a corporate citizen (the theory of “corporate citizenship”), not indifferent to the socio-economic and environmental problems of the region. the loyal attitude of employees, consumers, and investors to the company’s activities is the achievement of the company. however, the environmental hazard of the company, despite its compliance with the conditions, creates a significant concern of the public. german company deutsche post dhl (transport and logistics) is recognized as an expert in corporate communications solutions (csr in unternehmen beispiele; deutsche post dhl group). management and personnel of the company adhere to the code of conduct on the basis of group values, which since 2006 is mandatory for all regions where its affiliates and business units are located. deutsche post world net has an agreed concept of csr . it relies on its core competency (for example, logistics for eliminating the consequences of natural disasters) and thus baltic journal of economic studies 23 vol. 5, no. 3, 2019 maximizes the benefits of its commitment to society and the company. in order to protect the environment, deutsche post dhl is replacing freight transport by rail, purchasing environmentally friendly vehicles. the company cooperates with the un to create a global network of disaster response teams. collaborates with the charity “aktion mensch”. makes donations for educational institutions in the global south. dhl has its own private university in shanghai (china). deutsche bank operates in the financial services market (csr in unternehmen beispiele; deutsche bank). the condition of the economic success of the bank is the trust of society. the company’s social activities are focused on five areas (social innovation, education, corporate volunteer programs, arts, sustainable development). social responsibility is considered as a contribution to both their own development and development of society. the principles of socially responsible behaviour are respected by the company both in the internal and external environment. internal staff is provided for employees. there is an e-learning platform and also international scholarship programs are provided. the functioning of various professional pension schemes and own kindergartens are organized. one of the areas of social interaction of the organization is the support of musical and artistic organizations. the environmental programs of deutsche bank are aimed at economical consumption of electricity, water, and paper. german transnational corporations (like other enterprises) support the project “csr . made in germany”, the main aim of which is to form and implement a national idea of achieving a high degree of socially responsible behaviour by domestic businesses (csr made in germany). this strategic vision of csr ensures the systematic socio-economic relations, reflects the fundamental values of society, shapes the ethical principles of the behaviour of the subjects of social partnership, and opens up new perspectives. 6. conclusions modern society is under the influence of multi-vector changes that increase the asymmetry of the economy and social development. the need for business models on the basis of the strategy of sustainable development, socially responsible behaviour of business structures on the basis of systemic and long-term is growing. in a socially oriented model of a market economy, the ability of corporations to perceive social requests is flexible, multidirectional, and geared towards stakeholders (workers, shareholders, authorities, investors, consumers, and the public). it is stimulated by the state strategy of its regulation, social reporting, and strong public pressure. the implementation of various social programs, the functioning of the various forums, enables csr to be disseminated and adhere to its principles, which become extremely important in the face of globalization and the need to maintain sustainable development. experience of the functioning of european (in particular, german) corporate social responsibility model is beneficial for the countries that implement it. the main obstacles to dissemination of csr in ukraine are: declarative activity, impossibility to control the purposeful use of funds; lack of unification of standards, criteria for assessing the company’s social responsibility; the imperfection of the relevant legislation; low level of corporate culture, insufficient development of charity and social activity; the financial and economic weakness of a significant proportion of economic entities, their orientation to survival; legal nihilism and deformation of legal consciousness in compliance with current legislation; the closeness of the information of the majority of business entities to the general public; the passivity of the public. references: accountability. retrieved from: http://www.accountability.org barannik, l. b. 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(2016). sotsialna vidpovidalnist pidpryiemstva v ukraini: problemy zabezpechennia ta shliakhy pidvyshchennia [corporate social responsibility in ukraine: problems of security and improvement ways]. prychornomorski ekonomichni studii, 12(1), 95–99. world economic forum annual meeting (2012). retrieved from: http://reports.weforum.org/davos-2012/ world economic forum annual meeting (2017). retrieved from: https://www.weforum.org/events/worldeconomic-forum-annual-meeting-2017 baltic journal of economic studies 160 vol. 5, no. 4, 2019 corresponding author: 1 kryvyi rih national university, ukraine. e-mail: tdutybz.077@gmail.com orcid: https://orcid.org/0000-0002-9293-2969 2 kryvyi rih national university, ukraine. e-mail: mishchuk.ievgeniia@gmail.com orcid: https://orcid.org/0000-0003-4145-3711 3 kryvyi rih economic institute of kyiv national economic university named after vadym hetman, ukraine. e-mail: izmaylov_yo@kneu.dp.ua orcid: https://orcid.org/0000-0003-4853-205x doi: https://doi.org/10.30525/2256-0742/2019-5-4-160-170 development of the stereometric method to the analysis of economic categories and processes and its application in security and taxation vladimir nusinov1, ievgeniia mishchuk2, yaroslav izmaylov3 abstract. the article is aimed at the enhancement of the stereometric approach to analysing economic categories and processes and investigating directions of its application in the science of security and taxation. methodology. the methodological basis of the study consists of general scientific methods of analysis and synthesis, a comparative study of existing models of economic categories, which are based on the stereometric approach. the empirical method is used to describe the problem of using a stereometric approach to determining the economic security of an enterprise. the results of the study. the article demonstrates that modern realities increasingly require spatial thinking from economists, thus conditioning the appearance of 3d models of some economic categories in economic research papers. a number of stereometric elements have been applied by both foreign and ukrainian scholars in the economic sphere for several decades. the article points out that no current model could claim the complete realization of the stereometric approach as an independent unidirectional array of the content of principles and methods of analysing economic categories and processes. there are also determined regularities not considered by other scientists, as well as current problems and omissions. practical implications. there are substantiated differences between the stereometric and graphical methods of economic analysis. the stereometric approach is suggested to be meant as one of the economic analysis approaches based on visualization of economic categories and processes on the basis of geometric solids allowing qualitative and quantitative assessment of the level and dynamics of the selected array of indicators put into a single graphical model. there is revealed essence and principles of the stereometric approach use in the economy and in the science of security in particular. economic security is treated as one of the ternary nature being resources, processes and a condition simultaneously. the article suggests a pyramid to determine economic security and proves that changes of quality, speed, and quantity of business processes expressed by changes of corresponding angles of the pyramid impact both the condition and the general level of economic security. relevance/originality. the presented proposals on enhancing the stereometric approach create a theoretical foundation for applied research in various industries. the enhanced stereometric approach enables building a general-theoretical concept of economic security considering its connections with such notions as competitiveness and development. key words: analysis, economic security, taxation, process, stereometric approach. jel classification: b49, с13, с38, с81, h32, y10 1. introduction the economic science is now experiencing the transition from 2-dimensional to “stereometric” semantics that assigns at least three projections, each of them determining a certain kind of relationship (assessment) (tulchinskiy, 2017). at the same time, the approach to formation and assessment of economic categories through their type and kind remains dominant claiming to offer completeness of analysis and induction. however, modern realities are increasingly requiring spatial thinking of economists. apparently, space and time together create a structure containing baltic journal of economic studies 161 vol. 5, no. 4, 2019 the whole reality, beyond which economic categories cannot be understood to the full extent. so, threedimensional research models in economic works for studying individual economic categories and processes are quite objective. nevertheless, their disclosure is limited by specific, in some cases highly specialized aims and tasks of a particular investigation. at that, the methodological approach underlying these models remains understudied. in the scientific economic literature, the most popular models applying stereometric semantics are the following: maslow’s pyramid of needs, (maslow, 1943), d. scott sink’s performance management cube (sink, 1985), с. j. mcnair, richard l. lynch and kelvin  f. cross’s performance pyramid (mcnair, lynch, cross, 1990), a. moceng and p. bredup’s threedimensional model of economic processes efficiency (moceng, bredup, 1993), a. neely, c. adams, m. kennerly’s performance prism (neely, adams, kennerly, 2003). the main difference we pay attention to consists in the fact that the first three of the above models are just visual reflections of their authors’ scientific views but the other two are used not only as a visual graphical interpretation but also for assessing indicators determined in their basis. western researchers’ models have made the basis for ukrainian developments. numerous new models have been developed on the basis of the last two of the abovementioned models, which were updated considering the specific character of companies of various industries, transformed or used for another research direction (the science of security in particular). o. m. liashenko’s pyramid of efficiency of company economic interests harmonization (liashenko, 2008); o. i. oleksiuk’s ternary informationcentred model (the pyramid) of economic performance measurement (oleksyuk, 2009; oleksyuk, 2008); a. yu. kretova’s three-dimensional model of industrial company performance measurement (kretova, 2011); o. a. kirichenko’s (kirichenko, 2011) and l. o. korchevska’s (korchevska, 2016) model (the cube) of economic security assessment; o. i. belei’s trade company performance measurement prism (beley, 2012); n. v. biloshkurivska’s three-dimensional model of strategic provision of the economic and organizational mechanism of company economic security (biloshkurska, 2012); h. a. zhuchkova’s three-dimensional model of determining company performance efficiency (zhuchkova, 2013); m. i. ishchenko’s pyramid of measuring resource provision of company financial and economic performance (ishchenko, 2013); m. p. sahaidak’s graphical interpretation (the rectangular prism) of assessment of service company internal marketing potential (sahaidak, 2015); t. ye. chebanova and o. v. koretska’s three-dimensional model of resource intensity of providing port company economic security (chebanova, koretska, 2015) are some of them. despite the fact that a number of stereometric elements have been used by both foreign and national scholars for already several decades, it should be noted that current scientific theories lack systematicity. undoubtedly, the mentioned models solve certain applied tasks but none of them considers properties of geometric figures and rules of their construction. besides, there are currently no models that could claim complete elucidation of the stereometric approach as an independent unidirectional array of the content of principles and methods of analysing economic categories and processes. the article is aimed at the enhancement of the stereometric approach to analysing economic categories and processes and investigating directions of its application in the science of security and taxation. 2. existing trends in stereometric semantics application in economic research in this work, we do not consider economic developments that use stereometric semantics but the models based on which do not relate to stereometry and for this reason are not based on the stereometric approach. for instance, in (holden, 2014) the stereometric terminology is not applied in its proper sense, the authors study the liquidity cross section structures; (gerasymenko 2017) deals with three planes of competitiveness studies (horizontal, vertical, potential). the research of existing approaches to the analysis of economic categories and processes where particular elements of stereometry are used reveals the researchers’ various views that can be grouped into three directions. in the first group, the researchers apply threedimensional models but do not use geometric solids or call the approach like that a stereometric one. this direction is the widest and comprises a great number of scientific developments. investigations of the second directions focus on the approach the researchers call stereometric. this is clearly illustrated in works by p. i. zavorotnii who substantiates reasonability of applying the stereometric approach to assessing dynamics of determinants of economic development and its possibilities in this (zavorotnii, 2015). we agree with the researcher that assessment of indicators not associated in the discriminant model results in impossible application of classical factor analysis methods but the stereometric method allows obtaining the general idea of the dynamics of the selected array of indicators, putting the dynamics in a single graphical model and calculating the degree of the total change of the indicators in the accounting period (zavorotnii, 2015). here, the researcher delineates a triangle with the vertexes in different planes. the principal difference of this direction from the previous one is the explicit reference to the stereometric approach. however, p. i. zavorotnii does not specify features of the approach or elaborate the idea of its specific application. baltic journal of economic studies 162 vol. 5, no. 4, 2019 the third direction is characterized by the use of geometric solids (cubes, pyramids prisms). but the researchers call this a graphical or mathematical method that does not exclude its stereometric essence. in particular, the author of the company resource provision pyramid states that it is underlain by the graphical analysis method (ishchenko, 2014). nevertheless, we are convinced that the stereometric approach to the analysis of economic categories and processes should not be identified with the graphical method of economic analysis providing for geometrical representation of functional dependencies by one plane lines and used mainly for fast determination of function values by the corresponding argument value, as well as for simple visual demonstration of obtained data. in our opinion, the stereometric approach provides for investigation using geometrical figures, points of which lie in different planes, whereas economic analysis applies the following kinds of graphs: comparison diagrams, time diagrams, distribution curves, correlation diagrams, statistical cartograms. besides, the stereometric approach should be suitable for integrating the massif of economic knowledge in order to substantiate properties and regularities of formation and development of relatively new economic categories and processes. its application should also facilitate the enhancement and harmonization of the existing concepts. the mentioned is especially topical for the current state of one of relatively new and actual directions in economics – the science of security when requirements of explaining and assessing its basic notions (economic security, threats, guarantees, etc.) have conditioned the appearance of a number of conceptual approaches. these approaches, on the one hand, have integrated knowledge from various areas but, on the other hand, have not completely considered actual relations between separate notions (competitiveness, development, etc.) and, consequently, produced insufficiently correct explanations. this results in complication caused by the necessity of defining and measuring related and derivative notions. multidimensional matrixes are widely used to determine the level of efficiency of the implementation of certain security measures or the impact of various factors on the state of economic security. one of the most widely used is a three-dimensional matrix, this fact being explained by the clearness of data presentation in the form of “a kind of a cube” oriented by certain axes reflecting values of a particular group of parameters (kirichenko, shykova, 2011). this model is supplemented in (korchevska, 2016) where the cube is called a form of visualization of the company economic security assessment model. here, a company’s economic security is suggested to be assessed on the basis of convolving assessments of quantitative and qualitative parameters of providing resources and business-processes and parameters of harmonization of stakeholders’ interests. from the mathematical point of view, a company’s economic security assessment can be presented by a point in a cube (a vector form) or a parallelepiped volume in the unit cube volume (a scalar form) as the maximum value of each axis of the cube is equal to one (korchevska, 2016). to assess other economic security based notions, the following three-dimensional models are used: – the three-dimensional model of strategic provision of economic security, to form which n. v. biloshkurska suggests application of the current assets to equity ratio (the values to be plotted on the x-axis), the indicator of the economic and organizational mechanism of a company’s economic security (the values to be plotted on the x-axis) and the indicator of company market (the values to be plotted on the z-axis) (biloshkurska, 2012); – the three-dimensional model of resource intensity of port company economic security (chebanova, koretska, 2015). unlike in the previous work (biloshkurska, 2012), here are no empirical data or quantitative methods of assessment. besides, the name of the model contains the stereometric terminology, which does not basically relate to the stereometric approach. it should be noted that economic security is not separated from other notions. on the one hand, it is ternary by nature being resources, processes and a state simultaneously, as well as a specific structure i.e. integration with defined economic notions. thus, a. yu. kretova has developed proposals concerning the complex measurement of company performance considering both time and type aspects and suggests measuring the performance using the three-dimensional synthetic-prospecting model based on measurement of three components – company performance, potential and economic security, as well as considering the three-time states – retrospective, current, and future. here, economic security is called an indicator of the current performance of a company determined by the delta between desired and actual levels of harmonization of internal and external entities’ interests (kretova, 2011). so, the formation of the company’s economic security and its measurement should be accompanied by consideration of conditions of the company’s functioning in the external (in most cases – competitive) environment. apparently, during the process of development, the company economic security also undergoes changing and this fact should be considered in corresponding models as well. along with that, one of the key standards of substantiation assessment of the model is how well its application enables forecasting the future state. 3. company tax security through the application of a stereometric method efficient tax security of the company creates conditions for the stability of its economic situation and provides the basis for development, income growth, solvency, liquidity, creditworthiness, and profitability baltic journal of economic studies 163 vol. 5, no. 4, 2019 with a minimal risk level affecting directly the financial position and business cooperation potential. modern conditions of application of the investment and innovation development of the world economy model require the use of an integrated approach to the formation of theoretical, methodological, and organizational principles for the application of a stereometric method in tax security, which takes a key place in the structure of company economic security. the target of tax security is to determine the optimal measures, forms, and methods of the tax burden, minimize economic entities tax risks depending on the specifics of the industry, ensure the possibility of maintaining and increasing the results of its financial and economic activity. in order to apply a stereometric method to company tax security, it is necessary to determine the factors of influence estimating the level and dynamics of the selected aggregate of indicators both quantitatively and qualitatively. the main factors influencing company tax security are as follows: the continuous development of information systems and technologies; scientific and technical potential of the staff; modernization of the internal accounting and tax payment model; company depreciation policy; development of accounting payment system; failure to comply with tax legislation requirements; arithmetical and methodological mistakes in determining the tax base of gross income and gross expenditures; understatement of tax payments by illegal methods; limited liquidity and solvency; low payment discipline of suppliers and contractors. a senior manager can take his own decision upon the factors having the greatest impact on tax security, depending on the company type and sphere of financial and economic activity. besides, using a stereometric method, it is easy to assess both quantitatively and qualitatively the level and dynamics of the selected indicators aggregate built up in a single graphical model for providing tax security as a component of company economic security. 4. critical analysis of the basic models founded upon the stereometric method application of the stereometric approach to the formation and assessment of economic security can provide adequate tracing of cause-and-effect relations between both its structural elements and between itself and other economic notions. let us see it analysing the models based on the stereometric approach that are dealt with in (neely, adams, kennerley, 2003), (oleksyuk, 2009; oleksyuk, 2008), (liashenko, 2008), (ishchenko, 2013), (sahaidak, 2015) (table 1). despite different purposes of the models under consideration, they are built on the basis of two solids – a prism and a pyramid. a. neely, c. adams, and m. kennerley’s performance prism appeared first and is based on interconnected elements of performance management. the following statements underlie the model: – organizations achieve their objectives (i.e. fulfil their tasks) satisfying both the stakeholders’ and their own desires and needs at the expense of a higher degree of return and efficiency as compared with their competitors. not arguing with the point, we note the absence of coordination with the external competitive environment; – return means the degree of stakeholders’ requirements satisfaction: performance is a criterion of how a company’s resources are used to provide the defined level of harmonization in economic terms. apparently, the model provides for studying available resources but the process of their formation is not investigated; – the level of business efficiency is the function of performance and return of actions undertaken (a. neely, c. adams, and m. kennerley, 2003). consideration of the continuous series of interrelated actions is a manifestation of the process approach but the authors do not show how qualitative, quantitative, and/or temporal change of actions will impact the indicators under study. table 1 basic models of economic categories based on the stereometric approach models a. neely’s prism о. і. oleksiuk’s pyramid о. м. liashenko’s pyramid м. і. ishchenko’s pyramid м. p. sahaidak’s prism 1 2 3 4 5 6 pu rp os e of th e m od el company performance measurement informationcentred assessment of economic performance measurement determination of efficiency of company economic interests harmonization as the instrument of measuring its economic security assessment of resource provision of company financial and economic performance assessment of the level of resource, process and strategic prerequisites for achieving designed indicators of a company’s internal marketing g eo m et ri c fig ur e triangular prism pyramid with the triangular base pyramid with the quadrilateral base right prism with the regular pentagonal base source: developed by the author on the basis of the systematized works (neely, adams, kennerley, 2003; oleksyuk, 2009; oleksyuk, 2008; liashenko, 2008; ishchenko, 2013; sahaidak, 2015) baltic journal of economic studies 164 vol. 5, no. 4, 2019 in 2008 in ukrainian scientific literature, there appeared two pyramids – by о. і. oleksiuk and by o. m. liashenko. о. і. oleksiuk’s main idea consists in the fact that basic factors such as information, time, and traditional resources taken together impact company performance and their optimum balance allows reaching the highest level of performance and management efficiency (oleksyuk, 2009; oleksyuk, 2008). in our opinion, the principal omission of the model is, first, that information and time are kinds of traditional resources. besides, in real business conditions, there are parameter gaps in time, such as, for instance, production gaps. in our opinion, in this case, time is of ternary nature, being a production resource, a process practicability factor and a property of contradiction (threat) expression. second, it is not reasonable to neglect the non-traditional resources of a company (reputational, organizational, innovative, intellectual, and administrative ones. the first four kinds are rather well covered in the scientific literature. we suggest treating the remaining ones as additional advantages resulting from relations (family, friendly, political, business, etc.) of owners or top management of a company with officials at government and other bodies (organizations) connected with the company’s activities in order to achieve the company’s objectives. third, the model does not consider processes, due to which the mentioned resources facilitate achievement of economic results. in substantiating the second model-pyramid, the last of the discovered omissions are eliminated. the attempt is undertaken to take into account the process of company economic interests’ harmonization, which is, according to o. m. liashenko, in constant motion and, therefore, does not allow choosing and fixing criteria of this process. another important idea suggested by the author is the impossibility of assessing company economic interests’ harmonization on a plane and the necessity of applying three-dimensional images (liashenko, 2008). agreeing completely with the author, we note the omission of the model, which, despite the fact that o. m. liashenko considers the process-oriented criterion of the company economic interests’ harmonization efficiency, and which in our opinion consists in stationarity of the model. this can be explained by the use of not a dynamic but a static value – the degree of stakeholders’ requirements satisfaction in terms of their economic interests’ harmonization – as the mentioned criterion. in 2013, m. i. ishchenko’s pyramid of resource provision of a company’s financial and economic performance appeared in the scientific literature. the pyramid considers a number of requirements, unified directivity of group indicators of the whole system and possibility of forecasting indicator dynamics directivity being among them. m. i. ishchenko states the necessity of using the dynamic approach as the failure of absolute values of the resource components as of a certain date to form the database for analytical assessment of the company’s development prospects (ishchenko, 2013). however, in our opinion, the process approach should be applied in addition to dealing with the categories under study in their dialectic development, considering cause-and-effect relations and hierarchy based on the retrospective analysis of the company’s behaviour within a certain time period. to a certain extent, this omission is considered in the next model – m. p. sahaidak’s prism. in 2015, m. p. sahaidak identified the dependency of a service company’s performance on the efficiency of forming and using resources and elements of the internal marketing system and suggested the right prism of measuring the company’s internal marketing system potential. one of the principal ideas of the model is the statement that companies considering their personnel to be their core asset will finally win the competition and be able to reach the designed level of performance with fewer resources spent. resource provision of the service company performance is presented as a regular pentagonal prism illustrating the level of the internal marketing potential, enables forecasting the company’s possibilities on the relevant market in the short-term and long-term run and determining problems with the internal marketing system, resource provision, and the front line personnel (sahaidak, 2015). however, in spite of the mentioned advantages, the suggested approach contains omissions. thus, the author does not consider a higher correlation between similar brands in a better space than between different brands that results in a faster pace of displacement. here, the similarity based on total utility rather than on attributes only determines products similar in higher paces of displacement (dotson, 2018). besides, the model does not consider how the internal environment impacts on service companies’ incomes influence those of their personnel ( juhn, 2018). in our opinion, if graphical interpretation aided by the stereometric approach is used to visualize scientific ideas, it is sufficient to explain the choice of the geometric solid in general. however, this condition is not sufficient if economic categories and processes are to be explained. the choice of this or that shape requires additional substantiation from the economic point of view. particularly, the type of polyhedron chosen should be explained economically. if the base is a triangle, its types (scalene, equilateral, acute, obtuse) should be substantiated in economic terms. in case of a quadrilateral (reflex, convex, nonconvex, arbitrary; elliptical, parabolic, hyperbolic; a parallelogram, a rhombus, a square, a rectangle, a trapezoid, an isosceles trapezoid, a kite), as well as a pyramid and a prism, the choice should also be provided with reasonable economic substantiation. if it is not done, scientists focus on the figure shapes and sizes of its elements but not on its other properties. let us exemplify this by geometric figures of the models under study. elements of the solid bases are given in table 2. note that dash means that the element is not available in the solid. baltic journal of economic studies 165 vol. 5, no. 4, 2019 so, a number of elements in all the models except for m. p. sahaidak’s prism are not treated (“not specified” in table 2). the bottom base of practically all the models characterizes resource provision amounting to stakeholders’ contribution. comparison of interpretations of the bottom bases of a. neely, c. adams, and m. kennerley’s (neely et al., 2003) and m. p. sahaidak’s prisms show that both models specify main stakeholders: the business owner and the personnel. but in m. p sahaidak’s prism, top management is additionally specified that is not considered in the performance prism where investors, customers, suppliers, state institutions, etc. are mentioned instead (neely et al., 2003). when determining factors impacting the internal marketing system, m. p. sahaidak mentions, among others, building partnering relationships between top management, personnel, and other stakeholders of a company but the group of other stakeholders is not clarified. when characterizing company business processes, its personnel, customers, suppliers, state institutions, etc. are mentioned among key stakeholders (sahaidak, 2015). analysis of contributions (resources) required by the company from certain stakeholder groups shows common aspects in the models (table 3). table 2 interpretation of bottom base elements of figures in models under study elements model and characteristics of corresponding elements of solids a. neely at al. prism o. i. oleksiuk’s pyramid o. m. liashenko’s pyramid м. і. ishchenko’s pyramid m. p. sahaidak’s prism 1 2 3 4 5 6 figure vertexes – result not specified strategic resources – base not specified not specified not specified constructed of vectorsaxes constructed of vectors-axes bottom base vertexes not specified information; resources, time not specified material resources: financial, labour, material and technical resources five factors impacting the internal marketing system bottom base stakeholder’s contribution not specified polygon of economic interests of the external environment of a company resource provision polygon resources, the use of which enables the formation of the viable internal marketing system vectors-axes in bottom base not specified not specified not specified radiuses of the circle representing the maximum potential of company traditional resources resource use level bottom base area not specified not specified area of the polygon of external stakeholders’ interests harmonization area of the pyramid base – an area of the resource provision polygon the area of the pentagon reflects the efficiency of the use of the resource base in provision of the total performance of the internal marketing system source: developed by the author on the basis of the systematized works (neely, adams, kennerley, 2003; oleksyuk, 2009; oleksyuk, 2008; liashenko, 2008; ishchenko, 2013; sahaidak, 2015) table 3 types of resources (bottom base) in models under study stakeholders types of resources in a. neely at al. prism types of resources in m. p. sahaidak’s prism 1 2 3 business owner resources, investments financial, material, technical resources; informationcommunication and intellectual resources; innovative resources personnel intellectual capital, professionalism, clientcenteredness labour, social, organizational; intellectual, innovative, and information-communication top management – organizational and administrative; informationcommunication, and intellectual customers loyalty and profitability; labour, social, organizational suppliers equipment, materials and additional service – state institutions regulatory support of business activities and facilitation of authorization procedures – source: developed by the author on the basis of the systematized works (neely et al., 2003; sahaidak, 2015) baltic journal of economic studies 166 vol. 5, no. 4, 2019 in o. i. oleksiuk’s and m. p. ishchenko’s models, resources are not divided among stakeholders (oleksyuk, 2009; oleksyuk, 2008; ishchenko, 2013). three of the five models suggest defining the area of the bottom base. o. m. liashenko marks the base area as a key factor influencing the result – the economic security level – and depicts its value dynamics: “the smaller the area of the polygon of the company external economic interests harmonization is and the lower the level of interests harmonization of its internal environment that limits the volume of the pyramid under study and, in many cases, slows down the process of external economic interests harmonization is, the smaller the pyramid volume and the lower the efficiency of the company economic interest harmonization and, consequently, the company’s economic security level and capability of increasing this level are (liashenko, 2008). in m. i. ishchenko’s model, the base is constructed of vectors-axes and defines the level of formation and efficiency of use of traditional resources. each vector in its limit value is the radius of the circle depicting the maximum potential of the company’s traditional resources (the ideal option) (ishchenko, 2013). m. p. sahaidak treats the segments constructed on the base from its centre to the polygon vertexes as sides of equilateral triangles forming the prism base (a regular pentagon). according to the author, the segments enable reflecting the level of formation and efficiency of application of the resource base of the company internal marketing system performance (sahaidak, 2015). in m. i. ishchenko’s model, limit values of the pyramid base area (s) are determined: the maximum pyramid base area that corresponds to the maximum value of the state and efficiency of traditional resources use: s = 1.732; the high level: s ≥1.109; the medium level: 1.108 ≤ s ≤0.622; the low level: s < 0.622 (ishchenko, 2013). in the other models under study, base areas do not have economic characteristics of this kind. let us consider the interpretation of the main elements of the upper base of the prisms. as the upper base is not provided in pyramids, the models of o. i. oleksiuk, o. m. liashenko, and m. i. ishchenko are not tabulated (table 4). m. p. shaidak’s prism is called idealistic, which is evidence that with real data areas of the upper and bottom bases may not conform to each other. at the same time, the author does not consider economic substantiation of the situation if the number of factors of stakeholders’ interests and needs (the upper base vertexes) change, e.g. if it grows due to challenges of a new market environment, how will the geometric figure change? the situation changes may result in an increasing number of not only the upper base vertexes but also edges, diagonal planes, etc. thus, in their performance prism, a. neely at al. provides a more general interpretation of the upper base as compared to that of m. p. sahaidak. in m. p. sahaidak’s prism, creation of a positive image of a company as an employer and a service provider in order to keep its skilled personnel and attract the new one refers to the indicator impacting the level of stakeholders’ interests satisfaction that, consequently, facilitates the company competitiveness and value increase (sahaidak, 2015). let us consider the interpretation of other elements of the solids (table 5). so, all the geometric solids under study altitudes end at the bottom base. no scientist substantiates why exactly this is in this way. in regular prisms, altitudes coincide with a lateral edge. however, with actual data the prism is no longer “idealistic”; it turns into, for instance, an oblique one. according to the stereometry rules, its altitude is a perpendicular segment that starts from a base (often from an upper vertex) and ends in the second base of the prism. but what point the altitude of the oblique prism is projected into cannot be determined without specifying additional conditions. of all the pyramids under study, the lateral faces of o. m. liashenko’s model are only interpreted. the lateral faces of the prisms under study are interpreted similarly: strategies and possibilities. at that, in the prism of a. neely, c. adams, and m. kennerley strategies are divided into corporate, subdivision, brand, service, operational, etc. (neely, adams, kennerley, 2003), in m. p. sahaidak’s prism they are not characterized. this is correct for possibilities, too. in the first prism, they are characterized as a combination of a company’s personnel, work practices, technology and infrastructure, which together enable creating consumer and added values through business processes. table 4 interpretation of upper base elements of solids in models under study elements models and characteristics of corresponding elements of solids a. neely at al. prism m. p. sahaidak’s prism 1 2 3 upper base stakeholders satisfaction the satisfaction of stakeholders’ needs and interests upper base vertexes not specified factors of satisfaction of stakeholders’ needs and interests upper base vectors-axes not specified interests satisfaction levels upper base area not specified the efficiency of use of the resource base in provision of the total performance of the internal marketing system sourсe: developed by the author on the basis of the systematized works (neely et al., 2003; sahaidak, 2015) baltic journal of economic studies 167 vol. 5, no. 4, 2019 as for possibilities, there is certain inconsistency in the performance prism: their authors state that the processes will be effectively implemented if a company possesses corresponding possibilities – resources, skilled personnel, modern technologies, necessary infrastructure (neely, adams, kennerley, 2003). this statement implies the identity of resources and possibilities. unlike in the performance prism with business processes presented by the lateral sides, in m. p. sahaidak’s prism, they are presented by internal diagonal planes. the difference between the processes in both prisms is conditioned by different purposes of the models. 5. key areas of stereometric method improvement exemplified by economic security so, the studied models on the basis of geometric figures do not completely consider the figures’ properties. in particular, from stereometry we know about the following properties of the right prism: its lateral sides are rectangular, the lateral edges are equal to each other, the right prism is a rectangular one if its lateral edges form right angles with its base. so, every prism studied is a polyhedron, two faces of which are congruent polygons lying in parallel planes, the other two faces are parallelograms having common edges with the polygons. thus, every prism under study means parity of strategies, possibilities and business processes, which is not always so and requires additional explanation. this regards not only units of measurement which can be brought into accordance (e.g. (neely et al., 2003) states that the process results can be measured in units of quality, quantity, time, handiness, money (price)) but also the very nature of the notions (there may be fewer strategies than business processes, fewer possibilities than business processes and strategies altogether). operationalization of properties of solids, on the basis of which an economic category is defined, is an important feature as without it the research cannot use such procedures as observation, measurement and loses the empirical essence (hempel, 2000). it should be noted that the models under study do not consider the fact that processes can be enhanced even if resources do not change (e.g. “learning-by-exporting” studied by d. atkin, a. khandelwal and a. osman (atkin, khandelwal, osman, 2017). so, we think it is insufficient to have knowledge of solid shapes, faces, edges, vertexes, altitudes, volumes, etc. measures of angles are of importance as well, but this fact is not considered in any of the models under study. consider this further on the example of the model of economic security of the enterprise. considering the previous investigations, when determining a company’s economic security, at first glance the pyramid similar to that of m. i. ishchenko can be used and its elements can be interpreted correspondingly: the base area is the level of resource provision of economic security (the diagonals of a quadrilateral are traditional and non-traditional resources values), the altitude is the state of economic security, the angles are business processes of reaching and maintaining its level, the pyramid volume is the economic security level of a company. at that, resources and processes together can guarantee economic security to a certain degree. let us consider the dynamics of the pyramid altitude and volume depending on measures of its angles. the elements were determined on the basis of a pyramid (the regular quadrilateral base with a segment length of 12.69 standard units and the same length of edges, the angles of 60 degrees each) applying “geogebra” (table 6). table 5 interpretation of other elements of solids under study elements model and characteristics of corresponding elements of solids a. neely et al. prism o. i. oleksiuk’s prism o. m. liashenko’s pyramid м. і. іshchenko’s pyramid m. p. sahaidak’s prism 1 2 3 4 5 6 lateral faces strategies; possibilities; processes not specified external stakeholders’ economic interests not specified strategy and level of company possibility use lateral edges not specified not specified not specified not specified not specified diagonal planes not specified not specified not specified not specified efficiency of basic business processes solid altitude not specified not specified level of internal economic interests’ harmonization strategic resources amount not specified but noted that the prism altitude equals the lateral edge length solid volume not specified not specified company stakeholders’ interests harmonization efficiency total resource potential level of resource and equipment provision of company activities source: developed by the author on the basis of the systematized works ((neely, adams, kennerley, 2003; oleksyuk, 2009; oleksyuk, 2008; liashenko, 2008; ishchenko, 2013; sahaidak, 2015) baltic journal of economic studies 168 vol. 5, no. 4, 2019 the following regularities should be mentioned, values of the pyramid base elements remaining unchanged: – the acuter the angle at the pyramid vertex (the angle between all lateral edges) is, the greater its altitude and volume values are and vice versa; – decrease of the measure of the angle between lateral edges and the base of the pyramid results in a decrease of its altitude and volume and vice versa; the same dependency occurs when measures of dihedral angles between lateral faces and the base change. besides, angles at the base, between its faces, diagonals, between a diagonal and a face can be changed as well. thus, the obtained data confirms the fact that changes in quality, speed, and quantity of business processes expressed by changes in corresponding pyramid angles impact both the economic security state (the altitude value) and its general level (the pyramid volume). changes of the angle at the vertex with the resource provision (the pyramid base) remaining unchanged results in changes of the edge length, the other angles measures, the altitude, and the volume. the important omission of all the models based on the stereometric approach consists in the fact that none of them considers rules and principles of solid construction. it is known from school planimetrics that to construct an arbitrary quadrilateral it is not necessary to know lengths of its sides – it is quite sufficient to know the length of the diagonals and the angle between them. in terms of the present investigation, the interpretation of the latter can be as follows: to determine resource provision, data on the process and two kinds of resources should be available. in view of this, we think that to construct the economic security pyramid, all resources of a company should be divided into traditional and non-traditional that can graphically be presented as diagonals of the pyramid base – a quadrilateral, the angle between them represents the process of their formation (use). in this case, a simple question arises – if resource provision should be represented by a quadrilateral, or a triangle would be enough for this purpose. in accordance with planimetrics principles, to construct a triangle it is sufficient to know values of two sides and the angle between them, a side and two adjacent angles or three sides. in the first case, the third side and two other angles are constructed automatically; in the second case, two sides and the angle and, in the third case, all the angles are constructed automatically. here, there are elements of the triangle conditioned by known elements and their values are insignificant, i.e. they are determined automatically. so, if the base of the pyramid is a triangle with the established values of traditional and non-traditional resources and the process of their formation (use), the following problem requires further investigation – how to interpret the third side of the triangle as its value is determined automatically. elements with insignificant values occur when constructing polygons with vertexes in different planes. it should be noted that when considering such economic categories as competitiveness and development of a company, they can be graphically presented as a pyramid as they are based on ternary logic that focuses on their perception through resources, processes, and a state. on the one hand, economics already possesses tools of statistical inference for parametric estimation of the similitude function for both continuous and discrete variables. on the other hand, the stereometric approach suggests greater clearness. so, if to achieve a company’s competitiveness and/or development, the resources similar to those required for providing its economic security, at least bases of the competitiveness pyramid, development pyramid and economic security pyramid will coincide. besides, not only bases but also processes (measures of the angles) may coincide. in this case, the provision of competitiveness and/or development of the company mean reaching the state of economic security. thus, to enhance the state of economic security and increase its level, which are interpreted by us as the pyramid altitude and volume respectively, it is essential (without changing resource provision) to enhance corresponding business processes that is expressed by decreasing the angle at the pyramid vertex, increasing the angles between the lateral edges and the base edges and increasing the angles between the lateral faces and the base. when substantiating explanations of business processes, it should be taken into account that measures of the mentioned angles change simultaneously. table 6 dynamics of pyramid altitude and volume depending on measures of its angles lateral edge length angles, degrees pyramid altitude pyramid volumeangle at pyramid vertex linear angles between lateral and base edges angles between lateral faces dihedral angles between lateral faces and base 24.48 30.0 75.0 93.6 74.4 22.78 1223.61 12.69 60.0 60.0 99.6 54.7 8.98 482.19 9.87 80.0 50.0 97.0 32.9 4.10 220.45 8.98 90.0 45.0 90.0 0.0 0.0 0.0 source: developed by the author on the basis of “geogebra” baltic journal of economic studies 169 vol. 5, no. 4, 2019 6. conclusions stereometric semantics used in models of determining particular economic categories does not always testify to implementation of the idea of applying geometric figures with vertexes in different planes. the stereometric approach is suggested to be meant as one of the economic analysis approaches based on visualization of economic categories and processes on the basis of geometric figures allowing qualitative and quantitative assessment of the level and dynamics of the selected array of indicators put into a single graphical model. this approach has not been formed as an individual research direction so far. the analysed models based on the stereometric approach neglect insignificant elements when using geometric solids in economics. this can be explained by the fact that all the selected parameters (faces, edges, planes, etc.) are treated as equivalent for assessment. due to this, neglecting geometric figure construction rules, those of solids, in particular, may result in consideration of insignificant, irrelevant and unreal in the current conditions information. so, the application of the stereometric approach in the models with the mentioned omission does not produce a comprehensive idea and essence of economic categories (or an economic category) described by it. that is why such models are difficult to be implemented in practice. to enhance the stereometric approach, it is suggested to consider properties of geometric figures, rules of their construction, as well as focusing on angles that are proposed in economic interpretation to characterize corresponding business processes. thus, the stereometric approach to analysing economic categories and processes and its application in 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(2013). rezultatyvnist diialnosti pidpryiemstva: naukovo-metodychni aspekty yii vyznachennia [enterprise performance: research and methodological aspects of determination]. efektyvna ekonomika, 11. retrieved from: http://www.economy.nayka.com.ua/?op=1&z=2517 (in ukrainian) baltic journal of economic studies 72 vol. 2, no. 2, 2016 corresponding author: 1 department of trading business and logistics, kyiv national university of trade and economics. e-mail: kylik_anna@ukr.net modern methods of reasonable product supply anna kulik1 kyiv national university of trade and economics, ukraine abstract. thesis objective is to study modern methods of product supply with the purpose to determine optimal ways for their rationalization. since the use of reasonable practices, taking into account external and internal factors under the specific conditions of product moving from the supplier to the buyer, makes the process of product supply economically viable, i.e., low costs for product transportation, ensures fast moving products, their safety and, ultimately, results in reduction of the costs of product disposal. methodology. the study is based on theoretical methods to study this problem. system analysis method and simulation of the ways to improve were also used in the study. results. addressing these issues, the concept, form and stages of product supply process organization depending on the type of product have been studied; product supply management methods based on logistics concept of “demand response”. practical significance. optimization of the principles and methods of product supply, factors affecting its organization will, in practice, contribute to the development of reasonable product delivery systems featured with economic efficiency of advanced technologies of product supply. value/ originality. the analyzed methods of product supply management based on logistics concept of “demand response” can ensure maximum reduction of response time to the changes in demand by rapid stocktaking at those points of the market where the demand is expected to increase, which will allow to reduce the costs of bringing the product to the consumer. key words: product, product supply, logistics, market, demand. jel classification: l11, l17, m39, l17, r22 1. introduction the topic of this article is very urgent, as product supply is the basis of the sales process making it possible to provide trade chain with the product, to develop a complex system of bringing the product to the consumer that, in general, will ensure the reduction in the price cost of the product, will make them more competitive. the products are supplied to retail chain from a variety of sources, the main of which are manufacturing companies, distribution centers and warehouses, agricultural and procuring companies. today, there are various forms and methods of the product supply. the right choice of forms or methods of the product of supply in this or that situation will allow reducing the costs of bringing the product to the consumer. product supply process should be economical i.e. low costs for product transportation, ensure fast moving product, their safety and, ultimately, result in reduction of the costs of product disposal (dashkov, 2009). in general, product supply process is aimed at ensuring the complete range, clear interrelation of technological processes in wholesale and retail trade, rational division of labor between them, improving efficiency and reliability of the demand study. rational organization and technology of product supply require selection of the most efficient methods of product delivery from supplier to consumer. in practice, two basic product supply methods are widespread: decentralized shipment and centralized delivery. in this study, product supply methods organization based on logistics concept are covered as novelty elements. the article consists of introduction, theoretical and research sections, conclusion and references. the objective of the study: to study modern product supply methods, to determine optimal ways for their rationalization. the tasks of the study: – study the concept and classification of product as the main tool of product supply; – identify the product as an object of logistics activities; – study the product supply management methods based on logistics, concept “demand response” – analyze the optimization methods of product supply system. – methods of the study: – theoretical method for studying this problem; – system analysis method; – simulation of the ways to improve. baltic journal of economic studies 73 vol. 2, no. 2, 2016 to achieve the objective, it is necessary to ensure: continuity, rhythmicity, optimal delivery of the product to consumers. studying commodity sources on the basis of logistics concept “demand response”, which should result in active impact on range diversification and improving product quality, as the range and quality of the product play an important role not only in profit of commercial enterprise, but also in meeting the needs of the customers. 2. product: essence, characteristics, classification the object of product supply in product supply process is a product of labor which satisfies personal needs of a person and is distributed through purchase and sale, i.e., takes the form of the product. in marketing the product are considered, first, as a mean with the help of which it is possible to satisfy a certain need, and then as a product of labor manufactured for sale. these concepts are generalized in the definition provided by philip kotler (kotler, keller, 2011). product is anything that can satisfy need or want, can be offered to a market for attention, acquisition, or use. often, a product can be defined as a production representing a set of manufactured products or a separate product. in accordance with the existing classification, all products are divided into two categories: products of individual (mass) use and production (industrial) purpose (fig. 1) (vinogradska, 2005). the products of individual or mass consumption are intended to satisfy personal needs of people (consumers). in this regard, they are called consumer products. the products of production or industrial purpose are classified into three groups according to the degree of their participation in the production process: materials and parts, major construction, auxiliary materials and services. the products of individual consumption, in their turn, are classified by the degree of life-time into four groups: 1) long-term use – they are purchased rarely and withstand repeated use (tv, furniture, etc.); 2) short-term use – they are acquired often, are consumed in one or several cycles of their use (food products, cosmetics, medicines, bandages); 3) services – sale objects in the form of actions, benefits. services may be associated with the products in their material form and may be provided in tangible form (e.g. information services); 4) luxury products – if the products are not available, then the buyer is waiting until it appears in the market; if the buyer does not find such product, he does not buy it at all. the demand for manufactured products is formed, as a rule, in a close interrelation with the demand for consumer goods. for example, the demand for modern eco package equipment occurs as a consequence, firstly, of increased population demand for packages of such materials, and, secondly, the need to replace polyethylene package having environmental load. 3. product as logistics activity object finished products, in their turn, are classified as follows: 1) means of production (consisted of instruments of labor and objects of labor used by companies-consumers); 2) consumer products (to be sold to the end consumer). consumer products are classified as follows: 1) fast-moving consumer products (such products are characterized by a constant demand, mostly of daily consumption, the consumers often do not think about their quality characteristics). these products are subdivided into: a) basic goods of constant demand (characterized by a constant demand, high turnover, are conditioned by the consumers’ habit and action of permanent stimulating advertising); b) impulse buying products (characterized by unstable demand, sudden purchase depending on a need); c) emergency products (purchased when required, seasonal goods); 2) preselected products (characterized by the fact that when the consumer compares various options, he has a choice. normally, simple distribution trade chains with a small number of points of sales are established for such products. this reduces logistics costs); 3) products of special demand (in marketing, these are luxury goods, for which the consumer is willing to pay more and spend more effort on their acquisition, these may be a prestigious brand products, fashion products etc.). 4) products of passive demand (in marketing, they are characterized by low demand, because the market is not aware of them, the manufacturer requires additional efforts in advertising costs, marketing campaigns, etc.). products individual (mass) use production (industrial) purpose long-term use short-term use services luxury goods materials and parts major construction auxiliary materials and services fig. 1. product classification baltic journal of economic studies 74 vol. 2, no. 2, 2016 logistics management is determined by the life cycle of the product (afonin, afonina, petrova, 2014): 1) development stage (characterized by a long duration, related to the company’s investment in scientific research and design works); 2) launch stage of the product (long-term stage, characterized by big logistics and marketing costs, almost no profit); 3) growth stage (this stage is determined by the rise in demand level for the products, difficulties in logistics management – to predict demand correctly, identify key locations and points of sales, stock management, transportation, warehouses. information inaccuracy could lead to high costs). 4) maturity stage (growth in production rate, income level reaches its peak, in the late stage a decrease in sales volume may be observed due to the actions of competitors and emergence of new products. at this stage, the logistics management is aimed on active distribution of goods in the distribution network, sales control); 5) stage of decline (characterized by a decrease in sales volumes and a decrease in profit caused by saturation of the market with products, appearance of new products, competing products, scientific and technical progress. the logistics management at this stage is aimed at reducing the number of points of sale, cutting logistics costs, cutting stocks at warehouses.). logistics cycle is a set of cycles connected by integrated logistics functions. the components of the logistics cycle (afonin, afonina, petrova, 2014): 1) order, creation of stocks; 2) processing of customer’s orders, organization of purchases and order placement; 3) delivery, production; 4) collection of customer’s orders and preparation of documents; 5) analysis and preparation of reporting documentation. 4. logistics concept «demand response» back then, the logistics concept “demand response” was developed as a modification of the concept “needs/resource planning” in terms of improved response to the changes of consumer demand. the concept “demand response” is applied to minimize the response time to the changes in demand by rapid replenishment of the points of sale where the increase in demand is forecasted (hadzhynskyi, 2003). the benefits of this concept implementation are as follows: – the possibilities to get information on customer needs, order procedures and delivery schedules of finished products help manage better the stocks in distribution; – knowledge of sales volume and stocks in retail chain helps manufacturers to plan deliveries more accurately; – the suppliers react quicker on fluctuations in customer demand; – long-term partnership relations between the manufacturers and wholesale and retail companies are established which mitigate the risks and improve the efficiency of logistics operations. the following options for the concept “demand response” are the most known: 1. the concept of order (reorder) point uses one of the oldest of stock control and management method based on order point and statistical parameters of the product flow. for long, it could not find its application in logistics due to the inaccuracies in demand forecasting. the efficiency of this method depends considerably on the accuracy of demand forecasting, owing to this fact it was not popular for long. the emergence of telecommunications and information computer systems made it possible to study the demand at the points of sale, make more accurate forecasts, which has immediately affected the application of this concept in business practice. this was also contributed by new flexible manufacturing technologies which have significantly reduced the duration of the production and logistics cycles. the scope of application of this concept is mainly adjustment of the level of reserve stocks to equalize fluctuations in demand. order point is the parameter used in stock control systems and indicating the lower difference of drawing from the warehouse stocks, when the next order should be placed. the level of stock at the time of order shall be sufficient to ensure smooth operation during the period between placing the order for the products and delivery of the ordered products to the customer’s warehouse. 2. rapid response method is a close interaction between commercial enterprise and its suppliers to improve the promotion of products in the distribution chains. its essence is in planning and regulation of supplies to retail and wholesale trade companies and distribution centers. in retail trade, any sales process is supervised and controlled, information on sales volumes by articles and range is collected and transmitted through wholesalers to the manufacturers of products. rapid response method implies the optimization of trade companies stocks. application of this method reduces the stocks of finished products to the desired value, but not below the level at which the demand of the majority of buyers can be immediately met. therewith, the time of the logistics system response to the changes in demand decreases, the stocks area concentrated and replenished in the relevant points of sales, there is flexible interaction between the partners in the integrated logistics network, stock turnover significantly increases. main conditions that allow realizing in practice the concept of rapid response include: • ability of the supplier to quickly restructure its manufacturing process to the production of new goods in small lots; • information exchange based on pc communication between trade company and supplier-manufacturer; • barcoding to enhance the level of control over the state of stocks, cutting handling costs and the costs of registration works at the warehouse. 3. logistics concept of rapid response or continuous replenishment. this concept of continuous or frequent baltic journal of economic studies 75 vol. 2, no. 2, 2016 replenishment of finished goods stocks in retail companies is considered on the basis of logistics plan and agreement between the supplier, wholesale and retail trade companies on purchases and this eliminates the need to place replenishment orders. the key elements of the implementation of the concept of continuous replenishment are daily processing of sales volumes data in retail chain and product shipments from wholesalers; calculation of total demand and product range by supplier-manufacturer; continuous or frequent replenishment of stocks of retail trade company by the supplier through resellers or through direct delivery of finished products. according to this concept, efficient work requires two basic conditions: first of all, reliable information from retailers and reliable delivery of finished products should be provided, and secondly, the consignments shall comply with the maximum cargo capacity of vehicles. 4. further development of rapid response strategies and continuous stock replenishment is the logistics concept of automatic stock replenishment, which is an improved version of the rapid response method and the concept of continuous replenishment. all of them are mainly aimed at reducing the maximum response time of the logistics system to the changes in demand. the considered concept provides the suppliers of finished products with necessary set of rules for decision making on product characteristics and categories. product category is a combination of various characteristics of the products (sizes, colors, patterns) and related products presented together in a specific retail point of sale. applying automatic stock replenishment strategy, the supplier is able to meet the needs of the retailers in product category by eliminating the need to track individual sales and stock keeping level for fast sales. automatic stock replenishment method encourages the efficiency of restocking by the suppliers in the retail chain, more efficient stock management, delivery reliability, compliance of stocks and demand, allows establishing long-term partnerships (hadzhynskyi, 2003). despite the fact that the above strategies are aimed, to a bigger extent, at meeting retail trade requests, they allow to form the most optimal form of the relationship between manufacturers and wholesalers. manufacturers-suppliers can better plan the deliveries when they are aware of the sales volume and the level of finished products stocks at the retailers, distribution centers and manufacturing facilities. this helps them respond more quickly to the changes in demand, decide on the placement of warehouses and production lines, set priorities in manufacturing and distribution between individual products and consumer groups. 5. optimization of reasonable product supply system product supply is the system of measures complex of commercial and process operations to bring the product to the retail point of sales. it includes the following processes: purchasing, delivery, acceptance and storage, preparation and sale. in practice, two forms of product supply are applied: transit – delivery of the purchased products to the stores directly from the suppliers; warehouse – delivery of the purchased products through wholesale resellers warehouses (mazaraki, 2002). entire process of reasonable product supply system is based on the following principles: conformity to plan, rhythmicity, efficiency, centralization, feasibility, effectiveness. conformity to plan means that the products should be delivered based on the planned delivery schedules. rhythmicity means that the products should be delivered at relatively regular time intervals, creating optimal conditions for shops, warehouses and transportation. efficiency means to implement product supply process in response to changes in demand. feasibility means minimum manpower costs, material and financial resources for delivery of products. it is achieved by the efficient use of vehicles, mechanization of handling operations, establishment of reasonable chain product movement. centralization means product supply to retail chain by the efforts and means of the suppliers. effectiveness means use of the industrial system of product supply using containers. transit product supply form will be profitable for the manufacturer-supplier and customer (retailer) under the following circumstances: the amount of the products disposal is sufficiently big to justify the costs of direct sales; the consumers are few and are located in a relatively small territory (there is a concentration of the consumers’ market); the products require highly specialized service; the volume of each delivered lot is sufficient to fill one shipping place (wagon, container); the purchaser has sufficient network of warehouses, barns; there is a rapid fluctuation in price that requires immediate approval by the purchaser (hrynyova, 2011). the factors affecting the organization of product supply: production (manufacturing facilities location, specialization of production enterprises, seasonality of production); transport (state of transport routes, modes of transport); social (resettlement of population, income level); trade (size, specialization and location of the points of sale, degree of complexity of the range of products, their properties). purchase of goods is a component of commercial activity of trade company, which includes (vinogradska, 2005): – study and forecasting of consumer demand; identification and study of product sources and suppliers of products; – organization of business relationships with the suppliers of products, including development and conclusion of supply contracts; – organization of accounting and monitoring of fulfillment of contractual obligations. the level of service in product supply system depends on the following factors: – velocity of order execution (time period from order placement to the receipt of the products); baltic journal of economic studies 76 vol. 2, no. 2, 2016 – possibility of immediate delivery of the products by special order; – readiness to take back the delivered products, if it is found to be defective, and to replace within the shortest period with a product of good quality (and in certain cases – to take a product back without asking the reasons of return); – ensure various sizes of shipping lots according to the customer’s desire; – skills to use the most appropriate mode of transport; – high-performance support service; – well-organized warehouse network; – sufficient level of stocks; – level of prices at which the services are provided. efficient planning of reasonable product supply system should include several stages: 1 – information collection; 2 – analysis of needs and possibilities (supplier and customer); 3 – strategy (form) selection of product supply; 4 – determining the method of product supply; 5 – operative solutions related to product supply process; 6 – control; 7 – analysis of plan implementation; 8 – plan adjustment. formation of purchase volume (optimal order) is a necessary part of the reasonable product supply system organization. optimal order is the level at which storage area is used at the most, stock storage costs are minimized. to determination optimal order does not make sense, if the order lead time is rather long with a significant fluctuation in demand and unstable prices. in all other cases, the determination of the optimal order would reduce stock storage costs not reducing the quality of service. the calculation should ne according to the following formula (dashkov, 2009): ov= where оv – optimal order; v – annual sales volume; р – cost of one order delivery; с – product unit price; s – costs of unit storage at the warehouse. thus, reasonable organization of product supply means to purchase the products: 1) of the required quality; 2) in the desired quantity; 3) at the right time; 4) from reliable supplier; 5) at affordable price. 6. conclusion product supply is an important business process for the companies supplying products to a retail chain. due to reasonably organized product supply at retail points of sale, completeness and sustainability of goods range, necessary product stocks, demand satisfaction are provided, as well as high financial and economic performance of trade companies. in accordance with the objectives and tasks of the study, the following conclusions can be drawn: principal object in product supply system is a product. product is anything that can satisfy a need or a want, can be offered to a market for attention, acquisition, or use. the most important principles of reasonable organization and technology of product supply are: conformity to plan, rhythmicity, efficiency, centralization, feasibility, effectiveness. this or that source of products is chosen taking into account the factors influencing the organization of product supply: industrial (manufacturing location, specialization of production enterprises, seasonality of production); transport (state of transport routes, modes of transport); social (resettlement of population, income level); trade (size, specialization and location of the points of sale, degree of complexity of the range of goods, their properties), as well as the goods turnover, location, state of demand and price level for the goods of different suppliers. analysis of the product supply methods based on logistics concept “demand response”, its advantages were identified: – the possibility to get information about the customer needs, order procedures and finished products delivery schedules helps to manage better the stocks in distribution; – knowledge of sales volume and stocks in retail chain helps manufacturers to plan deliveries more accurately; – the suppliers react more quickly to fluctuations in customer demand; – long-term partnership relations between the manufacturers and wholesale and retail companies are established which mitigate the risks and improve the efficiency of logistics operations. the application of the methods of this logistics concept will allow optimizing the system of reasonable product supply, which consists in the minimization of response time to changes in demand by rapid stock replenishment at those market points where the increase in demand is forecasted. thus, reasonable organization of product supply means to purchase the products: 1) of the required quality; 2) in the desired quantity; 3) at the right time; 4) from reliable supplier; 5) at affordable price. further study of the product supply management process will allow identifying and proposing the recommendations to increase the efficiency of product supply in modern conditions of increased competition. baltic journal of economic studies 77 vol. 2, no. 2, 2016 references afonin, а.м, afonina, v.е, petrova, а.м. (2014). transport logistics: freight transportation organization: manual. moscow, foruм: infra-м, 368 p. dashkov, p.p. (2009). commerce and trade technology: manual for higher school. – 9nd edition: amended and modified. moscow, publishing trade corporation “dashkov & co”, 415 p. hadzhynskyi, а.м. (2003). logistics. moscow, publishing and book trading center «marketing», 408 p. mazaraki, а.а. (2002). economics of trade company: manual. kiev, khreshchatik, 800 p. kotler, f., keller, k.l. (2011). marketing management. moscow, 14nd edition spb., p. 246. vinogradska, а.м. (2005). commercial activity of trade: manual. kiev, кnteu, 280 p. hrynyova, v.м. (2011). mechanisms of enterprise strategic management based on logistics. kharkiv, publ. hneu, 232 p. анна кулик современные методы рационального товароснабжения аннотация. целью работы является изучение современных методов товароснабжения с целью определения оптимальных путей их рационализации. так как, использование рациональных методов с учетом внешних и внутренних факторов в конкретных условиях продвижения товара от поставщика к покупателю делает процесс товароснабжения экономичным, т.е., с минимальными затратами на транспортировку товара, обеспечивает высокую оборачиваемость товаров, их сохранность и в конечном итоге, приводит к снижению затрат на его реализацию. методика. исследование основано на теоретических методах изучения данной проблемы. так же в исследовании был использован метод системного анализа и моделирование путей совершенствования. результаты. путем решения поставленных задач было изучено понятие, формы и этапы процесса организации товароснабжения в зависимости от вида товара; методы управления товароснабжением на основе товарно-логистической концепции «реагирование на спрос». практическое значение. оптимизация изученных принципов и методов товароснабжения, факторов, влияющих на его организацию, на практике будут способствовать разработке рациональной системы доставки товаров, которая отличается экономической эффективностью прогрессивных технологий товароснабжения. значение/оригинальность. проанализированные методы управления товароснабжением на основе товарно-логистической концепции «реагирование на спрос» способны обеспечить максимальное сокращение времени реакции на изменение спроса путем быстрого пополнения запасов в тех точках рынка, где прогнозируется увеличение спроса, что даст возможность снизить затраты на доведение товара до потребителя. baltic journal of economic studies 189 vol. 5, no. 5, 2019 corresponding author: 1 uzhhorod trade and economic institute of kyiv national university of trade and economics, ukraine. e-mail: cobalyudmila@gmail.com orcid: https://orcid.org/0000-0002-9838-4051 2 uzhgorod trade and economic institute of kyiv national university of trade and economics, ukraine. e-mail: lalakylich.mariya1969@gmail.com orcid: https://orcid.org/0000-0003-1027-9458 doi: https://doi.org/10.30525/2256-0742/2019-5-5-189-196 problems and prospects of cooperation of the border regions of ukraine, romania, moldova and slovakia liudmyla chobal1, mariya lalakulych2 abstract. the purpose of the paper is to outline the legal framework for the development of ukrainianmoldovan, ukrainian-slovak and ukrainian-romanian transborder regions ( tbr), in particular in the context of intergovernmental agreements, national legislation on issues of cross-border cooperation, agreements between local authorities and regional cross-border regulatory support. the international cooperation of the western region of ukraine from the side of the authorities is focused mainly on the western vector, on relations with poland. in our view, such regional policy leads to increasing regional differences in the socio-economic development of the lviv and ivano-frankivsk regions, in particular their northern and southern parts. the intensification of the cross-border cooperation with romania will create promising conditions for the transformation of a number of southern regions of the carpathian region into a zone of accelerated economic development. this can be done through the development of transport, tourism and recreation, finance, logistics infrastructure, which will increase the attractiveness of the territories. and for this it is necessary to create an economic climate in the southern districts of the region, which would help attract foreign investment, especially romanian, possibly by creating special or free economic zones there. the region has significant untapped potential of the ukrainian-romanian interaction that can be harnessed. the ukrainian-slovak and ukrainian-moldovan cooperation should also be strengthened in the region, the latter especially for the purpose of the european integration of ukraine and moldova. to this end, the article outlines the regulatory framework for the development of the ukrainian-moldovan, ukrainian-slovak and ukrainian-romanian transborder regions, in particular in the context of interstate agreements, national legislation on cross-border cooperation, agreements between local authorities and regional transborder security. the article describes the current state of subregional cooperation within the transborder regions, identifies the problematic issues of such cooperation, as well as reveals its content through the lens of the euroregional cooperation. methodogy. the dialectical method of scientific knowledge, method of analysis and synthesis, comparative method, method of data generalization are used in the paper. results of the research. a description of the current state of subregional cooperation within the framework of the tbr is given, the problems of such cooperation are revealed, and its content is revealed through the prism of euroregional cooperation. the key international projects of the development of the transborder regions were identified and their content and significance were analyzed for the improvement of the ecological safety of tbr, their entrepreneurship development, activation of innovation activities, the development of the border infrastructure, deepening of cultural interaction, improvement of urban development, revival of trade and investment activity in the above-mentioned transborder regions. the perspective directions of development of these tbrs are determined. key words: transborder region, growth potential, strategy, energy security, eurointegration, tourism, clusters, international cooperation. jel classification: f15, o19 baltic journal of economic studies 190 vol. 5, no. 5, 2019 1. introduction formulation of the problem. complete modernization of the national economy, its effective integration into the world economy, european integration processes are inconceivable without the activation of the crossborder cooperation, especially with the eu. and in light of this cooperation border areas which cover this interaction should be in the center of the state regional policy in the western region of ukraine. however, in practice, such border areas as carpathians (for example the verkhovyna district) paid little attention. as a result, these areas are actually economically backward at that time, and cross-border cooperation was almost absent until recently. the same applies to the border regions of ukraine adjoining to slovakia and moldova. however, some positive steps towards progress on them are still and we want to stay on this in the study. the task was given to identify key international projects for the development of the ukrainian-slovak, ukrainianromanian and ukrainian-moldovan transborder regions and to analyze the content and importance of projects for improving the environmental security of the tbrs, development of entrepreneurship, enhancement of innovative activity, development of border infrastructure, deepening urban development, revitalization of trade and investment activity in the above-mentioned transborder regions, identify promising directions of development of these transborder regions. analysis of recent research and publications. considerable attention of researchers is devoted to the problems of cross-border cooperation and interaction of entities in transboundary space, development of border areas in conditions of intensification of european integration processes, cooperation between border communities. in particular, such scientists as s. hacman (hacman, 2004), o. havashi (havashi, 2013), y. kish (kish, 2004), v. kotsur (kotsur, 2013), v. kryvous (kryvous, 2006), n. kulya (kulia, n.d.), o. kyfyak (kyfiak, 2007), a. milashovska (milashovska, 2008), s. mitryayeva (mitriaieva, 2005) and others worked over this issue. however, insufficient attention is devoted for the current state of border areas and search of ways for their development. in this regard, our research is focused on studying the development characteristics of such border areas as the ivano-frankivsk, vinnytsia, odesa and transcarpathian regions in terms of border cooperation with the eu regions. methodology. the dialectical method of scientific knowledge, method of analysis and synthesis, comparative method, method of data generalization are used in the paper. the purpose of the article is to identify problems and outline the perspective directions of activating the interaction of the border regions of ukraine, moldova, romania and slovakia. 2. problems and prospects of cooperation of the border regions the structure of the ukrainian-slovak transborder region includes three administrative units: the transcarpathian region from the ukrainian side, presov and kosice regions of slovakia from the slovak side. the districts sobrance, mihajlivka and of kosice region and district snina of presov region in slovakia border directly with ukraine, and districts velykyi bereznyi, perechyn and uzhhorod of transcarpathian region border with slovakia. ukrainian-slovak cross-border region covers a total area of 28,504 km2. among all its neighboring countries, ukraine has the shortest state border with slovakia, which length reaches 97.85 km. there are located 6 crossing points and control points on the border, including three rail (uzhhorod, chop (strazh), pavlove), two cars (uzhhorod, malyi bereznyi), one bike-pedestrian (mali selmentsi) borders. the average distance between checkpoints is 19.57 km that corresponds to eu standards. increased interaction between two parts of the ukrainian-slovak transborder region takes place on the large enough basis of the bilateral legal framework, including 50 interregional and 30 strategically important for the development of tbr agreements between subjects. the most important among them are certainly agreement on small border traffic, agreement on promotion and mutual protection of investments, as well as memorandum of understanding between ukrtransgaz jsc (ukraine) and eustream a.s. (plc) (the slovak republic) on the reverse gas supplies to ukraine through slovakia, transborder region in hub of gas and energy or its important element (underground gas storage facilities in western ukraine) for enhance of energy security of ukraine, following the example of existing iranian, british and kazakh models. the ukrainian-slovak transborder region is involved in the functioning of the carpathian euroregion, in frame of which the projects are aimed at the development of municipal and green tourism, revival and preservation of cultural heritage, forming the base of investment ideas and fundraising, development of infrastructure and utilities sector, strengthening of environmental safety and setting up of information exchange. however, we believe that euroregional cooperation ("lemkivshchyna") should also be implemented within the same ukrainian-slovak tbr and based on energy and tourism components. this would allow to take into account the specifics of ukrainian-slovak tbr more fully and to build its development strategy on that basis. despite its small size and relatively small population, slovakia has a number of competitive advantages, including: membership in the european union; entry into the schengen area and the euro area; developed automotive industry; developed tourism, agricultural sector and pharmaceutical industry; extensive baltic journal of economic studies 191 vol. 5, no. 5, 2019 experience in the establishment and functioning of industrial parks; successful experience of the euroregional cooperation. this makes it one from priority partners for ukraine in the field of cross-border cooperation and determines the appropriate specificity of the ukrainian-slovak transborder region. despite the relatively short length of the ukrainian-slovak border (99 km), this region has significant potential for social and economic growth, which so far had realized and come mainly to administrative and cultural-ethnic issues of establishing of mutual cooperation. important steps of establishing inter-regional cooperation within the transborder region became ratification of the agreement on local border traffic between ukraine and the slovak republic (decree of the president of ukraine no. 697/2008 dated august 6, 2008) (the verkhovna rada of ukraine, 2008), the agreement between ukraine and the slovak republic on promotion and mutual protection of investments (signed on february 26, 2007) and signing of the memorandum of mutual understanding between ukrtransgaz jsc (ukraine) and eustream a.s. (plc) (the slovak republic) on the reverse gas supplies to ukraine through slovakia and other contractual documents in political, consular-visa, trade-economic, energetic, transport fields, etc. these steps contributed to the growth of investment attractiveness of the ukrainian-slovak tbr , its establishment as a strategic area of the energy security of ukraine strengthening and its organizational design. however, it should also be noted that despite all the positive effects of the signing of the agreement on small border traffic, its performance showed a large gap in social and economic living standards of transborder region. in particular, the slovak shopping tours in transcarpathia is very beneficial for local businessmen, but prices for local goods and services are increasing for the population, which make them less able to purchasing. in addition, act of this agreement applies to the 30-kilometer border zone, not on the 50-kilometer, as provided in similar agreements with poland and hungary. this means less coverage range of residents for the ukrainian-slovak tbr that can enjoy the benefits of the agreement. thus, the ukrainian side of the state border agreement covers 280 cities and villages. an additional obstacle to the implementation of the agreement is bureaucracy from the slovak side (bureau of border and foreign police in the ministry of internal affairs of the slovak republic), which requires an invitation, a large amount of information, evidence, justification, arguments and questionnaires or 3-year permanent residence in the border zone, a mandatory fee in 20 euro and compulsory indication and proof of travel reasons. as we know, the practice of introducing local border traffic is the norm of the eu, which aims to encourage ethno-related, cultural and historical ties between the citizens of neighboring countries. of course, the current situation on the slovak-ukrainian state border is not conducive to the full and in-depth development of the ukrainian-slovak transborder region. we think that the establishment of the cross-border cooperation between ukraine and the slovak republic should be based and united around the idea of the european integration, because from all the western countries neighboring with ukraine slovakia proved to be most successful in this process. in this regard, more attention needs expanding of activities and increasing of the transfer of functions of the center for experience transfer in integration and reforms (cetir), which has been operated in the foreign ministry of slovakia since 2010 and is intended to improve the qualifications of representatives of ukraine in the ministries and departments of the slovak republic. in the cut of the economic issues bloc of the ukrainianslovak transborder region development the definitely helpful priority in establishing of closer cooperation is spreading of the slovak experience in attracting of investments for the ukrainian part of tbr . thus, in its frames a list of tax exemptions and preferences is defined for investors that differentiated depending on the amount of investment, but also expected the practice of mandatory compensation of costs on creating of jobs and partial covering the capital costs of transborder region should be supported by a set of objective factors, among which the political and ethnocultural component has important value, taking into consideration the european integration aspirations of ukraine, centuries-old ethnic and historical proximity (the historical region of lemkivshchyna) and today presence of quite numerous ukrainian minority in slovakia and the slovak minority in ukraine. in recent years one of the most pressing issues of tbr development was the issue of strengthening of state border security and border infrastructure development. a key threat on the ukrainian-slovak state border is the proactive acts of criminal gangs that engaged by trafficking of persons, moving of tobacco products, drugs, stolen cars, goods and cargoes and so on. affair of the so-called "underground tunnel junction" (unian, 2012) through the ukrainian-slovak border acquired wide publicity in 2012. despite some difficulties, the ukrainian-slovak transborder region has a very strong potential for interregional cooperation. in particular, currently 50 agreements on cooperation at various levels of regions, districts and municipalities are concluded. also about 30 documents on cooperation between institutions are signed, the implementation of which provides contacts at the micro level: between certain structures, enterprises, universities, schools, research institutions, cultural institutions, libraries, etc., that allow regular conduction the joint activities, scientific conferences, round tables, workshops, forums, colloquiums, etc. baltic journal of economic studies 192 vol. 5, no. 5, 2019 the agreement on interregional cooperation between ivano-frankivsk regional state administration and the council of the maramures county was signed on march 29, 2008. the document dealt with the setting up the regional cooperation in trade-economic, scientifictechnical and cultural spheres. regarding implemented measures by the agreement, joint action plans were developed and implemented; promising direction with the romanian experience in the european integration and the use of eu funds is introduced. also the visit of the official delegation of the ivano-frankivsk region to the maramures county was agreed, led by the head of the regional state administration. in addition, was realized romania-ukraine neighbourhood programme "creating of cross-border network for development and promotion of tourism and investment opportunities in the ivano-frankivsk region of ukraine and the maramures county of romania" (odessa region state administration, 2016). this is, in essence, the basic meaningful project of the interregional cooperation. its general goal is the creation of conditions and framework for development of the cross-border tourism in two border regions. the implementation of project is aimed at: 1) launching of initiatives for cooperation with the romanian agencies and exchange of experience through the development of institutions and institutional framework for the crossborder tourism; 2) improving the quality and quantity of services in the regions, which can take local and international visitors; 3) joint creating of the system of tourism promoting; 4) searching and exploring of the possibilities for simplification of the passage of the ukrainian-romanian border for pedestrians and cyclists. the anticipated results of the project execution: initiatives for cooperation in experience exchange with the romanian agencies through the development of institutions and institutional framework for the crossborder tourism under the leadership of the ukraineromanian resource center for tourism and business (ivano-frankivsk); improving the quality and quantity of services in the regions, which can receive local and international visitors; creation of a joint ukrainianromanian tourism promotion system that includes conducting of marketing research on the cross-border tourism, organization of study tours, dissemination of information materials and joint participation in national tourism events; setting to work dialogue with the border authorities of both countries at the opening of the border for pedestrians and cyclists. executors and partners of project were ivano-frankivsk regional state administration, tourist association of the ivano-frankivsk region, carpathian national nature park, ecologic association (the maramures county, romania). an important aspect of the cross-border interaction, which is not important in terms of its organizational design, is a part of region in the functioning of the european regions. for the ivano-frankivsk region this are euroregions "carpathians" and "upper prut". the development of the cross-border innovation infrastructure is an important aspect of the organizational design of the cross-border cooperation. thus, in 2008 the ministry of regional development in cooperation with the national academy of sciences of ukraine on execution of n. 6 of cmu prescript on september 10, 2008, no. 1214 p. developed the project of "national strategy for creating and maintaining of cross-border clusters" as a tool for implementation of the state regional cross-border policy. this document for the ivano-frankivsk region offers two cross-border cluster initiatives: 1) forest transboundary cluster (as part of the carpathian border regions of ukraine and neighbouring countries); 2) cross-border tourism and recreation cluster (as in the carpathian border part of ukraine and neighbouring countries). however, none of the proposed cross-border clusters in the ivanofrankivsk region have effect. in addition, the ivano-frankivsk region is a member of the cross-border partnership of the cross-border cooperation programme of european neighbourhood and partnership instrument (ccp enpi) (ccp enpi, 2013) on the territory of poland, ukraine and belarus, which is actively forming today with the eu support. as part of this program two major programs boosting regional development are implemented: taiex (technical assistance and information exchange) and twinning (the exchange of management experience at the regional level). this cross-border partnership declared goals such as increasing competitiveness of regions that are involved in this partnership, improving socio-economic level of their development, strengthening cooperation of the border communities. the ivano-frankivsk region makes border region of the area about 50 km to the state border with romania. in general, today 10 checkpoints (control points) exist on the ukrainian-romanian border. five of them are in the transcarpathian region, there are two in the chernivtsi region and three in the odesa region. at the same time in there are no checkpoints in the transcarpathian region. however, during the period of 2009-2013 local authorities of the ivano-frankivsk region and authorities of the allied romanian county ( judeţ) maramures actively conducted and continued to work for creating an international checkpoint shybene–poienile de sub munte for motor road and pedestrian traffic, which will be located 10 km from suburb shybene of village yavirnyk of zelene village council in the verkhovyna district, near mountain kopylash (marmaros array in the chyvchyny mountains) at an altitude about 1600 meters above sea level. creating of this checkpoint will give the region a number of advantages: – transport advantages: increasing of passenger traffic volumes (including foreign tourists), moreover, not only in romania but also in the balkans countries that baltic journal of economic studies 193 vol. 5, no. 5, 2019 will be an additional source of revenue for local and state budgets. according to project estimates (galicia np in ivano-frankivsk, 2013) an average income will be about 115 mln. euro in the next 5 years after opening the crossing point; transport links to the southern districts of ivano-frankivsk region will be improved significantly, the construction of highway of 4 category is required after opening the checkpoint, which will connect the transcarpathian region with the romanian county maramures (road held on from the verkhovyna district to the border with romania (40 km) through the villages iltsi, krasnyk, topilche, zelene and yavirnyk); – investment advantages: at least three objects important for the economy of region and attractive for investment are allocated in the area of the possible checkpoint disposition, i.e. the verkhovyna district (ski centers "chornohora", "krynta" and recreational complex "hadzhyna"). thus there are opened the opportunities for creation of new jobs, infrastructure development of the southern part of the region; – social benefits: creating at least 3,000 new jobs, on the one hand, and the development of tourism and recreational industry, on the other hand; – advantages tied with saving on transaction costs: according to project developers estimations (radio românia internaţional, 2013). in addition, it should be emphasized also on the synergy effect from deepening of international division of labor in adjacent regions in the perspective and mutual interlacing of national processes of production reproduction; – cross-border advantages: opening of the crossing will allow the wide implementation of the programs of cross-border cooperation with the romanian side, and actually creation of checkpoint will be the first successful example of setting up of the cross-border cooperation. as a result the verkhovyna district is able to transform from the "hard to reach corner" of the ivano-frankivsk region into the active cross-border cooperation. the feature of the organizational infrastructure of border crossings is that in ivano-frankivsk act polish visa center at the same time as the romanian consulate or their representation is absent. based on all the above, we can formulate the following recommendations for enhancing of cross-border cooperation for ivano-frankivsk region: 1) accelerating of the establishment of the ukrainian-romanian border crossing " shybene–poienile de sub munte"; 2) activation of cooperation of the transcarpathian region with other regions within euroregion "carpathians" and especially "upper prut"; 3) the creation of two cross-border clusters in the ivanofrankivsk region (forestry and tourism); 4) development of investment and innovative infrastructure in the region (based on such transcarpathian innovative facilities as galician innovation agency, oil and gas science park, etc.); 5) construction of border infrastructure in the verkhovyna district within opening of the new border crossing, development of its organizational infrastructure. even from 2005 the representation of the romanian consulate in chernivtsi was planned to open in ivano-frankivsk, but this initiative has not been implemented. in our view, this creates a serious barrier to cross-border cooperation with the romanian side today; 6) promoting of the consistent growth of trade turnover between the ivano-frankivsk region and neighbouring romanian regions; 7) establishment of special or free economic zone in the verkhovyna district for attraction of foreign, primarily romanian, investments. despite the wide range of outstanding common problems from problems of delimitation and infrastructural improvement of the ukrainian-moldovan state border to all-round issues of environmental safety, the development of the ukrainian-moldovan transborder region going reinforced rapidly. this is evidenced by the growth of the number of the european regions, active intergovernmental dialogue on trade and economic cooperation, intensification of cultural, scientific and educational cooperation. the structure of the ukrainian-moldovan tbr includes the administrative-territorial units of the republic of moldova: 10 districts (causeni, soroca, cahul, stefan-voda, oknita, donduseni, briceni, cimislia, basarabeasca, taraclia) and two autonomous entities – transnistria and gagauzia, and the chernivtsi, vinnytsia and odesa regions from the ukrainian side. the legal bases for the development of the ukrainianmoldovan transborder region are as follows: interstate agreements: – treaty of good neighborhood, friendship and cooperation between ukraine and the republic of moldova dated january 5, 1997. agreements about the cross-border cooperation between neighbouring countries: – joint operational programme of the european neighborhood and partnership instrument (crossborder cooperation program) "romania – ukraine – republic of moldova 2007 – 2013"; – on april 15, 2015, the selection of projects under the eu-funded program of support of territorial cooperation of the countries of eastern partnership "ukraine-moldova" started; agreements on cooperation between the border regions of ukraine and the administrative-territorial units of the republic of moldova: – on march 11, 1997, in chisinau the "agreement between the government of ukraine and the government of the republic of moldova on cooperation between the border regions of ukraine and the administrative-territorial units of the republic of moldova" was signed. agreement between ukraine and the republic of moldova on local border movement: – "agreement between the government of ukraine and the government of the republic of moldova on baltic journal of economic studies 194 vol. 5, no. 5, 2019 entry points through the ukrainian-moldovan state border and simplified passage of citizens living in border areas", signed on march 11, 1997 and came into force on august 12, 1997. amendments to the agreement were filled by the protocol of the parties on may 29, 2006. other intergovernmental agreements and framework documents that deal with the cross-border cooperation issues: – on july 4, 1997, in the city of izmail, the "protocol on trilateral cooperation between the governments of ukraine, the republic of moldova and romania" was signed by the president of ukraine l. kuchma, president of the republic of moldova p. lučinski and the president of romania e. konstantinescu; protocol on the establishment of diplomatic relations between ukraine and the republic of moldova dated march 10, 1992; – consular convention between ukraine and the republic of moldova dated november 11, 1996; – agreement between ukraine and the republic of moldova on the state border dated april 6, 2000; – the memorandum of understanding (mou) between ukraine, the republic of moldova and the european union border assistance mission to moldova and ukraine (eubam) was signed on october 7, 2005; – on february 22, 2013, in vinnytsia, an agreement between ukraine and the republic of moldova on the regime of the ukrainian-moldavian state border, cooperation and mutual assistance on border issues was signed. national legislation on cross-border cooperation: – on june 24, 2004, the law of ukraine "on transboundary cooperation" was adopted; – on april 29, 2002 the cabinet of ministers of ukraine adopted resolution no. 587 "on certain issues of cross-border cooperation and euroregions development"; – order of the cabinet of ministers of ukraine no. 59-p "some issues of development of cross-border cooperation within the euroregion "upper prut" dated february 14, 2002; – in the state program for the development of crossborder cooperation during 2011-2015 (approved by the resolution of the cabinet of ministers of ukraine no. 1088 on december 1, 2010), paragraph 7 of the measures for ensuring the development of cross-border cooperation for 2011-2015 indicates the completion of the development of the joint ukrainian-moldovan urban development project of the region involved in the cross-border cooperation; – decree of the president of ukraine no. 271/94 dated june 3, 1994 "on measures for the development of economic cooperation of the regions of ukraine with the adjacent regions of the republic of belarus and the administrative-territorial units of the republic of moldova". agreements between local authorities: cooperation agreements between adjoining territories: – the agreement on the formation of the "upper prut" euroregion was signed on september 22, 2000 in botosani, romania. from the republic of moldova edinet, falesti, glodeni, ocnita, riscani, briceni districts and the municipality of balti included to the euroregion; – on february 2, 2012 in kyiv official representatives of the vinnytsia region and six districts of the republic of moldova (donduseni, ocnia, rezina, soroca, floresti and soldanesti) signed the treaty on the creation of the euroregion "dniester"; – agreements on trade-economic, scientific-technical and cultural cooperation between the vinnytsia regional state administration and the soroca district (dated september 25, 1999) and the transnistrian region of the republic of moldova; – since 2004 there has been the agreement between the yampil district state administration of the vinnytsia region and the soroca district council of the republic of moldova on trade, economic and cultural cooperation; – in 2012, agreements were signed on cooperation between the village of oclanda (the soroca district, the republic of moldova) and the village balanivka (the bershad district, the vinnytsia region), the village of cainarii-vechi (the soroca district, the republic of moldova) and the village of klembivka (the yampil district, the vinnytsia region). joint strategies for the development of the crossborder cooperation between neighbouring countries: operational program of the european neighborhood and partnership instrument (cross-border cooperation program) romania – ukraine – republic of moldova 2007-2013; the black sea cross-border cooperation program 2007-2013, which includes the republic of moldova and the odessa region of ukraine. other normative-legal and framework documents between local authorities dealing with the cross-border cooperation were issued, such as: in august 2014, in the framework of the international investment forum in vinnytsia, a protocol of intentions was signed for the construction of a combined bridge crossing between cosauti (moldova) and yampil (ukraine). regional legislation on cross-border cooperation: – "the program of european integration border cooperation and interregional relations of the odessa region for 2008"; – on april 26, 2012 the program of european integration, interregional relations and the formation of a positive image of the odessa region for 2012-2013 was adopted. prospects of the ukrainian-moldovan transborder region development must be viewed in several ways: – problems of arranging of the ukrainian-moldovan state border and border infrastructure development; baltic journal of economic studies 195 vol. 5, no. 5, 2019 – prospects of the ukrainian-moldovan cooperation within the euroregions "upper prut", "dniester" and "lower danube"; – the problem of the transnistrian conflict settlement and resolving of related with it socio-economic issues; – intensification of trade and economic cooperation and potential of the ukrainian-moldovan tbr, including within the regional association of countries of the organization for democracy and economic development guam, which runs the spheres of economy, trade, energy and fights against international crime; – the implementation of a number of important infrastructural projects in tbr (restoration of preserved construction of the railway izmail-reni even in 2008 (for unloading of so-called bender railway junction and avoiding of multiple changing by moldovan side of customs regulations for port reni), the construction of the railway route berezyne – bassarabeasca, the construction of bridge over the dniester estuary and bridge yampil – cosauti (across the dniester river), modernization and electrification of the rail track bilhorod-dnistrovskyi – izmail, restoring with the best option water route through the ukrainian part of the danube delta, the search for alternatives to moldovan gres and power plant vulcanesti (in transnistria) for power supporting of some districts of the odesa region of ukraine); – solving of environmental problem issues in the transborder region (flood system for the dniester and danube rivers, hydrometeorological monitoring system for problem areas, ecological danger of the moldovan refinery near the village giurgiulesti, located on the border, about forty entities in the ukrainian danube, which can be a source of environmental threat, the threats to ecosystem of danube biosphere resort from the side of erected deepwater navigable channel danube – the black sea by ukraine in 2007). specifically first, most multidimensional issue characterized by a number of key features: 1) the current state of demarcation of the ukrainian-moldovan border, safety and accountability of which is the key to the successful flow of the european integration and euro-atlantic processes on both sides of it; 2) the role of the transnistrian conflict in border issues of ukraine and moldova; 3) the effectiveness of the mission of the european commission on the transnistrian section of the state border between ukraine and moldova; 4) the value of demarcation of the ukrainian-moldovan border to the integration processes and the development of the cross-border cooperation in the region. 3. conclusions as the current practice shows, regional authorities of the ivano-frankivsk region focused in the field of international cooperation mostly on polish vector. in our view, this regional policy is not quite correct, because this situation exacerbates regional disparities of socioeconomic development of the ivano-frankivsk region, particularly its northern and southern parts. namely tbr activation with the romanian side will create conditions for transformation of verkhovyna districts and other southern districts in the transcarpathian region in zone of accelerated economic development in perspective. this can be done through the development of transport, tourism and recreational, finance, logistics infrastructure, increasing of investment attractiveness of territory. and for achieving this purpose it is necessary to create the special economic zone (sez) or free economic zone (fez) for encouraging of the involvement of foreign, especially romanian investors, in the southern districts of ivano-frankivsk region. the potential of the romanianukrainian interaction in the region is significant, but for now it is just the beginning of the realization. thus, the problems of border regions of ukraine, moldova and the eu are diverse and multifaceted, and their comprehensive solution requires the joint efforts of all participants in cross-border cooperation. at the same time the leading theme of this interaction must be european integration movement of 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http://www.unian.ua/society/677528-tunel-mij-ukrajinoyu-ta-slovachchinoyu-buduvali-na-ochah-meshkantsivujgoroda.html (accessed 15 october 2019). ukraiins’ko-rumuns’ka zustrich u iaremche [ukrainian-romanian meeting in iaremche] (2013). radio românia internaţional. retrieved from: http://www.rri.ro/uk_uk/ukrayinsko_rumunska_zustrich_u_yaremche-3652 (accessed 15 october 2019). baltic journal of economic studies 34 vol. 5, no. 4, 2019 corresponding author: 1 vinnytsia national agrarian university, ukraine. orcid: https://orcid.org/0000-0003-3072-4854 e-mail: aleskrovaaleskerova@gmail.com 2 uman national university of horticulture, ukraine. orcid: https://orcid.org/0000-0002-0532-136x e-mail: lavreniukliuba@gmail.com 3 podillia state agricultural and technical university, ukraine. orcid: https://orcid.org/0000-0002-4685-5544 e-mail: vitagavrilyuk1@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-34-41 innovative financial criteria for methodological approaches to the assessment of agrarian insurance yuliia aleskerova1, liubov kovalenko2, vita havryliuk3 abstract. the purpose of this article is to study the experience of financial support of agricultural insurance system of ukraine. investigated peculiarities of innovative financial criteria of methodological approaches to the estimation of agrarian insurance methodical provision of process and technologies of agricultural insurance are evaluated. the content and principles of functioning of the mechanism of agricultural insurance are revealed. methodology. the methodical approaches for determining the target indicators of a comprehensive assessment of the development of the agricultural insurance system and its criterion characteristics are developed. agricultural insurance is considered an area of insurance that is technically demanding. the state is considered and trends and regularities of insurance development are revealed. an assessment of the suitability of any agricultural insurance service should take into account the production system; asset type; key risk factors that are subject to insurance; location of agricultural land; data availability; the size of the farm; sales channels. the research was based on the use of a systematic approach to the consideration of financial phenomena, on the fundamental positions of economic theory, system theory, the theory of finance, insurance management, etc. the quality in the hypostasis of the philosophical category characterizes the stable property of the phenomenon in the dynamics of its general development. results. the practice and peculiarities of insurance protection of agricultural commodity producers are traced. the advantages and disadvantages of an assortment of insurance products are determined. the main internal and external factors influencing the mechanism of agricultural insurance have been identified. practical implications. deepened scientific ideas about the formation of the insurance policy. unification is carried out according to different algorithms. this is due to the expediency of unifying the components for which the ranking is from the highest to the lowest. value/originality. the essence of state support of agricultural insurance is determined. innovative tariff policy is proposed and possibilities of application of non-traditional agricultural insurance products are revealed. the recommendations for determining the main landmarks and the dominant components of the development of agricultural insurance system development strategies have been formed. the conceptual platform for harmonization of the mechanism of agricultural insurance and improvement of its institutional and infrastructural component is substantiated. key words: agricultural insurance, socio-psychological concept, development, financial, relations, innovation, investment, processes, analyse. jel classification: o31, g22, j43, q14 1. introduction the fundamental transformations in the agricultural insurance system conditioned by qualitatively new economic conditions limited the binding nature of insurance protection methods, which were constantly used as state levers of influence on agriculture. agricultural activities face risks linked to market trends and environmental conditions, in particular, climatic conditions and in italy, the heterogeneity of the territory determines a high variability of conditions and productions. these natural factors, associated with the scenarios of climate change, increase the level of uncertainty for agricultural activities, strongly baltic journal of economic studies 35 vol. 5, no. 4, 2019 influencing the interaction between climate and crops’ cycles (quantity and quality of productions) and between climate and farms’ investments (damages to equipment and infrastructures caused by extreme weather events). in order to manage risks in agriculture, one of the most important instruments used in the italian agricultural sector is the insurance system that without doubts can be one of the central climate change adaptation options. in facts, agricultural insurance allows managing a wide range of risks and it is theoretically enough flexible to adapt itself to changed conditions and priorities. however, the model of voluntary insurance with insurance subsidies remains acutely debatable. currently, the domestic agricultural insurance system is slowly developing at the expense of formal schemes mainly in the extensive format and is accompanied by a variety of financial, informational, analytical, organizational and institutional and infrastructural issues. the problems of increasing the quality of insurance products, combining and harmonizing the interests of participants in the system of agricultural insurance, its structural modernization remain unresolved. in the present, there is a controversial process of finding its own model of development of the agricultural insurance system. at the same time, they were closely intertwined with the remaining models of the administrative economy, as well as the latest, progressive ones. in this section, it is objectively necessary to consider the research of theoretical, methodological and practical aspects, the development on the scientific platform of strategies and a set of measures on the development of agricultural insurance system, taking into account the various instruments of state influence. 2. economic crisis effects on consumer behaviour the system of agricultural insurance as in any financial system is characterized by two driving forces – a desire to preserve itself and have some firmness and a desire to develop and modernize. we can’t but agree with h. visem who argued that now replacing the old ideas: “at first preservation and only then development,” an increasingly established understanding: “preservation through development” since self-preservation without self-perfection and constant adaptation to the external environment leads to destructive processes and destroys the very economic system. the concept of “development” is considered rather complex in conjunction with the economic system so it is important to consider its interpretation in two formats. the first format defines development as a philosophical-scientific concept, in the second format we consider it in the cut of the economic system and more specifically in the cut of the system of agricultural insurance (aleskerova, 2015). in the dictionaries, it is indicated that “development is a philosophical, economic, and socio-psychological concept, the meaning of which is concentrated in irreversible, purposeful, and logical changes of material and ideal objects” (aleskerova, 2015). only “simultaneous synthesis of all three properties distinguishes development among other changes” (aleskerova, fedoryshyna, koval, 2018). various interpretations of the category “development” are presented in table 1. thus, the meaning of development is focused on the fact that this is a special kind of movement, which is characterized by three characteristics: quality, quantity, and table 1 interpretation of the concept of “development” author definition a. vasilenko the acquisition of a new quality that strengthens viability in the context of changing the environment. o. shubravska the process of transitioning a system from one state to another, which is accompanied by a change in its qualitative and quantitative characteristics. l. zabrodska the dynamics of the transition of the economics and production system into a new more qualitative state by the accumulation of quantitative potential, changes and complications of structure and composition, the echo of which is to increase its ability to withstand the destructive effects of the environment and the efficiency of the activity. m. mescon, m. albert, f. khedouri long-term program to improve the ability to solve various problems and ability to recover, especially by improving the management of the culture of the organization. e. korotkov the set of changes that lead to the emergence of new quality and strengthening the vitality of the system, its ability to resist destructive forces of the environment o.v. rayevneva a unique process of transformation of an open system in space and time characterized by a permanent change in the global goals of its existence by forming a new dissipative structure and translating it into a new attractor of functioning. v. dovbenko the dynamics of the state change of an object by improving its characteristics and a qualitative, quantitative increase of parameters. m. afanasyev the objective change only of the qualitative characteristics of the system is determined by the fundamental laws of nature (the unity and struggle of opposites, the transfer of quantity to quality, the progress of society in a spiral and upward) and the laws of the activity of specific systems (aging equipment, accumulation of experience and knowledge of workers, depletion natural resources) in which the new properties of the system are formed baltic journal of economic studies 36 vol. 5, no. 4, 2019 structure. quantitative transformations are characterized by an increase or decrease in the number of components of the system or their quantitative characteristics, which after a certain time leads to qualitative transformations in accordance with the provisions of the law of transition of quantitative ones – into qualitative changes and vice versa. structural transformations should be considered as changes in the interconnections of system components, which may not be accompanied by an increase or a decrease in their number. predominantly, the number of components remains unchanged but structural transformations lead to qualitative changes as internal contradictions are the driving force behind development. the process of development through internal contradictions is defined by the law of unity and the struggle of contradictions. the source of quantitative transformations is the contradiction with the external environment, the source of structural transformations is internal contradictions. qualitative transformations can be expressed through extrapolation: by attracting matter and energy, through interaction with the external environment and through the differentiation of the system without its deformation and imbalance or as a change in the quality of the components or subsystems of the system. thus, we are convinced that the development of the agricultural insurance system should be understood as the aggregate transformation of interdependencies of qualitative, quantitative, and structural characteristics. a significant influence on the level of development of the system of agricultural insurance is its design since the composition and interconnection of components of the qualitative changes and the content of the system. 3. differences in consumer spending behaviour among age groups the development of the agricultural insurance system is a complex and multi-faceted dynamic, which in a certain time interval can display progressive, regressive or stagnant characteristics, it is defined by the system of certain values and landmarks and it possesses the ability to change its composition, functions, components, subsystems. thus, the development of the system of agricultural insurance contributes to the development of all its components and systems of a higher order: development of insurance, development of agriculture as an industry, development of agricultural commodity producers, development of infrastructure, institutions, financial relations, innovation and investment processes, etc. the development of the agricultural insurance system can also be outlined through the mega system of the “external environment – the system” since the agricultural insurance system is considered an open system, which has close ties and constantly interacts with external components. the set of all factors, mechanisms, preconditions should ensure the development of the system of agricultural insurance. it is important to distinguish between “development” as a certain process and “development” as a certain result. these two linked formats are interconnected. the first format shows the directions, mechanisms, tools for achieving the goal, the other – demonstrates the effectiveness of development, the speed and completeness of achieving the goal, the formation of prerequisites for the effective development of the system. in practice, the format “development – process” acts as a platform for the format “development – result” (aleskerova, 2018). the basis of the development of the agricultural insurance system is the transformation: within the system and in the relationship between the system and the environment. the development of the agricultural insurance system can be due to a combination of transformations: the link between transformation and development can be considered as causal, consequential, reciprocal, interdependent, and recursive. interestingly, the crisis and the deformation of the environment are predominantly an impetus for transformation. the key purpose is to destroy and replace the least sustainable and viable components that violate the unity of the agricultural insurance system. crises and deformations may deepen, which is explained by unfavourable environmental events. the above circumstances caused the relevance of this article, which aims at analysing innovative financial criteria for methodological approaches to the assessment of agrarian insurance introduction. to achieve this purpose it is necessary to investigate innovative financial criteria for methodological approaches to assessing agricultural insurance. 4. survey methodology the methodological basis of the research is the general economic method of ascending from abstract to concrete, theoretical achievements of domestic and world financial science, conceptual provisions of modern insurance theories. the research was based on the use of a systematic approach to the consideration of financial phenomena, on the fundamental positions of economic theory, system theory, theory of finance, insurance management, etc. thus, the development of the agricultural insurance system is multidimensional and outlines the deep transformations in all its components. this development should take into account all interconnections and interdependencies. therefore, in order to determine the criteria and methodological approaches to assessing the development of the agricultural insurance system, it is appropriate to consider this development in the interconnection and interdependence with other components of the environment. baltic journal of economic studies 37 vol. 5, no. 4, 2019 it is worth pointing out that in revealing the axioms of the complex economic systems, the thesis concerning the necessity of a criterion for the harmonious development of the system should be deepened by provisions regarding some uncertainty of this criterion and the expediency of its refinement and concretization. this provision is considered fundamental, although in its turn it causes uncertainty and risk and contributes to the construction of a qualitatively new system of agricultural insurance. interesting, many researchers are of the opinion that any economic system is evolving through information flows. e. pestel noted that “uncertainty is generated when there is a lack of exhaustive exact information or there is no knowledge of the phenomenon or object of the search”. the quality in the hypostasis of the philosophical category characterizes the stable property of the phenomenon in the dynamics of its general development. that is, the quality reveals the properties of agricultural insurance, outlines its objective characteristics, essential characteristics, and functional characteristics. without defining qualitative signs of the system of agricultural insurance, it is impossible to identify and explain the logic and trends in its development. qualitative transformations expand and deepen the content of agricultural insurance. we can’t but agree with the philosophers who claim that quality is “the primary direct determinate of being.” at the same time, the quality of agricultural insurance depends on quantitative characteristics and doesn’t manifest itself without them. the number is considered an objective characteristic “indifferent in being.” the number is an external property, an attribute of the phenomenon including agricultural insurance. these two characteristics (quality and quantity) don’t manifest themselves without one and they are objective signs of the system of agricultural insurance. that is the criteria of development of the system of agricultural insurance; it is expedient to consider both qualitative and quantitative parameters. they are mutually interconnected; there are direct and back links and mutual influence. quantitative transformations in agricultural insurance, which reflect its objective characteristics, appear in a certain quality circle (mention, in particular, the historical development of quantitative parameters of agricultural insurance in the cut of its qualitative characteristics). qualitative and quantitative characteristics of the development of the agricultural insurance system are estimated by measure. the philosophical category of measure serves as a kind of objective criterion between qualitative and quantitative indicators of agricultural insurance. the measure serves as contradictory unity, in which the qualitative characteristic is determined by quantitative (that is, quality is defined by the appropriate number) and the quantitative characteristic is determined by a qualitative (that is, the number corresponds to a certain quality). the distortion of the measure deforms the qualitative properties of the agricultural insurance system; it changes and acquires new qualitative features. demonstrates a qualitative outbreak or “continuity of graduality”, that is, there is a jump from a certain qualitative state to another qualitative state. “graduality” and “leap” are considered indissoluble, interconnected components of the development of agricultural insurance. the dialectical unity of these components is due to the consistency and qualitative differences between the unceasing cycles of the development of the agricultural insurance system as a complex economic phenomenon. these differences and interconnections demonstrate their echo in the evolutionary and revolutionary cycles of agricultural insurance development. in accordance with the provisions of the law of the transition of quantitative transformations to qualitative, the formation and development of the system of agricultural insurance must be carried out by gradually multiplying the quantitative components, parameters, transformations and jump to a qualitatively new level of functional transformations, from one state of the system of agricultural insurance to a qualitatively different. demonopolisation of domestic agricultural insurance, access to the insurance market of a large variety of private insurers explains radical qualitative changes in the system of agricultural insurance. practically, there was a “leap” as the system of agricultural insurance began to be formed. thus, there was a shift in quantity to quality. at the same time, the new quality of the agricultural insurance system, which is demonstrated in increasing its role in solving socio-economic problems of agricultural producers, determines the appearance of new quantitative transformations. the development of agricultural insurance requires an increase in the capitalization of insurers, in particular, through mergers, acquisitions, unions. the fall in the number of insurance companies with a simultaneous increase in insurance capital will increase the opportunities for agricultural insurance and will lead to new qualitative transformations. such dynamics is carried out continuously. the transition of quantitative transformations into qualitative ones leads to the objective estimation of quantitative and qualitative characteristics, internal and external factors of agricultural insurance. only by this approach, one can impartially investigate various quantitative changes in the system of agricultural insurance, explain the laws of its development, give them an objective assessment, demask their qualitative deep sense and, on this platform, ensure the formation of appropriate financial conditions for the harmonious development of the agricultural insurance system. the development of a system of agricultural insurance is important to consider in view of the interests of the baltic journal of economic studies 38 vol. 5, no. 4, 2019 state, insurer, insured person since their synthesis reflects the effectiveness of the whole system. a criterion for the development and effectiveness of the agricultural insurance system is a certain ratio of quantitative indicators and qualitative characteristics, which can be used to assess the relationship between the state, insured persons, and insurers. the criteria for the development and efficiency of the agricultural insurance system are: – ensuring the firmness and stability of the expanded reproduction of agricultural production; – provision of agricultural insurance utility functions for all participants; – coverage of insurance products by the risk maps of agricultural commodity producers; – the fullness of damages; – ensuring the adequacy of insurance reserves; – quality, breadth of assortment, and profitability of insurance products; – balance and availability of agricultural insurance; – the efficiency of agricultural insurance; – the rise of capitalization of insurers; – transparency of the system of agricultural insurance. let’s consider more carefully some of the criteria. the meaning of the coverage criterion of insurance products by the risk maps of agricultural producers is focused on providing agricultural products with insurance products for most of the identified agricultural risks. the risk map is a matrix-text description of the identified risks of agricultural commodity producers, which demonstrates the intensity of the impact, its significance, weight, and generation probability. formation of a matrix of risk maps for agricultural producers is a laborious and time-consuming procedure. by gathering the necessary information array for systematization and generalization of agricultural risks, a significant information base is formed (aleskerova, 2017). the assessment of agricultural risks (q) is expedient to carry out by the two-factor method of peter-ryan: q=z*j, where q – the probability of adverse events; j – the significance of adverse events (aleskerova, fedoryshyna, koval, 2018). it is important to take parameters of the probability of adverse events at the level of average insurance rates for the selected risks. significance is defined by the expert method. after identification of probable agricultural risks, the scenarios of their levelling or reduction and measures are selected. it is important to identify vulnerability to agricultural risk. subsequently, mathematical information processing is carried out to identify potential losses for each identified agricultural risk and probable insurance premiums. however, the probable risks associated with the proposed range of insurance products and the level of their profitability are compared. it is advisable to periodically update the risk map according to changes in internal factors and the external environment. the map should be improved along with the changes in agricultural production as new opportunities are generated with the expansion of opportunities, accordingly, the range of insurance products should be expanded and improved. to analyse the provision of the insurance benefit criterion for all participants, it is advisable to apply the following algorithm: 1. the largest and smallest values of the indicator are determined, if the utility is measured on a 100-point scale, utility values are ranked from 0 to 100. 2. several standard values are determined, which are expertly ranked and determine utility values. 3. average utility values are determined. 4. if there is a significant fluctuation of utility values then it is advisable to reconcile expert approaches to the range of utility values. 5. the integral utility is calculated using the regression function by calculating the least squares method. another key criterion for assessing the agricultural insurance system is the provision of insurance reserves. in general, insurance reserves include all components of insurance capital that can be oriented towards covering potential losses. the search for methodological approaches to the analysis of the development of complex integrated economic systems convinces us of the inadequacy of exploiting only quantitative indicators, since they outline their state and functioning in past periods and, therefore, can’t serve as a basis for predicting future development prospects. at the same time, the calculation of purely quantitative indicators will distort the assessment of the agricultural insurance system. therefore, it is important to exuberant the system of qualitative characteristics that allows outlining the dynamics of tendencies that are not subject to mathematical estimates but they can be considered valuable for assessing the development of the system of agricultural insurance. to assess the quality of the development of the agricultural insurance system, the list of criteria should be developed and it is important to establish the “weight” of each block of quality criteria (todosiychuk, 2016). the main indicator of the quality of the development of the agricultural insurance system can be the indicator – q, which should be determined using the modified method of the mean square deviation, which is calculated as the difference between the values of perception and the values of expectations with the simultaneous application of weight indices. the basis for such an assessment is the weighting of each criterion block: q k à àñ і ï = − = ∑ ( )0 2 1 , (1) where q – an integral indicator of the development of the agricultural insurance system; і – criterion of quality of development of the system of agricultural insurance; baltic journal of economic studies 39 vol. 5, no. 4, 2019 k – weight index of the relevant criterion block; àî – the value of the quality of the criterion block by the level of expectation; n – the number of criteria used to assess the development of the agricultural insurance system; àñ – the value of the quality of the criterion unit by the level of perception. one of the tasks of the development of the system of agricultural insurance should be the harmonization of expectations of agricultural producers with the proposed range and quality of insurance products. to assess the balance and accessibility criteria, it is expedient to assess the regional components of the agricultural insurance system according to the following scheme: 1) on the basis of forming a set of indicators of the functioning of the agricultural insurance system for insurance products and regions, to determine correlation dependencies, a variation of coefficients and to generalize to the integrated indicator; 2) to evaluate the regional components of the agricultural insurance system using one-factor and multi-factor dependencies with the inclusion of a multivariate assessment of internal and external factors of influence. it is expedient to search for harmonious correlation of the interests of agricultural producers, insurers, and the state with schedules of collected premiums, amounts of compensated payments, uncompensated losses, the profitability of agricultural production, loss-making of agricultural insurance and parameters of insurance subsidy of insurance protection of agricultural producers. harmony of the ratio of interests will be demonstrated by the criterion of the utility of agricultural insurance and determined by the formulas: d = dmax, in the situation: rrel * v = z>rnorm; f<fmax; wnorm = w<wmax where rrel– the probability of reverse by the insured of guaranteed means higher than the standard (rnorm); v – amounts of damages to be paid to agricultural producers with a certain probability – rrel; z – the amount of damage; f – time slot during which losses will be recovered (fmах); d – the income of agricultural producers from insurance calculated as the difference between the reduction of uncompensated damages and the amounts of insurance premiums; w – an integral indicator of the development of the system of agricultural insurance which includes a set of non-economic constraints harmonious balance of interests of all participants. integral assessment of the development of the agricultural insurance system is based on the blocks of indicators: homogeneity, balance, stability, profitability, loss-making, structuring, and risk-taking. each block contains quantitative and high-quality parameters, coefficients, indices, indicators (plakhtii, 2019). among the key indicators that should be used in the contour of the integrated assessment of the development of the agricultural insurance system, it is necessary to separate: the ratio of the amount of insurance premiums and agricultural gdp, the dynamics of the growth of assurer and insurers, the amount of insurance payments per one agricultural producer, the indicator of loss, the index of the severity of the consequences of natural disasters, the average amount of insurance indemnity, the ratio of reimbursed losses and the size of insurance premiums, the size of insurance premiums at the regional level. the application of this integrated assessment of the development of the agricultural insurance system will make it possible to more closely identify the contour of the development of the agricultural insurance system and will serve as an information justification for the adoption of strategic decisions. the matrix of the integrated assessment of the development of the agricultural insurance system on the platform of the modified main component has been constructed, which will facilitate the implementation of the curtailment of the output meters to form an integrated indicator and to disassociate the development of the regional components of the system (kraybill, 1989). a range of statistical indicators was selected that outline various aspects of the development of the agricultural insurance system and its regional components: x1 – the number of insurers in general and in the regional section; x 2 – receipt of insurance premiums, uah for one insured person; x 3 – the amount of insurance indemnities, uah for one insured person; x 4 – the size of insurance premiums, uah for one insured person; x 5 – segment of insurance indemnity in insurance premiums, %, and x 6 – segment of insurance premiums directed to reinsurance, %. an expedient procedure for the formation of an integral indicator is the unification of the selected output data, that is, the use of extrapolation with the use of which all of them will be calculated in the n-ball format. at the same time, the zero indicator will harmonize with the smallest level of development and the maximum number n – with the largest. such unification guarantees the comparability of the built information array. 5. findings unification is carried out according to different algorithms. this is due to the expediency of unifying the components for which the ranking is from the highest to the lowest. for measuring instruments, the rise of which contributes to increasing the measure of agricultural insurance, the index of a certain unified variable is determined by the algorithm: baltic journal of economic studies 40 vol. 5, no. 4, 2019 x x x x x nij ij j j j = − −     min max min (2) where xij – i index j of the output unified index xj (i n= 1, , j m= 1, , n – the number of observations for the index xj, m – the number of output values; xij – i index j output unsupported index x j; xj min – the lowest index j output unrestricted index x j; xj max – the highest index j source unregistered index x j. for meters whose rains negatively regulate the development of agricultural insurance, the index of a certain unified variable is determined by the algorithm: x x x x x nij j ij j j = − −     max max min (3) if the source index x j is linked to the aggregate integral index by nonmonotonic bonds (that is between xj min and xj max), there is a certain optimal index xjopt at which the maximum rate of development is observed, the index of a certain unified index x j is determined by the algorithm: x x x x x x x ijopt ij jopt j jopt jopt j = − − −( ) −( ){ }   1      max ,max min       n (4) the definition of the integrated indicator y is calculated by the algorithm: y w xj j m j= = ∑ 1 , (5) where wj – weight index, xj – output values, m – the number of output values. according to the definition of the modified main component by the algorithm (5) as a weight wj it is expedient to take the squares of the component j in a certain trajectory l1 of the matrix of the measuring instruments x1, x2, …, xm. when forming an integral indicator of the development of the agricultural insurance system in the country and in the regional section according to the algorithm (2.21), for comparison, weight indices wj were calculated at the same time according to another algorithm, namely, the dispersion segment d (xj) of the value of xj in the totality of the dispersion of all output indices: w d x d x j j j j m = = ∑ ( ) ( ) . 1 (6) the purpose of this assessment is to disassociate the laws and strategies of the development of the agricultural insurance system. such an assessment helps identify trends in the development of the agricultural insurance system and outlines the weaknesses of the system. the platform of the proposed methodological approach to assessing the development of the agricultural insurance system is a set of criterion characteristics and a balanced synthesis of selected meters (schindler, 1994). 6. conclusions insurance agricultural risk is defined as possible damage inflicted on a particular object of insurance due to its loss or damage as a result of the insured event specified in the insurance contract, calculated in the value equivalent but not greater than the specified amount of insurance. such an interpretation of insurance agricultural risks has allowed developing a matrix of insurance and non-insurance agricultural risks that are inherent in agricultural production. methods of calculating the insurance premium for agricultural insurance require reliable, objective, longterm data, which is possible when a system for collecting and processing statistical information on insurance incidents in agriculture is established (aleskerova, 2015). nowadays, agricultural insurance procedures and technologies can’t be considered perfect because of the inadequate exploitation of progressive tools. the mechanism of agricultural insurance – is the construction of methods, instruments, tools, and appropriate support. in this context, it is advisable to allocate the following components of the mechanism of agricultural insurance: 1) subjects and objects of agricultural insurance; 2) methods, levers, and instruments; 3) income, expenses, and reserves; 4) institutional and infrastructure component; 5) informational and organizational support. components of the mechanism of agricultural insurance with varying intensity affect the development of both the system of agricultural insurance and its participants (ransom, 2011). the development of the agricultural insurance system is a complex and multi-faceted dynamic, which in a certain time interval can display progressive, regressive or stagnant characteristics, it is defined by the system of certain values and landmarks and it possesses the ability to change its composition, functions, components, subsystems. the matrix of the integrated assessment of the development of the agricultural insurance system on the platform of the modified main component has been constructed, which will facilitate the implementation of the curtailment of the output meters to form an integrated indicator and to disassociate the development of the regional components of the system. references: aleskerova, yu., mulyk, t., & fedoryshyna l. (2018). improving credit protection analysis methods reports of main agricultural enterprises. baltic journal of economic studies, 4(2), 1–7. doi: 10.30525/2256-0742/2018-4-2-1-7 aleskerova, yu., & fedoryshyna, l. (2018). analysis of investment activities of enterprises of ukraine. economic system development trends: the experience of countries of eastern europe and prospects of ukraine: monograph. riga, latvia: “baltija publishing”. baltic journal of economic studies 41 vol. 5, no. 4, 2019 aleskerova, yu., fedoryshyna, l., & koval, n. (2018). features of loan security for the reproduction of fixed assets for agricultural purposes. baltic journal of economic studies, 4(4), 1–5. doi: 10.30525/2256-0742/2018-4-4-1-5 aleskerova, y. v. (2014). governmental support to agricultural insurance in the countries of the world. economic sciences: theory and practice. baku: azerbaijan state university of economics, 71(2), 31–41. plakhtii, т., fedoryshyna, l., & tomchuk, o. (2019). socio-economic component of preferential taxation of individuals' incomes. baltic journal of economic studies, 5(2), 1–7. aleskerova, yu., & todosiychuk, v. (2016). fiscal multipliers in ukraine. economy and management organization, 4(24), 36 –43. david ransom (2011). if1 – insurance, legal & regulatory. chartered insurance institute. donald, b. kraybill (1989). the riddle of amish culture. schindler, r . m. (1994). consumer motivation for purchasing low-deductible insurance. in marketing and public policy conference proceedings, 4, 147–155. baltic journal of economic studies 236 vol. 5, no. 4, 2019 corresponding author: 1 black sea research institute of economy and innovation, ukraine. e-mail: k.s.shaposhnykov@gmail.com orcid: https://orcid.org/0000-0003-0640-9934 2 black sea research institute of economy and innovation, ukraine. e-mail: o.p.golovko@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-236-242 public regulation and administration in the sphere of small business kostiantyn shaposhnykov1, oleh holovko2 abstract. the article highlights the system of public regulation and administration of the small business. the purpose of the article is to study features of public regulation and administration in the sphere of small business and to form conceptual foundations of its improvement. the subject-matter of the study is the theoretical and practical aspects of public regulation and administration of small business in the country. in the course of research, the following methods are used: dialectical – to identify factors and system of public regulation, system analysis – to determine the essence of state support for the country’s economy, graphical analysis – to present schematically the general theoretical and practical results of the study, logical generalization of results – to substantiate the basic prerequisites for the formation of state support system for small business. the essence and importance of public regulation and administration in the sphere of small business are studied. index of economic freedom is analysed and the ranking of countries by the ease of doing business is built. it is determined that the current political and economic situation in ukraine is unfavourable, which considerably slows down the development of small business. main prerequisites for the formation of the system of public regulation and administration of small business are revealed and justified: improving the legal framework to facilitate the development of small business; providing a system of benefits for small business; development of business environment infrastructure; expansion of small and large business cooperation; state support for the development of factoring and leasing activities; providing financial and credit and also investment support to the business sector; management and information support. key words: public regulation, administration, small business, development, state support. jel classification: м20, h70, z18 1. introduction one of the priority tasks of public policy in all countries is to support the development of small and medium business. it is a small business that is very important in providing a competitive environment, economic strength, increasing the employment level of the population and, therefore, reducing social tensions in society. so, the issue of regulation, administration, and support of small business development in developed countries of the world are decisive in the interaction of interests of the state and interests of small and medium business. in ukraine, unfortunately, a small business cannot yet be identified as an important sector of the national economy. taking into account the current transformation processes in the country’s economy and the features of the formation of small business in our country, comprehensive state support to the development of this sphere in ensuring stabilization and socio-economic development of society is required. 2. analysis of recent research and publications world economic science pays considerable attention to the study of the sphere of public regulation of small business as one of the natural factors of the country’s socio-economic development. an important contribution in the theory of entrepreneurship is made by a. smith, r. cantillon, j. thünen, f. knight, j.b. say, a. marshall, m. weber, w. sombart, p. drucker, b. karlöf, b. szántó. among the domestic researchers of various aspects of small business development, we should mark h. bilous, b. burkynskyi, a. butenko, z. varnalii, v. zhykharova, i. komarnytskyi, m. krupka, v. kuznietsov, ye. lazarieva, i. lemeshevskyi, v. lysiuk, v. liashenko, v. onyshchenko, l. nikolaiev, m. syzonenko, d. stechenko, o. tymchenko, n. shlafman. issues of regulation and development of small business are highlighted in papers of foreign scientists: a. müller, j. reid, m. porter, h. de soto, g. stigler, e. chamberlin, o. auzan, and others. among the domestic scholars and researchers of public regulation and administration of small business development, b. adamov, v. vyhovska, baltic journal of economic studies 237 vol. 5, no. 4, 2019 l. vorotina, yu. ivanov, m. kyzym, v. liashenko, v. orlova, n. poltarak, o. shpychak, l. cherniuk, m. chumachenko, v. yurchyshyn, and others should be noted. in their works, they studied theoretical, methodological, and practical aspects of the essence and condition of small business, identified problems of regulation of its development. however, the issue of public regulation and administration of small business development in ukraine remains extremely urgent for the modern stage of reformation of market relations in the country’s economy. modern organizational, legal, economic conditions of small business development require an in-depth study to ensure the socio-economic growth of the country. 3. essence and importance of public regulation and administration in the sphere of small business in the current economic environment, public regulation and support to small businesses in ukraine are an important prerequisite for its intensification in overcoming crisis phenomena and ensuring economic development. in general, in the papers written by o. prutska and yu. yarova, state support to the economy is determined within the public regulation as “a way of influencing business entities aimed at solving certain tasks of economic development through the use of a set of instruments and forms” (2013). researchers v. laptiev and s. zankovskyi (2006) consider state support through the state regulation of the economy and define it “as a set of organizational, legal, economic, and other measures of influence on the development of economic activity and solving social problems.” k. lebodkin (2011) notes as “positive tendencies in the sphere of small business as a result of implementation of measures of its state support, among them the increase of economic entities, small enterprises, the share of small and medium-sized enterprises in the total number of business entities, the volume of manufactured and sold products by one enterprise in the small and medium business sector, as well as some negative effects, namely: low volumes of production and sale of products per one operating enterprise; reducing the share of the small business sector in the volume of products sold (services provided)”. according to the law of ukraine “on state aid to business entities” (zakon ukrajiny pro derzhavnu dopomoghu subjektam ghospodarjuvannja), state aid to business entities – support in any form to business entities at the expense of state resources or local resources that distorts or threatens to distort economic competition, creating benefits for the production of certain goods or the conduct of certain economic activities. it should be noted that the importance of public regulation increases significantly with the signing of the association agreement between ukraine and the eu, in which the issue of legal regulation of state support has received considerable attention (iristyscheva, krupitsa, 2014). therefore, any state support requires spending of budgetary funds that must be used effectively and aimed at developing the country’s economic potential. in our opinion, public regulation and administration in the sphere of small business is a special type of business management relations between public authorities and local self-government and small business entities. in the current regulatory framework, there are several signs for identifying small businesses for various purposes. so, the law of ukraine “on state aid to business entities” substantiate the legal bases of state support and regulation of small business. this law defines the essence of a small business entity, that is, indicates which business entities belong to the category of small business entities, namely (zakon ukrajiny pro rozvytok ta derzhavnu pidtrymku malogho i serednjogho pidpryjemnyctva v ukrajini): – natural persons, registered in the established order as subjects of economic activity; – legal entities – subjects of economic activity of any organizational and legal form and ownership, in which the average accounting number of employees during the reporting period (calendar year) does not exceed 50 people, and the amount of annual gross income does not exceed 70 million uah. the commercial code of ukraine adopted on 09.06.2013 contains an updated classification of the small, medium, and large business entities (part 3, art. 55), which combines the definition of small business entities that previously existed in art. 1 of the above law. these changes in the commercial code of ukraine are made by the law “on development and state support of small and medium business in ukraine” no. 4618 where (section 5, para. 3) micro, small, and large business entities are clearly defined. those that are beyond the above categories are classified as medium-sized enterprises. among the small business entities, a sub-category of micro-business entities is distinguished. however, state support, in accordance with the law no. 4618, is provided to small and medium-sized businesses that meet the criteria set out in part 3 of art. 55 of the commercial code of ukraine (art. 12 p. 1) (ghospodarsjkyj kodeks ukrajiny). it should be noted that in ukraine, state regulation policy of small business is characterized by considerable state intervention in small business. this is evidenced by the dynamics of the indicator of business freedom of the index of economic freedom (figure 1). when calculating the index, 4 groups of factors are used (indeks ekonomichnoji svobody 2 5-ty richnyj vypusk): – rule of law; – government size; – regulatory efficiency; – market openness. today, the index of economic freedom is calculated for 186 countries of the world, with only 180 of them fully rated and ranked. baltic journal of economic studies 238 vol. 5, no. 4, 2019 during 2014–2019, the highest score of the index of economic freedom in ukraine is 52,3. compared to the last year, some indicators are worse, namely: property rights, governmental transparency and trade freedom. attention should be paid to the fight against corruption, the capital market development, the privatization of state-owned enterprises, and the improvement of the legal framework and the rule of law. the leading countries are great britain, sweden, and germany. it is worth noting that the main factors of negative processes of small business are ineffective state regulation of small business activities, in particular: frequent changes in public policy that do not allow time for the entities to adapt to new economic conditions, inefficient tax policy. the issue of corruption in the public authorities is of paramount importance, as it adversely affects all areas of small business. according to statistics, in recent years the number of small businesses per 10 thousand people in ukraine is much lower than in european countries. in 2017, the number of small enterprises in the country was 425 units per 10 thousand people, it significantly reduced by 52 units as compared to 2010 (derzhavna sluzhba statystyky ukrainy). it stands to mention that this indicator in italy – 600, in spain – 508, in france – 478. in terms of employment for small businesses in ukraine, it did not reach even 4% of the total population, but in european countries, the share of employed workers is between 10-20%. the volume of sales of small enterprises in ukraine in the total volume of sales is the smallest, which is almost 25%. in particular, the volume of sales in spain, italy, and portugal reaches 50% of the total sales. study of foreign experience in public regulation of small business shows that in many countries, various levers for supporting this sphere are widely used (table 1) (voloshchuk, rakovich, simochko, 2016). so, in great britain, there are programs of financial assistance to small businesses, namely: a scheme to support business creation, which provides assistance to unemployed people who intend to start their own business; loan guarantee program; programs to assist young people in creating and expanding their businesses; programs to assist local authorities in developing small business ( jevropejsjka khartija malykh pidpryjemstv). income tax rates for small businesses have been reduced up to 27%, while for other businesses it has been reduced to 35% and taxes on investments in new small business areas, especially those associated with high risk. support for small enterprises takes place at the expense of local business agencies, job centres, utility associations, and initiative groups and services of small firms. small business support in european countries is taking place through special programs implemented figure 1. dynamics of the index of economic freedom for 2014–2019 baltic journal of economic studies 239 vol. 5, no. 4, 2019 in the eu countries due to comprehensive support at the state level. within the theory of support, we substantiate the legal aspects of state support for small business in europe and ukraine. the legal aspects of supporting small and medium-sized businesses at the supranational level are defined by the small business act for europe (akt malogho byznesa dlja evropy), which is based on the european charter for small enterprises and is the first european initiative to ensure the sustainable growth and expansion of small and medium-sized enterprises (smes) ( jevropejsjka khartija malykh pidpryjemstv). as a result of this document, new opportunities have opened up for smes to sell products to foreign markets and prospects for expanding international relations, forming the legal framework of the country. the issue of support and development of small business in europe was identified in 2009 by the competitiveness council in the document “conclusions on the small business act”, which identified the following priority areas of economic development of small business: simplification of access to finance, facilitating market entry, creating an enabling environment for the effective development of the business sector (conclusions on the review of the “small business act” for europe). in 2010, another economic development strategy for small business was adopted – “europe 2020: a strategy for smart, sustainable and inclusive growth” that set out the following strategic goals for eu development: improving employment, scientific and technological development, improving education and science, increase of social activity and well-being of the population ( jevropa-2020 strateghija). this document has become the driving force for creating and promoting the necessary levers of economic, social, regional policy and has made it possible to reorient existing small business development measures to the most effective and promising ones. let us consider an analysis of the level of business development of countries in the world rankings on the ease of doing business (figure 2). according to the doing business-2019 ranking, ukraine occupies a positive position, having risen for 4 years by 12 positions (doing business in ukraine). the rating is compiled by the world bank and evaluates the following areas: business registration, building permit, connection to electrical systems, property registration, obtaining loans, protection of minority investors, taxation, international trade, contract execution, insolvency resolution (doing business in ukraine). the political and economic situation in the country is unfavourable, which significantly hampers the development of small business. it is worth noting that an important consequence of the existing problems of small business development in ukraine is the growth of the level of shadow economy every year. to improve the business environment in ukraine, the european bank for reconstruction and development (ebrd) is pursuing an active financial policy in ukraine, in particular, by funding 329 projects. the ebrd has already invested 9.64 billion usd in ukraine. since 2015, the ebrd and the eu have jointly launched a project to support small and medium-sized businesses in ukraine, georgia, and moldova. funding is provided through a network of regional banks to maximize the approximation of funds to their immediate recipients. table 1 characteristics of state support systems for small business country/ indicator financing taxation system opening and closing conditions organizations that support and regulate small business ukraine limited financial resources for small business development. ineffective credit and state financial support policy for small businesses. high tax rates the opening system is simple ukrainian fund for entrepreneurship support, small innovative business support fund, regional fund for entrepreneurship support usa lending with low-interest rates by programs: sba 7(a) loan, the 504 loan program. loan program for small businesses that are not eligible for loans through conventional lending channels for up to 10 years. taxes depend on enterprise size support to entrepreneurs and simplified startup process small business administration, small business development centers, california association for local economic development; service core of retired executives; centers for international trade development germany programs that facilitate access to capital and new technologies, granting preferential loans for small business development in the following fields: scientific development, construction, production, improving the environmental situation in the country. lending with low-interest rates and extending the use of finance up to 5-15 years. too high tax rate. grants for agriculture. the complicated and long registration procedure youth entrepreneurship strategy in wales, eu programme for the competitiveness of enterprises and small and medium-sized enterprises, smes), erp (european recovery programme, coparion for young firms, interreg – support for regional projects baltic journal of economic studies 240 vol. 5, no. 4, 2019 eu support to ukraine to re-launch the economy program, which is oriented to 2016–2020 with an estimated budget of 95 million eur , is aimed at supporting small and medium-sized businesses in the country’s regions through technical assistance and advice on business deregulation and improvement of national and regional business development programs, the establishment of regional business support centres, which will contribute to economic growth and employment, creation of an export-oriented economy. it also envisages the development of a loan-guarantee instrument to be issued by commercial banks. it is worth noting that according to the national program on promotion of small business development, financial and credit support for small business is a system of measures of a certain credit-guarantee mechanism that work for the development of small business and self-employment of the population (zakon ukrajiny pro nacionaljnu proghramu spryjannja rozvytku malogho pidpryjemnyctva v ukrajini). in order to intensify the activity of the small business, it is necessary to form a comprehensive mechanism for the development of public regulation and administration of the small business sector (figure 3). the main factors supporting small business include legal framework, tax regulation, support infrastructure for small businesses, as well as management and information support (grishina, butenko, grishina, 2014). support funds, governing bodies, and international institutions are the main institutional components of state support for small business. thus, the main tasks of public regulation and administration of the sphere of small business should be the following: – improving the legal framework for the development of small businesses; – benefits systems for small business entities in the country; – development of infrastructure for ensuring the functioning of the business environment; – development of cooperation of small and large business; – state support for the development of factoring and leasing activities; – providing financial and credit and investment support to small and medium business; – development of self-employment of the public; – management and information support in the sphere of small business. 4. conclusions based on the results obtained, the author concluded that for the effective public regulation and administration in the sphere of small business, favourable conditions are required for the development of activity of small business structures, which are implemented through support funds, governing bodies, and international institutions, as well as support of business incubators, technoparks, technopolises, and clusters. the conducted analysis of foreign experience shows that public regulation of small business is closely associated with other areas of socioeconomic development of the country, namely, new job formation, growth and development of the economy, and increase of the country’s competitiveness. when forming support programs for small business, public authorities and local self-government bodies should take into account the interests of employed workers, the degree of their loyalty to market relations. creation of favourable legal, organizational, and economic conditions for the development of small business should become one of the main goals of state policy. figure 2. the ease of doing business ranking of countries baltic journal of economic studies 241 vol. 5, no. 4, 2019 factors influencing small business support legal framework tax regulation funding sources small business infrastructure institutional components of state support for small business support funds governing bodies international institutions small innovative business support fund; ukrainian fund for entrepreneurship support; german-ukrainian fund. verkhovna rada of ukraine; cabinet of ministers of ukraine; local self-government bodies; ministry of finance of ukraine; ministry of economic development and trade of ukraine; state fiscal service of ukraine; entrepreneurship and regulatory policy development department. public regulation and administration of small business sphere management and information support european bank for reconstruction and development; international finance corporation; european investment bank. figure 3. 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[law of ukraine on state assistance to business entities: law of ukraine dated july 1, 2014 no. 1555-vii]. retrieved from: http://zakon2. rada.gov.ua/laws/show/1555-18 zakon ukrajiny pro nacionaljnu proghramu spryjannja rozvytku malogho pidpryjemnyctva v ukrajini: vid 21.12.2000 # 2157-iii [on the national program for promotion of small business development in ukraine: no. 2157-iii dated 21.12.2000]. retrieved from: http://zakon.rada.gov.ua/laws/show/2157-14 zakon ukrajiny pro rozvytok ta derzhavnu pidtrymku malogho i serednjogho pidpryjemnyctva v ukrajini: vid 22.03.2012 № 4618-vi [law of ukraine on development and state support of small and medium enterprises in ukraine: law of ukraine]. retrieved from: http://zakon.rada.gov.ua/laws/show/4618-17 baltic journal of economic studies 139 vol. 7, no. 1, 2021 corresponding author: 1 supreme court, ukraine. e-mail: suddya09@gmail.com 2 university of customs and finance, ukraine. e-mail: lyutikovp@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-1-139-144 the concepts and the essence of interpretation of law oleh bilous1, pavlo liutikov2 abstract. the purpose of the paper is to define the concept and essence of the interpretation of the rules of law based on the generalized analysis of scientific, journalistic, and regulatory sources. results. it is established that the interpretation of the rules of law is an intellectual and volitional activity of an interpreter, which is carried out under the principles and by means of interpretations and aimed at clarifying and/or specifying the content of the rules of law to understand and apply them in practice correctly and uniformly. value/originality. it may be enshrined in special acts of interpretation, scientific and practical commentary on legislation, doctrinal sources and other external forms of interpretation. key words: interpretation, law, rule of law, essence, object, purpose. jel classification: k10, k15, k38 1. introduction the complexity of legal interpretation and the ambiguity of its results always arise a genuine interest of both legal scholars who study general theoretical issues and scholars who deal with the problems of branches of legal sciences. essentially, from the beginning of the 40s – 60s of the past century, i.e. from the moment of the final establishment of the so-called theory of legal interpretation in the domestic legal doctrine, till the present, representatives of the scientific law society have been pursuing answers to the following questions: “what is interpretation of law? what are its real resource and potential? what is an object? finally, what is a subject of this complex intellectual-volitional process? taking into account that social relations are dynamic and fast-changing, law controlling them is also subject to transformation. one can objectively assume the abovementioned scientific questions concerning the interpretation of legal rules will never become obsolete and lose social importance. moreover, it is essential to consider that law, changing its regulatory options, requires a revision and renewal of approaches to its interpretation. it seems these factors have also influenced the fact that, even at a conservative estimate, domestic and foreign scholars have written more than a hundred theses and monographs devoted to various issues of interpretation of law, and the number of scientific articles cannot be counted at all. it stands to reason that such a diversity of scientific material indicates the ambiguousness in settling challenging issues for science. consequently, this complexity has brought about one can make bold to suggest on several independent and diametrically opposing views on the interpretation of law and its rules. 2. generalized analysis of theory of interpretation in the soviet period of legal doctrine development despite the statement that theory of statutory interpretation was developed in the mid-20th century, the authors consider it necessary to refer to the scholarly works of those scientists who are treated as its founders and whose scientific heritage is still relevant. thus, e. n. trubetckoi asserted it was not enough to be sure of the existence of a legal rule for the application of law, it was necessary to clarify the content of the rule to be applied. according to the prominent scientist, in order to establish the precise content of the rule, the text which notifies us of its availability is subject to grammatical analysis. if this involves the laws, their text can be subject to analysis. e. n. trubetckoi believed that interpretation of law was not limited to grammatical analysis. the interpretation focuses on clarifying the intrinsic meaning of legal provisions. that sort of interpretation, which stays within the letter of the law, is highly dangerous and can cause numerous abuses. relying on the above, he said the clarification of the spirit of the law, intentions and objectives the legislator implied was a real purpose and primary task of any interpretation (trubetckoi, 1998). baltic journal of economic studies 140 vol. 7, no. 1, 2021 such researchers as ye. v. vaskovskyi, a. a. rozhdestvenskii, m. s. tagantcev, m. d. shargorodskii et al. generally supported him or expressed similar views. in the soviet period of the development of legal doctrine, most of the ideas of the mentioned authors were rejected, scientific concepts were called in doubt in terms of their expediency and correspondence with the interests of the working class, and the very scholars were called bourgeois. iu. g. tkachenko was one of the pioneers who updated the issues of interpretation of legal rules at the level of thesis research in the soviet period. as the vast majority of studies of the soviet period, iu. g. tkachenko’s thesis substantiated the social relevance of the specific topic by the fact that “interpretation of legal rules in the ussr is essential to enhance the rule of law particularly significant for our state in the period of completion of the building of socialism and the gradual transition to communism. the necessity of addressing matters related to the interpretation of legal rules is conditioned both by the importance of the very interpretation and a lack in the soviet legal literature of innovative research dealing with the interpretation as one of means for establishing and enhancing legality in the soviet state” (tkachenko, 1950). specifically, iu. g. tkachenko, in the context of intolerance to dissent typical for that epoch, believed that despite the fact that interpretation should consolidate the application of the soviet laws, this process plays an entirely different role in capitalist countries – the bourgeoisie breaks the laws previously established by it through using the interpretation. the author individually wrote about it and reasoned his standpoint in full” (tkachenko, 1950). for the most part, criticism is focused on the whole common law in which, as known, the position of precedent is indisputable among sources of law. the soviet scientist regarded the mentioned practice and natural law theory as maleficent to the interpretation in the eye of the law. this even allowed iu. g. tkachenko to arrive at the idea that “…in the bourgeois states in the age of imperialism, the rule of law was destroyed, the arbitrariness of both judicial and administrative bodies was established, and the rejection of the rule of law was particularly evident in england and the united states” (tkachenko, 1950). nonsense of the above statements, or rather the origin of that sort of idea, is easy to explain since the influence of official ideology on science, including legal one, was extremely strong at the time (bilous, 2020). turning to the approach of iu. g. tkachenko, especially to the issue of the interpretation of legal rules, the scientist believed the soviet interpretation is instrumental in establishing a common understanding of the law, its uniform application across the soviet union. in the scientist’s opinion, interpretation is one of the most important tools for conducting and enhancing the rule of law to establish a common understanding and application of the laws. for this reason, in his thesis, iu. g. tkachenko concluded that interpretation could not and should not amend legal rules. “it solely details and clarifies the available provisions of the law. interpretation of legal rules cannot be identified with lawmaking. lawmaking involves creating new legal provisions, new rules. interpretation of these rules cannot and should not create a new law. the soviet interpretation does not focus on changing the laws, as in capitalist countries, but enhancing the laws through their clarification and specification” (tkachenko, 1950). fully sharing the scientist’s opinion that interpretation does not create a new legal rule, the authors note there is no point to criticize the common law for its peculiarity, including interpretation as one of the lawmaking stages, which results in a specific legal precedent – a judicial decision. essentially, there should not be a discussion under the framework of determining the legal nature of an outcome of the interpretative process. it appears to the authors that iu. g. tkachenko understood it as well, but given the impact of the soviet ideological steamroller, he was forced to catch an error in “the bourgeois law ” and highlight its highly adversarial and injurious nature to society. turning back to the matters of the development of scientific theories of interpretation in the soviet period, it is worth mentioning the contributions of a. s. pigolkin, who devoted a large number of his works to the issue under consideration. he, as well as iu. g. tkachenko, was very critical of the “ bourgeois” understanding of interpretation and stressed that “…against the backdrop of socialist reality, interpretation of legislative instruments is one of the ways of implementing the policy of the communist party of the ussr (pigolkin, 1962). moreover, his ideas of the very essence of interpretation were the most valuable for science. it was a. s. pigolkin who insisted that clarification and interpretation cannot be a part of the same process. he found them acting as inconsistent and independent phenomena. referring to n. g. aleksandrov, a. s. pigolkin emphasized that interpretation is a generic concept, comprising two individual and different generic concepts which, firstly, should be understood as the internal mental process taking place in the consciousness of a person who applies a legal rule, the clarification of the content of the legal rule and its explanation; secondly, interpretation is externally expressed clarification of the provisions of the legal rule, which is objectified both in the form of an official act of the state authority, recommendations, and advice provided by nongovernmental organizations or individuals having no binding effect (pigolkin, 1962). drawing a clear line between clarification and explanation, the soviet scientist wrote that interpretation, as clarification baltic journal of economic studies 141 vol. 7, no. 1, 2021 of a legal rule, is a necessary preparatory stage for an adequate solution of a particular issue, required prerequisite for the operation of legal rules in public life, while interpretation-explanation acts as an independent, special activity of certain bodies and individuals (pigolkin, 1962; bilous, 2020). consequently, a. s. pigolkin asserted interpretation aims to establish and clear up the will of the dominant class (and the will of the whole nation in the period of active building of communism) expressed in the law or other statutory act. this determines the commonality of the following issues for all aspects of interpretation: a class nature of interpretation, the extension of general philosophical questions of cognition to the interpretation matters, the connection of interpretation with the general tasks of enhancing socialist legitimacy (pigolkin, 1962). being guided by the above ideas, the scientist argued that interpretation of regulations in the soviet state is the activity of government bodies, nongovernmental organizations and individual citizens oriented to identify the will of the soviet people expressed in the regulations and cover the authentic content of this will (pigolkin, 1962). indeed, p. o. nedbailo did not share a. s. pigolkin’s approach. p. e. nedbailo categorically rejected the idea that interpretation is limited to clarifying a legal rule. in this regard, being in agreement with o. s. ioffe and m. d. shargorodskii, he wrote “the attempts to separate the explanation of the essence and content of legal rules from the interpretation of a legal act, as the clarification of the content of legal rules, have purely dogmatic nature. the concept of clarification of the legal rules, as a process of learning them for oneself, has no legal significance, and thus, it is useless as a legal term (nedbailo, 1960). somewhat, the authors share the mentioned idea considering that clarification of a legal rule is a preliminary stage for its explanation. clarification of the content of the legal rule makes sense per se, but it is devoid of legal significance without explanation. therefore, in the context of the so-called interpretation-clarification, it is expedient to refer to an unofficial or so-termed “common” or “routine” interpretation conducted by ordinary citizens or other subjects exclusively for clarifying the content of the legal rule and recognizing its essence to specify the use of their rights and performance of duties. as an intermediate conclusion about the soviet period of the development of legal science, for justice, it is worth mentioning that by giving up on the ideas of representatives of the pre-revolutionary legal science, the soviet legal doctrine could provide its visions of the interpretation of law and its rules as quite weighty arguments. at the same time, an aggressive rhetoric concerning the approaches of foreign scholars and those domestic researchers, who favored a concept of interpretation of law similar to western scholars, was not valid and objective. 3. analysis of modern approaches to the interpretation of legal rules s. v. pryima justifies close relationship between the interpretation of legal rules and some systems of philosophy, including hermeneutics and phenomenology. in addition, the scientist outlines the main features of interpretation of law: 1) it is a kind of legal activities; 2) it has (intellectual, mental, creative) nature; 3) it has a purposive character; 4) it has a clarifying (concretization) nature conditioned by standardized nature of law; 5) it has an indirect character; 6) it is performed by different subjects, the particularities of which determine a type of interpretation; 7) it is based on the relevant principles. following the specified features, s.v. pryima defines the interpretation of law as a type of legal activities which are cognitive, rely on particular principles and are conducted by relevant subjects for detecting and specifying the content of legal rules and, when necessary, include its explanation for other subjects (pryima, 2011). in o. e. leist’s opinion, the interpretation of a legal rule is the clarification and explanation of its real content which is subject to be realized under specific conditions of its action (leist, 2002; bilous, 2020). zh. m. melnyk-tomenko expresses a quite similar standpoint. studying the principles of interpretation of the general principles of administrative proceedings regarding the practice of the european court of human rights, she notes the interpretative process consists of two parts. according to the scientist, at the first stage, the rule should be understood, i.e., an executor of law or a subject of interpretation should come to grips with the rule. at the next stage, the interpreter clarifies the legal rule for other subjects. at the same time, the scientist notes that this mental process does not necessarily result in the approval of an individual interpretative act, but may find expression in the text of scientific-practical commentary on a statutory act, scientific article, speech of a lawyer or a representative in court etc. (melnyk-tomenko, 2020; bilous, 2020). o. v. kaplina also writes about the staging of interpretation, but her standpoint somewhat differs from the above one. thus, in the scientist’s opinion, clarification is not always an obligatory stage of interpretation of a legal rule. o. v. kaplina marks that every stage of the interpretation has its inherent features, specific characteristics, an aim, content, a form and implementation methods. clarification is the first element of interpretation and ensures the understanding of a legal rule during the law-making, application of legal rules, systematization of legislative acts. as the scientist rightly notes, the solution of the issue on the stages of interpretation and their interrelations depends on the fact what type of interpretation is maintained, the parties involved and baltic journal of economic studies 142 vol. 7, no. 1, 2021 a purpose of legal interpretation. in o. v. kaplina’s strong opinion, although clarification of the essence of a legal rule under interpretation is closely interrelated with explanation, they are independent processes. clarification is essential but not obligatory element of the interpretative process. however, it is an essential part of law-application interpretation. such an approach to the understanding of interpretation, which combines clarification and explanation, allows regarding the interpretation of a legal rule as a method of cognition, on the one hand, and the interpretation as a type of legal activities, on the other hand (kaplina, 2008). yu. l. vlasov defines the interpretation of legal rules as an intellectual-volitional activity of objective and subjective nature along with the clarification and explanation of the legislator’s will embodied in a legal rule and an outcome of this activity. moreover, the researcher, as well as o. v. kaplina, specifies that a balance between clarification and explanation should be established according to the intended purpose of the legal rule. when interpreting the legal rule, clarification acts as an independent cognitive process for understanding of its nature. when it is established a purpose of elucidating the essence of a legal rule, clarification and interpretation compose a single process focused on explaining the rule’s provisions to the third parties (vlasov, 2011; bilous, 2020). instead, o. i. kostenko does not divide two mentioned intellectual and volitional processes as it proceeds from the scholar’s definition of “the interpretation of administrative law acts”. it is rendered as the mental intellectual-volitional activity of a relevant subject of interpretation, which is characterized by specific methods and ways and enshrined in special acts of interpretation, aimed at clarifying and explaining the essence and scope of administrative rules, a particular administrative law act or its respective regulatory prescription for their correct and similar understanding and practical application (kostenko, 2011). in view of the above, v. v. honcharov marks that the term “interpretation of legal rules” denotes two related but not identical phenomena. the former is driven by the clarity of a rule for a recipient, i. e. when there is no doubt about its content, and thus, there is no need to reformulate the rule more clearly. that sort of phenomenon can be represented by the term “interpretation-comprehension”. indeed, the latter is associated with the recipient’s incomprehensibility of text of the rule that causes the need to convey its some lexemes clearer. such a phenomenon can be rendered by the term “interpretation-explanation” (honcharov, 2013). in the authors’ opinion, activities related to the interpretation of legal rules are performed independent of a degree of their clarity for the recipient, as it involves the definition of such content not in the abstract, but in terms of a specific subject (legal relationship). at the same time, “content” of the rule is an object of the interpretation in either case or “a form of its consolidation” within this study for establishing its “content”. it would be a mistake to regard the content of the rule as an object of interpretation, since the interpretation aims to establish its real content (bilous, 2019). iu. n. todyka wrote about the interpretation differently: “the very term of “interpretation of law” may be understood: firstly, as a specific cognitive process oriented to determine the meaning (content) of the legal rules… secondly, as an outcome of the cognitive process which is conveyed in a range of statements (grammatical sentences) covering and rendering the content of the rules being interpreted (todyka, 2000). therefore, a. g. manukian admits that the results of interpretation can exceed the limits of law enforcement. the researcher believes one can refer to the creation of new rules under the framework of “corrective kind of interpretation”. a. g. manukian says “an interpreter may be beyond the scope of the literal meaning of words and expressions of the legislative rule under the extensive interpretation as well, however, it is found out the essence of a rule the legislator intended it to have while adopting one – a new rule is not created. under corrective interpretation, there is a deviation from the original intention of the legislator – rather other social relations are subjected to the regulation than those which the legislator meant when adopting the rule”. in the same context, a. g. manukian turns to the socalled modernized kind of corrective interpretation of legal rules which is applied: either taking into account the essential, but not considered by the legislator, specifics of social relations in one or another segment of social reality, or by changing the objective meaning of this reality. however, the scholar emphasizes an executor of law changes the literal meaning of the legal rule at his or her discretion. admitting that the purpose of statutory interpretation is to identify the content of a legal rule without going beyond the principle of separation of powers, a. g. manukian stresses such a condition does not mean that modernized corrective interpretation is always wrongful, and the executor of law does not have the right to form other legal relations than those which proceed from the interpreted legislative prescription (manukian, 2006). therewith, the abovementioned yu. l. vlasov says that under the framework of legal activities, the interpretation of legal rules is encountered not only amidst law enforcement but also lawmaking, enforcement, systematization, legal education and promotion of law. moreover, the scholar specifies that in the context of legal regulation, the interpretation should be considered narrower through separating its tasks and functions from other types of legal activity such as legal specification, filling law gaps, adjustment of the rules to new living conditions etc. (vlasov, 2001; bilous, 2020). baltic journal of economic studies 143 vol. 7, no. 1, 2021 m. i. koziubra also admits a fact interpretation is not limited to clarification and explanation. the scientist makes some adjustments concerning the mentioned conclusion. thus, in the scientist’s opinion, lawmaking is not a function (i.e. one of the main activities) of law interpretation agencies, including courts. giving them that sort of authority would contradict the principle of separation of powers the opponents of judicial lawmaking reasonably paid attention to. consequently, it is pointless to apply the english “judge-made law ” by rote to the domestic legal system and the continental legal system. in addition, m. i. koziubra notes it would be more facilitated to regard law enforcement, primarily judicial practice and even more practical activity of the constitutional review bodies – constitutional courts, as something independent of the lawmaking process. the availability of lawmaking elements in law interpretation activity is not an anomaly – as the national literature often qualifies – but an objective need. although it has its limits, it shall not be deleted in its entirety from the activities of the constitutional court and general jurisdiction courts as it is inherent in the very nature of their activities (koziubra, 2014). m. i. koziubra assures that to deny the obvious facts of judicial interpretation’s violation of the limits of clarification and explanation of the will of the constitution-maker or legislator, scope of the relevant constitutional or legislative provisions, which are conveyed by meaning that often differs from the essence which the constitution-maker or legislator, entails keeping the positions of extreme formalism and dogmatism incompatible with modern ideas about law and man’s belonging to it. therefore, the prominent legal theorist specifies that the foregoing does not mean that judicial interpretation – a lawmaking or judicial “completion” and “development” of law – has no limits and is determined solely by judicial discretion (koziubra, 2014). having analyzed the above approaches to interpretation of law, the authors do not share the opinions of those scholars who either insist that interpretation is a law-making process in the context of our legal reality or allow “exceptions to the rule of traditional understanding of interpretation” and try to explain the logic of the decisions taken by jurisdictional entities, which are not only law enforcement acts in specific cases but also acts that were subsequently applied by other subjects of law which took the motivating and operative part of the court decision as a basis. 4. conclusions taking into consideration all the abovementioned opinions of both domestic and foreign scholars, the authors mark that, as legal literature rightly notes, one can draw the following conclusion relying on a large variety of approaches to the definition of the concept “interpretation of law”: despite the discordance of scientific opinions, the majority of representatives of domestic and foreign scientific schools agree that interpretation can be understood in two senses – as a process or a result (zvieriev, 2015). in addition, this procedure involves two other processes – clarification and explanation – which, according to some scholars, can exist as complementary components of a single process and, in the opinion of others – are independent, not always interconnected (interdependent) intellectual and volitional processes – “interpretation-clarification” and “interpretation-explanation”. the authors state interpretation is not an individual stage or type of rulemaking which results in the creation of a new rule of law. it is worth highlighting that among the above arguments, the authors’ vision of interpretation is based on the fact the word “interpretation” (latin “interpretatio”) means in common sense nothing more than “to determine the content, to explain, to clarify the essence of something; to give some explanation” (busel, 2001). in other words, the very semantics of the words of “interpretation” and “elucidation” does not provide for other intellectual and volitional processes except clarification and explanation, and attempts to expand the meaning of these words through specification – a new rule is created due to these mental processes – contradict their well-known meaning (bilous, 2020). the research highlights that so-called judicial interpretation, m. i. koziubra writes about in the context of the specified discussion, can go beyond the lawenforcement process and get the features of lawmaking. however, the authors believe the above can take place in cases of law interpretation activity of the constitutional court of ukraine and european court of human rights that is prescribed by the current legislation of ukraine whereby, for instance, the courts apply the echr practice as a source of law when considering cases. at the same time, the authors agree that a specific result of the interpretation set out in a relevant court decision (primarily, of higher courts) may be a ground for reviewing the case law on a particular category of cases. there is no gainsaying that in such cases, the rule of law didn’t change but get, so to speak, its new, more correct understanding and use patterns. the authors also recognize that the results of law enforcement or doctrinal interpretation may impact lawmaking, if an error or incompleteness of legal regulation of social relations was found due to such interpretive processes of a law or legal rules and the legislator subsequently made appropriate changes to the law (bilous, 2020). in the authors’ analysis, a just opinion is one under which the “stages” and complexity of the interpretative process depend on the purposes of interpretation and its varieties respectively. thus, if it refers to so-called unofficial interpretation, this process involves clarifying the rules of law and does not provide for the legal consequences of that sort of interpretation. if it refers to baltic journal of economic studies 144 vol. 7, no. 1, 2021 the official interpretation, it is evident the interpretative process comprises two interrelated stages – clarification and explanation. consequently, interpretation of legal rules is an intellectual and volitional activity of an interpreter, which is conducted under the principles and means of interpretation, aimed at clarifying and/or specifying the content of the legal rule to understand and apply them in practice correctly and uniformly. it may be enshrined in special acts of interpretation, scientific practical commentary on legislation, doctrinal sources and other external forms of interpretation (bilous, 2020). references: bilous, o. v. (2019). poniattia obiekta tlumachennia yak elementa pravozastosovnoi diialnosti [the concept of an object of interpretation as an element of law-enforcement activity]. pidpryiemnytstvo, hospodarstvo i pravo, vol. 3, pp. 132–136. bilous, o. v. (2020). liudynotsentrychni ta aksiolohichni aspekty tlumachennia poniat ta katehorii administratyvnoho sudochynstva: monohrafiia [human-centric and axiological aspects of the interpretation of concepts and categories of administrative proceedings: a monograph]. odesa: publishing house helvetica. (in ukrainian) bilous, o. v. (2020). poniattia ta katehorii administratyvnoho sudochynstva: liudynotsentrychni ta aksiolohichni aspekty tlumachennia [concept and categories of administrative proceedings human-centric and axiological aspects of interpretation] (phd thesis), dnipro. (in ukrainian) bilous, o. v. (2020). tlumachennia norm prava: poniattia ta sutnist [interpretation of legal rules: concept and essence]. jurnalul juridic national: teorie şi practică, vol. 3, pp. 46–53. busel, v. t. (ed.) (2001). velykyi tlumachnyi slovnyk suchasnoi ukrainskoi movy [great explanatory dictionary of the modern ukrainian language] kyiv: irpin: vtf “perun”. (in ukrainian) honcharov, v. v. (2013). dynamichne tlumachennia yurydychnykh norm [dynamic interpretation of legal rules] pratsi lvivskoi laboratorii prav liudyny i hromadianyna ndi derzhavnoho budivnytstva ta mistsevoho samovriaduvannia naprnu. seriia i. doslidzhennia ta referaty, vol. 27 [papers of lviv laboratory for human and civil rights of the ri of state building and local self-government of the nalsu. series i: research and abstracts]. lviv: spolom. (in ukrainian) kaplina, o. v. (2008). pravozastosovne tlumachennia norm kryminalno-protsesualnoho prava: monohrafiia [law-enforcement activity of the rules of criminal procedural law: a monograph]. kharkiv: pravo. (in ukrainian) kostenko, o. i. (2011). tlumachennia aktiv administratyvnoho zakonodavstva [interpretation of administrative law acts] (phd thesis), zaporizhzhia. (in ukrainian) koziubra, m. i. (2014). yurydychne tlumachennia: problemy metodolohii [legal interpretation: methodological problems]. naukovi zapysky naukma. yurydychni nauky, vol. 155, pp. 3–8. leist, o. e. (2002). sushchnost prava. problemy teorii i filosofii prava [the essence of law. problems of theory and philosophy of law]. moscow: ikd zertsalo-m. (in russian) manukian, a. g. (2006). tolkovanie norm prava: vidy, sistema, predely deistviia [interpretation of legal rules: types, system, action limits] (phd thesis), st. petersburg. (in russian) melnyk-tomenko, zh. m. (2020). zastosuvannia praktyky yevropeiskoho sudu z prav liudyny pry tlumachenni zahalnykh pryntsypiv administratyvnoho sudochynstva [application of the practice of the european court of human rights when interpreting the general principles of administrative proceedings] (phd thesis), dnipro. (in ukrainian) nedbailo, p. e. (1960). primenenie sovetskikh pravovykh norm [application of the soviet legal rules]. moscow: iuridicheskaia literatura. (in russian) pigolkin, a. s. (1962). tolkovanie normativnykh aktov v sssr [interpretation of statutory acts in the ussr]. moscow: iuridicheskaia literatura. (in russian) pryima, s. v. (2011). pryntsypy tlumachennia norm prava [principles of the interpretation of legal rules] (phd thesis), kharkiv. (in ukrainian) tkachenko, iu. g. (1950). tolkovanie iuridicheskikh norm v sssr [interpretation of legal rules in the ussr] (phd thesis), moscow. (in russian) todyka, iu. n. (2000). konstitutciia ukrainy: problemy teorii i praktiki: monografiia [the constitution of ukraine: theoretical and practical issues]. kharkov: fakt. (in russian) trubetckoi, e. n. (1998). entciklopediia prava [law encyclopedia]. saint-petersburg: iuridicheskii institut. (in russian) vlasov, yu. l. (2000). problemy tlumachennia norm prava [challenges of the interpretation of legal rules] (phd thesis), kyiv. (in ukrainian) vlasov, yu. l. (2001). problemy tlumachennia norm prava: monohrafiia [problems of the interpretation of legal rules: a monograph]. kyiv: in-t derzhavy i prava im. v. m. koretskoho nan ukrainy. (in ukrainian) zvieriev, ye. o. (2015). tlumachennia mizhnarodnykh dohovoriv natsionalnymy sudamy: yevropeiskyi dosvid ta ukrainska praktyka [interpretation of international agreements by the national courts] (phd thesis), kyiv. (in ukrainian) baltic journal of economic studies 111 vol. 2, no. 2, 2016 corresponding author: 1 department of accounting in credit and budgetary institutions and economic analysis, kyiv national economic university named after vadym hetman. e-mail: alexey.mishnyov@ukr.net essence of banks financial resources and classification oleksii mishnov1 kyiv national economic university named after vadym hetman, ukraine abstract. the purpose is an attempt to study the essence of the financial resources of the bank. methodology. in this paper, the author studied the issues of formation of financial resources of the bank, analysis, structuring, effective management. the basis of the study was the work of russian and foreign scientists and researchers groups. total compare and analyze the essence of the definition of financial resources 9 scholars (groups of scientists), who were divided into three groups. the results of the study show that there is no single definition of the financial resources among the domestic and foreign scientists, but the interpretation of the concept of banking financial resources are very similar. the first group of scientists determines the bank resources as the total amount of funds available to the bank, which are used to carry out active operations. the second group of scientists gives a broader definition of the essence of banking resources. they believe that the bank is a collection of resources of their own and «foreign» (attracted) funds that are used to carry out active operations. the third group of scientists lead the most accurate, thorough and comprehensive definition of bank resources. according to them, banking resources a combination of their own, attracted and borrowed funds, which are held by a bank and used to carry out banking activities. as a result of the study, the analysis of the three definitions given in three groups of authors, the rationale for allocation of loan and deposit resources, due to the nature of attraction srokowo, management and cost of resources by the author formed the following definition of the financial resources of the bank. thus, the financial resources of the bank a collection of funds that are at the disposal of the bank and consist of equity capital of the bank, borrowed and borrowed funds, received by the bank on the terms of urgency (a certain date), against compensation, and used the latter to provide the full range of banking services. the practical implications. implementation interpretation of financial resources of the bank according to the given definition of the author allow banking institutions weighed approach to resource mobilization policy, conservation and optimal proportions to maximize profits. issues related to the financial resources of the bank, require further study to find new ways to supplement the financial resources of banks. value/originality. as a result of the study, an analysis of the definitions of the three groups of authors highlight the necessity of loan and deposit resources, due to the nature of attraction srokowo, management and cost of resources. key words. banks financial resources, borrowed funds, borrowings, liabilities. jel classification: g21, g24, h74, g29 1. вступление основной и неотъемлемой частью ресурсов банков являются финансовые ресурсы. банковское учреждение, как и любое юридическое лицо, требует стартового и текущего капитала для проведения экономической деятельности. постоянная нехватка капитала в банках негативно отображается на доступности кредитных ресурсов, для других участников экономики, и их стоимости. в условиях тяжёлого финансового кризиса, второго меньше чем за десять лет, существенного оттока капитала из банковской системы, потери доверия банковских учреждений перед физическими лицами и юридическими лицами, особенно важными и актуальными направлениями работы являются возврат капитала в банки, разработка актуальных и эффективных методов управления финансовыми ресурсами, повышения надёжности банков и, как следствие, восстановление доверия к экономике страны в целом и к банковской системе в частности со стороны физических лиц и субъектов хозяйствования. учитывая то, что значительная часть финансовых ресурсов находиться вне банковской системы, банковским учреждениям необходимо ответственно подойти к вопросам управления финансовыми ресурсами, их классификации по разным признакам, для baltic journal of economic studies 112 vol. 2, no. 2, 2016 формирования взвешенной политики эффективного использования имеющихся средств и создания условий для возврата капитала в банковскую систему. банковская система украины состоит из национального банка украины и других банков, а также филей иностранных банков, созданных и действующих на территории украины согласно закону украины «о банках и банковской деятельности» и других законов украины (the law of ukraine «on banks and banking», 2000). одной из функций банковской системы является трансформационная  – мобилизация свободных средств на финансовом рынке и распределение их между нуждающимися субъектами экономической деятельности. следовательно, вопросы мобилизации средств, их привлечение в банковскую систему, структурирование и распределение являются сверх важными и сверх актуальными. вопросами формирования финансовых ресурсов банка, их анализа, структурирования и эффективным управлением занимаются как отечественные, так и иностранные учёные, в частности м.д. алексеенко (alekseienko, 2002), а.н. мороз, м.и., савлук (moroz, savluk, pukhovkina, 2002), о.и, лаврушин (lavrushyn, mamonova, valentseva, 2009), о. васюренко, и. федосик (vasiurenko, fedosik, 2002), с.в. землячёв (zemliachov, 2009), л. кутидзе, о. гранько (kutidze, hranko, 2009), в.и. мищенко (mishchenko, slavianska, koreneva, 2007), о.п. присяжнюк (prysiazhniuk, 2011). по результатам проведённого исследования, приходим к выводу что, учитывая катастрофическую ситуацию в экономике украины, боевые действия на её территории, падения уровня доверия к банковской системе, существенное сокращения количества банков, сокращения инвестиций в страну с одной стороны, и увеличения каналов привлечения средств в банковскою систему в условиях развития it технологий, разработку и внедрение банками дополнительных услуг и возможностей управления финансовыми ресурсами с другой, процесс формирования финансовых ресурсов банками, анализ их сущности, структуры требует дополнительного изучения. целью данного исследования является попытка проведения исследования сущности финансовых банковских ресурсов. решение поставленных в исследовании задач позволит внедрить эффективную систему формирования, структурирования, управления и использования финансовых ресурсов банка с целью эффективного распределения финансовых ресурсов, всестороннего анализа, снижения стоимости использования, предложения выгодных условий размещения ресурсов субъектам экономической деятельности. 2. ресурсная база банка и банковские финансовые ресурсы банковские финансовые ресурсы являют собой опору, опорный столб деятельности отдельного банка и всей банковской системы в целом. толковый словарь определяет ресурс як запасы чего-нибудь, которые можно использовать при необходимости. банкам, как и любым субъектам хозяйствования, необходимый запас средств, для проведения своей деятельности. но, несмотря на важность данной экономической категории, единого определения относительно ресурсной базы банков и финансовых банковских ресурсов нет. в своём исследовании с.в. землячёв разделяет понятия «ресурсная база» и «банковские ресурсы», банковские финансовые ресурсы. некоторые учёные отождествляют данные понятия, но это не верно. для достижения цели своей деятельности – удовлетворения потребностей участников рынка в финансовых средствах и получении прибыли, не всегда используются только деньги. к банковским ресурсам относится не только финансовая составляющая, но и предоставление специфических консультативных услуг, использование отдалённых способов управления собственными счетами с помощью it технологий, стандарты качественного обслуживания и управления. 3. определение понятия «банковские ресурсы» анализируя определение понятия «банковские ресурсы», предложенные разными учёными, автор пришёл к выводу, что единого устойчивого определения понятия финансовых банковских ресурсов не сформировано. по мнению м.д. алексеенка банковские ресурсы  – это совокупность денежных средств и выраженных в денежной форме материальных, нематериальных и финансовых активов, которые пребывают в распоряжении банков и могут быть использованы ими для проведения активных операций и предоставления услуг (alekseienko, 2002). данное определение является общим и даёт обобщённое понятие про банковские финансовые ресурсы без разделения на составляющее части, способами привлечения или сроками использования. авторский коллектив под руководством профессоров а.н. мороза и м.и. савлука даёт такое определение банковским ресурсам  – это совокупность денежных средств, которые пребывают в распоряжении банков и могут быть использованы для проведения активных операций; различают привлечённые, позаимствованные и собственные ресурсы банка (moroz, savluk, pukhovkina, 2002). данное определение является более глубоким, привлечено внимание к природе происхождения ресурсов. коллектив учёных под руководством о.и. лаврушина предлагает такое определение: «ресурсы коммерческих банков, или банковские ресурсы, представляют собой совокупность всех средств, имеющихся в распоряжении банков и используемых для осуществления активных операций. ресурсы коммерческого банка подразделяются на собственные и привлечённые средства (lavrushyn, baltic journal of economic studies 113 vol. 2, no. 2, 2016 mamonova, valentseva, 2009)». в этом определении акцентируют внимание на собственности используемых ресурсов, но не описаны механизмы привлечения средств в банковские учреждения. о. васюренко и и. федосик отмечают, что ресурсы коммерческого банка  – это совокупность собственных, привлечённых и целевых средств банка, которые находятся в непосредственном его распоряжении и используются по его усмотрению для осуществления полномасштабной банковской деятельности (vasiurenko, fedosik, 2002). данное определение имеет общий характер для теоретического понимания сущности финансовых ресурсов банка. юридическую сторону определения категории банковские ресурсы освещает с.в. землячёв: ресурсы коммерческого банка  – это средства, которыми распоряжается банк и использует для обеспечения своей деятельности на коммерческих началах и в соответствии с требованиями регулятивных органов (zemliachov, 2009). авторы л. кутидзе и о. гранько придерживаются мысли, что ресурсы коммерческих банков – совокупность собственного капитала и привлечённого банком в результате проведения пассивных операций и активно-пассивных операций, а также средств, которые есть в его распоряжении и могут быть использованы для активных операций (kutidze, hranko, 2009). в данном случае приведены способы привлечения средств в коммерческий банк и их целевое назначение. один из авторов банковской энциклопедии в.и. мищенко даёт глубокое и структурированное определение исследуемой категории: банковские ресурсы (bank resources)  – совокупность денежных средств, которые пребывают в распоряжении банка и используются им для выполнения своих функций и операций. банковские ресурсы  – это финансовые ресурсы банка, которые состоят из собственных, привлечённых и позаимствованных средств (mishchenko, slavianska, koreneva, 2007). в  данном определении раскрыта структура финансовых ресурсов банков и их целевое назначение. подобную точку зрения имеет о.п. присяжнюк. он определяет ресурсы коммерческого банка, как его собственный капитал, привлечённый и позаимствованный капитал, а также самостоятельный источник собственных средств банка (prysiazhniuk, 2011). в данном определении введена отдельная составляющая, как «самостоятельный источник собственных средств», которая не встречается у других учёных. сравнение приведённых определений понятия банковские ресурсы приведено в таблице 1. сравнивая приведённые разными учёными и группами учёных определения, автор пришёл к выводу, что все приведённые трактовки похожи по своей сути. под ресурсами банков авторы рассматривают средства, то есть конкретный финансовый высоколиквидный актив. разница между взглядами разных учёных состоит в трактовке структуры и природы исследуемого понятия. по взглядам, приведённые определения учёных и групп учёных, можно разделить на три группы. первая группа учёных, в составе алексеенка м.д. (alekseienko, 2002) и землячёва с.в. (zemliachov, 2009) приводит обобщённое понятие. они опредетаблиця 1 сравнение определения категории банковские ресурсы учёный/группа учёных определения понятия банковские ресурсы алексеенко м.д. банковские ресурсы –это совокупность денежных средств и выраженных в денежной форме материальных, нематериальных и финансовых активов, которые пребывают в распоряжении банков и могут быть использованы ими для проведения активных операций и предоставления услуг. мороз а.м., савлук м.и. банковские ресурсы – это совокупность денежных средств, которые пребывают в распоряжении банков и могут быть использованы для проведения активных операций; различают привлечённые, позаимствованные и собственные ресурсы банка. лаврушин о.и. ресурсы коммерческих банков, или банковские ресурсы, представляют собой совокупность всех средств, имеющихся в распоряжении банков и используемых для осуществления активных операций. ресурсы коммерческого банка подразделяются на собственные и привлечённые средства. васюренко о., федосик и. ресурсы коммерческого банка – это совокупность собственных, привлечённых и целевых средств банка, которые находятся в непосредственном его распоряжении и используются по его усмотрению для осуществления полномасштабной банковской деятельности. землячёв с.в. ресурсы коммерческого банка – это средства, которыми распоряжается банк и использует для обеспечения своей деятельности на коммерческих началах и в соответствии с требованиями регулятивных органов. кутидзе л., гранько о. ресурсы коммерческих банков – совокупность собственного капитала и привлечённого банком в результате проведения пассивных операций и активно-пассивных операций, а также средств, которые есть в его распоряжении и могут быть использованы для активных операций. мищенко в.и. банковские ресурсы (bank resources) – совокупность денежных средств, которые пребывают в распоряжении банка и используются им для выполнения своих функций и операций. банковские ресурсы – это финансовые ресурсы банка, которые состоят из собственных, привлечённых и позаимствованных средств присяжнюк о.п. ресурсы коммерческого банка – собственный капитал, привлечённый и позаимствованный капитал, а также самостоятельный источник собственных средств банка. baltic journal of economic studies 114 vol. 2, no. 2, 2016 ляют банковские ресурсы, как общий объём денежных средств, имеющийся в распоряжении банка, которые используются для проведения активных операций. такое определение даёт возможность понять общую сущность категории, не углубляясь в её структуру, назначение и способы привлечения. вторая группа учёных даёт более широкое определение сущности банковских ресурсов. о.и. лаврушин (lavrushyn, mamonova, valentseva, 2009), о. васюренко, и. федосик (vasiurenko, fedosik, 2002), л. кутидзе, о. гранько (kutidze, hranko, 2009) считают, что банковскими ресурсами является совокупность собственных и «чужих» (привлечённых) средств, которые используются для проведения активных операций. в данном определении отмечается собственник используемых банком ресурсов, что в свою очередь поднимает вопрос механизмов привлечения средств и сроков их использования. такое определение раскрывает сущность банковского учреждения, как такого, которое проводит свою основную деятельность за счёт ресурсов, полученных от других лиц. третья группа учёных, в которую входят а.н. мороз, м.и. савлук (moroz, savluk, pukhovkina, 2002), в.и. мищенко (mishchenko, slavianska, koreneva, 2007), о.п. присяжнюк (prysiazhniuk, 2011) приводит наиболее точное, основательное и всестороннее определение понятия банковские ресурсы. по их мнению, банковские ресурсы  – это совокупность собственных, привлечённых и позаимствованных средств, которые находятся в распоряжении банка и используются для проведения банковской деятельности. данное утверждение указывает на право собственности на ресурсы, способы привлечения и их целевое назначение. в данной трактовке исследуемого понятия выделено депозитную и кредитную природу банковских ресурсов. средства со ссудной природой (позаимствованные средства), оказываются в банке по его инициативе, путём получения кредитов в нбу или в другом банке. депозитная природа средств (привлечённые средства) определяется инициированием получения банком средств третьими лицами – физическими или юридическими лицами путём оформления текущих или депозитных счетов в банковских учреждениях на условиях, определённых непосредственно банковским учреждением. сравнение подходов к определению сущности банковских ресурсов по группам приведено на рисунке 1. проведённое исследование позволяет сделать вывод, что третья группа авторов привела наиболее точное и развёрнутое определение понятия банковских финансовых ресурсов. выделение кредитных и депозитных средств является существенным и важным. 4. важность выделения ссудных и депозитных ресурсов для обывателя разницы между ссудными и кредитными средствами  – нет, его интересует максимальный процент по депозитам, и минимальный по кредитам. специалисты банковского дела обязательно должны выделять эти составляющие части финансовых ресурсов банков, для надлежащего их учёта, анализа и контроля. с точки зрения бухгалтерского учёта оба вида данной задолженности относятся к кредиторской, учитываются на счетах 1 класса. с юридической и экономической точки зрения  – разница существенная. юридически, заимствования кредитных средств оформляются кредитным договором, сторонами которого выступают банковское учреждение, как заёмщик, и а другой банк или нбу, как кредитор. привлечённые средства оформляются договором банковского вклада между банковским учреждением и вкладчиком. вкладчиками могут быть как физические лица, так и юридические лица, другие банки, нбу. юридически, описываемые правоотношения регулируются цивильным кодексом украины. в зависимости от природы финансовых ресурсов: собственного капитала, позаимствованных или привлечённых средств – разным будет срок использования ресурса и его стоимость. собственный капитал  – собственность банка, постоянно находится в его распоряжении и не требует платы за его использования. срок использования привлечённых  – депозитных средств банковские финансовые ресурсы общий объём денежных средств, имеющийся в распоряжении банка, который используется для проведения активных операций совокупность собственных и «чужих» (привлечённых) средств, которые используются для проведения активных операций совокупность собственных, привлечённых и позаимствованных средств, которые находятся в распоряжении банка и используются для проведения банковской деятельности рис. 1. сравнение подходов к определению сущности банковских ресурсов baltic journal of economic studies 115 vol. 2, no. 2, 2016 регулируется договором банковского вклада. средства могут привлекаться на краткосрочный и долгосрочный срок. платой за использования депозитных средств выступает процент, который устанавливается банком и закрепляется в договоре. кредитные – ссудные средства являются наиболее дорогими. плата за них устанавливается кредитором и принимается заёмщиком. поскольку банковские учреждения рассчитывают на прибыль в виде разницы процентов по кредитам и процентам по депозитам (обычно процент по кредитам выше чем по депозитам, в результате чего и формируется маржа), то кредитные средства в основном будут дороже, чем депозитные. соответствующие условия побуждают банки к поиску более дешёвых  – депозитных ресурсов. другим важным вопросом использования банковскими учреждениями финансовых ресурсов есть следование установленных национальным банком украины отдельных нормативов, которые регулируют соотношение объёмов капитала, кредитных и депозитных средств. соответствующие нормативы определены инструкцией про регулирование деятельности банков в украине. нарушение утверждённых значений нормативов приведёт к вынесению предупреждений, штрафов, и, как последний аргумент, выведение банка с рынка. в результате проведённого исследования, анализа трёх приведенных определений тремя группами авторов, обоснования необходимости выделения ссудных и депозитных ресурсов, ввиду специфики срокового привлечения, управления и стоимости ресурсов автором сформировано следующее определение финансовых банковских ресурсов. итак, финансовые банковские ресурсы  – это совокупность денежных средств, которые находятся в распоряжении банка и состоят из собственного капитала банка, позаимствованных и привлечённых средств, полученных банком на условиях срочности (определённого срока), оплатности и используются последним для предоставления всего спектра банковских услуг. 5. выводы в условиях тяжёлого финансового кризиса, существенного оттока средств из банковской системы, военных действий на территории государства, значительной потери доверия субъектов экономических отношений – особенно важным и актуальным является привлечения банками финансовых ресурсов, эффективное управление ними и обеспечение функционирования национальной экономики путём реализации трансформационной функции банковской системы, а именно  – мобилизации свободных финансовых ресурсов и распределение последних относительно потребностей. роль финансовых ресурсов переоценить невозможно. финансовые ресурсы являются основой деятельности любого субъекта экономики, в том числе банковского учреждения. среди отечественных и зарубежных учёных нет единого определения финансовых ресурсов, но трактовки понятия финансовые банковские ресурсы очень похожи. автором предложено собственное определение финансовых банковских ресурсов, а именно: это совокупность денежных средств, которые находятся в распоряжении банка и состоят из собственного капитала банка, позаимствованных и привлечённых средств, полученных банком на условиях срочности (определённого срока), оплатности и используются последним для предоставления всего спектра банковских услуг. предложенное определение акцентирует внимание на разной природе средств, получаемых банками, их стоимости, срока использования и регулятивного аспекта. внедрение трактовки финансовых банковских ресурсов согласно приведённого определения позволит банковским учреждениям взвешено подойти к политике привлечения ресурсов, сохранения оптимальных пропорций и получения максимальной прибыли. вопросы, связанные с финансовыми банковскими ресурсами, требуют дальнейшего изучения для поиска новых путей пополнения финансовых ресурсов банков. references alekseienko, m.d. 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(2009). the essence of the sources of value and resource base of commercial banks. scientific journal: finance, banks, investment. 3: 68-74. baltic journal of economic studies 116 vol. 2, no. 2, 2016 алексей мишнев сущность финансовых ресурсов банков и их классификация аннотация. целью работы является попытка проведения исследования сущности финансовых банковских ресурсов. методика. в данной работе автором исследованы вопросы формирования финансовых ресурсов банка, их анализа, структурирования, эффективного управления. базой исследования стали работы отечественных и зарубежных учёных и групп учёных. всего сравнено и проанализировано определения сущности финансовых ресурсов 9 учёных (групп учёных), которые были разделены на три группы. результаты проведённого исследования показывают, что среди отечественных и зарубежных учёных нет единого определения финансовых ресурсов, но трактовки понятия финансовые банковские ресурсы очень похожи. первая группа учёных определяет банковские ресурсы, как общий объём денежных средств, имеющийся в распоряжении банка, которые используются для проведения активных операций. вторая группа учёных даёт более широкое определение сущности банковских ресурсов. они считают, что банковскими ресурсами является совокупность собственных и «чужих» (привлечённых) средств, которые используются для проведения активных операций. третья группа учёных приводит наиболее точное, основательное и всестороннее определение понятия банковские ресурсы. по их мнению, банковские ресурсы  – это совокупность собственных, привлечённых и позаимствованных средств, которые находятся в распоряжении банка и используются для проведения банковской деятельности. в результате проведённого исследования, анализа трёх приведенных определений тремя группами авторов, обоснования необходимости выделения ссудных и депозитных ресурсов, ввиду специфики срокового привлечения, управления и стоимости ресурсов автором сформировано следующее определение финансовых банковских ресурсов. итак, финансовые банковские ресурсы  – это совокупность денежных средств, которые находятся в распоряжении банка и состоят из собственного капитала банка, позаимствованных и привлечённых средств, полученных банком на условиях срочности (определённого срока), оплатности и используются последним для предоставления всего спектра банковских услуг. практическое значение. внедрение трактовки финансовых банковских ресурсов согласно приведённого автором определения позволит банковским учреждениям взвешено подойти к политике привлечения ресурсов, сохранения оптимальных пропорций и получения максимальной прибыли. вопросы, связанные с финансовыми банковскими ресурсами, требуют дальнейшего изучения для поиска новых путей пополнения финансовых ресурсов банков. значение/оригинальность. в результате проведённого исследования, анализа приведенных определений тремя группами авторов, обоснована необходимость выделения ссудных и депозитных ресурсов, ввиду специфики срокового привлечения, управления и стоимости ресурсов. baltic journal of economic studies 39 vol. 5, no. 5, 2019 corresponding author: 1 mykolayiv national agrarian university, ukraine. e-mail: olganykk@gmail.com 2 mykolayiv national agrarian university, ukraine. e-mail: kalyzna1976@gmail.com 3 national university of shipbuilding named after admiral makarov, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 doi: https://doi.org/10.30525/2256-0742/2019-5-5-39-46 infrastructure provision of the agrarian market in the globalized environment olga vyshnevska1, olena kaliuzhna2, inna irtyshcheva3 abstract. the main results of the research, which consist in determining the essence and features of the infrastructure provision of the agrarian market in the globalized environment, are formed. the priority of approaches in the development of logistics activities in the context of guaranteeing food security of regions and countries of the world is determined. the essence of the logistic process, strengthening the influence of the global market on the quality of agrarian products, is determined. the influence of the infrastructure provision of the agrarian market on the competitive positions of commodity producers is generalized, advantages and disadvantages in development are determined. the essence of informational logistics, its influence on the development of infrastructure provision of agricultural products market, satisfaction of consumers’ needs is investigated. the urgency of the introduction of e-commerce, which allows commodity producers to combine marketing activities with optimization of advertising costs, to ensure the efficiency and convenience of carrying out operations for the sale of agricultural products, its transportation, manage all logistics processes. it is proved that improvement of the infrastructure provision of the agrarian market of the world countries that adapts to the global market should be based on the dissemination of information opportunities, and the interaction of all participants in the process of selling agricultural products on an e-commerce basis, i.e. on cooperation of the network of producers, banking institutions, internet providers, supermarket chains, processing enterprises, including export-oriented agricultural products, as well as regional representatives of state authorities. the combination of actions and systematical implementation of the logistical approach will reduce the level of information, production, business risks, as well as significantly increase the export opportunities of producers of agrarian products, especially in the context of the urgency of the issue of ensuring food security of the world, its regions and countries. it is stipulated that in the global market the solution of a problem should have a wide range of actions that should be directed at the ordering of economic, social and environmental interests of the world society. it is proved that improvement of the infrastructure provision of the agrarian market should be a matter of food safety and availability, considering the need to level out obvious and hidden hunger, and not only the spread of innovative technologies of production and the receipt of super-profits. key words: globalization, global processes, global market, electronic commerce, competitive advantages, logistics activities, infrastructure objects, market participants' interests, food security. jel classіfіcatіon: f01, f63, o18 1. introduction globalization processes stimulated the process of forming the global market, which greatly increased the need to increase the competitive position of commodity producers. competitive positions of commodity producers, especially agrarian products, have a close connection and dependence on the process of food security formation of individual states, regions of the world. the urgent need is to ensure the food security of the global world, which prompts the need to regulate the infrastructure provision of the agrarian market in all continents and regions of the world. increasing the competitive position of agrarian products in the global market requires a clear and balanced policy in exportimport relations, commodity and transport flows, food quality, and information support. the competitiveness of agrarian products should be considered not only from the standpoint of its value, but also in quality, safety, environmental friendliness. most countries of the world focused on increasing the production capacities of organic agricultural production in order to increase the competitive position in the global baltic journal of economic studies 40 vol. 5, no. 5, 2019 environment, but the infrastructure maintenance of individual segments of the market remains a significant factor. it is the infrastructure support of the market that allows the supply of products in the required volumes and the corresponding quality from the producers to the consumer. the issue has particular relevance in the context of guaranteeing the market access of the necessary range of agrarian products, considering the specifics of regions of the world, mentality. in order to increase the competitive position of producers of agrarian products, innovative technologies are used in the production, harvesting, storage, transportation, processing and sale, which is confirmed by the experience of companies that fill the market with agrarian products globally. infrastructure provision of such processes is associated with significant financial burden, as it requires the creation of a coherent system of interaction between production and consumption, which prompts the need for integrated measures in the development of infrastructure objects of the agrarian market. taking into account the peculiarities of the infrastructure provision of the agrarian market, there is a need for further research, the identification of causal relationships and the substantiation of mutually agreed actions that will enable commodity producers to adapt to the conditions of the global market and to guarantee the food security of the states and regions of the world. the system of interconnections necessitates a detailed assessment of the infrastructure elements in order to find and substantiate the directions of forming effective levers of influence on the development of the market of agrarian products considering globalization transformations. the urgency of the assessment of trends in the development of the market of agrarian products, taking into account globalization changes and trends, and the improvement of infrastructure elements, is connected with the need to increase the competitive position of commodity producers in the global market, including logistic basis. 2. scientific approaches to infrastructural support of the agricultural market in the globalization environment the study of the market processes is associated with an assessment of a wide range of factors that, in the global market, are closely interrelated and interdependent. infrastructural peculiarities of the agrarian market are determined by processes and phenomena that change approaches in time and space to the conduct of activities by commodity producers and all other market participants in order to obtain appropriate economic interests. market research, infrastructure features of the agrarian market, logistics processes, and the identification of causal relationships between processes and phenomena in the global environment require the use of general and special research methods. during the research, the authors used the method of scientific abstraction, logical and historical method, analytical grouping, which allowed to study, generalize and form their own vision of the infrastructure support taking into account the characteristics of the market of agrarian products. in order to identify causal relationships, the authors used the historical method, the logical method, the method of scientific abstraction, the systematic method, which allowed to generalize the influence of globalization factors on the peculiarities of the infrastructure provision of the agricultural products market, development of logistic activity. the assessment of the market, the market position of commodity producers, their competitive advantages and disadvantages should be complemented by nonformalized research methods. they allow to identify priorities in the development of the agrarian business and the direction of improving the infrastructure provision. the consistency in conducting the research allows to determine the priority of the implementation of measures to minimize threats of internal and external nature, including food security. the urgency of the research is closely linked to the need to implement systematic actions to improve the infrastructure provision of the agrarian market and guarantee the food security of individual regions, countries of the world. priority in scientific research is the necessity of development and practical implementation of the directions of improving the infrastructure provision of the agrarian market, taking into account the tendencies towards the growth of the level of import dependence, which creates risks in guaranteeing food security of some countries of the world. and, on the contrary, it is stipulated by the profits of other countries of the world, which are the main exporters of agrarian products in the global market (the usa, canada, brazil, argentina, china, the european union countries). the system of interconnections stipulates the necessity of detailing the infrastructure elements in order to find and substantiate the directions of formation of effective levers of influence on the development of the market of agrarian products taking into account globalization tendencies, market opportunities of commodity producers in the global market, logistic processes. the urgency of the research is due to the high level of dependence of the process of formation of exportimport opportunities on the infrastructural provision of the global agrarian market. which priority directions will guarantee the food security of the world, its regions, individual states for the long term, especially the states that have been dependent on the import of agrarian products? the researches of many scientists are devoted to the market, market positions, market mechanisms, features of the market infrastructure, globalization, globalization baltic journal of economic studies 41 vol. 5, no. 5, 2019 management, logistics activities, among which there are the following: l. abalkin, v. andriychuk, i. ansoff, v. ambrosov, v. bazylevych, o. bilorus, l. walras, v. vlasov, a. galchinskiy, a. grytsenko, p. dalmond, t. dudar, d. keyns, f. kene, m. malik, l. mises, d. nort, m. oklander, t. ostashko, m. pyvovarov, d. ricardo, d. robinson, v. savchuk, v. sobolev, j.-b. sey, a. smit, j. tyrol, f. hayek, b. holstrem, e. chamberlin, m. friedman. the works of o. amosha, m. belopolskii, v. geyets, a. grandberg, m. gordon, b. danylyshyn, s. doroguntsov, l. zaytseva, a. kalchenko, e. kricavskiy, r . larina, v. mamutova, a. moshenets, m. oklander, v. srimichynskiy, n. chukhray are dedicated to the investigation of issues related to the development and management in the field of logistics. the need for further theoretical substantiation and development of priority directions for improvement of the market infrastructure of agrarian products, introduction of a logistic approach is a requirement of time, especially in the context of ensuring the growth of competitive positions in the market, guaranteeing a safe environment, including the food segment. conducted studies show that the essence of the concept of “market”, its components and features are interpreted in a wide range. thus, j. robinson (1986) and m. friedman (1996) characterize the market as a set of socio-economic relations that penetrate all spheres of public life, and the market itself, through its own laws and mechanisms, induces the interaction of its participants. some authors consider the market from the standpoint of institutional theory. d. nort characterizes the market as a system of institutions, some of which increase efficiency, while others encourage it to decline (nort, 1997 and 2010). hayek f. considers the category of “market” to socio-economic institutions, which covers the traditional elements of any institution, as well as the norms and mechanisms governing the specific relationship between them. it is the market that allows the most complete and effective use of information that is broadened between individual participants (hayek, 2011). gritsenko a. interprets the market infrastructure as a system, which is a set of elements that ensure uninterrupted multi-level functioning of economic interactions, interaction of subjects of market economy and regulate the flow of commodity-cash flows (gritsenko, 1998). it is determined that the majority of studies related to the essence of the market were conducted in the 1990s and 2000s, which testifies to the urgency of the issue that is transforming in time and space, and market mechanisms need to be adapted to globalization changes, requirements of the global market and further research in the context of the infrastructure provision of individual segments of the market, including the agrarian market. market infrastructure is regarded by most scholars as the foundation, basis, aggregate industries and activities that serve the economy, individual production, social sphere. bilorus o.g. notes that it is expedient to refer the following directions to the main directions of global governance: control of threats and prediction of their consequences, stimulation the development of international cooperation and integration, evaluation and forecast the results of the development of global processes, coordination of work on the implementation of global strategies, the creation of international management structures, the prevention of global conflicts and threats, etc. according to the author, the global economy generates global poverty of people in the world (bilorus, 2001; bilorus, 2009). one of the global threats is food problem. poverty causes global social problems of humanity that requires a comprehensive solution, regulation of the market of agrarian products and access to food. the authors’ position is to interpret the infrastructure of the agrarian market in a systematic interconnection of resource, production and logistics opportunities of the market participants, who must ensure efficient and ecologically safe functioning of the enterprises, introduction of resource-saving technologies, provide effective interconnections and an appropriate level of business activity, promote quantitative and qualitative increase of production by types, guarantee its safety for consumers. the infrastructural provision of the agrarian market consists of mutually agreed processes that allow obtaining economic (financial), social (food safety), environmental interests (preservation of the natural environment). in the context of combination of economic, social and environmental interests there is a need of introduction or regulation of the infrastructural providing for agricultural market through effective logistics activities of producers at all levels and the widespread use of information technology, including electronic commerce. 3. current trends in infrastructure provision of the agricultural market modern trends in the agrarian business show that commodity producers are actively using innovative approaches in the cultivation, storage and processing of products. the question of effective selling remains to be resolved, which will allow to increase the competitiveness of commodity producers, to ensure the development of the market infrastructure of agrarian products due to the global trends. the most important basis for the formation of the agrarian market is its structural elements, which are characterized by a variety of channels of sale, forms of sale, intermediaries and buyers, as well as a developed network of service, scientific and information services. that is why the process of forming the agrarian market is considered as a complex integrated category with functional features related to the production, baltic journal of economic studies 42 vol. 5, no. 5, 2019 distribution, exchange and promotion of agrarian products to the consumer. a fully functioning agricultural market includes a set of components such as: market mechanism, specialized markets, market infrastructure. the peculiarities of changing approaches to the formation and functioning of the market of agrarian products are the growing role of globalization and the transnationalization of the world economy, as well as the growing demands of consumers to the quality of products, their safety, as well as the level of infrastructure provision of the main and auxiliary industries. infrastructure development stimulates additional use in the area of material production of individual resources of territories, activates the territorial mobility of factors of production. the growing integration of foreign economic relations influences the nature of the use of infrastructure, the adaptation of its elements to the environment. its integration role is very important together with the growing role of the food market in the global economy, due to territorial and branch characteristics. consequently, external factors, including globalization processes, require changing approaches to the formation and transformation of agricultural market infrastructure, which includes: wholesale food markets; exhibitions; fairs; auctions; tenders; retail trade; agroindustrial groups; banking and insurance institutions; credit unions; agro services; information technologies and means of business communication; system of professional training; enterprises and organizations that perform functions of transportation, storage, standardization, certification, price monitoring; special zones of free enterprise, the level of organization of which depends on the effectiveness of the functioning of the market mechanism. it is revealed that the infrastructure features of the formation of the market of agrarian products consist of its elements taking into account the specific features of each particular product. a priority factor for the impact on the formation of the agrarian market is the specifics of the collection, storage, transportation of products by species. that is why the process of formation and functioning of the market of agrarian products requires the use of effective tools related to the attraction of technological innovations, which should be directed not only to increase production capacities and increase the level of product safety for consumers, but also to expand the possibilities of selling products with the use of modern approaches, including logistic approach. improving the infrastructure of the agrarian market is closely linked to the development of logistics activities. it is the logistical approach in the development of the market of agrarian products that prompts the identification of individual needs of consumers and responds to them, directing the available resources to their quantitative and qualitative satisfaction. the logistic activity allows to provide consumers’ inquiries related to the time, place of availability, quality of agrarian products through appropriate logistics operations. it is determined that logistic operations with information flows generalize the process of gathering, storing, processing and transmitting information that corresponds to material or service flows. all transactions with financial flows correspond to transactions with information flows. logistics related to information and financial flows includes collecting, storing and transmitting cargo information, receiving and sending orders, negotiating, entering into contracts, calculating with suppliers, intermediaries and buyers of goods, cargo insurance, customs clearance, acceptance and release of goods from the warehouse, compilation of reports, schedules, development of routes (oklander, 2004). effective management of information and financial flows enables to optimize costs for producers and ensure the interests of all consumers of agrarian products, including foreign markets. in order to meet consumer requests, the role of information and information flows is important, which can be mutually matched through information logistics. the information logistics ensures the organization of the information flow that accompanies the material flow, and serve as a priority link that connects the process of supplying resources, the process of production, storage, processing, transportation, selling of agricultural products. it is the information logistics that covers the management of all processes of product movement, ensures its selling, the flow of products in the required quantity and quality to the consumer, allows to optimize costs, including through the use of e-commerce. for products with storage specifics and a limited period of selling, the use of e-commerce is a time requirement. the main advantage of e-commerce is the constant presence of the commodity producer, its products in the range, conditions of sale in the free information access. that is, the commodity producer has a permanent opportunity to have a global presence on the market in on-line mode. that is, the commodity producer has a permanent opportunity to have a global presence at the market in on-line mode and modify (update) the information and be in constant contact with potential partners. such approach allows to expand the competitors’ capabilities of commodity producers significantly, provide a quick exchange of information. e-commerce allows commodity producers to combine marketing activities with optimization of advertising costs, to ensure the efficiency and convenience of carrying out operations for the sale of products, its transportation, managing all logistics processes. the use of e-commerce allows the commodity producer to be constantly connected with his/her partners, to carry out electronic calculations and conduct operational monitoring of the results of the selling of agrarian products. baltic journal of economic studies 43 vol. 5, no. 5, 2019 e-commerce is a time requirement for economies which adapt themselves to a high level of competition in the global market. the use of e-commerce allows to shorten the period of product sales, to reconcile the needs of producers and consumers and to reduce the number of intermediaries. the use of the internet technologies provides direct interaction between the producers and the consumer, provides the consumer with a full range of information on the range, quality of agricultural products, prices, storage and transportation conditions. due to the internet technologies, the producer has the opportunity to accumulate information about partners, to monitor the implementation process, to identify problem situations and to ensure the leveling of threats based on the analysis of situations. the experience of e-commerce in the countries of the european union proves its popularity and effectiveness for all participants (from suppliers of material resources to producers, consumers, banking institutions). restrictions that have a negative impact on the infrastructure provision of the agrarian market, the possibility of expanding the scope of e-commerce in the agrarian sector of the economies of the countries that adapt to the global market, are the need for a clear regulation of the process of selling agricultural products, protecting the interests of all participants in the process through regulation of legal framework, adherence to business ethics, ensuring a high level of business activity of all participants in the process, improvement of the electronic payment system, distribution of area covered with internet. the interaction of all participants involved in the selling of agrarian products on the basis of e-commerce is based on the cooperation of a network of producers, banking institutions, internet service providers, supermarket chains, processing enterprises, including export-oriented agricultural products, as well as regional representatives of state authorities. the interests of all participants of the process should be consistent with the current legal and regulatory framework, adapted to regional features, international agreements (norms, standards). the coherence of the interests of all participants of the process can be ensured by the functional features of the activity of the trade (commercial and industrial) chambers. it is effective in the process of selling agrarian products to involve internet providers, insurance companies, banking institutions, organizations for product certification, environmental and public organizations on the basis of partnership. the essence and peculiarities of the interaction of participants in the agrarian market with the use of e-commerce formed by the authors in table 1. the main processes that should be covered in the general logistic process are: peculiarities of cultivation (technologies, resources, ecological state of the territory), peculiarities of collection, storage, transportation, processing, marketing of products by species. in order to implement e-commerce, the producer must have the financial capabilities to create an electronic page, e-store, catalogs of products, catalog filling and updating. possibilities of information accumulation, conducting of operational analysis in the context of individual partners, will allow the owner (leader) to decide on the expediency of expanding the range of agrarian products, to forecast demand and price of product sales in different periods of sales, on different channels of sale, including external ones. under current conditions, improving infrastructure provision in the formation of the agricultural market has a strong link with a large number of factors. the priority is the issue of product flow to the consumer, with a minimum number of intermediaries, as well as expansion of export opportunities of commodity producers, due to expanding the scope and opportunities of information logistics, use of e-commerce. in combination of actions, when the logistic approach is implemented, this will reduce the level of information, production, business risks, as well as increase the export opportunities of producers of agrarian products significantly, especially in the context of the urgency of the issue of guaranteeing the food security of the world, its individual regions and countries. exports of agricultural producers are based on a combination of factors, including globalization. that is why the development of logistics centers, the strengthening of the role of logistics in the development of agrarian business will allow for wider opportunities in the selling of agrarian products and invest money in improving the infrastructure provision of the market in order to improve the management of financial and information flows. the use of e-commerce, which significantly expands the market opportunities of all participants in the process of selling agrarian products in the domestic and foreign markets, is evident at the time, which confirms the experience of most countries of the world that form the basis of food security such as: the usa, canada, australia, brazil, china, india. the main emphasis in the development of agrarian business in the last 10-20 years was made on the use of innovative technologies and the use of a wide range of logistical capabilities, which, together with the provision of infrastructure support for the market of agrarian products, allowed the exporting states to take the highest competitive position in the global market. but this approach allows to get the relevant benefits only locally, not globally. that is why the authors stipulate that the regulation of the infrastructure provision of the agrarian market at the local level through the introduction of a logistic approach provides an opportunity to obtain economic interests of the exporting states. in the global market the solution of a problem must have a wide range of actions and it is aimed at streamlining the economic, socio-ecological interests of the world society, which will eliminate food risks and baltic journal of economic studies 44 vol. 5, no. 5, 2019 table 1 the essence and features of the interaction of participants of the market of agrarian products with the use of e-commerce opportunities process participants informational support of activity of all market participants services in the field of foreign economic activity results of participants’ interaction agrarian enterprises of various forms of ownership, sizes of production. processing, storage enterprises. electronic exchange of information, electronic money flow, e-commerce, electronic money, e-marketing, e-banking, electronic insurance services development of partnership relations between all participants in the process coordination of actions, cooperation with state authorities participation in the development of regional, state development programs, development strategies implementation of measures aimed at increasing the competitive position of producers, improving image positions registration of customs documents issuance of certificates of origin of products, goods and services (in international form) issuance of expert opinions practical help in conducting trading operations provision of reference and information services organization of professional training, internships improvement of the infrastructure provision of the agrarian market, its separate segments on the domestic and foreign markets. internet service providers. increasing the level of awareness of all participants of the process, increasing the level of access to information, the speed of its updating, technical support. chambers of commerce and industry (regional level). improving the efficiency of the producers of agricultural products, processing enterprises. increasing the share of exports in total sales of agricultural products. banking institutions, insurance companies. coherence of interests of all participants of the process, increasing the level of business activity. reducing the level of information, production, entrepreneurial risk. environmental organizations. information provision of the process of mutual harmonization of environmental standards and norms at the international level, taking into account existing programs for the preservation of the natural environment. extension of the information circle of issues and implementation of measures for the preservation of the natural environment, reducing the level of resource intensity in the production of agricultural products. financing activities through environmental funds (grant projects). increasing the level of environmental friendliness (safety) of agrarian products. organizations for the certification of agrarian products. compliance with international standards, rules of certification of agrarian products. creation and free use of the information environment (databases). extension of information circle of issues and implementation of measures aimed at adherence to international standards of quality agricultural products. compliance of agrarian products with quality standards, including european, international standards. community organizations. availability and completeness of information on the compliance of agrarian products with international standards, safety and environmental friendliness of agrarian products by species. information provision of the process of ensuring food security for vulnerable groups of the population, implementation of international programs to combat and prevent obvious and hidden hunger. formation of an informational environment, which will allow the public to have free access to the results of compliance with producers of agricultural products technological norms, market access to safe products, and its export. increasing the level of environmental consciousness of producers, their social responsibility. prevention of obvious and hidden hunger. protection of vulnerable groups of the population. protecting the interests of import-dependent states of the world, leveling food risks. source: formed by authors baltic journal of economic studies 45 vol. 5, no. 5, 2019 ensure that the market receives sufficient quantity and range of agrarian products which are of certain quality and environmental friendliness. in the global environment, the issue of the infrastructure provision of the agrarian market is a matter of the safety, availability of everyone to food as the basic requirement of human existence. the regulation of the infrastructure provision of the agrarian market should be guaranteed by the state position in building up its own production, or by financial capacity to saturate the domestic market with imported products. expansion of the information environment allows to obtain appropriate advantages in solving the food issue, including the process of guaranteeing the appropriate level of security of the world society. receiving economic interests of exporting countries remains a priority in modern conditions. it forms the main directions of regulation of the infrastructure of the market of agrarian products. but economic interests must be supplemented by social and environmental, which will create the preconditions for the preservation of the world community, guarantee the possibility of filling food, minimize the threat of spreading the obvious or hidden hunger, preserve the natural environment of the world from the growing technological load of agrarian business. 4. conclusions providing opportunities in the development of the agrarian sector is closely linked to the operation of market mechanisms. in terms of the strengthening of globalization trends and the transnationalization of business, including agrarian, it is necessary to address the issues of improving the market infrastructure of agrarian products in order to increase the competitive position of commodity producers, adapt to the conditions of the global market, address the issue of food security of the world and its individual regions. one of the directions of improving the infrastructure of the market of agrarian products is the development of logistics activities and the expansion of information capabilities of all market participants, the introduction of the process of electronic commerce. it is revealed that expanding the scope of e-commerce in the agrarian sector allows obtaining the benefits of purchasing the necessary material resources, updating technologies and equipment, presenting products in constant global access for all potential partners, providing information on quality, safety, conditions of its sale, transportation etc. this approach allows not only to optimize costs, but also to expand the range of partners, enhance competitive positions and investment opportunities. it is stipulated that the information component of the infrastructure of the market of agrarian products allows to expand the export opportunities of commodity producers, which is confirmed by the experience of the majority of exporting countries. the use of e-commerce opportunities for the sale of agrarian products can increase the productivity of producers, processors, increase the awareness of all process participants, level of access to information, its updating, reduce the level of information, production and business risks, increase the level of information provision of activities of all market participants, including during export. this is due to the economic interests of agricultural market participants. this approach is local in terms of the growing influence of the global market requirements, and the high level of dependence of the process of formation of exportimport capabilities of the world countries prompts the settlement of infrastructure links. priority directions for further development of the agrarian sector should be to ensure not only economic interests, but also social and environmental, which is a time requirement due to the compliance with food quality standards, their availability for a long term, especially in the regions and individual states that have been dependent on the import of agrarian products. the authors stipulate that in the global market the solution of a question should have a wide range of actions that should be directed at the ordering of economic, social and environmental interests of the world society. improvement of the infrastructure provision of the agrarian market should be a matter of food safety and availability, given the need to level out obvious and hidden hunger, and not only the spread of innovative technology of production and receiving extra profits. the regulation of the infrastructure provision of the agrarian market should be guaranteed by the state position in the formation of food security on the basis of its own production or import of quality and safe agricultural products. the issue under study is complex and multi-faceted, but the orientation of agricultural production only to the economic interests of exporting countries can be used to increase the tension in society, including ignoring environmental problems and the social security of the world community. references: friedman, m. (1996). kolichestvennaya teoriya deneg [quantitative theory of money]. moskva. (in russian) robinson, j. (1986). ekonomicheskaya teoriya nesovershennoy konkurentsii [economic theory of imperfect competition]. moskva. (in russian) nort, d. (1997). instituti, institutsionalnyie izmeneniya i funktsionirovanie ekonomiki [institutions, institutional changes and the functioning of the economy]. moskva. (in russian) baltic journal of economic studies 46 vol. 5, no. 5, 2019 nort, d. (2010). ponimanie protsessov ekonomicheskih izmeneniy [understanding the processes of economic change]. moskva: vyisshaya shkola ekonomiki. (in russian) messi, d. (2005). lineynaya model innovatsiy: za i protiv. transfer tehnologiy i effektivnaya realizatsiya innovatsiy [linear innovation model: pros and cons. technology transfer and effective implementation of innovations]. moskva. (in russian) hayek, f. (2011). individualizm i ekonomicheskiy poryadok [individualism and economic order]. moskva. (in russian) erhard, l. (1991). blagosostoyanie dlya vseh [welfare for all]. moskva. (in russian) gritsenko, a. (1998). rynkova infrastruktura: sut, funktsii, budova [market infrastructure: nature, functions, structure]. kyiv. (in ukrainian) gadzhinsky, a. m. (1995). osnovyi logistiki [the basis of logistics]. moskva. (in russian) oklander, m. a. (2004). lohistychna systema pidpryiemstva: monohrafiia [the logistic system of the enterprise: monograph]. odessa: astroprin. (in ukrainian) pyvovarov, m. g. (2009). model of interaction of logistic concepts for the achievement of enterprise’s competitiveness [model of interaction of logistic concepts for the achievement of enterprise’s competitiveness]. derzhava ta rehiony. seriia: ekonomika ta pidpryiemnytstvo, no. 4, pp. 157–162. (in ukrainian) frolova, l. v. (2005). mekhanizmy lohistychnoho upravlinnia torhovelnym pidpryiemstvom: monohrafiia [mechanisms of logistic management of a trading enterprise: monograph]. donetsk. (in ukrainian) dudar, t. g. (2009). formuvannia rynku konkurentospromozhnoi prodovolchoi produktsii : teoriia, metodyka, perspektyvy: monohrafiia [formation of the market for competitive food products: theory, methodology, perspectives: monograph]. ternopil: economic thought. (in ukrainian) varenko, v. m. (2013). systemnyi analiz informatsiinykh protsesiv: navchalnyi posibnyk [system analysis of information processes: tutorial]. kyiv: university "ukraine". (in ukrainian) ostashko, t. o. (2006). rynkova transformatsiia ahrarnoho sektora [market transformation of the agrarian sector]. kyiv: institute of economics and forecasting. (in ukrainian) wheelan, c. (2010). naked economics. undressing the dismal science / n.y.; london: w.w. norton&company, 384 p. bilorus, o. g. (2001). hlobalizatsiia i bezpeka rozvytku: monohrafiia [globalization and security of the development: monograph]. kyiv: kneu. (in ukrainian) bilorus, o. g. (2009). globalization. visnyk skhidnoukrainskoho natsionalnoho universytetu imeni v. dalia, no. 8(138), part 1, pp. 3–16. (in ukrainian) baltic journal of economic studies 178 vol. 6, no. 5, 2020 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 2 admiral makarov national university of shipbuilding, ukraine. e-mail: antonina.trushliakova@gmail.com orcid: https://orcid.org/0000-0003-1958-3472 3 admiral makarov national university of shipbuilding, ukraine. e-mail: grayplusigor@gmail.com orcid: https://orcid.org/0000-0003-2947-4632 doi: https://doi.org/10.30525/2256-0742/2020-6-5-178-183 strategic human capital management in the context of digitalization inna irtyshcheva1, antonina trushliakova2, ihor sirenko3 abstract. the purpose of the article is to improve the strategic management of human capital in the context of digitalization. in modern conditions, the development of human potential is closely linked with the spread of digital technologies, which are being implemented and rapidly evolving in all spheres of the economy and society. in this context, the effectiveness of the processes of adaptation and competitiveness of socio-economic systems in the long run depends on the development and implementation of the concept of human capital development which takes into account the impact of digitalization processes on the formation of human capital, as well as on the relevant qualitative characteristics that will best meet the needs of the national economy in the transition to a digital model of governance. methodology. the article is based on international legal acts, laws and bylaws of ukraine in this area of legal regulation of human capital in the context of digitalization. both general scientific and special methodology were used for the research: methods of analysis and synthesis, method of description, method of induction, method of deduction. results. it is proved that the state policy in the field of human capital development in ukraine today does not meet the modern challenges associated with the rapid development and spread of digital technologies. the consequences of this are already growing disparities in the labor market, shortage of highly qualified specialists with digital competencies at the appropriate level, growing trends in emigration of intellectual capital and gene pool of the nation abroad, reduction of the "middle class" and intensification of social degradation. solving these problems requires the development and implementation of a unified state strategy for human capital development, which will stimulate its formation, development and effective use in the vector of transition to a new technological system, ensure economic growth and high living standards. to this end, the concept of strategic development of human capital in the context of digitalization is substantiated. it systematizes the goals, principles, strategies and tasks of the state to ensure effective processes of human potential formation and its transformation into human capital in the context of implementing the strategy of sustainable development of the national economy under the influence of digital technologies. conclusions. the strategy of human capital development in the conditions of digital transformations is substantiated. it is a system of interrelated directions, actions and mechanisms aimed at implementing the concept of formation, motivation and use of human capital, which meets the needs of the economy and society and contributes to the competitive advantage and continuous human development in the long run. key words: strategic management, human capital, digitalization, strategy, international rankings. jel classification: e22, f01, o10, j10 1. introduction in modern conditions, the development of human potential is closely linked with the spread of digital technologies, which are being implemented and rapidly evolving in all spheres of the economy and society. in this context, the effectiveness of the processes of adaptation and competitiveness of socio-economic systems in the long run depends on the development and implementation of the concept of human capital development, which takes into account the impact baltic journal of economic studies 179 vol. 6, no. 5, 2020 of digitalization processes on the formation of human capital, as well as on the relevant qualitative characteristics that will best meet the needs of the national economy in the transition to a digital model of governance. studies show that demographic and qualitative characteristics in ukraine have been deteriorating in recent years and that appropriate conditions for the use of human capital have not been created. the consequence is an increase in labor market imbalances, an increase in informal employment and the migration of skilled workers abroad. veryovina i.m. identifies the following main problems of formation and use of human potential in ukraine: 1. underestimation of the impact of human development on the economic growth of the state. this is one of the main reasons for the gap in the levels of development between ukraine and other developed countries. 2. lack of stable funding. expenditures on education, health care and social protection are often seen as “spending” of budget funds, while social investments could have a significant and lasting impact on ukraine’s development. 3. passive social policy. ukraine's social policy focuses more on helping the poor than on reducing poverty through empowerment. there are no effective incentives for employees (material and moral orientation), optimal working conditions. the level of social benefits is very low and does not solve the problem of poverty, and in some cases, against the background of low average wages, the amount of social assistance discourages people from being economically active, which reinforces dependence on material assistance. 4. low level of society consolidation. in ukraine, there is an urgent need to implement a human development strategy, which will combine public policy in areas such as demographic development, health care, employment and wages, social protection, regional development, education. 5. insufficient information support of social projects and programs aimed at creating conditions for sustainable human development in all spheres of public life; low access of people to the resources, official data, rights and services needed to participate in society (veryovina, 2012). 2. evaluation of the effectiveness of human capital management according to international ratings human capital is one of the leading elements of national wealth, and its efficient use of human capital is the main engine of economic growth. according to a world bank study, in developed countries the cost of human capital is over 70% of the national wealth structure. for example, in the us – 85%, in the uk – 87%, in japan – 72%. in ukraine and other post-soviet countries, the cost of human capital is estimated at 43-45%, which indicates an insufficient level of its use. the efficiency of the processes of human capital formation and development in comparison with other countries of the world is also shown by the international ratings formed at the level of international organizations. the most well-known include the global human capital report (2017), which is being developed by world bank experts, and the human development indices and indicators (2018). the human capital development index is formed to accelerate and expand investment in human resources to strengthen social justice, economic growth and prepare for the changes brought about by the fourth industrial revolution. the index covers indicators that characterize people's life expectancy, quality of education and level of professional training, efficiency of the labor market, employment rate, etc. analyzing the place in this ranking, which ukraine took in 2018 (50th place), it should be noted that in general the comparative positions are quite high. there is also a positive progress made in some areas of research, namely – increasing life expectancy at birth, literacy rates, reducing gender gaps and more. in the dynamics of 2015-2018, ukraine occupied various positions in this ranking from 26th place in 2016 to 79th place in 2017. the greatest influence on the dynamics of indicators was exerted by: the state of the labor market and employment, the cost of health care and education, the level of higher education coverage. ukraine's position in international rankings of human capital is shown in figure 1. in 2018, ukraine ranked 88th among 189 countries in terms of human development with a 0.75 coefficient. the main indicators of the rating are life expectancy of 72 years, the expected duration of training – 15 years, and the average duration of training – 11.3 years. ukraine's relatively high position in the rankings is ensured primarily due to the general increase in life expectancy, a high level of coverage of the population with primary, secondary and higher education. the lowest indicators that negatively affect the rating positions are the low level of gni per capita, as well as science, education and medicine expenditures as a percentage of gdp. the analysis of the state policy in the field of human development has shown that in recent years no significant progress has been made in the development of human capital in ukraine. reforms in education and medicine, as well as the modernization of the labor market, are not working as expected and are not being implemented effectively enough. imperfect policy in the field of education, a significant increase in tuition prices against the background of reduced public procurement contributes to a significant migration of potential students and people of the most productive age abroad (both for educational purposes and employment). baltic journal of economic studies 180 vol. 6, no. 5, 2020 ukraine's progress in the rankings of actual human capital needs effective, targeted economic and social reforms aimed primarily at improving education and adapting to the new digital realities of the economic and social environment, improving the standard and life expectancy, creating an effective system of public security. at the same time, achieving economic efficiency indicators should be based on qualitative functional cost analysis and forecasting in all areas of budget expenditures, rather than a simple budget reduction of social expenditures. thus, it can be stated that today in ukraine, under the influence of global trends, rapid technological development and growing current problems in the socio-demographic and economic spheres, certain preconditions have been formed for a radical overhaul of the current human capital development policy. this requires the formation of a unified strategic concept, clarification of strategic goals and the development of methodological tools for assessing the effectiveness of human development transformation processes in the context of digitalization. 3. conceptual approaches to strategic human capital management in the context of digitalization in order to improve the processes of human capital management and provide the national economy with human resources that will meet the long-term needs for its effective development, the concept of managing the strategic development of human capital in the context of digitalization is offered. it aims to ensure balanced causal links between economic growth, the formation and use of human capital and human development, taking into account the positive effects of the introduction of digital technologies in all areas of the national economy and society in the long run. the concept defines the main goals, principles and strategies of human capital development in terms of the impact of digital technologies on human development, motivating people to learn and apply digital skills and organize effective use of human capital in the context of digital transformation of national economy and society (figure 2). the basis for the formation of a strategy for the development and transformation of human capital in the context of digitalization is the draft strategy of sustainable development until 2030. it recognizes the development of human capital as one of the key factors and, at the same time, the goals of economic growth. strategic goals of human capital development in digitalization are aimed at ensuring a continuous process of formation, reproduction and optimal use of human capital, structural and qualitative characteristics of which will create a synergistic effect in the process of strategic transformations of socio-economic systems to sustainable development based on digital technologies. the processes of digitalization in the target strategic aspect of the formation, reproduction and development of human capital determine the main directions of digital technologies development and maximization of their positive impact on these processes through the following indicators: 1) the level of implementation of digital technologies in the field of health care. the following goals have been defined for the strategic goals of the ministry of health of ukraine: – unified electronic medical cards and electronic services are available to 100% of patients who are registered in the electronic health care system; – 20% of patients actively use them; – 100% of prescription drugs are available by electronic prescription; – vaccination records are kept for 70% of patients registered with the electronic health care system; 34 31 26 79 50 83 83 84 84 88 0 10 20 30 40 50 60 70 80 90 100 2014 2015 2016 2017 2018 human capital index human development index figure 1. ukraine's place in international rankings of human capital and human development source: (the global human capital report, 2017; human development indices and indicators, 2018) baltic journal of economic studies 181 vol. 6, no. 5, 2020 – 70% of basic medical certificates are issued in electronic format; – 100% of letters of incapacity for work are created in electronic format; – the electronic health care system records information about 100% of emergency medical calls (stratehichni tsili kri moz na 2019–2024 roky, 2020). 2) the level of implementation of digital technologies in secondary education, which will increase the level of mastering digital technologies by students and their use in the educational process, which will be the basis for the formation of digital literacy of graduates and the acquisition of digital competencies in future professions. according to experts, “ukraine does not currently have a clear, systematic vision and strategy for the "digitalization" of education. unfortunately, "digital" technologies are not a priority either in the new draft law "on education" or in the conceptual framework of reforming the "new ukrainian school". as for the national projects and programs that have sustainable development strategy forecasting the need for human capital development digital trends and their impact on human development strategic goals of sustainable development goals in the field of human capital formation goals in the field of human capital development goals in the field of human capital use criteria for assessing the effectiveness of human capital development and use principles of human capital development in the conditions of digitalization analysis of opportunities and threats to human capital development strategies for the development and transformation of human capital in the context of digitalization formation of human capital motivation of human capital use of human capital healthcare development strategy education development strategy security strategy labor market development strategy human capital investment strategy digital infrastructure development strategy science and technology development strategy strategy of the economy digitalization development of digital culture of the population figure 2. the concept of managing the strategic development of human capital in the context of digitalization baltic journal of economic studies 182 vol. 6, no. 5, 2020 been implemented in secondary education over the last 20 years, they were inconsistent, fragmentary in nature, closed with a change of government, even if they were justified” (tsyfrova adzhenda ukrainy 2020, 2020). 3) the level of implementation of digital technologies in the organization of security is a wide range of goals, covering goals in the areas of: safety of life, criminogenic safety, road safety, financial security, etc. they require the creation of integrated information systems for warning, calling, checking and responding to relevant situations. the key tasks of the state aimed at ensuring the balanced development of human capital in the context of digitalization is to create institutional, legal, economic and organizational conditions to minimize the gaps between the levels of current and necessary qualitative and structural characteristics of human potential. the development of human capital development strategies in the context of digitalization of the economy and society is an integrated process aimed primarily at minimizing the gaps between the expected needs of the national economy, taking into account digitalization processes and the rates of qualitative transformation of human potential in the strategic perspective. ensuring the integrated growth of human capital in the context of digitalization requires the formation of an effective motivational strategy that will promote the transformation of human potential into human capital, which will have a set of skills necessary for the effective realization of its potential in digital reality. in other words, it is necessary to create conditions that will determine the priority of the choice of learning, self-improvement and development of digital technologies of each individual in the process of their lives. an important component of such a strategy is the labor market development strategy, which will determine the main goals, directions and specific measures for the implementation of state policy in the field of employment and stimulate the creation of new jobs. the labor market development strategy should take into account all opportunities for the formation and support of the development of digital skills, competencies and the provision of conditions for lifelong learning. it is necessary to revise the current national classifier of professions, supplement and standardize the requirements for qualifications by specialties, ranks, etc., systematize digital skills and competencies and ensure the differentiation of salaries according to the complexity and level of creative abilities in relevant positions. that is, the urgency of revising and reengineering the current concept of organization, work motivation and personnel policy is becoming increasingly acute, especially in the field of public administration. the strategy of investing in human capital development determines the priority areas, sources of investment, the proportions of their distribution in accordance with the needs of the development of individual components of human capital, as well as indicators for evaluating the investment effectiveness. the presence of a clearly defined state strategy for investing in the development of human capital is an important factor in motivating its carriers to selfdevelopment as it encourages efforts and directs their vector in the field of demand for relevant skills and knowledge and opportunities to obtain resources for their acquisition (stehnei, 2018; vyshnevska, 2019). the strategy of digital infrastructure development aims to ensure broadband access to digital services, reduction digital gaps, introduction of convenient and mobile digital technologies and platforms that will promote social development, stimulate public activity, access to public, educational, medical and other services. it should be noted that the main goals, objectives and principles of the digital economy and society are defined in the relevant concept. it states that “the purpose of introducing incentives and motivations for digitalization is simple: to encourage businesses and citizens to consume and use information and communication and digital technologies. that is, the goal is to make technology available in ukraine; to evoke the desire and motivation to connect and use the digital infrastructure; to ensure that the desire to modernize, optimize, scale, accelerate and develop their own business and life can be realized and become the basis of the digital economy” (kontseptsiia rozvytku tsyfrovoi ekonomiky ta suspilstva ukrainy na 2018-2020, 2020). thus, the rapidly changing conditions of the environment, one of the most important features of which is the continuous and accelerated development of digital technologies requires a radical overhaul of personnel, economic and social policies in the direction of ensuring the effective adaptation of the processes of formation and development of human capital to the new digital realities and ensuring its effective use for the sustainable development of the national economy. 4. conclusion it is proved that the state policy in the field of human capital development in ukraine today does not meet the modern challenges associated with the rapid development and spread of digital technologies. the consequences of this are already growing disparities in the labor market, shortage of highly qualified specialists with digital competencies at the appropriate level, growing trends in emigration of intellectual capital and gene pool of the nation abroad, reduction of the "middle class" and intensification of social degradation. solving these problems requires the development and implementation of a unified state strategy for human capital development, which will stimulate its formation, development and effective use in the vector of transition baltic journal of economic studies 183 vol. 6, no. 5, 2020 to a new technological system, ensure economic growth and high living standards. to this end, the concept of strategic development of human capital in the context of digitalization is substantiated. it systematizes the goals, principles, strategies and tasks of the state to ensure effective processes of human potential formation and its transformation into human capital in the context of implementing the strategy of sustainable development of the national economy under the influence of digital technologies. it is noted that an important prerequisite for preparation for economic and social change and the implementation of appropriate transformations is the development of an effective strategy for human capital development that takes into account the main opportunities, risks and threats of digitalization and the development of related technologies for humanity in general and the labor market in particular. the strategy of human capital development in the conditions of digital transformations is substantiated. it is a system of interrelated directions, actions and mechanisms aimed at implementing the concept of formation, motivation and use of human capital, which meets the needs of the economy and society and contributes to the competitive advantage and continuous human development in the long run. references: the global human capital report 2017 (2017). available at: https://www.worldbank.org/en/data/ interactive/2018/10/18/human-capital-index-and-components-2018 (accessed 06 february 2020). ponomarova, m., irtyshcheva, i., & dolzhykova, i. (2019). conceptual fundamentals of development of the food security system. baltic journal of economic studies, vol. 5, no. 2, pp. 57–64. doi: 10.30525/2256-0742/2019-5-2-57-64 human development indices and indicators (2018). available at: http://hdr.undp.org/sites/default/files/2018_ human_development_statistical_update.pdf (accessed 06 february 2020). stehnei, m., irtyshcheva, i., & gurina, o. (2018). financial mechanism of the socio-oriented economic development of the black sea region. baltic journal of economic studies, vol. 4, no. 4, pp. 202–208. doi: 10.30525/2256-0742/2018-4-4-202-208 stratehiia staloho rozvytku do 2030 roku [sustainable development strategy until 2030]. available at: https://ips.ligazakon.net/document/view/jh6yf00a?an=332 (accessed 10 february 2020). vyshnevska, o., kaliuzhna, o., & irtyshcheva, i. (2019). infrastructure provision of the agrarian market in the globalized environment. baltic journal of economic studies, vol. 5, no. 5, pp. 39–46. doi: 10.30525/2256-0742/20195-5-39-46 stratehichni tsili kri moz na 2019–2024 roky [strategic goals of kri of the ministry of health for 2019–2024]. available at: https://moz.gov.ua/uploads/3/16002-15968_prezentacia_gromads_ki_obgovorenna_moz_ strategicnih_dokumentiv_1.pdf (accessed 15 february 2020). tsyfrova adzhenda ukrainy 2020 [digital agenda of ukraine 2020]. available at: https://ucci.org.ua/uploads/ files/58e78ee3c3922.pdf (accessed 05 february 2020). kontseptsiia rozvytku tsyfrovoi ekonomiky ta suspilstva ukrainy na 2018-2020 [the concept of development of the digital economy and society of ukraine for 2018-2020]. available at: https://www.kmu.gov.ua (accessed 18 february 2020). baltic journal of economic studies 207 vol. 5, no. 3, 2019 corresponding author: 1 lviv polytechnic national university, ukraine. e-mail: farat_o@ukr.net 2 lviv polytechnic national university, ukraine. e-mail: m.luvdar@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-3-207-212 elaboration of technology for implementing organizational solutions on innovative clusters development olexandra farat1, marta lyvdar2 abstract. the process of cluster paradigm development in ukraine is characterized by the absence of a clear legal and regulatory framework that would enable the clusters to be identified in the overall set of business entities. it complicates the coordination of the interaction of participants in the cluster process, as well as processes related to the creation and development of other innovation-oriented business structures. significant impact is the availability of the weak information support, the task of which is to establish business communications between the state and business, on issues of ensuring the maximum possible realization of the existing innovative potential, in particular, by commercializing progressive innovations. therefore, the particular topicality gets the issue of building a structured institutional environment that determines the clear mechanisms for the development of the most innovative business structures in ukraine. the purpose of the researches was to develop specific mechanisms for organizing synergistic interaction of all participants in the process of creation and development of clusters in ukraine in the context of multilevel sectors of their functioning. to achieve the goal, the following tasks were solved: the world tendencies of modern innovative development were investigated; the change of ukraine’s positions during 2014–2017 in innovation rankings was considered; the state of development of innovative entrepreneurship in ukraine was analysed; a system of scenarios for the organization of technological solutions for the development of innovative clusters was proposed; the indicator of the evaluation of the cluster paradigm development in the regions for the purpose of determining the useful effect from its implementation was presented. considered changes in ukraine’s positions in 2010–2017 in innovation rankings and indicators of the provision of innovation development in ukraine in 2010–2017 state the extremely low level of state interest in creating, internal commercializing, and promoting to the external market own innovative technologies, and in the development of the very innovative business, which, in turn, reflects on the ability of enterprises to develop their innovative potential. the proposed system of scenarios for the organization of technological solutions for the development of innovative clusters includes four possible technologies for the creation of clusters, which are united in two blocks: technologies in the sector of state entrepreneurship – the source of stimulation are state institutions and technologies in the sector of private entrepreneurship – the source of initial incentives are business entities themselves. using the proposed indicator of the expediency of cluster paradigm development in the regions to determine the useful effect from its implementation (ircd), it is possible to estimate the influence of clusters on the development of the economy in the region. key words: innovation development, cluster association, cluster background, cluster creation technology, cluster development. jel classification: o30, o33, r11, o57 1. introduction the current process of cluster paradigm development in ukraine is characterized by the absence of a clear legal and regulatory framework that would enable the clusters to be identified in the overall set of business entities and identified possible mechanisms for their creation and development. this greatly complicates the coordination of the interaction of participants in the cluster process, as well as processes related to the creation and development of other innovationoriented business structures (industrial parks, business incubators, etc.) in order to ensure the stable maintenance of their high competitive positions in the global space. baltic journal of economic studies 208 vol. 5, no. 3, 2019 the process of effective clusterization of the national economy taking into account modern economic realities requires a deep systemic approach of the directed and complete transformation of the existing institutional environment through its functional structuring. such functional structuring should provide a clear separation of all processes necessary for the effective development of the cluster paradigm: legal support – necessary for the clear identification of clusters among other business entities, software – necessary to stimulate and interest the economic entities themselves in creating clusters, information provision – necessary for the organization of effective interaction of all participants in the process of creating clusters and providing tools of analytical evaluating of their practical usefulness for regional economies and the economy as a whole. the topicality of the development of a cluster paradigm issue leads to an increase in the number of researchers who pay their attention to clusters. among domestic scientists dealing with research on the possibilities of cluster development and their impact on the growth of the competitiveness of the economy are: z. s. varnaliy, i. o. degtyariova, o. y. zhabynets, g. t. pyatnytska, and others. among foreign scientists, the issue of clusters was particularly active in the research of michael porter, g. lindquist, s. rosenfeld, e. glazer and others. the key attention in the works of these scholars was given to the study of the essence of the notion of “cluster” as a subject of market relations and its impact on the growth potential of the competitiveness of the economy. the research is devoted to the comprehensive study of organizational decisions regarding the development of innovative clusters, which are rather superficial, especially from the side of domestic scientists. the research is aimed at developing mechanisms for organizing synergistic interaction of all participants in the process of creation and development of clusters in ukraine, for which the following tasks were solved: the world trends of modern innovation development were investigated, a system of scenarios for organizing technological solutions for the development of innovative clusters was presented, an indicator for evaluating the feasibility of cluster paradigm to determine the useful effect of its implementation was suggested. 2. research of world tendencies of modern innovative development the current development of an innovative economy in the world can be estimated by analysing the expenditure on innovation in the world. there are listed the world leaders for the cost of innovative development in 2016 in table 1 (website of the forbes magazine, 2016). countries, depending on their influence on the formation of the world’s innovation economic policy, are divided into three groups, namely, asian, north american, and european. table 1 world leaders of innovative development financing in 2016 country expenditures on innovation, billion usd cost share in gdp, % united states 405 2,7 china 338 2,1 japan, 160 3,7 germany 70 2,3 south korea 65 4,4 france 42 1,9 united kingdom 38 1,7 india 35 0,9 russia 33 1 canada 24 1,8 ukraine 0,62 0,8 the asian group is represented by countries such as china, japan, south korea, and india with a total expenditure innovation of $598 billion; the north american group includes the united states and canada with a combined innovation cost of $429 billion. the european group includes germany, france, the united kingdom, and russia with a total expenditure on innovation in the amount of 183 billion usd. the most important influence on the development of innovations in the world is made by the north american group of countries. thus, according to top-50 ranking of the most innovative companies in the world in 2016 published by forbes magazine from 50 companies of leaders, 33 (66%) companies are american, 10 (20%) are european, and only 7 (14%) are asian. in its turn, the top five include: apple, google, tesla motors, microsoft, amazon (website of the forbes magazine, 2017). three companies of five deal with information technology, e-commerce, and one, namely tesla motors is an american automobile startup from silicon valley. consequently, the very development of information technology today is one of the key global trends in the development of an innovative economy. 3. consideration of changes in ukraine’s positions in 2010–2017 in the global innovation rankings, the ranking of doing business, competitiveness, and indicators of the provision of innovation development in ukraine in 2011–2016 as for ukraine, in order to more accurately assess the current state of the domestic economy, we will analyse ukraine’s place in such world rankings as: global innovation index (website of the world intellectual property organization, 2014–2017), global competitiveness index (website of the world bank, 2014–2017), and doing business index (website of the world economic forum, 2014–2017). baltic journal of economic studies 209 vol. 5, no. 3, 2019 the data in table 2 show that ukraine holds indirect positions according to the global innovation index but there is a tendency for its improvement, that is, there is a slight increase in the estimation of ukraine’s innovative development in the global economic space during the investigated period. table 2 places of ukraine in global rankings in 2014–2017 years places of ukraine in rankings/total number of evaluated states index values global innovation index 2014 63/143 36,26 2015 64/141 36,45 2016 56/128 35,72 2017 50/127 37,62 doing business index 2014 159/189 61,52 2015 146/189 63,04 2016 143/190 63,90 2017 140/190 65,75 global competitiveness index 2014 84/148 4,05 2015 76/144 4,14 2016 79/140 4,03 2017 85/138 4,0 as for the doing business index, ukraine is an outsider but at a low pace, ukraine’s assessment by this indicator in the global space also grows during 2014–2017. as for the global competitiveness index, this indicator shows a weakening of ukraine’s position in the global economic environment. analysing the abovementioned indexes, it is stated the fact of the extremely low level of state interest in the creation, commercialization, promotion of own innovative technologies on the external market, and the development of the very innovative entrepreneurship. unfortunately, domestic legislation does not provide conditions for the effectiveness of tax incentives for the development of innovative entrepreneurship. state programs for stimulating entrepreneurship development are not system-oriented; target financing, provided by state programs, is not always sufficient and does not allow meeting the needs of economic entities in full; there is a significant amount of bureaucratic barriers from registration processes to closing enterprises, etc. here is an example of georgia, where in order to implement the procedure for registration of ownership of enterprises, it was necessary to carry out only one procedure, and the procedure itself will last one day; in belarus, it is necessary to pass 2 procedures, and the process takes 3 days; in moldova, respectively, 5 and 5.5; in kyrgyzstan and kazakhstan – 3 procedures and 3.5 days. in ukraine, a business must pass 7 formal procedures and expect a registration within 23 days (website of the economic discussion club, 2017). the availability of highly skilled scientific personnel and adequate level of financing is important for ensuring stable innovative development in the state. table 3 provides data on some indexes of innovative development in ukraine during 2011–2016 (verner, 2017). data in table 3 shows that during the research period, there was an annual decrease in the number of employees involved in the implementation of research; more than half of the research is devoted to new products, not processes. table 3 indexes of the provision of innovative development in ukraine during 2011–2016 year th e nu m be r o f e m pl oy ee s in vo lv ed in re se ar ch a nd de ve lo pm en t, in di vi du al s in te rn al e xp en se s f or re se ar ch a nd d ev el op m en t, m ill io n u a h vo lu m e of in tr od uc tio n of in no va tiv e pr od uc ts b y in du st ri al e nt er pr is es , u ni ts vo lu m e of in tr od uc tio n of in no va tiv e pr oc es se s, un its c um ul at iv e in tr od uc tio n of in no va tio ns , u ni ts 2011 182484 8107,1 2408 2043 4451 2012 175330 8513,4 3238 2510 5748 2013 164340 9419,9 3403 2188 5591 2014 155386 10248,5 3138 1576 4714 2015 136123 9487,5 3661 1743 5404 2016 122504 11003,6 3136 1217 4353 it should also be taken into account that one of the factors that influence the reduction of scientific personnel in ukraine is “brain drain”, which has a significant negative impact on the formation and development of the state’s innovative potential. 4. analysis of the state of innovative entrepreneurship development in ukraine we will evaluate the first ranking of innovative companies of ukraine, which was compiled by forbes magazine in 2016. according to this ranking, the most innovative companies in ukraine are the following (table 4). according to the data of table 4, the largest share of innovative enterprises in ukraine, on the type of economic activity carried out in the agro-industrial complex accounts for 25% of the total, 15% belongs to the technology sector, 10% for pharmaceuticals, machine building, alternative energy, and 5% for finance, cargo transportation, fuel and energy complex, militaryindustrial complex, electronic commerce, and retail. less than half of these enterprises can be considered as the central (sound) enterprises, in particular, yuzhmash, turboatom, ukroboronprom, grammarly, wind power, petcube, drone.ua, eco-optima, to create innovative clusters focused on the production of hightech innovative products. baltic journal of economic studies 210 vol. 5, no. 3, 2019 5. the proposed system of scenarios for the organization of technological solutions for the development of innovative clusters studies have shown that the development of information technology and automotive are the most dynamic industries. ukraine has significant potential in these sectors; in particular, in western ukraine, there is a cluster of information technologies that should be considered as a background1 for the creation of the future silicon valley in ukraine. also, the concern “electron” which strategically can be regarded as one of the enterprises that will act as the core of a powerful machine-building cluster has actively started working today. one of the keys to the successful development of clusters, taking into account the world practice of the eu, north america, and developed countries in asia, is the formation of a structured institutional framework for the functioning of clusters, characterized by the presence of the following functional blocks, namely: the legal framework for the identification of clusters as economic entities, software tools for supporting and stimulating the development of clusters; mechanisms of information interaction of all participants of cluster work (processes of creation and development of clusters). in ukraine, there is no institutional environment for cluster associations of enterprises today, as clusters are not even identified in domestic economic legislation as an independent economic entity, which is reflected in the absence of official statistical information on the state and dynamics of their development in the regions. therefore, we proposed an example of a mechanism for providing information support for the development of innovative clusters in ukraine aimed at systematically improving the institutional foundations for the development of innovation entrepreneurship in ukraine by establishing clear algorithms for the creation and identification of clusters of enterprises. within the framework of the proposed structure of the institutional environment for the development of clusters and taking into account previous researches, four possible technologies of cluster creation (cluster scenario)2 can be distinguished, which are united into two blocks: technologies in the sector of state enterprise – the source of stimulation are state institutions and technologies in the sector of private entrepreneurship – the source of initial incentives are the business entities themselves. the following scenarios for the creation of clusters are possible in the public sector: the top-level scenario and the regional scenario. the main stages of the proposed “top-level” scenario: 1) the relevant ministry submits recommendations to the ministry of economic development and trade of ukraine regarding the possible development of a particular cluster (clusters) in its sector (sectors); table 4 ranking of innovative companies of ukraine in 2016 companies types of economic activity the value of the innovation index privatbank finance 79,2 yuzhmash machine-building 64,6 nova poshta cargo transportation pharmaceuticals 60,4 farmak pharmaceuticals 60,4 turboatom machine-building 58,3 grammarly technologies 56,3 naftogazvydobuvannya fuel and energy complex 54,2 mhp agroindustrial complex 54,2 ukrboronprom military-industrial complex 52,1 rozetka e-commerce 52,1 silpo retail 52,1 wind power renewable energy 50,0 darnitsa pharmaceuticals 47,9 petcube technologies 45,8 nibulon agroindustrial complex 43,8 drone.ua technologies 41,7 eco-optima alternative energy 41,7 svarog west group agroindustrial complex 41,7 agrilab agroindustrial complex 40,4 kernel agroindustrial complex 33,3 1 background of cluster – pre-formed conditions in the economic and legal environment of the state for the development of cluster associations of enterprises through the modification of the strategic vision of their development by business entities by combining existing independent enterprises; addition of existing associations by new participants (research institutes, territorial authorities, other enterprises, etc.). 2 cluster creation technology (cluster scenario) is a set of regulatory, investment, financial, information, and other organizational decisions resulted by the civic actions of all interested parties aimed at creating new and developing existing cluster associations of enterprises. baltic journal of economic studies 211 vol. 5, no. 3, 2019 2) the ministry of economic development and trade of ukraine (medtu) together with the ministry of finance of ukraine (mfu) assess the economic feasibility of setting up a cluster (clusters) in a particular industry (industries); 3) the results of the evaluation of the medtu and the mfu are submitted for consideration and approval by the cabinet of ministers of ukraine (cmu); 4) in case of a positive decision, the cmu coordinates work with the relevant territorial authority; 5) the territorial authority establishes communication between potential members of a cluster association and defines the process of organizing the creation of a cluster (a plan of successive actions to set up a cluster with their subsequent regulation through the removal of predetermined or addition of new members, distributes and redistributes allocated by the state financial resources for the creation of a cluster, etc.); 6) regional investment and development centres monitor the implementation of cluster-building activities in the regions, as well as evaluate the efficiency of their work, in particular by consolidating data on the economic efficiency of their work (calculation and analysis of the regional cluster development index and other indicators). regarding the stages of the regional scenario (the source of the initial incentive will be the territorial authority), they imply: 1) the territorial authority submits recommendations to the relevant ministry regarding the issue of the possible development of the cluster; 2) the relevant ministry examines this proposal and, upon approval, submits to the medtu; 3) the following steps are similar to the steps in the previous scenario. in the private entrepreneurship sector, the following scenarios for cluster creation are possible: the scenario of “independent business entities”, the “top-level” scenario, and the “implicit cluster” scenario. the scenario of “independent economic entities” (the source of initial incentives is independent economic entities) involves the following stages: 1) on their own accord, economic entities submit an application for the consideration of the territorial authority for the desire to unite in the cluster association of enterprises; 2) upon approval, the territorial authority transfers this proposal to the relevant ministry, and then the stages are similar to the previous scenario. the scenario of an “implicit cluster” (enterprises do not create a regulated cluster but formally unite in a non-cluster business association or are unrecognized associations but operate on a cooperative basis as independent economic entities by concluding cooperation agreements) implies: 1) monitoring the work of non-cluster associations with regional investment and development centres, which, analysing data on the activities of unofficially recognized clusters of associations of economic entities, will make recommendations to local authorities regarding their possible transformation into an officially recognized cluster association; 2) the stages are analogous to the scenario of “independent economic entities”. 6. the indicator of the evaluation of the expediency of the cluster paradigm development in the regions in determining the expediency of the cluster paradigm development in the regions, it is also important to assess the beneficial effect for regions from its implementation. for this purpose, we propose the following indicator, namely, the regional cluster development index (ircd). ircd sign cd npc ric rioe cprb cpoe veipc veipoe = −       × + +      1 � � , (1) where cd – is the amount of losses incurred by innovative clusters in the region during the reporting period, thousand uah; npc – the amount of total net profit received by innovative clusters in the region during the reporting period, thousand uah; ric – the amount of real cluster investments in the development of the regional economy during the reporting period, thousand uah; rioe – the amount of real investments in the development of the regional economy, invested in other economic entities during the reporting period, thousand uah; cprb – the amount of the cluster revenues to the regional budget during the reporting period, thousand uah; cpoe – the amount of revenues from other economic entities to the regional budget during the reporting period, thousand uah; veipc – the amount of sold innovative products for export by clusters in the region during the reporting period, thousand uah; veipoe – the amount of sold innovative products for export, thousand uah. the analysis of this indicator is recommended as a holistic in dynamics and in accordance with its structural elements. when calculating the component of the stage of development of clusters 1 −      cd npc � using the sign function, the following values can be obtained: 1) “+1” – cluster profits in the region exceeded the losses in the period under study; 2) “-1” – the losses incurred by clusters in the region exceed their net profits in the investigated period. this situation is normal for newly formed clusters but in the dynamics, this indicator should become positive; 3) “0” – net profits received by clusters are equal to the losses received in the investigated period (the practical baltic journal of economic studies 212 vol. 5, no. 3, 2019 absence of a beneficial effect of clusters for the regional economy in the investigated period, which is unlikely). it is also advisable to analyse the function arguments. after the analysis, the cd value should go to 0, and the npc – to grow. analysing relevant relationships, one can assess the impact of clusters on the development of a real economy in the region ( ric rioe )), the impact of clusters on filling regional budgets (cprb cpoe ), the impact of clusters on the formation of the foreign trade balance of regions ( veipcveipoe). this indicator should be calculated both in the region as a whole and in the context of the proposed scenarios, which will determine the most effective ones for specific regions, taking into account their economic, social, natural, and other conditions. 7. conclusion thus, tasks set for the authors are solved in full. the study of world trends in modern innovation shows that in today’s global economic environment, there are three key groups of countries that influence the formation of a global innovation economic policy, namely: asian, north american, and european. the most important influence on the development of innovations in the world is exactly the north american group of countries, and the development of information technology today is one of the key global trends in the development of the innovative economy. the considered changes in ukraine’s positions during 2011–2017 in global innovation rankings state the fact of the extremely low level of state interest in the creation, internal commercialization, and promotion of its own innovative technologies on the external market, and in the development of innovative entrepreneurship, which in turn reflects on the ability of enterprises to develop its innovative potential. the analysis of the state of innovative entrepreneurship development in ukraine shows that the largest share of innovative enterprises of ukraine, according to the type of economic activity carried out, the agro-industrial complex accounts for 25% of the total, 15% belongs to the technology sector, 10% for pharmaceuticals, machine building, alternative energy, and 5% for finance, cargo transportation, fuel and energy complex, militaryindustrial complex, electronic commerce, and retail. less than half of these enterprises can be considered as the central (sound) enterprises, in particular, yuzhmash, turboatom, ukroboronprom, grammarly, wind power, petcube, drone.ua, eco-optima, to create innovative clusters focused on the production of hightech innovative products. the proposed system of scenarios for the organization of technological solutions for the development of innovative clusters includes four possible technologies for the creation of clusters (cluster scenario), which are united in two blocks: technologies in the sector of state entrepreneurship, and technologies in the sector of private entrepreneurship. for the study of the effectiveness of the implementation of the cluster strategy in the regions, a comprehensive indicator of the feasibility of the cluster paradigm development in the regions was proposed for determining the useful effect from its implementation (ircd), and it can be used to estimate the influence of clusters on the development of the economy in the region, the influence of clusters on the filling of regional budgets, and the influence of clusters on the formation of foreign trade balance of the regions. references: fundeanu, d., badele, c. (2014). the impact of regional innovative clusters on competitiveness. procedia. social and behavioral sciences journal, 124, 405–414. «forbes» [forbes magazine]. retrieved from: http://forbes.net.ua/ua/magazine/forbes/1416757-vryatuvatimajbutne-pershij-rejting-innovacijnih-kompanij-ukrayini «forbes» [forbes magazine]. retrieved from: http://forbes.net.ua/ua/news/1426818-top-50-najbilshinnovacijnih-kompanij-svitu svitova orhanizatsiia intelektualnoi vlasnosti [world intellectual property organization]. retrieved from: http://www.wipo.int/publications/en/details.jsp?id=4193 svitovyi bank [world bank]. retrieved from: http://www.doingbusiness.org/reports/global-reports/doingbusiness-2018 vsesvitnii ekonomichnyi forum [world economic forum]. retrieved from: https://www.weforum.org/reports ekonomichnyi dyskusiinyi klub [economic discussion club]. retrieved from: http://edclub.com.ua/analityka/ doing-business-2017-ukrayina-v-reytyngu-svitovogo-banku-legkosti-vedennya-biznesu verner, i. y. (2017). ukraina u syfrakh 2016 [ukraine in numbers 2016]. kyiv: derzhavna sluzhba statystyky ukrainy. (in ukrainian) wolman, h., hincapie, d. (2015). clusters and cluster-based development policy. economic development quarterly: sage journal, 2, 135–149. baltic journal of economic studies 108 vol. 6, no. 2, 2020 corresponding author: 1 national university of food technologies, ukraine. e-mail: gutkevych@ukr.net orcid: https://orcid.org/0000-0003-2645-4011 2 vilnius university, lithuania. e-mail: virginija.jureniene@gmail.com orcid: https://orcid.org/0000-0002-2818-437x doi: https://doi.org/10.30525/2256-0742/2020-6-2-108-115 bank’s investment activity svitlana gutkevych1, virginija jureniene2 abstract. the article considers the investment system that is determined by the investment activity of financial institutions. the banking system is a dynamic system, the basis of the economic infrastructure of the market. the bank's investment operations are a complex process because the bank can be both an object and an investor. the bank's investment choices are influenced by the following major factors: expected rate of return, tax characteristics, mortgage requirements, risks.the stability of the banking system depends on the general equilibrium conditions between accumulation and investment demand. the state of the banking system affects investment. the structure of the modern banking system in ukraine is in line with western counterparts, and the domestic legal framework in the banking sector is perfect enough to regulate banking processes and ensure the stability of the banking sector. in a broader context, international investment processes are influenced by: the state of development of the world economy, international factor and investment markets; stability of the world monetary system; development of international investment infrastructure and the like. in the context of globalization, international investment is influenced by the interacting processes of trans nationalization and regional economic integration. the effects of global economic factors, on the one hand, offset some of the differences between countries, and on the other, it creates a macro environment for large-scale activity of international entities and investment institutions. key words: investment system, financial institutions, banking system. jel classification: g23, g24, e50 1. introduction the financial system emerges with the emergence of the state and develops with it improving its legal norms. financial stability is important to ensure the efficient operation of the state’s financial system. from an economic point of view, the financial system represents a set of different spheres of financial relations related to the formation and use of centralized and decentralized funds of monetary resources; from an institutional point of view, it is the totality of the country’s financial institutions. the financial system of the state is a set of interacting elements that make up a coherent formation. it includes directions or elements that have its own functional purpose. these are: – state finances (budgets of all levels and extrabudgetary funds); – finance of business entities – enterprises; – non-productive finance; – population finances; – internal and external financial obligations; – financial infrastructure. these elements of finance can properly affect the economy of the country only in a complex single system. the finances of economic entities are of crucial significance in this system. the financial resources of an entity 's economic activities are cash available to the entity. the finances of the entities reflect the turnover or cash flow. they are invested in the development of production facilities of non-productive sphere, consumption, may remain in the reserve of the enterprise. the development of the banking system is a factor that influences primarily the attraction and inflow of foreign investments, as they characterize the level of intensification of investment activity in the country. the functioning of the economy is impossible without the functioning of the banking system, which is a dynamic system, and especially in the market conditions cannot be in a static state. it represents a single system that includes various banking institutions. the main task of the banking system at the present stage is to ensure its stability and effective performance of its functions. baltic journal of economic studies 109 vol. 6, no. 2, 2020 2. banking system in ukraine there are two main types of banking practice in the world systems: – distribution, or centralized, banking system in which the state is sole monopoly owner of banks; – a market banking system that assumes a variety of forms of ownership of banks, in the absence of a state monopoly. a market economy involves the functioning of a twotier banking system: level i – national bank; level ii – commercial banks of private and public ownership. elements of the banking system are its constituent parts, form the unity, while expressing the specificity of the systeme, are carriers of its properties. the elements of the banking system are: banks; some special ones: financial institutions perform banking operations but do not have bank status; institutions that form the banking infrastructure and ensure the viability of credit institutions. the banking system is a system where the banks are main constituent or central element. central bank performs the monetary functions and directly or indirectly regulates the size and price of credit nationwide. the banking system is the basis of the market economic infrastructure. the normal functioning of the economy is influenced by the investment activity of banks. the level of banking system development is an important factor for the investment process, as the banks are the mediate between the investor and the investee. the bank is a special category of enterprises, monetary institute that does not participate directly in the production sphere but regulates money circulation (gukevych, 2012). investments are important in the ensure of the balanced circulation of the money market. in the banking system, investments are the funds of banks invested in these securities of enterprises, organizations and institutions of different ownership over a long period of time. credit is a form of loan capital movement or an agreement with economic partners that acquires a form of loan, that is, granting property or money to another person for ownership on terms that are signs of a loan: – urgency, – reversibility, – payments. the lender gives the loan while the borrower gets the loan. for any business, the benefit of bank loans is related to the size of the interest rate. with the rise in the nominal interest rate, the proportion of borrowers is falling. investments have qualities or characteristics that differentiate them from the economic category of “loan” (table 1). commercial banking includes the loan and investment operations that allow credit institutions to profit from the circulation of their resources. such transactions are the most profitable in the banking business and occupy a fairly large share in the assets of a commercial bank. unlike a loan that is provided for a relatively short period of time with a condition of repayment in excess of the original one by a loan, investing is, as already noted, the use of money for a long period of time. as an investor, the bank decides on its own investing in securities for profit. with the development of the securities market, the share of investments increases. one of the main tasks of banks is the need to maintain the optimal structure of their assets, taking into account the economic situation. banks must respond to the economic and political relations both within and outside the country. in a conditions of crisis, long-term investments and credit terms are reduced. the banking system in the conditions of state stability, ie risk minimization, intensifies its activity by regularly earning the interest income. the main function of banks is the financial services to provide loans, first and foremost long-term. borrowings are used by borrowers for consumer and investment purposes. at the regional level, investments make it possible to create jobs and provide a working population with employment, expanding the potential of enterprise investment resources in the future. the loan facilitates the concentration and efficient use of both cash and material resources available to enterprises. loan, credit are the most risky banking transactions as they tend to default. one of the negative factors that raised the desire to not repay was the existence of a planned economy. in times of planned economy debt was often written off, there was no clear control by the government over credit relations. this situation negatively affected the reproduction process in many. economic development, especially in agriculture. table 1 characteristics of features of bank investments and loans features investmnets loans by terms of use short term long-term short-term ones predominate bank as an investor one of many investors one of some lenders initiator of lending bank the borrower the purpose of investment profit repayment of loan interest baltic journal of economic studies 110 vol. 6, no. 2, 2020 the development of a market economy involves the widespread use of bank loans in all sectors of economy on the basis of the high probability of their repayment i. credit ceases to be a loan if it does not return. investor banks should provide savings based on the choice of: security of investments, profitability of bank investments, their liquidity and growth. there is the scheme of the investment operations of the bank at the figure 1 (gukevych, 2011). a bank's investment operations are a complex process that involves a complete set of bank investment instruments. each financial instrument has different characteristics in terms of risk, sensitivity to inflation, and changes in government policy and economic conditions. the number of financial instruments of the bank's investment portfolio is large enough. it is a collection of securities acquired by a bank in the course of active transactions, stocks, bonds, promissory notes and so on. in analyzing the bank's investment instruments, they consider, first of all, money market instruments with a maturity of up to one year, low risk and high level of liquidity and then – capital market instruments long-term and high-yield. securities can be the object of a bank investment if they are traded on the securities market and serve debt. the law of ukraine "on securities and stock exchange" stipulates that the main securities are stocks and bonds, others – derived from them. commercial banks may perform securities brokering. the bank's participation in the capital of a joint stock company makes it a co-owner of the company. the bank may purchase shares of commodity and stock exchanges created in the form of a joint stock company. banks are the founders of an insurance joint-stock company that conducts insurance for the activities of clients of these banks, thereby enhancing the loan repayment guarantee. banks have the right to set up subsidiaries and to transfer to them part of the functions of banks. for example, some banks outsource their equipment leasing operations to subsidiaries. a bond is a type of fixed income securities issued by an enterprise or a state, joint stock companies, funds, as a debt, under which the issuer undertakes to pay the holder a fixed amount of money within a specified period. bond investments are considered less risky than equity investments. at the world stock market the developed-country sovereign debts are the most reliable. unfortunately, at this time in ukraine, due to economic instability and the state budget deficit, the liquidity of government loans is not fully guaranteed. the resolution of the verkhovna rada of 17.06.92 “on the application of promissory notes 3 to the economic turnover of ukraine” introduced a promissory note. further development of the application of bills was acquired with the adoption of the law of ukraine “on bills circulation in ukraine”. bill is one of the types of securities. written debt of a clearly defined form, which gives its holder (the bill holder) the undisputed right after the expiration of the term to demand from the debtor the payment of the specified amount of money. debt – a bill p r o f i t bonds sto ck s bank's investment portfolio b a n k investment operations banking facilities profitability liquidity diversification securities figure 1. scheme of the investment operations of the bank baltic journal of economic studies 111 vol. 6, no. 2, 2020 commercial banks accept liquid bills at a discount price of discounted bills. the holder of the bill, in turn, has the opportunity to defend his rights. this is facilitated by normative legislative acts, including the the bankruptcy law of ukraine. the investment activity of a commercial bank is carried out by employees of the investment department, who perform the functions of analysis and reporting on investment activities. the ability of a bank to make investments is determined on the basis of: qualified supervision and study of the securities market, taking into account the risk of the purchased securities, and carrying out an assessment of the quality of these securities. the bank's management should take into account a number of significant factors (figure 2). that determine a bank's investment choices include: expected rate of return; tax characteristics; mortgage requirements; risks. banking investment choice is influenced by many factors, including the risk factor. consider the risk factors involved in the likelihood of an event related to potential financial costs or other negative consequences. these are: – credit risk associated with securities and caused by the deterioration of the economic position of the issuers of these securities that cannot fully bear responsibility for their financial obligations. – market risk is possible due to unforeseen and serious disturbances both in the stock market and in the economy as a whole. the market quotation of some securities may fall to their par value and even lower. – interest rate risk – change of interest rates – depends on the fluctuations in the market rates of debt, for which the percentage is agreed in the contractual order from the moment of their issue. rate is an important instrument of banking policy, competition, its level largely depends on the efficiency of the banking system. banking investments in securities are carefully regulated due to the credit risk inherent in most securities, especially those issued by private corporations and individual local governments. the business risk of banks is reflected in the loan portfolio and is related to the changing economic situation in the country, falling sales, rising bankruptcy, unemployment, non-repayment of loans. due to the risk of unbalanced liquidity, banks foresee the sale of investment securities before their maturity... the risk of early withdrawal is reduced by banks through the purchase of bonds whose issuers cannot make their withdrawal for several years or do not purchase withdrawable securities. inflation risk may impair the value of shareholders' investments in the bank, so the bank provides short-term loans and securities with a limited, non-prolonged, floating interest rate term. banks, while conducting investment transactions, monitor their level of profitability, since the return on invested funds should be proportional to the risk of investments. as the analysis of the activity showed, today banks, like other business entities, do not have sufficiently b a n k ’ s i n v e s t m e n t s expected rate of return tax characteristics interest rate iniflation f a c t o r s s ecu r i ti es credit business r i s k figure 2. factors that determine a bank's investment choices baltic journal of economic studies 112 vol. 6, no. 2, 2020 effective mechanisms for collecting overdue receivables, including the bankruptcy procedure of the defaulter. based on this, as well as on the general accounts payable, the risk of insolvency or non-repayment of loans is repeatedly increasing and is shared among all other enterprises. that is why commercial banks are forced to raise lending rates and therefore reduce lending volumes. in the investment field, banking institutions perform such functions: – credit and settlement; – cash services; – deposit operations; – servicing of business entities; – analysis of the investment market; – information and advisory services on effective investment. considering the above functions, banks can use their customers' resources more efficiently and influence their profitability. the national bank of ukraine controls the commercial banks activities. banking infrastructure is an important element of the banking system. it includes enterprises, agencies, services that support the activities of banks, such as information, methodological, scientific, human resources, communications, communications and more. banking infrastructure provides guarantees against insolvency and damages. according to the international treaties of ukraine, projects for the development of its economy are supported by international financial organizations: the international bank for reconstruction and development, the european bank for reconstruction and development, the european union, the international monetary fund. according to the legislation of most countries on national banking markets are allowed to operate foreign banks. in some countries (such as france) the activity of foreign banks is not restricted. in russia, canada and other countries, a certain corridor has been introduced, within which they can conduct their operations quantitatively. 3. cooperation with international financial organizations the international bank for reconstruction and development and the world bank important play the significant role in the investment activity of ukrainian banks. for several years, the world bank has been conducting monitoring studies of the country 's economic condition and providing financial assistance to the government in carrying out market transformations. ukraine cooperates with the world bank in the following areas: – macroeconomic stabilization and structural adjustment; – economic downturn and post-privatization development of enterprises; – reforms in the financial sphere and formation of the institutional basis of market relations; – improvement of the system of social protection of the population and development of infrastructure; – rehabilitation and support of agriculture; – reformation of the public sector of the economy; – creation of a legal basis for a market economy, a project in energy and economic sectors; – attractation of the foreign investors. the key objective of world bank’s activity is providing the assistance to the countries-participants. the world bank provides the government of ukraine with annual financial support for comprehensive reforms. these funds are usually provided in the form of loans, ie on the basis of the obligatory security of the repayment of interest. investing in education, health care, the food industry or the human resources are most likely to achieve high economic performance. this is because it has to do with intellectual and physical performance. for example, ukraine's agriculture is ranked fourth in projects financed by the world bank after: i – macroeconomics; ii – financial sector reform and enterprise development; iii – energy. each project determines its total cost, amount of funding, date of implementation, allocation of financial resources, location of project implementation and utilization of funds. the value of projects, their priority may change, and this is reflected in the financing depending on the investment banking policy. the world bank, together with the ukrainian government, is working to attract foreign investments into the country. to this end, the bank's specialists develop investment projects and conduct training on the involvement and cooperation of foreign partners. the european bank for reconstruction and development is an international financial institution established in 1991 to financially support projects to assist central and eastern european countries in their transition to a market economy. the ebrd is based on an agreement signed in 1990 and is based in london. in 1994, the ebrd had 60 shareholders, 58 countries, the european union and the european investment bank. the institution acts as both a business and an investment bank. according to the charter, at least 60% of its obligations must be related to private sector financing. the bank provides loans (up to a maximum of 10 years for businesses and 15 years for infrastructure development projects) at market rates. it also acquires participating shares, provides loan guarantees and subscriptions for bonds and equities, and participates in joint operations with other private and public financial institutions (gutkevych, korinʹko, 2003). the european investment bank is an institution set up by the european economic community to promote baltic journal of economic studies 113 vol. 6, no. 2, 2020 development, integration and cooperation through the provision of investment loans. in the economic sphere, the european union develops towards the creation of a single internal market, a single banking system and a common currency. the cooperation of ukraine with international financial organizations is carried out in accordance with the statutory documents of these organizations, international treaties of ukraine, in accordance with the legislation in order to obtain external financial resources for the implementation of systemic and investment projects. thus, the international finance corporation provides advisory and technical assistance to ukraine in its investment activities. ifc implements such technical support projects as: privatization of property of nonstate agricultural enterprises and land, development of private enterprise, reform of agricultural enterprises. at the macroeconomic level, systematic projects aimed at conducting economic reforms in ukraine are being implemented. investment projects aimed at the development of individual industries, sectors of the economy, production are carried out on the principles of financing under conditions of self-payment and obligatory internal self-financing. at the level of individual countries, the export (import) of private and public capital is distinguished. in the system of international capital movement. in the system of international movement of capital in various forms (loans, investments, assistance), the capital of international organizations and funds and mixed capital (private, state, international organizations) also function. the basis of entrepreneurial capital as a form of international capital movement is foreign direct and portfolio investment. 4. investments and financial institutions institutional principles of regulation of investment activity are carried out both through the public sector of the economy and through state institutions. the institutional role of the state in carrying out the functions of state regulation as a subject of investment activity is determined through regulation of financial investments, system of taxes, carrying out of depreciation policy, investing outside ukraine, allocation of subsidies, subsidies, subsidies. one of the forms that determine public investment policy is the investment activity of financial institutions. financial investments are investments in various financial instruments (assets). financial investments are called portfolio investments. investments include investments in the development of projects, in the purchase of shares, bonds and other securities issued by the state or private legal entities, targeted cash deposits, costs for the acquisition of securities and bank deposits. investments are made during the sale and purchase of securities in the stock market. direct investment is a capital investment driven by long-term economic interest and provides investor control over an investment object in order to generate entrepreneurial profit (income). direct investment is both initial investment and reinvestment (the share of the investment entity 's profit that is neither distributed nor made to the direct investor). in addition, direct investment includes all intra-corporate transfers of capital in the form of loans and loans between the direct investor and the affiliates, subsidiaries and associates. in world economic practice, a subsidiary is a whollyowned subsidiary. in a subsidiary, a non-resident direct investor holds more than 50% of the capital and in an associate less than 50% (krzanowski, 2012). portfolio investments is the investing in securities for profit (dividends). such investments do not provide real control of the investor on the investment object. the quantitative criterion for the distinction between direct and portfolio investment in a developed market economy is considered to be 10% of the investment object. however, an investment may be a direct investment with a smaller participation rate, but it has a real impact on the decision making of the investee. conversely, if the investor 's share is more than 10%, but he has no real control over the object, then the corresponding investment is not recognized as direct. an investment portfolio is a purposefully formed set of financial and real-estate investment assets that are designated to implement a pre-developed strategy in accordance with the investment objectives defined in that strategy. the implementation of the investment strategy in accordance with the objectives is achieved by selecting the most effective and secure financial instruments in the portfolio. basically, their theory is based on investing in financial instruments such as securities. however, under the present circumstances, a portfolio can be formed either as a combination of a certain amount of real or financial investment, or at the expense of a certain type of financial instruments. that is, the subjects of investment activity are conditioned to be able to form investment portfolios of a certain type (types) (sharpe, 1999). in the world practice of commercial banks, credit (loan) and securities portfolios have much in common. first of all, these are the most important types of banking activities aimed at launching own resources for profit. the main criterion in the formation and further functioning of both types of portfolios is their profitability, and since lending and investment transactions are the most profitable in banking, they have the highest share in the assets of a commercial bank. however, the ownership of these assets to different portfolios is explained by their significant differences. baltic journal of economic studies 114 vol. 6, no. 2, 2020 loan is an investment for a relatively short period of time, subject to their repayment or equivalent, in excess of the original amount of interest on the loan. investing, unlike a loan, is the use of money to make a profit over a long period of time, until the time when the investment is returned to the bank. the portfolio of real investments can be considered as a certain type of investment portfolio, which can be formed by separate entities of investment activity: corporations, investment funds and companies. the principle of compliance of the portfolio with the investment strategies of the company involves involvement in the portfolio of such projects, which should ensure the investor realizes its strategic goals. the portfolio of real projects is formed, in the vast majority, by medium– and long-term investments. in some cases, the portfolio may include short-term projects – the acquisition of businesses and industries, equipment that does not require installation, unfinished objects, other real estate. short-term real investments include enterprises with a maturity of less than one year. in accordance with the objectives of investing in the portfolio include equity instruments, investing in which has a different purpose and the formation of which is influenced by many both subjective and objective factors, in particular: – investor's financial capabilities (internal source of financing); – opportunities for attracting external sources of financing for investment purposes (domestic or foreign); – investment climate in the country; – investment market conditions; – personal qualities of the investor (aggressiveness of economic strategy, tendency of the investor to take risks, ability to effectively manage the portfolio, ability to react instantly to changes and make appropriate decisions, etc.) the motivation behind international portfolio investment is generally close to that of direct investment. however, despite the much higher liquidity of portfolio investments compared to direct ones, the main goal of an investor in portfolio investing is to seek to maximize profit at an acceptable level of risk (to place capital in certain countries and in certain securities). international portfolio investment requires its participants to carry out numerous securities transactions that are not limited to sale and purchase of assets. it is necessary to carry out the whole spectrum of operations. here are the main ones: purchase of securities at your own expense; purchase of securities on behalf and at the expense of the customer; sale of own securities; sale by proxy; information, analytical and advisory services, including analysis of the securities market and the portfolio of financial assets; organizational activities accompanying securities transactions (eg, issue registration, stock exchange approval, etc.); mediation in the organization of issue and initial placement of securities (development of documentation and terms of issue, preliminary evaluation of securities, advertising, selection of investors, etc.); securities purchase and sale calculations; registration of securities owners during the sale and purchase operation; security, storage and transfer of securities; in case of withdrawal of the bonds by the issuer of the bonds by the maturity date, the withdrawn bonds shall be returned; repayment of securities with maturity; payment of stock dividends and coupon payments on bonds; convertible preference shares and debentures into shares; delegation of voting power to the trustee; guaranteed placement of securities (underwriting); reinvestment of securities dividends and income from market value gains; placement of securities as collateral; managing the securities portfolio; granting and obtaining securities loans; currency risk insurance. international investment activity is a set of practical actions of entities to invest abroad. it redistributes in space and time the resources between individual entities that make the decision to invest their own, borrowed or attracted property or intellectual property in the investment objects, is an investor. there are individual and institutional investors. the differences between them lie in the scale of the resources they manage, the nature and methods of decision-making. an individual investor is a legal or natural person who independently (without intermediaries) carries out investment activities. an institutional investor is a financial intermediary that accumulates the funds of individual investors and conducts specialized investment activities, as a rule, in securities transactions. institutional investors include investment funds and companies, pension funds, insurance companies, mutual funds, and banks. corporate investors and the government are distinguished as separate entities. by defining the goals, directions and volumes of investments, the investor may, on a contractual basis, involve any participants in international investment activity, investor resources consist of resources obtained from all available sources of investment resources – internal, attracted and borrowed. different investment entities have different sources of attracting resources (see table 2). in modern conditions, the investor has access to both national and international investment resources, which are accumulated and redistributed mainly through international (world) markets. national and international investment resources together are a global investment asset that has financial and material components. financial wealth is accumulated in the form of securities and cash, and material wealth in real estate and metals. baltic journal of economic studies 115 vol. 6, no. 2, 2020 5. conclusions in the conditions of increasing the independence of enterprises and their transition to self-financing, there was a need to create a financial market. the economic basis and market for which the enterprise needs is additional financial resources. shortage of working capital impedes the development of production and attraction of material resources. this largely explains the shortcomings in the work of attracting financial resources of enterprises. becoming a financial market is possible only with the elimination of imbalance between financial and material resources. there are many factors influencing the motivation, volume and direction of international investment. at the level of the relationship “basic country – country receiving”, the following factors are crucial: – political and economic: political stability; degree of government intervention in the economy: relation to foreign and foreign investments; adherence to bilateral and multilateral agreements; – resources:geographical location; availability of natural resources; demographic situation; – general economic: the rate of economic growth; ratio of consumption and savings; loan interest rate; the rate of net profit; the level and dynamics of inflation; balance of payments status. in a broader context, international investment processes are influenced by: the state of development of the world economy, international factor and investment markets; stability of the world monetary system; development of international investment infrastructure and the like. in the context of globalization, international investment is influenced by the interacting processes of trans nationalization and regional economic integration. the effects of global economic factors, on the one hand, offset some of the differences between countries, and on the other, it creates a macro environment for largescale activity of international entities and investment institutions. table 2 investors' resources investors resousces (sources) own borrowed physical individuals savings, unused portion of individual income loans corporations (organizations) company stocks, retained earnings, depreciation and other funds, know-how, non-operating income, etc. funds raised through the sale of stocks, bonds, other securities, long-term loans and loans state profit of state-owned enterprises, tax receipts, contributions to state funds, state reserves, credit and monetary issues, privatization funds internal and external loans references: gukevych, s. (2012). investment: theory and practice. poland, volumina. pl daniel krzanowski. gutkevych, s. a., & korynʹko, n. d. (2010). praktyka sovremennoho vekselʹnoho obrashchenyya v ukrayne [the practice of modern bill circulation in ukraine]. razvytye byznesa v uslovyyakh perekhodnoy ékonomyky v stranakh tsentralno-vostochnoy evropy: monografiya. baku, kyev, kaunas. gutkevych, s. o., & korinʹko, m. d. (2003). vekselʹ u systemi tsinnykh paperiv: problemy stanovlennya ta rozvytku: navchalnyi posibnyk [promissory note in the securities system: problems of formation and development]. kyiv: vydavnytstvo yevropeiskoho universytetu. gutkevych, s. (ed.) (2011). model rozvytku haluzey ekonomiky ukrayiny [model of development of branches of economy of ukraine]. kyiv: nutu «kpi». gutkevych, s. (ed.) (2003). synergetic bases of investment in economy sectors. kyiv. sharpe, w. (1999). investments: 6th (sixth) edition paperback. baltic journal of economic studies 19 vol. 7, no. 1, 2021 corresponding author: 1 national university of life and environmental sciences of ukraine, ukraine. e-mail: serg.bardash@gmail.com orcid: https://orcid.org/0000-0001-5711-5229 researcherid: f-4116-2018 2 kherson state university, ukraine. e-mail: tatiana@osadcha.com orcid: https://orcid.org/0000-0003-4258-0907 researcherid: f-4110-2018 doi: https://doi.org/10.30525/2256-0742/2021-7-1-19-26 substantiation of theoretical fundamentals of social control in the sphere of economic management sergiy bardash1, tatiana osadcha2 abstract. urgency of the research is due to the fact that social control is an integral and comprehensive component of any society. the development of theoretical, methodological and practical foundations of social control and the application of its cognitive tools in the transformation of consciousness and participation in the development of a democratic society on the basis of sustainability is of paramount importance. the research activity of scientists in studying philosophical, social, legal, economic, educational and other aspects of control as a complex polymorphic phenomenon is due to the fact that social relations are certainly an important component of the economy at all levels. however, the social mechanism for regulating economic systems at various levels remains ineffective. the purpose and the objective of the research are to prove the importance of social control in the sphere of economic management and to determine its theoretical foundations. the research methodology consists in the dialectical method of understanding the essence of social control and assessing its importance in the sphere of economic management; general scientific methods of analysis, abstraction, induction and deduction, synthesis and generalization are used to substantiate the basic theoretical provisions, the formation of the conceptual framework of social control in the sphere of economic management, the formulation of conclusions. the most significant scientific results are as follows: proving the importance of public control in the sphere of economic management, recognizing it as an indispensable element of the social mechanism for the development of economic systems at all levels of the economy; defining its theoretical foundations: the scope of application, object, matter, subject, forms and results. the practical significance of the research is to determine the vector of control development in the sphere of economic management – compliance with standards that affect the economic interest and determine economic behaviour. value/originality. the results obtained can be considered as forming the concept of behavioural control in the sphere of economic management and create new grounds for developing the theory and practice of social audit as well as reviewing the paradigm of economic management control. key words: social control in the sphere of economic management, social audit, social and economic relations, economic interest, economic behaviour. jel classification: m10, m40 1. introduction the rapid development of civilization convincingly proves that the importance of social control is not lost, but only gaining weight. a more or less stable interpretation of social control as a way of selfregulation of the social system, which ensures the orderliness of interactions between individuals through regulation is gradually transformed due to the shift of emphasis from the economic component to the social. the world’s leading economists are beginning to realize that economic development can occur mainly in harmoniously developed social systems. at present, everyone agrees that social control guarantees comfortable behavior of members of society or social group in relation to role requirements and expectations, including those determined by the content of economic relations. social control is one of the basic concepts in sociology. they denote baltic journal of economic studies 20 vol. 7, no. 1, 2021 the various means that any society uses to tame its rebellious members. no society can do without social control. such control is extremely necessary even for a small social group that was formed accidentally or deliberately to achieve a common goal, as well as the subjective goals of its individual members. without certain norms of behavior and the mechanism of their control, the life cycle of such a group will be short. the most important recent events, including global economic processes, the development of artificial intelligence, the digitalization of economic relations, the impact of the covid-19 pandemic on the socioeconomic development of many cranes in the world, are still factors that force to reconsider the importance and prospects of social control development. social control is an integral and comprehensive part of any society. scientific research into the nature, content and forms of social control is becoming increasingly important. researchers emphasise the legal, economic, sociological and ethical aspects of studying control as a social phenomenon. such activity of scientists is due to the fact that social relations are a key component of the economy at all levels. the individual, who is an element of society, realizes economic relations, and his or her activities in the field of economic management are one of the conditions for the growth of the national economy. however, the social mechanism for regulating economic systems at various levels remains ineffective. research into the philosophical foundations of social control in the field of economic management as an element of this mechanism is therefore relevant. 2. overview of the polymorphic nature of social control the problem of social control has been studied by all sociology theorists, starting with o. conte, g. spencer and j. spencer, j-g. tarde, e. durkheim, p. sorokin, t. parsons, r . merton, n. luman, j. gilinsky and others. the foundations for the study of the diversity of social control manifestations are laid down in the works of e. ross (ross, 1969), m. janowitz ( janowitz, 1975), r . meier (meier, 1982), s. sumner (sumner, 1994), r . akers (akers, 2012) and other foreign scientists. the importance of social control in the assessment of civilization transformations has been convincingly proven by the fact that its essence, meaning, functions and forms are examined from the standpoint of philosophy, law, pedagogy, sociology, and criminology. recently, the results of studies of the importance and impact of social control, in particular, social audit, on economic relations have been presented in the publications of h.m. boislandelle, j-m. esteve (boislandelle, esteve, 2007), g. lehman (lehman, 2006), h. ahaverdiieva, o. ivanisova, o. lebedynska (ahaverdiieva, ivanisov, lebedynska, 2019), f. aliieva (aliieva, 2008), l. holinach (holinach, 2015), v. derii, s. sachenko, l. babii (derii, sachenko, babii, 2016), v. yemelina, y. skvortsova (yemelin, skvortsova, 2013), d. dolbnieva (dolbnieva, 2014), v. levitskyi (levytskyi, 2012), o. mazuryk (mazuryk, 2011, 2014) and others. w hile recognising the significant contribution to the development of theoretical and methodological aspects of social audit as a tool for measuring the level of social responsibility of economic entities, it should be noted that the importance of social control over economic relations and the definition of its theoretical foundations remain under development. the philosophical foundations of social control in the field of economic management are, firstly, a metaconstruction of its basic provisions as a field of scientific knowledge, and secondly, a system of categorical meanings. their substantiation will make it possible to establish the relationship between scientific knowledge and worldview benchmarks that have developed within a certain socio-cultural space regarding social control. these foundations include philosophical approaches to understanding the concepts of the essence, subject, object, matter and form. today we can distinguish three groups of approaches to the essence and content of social control. according to the first approach, social control is seen as the influence of large social groups, including the state, on the goals, actions, behaviour of the individual. sociological interpretations of social control include both regulation of individual behaviour through the internalisation of social norms and regulation of behaviour through outside or external social sanctions (mazuryk, 2011). at the same time, approaches to understanding social control differ, which explains the new attempts by sociologists working in competing paradigms to clarify this concept. the second approach is based on the consideration of social control as a set of norms, institutions and relations aimed at ensuring the behaviour of people in accordance with those norms that are protected by society, state, social groups and express their interests, as well as a tool to identify and study the causes of delinquent behaviour (bardash, 2013). proponents of the third approach consider social control as a subsystem for managing the social and economic sustainability of the enterprise (aliyev, 2008). in characterising the above approaches from the standpoint of the purpose of the study, it is worth noting that, in our opinion, there are some shortcomings. firstly, researchers studying the sociological aspect of social control do not disclose its procedural component, how it should be implemented, in particular it is noted that social control refers to the practice of all types of social groups with the prescription and encouragement of conformity and the application of sanctions to behaviour, which violates the established norms (berger, 2004). according to s. spilnyk, “in general, social baltic journal of economic studies 21 vol. 7, no. 1, 2021 control is one of the most important functions of public administration, which makes it possible to identify and prevent deviations, errors and shortcomings that arise in the social organisation of society”. thus, such control can be recognized as state social control, the only form of which, according to s. spilnyk, is supervision (spilnyk, 2012). secondly, the legal approach also has similar shortcomings, as social control is positioned by its supporters at the state level and identified as formal. the entities of such control include supervisory authorities, respectively, supervision is considered to be the only form. the emphasis in the legal approach is on the tools of social control (punishment) and their impact on the behaviour of individuals. thirdly, in studies that reveal the economic aspect, social control is defined as one of the main components of enterprise development as a holistic socio-economic structure. the forms of such control at the enterprise are inventory and audit of the actual state of affairs in the social sphere of the enterprise and verification of compliance of this state with mandatory standards established by the state, the enterprise itself or verification of social reporting (levytskyi, 2012). thus, the forms of social control, according to this approach, are inventory and audit, the content of which does not correspond to the long-held beliefs of economic control specialists. even if we agree on the forms of such controls, then methodological methods, standards and factual information must be defined for their implementation in practice in order to comply with the principle of comparability. o. mazuryk’s research should be singled out, within which the author seeks to conceptualize social audit and outline its theoretical and methodological foundations in the sociological tradition of studying social control. he notes: “social audit is a way to comprehensively and objectively assess the state of social relations at various levels (corporate, municipal, industrial, regional, national), which makes it possible to identify potential threats of deterioration of the social climate, reserves of human resources development, etc.” (mazuryk, 2011). it should be noted that a large number of domestic and foreign scientists, in particular k . abdurakhmanov, a. andriushchenko, b. bondarets, m. bukovynska, r . vatye, o. hnatiuk, a. danyliuk, t. kalinescu, a. kasperovych, n. marushko, s. poliakova, h. potopalska, yu. popov, a. svyrydov, a. sotula, v. ter-akopyan, p. schlender, o. shulus and others, have been and continue to be actively involved in shaping the theoretical and methodological foundations of social audits. currently, some researchers note that social audit is: – a specific form of analysis, revision of the social environment of the enterprise to identify social risk factors and implement proposals to reduce them in the result of the development of other forms of audits, in particular, management and financial audits by expanding the performance criteria, as they include many social factors (mekheda, madzhula, 2010); – an instrument for regulating social and economic relations through voluntary social dialogue of all parties interested in achieving social consensus (marushko, volianyk, 2013); – one of the main and most realistic directions of increasing the competitiveness of domestic enterprises, as it allows all interested parties to receive complete and objective information about the state of the social and labour sphere at the enterprise, implementation of the enterprise’s plans on social, economic and environmental measures; strengthens public control over compliance with certain standards and norms at the enterprise (dolbnieva, 2014); – a tool for assessing, monitoring and controlling social and economic relations, the purpose of which is to identify social risk factors and development reserves of human resource in order to ensure a favourable social climate for the economic entity and to improve the effectiveness of its quality management system (chenash, 2016); – an operational assistance for management personnel to ensure the effective implementation of social policy, and later it is a method of confirming the level of corporate social responsibility (derii, sachenko, babii, 2016); – a universal technology for comprehensive verification of the actual state of a social object in relation to the accepted standards, ... the complexity of social audit consists in the systematic application of various research procedures: software audit, monitoring, diagnostics, social expertise, qualimetric analysis, survey, document analysis, etc. (mazuryk, 2015). thus, according to the authors of some publications, social audit is: a specific form of analysis, audit, ... the result of the development of other forms of audit; a tool for regulating social and economic relations; one of the main and most realistic directions of competitiveness improvement; a tool for assessment, monitoring and control ...; an operational assistance for management personnel and a method for confirming the level of corporate social responsibility; a universal technology for comprehensive verification of the actual state of a social object in relation to the accepted standards. this polymorphism of views on the nature and significance of social audit is explained by the fact that, as noted by o. mazuryk, “to date, the development of social audit is carried out mainly in the uk, france, the usa, belgium and those countries where it is actively used as a practical tool” (mazuryk, 2015). accordingly, in developing countries, the theoretical and praxeological foundations of social audit are only at the stage of active research and development. therefore, the scientific community continues to discuss the theoretical and methodological foundations of social audit in the context of assessing the social baltic journal of economic studies 22 vol. 7, no. 1, 2021 responsibility of business, competitiveness growth, ensuring social security, improving the efficiency of quality management and the like. this shows that the cognitive potential of social audit has not yet been definitively determined, but all researchers recognize that social audit is a necessary measure for making effective management decisions in the economy in conditions of uncertainty. 3. substantiation of theoretical and methodological foundations of social control in the field of economic management a more important scientific task is to substantiate the theoretical and methodological foundations of social control. this can only be achieved by clarifying the term “social control”. encyclopaedic publications contain various attributes of social control: – essence: a way of self-regulation of the system (sociological dictionary, 2008); a mechanism of system self-regulation (sociology: encyclopaedia, 2003); a system of forms and methods of influence (psychological encyclopaedia, 2006); a complex of measures (economic encyclopaedic dictionary, 2006); – subject: society and social groups (psychological encyclopaedia, 2006); state and public organizations, civil society institutions (economic encyclopaedic dictionary, 2006); – purpose: to ensure the functioning of the social system in accordance with the accepted standards, as well as to support socially acceptable patterns of behaviour (sociology thesaurus, 2009); to regulate social behaviour in accordance with the standards established in the community (psychological encyclopaedia, 2006); to ensure well-ordered interaction within the social system (society as a whole) and its individual subsystems and elements (individual social groups, organisations, etc.) in accordance with the country’s established system of values, moral, and ethical, and legal norms, etc. (economic encyclopaedic dictionary, 2006); – form: observation (supervision) (sociology thesaurus, 2009). this analysis is incomplete, but its results indicate that the scope of social control is the social system, and the tool for self-regulation is normative (including legal) regulation. accordingly, the subjects of such control are the institutions of civil society. at the same time, we should agree with v. palchenkova, who believes that “the social control category is a concept that has a much broader content compared to a purely legal understanding, since it covers a much wider range of means of influencing socially significant behaviour of a person, which include, in addition to legal means, those which are usually ignored by legal scholars when studying legal issues. in addition, the theory of social control demonstrates the life of social relations and the development of social patterns more fully than the traditional legal interpretation, because it includes the mutual influence of two contradictory planes – state and society” (palchenkova, 2015). social control in the deviantological sense is considered as a mechanism for counteracting torts, designed to influence negative deviance and, above all, to prevent, reduce and transform the structure of delinquency (mazuryk, 2011). now it is worth agreeing on the opinion that the social system is connected with the economic system, because one of the obligatory elements of two systems is a person, so the level of development of the social system depends on and affects the development of the economic system at the same time. in the economic system, a person is the producer of goods, works and services, and in the social system, a person is a consumer of goods, works and services. accordingly, the perception of economic and social norms, as well as their observance, may have correlated reasons or those that have one source. such interpenetration will affect the deviance and structure of delinquency in the economic sphere. the social sphere as a system of social relations (including economic) is not a mechanical combination of its subsystems, but a specific combination of them (economic encyclopaedic dictionary, 2006). it is essential for the study to realize that from the standpoint of economic sociology, the content of the economic sphere and the sphere of social relations reflects the characteristics of society that are most important for understanding the processes occurring at the “intersection” of economic and social manifestations of society. based on the fact that social control extends to social relations, which closely intersect with economic, including management, relations, there are grounds for considering social control in the field of economic management as a type of economic management control. the formulated inference allows us to determine some aspects of the philosophical foundations of social control in the field of economic management. thus, the social sphere covers economic relations, which include those of them arising mainly at the micro level. therefore, the latter are at the same time specific social relations that arise between individuals in the implementation of their own economic interests owing to the chosen economic behaviour. accordingly, the exercise of public control is actualized when conducting business activities. the ground for recognizing social control as a type of economic management control is that the economic system is a complex of subsystems, and elements, and a set of various forms of connections between them, the interaction of which results in laws on the development and functioning of this system, as well as the respective economic mechanism, which give it integrity and organisation, eliminate anomalies and enhance efficiency in order to achieve the common goal embodied in the baltic journal of economic studies 23 vol. 7, no. 1, 2021 basic economic law. the economic system can also be regarded as a set of all economic activities of people in the process of their interaction aimed at the production, exchange, distribution and consumption of goods and services, as well as the regulation of such activities for the purposes of the existing social formation. the main subsystems of the economic system are: productive forces; technical and economic relations; organizational and economic relations; economic property relations; economic mechanism. in analysing the composition of the main subsystems of the economic system, it can be noted that social relations and their producers (individuals, social groups) belong to virtually all of its subsystems (productive forces, organizational and economic relations, economic property relations), as well as economic mechanism, i.e. the national economy management system by using economic laws, resolving the contradictions of the social mode of production, sale of property, as well as human development and coordination of its interests with the interests of the team, class and society. at present, it should also be borne in mind that, according to k. marx, the social and economic formation is the unity of the interaction of the superstructure and the mode of production. however, for many post-soviet countries, including ukraine, the social and economic formation did not even come close to capitalist, because the ownership relations for the means of production were formed revolutionary in a mostly formally legitimate way, determined by political and legal institutions of society, which tried to consolidate production relations, that were in permanent transformation. in the context of the study, it must also be taken into account that the content of the social mechanism of economic development and the individual social mechanisms of economic relations and economic processes is specified by economic consciousness and economic thinking, social and economic stereotypes, economic interests, economic activity, economic behaviour and economic culture. nowadays, social relations in the sphere of economic management, which are implemented in the economic behaviour of some individuals and social groups involved in economic management, act as a driving force, causing changes in the development of economic systems at the macro-, mesoand micro-levels. in order to identify the real causes and the most profound incentives for people’s economic behaviour, the category of economic interest is important as a form of relationship between economic entities regarding the production, distribution, exchange and consumption of limited material resources. it is economic interests that contribute to the coordinated interaction of different groups and social strata during the continuous adaptation to change. the patterns of the relationship of economic interests and the state of economic relations, manifested in economic interests in economic interests, acquire the character of the driving forces for social development, an incentive for people’s economic activity. economic interests and economic way of thinking are the preconditions for economic behaviour, which involves choosing the best economic alternative and making rational choices that minimize costs and maximize net income. representatives of social institutions, such as social group, labour collective, owner (founder), administration of the enterprise (non-economic entity), authorized state and local government body as well as public organization are subject to social control in the area of economic management. the successful functioning of a social institution is connected with the existence of a comprehensive system of standards of behaviour for specific individuals in typical situations. these standards of behaviour are regulated, i.e. they are enshrined in the law and other social standards. thus, the condition for social control in the field of management is the socio-economic norms of control, which should be understood as established rules of economic behavior and activities of people in employment with economic and non-economic entities (executive authorities, local governments). these standards are produced by social institutions and, depending on the level of application, are established at the state and municipal levels, as well as at the level of the individual participant in economic relations. social control will not be possible without the existence of such standards, as there will be no compliance with the principle of comparativity, without which control turns into monitoring, only for the purpose of collecting information. it should be noted that all the economic standards mentioned in the study (toshchenko, 2009) are at the same time social standards that should be followed in the field of economic management, since the social standards regulating social relations are also divided into economic standards (modern legal encyclopaedia, 2009). the results of social control in the field of economic management, in addition to compliance of economic behaviour with the established standards, should include: – deviant economic behaviour, i.e. economic activity that violates the social and economic standards of a particular social group (labour collective, administrative apparatus of the business entity, owners (founders) of the business entity, governing body of the noneconomic entity); – delinquent economic behaviour, i.e. illegal economic activity of an individual manifested in his or her doings (actions, omissions), which are contrary to economic interests and cause harm both to business entities, their associations, non-economic entities, and to regional and national economy in general. analysis of the economic behaviour of the individual, in the context of the methodology of a. smith, shows that two basic types of such behaviour clearly dominate in baltic journal of economic studies 24 vol. 7, no. 1, 2021 the formation of market relations: pre-market behaviour and market behaviour. pre-market type of behaviour is characterized by the formula “guaranteed income with minimum labour costs”. generally speaking, carriers of pre-market behaviour are characterized by market rejection or distrust, low self-esteem of the market economy, high level of social and psychological stress of the individual, who is influenced by social stereotypes formed during the soviet economy era. the market type of behaviour is based on the principle of “maximum income with maximum labour costs”. it presupposes a high degree of economic activity of the individual, his or her understanding that the market provides opportunities to increase welfare in accordance with the efforts made, the knowledge invested, the skills applied. the market type of behaviour is formed in a small part of the economically active population of ukraine and mostly depends on market reforms and their compliance with the social expectations of economically active individuals (bardash, 2013). there are now sufficient grounds to state that it is too early to identify the national economy of ukraine as a market economy because “in the period of transition to a market economy, the state regulation of economic activity should contribute to the formation of selfregulating factors inherent in it, creating a legislative environment for a market society. however, in relation to the domestic economy of the early 90s of the 20th century, this did not happen” (economic encyclopaedic dictionary, 2005). this statement is based on the fact that, even today, in the national economy of ukraine, the market as an institution does not perform the incentive, regulatory, monitoring and rehabilitation functions. at the same time, the national economy is experiencing dysfunctional market manifestations, including: the function of provoking and committing bankruptcy, antisocial, anti-environmental and payment-reducing function. the described state provides certain grounds for identification of the national economy as a “market fiasco”, a term introduced by american economists e. dolan and d. lindsay (economic encyclopaedic dictionary, 2005). thus, according to the described features of the national economy, the economic activity of certain business entities is under constant threat of suspension. this threat is formed by the dysfunction of the domestic economic model, which in turn forms a number of objectively significant and subjectively secondary factors that provide sufficient grounds for recognizing economic activity as risky because in the vast majority of cases managerial decisions are made in conditions of uncertainty (bardash, 2013). the state of the business environment can be recognized as having a negative impact on the economic behaviour of individual actors in social and economic relations. the inevitable costs of forming the labour market have led to the emergence of another type of economic behaviour – pseudo-market, which is based on the principle of “maximum income with minimum labour costs”. the manifestations of such behaviour are corruption and economic crimes. one of the official indicators of the delinquent behaviour of actors in social and economic relations is the indicators of violations detected by state financial control authorities. thus, in 2010 alone, the accounting chamber of ukraine and the state audit office of ukraine jointly identified financial violations amounting to 87.1 billion uah. these and other violations, the volume of which remains large today, indicate a certain discrepancy between the economic interests of individuals endowed with state power and the vast majority of ukrainian citizens who have chosen the pro-european choice of the country’s development (bardash, osadcha, 2020). the existence of a pseudo-market type of behaviour in a particular social system indicates a low level of its development and the lack of a clearly defined concept of such development, which is characteristic to some extent for developing countries. these data indirectly testify that a certain part of economically active individuals of ukraine is characterized by a pseudo-market type of behaviour, transformation of which into a market type can be carried out, in particular, due to the implementation of public control in the sphere of economic management. summarizing the above, we note that social control in the sphere of economic management plays an important role, because it is an indispensable element of the social mechanism of development of economic systems at the micro-, mesoand macro-levels. operation of microlevel economic systems or economic support systems for the functioning of non-economic entities should be subject to such control. social control in the sphere of economic management can be carried out in the form of social audit. at the same time, it may manifest itself through the tasks performed in the course of other forms of control in the sphere of economic management, the results of which should be used to provide economic and legal assessment or economic behaviour (actions) with assets affecting their quality, composition and volume, or economic behaviour (actions) which may manifest itself through managerial decisions to change the composition and volume of equity capital and liabilities of the business entity, the revenue and expenditure parts of the estimate of a non-economic entity. the results of social control in the sphere of economic management make it possible to analyze the causes of differences in the economic interests of individuals, as well as small and large social groups and to determine the priorities of social and economic development. the formulated theoretical foundations of social control in the sphere of economic management will contribute to the scientific knowledge of control as a complex polymorphic phenomenon. baltic journal of economic studies 25 vol. 7, no. 1, 2021 4. conclusions the results of the study, in particular, the identification of the relationship between social and economic system, the fact of coverage of the social sphere of economic relations, the content of the social mechanism of economic development, have provided sufficient grounds for considering social control as a type of economic management control, which is implemented through a set of control actions aimed at determining compliance with social standards of economic behaviour of individuals or small social groups in the sphere of economic management. the object of such control is the social and economic relations that are implemented in the economic management system or the system of economic security management, and the subject is the compliance of the economic behaviour of an individual or social group to the established social and economic management standards. in this case, economic behaviour means a set of actions and activities that have occurred within the scope of economic competence or economic relations. the subjects of social control in the field of management should be considered endowed with control powers by representatives of social institutions that act as actors in economic relations. in our opinion, social control in the field of management plays an important role because it is an indispensable element of the social mechanism of development of economic systems at the micro, meso and macro levels. such control should be subject to the operation of micro-level economic systems or economic support systems for the functioning of non-economic entities. social control in the field of management can be carried out in the form of social audit. however, it may be manifested through the tasks to be performed in other forms of control in the field of management, the results of which should be provided economic and legal assessment or economic behavior (actions) with assets that affect their quality, composition and volume, or economic behavior (actions) that are manifested through management decisions to change the composition and amount of equity and liabilities of the entity, income and expenditure parts of the budget of the non-entity. the results of social control in the field of management provide an opportunity to 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(2013). social audit as a method of increasing the efficiency of the enterprise. molodyi vchenyi, vol. 7, pp. 161–163. baltic journal of economic studies 93 vol. 7, no. 1, 2021 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: vadympopko@gmail.com orcid: https://orcid.org/0000-0001-8358-7721 2 taras shevchenko national university of kyiv, ukraine. e-mail: ep@pbp.ua orcid: https://orcid.org/0000-0002-7417-7584 doi: https://doi.org/10.30525/2256-0742/2021-7-1-93-101 theoretical and legal characteristics of economic crimes of a transnational nature vadym popko1, yevgen popko2 abstract. the article examines the theoretical and legal foundations of economic crimes of a transnational nature formed under the influence of globalisation processes in the world, the growth of international crime and other factors. the author provides a conceptual description of transnational crime as the main category of transnational criminal law, including economic crimes. scientific views of domestic and foreign scientists on the nature of crimes of an international nature, including criminal acts in the economic sphere are analysed; the most dangerous and widespread economic crimes are characterised. attention is paid to the legal regulation of these relations, universal and regional conventions, other sources. the authors justify the need to criminalise transnational economic crimes in national law, regardless of whether a particular state is a party to international conventions adopted by international organisations. the authors pay special attention to the characteristics of the subjects of the crime and reveals the debatable nature of their definition, in particular, analyse the problematic nature of the recognition of a legal entity as a subject of crime. the authors use a conceptual approach to clarifying the subject of study, which determines the reasonability of theoretical research, and modern principles of scientific methodology: the principle of scientific pluralism, impartiality, comprehensiveness of research, historicism, complexity and others. a modern requirement in the methodology of science is the rejection of methodological monism, which has long been dominant in theoretical and historical studies of social (including legal) phenomena and the rejection of the ideology of scientific knowledge, which provides an objective, unbiased attitude to any legal phenomena, legal systems, etc. the purpose of the article is to provide theoretical and legal characteristics of international crime in the economic sphere, identify the transnational nature of these crimes, clarify the state of legal regulation of these relations at the international level, as well as international cooperation to combat these crimes. based on the study and theoretical generalisation of the research topic, the authors emphasise the following conclusions: modern world problems are global in nature; economic crime transcends borders and becomes international; economic crimes of a transnational nature are recognised as socially dangerous acts that encroach on the system of social relations in the field of financial and credit, investment, information, trade, etc. activities, and have a transnational nature, i.e. go beyond one state; countering economic crimes of a transnational nature is within the internal competence of states, but international cooperation in this area also has an objective basis; the legal basis of international cooperation of states are international legal anti-criminal conventions, which define the criminal acts and obligations of states to criminalise economic crimes and provide legal assistance in criminal proceedings, in particular in extradition and transfer of accused and convicted persons, disposal of confiscated property, joint investigation and other issues. key words: globalization, economic crimes, transnational criminal law, domestic law, internal legislature, convention. jel classification: k14, k33 1. introduction globalisation is a comprehensive process that affects economic, political, informational, cultural, social, and legal trends, and involves an increase in the level of interaction both within individual states and between states. the intensification of these processes contributes to both the expansion of the functions and areas of responsibility of the state and the inability to effectively cope with the challenges of time. goods, capital, people, information, weapons, drugs, etc., became easy to cross baltic journal of economic studies 94 vol. 7, no. 1, 2021 state borders, which contributed to the penetration of transnational networks in almost all spheres of human activity (gadzhiev, 2002) by using favourable market conditions (both shadow and legal ones) in order to obtain economic benefits (chuprova, 2009). the eleventh united nations congress on crime prevention and criminal justice (2005) notes that globalisation and technological development have brought many benefits to society, but they have also opened up new opportunities for crime and for criminals.” nowadays, transnational economic crime has become significant in the world and has become a global business, which brings huge profits to organised criminal groups and really threatens the statehood of many countries (gros, 2003). the so-called economic crimes became especially dangerous (streltsov, 2000). indeed, crime generates huge revenues. despite the lack of accurate estimates, it is known that these revenues pose a global threat to the economic security of many countries and the global financial system as a whole (zelinskaia, 2017). international crimes such as smuggling, robbery, corruption and bribery of state, public, party figures and elected officials, counterfeiting money and securities, money laundering, false bankruptcy, illegal entry into legal business, etc., have become large-scale and more sophisticated. crimes committed in the economic sphere at the national and international levels, together, began to occupy a leading place (after drug crime) in the total number of crimes of an international nature. combating this crime requires the efforts of the international community, as the consequences of these crimes are manifested across national borders. economic crimes of an international nature are increasingly becoming transnational in nature, constantly improving their forms and methods and expanding the scope of their activities, which requires theoretical, scientifically sound and critical analysis of these processes. given that the problem of globalisation of crime in the economic sphere at the beginning of the 21st century has become unprecedented, it cannot be solved within the framework of limited nationalstate means and methods. in order to combat these crimes, international conventions, resolutions and recommendations are adopted, international forums and congresses are convened, and the activities of international organisations are intensified. recently, the interest in the study of general theoretical and applied problems of combating transnational crime has significantly increased in the science of international criminal law. scientists study the phenomenon of crime in various fields and the impact of globalisation in this matter, examine causes and social preconditions, summarise the international experience of cooperation in this area, study national criminal justice systems and the system of international criminal law. researchers pay special attention to the legal nature of international crimes and crimes of an international nature (conventional crimes, extradition crimes, transnational crimes), clarification of the qualifying features of the crime and its subjects; certain types or categories of crimes of an international nature are actively investigated (terrorism, piracy, drug trafficking, human trafficking, illegal migration, crimes in the environmental sphere, etc.). domestic and foreign scholars in the system of international criminal law distinguish an autonomous sub-branch, called transnational criminal law, which is based on the separation of the subject of legal regulation of public relations ( j. albanese, n. boister, a. bossard, h. zharovska, n. zelinskaia and etc.). transnational criminal law requires the study of the categorical apparatus, the source base, the subjects of the crime, its qualifiers, the responsibility for the act and the classification of types of crimes on various grounds. according to the criterion of the generic object of encroachment, a group of transnational crimes committed in the economic sphere is distinguished, but their study has so far received little attention and concern mostly criminology issues. 2. transnational crime – category of transnational criminal law under the influence of globalisation factors, primarily economic, as well as increasing influence of international organisations, supranational entities, the development of international law, its fundamental principles, expanding the range of subjects of international relations, unprecedented growth of transnational crime, the emergence of new crimes and increase in their number, has formed a new area of legal regulation – transnational criminal law, which is an autonomous part of international criminal law (popko, 2020). the answer to the challenge of globalisation of crime should be to accelerate the development of international criminal law, the prospects of which are associated with the political integration of the world community in a criminal policy entity that has universal jurisdiction and can radically solve the problem of effective crime control” (kibalnik, 2003). transnational criminal law is a sub-branch of international criminal law, allocation of which into an independent autonomous part took place in the late 20th – early 21st centuries. significant differences in the sub-branches of international criminal law indicate the de facto separation of transnational criminal law into a separate system, which has its own subject, method, tasks, principles, sources and categorical apparatus. the main category of transnational criminal law is transnational crime, which is the main criterion for distinguishing this sub-branch from, in the words of british scholar neil boister, “basic international criminal law” (boister, 2012). this has been scientifically baltic journal of economic studies 95 vol. 7, no. 1, 2021 substantiated in a number of works by domestic and foreign scientists (boister, zharovska, zelinskaia) and is characterised by a number of qualifying features. it should be noted that the analysis of the provisions of international acts indicates that in the vast majority they do not contain a definition of this phenomenon, and in the absence of a general concept of transnational crime introduced special, such as corruption as a transnational crime (gravina, 2015), drug falsification as a transnational crime (demchenko, solovyov, 2014) and others. the most important conceptual feature of a transnational crime is transnationality, which should be interpreted in accordance with art. 3 para. 2 of the un convention against transnational organised crime of 2000. according to this article, a transnational crime is considered as a) an act committed in more than one state; b) the offence is committed in one state but a substantial part of its preparation, planning, direction or control takes place in another state; c) it has been committed in one state but with the participation of an organised criminal group carrying out criminal activity in more than one state; d) it is carried out in one state, but its significant consequences take place in another state. transnational crime is characterised as an act (it can be both action and inaction) committed by the subject of the crime with a “foreign element” (the territory of the crime may be foreign, the accomplices may be foreigners, etc.), which threatens important social relations (security, life and human health, property, funds, etc.), or harms these relationships. it should be borne in mind that criminal consequences usually occur for more than one state. in contrast to the jurisdiction over major international crimes, which according to article 5 of the rome statute of the international criminal court is “limited to the most serious crimes of concern to the entire international community”, jurisdiction over transnational crimes is purely national (hnatovskyi, tropin), as international criminal jurisdiction in such cases is absent. transnational crimes are usually committed by private individuals, for profit or other private gain, and prosecution does not require the institutionalisation required by individuals for committing an international crime in the form of an international criminal tribunal. 3. characteristic of the economic crimes of a transnational nature in contrast to transnational crimes of a political nature (for example, political orientation is inherent in some terrorist acts), which should be considered as an exception (zelinskaia, 2003, karpets, 1988), when characterising transnational crimes it is advisable to pay attention to their economic orientation. according to researchers, “most transnational criminal activity is motivated by a desire for personal economic gain” (boister, 2012). crimes in the economic and financial spheres related to false bankruptcy, concealment of income, tax evasion, smuggling, and the shadow economy are becoming increasingly dangerous. scholars view transnational organised crime as an economic phenomenon by nature, arguing that it is essentially one of the sectors of the economy that produces and supplies illegal goods and services or illegal goods to world markets, and invests the resulting capital in including in the legitimate spheres of economics (repetskaya, 2001). it is argued that transnational organised crime can be seen as the functioning of criminal organisations and communities that have an extensive network in other countries that use international connections to carry out global illicit transactions involving the movement of information, money, and physical objects, people, other tangible and intangible assets across national borders in order to use favourable market conditions in one or more foreign countries to obtain significant economic benefits, as well as to effectively evade social control through corruption, violence and the use of significant differences in criminal justice systems of different countries (repetskaya, 2001). a similar view is expressed by other scholars, who note that using corrupt connections, modern organised crime in the economic sphere is transnational in nature, criminal organisations create transnational companies engaged in criminal business in various sectors of the economy. being associated with illegal transactions for the movement across state borders of tangible and intangible assets that bring significant economic benefits, using the favourable market conditions of other countries, significant differences in criminal justice systems of different countries, modern communication technologies, banking electronic payment systems, penetrate the legal economy of other countries through corruption and violence, the greatest interest in these organisations is the fuel and energy complex (pohoretskyi, 2007). economic transnational crime is most often associated with the financial and credit system, the consumer market, the manufacture and circulation of unlabelled products, the illicit trafficking of precious metals and stones, etc., which causes significant material damage. it should be noted that nowadays there are virtually no criminal organisations whose activities are related to only one area of criminal business. given the fact that the main goal of any organisation is to obtain economic benefits, without a doubt, any transnational criminal organisation uses modern financial and information technologies to launder the proceeds, including through the commission of cybercrime. minimising the risk of exposure requires establishing corruption links. economic crimes of a transnational nature are conventional, i.e. their normative enshrinement is enforced in international legal acts, primarily antibaltic journal of economic studies 96 vol. 7, no. 1, 2021 criminal conventions (boister, werle, zelinskaia, cassese); they are characterised by diversity and they can be classified according to different criteria. the specific characteristics of economic crimes are given in numerous anti-criminal conventions aimed at regulating specific legal relations, as a single codified act in this area has not existed yet. thus, in international criminal law, among the numerous crimes of an international nature, there is a group of economic crimes of a transnational nature, the separation of which is indicated by foreign and domestic scholars (adelkhanian, andrushko, boister, butkevych, karpets, skrylnyk). all of them emphasise the need to criminalise these crimes in national law, given their great public danger. economic crimes of a transnational nature are unlawful acts, harm citizens, businesses or states and are committed for selfish purposes; such crimes are always planned, always intentional, but can sometimes be committed through negligence. economic crime is a crime committed by corporations against other corporations, the state economy, or consumers (luneev, 1999). this is also emphasised by swedish researchers: economic crimes should include acts that have economic benefit as their motive, which is also characterised by duration, regularity, carried out in the framework of legal economic activity (svensson, 1987). this category of economic crimes is characterised by the crossing of the border by criminals or the manifestation of the results of their illegal actions outside the country, which can be both physical and virtual, i.e. consist in the transfer of information. the concept of economic crime of a transnational nature is multifaceted, as it includes not only violations of criminal law but also accompanying violations of other branches of law – administrative, financial, customs, civil, and so on. such a crime is characterised as an act committed by the subject of the crime, in the presence of a “foreign element”; has a transnational character, i.e. the criminal consequences of which extend to more than two states; liability arises not only on the basis of international agreements, but also under national law. regarding the subjects of economic crimes, their range is not constant and may depend on various circumstances, including the level of development of international financial and economic relations (raising the question of the international legal personality of transnational corporations), the types and means of organising human communities in state (hnatovskyi, 2019). the most difficult issue is the recognition of a legal entity as a subject of crime (inogamova-khegai, 2004). despite the problematic nature of the provisions on the recognition of a legal entity as a subject of a transnational crime (in particular, the thesis on the recognition of the subjective guilt of a legal entity is problematic), the rules of anti-criminal conventions (article 5 of the international convention for the suppression of terrorist financing 1999, art. 26 un convention against corruption 2003, article 10 of the un convention against transnational organised crime 2000, etc.) allow criminal liability of legal entities. in international criminal law, the generally accepted thesis is the recognition of an individual as the main subject of criminal liability for the commission of a transnational crime. the actions of individuals constitute a transnational criminal act, and the commission of an economic crime of a transnational nature by a collective entity (for example, an organised group) requires the establishment of the role of each person in the crime. this does not contradict the principle of individual criminal responsibility, because the collective nature of such acts does not exempt from the need to address the issue of individual criminal responsibility (inogamova-khegai, 2004). specific penalties are defined in national law in accordance with the peculiarities and traditions of legal systems, while the rules of transnational criminal law do not provide for sanctions for the crime. they do not contain specific characteristics of the person, for example, do not establish the age for being subjected to criminal liability. sources in such cases refer to domestic law. transnational convention crimes are committed by subjects on their own grounds, outside the direct connection with the policy of a state (hnatovskyi, 2019) and such subjects are liable under national criminal law on the basis of criminalisation of an international convention. transnational economic crimes are characterised by the presence of collective actors, i.e. their multiplicity, which involves the commission of a crime by several persons or an organised group. there are a large number of organised criminal communities, which differ in size, areas of specialisation, area of operation and other parameters. transnational criminal organisations are different, have different histories of origin and spread, engage in different types of criminal activity, different scales of their activities” (zharovska, 2019). they are referred to by different terms: “transnational criminal corporations” (ivanov, 1999), “international criminal organisations” (godson, olson, 1995), “transnational organised criminal groups” (shelley, 1995), most criminologists use the term “transnational criminal organisations” (bilenchuk, 1999; verbenskyi, 2010). it should be noted that these differences are mostly terminological in nature, the characteristics of these subjects usually coincide. it should be noted that the un convention against transnational organised crime of 2000 uses the term “organised criminal group”. the convention defines “organised criminal group” as a structured group of three or more persons that exists for a specified period of time and acts in concert to commit one or more serious crimes or crimes recognised as such under the convention, in order to receive, directly or indirectly, financial or other tangible benefits. a “structured group” should be baltic journal of economic studies 97 vol. 7, no. 1, 2021 defined as a group that was not formed by chance to commit a crime immediately and in which the roles of its members are not necessarily formally defined, the continuity of membership is discussed, or a developed structure is established. given that transnational crimes are characterised by multiple subjects (the commission of a crime by several persons or an organised group), the collective nature of such acts does not relieve the need to address the issue of individual criminal responsibility (buergenthal, maier, 2001). the most powerful of the transnational criminal groups today are: the colombian cocaine cartels; chinese criminal groups – triads; sicilian mafia (cosa nostra), neapolitan camorra, calabrian ndrangheta. the main group of collective actors of transnational organised crime are criminal organisations and communities that have an extensive network of branches in different countries and are characterised by a high degree of organisation on a family or ethnic basis, which greatly contributes to solidarity of members, increase their responsibility for security, ensure discipline and subordination within the links and in the organisation as a whole (verbensky, 2009). describing the subjects of transnational crime, l. shelley draws attention to the spheres of collective activity of the subjects of criminal activity, because “at the beginning of the 21st century subjects of transnational organised crime are involved in a wide range of criminal activities, their criminal interests include traditional types of organised crime (drug and arms trafficking, human trafficking, smuggling), which are combined with industrial and technological espionage, financial manipulation, stock market, counterfeiting of high-tech products, etc. corruption and links with political circles, control of law enforcement and the judiciary, and money laundering through offshore are used as a means of committing such criminal activity (shelley, 1995). 4. conventional and institutional mechanisms of combating economic crimes of a transnational nature the convention mechanism, established by the international community, ensures the cooperation of states in combating various types of transnational economic crime, despite the diversity of economic systems in the modern world and differences in the qualification of economic crimes in different legal systems. the conventional mechanism of international cooperation in the fight against economic crimes of a transnational nature should be understood as a set of international legal acts concluded at international conferences (universal and regional) and regulating relations between states in combating these crimes. the beginning of the formation of the convention mechanism for international cooperation in combating economic crimes was laid by the geneva convention for the suppression of counterfeiting currency of 1929, concluded at the initiative of the league of nations. states parties have committed themselves in the fight against counterfeiting not to distinguish between counterfeiting of domestic and foreign banknotes and securities and to punish criminals with the same principle (article 5). with the development and emergence of new forms of economic crime, the reaction of states was the adoption of the council of europe convention on laundering , search, seizure and confiscation of the proceeds from crime of 1990, in which the definition of “money laundering” (article 6) coincides with the first in article 3 of the 1988 un convention against illicit traffic in narcotic drugs and psychotropic substances, which preceded chronologically the issue of money laundering illegally obtained from the sale of narcotic drugs and other substances. according to article 3 of this convention, the legalisation of income means: – conversion or transfer of property, if it is known that such property was obtained as a result of any offence…; – concealment of the true nature, source, location, method of disposal, transfer, real rights in respect of property or its belonging, if it is known that such property was obtained as a result of an offence…; – acquisition, possession or use of property, if at the time of its receipt it was known that such property was obtained as a result of an offence…; – participation in, involvement in, or conspiracy to commit any offence or offences recognised in accordance with this article, attempts to commit such an offence or offences, and aiding, abetting, facilitating or advising in the commission thereof. thus, the term “money laundering” refers to a process that allows you to mask the illegal origin of proceeds of crime. money laundering is a system-forming element and at the same time a condition and consequence of organised crime. the provisions of this convention were further developed in the 2000 un convention against transnational organised crime and in the council of europe convention on laundering , search, seizure and confiscation of the proceeds from crime and on the financing of terrorism in 2005. these conventions provide for international legal action for combatting the legalisation of criminal proceeds, in particular states parties have undertaken to criminalise the crime; to adopt relevant laws on the procedure for searching for the seizure and confiscation of illegally obtained funds, to consolidate the right of access of law enforcement agencies to banking operations that allow for the timely detection of such crimes. no less dangerous economic crime of a transnational nature is corruption, the criminalisation of which is provided for in the un convention of 2000 and the un convention against corruption of 2003. the baltic journal of economic studies 98 vol. 7, no. 1, 2021 convention against corruption is a basic international legal document based on a comprehensive approach to the socio-legal nature of corruption, and is concerned about the relationship with “other forms of crime, including organised crime and economic crime, including money laundering” (preamble). the convention further believes that “corruption is no longer a local problem, but has become a transnational phenomenon that affects the societies and economies of all countries, which makes international cooperation in preventing and controlling corruption crucial.” scholars characterise corruption as a transnational phenomenon, which consists in bribing foreign officials in order to gain the opportunity to conduct or continue economic activity in any country, or to gain some inappropriate advantage (repetskaya, 2005). according to the latest sources, corruption combined with money laundering and illicit enrichment fall under the category of organised crime. the anticorruption mechanism in today’s conditions is being developed and improved through the participation of international organisations, including the un (hrynchak, zeman, kohutych, marin, 2019). the convention against corruption is used to prevent, investigate and prosecute corruption, as well as to suspend operations (freeze), arrest, confiscate and recover proceeds of crime under the convention. such crimes include: bribery of national public officials, bribery of foreign public officials and officials of public international organisations, theft, misappropriation or other misuse of property by public officials, abuse of power, abuse of office, illicit enrichment, etc. a special place in the convention mechanism of cooperation between states in combating economic crimes is occupied by the un convention against transnational organised crime 2000, which defines the main types of transnational crime related to economic activity: money laundering, intellectual property infringement, insurance fraud, false bankruptcy and other. the list of transnational economic crimes defined by the convention cannot be considered exhaustive, as the features of a transnational crime are inherent in the composition and other illegal acts inherent in this phenomenon (smuggling, counterfeiting, etc.). the 2000 convention contains preventive norms that oblige states to “develop and evaluate the effectiveness of national projects, as well as to identify and implement best practices and policies aimed at preventing transnational organised crime” (article 31, para. 1). and further specifically: the provisions of the convention provide for the prevention of abuse by organised criminal groups of bidding procedures conducted by public authorities, subsidies and licenses issued by public authorities for commercial activities. the convention obliges states parties to establish public registers of legal entities and individuals, their management and financing, and to establish a national register of persons deprived of the right to hold the office of head of legal entities. there are a number of other conventions aimed at combating transnational economic crimes, in particular the basic document in the fight against cybercrime for european countries is the council of europe convention on cybercrime 2001, which is the basis for drafting relevant legislation in european countries. the organisation for economic co-operation and development (oecd) concluded in 1997 a convention to combat bribery of foreign public officials in international business transactions; in 1883, the paris convention for the protection of industrial property (last revised october 2, 1979) was adopted, which aims to protect any intellectual property and to generate income from its use. the existing regulatory framework, which is not perfect (for example, there is no universal regulation at the international level on smuggling, although the convention on the suppression of alcohol smuggling was adopted in 1925), is a conventional mechanism for combating transnational economic crimes, complemented by an institutional mechanism and requires law enforcement activities. one of the main activities of the united nations is to create a regulatory framework for effective cooperation between states in combating economic crime. as a coordinating center for cooperation between un states, it promotes the interaction of international and national law, especially international criminal law with national law. the institutional mechanism includes the activities of un bodies, regional international organisations and specially created structures to combat crime. the main body for the coordination of economic activities of the un and specialised agencies related to the un is the un economic and social council (ecosoc). within the framework of the un, the office for drugs and crime functions fruitfully, within the framework of the european union, the control over the implementation of legal acts in the field of anti-corruption is entrusted to a special pan-european eu body – greco. in the process of cooperation, the interaction of the states is carried out on the issues of extradition / transfer of prisoners or convicted persons, provision of legal assistance, information exchange, technical assistance and other criminal procedure issues. 5. conclusion the main scientific conclusions and generalisations are as follows: 1. achievements of the 21st century have significantly changed the world, creating the latest technologies, discoveries in the field of basic and applied science, economics, culture, art, etc., but there are problems that are global in nature, the solution of which requires the efforts of all states. one such problem is crime that baltic journal of economic studies 99 vol. 7, no. 1, 2021 transcends borders and becomes international. crimes committed in the national and international economy are defined as economic crimes of an international (transnational) nature (transnational crimes). 2. countering economic crimes of a transnational nature is within the internal competence of states, but international cooperation in this area also has an objective basis, as crime is now internationalising. it is gaining more and more foreign and international elements, i.e. the commission of criminal acts on the territory of two or more states, attempts by criminals to flee from justice abroad, the sale of abductees, money laundering, computer crime for which there are no national borders. thus, the problem of international economic crime is becoming more and more global. 3. international criminal law and its subbranch – transnational criminal law, constitute a kind of legal basis for international cooperation in combating economic crimes of an international nature in terms of detecting and classifying illegal acts committed by entities to the category of crimes of international nature in international economic relations, establishing responsibility of international law and the punishment of persons guilty of such crimes. 4. economic crimes of a transnational nature are recognised as socially dangerous acts that encroach on the system of public relations in the field of financial and credit, investment, information, trade, and other activities; have a transnational character, i.e. go beyond one state; protected by states and the international community. 5. the convention and institutional mechanisms for combating transnational economic crimes involve the criminalisation of these crimes and the set of obligations assumed by the states’ parties to universal and regional conventions. the obligations include international cooperation in criminal procedure, in particular in matters of extradition / transfer of accused and convicted persons, disposal of confiscated property, joint investigation and other issues of mutual legal assistance. 6. the adoption of a significant number of international legal instruments in a relatively short period of time indicates: the global nature of the problem and the need for its regulation; awareness of states of the impossibility to independently counteract transnational economic crimes only through domestic regulation; the need for international cooperation to successfully combat crimes such as money laundering, corruption, smuggling, counterfeiting of money and securities, illicit trafficking in narcotic drugs and psychotropic substances, tax evasion, false bankruptcy, illegal use of trademarks and service marks, etc. 7. an important task to be solved by the world community, with the preventive purpose of preventing the commission of economic crimes of a transnational nature using global information and telecommunication networks 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(2009). transnatcionalnaia ekonomicheskaia prestupnost: voprosy protivodeistviia [transnational economic crime: issues of counteraction]. biznes v zakone. ekonomiko-iuridicheskii zhurnal. yur-vak, vol. 1, pp. 147–150. baltic journal of economic studies 24 vol. 2, no. 2, 2016 corresponding author: 1 department of accounting in production, ternopil national economy university. email: koval_olia@ukr.net the financial statements of user requirements olga gandziuk1 ternopil national economy university, ukraine abstract. the aim of the study is to investigate qualitative characteristics of financial reporting in the context of the interests of different groups of users. the subject of research is the financial statements of the enterprise. methodology. the theoretical base of the study are the provisions of general scientific theory of knowledge studied phenomena and processes, in particular: the methods of induction and deduction (in determining the principles of formation of the financial statements); analysis and synthesis (in establishing the role and importance of reporting to the needs of users) comparisons, associations and analogies (the justification of qualitative characteristics of financial statements). the information base for scientific research became scientific papers and publications of domestic and foreign scientists-economists, materials of scientific-practical conferences, legislative and normative documents, the world bank materials and international accounting standards board. results of the research showed that in the present conditions of economic activities of ukrainian enterprises, for the effective functioning of the company, is required to have them control system was adequate to the environment, and this is possible only if the relevant information systems. the financial statement plays a crucial role in the management of the company and is the main source of information about the firm’s financial condition. the basic groups of users of financial statements, depending on the interest that they show to the results of activity of the enterprise: external and internal. external users are classified into direct users and not a direct financial interest. it was determined that the financial statements should meet, first of all, the information needs of users with a direct financial interest, it is this group of users has the most leverage to influence the company. the influence of the quality characteristics of the formation of the real information in the financial statements is investigated. it is proved that the main requirements that apply to the financial statements, is it to be useful to users. it was established that the qualitative characteristics of financial reporting are not the same; they are subject to adjustments, primarily related to changes in the country’s economic realities. all possible adjustments should be carried out in accordance with the principles of data display system and based on scientifically developed approaches that will ultimately guarantee the interests of users of financial statements. we consider the actions and procedures of the world bank, which are focused on improving the institutional framework for corporate financial reporting. practical implications. the results of the study can be used in the formation of accounting enterprise policies of ukraine, as well as the formation of special financial statements to meet the information needs of key users. value/originality. get further development the theoretical and methodological aspects of the formation of the qualitative characteristics of financial statements of enterprises of ukraine in the context of the interests of the key user groups. key words: management company, decision-making, financial statements, users reporting, quality characteristics, global support. jel classifications: d21, l20, m41, o19 1. introduction in the current economic conditions when ukraine intends to cooperate with the largest possible number of european countries remains very important issue of drawing up transparent and reliable financial reporting. the successful operation of the business will always depend on the quality, accuracy, completeness and impartiality of received information about the external changes in operating conditions, as well as the internal state of the company. internal information system should satisfy all interested users on study and take the necessary management decisions. financial reporting is the main source of information both external and internal users. the uncertainty in the financial statements leads to errors in decision-making by external users of information, management reporting – to the wrong actions of managers and leaders at various levels within the company and so on. in general, this is resulting in reduced efficiency of enterprises and, accordingly, their level of profitability. baltic journal of economic studies 25 vol. 2, no. 2, 2016 the purpose and objectives of the study. changing economic conditions of functioning entities causes a change in the order of formation of indicators of financial reporting and is evidence of the emergence of new factors of influence and claims it. aim of the study is to examine the qualitative characteristics of financial reporting in the context of the interests of different groups of users. to achieve this goal and implement a comprehensive research, it is necessary to solve the following problem: the place and role of financial statements in the enterprise management system to meet the needs of major groups of users; analyze the main qualitative characteristics that apply to reporting; explore the level of exposure and the world bank on the development of accounting in ukraine and abroad. methodology. the theoretical basis of the research was the position of general theory of knowledge studied phenomena and processes, including: methods of induction and deduction (in determining the principles of financial statements); analysis and synthesis (in determining the role and importance of reporting to user needs); by comparison, associations and analogies (with justification qualitative characteristics of financial reporting). the information base for scientific research were research papers and publications of local and foreign scientists, economists, materials of scientific conferences, legislative and regulatory documents, materials world bank and the council of international financial reporting standards. 2. reporting for satisfaction needs of users a statement is a listing of the transactions impacting an account during a specific period of time. statements are typically sent to customers on a monthly basis, so that they can review and verify account activity. the format of a statement that relates to unpaid customer receivables usually contains a reminder to pay any unpaid amounts that have exceeded the payment terms assigned to a customer. statements are also routinely sent by banks to their customers, showing all bank account activity. these statements are an essential part of the bank reconciliation process that customers routinely conduct. financial information presented in financial statements needs to have some key qualities which make it useful for the users. in international financial reporting standards (ifrs) are the main groups of users who have equal rights in respect of reporting information: investors, employees, creditors, suppliers, government and society. european directives governing accounting and reporting, without considering orientation reporting and does not set priorities in providing priority information needs of different users. the us standards of accounting (gaap – generally accepted accounting principles) states that the financial statements are assigned to creditors, shareholders and other investors, and other users (employees and customers of the enterprise, government and the general public, but they are regarded as secondary). the reason for determining such priorities was that the united states accepted that information useful to investors and lenders, and will be useful to others. the target audience for the benefit of preparing financial statements which must meet the following criteria: – first, do not have the authority to request from companies, businesses necessary information, and therefore having to rely on the information it conveys leadership; – secondly, understanding of enterprise activities and seek to learn with sufficient thoroughness of the information contained in the financial statements. it is believed that these individuals have a certain level of competence in order to take based on the information received solutions that meet their interests. this criterion determining user groups is critical because the wrong decisions can be taken by users on the absence not only reliably provided useful information in the financial statements, but also knowledge of the rules that this statements are prepared and presented (davidov, shalimova, 2011). today almost all countries with developed economies considered the feasibility and the need to meet information needs of different users. understanding the information needs of users reporting contributes significantly to their classification. users are divided into: internal and external, depending on the interest they show the results of the company. internal users function as part of the economic entity. these are people who make management decisions (government, administration, managers of various units), as well as workers. information for decision-making managerial, strategic and tactical planning, budgeting, etc. is used by executives and its employees. information they need to determine the strategy and tactics of business identify the main directions of the company, its strengths and weaknesses, effectively control the activities of the company. on the basis of statements they determine the need for financial resources, assess the correctness taken before investment decisions and capital structure efficiency, assess for making adjustments to the targets, develop and implement policies dividends, make proposals for restructuring the company. this group includes professionals who are agents of the owners of firms and achieve their goals. with their position accounting reporting system should, firstly, to enable control of the daily operations, and secondly, to provide such data, which could report to the owners of performance. sometimes in the economic literature to internal users are also owners. in international practice such interested persons, even if they are the owners, attributed to external users associated with the use of a basic accounting principles  – the principle of autonomy (separation of property). if the owners at the same time performing administrative functions, they can be classified as internal users. external users of financial statements need information about the financial condition, results of operations. they meet their needs in the following information: baltic journal of economic studies 26 vol. 2, no. 2, 2016 – owners who have transferred their assets and reinvested profit economic activity, interested in assessing the ability of the company to increase equity and dividends; – shareholders should know whether they will receive dividends and when they should buy or sell shares; – lenders are interested in information that enables them to determine whether their loans and interest paid on time and in full, assess the feasibility of the loan or extension of the term of the loan, to determine the conditions of credit and guarantees on loans; – trade unions are interested in the financial statements for identify opportunities for increasing the wages of workers in the renewal of contracts and labor agreements in the next reporting period; – tax examines financial statements to assess the tax ability of firm’s accuracy of the calculation of income taxes and other payments; – government agencies need information in order to regulate (within its competence) of the company, determine tax policy, use it as the basis of statistical data by sector for the analysis and assessment of economic conditions in a particular area (veruga, 2005). external users operate outside a company. they can be divided into two groups: those with no financial interest and with financial interest. financial interest of external users may be direct or indirect. direct interest manifested in user interest in the performance of the economic entity. indirect interest has less to do with interest in the effective operation of the company as of the existence of this organization and the existence of the possibility of extending its activities in the future. users with a direct financial interest  – owners, current and potential investors, lenders and banks that provide credit, suppliers and others. owners and investors who invest in their venture capital, accounting statements needed to assess the ability of the enterprise to pay dividends, to assess the risk associated with investing capital. suppliers and contractors interested in the timely payment of obligations, the provider closely linked with the client, the more closely it will follow its financial situation. indirect financial interest users  – financial bodies, serving banks, government agencies, trade unions, insurance companies and customers. financial authorities and government agencies reporting information needed to control the flow of funds to state and local budgets, correct financial policy through the tax system. audit firms use accounting data to confirm the degree of reliability of reporting and compliance with accounting procedure legal requirements. but since the inspection services, company pays client auditors assigned to user groups that have an indirect financial interest in the results of the company. to non-financial interest attributed statistics agencies, arbitration, and law enforcement. members of this group report information or interest in terms of checking the legality of the transactions (arbitration, law enforcement) or in terms of statistical information for microanalysis (statistics agencies). basically they are interested in reporting form as an information unit, but not its contents (kindracka, 2011). information needs of these groups are significantly different, and they have different information possibilities. separated unlawful user group in its capabilities from the perspective of availability of information sources. thus, domestic users in the decision-making analyze data not only financial but also administrative account and have access to all relevant information that details the processes occurring in the enterprise. external users are able to assess the situation at the plant using only usually financial statements. ambiguous solve the problem selection the main use of accounting statements. so, is that a common set of individuals who are related to a particular company, the main role played by the owners who provided financial resources in creating the company and continue to hold it their capital, they determine the fate of the company as an independent entity (golcova, glikus, 2004). in our opinion, other external users with a direct financial interest have the same leverage, for example, creditors may file a lawsuit on the recognition of the company insolvent and the owners desire to «keep the company afloat» cannot give the necessary results. thus, the system of accounting and reporting, which is formed on its basis, should be organized so those especially meet the needs of users with a direct financial interest. in addition, because the company cannot do without interest in the activities of other actors (who have little financial interest) reporting, where possible, and should provide them sufficient volume of informative information. depending on which user group predominating in a particular country, formed a model of corporate governance or focused on the needs of all stakeholders (within the continental law) or its shareholders (under common law) (syk, 2008). according to the sfac №1 «objectives of financial reporting by business enterprises» approved by the us financial accounting standard board (fasb), belongs to the main user group of persons «have no authority to demand (the company) information they need and to rely on the information that reveals the company». it is assumed that these persons have sufficient competence that makes decisions in their interests, based on the information received. fasb expands the range of stakeholders as much as possible with the opportunity to influence the qualitative characteristics of financial reporting (sinelnikova, 2012). axiom formation of indicators of financial statements is the authenticity of their values. given the characteristics of modern enterprises in ukraine, a large amount of work done by hand in the management of the account, the interest of various economic actors in a certain adjustment values that should be reflected in the financial statements, and other factors influence reliability to achieve full performance reporting are both very difficult, but very important. baltic journal of economic studies 27 vol. 2, no. 2, 2016 shaping the financial statements, especially the need to clearly define what its requirements must meet. legislation has devoted to this issue national position (standard) accounting №1 (np(s)a №1), which is called «general requirements for financial reporting.» it examines the structure and elements of the financial statements of its qualitative characteristics, principles of preparation and disclosure order in it. in addition to specifying the ten basic principles of financial reporting, this standard also states that the information provided in the financial statements must be intelligible, relevant, reliable and comparable indicators enable a variety of companies and one company for various periods. statements users should be confident in the quality of information provided in the reports, which leads to further consideration of qualitative characteristics of financial reporting. 3. financial reporting qualitative characteristics under ifrs, the qualitative characteristics of financial reporting are features that specific to reports, due to which the information set out in the reports will be useful to users. ifrs 1 «presentation of financial statements» on the main common characteristics of financial reporting defines: – reliability; – compliance with ifrss; – continuity; – reporting on the basis of calculation; – selection of material items in separate classes; – prohibition coagulation revenues and expenses or assets and liabilities; – the frequency; – comparability of information on the previous period. qualitative characteristics of accounting information determine its usefulness for decision-making by different user groups. therefore, should agree with the opinion of leading scientists and economists that quality standards are characteristics evaluation of accounting information attributes that tend to increase its usefulness (homun, 2001; sokolov, bychkova, 2004; ryndia, 2009). in ukraine, the qualitative characteristics of financial reporting were formulated and legislated the adoption np(s)a №1, which listed only requirements for the quality of the information presented in the financial statements without their proper identification and interpretation. qualitative characteristics of information reporting are reliability, relevance, understandability, comparability. the following are all qualitative characteristics of financial statements: – reliability. the information must be free of material error and bias, and not misleading. thus, the information should faithfully represent transactions and other events, reflect the underlying substance of events, and prudently represent estimates and uncertainties through proper disclosure. – relevance. the information must be relevant to the needs of the users, which is the case when the information influences the economic decisions of users. this may involve reporting particularly relevant information, or information whose omission or misstatement could influence the economic decisions of users. – understandability. the information must be readily understandable to users of the financial statements. this means that information must be clearly presented, with additional information supplied in the supporting footnotes as needed to assist in clarification. – comparability. the information must be comparable to the financial information presented for other accounting periods, so that users can identify trends in the performance and financial position of the reporting entity. the disadvantage of the existing system of quality characteristics established by the legislation of ukraine is the lack of such important components as predictability and property to feedback materiality. it should be noted that the requirement of materiality relate to the rank of principles of financial reporting, while both domestic account this requirement is not isolated or a part of the qualitative characteristics of financial reporting principles or as a part of preparation of the financial statements. in the state of emergency np(s)a №1 provided only definition of «material information» – is «information, the lack of which can influence the decisions of users of financial statements». the requirement of materiality is a major component of relevance. information is considered material if its absence or incorrect rating can influence the economic decisions of users; materiality depends on the amount of paper and errors assumptions in certain circumstances due to the omission or misstatement. this is an important requirement for information that should not be neglected. it occurs when the decision on disclosure of the facts of economic life in a form in which they would be useful for users, subject to the requirements of efficiency of information. in the state of emergency np(s)a №1 reached the requirement of completeness of reflection of economic activity, but there is no requirement of materiality and cost is not conditioned on receipt of information. in this regard, we consider it appropriate legislative consolidation of the qualitative characteristics of information as the significance and effectiveness. under the qualitative characteristics of information necessary to their optimal combination, depending on the professional accountant (for example, the requirement would be contrary requirement of relevance or credibility of the principle of prudence). in this connection it is important to balance quality characteristics. khomyn p. (2004) provides a unique and extremely important for financial reporting aspect as the diversity of information that should be reflected in the accounts. other information that consumers need is in the direction of interest to the user  – other areas reporting to them are baltic journal of economic studies 28 vol. 2, no. 2, 2016 almost zero value. potential shareholders are interested usually only in the general state of the company, its capacity sizes; investors  – profitability and dividends on shares; creditors – enterprise capability to repay the loan; suppliers – solvency, etc. oliinychuk v., oliinychuk o. (2013) eliminate the system of qualitative characteristics of financial reporting following: – the possibility of checking, which stems from the need for additional restrictions reliability. the information is such that checked if it is confirmed evidence of independent thought or total qualified experts; – neutrality, which means that no one influences the financial statements in order to achieve the desired result; – timeliness. this element should be used as a tool in addition to the requirements of expediency. the information may not be appropriate, if untimely, since it must be suitable for making a decision before you lose this ability. this does not guarantee the timeliness of expediency, on the contrary, the latter is impossible without timely; – materiality. with the formation of the financial statements, the amount of information to be optimal because the excess or deficiency can affect the quality of management decision. such additions are attributed to the system as a result of the relationship quality characteristics serve as predictability and properties will have feedback. the procedure for filing their forms, a list of indicators to include them, are among the most variable elements of modern ukrainian statements. the desire to improve as better reporting, make it a more operational, more detailed and better sometimes led to the fact that actual changes are reflected keep up with the changes that were implemented regulations cannot be applied in practice after their publication in the official publications. in ukraine there are problems with using statements. thus, paragraph 2 of article 14 of the law of ukraine «on accounting and financial reporting in ukraine» stipulates that reporting companies does not constitute a trade secret, except as required by law. but in ukraine, as in other post-soviet states, a point of interpretation is different. by inertia after the situation in the soviet union, which was considered any information as a state secret, and to conceal the abuse, state enterprises and economic sectors of private and corporate structures tend to assume all financial reporting trade secrets. this much harm has primarily an educational process of students in higher educational institutions oriented specialties economics, finance, management, accounting and auditing and so on. they are manufacturing practices through privacy information often cannot read the indicators of financial statements. in the same situation are often employees of research institutes, to whom the task is to examine the financial and economic situation of the entity, region, and area. in this case, inflicted economic damage due to lack of transparency and lack of access to information and inability to assess and analyze information, identify the real financial and economic conditions and the factors influencing it. in this regard, makarov v. (2010) just expressed the opinion that the financial statements should photograph the facts of economic life, but in reality it is often the sarcophagus hiding the true state of affairs. in economically developed countries, honesty, transparency and openness of its accounting firm show and demonstrate. mandatory financial reporting information is saturated with data, containing an analysis of indicators characterizing the achievement of technical, technological, social, environmental and so on. reports filled with graphs, diagrams, photographs, other visual objects. in the world is organized competition for the best annual reports and their performance. these reports are available for review a wide range of users who can be suppliers, customers, lenders, bankers and others. information from the financial statements of its position in the print media, on internet sites is disseminated. 4. world bank support in today’s economic situation, many european countries are facing a double challenge  – the need to stimulate economic growth under unstable conditions and at the same time adhere to fiscal discipline. the long recession and slow recovery of growth have long-term consequences not only for employment but also for competitiveness and entrepreneurship in the region. enterprises, large and small, competing for credit and capital, and banks and other financial institutions have become much more cautious in their investment decisions. against this background, financial transparency is increasingly important for businesses, and creating the proper regulatory environment for corporate financial reporting – for the government. financial resources are currently limited, so to get the most revenue, investments should be directed as efficiently as possible. financial transparency helps businesses attract such investments, which is particularly important for small and medium enterprises (smes), because such enterprises often lack the assets that the bank will accept in the institution. companies with good prospects and efficient organization of financial reporting are also more likely to get a loan, even if they lack the assets to the institution, because in this case the bank receives more information to make decision on approval of the loan, and it has not need a big bet. therefore, to attract investment and business development is essential to make the country an effective system of corporate financial reporting. however, the transparency of financial reporting is to cross national borders. as demonstrated financial crisis, the economy of different countries is becoming increasingly connected and interdependent. constantly increase importance of regional production networks, increase the volume of regional trade. for example, in eastern europe and eurasia, many countries seek closer baltic journal of economic studies 29 vol. 2, no. 2, 2016 economic ties with the european union (eu), hoping to benefit from access to markets and networks of western european countries. to the ranks of countries that are trying to build stronger economic ties with the eu are azerbaijan, armenia, belarus, georgia, moldova and ukraine  – six countries of the eastern partnership (eap). to fully take advantage of these bonds, these six countries have finally adopted a common system of financial reporting, part of the legal system of the european union. since 2004 the world bank reviews its standards and practices in the field of accounting and auditing in the eap countries to help the government and the main stakeholders in these countries in developing proposals for improving the conditions for enterprise reporting. although some progress has been made in the development of accounting and reporting eap countries still have difficulty in creating appropriate institutional framework and conditions that would encourage the spread of best practices in financial reporting. the new program, strengthening auditing and reporting in the countries of the eastern partnership (starep) which aims to help countries to create joint venture effective and durable system of financial reporting and auditing in accordance with international standards and taking into account the requirements of the european legal system. starep program involves a wide range of stakeholders, including the ministry of finance, the professional community, financial controllers, accounting professors. the program aims to improve education in accounting; development of the institutional framework of financial reporting; facilitate the transition to standards compatible with eu requirements; strengthening international cooperation and exchange of experience between key institutions. program starep is built on the model of mutual learning  – it brings together people who determine public policy, teaching accounting, financial reporting professionally engaged regulate financial activities and helping participating countries to share experiences of reform and avoid potential difficulties. centre for financial reporting reform (cfrr) of the world bank, located in vienna, coordinates the activities of the world bank in the financial statements in all countries of europe and central asia. the center provides a range of services including analytics, consulting, education and development of skills, know-how and technology, technical support and strengthening of institutions, and helps in building the foundations of financial reporting. in 2016, the world bank continues active in the field of corporate financial reporting and improves the quality of financial information for the purpose of the enterprise and the development of the region. from 26 to 28 april 2016, the cfrr is hosting three high-level events in vienna on the following theme: “financial information: catalyst for growth”. the series of events will discuss the role of good quality and transparent financial reporting in the economic development of east, central and southeastern europe. the 2016 cfrr ministerial conference is dedicated to the impact of quality financial reporting on catalyzing growth in investments and economies. senior officials from participating countries (albania, armenia, azerbaijan, belarus, bosnia and herzegovina, georgia, kosovo, former yugoslav republic of macedonia, moldova, montenegro, serbia and ukraine) will meet for further exchanges on progress on corporate financial reporting reform and explore avenues for improving the quality of financial information that supports decisionmaking and facilitates investment. participants will review progress made in reforms in their respective countries and explore how to build trust in financial reporting and promote its use as the basis for fostering inclusive growth. this biennial event promotes the use of financial information in support of financial stability, access to finance for businesses, and economic growth in the region. such assistance of the world bank in the development of financial reporting firms in ukraine is a prerequisite for european integration processes taking place today, and is a new step in the ukrainian companies on the european and world markets. 5. conclusions from the study we can draw the following conclusions: – active accounting reform in ukraine, carried out in recent years, aimed at optimizing accounting process, the creation of the information-analytical base that would get the output statements that reflect the real financial position, financial firms and adequately would meet the demands of the users concerned; – financial statements should satisfy primarily the information needs of users with a direct financial interest, because this group of users has the most leverage over the entity. the enterprise cannot do without its interest in the activities of other actors (who have little financial interest) reporting, where possible, they should provide sufficient volume and informative information that is only possible in preparing and presenting targeted reporting; – qualitative characteristics of financial reporting are not the same, they are subject to adjustments, primarily related to changes economic realities of the country. all possible adjustments to be made in accordance with the principles of the system and display data based on research developed approaches that ultimately will guarantee the interests of users of financial statements; – the world bank has a large impact on the financial reporting, directing to improve the institutional framework of corporate financial reporting, promote the adoption of standards that meet the eu. this is in turn a necessary prerequisite european integration processes taking place today in ukraine, as well as a new step in the ukrainian companies on the european and world markets. further studies towards the development and improvement of accounting firms should be focused on possible ways of promoting ukraine’s positive experience of the european union formation, saturation and presentation of financial statements. baltic journal of economic studies 30 vol. 2, no. 2, 2016 references davidov, g.m., shalimova, n.s. (2011). reporting companies – kyiv, knowledge, 623 p. golcova, s.m., glikus, i.y. (2004). statements (financial, statistical, consolidated and for social and pension insurance) – kyiv, center of educational literature, 292 p. homun, p. ya. (2001). accounting of agricultural enterprises – ternopil, 453 p. homun, p. ya. (2004). formation reporting of financial, management and tax accounting subsystems – ternopil, economic thought, 288 p. kindracka, l.m. (2011). statements in the general accounting system entities: the development and improvement. bulletin of the commerce lviv academy, vol. 35, pp. 175-178. makarova, v.f. (2010). problems of reliability and authenticity of the financial reporting, the bulletin of the professional accountant, vol. 10-12, pp. 33-39. oliinychuk, v.m, oliinychuk o.i. (2013). the principles of formation and the system of properties of the usefulness of financial statements – innovative economy, vol. 9(47), pp. 185-195. ryndia, a. (2009). financial reporting: looks from different parties  – the taxes and record-keeping, vol. 7, pp. 17-19. sinelnikova, n.o. (2012). organizational aspects of the transition ukrainian companies to use international financial reporting standards – youth science journal uabs nbu, vol. 1, pp. 330-338. sokolov, ya.v., bychkova, s.m. (2004). principle of circumspection (conservatism) is in a record-keeping  – the accounting, vol. 5, pp. 54-59. syk, l. (2008). organization of preparation and reporting – accounting in agriculture, vol. 24, pp. 39-48. the law of ukraine is «on a record-keeping and financial reporting in ukraine» (in a release from 02.12.2012.) retrieved from: http://zakon4.rada.gov.ua/laws/show/996-14 the national position (standard) of accounting 1 the “general requirements to the financial reporting” [by the order from 7.02.19994, no 73]. veruga, u. (2005). enterprises reporting – kyiv, 656 p. web-site of «world bank». retrieved from: http://www.worldbank.org/uk/news/press-release/2013/10/01/ world-bank-helps-improve-financial-reporting-in-eastern-europe ольга гандзюк соответствие финансовой отчетности потребностям пользователей аннотация. целью работы является исследование качественных характеристик финансовой отчетности предприятий в контексте обеспечения интересов различных групп пользователей. предметом исследования выступает финансовая отчетность предприятия. методика. теоретической базой исследования стали положения общенаучной теории познания исследуемых явлений и процессов, в частности: методы индукции и дедукции (при определении принципов формирования финансовой отчетности); анализа и синтеза (при установлении роли и значение отчетности для нужд пользователей) сравнения, ассоциаций и аналогий (при обосновании качественных характеристик финансовой отчетности). информационной базой научного исследования стали научные труды и публикации отечественных и зарубежных ученыхэкономистов, материалы научно-практических конференций, законодательные и нормативные документы, материалы всемирного банка и совета по международным стандартам финансовой отчетности. результаты исследования показали, что в современных условиях хозяйственной деятельности украинских предприятий, для эффективного функционирования фирмы необходимо, что бы система управления ним была адекватна внешней среде, а это возможно только при наличии соответствующего информационного обеспечения. именно финансовая отчетность играет исключительно важную роль в процессе управления предприятием и является главным источником информации о финансовом состоянии фирмы. выделены основные группы пользователей финансовой отчетности, в зависимости от интереса, который они проявляют к результатам деятельности предприятия: внешние и внутренние. внешние пользователи классифицированы на пользователей с прямым и не прямым финансовым интересом. определено, что финансовая отчетность должна удовлетворять, прежде всего, информационные потребности пользователей с прямым финансовым интересом, ведь именно эта группа пользователей имеет самые рычаги влияния на предприятие. исследовано влияние качественных характеристик на формирование реальной информации в финансовой отчетности. обосновано, что главное требование, которое предъявляется к финансовой отчетности, заключается в том, чтобы она была полезной для пользователей. установлено, что качественные характеристики финансовой отчетности не являются неизменными, они подлежат корректировкой, в основном связанные с изменениями baltic journal of economic studies 31 vol. 2, no. 2, 2016 экономических реалий страны. все возможные корректировки должны осуществляться в соответствии с системой принципов отображения данных и на основе научно разработанных подходов, которые в конечном итоге будут гарантией интересов пользователей финансовой отчетности. рассмотрены действия и процедуры мирового банка, которые ориентированы на совершенствование институциональной основы корпоративной финансовой отчетности. практическое значение. результаты проведенного исследования, могут быть использованы при формировании учетной политики предприятий украины, а также при формировании специальной финансовой отчетности для удовлетворения информационных потребностей ключевых пользователей. значение/оригинальность. получили дальнейшее развитие теоретические и методологические аспекты формирования качественных характеристик финансовой отчетности предприятий украины в контексте обеспечения интересов ключевых групп пользователей. baltic journal of economic studies 39 vol. 6, no. 2, 2020 corresponding author: 1 v.n. karazin kharkiv national university, ukraine. e-mail: lnzhukova16@gmail.com orcid: http://orcid.org/0000-0003-2765-5544 doi: https://doi.org/10.30525/2256-0742/2020-6-2-39-42 ensuring of the institutional status of the state under global challenges larysa zhukova1 abstract. the purpose of the article is a study of the theoretical and methodological aspects of ensuring the institutional status of the state under global challenges. methodology. the scientific search for changes in the institutional status of the state has been carried out on the basis of classical, neoclassical and institutional methodology. on the basis of classical methodology, general theoretical approaches to discovering alternative options for ensuring the institutional status of the state in the economy have been clarified using the tools of dialectical analysis and synthesis. structural and functional method based on systemic analysis has made it possible to formulate the author's vision about the contradictory impact of global challenges on the institutional status of the state. institutional and neoclassical approaches have made it possible to analyze the factors of manifestation of the contradictory nature of the state in the economy. the results of the study have shown that, to date, there is still no effective institutional system in place in ukraine that would ensure optimal use of economic potential and could form the basis of public consensus on strategic goals of socio-economic development. all this negates the effectiveness of measures to identify alternatives to the development of the institutional status of the state and to find ways to preserve national identity under globalization. the practical implication is to identify the priorities and directions of the state's regulatory capacity under growing socio-institutional gaps to maintain macroeconomic stability and an effective system to counteract destructive exogenous influences clearly. when choosing possible alternatives, the desire for economic efficiency and social justice of the society, ensuring sustainable development, which does not worsen the conditions and opportunities for future generations, should remain the leading idea of strengthening the institutional status of the state. value/originality. during the research, it has been proved that one of the priority tasks of the state should be a radical change of the vector of socio-economic development and carrying out of urgent institutional reforms. in view of this, the fundamental ambiguity of global development paths requires the state to tackle the challenge of preserving and strengthening national subjectivity as a key condition for ukraine's security and sustainable development. connecting the tools and resources of innovative development to the problem can contribute to the long-term strengthening of national competitiveness and the strengthening of the institutional status of the state. the reliability of the work of all public institutes, the extension of technological freedom of economic entities and the safety of the functioning of the whole socio-economic system depend on the key position of the economic power of the state. key words: state, economic development, institutional status of the state, institutional changes, global challenges. jel classification: e02, о11, р43 1. introduction the deepening of the contradictions of the development of the modern economy against the background of exacerbation of global transformational changes at different levels of the economic system actualizes the decisions of fundamental questions of the institutional status of the state. in this regard, the economic research of ensuring the institutional status of the state in conditions of socio-economic instability becomes extremely important. today, there is still no effective institutional system in place in ukraine that would ensure optimal use of the national economic potential and could form the basis of public consensus on strategic goals of socio-economic development. awareness of the peculiarities and radical nature of the institutional changes that have been made dictates to the society the need to develop a different behavior model, both economic agents and authorities, and requires a change in the priorities of their interaction. baltic journal of economic studies 40 vol. 6, no. 2, 2020 establishing and enforcing civilized rules and regulations is of paramount importance for all participants in the economic system, as it determines the further sustainable development of our state's economy. modern economic science has recently linked the institutional status of the state not only to the level of socio-economic development, but also to the potential and real opportunities for its enhancement. therefore, the study of the institutional status of the state is quite relevant task in both scientific-theoretical and practical aspects. the purpose of the article is a research of the theoretical and methodological aspects of ensuring the institutional status of the state under global challenges. the scientific search for changes in the institutional status of the state has been carried out on the basis of classical, neoclassical and institutional methodology. on the basis of classical methodology, general theoretical approaches to discovering alternative options for ensuring the institutional status of the state in the economy have been clarified using the tools of dialectical analysis and synthesis. structural and functional method based on systemic analysis has made it possible to formulate the author's vision about the contradictory impact of global challenges on the institutional status of the state. institutional and neoclassical approaches have made it possible to analyze the factors of manifestation of the contradictory nature of the state in the economy. 2. theoretical approaches to the analysis of the institutional status of the state given that the crisis phenomena have identified the shortcomings and gaps of the existing theoretical paradigm in economic development and have outlined the likely threats to national sovereignty of states, the issue of identifying alternative concepts of developing the institutional status of the state and finding ways to preserve national identity are of particular relevance. the tendencies of development of the institutional status of the state under globalization are covered in the works of such foreign researchers as: l. britton, i. clark, e. kofman, s. d. krasner, m. newman, r . robertson, m. fowler, j. h. franklin, m. fritzler and others. various aspects of the study of problems of realization of the institutional status of the state under deepening integration and globalization of the economy have been reflected in the works of a number of leading domestic scientists, in particular v. heiets (justification of the ways of institutional and structural transformations in the economy of the state in the context of the evaluation of alternative variants of development), a. hrytsenko (institutional architectonics and the search for alternatives to strengthening the institutional status of the state), p. yeshchenko (transformation of economic relations and alternatives ways of the institutional changes under global changes), v. sidenko (the impact of economic integration on the institutional status), o. yaremenko (institutional foundations of alternative choices of a national model of economic development) and others. 3. research on the category of the concept of "institutional status of the state" obviously, the most effective institute capable of forming and maintaining the stability of the national economy (the ability to maintain its structure and functional features during a certain interval despite external and internal shocks) is the institute of the state. as v. osetskyi notes: “the institute of state is a relatively separate part of its mechanism, which has the characteristics of an institutional status and a certain autonomy” (osetskyi, 2016). by means of economic rules, each entity acquires its own institutional and economic status. category “status” can mean a condition, position, establishment, which implies a certain static condition of the subject, the condition is outlined, defined (yakovlev, 1988). the process of forming an institute and acquiring, in fact, an institutional status is a process of formalizing social relations, moving from informal relations and unorganized activity to creating organizational structures with a clear hierarchy of power, taking into account the regulation of the activity of individuals and their relationships, juridical legalization of organizational structures, if available and necessary (stopin, 2001). the specificity of the institutional status of the state lies in the possibility of “self-institutionalization”, that is, in granting the attribute of legitimacy to other institutes, in managing (within certain limits) the pace and stages of institutional transformation. institutional status determines the place of the entity in the economic structure, relationships, rights, responsibilities in relation to other entities. formation of institutional status requires social, economic and individual (obligations to pay taxes or obtain necessary permits, to comply with public order) transaction costs. the mentioned costs should offset the social costs of establishing such institutional status. ultimately, they should be identical. accordingly, a society where the public and individual costs of institutional status coincide, or at least have slight variations, can be considered normal. in the case of a larger difference in the amount of expenditures, the inefficient state of resource allocation in society is obvious (hrytsenko, 2007). with these considerations in mind, let us define that the institutional status of the state is a theoretical concept that reflects the state's ability to embody the valueinstitutional foundations of the socio-economic system (solidarity, justice, cooperation, equality and hierarchy, equivalence and reciprocity); exclusive powers of the state to formulate institutional rules and norms and baltic journal of economic studies 41 vol. 6, no. 2, 2020 enforce them (exclusive right to violence, separation of powers, judiciary, monetary issue and ensuring trust in money, fiscal system, property institutions and their protection); the limits and nature of the subordination of the state itself to the mandatory institutional rules and regulations (judicial procedure for resolving disputes between the state and citizens, the obligation to provide social guarantees, following the principle: the state can only do what is allowed by law). 4. search for alternatives to the realization of the institutional status of the state against the background of exacerbation of global imbalances and crisis phenomena, the scientific discourse on the regulatory capacity of the state under growing socio-institutional gaps to maintain macroeconomic stability and an effective system of counteracting destructive exogenous influences has been significantly actualized. in view of this, the important conditions for the institutionalization of secure economic development are the formation of a certain economic and institutional status by the state, that is, a set of rules and regulations that allow each entity to perform a certain economic role. granting status, on the one hand, frees subjects from the uncertainty of their actions, extends their economic freedom and provides opportunities for accelerated development. on the other hand, due to its status, the state involves economic agents in the area of joint responsibility by overseeing, regulating and controlling their behavior to prevent deflection (shevchenko, 2009). that is, the analysis of the institutional status of the state is obligatory for understanding the complex transformational processes, crisis phenomena, when the clear functional specialization of certain elements of the economy is broken and the factors that usually go beyond the subject of economic science begin to play a decisive role (yaremenko, 1997). therefore, it becomes too difficult to choose possible alternatives, but the desire for economic efficiency and social justice, ensuring sustainable development, which does not worsen the conditions and opportunities for future generations, should remain the leading idea of strengthening the institutional status of the state. thus, one of the primary tasks of the state is a radical change in the vector of socio-economic development and the implementation of urgent institutional reforms. 5. review methodology in today 's environment of increasing global competition, a strategy of “gradual change” is becoming crucial in ukraine. along with the implementation of fundamental institutional reforms, the task of developing and implementing national programs for achieving social stability as a basis for ensuring the institutional status of the state is at the forefront. as v. lahutin emphasizes, these national programs (shadowing the economy, overcoming corruption, deoligarchization, protecting property rights, overcoming the fictitious nature of the financial sphere) should form an effective system of anti-crisis measures that will not allow the uncontrolled development of society (lahutin, 2017). the process of integration of ukraine into the environment of global competition calls for orientation on an innovative model of development, that is, a model of competitive behavior of a breakthrough nature. institutional reforms aimed at concerted changes to rules and programs that form adequate conditions for access to resources and technology should be a condition for movement in this direction. in the context of accelerating global innovation in technology, it is unlikely to be able to catch up to the leaders, so, a “tunnel effect”, when a country finds a technological niche that corresponds to the national socio-economic genotype, is a more realistic alternative in choosing a national innovation development strategy. such a transition is most possible if the national economy relies on a model of endogenization of economic growth, which once has been substantiated at the institute for economics and forecasting of the national academy of sciences of ukraine (heiets, 2003). the advantage of this endogenous model is the focus on the advanced development, which compels the state and business to seek criteria for the effectiveness of reforms in the field of mutual complement of state institutes and market institutions, which is impossible without careful use of the available institutional and value resources of society. a national strategy for socio-economic development cannot be conservative. it is forced to be innovative, that is, oriented towards the inevitable change of environment, technology and institutes. the realities of the modern world lead to the search for innovative solutions and mechanisms of innovative development that ensure the institutional status of the state. therefore, a coordinate system is needed, the economic basis of which will be a scientifically grounded strategy for the transition of the socio-economic system to a new technological model of development, which would be in the interests of the people and society as a whole. the american scientist a. toffler at one time pointed to the advent of the age of “industrialization” or the era of “knowledge and information technology”. currently, only a few countries are in transit and are able to move from the fifth to the sixth technological paradigm in the next 15-20 years. as for ukraine, it is between the fourth and the fifth paradigm. the structure of the domestic economy is a symbiosis of industrial and post-industrial sectors of the economy. the main point, as a. toffler pointed out, was to prepare the country for the big leap and also to reduce the negative consequences of collision with the “shock of the future” (toffler, 2002). baltic journal of economic studies 42 vol. 6, no. 2, 2020 the entry of the ukrainian economy into the technological trajectory of the evolution of human civilization requires increased attention to the knowledge-intensive industries, which will make it possible to build the type of economy where the sectors of technological materialization of knowledge will play a decisive role, and the production of knowledge will serve as a source of economic growth. 6. conclusions the particular complexity of the specific conditions of existence of the modern state structure is due to the fact that today there are many different perspectives and lines of development that may conflict with each other. in view of this, the fundamental ambiguity of global development paths requires the state to tackle the difficult challenge of preserving and strengthening national subjectivity as a key condition for ukraine's security and sustainable development. connecting the tools and resources of innovative development to the problem can broaden the scope of historical alternatives and contribute to the long-term strengthening of national competitiveness. the reliability of the work of all public institutions, the extension of technological freedom of economic entities and the safety of the functioning of the whole socio-economic system, which should be based on the population of creative ideas for the approval of innovation-modernization development, depend on the key position of the economic power of the state. today, the technological subjectivity of ukraine can be seen as a prerequisite for the realization of economic sovereignty and strengthening of the institutional status of the state. in turn, ensuring sustainable economic development of the state is impossible without institutional transformation and providing policy of constructive change. firstly, the further dynamics of the institutional status of the state, based on a series of changes and reforms, should involve close cooperation between the private and public sectors of the economy. in order to do this, private businesses and government agencies need to adopt a new format for cooperation in order to increase national competitiveness. secondly, it is necessary to dramatically change the vectors in the state's policy on realizing the potential of the regions on the way to forming a single european space. thirdly, overcoming threats to the labor resources security of the country, which are caused by demographic challenges (rapid aging of the population, mass unemployment of persons of working age, migration, internal displacement of persons). fourthly, the development and further reform of high-potential branches of economy. therefore, the ukrainian economy can succeed if the authorities engage in dialogue with the people and the reforms, in turn, are comprehensive and decisive. it is this process that will promote the norms of democracy, the rule of law, human rights and freedoms in ukraine, as well as accelerated economic development. references: heiets, v. m., & skrypnychenko, m. i. (2003). vid ekzoghenno zalezhnoji do endoghenno orijentovanoji strateghiji rozvytku ekonomiky [from exogenously dependent to endogenously oriented economic development strategy]. ekonomika ta proghnozuvannja, no. 1, pp. 34–46. hrytsenko, s. a. (2007). ekonomicheskie prestupleniia kak institutsyonalnye deviatsyi [economic crimes as institutional deviations]. nauchnye trudy donntu, vol. 31–3(117), pp. 17–21. lahutin, v. d. (2017). stabiljnistj suspiljnogho rozvytku: dosvid mizhdyscyplinarnogho doslidzhennja [stability of social development: experience of interdisciplinary research]. ekonomichna teorija, no. 2, pp. 5–18. osecjkyj, v. l. (2016). upravlinnja vlasnistju jak umova posylennja funkcij derzhavy: instytucijnyj kontekst [property management as a condition for strengthening state functions: an institutional context]. naukovyj poghljad: ekonomika ta upravlinnja, no. 1(55), pp. 61–68. shevchenko, l. s., ghrycenko, o. a., & makukha, s. m. (2009). ekonomichna bezpeka derzhavy: sutnistj ta naprjamy formuvannja [economic security of the state: essence and directions of formation]. kharkov: pravo. (in ukrainian) stepyn, v. s. (ed.) (2001). novaya fylosofskaya еntsyklopedyya [new philosophical encyclopedia]. moscow: mysl'. toffler, e. (2002). shok budushcheho [future shock]. moscow: yzdatel'stvo – ast. (in russian) yakovlev, a. m. (1988). sotsyolohyya ekonomycheskoy prestupnosty [sociology of economic crime]. moscow: nauka. (in russian) yaremenko, o. l. (1997). institutsyonalnye osnovaniia perehodnyh protsesov v ekonomike [institutional foundations of transition processes in the economy] (phd thesis). kharkov: kharkov state university of maxim gorky. baltic journal of economic studies 36 vol. 6, no. 3, 2020 corresponding author: 1 institute of innovative education of kyiv national university of construction and architecture; national expert building alliance of ukraine, ukraine. e-mail: le_v@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-3-36-40 development of administrative and legal regulation of urban planning activity in the conditions of economic crisis and european integration desire viktor leschynsky1 abstract. the irreversibility of the european course of ukraine, enshrined in the fifth paragraph of the preamble of the constitution of ukraine, determines the direction and methods of implementation in all spheres of society and the state, everyone’s awareness of the leading role of guarantees of rights, freedoms, legitimate interests of each person, acquisition of power ex officio. the current legislation, endowing a person with power, not only provides the scope of rights, respectively, the functions performed, but also imposes additional responsibilities, the proper implementation of which is one of the guarantees of the legitimacy of state power. this fully applies to the implementation of permitting activities in the field of urban planning, which aims to create conditions for the formation and maintenance of a full living environment, including ensuring the preservation of cultural heritage and infrastructure necessary for the existence of the living environment. methodology. the use of cognitive general scientific and special methods allowed to achieve the goal of this publication. thus, the study of the historical development of administrative and legal regulation of urban planning allowed to determine the close relationship between the areas, in which such construction was carried out, and the development of legal norms for it (both administrative and legal, and technical). comparative legal method, analysis, synthesis allowed to identify prospects for administrative and legal regulation of urban planning. the practical importance. improving the administrative and legal regulation of urban planning activities takes into account not only specific law enforcement problems, but also general social (including economic, social, etc.) processes; systematization of construction legislation and its proper application. a feature of the current stage of development of administrative and legal regulation in this area is the focus on the best foreign experience, which gives initial importance to human rights and freedoms as factors of legal regulation in this area. key words: development of administrative and legal regulation, urban planning activity in the conditions of economic crisis; standards of urban planning activity; international guarantees of urban planning activity. jel classification: k11, k23 1. introduction the conclusions of modern researchers in the field of urban planning allow us to formulate areas of urban development (in addition to the actual creation of construction projects), such as: planning, construction and recreation areas, other facilities, creating infrastructure and maintaining it in good condition, maintaining proper condition of cultural heritage sites, etc. (shtompel, 2010). the implementation of all these areas involves compliance with certain standards of the creation of appropriate facilities. however, the ukrainian experience of urban planning in the economic crisis shows not only a significant decline in the development of existing construction standards, compared with, for example, the flourishing of construction activities during the soviet era in the 80s, but also numerous violations of existing standards. as u. mantsevich, the importance of the crisis in urban planning, especially economic, in the elimination of unnecessary management decisions, reducing the impact of outdated decisions on the actual course of urban development (mantsevich, 2015). another aspect that draws attention to the study of the historical development of sources of administrative and legal regulation of urban planning is the systematization of construction legislation. in particular, the concept of public administration in the field of urban planning for 2019-2030 provides for the problems of legal regulation of urban planning: lack of codification of urban legislation and its inconsistency with other areas of legislation; terminological shortcomings of urban planning legislation; the need to bring certain bylaws in the field of urban planning in line with the baltic journal of economic studies 37 vol. 6, no. 3, 2020 requirements of legislative acts. including, in relation to the permitting system: legislative gaps in relation to certain categories of work that require permits; gaps in procedures, guarantees of applicants’ rights in respect of such permits, such as the issuance of a construction permit and the revocation of such a permit (concept of public administration in the field of urban planning, 2019). concluding the description of the current stage of development of administrative and legal regulation of urban planning activities and the organization of its implementation, it is necessary to pay attention to the prospects for the development of this legislation. in the legal literature, there is a well-established position on determining the internal and external factors of the legal system. thus, internal factors include: type and form of state, succession, reception, and so on. among the external factors, there are the status and authority of the state in the international community, globalization processes in law (petryshyn, 2015). 2. directions for improving public administration in the field of urban planning the concept of public administration in the field of urban planning for 2019-2030 provides a number of ways to improve public administration in the field of urban planning. these include: regulatory and legal regulation (including improving the quality of legislation through its systematization, the development of control over the legality of public authorities in the field of urban planning); procedures in urban planning (including automation of a significant number of permits, consistency of terminology, state classifiers); clarification of regulatory requirements for the implementation of spatial planning; public involvement in decision-making in the field of urban planning, etc. (concept of public administration in the field of urban planning, 2019). it is easy to see that all these and some other areas have consequences for improving the quality of urban planning legislation and creating conditions for its proper enforcement (e.g., introduction of electronic information processing and adoption of separate permits in the field of urban planning). special mention is made of the need to ensure transparency and stability of legislation on the provision of administrative services (tymoschuk, 2013). it should be noted that the “manual” mode of adoption of these acts is now defined as a lack of legality of licensing activities in this area in the works of many researchers, it is almost universally accepted. thus, an important area of ensuring the legality of permitting activities in urban planning is the proper application of law in this area. a separate group of guarantees of legality are international guarantees related to the activities of subjects of international law (skakun, 2010). (voluntary compliance with standards while increasing their requirements, the presumption of compliance with the construction standard by the subject of urban planning, harmonization of building standards and some others); transparency of the decision-making process on the approval of regulations and standards; codification of construction legislation; expansion of the electronic information database on urban planning (registers of conclusions of examination of project documentation on capital construction objects, information systems of territorial planning and urban planning); codification of construction legislation and some others (stukalenko, 2016). a comparison of these provisions with the provisions of the concept of public administration in the field of urban planning for 2019-2030 shows that a significant number of proposals set out in the concept coincide with them. this can be stated, for example, in the proposals on: approval of the urban planning code of ukraine as a codified act in the field of urban planning; harmonization of urban planning and other sector specific legislation; monitoring of acts (decisions) of public authorities in the field of urban planning; creation of urban cadastre and its maintenance; automation of permitting and administrative procedures in the field of urban planning and others (concept of public administration in the field of urban planning, 2019). these and other changes in the organization of both urban planning and permitting activities in this area will contribute to the realization of human rights such as: improvement of living conditions, housing, a sufficient standard of living (part 1 of article 11 of the international covenant on economic, social and cultural rights dated december 16, 1966). ensuring respect for human rights, including in relation to these rights, is carried out by such international organizations as the organization for security and cooperation in europe, the committee of ministers of the council of europe, the parliamentary assembly of the council of europe, the european commission for democracy through law (petryshyn, 2015), the european parliament, the council of the european union, the european free trade association. further research of administrative and legal regulation of urban planning activities should be conducted on the basis of the modern paradigm of legal understanding, which involves the consideration of legal knowledge as part of legal reality. within such a paradigm, it is necessary to apply an axiological strategy of research, with the definition of human rights (including the provision of a proper living environment) as the starting value for which there is a right. at the conceptual level, this involves taking the value-normative concept of legal understanding as a basis, which involves the consideration of law as a system designed for certain human behavior and the preservation of a certain social integrity (linnyk, 2006). it is the nature of behavior and social integrity in a particular case (the values to which the law is aimed) and determines the value-normative understanding of law. baltic journal of economic studies 38 vol. 6, no. 3, 2020 3. means of ensuring the rule of law in the field of urban planning the carried out general characteristic of bases of maintenance of legality in the field of urban planning creates a basis for working out of separate actual problem questions, in this sphere. the study shows that such issues have developed historically, as traditionally problematic in the field of urban planning. however, outlining the range of these problems involves taking into account the existing scientific advances on the means of ensuring the rule of law as a generic category, on the basis of which the appropriate means in the field of urban planning will be determined. in characterizing the administrative and legal means of ensuring legality, it is necessary to take into account the scientific achievements of a general nature, which determine the general provisions for such means. in particular, r . lenivskyi, on the basis of scientific developments, defines the following features of such means: clear definition of subjects of application of such means and their legal personality in this regard; strict observance by them of the established order of realization of own competence; the existence of requirements for their activities as such, which has a law enforcement nature. in addition, the scientist determines the leading role of the procedural form of implementation of these funds, given that they are implemented mainly in the order of law enforcement (lenivsky, 2018). it is worth agreeing with this conclusion of the scientist. indeed, despite this wide range of guarantees of legal legitimacy, the study of individual means should take place solely in the light of their law enforcement nature. under this approach, it is necessary to identify the following most problematic administrative and legal means of ensuring the rule of law in the field of urban planning: legal liability of both urban planning entities and public authorities; administrative procedural support of urban planning, which provides for the development of administrative procedures that would take into account the special requirements determined by the conditions of urban planning activities. legal liability in the field of urban planning has been historically established within the general norms, without defining relations in the field of urban planning as a separate object of relevant violations. however, in almost all times there has been a tendency to separate certain groups of relationships into an independent object. in particular, emphasis has been placed on the separate establishment of liability for violation of the requirements for measures and weights in kievan rus, up to the application of the death penalty. in addition, at the beginning of the twentieth century (1903), criminal liability was established for a certain crime in the field of construction, such as violation of the order of construction works. violation of building codes and regulations was determined by a separate object of administrative liability during the soviet era. prosecution in the field of urban planning was carried out either by law enforcement agencies (for example, the police) or by specialized control bodies in the field of urban planning. characterizing the current stage of development of urban planning legislation, the scientist proposes to consider construction law as a sub-branch of administrative law, which includes administrative responsibility in the field of construction as one of the institutions of this subbranch (stukalenko, 2016). therefore, it is necessary to point out the predominant administrative responsibility in the field of construction as one that has its own special object, which shows the consequences of the soviet regulation of this social institution. however, market relations in this area (unlike in soviet times) necessitate the use of more stringent means of ensuring the rule of law, given the numerous violations in this area, including through the criminalization of certain acts. this is confirmed by the above historical experience, when for violation of the order of construction work criminal liability has been introduced (the russian empire, 1903). as for bringing to legal responsibility, the authors of the concept of public administration in the field of urban planning activities for 2019-2030 do not pay direct attention to this issue. however, there are other areas of legality, including the legality of legal prosecution: the introduction of effective means of public control over the activities of public authorities in this area; improvement of means of compensation of damage by landowners caused as a result of restrictions on the right to use it; ensuring the right of the complainant to be present during the inspection, if it was initiated at his or her request; introduction of legal liability for noncompliance with guarantees of public participation in decision-making in the field of urban planning, etc. another means of ensuring legality is the implementation of control activities. it is necessary to note its rather broad meaning, as this concept covers all the variety of activities of public authorities aimed at: obtaining information on the state of affairs at the controlled object; detection, termination, as well as prevention of violations in the controlled area (shemshuchenko, 2012). consideration of appeals of private persons in the administrative order (the third means of ensuring legality) is in fact one of the forms and methods of application of control. the use of administrative proceedings (the fourth means of ensuring legality) can also be considered as one of the forms of control – judicial control. the study reveals the most complex problems in relation to the consideration of appeals of individuals and judicial control in the field of urban planning. therefore, further research should be conducted in relation to these forms and methods of state control in urban planning. baltic journal of economic studies 39 vol. 6, no. 3, 2020 distinguishing between administrative consideration of appeals of private persons and consideration in the order of administrative proceedings, it is impossible not to take into account scientific developments in which the characteristic features of administrative jurisdictional (extrajudicial) proceedings are given: the subjects of their implementation are mainly executive authorities; settlement by administrative procedural norms; lack of detailed structuring of the procedural form (stages) and some others (lenivsky, 2018). a. martin, e. berdnikov and o. malomuzh analyze the problems of the current state of permitting procedures in the field of urban planning. from the provisions cited by researchers, it can be concluded that the most common types of appeals in this area are complaints. after all, a typical situation is one in which a public authority in the field of urban planning makes a decision, and after a long period of time such a decision may be revoked by another government entity, and the most effective way to protect their rights is administrative proceedings. as one of the possible ways out of this situation, it is proposed to detail the regulation of procedures implemented within the state architectural and construction control (which may also include complaints procedures – the author’s note) (concept of public administration in the field of urban planning activities, 2019). thus, the concept of public administration in the field of urban planning activity for 2019-2030 marks inefficiency of actual procedures of the appeal of decisions of bodies of the state architectural and building control (concept of public administration in the field of urban planning activities, 2019). regarding the use of administrative proceedings as a way to ensure the legality of urban planning, they point to such problems as: lack of effective pre-trial dispute resolution procedures, in particular – by selfregulatory organizations in the field of urban planning; the need to introduce the right of representatives of the territorial community to judicial protection of the rights of the territorial community, which are violated as a result of territorial planning, as well as the placement of construction; building an optimal balance of the use of judicial and extrajudicial methods of protection of rights in relation to urban planning (concept of public administration in the field of urban planning, 2019). the guiding direction of further development of administrative and legal regulation of urban planning is the development of administrative and legal means of ensuring legality in this area. using a systematic approach allows to identif y relevant categories of such tools: firstly, the legal responsibility of individuals and public authorities, especially administrative; secondly, the administrative procedural activities of authorized entities aimed at exercising control in the field of urban planning by reviewing complaints against acts of public authorities, implementing judicial control in this area. peculiarities of urban planning activity (increased requirements for predictability of decisions of public authorities, inadmissibility of delaying the resolution of legal conflicts in this area) determine the urgency of the development of outof-court means of resolving administrative conflicts. extrajudicial administrative jurisdiction may be a means of resolving such conflicts. 4. conclusions the requirement of transparency of administrative procedures in general and permitting in particular in the field of urban planning draws attention to such direction of management of the permitting system as its internal ordering according to the actual public request, which can be considered as one of the directions of public administration in this sphere. in this case, the immanent function of the head (both in line and functional management) is the internal management of the team. in this regard, it should be noted that at the level of the law only the basic principles of permitting should be regulated: a specific body authorized to issue specific permits; paid nature of issuing a permit, etc. ensuring the legality of permitting activities in the field of urban planning involves improving not only the legislative regulation of its implementation, but also at the level of bylaws, including the regulation of interaction of units of public authorities in this area, as well as interaction between such subjects. that is the activity of, in particular, the management of public authorities on the organization of permitting activities within their powers. references: shtompel, n. (2010). urban planning: lecture notes. harkiv: knamg, 104 p. jankovska, l., tylchyk, v., & khomyshyn, i. (2018). national economic security: economic and legal framework for ensuring in the conditions of the european integration. baltic journal of economic studies, vol. 4, no. 1, pp. 350–357. doi: 10.30525/2256-0742/2018-4-1-350-357 bielai, s., morozov, i., & tylchyk, v. the innovative approach to the crisis situations monitoring of the social and economic origin that endanger the security of ukraine. baltic journal of economic studies, vol. 4, no. 3, pp. 15–21. doi: 10.30525/2256-0742/2018-4-3-15-21 tylchyk, o. dragan, o., & nazymko, o. (2018). establishing the ratio of concepts of counteraction to legalization (laundering) of illegally-obtained income and counteraction to the shadow economy: the importance for determining performance indicators of the european integration processes. baltic journal of economic studie, vol. 4, no. 4, pp. 341–345. doi: 10.30525/2256-0742/2018-4-4-341-345 baltic journal of economic studies 40 vol. 6, no. 3, 2020 mantsevych, y. (2015). conceptual forecast of housing development in ukraine against the background of the general urban planning crisis. economy and state, vol. 4. skakun, o. (2010). theory of state and law: a textbook. kyiv: alert; cst; cul. 520 p. the concept of public administration in the field of urban planning. collection of analytical materials. kyiv, 2019. 369 p. url: http://www.vin.gov.ua/images/doc/vin/dep-dmba/news/conc.pdf petrishin, o. (ed.) (2015). theory of state and law: textbook. harkiv: pravo, 368 p. timoshchuk, v. (ed.) (2013). scientific and practical commentary to the law of ukraine “on administrative services”. kyiv: fop moskalenko o., 392 p. stukalenko, o. (2016). administrative and legal support of the construction industry: monograph. kyiv: center for educational literature, 376 p. international covenant on economic, social and cultural rights of december 16, 1966. bulletin of the ministry of justice of ukraine. 2002. issue 2, pp. 21–26. linnyk, n. values and regulations in the understanding of human rights. state and law. legal and political sciences. issue 56, pp. 43–47. lenivsky, r . (2018). legality and law and order in ukraine: administrative and legal means of support: dis. ... ph.d. 12.00.07. open international university of human development “ukraine”; nat. aviation. un-t. kyiv, 187 p. rybak, k. (2018). urban planning activity as an object of administrative and legal regulation: dis. ... ph.d. 12.00.07. kiev. nat. un-t. them. t. shevchenko. kyiv, 275 p. large encyclopedic legal dictionary. y. shemshuchenko. kyiv: legal opinion publishing house, 2012. 1020 p. baltic journal of economic studies 145 vol. 5, no. 3, 2019 corresponding author: 1 institute of industrial economics of the national academy of sciences of ukraine, ukraine. e-mail: novikovaof9@gmail.com orcid: https://orcid.org/0000-0002-8263-1054 2 institute of industrial economics of the national academy of sciences of ukraine, ukraine. e-mail: ost_ya@ukr.net orcid: https://orcid.org/0000-0003-2495-4100 3 institute of industrial economics of the national academy of sciences of ukraine, ukraine. e-mail: alkhandiy@ukr.net orcid: https://orcid.org/0000-0002-7926-9007 doi: https://doi.org/10.30525/2256-0742/2019-5-3-145-151 social justice and economic efficiency of the modern labour market olga novikova1, yaroslav ostafiichuk2, olena khandii3 abstract. the purpose of the paper is to identify contradictions in the social and economic field in the process of achieving social justice and economic efficiency. methodology. methods of induction and deduction are used to determine the causal relationships; a systematic approach is applied to study research objects; abstract and logical methods of analysis, comparison and generalization allowed us to characterize the existing level of social injustice peculiar to the ukrainian labour market. the results of the study are identified: manifestations of social injustice in ukraine related to gender inequality in wages and different employment opportunities, income disparities in various sectors and regions, an increase in the gap between the income of rich and poor people, inconsistency between compensations for adverse working conditions and necessary expenses for labour rehabilitation, legal insecurity in informal, incomplete, and flexible forms of employment. conclusions are made about their influence on the general situation on the labour market. practical implications. to eliminate social inequality and injustice, ensure observance of labour rights and privileges, and create high social standards it is recommended to develop youth entrepreneurship programs; to provide free legal and informational support at the stage of opening own businesses and preferential lending and taxation in order to minimize youth unemployment; to develop a social unified agreement binding upon the execution of any work or provision of services to protect all participants in the social dialogue of the flexible and informal labour markets; to develop gender-sensitive personnel policies at all enterprises and organizations, to eliminate pay disparities, to develop state programs of promoting gender equality among legislators and senior officials to achieve gender equality; to attract the unemployed and economically inactive population for the growth of the labour potential of the country, which requires providing decent living conditions and remuneration to internally displaced persons, necessary working space for people with disabilities, creating a system of quality social care services for the elderly, sick and children with decent conditions and affordable services to people who receive social benefits in order to release the able-bodied population engaged in caring for relatives. value/originality. the value of the research is the established facts of violations of human dignity and social injustice on the modern labour market and suggested recommendations for the elimination or minimization of them. key words: social justice, economic efficiency, labour market, informal employment, income differentiation, gender inequality. jel classification: d31, d61, d63, e24, j16 1. introduction the model of social policy of any country is the embodiment of ideas of authorities and civil society about the possibility of combining the principles of social justice and economic efficiency in achieving sustainable development of the country. economic efficiency and social justice are simultaneously synergetic and in constant conflict. ensuring social justice in society requires the intervention of a state in market pricing mechanisms, determining the value of labour, competition on the labour market, forming labour supply and demand. the functioning of market mechanisms depends on social factors, and the economic efficiency is based on the qualitative and quantitative baltic journal of economic studies 146 vol. 5, no. 3, 2019 characteristics of labour potential, consumers’ solvency, and the level of development of social infrastructure. most researchers find the achievement of social justice in “fair” redistribution of income. the pursuit of social justice through income equalization will inevitably lead to a reduction in economic efficiency since the incomes of more productive market participants will be redistributed in favour of less productive market participants, the motivation to increase labour productivity and economic efficiency of business entities will decrease, and the number of economically inactive people will grow. the pursuit of economic efficiency with a focus on maximizing incomes and ignoring the principle of social justice in decision-making at all levels of public administration will result in an increase in inequality, further stratification of society by income, growing poverty of the country’s population, weakening of the middle class positions, and increasing social instability. to find a balance of priorities is a difficult task for each country, especially in a long-term financialeconomic and socio-demographic crisis. the purpose of this article is to study social justice and injustice as a result of achieving economic efficiency peculiar to the social and economic area in ukraine. the tasks of the article include considering existing theories of justice, the role of the state in ensuring social justice, identifying the manifestations of social injustice of the ukrainian labour market. the paper uses general scientific methods, in particular methods of abstract and logical analysis, systematic approach, methods of comparison and generalization to assess income disproportions, gender inequality, informal employment, and poverty level in ukraine. the methodological and informational basis of the work is scientific works, materials of periodicals, internet resources, laws, and regulations. 2. social justice from the standpoint of different justice theories social justice is a fundamental principle of social policy, which consists in observing equal rights, freedoms and opportunities, ensuring social guarantees and preventing discrimination based on the place of residence, nationality, sex, age, religion. the problem of the achievement of justice in society has been solved by philosophers, sociologists, economists, lawyers since ancient times, but there is still no single definition of social justice. in most of the proposed explanations, the definition of social justice is closer to that of social equality – equal rights and freedoms of individuals belonging to different social groups and strata, their equality before the law, and formally equal opportunities to succeed according to the principle “to everyone to the extent of his/her personal socially useful work”. agreeing with the author of ( jaremenko, 2016), it should be noted that not every equality is fair and not every inequality is unfair. the complexity and structuredness of social systems require a certain level of inequality of their elements by different criteria, which do not necessarily contradict the conditions of justice. the paper (ghrynenko, 2009) studies the scientific views on the category “social justice” and defines it as “both a generalized moral assessment of social relations, and one of the basic universal human social ideals, the specific understanding and meaning of which has been changed throughout history...” in this interpretation, social justice requires taking into account national peculiarities of the formation of social norms, traditions, existing social standards and principles to characterize the conditions and criteria and their permissible level in determining the justice/injustice ratio. in studies on social justice, the focus is on the redistribution of surplus wealth. in egalitarian theory, the distribution of benefits among people who equally deserve this should be equal. according to the utilitarian theory, a fair distribution is proportional and maximizes the total utility of all members of society. the founder of utilitarianism d. bentham understood the meaning of ethical norms and principles in “the greatest happiness” for “the largest number of people”, and people’s actions should be judged according to their usefulness. these principles of distribution, due to the complexity of determining the usefulness of goods for everyone, have all the disadvantages of egalitarian theories, which include low incentives for productive work, entrepreneurship, innovations, and efficient use of productive resources, insufficient motivation to develop labour potential. in rawls’s theory of justice, the principle of income distribution is the maximization of the usefulness of the poorest members of society. the theory suggests that people, being in their natural state, are equal: they do not know their place in society, social status, class position. in this situation, nobody can change anything for themselves for the better, which determines the initial situation as honest (rawls, 1995). according to the author of this theory, j. rawls, “the differences in the distribution of income and power among organizations are expected, but it is necessary to use these revenues and power to gain benefits for the whole society; in addition, posts should be available to everyone. in other words, inequality can be permissible only if it is beneficial to all” (maffettone, 2010). rawls’s theory of justice is criticized for the limited use and similarity to the ideas of egalitarian theory in the distribution process (kheffe, malakhova & filatova, 2009). under the market concept, the distribution of benefits occurs in accordance with the economic usefulness and productivity of the production factors, depending on the degree of their participation in production. owners of production factors receive different incomes, which depend on the cost of resources and their quantity. the cost of production resources is determined by market baltic journal of economic studies 147 vol. 5, no. 3, 2019 pricing mechanisms depending on demand and supply, their marginal productivity. in a highly competitive environment, incentives for effective work, innovation and efficient use of resources are growing. the distribution of income by wealth, the privileged distribution of income along with the market approach, which are prevalent in the modern economy of many countries, increase social inequality and give an opportunity to receive additional income to those who accumulate assets and inherit them, enjoy privileges in power. these approaches create strong economic incentives for personal wealth accumulation and are characterized by an increase in the proportion of the population classified as poor. 3. state intervention in ensuring social justice when the state implements social and economic functions, including creation of equal opportunities for achieving welfare, ensuring decent living conditions, social protection of disadvantaged population, development of the education system, health care, environmental protection through the growth of social expenditures, introduction of progressive taxation and other market tools, a possibility of achieving social justice increases. state intervention in market processes weakens incentives for entrepreneurship and affects pricing mechanisms, including using tax instruments to regulate the economy. and a question arises: is a non-market mechanism of redistribution of wealth fair and who is responsible for observing the principle of social justice: market, state, or civil society? what is the balance between state and market instruments for decent living conditions and wages to ensure an increase in the efficiency of using and reproducing labour potential and minimizing social tension and instability? the stronger social support of the population from the state, the more opportunities for the development of labour and social potential of the country. ensuring decent social protection and population support is possible under conditions of a stable and efficient economy. on the other hand, with the excessive state intervention in the redistribution of material wealth, a risk of an increase in the proportion of the economically inactive population with growing transfer payments rises. the optimal level of social norms and guarantees should contribute to the growth of labour productivity, the share of the economically active population by attracting economically inactive population and keeping retirement age people and persons with disabilities in the labour force. for an effective social inclusion of economically inactive people, there must be necessary social infrastructure, namely education system, healthcare system, transport and environment convenient for persons with disabilities and retirement age people. public opinion should positively perceive these changes and get prepared for further changes and transformations that social inclusion requires in society. the fulfilment of the foreign investors’ requirements to attract financing from international funds in order to maintain macroeconomic stability requires a continuous reduction of social costs, which “painfully affects the poorest groups of the population. there is an additional endogenous failure of demand, which almost automatically worsens the budget” ( jaremenko, 2016). however, experts from the world bank state that in ukraine “social security is not only expensive for the budget (it accounts for almost 5% of gdp in 2017) but also insufficiently targeted: only 30% of the aid falls to 20% of the disadvantaged population. solving this problem requires improving the targeting of one of the largest programs, the housing and communal subsidy” (press release, 2018). the imf expects optimization of budget expenditures with structural reforms in the main budget spheres (education, healthcare, pension system, public administration). optimization of expenditures is achieved by reducing the number of employed and reorganizing, combining budget organizations and institutions. achieving a decent remuneration rate in the budget sphere is accompanied by increasing the qualified staff while reducing the low-skilled representatives of this sphere, and the main direction within the framework of decentralization is optimization (reduction) of the network of schools and hospitals. the achievement of the economic effect in the budgetary sphere corresponds to the negative social effect expressed in the increase in the number of unemployed. the growth of social injustice with increasing the differentiation of people’s incomes and the number of people under the poverty line affects the strengthening of social potential with a negative vector characterized by reduced trust in employers and authorities, decreased labour productivity, a tendency toward open and hidden forms of conflicts in defending equal rights and opportunities. according to the studies (monitoring of various…, 2016), about 70% of the population of ukraine classifies themselves as poor, and 38.1% of the population is unable to meet their basic needs in full and the need for food, 68.6% at least by one criterion belongs to the category of poor. comparing the actual and official subsistence level, the number of poor in ukraine is 58.3%, indicating a crossing of the critical threshold of 50% (protesty nachinaiutsia…, n.d.). only 30% of ukrainian population receives income that provides the minimum standards of living. according to the research done by financial analysts of the american business edition bloomberg, ukraine ranks seventh among the poorest countries (saraiva, jamrisko, 2017) by bloomberg’s misery index. the eradication of poverty is the number one goal among the sustainable development goals, approved by the un general assembly at the end of september 2015. 193 un member states have committed themselves to end extreme poverty, to reduce inequality and injustice, baltic journal of economic studies 148 vol. 5, no. 3, 2019 to fight with the challenges of climate change in the next 15 years. in 2006, the verkhovna rada of ukraine ratified the european social charter (revised), where one of the main directions is poverty reduction. to achieve the goal number “one”, ukraine adopted the poverty reduction strategy. this strategy identifies poverty prevention mechanisms and main tasks for solving this problem until 2020, updates the integrated poverty assessment methodology (ministry of social policy…, 2017), and implements the action plan for 2018 for implementation of the strategy to overcome poverty. according to the poverty reduction strategy, the absolute poverty rate (costs below the actual subsistence level) in 2018 should decrease to 23% (according to the data of nine months of 2015, this indicator was 23.8% of the population), and the level of unemployment rate of the population aged 15-70 by the ilo methodology should fall to 9.2%. according to the official statistics, in 2017 the unemployment rate of the population by the ilo methodology at the age of 15-70 was 9.5% with an employment rate of 56.1%, and the unemployment rate of the working age population was 9.9%, with the employment rate of 64.5%. according to the world bank’s national methodology for ukraine (ukraina ekonomichnyi ohliad…, 2018), the level of poverty still remains above pre-crisis level, although in 2017 it declined slightly due to the economic recovery and growth of wages and pensions. the poverty level (up to $ 5.5 per day at purchasing power parity in 2011) is estimated at 5.7% in 2017. the level of moderate poverty dropped to 24.5% in 2017 from 26.7% in 2016 (compared to 14.1% in 2013) due to higher minimum wages, growth of wages in the public sector and pensions. 4. manifestations of social injustice in the labour market the high percentage of the population below the poverty line is the result of social injustice in the labour market. the ukrainian labour market is characterized by the following manifestations of social injustice: gender inequality in wages and different employment opportunities, income disparities in various sectors and regions, increased gap between the income of rich and poor, age discrimination in employment, inconsistency between compensation for adverse working conditions and necessary expenses for labour rehabilitation, disproportions in labour demand and supply by age, qualifications in different sectors and regions, legal insecurity in informal, incomplete, and flexible forms of employment. the painful issue for elderly is disproportions in the level of pensions in different years. the growth of social injustice in wages affects the growth of mobility of labour resources both within the country and beyond its borders. by the level of payment, the national labour market is currently uncompetitive compared to the labour markets of european countries. the transformation of labour markets from excess labour markets to tight labour ones leads to an increase in their transaction costs. according to the studies of the social integration and reconciliation index, in donetsk and luhansk oblasts, the level of inclination to migrate among adolescents is 6.8 on a scale from 0 to 10, where 0 means that nobody thinks of migration and 10 means that everyone wants to leave the region (indeks sotsialnoi zghurtovanosti…, n.d.). teens are the greatest value of every community, they realize its future plans, share the values, attitudes, and social norms of the parents. adolescents have a higher inclination to migrate than adults, compare that the inclination to migration according to the results of the general population survey of donetsk and luhansk regions is 4.1 and 4.4, respectively. in turn, girls are more inclined to think of migration than boys. based on the results of the survey, the main reasons for the desire to leave the region are the impact of negative psychosocial factors, individualistic values, quality of life, and entrepreneurial aspirations. low wages, youth unemployment, and lack of widespread choice of employment in rural areas push young people to find better living conditions and work in other cities, further reducing the opportunities for the social and economic development of their communities. for the modern labour market, typical are situations where a high percentage of people’s unemployment in certain regions is accompanied by a high demand for labour by employers. this situation is the result of the mismatch of vocational education with the actual needs of the regional labour market. the outdated material and technical base, the so-called “old school” in the methods of work of the teaching staff, the discrepancy between the expectations of young people of “generation z” (“digital generation”) and traditional approaches to teaching and learning in the system of higher and vocational education, high youth unemployment, which reduces the motivation of young people to study, have a negative impact on the quality of training of young experts and professionals. the development of the material and technical base of educational institutions, the introduction of innovative forms of training, new modern interactive technologies, the formation of competencies demanded in the labour market, will accelerate the transformation of the sectoral structure and balance the needs of the quality workforce and its supply, timely take into account the changes of needs on the labour market and reduce youth unemployment. gender inequality in the world in 2017 according to the gender gap index 2017 increased the first time in the history of the calculation of this index since 2006. however, ukraine improved its position in the world ranking, moving from 69th place in 2016 to 61st place in the ranking of 144 countries in 2017. the level of female and male wages for similar work improved significantly, baltic journal of economic studies 149 vol. 5, no. 3, 2019 rising from 59th to 37th in the ranking (index of equality is 70.5%), the ratio of female to male among lawmakers, officials and managers decreased from 23 to 24 positions (index of equality is 65.5%) (economic discussion club, 2017). according to the official statistics of ukraine, in the 1st quarter of 2018, the gap between male and female wages amounted to 27.5% (in 2017 for the same period the gap was 27.5%), the largest gap was 69.8% in postal and courier activities, 58.1% – in financial and insurance activities. in turn, women received higher wages than men by 1.7% in the sphere of water transport and by 0.7% in the area of administrative and support services. compared to the previous year, the gap in female and male wages for similar work decreases, in 2016 it was 34%. overcoming gender inequality positively affects the country’s economy. according to the researchers, achieving a gender parity allows a country to increase its gdp, for example, gdp of great britain would increase by $250 billion, the united states by $1750 billion, japan by $550 billion, france by $320 billion, germany by $310 billion (for ukraine, such studies were not conducted) (economic discussion club, 2017). income disproportions in various industries in 2017 is 8 times (in postal and courier activities, the average monthly salary was 3 851 uah, which was almost half the average monthly wage in the country, against 31 088 uah in aviation transport and 12 018 uah in the field of information and telecommunications) and in different regions is 1.4 times (in 2017 the average monthly salary in ternopil oblast was 5 554 uah against 7 764 uah in donetsk oblast). these imbalances in the labour market affect the crosssectoral and territorial mobility of skilled personnel and the growing popularity of specialties in the market for educational services that train specialists for industries with high wage levels. the regional differentiation of wages depends on the specialization of regions and the level of social and economic development of the territory, which is determined by a large number of factors, including investment attractiveness, developed transport infrastructure, quality of implementation of regional development programs, and support of small and medium-sized businesses to create new jobs and promote self-employment of the population. special attention should be paid to the phenomenon of informal employment, which in 2017 amounted to 22.9% (3 695.6 thousand people vs. 16 156.4 thousand people aged 15-70) of official employment in ukraine. compared to 2016 and 2015, where the level of informal employment was 24% and 26.1% respectively, there is a gradual decrease, which should be considered positively. the reasons for informal employment are various, firstly, in order to improve the financial situation and reduce the poverty rate, the population looks for an extra job and is not interested in formalizing labour relations since it reduces earnings or such conditions are not beneficial to the employer; secondly, under the influence of globalization and informatization of the economies of many countries, the number of freelancers who agree to work without formalizing labour relations is increasing, often being guided by the choice of employer by its reputational characteristics and their own capabilities and work needs; thirdly, the participants in the informal market are those representatives of the workforce who cannot find official work or it is very difficult to do it (convicted persons, people fired for violations of labour discipline, retirement-age people, people without experience, illegal migrants) and they are ready to perform work under any conditions and for a minimum wage. failure to settle labour relations, absence of legal employment contracts lead to a violation of employees’ labour rights, nonfulfillment of obligations by the employer, the performance of work in improper working conditions, frequent cases of non-payment for performed work because of its noncompliance with employer’s expectations. worldwide growth in informal employment is negatively assessed by international experts due to the high risk of violation of labour rights, tax evasion of employers and loss of social and labour guarantees and insurance job seniority by hired workers, on the one hand, and on the other hand, for certain categories of population, this is the only opportunity for poverty alleviation. protection of labour rights and social protection contribute to the development of labour potential, minimize the risks in the process of using labour resources and provide equal opportunities and labour standards, in the conditions of informal employment this protection is absent. the increased gap between the income of rich and poor is characterized by the following indicators: the quintile ratio (ratio of the average income of the richest 20% of the population to the average income of the poorest 20% of the population), which according to the human development report 2016 in ukraine was 3.3; the palma ratio (the ratio of the richest 10% of the population’s share of gross national income (gni) divided by the poorest 40% share) is 0.8; gini coefficient (characterizes the deviation of the actual distribution of incomes of individuals or households in a particular country from absolute equality. it ranges between 0 in the case of perfect equality and 100% in the case of perfect inequality) is 24.1%; coefficient of human inequality equals 7.2 (average index of inequality by three main dimensions of human development); income inequality is 9.2 (based on household survey data, inequality in income distribution, estimated by using the atkinson inequality index) (human development report, 2016). with such characteristics of human development, ukraine ranks 84th in the ranking of 188 countries, having lost 3 positions for the year. according to the world bank, ukraine leads among the most equal nations in the world, along with slovenia and norway. in 2016, ukraine had the smallest gap between poor and rich among 140 countries. however, baltic journal of economic studies 150 vol. 5, no. 3, 2019 the methodology of calculating inequality indices in society has its drawbacks; it does not take into account shadow revenues. according to the studies of m.v. ptukha institute for demography and social studies, incomes of 10% of the richest and 10% of the poorest ukrainians, considering the shadow, differ by 40 times (pozhivanov, 2018). polarization of society by income does not contribute to strengthening the position of the middle class, increases social instability, inequality in the labour market, and the inclination for migration of the population. labour law and collective and contractual regulations should protect labour rights and ensure safe working conditions and decent compensation for work in harmful working conditions. in 2017, 838.6 thousand people in ukraine (11% of the average number of full-time employees or 28.4% of the number of registered staff as of december 31st) were employed at work with harmful labour conditions, amounting to 93.3% of the indicator of 2015. the number of employees who are eligible for at least one of the types of benefits and compensations for work with harmful working conditions in 2017 is by 7.7% less than in 2015. employment in areas with harmful working conditions decreases annually, partly due to a decrease in production volumes and a reduction in jobs in the industry with harmful working conditions. the state of working conditions indirectly characterizes the number of days of disability as a result of accidents at work, which in recent years is steadily increasing from 201 thousand in 2014 to 244 thousand in 2017, with the annual reduction in the number of employed population (statistics are given according to the official website of state statistics service of ukraine http://www.ukrstat.gov.ua/). low wages and insufficient level of preventive measures to combat occupational diseases reduce the labour potential of the relevant industries. 5. conclusions 1. the international experience shows the existence of a relationship between the level of a country’s labour and social capital development and its social and economic development. social policy, which should be aimed at social protection, eliminating social inequality and injustice, ensuring labour rights and benefits, and creating high social standards play an important role in this process. 2. the growth of labour potential by attracting unemployed and economically inactive population requires creation of the necessary working space for people with disabilities from the employers’ side and creation of a system of high-quality social services for the care of the elderly, sick and children, with decent conditions and affordable services to people receiving social benefits from the state’s side. psychological support for the inclusion of people with disabilities should be introduced starting from pre-school education and cover all segments of the population in order to change the perception and prevention of the influence of social exclusion factors. 3. activation of the economically active population needs the stimulation of self-employment and creation of new jobs, improvement of the system of professional development and retraining throughout the working life. internally displaced people should be perceived as the most valuable resource of any territory. involvement of the internally displaced people in the labour potential of the territory requires appropriate public goods at the regional and local level, effective regional programs for housing and work, and enhancing their vocational qualification. the investment climate of the regions depends on a large number of factors, but for ukraine political support of the authorities is the most important factor. foreign and domestic investors are interested in even social and economic dangerous areas of luhansk and donetsk oblasts, but the political interests of regional and local authorities do not contribute to the emergence of new investors and new jobs. 4. the support of young people at the stage of vocational education, employment, development of youth entrepreneurship programs, provision of free legal and informational support at the stage of establishing their own businesses and concessional lending and taxation will reduce youth unemployment. 5. the processes of globalization affect the growth of the individual, flexible, informal forms of employment that require protection of labour rights and support of new forms of collective association of workers, such as associations, unions, associations of youth, women, internally displaced people, migrants, workers with flexible working hours, that is, all those groups of people who are most often faced with social injustice. national and regional programs should solve issues of preventing social injustice and ensuring social guarantees and legal support to vulnerable categories of the workforce. a social unified agreement is a new type of collective and contractual regulation, which should arise through the efforts of all parties in social and labour relations. this agreement must be concluded when performing any work or service (including one-time) to protect all participants in the social dialogue of a flexible and informal labour market. 6. achievement of gender equality in ukraine requires developing a gender-sensitive personnel policy at all enterprises and organizations, eliminating wage disparities, and working out state programs promoting gender equality among lawmakers and highlevel officials. the highest level of gender inequality in ukraine concerns political rights and opportunities, which can be eliminated through the creation of schools, clubs, associations, and other forms of associations to educate, support, and promote women in politics. baltic journal of economic studies 151 vol. 5, no. 3, 2019 7. social support requires the growth of targeting and increasing social guarantees and standards in order to maintain social justice in society. the processes of globalization should be aimed at achieving a balance between social justice and economic efficiency. 8. the digital revolution shifts any boundaries in the labour market, 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https://orcid.org/0000-0001-5257-5517 researcherid: aah-7498-2020 2 uman national university of horticulture, ukraine. e-mail: sakovska_lena@ukr.net orcid: https://orcid.org/0000-0003-2676-6170 researcher id: aad-7646-2019 doi: https://doi.org/10.30525/2256-0742/2020-6-3-183-189 agricultural cooperation as an innovation for rural development oleksandr shpykuliak1, olena sакоvska2 abstract. the purpose of this article is to investigate agricultural territories and their impact on agricultural cooperatives. in this case, the cooperative acts as a mechanism for rural development. the defining feature is that the mechanism of integrated development of rural territory to provide a comprehensive solution to the problems of the economy of the area and settlement, the formation and increase of investment attractiveness of the territory of the rural settlement and the creation of a “working” climate for private business are agricultural cooperatives. analyzing the state of cooperation in the context of the european integration tendencies, which currently permeate the agrarian sector of the ukrainian economy, studying the experience of cooperation among farmers of the european countries can be useful both from the point of view of its adaptation to domestic realities, and from the point of view of the most significant mistakes in development and miscalculations in rural areas. in addition, marketing studies have been conducted in rural areas of ukraine, which have revealed the most significant areas of rural settlement development, including the creation and development of enterprises of meat, construction, tourism and recreational clusters and the development of joint ventures as growth points that activate the development of small and medium-sized businesses around them and the formation of interregional ties and rural cooperatives. methods. creating an agricultural consumer supply cooperative is the most effective mechanism for developing identified growth points and creating infrastructure to support them in rural ukraine. the basis for the construction of an agricultural cooperative in rural areas is the formation of a model of maximum cost reduction for all members of the cooperative. results. the further development and effective management of the cooperatives will contribute to solving socio-economic problems, improving the well-being of the peasants and, as a consequence, ensuring the integrated development of rural areas. value/originality. analyzing the activities of agricultural cooperatives operating in the world, we point out that research on the institutional foundations of the cooperative and its functioning as a mechanism of economic self-regulation give reason to claim that the cooperative does not have sufficient state support for its development. as a consequence, the number of cooperatives is steadily decreasing, we believe that the cooperative system of interaction of economic agents in the agricultural sector should include nationwide programmatic measures on institutional adaptation of cooperation as a mechanism of market self-regulation, a special form of integration, institutional mechanism for regulating entrepreneurship and the basis of cooperation, rules, traditions, organizations and institutions, the task of which is to determine the behavior of economic entities for the sake of satisfaction individual and social goals in the system of production and exchange of goods and services. key words: agricultural cooperation, european union, rural areas, ukraine, cooperative organizations, agricultural production. jel classification: d73, h70, h72, h77, r50 1. introduction an integral component of the economic systems of the member countries of the european union is the cooperative organizations. their role in the agricultural sector of the european countries is especially noticeable. the activities of the cooperatives of the european union, based on the principles of democracy, transparency, and solidarity, provide the agricultural producers with baltic journal of economic studies 184 vol. 6, no. 3, 2020 access to financial and logistical resources, internal and external sales markets, and contribute to the social and economic development of rural areas. ukraine has the very diverse conditions and opportunities for the development of rural territories; therefore, without the evaluation of the potentials of specific territories, it is impossible to develop a strategy for the development of region and rural territories. consequently, the ensuring of sustainability of rural territories is possible only on the basis of an integrated approach that involves a comprehensive study of the problems, prerequisites, factors, and ways of further development in their relationship, identifying various solutions and, ultimately, developing a system of agricultural cooperation in rural areas. today, the majority of the ukrainian population does not accept cooperative organizations as more attractive and alternative organizational and legal forms of business. such views on cooperative business structures have been formed under the influence of the soviet forms of cooperation, such as former collective and state farms, and, now, agricultural firms. the formal processes of privatization, conducted in most of them, do not facilitate their participation in the development of cooperation. as a result, mainly agricultural production cooperatives and other commercial enterprises (joint ventures, limited liability companies, private enterprises), but not agricultural service companies, have emerged in place of reorganized collective and state farms. the development of service cooperatives also prevents the presence of intra-system cooperative problems, the lack of targeted and constant support from the state. in the context of the european integration trends, which are currently permeated the ukrainian agricultural sector, studying the experience of cooperation of farmers in the european countries can be useful both from the standpoint of adaptation to domestic realities, and from the standpoint of taking into account the significant errors and miscalculations in the development of the cooperative movement of these states in rural areas. the cooperation is a partnership in economic area, it is implemented through many organizational forms. an agricultural cooperative is a system of various agricultural cooperatives and their unions, set up by agricultural producers in order to meet their economic and other needs. agricultural cooperative is one of the organizational and legal forms of farming. it is an organization created by agricultural producers for joint production or other economic activities, based on the pooling of their property shares in order to meet the material and other needs of the cooperative members. an agricultural cooperative is one of the organizational and legal forms of farming. it is an organization, created by agricultural producers for joint production or other economic activity, based on the unification of their property share contributions in order to meet the material and other needs of members of the cooperative. market research, conducted in the rural areas of ukraine, has made it possible to identif y the most significant directions of rural settlement development, including the creation and development of enterprises of meat, construction, tourism and recreational clusters and the development of joint ventures as growth points, which intensif y the development of small and medium businesses and the formation of interregional ties and agricultural cooperation around themselves. 2. economic crisis effects on consumer behaviour according to the ministry of agrarian policy and food of ukraine, as of january 1, 2017, 1097 agricultural service cooperatives were registered in ukraine, 589 of which, or 53.7% of business entities, were active and united 24.8 thousand people. the structure of service cooperatives at the national level by areas and activities is shown in table 1. by the areas of activity, the majority of members of service cooperatives associate their economic activity with milk production, tillage and harvesting, the specific weight of which in the overall structure is 25.6 and 25.8%, respectively. due to the village cooperatives, 1636 working places on a permanent basis have been created. in contrast to the development of agricultural cooperatives abroad, in ukraine, the cooperative relations in the areas of supply and processing are just beginning to be implemented. the members of service cooperatives sold 48.7 thousand tons of milk, 200 tons of meat, 2.8 thousand tons of grain (mazur, tomashuk, 2019). creating of agricultural consumer supply and marketing processing service cooperative is the most effective mechanism for the development of identified growth points and the creation of infrastructure to support them in the rural areas of ukraine. the strategic directions of development of agricultural cooperative have been formed, the following types of activity of agricultural cooperatives in ukraine in rural territories have been defined: processing, supply, sale, service. the essence of the cooperation: attraction of the investments by the cooperative within the framework of private-public partnership for the formation of meat processing complex of rural settlement, including the enterprise for slaughtering cattle, processing of skins and by-products, enterprises of complete waste-free deep processing of raw meat into finished products for the purpose of its further realization in the domestic market, the transport and logistics sector; development of livestock production, crop production, fisheries, beekeeping, processing of wild plants, development of domestic tourism. baltic journal of economic studies 185 vol. 6, no. 3, 2020 the basis for building a cooperative in rural areas of ukraine is the formation of a model of maximum cost reduction for all members of the cooperative. a comprehensive approach is taken into account, when developing a cooperative development plan. key income-generating centers of cooperation are tied to traditional activities that have historically developed in the territory under the influence of weather, climate, geographical and other factors; meat and dairy farming, production and deep processing of agricultural products, development of rural tourism. agricultural production cooperative is a commercial organization created by citizens for joint activity on production, processing and marketing of agricultural products, as well as for performing other activities not prohibited by law, based on the personal labor participation of its members (mazur, tomashuk, 2019). the only constituent document of a cooperative is a charter, which must contain the following mandatory information: the name and location of the cooperative, the object and purpose of its activities, the procedure and conditions for joining the cooperative, the size of share contributions and the procedure for their payment, rights and duties of members of the cooperative and associate members, composition and competence of cooperative management bodies, the order of distribution of income and losses, nature and procedure of personal labor participation in the activity of a production cooperative, responsibility for violation of obligations for personal labor participation, conditions of formation and use of the reserve fund, the size and conditions of formation of indivisible funds, if they are provided, procedure for valuation of land plots, land shares and other property, contributed to the share contribution, conditions of subsidiary responsibility of the cooperative members, the procedure and conditions of reorganization and liquidation of the cooperative, other information provided by law (lindenfors, patrik, 2017). the sources of formation of a cooperative’s property can be both own and borrowed funds; herewith the share of borrowed funds should not exceed 60%. the own funds are formed at the expense of share contributions of members of the cooperative, income from its activities, as well as due to the income from the placing funds in banks and securities. a member of a production cooperative must pay at least 10% of the mandatory share contribution by the time of its registration and the rest should be paid within a year from the moment of its registration; a member of a consumer cooperative must make at least 25% of the mandatory share by the time of registration, and the rest should be paid within the time limits, provided by the charter of the cooperative. increasing the role of agricultural cooperation in the development of civil society and rural territories is possible only if a large part of population is involved in such a movement and the scope of cooperation is expanded. insufficient development of the local self-government institution, inability of local authorities due to limited financial resources or for other reasons to solve problems of rural population causes the development of agricultural cooperatives in rural areas of ukraine (mazur, tomashuk, 2019). co-operation is a logical stage in the further development of administrative and economic reforms. an important component of the agrarian transformation is the development of a cooperative movement in the countryside. 3. survey methodology agricultural cooperative is the center of formation on the territory of meat processing and tourist complexes. the meat processing complex has united the formation of raw materials base, deep processing of meat raw materials and sale of finished products in the production chain. the indicators of rural development through the development of a rural cooperative are presented in table 1. the supply of raw materials to deep processing shops will be done in several ways: purchase of raw meat from suppliers; transition to own raw materials through the formation and development of livestock farms, the stimulation of personal farms by guaranteed sales of meat products; harvesting, production and storage of feed, launching of a slaughterhouse and a primary meat processing plant; production of crop and vegetable growing; creation of transport and logistics sector and distribution channels. agricultural cooperative is able to combine eight platforms, which house summer and year-round houses for tourists, baths, equipped areas for summer and winter recreation, fishing, hunting, food outlets, necessary infrastructure for transit and event tourism, mini-farms, bee-gardens , fish farming, shopping malls, where one can buy environmentally friendly products. the economic and social effectiveness of the program measures is expressed in the cooperative’s increase in production of agricultural products due to increase of labor productivity, providing employment, creating new working places, improving living conditions in the countryside, attracting young professionals, budget revenues at various levels and extrabudgetary funds of taxes and fees, reducing unemployment payments, formation of new directions of development – meat, tourist-recreational, construction clusters. the association of entrepreneurial initiatives in a cooperative allows to obtain a synergistic effect from reducing the costs of production and services, as well as to use the opportunities of private-public partnership for the benefit of rural settlement development. baltic journal of economic studies 186 vol. 6, no. 3, 2020 4. conclusions in the future, small-scale farmers and private peasants’ farms can become members of service cooperatives. in ukraine, out of 32.1 thousand farms, 97.5% are smallscale farms with an area of up to 1000 ha and a staff of up to 50 people. they cultivate 55.5% of arable land and produce 52.2% of the gross agricultural output of all farms, 82.2% of which are farms with an area of agricultural land up to 100 ha, with a share of 30.6% in land use. in addition, there are 4.3 million private farms, operating in the country, which cultivate 6.5 million hectares of land and produce about 50% of the gross agricultural output. the development of an agricultural cooperative, which in the long run will unite small agricultural producers from among farmers and private farmers, requires state support in specific areas. implementing targeted programs, the state should comprehensively support potential participants in cooperative relations in the areas of development of supply, procurement and marketing, processing and transport infrastructure, create favorable conditions for attracting foreign investments, provide access to insurance and credit resources on preferential terms, to encourage young people to live and work in rural areas. this requires the development of appropriate transparent mechanisms, through which state support will be provided and the introduction of new instruments for its allocation, taking into account the differentiated approach and co-financing opportunities. the revival and development of the ukrainian countryside, stability and socio-economic well-being of the rural population are impossible without a welldefined strategy. one of the strategic directions for the development of rural territories should be the agricultural service cooperative. the establishment of agricultural service cooperatives in ukraine is a complex socio-economic problem. the solution to this problem table 1 indicators of rural development through the development of a cooperative № name year total 2020 2021 2022 2023 2024 2025 2026 1 expected income on the psp, total 85 328 457 612 942 2060 4484 including cooperative 74.9 221.3 319.9 361 411.7 481.1 1869.9 2 investment, total 48.9 650.1 2042.8 1089.5 512.7 552.1 360.0 5256.1 including cooperative 48.9 558.4 969 806.8 394.8 422.9 50 3250.8 3 working places 20 215 358 429 527 585 637 2771 including cooperative 20 85 295 393 434 458 479 2161 4 tax effect, total 1.9 19.8 54.5 61.2 69.8 103.2 96.5 407.2 including cooperative 1.9 17.3 44.3 47.8 40.5 44.7 41.1 237.6 table 2 directions of complex development of the cooperative in rural areas for 2020-2025 № name investments, mln. uah expected revenue mln. uah number of working places, units 1 meat processing complex (cattle slaughtering workshop, processing workshop raw meat, transport and logistics) 162.4 503.1 44 (year-round) 2 animal breeding farms 1195.9 174 83 (year-round) 3 crop production (vegetables, root crops, grains, oilseeds, fruit crops) 463 221.7 120 (in season) 4 fish farming 27 31.5 15 (in season) 5 beekeeping 2.8 5.6 4 (in season) 6 tourism and recreation 233 352 192 (year-round) 7 collection and deep processing of wild plants, pine nuts 8 purchase of equipment for the preparation of feed, vehicles 275 15 (year-round) 9 organization of infrastructure (supply of roads to facilities, electricity, water, etc.) 55.1 10 storage, processing of agricultural products, procurement of feed (elevator, vegetable store, silos, sales) 164.3 120 (in season) total 2730.8 1359.9 342(year-round) 589(in season) baltic journal of economic studies 187 vol. 6, no. 3, 2020 is impossible without a clear understanding of the essence and principles of cooperative organizations, the development of cooperatives in the countryside as part of the state’s agricultural policy, the creation of appropriate legal framework and the implementation of the necessary organizational measures. the development of agricultural cooperatives in ukraine will allow to use the advantages of large commodity production and to take into account the interests of rural commodity producers, contributing to the revival of the peasant as the owner of production, the real owner of the means of production and products, produced by him or her and, as a result, the development of rural territories of ukraine. a fundamentally important element in strengthening the material and technical base of agricultural cooperatives is their participation in state and regional programs for the development and support of the cooperative movement in rural areas. in july 2016, 6 agricultural service cooperatives asc “yahidnyi krai” village losiatyn, asc “shchedryi kray” village staryi pochaiv, asc “dary laniv” village rudka, kremenetsk district, asc “zelena krynytsia” village koshliaky, pidvolochysk district, asc “krynychky” village kotiv, berezhany district and asc “staryi mlyn” village tseniv, koziv district, which were created within the framework of the project eu / united nations development programme “community-based local development”, signed a declarative protocol on the establishment of the cooperative association “association of agricultural cooperatives of ternopil region” (tomashuk, 2017). the experience of the organization of agricultural cooperatives of ternopil region shows, that the cooperative model of management is an important step in the future of the ukrainian peasantry. the most important is that cooperatives return life to the region. the “pershyi yahidnyi” cooperative in dnipropetrovsk region became not only the first in this field in the region, but also the first in ukraine, that began to make a profit without foreign grants or financial infusions of big agribusiness. the chairman of the registered cooperative “pershyi yahidnyi” (village mohyliv, tsarychanka district, dnipropetrovsk region) andrii oseledets admits: informal cooperation of berry-professionals in the village has been practiced since 2014. then, four owners instead of rushing everywhere with the idea of the cooperative took up the real cases: they began to buy together basic resources, to arrange logistics and to unite consignments of goods. an important element of cooperation was the exchange of experience” (tomashuk, 2017). it is noteworthy that none of the hosts were local, all came from the city. it is even more interesting that only they (and there are more than a dozen of them, and at the moment they all have joined the cooperative) were the professional producers of berries in a large (4000 inhabitants) village. of course, many villagers sold berries in the season. but only those, who united in the cooperative this year, grow berries professionally: on drip irrigation, raspberries – on the trellis, etc. members of the cooperative of scientists of the institute of agrarian economics of the uaas of ukraine, members of the cooperative of scientists of the institute of agrarian economics of the uaas of ukraine. the experience in professional berry growing is very different for everyone: from one year to 10. their areas are small – from 0.5 to 2 hectares, usually 1-2 hectares. currently, the cooperators have a total of 24 hectares of berries: 14 hectares of raspberries (both summer and remontant varieties), 7 hectares of strawberries, a little blackberries and grapes. and these areas are scattered up to 30 km. according to the chairman of the cooperative, current participants of the “pershyi yahidnyi” can collect a batch of 60-100 tons of raspberries and 50-60 tons of strawberries. the effect of the cooperation was seen immediately. the main thing, according to one of the participants: the producers, who were competitors before, became partners. for example, they found out very quickly, that the same dealers were paying them a price, differed by several hryvnias, and that was for the products of the same quality. therefore, setting a single price, they have already achieved more favorable conditions. the large volume of the batch made it possible to increase further the price of sale. additional benefit was the registration of the cooperative. after having created a legal entity, the owners were given the opportunity to sell the products on a non-cash basis. this has significantly expanded the potential of customers through retail chains and large freezing and processing plants. so now the cooperative works with any category of buyers: the dealers, the processors, freezers, and with retail. a. oseledets said: “the cooperation has allowed to receive almost the highest price in ukraine for raspberries this season – 16-20 uah / kg.” at the same time, he noted, that even at such a price for raspberries, cooperatives “flew in”. so they want to uproot part of the area. the main reason for the current decline in the prices was that the chairman of the cooperative did not consider overproduction, but coordinated pricing by large freezers, which made the weather on the market. cooperatives have also received very significant benefits from general purchases of basic resources. together they bought drip irrigation, fertilizers. this helped the chairman to save 50% of his expenses. a crucial element in strengthening the material and technical base of agricultural cooperatives is their participation in state and regional programs for the development and support of cooperative movement in the countryside. the further development and effective baltic journal of economic studies 188 vol. 6, no. 3, 2020 management of the cooperatives will contribute to solving of socio-economic problems, improving the welfare of the peasants and, as a consequence, ensuring the integrated development of rural areas. the directions for the development of agricultural cooperation should include: measures to create favorable regulatory, socio-economic conditions for the organization and development of rural cooperation at national, regional and municipal levels; improving and expanding the current state support mechanism; qualitative increase in the number of rural cooperatives in different areas of activity; a significant increase in the profitability of agricultural producers by improving the quality of products and raw materials with active participation in cooperative activities; ensuring more complete and better provision of services to agricultural producers and the rural population; creation and development of an independent cooperative marketing system for agricultural products, which is able to compete with large retail chains; effective development of cooperative institutions in order to accelerate the socio-economic development of rural areas and improve the quality of life of the rural population. 5. conclusions the creation and effective functioning of cooperatives is possible if there are appropriate prerequisites of social, legal, economic and psychological character in society, that is, sufficient social capital. the absence of at least one of these prerequisites can be a significant obstacle to the creation of cooperatives, or may suspend this process. and vice versa, the more realistic the prerequisites, the faster their formation, further unification and formation of an integral cooperative national system on a national scale. studies of the institutional foundations of a cooperative and its functioning as a mechanism of economic self-regulation give reason to argue that the cooperative does not have sufficient state support for its development. as a result, the number of cooperatives is constantly decreasing. we believe that the cooperative system of interaction of economic agents in the agricultural sector should include national program activities for institutional adaptation of cooperation as a mechanism of market self-regulation, a special form of integration. the institutional mechanism for regulating entrepreneurship and cooperation includes a system of basic and derivative institutions, rules, traditions, organizations and institutions whose task is to determine the behavior of economic entities to meet individual and social goals in the system of production and exchange of goods and services. the development and implementation of rural development policy in the new paradigm are now being joined by partnerships of various sectors from public to private, local authorities, rural communities, local activists and local science. a series of thematic publications, based on the 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(2019). governance and regulation as an indispensable condition for developing the potential of rural areas. baltic journal of economic studies, vol. 5, no. 5, рp. 67–78. doi: 10.30525/2256-0742/2019-5-5-67-78 baltic journal of economic studies 100 vol. 5, no. 5, 2019 corresponding author: 1 central research institute of the armed forces of ukraine, ukraine. e-mail: ovk1923@gmail.com 2 central research institute of the armed forces of ukraine, ukraine. e-mail: vitalikgodz@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-5-100-109 general approaches to the substantiation of combat staff of the armed forces depending on military-economic capabilities of the state volodymyr mozharovskyi1, serhii hodz2 abstract. the article presents the essence and main points of the methodological approach to the substantiation of the optimal combat staff of the armed forces from the perspective of the theory of prevented damage of our troops in the operation and taking into account military-economic capabilities of the state, in particular, financial constraints on the procurement and maintenance of combat means of relevant j-types. inconsistency between tasks scope, which are entrusted to the armed forces (af) for national security, and level of their combat capability has been and remain one of the fundamental problems that adversely affects the process of their forming, developing, preparing and using. that kind of inconsistency is caused by the impact of some factors, primarily factors characterizing economic-military capabilities of the state. such factors also involve the capacities of the defense industrial complex in terms of development, production, modernization and providing military units (mu) with weapons and defense equipment ( wme). the experience of the troops shows that current financial constraints on the procurement and maintenance of the necessary wme negatively affect the level of mu fighting potential. thus, the problem and need for the substantiation of optimal combat staff of the af have been and remain inherent components of the process of their forming and developing taking into account military-economic capabilities of the state. the above defines the relevance of the research under consideration and needs new scientific approaches to the justification of optimal combat staff of the af, which would ensure guaranteed execution of national security tasks. based on the analysis of recent research and publications related to the problems of substantiation of the af staff as well as the assessment of the impact of cp of mu on the level of their combat capability, the paper establishes that available methodologies (methodological approaches) don’t specify some issues, including what should the optimal af combat staff be for guaranteed execution of their intended targets, taking into account the military-economic potential of the state? one of the alternate solutions of the problem is the methodological approach, which is presented in the article, to the justification of the optimal combat staff of the armed forces from the perspective of the theory of prevented damage of our troops in the operation and taking into account military-economic capabilities of the state, in particular, financial constraints on the procurement and maintenance of fighting means of relevant j-types. to get a much better sense of the essence and content of the research subject, the authors define a range of the concepts: “military-economic factors”, “prevented damage”, “prevented damage theory”, “combat potential”, “combat capability”, “combat staff ”, “effectiveness of combat use of forces”. the authors believe that compared to the available methodological approaches (methods), the methodological approach set out in the article allows: formalizing the interrelation between the level of combat capability of our forces and the desired value of their prevented damage (cp maintenance) for a defined period of operation, which is achieved by the results of counteraction (fire effect) of fighting means of j-types of our troops against the enemy. this enables us to determine the number of combat means of all j-types of our troops required at the initiation of the operation, which (taking into account losses for t days of combat activities) ensures the target level of their fighting efficiency; carrying out the differentiated approach to the determination of the role (contribution) of every kind of our forces in the execution of tasks set in the operation that makes it possible: to calculate the contribution of every j-type of combat means (military branch) to the tasks of general damages on enemy and achievement of combat actions baltic journal of economic studies 101 vol. 5, no. 5, 2019 of the required correlation of parties’ cp during t days; to define the contribution of combat means of every jtypes (military branch) to reducing the predicted value of the average-daily costs of the original cp of our troops to the acceptable one, the accomplishment of the necessary absolute value of our troops and maintenance of the target level of their combat capability during the t-days operation; improving (based on the indicators of prevented damage) the mathematical model of the optimization problem and elements of the calculation process (algorithm) that allows studying the interdependence between core indicators, which evaluate the effectiveness of combat use of troops during the operation, more specifically. prospects for future research are the detailed elaboration of mathematical models and elements of the calculation process (algorithm) for upgrading methodical apparatus, which makes it possible to substantiate the optimal combat staff of the af required for the successful execution of state security tasks from the perspective of the theory of prevented damage of our troops and taking into account military-economic capabilities of the state. key words: combat potential, combat capability, combat staff, combat equipment, prevented damage, mathematical model, optimization problem, methodical apparatus. jel classification: n40, n44, c65 1. introduction problem statement in general terms. the capacity of the armed forces (af) to accomplish national security tasks depends on many components. in addition, a combat potential (cp) of the af, which is considered as a set of material and spiritual factors determining the state and competence of the af to deliver on the intended outcomes, is a major figure. cp of the af is the central component of the military potential of the state (combat potential). it is known that cp of the military organization (mo) (unit, base, formation, union and the af as a whole) is an integrated index of the effectiveness that characterizes the maximum number of tasks for the purpose, which mo is able to perform in the context of typical conditions under the regulatory levels of the capabilities of its command systems, combat (operational), logistics and personnel training (study skills). 152 mm towed gunhowitzer m1955 (d-20), whose fire power potential is the measurement unit of firepower of different weapons of destruction, is accepted is an accounting unit (au) of cp of the af of ukraine (mozharovskyi, godz, 2016). cp of mo determines its combat potential – a state which permits mo to realize its combat capabilities (fighting, fire, maneuver), conduct operations under any conditions and exercise tasks for the purpose intended. combat potential and combat capabilities of mo are evaluated by several indicators where the provision of mos with fighting equipment plays an important role – key samples of weapons and military equipment (wme). this indicator is one of the decisive when substantiating the combat staff – the manning strength of units, formations, unions, which involves organic forces as well as reinforcements that are intended to carry out combat missions. despite that combat staff of the formations and units is determined by their major (combat) units, combat staff of military branches (forces), uniformed services and the af as a whole is defined by the available number and combat staff of relevant formations and units and thus, the total number of fighting equipment which is in service of their major units. consistency of the combat staff with the assigned stare security tasks mainly determines the effectiveness of combat use – a degree of the implementation of combat capabilities of forces, which are engaged in conducting operations (military actions). at the same time, the effectiveness of combat use of forces in the operation is considered as expected target or achievable result upon completion of the operation, which is evaluated by the following core indicators: the extent of damage inflicted on the enemy; the level of survivability (loses of human and material-technical resources shouldn’t exceed admissible ones); the volume of spent material and technical resources in the course of operation; completion time (terms) of missions defined by the operation (mozharovskyi, hodz, 2018; mozharovskyi, hodz, 2017). the analysis of the principal impact factors on the formation of the combat staff, operational and mobilization readiness of the af as well as the conclusions on the assessment of the influence of the level of combat capability of the troops (forces) on the degree of realization of their fighting efficiency shows that there is an inconsistency between the scope of state security tasks entrusted on the af and the level of their combat capability in the practice of forming, preparing and using the af. that kind of inconsistency is a consequence of the impact of some factors, in particular, those that characterize the country’s military and economic capabilities, namely: macroeconomic indicators of the state (development) of the state economy in a particular period; trends in the military budget of the state; possibilities for the development of military manufacturing in a special period; the cost indicators of maintaining and providing formations (units) with wme and expandable material and technical resources (mtr); industrial capacity on the autonomous production baltic journal of economic studies 102 vol. 5, no. 5, 2019 of wme and other types of mtr ; the development level of science and technology; state of infrastructure and transport capacities of the country; the degree of dispersion, security and vulnerability of important economic entities (review of force structures in implementation of partnership goal 0028…; the norwegian navy under the 2017–2020 long term defence plan; french and german defense…; le roux l.; the voluntary sector knowledge network…). there are important factors determining the capabilities of the defense industrial complex (dic) of the state on the development and launching of production of samples (groups) of wme, modernization and term extension for the operation of the available wme; the existence of wme reserve and wme delivery terms of procurement (additional supply) for military organizations; the conformity of wme samples with current requirements (poland’s defense modernization plan; the danish defense agreement 2013–2017; bassford, matt, kristin weed, samir puri, gregory falconer and anaіs reading, 2010). when conducting operations (combat activities), mo is considered to be combat-effective if its procurement with basic key wme samples is not less than 80%, with others – not less than 60%, provided that the technical condition of these samples meets the established standards. mo is considered to be combat-ineffective if it has lost more than 50% of its original cp (combat equipment) (mozharovskyi, hodz, 2018). however, the experience of development, preparation and use of the af shows that the current financial constraints on the procurement and maintenance of the necessary wme negatively affect the level of mo combat capability. therefore, the problem and the need to justify a rational (optimal) combat staff of the af, taking into account the military and economic potential of the state (in particular concerning the elaboration, production, modernization and providing mo with wme) have always been and remain integral components of the process of their forming and developing. the above defines the relevance of the authors’ research and needs new scientific approaches to the substantiation of the optimal combat staff of the state af, which taking into account military-economic factors of the influence on the level of their combat capability, provides a guaranteed execution of the entrusted tasks by the af. the purpose of the article is to present the essence and main points of one of such scientific (methodological) approaches. 2. analysis of recent research and publications. according to the results of recent research and publications related to the problems of substantiation of the rational (optimal) mo combat staff as well as the assessment of the influence of cp of mo on the level of their combat capability, one establishes that available methods (methodological approaches) don’t come up with responses to the following important questions: first, what is an acceptable level of loses for the af to execute the tasks on purpose during conducting operations (combat actions)? second, what number of combat means (wme samples), including mos of relevant military branches (forces), should af staff have to keep the target level of fighting efficiency of our troops in the t-days operation and their capacity to exercises tasks by designation with the necessary effectiveness? third, considering military-economic capabilities of the state, what should the optimal af combat staff be for the guaranteed performance of the tasks by designation? (mozharovskyi, hodz, 2017; romanchenko, shuenkin, mozharovskyi, 2017; mozharovskyi, godz, 2018). to get a well-argued answer to the above questions, the authors propose to use the methodological approach to the substantiation of optimal combat staff of the armed forces from the perspective of the theory of prevented damage of our troops in the operation and taking into account military-economic capabilities of the state ( financial constraints on the procurement and maintenance of some jtypes). 3. on the theory of prevented damage of troops in the operation the armed forces of the state are a complex organizational and technical system, which is considered as a set of interdependent and organically operating elements (sub-systems) according to a unified plan for solving a range of challenges in the context of predetermined factor space (mozharovskyi, hodz, 2017). the study of substantiation of the af combat staff is proposed to be carried out from the perspective of the theory of prevented damage of our troops in the operation, which is comprehended as an integral part of the systems analysis. the authors believe that the above approach makes it possible to conduct morphological, functional and parametric representation of the complex organizational and technical system, to examine all its elements concerning unified positions of the general and basic property of this system (appropriate criterion) holistically – a given coefficient of the combat capability of our troops in the t-days operation. prevented damage of our troops in the operation means the difference between the loss of our troops, which is potential without taking into account measures on its hindrance or reduction, and the loss taking into account such measures. the theory of prevented damage of our troops in the operation is an integrated system of general knowledge, provisions, mathematical and logical correlations that allows formalizing the relationship between the current and targeted levels of combat capability of the troops, the required volume of their prevented damage baltic journal of economic studies 103 vol. 5, no. 5, 2019 which is achieved by counteraction – the impact of the troops on the enemy by combat equipment, the damages which have to be inflicted on the enemy to reduce its combat potential, the weakening of the impact on our troops and descent of the average-daily casualties of the original cp of our troops to an acceptable level, as well as the number of combat weapons of all types required at operation’s initiation, which provides (taking into account the losses for t days of combat activities) the level of fighting efficiency of troops not lower than targeted one and fulfillment of the tasks defined in the operation with the necessary efficiency (romanchenko, shuenkin, mozharovskyi, 2017; mozharovskyi, godz, 2018). 4. general scope of the methodological approach (calculation process stages) methodological approach to the substantiation of the optimal combat staff of the armed forces of the state envisages the use of indices of output data, which are presented in table 1, and involves six consecutive and interrelated stages from the perspective of the theory of prevented damage of our troops in the operation and taking into account the state’s capabilities (financial restrictions on procurement and maintenance of combat means of some j-types) (romanchenko, shuenkin, mozharovskyi, 2017; mozharovskyi, godz, 2018; mozharovskyi, hodz, 2018). the first stage. evaluation of δ ï – a necessary absolute value of prevented damage (cp conservation) of our troops (combat means of all j-types) (in au of cp) for the guarantee of the targeted value of the coefficient of their combat capability θâèì in the t-days operation θâèì. it is generally thought that one of the possible ways for achieving the value δ ï in the operation, without considering the measures of operational (combat) security, is to reduce the enemy’s cp by causing damage, that is, the cut in the original ration of cp parties (α0) to a level that would meet the targeted θâèì, and therefore, the current number n âèì of combat means of all j-types of our troops whose combat capability (taking into account βï ) has to be kept. increasing the level of fire influence on the enemy will lead to a decline in its cp (combat capabilities) and weaken the impact on our troops. as a result, predicted daily-average relative loses β0 , of our troops will decrease to the level of acceptable daily-average relative losses ïβ . this will make it possible to hold combat capability ( )n nâèì > of units of combat means of all j-types of our troops. the physical content of the value δ ï is a difference between required numbers of combat means n âèì whose combat capability has to be kept in the result of increasing fire effect on the enemy to provide (under the conditions βï ò⋅ ) the targeted value θâèì and actual number of combat-effective means n of the available combat staff of our troops (under the conditions β0 , ⋅ò ): δ β β β β ï n n n n ò t n t ò n âèì n n = − = − = ⋅ − ⋅ ⋅ = = − ⋅ − − ⋅  ⋅ ∆ ∆0 0 0 01 1 ( ) ( ) ( ) , , nn n ïâèì j j r 0 0 1 = − ⋅ = = ∑( ) .θ θ δ (1) the second stage. determination of the number of fighting means necessary for the initiation of the operation, taking into account calculated value δ ï , which will ensure the target level of combat capability (θâèì,)of our troops in the t-days operation. it is believed that achieving the desired level of firepower on the enemy requires an increase in the ammunition expenditure (firing amount), as well as an expansion in the number of combat means of the relevant j-type of our troops. in this context, the essential additional number of j-type combat means (combat means of all j-types) of our troops at the beginning of the operation is calculated by the need for the boost of fire influence on the enemy, the destruction of a certain number of its combat means, thus, by calculated means δïj and δ ï which will provide targeted θ j âèì and θâèì respectively. consequently, the number n âèì0 of combat means of all j-types of our troops which is necessary at the operation’s outset including δ ï (1) for the achievement of the targeted θâèì is as follows: n n n ï n n nâèì j âèì j ï0 0 0 0 0= ≥ + = + −∑ δ ( );∆ ∆ (2) and the number n j âèì 0 of combat means of j-type of our troops necessary at the operation’s outset including δïj for the achievement θ j âèì is as follows: n n ï n n nj âèì j j j j ï j0 0 0 0≥ + = + −δ ( ).∆ ∆ (3) the third stage. calculation of the number of combat means of the enemy ∆n f ïïð âèì = ( )δ, which must be destroyed for the achievement of the necessary absolute value of prevented damage ( )δ ï of our troops. the realization of the value δ ï is conditioned by the destruction of the required number ∆n f ïïð âèì = ( )δ of the enemy’s combat means by our troops. at the same time, the formal interrelation between the indices ∆n f ïïð âèì, ( )δ can be established through β β n ïð ïð ïð ïð n n n n0 0 0 1 , .= = − ∆ an additional number of combat means of j-type and combat means of all j-types of our troops, which is necessary at the outset of the operation, will be defined by the demand for increasing fire influence on the enemy, that is the need for the destruction of a targeted number of its combat means ( ∆n f ïïð âèì = ( )δ), and calculated through an obtained value δ ï : ∆ ∆n n n ò n ò ï n ïð âèì ïð і âèì і ïð âèì ïð= = ⋅ − − ⋅ = ⋅ − ⋅ − ∑ 0 0 0 0 01 1 1( ) ( , , θ β β δ ββ δ β0 0 0 0 , , ) ⋅ = ⋅ ⋅ ⋅ò n ï n ò ïð (4) baltic journal of economic studies 104 vol. 5, no. 5, 2019 table 1 output data indices sl.no. index index essence θâèì composite index (criterion) is a coefficient of combat capability of our troops (combat means of all j-types) for t days of the operation, which is set by the commander’s decision 1. ò duration (number of days) of the operation 2. n nïð і ïð i v 0 0 1 = = ∑ the original cp of the enemy taking into account its combat means of all і-types that is defined by the number of tangible combat means or the number of combat means expressed in the accounting units (au) of cp 3. n n j j r 0 0 1 = = ∑ the original cp of our troops taking into account combat means of all j-types (military branches) that is defined by the number of tangible combat means or the number of combat means expressed in au of cp 4. a n n n n ïð і ïð i j j 0 0 0 0 0 = = ∑ ∑ general original correlation of parties’ cp 5. β0 j average standard relative average daily loses of the combat means of j-type of our troops due to the enemy’s influence 6. β β0 0 0j ô îòâ ó j ja ê ê ê , = ⋅ ⋅ ⋅ ⋅ the predicted value of the relative average daily expenditures of the original cp of j-type of our troops (combat means of j-type) for t days of operational activities caused by the combat means of the enemy in view of the specified value β0 j and coefficients: a0 ; êô – forms of the engagement of own troops; êîòâ – an operational-tactical significance of the troops; êó j – original staffing level of j-type of troops in accordance with the staff-basic needs 7. β β 0 0 0 1 0 , , = ⋅ = ∑n n j j j r the predicted value of average daily loses, which is unified for all branches of our troops (combat means of all j-types), of their original cp for t-days of combat activities 8. β β 0 0 0 1 0 1, , ⋅ = ⋅ ⋅ ≤= ∑ ò n n ò j j j r the predicted value of average daily loses, which is average for all branches of our troops (combat means of all j-x types), of their original cp for t days combat activities 9. ∆ ∆n n ò n j j r 0 0 0 0 1 = ⋅ ⋅ = = ∑β , ; ∆n n òj j j0 0 0= ⋅ ⋅β , the predicted number of lost ∆n0 from n0 combat means of all j-types of our troops (tangible and in au in cp) under the conditions β0 , for т days of combat activities; the number of lost ∆n0 j combat means of j-type of our troops under the conditions β0 j , for – days of combat activities 10. n n n n n tj j = = − = ⋅ − ⋅∑ 0 0 0 01∆ ( );,β n n n n tj j j j j= − = ⋅ − ⋅0 0 0 01∆ ( ) ,β the predicted current number of n combat-effective means of all j-types of our troops (tangible ones and in au of cp) on the results of the influence of enemy’s combat means of all types on them under the conditions β0 , for т days of combat activities; the current number n j of combat-effective means of j-type of our troops under the conditions β0 , for т days of combat activities 11. θ = = − = − ⋅ ⋅ = n n n n n n t n t 0 0 0 0 0 0 1 ∆ ∆ = − ⋅ = − − ⋅ = ∑ 1 1 1 0 0 1 0 ( ) ( ) ] ,β θ t n n j j j r the predicted current coefficient value of combat capability (relative value of cp) of our troops of the available combat staff according to the actual number n of combat-effective means of all j-types of our troops under the conditions β0 , for т days of combat activities 12. θ j j j j j j n n n n n = = − = 0 0 0 0 ∆ = − ⋅ ⋅ = − ⋅1 10 0 0 ∆n t n t tj j jβ , the predicted current coefficient value of combat capability of j-types of troops according to the current number n j of combat-effective means of relevant j-type under the conditions β0 j , for т days of combat activities 13. β θ βï âèì ò = − ≤ 1 0 , acceptable value of daily average relative loses of the original cp of combat means of all j-х types of our troops for т days of combat activities for the achievement of the targeted value θâèì baltic journal of economic studies 105 vol. 5, no. 5, 2019 sl.no. index index essence 14. β β β βï j ï j= ⋅ 0 0, , acceptable value of daily average relative loses of the original cp of combat means of all j-х types of our troops for т days of combat activities for the achievement of the targeted value θ j âèì 15. θ βj âèì ï j ò≥ − ⋅1 targeted value of the coefficient of combat capability of j military branch (combat means of j-type) 16. ∆ ∆n n ò n n tï ï n j j r j j r n j= ⋅ ⋅ = = ⋅ ⋅ = = ∑ ∑0 1 0 1 β β acceptable number of the lost ∆nn for the achievement θ âèì from n0 combat means of all j-types of our troops under the conditions β βï ≤ 0 , for т days of combat activities 17. n n n n n ò n âèì j âèì j ï ï âèì = = − = = ⋅ − ⋅ = ⋅ ∑ 0 0 01 ∆ ( )β θ the current number of combat means of all j-types of our troops whose combat capability has to be kept for the achievement of the given one θâèì 18. θ j âèì j âèì j âèì j âèì n j j âèì n n n n n ≥ = − 0 0 0 ∆ the targeted value of the coefficient of the combat capability of j-type of troops in view of the necessary number θ j âèì of combat means of j-type of our troops whose combat capability has to be kept 19. θâèì âèì âèì âèì n âèì n n n n n ≥ = − 0 0 0 ∆ the targeted value of the coefficient of the combat capability ( )θ âèì of our troops in view of the necessary number ( )n âèì of combat means of j-x type of our troops whose combat readiness has to be kept (end of table 1) however, the outcome of such calculations is the determination of not only indices n nâèì j âèì j 0 0= ∑ (2)–(3) and ∆ ∆n n f ïïð âèì ïð і і = =∑ ( )δ (4) but also the number ∆ ∆n n f ïïð âèì ïð і і = =∑ ( )δ of the destroyed combat means of і-type of the enemy by combat means of j-type of our troops. wherefore, it is essential to calculate the number of combat means of every j-type of our troops necessary at the outset of the operation – n j âèì 0 (combat staff of every j-type of our troops). the fourth stage. calculation of the current number of i-type combat means of the enemy (∆ ∆n n f ïïð âèì ïð і і = =∑ ( )δ) which have to be destroyed by combat means of j-type of our troops relying on their fighting potential and without considering the value δ ï. for this reason, the calculated value n j âèì 0 is converted in the tangible combat means n n nj ð âèì j âèì j ð âèì 0 0 0...( ).↔ every tangible combat means has its inherent fighting capabilities (official parameters). combat means of all j-types of our troops can participate in destructing i-type combat means of the enemy with some probability ð j і of elimination of i-type combat means of the enemy (or at least one combat means) from the whole number n і ïð0 of units by the tangible combat means of j-type of our troops composed of n n n ïj âèì j ð âèì j j0 0 0↔ = + δ etc. taking into account the amount n j і of conducted fire activity of every combat means during t days of military operation, it is calculated the number of destroyed ∆ ∆n n f ïïð âèì ïð і і = =∑ ( )δ from n і ïð0 of combat means of i-type of the enemy during t days of military actions. the number ∆ ∆n n f ïïð âèì ïð і і = =∑ ( )δ of destroyed i-type combat means of the enemy for t days of military operation from the available 0 ïð in units in terms of the influence on them by combat means of all types in the composition 0n of units of our troops is calculated: ∆n n ò n ð n pïð і ïð і ïð і ïð і ïð і ïð і j r j i= ⋅ ⋅ = ⋅ = ⋅ − −       = ∏0 0 0 1 1 1β ( ) . (5) then, it is calculated the total number of destroyed (without δ ï ) combat means of all types of the enemy from n ïð0 for t days of military operations: ∆n n ð nïð ïð і ïð і і ïð і і = ⋅ = ⋅ ⋅∑∑ 0 . (6) to carry out calculations at the fourth stage, it is also used individual mathematical models [15; [16]. the fifth stage. the comparison of the current number ∆n n ð nïð ïð і ïð і і ïð і і = ⋅ = ⋅ ⋅∑∑ 0 . of combat means of all types of the enemy and particularly combat means of every i-type of the enemy, which were destroyed by combat means of every j-type of our troops, proceeding from their inherent fighting potential (official parameters 1 jir , jin ) and without considering δ ï with required number of the enemy ’s destroyed combat means of all types ∆ ∆n n n ï n ò ïð âèì ïð і âèì і ïð= = ⋅ ⋅ ⋅ ∑ 0 0 0 δ β , , which has been calculated at the third stage according to the necessary δ ï of our troops obtained at the first stage. if the condition ∆ ∆n nïð ïð âèì≥ is not performed , there is a need to advance combat capabilities of our troops either by improving military characteristics (modernization) of wme samples or by increasing the number of tangible 0 j ð îáìn combat means of j-types of our troops or scheduling required fire activity jin to blow up the value j ip , ïð ip given 1 jir , ïjβ , 0 j ðn under unvaried value 0 ïðn . at the same time, the amount jin of conducted fire activity during the t-days operation can be realized by relevant tactical and technical characteristics baltic journal of economic studies 106 vol. 5, no. 5, 2019 of combat means as well as due to the available reserve of missiles and ammunition of every combat means, which is allocated for disbursements for every day of combat actions. thus, one gets back to the fourth stage of calculations. using the method of successive approximations (iteration), it is achieved the condition where ∆ ∆n nïð ïð âèì≥ . in this context, it is considered that the troops, according to the level of their fighting efficiency, can complete the tasks defined in the operation with the desired result. then, the number of combat means of every j-type and combat means of all types of our troops (in au of cp and tangible combat means) required at the operation’s initiation is calculated as a total value of their original initial number (n0 j), (n0) and an absolute value of prevented damage of every j-type of our troops ( )δïj based on the results of calculations and an absolute value of prevented damage of combat means of all types of our troops ( )δ ï . in prospect, it will allow determining what number of different types of combat means should be in the armed forces of the state at the beginning of the operation (rational combat staff of the af) to ensure (taking into account the losses for t days of combat operations) the current coefficient of combat capability ( )θï of our troops not lower than the given one ( ).θâèì the sixth stage. statement of the optimization problem and its solution based on the use of the mathematical model for the substantiation of the desirable combat staff of the national af from the perspective of prevented damage theory of our troops in the operation and taking into account military and economic capabilities of the state (mozharovskyi, hodz, 2018; mozharovskyi, godz, 2018). it is generally believed that the coefficient of combat capability âèìθ of our troops, which is fixed by the commander’s decision, in the t-days operation is achieved through varying the number of combat means of j-type, which are necessary at the operation’s onset and similar in terms of their purpose and potential. combat means of j-type can be expressed both in wme hardware 0 0 1 ð âèì jð âèì j r n n= = ∑ and au of cp 0 0âèì jâèì j n n= ∑ . it is important to note that combat means of j-types (military branches) can significantly differ not only in terms of the purpose and capabilities (tactical and technical characteristics) as well as cost indicators jñ . thus, if it is specified the cost jñ of one combat means of j-type, the cost of all combat means (weapons pieces) of this type (military branch) jc is interpreted as follows: j j j ðâèìc c n= ⋅ 0 ; (7) and the total cost of combat means of all types of our troops is defined: c c nj j j j ð âèì j c= = ⋅∑ ∑ 0 . (8) in the light of the existing trends of the state budget expenditures on defense needs, the option of imposing financial restrictions îáìc on the procurement (purchase, production, modernization) and maintenance (operation, storage, overhaul and repair) of combat means of certain j-types (military branches) is not excluded. therefore, there may be the need to select such combat means of j-types numerical strength of which will make it possible to achieve the targeted value of the combat capability âèìθ of our troops and maximize the damage to be inflicted on the enemy max ∆n пр. consequently, it is considered the optimization problem, which involves determining the possible (limited) number 0 0 îáì j îáì j n n= ∑ of combat means of some j-x types (military branches) which would give an option of inflicting maximum damage max ∆n пр on the enemy in the t-days operation as well as achieving the required degreed of prevented damage δ ï of our troops and thus, the current coefficient of combat capability value of the troops ( )θï not lower than given one ( ).âèìθ it should be pointed out that the problem statement envisages the condition when a certain number of combat means of j-type can be purchased and maintained in the context of financial constraints (allocated funds) îáìc . there may be also a need to justify the favorable ratio between the number 0 j ð îáìn of actual combat means and the amount βï ≤ 0 04, , of firing activity, which is conducted by every combat means of j-type of our troops during t days of operational activities to achieve a particular degree (probability j ip ) of destruction of і-type combat means of the enemy. to set the optimization problem, one must also bear in mind that the achievement of the value ∆nпрвим is provided by the actions of a possible (limited) number 0 0îáì j îáì j n n= ∑ of combat means of all j-types of our troops, which are characterized by the inherent parameters 1 jir , jin , before the operation. in this regard, it is assumed that for maximum damage to the enemy ïð ïð i i n nmax ∆ ∆ = ∑ , actual combat means ïð ïð i i n nmax ∆ ∆ = ∑ of our troops can act together with some probability ïð i j i j r p p = − − = ∏1 1 1 ( ) against any combat means of i-type of the enemy. consequently, a value ïð i ïð i ïð іn p n∆ = ⋅ 0 can be carried. calculations results of the actions of tangible combat means of our troops depend both on the values 0 j ð îáìn and 1 jir , jin . there may also be a need to justify the optimum ratio between the number 0 j ð îáìn of actual combat means and the amount βï ≤ 0 04, , of firing conducted by each combat means of j-type of our troops during t days of military operations to achieve varying degrees (probability j ip ) of destruction of i-type combat means of the enemy. considering the above, the target function of the optimization problem is as follows: baltic journal of economic studies 107 vol. 5, no. 5, 2019 in addition, there are some restrictions. the first restriction. financial resources (funds) ñ, which are necessary for the procurement and maintenance of the possible (limited) number 0 0ð îáì j ð îáì j n n = ∑ of actual combat means of all types of our troops, shouldn’t exceed allocated financial resources (funds) îáìñ . in other words, it is essential to adhere to the condition where ñ c n ñj j ð îáì j îáì= ⋅ ≤∑ 0 . moreover, the initial (approximate) value of the allocated funds îáìñ is decided in the context of overrun of the total cost 0 0 0ñ ñ c nj j j j ð j = = ⋅∑ ∑ of combat means (wme samples) of all types of the original combat staff 0 0n n j j = ∑ of our troops as well as considering the cost δ δ δ β βñ ñ c ï c n tj j j j j j ï j ð j = = ⋅ = ⋅ − ⋅ ⋅ ∑ ∑ ∑ ( ),0 0 of combat means of all j-types of our troops, which should be added to their original combat staff for achieving expected absolute value of prevented damage (cp maintenance) δ δï ïj j r = = ∑ 1 of our troops in the t-days operation: îáì j j j j j jð j j j j ñ ñ ñ c c c n c ï≥ + = + = ⋅ + ⋅∑ ∑ ∑ ∑0 0 0δ δ δ . (10) the second restriction. a calculated possible (limited) number n ð îáì0 of combat means of all j-types of our troops before starting the t-days operation should provide the current value of the coefficient of combat capability θï of the troops not lower than given one âèìθ . moreover, the actual absolute value of prevented damage of our troops has to be not lower than calculated required absolute value of the prevented damage ( )δ ï of the troops. thus, the condition should be met: n n n ï n ïð îáì j ð îáì j ð j ð j j j r 0 0 0 0 1 = ≥ + = +∑ ∑ ∑ = δ δ (11) the third restriction. taking into account the damages which our troops will cause to the enemy during the t-days operation with the probability ïð ip , the current number ïð ïð i i n n= ∑ of the enemy’s combat means of all i-types, whose combat capability will be kept, shouldn’t exceed the acceptable number n n nïð âèì ïð ïð âèì 0 = − ∆ of combat-effective means of all i-types of the enemy, which can inflict on our troops average-daily relative losses not more than the acceptable losses ïβ in the t-days operation (table 1). thus, one should adhere to the condition: ïð ïð i i ïð i i ïð і ïð і і r n n n p n n å j i j ð îáì max ∆ ∆ = ∑ ∑ ∑= ⋅ = ⋅ − − ⋅ ⋅ 0 0 1 1 0 ïï n j i ï j t j r ïð і ⋅ − = ∑            ( ) . 1 1 0 β (9) ïð ïð ïð ïð i i n n n n= − =∑0 = ∆ n ïð і і 0∑ ⋅ å r n ï n j i j ð îáì j i ï j t j r ïð і − ⋅ ⋅ ⋅ − = ∑ ≤ 1 0 1 0 1( )β 0 0 0 0 0 1 1 ïð ïð âèì ïð âèì n ï n t n t n≤ ⋅ − ⋅ ⋅ = ⋅ ⋅ − =( ) ( ) , , , δ β β θ (12) where 0 0j ð îáìn ≥ is a value that determines the possible (limited) number of actual j-type combat means of our troops with specific fighting potential ( 1 j ir , j in ), which can be purchased and maintained using special allocated funds îáìñ . . the above optimization problem (7)–(12) belongs to the nonlinear programming problems. thus, this problem can be successfully solved through, for example, the method of lagrange multipliers. 5. example of calculations the solution of the optimization problem involves an advance consideration of the results of calculations of the rational combat staff of our troops in t-days operation. consequently, according to the calculation results (1)–(6) (the first-fifth stage), one marks that the number of combat means of all types of our troops n ðî n ðîâèì0 0585 6 582 3 , , ,= > = that is essential at the beginning of tactical activities guarantees the coefficient value of fighting potential of our troops not lower than given one: θ θ, , ,= > ≥0 805 0 80âèì . the number of combat means (rational combat staff of the af) makes it possible to inflict damage on the enemy at the level ∆ ∆n ðî n ðîïð ïð âèì, , , ,= ≥ =713 3 697 1 which meets the specified requirements. in view of the aforesaid, the solution of problem optimization includes: 1) the valuation ∆c' of an additional quantity ∆ ∆n n j j = ∑ of combat means of all types of our troops, which is necessary for the condition’s fulfillment θ θ, .≥ âèì it is established that the valuation ∆c' of the additional number of combat means ∆ ∆n n j j = ∑ of all types of our troops required for the condition fulfillment θ θ, ,≥ âèì is ∆ ∆ñ ñ cj j , , , .= = < =∑ 173 1 177 9 million uah , million uahδ in other words, ∆c' is less than the value δ δ δñ ñ c ïj j j j j = = ⋅∑ ∑ – cost of combat means of all types of our troops that should be added to their original combat staff n 0 for the achievement of an essential value δ δï ïj j r = = ∑ 1 of the troops in the t-days operation. baltic journal of economic studies 108 vol. 5, no. 5, 2019 2) the cost calculation ñ0 , of the total number of combat means of all types of our troops required at the operation beginning to fulfill the condition θ θ, .≥ âèì thus, taking into consideration the cost of original number of combat means of all types of our troops ñ ñ j j 0 0 517 1= =∑ , million uah , the cost ñ0, of the general number of combat means of all types of our troops needed to start the operations n ðî0 585 6 , ,= is ñ ñ ñ ñ ñ ñ ñj j âèì 0 0 0 0 0690 2 695 0 , , , , ,= = + = < = + =∑ δ δmillion uah milli oon uah. ñ ñ ñ ñ ñ ñ ñj j âèì 0 0 0 0 0690 2 695 0 , , , , ,= = + = < = + =∑ δ δmillion uah milli oon uah. 3) determining the demand for funds c to purchase and maintain a possible (limited) number 0 0 îáì j îáì j n n= ∑ of combat means of all types of our troops, which shouldn’t exceed the allocated funds собм, that is when the condition ñ c n ñj j ð îáì j îáì= ⋅ ≤∑ 0 is fulfilled. considering that собм≥с0вим, from this perspective, one accepts a condition under which с ≥ собм. according to the results of calculation of the target function through the method of lagrange multipliers, given the restrictions, we obtain the following data: ñ ñ ñ cîáì âèì= = = > =0 0695 0 690 0, , ; ,million uah million uah n n ðî n ðî n ðîîïò îáì âèì 0 0 0 0593 6 585 6 582 3= = > = > =, , , , , where n îïò0 – a combat staff of our troops, which is optimal at the outset of operational activities (an optimal number of combat means of all j-types) resulting from solving the optimization problem. at the same time, ïð ïð ïð âèì n ðî n ðî n ðî= < = < =488 7 498 4 514 6, , , . , respectively, indicator values regarding the infliction of the maximum damage on the enemy are as follows: max , , .,∆ ∆ ∆n ðî n ðî n ðîïð ïð ïð âèì= > = > =723 713 3 697 1 findings provide (including loses during т=5 days of operation activities) the current value of the coefficient of combat capability θ ï of our troops not lower than given one: θ θ θï âèì= > = > ≥0 816 0 805 0 80, , , ., 6. conclusions and prospects for future research one can note that the problem and need to substantiate the optimal combat staff of the af of the state (taking into account the financial constraints on the procurement and maintenance of combat means of particular j-types) have been and remain an integral component of the process of their formation and development. one of the options for problem solution is the methodological approach, which is presented in the article, to the justification of the optimal combat staff of the armed forces from the perspective of prevented damage theory of our troops in the operation and taking into account military-economic capabilities of the state, in particular, financial limits on the purchase and maintenance of fighting equipment of j-types. compared to the available methodological approaches (methods), the article’s methodological approach allows: formalizing the interrelation between the level of combat capability of our forces and the desired degree of prevented damage (maintenance of cp) for a defined period of operation, which is achieved by the results of counteraction (fire effect) of combat means of all types of our troops against the enemy. this makes it possible to determine the number of combat means of all types of our troops required at the initiation of the operation, which (taking into account losses for t days of combat activities) provide the target level of their fighting efficiency, due to the calculated data of the needed absolute value of prevented damage; carrying out the differentiated approach to the definition of the role (contribution) of every military branch in the execution of tasks set in the operation that enables us: to calculate the contribution of every type of combat means (military branch) to the tasks of general damages to enemy and achievement of the required correlation of parties’ cp for t days of tactical activity; to define the contribution of combat means of every type (military branch) to reducing the predicted number of the average-daily costs of the initial cp of our troops to the acceptable one, the accomplishment of the required absolute value of prevented damage of our troops (cp conservation) and maintenance (taking into account loses for t days of tactical activities) of the target level of their fighting potential; improving (based on the indices of prevented damage) the mathematical model of the optimization problem and elements of the calculation process (algorithm) that allows studying the interdependence between core indicators, which evaluate the effectiveness of combat use of troops in the operation, more specifically. in the future, this will allow determining the number of combat means of every type (military branches), which is optimal at the beginning of the operation. the above will ensure (taking into account the losses for t days of combat operations) the required amount of prevented damage and the level of combat capability of our troops not lower than the specified one. in the authors’ view, the application of article’s methodological approach in the practice of forming, preparing and using the af will enable one to give a substantiated response to the following questions: what the optimal number of combat means (wme samples), as well as mo of relevant military branches (forces), should the af have in its composition to keep the targeted level of fighting capability of our troops and their potential to exercise the tasks on purpose with necessary effectiveness during t days operation, taking into account financial constraints? prospects for future research are a specification of mathematical models and elements of the calculating process (algorithm) for improving methodical apparatus, which allows substantiating the optimal combat staff of the af needed for the successful execution of national security tasks from the perspective of the theory of prevented damage of our troops in the operation and considering military and economic potential of the state. baltic journal of economic studies 109 vol. 5, no. 5, 2019 references: combat potential. military encyclopedic dictionary. moscow: onics 21 century publishing house, 2002. 1036 p. mozharovskyi, v. m., & godz, s. v. 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(2018). the mathematical model of substantiation of the optimal combat staff of the armed forces of the state from the standpoints of the theory of prevented damage and taking into account economic factors. international scientific theoretic. journal of cybernetics and systems analysis, vol. 54, no. 5, pp. 150–159. baltic journal of economic studies 85 vol. 2, no. 2, 2016 corresponding author: 1 department of political economy, kyiv national economic university named after vadym hetman. e-mail: 1010bios1989@gmail.com problems of public-private partnership in ukraine and ways of solving them maksim levochkin1 kyiv national economic university named after vadym hetman, ukraine abstract. the article reveals the essence and role of public-private partnership (ppp). it is established that a public and private partnership is a powerful and promising tool of social and economic development at both the regional and local levels, as well as a means of raising funds to projects. the legal regulation of public and private partnership in ukraine and its shortcomings are determined. it was found that the legislation contains a lot of controversial issues related to: communication problems between the partners; legislative and regulatory issues; financing problems. the number of the ppp projects in ukraine is presented by sectors and investment in projects of public-private partnership is shown. it was determined that during 1992-2012, 58 ppp projects have been implemented in ukraine, or 7.03% of the total number of implemented projects. the structure of ppp projects implemented in ukraine is shown, where the lion’s share is taken by the energy sector (71%), telecommunications (24%), transport (2%), water supply and drainage (3%). the problems that hinder the development of public and private partnership in ukraine were identified, namely the shortage of highly qualified specialists who are able to develop public-private partnership in the future  – both on the part of business, and country; shortage of projects of public-private partnership as well as appropriate banking requirements to them; disinclination of business for stimulating the development of public-private partnership, since the number of private operators is negligible in a very few sectors; inability of public authorities to maintain partner relationships and the implementation of ppp projects; shortcomings of the legislative framework (such as concession) and mismatch of enforcement activity; little activity of the regions in showing initiative to develop and implement ppp projects; inability to attract investment in long-term ppp projects, etc. the ways of improving the implementation of public and private partnership in ukraine according to the concept of development of public and private partnership in ukraine are identified, including the identification of priority areas for the development of ppps; improving the investment climate and business environment in the context of the development of ppps; the development of the authorized state body responsible for the development of ppps; strengthening the functions of local authorities in the area of ppps; improving funding mechanisms for ppp projects; activation of the development institutions in the ppp management system; elimination of contradictions and shortcomings of the legal framework of ppp; improving the cooperation of the authorities with civil society institutions for the implementation of ppp projects. purpose. this article provides for achieving the following objectives: 1) the study of problems of public-private partnership in ukraine; 2) identification of solutions thereto. the subject of the research is the mechanism of public-private partnership, its problems and solutions thereto. methodology. in this work the following general scientific and special methods of study were used: comparative and legal, historical, dialectical, analytical and synthetic, formal and logical and statistical methods. results. the findings allowed drawing specific suggestions for overcoming the problems of public and private partnership in ukraine. the practical significance of the findings is that the article thoroughly investigated the situation and problems of public and private partnership in ukraine. value/originality. this article is a completely original investigation, is practical and can be used for further scientific work. key words: public-private partnership, state, private sector project. jel classification: p26, p27, l32 baltic journal of economic studies 86 vol. 2, no. 2, 2016 1. introduction the development of public-private partnership in ukraine is in the initial stage, as evidenced by the low share of private investment in ppp projects, the use of public-private partnership not in all sectors of the national economy, lack of effectiveness of the implementation of ppp projects (in the field of education, health care). the key issues of the implementation of ppp projects in the ukraine are the following: poor institutional environment, imperfect regulatory support, scanty profit attractiveness of projects for private investors, the lack of incentive mechanisms in the implementation of ppp projects. in addition, at the present stage of ppp establishment, the questions concerning the need for applying new areas of the implementation of ppp projects become extremely topical in ukraine. the problems of the formation of public-private partnership are studied in the research works of such scholars as butnyk o.o. (butnyk, 2014), honcharenko n.v. (honcharenko, 2015), didchenko a.i. (didchenko, 2011), kalinko i.v. (kalinko, 2015), maslennikov a.m. (maslennikov, 2011), moskalenko s.a. (moskalenko,2011), pavlova g.a. (pavlova, 2011), pavliuk k.v. (pavliuk, 2010), pavliuk s.m. (pavliuk, 2010), pavliuk i.v. (pavliuk, 2010), sulyma n.m. (siduniak, 2014) et al. despite quite a large number of studies on this subject matter, to date there is no single approach to defining the key areas of addressing systemic issues of public-private partnership in ukraine. accordingly, this research paper aims at studying the problems of public-private partnership in ukraine and ways of solving them. 2. research findings public-private partnership is an effective tool for economic and social development at the regional and local levels, a means of raising funds for projects where the state and local authorities are trying to maintain control and to establish cooperation with private investors (didchenko, 2011). according to the law of ukraine “on public-private partnership” no. 2404-vi dated july 1, 2010, the publicprivate partnership is defined as a partnership between the state of ukraine, the autonomous republic of crimea, territorial communities represented by the relevant state authorities, local governments (public partners) and legal entities, except state and municipal enterprises, or individual entrepreneurs (private partners), which is carried out on a contract basis in accordance with the procedure established by this law and other regulations (the law of ukraine “on public-private partnership” dated july 1, 2010). public-private partnership can be defined as a form of interaction between the public partner represented by the state, local communities and local governments, and the private partner – legal persons or individual entrepreneurs aimed at achieving specific economic outcomes, such as, for example, the development of infrastructure projects (maslennikov, 2011). in the current economic conditions, ppp is an alternative to privatization of state and municipal property, because it combines the advantages of public and private sectors, in particular: social responsibility, social accountability and priority of environmental standards in the activities; it is characteristic of the state and municipal organizations; financial resources, technology, managerial efficiency and entrepreneurial spirit of the private sector (butnyk, 2014). ppp allows not simply implementing the project, but implementing it efficiently, on time and without delay, thus enhancing the quality of public services provided to the population and increasing the efficiency of infrastructure management, promotes the effective development of state property. thus, the mechanisms of ppp allow successful using of the experience and expertise of the private sector, while maintaining state control over the assets (pavliuk, 2010). table 1 the number of ppp projects in ukraine in 1992-2012 by sectors* no. year sector total po w er e ng in ee ri ng te le co m m un ic at io ns tr an sp or t w at er su pp ly a nd se w er ag e 1 1992 0 1 0 0 1 2 1993 0 1 0 0 1 3 1994 0 0 0 0 0 4 1995 0 0 0 0 0 5 1996 0 3 0 0 3 6 1997 0 2 0 0 2 7 1998 6 1 0 0 7 8 1999 0 0 0 0 0 9 2000 0 1 0 0 1 10 2001 6 3 0 0 9 11 2002 1 0 0 0 1 12 2003 0 0 0 1 1 13 2004 0 0 0 0 0 14 2005 0 0 0 0 0 15 2006 1 1 0 0 2 16 2007 1 0 0 0 1 17 2008 1 0 0 1 2 18 2009 0 0 1 0 1 19 2010 4 0 0 0 4 20 2011 5 1 0 0 6 21 2012 16 0 0 0 16 22 разом 41 14 1 2 58 * composed by the author based on the database of public-private partnership projects in the world baltic journal of economic studies 87 vol. 2, no. 2, 2016 as a general rule, a return on investment within ppp is much higher than in traditional schemes of implementation of various social projects. this, in turn, helps to successfully implement large infrastructure projects, which otherwise could hardly be implemented (pavliuk, 2010). in 1992-2012, 58 ppp projects were implemented in ukraine (table 1), or 7.03% of the total number of completed projects (820). this figure is more than one and a half times higher than the regional average. in addition, if in the region as a whole, the number of projects in 2012 decreased in comparison with the previous year, in ukraine it has grown and has the largest figure in the history of this activity (the database of public-private partnership projects in the world). the structure of total implemented ppp projects includes power engineering (71%), telecommunications (24%), transport (2%), water supply and sewerage (3%) (figure 1). the total volume of investment in the projects of publicprivate partnership in ukraine amounted to 14.16 billion us dollars for 1992-2012, the amount of investment obligations of the state partners is 1.8 billion us dollars, see table 2. this figure is quite significant in comparison with countries in the region. it should also be noted that even in those years when new ppp projects have not started, the investment flow through long-term projects did not have a zero value. at the same time, insignificant, from our point of view, participation of the state in the funding of projects should be noted. most of the period, the state did not provide financial assistance to ppp projects, it has started to do so more or less consistently in 2009. this trend indicates a lack of attention that the state pays to partnership with the private sector (braylovsky, 2014). today, the system of legislative support of the ppp mechanisms consists of such legislative acts: the law of ukraine “on public-private partnership”, “on financial leasing”, “on concessions”, “on concessions for construction and operation of motor roads”, “on public property management”, “on peculiarities of transferring facilities of central water supply, heat supply and sewerage being communal property for lease or concession”, “on amendments to certain legislative acts of ukraine regarding implementation of joint activities”, “on peculiarities of transferring the facilities of state-owned fuel and energy complex for lease or concession”, “on transparency of use of public funds”, and others. considering that the experience of public-private partnership in ukraine is insignificant, legislation contains a lot of controversial issues related to: communication problems between the partners; legislative and regulatory issues; funding problems (resolution of the cabinet of ministers of ukraine on the approval of the concept of the development of public-private partnership in housing and communal services dated september 16, 2009). these legislative acts are also far from ideal (in terms of regulation of relations in ppp) and require significant improvements. and ukraine cannot boast of some successful projects in the field of ppp (butnyk, 2014). power engineering 71% telecommunications 24% transport 2% water supply and sewerage 3% fig. 1. the structure of implemented ppp projects* *composed by the author based on the database of public-private partnership projects in the world table 2 investments in ppp projects in ukraine in 1992-2012 (million usd)* no. year government investment obligations total 1 1992 0 11 2 1993 65 72 3 1994 0 10 4 1995 0 18 5 1996 65 317 6 1997 9 187 7 1998 0 331 8 1999 0 242 9 2000 0 206 10 2001 160 415 11 2002 0 206 12 2003 0 370 13 2004 0 738 14 2005 0 1,507 15 2006 4 869 16 2007 41 1,429 17 2008 0 1,566 18 2009 54 1,185 19 2010 85 501 20 2011 1,320 2,816 21 2012 35 1,164 22 разом 1,838 14,161 *composed by the author based on the database of public-private partnership projects in the world 88 vol. 2, no. 2, 2016 baltic journal of economic studies today, specialists identify a number of problems in the legal framework for the implementation of public-private partnership that need to be addressed. firstly, the issues in the field of protection of intellectual property rights and technology transfer in the framework of public-private partnership are not resolved. secondly, for the efficiency of public-private partnership we need political stability not only enshrined in law, but practically implemented. third, a legal mechanism for the use of corporate instruments to attract funding is not established, this requires the development of a system of partner interaction in the form of joint-stock companies (didchenko, 2011). table 3 the ways of improving the implementation of ppp in ukraine, according to the concept of the development of public-private partnership in ukraine for 2012-2017* no. ways activities 1 identification of priority areas of the activity for the development of ppp in the future development ppp should apply to: scientific, technical and innovation sphere; information sphere; agro-industrial complex; forestry. 2 improving of the investment climate and business environment in the context of ppp development increasing the transparency of the licensing system and reduction of bureaucratic barriers. regulating the inspections and regulatory procedures (standardization and certification). simplification of property registration procedures. creating favourable conditions for the use of land plots within the framework of ppp projects. ensuring transparency in relations between private and public partners in the preparation and implementation of ppp projects. focusing government efforts on the implementation of ppp projects and the formation of effective feedback in the relationship of the state with the private sector. 3 establishment of authorized state body responsible for ppp development formation of strategic directions of ppp development in ukraine. methodical and advisory support to the projects. harmonization of the analysis of ppp effectiveness. the mechanism of clear coordination of the activities of central authorities for the implementation of ppp projects at the national level. the transparency of activities in the field of ppp, including through the establishment of the public board at the ministry of economic development and trade of ukraine. 4 strengthening the functions of local authorities in the area of ppp ensuring effective implementation of projects through the development of a single management mechanism of selection, examination, coordination and implementation of the project with the assistance of appropriately qualified specialists 5 improving mechanisms for funding ppp projects building relationships with international development institutions and fostering the formation of national development institutions which activities should be aimed at achieving the priorities of innovative renovation of the economy using modern approaches to risk management 6 activation of development institutions in ppp management system increasing the efficiency of using budgetary funds, the intensification of involvement of the development institutions in ppp projects, the expansion of long-term project funding tools, and the like. 7 eliminating contradictions and shortcomings of the ppp regulatory framework improvement of the law in terms of: – more clear determination of powers of the authorities involved in ppp projects at all stages, both at central and local levels; – extension of the time horizon of relations in the framework of ppp; – clarifying the ppp signs regarding the delegation of functions and powers of the state in relation to the development of infrastructure and provision of public services to the private sector; – clarifying the list of areas of application of ppp agreements; – introduction of the possibility of implementing an institutional partnership, and hence the creation of a special joint venture project company, authorizing the state (municipal) enterprises to be parties of ppp agreements on the side of the public partner; – harmonization of provisions of the law with the provisions of special laws regulating the contractual relationship between the state and the private sector in the field of concessions, joint ventures, leases, product distribution, etc. 8 improving cooperation between the authorities and the institutions of civil society on the implementation of ppp projects activation of public involvement in the preparation and implementation of ppp projects at the state and local levels. in this context, it is necessary to develop mechanisms of interaction between the authorities and civil society institutions in the direction of engaging society in the discussion, examination and monitoring of the implementation of ppp projects on a permanent basis. *composed by the author based on the concept of the development of public-private partnership in ukraine for 2012-2017, 2011 baltic journal of economic studies 89 vol. 2, no. 2, 2016 therefore, using international experience of ppp for the benefit of the ukrainian economy is quite an effective government initiative. moreover, we really need this expertise, given the current state of industrial infrastructure  – power engineering, motor roads and railways, ports, airports, pipelines. fixed assets are extremely worn out, over the last 20-30 years there was almost no investment in infrastructure, and no construction of new facilities took place. its current state is a source of possible structural, technological and other crises and disasters (butnyk, 2014). the problem of funding is a major obstacle to the implementation of ppps, especially small and mediumsized projects. the high cost of bank funding in ukraine and the lack of access to other forms of funding restrains investment in ppp infrastructure projects. after all, under adverse conditions in the country, reliable state support for investment projects cannot be provided. most entrepreneurs do not trust governmental authorities. there are also significant external risks, which the state cannot protect the private partner from (siduniak, 2014). thus, today there are many obstacles to the development of public-private partnership in ukraine; the main ones are the following: 1. lack of experienced personnel that could promote public-private partnership – from both the business and the state sides. 2. lack of attractive projects compliant with bank requirements. 3. unreadiness of the private sector: a small number of private operators in a very small number of sectors. attitude to public-private partnerships and concessions among the ukrainian businesses as the projects with extremely high risks and low returns, uncertainty about future conditions. 4. unreadiness of authorities for the partner relations and implementation of public-private partnership projects. 5. gaps and constraints of legislation (in particular, in the field of concession) and the lack of enforcement practice. 6. lack of a regional activity both in the initiation of projects and their implementation. 7. unreadiness to invest in long-term projects, and others (pavlova, 2011). the main problems of state support in the field of publicprivate partnership are the following (resolution of the cabinet of ministers of ukraine on the approval of the concept of the development of public-private partnership in ukraine for 2013-2018 dated august 14, 2013): – deficit of budget funds and the complexity of state support mechanism; – lack of annual funding of long-term projects of publicprivate partnerships; – uncertainty of the methodology of providing state support in the framework of the implementation of publicprivate partnership projects; – incompliance of principles and approaches in the field of public-private partnership with international principles; – limited possibilities of obtaining government guarantees for the implementation of public-private partnership projects at the local level. these problems should be solved with a focus on the best european and international practices, taking into account the current crisis trends, through the concept of the development of public-private partnership in ukraine for 2012-2017, 2011: – identification of priority areas for the development of ppp in ukraine; – improving the investment climate and business environment in the context of the development of ppps; – establishment of the authorized state body responsible for ppp development in ukraine; – strengthening the functions of a local authority in the area of ppps; – improving the mechanisms of funding ppp projects; – fostering the development institutions in the ppp management system; – elimination of contradictions and shortcomings of the legal framework of ppp; – improvement of cooperation of state (local) authorities with civil society institutions in the implementation of ppp projects (table 3). thus, the above described ways will help to bring the implementation of public-private partnership in ukraine to a new level. furthermore, the latest approaches to the management and implementation of public-private partnership should be applied. one of the most promising innovation areas is considered to be the implementation of innovation ppp projects on the basis of cluster approach. public-private partnership in ukraine should become a catalyst for the activity that will contribute to the development of economy and social sphere. the above is very likely to happen, provided legislative determination of legal, economic and organizational basis of ppp functioning in a special law on the general principles of ppp development. after the adoption of a special law, regulatory framework is required for the features of ppp in various sectors of the economy, as well as the legislative improvement of ppp mechanisms (concessions, product sharing agreements, joint activities, etc.) (pavliuk, 2010). 3. conclusions public-private partnership in ukraine should further be a key factor for socio-economic development in the state, but this requires legislative determination of the legal, economic and organizational basis for the functioning of public-private partnership in a special law, following the adoption of which it would be necessary to set the regulatory framework for the features of ppp in certain sectors of the economy, as well as to improve ppp mechanisms. baltic journal of economic studies 90 vol. 2, no. 2, 2016 references the database of public-private partnership projects in the world. the world bank [electronic resource].  – retrieved from: http://ppi.worldbank.org/index.aspx. braylovsky, i. (2014). the development of public-private partnership in ukraine in the context of the world trends. skhid, 1: 6-10. butnyk, o.o. the analysis of the development of public-private partnership in ukraine / o.o. butnyk [electronic resource]. – retrieved from: http://www.dy.nayka.com.ua/?op=1&z=709. didchenko, o.i., public-private partnership: the essence, legislation, foreign expertise [electronic resource].  – retrieved from: http://www.zgia.zp.ua/gazeta/evzdia_2_048.pdf. kalinko, i.v. (2015). public-private partnership: foreign expertise and prospects of implementation in ukraine. scientific bulletin of polissia region, 1 (1): 15-21. the concept of the development of public-private partnership in ukraine for 2012-2017 [electronic resource].  – retrieved from: http://ppp-ukraine.org/wp-content/uploads/2015/03/ppp-development-concept-2012-2017.pdf. maslennikov, o.m. the problems of the development of public-private partnership in ukraine [electronic resource]. – retrieved from: http://eprints.kname.edu.ua/32291/1/106.pdf. pavlova, h.o. public-private partnership: analysis of the world expertise and the ways of development in ukraine [electronic resource]. – retrieved from: http://www.kbuapa.kharkov.ua/e-book/putp/2011-3/doc/3/02.pdf. pavliuk, k.v. (2010). the essence and the role of public-private partnership in socio-economic development of the state. scientific works of kntu, economic sciences, (17): 123-133. the law of ukraine “on public-private partnership” dated july 1, 2010. holos ukrainy, 2010, july 30 (140): 89-91. resolution of the cabinet of ministers of ukraine on the approval of the concept of the development of publicprivate partnership in housing and communal services dated september 16, 2009 no. 1184-r [electronic resource]. – retrieved from: http://zakon2.rada.gov.ua/laws/show/1184-2009-%d1%80. resolution of the cabinet of ministers of ukraine on the approval of the concept of the development of publicprivate partnership in ukraine for 2013-2018 dated august 14, 2013 no. 739-r. [electronic resource]. – retrieved from: http://zakon4.rada.gov.ua/laws/show/739-2013-%d1%80?test=qy4mfbtc78f vy6yuzi9ovkechi4zgs80 msh8ie6. siduniak, o.v. public-private partnership: current condition and problems of the development in ukraine [electronic resource]. – retrieved from: http://globalnauka.com/naukova_ukraina/2090.html. максим левочкин проблемы государственно-частного партнерства в украине и пути их преодоления аннотация. в статье раскрыта сущность и роль государственно-частного партнерства. установлено, что государственно-частное партнерство – это эффективный и перспективный инструмент социальноэкономического развития как на региональном, так и на местном уровне, а также средство привлечения средств в проекты. определены законодательное регулирование государственно-частного партнерства в украине и его недостатки. выяснено, что законодательные акты содержат много спорных вопросов, касающихся: проблем коммуникации между партнерами; законодательных и регуляторных проблем; проблем финансирования. приведено количество проектов гчп в украине по секторам и инвестиции в проекты государственно-частного партнерства. определено, что в течение 1992-2012 годов в украине было реализовано 58 проектов гчп, или 7,03% от общей численности реализованных проектов. изображен структуру реализованных гчп проектов в украине, львиная доля в которой приходится на энергетику (71%), телекоммуникации (24%), транспорт (2%), водоснабжения и водоотведения (3%). определены проблемы, которые препятствуют развитию государственно-частного партнерства в украине, а именно: брак высококвалифицированных специалистов, способных развивать в будущем государственно-частное партнерство  – как с стороны предпринимательства, так и страны; брак проектов государственно-частное партнерства и надлежащих банковских требований к ним; не желание предпринимательства стимулировать развитие государственно-частного партнерства, поскольку численность частных операторов незначительна в очень невысоком количестве секторов; неспособность государственных органов к поддержанию партнерских взаимоотношений и выполнения проектов государственно-частного партнерства; недостатки законодательной базы (например, концессионного) и несоответствие правоприменительной деятельности; незначительная активность регионов страны проявлять инициативу в разработке и реализации проектов государственно-частного партнерства; неспособность привлекать инвестиции в длительные проекты государственно-частного партнерства и другие. раскрыто направления совершенствования реализации baltic journal of economic studies 91 vol. 2, no. 2, 2016 государственно-частного партнерства в украине согласно концепции развития государственно-частного партнерства в украине, среди которых определение приоритетных сфер деятельности для развития гчп; улучшение инвестиционного климата и предпринимательской среды в контексте развития гчп; развитие уполномоченного государственного органа, ответственного за развитие гчп; усиление функций органов местного самоуправления в сфере гчп; совершенствование механизмов финансирования проектов гчп; активизация институтов развития в системе управления гчп; устранение противоречий и недостатков нормативно-правовой базы гчп; совершенствования сотрудничества органов власти с институтами гражданского общества по реализации проектов гчп. данная статья предусматривает достижение следующих целей: 1) исследование проблем государственно-частного партнерства в украине; 2) определение путей их решения. предметом исследования выступает механизм государственно-частного партнерства, его проблемы и пути их решения. в данной работе были применены такие общенаучные и специальные методы изучения: сравнительно-правовой, исторический, диалектический, аналитико-синтетический, формальнологический, статистический. результаты. полученные результаты позволили сформулировать конкретные предложения по преодолению проблем государственно-частного партнерства в украине. практическое значение полученных результатов заключается в том, что в статье основательно исследовано положение и проблемы государственно-частного партнерства в украине. значение/оригинальность. данная статья является полностью оригинальным исследованием, носит практический характер и может быть использована для дальнейших научных работ. baltic journal of economic studies 171 vol. 2, no. 2, 2016 corresponding author: 1 department of agribusiness, national university of life and environmental sciences of ukraine. e-mail: sergey.us.ua@gmail.com agricultural enterprises production evaluation and development in ukraine serhiy us1 national university of life and environmental sciences of ukraine, ukraine abstract. the purpose of the article is to analyze correlation between production volume (v), labour factor (l) and capital factor (k) with further production volume forecasting of researched agricultural enterprises in ukraine as well as their competitiveness in the european market. methodology. the survey based on statistical data of state statistics service in ukraine, poland and accounting data of investigated enterprises during 2004-2013 years. production volume and capital amount taken in monetary terms, labour factor is calculated in monetary terms using the average wage and the number of employees. treatment of major production factors according to classical economic theory is generalized. correlation of v, l and k factors are calculated using method of the least squares in production function evaluation. production volume of enterprises a and b are forecasted with further evaluation of its reliability in the econometric program eviews 7. results of the survey showed the dominant role of l factor over the k factor especially after world economic crisis 2008 in investigated agricultural enterprises of ukraine. according to high determination coefficient, the influence of both factors on production volume is 85% for enterprise a and 95% for enterprise b. production forecast shows the increase of its volume till 2020 in both enterprises with high probability according to forecast credibility indicator mape. practical implications. application of the results, in particular the ratio of production factors and forecast of production volume, will allow more effective use of production resources and better planning of production process taking into account market conditions. value/originality. production activity estimation and output forecast of investigated agricultural enterprises were used for competitiveness analysis of agricultural enterprises in ukraine and poland, which is important for european integration process of domestic economy. key words: production factors, agricultural enterprises, production forecast, production function, optimization. jel classification: q12, b12, d24, c53 1. introduction in the economic crisis conditions of ukraine in 20142015 an effective usage of available resources, including labor and capital, through production optimization has become particularly important. according to classical economic theory, the desire of entrepreneurs to achieve their interests leads to economic benefits for society (smith, 2012). this statement prove that effective production process in different organizations should be encouraged and achieved by choosing appropriate development strategy. in order to choose correct development strategy for agricultural enterprises, it is necessary to have deep understanding of processes and trends inside and outside of the enterprises. that required usable methodology and tools for comprehensive analysis taking into account the purpose of investigation. using of the data of state statistics service in ukraine, poland and accounting data of investigated enterprises during 2004-2013 years production function built with further identification of production optimization possibility. moreover, econometric forecasting methods were used to find out production volume till 2020 and to identify the most effective production development strategy. 2. analysis of the main publications the basis of production process is about effective use of economic resources by converting to the production inputs. one of the main tasks of economics is to increase economic efficiency by optimizing these factors usage. this could be done by determination of effective ratio between inputs and intensity of their usage. in general, classic economic school distinguishes three factors of production: land, labour and capital, which are independent sources of value. wages are the price of labour, profit is the result of capital, rent is a “gift of nature”. at the same time capital refers to buildings, instruments, machinery, so called real capital (say, 2012). one of the main methods to research technological ration between production factors and its volume is production function (shepherd, 2015). baltic journal of economic studies 172 vol. 2, no. 2, 2016 capital as a factor of production represented by a set of previously manufactured benefits, which are involved in goods and services production process to: tools, machines, equipment, production facilities, communications etc. their technical and technological condition constantly improving and has decisive impact on the economic activity. labour presented as intellectual and physical activity focused on goods and services production. also it’s treated as “human capital”, which means a combination of knowledge, skills and abilities of person due to education, professional training, skill, health etc. complicated work leads to higher human capital and as a result the increase of income (kundyzky, 2012). individual and material factors are the complex system elements connected by technology and organization of production. therefore, technology expresses cooperation between main production factors and means using of different processing factors, change of characteristics, form and conditions of labour subjects. organization of production provides coherent functioning of all production factors, their ratio, interchangeability etc. in the market economy the factors choice isn’t accidental but has theoretical basis which gives meaningful interpretation of production function characteristics. discussions about production factors and type of production function ratio given foundation for more general concept instead of production function  – production dependence which is defined as functional correlation more general type with possibility to use not only absolute but also relative values as well as wide set of non-traditional production factors. among the methods that are offered by specialist for adequacy consideration of transitional economy specifics it is necessary to underline preliminary analysis of data before specified dependencies parameters evaluation. in other words, not just production function construction macroeconomic dynamics analyzing using terms and concepts from the theory of production function (shumska, 2007). 3. the influence of main production factors on its volume there are many useful tool which can be used to analyze internal and external environment of enterprise functioning. according to the purpose of the research, it’s appropriate to use production function for analysis of production factors influence on its volume. production function  – is a technical ratio between amount of resources, which used by producers, and volume of output on this basis. production function could be used at macroeconomic and microeconomic levels (mocherny, 2005). among the most usable types of production function is cobb-douglas function, which in general can be written as (shumska, 2007): yt=f(kt,lt)=ak α tl β t, (1) where a  – coefficient which characterises production effectiveness, α і β – coefficients of production elasticity of capital (k) and labour (l), which according to neoclassical theory reflects the role of every production factor in the surplus of final product (or relevant factor share of revenue in units of total income). in practical calculation model converted in log-linear and resulting equation becomes: log(y)=c1log(x1)+c2log(x2)+c3. (2) a first, every constructed production function should pass actual logic and statistical adequacy check. logic adequacy means equation compliance with the economic content of the investigated phenomenon. statistical adequacy and reliability characterize by the system of indicators and its comparison with established limits. in terms of european integration, agricultural enterprises of ukraine should consider market conditions of countries in european union. one of the main agricultural countries in european union is poland, which agricultural production was assessed for comparison with ukraine. table 1 evaluation of regression model parameters for enterprise a dependent variable: log(v) method: least squares sample (adjusted): 2004 2013 included observations: 10 after adjustments log(v) = c(1)*log(k) + c(2)*log(l) + c(3) variable coefficient std. error t-statistic prob. log(k) 0.117018 0.156325 0.748555 0.0785 log(l) 0.739496 0.317872 2.326396 0.0529 c 4.577633 0.895225 5.113390 0.0014 r-squared 0.846017 mean dependent var 9.832381 adjusted r-squared 0.802022 s.d. dependent var 0.582694 s.e. of regression 0.259268 akaike info criterion 0.381418 sum squared resid 0.470540 schwarz criterion 0.472194 log likelihood 1.092909 hannan-quinn criter. 0.281838 f-statistic 19.22975 durbin-watson stat 2.897791 prob(f-statistic) 0.001433 source: calculated by the author baltic journal of economic studies 173 vol. 2, no. 2, 2016 following the terms of logical and statistical adequacy it was calculated that agricultural enterprises in ukraine has l=0,39 and k=0,88 ratio of production factors while in poland factors are l=0,20 and k=2,28 which means lower labour input and better effectiveness of agricultural enterprises in poland. for better evaluation of agricultural enterprises production activity there were identified similar by size and production structure agricultural enterprises in ukraine. the production function equation obtained for period 2004-2013 and estimated by method of least squares in econometric program eviews 7. constructed regression models show correlation between outputs (v), fixed assets (k) and salary fund (l). there is the following model for enterprise a: log(v)=0.117018009955*log(k)+ 0.73949633459*log(l)+4.57763310322. (3) evaluation of enterprise a regression model is shown in a table. 1. according to the calculation r2=0,846 (coefficient of determination), which means than change in production volume is caused on 85% by labour and capital factors. criteria of durbin-watson (dw=2.897791) means presence of first order negative autocorrelation of regression model; statistical significance of results for l=0,05 and k=0,08 is high; prob (f-statistic)=0,001 which means properly selected equation for calculation. coefficients l=0,74 and k=0,12 which together is equal 0,86<1 that means negative effect on scale, significant need of investments and dominant role of labour factor on production output. there is the following model for enterprise b: log(v)=0.478201119432*log(k)+ +0.851756603007*log(l)+0.961445526587. (4) evaluation of enterprise b regression model is shown in a table. 2. according to the calculations change in production volume caused on 95% (r2=0.950181) by factors of capital and labour; dw=2.397459, which means presence of first order negative autocorrelation of regression model; statistical significance of results for l=0,03 and k=0,00 is high; prob (f-statistic)=0,000, which means properly selected equation for calculation. the sum of labour coefficient (l=0,85) and capital coefficient (k=0,48) is 1,33>1, which means high reproduction level with dominant role of labour factor. at the same time estimation of the regression model during 2004-2008 and 2009-2013 showed dominant role in both enterprises of capital factor before 2008 and conversion to labour factor since 2009. that means reduce of access to financial resources because of the global economic crisis 2008 with compensation of it by an increase in use of labour resources. agricultural enterprises of ukraine require investments in production process to improve production efficiency by optimizing labour costs. it is necessary to become competitive comparing with european producers. at the same time, for effective production process optimization in agricultural enterprises of ukraine it’s reasonable to forecast their production activity. 4. determination of production volume on prospect in order to ensure production effectiveness of agricultural enterprises and price stability on the agricultural products market it’s appropriate to apply methods of market conditions forecasting. according to the purpose of the research, forecasts of investigated enterprises production volume were made. on the fig. 1 there is a production volume forecast for enterprise a. using available statistic data with an assumption about production dynamics preserving agricultural production volume forecast was built for the enterprise a till 2020 with level reliability at mape=16,2 which is sufficient level to be considered significant. according to a forecast, production table 2 evaluation of regression model parameters for enterprise b dependent variable: log(v) method: least squares sample (adjusted): 2004 2013 included observations: 10 after adjustments log(v) = c(1)*log(k) + c(2)*log(l) + c(3) variable coefficient std. error t-statistic prob. log(k) 0.478201 0.454402 1.052375 0.0276 log(l) 0.851757 0.113606 7.497494 0.0001 c 0.961446 3.313660 0.290146 0.7801 r-squared 0.950181 mean dependent var 9.114894 adjusted r-squared 0.935947 s.d. dependent var 0.520437 s.e. of regression 0.131716 akaike info criterion -0.973013 sum squared resid 0.121444 schwarz criterion -0.882237 log likelihood 7.865064 hannan-quinn criter. -1.072593 f-statistic 66.75420 durbin-watson stat 2.397459 prob(f-statistic) 0.000028 source: calculated by the author baltic journal of economic studies 174 vol. 2, no. 2, 2016 volume of agricultural enterprise a in 2020 will be 48245 thsd uah. at the same time, this figure can change from 30930 thsd uah to 75254 thsd uah according to the calculation. construct forecast for enterprise b using the same methodology (fig. 2). forecast reliability for the enterprise b is higher than for the previous enterprise (mape=13,0). according to a forecast, production volume of agricultural enterprise b in 2020 will be 22061 thsd uah. at the same time, this figure can change from 15354 thsd uah to 31697 thsd uah according to the calculation. 5. survey methodology the survey based on statistical data of state statistics service in ukraine, poland and accounting data of investigated enterprises during 2004-2013 years. production volume and capital amount taken in monetary terms, labour factor is calculated in monetary terms using the average wage and the number of employees. treatment of major production factors according to classical economic theory is generalized. correlation of v, l and k factors are calculated using method of the least squares in production function evaluation. production volume of enterprises a and b is forecasted with further evaluation of its reliability in the econometric program eviews 7. 6. conclusions according to the statements of classical economic theory, production factors include land, labour and capital. all of these factors are equally important for the production process. research of the correlation between production volume, labour and capital can be done by using cobb-douglas production function. research is shown that agricultural enterprises in ukraine are less competitive then in poland because of higher labour input and lower capital investments, for example, in ukraine average enterprise has l=0,39 and k=0,88. at the same time in poland these factors are l=0,20 and k=2,28. this situation requires increase of investment in fixed assets of agricultural enterprises and optimizing labour usage. investigated agricultural enterprises a and b have worse ratio of production factors than the average in ukraine. for fig. 2. forecast of agriculture products production for enterprise a, thsd uah source: calculated by the author fig. 2. forecast of agriculture products production for enterprise b, thsd uah source: calculated by the author 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 2004 2006 2008 2010 2012 2014 2016 2018 2020 v_mf ± 2 s.e. forecast: v_mf actual: v_m forecast sample: 2004 2020 included observations: 17 root mean squared error 5525.501 mean absolute error 4287.857 mean abs. percent error 16.15372 theil inequality coefficient 0.076492 bias proportion 0.026809 variance proportion 0.247852 covariance proportion 0.725339 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 2004 2006 2008 2010 2012 2014 2016 2018 2020 v_schf ± 2 s.e. forecast: v_schf actual: v_sch forecast sample: 2004 2020 included observations: 17 root mean squared error 2787.164 mean absolute error 2060.985 mean abs. percent error 12.98161 theil inequality coefficient 0.081682 bias proportion 0.009603 variance proportion 0.113152 covariance proportion 0.877245 baltic journal of economic studies 175 vol. 2, no. 2, 2016 the enterprise a it’s l=0,74 and k=0,12 as well as for the enterprise b it’s l=0,85 and k=0,48. high determination coefficient for these companies shows that labour and capital influence on production volume at 85% for the enterprise a and at 95% for the enterprise b. forecasts for both enterprises indicate that there is high probability level for production volume increase in future which mean necessity in infrastructure investments and search of the new distribution channels. at the same time, for achieving this growth it’s reasonable to invest in equity not in labour for improving competitiveness of ukrainian agricultural enterprises in long-term period. references say, j.-b. (2012). a treatise on political economy. – london, forgotten books, 494 p. smith, a. (2012). the wealth of nations. – london, simon & brown, 544 p. shumska, s.s. (2007). the instrument of production function in ukrainian economy research. – economics and forecasting, vol. 4: 104-123. shepherd, r .w. (2015). theory of cost and production functions. – princeton, princeton university press, 322 p. shumska, s.s. (2007). production function in economic analysis: theory and practice of usage. – economics and forecasting, vol. 2: 138-153. kundyzky, o.o. (2012). economic regulation of inputs reproduction. – sumy, dovkillya publishing, 344 p. mocherny, s.v. (2005). economic encyclopedic dictionary. – lviv, svit publishing, 616 p. сергей ус оценка производственной деятельности и развитие сельскохозяйственных предприятий украины аннотация. целью статьи есть анализ соотношения между объемом производства (v), фактором труда (l) и фактором капитала (k) с последующим прогнозом объема производства исследованных сельскохозяйственных предприятий в украине, а также их конкурентоспособность на европейском рынке. методика. исследование основано на статистической информации государственной службы статистики украины, польши и бухгалтерской отчетности исследованных предприятий в период 20042013 годов. производственный объем и капитал взяты в денежном выражении, фактор труда рассчитан в денежном выражении с помощью показателей средней заработной платы и количества работников. обобщена трактовка основных производственных факторов в соответствии с классической экономической теорией. корреляция факторов v, l и k рассчитана с помощью метода наименьших квадратов через оценку производственной функции. спрогнозировано объем производства предприятий а и в с последующей оценкой его достоверности в эконометрической программе eviews 7. результаты исследования отображают доминирующую роль фактора труда над фактором капитала, особенно после экономического кризиса 2008 года в исследованных сельскохозяйственных предприятиях украины. высокий коэффициент детерминации указывает на влияние обоих факторов на объем производства на уровне 85% для предприятия а и 95% для предприятия в. прогноз производства демонстрирует увеличение его объема в обоих предприятиях с высокой вероятностью в соответствии с индикатором достоверности прогноза mape. практическое значение. применение полученных результатов, в частности соотношения факторов производства и прогноза его объема, позволит эффективнее использовать производственные ресурсы и точнее планировать производственный процесс в соответствии с конъюнктурой рынка. значение/оригинальность. оценка производственной деятельности и прогноз результатов производства исследованных предприятий использованы для сравнения конкурентоспособности сельскохозяйственных предприятий украины и польши, что важно в условиях процесса европейской интеграции отечественной экономики. baltic journal of economic studies 42 vol. 6, no. 5, 2020 corresponding author: 1 kyiv national university of culture and arts, ukraine. e-mail: ludavic@meta.ua orcid: https://orcid.org/0000-0001-6975-5813 2 national university of life and environmental sciences of ukraine, ukraine. e-mail: marina.dielini@gmail.com orcid: https://orcid.org/0000-0003-1016-2305 researcherid: http://www.researcherid.com/rid/aap-2566-2020 3 kyiv national university of culture and arts, ukraine. e-mail: glo1991@bigmir.net orcid: https://orcid.org/0000-0001-5621-0910 doi: https://doi.org/10.30525/2256-0742/2020-6-5-42-53 a value-oriented polyparadigmal approach to the development of management education in the conditions of transformation change liudmila batchenko1, maryna dielini2, liliia honchar3 abstract. the purpose of the article is a theoretical, methodological, and practical justification for the introduction of a value-oriented polyparadigmatic approach to the development of management education. methodology. scientific analysis is carried out by an interdisciplinary system of methods: systemic philosophical analysis, structural functional method, generalization, modeling, and others. results. the known methodological approaches to the formation of modern educational models of management training are considered; the essential concepts of educational paradigms are revealed and the necessity of their generalization is scientifically confirmed; the presence of values in each of them is established, which allowed to justify the polyparadigmatic approach to the development of management education. the most significant scientific results: the author’s definition of the concept “value-oriented polyparadigmatic approach” is proposed, which is based on the understanding of the need to integrate effective educational paradigms based on the correlation of their valuable component in the educational construct of polyparadigmatic approach to management personnel development; principles of valueoriented approach to management activity (the principle of cognitive integrity; methodology; national orientation; axiological mediation; feasibility; polysubjectivity; the principle of statehood; scientific) is defined, the effectiveness of which ensures the complexity of their use at any level of management; axiological functions of the modern education system (ecological, humanistic, cultural heritage, creative, developmental, adaptive) are substantiated, which include certain axiological attitudes, affect the value aspects of training and education of the future manager and are important for the educational system, society, state, individual people in the present and will remain relevant for the future; a matrix of valuable orientations of the subjects of managerial activity is formed, which, according to the functional approach, has generalized the key parameters of determining the bank of competencies of managers. the practical significance of the study is in expanding and supplementing the theoretical and applied knowledge of management; in the possibility to apply knowledge in the educational process in the implementation of a value-oriented polyparadigmatic approach to management education; in use in the preparation of new regulatory and methodological documents on higher management education. value/originality. the originality of the scientific research is represented by a fundamentally new combination (set) of methodological tools that ensure the uniqueness and value of scientific research. key words: axiology, value-oriented approach, methodological approach, paradigm, polyparadigmatic approach, manager, managerial education. jel classification: a22, b41, i21, m53 1. introduction the relevance of the study is due to a number of objective circumstances, among which the following are of particular importance: the urgent need for a systemic view of modern management education in the transformation of socio-economic relations, radical changes in all areas, affecting the state and development of higher education in general and management in baltic journal of economic studies 43 vol. 6, no. 5, 2020 particular. scientific interest in the study of axiological issues is caused by transformational social changes, which, on the one hand, have led to changes in traditional values that have been focused on the education system, and on the other hand, have given rise to new values. this problem has prompted the scientific community to expand and improve value-oriented approaches for the further development of management education. the urgency of this theoretical and applied problem requires the subjects of educational activities, firstly, filling educational paradigms with new axiological (valuable) content of management training, and secondly, finding and developing a mechanism for adapting scientifically proven methodological approaches and principles to the preparation of management personnel, updating them taking into account valuable (axiological) guidelines. the purpose of the study is to identify the main paradigmatic axiological characteristics of management education; to establish the degree of their possible correlation taking into account transformational changes; to substantiate the introduction of a value-oriented polyparadigmatic approach to the development of management education in the conditions of transformational changes. the most significant scientific results: – the author’s definition of the concept “value-oriented polyparadigmatic approach” is proposed, which is based on the understanding of the need to integrate effective educational paradigms based on the correlation of their valuable component in the educational construct of polyparadigmatic approach to management personnel development; – the principles of value-oriented approach to management activity (the principle of cognitive integrity; methodology; national orientation; axiological mediation; feasibility; polysubjectivity; the principle of statehood; scientific) are defined, the effectiveness of which ensures the complexity of their use at any level of management; – the axiological functions of the modern education system (ecological, humanistic, cultural heritage, creative, developmental, adaptive) are justified, which include certain axiological attitudes, affect the value aspects of training and education of the future manager and are important for the educational system, society, state, individuals in the present and will remain relevant for the future; – a matrix of valuable orientations of the subjects of managerial activity is formed, which, according to the functional approach, has generalized the key parameters of determining the bank of competencies of managers. based on the nature of the study, methods of various sciences were used, such as philosophy (dialectical, formal logical, systemic philosophical analysis, critical, modeling); culturology (psychological, structural and functional, modeling); sociology (information analysis, sociological observation, expert assessment); history (historical comparative, historical systemic, generalization). each method has a certain potential and certain limitations when using in the study of the valuable component of methodological approaches and, on their basis, the existing educational paradigms of management personnel training. this comprehensive methodological approach to the subject of the study allowed to comprehensively analyze the problem of identifying current unresolved aspects of management training, defining the principles of value-oriented approach and axiological functions of the modern education system. the following approaches have been identified and studied as a special methodology: civilizational, axiological (valuable), culturological, sociocultural, competence, humanistic, praxeological, systemicactivity, and practice-oriented. according to the logic of presenting the material in the content structure of the article, the results of the study are structured in four sections: axiological (valuable) direction of managers’ education – scientific and methodological provisions and approaches to managers’ education – problem field as an indicator of transformational changes in training systems formation of an educational model for the training of management specialists. based on the results of the research, conclusions are formulated and problems for further scientific research are identified. 2. axiological (valuable) direction for training managers the study of axiology has always been important, but this problem has become especially relevant in the 21st century due to changes in structures of values. in the second half of the 19th century in the system of production management attention to social and sociocultural parameters was relatively weak. axiology has not yet penetrated into the field of labor organization and management, dominated by the principle of profit maximization through the minimization of labor costs. the tendency to form new meaningful concepts of value is based on the existence of a system of axiological knowledge, giving it a multidimensional and polyparadigmatic character. the term “axiology ” was introduced in 1902 by the french philosopher p. lapi (krainikova, 2017). axiology as a philosophical discipline explores the nature of values, their place in reality, the structure of the value world, the conditionality of social and cultural factors. axiology of education helped to create scientifically sound models of modern education, to predict trends in its development. in the second half of the 1980s, the general features of pedagogical axiology began to form (rozin, 1989; shchedrovitskii, 1993). baltic journal of economic studies 44 vol. 6, no. 5, 2020 pedagogical axiology as an interdisciplinary field of knowledge considers education, training, upbringing, pedagogical activity in the vector of basic human values. axiological priorities of strategic development of education are revealed by m.v. bohuslavskyi (1999), z.i. ravkin (1995), n.d. nikandrov (1998). in its most consistent and systematic form, the philosophy of value was formed by immanuel kant (2000), the founder of german classical philosophy, who formulated his famous questions: “what can i know?”, “what can i do?” and “what can i hope for?”. answers to them value a person, help to realize goals, ideals, hopes. values are quite diverse and create a complex system. each historical epoch and each ethnic group had its own hierarchy of values, which determined socially acceptable behavior. many researchers, including ukrainian sociologists and culturologists, have been engaged in the typology of values: o.g. drobnitckii (1966), a.h. maslow (1995, 1999), h. rickert (1998), m. rokeach (2015), v.p. tugarinov (1968), a.ya. flier (2016), v.a. yadov (1977). the evolution of society’s values takes place constantly, changing priorities and hierarchy, devaluing some and putting forward others. studies of sociologists, psychologists, and culturologists are devoted to the problem of value orientations – b.g. ananev (1968), e.i. eroshenkova (2016), and n.i. lapin (2000), d.a. leontev (1996, 2002), v.s. mukhina (2005), n.v. sharkovskaia (2008), etc. value orientations also do not have an unambiguous interpretation and are considered by researchers as conscious beliefs and ideas of the subject about the value for him. the relationship between “values” and “value orientations” is fixed as a problem of difference between declared and real values (d.a. leontev, 1996). thus, the category “value” is an interdisciplinary category. currently, based on a theoretical analysis of the category, there are more than 400 definitions of “value” from the point of view of different philosophical, sociological and psychological scientific schools, but they do not contradict each other. “value” refers to general scientific concepts, the methodological significance of which is special for the process of training of managers. analyzing the definition of value according to their essential content, it should be noted that the unifying, integrative factor of numerous value variations is education, which in itself is a value in the philosophical and methodological sense. positive changes in society are possible only when education focuses on the formation of values. the formation of value orientations is a rather complex process that changes over time and does not tolerate the directives of “imposition”, but provides a delicacy in consolidating the value orientation of higher education seekers. for management education, values are seen as the “core” of culture and education. cultural aspects are related to the content and process of preparation of this profile of the specialist through the coincidence of the main functions of culture and education – the preservation and transmission of society’s self-identity. there is a content-functional connection, which should become the basis of education of specialists in the modern world and will determine the main directions of the future educational process. the problem of the system of value orientations in education is especially relevant in the transitional periods of social development (v.i. ginetcinskii, 1989; z.i. ravkin, 1995; v.s. sobkin, 2004). the traditional system of management education, which focuses on training specialists with a set of professional competencies, no longer meets the requirements of modern business and society. modernization of vocational education is also related to the issues of axiological training of managerial staff. the most general approaches to the study of value orientations are described in the scientific literature. an important area of modern research is the study and evaluation of value priorities of future managers, modeling the system of their training taking into account the new value-oriented parameter. a comprehensive analysis of the value category allowed us to consider the axiological approach to the education system in the context of transformational changes in modern society. axiology, along with the theory of culture, psychology, pedagogy, has always been and will be the “ideological basis” for the education of future professionals. the educational potential of the educational activity of a higher education institution is a value basis for the formation of general professional competencies of applicants for higher education. despite the different formulations of the concept of value, scientists agree that human activity has axiological properties. in the new system of values, the priority should be the increase of human capital, the humanization of the economy, the inseparability and interdependence of economic and humanitarian development, effective international dialogue for peace and the achievement of sustainable development goals. 3. scientific and methodological provisions and approaches to the training of managers the procedural side of training activities is connected and disclosed through the methodological apparatus of the study (principles, functions, methods and approaches). among the basic principles there are the following: – principles of integrativeness and interdisciplinarity; baltic journal of economic studies 45 vol. 6, no. 5, 2020 – principles of regionalization and internationalization, which will help to harmonize and adapt the parameters of domestic and foreign education, ensure student mobility and the possibility of forming communicative competence; – the principle of professional self-determination and autonomy, which confirms the openness, interaction of the training system with the business environment; – the principle of openness (transparency) of learning objectives, content and evaluation criteria and ensuring a high level of personal responsibility of the student for the results of work; – the principle of continuity, multilevel educational process, which requires the creation of criteria for assessing the formation of competencies at each level of education in accordance with the national and international qualifications framework. in the process of training of future managers, it is necessary to take into account the interests of business and culture in management through the adequate formation of the functionality of future managers. in the process of performing professional duties, the manager performs a number of functions: organizational and managerial, design and technological, communication, marketing, financial and economic, legal and others. when researching the problem of training future managers and developing an improved approach to the training model, it is necessary to take into account the functionality of future managers to determine their competencies. thus, the set of future professional competencies must fully correspond to the functional areas of managers. these requirements should be reflected in educational programs, curricula, as well as in forms, methods and modern learning technologies. there is no unambiguous definition of professional competencies of graduates of higher education institution (hei) in the scientific literature. the concept of professional competence is associated with the production functions that are provided in the professional activity. their design requires joint interaction of hei, business, society, and the state. there is no universal recipe for forming a model of professional competencies. competences are not once and for all defined neoplasms, they are in constant development and renewal. competence approach is a “method of modeling and designing educational outcomes” (baidenko, 2004). multifunctional, interdisciplinary and transdisciplinary competencies create basic competencies – general scientific, socio-economic, civil law, informational and communicative, general professional (zeer, zavodchikov, 2007). universal competencies (in western terminology, soft-skills) are mental and interpersonal competencies that, unlike hard skills, cannot be quantified or certified. they are crosscutting and not subject-specific. they are subjective and poorly measured. the digital transformation of the economy and the technological revolutions of today are challenges and at the same time the need to master another group of skills – digital skills. these groups of skills should become separate puzzles in the design of the educational process and the appropriate basis for the formation of educational programs. this approach of business to the required competencies of management professionals should be taken into account by heis in a paradigmatic approach to the formation of an educational model for the training of management professionals. the educational model of the manager should take into account the existing methodological approaches: competence, humanistic, sociocultural, culturological, axiological (valuable), civilizational, praxeological, systemic-activity, and practice-oriented. the competency approach has been adopted as one of the key methodological tools for modernizing vocational education in the european countries. designing educational programs according to the competency approach means reflecting the results of education in a systemic and holistic way. competence approach is substantiated in the works of o.a. gurianova (2009), i.a. zimniaia (2006), a.v. khutorskoi (2002). the competency approach should be balanced by strengthening humanization in the educational activities of hei. humanistic approach in education (s.u. honcharenko, 2001; yu. v. senko, 2002). humanization of education is a reorientation of education from the subject-content principle of learning to understand the valuable picture of the world and, above all, the world of culture, human, to the formation the humanities and systems thinking by managers. yu.v. senko (2002) emphasizes that humanitarian knowledge is not a priori. they become (or do not become) for those who master them. it all depends on whether the applicant sees personal meaning in them. one of the most important practical directions of humanization is the meaningful transformation of syllabuses (work programs) of disciplines, so that they reflect the humanitarian nature of the student and the criteria for the humanitarian dimension of his personality. the socio-cultural approach holds significant opportunities for the implementation of essential requirements for the education system of the 21st century. it envisages combining the content of education and upbringing of young people into a holistic educational process based on a single goal, common socio-cultural values and technologies of effective learning. it ensures the harmonious development of the student’s personality. it develops education as an open organizational system that can be an important unifying factor. baltic journal of economic studies 46 vol. 6, no. 5, 2020 socio-cultural approach was formed over a long period. pitirim sorokin (2017), one of the classics of sociology of the 20th century, is rightly considered the founder of the socio-cultural approach. in the fundamental work “social and cultural dynamics” he made a revolution in the theory of sociology, subordinating it to values as the main driving force of society. one of the most important beliefs of p. sorokin (1992) is expressed in his thesis “personality, society and culture as an inseparable triad” (p. 218). in the formation of a modern understanding of the subject and essence of the socio-cultural approach contributed american sociologist t. parsons (2002), american culturologist l. white (2004), and american sociologist r . merton (1992). regarding the genesis of the development of the socio-cultural approach in ukraine, we can single out the works of l. batchenko (2018), l. honchar (2018), j. martynyshyn (2017), v. rusavska (2018), o. shcherbyna-yakovleva (2017), etc. the culturological approach is the main method of designing of personality-oriented education. the culturological approach in education is a methodological orientation, which in its philosophical basis has an axiological (valuable) vector of development, substantiated in the works of m. berdiaev (1993), a.n. leontev (1996, 2005), p. sorokin (2017). the axiological approach is one of the important directions in solving the problems of humanistic training. this approach basically considers the concept of value as a scientific phenomenon, which has the following properties: activity-related and subjective; time variable; determines the properties of personality and has different meanings for them. the contribution to the development of the axiological approach was made by m.s. kagan (1997), a.v. kiriakova (2011), d.a. leontev (2002), and others. the civilization approach (a. toynbee, 2004; g.b. kornetov, 2001; s. kopylova, 2019) as an opportunity to analyze the methodological potential in a specific historical framework allows us to present microresearch and its subjects included in the life of larger entities (culture, civilization, state, world economy). this approach enhances the formation of civic consciousness, corresponding to the challenges of civilization faced by society, education, and science. it is not possible to form civic positions fully outside the civilizational context. the praxeological approach. the managerial function is praxeological by its nature. this approach allows to optimize the quality assessment of management training and develop relevant to a modern competent educational model of a specialist manager. general ideas of praxeology are reflected in psychology (leontev, 2005); in pedagogy (kolesnikova, titova, 2005); in management (bohoiavlenska, 2004); in education (baidenko, 2004). in the conditions of necessary interaction in the educational process of hei with real business, the methodological component of professional training and adaptation of future managers should become systemicactivity and practice-oriented approaches. the systemic-activity approach to learning is based on the theory of activity of a.n. leontev (2005), which is based on the psychological concept of personality. this was a new vision of the problem of activity from the standpoint of psychological thought. the very concept of systemic-activity approach was introduced in 1985, when systemic and activity approaches were combined (ananev, 1968; davydov, 1996). the systemic-activity approach provides: – formation of readiness for self-development and continuing education; – designing the social environment of development (connection with society) in the education system; – active educational and cognitive activity; – construction of the educational process taking into account individual characteristics. the famous report of the president of the international commission on education for the 21st century jacques delors (1996) “learning – hidden treasure”, published by unesco in 1996, has not lost its relevance today. in this report four pillars on which education is based were announced: – learn to know; – learn to do; – learn to live together; – learn to be. these postulates have become decisive in the development and implementation of second-generation educational standards, which are based on a systemicactivity approach. a relatively new form in the educational process is a practice-oriented approach to student learning (bolotov, 1997; borysenko, 2017; serikov, 1999). f.g. yalalov (2008) most capaciously revealed the essence of the practice-oriented approach in the activitycompetence paradigm, according to which practiceoriented education is aimed at acquiring in addition to knowledge, skills, abilities – practical experience in order to achieve professional and socially significant competencies. practice-oriented approach should be crosscutting (conceptual) in the training of specialists. tasks focused on the implementation of real business problems should be introduced from the very beginning of training, which will ensure the aggregation of the learning process and internships, as well as the formation of students’ competencies that would ensure the performance of functional responsibilities in the speciality. considering methodological approaches will provide higher education not only practical, but also general baltic journal of economic studies 47 vol. 6, no. 5, 2020 cultural and social competencies that are necessary for their future professional activity. 4. the problem field as an indicator of transformational changes in the training systems of rulers in a globalized world, problems are caused by transformations in the technical, informational, communicative fields due to the rapid acceleration of the pace of civilizational development. in the field of management there have always been and will be problems as a result of transformation processes in economics, technology, science, which are directly correlated with the need to take them into account by the subjects of the educational process for further solution. such problems exist at all levels and can be divided into “global”, “glocal” and “local”. in general, these are problems of management, communications, infrastructure, legislation, finance and education. among the systemic consequences that will affect the situation in the educational sphere of ukraine in accordance with the significant problems there are: – marginalization of the socio-cultural sphere; – unsatisfactory quality of the educational product; – resistance to the external environment in the field of culture; – mistrust between society and the authorities; – non-promotion of culture as an important factor in the unification of society, its development; – weak development of educational infrastructure; – limited opportunities for the development of educational institutions; – insufficient extra-budgetary sources of funding for education; – the quality of management staff does not always meet modern requirements; – the network of management institutions is not used in the educational process, which contradicts modern trends. the identified “problem field” dictates the necessary system of competencies, functions and content of management, and hence sets the content of its training in the 21st century. management of the 21st century is a new paradigm of management, which is due to modern world trends, new economy, technological changes, changing knowledge for new professions, competencies, digitalization, development of e-business and the formation of business ecosystems and more. this order of world trends requires changes in the educational process of management training in the direction of expanding competencies and changing thinking – to systemic and value-oriented ones. accordingly, the training of managers according to unified methods and standards is currently impossible. the annual session of the world economic forum in davos (2020) proclaimed the “reskilling revolution” – an initiative that aims to provide 1 billion people by 2030 better skills, education and jobs. the key to training is better skills and better education. when discussing issues of professional development and the future labor market, well-known experts (m. zuckenberg, g. soros, b. gates and others) noted the rapid pace of learning – the change of key professional skills, the reorientation of most future competencies to cognitive nature (related to thinking). such statements of expert scientific opinion are a guideline for hei to rethink the process of management training and develop adequate flexible educational models. the model of a professional manager is a wide range of competencies that form the ability to apply knowledge in different situations (management, marketing, finance, economics, people management, etc.) and their deep (expert) level (functional knowledge and skills). a new key resource for management is leadership based on values, ethics, trust, creativity, and organizational culture. in the manifesto of the leader (2013) g. hamel notes that it is really important for the training of specialists now. these are ethical values, effective mechanisms of adaptation, enthusiasm for the future profession, constant involvement of students in the ideology of management. today it is especially important to realize what degree of competence and responsibility lies on the modern manager. regarding the competence horizon 2020, the world economic forum (wef, davos, 2020) ranked among the most important and relevant: critical thinking, creativity, cognitive flexibility (ability to adapt), emotional intelligence, soft skills, customer orientation, initiative, creativity, enthusiasm. these skills of future professionals should be “nurtured” on every square meter of the university. this is the purpose and mission of the university: the demand for graduates is the main task. 5. polyparadigmatic approach to the formation of an educational model of training management the era of mono-tools of learning is coming to an end; the popularity of poly-tool practices is growing. the activities of managers became the subject of research in the field of socio-humanitarian sciences in the late 20th century. the works by h. mintzberg (1991), i. adizes (2018), m. woodcock (1991), etc. are devoted to theoretical and practical aspects of managers’ work. their research sometimes does not always correspond to ukrainian realities and cannot be fully implemented in national business practice. recently, many works by domestic researchers have appeared, among which the works by l. batchenko (2018), l. honchar (2018), baltic journal of economic studies 48 vol. 6, no. 5, 2020 o. hrishnova (2001), o. kuzmin (2007, 2012), o. melnyk (2007), o. ovcharuk (2004), v. rusavska (2018) and others should be singled out. however, the issues of value regulation of managers’ activities remain insufficiently researched. the axiological side of the harmonization of the management process and, as a consequence, the system of management training is problematic today. the study of the possibilities of optimizing the educational training of managers from the standpoint of value-oriented approach is of great theoretical and practical importance. since, based on the abovementioned, management education is a complex, multidimensional educational and scientific object, which is studied from the standpoint of many sciences, so its conceptual representation (vision) should be based on a paradigmatic approach to its development. the concept of paradigm was introduced into scientific circulation by the famous american scientist thomas kuhn (1977), who proposed as a conceptual module of science to take not a separate theory, but a set of theories that form a certain metatheoretical unity – a paradigm based on different approaches and theoretical developments in scientific community. t. kuhn (1977) identified various stages in the development of the paradigm as a scientific category: – pre-paradigmatic (the future paradigm is in a state of formation, it has many opponents); – paradigmatic (period of paradigm domination); – post-paradigmatic (growing criticism of existing theory among scientists and administrative circles in science). thus, the paradigm is similar to living beings: it is born, it lives (reigns), and dies. the scientific revolution according to t. kuhn (1977) leads to a paradigm shift, the transition from one to another. that is, t. kuhn (1977) was the first to talk about changing the paradigm. “by paradigm,” writes t. kuhn (1977), “i mean the scientific achievements recognized by everyone, which for some time give the scientific community a model of problems and their solutions.” according to his general scientific definition, a paradigm is a set of theoretical and methodological attitudes, a concept broader than a theory, concept or approach. several theories, concepts or approaches to a particular object of study may correspond to one paradigm. as g. hamel (2007), authoritative american author of “management 2.0”, chief management specialist and head of the silicon valley management lab, writes in his book “the future of management”: “paradigm is more than a way of thinking, it is a worldview, a deep conviction of what kind of problems should be solved and what can be solved in general”. traditionally, the “paradigm” (paradeigma) is considered as a concept of methodology of science, but the multidimensionality, contradictions, constant variability of the modern educational environment necessitate the development of alternative concepts of educational practice and their methodological justification and design. for education, the “paradigm” is an ascending conceptual scheme, model, solution to the problem in education (learning). the paradigm of education can be understood as a set of modern basic concepts and ideas that are recognized by the scientific and educational community and underlie further research in education. higher education opens up new horizons related to innovative technologies. this is an opportunity to accumulate huge amounts of new knowledge in the field of management, economics, communication and their rapid spread. the paradigm of management education is formed also in the course of the development of management in general and the competence approach to the educational process in particular. since knowledge develops consistently and is based on its evolutionary development of succession, the development of new conceptual visions is based on probable concepts and is their generalization (figure 1). the polyparadigmatic approach takes into account the main value-oriented characteristics of paradigms. and also takes into consideration the dominant type of thinking in society in general and in business in particular, functionality, innovation, flexibility. the polyparadigmatic approach is a system of coordinates of the dominant views of the subjects of educational management training (standards, principles, models, rules) taking into account the requests of business structures. approaches are not mutually exclusive, they are used together and complement each other, giving multi-vector and multifaceted management training system. of course, in the framework of the article, it is impossible to provide a detailed description of each educational paradigm defined by the research framework and the factors of their interaction. therefore, conceptually we consider only the main paradigms, which, correlating with each other, give a synergistic effect, strengthening the competitiveness of training in management, and determine the meaningful direction of implementation in the educational process of polyparadigmatic approach. the basis of such a conceptual vision is a kind of methodological construct, which in use will be appropriate only in the system of common values. without a foundation of values, it will be just an eclectic design. the competency paradigm and methodological approaches due to it have become a strategic direction in the development of professional management education at the present stage. the main goal of the competency paradigm is to form a competent specialist in the field of management in an organic combination of baltic journal of economic studies 49 vol. 6, no. 5, 2020 complex cultural and professional competencies, based on students’ acquisition of conscious knowledge, skills, methods of activity, self-education, self-bringing up, selfimprovement and self-realization. the abovementioned elements of the complex of competence paradigm are realized through the culturological and humanistic paradigm as well. the humanistic paradigm comes down to the fact that education should shape the individuality of the specialist. humanistic education will become a means of social orientation of the individual. the formation and development of the humanistic educational paradigm determine new theoretical directions and methodological approaches, methods of organizing the learning process for further management. according to i. sergeev (2004), certain elements of the humanistic paradigm have proved to be a strong catalyst for all modern educational reform and continue to retain their role as a “breath of fresh air” in pedagogical activities (p. 123). the culturological paradigm approaches education as a sociocultural phenomenon. the problem of the relationship between culture and education is covered in the works of m. bakhtin (1985), v. bibler (1991), a. bondarevskaia (2015). in general, the cultural paradigm in terms of valueoriented polyparadigmatic approach to management training is implemented through the design of a matrix of value orientations of management entities (figure 2), functional approach of which summarizes the key parameters of defining the bank of competencies of managers. each of the abovementioned paradigms is an independent equilibrium, they are still used in the training system to some extent depending on the free economic zone, speciality, training system. but, given that modern management education is not defined by a clearly formulated single paradigm of training managers, it is necessary to recognize the fact of polyparadigm. t. kuhn’s (1977) conclusion that “no paradigm ever solves all problems” is still more relevant today than ever. but paradigms can complement each other while forming a value-oriented paradigm approach to the development of management education in a transformational change. in recent years, a number of changes have been made in the system of training management specialists. the transformation is based on a new concept of higher education, which takes into account the rapid variability of the socio-cultural situation, new priorities in social development, new trends in business education. but the rapid variability of processes and systems makes constant adjustments to educational models of training. culturological paradigm humanistic paradigm competence paradigm axiological approach practicaloriented approach competence approach systemicactivity approach humanisticapproach praxeological approach culturological approach civilizational approach socio-cultural approach figure 1. polyparadigmatic conceptual approach to management training baltic journal of economic studies 50 vol. 6, no. 5, 2020 procedurally in the design of training of managers qualitatively new parameters should be used that would ensure the implementation of innovative educational technologies through the creation of an effective mechanism for their implementation in the training process. guaranteeing quality management education in the 21st century is possible only on the basis of the principle of polyparadigm: the integration of modern innovative educational systems of education and personal development in the training process. the polyparadigm of modern science and education is already a recognized fact. changing scientific and educational paradigms in educational activities is necessary for further transformations. the polyparadigmatic approach to the management education system provides an opportunity to analyze specific phenomena, situations, conditions comprehensively, which will serve as a certain indicator for choosing the necessary innovative flexible educational model, synthesizing the role of which will be in the value-oriented vector of management education. 6. conclusions the results of research, based on scientifically and methodologically sound basic provisions, basic principles and existing educational models of training, as well as on the analysis of the requirements for the training of managers, indicate that: 1. conceptual view of the polyparadigmatic approach to the educational process of management training not only actualized the problem points of management development, but also justified their solution in the value-oriented vector of management education, which will prevent the lag of meaningful content of university management education (national and foreign). 2. using the term “value-oriented polyparadigmatic approach” to the training of managers, we understand that its phenomenon is quite rare. in our understanding, the change of the existing paradigm of training managers is presented as the formation of a new understanding of some of its key parameters, i.e. certain paradigm changes that are necessary and dictated by time, market, business and can synergize on educational outcomes. 3. this polyparadigmatic conceptual vision requires concretization to the level of organizational and technological mechanism, which must be further implemented in the form of innovative scientific and methodological approaches to improve practical results in the educational process of training. 4. implementation of the main provisions of the polyparadigmatic conceptual approach to the training of managerial staff will create a scientific and professional basis in the system of training management, which focuses on the formation of values, social activity, patriotism, civic position, cultural tolerance and more. prospects for further scientific exploration in this direction are primarily: – theoretical and methodological substantiation of the development of educational models that would reflect the convergence of modern science and innovative technologies in the higher education system. economic values: 1. anthropocentrism of economic activity 2. the knowledge economy 3. economic culture 4. competitive centrism 5. economic efficiency professional values: 1. critical thinking 2. innovation and creativity 3. compliance 4. customer orientation 5. stress resistance, flexibility to change values of interpersonal relationships: 1. communicativeness 2. team orientation 3. reputational capital 4. adaptability to the culture of the organization 5. ability to motivate yourself and others personal values: 1. positive thinking 2. empathy 3. honesty 4. responsibility 5. professionalism figure 2. matrix of value orientations of subjects of administrative activity baltic journal of economic studies 51 vol. 6, no. 5, 2020 – development of a single information space of scientific communication in the field of management; – features of training of management specialists in accordance with the needs of regional labor markets; – digitalization of the educational process – the use of informational educational technologies (digital technologies) during the full educational cycle of management training. references: adizes, і. 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(in russian) baltic journal of economic studies 141 vol. 6, no. 4, 2020 corresponding author: 1 district administrative court, ukraine. e-mail: paazu@ukr.net 2 classical private university, ukraine. e-mail: julia_v_abakumova@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-4-141-148 principles and problems of financial provision of education to persons sentenced to imprisonment oleksandr prasov1, yuliia abakumova2 abstract. the purpose of the article is to study the economic and legal problems of financing the education of persons sentenced to imprisonment, realization of their constitutional right and to propose to eliminate existing gaps in the legislation. methodology. the survey is based on an analysis of the principles of financing education, including prison education, on the procedure and problems of financing education for persons sentenced to imprisonment. the principles, good practice and problems of providing educational services in singapore, japan, hong kong, south korea, finland, the netherlands, canada, poland, germany, ireland, great britain, the usa, estonia, kazakhstan, ukraine, the russian federation are considered. sourcing of education (state, non-state and mixed) are investigated. the analysis of macro indicators of social and economic development of the countries, in which certain system of financing of education operates, is carried out. emphasis is placed on the fact that the country's development largely depends on the share of gross domestic product spent on research. only if the cost of science exceeds 0.9% of gross domestic product, it can be said about the impact of science on the development of the state economy. it is concluded that most european countries use the so-called principle of "funding formula", according to which the state allocates financial resources to higher education institutions in amounts determined by special indicators, such as high quality of education, number of students, labor intensity and material consumption of the education process. results. in the process of studying the state policy on financing the educational system, it has been concluded that tthe most developed countries with a sufficiently high level of gross domestic product per capita have the state system of financing higher education. the main positive feature of penitentiary educational systems is their focus on the prisoner as an individual to provide his or her needs, the opportunity to acquire professional skills and, in the future, to integrate into society and restore his or her social status easily. the authors also conclude that due to certain difficulties in obtaining education by prisoners, namely, most of these persons cannot get an education because they are in isolation from society, their attendance at school is impossible, the way out of this situation is distance learning. practical implications. proposals have been made, according to which higher education for persons sentenced to imprisonment should be regarded as paid activity along with work, and the possibility of obtaining distance education should be enshrined in law. value/originality. the article provides proposals for amendments to the legislation in the field of education for persons sentenced to imprisonment in some post-soviet countries for the harmonization of regulations. key words: right to education, system of education, sourcing, budgetary facilities, imprisonments, realization of right to education. jel classification: а12, а13, d63, h52 1. introduction persons sentenced to imprisonment remain citizens of their state, and, accordingly, they are subject to all rights, legitimate interests and legal obligations of human and citizen, except for restrictions related to the fact of their imprisonment. one of the purposes of imprisonment of a person who has committed a crime is his or ehr correction and resocialization. correction is the process of positive changes that occur in the personality of the offender and create his or her readiness for self-directed lawabiding behavior. in turn, resocialization is a conscious restoration of a prisoner in the social status of a full member of society, his or her return to an independent generally accepted social normative life in society (criminal executive code of ukraine, 2004). baltic journal of economic studies 142 vol. 6, no. 4, 2020 the constitution of each developed country provides the rights and responsibilities of human and citizen, including the right to education. in most european countries, the country ensures a complete general secondary education accessible to everyone. there is also state funding not only for preschool, complete secondary education, but also vocational and higher education (maklakov, 1999). in view of the above, it can be argued that persons sentenced to imprisonment have the right to education, as well as any other citizen of the country. the following scientists devoted their scientific works to the study of problems related to ensuring the right to education of persons sentenced to imprisonment: h. a. avanesov, m. l. ahranovych, yu. m. antonian, v. a. badyra, a. v. bailov, o. i. bohatyrova, v. o. boniak, o. v. vakulenko, o. v. haltsova, a. v. hradetskyi, o. v. honcharenko, d. v. zahula, ya. s. ivasenko, o. m. kozhevnykova, yu. o. matvieieva, o. v. poletaiev, a. kh. stepaniuk, s. v. siur, a. v. fadieieva, etc. when representing significant scientific value, most studies lack the implementation of the right to education by persons sentenced to imprisonment and the problems of its sourcing. the purpose of the article is to study the economic and legal problems of financing the education of persons sentenced to imprisonment, realization of their constitutional right and to propose to eliminate existing gaps in the legislation. 2. modern principles and problems of sourcing the educational system effective education of the population of any country acts not only as a driving force of political, economic, technical progress, but also as a basis of national consciousness, patriotism, desire of constant selfimprovement and increase of the countrie's potential. knowledge, information and the ability to use them correctly are the greatest resource and factor of economic growth. education performs one of the most important functions: to provide the state with the necessary qualifications (kozarezenko, 2010). world experience shows that most of the country 's development largely depends on the share of gross domestic product (hereinafter referred to as gdp), which is spent on research, and only if the cost of science exceeds 0.9% of gdp, it can be said about the impact of science on development of economics (malitskyi, 2004). however, not every state is able to create the necessary conditions for the development of science and sufficient funding for education. given the above, it is worth paying attention to the principles of financing the educational process in countries with the best educational systems, including the united kingdom, hong kong, ireland, canada, the netherlands, germany, south korea, poland, singapore, finland, japan and some others. according to the official world ranking of education, we currently have the following situation. the first place is occupied by singapore, then: 2. hong kong; 3. south korea; 4. japan; 5. taiwan; 6. finland; 7. estonia; 8. switzerland; 9. the netherlands; 10. canada; 11. poland; 12. vietnam; 13. germany; 14. australia; 15. ireland; 16. belgium; 17. new zealand; 18. slovenia; 19. austria; 20. the united kingdom; 21. the czech republic; 22. denmark; 23. france; 24. latvia; 25. norway; 26. luxembourg; 27. spain; 28. italy; 29. the usa; 30. portugal; 31. lithuania; 32. hungary; 33. iceland; 34. russia; 35. sweden; 36. croatia; 37. slovakia; 38. ukraine; 39. israel; 40. greece, etc. the states of africa were the last (kohlan, 2015). this result is particularly surprising, given that until the 1960s, singapore had one of the highest levels of illiteracy. it is safe to say that an effective educational system plays a key role in the country 's success. the singapore government does not spare funds for the education of its citizens. every year, 12.1 billion usd is invested in this area (kohlan, 2015). in general, in many asian countries, schools expect high results from each student. there is a lot of impulse, focus and consistency, as these countries are able to attract the most talented teachers, which accordingly implies a high level of sourcing for the educational system (kohlan, 2015). for example, japan, a country with the highest level of technology, has such potential, not least due to reforms in the educational system. in this country, the educational model has been completely changed and an effective system of quality control has been created. the literacy rate in japan is 99.9%, despite the fact that only primary education is compulsory (the best educational systems in the world, 2018). the people of hong kong have the highest iq on the planet. this country is characterized by high achievements in the field of technology due to the excellent educational system. education in hong kong is built on the same model as in the united kingdom. it is under the control of the bureau of education and the department of social security. 12-year education is compulsory in the state. the government encourages private primary and secondary schools that have achieved a fairly high standard of education. such schools are awarded a subsidy, which is provided according to the number of students (the best educational systems in the world, 2018). south korea's educational system is developing rapidly. the country is the leader in the number of people obtained higher education. education is the main life position of the country 's population. the schools have the most comfortable conditions for learning, in particular, each student is provided with a personal locker, primary classes are taught separately from secondary and high school, each class of primary school has a special place for recreation and a creativity baltic journal of economic studies 143 vol. 6, no. 4, 2020 area. elder students study in rooms equipped with a tv, blackboard and, in some cases, an interactive screen. schools have a football field, a sports field, and in addition, there may be a swimming pool, archery and golf court, a small garden or a mini-arboretum, which is cared for by children. the annual budget for education in south korea is 11.3 billion usd (khshanovych, 2018). finland implements a special approach to the educational process, which is expressed in the fact that schoolchildren and students are given maximum freedom. education is free, food is also provided if the student is present at school full time. the country pays great attention to attracting applicants to higher education institutions. finland has a fairly large budget for education: 11.1 billion eur per year (yurchenko, 2019). the educational system of the netherlands is efficient. firstly, educational institutions in this country are divided into religious and public. education is free at all levels. in some cases, private schools still require tuition fees, including for additional educational services. a feature of the educational system in the netherlands is that students under the age of sixteen are required to devote a full day to education. in the future, they have the right to choose the opportunity to receive higher education and, accordingly, to study full or part time freely (the best educational systems in the world, 2018). in canada, the quality of education is quite high, as the government pays great attention to its standards. education is mainly funded by the government of each individual province. the canadian educational system is unique as it integrates materials from different cultures into the curriculum, so students have the opportunity to perceive the world from different perspectives from childhood (yurchenko, 2019). poland is the first country in the world to have its own ministry of education. this state has high literacy rates. compulsory education lasts 9 years. after graduation, a person has the opportunity to enter a lyceum or college. polish higher education is recognized in many countries due to its consistently high quality. the european system of higher education is practiced in the country. there are two admission campaigns per year to higher education institutions, which avoids the loss of a student for the entire academic year. 70% of polish students are taught in english (the best educational systems in the world, 2018). the german educational system is deservedly considered one of the best in the world. compulsory education in the state lasts 9 years. as for the german higher educational system, it is funded by the state and belongs to the institutions of public administration. the number of private higher education institutions is about 10% of the total. they are, in most cases, related to legal and economic specialties. 10% of the budget of german higher education institutions comes from the federal government, and 90% – from the federal lands. the german government is also making significant investments in the development of domestic science. thus, in 2005, an additional 6 billion eur was allocated for the government's best of the best program (otroshchenko, 2018). ireland's educational system is also considered one of the best, as education in this country is absolutely free at all levels, including higher education and colleges. currently, the emphasis in education is on learning and teaching in irish. in the state, education is compulsory for all children. all educational institutions, including private ones, are fully funded by the government in order to provide free and quality education at all levels and to all residents of the country (the best educational systems in the world, 2018). the uk is well known around the world for the quality of its education not only at the school level but also at the higher education level. university of oxford is the number one university in the world. in the uk, education is largely funded by the state. there is also a form of sourcing such as a grant, which is issued taking into account the government's priorities for the development of science and education. the award of the grant mainly depends on the indicators of the number of students, the complexity and material intensity of their education. also, significant financial resources are allocated to support talented youth (malik, 2014). the united states ranked 29th in the above ranking, behind successful european countries in terms of schooling, indicating the need to improve the quality of education in the country, especially given that according to a study by the national center for quality of personnel education increasing the level of education of employees by 10% improves their productivity by 8.6%, while increasing the same amount of investment in technical equipment leads to the development of productivity by only 3.4% (first findings from the eqw national employer survey, 2017). among the countries of the post-soviet space, the estonian educational system is the most effective, which ranks seventh in the world education ranking. according to the results of pisa in 2015, this country is among the ten countries that have shown the greatest success in mathematics, science and reading, ahead of finland. the estonian educational system is characterized by such a feature that it strives for the maximum equality of its citizens, in particular with regard to ensuring the right to education. education in estonia, as in other nordic and baltic countries, is financed from the state budget. private funding amounts a small share (yurchenko, 2019). in a post-soviet state such as kazakhstan, despite the financial crisis of the last 10 years, significant financial resources have been allocated for education. budget funding for education increased by 10.7% and amounted to 627.3 billion kzt (tuimebaiev, 2019). baltic journal of economic studies 144 vol. 6, no. 4, 2020 it is concluded that most european countries use the so-called principle of "funding formula", according to which the state allocates financial resources to higher education institutions in amounts determined by special indicators, such as high quality of education, number of students, labor intensity and material consumption of the education process, etc. (yashchuk, 2019). thus, the effective provision of education of the population determines the rapid development and strengthening of the countries' economic position. however, if the provision of full general secondary education to the population, in civilized countries, is the responsibility of the state, the sources of funding for education, especially higher education, can be different, namely: public, private and mixed. public funding is possible in the form of: direct funding; additional allocations for certain categorical programs or activities; grants or subventions; targeted allocation of special material resources; granting benefits; granting a place in a higher educational institution by competition; implementation of specific programs for financing education (lending, voucher education, providing food for low-income children, etc.); according to a formula that takes into account certain quantitative and qualitative indicators of educational activities of a particular educational institution (urusova, 2013). the system of public funding of higher education is effective, for example, in germany, norway, france, sweden. implementation of non-public funding is possible as follows: funding for training in accordance with the concluded agreement on retraining; providing subsidies from local budgets; allocation of funds received by the educational institution for research or other work performed on behalf of organizations, enterprises, institutions or citizens; receiving income from the sale of products of training and production workshops, laboratories of enterprises; receiving funds from the lease of premises, buildings, equipment of the educational institution; payment for the provision of additional educational services or services to provide greater comfort during training; lending and lending by banks; receipt of dividends from securities and income from placement on time deposits of temporarily free funds; receiving by the educational institution from enterprises, institutions, organizations or citizens of voluntary monetary contributions or material values, in the order of sponsorship (urusova, 2013). such a system of financing higher education exists, in particular, in australia, south korea, the united states, and japan. table 1 macro indicators of socio-economic development of states with a state system of sourcing higher education country population gdp (mln usd face value) gdp (mln usd per capita) public expenditure on education (% of gdp) government spending per 1 student (usd) germany 82800000 3466639 48111 4,81 6872.53 norway 5258317 370449 69249 7.55 13811.01 france 67013000 2463222 42314 5.46 6590.46 sweden 10053200 511397 49836 7.55 14280.05 table 2 macro indicators of socio-economic development of states with a non-public system of sourcing higher education country population gdp (mln usd face value) gdp (mln usd per capita) public expenditure on education (% of gdp) government spending per 1 student (usd) australia 24458800 1258978 48899 5.32 5948.92 south korea 51446201 1411246 37740 5.25 7289.88 usa 324973000 18569100 57436 4.99 6522.3 japan 126790000 4938644 41275 3.47 3047.7 table 3 macro indicators of socio-economic development of states with a mixed system of sourcing higher education country population gdp (mln usd face value) gdp (mln usd per capita) public expenditure on education (% of gdp) government spending per 1 student (usd) great britain 65110000 2629188 42481 5.54 4120.21 canada 36539100 1529224 46437 7.1 15004.05 ispania 46812000 1232597 36416 4.28 4076.34 italy 60599936 1850735 36833 4.08 5396.7 baltic journal of economic studies 145 vol. 6, no. 4, 2020 the mixed system of financing higher education is typical, for example, for great britain, canada, spain, italy, and the post-soviet states. if we pay attention to the dependence of the types of financing of higher education on the macroeconomic indicators of socio-economic development of a particular state (in% of gdp) (zhuravel, shynkaryk, 2020), we see the following result. expenditures on financing education at the expense of the state are provided by a separate item of the state budget. it is clear that the level of funding for education directly depends on the state budget. therefore, the state system of financing higher education has the most developed countries with a fairly high level of gdp per capita. unfortunately, not all countries have the ability to provide adequate funding for the educational system. in many cases, public funding is insufficient to implement all necessary educational programs, and attracting private investors makes educational institutions dependent on the latter. if we pay attention to the problems of financing higher education, for example, ukraine, we can note the following. despite the fact that the state has a fairly extensive and powerful system of higher education institutions of all forms of ownership, the share of their funding from the state is insignificant, and this percentage decreases every year. over the last five years, budget funding for higher education in ukraine has decreased (in% of gdp) from 9 to 5.4%. and this is not surprising, especially considering that, for example, in 2016, ukraine ranked 138th out of 189 countries in terms of gdp per capita (kononenko, 2017). in financing education, the state sees a socio-political component rather than investing in human potential, which threatens the country 's development. therefore, in order to ensure sufficient funding for education, in addition to budget funds, it is necessary to attract more funds from other sources of funding (lending, loans, grants, etc.). and, for example, the main problems of the educational system of the russian federation (hereinafter referred to as russia) are the lack of independence of recipients of budget funds and low managerial and financial and economic qualifications of managers of the educational system (kaleniuk, 2017). based on the above, we can conclude that education is an important factor in economic and technological progress of any state. each country has its own educational system, which is consistent with the national system of budget policy and its traditions. 3. principles and problems of sourcing education for persons sentenced to imprisonment as noted above, persons sentenced to imprisonment have equal rights with other citizens of the state, except for those rights that are limited by a court decision or by law. therefore, like other citizens, such persons have the right to education. for the most part, such a right is explicitly stipulated in the relevant legislation of the country. for example, in accordance with art. 8 of the criminal executive code of ukraine "basic rights of convicts", convicts have the right: in penitentiaries, in accordance with the laws of ukraine "on education" and "on general secondary education", to ensure the availability and free of charge of full secondary education. general education and vocational training of convicts is carried out to promote the development of the individual, in order to correct and resocialize the person. in addition, it provides a system of knowledge, skills and abilities in the field of a particular speciality, which will be needed by a person after release (criminal executive code of ukraine, 2004). convicts who wish to improve their general education level, regardless of age, are provided with conditions for selfeducation, given the opportunity to study in general educational institutions of colonies created by local executive bodies and local governments in accordance with their needs and with the necessary logistical and scientific methodical base, pedagogical staff in the manner prescribed by the cabinet of ministers of ukraine (part 2 of art. 125 of the criminal executive code of ukraine). in addition, secondary schools of three levels are formed in educational colonies. textbooks, notebooks and stationery are provided free of charge for convicts who study in these schools. for convicts who do not have a vocational profession for which they can be employed in this colony, it is possible to train in vocational training courses for workers in the workplace (criminal executive code of ukraine, 2004). it can be noted that in this part the norms of the penitentiary legislation of ukraine generally correspond to the european penitentiary rules, according to para. 28.1 of which each penitentiary institution should strive to provide all prisoners with access to educational programs which should be as comprehensive and meet individual needs of the prisoners and their aspirations. para. 28.3 emphasizes that special attention should be paid to the education of young prisoners as well as prisoners with special needs (european penitentiary rules, 1987). and, according to the standard minimum rules for the treatment of prisoners, “prisoners who are able to benefit from this should be provided with the opportunity for further education, including religious education, in countries where this is permitted. education of illiterate persons and young people should be considered compulsory, and prison authorities should pay special attention to it; the education of convicts should, as far as possible, be linked to the country 's educational system so that released prisoners can continue their studies without complications” (para. 77) (chechyn, 2016). baltic journal of economic studies 146 vol. 6, no. 4, 2020 in the case of training of convicts not only the constitutional right to education is realized, but also the horizons of the latter are expanded, it is possible to see and assess the existing reality, new needs of persons are formed, which can contribute to further correction and resocialization of the prisoners, which has a positive effect on increasing their employment. but the education of convicts has its own specifics, which concerns not only the process of its actual implementation but also funding. the main problem with such training is that the person is isolated from society. in addition, on the one hand, giving convicts the opportunity to receive education is a manifestation of humane treatment (humanization of the penitentiary system), on the other hand, often the need to receive education is perceived by prisoners as an additional punishment (chechyn, 2016). in addition, in countries with insufficient budget support for the educational system, prisoner education is funded on a “residual basis”. therefore, the experience of those countries in which the level of gdp per capita is quite high, and at the same time, whose policy in the field of realization of the right to education of persons sentenced to imprisonment, has certain call points and standards may be useful. for example, in finland a lot of attention is paid to the re-education and resocialization of convicts, significant funds are allocated for their training, various forms and methods of training are used, and special training courses are developed. prisoners have the opportunity, if necessary, to study during working hours. external educational institutions are involved in cooperation (yunkari, 2004). the main purpose of education in finland, for the further resocialization of convicts, is to increase or improve their vocational skills. convicts receive general education in this country, as in many other countries of the world, free of charge. in prison, they also have the opportunity to prepare for university entrance exams and, if successful, to continue their education there, even while in prison. if the prison library does not have the necessary literature to prepare for admission, prisoners can buy books in educational institutions or public libraries. in some cases, convicts may be allowed to study or work outside the prison without additional supervision (shevchenko, 2015). in german prisons, a large percentage of prisoners do not even have compulsory basic education. in order to remedy this situation in prisons, convicts are provided with education using an individual approach to each, which involves the development of a number of educational programs. general education is free. convicts also have the opportunity to receive higher education. the end of a prisoner's vocational training occurs at the same time as the end of his sentence, so that a person can, immediately after release, integrate normally into public life. the organization of professional training of convicts and their professional development in places of imprisonment in germany is carried out jointly by the administration of these institutions and a special trade union (pshenychka, 2019). swedish prisons have all the necessary conditions for convicts to receive education. vocational education is provided to prisoners at their request and is paid for from the budget. distance learning and individual approach are used. a personal training program is developed for each prisoner, taking into account his or her needs, which can be continued after release. if a convict wishes to continue his or her education after release, he or she must inform the prison administration in advance in order to organize his or her admission to the relevant educational institution (shevchenko, 2015). in france, secondary education is compulsory, including for prisoners. the french penitentiary system is part of the ministry of justice and reports to the prison administration. it consists of 9 regional directorates, one mission dealing with overseas departments and territories, and one national school of prison administration. 186 institutions are subordinated to the prison administration, of which 119 are remand prisons, 55 are institutions for serving criminal sentences, 12 are autonomous centers of semi-free regime and one public institution of national health care (aleksandrov, 2004). much attention in french prisons is paid to the training of prisoners. ensuring this opportunity is mainly entrusted to the organization of the greta system of national education (alexandrov, 2005). the main task of this organization is to ensure lifelong learning. in the united states, the educational system in prisons is provided in a decentralized manner, which, in addition to federal prisons in the states, provides for local and private prisons. in order to adapt and resocialize convicts, they are provided with psychological services, education is provided in accordance with school and university curricula, the process of professional training is organized, they are given the opportunity to participate in religious groups, industrial production and agricultural work. scholarships are paid to convicts during their studies at vocational training centers. convicted persons who have not been prosecuted for a long time have the right to request free vocational training through the administration of the departments (pshenychka, 2019). the main positive feature of penitentiary educational systems is their focus on the prisoner as an individual to provide his or her needs, the opportunity to acquire professional skills and, in the future, to integrate into society and restore his or her social status easily. the most effective for places of imprisonment is the training of a convict by distance learning. the advantages of this method of education, first of all, are: providing prisoners with equal opportunities with other citizens to obtain education, ie the realization of their constitutional right; providing prisoners with an additional guarantee of choosing a profession after release; opportunity to practice at a convenient time and in a convenient place baltic journal of economic studies 147 vol. 6, no. 4, 2020 and mode; providing an unregulated period of time for the study of the discipline, which in the conditions of places of imprisonment is very relevant and so on (hradetskyi, 2015). but such training requires the provision of appropriate information technology, which involves the allocation of significant financial resources. the budgets of many states cannot even afford to fund the education of prisoners. therefore, it can be assumed that it is necessary to look for other sources of funding for education in prisons. thus, if a person works in prison and receives a salary, a person could provide funding for his or her own education. however, if we draw a parallel in this area between the penitentiary system, for example, france and russia, we can see that the latter prisoners are deprived of such an opportunity. the salary of french prisoners is about 300 usd a month, while in russia it is about 10 usd. in addition, in french prisons, prisoners do not pay for food, while in russia the state takes a significant portion of food from the salaries of convicts. but when financing the penitentiary system of education, problems arise not only due to insufficient funds, but also due to inconsistencies in legislation in this area. thus, for example, according to the order of the ministry of justice of ukraine no. 2823/5 dated auguat 28, 2018 “on approval of the rules of procedure of penitentiary institutions”, convicts have the right to receive education in accordance with the legislation on education (para. 2). at the same time, the ukrainian legislation (criminal executive code of ukraine, 2004) deals only with the types and forms of education, but there is no indication of the procedure and methods of education. according to the law, the only way to obtain higher education in places of imprisonment in ukraine is distance learning, given the lack of financial capacity to provide all the necessary technical base. therefore, the legislation of ukraine requires clearly defined rules for the education of persons sentenced to imprisonment. there are other difficulties in obtaining education for prisoners. most people sentenced to imprisonment cannot get an education because they are in isolation from society, and therefore it is impossible for them to attend school, because convicts are obliged to adhere to the regime of the penitentiary institution. distance learning is a way out of this situation. but it not only needs funding, it also takes a long time. therefore, attention should be paid to the experience of finland, where prisoners have the opportunity to study during working hours. the european penitentiary rules also state: "under the internal regime, the status of education must not be lower than the status of work, and prisoners must not be financially oppressed or otherwise involved in educational programs" (para. 28.4) (european penitentiary rules, 1987). if the planned regime for convicts provides for their participation in educational or other programs during working hours, they should receive a monetary reward for it, as for work (para. 105.4.) (european penitentiary rules, 1987). that is, obtaining higher education by persons sentenced to imprisonment should be regarded as paid activity along with work, and the possibility of distance education should be enshrined in law, in connection with which the current criminal executive legislation of ukraine needs to be amended. 4. conclusions the state policy on financing education, in particular, persons sentenced to imprisonment and exercising this constitutional right has been studied. the general characteristic of principles of financing of system of education in such countries as: singapore, japan, hong kong, south korea, finland, the netherlands, canada, poland, germany, ireland, great britain, the usa, estonia, kazakhstan, ukraine, the russian federation is given. sourcing of education (state, non-state and mixed) are investigated. the analysis of macro indicators of social and economic development of the countries, in which certain system of financing of education operates, is carried out. the positive experience of providing educational services to persons sentenced to imprisonment in finland, germany, sweden, france, and the usa is analyzed. problems and peculiarities of providing educational services to persons sentenced to imprisonment in some post-soviet states have been studied. in the course of the research it was concluded that the most developed countries with a sufficiently high level of gdp per capita have a state system of financing higher education. the main positive feature of penitentiary educational systems is their focus on the prisoner as an individual to provide his or her needs, the opportunity to acquire professional skills and, in the future, to integrate into society and restore his or her social status easily. the most effective for places of imprisonment is the training of a convict by distance learning. references: criminal executive code of ukraine. information of the verkhovna rada of ukraine (vrru), 2004, № 3-4, art. 21. available at: https://zakon.rada.gov.ua/laws/show/1129-15 maklakov, v. v. (1999). constitutions of foreign states. 2nd edition. moscow: bec publishing house, 584 p. kohlan sean. world education ranking. news ukraine. available at: https://www.bbc.com/ukrainian/ science/2015/05/150513_vj_education_rankings_it the best educational systems in the world. available at: https://rainbowschool.international/uk/luchshie-sistemyobrazovaniya-v-mire-top-10-stran/ baltic journal of economic studies 148 vol. 6, no. 4, 2020 first findings from the eqw national employer survey / the national center on the educational quality of the workforce. available at: https://www.census.gov/econ/overview/mu2400 khshanovych, k. o. how to teach them: the experience of south korea. available at: https://vseosvita.ua/news/ ak-navcaut-u-nih-dosvid-pivdennoi-korei-2329.html yurchenko, o. 5 stories about the 5 best educational systems in the world. available at: https://osvitoria.media/ experience/5-istorij-pro-5-najkrashhyh-osvitnih-system-svitu/ otroshchenko, l. s. (2018). experience in the management of higher education in germany. bulletin of kyiv national university of culture and arts. series: management of socio-cultural activities, vol. 32(2), pp. 120–133. malik, ye. a. (2014). financing of higher education: current trends and foreign experience. effective economics, vol. 8. available at: http://www.economy.nauka.com.ua/?op=1&z=3259 tuimebaiev, zh. k. financing of education in kazakhstan. kazakhstan today news agency. url: www.kt.kz yashchuk, t. a. (2019). the mechanism of financing higher education institutions in the instability of the market of educational services. the dissertation of the candidate of economic sciences: 08.00.03. pavlo tychyna uman state pedagogical university, 315 p. urusova, z. p. (2013). the role of the state in financing education in ukraine. economy and innovative development of the national economy, vol. 6(44), pp. 49–52. zhuravel, h., & shynkaryk, m. some aspects of increasing the competitiveness of higher education. available at: http://visnykj.tneu.edu.ua/index.php/visnykj/article/view/1082 kozarezenko, l. v. (2010). socio-economic efficiency of the functioning of educational services. abstract of the dissertation of the candidate of economic sciences: 08.00.03. kyiv national economic university named after vadym hetman. kyiv, 21 p. malitskyi, b. a., et al. (2004). rational financing of science as a prerequisite for the development of knowledge society in ukraine. national academy of sciences of ukraine h.m. dobrov center for scientific and technological potential and science history studies. kyiv: phoenix, 32 p. kononenko, o. b. (2017). current state and trends in state educational policy in ukraine. national university of civil protection of ukraine (series: public administration), vol. 32(2), pp. 276–287. kaleniuk, i. s. (2017). directions of transformation of mechanisms of financing of education in the modern world. demography and social economy, vol. 1/29, pp. 24–36. european penitentiary rules. available at: https://zakon.rada.gov.ua/laws/show/994_032 chechyn, m. yu. (2016). the current state of education of convicts. scientific bulletin of the international humanitarian university. series: jurisprudence, vol. 23, pp. 173–176. yunkari, t. (2004). actual problems of the prison service finland. proceedings of the international scientific-practical conference. part 1: edited by o.h. kovalev. moscow: sri ps (nii uis) ministry of justice of russia, 111 p. shevchenko, o. d. (2015). experience of foreign countries in ensuring the right to education of convicts. scientific bulletin of kherson state university. series: legal sciences, vol. 32(6), t. 3, pp. 76–78. pshenychka, ya. v. (2019). ensuring the realization of the right to education of convicts in ukraine and abroad. molodyi vchenyi, vol. 3(67), pp. 397–401. aleksandrov, yu. a. serving a criminal sentence in france and russia: a brief comparative review. available at: http://www.index.org.ru/turma/ft/po/020527-3.htm aleksandrov, yu. a. (2005). a day in a french prison. crime and punishment, vol. 1, pp. 87–120. hradetsky, a. v. (2015). education as a means of correction of convicts. state and regions. series: law, vol. 1, pp. 51–55. baltic journal of economic studies 97 vol. 5, no. 4, 2019 corresponding author: 1 kyiv national university of technologies and design, ukraine. e-mail: ezabashta@i.ua doi: https://doi.org/10.30525/2256-0742/2019-5-4-97-104 theoretical fundamentals of formation of innovative development of entrepreneurship eugeniy zabashta1 abstract. the article studies and analyses the theoretical fundamentals of the formation of the mechanism of the innovative development of entrepreneurship. today, the global economy is gradually globalizing. no country in the world can avoid its influence on certain spheres of public life. the process of “globalization” affects the development of innovative entrepreneurship. today, the driving force of the functioning of innovative entrepreneurship in ensuring economic growth is its development and it is one of the main preconditions for the successful functioning of entrepreneurship in various spheres of the economy, an incentive for increasing the efficiency of production. innovative entrepreneurship is a special innovative process of creating a new, a kind of management, aimed at finding new ideas and opportunities for the commercial use of innovations. investment and sufficient funding are required for the development of innovative entrepreneurship. it is investigated that the formation of innovative development of entrepreneurship is constantly based on the search for new methods, the general scheme of formation, and the model of innovative development, is based on innovations, new technologies, which involves expanding the boundaries of innovation activity. innovative entrepreneurship is a process of creating something new, a management process, based on finding new opportunities, an orientation towards innovation. this is associated with the willingness of the entrepreneur to assume the risk of project implementation or improvement of the existing, as well as economic, financial, moral, and social responsibility. therefore, innovative entrepreneurship is defined as an economic process that leads to the creation of goods (products, services) and technologies, which are best by their properties, through the practical use of innovations. it is analysed that reformation of the economy is a prerequisite that will lead to increasing competitiveness and provide for the renewal of organizational structures in accordance with the best world trends of innovation activity, taking into account the peculiarities of market transformations in the country, and proposes effective measures to improve the efficiency of innovative entrepreneurship development. the level of development of innovative entrepreneurship determines the country’s place in the global space. the low technical level of many sectors of the economy in comparison with industrialized countries (eu, usa) can be overcome only due to the updating of the production base of most enterprises of the country. the development of innovative entrepreneurship in the eu and the usa has become quite successful thanks to individual initiative, creating conditions for the fulfilment of the individual interests of the entrepreneur. ensuring material wealth, finding appropriate forms of self-expression should represent strong incentives for highly effective work. therefore, innovative entrepreneurship is considered as the most important tool for the development and transformation of the economic system in terms of modern scientific and technological progress (stp). the use of new types of techniques, management methods, technologies, and organization of production will significantly expand the range, quality, and volume of production, and this will lead to the transformation and reform of the country’s economy. the purpose of the study. the main purpose of the paper is to substantiate and deepen the theoretical and methodological provisions regarding the formation of innovative development of entrepreneurship. the object of the study is the processes that form the innovative development of entrepreneurship. the subject-matter of the research is a set of theoretical fundamentals for improving the formation of innovative development of entrepreneurship. research methods. the theoretical and methodological basis of the study was the modern theories of enterprise management, monographs, publications, and scientific and analytical developments of scientists on the issues of formation of innovative development of entrepreneurship, as well as abstract-logical and graphical methods of research. key words: innovation, innovative development of entrepreneurship, innovation activity of entrepreneurship, economic reform. jel classification: o31, l26 baltic journal of economic studies 98 vol. 5, no. 4, 2019 1. introduction the crisis state of the country’s economy is characterized by a general decline in the production and product competitiveness, a decrease in interest in innovative entrepreneurship development, and almost a complete absence of a state plan for the development of innovation policy. at the present stage of innovative entrepreneurship, the key role in ensuring economic growth is played by innovative development. as the world practice shows, enterprises, which are able to innovate and apply innovations in the production of new products or services necessary for the consumer, effectively implement the innovation process, gain sustainable competitive advantages, which enables them to successfully develop in the market in an unstable economic environment. the low technical level of many sectors of the economy in comparison with industrialized countries (eu, usa) can be overcome only due to the updating of the production base of most enterprises of the country. the use of new types of techniques, management methods, technologies, and organization of production will significantly expand the range, quality, and volume of production, and this will lead to the transformation and reform of the country’s economy. processes of the formation of innovative entrepreneurship in the countries began immediately with the acquisition of independence but its functioning and development are still in crisis. it is also related to unsatisfactory innovation and investment provision, an imperfect tax mechanism, which is the result of an incorrect and unjustified state innovation policy in the field of entrepreneurship. today, the main problem of innovation in the event of a change in production technology is the implementation of innovations, their commercialization and promotion on the market, which requires the mandatory modernization of all innovation activities of entrepreneurship. the high level of risk and uncertainty inherent in the innovation activity of entrepreneurship requires continuous monitoring and coordination of innovation changes, as well as the realization of a set of measures for their provision. formation of innovative development of entrepreneurship should be oriented towards solving problems, which include the effective use of existing material and technical, raw materials, and labour potential, promotion of programs of fundamental research and development (r&d), and the implementation of state support for the introduction of innovations. 2. formation of innovative development of entrepreneurship the term “innovative development of entrepreneurship” is used when research on the mechanism of implementation of scientific and technological progress in the process of activity is carried out and the type of development is discussed and research on the mechanism of implementation of scientific and technological progress in the process of activity, the construction of a state innovation plan, etc., is conducted. the term “innovative development” should be understood as a way of economic growth aimed at the significant improvement of all types of economic activity, first of all, innovation, which is ensured by scientific and technological progress (stp) and provides gdp growth, mainly due to the implementation of science-intensive products and production, services, etc. innovative entrepreneurship is a key to ensuring competitiveness, therefore, a market participant is interested in using and creating and developing innovation. reforming market economy requires incredibly large efforts from enterprises to manage innovative development, so they need support at the appropriate level due to fast-changing conditions. the purpose of the operation of any innovative enterprise is the satisfaction of social needs in certain types of products (works, services) and profit. examples of enterprises and companies that meet market requirements in the management of innovative development of entrepreneurship are: volkswagen, mercedes, bmw, samsung, apple, etc. (butler, 2006). the implementation of innovation processes in the industrial sector of the economy has been changing in recent years. however, the qualitative characteristic of innovative processes can be submitted through monitoring of innovative development of business entities in the context of the directions presented in figure 1. as we see from the monitoring of innovative development of entrepreneurship, the monitoring directions are divided into four main stages: – the first stage – monitoring of innovation activity of enterprises; – the second stage – monitoring of the level of costs and financing of innovation activities of enterprises; – the third stage – monitoring of the number of enterprises that introduced innovations; – the fourth stage – monitoring of the number of industrial enterprises that implemented innovative products. 3. forming the mechanism of innovative development of entrepreneurship in order to reform the market economy, it is necessary to analyse the concept of “the formation of a mechanism of innovative development of entrepreneurship.” under the formation of the mechanism of innovative development of entrepreneurship, it is necessary to understand a set of interrelated activities in the study baltic journal of economic studies 99 vol. 5, no. 4, 2019 of stages and general scheme of innovation activity of entrepreneurship, which are based on monitoring of the current state of entrepreneurship and the results of previous innovative changes, on the basis of which it is possible to decide on the choice of directions of innovative development and the formation of appropriate programs and projects (boichuk, 2016). the main problems of the development of innovative entrepreneurship are: – the imperfection of the legislative framework for the development of innovative entrepreneurship; – lack of significant sources of financing; – lack of clear and stable state policy in the field of innovation policy; – levers of stimulation (loans, concessional financing, tax burden, etc.) are not fully used, etc. the main requirements for building a mechanism of innovative development of entrepreneurship are as follows (goutam, 2015): – innovative development of entrepreneurship should be presented in the form of a precise structural scheme (from the definition of the need for innovative development to the calculation of indicators that enable to evaluate the effectiveness of the chosen model); – it is necessary to pay more attention to innovations in all spheres of activity (technical, technological, organizational, managerial, etc.); – a resource approach should be presented, which can provide the best way for the innovative development of entrepreneurship; – for the effective construction of innovative development, it is necessary to introduce quantitative indicators that will enable to assess the need of an economic entity for innovative development, as well as the results from the introduction of this mechanism; – innovative development of entrepreneurship should not contradict the mission and corporate purpose; – the choice of the program of innovative development of entrepreneurship should be based on the economic capacity of a separate economic entity; – innovative development of entrepreneurship should not contradict the basic requirements and principles laid down on the basis of the regulation (state, regional) of innovation activities of economic entities. the key directions of monitoring of innovative development of entrepreneurship і stage. monitoring of innovation activity of enterprises innovation activity of industrial enterprises by directions of innovations; number of industrial enterprises by directions of innovations by types of economic activity. іі stage. monitoring of the level of costs and financing of innovation activity of enterprises distribution of total costs by directions of innovations; distribution of total financing of innovation activity. ііі stage. monitoring of the number of enterprises that introduced innovations dynamics of the number of industrial enterprises that introduced innovations; number of industrial enterprises that introduced innovations by types of economic activity; number of industrial enterprises that introduced marketing and organizational innovations; number of introduced innovative products at industrial enterprises. іv stage. monitoring of the number of industrial enterprises that implemented innovative products number of industrial enterprises that implemented innovative products by types of economic activity; volume of innovative products sold; export sales of innovative products; number of enterprises that purchased and passed new technology (engineering achievements) within and outside of the country by forms of purchase and passage. figure 1. integrated monitoring of innovative development of entrepreneurship source: generalized by the author baltic journal of economic studies 100 vol. 5, no. 4, 2019 the main stages of forming the mechanism of innovative development of entrepreneurship are: – the first stage – the definition of the main goal and purpose of developing the mechanism of innovative entrepreneurship; – the second stage – the development of principles to achieve the main goal, namely, the formation of a mechanism of innovative development of entrepreneurship, laws that are necessary for the existence of each phenomenon or process in time and space, research of scientific works of scientists, etc. – the third stage – the study of factors influencing the innovative development of entrepreneurship; – the fourth stage – the development of indicators and a systematic approach to assessing innovation development of entrepreneurship on the basis of the research of modern approaches in the field of science and innovative technologies; – the fifth stage – the development of the integral indicator and the methodology for calculating the appropriate scale for identifying alternatives to innovative development of entrepreneurship; – the sixth stage – the development of measures to eliminate the “imperfect sides” of entrepreneurship and to form reserves for enhancing the capacity for innovative development; – the seventh stage – the identification of the main tools for the implementation of innovative development of entrepreneurship; – the eighth stage – analysis and monitoring and evaluation for setting target indicators of the necessary transformations of innovative development of entrepreneurship. let’s define the main problems that hamper the formation of the mechanism of innovative entrepreneurship: – firstly, it is an imperfect system of methodological and regulatory support, as well as state support; – secondly, imperfect legislation and lending to key economic sectors; – thirdly, the lack of investment and innovation motivations for national and foreign investors. today, the main problem of the innovation activity in the event of a change in production technology is the development of knowledge-intensive innovations, their commercialization, and market promotion, which requires the mandatory modernization of all innovation activities of entrepreneurship (melnyk, 2011). the high level of risk and uncertainty inherent in the innovation activity of entrepreneurship requires continuous monitoring and coordination of innovation changes, as well as the implementation of a set of measures for their provision. general scheme of formation of innovative development mechanism for entrepreneurship is represented in figure 2. according to the general scheme of forming the mechanism of innovative development of entrepreneurship, we see that the mechanism of formation of innovative entrepreneurship includes: – resource support of innovative development; – factors of the external and internal environment; figure 2. general scheme of formation of innovative development mechanism of entrepreneurship source: compiled by the author based on (teece, 2010) mechanism of formation of innovative entrepreneurship the efficiency of the innovative development of entrepreneurship assessment of innovative development of entrepreneurship functions of management of innovative development of entrepreneurship factors of the internal environment of entrepreneurship resource support of innovative development of entrepreneurship factors of the external environment of entrepreneurship principles of innovative development of entrepreneurship goals of innovative development of entrepreneurship indicative control of innovative development of entrepreneurship baltic journal of economic studies 101 vol. 5, no. 4, 2019 – principles of innovative development; – tasks of innovative development; – the efficiency of innovative development; – functions of the management of innovative development; – indicative control of innovative development; – assessment of innovative development. 4. models of innovative development of entrepreneurship the transformation and reform of the economy on an innovative basis are a prerequisite for increasing its competitiveness, and also envisage the creation and renewal of organizational and legal structures of governance. the combination of changes that took place in the country’s economy led to significant transformations in the organization of economic activity and the emergence of new organizational structures. for this, one needs to investigate and propose own model of innovative development of entrepreneurship. in order to achieve a positive result, it is necessary for each of the listed elements of the innovation model to be given due attention at all levels of the country’s economic development. today, the following models of innovative development of entrepreneurship can be distinguished (table 1) (butnik-siversky, 2011). it is investigated that the model of innovative development of entrepreneurship should combine components that are characteristic of different types of models under consideration, starting with state support for the development of innovation policy and ending with the internal motivation of economic entities to the development of innovative entrepreneurship. creating an innovative development model will lead to: – decentralization of large and small enterprises in the field of innovation, which can make them more flexible and attractive; – changes in the management of local authorities, support for enterprises that implement innovation and introduce new technologies, research funding, etc.; – development of cooperation between entrepreneurs and trade unions in the region, the emergence of a network of small innovative firms (butenko, 2008). the need to develop an innovative model of entrepreneurship is stipulated by: 1. improvement of scientific and technical potential. 2. the need to support a national producer. 3. creation of an appropriate legislative framework. 4. attraction of investments and innovations. 5. strengthening of scientific potential. 6. formation of a system of state orders for scientific and technological and innovation-technological products. today, the main mistake is minimizing the role of the state because it is one of the main investors as the state through investments can affect the enterprise innovative development. the state adopts laws and other enactments and documents by which the regulation of activity of business entities is carried out. the need for the development of innovative entrepreneurship is specified by the development of innovations, new technologies, and also modern globalization, which stimulates the development of information technology and com+munications (zjanjko, 2008). an innovative business model is developed in figure 3. by studying the innovative model of entrepreneurship, we can draw the following conclusions: 1) innovative model of entrepreneurship is divided into development factors and deterrents; 2) the process of formation of the innovative model of entrepreneurship depends on the main measures and on development factors and deterrents; 3) the innovative model of entrepreneurship includes: a system of production of scientific knowledge and innovative development, a system of education and advanced training of innovative development, a system of commercialization of innovative development, a system of use of innovative development, a system of management and regulation of innovative development of the economy; table 1 modern models of innovative development of entrepreneurship model of innovative development key features active diffusion of innovations interaction of government with scientific establishments, enterprises, higher education institutions, and organizations in order to implement innovations. state support for innovative forms it is aimed at the state support of national innovative structures for promoting the rapid entry of national products into the world market (eu and us markets). local innovative environment development and establishment of technoparks, technopolises, territorial research and development centres, clusters, consortia. cis model based on cooperation in science and technology between enterprises and states of cis in joint programs, orders, etc. interbranch scientific and technical complexes close to the model of a local innovative environment and covers the same factors. world cooperation includes active participation of the country in the international scientific and technical cooperation, as well as the broad exchange of scientific results and new technology. source: compiled by the author based on (uvarova, 2010) baltic journal of economic studies 102 vol. 5, no. 4, 2019 figure 3. an innovative model of entrepreneurship source: generalized by the author innovative development production system innovative development education system innovative development commercialization system innovative development use system system of management and regulation of innovative development of the economy d e v e l o p m e n t f a c t o r s development of the venture business of entrepreneurship development of innovation infrastructure of entrepreneurship formation of innovation culture of entrepreneurship provision of tax and depreciation incentives, preferential loans to entrepreneurship formation at the state level of priority areas for the development of science and technology and their financing of innovative entrepreneurship introduction of motivational mechanisms of innovative entrepreneurship t h e p r o c e ss o f f o r m a t io n d e t e r r e n t s structural reform of the economy of innovative entrepreneurship of the country lack of demand for advanced technology products of entrepreneurship lack of an effective system for improving the organization of work in terms of innovative development of entrepreneurship deterioration of the state of facilities and resources of innovative entrepreneurship lack of due attention to the formation of effective structures imperfect legislative framework on innovation activity of entrepreneurship lack of financial resources of innovative entrepreneurship 1. formation of a support mechanism of innovative entrepreneurship. 2. improving the level of resource support of research and development of innovative entrepreneurship. 3. increasing the motivation of business structures in the introduction and development of innovative entrepreneurship. 4. integration of science and needs of the world market for innovative entrepreneurship. 5. development of ways of material encouragement of scientists and specialists, as well as commercialization of the results of their scientific activities of innovative entrepreneurship. key activities an innovative model of entrepreneurship baltic journal of economic studies 103 vol. 5, no. 4, 2019 4) according to the author, measures of the formation of an innovative model of entrepreneurship are: – firstly, it is a process of forming a mechanism for supporting innovative entrepreneurship; – secondly, it is a process of developing ways of material encouragement of scientists and specialists, as well as commercialization of the results of their scientific activities of innovative entrepreneurship; – thirdly, it is a process of increasing the motivation of business structures in the introduction and development of innovative entrepreneurship; – fourthly, it is a process of integration of science and needs of the world market for innovative entrepreneurship; – fifthly, it is a process of improving the level of resource support of research and development of innovative entrepreneurship. 5) according to the author, development factors of an innovative model of entrepreneurship include: – development of the venture business of entrepreneurship; – development of innovation infrastructure of entrepreneurship; – formation of innovation culture of entrepreneurship; – provision of tax and depreciation incentives, preferential loans to entrepreneurship; – introduction of motivational mechanisms of innovative entrepreneurship; – formation at the state level of priority areas for the development of science and technology and their financing of innovative entrepreneurship. 6) deterrents to the development of an innovative model, according to the author, include: – structural reform of the economy of innovative entrepreneurship of the country; – lack of demand for advanced technology domestic products of entrepreneurship; – lack of an effective system for advanced training and improvement of the organization of work of the staff in terms of innovative development of entrepreneurship; – deterioration of the state of facilities and resources of innovative entrepreneurship; – lack of due attention to the formation of effective structures; – imperfect legislative framework on innovation activity of entrepreneurship; – lack of financial resources of innovative entrepreneurship. 6. conclusions in the context of the crisis situation that has occurred in the country’s economy, it is necessary to pay attention to the innovative development of entrepreneurship. the formation of innovative entrepreneurship requires the introduction of innovative technologies and their development. search should be aimed at generating new ideas, technical solutions, creating innovations. formation of financial resources of innovative entrepreneurship determines ways to stimulate their interest in introducing innovations. among them are distinguished: formation of expenses for research and development, the formation of own capital, etc. formation of innovative development of entrepreneurship should lead to the economic stability of the innovative development of entrepreneurship at the country level. consequently, for the formation of innovative entrepreneurship in the country, it is necessary: – to develop an effective state program for the development of innovative entrepreneurship in the country, taking into account the experience of the leading economies of the world; – to supplement the legislative framework of laws and regulations with documents and laws that would create conditions for the introduction of modern technologies into the production and further development of venture financing; – to create an effective legislative framework for the protection of intellectual property rights of scientific and technical products; – to ensure active participation of enterprises, scientific and technical organizations, and other interested structures in major state programs on innovation development, and initiate the development, approval, and financing of state and local target programs. references: butenko, a., & lazarieva, y. (2008). infrastructure components of an innovative economy model. economics and forecasting, 4, 69–82. (in ukrainian) bloom, n., & reenen, j. v. (2010). human resource management and productivity, cambridge: national bureau of economic research. butler, d. (2006). enterprise planning and development: small business start-up, survival and development. oxford: elsevier ltd. boichuk, n. ya., & orel, v. v. (2016). optymizatsiia upravlinnia biznes-protsesamy na pidpryiemstvakh ukrainy [optimization of management of business processes at enterprises of ukraine]. zbirnyk naukovykh prats natsionalnoho tekhnichnoho universytetu ukrainy «kpi», 17, 173–180. (in ukrainian) entrepreneurship development for competitive small and medium enterprises: report of the asian productivity organization survey on entrepreneur development for competitive smes (2007). available at: http://www.apo-tokyo.org/00e-books/is-26_smes/is-26_smes.pdf (accessed 10 june 2017). baltic journal of economic studies 104 vol. 5, no. 4, 2019 goutam, s., & rishiraj, s. (2015). role of technology in entrepreneurial development: facilitating innovative ventures. international journal of emerging technology and advanced engineering, vol. 5, special issue 1, pp. 239–244. ghoncharova, n. p., shvydanenko, gh. o., & pavlenko, i. a. (2006). upravlinnja pidpryjemstvamy – suchasni tendenciji rozvytku: monoghrafija [enterprise management – contemporary development trends: monograph]. kyiv: kneu. (in ukrainian) innovative infrastructure in the context of the national innovation system (economic and legal problems). ed. by butniksiversky, o. (2011). kyiv: lazuryt-polihraf. (in ukrainian) itskovits, h. (2010). triple spiral: universities – enterprises – state. innovation in action. tomsk: tomsk state university of control systems and radioelectronics. (in russian) innovatsiina ukraina 2020 : natsionalna dopovid [innovative ukraine 2020: national report]. za zah. red. v. m. heitsia ta in.; nan ukrainy. kyiv, 2015. (in ukrainian) melnyk, l. h., & shkarupa, o. v. (2011). rol systemnoho upravlinnia innovatsiiamy v klasternykh formuvanniakh [the role of system management of innovation in cluster formations on the basis of an eco-oriented approach]. marketynh i menedzhment innovatsii, 3, 187–196. (in ukrainian) taiwo, m. a., ayodeji, a. m., & yusuf, b. a. (2012). impact of small and medium enterprises on economic growth and development. american journal of business and management, 1(1), 18–22. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43, 172–194. uvarova, iu. m., hnylobokov, i. o., & boiakova, n. v. (2010). udoskonalennia upravlinnia innovatsiinym protsesom pidpryiemstva [improvement of the management of the innovation process of the enterprise]. ekonomika pidpryiemstva, 4, 30–34. (in ukrainian) varvarigos, d., & zakaria, i. z. (2017). longevity, fertility and economic growth: do environmental factors matter? review of development economics, 21(1), 43–66. zjanjko, v. v. (2008). innovacijne pidpryjemnyctvo: sutnistj, mekhanizmy i formy rozvytku: monoghrafija [innovative entrepreneurship: the essence, mechanisms and forms of development: monograph]. kyiv: universum. (in ukrainian) baltic journal of economic studies 26 vol. 6, no. 1, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: m.vilgushynskyi@ukr.net 2 svyatoshinsky district court of kyiv city, ukraine. e-mail: petrov1912p@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-1-26-34 administrative and civil legal regulation of public administration bodies' activity in the sphere of electronic money turnover taking into account publicity and transparency principles mykhailo vilhushynskyi1, oksana ulianovska2 abstract. the article is devoted to the study of administrative and civil legal regulation of the public administration bodies' activity in the sphere of electronic money turnover, in particular, taking into account the publicity and transparency principles. the author emphasizes that publicity and transparency principles of administrative and civil legal regulation in the sphere of electronic money turnover are modern universally recognized democratic values of the european civilization, which serve as a benchmark for state legal reforms in the countries of central and eastern europe. the author also points out that the transparency principle is of outmost importance for administrative and civil legal regulation of public administration bodies' activity in the sphere of electronic money turnover and, moreover, the principle appears to be a key characteristic of public administration as a whole, which ensures proper interaction between the state and citizens in a form that provides state authorities of different branches with information in all spheres or access to it, except for statutory restrictions on the provision of information. according to this principle, the activity of public bodies should be as transparent as possible, except for those cases when information constitutes state secret. furthermore, the transparency principle not only ensures proper interaction between the state and its citizens, but also positively influences the rule of law. on the other hand, the publicity principle is a principle of administrative and civil legal regulation of public administration bodies' activity in the sphere of electronic money turnover that becomes apparent in a form of public control exercised over the public administration bodies' activity. the publicity principle characterizes public administration democracy, and open and transparent activity of public authorities that enables citizens to become personally familiar with the work of public administration. moreover, publicity is closely connected with democratisation of public authorities, which, in turn, indicates the principle's intention to become closer to society and more effectively ensure efficient public administration, especially in the sphere of legal regulation of electronic money turnover. the article emphasizes that principles of publicity and transparency in administrative and civil legal regulation of public administration bodies in the sphere of electronic money turnover are not identical. transparency means the availability of electronic money for all citizens, while publicity means not only availability, but also the possibility for the general public to discuss the course and results of such a process, that is, a way of forming public opinion, its evaluation of activities related to electronic money turnover, which public administration authorities should take into account in order to improve their work. the paper also examines issues related to the legal status of electronic money, the definition of this concept at the legislative level and in practice. the author analyzes issues of current legal regulation of e-money as a means of payment under the ukrainian legislation. the article identifies that using electronic money allows saving on cash maintenance costs, reducing transaction time, and, at the same time, electronic money keeps having the same functions as traditional fiat money, which makes it highly plausible to get cash replicated with e-money, though such a transition still requires a developed and effective regulatory framework. methodology. in the course of this article preparation, a whole range of philosophical and ideological approaches (dialectical, as a way of thinking based on the analysis of all available views on the content of administrative and baltic journal of economic studies 27 vol. 6, no. 1, 2020 civil legal regulation of public administration bodies' activity in the sphere of electronic money turnover; analytical, based on cognitive activity by proving or refuting the definition of transparency and publicity in the electronic money turnover sphere; hermeneutic, applied for understanding terms related to the legal regulation of public administration bodies' activity in the electronic money sphere; general scientific research methods (logical, based on ascending from simple to complex, from abstract to specific as related to general characteristics of legal regulation in the sphere of electronic money turnover; special methods (systemic and structural, particularly in the process of providing legal support related to electronic money turnover, comparative legal research, aimed at the examination of foreign experience, formal legal or formal logical). results. according to the research results, the author has determined the publicity and transparency principles of administrative and civil legal regulation of public administration bodies activity in the sphere of electronic money turnover, where the principle of transparency allows to ensure the interaction between the state and its citizens in the form of exchange of information derived from all spheres or by granting access to such information, except for the information with restricted access. according to this principle, the activity of public administration bodies should be as transparent as possible, except in cases when it constitutes state secret. the principle of publicity not only ensures interaction between the state and its citizens, but also helps strengthen the rule of law. in turn, publicity as a principle of administrative and civil legal regulation of activities of public administration bodies in the sphere of electronic money turnover is a form of exercising public control over the activities of public administration. the principle of publicity characterizes democracy of public administration. special emphasis is given to the need to legally enshrine electronic money as a means of payment in the legislation of ukraine as the most convenient form of using electronic money, which allows to save on cash maintenance costs, reduce transaction time, and, at the same time, electronic money keeps having the same functions as traditional fiat money, which makes it highly plausible to get cash replicated with e-money, though such a transition still requires a developed and effective regulatory framework. practical implications. the results of this scientific article can be used in legislative framework for legal regulation of activities of public administration bodies in the sphere of electronic money turnover. the provisions of the article may also be used in scientific activities to further investigate the principles of publicity and transparency in administrative and civil legal regulation of the activities of public administration bodies in the sphere of electronic money turnover. in addition, the paper’s provisions can be used for educational purposes, during lectures and seminars on civil, information and administrative law. value/originality. scientific novelty of the obtained results is that the scientific article summarizes the existing normative and doctrinal approaches to understanding administrative and civil legal regulation of the activities of public administration bodies in the sphere of electronic money turnover; knowledge of the principles of publicity and transparency of administrative and civil legal regulation of activities of public administration bodies in the sphere of electronic money turnover has been systematized. the paper also identifies trends in the development of legal regulation in the sphere of electronic money turnover. key words: public administration, electronic money, electronic money turnover, administrative and civil legal regulation of electronic money, principle of transparency and publicity of legal regulation of electronic money turnover, electronic payment systems. jel classification: h71, l81, e42 1. general problem statement and its relation to important scientific and practical tasks in the current context, a significant number of legal entities operate both in real economic environment and in the framework of the virtual environment, which helps expand the ways they interact with customers using technical devices, such as personal computers, mobile phones. in such circumstances, the question arises if there is proper legal regulation of activities of public administration bodies in the sphere of electronic money turnover, which activities should be implemented taking into account principles of transparency and publicity. it is important to realize that electronic money has become an essential element of e-commerce today. on the other hand, electronic money as a means of payment is superior to plastic cards or deposit money, since it is more convenient, faster and cheaper to use not only over the internet, but also in real public and private legal relations. it is necessary to note that ukraine, on its way to integration with the international community, cannot remain aloof from processes occurring in particular in the field of information technology. legal regulation of electronic money in our country is of particular baltic journal of economic studies 28 vol. 6, no. 1, 2020 relevance. electronic money means the equivalent of traditional (paper) funds in turnover within a specific electronic payment system. the essence of electronic money is the storage of monetary value electronically, i.e., using smart cards or a computer hard drive. its turnover occurs through computer networks, the internet, payment cards, electronic wallets and devices that work with payment cards (atms, pos-terminals). accordingly, it is relevant to create an effective legal environment for the issuance and turnover of electronic money and exert state control over this area. 2. analysis of the recent studies and publications that begin to address the issue and highlight the previously unresolved elements of the overall problem that the article deals with the issue of legal regulation of electronic money was the subject of research of foreign scholars, in particular, m. king, m. woodford, b. summers, l. white, s. klein, b. schmidt and b. friedman. certain issues of legal regulation of electronic money were studied mainly from the position of legal regulation of its issuance, turnover, security of payments, information security in the electronic money system in scientific works of l. baraban, n. gryshchuk, y. boiko, i. holosnichenko, p. dikhtiievskyi, o. zaiarnyi, v. kravets, i. lavrynenko, o. makhaieva, r . melnyk, v. mishchenko, a. moroz, d. naumenko, m. romaniuk, m. savluk, p. senyshch, s. shymon and others. however, given the fact that money is considered to be a historical category, which develops at each stage of commodity production and which gains new value, complicated due to changing production conditions, certain aspects of modern money have not been subject to detailed analysis. therefore, now, when the world is entering the era of electronic money and virtual history, the issue of legal turnover of electronic money is becoming of special relevance. in addition, the effectiveness of legal impact on public relations to a significant (if not decisive) extent depends on the timely alignment of legislation with the new needs of economic development. thus, there is now a need for new research, due to changes in legal thought and legislation, whereas the accumulated material on this issue requires rethinking. that is why the topic of this scientific article is relevant. 3. statement of objectives the purpose of the article is to analyze administrative and civil law regulation of public administration bodies' activities in the sphere of electronic money turnover. the study is worthwhile for further analysis by domestic scholars, as the topic of legal regulation in the field of electronic money turnover is not well researched and should develop dynamically, along with the increasing importance of electronic payment systems, and electronic money in particular. it is also important to study the role of public administration bodies in the researched area, taking into account the principles of publicity and transparency. 4. discussion electronic money is actively used in financial systems of foreign countries, in particular the eu countries, so, given the european integration component of our country, electronic money turnover requires appropriate civil and administrative regulation by the state, including based on the principles of publicity and transparency. publicity and transparency principles of administrative and civil legal regulation in the sphere of electronic money turnover are modern universally recognized democratic values of the european civilization, which serve as a benchmark for state legal reforms in the countries of central and eastern europe. therefore, the study of their content becomes a priority for the implementation of ukraine's european integration. in the past, in the doctrines of administrative law, these principles were unjustifiably replaced by the principles of public administration. this hindered democratic development of the national legal system. in this regard, as a. pukhtetska emphasizes, the principle of transparency provides for subordination of public administration bodies to external control, and the principle of transparency, in turn, suggests that, when examined in detail, the activity of these bodies has to be “looked through” for the purposes of control or supervision (pukhtetska, 2014). in addition, it should be emphasized that transparency as a principle allows us to achieve two important goals. the first is to protect public interests, as it reduces the likelihood of "mismanagement" and corruption. the second is that this principle (along with transparency) is necessary for protection of personal rights, since it determines the grounds for the adoption of administrative legal acts and, accordingly, gives the interested party the right to appeal against such acts. practical implementation of the principles of publicity and transparency is manifested in administrative law, for example, where administrative acts must be motivated and adopted by the authorized bodies; public registers shall be accessible to the general public; civil servants shall comply with certain restrictions on income from private activity. obligation of public administration bodies to indicate the reasons (grounds) for adoption of certain decisions is of particular importance for the implementation of the principle of publicity. an administrative act or decision must contain a list of grounds reflecting the general logic of the decision and demonstrate the conformity of the baltic journal of economic studies 29 vol. 6, no. 1, 2020 actual circumstances of the case and their reflection in the current legislation. accordingly, the list of grounds must contain facts and supporting evidences, as well as legal norms that are used. exploring the principle of transparency of administrative and civil legal regulation in the sphere of electronic money turnover, first of all it should be noted that the advantage of an open government, a transparent decision-making process means that citizens in one way or another become involved in development of an administrative decision, and therefore, with a higher probability will support its implementation. when citizens do not understand how a decision has been made, and they do not consider its consequences to be favorable for themselves, they tend to suspect the authorities of corruption and inefficient work. this thesis is extremely relevant for the sphere of electronic money turnover. the principle of transparency is widely used and is not limited to particular areas of public relations. thus, as a general rule, the activities of public authorities should be transparent and open today. and only in exceptional cases they should constitute a secret and be confidential. it should once again be emphasized that transparency as a functional characteristic of state and local selfgovernment bodies reveals the following: – the degree of direct participation of citizens in their activities; – level of public control over the activity of public authorities and administration; – the degree of ensuring real influence of citizens and their associations on public and administrative activity by requiring public authorities to make certain decisions, take actions or abstain from them (shemshuchenko, 2012). transparency of state power means its readiness and ability to share this power by involving objects in the decision-making process and exercise of power. in turn, publicity as a principle of administrative and civil legal regulation in the sphere of electronic money turnover is a form of exercising public control over the activities of public administration. by the way, such control can be carried out in form of public control, feasibility of the introduction of which is increasingly expressed by leading administrative scholars. thus, o. zaiarnyi emphasizes that there is no single approach to understanding the very definition of public control, its subjects, objects and functioning mechanisms, and that control functions of public control entities are enshrined in a variety of normative acts, hence the blurred understanding of its functions as a whole (zaiarnyi, savchuk, 2014). in general, in etymological sense, "publicity " is defined as: 1) general acquaintance and discussion, control; 2) public disclosure; 3) public awareness of something, announcement (slovnyk ukrainskoi movy, 2010). in turn, authors of a legal encyclopedia suggest the definition of the term "publicity ", whereby publicity is one of the principles of democracy, guaranteeing the effective functioning of all its institutions; activities of state bodies, local self-government bodies and associations of citizens; exercise of right to information (shemshuchenko, and others, 1998). it is necessary to note that at the end of the 1980s there was a great debate about defining publicity as a legal category. some scholars tried to develop publicity into a principle. thus, v.a. kriazhkov defined publicity as the principle of socialist democracy, which ensures such a regime of political life when state and public authorities operate transparently and systematically inform the population about their activities. other scholars suggested that publicity should be defined through a set of requirements for the activities of public authorities. y.m. baturin and v.a. tumanov gave the following definition: «activity of state bodies, public organizations and officials is based on publicity, which is expressed through: a) transparency of their activity; b) the right of citizens, their associations, other organizations to obtain information; c) obligation to take into account public opinion when making important decisions on public and social life; d) widely publicized statistics and other information and materials on public and social life” (baturin, 1989; bezuglov, 1988). despite the outward differences between the above interpretations, they are essentially similar. thus, based on these definitions, most of the leading scholars identify the following major elements of publicity: 1) the right of citizens to discuss activities of public authorities, to criticize, comment and make suggestions on issues of public and social life, in particular through mass media, and to use information obtained in any other way that is not contrary to the law; 2) transparency of the activity of public authorities, that is, a regime where all interested parties may visit and monitor the progress of activity of any public authority; 3) informing the public about functioning of the state bodies and the adopted decisions, that is, about the activity of the state bodies in terms of information disclosure. by attributing these elements to the definition of publicity makes it possible to view it in a very broad sense, even to identify it with transparency of public administration bodies. in general, in the broadest sense, publicity, first and foremost, is transparency and openness of the activity of state structures, as a prerequisite for democratic decision-making, as well as public awareness of all socially significant problems affecting their interests (afonin, sushii, 2010). in other words, publicity means: transparent activity of state bodies, public organizations and officials; providing citizens and their associations with information necessary to participate in discussion and resolution of matters of state and public life, as well as matters concerning their rights, duties or legitimate interests; availability of organizations, institutions and officials for meeting with citizens; possibility for the baltic journal of economic studies 30 vol. 6, no. 1, 2020 citizens to freely submit their proposals and statements; identifying, studying and taking into account public opinion in the development and decision-making process; publicizing the adopted decisions and bringing them to the attention of citizens; awareness, accessibility, taking into account of public opinion, promulgation of the adopted decisions. scientific literature emphasizes that the principle of publicity characterizes democracy of public administration, in its turn, open and transparent work of public authorities enables citizens to directly get acquainted with public administration (vidkrytist ta prozorist orhaniv derzhavnoi vlady…). in other words, publicity is directly related to democratism of public authorities, which indicates their desire to be closer to the people and to more effectively ensure efficient public administration. in this context, it is possible to cite the position of scholars who believe that the mechanism of publicity is a complex, versatile process, which requires focused work to increase the level of activity, political and legal awareness of the people, instilling in the public the desire for constant and active participation in public administration (bezuglov, 1988). indeed, publicity is a complex process that combines awareness of the people and effectiveness of public administration. thus, publicity can be understood in a broad sense as a democratic constitutional principle of the social relationship between the society and the state; in the narrow sense, it is a legal principle, implemented through disclosures to the society and in the activities of the public authorities. publicity as a state and legal phenomenon is characterized by the following elements: transparency of activity of public administration bodies and their adoption of government and administrative acts, public opinion on political, social, economic and other situation in the country, as well as its consideration by the state authorities (vidkrytist ta prozorist orhaniv derzhavnoi vlady…). disclosure of information to the society ensures citizens’ control over public authorities, which promotes democratisation of all social institutions in the country and further development of the principle of publicity. in addition, the procedural nature of publicity of administrative and civil legal regulation should become an essential element in the sphere of electronic money turnover, which means express enshrining and regulation in the ukrainian legislation and the possibility for further implementation in the form of rights and duties of individuals and legal entities, as well as public authorities, which are guaranteed by the state coercive power. in other words, it is a norm failure to comply with which gross violation of the law shall constitute. publicity can also exert control functions in the field of legal regulation of electronic money turnover. since publicity is a form of control over the activity of public authorities, it is aimed at measures to prevent corruption and unlawful acts, and to some extent contributes to stimulating professional development in this area (kondratenko, 2015). it is important to note that, although they have many things in common, the principles of publicity and transparency of administrative and civil legal regulation in the field of electronic money turnover are still different. transparency means the availability of electronic money for all citizens, while publicity means not only availability, but also the possibility for the general public to discuss the progress and results of such a process, that is, a way of forming public opinion, its evaluation of activities related to electronic money turnover, which public administration authorities should take into account in order to improve their work. in the context of the topic of the article, it is worth mentioning the position of r . melnyk, who draws attention to the new interpretation of public administration and the purpose of public administration as a whole. thus, according to the scholar, public administration can be carried out both in compulsory and non-compulsory (public service) manner (melnyk, 2012). such an approach seems to be justified in the current conditions of civil society development and should also be used in the administrative, civil and legal regulation of activities of public administration bodies in the sphere of electronic money turnover, taking into account principles of transparency and publicity. in ukraine, as of 2020, citizens have access to various types of electronic payment instruments. in such circumstances, the ukrainian market urgently requires a modern, clear and transparent legal framework based on best international experience, with a balance between protecting consumer rights, public oversight of the functioning of electronic payment instruments, electronic money systems and promoting their development (kravchuk, naumenko, glybovets, 2014). in order to regulate activities related to the issuance of electronic money in ukraine and to introduce monitoring of such activity, the nbu board with its resolution approved regulation “on electronic money in ukraine” as amended on 12 september 2019 (polozhennia «pro elektronni hroshi v ukraini»). this regulation set requirements of the national bank for the subjects of issuance, turnover and redemption of electronic money, as well as for electronic money systems in ukraine. however, in practice, the issue of payments using electronic money, that remained unresolved for many years, led to civil and legal problems and caused contradictions as to how they should be reflected. it should also be noted that according to the law of ukraine "on payment systems and funds transfer in ukraine", electronic money is a unit of value stored electronically and accepted as a means of payment by an entity other than its issuer and constitutes monetary baltic journal of economic studies 31 vol. 6, no. 1, 2020 obligation of such an entity, either in cash or in noncash form” (zakon ukrainy «pro platizhni systemy ta perekaz koshtiv v ukraini»). legal definition of the term “electronic money” for the countries of the european union is provided for in the directive of the european parliament and of the council of europe 2009/110 eu on the initiation and implementation of activities of electronic money issuers, as well as prudential supervision of such activities, dated september 16, 2009. the directive defines electronic money as monetary value that is a claim on the issuer and which: (a) is electronically stored; b) is issued on receipt of funds at a value not less than the issued cash value; .c) is accepted as a means of payment by enterprises other than the issuer (baraban, 2014). electronic money is a complex legal and economic category that is of great interest to both the scientific community and the regulators of payment transactions. in addition, according to statistics, in terms of use of electronic money for payment purposes, significant interest is expressed by its users: individuals and legal entities (yesimov, 2014). in general, electronic money is now one of the newest means of payment of revolutionary significance. electronic money is one of the most promising innovative payment tools. with the advent of electronic money, it has become an issue how to define both theoretical and practical basis for functioning of the newest payment instruments in a market economy and assessing their value in the country 's monetary turnover, establishment of appropriate legal regulation and their introduction into civil turnover. the issue of enshrining financial and legal nature of electronic money in regulatory acts is crucial, as further development of financial and legal regulation of electronic money turnover depends on this. in countries where electronic money is recognized as monetary value stored electronically (for example, the eu countries), financial and legal regulation is developed by legislative introduction of methods for such regulation by providing for licensing of issuers of such money, establishing requirements for minimum size of their charter capital, providing for financial liability for failure to comply with these requirements, etc. in countries where electronic money is treated as a form of obligation, financial and legal regulation of its turnover is advisory (riadinska, 2016). the widespread use of electronic money leads to formation of a new system of payments and a powerful financial superstructure, which, on the one hand, leads to new opportunities for growth and, on the other, to alignment of the national legislation with the norms of the european union, which govern the financial sector of the economy. expanded use of electronic money, which occurs simultaneously with the rapid development of telecommunication technologies, is able to radically change the existing mechanism of functioning of the monetary system of ukraine (yesimov, 2014). in ukraine, regulation of relations in the sphere of electronic money is carried out by general and special legislation: the civil code of ukraine no. 435-іу dated january 16, 2003; the law of ukraine "on payment systems and funds transfer in ukraine" no. 2346-iii dated april 5, 2001; resolution of the board of the national bank of ukraine “on performance of transactions with special payment instruments” no. 223 dated april 30, 2010; resolution of the board of the national bank of ukraine "on amendments to certain regulatory and legal acts of the national bank of ukraine on regulation of issuance and turnover of electronic money " no. 481 dated november 4, 2010, approving the regulation on electronic money (shlapko, 2017). in order to regulate activities related to the issuance of electronic money in ukraine and to introduce monitoring of such activities, the nbu board approved the regulation “on electronic money in ukraine” (polozhennia «pro elektronni hroshi v ukraini»). this regulation set requirements of the national bank for the subjects of issuance, turnover and redemption of electronic money, as well as for electronic money systems in ukraine. however, in practice, the issue of payments using electronic money, that remained unresolved for many years, led to civil and legal problems and caused contradictions as to how they should be reflected. the lack of legal base for accounting for electronic money has given rise to a number of opinions in the scientific and professional community on how to address this problem. in domestic accounting, the term "electronic money " was legally defined a little later, together with establishing the order of accounting for electronic money, in compliance with the order of the mfu "on approval of changes to some regulations of the ministry of finance of ukraine on accounting" no. 627 dated june 27, 2013. electronic money means units of value that: 1) are stored electronically, 2) are accepted as a means of payment by an entity other than the issuer, 3) constitute a monetary obligation of that entity, either in cash or in non-cash form" (baraban, 2014). however, prepaid single-purpose cards are not recognized as electronic money: merchant discount cards, gas station cards, public transport tickets, etc., which are accepted as a means of payment exclusively by their issuers. according to the legal concept of electronic money, by its civilistic nature, it is a monetary obligation, which, on the basis of a civil law contract, an agreement of two parties, whereas one party, an individual or business entity, expressed a desire to exchange cash or noncash money for electronic money. it is the will of the individual or business entity, and not the will of the issuer, that is the main condition for issuing electronic money, as opposed to the issuance of the hryvnia as a legal means of payment in ukraine, whereas it is the national bank of ukraine that has the exclusive right baltic journal of economic studies 32 vol. 6, no. 1, 2020 to enter it into turnover. the reason why electronic money is now regarded as a monetary obligation can be explained by historical analogy with other types of money: in due course banknotes were also treated as payable by metal coins and non-cash as repayable by metal or paper money. legislation of ukraine may be amended over time, and the national bank of ukraine will be able to issue electronic money as a form of money (petrofanova, 2016). electronic money belongs to non-material property objects of civil rights and constitutes a perfect thing. in its essence, electronic money can be considered as "private money ", issued personally at the request of the user by the appropriate banking institution, which at its own expense provides for its property value, guaranteeing its exchange for legal means of payment: cash or non-cash money (shymon, 2015). in general, the term "electronic money " has been used at various times to refer to various technological processes in banking and payment system. primarily they were referred to electronic money transfer systems, then payment systems using credit/debit cards (shymon, 2015). since the second half of the 2019s, the term "electronic money " (e-money) has acquired a specific economic definition and has been limited to new electronic means of payment that use electronic script, which script the payer passes to payee on payment. thus, the money received a new design that meets the requirements of modern property turnover more closely. the legal nature of such money has become the subject of international scientific debate. digital money or cryptocurrency theories are just being developed. according to the itexpert online resource, as of september 7, 2014, three us universities have introduced online courses to teach cryptocurrencies, in particular, bitcoin ("itexpert"). wikipedia, free encyclopedia, defines bitcoin as a peer-to-peer electronic cash system that uses the homonymous digital currency, often called cryptocurrency or virtual currency. the network is fully decentralized, with no central administrator or any equivalent thereof (wikipedia free encyclopaedia). bitcoin exchange rate against the us dollar as of october 10, 2014 was as follows: 1 bitcoin (btc) equaled 370.97 usd, and respectively 1 usd equaled 0.002696 bitcoins (btc). bitcoin turnover in world markets peaked at the end of 2013 at around 14 billion usd, but has since dropped to 8 billion usd. we believe that cryptocurrency is another embodiment of the economic essence of money that has yet to be studied (isaiev, 2014). it should also be noted that in domestic practice of legal regulation of electronic money there remains the following problematic issue: how to identify the primary document in order to record transactions in electronic money. electronic money settlements with nonresidents of ukraine in international e-commerce are unregulated. the use of electronic money, expressed in foreign currency, when calculating and conducting crossborder transfers requires a legislative solution (kravchuk, naumenko, glybovets, 2014; baraban, 2014). in addition, government regulation should encourage the widespread adoption of innovative payment instruments and, at the same time, ensure interests of users in terms of security of e-money transactions, especially given the fact that problems with the loss of e-money through fraudulent transactions and any delays in e-money redemption may have negative impact on the stability of the market as a whole. the regulator's task should also be to ensure equal conditions for competition in the market and the absence of excessive barriers to enter this market, since such regulation should comply with ukraine’s obligations under the gatt and wto, and ukraine’s state policy should align its legislation with the european standards, as well as the process of ukraine’s integration into the eu (kravchuk, naumenko, glybovets, 2014). according to s. yesimov, it is necessary to improve legal regulation of functioning of electronic money in three directions: – institutional direction involves the development of relations in order to increase competition and lower the entry threshold for new participants; – infrastructural direction is related to increasing the availability of electronic money and expanding the scope of its application, through development and legalization of payment instruments, as well as standardization and unification of the technological component through implementation of the relevant technical regulations of information support; – ensuring and improving security of payment transactions using electronic money within the framework of information security (yesimov, 2014). international experience demonstrates that development of the electronic money market depends to a large extent on effective legal regulation. the issue of enshrining the financial and legal nature of electronic money in regulatory acts is crucial, since further successful introduction of electronic money in the payment turnover depends on this. in order to improve and solve modern problems of electronic money turnover in ukraine, it is necessary to apply the experience of foreign countries: to improve and adapt the legislative base to changing conditions, to introduce new electronic payment systems, to create a single body for its regulation and to increase the security of payment transactions that uses electronic money (shlapko, 2017). the main obstacle associated with the prospect of the development of electronic money in ukraine is its legal definition and legislative regulation. since issuance of electronic money, in the absence of proper legislation, is regulated by the rules on the issuance of payment cards and is carried out in ukraine only by banks, the software-based electronic money payment systems and baltic journal of economic studies 33 vol. 6, no. 1, 2020 non-bank issuers of this money operate in conditions of legal uncertainty. that is why legislative background is the first point in regulation of electronic money in ukraine (mokiienko, pryidak, lipskyi, 2019). 5. conclusions and prospects for further studies thus, the development of electronic money turnover depends to a large extent on effective administrative and civil legal regulation of the activities of public administration bodies. in addition, the activities of public administration bodies in the area of electronic money turnover should be based on the principles of transparency and publicity. where, transparency means the availability of electronic money for all citizens, and publicity means not only availability, but also the possibility for the general public to discuss the progress and results of such a process, that is, a way of forming public opinion, its evaluation of activities related to electronic money turnover, which public administration authorities should take into account in order to improve their work. it should also be noted that nowadays the sphere of electronic money turnover is developing very fast, the legislation does not always keep up with these trends, and therefore, in practice money turnover operates ahead of the regulatory base. it is possible to find a way out of this situation through the creation of a single regulatory body of electronic money, together with ensuring principles of publicity and transparency of administrative and civil legal regulation in the sphere of electronic money turnover. the existing legal framework enables to resolve problems in development of the electronic money system. at the same time, legislation regarding the functioning of electronic money, taking into account existing international experience, needs to be further improved. the issue of enshrining the financial and legal nature of electronic money in regulatory acts is crucial, since further successful introduction of electronic money into the payment turnover depends on this. in order to improve and solve the current problems of electronic money turnover in ukraine, it is necessary to apply the experience of foreign countries: to improve and adapt the legal framework to changing conditions, introduce new electronic payment systems, create a unified regulatory authority, ensure reliability of electronic money issuers, and increase the security of payment transactions that use electronic money. in addition, as the leading international practice demonstrates, in order for the regulatory system to be effective and stimulate the development of the electronic money market, the following aspects should be enshrined at the legislative level: – a wide range of companies (and not just banks) should be authorized to issue electronic money; – at the same time, in order to be authorized to issue electronic money, a company must meet the requirements regarding the size of its charter capital, technical capacity and business reputation. in this case, the size of capital should be significantly less than that set for banks; – electronic money should be allowed for all types of payments between individuals, legal entities and the public sector; – the users should be able to redeem electronic money by investing the attracted funds into liquid and safe assets; – the activities for the issuance, turnover and redemption of electronic money should be isolated from transactions that are not related to payment services; – in order to avoid the risk of money laundering, anonymous 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(in ukrainian) baltic journal of economic studies 91 vol. 5, no. 3, 2019 corresponding author: 1 national university “odessa law academy”, ukraine. e-mail: tamaralatkovska@gmail.com orcid: https://orcid.org/0000-0003-3159-5994 2 national university “odessa law academy”, ukraine. e-mail: bilatiunova@gmail.com orcid: https://orcid.org/0000-0001-7886-793x doi: https://doi.org/10.30525/2256-0742/2019-5-3-91-98 political and economic governance: a comparative analysis of eastern european countries and ukraine tamara latkovska1, lyubov bila-tiunova2 abstract. the presented work is an attempt to compare the quality of governance in non-eu states in the western balkans and eastern europe with which the eu association agreements have been concluded, and ukraine, including aspects of the impact of the dcfta (deep and comprehensive free trade areas). the most important issues are the interpretation of the results, the equality of countries, and the political consequences that may arise after the progression and the rapid pace of the member countries of the dcfta towards the countries of the balkan region. the identified countries seek full membership in the eu. although the eu distinguishes between these countries, it recognizes “european prospects”, that is, membership in the eu, the commitments to adopt or approach eu laws and policies, made by both groups of countries, have much in common. this makes the comparison between the countries of the balkan region and the member states of the dcfta a sound and politically significant one. such comparison is facilitated by numerous sources, qualitative assessments, and official ratings. figuratively by analytical indicators, the countries can be divided into the first group of leading countries (serbia and montenegro) for which in february 2018 the european commission proposed to consider 2025 as the possible date of accession to the eu. the second group (albania and macedonia), for which the date of accession negotiations is conditionally open in 2019. the third group includes bosnia and herzegovina, kosovo, for which there are no dates, and turkey, the negotiations with which are suspended. for comparison, if we take both political and economic indicators of ukraine, it is approximately equal to the balkan states of the second group and outstrips the states of the third group. the prospect of eu membership was recognized as the strongest external factor of internal political changes in the countries surrounding the eu. one of the most striking trends is the steady decline in the standards of political governance in all countries, for which the eu expands its membership perspective. one of the main manifestations of poor governance in the broader neighbourhood is the widespread corruption and impunity of officials. weak rule of law and ineffective law enforcement bodies have become common practice in all different states and have allowed current officials to act impunity during their term of office. the identified results challenge the assumption dominating in political and scientific circles that a credible prospect of eu membership is steadily generating an internal environment conducive to democratic changes. the effectiveness of economic governance was assessed by the indicators of competitiveness of the national economy (global competitiveness index, corruption perceptions index, human development index, ease of doing business index, index of economic freedom, index of globalization, seda (sustainable economic development assessment)); gdp dynamics; the volume of foreign direct investment; economic activity of the population. in practice, the eu applies an increasing number of common economic policy instruments for the balkans and member countries of the dcfta, in spite of the political (or rhetorical) differentiation between countries, given the categorization of membership prospects. the convergence of the actual eu policy has taken place. the association agreements and the dcfta have raised the level of political and economic governance in georgia, moldova, and ukraine at the level of the balkan countries while the expansion process for the balkan countries has not advanced. key words: european studies, dcfta, political governance, economic governance, baltic states, democratic choice. jel classification: o19, f15, f42, r38, r50 baltic journal of economic studies 92 vol. 5, no. 3, 2019 1. introduction the presented work is an attempt to compare the quality of governance in non-eu states in the western balkans and eastern europe, with which the eu association agreements have been concluded, and ukraine, including aspects of the impact of the dcfta (deep and comprehensive free trade areas). the most important issues are the interpretation of the results, the equality of countries, and the political consequences that may arise after the progression and the rapid pace of the member countries of the dcfta towards the countries of the balkan region. the main characteristics include: direct neighbourhood/proximity to the eu; the overall goal of full membership in the eu; granting of the right to european democracies to apply for membership in the eu (article 49 of the lisbon treaty); progressive adaptation of eu political and economic regulations and standards; comparability of results of political and economic governance. analytical items allow revealing some anomalies in the structural development of countries, how the eu should react, and which scenarios it will choose according to the countries of the balkan region and the member countries of the dcfta. the identified countries seek full membership in the eu. although the eu distinguishes between these countries, it recognizes “european prospects”, that is, membership in the eu, the commitments to adopt or approach eu laws and policies, made by both groups of countries, have much in common. this makes the comparison between the countries of the balkan region and the member states of the dcfta a sound and politically significant one (richter, solveig, 2012). such comparison is facilitated by numerous sources, qualitative assessments, and official ratings. the emphasis is made on regular annual reports on the development of the balkan region and turkey prepared by the eu institutions and research papers published by ceps. in general, these assessments show that political and economic governance in the countries is comparable, even taking into account the wide range of country ratings. 2. the methodology of research the deep and comprehensive free trade area (dcfta) between ukraine and the eu is a broad-based trade agreement aimed at reducing and eliminating tariffs applied by the parties to goods, liberalizing access to the services market, and bringing ukrainian business rules and regulations in line with eu rules and regulations for the purpose of free movement of goods and services between the two parties and mutual nondiscriminatory attitude towards companies, goods, and services on the territory of ukraine and the eu. in january 2016, the deep and comprehensive free trade area (dcfta) between ukraine and the eu, which is a part of the association agreement, signed in june 2014, began to operate. the introduction of dcfta has led to a reduction in import duties in ukraine for eu goods. at the same time, ukrainian exporters have already received liberalized access to the eu market through autonomous trade preferences (atp) from the eu, which operated during the past two years. in 2019, the tariff protection of the eu market for ukrainian exporters did not change significantly, since according to the atp, they were already subject to import duties and tariff quotas in the eu as foreseen in the agreement for the first year of the dcfta. therefore, the achievements in 2016 can be expected by means of the use of previously unused opportunities (due to low demand in the eu, non-compliance with eu standards), as well as the reduction of non-tariff barriers to the eu market. in order to inform ukrainian entrepreneurs about what will help them to develop their own business in european markets, the delegation of the european union to ukraine has launched a new uopeneu project in social networks. it is an additional information resource about innovations and opportunities that will appear in the ukrainian business after the entry into force of the dcfta. the conducted analytical study found that prospects for joining the eu should be determined by a threestep methodology. in february 2018, the european commission proposed to consider 2025 as the possible date of the accession of serbia and montenegro, which means recognizing these two countries as leaders in the balkans (or the first league), even if the eu council does not approve this date. the second league was determined by the council in june 2018, when 2019 was designated as a possible, conditional date for the opening of negotiations on the accession of albania and macedonia. while the third league – the entry of bosnia and kosovo, for which there are no dates, and turkey, negotiations with which are suspended. for comparison, if we take both political and economic indicators, ukraine is approximately equal to the balkan states of the second league and outstrips the states of the third league. this is a general picture that has an obvious political significance, although there remains plenty of space for discussion of many indicators (balkans in europe policy advisory group (biepag), 2017; european commission, 2018). the general picture places in question the eu’s objectivity in expanding its membership prospects for the balkan group but denies it for the group of states of the dcfta. it also requires a more thorough consideration of the overall assumption that membership incentives determine the effectiveness of the reform processes and the degree of convergence of these neighbouring states with respect to eu values and laws. it also raises questions about the appropriateness of the eu neighbourhood policy, which may have changed (steven blockmans, 2017. the obsolescence of the european neighbourhood policy, ceps, brussels). baltic journal of economic studies 93 vol. 5, no. 3, 2019 the political geography of the territories directly close to the eu consists of three groups of countries, which in the eu official doctrine differ in terms of prospects of integration in the eu. the balkans, of course, is the most privileged group that received the conditional promise of eu membership in 2000. then, the countries of the eastern partnership (ukraine, georgia, moldova), which adopted the eu proposal on deep and comprehensive free trade and a close political association, which nevertheless do not correspond to full membership in the eu, can be identified. the countries of the middle east and north africa (mena) are at the third place with less probability of achieving an advanced level of integration in the eu than its eastern neighbours due to a variety of domestic and regional barriers or lack of interest from the countries concerned. the eastern partnership countries (including ukraine), if they are democratic countries, have the right to apply for full membership in the eu in accordance with article 49 of the treaty, as opposed to their southern neighbours. the prospect of eu membership was recognized as the strongest external factor of internal political changes in the countries surrounding the eu. scientists have argued that the quality of democratic governance in broader neighbourhoods is correlated with the strength of the incentives proposed by the brussels committee (boerzel and schimmelfennig, 2017). countries with a credible prospect of joining the eu have larger democratic changes. it was suggested that the countries, with which the eu association agreements have been concluded, have different pace and level of democratic transformation, as compared to the candidate countries for joining the eu (boerzel and schimmelfennig, 2017). however, these arguments, in our opinion, should be clarified and investigated. 3. results and discussion 3.1. discourse and analysis of political governance the analysis of political governance in the neighbouring countries of the eu in 2018 shows a much more diverse environment that ignores regional differences caused by both official eu enlargement and neighbourhood policy and the expectations of the scientific environment that the prospect of eu membership definitely creates political changes. the key point here is the belief in membership prospects. almost two decades after the eu expanded its prospects for membership in the balkans, the possibility of joining is still not visible even for the leaders of the region. after more than a decade after the start of the european neighbourhood policy, political realities are quite diverse, and leaders and less developed states in each region are confronted with the problem of regional stereotypes (see table 1). one of the most striking trends is the steady decline in the standards of political governance in all countries, for which the eu expands its membership perspective. turkey’s retreat from democracy is the brightest one but the balkan candidates have also been affected by the table 1 formed democracy rating in the eu’s neighbouring countries 2006 2008 2010 2012 2014 2016 2018 albania 7,25 7,5 7,55 7,25 6,7 6,95 7,1 croatia 9,1 8,85 8,5 8,4 8,45 8,4 8,4 bosnia and herzegovina 6,8 6,7 6,5 6,4 6,35 6,3 6,1 kosovo н/д н/д 6,95 6,7 6,6 6,65 6,5 macedonia 7,55 7,75 7,95 7,6 7,2 6,65 6,5 montenegro 7,4 7,85 7,8 7,6 7,9 7,85 7,6 serbia 7,4 7,75 8 8,05 7,95 7,85 7,6 the western balkans 7,58 7,73 7,61 7,43 7,31 7,24 7,13 turkey 7,05 7,05 7,65 7,65 7,55 7,25 5,6 armenia 5,2 6 4,92 5,25 5,35 5,23 5,1 azerbaijan 3,8 3,8 3,92 4,02 3,92 3,48 3,4 belarus 3,97 3,95 4,08 3,93 3,93 3,93 4,3 georgia 6,1 6,81 6,05 6,15 6,5 6,7 6,8 moldova 5,4 6,85 6,65 7,05 7,15 6,7 6,2 ukraine 7,1 7,35 7 6,1 6,1 6,75 6,9 the eastern partnership 5,26 5,8 5,44 5,42 5,49 5,47 5,45 algeria, egypt 4,23 4,27 4,37 4,3 4,8 4,8 4,8 jordan 4,1 3,98 4,02 3,92 4,1 4,03 4,4 lebanon 5,6 6,25 6,25 6,15 6 5,7 4,9 morocco 4,48 4,4 4,05 3,9 4 3,83 3,8 tunisia 3,38 3,95 3,78 3,85 5,8 6,3 6,5 the southern neighbourhood 4,05 4,10 4,14 4,06 4,47 4,08 4,06 source: bertelsmann stiftung , bertelsmann transformation index, 2018 baltic journal of economic studies 94 vol. 5, no. 3, 2019 narrowing of democracy, and this process can extend, if not completely abolished, the process of their accession to the eu. leaders in the region, according to political criteria, serbia and montenegro did not avoid regional trends, although their decline is lower compared to others – albania, bosnia and herzegovina, kosovo, and macedonia. recent events in macedonia indicate improvements in political governance but this is not yet confirmed by new data (bertelsmann stiftung, 2018). contrary to these negative trends are recent democratic achievements among the leaders of the eastern partnership during 2012–2016, which may be enigmatic to scholars. however, it was a period when free trade agreements were concluded, and this was a stimulus that had some weight. ukraine not only improved the quality of democratic governance during this period but also overtaken the balkan countries. the relatively positive quality of democracy in ukraine against the backdrop of general authoritarianism in the regions bordering the eu and increasing geopolitical tensions in this period impresses (freedom house, 2018). one of the main manifestations of poor governance in the broader neighbourhood is the widespread corruption and impunity of officials. weak rule of law and ineffective law enforcement bodies have become common practice in all different states and have allowed current officials to act with impunity during their term of office. it emerged that it is difficult to control corruption; however, data of the regions show that georgia differs not only from its dcfta partners but also from all balkan states, including even the balkan eu member states, as evidenced by the achievements of ratings close to the average level of oecd countries and the eu. on the other hand, moldova and ukraine have a lower rating than the least effective balkan countries (see table 2). table 2 corruption indicators in the balkan countries and countries of the dcfta among 180 countries of the world in 2017–2018 country rating country rating croatia 57 turkey 81 bulgaria 71 georgia 46 montenegro 64 moldova 122 serbia 77 ukraine 130 kosovo 85 albania 91 bosnia 91 macedonia 107 source: transparency international a similar picture is formed in establishing the rule of law rating. georgia is ahead of all western balkan states and has the best rating among the eu member states in the balkan region (like in croatia and much better than in bulgaria). ukraine, as the countries of the dcfta, are close to serbia, which, however, is not a regional leader. the identified results challenge the assumption dominating in political and scientific circles that a credible prospect of eu membership is steadily generating an internal environment conducive to democratic changes. the prospect of joining the eu did not contribute to the increased dynamics of democratization in the countries of the western balkans, which, after the initial strengthening of political rights and civil liberties in the early 2000s, regressed in the last decade in all respects. the reasons for this are well-known. from the eu side, the interest in stability in the region is caused by anxiety due to an increase in authoritarian tendencies (bechev, d., 2016; biepag, 2017; richter, 2012). most of the eu levers of influence regarding membership have been used to exert pressure on security officials in the balkans to provide security by weakening hidden conflicts and moving towards normalization of good-neighbourly relations (emerson, 2018) and by cooperation with eu countries’ governments in issues of migration and fight against terrorism (bechev, 2016). similarly, the cooperation of the balkan governments helped to consolidate the so-called balkans migration route in 2016, which strengthened the security of the eu borders and prevented criticism of the issues of internal political governance. as a result, the retreat from democracy in the region was unobstructed, local leaders eliminated media freedom, established political control over nominally independent institutions and extreme forms of political bribery. in other words, the eu has consistently applied political pressure and sanctions concerning democratic regression in the region and sent an incorrect signal to the balkan political elite that rushed to power to enjoy the benefits of public office (pomorska and noutcheva, 2017). inside these countries, there was no consistent, sustained social push aimed at crowding out a firm interest in the status quo, although casual social protests sometimes showed public dissatisfaction with the ruling political class. in general, the balkan societies were too concerned about economic survival and wound healing after the conflicts of the 1990s to oppose the seizure of state resources by predatory elites. in addition, the eu’s democratic mandate has suffered as a result of democratic challenges within the eu. the retreat from democracy in hungary and poland, as well as the reluctance of the eu to defend their fundamental political values, undermined the image of the eu as a propagandist of democracy abroad. however, the experience of ukraine indicates that a certain set of internal and regional factors can contribute to a push to democracy from the inside in the absence of a stimulus from the outside, although this process may be fragile and change to the opposite. 3.2. discourse and analysis of economic aspects of governance at the present stage of development of the world economic system, in conditions of uncertainty and baltic journal of economic studies 95 vol. 5, no. 3, 2019 instability of functioning, the key tools for ensuring the effectiveness of the implementation of socio-economic policy of the state are: the formation of an appropriate type of policy of modernizing the economy on the basis of the implementation of societal principles to determining the directions of structural and dynamic changes (environmental performance index, 2016); the use of the principles of developing socio-economic systems, the application of which provides for the development and definition of a specific set of modernization measures regarding the implementation of functions of generating favourable conditions for targeted general economic growth, taking into account transformational changes to the adjustments to the target orientation of evolution. the effectiveness of economic governance is assessed by the indicators of competitiveness of the national economy (global competitiveness index, corruption perceptions index, human development index, ease of doing business index, global innovation index, index of economic freedom, index of globalization, life expectancy, welfare index, global peace index, press freedom index, seda (sustainable economic development assessment)); gdp dynamics; indicators of exports and imports of goods and services; the volume of foreign direct investment; the number of people engaged in economic activity; economic activity of the population. let us consider and analyse the most important performance indicators. the first indicator is the gdp per capita. the gap in gdp per capita is significant between the economies of the balkan region, the economies of the dcfta and the eu member states. the adjusted average gdp per capita in the balkan countries is about 1/3 of the average in all 28 eu countries, which is about 1/5 of the gdp per capita in the dcfta countries. the key issue for comparison is how far the countries of these regions have advanced in achieving the european level of economic efficiency since the 1990s. in the period from 1990 to 2016, the average figures of the eu countries increased 2.6 times. thus, convergence for non-eu countries means an increase in gdp per capita faster than this value (see table 3). analysing the table, we note that albania and turkey have made significant progress while macedonia and belarus have remained stable. reforms in the dcfta countries are ineffective, and there were many political and economic reasons for this. one of the decisive factors is, in particular, the relative severity of post-soviet and post-yugoslav economic shocks. thus, the economic losses of the 1990s were smaller, although the regions had to suffer from the costs of wars that occurred after political disintegration. countries of the dcfta suffered significant economic losses immediately after independence. ukraine was lagging behind the eu and other cis countries (but only some of them benefited from the oil and gas sector). the low productivity of ukraine is explained by a number of factors. first, the industrial structure of ukraine was vulnerable after the collapse of the soviet economy, moreover, many key supply chains, tied to the russian industry, collapsed following independence and were finally destroyed by a conflict that began in 2014. what is more, ukraine has suffered extremely unfavourable economic leadership and refusal of reform measures. economic reforms have started only after the maidan in 2014 and are still incomplete, and corruption remains widespread. the situation of the dcfta countries shows the ineffectiveness of their economic governance. the second indicator of the efficiency of economic selfgovernment is the definition of the human development index. most countries in these regions belong to a group of “high human development” countries, measured by the undp human development index, which takes into account not only the economic level of the nation but also the health assessment by estimating the expected life expectancy at birth and the educational dimension, which is determined by the years of education (see table 4). montenegro is characterized by “very high human development”, exceeding the indicators of such eu member states as romania and bulgaria, while moldova is below with “moderate human development”. table 3 determination of adjusted gdp per capita in the baltic states and the dcfta in comparison of 1990 with 2016 (usd) countries of the balkan region 1990 2016 countries of the dcfta 1990 2016 albania 2,72 11,54 georgia 5,17 10,00 bosnia n/a 12,17 moldova n/a 5,33 macedonia 5,25 14,52 ukraine 6,76 8,27 montenegro n/a 17,63 average indicator 7,86 serbia n/a 14,51 other countries of the eaeu average indicator 13,40 armenia 2,41 8,83 croatia n/a 23,42 belarus 5,39 18,06 turkey 6,17 25,25 russia 8,01 24,78 average for eu countries 14,99 39,61 kazakhstan 8,44 25,28 average indicator 18,84 source: ebrd (2018), com (2018) baltic journal of economic studies 96 vol. 5, no. 3, 2019 georgia took a place next to the balkan leader, serbia, and ukraine is approaching bosnia, which is lagging behind other balkan countries. table 4 human development index, 2017 countries by categories human development index country rating countries with the highest hdi croatia 0,827 45 montenegro 0,807 48 romania 0,802 50 countries with high hdi belarus 0,796 52 bulgaria 0,794 56 serbia 0,776 66 georgia 0,769 70 turkey 0,767 71 albania 0,764 75 azerbaijan 0,759 78 bosnia and herzegovina 0,750 81 ukraine 0,743 83 armenia 0,742 84 countries with moderate hdi moldova 0,699 107 source: com (2018), ebrd (2018) the rating of the balkan countries and the member countries of the dcfta is more similar according to the human development index than according to gdp per capita. this indicates that the level of human capital was much more stable than macroeconomics since relatively high educational achievements of the past were transferred to independent states better than economic structures. the third indicator of the efficiency of economic self-government is an economic transition indicator, calculated by the european bank for reconstruction and development (ebrd). given that the regions have undergone a difficult transition from one type of the economy to another, the ebrd has developed a comprehensive set of transition indicators to assess how successful this process was. the results for several groups of countries, such as non-eu balkan countries, three countries of the dcfta, two most powerful southern mediterranean states, and also, for the reference, new member states of the eu, were different. the average indicators of the balkans and non-eu member countries of the dcfta are practically the same and amount to 5.04 for the dcfta countries (ukraine, georgia, moldova) and less than 4.99 for the five balkan states (montenegro, serbia, macedonia, albania, bosnia). kosovo, which is a special case, because it does not have the full attributes of statehood. both groups have a rather wide dispersion of indicators. the best indicator in georgia is 5.41, ahead of montenegro – 5.38, serbia – 5.36, macedonia – 5.26. the two less prosperous countries of the dcfta, moldova and ukraine, are estimated to be approximately the same or slightly better than the less successful balkan states (albania and bosnia) (emerson, 2018; popescu, nicu, 2018). comparison can also be made with the “new” eu member states, among which the best result is in estonia (7.58), and the worst – in croatia (6.06) and bulgaria (5.86). the two mediterranean countries, morocco (4.91) and tunisia (4.53), are the weakest in comparison with the balkans and the countries participating in the dcfta. the general conclusion of the analysis of indicators of the transformation of ebrd’s economic self-government is that the countries of the balkans and the dcfta are closely correlated and may be averaged. for example, the best of the countries of the dcfta (georgia) can be compared with the best countries in the balkans, while other states of the dcfta (moldova and ukraine) can be compared to the average balkan states. the next macroeconomic indicator of the effectiveness of economic governance is the ease of doing business, which is calculated by the world bank. the conditions for doing business in the regions are getting better, for example, georgia and macedonia catch up developed countries by this indicator and earned a place among the leading countries of the world in the world bank’s ease of doing business ranking (see figure 1). however, the improvement is not homogeneous. the economies of ukraine and bosnia are the worst in each of the regions, in terms of the regulatory environment, and an unattractive place to stimulate investment and local business initiatives. there are certain assumptions in the calculation methodologies of the world bank. for example, macedonia’s high ranking seems to be abnormal, as most of the polling components (not shown here) are much less favourable than the overall rating given in figure 1. calculation of financial and economic ratings. there are several international rating agencies (moody’s, standard & poor’s, fitch), which evaluate countries according to their creditworthiness, based on a set of financial and macroeconomic criteria, including political assessments that may affect creditworthiness. since the assessments of various rating agencies largely coincide, we present here only the current ratings of one agency – moody’s. the highest ratings of category a, or even larger aaas, are granted to the strongest market economies or individual entities, which means that their securities are risk-free and highly profitable for the investor. no country in the balkans and member countries of the dcfta achieves this rating. all credit ratings of countries in categories b or c are considered risky or such that have speculative investment prospects, with gradations (serbia – в3; montenegro – в1; albania – в1; bosnia – в3; georgia – в2; moldova – в3; ukraine – с). economic governance in accordance with eu standards. since all the countries of the balkan region baltic journal of economic studies 97 vol. 5, no. 3, 2019 and the member countries of the dcfta are seeking full membership of the eu, they have undertaken a commitment to comply with eu legislative acts and standards. countries differ in the eu’s readiness to recognize their membership prospects; however, all countries are developing programs for progressive compliance with eu requirements. for candidates for accession to the eu, this process consists of “chapters”, which include eu policy blocs. they are informally similar to the materials of the free trade agreement. and the eu’s regular reports on progress in the balkan countries, in turkey, and in the member countries of the dcfta cover the same issues to a large extent. this means that there is a well-structured base for comparison between all individual states. the commission favours the execution of this task through the methodology it has adopted to describe the essence of this complex material in a short “coded language”. each chapter in its assessments ends with an assessment of three degrees of readiness for eu membership with “certain”, “moderate” or “good” levels of readiness. in the economic ranking, georgia occupies a higher place than the leading balkan countries (montenegro, serbia, and macedonia) while moldova and ukraine outstripped albania and bosnia, for which the eu did not publish full data (popescu, nicu, 2018). 4. conclusions in general, we can say that high-quality democracy has not rooted in any country in both regions, where democratic breakthroughs are rarely followed by democratic upheavals. political changes cause anxiety in all countries in the balkans; nevertheless, they are less impressive in the countries of the dcfta. the purpose of the political trajectories of the balkan countries for joining the eu is that the region is approaching authoritarianism, and the challenges of political reform are serious. political changes in the eastern neighbouring countries are fragile and occur in a less favourable geopolitical climate, so they are no less worthy of support and encouragement from the eu. so, it’s time for the eu to justify its international reputation as a supporter of democracy, changing the situation as it is possible. the effectiveness of economic governance was assessed by the indicators of competitiveness of the national economy (global competitiveness index, corruption 0 10 20 30 40 50 60 70 80 90 100 georgia macedonia russia belarus montenegro serbia moldova romania armenia bulgaria croatia azerbaijan turkey albania ukraine bosnia and herzegovina place figure 1. ranking of countries by the ease of doing business index, 2017 source: ebrd, 2018 legend: economy is evaluated for ease of doing business from 1 to 190. a high place in the ease of doing business ranking means that the regulatory environment is more favourable for the creation and operation of a local company baltic journal of economic studies 98 vol. 5, no. 3, 2019 perceptions index, human development index, ease of doing business index, global innovation index, index of economic freedom, index of globalization, life expectancy, welfare index, global peace index, press freedom index, seda (sustainable economic development assessment)); gdp dynamics; indicators of exports and imports of goods and services; the volume of foreign direct investment; the number of people engaged in economic activity; economic activity of the population. in practice, the eu applies an increasing number of common economic policy instruments for the balkans and member countries of the dcfta, in spite of the political (or rhetorical) differentiation between countries, given the categorization of membership prospects. there has been a convergence of the actual eu policy “outside the political radar” with respect to the two groups (for example, many technical measures are not proposed as a strategy). agreements on the association and the dcfta have raised the level of political and economic governance in georgia, moldova, and ukraine at the level of countries of the balkan region while the expansion process for the balkan countries has not advanced. the basis of the common economic and political development was the creation of deep free trade areas with the eu with a somewhat different meaning: this includes the stabilization and association agreements (saa) with the balkans, the customs union with turkey, and the dcfta for georgia, moldova, and ukraine. the main duty-free trading elements are supplemented by the pan-euro-mediterranean convention on preferential rules of origin and the diagonal cumulation of value-added, common product standards, certain blocks of sectoral policies, including energy and transport policies, financial and investment mechanisms (eib, ebrd, eu budget), etc. references: balkans in europe policy advisory group (biepag) (2017). the crisis of democracy in the western balkans. authoritarianism and eu stabilitocracy. policy paper, march. retrieved from: http://www.biepag.eu/wp-content/ uploads/2017/03/biepag-the-crisis-of-democracy-in-the-western-balkans.-authoritarianism-and-eustabilitocracy-web.pdf bechev, d. (2016). europe’s refugee crisis and the balkans. expert brief, alsharq forum, 8 june. retrieved from: http://sharqforum.org/2016/06/08/europes-refugee-crisis-and-the-balkans/ bertelsmann stiftung (2018). bertelsmann transformation index, gütersloh. blockmans, s. (2017). the obsolescence of the european neighbourhood policy, ceps and rowman & littlefield international, october. börzel, tanja a. and frank schimmelfennig (2017). coming together or drifting apart? the eu’s political integration capacity in eastern europe. journal of european public policy, 24:2, 278–296. ebrd (2018). transition report. london. emerson, m. (2018). the strategic potential of a wider european economic area (weea), ceps commentary, ceps, february. european commission (2018a). a credible enlargement perspective for and enhanced eu engagement with the western balkans. environmental performance index (2016). global metrics for the environment. retrieved from: https://www.epi.yale.edu com (2018). 65 final, strasbourg, 6.2.2018. european commission, ‘2018 communication on eu enlargement policy’, com (2018)450 final, 17 april 2018; to which are annexed “accompanying documents” on montenegro, serbia, macedonia, bosnia, albania, kosovo and turkey. freedom house (2018). freedom in the world, 2018: democracy in crisis. paweł dziekański (2017). diversification synthetic indicator for evaluating the financial capacity of local government. the case of polish voivodeships. acta universitatis agriculturae et silviculturae mendelianae brunensis; volume 65 number 2. retrieved from: https://doi.org/10.11118/actaun201765020611 pomorska, k., noutcheva, g. (2017). europe as a regional actor: waning influence in an unstable and authoritarian neighbourhood. journal of common market studies 55: (s1), 165–176. popescu, nicu (2018). why georgia’s lessons for russia don’t apply in ukraine, carnegie moscow center, 13 february https://carnegie.ru/commentary/75483 shevel, oxana (2014). how putin turned ukraine to the west, monkey cage, washington post, 29 october. retrieved from: https://www.washingtonpost.com/blogs/monkey-cage/wp/2014/10/29/how-putin-turnedukraine-to-the-west/ richter, solveig (2012). two at one blow? the eu and its quest for security and democracy by political conditionality in the western balkans’. democratization, 19:3, 507–534. transparency international (2017). corruption perception index, 2016, 25 january. vachudova, milada anna (2014). eu leverage and national interests in the balkans: the puzzles of enlargement ten years on, journal of common market studies, 52:1, 122–138. world justice project (2018). rule of law index, 2017–2018. baltic journal of economic studies 243 vol. 5, no. 4, 2019 corresponding author: 1 ural state university of economics, russian federation. e-mail: jadransky@yandex.ru 2 ural state university of economics, russian federation. e-mail: lena22021977@yandex.ru doi: https://doi.org/10.30525/2256-0742/2019-5-4-243-247 social mechanisms of scientific management dmitry yadransky1, elena chumak2 abstract. the article is devoted to issues of social management in the context of modern industrial and economic transformations. the main purpose of the article is to formulate the author’s concept of scientific management using social mechanisms. as a hypothesis, the possibility of implementing scientific management through the use of social norming is considered. the main research methods were general scientific methods of cognition, in particular, dialectic, system, comparative analysis, as well as the induction method in developing the author’s concept. the article considers the issue of labour management in conditions of the impossibility of applying quantitative labour standards for intellectual and informational activities. the methodological basis consists of the concepts of foreign and domestic researchers regarding the scientific organization of labour. the concept of social norming is formulated, according to which, managers must ensure the existence of two types of social norms in the organization: rigid (unchanging) and flexible (the content of which varies depending on the current tasks of the organization). based on the specifics of the labour functions of specific workers, managers can model and implement social norms that stimulate certain social changes. conclusions. based on the proposed approach, the nature of managerial influence is determined, which consists of two parts: development and implementation of social norms; stimulation of its fastest assimilation by all members of the labour collective. key words: management, functions, social norms, efficiency, social requirements, goals. jel classification: m12, m14 1. introduction in the modern management space, issues of the search for internal reserves are one of the acutest. the situation is aggravated by the fact that in the conditions of a permanent social crisis, social and psychological attitudes of workers shift. because of this, economic methods become of particular value. however, in conditions of crisis processes, the use of economic management methods is not always possible or appropriate (kalabina, 2016). therefore, there is a need to develop managerial approaches based on other mechanisms (including social). the novelty of the topic lies in the fact that in the framework of this study, it is proposed to move away from the methods of technical regulation of labour as the basis of scientific organization and the author’s concept of labour organization based on alternative principles is formulated. the need to develop the proposed concept is explained by the dynamics of changes in the structure of the employed population with a constant increase in the share of intangible production, which significantly complicates the assessment of labour results for the effective application of economic methods. the growth of the intellectual component of the modern labour process significantly reduces the possibility of using clearly structured mechanisms for its regulation (primarily labour regulation). herewith, the overwhelming majority of scientific concepts (including lean manufacturing, sm) are based on an artefact, the absence of which increasingly characterizes the result of labour activity. the relevance of scientific decisions lies in the fact that there is a need to rethink the concept of scientific management from the standpoint of the dominance of an intangible product over a tangible one. the last thesis applies both to the process and to the result of labour. thus, the purpose of the study is to analyse social aspects of scientific management for types of labour that have lost (are losing) an artefact as a result of the activity. to achieve this goal, it is necessary to solve a number of research problems: to formulate social aspects of scientific management, to study the transformation of approaches to scientific management, in relation to information work, to propose an algorithm of managerial impact in accordance with the modern specifics of work. the methodological basis of the research is based both on the classical principles of scientific management laid down by taylor, gastev, and their followers, as well as on the results of the author’s research described in previous works (yadransky, 2012). baltic journal of economic studies 244 vol. 5, no. 4, 2019 the logic of the material studied is based on the fact that the application of quantitative methods of norming and organization of labour for types of labour that do not have an artefact as a result is unproductive, due to which there is an objective need to develop combined methods. the essence of these methods should be reduced to a combination of social self-organization of workers and mechanisms of external regulation of the labour process. considering the stated goals, it should be noted that most theoretical and applied research in modern scientific literature is focused on social management in conditions of large social groups, usually institutionally designated (collective of the enterprise, population of the territory). at the same time, these issues in small groups (which, for example, are brigades, project teams) are based mainly on the classical methods of tangible incentives and technical regulation of labour. on the one hand, this is due to the fact that the social management system requires a sufficiently qualified management entity, and on the other, the lack of specific universal methodological recommendations for social management of small labour groups. as the authors of the article rightly note: “today, the employer is interested in an employee who has the abilities, knowledge, experience, competencies, relationships, and connections – which forms the intellectual capital of the company” (ryabcev, kochergina, khokholush, 2017). therefore, we are talking about the growth of social requirements for the employee by the employer, in the absence of real criteria for assessing the effectiveness of their implementation. 2. methodological problems of the scientific management of information work for the application of classical management methods in the modern labour process, there are a number of limitations: – in the conditions of informational (intellectual) work, its result is, to a large extent, is difficult to formalize (especially within individual performers); – labour result may turn out to be little predictable and dependent on external conditions (in which the labour process takes place directly); – the result of intellectual work is largely determined by social norms and values of the social environment in which labour occurs. in other words, each participant in the labour process can have unique personal experience, various social norms and values, which in combination with the norms of other workers can lead to both growth and decrease in the overall productivity of the group; – external (by managers) and internal (by the employee) assessment of labour results may not coincide. given the differences formulated, for operator-based labour, such differences can be neglected. however, in the conditions of creative work, the above discrepancies directly affect all management processes. based on the logical differences of the informationmanagement labour process and the process of physical reproduction, we can state their only fundamental difference – the absence of a material artefact. herewith, the indicated processes are of a cyclic nature, which proceeds in time. at the same time, the information and management labour process (work cycle) can vary significantly in duration. the duration of the work cycle of an individual managerial employee may vary significantly depending on the characteristics of his professional functions. so, the duration of the work cycle of the chief accountant, in our opinion, is 1 year because it contains work related to the preparation of the annual report (the frequency of which is 1 year). at the same time, the work of the call centre operator, who provides telephone counselling to customers, is repeated 100 times or more during the shift in some cases. however, the nature of the information (even in the context of its standardized provision) is constantly changing. accordingly, an individual operator cycle will be faster than an accountant. on the one hand, this leads to faster acquisition of experience (professional, communicative, social), and on the other hand, it causes a more rapid increase in fatigue over the constant repetition of the work cycle (monotony, possible feeling of the low social significance of work). it should be noted that for the information management work process, the result is communication (information increment). moreover, the operator during the work cycle has a standardized character and is reduced to the transfer of information, which leads to a low social significance of such work cycle. the problem of preparing an annual report concerns the chief accountant, however, a separate accountant can prepare certain types of reports, which will make the work of a particular accountant more cyclical and the cycle time – shorter (with a corresponding reduction in the social content of the corresponding cycle). herewith, for both the operator and the chief accountant, the structure of the work cycle consists of separate microcycles (which can have clear time behaviour). the structure of the operation, the optimal sequence and duration of individual elements can be established using sipoc or other methods of managerial optimization. duration can be determined both expertly and using methods for studying the costs of working time. the main difficulty of this approach is to determine the social significance of the labour function. the change of cycles, together with the acquisition of social experience, causes the accumulation of employee fatigue. even fatigue does not always occur as a result of a certain type of work, but often as a result of its constant repetition. this phenomenon is true and proven for elements of labour processes (pozdnyakov, kozlovcev, mukhamedzhanova, 2013); however, it may baltic journal of economic studies 245 vol. 5, no. 4, 2019 fully be inherent in social and professional experience (including professional burnout). therefore, the above affects the entire process of labour activity and should be taken into account in social management. 3. social mechanisms of scientific management it should be said that as a kind of norm, for using in the standardization of intellectual work, one can use the change in the duration of individual labour cycles (relative to the standard duration). in our opinion, this approach creates the prerequisites for assessing the possible accumulated fatigue and social experience gained (social competence of the employee). it should also be emphasized that the role of the individual significantly increases in informational work, which is why there is a need for the personification of norms (adaptation to the value-motivational orientations of the individual). such personification can be achieved by studying the social causes of individual effectiveness and individual labour behaviour. as ukrainian researcher v. pilipenko notes, in modern management, the labour behaviour of workers comes to the fore (pilipenko, 1993). since labour behaviour is a type of social behaviour, it is based on labour standards and values that are acquired in the process of labour interaction in a specific labour group. taking into account the fact that depending on the nature of the professional activity, norms may differ, there may be certain specific norms (values) in a separate labour group. moreover, the system of norms and values is relatively dynamic, which necessitates its preliminary study (before the start of managerial impact). considering the issue of social mechanisms of scientific management, the opinion of p. drucker is noteworthy, according to which “the productivity of a mental worker becomes the goal of personnel management, as increasing the productivity of a low-skilled worker has been the goal of personnel management for the past century, since the time of f. taylor. this will require, among other things, completely different approaches to those working in the organization and to their work. namely: people do not need to be ‘controlled.’ the task – to guide people. the goal – to make the specific habits and knowledge of each individual employer as productive as possible” (drucker p.f., 2000). in our opinion, we should talk about social conditions in which the labour actions of employees correlate as much as possible with the expectations of employers. accordingly, the main discrepancy in this vein (between the employee and the employer) may be not the content of the elements of the labour cycle but its duration or social significance. under the conditions of individualized informational (intellectual) work (freelance, remote workplaces), the problem of finding mechanisms for influencing the individual normative field of an employee arises. in this context, we propose to consider means of scientific management, on the one hand, self-standardization, and on the other, the active declaration of desired practices (their intensity), with the goal of “embedding” the expectations of employers in the system of individual life values (social norms) of individual workers. as v. e. pilipenko rightly noted: in a superindustrialized society, the main thing is information and creativity. this changes, among other things, the nature of labour, which requires an employee of a new type. the “third wave” worker is more independent, more agile, and no longer an appendage of the machine” (pilipenko, 1993). partially agreeing that the worker ceases to be an “appendage of machines”, we consider it appropriate to note that the reason for standardization was precisely the need to synchronize a person and a machine. in the conditions of classical labour, there is a need to synchronize the psycho-emotional (intellectual) processes of various workers. it is possible to consider the social norm characterizing the expected result or the labour process, as well as the intensity of labour cycles, as objective factors of information work. being aware of the existence of specific requirements (and not statements of the type “you need to work efficiently”), it is easier for an employee to agree (abandon) to a certain type of activity based on a personal value-norm base. the absence of a declared norm can lead to the fact that optimization of one’s own effectiveness can come into a certain dissonance with the value orientations of other members of the collective. such an approach, in our opinion, will cause a conflict (in a. zdravomyslov’s classification – a conflict at the level of everyday life) because such conflicts are associated with the use by people of new opportunities for self-affirmation, with complex processes of adaptation to values, norms, and requirements, consisting for the first time (zdravomyslov, 2003). therefore, the establishment of a social norm (intensity, effectiveness, importance) of labour is an important component of scientific management. in this case, we are talking about the norm – a guideline. however, having established the norm, it is necessary to give the workers a mechanism (tools) to achieve it. one of such mechanisms may be the creation of a selfnorming system (the formation of the skills of such activities in employees). for people of intellectual labour, self-standardization is more represented by time management (klemens, 2007). summarizing the considered literary sources in this area, time management is understood as effective planning of working time to achieve goals, finding temporary resources, prioritizing and monitoring the implementation of planned (arkhangelskij, 2005). these approaches largely coincide with modern approaches to labour standardization (except the standardization object). in fact, the main difference is that time management is aimed at independently regulating own labour process (while external assistance is recognized as necessary). the usual labour baltic journal of economic studies 246 vol. 5, no. 4, 2019 standardization is aimed at managing the efficiency of the work process of a group of averaged performers, increasing not only individual but also group efficiency. appealing to the classic of soviet standardization, a. gastev (bodrov, 2010), who considers increasing organizational effectiveness as a whole, from the personal effectiveness of an individual (“narrow base”), one can note some utopianism of this logic. the author proposes the logic of increasing the efficiency of the team through the aspirations of individual workers for maximum productivity. if all members of the group have such an aspiration, a consensus is possible but if there are contradictions – a social conflict is inevitable. accordingly, an artificial rapprochement of individual and group aspirations (norms, values), including those aimed at increasing personal effectiveness, is required. turning to another classic p. kerzhentsev who initiated the movement for the individual saving of working time (bodrov, 2010), one can also ascertain the archaic nature of his views for the conditions of normalization of information and management work. individual savings are possible either in the conditions of constant changes in the parameters of a labour organization (which is impossible) or in conditions of collective time-saving. especially ineffective this process will be as the degree of division of labour increases. an exception may be the situation in which such savings act as a group value. otherwise, such savings will be considered as contrary to the interests of the team (as empirical confirmation, the results of a survey conducted by i. burov, according to which up to 70% of respondents think only of themselves) (vorona, suimenko, pilipenko, 2001). at the beginning of the xx century, unlike foreign researchers in scientific management, a. gastev regarded the worker as an active source of improving labour methods. this was reflected in his concept of the labour attitude. thus, the social aspects of scientific management by gastev can be represented as follows: – ensure the manifestation of the personal initiative of each employee in improving the efficiency of use of working time; – ensuring each employee’s attention to issues of increasing production efficiency (“take to heart”); – standardization in increasing not only “mechanical” but also “creative” efficiency contributes to the conversion of the unspent physical energy of the employee, in the course of performing direct (mechanical) labour processes, into creative energy. it’s advisable to spend such energy on improving the efficiency of the entire economic activity of the enterprise (au. – quality control circles) (yadransky, 2012). under the conditions of intellectual labour, the last thesis is archaic; however, it is interesting in that it considers the possibility of the transition of one form of labour activity to another (physical to mental). considering social management from socioengineering positions, we can talk about a change in social norms (values) that cause a certain social behaviour of the employee. moreover, most modern theorists of labour organization do not consider the individual in the labour process as a source of normsetting and consider only external standardization possible. in our opinion, such a technocratic approach is fundamentally outdated. personal attitudes in the system of individual values can create prerequisites for finding ways to improve results (guided by an individual success model). in this case, the reason for such a search may be the need for adaptation to the requirements of the social environment (team). 4. conclusions and recommendations based on the theoretical analysis, it can be concluded that modern management practice requires the development of alternative approaches to the organization of creative (including managerial) work, taking into account the significant influence of social factors on this labour process. as a result of the consideration of the first research task, the social aspects of scientific management were determined. as a result of the analysis, it was proposed: – to consider the individual as an open system that has its mission, its strategic and tactical plans, chooses alternative ways to achieve them, and is in the external environment of direct and indirect impact. the specified system should coordinate its goals with the goals and state of the environment to maximize compliance with external parameters; – scientific management, in this context, comes down to creating conditions for increasing the efficiency of functioning by establishing an open system for declaring expected (recommended) modes of behaviour. within the second task, aimed at studying the transformation of approaches to scientific management in relation to information work, it is noted that such studies were conducted by domestic scientists in the first half of the xx century. integrating the gained experience and modern foreign developments, we see the need to develop social parameters of the work cycle. we include the following parameters: – labour intensity; – number of tasks; – the level of independence of decisions made; – social significance. based on these parameters, it becomes possible to differentiate the categories of workers who do not have an artefact as a result of labour. within the scope of the solution of the third task, an algorithm of managerial impact was proposed in accordance with the specifics of social management. the thesis is formulated, according to which the practical implementation of social aspects of scientific management ultimately means the formation of an organizational system of social norms and rules. these standards are divided into two groups: baltic journal of economic studies 247 vol. 5, no. 4, 2019 – the first – the norms (rules) are persistent and cover the general rules for the joint implementation of labour activities; – the second – flexible standards. the flexible part of social norms should provide for changes in the regulatory system of the labour group as a response to changes in the external environment. the managerial impact, in this case, will consist of two parts: development and implementation of the social norm and stimulation of its fastest assimilation by all members of the labour collective. a criterion for the ultimate effectiveness of the social organization of labour is defined – maximization of the social result with minimal aggregate parameters of labour costs (labour intensity, number of tasks). herewith, the criterion of social effectiveness is the consistency of the actual labour costs of the microgroup with the views of the leadership and organization. the specific forms of managerial influences will be predetermined by the management model selected in a particular organization, the type of organizational culture, as well as a number of other organizational factors. scientific management, respectively, will be determined by the criteria of rationality and systematicity. direct empirical indicators of these criteria should be: – for rationality – economic stability, profitability, environmental friendliness, productivity, market adequacy (demand); – for systematicity (parameters of labour intensity, social efficiency, structural optimality, time parameters, adequacy to internal processes of the organization). the main prospects of the conducted theoretical analysis, in our opinion, are the development of a specific system of social standardization at a particular enterprise. we conduct similar studies at a number of enterprises. among the categories of workers studied: ted specialists, design engineers, shift foremen, transfer line operators, call centre operators. practical results of the implementation of this concept will be presented in our next works. references: arkhangelskij, g. a. (2005). tajm-menedzhment v sisteme upravleniya organizaciej [time management in the organization management system]. mоscow: moskovskaya finansovo-promyshlennaya akademiya. (in russian) berd, p. (2001). tajm-menedzhment: planirovanie i kontrol vremeni [time management: time planning and control]. mоscow: fair-press. (in russian) bodrov, b. a. (2010). razvitie ucheniya o professionalnom utomlenii cheloveka. chast і. kategoriya "utomlenie" v sisteme predstavlenij o funkcionalnom sostoyanii i deyatelnosti cheloveka [development of the doctrine of professional human fatigue. part i. the category of “fatigue” in the system of ideas about the functional state and activities of man]. psikhologicheskij zhurnal, 31(3), 46–57. (in russian) gastev, a. k. (1972). kak nado rabotat [how to work]. moscow: ekhonomika. (in russian) drucker, p. f. (2000). zadachi menedzhmenta v xxi veke [management challenges for the 21st century]. moscow: vilyams. (in russian) zajvert, l. j. (2007). esli speshish – ne toropis. novyj tajm-menedzhment v uskorivshemsya mire. sem shagov k effektivnosti i nezavisimosti v ispolzovanii vremeni [slow down to speed up: how to manage your time and rebalance your life]. moscow: ast : astrel. (in russian) zdravomyslov, a. g. (2003). chelovek i ego rabota v sssr i posle [man and his work in the ussr and after]. moscow: aspekt-press. (in russian) kalabina, e. g. (2016). adaptaciya povedeniya predpriyatiya v sfere oplaty truda i zanyatosti v rossijskikh ekonomicheskikh realiyakh [adaptation of enterprise behaviour in the field of remuneration and employment in russian economic realities]. upravlenecz, 6(64), 26–31. (in russian) klemens, dzh. k. (2007). vlast nad vremenem: za predelami tajm-menedzhmenta: kak stat effektivnym rukovoditelem, izmeniv svoe otnoshenie ko vremeni [time mastery: how temporal intelligence will make you a stronger, more effective leader]. moscow : dobraya kn. (in russian) pilipenko, v. e. (1991). organizaciya. trud. effektivnost [organization. labour. efficiency]. kiev: naukova dumka. (in russian) pilipenko, v. e. (1993). socialnaya regulyaciya trudovogo povedeniya (sociologicheskij analiz) [social regulation of labour behaviour (sociological analysis)]. kiev: naukova dumka. (in russian) pozdnyakov, v. d., kozlovcev, a. p., & mukhamedzhanova, g. sh. (2013). vliyanie utomlyaemosti na rabotosposobnost i funkcionalnuyu nadyozhnost operatorov zhivotnovodstva [the effect of fatigue on the performance and functional reliability of livestock operators]. izvestiya orenburgskogo gosudarstvennogo agrarnogo universiteta, 4(42), 83–85. (in russian) vorona, v. m. (2001). promyshlennoe predpriyatie i ego lyudi: problemy socialno-ekonomicheskogo povedeniya [industrial enterprise and its people: problems of socio-economic behaviour]. kiev: in-t sociologii nan ukrainy. (in russian) ryabcev, a. yu., kochergina, t. v., & khokhlush, m. s. (2017). vozmozhnosti obrazovatelnoj sredy v formirovanii intellektualnogo kapitala [the possibilities of the educational environment in the formation of intellectual capital]. upravlenecz, 1(65), 60–65. (in russian) yadransky, d. n. (2012). norma truda: sociologicheskoe izmerenie: monogr. [worktime standard: sociological dimension: monograph]. zaporozhe: prosvita. (in russian) baltic journal of economic studies 93 vol. 6, no. 2, 2020 corresponding author: 1 national academy of internal affairs, ukraine. e-mail: tsutskiridzem@gmail.com 2 classic private university, ukraine. e-mail: berezaanatoliy@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-2-93-99 the impact of e-government on the level of corruption maksym tsutskiridze1, anatoliy bereza2 abstract. the purpose of the article is to determine the way e-government can reduce corruption in the country and to analyze the dynamics of four indices of corruption in ukraine. the subject of the research is the features of the civil law nature of electronic money. methodology. research methods are chosen based on the object, subject and purpose of the study. when researching, the general scientific and special methods of legal science have been used. thus, the analysis and synthesis method as well as the logical method have been used to formulate a holistic view on the relationship between e-government and corruption, its features and legal nature. the logical-semantic method has been used to establish the meaning of the concepts “corruption” and “e-government”, “inflation”. the legal modeling method has been applied to formulate the relevant conclusions and propositions. results. the potential of e-government impact on the level of corruption in the country is analysed, in particular, depersonification, deregulation and transparency. the main obstacles to the implementation of e-government initiatives (problems with the access to the internet, limited list of electronic services, sabotage by the government officials) and factors affecting the level of corruption (economic freedom, inflation, welfare level, political stability) are highlighted. practical implication. the comparison of international indicators on the level of development of e-government and the level of corruption in ukraine does not confirm such dependence, although there is a positive correlation between liberalization of the economic sphere and reduction of the level of corruption. value/originality. the study shows that e-government as the tool to combat corruption can be effective only in combination with other means. accordingly, the list and scope of electronic public services should be expanded; this could give impetus to further deregulation, which is a key component of economic freedom. key words: e-government, corruption, public administration, deregulation, political stability, democracy. jel classification: d74, e42 1. introduction over the last decades, information and communication technologies have been actively involved in all fields of public life, as a result manners and established patterns of relationships undergo transformation, sometimes even radical. public administration, gradually utilising new tools for data collection and processing, provision of information and services to citizens, is no exception. obviously, such changes have affected in some way such traditional illness of the bureaucratic apparatus as corruption. the issues of corruption and e-government are well-studied by domestic and foreign researchers (in particular, a. bova (2006), i. valiushko (2013), i. kushnarov (2018), k . layne (2001), a. safonenko (2004), s. seriohin (2009), d. serra (2006), h. singh (2007), and others). however, their interrelations have not been studied thoroughly. the relationship between e-government implementation and the level of corruption is scarcely studied in ukraine, with the exception of teaching aids (semenchenko & zhuravlov, 2011). moreover, anti-corruption recommendations by various international organizations only briefly mention the benefits of implementing e-government services, while among the benefits of e-government, reducing corruption is considered a minor consequence. for example, the united nations e-government survey (un e-government survey, 2018) states that its greatest potential merit is transformation towards resilient societies (achieving sustainable development goals through accessibility to services for all), inclusivity (negative correlation between digital technology use and social exclusion is established, however an obstacle in this field is e-illiteracy or difficult network access) and disaster forecasting and better response. baltic journal of economic studies 94 vol. 6, no. 2, 2020 the study of the relationship between e-government and corruption has become of increasing interest relatively recently. for example, a number of researchers, including n. elbahnasawy (2012), k. kim (2014), d. shim (2008), believe that e-government is capable of reducing corruption in government, but j. mistry and a. jalal (2012) have been the first to prove this dependency: the findings of their study suggest that the use of ict leads to corruption reduction. moreover, in the analysis of 2003-2010, these authors found that the impact of e-government was higher in developed countries than in developing countries. m. garcia-murillo and r. ortega analysed the corruption model developed by r. klitgaard (1991), which included factors such as: number of governmental websites, monopoly power of the state, public officials’ authorities and responsibility of bureaucracy (garcia-murillo & ortega). in the context of e-government initiation, transparency issues were studied by f. bannister (2011), j. bertot (2010). the study of the relationship between these two phenomena is complicated due to the nature of corruption, which is difficult to observe and quantify. therefore, in establishing the level of corruption, researchers have to use either subjective indicators (surveys of citizens and entrepreneurs about their experience of dealing with corruption cases), or apply complex, indirect indicators. moreover, the disadvantages of this type of research are due to a large number of countries involved in comparing the experience thereof. on the one hand, expanding the research database creates the illusion of identifying common trends and, thus, minimizing the impact of country-specific characteristics. on the other hand, corruption is to a certain extent a cultural phenomenon linked to the mentality, political culture, ethical values of public officials, which are determined primarily by the context of a specific country. therefore, the analysis of several international indicators in several countries has enabled d. lupua and k. lazar (2015) to argue that the more frequent use of e-government, the lower corruption. in particular, it can be assumed that a 1% increase in the e-government index has been able to lead to a 6.7% decrease in corruption in the eu member states and 6.3% for non-eu countries. analysis of changes in corruption data between 1999 and 2006 due to the use of information technology – the launch of e-government initiatives during this period – enables t. andersen (2009) to conclude that the implementation of e-government significantly reduces corruption. however, the utilisation of the most relevant indexes, which determine the level of corruption and the level of e-government development, enables to confirm or refute the hypothesis of their correlation. 2. presentation of the main material firstly, it should be determined how e-government can help counteract corruption. in general, three positive outcomes of the widespread introduction of electronic government services and access to information on government activities by citizens can be identified: depersonification, deregulation and transparency. its main advantage is to depersonalize interaction between a government official and a citizen: it is during physical contact between them the former has opportunities for abuse of his/her position and, next, for bribery. in other words, the more public services are provided through electronic portals, the less opportunities for corrupt behaviour occur. secondly, an important point is a decrease in the number of powers of public officials, in particular, regarding the decision-making on public contracts, the purchase of goods or services from entrepreneurs. that is, e-government acts as a deregulator, limiting the ability of public officials to commit unlawful acts for personal gain. in other words, it is the physical interaction between the official and the citizens, considerable powers of the former to issue permits, to register, to conclude contracts for the purchase of goods or services at the expense of the public budget, are among key prerequisites for favourable conditions for corruption. however, this assumption is rather theoretical and logical since it is almost impossible to confirm it empirically because of the nature of corruption, which depends on a number of factors rooted in the cultural, legal, social, political and economic structure of society. thirdly, an important outcome of e-government initiation is an increase in the transparency of public authorities’ activities, which, accordingly, reduces opportunities for corruption and increase the public's confidence in their activities (grimmelikhuijsen, porumbescu, hong & im, 2013; porumbescu, 2016 (1); bertot, jaeger & grimes, 2010; porumbescu, 2016 (2)). moreover, thanks to the availability of information, citizens and civil society organizations have effective instruments to control the activities of executive bodies at all levels of government and officials' decisions, including on spending public funds (shim & eom, 2008). considering e-government as one of the important tools for combating corruption, s. bhatnagar (2002) argues that by making rules more simple and transparent, e-government encourages citizens and businesses to question unsubstantiated procedures and their arbitrary application. transparency and the right to access to public information are considered essential for democratic participation, strengthening trust in the government, preventing corruption, improving the accuracy of government information and providing information to citizens (cullier & piotrowski, 2009). information technology is important for direct accountability: citizens can get direct access to information on the functioning of government institutions and use ict for public debate. t. northrup and s. thorson (2003) argue that this form of accountability requires openness and reduces corruption. baltic journal of economic studies 95 vol. 6, no. 2, 2020 in turn, d. shim and t. eom (2008) reveal that countries that use e-government have achieved a reduction in corruption; in particular, in the fields of taxes and government contracts, e-government is a successful solution to corruption in many countries in europe, asia and america. the potential of e-government to transform public administration (enhancing its efficiency, costeffectiveness, quality of service) and the behaviour of officials (increasing accountability and transparency of their activities) even enable some experts to argue that information technology has led to a paradigm shift in public administration practices, particularly at the municipal management level. in this context, southern korea’s experience is illustrative (porumbescu, 2013): the e-system, improving management of the capital seoul (open) (porumbescu, 2016), provides any person at anytime and anywhere with the opportunity to apply (for permits, registrations, purchases, contracts, etc.) and track the status of their application. this reduces the abuse of officials with their administrative powers, intensifies the interaction between citizens and public authorities, increases the transparency of the activities of government bodies of state and increases the accountability of officials, because each step is fixed by a system that promotes trust in a specific body and legitimacy of the political regime as a whole. for a successful implementation of an e-government project as an instrument to counteract corruption, a number of factors, which have a significant impact on its level in a particular country, have to be considered. this issue is especially relevant for developing countries, where the implementation of modern information technology faces the problems of weak telecommunications infrastructure and the inaccessibility of computer equipment to a large number of citizens. these are economic freedom, inflation, welfare level, political instability. the level of economic freedom is one of the most important obstacles to the spread of corruption. a number of comparative studies, for example by p. graeff (2003), m. paldam (2002), and l. pieroni (2013), have empirically confirmed this conclusion. as a multifaceted phenomenon, economic freedom includes components that exclude opportunities for corrupt practices. in general, this applies to cases where corrupt practices arise from the physical interaction between those who need public services and the officials who provide them. bribes and kickbacks are illustrative. deregulation is an economic freedom key component that eliminates such corruption. in different countries, comparison of the level of economic freedom will include a number of criteria, such as freedom from corruption, protection of property rights, tax freedom, financial freedom, investment freedom, trade freedom, free movement of labour, public expenditure and so on. economic freedom, enhanced by economic liberalism, weakens corrupt behaviour, encourages economic openness and prevents dangers in economic relations (shen & williamson, 2005). r. goel and m. nelson (2005) have found that economic freedom is more important than political in reducing corruption. economic liberalization, based on a high level of economic freedom, enhances significantly the positive impact of democratic procedures on reducing corruption (saha, gounder, & su, 2009). liberal economic globalization promotes economic freedom and corruption reduction (akhter, 2004) by forcing international trade participants to follow international rules and regulation of economic globalization, as a result, countries have to reduce domestic corruption (sung, & chu, 2003). w. sandholtz and m. gray (2003) have analysed 150 countries and concluded that the level of corruption in the country is highly dependent on participation in international trade. using data of a 6-year period (2002–2005 and 2008) for 187 countries and analysis of data as a methodology, they have found that e-government reduces corruption worldwide. the authors recommend international bodies to support and facilitate the implementation of e-government in parallel with other anti-corruption measures (shim & eom, 2008). inflation is an important factor contributing to the spread of corruption in government. since high inflation reduces real income, if it is nominal (i.e., officials’ salaries) and is not indexed, then when faced with a real decline in income, public officials may resort to corrupt practices to obtain additional profits. in poor countries with very limited access to computers and the internet in the community, e-government is unlikely to influence corruption in times of high inflation. with regard to welfare level, it is evident that rich countries have all the infrastructure needed to implement e-government, and a large proportion of the population is taking advantage of e-government capabilities. r. abdel (2014) proves that wealth has a positive impact on the large-scale transition to e-government services. at the same time, numerous studies of the phenomenon of corruption illustrate that in prosperous countries its level is much lower than in developing countries. a number of studies, such as those conducted by l. pellegrini (2008) and d. teisman (2000), mention political instability as one of conditions contributing to the spread of corruption practices in the country. usually, political instability means poor efficiency of law enforcement agencies that, in the face of political uncertainty, are incapable of performing their duties professionally, and in particularly difficult situations instability leads to lawlessness. at the same time, recent revolutionary events in ukraine, georgia, and egypt indicate that the corruption of the country’s top leadership has become one of the causes of riots. the authors of corruption and peace reveal this causation and prove that increasing corruption in the police and the judiciary weakens directly the rule of law and thus intensifies internal conflict and leads to violence (institute for economics baltic journal of economic studies 96 vol. 6, no. 2, 2020 and peace, 2015). however, corruption is not confined to individual authorities or branches of government. for example, a group of researchers led by f. campante (2009) argues that political instability encourages government officials to embezzle public funds. as an anti-corruption tool, e-government faces some potential obstacles or challenges, especially in the context of developing countries. the main challenge is limited public access to the internet in these countries. for example, the internet penetration in africa and asia is 39.8% and 51.9% respectively, which is less than the world average of 57.3% (internet users in the world by regions, 2019). in such context, government network information and services cannot be expected to have a slight impact on the level of corruption. moreover, access and utilisation of e-government will be of use for the urban dwellers of these countries, except for people of rural areas. this raises the issue of the digital divide in the societies of these countries, and the legitimate asymmetry and inequality in access to government information and government services. another obstacle to the effective use of e-government to counteract corruption is that online services are limited because they do not cover the full range of public services. for example, online services do not cover government officials (i.e. police and traffic officers) or bureaucrats in services that require physical interaction between the service provider and the citizen (teachers, caregivers, social workers, etc.). in view of the potential inability of e-government to provide full government information and online services to most people in developing countries, its effectiveness in reducing corruption will be rather low. however, given these constraints, traditional media (tv, radio, media, etc.) can become more effective in providing government information and services to the public, monitoring the activities of officials and public authorities through journalistic investigations. the third obstacle to the effectiveness of e-government in reducing corruption is the inclination of public officials to resist the implementation of networked public service and even to influence government projects failure (aladwani, 2016). there are three reasons to explain the resistance of officials. first, the online public services abolish or at least diminish the administrative powers of officials. there is no place for grassroot-level officials with appropriate administrative powers in modern high-tech government, in which the street-level of bureaucracy is replaced by bureaucracy at the monitor level. according to m. s. zouridis (2002), bureaucracy of the monitor level is a direct interaction of officials with citizens through a computer screen. however, monitor-level bureaucracy itself dies out in favour of system-level bureaucracy when administrative authority is delegated to system developers and other officials involved in data processing. this delegation does not require personal contacts between citizens and officials, technical administrators (who simply operate between society and the system as support). the result of this process is the reduction of the number of public officials, named organizational disintermediation (rejection of intermediaries), when internet systems increase the performance of public authorities by reducing the middle levels (swiss, 2003). regarding e-government development in ukraine, nowadays 119 citizens have access to e-services, presented on the government portal (official website of government portal for electronic services). most of the services are available in categories as follows: business, land & ecology, finance & tax, somewhat less in: health & education, security & court, finance & tax, transportation, citizenship & migration, construction & real estate, social security. citizens use e-services increasingly. for example, the noticeable growth of 2018, compared to the previous year, was recorded in the registration of childbirth assistance, that is, 25.8 thousand users (in 2017, 6.4 thousand), registration of a criminal record – up to 116.9 thousand (16.7 thousand), e-services for public registration of an individual entrepreneur (opening, closing, changing kved) – 14.8 thousand (5.5 thousand). regarding legislative support, the concept of development of the electronic service system in ukraine (the order of the cabinet of ministers of ukraine no. 918-r dated november 16, 2016) was adopted in order to define the areas, mechanism and terms of formation of an effective electronic service system in ukraine to satisfy the interests of individuals and legal entities through development and support of available and transparent, secure and non-corrupt, least-cost, fast and convenient electronic services. in addition to improving the quality of administrative services provided to citizens and businesses in line with the european requirements, increasing the efficiency of public authorities, the expected outcomes include a reduction in the risk of corruption in providing administrative services. nowadays, 2019–2020 action plan for implementation of the e-services development concept in ukraine is realised (the order of the cabinet of ministers of ukraine of january 30, 2019 no. 37-r). it should be noted that in 2014 the law of ukraine “on the principles of 2014–2017 anti-corruption public policy in ukraine (anti-corruption strategy)” (law of ukraine no. 1699-vii dated october 14, 2014) provided for a number of specific preventive measures to combat corruption in different areas, which involve and require utilisation of modern information and communication tools. therefore, e-government in ukraine is relatively mature and grounds to find out its impact on the level of corruption in the country exist. the analysis involves data for ukraine, such as: the e-government development index, the corruption perceptions index, the economic freedom index, and the ease of doing business index. baltic journal of economic studies 97 vol. 6, no. 2, 2020 – the e-government development index (united nations e-government survey, 2018). according to the un report, the e-government development index considers three components: 1) the scope and quality of online services; 2) the status of the development of telecommunication infrastructure; 3) the status of domestic human capital; – the corruption perception index (transparency international, 2018); – the economic freedom index, defined by the wall street journal and the heritage foundation and takes into account components, such as freedom of business, investment, labour and trade, tax freedom, monetary freedom, financial freedom, protection of property rights and freedom from corruption; – the ease of doing business index (the world bank, 2020) is the world bank index that enables to compare the availability of business between countries. it is derived from the study of laws, regulations and rules regarding business activities, without consideration of external conditions, such as infrastructure, inflation and crime. in the context of the counteracting corruption, the most significant indicators specif y the complexity of starting a business, obtaining a building permit, registering property, paying taxes, conducting international trade, closing a company. according to the table, since 2014 ukraine has shown stable positive dynamics in terms of reducing corruption, increasing economic freedom and ease of doing business. however, the level of e-government development has not managed to get closer to the indicator of 2010, due to changes in the methodology of index calculation or accelerated introduction of modern information and communication technologies into the public administration of other countries (or the slowdown of this process in ukraine). 3. conclusion in the most general form, three positive effects can be identified from the widespread introduction of electronic government services and access to information on government activities by citizens: depersonification, deregulation and transparency. its main advantage is the depersonification of the interaction between a government official and a citizen: it is during physical contact between them that opportunities for abuse of the first position and bribery of the second are created. in other words, the more public services provided through electronic portals, the less opportunities for corrupt behaviour. for a successful implementation of an e-government project as a tool to counteract corruption, the following factors have to be taken into account, which have a significant impact on its level in a particular country. this issue is especially relevant for developing countries, where the introduction of modern information technology faces the challenges of poor telecommunications infrastructure and the inaccessibility of computer technology to a large number of citizens. these are economic freedom, inflation, the level of prosperity in society, political instability. as an anti-corruption tool, e-government faces some potential obstacles or challenges, especially in the context of developing countries. the main challenge is that access to the internet in these countries is very limited. another obstacle to the effective use of e-government to counteract corruption is that online services are limited because they do not cover the full range of public services. the third obstacle to the effectiveness of e-government in reducing corruption is the inclination of public officials to resist the implementation of networked public service delivery and even to fail e-government projects. we can talk about the relative maturity of e-government in ukraine and the existence of grounds to find out its impact on the level of corruption in the country. the analysis of correlation between e-government and level of corruption in ukraine is based on four criteria: e-government development index, corruption perceptions index, economic freedom index, ease of doing business index. the analysis of literature gives grounds to claim that e-government only in combination with other factors makes it possible to reduce the level of corruption. accordingly, the list and scope of electronic public services should be expanded: this can give impetus to further deregulation, which is a key component of economic freedom. the correlation between e-government and corruption becomes more evident and produces a positive result once society has achieved a high level of economic growth and development. further studies should include the analysis and indicators of the stability of countries and their degree of democracy, which indirectly indicates the level of corruption and real opportunities for citizens to participate in decisionmaking and control the activities of public authorities through the use of modern information technologies. table 1 rating dynamics (2009-2019) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 corruption perceptions index (the higher the better) 26 25 26 27 29 30 32 e-government development index (the lower the better) 54 68 87 62 82 economic freedom index (the higher the better) 51.0 48.8 46.4 45.8 46.1 46.3 49.3 46.9 48.1 51.9 ease of doing business index (the lower the better) 145 142 145 152 137 112 96 83 80 76 71 baltic journal of economic studies 98 vol. 6, no. 2, 2020 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https://zakon.rada.gov.ua/laws/show/1699-18 un e-government survey 2018. url: https://publicadministration.un.org/egovkb/en-us/reports/un-egovernment-survey-2018 transparency international. corruption perception index 2018. url: https://ti-ukraine.org/research/indeksspryjnyattya-koruptsiyi-2018 the world bank (2020). doing business project. url: https://www.doingbusiness.org/en/doingbusine baltic journal of economic studies 197 vol. 5, no. 5, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: makvknteu@gmail.com orcid: http://orcid.org/0000-0003-4915-1267 2 kyiv national university of trade and economics, ukraine. e-mail: makvknteu@gmail.com orcid: http://orcid.org/0000-0002-2331-8455 3 research financial institute, kyiv national university of trade and economics, ukraine. e-mail: krykun1909@gmail.com orcid: https://orcid.org/0000-0003-0355-5768 doi: https://doi.org/10.30525/2256-0742/2019-5-5-197-203 fiscal policy and institutional budget architectonics* igor chugunov1, valentina makohon2, tetniana krykun3 abstract. the purpose of the article is to study the role of fiscal policy in the context of the development of institutional budget architectonics aimed at ensuring macroeconomic stability, boosting economic growth, strengthening human potential, improving public welfare and defining approaches to its formation in advanced and transition economies. comparative and factor methods make it possible to cover the peculiarities of institutional environment of the formation of fiscal policy in eu countries and ukraine in the context of the development of the institutional budget architectonics and to identify ways for its improvement. methodology. substantiation of the role of fiscal policy in terms of the development of institutional budget architectonics, determination of its strategic orientations are based on generalization and systematization of experience of advanced and transition economies. for this very reason, the authors analyse and assess the fiscal policy and define special aspects of the formation and implementation of its components in relevant countries. results show that to increase the effectiveness of the fiscal policy, it is expedient to ensure its interrelation with other components of financial policy based on a combination of fiscal and motivation function. effective institutional budget architectonics provides means for creating conditions for sustainable economic growth, achieving strategic goals of socio-economic development of the country. significant tasks of the development of institutional budget architectonics are regulation of the ratio between direct and indirect tax revenues, the structure of budget expenditures in terms of functional, economic classifications, maintaining the budget gap and public debt at the level that contributes to the financial and economic stability of the country, taking into account economic cyclical nature. practical implications. a feasible budget architectonics would facilitate the maintenance of macroeconomic stability and accelerate economic growth. it is expedient to carry out institutional changes of budget architectonics on the ground of dynamic interconnection of budget and macroeconomic indicators. value/originality. fiscal policy plays a significant part in the process of government regulation of socio-economic development of the country. elaboration of fiscal policy approaches in the context of the development of institutional budget architectonics is an important prerequisite for improving the quality of budget planning, ensuring the strength, stability and dynamic balance of the budget system. it is advantageous to introduce adaptive institutional changes into the budget architectonics in order to accelerate economic growth. therefore, the article covers the essence and role of institutional budget architectonics aimed at ensuring macroeconomic stability, accelerating economic growth, developing human potential, improving public welfare; it defines the approaches to its development in transition and advanced economies. the authors establish that effective fiscal policy based on feasible institutional budget architectonics provides means for creating conditions for sustainable economic growth, achieving strategic goals of socio-economic development of the country. key words: fiscal policy, budget system, budget architectonics, budget deficit, government debt. jel classification: е62, h60, o40 * the article is based on r&d data: “the fiscal strategy of economic growth” (state registration number of the paper 0119u100577); “fiscal and socio-economic security of the county in the context of hybrid aggression” (state registration number of the paper 0119u100581). baltic journal of economic studies 198 vol. 5, no. 5, 2019 1. introduction at the current stage of the development of the system of public finance, improvement of the effectiveness of fiscal policy and ensuring its coherence with economic policy necessitates the intensification of the research of approaches to its development based on sound institutional budget architectonics. the use of discretionary and non-discretionary instruments of fiscal policy based on adaptive institutional changes in budget architectonics, taking into account economic cyclical nature, will allow reacting to the influence of endogenous and exogenous factors, changes in the external economic environment and maintaining the economic and financial stability of the state. it is important to define and implement institutional budget architectonics keeping in mind economic cyclical nature, the state of the institutional environment of the formation of fiscal policy based on the optimal balance of budget, tax, social and government debt indicators. the need for adaptive institutional changes in budget architectonics in the current context is due to the instability of the financial and economic context. the above confirms the relevance and timeliness of the research. thus, the research problem is as follows: what is the role of fiscal policy in the ensuring of macroeconomic stability under transformation changes, what are the orientations of changes of budget architectonics will facilitate the acceleration of economic growth maintaining characteristics of the integral development of the public finance system in general? the paper aims to find out the role of fiscal policy in the context of the development of institutional budget architectonics, generalize and substantiate the approaches to its formation in the advanced and transition economies. 2. approaches to the formation of fiscal policy the essence of fiscal policy involves the system of measures using which the state influences the economy through the structure of tax payments to the budgets of all levels and state trust funds and their relevant expenditures (karlin, 2014); the system of economic instruments due to which state administration bodies influence the size of the public and private sectors that determine the aggregate demand and the level of economic activity (harumová, 2002). the point of budget architectonics is to form budgets of different levels based on the optimal balance of budget, tax, social, monetary and government debt components, which is a dynamic institutional process of elaborating and implementing budget policy in the corresponding socioeconomic conditions of the country’s development. the researches make a hypothesis that the implementation of discretionary fiscal policy creates different expectations about the level of public debt and budget balance (montes, luna, 2018). however, it is defined that fiscal policy is predictable, and its consequences depend on the degree of its influence on the expectations (cavallari, romano, 2017). the issues concerning the implementation of the fiscal policy taking into consideration economic cyclical nature are still controversial: studying the cyclical nature of fiscal policy in eleven oecd countries, scholars note that fiscal policy is counter-cyclical in seven of the eleven countries analyzed. at the same time, there is no evidence of pro-cyclical fiscal policy in none of eleven countries (omar h.m.n. bashar & prasad sankar bhattacharya & mark e. wohar, 2017); fiscal policy is countercyclical. thus, when the debt/gdp ratio exceeds 87%, fiscal policy becomes pro-cyclical (combes jean-louis & minea a., & sow, 2017). the budget deficit is a significant instrument of fiscal policy. in particular, one marks that it has a more powerful influence on economic growth than government debt (kameda, 2014); the negative correlation between the growth of the state budget deficit and the level of economic growth remains. thus, an important task is to justify sources of its funding (arjomand, emami, salimi, 2016); it is expedient to increase the share of the budget deficit in the gross domestic product to have a countercyclical effect on the economic growth (taylor, proaño, carvalho, nelson, 2012). an important task is to reduce public expenditures for the optimization of the level of the budget deficit in the modern context. research states that fiscal policy measures on the austerity of public resources significantly enhance the economic activity of eu member states. moreover, the level of impact of public expenditures on economic growth in the eu member states is more significant when joining than in the full member states (mencingera, aristovnika, verbičab, 2017). when evaluating the impact of fiscal policy using public expenditures and taxes on economic growth, it is important to take into account the unemployment rate as the increase in its critical level gradually leads to a higher government multiplier (biolsi, 2017). evaluating the multiplier of short-term investments, it is noted that the built-in stabilizers of fiscal policy can only mitigate but not eliminate the impact of negative exogenous impulses causing cyclical economic downturns (dupaigne, fève, 2016); degree of the economic advance can change the effect of the traditional determinants of fiscal multipliers (hory marie-pierre, 2016). the financial crisis has prompted the need to combine fiscal policy with monetary one (allard, catenaro, vidal jean-pierre, wolswijk, 2013). components of the financial policy, in particular, monetary and fiscal policies reinforce each other in terms of ensuring macroeconomic stability (wang, 2018). consistency of monetary and fiscal policy instruments contribute to the stabilization of government debt (çebi, 2012). thus, according to “fiscal theory of the price level” baltic journal of economic studies 199 vol. 5, no. 5, 2019 (2008), a significant level of government debt and an unbalanced budget in the long term activate inflationary developments. 3. special aspects of fiscal policy in the context of transformational changes the intensification of globalization has led to transformational changes focused on creating new financial and economic conditions which refresh the need to advance the efficiency of fiscal policy. moreover, the level of financial and budget firmness and stability of the majority of the states confirms the importance of applying an adequate system of budgetary regulation, ensuring the dynamic harmony of the state budget as a necessary condition for sustainable economic growth. the effective institutional budget architectonics is the basis for the implementation of fiscal policy and achievement of its strategic goals. the development of social relations provides for adaptive changes in budget architectonics, taking into account the cyclical nature of economic processes. in particular, in substantiating the objectives of fiscal policy, the important task is to determine the current phase of the economic cycle of the country, calculate the level of potential gross domestic product at which the economy can generate in terms of full-time occupation and the difference between actual gross domestic product and potential one – the gdp gap. in case of a negative gdp gap at which the actual economic growth rate lags behind the potential, it is expedient to realize expansionary fiscal policy and contractionary one under the condition of a positive gap of the gross domestic product based on introducing adaptive institutional changes to budget architectonics. it is important to note that the special aspects of modern budget architectonics both in advanced and transition economies are determined by: development level of financial-budget institutions; specific nature of budget mechanisms, its methods and instruments; historically contingent part of the public sector of the economy and the level of the tax burden, the development of a system of state welfare activities, which affects the share of gdp redistribution through the budget system. the above optimum share ratio is different for advanced and transitive economies and depends on economic cyclical nature. the level of fiscal revenue, including tax, primarily influences the aggregate consumption, determines the directions of savings use, and regulates the demand, the structure of manufactured goods and ultimate use. thus, it ensures the reduction of cyclical fluctuations in the economic development of the country. in addition, a significant level of recovery of funds from economic entities and household sector does not stimulate entrepreneurial activity, which affects the cutback of the rate of manufactured products, the growth of real gross domestic product and, accordingly, the increase of the revenue. the establishment of a low recovery rate reduces budget revenues, which limits the regulatory capacity of fiscal policy. thus, it is important to determine the optimal level of budget redistribution, taking into account economic cyclical nature and the level of economic growth. budget expenditures affect structural changes in the economic sectors, the advancement of human potential and improvement of its quality, equalization of disproportions of socio-economic development of territories. the level of budget expenditures should correspond to the economic capabilities of the society, taking into account socio-economic factors of the national development. in particular, one of the main reasons for the disruption of fiscal stability in transition economies in the current context is the inconsistency of the rate of growth of the expenditure budget with the rate of economic growth. the transition to sustainable economic growth can be achieved by optimizing budget expenditures through their concentration on priority areas of socio-economic development of countries. 4. assessment of budget parameters of eu countries in the countries of the european union, the share of revenues and expenditures in the gross domestic product for 2008 – 2017 is 44.45% and 48.04% respectively, including 43.89% and 48.75% for 2008 – 2012, 45.02% and 47.32% for 2013–2017 (table 1). to ensure budget balance and sustainability, eu countries take the following measures: the growth in the average rate of increase in tax revenues, including direct taxes and capital taxes; the cut of growth rate of all government expenditures, budget deficit and public debt. at the same time, an important task at this stage is to revise government expenditures in order to reduce them to the central european level and focus on priority areas of socio-economic development of countries. thus, the principle of optimization of government expenditures, the size of the budget deficit, and the level of public debt become a significant lever for sound fiscal policy. the above trends are observed in other countries. thus, in accordance with the federal constitution of the swiss confederation, to maintain a balanced structural budget, its expenditures must correspond to cyclicallyadjusted budget revenues, which are calculated on the basis of the anticipated actual budget revenues and the indicator of cyclical phase. this principle of the formation of budget expenditures makes it possible to limit their growth following the counter-cyclical nature of fiscal policy. if the budget deficit passes 6% on the expenditure side, it will be reduced within three years by cutting the marginal amount of budget expenditures. through an exception, an increase in expenditures is allowable only under the long and deep financial and economic recession (geier, 2011). baltic journal of economic studies 200 vol. 5, no. 5, 2019 5. assessment of budget parameters in ukraine on average, the share of revenues and expenditures of the consolidated budget of ukraine in the gross domestic product is 31.20% and 34.24% for 2008–2017 respectively, including 30.51% and 33.89% for 2008–2012, 31.88% and 34.60% for 2013–2017 (table 2). major portion of expenditures of the consolidated budget of ukraine are for the financing of the sociocultural sphere. moreover, it is marked the growth in the share of defense expenditures. in the total volume of expenditures, the corresponding figure is 4.58% for 2008–2017 on average, including 3.18% for 2008– 2012 and 5.97% for 2013 – 2017. whereas, in 2016 in the uk, defense expenditures in the overall spending structure were 6.59% (third place in europe), 3.52% – in france (seventh place in europe), 2.58% – germany (ninth place in europe). boost of the level of efficiency and effectiveness of budget expenditures necessitates the optimization of their share in each area in the general structure in such a way that their financial and budget architectonics helps to solve the tasks of socio-economic development of the country that provides for ensuring the consistency of the growth of the budget expenditure with the pace of economic growth, objective assessment of the need for each area of the use of budgetary funds and taking into account their impact on the efficiency of socialeconomic processes. in the structure of the revenue side of the consolidated budget of ukraine as well as in the eu countries, the largest share is for tax revenues. in particular, on average, the share of tax revenues in the consolidated budget revenues of ukraine amounted to 79.50% for 2008–2017, including 78.40% for 2008–2012, and 80.60% for 2013–2017. whereas, in eu countries, the average share of tax collection in state revenues was 58.63% in 2008–2017, including 58.19% in 2008–2012 and 59.07% in 2013–2017. it is worth pointing out that the role of indirect taxes is enhanced in ukraine in the context of economic transformations. the improvement of the effectiveness of their use is conditioned by the need for a balance between internal supply and demand, formation of relevant proportions of consumer market development, ensuring of the growth of competitive capacity of the producer, stimulation of priority economic activities and support of the development of administrative and territorial units. the share of indirect taxes in tax revenues of the consolidated budget of ukraine was 52.82% on average for 2008–2017, including 52.76% for 2008 – 2012, 52.89% for 2013–2017. and the corresponding indicator of direct taxes was 47.18% for 2008–2017, including 47.24% for 2008–2012, 47.11% for 2013 –2017. the share of the consolidated budget deficit in the gross domestic product was 3.12% for 2008–2017, including 3.40% for 2008–2012, and 2.84% for 2013–2017. a relevant indicator of direct government and guaranteed debt was 50.90% for 2008–2017, including 33.52% for 2008 – 2012, and 68.28% for 2013–2017. under the increase of the share of direct government and guaranteed debt in the gross domestic product for 2008–2017, the growth in the real gross domestic product decreases by 0.06 percentage points. table 1 the share of government expenditures and revenue in gdp in countries of the european union for 2008–2017, % 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 revenue 43.76 43.47 43.49 44.02 44.71 45.38 45.13 44.86 44.87 44.85 taxes: 25.92 24.91 25.15 25.59 26.14 26.52 26.58 26.65 26.72 27.77 indirect taxes 12.59 12.46 12.82 13.03 13.27 13.34 13.43 13.43 13.40 13.38 direct taxes 12.90 12.13 12.09 12.29 12.65 12.90 12.89 12.95 13.02 13.10 capital taxes 0.43 0.32 0.23 0.27 0.22 0.28 0.25 0.27 0.30 0.29 social insurance contributions 12.97 13.47 13.25 13.29 13.37 13.45 13.36 13.18 13.37 13.33 sales taxes 2.87 3.09 3.13 3.12 3.12 3.18 3.15 3.09 3.07 3.06 capital gains tax 0.16 0.15 0.18 0.20 0.23 0.24 0.25 0.29 0.15 0.15 others 1.84 1.84 1.78 1.83 1.85 2.00 1.80 1.65 1.55 1.54 expenditures 46.25 50.08 49.89 48.57 48.96 48.68 48.12 47.23 46.56 46.01 intermediate consumption 5.79 6.26 6.20 6.06 6.10 6.12 6.06 6.04 5.93 5.78 labour renumeration 10.30 11.03 10.86 10.59 10.50 10.44 10.31 10.11 10.06 9.95 repayment of interest 2.69 2.58 2.67 2.89 2.87 2.70 2.54 2.27 2.14 2.04 subsidies 1.13 1.34 1.32 1.26 1.24 1.25 1.33 1.35 1.37 1.33 social aid 19.07 21.20 21.11 20.79 21.09 21.31 21.22 20.93 20.98 20.78 others 2.45 2.59 2.63 2.56 2.62 2.79 2.64 2.57 2.52 2.43 capital debt transfers 1.42 1.38 1.63 1.18 1.51 1.15 1.12 1.07 0.91 1.04 capital investment 3.40 3.71 3.47 3.24 3.03 2.91 2.89 2.89 2.66 2.66 * it is developed by the authors according to figures of the official site of the statistical office of the european commission. retrieved from: http://ec.europa.eu/eurostat baltic journal of economic studies 201 vol. 5, no. 5, 2019 6. strategic targets of the fiscal policy in the context of transformational changes priority targets of fiscal policy at the current stage are as follows: provision of the stability, sustainability and dynamic balance of budgets at different levels based on fiscal constraints, in particular, at the level of government debt and budget deficit; enhancing the efficiency of use of budget funds by ensuring consistency of budget assignments with strategic priorities of socio-economic development of the country, substantiation of efficiency, effectiveness and expediency of budget expenditures; elaboration of provisions on the use of the mechanisms of public-private partnership as a tool reducing the impacts on the budget; raising the level of economic return of the tax system, which envisages creation of favourable conditions for growth of economic activity of undertakings and the economy as a whole, due to its de-shadowing, optimization of the tax potential of territories, introduction of the principles of transparency of entities of tax relations, renewal of confidence between taxpayers and the state, carrying out a comprehensive assessment of the uniformity of the tax burden and the consequences of predicted and conducted fiscal measures, improvement of the monitoring system of major taxpayers, the establishment of balanced criteria and requirements for the provision of tax incentives; intensification of fiscal decentralization processes; advancement of the effectiveness of control and audit in the budget process; development of the system of medium-term budget planning. an important task is to update the mechanism of management of budget deficit and government debt in the system of financial regulation that envisages the determination of strategic guidelines on the sources of budget funding and the level and structure of debt portfolio. optimization of budget expenditures should be based on mediumand long-term budgetary forecasting, taking into account macroeconomic indicators and targeted prudential fiscal policy. budgetary forecasting plays an important role in providing firmness, stability and balance of the budget system. the use of economic and mathematical modeling in budget forecasting makes it possible to determine reasonable directions for the use of budget funds, identify the factors which can influence the development of the budget system to the fullest extent. thus, it permits realizing a comprehensive approach when substantiating the directions of fiscal policy and ways for its implementation. thus, the formation of effective budget architectonics involves the development of budget strategy aimed at achieving macroeconomic stability, accelerating economic growth and developing human potential. the elaboration of budget strategy provides taking into account the complex of institutional components of the budget space that determine the extension of the budget system for the long run, the opportunities and threats of the internal and external financial and economic environment, strategic objectives of socio-economic development of the country. the priorities of the budget strategy of advanced and transition economies should include the following: guarantee of macroeconomic stability, which involves reducing the deficit of the national budget and maintaining public debt at the economy-safe level; increase of efficiency of use of table 2 the share of revenue, expenditures, deficit of the consolidated budget in the gdp, % indicators 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 revenues 31.42 29.89 29.05 30.61 31.57 30.43 29.11 32.94 32.85 34.09 tax revenues 23.96 22.78 21.65 25.70 25.55 24.33 23.46 25.64 27.31 27.76 non-tax revenues 6.38 6.39 6.82 4.61 5.73 5.84 5.14 7.08 5.27 5.18 capital gains tax 0.71 0.41 0.29 0.18 0.21 0.11 0.13 0.09 0.07 0.07 official transfers from foreign governments and international organizations 0.01 0.07 0.03 0.04 0.01 0.10 0.34 0.10 0.18 0.05 trust funds 0.35 0.24 0.26 0.08 0.06 0.05 0.03 0.03 0.03 1.02 expenditures 32.91 33.96 35.03 32.36 35.17 34.80 33.28 34.34 35.16 35.43 nationwide functions 3.26 3.63 4.15 3.82 3.87 4.24 4.84 5.92 5.64 5.57 military defence 1.23 1.06 1.04 1.01 1.03 1.02 1.72 2.62 2.49 2.49 public order, security and the judiciary 2.86 2.66 2.66 2.50 2.60 2.71 2.83 2.76 3.03 2.97 economic activity 5.67 4.64 4.17 4.73 4.66 3.49 3.04 2.97 2.84 3.45 environmental safety 0.30 0.27 0.27 0.30 0.38 0.38 0.22 0.28 0.26 0.25 housing and utilities infrastructure 0.95 0.82 0.51 0.68 1.45 0.55 1.14 0.80 0.75 0.91 health care 3.54 4.01 4.13 3.76 4.15 4.23 3.60 3.57 3.17 3.43 spiritual and physical development 0.83 0.91 1.06 0.83 0.96 0.94 0.87 0.82 0.71 0.81 education 6.42 7.31 7.37 6.63 7.20 7.25 6.31 5.74 5.43 5.96 social protection and social security 7.84 8.64 9.67 8.11 8.88 9.98 8.70 8.87 10.85 9.58 budget deficit -1.43 -3.93 -5.77 -1.71 -3.48 -4.18 -4.54 -1.55 -2.30 -1.40 * it is developed by the authors according to figures of the official site of ministry of finance of ukraine. retrieved from: https://minfin.gov.ua. baltic journal of economic studies 202 vol. 5, no. 5, 2019 budget funds and economic return of the tax system; consistency of fiscal policy with monetary policy. in transition economies, important objectives are change from expenditure control to results management, development of the system of a medium-term budgetary planning, ensuring coherence of socio-economic, budget and monetary policies, rational formation of a tax revenue system based on reduction of tax pressure and combination of fiscal and incentive function of taxes, expenditure of financial resources through strengthening control over the efficiency of their use, improvement of the system of relations between budgets of different levels in terms of intensification of decentralization processes, maintaining the independence of local budgets, promotion of comprehensive and dynamic development of administrative units. being a significant instrument of socio-economic development of the country, the budget strategy will help to activate economic processes, stimulate the development of its priority sectors, accelerate the intensification of production following the level of social development, and provide social support for the least protected segments of the population. at the same time, the budget strategy makes it possible to form budgets of different levels in terms of conformity of budgetary, tax, social and public debt components of fiscal policy. 7. conclusions in order to promote the substantiation of fiscal policy, it is expedient to ensure its interconnection with other components of financial policy based on the combination of fiscal and motivation function. effective institutional budget architectonics permits creating conditions for sustainable economic growth, achievement of strategic goals for socio-economic development of the country. in the context of economic transformations, the level of efficiency of the institutional budget architectonics depends on the degree of consistency of its components in the budget strategy. the important tasks of the development of institutional budget architectonics are regulation of the ratio between direct and indirect tax revenues, the structure of budget expenditures in terms of functional, economic classifications, ensuring of the volume of budget deficit and government debt at a level that contributes to the financial and economic stability of the country taking into account economic cyclical nature. considering the need to find a good deal of money for servicing government debt and its repayment, it is advisable to develop an economic and mathematical model based on the assessment of the national economy’s ability regarding the maintenance of the above so as well as the uses of the loans obtained. it is expedient to carry out the formation of budget architectonics in the part of the public debt relying on the assessment of macroeconomic proportions and relevant socio-economic conditions of social production. the assessment will make it possible to realize fiscal policy based on the reasonable means of the influence on the socio-economic processes. institutional changes in budget architectonics should be made on the ground of dynamic interrelation of budgetary and macroeconomic indicators. the fiscal policy aimed at changing reproducible proportions, it should combine and coordinate measures of state administration bodies on the influence on the expansion of production of goods and services. moreover, it requires the targeted implementation of fiscal policy measures to stimulate investment activity, structural restructuring and economic modernization. taking into account modern economic transformations, the important tasks are to provide for dynamic system co-ordination and adequate longterm regulatory measures of fiscal policy for changing the internal and external socio-economic environment, a holistic character of assessment of the influence of institutional budget architectonics on the economic growth; increase of the level of economy monetization; determination of a reasonable level of inflation and interest rate to ensure the sustainability of the budget system; refinancing of innovation development. the importance of further research regarding the above issues is conditioned by the expediency of improving the effectiveness of fiscal policy based on the elaboration of approaches to the development of institutional budget architectonics aimed at ensuring macroeconomic stability, accelerating economic growth, the expanding of human potential, and improving the welfare of the population. references: harumová, a. (2002). dane v teórii a praxi. bratislava: iura edition, 240 р. karlin, m. (2014). sotsialna i fiskalna polityka derzhavy: problemy rehionalnoi koordynatsii v umovakh novoho etapu hlobalizatsii [social and fiscal policy of the state: problems of regional coordination in the conditions of a new stage of globalization]. demography and social economics, 2(22), 34–44. retrieved from: http://nbuv.gov.ua/ ujrn/dse_2014_2_5 montes, g., & luna, p. (2018). discretionary fiscal policy and disagreement in expectations about fiscal variables empirical evidence from brazil. economic modelling. cavallari, l., & romano, s. (2017). fiscal policy in europe: the importance of making it predictable. economic modelling , 60, 81–97. combes, jean-louis, minea, a., & sow, m. (2017). is fiscal policy always counter(pro-) cyclical? the role of public debt and fiscal rules. economic modelling , 65, 138–146. baltic journal of economic studies 203 vol. 5, no. 5, 2019 bashar, omr h.m.n., bhattacharya, p., & wohar, m. (2017). the cyclicality of fiscal policy: new evidence from unobserved components approach. journal of macroeconomics, 53, 222–234. kameda, к. (2014). budget deficits, government debt, and long-term interest rates in japan. journal of the japanese and international economies, 32, 105–124. taylor, l., proaño, c., carvalho, l., & nelson, в. (2012). fiscal deficits, economic growth and government debt in the usa. cambridge journal of economics, 36, 189–204. arjomand, м., emami, k., salimi, f. (2016). growth and productivity; the role of budget deficit in the mena selected countries. procedia economics and finance, 36, 345–352. biolsi, c. (2017). nonlinear effects of fiscal policy over the business cycle. journal of economic dynamics and control, 78, 54–87. mencingera, j., aristovnika, a., & verbičab, m. (2017). asymmetric effects of fiscal policy in eu and oecd countries. economic modelling , 61, 448–461. dupaigne, м., & fève, р. (2016). persistent government spending and fiscal multipliers: the investment-channel. european economic review, 89, 425–453. hory, marie-pierre (2016). fiscal multipliers in emerging market economies: can we learn something from advanced economies? international economics, 146, 59–84. allard, j., catenaro, м., vidal, jean-pierre, & wolswijk, g. (2013). central bank communication on fiscal policy. european journal of political economy, 30, 1–14. wang, l. (2018). monetary-fiscal policy interactions under asset purchase programs: some comparative evidence. economic modelling. çebi, с. (2012). the interaction between monetary and fiscal policies in turkey: an estimated new keynesian dsge model. economic modelling, 29, 1258–1267 р. auernheimer, l. (2008). monetary policy rules, the fiscal theory of the price level, and (almost) all that jazz: in quest of simplicity. baltic journal of economic studies 213 vol. 5, no. 3, 2019 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: chugunov055@gmail.com orcid: http://orcid.org/0000-0003-4915-1267 2 kyiv national university of trade and economics, ukraine. e-mail: makvknteu@gmail.com orcid: http://orcid.org/0000-0002-2331-8455 *the article is prepared on the basis of materials of rw “budget strategy of economic growth” (state registration number 0118u000128). doi: https://doi.org/10.30525/2256-0742/2019-5-3-213-217 fiscal strategy as an instrument of economic grow th* igor chugunov1, valentina makohon 2 abstract. the purpose of the article is to justify the role of the fiscal strategy in ensuring macroeconomic stability and accelerating the pace of economic growth, disclose and substantiate its key objectives in the developed and transformational economies. the comparative and factor method allowed revealing the essence and role of the fiscal strategy as an instrument of economic growth, identifying peculiarities and substantiating approaches to the management of uncertainty of fiscal strategies, revealing the principles of the formation of the fiscal strategy and medium-term budget planning in ukraine. methodology. the substantiation of the role of the fiscal strategy in ensuring macroeconomic stability and accelerating the pace of economic growth, and definition of its key objectives are based on the generalization and systematization of the experience of countries with a developed and transformational economy. for this purpose, the analysis and evaluation of the fiscal policy were made, the peculiarities of the formation and implementation of fiscal strategies in the corresponding countries were determined. results have shown that in developed countries, the gdp gap concept is used in order to use fiscal policy for countercyclical purposes. budget sustainability is characterized by the ability of state and local government bodies to timely and fully finance budget expenditures and to support the share of budget deficits and public debt in the gross domestic product at an economically sound level. budgetary stability is the constancy of budget architectonics in time. the essence of budget architectonics is the optimal ratio of budget, tax, social, monetary, and public debt components of the fiscal policy, which is a dynamic institutional process of its development and implementation in the relevant socio-economic conditions of the country’s development. at an appropriate level of budget stability, the level of fiscal burden on the economy does not increase. fiscal equilibrium – consistency of budget revenues and expenditures. practical implications. the benchmark of the fiscal strategy in terms of economic transformations should be to ensure macroeconomic stability and accelerate the pace of economic growth by increasing the soundness of budget architectonics. value/originality. strengthening the influence of endogenous and exogenous factors on the financial and economic environment of the state, and negative demographic tendencies on the development of society necessitate the development of a fiscal strategy as a dynamic self-organizing one with a fractal dimension and scale, the system of long-term financial and economic measures, goals, principles, directions, tasks that are implemented by public administration, in a multiaspect dimension: budget transformations, configurations of fiscal institutions, socio-economic transformations. the fractal dimension implies the formation of a system of long-term financial and economic measures, goals, principles, directions, tasks of the country’s fiscal policy based on the subsystems of the fiscal policy of regions with similar features, which will provide an opportunity to ensure consistency of actions of state authorities and local self-government bodies, constituents of the fiscal policy. the validity of the fiscal strategy determines the level of effectiveness of socio-economic transformations. in terms of economic transformations, budget architectonics, the institutional features of its formation are becoming increasingly difficult to assess in both developed and transformational economies. key words: public finance, fiscal strategy, budget architectonics, budget deficit, public debt. jel classification: е62, h60, o40 baltic journal of economic studies 214 vol. 5, no. 3, 2019 1. introduction in modern conditions, the fiscal strategy plays a significant role in regulating economic processes, taking into account their dynamism and cyclicality. the need to develop and increase the validity of the fiscal strategy is conditioned by transformations in the economic environment, which actualize the issue of predicting financial opportunities for their implementation and assessing the risks of violations of budget stability associated with the processes of deepening financial integration and increasing negative demographic trends in society. the importance of developing a fiscal strategy is fully understood both in countries with developed and transformational economies. government documents define strategic tasks for the development of the budget system, directions for coordinating its components in the short, medium, and long term. a fiscal strategy is a powerful tool for influencing macroeconomic stability and accelerating economic growth. its effectiveness is determined by the level of maintenance of long-term sustainability, stability, and balance of the budget system. at the same time, the forms of manifestation of fiscal instability are a violation of the interconnections in the system of capital turnover, as evidenced by the processes: the formation of consumption funds at the expense of fixed and working capital; strengthening of speculative aspects in the turnover of capital, which is reflected in its outflow from the production sphere to the trade and intermediary and financial and credit; the incapability of public authorities to effectively influence monetary circulation and the system of bank settlements, which prevents the continuity and stability of the capital turnover; failure to ensure full and timely payments in the vertical and horizontal planes of the budget system. thus, the research problem is as follows: what is the role of the fiscal strategy in providing macroeconomic stability in the context of economic transformations, which its key areas will contribute to accelerating economic growth? this article aims to reveal the features of the formation and implementation of fiscal strategies in developed and transformational economies, to generalize, systematize, and substantiate their strategic directions in the context of economic transformations. 2. the essence and role of the fiscal strategy the fiscal strategy is dynamic, capable of selforganization, has a fractal dimension and scale of the system of long-term financial and economic measures, goals, principles, directions, tasks implemented by public administration, in a multidimensional dimension: budget transformations, configurations of fiscal institutions, socio-economic transformations. the fractal dimension implies the formation of a system of long-term financial and economic measures, goals, principles, directions, tasks of the country’s fiscal policy based on the subsystems of the fiscal policy of regions, with similar features, which will provide an opportunity to ensure consistency of the actions of state authorities and local self-government bodies, constituents of the fiscal policy. strategic directions of fiscal strategies are the basis for developing effective practical measures to ensure budget sustainability, stability, and balance, which contributes to accelerating the pace of economic growth. budget sustainability is characterized by the ability of state and local government bodies to timely and fully finance budget expenditures and to support the share of budget deficits and public debt in the gross domestic product at an economically sound level. budget stability is the constancy of budget architectonics in time. the essence of budget architectonics is the optimal ratio of budget, tax, social, monetary, and public debt components of the fiscal policy, which is a dynamic institutional process of its development and implementation in the relevant socio-economic conditions of the country’s development. at an appropriate level of budget stability, the level of fiscal burden on the economy does not increase. fiscal equilibrium – consistency of budget revenues and expenditures. the development of the fiscal strategy allows: on the basis of the key tasks of socio-economic development of the country, to evaluate the necessary financial resources for their solution and to determine the main sources of their obtaining; to make sound, rational decisions based on their future impact assessment; to take into account probable trajectories of development of fiscal relations proceeding from the development of new programs, reforms, legislative acts; to identify in a timely manner the methods and instruments of fiscal policy necessary for achieving the goals set; to evaluate adverse trends and risks of violation of budget sustainability, stability, balance and justify preventive measures. when substantiating the fiscal strategy, important tasks are to take into account the institutional features, trends and cycles of economic processes without losing the unity of goals and objectives of the development of the system of public finances in general. 3. features of fiscal strategies in developed countries as foreign experience shows, the effectiveness of fiscal strategies depends on the reasonableness of choosing methods and tools for budget projection and planning, and the quality of assessing the efficiency of public financial resources in terms of economic and functional classification. in particular, in the countries of the european union, considerable attention is paid to public financing of innovations as a key component for sustainable economic growth, long-term competitiveness of countries. at present, the horizon baltic journal of economic studies 215 vol. 5, no. 3, 2019 2020 program is designed to finance innovation (about 80 billion euros), which consists of the following areas: excellence science; industrial leadership; societal challenges; spreading excellence and widening participation; science with and for society; european innovation council (eic) pilot; focus areas; european institute of innovation and technology; euratom (horizon 2020, 2018). the role of the social function of the fiscal policy aimed at raising the level of public welfare through budget support of healthcare and pension insurance is increasing (table 1). table 1 main demographic and macroeconomic assumptions (baseline scenario in % of gdp) 2020 2030 2040 2050 2060 2070 real potential gdp (growth rate) 1,4 1,2 1,2 1,4 1,5 1,4 healthcare costs 6,9 7,2 7,4 7,6 7,7 7,7 state pensions 11,1 11,6 12,0 11,7 11,3 11,0 source: developed by the author according to the data: the 2018 ageing report (2018) of great importance in ensuring budget stability in the european union countries are: european financial stability facility; european stability mechanism; european financial stabilization mechanism. in order to determine the level of impact of potential imbalances on budget sustainability, stability, and balance, these institutions use a wide range of indicators. if indicators show the existence or predictability of imbalances in a particular country of the european union, an in-depth analysis of macroeconomic and fiscal indicators is carried out in order to determine the degree of risk, as well as recommendations for solving the identified problems are provided. the key parameters of fiscal sustainability in the long term include economically justified indicators: external imbalance; share in the gross domestic product: budget deficit, state and commercial debt, credit flows in the non-government sector, international assets, export market; the level of labour expenditures per unit of output; exchange rate fluctuations; annual increase in real estate prices; unemployment rate. in accordance with the legislation, countries of the european union develop long-term fiscal projects, which are based on the assessment of the efficiency and effectiveness of public financial resources, their influence on the country’s socio-economic development in the process of projecting their distribution. when developing projects, economic and mathematical models based on fiscal rules are used. at the same time, several scenarios of budget indicators are developed, including baseline one based on the expected rates of economic development. at the supposed negative gap of the gross domestic product, incentive measures of the fiscal policy are considered reasonable, at positive one – restrained, which allows minimizing the negative impact of the downward economic trend. in particular, with a negative gap of the gross domestic product, the level of budget revenues reduces due to a lower volume of production and, consequently, a decrease in the level of receipts from income tax, a lower volume of consumption and, consequently, a decrease in the level of vat revenues. the study of the experience of the european union countries has made it possible to identify the peculiarities of the formation and implementation of fiscal strategies: strategic directions are necessarily published in official mass media, accordingly, the principle of openness and transparency is ensured; the justification of directions is based on taking into account the interests of all participants in the budget process; strategies necessarily include: the analysis and comparison of the foreseen financial situation with the past, the main problems of ensuring budget sustainability, stability, and balance, and expected changes in the development of the economic environment are revealed; strategies include an assessment of the impact of possible measures of the fiscal policy in the foreseeable future on the country’s socio-economic development; strategies determine the goals, priorities, tasks of the fiscal policy and possible ways of their implementation; strategies include an assessment of the impact of macroeconomic and demographic factors on budget stability. it is important to note that fiscal strategies in developed countries are largely aligned with countries’ socioeconomic development programs, and projections of their tasks in the short-term and medium-term budget planning are provided. in conditions of economic transformations, attention is paid to the evaluation of uncertainty of fiscal strategies since the effectiveness of the uncertainty management mechanism determines the level of achievement of their goals. 4. uncertainty management approaches the uncertainty of the fiscal strategy is associated with a significant level of volatility of income, interest rates, negative effects of factors that determine global demand, natural disasters, political decisions, and the amplitude of exchange rate fluctuations. among the approaches to managing uncertainty, it is expedient to distinguish between: conservative budget projections, according to which key budget parameters are projected conservatively, so the real budget execution may be better than previously laid in budgets; central reserves, according to which the definition of a budget reserve at an economically justified level creates the necessary margin for budget sustainability and stability in the conditions of increasing the negative impact of exogenous or endogenous factors. it is determined that a sufficient amount of budgetary reserves contributes to the development of the investment environment; the baltic journal of economic studies 216 vol. 5, no. 3, 2019 establishment of a margin consisting of reserves defined by the ministries, from which technical or political adjustments to budget expenditures may be financed; the exclusion of volatile expenditures from the mediumterm and long-term budget planning limits. it is worth pointing out that the spending limits can be determined in real or nominal terms. as a rule, determining the nominal terms for the current year creates a reliable basis for budget planning. establishing limits in real terms for future years can provide a better basis for planning in the event of high and volatile inflation rates. when making decisions on setting limits in real terms, the fiscal impact is taken into account. at the same time, the creation of a budget reserve is considered to be justified. in particular, in new zealand, in the budget projection process, the budget reserve, which is allowed to be recalculated in case of changes in economic conditions, is taken into account but changes in the limits of new costs that may be covered by the next annual budget are not allowed. by limiting the new political initiatives that can be taken, at the same time, it does not place the actual costs in the rigid boundaries in case of a deterioration of the indicators of the country’s economic development. in austria, there is a model that provides for significant deviations from the limits and gives the government agencies the opportunity to underspend the allocated funds. fixed expenditures in austria make up 75% of total expenditures. the reserve of funds for unbudgeted expenditures is about 0.5% of expenditures for the budget year with an increase of approximately 2% over the medium term. the reserve is not allocated between the ministries and is provided to compensate for technical adjustments, rather than to finance new political initiatives. 5. ukraine’s fiscal strategy according to the strategy for sustainable development “ukraine 2020”, the importance of substantiating the strategic directions of the fiscal policy in the medium and long term is determined; it is justified that the important task is not only to develop priorities but also the mechanisms for their implementation, define specific time frames for achieving key macroeconomic and fiscal indicators; the selectivity and timeliness of decisions of the fiscal policy and its components will reduce to zero economic growth and increase socio-economic tension in society; the strategic goal is to fulfil the maastricht convergence criteria, in particular, regarding price stability, budget deficit, public debt, stability of national currency and interest rates (on the strategy for sustainable development “ukraine 2020”, 2015). an important condition for ensuring the acceleration of economic growth is the development of an integrated and harmonized program for reforming the system of public finances in the medium and long-term perspective, including the substantiation of effective mechanisms for its implementation, in accordance with the strategy for public finance management system reform for 2017–2020. the key objectives of this strategy are to create conditions for the full implementation of strategic budget planning, ensuring the strategic distribution of public financial resources (on approval of the strategy for public finance management system reform for 2017–2020, 2017). at the same time, in ukraine, the fiscal strategy as a separate strategic document is not developed. at the present time, issues of full implementation of the medium-term budget planning in the budget process were actualized. an important task in this direction is to ensure a clear link between the formation of budgets of different levels and their implementation in the medium term. at the same time, the basis for a full-fledged introduction of medium-term budget planning is to provide a reliable source base for macroeconomic and fiscal indicators. in order to evaluate the initial base, it is necessary to understand well the budget architectonics and the factors of its formation. herewith, it is appropriate to develop a methodology for evaluating the components of budget architectonics. to this end, it is necessary to carry out a qualitative analysis of budget execution in previous years; to determine the methodology for assessing the impact of macroeconomic parameters on budget indicators, which will enable to optimize the procedure for updating the source base. also, an important task is to ensure the uniformity of the budget execution process, which envisages: provision of the opportunity to use the appropriations released at the beginning of the fiscal year; preparation of ministries for the budget execution during the last quarter of the previous year; the possibility of allocating budgetary appropriations based on a plan prepared before the beginning of the fiscal year; settlement of transfer of budget commitments to the next year. the possibility to spend over-planned revenues will allow avoiding changes in the budget balance; however, this is not necessarily optimal for medium-term budget planning since over-revenues are mostly worthwhile saving. herewith, this may increase the budget volatility, which will increase the level of expenditures for the coming years. it is worth pointing out that the “use or lose” concept can stimulate inappropriate spending at the end of the year. at the same time, unlimited transfers of unused funds create a risk of significantly exceeding the aggregate limits and reduce the ability to perform fiscal target indicators and objectives in subsequent years. in particular, in austria, departments received the right not to return unused funds, which led to a significant accumulation of reserves, the use of which to achieve the target budget indicators is practically not allowed. in france, no more than 3% of expenditures are allowed to be transferred. in ireland – not more than 2%, while in the range of 2% to 6% it is allowed to transfer 2/3 of unused budgetary appropriations. baltic journal of economic studies 217 vol. 5, no. 3, 2019 the experience of developed and transformational economies shows that the development of a fiscal strategy contributes to ensuring the effectiveness of the system of public finances in general, and creates a basis for raising the level of responsibility of public authorities for achieving the strategic goals of socio-economic development of countries. 6. conclusions the fiscal strategy plays a significant role in the system of state regulation of economic processes, as it provides an opportunity for a timely and well-balanced assessment of the influence of exogenous and endogenous factors on budget parameters, sustainability, stability, and balance of the budget system. the development of the fiscal strategy contributes to strengthening the overall fiscal discipline and consistency of the fiscal policy with the strategic goals of socio-economic development of the country based on an integrated combination of long-term directions and tasks of state authorities and local self-government and justifies the ways of their implementation. the basis of the budget strategy is the system of long-term financial and economic measures, goals, principles, directions, tasks that are implemented by the public administration in a multiaspect dimension based on the features of social development of the country, the level of economic development, cyclicality and dynamism of economic processes. the achievement of the strategic goals of the country’s development depends on the degree of consideration in the budget strategy of development trends in the institutional environment of the fiscal space, the effectiveness of the mechanisms used to manage uncertainty in the budget sphere. at the same time, an important task in the context of economic transformations is to implement prudent fiscal policy on the basis of the justification of the total budget expenditures and the assessment of fiscal risks. based on the experience of developed economies, the development of a fiscal strategy in countries with a transformational economy should be based on: the projected prospect of socio-economic development of countries; ensuring consistency of the indicators of short-term, medium-term, and long-term budget planning; development of the base budget on the basis of evaluation of various options of the fiscal policy; assessment of the impact of exogenous and endogenous factors on budget sustainability, stability, and balance. in conditions of economic transformation, budget architectonics, the institutional features of its formation are becoming increasingly difficult to assess in both developed and transformational economies. the benchmark of the fiscal strategy in terms of economic transformations should be to ensure macroeconomic stability and accelerate the pace of economic growth by increasing the soundness of budget architectonics. at the same time, the development of a fiscal strategy is only a prerequisite for ensuring macroeconomic stability and accelerating the pace of economic growth. it is advisable to ensure its feasibility, reasonableness, and the effectiveness of the ways of implementation. disclosure of these issues requires further scientific research. references: european financial stability facility. retrieved from: https://www.esm.europa.eu/ european financial stability mechanism. retrieved from: https://www.esm.europa.eu/ european stability mechanism. retrieved from: https://www.esm.europa.eu/ horizon 2020 (2018). work programme 2018–2020. european commission decision c, 4708: 39. the 2018 ageing report (2018). economic and budgetary projections for the eu member states (2016-2070). institutional paper 079: 406. pro stratehiiu staloho rozvytku “ukraina – 2020” (2015). [on the strategy for sustainable development “ukraine – 2020”]. ukaz prezydenta ukrainy 12.01.2015, 5/2015. retrieved from: http://zakon.rada.gov.ua/laws/show/5/2015 pro skhvalennia stratehii reformuvannia systemy upravlinnia derzhavnymy finansamy na 2017-2020 roky (2017). [on approval of the strategy for public finance management system reform for 2017–2020]. rozporiadzhennia kabinetu ministriv ukrainy 08.02.2017, 142-р. retrieved from: https://www.kmu.gov.ua/ua/npas/249797370 baltic journal of economic studies 107 vol. 6, no. 3, 2020 corresponding author: 1 national university «odesa law academy», ukraine. e-mail: petrunenko@email.ua orcid: https://orcid.org/0000-0002-1186-730x 2 national university «odesa law academy», ukraine. e-mail: opp@ukr.net orcid: https://orcid.org/0000-0003-1095-3481 doi: https://doi.org/10.30525/2256-0742/2020-6-3-107-113 transformation of the strategy of state economic policy in modern conditions iaroslav petrunenko1, oleg podtserkovnyi2 abstract. complex and contradictory processes of modern social transformations and the need to overcome the crisis in the economy require the appropriate influence of the state and a clear system of socio-economic management through the formation and implementation of effective state economic policy. the main elements of economic policy are financial and credit, budgetary, scientific and technical, structural, social, investment, agricultural, regional, foreign economic policy. the implementation of state economic policy is considered in terms of the relationship between social problems and the state. therefore, the purpose of the article is to study the essence, tools and methods of state economic policy in modern conditions. it is also necessary to identify the main risks and features of further development of state economic policy of individual states in a global imbalance and crisis. the theoretical part is devoted to the study of the essence of state economic policy, theoretical and practical aspects of its organization in the state, as well as tools that can be used by the state. the resulting part is devoted to the consideration of the situation, in which the world economy has found itself in 2020 in the conditions of the economic covid-19 crisis. general forecasts have not provided to individual states because it has been impossible to predict the end of the pandemic and the return of the world to normal life. however, it is clear that the world economy has undergone irreversible processes that will synergistically affect different states in different ways. the crisis has hit a significant number of industries, including tourism, logistics, hotel business, the crisis has been felt in world markets: oil prices have collapsed, as well as the stock markets. undoubtedly, there are areas with a rapid growth, especially the pharmaceutical industry and retail, online delivery services, it entertainment and communications industry, information marketing business and education and training services. it is likely that the indicators of economic development in the states by the end of the year will be better than the results of the first half of the year. the basic forecast of economic world development assumes a sharp growth of the economy after a short recession after quarantine. the financial capabilities of the eu states vary considerably, but each state must pursue counter-cyclical policies aimed at stabilizing its own economy. the answer to the question of what kind of crisis response policy they can afford depends on the fiscal policy of the states before the crisis. in economically developed states, where emergency measures have been introduced, governments and central banks issue trillions of dollars in government spending, social support of citizens, and interest-free business loans to limit the economic damage of quarantine. at the same time, in latin america and southeast asia, total quarantine is impossible in multi-million cities. such states have a triple effect of suffering from the virus, the environment and poverty. states dependent on the export of natural resources and raw materials, when faced with the crisis, are forced to sell them for nothing, so they will suffer great losses. more than 150 states have set up anti-crisis headquarters and are taking anti-crisis measures. the authors have also tried to predict how largescale the global economic crisis will be for ukraine, what consequences await it, and what measures need to be taken to overcome it. key words: economic policy, covid-19 crisis, consequences of crisis, state mechanism, anti-crisis headquarters, anti-crisis measures, ukrainian policy, forecast scenario, forecast risks. jel classification: e01, e60, h77, o11 baltic journal of economic studies 108 vol. 6, no. 3, 2020 1. introduction complex and contradictory processes of modern social transformations and the need to overcome the crisis in the economy require the appropriate influence of the state and a clear system of socioeconomic management through the formation and implementation of effective state economic policy. such researches have become especially relevant in 2020, when the state's ability to protect and care for its citizens has become a significant guiding factor. the main elements of adaptive economic policy, which come to the fore, are, on the one hand, the possibility of increasing the influence of public administration, and on the other hand, increasing responsibility for the efficiency of socio-economic life, rational use of internal potential and use of untapped sources of development at the level of regions and smaller territorial units. during all the decades of state-building processes, a significant number of scientists and researchers have dealt with the issues of theoretical and methodological foundations of the implementation of state economic policy. from the point of view of methodological approaches, the comparative legal approach is relevant, which makes it possible to properly justify ways to improve economic policy, taking into account the positive experience of developed states and to avoid mistakes. the purpose of state policy is to create conditions for dynamic, balanced development of the state and its regions, ensuring their social and economic unity, improving living standards, compliance with state-guaranteed social standards for every citizen regardless of his or her place of residence. the process of integration into the european union can be attractive in terms of gaining experience of collective interaction, creating a mechanism for forming and strengthening the norms of democracy, revising the rule of law, human freedoms and rights, and accelerating economic development that will positively influence on the living standards (soloviov, 2017). to master the pace of integration processes, it is necessary to distinguish between the peculiarities of foreign economic activity and priority areas for foreign economic activity. for example, for ukraine in 2017, seven priority areas of cooperation with the eu were identified, such as energy, trade and investment, justice and domestic affairs, approximation of the ukrainian legislation to the eu legislation, environmental protection, transport, and cross-border cooperation, cooperation in science, technology and space (kulysh, 2019). in recent years, this trend has not changed, but rather deepened. 2. methodology of research state economic policy is based on the theoretical and methodological principles of economic theory, on knowledge of objective economic laws, needs, interests and goals of various economic entities. the main elements of economic policy are financial and credit, budgetary, scientific and technical, structural, social, investment, agricultural, regional, foreign economic policy. the implementation of state economic policy is considered in terms of the relationship between social problems and the state. the algorithm for implementing state policy can be divided into certain stages. at the first stage of economic policy implementation the state determines the most acute problems of the state, at the second stage, it develops a strategy and plan for their solution, as well as legislates (legitimizes) policy, at the third stage, it takes measures to solve these problems, and at the final stage, the state evaluates the results and determines the direction of future action. state economic policy can be seen as a mechanism for using regulatory instruments to achieve national interests. this policy consists of two main aspects: theoretical and practical. the theoretical aspect of state economic policy involves a systematic scientific study of methods, actions and measures aimed at ensuring and supporting the most effective development of the national economy, as well as the formation of economic thinking. the practical aspect of state economic policy is associated with the development of a system of specific measures for state regulation of the economy, which, in turn, involves the disclosure of the essence of the mechanism of formation and implementation of economic policy. state economic policy is a set of forms, methods, principles and tools, by which the state influences the activities of economic entities and market conditions in order to create appropriate conditions for the functioning of the market and solve socio-economic problems of society. the implementation of state economic policy is a continuous, dynamic process of achieving the set goals, in which various public authorities and civil society institutions participate. implementation begins immediately after the approval and legitimation of state economic policy or a separate program and is the main activity of public authorities. the formation and implementation of state economic policy is carried out in four stages (this process is also called the political cycle): stage 1 – definition of social problems and policy goals (policy initiation). stage 2 – development and legitimation of state economic policy (policy formation). stage 3 – implementation and monitoring of state economic policy (policy implementation). stage 4 – evaluation and regulation of state economic policy (policy evaluation) (belyaev, 2003). the main elements of the mechanism of economic policy are characterized by such terms as subject, object, goals, methods and means. baltic journal of economic studies 109 vol. 6, no. 3, 2020 as a rule, under the subjects of economic policy a state only is meant. however, this understanding is quite simplistic. in fact, the subjects of economic policy are both carriers and representatives of economic interests. these include various types of associations that express the interests of certain strata and groups of the population. these are, first of all, trade unions and associations of entrepreneurs. public authorities, including regional and local institutional structures, use their power to reconcile the economic interests of different groups of producers and the population of the state, directing their work to achieve a common goal (umantsiv, 2015). objects of state economic policy are areas, industries, regions, as well as phenomena, situations and conditions of economic life of the state, where certain problems have arisen or may arise that are not solved automatically, as required by the normal functioning of the economy and social stability. objects of state economic policy are: economic cycle; structure of the economy; conditions of investment activity; scientific and technological progress and innovation processes; money circulation and inflation; balance of payments; social problems (employment, income, training and retraining, social protection, etc.); conditions of competition; environment (environmental problems); regions (didkivsʹka, holovko, 2000). the methodology of economic policy of the state should be based on certain approaches and principles and provide for the logic of managing the socioeconomic development of the state. the principles of public administration are understood as guiding rules, basic provisions, norms of behavior that reflect the most common stable features of laws and regularities of management, which must be observed in management activities (maystro, 2013). 3. results and discussion 3.1. the context of world transformations of the state economic policy of the states in the conditions of covid-19 world crisis the coronavirus outbreak has been a major challenge and shock to the world economy. initially, china and, later, the world have experienced a decline in gdp, a sharp decline in the tourism business and financial problems. the covid-19 crisis has led to a situation where the economies of the states are suffering significant losses and another attempt is likely to “flood” the crisis with money: the european states will simply soften the monetary policy of central banks as much as possible. however, the crisis has hit a significant number of industries, including tourism, logistics, and the hotel business, and these areas will have significant problems. the crisis has been felt by world markets: oil prices have collapsed, as well as the stock markets. lebanon declared default on march 7, the first time in the state's history since independence in 1943. estonia has also announced the onset of an economic crisis, with no such sharp drop since 2008. at the end of february, even the us indices have shown the largest decline since the 2008 financial crisis (radchuk, 2020). it is still difficult to estimate what the recession in the world economy will look like. it all depends on the duration of the crisis caused by the coronavirus, and this issue is multifaceted, as it concerns not only medicine, this issue is becoming geopolitical and geoeconomic in nature. based on official public data, we can make a rather pessimistic forecast – the decline will be measured in double digits. however, it is likely that the indicators of economic development by the end of the year will be better than the results of the first half of the year. this is a ver y specific crisis, which is different from all previous ones, and the classic measures to stimulate economic, political and public administration need to be adjusted. the basic forecast of economic world development assumes a sharp growth of the economy after a short recession after quarantine. the financial capabilities of the eu states vary considerably. therefore, only the finance ministers of these states know the answer to this question. some of these states have already faced an excessive burden on the budget, while others have a fairly comfortable financial position. this means that the states must pursue counter-cyclical policies, that is, when their economies grow, seek to reduce budget deficits or even ensure their surpluses. the answer to the question of what kind of crisis response policy they can afford, depends on the fiscal policy of the states before the crisis. in economically developed states, where emergency measures have been introduced, governments and central banks issue trillions of dollars in government spending, social support of citizens, and interestfree business loans to limit the economic damage of quarantine. at the same time, in latin america and southeast asia, where large families of several generations are housed in dense slums in multi-million cities, complete quarantine is often impossible. people who earn a living by working in temporary employment and low-paid jobs run the risk of losing their livelihoods and starving themselves if they stay at home. communities that have already suffered from appalling living conditions, exploitation, inequality and environmental problems now face the triple threat of a coronavirus epidemic, economic crisis and natural disasters caused by climate change. baltic journal of economic studies 110 vol. 6, no. 3, 2020 for asia, africa and latin america, this has resulted in an unprecedented health emergency and a deep economic crisis. the same effects are observed in wealthy states, but in poor states, where billions of people are on the brink of survival, even in the best of times, the dangers are mounting. at the same time, there is a sharp decline in international investment in emerging markets and the withdrawal of capital from them. in 2019, a group of two dozen of developing states, including china, india, south africa and brazil, had a net investment inflow of 79 billion usd. in the last two months of 2020, more than 70 billion usd was withdrawn from these states. as a result, some states may fall into insolvency and default. states dependent on the export of natural resources and raw materials, faced with the deadly danger of the covid-19 epidemic and its consequences for the national economy, are forced to sell oil and other natural resources for nothing due to the global recession and suffer the greatest human and economic losses. combined with the negative effects of climate change, the socio-economic consequences for them can be dire and devastating. at the same time, capital accumulation centers can strengthen their positions and use the pandemic to get rich, gain even more power and unlimited access to the natural resources of the most affected states. thus, the current crisis breaks the mask of decency and humaneness from the neocolonial system, showing its predatory murderous nature. more than 150 states have set up anti-crisis headquarters and are taking anti-crisis measures (kusa, 2020; savitsky, 2020). in connection with the coronavirus, the trump administration proposed to reduce to 0% their payroll tax (contributions for social insurance and medicine, 6.2% +1.45% for employees and the same for employers, a total of 15.3%). denmark will give a delay to vat payers because of the coronavirus to mitigate the shock. australia intends to adopt a set of measures aimed at saving businesses from the after-effects of the coronavirus, in the form of tax incentives for investment, support for small and medium-sized businesses and benefits for retirees. china is introducing tax breaks to protect its economy from the coronavirus. the united kingdom is planning tax breaks for vulnerable people and cheap loans for small businesses, and is even considering reducing vat as a response to the coronavirus. italy will introduce tax breaks for businesses to help to overcome the effects of the epidemic. almost 150 states have identified a scenario for the development of state economic policy as a policy of saving the local economy and supporting small and medium-sized businesses while preserving jobs. 3.2. determining the state economic policy of ukraine taking into account the factors of the covid-19-20 crisis the general situation in the economy, despite the persistence of a number of significant problems and risks, indicates the gradual formation of a qualitative basis for further economic development in the new economic realities. can we try to predict how large-scale the global economic crisis will be and how it will hit ukraine? the ukrainian business suffers great losses. the european business association has conducted a rapid survey among small and microbusiness, which is the basis of a market economy and forms the middle class. it showed that 18% of respondents are considering closing a business, 78% report losses of up to 75% of income, and only 4% report an increase in profits. labor market. according to the job search service work.ua, since march 17, the number of vacancies has more than halved: on march 17, there were 38 171 vacancies, and on april 21, 2020, their number decreased to 16 683 vacancies. in the it industry, which exported 4.2 billion usd in computer services last year, the number of open vacancies from march 16 to april 20 decreased from 7 326 to 4 919 (radchuk, 2020). business registration. registration of new companies and individual entrepreneurs has experienced triple reduce during the quarantine period. if before the quarantine more than 5 thousand individual entrepreneurs were registered every week, then, according to the data on april 19, the number of registrations during the week decreased to 1.5 thousand (voloshin, 2020). from march 12 to april 15, 2020, youcontrol has researched the dynamics of business opening and closing and found that there have been industries with the active growth. in particular, these are: production of pharmaceuticals (+600%); production of cosmetics (+100%); extraction of raw materials for the chemical industry (+100%) (+100%) (vinichuk, 2020). the turnover of catering establishments has decreased by 73% since the beginning of march 2020, according to data from the company for automation of restaurants poster, which serves 12 thousand establishments. now the only way for restaurants to survive is working online. quarantine has dramatically changed the way businesses interact with customers: in self-isolation, consumers have begun to shop online en masse, where they prefer essential products. this has forced the business to reorient in a hurry, such large retailers as silpo and roshen confectionery corporation have gone online. in the first place, large online stores and online platforms have benefited from this. baltic journal of economic studies 111 vol. 6, no. 3, 2020 according to the retailers portal, in march, the attendance of those services, the goods and services of which became in demand in the conditions of quarantine and self-isolation, sharply increased: in the service of products ordering zakaz.ua the attendance increased by 73.7%, in the pharmacy marketplace liki24 – by 73%, and in tabletki.ua – by 32% (vinichuk, 2020). the analysts of pro-consulting predica that, according to the results of 2020, the food delivery market may grow to 50 billion uah (from 20 billion uah in 2019) (voloshin, 2020). in fact, ukraine, in its current state, does not have the worst economic indicators than in 2008-2009 and in 2013-2014. the national bank is still in control of the situation on the domestic financial market, we do not have a high level of inflation, economy with not too high debt ratio and opportunities for further gdp growth. however, the key risks remain the same as in previous years: a weak economy, dependent on the situation in foreign markets, lack of significant investment and strong development of small and medium-sized businesses, significant credit obligations, etc. according to a study by the ukrainian institute for the future, the consequences of the economic crisis for ukraine are presented in table 1 (radchuk, 2020). the most likely scenario in the event of a sharp decline in the world economy for the ukrainian realities is default and a complete restructuring of the financial and industrial sectors. however, we should not forget about a significant local problem – russia's military aggression and the possibility of new military operations in eastern ukraine. currently, the best recipe for countering the crisis is to implement reforms and implement commitments made in cooperation with the imf, also attracting investors and finding new markets. the forecast of the state economic policy for 20202022 is formed on the basis of proposals of economists, political scientists and public administration specialists. given the global practice of making a forecast in the budget, which is the least risky, the baseline scenario assumes not the maximum possible, but a moderate response of the economy to the implemented reforms. also, for a number of reforms, for which no consensus has been reached in society today, primarily land and tax reform, in this scenario, we proceed from the formation of conditions for the functioning of the economy on the principle of "status quo". it is necessary to create an anti-crisis headquarters based on the type of developed states, which will be able to coordinate actions in the state (amelin, 2020): 1. first and foremost, to create an anti-crisis plan and anti-crisis program of economic action of the state for 2020-2021. 2. to stabilize the macroeconomic situation as follows: 2.1. to carry out a moderate controlled devaluation to improve the economy and stimulate exports. 2.2. to balance and, if necessary, sequester budget expenditures. 2.3. to identify the main inflation targets and take measures to curb inflation expectations. 3. to develop and implement programs to support business and entrepreneurs, especially small businesses and the self-employed, as the basis of our economy. 3.1. to encourage the retention and creation of new jobs. 3.2. to neutralize the panic among the population (to develop measures to provide medical care and food during the quarantine period, to ensure the stabilization of the exchange rate in the cash market). to ensure competent communication between different levels of business, government and the public. 3.4. to encourage the consumption essential and permanent products in sufficient quantities, including through consumer lending (at a rate of 0% per annum) and job creation. table 1 potential losses of ukraine during the covid 2020-2021 crisis the name of the current factor forecast results export fall by 16% in 2 years (-10 billion usd) trade balance deficit growth to -13 billion usd current account balance -7 billion usd the official exchange rate of usd / uah reduction to 35-37 uah / usd credit rating of ukraine decrease to pre-default the cost of borrowing in foreign markets growth from 5 to 8% (in foreign currency) volume of the nbu reserves reduction up to 10-15 billion usd in imports real hryvnia gdp falling by 8-10% per year dollar gdp reduction to 20-30 billion usd falling wages in dollars -15-20% job loss up to 500 thousand people return of migrant workers up to 3 million people (low-skilled staff ) source: compiled on the basis of (radchuk, 2020; vinichuk, 2020; voloshin, 2020) baltic journal of economic studies 112 vol. 6, no. 3, 2020 3.5. to create and implement a program to support exporters (intensify the work of the export credit agency, create a network of trade missions within the export strategy, tax preferences for exporters of hightech products, especially agricultural products). 3.6. to create and implement a comprehensive program to stimulate import substitution, localize the production of imported products today, and support domestic producers. 3.7. to carry out tax reform and launch exit capital tax (tax on distributed profit) as a factor in stimulating business activity and accelerating the modernization of the economy (after the active phase of the crisis, but to prepare the base in advance). 3.8. to restore the possibility of functioning of special economic zones, industrial parks as a factor in attracting investment in new sectors of the economy and creating new jobs. 3.9. to create and implement an anti-crisis program to support the ukrainian producers and industry. 4. to establish the kyiv international financial center with the participation of international financial institutions and work under the british law in order to attract investment and mitigate the risks of the ukrainian jurisdiction (2 years for project preparation, start – after the crisis). 5. to prepare and launch infrastructure projects in the format of ppp (public-private partnership) (ports, airports), including on the state guarantees. infrastructure projects in crisis are an important support to the economy, stimulating domestic consumption and job creation. 6. to intensify and complete the implementation of the digital strategy of ukraine as a factor that can increase the productivity of the economy. among the risks of the forecast, which may worsen the situation, there should be noted: – strengthening of the hybrid threats to ukraine's national security, including active military confrontation in the east of the state, which could have extremely unpredictable consequences both in the short term and in terms of the scale of the destruction of development potential; – aggravation of the socio-political situation in the state, which, against the background of reduced efficiency of international cooperation, will cause a decline in production activity, will form threatening devaluation trends in the foreign exchange market (increasing exchange rate volatility) and inflation in the state with growing negative expectations and confrontations; – the risk of implementing populist measures in the social direction, especially during periods of expected increase in political activity; – more than the predicted increase in world food prices and accelerated growth in the cost of energy resources; – lower yields of individual crop products than expected; – the risk of non-continuation of cooperation with the imf or new conditions of cooperation on less favorable terms for ukraine; – tougher conditions in global financial markets; – the risk of increasing the level of labor migration and the strengthening of the refugee factor, which, combined with the growing poverty of ukraine and incomplete transformation processes in the labor market, including the aggravation of the situation in rural areas, will reduce human resources in the state. 4. conclusions consequently, the state economic policy is a strategy of purposeful influence on economic processes at the macro and micro levels, creation of conditions and improvement of directions of development of economy according to a certain social system. in addition, the essence of state economic policy should not be reduced only to a set of methods and levers of managerial influence on economic processes. the managerial influence of the state includes not only regulation, but also organization, planning and control. the basis of state economic policy should be to determine the purpose of the economic system, the specific functions of each of its elements to achieve this goal and their interaction with other elements of the system, which will be the subject of further research. the general situation in the economy, despite the persistence of a number of significant problems and risks, indicates the gradual formation of a qualitative basis for further economic development in the new economic realities. the covid-19 crisis has led to a situation where the economies of the states are suffering significant losses and another attempt is likely to "flood" the crisis with money: the european states will simply soften the monetary policy of central banks as much as possible, and the situation might be improved in 2-3 quarters. if we talk about oil prices, we cannot say about a significant reduction in high demand for it – the price also stabilizes in 2-3 quarters. currently, the best recipe for countering the crisis is to implement reforms and implement commitments made in cooperation with the imf, also attracting investors and finding new markets. we define that there are a number of risks which realization will influence the realization of forecast estimations. among the main point, the folowing should be noted: – uncertainty of the political situation, with a constant threat of escalation of hostilities; – continuing the trend of increasing labor migration with a 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(2020). global crisis 2020 and coronavirus: what will happen to the economy? retrieved from: https://vgolos.com.ua/news/svitova-kryza-2020-i-koronavirus-shho-bude-z-ekonomikoyu_1191896.html baltic journal of economic studies 118 vol. 6, no. 5, 2020 corresponding author: 1 institute of market problems and economic-ecological research of the national academy of sciences of ukraine, ukraine. e-mail: alexlayko@gmail.com orcid: https://orcid.org/0000-0001-7082-0862 2 danube institute of national university “odessa maritime academy”, ukraine. e-mail: kovalenko@dinuoma.com.ua orcid: https://orcid.org/0000-0001-7430-9412 3 odessa national polytechnic university, ukraine. e-mail: а.biliusoff@gmail.com orcid: https://orcid.org/0000-0003-2535-5505 doi: https://doi.org/10.30525/2256-0742/2020-6-5-118-128 prospects for the development of cluster forms of entrepreneurship in euroregions oleksandr laiko1, sergey kovalenko2, oleksandr bilousov3 abstract. the aim of the proposed research consists in outlining prospects of cluster mechanism application and verification of the cluster strategy in view of innovative development of cross-border regions against the background on strengthening integration processes. the work is dedicated to research of theoretical, methodical and applicable basis of strategic management of development of international integration associations as network-like structures of intra-branch and inter-branch cooperation on their mesolevel. the research method is based on mesoeconomic synthesis of development concepts in industrial and innovative clusters and international integration associations. to the authors’ opinion, it enables to work out both mechanism and scientific understanding of development trends in modern integration systems. the scientific hypothesis of the proposed work suggests that the cluster approach is the most efficient mechanism of development of international economic cooperation under modern conditions and, finally, is a mesolevel of competitive international integration systems and necessary pre-condition of qualitative progress of integration of ukraine into the eu. the authors propose to develop integration processes of mesolevel within the framework of unified economic space basing upon clustering. concept, structure and life cycle of net forms of self-organization of a cross-border economic space in conditions of developing a postmodern economy are considered. conclusion is drawn to state that the cross-border clusters concept construes an approach adequate to modern challenges to stimulate economic development of peripheral regions with inherent features and advantages taking into account comprehensive dynamic competition and coordination of problems of meso– and macrolevels with conditions accompanying operation and activity of particular business entities. under such circumstances, cluster policy consists in creating conditions for formation and development of cross-border clusters, but, under no circumstances, in artificial generation of such clusters. theoretical positions and methodological approaches to the formation of industrial clusters within european regions are systematized. the essence of cross-border and internal relationships of the cluster as a factor in increasing competitiveness in the increasingly euroregion integration processes and the need to enhance the role of peripheral regions within the framework of crossborder cooperation. the strategic priorities for spatial development of new forms of cross-border cooperation in the context of regional policy of the eu are outlined. key words: quasi-integration, mesocompetitiveness, cluster, cross-border cluster system. jel classification: o31, m16, f23 1. introduction the ability to adapt promptly to international competition becomes the most important condition of sustainable development. competition is occupying a priority position in placing aims for management of enterprises. development of “newer” economy occurs as a result of transfer from centralized management of economic space to pluralism and, further, from vertical hierarchy to horizontal networks. this process is defined among western scientists as “quasi-integration”. such conditions demand search for newer sources of economic growth, baltic journal of economic studies 119 vol. 6, no. 5, 2020 formation of flexible business structures enabling to react promptly to changes in economic situation and to generate competitive advantages of high level, as demanded by increased degree of virtualization in economy. steady competitiveness growth is identified as a critical factor enabling to achieve strategic aims, improve political and economic role of eastern european states in global community. the need for development newer theoretical approaches to problems of forming and improving competitiveness on mesolevel is longstanding and requires studying worldwide experience in this field (andersson t. schwaag-serger, sorvik, hansson, 2004). specific features of this stage place new objectives in researching problems of competitiveness improvement at the level of enterprises as essential participants of competitive relations. first of all, the matter concerns revealing of factors and conditions facilitating to creation of competitive advantages, choice of adequate mechanisms and instruments enabling to improve competitiveness of enterprises. urgency of research is caused by severe demand to improve competitiveness of native industry at mesolevel by means of establishing clusters in competitive branches and lack of scientifically validated organizational and economic approaches, methodological tools and strategies for implementation of the specified demand under prevailing economic circumstances. newer conceptual approach should be developed enabling to improve mesolevel of competitiveness of industrial enterprises on the basis of boosted clustering processes in branch composition and space structure of industry in general. current situation requires decisive actions not only to improve competitiveness of native manufacturing, reviving innovative activeness, but also to achieve a breakthrough in this area. this problem may be solved by means of creating competitive clusters in native industry. solution of the mentioned problem is capable to provide construction of structures to improve competition of entire economy by means of concentration upon creation and development of newer hi-tech manufactures based on the most recent scientific and technical discoveries with high share of knowledge factor in production. in this view, a demand rises to develop organizational, economic and methodological recommendations aimed to improve competitiveness of native industry within mesolevel basing on cluster approach. aim of the proposed research consists in outlining prospects of cluster mechanism application and verification of the cluster strategy in view of innovative development of cross-border regions against the background on strengthening integration processes and development of cross-border cooperation. in this context the authors have chosen to reveal preconditions and key factors of generation of cross-border cluster systems and identification of the part they may play in innovative capabilities of euroregions. 2. an overview of the relevant publications strong resemblance between clusters, industrial areas and complicated adaptive (capable to self-organization) systems are marked by a number of researchers. as m. porter writes, “cluster is a system of interconnected corporations and institutions which in total exceeds a mere sum of its components”, thus displaying systemic effects and self-organization basis of clusters (porter, 1998). michael porter in his work “the competitive advantage of nations” draws a remarkable conclusion, as follows, “...developing an investment policy transition economy should strive to develop mutually dependent industrial cluster involving basic and auxiliary branches of industry” (porter, 1990). an approach to estimate a regional competitiveness may be formulated basing upon a national competitiveness concept proposed by m. porter. prof. t. brenner from max planck institute of economic suggests that “…cluster is reviewed as a result of evolutionary processes forming specific conditions and motivating forces in a certain particular area in a certain particular time leading to a phenomenon called in literature as a cluster, industrial area, innovative environment, etc.” (brenner, 2001). clusters are directly associated with systems capable to self-organization in another work by prof. t. brenner, “…local system is considered as a set of corporations operating in one or more branches of economy deriving mutual advantages from their proximity to each other and local accessible conditions and resources. cyclic stimulating mechanisms are inherent with such or similar systems capable, together with favorable local conditions, to maintain high level of employment within the corporations, which, in their turn, support local favorable conditions. it means observing aspects with positive influence upon each other and thus bringing their state to a new, more advanced level. these are the features of a system capable to self-organization” (brenner, 2000). important contribution in development of theory of economic space organization has been made by economists representing institutionalism trend (o. williamson, r . coаsе, w. nordhaus, f. hаyek). in their works they drew utmost attention to lack of information, affecting mutually profitable activities, differences in obvious and “hidden” knowledge concentrated on studying influence of transactions expenditures on advantage of various forms of organization (williamson, 1985). their works displayed their being aware of existence and importance of net clusters phenomenon, including researches in growth poles and structures with direct links and feedbacks, reviews of agglomerations’ economy, economic geography, urbanized and peripheral economy, national innovation systems, regional science, industrial areas and social structures (coase, 1994). baltic journal of economic studies 120 vol. 6, no. 5, 2020 works by m. kastels and m. himanen showed on the basis of oulu technopark that it is linked with foreign corporations to greater extent, than with its own business entities. however, the technopark shows economic progress only where and when it is joined with significant innovative clusters. technoparks activities’ efficiency analysis influenced transformation of finnish national policy in economic development from programs based on national priorities towards supporting private and public entities involved into regional development (corporations, local authorities, public initiatives) in their business activities (nordhaus william, 1969). “possible self-organization, i.e. spontaneous emergence of order from chaos is experimentally proved and theoretically grounded for the most various opentype unbalanced systems”. in general, a self-organizing system is defined as a “complicated dynamical system capable to preserve or to improve its organization in altering external or internal conditions of its functioning and development considering the past experience” (cluster policy in europe, 2008). 3. research methods the research focuses on solving a fundamental problem of competitiveness improvement for ukrainian industrial enterprises on mesolevels basing on cluster approach to validation of sources of competitive advantages and mechanism of their application. in view of growing involvement of ukraine into global economic processes, formation of mesocompetitive clusters becomes particularly urgent for our state. competitiveness in view of new production mode is determined by innovations’ intensity rate and capability to continuous renewal. thus, there is a necessity to establish a methodology of cross-border cluster systems’ development as a mesolevel of international economic integration. methodology in this research means a set of organization and development principles and methods of cross-border cluster systems’ generation as elements linking together integrating national economic systems. complex of problems reviewed in this work is of multisubjects nature and encompasses a lot of theoretical approaches and concepts. however, in general it may be subdivided into a few essential blocks: – problems of international economic integration in theoretical and practical aspects in the post-crisis period; – development of inter-institutional networks in view of industrial innovative clusters; – turning to mesoeconomy as a uniting link between two blocks. however, even in view of deep study of theoretical approaches to processes of international economic integration, in general, and to development of clusters, in particular, on the level of individual enterprises, branches and regions, there is no uniform concept of international economic integration applying methodology of development of international industrial innovative clusters. such a problem statement may be described as mesoeconomic synthesis of industrial innovative clusters’ and international integration associations’ development concepts, and, to our opinion, enables to develop mechanism and scientific understanding of development of modern integration systems. the scientific hypothesis of the proposed work represents an allowance that the cluster approach is the most efficient mechanism of development of international economic cooperation under modern conditions and, finally, is a mesolevel of competitive international integration systems and necessary precondition of qualitative progress of integration of ukraine into the european economic space. 4. results of the research cluster policy is the most efficient instrument of competitiveness improvement of a national economy under prevailing conditions. cluster policy started to be applied in some european states since 1980s. it should be noted, that “clustering manifest in eu member states” (vienna cluster manifesto) was approved in 2006 (2012) and “european cluster memorandum” was approved in 2008. substantial number of clusters already operate in eu. for example, there are 206 clusters in italy, 168 in the uk, 96 in france, 34 in denmark, 32 in germany, 20 in netherlands and 9 in finland. global experience shows that during recent times the process of clusters’ formation runs actively in the usa (380) and in india (106). “cluster policy” should be understood as a “system of governmental and social clusters and cluster initiatives’ support measures and mechanisms facilitating to improve competitiveness of enterprises and regions included into the cluster, development of institutions facilitating the clusters’ formation and innovations’ implementation”. there are a sufficient number of positive examples of cross-border inter-corporate cooperation on mesolevels including industrial innovative clusters. however, experience of corporations and states in this aspect is insufficiently studied and common features, obstructions and stimulations to develop such a cooperation system remain unrevealed. decrease of a part previously played by territorial component of manufacturer’s location with developing it and economic space tendency to self-organization leads to formation of virtual inter-corporate networks and provides an opportunity to create cross-border cluster systems capable to evolve rapidly under prevailing circumstances. thus, cluster approach becomes more advanced and enables to involve a great quantity of corporation and states worldwide into data exchange. baltic journal of economic studies 121 vol. 6, no. 5, 2020 to date, the uniform concept of the european economic integration based on methodology of development of international industrial and innovative clusters is not formulated. economic cluster is a result of self-organization of subjects of economic activities applying efforts to achieve aims of their own and acting within the framework of their individual interests with their strategic interests being related together and are implemented more efficiently by means of cooperation within the structure of economic cluster. economic cluster, from this point of view, provide its participants an advantage identified as agglomeration economies. the effect of the agglomeration economies is generated by means of following factors: 1) reduction of transactional and manufacturing costs of various kinds due to savings on scales and logistics; 2) concentration of business entities at certain territory increasing the innovative index of production (with ideas circulation partly being an essential factor of the latter); 3) knowledge spreading migration; 4) emergence of technological partnership, where a few cooperating corporations (even competing with each other) coordinate their research and development activities, products design, basic technologies, which are further implemented into specific final products by each enterprise (enright, 2000). 5. neo-factors of enterprises’ competitiveness growth in mesolevels generated by acceleration of clustering process 1. innovations. worldwide experience showed, that clustering of cross-border economy causes and decisively influences processes of competitiveness improvement and boosting innovative activities. it forms a newer economic phenomenon, which enables to counteract the pressure of global competition and respond adequately to requirements of national and regional development. priority of essential factors of deployment changes substantially in modern postindustrial paradigm affecting the functions of peripheral territory. it transforms from the location of material factors of production (resources) as a physical basis into spatial environment for development of human capital, innovations and euroregional self-development. 2. institutional transplantation. transplantation is defined as a process of transfer of institutions, which developed into another institutional environment. newer postmodern reality lies in association of post-industrial manufacturing with network structure of economic space which provides for institutional transplantation by means of self-organization of hybrid network clusters at both sides of border which becomes a concentration factor and free circulation of monetary funds in euroregions. with newer manufacturing mode, the competitiveness is defined by innovations implementation rates and capability to continuous renewal. thus, the postindustrial economy evolved into a system of cooperating institutions, forming a new cluster postmodern paradigm in cross-border dimension, requiring virtual resources for development, such as information, innovations, communications, knowledge. this process started in all states practically simultaneously (including ukraine). however, it may be noticed, that states of central and eastern europe are rather more advanced in this aspect. in comparison with ukraine, these states achieved the crucial aim of the eu integration. here a substantial part was played by cross-border cooperation institute as an experimental array for testing and adapting the european laws, instruments improving roles played by regions, adaptation of financial support mechanisms. this strategy means a possibility to apply an institution “from the past” of donating state at any stage of its development. it is supposed that spontaneous evolving of a transplanted institution will (directly or implicitly) facilitate to generation of format meeting the requirements of the recipient state. the "growth" allows simultaneous transplantation of multiple versions of the institution and their coexistence (competition) with similar institutions of the recipient and, to the authors’ opinion, possible corrections to be introduced into the process of transplantation. 3. synergistic effect. cluster framework generates an additional economic effect, which improves competitive advantages of the region. enterprises within a cluster earn an additional synergistic effect due to shared usage of resources (technologies and expenditures strategy), market infrastructure (joint sales), and spheres of activities (planning and management synergy). meaning of synergy strategy consists in its possible usability to obtain higher efficiency of manufacturing with relations between enterprises involved into cluster that in situation when they are controlled separately. synergistic effect is an activity efficiency increase as a result of association, integration, merging of individual parts into a single system due to so-called positive system effect (emergence effect), with effect achieved by cooperation of participants in integrated system exceeds total summarized effect of activities of each individual (autonomous) participant. i. ansoff, a famous economist and theoretician in strategic management, proposed a term “synergism” describing it as a difference between total effect of common usage of resources and a sum of individual effects from using same resources separately. synergistic effects is formed as a result of a process of deriving direct economic, system and strategic effects united into hierarchy system and consists in such an increase of operational indexes, which exceed the total increase of indexes of integrated systems achieved by means of traditional scenario of development. baltic journal of economic studies 122 vol. 6, no. 5, 2020 4. transfer of technologies and knowledge. it is regarded as one of the aspects of innovative process. the latter means a transformation of scientific knowledge into innovation. it may be represented as a sequence of events, in the course of which the innovation passes a way from an idea to a particular product, technology, or service and spreads during practical application. consequently, the innovative process efficiency, e.g. hi-tech production, is connected with transfer of newer knowledge from one group of involved parties to others (developers, technology holders, intermediate parties, authorities and administrative bodies, investors, potential purchasers). economic development of any states requires increase of transfer rates of unique and advanced technologies, attraction of funds for development of innovative activities. enterprises’ clustering facilitates to development of certain types of technologies transfer, such as: 5. quasi-integration. “integration/disintegration” dichotomy applied in modern theory of economics is supplemented with another category known as “quasi-integration”. another dichotomy, “corporation/ market” is expanded with the “hybrid” category. distinguishing feature of a cluster as a version of quasiintegration is its geographical localization, which reflects concentration of mutually related corporations, specialized suppliers and servicing organizations within a limited territory where they compete and carry on joint activities at the same time. clusters so far remain such a theoretical construction which does not possess sensible images and clear externalities. however, these quasi-integrating forms will become a main moving force of innovative development in long-term future (kovalenko, 2019). 6. cooperation. development of cross-border cooperation leads to appearance of cross-border market, which may be defined as a system of cooperation of international business entities at regional level, where economic exchange and joint usage of material, financial and human resources takes place within a framework of a common cross-border region. in this case, the presence of a border effect is mitigated by means of creation of cross-border network structures in economic space organization. they possess a greater potential in view of demand for efficient application of homogenous manufacturing factors, such as knowledge capital, information, innovative technologies. 7. self-organization. rapid it development led to emergence of network society. sophistication of economic space accompanied by bifurcations leads inevitably to its self-organization. due to it network, society becomes capable to establish contacts, generate links, mitigate effects of borders, conformities and cause multiple newer opportunities in the form of bifurcations, such as computerized trading, virtual societies, virtual enterprises, creation of cybernetic cities. network economy is super-transparent and super-prompt. the most important is that it creates favorable conditions for importing efficient institutions by means of working out new form of organization for postmodern economic space. 8. branding. it is a consistent and gradual creation of a trademark popular among the targeted audience and implementing an appropriate approach into the corporation policy. branding is a set of marketing tools. the process of brand management consists in development of a trademark for a production item, positioning and promotion at the market, care of reputation and continuous monitoring for individual trademark compliance to demands of the market. it is possible to state that branding, in its present interpretation, means a systematic, scrupulous process providing for planning and implementation of complex measures to create a trademark, planning approaches to transform trademark into brand to form desirable associative impressions and gain expected advantages among customers and consumers (figure 1). on the other side, the increase of competition intensity stimulates counteragents to more active search for innovations. cooperation between the parties depends on competition (back feed in the most primitive version). cooperative interactions simulate the most preferable technologies and ways to do business effecting innovative and technological components. description of cooperation process takes into note a proximity and mutual influence of the parties located in innovative and technological area. clusters may be determined as groups of independent corporations and associated organizations located within the same geographical region, which cooperate and compete, specialize in various areas, linked with common skills and technologies and supplement each other, which, finally and in total, enables to obtain synergetic and network effects, diffusion of knowledge and skills. cluster frameworks generate additional economic effect and improve competitive advantages. enterprises involved into cluster gain an additional synergistic effect due to common usage of resources (technologies and expenditures strategy), market infrastructure (joint sales) and spheres of activities (planning and management synergy). synergy strategy part consists in the fact that it enables to gain higher manufacturing efficiency with cluster participants’ enterprises cooperating with each other than in the case when they are run separately. synergistic effect is an efficiency increase as a result of establishing an association, integration, merging individual parts into united system by means of so-called positive system effect (emergence effect), where effect from cooperation of participants in integrated system exceeds total summarized effect from activities of each particular participant who act autonomously. baltic journal of economic studies 123 vol. 6, no. 5, 2020 6. essential advantages of clusters as a result of competitiveness research problems, m. porter found three essential advantages of clusters: firstly, they increase productivity providing an access to specialized labor and resources and making data, institutions and common public benefits easier to access. secondly, clusters encourage higher rate of generating newer business formations transforming employees of existing corporations into brand new businessmen. thirdly, they improve corporations’ capability to implement innovations due to more rapid diffusion of technological knowledge. unique feature of clusters to boost innovations’ diffusion enables to define them as innovatively active economic agglomeration of an area of innovative activeness. any cluster represents a network structure with ideology of competitive cooperation (or non-competition) where motivations to progress generated by competition among the network participants are combined with improvement of cooperation in mutually beneficial directions (porter, 1998). network model of national economic space organization becomes more prospective under prevailing conditions. this model was placed into foundation of economic organization in those regions, which appeared to be the most successful in the system of global exchange of goods, finances, labor, technologies and data. they represent a network of autonomous and yet mutually substitutable enterprises. mesoeconomy is supposed to play a part of connecting “bridge” between microeconomy and macroeconomy being, however, an under-estimated component of economics as a science, especially from the point of view of modern international economic relations. briefly, mesoeconomy may be defined as a system of inter-branch contacts consisting of certain types of networks and chains. mesolevel of international economic integration is an organizational structure of intra-branch and inter-branches cooperation in the form of international cluster systems involving macro– and micro– integration levels of national economies. cross-border clusters are formed in regions adjacent to national borders in two or more states “beyond” their administrative borders. they encompass adjacent territories of neighboring states with institutions and corporations located at both sides of borders. therefore, cross-border clusters may be defined as groups of independent corporations and associated institutions innovation clusters’ development сomponents clusters as ecological systems economic space (euroregional aspect) cross-border clusters (international cluster systems) clusters’ competitiveness joint training of cluster’s participants innovative clusters identification problem innovations (knowledge and technologies transfer) figure 1. trends in innovative clusters’ theory development source: the authors’ own work baltic journal of economic studies 124 vol. 6, no. 5, 2020 which are geographically concentrated in cross-border region, compete and cooperate, specialize in various branches, related to common technologies and skills and mutually supplement each other, which, finally, enables to obtain synergetic and network effects, diffusion of knowledge and skills (figure 2, figure 3). at the same time, virtualization processes of intercorporate cooperation gradually started accompanied by appropriate virtualization of clusters (kovalenko, 2017). in general, logical aspect of concept synthesis of international cluster systems as a mesolevel of cross-border cluster system object structure process structure project structure environmental structure object strategy process strategy project strategy environmental strategy organization harmonization transformation contracting e n v i r o n m e n t e n v i r o n m e n t subsystems “background” subsystem simulation subsystem technological subsystem cognitive subsystem institutional subsystem cultural subsystem mental subsystem results internal samples external samples products, income, taxes knowledge institutions cultural samples mental models figure 2. structure of subsystems and results in cross border cluster system source: compiled by the authors baltic journal of economic studies 125 vol. 6, no. 5, 2020 sub-regions involvement into a process of generation and innovative potential development in euroregion state “а” (euroregional level) state “b” (euroregional level) expert council for development and innovative activities the “southern danube” technopark investment fund euroregional chamber of commerce and industry innovative enterprises business associations activation of structural alterations in economy interregional integration involvement of export-oriented enterprises of a certain branch (euroregional specialization) involvement of inter-branch structures main euroregional stockholders (authorities, business, science, education) outline and arrangement of programs for development and support of innovative activities in euroregion synchronizing of euroregional innovative policy with the national one identification of cross-border (transnational) protoclusters in euroregion and designing of their development programs establishing of stimulating institutional environment regionalization (differentiation of measures) of national innovative policy identification of regional innovatively active “points of growth” core of cross-border cluster system danube institute nu “odessa maritime academy” scientific & research centre innovations hub business center center of continuous training іт-center educational establishments of all levels figure 3. model of euroregional innovation potential based on cross-border clustering source: compiled by the authors baltic journal of economic studies 126 vol. 6, no. 5, 2020 international economic integration bases of the following criteria: – necessity to improve efficiency of regional integrating structures in terms of accelerating economic and innovative cycles; – character of international economic integration mesolevel (regions, institutions, inter-corporate networks); – international cluster system representing mesoeconomic approach most completely under prevailing conditions; – international clusters as business ecosystems, evolutionary network approach to development of international economic integration. cross-border cluster systems are convenient since they generate certain effects of synergy and are efficient being low cost at the same time. main sources of synergy in clusters are knowledge exchange, mutually accessible qualified labor for participants or possibility to use jointly general social benefits. cluster in such a context represent signal characteristics of “real” economy. cluster strategies and cluster thinking possess a sufficient potential to boost regional economic growth and produce a favorable influence upon economic restructuring. however, the most crucial factor in this context lies in a provision that clusters are a paradigm to great extent. so, another reason of addressing to cluster concept lies in the fact that clusters, further to a pure practical aspect, provide a powerful paradigm to understand principles of economic life and economic policy (hayek, 1945). the cross-border cluster systems, (ccs), are proposed for review as objects of strategic planning. they are defined as territorially localized social and economic system established by a group of independent economic entities at both sides of the border involving also administrative bodies of states, participants of the euroregion and public bodies. they stably cooperate with each other in forms of data exchange, services exchange, personnel and funds exchange and provide higher efficiency in comparison with other objects not organized systematically (kovalenko sergey, 2020). cluster formation review should be carried on not only basing on social and economic system criteria, but also referring to estimated competitiveness increase of the clusters being under formation. in this view, both external (generated on levels of national economy, regional economy, or branch) and internal cluster effects, caused by synergistic effects produced by their participants should be considered. cluster manufacturing structure synthesizes synergy effect based on universal standardizing of production. it should be emphasized that it is cluster approach which nowadays became one of the main trends of national policy in advanced and developing states aimed on improvement of national competitiveness. the proposed cluster approach to improve competitiveness of industrial enterprises represents a special combination of territorial and inter-branch management principles enabling to stimulate integration processes on mesolevel of economy (figure 3). cluster approach is, certainly, necessary, since it focuses, in essence, upon solution of essential problems of national economy. firstly, as the cluster approach is implemented, the main aims are development of competitive market, supporting competition as a driving force of corporations’ competitiveness. it should be noted that economy of ukraine features a high degree of monopolization of regional and local markets which negatively affects competitiveness of economy in general. here governmental initiatives in cluster policy are aimed, first of all, towards providing support to stronger and more creative corporation and creating favorable environment for weaker and obsolete corporations to improve their competitiveness. secondly, formation of clusters pays the greatest attention to microeconomy – studying local markets and corporations on the basis of built up manufacturing factors (skilled personnel, accessible infrastructure, etc.) and not inherent ones (natural resources, etc.). microeconomic approach to clusters’ formation enables to take into account local specifics and work out efficient programs to boost development and improve competitiveness of corporations. thirdly, cluster approach implementation is based on organization of cooperation between governmental administration bodies and those of local administration, business entities and scientific and educational establishments to coordinate efforts to improve innovative nature of manufacturing and services facilitating mutual improvement of operational efficiency. fourthly, cluster approach is aimed to stimulate development and improve innovative potential for minor and medium business, which occupies weaker positions in native economy in comparison with advanced states. mainly minor and medium business entities form clusters and cluster initiatives – the essential objects in cluster approach implementation. 7. conclusions in general, methodology approach to industrial enterprises competitiveness improvement may be formulated in the manner, as follows, – hierarchical pattern, the implementation of system approach as a cornerstone principle of scientific cognition supposes actions to be developed for all three levels – microeconomic, mesoeconomic and macroeconomic – basing upon competitiveness category. in this case the higher level of competition field creates conditions for actions for lower level efficiency of which, in their turn, construes a way to achieve competitiveness aims put on a higher level. baltic journal of economic studies 127 vol. 6, no. 5, 2020 vertical unity in achieving competitiveness determines logics of development of management tools. – forming of competitive advantages for ukrainian enterprises should be based, firstly, on applying mechanisms of mesoeconomy instead of microeconomy mechanisms. numerous important processes occur on branch, regional and quasi-corporative levels without which competitive advantages cannot be achieved by means of reconstruction and improvement of value generation chains. these processes are currently the least involved in the industry. 1. industrial business network become the essential objects of economic management in post-industrial economic system. they take a form of network cluster experiencing the impact of globalization and internationalization processes. european integration opens newer opportunities for ukraine and its regions. at the same time, integration of ukraine into the european economic space demands to develop own competitiveness strategy concept, formation of appropriate social ideology for competitiveness of each of cross-border regions. 2. globalization of markets and competitiveness increase led to growing popularity of newer manufacturing innovative model with all the participants striving to unite into clusters. cluster development as a factor improving regional competitiveness is a typical feature of modern innovative economy. global practice showed that clustering of cross-border economy produces a decisive effect on competitiveness improvement processes and boosting of innovative activities. it represents a newer economic phenomenon enabling to counteract the pressure of global competition and respond duly to demands of national and regional development. 3. development of international competition led to development of newer theories of competitive advantages formation. competitiveness development bases on determinants of national “golden section” and operates in the form of competing clusters of national economy. 4. newer postmodern reality consists in combination of postindustrial manufacturing with network structure of economic space. it supposes institutions transplantation by means of self-organization of hybrid network clusters at both sides of the border, which becomes a factor of consolidation and free circulation of monetary resources in euroregions. 5. to date, development and implementation of euroregional cross-border development strategy referring to european experience of cross-border strategies gains an utmost urgency. its object is a stable and steady social and economic development of euroregional system in conjunction of its human, natural and manufacturing potentials on the basis of network clusters. development of efficiently operating clusters is a substantial step on the way towards development of euroregional economy, improvement of competitiveness of production manufactured within their territories. corporations, especially minor, may be able to enter global markets with their production only by means of cooperation and consolidation of efforts. this principle lies in the foundation of entire competitiveness system of states, regions and territories in global economy. 8. acknowledgements this publication was prepared within the framework of the scientific project “organizational and economic mechanisms of increasing entrepreneurial activity in ukraine ” at the expense of the budget program “support of priority areas of scientific research development” (kpkvk 6541230). references: andersson, t., schwaag-serger, s., sorvik, j., & hansson, e. w. 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(2000). survey on the characterization of regional clusters: initial results: [working paper]. university of hong kong, institute of economic policy and business strategy: competitiveness program. hayek, f. a. (1945). the use of knowledge in society. american economic review, vol. 35(4), pp. 519–530. kovalenko, s. (2020). cross-border cluster system as an object of strategic planning. cluster model of innovative development of the national economy: integration and infrastructure aspects: collective monograph / under the editorship of professor svitlana smerichevska. poznan, poland, wspia. baltic journal of economic studies 128 vol. 6, no. 5, 2020 kovalenko, s. i. (2017). the mesolevel of selforganization of cross-border economic space on the basis of network clusters. national economic development and modernization: experience of poland and prospects for ukraine: collective monograph. edited by a. pawlik. vol. 2. poland: state university of jan kochanowski, baltija publishing. kovalenko, s. i. (2019). strategic management of the development of cross-boundary cluster systems: euroregional dimension. monograph. odessa, national university “odessa maritime academy”, llc “courier publishing house”. nordhaus william, d. (1969). invention, growth and welfare: a theoretical treatment of technological change. m.i.t. press. porter, m. e. (1998). clusters and competition: new agendas for companies, govern ments, and institutions. on competition. boston, ma: harvard business school press. porter, m. (1990). the competitive advantage of nations. london: macmillan. williamson, o. (1985). the economic institutions of capitalism. new york: free press. baltic journal of economic studies 102 vol. 7, no. 1, 2021 corresponding author: 1 v.o. sukhomlynskyi mykolaiv national university, ukraine. e-mail: tanyastroyko@gmail.com orcid: https://orcid.org/0000-0002-0044-4651 2 v.o. sukhomlynskyi mykolaiv national university, ukraine. e-mail: ludaviva@gmail.com 3 v.o. sukhomlynskyi mykolaiv national university, ukraine. e-mail: natasha.danik29@gmail.com doi: https://doi.org/10.30525/2256-0742/2021-7-1-102-106 transformation of economic processes on the basis of digitalisation tetiana stroiko1, ludmila nazarova2, natalia danik3 abstract. the main task of our study is to justify the primary directions of transformation of economic processes on the basis of digitalisation. nowadays, the digitalisation of the economy in the global economic environment is considered a priority model of global innovation development. institutional factors are particularly important in the conditions of transformation of economic processes on the basis of digitalisation. they form the fundamental parameters of the long-term functioning of economic systems. it is determined that the role of institutional factors in ensuring economic development is multifaceted as they affect its duration and quality. these factors can be divided into formal and informal. we have systematised the influence of formal and informal institutional factors on the transformation of economic processes. it is found that the inability of the ukrainian institutional system to ensure effective economic development demonstrates the institutional traps. negative manifestations of this system hinder the positive directions for the transformation of economic processes, modernisation of the economy, and competitiveness. it is justified that the transformation of management economic processes should be based on the implementation of the proposed system of principles, the use of which will identify and solve a set of problems of social development of the region, which meets the challenges of our time. to create an effective system of interaction between corporate and regional participants, it is necessary to link their goals, to harmonise them with the goals of socio-economic development of the region. this is where digitalisation can help. it is determined that in modern conditions, the problems of the digital sector affect the competitiveness of the economy, as the lag in obtaining and processing relevant data, the inability to use digital resources are accompanied by the loss of former market positions. from the standpoint of the theory of asymmetry of international trade, the digital dependence of one country on another leads to an increase in the gap in economic development between these countries. the rapid development of information and computer technologies and the active internet penetration into all spheres of human life have led to the transformation of economic processes according to the level of digitalisation. the development and dissemination of key technologies underlying the digital economy have a decisive impact on the transformation of globalisation: they directly affect the production of goods and services, human resources, investment in human and physical capital, foreign direct investment, international technology transfer, industrial innovation. in essence, all this directly affects the efficiency of production, performance, competitiveness, and economic growth – from individual market participants to countries, regions, and the world economy as a whole. key words: digital economy, digitalisation, economic processes, transformation, institutional factors. jel classification: a10, f55, o17 1. introduction ensuring balanced economic development based on systemic digitalisation is a priority for each country and the world community. nowadays, the digitalisation of the economy in the global economic environment is considered a priority model of global innovation development. institutional factors are particularly important in the conditions of transformation of economic processes on the basis of digitalisation. they form the fundamental parameters of the longterm functioning of economic systems. the study of the essence, principles of institutional transformations, identification of trends, contradictions, and factors influencing the formation of the institutional baltic journal of economic studies 103 vol. 7, no. 1, 2021 environment, is of key importance to transform the economic system on the basis of digitalisation successfully. we need a special methodology for studying economic processes in a digital economy, and new analytical tools for understanding reality, which are developed in the institutional theory. 2. institutional factors as a foundation for the transformation of economic processes on the basis of digitalisation along with material factors, institutionalists consider the spiritual, moral, legal, environmental, and other factors determined in the historical context to be the driving force of the economy. among the neo-institutionalists who have studied the process of development of institutions in line with the theme of this study, it is worth noting the works by d. north (douglass c. north, 2005), who is one of the first to identify the problem of the impact of institutions and institutional changes on economic growth and the functioning of the economy as a whole. institutional theory notes the importance of structural and institutional features of the real economy. along with the economic human (homo economicus), g. b. kleiner (kleiner, 2014) introduces the concept of institutional man in a purely economic sense, but as homo institutius. he notes that for an institutional human, material and financial resources play the role of constraints, and personal assessment of the situation – the role of a criterion, while for an economic human it is completely opposite. it is determined that the role of institutional factors in ensuring economic development is multifaceted as they affect its duration and quality. these factors can be divided into formal and informal. formal institutions are the legislative, judicial, and legal systems, including the specification and protection of property rights, public administration, education and science, market infrastructure: credit and financial, insurance, nonprofit, investment institutions etc. informal institutional factors include culture, traditions, standards of behaviour of economic entities, the system of basic economic values that determine relations in society, business practices, attitude to work and business, the degree of trust and honesty in society. we systematised the influence of formal and informal institutional factors on the transformation of economic processes (table 1 and table 2). institutional factors in the transformation of economic processes also include such phenomena as building a responsible state, the degree of development of the stock market, the stability of the tax system, reduction of investment, financial, economic risks, increasing the reliability of cooperation, low bureaucratisation, and corruption, etc. thus, as factors of economic development, the representatives of the institutional direction consider investments not in fixed capital, but in scientific discoveries, inventions, and innovations. the inability of the ukrainian institutional system to ensure effective economic development demonstrates the institutional traps. negative manifestations of this system hinder the positive directions for the transformation of economic processes, modernisation of the economy, and competitiveness. table 1 the influence of formal institutional factors on the transformation of economic processes formal factors economic processes judicial independence private property rights are more fully protected and conditions for intensive economic growth are provided building a responsible state, ensuring the effectiveness of public administration all the necessary conditions for economic growth are being formed improving legislation and the legal system the most effective source of long-term economic growth and effectiveness of socio-economic policy specification and protection of property rights, including enforcing contractual obligations positive impact on long-term economic growth, investment, and efficiency of financial markets effective corporate governance forming a system of effective property relations favourable business climate (environment) private capital inflow into the process industry and innovative production activities institutional conditions for attracting investments increasing the competitiveness of producers development of social and economic institutions, including scientific and educational systems the basis of long-term scientific and technological progress, growth of production culture, and labour productivity perfect market infrastructure (competitive market) favourable conditions for investment activities simplicity, transparency, progressiveness, and stability of the tax system increased tax collection; reduction in the share of the shadow economy development of financial markets, stable credible institutions, banking and credit system, the degree of development of the stock market affecting the rate of savings, the choice of technology, increasing the competitiveness of economic agents; expanding the scope of innovative activity of entrepreneurs, optimizing inflation baltic journal of economic studies 104 vol. 7, no. 1, 2021 3. transformation of economic processes in the conditions of digitalisation: regional dimension the transformation of economic processes in the regions should take into account the consistent formation of the foundations of the new ukrainian identity and economic culture, which synthesise modern and traditional national values, ideas, and orientations. specific results can be achieved only on the basis of the implementation of systemic principles and principles of harmonisation. accordingly, the transformation of management economic processes should be based on the implementation of the proposed system of principles, the use of which will identify and solve a set of problems of social development of the region, which meets the challenges of our time (figure 1). table 2 the influence of formal institutional factors on the transformation of economic processes informal factors influence on economic growth culture, traditions, standards of behaviour of the economic entities influence economic development through worldview, ideological and religious guidelines, as well as attitudes to work, business, property, law, legal culturenational economic mindset responsible attitude to work and business forms effective work motivation; increases social responsibility of the private sector of economy, enhances the entrepreneurial culture favourable institutional expectations strengthening investment activity degree of trust and honesty in society stable socio-political situation in society civilised behaviour of households high force of law, reduction of crime institute of business ethics strengthening economic and cooperative ties business practices elimination of oligarchic and other parasitic organisations market culture of officials intensifies entrepreneurial activity low corruption low business transaction costs, high level of tax collection low bureaucratisation there are no obstacles to entrepreneurial activity low poverty rate high level of domestic demand; income and consumption growth transformation of economic processes in the regions principles of digitalisation operation organisational construction information support principle of strategic importance principle of outcome principle of globalisation of system development systematicity principles principle of harmonisation principle of the process diversification of social impact principle of innovation principle of social partnership social responsibility principle cooperative principle principle of conformity principle of priority principle of social audit principles of openness and transparency objectivity principle principle of efficiency principle of feedback figure 1. transformation of economic processes in the regions baltic journal of economic studies 105 vol. 7, no. 1, 2021 the qualitative characteristics of the entire socioeconomic system of the region depend on the competent organisation of the process of transformation of economic processes. achieving the goals of socio-economic development in the regions is a complex process determined by the interaction of interests and resources of different groups of stakeholders. the main complexity of socio-economic management in the region is associated primarily with the different nature and scale of corporate participants in different sectors of the regional economy. the isolated actions of these participants cannot ensure comprehensive socio-economic development but often lead to the strengthening the regional disparities. to create an effective system of interaction between corporate and regional participants, it is necessary to link their goals, to harmonise them with the goals of socio-economic development of the region. this is where digitalisation can help. 4. digitalisation as an important direction of transformation of economic processes in the world’s leading countries, the annual investment in the digitalisation of the economy already amounts about one trillion usd a year. by 2020, the economies of the leading countries will spend on digitalisation almost 15 trillion usd (bukreev, 2018). the global digital economy is seen as a driving force for economic growth, capable of leading to significant economic changes and affecting the goals of the business, the labour market, and people’s way of life; it has significant potential for developing countries, for which such economic shifts can mean economic growth, increased productivity of capital and labour, reduce transaction costs and expand access to world markets (kovalenko, 2017). in modern conditions, various aspects of digitalisation of economic processes have been studied by: jonathan burston ( jonathan burston, 2010), nick dyer-witheford (nick dyer – witheford, 2010), alison hearn (alison hearn, 2010), christian fuchs (christian fuchs, 2014), trebor scholz (trebor scholz, 2012), sevignani (sevignani, 2013). it is determined that in modern conditions, the problems of the digital sector affect the competitiveness of the economy, as the lag in obtaining and processing relevant data, the inability to use digital resources are accompanied by the loss of former market positions. from the standpoint of the theory of asymmetry of international trade, the digital dependence of one country on another leads to an increase in the gap in economic development between these countries. the global digital economy provides companies with new business opportunities: – unimpeded access to the best suppliers, customers, workforce, financial resources, in whatever country they are located; – doing business “without borders”: real-time interaction with foreign clients and partners, supply chain management on a global scale, supporting the activities of foreign employees in conducting operations and customer service, instant cross-border operations in distant markets; – reduction of costs for transactions, marketing, interaction with customers in emerging markets; – organisation of virtual teams through the effective use of digital platforms interacting online; – transition of small businesses and startups to the category of transnational since its inception. the rapid development of information and computer technologies and the active internet penetration into all spheres of human life have led to the transformation of economic processes according to the level of digitalisation. digitalisation of the economy requires the development of new business models. network organisations based on collective methods of production and consumption transform traditional market relations and require the development of new solutions in the field of modern company management. the further development of digital technologies is important for the economy as a whole. currently, the share of retail trade on the internet accounts for about 10% of all transactions; in the future, their number will only increase (dzhulii, 2015). accordingly, digitalisation stimulates the growth of economic value in the field of data creation, transmission, processing, storage. if this kind of activity prevails over activity in the field of agriculture and industry in the economic sphere, then we can talk about the transition to a digital economy. in addition, in such conditions, the data themselves become the object of economic relations. specialised companies, research organisations provide services for the collection, analysis of data for the purposes of the customer; accordingly, such data have a certain value. 5. conclusions the development and dissemination of key technologies underlying the digital economy have a decisive impact on the transformation of globalisation: they directly affect the production of goods and services, human resources, investment in human and physical capital, foreign direct investment, international technology transfer, industrial innovation. in essence, all this directly affects the efficiency of production, performance, competitiveness, and economic growth – from individual market participants to countries, regions, and the world economy as a whole. in the context of ukraine, the presence of many unresolved political and legal issues, outdated economic processes associated with the rapid development of information and communication with baltic journal of economic studies 106 vol. 7, no. 1, 2021 the advent of digital technologies, has become a sign of danger. expansion of digital service, individualisation of many types of services have increased the threat of fraud by a wide range of users or providers to a critical level; the risks of information leakage require constant state’s attention to increase the level of protection of electronic systems. accordingly, strategies for the implementation of certain digital technologies should be developed taking into account the needs of the development of the regulatory framework for their implementation and operation, as this includes the processes caused by digitalisation. references: north, douglass c. (2005). understanding the process of economic change. princeton: princeton university press. kleiner, g. b. (2014). the rhythms of evolutionary economics. voprosy ekonomiki, vol. 4, pp. 123–136. bukreev, v. v. (2018). is digitalisation a panacea for the russian economy? voprosy politicheskoi ekonomii, іssue 4. moscow: kulturnaia revoliutciia. kovalenko, b. b., & kovalenko, о. h. (2017). digital globalisation: opportunities and risks of strategic development of business organisations. hlobalnyi naukovyi potentsial, vol. 10(79), pp. 140–142. burston jonathan, nick dyer-witheford and alison hearn, eds. (2010). digital labour: workers, authors, citizens. ephemera: theory & politics in organization, vol. 10(3). scholz t., ed. (2012). digital labour. the internet as playground and factory. new york: routledge. fuchs, c. (2014). theorising and analysing digital labour: from global value chains to modes of production. the political economy of communication, т. 1, no. 2. fuchs, c., & sevignani, s. (2013). what is digital labour? what is digital work? what’s their difference? and why do these questions matter for understanding social media? triplec: communication, capitalism & critique. open access journal for a global sustainable information society, т. 11, no. 2, рр. 237–293. dzhulii, l. v., & emchuk, l. v. (2015). information systems and their role in the activities of modern enterprises. perspective economic and management issues collection of scientific articles. scientific journal “economics and finance”, “east west” association for advanced studies and higher education. baltic journal of economic studies 114 vol. 2, no. 1, 2016 corresponding author: 1 department of accounting, uzhgorod trade and economic institute of kyiv national trade and economic university. e-mail: cenkler.knteu@gmail.com spatial development of the carpathian region in the contex of european integration processes natalya tsenkler1, uzhgorod trade and economic institute of kyiv national trade and economic university, ukraine abstract. the purpose of this publication is valuation of theoretical subsoil and prospective of spatial development of the carpathian region in the context of deepening of european integration processes. methodology. the monographic method, comparison, analysis and synthesis, mapping method were used in the study. results. the theoretical bases and ways of spatial development of the carpathian region in the context of european integration processes are discussed in the article. it is determined that the modern spatial development of regions and countries is not possible without the appearing and operation of innovative structures. the role of transport routes in ensuring the sustainable economic development of district of the carpathian region is considered, and a theory of transport corridors as a factor of economic development of the carpathian region is proposed. the appropriate schematic map is elaborated, on the basis of which peripheral territories (sectors), which are situated outside the influence of the main traffic arteries, are singled out. taking into consideration location and the specific socio-economic development of appropriate sectors, differentiated tasks are elaborated, which should be priority in the strategies of social and economic growth of appropriate district in terms of european integration processes intensification. in the article there is suggested to realize modelling strategic directions of the carpathian region economy development by different scenarios that anticipate different directions and action intensity of specific groups of factors, on the grounds of summary generalization of statistical analysis methods and results of thorough investigation of economy development processes of the carpathian region in the context of european integration of ukraine under conditions of instability of external environment factors. practical implications. the results can be used in the development of strategic plans for development of the carpathian region, as well as infrastructure development with a focus on the draft spatial innovation network of transcarpathian oblast. value/originality. taking into account stated view of scenarios of the carpathian region economy development under conditions of european processes intensification, the grounding of separate statements of economy development strategy of the region and specific mechanisms of solving the urgent problems of its economic growth is considered. key words: carpathian region, european integration, innovation network, spatial development, innovation infrastructure. jel classification: r11, r58, f15, o32, o18 1. introduction the category of economic development of the region is treated enough in domestic science as well as in foreign one no longer includes all the aspects of operating of regional social systems in present-day conditions. moreover, the theories of social geography and regional economy, which enlighten the problem of space in economic activity somewhat one-sided, are often clashing and incompatible. considering it, there arise not only indispensability to solve applied decisions of spatial disposal of economic agents, but also a need of grounding the theoretical and methodological principles of spatial development of economics of the region, in economic science. the following domestic scientists investigated the problem of development of economics of oblasts of the carpathian region in the context of european integration processes: y. holovach, м. dolishniy, f. zablotskyi, y. kish, n. mikula, м. lendyel, v. khymynets etc. yet problem of spatial development in the carpathian region in the context of deepening of european integration processes is faintly enlightened in the domestic scientific literature. 2. spatial development spatial development (according to і. minyaylenko, 2013) is a form of coordination of dynamic process of quantitative and qualitative changes of any phenomena (region, economy of region, social-economic system), which takes into consideration connections of all components. as a baltic journal of economic studies 115 vol. 2, no. 1, 2016 result, development acquires a new qualitative condition in a form of some correlation of elements that insures synergetic effect. spatial development cannot be reduced to any quantitative changes or economic growth. its content as a category is determined also by totality of factors, which have influence on life quality: life duration, condition of environment, condition of public health, purchase ability of population, quality of housing conditions, level of economic and political stability etc. it is no wonder that spatial development in many respects is tightly connected to innovative development, which has immediate influence on level of production, technologies, education, medicine, quality of life of population, environment condition. spatial development in our understanding is optimal combination of all components of region development (social, economic, cultural and ecological) with creation of new special structures that combine social, as well as natural components. in such interpretation, spatial development is an attempt to integrate conceptions of economic development of the region in its all-embracing meaning and conception of territorial society organization into one-entity. in other words, spatial development is spatial and time category, and includes dynamic and structural, as well as spatial components. an optimal example of realization the conception of spatial development in regions is creation of economic clusters in wide understanding. it is worth to notice a category “development” in general, as well as a category “spatial development”, can be characterized by different trends. thus, one can speak about progressive and regressive spatial development. it is obviously that transformation of economics of the region in the context of activation of european integration processes requires properly progressive spatial development of economics of the region. extension of circle of factors that are taken into consideration, removal of centre of gravity from the general territorial problems to the regional level, more complete consideration of regional peculiarities and interests of population and also multi-criteria approach to evaluation of rationality of regions economy development should be emphasized among the most important directions of methodology evolution of current regional investigations. in connection with this, revision and change of theoretical and methodological principles of regional economic development takes place. this process and its result are less and less connected with concept “territory”. instead of it, attention of scientists is attracted by more capacious category “space”. spatial aspect of analysis of economic development is the most complete reflection of reality, assists deepening of knowledge on cooperation of objects, their spatial and temporal connections (olshanska, 2011) furthermore, it should be pointed out that level and quality of life of population is determined not only by economic sphere, but also by possibility of national culture development, ecological safety degree, freedom of choice between some kinds of activity and preservation of traditional way of life. owning to it, criteria of selection of regional social and economic systems also change. the most important among them are the following ones: increase of life level, degree of social welfare of population and other social criteria that not always have economic character; economic effect value for present regional system that can be expressed in a form of growth of labour and intellectual potential; degree of ecological safety and preservation of anthropological and natural balance of ecosystems (olshanska, 2011). 3. spatial structure of economic of the carpathian region spatial structure of economic of the carpathian region is characterized by substantial disproportions, which are even more expressed than in branch dimension. such differences in the territorial allocation of economic activity in the region are mainly stipulated by natural and geographic premises, and by system of settling that was formed historically. mentioned problem was analysed in detail in a line of investigations of domestic scientists. however, in new economic conditions the most prospective and significant component of the territorial structure of economic of the region is its spatial clustering. it consists in creation and functioning of specific functional and spatial forms of economic activity organization in a shape of innovative clusters. from the point of view of crossborder cooperation and european integration processes the problem of creation of cross-border innovative clusters is worthy of special attention. as i. peleschak (2008) indicates, cross-border clusters create cooperation of neighbouring frontier territories of neighbouring countries. that is, availability of common border of countries between frontier territories of neighbouring countries that cooperate is determinant. they are based on using competitive advantages of neighbouring countries territories, which participants of cluster belong to. in this context, we can also offer principle of equal weighting of cross-border development, which consists in convergence of regional social systems of neighbouring countries and is the main premise of intensification of integration processes on the intergovernmental level. undoubtedly, mentioned principle contradicts the quite broadcast paradigm of international economic integration, which consists in neglect of regional aspects and is based on centralized decisions of state authority bodies. however, in the context of present tendencies of development of social-political and economic system of ukraine, in particular, actualization of processes of decentralization of regional development, properly principle of equal weight of cross-border development, suggested by us, can be laid down in base of intensification of european integration processes in our country. as it is known, since the end of хх century ideas of “green economics” were spread in economic science – ascending baltic journal of economic studies 116 vol. 2, no. 1, 2016 economic development of society without changes of surroundings with application of “remedial technologies” of energy as well as raw materials. promising direction of development of these ideas is “blue economics”, which foresees that logic of development of natural ecosystems, their complementarity and balance that goes beyond endurance of ordinary preservation of resources, should be laid in base of economic growth (gunter pauli, 2012). natural systems work under the principle of total transformation of raw material resources from one kind to another, which lets implement stable production that is higher degree of functioning. in concentrated form, essence of blue economics consists in consideration of integral ecological and economic effect under results evaluation of all kinds of economic activity. integral ecologicallyeconomic effect is a non-linear sum of two different by nature effects – traditional economic and ecological. an important aspect of blue economy is priority of preventive measures concerning negative influence of manufacturing economic activity on environment. implementation of cluster development model into economy of mountain territories of the carpathian region is considered an important example of efficient use of blue economy ideas. as v. khymynets (2013) thinks, this region should be represented for investors as a region attractive for placing of manufactures with great deal to environment cleanness, availability of appropriate infrastructure and highly qualified labour resources. there are all the preconditions for clusters appearance in district of the carpathian region. their creation does not require large-scale financial expenditures from the state, but lays in the plane of good combination of sustainable development conception, adequate legislative support and efficient administrative decisions. it is worth also to consider an influence of settling system of the carpathian region on development of its economy in the light of european integration processes activation. to our point of view, under the present conditions traditional opinions on principles of productive forces placement and their role in economic development of territories gradually lose their actuality. in the reason of the space traditional role as a place, where sources and subjects of economic activity are disposed, and as its weighty factor, under conditions of computer and network technologies expansion, and innovative development activation becomes out-of-date. 4. spatial model of economic development of oblasts of the carpathian region in the context of european integration considering it, we can compare properly two approaches to spatial development on the example of the carpathian region – traditional and modern one. traditional approach pays attention to the importance of manufacturing resources disposition and goods consumers and services for projection of manufactures and other forms of territorial organization of economy. it is worth to notice that according to this approach innovative development of territories is still planning. for example, there is planning creation of network of woodworking clusters on the mountain-afforested territories of the carpathian region. in such way, combination of traditional resource approach in regional economy with modern forms of spatial development takes place. this turns out in processes of economic clusterization. from our point of view, a modern approach makes accent on disposition of intellectual resources inside the region, and the role of natural factors and space, on condition of information network availability, becomes secondary. available technologic resources let organize scientific manufactures not only on the base of large industrial centres, but also in relatively peripheral regions, including mountain ones, where innovative scientific and technical activity can be successfully combined with recreation and tourism. moreover, just favourable ecologic conditions and reach natural resources, on condition of developed infrastructure availability, can secure optimal working and resting conditions, for example, experts in іт-technologies, for professional activity of which they do not need special facilities and bulky equipment. right intellectualization of economic activity on peripheral from standpoint of traditional approach territories, is, from our point of view, perspective approach in transformation of the carpathian region economy accounting foreign experience, in particular european one. from our point of view, taking into consideration the results of analysis of external economic activity of the carpathian region and its demo-social potential, it is reasonable to elaborate a model, which should account potential of separate district of the carpathian region, as well as their direction on activation of international integration processes. accounting configuration in space of the carpathian region, optimal version of structure of such spatial model can be sector approach, which was in particular applied by u. pavlyuk (2013), for analysis of ecologic security of lviv. constructed model illustrates simultaneously three indices – gross regional product (filling intensity), demographic potential, i.e. population quantity of region (width of appropriate sector) and coefficient of economy openness, calculated by us in the previous section (radius of each sector). received model let evaluate potential of each district of the carpathian region concerning its possible participation in european integration processes. as we can see, despite of substantial differences of gross regional product indices and demographic potential, exactly transcarpathian district makes significant contribution to european integration perspectives of the carpathian region. the most unfavourable, in comparison with the others, is situation in chernivetska district, european integration potential of which requires further development (scheme 1). baltic journal of economic studies 117 vol. 2, no. 1, 2016 lvivska oblast the carpathian region transcarpathian oblast ivano-frankivska oblast chernivetska oblast scheme 1. spatial model of economic development of oblasts of the carpathian region in the context of european integration elaborated by authoress however, from our point of view, it is worth to observe spatial development of the carpathian region not only in international economic aspect, as far as adjustment of tight and efficient relations with neighbouring regions of ukraine is also indispensable component of economy transformation of investigated region as an important component of economic system of the state. especially perspective, from our point of view, are relations with volyn district, which is frontier region with eu and adjusts tight economic relations with neighbouring territories of republic of poland. it is worth to mention in this context also ternopilsk district, which in historical and cultural sense together with lviv and ivano-frankivsk district belongs to halychyna, thus it has important historical, cultural and social relations with mentioned regions of ukraine. despite of some levelling of role of space in economic development of regions, at the present stage importance of transport infrastructure still remains quite great. the main reason of this is necessity of goods and people transfer within space, which in contrast to information transfer requires use of some kinds of transport and ways of connection. properly development of transport infrastructure of the carpathian region, as experts indicate, is one of its weak sides in the context of international integration processes. on one hand, important international highways and railways pass through the territory of the region international airport of world level is operating in lviv. on the other hand – transport ways of nationwide, regional and local importance are in improper condition and practically cannot be used efficiently under conditions of economic development of the region activation. certainly, for the last decades, the situation with development of transport infrastructure of regions considerably improved, but mainly certain improvements in this direction were connected only with conducting the european football championship in the year 2012. as far as football matches were conducted in lviv, then, first of all, development of transport infrastructure began to improve dynamically in the regional centre of lviv district. in addition, some positive changes envelope traffic arteries of international importance, including aviation ones. at the same time, the greater part of the territory of the carpathian region, especially mountain one, is secured by transport ways of proper quality on unsatisfactory level. it is obviously that solving of this problem by traditional methods is impossible and efficient state financing of appropriate programs on the present stage of ukrainian economy development also does not appear a real way of this problem solving. there exist expectations that processes of decentralization, which initiate on the regional and local level in ukraine since the year 2015, can become a perspective way of solving the problem of transport infrastructure development in the regions of the country. having observed in detail the role of transport ways in providing with stable economic development of the carpathian region, we can note that accounting specific natural conditions and resources, development of transport here largely determines possibilities of socialeconomic growth of separate territories. thus, we can offer and prove the theory of transport corridors as a factor of economy development of the carpathian region. having indicated the main traffic arteries that pass through the territory of the carpathian region on the schematic map, in particular road of international importance kyiv-chop, and having drawn conventional transport corridors, which narrow in mountain locality, we can clearly notice peripheral territories or sectors, which are disposed out of the main traffic arteries influence (scheme 2). having analysed the indices of social-economic development of district of the carpathian region and their internal differentiation, we can notice essential correlation between depression of economic development of territories and their distance from the main traffic arteries. having singled out peripheral territories to appropriate sectors, taking into consideration their disposition and specific character of social-economic development of proper regions, possibility of differentiated tasks elaboration appears, which must be priority in the strategies of social-economic growth of appropriate regions from position of european integration processes activation (table 1). despite of perspective importance of peripheral territories, nevertheless, the main driving forces of economy of the region transformation in the context of european integration processes activation are the large cities. high economic and intellectual potential is baltic journal of economic studies 118 vol. 2, no. 1, 2016 concentrated exactly in the large cities of the region. it lets not only plan but also implement the main directions of economic activity transformation in the region, taking into consideration european examples. afterwards, from our point of view, one of perspective directions of european integration processes intensification in the carpathian region may be projecting of not only european regions, but also “european cities”. by analogy with european region, european city can also be considered as organizing legally consolidated form of cross-border regional cooperation between territorial communities and/or state authority bodies of frontier regions of several countries with common boundary. at the same time, from our point of view, legal consolidation of european cities as a form of international cooperation at present stage is not obligatory. their interpretation as intensification poles of european integration processes on the regional level and inclusion into regional strategy of development in such role seems more expedient. in addition, in contrast to conception of european regions, european cities occupy small territory that is characterized by considerable similarity of population, as well as of economic potential. european cities administration is also considerably easier process, taking into consideration their compactness. table 1 priority tasks of spatial development of peripheral territories of the carpathian region sectors (subsections) oblasts priority tasks sector 1 ivano-frankivska, thranscarpathian, chernivetska, lvivska development of transport and tourist infrastructure; creation of international recreational clusters; subsection 1а transcarpathian development of frontier infrastructure; creation of cross-border clusters with neighbouring regions of hungary; sector 2 lvivska development of transport and tourist infrastructure; intensification of cross-border cooperation with neighbouring regions of poland; sector 3 lvivska creation of cross-border clusters on the base of small towns; development of frontier infrastructure; sector 4 lvivska development of transport infrastructure; increase of life quality of population; sector 5 chernivetska development of frontier infrastructure; creation of recreational clusters. elaborated by authoress scheme 2. spatial structure of the carpathian region perspective development according to the theory of transport corridors elaborated by authoress lviv uzhgorod ivano-frankivsk chernivtsi conventional signs directions of system forming transport traffic arteries of different importance conventional boundaries of peripheral sectors numbers of peripheral sectors numbers of peripheral subsections baltic journal of economic studies 119 vol. 2, no. 1, 2016 at the same time, sustainable difference of the european city is absence for the most part common border with neighbouring countries of eu. although, there is no doubt that taking into consideration geographical closeness of the carpathian region to eu and developed enough international transport relations, absence of direct spatial contact of the cities of the region with eu countries does not seem development factor of special importance. at the same time, on the city level intercultural relations and interpersonal interaction are highly active. from our point of view, all this together with crossing of intensive traffic streams causes progressive influence of the european cities on european integration processes activation within the carpathian region. pertinent to the european city conception can be concept of urban-cluster, which is treated, in particular by g. komarnytska (2013) as “territorial combination of settling forms and kinds of economic activity that is a source of extension of range of social innovations, including specific urban way of life, and a generator of growth of the modern city agglomerations”. one of the real examples of the european city in the carpathian region is lviv. just conducting of matches of final part of the football championship of europe in lviv in the year 2012 and increase of tourist streams in the next years assured transfer of the city to new level of socialeconomic development, its approaching to the proper european examples. just after the year 2012 european standards in the sphere of urban construction, municipal utilities, transport etc. are actively implemented within the city. in other words, all the spheres of city administration that are in competence of local authorities suffer active reforming. it is no wonder that in the year 2015 lviv became the second city of ukraine, in which after kyiv new police was introduced. as we can see, nationwide conception of creation of economy growth poles, taking into consideration the fact that a range of economic centres has a lot of aspects and are multifunctional, despite of war actions and terrorist menaces, is in progress successfully and rapidly enough. however, from our point of view, one city on the example of lviv within the carpathian region is not enough. undoubtedly, the most perspective in the context of transformation to the european city in our understanding is uzhgorod, which taking into account close disposition to the borders of european union, availability of close traditional cross-border relations, can acquire appropriate significance already in the nearest future. similar situation is typical for chernivtsi too. somewhat more problematic is creation of the european city on the base of ivanofrankivsk. we cannot also pass by small towns of the region in this context, which can also be perspective as the poles of economic growth in the context of european processes intensification. undoubtedly, towns in borderland are worth of attention. from the view of spatial development of the region, they are considered peripheral ones in general; however, in the context of european integration they acquire special significance. there are some projects of frontier towns development and transformation of border infrastructure in the region, yet it is still too early to talk on their successfulness. it is obviously that together with real introduction of decentralization in the sphere of regional administration and local self-government the processes of frontier towns and surrounding territories development suffer some intensification concerning spreading of the european integration processes in the region. 5. conclusions thus, spatial development of the carpathian region in the context of the european integration processes should be based on all-around evaluation of economic potential and development of its main possibilities in social and economic, transport and international spheres. taking into consideration location and specific of social and economic development of appropriate sectors, differentiated tasks should be elaborated, which should be priority in the strategies of social and economic growth of appropriate district in terms of european integration processes intensification. references minyaylenko, i.v. (2013). spatial development of the region: evolution of modern concepts concerning the essential of category. effective economy. no. 11. retrieved from: http://www.economy.nayka.com.ua/ ?op=1&z=2518 olshanska, o.v. (2011). region as spatial socio-economic system. urgent problems of economy. no.117. retrieved from: http://ir.kneu.edu.ua:8080/bitstream/2010/3731/1 peleschak, i. (2008). cross-border clusters and cross-border associations as a form of cross-border cooperation. heralds of lviv university. series “international relations”. no.25. : 295-230. gunter pauli, (2012). blue economy. 10 years, 100 innovations, 100 million working positions. report of roman club. edition “risk reduction foundation”: 320. khymynets, v.v. (2013). institutional principles of constant development of the carpathian region in the context of blue economy. constant development of economy. no. 3. : 161-165. pavlyuk, u.v. (2013). socio-economic principles of ecological security of large cities population: author’s abstract from thesis of candidate of economic science: 10-21. komarnytska, g.o. (2013). urban-clusters as an innovative structures of urban processes regulation in the region . marketing and management of innovations. no. 1. : 247-253. baltic journal of economic studies 120 vol. 2, no. 1, 2016 наталия ценклер пространственное развитие карпатского региона в контексте евро интеграционных процессов аннотация. целью данной публикации является оценка теоретической почвы и перспектив пространственного развития карпатского региона в контексте углубления евроинтеграционных процессов. методика. при исследовании использованы монографический метод, методы сравнения, анализа и синтеза, картографический метод. результаты. в статье рассматривается теоретические основы и пути пространственного развития карпатского региона в контексте евроинтеграционных процессов. определено, что современный пространственное развитие регионов и государств невозможно без возникновения и функционирования инновационных структур. подробно рассмотрена роль транспортных путей в обеспечении стабильного экономического развития областей карпатского региона, и предложена теория транспортных коридоров как фактора развития экономики карпатского региона. разработана соответствующая картосхему, на основе которой выделено периферийные территории (сектора), которые расположены за пределами влияния основных транспортных магистралей. с учетом расположения и специфики социально-экономического развития соответствующих секторов, разработаны дифференцированные задачи, которые должны быть приоритетными в стратегиях социально-экономического роста соответствующих областей с точки зрения активизации евроинтеграционных процессов. практическое значение. результаты исследования могут быть использованы при разработке стратегических планов развития карпатского региона, а также развития инфраструктуры с ориентацией на проект пространственной инновационной сети закарпатской области. значение/оригинальность. с учетом изложенного виденья сценариев развития экономики карпатского региона в условиях активизации евроинтеграционных процессов, рассмотрено обоснование отдельных положений стратегии развития экономики региона и конкретных механизмов решения актуальных проблем его экономического роста. baltic journal of economic studies 47 vol. 5, no. 5, 2019 corresponding author: 1 black sea research institute of economy and innovation, ukraine. e-mail: k.v.mozharovska@gmail.com 2 black sea research institute of economy and innovation, ukraine. orcid: https://orcid.org/0000-0002-3386-5962 e-mail: lightstarpro@ukr.net 3 admiral makarov national university of shipbuilding, ukraine. e-mail: dubinskiy_oleg@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-5-47-53 theoretical and applied aspects of comprehending a new constitutional doctrine in ukraine kateryna holovko1, svitlana levchenko2, oleg dubinskiy3 abstract. the article is devoted to the research of the nature and essence of some aspects of the new constitutional doctrine in ukraine. attention is paid to the basic constitutional and legal concepts actualized at the present stage of development of ukraine as a democratic, legal, social state and building a civil society in it. emphasis is placed on the issue of constitutional changes in ukraine that have taken place over the last decades, both in the form of modernization and reform. the author concludes that qualitative and substantial upgrading of the theoretical and methodological base should be an integral part of constitutional and legal reform. the positions of the leading constitutionalist scientists on the essence of the category of "constitutional and legal doctrine" are analyzed, the significance of the dualism of approaches to its definition and peculiarities of influence on the rulemaking processes and enforcement are revealed. in addition, the importance of not only the process of forming a modern doctrine of constitutional law, the clear definition of basic concepts and general problems that operate and exploring the constitutional law of ukraine as a science and as a leading branch of national law, but also the process of renewal the categorical apparatus, the introduction of the legal circulation of new categories capable of creating a more solid scientific basis for constitutional law, is proved. the subject of the research is the theoretical and applied aspects of comprehending the latest constitutional doctrine in ukraine. the purpose is a study of the nature and essence of transformational changes in the constitutional and legal doctrine of ukraine in view of the transformation processes in society at the present stage. the methodological basis of the research is a set of methods and techniques of scientific knowledge. the methodological construction is based on a systematic analysis that determined its directions. the systematic approach in some issues was supplemented by an axiological (ideological) approach. in order to identify trends, patterns and features of the development of constitutional law as a branch of law in the system of national law of ukraine such empirical methods as observation, description, comparison and inductive generalization were used. logical and semantic method was used for formulation and in-depth study of the conceptual apparatus. the dialectical cognition method allowed us to explore the problems associated with the definition of particular theoretical constructs, basic concepts and categories used in the ukrainian constitutional and legal doctrine. the application of methods of modeling, analysis, synthesis, generalization and analogy made it possible to formulate the conclusions of the research. the conclusions of the research is that the author found that the content of the constitutional reform cannot be reduced to the problems of renewal of the constitution as a normative legal act or its separate provisions, because its implementation goes beyond the procedural issues and tasks of the legal technique. at the same time, an essential component a qualitative and substantial renewal of the categorical and terminological apparatus of the branch of constitutional law should be part and parcel of the constitutional and legal reform of ukraine. special attention also needs to be paid to scientific and analytical monitoring of the state of the introduced changes and forecasting of the socio-political and legal consequences of the transformations, which will allow to expeditiously identify and correct possible mistakes, as well as to make recommendations on further perspectives of the development of the constitutional and legal branch. the practical implications. the results of the research will help to better understand the basic aspects of the latest constitutional doctrine in ukraine and can be used in the research branch to further study the issue of transformational changes in the constitutional and legal branch. key words: doctrine, constitutional doctrine, constitutional reform, constitutional law of ukraine, constitutionality, constitutionalization, constitutionalism, constitution. jel classification: к15, к19, к38 baltic journal of economic studies 48 vol. 5, no. 5, 2019 1. introduction on the way towards development of civil society in ukraine and the corresponding democratic, social, ruleof-law state, the problem of doctrinal justification and theoretical rethinking of some fundamental provisions by the constitutional law takes new features. the constitutional transformations in ukraine, which have taken place over the last decades both in the form of modernization and reform with the main purpose to shape the system of modern ukrainian constitutionalism, do not always objectively lead to an innovative transformation into new realities. this is explained by the fact that society and the expert community in ukraine treat constitutionalism rather with restraint (because not everyone can dully understand the modern ukrainian constitutionalism, although it has become more or less an idealistic doctrine), but the state still suffers from a systemic unsoundness of self-actions, a bureaucracy management, stable paternalism. at the same time, value of the constitutionalism as the most perfect form of implementation of the rule of law, the level of formation of its framework and paradigm require fundamental understanding of the specifics of a wide range of social relations, development of the foundation for qualitative changes and transformations, which are planned to be implemented in key areas of the national life, integrated efforts of the scientists society that will help to develop the advanced axioms and constitutional imperatives for ukraine, to overcome obstacles and risks in the national legal ideology and to accelarate and to simplify the basic state-forming processes effectively. it should also be emphasized that, given the fundamentality (with respect to other branches) of constitutional law, which is possible to call the core of the national legal system and its constituent component (skrypniuk, 2009), the development and essence of the system of other branches of public and private law in ukraine depend directly on the qualities of constitutional law as a leading branch of national law. therefore, the urgency of the conceptual renewal of the modern paradigm of the doctrinal interpretation of the constitutional law and constitutional regulation essence, the role that they must play in modern state-forming conditions and in the process of ensuring the interaction of the state and civil society, always requires a deep understanding and forecasting of social and political consequences of the transformations performed. at the same time, despite the fact that a multiple pleiad of the leading ukrainian scientists was engaged in researching the nature and essence of transformational changes in the constitutional and legal doctrine of ukraine in the conditions of reforming, among which there are: m.o. baimuratov, yu.g. barabash, o.v. batanov, d.m. bielov, p.o. dobrodumov, s.s. kvach, s.v. kivalov, a.m. kolodii, l.t. kryvenko, a.r . krusian, l.i. letnianchyn, o.v. martseliak, m.p. orzikh, n.m. parkhomenko, o.v. petryshyn, v.f. pohorilko, a.o. selivanov, v.l. fedorenko, o.f. frytskyi, v.m. shapoval, yu.s. shemshuchenko and others; at the present stage many issues related to certain aspects of the newest constitutional doctrine in ukraine have a high level of scientific novelty. that is why the relevance of the question regarding the theoretical and applied aspects of comprehending the newest constitutional and legal doctrine in ukraine, the theoretical and practical significance of the chosen topic are not in doubt. the purpose of the article is a study of the nature and essence of transformational changes in the constitutional and legal doctrine of ukraine in view of the transformation processes in society at the present stage. methodological basis of the research is a set of methods and techniques of scientific knowledge. the methodological construction is based on a systemic analysis that determined its directions. the systemic approach in some issues was supplemented by the axiological (ideological) approach. in order to identify trends, patterns and features of the development of constitutional law as a branch of law in the system of national law of ukraine such empirical methods as observation, description, comparison and inductive generalization were used. logical-semantic method was used for formulation and in-depth study of the conceptual apparatus. the dialectical cognition method allowed us to explore the problems associated with the definition of particular theoretical constructs, basic concepts and categories used in the ukrainian constitutional and legal doctrine. the application of methods of modeling, analysis, synthesis, generalization and analogy made it possible to formulate the conclusions of the research. 2. the concept of constitutional doctrine it is significant that the constitutional law in modern legal science is considered in several aspects: as a branch of law in the system of national law, as a science and an educational discipline. however, as a branch of the national legal system, the constitutional law is a leading (fundamental) branch, which is important both for the national legal system and for the legal system of ukraine as a whole, which is preconditioned by the high mission of affirming and guaranteeing the statehood of the ukrainian people, territorial integrity, human freedom and rights. this branch involves a set of legal norms that are sanctioned, defined and guaranteed by the state and which regulates the most important social relations connected with the organization of state power (relationship of power) and the basics of the relationship between the individual and the state (fedorenko, 2009; fedorenko, 2017; krusian, 2010). at the same time, the constitutional law differs from other branches of law, first of all, by the specifics of the sphere of public relations, which are regulated under its norms: baltic journal of economic studies 49 vol. 5, no. 5, 2019 1) the democratic foundations of the constitutional order; 2) the democratic status of the person and the citizen; 3) the democratic principles of the exercise of power (slinko, dakhova, letnianchyn, 2019). this allows to assert with confidence that the noted branch undoubtedly holds a special and unique place among the fundamental branches of the domestic law. given the fundamentality (with respect to other branches) of constitutional law, which is the core of the national legal system and its constituent component, it is necessary to consider the exceptional importance and value of the national constitutional law doctrine; through reflecting the practical orientation of fundamental scientific research, it can be the starting point of a constructive consolidation of the efforts of scientists, politicians, statesmen to strengthen the constitutional order, which will fully meet the interests of the individual and the state as a whole (nelin, 2015). thus, pointing to the objective nature and determination of the transformation of the constitutional and legal doctrine, its close connection with the permanently ongoing constitutional process (shemshuchenko, 2012), the other reasons that influence the rethinking of the current national doctrine of the constitutional law should be remembered. that is why we support the position of experts who argue that the change in the constitutional doctrine of modern ukraine should be considered in its own methodological aspect in at least two dimensions: a) as a change in the theoretical and methodological background of scientific understanding of the essence of the constitutional law and the subject of the constitutional and legal regulation of a process that should embody the most important values of the modern world constitutionalism; b) as a change of the constitutional organization and functioning of the ukrainian state, which should find new forms of interaction with civil society and provide those fundamental constitutional principles that make the state democratic, legal and social (shemshuchenko, skrypniuk, yushchyk, antonov, kostetska, kuian, murashyn, surzhynskyi, 2014). at the same time, scientists express different views on the interpretation of the concept of the "constitutional doctrine". for example, n.a. bohdanova justifies the attitude that doctrine is the particular theoretical entity in the system of science of the constitutional law. at the same time, according to the author, the nature of the logical generalization of constitutional and legal knowledge, semantic content and form, the doctrine is equal to the principles, theories, and concepts. it seems that each of these theoretical constructs can take on the properties of the doctrine, but the doctrine must bear additional strain in the science of the constitutional law and be specifically related to practice. the purpose of the doctrine is the affirmation, the imposition of ideas that make up its content with a view to their application in practice. therefore, the doctrine is always more categorical and, under certain circumstances, more conservative than principle or theory, and is more or less dogmatic in nature (2001). it seems that the proposed definition of the "constitutional doctrine" is not fully correspondent to the state-of-the-art development of jurisprudence and the methodology of constitutional science, and is too narrowed and does not clarify the content of the category of interest. a slightly different approach to interpreting the concept of the "constitutional doctrine" is in the works of t.m. priakhina, who argues that the constitutional doctrine is a specifically formalized system of fundamental views on the essence, social purpose, legal nature, matter, internal and external forms of the basic law; it is a set of theories and concepts that determine the strategic perspectives of the constitutional development of the state, the place and role of the constitution in the state, social and legal systems that set the constitutional standards of the relationship between the individual, society and the state. at the same time, the external forms of its expression, consolidation, which directly influences the degree of binding of its provisions are important for the constitutional and legal doctrine. it is one thing when the doctrine as an idea or a set of ideas is not embodied in legal regulations, and it is different when it is clearly enshrined at the constitutional level and determines the orientation of the legal system of the state. such an idea is of the normative, binding nature (2002). a similar position is supported by a.o. selivanov, who says that the doctrine is a thoroughly authoritative scientific research, which is treated by a legislator as a public value and is performed as the legislative form when defining. therefore, the doctrine identifies the conceptual framework of the development of legislation, formulates scientifically sound ideas about state-legal phenomena and processes, which, if defined by the legal community and professional community, are the basis for the development of relevant drafts. the latter, if passed by a legislator, institutionalize the new legal institutions, giving them a legal form (2009). often enough the constitutional and legal doctrine is considered as a set of philosophical and legal ideas of conceptual level, embodied in the constitution and other legislative acts that determine the tendency of development of the state and society, the national legal system. but this does not deny its interpretation as a set of ideas about the role of the constitutional law set out in the scientific works of constitutionalist scientists, which are essential for the development of the theory and practice of constitutionalism, constitutional reform of society. therefore, according to the scientists, the doctrines in the constitutional law can be attributed not only to the views of the constitutionalist scientists and their scientific works, but also to the fundamental conceptual ideas embodied in the constitution and other legislative acts (todyka, 2000). baltic journal of economic studies 50 vol. 5, no. 5, 2019 in turn, the concept of the "constitutional doctrine" has two meanings. according to the first of these, the "doctrine" can be understood as a set of concepts and theories formulated by jurists. the second one concerns the official constitutional doctrine formulated by the body exercising constitutional control. in this case, the concept of "official" implies that this type of the constitutional doctrine provides the final and binding interpretation of the constitutional norms, while other interpretations, even made by the most authoritative scientists, contain only the ideas of law, not the law itself. it should be noted that the official constitutional doctrine does not arise in a vacuum, it combines the academic legal doctrine with the legal content of the constitution. therefore, the official constitutional doctrine can be defined as the result of a series of interpretations of constitutional provisions carried out by the competent authority and based on the academic legal doctrine (zhalimas, 2017). moreover, there is good justification in the legal literature that the legal doctrines should be distinguished by the degree of their detalization in legislative provisions. thus, the established doctrines formulated by well-known scientific schools (scientists), recognized and developed by the international and national judicial institutions (for example, the doctrine of the rule of law, of a democratic state), are capable to perform a regulatory function by virtue of the fact of their recognition by the state (through consolidation in the constitution, legislative acts, sanctioning by judicial practice). however, the doctrines that are fundamentally new to a particular legal system of legal institutions, which contain both substantive and procedural components, require their detailed legislative regulation. such doctrines can only exercise their regulatory influence on legal practice if the proper legal basis for their functioning is enshrined in current legislation. only then such doctrines will be able to unfold their regulatory potential in the process of shaping the practice of applying the relevant legal requirements (hultai, 2013). in summary, we fully agree with the position of o. nelin, who states that disregard for the constitutional doctrine has negative consequences for the national legal system. first of all, it is connected with «planned», and often, hasty adoption of a large amount of laws by the verkhovna rada of ukraine; a lot of them cannot be realized in advance and in this sense they are critically evaluated by the lawyers, and most importantly by the ukrainian people (2015). it appears that the inconsistencies and shortcomings of the ukrainian legislation development are due to the fact that it is not the results of researches,views, scientific standpoints which justify the formation of the constitutional doctrine, but on the contrary, the "current" legislation compels the creation of so-called "doctrine of its application". 3. constitutional reform and modernization it is necessary to fully agree with the estimations of those scientists who uphold the position that the retrospective constitutional transformations in ukraine were in the form of modernization and reform, but not always receiving doctrinal justifications with the necessary analysis and prognosis of the socio-political and legal consequences of these transformations, which were related to the reform "going above" its own subject of the constitutional law into the sphere of the systemic and structural qualitative changes in the state-legal and public life (orzikh, 2010). therefore, it seems that it is now necessary to give a more detailed assessment to the processes of modernization and reformation of the constitutional framework of the state and society, provided the indisputable constitutionalization of public and state life. considering the conceptual positions of the new doctrine of the ukrainian constitutional law, it should be noted that it is necessary to understand the difference between constitutional modernization and reform. thus, the broader range of law-regulation is more often considered in the latter as stepping of managing changes, systematicity of the constitutional, the political and legal transformations carried out in the process of the constitutional reform, the dynamics of constitutional relations, the full or partial transformation of the constitution and constitutional legislation, the formation of constitutional legal consciousness to perceive constitutional transformations as an objectively useful necessity, to create a functional mechanism ensuring and protecting the constitutional order and constitutional legitimacy, the integration of constitutional legislation and constitutional realities into the system of modern constitutionalism (lazarenko, 2016). however, the modernization of constitutional existence and constitutional and legal realities does not always mean the introduction of textual amendments to the constitution of ukraine or the transformation of its certain provisions. constitutional modernization is possible both in the form of changes in constitutional normative verbal foundations and in the form of interpretation of constitutional norms, which leads to increased attention to the activities of the constitutional court of ukraine: the only body authorized for official interpretation of the constitution of ukraine, determination of the constitutionality of acts of state authorities (orzikh, 2010). therefore, in view of renewal of the main aspects and key characteristics of the branch of constitutional law, it is definite that the institutional reform differs qualitatively from modernization in terms of means and consequences. however, the classic form of the constitutional reform implies realization of the politicallegal and organizational measures aimed at adopting a new constitution or its qualitative change of the baltic journal of economic studies 51 vol. 5, no. 5, 2019 current version according to certain legal procedures, aimed at developing constitutional relations and constitutional legal consciousness, creating a system of ensuring (protection) of the constitutional order with the aim of forming a modern constitutionalism (lazarenko, 2016). at the same time, the constitutional modernization must first and foremost be addressed to eliminate the existing defects and gaps in the constitutional law. this problem is important and urgent not only for ukraine, but also for any other state, because in any constitution there are defects and gaps, which can be overcome as a prerequisite for the development of the modern constitutionalism (krusian, 2008). it should be noted that the constitutional modernization implies not only the improvement of the text of the basic law, but also its "updating", that is, the introduction of features of the modern socio-political practice. after all, the constitution must be improved and modified in accordance with changes that occur in connection with the development of a particular society and state, the evolutionary development of the system of national constitutionalism (lazarenko, 2016). it seems that this allows us to agree with the position of those who consider constitutional modernization not as a part of constitutional reform, but as its alternative, emphasizing that modernization will mean improving the existing constitutional model through the development of positive elements and minimizing the negative ones, while reform entails revising or even changing the current constitutional model (balytnikov & ivanov, 2000). however, without a conceptual understanding of the further prospects for the development of the constitutional and legal sector, as well as the need and expediency of amending the constitutional legislation, there is no point to hope for the productive functioning of public authorities and civil society institutions. unfortunately, the national legal system has repeatedly suffered from ill-considered reforms that distorted not only legislative activity and the quality of the legislative process, but also adversely affected the effective implementation of the rule of law. 4. transforming the paradigm of the ukrainian constitutionalism the emerging concept of the ukrainian constitutionalism implies that the constitutionalism is the centre and all the modern constitutional and legal issues "revolve around" it. categorically it is a sufficiently universal carrier of theoretical energy of the modern constitutional law, the basic paradigm of constitutional practice, the criterion of the constitutionality of activities and acts of individual and collective subjects of law, the condition of formation of "dynamic constitutional jurisprudence", which, unlike "static", is oriented to form and use the laws and technical means of developing law, reforming constitutional reality. it should be noted that this approach is especially relevant for countries in transition, which is characterized to a large extent by the uncertainty of socio-political coordinates of society 's development and requires an adequate constitutional and technological (engineering) solution, constitutional support for political reform (orzikh, 2010). in the context of developing the scientific and practical paradigm of the contemporary ukrainian constitutionalism, it is impossible to overlook the achievements of a.r . krusian, who views the modern constitutionalism as a public and legal system of the constitutional organization of modern society on the basis of law, democracy and the establishment of constitutional and legal human freedom, the content of which (of this system) is the constitution and constitutional legislation, constitutional relations, constitutional legal consciousness, its constitutional legal order and functioning aim at restricting (selflimiting) public authority for the benefit of civil society, human rights and freedoms (2010). given the fact that constitutionalism is a multilevel system that, which is although formally beyond the constitution, but is a reliable guarantee of its supremacy, as well as an important institutional and procedural guarantee of the constitutionalization of the legal order, it is now crucial to ensure the interaction between the theory and practice of constitutionalism. in particular, it is necessary to develop a common universal constitutional language of communication between constitutionalist scientists and practitioners. for this purpose, constitutional practice must be built on the basis and in accordance with the doctrinal concepts of the modern constitutionalism, and the theory should not be detached from real constitutionalism, but revived by its practical experience. at the same time, it seems that the application of legal science and, in particular, the works of constitutionalist scientists, concerning the identification of key problems, the analysis of fundamental factors of influence, as well as the introduction of scientifically sound and systematic proposals, increases the efficiency of implementation of state-legal reforms, amending the constitution, the solution to the problems of perfection of the state system and democracy, as well as the strengthening of law and order in the state. 5. conclusions it is obvious that from the standpoint of the development of the ukrainian constitutional and legal doctrine, the branch of the constitutional law is undergoing transformation, which is caused by rethinking of values and priorities. however, even the formation of fundamentally new theoretical paradigms is unable to undermine the foundations of public recognition of the legitimacy of the state and its power, the rules of baltic journal of economic studies 52 vol. 5, no. 5, 2019 interaction that make it possible to guarantee the stability of the existence and development of ukraine. at the same time, it seems that the indisputable recognition of the value of constitutional law as a system of universal rules, values, principles and mechanisms that guarantee the stability, well-being and security of both citizens and the state should be the attributive characteristic of the new doctrine of the consstitutional law. at the same time, in the process of qualitative and substantial renewal, it is necessary to strictly adhere to the new ideology of development of the constitutional law, which should become a right not only of the state itself, but also of the law that ensures the interaction of a legal, democratic and social state with civil society. in this connection, the strategic priorities for the development of the ukrainian state and society should remain crucial for the science of the constitutional law and constitutionalist scientists. however, all the mentioned above requires not only the dynamism of the constitutional and legal studies, but also the development of a unified strategy and algorithm of actions in order to avoid the illogical analysis of priority problems of national constitutional law science: the methodological and theoretical framework of its development, the system of the constitutional law of ukraine, the development of constitutionalism and the theory of the constitution, the national sovereignty, improvement of the legal mechanism for ensuring human rights and freedoms and many other issues. in this regard, in the conditions of development of ukraine as a democratic and rule-of-law state, all reform initiatives should be systematic, be consistent with each other and take into account the new content of the constitutional doctrine, filled at the present stage with such values and principles that allowed it to become the basis for the development of the ukrainian state, development and functioning of society, as well as the basis for an organic combination of the ideals of democracy, law, justice and prosperity. only this approach will help to ensure the guaranteed progressive social development of ukraine and to bring it to the highest level of social organization and functioning, which is native to the developed european societies, as well as to correct the shortcomings of the ukrainian constitutionalism both at the theoretical (causes) and at the practical (effects) levels. references: balyitnikov, v. v., & ivanov, v. v. 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(2017). systema konstytutsiinoho prava: poniattia, struktura, vzaiemozviazok z systemoiu konstytutsiinoho zakonodavstva [the system of the constitutional law: concept, structure, relationship with the constitutional law system]. visnyk luhanskoho derzhavnoho universytetu vnutrishnikh sprav im. e.o. didorenka, 1, 27–36. (in ukrainian) hultai, m. (2013). do pytannia pro formuvannia doktryny konstytutsiinoi skarhy v ukraini [to the question of formation of the doctrine of constitutional complaint in ukraine]. visnyk natsionalnoi akademii pravovykh nauk ukrainy, 3, 117–127. (in ukrainian) krusian, a. r . 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(2016). konstytutsiina reforma i modernizatsiia: spivvidnosheniia poniat [constitutional reform and modernization: comparing concepts]. molodyi vchenyi, 5, 424–427. (in ukrainian) low benjamin (2019). full powers and the constitutional doctrine of implied amendments. singapore journal of legal studies, september, pp. 390–422. michael zuckert (2004). natural rights and modern constitutionalism. northwestern journal of international human right. volume 2. issue 1. url: https://scholarlycommons.law.northwestern.edu/cgi/viewcontent. cgi?article=1007&context=njihr nelin, o. (2015). konstytutsiina doktryna ukrainy: problem kontseptualizatsii osnovnykh pidkhodiv [constitutional doctrine of ukraine: problems of basic approach conceptualization]. yurydychna ukraina, 9, 20–25. (in ukrainian) baltic journal of economic studies 53 vol. 5, no. 5, 2019 orzikh, m. p. 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(in ukrainian) shemshuchenko, yu. s., skrypniuk, o. v., yushchuk, o. i., antonov, v. o., kostetska, t. a., kuiian, i. a., murashyn, h. o., & surzhynskyi, m. i. (2014). problemy rozvytku konstytutsiinoho prava ukrainy na suchasnomu etapi: teoriia i praktyka [problems of development of the constitutional law of ukraine at the present stage: theory and practice]. pravova derzhava, 25, 66–97. (in ukrainian) skrypniuk, o. v. (2009). kurs suchasnoho konstytutsiinoho prava ukrainy: akademichne vydannia [the course of modern constitutional law of ukraine: academic publication]. kharkiv: pravo. (in ukrainian) slinko, t. m., dakhova, i. i., letnianchyn, l. i. and other (2019). konstytutsiine pravo ukrainy: navch. posib. dlia pidhotovky fo zovnishnioho nezalezhnoho otsiniyvannia [constitutional law of ukraine: training manual for preparation to the external independent testing]. kharkiv: pravo. (in ukrainian) todyka, yu. m. (2000). konstytutsiia i pravova doktryna [constitution and legal doctrine]. visnyk akademii pravovykh nauk ukrainy, 1, 42–50. (in ukrainian) zhalimas, d. ofitsiina konstytutsiina doktryna: konysepysiia, znachushchist, holovni pryntsypy rozvytku [official constitutional doctrine: concept, relevance, main principles of development]. url: https://krytyka.com/ua/ articles/ofitsiyna-konstytutsiyna-doktryna-kontseptsiya-znachushchist-holovni-pryntsypy-rozvytku baltic journal of economic studies 143 vol. 2, no. 2, 2016 corresponding author: 1 department of globalization, european integration and national security management, national academy of public administration under the president of ukraine e-mail: vitastrukova@gmail.com privatization in ukraine in the context of public-private partneship processes vita strukova1 national academy of public administration under the president of ukraine abstract. the purpose is the study of aspects of privatization in ukraine in the context of the partnership between the public and private sectors of the economy, problems and assessment of privatization process effectiveness, steps and error analysis when selecting privatization models, and special aspects of programs implementation considering the existing socio-economic and political factors in ukraine. methodology. the study is based on the relevant scientific and regulatory and legal framework of public sources with due account for the current state of affairs and recent theoretical developments in this field. results showed that the current analysis of privatization process practice in ukraine highlights the existence of its vulnerability factors that, on the one hand, are caused by the legislation imperfection and, on the other hand, by lack of efficiency of public administration and control mechanisms in this field. practical implications. privatization is one of the key elements of the national economy development and market reforms implementation. its further implementation into the market economy development in ukraine should be based on the gained experience and the obtained results. value/originality. after analysis of the most popular privatization methods in other countries, examining the tasks, specifics and methods of privatization in ukraine at its different stages, the author came to the conclusion that a number of important factors should be taken into account in order to avoid or minimize certain negative effects of privatization. the study revealed systemic contradictions in the process of privatization in ukraine, including the spontaneity and inconsistency in shaping the goals and approaches. moreover, the main goal of privatization, which is creating conditions for increasing the production efficiency, has not been achieved, and the expected intensification of the investment activity has not taken place as expected in the study. at the same time, the transition of state enterprises to private ones has failed to lead to their economic status improvement, and the principle of social justice has failed to be fully implemented during the state property redistribution process. the analyzed data shows that inefficiency of privatization in ukraine is caused by the selected model. ukrainian model of raising private capital for the economy development by privatization has too many flaws, which does not allow achieving the main objectives declared, resulting in a national commodity producer failing to meet the needs of the domestic market and to be competitive in the world market. in its turn, ukraine desperately needs reforming ownership economic affairs in the condition of the economic crisis. the author offers practical steps for changing the privatization model and adheres to the position that transferring assets within the framework of public-private partnership could become the model of privatization processes for ukraine that would allow combining the interests of society, government bodies and private sector, as well as increasing efficiency of the economy development strategy of ukraine. key words: public-private partnership, privatization, certificate and monetary privatization models, corporatization. jel classification: h11, h80, r58, l32 1. вступление сегодня механизм государственно-частного партнерства (гчп) является весьма привлекательным для государственного и частного секторов экономики в связи с тем, что он основывается на согласовании между сторонами подходов к развитию инфраструктуры государственного и частного секторов, а также удовлетворения их интересов. за счет объединения активов государства с инвестиционными, управленческими, мотивационными и другими ресурсами частного сектора, можно добиться синергетического эффекта и обеспечить повышение эффективности использования потенциала, который находится в распоряжении общества, для решения социально значимых задач. одной из моделей гчп выступает приватизация. несмотря на то, что теме приватизации в украине baltic journal of economic studies 144 vol. 2, no. 2, 2016 посвящено уже немало научных работ, а законодательное поле претерпело многочисленные изменения, проблема эффективной реализации процессов разгосударствления остаётся актуальной в силу различных причин, среди которых остаются частные интересы правящих элит и их лоббирование в нормативном регулировании, проблемы специфики украинского рынка, колебание внешнеполитических векторов, а со времён начала революционных событий 2013-2014 годов  – также смещение акцентов и попытки масштабного реформирования государственного управления. в данном исследовании рассмотрены некоторые аспекты приватизации в украине в контексте партнерства государственного и частного секторов экономики. 2. изложение основного материала понятие «приватизация» появилось сравнительно недавно  – его впервые употребил в 1976 г. американский ученый р. пул. весьма популярным в науке и в практическом контексте оно стало в начале 1980-х лет хх века, когда правительство м. тетчер в великобритании приступило к реализации политико-экономической стратегии по реструктуризации частного сектора. при этом, приватизация рассматривалась как положительный фактор экономического и социального развития. одновременно, термин «приватизация» в великобритании был использован для обозначения всех форм участия частного сектора в делах государственного, начиная с продажи объектов национальной промышленности и заканчивая простым субподрядом или аутсорсингом таких процессов, как уборка мусора. несколько позже, в стране возник термин «частная финансовая инициатива», которую большинство исследователей рассматривает как начало государственно-частного партнерства. в других странах ес в качестве приватизационных, рассматривались лишь отношения прямого участия частного сектора в деятельности государственного. субподрядные же отношения между государственным и частным секторами сосуществовали достаточно давно и отделялись от приватизации. в странах центральной и восточной европы термин «приватизация» использовался для обозначения любых действий, которые не совпадали с функциями исключительно правительства. то есть, в данном случае, термином «приватизация» назывались как продажа активов частному предприятию, так и делегирование функций водоснабжения муниципалитетам. в украине приватизационные процессы тоже имели свою специфику. социально-экономическая трансформация в украине проводилась с тем, чтобы изменить существующий экономический порядок (экономическую систему) и обеспечить экономический рост. считалось, что достичь поставленной цели удастся благодаря тотальной приватизации, и не учитывалось то, что процесс приватизации является лишь составной частью создания социально ориентированной экономики, и его надо осуществлять синхронно с другими процессами, которые образуют регулируемый рынок (noginova, 2014). приватизация в украине осуществлялась под влиянием, с одной стороны, приобретенного мирового опыта разгосударствления, а с другой – социально-экономических и политических особенностей страны. это и обуславливает специфику приватизационных процессов. экономика украины перед началом рыночной трансформации характеризовалась такими чертами, как тотальное огосударствление и тотальная монополизация, отсутствие свободных капиталов, которые могли бы быть использованы для приватизации, отсутствие рыночной инфраструктуры. эти обстоятельства привели к неоднозначному пониманию приватизации. с одной стороны, потребность в создании условий для формирования частного предпринимательства требовала осуществления приватизации относительно высокими темпами, чтобы сформировать достаточный слой самостоятельных субъектов хозяйствования, без которого строить рыночную экономику практически невозможно. а с другой стороны, необходим значительный объем свободных денежных капиталов, чтобы осуществлять приватизацию государственного имущества. решение этого противоречия было достигнуто путем объединения платных и бесплатных форм приватизации. именно в этом и заключается основная особенность приватизации в украине (chepinoga, 2011). важную роль в процессе приватизации играют ее способы. действующим украинским законодательством предусмотрены следующие способы: продажа объектов приватизации на аукционе (в том числе путем снижения цены, без объявления цены); продажа объектов приватизации по конкурсу с открытостью предложения цены по принципу аукциона; продажа акций (долей, паев), принадлежащих государству в хозяйственных обществах, на аукционе, по конкурсу, на фондовых биржах и другими способами, которые предусматривают общедоступность и конкуренцию покупателей; продажа на конкурсной основе целостного имущественного комплекса государственного предприятия, которое приватизируется, или контрольного пакета акций акционерного общества; выкупа объектов приватизации; продажи акций на международных фондовых рынках, в том числе в виде депозитарных расписок; другими способами, которые устанавливаются специальными законами, регулирующими особенности приватизации объектов отдельных отраслей. данный перечень способов приватизации государственного имущества за годы независимости украины претерпел немало изменений. в общем, по украине самыми популярными способами приватизации оказались выкуп объектов приватизации (46,2%), выкуп baltic journal of economic studies 145 vol. 2, no. 2, 2016 имущества, сданного в аренду с выкупом (18,6%), продажи на аукционе (15,9%), продажа акций открытых акционерных обществ (11,5%). в подавляющем большинстве случаев во всех отраслях экономики украины доминировал такой способ приватизации, как выкуп объектов приватизации, более 50% объектов изменили форму собственности таким образом в сельском хозяйстве, в оптовой и розничной торговле, в финансовой сфере, в операциях с недвижимостью, в государственном управлении, в здравоохранении, в коллективных, общественных и личных услугах. в таких отраслях отечественной экономики, как промышленность, сельское хозяйство, строительство, транспорт и связь более 40% объектов, подпадающих под приватизацию, были корпоратизированы и поиск эффективного собственника происходил через продажу пакетов акций новосозданных открытых акционерных обществ. предпочтение этого способа приватизации в данных отраслях украинской экономики обусловлено прежде всего тем, что на продажу выставлялись единые имущественные комплексы, которые не могли быть выделены в отдельные самостоятельные предприятия. такой способ приватизации, как аукцион оказался наиболее подходящим при продаже объектов государственной и коммунальной формы собственности в сфере образования, здравоохранения и социальной помощи, для объектов незавершенного строительства. в украине более 20% приватизированных предприятий промышленности, оптовой и розничной торговли, области строительства, гостиниц и ресторанов изменили форму собственности через аренду с выкупом. этот способ приватизации занимает важное место в этих отраслях отечественной экономики из-за простоты применения: владельцами государственного имущества практически становились работники того или иного предприятия, использовались внутренние источники привлечения средств. 3. модели и этапы приватизации при создании украинской модели приватизации государственных предприятий было затруднительно использовать западную модель. это было обусловлено тем, что, во-первых, приватизация в этих странах происходила в условиях развитой рыночной экономики. во-вторых, соотношение между государственным и негосударственным секторами в этих странах является более или менее стабильным на протяжении многих лет. в-третьих, темпы приватизации даже в великобритании, чья программа является образцом для других стран, составляли не более 10% за десятилетие. в украине в собственности государства перед началом реформ находилось 85,4% предприятия (eshhenko, palkin, 2005). государственный сектор экономики имеет место во всех странах. значительное место в экономике он занимает как в новых индустриальных странах (южной корее, сингапуре, тайване, гонконге), так и в старых (швеции, голландии, дании, португалии). традиционно высоким является удельный вес этого сектора в национальной экономике франции – 33%, австрии – 37%, италии – более 40% (skiba, 2010). разрабатывая модель приватизации для украины, нужно было учитывать социально-экономические и идеолого-политические реалии того периода, во многом обусловившие масштабы и темпы приватизации. в основу модели были положены принципы социальной справедливости и равенства распределения и продажи государственного имущества, что означало бесплатную передачу большей части государственного имущества населению, обеспечение равенства прав граждан в приватизационном процессе. в то же время часть приватизационных бумаг реализовывалась на платной основе. воплощению принципа социальной справедливости и равенства приватизации должны способствовать механизм гласности, антимонопольная политика и предоставление льгот трудовым коллективам предприятий, которые приватизируются (выбор способа приватизации, предоставление права первоочередного выкупа имущества предприятий) (eshhenko, palkin, 2005). можно выделить следующие этапы приватизации в украине: 1. стихийная, теневая приватизация (середина 1980-х – 1992 г.). 2. коллективно арендная приватизация (1992-1994 гг.). 3. сертификатная, или бумажная, приватизация (1995-1999 гг.). 4. денежная приватизация (2000 год  – настоящее время). первый этап приватизации начался в украине во времена ссср, во второй половине 1980-х годов в период так называемой перестройки. тогда был принят ряд законов, которые позволяли частное предпринимательство. этим воспользовалось руководство государственных предприятий для перевода государственных финансов в частные. на этом этапе было принято сертификатную модель приватизации и разработаны основные законы, регулирующие приватизацию. они вступили в силу в начале 1992 г., что послужило началом второго этапа приватизации. на этом этапе приватизация приобрела официальный статус. в течение 1992-1994 годов изменили государственную форму собственности 9082 объектов малой приватизации, 2 650 крупных и средних предприятий и 122 объекта незавершенного строительства. но по ряду причин намеченные задачи в сфере приватизации, прежде всего ее массовость, не были достигнуты. приватизация осуществлялась стихийно, неконкурентными способами, а также сдерживалась организационной сложностью использования приватизационных имущественных сертификатов. поэтому в конце 1994 и в начале 1995 года был принят ряд указов президента украины, с которыми начался третий этап, получивший название сертификационной приватизации и продолжался до 1999 года. baltic journal of economic studies 146 vol. 2, no. 2, 2016 принятые законодательные акты создали предпосылки для ускорения приватизации. было разрешено приватизировать помещения, в которых расположены объекты малой приватизации, ликвидировано бюрократические монопольные объединения малых предприятий в сфере торговли, общественного питания и бытового обслуживания, введено наличную форму приватизационных имущественных сертификатов. это ускорило темпы малой приватизации. количество ее объектов составило почти 45 000, что способствовало внедрению рыночных механизмов в указанных отраслях. с 1995 г. ускорилась приватизация крупных и средних предприятий. была введена в обращение наличная форма приватизационных сертификатов, которые на этом этапе получили почти 46 млн. граждан украины. одновременно была создана сеть сертификатных аукционов, на которых было использовано около 38 млн. приватизационных сертификатов (trofimova, 2013) основным итогом третьего этапа приватизации было принятие ею необратимого характера. в течение 19921999 годов государственную форму собственности изменили почти 21 тыс. предприятий. в результате к началу xxi в. разгосударствленных предприятий было в 2,7 раза больше чем государственных. за счет корпоратизации сформировался существенный корпоративный сектор экономики, а количество акционеров достигла 35 млн. в то же время сформировался первичный рынок ценных бумаг. однако проявились и существенные недостатки, и противоречия массовой приватизации. самым важным было то, что не была реализована главная цель приватизации – создание условий для повышения эффективности производства. причина в том, что в процессе сертификационной приватизации произошло формальное разгосударствление. большинство новых владельцев, которые стали ими из-за использования приватизационных сертификатов, были формальными, не оказывали активного влияния на управление приватизированными объектами, которое, к тому же, осуществлялось управленческим корпусом, который образовался в командной системе и был не в состоянии обеспечить эффективный менеджмент за неимением навыков рыночного управления и достаточных капиталов. сформировался также прослойка новых владельцев, которые использовали приобретенные объекты для перепродажи с целью получения спекулятивных доходов. как и на предыдущих этапах, приватизация осуществлялась стихийно, отдельно от других составляющих рыночного реформирования экономики, прежде всего, структурной ее перестройки. не состоялась и ожидаемая активизация инвестиционной деятельности, как это предполагалось при ее обосновании. переход государственных предприятий в негосударственные не привел к улучшению их экономического состояния. методы приватизации и законодательно-нормативная база не были ориентированы на подъем реального сектора экономики. эффективность приватизированных предприятий была невысокой, происходила лишь формальная смена собственника. не удалось полностью реализовать принцип социальной справедливости в процессе перераспределения государственной собственности. реальную выгоду от нее получил небольшой слой общества. это увеличило недовольство основной части населения приватизацией (zhalilo, 2009). существенные негативные последствия приватизации в определенной мере вызваны недостатками и противоречиями ее законодательной базы. это создало благоприятные условия для злоупотреблений в процессе приватизации, породило коррумпированность чиновников, причастных к ее осуществлению, не обеспечило действенной защиты интересов большинства населения украины. выявленные противоречия и недостатки обусловили переход к новому этапу приватизации, который начался с принятием государственной программы приватизации на 2000-2002 годы и получил название этапа денежной приватизации. он был также обусловлен тем, что на начало xxi века в украине был сформирован достаточный массив интеллектуальных, организационных и правовых основ рыночной экономики. поэтому приватизацию уже можно рассматривать только как инструмент трансформации государственной собственности в негосударственную. она должна быть рычагом решения таких важных проблем развития экономики, как темпы экономического роста, усиление корпоративного сектора экономики, возрастание роли финансовых механизмов в функционировании экономики. основные приоритеты на этом этапе следующие: обеспечение инновационного обновления предприятий; привлечение к приватизации покупателей, имеющих долгосрочные интересы в развитии приватизированного объекта; повышение доверия покупателей к процессу приватизации; максимальная открытость всех процедур приватизации для общества. на основании названных приоритетов определены и основные задачи приватизации: создание эффективного собственника, то есть условий, при которых решается проблема инвестиций в приватизированные объекты в после приватизационный период и формирование эффективного менеджмента; достижения максимальной открытости и прозрачности процедур приватизации; сосредоточение на индивидуальной приватизации, особенно стратегических предприятий; увеличение поступлений в государственный бюджет средств, получаемых от приватизации путем повышения конкуренции и прозрачности продажи объектов приватизации; оптимизация структуры государственной собственности в реальном секторе экономики (chepinoga, 2011). baltic journal of economic studies 147 vol. 2, no. 2, 2016 следует отметить, что украинская модель приватизации, в том числе за деньги, имеет много недостатков, что пока не позволяет достичь заявленных основных целей, в результате чего национальный товаропроизводитель не удовлетворяет потребности внутреннего рынка и неконкурентоспособен на мировом. неэффективность приватизации в нашей стране обусловлена выбранной моделью. как показал опыт, массовая сертификатная приватизация, ориентированная на систему льгот и аукционов, не способна создать фондовый рынок, механизм перераспределения собственности, и помешала реструктурированию и развитию большинства предприятий (eshhenko, palkin, 2005). некоторые авторы рассматривают гчп как косвенную, частичную приватизацию, своего рода альтернативу полной приватизации жизненно важных, объектов государственной собственности, которые имеют стратегическое значение. считаем, что формы и модели гчп не ограничиваются только передачей активов от государства частному партнеру поэтому говорить о том, что гчп является какой-то формой приватизации, по нашему мнению, некорректно, поскольку при использовании многих его моделей собственность на активы остается за государственным партнером. хотя нельзя не отметить, что приватизация занимает достойное место среди моделей гчп. при этой модели, частный сектор является ответственным за проектирование, строительство и эксплуатацию объектов инфраструктуры, а государственный сектор, в некоторых случаях может отказаться от прав собственности на активы или части активов, передав их частному партнеру. при использовании моделей данного типа, за счет объединения проектирования, строительства и эксплуатации объектов инфраструктуры или услуг в одном договоре, могут быть достигнуты значительные преимущества с помощью возникновения синергетического эффекта. поскольку частный сектор проектирует, строит и эксплуатирует объекты и услуги в одном лице, а оплата осуществляется только после успешного завершения проекта по заранее согласованным стандартам, частный сектор не имеет стимулов к повышению качества и количества услуг. по сравнению с традиционными моделями закупок общественного сектора (госзакупок), где проектировочные, строительные и эксплуатационные аспекты, как правило, разделены, эта форма проектов государственно-частного партнерства снижает риски перерасхода средств на этапах проектирования и строительства или выбора неэффективных технологий, поскольку будущие доходы оператора зависит от контроля за затратами на этих этапах. основные преимущества государственного сектора состоят в освобождении от затрат на проектирование и строительство, передаче определенных рисков в частный сектор и обеспечении лучшего проектирования, строительства и эксплуатации объектов инфраструктуры или услуг, которые носят общественно значимый характер. основные плюсы этой модели сводятся к следующему: – частный сектор несет большую часть рисков; – высокий уровень частных инвестиций; – значительный потенциал повышения эффективности деятельности и внедрения инноваций. в тоже время следует отметить и минусы: – может привести к увеличению бюджетных затрат правительства; – переговоры между сторонами в процессе подготовки и заключение контракта могут занять продолжительное время; – не всегда имеется возможность оценки нормативной эффективности проекта; – могут возникнуть непредвиденные условные обязательства государственного сектора в среднесрочной и долгосрочной перспективе. отчуждение  – третий тип частной собственности на активы (разгосударствление), фактически  – приватизация, как видно из самого названия. в этой форме частное предприятие покупает долю в государственном предприятии. тем не менее, наличие у частного сектора части активов государственного предприятия не обязательно означает управление этим предприятием частным сектором. полная же приватизация, допускает полную передачу дел государственного сектора в частный. это может быть осуществлено или путем прямой продажи, или с помощью публичного размещения акций, если государственное предприятие акционировано. 4. выводы приватизация является одним из основных элементов развития национальной экономики и осуществления рыночных преобразований. однако, анализ практики приватизационного процесса в украине указывает на существование факторов ее уязвимости, которые с одной стороны, вызванные несовершенством законодательства, по другой – неэффективностью государственного управления и контроля в этой сфере. все это создает угрозу национальной безопасности украины в экономической и социальной сферах, особенно в период нестабильности на востоке страны. дальнейшее развитие рыночной экономики, осуществления структурных преобразований и реформирования экономических отношений собственности в украине требует осуществления необходимых шагов по: изменению модели приватизации, когда приоритетом становится повышение эффективности управления, а не наполнение государственного бюджета и приведению в соответствие стратегии приватизации государственного имущества со стратегией развития экономики украины и ее отдельных отраслей (приватизация стратегических предприятий должна согласовываться с рыночной трансформацией отраслей, с отраслевыми программами приватизации предприятий); возвращению доверия населения к приватизации; страbaltic journal of economic studies 148 vol. 2, no. 2, 2016 тегической ориентированности направления средств, полученных от приватизации; усовершенствованию программы приватизации, выделению приоритетных направлений, по которым должна осуществляться приватизация, разработки и реализации комплекса мероприятий по устранению монополизма в процессе преобразования государственной собственности; оптимизации структуры госсектора; усовершенствованию инструментов влияния фонда государственного имущества на инвесторов с целью обеспечения выполнения взятых постприватизационных обязательств; обеспечению прозрачности процесса приватизации и уменьшению возможностей для коррупции; определению и четкому закреплению полномочий фонда государственного имущества украины по распоряжению и продажи земель государственной собственности, способа их реализации; совершенствованию порядка продажи объектов, подлежащих приватизации, вместе с земельными участками государственной собственности; повышению эффективности управления предприятиями, которые находятся в государственной собственности; усилению информационного обеспечения приватизационных процессов в экономике; привлечению общественности к приватизационным процессам. сегодня государственно-частное партнерство стало неотъемлемой составляющей современной мировой экономики. в рамках такого сотрудничества государственного и частного секторов экономики возникло несколько моделей, одной из которых является приватизация. передача активов или приватизация в контексте государственно-частного партнерства, заключается в том, что частная компания покупает пакет акций государственного предприятия, которое владеет инфраструктурным объектом, посредством публичной продажи активов, программы приватизации и других механизмом. в данную группу входят следующие модели: полная (full)  – государство передает 100% пакета акций государственного предприятия частной компании; частичная (partial)  – государство передает некоторый пакет акций государственного предприятия частной компании. в этом случае может иметь место передача управления инфраструктурным объектом частной компании. при частичной приватизации частное предприятие покупает не весь пакет акций государственного предприятия. однако приобретение акций не обязательно может означать частное управление предприятием. полная же приватизация, допускает полную передачу дел государственного сектора в частный. это может быть сделано или путем прямой продажи, или путем публичного размещения акций государственного предприятия, которое акционируется. считаем, что передача активов в рамках гчп может стать для украины такой моделью приватизационных процессов, которая позволить совместить интересы общества, органов госуправления и частного сектора, а также повысить эффективность стратегии развития экономики украины. references eshhenko, p.s., palkin, ju.i., (2005). sovremennaja jekonomika. k. : vysshaja shk., 326 p. skiba, n.v. (2010). privatizacija kak instrument strukturnyh preobrazovanij v jekonomike ukrainy: ponjatie, osnovnye problemy i puti ih reshenija.vestnik nacional'noj akademii gosudarstvennogo upravlenija pri prezidente ukrainy: nauchnyj zhurnal, 4: 125-133. noginova, n.m. (2014). privatizacija v ukraine: upushhenija, dostizhenija i perspektivy dnepropetrovskij gosudarstvennyj agrarnyj universitet. jeffektivnaja jekonomika, 1. zhalilo, ja.a. (2009). teorija i praktika formirovanija jeffektivnoj jekonomicheskoj strategii gosudarstva : monografija. m. : nisi, 336 p. chepinoga, v.g. (2011). jekonomicheskaja teorija. k.: jurinkom inter., 656 p. trofimova, a.h. (2013). ponjatie privatizacii (juridicheskij i jekonomicheskij aspekty). juridicheskie zapiski, 2: 61-69. вита струкова приватизация в украине в контексте процессов государственно-частного партнерства аннотация. целью работы является исследование аспектов приватизации в украине в контексте партнерства государственного и частого секторов экономики, проблем и оценки эффективности приватизационного процесса, этапов и анализа ошибок в выборе моделей приватизации, особенности внедрения програм с учётом сложившихся в украине социально-экономических и политических факторов. методика. исследование основывается на соответствующую научную и нормативно-правовую базу из открытых источников, с учетом современного состояния дел, последних теоретических разработок в данной области. результаты исследования показали, что сегодня анализ практики приватизационного процесса в украине указывает на существование факторов ее уязвимости, которые, с одной стороны, вызваны несовершенством baltic journal of economic studies 149 vol. 2, no. 2, 2016 законодательства, c другой  – недостаточной эффективностью механизмов государственного управления и контроля в этой сфере. практическое значение. приватизация является одним из основных элементов развития национальной экономики и осуществления рыночных преобразований. дальнейшее ее внедрение в развитие рыночной экономики в украине следует осуществлять на основе приобретенного опыта и полученных результатов. оригинальность. проведя анализ самых популярных способов приватизации в других странах, рассмотрев задачи, специфику, способы приватизации в украине в разные ее этапы, автор пришел к выводу о необходимости учитывать ряд важных факторов, чтобы избежать или минимизировать определенные негативные последствия приватизации. в процессе исследования выявлено системные противоречия в ходе приватизации в украине, среди которых стихийность и непоследовательность в формировании целей и подходов. кроме того, не была реализована главная цель приватизации – создание условий для повышения эффективности производства, не состоялась ожидаемая активизация инвестиционной деятельности, как это предполагалось при обосновании. одновременно с этим переход государственных предприятий в негосударственные не привел к улучшению их экономического состояния, не удалось полностью реализовать принцип социальной справедливости в процессе перераспределения государственной собственности. проанализированные данные показывают, что неэффективность приватизации в украине обусловлена выбранной моделью. украинская модель привлечения частного капитала в развитие экономики в форме приватизации, имеет слишком много недостатков, что пока не позволяет достичь заявленных основных целей, в результате чего национальный товаропроизводитель не удовлетворяет потребности внутреннего рынка и неконкурентоспособен на мировом. в свою очередь, в условиях экономического кризиса украина остро нуждается в реформировании экономических отношений собственности в украине. автор предлагает действенные шаги по изменению модели приватизации и придерживается позиции, что передача активов в рамках государственно-частного партнерства может стать для украины такой моделью приватизационных процессов, которая позволить совместить интересы общества, органов государственного управления и частного сектора, а также повысить эффективность стратегии развития экономики украины. baltic journal of economic studies 35 vol. 1, 2015 origins of formation of social innovation in transition economy olha bilskaya1, oles honchar dnipropetrovsk national university, ukraine abstract. purpose of the work is determination of the essence, source base and mechanism of formation of “social innovation” under the conditions of the transitional economy with a market mechanism for ensuring activity in the territory of countries, engaged in the development of a social state. methodology. to solve this problem, a number of scientific methods was used, such as analysis and synthesis during the critical evaluation of approaches of domestic and foreign authors regarding the nature of “novation”, “developments” and “innovation”, system and structural in the design of the mechanism of cyclic renewal of the institutional content of the regulation system of social development, summarizing in justifying the conceptual terminological apparatus of social innovation, and in particular gradual clarification of the social innovation formulas, abstract and logic when making theoretical generalizations and forming conclusions. results of the study lead to the need of introducing the term “social” in the scientific and practical use, as normalized inequality in the society to the limits that define the motivational aspects of work, and “innovation” as changes that are generated within the social and economic system. social innovations were proposed to be interpreted as solutions that can change directly or indirectly selectively fixed institutions in different sectors of the national economy of the country at the appropriate stage of the socialization transformations with compulsory positivization of the social status of subjects of social and economic processes through constructs of mitigation of the revenue and income inequality. it has been proved that the source base of the social innovation is social traditions, which by virtue of multi-purpose certainty are associated with metamorphic feature and stochasticity of a set of proposals of social innovations and their destructive constructs. practical implications. organization of the conceptual and categorical apparatus of the social innovation will promote to justification of social policy measures and will exclude from the practice of managing the situation regarding a non-professional solution of problems of ensuring public progress. value/originality. the scientific and practical significance of developments means that they provide a basis for theoretical and methodological justification of processes of social innovation, and should change for the better and welfare. key words: social innovation, concepts, approaches, destruction, formation mechanism, and concept. jel classification: r14, o31, j24 corresponding author 1 department of economics and management of national economy, oles honchar dnipropetrovsk national university. e-mail: lexusol@yandex.ru 1. introduction the driving force of economic development of the world community for centuries was and is innovations. however, in the full extent the innovation processes, despite a long history, have been the subject of scientific study only in the xx century. and, what is the most important, so it was the identification of innovation solely with technical and technological changes first in the industry, and then in other areas of economic activity. in the last decade of the xx century and largely with transition to the coordinate system of the xxi century in the industrialized countries, practically all spheres of human activity were gradually covered by innovations. but over time it became increasingly clear that the only technical innovation is not enough to overcome the challenges of the modern society. for the establishment of the institute of the welfare state, which is built in the territory of ukraine and its effective functioning, we need a fundamentally new type of innovations that are able to create changes not only in the economic sphere but also in the social sphere, and thereby contribute to the formation of the civilization quality of the life of a decent person. they are called social innovations. it should be emphasized that the issues of social innovation due to the reorientation of the national economy on an innovative path of development have become one of the main topics of problem and oriented research. but in general, “social innovation” and “social innovation processes” as the main content of the innovative model of ensuring the social progress are not new categories for the science. baltic journal of economic studies 36 vol. 1, 2015 the analysis of the literature sources of the raised issue gives an opportunity to state the compilation of several scientific currents on the interpretation of social innovation direction. this is natural as economists, sociologists, philosophers, psychologists, teachers, lawyers and politicians were involved and engaged in the development of this problem. at the same time some of them were interested and are interested in short-term one-way processes, and others  – in long-term and multivector transformation. moreover, theoretical development of specific fields of science by the experts would seem to frame the issue, carried out by them in different time intervals for restructuring the social state and the territory of different countries. innovation theoretical foundations in the social sphere were offered by the russian-american sociologist p. sorokin. it is natural that his achievements have been supplemented and developed by scientists of the developed countries in the context of the constitutional declaration of the social states after the second world war. it is about a. giddens, p. david, d. foreyya, s. courtois, j. nesbitt, k. polanyi and others. but the results of their scientific thoughts were implemented to the classical type of formation first of the market economy, and then its immunization of the one or other dose of sociality. in postsoviet time the development of the concept of a social state is carried out by something opposite, inversion principle with some backsliding on large-scale socialization through the state financing. in the context of such specificity among national scientists a number of representatives who initiated research on the social innovation also started to be separated, such as l. antoniuk, l. boyko-boychuk, e. kuchko, n. letunovska, i. meyzhys a. poruchnyk, b. savchuk, a. sandyha, l. fedulova, and others. but knowledge was and remains a relative category. so the fact of holding some interpretations of social innovations of theoretical and methodological differences is natural. in addition, a reasoned decision as to the source base of social innovations has not been discovered until recently. as a result, not the whole set of processes and phenomena that make up the essence of the social are subject under the direct influence of the state. moreover, the innovation social programs, taken for implementation at different levels of management, turn out to be incapable by their potencies of influence to adequately respond to the made destructive aspects in ensuring social dynamics. these realities certify in favor of the fact that the issue of implementation of its social purpose by the state through social innovation is as complex organization, some of them require further research in the context of streamlining the content of the mechanism of formation and technology implementation. guided by urgent requirement to strengthen the social component in ensuring social dynamics, within this article we have put a research problem, whose main task is the certainty with essence, source base and mechanism of formation of “social innovation” in the transitional economy with a market mechanism for ensuring activity in the territory, engaged in the development of the social state. basically the represented is seen as a replication and extension, but something borrowed and qualitative upgrading to review investigations (azgaldov, g.g., & kostin, a.v. (2008); cherepanova, n.v. (2007); elias, n. (2001); grishkіn,  v.o. (2005); huchek, m. (1995); perlaki, i. (1980); zinoviev, a.a. (2008)). 2. concept of nature of social innovations the term “social innovation” is a phrase from the concepts of “social" and “innovation”. mostly the term “social” was identified and today is interpreted as “public”. in soviet times the social research was narrowed to the extent caused by political expediency. thus, in the “dictionary of russian language”, the term “social” is defined as “public, referred to people’s lives and their relations in the society” (ozhegov, 1953) and in the political dictionary of the soviet era the concept of “social” is associated exclusively with “attitude to the social order” (ponomarev, 1956). it is natural that with the deployment of democratization of public life and centrifugal processes that led to the declaration of independence of former soviet republics in the late 90s of the twentieth century, the issue of the nature of “social” has actualized. however the regulation of the term “social” has not changed dramatically. modern explanatory dictionary editions are virtually the same footsteps with no desire to build a theoretical apparatus of sociality adequate to the situation occurred in the country. as a social content they present all the same, namely, “... linked to the life and relations of people in the society, the public” (yaremenko and slіpushko, 2001). national experts of the sociological direction in the interpretation of the concept “social” reduce it to “... the attraction to another person against the will and desire of both or a combination of several of them in the community” (andrushchenko and gorlach, 1996) or “active communication between people” (andrushchenko and mihalchenko,1996, pp. 95-96). as for the views of economists about the nature of “social”, they are reduced to either “... the system features, integrated effect of direct or indirect interaction between people” (deeva, 2006) or the “… possibilities of a decent life in the society” (grishkіn, 2005). thus, the formula of sociality has not received the final character and if left open for further philosophy regarding the nature of “life” and “relations in the society”. taking into account this fact, our understanding of the nature of “social” is not something that is not compounded, but do not get adequate time of a formal nature. as a result, we live in the linguistic world saturated with a term “social” in different meaningful combinations as relevant and irrelevant for it. indeed, you cannot find objections, because people in the process of life come into relations with each other. however, productive activities and meeting the needs of the economic entities are only possible in unity and mutual baltic journal of economic studies 37 vol. 1, 2015 understanding. in reality, these attributes of social features are sufficiently contradictory. the given interpretation of the social aspect ignores these nuances of social relations. it seems that scientists fear unreliable social reality which forces to remain in positions of controversial decisions, adaptability to the situation, and so on. a statement the german sociologist n. elias (2001) regarding the issue of social concept, who identified it with “structural changes associated with the growth of differentiation and integration ”and“ aimed at reducing differentiation and integration, is correct in this context. the present requires disclosure of the logic of the latest social and economic and social processes on axis “equalityinequality”. and in this case it is extremely important to focus on the fact that the dominance of inequality within certain limits is not an abnormal phenomenon, and appears in the market economy as an integral part of social evolution. a prominent dissident russian scientist a.a. zinoviev (2008) on this occasion said that “the paradox of history ... is that the tendency of inequality is more progressive and promising” and further “progress of inequality is the change of inequalities, which are improving the living conditions of the most active part of the society, and perhaps other members of the society”. according to the statement of the modern intellectual k. popper (2004) “... the desire for equality, particularly in the economic sphere can be a threat ...”. based on these methodological definitions, we can state that the term “social” for economic transition should be associated with standardized inequality in the society to the limits that define the motivational aspects of the work. the starting point of its establishment is the generation of the awareness of initial needs and interests by the workers, who being objective by their nature influenced by comparison with the results of meeting the similar needs of other more active economic actors, are experienced as dissatisfaction with conditions of existence. as for the term “innovation” it is necessary to take into account the fact that it consists of the concept “novation” and the prefix “in”. then there is a question of substantial difference of this category from “novation”. some scientists regarding the prefix “in” refer to a translation in latin as “in the direction” (azgaldov and kostin, 2008), and others, following the etymology of the term “in”, give it a value of “internal” and “inside” (cherepanova, 2007). if guided by the first one, the innovation does not differ from novation or developments, which are also understood as “... any purposeful, positive and progressive change ...” (perlaki, 1980) or “... purposeful change that makes the environment ... introducing new elements relatively stable” (prigogine, 1989, p. 29). thus, “innovation” should be linked with the changes that are generated within the social and economic system. in our opinion, adequate time would be appropriate at first to identify social innovation at the macro level with solutions that can change directly or indirectly, the social status of the subjects of social and economic processes at the appropriate stage of socialization reforms. but we have to consider another as well. in the definition there is no focus on the source basis of the social innovation, and a very general approach is used, as a result of which it becomes universal, noting possible welfare increase from a weak reference to the realities of their generation. 3. sources of formation of social innovations the fact that the concept “innovation” was introduced in the scientific revolution in the xix century at the suggestion of the famous austrian economist j.  schumpeter (1982) is well-known. he understood by it “... a new quality or property of the means of production that can be obtained by improving the existing equipment”. further j. schumpeter showed the specter of innovation with more details also covering other factors and areas of social and economic activities. but the main thing is not the essence and typology of innovation, and the nature of their occurrence defined by it. this separation requires more attention because it is of fundamental methodological load. in this context, the emphasis of the author to the phrase “improvement of existing” draws attention. it turns out that innovation cannot be just designed object. innovation appears not as just created novation and qualitatively transformed, previously known as a sample. everything that we attribute to the new, the majority borrows “construction material” of the previous system state. considering this, in our view, the key statement for understanding the emergence of innovation methodology should emphasize that the people apply such a thing as tradition to display the past in the present and in the future. it is not about an abstract concept, but rather a massive phenomenon and that covers all the elements of social coexistence and directly related to the emissions of innovation and developments and, moreover, formats them according to the essence and social role. a tradition acts as one of the most effective mechanisms of human communities’ adaptation to the changing environment through regulation of norms and values. as a rule all changes in the agreed and existing community of people take place due to the reason of exhausting their possibilities of solving vital problems in ways that were used before. in the process of understanding the new reality, the society always deals with a certain amount of already identified states of the one or another state of the economy. this repetition is inherent in the most social and economic system. however, it cannot be considered as a repetition return back. involvement of the tradition in the processes of human activity unfolds in the form of a circle, which is essentially a “circle of circles” and finds explanation in bringing the tradition for functioning under the changed circumstances, to return back for identifying its braking elements and then move forward to adapt traditions through sub-functions in the already changed society. however, it is important to take into account the fact that the previous fixing traditions involved in the present serve as a source maintaining the dynamics of the directional process which continually brings social system to a desired baltic journal of economic studies 38 vol. 1, 2015 38 state of the human community. so tradition involved in the process of social development, realizing the potential of streamlining processes in the social system ensures repeatability, predictability and accountability and, thereby, contributes to their inclusion in the area of social expediency. all the aforementioned confirms the fact that the tradition is not something static, because at each stage of its involvement in social development processes there are actions for improving implementation of mechanisms potentially inherent in it structural roots. it should be noted that the tradition is not opposed to change, but rather creates a spatial and temporal context, which updates the changes. the point is that due to the positive traditions of the previous stage of social development as stable invariant elements, values, relationships and social relations transferred to the present. and it is the presence of invariant, that is something unchanging that determines the stability of the social and economic system. it turns out that by its nature a tradition and novation are inextricably linked. they mutually stipulate, complement and reinforce each other. guided by the given statements we can believe that due to the appointment of the tradition of the social plan there is a constant setting of the target vector of social dynamics by metamorphic way and stochasticity of a set of proposals to ensure innovation and thus the evolution of some persistent macro-states at the relevant stage of social dynamics. the expressed gives reason to believe that social tradition in contrast to all other content types is a relatively more complex phenomenon than a number of reasons. social tradition is quite versatile. first of all, it includes many components. secondly, it has integrative function, and its sub-functions stipulating it. thirdly, it finds its expression in sufficient quantity of changing and unstable forms, methods, approaches, etc. fourth, it is a landmark of innovation searches. fifthly, the tradition of social content is a means of regulating social relations. sixth, it is a means of securing a positive experience. seventh, it is an effective means of socialization. taking into account the aforementioned, we can confirm that social traditions are concentrate, and even a conglomerate of social values. one of the possible ways of understanding a social tradition is a comparison of the recognized and described constructs. the tradition holds samples, forms of work organization, relationships, distribution, means and methods that have proven themselves in the past. social traditions that make up the current value for the community, formed in the past and carry viable “old” maintaining stability while ensuring social positions. with regard to the origins of the formation of social innovation there are solutions that can change directly or indirectly selectively fixed social institutions in various sectors of the national economy. all interpretation, the meaning of which brings social innovations beyond improvement, development, change, transform them automatically into something else that is somewhere nearby and only. 4. innovation mechanism and foundation of social innovations the design of the innovation mechanism of social development shall be built on the fact that updating of the existing social traditions because of the changed social circumstances has a permanent character. every next cycle of updating valuable components of the social tradition of regulation of the functioning processes of the society does not appear as separated from the previous one, and is in internal communication with it. development based on novation is oriented on the change of valuable content of the existing tradition, its transfer to a new quality. novation, as a rule, appears and is implemented through modernization of the tradition. in case if it is recognized by the society, it is institutionalized. due to the fact that the practice on the innovation issues is ambiguous and the specialized literature on this fact has not offered final decision, let’s find it appropriate to support the scientists who believe that the result of improvements of the existing traditions is novation, the components of which are interior and exterior novation externally t ra di tio na l l va lu ab le co nt en tн ап ов не нн я (т 1) modernization (improvement) (уi) exonovation implementation institution traditional valuable content – (т1; т2) **** innovation (і1) n ov at io n traditional valuable content (т2; т3) або (т1;т2; т3)…(тn) in co m pl ia nc e w ith th e ch an ge d ci rc um st an ce s fig. 1. mechanism of cyclical renewal of institutional content of the social development regulation system baltic journal of economic studies 39 vol. 1, 2015 constructs. in this case the novation decisions borrowed from outside according to the semantics of composite conceptual apparatus, in our opinion, should be called as exo-novation, and internal – innovation. the foregoing gives an opportunity to give the scheme of universal mechanism of innovation of social development in the national economy (see figure 1). the scheme presented in figure 1 shows that the fixation of the novation means the transition from the traditional system with its valuable content (t1) in a high-quality new state with valuable-formation system component (t1, t2), which did not exist in the past. the past content of the public system establishment with tradition (t1) basically means providing it with a plurality of values, properties, characteristics and so that т 1 = f /x i , y j , z k , l m , n g ,……/. it is possible to assume only hypothetically that the whole set of values, properties; characteristics and so on shall be subject to changes. this change is actually made in relation to the limited number of т 1 = f /x i , ..z k , ..n g ,../. if everything happened according to the different scenario and the system in all of their content would become the new characteristics, it would lose its continuity. the complete system change that is coming to the state (t 2 ) marks the end of the existing system and replaces it by another. “in this case, – emphasized p. sorokin (2006) – we do not have the right to talk about the processes of changes, transformation, modification or evolution of the system, and only the replacement or displacement of the system (or process) to another, completely different from it can be talked about”. from the aforementioned it is clear that the new appear either on the foundation of the past and stipulated by it, or against it. from this follows the recognition that the emergence of entirely new unrelated to the past in any context is impossible. and when we are talking about something new, we mean exclusively qualitative characteristics. but it is not a blind adherence to it because doing so may cause certain difficulties or even block the way to the formation of innovation. finally, always keep in mind that the transfer of the achievements of the past contemporaries solely because the tradition is to some extent absolutization of this process. there is a rational way to produce innovation through scientific and technical work. however, if you compare amounts in respect of purely scientific novation and novation stipulated by the traditions, the latter will surpass the first 9 times (karmazіna, 2014). quite clearly the potential of the chain “tradition  – novation” was described by m. porter (1993, p. 64), emphasizing that “... most part of changes is evolutionary, not radical; accumulation of small changes often gives more than a major technological breakthrough ". thus, the tradition (т 1 ), being the last in content, shall be reconstructed on the contemporary basis of today generally or in respect of certain values which makes not only partially reproduced (т 1 ), aut also updated (т 2 ). in this case the ontological sense the tradition (t 1 ) is not actually aimed at maintaining or mandatory change to (t 2 ). to the great extent it is something permanent in landmark changes (the first – t 1 = const, on the second – t 2 = const etc.). it can be compared to the foundation, which constantly forms something purely new or updated. the main purpose is to link the traditions of the past (t 1 ) to the future (t n ) through modernity (t 1 , t 2 ). in fact, following the description of the cycle novation updating of the economy, at first sight we can confirm its stereotype and structuring capabilities and algorithmic process of innovation. but this is an illusion. if the operation of technical systems has really stereotypes, the functioning of social systems is closely linked to the dynamics of other categories, namely development. moreover, if the technical systems need accurate and unambiguous implementation of prescribed technology, social – after solving one problem, which brings to life a different and usually more complex, discover the means to solve it, and so on. it is natural that by virtue of the separated features the novation processes in the social dimension compared to the technical and technological sphere are implemented with a higher uncertainty about the consequences of their implementation and are characterized by difficulty in assessing the intended effect. guided by the tradition as social and civilization accumulated experience, it is by virtue of the speed of changes in the modern society is deformed and requires new orientation in life. in this sense tradition provides the necessary precondition for the implementation of creative processes, and innovation as their product becomes a potential source of new traditions. there is every reason to believe that the appointment of the tradition of the social plan is caused by setting a targeted vector of social dynamics by setting metamorphic aspect and stochasticity of a number of proposals to ensure innovation and thus the evolution of some persistent macro-states at the appropriate stage of social dynamics. the fact that the relations between the terms “traditioninnovation” is more complex than it seems. innovations with social overtones are made on the basis of improvement of component combinations of social traditions. in such a component range of social traditions a stream of improvements is quite diverse and in some ways not always focused. in this regard, there is a need to state that understanding of the social innovations requires their expansion by including para-social innovation and exonovation antisocial ones to them. other authors also have the idea of isolating the innovations of negative or indifferent to ensure positive changes. thus, yu. yakovets (2004), providing classification of innovations, highlighted among them pseudo-innovation and anti-innovation. he referred those related to wrong ways of human ingenuity to the first ones, and to the second  – those with reactionary nature and stipulating the reverse movement in any sphere of national economy. m. huchek (1995) called innovation with such content as “simulated” and “unoriginal”. in our view, social and organizational innovation and institutional nature of non-compliance in providing social baltic journal of economic studies 40 vol. 1, 2015 dynamics associated with dead-end management solutions and inadequate response to change. the prefix “para” [greek para near, at m in the contrary, a deviation from somewhat  – or something “similar, but not identical”], which means deformation of the content designated with root part of the word “social” more accurately to reproduce the contents of “innovation” of the inhibitory nature. in the word “para-social” a prefix “para” give it a meaning of the antipode of social aspect in its traditional interpretation. para-social aspect of social practice accumulates the total content of negative social issues. concerning the introduction of social innovations in practice the term “exo-novation anti-social”, then it is about improvements imposed on the society, which is generally alien to the society. we shall distinguish formal and sometimes seeming innovations from those that really are such that bring to a qualitatively new level of social dynamics in a particular social space. innovations that are frankly alien to the society represent a threat to the society and are able to even disrupt it. in our opinion, adequate time would be appropriate to identify social innovation at the macro level with solutions that can change directly or indirectly selectively fixed institutions in various sectors of the national economy at the appropriate stage of socialization transformation with compulsory positivization of the social status of subjects of social and economic processes through constructs by mitigating revenue and income inequality. 5. research methodology the methodological basis of the study is fundamental provisions of the economic theory of socialization of the market economy, the laws of dialectical logic and materialist understanding of social and historical development, the work of the leading foreign and domestic scientists, which highlights the problems of innovative development in general and social innovation in particular. to solve this problem, a number of general scientific methods is used, such as analysis and synthesis during the critical evaluation of approaches of the domestic and foreign authors about the nature of “innovation”, “novation” and “developments” of the systematic and structural in the design of the mechanism of the cyclic renewal of institutional content of the regulation system of social development, summarizing the justification of the conceptual terminological apparatus including social innovation and gradual refinement of social innovation formulas, abstract logic when making theoretical generalizations and forming conclusions. 6. conclusions the survey results give an opportunity to confirm the presence of non-compliance of the theoretical constructs of social innovation with the changes of the reality according to the results of development of the oriented social market economy in the post-soviet republics. the idea of the nature of “social” is not something that is not compounded, but does not get adequate time of formal nature. the concepts “innovation”, “novation” and “developments” that dilute the content of the category “social innovation” are identified. the source base of social innovation that generates parasocial types of innovation and antisocial innovations has not been contoured until recently. it is difficult to rely not only on a theoretical breakthrough, but on the effective implementation of social innovation on the national territory without removing these destructions. the process of ordering and organizing the process of social innovation by certain rules and regulations will contribute, in our opinion, to the generation of forms of social integration and regulation of relations between individuals and their collective combinations relatively independent and also independent of individuals. and on the way of modernization of the mechanism of design and involvement of potential of social innovation can provide a number of contradictions about eliminating differences desired and actual conditions of social life that should be set to identify and distinguish the nucleus and spheres of influence. 7. conclusions of the scientific research the necessity of introducing the term “social” as normalized inequality in the society to the limits that defines the motivational aspects of work, and “innovation” as the changes that are generated within the social and economic system in the scientific use. it has been offered to interpret social innovation as solutions that can change directly or indirectly selectively fixed institutions in various sectors of the national economy at the appropriate stage of socialization transformation with compulsory positivization of the social status of subjects of social and economic processes through constructs of mitigating the revenue and income inequality. the falsity of orientation in the development of programs of social innovation on purely rational methods of production of innovation through scientific and technical work has been proved. it has been revealed that the new appears either on the foundation of the past and stipulated by it, or against it. from this follows the recognition that the emergence of entirely new unrelated to the past in any context is impossible. but by virtue of multi-purpose of definition of the social aspect there is a problem of setting a targeted vector of social dynamics by leveling stochasticity and metamorphic aspect of a number of novation proposals and thus ensuring the evolution 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(2004). epochal innovations of the xxi century. moskau.: economics. yaremenko, v., & slіpushko, o. (ed). (2001). // ne interpretation vocabulary in the ukrainian language. (v. 3) – kiev: publishing house “akonіt”. zinoviev, a.a. (2008). logistic sociology: selected writings. moskau: product. ольга бильская происхождение формирования социальных инноваций в условиях переходной экономики аннотация. целью работы является определение сущности, источником базы которой является механизм формирования “социальных инноваций” в условиях переходной экономики с рыночным механизмом для обеспечения деятельности на территории стран, которые осуществляют развитие социального государства. методология. для решения этой проблемы использовано ряд научных методов, таких как анализ и синтез во время критической оценки подходов отечественных и зарубежных авторов о природе “новация”, “события” и “инновации”, системно-структурный механизм циклического обновления содержания институциональной системы регулирования социального развития, подводя в обосновании концептуальных терминологический аппарат социальной инновации, и в частности постепенного прояснения формул социальных инноваций, делая абстрактно-логические теоретическое обобщение и выводы. результаты исследования приводят к необходимости введения термина “социальное” в научном и практическом обороте, как нормализация неравенства в обществе до границ, которые определяют мотивационные аспекты работы, и “инновации” как изменения, которые генерируются в рамках социально-экономической системы. предложено разъяснять социальные инновации, как решения, которые могут изменить напрямую или косвенно выборочно фиксированные учреждения в различных отраслях народного хозяйства страны на соответствующем этапе социализации преобразований с обязательной позивитацией социального статуса субъектов социальных и экономических процессов через конструкты смягчения доходов и неравенства в доходах. доказано, что базовым источником социального инновирования являются социальные традиции, которые в силу многоцелевой определенности социального связаны с метаморфическими характеристика и стохастичностью набора предложений социальных инноваций и их деструктивных конструктов. практическое значение. организация понятийного и категориального аппарата социальных инноваций будет способствовать обоснованию социальной политики меры и исключит из практики урегулирования ситуации относительно непрофессионального решения проблемы обеспечения общественного прогресса. значение/оригинальность. научно-практическая значимость разработок означает, что они служат основой для теоретико-методологического обоснования процессов социальных инноваций, и должны меняться к лучшему благополучию населения. baltic journal of economic studies 87 vol. 6, no. 1, 2020 corresponding author: 1 general prosecutor’s office of ukraine, ukraine. e-mail: mamedovh@ukr.net 2 taras shevchenko national university of kyiv, ukraine. e-mail: babych_no@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-1-87-91 green economy: global development priorities gyunduz mamedov1, nadiia babych2 abstract. the aim of the article is to reveal the modern priority trends in forming incentives for the world green economy development in the context of globalization. the subject of the study is the global priorities for green economy development. methodology. the scientific literature analysis enables to study the current economic status of the global green economy and to determine strategic priorities and targets of such development, in addition, the dialectical method, scientific abstractions, methods of system analysis are used. the results of the study reveal that the authors propose a perspective on the strategy, ways and mechanisms of the global green economy development. it is proven that a complex structural transformation of the economy is required to increase the share of the high-tech and innovative sectors. practical implications. the complex analysis of the state of affairs and determining trends in the green economy development under threats and risks, related to the crisis processes in the modern world, is carried out. the study determines the key principles for the formation and implementation of a strategy for the green economy development based on the coherence of strategic priorities and strategic targets of the eu, as well as the need to reform the economic sector in order to develop promising green economy areas in ukraine. relevance/originality. the study reveals the state of affairs in the global green economy development, as well as further identification of promising trends of the green economy. key words: green economy, economic development, innovative development, ways of improvement. jel classification: f63, r11 1. problem statement current changes in society lead to occurrence of both positive and individual negative trends, which significantly impede the development of the world economy and cause serious problems of economic stability (mohilevskyi, sevruk, pavlenko, 2017) in the world. the 21st century should be decisive in the history of humankind, because there is no alternative to balancing the man-made impact on the environment with the ability to reproduce the primary properties of natural components, to developing without the deterioration in living conditions of organisms. the development of society in the 21st century will be based mainly on innovation, new technologies and elaboration of information flows that is why it requires new approaches to the use of natural resource potential (nrp) (filipenko, budkin, halchynskyi, 2002). current changes in society lead to occurrence of certain both positive and negative trends, which significantly impede the development of the world economy and cause serious problems of economic stability (mohilevskyi, sevruk, pavlenko, 2017) in the world. numerous examples demonstrate that economic development, high competitiveness and productivity in the information economy (as opposed to industrial) is not possible without permanent accumulation of new knowledge and effective work with relevant information. it should be noted that the interrelation between intellectual activity and material production has become especially close due to the development of information and communication technologies that have enabled a person to continuously generate and accumulate new layers of knowledge and information (pestova, 2014). the global problems of humankind, such as climate change, resource depletion, poverty, overpopulation, and food shortages, are compounded by the crisis of a socio-economic system built on free market relations. market self-regulation processes have a negative impact on social security and the environment. therefore, the un experts advise to concentrate on the formation of a new green economy, which provides for an increasing role for the state and interstate bodies in economic regulation, promotion of business development on the basis of new green technologies and greening of industrial branches of economy. this study focuses on the issue of strategic priorities for the green economy development in the context of economic security (hrytsiuk, vasylenko). baltic journal of economic studies 88 vol. 6, no. 1, 2020 the aim of the article is to reveal the modern priority trends in forming incentives for the world green economy development in the context of globalization. 2. main material the formation of the green economy is a modern trend of ensuring the economic security of the state in the context of globalization. poverty eradication, control over the use of natural resources, and increase in the number of jobs should be under focus. application of market mechanisms should be combined with national and international regulation of economic processes. improving the environmental situation ceases to be an expenditure line of the state budget and becomes the very essence of the new economic system. therefore, the state forms new economic conditions for doing business, attractive for investments precisely in the development of new green industries and ecological transformation (greening) of the traditional economy (hrytsiuk, vasylenko). the 2009 nobel prize winner in economics, paul krugman, argues that there is no reason to believe that free markets will deliver an outcome that society considers fair. market efficiency is in no way related to the guarantee of health insurance, aid to the poor, etc. markets should be allowed to do their job, making efficient use of the nation's resources, then taxes and transfers should be utilized to help the poor. when there are "negative externalities", that is, costs that economic actors impose on others without paying an adequate price for environmental pollution and the use of natural resources, any presumption that the market economy will self-regulate, does not work. the green economy answers these questions (krugman, 2010). green growth means fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. to this end, it must catalyse investment and innovation that will be a basis for sustainable growth and contribute to new economic opportunities (kurs na zelenyiy rost). according to the us social investment forum, about 11% of big corporations spend on sustainable investing; in europe, this figure is about 17%. nowadays, most grants from international organizations are given under fairly stringent environmental terms, which increases the interest of businessmen in the development of green technologies (strategiya “zelenogo” zrostannya oesr). officially, the oecd green economy policy was adopted in 2009 as a strategic direction for development (oecd green growth strategy) (оrganization for economic co-operation…). in europe, the official document for this is the roadmap to a resourceefficient green economy in europe. in addition, low carbon green growth roadmap for asia and the pacific is adopted (european commssion). the goal of the green economy is to create an effective environment for economic and social progress, based on minimizing the negative impact on the environment and the efficient use of natural resources while maintaining a decent standard of living. this goal is achieved through lower goals (sub-goals), which include protection, conservation, reproduction of natural resources and prevention of nonrecoverable losses of biodiversity by minimizing negative anthropogenic impact on the environment, conservation and restoration of green spaces, ensuring the integrity of ecosystems, improving the quality of natural resources, etc.; increase of resource efficiency (increase of productivity of natural resources involved in economic circulation and reduction of waste volume through implementation of the closed loop production and maximum waste utilization), with reorientation to the preferential use of renewable resources; economic development based on structural changes leading to an increased importance of green sectors with a corresponding reduction in brown ones; ensuring social progress in the green segment of the economy, that is, creating “green” jobs, increasing the income generated by employment in the “green” sector of the economy, improving the quality of goods and services by entering the “green” market, etc. (chmyr, zakharkevych, 2013). in this study, ukraine should be under focus due to its great potential for green economy development, but unfortunately, to some extent, it does not properly use natural resources to ensure economic growth and sustainability. at the present stage, ukraine, as a european state, implement a set of strategic measures aimed at developing the economy in the context of the european integration (yunin, sevruk, pavlenko, 2018). therefore, ukraine's economic development requires today, as never before, a well-targeted and sound macroeconomic policy aimed at further stabilization. since the radical socio-economic transformations over the last decade have caused both positive and negative changes in ukrainian society (pavlenko, sevruk, kobko, 2017). the system of economic security of ukraine's development in the context of globalization requires consideration of the current trends of world development. it is about introducing the principles of green economy into different sectors of our country 's economy. from the perspective of ensuring the economic security of the state, it is possible to distinguish new green sectors of the economy, as well as those that undergo environmental transformation (greening) of the existing branches of the ukrainian economy. energy security: – small hydropower; – wind power; – solar electric power; – biogas energy; baltic journal of economic studies 89 vol. 6, no. 1, 2020 – the use of combustible gases from coal and lignite conversion process; – providing power plants with cleaning equipment; – refusal of direct combustion of coal; – utilization of secondary energy resources, such as woodworking and other waste. resource security: – transition to utilization of local energy sources, such as peat, firewood, shale, with modern environmentally friendly technologies; – use of shale gas. food security: – control over the cultivation, production, sale and consumption of gmo products; – introduction of eco-labelling; – development of organic agriculture. social security: – adaptation of the economy and population to climate change; – improving the energy efficiency of housing; – systematic measures to prevent man-made emergencies. industrial safety: – green building, the widespread use of energy-saving technologies and materials produced with minimal environmental damage; – development of green tourism; – energy savings in production; – implementation of the “cleaner production” program; – application of green technologies; – joint implementation projects under the kyoto economic mechanism. transportation security: – development of green transport, such as trolleybuses, trams, electric cars, bicycles; – limitation of emissions from motor vehicles, air transport. financial security: – formation of the carbon market; – green purchases; – green electricity tariffs. regional security: – rehabilitation of territories affected by radioactive contamination resulting from the chernobyl disaster; – reduction of water consumption; – restoration of forests and protected areas (potapenko, 2012). the annual turnover of the green economy in the eu is over € 300 billion, equivalent to 2.5% of gdp. it already employs about 3.4 million people, i.e. 1.5% of all employed. a quarter of all investment goes to clean technologies. for example, a wind power trend gives the largest increase in investment compared to other sectors of the eu economy in recent years. evidently, it is time to formulate a strategy for the development of the ukrainian economy on an innovative basis and to adopt relevant legislation, using the experience developed and implemented in many countries of the world, such as the usa and the european union, including great britain, germany, poland (heiets, 2015). therefore, the current legislative framework governing innovation activity in ukraine should be analysed thoroughly to introduce effective proposals on changing this framework, taking into account the challenges of economy modernization on an innovative basis. thus, fulfilment of these missions requires “transition of the national economy to the “green” model of development based on sustainable production and consumption, decoupling of economic growth and implementation of measures on combating degradation of the environment and exhaustion of natural resources and implementation of green growth policies based on the effective use of material resources, as well as the results of scientific research and environmentally-oriented innovative technologies, promotion of business activities in resource-efficient and environmentally safe production” (yunin, sevruk, pavlenko, 2018; drozd, pavlenko, sevruk, 2019). in september 2015, the united nations adopted a new global program to ensure a sustainable future by 2030, which sets out 17 sustainable development goals (hereinafter referred to as the sdgs) and 169 targets. sdgs should become a platform for developing national strategies for over the next 15 years. it is goal # 8 that promotes progressive, inclusive and sustainable economic growth, full and productive employment and decent work for all. the organisation for economic co-operation and development (оеср) projections suggest that with current production and consumption by 2050, the world will lose two-thirds (61 to 72%) of flora and fauna compared to the beginning of the 21st century, and the conservation of natural areas will be irreversibly impaired in 7500 thousand square kilometres, this is comparable to the territory of australia (policy brief ). for the european union specialists, sustainable development is a complex construction, which involves balanced development of three components, such as economic, social and environmental. therefore, sustainable development cannot be referred from the perspective of only one component. schematically sustainable development can be presented as the intersection of three circles: economy, society, nature. thus, the place of their intersection will become an area of sustainable development. unfortunately, in the world and in ukraine these are three equal circles now. nowadays, the economy is the largest circle, society is a smaller circle, and nature is the smallest circle, which is almost out of focus for the economy and society. and the challenge of sustainable development is to make these circles equal and to make the maximum area of their intersection balanced. one of the keys for systematic and coherent activity of the country in the course of introducing the concept of sustainable development is baltic journal of economic studies 90 vol. 6, no. 1, 2020 the development of a comprehensive plan of actions, strategies that would ensure the full implementation of economic entities’ activities without discrimination of environmental and social interests; would consider the international experience of implementing the above concept and the reality of the entire world economy. in turn, the multifaceted notion of sustainable development and differences in mentality, culture of the peoples of the world determine the presence in the scientific literature of a wide range of individual approaches of economists and collective views, formulated within international organizations, concerning the interpretation of the essence, components of such documents and, above all, sustainable development strategies (ianshyna, 2014; makovoz, perederii, 2018). 3. conclusions therefore, at the present stage, the basis for the successful development of countries is the implementation of public policies aimed at economic growth in accordance with the latest global trends of sustainable development, such as the model of green economy. the green economy model deepens and develops the concept of sustainable socio-economic development. it has occurred to address the challenges of today, related to natural capital degradation, increase in world poverty, acceleration of the onset and magnitude of the global crises. according to unep, there is no one-size-fits-all solution to the transition to the green economy. all measures should relate to the characteristics and natural heritage of each country, the level of its development, the effectiveness of its institutions, as well as the nature and extent of prevailing defects in the market mechanism, sectors identified as priorities, targets and other specific factors in an individual situation. it must be acknowledged that the transition to the green economy promises numerous benefits for the international community and all nations in terms of addressing food, energy and water security and climate change. this model is considered as an effective response to the financial crisis, which can ultimately lead to the achievement of the millennium development goals. at the same time, further study of the green economy, in particular with regard to developing and transitional economies, needs to be continued (hrytsiuk, vasylenko). therefore, the green growth doctrine is considered as a system of long-term actions, itemising resource opportunities, justifying the importance of green growth of the ukrainian economy and favourable business environment at both national and regional levels. this doctrine is based on the analysis of opportunities to use available natural resources more effectively on the principles of interregional (transnational) cooperation and mutual compensation for the damage caused. the implementation of these measures should form a sustainable economic system focused on providing a green vector for the development of the economy of the country and its regions. in practice, a scientific interpretation of favourable institutional prerequisites that ensure the implementation of the ukrainian green economy doctrine requires further improvement and innovative ways of its development should be substantiated (halushkina, 2011). references: mohilevskyi, l. v., sevruk, v. g., & pavlenko, s. o. 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"zelenyi" vektor rozvytku ekonomiky ukrainy ["green" vector of economic development of ukraine]. ekonomist, no. 11, pp. 4–7. baltic journal of economic studies 43 vol. 6, no. 2, 2020 corresponding author: 1 danylo halytsky lviv national medical university, ukraine. e-mail: roslemekha@gmail.com 2 lviv university of trade and economics, ukraine. e-mail: bogdanshchur1965@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-2-43-46 causes and consequences of economic crimes linkage in the contemporary realities of integration processes rostyslav lemekha1, bogdan schur2 abstract. the economically and socially advanced countries of the world have encountered a number of issues that are not new and examples of the systematic recurrence of which are known in europe, asia, america, africa. the spread of infectious diseases and the fight against their worst consequences have become relevant to different countries at least every 50 years. such recurrence, and therefore high probability and expectation, should be taken into account in the national security strategies and, rather, resources should be accumulated quickly to minimize the adverse effects on societies and the world at large. nonetheless, the first quarter of 2020 has been extremely difficult for countries that, with their vast array of new technologies, have been unable to navigate the dangers of covid-19 coronavirus disease or take precautionary measures without undue panic quickly. in addition to these generally strategic ones, a number of other problems have become apparent. these include the following, which relate to counter crimes that are committed in the economy and keep the gaps in policy approaches to identify the causes and effects of all other related aspects of society. therefore, the overriding task of international organizations, national governmental and non-governmental organizations are the development of concerted recommendations for the formulation and maintenance of systematic development of national and world security strategies. the component of economic security is particularly important, which is emphasized in virtually every speech by statesmen of countries suffering from the spread of covid-19 coronavirus disease. there is no doubt that the protection of the interests of public and private persons, producers, compliance with the requirements of ratified international pacts, other documents at all levels of the government of the state for the awareness of the cause-and-effect relations of economic crimes (to which all members of the corporation should apply) remains paramount, which is unfortunately very low in ukraine today. methodology. the stated purpose of this article is primarily related to the use of the cognitive potential of a number of philosophical, general scientific and special methods. the dialectical methods of analysis and synthesis, the comparative-legal method have become the methods of research taking into account the desire to determine the directions of development of foreign and national scientific opinion on the subject of the publication, they have allowed to distinguish perspective measures to counteract these offenses, taking into account the experience of the highly developed eu countries. methods of grammatical examination and interpretation of legal norms have helped to identify the gaps in the legislation governing the grounds and the procedure for bringing to justice the perpetrators of them, to develop proposals for its improvement. practical importance. establishing causality of crimes in the sphere of economy, shadowing the economy, which occurs in particular by committing corruption crimes, will help to identify systematic measures and effective instruments (including legal norms) aimed at preventing their spread and eliminating the negative impact of social institutions, relationships, which are not even perceived by most members of society today. awareness of the cause and effect of relationships of crimes in the field of economics will enable theoretical and practical support for the prevention of their negative consequences by using adequate legal and other mechanisms. an attempt to solve such a problem is presented in this study. key words: causation, property damage, criminal outcomes, crimes in the economic sphere, restitution, socially dangerous consequences, the purpose of criminal penalties, corruption crimes. jel classification: p11, k14, h51 baltic journal of economic studies 44 vol. 6, no. 2, 2020 1. introduction analysis of the legal protection of public relations in the sphere of economy allows to establish that it is mainly provided by means of criminal law, by establishing criminal liability for socially dangerous acts, the lists of which differ depending on the legal traditions of a particular crane. however, such remedies are usually not limited but form an integrated approach using the opportunities of other fields of law (tylchyk, et al., 2018). for example, in the uk, the activity of the financial sector is governed by two sets of rules: civil and criminal law. in this approach, despite the preference for civil law in quantitative terms, parity remains between the interests of business and the interests of the state, that is, business interests are "protected" by civil law, and the interests of the state by criminal law. the differentiation of criminal liability is due to the use of qualifying signs of crime both horizontally (within one part of the article) and vertically (for example, when passing qualifying features from serious to especially serious). in the united states, among the crimes that are referred to as economic crimes in the post-soviet codes, there are not only common criminal rules that "cover" virtually all economic processes, but also stand out rules that provide for liability for the most dangerous and sufficiently pervasive crimes. in particular spheres or sectors of economic activity (streltsov, 2014). in contrast to the above example, ukraine and other countries of the post-soviet space are dominated by the approach to defining crimes of any kind exclusively by criminal law (the criminal code). however, many of the normative acts that it refers to, including administrative law, contain prescriptions for the types of administrative offenses and penalties for committing them. in domestic legal doctrines, sometimes it is argued that the basis of such graduation of types of legal liability is the degree of social danger, harmfulness of the offense, and therefore many crime and qualifying traits are such that characterize precisely the qualitative and quantitative characteristics of consequences (harm). there should be separately mentioned the property (as an example, causing property damage to the ministry of defense of ukraine in connection with the misuse of budget funds in the process of inflating contract prices for housing construction for servicemen to obtain military equipment, weapons, equipment, clothing, medicines, food, etc.). such damages are in turn divided into direct pecuniary and indirect (lost profits and criminal justice costs). according to scientist tylchyk o. (2018), the costs of criminal justice make up about 2 % of ukraine's gross domestic product, and it is difficult to calculate the lost profits from economic crime, as well as the shadowing of the economy. it is also worth acknowledging the existence of damage that can be conditionally attributed to material, although the deduction of its specific results is not possible: reducing the attractiveness of investment and the level of protection of economic relations, reducing the competitiveness of domestic producers, monopolization of the market, reducing the activity of market relations, suppression of such activity, etc. in the last decade, the attention of the european community has been drawn to the development of means of combating the legalization (laundering) of proceeds of crime (tylchyk, 2018). this, on the one hand, is an independent type of crime; on the other hand, it is usually the result: the consequences of individual crimes, many of which are committed in the economic sphere. as a result of the actions of the subjects determined by the criminal law, such results, namely the proceeds of crime are the subject of a new crime. their quantitative characteristics are now counted, however, according to scientists, they are significantly low due to the high latency of crimes in the field of economy. in 2017, the officially established amount of proceeds of crime (under indictments) amounted to almost 6.5 billion uah, the amount of unpaid taxes, fees, and other mandatory payments – 3.3 billion uah, the amount of hidden profit – almost 5 million uah, and the cost of counterfeit and substandard goods – over 7 million uah. given that the amount of registered economic crimes is about 10% of the actual number of economic crimes, the direct material damage from economic crime can be much higher (only report criminal offenses for january – december 2017). therefore, research into the cause and effect relationships of crimes in the field of economy is a priority area of the humanities. 2. definition of the concept of causation in crimes in the sphere of economy theories of causation are associated with the doctrine of “condition" (siconditio sine gua non), or the "equivalent causation" of thomas hobbes. the object of this theory was the behavior of a particular person in the aspect of answering the question of its relevance to the cause. the reason is such a condition, the mental exclusion of which excludes the possibility of consequences, if the consequence occurred despite the elimination of the condition, then the reason is defined incorrectly (with all the conditions, the possible reasons are legally equal. in addition, the theory of the necessary condition, formulated by ortman, birkmeister, binding, recognizes the cause of any condition in the absence of which it is impossible to achieve the result. unlike the previous theory, the conditions are recognized as non-equilibrium, the decisive, the most effective conditions are distinguished. under the theory, a condition determines the cause of consequence when it increases the probability and possibility of such an outcome, and if it (the result) is a typical result of the condition that is the cause. if the results are not typical conditions, there is no causal relationship. the criterion baltic journal of economic studies 45 vol. 6, no. 2, 2020 for determining the typicality: consciousness authorized officer, consciousness offender – unauthorized persons. modern theories of causality, in particular the angloamerican system of law, determine that harm is an inevitable consequence of a breach of a duty to comply with legal requirements. the jurisprudence of germany, austria, and switzerland determines that a legally valid causal link exists if the objective achieved by the subject is the result of his/her behavior and corresponds to the real state of things (tanriveriev). any activity of a person causes changes in the environment. due to the axiomatic nature of the above thesis, it does not raise any objection and assertion that crimes in the sphere of economy, as a type of behavior, lead to negative changes of objective reality in the specified and tangible spheres. in the aspect of criminal law, not only the consequences of the crime but also the criminal consequences or results are defined as a link between the criminal act (inaction) and the object of the criminal offense as material or non-pecuniary damage, defined by the criminal law norm, the object of the encroachment. it should be agreed with scientists who emphasize that the process of causation is not a linear but structurally complex process of interaction of constituent systemic causes, which mediates a successfully dangerous result (soktoyev, 2014). the reasons for the steady increase in crimes in the sphere of the economy are caused, first of all, by the global socio-economic and political crisis in the country, which, against the backdrop of the spread of the pandemic, is gaining ground. therefore, the organization of an effective system for combating economic crime is possible only on the basis of the unity of general social, socio-criminological and legal measures, including criminal law. in the structure of economic crime, the size of the damage caused is dominated by crimes in the banking sector, in the sphere of international economic relations. official statistics on the dynamics of economic crime are not objective and incomplete. given these circumstances, it is possible to agree with the findings that general measures – social card – become crucial for the prevention of criminal behavior. they should aim at a) a clear definition of the functions of the state in regulating economic relations; b) the formation of its economic and legal policy; c) distribution of powers between central and local authorities in regulating economic processes; d) creation of appropriate conditions for the proper legal behavior of economic operators; e) ensuring equal legal protection of the public and private sectors of the economy; f ) creation of such market infrastructure that would provide equal opportunities for realizing the creative potential of various business entities; i) establishing democratic principles of control over the activity of business structures, etc. (olashin, 2015). 3. correlation of the consequences of the crimes in the sphere of economy and legal responsibility as a component of causation, the consequences of committing crimes in the economic sphere can be characterized as a separate social and legal phenomenon, in which the signs, properties of the crime, the nature and features of the object of crime are repeated: the normatively determined and protected procedure of economic activity. the most detailed causation analysis is offered in the doctrine of criminal law. however, as it has been repeatedly noted by researchers, the issue of revising most of the provisions to date is developed with a view to updating the concept of counteracting the shadow economy and determining the place of legal liability for offenses, including crimes, in the economic sphere among the means of counteracting it. analyzing the system and types of punishments that are imposed for such crimes, scientists indicate that the main goals that the legislator pursues in the countries of the anglo-saxon legal family are: the punishment of the offender; if not in the full correction of the criminals, then at least in "warning" him/her in committing new crimes; in cases of necessity, compensation for harm to the victims of the crime; reducing crime; protection of society and others (streltsov, 2014). at the same time, compensation for the victims of crimes in this category, as evidenced by the statistical reports on the results of the activities of law enforcement agencies for the detection of these crimes, is not their priority. in trying to remedy such provisions, lawmakers have recently been decriminalizing criminal acts, which in turn leads to the formation of impunity in the public consciousness and leads to an increase in the amount and magnitude of the harm caused by such offenses. the need to establish such causal relationships is obvious. however, it should be borne in mind that sanctions of criminal law differ substantially from those types of liability, which are in the regulatory fields of law and have a compensatory orientation there. as the scientists point out, each branch of law must perform one basic function, which directly follows from the main task before it. such a basic general function, which is specific to a particular field of law, is determined by the basic number, orientation, and content of the legal norms inherent in a particular branch of law. therefore, a crucial function of criminal law is a protective function, since the vast majority of the basic rules of this area of law are aimed at protecting values, interests, and benefits from prohibited acts (streltsov, 2014). the un declaration of basic principles of justice for victims of crime and abuse of power (1985) recommends that states include restitution as a punishment in their laws. criminal restitution has also been addressed in the european convention on the compensation of victims of violent crime council (1983), the coe recommendations on the status of baltic journal of economic studies 46 vol. 6, no. 2, 2020 victims within the framework of criminal law and criminal procedure, and on criminal justice in europe (changing europe, 1985). the second of these acts, in particular, states that: compensation to the victim may be imposed in the form of a criminal sanction or in the form of a measure instead of the sanction, or in addition to it; if compensation is intended as a criminal sanction, it must be enforced in a similar manner to the enforcement of penalties and take precedence over other financial penalties applicable to the offender. the current situation in ukraine in connection with the introduction of a number of measures aimed at curbing the negative effects of the spread of covid-19 coronavirus disease, especially regarding the significant restriction of the individual's rights to carry out economic activities, is quite indicative of the state and prospects of development legal responsibility, including for crimes in the sphere of economy. the enforcement of sanctions for violations of the established legal regime, which predominantly involves substantial penalties, has led to a significant negative reaction of the majority of the population. particularly noteworthy is the significant discrepancy in the number of penalties for such violations compared to even the average wage at the tap. a large-scale practice of appealing against decisions in cases of relevant offenses is predicted, in case of violation by the authorized subjects of proceedings for their commission. the non-proportionality of penalties for these offenses for other crimes prompts another rethinking of the provisions 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(in ukrainian) baltic journal of economic studies 42 vol. 5, no. 4, 2019 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: n_butenko@ukr.net 2 taras shevchenko national university of kyiv, ukraine. e-mail: lyuda.kot@gmail.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-42-49 methodological approaches to the evaluation of the effectiveness of partnership relations nataliia butenko1, liudmyla kot2 abstract. the objective prerequisites for the transition from a strategy of confrontation to partnership relations in a competitive struggle for the consumer predetermine the need for a clear definition of such concepts as partnership relations and partner networks, since it is the partnership relations that provide market participants with more competitive advantages than they could have under condition of separate activities. the subject-matter of the study is a methodological solution to the problem of determining the effectiveness of establishing partnership relations and the formation of partner networks. after all, the effectiveness of the partner network can only be achieved if the effectiveness of the partnership relations is achieved. therefore, the purpose of the article is to develop methodological approaches to determining the effectiveness of partner networks through the evaluation of partnership relations. in order to achieve this goal, the following research methods have been used in the paper: analysis and generalization of theoretical sources and scientific literature; abstract-logical method in the process of theoretical generalizations and formation of conclusions; prognostic and diagnostic; general scientific methods of analysis and synthesis. as a result of the research, the methodology of constructing a morphological matrix of the effectiveness of a partner network based on integrated indicators of the sustainability and reliability of partnership relations was proposed. in order to determine the components of sustainability, a methodology for calculating the integrated value of the sustainability index of the partnership relations is proposed. herewith, five interrelated components are taken into account that are equally important for strategizing partnership relations such as economic, marketing, social, environmental sustainability, and also the sustainability of partner networks in general. the algorithm of quantitative and qualitative assessment of the reliability of partnership relations involves seven stages. in particular, the definition of requirements for the reliability of partnership relations within a certain partner network, the definition and adjustment of the indicators of the rating system of the reliability of partnership relations and their importance for the partner network, the formation of the rating of partnership relations by the values of the generalized index of reliability, rating partners within a specific partner network by the level of reliability. therefore, the proposed expert methodical approach to the assessment of the reliability of partnership relations involves the calculation of three characteristics of reliability (partner, production and economic activities, partner network in general) and is an applied instrument set for a new solution to the scientific and applied problem in the area of formation and development of partner relations in the economy of ukraine in order to ensure a high level of management of them in resource constraints. key words: partnership relations, partner network, reliability of partnership relations, effectiveness of partnership relations. jel classification: m30, m31 1. introduction the influence of globalization processes on economic activity contributed to the active search for new sources of competitive advantages. it is effectively established relations with partners that become a unique asset, which can positively affect the competitiveness of market actors. a partnership can be defined as a type of economic relations based on joint actions and efforts of the parties, united by a common interest, aimed at achieving specific goals well understood by the participants in such relationships. in other words, partner economic relations are understood as a set of ways and forms of purposeful organization of relations between the parties to achieve common goals. thus, it can be argued that there are objective prerequisites for the transition from a strategy of baltic journal of economic studies 43 vol. 5, no. 4, 2019 confrontation to partnership relations as the basis for the interaction of business entities in the structure of the national economy. the partnership reflects: – the natural development of relations in the market, reproducing socio-economic interconnections, which envisage joint actions and efforts of the parties, united by the common interest; – relationships of equal subjects who are aware of the importance of their actions for the partner and build their activities in such a way as to meet the expectations and achieve the set goal; interaction in the case of mutual trust, confidence, and joint activities aimed at achieving a common result. partnership relationships provide market participants with access to more diverse resources than they would have had based on a stand-alone activity. therefore, the purpose of the partnership relations is to get access to the necessary resources, markets, technologies or to the distribution channels. at the same time, it should be noted that at the present stage of development of the domestic economy, competition in the traditional form, as a rivalry between individual enterprises, began to be replaced by a rivalry between entire production chains. therefore, it is worthwhile to talk about the formation of partner networks as a sustainable formation of two or more market entities in order to exchange information (ideas, technologies, resources, etc.) and increase their performance. the main characteristics of partner networks are information, cooperation with partners, and industrial capacity. the exchange of information in the network provides the participating companies with ideas for generating innovations in the production of goods and services, for increasing the efficiency of production or for finding new customers and new sales markets. cooperation in a partner network allows combining resources and knowledge, helps participating companies benefit from the use of assets and experience of other companies. joining of participating companies into partner networks allows them to increase their industrial capacity and thus contributes to obtaining competitive advantages in the market. partner networks, as multidimensional productioneconomic systems created as a result of the activity of two or more market actors, can be considered as a focused set of processes of different nature in order to establish and consolidate the interaction between the internal elements of this system and external management structures that interact on a long-term basis in order to consider the interests of all participants in economic relations. today, when building partner networks, the propensity to cooperate and the constant search for the most effective partnership relations, through which the reorientation of activities is carried out in accordance with market conditions, is becoming increasingly important, that is, partnership relations allow partner companies to achieve, maintain, and enhance their competitive advantages. therefore, an important methodological problem of establishing partnership relations and forming partner networks is the problem of determining their effectiveness. after all, the effectiveness of the partner network can only be achieved if the effectiveness of the partnership relations is achieved. under effective partnership relations, we understand the mutually beneficial relationship between sellers, buyers, competitors, suppliers, intermediaries, personnel, shareholders, investors, and other stakeholders, as a result of which the production and economic activity as of a specific market player so of the entire partner network, at the expense of consolidation of intersectoral and interregional interaction, allows ensuring and coordinating the economic interests of all interested market players. 2. literature review and research methodology in the works of well-known scholars such as r . morgan and s. hunt (2011), the commitment-trust theory, which in their opinion is a key factor in the success of partnership relations, is considered thoroughly and in detail. economic rents related to network activity were considered by j. dyer and h. singh (1998). the formation of partnership relations in logistics channels is highlighted in the writings by b. j. lalonde and m. c. cooper (1989). m. christopher (2004) studied “competition of supply chains.” issues of the monetary and non-monetary value of partnership relations were investigated in the work by m. tewes (2003). on such an important characteristic of partnerships as a synergy, j. bivainis (2006) emphasizes in his research (2006). the formation of competitive advantages of the enterprise in the context of relationship management with business partners was investigated in the writings of ya. kryvoruchko (2010), the issues of the relationship between companies and consumers in the industrial markets were thoroughly considered in the works of s. kushch (2006), the study of competitive advantages on the basis of partnership relations was thoroughly covered in the work by m. porter (2005). the following research methods are used in the paper: analysis and generalization of theoretical sources and scientific literature; abstract-logical method in the process of theoretical generalizations and formation of conclusions; prognostic and diagnostic; general scientific methods of analysis and synthesis. in particular, comparative analysis – to study and compare the factors that influence the formation and development of partnership relationships and partner networks; semantic analysis – to clarify the essence of the main categories; morphological analysis – to clarify the composition of the conceptual and categorical baltic journal of economic studies 44 vol. 5, no. 4, 2019 framework on the problem; system – for building a system of indicators for evaluating the effectiveness of partnership relations. 3. the main characteristics of the effectiveness of partnership relations given the fact that the process of forming partnership relations is complex, the results, conclusions, and overall outcomes of the partnership are diverse. that is why it is necessary to approach the definition of their effectiveness in a complex way. we share the opinion of scholars (tewes, 2003), who suggest approaching the assessment of the effectiveness of partnership relations through the definition of their monetary and nonmonetary value. the monetary value of partnership relations is the value that is shown on the basis of money value, that is, it has a fixed money form. indicators of the monetary value of partnership relations can be indicators such as real costs and benefits of the partnership approach, in particular, reduction of production costs, productivity increase, sales growth, quantity and quality of attracted investments, etc. however, partner networks also create for their participants a variety of non-monetary values, that is, those that are quite difficult to reflect in the money equivalent, but which significantly affect their activities. thus, such non-monetary values can include such as improving market position, reducing the time of market promotion of a new product, improving reputation and consumer confidence, the impact of the partnership on society, etc. however, in our opinion, sustainability and reliability of partnership relations determine the effectiveness of partnership relations most completely. therefore, the formation of a system for evaluating the effectiveness of partnership relations should be based on the quantitative values of generalized integral indicators of the sustainability and reliability of partnership relations. reliability of partnership relations is the ability of relationships to provide an effective joint activity for a long period, characterized by mutual confidence, trust, and loyalty of partners, and the absence of negative externalities for the members of the partner network. the reliability of partnership relations is determined by the following characteristics: 1. the equality of participants in partnership relations is a priori prerequisite for their effectiveness since only in partnership relations, there may be no pressure based on the force of power or position when the will of one party is compulsory for another. equality implies the absence of privileges and powers of either party; 2. the autonomy of partners in the partnership, which means the isolation of the individual partner of the partnership, its independence from the potential partner, and the ability to independent, responsible decisions regardless of external pressure; 3. the freedom of choice of partners is possible only upon conditions of the existence of a market economy characterized by pluralism and free competition. this does not mean that in the situation of a monopoly, there is no interaction between market participants. it exists but has certain limitations, and therefore, it is rather an example of “forced cooperation”. for fruitful, effective partnership relations, a “market of partners” is needed, where one can choose the one with whom the interaction is most effective. methodology for identification of reliability measurements of partnership relations the introduction of the author’s methodology for identifying the measurements of the reliability of partnership relations (pr) is based on the use in estimations of the method of logical design when developing a rating matrix (an example for a binary partner network (pn) – in table 1). to identify qualitative features of the reliability of partnership relations, we propose to determine them by three determinants: the reliability of the partner; reliability of production and economic activity; the reliability of the partner network in general. herewith, their values are represented with a delimitation of three qualitative levels: “high” (b), “normal” (h), not relevant (не). it should be noted that the proposed morphological matrix is constructed only for the two entities of the partner network, and, for more partners within a separate partner network, the latter will have a more complex multiplicative appearance. we recommend performing a quantitative-qualitative assessment of reliability according to an algorithm that involves the following seven stages: 1. determination of the requirements for the reliability of partnership relations within a particular partner network. selection of objects of the rating assessment of the reliability of partnership relations. at this stage, one should consider the purpose of the partnership network and the type of strategy developed for managing partnership relations. 2. identification and correction of indicators of the rating system of the reliability of partnership relations and their importance for the partner network. given the above, in the rating estimation, the indexes of the assessment of the partner’s reliability and the partnership relations between the market participants and the assessment of the reliability of the partner network, in general, are used. an expert assessment of the value of relations between partners is a key component of assessing the reliability of partnership relations. 3. assigning a score to each local indicator of the reliability of partnership relations and determining and justifying the permissible fluctuations of their values. 4. definition of integrated reliability indicators in each local group as the ratio of the sum of products of the score of each group indicator and its significance to baltic journal of economic studies 45 vol. 5, no. 4, 2019 table 1 evaluating the reliability of partnership relations by measurements of the corresponding index estimation of pr reliability index within a certain pn e xp er t l oc al re lia bi lit y in di ce s partner 1 pa rt ne r’s re lia bi lit y re lia bi lit y of p ro du ct io n an d ec on om ic re la tio ns pn re lia bi lit y pa rt ne r’s re lia bi lit y re lia bi lit y of p ro du ct io n an d ec on om ic re la tio ns pn re lia bi lit y pa rt ne r’s re lia bi lit y re lia bi lit y of p ro du ct io n an d ec on om ic re la tio ns pn re lia bi lit y pa rt ne r’s re lia bi lit y re lia bi lit y of p ro du ct io n an d ec on om ic re la tio ns pn re lia bi lit y pa rt ne r’s re lia bi lit y re lia bi lit y of p ro du ct io n an d ec on om ic re la tio ns pn re lia bi lit y thresholds for index values from 0 to 6 from 6 to 12 from 12 to 18 from 18 to 24 from 24 to 30 pa rt ne r 2 partner’s reliability from 24 to 30 в absolute reliability of pr * reliability of production and economic relations pn reliability partner’s reliability from 18 to 24 high reliability of pr * reliability of production and economic relations pn reliability partner’s reliability from 12 to 18 н medium reliability of pr ** reliability of production and economic relations pn reliability partner’s reliability from 6 to 12 не low reliability of pr *** reliability of production and economic relations pn reliability partner’s reliability from 0 to 6 unreliability of pr *** reliability of production and economic relations pn reliability * corresponds to a quality level of high reliability (в) ** corresponds to level of reliability (н) *** corresponds to level of unreliability (не) the sum of the materiality of each indicator in this group. at this stage, figures-indicators of the reliability of each group are analysed, comparing the obtained values. the overall reliability indicator is found by summing up the group figures. 5. formation of the ranking of partnership relations by the values of the generalized reliability index. the final result of the rating assessment is the list, in which the partners of the partnership will be classified according to the quantitative value of the indicator (the higher its value, the higher the place that the partner occupies in the overall rating). 6. ranking partners within a certain partner network by the level of reliability. according to the results of the rating assessment of the reliability of partner relations in the partner network, they are divided into 5 groups: absolute reliability, high, medium, low, lack of reliability. for this, we get recommendations for high (b), normal (h) or unstable (не) prospects for partnership. types of partner networks for these characteristics are given in table 1. the indicated quantitative and qualitative values of the reliability index of partnership relations – are the starting point for calculating the integral indicator of reliability index. 7. the selection of the elemental composition of substrategies and the development of the appropriate type of the partnership management strategy with a permanent transition to the execution of the tasks provided for in stage 1 (to clarify the requirements for the reliability of the partnership relations’ functioning within the partner network). baltic journal of economic studies 46 vol. 5, no. 4, 2019 table 2 instruments for the strategic management of pn development by integrated reliability index network type reliability evaluation content of strategic instruments for the strategic management of pn development type of pr management strategy – system i type partner networks with an absolute level of reliability quantitative 24-30 points pns are built based on the principles of long-term, synergy, trust, the formation of common information networks, and the use of mutual competencies. they have the highest monetary and non-monetary value. they are implemented in the form of strategic alliances, organization of relations with a partner on the basis of complete trust, the establishment of long-term pr . strategic instruments are aimed at achieving goals by all objects and spheres of business activity. qualitative в – high pr reliability absolute reliability of partners ii type partner networks with a high level of reliability quantitative 18-24 points formation of pr , assessment of their reliability level, exchange of information and intellectual property, use of mutual competencies. search and attraction of new reserves for value increase to production and economic activity. strategic instruments are aimed at achieving goals by all objects and spheres of business activity. qualitative в – high pr reliability high reliability of partners type of pr management strategy – target iii type partner networks with a medium level of reliability quantitative 12-18 points formation of long-term pr , control over the level of reliability, application of correction measures, use of collateral/guarantees of the bank; the creation of marketing research and r&d departments that realize common goals will allow increasing the level of necessary stocks, involve advertising campaigns to expand the sales markets, and ensure the use of effective methods of product distribution. search for internal reserves to increase value and trust. qualitative н – normal pr reliability medium reliability of partners type of pr management strategy – program iv type partner networks with a low level of reliability quantitative 6-12 points control over the compliance with contractual obligations, using the prepayment, applying guarantees, searching for a partner with a higher level of reliability. strategic instruments of process management are directed to objects and activation of activity by subjects of pn reliability programs. qualitative нс – unstable pr reliability low reliability of partners v type partner networks with an extremely low level of reliability quantitative 0-6 points the termination of the pr and the search for a more promising partner with a higher level of reliability. strategic instruments of process management are directed only to own objects of activity, elaboration of the program of elimination of destructive influence of events, which caused a breach of reliability within a certain pn. qualitative нс – unstable pr reliability lack of reliability of partners therefore, given the characteristics of the reliability of a particular partner network that characterizes an integrated reliability indicator, the appropriate system, target or program strategic management instruments are proposed. determining the sustainability component and calculating the integrated value of the sustainability index of partnership relations in the strategic perspective, for the purpose of long-term implementation of partnership relations, it is expedient to determine the parameters of sustainability of partnership relations. thus, the sustainability of partnership relations is an indicator that reflects the ability of a partner network to maintain activity parameters and their functional activity at a level that ensures compliance with the interests of the members of the partner network in the conditions of the negative influence of environmental factors. sustainability of partnership relations characterizes: – consideration and coordination of economic interests of individual market players. each market participant is the bearer of particular interest – a set of benefits that it seeks to gain by entering into economic relations with other participants; – partnership relations should create conditions for simultaneous fulfilment of various economic interests of each partner, that is, the realization of interests at the expense of partners’ achievement of specific economic goals (income growth, profit maximization, improvement of living standards, etc.). for this purpose, five interrelated components should be distinguished that are equally important for strategizing partnership relations. these include: economic, marketing, social, environmental sustainability, and also the sustainability of partner networks in general. we propose the following list of implementation of valuation procedures defined within the framework of the author’s methodical approach to assessing the sustainability of partnerships: in order to calculate the aggregate indicator – the partnership sustainability index (іспв), we form a database of integrated indicators baltic journal of economic studies 47 vol. 5, no. 4, 2019 (іес, імс, ісс, іес, ісм) in the composition of economic, marketing, social, and environmental sustainability, sustainability of the regional socio-economic system (the latter will be clarified by the consequences of incorporation into the existing database of a generalized integrated indicator of the scale of sustainable development potential), and the sustainability of the partner network. a generalized indicator of the sustainability of partnership relations in the corporate sector is calculated based on the geometric mean of complex indicators of economic, marketing, social, and environmental sustainability and, accordingly, the sustainability of the partner network in general, having the form of the formula (1): і і і і і іñïâ ñ ìñ ññ c ñì� � � � � �= å å* * * *5 (1) we propose to interpret thresholds and quantitative changes of the generalized sustainability indicator and the characteristic of its correspondence to qualitative parameters of the partner network development by using estimation of each of the components of sustainability (generalized indicators of sustainability of partner relations at high (b), normal (н), and unstable (нс)), which is respectively given in table 3. in accordance with the proposed methodology for evaluating the reliability and sustainability of partnership relations, we consider it expedient to substantiate the methodology of constructing a morphological matrix of the effectiveness of the partner network by integrated indicators of the sustainability and reliability of partnership relations. the given matrix proposes the subjects of partnership relations to choose the most priority development direction for partnership relations according to three qualitative characteristics: б – desirable partnership relations (contribute to the synergy of partner resources and improvement of the level of sustainability and reliability associated with low risk); m – possible (in the case of availability of resources of a partner to improve the level of sustainable development and reliability associated with the medium risk level); h – unreasonable (in the case of availability of resources of a partner to improve the level of sustainable development and reliability associated with high risk). 4. conclusions for the most complete assessment of the effectiveness of partnership relations, the sustainability and reliability of partnership relations must be taken into account. in turn, in order to identify qualitative signs of the reliability of partnership relations, it is worth defining table 3 integrated partnership sustainability index within a certain network sustainability class indicator value components of sustainability and characteristics absolutely sustainable development 0,9<іспв≤1 в it is characterized by highly effective economic development, stable competitive advantages, market growth, stable wages and working conditions; all environmental issues are solved; increasing the effectiveness of all pn participants, obtaining synergetic effects from cooperation. highly sustainable development 0,8<іспв≤0,9 в it is characterized by a steady increase in technical and economic indicators within the planned values; sustainable competitive advantages in the target market; high level of social security of employees; effective projects of environmental safety of the enterprise; high probability of fulfilment of contractual obligations by participants in partner networks. normal sustainable development 0,7<іспв≤0,8 н it is characterized by a uniform positive trend of indicators, but values are below the planned ones; the maintenance of competitive advantages shows the probability of retaining the market share; social and material satisfaction of the collective; minimization of harmful influence of the activity on the environment; the probability of fulfilling all main obligations. medium sustainable development 0,6<іспв≤0,7 н the economic situation is ensured by stable technical and economic indicators; there may be some difficulties in maintaining competitive advantages and market share; issues of social security and staffing are resolved; network members may have some difficulties in meeting their contractual obligations. weakly sustainable development 0,5<іспв≤0,6 не the economic situation is unstable; there may be some difficulties in maintaining competitive advantages and market share; social security of the staff is provided; slight pollution of the environment beyond the limit; participants in the partnership may face difficulties in meeting their contractual obligations. unstable development 0,4<іспв≤0,5 не maintaining competitive advantages and market share is unstable and requires constant attention; social security of the staff is not ensured; destructive impact on the environment; participants in the partnership are prone to unsustainable development and deterioration of the fulfilment of their obligations. critical position 0,3<іспв≤0,4 не economic indicators are at the low level, there are problems in production or sales; the maintenance of competitive advantages and market share is problematic but is still possible; the level of social sustainability is critical; the level of waste is high; fulfilment of the main obligations of network participants is still possible. crisis position іспв≤0,3 не production is carried out irregularly, sales of previously manufactured products are not carried out; stable competitive advantages are absent, holding market share is impossible; job cuts, arrears in wages; critical negative impact on the environment with the inability to counteract it; network participants are not able to fulfil contractual obligations. baltic journal of economic studies 48 vol. 5, no. 4, 2019 them according to three determinants: the reliability of the partner; the reliability of production and economic activity; the reliability of the partner network in general. therefore, the methodology of constructing a morphological matrix of the effectiveness of a partner network is based on integrated indicators of the sustainability and reliability of partnership relations. in order to determine the components of sustainability, a methodology for calculating the integrated value of the sustainability index of the partnership relations is proposed. herewith, five interrelated components are taken into account that are equally important for strategizing partnership relations such as economic, marketing, social, environmental sustainability, and also the sustainability of partner networks in general. the proposed expert methodical approach to the assessment of the reliability of partnership relations involves the calculation of three characteristics of reliability (partner, production and economic activities, partner network in general) and is an applied instrument set for a new solution to the scientific and applied problem in the area of formation and development of partnership relations in the economy of ukraine in order to ensure a high level of management of them in resource constraints. thus, the evaluation of the effectiveness of partnership relations by qualitative and quantitative parameters objectively reflects the degree of achievement of the goals by the participants of the partner network, the level of satisfaction of partners with the relationship, their development potential, allows establishing further expediency and effectiveness of the implementation of partnership relations and, by justifying rational managerial decisions, developing partnership management strategy of an appropriate type. table 4 morphological matrix for evaluating the effectiveness of the partner network by integrated indicators of sustainability and reliability of partnership relations qualitative values of the basic pr characteristics by sustainability and reliability parameters the level of sustainability of the partner network ab so lu te ly su st ai na bl e de ve lo pm en t hi gh ly su st ai na bl e de ve lo pm en t no rm al su st ai na bl e de ve lo pm en t m ed iu m su st ai na bl e de ve lo pm en t w ea kl y su st ai na bl e de ve lo pm en t un st ab le de ve lo pm en t cr iti ca l s ta te cr is is st at e qualitative ranking в н нс th e r el ia bi lit y le ve l o f p ar tn er sh ip re la tio ns absolute reliability level в б б б м м м н н high reliability level б б б м м м н н medium reliability level н б б б м м н н н low reliability level не б м м м м н н н extremely low reliability level м м м н н н н н references: bivainis, j. 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(in ukrainian) baltic journal of economic studies 116 vol. 6, no. 2, 2020 corresponding author: 1 pridniprovska state academy of civil engineering and architecture, ukraine. e-mail: juliaorlov@ukr.net orcid: https://orcid.org/0000-0003-0966-931x 2 pridniprovska state academy of civil engineering and architecture, ukraine. e-mail: acherchataya@gmail.com orcid: https://orcid.org/0000-0002-6753-2891 3 dnipropetrovsk scientific research institute of forensic expertise, ukraine. e-mail: ap0005aa@email.ua orcid: https://orcid.org/0000-0002-6802-7213 doi: https://doi.org/10.30525/2256-0742/2020-6-2-116-124 development of intellectual economy: some approaches for policy elaborating yuliia orlovska1, anzhela cherchata2, olena kovalenko3 abstract. this research is devoted to revealing the theoretical and practical foundations of the intellectual economy formation in the conditions of post-industrial society transformation. using the historical method of analysis, the authors has made the comparative assessment of the main approaches to explaining the content, factors and features of the intellectual economy development. it has been proved that the main driving force of economic development in the intellectual economy is knowledge, which simultaneously acts as both a resource and a product, and for that product specific demand at all levels of the economic system has been formed. in our view, the intellectual economy is a type of economic system that, being based on the intellectual capital of society in the conditions of development of modern information technologies and systems, uses, transforms, creates and disseminates information and knowledge in order to ensure the growth of social welfare, international competitiveness of countries and extended knowledge and innovation cycle formation. that is, knowledge is at the heart of the development of the economic system, and, at the same time, is the final product of this system in each cycle of reproduction of the socio-ecological-economic system. the determining direction of the transformations in the intellectual economy is predominantly the creation and consumption of knowledge as a different type of intellectual property, including its materialized form with a high intellectual component. the fact that knowledge and information are not only used as an inexhaustible cognitive resource for the development of production, but also turn into the main types of consumption associated with personal development, as a means of renewing and building up this resource, is the key to the endless progress of the intellectual economy. the special features and principles of development of intellectual economy have been explained in the paper. these features and principles have been suggested to use as criteria for the construction of national programs for the intellectual economy formation, as well as for these programs success estimation. the recommendations for overcoming the barriers to building ukrainian intellectual economy have been elaborated. key words: intellectual economy, economic system, capital. jel classification: o34, p12, e22 1. introduction the current stage of the world economic system development is characterized by intensification of the intellectual capital use and shift of public demand towards the products of creative industries, intellectual services, it and media products, etc. in these circumstances, information and knowledge play an increasingly important role in the development of post-industrial society. methodological issues about the country-specific factors of intellectual economy development as well as the scientific and practical tasks about relevant economic policies have been posed to the governments and scholars. the importance of these tasks has been reinforcing by the current trends in the center-peripheral development of the countries, by the development of new world “influence centers” as well as of modern drivers of growth. it is important for governments and academia not only to understand the country 's existing and desirable position in the world economic system, but also to formulate basic principles and priorities for strengthening and effectively harnessing the potential of post-industrial growth. baltic journal of economic studies 117 vol. 6, no. 2, 2020 in addition, taking into account the modern course of humanity for sustainable development, economic resources and innovative products must be directed towards environmentally sound growth. all these features have fundamentally changed the structure of the modern postindustrial economic system, which is based on the development of intellectual economy. a knowledge-based intellectual economy is becoming an economic system that provides economic growth and international competitiveness for countries, and therefore requires an additional investigation about the preconditions and current features of its development. in the other words, the peculiarities of the modern economic system of the post-industrial era should be analyzed by assessing the genesis of the development of its dominant form – the intellectual economy 2. preconditions for the intellectual economy development in post-industrial society the preconditions that led to the formation and development of the modern intellectual economy should be considered based on the method of historical analysis and, first of all, on the evolution of scientists’views regarding modifications in post-industrial society. in turn, the emergence of the concept of post-industrial society and post-industrial economy has its historical background, an understanding of which is important for the proper perception and use of modern factors of economic growth and social well-being. the first shifts in scientific circles from material resources to intangible, namely information and intellectual, began to take place at the end of the nineteenth century. marshall a. in 1890 emphasizes in his papers that knowledge itself is the driving force and the most powerful engine of production. these ideas are developed in the works of schumpeter j. (1911), in which the scientist notes that it is a particular combination of knowledge is the driving force of innovation and production process. in other words, the transition from industrialism to a new system based on intangible factors of production is gradually being realized. as for the formation of the categorical apparatus, the term “postindustrialism” itself was introduced into scientific circulation at the beginning of the 20th century (1914) by the scientist coomaraswamy a., who specialized in research on the preindustrial development of asian countries. almost simultaneously the concepts of "post-industrial state" and "post-industrialism" have appeared in the papers of penty a. 1917-1922. the work of drucker p. in 1950 was devoted to explaining the main reasons for the transition from industrialism to post-industrialism, in which he began to identify the innovative industries, at the heart of which is knowledge. his ideas were extended by machlup f. in 1962. the term “post-industrial society” was first used by the american sociologist riesman d. in his work “leisure and labor in a post-industrial society”, published in 1958. however, according to inozemcev v.l., whose opinion is shared by most modern scholars, d. risman cannot be considered the author of this term, since he incorporated into the concept the so-called "leisure society ", which is different from today 's interpretation of the concept of post-industrial society. therefore, most scholars believe that the term "post-industrial society " was first used and justified by bell d. in 1959 to refer to a society in which material production loses its leading role and knowledge becomes the main productive force. in 1965, bell d. headed a futurological commission in the united states, which developed a prognosis for human development by 2000 (bell, 1968), and noted that post-industrialism would be the main vector of development. in the interpretation of bell d., a postindustrial society is a society where serious shifts are taking place: in the economy, a shift from manufacturing to services, and in technology, knowledge-intensive industries begin to play a leading role. later, this concept was reflected in the work of the scientist "the coming post-industrial society " in 1973 (bell, 1973), which gave impetus to the emergence of new theories of post-industrialism. by the beginning of the 1980th, the point of view on the formation of an information economy in a postindustrial society began to prevail in the scientific community. a number of economists in their works began to note the growing role of information and knowledge in the production of goods and services, which gave them reason to introduce the concept of the information society. in particular, the american economist martin w.j. defined the information society as a society "... in which the quality of life, as well as the possibility of social change and economic development, increasingly depends on information and its use." stoun'er t. in 1986 argued that there is a shift from material production to production of services, which is essentially information processing. masuda y. believed that the information society is a society based on informational values rather than material values, and whose economy estimates knowledge capital higher than material capital. according to another economist kastel's m., the information economy can also be called the global economy. the scientist noted that the economy is informational, because “the productivity and competitiveness of factors or agents in this economy depend, first of all, on their ability to generate, process and efficiently use information...”; at the same time, the information economy is global, because “the main types of economic activity, such as the production, consumption and circulation of goods and services, as well as their components (capital, labor, raw materials, management, information, technology, markets) are baltic journal of economic studies 118 vol. 6, no. 2, 2020 organized on a global scale, using an extensive network connecting economic agents” (kastel's, 2000). at the same time, the other scientists fixes their attention on the categories of knowledge and brings the theory of the knowledge economy (knowledge economy) to the fore. in 1994, stehr n. introduced the concept of a "knowledge society " as one that actively uses knowledge not only as a resource but also as a product of the economic system. it the papers of kelly k. “new rules for the new economy” (1998) the web of the modern economic system, which is characterized by global transformations, by the management of information, knowledge, intellectual capital and by the emergence of close interconnections between elements of the new system, has been investigated and detailed. in general, at the end of the xx century, and especially at the beginning of the xxi century, the theory of knowledge economy was actively developed and now, in our opinion, it has become the main theoretical basis of modern concepts of intellectualization of economy. we believe that the development of the methodology of these concepts occurred mostly within the different perceptions of knowledge – whether as a factor of production or as its result (product). the main approaches of scientists, as well as the process of convergence of their thoughts are summarized in table 1. it should be noted that scientists for a long time did not consider knowledge and information through the prism of the production function (except for the works of a. marshall and j. schumpeter mentioned above). for example, in the 1950th and 1960th skilbeck and abramowitz wrote about knowledge as a “human factor” or “technology change”, but do not see knowledge and information as a separate factor of production. the change in the perception of this concept was laid by r . romer in the 1980th, where he began to consider knowledge as an important factor of production, that is, the basis of a knowledge-based economy. at the same time, a number of scientists offer knowledge not only as a factor of production, but also as a product of relevant intellectual industries. the essence of such a new structure of the economy first appears in the works of p.f. druker and f. machlup, who perceive the knowledge economy as an economic activity based on the use of knowledge and with its final product new knowledge, or a certain information product or service. f. machlup focuses on areas such as education and science, the fields where the intellectual product is “manufactured”, and the field of intellectual services and media as such, through which the product is distributed. and it was during this period when the concepts of “knowledge economy” and “knowledge table 1 theoretical background of the role of knowledge in the intellectual economy development: a convergence of approaches knowledge as a factor of production knowledge as a factor of production and product end of the xix century: marshall a. writes about knowledge as "the most powerful engine of production" mid-xx century: p.f. druker and f. machlup "industrial economic system, innovative industries that have knowledge or information at their core"; “knowledge economy as an economy that both is based on knowledge as a factor of production and has new knowledge (information product or service) as its final product” emphasis on education and science as areas where the intellectual product is produced and the intellectual services and media through which this product is promoted. it was during this period that the concepts of knowledge economy and knowledge based economy were closely intertwined beginning of the xx century: schumpeter j. emphasizes the combination of knowledge as the basis for innovation, which (yu.o: in turn)* is the driving force of production end of the xx century: unlike skilbeck and abramowitz, who perceive knowledge as a “human factor” or “technology change” and do not see it as a separate production factor, romer emphasizes the need to consider knowledge as important factor of production. 1990th: stehr n. sugest the concept of "knowledge society ", which became the basis of the development of the theory of knowledge economy, the main provisions of which are set out in the work "knowledge society " the oecd defines a knowledge-based economy as inherently oriented towards the production, dissemination and use of knowledge or information. a similar interpretation is provided by apec beginning of the xxi century: chartland, brinkley, tapscott emphasis on inclusion of it sphere in the concept of knowledge economy. triple concept (knowledge, network, innovation); the concept of the role of highly skilled workers who use knowledge and information to create an intelligent product. economy virtualization concept 2010-th: white, gunasekaran, ariguzo. education, knowledge management and creativity as elements of economic structure; at the same time, all components of the structure of the economy are based on it technologies. as shahrazad points out, knowledge becomes the driving force of an economy based on human, intellectual and social capital (yu.o: intellectual capital) in the context of increasing the role of the economy 's creativity source: created by the author * here and below – initials of the author: yuliia orlovska baltic journal of economic studies 119 vol. 6, no. 2, 2020 based economy” were most closely intertwined. the oecd (organization for economic cooperation and development) (oecd, 1996) is considered to make the first attempt to define the category of a knowledgebased economy as being essentially oriented to the production, dissemination and use of knowledge or information. a similar interpretation was provided by apec (apec, 2000). it should be noted that quite often scientists identif y these concepts. however, in our opinion, there is a fundamental difference between them. we fully share the opinion of ivanova v.v. (ivanova, 2011), who argues that a knowledge-based economy is the type of economic system, having at its core the knowledge and information that is embedded in all sectors of economic activity; instead, the knowledge economy is an sum of sectors of the economy that specialize in obtaining (yu.o: production and sales) an intellectual product. with the development of technology, the category “knowledge economy” is beginning to include the field of it-technologies. chartland (chartland, 2006) introduces three key concepts into the concept of the knowledge economy: knowledge, network, innovation. brinkley, who also perceives the knowledge economy inseparable with the it, argues that the concept of the structure of such an economy lies in the combination of highly skilled, knowledge-intensive workers and the information technology that ultimately creates the intellectual product. another important aspect of itrelated issues, as tapscott notes (tapscott, 2014), is the virtualization of the economy. the interpretation of the structure of the knowledge economy is extended by white, gunasekaran, ariguzo. scientists complement the structure of the knowledge economy with such concepts as knowledge management and creativity. according to shahrazad (shahrazad, 2017), information as an expression of knowledge becomes the driving force behind the knowledge economy, based on human, intellectual and social capital, in the context of enhancing the creativity of the economy, which is seen as a key aspect in building a long-term sustainable development strategy. in our opinion, the term “intellectual economy” includes the connection of categories of knowledge economy; service and information economies; sustainable (socio-ecological-economic) development; creative economy, etc. in our view, the intellectual economy is a type of economic system that, based on the intellectual capital of society in the conditions of development of modern information technologies and systems, uses, transforms, creates and disseminates new information and knowledge in order to ensure the growth of public welfare, international competitiveness of countries and formation of an extended circle of knowledge and innovations. that is, knowledge is at the heart of the development of the economic system, and is the final product of this system in each cycle of reproduction of the socio-ecological-economic system. we propose a schematic diagram of the positioning of the intellectual economy in today 's post-industrial society as figure 1. the objectivity of the process of the intellectual economy formation and the corresponding challenges to the factors of success of countries’ development in modern conditions of post-industrial society requires a more detailed study about priorities and guidelines of the modern government’s policy of projecting and administration the processes of formation and development of this type of economy. 3. priorities and guidelines for the intellectual economy development in view of the arguments set out in the first paragraph, it should be assumed that the intellectual economy has appeared from the intersection of concepts: the economy of knowledge; information economy; green economy (sustainable development economy); bioeconomics; circular economy; smart-economy; innovative economy; creative economy; economy of intellectual property. t he p ar ad ig m o f su st ai na bl e de ve lo pm en t in cr ea si ng th e ro le o f kn ow le dg e as a re so ur ce an d th e pr od uc t service economy innovation economy information economy intellectual economy post-industrial society figure 1. positioning of the intellectual economy in post-industrial society source: created by the authors baltic journal of economic studies 120 vol. 6, no. 2, 2020 as to understanding the priorities and guidelines for the intellectual economy development as a basis for an appropriate policy elaborating is primarily based on identifying the changes in the demand and production of intellectual products. regarding to changes in the demand for knowledge as a resource and as a product, maksimova v.f. (maksimova, 2011) highlights significant changes in the structure of three types of demand: consumer, corporate and public. she argues that in today 's environment, the consumer is in demand for spiritual values. the lifestyle, adequate set and quality of services provided, the organization of business climate, and leisure are important for the members of society. with regard to corporate demand, businesses and organizations are increasingly in need of workers with a wide range of competencies that enable them to meet the challenges of value-adding, labor productivity growth, the generation of new knowledge and their incorporation into production processes, to carry out innovative processes at the local and integrated levels and, as a result, to achieve the stable growth of corporation. on the part of the state the demand for rational use of material, labor, intellectual resources for solving national and global problems is firstly increasing. this refers to changing the nature of labor, enhancing its innovation component, increasing participation in the production processes of intellectual workers, the emergence of firms operating in remote access mode, outsourcing and smart-sourcing in the commodity and resource markets. mokyr j., in turn, draws attention to the role of methods of modern knowledge production and selling. the scientist claims that the transition from traditional to an intelligent economy has arisen due to the fact that information and telecommunication technologies have radically transformed the methods of generating and disseminating the knowledge, significantly reducing the marginal cost of obtaining, storing and transmitting of knowledge. it is obvious that the adequate use of intellectual resources plays fundamentally important role in the process of solving the problems about the qualitative modernization of the economy, expanding the production of goods and services that meet the requirements of material, labor and energy conservation, could provide innovative development, competitive advantages increasing, sustainable economic growth maintaining, etc. according to experts, the share of intangible assets in the property of large american companies exceeds 50%; the share of the intellectual capital in the pharmacist cost of production is about 99,5% (new zealand bank). in modern conditions, intellectual resources are widely used in terms of structural transformations, the creation of fundamentally new forms of entrepreneurship and innovative corporate relations, as well as to increase the competitive advantages of the company. in the usa and in the eu, many companies that practically do not use fixed capital, but only intellectual capital (they are called “knowledge companies” – knowledge companies) have been recently created. such companies sell knowledge rather than manufacture traditional goods. in the united states, half of fast-growing companies are knowledge companies (nature, 1999). well known professional in the field of management, druker p.f., claims that while in the 20th century the leadership in the global economy depended on the ability to achieve high physical labor productivity, in the 21st century this leadership will be transferred to countries that are able to increase the productivity of mental labor most systematically and efficiently. the term “knowledge workers” that means intellectual workers who generate new knowledge has also recently appeared. florida r . in this regard wrote about the emergence of the creative class and the development of the creative economy. we propose to consider the intellectual economy and evaluate its development through changes that occur with the main features (characteristic features) of this type of economy (figure 2). it is possible and necessary to assess: the share of the tertiary and quaternary sectors in the economy; the degree to which processing and recycling are used; the dynamics of the involvement of highly skilled workers in the creation of products of the intellectual economy; the speed and globalization of production and consumption of such products and other indicators. such kind of criteria and indexes may build the methodological basis for the elaborating the special programs about the formation of intellectual economy in a country. it should be noted that in some countries such government programs have already been developed. in ireland, for example (government publications, 2008; preston, sparviero, 2010), the focus is on creating a world-class research system, on ensuring economic growth through innovation and scientific research, on increasing the country 's competitiveness, as well as on developing the green sector of the economy based on the transition from carbon energy using to alternative renewable energy sources using. the problems of actively attracting scientific ideas and know-how, their protection and commercialization, creation of an innovative ecosystem, as well as social protection of the population do not also stand aside. to resolve these problems, some tasks have been put: about increasing the investment into researches, about the formation of a first-class business infrastructure, about the widespread use of human and intellectual capital in the value added creating and innovative goods and services production. the irish government program focuses on the development of a “green economy” that contributes to the preservation and protection of the environment, to the creation of new jobs in this area and the formation of a special environment for “green collars”. baltic journal of economic studies 121 vol. 6, no. 2, 2020 it should be considered that the intellectual economy is an economy in which knowledge is acquired, generated, and disseminated in order to enhance economic development. intellectual economy should therefore be based on four pillars: the education system, information and telecommunications infrastructure, an effective innovation system and the institutional regime. economic policy guidelines and priorities must be appropriately established. such guidelines of the policy of intellectual economy development can be called the following: 1. guideline of intellectualization: it involves the growth of research and development, followed by their introduction into production on an innovative basis; the development of intellectual potential of individuals and enterprises; the creation and development of intellectual needs; stimulation of creativity to the tasks resolving; the constant increase of knowledge in the process of education; the improvement of innovative technologies created on the basis of international standards. 2. institutional guideline, which means the activation of the state in the field of structural transformation of property relations; the creation of an effective system of protection of intellectual property rights; the improvement of the legal framework governing research and innovation processes; the promotion of environmental protection of economic entities. 3. guideline of ecologization: it is aimed at the implementation of environmental and economic interests; the ensuring the integrity of natural systems; the environment protecting its reproduction and rational nature management; the ecological infrastructure improving; the level of ecological culture of the population development. 4. a social guideline: that is aimed at achieving common welfare and collective security in an increasingly interdependent world; at socially oriented coordination of actions; at forming a set of new sociocultural and economic values that ensure the implementation of adequate relationships within civil society; at ensuring the people's confidence about getting a professional education, quality medical care, an adequate job, and access to other social benefits. the creation and consumption of predominantly not material goods, but knowledge as a different type of intellectual property, including its materialized form with a high intellectual component, has appeared to be the determining direction transformations in the intellectual economy. it is obvious that on the way to such kind of transformation almost every country faces many barriers which are inherent in ukraine’s regulatory policy as well. in this context, we suggest the set of tools of these barriers overcoming in ukraine: to increase innovation potential: the integrated programs of intellectual development (intellectualization), and of international cooperation strengthening in education and science, are required. to ensure the growth of innovation in strategically important activities: the funding of relevant research through the grant system should be motivated; specialized research centers based on the interaction of the state, business, scientific and educational institutions as well as scientific clusters must be the main features of the intellectual economy knowledge as a driver in combination with intellectual technology predominance of tertiary and quaternary sectors of the economy processing and recycling as main methods of production supranational entities are advanced organizational structures scientists and highly skilled workers are key labor resources production, distribution and consumption have global and speed character computer and transmission systems and technologies of the future are key resources for transformation the basic principle is to increase wellbeing and sustainable development figure 2. main features and principles of intellectual economy development source: created by the author baltic journal of economic studies 122 vol. 6, no. 2, 2020 established. it is necessary to create conditions for the widespread use of intellectual workers in the process of innovative products and services production. for example, in the uk, at one time, the task about bringing the employment rate of intellectual workers to 40% or more was put and reached (brinkley, 2008). to increase the level of commercialization (capitalization) of innovations: first of all the public-private partnership as well as motivating subsidies and taxation, should be developed; preferential target lending programs might be established. to enhance the effectiveness of the innovation financing mechanism: creating the programs which could stimulate the development of the financial market and relevant financial instruments to serve the intellectual economy; the stimulating the private, public and public-private venture funds creating. for the development of intellectual small and mediumsized businesses: the system of regulation of the processes of firms creation and liquidation (in order to accelerate and simplify it), should be reformed; the information support for startups in the field of intellectual business as well as creation of relevant specialized educational platforms must be launched. to stimulate the inflow of technology from abroad– such set of tools: the protecting investor rights; provision of state guarantees; development of public-private partnership. it is important to create the conditions for the introduction of the latest technologies, smartnetworks in all sectors of the economy to provide quick access to information and knowledge, generate new ideas with their subsequent implementation in the production of products and services with high added value and intellectual component. to increase the demand for, and funding for, environmentally-friendly innovations – such set of tools: regulatory support for high-level environmental standards; preferential targeted lending; tax incentives, subsidies and penalties; support for sustainable green investment (green investments); state targeted investment in the development of green activities and intellectual and ecological production. as a result, we should expect the creation and provision of a productive business environment to increase the degree of innovation, and the optimum use of natural, energy and material-saving technologies. a special role should be given to the development of education, first of all – university education. kvasniy l.g. and shcherbak o.ya. point out that the modern man, who has the relevant knowledge, does not mechanically combine some individual elements, but seeks to ensure that everything takes its place. therefore, the main principle of the new paradigm is the education development with the purpose not for adequate reflection of the demands of life, but for a radical creative improvement of life; not for responding to the changing needs of society, but for formation of new creative, high-spirited needs, that is, the formation of a new quality of aggregate demand (both as individuals and corporations and states in general). the modern content of the quality of education is multicomponent. its main components are: acquisition of new knowledge throughout life; application of modern pedagogical technologies; technical and technological support of the educational process; language policy; creation of a powerful information base of the educational process; national and public education; scientific support for the functioning and modernization of education. it should be noticed that the scientific and methodological achievements of modern processes of modernization of higher education in ukraine are already being implemented in the effective work of the national agency for quality assurance in higher education, which is reflected in the preparation of a whole corps of experts, consultants, experts and the results of the first accreditation examinations of educational programs. despite some contradictions in the procedural issues and regulations, as well as the expected resistance from some university and other communities, the process of radical changes in the training of highly qualified personnel has already begun and looks inevitable. in our opinion, due to the described measures and priorities of economic policy, it is possible to form a selfregulatory mechanism that allows for investments that stimulate the economic development due to maximize the personal consumption, which in the traditional economic theory would previously be considered the antithesis of accumulation and investment. in the fact that humanity not only masters information as an inexhaustible cognitive resource for the development of production, but also turns the main types of consumption associated with the development of personality into a means of renewing and building up this resource, scientists see the key to the endless progress of post-industrial society. zahodjakin i.v. (zahodjakin, 2008) emphasizes that this progress of modern post-industrial society is ensured by economic growth, which can continue for decades under conditions of not only low, but also a negative rate of accumulation in its traditional sense. 4. conclusions the preconditions for the development of a modern intellectual economy have been developed within the framework of post-industrial theory and practical experience in the formation of post-industrial society. as it was predicted by post-industrial theory creators, a mass consumer society gave rise to a service economy, and within its framework, the information sector of the economy began to develop at the fastest pace. at the same time, it can be stated that the traditional concept baltic journal of economic studies 123 vol. 6, no. 2, 2020 of “postindustrial economy” is getting out of use in scientific circulation. today, it includes more specialized categories: “knowledge-based economy”; “service economy” (since the result of labor in a post-industrial society is mostly intangible products, i.e. services); innovative economy (intangible product, in fact, is innovative, and after it innovative material products appear); information economy (since information is the main resource and product); creative economy (the creative class and creative industries are growing at the fastest pace); sustainable (socio-environmentaleconomic) development. in our view, the intellectual economy is a type of economic system that, being based on the intellectual capital of society in the conditions of development of modern information technologies and systems, uses, transforms, creates and disseminates information and knowledge in order to ensure the growth of social welfare, international competitiveness of countries and extended knowledge and innovation cycle formation. that is, knowledge is at the heart of the development of the economic system, and, at the same time, is the final product of this system in each cycle of reproduction of the socio-ecological-economic system. the determining direction of the transformations in the intellectual economy is predominantly the creation and consumption of knowledge as a different type of intellectual property, including its materialized form with a high intellectual component. the fact that knowledge and information are not only used as an inexhaustible cognitive resource for the development of production, but also turn into the main types of consumption associated with personal development, as a means of renewing and building up this resource, is the key to the endless progress of the intellectual economy. references: marshall, a. 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[postindustrial economy – what does this concept mean in the modern world?]. kreativnaja jekonomika, (electronic journal), no. 1. retrieved from: https://cyberleninka.ru/article/n/postindustrialnaya-ekonomika-chto-znachiteto-ponyatie-v-sovremennom-mire/viewer (accessed 30 january 2020). baltic journal of economic studies 78 vol. 2, no. 2, 2016 corresponding author: 1 department of the international economics, tourism and foreign economic activity management, lviv national agrarian university. е-mail: lavriv.im@gmail.com the factors affecting the export potential and its formation under the conditions of integration iryna lavriv1 lviv national agrarian university, ukraine abstract. the aim of the article is to analyze the factors affecting the export capacity of the country and their interpretation by domestic and foreign scientists; to distinguish the basic classification and to form the unified system of factors that affect export potential of ukrainian agricultural enterprises. on the basis of the classification of factors it is necessary to distinguish the main stages of development of the export opportunities of agrarian formations in the context of european integration. the method. theoretical and methodological basis of the study is a critical analysis of the fundamental works devoted to the export potential increasing. the given tasks were solved on the basis of a systematic approach with using the scientific methods of analysis and synthesis. the method of abstraction was used in order to research the economic essence of the economic factors that impact the export potential of the company. the combination of the methods of analysis and synthesis were used to determine the priority directions of export opportunities development. the results of the research. the analysis of theoretical approaches to identify factors influencing the export potential of the enterprise is provided. this allowed identifying the several directions of classification. results of the research helped to shape a common classification of factors that affect the export potential of agricultural enterprises and to distinguish the integration processes as a separate group of factors. on the basis of the classification of the main factors it was formed the phase of development of export opportunities in the context of approximation of the ukrainian economy to the european standards. the prospects of development of the domestic agriculture export potential under the influence of international integration processes are grounded. they consist of the ability to increase the efficiency by redistribution of export volumes among major importers. the directions of activating the process of increase of efficiency of the basic agricultural branches export potential using by creating a positive image of agricultural enterprises and the directions of improving product competitiveness and quality standards of the european union are determined. the recommendations for the ways of regulatory policy improvement at forming the legal provision of export potential in the context of european integration are developed (the selective support of structural changes in ways that exclude the possibility of using protectionist instruments by trading partners; creating the information system of foreign trade; expert and consultative support of export transactions). the practical meaning. the practical meaning of the results is the formation of the unified classification and grounding the factors which influence on the export potential of agricultural enterprises. the conclusions can be used in further improving the mechanism of foreign policy in ukraine, in particular, in the process of the legal and regulatory framework improving, and in the process of assessing the prospects of the development of the international cooperation between ukraine and foreign countries by ukrainian ministries and special agencies. significance/originality. the formed classification of factors will help to provide a better understanding of the export potential formation and can be used in management decisions by the leaders of farms in ukraine and others countries. key words: export potential, agricultural enterprises, the factors of influence, the integration processes. jel classification: p45, q17 1. introduction the export potential of the enterprise as an economic category and an object of analysis got the increased attention of scientists and practitioners in the international business. the experience of highly developed countries and countries that are rapidly developing convinced that the dynamism of the positive development of most national economies largely achieved through an effective export policy, depending on the level of excellence of the processes associated with the formation and using of baltic journal of economic studies 79 vol. 2, no. 2, 2016 the export potential of both the state and entities, as well as the selection of methods and tools that can provide a successful course of these processes. however, despite the large number of domestic and foreign researchers, nowadays there is no unified classification of the factors affecting the export potential of agrarian business. the actuality of the topic is caused by the fact that under the conditions of unstable economic environment every subject of the foreign economic activity solves the problem of improving the efficiency of foreign trade operations. it is very important task to solve this problem under current economic environment. thus, from the side of subjects of the economic activity the need to analyze the factors affecting the efficiency of foreign trade activities appears. 2. the classification of the factors that affect the export potential of agricultural enterprises analyzing the theoretical foundations and the essence of export potential, we concluded that the export potential is central element of the state economic growth. the overall development of the national economy and its monetary system, foreign trade balance and standard of living depend on the dynamics of exports. however, the export potential doesn’t depend on the volume of exported goods, but on a huge number of factors, influenced on its formation. exploring the impacts on export potential, it should be noted that a unified classification does not exist, but all factors, that scientists proposed, can be attributed to two main groups: internal and external (figure 1). the internal factors include the factors that influence at the formation of export potential of farm businesses of the company. those factors a. o. fatenok-tkachuk divides into three groups: innovation and business activity of the enterprise, increasing the economic potential of the entity, support and stimulation enterprises with high export potential at the state level (fatenok-tkachuk, 2008). in his other work this author (lipych & fatenoktkachuk, 2010) in order to evaluate the impact of factors on the development of export potential of the company distinguishes the factors into two levels: micro and macro level. on the micro level internal and external factors are distinguished. the internal factors caused by the enterprise’ activity, and the external ones are the result of the public policy, the competitors activity, the environment in which the entity operates, so these factors have an impact on the state level, where the company operates. at the macro level there are factors that have an impact on the foreign competitors and the partner country. in addition, the external factors are separated to those caused by the activities of the state and those caused by the activity of the market player. olga homenyuk attributes the factors related to the intra-corporate enterprises potential, which represents the ability to export development by using internal strengths and competitive factors of the company in order to gain the identified target export markets, to the internal factors external factors related to the external market export potential, which represents the ability to export development by finding new and developing existing target markets for export oriented products of the enterprise (using the external environment factors (homenyuk, 2014). as we can see the scientist includes to the factors two main elements: intra corporate environment and the sphere of foreign markets, but, in our view, external factors also include political, financial and legislative environment of the country in which the economic subject performs its financial and economic activity. the export potential of the agricultural enterprise internal factors external factors factors that hinder the development of the ep factors that promote the development of the ep endogenous exogenous controlled uncontrolled fig. 1. the classification of the factors that affect the export potential of agricultural enterprises source: it is summarized by the author on the base of the conducted research baltic journal of economic studies 80 vol. 2, no. 2, 2016 belarusian scientists d. formenok, s. dubkov, s. dadalko proposed a classification of the internal factors on the basis of the enterprise marketing environment and distinguished the several groups of the factors: 1) characteristics of the firm (size, international competence, the number of managers with international experience), product, industry and export market; 2) psychological characteristics and management advantages; 3) the choice of the target market and the segment in order to analyze the factors influencing the export potential they are divided into: 1) controlled ones, which may vary in the right direction; 2) uncontrolled ones, which are divided into controllable and uncontrollable factors by state. the scientists propose to distinguish two groups of factors depending on the degree of their control: endogenous  – related with a company activity, its foreign marketing strategy, performance management; exogenous  – include political, geographical, natural and environmental characteristics (formenok, dubkov, & dadalko, 2011). dunska a. r . considers that the most important internal factors of the export potential development include the following: 1) business management organization; 2) informational support of foreign economic activity; 3) export production planning; 4) accounting and analysis of export deliveries; 5) hr management (dunska, 2013). baban t. o. exploring the export potential of barley as part of the external factors of barley export potential of the ukrainian agricultural enterprises, which have the greatest influence under the modern terms, distinguished following factors: 1. supply factors: natural resource potential in the producing countries; the overall development of agricultural production in producing countries; supply of the competing products; seasonality factor. 2. demand factors: demographic factors; purchasing power in importing countries; geographical location; development and structure of livestock; consumption of competing cultures; the availability of information about the conditions of the ukrainian barley sale. 3. institutional factors: regulation of the barley trade by exporters, importers and the international organization. 4. condition of infrastructure in exporting countries and importing countries (baban, 2014). the factors that hinder the development of innovative capacity include infrastructural problems and characteristics of business environment, energy inefficiency, complexity of the investment protection, insufficient development of the information and communication technologies, etc. at the same time the factors, positively affecting the export activities of agricultural enterprises in ukraine include the intensification of economic cooperation between ukraine and the european union. our point of view also supports i. sakalo. she thinks that the positive factors are the following: – expansion of the cooperation areas between ukraine and the eu; – strengthening cooperation of both government and business partners; – the implementation into practice the foundations of partnership and cooperation; – removing obstacles (imperfections in the tax and judiciary, reducing corruption) due to integration processes; – regular monitoring and evaluation of trade relations will be able to identify weak and strong areas, which in turn will strengthen the annual progress; – reduction of trade barriers by changes in standardization, strengthening administrative control etc. (sakalo). the factors above contribute to the development of export potential related to environmental factors, scientist m. nalyvayko identifies internal factors influence the development of export potential and considers that they include: 1. improving the competitiveness of goods. 2. reducing the cost of goods. 3. the increase the range of goods for various kinds of markets. 4. development and implementation of export policy of the company. 5. search and continuous analysis of new markets. 6. searching for new and analysis of existing suppliers of materials and components for the production company. 7. attracting foreign investment (nalyvayko, 2015). the author notes that the attraction of the foreign investment is the factor influencing the export potential. we share this point of view, because foreign investments play an important role in the present economic development of some countries and other economic crisis. the volume of foreign investments in the world is growing rapidly, thus increasing the role of the international production and international division of labor in the global economy. it is impossible to leave aside the impact of foreign investment in export activities of enterprises, because due to investments agricultural enterprises can update technical and technological base and increase product competitiveness. considering that the export potential of the country consists of the export potential of several parts of the economy l. p. petrenko identifies three main elements that affect on its formation the most: 1) export competitiveness of the product; 2) export competitiveness of the manufacturer; 3) export competitiveness of a producing country (petrenko, 2008). summarizing the above, it is worth noting that in ukraine there are conditions for export potential development because strengthening and increasing the level of export potential of the agricultural enterprise is the primary factor of economic reforms, because the increase in export baltic journal of economic studies 81 vol. 2, no. 2, 2016 potential in agriculture is a significant source of foreign currency, which is necessary for social and economic development. 3. development of export potential in the context of european integration development of export potential is associated with the integration processes taking place in the country. nowadays the course of international economic integration is the engine of the world economies. integration as a process means measures aimed to eliminate the discrimination between economic units that apply to different states and integration, considered as a state which can be represented as a lack of various forms of discrimination between national economies. thus, the disparities between countries development have to be negated in the process of integration. it means that in order to balance development it is necessary to complete the resource allocation. in order to avoid such unjust balance, the rational distribution of resources in terms of money or barter is required. we are more inclined to the opinion of m. arah, that the integration is the process of creating the optimal structure of the international economy and the smooth functioning of coordination mechanisms and unification (arah, 1998) and support that it is the process of economic cooperation, which promotes the convergence of economic mechanisms. the export of goods and services is one of the forms of economic cooperation, in our opinion. according to the economic essence these relate to economic integration, because as scientists (hrontkovska, riaba, ventsuryk, & krasnovska, 2014) consider, the economic integration is a process of convergence, mutual adaptation and gradual integration of national economic systems. the others authors (kozak, lohvinova, zakharchenko, & kravchenko, 2012) complement this point of view indicating that association of economies is intended for the free movement of goods, services, capital and labor across national borders. considering the factor of influence on export potential we mentioned external factors, including the isolated impact of foreign institutions. this impact is realized through the integration process. summarizing the views of scientists, we have identified the main directions of ukraine’s integration into the world economy. – asian direction; – eastern direction (cis); – western european direction (eu); – african direction; – american direction. considering the works of many scientists who conducted research of integration processes it can be argued that the most perspective way of ukraine’s entry into the global economy is «european integration.» n.v. osadcha (osadcha, 2011) gives the definition of the category «european integration» for ukraine the most clearly. she notes that this is the way to modernize the economy, by attracting foreign investment and new technologies, increasing the competitiveness of the export potential e c o n o m y o f u k r a i n e north and south america the european union countries asian countries the cis countries african countries fig. 2. the impact of integration processes on export potential source: the author’s summarizing baltic journal of economic studies 82 vol. 2, no. 2, 2016 domestic producers, the possibility of entering the single eu internal market. the final turn towards european integration took place after revolution during 2013-2014 years. ukraine became quickly reorient from the russian market to european one. if in 2010-2013 the share of russian exports from ukraine was approximately equal to or a little higher than the share of the european union, in 2014-2015, the share of the russian federation in ukrainian exports has declined, while the share of the eu  – has increased. thus, in 2015 tendency to reduce the of russian exports continued and the proportion in the general flow of merchandise exports for the first time was less than 15% (the unifiedcomprehensive strategy and action plan for the development of agriculture and rural areas in ukraine in 2015-2020 years). analyzing these figures we see that exports depends on the global integration process, that’s why we consider that it is appropriate to reflect the impact of integration processes on the export potential of the company (figure. 2). while integrating into the world economy, countries make choices what direction of integration is beneficial for them in social and economic terms, and the lighter in the process of unification. extension of export potential in the context of european integration is an important aspect of improving the economic situation of the country, but according to the statistical information it is necessary to indicate the fact that exports of agricultural products in the european union are insignificant. the reason is its low competitiveness, but as it was noted above, the outdated technical and technological base of agricultural enterprises effects on this. as the result, the production does not meet the requirements of the european market. among the products that ukraine exports to the eu cereal crops oilseeds, vegetable oil, waste food dominated, but the product line has prospects to expand and we suggest considering the main stages of increasing of export potential of agricultural enterprises at the national level and the impact of regulatory legal base that unsupports it (figure 3). exit on foreign markets is impossible without a specific image of economic entity that depends on the quality of the products that it produces, on the ability to use modern methods of management, negotiations, and the established image of the country on the world economic scene. for ukrainian agricultural enterprises the quality of production is an important factor of the image. the improvement of the quality of production is the next stage in the development of export potential. only after produced products will correspond the quality standards, they can be removed from the territory of ukraine. 4. conclusions the study identified and comprehensively researched the key factors influencing the development of the export potential of agricultural enterprises. summarizing the research of domestic and foreign scientists it should be раціоналізація процесу сертифікації regulatory and legal support development of the export potential in the context of european integration simplification of customs procedures creating the free trade zone 1. creating a positive image of agricultural enterprises 2. improving the competitiveness of production 3. compliance with the quality standards of the european union 4. the analysis of the european market 5. entering the eu market fig. 3. the main stages of development of export potential of agricultural enterprises in the context of the processes of the european integration source: the author’s summarizing baltic journal of economic studies 83 vol. 2, no. 2, 2016 noted that certain factors influence the export potential of the enterprise are systematic, because they form the export potential of the enterprise, and interdependent, because their meaning are combined by the single purpose  – to ensure the development of foreign economic activity of the enterprise. the implementation of measures for each factor of development of export potential will improve the competitive position of the company and the effective promotion of enterprise in the target foreign market. thus these factors affect not only the development of export potential, but in the final result they are able to enhance the competitiveness of the whole enterprise. references arah, м. 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(2011). formation and an estimation of the export potential of industrial enterprises. the bulletin of bakov (10), 29-35. ирина лаврив факторы влияния на экспортный потенциал и его формирование в условиях интеграционных процессов аннотация. целью работы является провести анализ факторов влияния на экспортные возможности страны и их толкование отечественными и зарубежными учеными; выделить основную классификацию и сформировать единую систему факторов, оказывающих влияние на экспортный потенциал сельскохозяйственных предприятий украины. на основе классификации факторов выделить основные этапы развития экспортных возможностей аграрных формирований в контексте евроинтеграционных процессов. методика. теоретические и методологические основы исследования составляет критический анализ фундаментальных трудов по проблемам наращивания экспортного потенциала. поставленные задачи решались на основе системного подхода с применением общенаучных методов анализа и синтеза. метод научной абстракции использовался при исследовании сущности и экономической природы факторов, осуществляющим влияние на экспортный потенциал предприятия. сочетание методов анализа и синтеза использовано для определения приоритетных направлений развития экспортных возможностей. результаты исследования. проведен анализ теоретических подходов к определению факторов влияния на экспортный потенциал предприятия, что позволило выделить несколько направлений их классификации. результаты исследования помогли сформировать единую классификацию факторов, влияющих на baltic journal of economic studies 84 vol. 2, no. 2, 2016 экспортный потенциал аграрных предприятий и выделить интеграционные процессы, как отдельную группу факторов. на основе классификации факторов были сформированы основные фазы развития экспортных возможностей в контексте приближения украинской экономики к европейским стандартам. обоснованы перспективы развития экспортного потенциала отечественного агропромышленного под влиянием международных интеграционных процессов, которые заключаются в возможности постепенного повышения уровня эффективности его реализации путем перераспределения объемов экспорта между основными импортерами; определены направления активизации процесса повышения эффективности использования экспортного потенциала базовых отраслей сельского хозяйства путем создания положительного имиджа аграрных предприятий, повышение конкурентоспособности продукции, соблюдения стандартов качества европейского союза. разработаны рекомендации по направлениям совершенствования регуляторной политики при формировании нормативно-правового обеспечения развития экспортного потенциала в контексте евроинтеграции (селективная поддержка структурных изменений в формах, исключающих возможность применения протекционистских инструментов торговыми партнерами, создание системы обеспечения внешнеторговой информации; экспертно-консультативное сопровождение экспортных операций). практическое значение. практическое значение полученных результатов заключается в формировании единой классификации и обосновании факторов влияния на экспортный потенциал сельскохозяйственных предприятий; его положения и выводы могут быть использованы в процессе дальнейшего совершенствования механизма внешнеторговой политики украины, в частности, в совершенствовании ее нормативно-правовой базы, соответствующими министерствами и ведомствами при оценке перспектив развития внешнеэкономического сотрудничества украины. значимость/оригинальность сложившаяся классификация факторов поможет обеспечить лучшее понимание формирования экспортного потенциала предприятия и может быть использована при принятии управленческих решений руководителями хозяйств украины и других стран. baltic journal of economic studies 152 vol. 5, no. 3, 2019 corresponding author: 1 scientific-research financial institute, state educational-scientific establishment “academy of financial management”, ukraine. e-mail: odnorog_btnau@ukr.net orcid: https://orcid.org/0000-0002-6650-6181 2 borys grinchenko kyiv university, ukraine. e-mail: k2205n@ukr.net orcid: https://orcid.org/0000-0001-8610-3980 3 bila tserkva national agrarian university, ukraine. e-mail: savchukliudmylao@gmail.com orcid: https://orcid.org/0000-0002-5061-8605 doi: https://doi.org/10.30525/2256-0742/2019-5-3-152-158 system-forming innovative institutions of the agrarian market maksym odnorog1, nataliia kraus2, liudmyla savchuk3 abstract. the agrarian market of ukraine and its basic component, agriculture, is the backbone of the national economy, forms the basis of preserving the sovereignty of the state food and, within a certain range, economic, environmental, and energy security, ensures the development of technologically related sectors of the national economy, and forms socio-economic development of rural areas, therefore, the purpose of the paper is to develop scientifically-based proposals to identify the role of strategic institutions of the agricultural market. methodology. the theoretical and methodological basis of the research is the dialectical method of cognition and systematic approach, which are used for studying theoretical and methodological foundations of strategic innovation institutes of the agricultural market. the results showed that the article examines the strategic factors that determine the efficiency of functioning of the agrarian market. the results of the monitoring and analysis of the formation of the institutional market environment are presented. there are proposed a model and priority directions of formation and development of systematizing institutions of the agricultural market. practical implications. the studied institutions create incentives for the development of science and education, encourage the mobility of production factors, facilitate the transfer of scientific and technical information and the introduction of new technologies, promoting entrepreneurship and innovation. conversely, inefficient institutions reduce the potential level of wellbeing, reliability of property rights, and enforcement of contracts. value/originality. the increasing importance of innovation institutions of the agricultural market enables you to define the latter as an important intangible factor in the development of the economy and society that create the conditions necessary for the transformation and development of the agrarian market. the system of formation of a modern institutional environment should include a system of regulators, which would provide favourable conditions for attracting domestic and foreign investment, further structuring of the economic complex of the agricultural market, reduction of regional asymmetries of socioeconomic development. how full individual investment units will operate in the institutional environment depends on the realization of economic and social development priorities of the ukrainian village. key words: institute, institute of agrarian market, model and directions of formation of market institutions. jel classification: o31, o32, e11, g20, g23, n20, 017, p32, f14, n50, o13, q12 1. introduction the genesis of a new institutional theory in a significant way changes the view of the understanding of the role of the institutional environment in shaping and improving the food security of the country. in this sense, it is impossible to do without a formalization of the influence of the institutional environment, without measuring the magnitude and direction of this influence. among the main elements of the institutional environment of socio-economic development of the agrarian market are: state property (land and means of production), labour, competition, infrastructure, and price. they stimulate production, increase the investment attractiveness of the agricultural sector, lead to an improvement in the financial condition of producers, and improve the availability, quality, and safety of food products. the research methodology of the influence of the institutional environment of the agrarian market baltic journal of economic studies 153 vol. 5, no. 3, 2019 should be created through the identification of linkages between institutions characterized by a degree of influence of elements of the institutional environment. one of the most important strategic factors determining the efficient functioning of the agricultural market is development and availability of a number of market institutions. for the successful development of the agrarian economy of the country, region, and individual enterprises, the modern state and public monitoring of formation and development of institutions require analysis with the purpose of revealing discrepancy of technical, technological, and economic factors existing in the institutional environment of the agricultural market, leading to increased uncertainty and risk of business behaviour. this, in turn, is a major factor in increasing transaction costs, which require changes in existing institutions. the processes associated with the further institutional restructuring of the national system of agrarian business take another one place in the area of the development of an effective set of social and economic formations, or formal institutions of the content market. entrepreneurship is a fundamental institution that serves as a factor of the functioning of the agrarian economy. publishing of scientific publications on the problems of agricultural enterprises is predominantly a classical implication, therefore, institutional studies of areas of interest. one of the problems of effective development of agrarian business is the need for the development of the value chain that allows you to efficiently develop and operate small and medium-sized producers. the agrarian market institute provides such a development in terms of vertical and horizontal integration of producers, in the process of their joint activities. the problem is obvious; therefore, it is appropriate and adequate to assess the development of the agrarian market and its institutions from both theoretical and practical points of view. the process of formation and development of formal and informal market institutions continues, both in the process of improving the mechanisms of state regulation of the agrarian market and in the process of increasing its effectiveness. a better understanding of market processes and factors of effectiveness of agricultural market is of practical importance for adequate market regulation. analysis of recent researches and publications shows that the issues related to the formation and development of the agrarian market and its institutions were viewed by domestic and foreign economists. works of many domestic scientists are devoted to the theoretical fundamentals and improvement of the categorical-conceptual framework of the agrarian market: (andrijchuk, 2013), (gajduckyj, 2004), (sabluk, 2010). at different times, such scientists as (grycenko, 2008), (zagurskyj, 2014), (lopatynskyj, 2006), and others investigated in their writings problems of the agricultural market through the prism of the theory of institutionalism, institutions, and institutes. however, the analysis of the studied categories leads to the conclusion that not all aspects of institutional development of the agrarian market are considered, and especially in the issue of forming institutions. the goal of the article is to develop evidence-based proposals and identify the role of strategic institutions of the agricultural market. the theoretical and methodological basis of the research is the dialectical method of cognition and systematic approach, through which theoretical and methodological foundations of an innovative component of institutions of the agricultural market are considered. 2. strategic determinants of the efficiency of functioning of the agrarian market society and state are a complicated organizational system. the system is an organized structure consisting of elements (subsystems) connected by links and the total objective function, which is controlled by the “core” of the system, its subsystems, and the control connection in order to maintain the system, to transform or destroy it. for the effective and coordinated functioning of the system, one should adhere to certain requirements: ‒ continuous identification of target priorities; ‒ maintaining and strengthening purposes and functions of the system; ‒ the removal of internal contradictions, as in the system kernel and between the kernel and subsystems (grycenko, 2008); ‒ levelling of system fluctuations in order to avoid going beyond sustainability. the crisis in the agrarian economy of our country in the 90s, according to some scientists (gajduckyj, 2004), is largely systemic in nature. this means that during the operation of the agrarian economy as a complex multilevel socio-economic system, the so-called systemforming factors have been lost, without which the system dramatically reduces the effectiveness of governing relations, which in turn leads to a weakening of the objective function of all the elements of its components. one of the most important system-forming factors determining the efficient functioning of the agricultural market is underdevelopment and the absence of a number of its market institutions. for the successful development of the agrarian economy of the country, region, and individual enterprises, analysis of the modern state is required, as well as public monitoring of formation and development of institutions of the agricultural market in order to detect inconsistencies in technical, technological, and economic factors existing in the institutional environment of the agricultural market, which results in increased risk and uncertain baltic journal of economic studies 154 vol. 5, no. 3, 2019 business behaviour. this, in turn, is a major factor in increasing transaction costs, which require changes in existing institutions. the purpose of continuous monitoring and analysis of the formation of the institutional market environment is also to identify the priority areas of its formation and development. a model of systematizing market institutions is developed and presented in figure 1. agricultural economics is a part of the country’s economy and it fully reflects its problems. however, it has, in our opinion, a number of specific system-forming institutions in the agrofood market, which are related with a feature of economic relations and arise from the peculiarities of the central sphere of the agro-industrial complex, which as a branch is agriculture. such specific institutions that require priority in the formation and development and the effectiveness of which largely determines the efficient functioning of the agricultural market as a system are: ‒ underdeveloped institutions of land tenure and land use (sabluk, 2010); ‒ lack of efficient owner institution and, as a consequence, the inefficient functioning of market legal forms; ‒ underdevelopment and inefficiency of institutions of state regulation and state support, which, in turn, includes sales guarantees and sustainable minimal profitability of agricultural producers in a changing market environment. 3. priority directions of formation and development of major systemically important institutions priority directions of formation and development of key systemically important institutions of the agricultural market are presented in figure 2. production structures are one of the most conservative elements of socio-economic systems. their change and improvement require a significant investment of time. radical institutional changes occur more slowly. especially conservative informal institutions are associated with the change of people’s consciousness. however, they create a legitimate basis for the laws. such drastic (revolutionary) changes, carried out not from below (objective) and imposed from above, often lead to negative results in economic transformations (zagurskyj, 2014). in the former socio-economic system, the effect of such a powerful group of motivations was eliminated as the motivation of having the right of ownership, whereas in the market organizational and economic mechanisms, it occupies one of the leading places. to achieve the success of the agrarian reform and ensure the long-term and sustainable economic growth, first of all, modification of informal norms of behaviour that legitimate new laws and regulations which are the basis for the formation of new motivation mechanisms in society is necessary (andrijchuk, 2013). the most effective, as experience shows, are flexible institutional structures, able to adapt to new conditions in a wide range. an objective assessment of institutional losses, acquired during the existence of the administrativecommand system, allows you to note the number of benefits associated primarily with the achievement by the country’s population of high-level general and special education, as well as access to the advanced technological frontier in several industries. we made an attempt to assess, generalize, and systematize institutional advantages and losses incurred over the years of the command economy (table 1). failure to comply with technical, organizational, and technological factors existing in the institutional major system-forming market institutions that require priority in the transformational formation and development institutions of legal forms of business and associations of enterprises institutions of state support and regulation institutions of the effective owner institutions of rehabilitation and bankruptcy of insolvent enterprises institutions of market contract and corporate ties figure 1. major systemically important market institutions in most urgent need of transformational formation and development source: developed by the author baltic journal of economic studies 155 vol. 5, no. 3, 2019 fu nd am en ta l s ys te m -f or m in g in st itu tio ns o f t he a gr ic ul tu ra l m ar ke t i n m os t u rg en t ne ed o f t ra ns fo rm at io na lf or m at io n an d de ve lo pm en t in st itu tio ns o f a gr ic ul tu re an d la nd u se in st itu tio ns o f t he e ff ec tiv e ow ne r in st itu tio ns o f s ta te gu ar an te es ,s al es s ta bi lit y, an d a m in im um in co m e in st itu tio ns of m ar ke t co nt ra ct an d co rp or at e tie s an d al lia nc es in st itu tio ns of w ho le sa le m ar ke t t ra de p ro ce ss in g of ag ri cu ltu ra l p ro du ct s in st itu tio ns of la nd le as e in st itu tio ns of re nt re la tio ns in st itu tio ns o f t he la nd m or tg ag e in st itu tio ns o f p re se rv in g so il fe rt ili ty in st itu tio ns of in te lle ct ua l pr op er ty in st itu tio ns of o w ne rs hi p of br ee ds , v ar ie tie s in st itu tio ns of o w ne rs hi p of th e te ch no lo gy in st itu tio ns of o w ne rs hi p of so ft w ar e an d in fo rm at io n te ch no lo gy in st itu tio ns o f g ua ra nt ee d pr ic es in st itu tio ns o f p ay m en ts fo r cr op re du ct io n in st itu tio ns o f t ra di ng an d pr oc ur em en t t ra ns ac tio ns o f st at es in st itu tio ns o f c om m od ity in te rv en tio ns o f t he s ta te in m ar ke ts fi gu re 2 . p ri or it y di re ct io ns o f f or m at io n an d de ve lo pm en t o f k ey s ys te m -f or m in g in st it ut io ns o f t he a gr ic ul tu ra l m ar ke t so ur ce : d ev el op ed b y th e a ut ho r baltic journal of economic studies 156 vol. 5, no. 3, 2019 environment of the agricultural market leads to uncertainty of entrepreneurs who, in turn, are a factor of increase in costs of transaction operations. inadequate organization and lack of a culture of contractual relations and other informal institutions lead to an increased risk in commerce and entrepreneurship. thus, the solution to the problem of institutional change in the agricultural sector implies creating a multilevel structure and an infrastructure of the agrarian market, which will allow forming an effective owner and implementing more fully the action of market mechanisms and institutions (lopatynskyj, 2006). the concept of institutionalism in a market economy is an interpretation of the theory of social relations in a society represented as a structure consisting of influencing each other groups, the hierarchy of relationships among them, mediated by social institutions. social connections are considered to be organized, controlled, and managed. 4. informal institutions in the system of institutional relations the greatest difficulty in the system of institutional links is represented by informal institutions, that is, unwritten rules, and professional codes of conduct. along with the formalized, they exist as an inner voice, the imperative of practical and not just theoreticallyoriented social behaviour that is taking place in the direction: “it is developed not by us and it is not ours to refuse.” often informal institutionalization is supported or weakened in the process of social communication. in all types of partnership, it is not only intrinsically valuable but predetermines a lot. considering the current status of major institutions in the agricultural market, as well as their role in the effective functioning of market mechanisms and instruments necessitated the recourse to the epistemological roots of traditions and customs that underlie the national mentality of the peoples of ukraine. the mentality is largely determined by nature and climate where these people live and the conditions of agricultural labour and prevailing economic patterns: nature often laughs at the most careful calculations: the perversity of climate and soil deceives modest expectations. the main feature of the mentality is the habit to work for a short time, excessively hard and fast. features of traditions and customs in the behaviour of people living in ukraine are determined by the centuries of the existence of the ukrainian peasant in the framework of such a form of social organization as a rural community. community, originating in prefeudal time, was the organization that united the collective and private origins in the land tenure system. the ukrainian peasant community had a number of development features, which were stabilization and strengthening of community institutions and wide use of equitable redistribution of land among its members in the seventeenth and eighteenth centuries. the community carried out a number of functions of social protection and social security of its members. as noted by some researchers, the development of capitalism in the agriculture of ukraine did not manage to destroy peasant communities; they existed even in the end of the xix – the beginning of the xx century. all these institutional features, in our opinion, should be considered when forming market institutions, both at the macro and micro level. within the theory of r . coase, there are allocated institutions that define general rules of the game at the macro level, which include: the legal system; contract table 1 institutional benefits and losses acquired during the existence of the command-administrative economy in our country institutional losses of the period of socialism institutional benefits acquired during the operation of the command-administrative system ‒ loss of traditions and culture of the market contractual and subcontracting relations in the early years was the cause of the existence of the market predominance of mainly integration schemes of interaction between its agents; ‒ loss of customs and traditions, the implementation of property rights by citizens, which became the main reason for the present lack of “effective owner”. this, in turn, led to insufficient control by the owner over the management, which reduces the efficiency of associated forms of entrepreneurship; ‒ institutions related to efficient use of land and reproduction of soil fertility are lost and in need of a revival. the main among them are: institutions of rent relations, land lease, land mortgage, etc.; ‒ loss of market institutes and mechanisms of their implementation, associated with the introduction of innovative high technologies. ‒ the total literacy of the population that allowed a number of industries to reach the forefront in the field of engineering and technology; ‒ in the framework of the planned economy, a number of organizational institutions are formed that ensure the efficient conduct of scientific research and introduction of innovative technologies based on command-administrative principles. for effective functioning, they need to be adapted to market conditions; ‒ the country has formed a multi-level system of training and retraining in vocational schools, technical schools, and universities. trained professionals have become carriers of technological knowledge, and knowledge were transferred in the majority of cases not by succession but in the formalized way; ‒ due to the achieved high level of concentration of production and size of enterprises, the opportunity to get close to world level has appeared in some sectors of agriculture. source: formed by the author baltic journal of economic studies 157 vol. 5, no. 3, 2019 law; the regime of property rights. the institutions that set the rules for the functioning and organization of transaction at the micro level or, in the words of coase, at the level of institutional structures of production, are alternative organizations, transactions, among which he considers: markets, integrated firms, hybrid contractual arrangements (network organizations). 5. findings for accelerated socio-economic reforms in the agricultural sector of our country, it is necessary to create adequate to the historical conditions of ukraine, strategically oriented, vertically integrated, and structurally-organized institutional space with power lines of structural priorities of economic complexes and subcomplexes at the level of countries, regions, and industries. in domestic economic environment under the influence of this space, there are processes of interactions between actors and the sequence of such interactions leads to a further transformation of the entire system. in addition, this interaction extends to the internal space. therefore, it is possible to speak about the functioning of a certain aggregate institutional space, which is formed by the superposition of individual spaces of various institutions and functional segments within them. the end result of such interaction is the formation of complex three-dimensional configurations, the study of which allows us to consider different variants for the operation of multilevel economic systems and to make a forecast of their development. 6. conclusions based on the above, it is proposed to understand agricultural market as the totality of social relations that arise between market participants on the sale of agricultural products and provision of related support services on the principles of competition, free choice of areas of implementation, as well as state control over the safety and quality of agricultural products. the development of financial relations in the agricultural market, depending on the presence of a complex of factors related to the production, distribution, and allocation of agricultural products and funds, and the formation of a highly developed agricultural market in ukraine will be the basis of food security, provision of food and financial wellbeing of the population, which in general will mean stability in the social life of our country. financial relations between the state and business entities in the agricultural market amid the financial and economic crisis should be based on economic development of fair rules of the game between market players and on the improvement of methods of state support, especially for small business entities in the agricultural market through the mechanisms of taxation, crediting, leasing, social projects and so on. it is established that the institutes and institutions form the background and create the mechanisms of regulation of socio-economic processes of market behaviour, income, expenditure, prices and the like. analysis of institutional economics has given us the opportunity to form our own vision of the institute and the institution. established that market coordination and integration, as efficient market institutes, facilitate mutual ordering of the activities of economic entities, forming a suitable environment of interaction and cooperation, according to which each economic agent operates in the market. depending on the development, the agrarian market coordination is developing and corresponding shapes and types are formed. for this very reason, institutes and institutions of the agricultural market perform the function of continual regulation of the behaviour of market actors, structures of society, create a favourable and predictable environment for market activities. for accelerated socio-economic reforms in the agricultural sector of our country, it is necessary to form adequate to the historical conditions of ukraine, strategically oriented, vertically integrated, and structurally-organized institutional space with power lines of structural priorities of economic complexes and subcomplexes at the level of countries, regions, and industries. the creation of this institutional space will allow formulating for agricultural entrepreneurs a system of strategic benchmarks, value preconditions, and guarantees, which are indispensable for the ordering of processes of harmonization of economic interests of individual producers in the framework of aic throughout the technological chain. this, in turn, will reduce business risks and, as a consequence, transaction costs. references: andrijchuk, v. g. (2013). agropromyslovi formuvannja novogo typu v konteksti strategii rozvytku vitchyznjanogo silskogo gospodarstva [agroindustrial formations of a new type in the context of the development strategy of domestic agriculture]. ekonomika apk, 1, 3–16. bergman, x. (1969). razdelenie truda i specializacija v selskom hozjajstve [the division of labour and specialization in agriculture]. ( ju. i. timofeeva, o. g. tropova, trans). moskva: “progresc”. gajduckyj, p. i. (2004). formuvannja ta rozvytok agrarnogo rynku [the formation and development of agrarian market]. ekonomika apk, 3, 4–15. grycenko, a. a. (2008). rynkovi instytuty ta infrastruktura [market institutions and infrastructure]. ekonomichna teorija, 3, 53–73. baltic journal of economic studies 158 vol. 5, no. 3, 2019 jeggertsson, t. (2011). znanija i teorija institucionalnyh izmenenij [knowledge and the theory of institutional change]. voprosy jekonomiki, 7, 4–16. zagurskyj, o. m. (2014). instytucijni chynnyky rozvytku konkurencii na agroprodovolchyh rynkah [institutional factors the development of competition in agricultural markets]. aktualni problemy ekonomiky, 3(153), 15–22. lopatynskyj, ju. m. (2006). instytucionalizacija tranzytyvnoi ekonomiky [the institutionalization of transitive economy]. nauchnye trudy donntu. serija jekonomicheskaja, 103–1, 15–22. nort, d. (1997). ynstytucyonalnyуe yzmenenyja: ramka analyza [institutional changes: framework of analysis]. voprosy ekonomiky, 3, 6–17. palmer, t. d. (2014). moralnist kapitalizmu. te, pro shho vy ne pochujete vid vykladachiv [the morality of capitalism. what you will not hear from the teachers]. kyiv: osnovy. rodzhers everett, m. (2009). dyfuzija innovacij [the diffusion of innovations]. (v. starka, trans). kyiv: vyd. dim “kyjevo-mogyljanska akademija”. sabluk, p. t. (2010). rozvytok instytucij udoskonalennja mehanizmu reformuvannja agrarnogo sektoru ekonomiky [the development of institutions to improve the mechanism of reforming of agrarian sector of economy]. ekonomika apk, 10, 3–11. shumpeter, j. teorija ekonomichnogo rozvytku: doslidzhennja prybutkiv, kapitalu, kredytu, vidsotka ta ekonomichnogo cyklu [the theory of economic development: a study of profits, capital, credit, interest and economic cycle]. (v. starka, trans). kyiv: vydavnychyj dim “kyjevo-mogyljanska akademija”. veber, m. (2016). hozjajstvo i obshhestvo: ocherki ponimajushhej sociologii [economy and society: essays on the understanding of sociology]. jekonomicheskaja sociologija, 5(17), 13–28. baltic journal of economic studies 92 vol. 2, no. 2, 2016 corresponding author: 1 department of economics and finance, ternopil ivan puluj national technical university. e-mail: n_marynenko@ukr.net the comprehensive approach to the enterprise’s adaptation in the process of development: managerial aspect nataliia marynenko1 ternopil ivan puluj national technical university, ukraine abstract. the purpose of the paper is to develop a comprehensive approach to managing the enterprise’s adaptive development within the production and economic organizations (peo). the methods of economic and mathematical modeling are used for assessing the enterprise’s adaptive development capacity. methodology. the research is based on the developing the approach to managing problem situations emergence at the stages of the enterprises’ pre-adaptation, co-adaptation and adaptation within peo, introducing the equation for the adaptive development capacity implementation efficiency determination and identifying the stages of the industrial enterprises’ adaptive development forecasting. results. the comprehensive approach to the enterprise’s adaptation in the process of development, which consists of the problem situations management, determination of the enterprise’s adaptive development capacity and forecasting of the enterprises’ adaptive development is introduced. practical implications. the application of the proposed approach for identifying the problem situations to emerge at the stages of the enterprises’ pre-adaptation, co-adaptation and adaptation within peo will make it possible to avoid such situations emergence at the enterprise or, if the situation has already occurred, to adjust managerial decisions for doing so. the use of the ratio for assessing the relevance of situation to emerge will improve the decision making process concerning the enterprises’ adaptation to macroeconomic challenges effectiveness, save time and resources on the reaction which is required by the external environment due to the situation’s relevance and will significantly facilitate the assessment of the adaptive measures being undertaken effectiveness during the enterprise’s development within the peo. a criterion of the adaptive development capacity implementation efficiency will allow to determine the impact of the managerial decisions concerning the adaptive capacity (with all identified constraints) implementation on the level of such capacity. fuzzy-multiple descriptions are used as a tool for recognizing the managerial decisions efficiency level. the results of the analysis of the proposed enterprise’s adaptation coefficient value testify about the correctness (or not) of the adaptive decisions and actions being undertaken. value/originality. the development of a well-grounded approach of the enterprise’s adaptation to the external environment under modern conditions is an urgent task as there is a likelihood of new and unpredicted factors to impact its activities, so effective decisions on adaptation are necessary to be made quickly. the application of the developed comprehensive approach by enterprises will make it possible for them to effectively adapt to the dynamic and challenging market environment. key words: management, adaptive development, forecasting, adaptive capacity, problem situation, external environment impact. jel classification: m1, m21, с53, d2, d74, d81 1. introduction the external environment rapid development and new challenging market conditions result in the necessity of developing an adaptive approach to the enterprises functioning. success of the peo, which is a form of economic organization that incorporates different by their ownership, legal form, production and commercial activity industrial enterprises and other companies, e.g., banks, financial institutions etc. (aliieksieiev, 2002) in many aspects is determined by an aggregate indicator of the enterprises’ adaptation to the external environment changes. appearance of new technologies and technological processes in the world imposes new requirements for the rapid development of relevant branches of industry making enterprises to adapt to these changes in order to maintain or achieve an optimal state baltic journal of economic studies 93 vol. 2, no. 2, 2016 of the peo functioning while external conditions tend to change. the ability of the peo to adapt is determined by the strength of the relationships between enterprises within it and their impact on the adaptation process final result. the aim of the paper is to present a comprehensive approach to managing the enterprise’s adaptive development within the peo. 2. identification of problem situations emerging during the enterprises development the pace of the company’s external environment change faster than the management system reaction to them. that’s why it is of urgency to identify and remove possible problem situations to occur in time. for doing so, few issues should be taken into consideration: 1) companies might have significant discrepancy of technological, industrial and institutional capacity to the environment requirements; 2) activity under uncertainty enforces enterprises to reconstruct internal industrial relationships and to improve the internal structure without proper consideration of the entity’s external environment etc. by their nature and type the problem situations emerge at different stages of the enterprises’ adaptive development within a specified peo. therefore, approach, the use of which would make it possible to identify and correct problem situations emerging at the stages of the enterprises’ pre-adaptation, co-adaptation and adaptation is proposed. its main components are as follows: 1. enterprise’s pre-adaptation process analysis within the peo, which includes the identification of the enterprise’s active and passive components as well as the enterprise’s management subsystems efficiency analysis with the adjustment of management subsystems operations if necessary (identification and removal of management subsystems problem situations). 2. identification of potential areas for development: the emergence of problem situations in interrelations between the enterprises within the peo (e. g., functions duplication, conflict of interests, functional processes deficiency) which leads to the inconsistency zones emergence between the enterprises. 3. resolving of the inconsistency between enterprises by their co-adaptation (by applying the inconsistency level management with the help of specific management functions performance efficiency criteria) and adaptation within the peo (by finding out the nature of necessary changes in accordance with the external environment requirements, ranking of those changes by their urgency and identifying the reaction type). during the adaptation of the peo to the changes in the external environment the potential for problem situations emergence also exists when the system can randomly react to different disturbances. with the aim of avoiding this, the ranking of events that are to be responded quickly is of need. based on the study of baranenko and shemetov (2004), the assessment of the situation’s relevance should be carried out by the following equation: red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= , (1) where δт – is the assessment of the situation’s relevance; δтres – is the time remaining before the onset of situation; δтred – is the time required to take action concerning the targeted impact on the processes occurring in the external environment. the application of this assessment method will improve the decision making process concerning the enterprises’ adaptation to macroeconomic challenges effectiveness, save time and resources on the reaction which is required by the external environment due to the situation’s relevance and will significantly facilitate the assessment of the adaptive measures being undertaken effectiveness during the enterprise’s development within the peo. 4. the enterprises’ activities mutual coordination within the peo and the reaction rate identification as a result of the measures stated above. 3. determination of the enterprise’s adaptive development capacity the adaptive development process and enterprise ongoing management are directly related to the adaptive capacity of the company, its size and structural components. adaptive capacity, which is shaped by both qualitative and quantitative indicators, is a key condition for the implementation of adaptive management under the changing external environment, and the most important factor that contributes to the enterprise competitiveness increase in the new functioning circumstances. first of all, it is required to create a system of constraints concerning the use of adaptive capacity by accenting on its financial, production, technological and labor components for fitting the approved managerial decisions on adaptive development. the constraints determined above should meet the main aim of the managerial decisions on adaptation implementation, which is the profit to be continuously received in terms of the external environment dynamics. red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= , (2) where red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= – is the net profit in the selected time period t, received as a result of the approved managerial decisions on adaptive measures implementation t within the chosen variant of implementation ttj 0, = . next, the impact of the approved managerial decisions concerning the adaptive capacity (with all identified constraints) implementation on the level of such capacity is to be determined. for doing so, it is necessary to use a criterion of the adaptive development capacity implementation efficiency which is a correlation between the level of satisfaction of those needs that emerge at the baltic journal of economic studies 94 vol. 2, no. 2, 2016 enterprise under the impact of the changing external environment (by the use of the previously determined financial, technological, industrial and labour components and their constraints which are to be taken into account during the decision-making process on adaptive management) and the costs of their provision: red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= , (3) where e – is the adaptive development capacity implementation efficiency; red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= – is the level of satisfaction of those needs that emerge at the enterprise under the impact of the changing external environment; red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= – are the costs for the needs provision. for preserving the reliability of the obtained results the use of fuzzy-multiple descriptions as a tool for recognizing the e level values is the most appropriate one. the fuzzymultiple descriptions are to be used in order to replace the point numeric values on their quality characteristics, such as “low-medium-high”. scale of the e possible point numeric values is the interval (0, 1) as a standard five-fuzzy classifier (loyko and yefanova, 2005). based on the presented system of constraints concerning the use of the development adaptive capacity with its determined financial, production, technological and labor components, we represent the e as a fuzzy figure, the model of which is as follows: red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= , (4) where а – are the possible types of the adaptive development capacity resources; f – is the financial resource; p – is the production resource. s – is the technological resource; k – is the labor resource; м – is a term-set of possible assessments of each model’s component level: м={very low level (vll), low level (ll), average level (al), high level (hl), very high level (vhl)}. h – is the symbol of the indicators system hierarchy. the assessment of the adaptive development capacity implementation efficiency involves a comparison of qualitative and quantitative characteristics of the e model components. 4. forecasting the enterprises’ adaptive development the development of a well-grounded forecast of the enterprise’s adaptation to the external environment under modern conditions is of great necessity as the likelihood of new and unpredicted factors impacting its activities and decision-making on adaptation emergence should be taken into account. the stages of the industrial enterprises’ adaptive development forecasting are as follows: 1. the current period adaptive development pre-forecast evaluation stage. 2. the enterprise adaptation coefficient real value calculation. 3. concluding about the effectiveness of adaptive development selected policy. 4. the determination of external and internal factors affecting the enterprise’s adaptive development. 5. ranking of these factors by their importance. 6. the enterprise’s adaptive development scenarios simulation. 7. the adaptive expectations model development. 8. the moving equilibrium coefficient calculation. 9. the enterprise’s adaptive development results forecast. for forecasting the enterprise’s adaptive development within peo we propose to use the adaptation coefficient ca, which reflects the relationship of external and internal environment of the enterprise and which would maintain the relative equality of two processes – the dynamics of the environmental factors impact on the enterprise and its reaction on such an impact under the process of adaptation to changes. for obtaining the current value of the enterprise’s adaptation coefficient to the changes being provoked by the environment (macroeconomic one) at the pre-forecasting stage, the ratio of the index of the company’s sales to the index of the country’s industrial production is introduced: red res t t t ∆ ∆ =δ ( )∑∑∑ === ≥ jq j j i j i n i t t ytb 111 0 ( ) jiji ytb max)/( 11 →= ∑∑ == q j j i n i j i cye ∑ = q j j ic 1 ),,,,,( mkspfahe = ipca iic /= , (5) where ic – is the index of the enterprise’s sales in the current period; iip – is the index of the country’s industrial production in the current period. the economic essence of this ratio is as follows: the impact of macroeconomic instability on the company’s activities results in the emergence of the same changes in the company (when the business activity decrease in the country the enterprises’ sales reduce as well). in case of the coefficient value to be equal to or greater than one, we may conclude about the positive effects of the adaptive measures being undertaken. conversely, if the coefficient value is less than one it means that the company made wrong adaptive decisions and actions or did not undertake any (revenko, lyba, moshkina, 2013). the satisfactory value of the coefficient testifies about a balanced policy concerning the development and implementation of adaptive measures which should be maintained in the future. in case of the coefficient value to be unsatisfactory (not only for the present ratio but also as to the calculation of other groups of internal and external environments indicators), the areas to be focused on when complying the moving equilibrium with the environment should be indicated. 5. conclusions the comprehensive approach to the enterprise’s adaptation in the process of development, which consists of such constituents as the problem situations baltic journal of economic studies 95 vol. 2, no. 2, 2016 management, determination of the enterprise’s adaptive development capacity and forecasting of the enterprises’ adaptive development, is introduced. the approach to managing problem situations emergence at the stages of the enterprises’ pre-adaptation, co-adaptation and adaptation within the peo is offered. it is determined that the industrial enterprise’s adaptive development management within the peo at the pre-adaptation stage should employ its structural components and management subsystems effectiveness analysis for identifying some problems emergence (e.g., duplication of functions and processes, conflicts of interest etc.) in the interrelation between the enterprises within the peo. in order to maintain the viability of the peo as a system the ratio for assessing the relevance of the situation to emerge is proposed. the system of constraints concerning the use of adaptive development capacity is identified and the criterion of the adaptive development capacity implementation efficiency is obtained. the approach to forecasting the industrial enterprise’s adaptive development is proposed in the paper as well as the determination of the current value of the enterprise’s coefficient of adaptation to changes in the external environment. references alieksieiev, i. v. (2002). strategies and regulation for industrial-economic structures innovation development. dissertation, institute for economics and forecasting of the national academy of sciences of ukraine. baranenko, s. p. & shemetov, v. v. (2004). strategic sustainability of the enterprise : monograph. moscow: tsentrpolygraph. loyko, v. i., & yefanova, n. v. (2005). approach to the evaluation of the risk integral index of integrated production systems. scientific journal of kubsau, 3(11.) retrieved from: http://ej.kubagro.ru /2005/03/18/ revenko, d. s., lyba, v. a., & moshkina, i. k. (2013). diagnostic method of stability of enterprise operation in the macroeconomic volatility. economics and management of machine-building industry: problems of theory and practice, 3 (23), 34–43. наталия мариненко комплексный подход к решению проблемы адаптации предприятий в процессе развития: управленческий аспект аннотация. целью работы является разработка комплексного подхода к управлению адаптивным развитием предприятия в рамках производственно-хозяйственных структур (пхс). для оценки их адаптационного потенциала были использованы методы экономико-математического моделирования. методика. исследование основано на разработке подхода к управлению проблемными ситуациями, которые возникают на этапах предварительной адаптации, коадаптации и адаптации предприятий в рамках пхс, использовании уравнения для определения эффективности реализации потенциала адаптивного развития и определении этапов прогнозирования адаптивного развития промышленных предприятий. результаты. предложен комплексный подход к адаптации предприятия в процессе развития, который состоит из управления проблемными ситуациями, определения потенциала адаптационного развития предприятия и прогнозирования адаптивного развития предприятий. практическое значение. применение предлагаемого подхода для выявления проблемных ситуаций, которые возникают на этапах предварительной адаптации, коадаптации и адаптации предприятий в рамках пхс позволит избежать возникновения таких ситуаций на предприятии или, если ситуация уже возникла, скорректировать управленческие решения для устранения этой ситуации. использование уравнения для оценки актуальности ситуации, которая возникает, улучшит процесс принятия решений, касающихся эффективности адаптации предприятий к макроэкономическим вызовам, сэкономит время и ресурсы на реакцию на ситуацию и будет в значительной степени способствовать оценке эффективности предпринимаемых адаптивных мер в процессе развития предприятия в рамках пхс. критерий эффективности реализации потенциала адаптивного развития позволяет определить влияние осуществляемых управленческих решений, касающихся адаптационного потенциала (со всеми выявленными ограничениями), на его уровень. нечетко-множественные описания используются в качестве инструмента для выявления уровня эффективности управленческого решения. результаты анализа значения предлагаемого коэффициента адаптации предприятия свидетельствуют о правильности (или нет) предпринимаемых адаптивных решений и действий. значение/оригинальность. разработка обоснованного подхода к адаптации предприятия к внешней среде в современных условиях является актуальной задачей, поскольку постоянно существует вероятность влияния новых и непредсказуемых факторов на деятельность предприятия и необходимость принятия быстрых эффективных адапционных решений. применение предприятиями разработанного комплексного подхода позволит им эффективно адаптироваться к постоянно изменяющимся условиям рыночной среды. baltic journal of economic studies 25 vol. 5, no. 3, 2019 corresponding author: 1 yaroslav mudryi national law university, ukraine. 2 lviv polytechnic national university, ukraine. doi: https://doi.org/10.30525/2256-0742/2019-5-3-25-36 foreign experience in countering (preventing) organized crime in the financial system: special law enforcement bodies and strategic priorities bohdan holovkin1, kostyantyn marysyuk2 abstract. the aim of the article is the analysis of countering organized crime in the financial system in ukraine and abroad, as well as the development of concrete proposals to optimize the legislative provision of such activities by special international law enforcement agencies in connection with countering crimes in the financial system committed by organized groups and criminal organizations. the subject of the study is an organized crime in the financial system: foreign experience. methodology. the analysis of legal regulations of ukraine, the eu, and the usa, as well as scientific literature, enables to study the state of affairs in combating organized groups, which commit economic crimes, and define strategic priorities and objectives of countering this socially negative phenomenon in ukraine. the results of the study reveal that the implementation of foreign experience in the national economic development faces a number of key economic challenges, primarily organized crime, that hinder the national economy improvement. the author determines that a comprehensive organized crime coping strategy in the financial system is needed currently. practical implications. the study determines that the issue of countering organized crime in the financial system has become international over the last few decades, overstepping the boundaries of individual countries or regions and gaining global significance. the world community recognizes that organized crime in the financial system has become a global threat to economic security that requires states to adopt measures agreed to combat this socially dangerous activity, both nationally and internationally. relevance/ originality. the study reveals the status of the economic system development in ukraine, as well as further improves identifying of effective trends of organized crime prevention in the financial system of ukraine, taking into account positive foreign experience. key words: foreign experience, organized crime, financial system, state security. jel classification: g32, f38, f52 1. introduction ukraine has declared its intention to enter the european union of developed democracies that have high standards of safety, well-being, and living, as well as the priority of human rights, the rule of law, and punishment inevitability for those who have committed a crime. strengthening of democratic institutions is impossible without reducing the negative effects of corruption and organized crime, which remain one of the greatest current threats in our country (yevropeyskyi dosvid zapobihannia orhanizovanii zlochynnosti: teoretychni pytannia). nowadays, the ukrainian economy’s status, transformations and processes in the past and especially in recent years testify convincingly that solving of socioeconomic development problems has become strategic and global, has become one of the most important in the state. coping with crisis phenomena and the consequences of the global financial crisis, as well as a shift to sustainable economic growth, requires the further elaboration of the mechanisms of economic regulation both at the state and at the regional level (ruden, 2014). legal instruments of the market economy have been used extensively for the purpose of unlawful enrichment of certain segments of the population. because of an active extensive network of fictitious business entities and their highly organized informal associations, that is, converting centres, the state, citizens, and legal entities suffer multimillion losses annually. a fictitious enterprise is a tool for committing a number of mercenary crimes (tax evasion, smuggling, fraud with financial resources, etc.) (hryhorovych, 2018). this situation is due to crime adjustment to the transformations of the socio-economic structure of society and dynamic response to social and legal control in order to avoid it (sevruk, 2017). baltic journal of economic studies 26 vol. 5, no. 3, 2019 therefore, economic crime is becoming an increasingly problematic, threatening phenomenon for ukraine as a strong independent and young sovereign state. long-standing imperfect economic relations are used by criminals to parasitize the body of society, to provide themselves with significant material revenues by tax avoidance, corruption, fraud with financial resources, “money laundering”, prohibited economic activities, direct encroachment on all forms of property and committing other economic crimes. undoubtedly, such acts should not and do not remain without a proper state response, requiring its law enforcement bodies to combat them uncompromisingly (tokarchuk, 2013). the issue of countering organized crime in the financial system by a specialized body can be solved theoretically because a sufficient number of scientific works reveal the international experience of the creation and performance of relevant specialized bodies. however, it should be underlined that a systematic analysis of the feasibility of this body establishment in ukraine, considering ukrainian specificity, is absent. the issue of the place and role assigned to the state bureau of investigations among other law enforcement agencies, including pre-trial investigation bodies, are studied insufficiently. moreover, the problem is complicated by the weak financial control system in ukraine and the cis countries, in which it is nearly impossible to establish the origin of funds and large sums are in circulation in cash (tokarchuk, 2013). therefore, the study of foreign experience in countering organized crime in the financial system is becoming especially relevant today and that is why the topic is chosen to study. 2. literature review a significant contribution to the study of the problem of countering organized crime in the financial system was made by foreign and domestic scientists such as v. v. volynets, p. o. hryhorovych, o. m. dzhuzha, s. o. dmytrov, l. m. dolia, s. b. yehorychev, a. v. yezhov, zh. o. zhukovska, m. i. zhuravel, f. o. zhuravka, y. kobko, v. v. kovalenko, s. kravchuk, l. v. kryvonos, i. e. lapinskyi, o. m. lytvynov, m. d. martynov, v. i. muntiian, o. o. onyshchuk, s. v. onyshchenko, i. m. osyka, s. o. pavlenko, a. b. parshutin, l. v. polovynskyi, a. l. repetska, v. v. ruden, v. h. sevruk, s. k. shandruk, o. tokarchuk, n. p. chorna, r . s. chornyi, o. yu. shostko, o. yunin. the aim of the article is the analysis of countering organized crime in the financial system in ukraine and abroad, as well as the development of specific proposals to optimize the legislative provision of such activities by special international law enforcement agencies in connection with countering crimes in the financial system committed by organized groups and criminal organizations. 3. presentation of the main material the financial sector claims to be the undisputed worldwide leader in economic globalization. total financial transactions have increased significantly and now exceed the total value of trade dozens of times. under financial globalization, banks become more market-oriented, the influence of new participants in financial markets, such as pensions, investment, hedge funds, insurance companies, brokerage firms, etc., has increased. finally, financial globalization has contributed to both the occurrence of new opportunities for banks and an increase of risks in their activities (valiutne rehuliuvannia ta kontrol). the main elements of the financial system are national finances; local finances; finances of business entities of all forms of ownership; non-productive business finance; finances of the population; financial market; financial infrastructure. considering the main elements of the financial system in the context of the world economic functioning, each country tries to achieve a high level of socio-economic development. since globalization processes give rise to increasing demands on the national economy parameters, ukraine must improve its development strategy that can reflect our state adequately (chorna, chornyi, shandruk, 2018; yunin, sevruk, pavlenko, 2018) and counter organized crime in the financial system. over the last decade, relevant radical socio-economic transformations have caused both positive and negative changes in the modern ukrainian society (pavlenko, sevruk, kobko, 2017), encouraging the introduction of foreign experience in combating organized crime in the financial system at all levels by the state and law enforcement bodies of ukraine. the analysis of the main approaches to the determination of mechanisms for the anti-shadowing of the ukrainian economy enables to argue that according to scientists, the main mechanisms are economic (improvement of the tax system; reform of the national financial control system; stimulation of investment processes; creation of favourable conditions for entrepreneurship development; combating corruption, etc.). s. o. pavlenko’s argument should be considered, that is, close corrupted relations, formed in legislative, executive, and judicial authorities, lead to the dependence on criminal organisations, which ensures the adoption of decisions necessary for them, in violation of current legislation or existing social norms (shliakhy udoskonalennia pravovoho rehuliuvannia). o. o. onyshchuk argues that the effectiveness of counter-measures against crime largely depends on achieving their uniformity within a coherent and consistent unified european policy. this condition is increasingly necessary because of phenomena such as organized crime, often international, facing which national systems may prove ineffective. baltic journal of economic studies 27 vol. 5, no. 3, 2019 in modern europe, where the borders between countries are disappearing, the police and its powers should be considered from the international perspective. the issue depends on the extent to which the police performance is effective in combatting forms of crime, which crosses the state borders frequently, including organized crime (onyshchuk, 2011). modern organized crime in the financial system threatens not only the national interests of individual states but also international security since it has acquired a transnational character. primary, it concerns countries, such as ukraine, with an unstable socio-political and economic situation at the stage of economic and political transformation (pohoretskyi, 2007; pavlenko). the leaders of organized crime groups are focused on the search and establishment of corruption ties among officials performing law enforcement, regulatory economic activities, judges, heads of local authorities and other officials, empowered to make decisions important for organized criminal groups. this contributes to an increase in the number of corrupt officials holding positions of responsibility. furthermore, it should be considered that corruption is characterized by a high level of latency (dzhuzha, 2007; pavlenko, 2013). in the course of the research, during the questioning of the bodies of the national police of ukraine, it was established that 91% of our state should take into account the foreign experience in combating organized crime in the financial system in the course of the study, the survey of the ukrainian national police bodies established that in 91% of cases, our state should consider foreign experience in countering organized crime in the financial system. moreover, in the course of this survey, respondents were asked what foreign countries’ experience they would implement in the performance of the national police of ukraine; accordingly, the answer was: the united states – 21%; great britain – 19%; poland – 15%; switzerland – 13%; italy – 11%; france – 11%, and 10% fell on the experience of other countries. therefore, taking into account the survey conducted, the analysis will be focused on the experience of the countries mentioned above, because practical workers are interested in precise bodies, which counter organized crime in the financial system and regulating such activities by legal acts. considering this, reasonable conclusions regarding the implementation of positive foreign experience for ukraine will be provided. consequently, subjects of counteraction to crime form a functionally and organizationally holistic system, united by the common purpose and management in combating crime. the complexity of this system is due, on the one hand, to the multidimensional tasks of ensuring security, preventing, deterring, terminating, disclosing, and investigating crimes and, on the other hand, mission distribution between subjects of different levels, attributable to the hierarchical construction of the system. this system is a complex social organization because the groups of homogeneous bodies involved constitute relatively independent organizational formations that function according to identical rules. each of these formations is a subsystem of a larger system and simultaneously it consists of its subsystems (lytvynov, 2015; sevruk, 2017). it should be noted that one of the most effective instruments of anti-shadowing in many countries of the world is systems and mechanisms for financial control over illegal proceeds. for example: a) in italy, a government decree bans cash payments for large sums; b) in germany, settlements with non-residents requires declaration; c) in japan, obligatory financial monitoring exists (financial institutions are obliged to report on major financial transactions to authorized public authorities). meanwhile, in germany, not only banks and financial institutions but also lawyers, auditors should report suspicious transactions to financial monitoring bodies (muntiian, 1999; europe: hidden economy; weu council of ministers; onyshchenko, lapinskyi, 2013). therefore, to consider the tasks set, first, international special bodies and organizations that combat organized crime in the financial system should be analysed. nowadays, many special law enforcement agencies exist, but the three most effective ones that counter organized crime in the financial system should be distinguished. these global law enforcement organizations are the international criminal police commission (interpol), the european police office (europol), the bureau for the coordination of the fight against organized crime and other dangerous types of crimes in the cis member-countries (bcfaoc). the existence of these structures can be defined as one of the organized responses of the international community to the illegal activities of such groups. at the regional level, this cooperation is developed most of all in europe, european police office (europol), and the cis member-countries, the bureau for the coordination of the fight against organized crime and other dangerous types of crimes in the cis member-countries (bcfaoc); meanwhile, in other geopolitical regions, the issue of such organization creation remains open. however, despite existing international acts of various levels and the work of international law enforcement organizations, the problem of combating transnational organized crime remains a worldwide issue (etnicheskaia orhanyzovannaia prestupnost; sevruk, 2017). nowadays, europol coordinates the police service performance of all 28 european union member states. in contrast to national police forces, europol does not have its own investigative authorities. europol works closely with law enforcement agencies in 28 eu member states and other partner states and non-eu countries such as australia, canada, the united states, and norway (yevropol). in addition, europol baltic journal of economic studies 28 vol. 5, no. 3, 2019 has relationships with the eu member states and organizations that interact with europol according to cooperation agreements: albania, australia, canada, colombia, iceland, norway, switzerland, interpol, and us law enforcement agencies: the bureau of alcohol, tobacco, firearms and explosives (atf), the drug enforcement administration (dea), the secret service (usss); the federal bureau of investigation (fbi), the immigration and customs enforcement (ice) and the internal revenue service (irs). this network has secured communication channels provided by europol. moreover, europol has two liaison officers deployed to washington dc (usa) and the interpol headquarters in lyon, france (yevropol). the prospects for ukraine’s cooperation with eurojust, the eu collective body aimed at assisting the member states in crime investigation, and accelerating the coordination of competent authorities’ performance (those performing investigative functions), should also be taken into account. for ukraine, it is important that to fulfil its missions, eurojust is authorized to conclude agreements and establish cooperation with the third countries that are not eu members. considering that the assistance and support of eurojust in the criminal prosecution of offenders, members of organized communities, which it provides at countries’ request, contributes to suppressing organized groups and criminal organizations eventually, the signing of the relevant international agreement with this organization is of the utmost importance. moreover, the eu working bodies encourage states to expand operational cooperation between the competent authorities, especially within the framework of bilateral and multilateral mechanisms and agreements (further: council document 11037/05 of 8 july 2005). these aspects of the organized crime prevention in the financial system, in particular transnational, are reflected in the united nations convention against transnational organized crime, which defines the following areas in relation to combating organized crime in the financial system of the world: the first area involves strategies for limiting opportunities for committing crimes by reducing existing or future opportunities for organized criminal groups to participate in lawful markets with proceeds of crime, through appropriate legislative, administrative or other measures (para. 2, art. 31 of the convention) (konventsiia oon proty transnatsionalnoi orhanizovanoi zlochynnosti). the second area of crime prevention strategies is the need to reduce the level of legal economy’s vulnerability to prevent possible misuse by organized criminal groups. organized crime strives for integrating the legal economy for a number of reasons, for example, with the aim: a) to legalize and invest the proceeds of crime; b) to acquire respectability and social rehabilitation for “their” people, members of organized communities; to gain control over the territory in which criminal groups conduct their operations to obtain maximum economic and political benefits and minimize the risk of detention, arrest, and conviction (“law-enforcement risk”) (repetskaia, 2001). in implementing this strategic area, it should be considered that its successful implementation depends on the optimal combination of regulation and deregulation measures. in 2004, the council of europe (within the octopus platform) published the survey on best practices against organized crime (bps) prepared by the group of specialists on criminal law and criminological aspects of organized crime (pc-s-co) (aromaa, 2006). eight most effective strategies for influencing organized crime (according to experts) applied in different countries were selected. they are: witness protection; reversing the burden of proof in confiscating the proceeds of crime on the offender (shostko, 2007); interception of communication and intrusive surveillance; crime analysis through studying crime patterns and trends; cross-border cooperation; provisions on membership of criminal organisations; cooperation against trafficking in human beings; preventive legal measures (administrative approach (shostko, 2008)). in response to the high degree of harm caused by economic crimes to society and the world financial system, the police directorate of the general secretariat of interpol formed a department for combating financial and economic crimes, which also includes a working group, controlling proceeds of crime. the research of flatwash group is aimed at revealing suspicious financial transactions and funds, property and values of crime, including the cis countries (martynov, 2010). in some states, financial intelligence units have been established and integrated into the single egmond network, aimed at intensifying the exchange of information on economic crimes, and creating a unified international database of such crimes. it is focused on money-laundering (tokarchuk, 2013). considering the relevance of the issues related to money-laundering, at the 1989 meeting of g-7 leaders in paris, the financial action task force (fatf) was set up to develop financial measures against moneylaundering. the fatf is an intergovernmental body that develops an anti-money laundering policy and contributes to its implementation at the national and international levels. the fatf is a transnational body that develops a policy against money laundering and contributes to its implementation at the national and international levels. the fatf consists of 29 participating countries: australia, austria, argentina, belgium, brazil, the united kingdom, greece, denmark, ireland, iceland, spain, italy, canada, hong kong (china), luxembourg, mexico, the netherlands, germany, new zealand, baltic journal of economic studies 29 vol. 5, no. 3, 2019 norway, portugal, singapore, the united states of america, turkey, finland, france, switzerland, sweden and japan and two regional organizations: the european commission and the gulf cooperation council. the fatf cooperates with other international organizations working in this area, such as the united nations office for drug control and crime prevention, the council of europe, the asia-pacific group on money laundering, and the caribbean task force. the fatf secretariat is located in the organization for economic cooperation and development (oecd) (dolia, 2001). the fatf mission is to ensure that all financial centres comply with international standards for prevention, detection, and prosecution of money laundering. to accomplish this mission, the fatf has developed forty recommendations, which are international standards and constitute the basic structure of counter-measures against money laundering to be applied at the global level. forty recommendations define the general principles for action to be reflected in the national legislation of the countries on the following issues: criminal liability, the justice system, administrative and civil coercion measures, the financial system, international cooperation, etc. they emphasize the need to strengthen national legal actions aimed at the counteraction to money laundering, to increase the role of the financial and banking system in this matter, and to expand international cooperation. though it is not a binding international convention, many countries in the world have made a commitment to regulate counteraction to money laundering at the state level. the fatf focuses on analysing global financial flows, banking and financial systems and money laundering practices with a view to identifying weaknesses in combating this phenomenon. the body continuously monitors and analyses both the fatf member countries’ progress against money laundering and processes to bring the legislation of certain countries, which have expressed their support for the global counteraction to money laundering, into line with the fatf recommendations (kryvonos, 2014). in case of negative evaluation results, the fatf has the right to apply certain measures, such as warnings issued for a country, blacklisting a country (the list of countries that do not cooperate with the fatf against money laundering), even to apply recommendations on limiting cooperation with offending countries. the consequence of sanctions may be restrictions and termination of settlements, blocking funds on correspondent accounts of banks and accounts of enterprises, closing these accounts, etc. (cabinet of ministers of ukraine). in addition to the bodies mentioned above, such as interpol, europol, the bccoc, eurojust, the fatf, the un, other special international organizations that coordinate activities in preventing and combating organized crime in the financial system exist. nowadays, such organizations are: 1. egmont group (egmont financial intelligence unit). 2. moneyval is the council of europe special on committee of experts on the evaluation of antimoney laundering measures and terrorist financing measures. 3. eurasian group on combating money laundering and financing of terrorism (eag). 4. basel committee (committee for bank regulation and supervision). 5. wolfsberg group, interbank association. 6. international monetary fund. 7. the world bank. 8. european bank for reconstruction and development. therefore, the analysis of the abovementioned special bodies and organizations for combating organized crime in the financial system enables to consider the direct positive experience of the states that counteract effectively nowadays. among these countries, the usa comes first. professor of chicago-kent college of law philip habultzel has analysed the development of current us legislation on money laundering, including amendments to american legislation after the events of september 11, 2001. in particular, the legal definition of money laundering was expanded, and now the operation with funds of doubtful origin is recognized as a crime, regardless of proving a predicate crime. in the united states, the criminal responsibility for money laundering is established both at the federal level and in each separate state, including the so-called “structuring,” that is, the distribution of a large amount of money for small amounts in order to avoid governmental checks, which is considered as deceit with the purpose of concealing suspicious transaction. furthermore, the list of financial and non-financial institutions subject to report to public authorities on suspicious financial transactions was expanded significantly; and duty for lawyers and auditors to report suspicious financial and property transactions of their clients was imposed. violations of these requirements shall entail strict civil and criminal liability; one of the types of its punishment is a fine of twice the amount of the transactions (osyka, 2003). for example, in the united states, special fbi units (fbi swats) combat organized crime (gangs, syndicates, mafia), they are assault teams with special armed forces that exist in each of the 56 regional units of the fbi and use a special tactic to neutralize criminals during special operations, which require skills and abilities beyond the capacity of ordinary policemen (volynets, 2014). the u.s. experience against money laundering proves the following. in the usa, the legal definition of money laundering was expanded, and now the crime is recognized by the conduct of the very operation with funds of doubtful origin, regardless of proving a predicate baltic journal of economic studies 30 vol. 5, no. 3, 2019 crime. criminal liability for money laundering in the united states is established both at the federal level and in each individual state. separate responsibility for the establishment and the so-called “structuring,” the act of breaking up a large transaction into several smaller transactions in order to avoid checks by the government. such activity is regarded as misleading in order to conceal suspicious transactions (polovynskyi, 2008). since money laundering is the implementation of financial transactions, countering the legalization is, primary, tracking cash flows and cashless funds. one of the most effective ways of tracking cash flow is payment monitoring. today, in the united states, the two most common forms of settlement are using checks and credit cards. both forms of settlement are through the system of the federal reserve and the central bank, which monitor payments using checks and credit cards. the american strategy to combat money laundering cannot be called decent and rational. despite legislative innovations, the federal government cannot be considered able to prosecute all illegal transactions with the money of suspicious origin. in addition, the issue of interaction between law enforcement and controlling bodies is not resolved. for example, in the american government strategy to combat money laundering, 10-12 different federal agencies are responsible for different areas of its implementation, and the mechanism of their cooperation is not developed (zhuravel, 2010; tokarchuk, 2013). however, after september 11, 2001, this law expired, and a bank report to clients, including individuals, on information provided to law enforcement agencies on their request, is prosecuted by criminal law. the trial goes the same way. according to the latest decision of the u.s. supreme court, bank account information is not the information covered by the rules for the non-disclosure of private data in accordance with amendment 4 to the u.s. constitution, which provides for the privacy of a person from the third-party interference. now banks are obliged to provide law enforcement agencies with any information about their clients on the demand of law enforcement agencies (osyka, 2003). the u.s. government’s strategy against money laundering has changed. today, it aims at combating terrorism financing and depriving organized crime groups of the financial foundation. earlier, law enforcement agencies tracked the sources of doubtful proceeds, but now the focus is on the sources of their use. recent studies conducted in the united states reveal that even legally obtained money can be used for criminal purposes. this applies particularly to the activities of various charitable and religious organizations that collect donations and spend them on organizing terrorist acts or other criminal activities. this activity is very attractive to terrorists and criminals since it is an effective cover. therefore, the focus is on the detection and confiscation of hidden proceeds of criminal or terrorist activities, the prevention of money laundering and predicate crimes, that is, the source of proceeds of crime. furthermore, the focus is on the study of criminal statistics, in particular, regarding the financial analysis of legalization operations to find out the actual total profits of economic specialists who advise offenders, which unofficially amounts to 4, 8 or 12% of the amount to be legalized. nowadays, such statistics are expressed by the total property confiscated and the number of persons convicted for this crime. for example, in 2001, 639 million dollars were confiscated; in the fiscal year of 2001–2002, about 1,000 people were prosecuted, only 50 of whom were sentenced to more than 3-year imprisonment. professor habultzel argues that sharing operational information is an important element in counteracting money laundering. after the events of september 11, 2001, in the united states, even the traditional opponents of the fbi and the cia began an active exchange of data, but at the international level, this problem remains acute. negative factors still include lack of trust in the agencies of individual countries and a warning about deliberate misinformation and misuse of information received. in the usa, the financial crimes enforcement network (fincen) is responsible for developing international cooperation in this area, its mission is to establish relations with law enforcement agencies of different states and to share information with them by signing relevant international agreements and amending the internal law (osyka, 2003). in the united kingdom, the first provisions against money laundering were in the anti-drug abuse act (1986). in 1990, this country became the first european state to ratify the council of europe convention on laundering, search, seizure and confiscation of the proceeds from crime (the strasbourg convention) (yehorycheva, 2014). for example, in the united kingdom, individual elements of the currency control system continue to be used. these are limitations in currency exchange, control over foreign currency investment, and active counteraction to money laundering, which involves the joint working group and the national bank of the united kingdom for financial investigations. according to the british experience against money laundering, each bank has an authorized employee responsible for complying with the requirements of banking legislation in countering money laundering. annually an authorized employee must undergo retraining on new legislation, means, and methods of counteraction in this area. a bank employee who has not taken appropriate countermeasures against money laundering is criminally liable (kravchuk, kravchuk, 2010). in the uk, a new form of work with informants has been introduced. hereafter, all information relating to money laundering is sent to a centralized authority. banks pay 75% and the ministry of internal affairs 25% baltic journal of economic studies 31 vol. 5, no. 3, 2019 for the services of informants. this should help increase the effectiveness of counteraction to money laundering (tokarchuk, 2013). in poland, the legal basis for countering money laundering is the law “on tax control” and the law “on counteraction to money laundering”, the relevant provisions of the criminal and foreign exchange codes. according to the law “on tax control,” the bureau has been created in the structure of the ministry of finance. in accordance with the law “on counteraction to money laundering,” the ministry of finance established the department of financial information and introduced the position of general inspector of financial information with the status of deputy minister. therefore, nowadays, in the structure of the ministry of finance of poland, two departments work in parallel: the department of financial information and the bureau of tax control (zhukovska, 2008). on 27 july 2002, in poland, a new law “on foreign currency” was issued to regulate foreign exchange transactions. this law abolished all restrictions on the movement of funds between poland and the eu countries. at the same time, the law provides for some restrictions regarding the movement of funds from noneu countries. limitations on currency exchange can be removed by obtaining foreign exchange permits that are of two types: general and private. the ministry of finance issues general foreign exchange permits, and the national bank of poland issues private ones. the main measure of foreign exchange regulation has become the transition to a flexible exchange rate and the introduction of the “freefloating” regime in 2000. thus, the government and the national bank of poland managed to resolve the problem of the improbability to combine three goals, such as the exchange rate stability, capital mobility, and monetary autonomy (zhuravka, 2008). in 1998, in the ministry of finance, a tax records bureau was set up and after the introduction of amendments to the law “on tax control” of june 7, 2002, the scope and functions of the bureau were significantly expanded through a combination of tax and customs control functions. according to it, the bureau’s staff was provided with appropriate police rights, up to the conduct of operational-search activities (osyka, 2003). the tax records bureau has a vertical structure with the central office in warsaw, tax records departments in 16 voivodships and tax records prefectures in the counties. at present, the bureau employs over 350 people throughout poland. the responsibilities of the bureau include: counteracting violations of current legislation in external and internal commodity circulation; detection of violations and crimes in management of public funds and funds derived from the european union and international financial organizations (after the accession of poland to the european union, proceeds from various organizations began, at the same time, there were cases of non-economic spending, embezzlement, and other means of theft of these funds); civil servants prevention corruption in the ministry of finance; control over declarations of income and property status of civil servants, including employees of structural subdivisions of the ministry of finance; the disclosure of crimes that encroach upon polish national culture, archival resources and intellectual property; detection of proceeds of crime and property subject to confiscation; revealing the mechanisms of transportation of payment means from crimes to the territory of poland; analytical work on these types of crimes (tokarchuk, 2013). however, according to polish experts, even the best domestic laws against legalization cannot be sufficiently effective without international cooperation, since criminals are very rarely confined to the territory of one state, which causes jurisdictional and organizational problems. therefore, the domestic legislation of the states must comply with the needs of international cooperation, that is, to have common features. firstly, with regard to the system of legal assistance, as well as sharing of information between the police, customs and tax authorities. for example, the ministry of internal affairs of ukraine and poland have an agreement on mutual assistance; besides, in august 2001, the general police headquarters of poland and the ministry of internal affairs of ukraine signed a protocol on cooperation that lists individuals responsible for specific areas of crime control, including money laundering. the experience of solving current operational issues under the protocol has shown excellent effectiveness of direct contacts between law enforcement officers of different countries. second, an effective and harmonious system of extradition of criminals and property belonging to them should be created; third, to provide free access to information and documents in the territory of other states through the conclusion of bilateral reciprocal agreements (osyka, 2003). in switzerland, since 1990, articles on money laundering have been introduced into the criminal code that provide for maximum punishment for this crime in the form of imprisonment for up to three years, in serious cases, up to five years together with a significant penalty. in 1997, the federal law on money laundering prevention in the financial sector (the antimoney laundering act) was adopted, forming the part of the legislation that regulates the activities of financial intermediaries. it provided for that financial institutions are obliged to counteract money laundering and gave supervisors the right to elaborate appropriate rules for banking and non-banking financial market institutions in detail. in general, this regulation provides for strengthening the control of banks and other financial intermediaries, their duty (and not the right, as recorded in 1994) to report suspicious transactions, to identify customers; therefore, it means a significant restriction of banking secrecy, according to the 1934 law (yehorycheva, 2014). baltic journal of economic studies 32 vol. 5, no. 3, 2019 in accordance with the requirements of the law, before establishing business relations with customers, financial institutions should validate them, as well as identify the real beneficiaries. furthermore, they are subject to find out the economic background and purpose of conducting unusual and suspicious transactions, to demand necessary documents from clients and to keep them for ten years. in addition, money laundering reporting office switzerland (mros), a subordinate to the federal police service, has been set up under the anti-money laundering act. when communicating to this body about transactions of a strong suspicion of their connection with money laundering or terrorist financing, financial intermediaries are obliged to “freeze” the relevant assets for up to five days, while they are exempted from disclosure responsibility secrets and consequences of such actions (yehorycheva, 2014). in 1995, the italian foreign exchange office created a special department on combat and prevention of the use of financial institutions for money laundering (kolesnikov, shmyreva, klimov, 1999). italy’s current legislation requires banks and other intermediaries to keep detailed documentation on resident currency transactions in order to avoid money-laundering attempts. the law of 1990 criminalized the operation of “laundering” and for the first time defined the concept of “mafia-type unlawful association.” the italian criminal code provides for sentences of 7 to 12 years’ imprisonment and fines. punishment can be increased if officials, using their official position, commit the same actions. legislative changes of 1990 require the state to monitor the detection and suppression of moneylaundering attempts. the monitoring system provides for that the remittance of any sum abroad should be accompanied by the simultaneous declaration of income (kryvonos, 2014). in france, the central body for countering and preventing money laundering and combating terrorist financing is traitement du renseignement et action contre les circuits financiers clandestins (tracfin), that is fiu in the ministry for economy, finance and industry of france, which includes the information centre, the financial expertise department, the operations department, etc. (tracfin). tracfin is provided with information about the bank accounts opened by individuals and legal entities. the french legislation does not contain requirements for providing information about financial transactions if the total financial transaction exceeds a certain limit. details for entities’ financial reporting on financial transactions to tracfin are a reasonable suspicion that it is being carried out for money laundering, namely, funds that can relate to: organized crime, drug trafficking, terrorist financing, and corruption. financial transactions of more than 15 thousand euros are under particular attention if they are intricate or have no economic sense. crimes related to money laundering are punishable by imprisonment for a term of up to 8 years and a monetary fine (kovalenko, dmytrov, yezhov, 2007). therefore, having analysed an effective experience of the usa, great britain, poland, switzerland, italy, and france against organized crime in the financial system, interesting provisions, concerning the topic under the study, of other countries, such as spain, ireland, cyprus, greece, austria, belgium, japan, hong kong should be considered. in spain, the criminal code (article 301) refers money laundering to the section on bribes and similar offenses. it includes all serious crimes with imprisonment of more than three years. the money laundering law includes combating proceeds from organized crime, terrorism, drug trafficking. in ireland, the criminal act of 1994 obliges all financial institutions to require new clients, who will carry out large transactions, documentary evidence of the origin of money. the strategy of cyprus banks is based on the principle of “know your client” and is aimed at identifying individuals who have several trust accounts that incompatible with their business form, or accounts receivable from a large number of different private recipients, as well as those customers, who try to open an account for a large sum even on unprofitable terms. under this strategy, bankers should know the origin of funds, the history of all accounts opened in the bank, the frequency of customer referrals to the bank. the legislation of greece provides for the identification of clients in the case of contracts, opening accounts, hiring safes, lending on bail; at the same time, insurance operations for insignificant amounts and terms and those related to pension insurance do not require identification. while in the european union, austria is the only state that allows anonymous bank accounts, fatf has insisted on developing a program for phasing out them. in particular, the austrian criminal code criminalises laundering all assets derived from the commission of serious crimes entailing imprisonment for a term of more than three years. the belgian financial authorities, strictly controlling the movement of money, must check all transactions worth more than 10 thousand euros. the special law on money laundering of january 11, 1993, includes terrorism, organized crime, drug trafficking, weapons, the use of underground labour, trafficking in human beings, prostitution, illegal use of hormones in animals, human trafficking, serious and organized tax fraud, which violates the financial interests of the eu, corruption, non-typical investments, false bankruptcy. in accordance with the royal decree of june 11, 1993, under the auspices of the ministries of finance and justice, a special structure was created, the financial intelligence processing unit (ctif). this body analyses, with the involvement of relevant baltic journal of economic studies 33 vol. 5, no. 3, 2019 experts, the declarations of banks, exchanges, and other financial institutions about suspicious transactions, uses information from police, customs, and other government agencies (kryvonos, 2014). until recently, the legislation of japan has regulated only issues related to money laundering from illicit drug trafficking. these issues were regulated by the law on special exceptions to the law on the control of narcotic drugs and psychotropic substances (1991), the law on drugs. in 1998, its provisions were implemented to the basic principles of financial institutions supervision, developed by the financial supervision authority established in the same year (since 2000 it is the financial services agency). at the same time, the amendment to the foreign exchange and foreign trade act obliged banks and currency exchange operators to identify clients in a number of cases but did not assume any liability for non-compliance with these requirements. in the 1999 law on combating organized crime, japan expanded the scope of money laundering crimes, and later, these provisions were included in the basic principles of supervision (yehorycheva, 2014). in 1973, in hong kong, which has long been considered the most corrupt financial capital of the world, an independent anti-corruption commission subordinate to the hong kong governor, who personally appointed each investigator to this post, was established (parshutin, 2015). therefore, it can be argued that the current system of counter-measures against organized crime in the financial system is based on the following basic principles: – the minimum financial transaction is established, above which all transactions of a certain type are subject to registration by the institutions and persons designated by the law for the purpose of possible further verification, as a rule, this amounts from 10 thousand us dollars; – a list of features is developed and introduced to determine whether a financial transaction carried out is for the purpose of money laundering or terrorist financing; – the responsibility for suspicious transactions report to the law enforcement or controlling bodies rests with the designated subjects that participate or assist in carrying out financial transactions; – the governments of the countries empower one of the executive authorities to coordinate the activities of all law enforcement and controlling bodies against money laundering and terrorist financing; accordingly, it acquires the status of a financial intelligence unit (yehorycheva, 2014). almost all countries have created special organizations involved in combating money laundering. in the usa, this is the financial crimes enforcement network, established under the us treasury department; in canada, the financial transactions and reports analysis centre; in japan, the japan financial intelligence centre; in greece, the special anti-money laundering board; in argentina, the financial information committee; in brazil, the financial supervisory authority. in mexico, there are two special organizations, the directorate general for transaction investigation and the anti-money laundering agency. in belgium, money laundering in financial institutions is under the competence of the financial information sector of the ministry of finance and justice, which analyses suspicious transactions, as well as reports from police, customs, and other government bodies and, if necessary, checks the information, suspend suspicious transactions (kryvonos, 2014). in addition, it should be noted that the counteraction to organized crime in the financial system requires special attention and special approaches of both scientists, who develop methodological recommendations, and practical workers, who use them during detection, termination, and prevention (sevruk, 2016). analysis of the foreign experience of police, as well as special bodies and organizations on countering organized crime in the financial system, to be precise, a comparative legal analysis of the principles, provided for in the international legal documents, and their use in policing of democratic states enables to determine the feasibility of their implementation in the police activities of the national police of ukraine. this will enable to deviate from the standards of the soviet law enforcement system and update approaches to countering organized crime in the financial system in ukraine, resulted by the need to apply the foreign experience of law enforcement bodies and to imply the international legal framework considering national interests and specificities of domestic experience. currently, a number of issues exist in the practice of this area. for example, according to the survey, the state of affairs in scientific development of counteraction to organized financial crime needs to be improved by identifying the conceptual and categorical framework of organized financial crime (72%), the study of organized crime in the financial sector as a criminological phenomenon (68%), others (63%). in this context, for ukraine, it is decisive to study the experience of foreign countries that have succeeded in this area (87% of respondents) (androsovych, 2018). therefore, the perspective of s. a. pavlenko should be highlighted, namely, he argues that a society educated in a low moral environment cannot effectively counteract organized crime in the financial system. therefore, primary state policy measures should be the cultivation of individual moral qualities (pavlenko, 2015). evidently, under the current economic situation in ukraine, not all the positive foreign experience in countering organized crime in the financial system can be applied but the study of its individual elements and their introduction into the practice of law enforcement agencies in ukraine will help to improve performance in countering organized crime in the financial system. baltic journal of economic studies 34 vol. 5, no. 3, 2019 4. conclusion therefore, an effective system of countering organized crime in the financial system should be created in ukraine. accordingly, the use of foreign experience of public mechanisms for preventing and countering organized crime in the financial system enables to formulate a set of effective national levers of public regulatory influence in counteracting this type of crime. the issue of organized crime in the financial system has become international over the last years, overstepping the boundaries of individual countries or regions and gaining global significance. moreover, the world community recognizes that organized crime in the financial system has become a global threat to economic security that requires states to adopt agreed measures to combat this socially dangerous activity, both nationally and internationally. therefore, the author agrees with v. h. sevruk that the system proposed should have international status and accumulate information from all law enforcement bodies and special international law enforcement structures (interpol, europol, the bccoc, eurojust, the fatf, egmont group, moneyval, eurasian group on combating money laundering and financing of terrorism (eag), basel committee (committee for bank regulation and supervision), wolfsberg group, international monetary fund, the world bank european bank for reconstruction and development). this system will provide certain developments to overcome this phenomenon globally, as well as prerequisites for international cooperation on counteraction for subjects that carry out countering organized crime in the financial system in general (sevruk, 2017). it should be noted that the analysis of foreign experience in countering organized crime in the financial system of the usa, european and other countries enables to highlight a number of points that characterize the counteraction aspects mentioned above: the legal basis of these states are the constitution and national laws, as well as specialized legal acts, which provide for the status, rights and duties, and the responsibility of the special bodies’ personnel in combating organized crime in the financial system. furthermore, foreign countries delineate clearly between national and special authorities’ competences, which excludes duplication of powers. therefore, it should be noted that the implementation of 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(in ukrainian) baltic journal of economic studies 184 vol. 6, no. 5, 2020 corresponding author: 1 national institute for strategic studies, ukraine. e-mail: vkovalivska@gmail.com orcid: https://orcid.org/0000-0001-8919-075x researcherid: abh-3699-2020 2 municipal concern “centre of municipal service”, ukraine. e-mail: a.a.shcherbina@gmail.com orcid: https://orcid.org/0000-0001-8744-3418 researcherid: aaa-6409-2021 3 kiev national university of construction and architecture, ukraine. e-mail: vsevolod.nikolaiev@gmail.com orcid: https://orcid.org/0000-0003-0014-1340 researcherid: aab-3328-2021 doi: https://doi.org/10.30525/2256-0742/2020-6-5-184-195 intensification of investment in the renovation of residential real estate in the context of the sustainable development goals svitlana kovalivska1, andrii shcherbyna2, vsevolod nikolaiev3 abstract. the subject of the paper є is to study the mechanisms for investing in residential renovation in the context of the sustainable development goals. at the same time, sustainable development is considered both from the point of view of safety and environmental friendliness of residential buildings, and from the social point of view of providing housing to citizens from strategic perspective. it is shown that the current sustainable development goals, the definition of indicators of their achievement do not cover the problem of housing deterioration, which is one of the most acute for national and social security, as well as the financial stability of the state. therefore, the achievement of sdg-11 in ukraine is in a high risk zone given the catastrophic state of housing, the scale of the problem, and the high cost of its renovation for insolvent households; this does not solve the problem only at the expense of homeowners as follows from the essence and functions of property owners. the situation in ukraine differs from european countries in that the state is impossible to further subsidize the owners on a large scale. this requires a combination of public investment in renovation of residential real estate with property reform, transforming part of the housing stock into social housing. as the implementation of housing projects concerns the local level, the general shortcomings of strategic management are shown, where there is no vision of communities to solve the problem. methodology. based on the methodological developments of the authors on the insolvency of homeowners in ukraine (a. shcherbyna), criticism of unjustified approaches to co-financing by residents and local authorities of renovation projects in kyiv (o. popeko), and the need to justify and evaluate investment projects to achieve sustainable development goals (s. kovalivska), the article forms a comprehensive approach to solving the problem in terms of all three aspects. therefore, the purpose of the paper is to deepen the formulation and analysis of methods to achieve sustainable development goal 11 "make cities and human settlements inclusive, safe, resilient and sustainable" with the help of provisions on sustainable housing for citizens based on a projectoriented approach and mechanisms for financing projects using public-private partnerships of homeowners with local authorities, as well as taking into account sustainable development goals. practical implications. the main directions of further progress in reforming property relations in the housing sector and creating tools for intensifying partnership mechanisms at the vertical and horizontal levels in the public administration system are identified. results. the proposed methodology provides for the selection of projects for budget support and development of recommendations for their implementation, taking into account sdg in several stages: preselection based on cost-benefit analysis; assessment of the impact of the project on sdg (determination of the sdg identity of the project based on a quantitative assessment of the impact of its objectives on sdg and vice versa); determination of the volume and type of budget support (rating of projects based on a comprehensive analysis of their commercial, budgetary and social efficiency, adjusted for the level of manufacturability, export orientation, and sdg identity); development of recommendations for project implementation, which take into account the approaches to assessing the impact of the project on sdg and, conversely, the achievement of sdgs or the risks of baltic journal of economic studies 185 vol. 6, no. 5, 2020 their failure to achieve project objectives (4). value. to link sdg with budget planning, it is proposed to introduce an additional classification of budget expenditures on sdg, which will help to reconcile strategic and budget planning with investment in order to achieve sdg, including in the process of ensuring state participation in programs and projects for renovation and construction of housing based on the concept of sustainable development. key words: sustainable development goals, housing, property, public-private partnership, investments, projects, criteria. jel classification: q01, о20, p41 1. introduction occupying high starting positions for achieving the sustainable development goals (sdgs) in the first third of the rating of the global index of sdg (sachs, fuller, kroll, lafortune, schmidt-traub & woelm, 2020), ukraine has fallen from 39 to 47th place over the past 3 years. in 2020, the indicators of the goal 11 (sdg-11) "make cities and human settlements inclusive, safe, resilient and sustainable", have shown significant negative trends; this opposes the fact that a large-scale reform of local self-government and territorial organization of power – the reform of decentralization – is considered to be the most successful reform in the last five years in ukraine (shevchenko, romanova, zhalilo, 2020). at the global level and in ukraine, sdg-11 is measured by various indicators (table 1 shows national indicators). the state statistics service of ukraine (2020) assesses the progress of achieving sdg-11 according to some available indicators, which are currently measured at the national level (figure 1). table 1 tasks and indicators of sdg-11 for ukraine tasks of sdg-11 «sustainable development of communities» sdg-11 indicators 11.1 to ensure housing affordability 11.1.1. borrower's solvency ratio, pti (payment-income ratio of monthly expenses of the borrower and his or her family members to service the mortgage loan debt and the total monthly income) 11.1.2. the share of refusals to mortgage borrowers in the total volume of requests for loans with a mismatch of the solvency ratio (pti> 43%) 11.2 to ensure the development of settlements and territories exclusively on the basis of integrated planning and management with the participation of the community 11.2.1. proportion of regions that have approved and implemented regional development strategies and action plans for their implementation created with participation of the community, % 11.3 to ensure the preservation of cultural and natural heritage with the involvement of the private sector 11.3.1. number of cultural and natural heritage sites included in the unesco world heritage list, units 11.3.2. number of monuments of national importance included in the state register of immovable landmarks of ukraine, units 11.3.3. area of nature reserve fund of national importance, % of the country 's territory 11.5 to reduce the negative impact of pollutants, including on the urban environment, in particular through the use of innovative technologies 11.5.1. volume of air pollutant emissions, % to the level of 2015 11.5.2. total emissions of pollutants into the atmosphere from stationary sources, conditionally reduced to carbon monoxide, taking into account the relative aggressiveness of major pollutants, % to the level of 2015 11.5.3. total emissions of pollutants into the atmosphere from mobile sources, conditionally reduced to carbon monoxide, taking into account the relative aggressiveness of major pollutants, % to the level of 2015 11.5.4. number of cities, in which the average daily concentrations of major pollutants in the air exceed the average daily maximum allowable concentrations, units 11.6 to ensure the development and implementation of local development strategies aimed at economic growth, job creation, tourism development, recreation, local culture, and production of local products 11.6.1. number of jobs in the field of tourism (average number of full-time employees of collective accommodation and tourism entities of ukraine), thousand units source: sustainable development goals: ukraine. national report (the ministry of economic development and trade of ukraine, 2017) baltic journal of economic studies 186 vol. 6, no. 5, 2020 this indicates that the situation in ukraine is not monitored with the consistency of domestic statistics with the international indicators and that ukraine's place in the international ranking may be overestimated. we also believe that the implementation of sdg-11, as one that localizes the goals and objectives of the agenda-2030, requires in-depth analysis. the specificity of ukraine determines the attention primarily to domestic research and publications of authors from near abroad. among ukrainian scientists, the works of i. mantsurov (shevchuk, kovalchuk, malisheva, mantsurov, 2014), a. maksyuta, v. nikolaev (maksiuta, kovalivska, nikolaiev et al., 2017), v. shevchuk (2006), and others. along with the macroeconomic approach, the scientific literature considers the sectoral approach to the implementation of sdg-11 in construction. accordingly, o. belenkova (2020) notes that the world and domestic experience of implementing elements of sustainable development in construction management processes is not systemic, as researchers focus on the implementation of general social or environmental conditions during construction. the concept of sustainable development of construction should be much broader and cover, on the one hand, the formation of stakeholders in construction projects, environmental and social requirements for construction products, and on the other hand, the formation of networking culture based on sustainable development, environmental management, environmental protection and social responsibility for the participants of the investment construction process. however, if these requirements contradict the profitability of enterprises, their implementation in practice will remain purely declarative. this is happening today in construction because construction companies are not represented at all among ukrainian participants in the un global compact to ensure sustainable development. o. belenkova formulates a number of principles: – the principle of balanced economy and ecology requires significant changes in technology, materials, machines, and mechanisms used. of course, this principle must be maintained not only in the process of production and commercial activities – its implementation extends to buildings, structures, premises, communications, and landscaping of the surrounding area. the latter is achieved exclusively by construction companies only if they have proper property status; – the principles of balance of economic and social spheres is realized due to the proper speed of construction. the latter becomes possible when the contractors have the appropriate material and technical base. at the same time, the financial stability of construction contractors should provide an opportunity to carry out economic activities throughout the long construction cycle. after all, the bankruptcy of development companies, developers, and contractors is one of the main reasons for delaying the commissioning of facilities, or the emergence of unfinished projects. the financial stability of construction companies directly determines the possibility of implementing the third principle, which is the most important, from our point of view: ensuring development with no harm to future generations. as this principle is focused on the long term, it "imposes responsibility " on construction companies for design decisions and efficient real estate management. in our opinion, sdg-11 is achieved in three processes: design, construction, and operation of facilities. this approach is developed in collective monographs on real estate management by v. nikolaev (kuybida, nikolaiev, nikolaieva, 2017), t. nikolaeva (2018), n. siniak (2015), s. shavrov, and others (voitov et al., 2018). particular attention is paid to the use of digital technologies, namely, building information modelling (bim) (kuybida, nikolaiev, nikolaieva, sichny et al., 2018). one example of cooperation to achieve common sustainable development goals is to solve the problems of housing at the national and regional levels, taking into account the high level of wear and tear, high cost of total renovation, and unavailability of funds. in addition to assessing the relationship between sdg-11 and real estate lifecycle management, figure 1. assessment of progress in achieving sdg-11 in ukraine source: state statistics service of ukraine (2020) baltic journal of economic studies 187 vol. 6, no. 5, 2020 housing policy and housing management emphasize the critical condition of residential real estate, which poses a specific threat to the sustainable provision of citizens with basic human needs and, at the same time, as the risk of loss of a significant part of assets by the country as a whole, and by individual households. after all, global real estate assets comprise nearly 60% of the value of all global assets, including equities, bonds, and gold. three-quarters of global real estate value is residential, 13% commercial and 12% agricultural. and the average cost of residential real estate households in the world is 43 thousand usd (savills world research, 2016). in the problem of sustainable housing for citizens, the following issues are highlighted: financing the renovation of buildings, including apartment buildings. studies by a. babak (nikolaiev, babak, 2018), v. nikolaev (nikolaiev, nikolaieva, 2014), and t. nikolaeva (2016) are devoted to these issues. objectives of the article consist in deepening the formulation and methods of analysis of the achievement of sdg-11 regulations on housing, including solving the problem of sustainable housing on the basis of public-private partnership and projectoriented approach to evaluating investment projects for compliance with sdg. 2. problems of sustainable housing for citizens the results of the analysis of the sustainability of housing in ukraine indicate the following: – volumes of housing renovation due to the introduction of new housing about 10 million sq.m per year, which are determined by the solvency of up to 10% of citizens (pinda, 2018), are insufficient for renovation; – high wear and tear of houses and insufficient total renovations accelerate the disposal of housing. thus, total renovations are needed in old houses and massproduced buildings of 1960-1980, which make up about 80% of the area of apartment buildings. on the other hand, the percentage of households that suffer from excessive wear and tear is 64.9% (kucherenko, 2019); – in terms of transferring the cost of total renovations to apartment owners, the share of the population that is financially unable to purchase or overhaul (reproduce) their own housing in apartment buildings will also be up to 80% (shcherbina, 2019); solving these financial problems is extremely important for ukraine, where ownership of residential real estate of high but not formally defined value dominates. with 17 million households, the total value of the residential real estate at a global average of 43 thousand usd (savills world research, 2016) could amount to 731 billion usd, or more than 20 trillion uah. this is absurdly combined with: – receivables from the population for housing and communal services, which, according to official data at the end of may 2020, amounted to 59.9 billion uah, including for the supply and distribution of natural gas – 23.9 billion uah, for the supply of thermal energy and hot water – 18.8 billion uah, for the supply and distribution of electricity – 5.8 billion uah, for centralized water supply and sewerage – 5.4 billion uah, for the management of an apartment building – 5.0 billion uah, for the removal of household waste – 1.0 billion uah; – the long-term needs in the overhaul of buildings, estimated at at least 600 to 2400 billion uah, depending on the level of modernization (nikolaiev, kucherenko, 2019); – the provision of housing and communal benefits and subsidies to the population in the amount of uah 47.5 billion by the state in 2019 (71 billion uah in 2018). therefore, own housing after the expiration of the service life for most owners will disappear in our conditions. therefore, there is no alternative to creating other homeownership systems, where sustainable reproduction of the housing stock is possible. through redistribution mechanisms, the state should actively participate in the regulation and financing of housing because, according to article 47 of the constitution of ukraine, "citizens in need of social protection are provided with housing by the state and local governments free of charge or for a fee under the law", which is impossible while maintaining the existing property relations and will be completely unrealistic after the decommissioning of a significant number of housing facilities (constitution of ukraine, 1996). reforming property relations in the housing sector in order to form an efficient owner and in accordance with the goals of sustainable development should be based on such principles as: – ensuring the efficiency of property objects – buildings (their design, construction, operation), prevention of premature destruction; – ensuring the efficiency of the whole set of households, their economic behavior, including awareness of financial capacity or inability to maintain, operate facilities; – ensuring management efficiency, the formation of the efficient organizational forms and management structures, use of modern methods and information resources; – ensuring an efficient institutional environment for market relations in the housing sector and state support for people on lower incomes. this requires a revision of the state housing policy in the direction of ensuring both the processes of reproduction in the housing sector and guarantees of housing for those who are unable to purchase and maintain it at their own expense. the full cost of owning and using housing must be reasoned. nowadays, the average ukrainian family pays about 8% of the cost of all housing services for the baltic journal of economic studies 188 vol. 6, no. 5, 2020 maintenance of buildings and structures and adjacent territories (housing services) without taking into account the cost of total renovation and the purchase of housing. in the eu countries, statistical housing costs include, in addition to current maintenance, the cost of total renovation and the purchase of new apartments and houses, taking into account more than 70% of the cost of all housing services (panteleev, 2018). depending on the quality and cost of housing, the ownership relations and structure of the existing multistoreyed apartment housing stock should be diversified: the social housing stock is formed, the income houses are widespread. individual housing construction will develop in parallel. for the transformation of property rights (transition of apartments to the category of social housing and tenement houses), in addition to buying and selling, new financial mechanisms common in the west must be introduced: reverse mortgage and distributed loan. additional funds of state and local budgets on programs for the preservation and renovation of housing, in particular, social housing, can be obtained as a result of reforming taxes and fees in construction, real estate, and land, possibly when the introduction of housing tax, balanced with the needs of relevant state and local housing programs. in many countries, the construction of social housing is an important component of public housing policy. the development of the social housing sector should become an important area of state housing policy in ukraine. in our opinion, it is necessary to ensure the development and implementation of the state program for the creation of the social housing sector in ukraine. such a program should provide for a gradual (over 10 years) increase in the share of social housing to 30-50% of the total living space in apartment buildings in need of repair (albeit up to 200 million sq. m). the estimated amount of funds required for the implementation of the program through a total renovation, modernization, and reconstruction of existing buildings at a unit cost of 25,000 uah per 1 sq. m, amount to 50 billion uah annually. 3. the role of local self-government (lsg) strategies organizationally, ensuring the achievement of sdg-11 is most related to regional governance (shevchenko et al., 2020), the competencies of lsg, which is responsible for ensuring balanced economic and social development of the territory (nikolaiev et al., 2015). having broad powers provided by law (on local self-government in ukraine, 1997), lsg in ukraine can comprehensively contribute to the achievement of sdg-11 through the following measures: consideration of plans for the use of natural resources of local importance in the territory; making proposals to the programs of socio-economic development of districts and regions, respectively, as well as to the plans of utilities; establishing the procedure for the use of funds and other property; participation in the organization and financing of total renovations; registration of citizens who need to improve living conditions under the law; distribution and provision of residential and non-residential premises of communal property; assistance in the expansion of housing construction, obtaining mortgage loans; improvement of settlements; approval of sanitary cleaning schemes for settlements and introduction of systems of separate collection of household waste; performing the functions of the customer for the construction, reconstruction, and renovation of housing, other objects of the social and industrial infrastructure of communal property; making proposals to plans and programs for construction and reconstruction of facilities in the relevant area; preparation of local town-planning programs, general plans to build the settlements, other town-planning documentation; establishing the regime of land use and development; conducting a public discussion of urban planning documentation; control over ensuring the reliability and safety of buildings and structures. therefore, the above proposals for the transformation of approaches to the formation and implementation of public housing policy on the basis of sustainable development should be included in the tasks of sdg11. however, the powers defined in the law are not enough, it is important to realize who uses them and in what way. this is determined by state, local, and sectoral development strategies and programs, and in practice, it affects which investment projects are selected for funding from the state and local budgets (maksiuta, kovalivska, pisheyko, zhalilo, 2019). as zhalilo and kovalivska (2020) recognize that “agenda implementation not only joins the local level stakeholders, but also can form the landmarks to determine priority directions and targeted indicators in the strategic planning of development and gives an opportunity to reach the synergy of spatial development at the levels of region and country as a whole”. we should note that in the study (sachs j. et al., 2020), ukraine was in the group of countries with critically inefficient government strategies and policies to contain global warming, and these were comprehensive strategies that cover economic and environmental sdgs, including the tasks provided for in sdg-11. sustainable development cooperation seeks to adapt to a dynamic world and faces a growing need for strategies, adaptive and responsive to rapid change and high uncertainty. however, traditional approaches to linear planning based on historical data may have limited use in rapidly changing conditions. the sdg system is able to serve as a benchmark for setting priorities and targets in the process of strategic development planning at all levels – national, regional, and local, – which can become the basis for building partnerships at the vertical and baltic journal of economic studies 189 vol. 6, no. 5, 2020 horizontal levels in the public administration system, as well as in the formation of business strategies and their own life strategic guidelines of community members. the value of a strategic approach based on the concept of sustainable development (sdg planning), taking into account aspects of the interaction of decisions to achieve specific goals and all goals in the complex, is to create sustainable sources of income from the responsible use of local natural, economic, human, and social potential, attracting investment resources, and, accordingly, the formation of expenditures that contribute to the development of the local economy, environmental protection, and social capital development, will create a basis for sustainable development of regions and communities and, accordingly, achieve sdg at the national level (zhalilo, bazyliuk, kolomiets, kovalivska et al., 2020). the approach to achieving sdg should be multifaceted and require the implementation of an agreed set of measures in the exercise of its own and delegated powers in accordance with applicable law, taking into account the national objectives set out in the national report "sustainable development goals: ukraine" (the ministry of economic development and trade of ukraine, 2017). the approach complexity involves the assessment of any investment projects in terms of their impact on the achievement of several sdgs, and vice versa – how the tasks of other sdgs will affect the achievement of the studied project using the following methods of selection of investment projects for budget support and development of recommendations for their implementation taking into account the sdg (proposed by s. kovalivska, the author). this requires the introduction of measures and strengthening the capacity of public authorities and local governments to determine the priorities of communities and territories in achieving national goals based on the common characteristics in the social, economic, environmental spheres, i.e. defining of sdg-identity of communities, which should be the basis for sdg-planning and sdg-strategizing of communities, and will become the basis for the creation of the partnership, cooperation between different administrative territorial units on the basis of defined priorities, by: – wide dissemination of information about sdg; – development and approval of methodological recommendations for taking into account the sustainable development goals and objectives in community development strategies, sectoral programs; – improving the procedures for budget planning and reporting on the implementation of sdg in the budget process at the state and local levels, based on the proposed approach to the selection of investment projects taking into account sdg-identity of the projects; – development of an online training program for public authorities and local governments, which would include the implementation of practical tasks related to the current tasks in the field of strategic planning for sustainable development, and the introduction of the obligation to participate in this training. the practice of financing housing projects in the absence of investment justifications. in the conditions of insufficient solvency of owners/residents, which does not allow them to fulfill their responsibilities for proper maintenance of houses and purchase of housing in the strategic perspective, local governments were forced to decide on tenders for energy-efficient projects, which are implemented on co-financing terms (70/30) (on approval of the call for proposals for the implementation of energy efficiency measures in homes of kyiv, which created condominium associations, as well as cooperative, 2014), aimed at improving the technical condition of the housing stock through reconstruction, restoration, carrying out total renovation, technical re-equipment of common property in an apartment building. thus, in kyiv, the decision of the kyiv city council approved the regulations on the competition of projects for residential buildings in the city of kyiv, in which associations of co-owners of apartment buildings and cooperatives were established. if in 2015, 16 participants took part in the project in kyiv, in 2018 – 119 participants, and in 2019 – 168 participants, who were given the opportunity to implement their energyefficient projects on a competitive basis. from 2015 to 2019, 238 million uah was allocated for co-financing the energy modernization of the housing stock, and homeowners, for their part, invested 122.7 million uah in only 333 houses. in 2016, according to the decision of the kyiv city council (on approval of the co-financing of the reconstruction, restoration, overhaul, technical re-equipment of common property in apartment buildings in kyiv, 2016) in order to ensure co-financing of total renovations, residents of all homes were allowed to participate in projects. if we consider the housing stock in terms of the city of kyiv, today we can see the following picture: in total in kyiv, there are 11,740 houses with a total area of 85,561.5 thousand sq.m. among them, there are 8368 houses serviced by municipal management companies, 892 hсcs, 759 condominiums, departmental residential buildings – 414 houses, 931 investment houses, 376 dormitories. less than 5-storey houses – 2307, 5-storey houses – 3254, 6-10 storey houses – 3494, more than 10-storey houses – 2685. in the absence of any methods of project selection for the implementation of local programs of thermal modernization of the housing stock, a method of approach is proposed, according to which up to 5-storey houses will be to participate in the competition on the terms of co-financing 70/30; 5-storey houses – 75/25; 6-10 storey houses – 80/20, 10-storey houses – 85/15. this is due to a number of factors, such as the cost of baltic journal of economic studies 190 vol. 6, no. 5, 2020 thermal modernization, work completion time, the work technical complexity. however, co-financing programs need deeper justifications in the methodology for the creation and implementation of economic and environmental projects. the general approach, taking into account the age and condition of the houses can look like this: houses built before 1970: state budget – 60%, local budget – 25%, homeowners – 15%. houses built before 1980: 55%, 20%, and 25%. houses built before 1980: – 50%, 25%, 25% respectively (popenko, 2020). on june 8, 2017, the law “on the energy efficiency fund” (2017) was adopted, and therefore the financing of payments from the state budget could go through the energy efficiency fund with the involvement of donor funds. the application of an integrated approach in the formation of the model of public-private partnership of co-financing of total renovations, taking into account sdg-11, will help to improve the housing stock, as well as environmental protection and social capital development. 4. investing in sustainable development projects taking into consideration all the aforementioned, the selection of investment projects for budget support and development of recommendations for their implementation taking into account sdg is proposed to apply taking into account conceptual approaches to assessing the efficiency of projects in the public sector for their further selection using an integrated rating and weight system for evaluating investment projects. to this end, a method for assessing the impact of the project on achieving the sustainable project assessment of ukraine and tools in ms excel for calculations, including a matrix of interactions of project objectives on sdg, and sdg to achieve project objectives, as well as forms for filling evaluation results. here are the main stages of the methodology for selecting investment projects for budget support and development of recommendations for their implementation, taking into account sdg. 1. selection of projects for budget support. in the beginning, it is planned to carry out an economic analysis of the project, which includes the analysis of benefits and costs in terms of its social efficiency in order to determine the feasibility of the project and choose the most efficient way to implement it. it is advisable to apply the recommendations on the stages and methodology of cost-benefit analysis (rozputenko, bazhal, kilievich & martens, 2002). a project will be eligible if the aggregate benefits of its implementation, calculated on the basis of certain values of the value of all its consequences, exceed the corresponding aggregate costs, as well as it meets the following criteria: a) it has positive socio-economic results; b) it corresponds to operational support programs, development priorities, and other areas provided for in development strategies. this is achieved by verifying that the benefits of the product produced by the project are related to program (strategic) goals; c) it needs budget funding. 2. assessment of the project’s impact on sustainable development goals. to do this, it is proposed to fill in results of the calculations in the matrix of mutual influences of project objectives on sdg, and sdg to achieve project objectives (horizontally and vertically placed first project objectives, then goals and objectives of sustainable development, localized for the appropriate level (national, regional, local)), at the intersection in matrix cells, according to the following principle: – to assess the impact of each sdg horizontally according to each project goal vertically with a mark in the cell at the intersection of the degree of impact of tasks on a scale: -2 – "significantly negative", -1 – "insignificantly negative", 0 – "absent", +1 – "insignificantly positive", +2 – "significantly positive"; – to assess the impact of each project objective vertically on each sdg horizontally with a mark in the cell at the intersection of the degree of impact of tasks on a scale: -2 – "significantly negative", -1 – "insignificantly negative", 0 – "absent", +1 – "insignificantly positive", +2 – "significantly positive"; – to determine the sum of estimates for each goal horizontally and vertically and find the maximum and minimum values of the sum of estimates vertically and horizontally, which mean, respectively, indicators: max values of the project's impact on sdg; min value of the project impact on sdg; max value of sdg impact on the project; min value of sdg impact on the project. it is further proposed to develop recommendations to support the implementation of the project in accordance with sdg using and completing the swot + sustainability project assessment (spa) tool (table 2). all researched projects should be ranked from the maximum to the minimum value for each goal in order to determine the rating of the project with the so-called achievement of sdg (sdg-identity of the project). it is also proposed to use weights for each sdg, taking into account the provisions of the community strategy (sdg-strategizing). 3. determining the amount and type of budget support. the input parameters for the analysis should be the assessment of budget support based on coefficients that take into account the maximum possible percentage of state financial (share) support for the project, adjusted baltic journal of economic studies 191 vol. 6, no. 5, 2020 to the level of manufacturability, and export orientation (maksiuta, avramchenko, deshko, fedchishyn, kovalivska, onufryk, zhalilo, 2016), and sdg-identity (rating) of the investment project. that is, the higher these ratios, the greater the share of state support that an investment project can potentially receive. in order to optimize budget resources and implement an efficient state support policy, it is advisable to conduct a comprehensive analysis of commercial, budgetary, and social efficiency of investments at this stage. as a result, 3 main parameters are compared: commercial efficiency, budget efficiency, social efficiency. possible combinations of positive and negative values of these indicators will give eight arrays of possible variants of efficiency values for decision-making or adjustment of the type and share of state support of the project. the alternative should be to reduce the share of state support, any other type of state aid (rules and relevant institutions providing such support should be fully proposed). regarding budget planning, it is recommended to ensure the transition to results-oriented funding. budget allocations must be sufficient to achieve the planned results, and each state target program or plan for implementing a program or strategy must clearly link each task to the relevant budget program. due to the improvement of coding, budget programs should be further classified by sdg. in such a system, the total amount of funding for tasks under all program documents should be equal to the amount of funding for tasks in all budget programs of the year (maksiuta, et al., 2017). thus, it would be possible to assess the contribution of public funds to the achievement of sdg and assess the efficiency of the decision to change policy in relevant areas. this should pave the way for achieving the objectives of the relevant policies. at the same time, the discipline of mandatory financing of planned activities should be an integral prerequisite for achieving sdg in order to improve the effectiveness and efficiency of the strategic planning process in ukraine. the objectives and targets of the sdg indicators can be coordinated at the planning stage, taking into account budgetary constraints and the priority areas of government programs. 4. development of recommendations based on swot+ spa. for each of the selected projects, it is proposed to develop recommendations using the proposed forms (table 3) and an action plan to support project implementation in accordance with sdg (table 4). 5. conclusions in ukraine, there are negative trends in the dynamics of indicators that measure the achievements of sdg11 "make cities and human settlements inclusive, safe, resilient and sustainable", both on indicators at the global and national levels. at the same time, there are differences in indicators at the global and national levels, which indicates that the situation in ukraine is not monitored with the consistency of domestic statistics with international ones. the low attention to the impact of the construction sector, in particular, the state of the housing stock table 2 swot+sustainability project assessment (spa) positive impact negative impact impact of the project on sdg promotes sustainable development (max project impact on sdg, goal title) inhibits sustainable development (min project impact on sdg, goal title) sdg impact on the project opportunities (max value of sdg impact on the project, goal title) threats (min value of sdg impact on the project, goal title) table 3 recommendation matrix based on swot+ spa indicator quantitative assessment, points title of sdg of the respective indicator recommendations for project management taking into account the results 1. max value of the project impact on sdg grant opportunities, information campaign, partnership opportunities 2. min value of the project impact on sdg grant opportunities, mitigation strategy 3. max value of the sdg impact on the project consideration and revision of the project plan and resources, partnership opportunities 4. min value of the sdg impact on the project consideration and revision of the project plan and resources, risk management strategy baltic journal of economic studies 192 vol. 6, no. 5, 2020 table 4 action plan to support the implementation of the project in accordance with sdg recommendations (from table 3) priority measures (standard proposals for investment projects in construction are given) grant opportunities for projects with maximum impact on sdg, the following is recommended: – list of organizations and banks providing financing (non-refundable financing is possible) – list of state and municipal programs that provide for co-financing of construction projects depending on the type of project (70/30, housing for ato veterans, subventions from the state budget to local infrastructure, sfrd revolving funds, etc.) – list of loan reduction programs; for projects with minimal impact on sdg: – list of organizations and banks that provide loans for construction, including mortgage recommendations for reviewing the project with the so-called ensuring a positive impact on sdg information сampaign the list of current programs of information campaigns of local and state authorities, which will include measures to inform the public about this project, its positive effects on the achievement of sdg, is presented, in particular: sdg-11, to ensure access to housing, reducing emissions from stationary sources, and other goals that characterize energy efficiency, resource intensity, waste management, sewerage, and water supply. partnership opportunities the conditions under which the local authorities are ready to consider the project within the framework of public-private partnership under current legislation are provided. opportunities for social housing programs for people in need of social protection mitigation strategy for projects with minimal impact on sdg: review of the construction project from the viewpoint of – environmental impact assessment of the project: – creation of additional supporting infrastructure to promote the sustainability of cities, – creating infrastructure sustainability; – supplementing the project with anti-epidemic resilience analysis; – taking into account the needs of people with disabilities; the list of consulting organizations to review the project with the so-called ensuring a positive impact on sdg risk management strategy to improve the project risk management strategy from the viewpoint of the increase of the probability of negative impact of sdg on the project. for example, non-compliance with sdg-13 to reduce emissions may result in a sharp rise in temperature in cities, for which the project should provide appropriate safeguards: the creation of park areas, cooling, blackouts, and so on. the proximity of the construction site to the coastal zones should take into account the possibilities to avoid flooding given the likelihood of sea level rise. it is necessary to assess the impact of the probability of failure of each sdg on the project and to propose measures and appropriate adjustments to the project if there is a close link with the objectives and a high probability of risk. consideration and revision of the project plan and resources review of the construction project from the viewpoint of the assessment of all building components for the possibility of their replacement by those that: – provide better energy efficiency; – are made from processed raw materials; – have lower resource intensity; – have lower emissions / pollution rates; – reducing the cost of operational characteristics of a promising facility through the introduction of energy-saving and other innovative technologies, comparative characteristics of the improved project with the typical (previous) from the viewpoint of the impact on the environment and social living conditions; on sdg and, conversely, the achievement or failure of sdg in the housing sector (sdg-11) in general requires an in-depth analysis of its role and place in the 2030 agenda and development of appropriate recommendations. the main problem that hinders the achievement of sdg-11 is the lack of effective mechanisms for financing the renovation of buildings, including apartment buildings. given the state of wear and tear of the housing stock, the scale of the problem, and the very high cost of its renovation, it is impossible to solve the problem only at the expense of homeowners, therefore, without changing public policy in housing to achieve sdg11 interconnected, are in a zone of high risk, because after the end of service own housing for most owners will disappear, which will certainly worsen the indicators of poverty, inequality, negative impact on the environment. to reform property relations in the housing sector in ukraine, it is proposed to create mechanisms for the formation of an effective owner, in particular: baltic journal of economic studies 193 vol. 6, no. 5, 2020 the property itself, the whole set of households, management, operation, and institutional environment. among the results of such a policy, there is a significant expansion of the social housing stock, the expansion of apartment buildings, repayable mortgages and distributed loans, housing preservation and renewal programs, the creation of revolving funds for total renovations, and the introduction of a housing tax. based on the analysis of the competence of local selfgovernment bodies, it was determined that the greatest extent to ensure the achievement of sdg-11 is related to regional and local government. regarding weakness of strategic management at this level, which does not allow to address the issue of housing renovation: strategic planning at the local level is proposed, it is identified as a basis for building partnerships at the vertical and horizontal levels in the public administration system. in this case, the complexity of sdg, which should be presented in the strategies, should be selected in the projects that are planned for their implementation. in the absence of opportunities for total renovation by co-owners of apartment buildings, state and municipal housing modernization programs come to the fore, which do not prescribe clear criteria for co-financing conditions for different types of buildings and different types of age. in our opinion, the existing programs require a systematic approach to the definition of appropriate mechanisms of public administration at both state and regional levels, which will allow to consolidate the budgets at all levels, to address large-scale housing problems covering almost all sectors of the economy and social life. given the current circumstances, at the level of economic entities: condominiums, housing, and communal services, municipal and private management companies, as well as local governments, require immediate resolution of economic, energy and technical assessment of facilities, identification and communication to co-owners houses of financial needs for their maintenance taking into account necessary total renovation. as a tool for the implementation of such an integrated approach, a methodology for selecting investment projects for budget support and development of recommendations for their implementation, taking into account sdg, has been developed and presented, and approaches for its application in the construction sector are presented. this technique will achieve significant results in improving the technical condition of the housing stock and the rapid achievement of sustainable development goals. references: belenkova, o. 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(2020). realizatsiya tsiley staloho rozvytku yak pidgruntya intehratsiyi prostorovoho ta rehionalnoho rozvytku [realization of sustainable development goals as a basis for integration of spatial and regional development]. finansy ukrainy – finance of ukraine, vol. 9, pp. 9–14. doi: https://doi.org/10.33763/finukr2020.09.009 (in ukrainian) baltic journal of economic studies 107 vol. 2, no. 1, 2016 corresponding author: 1 department of economics and management, kirovohrad national technical university. e-mail: ilona.tsarenko@yandex.ua the competitiveness of higher education of ukraine according to the international dimension ilona tsarenko1, kirovohrad national technical university, ukraine abstract. the purpose of research is evaluation of competitiveness of higher education of ukraine in comparison with the foreign countries and under the influence of the globalization of market environment. the evaluation of the level of competitiveness of higher education in ukraine on the modern stage under the influence of the globalization transformation and in the light of international comparisons is investigated insufficiently, which makes up for the purpose and objectives of this research. methodology. the research is based on a comparison of the data, which are set out in the international reports about the competitiveness of countries in the world, in particular about the higher education. the analysis of the degree of researching the problem of competitiveness of higher education in the works of scientists is made in advance. results of the research showed that the main components of pillar «high education and training» of the global competitiveness index, namely: secondary education enrollment, tertiary education enrollment, quality of the education system, quality of math and science education, quality of management schools, internet access in schools, availability of research and training services and extent of staff training. the analysis of the dynamics of the indicator “higher education and training” of global competitiveness index is made for ukraine and the other countries, which is showed the following: in the last five years the highest index of higher education and training belongs to finland, the score of which, in the dynamics, significantly increases, concerning ukraine, it among 132 countries takes 40th place, that is top 50 countries with the highest ranking of the competitiveness of higher education and training, this position for ukraine is stable, with the exception of 2011, when the position was reduced to 51 in the rankings. furthermore, in 2014 ukraine’s rating has increased in comparison with other years. then in more detail the macroeconomic indicators of ukraine and finland were analyzed. the main indicators of the level of funding of higher education in different countries have been investigated (total expenditure on education, public expenditure on higher education of gdp, total expenditure on education per capita, expenditure per student per year, personal computers per 100 population, internet users per 100 population), by the results the relevant conclusions are made. the most influential world rankings such as the shanghai ranking, ranking qs and times higher education world university ranking are considered. the analysis of the positions of ukrainian higher educational institutions, which are included in these rankings, is proposed, namely taras shevchenko national university of kyiv (placed 421-430) and v.n. karazin kharkiv national university (placed 481-490). additionally, the principles of improving the competitiveness of higher education are explored. value/ originality. the obtained results showed, that it is necessary to develop an integrated evaluation methodology of the competitive positions of higher education of ukraine. key words: global competitiveness index, higher education and training, efficiency-driven economies, funding provision, rating, the index of mobility. jel classification: i23, i28, i38, g24 1. introduction institute of higher education is the formative system for the prospects of further development of the country in the direction of the economic growth, increasing social and cultural level of their population, consequently represents the characteristic of the competitiveness of any country. the level of development of higher education affects both the current state of the country’s economy and presents a lever for growth of its effectiveness in the future. given this, the evaluation of the competitiveness of higher education in ukraine at current stage is very important, as a factor of overcoming the crisis and the formation of the prerequisites for economic growth in the future. higher education, in general, forms the intellectual component of human capital, which under conditions of baltic journal of economic studies 108 vol. 2, no. 1, 2016 the innovative transformation of market environment is a key for certainly actualizes studying this issue. the problems of competitiveness of higher education in the context of the globalization transformations are studied by scientists from different countries, each of which is aimed at a particular sphere of research in this field, in particular: n.m. avshenyuk analyses the socioeconomic determinants of the development of the transnational higher education and indicates, that it’s the main indicator in the current conditions is rather rapid growth of the international academic mobility of students (avsheniuk, 2011), n.i. konstantyuk characterizes the basic principles of improving competitiveness of higher education in view of the conditions of formation of the global economy (konstantiuk, 2013), t.m. nogulich examines the factors of globalization of regional development, paying attention to the positive and negative effects of the globalization for the social sphere and its manifestations in higher education (nosulich, 2009); t.h. poluhtovych determines, that the integration of higher education under the conditions of globalization requires the relevant reforms, which are based on the priority the innovation – the susceptibility to innovation and the ability to reproduce them in educational practice (polukhtovych, 2012); i.g. utyuzh defines the main directions of globalization in higher education, highlighting the main factors and the signs of manifestation (utiuzh, 2011). table 1 the dynamics of pillar “higher education and training” of the global competitiveness index country/economy 2008 2009 2010 2011 2012 2013 2014 rank score rank score rank score rank score rank score rank score rank score the usa 5 5,67 7 5,57 9 5,64 13 5,58 8 5,72 7 5,75 7 5,82 japan 23 5,08 23 5,06 20 5,28 19 5,27 21 5,28 21 5,28 21 5,44 china 64 4,05 61 4,09 60 4,24 58 4,34 30 4,64 70 4,23 65 4,42 switzerland 7 5,60 6 5,60 4 5,79 3 5,80 3 5,90 4 5,88 4 5,98 france 16 5,37 15 5,30 17 5,36 20 5,24 27 5,14 24 5,21 28 5,26 united kingdom 18 5,27 18 5,17 18 5,34 16 5,47 16 5,57 17 5,45 19 5,5 denmark 2 5,98 2 5,90 3 5,84 6 5,75 14 5,59 14 5,54 10 5,68 poland 34 4,64 27 4,82 26 5,00 31 4,95 36 4,92 37 4,88 34 5,04 czech republic 25 4,98 24 5,05 24 5,11 30 4,95 38 4,87 39 4,85 35 5,02 finland 1 6,07 1 5,97 1 6,06 1 6,09 1 6,18 1 6,27 1 6,22 romania 52 4,29 52 4,30 54 4,47 55 4,42 59 4,36 59 4,41 58 4,63 ukraine 43 4,46 46 4,38 46 4,61 51 4,58 47 4,70 43 4,75 40 4,93 russian federation 46 4,40 51 4,30 50 4,55 52 4,54 52 4,59 47 4,66 39 4,96 kazakhstan 59 4,12 59 4,13 65 4,20 65 4,18 58 4,37 54 4,52 62 4,51 azerbaijan 80 3,76 72 3,88 77 3,96 75 4,01 89 3,91 87 4,00 90 3,9 georgia 84 3,72 84 3,70 90 3,74 88 3,87 93 3,82 92 3,79 92 3,89 armenia 94 3,43 96 3,46 91 3,66 76 4,01 70 4,22 77 4,18 75 4,20 source: is composed by the author on the basis the source (vsesvitniy ekonomichnyi forum) basic requirements subindex: pillar 1. institutions pillar 2. infrastructure pillar 3. macroeconomic environment pillar 4. health and primary education efficiency enhancers subindex: pillar 5. higher education and training pillar 6. goods market efficiency pillar 7. labor market efficiency pillar 8. financial market development pillar 9. technological readiness pillar 10. market size key for factor-driven economies key for efficiency-driven economies key for innovation-driven economies innovation and sophistication factors subindex: pillar 11. business sophistication pillar 12. innovation. fig. 1. the components of the global competitiveness index source: is composed by the author on the basis the source (proekt fondu «efektyvne upravlinnia») baltic journal of economic studies 109 vol. 2, no. 1, 2016 2. higher education at global competitiveness index the level of development of higher education as a factor in the competitiveness of the economies of the world is represented in many international rankings. the most common of these is the global competitiveness index (gci) – a global research and accompanying its ranking countries by the indexes of economic competitiveness. gci is calculated according to the methodology of the world economic forum (wef), and is based on the combination of common statistics and the results of a global survey of corporate executives. the global competitiveness index is composed of 113 variables that describe in detail the competitiveness of countries at different levels of economic development and are combined into 12 pillars that determine the national competitiveness (vilna entsyklopediya). in general, the components that form an individual global index of competitiveness for each country can be reduced to 12 (fig. 1). on the basis of the purpose of the research, we pay attention to such factor (fig. 1) as higher education, which represents the component that improves the efficiency of the economy of any country. then, we consider it appropriate to analyse the dynamics of the given component “higher education and training” of the global competitiveness index (table 1). analysing the table 1, we observe that in the last five years the highest index of higher education and training belongs to finland, the score of which, in the dynamics, significantly increases. only at the end of 2014 is observed a slight decrease of the index. the position of the usa is variable: falling of the index from 5.67 in 2008 to 5.58 in 2011 and its increasing from 2012 till 2014 to 5.82. the weakening of the position is observed in denmark, which during 2008-2010 was part of the three countries with the highest index, whereas during the recent years singapore has strengthened, as it is a country of the group of newly industrialized states – from 5.56 (8) in 2008 to 6, 09 (2) in 2014. looking at the pillars of higher education and training in poland, it is concluded that its value during the analysed period is dynamically changing – namely, at the end of 2014 the country took the same position as in 2008 – 34th place, while the score of the index started to restore the own positive dynamic only at the end 2014, which indicates the relative instability and deteriorating of competitiveness. the value of the pillar in the dynamics of ukraine for clarity portrayed as fig. 2. table 2 the detailed comparative characteristic of variables of the pillars “higher education and training” of the global competitiveness index of ukraine and finland in 2014 the name of the variable of the pillar: «higher education and training» of the global competitiveness index in detail ukraine finland ratio value rank value rank relative absolute secondary education enrollment, gross % 97,8 41 107,7 14 1,10 -27 tertiary education enrollment, gross % 79,7 13 93,7 4 1,18 -9 quality of the education system 3,7 72 5,9 2 1,59 -70 quality of math and science education 4,8 30 6,3 2 1,31 -28 quality of management schools 3,9 88 5,6 12 1,44 -76 internet access in schools 4,3 67 6,5 4 1,51 -63 availability of research and training services 3,9 84 5,9 6 1,51 -78 extent of staff training 3,8 92 5,3 5 1,39 -87 source: is composed by the author on the basis the source (vsesvitniy ekonomichnyi forum) 43 46 46 51 47 43 40 4,46 4,38 4,61 4,58 4,7 4,75 4,93 0 10 20 30 40 50 60 2008 2009 2010 2011 2012 2013 2014 rank score fig. 2. the dynamics of pillar “higher education and training” of the global competitiveness index of ukraine source: is composed by the author on the basis the source (vsesvitnii ekonomichnyi forum) baltic journal of economic studies 110 vol. 2, no. 1, 2016 we observe, that the rank of index increases, and in 2014 was the highest, including the score of 4.93. this growth enhances the competitiveness of the economy, because this pillar is “efficiency enhancers”, which is especially important for ukraine as a country, which is approaching the second stage of the development (by the wef’s methodology). then, by comparing with the highest value unifying pillar of higher education and training, we consider the variables that includes ukraine and the country-leader in 2014 – finland (table 2). as can be observed from the table 2, the variables of finland are exceeding the components of ukraine almost 1.5 times, the exception is only such component as ‘secondary education enrolment’, that for ukraine is about 97.8. this indicates that 2.2% of the population has no education. concerning the high education, the coverage in ukraine is only 79.7%, which is 14% less than in finland. given these differences, we consider it appropriate to analyse the main macroeconomic indicators of both countries (table 3). table 3 the comparative characteristics of the main macroeconomic indicators of ukraine and finland in 2014 key indicators ukraine finland the relative ratio population (millions) 45,4 5,5 0,1 gdp (us$ billions) 177,8 256,9 1,4 gdp per capita (us$) 3919 47129 12,0 source: is composed by the author on the basis the source (vsesvitniy ekonomichnyi forum) a key indicator of finland – the gdp per capita is 12 times higher than in ukraine. this may indicate a higher standard of living in the country and, as a result, more opportunities for population. table 4 presents the main indicators, which characterize the level of funding the higher education, gets in different countries. looking at table 4, observe the following: 1. the share of total expenditure on education in total gross domestic product of most countries ranges from 3.8 to 5.9%. the relative value for ukraine is about 5.3%, although in article 61 of the law of ukraine about education states that the budgetary allocations to the education sector should be not less than 10% of gdp. however, in view of the analysis of world practice, consider that this norm is enough inflated because in the world there is only a few countries which expend on the education more than 10% of national income, mainly it concerns the small island countries, which are located in the pacific ocean or the caribbean. 2. concerning the total public expenditure on education, despite the fact that the value of this indicator as a percentage almost the same, the actual costs are various due to the differences in gdp per capita, especially noticeable on the example of the developed countries. 3. given the different value of gdp, and as a result the total expenditures on the education, one can observe the significant differences in spending per student, particularly in ukraine. this value is only 3 121 usd per year, while in other countries it is several times over, from 9 000 to 30  000 usd. in the neighbouring russian federation, where about 10.7 thousand ukrainians study the costs per one student are 7 749 usd. in addition, the reflection of the financial provision of the higher education of any country is the material and technical base of universities. for example, analyse such indicators as the number of personal computers per 100 persons and them the quantities the internet users. 5. we can see the prior point when analysing indicators of pc owners per 100 persons and internet users per 100 persons. ukraine remains at the level below average according to global tendencies. the value of these indicators for ukraine is below the world average, which characterizes the lack of financial provision in order to create an appropriate material and technical base. concerning the expenditure on the education of the country-leader pillar “higher education and training” of the global competitiveness index, the costs of finland to the education are 6.8% of gdp and 12.1% of total government expenditure. this indicator is slightly higher than the average for the european union. in addition, the level of competitiveness of higher education in any country, as a reflection of its effectiveness, table 4 the main indicators the level of funding the higher education by different countries indicators ukraine russian federation usa germany france japan china poland gdp per capita (us$) 3 870 19 833 46 588 37 430 34 256 33 785 7 519 19 908 total expenditure on education, % of gdp 5,3 4,1 5,6 4,6 5,9 3,8 4 5,1 public expenditure on higher education % of gdp 2,0 1,2 1,0 1,1 1,3 0,5 1,1 total expenditure on education per capita (us$) 205,1 813,1 2515,7 1721,8 2021,1 1283,8 300,8 1015,3 expenditure per student per year (us$) 3 121 7 749 29 201 15 711 14 642 15 957 19 269 personal computers per 100 population, units 4,5 13,3 80,6 65,6 63,1 40,7 5,7 16,9 internet users per 100 population, units 44,6 43,4 74,2 82,5 77,5 77,6 34,4 62,5 source: is composed by the author on the basis the source (undp, 2014) * note: data for 2012 baltic journal of economic studies 111 vol. 2, no. 1, 2016 demonstrates the indicator of mobility of the students. that shows the quantities of students, which to obtain more quality education, are ready to move to another country, in other words, it can be called the lost amount of potential students for national universities. then, we analyse the connection of the index of mobility with the country’s position in the global competitiveness index in the aspect of higher education. in 2014 ukraine was 40th in the rankings of gci, while the quantities of potentially lost ukrainian students, which moved to study abroad is 39.63 thousand people, which is 1.4 of the total; russian federation is located above ukraine – on the 39 position, and the quantity of students is 51.17 (0.7%). finland, which is in first place in the ranking, has the lost quantity of domestic students in the amount of 8.212  thousand. for denmark, for example (10th place, but during 2008-2010 the country was in the top three), it is typical, that 5.767 thousand of domestic students prefer the foreign universities. from china, which maintains the 65th position at the rank, 694.041 thousand persons moved elsewhere. 3. rating systems and ukraine today, one of the most common methods of comparative evaluation of the universities in the world are rating systems. among the most influential world rankings are the shanghai ranking, ranking qs and times higher education world university ranking. the leaders of the shanghai ranking are the universities of the uk and the usa. in 2014, the ranking was led by harvard university, at the second position was stanford university, closed the top three – massachusetts institute of technology, the fourth – university of californiaberkeley, the fifth position headed university of cambridge (unesco). however, the top five universities of qs world university rankings look different, in particular: massachusetts institute of technology (usa), two second places – university of cambridge (uk) and imperial college of london (uk), the fourth – harvard university (usa) two fifth positions – university of oxford (uk) and university college of london (uk) (academic ranking of world universities). concerning the representation of ukraine in international rankings, for example, in 2014, in comparison with the past, the number of ukrainian universities that were included to the world ranking qs had six universities, two of them got into the top 500 ranking. those were taras shevchenko national university of kyiv (placed 421-430) and v. n. karazin kharkiv national university (placed 481-490). in addition, by the results of the qs world university rankings 2014/15 the rating also includes national technical university of ukraine “kyiv polytechnic institute” (place 551-600), sumy state university (place 651-700), donetsk national university (701+ place) and the national technical university “kharkiv polytechnic institute” (701+) (tsarenko, 2014). note, that in 2013 the rating included only four ukrainian universities, among the newcomers in 2014 were v.n. karazin kharkiv national university and sumy state university. in this regard, given the aforementioned circumstances and international experience, the modern directions of increasing the competitiveness of higher education should be based on the following principles: – public funding should primarily focus on the directions of training, which are required for the development of the national economy; – conditions of the access to the quality of higher education should conform the strategic interests of the country, which lie in the fact that to such education, in the first place, could get talented citizens, regardless of their place of residence and income of their families; – level of public funding of universities should depend on the quality level of the training specialists, but the state should at the same time stimulate increasing the quality of training in the regional universities in order to increase the accessibility to quality higher education in low income levels of the population; – creation of positive investment climate in the sphere of higher education to improve the efficiency using of budget funds and funds of the private investors; – bringing of price level on the educational services of university to the level of real cost of education, taking into account the raising salaries of the teaching staff and improving the necessary material and technical provision of the training process; – creating the real economic mechanisms and ensuring accessibility quality higher education for the talented young persons, by means of the diversified model of financial provision of this process, using of direct budgetary financing of the training of students in higher education, and the use of instruments of real preferential loans, grants, etc.; – stimulation for the employers and local governments to participate in the financing of the establishments of higher education and the training of personnel for internal needs for their own means; – strengthening the monitoring for graduates of the universities, who have studied for budgetary funds to improve the effectiveness of this process and the establishment of mechanisms for the targeted training specialists on order from certain organizations or enterprises; – transformation of the model of funding science in accordance to the public priorities and the level of quality of the most researches in universities, stimulation of the development of scientific research and innovation activities; – stimulating the cooperation among the universities, research institutions and the corporate sector in the sphere of the scientific research, organization of the manufacturing practices, conduction of the scientific and practical seminars and conferences for the purpose baltic journal of economic studies 112 vol. 2, no. 1, 2016 of attracting the modern knowledge in the educational process (levchenko, 2009); – intensifying the participation of universities in the world rankings and international cooperation, improving the quality of education to the european standards, increasing the academic mobility of teachers and students. 4. conclusions thus, evaluating the level of competitiveness is a multifaceted research of different orientations and depends on many factors, from the country’s macroeconomic indicators to directly generalizing the characteristics of the work process of universities, their material base, the quality of teaching, etc. in the context of international comparisons ukraine among 132 countries takes 40th place that is top 50 countries with the highest ranking of the competitiveness of higher education and training. this position for ukraine is stable, with the exception of 2011, when the position was reduced to 51 in the rankings. furthermore, in 2014 ukraine’s rating has increased in comparison with other years. although, due to the fact that, for example, such countries as puerto rico (rank 27, score of index 5.27), qatar (rank 38, score of index 4.99) are assigned the higher ranking positions, the government needs to address some issues with ukraine’s position. the state has to eliminate the problems and strengthen the competitive position. first of all it concerns improving the quality of education, level of training, dissemination of research and training services, transfer of educational and professional knowledge, increasing academic mobility of teachers and students. therefore, it is necessary to develop an integrated evaluation methodology of the competitive positions of higher education in ukraine, so it can become the perspective direction for further research in this sphere. references avsheniuk, n.m. (2011). sotsialno-ekonomichni determinanty rozvytku transnatsionalnoi vyshchoi osvity na zlami хх-ххi stolit – porivnialna profesiina pedahohika, № 1, p. 52-61. konstantiuk, n.i. (2013). osnovni zasady pidvyshchennia konkurentospromozhnosti vyshchoi osvity ukrainy v umovakh formuvannia hlobalnoi ekonomiky – stalyi rozvytok ekonomiky, mizhnarod.nauk-vyrob. zhurnal, № 3, p. 26-28. nosulich, t.m. (2009). hlobalizatsiini chynnyky rehionalnoho rozvytku-sotsialnyi vektor proiavu – stratehiia ekonomichnoho rozvytku ukrainy, vol. 24-25, p. 141-144. polukhtovych, t.h. (2012). intehratsiia vyshchoi osvity ukrainy v umovakh hlobalizatsii – sevastopol , visnyk sevntu, vol. 127, p. 184-187. utiuzh, y.h. (2011). hlobalyzatsyia v systeme vissheho obrazovanyia – humanitarnyi visnyk zdia, № 47, p. 51-65. vilna entsyklopediia. [electronic resource]. – retrieved from: http://uk.wikipedia.org/wiki/ proekt fondu «efektyvne upravlinnia» «competitive ukraine». 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(2014). reitynhovi systemy ranzhuvannia vyshchykh navchalnykh zakladiv: ukrainski ta svitovi metodyky – naukovi pratsi kirovohradskoho natsionalnoho tekhnichnoho universytetu. ekonomichni nauky, p. 56-66. илона царенко конкурентоспособность высшего образования в соответствии с международным измерением аннотация. целью исследования является осуществление оценки конкурентоспособности высшего образования по сравнению с зарубежными странами и под влиянием глобализации рыночной среды. оценка уровня конкурентоспособности системы высшего образования украины на современном этапе под влиянием глобализационных преобразований и в призме международных сравнений исследована не в достаточной степени, на что и сосредоточено данное исследование. методика. исследование основано на baltic journal of economic studies 113 vol. 2, no. 1, 2016 сравнении данных, которые изложены в международных отчетах об конкурентоспособности стран мира, в частности касательно высшего образования. заранее сделан анализ степени изучения проблематики конкурентоспособности высшего образования в работах ученых. практическое значение. описаны основные компоненты столба «высшее образование и обучение» глобального индекса конкурентоспособности, а именно: охват средним образованием, охват высшим образованием, качество системы образования, качество преподавания математики и естественно-научного образования, качество школ менеджмента, доступ к интернету в школах, наличие научно-исследовательских и учебных услуг, степени подготовки персонала. сделан анализ динамики показателя «высшее образование и обучение» глобального индекса конкурентоспособности для украины и других стран, который показал следующее: за последние пять лет самый высокий показатель высшего образования и профессиональной подготовки принадлежит финляндии, показатель которой, в динамике, значительно возрастает, касательно украины, то украина среди 132 стран занимает 40-е место из топ-50 стран с наивысшим рейтингом конкурентоспособности высшего образования и профессиональной подготовки, эта позиция для украины является стабильной, за исключением 2011 года, когда позиция была снижена до 51 места в рейтинге. кроме того, в 2014 году рейтинг украины увеличился по сравнению с другими годами. после чего более подробно были проанализированы макроэкономические показатели украины и финляндии. были исследованы основные показатели уровня финансирования высшего образования в разных странах (общие расходы на образование, государственные расходы на высшее образование к ввп, общий объем расходов на образование в расчете на душу населения, расходы на одного учащегося в год, число персональных компьютеров на 100 человек населения, интернет-пользователей на 100 человек населения), за результатами сделаны соответствующие выводы. рассмотрены наиболее влиятельные мировые рейтинги, такие как шанхайский рейтинг, рейтинг qs и times higher education world university. предложен анализ позиций украинских высших учебных заведений, которые входят в такие рейтинги, а именно – киевский национальный университет имени тараса шевченка (421-430 позиции) и харьковский национальный университет имени в.н. каразина (481-490  позиции). кроме того, исследованы принципы повышения конкурентоспособности высшего образования. значение/ оригинальность. полученные результаты показали необходимость разработки методики усиления конкурентных позиций высшего образования украины. baltic journal of economic studies vol. 2, no. 2, 2016 corresponding author: 1 department of industry’s economy and production’s organization, ukrainian state university of chemical technology. e-mail: sveta_fedulova@ukr.net formation of the market of water resources as a process of accumulation of capital in the regions of ukraine on the way to sustainable development svitlana fedulova1 ukrainian state university of chemical technology, ukraine abstract. the subject of study in this paper is the scientific basis of capitalization of water resources of the regions of ukraine with a view to accumulating the capital in the regions of ukraine and their balanced development. the problems of water management complex are conditioned, first of all, by dramatic changes of the institutional environment in the country, weakening of the system of public administration, and considerable reduction of the volume of financing of water-related activities. critical wear of capital assets of water industry is the cause of negative consequences in the domain of water supply, and the resulting damage to the economy and population in this regard is far greater than the amount of money needed for its prevention. methodology. we used in our study the traditional and special methods, including: historical and logical method, abstraction and analogy and system analysis methods. results. this paper states that the problems of development of water management complex of ukraine can be solved by taking systemic measures aimed at capitalization of water resources, corporatization of water sector management, and institutionalization of the market methods of management. the process of water resources capitalization will give an opportunity to transform the production factor into capital on the basis of harmonization of interests of business entities in order to ensure the sustainable development of the national territorial formations. it should be noted that it is necessary to form the cost of water resources. study of the cost of water resources determines that today it is not possible to determine this cost in ukraine, since the market of water resources does not actually exist, and this fact significantly restrains the development of water management complex in the economy. practical implications. therefore, in the current economic situation in ukraine the necessary condition of achieving the objectives of sustainable development is the promotion of processes of the natural resources’ capitalization. the basis of inclusion of the natural potential into economic turnover should become the adequate assessment of water resources which may convert them in the form of financial capital. it is offered to introduce in the economic turnover the system of assessment of water resources based on the differential rent which can provide the capitalization of water resources on demand of sustainable and balanced development of the regions in the conditions of integration changes. the current state of water use is characterized by inadequate mechanism of water resources’ management. in order to increase the level of capitalization of water resources in ukraine it is necessary to create the mechanism of environmentally sustainable water use based on the renewed institutional environment which would promote the recovery of water resources in the form of the most productive capital. this approach will allow determining the real value and prices of water resources, enhancing their capitalization, eliminating mismanagement syndrome and free-of-charge principle for the resources from the economic turnover, and promoting development of the natural infrastructure. value/originality. despite the existence of studies of the problems concerning the recovery of the natural and water resources, development of the regional social and economic systems, conducted by ukrainian and foreign researchers, the issue of capitalization of water resources in the system of development of the regional socio-economic systems today remains a subject of scientific discussions. key words: socially oriented market economy, balanced development of the regions, capitalization of water resources, cost of water resources, market of water resources, differential rent jel classification: p11, p25, q56, q57, q58, g18 baltic journal of economic studies 177 vol. 2, no. 2, 2016 1. introduction the paper offers for consideration the problems of water management complex of ukraine, namely, formation of the market of water resources and implementation of the mechanism of capitalization of water resources of ukraine; their effect on the social and economic development of the regions and regional systems for ensuring sustainable development of the regions of ukraine. the subject of study in this paper is the scientific basis of capitalization of water resources of the regions of ukraine with a view to accumulating the capital in the regions of ukraine and their balanced development. we used in our study the traditional and special methods, including: historical and logical method, abstraction and analogy and system analysis methods. despite the existence of studies of the problems concerning the recovery of the natural and water resources, development of the regional social and economic systems, conducted by ukrainian and foreign researchers, the issue of capitalization of water resources in the system of development of the regional socio-economic systems today remains a subject of scientific discussions. conditions of implementation of sustainable development of the ukrainian territories demand from the scientists of ukraine the development of a mechanism of water resources market functioning in order to capitalize these resources and to provide further preservation and recovery of water resources in ukraine. 2. problems of development of water management complex of ukraine problems of the water utilization system are conditioned, first of all, by the dramatic changes in the institutional environment in our country, weakening of the government control system, and considerable reduction of the amount of financing of water management activities. critical depreciation of the fixed assets in water industry has adverse effect on the water supply domain, and the resulting damage to the economy and population in this regard is far greater than the amount of money needed for its prevention. in the course of development of the general concept of integrated use and protection of water resources of the ussr and soviet republics, large water management system were built, and now it is very difficult to manage them. in order to form socially oriented market economy based on resource-saving nature management, it is necessary to develop state-of-the-art institutional arrangement for ecologically balanced water use which would successfully combine the formal institutes (laws, regulations, etc.) and informal ones (social customs, values and so on). the basic institute which needs major transformations is the system of water sector management representing a symbiosis of the regional water engineering facilities and water supply organizations which have passive influence on the economic proportions and ecological compatibility of water use (khvesik, 2013). this system requires improvement by creation of the management structure providing for proper conditions of natural reproduction of water bodies, provision of the citizens and branches of economy with water of good quality and in sufficient volumes. apart from depreciation of the fixed assets in water industry, there is a problem of high energy intensity of water supply system which complicates the process of water industry management considerably. systems of water supply of the industrial enterprises and public utility companies relate to the most energy-intensive ones. among the constituent parts influencing the formation of water cost, the most substantial share usually falls on the expenses for consumed electric power. considerable rise in the cost of power resources for the systems of water and sewage utilities over recent years resulted in the increase of water cost and growth of water tariffs for various categories of consumers. in these conditions, the issue of energy saving in water supply systems becomes increasingly important. specific consumption of electric power for production and supply of water in ukraine, whereas featuring recently the downward trend, is still significantly higher compared with similar indices in the european countries (khomutetska, syzonenko, 2014). at present time, quality of water resources of ukraine which are used in various branches of the ukrainian economy fails to meet the requirements of the current standards. the cause of the above is the fact that a great amount of wastewaters is discharged every year in the river basins, in particular, from 10,5 (in 2000) to 7,8 bln. m3 (in 2010), including contaminated wastewaters – 3,9 and 1,7 bln. m3, accordingly (khvesik, 2013). implementation of principles of the integrated management and management of the river basins in ukraine updates the searching for ways of the improvement of organizational mechanisms of the state water resources’ management according to the european requirements. these are the major principles of the eu water framework directive which are taken as a basis in the governmental legislative and regulatory acts in ukraine with regard to development of the water management activities. determination of the basin principles and integrated management principles can be found in the law of ukraine as of 24.05.2012 no. 4836-vi on approval of the national program for water management and environmental rehabilitation of the dnipro river basin for the period till 2021. today this program is the principal state act in the domain of water resources’ management. in the territory of ukraine there are 9 areas of the river basins: 1 – areas of the river basins of the vistula (zakhidny buh and the san), 2 – of the danube, 3 – of the dniester, 4 – of the pivdenny buh, 5 – of the dnipro, 6 – of the don, 7 – of the prychornomorye river basins, 8 – of the pryazovye river basins, 9 – of the crimea river basins. the law also sets a task of “improving the system of the state water resources’ management”; however, no ways and mechanisms of such improvement are cleared up. baltic journal of economic studies 178 vol. 2, no. 2, 2016 it should be noted that the draft law of ukraine on making amendments to water code of ukraine regulates the major issues such as determination of the basin principle of management, implements the hydrographic and hydroeconomic zoning of the territory of ukraine in order to develop the plans for river basin management; the concept of “river basin management plan” is introduced. therefore, it may be concluded from the above that in the system of water industry and water resources’ management it is necessary to follow the path of decentralization of the system of water use management and diversification of individual functions for the gradual transformation of the administrative-command model of water sector management into mobile segment of the national economy. iit is believed that water industry development problems in ukraine can be solved by taking systemic measures for capitalization of water resources, corporatization of water management, and institutionalization of the market methods of management. the process of water resources’ capitalization would give an opportunity to transform the factor of production into capital on the basis of harmonizing the interests of business entities in order to ensure sustainable development of the national territorial subdivisions. ecological and economic evaluation of the maximum permissible load on water ecosystems of ukraine shows the volume of water to be reduced in the water utilization system in order to create the favorable conditions for restoring the water resources (table 1). water intensity of the ukrainian production comprises on average 0,3 m3 per one hryvnia of the finished product which exceeds the similar index in the developed european countries considerably. the volume of water loss during transportation is estimated at 2.0 km3 per year. this being the case, more than one third of water supplied to the irrigation systems is lost because of the low technical level and obsolescence of waterworks. besides, there are considerable water losses in water supply networks which are used for covering drinking and domestic needs of the population (khvesik, 2015). water intensity of the gross national product is 3–5 times higher compared with that in the major economies of the europe, which is the evidence of unsustainable water utilization and low efficiency of operation of the available production equipment. today the volumes of water use in the river basins almost reached their upper limit; as a result, there is a contradiction between water demand and possibilities to satisfy it both by quantity and quality (khvesik, 2013). industrial production and agriculture are highly concentrated in ukraine. because of intensive use of the natural resources for decades, it has become one of the most dangerous countries in terms of the environmental impact. the current ecological situation in ukraine is characterized as a deep ecological and economic crisis, which is conditioned by the laws governing the administrative-command economy of the former ussr . for example, disparities in the distribution of productive forces which existed for a long time led to the fact that the ukrainian territory in terms of technogenic impact on the natural environment 4-5 times exceeded the similar index in the developed countries (shmandiy, 2004). 3. capitalization of water resources and their cost when we return to the issue of capitalization of water resources, we should note the necessity to form the cost of water resources. study of the cost of water resources determines that today it is not possible to determine this cost in ukraine, since the market of water resources does not actually exist, and this fact significantly restrains the development of water management complex in the economy. absence of the market of water resources is also proved by statistics of industrial products sold by the main lines of activities in ukraine in year 2015 (table 2). table 1 ecological and economic evaluation of the maximum permissible load on water ecosystems of ukraine (yarotska, 2006) river basins actual load on water resource potential of the river basins, mln. m3 (sum of volumes of the irrevocable water consumption and contaminated wastewater) environmentally sound load on water resource potential of the river basins, mln. m3 (10 % volume of water of the river flow per year) difference between actual and environmentally sound load on water resource potential of the river basins, mln. m3 irrevocable water consumption discharge of contaminated wastewater total dnipro 3758 1862 5620 3500 -2120 dniester 400 77 477 660 183 siverskyi donets 769 315 1084 210 -874 pivdenny buh 153 30 183 140 -43 danube (incl. tisa and pruth) 356 51 407 530 123 zakhidny buh -103,3 173,4 70 40 -30 crimea and priazovye rivers -162 502 340 196 -144 total 3209 3445 6654 5590 -1064 baltic journal of economic studies 179 vol. 2, no. 2, 2016 table 2 shows that the share of sold industrial products related to water supply, sewerage, waste disposal systems, makes only 1.2% of all products sold, indicating the absence of water resources’ market. ukraine possesses the considerable amount of water resources, however non-rational use and inefficient management thereof give no opportunity to create own markets of resources and to enter the international markets. in 2014, 8.71 bln. m³ of water [9] were consumed in ukraine for the needs of water supply of citizens and branches of economy, of which 68% in the basin of the dnipro river, about 11% – of the siverskyi donets, 4% – of the dniester, 3% – of the pivdenny buh and 7% – of the danube. the largest water consumers in the regions are dnipropetrovsk, donetsk, zaporizhzhya, kyiv, kherson regions, accounting for 63.26 % of total volume of water consumption (fig. 1). this figure clearly indicates that large markets of water resources can be potentially formed in dnipropetrovsk, donetsk, zaporizhzhya, kyiv and kherson regions, and it would give considerable effect from taking systemic measures towards capitalization of water resources. year by year, increase of revenues to the state and local budgets at the expense of dues for special water use is observed. the dynamics shows that for ten years (from 2002 till 2012) the incomes of budgets from water use have grown by 1100,2 mln. hryvnias only. these figures support the fact that management of water resources is not effective at this time. to change this situation, the central and local authorities should focus on solving three key problems: establishment of transparent terms of lease, provision for proper observance of special water use conditions and, most importantly, securing of strict control over the rational water use. in connection with the severe shortage of water in many countries it is considered that water may become “the future coal”, and it is expected that the models for assessment and trading with regard to both water consumption and water contamination, will be formalized in the coming days (lutsiv, 2014). 4. problems of water use in dnipropetrovsk region let’s consider the problems of water use by the example of the dnipropetrovsk region of ukraine and the dnipro basin. one of the main ways of preserving and improving the fertile soils is the reclamation of land in all its forms. the area of the dnipro basin within ukraine makes 292,700 km2, that is, almost 48.5% of the area of ukrainian territory. in the structure of hydrographic network of the dnipro river within the limits of ukraine there are 15381 minor rivers (of 67.2 thous. km total length), 40 mediumtable 2 volume of industrial products sold by the main lines of activities in january – november 2015 (zhuk, 2016) indicator volume of industrial products (goods, services) sold, vat and excise tax excluded uah mln. % of all products sold industry (b+c+d+e according to ukrainian industry classification system – kved-2010) 1351374.7 100 1. mining and processing industry 1084756.0 80.3 mining industry 165214.4 12.2 processing industry 919541.6 68.1 2. supply of electric power, gas, steam, and conditioned air 251009.2 18.5 3. water supply, sewerage, waste disposal systems 15609.5 1.2 0 200 400 600 800 1000 1200 1400 1600 usage of source water in the regions in 2014, mln.m3 (including sea water and fresh water) fig. 1. use of fresh water in the regions in 2014, mln.m3 (zhuk, 2015) baltic journal of economic studies 180 vol. 2, no. 2, 2016 size rivers (9.3 thous. km) and three large rivers (the dnipro, pripyat and desna rivers) of about 2 thous. km). average density of the river network is 0.23 km/km2. among the dnipro tributaries, the pripyat river is the most important; its water content at the mouth (place of inflow into the dnipro) is almost equal to the dnipro water content. in the ukrainian part of the pripyat basin there are 11 medium-size rivers, of which the horyn with sluch and the styr river are the largest. the desna river is the second (after pripyat), by water content, tributary of the dnipro river. in the ukrainian part of the desna basin there are 4 medium-size rivers, with the seym and snov being the largest ones. in the medium and lower parts of the dnipro basin there are also 22 medium-size rivers, of which the ros, the sula with uday, the psel with khorol, the vorskla, the oril, the samara with vovcha and the inhulets are the largest. dnipropetrovsk region is situated in the area of insufficient moistening. summer rains, mainly, are showers by their nature, so they are not largely useful. it creates unfavorable conditions of soil water supply in the vegetation period. therefore, in order to provide high and stable harvests, the region demands the arrangement of irrigated agriculture. reclamation works, including irrigation, in the katerynoslav province (the former name of dnipropetrovsk region) started at the close of the xix century after the catastrophic crop failure in the southern part of russia. from its source to mouth, the dnipro flows through the territory of three countries: russia, belarus and ukraine. the river and its tributaries on some areas serve as the natural border between the countries. they are also watering 12 densely populated regions, 1 – in russia (smolensk region), 3 – in belarus (minsk, mogilev, gomel regions), 8 – in ukraine (chernihiv, kyiv, cherkasy, kirovograd, poltava, dnipropetrovsk, zaporizhzhya and kherson regions). the most of large european river basins are also located within several countries. accordingly, cross-border cooperation is required for analysis of the river basin and management thereof. of the dnipro bed located in the territory of ukraine, the area of 100 km (degodyuk, 2006) only is preserved in its natural condition. the other areas are regulated by the cascade of water reservoirs: kyiv, kaniv, kremenchuk, dniprodzerzhinsk, dniprovsky, kakhovka reservoirs with 6,979 km² total area of water surface and total volume of 43.8 km³ of water, making accordingly 94.7 and 90.8% of total amount of all large waters reservoirs of ukraine (degodyuk, 2006). over decades, enterprises in the dnipro basin were building up the use of water without taking into account the economic and environmental consequences for ukraine, as it was emphasized by environmental specialists (yatsyk, 2002). many industrial production facilities are located in the river basin; among them the plants of “dirty” industries (metallurgical, chemical, coal mining industries) prevail. there are also the large power-generating facilities and massifs of irrigated lands, from which a considerable amount of agricultural chemicals (fertilizers, pesticides) is washed out (khilchevskyi, 1996). as a consequence, the river is on the verge of hydroecological crisis, because self-repairing ability of the dnieper river and many rivers of the basin cannot ensure the repairing of ecological imbalance, as stated by environmental specialists (yatsyk, 2002). contamination of water and water intake landscapes by a large amount of chemicals, with the most of them not characteristic to living organisms, resulted in changing of the natural chemical type of water in many rivers of the basin and greatly complicated obtaining of high-quality drinking water at treatment plants (yatsyk, 2002). because of human economic activities, heavy contamination of ground waters continues. about 1000 filtering reservoirs are located in the dnipro basin, with 80% of them concentrated in its southern part. total volume of highly mineralized waters collected in reservoirs reaches 1 km³, and 77% fall on dnipropetrovsk region (1997). so, there are large centers of contaminated ground waters formed in the dnipro basin, in particular, in the regions of: 1. dnipropetrovsk – dniprodzerzhinsk – by wastewaters of chemical and metallurgical productions; 2. novomoskovsk – pavlograd – by mine waters and wastes of animal production units; 3. kryvyi rih – by mine waters and wastewaters of metallurgical plants; 4. zhytomyr – rivne – by wastewaters of enterprises of chemical and light industries, as well as household wastewaters. because of the chernobyl disaster, large territory of ukraine, including the part of the dnipro basin and all water reservoirs of the cascade (yatsyk, 2002), was contaminated by radionuclides, predominantly by cesium-137, strontium-90 and plutonium-239 (240). the most important is the fact of release from the reactor of the 4-th block of chernobyl npp of about 2000 cі of isotopes of plutonium-239 (240) with half-life period of 24 110 years (bondarenko, 2002). the most of plutonium is located in the mud of the kyiv reservoir (about 60 million tons) and in soil of the surrounding area (bondarenko, 2002). water reservoirs of the dnipro cascade represent a peculiar kind of accumulators of radioactive contamination. radionuclides are mainly located in the mud, tissues of plants and shellfish, which are the concentrators of cesium and strontium (yatsyk, 2002). although in 1994 the 100 times’ decrease in concentration of isotopes in the reservoirs was recorded, compared to 1986, but it is still exceeds the level preceding the accident 35 times (1997). the chernobyl accident almost destroyed the pripyat river and its entire basin of 122,000 km², which is currently suitable only for preserved areas. baltic journal of economic studies 181 vol. 2, no. 2, 2016 situation in the dnipro basin is complicated by high level of development of erosion processes and river banks’ wearing away. for the last 25 years, total humus content in soil decreased by 10% (1997). products of erosion, entering the water, fill it with mud and contaminate with organic compounds and mineral fertilizers, in particular, nitrogen and phosphorus. 5. findings industrial enterprises of the dnipropetrovsk region use large amounts of water. water is consumed for production, domestic, drinking, and firefighting needs. among the largest production consumers there are metallurgical, oilprocessing, chemical plants, thermal power plants which use water for cooling, enterprises of paper industry and mining industry, where considerable amounts of water are used for washing of raw materials and products (airapetyan, 2010). high volumes of water consumption in the industry require specific attention to the issues of water saving and rational use, elimination of water losses with runoffs and in the coolers of return water. for recirculating water systems of industrial enterprises it is important to distinguish the return water consumption for the needs of products’ manufacturing and consumption of “fresh water” taken from the water source to replenish water reserve consumed in production. for increasing the efficiency of the system of water management at the industrial enterprises and protection of the environment, it is necessary to aim for reduction of fresh water consumption and decrease of wastewater volumes discharged into water bodies. concerning industrial needs, the largest amounts of water are used for cooling of process equipment, steam, liquid and gaseous products, condensers of steam turbines, blast and open-hearth furnaces, with the use of oncethrough and recirculating water supply systems. in order to create sustainable systems of water use, the industrial enterprises implement water-less or low-water technologies and systems with multiply rational use of water. for economic and environmental reasons, and in the events of limited water supply from the natural sources, it is recommended to construct recirculating systems of technical water supply at the industrial enterprises. such recirculating systems of technical water supply allow using water several times. recirculating water systems is a great advance in the field of protection of water bodies from contamination, since they allow to reduce the intake of fresh water considerably and to decrease the amount of waste waters discharged into water bodies. creation of closed water supply systems at the industrial enterprises is not an easy task. complex chemical composition of wastewaters, variety of chemicals contained therein, make the development of universal effluent-free technology pattern impossible. so, one may talk only of general principles of development and designing of such systems (airapetyan, 2010). 6. conclusions today water is a resource no longer available; water industry is huge in volume global market, which can be compared with oil-and-gas and power generation sector. the recent years have witnessed the active formation of exchange-traded funds (etf), steadily investing in water industry. portfolios of management companies concentrate the shares of utility companies – suppliers of drinking water, manufacturers of water equipment, and companies engaged in water treatment, as well as the other infrastructure companies supplying the industrial and agricultural enterprises with water. therefore, in the modern economic environment in ukraine the necessary condition for achieving the objectives of sustainable development is the promotion of processes of capitalization of the natural resources. capitalization, as a process of accumulation of capital through transformation of added value into it, was analyzed by k . marks far back in the past. with the transition of ukrainian economy to market relations, the interest to this process is growing considerably. the basis for inclusion of the nature potential into economic turnover should be adequate assessment of water resources, capable of transforming them into the form of financial capital. the current state of water use is characterized by inadequate mechanism of water resources’ management which leads to mechanic appropriation of the rent and, as a consequence, to the decline of industry and depletion of water bodies (lutsiv, 2014). in order to increase the level of capitalization of water resources in ukraine it is necessary to create the mechanism of environmentally sustainable water use based on the renewed institutional environment which would promote the recovery of water resources in the form of the most productive capital. this approach will allow determining the real value and prices of water resources, enhancing their capitalization, eliminating mismanagement syndrome and free-of-charge principle for the resources from the economic turnover, and promoting development of the natural infrastructure. references khvesik, м.а. 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(2010). water industry of industrial enterprises: teaching guide – kh., khnamg, 280 p. светлана федулова формирование рынка водных ресурсов как процесс накопления капитала регионов украины на пути к сбалансированному развитию аннотация. предметом исследования статьи являются научные основы капитализации водных ресурсов регионов украины с целью накопления капитала регионов украины и их устойчивого развития. проблемы водохозяйственного комплекса обусловлены, в первую очередь, кардинальными изменениями институциональных условий в государстве, ослаблением системы государственного управления, многократным уменьшением объемов финансирования водохозяйственных мероприятий. методика. при осуществлении исследования использовались традиционные и специальные методы, среди которых: историко-логический, абстракции и аналогии и методы системного анализа. результаты. в данной статье определено, что проблемы развития водохозяйственного комплекса украины можно решить путем осуществления системных мер по капитализации водных ресурсов, корпоратизации управления водным хозяйством и институционализации рыночных методов управления. процесс капитализации водных ресурсов позволит преобразовать фактор производства в капитал на основе гармонизации интересов субъектов хозяйствования с целью обеспечения устойчивого развития национальных территориальных образований. нужно отметить, что необходимо сформировать стоимость водных ресурсов. исследование стоимости водных ресурсов показывает, что сегодня в украине невозможно определить такую стоимость, так как не существует рынка водных ресурсов, что существенно тормозит развитие водохозяйственного комплекса экономики. практическое значение. поэтому в современных условиях хозяйствования в украине необходимым условием достижения целей устойчивого развития является активизация процессов капитализации природных ресурсов. основанием для включения природного потенциала в хозяйственный оборот должна стать адекватная оценка водных ресурсов, которая сможет превратить их в форму финансового капитала. предлагается внедрение в хозяйственный оборот системы оценки водных ресурсов на основе дифференциальной ренты, что сможет привести к капитализации водных ресурсов в соответствии с требованием устойчивого и сбалансированного развития регионов в условиях интеграционных изменений. для повышения уровня капитализации водных ресурсов в украине необходимо создать механизм екологозбалансованого водопользования на основе обновленной baltic journal of economic studies 183 vol. 2, no. 2, 2016 институциональной среды, которая будет способствовать восстановлению водных ресурсов в форме самого производительного капитала. такой подход позволит определить реальную стоимость и цены на водные ресурсы, позволит усилить капитализацию, устранить из экономического оборота синдром бесхозяйственности и бесплатности ресурсов, способствовать развитию природной инфраструктуры. значение/оригинальность. несмотря на существование исследований проблем воспроизводства природных и водных ресурсов, проблем развития региональных социально экономических систем украинских и зарубежных ученых, проблема капитализации водных ресурсов в условиях развития региональных социально экономических систем и сегодня является предметом научных дискуссий. baltic journal of economic studies 41 vol. 6, no. 3, 2020 corresponding author: 1 university of łódź, poland. e-mail: cezary.szydlowski@uni.lodz.pl orcid: https://orcid.org/0000-0002-7454-2908 doi: https://doi.org/10.30525/2256-0742/2020-6-3-41-47 income budgets evaluation of selected communes of pomorskie voivodship in poland from the tax on means of transport cezary szydłowski1 abstract. local government in poland at the commune level has various sources of own income, one of them being the tax on means of transport. the need for communes to carry out many tasks requires ensuring income to the local budget at a sufficiently high level. the risk of a decrease in income to the budgets of communes caused by the worsening of the economic situation as a result of an epidemic makes it necessary to assess the sources of communes’ income. an audit, which evaluates selected areas of activity of a given organization, is a useful tool. the main objective of the research for the purposes of this publication was to assess the level of income to the budget of selected municipalities from the tax on means of transport and its share in the total income of municipalities. in addition, changes in the level of income to the budgets of the surveyed municipalities in 2016-2019 were verified. moreover, the article presents the essence and importance of audit in the assessment of revenue to the municipal budget. the article uses a case study, an analytical method, an application method, a method of examining source documents and a literature review as the research methods. the analysis of budget revenues of selected communes of pomorskie voivodship in poland showed that the tax on means of transport constitutes a small percentage share in total budget revenues (below 1% of total budget revenues). in addition, a significant decrease in revenues from this tax to the budgets of 11 surveyed municipalities was observed in the surveyed period 2016-2019. the analysis also revealed fluctuations in the municipalities’ revenues from the tax on means of transport, which make it difficult to forecast revenues. it should also be noted that municipalities apply certain discounts and preferences when setting the amount of the tax on means of transport, which also reduce the revenue of the municipality. the assessment of revenues to municipalities’ budgets from the tax on means of transport indicates that further analyses of revenues from individual local taxes and charges should be carried out in order to identify potential risks and threats to the financial economy of municipalities in poland. key words: audit, budget revenues, local tax, public sector, local government, tax on means of transport, public finance. jel classification: h71, h83 1. introduction the implementation of public tasks by local government requires financial resources, which are obtained from public levies. valid in poland, legal and systemic solutions have been established by three levels of local government (communes, county, voivodship), however, the basic unit of local government is the communes. the powers and tasks granted to the communes government require an appropriate system of financing them within the budget of the given communes unit. local self-government in poland at the communes level has various sources of its own income, which have been defined in relevant legal regulations. one of the basic sources of own revenues is the tax on means of transport, which constitutes a public tribute, its amount and the rules of collection from taxpayers are determined by the appropriate commune’s legislative bodies. planning expenses for the execution of tasks by the municipality also requires planning the level of the municipality’s income for a given year from particular taxes and local fees. therefore, it is necessary to assess revenues from a given tax, e.g., in the form of an audit. the assessment of the level of revenues to the local government budget is important in case of threats related to the deterioration of the country’s economic situation, e.g., in connection with the occurrence of a global epidemic (world economic outlook, imf, april 2020). economic problems associated with the baltic journal of economic studies 42 vol. 6, no. 3, 2020 crisis, affect the reduction of income to the municipal budget. the results of the analysis may allow to take appropriate remedial actions to improve local tax collection. the aim of the research is to assess the level of municipalities’ revenues from the tax on means of transport and its share in the total revenues of municipalities. the research was conducted on the basis of selected 11 coastal urban and rural municipalities of pomorskie voivodship in poland. moreover, the publication was intended to show that an audit of the assessment of income to the commune’s budget can be an important source of financial information, which will enable communes to take corrective actions. 2. research methods the article uses a case study, an analytical method, an application method and a method of examining source documents (reports on the implementation of commune budgets in a given year and rb27s reports containing the amounts of obtained commune income in a given year), a literature review as the research methods. the study covered selected coastal urban and rural communes of pomorskie voivodship in poland. the choice of the commune was determined by its location and availability of data for the study. the surveyed time horizon covered the years 2016-2019. 3. tax on transport equipment as revenue for the municipal budget local government in poland is classified as a public finance sector unit (law, 2009), whereas the tasks of communal self-government in poland are defined by the act on communal self-government (law, 1990). implementation of tasks at the commune level requires an appropriate system of financing mainly through own revenues to the budget in the form of public levies (freire, garzón, 2014). the polish legislator has granted the local government the right to collect selected taxes and local fees (chojna – duch, 2003), it has also laid down rules for the participation of municipalities in other public levies charged by the government (rudowicz, 2010). the systemic regulation of the income of local governments in poland was established by an appropriate legal act, which specified that the source of the municipality ’s own income is, inter alia, the tax on means of transport (law, 2003). the level of income depends on “the nature of the municipality, the level of social infrastructure – the economic activity of the commune, as well as the activities of the commune in terms of their acquisition” (podstawka, 2010). the specific provisions specified that the tax on means of transport is subject to (law, 1991): 1) lorries with a maximum permissible laden weight above 3.5 tons and below 12 tons; 2) lorries with a maximum permissible laden weight equal to or higher than 12 tons; 3) truck-tractors and ballast tractors adapted for the use with a semi-trailer or trailer with a maximum permissible laden weight of a vehicle combination from 3.5 tons to below 12 tons; 4) truck-tractors and ballast tractors adapted for the use with a semi-trailer or trailer with a maximum permissible laden weight of a vehicle combination equal to or higher than 12 tons; 5) trailers and semi-trailers, which together with a motor vehicle have a maximum permissible laden weight from 7 tons to below 12 tons, excluding those that are used solely in connection with agricultural activities carried out by an agricultural tax payer; 6) trailers and semi-trailers, which together with a motor vehicle have a maximum permissible laden weight equal to or higher than 12 tons, excluding those that are used solely in connection with agricultural activities carried out by an agricultural tax payer; 7) buses. the legislation specified that the tax liability for the tax on means of transport covers natural persons and legal entities owning means of transport. according to the act, the owners are also deemed to be organizational units without legal personality, for which the means of transport is registered, and owners of means of transport registered on the territory of poland as entrusted by a foreign natural or legal person to a polish entity (law, 1991). the amount of the tax on means of transport shall be determined by the municipalities taking into account various criteria such as environmental standards, capacity, number of seats on the bus, etc. however, the polish legislation has set maximum rates of tax on means of transport that can be set by municipalities for a given year. each year, the minister of finance publishes the maximum rates of individual taxes and local charges that may be set by municipalities. statement of maximum rates of the tax on means of transport in poland, valid for the years 2016-2019 are presented in table 1. the data in table 1 indicate that in 2017 minister of finance for 2016, reduced the maximum rate of tax on means of transport in all tax bases by 0.9%. however, the maximum rates of the tax on means of transport established for 2018-2019 were increased by the minister of finance in all tax bases (increase of rates by 1.9% in 2018 with respect to 2017 and increase of rates by 1.6% in 2019 with respect to 2018). the analysis of the maximum amount of individual property tax rates indicates that they differ significantly with respect to individual tax bases. these rates are the basis for municipalities to develop their own tax rates on means of transport for a given baltic journal of economic studies 43 vol. 6, no. 3, 2020 year. w hen setting the tax rates outside the criterion of revenue to the municipal budget, municipalities are also guided by environmental protection, for example by setting lower tax rates for vehicles with higher environmental standards. as a result, transport companies located in a given municipality are encouraged to replace their vehicles with vehicles meeting higher environmental standards. this plays a particularly important role in the analyzed tourist communes, which are interested in attracting new tourists who appreciate the climatic and tourist values of a given commune. 4. evaluation of revenues to the budgets of the analyzed communes in total the stable financing of the self-governments’ own tasks depends primarily on the effective acquisition of funds from individual public levies as provided for in the legislation of a given country. the public authorities of particular local government units should take care of increasing the revenues of municipalities from the local taxes and fees due to them. current and independent assessment of communes revenues is the basis for balancing the local government budget (wildasin, 2012). therefore, monitoring, controlling and auditing the revenue generated by a given tax is crucial to ensure the proper functioning of each municipality (filipiak, 2006). the supervision and control of local governments budgets is an important area of activity of the independent external audit institutions established for this purpose (in most countries) (overview of external audit, 2018). revenue from the municipal budget is examined by specialized organizational units of municipalities (control and audit). specialized public entities, which act as external auditors of local governments budgets, also examine the revenues of municipalities in poland. (e.g., regional chambers of auditors). the assessment of self-government revenues on the basis of financial statements prepared by the communes, carried out by independent auditors, makes it possible to diagnose threats to the implementation of the communes budget. such activities have been carried out all over the world for many years, mainly in the united table 1 maximum rates of tax on means of transport in poland for 2016-2019 n. tax base for the tax on means of transport (pursuant to the act of 12 january 1991 on local taxes and charges) maximum tax rate in a given year in pln change in % (year-on-year) 2016 2017 2018 2019 2017/ 2016 2018/ 2017 2019/ 2018 1 lorries with a maximum permissible laden weight above 3.5 tons and below 5.5 tons 811.60 804.3 819.59 832.71 -0.90% 1.90% 1.60% 2 lorries with a maximum permissible laden weight above 5.5 tons and below 9 tons 1353.94 1341.76 1367.26 1389.14 -0.90% 1.90% 1.60% 3 lorries with a maximum permissible laden weight above 9 tons 1624.72 1610.10 1640.70 1666.96 -0.90% 1.90% 1.60% 4 lorries with a maximum permissible laden weight equal to or higher than 12 tons 3100.42 3072.52 3130.90 3181 -0.90% 1.90% 1.60% 5 truck-tractors and ballast tractors adapted for the use with a semi-trailer or trailer with a maximum permissible laden weight of a vehicle combination from 3.5 tons to below 12 tons 1895.48 1878.43 1914.13 1944.76 -0.90% 1.90% 1.60% 6 truck-tractors and ballast tractors adapted for the use with a semi-trailer or trailer with a maximum permissible laden weight of a vehicle combination equal to 36 tons 2396.41 2374.85 2419.98 2458.7 -0.90% 1.90% 1.60% 7 truck-tractors and ballast tractors adapted for the use with a semi-trailer or trailer with a maximum permissible laden weight of a vehicle combination higher than 36 tons 3100.42 3072.52 3130.90 3181 -0.90% 1.90% 1.60% 8 trailers and semi-trailers, which together with a motor vehicle have a maximum permissible laden weight from 7 tons to below 12 tons, excluding those that are used solely in connection with agricultural activities carried out by an agricultural tax payer 1624.72 1610.10 1640.70 1666.96 -0.90% 1.90% 1.60% 9 trailers and semi-trailers, which together with the motor vehicle have a maximum permissible weight of 36 tons 1895.48 1878.43 1914.13 1944.76 -0.90% 1.90% 1.60% 10 trailers and semi-trailers, which together with the motor vehicle have a maximum permissible weight of over 36 tons 2396.41 2374.85 2419.98 2458.7 -0.90% 1.90% 1.60% 11 buses less than 22 seats 1918.50 1901.24 1937.37 1968.37 -0.90% 1.90% 1.60% 12 buses equal to or greater than 22 seats 2425.51 2403.69 2449.37 2488.56 -0.90% 1.90% 1.60% source: own study based on the announcements of the minister of finance and the minister of finance and development on the upper limits of specific taxes and local fees in the years 2016, 2017, 2018, 2019 (m.p. z 2015 r., item 735, m.p. z 2016 r., item 779, m.p. z 2017 r., p item 800, m.p. z 2018 item 745) baltic journal of economic studies 44 vol. 6, no. 3, 2020 states of america, where an external audit carried out by auditing companies plays a very important role in this respect (copley, 1991). ongoing assessment of the municipalities revenues from local taxes and charges is carried out through information technology systems that accelerate the process of data collection and processing (coderre, 2009). when analyzing income, it is also worthwhile to pay attention to the potential risks in this area (borghesi, gaudenzi, 2013). the implementation of the assessment of the revenue to the municipal budget from the selected tax requires a general revenue survey (pfaff, 2011). this is the basis for determining the share of the tax on means of transport in the total income to the budget of the analyzed local governments. the analysis of revenues to the communes budget is an element of the assessment of the revenues of local governments (new jersey manual of audit procedures, 2019). table 2 presents a general statement of income to the budgets of 11 communes of pomorskie voivodship in poland in 2016-2019 (urban gdańsk, gdynia, jastarnia, łeba, puck, sopot, ustka, władysławowo and rural communes of krokowa, stegna and ustka). a detailed breakdown is provided in table 2. the concluded statement of total revenue to the budgets of the 11 municipalities under analysis (8 urban and 3 rural) from pomorskie voivodship in poland table 2 shows that all the communes under analysis recorded a general increase in revenue to the budget in 2019 in relation to the base year 2016. the highest revenue growth over the 4 years under analysis was recorded by the cities of jastarnia and władysławowo (a 33% increase in 2019 in relation to 2016). the lowest increase in revenue in 2019 over the 4 years under consideration in relation to the base year 2016 was recorded by łeba (increase by 9% in 2019 compared to 2016). the highest dynamics in 2017-2019 in relation to the base year 2016 concerned the rural municipality of stegna, which in 2018 achieved a 40% increase in total income compared to the base year 2016. in total, 5 municipalities recorded decreases in total income to the commune budget on an annual basis (year-on-year) in the audited period, including 20162019. 2% drop in revenue in 2017 compared to in 2016, the city of sopot (a nominal decrease of 4 550 823 pln) and the rural municipality of ustka (a nominal decrease of 793 364 pln in revenue) recorded. in 2018, none of the analyzed municipalities recorded a decrease in budget revenues in the annual perspective. further declines in revenues to the municipalities budgets in the annual perspective occurred in 2019. 3 municipalities, the city of ustka, recorded declines in revenues in 2019 as compared to 2018 (decrease in the following factors were taken into account: stegna rural municipality (decrease by 6%, nominal income decrease by 5 921 474 pln), stegna rural municipality (decrease by 13%, nominal income decrease by 8 135 681 pln) and krokowa rural municipality (decrease by 13%, nominal income decrease by 962 729 pln). generally speaking, it should be noted that out of the 11 assessed coastal communes of pomorskie voivodship in poland, the total revenue-to-budget decreases in 2016-2019 concerned 2 urban communes (sopot and ustka) and 3 rural communes (krokowa, stegna and ustka). 5. assessment of municipalities revenues from the tax on means of transport the next stage of the analysis is to assess the level of income to the budgets of the analyzed municipalities from the tax on means of transport. it should first be noted that, as mentioned above, the municipality sets the rates of the tax on means of transport on its own, taking into account certain criteria for setting the rate for a given tax subject. for example, when setting the tax rates on means of transport for 2016, the municipality of gdańsk applied a reduced rate on a car meeting the environmental standard at the minimum level of euro 2/ii (resolution no. xv/396/15, 2015). similar reduced rates of tax on means of transport depending on combustion standards were applied, for example, in sopot in 2019 for vehicles meeting the euro 0, euro 1/i, euro 2/ii, euro 3/iii, euro 4/iv, euro 5/v, euro 6/vi standards (law no ii/12/2018, 2018). it should be noted that the city of sopot has the status of a health resort, so environmental protection and pro-ecological activities play a major role there. the preference for reduced rates of real estate tax for vehicles meeting high ecological standards results in a reduction of income to the budget of a given commune, however, at the same time improving environmental conditions in the commune. the above examples indicate that the tax on means of transport, apart from the income effect on the commune budget, is also an instrument of the communes influence on other key areas for the city, in this case on the state of the environment. the following table 3 presents a summary of income to the budget of the analyzed communes from the tax on means of transport together with its share in the total income to the municipality budget. an analysis of the data in table 3 shows that revenues from the tax on means of transport constituted a small percentage of the total revenues to the budgets of the municipalities under analysis. none of the municipalities in 2016-2019 recorded revenues to the budget from the tax on means of transport at a level exceeding 1% of total budget revenues. the highest percentage share of the tax on means of transport in total revenues concerned the rural municipality of ustka and was 0.67% in 2016 (nominal income of 327 671 pln) and in 2017 (nominal income – 319 355 pln). the lowest share of the tax on means of transport in the total income to the municipality budget was recorded in 2019 in the baltic journal of economic studies 45 vol. 6, no. 3, 2020 ta bl e 2 to ta l i nc om e to th e bu dg et o f t he s ur ve ye d m un ic ip al it ie s in 2 01 620 19 n . n am e of th e m un ic ip al ity m un ic ip al st at us to ta l b ud ge t r ev en ue s i n th e ye ar s i n pl n n om in al in cr ea se /d ec re as e in to ta l bu dg et re ve nu es in p ln in cr ea se / d ec re as e in to ta l c om m un e in co m e in % d yn am ic s i n % (2 01 6= 10 0% ) 20 16 20 17 20 18 20 19 20 17 /2 01 6 20 18 /2 01 7 20 19 /2 01 8 20 17 / 20 16 20 18 / 20 17 20 19 / 20 18 20 17 20 18 20 19 1 g da ńs k ur ba n 2 79 4 08 1 08 0 2 92 2 79 8 78 2 3 27 6 98 5 53 8 3 62 3 04 7 44 9 12 8 71 7 70 2 35 4 18 6 75 6 34 6 06 1 91 1 5% 12 % 11 % 10 5% 11 7% 13 0% 2 g dy ni a ur ba n 1 36 1 86 1 89 2 1 40 9 66 7 66 7 1 60 5 97 7 09 0 1 80 3 29 0 00 9 47 8 05 7 75 19 6 30 9 42 3 19 7 31 2 91 9 4% 14 % 12 % 10 4% 11 8% 13 2% 3 ja st ar ni a ur ba n 25 0 01 0 66 26 3 97 0 78 27 6 55 3 90 33 2 24 8 21 1 39 6 01 2 1 25 8 31 2 5 56 9 43 1 6% 5% 20 % 10 6% 11 1% 13 3% 4 ł eb a ur ba n 28 0 33 8 93 29 1 65 3 81 29 7 38 7 55 30 6 12 1 19 1 13 1 48 8 57 3 37 4 87 3 36 4 4% 2% 3% 10 4% 10 6% 10 9% 5 m ia st o pu ck ur ba n 50 6 07 7 10 55 5 24 4 72 61 1 53 2 28 64 9 82 5 79 4 91 6 76 2 5 62 8 75 6 3 82 9 35 1 10 % 10 % 6% 11 0% 12 1% 12 8% 6 so po t ur ba n 29 9 51 6 56 2 29 4 96 5 73 9 32 9 27 1 24 6 38 0 02 5 76 4 -4 5 50 8 23 34 3 05 5 07 50 7 54 5 18 -2 % 12 % 15 % 98 % 11 0% 12 7% 7 m ia st o u st ka ur ba n 69 9 93 6 83 82 6 52 1 09 92 5 62 6 61 86 6 41 1 87 12 6 58 4 26 9 91 0 55 2 -5 9 21 4 74 18 % 12 % -6 % 11 8% 13 2% 12 4% 8 w ła dy sł aw ow o ur ba n 81 1 67 7 85 90 6 60 1 91 98 9 07 8 33 10 7 86 0 32 8 9 49 2 40 5 8 24 7 64 3 8 95 2 49 5 12 % 9% 9% 11 2% 12 2% 13 3% 9 k ro ko w a ru ra l 58 1 37 5 28 60 2 70 6 23 69 8 12 0 54 68 8 49 3 24 2 13 3 09 5 9 54 1 43 1 -9 62 7 29 4% 16 % -1 % 10 4% 12 0% 11 8% 10 st eg na ru ra l 43 4 27 8 60 50 2 72 7 51 60 7 62 6 42 52 6 26 9 61 6 84 4 89 1 10 4 89 8 91 -8 1 35 6 81 16 % 21 % -1 3% 11 6% 14 0% 12 1% 11 c om m un es o f u st ka ru ra l 48 6 46 2 25 47 8 52 8 61 51 1 53 8 40 61 0 04 8 12 -7 93 3 64 3 30 0 97 8 9 85 0 97 3 -2 % 7% 19 % 98 % 10 5% 12 5% so ur ce : o w n st ud y ba se d on re po rt s r b27 s a nd re po rt s o n th e i m pl em en ta tio n of th e c om m un e b ud ge t f or 2 01 620 19 p ub lis he d in p ub lic in fo rm at io n bu lle tin s b y lo ca l g ov er nm en ts ta bl e 3 r ev en ue fr om th e ta x on m ea ns o f t ra ns po rt to th e bu dg et o f t he in ve st ig at ed m un ic ip al it ie s in 2 01 620 19 n . n am e of th e m un ic ip al ity m un ic ip al st at us to ta l b ud ge t r ev en ue s i n th e ye ar s i n pl n r ev en ue fr om th e ta x on m ea ns o f t ra ns po rt in 2 01 6 – 20 19 pe rc en ta ge sh ar e of th e ta x on m ea ns of tr an sp or t i n th e to ta l r ev en ue o f th e m un ic ip al ity in 2 01 6 – 20 19 20 16 20 17 20 18 20 19 20 16 20 17 20 18 20 19 20 16 20 17 20 18 20 19 1 g da ńs k ur ba n 2 79 4 08 1 08 0 2 92 2 79 8 78 2 3 27 6 98 5 53 8 3 62 3 04 7 44 9 8 04 1 44 9 7 53 3 94 1 7 37 7 93 6 7 48 1 49 7 0. 29 % 0. 26 % 0. 23 % 0. 21 % 2 g dy ni a ur ba n 1 36 1 86 1 89 2 1 40 9 66 7 66 7 1 60 5 97 7 09 0 1 80 3 29 0 00 9 7 78 0 87 9 7 52 5 52 2 6 97 0 84 8 6 41 6 00 2 0. 57 % 0. 53 % 0. 43 % 0. 36 % 3 ja st ar ni a ur ba n 25 0 01 0 66 26 3 97 0 78 27 6 55 3 90 33 2 24 8 21 21 3 04 27 8 97 23 4 10 19 5 26 0. 09 % 0. 11 % 0. 08 % 0. 06 % 4 ł eb a ur ba n 28 0 33 8 93 29 1 65 3 81 29 7 38 7 55 30 6 12 1 19 55 6 97 52 5 24 43 7 68 34 8 92 0. 20 % 0. 18 % 0. 15 % 0. 11 % 5 m ia st o pu ck ur ba n 50 6 07 7 10 55 5 24 4 72 61 1 53 2 28 64 9 82 5 79 15 2 01 8 17 1 30 6 12 2 33 1 11 7 81 8 0. 30 % 0. 31 % 0. 20 % 0. 18 % 6 so po t ur ba n 29 9 51 6 56 2 29 4 96 5 73 9 32 9 27 1 24 6 38 0 02 5 76 4 38 9 62 8 38 8 87 2 36 8 03 3 34 0 52 9 0. 13 % 0. 13 % 0. 11 % 0. 09 % 7 u st ka ur ba n 69 9 93 6 83 82 6 52 1 09 92 5 62 6 61 86 6 41 1 87 10 9 99 6 17 7 30 5 15 4 02 6 14 3 24 1 0. 16 % 0. 21 % 0. 17 % 0. 17 % 8 w ła dy sł aw ow o ur ba n 81 1 67 7 85 90 6 60 1 91 98 9 07 8 33 10 7 86 0 32 8 19 9 42 3 27 8 63 0 24 7 72 6 30 4 38 0 0. 25 % 0. 31 % 0. 25 % 0. 28 % 9 k ro ko w a ru ra l 58 1 37 5 28 60 2 70 6 23 69 8 12 0 54 68 8 49 3 24 20 6 45 8 21 4 65 2 21 0 77 4 23 7 20 4 0. 36 % 0. 36 % 0. 30 % 0. 34 % 10 st eg na ru ra l 43 4 27 8 60 50 2 72 7 51 60 7 62 6 42 52 6 26 9 61 11 4 20 4 13 7 37 0 16 9 80 7 14 7 03 9 0. 26 % 0. 27 % 0. 28 % 0. 28 % 11 c om m un es o f u st ka ru ra l 48 6 46 2 25 47 8 52 8 61 51 1 53 8 40 61 0 04 8 12 32 7 67 1 31 9 35 5 32 1 22 8 29 5 23 6 0. 67 % 0. 67 % 0. 63 % 0. 48 % so ur ce : o w n st ud y ba se d on re po rt s r b27 s a nd re po rt s o n th e i m pl em en ta tio n of th e c om m un e b ud ge t f or 2 01 620 19 p ub lis he d in p u bl ic in fo rm at io n bu lle tin s b y lo ca l g ov er nm en ts baltic journal of economic studies 46 vol. 6, no. 3, 2020 ta bl e 4 c ha ng es in th e le ve l o f r ec ei pt s fr om th e ta x on m ea ns o f t ra ns po rt in th e m un ic ip al it ie s co nc er ne d in 2 01 620 19 n . n am e of th e m un ic ip al ity m un ic ip al st at us r ev en ue fr om th e ta x on m ea ns o f t ra ns po rt in 2 01 6 – 20 19 n om in al c ha ng es in th e re ce ip ts o f t he ta x on m ea ns o f t ra ns po rt in p ln c ha ng es in % in th e re ce ip ts o f t he ta x on m ea ns o f t ra ns po rt ( ye ar /y ea r) 20 16 20 17 20 18 20 19 20 17 /2 01 6 20 18 /2 01 7 20 19 /2 01 8 20 17 /2 01 6 20 18 /2 01 7 20 19 /2 01 8 1 g da ńs k ur ba n 8 04 1 44 9 7 53 3 94 1 7 37 7 93 6 7 48 1 49 7 -5 07 5 08 -1 56 0 05 10 3 56 1 -6 % -2 % 1% 2 g dy ni a ur ba n 7 78 0 87 9 7 52 5 52 2 6 97 0 84 8 6 41 6 00 2 -2 55 3 57 -5 54 6 74 -5 54 8 46 -3 % -7 % -8 % 3 ja st ar ni a ur ba n 21 3 04 27 8 97 23 4 10 19 5 26 6 59 3 -4 4 87 -3 8 84 31 % -1 6% -1 7% 4 ł eb a ur ba n 55 6 97 52 5 24 43 7 68 34 8 92 -3 1 73 -8 7 56 -8 8 76 -6 % -1 7% -2 0% 5 m ia st o pu ck ur ba n 15 2 01 8 17 1 30 6 12 2 33 1 11 7 81 8 19 2 88 -4 8 97 5 -4 5 13 13 % -2 9% -4 % 6 so po t ur ba n 38 9 62 8 38 8 87 2 36 8 03 3 34 0 52 9 -7 56 -2 0 83 9 -2 7 50 4 0% -5 % -7 % 7 u st ka ur ba n 10 9 99 6 17 7 30 5 15 4 02 6 14 3 24 1 67 3 09 -2 3 27 9 -1 0 78 5 61 % -1 3% -7 % 8 w ła dy sł aw ow o ur ba n 19 9 42 3 27 8 63 0 24 7 72 6 30 4 38 0 79 2 07 -3 0 90 4 56 6 54 40 % -1 1% 23 % 9 k ro ko w a ru ra l 20 6 45 8 21 4 65 2 21 0 77 4 23 7 20 4 8 19 4 -3 8 78 26 4 30 4% -2 % 13 % 10 st eg na ru ra l 11 4 20 4 13 7 37 0 16 9 80 7 14 7 03 9 23 1 66 32 4 37 -2 2 76 8 20 % 24 % -1 3% 11 c om m un es o f u st ka ru ra l 32 7 67 1 31 9 35 5 32 1 22 8 29 5 23 6 -8 3 16 1 87 3 -2 5 99 2 -3 % 1% -8 % so ur ce : o w n st ud y ba se d on re po rt s r b27 s a nd re po rt s o n th e i m pl em en ta tio n of th e c om m un e b ud ge t f or 2 01 620 19 p ub lis he d in p ub lic in fo rm at io n bu lle tin s b y lo ca l g ov er nm en ts case of jastarnia municipality, where it represented only 0.06% of the total income to the municipality budget. in the case of jastarnia municipality, income from the tax on means of transport also in the remaining examined period represented a small share in the total income of the municipality (0.09% in 2016, 0.11% in 2017, 0.08% in 2018). similarly, a small share of the tax on means of transport in the total income to the municipal budget was recorded in 2019 in sopot, where it represented only 0.09% of the total income to the municipality budget. a very low share of income to the communes budgets from the tax on means of transport could result from the introduction of exemptions for vehicles with low exhaust emissions. the low share of the tax in question may also indicate that there are not many heavy goods vehicles in the area of the communes under analysis, and therefore no transport companies using this means of transport were located there either. moreover, it should also be noted that the surveyed communes are located in a tourist attractive area, which determines the specificity of the local industry focused mainly on servicing tourists and not transporting goods. the exceptions are gdańsk and gdynia, where there are important sea ports for poland. however, also in these cities, the share of the tax on means of transport constitutes a small share in revenues to the budgets of communes. table 4 contains data on nominal and percentage changes in revenues to the budgets of the analysed municipalities from the tax on means of transport in 2016-2019. the statement of revenue to the budgets of the 11 municipalities concerned from the tax on means of transport in nominal terms (presented in table 4) indicates that during the period considered all municipalities recorded declines in income. the highest drop in revenue to the municipal budget from the tax on means of transport on an annual basis (year-onyear) occurred in puck in 2018 (a 29% drop in revenue compared to 2017). łeba was another municipality which recorded a large drop in revenue of 20% in annual terms, which occurred in 2019 (decrease in revenue compared to revenues in 2018). the two municipalities of gdynia and łeba recorded decreases in revenues from the tax on means of transport in three consecutive years (in 2017, 2018, 2019 as compared to the previous year). the data in table 4 show a general downward trend in revenues from the vehicle tax in the surveyed municipalities. the decrease in the budget revenues from the tax on means of transport concerned 4 municipalities in 2017, while in 2018, the decrease in revenue concerned 9 municipalities. in 2019, 8 municipalities recorded a decrease in revenue from this tax. the scale of changes in the level of income is interesting, as the city of ustka in 2017 recorded a 61% increase in income from the analyzed tax the municipality of władysławowo had a similarly high income of 40% in 2017 in comparison with 2016. baltic journal of economic studies 47 vol. 6, no. 3, 2020 unfortunately, both municipalities (the city of ustka and władysławowo) in 2018 recorded drops in income at the level of 11%-13% compared to 2017, with władysławowo commune increasing its revenue from this tax by 23% in 2019 compared to 2018, when it recorded a decrease in revenue. the analysis of the surveyed municipalities indicates that there is a high risk related to the difficult forecasting of the level of income to the municipal budget from the tax on means of transport for the following year. 6. conclusions the assessment of revenues to the budgets of 11 analyzed communes indicates, that the tax on means of transport in the period under examination (covering the years 2016-2019) accounted for a small share in the total revenues to the municipal budgets (less than 1% of total budget revenues). the analyzed municipalities recorded a general decrease in revenues to the budgets from the tax on means of transport. revenues from the analyzed tax are characterized by large annual fluctuations and a general trend of their decrease in particular years. the unstable revenue from this tax indicates potential risks related to difficult financial planning of the assessed municipalities in the coming years. this is due to the aforementioned fluctuations in revenue levels and the trend towards lower budget revenues. it is worth noting, however, that according to the data under analysis, the tax on means of transport constitutes a small share in the total revenues to the municipal budget and therefore, the decrease in revenues from this title should not cause serious financial problems for individual municipalities under analysis. the results of the research indicate that the tax on means of transport is not a significant source of budgetary revenue for the polish municipalities. moreover, the conducted research indicates that it is justified to continue the research on the evaluation of municipalities revenues in relation to other taxes and local fees. references: antonio borghesi, barbara gaudenzi (2013). risk management how to assess, transfer and communicate critical risks, springer-verlag italia. chojna-duch, e. (2003). polskie prawo finansowe. finanse publiczne, lexisnexis, warsaw. copley, p. a. (1991). the association between municipal disclosure practices and audit quality. journal of accounting and public policy, volume 10, issue 4, winter 1991, p. 245–266. freire, m. e., & garzón, h. (2014). managing local revenues [in:] farvacque-vitkovic c., kopanyi m. (red.), municipal finances. a handbook for local governments, international bank for reconstruction and development / the world bank, washington dc, p. 147–213. retrieved from: http://documents.worldbank.org/curated/ en/403951468180872451/pdf/municipal-finances-a-handbook-for-local-governments.pdf world economic outlook reports, april 2020: chapter 1. retrieved from: https://www.imf.org/en/publications/ weo/issues/2020/04/14/weo-april-2020. rudowicz, e. (2010). dochody jednostek samorządu terytorialneg. podstawka m. (red.), finanse. instytucje, instrumenty, podmioty, rynki, regulacje, pwn, warsaw 2010 r., p. 155–176. podstawka, m. (2011). podstawy finansów. teoria i praktyka. warsaw university of life sciences (wuls – sggw), warsaw. wildasin, d. e. (2012). urban public finance, routledge taylor&francis group, new york, p. 65–68. filipiak b (2006). istota, zakres i cechy finansów samorządu terytorialnego [in:] dylewski m., filipiak b., gorzałczyńska-koczkodaj m., finanse samorządowe. narzędzia, decyzje, procesy, pwn, warsaw. j. pfaff (2011). rewizja finansowa, university of economics in katowice. coderre d. (2009). internal audit, efficiency through automation. the institute of internal auditors john wiley & sons. retrieved from: https://tse.ir/cms/portals/1/i%20a%20tse.pdf new jersey manual of audit procedures (2019). state of new jersey department of the treasury division of taxation. retrieved from: https://www.state.nj.us/treasury/taxation/pdf/njmap.pdf overview of external audit systems in local government (2018). eurosai task force on municipality audit (tfma). retrieved from: http://www.eurosaiop.org/docs/upload/documents/tfma_overview_external_ audit_systems_2018_1555656170.pdf the act of 12 january 1991 on local taxes and fees (i.e., journal of laws of 2019, item 1170). the act of 27 august 2009 on public finance (i.e., journal of laws of 2019, item 869). act of march 8, 1990 on communal self-government (i.e. journal of laws of 2019, item 506). act of 13 november 2003 on the income of local government units (i.e. journal of laws of 2020, item 23). resolution no. xv / 396/15 of the gdańsk city council of october 29, 2015 on determining the amount of tax on means of transport in the city of gdańsk ( journal of laws of the pomeranian voivodship from 2015, item 3982). baltic journal of economic studies 204 vol. 5, no. 5, 2019 corresponding author: 1 dnipropetrovsk state university of internal affairs, ukraine. e-mail: vo-1_shablisty@ukr.net 2 dnipropetrovsk state university of internal affairs, ukraine. e-mail: primachenko_vf@email.ua doi: https://doi.org/10.30525/2256-0742/2019-5-5-204-212 results of sociological study of economic factors of effectiveness of victimological prevention of security of living environment volodymyr shablystyi1, vitaliy prymachenko2 abstract. one of the criminological science dogmas is that prophylaxis and prevention of offenses are made at three levels: general social (in society as a whole), special (in relation to certain types (groups) of offenses) and individual (with a specific offender). some scientists allocate the fourth level of prophylaxis and prevention of an offense into regional or sectoral ones. some scholars call these levels somewhat differently, but their content is approximately the same, and, most importantly, they all aim to create a sense of security of each of us from violations of norms of laws, morals, traditions, etc. of course, the scientific provision of crime prevention is impossible without a proper economic basis. the complexity of such studies is that since the end of 2013 and till now the development of ukraine was marked by the acute problem of ensuring security in the full sense of the word and the leveling of the single person’s safety. we hope that making a sociological study of the economic factors of the effectiveness of victimological prevention of the living environment from a human position may be a part of the general return to the state development vector of a person with its rights, freedoms and responsibilities. key words: economic support, victimological prevention, human security, crime, state of security. jel classification: f52, h56 1. introduction the history of human development shows the multifaceted and ambiguous nature of civilization processes in different social entities at different times. in fact, by the end of the twentieth century, each country tried to preserve its achievements in clearly defined borders with all available means. the ideas of the renaissance, which were not progressive in time, were reflected in the legislative acts only at the end of the twentieth century – at the beginning of the xxi century. it is a vital need, inherent in each of us aspiration from birth: to live in safety. moreover, for this purpose, selfish manifestations have always been and will be defined, these are personal, safety of relatives. of course, without the security of society and state, one can hardly speak of an individual’s safety. at the same time, only now everybody seriously started talking about the correctness and the long-overdue need for the normative-legal consolidation of the transformation of the triad of the most important values "state-societyhuman" to the diametrically opposite one – "humansociety-state". ever since the renaissance of the axiom, the crime rate can be reduced in two ways: by minimizing the causes of criminal behavior and by enhancing criminal repression. it is much easier to eliminate the cause than to deal with the aftermath. crime cannot be defeated or eradicated, it can only be reduced by a few indicators to a socially tolerant or better socially acceptable level (schmalleger, 2005). in view of this, it becomes apparent that there is a need to find or qualitatively upgrade the existing means of influencing those who commit or are likely to commit various offenses. one of such means of influence should be setting on preventive account of offenders or persons who are inclined to commit certain offenses, carrying out with them real individual preventive work; victimology prevention; government programming against crime, including through planning for the safety of the living environment (yurtayeva, hladkova, shcherbakova, 2018). this should ensure the proper logistical support of law enforcement and minimize the potential for abuse, as it is a temporary restriction on the rights and freedoms of the individual and citizen. the preventive accounting of persons who are inclined to commit certain types of offenses should be restricted in the public domain, as otherwise the achievement of their purpose becomes an impossible task. planning for home security is impossible without taking into account the views of all stakeholders. baltic journal of economic studies 205 vol. 5, no. 5, 2019 2. "state-society-human" or "human-society-state" there is an axiomatic statement that scientific research firstly in humanities should be made in the standpoint of a person, not a society or a state, since the country at the highest level having proclaimed a human as the highest social value should contribute to the continuous progressive development of science, in order to implement its results in legislation, in the practice of its application and in further research elaboration subsequently. at the same time not every country in the basis of its political activity can put interests of the man, and not of the state. in this area only developed countries have succeeded, first of all scandinavian, because human security is a very costly problem in terms of its ensuring. that is why security is very often a problem for the very person who is forced to spend his/her own resources to provide it. human security is freedom without fear and freedom without poverty. this is a necessary condition for the development of a person, who is the goal of cooperation for development. the purpose of development is to provide people with the opportunity to live a long life and to be healthy (health), to continuously acquire new knowledge (education) and to have access to resources to ensure a decent living standard (material well-being). if human development is aimed to empowerment, then the human security concept is looking for ways to avoid, mitigate and cope with threats (dopovid oon pro rozvytok lyudstva). the term "human security " has been used internationally since the publication by the united nations development program (undp) in 1993 of the "human development report" in which the concept of human security refers to people, not to states and nations, with this limited concept of national security expands more generally: the safety of man or humanity. the safety of all people, not just the state or the nation, must be in the first place, it must be ensured not by force structures, but through human development. after that, each un member state annually reports on the safety of its people every year with clearly defined parameters (dopovid oon pro rozvytok lyudstva). ukraine belongs to those states where public interest prevails over private in all fields of social development. opened since the seizure of ukrainian seamen in the sea of azov, the russian military aggression against the entire civilized world has forced most of the gross domestic product to spend on the security of the state, i.e. the army. in such a situation, the solution to the problem of personal security of every ukrainian, his/her everyday habitual way of life, is assigned to him-/herselves. of course, it is about the economic factors of victimological prevention of the security of the living environment. the victimological prevention itself should be understood as a system of interrelated, organizationally secured state, social and individual measures aimed at identifying and eliminating or neutralizing factors that form a person's or a mass opportunity to become a victim of a crime (atlas bezpeky lyudyny). we share the assertion that in any field of study a central figure, the main subject of responsibility is a person. without him/her there cannot exist any other subject of social relations, of which is nothing more than a manifestation of the self-organization of man (people) in a civilized society (hryshchuk, 2012). in march-november 2018, in order to develop effective measures of victimological prevention of human safety, a sociological study aimed at studying citizens' opinion on the crime prevention through the planning of territories and the security of the living environment has been conducted. 3. results and discussion object of the research is the citizens' opinion on matters of crime prevention through planning territories, and security of living environment. the purpose of the study is to find out the citizens’ opinion on crime prevention through planning territories, the security of the living environment. the objectives of the study: 1) to find out citizens' opinion regarding the state of the house they live in; 2) to find out citizens' opinion regarding the lighting of their home and adjoining territory; 3) to determine citizens’ security level in their area, in their district / neighborhood, in their courtyard; 4) to identify causes of anxiety and sense of security of citizens in their settlements, districts, yards; 5) to find out the level of protection from criminals and encroachments on life, health and property; 6) to find out the respondents’ opinion regarding the increase in the number of crimes in courtyards and entrances; 7) to find out the respondents’ opinion regarding the authorities’ activities of their settlement to ensure the citizens’ safety; 8) to determine citizens’ opinion regarding causes of committing crimes near their houses or in houses themselves (entrances); 9) to identify the basic measures necessary to improve the living environment security. hypotheses of the study: direct 1. most respondents are satisfied with condition of their home. reverse 1. most respondents are not satisfied with condition of their home. direct 2. respondents assess the lighting level of their homes and adjoining areas satisfactorily. reverse 2. respondents, on the contrary, indicate that the lighting of their homes and the adjoining areas are unsatisfactory. direct 3. most citizens say they are safe enough in their area, in their neighborhood / in the courtyard. baltic journal of economic studies 206 vol. 5, no. 5, 2019 reverse 3. respondents indicate that they are at risk in their area, district / neighborhood, yard. direct 4. most respondents feel anxiety through street crime. reverse 4. on the contrary, the vast majority of respondents feel safe. direct 5. respondents feel protected from crimes and encroachments on life, health, property. reverse 5. respondents say they do not feel protected from crime and from attacks on life, health and property. direct 6. respondents believe that in recent years the number of crimes in courtyards and entrances has increased. reverse 6. on the contrary, the vast majority of respondents believe that in recent years the number of crimes in courtyards and entrances has decreased. direct 7. respondents in most cases believe that the authorities of their settlements are making every effort to ensure the citizens’ safety. reverse 7. respondents believe that the authorities of their locality do not make enough efforts to ensure the citizens’ safety. direct 8. most respondents believe that the main reasons for committing crimes near houses or in houses (entrances) themselves are the passivity of building residents and government bodies. reverse 8. most respondents tend to think that the reasons for committing crimes near houses or in homes (entrances) are the lack of lighting in yards, streets. direct 9. citizens believe that the main measures necessary to improve the security of the living environment are the involvement of public authorities and police in the planning of residential areas, and landscaping. reverse 9. respondents argue that the main measures necessary to improve the security of the living environment are the incentives for building owners and apartment owners in multistoried buildings to make improvements and order in the territory. 4. methodical part method and sample. the study was held using a continuous survey. a total of 1001 respondents were interviewed. toolkit: the questionnaire consisted of 24 questions: 16 were of closed type, where respondents had to choose one answer from the proposed options; 8 were of semi-closed type, where, along with the proposed variants of the answer, the respondent's own answer variant was foreseen. 5. findings thus, we have found out that the improvement of education will lead to a reduction in the level of crime and an increase in the culture of both group and individuals, and this will become a solid foundation for human security. the problem of security is the problem of each of us; its solution requires material costs, including our own. the government and civil society institutions should be more actively involved in solving problems of an individual citizen from lighting of the entrance to the house to introducing new approaches to the work of law enforcement agencies. each problem is individual. in general, one of the most important criteria for the progressive development of the system, increase 42,6 12,9 40,6 0 4 0 5 10 15 20 25 30 35 40 45 1 apartment complex residential complex private sector other no answer figure 1. distribution of answers to the question " you live in ...", % baltic journal of economic studies 207 vol. 5, no. 5, 2019 10,9 48,5 40,6 low-rise building (1-4 floors) multi-storey building (5 floors and above) private house (mansion type) figure 2. distribution of answers to the question “what house do you live in?", % 7,9 47,5 36,6 7,9 0 5 10 15 20 25 30 35 40 45 50 excellent condition good condition satisfactory condition poor condition figure 3. distribution of answers to the question “what condition is your home in?", % 12,9 46,5 28,7 11,9 10,9 34,7 36,6 15,8 2 0 20 40 60 80 100 rate of the house and adjoining territory lighting rate of the adjoining territory excellent good satisfied poor no answer figure 4. distribution of answers to the question "how do you assess the lighting rate of a building and the rate of the adjoining territory?", % baltic journal of economic studies 208 vol. 5, no. 5, 2019 64,4 18,8 15,8 2 61,4 19,8 11,9 6,9 69,3 11,9 11,9 6,9 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% in your township in your district/ microdistrict in your yard yes, i feel safe і feel more concern than secure i feel unsafe no answers 33,7 7,9 10,9 43,6 1 0 5 10 15 20 25 30 35 40 45 related to street crime related to environmental situation related to traffic i feel safe other 30,7 37,6 22,8 6,9 2 26,7 37,6 21,8 7,9 5,9 24,8 22,8 31,7 12,9 7,9 0 20 40 60 80 100 120 from attacks on life from attacks on health from attacks on property i feel secure rather protected rather not protected i feel not protected no answers figure 5. distribution of answers to the question "do you feel safe?", % figure 6. distribution of answers to the question "if you feel anxious or do not feel safe, then why", % figure 7. distribution of answers to the question "do you feel protected from criminals, from encroachments?", % baltic journal of economic studies 209 vol. 5, no. 5, 2019 5 95 yes no figure 8. distribution of answers to the question "have you personally become a victim of crime over the past two years?", % 77,2 5,9 16,8 0 10 20 30 40 50 60 70 80 yes no difficult to answer figure 9. distribution of answers to the question "has the number of crimes committed in courtyards and entrances increased in recent years?”, % 9,9 26,7 40,6 22,8 0 5 10 15 20 25 30 35 40 45 yes, definitely rather yes than no rather no than yes no figure 10. distribution of answers to the question "do you think that the authorities of the locality where you live do their best to ensure the citizens safety?", % baltic journal of economic studies 210 vol. 5, no. 5, 2019 28,7 45,5 18,8 6,9 0 5 10 15 20 25 30 35 40 45 50 yes, definitely rather yes than no rather no than yes no 73,3 23,7 3 0 10 20 30 40 50 60 70 80 1 74,3 23,7 2 0 10 20 30 40 50 60 70 80 yes no other figure 11. distribution of answers to the question "in your opinion, do signs of mess and homelessness in streets and houses courtyards awaken in people the unconscious desire to break the peace, do a mess, hooligan acts?", % figure 12. distribution of answers to the question "do you participate in cleaning and landscaping at your home?", % figure 13. the answers to the question "is it appropriate to legislatively oblige building and apartments owners in apartment buildings to clean and participate in the landscaping of the adjoining territory to the house?", % baltic journal of economic studies 211 vol. 5, no. 5, 2019 its level of organization (and, consequently, the decrease of entropy) is the differentiation, complexity of the structure, the diversity of the components of the elements system. law of the necessary variety of u.r . ashby also works in the social world. this is well understood by foreign researchers, in particular a. toffler, an active supporter of raising the level of social diversity. it is particularly important to emphasize now that a new thinking is needed to form it, to liberate it from dogmatic shades, and to captivate stereotypes of barracks of equality, general unanimity and unanimous thinking, for decades cultivated in the ussr "syndrome of uniformity " (hylynskyy, 2013). 6. conclusions among the respondents are the youngest people of 26-35 years old. it should be noted that respondents over 45 were not questioned. as for the distribution of gender, the vast majority of respondents are males: 86.1%. the largest number of inhabitants is of cities 64.4%, the smallest number is on;y 8.9% of residents of settlements. the number of inhabitants of both microdistricts and the private sector is almost identical, 42.6% and 40.6% respectively. most of respondents were residents of multistoried (48.5%) and private (40.6%) houses. the condition of their homes was estimated by the majority of respondents as good – 47.5%, satisfactory – 36.6%, equal answers on the criteria of excellent and poor – by 7.9%. the rate of lighting of their houses and the territory of the neighborhood is estimated by the respondents as good (46.5%), and the state of the adjoining territory is estimated mostly satisfactorily (36.6%) and well (34.7%). the respondents mostly feel safe in their own area, district and yard. they feel safest in their yard (69.3%), the most dangerous in their township (15.8%). the main reason for anxiety and feeling of danger is related to street crime, 33.7% of respondents say this. respondents mostly feel protected from attacks on life and health. the most vulnerable respondents feel from attacks on property – 44.6%. almost all respondents (95.0%) during the last two years personally did not become victims of a crime. the majority of respondents (77.2%) believe that in recent years the number of crimes committed in courtyards and entrances has increased. respondents tend to believe that the authorities of the locality where they live do not do their best to ensure the safety of citizens (63.4%). the vast majority of respondents (74.2%) believe that the signs of disorder and homelessness in the streets and courtyards of houses awaken in the people the unconscious desire to break the peace, do a mess, commit hooligan acts. according to the respondents, among the main reasons for committing crimes near houses or in the houses themselves (entrances), there is, first of all, the lack of lighting in the yards, streets; passivity of inhabitants of houses; lack of control and neglect of the building territory, the presence of abandoned buildings; passivity of state authorities. in order to improve the security of living environment, the following measures are necessary: installation of video surveillance systems; involvement of state authorities and police in planning of residential areas, landscaping; increasing the transparency of territories and reducing the number of passes, abandoned buildings, unlit places; participation of citizens in patrolling the territory to ensure the necessary level of law and order; stimulation of buildings and apartments owners in multi-apartment buildings for improvement and ordering in the territory. the majority of respondents (73.3%) take part in cleaning and improvement of the territory near their houses. the same number of respondents does not tend to think that the more families are owners of the adjoining territory, the more unattended it looks. 74.3% of respondents consider that it is expedient to oblige houses and apartment owners in multistory buildings at the legislative level to clean and to take part in the landscaping the adjoining territory. consequently, the results of a sociological study of the economic factors of the effectiveness of victimological prevention of the living environment security in ukraine proved that the population asserts their own security and the security of the living environment on the government or other social entities, especially not willing to take part personally. ensuring human security in all spheres depends on the country 's economic development, investment in security is the future of investment, and therefore further research on this issue should be carried out in order to scientifically substantiate the feasibility of allocating funds from the local and state budgets for the victimological safety of the living environment. references: schmalleger, f. (2005). criminal justice today: an introductory text for 21st century. 8th ed. p. cm. includes bibliographical references and index. 1. criminal justice, administration of united states i. title. yurtayeva, k., hladkova, ye., & shcherbakova, a. (2018). role of mass media in combating drug-related crime. baltic journal of economic studies, vol. 4, no. 3, pp. 366–371. doi: 10.30525/2256-0742/2018-4-3-366-371 baltic journal of economic studies 212 vol. 5, no. 5, 2019 dopovid oon pro rozvytok lyudstva [the report un about development of the people]. retrieved from:  http://hdr.undp.org/en/media/hdr_2011_ru_complete.pdf (in ukrainian) atlas bezpeky lyudyny [atlas of human security]. retrieved from:  http://lapas.lv/ru/безопасность-человека/ (in ukrainian) 3. dzhuzha, o. m., kondratyev, ya. yu., kulyk, o. h., mykhaylenko, p. p. and other (2002). kryminolohiya: pidruchnyk dlya studentiv vyshchykh navch. zakladiv. [criminology]. kyiv: yurinkom inter. (in ukrainian) hryshchuk, v. k. (2012). filosofsʹko-pravove rozuminnya vidpovidalnosti lyudyny: monohrafiya [hilosophical and legal understanding of human responsibility]. khmelʹnytskyy: khmelnytskyy universytet upravlinnya ta prava. (in ukrainian) hylynskyy, ya. y. (2013). sotsyalnoe nasylye: monohrafyya [social violence]. sankt-peterburg: ooo izdatelʹskyy dom «alfa press». (in russian) baltic journal of economic studies 72 vol. 6, no. 4, 2020 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: eyzhukova@gmail.com orcid: https://orcid.org/0000-0001-8966-8354 2 admiral makarov national university of shipbuilding, ukraine. e-mail: volodymyr.parsyak@nuos.edu.ua orcid: https://orcid.org/0000-0002-4756-8977 doi: https://doi.org/10.30525/2256-0742/2020-6-4-72-80 systemic components of economic security of higher education institution оlena zhukova1, volodymyr parsyak2 abstract. the purpose of the paper is to search for arguments to confirm the working hypothesis about the importance of implementing a systemic approach to using the effective means of ensuring economic security of higher education institutions in terms of their further involvement in market relations. it is necessary to adapt the universal concept of a systemic approach to the peculiarities of the participants’ relations in the educational process. methodology. to solve the problems arising from the purpose of the study, methods of generalization and systematization of primary information obtained during the observation of the practice of domestic higher education centers, as well as data from state statistics have been used. results. modern centers of educational services are going through a period of profound transformation. along with the strengthening of business requirements for the quality of intellectual capital they produce, the competitive confrontation with ukrainian and, more recently, foreign providers of educational services has significantly intensified. moreover, the relevant state policy has changed dramatically, accordingly, it is becoming increasingly difficult to rely on budget funding, and the economic security is becoming a daily affair of the whole academic management. taking care of the future wellbeing is becoming a matter for everyone: from the rector to the head of the department, even professors and senior lecturers. the scientific work has examples of how this problem is solved in relations with key stakeholders: applicants, educational institutions operating in common market segments, representatives of the business community, state executive authorities. the subject of special attention is the internal system structure, the important characteristics of which are considered to be flexibility, balance, and economy. for this reason, it is proposed to distinguish key activities of the educational institution: operating, research and development of the institution and administration. the vectors for development are determined: digitalization, personalization of education, project approach to the formation of educational content, a combination of its formal and informal forms. key words: economics, economic security, educational services, educational institutions, system, structure, relations, academic management. jel classification: a10, i23, i25 1. introduction we have demonstrated our commitment to a systemic approach (parsiak, drahomyrova, 2010; dybach, zhukova, parsiak, 2019), the direction of the methodology of cognition, which moves the initiators of scientific research. we will not betray this approach in the future because it establishes the foundation for design of facilities with a complex internal organization. higher education institutions (heis) occupy a prominent place among them. the reflection of reality through a systemic approach involves a movement towards truth making the solution of some interrelated problems. the first of them is the use of the inherent object of the conceptual and categorical apparatus. to this end, it is desirable: a) to define the system as a relatively autonomous set of interconnected elements capable of self-diagnosis, self-assessment, self-adjustment, self-development and continuous exchange of information with each other and environment; b) to find dialectical or genuine antagonisms between order of the system elements and disorder, which not only continues to exist in spite of all the efforts of management and dedicated employees, but has the ability to neglect the subordination of elements to each other and to the system in general. observations show baltic journal of economic studies 73 vol. 6, no. 4, 2020 that such contradictions usually occur in the internal environment of the system and create a basis for exacerbation of inconsistencies, emergence of personal and industrial conflicts, not always light versions of them. sometimes they lead to revolutionary changes in the top management of heis, heads of faculties, administrative departments, to choosing the alternative strategies for their development. experts distinguish conflicts due to the confrontation of social roles played by people (for example, formal and informal leaders), incomparability of the norms of behavior, life experience, values (the sources of which are the persons prone to academic dishonesty and scientific misconduct, supporters of authoritarianism); due to a conflict of expectations (let us say, several candidates for the vacant position of head of department, dean, rector); c) to establish a rational subordination of subsystems (for example, the order for the managing and managed subsystems, functional units that take care of interconnected fragments of the educational process) and of the higher order system itself. the second task is to make the management of hei aware of the integrity of the object that came under control. this requires the following actions: – to find out its nature1, to identify features and characteristics that indicate affiliation to the relations formed in the higher education system and enable the development of means to ensure economic security; – to outline the object’s components, to provide their qualitative characteristics, to understand the mutual subordination and identify those key components that allow to reproduce properties inherent in the system; – to find the resources for ensuring security mobilized by hei. these are both available sources and carrying out a thorough audit of costs, as some of them may be detrimental; – to find out the structure of the whole system and the relationship between all its structural units, the circumstances accumulated in the organization and their interconnection; – to depict the roles played by hei. the first thing that comes to mind is the formation of professional competencies of educational services’ customers and conducting researches. that is what on the surface. meanwhile, we should not forget about the role to form a self-sufficient, socialized person with a high level of responsibility for the decisions he or she will make when holding some position in the future. the entrepreneurial role becomes increasingly important as heis are facing the need to provide themselves with everything necessary for operation; – to check the history of formation and development of the system to understand its past and current state, the reasons for which we are at the present stage. this is regardless of whether the current events satisfy the organization or, conversely, give rise to concern; – finally, to predict the development path in the short and long term. this is about the use of non-traditional management technologies in the field of education, because the current tools have exhausted their limit and need to be replaced. 2. brief literature review our colleagues are making a good progress in using a systemic approach to create software products for automation of decision-making for university management and control over the academic, scientific and administrative information flow in the environment (from the moment certain information emerges to its transfer to archives) (prusty, patnaik, 2017). this requires an accurate and unambiguous description of business processes that occur in hei and the relations between them. the systemic approach is indispensable in the design and implementation of quality management systems for educational services. the employees of the faculty of the sea economics (fse) of the admiral makarov national university of shipbuilding (nus) have been ensured of the validity of this statement in practice (parsiak, dybach, parsiak, 2014); here, the quality management system is certified in accordance with the new version of the standard iso 9001:2015 “quality management system – requirements”. apologists for the application of frugal management in hei are attentive to the systemic approach. this is discussed, in particular, in the article (höfer, naeve, 2017). we are impressed by the scientists’ views, as they are directly related to the problem that has been in the spotlight. 3. the purpose of the paper on the basis of the consideration mentioned above, it has been hypothesized that the concept of “system” still needs to be clarified in the educational services, despite its widespread use in academic management. the sole concept of a systemic approach should be adapted accordingly, given the nature of the relationship between the participants in the educational process. the desire to solve the identified problems determines the purpose of this work. on the way to it, the authors have used methods of generalization and systematization of primary information obtained during the performance 1 it is not obvious at all especially in the new unfriendly environment. it is not limited to increasing competition in the market of educational services. turbulence is increased by government, in particular, promises to reduce the government order. it seems that the official is happy with the mass academic migration and the prospects to provide diplomas to the natives of ukraine at the expense of foreign taxpayers: poland, germany, norway and other countries. baltic journal of economic studies 74 vol. 6, no. 4, 2020 monitoring of the ukrainian centers of higher education, as well as data from the state statistical service. 4. the essence and external attributes of the system in comparison with the past, nowadays, the range of use of the term “system” has expanded significantly. under this concept, researchers and practical managers understand: – the order caused by the arrangement of elements (groups, parts) provided in advance (akademichnyi tlumachnyi slovnyk ukrainskoi movy, 2020); – a set of elements interconnected so closely that they act in relation to the environment and other systems as a whole (slovnyk osnovnykh filosofskykh terminiv, 2020); – a combination of organizations (enterprises, institutions, establishments) into an inseparable whole, a form of composition, organization of something (morozov, shkaraputa, 2020). as we can see, in almost all cases, the sign of the system is the presence of components that contain the features of the whole and, at the same time, autonomously perceive their current and future state. elements of the system can manifest themselves in certain way, experience the results of mutual activity and therefore, as defined, should respond to them adequately, particularly, move in the direction the system is interested in. for example, in 2013, the faculty of engineering and economics of nus was reorganized into the faculty of the sea economics. the decision of the scientific council taken after a long but rather intense discussion, met the public demands of the maritime economy’s enterprises, their regional clusters and reflected the geoeconomic shifts taking place on the planet. all this can mean only one thing: the relationship between subsystems differs in mobility and flexibility. theoretically, each of them should help in solving the problems facing the system. however, at the same time, we have a number of examples of contradictions between the individual and the whole with some negative consequences for both subsystems and their totality as a whole. for example, the problem of ensuring the economic security of the educational institution cannot but worry the top management of the organization as well as each structural unit. but the admission campaigns of recent years have shown that some of them perform constructive initiative, while others are limited to completely unproductive concerns about reducing the birth rate in the country and increasing academic migration of young people. the consequences of this multi-vector position can be seen in table 1. and what next? along with the destruction of educational and professional programs, there can be liquidation of faculties, unification of departments with insignificant amount of students, reduction of teaching and support staff, deprivation of those who remained, decrease in wage supplement for high achievements in work, intensity of work, performance of especially important tasks. to sum up, it is unpleasant. the system is able to preserve its identity in a changing and not always predictable environment, which constantly influences it. for example, the effectiveness of the formation of students’ professional competencies significantly depends on the ability of applicants to absorb new knowledge and skills. this is more than relevant in the era of rapid development of technologies and methods of organization of production, which has been called the “fourth industrial revolution”. the basis of a correct attitude to it should logically be shaped by teachers of colleges, lyceums, colleges and other table 1 the effect of inconsistency in the attitude of structural units to ensure the economic security of hei (admission campaign of 2019-2020 academic year)* specialities amount of involved in receiving educational services, persons bachelor’s degree master’s degree electrical power engineering, electrical engineering, electromechanics 158 202 shipbuilding 191 92 river and marine transport 152 computer sciences 108 48 law 141 35 applied mechanics 68 44 management 59 81 physical culture and sports 54 30 philology 39 15 power engineering 38 51 software engineering 32 29 accounting and taxation 27 18 heat power engineering 16 60 *according to nus admission committee baltic journal of economic studies 75 vol. 6, no. 4, 2020 institutions that perform the tasks assigned to them at previous educational levels. but the teachers of the graduating departments of fse, appealing to the accumulated professional experience, do not expect mercy from fate. guided by the provisions of the created educational and scientific complexes, the developed integrated curricula, the concluded agreements on cooperation, they carry out lessons of economics, financial literacy in schools2, give lectures, start thematic contests, academic competitions, tournaments, quests. they also participate in extracurricular activities as coaches, mentors, moderators, and guides. in another way, hei positions itself in relations with other stakeholders, as folows: – competitors with whom they intersect through the provision of similar educational services in common market segments. signs of intensifying competition are numerous examples of the use of marketing tools by marketing management: advertising, pr , offers of original educational products, forms of communication between teachers and students using modern educational technologies and global information networks; – with enterprises-, institutionsand organizationscustomers of specialists of relevant professions, including coordinated dual education programs, which are becoming increasingly popular as they prove their effectiveness in practice. while studying at the university, students acquire professional skills in future or similar workplaces, significantly reducing the time to adapt to relevant business processes. individuals of this type have no problems in the labor market. moreover, there is a real struggle between the hr managers for the right to conclude a contract with them; – with state bodies that take care of the implementation of policy in the field of education, carry out accreditation, licensing of educational programs, monitor compliance with educational standards, as well as determine the scope of public procurement. usually, the ministry of education and science of ukraine and the national agency for higher education quality assurance are mentioned in this context. meanwhile, we note that part of heis in our country is subordinated to other bodies of state executive power with the following number of students, available in figure 1 (vyshcha osvita, 2019). 5. internal organization of hei system another constitutive attribute of the system is its inherent structure. by default, it arranges the internal organization of the system, streamlines the interaction of all its components. the results of multiannual observations of the operation of public and private higher education institutions, conducted by the authors, allowed to make the following conclusions: 1. if the system is unstructured or designed with fundamental flaws (for example, without taking into account the amount of students and teachers, with an exaggerated control over the activities of basic educational units instead of concentrating on monitoring changes and developing strategies to strengthen economic security), there is no system as a whole. characteristics of the most important academic units of hei are available in table 2 (zakon ukrainy, 2020). 2. the management should compose the structure in such a way that the interests of the involved personnel at each stratum of the higher education institution are in harmony with its vision and mission. let us say that for the vast majority of heis, it is becoming increasingly important to achieve the best ratio between the quantity and quality of teaching, support and administrative personnel, especially given the growing shortage of 2 when hrynevych l. was the minister of education and science of ukraine, the corresponding course was introduced as a mandatory part of the school curriculum. few people were interested in whether the teachers were ready for this. 3306 152 276 4507 2765 11864 1282 50 2050 4050 6050 8050 10050 ministry of infrastructure ministry of health ukrainian state construction corporation "ukrbud" ministry of culture state forest resources agency of ukraine ministry of youth and sports ministry of agrarian policy and food figure 1. amount of students at the beginning of the 2017-2018 academic year, in the field of management of ministries (departments) in which heis are located, persons baltic journal of economic studies 76 vol. 6, no. 4, 2020 funds due to the collapse of the national market of higher education services, the consequences of public administration decentralization with a corresponding redistribution of funds between the budgets of the country and local communities. it is considered that they have a better understanding of the personnel needs in the regions and, therefore, should take care of ordering educational services, particularly in universities. most rectorates are forced or deliberately thinking about reengineering the educational process, seeking to get rid of units that burden the expenditure side of the budget. for example, in v.o. sukhomlynskyi mykolaiv national university in the 2019-2020 academic year, students in tuition-paying and tuition-free bases were divided into different groups, for which they differentiated the amount of class exercises depending on funds received from the relevant sources. since the state, on average, allocated more for education than the amount, for which hei undertook to provide education services to students at the expense of individuals and legal entities3, then it was decided to “save” in such a creative way. someone had no problem with this transformation. most of the applicants who hoped to receive good education began to oppose the innovation, and with the rest of them went to look for a better fate in the neighbouring heis. basically, it is difficult to disagree with the desire to respond rationally to the latest threats and challenges (certainly not in the barbaric ways). at the same time, we consider it our duty to pay attention to the need for a thorough analysis of reserves of the administrative services, which often have fairly surplus personnel with the unacceptably blurred job responsibilities. using phrases from fairytales, some “officials” are required to “go i know not whither and fetch i know not what”. and, it is not surprisingly, but they go and fetch something during the working day for years, although everyone is completely indifferent to them. they do not fetch it to the same basket, which, unfortunately, also happens. in 2018, the national police in zaporizhzhia oblast exposed a criminal group of employees of state hei and a private enterprise who, according to forged official documents, accepted foreigners “for training”. they visited ukraine, but with the sole purpose of settling accounts with those who abused their official position in a timely manner. while executing searches, 110 thousand usd and 70 thousand eur were seized in addition to the evidence of criminal activity (na zaporizhzhi, 2018); 3. if we resort to a broad interpretation of the essence of the structure, it turns out that it ca be used to characterize the connections required for the system to cope with the solution of the enormous number of problems that face it on the way to the defined goal. without these connections, it would not be able to appear, function, or, moreover, take care of its safety. 6. organizational structure of hei generalizing the experience of using a systemic approach, academic theorists have opened the relationship discovered to practice managers, the varieties of which are summarized in figure 2 and table 3. analyzing the above data, we found a correlation between what it depicts and the key business processes that make up the operation of higher education institutions. we do not consider it a mistake to use the category of “business process” in this context, as today’s heis are increasingly manifesting themselves in two images: on the one hand, a trustee of educational service recepients, and, on the other hand, a market operator concerned with increasing revenues and economic independence. in this case, the business process is considered as a sequence of ordered actions of the personnel, so that in result, students receive the expected profession. the peculiarities of each of the business processes determine the content of strategies and measures to ensure the economic security of hei. we took the liberty to cover the process map of a higher education institution, creating a text interpretation of its structural model: table 2 key elements of higher education institution as a system* title function educational and scientific institute a structural unit of a university, academy, institute that consolidates the relevant departments, laboratories, scientific research centers and experimental laboratories that conduct educational activities and research faculty a structural unit of a higher education institution that consolidates minimum three departments (laboratories), which together provide training of at least 200 full-time graduates in state and municipal higher education institutions department a general structural unit of higher education institution of state (communal) form of ownership (its branches, institutes, faculties), which conducts educational, methodological (scientific) activity in a certain speciality or interdisciplinary group of specialities, which includes at least five academic workers for whom the department is the main place of work, and at least three of whom have a scientific or academic (honorary) title *explanation: in addition to faculties and departments of hei, the same article of the law includes libraries, i.e. the place where students and teachers get access to paper and electronic media of specialized information. 3 this is not a charity, but a marketing tool aimed at increasing the competitiveness of the market offer compared to other universities represented in the regional segment. households, especially those in rural areas, respond instantly to such a lure, trying to provide education to their children and grandchildren. baltic journal of economic studies 77 vol. 6, no. 4, 2020 1. the process of operational activities related to the development and implementation of educational programs. they gather intellectual products, through their implementation heis receive income, which is the key to their economic stability and independence. it should be recalled that the law of ukraine “on higher education” also defines the educational program as a system of educational components at the appropriate level of higher education within the speciality, which determine the requirements for the educational level of persons able to start training in this program, the list of disciplines and their logical sequence, the number of credits for european credit transfer and accumulation system necessary for the implementation of this program, as well as the expected training results that must be mastered by the applicant of the appropriate degree of higher education (zakon ukrainy, 2020); operational activities are aimed at creating appropriate conditions for the acquisition of professional competencies required for further work according to the chosen speciality by all the persons who have the desire, vocation and a satisfactory level of prior education. it consists of a number of business functions: – enrollment of entrants in accordance with the approved conditions and rules of admission to higher education institutions; key components of hei as a system administration subsystem collective leadership bodies service units infrastructure subdivision accounting supervisory board academic council of educ. inst. institutes faculties staff meetings department of planning and economics department of capital construction security service department of chief power engineer enter for international cooperation osh department academic office separate units operational activity subsystem institutes faculties departments educational subdivision of branches of hei training and consulting center preparatory department practice department … scientific libraries household services department secretariat rectorate …… dean’s offices hr department editorial and publishing department figure 2. generalized model of the organizational structure of hei table 3 varieties of system connections and their characteristics title characteristics example between the systems’ elements determine the degree of interaction of the system’s elements, which ultimately affects the qualitative features of its operation. it has an effect on the efficiency of system management and, as a consequence, the performance of the administration connections between the supervisory board and the administration of hei; the academic council and the rectorate; the rectorate and the heads of structural divisions; the dean’s office (directorate) and the searching staff and support staff, united in departments, research laboratories, institutes, faculties system-wide preserve the integrity, maintain the system’s integrative properties regardless of the quantitative and qualitative composition of its elements. play a decisive role in creating a synergistic effect subordination of all basic educational subdivisions, management bodies and support services, which are a part of hei, to the general purpose and the chosen strategy of movement to it through reflection of the corresponding tasks in individual plans of teachers, current and perspective tasks to other personnel reverse come as a signal of the system’s response to certain exogenous and endogenous changes, events and disturbances that occur in this regard at the input of the system or its individual elements reorientation of preparatory centers to provide services for the preparation of applicants for preliminary examinations to train them for the successful completion of external independent evaluation (eie) baltic journal of economic studies 78 vol. 6, no. 4, 2020 – formation of knowledge and skills according to the educational programs of each level of higher education and specialities in demand; – current management of educational activities (control over the observance of academic discipline, academic integrity, acquired knowledge and skills). 2. the process of research and development in hei. this means creating and improving the comfortable academic environment, developing new and modernizing existing educational programs that meet the demands of the real and financial sectors of the economy of the country or region. the modern reform of operational activities in the context of the fourth industrial revolution is of particular importance. it is known to differ from the previous ones by a broad appeal to the services of artificial intelligence and the use of the latest information technologies. with regard to educational activities, this means, in particular: digitalization of education (e-learning technology), which provides access to an array of educational resources of leading universities (audiovisual online courses, online exams), libraries (electronic textbooks, abstracts), research centers represented on the world wide web, involvement to participate in distributed research and academic groups. the first of them create the prospects for mobilizing the collective mind to improve the professional behavior (actions) of teachers and leaders of hei to evolve their results. in educational groups, students from different universities (sometimes in other countries or even on continents) arrange discussions on current issues or listen to lectures by representatives of different scientific schools providing further discussion of the information, receptivity and effectiveness of the proposed didactic methods; – personalization of education (as opposed to unified curricula and standardized approaches to teaching disciplines) with the construction of an individual educational trajectory. acquisition of skills to deepen knowledge throughout life (as a response to the fast updating of equipment and technology), taking into account the requirements and demands generated in industrial labor markets by employers. the latter are looking for self-sufficient persons among the candidates for vacant positions who are able to identify current problems, form effective professional teams to solve them, properly distribute responsibilities and coordinate the colleagues’ activities, evaluate and motivate participants. personalization technology is based on the online learning materials prepared by hei, students search for additional resources and teachers control the progress (learning rate, cognitive capabilities) in real time providing appropriate services to anyone who needs it, on individual requests or in small groups. it is especially useful for people who combine learning with work (and there are more and more of them), those with special needs, as well as experienced professionals in need of advanced training; – project approach to the formation of the content and technology of higher education in order to create a layer of professionals who realize their potential as knowledge and skills acquired during learning, to generate innovations in industrial and social spheres (depending on the place of work), ensuring their continuous and gradual progress. for this purpose, students are involved in solving an acute problem that has arisen in the real life of the organization. at the same time, the necessary conditions are created to demonstrate personal abilities to understand the situation and choose effective tools to achieve the goal, visualization of the results obtained through graphs, diagrams, mathematical or physical models, schemes, etc.; – a combination of formal (within the scope of licensing and accreditation of educational programs, providing a degree, diploma, certificate, recognized by the state) and non-formal education. the latter takes place outside the time regulations established by the schedule of the educational process, the approved schedule of classes and the academic spaces of classrooms, methodics offices and laboratories of universities. the key characteristics of non-formal education are its voluntariness, independent decision-making by a person who must be capable to study until retirement. an example is the meetings of the successful alumni club of fse, where there are meetings of current and former students who have achieved great success in their own business, delegated management or have extraordinary professional up rises in their positions. in a relaxed, friendly circle, the participants exchange unique knowledge and life experience, which significantly expands the understanding of young people about career planning in the future. excursions to enterprises and organizations, stories of their managers and leading employees about the organization of production, methods of personnel motivation, implementation of innovative projects, technologies of investment attraction, etc. are also useful. there are also courses, workshops, seminars, other forms of education that enrich students with new values, attitudes, knowledge and skills. 3. the process of administration (planning, organization, control, analysis, motivation) of the staff of hei as a holistic system. it consists of the implementation of accordingly approved procedures, the appointment or election of officials (rector, vicerectors, deans) and administrating bodies (staff meetings, the academic council, rector, administrative departments, deans). all of them are organized and subordinated in accordance with the legislation, the charter of hei, the provisions on structural units, job descriptions of employees, contracts concluded with them (in terms of responsibilities assigned to performance). baltic journal of economic studies 79 vol. 6, no. 4, 2020 the teaching and technical staff must have adequate moral and material incentives in order to perform their duties to add value to the educational service in its creation chain. we consider it necessary to emphasize that the approaches to the management of hei in our time are different from the previously accepted. the reason is a radical change in the environment where educational activities take place. stability (funding, number of entrants, hourly rates of teachers, etc.) is a thing of the past. therefore, we are convinced that strategic management of universities becomes relevant. in short, its content is a task for the rector’s team to find the answers to a number of key questions (figure 3). obviously, these issues are so important and complex that it would be reckless to rely on the vision of top management alone. strategy development is a joint task of the administration, the heads of departments (they understand the characteristics of market segments that serve their teams) and each teacher who perceives hei as his or her second home. it often happens that many of them have received higher education, degrees and titles in this hei, have devoted the best years of their lives to the development and implementation of scientific and academic projects. that is why the appeal to their experience and professional knowledge is able to encourage constructive initiative, create a synergy of collective vision of the future, accurately outline the vector of movement in an unknown, poorly predicted environment. 4. the process of providing and supporting academic and administrative operation. its components include: – procurement of resources necessary for the operational activities of hei at prices comparable to the budget potential and quality requirements; – improvement of the university infrastructure (financial, legal, administrative), which supports the reputation of hei, contributes to improve its image in the minds of the public, customers of educational services, the business community; – economic activity (maintenance of real estate, including their capital construction and reconstruction, provision of transport services, provision of all types of communications, safety and labor protection). the processes in question and the sub-processes that make it up are important. for example, at odessa national medical university in 2018, goods and services were purchased for 22.5 million uah; it is 19% of the total current expenditures. another amount of 152.5 thousand uah was spent on the acquisition of fixed assets (koshtorys vytrat, 2018). it is a great deal of money. therefore, business management depends on economically feasible use of resources purchased by the organization. 7. conclusions it is unlikely that there will be an impartial person who will take the courage to deny the urgency of the problem of ensuring the economic security of higher education institutions in modern realities of ukraine. it is obvious that the american model is dominating in our area, according to which the finance burden of the initiated programs is on their initiators – higher education institutions. we are not inclined to assess the choice of government, especially since, under the circumstances, more than one generation of state leaders is behind the relevant political decisions. we believe that the search for ways and means to mobilize internal reserves to ensure the stability of the organization in the market of educational services is more constructive. along with academic, economic security should be the focus of university management. this statement is increasingly realized by the leaders of heis, as well as the heads of structural units, to which, as a rule, the responsibility for non-receipt of funds are delegated “from the top”. in part, this treatment is fair. it is the departments and faculties that determine the attractiveness and quality of educational and professional programs the main product offered to the market. we consider the hypothesis about the importance of laying a systemic approach in the basis of decisions to ensure the economic security of hei to be proved. 1 what changes occur in the environment and how they affect the competitive position of the institution? 2 what are the key goals of hei for the foreseeable future in terms of its mission? 3 how are the needs of key audiences ordering educational services changing? 4 what characterizes the behavior of competing heis and what may be the response to their threats? 5 what are the limits of the efforts that the hei team is able to make to strengthen its economic security? figure 3. key issues of hei’s strategic management baltic journal of economic studies 80 vol. 6, no. 4, 2020 behind the outer shell of the organization, which we are used to seeing in business, there are a number of subsystems. each of them has a unique purpose, solves problems that are typical to it. universal tools for the impact of management on staff will not work. the professor of the department differs from the technical worker in all parameters (job responsibilities, “production” technologies). these features must be taken into account, because everyone’s contribution to the common cause is important. the educational institution is obliged to respond to changes that occur from the outside quickly and effectively, as it is part of the country ’s higher education system and an integral part of the economic system. appropriate educational products are launched at its request and for meeting its needs. non-compliance with market expectations is a threat to the economic danger of hei. we hope that the considerations set out in this regard will be useful to our colleagues. references: akademichnyi tlumachnyi slovnyk ukrainskoi movy (2020). available at: http://sum.in.ua/s/systema (in ukrainian) dybach, i. l., zhukova, o. iu., parsiak, v. n. et al. (2019). universytetskyi menedzhment: pidgruntia zaprovadzhennia. monohrafichna seriia. kherson: vydavnychyi dim «helvetyka». (in ukrainian) höfer, s., & naeve, j. (2017). the application of lean management in higher education. international journal of contemporary management, іssue 16(4). available at: http://www.ejournals.eu/ijcm/2017/numer-16(4)/ art/11328/ koshtorys vytrat. odeskyi natsionalnyi medychnyi universytet (2017). available at: https://onmedu.edu.ua/ wp-content/uploads/2017/06/koshtoris-2018r.-2301170.pdf (in ukrainian) morozov, s. m., & shkaraputa, l. m. (2000). slovnyk inshomovnykh sliv. kyiv: naukova dumka. (in ukrainian) na zaporizhzhi posadovtsi vnz orhanizuvaly fiktyvne navchannia inozemtsiv (2018). available at: https://prm.ua/na-zaporizhzhi-posadovtsi-vnz-organizuvali-fiktivne-navchannya-inozemtsiv/ (in ukrainian) parsiak, v. n., & drahomyrova, i. m. (2010). transformatsiia diialnosti operatoriv rynku osvitnikh posluh na zasadakh korporatyvnoho menedzhmentu. mykolaiv: vydavnytstvo torubara o.s. (in ukrainian) parsiak, v. n., dybach, i. l., & parsiak, k. v. (2014). upravlinnia yakistiu osvitnikh posluh. mykolaiv: vydavnytstvo «talisman». (in ukrainian) prusty, s., patnaik, r . et al. (2017). university management system using model-view-controller. available at: https://www.researchgate.net/publication/322099765_university_management_system_using_model-viewcontroller_mvc_1 slovnyk osnovnykh filosofskykh terminiv (2020). available at: http://library.nlu.edu.ua/poln_text/ kompleks/kurs_1/kurs/5/109.htm (in ukrainian) vyshcha osvita v ukraini u 2017 r. (2018). statystychnyi zbirnyk (2018). derzhavna sluzhba statystyky ukrainy. (in ukrainian) zakon ukrainy pro vyshchu osvitu (2020). available at: http://zakon.rada.gov.ua/laws/show/1556-18 (in ukrainian) baltic journal of economic studies 35 vol. 6, no. 1, 2020 corresponding author: 1 black sea research institute of economy and innovation, ukraine. e-mail: k.v.mozharovska@gmail.com 2 black sea research institute of economy and innovation, ukraine. e-mail: lightstarpro@ukr.net orcid: https://orcid.org/0000-0002-3386-5962 3 admiral makarov national university of shipbuilding, ukraine. e-mail: dubinskiy_oleg@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-1-35-41 subjects of public administration: reforming the concept in ukraine kateryna holovko1, svitlana levchenko2, oleg dubinskiy3 abstract. the article is devoted to the identification of subjects, which, under the conditions of administrative and legal reform and changes of the guidelines in the relations between the state and the citizen, carry out public administration. emphasis is placed on the sphere of relations that cover the essence of public administration. it is proved that the effectiveness of administrative law through the lens of governance is doubtful and does not fully meet the requirements of the development of public relations. therefore, it is necessary to return to the educational ideas of the functioning of the state and its interaction with citizens, which has a manifestation in public, not state; in administration, not government. the authors substantiate that public administration is the activity of public authorities, which manifests itself in a concerted influence on specific public relations by means of specific methods, tools, forms and aims to secure public interests. the relation between the concepts of "subject of public administration" and "public management" is investigated. the proposals of the leading ukrainian administrative scientists regarding the essence of the category of "public management" are analyzed and the reasons for the dualism of approaches to its definition in the ukrainian administrative and legal doctrine are revealed. in addition, the subjects of public administration are classified according to their competence, scope, functions, and objectives of public administration. the subject of the research is the subjects of public administration and their functions in administrative law. the purpose is a study of the institutional constituent of public administration and defining changes experienced by governing entities as a result of reformatting the concept of relations between the state and society in ukraine. methodological basis of the research is a set of methods and techniques of scientific knowledge. the methodological construction is based on a systemic analysis that determined its directions. the systemic approach in some issues was supplemented by the axiological (ideological) approach. empirical methods such as observation, description, comparison, inductive generalization were used to identify tendencies of reforming the system of subjects of administrative law of ukraine. logical-semantic method was used for formulation and in-depth study of the conceptual apparatus. the dialectical method of cognition made it possible to investigate the problems associated with the definition of the concept of "public administration". the application of methods of modeling, analysis, synthesis, generalization and analogy made it possible to formulate the conclusions of the study. conclusions of the research correlate with the delineation of the institutional component of public administration in ukraine. the authors have made qualitative and quantitative changes concerning the updating of the subjects of administrative law. at the same time, in the conditions of development of ukraine as a democratic and rule-of-law state, all reform initiatives should be systematic and consistent with each other, therefore, during the study, the features that characterize the subject of public administration are highlighted. the scientific and analytical monitoring of the state of the introduced changes and the consequences of the implemented administrative reform measures for the classification of the subjects of public administration was carried out. practical implications. the results of the research will help to understand the basic aspects of the content of public administration better and can be used in the research field in order to further study the issue of transformational changes that governing subjects under the background of actualization of trends of democratization and humanization of administrative processes. key words: democratization, humanization, human-centric concept, public administration, subject of public administration, public administration, public management. jel classification: h76, h83 baltic journal of economic studies 36 vol. 6, no. 1, 2020 1. introduction the development of the ukrainian nation should be a priority for any governing body, it is with no specific justification. instead, the institutional and legal mechanisms for ensuring the proper influence of the state on public relations are characterized by casuistic tendencies of discrepancy between the existing state of society 's needs and the requirements which they place on the governing entity, the model of the system of public administration entities that should be implemented in ukraine. the negative signs of governance are, first of all, the lack of a clear algorithm for holding subjects of public administration accountable, defining mechanisms for their interaction with civil society institutions. public administration cannot develop and function in isolation from the problems of today and the consequences of social development. therefore, both the development of a long-term concept of sustainable development of public administration institutional support and the constant monitoring of existing and emerging problems in the said field seem urgent. despite the fact that a number of administrative theorists and practitioners have devoted their attention to the study of the nature and content of the problems of the system of public administration in ukraine: averianov  v.b., bevzenko v.m., bytiak yu.p., bondarenko  h.p., golosnichenko i.p., kivalov  s.v., kolomoiets t.o., kurinnyi ye.v., melnyk r .s., stetsenko  s.h. and others, at the present stage, many aspects are left unaddressed by scientific knowledge. therefore, the relevance of the issue of research on the changes experienced by the governing entities as a result of reformatting the concept of relations between the state and society in ukraine, the theoretical and practical significance of the chosen topic are not in doubt. the purpose is a study of the institutional constituent of public administration and defining changes experienced by governing entities as a result of reformatting the concept of relations between the state and society in ukraine. methodological basis of the research is a set of methods and techniques of scientific knowledge. the methodological construction is based on a systemic analysis that determined its directions. the systemic approach in some issues was supplemented by the axiological (ideological) approach. empirical methods such as observation, description, comparison, inductive generalization were used to identify tendencies of reforming the system of subjects of administrative law of ukraine. logical-semantic method was used for formulation and in-depth study of the conceptual apparatus. the dialectical method of cognition made it possible to investigate the problems associated with the definition of the concept of "public administration". the application of methods of modeling, analysis, synthesis, generalization and analogy made it possible to formulate the conclusions of the study. 2. public administration as a qualitative indicator of the development of power-subordination relations the area of public administration essentially reflects a qualitative approach to public governance. administration (from the latin “administratio” – “service”, “assistance”, “governance”) is an activity that consists in directing and managing certain social relations. by focusing on the essence of administration, i.p. yakovliev states that in the theory and practice of administration it is used to describe: governance and its mechanism, implementation of administrative orders in the judicial branch of state power, executive and administrative activity of the state, science of public administration, processes of payment of obligatory payments, etc. (2015) along with this, s.i. chernov and s.o. рaiduchenko's define administration as the prerogative of executive authorities or an official (civil servant) (2014). that is, administration is regarded as an analogue of governance. however, governance is a deliberate influence precisely on governance objects, using methods that imply the subordination of these objects to government influence by the subject of governance (kniaziev & bakumenko, 2002). moreover, understanding administration as a synonym for governance has no logical basis, since replacing one term with another does not change the nature of the phenomenon that is characterized. turning to the definition of "administration" in its original meaning, let us pay attention to its interpretation as activities of "service" and "assistance". such interpretation is characteristic of the human-centric approach in administrative law. the advantage of a democratic model of state-citizen relations is, first of all, reflected in the longterm perspective, which is the flexibility and elasticity provided by effective feedback (bila-tiunova, bilousosin, kozachuk, vasylkivska, 2019). it should be noted that progressive thoughts on the appointment of administrative law are traced back to the works of a.i. yelistratov, who found that administrative law best protects the individual from excessive state intervention, incompatible with the conditions of his/ her free development (1917). at the present stage, the aforementioned thesis is undeniable, but the process of its transfer into legal reality and scientific circulation is still ongoing. at the present stage, the aforementioned thesis is undeniable, but the process of its transfer into legal reality and scientific circulation is still ongoing. in this case, as it is indicated by r .s. melnyk and v.m. bevzenko, only since the declaration of ukraine's independence, the enshrining in its basic law of the provision that a person, his/her life and health, honor and dignity, inviolability and security are recognized as of the highest social value, the process of reforming the relations between the population and state power began, which must end in civil society development. baltic journal of economic studies 37 vol. 6, no. 1, 2020 the solution to this problem can only be achieved by reviewing the role of state power in society (2014). re-evaluation of the priority of state interests is a reflecting of a new approach to the way the state's organizational influence on public relations. public administration is characterized by securing the interests of the person with the emphasis on the individual as the main subject of administrative and legal relations (pyrozhkova, 2017). in addition, human-centrism, as a new concept of administrative law, is to ensure and adhere to the principle of rule of law (power of law) in the public-legal sphere, to ensure the focus of administrative law on the priority of the rights of individuals and legal entities, to ensure the observance of constitutional principles in all areas of social life without exception (yarovska, 2016). thus, the effectiveness of administrative law through the lens of governance is dubious and does not meet the requirements of the development of public relations. therefore, it is necessary to return to the educational ideas of the functioning of the state and its interaction with citizens. modern administrative law has to operate with the concept of "administration", which reflects the influence of the state represented by the authorized bodies on public relations in a way that is, first and foremost, effective for the individual. if necessary, the state should govern, otherwise it should assist, but in any case, such activity should be carried out in order to serve the people. for these reasons, the term "administration" fully reflects the state of qualitative development of the functioning of the state and the way it organizes influence on public relations. with regard to publicity, one of the main features of administration is the following. the difference between "public" and "state" lies in qualitative and quantitative indicators. in terms of quantitative differences, they relate to etymological comparisons of a relatively larger amount of publicity. subjects of public authority, in addition to state authorities, authorities of the autonomous republic of crimea, include bodies of local self-government, organizations with delegated powers, and possibly other public authorities. thus, the category of "public service" has become widely used in domestic administrative science. the need to rethink the role of public authority ensured the emergence of new social roles for citizens, enhancing their jurisprudence and shaping their legal culture, on the one hand (gestel, kuiper, hendrikx, 2019), and, on the other hand, the need for well-being for people (torres, barreto, maggia, gibaja, 2019). the voluminous prevalence of "public service" is confirmed by the provisions of the code of administrative proceedings of ukraine. according to paragraph 15 of part 1 of the article 3 of the code of administrative proceedings of ukraine, public service means the activity in the state political positions, professional activity of judges, prosecutors, military service, alternative (non-military) service, diplomatic service, other civil service, service in the authorities of the autonomous republic of crimea, local authorities. that is, the concept of "public" is broader than the concept of "state". it is rightly nored by i.p. yakovliev that the main purpose of the public is public interest, guaranteeing the common good of civil society, its stable development, combined with ensuring and maintaining effective institutions of self-regulation. secondly, in the reference literature, the term "public" further states the need for informational interaction of public authorities with society, which has become one of the qualitative features of administration (2016). bondarenko k.v. differentiates the concepts of "public administration" and "public givernance" according to the criteria of subject composition, implementation, essence, nature, characteristics (2018). inherently, these criteria reflect the qualitative and quantitative changes that the “concept of the state” underwent when transformed into the “concept of the public”. thus, public administration refers to the activity of public authorities, which has a manifestation in the concerted influence on specific public relations by means of specific methods, tools, forms and aimed at securing public interests. 3. concerning the essence of the concept of "subject of public administration" concerning a particular type of public administration, public relations emerge, which are characterized by a set of specific characteristics. at the same time, participants in relations, which arise in the process of public administration, can be classified as those who exert a concerted influence on specific public relations by means of specific methods, tools, forms and aiming to secure public interests and those who fall under the influence of such a concerted influence. this statement correlates with the generally accepted approach to the relation between the terms of "subject of legal relations" and "legal subject". a subject exercising a concerted influence and having the relevant powers is inherently a subject of public administration. in general, the doctrine of administrative law uses the following approaches to the essence of the concept of "subject of public administration". firstly, the practice of using the concepts of "public administration" and "subject of public administration" as synonyms is widely known (halunko, dikhtiievskyi, kuzmenko, stetsenko et al., 2018). from a functional point of view, this is true, since the subject of public administration is one who is authorized to carry out such activity. accordingly, the group of these subjects is determined to be designated as "public management". two approaches can be applied to the definition of public administration in the european law: narrow and baltic journal of economic studies 38 vol. 6, no. 1, 2020 wide. the first approach is to define "public management" as "regional authorities, local and other public authorities", "central governments" and "public service". at the same time, public authorities are institutions of a regional, local or other nature, other bodies, the activities of which are governed by public law or by member states. in a wide definition of “public management”, it is referred to public authorities and entities that are not organizationally intended, but perform delegated functions (kravtsova & solonar, 2010). at the same time, “public authority” (or public authorities) should be understood as: any publiclaw body (including the state, regional and local public authorities, independent public enterprises) and any natural person in the exercise of their official authority (hnydiuk, 2006). however, v.k. kolpakov draws attention to the fact that public management as a legal category has two dimensions: functional and organizational-structural. at the same time, the functional dimension involves the consideration of public management as an activity of relevant structural entities in the performance of functions aimed at the realization of public interest, and organizational-structural is a set of bodies formed for the implementation (realization) of public authority (2012). it should be noted that, from the structural dimension there is a quite widespread point of view that public management is an organically unified and functioning system of public administration, first of all, of executive authorities and local self-government bodies, their officials, as well as institutions and organizations, individual non-governmental entities that, in accordance with the law, perform public management functions to satisfy the public interest (halunko, dikhtiievskyi, kuzmenko, stetsenko et al., 2018). supporters of this view are v.b. averianov (2003), i.b. koliushko, v.p. tymoshchuk (2006), o.o. hubanov (2018) and several other scientists. the features that characterize the subject of public management are the following: 1) it is in a way a coherent and organized system of bodies, which is not hierarchically constructed, but must act in a coherent, purposeful manner, avoiding duplication of functions and unnecessary bureaucracy; 2) the subject is the state, the purpose of the activity of the subjects of public management is to ensure the public interest, that is, the interests of both the state and society as a whole, and not individual citizens or social groups; 3) the public management relies on authority, when performing public functions; 4) the activity of public management covers the whole society; 5) public management operates on the basis of a set of measures of influence: legal, political, economic, social; through the application of legal regulation methods: harmonization, persuasion, stimulation, coercion, etc. separately, one should dwell on such a functional attribute of the subject of public management as mandatory engagement with civil society institutions. thus, the need to involve the society in public administration is conditioned by the national strategy to promote civil society development in ukraine for 2016-2020, the adoption of which provides for the creation of favorable conditions for the development of civil society, various forms of participatory democracy, establishment of effective interaction with public and local self-government authorities (decree to promote civil society development in ukraine, 2016). at the same time, the forms of interaction of civil society institutions with the subjects of public administration differ depending on the rights granted to citizens. in general, this applies to: ensuring the ability of citizens to apply electronically to the subjects of public administration and the possibility of submitting an electronic petition (law on citizens' appeals, 1996); conducting public consultations on the formulation and implementation of public policy (resolution on ensuring public participation in public policy formation and implementation, 2010); conducting public examination of the activity of public authorities, anti-corruption public examination of the activity of the subjects of public administration (resolution on approval of the procedure for promoting public expertise of the activity of executive bodies, 2008); creation and functioning of public (expert) councils in the activity of public administration entities (resolution on amendments to the resolution of the cabinet of ministers of ukraine no. 996 dated 3 november 2010, 2019); ensuring that citizens can access public administration entities through telephone communications through designated contact centers, telephone hotlines, and the use of the internet and electronic communications (resolution on approval of the concept of establishing a national contact center, 2015), etc. 4. grading of subjects of public administration first of all, it should be noted that a unified approach to the grading of subjects of public administration has not been developed yet. however, in general, in the national legal science there are ways of allocating groups of subjects that carry out public administration, but without identifying the grounds for such a list. thus, the position of r .s. melnyk and v.m. bevzenko is quite interesting, which includ to the subjects of public administration the following components: bodies of state executive power, bodies of local self-government; their officials; other subjects in the exercise of their managerial functions on the basis of the legislation, in particular for the exercise of delegated powers; other subjects that are endowed with different administrative powers in terms of essence and scope (the verkhovna rada of ukraine, the accounting chamber of ukraine, the ukrainian parliament commission for human rights, the president of ukraine, etc.) (2014). baltic journal of economic studies 39 vol. 6, no. 1, 2020 however, in modern legal science there are several other quite common variants of the classification of the subjects of public administration, which are characterized by the different composition of the subjects. some researchers take the position that the subjects of public management should be referred to as: bodies of state executive power, bodies of local selfgovernment; government bodies that do not belong to any of the branches of government (for example, the national commissions for the regulation of natural monopolies, the national bank of ukraine, the security service of ukraine) (karabin, 2015). at the same time, the legal literature prevails views on the separation among the subjects of public administration: bodies of state executive power, bodies of local self-government; other delegated subjects (sukmanova, 2018). at the same time, there is a quite interesting position of those scientists who refer to the subjects of public administration the following: public authorities of national importance; local public authorities; legal entities irrespective of ownership and organizational form or their separate subdivisions, which carry out public administration; non-governmental organizations acting as subjects of delegated authority and as a fullfledged subject of public administration (bila-tiunova, neudodnikov, danylenko, 2019). thus, the analysis of sustainable scientific achievements suggests that a unified approach to the grading of the subjects of public administration in scientific sources has not been formed yet. therefore, it seems appropriate to use a combined approach whereby the separation of the subjects of public administration is made according to: the availability of powers of authority (entities empowered by such authority under the law and subjects empowered with such authority through delegation); the nature of the distribution of powers of authority (subjects operating at the national level and subjects operating at the local level); the type of public administration (subjects that engage in intrusive public administration; subjects that carry out security public administration; entities that carry out facilitative public administration); spheres of public administration (subjects of public administration in the field of national security; subjects of public administration in the field of health; subjects of public administration in the field of education; subjects providing public administration in the field of national security; subjects of public administration in the field of culture; subjects that carry out public administration in the use of information and telecommunications technologies; entities that carry out public administration in the field of ecology, etc.). 5. conclusions summarizing the analysis of the institutional component of public administration and the changes experienced by the governing entities as a result of reformatting the concept of relations between the state and society in ukraine, we come to the conclusion that in the conditions of building ukraine as a democratic and legal state, all reform initiatives have systemic character. at the same time, only the use of a comprehensive approach will allow to look on the subjects of public administration as a coherent system and, in turn, make it possible to conduct not only their in-depth scientific analysis, but also effective reformation, which is of particular relevance beacuse of the current realities, given the globalization processes. at the same time, given the peculiarities of the field of operation, it seems appropriate to define public administration as the activity of public authorities, which has a manifestation in the concerted influence on specific public relations by means of specific methods, tools, forms and aimed at securing public interests. in addition, the study allowed to isolate features that characterize the system of subjects of public administration. after all, every subject of public administration should act in concert, purposefully, avoiding duplication of functions and unnecessary bureaucracy. at the same time, it seems urgent to establish mandatory interaction between public management and civil society institutions. a well-balanced, effective and aimed at real improvement of social preconditions for establishing effective functioning of subjects of public administration may also become inclusion in the curricula of general, vocational, higher educational institutions courses and topics on subjective provision of public administration, as well as introduction of training in the system of higher and postgraduate education of specialists in the management of non-governmental organizations. references: acevedo torres samuel isaias, barrutia barreto israel, urquizzo maggia, jose antonio, venero gibaja roger (2019). the public administration and sense of welfare for progress. religacion-revista de ciencias sociales y humanidades, vol. 4, pp. 178–185. bila-tiunova, l., bilous-osin, t., kozachuk, d., & vasylkivska, v. 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(in ukrainian) baltic journal of economic studies 100 vol. 6, no. 2, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: chugunov055@ gmail.com orcid: http://orcid.org/0000-0003-4915-1267 2 kyiv national university of trade and economics, ukraine. e-mail: makvknteu@gmail.com orcid: http://orcid.org/0000-0002-2331-8455 3 kyiv national university of trade and economics, ukraine. e-mail: koroviy@vmr.gov.ua orcid: http://orcid.org/0000-0002-0625-6547 doi: https://doi.org/10.30525/2256-0742/2020-6-2-100-107 formation of budget expenditure in the system of fiscal regulation igor chugunov1, valentina makohon2, valerii korovii3 abstract. the purpose of the article is to substantiate scientific and methodological approaches to the development of a financial and budgetary strategy for budget expenditures in the context of globalization of the economy. the comparative and factor method allowed to reveal the peculiarities of the financial and budgetary strategy of forming the budget expenditures of the eu and ukraine in the system of public finance management, to determine approaches for its improvement. methodology. the substantiation of scientific and methodological approaches to the development of the financial and budgetary strategy of budgeting in the conditions of globalization of the economy is based on the generalization and systematization of the relevant instruments and instruments of the financial and budgetary strategy in the countries with advanced and transformative economies. to this end, the analysis and evaluation of budget architecture in terms of expenditures in different countries was done. results. the results showed that the financial and budgetary strategy for budget expenditures is a comprehensive, adaptive system of directions and tasks of public administration in the sphere of budgeting expenditures to socio-economic transformations, which aims at improving the welfare of the population and the efficiency of the national economy. to accelerate economic growth, the eu countries are changing the structure of public sector spending in favor of productive ones, while optimizing unproductive spending. in particular, there is an increase in government capital investment. long-term financial and budgetary sustainability should be assessed based on a system of thresholds for both budget expenditures and revenues; the increase in government spending should not exceed gdp growth. practical implications. the financial and budgetary strategy is the target of the reproduction process. an adequate level of reasonableness of the architectonics of budget expenditures will contribute to ensuring the dynamic balance and stability of the budget system. it is advisable to make institutional changes to the architecture of budget expenditures based on an assessment of the dynamic interrelation of macroeconomic and budgetary indicators. there is an important task to develop economic and mathematical models based on the analysis and evaluation of macroeconomic proportions and the level of devel-opment of social production. value/originality. substantiation of scientific and methodological approaches to the development of financial and budgetary strategy for budget expenditures in the context of globalization of the economy is an important condition for ensuring macroeconomic stability and social development. to increase the feasibility of architectonics of budget expenditures, it is advisable to optimize them, to increase the share of productive costs and to reduce unproductive ones, to reconcile the dynamics of budget expenditures with macroeconomic indicators. based on the aforementioned in this article, substantiated scientific and methodological approaches to the development of financial and budgetary strategy for budgeting expenditures in the context of strengthening globalization processes and their impact on the financial and budget sphere; approaches to improving the system of fiscal regulation in terms of budget expenditures are revealed, and it is determined that the soundness of the budget expenditures architectonics is the basis for the formation and implementation of effective fiscal policy, which determines the effectiveness of changes in the public finance system. key words: budget, budget expenditures, fiscal policy, budget system, budget architectonics. jel classification: е63, н50, н61 baltic journal of economic studies 101 vol. 6, no. 2, 2020 1. introduction updating the issues of developing a fiscal strategy for budget expenditures at the beginning of the 21st century was prompted by increased attention to the longterm impact of political, economic and demographic challenges on the public finance system. initially, fiscal strategies for budget expenditures were developed in countries with developed economies, and later in emerging countries. the importance of developing a fiscal strategy for budget expenditures is explained by the growing importance of challenges that violate the sustainability and stability of the public finance system and threaten the future socio-economic development of countries. the reduction in economic growth caused by the financial and economic crisis processes, raising pension load (caused by aging) increases the risk of destabilization of public finances and reinforces the need to address funding problems of socio-economic development orientation of fiscal strategy for budget expenditures to economic growth; improving the level of stability of public finances whereby public authorities will be able to fulfill their expenditure obligations without increasing the tax burden. the validity of fiscal strategy for budget expenditures envisages its quantitative and qualitative assessment of the long term. however, significant attention is paid to change their structure over time, the relationship with macroeconomic variables. in particular, the europlus pact identifies the need for greater efforts and coordination of public authorities in achieving longterm sustainability of public finances, which provides for an adequate structure of government spending that will guarantee sustainability when increasing potential economic growth (euro-plus pact, 2011). in this context, the fiscal strategy for budget expenditures should aim to create conditions that will help to increase employment and attract investment while maintaining a position close to the budgetary equilibrium. thus, the research problem is: what role of budget expenditures is in the system of fiscal regulation of economic processes, what directions of changes in scientific and methodological approaches are to the development of the financial and budgetary strategy will contribute to the dynamic balance, and stability of the budget system in the context of globalization of the economy. 2. scientific and methodological approaches to the development of the fi-nancial and budgetary strategy for budgeting a lot of scientists study the theoretical and methodological aspects of developing a fiscal strategy for budget expenditures. at the same time, the issues of its optimal structure, architectonics, and influence on the level of economic growth remain unresolved. according to researchers, effective use of tools of budgetary strategy for budgeting helps to stabilize macroeconomic processes (olanubi, osode & adegboye, 2019); the validity of fiscal stabilization programs in budget expenditures plays an important role in ensuring macroeconomic stability and eliminating structural fiscal imbalances (hu & zarazaga, 2018); the prudence of government spending contributes to accelerating economic growth (european commission, 2002 and 2004; lin & zhu, 2019). at the same time, uncertainty in government spending policy has a negative impact on economic activity (kim, 2019; lópez, galinato & islam, 2011). budget capital expenditures play a significant role in stimulating economic growth. in particular, it is argued that the intensity of research and development contributes to accelerating economic growth (pop silaghi, alexa, jude & litan, 2014). public investments are classified as expenses that are most directly related to the acceleration of economic growth. however, their productivity depends largely on the nature of innovation and investment projects (the quality of public expenditures in the eu, 2012; ricco, callegari & cimadomo, 2016). also, socio-economic policies of many countries are aimed at accelerating economic growth, limiting government spending on education, science, and technology, leading to stagnation of human capital and technological progress, limiting long-term economic growth (liu & xu & yu & rong & zhang, 2019; pasichnyi, 2017). in this connection, the important questions are estimating the relationship between the size and composition of government spending and the sectoral composition of employment in the economy. government production spending is determined to influence long-term growth rates by their size and composition, both directly by increasing productivity and indirectly by changing the sectoral composition of the economy (felice, 2016). increasing spending on health, education, and transportation at constant total costs contribute to accelerating economic growth. increasing the share of spending on housing and communal services has a negative impact on economic growth. the impact of changing the structure of government spending on economic growth is fully realized after five years (barbiero & cournède, 2013). at the same time, it is important to find the optimal configuration of expenditure decentralization measures, given the institutional capacity of local governments and the level of economic development of regions (pasichnyi, kaneva, ruban & nepytaliuk, 2019; burge & rogers, 2011). fiscal and monetary policy reconciliation tasks are important in the context of the multifaceted impact of budget expenditures on the social and economic development of countries. as inflationary processes can be activated both by monetary policy measures (demand inflation) and by price increases by public authorities, in particular, petroleum products (cost inflation) (yong & dingming, 2019). baltic journal of economic studies 102 vol. 6, no. 2, 2020 government spending architecture plays a significant role in preventing intergenerational mobility by offsetting the effects of income inequality (nam, 2019; flavin, 2019). at the same time, scientists argue that the multiplier of government spending changes over time. accordingly, the fiscal strategy for budget expenditures should take into account the phases of the economic cycle when assessing their effectiveness (glocker, sestieri & towbin, 2019). the multiplier effect of increasing production costs is 1.3 per year and 1.2 per three years. however, the effect is quite divergent in different countries depending on the particularities of the economic environment and the institutional context. in this case, the cost multiplier is larger during the recession period; expenditures have a relatively greater impact on the state with "medium" requirements for a balanced budget than those with weak or strong requirements; the cost multiplier is relatively smaller for states with weak or severe constraints on public debt levels than those with moderate reserves (atems, 2019; dupaigne & fève, 2016). thus, the issues of developing an effective scientific and methodological ap-proach to the fiscal strategy for budget expenditures in a globalizing economy remain unresolved. 3. special projects that are added to the budget in the fiscal regulation of the eu country the globalization of the economy leads to the creation of new socio-economic conditions, which should be guided by the methodology of financial and budgetary regulation of social relations. crisis processes in the financial sphere indicate the need to increase the efficiency of the public finance management system, which is currently characterized by instability and reflects the crisis state of the reproduction process. the public finance system and its constituents operate under the weight of political priorities, especially in emerging countries. however, in the context of economic transformation, this is a prerequisite for the disproportionate regional development of countries and the unreasonableness of government spending structure. also, the urgent need to justify reforms through the fiscal strategies development (in particular for budget expenditures) was driven by the crisis that occurred in 2008-2009. the fiscal strategy for budget expenditures should help to increase its balance because it is a necessary condition for ensuring macroeconomic stability and accelerating economic growth. decisionmaking by public authorities on the use of budgetary funds is intended to ensure the implementation of public functions at the proper level in the context of limited revenues. to determine the effective vectors of the fiscal strategy for budget expendi-tures, it is necessary to justify the thresholds of key fiscal indicators in this area. in particular, the european commission has developed a system of key indicators of financial sustainability, which is the basis for determining the thresholds for financial and budgetary indicators, including budget expenditures (the long-term sustainability of public finances in the european union, 2006). scientific research covers the budget revenues issues first and foremost. at the same time, the problems of the validity of the budget expenditures architectonics, their structure, and thresholds remain unprocessed. assessment of the specificity of its formation in the long term is necessary for justifying the threshold values of budget expenditures, their architectonics. when analyzing the limits of budget expenditures, it is advisable to pay attention to the coherence of their growth rates with gdp growth rates, the share of capital expenditures in the general structure of expenditures. studying the scientific literature on these issues leads to the conclusion that in most cases, the architectonics of budget expenditures is determined by expert estimates based on world indicators and trends, as well as the specifics of the national economy. economic and mathematical modeling, in particular, simulation models, is used to achieve this goal. expenditure estimation (using simulation models) is relevant only for a certain period and should be updated as the longterm forecast of the socio-economic development of countries. at the same time, to achieve the goal of the fiscal strategy for budget expenditures, public authorities must, first of all, make relevant decisions about spending a certain amount of budget funds (which should be sufficient to ensure that citizens' constitutional rights and freedoms) in a certain direction. in particular, in the eu countries, the share of government spending in gdp for 2007-2018 was 47.57%, including 47.10% for 2007-2009, 49.23% for 2010-2012, 47.90% for 2013-2015, 46.03% for 2016-2018 (table 1). the highest corresponding indicator for 20072018 is observed in the following countries: 56.13% in france, 54.04% in denmark, 53.72% in finland, 53.53% in belgium, 52.01% in greece. the smallest: 33.20% in switzerland, 36.78% in romania, 37.19% in lithuania, 37.24% in bulgaria. the highest gdp per capita is observed in the following countries: 169.08% in norway, 160.42% in switzerland, 149.33% in ireland, 133.33% in the netherlands. the smallest: 45.83% in bulgaria, 54.58% in romania, 60.50% in croatia, 60.50% in latvia. budget expenditures issue is optimized in the context of strengthening or weakening the role of public authorities in regulating socio-economic processes, and there is an alternation of liberal and regulatory economic models that differ in their degree and nature of the impact on the economy. the regulatory model is characterized by the active role of public authorities in regulating the baltic journal of economic studies 103 vol. 6, no. 2, 2020 production processes and the citizens’ welfare. the liberal model is characterized by a significant role of market mechanisms of self-regulation. depending on the cyclical nature of economic processes and the dynamics of social transformation, a particular model is inherent in a particular country at the appropriate stage of its development. the role of state regulation is enhanced in the context of intensified crisis processes. in the context of achieving macroeconomic stability and resilience, the transition to a liberal model begins. in general, this affects the government spending structure. in particular, during 2010-2018, the largest share of government spending in the gdp of the eu countries is social assistance and remuneration. the share of capital investments is about 3% (table 2). the key objective of the eu fiscal strategy for budget expenditures is to create the conditions for innovation, in particular by increasing public investment in r&d. however, if the change in private investment occurs by cyclical patterns to changes in gdp, then the change in budget investment is anti-cyclical. this contributes to stimulating economic growth and creating the conditions for encouraging private investment. in particular, in 2008-2009, the vast majority of the eu countries increased the share of government spending on r&d in the overall spending structure. at the same time, transformations in the eu's fiscal policy are underway to find a better model for socio-economic development and government spending structure. the coordination of fiscal table 1 the share of government spending to gdp and gdp per capita of the eu countries, % geography\period 2007-2009 2010-2012 2013-2015 2016-2018 expenditur % of gdp gdp per capita in pps* expenditur % of gdp gdp per capita in pps* expenditur % of gdp gdp per capita in pps* expenditur % of gdp gdp per capita in pps* eu (28 countries) 47.10 100.00 49.23 100.00 47.90 100.00 46.03 100.00 euro area (19 countries) 47.77 108.33 50.10 107.67 49.20 106.33 47.30 106.00 euro area (18 countries) 47.80 109.33 50.10 107.67 49.23 106.67 47.30 106.33 belgium 51.37 116.00 55.23 119.33 55.13 120.00 52.37 118.00 bulgaria 38.03 42.00 34.90 45.00 40.53 46.33 35.50 50.00 czechia 41.73 83.67 43.67 82.67 42.23 85.33 39.70 89.00 denmark 52.17 124.33 57.03 128.00 55.17 127.33 51.80 127.33 germany 45.27 116.00 46.07 121.33 44.40 123.67 44.43 122.67 estonia 39.57 67.67 38.67 70.00 38.30 76.33 39.30 78.67 ireland 41.57 137.00 51.30 130.00 35.60 148.33 26.40 182.00 greece 50.67 93.33 54.13 77.00 55.43 70.33 47.80 67.67 spain 42.30 101.33 46.97 92.33 44.93 89.33 41.77 91.33 france 54.37 107.33 56.77 107.67 57.07 106.67 56.33 104.00 croatia 46.77 62.00 48.60 59.67 48.53 59.00 46.37 61.33 italy 48.57 106.67 49.90 103.67 50.73 96.67 48.70 96.67 cyprus 39.37 104.67 42.00 95.33 44.40 81.67 39.37 88.00 latvia 38.73 56.00 41.17 56.67 37.90 63.00 37.80 66.33 lithuania 39.43 59.67 40.43 65.33 35.10 74.00 33.80 77.67 hungary 49.80 62.33 49.33 65.67 50.37 68.00 46.97 69.00 malta 41.87 79.67 41.67 82.67 40.83 89.00 36.37 96.67 netherlands 44.33 139.00 47.17 134.33 45.60 132.00 42.70 128.00 austria 51.07 125.67 51.63 128.67 51.70 130.00 49.27 127.33 poland 43.90 55.67 44.20 64.67 42.23 67.33 41.30 69.00 portugal 46.67 81.33 50.27 78.00 49.93 76.33 44.57 77.00 romania 38.17 48.67 38.93 52.33 35.60 55.00 34.43 62.33 slovenia 45.97 87.33 50.17 83.00 53.27 82.00 44.60 85.00 slovakia 39.27 69.67 41.53 75.33 43.80 77.00 42.00 72.33 finland 49.53 119.67 54.33 117.00 56.87 111.67 54.13 110.33 sweden 50.73 126.67 50.40 127.67 50.73 125.67 49.60 121.67 united kingdom 44.13 111.00 46.27 108.33 43.10 109.67 41.20 106.33 iceland 47.50 130.00 45.27 118.33 42.53 123.00 43.17 129.33 norway 42.93 178.67 44.30 179.33 46.67 171.33 50.40 147.00 switzerland 31.73 158.33 33.03 161.67 34.00 165.00 34.03 156.67 *gdp per capita in pps – index (eu28 = 100) source: based on the data from (official site of the statistical office of the european com-mission. url: http://ec.europa.eu/eurostat) baltic journal of economic studies 104 vol. 6, no. 2, 2020 policy on economic policies was highlighted as a whole. financial-budget transformations envisage optimization of “unproductive” expenditures and increase of “productive” expenditures of the public sector. this implies the development of an effective model for assessing changes in the level and rate of economic growth. the ways of implementing fiscal policy in the eu countries are somewhat coordinated, but each country applies its fiscal tools, including expenditures budgeting based on national programs. 4. features of formation of budget expenditures in the system of fiscal regulation of ukraine according to the data in table 3, ukraine refers to the number of countries where a relatively low share of gdp is redistributed through the budget. in particular, the share of expenditures of the consolidated budget of ukraine in gdp is 34.11% for 2007-2018, including 34.19% for 2010-2012, 34.14% for 2013-2015, 35.28% for 2016-2018 (table 3). these figures are lower than in the majority of eu countries. at the same time, a significant share in the structure of expenditures of the consolidated budget of ukraine is made by expenditures for the human potential development (for 2010-2018 – 20.25% in gdp). thus, the degree of centralization of ukraine's public financial resources is not high compared to the eu countries. at the same time, based on foreign experience, high rates of economic growth are observed at much lower values of the share of government spending in gdp. this justifies the proposition that long-term fiscal sustainability should be assessed based on the thresholds of both budgetary architectures of expenditures and revenues. considering the share of the public sector and the role of public finances in regulating socio-economic processes, in the situation of complicated geopolitical circumstances in ukraine, financial and economic crisis phenomena, in our opinion, the share of expenditures of the consolidated budget should not exceed 40%. even though this level has passed almost all the leading foreign countries, the fiscal strategy of which is aimed at accelerating economic growth and improving the welfare of citizens. accordingly, based on the marginal value of the budget deficit defined in the maastricht treaty of 3% of gdp, the share of ukraine's consolidated budget revenues should not exceed 37% of gdp. taking into account the significant share in the structure of expenditures of the consolidated budget of ukraine, expenditures for the development of human potential, the significant fiscal indicator is a measure that characterizes the general government solvency in the long table 2 the share of government spending in gdp in eu countries, % indicators 2010-2012 2013-2015 2016-2018 2010-2018 intermediate consumption 6.20 6.17 5.93 6.10 wages 10.67 10.27 9.97 10.30 repayment of interest 2.83 2.47 1.97 2.42 subsidies 1.30 1.33 1.37 1.33 social assistance 20.97 21.07 20.60 20.88 other operating costs 2.57 2.60 2.43 2.53 capital debt transfers 1.43 1.13 1.03 1.20 capital expenditures 3.30 2.93 2.77 3.00 total 49.23 47.90 46.03 47.72 source: based on the data from (official site of the statistical office of the european com-mission. url: http://ec.europa.eu/eurostat) table 3 share of expenditures of consolidated budget of ukraine in gdp, % functional classification 2010-2012 2013-2015 2016-2018 2010-2018 state administration 3.94 5.00 5.53 4.83 defense 1.03 1.79 2.57 1.80 public order, security and the judiciary 2.59 2.77 3.10 2.82 economic activity 4.52 3.17 3.43 3.71 environmental protection 0.31 0.29 0.25 0.29 housing and communal services 0.88 0.83 0.86 0.86 health care 4.01 3.80 3.29 3.70 spiritual and physical development 0.95 0.88 0.78 0.87 education 7.07 6.43 5.77 6.42 social protection and social security 8.89 9.18 9.71 9.26 total 34.19 34.14 35.28 34.54 source: based on the data from (ministry of finance of ukraine. url: https://minfin.gov.ua) baltic journal of economic studies 105 vol. 6, no. 2, 2020 term (assuming implementation of established priorities of social and economic development). because the spectrum of relevant priorities is reflected in the structure of budget expenditures. according to the fiscal strategy of ukraine, the main directions in this area include: accelerating economic growth by creating conditions for the development of a favorable investment climate and ensuring macroeconomic stability; determining at the appropriate level the state social guarantees and standards in the population`s income, in the sphere of housing and communal services, household, social and cultural services, health care, education, etc.; creating favorable conditions for the business environment, which will increase investment in innovation; enhancing the competitiveness of human capital (budget declaration of ukraine on 2020-2022, 2019). these strategic priorities are specified in the annual messages of the president of ukraine to the verkhovna rada of ukraine “on the internal and external situation of ukraine”. the messages underline the importance of addressing issues both in improving the efficiency of the national economy and the welfare of citizens, which is in line with the strategic priorities of the socio-economic development of the eu countries. in particular, according to the strategy "europe 2020", the main priorities to improve the welfare of the eu countries citizens include: increasing employment; increasing the share of the population with higher education; reducing the number of people living below the poverty line. the main priorities for improving the efficiency of the national economy are: creating the conditions for the development of a knowledge-based and innovative economy; sustainable growth: creating an economy based on sustainable use of resources, compliance with environmental requirements and promoting competition. the budget expenditures structure is formed following these priorities. at the same time, to ensure its validity, an important task is to estimate the expenditures multiplier and the impact of the expenditures level on gdp. therefore, in the current context, it is an important task to strengthen the positive impact of the fiscal strategy for budget expenditures on the economic growth of the country. at the same time, authors use correlation-regression analysis methods to estimate the impact of budget expenditures on economic growth. based on the correlation-regression analysis, with the share of consolidated budget expenditures in ukraine for 2010-2018 growing by 1 percentage point in gdp, real gdp decreases by 3.58 percentage points (y = -74.14-3.58x), including expenditures on state administration – 7.57 percentage points (y = 87.51-7.57x); defense – 7.40 percentage points (y = 92.41-7.40x); public order, security and the judiciary – 17.13 percentage points (y = 45.30-17.13x); economic activity – 0.80 percentage point (y = 64.90-0.80x); environmental protection – 69.97 pp (y = 75.55-69.97h); housing and communal services – 19.91 percentage points (у = 91.24-19.91х); health care – 11.04 percentage points (c = 55.20-11.04h); spiritual and physical development – 39.23 percentage points (y = 58.09-39.23x); education – 4.37 percentage points (y = 49.32-4.37x); social protection and social security – 4.42 percentage points (= 40.61-4.42x). the results show that budget expenditures are not adversely affected by economic growth. economic activity expenditures have the most beneficial effect on economic growth. thus, the budget expenditures structure has to be assessed in terms of contribution to the achievement of the strategic objectives of socio-economic development. accordingly, a significant task is to develop an effective methodology for assessing expenditures and to increase the responsibility of public authorities for the reliability of relevant financial and economic justifications. making rational management decisions on budgeting should be ensured not only by analyzing trends and the dynamics of their use but also by strategically modeling their impact on socio-economic processes. 5. conclusions the conducted research makes it possible to determine that the fiscal strategy for budget expenditures is a complex, adaptive system of directions and tasks of public authorities in the sphere of budget expenditures formation for socio-economic transformations. it aims at improving the citizens' welfare and the efficiency of the national economy; the intensification of globalization processes leads to the emergence of a large spectrum of both objective and subjective factors that adversely affect the effectiveness of a fiscal strategy for budget expenditures. the study of the peculiarities of fiscal priorities and strategic directions of the socio-economic development of ukraine and eu countries proves that they are largely similar. at the same time, analysis and estimation of budget expenditures and government spending show significant differences in the ways of their optimization. to accelerate economic growth, eu countries are changing the structure of government spending in favor of productive ones, while optimizing unproductive ones. in particular, there is an increase in government capital investment. summarizing and systematizing the experience of eu countries has revealed that long-term fiscal sustainability should be assessed based on a system of thresholds for both budget expenditures and revenues. at the same time, the most important indicator (the threshold of which justifies the economically feasible degree of public financial resources centralization) is the share of government revenues, not spending in gdp; the increase in government spending should not exceed gdp growth. therefore, future studies should be conducted on the search for new scientific 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(1998). u іstokov fіnansovoho prava [at the origins of financial law]. moskva: statut. baltic journal of economic studies 54 vol. 6, no. 5, 2020 corresponding author: 1 institute of market problems and economic&ecological research of the national academy of sciences of ukraine, ukraine. e-mail: burkinskij@nas.gov.ua orcid: https://orcid.org/0000-0001-9303-0898 2 institute of market problems and economic&ecological research of the national academy of sciences of ukraine, ukraine. е-mail: valeriygoryachuk@gmail.com orcid: https://orcid.org/0000-0001-7083-0863 3 institute of market problems and economic&ecological research of the national academy of sciences of ukraine, ukraine. e-mail: ju.lia.uniti@gmail.com orcid: https://orcid.org/0000-0001-9049-1218 doi: https://doi.org/10.30525/2256-0742/2020-6-5-54-63 concept of “hidden assets” and methodological bases for their assessment borys burkynskyi1, valeriy goryachuk2, julia nazarenko3 abstract. to assess the prospects of an enterprise and plan its activities, it is very important to know what assets it has, including hidden assets. today, there is no single understanding of this concept. some researchers attribute this to an underestimation of the company’s assets, others – to a lack of accounting for assets, or to insufficient use of assets. this is the result of applying various methodological approaches and insufficient research of this concept. on the ground of a methodological approach based on the identification of generic concepts and essential features, a generalized definition of the concept of “hidden assets” is proposed. these are assets, value of which on the company’s balance sheet is undervalued compared to their real value, or which are not reflected in the balance sheet, or which are underutilized and which are real assets, and which are capable to provide a competitive advantage or economic benefit. this definition of the concept of “hidden assets” allows to combine different existing points of view on this concept and to look at the capital of an enterprise in a broader context. the difference between the concepts of “hidden assets” and “accounted assets” from the point of view of law is considered separately. assets that are recorded in the balance sheet belong to the enterprise based on ownership rights. as for hidden assets, as a rule, the enterprise in relation to them has the right to use only. firstly, this applies to the leased fixed assets, human capital (use of time, knowledge and skills of specialists). in other words, the right to use is of crucial importance. in this case, the assets of the enterprise are considered as a set of rights to receive economic benefits. with such a broad view, the components of the hidden capital of an enterprise can be identified. analysis of existing methodological approaches to the assessment of hidden assets has shown that they have significant methodological shortcomings and difficulties in applying and collecting the necessary initial data. methodological bases for estimation of hidden assets are proposed based on the defined concept of “public value of an enterprise” as the sum of all assets used by an enterprise to create gross value added. calculations have shown that the average share of hidden assets of ukrainian enterprises in the period from 2012 to 2018 in the total volume of all assets is 33.7 %, and by type of economic activity from 14.3 % in construction to 70.1 % in agriculture. hidden assets are the missing link in determining the level of capitalization of an enterprise. all other things being equal, the difference in the level of economic development of enterprises can be explained by differences in the volume and structure of their hidden assets. hidden assets can be the key to creation of an enterprise’s development strategy. key words: enterprise, ukraine, types of activities, capital, social value, structure. jel classification: d24, m11 1. introduction the dominant feature of enterprise development is capital. traditionally, it is understood as assets that are accounted for in the balance sheet of an enterprise and belong to it based on ownership rights. however, the concept of enterprise capital is a broader concept and is not limited to the right of ownership. the right to use assets is important. this allows us to consider hidden assets as a component of the enterprise’s capital, which are the missing link when determining the level of capitalization of the enterprise. all other things being equal, the difference in the level of economic development of enterprises can be explained by differences in the volume and structure of their hidden baltic journal of economic studies 55 vol. 6, no. 5, 2020 assets. identifying hidden assets and evaluating them is important when forming an enterprise development strategy. the economic development of a country depends on the level of capitalization of business entities. the definition of the capital of an enterprise and its structure given in the provisions (standards) of accounting in ukraine does not meet the modern understanding and needs of the development of enterprises and the country’s economy. in this context, it is relevant to develop a broad understanding of the company’s capital in terms of “hidden assets” and their valuation. 2. literature review 2.1. semantic analysis of the concept of “hidden assets” capital is the main source of economic development of both society and individual enterprises. as fisher (1927) noted it, capital is any asset that provides income (value added). according to accounting, the capital of an enterprise is its assets formed by investing its own and borrowed capital. skillful use of assets ensures that the enterprise receives benefits now and in the future, and the relevant legislative and regulatory framework ensures ownership of its assets. at the same time, the idea of the company’s capital and its assessment based on its balance sheet has significant disadvantages: – firstly, the discrepancy between the value of assets according to accounting and their real value. as a rule, there is an underestimation of the cost, which is due to inflation processes and other factors; – secondly, there are assets that are controlled by the enterprise and used for profit, but are not accounted for in the balance sheet of the enterprise. to assess the prospects of an enterprise and plan its activities, it is very important to know what assets it has, including hidden assets. today, there is no single understanding of this concept. some researchers attribute this to an underestimation of the company ’s assets, others – to a lack of accounting for assets, or to insufficient use of assets (chukhrai, 2012; insiderpro, 2017; lopatnikov, 2003; moiaosvita, 2017; shchepotev, 2011; viazemskaia, n.d.). this is the result of applying various methodological approaches and insufficient research of this concept. our analysis has shown that hidden assets are the assets that are: – not included in the balance sheet, but give the company some benefits; – written off (amortized); – not the property of the company, but are controlled and used by it (for example, leased fixed assets); – the information; that are the relationships with partners and clients; – a human capital; – a customer capital (relations with customers and suppliers); – a company image, organizational structure of the enterprise, databases, administrative systems, research and development. each of the above-mentioned definitions of the concept of “hidden assets” enriches the understanding of the essence of this concept, but none of them provides an exhaustive description of it. that is, we can talk about the relevance of the task of formulation of a generalized definition of the concept of “hidden assets”, which would cover all the variety of points of view on this phenomenon. to solve this problem, a methodological approach was used, which provides for the following sequence of actions (burkynskyi & horiachuk, 2014): – structuring of existing definitions of the concept under study, namely, highlighting in each of them the generic concept and essential features; – formation of generalized generic concepts and essential features; – synthesis of a generalized definition of a concept. as a result, a generalized definition of the concept of “hidden assets” is proposed. these are assets whose value on the company ’s balance sheet is undervalued compared to their real value, or which are not reflected in the balance sheet, or which are underutilized and which are real assets, and which are capable to provide a competitive advantage or economic benefit. this definition of the concept of “hidden assets” allows to combine different existing points of view on this concept and to look at the capital of an enterprise in a broader context. separately, we should consider the difference between the concepts of “hidden assets” and “accounted assets” from the point of view of law. assets that are recorded in the balance sheet belong to the enterprise based on ownership rights. the latter is considered in the legislation as a triad of the owner’s rights – the right to own, the right to use and the right to dispose of a thing. as for hidden assets, as a rule, the enterprise in relation to them has only the right to use. firstly, this applies to the leased fixed assets, human capital (use of time, knowledge and skills of specialists). in other words, the right to use is of crucial importance. in this case, the assets of the enterprise are considered as a set of rights to receive economic benefits. with such a broad view, the components of the hidden capital of an enterprise can be identified. hidden assets are the missing link in determining the level of capitalization of an enterprise. all other things being equal, the difference in the level of economic development of enterprises can be explained by differences in the volume and structure of their hidden capital. hidden assets can be the key to creation of an enterprise’s development strategy. baltic journal of economic studies 56 vol. 6, no. 5, 2020 2.2. analysis of methodological approaches to the assessment of hidden assets to assess hidden assets, experts use a number of methods, which are divided into four groups (golovchanskaia & stelchenia, 2015; li, et al, 2016; sveiby, 2010): – methods of direct valuation of hidden assets, the essence of which is to evaluate these assets directly; – market capitalization methods that are based on comparing the market capitalization of an enterprise and the value of its assets; – methods for estimating the return on use of assets, which are based on comparison of the income of an enterprise and the value of its assets; – scoring methods. they provide for the identification of various components of hidden assets, which will be presented in the form of a system of indicators and which are evaluated in points. these methods do not involve obtaining monetary estimates of hidden assets. let us take a closer look at these groups of methods for evaluating hidden assets. methods for direct valuation of hidden assets. these methods first determine the components of hidden assets. then the cost of each of them is estimated. the third optional step is to determine an integral (total) estimate of the value of hidden assets. the disadvantages of this group of methods include: – imperfect methods for evaluating individual components of hidden assets. this is especially true for intellectual capital, due to its intangible essence, the uniqueness of its individual elements; – failure to take into account the synergistic effect of the interaction of various components of hidden assets. market capitalization methods. they are based on a comparison of the market value of an enterprise and its assets. there are several approaches to calculation of the value of hidden assets: – as the difference between the market value of an enterprise and the cost of restoring its assets (reproduction cost); – as the difference between the market value of an enterprise and the cost of replacing its assets (replacement cost); – as the difference between the market value of an enterprise and the book value of its assets (book value). the first two approaches in methodological terms should give a more adequate assessment of hidden assets, because they use an assessment of the value of the enterprise and its assets in actual (current) prices. as part of the third approach to calculation of the value of hidden assets, it is defined as the difference between the market value of an enterprise and the book value of its assets. the latter may differ significantly from the real value if the indexation and revaluation of assets has not been performed. however, given the difficulties in estimating the cost of restoring or replacing assets, their book value is often used in practice, especially when it comes to the evaluation of the enterprises in the industry or the entire market. the disadvantage of the market capitalization method is the possibility of obtaining negative values, which is due to the algorithm for the calculation of the hidden assets as a balance and the use of various methodological approaches to assessing the market value of an enterprise and the value of its assets. the tobin’s q ratio is widely recognized in the valuation of hidden assets, namely such a component as intellectual capital (hayes, 2020; sokolianskii & sysoeva 2015). q = p / a, (1) where: p is a market value of an enterprise, which is usually defined as the value of its shares; a is a reproduction cost of the enterprise’s assets, that is equal to the sum of the costs required to restore all its assets at current prices. many experts believe that when the tobin q ratio is greater than one, it is due to the presence of some assets that are not taken into account in the balance sheet of the enterprise; first, we are talking about intellectual capital. as a justification, they use the results of calculations of the tobin q ratio for it companies in comparison with oil and gas and mining companies, whose activities are based on large amounts of physical capital (golovchanskaia & stelchenia, 2015; komarova & krupina 2017). t. piketty (2014) performed calculations of the tobin q ratio for the developed countries (the usa, great britain, france, germany, japan) for the period from 1970 to 2010, which showed that the absolute majority of companies in developed countries have the tobin q ratio value of less than one. the average tobin q ratio value in the period from 1970 to 2010 in the united states was about 0.80. the fact that most companies in developed countries have the tobin q ratio value of less than one cannot indicate the absence or negative value of hidden assets, especially intellectual capital, because by its nature it and such a component as human capital cannot be negative. accordingly, the difference between the market value of a company and the value of its assets or equity cannot be considered the value of hidden assets. 1. methods for estimating the return on assets. these methods are based on comparison of the income of an enterprise and the value of its assets. the approach to the valuation of hidden assets, namely their main component – intellectual capital, based on the value added intellectual coefficient (vaic) model, has been widely recognized. according to the experts, its advantage lies in the fact that calculations are simple and all the necessary information can be easily obtained in the financial statements of companies (bryl & truskolask, 2015; forte, et al., 2017; javornik, et al., baltic journal of economic studies 57 vol. 6, no. 5, 2020 2012; mohamed, 2017; puliс, 2008; smriti, et al., 2017; stahle, et al., 2011; svanadze & kowalewska, 2015). calculations of the vaic coefficient are based on the following concepts: – human capital (hc), which is interpreted as staff costs (salaries and accruals); – structural capital (sc), which is interpreted as the difference between generated value added (va) and human capital (hc), i.e. sc = va-hc; – capital employed (ce), which is interpreted as the book value of the net asset, i.e. as equity. based on these definitions and assumptions, the vaic coefficient is calculated as the sum of the following performance indicators: – capital efficiency (cee) = va/ce; – human capital efficiency (hce) = va/hc; – structural capital efficiency (sce) = sc/va. vaic = cee + hce + sce (2) the average values of the vaic coefficient of ukrainian enterprises by type of economic activity in the period from 2012 to 2018 are presented in table 1, which shows that it has a value greater than 2.5, which is according to classification of pulic indicates very efficient business management (puliс, 2008). however, this contradicts the current state of the economy and the processes of deindustrialization and dominance of raw materials industries in the country. table 1 average values of the vaic coefficient for ukrainian enterprises as a whole and by type of activity in the period from 2012 to 2018 vaic total 4.17 agriculture 5.72 industry 4.13 construction 3.82 trade 5.69 transport 3.36 source: calculated on the basis of data from the statistical collection “activities of business entities” for 2018 to explain this contradiction, we will consider the methodological basis of the vaic coefficient model. it uses such concepts as “human capital”, “structural capital” and “intellectual capital”. however, their interpretation and understanding do not correspond to the generally accepted ones. firstly, in the model, human capital is interpreted as personnel costs (wages and accruals). however, this is not human capital, but a payment for its use. just as the rent for the use of physical capital (fixed assets) is not physical capital. the same can be said about interest on deposits in banks, because this is a fee for the use of financial capital, and not it itself. in many scientific papers, personnel costs are used to estimate human capital based on a revenue-based approach by discounting them and then adding them up or capitalizing them (koritckii, 2013). this assessment of human capital is several times or even higher than the cost of personnel. secondly, in the vaic ratio model, structural capital (sc) is defined as the difference between value added (va) and human capital (hc) sc = va – hc. (3) if we take into account the definition of va given in the model, namely va = hc + p + a, (4) where: hc is human capital: p is operating profit; a is amortization; then we get that sc = p + a. (5) however, structural capital cannot be calculated as the sum of operating profit and amortization, because the experts define it as software, organizational structures, ideas, trademarks, patents, license agreements, customer relations, etc. in addition, when operating profit is negative, the company’s structural capital can also be negative, which contradicts its essence (fijałkowska, 2014). thirdly, in the vaic coefficient model, the sum of structural and human capital is defined as intellectual capital (ic) and as value added (va). that is, intellectual capital is defined as gross value added iс = va. (6) however, this does not contradict the economic essence of value added, which is created by all types of capital used by the enterprise – physical, natural, intellectual, social, financial, etc. therefore, value added cannot be considered as intellectual capital. thus, the vaic coefficient model declares the use of the concept of intellectual capital, but in fact, it does not have this, and therefore it cannot be considered as a tool for evaluating intellectual capital scoring methods. these methods determine the various components of intellectual capital that will be represented in the system of indicators or in charts. the use of scoring methods does not provide for obtaining a monetary assessment of intellectual capital. the advantages of these methods are that they can create a more complete picture of the state of the enterprise than financial indicators, and that they can be easily applied at any level of the organization. they are measured closer to the event and therefore reporting can be obtained more accurately and faster than purely financial indicators. the disadvantages of these methods are that metrics are contextual and must be configured separately for each enterprise and each goal, which makes it very difficult to compare different enterprises. scoring methods are relatively new and are not easily perceived by society and managers, who are used baltic journal of economic studies 58 vol. 6, no. 5, 2020 mainly to using financial indicators (golovchanskaia & stelchenia, 2015; mohamed, 2017; sveiby, 2010). summing up the analysis of existing methods for evaluation of hidden assets and their main component – intellectual capital, it should be noted that they have significant methodological flaws and difficulties in applying and collecting the necessary initial data. 3. methods w hen making an investment, an investor sacrifices something less today for the sake of getting something more tomorrow. that is, it means that the investor invests in an enterprise and, accordingly, forms his or her asset expects not only to return the investment, but also to receive additional income (capital). that is, the cost (capitalization) of an enterprise based on the income approach should be greater than based on the investment (cost) approach. one of the main factors in this state of affairs is the presence of hidden assets. as the basic provisions of the methodological base for assessing hidden assets, the following are proposed: – capital is the value that creates added value; – capital of an enterprise is a broader concept than its balance sheet assets. capital of the enterprise, which ensures the creation of gross value added, is the assets that are accounted for in the balance sheet of the enterprise, and hidden assets, including human capital, leased physical assets (fixed assets, etc.), natural capital, social capital and other hidden assets (figure 1); – main result of the company’s activity is gross value added, not profit; – social value of an enterprise is the value of all assets that the enterprise uses to create gross value added. it is estimated based on the income approach, where income is gross value added (figure 1). hidden assets will be calculated as the difference between the public value of the enterprise (the value of all types of capital involved) and the value of its balance sheet assets. ha = pve – bsa (7) pve = gva/cr (8) where: pve is public value of enterprise; bsa are balance sheet assets; gva is gross value added that creates the enterprise; cr is capitalization rate. it is also proposed to calculate the hidden asset ratio (rha) according to the formula rha = pve/bsa – 1. (9) 4. results and discussion the results of calculating the rha show that in the period from 2012 to 2018 it fluctuated around the average value of 0.54 (figure 2). this indicates the presence of hidden assets. in agriculture and transport in the period from 2012 to 2018, there was a tendency to reduce the rha from 3.19 and 2.24 to 2.27 and 1.31, respectively. at the same time, in agriculture, a significant drop occurred in 2016 and it is associated with a sharp increase in accounts receivable and, accordingly, a significant increase in the value of assets. in transport, a significant drop in the rha occurred in 2015 and is associated with a significant indexation of fixed assets and intangible assets and, accordingly, a significant increase in the value of assets (figure 3). the results of calculations of the rha for industrial enterprises in the period from 2012 to 2018 indicate a tendency to increase it from 0.25 to 0.34, but it is lower than in the whole country (average values of 0.21 and 0.54, respectively). in trade, there is also a positive trend in terms of the rha, but it is higher than in industry and in the country as a whole (average value of 0.55) (figure 4). in construction, in the period from 2012 to 2018, there was a tendency to increase the rha, but at the same time, it should be noted that the average value of this coefficient was 0.22, that is, almost at the same level with industry (figure 5). assets that are recorded in the balance sheet fixed assets intangible assets cash funds inventory and other assets gross value added human capital leased fixed assets social capital natural capital hidden assets figure 1. types of assets (capital) that create gross value added baltic journal of economic studies 59 vol. 6, no. 5, 2020 the value of hidden assets was calculated according to formula 2. calculations for the period from 2012 to 2018 show that the average share of hidden assets in the total capital of enterprises in the country is 32.2 %, the largest share in agriculture is more than 70 %, and the smallest share in construction is 12.5 % (table 2). the fact that the highest share of hidden assets is in agriculture to a certain extent can be explained by the fact that unlike other types of activities, gross value added is created in addition to physical, human, social, financial capital, also natural capital in the form of land, also by the fact that agriculture of ukraine in modern conditions has become one of the leading export industries. 0,51 0,37 0,64 0,30 0,39 0,73 0,74 0,0 0,3 0,5 0,8 1,0 2012 2013 2014 2015 2016 2017 2018 figure 2. the rha for ukrainian enterprises in the period from 2012 to 2018 3,19 2,46 3,95 3,10 0,92 2,42 2,272,24 1,90 2,06 0,39 0,61 1,27 1,31 0,0 1,0 2,0 3,0 4,0 2012 2013 2014 2015 2016 2017 2018 agriculture transport figure 3. the rha for agricultural and transport enterprises in the period from 2012 to 2018 0,25 0,05 0,19 0,06 0,23 0,38 0,34 0,25 0,28 0,90 0,56 0,41 0,73 0,72 0,00 0,20 0,40 0,60 0,80 1,00 2012 2013 2014 2015 2016 2017 2018 industry trade -0,22 0,20 0,60 -0,01 0,30 0,37 0,33 -0,5 0 0,5 1 2012 2013 2014 2015 2016 2017 2018 figure 4. the rha for industrial and trade enterprises in the period from 2012 to 2018 figure 5. the rha for construction enterprises in the period from 2012 to 2018 baltic journal of economic studies 60 vol. 6, no. 5, 2020 based on the assessment of hidden capital, we will proceed to the assessment of its components. human capital. there are various approaches to the assessment of human capital, and the approach based on the method of capitalization of personnel costs is widely recognized (burkynskyi & horiachuk, 2014; koritckii, 2013). hc = s / cr , (10) where: hc is human capital, s is salary for accrual on it, cr is capitalization rate. the capitalization rates used were the same as when calculating the public value of enterprises by type of activity. calculations for the period from 2012 to 2018 show that the average share of human capital in the total capital of enterprises in the country is 26.9 %, the smallest – in trade and agriculture, respectively, 18.8 % and 20.3 %, and the largest in transport – 36.6 % (table 3). table 3 average share of human capital in the total capital of enterprises by type of activity in the period from 2012 to 2018 share of human capital, % total 26.9 agriculture 20.3 industry 30.3 construction 30.6 trade 18.8 transport 36.6 leased fixed assets. according to the provisions (standards) of accounting in ukraine, leased fixed assets are accounted for in off-balance sheet account 01 “leased non-current assets”, their value is not taken into account in the total amount of assets of the enterprise. this allows you to avoid double accounting if we are not talking about one specific enterprise, but about all enterprises of a separate type of activity or all enterprises of the country, because leased fixed assets are accounted for on the balance sheet of the lessor’s enterprise. natural capital. in ukraine, minerals, agricultural land and other natural resources are mainly state property. therefore, they are not taken into account on the balance sheet of enterprises. that is, they are hidden assets that can be very significant for creating the gross value added of enterprises, for example, in the field of agriculture (land) or the extractive industry (minerals). the value of natural resources is determined according to their assessment in the relevant markets or with the involvement of experts (appraisers). the assessment of the value of the agricultural land involved can be carried out based on rent for a 20year period. the value of the land used by agricultural enterprises is calculated based on the fact that the share is 80 % of the total volume of agricultural land used. the area of land used by agricultural enterprises in the period from 2012 to 2018 fluctuated slightly and averages 21.2 million ha, and the cost increased 3.2 times due to a significant increase in rent and reached 720.8 billion uah. social capital. this type of capital will be understood as the capital of the internal organization of the enterprise and the capital of its external environment. the second component will be considered as an external institutional environment related to the state of the market, the effectiveness of public administration, corruption and other factors. social capital can have a negative impact on the creation of gross value added and can be negative. ronald becker, who identifies human capital, structural capital and social capital in the structure of intellectual capital, points out this possibility. he focuses on the existence of negative human capital, negative structural capital, and negative social capital. he explains the paradoxical nature of this phenomenon by saying that not every element of intellectual capital contributes to making a profit. ronald becker writes, “the examples of negative intellectual capital in an organization have included a strong commitment to old methods that prevent your people from reaching their potential” (lekarkina, 2017). this provision at first glance raises the question of whether capital can be negative. in support of ronald becker’s statements, it should be added that there are other factors that relate to the components of social capital and that can negatively affect the creation of added value and, accordingly, be considered as negative capital. in the conditions of ukraine, these are inefficient government activities, unsatisfactory quality of the legislative and regulatory framework, low level of compliance with laws and regulations, and a huge scale of corruption that covers all levels of government and society. accordingly, we can talk about the possibility of negative values of social capital. based on the above-mentioned the assessment of social capital for an individual enterprise is proposed to be carried out as follows table 2 average share of hidden assets in the total capital of enterprises by type of activity in the period from 2012 to 2018 share of hidden assets, % total 33.7 agriculture 70.1 industry 16.8 construction 14.3 trade 34.0 transport 54.4 baltic journal of economic studies 61 vol. 6, no. 5, 2020 sc = ha – hc – lfa – nc (11) where: sc is social capital of enterprise; ha are hidden assets of enterprise; hc is human capital of enterprise; lfa are leased fixed assets; nc is natural capital. and for the type of activity or all enterprises in the country, taking into account the nature of accounting for the lease of fixed assets, sc = ha – hc – nc (12) where: sc is social capital of enterprise; ha are hidden assets of enterprise; hc is human capital of enterprise; nc is natural capital. calculations of social capital in the total capital of enterprises by type of activity for the period from 2012 to 2018 are presented in table 4. they show that the average share of social capital in the total capital of enterprises in the country is only 3.5 %, the largest in agriculture – 31.3 %, in transport and trade, respectively, 17.8 % and 15.2 %, and the smallest in industry and construction, moreover it is negative (-13.5 % and -16.4). table 4 average share of social capital in the total capital of enterprises by type of activity in the period from 2012 to 2018 share of social capital, % total 3.5 agriculture 31.3 industry -13.5 construction -16.4 trade 15.2 transport 17.8 high values of the share of social capital in the case of agriculture can be explained, firstly, by the lack of a land market in ukraine and, accordingly, an underestimation of the value of land, and secondly, by the significant export potential of the industry. in the case of transport – a favorable geographical location at the crossroads of trade routes and a significant potential for exporting services. the negative value of the social capital in industry can be explained by the process of deindustrialization, low technological level and corresponding outflow of skilled labor abroad, high loan rates and lack of working capital. the structure of the total capital of ukrainian enterprises by type of activity, taking into account the hidden assets in the period from 2012 to 2018, is presented in table 5. in the total capital of ukrainian enterprises, the share of hidden assets is 33.7 %, in agriculture and transport this share is more than half, respectively 70.1 % and 54.4 %. in industry and construction, only 16.8 % and 14.3 %, this is largely due to the negative values of social capital. 5. conclusions on the grounds of a methodological approach based on the identification of generic concepts and essential features, a generalized definition of the concept of “hidden assets” is proposed, which covers all the variety of points of view on this phenomenon. analysis of existing methodological approaches to the assessment of hidden assets has shown that they have significant methodological shortcomings and difficulties in applying and collecting the necessary initial data. methodological bases for estimation of hidden assets are proposed based on the defined concept of “public value of an enterprise” as the sum of all assets used by an enterprise to create gross value added. calculations have shown that the average share of hidden assets of ukrainian enterprises in the period from 2012 to 2018 in the total volume of all assets is 33.7 %, and by type of economic activity from 14.3 % in construction to 70.1 % in agriculture. the share of human capital of ukrainian enterprises in the period from 2012 to 2018 in the total volume of all assets is 26.9 %, and by type of economic activity from 18.8 % in trade to 36.6 % in transport. the share of social capital of ukrainian enterprises in the period from 2012 to 2018 in the total volume of all assets is only 3.5 %. in industry and construction, it has negative value (-13.5 % and -16.4 %, respectively). table 5 structure of capital of ukrainian enterprises by the type of activity, taking into account the hidden assets in the period from 2012 to 2018, as a percentage balance sheet (recorded) assets hidden assets total fa and ia* reserves ar** other total human capital natural capital social capital total 66.3 19.7 7.9 22.4 16.4 33.7 26.9 3.3 3.5 agriculture 29.9 5.8 5.7 13.6 4.8 70.1 20.3 18.5 31.3 industry 83.2 32.6 10.4 26.7 13.5 16.8 30.3 0 -13.5 construction 85.7 10.7 14.3 31.1 29.7 14.3 30.6 0 -16.4 trade 66.0 4.7 12.5 34.0 14.7 34.0 18.8 0 15.2 transport 45.6 31.4 2.0 6.8 5.4 54.4 36.6 0 17.8 * – fa and ia (fixed assets and intangible assets) ** – ar (accounts receivable) baltic journal of economic studies 62 vol. 6, no. 5, 2020 hidden assets are the missing link in determining the level of capitalization of an enterprise. all other things being equal, the difference in the level of economic development of enterprises can be explained by differences in the volume and structure of their hidden assets. hidden assets can be the key to creation of an 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(2011). value added intellectual coefficient (vaic): a critical analysis. journal of intellectual capital, vol. 12(4), pp. 531–551. doi: https://doi.org/10.1108/14691931111181715 svanadze, s., & kowalewska, m. (2015). the measurement of intellectual capital by vaic method – example of wig20. online journal of applied knowledge management, vol. 3(2), pp. 36–44. available at: http://www.iiakm.org/ojakm/articles/2015/volume3_2/ojakm_volume3_2pp36-44.pdf sveiby, k.-e. (2010). methods for measuring intangible assets. available at: https://www.sveiby.com/files/ pdf/1537275071_methods-intangibleassets.pdf viazemskaia, v. (n.d.). skrytye aktivy v biznese [hidden assets in business]. available at: http://www.markint.ru/ skrytye-aktivy-v-biznese-2/ baltic journal of economic studies 110 vol. 5, no. 5, 2019 corresponding author: 1 admiral makarov national university of shipbuilding, ukraine. e-mail: volodymyr.parsyak@nuos.edu.ua orcid: https://orcid.org/0000-0002-4756-8977 2 admiral makarov national university of shipbuilding, ukraine. e-mail: eyzhukova@gmail.com orcid: https://orcid.org/0000-0001-8966-8354 doi: https://doi.org/10.30525/2256-0742/2019-5-5-110-120 alternative strategies for construction of the organizational structure of management of the marine industry cluster in ukraine volodymyr parsyak1, оlena zhukova2 abstract. the purpose of the paper is to to elucidate the authors' attitude to the nature of clusters that have become widespread in marine economic activity, find out the motives that lead to their initiation, to demonstrate the variants of their organizational structure of management and the sources of funds needed to perform the delegated functions, in the context of current ukrainian legislation. methodology. towards this goal the authors collected, systematized and analyzed a number of facts obtained from numerous publications in writing and electronic domestic and foreign publications. results. commodity diversity, which is so welcomed by consumers in developed countries, is the result of a strenuous competitive battle between suppliers at the market of alternative products and services. it is carried out not only among consumer goods producers, but also covers shipbuilding corporations and many related firms, among which there are medium and small ones in value creation chains. often, they are concentrated in specific regions and in one way or another determine its industrial specialization. competition does not bypass any country, although sometimes there is a sense that only those who keep marching the thorny paths of economic, political and social reforms are affected. for this reason, everyone is constantly looking for tools to reinforce their strengths over opponents in the fight for solvent purchasers. clusters occupy a valid place among such tools, and it is generally recognized. in the countries of the european union, clusterization has been raised to the level of public policy, strategies of behavior of entire industries and certain enterprises. in domestic areas, it is often that not everybody can clearly understand even the nature of clusters. practical implications. the word "cluster" is etymologically derived from english and means "association" or "union". the ukrainian legislator, while building the institutional basis for economic development, does not use this term, but outlines its varieties and formalizes procedures for starting unions. for this reason, domestic clusters are single and are rather examples of an initiative of the territorial communities. one of such initiatives can be considered an offer from a number of enterprises, organizations and authorities created in the mykolaiv region. it is formalized in the form of the mykolaiv maritime service cluster. value/originality. observing the first steps of the initiators shows that the enthusiasm of the pioneers is unlikely to be enough to solve all the tasks that have already been set up, and even more the tasks for the cluster to be solved in the future. thus, there is nothing to do without creating at least a small administration. since the top of the cluster is an unprofitable organization, according to the current legislation, it is most viewed by such organizational and legal forms as a cooperative (servicing) or a public union. if you consider them, you have an opportunity to create a budget and use the funds received for the implementation of approved plans, programs and projects. key words: economy, maritime industry, clusters, maritime clusters, management, organizational structure of management. jel classification: м10, м11, м13 baltic journal of economic studies 111 vol. 5, no. 5, 2019 1. introduction a market economy is based on competitive relations. this truth needs no proof because it is an axiom. competition motivates the implementation of innovations (in the technological, product, management spheres). through their agency, they create a unique offer from the manufacturers, meeting the most demanding needs of consumers. from this point of view, the benefits of competition are undeniable. meanwhile, like for any "medal", competition has a "downside": competitiveness. and in its essence, it has to do with determining the winner and the loser. ideally, as in sporting contests, everyone has approximately equal options at the start, but only the best can use them with success. in an entrepreneurial environment, the slogan associated with the name of the baron pierre de coubertin, «the most important thing is not to win, but to take part», is not justified. according to the statista portal (statista, 2019), in the last three years, france has emerged as the record holder for corporate insolvency in the european continent. about 54 thousand of enterprises went bankrupt here in 2018 alone. in germany this number was up to 19.5 thousand. it is an open secret that shipbuilding also belongs to those segments of the planetary maritime industry where fierce competitive confrontations are taking place. they are complicated, in particular: by the original imbalance of shipowners' demand and the offer of shipyards to the benefit of one side or the other; by the problems with providing construction sites with skilled labor. and one should not think that only ukrainian shipyards suffer from its shortage. complaints about the need for staff (workers, engineers) are heard in bulgaria, estonia, romania, croatia, etc. according to "the wall street journal" (hinshaw, ojewska, 2018), until recently, the polish shipyards actively involved even south koreans’ workers to repair nato submarines and warships. for example, in 2014-2016, they repaired a two-ton patrol ship of the danish navy. it is not difficult to imagine the fuss made when it was learned at the nato’s headquarters; by the justified requirements of governments and international organizations to improve the environmental "cleanliness" of ships. in recent years, they have become much safer, but they are still among the major environmental pollutants (in particular, ballast water, sulfur and nitrogen oxide emissions from the exhaust gases of the main and auxiliary engines); by the protectionism which almost every coastal country resorts to in order to support a domestic producer1. it is quite possible to understand those who have power. the labor-intensive manufacturing, despite all attempts of its automatization, provides a lot of jobs. the european commission is proud to announce that more than 150 large shipyards operate within its control. thanks to the orders received, they attract more than 120 thousand of the employees. their efforts generate annual revenue of up to €60 billion (shipbuilding sector, 2019). we must also add almost the same amount in related fields: from metallurgy to radio electronics. how can you not take care of "your people" here? but to put up with overprotection means to accept market distortions, to push competition to the "red line" by which it acquires signs of dishonesty, it is all contrary to international agreements. sometimes it seems that a competition in the shipbuilding industry is selective and particularly our country has suffered most from it. however, to think in this way is to be wrong. we take it from the experience of the united states, which, after world war ii, was the industry's absolute leader (klein, 2015). today, america is far from the first place in the world rating of commercial shipbuilding with a small fraction of its volume. who knows what would happen, if there was no order from the military to maintain the combat readiness of the largest known naval armaments. the fact is that under the local laws the contracts on this matter must be concluded exclusively with domestic shipyards. however, similar projects abroad would be cheaper. shipbuilders in europe are also facing strong competitive challenges. they are solved in several dimensions: firstly, public protection with a focus on enhancing the innovative advantages of continental firms. just one example from this series is the 2018 navis research and innovation program launched by the european commission. the purpose of the novation is to increase the efficiency of marine engineering and flexibility in production networks; secondly, the owners and management of the shipyards take a constructive initiative, invent methods and effective practices to strengthen their market positions by themselves. clusters as the instrument for pooling the potential accumulated by individual organization were among the most productive (parsiak, 2018). speaking of industry, comparing them with other common forms of business combination has revealed a number of features: a) informal and flexible integration of large, medium and small businesses, technology centers, engineering firms that mutually benefit from collaborating within a common value creating chain; b) high innovation: a source of added benefits against key competitors focused in china, south korea, japan, and now algeria, bangladesh, vietnam, india, indonesia, 1 one of the most common forms of the protectionism is an export subsidy. export subsidies take the form of numerous government benefits: direct financial compensation of the difference between actual costs and prices setting in foreign markets, tax reliefs, aid for the development and implementation of new technologies, training and skills development of the staff, etc. baltic journal of economic studies 112 vol. 5, no. 5, 2019 malaysia, singapore, the philippines, etc. they prove themselves the best in the following segments: – creation of engineering complex ships (ferries, specialized research vessels, the "ro-ro" vessels, chemical carriers, offshore service and supply vessels, seismic vessels); – perfect meeting of the most demanding needs of customers of "lexus-class" ships (cruise ships, ocean megayachts); – construction of offshore wind parks; eco-friendly or "blue" vessels that reduce harmful emissions into the atmosphere and use bunker-saving technologies. at the same time, we consider it necessary to emphasize the importance of a comprehensive and systematic approach to uplifting other businesses that, through their desire to use the resources of the oceans, constitute the phenomenon known in political, professional and public circles as "sea economy " or "blue economy ". 2. brief literature review seeking to achieve this goal, we have enthusiastically discovered an incredible number of extremely interesting publications of our colleagues in ukraine and abroad. for some of them, a cluster is an integral part of real economic life. therefore, they resort to generalizing the experience gained (finnish maritime cluster, 2018; finnish maritime cluster, 2019; ffowcswilliams, 2016), develop practical recommendations for those who take the first steps on the clusterization path (the role of maritime clusters, 2008; porter, 1998; ethekwini maritime, 2019; claster maritime, 2019), showcase examples of building institutional foundations for the implementation of a cluster approach, which is raised to the level of public policy, for example, in the eu (shipbuilding sector, 2019; maritime clusters unlock, 2015). not once or twice there has been coverage of examples of cluster application in the domestic territories (voinarenko, bohatchyk, 2014; hridniev, 2018; repp, 2018). together with the positive effects, the authors of these publications openly analyze the problems faced by the initiators of the respective novations. but the "blue" topic is not mentioned in the discussions. this is all because we do have access to the black and azov seas, we do remember the glorious campaigns of the ukrainian cossacks to the walls of the constantinople fortresses, the labor victories of the past generations of shipbuilders and naval navigators. the purpose of the paper is to highlight our relationship to the nature of clusters, to demonstrate the organizational structure of maritime clusters and to find out the motives that lead to their initiation. in order to get the desired one, the authors have collected, systematized and analyzed a number of domestic and foreign publications in writing and electronic concerning the views on the essence of clusters, the reasons for their dissemination in industries for the creation of complex engineering structures. we were particularly interested in the information about the features of management that is able to preserve the unity and coherence of the actions of the economically independent economic entities. 3. what is the meaning of "a cluster" category? firstly, let us clarify what term is called "a cluster" and how it differs from the other known types of business alliances. in search of the truth, we turn to the repositories of human wisdom: explanatory dictionaries. for obvious reasons, let us start with the english-language sources we need. the one created at cambridge offers the following versions (cambridge dictionary, 2019): 1. noun: "a group of similar things or people, which are close together, sometimes surrounding something. for example, there are mentioned a cluster of galaxies, a cluster of fans of a personality (film actor, politician, athlete), a cluster of high-tech enterprises in an industrial park (e.g. cedar crossing industrial park, rotterdam harbor, yanbu industrial city), a cluster of computers connected together to work as one powerful computer2». further, thesaurus contains synonyms: ensemble, generation, subgroup, collection, dataset, anthology, and even sheaf. why not? especially when it comes to a bunch of stems of cereals of a certain kind (wheat, rye, oats, etc.), there are no closer. 2. verb: to form a group of similar things or people, sometimes by surrounding something; to happen a lot in the same small area or in a small group of people. for example, grandchildren cluster their grandmother to listen to a fairy tale, students cluster around the department's noticeboard to read a message from a teacher about the results of a recent module academic performance rating. longman dictionary of contemporary english (longman, 2019) reinforces the previous thought: a group of things of the same kind that are very close together. and further explanation: a cluster of low farm buildings, a cluster of teachers of small school providing curriculum support for each other. in the latter case, even the phrase "cooperative cluster" is used. we will still have the opportunity to recall this not accidental focus, as it turned out. the oxford dictionary 's authors adhere to the assumption that etymologically the word "cluster" is derived from the old english "clot" (lexico dictionary, 2019). for example, a blood clot of clot of fallen leaves. 2 a similar definition connected to the electronic computing machines is found in the regulation "on the register of information, telecommunication and information and telecommunication systems of executive bodies, as well as enterprises, institutions and organizations related to their sphere of their management", approved by the cabinet of ministers of ukraine in 2005 (polozhennia, 2005) baltic journal of economic studies 113 vol. 5, no. 5, 2019 their "homogeneity " in the rainy autumn days, full of sadness, is obvious. unless, of course, abstracting from the memories that are reminiscent of: once upon a time, each one of them that has fallen into a ragged wet pile in a remote corner of a city park was caressed by the light wind on the branches of trees of different breeds. thus, as we can see, formally the term "cluster" translates from english as "association", "union". in everyday perception the semantic charge of these words in the ukrainian language has different shades. association is something disordered, the agglomerate of something that uses their direction. the union, on the contrary, gives rise to the idea of an organized system of its components. thus, the meaning of the term each time is determined by the contexts of use, the nature of the integrated objects and, finally, the tasks that the researchers are facing in course of a particular process or phenomenon. this can probably explain that the national legislator, while forming the institutional basis for the development of the ukrainian economy, has not mentioned the clusters yet. instead, in art. 120 of the economic code of ukraine we find a section devoted to the definition of organizational and legal forms of associations in the business environment (table 1). the analysis of the information provided and other provisions of the legislative act made it possible to determine the legal bases on which their creation is based: a) only legal entities may be sponsors and members of the association. all of them, even after the merger is created, retain the status and corresponding rights of the independent business entities; b) the association acquires ownership of the capital (fixed assets and working capital) transferred by the initiators of creation to its balance sheet in accordance with the contract or charter, and to the property subsequently acquired as a result of economic activities. as a legal entity, the association is not responsible for the obligations of its members, and they, in turn, are not responsible for the obligations of the association; c) function and powers in the centralized management of such, for example, fields as scientific and technical, industrial-economic, marketing, export-import, etc. agreed upon by the founding companies are delegated to the newly formed bodies of the association. the scope of these functions and powers should be enshrined in the agreement or charter of the association. one would think that this can make it final. meanwhile, we are convinced that such a decision will look premature. and here are the reasons: firstly, in 2018, another economic interpretation of the cluster emerged in the ukrainian institutional space. and it concerned not just any field, but the sea. it was contained in a new version of "the maritime doctrine of ukraine for the period until 2035" approved by the cabinet of ministers. in the glossary, among the table 1 organizational and legal forms of associations of enterprises form objective examples contracting a ss oc ia tio n ongoing coordination of the business activities of the merged enterprises, through the centralization of one or more production and management functions, the development of specialization and cooperation of production, the organization of joint productions based on the association of financial and material resources by the participants to meet mainly the economic needs of participants. the association has no right to interfere in the economic activities of the participating companies, but may be authorized to represent their interests in relations with authorities, other enterprises and organizations. 1. association of shipbuilders of ukraine "ukrsudprom" 2. association of international road carriers of ukraine "asmap" 3. association of ports of ukraine "ukrport" c or po ra tiv e combining the production, scientific and commercial interests of the merging companies with the delegation of the individual powers of centralized regulation of the activities of each participant to the governance board of the corporation. 1. "bogdan" 2. "ceramist" 3. "temp 21" 4. "omex" statutory c on so rt iu m achievements by participants of a certain common economic objective (implementation of targeted programs, scientific and technical, construction projects, etc.). the consortium uses the funds provided by the participants, the centralized resources allocated for the financing of the respective program, as well as the funds coming from other sources, in the order specified by its charter. if the objective of its creation is reached, the consortium ceases to operate. 1. "astek" 2. "ecosorb" 3. "ukrtransgaz" 4. "all-ukrainian sociological consortium" 5. "geogelio-astrophysics" c on ce rn centralization of the functions of scientific and technical and industrial development, investment, financial, foreign economic and other activities of the participating companies, as well as other organizations based on their financial dependence on one of them or a group of members of the association. members of the concern give it (them) a part of their powers, including the right to represent interests in relations with authorities, other enterprises and organizations. 1. "nuclear fuel" 2. "zirka-technologies" 3. "ukroboronprom" 4. "ukrpalyvo" source: systematized by the authors (hospodarskyi kodeks, 2019) baltic journal of economic studies 114 vol. 5, no. 5, 2019 key terms identified, we read: "maritime cluster is an informal functional association of similar, related or additional entities of the maritime complex with active channels for business transactions, communications and dialogue that share specialized infrastructure, labor markets and services and share common opportunities or threats" (sea doctrine, 2018). we do not consider it necessary to waste time and distract the attention of our dear readers to "showdown" with the authors of the above definition, since they have not so opened their eyes on the essence of the phenomenon, and in the result distorted the idea of the term by the chaotic agglomerate of the words such as "functional association", "active channels", "additional entities", "labor market", etc.; secondly, almost a quarter of a century the pages of scientific periodicals, impressive monographs, statements of accredited institutions while discussing problems of regional development are pierced by the golden thread of the idea of clusterization. therefore, there is an urgent need to continue the research. in this regard, let us turn to the academic explanatory dictionary of the ukrainian language. it clearly distinguishes the concepts that have come to our attention: association is a whole formed on the basis of a connection, combination of anything. the organizing people based on a commonality of goals, objectives (slovnyk, 1974). we state almost absolute harmony of views with the developers of the economic code of ukraine; assemblage is a large number of people, objects, and more collected in one place (slovnyk, 1978). there is not even a hint of the inviolability of the ranks and the subordination of one will and a high correlation with the definitions of english colleagues. if the enterprises with related activities are added to the list of accumulated objects (which together form the value creating chain), then we will come close to solving the "secret". m. porter helps to put the end. it is the professor at the department of business administration in the harvard business school who is considered by authors of the large number of publications to be the person who first attached attention to clusters (in the assemblage posture) as a tool to enhance the business competitiveness. we offer you to see his take (porter, 1998), presented in outline and completed by the contextual illustrations: 1. cluster is a geographical assemblage of firms in a particular industry. for example, shipbuilding companies, ports, mariculture farms, shipping companies. 2. clusters, which in addition cover a number of enterprises of related industries and other entities capable of enhancing the competitiveness of the first group, to give new impetus to the development of regions. for example, suppliers of specific materials (shipbuilding), components (main and auxiliary engines, navigation equipment, etc.), service providers (engineering, cable and electrical equipment mounting, etc.). 3. clusters with the participation of dealers involved in the created distribution channels and end consumers of products. for example, offshore enterprises: oil and gas platforms, offshore wind parks, service firms that are responsible for building and maintaining their livelihoods. 4. clusters with the participation of producers of educational programs on the formation of professional competences (universities: training of the students, who are the future employees of the relevant enterprises, upgrading the skills of personnel already admitted to work; colleges: assistance to those wishing to master vocational professions), technology developers (research centers), compliance agencies (classification societies). 5. clusters that are of the interest for government institutions and local self-government authorities. they may be attracted by the increase in export of products produced by cluster enterprises, the prospect of job creation, increased economic capacity and, thus, the region's attractiveness to local residents or migrant workers. which of the five mentioned is the best? the answer to this question lies in the plane of measuring the competitiveness of each of those who are in the assemblage or find the benefits for themselves associated with joining it. it does not prevent the competition: the cluster is not a cartel. the benefits can rather arise from establishing cooperative relationships with all businesses capable of helping to start an innovative business quickly, at a moderate cost, in accordance with recognized quality standards. let us look at the structure of one of the clusters (with a total added value of $ 24 billion) introduced in norway (table 2). obviously, we have real confirmation of at least one of the formats outlined above. the following example is the finnish maritime cluster (fmc), which is believed by its founders to stand a good chance of becoming the new cornerstone of the economy, given its role as a key operator of trade and well-being in the scandinavian country (finnish maritime cluster, 2019). it is not surprising, since three thousand participating companies serve almost all segments of the global market (transportation of goods by all types of cargo and passenger ships, offshore oil, gas and energy production from renewable sources, the production of biological resources and their processing, etc.), and value creating chains consist of components already known to us: engineering, production, operation and service. shipping companies (there are 26 of them; it makes an impression if you recall the size of the country on a geographical map) have 108 ships in the external communication only. about 700 vessels operate under the finnish flag. together with the other enterprises of baltic journal of economic studies 115 vol. 5, no. 5, 2019 the maritime economic complex (in particular, ports and port operators), the shipping industry is a powerful generator of technological and environmental innovations. including the reduction of harmful emissions into the environment, the observance of the applicable norms in this regard and those which are planned for the near future. the finnish shipowners' association, the finnish maritime industries federation, the finnish port association and the finnish port operators association joined the development of fmc and the acceleration of "blue" growth. the efforts they make are coordinated by the centrum balticum foundation and funded by the european marine and fisheries fund and the national center for economic development, transport and the environment. the list of examples from other countries could be continued. let us say more: in 2005, the creation of the european network of maritime clusters (enmc) was announced in paris. in pursuance to the organizational and legal form, it is a confederation covering more than sixteen national maritime clusters (nmc): sea vision uk (united kingdom), dutch maritime cluster (netherlands), federazione del mare (italy), bundesministerium fur wirtschaft und technologie (germany), cluster maritime francais (france), marine cluster bulgaria (bulgaria), etc. from what we already know, we can make generalizations about the most common components of national clusters and the relationships among them (figure 1). it is obvious that as soon as the prospect of enhancing its own competitive advantages emerges, business raises integration to a higher level. 4. motives that encourage the creation of clusters observation of foreign economic practices revealed positive consequences of nmc activity: reducing the costs associated with operating activities through the occurrence of the "economies of scale". for example, combining inbound orders opens the prospect of receiving it from suppliers with substantial volume discounts; concentration of new knowledge and creative ideas that enhance the competitiveness of everyone, and at the same time, the whole group of participants together by distributing customized information sharing channels (for example, in foreign markets in the joint struggle for export orders). and the more they are involved in the endogenous data transfer system, the more information about markets, inventions and technologies becomes available to them; separation into service cooperatives or release the units into the “free market floating” (for example, table 2 structure of the national maritime cluster sub-sectors scope of activities share in av*, % shipping operation of ships and other floating offshore structures (drilling rigs, etc.) 54 services (engineering, ship brokers, insurance companies, banks, classification societies) financial, legal, technological, port and logistics. design of ships. sale of component parts and ship equipment, ship agenting 21 production of a ship equipment виготовлення усіх видів обладнання для суден та інших морських плавзасобів і споруд 18 shipbuilding (shipyards and ship repairing yards and workshops) construction, maintenance, repair and modernization of ships and other floating offshore structures 7 *explanation: av – added value source: o sudostroenyy, 2015 national cluster regional clusters professional associations non-associated firms figure 1. structure of the national cluster source: formed by the authors baltic journal of economic studies 116 vol. 5, no. 5, 2019 such as marketing, procurement, engineering); they are previously engaged in solving the same tasks, overburdening the corporate budget. the benefit is also for the participating companies to get rid of inefficient business processes through the use of the strengths of emerging partners through conducting the outsourcing contracts. this is good news that the views expressed in this regard are in line with the views of the european union commissioner for the environment, maritime affairs and fisheries vella k., which he made at one of the enmc meetings: "thanks to the clusters that are now all over europe, businesses are able to network on innovation, create economies of scale, and cooperate with each other nationally and internationally " (maritime clusters, 2015). meanwhile, other motives have been identified that fuel the interest in clusterization in the maritime economy: 1. there are conflicts related to the enterprises located in the coastal waters and territories (in addition to shipbuilding, there are also shipping, ports, fishery and fish-processing, mariculture, extraction of building materials, marine energy, recreational activity) connected with encroachment on limited marine space, especially when taking into account the growing technological power and technical equipment of producers. in such circumstances, the integration of businesses within the clusters creates a favourable base for establishing effective maritime activities management, including the usage of spatial planning technologies. in this context, the mission of national maritime administrations (related to clusters) is important: the unbiased, competent arbitrators for whom the interests of the country and local territorial communities are an absolute priority over the interests of certain entrepreneurs and, moreover, their own needs. 2. the cluster is a tool for protecting important economic values. as far as the eu is concerned, this includes 25% of the world's maritime trade, 40% of the world's fleet, dominance in the offshore renewable energy sector, the fantastic rise of cruise tourism, etc. (the role of maritime clusters, 2008). these properties of the previous generations of the continent’s inhabitants must be preserved and multiplied. the same applies to the regions of our country that are on the shores of the black, azov seas and the kerch strait. 3. for socially responsible business, clusters open the prospect of consciously combining purely economic interests with generally recognized social values and concern for the environmental health of the oceans (to ensure its sustainable development, preserve resources for the benefit of future generations of the planet) for their participants. to this end, the innovations that require considerable investment are inevitable. once again, integration provides benefits. with pride for our countrymen we state that the first sprouts of clusterization had their effect on the domestic shipbuilding. the corresponding initiatives were made by scientists, businessmen, shipyard management and engineering centres in mykolaiv. firstly, most of them are in the most productive phase of their own life cycles, with enough energy and authority to instill the enthusiasm of colleagues, formulate relevant objectives and determine the best methods for solving them. secondly, we are dealing with the "bottom-up" development technology, which shows a great demand for clusterization. and, true to form, it comes from enterprises in the real sector of the economy. the city authorities, as well as reputable international financial organizations, were in favour of the idea, particularly, the european bank for reconstruction and development. with its support, a series of regional roundtables were held with the involvement of experts, academics, and practitioners in 2018. it is characteristic that when starting the discussion with the issue of small ship design, creation the infrastructure, needed for their maintenance (especially during the offnavigation period), ship repair, the participants expanded their ideas about the subject of discussion, became aware of the pressing problems of the industry. as a result, in the spring of 2019 during the european maritime day event signed a memorandum on the creation of a maritime service cluster by nine entities. the idea is practical, because as of the end of 2019, the southern territories of the region are located at least six shipyards and ship repairing yards, nine ports, load/ unload complexes and terminals, seven shipbuilding engineering-related offices, a number of educational institutions (from professional lyceums and colleges to the world-famous admiral makarov national university of shipbuilding). it is quite enough for the first time to take the world experience (figure 2). this truth is needed to be realized necessarily by all the current and potential participants to get down to business quickly, because nobody except us will help us become successful. a competent staff (workers, engineers, managers) is necessary for reaching this goal: it is a matter of educational institutions and their direct interest. the availability of innovative, knowledge-intensive jobs can at least reduce the dangerous traffic of young people from abroad, increase the number of applicants in student audiences, strengthen the economic security of educational centres, reduce their humiliating dependence on the whims of political elites in power. business will grow and new investors will be attracted to the cluster if the region differs in a proper business environment: security, modern infrastructure in all its multiversity (industrial, social). here the local authority has to say its word, although, not only the local one. there is much depends on the favourable legal climate in the country as a whole. it is characterized, in particular, by such features as the business security (from raiding, baltic journal of economic studies 117 vol. 5, no. 5, 2019 criminal trespassing, scrupulous state control), equal rights in fair competition, impartiality of the judicial system. so, the motivational circle is closed. at least it is so from theoretical perspective. and all this is based on good will, without any external coercion. 5. organization of cluster management the cluster is a surprisingly democratic system. it does not in any way limit the desire of each participant to achieve an advantage over the other, but at the same time, it gives the opportunity to establish long-term partnerships based on mutual trust. it is just like an elite club of key interest: increasing productivity and efficiency. the main forms of cooperative are: meetings (seminars, conferences, roundtables), exchange of information, lessons learned, best practices, policy initiatives, research findings. "these are not so difficult events": that is how everyone thinks who has never participated in them, and, moreover, has never been in the organizing committee. oh, how wrong you are, ladies and gentlemen! as this issue is beyond the scope of our research, we illustrate with clarity the key stages of the preparation and conduction of the event: the choice of the appropriate (according to size, decoration, equipment) premises, its division into zones (conference room, buffet, meeting room), the media (sending invitations, press release), selection and preparation of speakers, moderator, support staff, preparation and sending the invitations to participants, approval of the event program and control over its implementation, preparation and distribution of final documents, etc. all this and many other really important things someone, somewhere and someday has to do. and beyond that: to create and maintain an official cluster site; to publish periodic newsletters, brochures, to participate in fairs, exhibitions, presentations; to conduct educational events, to establish links with academic centers on this subject; to arrange meetings with foreign cluster visitors, representatives of public and academic circles, business, media; to support joint research projects, to establish relationships with grantmakers and donors. the conclusion is obvious: the cluster needs "management". we deliberately put this word in quotation marks because, in fact, it is not about management, but about delegating functions and allocating funds for the organizational support of the discussion and decision-making processes that are on the agenda. it is futile to hope that the case will be “pulled out” by individual enthusiasts. their passion is useful to keep the fire engaged, but keeping its appropriate intensity involves teams of professionals. logic and intuition suggest images for this facilitation to likely manifest itself, such as: firstly, the cluster management functions are assumed by the cluster participants on an agreed basis (from project to project or for a specific period: quarter, halfyear, year); secondly, the involvement of competent persons in a newly created unit at one of the cluster participating companies with the obligation for others to enter into agreements to obtain, for example, consulting services from the partner, to offset the costs we have mentioned; thirdly, the integration of cluster management into the structure of the local chamber of commerce and industry. the peculiarity of these three options is that access to each of them prevents the emergence of another components of a refional cluster shipbuilding cluster shipping cluster ship engineering cluster port cluster maritime recreational cluster cluster of mariculture enterprises cluster of educational institutions local self-government authorities figure 2. perspective design of a maritime service cluster source: formed by the authors baltic journal of economic studies 118 vol. 5, no. 5, 2019 legal entity. at the same time, there is an effect of double subordination of the employees of the cluster management body, eliminating them from the disposal of financial resources, which can provoke serious confusion and complications in communications. let us not forget about the taxes: additional expenses; fourthly, the creation of a cluster management apparatus in an organizational and legal form that complies with the current legislation in the country. the analysis showed that a correlative benefit can be found: in the law of ukraine "on civil associations" (pro hromadski obiednannia, 2019 ). it opens the prospect of a public union: a species of a public association founded by legal entities under private law. both legal entities of private law and individuals may be involved as members (participants); if it is guided by the provisions of the law of ukraine “on cooperation” (pro kooperatsiiu, 2019), it is likely to be a matter of service cooperative. it is formed by interested legal entities to provide them with services related to conducting business activities. it may happen that the cooperative (with the permition of the board) will be able to provide the relevant services to other persons, but their volumes should not exceed 20% of the total turnover. with regard to "internal" clients, it is necessary to determine what services they will receive, figuratively speaking, for free, and for which it should be charged a reasonable fee. it is obvious that we are dealing with a legal entity, with all the relevant attributes: an independent balance, stamp, current and other accounts in commercial banks. confirmation of the full reality of these latter alternatives has been found in the coastal regions of european countries as well as far away: in the republic of south africa (ethekwini maritime cluster, 2019). there in the city of durban, the maritime cluster was set up precisely as a non-profit organization with a mandate to support and promote maritime businesses, to overcome the non-conformities between the government's industrial policy and private enterprise. it is characteristic that, like mykolaiv, durban plays an important role in the region as a transit region, and the geographical location of rsa, by analogy with ukraine, creates favorable prospects for the rise of trade and other types of maritime economic activity. the organizational structure for managing a cooperative (public union) may look like as shown in figure 3. we think that there is no need to convince anyone: the number and quality of staff of a cooperative is determined by the satisficing principle. that is, it depends on the structure and complexity of the functions delegated to it. we found out that there are only three employees in the administration of the luxembourg maritime cluster: the chairman, the managing director and the assistant manager (claster maritime luxembourgeois, 2019). it is as obvious as the desire to involve in the board the persons with impeccable reputation, the only names of whom confirm the justification of the idea (ffowcswilliams, 2016). their generally recognized virtues, enthusiasm, constructive initiative must make a positive impression on officials, on probable philanthropists, and on the wider public, including the media, to be the key to realizing the intended effect: increasing the competitiveness and efficiency of the case set up. and this is the most important thing for business owners involved in the cluster. their efforts are enhanced by the impeccable management of the executive directorate. together, they open the way to new technologies, products, markets, and the explosion of maritime economic activity in the region. the cluster is not a business addon. it works as an accelerator and is expedient only if this mission is fulfilled. concerning the budget of the cooperative (public union), its revenue side, according to the norms of national legislation, is formed from sources that can be seen in tab. 3. the analysis of the european experience shows that the list mentioned can be expanded with the help of private funds or donations from those who stand with the goals that the cluster aims to achieve in this way. they receive significant assistance (almost 50%) general meeting of the cluster: founders of the cooperative board executive director supervisory council revision group (auditor)chairman executive directorate staff of the executive directorate 1 2 3 … n figure 3. structure of the cluster maintenance cooperative source: systematized by the authors (pro kooperatsiiu, 2019) baltic journal of economic studies 119 vol. 5, no. 5, 2019 from their countries and the eu funds (for example, european structural and investment funds, horizon 2020): grants, technical assistance, export consultancy, educational programs, monitoring and evaluation of activities, infrastructure development, startup financing, promoting environmental efficiency, building a new cluster management organization, co-financing business projects on the basis of public-private partnerships, etc. (cluster programmes in europe, 2008). this is not "philanthropy " of officials at the expense of taxpayers, which we see somewhere in ukraine. it is about motivating the most recognized development areas: innovation, research and development, balancing regional industrial systems, accelerating the high-tech or export-oriented businesses, enhancing the chances of small and medium-sized enterprises, key competences and upgrading human capital, etc. of course, the respective priorities vary from country to country, region to region, from the time period in question. 6. conclusions "cluster" is one of the most used terms in modern management. someone applies it consciously, understanding the nature and purpose of the phenomenon. someone is paying tribute to fashion and, rather, moving downstream than actually realizing the beneficial consequences of using regional clusterization in practice. for this reason, we have frequent examples of too long period of time between generating a relevant initiative and organizing a cluster of businesses that are in fact linked to the value creating chain. and, unfortunately, sometimes the intentions do not develop from the decorations. therefore, the authors hope that this material will fulfill at least its informational and educational mission. in turn, awareness of the subject matter of the research subject will open up for clusters the prospects for the benefit of regional economies. the topic of clusterization is of particular importance in the context of the increasing role of the blue economy in solving the problem of providing humanity with the resources necessary to meet its needs. this assertion is brilliantly proven by the experience of the enterprises in the european countries that are directly related to maritime business. the clusters they have created intensify innovation, save on operating costs, strengthen the position of continental commodity producers in the highly competitive global shipbuilding markets and related industries. the accumulated experience is a model for imitation for the enterprises, state authorities and local self-government. the organization of regional clusters should not be delayed, at least, in order to look contemporary in the eyes of foreign partners. no matter what one says, but first you judge how nice. meanwhile, too forced rush would be a mistake. the bureaucratic component of the association should not cause concern for the participating companies. moreover, the cost of its maintaining should return positive results, some of which were have been introduced in the article. and that will depend on the person who will be invited to the positions of manager and staff-executors. continuing the folk wisdom, let us remind you: then you judge how wise! table 3 budget sources of the cooperative subject characteristic property joining fee cash or other asset non-refundable contribution paid by the entrant membership fee monetary non-refundable contribution periodically paid by a cooperative member to support the ongoing activities of the association target contribution monetary or other asset contribution of a cooperative member to the dedicated fund for the specific tasks of the cooperative share asset refundable contribution of the cooperative member (associate member) in the creation and development of the organization. at the physical level it can be property, money, property rights, land; additional share voluntary monetary or other refundable asset share of a member (an associate member) of the cooperative made over the share in the share fund of the cooperative source: systematized by the authors 9 (pro kooperatsiiu, 2019) references: cambridge dictionary. claster (2019). retrieved from: https://dictionary.cambridge.org/dictionary/english/ cluster cluster maritime luxembourgeois (2019). retrieved from: https://www.cluster-maritime.lu/the-cml-team/ 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(in ukrainian) baltic journal of economic studies 54 vol. 5, no. 5, 2019 corresponding author: 1 borys grinchenko kyiv university, ukraine. e-mail: kazakoksana1974@gmail.com orcid: https://orcid.org/0000-0003-2088-9022 2 igor sikorsky kyiv polytechnic institute, ukraine. e-mail: obelectv@ukr.net orcid: https://orcid.org/0000-0002-1553-5150 doi: https://doi.org/10.30525/2256-0742/2019-5-5-54-60 determinants of investment sphere development in the context of the modern economic paradigm oksana kazak1, tetyana obelets2 abstract. the aim of the article is to illuminate the modern paradigm of the globalization economic environment, which shows the gradual end of the decade of “crisis-free” growth of the world economy and, accordingly, the nearing to the next global economic crisis; to cover the importance of attracting investment and implementing a specific national industrial policy as one of the key factors of development; to outline the problems of prevention, forecasting and analysis of risks arising in the investment sphere in the context of providing conditions for sustainable development of the ukrainian economy. the subject of the study is: the monitoring of investment sector indicators that determine the potential of economic development and provide an analytical assessment of the risks posed in the investment sphere in the context of ensuring the conditions of sustainable development of the ukrainian economy. methodology. the article uses the complex approach with the application of methods of simulation and econometric modeling for analytical estimation of gross fixed capital formation as a key investment indicator in the current economic conditions of ukraine. results. the conducted study clearly demonstrates not only the presence but also the obvious deepening of the imbalance between the current state of attracting foreign investments and actual needs in technological and physical renewal of the production sphere. the consequence is a real threat of loss of potential for economic development. some measures have been identified to improve the investment climate, and the key ones are the provision of state support for reforming the ukrainian economy in terms of improving the investment climate and stimulating the innovative potential of entrepreneurial activity. the practical implications of this study are to identify the lack of innovation strategy, which deepens ukraine’s technological backwardness compared to developed countries in general, and the eu countries, in particular, and keeps the inefficient and destructive natural-production base of ukrainian economy. value/originality. this research was carried out within the framework of the implementation of a scientific paper of the department of theoretical and applied economics of national technical university of ukraine “igor sikorsky kyiv polytechnic institute (no. 0112u007817) on the topic: “globalization of industrial capacity formation trends in the terms of post-industrial transformation”. key words: technological process, gross fixed capital accumulation, capital investments, investment potential, modernization of the economy. jel classification: e22, o47 1. introduction the global economy has been in a steady upward trend since 2009 preparing to set a record in post-war history in 2019. therefore, the main global risk lies in the macroeconomic field – the end of the current business cycle and the onset of recession, or global economic crisis. the above is evidenced by the negative signs in key economies which always precede deeper recessionary processes. thus, the international monetary fund recently lowered its forecast for global economic growth to 3.2% in 2019 and 3.5% in 2020, the lowest since 2009 (world economic outlook, 2019). world debt is growing at a record pace, and the problem is compounded by the fact that central banks are gradually stopping to fill the economy with cheap money. under these conditions, commodity prices, which are a key export commodity in developing countries, remain at a low level, causing a global recession. it is the debt problems of countries that can become a “black swan” for the world economy. in addition to the significant pressure of global debt, trade wars have a negative impact on the global economy. baltic journal of economic studies 55 vol. 5, no. 5, 2019 one of the negative effects of the china-us trade war has been the rapid decline in oil prices to record lows over the past 4 years. although the united states is trying to remedy the situation with existing oil reserves, tough rhetoric in the context of the trade war and the corresponding sentiment of experts on the expected level of demand continue to affect the price negatively. due to the trade war between the us and china, the eu’s most powerful economy is losing a lot, since these two markets are major export destinations. the implications include the lack of global trade growth and a “significant” decline in investment in manufacturing. however, given that central and eastern europe has already passed the peak of its most dynamic growth and investors are interested in new markets, ukraine today has a strong competitive advantage in attracting investment. at present, ukrainian economic growth is mainly driven by consumption. however, solely consumption will not be able to provide a sustainable growth model for a long time, especially in a slowing global economy. qualitative and structural shifts can ensure foreign direct investment, especially in manufacturing. the current economic life of ukraine is characterized by a rather clear manifestation of the phenomenon of hysteresis, that is, the loss of part of the production potential as a result of a sufficiently stable and long-term decline in the production component of the ukrainian economy. at the same time, the provision of sustainable economic development can only be based on the ecologically balanced structural and technological restructuring of the production base of the ukrainian economy where the natural-exploiting production will enter the natural-food vertical. these structural changes require huge investments aimed at creating a modern post-industrial model of the economy. and the very monitoring and evaluation of investment development trends are extremely important for the ukrainian economy. the paper presents the results of the analytical assessment of emerging risks in the investment sphere in the context of ensuring the conditions for sustainable development of the ukrainian economy. 2. the main determinants of the economic development potential over recent years, the problem of analyzing the factors and components of ensuring economic growth in ukraine is very acute in order to level the main macroeconomic imbalances that arose as a result of the political and socioeconomic crisis and to stabilize further economic development (skrypnychenko, 2015). one of the important components of this problem is monitoring of indicators of the investment sphere, which determine the potential of economic development. this is especially important today when the pace of technological progress has significantly accelerated, and the world economy is on the verge of a new technological way. types of activity that over the past few decades formed the fifth technological process and were the main drivers of economic growth – the production of computers and consumer electronics, mobile communication and data transmission, programming – virtually exhausted the opportunities to perform this function in the future, as in these industries the mechanism of steady reduction of the cost of production, which is manufactured even with a constant increase in its quality and technical capabilities, has already been started. the new approach is an epoch of nanoscience and cell technology that reduces energy intensity and material production, opens up new possibilities for controlling the properties of materials and organisms. in the modern world, revolutionary changes take place more than ever before. according to experts, there is the so-called “big seven” technologies that will have the most significant impact on the development of the economy in the near future (anton, silberglitt, schneider, 2005; mapping the global future, 2004; silberglitt, antón, howell, wong & gassman, jackson, landree, pfleeger, newton & wu, 2006). nowadays, the main trend in the development of the aggregate supply is the formation of a modern post-industrial model of the economy at the expense of a fundamental redistribution between primary (agrarian), secondary (industrial) and tertiary (services) sectors of the economy, as well as due to changes in the structure of each of these sectors. thus, the main trend in the development of industrial production is the rapid growth of high-tech industries. developed countries provide 85-90% of gdp growth at the expense of these products (zhemba, 2013). in general, the share of high-tech production in the world average is about 18%. in japan, it exceeds 19%, in the united states – 24%, while in china – 28%. economic development leaders consider technology and innovation to be the key to further development. thus, more than 70% of industrial enterprises in germany, about 60% of belgian enterprises, implement technological innovations. overall in the eu countries, more than 50% of enterprises are innovative (skrypnychenko, 2018). these changes require huge investments in structural and technological restructuring of the economy. for ukraine, where the depreciation of fixed assets has become disastrous, this problem has become particularly acute. so, if in the usa and western european countries the depreciation of fixed assets does not exceed 20%, in 2016 in ukraine the general degree of depreciation of fixed assets amounted to 58%. at the same time, the main means of rail transport were worn by almost 99%, on land transport and transport baltic journal of economic studies 56 vol. 5, no. 5, 2019 infrastructure – more than 97%, maintenance of houses and territories – by 80%, in the processing industry – by 77% in general, and in certain types of industrial activity, depreciation was about 90%. and this refers only to physical deterioration without taking into account the degree of moral depreciation. a survey conducted by the state statistics committee of the enterprises of the processing industry has shown that only about 19% of them use technologies whose age does not exceed 5 years. at the same time, more than 14% use technology from the age of 20 to 30 years, and another nearly 23% – from 11 to 20 years. the above indicates ukraine’s loss of a significant part of its production potential due to the fact that the decline in production proved to be sufficiently stable and longterm, which in turn did not allow for the accumulation of sufficient investment potential. ensuring sustainable economic development aimed at preserving and increasing the aggregated industrial potential of ukraine, meeting not only the needs of the existing generation but also the ability of future generations to meet their needs, requires an ecologically balanced structural and technological restructuring of the production base of the ukrainian economy, in which the natural-exploiting production will receive natural-grocery vertical. these structural changes require huge investments aimed at creating a modern post-industrial model of the economy through a fundamental redistribution between the primary (agrarian), secondary (industrial) and tertiary (services) sectors of the economy, as well as changes in the structure of each of these sectors (kuznietsova, 2019). and the very monitoring and assessment of the tendencies in the development of the investment sphere are so important for the ukrainian economy. 3. the investment potential of ukraine during the entire period of independence, the investment sphere of ukraine had no stable development dynamics. the sharp contraction of investment in the crisis of the 1990s stopped only in 1998; however, the positive dynamics showed significant volatility ranging from an increase of 1.9% in 2005 to 31.3% in 2003. since 2008, the economy has again undergone investment a three-year recession, in 2011-2012, a slight increase and a sharp fall in 2013-2015, which has been overcome since 2016, and so far the investment sector has shown positive dynamics. however, the very dynamics of attracting investments into the economy do not allow assessing the investment potential of ukraine adequately. one of the most important indicators for the development of the investment sector is the gross fixed capital formation (gfcf) in the structure of gdp. it should be noted that monitoring of the gfcf in ukraine is carried out by the state statistics service since 2002. during 2002-2009, in ukraine, there was a steady trend towards the growth of this indicator, and in 2006-2008 its values were 24.4%, 27.1% and 25.9% respectively, which even exceeded the level of this indicator in such countries. the eu is like poland, hungary, and estonia in 2008 is shown in figure 1. in the countries of the former socialist camp, such as the czech republic, slovakia, romania, the indicator of gfcf in % of gdp significantly exceeded as well as in ukraine, reaching 30-35%, which provided an effective technological upgrade of the economies of these countries (macroeconomic imbalance procedure scoreboard, 2018). in 2009, the proportion of gfcf in gdp declined sharply, from 25.9% to 18.3%, and in 2015 fell to 13.5%. in 2016-2018, there was a certain increase in the indicator – according to 2018, it was 17.1%. over the entire period, only the crisis in greece showed a lower level of indicator among all eu countries, and the eu average was 20.5%. analyzing the dynamics of this indicator, it should be noted that throughout the period of independence, the ukrainian economy has developed volatilely. none of the macroeconomic indicators showed sustained dynamic trends. that is why the difference in the rates of their changes is strongly influenced by the level of the indicators. the above is clearly in evidence if we compare the dynamics of the indicator of gross fixed capital formation (gfcf) as% of gdp and gfcf dynamics of changes in the volume of gdp (is shown in figure 2). it can be observed that the rather rapid growth of the gfcf indicator in % of gdp in 2006-2008 was due to the increase in gross accumulation: their growth rates significantly exceeded gdp growth rates. instead, a significant decline in the indicator in 2014-2015 occurred in the falling dynamics of both components, but the gfcf decreased by a higher pace. since 2016 the proportion of gfcf in gdp gradually increases against the backdrop of the high growth rate of gross fixed capital formation, but its level remains lower than that required for the formation of investment potential upgrade ukraine’s economy. over the last seven years, the structure of gfcf has changed. during the biggest drop in gdp – 2014-2015 biennium – the proportion of residential buildings in the gross capital formation increased dramatically, while the share of other buildings fell sharply (it is shown in table 1). the reduction in the proportion caused cut-backs of the construction of engineering structures that is industrial infrastructure. the share of gfcf in machinery and equipment is not going growth. in the 2016-2018 biennium, the share of machinery and equipment in gross fixed capital formation rose sharply – up 44.7% and 45%. however, in the years 2013-2015, gfcf volumes in this position were so reduced that even higher rates of accumulation did not baltic journal of economic studies 57 vol. 5, no. 5, 2019 10 15 20 25 30 35 40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ukraine estonia poland hungary data for ukraine for 2010-2017, excluding the temporarily occupied territory of the autonomous republic of crimea, sevastopol and parts of the area of the anti-terrorist operation figure 1. gross fixed capital formation in ukraine and individual eu countries, % of gdp source: calculated according to the state statistics service of ukraine (url: http://www.ukrstat.gov.ua/) and eurostat (url: https://ec.europa.eu/ eurostat/web/macroeconomic-imbalance-procedure/data/scoreboard excluding the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and parts of the anti-terrorist operation zone figure 2. change of gdp and gfcf in% to the previous year source: calculated according to the state statistics service of ukraine (url: http://www.ukrstat.gov.ua/) 131,8 115,9 148,8 138,3 120,0 77 115 108,5 105 91,6 76,0 80,8 120,4 118,2 111,8 103,1 107,6 108,2 102,2 84,8 104,1 105,5 102 100 93,4 90,6 102,4 102,5 70,0 80,0 90,0 100,0 110,0 120,0 130,0 140,0 150,0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015* 2016* 2017* gfcf gdp compensate for the losses of the previous period, and the volume of accumulation in 2010 prices in terms of “machinery and equipment” remained in 2018 7.5 % less than in 2012 and almost 2 billion uah lower than the level of 2013. that is, even in those periods when the ukrainian economy demonstrated rather high gross capital accumulation in% of gdp, it is impossible to create stable positive tendencies in the formation of investment potential and mitigate the existing imbalances. baltic journal of economic studies 58 vol. 5, no. 5, 2019 this is evidenced by the dynamics of innovation activity in ukraine. even during the period of intensification of investment activity, the upgrading of production capacity was practically unavailable. the proportion of enterprises introducing innovations almost remained at one level – about 10%, and since 2010 their share has started to increase gradually, and in 2016 it was 16.6%. however, in 2017, the indicator decreased, while the share of implemented innovative products, the introduction of innovative types of products, and new technologies dropped sharply (it is shown in table 2). the strategy of socio-economic development adopted in ukraine has repeatedly declared the transition to an innovative path of evolution. however, further declarations case never progressed. this is evidenced by numerous international innovation ratings where ukraine occupies one of the last places. in particular, since the beginning of the previous decade, the eu conducted regular surveys of innovation and scientific and technological development of the economy based on comprehensive indicators for (countries, regions, public sector) (european public sector innovation scoreboard 2013, 2014; regional innovation scoreboard 2016, 2017). the most wellknown tool for such comparisons is the eu innovation scoreboard (ite), which includes data on eu countries, candidate countries for accession to the eu and some other countries. the main result of the ite is the consolidated innovation index (cii). this aggregate indicator of innovation and scientific and technological development summarizes a wide range of indicators, which in 2016 were grouped in eight, and in 2017 – ten thematic subgroups, i.e. “innovation dimensions”. in 2016, ukraine was officially involved in the european survey of the economy “eu innovation scoreboard”. however, even in 2014-2015, ukrainian experts carried out an assessment of ukraine according to the ite methodology (heits, 2015). with the development of innovation, the countries included in the “innovation scoreboard of the eu” were divided into four groups: – innovative leader; – an active innovator; – moderate innovator; – the emerging innovator. according to the 2017 data and the consolidated index of innovations, ukraine entered the last group and occupied the last place with the index of 0.149. pre-emptive country – romania – a low figure of 0.173. the leaders ranked 6 in switzerland (0.794), sweden (0.717), and denmark (0.691). on average, in the eu, table 1 structure of gross fixed capital formation by type of non-financial assets * %% 2012 2013 2014 2015 2016 2017 2018 gross fixed capital formation 100 100 100 100 100 100 100 residential buildings 12,4 15,8 19,3 20,5 16,6 15,8 14,2 other buildings and structures 44 41,4 38,8 34,9 33,4 32,3 34 machinery and equipment 38,7 38,1 37,2 38,3 44,7 47 44,6 armament systems 0,3 0,3 0,3 1,7 1,5 1,4 3 cultivated biological resources 0,6 0,9 0,4 0,9 0,7 0,5 0,6 costs associated with the transfer of ownership of assets rough 4 3,5 4 0 0 0 0 intellectual property products 2,6 2 2,5 3,7 3,1 3 3,6 research and development 0 0 0 1,7 1,2 1,1 1,5 exploration and evaluation of mineral resources 1,3 1,4 1,5 0,1 0,1 0,1 0,1 computer software and databases 0,1 0,1 0 1,8 1,7 1,7 1,9 entertainment programs and originals of literary and artistic works 0 0 0 0,1 0,1 0,1 0,1 * excluding the temporarily occupied territory of the autonomous republic of crimea, the city of sevastopol and parts of the anti-terrorist operation zone source: according to the state statistics service of ukraine (url: http://www.ukrstat.gov.ua) table 2 implementation of innovations at industrial enterprises indicator 2012 2013 2014 2015 2016 2017 the proportion of enterprises that implemented innovations, % 13,6 13,6 12,1 15,2 16,6 14,3 the proportion of realized innovative products in volume of industrial, % 3,3 3,3 2,5 1,4 *** 0,7 introduced innovative types of products, names 3403 3138 3661 3136 4139 2387 including new types of equipment 942 809 1314 966 1305 751 introduced new processes, processes 2188 1576 1743 1217 3489 1831 including low-waste, resource-saving 554 502 447 458 748 611 source: gosstat of ukraine data. url: http://www.ukrstat.gov.ua baltic journal of economic studies 59 vol. 5, no. 5, 2019 the cii was 0.503 (european innovation scoreboard 2017, 2017). the ratings on individual indicators included in the cii allow us to assess in more detail those areas that hinder the innovative development of ukraine. in particular, ukraine is ranked “innovatively favorable environment”, “research systems” and “communications”. by other indicators, ukraine ranks 3-4 from the end with an indicator lower than the leaders 7-10 times. under unacceptably large resource input of the ukrainian economy, only about a quarter of new technological processes are resource-saving. drop in the innovation activity is primarily due to a reduction in spending in this area caused by deterioration in the financial condition of enterprises. the total cost of innovation declined by 20% in 2014, at the same time, the enterprises’ funds, which are the main source of innovations, decreased by 6.3%; moreover, budget funds decreased by 86%, while foreign investors’ funds went up by 89% %. in 2015, the company’s expenses for innovation increased almost twice by face value, while budget funds decreased by 84% and foreign investors – by 58%. in 2016, the financing of innovation activity increased, however, in 2017, the costs were again significantly reduced. 4. conclusions consequently, the study on the development of the investment sector in ukraine has shown not only an imbalance between the need for technological and physical upgrading of the manufacturing sector and the actual attraction of investments aimed at modernizing production but also the deepening of this imbalance. a high-level threat is the lack of a strategy for the development of innovation, which deepens the technological lag of ukraine from developed countries in general, and eu countries, in particular, and preserves the inefficient and destructive natural-industrial production base of the ukrainian economy. at present, there is a loss of the potential of economic development. the state economic policy should aim at a radical improvement of the investment climate and stimulation of innovation capacity of entrepreneurial activity. indeed, an indispensable condition for improving the investment climate is the cessation of hostilities, the protection of property rights and the reduction of corruption in their structures. however, experience of successful countries is important as well as the state policy of stimulating innovative economic renewal (mykhailyshyn, 2016). among its activities the most common are: – preferential taxation of r&d expenditures related to the principal activity, preferential taxation of private investment in r&d; – preferential mode of depreciation on the equipment introduced; – reimbursement of part of the cost of innovation in accordance with state subsidies programs for small innovative firms; – the provision of preferential subsidies to enterprises adopting new technologies, in particular for the purpose of energy conservation etc. the provision of state support (tax and credit privileges, budget financing, information support, etc.) should focus on a number of projects that respond to current technological developments and have a systematic impact on economic and social reform, including: – energy saving; – alternative energy sources; – technical and technological modernization of infrastructure; – modernization of the agricultural sector in line with european requirements; – the introduction of digital technology; – housing reform; – restructuring of the system of technical regulation under the european technical regulations. in addition, special attention should be paid to the problems of harmonization of innovation and other types of policies, including industrial, social, etc., since in the case of “autonomous” implementation of a policy, the integrity of the system of public administration of socio-economic processes is broken, which causes a decrease in its overall effectiveness. references: european innovation scoreboard 2017 (2017). reading allowed: european innovation scoreboard. retrieved from: https://ec.europa.eu/docsroom/documents/24829 (accessed 15 august 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(ed.) (2015). modeli identyfikatsii makroekonomichnykh dysbalansiv v ukraini [models for identification of macroeconomic imbalances in ukraine]. kyiv: nas of ukraine, state organization “institute of the economy and forecasting of the national academy of sciences of ukraine”. (in ukrainian) skrypnychenko, m. i. (ed.) (2018). chynnyky i trendy ekonomichnoho zrostannia v ukraini [factors and trends of economic growth in ukraine]. kyiv: nas of ukraine, state organization “institute of the economy and forecasting of the national academy of sciences of ukraine”. (in ukrainian) zhemba, a. y. (2013). svitovi tendentsii vplyvu innovatsiinykh faktoriv na ekonomichnyi rozvytok krain v umovakh hlobalizatsii [global tendencies of influence of innovative factors on the economic development of countries in the conditions of globalization]. scientific notes of ostroh academy national university, "economics" series, 21, 16–19. (in ukrainian) world economic outlook, april 2019, growth slowdown, precarious recovery (2019). reading allowed: world economic outlook. retrieved from: https://www.imf.org/en/publications/weo/issues/2019/03/28/ world-economic-outlook-april-2019 (accessed 15 august 2019). baltic journal of economic studies 117 vol. 2, no. 2, 2016 corresponding author: 1 institute of regional research named after m.i. dolishniy of the national academy of sciences of ukraine. e-mail: nazar789@gmail.com regional features of the global market of syndicated lending nazar moroz1 institute of regional research named after m.i. dolishniy of the national academy of sciences of ukraine, ukraine abstract. the purpose of the paper is to explore and analyze of current market trends in the global market of syndicated lending, characterized its regional structure, identify its specific features and characteristics in different regions of the world and defining the main directions of further development of the global market of syndicated lending. methodology. the research is based on statistical information from public sources from different countries concerning the development of syndicated loans. data was also obtained from the websites of leading credit rating agencies, exploring the development of syndicated lending. also, in the study of the issue, analytical articles on the development of syndicated lending in the world were used. results. the development of syndicated loan market in recent years is characterized by: rapid growth of the volume and number of transactions; international nature; determining influence the us and western europe to market dynamics; active actions of international financial institutions in the developing countries markets; simplification of credit agreements conditions; consolidation of basic parameters of the loan – the total transaction amount and term of the loan. the dynamics of the global market of syndicated lending and its profitability determines the ratio between the leveraged and investment grade loans, which development depends on the overall market situation. based on the analyzed of main factors it was found that in the short term the market will continue to grow, however quite slowly. practical implications. research of the syndicated loan market makes it possible to understand more about the mechanism of functioning of the modern financial sector. in our opinion, special attention should be paid to markets in developing countries which have considerable growth potential. value /originality. it is first time we have grouped countries due to the main aspects of syndicated lending, such as: the amount of the transaction, loan term, the industry and the share of foreign capital in the market. the obtained results of research will contribute to a better use of international experience for building a system of syndicated lending in country, and make possible transforming it into an effective instrument of financing the real economy. key words: syndicated loans, syndicated lending, market of syndicated lending, commercial bank, development. jel classification: f01, g15, g17, g21 1. introduction syndicated lending has become increasingly popular at the present stage of development of global economic relations. along with the issue of shares and bonds, syndicated loans have become a powerful source of financing of the current activities and the implementation of large-scale investment in the development of economic entities. the largest loan agreements determining the further development of transnational corporations are taking place on the market of syndicated lending. these circumstances determine the relevance of the research of problems related to the optimization of commercial banks lending for the development of syndicated lending. at the same time, studying of issues related to the organization of this type of lending intensified under the influence of globalization and the asymmetries of development of financial markets, increasing competition, both in the domestic and global banking space. building an effective system of syndicated lending requires active use of foreign experience. at the same time, foreign approaches should be used extremely carefully, taking into account, as the national features of construction of the banking system, and features countries with extensive using of syndicated loans. among the foreign and domestic scientists, there are many scholars who examined patterns of development of syndicated loan market, its nature and structure. special attention deserve the works of such scholars as karl dawson, m. campbell, t. rhodes, a. taylor, a. fait, j. levkovsky, s. tsyganov, v. mishchenko, n. panteleeva, a. yanshina and others. in the reviewed literature sources the essence and principles of syndicated lending are disclosed, the impact of certain factors on its development baltic journal of economic studies vol. 2, no. 2, 2016 118 are analyzed, as well as various economic and legal aspects of the organization of syndicated transactions. at the same time, features of the functioning of the global market of syndicated lending in a particular region of the world are still scarcely explored. 2. the role of the syndicated loan syndicated loan is a loan provided by two or more creditors, organized on the basis of a multilateral agreement in the banking syndicate, one or more borrowers, in order to ensure concentration of financial resources without increasing the additional risk of lenders. the commitment of governments, corporations and banks to syndicated lending in comparison with other forms of financing is explained by a combination of the most attractive features of commercial and investment banking practices. based on studies of the essence of syndicated lending and comparing it with a bilateral lending, we can distinguish a number of benefits to the participants of credit relations. in particular, for borrowers we can define the following benefits: the possibility of obtaining a much greater loan amount than in the bilateral lending; speed of getting and credit services; the presence of common conditions; reducing the risk of dependence on a single lender and expanding common database of partner banks; increasing business reputation in the market; opportunities of outputs in the international markets, etc. lenders involved in the syndicate, also receive a number of benefits, among them – the simplicity and the speed of formation of assets; diversification and minimization of credit risks; reduction of additional costs on the marketing activities and savings on transaction costs; obtaining additional income in the form of commissions; the expansion of the customer base; improving the business reputation; increasing liquidity of assets, etc. 3. development of the global market of syndicated lending the market of syndicated lending originated in the 60s of the last century and during the last decades has acquired a considerable scale. for instance, during 2015 on the global market for of syndicated lending were held for more than ten thousand transactions totaling usd 4,662bn (figure 1). together with the increased volumes of syndicated loans, rose their share in the financial sources compared with stocks and bonds. in particular, if in 1993 the share of syndicated loans in the structure of funding sources was approximately 10%, in 2003  – at 35%, in 2013 nearly 45% of all long-term resources raised on the financial capital markets, accounted for the syndicated loans (world bank, 2015). the essence of the global market of syndicated lending as a specific sphere of international economic relations, and part of the global market consists in the organization of the legislative system of relations between its subjects for purchase and sale of the specific nature of the services, channeling financial resources from the owners to the borrowers. the modern market of syndicated lending is provided by the existence of multinational financial institutions, which act as intermediaries in the redistribution capitals and provide the continuity of the process of economic reproduction. one of the most important elements determining the order of relations between participants in lending is the credit rating of the borrower. information for its definition is taken from the leading rating agencies  – standard and poor’s, moody’s and fitch. number of essential terms of the loan (interest rate, term, collateral type, a list of standard covenants, etc.) depends on the credit rating. most of the information and analytical agencies, as well as scientists in their studies, depending on the assigned credit rating share loans to the two groups: 1. investment-grade loans  – are granted to borrowers whose credit rating are highly rated (bbbor higher by standard and poor’s, baa3 or higher by moody’s investors service, and/or bbbor higher by fitch ratings). these companies tend to be large, established, and profitable, and usually obtain their long-term financing from the issue of bonds or commercial paper, which are cheaper methods for them. however, they borrow by way of syndicated loans in the form of revolving credit as back-up 0 1000 2000 3000 4000 5000 6000 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 fig. 1. dynamics of the global market of syndicated lending, usd billions source: bloomberg finance l.p., 2015, world bank, 2015, thomson reuters, 2015 baltic journal of economic studies 119 vol. 2, no. 2, 2016 for seasonal borrowing needs, backstop commercial paper, or fund acquisitions on a short-term basis. many of the transactions are unfunded credits and are seldom used. for this reason, most of the lenders’ income comes from a facility or ‘non-use’ fee, and the lenders do not earn much interest income; 2. leveraged loans  – are a subset of corporate loans and are those generally with noninvestment grade ratings (bbbor below). a loan also qualifies as leveraged even if the borrower is rated investment grade or not rated at all, but the loan is backed by security and has a spread of libor +125 basis points or higher. these loans are more risky than the investment grade loans and are sometimes viewed as speculative-grade instruments. for the higher risk they carry, they also attract higher yield and attract higher interest rates than investment grade loans. the leveraged borrowers have significantly less access to the public market alternatives, and thus loans are their best financing alternative. such loans are made to finance companies that are making acquisitions or large capital expenditures, refinancing, or making dividend payments to shareholders. the loans are attractive to the lenders for several reasons. first, because of the higher interest income and higher front-end fees, even if the risk of default is higher than for investment grade loans; this also makes them attractive as a basis for building investment portfolios in collateralized debt obligations and collateralized loan obligations. secondly, because the interest rate is periodically set above libor , it keeps pace with changing interest rates. thirdly, such loans are usually secured by the borrower’s assets and are further protected by covenants in the loan agreement. covenant protection enables the lenders to monitor the borrower’s activities and reset conditions of the loan along the way if the covenants are breached. collateral protection enhances the chances of full recovery in case of default. as a result, leveraged loans are more attractive as investments than, for example, high-yield bonds (mugasha, 2007). despite the high rate of return, investment-grade loans dominated in the structure of syndicated lending. during 2015 it’s accounted for 74% of the syndicated loan, which is 7% higher than in 2014. according to leading experts, the reduction of the syndicated lending in 2015 was caused by a reduction in leveraged loans, which are more sensitive to changes in market conditions. stock crisis in china, the continuation of the crisis in greece, the fall in oil and energy prices, prolonged uncertainty of the us federal system on the level of interest rates and its increasing, ultimately, were the main factors influencing the of the global market development of syndicated lending during 2015. 4. regional features of the market the most of foreign information agencies reflecting the statistics of the global market of syndicated lending, share it on three major regions – the americas, asia (also includes australia and the pacific) and the emea (europe, middle east and africa). considering the development of syndicated lending within the specified regions, it can be seen that over the past decade the largest by volume and number of transactions is the american market (figure 2). the leading role in the american market plays the us, where during 2015 was raised usd 2,342bn and carried out 4,155 transactions. however, the market showed a drop by 1.4%, which was mainly caused by the change in approaches to the borrowers. the uncertainty of the federal reserve and increasing interest rates have led to rapid reduction in the share of leveraged loans and increasing investment grade portfolio in the q4. previously, banks were actively providing revolving facilities, but in recent years there has been a tendency to issue term loans (71% vs. 29%). although relationship remains an important driver in the investment grade space, its relative weight in the decisionmaking process has dropped significantly (today, only 31% of banks prioritize relationship over return vs. 59% a year ago), while return on capital has become a top priority for 63% of lenders vs. only one third last year. however, the enhanced focus on return on capital has not translated into higher pricing due to the abundant liquidity available in the market, and pricing has remained stable since the beginning of the year. rather, it has led to more volatility fig. 2. regional structure of the global market of syndicated lending source: bloomberg finance l.p., 2015, thomson reuters, 2015 2476 1278 754 1302 2160 1830 2533 2682 2622 530 606 492 638 758 479 779 795 781 1883 1098 611 993 1154 791 1056 1293 1260 0 1000 2000 3000 4000 5000 6000 0 1000 2000 3000 4000 5000 6000 2007 2008 2009 2010 2011 2012 2013 2014 2015 n b o f i ss ue s v ol um e, u sd b ill io ns americas asia pacific emea americas asia pacific emea baltic journal of economic studies 120 vol. 2, no. 2, 2016 in bank groups and less predictable behavior by banks in any given transaction (societe generale, 2015). the largest transactions that have taken place in the market, were implemented in the second half of this year, and were used to finance m & a transactions. among the banks a major player in the market served bank of america merrill lynch, which also received the championship of the global market (thomson reuters, 2015). on the second place after the american market is an emea market, which also showed a decline of 2.6% during 2015, which was caused by the reduction of lending in the european market. in total, during the year on the european market were held 1,849 transactions for the total amount usd 1,093 bln. the eastern european market continued to decline, due to the continuation of economic sanctions against the russian federation and the western european market showed a sharp decline (in the range of 20-50%) in germany, france, uk and the growth to 70% in belgium, spain, italy. the vast majority of large european corporations have already refinanced their transactions over the last two years, so we are seeing an increasing share of mid-caps and non-investment companies in the current deal flow as they seek to take advantage of favorable market conditions. in particular, a number of mid-cap companies are launching inaugural syndicated facilities, diversifying away from traditional reliance on bilateral lines with their historical banks (societe generale, 2015). a key trend in 2014 was the emergence of cov-lite loans in europe. this trend has continued to develop in 2015: the q1-q3 2015 european institutional cov-lite new issuance volume totaled eur 13.3bn. although it fell behind the eur 14.7 bln issued over the same period in 2014, it represented a bigger share of institutional level (45% in january-september 2015 vs. only 39% in januaryseptember 2014). covenants are undertakings given by a borrower as part of a term loan agreement. their purpose is to help the lender ensure that the risk attached to the loan does not unexpectedly deteriorate prior to maturity. covenants may, for example, place restrictions on merger activity or on gearing levels. breach of a covenant normally constitutes an event of default and, as a result, the loan may become repayable upon demand. (fight, 2004). it is expected that new cov-lite deals will continue to flow in the european market going forward. the market of the middle east and africa in contrast to the american and european markets has demonstrated rapid growth during 2015 (growth was 77%). despite the difficult geopolitical situation and the fall in oil prices the islamic lending market was quite stable. it should be noted that the islamic lending refers to specific types of loans. islamic syndicated loan is loan for which the bank is not allowed to charge any interest. however, the financial institution shall be entitled to receive income from lending other way. for example, it may become a party to an equity-funded project, fully sharing the risks and the awards of enterprise. also, the bank has the right to participate in trade, to earn income from the difference between the cost and the selling price. at the same time, under sharia law investment in the production and sale of alcohol, drugs, weapons, etc. are not allowed. any trade agreement should be based on the principle of justice and should not presume illegal enrichment of either party. taking into account high interest of investors and activities of international organizations (such as international finance corporation, the world bank) the african market of syndicated lending is steadily growing in recent years. last year was also characterized by slowdown in the so-called “chinese factor” (the chinese market of syndicated lending in recent years has demonstrated high growth). in connection with the stock market crisis, credit markets in asia has shown decline of 16%. together with the reduction of the development of the chinese market, there has been a drop in lending markets of india and australia, due to the suspension of financing of individual projects and transferring them to the next fiscal year (societe generale, 2015). the japanese market continues to be one of the most stable markets in recent years and is ranked second by number of transactions after the us. based on analysis of the syndicated loan features in the different countries of the world, we have compiled the segmentation of the global market of syndicated lending in the regional context by the following features – the average amount of the deal, loan term, the main industry and the share of foreign capital (table 1). as can be seen from table 1, in highly developed countries syndicated loans are characterized by short-term, large amounts, and a smaller share of foreign capital (us, canada, western europe, japan), in developing countries, these values are opposite. table 1 features of syndicated loans in different regions of the world region the average amount of transactions, usd mln loan period, years priority sector (%) the share of foreign capital in the market,% us and canada 550,0 4 energy (18%) 32,0 latin america 380,0 6 materials (29%) 93,3 western europe 600,0 5,5 energy (18%) 68,4 eastern europe 450,0 5 92,2 middle east and africa 725,0 7,5 78,0 asia and australia 335,0 5,5 financials (30%) 67,0 japan 110,0 4 industrials (21%) 17,0 baltic journal of economic studies 121 vol. 2, no. 2, 2016 us and european leadership are achieved by consistently high demand for loans of this type, which are supported by three main factors. firstly  – is a significant integration of national markets to international market, which allows local banking institutions, carrying out operations, make a profit, not only on the national market, as well as in other markets. secondly  – syndicated loan provides to borrowers an alternative choice between bond and bilateral bank loans, providing an opportunity to attract large-scale resources to finance capital projects. and the thirdly – standardized rules, regulations and standardized procedures for documentary support syndication loans in the primary market and the secondary market infrastructure that allow lenders to resell syndicated loans. speaking about markets of developing countries, the defining features of these markets are a significant level of risk and therefore increased profitability and comparable instability, which leads to crises that are overcome with the help of official creditors and international financial institutions. in turn, syndicated loans are a new source of foreign loan resources, and thus contribute to an increase in investments in emerging markets. syndicated financing accord to the national banking institutions opportunities for diversification as sources of income, as well as risks leading to financial stability, which is a fundamental issue for emerging markets. a key role in the processes of intensification in such markets assigned to international organizations, such as the european bank for reconstruction and development (ebrd), international finance corporation (ifc), the asian development bank and the bank for international settlements. taking into account the volume of loans, we can definitely say that the leading role on the market played by the ifc. 5. market forecast carried out analysis of the current state of the global syndicated loan market on the example of different regions makes it possible to formulate the main trends in the development of this market and forecast its development in the short term. based on data from previous years and due to the construction of the approximation lines it can be assumed that the volume of syndicated lending during 2016 will continue to grow, but rather a slow pace  – in the range of 6-8%, and end of the year will be about usd 5,000bn. the main factors that will contribute to the growth of syndicated lending will be: high liquidity in the american and european markets, which will contribute to capacity leveraged lending and, together with the spread of cov-lite deals could lead to an increase in syndicated lending in the american and european markets to 10% and 5% respectively; increasing lending in the african region through the international organizations, will compensate for the decline of islamic lending through the sharpening geopolitical situation; in fact the market will remain at the same level with a slight increase (about 2-3%); recovering of asian market through the implementation of the agreements that had been postponed in 2015 in india and australia, as well as the continuation of m & a deal that took place in previous years; approximate growth will be in the range of 3-4%. 6. conclusion during the last decade the global market of syndicated lending grew almost twice and continues to grow. in conditions of economic globalization, syndicated loans acquire the dynamic development and become one of the most influential factors that affect the growth of the economy and increasing the country’s competitiveness in world markets. taking into account the peculiarities of the development of syndicated lending in different regions of the world, its segmentation was carried out. it was found that the level of economic development depends on such factors as the term of the loan, the amount and the share of foreign capital in lending. based on analysis of major economic events that took place during 2015 and their impact on the market, as well as taking into account lending characteristics in certain regions, the development of the syndicated loan market in the short term was predicted. references bloomberg finance l.p. (2015). global syndicated loans. retrieved from http://www.bloomberg.com/ professional/content/uploads/sites/4/bloomberg-global-syndicated-loans-league-tables-20151.pdf fight, a. (2004). syndicated lending – london: elsevier butterworth-heinemann, 208 p. mugasha, a. (2007). the law of multi-bank financing. syndicated loans and secondary loan market – new york: oxford university press inc., 84 p. societe generale. (2015). debt capital markets 2015 review and 2016 forecast. retrieved from http://cib.societegenerale.com/uploads/tx_bisgnews/sg_cib_dcm_2015_review_and_ 2016_forecast.pdf thomson reuters. (2015). global syndicated loans review. retrieved from http://share.thomsonreuters.com/ general/pr/loan-4q15-%28e%29.pdf world bank. (2015). global financial development report 2015: long-term finance. retrieved from http://www-wds.worldbank.org/external/default/wdscontentserver/wdsp/ib/2015/09/02/090224b0830 b28d/2_0/ rendered/pdf/global0financi0000long0term0finance.pdf baltic journal of economic studies 122 vol. 2, no. 2, 2016 назар мороз региональные особенности развития мирового рынка синдицированного кредитования аннотация. целью работы является исследование и анализ современных тенденций мирового рынка синдицированного кредитования, характеристика его региональной структуры, выявление специфических признаков и особенностей в отдельных регионах мира и определение основных направлений дальнейшего развития мирового рынка синдицированного кредитования. методика. исследование основано на статистической информации из открытых источников отдельных стран по отношению к рынку синдицированного кредитования. данные также были получены с сайтов ведущих рейтинговых агентств, исследующих развитие синдицированного кредитования. также, при исследовании вопроса использовались аналитические экономические статьи и материалы исследований ведущих зарубежных ученых по вопросам развития синдицированного кредитования в мире. результаты исследования показали, что развитие рынка синдицированного кредитования в последние годы характеризуется: стремительным наращиванием объемов и количества сделок; определяющим влиянием сша и стран западной европы на динамику рынка; активными действиями международных финансовых организаций на рынках развивающихся стран; упрощением условий кредитных договоров; укрупнением основных параметров кредитования  – суммы сделки и общего срока кредитования. динамику мирового рынка синдицированного кредитования и его доходность определяет соотношение между спекулятивными и инвестиционными кредитами, развитие которых зависит от общеэкономической ситуации на рынке. на основе проанализированных факторов влияния на рынок установлено, что в краткосрочном периоде рынок будет продолжать расти, но достаточно медленными темпами. практическое значение. изучение рынка синдицированного кредитования дает возможность лучше понять механизм функционирования современного финансового сектора. особого внимания, на наш взгляд, заслуживают рынки развивающихся стран, которые имеют значительный потенциал роста. значение/оригинальность. впервые было осуществлено сегментацию мирового рынка синдицированного кредитования на основе следующих критериев  – сумма сделки, срок кредита, отрасль и доля иностранного капитала. полученные результаты исследования будут способствовать лучшему использованию зарубежного опыта для построения системы синдицированного кредитования в стране, превратив его в эффективный инструмент финансирования реального сектора экономики. baltic journal of economic studies 129 vol. 6, no. 5, 2020 corresponding author: 1 kherson state university, ukraine. e-mail: makar0684@gmail.com orcid: https://orcid.org/0000-0001-9929-8967 researcherid: https://publons.com/researcher/1878529/serhii-makarenko/ 2 kherson national technical university, ukraine. e-mail: nat-o@ukr.net orcid: https://orcid.org/0000-0002-1019-5708 3 kherson state university, ukraine. e-mail: kazakova@ksu.ks.ua orcid: https://orcid.org/0000-0003-1680-7653 researcherid: https://publons.com/researcher/3591913/tetiana-kazakova/ doi: https://doi.org/10.30525/2256-0742/2020-6-5-129-136 features of assessment and forecasting of socio-economic development of regions in ukraine serhii makarenko1, nataliia oliinyk2, tetiana kazakova3 abstract. the purpose of the article is to carry out an analysis and improvement of the methodological approach for estimating and forecasting socio-economic devel-opment of regions. the methodological basis of the study consisted of scientific works of domestic and foreign scientists and leading specialists, statistical and analytical materials of state authorities. the results are obtained through the use of such methods as: expert – to identify the impact of qualitative and quantitative indicators on the socio-economic development of the region; economicmathematical analysis – to study the influence of a defined group of indicators on the level of development of the region; abstract-logical – for a theoretical synthesis and formulation of conclusions. the results of the study suggest that the introduction of a sound scientific and methodological approach to assessing and forecasting the level of development of the country and regions in particular will allow not only to identify problem areas in the development of the respective territories, but also to get the potential investor reliable information about the real state of affairs and to determine the justification of further investment in the activity of the research object. using an unjustified scientific and methodological approach not only can distort the real state of affairs in the regions and the country in general, but also send limited financial resources of the state and local budgets in the conditions of the crisis to improve the indicators that have a minor impact on the development of the economy. it is proved that in current crisis conditions, the functioning of the national economy, state authorities should implement a more effective discretionary fiscal policy aimed at reducing the tax burden in the formation of the wage fund of the socially vulnerable population. the errors, ob-tained during misuse of information technologies in the assessment of socio-economic development of regions are revealed. the scientific and methodological approach to determining the coefficient of competence of experts and the value of 1 point of qualification competences during the construction of forecast scenarios and the development of regional economic development programs using intuitive fore-casting methods has been improved. proposals for improving the system of taxation of the socially vulnerable population are developed. key words: assessment, forecasting, socio-economic development, coefficient of competence, taxation of the socially vulnerable population. jel classification: h21, h70, o11 1. introduction the development of market transformations in the country and its regions is impossible without reforming of the fiscal system based on a fundamentally new model of its organization – fiscal decentralization, which provides for the extension of powers of local selfgovernment bodies in the tax area in order to obtain financial leverage for the socio-economic development of their territories, expansion of the local tax base. this is precisely what the introduction of a regional baltic journal of economic studies 130 vol. 6, no. 5, 2020 tax policy requires, the formation and implementation of which should be undertaken both by the state and local authorities. the new administrative and territorial unit should become the basis for constructing a new territorial management model based on the principles of decentralization, subsidiarity, balance of national interests with the interests of the population of regions and territorial communities, the widespread local self-government, the capacity and independence of territorial communities to address local issues. in the current unstable business environment, the main task for local governments is to learn how to plan their development and use resources of updated budgets efficiently; for state bodies – to substantiate and transparently assess the state of socio-economic development of administrative and territorial units of all levels and ensure implementation of the general forecast of the country development and individual regions in particular. in current conditions of unstable business environment, state authorities and local self-government bodies, together with representatives of the economic entities, are interested in developing a coherent mechanism for reliable assessment of the level of socioeconomic development and the construction of an effective forecast model that will determine the impact of the most important factors on the productive indicator and outline the plan for further measures regarding the development of administrative and territorial units. the purpose of the article is to carry out an analysis and improvement of the methodological approach for estimating and forecasting socio-economic development of regions. 2. features of definition of forecast scenarios of socio-economic development of regions the research of the modern specifics and methodological approaches to the evaluation and forecasting of socio-economic development of administrative and territorial units in the short and medium term in their analytical works was carried out by specialists of state authorities – cabinet of ministers of ukraine (2011; 2012), state statistics service of ukraine (2018), scientific institutions – scientific research center for industrial problems of development of the national academy of sciences of ukraine (2018), as well as representatives of scientific community – i. bohdaniuk, v. kolisnichenko, & o. ustymenko (2018), b. guziejewska (2015), m. v. kichurchak (2016), o. v. lozova (2012), n. i. soloviova, s. m. makarenko, & n. m. oliinik (2016), n. a. tyukhtenko, s. m. makarenko (2019), i. v. yaroshenko, & i. b. semyhulina, n. zachosova (2019). despite significant work, there remain problems requiring additional scientific analysis, especially as regards the justification for using the proposed group of indicators and the methodology for assessing and forecasting socio-economic development of the regions. in ukraine, the bulk of the national product is created in certain sectors and regions, and the current situation is urgent in reducing territorial disproportions, expanding interregional cooperation in the markets of goods, services, capital and labor. effective regulation of regional development ensures the functioning of the national economy as an integral system based on the optimal allocation of productive forces, taking into account local resources, existing settlement systems, and the peculiarities of historical development. the basis for such regulation should be the real assessment and construction of a sound forecast of socio-economic development of the country and regions in particular. without qualitative information it is impossible to make the right decision, but it is much more difficult to use this information in practice. in determining the optimal development strategy, the necessary condition is the development of appropriate effective methods and tools for managing entities of all forms of ownership and the region in general. one of the most important tools is modeling and forecasting socio-economic processes. the forecasting scheme should take into account not only stable tendencies of the basic parameters functioning of the regional economic complex or its environment, but also circumstances that cannot be reflected in formal mathematical models. typically, in constructing forecast of socio-economic development scenarios of the region, the following sequence of actions is carried out (figure 1). as we see from the given chain of actions, during the forecast development of the region, work begins with the definition of the bases observation and the search for information sources, which greatly complicates the modeling of socio-economic processes of the region: the basis of the indicators of economic and social develop-ment, which do not have significant impact on the overall indicator of the region’s development. the results of previous surveys (soloviova, makarenko, oliinyk, 2016) suggest that the lack of a well-founded and correct model of assessment and forecasting of socio-economic development of regions does not allow public authorities and local government to determine an effective set of measures aimed at development of territories, which, as a result, leads to inefficient and ineffective use of funding sources for the implementation and improving of measures that have little impact on the region’s economy. also, the lack of a reliable assessment of socio-economic development level undermines the trust of foreign investors in domestic sources of information, which is reflected on official websites of central authorities (ministry of economic development and trade of ukraine, state statistics service of ukraine, etc.), which leads to deterioration of investment the attractiveness of the domestic economy and the reduction of the foreign direct investment attraction. baltic journal of economic studies 131 vol. 6, no. 5, 2020 3. modern models assessment of social and economic development of the country and regions in order to assess and forecast the socio-economic development of the country and regions, various methodological approaches developed by both public authorities and local self-government, as well as the scientific community and public organizations, are used in particular. it deserves attention to the methodological approach provided by the decrees of the cabinet of ministers of ukraine dated june 9, 2011 no. 650 and april 9, 2012 no. 335, according to which the evaluation was conducted using 81 indicators in 10 areas of analysis. the calculations were carried out in three stages (figure 2). the region was considered the best, the average arithmetic mean of the sum of rating grades has the lowest value. however, in the proposed methodological approach, some of the proposed indicators were not used in the calculation of the rating assessment in general or in relation only to the cities of kyiv and sevastopol. thus, according to the results of the year, the assessment without the cities of kyiv and sevastopol was conducted only in 52 indicators, among which 16 indicators reflected the growth rates (indices) growth / decrease, 9 of them reflected the share of the found indicator, 19 had natural units of measurement, 8 had other units of measurement. and the other 29 indicators were informative in nature. the proposed method of determining the total place as the average arithmetic mean of rating assessments sum of a specific region activity in all areas, established a non-transparent and mathematically unjustified action to determine the proposed in-dicators importance. thus, the direction where only two indicators for evaluation (“crime rate”) were used had the same share in comparison with the direction, in which fourteen indicators (“economic development”) were used, which prevented the conduct of reasoned assessment and the real situation in the regions, where a relevant study was conducted. also, during the introduction of this methodological approach, it was not considered that the presence of a wide range of indicators could reduce the proportion of the most influential factors, and increase the probability of error in planning and forecasting, and send the authorities to implement a set of measures to improve the values of the insignificant indicators for the economy. the above was confirmed by the conducted economicmathematical analysis, during which the system was checked for possible multicollinearity between the indicators and found a strong connection only between the gross domestic product (effective factor) and 17 indicators (with the use of official materials for 11 reporting periods from 2010 for the first half construction of forecast scenarios of socio-economic development of the region collection of specialized structural subdivisions of district state administrations, city executive committees of cities of regional importance of information from business entities of the region regarding their forecast performance and development indicators generalization of district state administrations, city executive committees of cities of regional significance of given information, and based on it, taking into account the tendencies of recent years, providing proposals on quantitative and qualitative changes in indicators of the region’s development for the next years and the necessary set of measures for the accomplishment of the tasks set to the specialized structural subdivision of the regional state administration analysis and generalization of the submitted subdivisions of the regional state administration, formation of the project of the forecast (program) of the region development approval of the draft forecast (program) of the development of the region in accordance with the established procedure with the head of the regional state administration and deputies (approval by the chairman of the regional state administration), officials and deputies of the regional council, making, if necessary, comments and proposals; approval at the session of the regional council of the forecast (program) of the region’s development figure 1. the sequence of actions in constructing forecast scenarios of socio-economic development of the region source: own elaboration based on information of the regional state administration baltic journal of economic studies 132 vol. 6, no. 5, 2020 of 2013). the highest correlation was observed between the gross domestic product and the volume of industrial products sold per unit of population (r = 0.9963), the volume of agricultural production per 100 hectares of agricultural land (r = 0.9647), the volume of capital investments (except for investments from the state budget) per unit of population (r = 0.9891), volume of tax revenues to local budgets per unit of population (r = 0.9948), volume of commissioned housing in the calculation 10 thousand population (r = 0.9639). these indicators actually reflected the existing system of interconnection among the population (labor resources), business entities of all forms of ownership and state institutions. it was found that the above proposed approach included not only the disadvantages associated with the mechanism of determining the importance of indicators and the method of conducting the calculations, but also observed the reasons associated with the lack of quality training in working with specialized software from experts who conducted a quarterly assessment of the results of the regions. thus, during the evaluation of the results of the first half of 2013 in the direction “child protection”, there were found errors in determining the general place of each region. despite the fact that five leaders and five outsiders did not change due to the mis-takes made in the “child protection” direction, there was a significant change in leaders and outsiders in accordance with the overall integrated calculations, namely: the top five leaders should have been kyiv (1st place), rivne (2nd against 3rd), odesa (3rd against 4th), crimea (4th against 2nd) and chernivtsi (5th against 6th) region. instead, five outsiders were supposed to make up kherson (25th against 23rd), sumy (24th against 25th), lviv (23rd against 24th), lugansk (22nd against 21st) and zakarpattia (21st against 22nd) regions respectively. using various methodological approaches in table 1, we will describe and compare the results of the conducted evaluation of the activity of the administrative and territorial units on the results of the first half-year of 2013. the conducted studies indicate that taking into account the proposals made to eliminate the mistakes made in determining the general place of each region and the weight of the proposed indicators, there would be significant changes in both the three outsiders and the three leaders. thus, among three regions that occupy leading positions, only crimea would remain in the leaders, having entered the first place for each group of indicators, as well as an improved method of calculation, which determines that each indicator has the same value for the assessment of socio-economic development of regions. the results of the same indicators for the kyiv region identify that in the case of changing the methodology key indicators characterizing the socio-economic development of the administrative and territorial unit processing received information determination of relative deviations of indicators of each region from the maximum and minimum values of such indicators in other regions: rj = ∑ = ∑ = − − + − −n 1i n 1i min x max x min x ij x min x max x ij x max x determination of the arithmetic mean value of the sum of rating assessments of a particular region by all indicators characterizing a separate direction of activity definition of integral rating assessment as the average arithmetic mean of the sum of rating assessments of a specific region in all areas of activity 1 s t a g e 2 s t a g e 3 s t a g e determination of the place of a separate administrative and territorial unit in the general rating figure 2. methodological approach to determining the individual administrative unit location in the overall ranking source: own elaboration based on resolution of the cabinet of ministers of ukraine dated june 9, 2011 no. 650 baltic journal of economic studies 133 vol. 6, no. 5, 2020 of conducting the evaluation, the indicated area would not even be among the top three leaders, not to mention absolute leadership. the same goes for the rivne region, which, in case of a change in the list of indicators and calculation methodology, could be in the second ten regions. as for outsiders, the last and penultimate places are occupied by the sumy region with each method of calculation and using the proposed list of indicators, confirming the crisis situation in the economy of the region. instead, the lviv and kherson regions showed a significant change in positions taken for the better on 7-9 positions. when using the official materials of the ministry of economic development and trade of ukraine together with the state statistics service of ukraine for the 14 reporting periods from 2010 to the first quarter of 2014, the authors (soloviova, makarenko, oliinyk, 2016) in assessing the socio-economic development of the re-gions it is suggested to use 13 indicators. this could be related, first of all, to the possible changes in the statistical methods for the determination of individual evaluation indicators, which could lead to a distortion of the link between the effective factor and the proposed indicators. thus, on the example of kherson oblast, one can state that in 2007 the results of industrial activity of one of the most powerful light industry enterprises of ukraine and europe in general, the budget-formative enterprise of kherson – ojsc “kherson cotton plant”, were isolated from the basis of calculations, in which the number of employees in the heyday reached 23 thousand people. as a result, instead of reducing the output of industrial products of the kherson region by more than 15% by the results of 2007, an increase of 9.4% was received. similar changes in the defined set of indicators could be table 1 assessment of the results of activity of administrative and territorial units (on the results of the first half of 2013) (using different assessment techniques) the region in accordance with the list of indicators provided in the resolution of the cabinet of ministers of ukraine no. 650 dated 09.06.2011 according to the adjusted list of indicators assessment carried out by the ministry of economic development and trade of ukraine adjusted score evaluation as a result of association 2 and 3 stages (figure 2) assessment that was carried out in accordance with the procedure defined by the cabinet of ministers of ukraine no. 650 dated 09.06.2011 evaluation due to the merger 2 and 3 stages (figure 2) place coefficient place coefficient place coefficient place coefficient place crimea 2 0.488 4 0.482 1 0.362 1 0.432 1 vinnytsia 14 0.554 14 0.555 13 0.649 14 0.64 20 volyn 20 0.573 18 0.569 17 0.591 8 0.615 15 dnipropetrovsk 9 0.527 8 0.489 2 0.649 15 0.522 4 donetsk 18 0.575 20 0.587 22 0.592 9 0.596 11 zhytomyr 12 0.549 12 0.544 10 0.699 20 0.65 21 zakarpattia 22 0.582 21 0.565 16 0.605 11 0.566 9 zaporizhzhia 13 0.552 13 0.532 8 0.553 5 0.555 8 ivano-frankivsk 19 0.56 16 0.582 21 0.576 6 0.541 6 kyiv 1 0.473 1 0.494 3 0.458 3 0.532 5 kirovohrad 17 0.574 19 0.546 11 0.701 21 0.631 18 luhansk 21 0.602 22 0.61 24 0.585 7 0.605 13 lviv 24 0.603 23 0.609 23 0.681 17 0.622 17 mykolaiv 5 0.518 7 0.51 5 0.517 4 0.468 2 odesa 4 0.488 3 0.503 4 0.434 2 0.48 3 poltava 8 0.541 11 0.551 12 0.642 13 0.589 10 rivne 3 0.482 2 0.515 6 0.619 12 0.605 12 sumy 25 0.626 24 0.619 25 0.759 25 0.687 24 ternopil 7 0.515 6 0.573 18 0.717 24 0.696 25 kharkiv 16 0.563 17 0.556 14 0.713 23 0.667 22 kherson 23 0.626 25 0.577 20 0.658 16 0.616 16 khmelnytskyi 15 0.557 15 0.543 9 0.683 18 0.612 14 cherkasy 11 0.536 10 0.559 15 0.685 19 0.636 19 chernivtsi 6 0.513 5 0.518 7 0.597 10 0.553 7 chernihiv 10 0.535 9 0.577 19 0.704 22 0.673 23 source: authors’ own work baltic journal of economic studies 134 vol. 6, no. 5, 2020 observed both in different regions and in the country in general. today, despite the expiration of the normative legal acts, the assessment of the socio-economic development of the regions of ukraine is carried out in the same way using the scientific and methodological approach provided by the decrees of the cabinet of ministers of ukraine no. 650 dated june 9, 2011 and no. 335 dated april 9, 2012. minor changes only occurred in relation to the directions and number of evaluation indicators. thus, the department of macroeconomic policy and regional development of the research center for industrial development problems of the national academy of sciences of ukraine uses 50 key indicators in 9 areas for the monthly rating assessment of the socioeconomic development of the regions of ukraine. 4. the current state of functioning of state authorities and local self-government the development of the regional economy depends to a large extent on how reliable the experts of local government and local government itself will be able to identify the strengths and weaknesses, opportunities and threats for the regional economy; to forecast changes in the external and internal business environment and their impact on the region’s economy; plan and implement a plan of measures to ensure the development of key economic activities. at the same time, it should be kept in mind that the construction of forecast scenarios and the development of regional economic development programs are usually carried out using intuitive forecasting methods without the use of specialized software. however, even in this case, mathematical models and information technol-ogies are almost not used, which will allow to assess the level of competence of the involved experts and increase the reliability of the projected assumptions made. according to the results of the research, authors (makarenko, oliinyk, kazakova, 2018) proposed to determine the coefficient of competence of experts, depending on the experience of the position (occupied position), the existing level of education, degree, academic rank and other factors related to the object of the study. at the same time, in determining the coefficient of competence of experts, it would be advisable to also take into account the level of fluctuations of the relevant qualifications in the middle of the study group. the above will allow to transfer all qualitative and quantitative evaluation indicators into a single scale of evaluation. the proposed approach can be used not only in determining the level of competence of experts, but also in assessing the qualification level of employees (qe) and determining the value of 1 point of qualification competencies (c) (table 2) in the corresponding economic area. the performed calculations show that according to the proposed methodology the highest qualification level has an employee number 6 (qe = 17.318 points). also, the value of 1 point of quality of the said employee is the lowest, which indicates his or her high level of competitiveness in the respective production area. the aforementioned methodological approach in determining the level of competence of experts, based on the received calculations for three indicators of evaluation, allowed to identify their next level of competence: expert no. 1 – 4.14%, expert no. 2 – 6.62%, expert no. 3 – 3.89%, expert no. 4 – 3.81%, expert no. 5 – 8.01%, expert no. 6 – 53.83%, expert no. 7 – 16.25%, expert no. 8 – 3.45%. leading experts from the educational sector, local authorities, budget-making enterprises and organizations of kherson were involved in determining the feasibility of implementing the developed forecasting models. taking into account the level of their competence and the results of the conducted questionnaire, the need to conduct a study on the level of influence of the main financial indicators on the level of development of the region was determined. table 2 example of calculation of the value of 1 point of qualification competencies expert / employee employee education, points c1 work experience, months c2 productivity of labor, uah / h c3 к• 3 qe, points average monthly salary, uah. cost of 1 point of quality no. 1 5 0.5 37 0.89 110 0.863 0.751 1.332 6500 4881.33 no. 2 7 0.167 55 0.748 145 0.495 0.47 2.129 8000 3758.49 no. 3 3 0.833 42 0.850 124 0.716 0.8 1.25 7000 5598.87 no. 4 4 0.667 23 1 118 0.779 0.815 1.227 6400 5217.31 no. 5 6 0.333 78 0.564 167 0.263 0.388 2.579 8500 3296.36 no. 6 8 0 128 0.173 192 0 0.058 17.318 9500 548.56 no. 7 5 0.5 150 0 185 0.074 0.191 5.229 10000 1912.28 no. 8 2 1 61 0.701 97 1 0.9 1.111 7500 6751.97 max = 8 max = 150 max = 192 min = 2 min = 23 min = 97 source: own elaboration baltic journal of economic studies 135 vol. 6, no. 5, 2020 an effective index is suggested to use the index of the physical volume of the gross regional product (in the prices of the previous year) (9.4 from 10 points)). among the most influential financial indicators that reflect the financial capacity of the local community (region), it is proposed to consider: corporate income tax (x1), value added tax on goods manufactured in ukraine (x2), personal income tax (x3), single tax for small businesses (x4). using the reporting data for 2010-2017 and the formula for calculating the correlation coefficients, the following relationship was established between the performance indicator (y) and the factors indicated: – ryx1 = 0.474 – in accordance with the scale of the assessment of the relation-ship of variables, the relationship between y and x1 is considered average; – ryx2 = 0.038 – the connection between y and x2 is almost absent; – ryx3 = -0.089 – the relationship between y and x3 is almost absent; – ryx4 = -0.056 – the connection between y and x4 is almost absent. the existing contradictions in terms of results, especially in determining the relationship between the performance indicator (y) and the personal income tax (x3) and the single tax for small business entities (x4) are primarily related to the changes introduced in part changes in the minimum wage and the ratio between the minimum wage and the living wage. as a result, for individual entrepreneurs who used the simplified taxation system and have been classified in the second group of single tax payers, the volume of the single tax increased twice without the corre-sponding increase in volumes of manufactured products, works performed, services rendered. a similar situation was observed with respect to the income of individuals’ income tax – as a result of the growth of twice the minimum wage, with the full development of the working month and unchanged labor productivity, there was a significant increase in the volume of transfers of personal income tax, which was not supported by the results of the entity’s economic activity management. also, the share of workers who could take advantage of the tax social benefit at the time of payment of the tax on personal income decreased. also, a high level of connection between the average monthly wage of the population of the kherson region and the amount of personal income tax (r = 0.995) and the single tax for small business entities (r = 0.925) were revealed. in modern conditions, the low level of average monthly wages in the kherson region and ukraine in general, the use of advanced technologies for taxation of in-comes is a necessary component of paying decent wages to the socially vulnerable population and increasing the levels of competitiveness of products (works, services) and enterprises in general. taking into account the above, based on the foreign experience of taxation of individuals’ incomes, it was proposed to ensure the implementation of the following measures for workers of industrial enterprises in the region: non-taxation of 30% of the average wage in the manufacturing sector (in january 2019 the industry average salary amounted to 10388 uah), that is, 3116.4 uah; establishment of communication in determining the maximum amount of income to which the use of tax social benefits may be applied, and the size of the tax social benefit, with the size of the minimum wage on january 1 of the reporting year. that is, the maximum amount of income in 2019 will be 5840 uah, the amount of tax privilege will be calculated in the proportional equivalent to 4173 uah; the introduction of an additional tax of 7% on incomes, which is 3 times higher than the average wage in the production sector, that is, more than 31164 uah. proposed offers for taxation of the socially vulnerable workers of manufacturing enterprises in 2019 will be reflected in table 3. at the testing of the provided recommendations to “amalteya” ltd., it was established that the total salary payable to employees in january could increase by 175.6 thousand uah or 17.7%. the average share of deductions from accrued wages amounted to only 5.3%, which, in the conditions of permanent increase of prices for essential products and payment of housing and communal services, is the most important component in ensuring the creation of proper living conditions for the socially vulnerable population. moreover, the growth of the size of the “net” wage will not only reduce the size of the indebtedness of table 3 proposals for taxation of the socially vulnerable population manufacturing enterprises in 2019 indicator accrued wages (x), uah х≤3116.4 3116.4< x ≤5840 5840<х≤31164 31164<х interest rate of pit,% 0 18 18 25 the size of the tax allowance for the payment of personal income tax (for taxpayers specified in subparagraph 1 of clause 4 of article 169 of the tax code of ukraine), uah 3116.4 3116.4+ 0.5*4173 3116.4 3116.4 the size of the personal income tax, uah 0 (х-0.5*41733116.4)*0.18 (х-3116.4)*0.18 (31164-3116.4)* 0.18 + + (х-31164) *0.25 source: own elaboration baltic journal of economic studies 136 vol. 6, no. 5, 2020 the socially vulnerable population for the use of housing and communal services, but also increase the purchasing power of the population and ensure the growth of the value added tax revenues to the state budget of ukraine (the correlation between the average monthly wage in the kherson region and the value added tax on manufactured goods is 0.967). 5. conclusions and recommendations for further research the results of the study suggest that the introduction of a sound scientific and methodological approach to assessing and forecasting the level of development of the country and regions in particular will allow not only to identify problem areas in the development of the respective territories, but also to get the potential investor reliable information about the real state of affairs and to determine the justification of further investment in the activity of the research object. using an unjustified scientific and methodological approach not only can distort the real state of affairs in the regions and the country in general, but also send in the conditions of the crisis limited financial resources of the state and local budgets to improve the indicators that have a minor impact on the development of the economy. it is proved that in current crisis conditions, the functioning of the national economy, state authorities should implement a more effective discretionary fiscal policy aimed at reducing the tax burden in the formation of the wage fund of the socially vulnerable population. references: bohdaniuk, i., kolisnichenko, v., & ustymenko, o. 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(2015). metodychni pidkhody shchodo stvorennia ta zabezpechennia funktsionyvannia systemy monitorynhu ta otsinky sotsialno-ekonomichnoho rozvytku rehioniv v ukraini [methodological approaches to the creation and maintenance of a system of monitoring and evaluation of socioeconomic development of regions in ukraine]. problems of the economy, vol. 1, pp. 180–186. zachosova, n. (2019). innovative approach in the estimatology of financial institutions economic security: possibilities of use in management and regulatory activity within the means of provision of the state financial security. baltic journal of economic studies, vol. 5, no. 2, pp. 45–56. doi: 10.30525/2256-0742/2019-5-2-45-56 baltic journal of economic studies 55 vol. 2, no. 2, 2016 corresponding author: 1 department of accounting, auditing and statistics, odessa institute of trade and economics. e-mail: lena_drozdova@ukr.net accounting aspects of the peculiarities of the functioning of internet-shops in modern conditions elena drozdova1 odessa institute of trade and economics, ukraine abstract. under modern conditions, characterized by the development of information technologies, the approach to trade activity has been changing fundamentally as its movement to the virtual reality brings changes in the sphere of management and determines the organization of accounting. the current pace of development of computer systems and technologies has led to the development of e-commerce, the possibility of function of which is provided by the information systems. methodology of research, analysis of last researches and publications. rapid growth of e-commerce market and the existence of practical issues concerning the organization and the peculiarities of functioning of the appropriate entities have been formed a scientific interest in the task solving. the need for accounting approach to e-commerce activity subjects has been identified the relevance of research. the purpose of research is to generalize the researches regarding the e-commerce and its components, formation of a common understanding of organization and the features of e-commerce business entities with the definition of the accounting aspects in order to ensure efficiency. subject of research. in the article the essence of e-commerce and peculiarities of its implementation in connection with the development of e-commerce in ukraine and in the world has been considered. the activity of internet-shops as one of the most popular e-commerce systems has been researched. advantages, disadvantages and feasibility of functioning of internet-shops compared to other systems have been identified. the place and role of accounting as well as the features of its organization in creating of internet-shop have been determined. the features of accounting according to the different ways of payment have been considered. results of research. the development of e-commerce in ukraine and in the world contributed to the development of the activities of internet-shops as one of the most common of its systems. the ability to save money and time when buying goods contributed to factors of this kind of e-commerce system in ukraine. however, during the organization of this type of trade it is important to take into account the negative impacts, one of them – the need to develop electronic payment systems. organization of operation of internet-shops has a number of features and in the first place it is provided by the internet-site that initially requires an investment, but in the future development minimizes costs and is more efficient and less expensive way of doing business in the modern world. in the research the different aspects of internet-shops, taking into account the methods and organization of accounting, have been considered, the possible expenses at the beginning of activity and in the further development of this type of trade have been identified, the various ways of purchase by customers, that determine in complex the characteristics of functioning of the internet-shop, have been considered. thus, accounting in modern conditions being still a source of high-quality (accurate, timely) information for management system has been developing and transforming in parallel with changes in the types of business, appearance of new objects and requests for information by appropriate users. in the article the peculiarities of the activities of the online shops in modern conditions have been considered, in further research the other types of such business models should be more studied. in addition, as e-trade is actively growing, the analysis of problematic issues becomes the main tasks: pricing, product range, delivery and payment. key words: accounting, e-trade, e-trade systems, internet-shops, e-commerce, e-commerce market. jel classification: м40, м41, о31 baltic journal of economic studies 56 vol. 2, no. 2, 2016 1. problem definition the computer system and technologies development influences the all types of activity and actual development temps caused to the electronic business formation and the opportunity the existence of which is provided by information systems. according to the ukrainian association evaluation the direct marketing association (udma) total market e-commerce by the end of 2014 amounted to 1.6 bln. dollars. (it’s included in the scope of the b2c-only sale of new goods). in comparison with the 2013, the market of e-commercial grew up to the 19% but in the dollars cheeped for 20%. a lot of segments are recessed because of uah hard fall. considering the economic situation stabilization, the e-commerce market volume to 20162018, is foreseen to positive tendency: 2016  – $1.4 bln., 2017 – $1.8 bln., 2018 – 2.3 bln. dollars (udma, 2014). the common tendencies witness about the functioning of the e-commerce market and ukraine’s integration to the global processes. by the foresee of a lot of other experts in 2016, the internet trade in money equivalent will reach the point of 5,65 bln. dollars. in ukraine there are 8000 shops that sell almost any product, but most of them are small players in the market are not able to provide a significant level of investment in marketing and advertising, infrastructure and logistics (boychuk, 2014). currently, the most common type of e-commerce is the sale of goods and services through the activities of online stores. this distance selling includes many features and uses, as a system that requires a comprehensive approach to the organization of its operation, and in the subsequent development. the speeded up of e-commerce and existing of practical questions about organization and features of the activities of relevant stakeholders to formulate a scientific interest in the problem solving. in a way, such tendencies of internet development in ukraine are studies by o.v. boychuk (boychuk, 2014), the features of stakeholder e-commerce is considering t.v. bochulia (bochulia, 2013), e-commerce in the field of information services examined ll intercession, a.a. kopachev (pokrovskaia, kopachev, 2014), accounting and tax aspects of the online shopping study yu.a. kudryavtseva, s.v. pelkova (kudryavtseva, pelkova, 2014), v.v. khudoleev (khudoleev, 2003) and others. the necessity of accountancy approach to the activity of electronic trade defined the actuality of carried out research. the goal of research is the informational generalization in connection with systems of e-commerce and its components the formation of a common understanding of the organization and characteristics of the subjects of e-commerce activities, the definition of the accounting aspects in order to ensure efficiency. 2. tendencies of e-commerce development in ukraine in the modern conditions with specific development of informational technologies, the approach to the trade activity is essentially changed, because its movement in the virtual reality brings changes in the sphere of management and determines the organization of accounting. learning the especially the organization of accounting and taxation treatment of trade organizations costs, t.v. dedova (dedova, 2005) means that in the system of state market relations is a set of trade organizations is the main link between the production and consumption of products. as a source of cash income, sale forms are the basis of the financial stability of the state. the advantages of alternative trade activity functioning – are the internet shopping is studying t.v. bochulya (bochulya, 2013), calling such: for the buyer – costs saves time and money for the seller  – the savings on rent and commercial premises maintenance, payment of personnel and other expenses associated with the conduct of commercial activities. internet  – is a trade has own legal, accounting and tax features, is developed last times and it’s appeared more and more online retailers. internet shops  – it’s the enterprises and organizations engaged in trade via the internet (khudoleev, 2003). learning the features of e-commerce, l.l. pokrovskaia, a.a. kopachev (pokrovskaia, kopachev, 2014) focused attention that traditional methods of doing business in today’s economy is not fully in line with trends in the development of organizations. electronic commerce is able to essentially increase the economic efficiency of enterprises. researchers define that the implementation on the enterprise the e-commerce methods of business allows increasing the efficiency of promoting goods and services, to expand markets, develop a relationship with customers, helping to reduce ongoing costs, reducing the total time of customer service and order processing. according to the khudoleev v.v. definition (khudoleev, 2003), the trading through the internet has the list of practical features: ‒ sale of goods produced mainly natural persons; ‒ link the buyer and seller there is no direct, personal contact by using different means of communication; ‒ lack of internet-shop real trading platform; ‒ implementation of the delivery of the goods to the buyer; ‒ other features of e-commerce. 3. internet-markets as the system of e-commerce traditionally e-commerce systems in the consumer’s sector (b2c) are the electronic strip mall (supermarket), baltic journal of economic studies 57 vol. 2, no. 2, 2016 internet storefronts and internet stores. the organization of market activity and implementation of certain system depends on the daily transactions number which defines the opportunity each of independent business with the help of internet storefronts and automation of all processes and the functioning of the respective internet stores. internet-store needs the official web-page with online sales function which is possible to be carried out in two ways: creation of an electronic sale point or its renting. in the first case developers wages, premiums charged with such salaries, payment of a domain name for your site (the special name of the site), the cost of hosting (storage services pages on the site on a dedicated server on the internet) are the expenses. it also includes the other expenses which are connected with developing (kudriavtseva, pelkova, 2014). in the case when the online store is rented, the rent expenses per month are got (kudriavtseva, pelkova, 2014). in the same time the e-commerce trade supposes the permanent support in adjusted site operation, tracksystems by site visits accounting and individual products pages on the basis of the principle of personalization and profiling technologies to further analysis and possible management decision-making, cooperation with delivery services, online counselling clients. the qualitative consumer consultation, especially in the internet-stores activity, is the key task because quick servicing and informing encourage the competition advantages in the actual competitive conditions. the servicing tasks are the professional consulting, quick order execution. 4. organizational aspects of accountancy in internet stores the accountancy is the source of informational formation about enterprise activity with the purpose of future control and use for management decisions. the importance of such information forming is defined by the market competition, the predominant choice of the buyer, and the influence of external factors in the market, highrisk conditions of uncertainty in the business. the risks influence may be avoided or minimized having qualitative information which the reliability, timeliness, volume define the main characteristics. it’s widely known that information is the priority productive factor which defines classic land, labour, capital. together with the entrepreneurship abilities as the productive factors form the most powerful competitive potential development of economic activity in the modern conditions. traditionally the elements of accountancy define the primary accountancy, document circulation, inventory, chart of accounts, forms of accounting, reporting. the accountancy of internet stores activity is not the exception and the head of company is responsible for its organization and legislation leading considering the features of sale volumes and specific of internet stores, key elements of internet trade organization online store or its combining with the real trade network; the opportunity of goods getting in the office and showroom the opportunity of operative work; basing on incoming orders, or owning a warehouse for storing supplies; optimization of problem such as stocks in order to minimize their storage and maintenance costs bank transfer, credit card, e-money, cash on delivery, cash on hand; system of discounts and bonuses, promotions and sales, special conditions responsibility for goods quality responsibility for breach in personal data confidentiality way of trade features of collaboration with providers way of payment for goods goods quality personal data protection fig. 1. features of internet trade organization and web page functioning baltic journal of economic studies 58 vol. 2, no. 2, 2016 defines the necessity of accountancy service creation or leads the accountancy personally and also outsourcing (which is considered below) the accountancy leading for internet stores originally consists of taking into account the cost of website creation and its functioning depends on the conditions. in dependence of existence of outstanding rights for web page and it’s defined as non-material active or future periods expenses. by the way, the accountancy organization depends on the its features of web page functioning (fig. 1). the differentiation of payments ways for consumers is the main above mentioned moments because it forms the completive advantages in connection with the suitableness of purchase payment. in the same time, the use of bank payment is the easiest way of payment for internet store. that’s why with the goal of such way popularization, some internet stores use sales pitch– is the additional bonuses or discounts for customers who prefer this method of payment. internet store accountancy may be carried out by the introduction of the state of their own accountants (financial services), or the financial company (outsourcing). the internet stores activity is new enough in this reason the directing should to define the advantages and disadvantages in every methods considering the cost of services, the volume of work, qualified professionals. according to the definition of v.f. trunina and v.a. starodubtseva (trunina, starodubtseva, 2013), the accountancy provides the qualitative service with the essential economy of money in connection with unnecessary equipment costs jobs, special software and literature, payroll staff accountant and finance training and refresher courses. in connection with the minimization of costs, there is a time-saving, labor resource, which allows us to develop more effectively. the strengthening concentration of internal corporate focus on the main purpose of the company by delegating responsibilities for accounting outsourcer, which positively encourage business, are watched in the organization. such company as a rule has the staff of highly qualified specialists with wide job experience which is accumulated by the similar tasks solving which means the essential risk recession in correctness of accounting operations and reporting distortion (trunina, starodubtseva, 2013). researching the accountancy in outsourcing, t.i. kisilevich (kisilevich, 2011) focuses attention on that small and medium businesses are essentially interested in outsourcing development, as large companies create institutions serving them on different types of consulting, analysis, accounting, etc., as well as enter into contracts with organizations, transferring to outsource not only accounting, but also a number of other non-core functions. by the way, the work of personal accountant or accounting service of internet store is often needed automation and purchases the finished product, the use of rented services. such necessity is defined by the scale of operations and additional tasks in the accountancy organization: conducting book expenses and income, the formation of the amount of taxes, registration of goods in the context of suppliers and buyers, and others. 5. conclusions and perspectives e-commerce dynamic in ukraine and world encouraged the development of internet stores activity as one of the most distributed system. the opportunity in money and time economy by the goods purchasing is the establishing factors such e-trade in ukraine. but during its organization, it’s necessary considering the negative influences one of which is the necessity in e-payment system development. internet stores functioning organization has its list of features and is provided by the web page functioning which originally needs the investments but further progress in minimizing costs and is more efficient and less expensive way of doing business in the modern world. in the researching it’s considered the different aspects in internet stores functioning, taking into account the ways and organization of accountancy, identified the possible expenses in the beginning of activity and in future such trade development, analyzed the different ways of goods payment by consumers which in combination define the features of internet store functioning. in a way the accountancy in modern conditions is still the informational source for administrative apparatus, developed and transformed in parallel with changes in the business, the appearance of new objects and requests for information relevant users. article considered the features of internet store functioning in modern conditions, further studies should investigate in more detail other kinds of business models for trading by the internet. by the way because such trade type is actively developed. the analyses of problematic moments became the priority task: pricing of products, product range, delivery and payment. references boychuk, i.v. (2014). directions of modern internet development in ukraine. retrieved from: http://www.lac.lviv.ua/fileadmin/www.lac.lviv.ua/data/kafedry/marketyngu/docs/kaf_market_presentation_ bojchuk_2014.pdf bochulia, t.v. (2013). accounts intricacies of trading internet rating in economic subjects. journal of «international accounting», moscow, 28(274): p. 55-62. dedova, t.v. (2005). organization of accountancy and taxation cost treatment of trade organizations: dis. cand. econ. sc., voronezh, 178 p. baltic journal of economic studies 59 vol. 2, no. 2, 2016 kisilevich t.i. (2011). accountancy on the outsourcing. magazine «audit and financial analysis”, № 4, 2011. retrieved from: http://www.auditfin.com/fin/2011/4/2011_iv_02_05.pdf kudriavtseva, yu.a., pelkova, s.v. (2014). features of goods sale organization by the internet under the simplified system of taxation. journal of «international journal of applied and basic research”, 7: 92-95. pokrovskaia, l.l. (2014). e-commerce in the sphere of informational services: monograph, м.-berlin: directmedia, 182 p. trunina, v.f., starodubtseva, v.a. (2013). advantages and disadvantages of accountancy outsourcing in russia. young scientists, № 1: p. 192-194. – retrieved from: http://www.moluch.ru/archive/48/5990/ khudoleiev, v.v. (2003). legal, accounting and tax aspects of the online stores. journal «accounting and taxes in the trade and public catering”, № 4. retrieved from: http://www.buntorg.ru/articles/2003/4/3474.html what happened to the e-commerce market of ukraine for 2014 and what to expect at the end of 2015 / ukrainian direct marketing association (udma). retrieved from: http://www.uadm.com.ua/wp-content/ uploads/2015/07/e-commerce-.pdf елена дроздова учетные аспекты особенностей деятельности интернет-магазинов в современных условиях аннотация. в современных условиях с характерным развитием информационных технологий, кардинально меняется подход к торговой деятельности, поскольку ее перемещение в виртуальную реальность несет изменения в сферу управления и определяет организацию бухгалтерского учета. актуальные темпы развития компьютерных систем и технологий привели к формированию электронного бизнеса, возможность существования которого и обеспечивается информационными системами. методика исследования, анализ последних исследований и публикаций. ускоренный рост рынка электронной коммерции и существование практических вопросов по поводу организации и особенностей деятельности соответствующих субъектов сформулировали научный интерес к решению поставленных задач. необходимость учетного подхода к деятельности субъектов электронной торговли определили актуальность проведенного исследования. целью исследования является обобщение информации касательно систем электронной коммерции и ее составляющих, формирование общего понимания организации и особенностей деятельности субъектов электронной торговли, определение учетных аспектов с целью обеспечения эффективности. предмет исследования. в статье рассмотрена сущность электронной торговли и ее особенности в связи с развитием электронной коммерции в украине и в мире. исследована деятельность интернет-магазинов как одной из наиболее распространенных систем электронной коммерции. выявлены преимущества, недостатки и целесообразность функционирования интернет-магазинов по сравнению с другими системами. определено место, роль бухгалтерского учета и особенности его организации при создании интернет-магазина. рассмотрены особенности организации бухгалтерского учета при различных способах оплаты. главные результаты и выводы исследования. динамика электронной коммерции в украине и мире способствовала развитию деятельности интернет-магазинов как одной из наиболее распространенных ее систем. факторами становления такого вида электронной торговли в украине является возможность экономии денежных средств и времени при покупке товаров. однако при ее организации важно учитывать негативные влияния, одно из которых  – необходимость развития системы электронных расчетов. организация функционирования интернет-магазинов имеет ряд особенностей и, в первую очередь, обеспечивается работой интернет-сайта, что изначально требует инвестиций, но в дальнейшем прогрессе минимизирует расходы и является более эффективным и менее затратным способом ведения торговли в современных условиях. в исследовании рассмотрены разные аспекты деятельности интернетмагазинов, учитывая способы и организацию бухгалтерского учета, идентифицированы возможные расходы в начале деятельности и в дальнейшем развитии такого вида торговли, проанализированы различные способы оплаты покупок клиентами, что в комплексе определяет особенности функционирования интернет-магазина. таким образом, бухгалтерский учет в современных условиях, по-прежнему являясь источником качественной (точной, своевременной) информации для управленческого аппарата, развивается и трансформируется параллельно с изменением видов деятельности, появлением новых объектов и информационных запросов соответствующих пользователей. в статье рассмотрены особенности деятельности интернет-магазинов в современных условиях, в дальнейших исследованиях более детально следует изучить другие разновидности бизнес-моделей для торговли через интернет. кроме того, поскольку такой вид торговли активно развивается, приоритетным заданием становится анализ проблемных моментов: формирование цен на продукцию, ассортимент продукции, способ доставки и оплаты. baltic journal of economic studies 92 vol. 6, no. 1, 2020 corresponding author: 1 kyiv national university of trade and economics, ukraine. e-mail: melnichenko@knteu.kiev.ua orcid: https://orcid.org/0000-0002-5162-6324 researcherid: n-9535-2016 2 kyiv national university of trade and economics, ukraine. e-mail: volosovich_sv@ukr.net orcid: https://orcid.org/0000-0003-3143-7582 researcherid: n-2394-2016 3 kyiv national university of trade and economics, ukraine. e-mail: baraniukyurii@gmail.com orcid: https://orcid.org/0000-0003-1289-2248 researcherid: j-5726-2018 doi: https://doi.org/10.30525/2256-0742/2020-6-1-92-99 dominant ideas of financial technologies in digital banking svitlana melnychenko1, svitlana volosovych2, yurii baraniuk3 abstract. the purpose of the research is the definition of the dominant ideas of financial technologies in digital banking. the methods of theoretical generalization, qualitative, quantitative and correlation analysis, causality tests, description and explanation are used, which made it possible to establish the relationship between the volume of investments in financial technologies and the performance of the banking system, identify the areas of application of financial technologies in the activities of the bank, determine the dominant ideas of financial technologies in digital banking and to uncover the factors and prospects of intensifying the use of financial technologies in digital banking in ukraine. results of the research are to substantiate the impact of artificial intelligence, biometrics, cloud services, big data, blockchain and open banking services on digital banking. due to financial technologies in digital banking, it is possible to generate and store large amounts of data, simultaneously analyze and apply the results of their analysis, provide personalized banking services, perform the functions of central storage of information about the client of financial and non-financial nature, which facilitates the effective investment and credit decision-making, as well as improving the level of information security of banking operations. practical implications. financial services markets are transformed by the impact of financial technologies. development of financial technology instruments by non-banking institutions necessitates the identification of opportunities for their use in banks. the set of financial technologies used by banks forms the digital banking system, the development level of which is the main competitive advantage of the bank in the business environment. digital banking is characterized by the continuity and security of banking services, which provide the consumer with the ability to receive them online anywhere around the clock, personalization of banking services, digital authentication of users and digitization of banking transactions with the replacement of paperwork. the use of financial technologies in digital banking enables to automate customer segmentation processes, reduce costs on payment transactions, optimize accounting, financial and tax accounting, improve customer service and expand your customer base while maximizing revenue in certain business segments. value/originality. the basic spheres of the use of financial technologies in digital banking, as well as the factors and prospects of intensifying the use of their instruments in ukraine are revealed. the main areas of use of financial technologies in digital banking are customer behavior analysis, transaction monitoring, customer identification and segmentation, fraud management, banking services personification, risk assessment and regulatory compliance, customer response analysis, process automation, financial advice, investment decision-making, trade facilitation, syndicated loan services, and p2p transfers. the prospects for developing financial technology tools in digital banking include strengthening the interaction between regulators, banks and financial technology companies, the increased use of biometrics, the development of neo-banking and open banking services. key words: digital banking, financial technologies, cloud services, blockchain, big data, artificial intelligence, biometrics. jel classification: g21, o14, o32, q55 baltic journal of economic studies 93 vol. 6, no. 1, 2020 1. introduction financial services markets are transformed by the impact of financial technologies. in recent years, there has been a situation in the european countries where financial institutions are empowering consumers to access cheaper products, lowering fees for intermediaries, which increases competition between them. the result of competition in the banking sector is the formation of conditions under which in some countries deposit interest rates have acquired negative values in the currencies of euro, swiss franc, japanese yen, etc. these effects lead to a decrease in profitability of banking institutions, decreases the margin between interest rates on credit and deposit products, business and households saving more funds directs to consumption. to maintain market positions, banks develop collaborations with non-banking institutions to develop financial technology tools that can optimize individual business processes and help to improve customer service. as a result, there is a need to substantiate the impact of dominant ideas of financial technologies on the activities of banks, in particular, digital banking. the purpose of the research is the definition of the dominant ideas of financial technologies in digital banking. based on the stated purpose, the following research objectives are solved in the article: – to establish the relationship between the volume of investments in financial technologies and the performance rates of the banking system; – to identify areas of application of financial technologies in the bank's activities; – to identify dominant ideas of financial technologies in digital banking and substantiate their feasibility; – to reveal the factors and prospects of intensifying the use of financial technologies in digital banking in ukraine. the works of scientists and practitioners, published in ukraine and abroad, became the scientific base of the research. the research was conducted using the methods of theoretical generalization, qualitative, quantitative and correlation analysis, causality tests, description and explanation. to identify the impact of financial technology investments on the volume of bank loans and deposits in the european union countries, the materials of the european statistical office and the auditing company kpmg international were used. 2. literature review on the definition of the essence of digital banking in the conditions of development of financial technologies financial systems undergo transformational changes, which are a characteristic feature of the economic systems of many developed countries (mazaraki, 2018). as melnyk t. (2019) points out, significant transformations of the structure of the financial system are caused both by the invention of new financial instruments and the gradual process of universalisation of banking activities. the reliability, financial firmness, efficiency of the bank's operation and its competitiveness in the market depend on the introduction of innovative banking products and technologies that can be an impetus in the further development of the banking system as a whole (rysin, fediuk, 2017). in the context of the transformation of the domestic economy towards the transformation of consumer preferences and technological solutions (mazaraki, kasianova, 2015; baranovskyi, 2018), banking institutions are influenced by their activities such as increasing the need to take into account the dynamic needs of consumers, increasing the cost of financial technology products, increased competition from a growing number of non-traditional banking service providers, and increased demands from central banks (mnykh, bardash, shevchuk, 2011). back in 2015, a. jenkins, ceo of barclays, one of the uk's largest banks, suggested that the introduction of financial technology into the banking service delivery process could cut half the staff of large banks, which is necessary because of the decline in banking profitability in individual regions (williams-grut, 2015). it follows that the use of financial technologies in the banking sector is now a necessary component of the banking institution's ability to survive in the market. the set of financial technologies that are implemented in the activities of the bank, constitute a certain technological system, which means digital banking. digital banking is a new paradigm of customer-bank interaction as it is a field that embraces innovation in financial services for it customers in the area of information and technology solutions (hontar, 2017). at the same time, it is believed that digital banking is broader than the activity of an online platform or mobile banking, as it relates to the automation of every stage of a bank's relationship with a customer, which involves the digitization of both banking services and all banking and customer activities (five degrees solutions, 2019). it follows that in the current context, the essence of digital banking is characterized by the continuity of banking services, which provide the consumer with the ability to receive them online anywhere around the clock, personalization of banking services, digital authentication of users and digitization of banking transactions with the replacement of paperwork. there are three stages of the evolution of digital banking. the first stage concerned the introduction of atms and call centers into the banking activities, which improved customer service. in the second phase, cloud technologies, social networks, analytics and mobile access were applied, which allowed banking institutions to personalize their banking services. the third stage of development of digital banking is related to the use baltic journal of economic studies 94 vol. 6, no. 1, 2020 of artificial intelligence, blockchain, programming interfaces, robotization of individual business processes. in the third stage of development of digital banking the following components are distinguished: 1. three-tier digital core banking architecture, including: presentation level; client level; product level. 2. collaboration with other financial technologies, which presupposes the existence of a common system. 3. customer trust and massive customer acquisition (five degrees solutions, 2019). nowadays, the popularity of digital banking is growing all over the world. thus, the results of the visa survey indicate that 91% of the turkish residents use mobile payments and online banking, 89% in denmark, 87% in norway; 86% in israel (bainazarov, 2018). according to a survey of the companies in north america and europe in 2019 conducted by bottomline technologies, 76% of banks seek to maximize the use of financial technology solutions for payment services and do so in order to retain customers of certain segments, whereas 28% of corporations surveyed indicate that they use non-banking providers for payments. a survey finds that nearly half of corporations use or are interested in using new payment services, with the focus on real-time payments (55%), automated clearing centers (44%) and implementation of blockchain services (35%) (the paypers, 2019). 3. results 3.1. influence of investments in financial technologies on the performance of the banking system the financial technology market of the world has shown rapid development in recent years, driven by the demand from leading international banks for innovative products and the supply of financial technology companies. for international banks, there is a need to automate business processes, create the conditions under which it is possible to expand the customer base, increase the demand for banking products, which contributes to the use of financial technology tools. according to ian pollari, in the current conditions, the international financial market continues to expand and diversify. geographically, there has been an increase in activity in the financial markets in brazil, japan and south korea. also, there is a diversification of financial technology sectors in the world, in particular, regtech (regulatory technology), wealthtech (wealth technology), insurtech (technology for insurance companies), proptech (real property technology). the diversification of financial technologies between countries and species in the near future will be able to strengthen the financial markets, including the banking segment (kpmg, 2019). financial sector institutions, including banks, are ready to invest resources in financial technology, the amount of which is increasing every year. an analysis of the continental geography of investing in financial technology shows that the greatest growth is demonstrated by the america and the countries of europe (kpmg, 2019). the growth in investment in financial technology has enabled european banks to expand their operations, increase deposits and lending, as evidenced by statistics. the granger causality test between the dynamics of investments in financial technologies (kpmg, 2018) and the volume of deposits and loans in europe, by corporations, households, insurance, pension and other financial institutions (euro area statistics, 2019), allowed to establish the relationship between the indicators under research. in particular, the following results were obtained: – a decrease in deposits from insurance and pension companies led to an increase in investments in financial technology instruments (the granger p-value = 0.0009; the pearson correlation coefficient = -0.35881); – an increase in investments in financial technology instruments led to an increase in lending to other financial corporations (the granger p-value = 0.0225; the pearson correlation coefficient = 0.554475). it follows that, on the one hand, the increase in investments in financial technologies in 2012-2018 is due to the outflow of resources of insurance companies and pension funds from the banking sector, their funds are placed in non-banking institutions, probably in bonds or specialized funds for asset management. on the other hand, the growth of investments in financial technologies, in the same period, broadens the horizons of cooperation of banks with other financial institutions, including the inter-bank one. for example, for a banking institution that trades in securities, there is a need to make payments on their purchase or sale transactions, which can be done with the help of depository service providers, there are only two of them in europe (clearstream, euroclear). therefore, in certain banking segments, the use of financial technologies is a prerequisite for the provision of services or transactions. 3.2. areas of application of financial technologies in the bank's activities in recent years, digital technologies such as big data, artificial intelligence, biometrics and blockchain have become widespread in digital banking. previously, financial technology tools in the bank were used, as a rule, in the form of software for keeping accounts, transactions, managing customer databases, now they can be used in most banking operations (table 1). according to table 1, the financial technologies in digital banking, depending on the area of application, can be divided into two groups, one of which is aimed at developing customer service, the other is to optimize the operation of internal systems. baltic journal of economic studies 95 vol. 6, no. 1, 2020 3.3. dominant financial technologies in digital banking dominant financial technologies in digital banking aimed at developing customer service are artificial intelligence, biometrics and open banking services. open banking should be understood as a set of rules that give users access to information from various financial institutions (banks, payment service providers, insurance companies) through application programming interfaces (ifrim, 2019). the development of open banking creates new opportunities for both banks and consumers. for banks, open banking allows to retain customers and increase product value through additional services. in the retail banking segment, open banking helps to eliminate the difficulties of registering new customers, creating personalized offers based on customer behavior. and in the retail segment, open banking allows to inform the customers about the balance, electronic receipts and transaction history. for customers, the advantages of open banking are the ability to obtain financial management services, view their accounts at different banks in one place. examples of consumer benefits include paying for taxi via the bank application p2p, purchasing a ticket with travel insurance, etc. for corporate clients, the open banking allows to manage liquidity, maintain accounting and tax records. the results of the 2018 accenture open banking for businesses survey indicate that 77% of corporations have already participated in, or plan to do, open-source platforms, mainly payments and cost management (ifrim, 2019). in recent years, artificial intelligence technology in customer service has become widespread in digital banking, enabling enhanced quality of service through personalized services, prevention of cybercrime and fraud. artificial intelligence is used: – in 2018 bank of america launched erica, a virtual assistant, it uses predictive analytics and cognitive messaging to provide financial guidance to customers around the clock. erica helps with balance information, transaction overview and payment planning. customers communicate with erica via voice or text messages; – bbva uses bbva valora to calculate the best price for renting, selling or buying a property, нome and baby planner help to understand how starting a family and having a baby will affect your financial situation. the bank also plans to launch a new program that uses biometric technology to automate payments, allowing users to book tables at restaurants, place orders from their smartphone and pay for food without requiring an account; – citibank has strategically invested in a leading information technology company, feedzai, to alert customers of fraudulent actions in real time; – jp morgan chase launched coin platform in 2017 to avoid errors and reduce credit servicing time; – the royal bank of scotland uses an automated commercial real estate lending process worth up to 2.7 mln usd in less than 45 minutes away, although it usually takes several days (w.up, 2018). the most common areas of artificial intelligence in banks include: customer information support, which involves directing them to the appropriate source of information and reducing the burden on bank employees; accumulation of customer data; carrying out of individual banking transactions by means of chatbots, in particular, opening or closing of an account, transfer of funds; the provision of services based on consumer behavior, which is analyzed through smart programs; providing advice to clients on managing their assets and spending through digital assistants; development of investment plans for clients based on real-time data from financial markets. table 1 dominant ideas of financial technology in digital banking area of application (dominant ideas) big data artificial intelligence biometrics blockchain analysis of customer behavior + + transaction monitoring + + + customer segmentation + + customer identification + + fraud management + + + + personalization of banking services + + risk assessment and regulatory compliance + + customer response analysis + + process automation + providing financial advice + + investment decision-making + + + trade facilitation + syndicated loan services + p2p transfers + source: complied by the authors baltic journal of economic studies 96 vol. 6, no. 1, 2020 an important technology used in working with clients in digital banking is biometrics. the fingerprint recognition, which was first applied in 2013 on apple smartphones with touch id, has now caught the attention of most of the world's banks. nowadays, contactless atms with the use of smartphone and biometrics are becoming more popular. biometric atm user authentication is already in place in india, japan, china, and iris authentication in qatar. therefore, there are 80 000 atms in japan with biometric identification of more than 15 million customers. at the same time, in april 2017, the international payment corporation mastercard worldwide announced a biometric credit card (thakkar, 2019). it is likely that next-generation atms with fingerprints will completely replace pin-based atms. according to the above, it follows that digital banking financial technologies aimed at developing customer service are artificial intelligence, biometrics and open banking services. the use of these financial technology tools helps to improve the quality of customer service and, consequently, to expand the customer base, while increasing the amount of revenue in the respective segment. dominant financial technologies in digital banking aimed at optimizing the operation of the internal systems of the bank are cloud technology, big data, blockchain and artificial intelligence. the role of big data technology for banks is continuing to grow. the use of big data technology in digital banking enables customer segmentation, which can save the marketing budget. as far as determining the position of the bank in the market, based on the available resources, will allow us to concentrate efforts and direct actions in the direction that will ensure the bank's acquisition of achievable market share, which will contribute to obtaining the desired result. big data technologies in digital banking are able to solve the problems of business process optimization and automation, which will allow banks, on the one hand, to save resources, and on the other hand, to reduce operational risks. however, the solution to this problem requires modern technology in banking institutions, as legacy systems will not be able to cope with the increasing workload, which requires increased capacity for processing information or complete system reconstruction. with the help of big data technology in digital banking, it becomes possible to organize the system of "social listening", i.e. the analysis of information on user activity on social networks, to identify problems and correct them. since barclays launched the mobile app, many people have expressed dissatisfaction in social networks that users under the age of 18 have not been able to transfer or receive money. as a result, there was made a decision by barclays management, after which users aged 16 and under were allowed to access the program. the use of big data technology in digital banking necessitates the expansion of computer hardware memory. to address this, more and more banks are moving from traditional storage systems to the use of cloud storage. in april 2018, microsoft told the daily newspaper the financial times that the key to successful implementation of cloud financial services is having a close partnership between regulators, financial institutions and cloud providers to provide the right structures, programs and processes that will leverage cloud services (springfield, 2018). the use of cloud technology in digital banking can reduce the cost of hardware, software and related workforce. it is easier for banks to upgrade their it infrastructure against the backdrop of the fact that the cost of using online resources to save data provides significant cost savings. the availability of cloudbased technology tools in digital banking contributes to improving the efficiency of banking, since cloudbased standardization can facilitate the integration of new technologies in the future. also, the use of cloud technology makes customer service fast as computing power grows, providing the departments involved with the solutions. the need for cloud technology is emerging at international banks as well, since it requires considerable additional costs to exchange information between regional and head offices, and access to the cloud enables users to share data anywhere in the world. an important advantage of cloud technology in digital banking is the ability to scan over a thousand transactions per second, which greatly improves banks' ability to deal with financial crimes such as fraud and money laundering. at the same time, there is a need to constantly observe security measures to protect the data stored in the cloud, to guarantee the constant availability of programs and data in case of force majeure, effective management of clouds when receiving services from multiple providers, since it is necessary to ensure communication between all business processes and units, as well as with customers. this requires a single interface and management layer that can run across platforms inside and outside the cloud (fintech futures, 2014). the recording and storage of data in banks is made possible by means of blockchain, which helps to optimize accounting, financial and tax accounting in the bank, as well as to automate the processes of issuing loans in the part of the verification of customer information. blockchain in digital banking is capable of reducing the cost of settling investment banking activities. thus, according to the results of the accenture study, clearinghouses and payment systems can save about 10 bln usd annually when using blockchain technology (binance, 2019). however, it should be kept in mind that the use of blockchain in digital banking is able to increase the speed of payment transactions, especially those performed between countries, due to the high speed of data exchange. baltic journal of economic studies 97 vol. 6, no. 1, 2020 one of the main problems in using financial technology tools in digital banking is to ensure the security of banking activities. thus, 73% of the us banks recognized their security concerns as citing privacy issues as a major concern. banks are losing resources every year as a result of fraud, with central banks increasing the pressure every year to protect customers' personal data. the eu general data protection regulation, which came into force in may 2018, strengthened citizens' rights to data. according to expert estimates, the use of blockchain by banks in the field of personal data protection can save up to 1 bln usd of operating costs and reduce penalties by 2-3 bln usd (debonis, 2017). the need for reliable and fast processing of large amounts of data, the emergence of mobile technologies, data availability and the distribution of open source software create the basis for enhancing the use of artificial intelligence in digital banking. using artificial intelligence technology, it becomes possible to carry out credit risk assessments that require accuracy and confidentiality. in doing so, there is an opportunity to minimize the likelihood of errors and fraud. accordingly, financial technology tools in digital banking aimed at optimizing the operation of the bank's internal systems are cloud technologies, big data, blockchain and artificial intelligence, while the use of some of them also helps to improve customer service. according to a study conducted by the international payment company mastercard worldwide, 87% of the polled representatives of the banking sector in ukraine are ready to partner with fintech startups (unit. city, 2018). in 2017, the first domestic digital bank monobank was launched in ukraine, where individual customers can receive payment, deposit and credit services through the mobile application. 3.4. factors and prospects of intensifying the use of financial technologies in digital banking in ukraine digital banking in ukraine has seen an increase in the use of financial technology tools. the main factors influencing the intensifying the use of financial technologies in digital banking in ukraine are: – changes in the domestic regulatory framework that contribute to the development of financial technologies, in particular, the granting of authorization to sign accounts and agreements by electronic signature, ukrainian financial technology companies continue to use simplified taxation of 5% per year, adoption of the law on electronic identification; – access to capital and investment, in particular the abolition of the requirement for foreign direct investments; – sufficient readiness of the domestic financial technology market. in particular, 40% of financial technology providers were established by 2015 (unit. city, 2018). considering the distinguished factors, it should be noted that the prospects for the development of financial technologies in digital banking in ukraine are: 1. development of neobanks that serve consumers through the use of sites and mobile applications without having physical offices in them. these banks are now popular in the us and the uk. neobanks offer services such as deposit accounts, payment services, money transfers, loans to individuals and business entities. 2. intensifying the open banking development through the directive psd2, which provides access to the data of more than 5 000 european banks. 3. more use of biometrics in digital banking. banks are increasingly using biometric customer identification when providing services through a mobile device, as they have a higher level of security than passwords, pins or e-mails that are highly likely to be hacked. 4. increasing the interaction between regulators and financial technology companies. according to the statement of the national bank of ukraine, it is planned to create a platform for communication with financial technology companies to assess the volumes and needs of this market (national bank of ukraine, 2018). 5. strengthening the interaction between banks and financial technology companies. according to the survey of 39 banks in 17 countries conducted by pricewaterhousecoopers, it was found that future partnerships with financial sector companies are important for 92% of banks (scheele, 2018). as a result, the rapid development of the digital economy now has a significant effect on the fact that banks have more and more business partners in the financial technology sector every year. 4. discussion thus, digital banking involves digitization based on the use of financial technology tools in the processes of banking services, banking operations or the operation of bank information systems. its strengths are the ability to generate and store large amounts of data while simultaneously analyzing and applying the results of their analysis. also, the strengths of the use of financial technology tools in digital banking include the impartiality of decision-making, i.e. those decisions that are less dependent on staff, the ability to provide personalized banking services to clients, the functions of central repository of financial and nonfinancial customer information. the disadvantages of using financial technologies in digital banking are that their presence contributes to the development of non-banking financial institutions, which leads to a decline in the pace of development of traditional banks. a major drawback to consider is the lack of licensing of financial technology companies, which leads to their failure to comply with regulatory requirements in the field of digital banking. baltic journal of economic studies 98 vol. 6, no. 1, 2020 threats to use financial technologies in digital banking are to reduce the number of bank employees, create new risks through automated systems, in particular, the risks of falsification, external manipulation of data. the potential of using financial technology tools in digital banking is to make effective investment decisions, increase the level of information security of operations, strengthen the cooperation of banks and companies in the financial technology sector. 5. conclusions the development of the financial technology market tends to expand and diversify. geographically, there is an increase in activity in the financial markets in the americas and europe. however, there is a diversification of financial technology sectors, with regtech, insurtech, wealthtech and proptech emerging. this diversification between countries and products helps to strengthen the financial markets, including the banking segment. the trend of investments in the financial technology market shows an increase in the period of 2012-2018. increasing investment in financial technology allows the european banks to expand their operations, increase deposits and lending. the catalyst for accelerating the growth of investments in financial technology is the decline in bank deposits from insurance and pension companies. due to the growing volume of investments in financial technology, the european banks have been able to increase lending to other financial corporations, including banks among themselves. the use of financial technology is taking place in digital banking, which is a field that covers the bank's innovation in information and technology solutions. moreover, digital banking concerns the automation of both banking services and all banking activities. the digital banking is characterized by the continuity of banking services, which provide the consumer with the ability to receive them online anywhere around the clock, personalization of banking services, digital authentication of users and digitization of banking transactions with the replacement of paperwork. the main areas of use of financial technologies in digital banking are customer behavior analysis, transaction monitoring, customer identification and segmentation, fraud management, banking services personification, risk assessment and regulatory compliance, customer response analysis, process automation, financial advice, investment decision-making, syndicated loan services, trade facilitation and p2p transfers. depending on the scope of use of financial technology tools, they can be divided into two groups, one of which is aimed at the development of customer service, the other is to optimize the operation of internal systems. dominant financial technologies in digital banking aimed at developing customer service are artificial intelligence, biometrics and open banking services. the use of these financial technology tools helps to improve the quality of customer service and, consequently, to expand the customer base, while increasing the amount of revenue in the respective segment. dominant financial technology tools in digital banking aimed at optimizing the operation of the bank's internal systems are cloud technologies, big data, blockchain and artificial intelligence, while the use of some of them also helps to improve customer service. the need to use certain financial technology tools in digital banking is that they help to create personalized banking products, automate the processes of issuing loans in terms of verifying customer information, segment customers, reduce the cost of settlements in investment banking, optimization of accounting, financial and tax accounting in the bank. factors of intensification of the use of financial technology instruments in digital banking in ukraine are changes in the domestic regulatory framework, creation of opportunities for foreign investment and sufficient maturity of the national market of financial technologies. the prospects for developing financial technology tools in digital banking include strengthening the interaction between regulators, banks and financial technology companies, the increased use of biometrics, the development of neo-banking and open banking services. references: 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(2015). ex-barclays ceo: banks are about to have an 'uber moment' – and it’s going to be painful. business insider. retrieved from: http://uk.businessinsider.com/ex-barclays-boss-anthony-jenkins-onfintech-and-bankings-uber-moment-2015-11 (accessed 21 november 2019). w.up (2018). machine learning in banking: the rise of the bots. retrieved from: https://wup.digital/blog/ machine-learning-digital-banking (accessed 21 november 2019). baltic journal of economic studies 9 vol. 6, no. 4, 2020 corresponding author: 1 jan kochanowski university in kielce, poland. orcid: https://orcid.org/0000-0002-5362-3768 e-mail: wojciech.pietrowski@gmial.com doi: https://doi.org/10.30525/2256-0742/2020-6-4-9-16 income structure of communes of the świętokrzyskie voivodship in 2009-2018 pietrowski wojciech1 abstract. the issue of this paper concerns the income of municipalities and their structures. the research topic is not a new issue, it has been raised in the literature. however, it is justified to take up this subject due to the dynamics of this phenomenon and outdated research results. undertaking the subject matter is also justified by the variable economic situation affecting the achieved revenues of municipalities. the article aims to analyze the income structure of communes in the świętokrzyskie province. the author will also refer to changes in the structure of income, the dominant categories of income over the decade under review. when reading the literature, no similar research was found covering the świętokrzyskie region. the analysis was based on data from the local data bank regarding municipalities in the świętokrzyskie province. the formatted databases included municipal incomes divided by a source. during the study, all municipalities from the świętokrzyskie province were taken into account, along with kielce – a city with poviat status. in total 102 units were included in the study. the research period covered the years 2009-2018 and resulted from the availability of statistical data and a correspondingly long period of analysis. while discussing the phenomenon, data on individual years were used, and the average share of a given category in the period under consideration was determined. due to the attention paid to the structure of income at work, the data was presented as a percentage. the obtained data, expressed in terms of value, was developed by transforming it into a percentage share. the average values for the research period were determined by taking the average value from the sum of values of individual years. the author does not refer to data other than the accepted one, instead he focuses on analyzing changes in the structure. differentiation of particular categories of income is visible. comparing the data at the country and region level, the deviations are not large. however, by looking at the data of individual units, one can see their diversity under this account. despite the presentation in the main three areas (own revenues, subsidies and general subsidy) of their detailed elements, large differences in the share between individual taxes and subsidies can be seen. the average income structure in communes in the świętokrzyskie voivodship does not differ significantly from the national trend. in communes with the highest share of own revenues, their amount is determined by property tax. the structure presented in this way, its diversity in the świętokrzyskie region is a premise for comparing the analyzed data on individual municipalities with indicators from other areas. key words: commune income, commune own income, general subsidy, grants, tax revenues, shares in taxes. jel classification: h20 1. introduction the tasks of the local government unit (lgu) can only be carried out if they are properly financed. without properly secured means, it is not possible for local government units to function properly. the area providing such security is the entity’s income. it provides the basis for the implementation of tasks assigned to local government units. the issue of this paper concerns the income of municipalities and their structures. the research topic is not a new issue, it has been raised in the literature. however, it is justified to take up this subject due to the dynamics of this phenomenon and outdated research results. undertaking the subject matter is also justified by the variable economic situation affecting the achieved revenues of municipalities. the article aims to analyze the income structure of communes in the świętokrzyskie voivodship. the author will also refer to changes in the structure of income, the dominant categories of income over the decade under review. when reading the literature, no similar research has been found covering the świętokrzyskie region. the analysis was based on data from the local data bank regarding municipalities in the świętokrzyskie baltic journal of economic studies 10 vol. 6, no. 4, 2020 voivodship. the formatted databases included municipal incomes divided by a source. during the study, all municipalities from the świętokrzyskie province were taken into account, along with kielce – a city with poviat status. in total, 102 units were included in the study. the research period covered the years 2009-2018 and resulted from the availability of statistical data and a correspondingly long period of analysis. while discussing the phenomenon, data on individual years were used, and the average share of a given category in the period under consideration was determined. due to the attention paid to the structure of income at work, the data was presented as a percentage. the obtained data, expressed in terms of value, was developed by transforming it into a percentage share. the average values for the research period were determined by taking the average value from the sum of values of individual years. the author does not refer to data other than the accepted one, instead he focuses on analyzing changes in the structure. 2. income characteristics local self-government’s revenues are part of its budget adopted for the calendar year. the amount of planned budget revenues for a given year is specified in the budget resolution1. local self-government’s budget revenues are a source of information on the shape of its wealth and affect the directions of spending funds. they can be classified in different ways. we can talk about the division into compulsory and optional incomes. obligatory revenues include: own revenues, general subsidy and earmarked subsidies from the state budget. optional revenues include: funds from foreign sources, non-returnable funds, funds from the eu budget and other funds specified in provisions separate from the act on the income of local government units. another division of local selfgovernment’s income is into current and property income. property income includes subsidies and funds allocated for investments, income from the sale of assets, income from the transformation of perpetual usufruct right into ownership. other income is recognized as current income. another classification divides the revenues of local government units from the perspective of their sources of origin, separating own and supplementary income. supplementary income includes general subsidies and grants2. the act divides the income of local government units into3: – own revenues; – general subsidy; – earmarked subsidies from the state budget. it also indicates other possible sources of income4. in the paper for the purposes of the analysis, the abovementioned division of income of local government units indicated in the act was adopted. as part of our own revenues we distinguish, among others5: – revenues from taxes (on real estate, agricultural, forestry, on means of transport, income from individuals, paid in the form of a tax card, on inheritances and donations, on civil law transactions); – income obtained by municipal budgetary units and payments from municipal budgetary establishments; – income from the commune's assets; – inheritances, bequests and donations to the commune. special-purpose subsidies from the state budget may be granted for6: – government administration tasks and other tasks commissioned by statutes; – tasks implemented under agreements; – financing or co-financing of own tasks; – implementation of tasks resulting from international agreements; – removing immediate threats to public security and order. budget revenues are an important element of the local government finance system, as they affect the ability of local government units to perform public tasks7. the general subsidy for municipalities consists of the equalization part, the balancing part and the educational part. it is an important component of public finances in terms of the analysis of state budget expenditure and the income of local government units. the system of subsidizing the local government sector involves a significant amount of public funds8. the general subsidy 's performance of its income and compensatory function is determined by objective and stable criteria for its granting. it is also important to emphasize the continuing increase in the importance of the educational subsidy due to all municipalities in relation to the compensatory and balancing part9. 1 ustawa z dnia 27 sierpnia 2009 roku o finansach publicznych (dz.u. 2009 nr 157 poz. 1240 z późn. zm.), art. 211 i 212. 2 m. dworakowska, dochody budżetowe jednostek samorządu terytorialnego z perspektywy absorpcji funduszy unijnych, optimum. economic studies nr 3(93), białystok 2018, s. 54–56. 3 ustawa z dnia 13 listopada 2003 r. o dochodach jednostek samorządu terytorialnego (dz.u. 2020 poz. 23, 374) art. 3, pkt. 1. 4 op. cit., art. 3, pkt. 3. 5 op. cit., art. 4, pkt. 1. op. cit., art. 8, pkt. 1. 6 m. dworakowska, dochody budżetowe jednostek…, op. cit., p. 61. 7 a. sekuła, system subwencjonowania jednostek samorządu terytorialnego w polsce: dysfunkcje i pożądane kierunki racjonalizacji, politechnika gdańska, gdańsk 2016, p. 244. 8 j. szołono-koguc, subwencja ogólna jako instrument wsparcia transferowego samorządu gminnego, prace naukowe uniwersytetu. 9 ekonomicznego we wrocławiu, nr 485 relacje fiskalne państwo – samorząd terytorialny, wrocław 2017, p. 470. baltic journal of economic studies 11 vol. 6, no. 4, 2020 subsidies are a source of funding for tasks that must be carried out by a local government unit. due to their desirability, they limit the free spending of funds, at the same time ordering them to account for their use10. budget revenues are an important element of the local government finance system, as they affect the ability of local government units to perform public tasks11. local government has the ability to implement its tasks when it has stable and efficient sources of its own revenues. the share of own income has a positive effect on the independence of decision making. these revenues are characterized by the highest stability, predictability and the possibility of direct impact on their amount. the share of own revenues in total revenues is one of the determinants of financial independence of the commune. the structure of municipalities' revenues in the voivodship and the country is presented in charts 1 and 2, taking into account the city with poviat rights. the above chart presents the income structure of communes of the świętokrzyskie voivodship in selected years of the examined period. the structure of income in the period under review slightly changed, which is visible mainly in 2018 where the increase in the level of subsidies by 10% was accompanied by a decrease in the level of own revenues and general subsidy. own revenues in a local government unit should constitute a financial base, which should reflect their highest share in the total income structure12. comparing data from the świętokrzyskie region (figure 1) to data from the whole country (figure 2), diagram 1. the structure of municipalities' revenues in the świętokrzyskie voivodship in the years 2009-2018 source: own study based on data from bank danych lokalnych gus 10 k. owsiak, kontrowersje wokół dotacji celowych dla jednostek samorządu terytorialnego, prace naukowe uniwersytetu ekonomicznego we wrocławiu, nr 485 relacje fiskalne państwo – samorząd terytorialny, wrocław 2017, p. 341. 11 m. dworakowska, dochody budżetowe jednostek…, op. cit., p. 61. 12 m. dworakowska, dochody budżetowe jednostek…, op. cit., p. 55. 0% 20% 40% 60% 80% 100% 120% 2009 2012 2015 2018 42% 42% 45% 39% 23% 25% 25% 35% 35% 33% 30% 25% own income grants general subsidy 0% 20% 40% 60% 80% 100% 2009 2012 2015 2018 55% 53% 56% 51% 16% 20% 19% 28% 29% 27% 25% 21% own income grants general subsidy diagram 2. the structure of municipalities' revenues in poland provinces in the years 2009-2018 source: own study based on data from bank danych lokalnych gus baltic journal of economic studies 12 vol. 6, no. 4, 2020 we can state the existing analogies. namely, it is the advantage of own revenues and the increase in the share of subsidies in 2018. however, there is an approximate 10% advantage of the share of own revenues in the revenues of municipalities throughout the country. own revenues are the dominant source of municipalities’ revenues, which constitute about 40% of municipalities’ revenues in the świętokrzyskie voivodship, and over 50% of municipalities’ revenues in the country. chart 3 shows the structure of municipalities' income in the country, region and selected communes from the region with the largest and smallest shares of individual income categories. the structure diversity is not visible in relation to the average country and voivodship. however, if we look at the income structure of individual municipalities, the situation changes significantly. the difference in the share of own income between the municipality with the highest share (sitkówka-nowiny) and the lowest (radoszyce) is 52%. it is true that these are extreme cases, and their scale in the studied region is not so large. the smaller variation is represented by subsidies, in which the difference between the extreme communes (solec-zdrój and sitkówka-nowiny) is 29%, while in the case of the general subsidy it is 41% (kluczewsko and połaniec). referring to changes in the structure in individual years of the audited period, they vary in different municipalities. due to the very large volume of databases (102 units and 10 years), the conclusions of some observations will be presented only in a descriptive form. 3. structure of own income, subsidies and general subsidy own income is a special type of commune income. it decides on the degree and scope of financial independence of the entity. the appropriate level of own income provides freedom in shaping financial policy, allows to dispose of the assets independently, which translates into its stable development13. table 1 shows the division of communes in the świętokrzyskie voivodship due to the share of own revenues in revenues. a division into 5 groups including 20% ranges was used. the largest number of communes was in the group with a share of 21% to 40% – 70 communes per 102 communes. in the ranges above 40%, municipalities were in the majority, 21 communes in total. the lowest share of own revenues occurred in mniów, radoszyce and słupia konecka amounting to 17%. for 11 municipalities, the share of own revenues in revenues is less than 20%. in order to compare the spatial distribution of municipalities with the data contained in table 1, figure 1 was developed, in which municipalities were presented, taking into account the division into groups already cited in the paper. as shown in the figure, the share of own revenues in terms of the distribution of municipalities on the map of the region is varied. it should be noted, however, that 6 out of 11 communes with the lowest share of own revenues are located in the northwestern part of the region, bordering each other. 3 communes with the highest share of own revenues, i.e., sitkówka 0% 20% 40% 60% 80% 100% 53% 42% 69% 17% 28% 66% 19% 21% 28% 13% 31% 42% 21% 27% 25% 30% 17% 52% 30% 13% 54% own income grants general subsidy diagram 3. income structure in selected communes of the świętokrzyskie voivodship source: own study based on data from bank danych lokalnych gus 13 p. dziekański, wykorzystanie wskaźnika syntetycznego do oceny poziomu rozwoju samorządu na przykładzie gmin wiejskich województwa świętokrzyskiego, [in:] determinanty rozwoju polski, s. owsiak (ed.), pte, warszawa 2015, p. 261. baltic journal of economic studies 13 vol. 6, no. 4, 2020 table 1 average share of own revenues in the revenues of communes of the świętokrzyskie voivodship in the years 2009-2018 no. average share of own income in the commune's income name of the commune commune (own income in %); number of communes 1 2 3 2 from 0% to 20% mniów (17), radoszyce (17), słupia konecka (17), klimontów (18), pawłów (18), bieliny (19), smyków (19), waśniów (19), łubnice (19), kluczewsko (19), łopuszno (20) 11 communies 3 from 21% to 40% oksa (21), gowarczów (21), fałków (22), iwaniska (22), imielno (23), górno (23), lipnik (23), tarłów (23), samborzec (23), wilczyce (23), mirzec (23), wiślica (24), sobków (24), bejsce (24), bodzentyn (24), złota (24), brody (24), secemin (24), nowy korczyn (25), pacanów (25), nowa słupia (25), raków (25), gnojno (26), nagłowice (26), słupia (26), czarnocin (26), ruda maleniecka (26), michałów (26), koprzywnica (26), łoniów (26), pierzchnica (27), ćmielów (27), bliżyn (27), moskorzew (27), radków (27), solec zdrój (28), opatowiec (28), sadowie (28), zawichost (28), wodzisław (29), łagów (29), kije (29), skalbmierz (30), dwikozy (30), łączna (30), skarżysko kościelne (30), szydłów (30), chmielnik (31), strawczyn (31), stąporków (31), obrazów (31), wąchock (31), rytwiany (31), stopnica (32), daleszyce (32), kunów (32), działoszyce (32), bogoria (32), baćkowice (33), bałtów (33), miedziana góra (34), wojciechowice (34), bodzechów (34), oleśnica (35), kazimierza wielka (37), zagnańsk (37), krasocin (38), chęciny (39), opatów (40), osiek (40) 70 communies 4 from 41% to 60% staszów (42), sędziszów (43), jędrzejów (43), piekoszów (43), suchedniów (44), tuczępy (45), małogoszcz (45), morawica (45), masłów (46), włoszczowa (46), busko-zdrój (49), pińczów (50), końskie (52), kielce (52), ożarów (55), ostrowiec świętokrzyski (55), starachowice (55), skarżysko-kamienna (60) 18 communies 5 from 61% to 80% sandomierz (61), połaniec (66), sitkówka-nowiny (69) 3 communies 6 from 81% to 100% – 0 commune source: own study based on data from bank danych lokalnych gus nowiny, połaniec and sandomierz are significantly separated from each other. the reasons for the share of own revenues at the level of over 60% in the indicated communes will be discussed further in the paper. the rest of the paper is based on the basic division of income into own revenues, subsidies and general subsidy. a comparison of revenues at the level of communes in the świętokrzyskie voivodship and communes throughout the country was presented. the following table presents the share of individual categories of income in total own revenues. as part of own revenues, the highest share is represented by taxes constituting state budget revenues, i.e., from personal income tax and corporate income tax. tax revenues including agricultural tax, forest tax, property tax, tax on means of transport, tax on civil law transactions are another category of own income constituting about 30% share in the income of municipalities both in the świętokrzyskie voivodship and the whole country. the share of other own income groups in total income does not exceed 10%. table 2 shows a sustained level of tax revenue, which is table 2 structure of communes' own revenues in the świętokrzyskie voivodship and poland in selected years own income świętokrzyskie poland 2009 2012 2015 2018 2009 2012 2015 2018 tax revenues determined and charged on the basis of separate acts 33% 33% 33% 31% 29% 30% 28% 27% proceeds from fees 1% 3% 7% 6% 2% 2% 6% 6% income from assets 9% 9% 6% 5% 8% 9% 8% 7% shares in taxes constituting total state budget revenues 37% 36% 38% 43% 40% 39% 40% 45% receipts from services 5% 6% 6% 6% 6% 7% 6% 5% other income 15% 13% 10% 9% 14% 13% 11% 10% source: own study based on data from bank danych lokalnych gus baltic journal of economic studies 14 vol. 6, no. 4, 2020 figure 1. spatial differentiation of the share of own revenues of communes of the świętokrzyskie voivodship in total revenues (on average in the years 2009-2018) source: own study tax revenues determined and charged on the basis of separate acts; 33% proceeds from fees; 5% income from assets; 7% shares in taxes constituting total state budget revenues; 38% receipts from services; 6% other income; 12% figure 2. structure of own revenues of communes in the świętokrzyskie voivodship (on average from 2009-2018) source: own study based on data from local data base gus slightly higher in the region studied than in the whole country. the share of taxes constituting state budget revenues is gradually increasing, especially in 2018. on the national scale, this category of own revenues has a higher share than in relation to the region. the figure above presents the share of individual categories of income in the own revenues of communes of the świętokrzyskie province. the % share was presented as average income from 2009-2018. it confirms the data contained in table 2. tax revenues baltic journal of economic studies 15 vol. 6, no. 4, 2020 and shares in taxes constitute over 70% of the revenues of communes of the świętokrzyskie voivodship in the analyzed period, determining their decisive role in shaping the revenues of communes. table 3 presents a detailed structure of two categories of income deciding on the amount of own revenues of communes. analyzing the data contained in the table above, we can see a clear advantage of personal income tax and real estate tax in the structure of own income. other taxes have only a few percent share in income. one can also state a systematic increase in the share of personal income tax, which increased in the 10-year period by approx. 6%. the share structure of the two main categories of income overlaps at the regional and national levels. the 0% share of personal income tax paid in the form of tax cards results from the applied rounding of the percentage share to whole numbers. in the case of the połaniec and sitkówka-nowiny municipalities, real estate tax receipts account for over 50% of revenues, referring to the sandomierz commune the structure of own revenues is similar to the regional and national average. the structure of targeted subsidies is discussed below. table 4 presents the percentage share of earmarked subsidies in the revenues of municipalities. target subsidies from the state budget for government administration tasks have the largest share in the revenues of municipalities under targeted subsidies. in the years 2009, 2012 and 2015 they remained at a similar level, while in 2018 the share of this type of subsidies in the revenues of municipalities more than doubled. these changes can be related to the “family 500 plus” program introduced in 2017 and its significant share in the state budget expenditure on meeting social needs14. special-purpose subsidies from the state budget for own tasks remain at a similar level during the period considered. subsidies paragraphs 200, 620 and subsidies paragraphs 205, 625 concern in particular funds under programs financed with the participation of the european funds. as part of the financial perspective 2014-2020, paragraphs 205 and 625 have been separated for local government units acting as beneficiaries15. the literature on the subject often emphasizes the aspect of treating subsidies as instruments of state interference in the activities of local government units. the high share of subsidies in the total income structure indicates a decrease in income independence. it should also be noted that there is considerable discretion regarding the amount of subsidies awarded due to the table 3 the share of selected categories in the own revenues of communes in the świętokrzyskie voivodship and poland own income świętokrzyskie poland 2009 2012 2015 2018 2009 2012 2015 2018 tax revenues determined and charged on the basis of separate acts agricultural tax 3% 3% 3% 3% 2% 2% 2% 1% forest tax 0% 0% 0% 0% 0% 0% 0% 0% property tax 25% 26% 27% 24% 22% 24% 23% 22% tax on means of transport 2% 2% 2% 2% 1% 1% 1% 1% tax on civil law transactions 2% 2% 2% 2% 3% 2% 2% 3% business tax on natural persons, paid in the form of tax cards 0% 0% 0% 0% 0% 0% shares in taxes constituting total state budget revenues income tax from individuals 34% 34% 36% 41% 37% 36% 37% 42% corporate tax 4% 2% 2% 2% 4% 3% 3% 3% source: own study based on data from bank danych lokalnych gus table 4 structure of the share of grants in the revenues of communes of the świętokrzyskie voivodship and poland in selected years grants świętokrzyskie poland 2009 2012 2015 2018 2009 2012 2015 2018 earmarked grants from the state budget for government administration tasks 31% 29% 27% 60% 18% 17% 15% 38% earmarked grants from the state budget for own tasks 12% 10% 13% 12% 6% 6% 7% 6% grants §§ 200, 620 10% 18% 15% 1% 3% 13% 10% 1% grants §§ 205, 625 0% 1% 0% 8% source: own study based on data from bank danych lokalnych gus 14 a. rączaszek, w. pietrowski, wydatki społeczne w budżetach jednostek samorządu terytorialnego województwa śląskiego w latach 2002-2017, [in:], problemy finansów w obliczu nowych wyzwań gospodarki (red.) m. sosnowski, ue we wrocławiu, wrocław 2019, p. 56. 15 rozporządzenie ministra finansów z dnia 16 grudnia 2014 roku zmieniające rozporządzenie w sprawie szczegółowej klasyfikacji dochodów, wydatków, przychodów i rozchodów oraz środków pochodzących ze źródeł zagranicznych (dz.u. 2014, poz. 1952), par. 1, ust. 2, lit. i, l. baltic journal of economic studies 16 vol. 6, no. 4, 2020 lack of legal regulations. however, it has an impact on the uniform nature of the economic policy pursued throughout the country16. the last of the analyzed categories of municipal revenues is the general subsidy. the average subsidy structure over the period considered is shown in figure 3. the general subsidy in over 70% consists of the educational part, the next element is the compensatory part over 25%. however, the share of balancing, supplementing and compensating parts is negligible. it can therefore be said that the general subsidy mainly covers the maintenance of educational establishments in communes. 4. conclusions the data presented illustrate the structure of own revenues, subsidies and general subsidies, as well as their changes during the period considered. differentiation of particular categories of income is visible. comparing the data at the country and region level, the deviations are not large. however, by looking at the data of individual units, one can see their diversity under this account. despite the presentation in the main three areas (own revenues, subsidies and general subsidy) of their detailed elements, large differences in the share between individual taxes and subsidies can be seen. the average income structure in communes in the świętokrzyskie voivodship does not differ significantly from the national trend. in communes with the highest share of own revenues, their amount is determined by property tax. the structure presented in this way, its diversity in the świętokrzyskie region is a premise for comparing the analyzed data on individual municipalities with indicators from other areas. 16 k. owsiak, kontrowersje wokół dotacji…, op. cit., p. 347. educational part; 72,42% supplement; 0,47% compensatory part; 25,41% balancing part; 1,70%compensation part; 0,00% figure 3. structure of the general subsidy of communes of the świętokrzyskie voivodship (on average from 2009-2018) source: own study references: determinanty rozwoju polski, s. owsiak (red.), pte, warszawa 2015. optimum. economic studies nr 3(93), białystok 2018. prace naukowe uniwersytetu ekonomicznego we wrocławiu, nr 485 relacje fiskalne państwo – samorząd terytorialny, wrocław 2017. problemy finansów w obliczu nowych wyzwań gospodarki (red.) m. sosnowski, ue we wrocławiu, wrocław 2019. rozporządzenie ministra finansów z dnia 16 grudnia 2014 roku zmieniające rozporządzenie w sprawie szczegółowej klasyfikacji dochodów, wydatków, przychodów i rozchodów oraz środków pochodzących ze źródeł zag ranicznych (dz.u. 2014, poz. 1952). sekuła a., system subwencjonowania jednostek samorządu terytorialnego w polsce: dysfunkcje i pożądane kierunki racjonalizacji, politechnika gdańska, gdańsk 2016. studia ekonomiczne. zeszyty naukowe uniwersytetu ekonomicznego w katowicach, nr 345, katowice 2017. ustawa z dnia 13 listopada 2003 r. o dochodach jednostek samorządu terytorialnego (dz.u. 2020 poz. 23, 374). ustawa z dnia 27 sierpnia 2009 roku o finansach publicznych (dz.u. 2009 nr 157 poz. 1240 z późn. zm.). baltic journal of economic studies 196 vol. 6, no. 5, 2020 corresponding author: 1 public institution «institute of environmental economics and sustainable development of the national academy of sciences of ukraine», ukraine. e-mail: levlv@ukr.net orcid: https://orcid.org/0000-0002-7823-7062 2 admiral makarov national university of shipbuilding, ukraine. e-mail: innauamd@gmail.com orcid: https://orcid.org/0000-0002-7025-9857 3 admiral makarov national university of shipbuilding, ukraine. e-mail: management@nuos.edu.ua orcid: https://orcid.org/0000-0003-0709-0187 doi: https://doi.org/10.30525/2256-0742/2020-6-5-196-202 current trends in the development of the water management complex: ukrainian realities and international experience lyudmila levkovska1, inna irtyshcheva2, іryna dubynska3 abstract. aim. the ratification of the paris agreement by ukraine envisages an increase in the ability to adapt to the negative effects of climate change, as well as promoting low carbon development so as not to endanger food production. at the same time, water resources, on the one hand, are one of the most vulnerable to climate change components of the environment from the state of which the food security of the country depends directly, and on the other hand, the activity of the water management complex causes the emergence of both direct and indirect carbon footprint. therefore, an indispensable prerequisite for sustainable low carbon development is the assessment of the carbon footprint of the main sectors of ukraine's water management complex and the identification of priority measures for their decarbonisation and adaptation to expected climate change. methods. the methodological basis for the assessment of the carbon footprint of the main sectors of the water management complex was the life cycle method (lca), by which, based on the open data of the national inventory of anthropogenic emissions from sources and absorption by greenhouse gas absorbers in ukraine and the statistical analysis of the results of previous studies. by means of systematic analysis of the main factors of greenhouse gas emission in the water management complex of ukraine, the priority directions of its decarbonisation and adaptation to climate change were determined. results. the estimated carbon footprint of ukraine's water complex in 2017 was estimated to be 5.15 million tons of co2-equiv, which was 1.6% of the total greenhouse gas emissions in ukraine in 2017, and taking into account the potential carbon footprint enduse processes can be increased by up to 3%. due to the deterioration of the water supply networks, an average of 35% of the supplied water is lost in ukraine. reducing network leakage by at least 10% will reduce carbon footprint by 30,000 tons of co2-equiv annually. the priority areas for decarbonisation of the water management complex should be modernization of water supply and water treatment infrastructure, improvement of energy efficiency of pumping equipment and introduction of drip irrigation, and its adaptation to climate change – development of the network of green infrastructure. conclusions. the low-carbon development of the water management system should include the introduction and coordination of such measures, which, on the one hand, minimize the adverse effects of climate change on water resources and contribute to reducing the carbon footprint of water management activities, and on the other hand, guarantee the achievement of sustainable development goals, in particular for ensuring water and society proper sanitary conditions. key words: carbon footprint, water management complex, adaptation, decarbonisation, climate change. jel classification: f01, r14, q28, q29 1. introduction one of the current global challenges for humanity is climate change and related transformations of hydrometeorological and hydrological conditions. in the context of the formation of new socio-economic relations, this requires a quality solution to the problem of sustainable water supply, because in the 21st century, access to quality water resources for most consumers baltic journal of economic studies 197 vol. 6, no. 5, 2020 will be much more difficult due to population growth and rapid urbanization. the concept of low-carbon development is a relatively new model of the political, economic and social structure of society, aimed at reducing greenhouse gas emissions and achieving sustainable development goals. the primary task of implementing this concept is decarbonising all areas of the economy, increasing energy efficiency and ensuring global ecological balance (hu, peng and dequn, 2011). among the studies of recent years to assess changes in water regime in the basins of the main rivers of ukraine should be noted the ukrainian hydrometeorological institute of the national academy of sciences of ukraine (2020). on the basis of the analysis of long-term dynamics of average annual water runoff the study contains the forecast modelling based on regional climate models on the basis of scenarios of climate change in ukraine until 2050 and contains the basics of a comprehensive approach to assessing current and possible changes in river runoff. the applied models show that a slight increase in the average annual water runoff can be expected on the mountain rivers of crimea and in the kalmius river basin – up to 2–4%. water flow up to 10% is possible on the rivers of polissia. the water content of the carpathian rivers and the northern part will not change. on other rivers there will be a decrease in runoff. its largest decrease (up to 12%) is possible on the rivers of the black sea coast. probable changes are also in the intra-annual distribution of river runoff: an increase in the runoff of the winter low and a shift in the onset of spring floods to earlier dates. at the same time, research (haidutskyi, 2014) shows that there is no universal way to transition sectoral economic systems to sustainable low-carbon development. this transition is determined by the unique characteristics of each area of economic activity of society and requires the implementation of specific mutually agreed adaptation and decarbonisation measures, which would be based on an appropriate assessment of total greenhouse gas emissions from economic activities (carbon footprint) and the main factors of its occurrence. therefore, the purpose of the study is assessing current trends in the development of the water complex of ukraine through the prism of international experience. 2. analysis of the development of the water management complex of ukraine using international experience analysis of the carbon footprint of the main sectors of the water management complex of ukraine can be performed using the life cycle assessment method (lca) accredited according to international standards iso 14044 (international standard organisation, 2006), which allows identifying the total carbon footprint of a particular production process, final product or service, taking into account all stages of their formation. life cycle assessment (lca) is carried out in four main stages, namely: 1. defining the purpose and scope of the study. 2. analysis of the life cycle inventory of the final product (lci). 3. assessment of the impact of final production on the environment (lcia). 4. interpretation of the obtained results and substantiation of further directions of research. the first stage is the collection of general information about the study object, comparison and evaluation of the main input and output streams of its impact on the environment throughout the life cycle of the final product. in the context of this study, only output stream of impact was considered, namely the direct and indirect carbon footprint of water management activities at the stages of water intake, water supply, drainage and water treatment in municipal, industrial and reclamation complexes (figure 1). inventory analysis, which provides for the collection of information and quantification of inputs and outputs of final products at all stages of the life cycle was conducted based on data from the ukraine’s greenhouse gas inventory in 2017 and by determining energy consumption water management in major sectors of ukraine. the third stage of the method (lca) aims to determine the magnitude and significance of the impact of the production process on the environment. in this context, a comparative evaluation of the results was obtained on the carbon footprint of water management in ukraine and other countries, and also on the basis of the system analysis of the basic factors in a water management complex of ukraine the priority directions of its decarbonisation are defined. interpretation of the results obtained after the inventory analysis and assessment of the carbon footprint impact on the environment in accordance with the fourth stage (lca) allowed to suggest ways and directions of adaptation of the water management complex of ukraine to the expected climate change in order to minimize their possible negative consequences. among all management models in the system of municipal services of different countries it is expedient to allocate three most successful and developed types: english model, which provides for full privatization of housing and communal services; german, created on the basis of the corporatization of enterprises with a majority stake in the municipality, and french, which combines municipal ownership of housing and communal services and management from private businesses on the terms of long-term leases and aggregate investment agreements. baltic journal of economic studies 198 vol. 6, no. 5, 2020 3. economic diagnostics of efficiency of development of water management complex of ukraine and international experience of its spatial organization the largest issuer of direct greenhouse gas emissions in the water management complex of ukraine is the wastewater treatment and discharge sector. the volume and structure of emissions in this sector are presented in ukraine’s greenhouse gas inventory. the calculations used data (fritsche, 1997), which were obtained as a result of 10-year studies performed using the global emission model for integrated systems and coincide with the results of other studies (table 1). thus, the weighted average value of greenhouse gas emissions from electricity production in ukraine in 2017 was 146.14 grams of co2-equiv/kw h. thus, the carbon footprint of the main sectors of the water management complex of ukraine in 2017, according to our calculations, was equal to 5.15 million tons of co2, which is 1.6% of the total greenhouse gas emissions in ukraine in 2017. this figure is slightly lower than similar, which was calculated, for example, for the united states. in particular (griffithssattenspiel and wendy, 2009), the total carbon footprint associated with the transportation, use, treatment, and heating of water in major sectors of the u.s. water management complex was 290 million tons of co2 that was 5% of total u.s. greenhouse gas emissions in 2007. in the context of this, we can identify two main areas of low-carbon development of water management complex of ukraine. the first concerns the immediate reduction of direct greenhouse gas emissions, in particular in the field of water treatment. the second involves the implementation of measures aimed at minimizing the indirect carbon footprint of water management activities by increasing the overall energy efficiency of the relevant infrastructure. in addition, in order to achieve the goals of sustainable development of water management, it is necessary to carry out adaptation measures for global climate change in the field of water supply, which can be aimed at regulating the demand for water resources or their offers. the former contributes to improving the efficiency using water, usually through the widespread use of economic instruments and the introduction of new technologies. these include: accounting, limiting and standardizing water use, setting water prices, developing water markets and trading in virtual water, implementing re-sequential water use systems, and more. measures aimed at regulating the supply of water resources include, first of all, increasing the useful volume of reservoirs, water abstraction from surface watercourses and underground sources, water transportation, etc. (figure 2). reclamation complex water source industrial water use municipal water use water treatment sector water intake water supply water removal figure 1. main components of water life cycle assessment in water management complex of ukraine table 1 determination of the weighted average value of greenhouse gas emissions in the process of electricity production in ukraine in 2017, co2-equiv/kwh electricity generation method electricity generation greenhouse gas emissions (со2--equiv/kwh) total gge, million tons the weighted average value of gge in the production of 1 kwh structure, % amount, billion kwh gram tone gram tone npp 55.1 85.63 35 0.000035 3 146.14 0.000146 hpp (coal) 36.9 57.34 1000 0.001 57.34 gps 6.8 10.57 33 0.000033 0.35 wf/spp/bpp 1.2 1.86 50 0.00005 0.093 total 100 155.4 60.783 baltic journal of economic studies 199 vol. 6, no. 5, 2020 as the main part of the carbon footprint in the water management complex of ukraine (4.040 million tons of co2-equiv) is generated in the field of wastewater treatment, the priority measures for decarbonisation of the water management complex should be aimed at modernizing the relevant water treatment infrastructure. such measures include: – introduction of new production technologies to reduce water consumption and wastewater generation; – stimulating the development and use of new water treatment methods; – introduction of an integrated wastewater management system to ensure their reuse. given the above, the priority measures to reduce the level of the indirect carbon footprint of the water management complex of ukraine should be the replacement of worn-out water supply networks and modernization of pumping equipment in the sector of housing and communal water supply. in the reclamation complex, an effective method for reducing the indirect carbon footprint is the introduction of drip irrigation systems, which reduce the using water by 50-500%, electricity (50-70%), fertilizers (20-50%). irrigation efficiency reaches 85-90%, as water enters directly into the root system of plants, the surface area of which is from 40 to 60% of the total area (griffiths-sattenspiel and wendy, 2009). also, evaporation losses are reduced and there are no losses from peripheral water runoff. a promising area for decarbonisation of reclamation and industrial complexes is the implementation of wastewater (gray) for irrigation in special areas – agricultural irrigation fields and production needs in reusable water supply systems. the experience of the city of königsbrück (germany) in the implementation of publicprivate partnership in the treatment plant project is interesting (figure 3), as it did not relieve the local government of responsibility for fulfilling its high duty – sewage disposal. they delegated its removal to a private individual, but not the task. legal relations exist between local governments and the citizen (fees and contributions), on the one hand, and local governments and those who operate buildings and receive remuneration for their work from municipal authorities on the basis of private law – on the other hand. according to current german law, operating models must be put up for competition. the independent consulting bureau for engineering and economic affairs has been instructed to develop a draft permitting procedure for the königsbrück wastewater treatment plant competition. upon the completion, this project sent for approval and verification to the water supervisory authorities. in parallel with the development of the draft permitting procedure, an examination of the construction soil at the site of the future treatment plant and a geodetic survey were carried out. thus, the use of wastewater in particular in agriculture is one of the integrated use measures and water resources protection, because the soil is able to treat wastewater, increasing its own fertility. at irrigation by sewage three tasks are solved: removal and clearing of the polluted waters; their use in the fields for artificial soil moisture; application of a large amount of mineral, organic and bacterial fertilizers to the soil. taken together, this can significantly reduce the carbon footprint level in water management. a significant climate change level impact on the state of water resources necessitates the development low-carbon development of the water management complex of ukraine in the conditions of climate change decarbonisation reduction of direct greenhouse gas emissions reduction of carbon footprint in water management adaptation water offer management water demand management figure 2. directions of low-carbon development of the water management complex of ukraine baltic journal of economic studies 200 vol. 6, no. 5, 2020 and application of appropriate methods of adaptation of water supply systems in the context of implementing the concept of low-carbon development of the water complex of ukraine. these methods can be conditionally structured on two approaches: infrastructural or water supply management and institutional or water demand management. however, the implementation of measures to decarbonise the water management complex of ukraine imposes additional requirements on the priority of the application of certain adaptation methods. for example, most extensive methods of managing the demand for water resources allow to attract a significant amount of water resources relatively quickly to achieve sustainable development goals, but their use also causes additional greenhouse gas emissions and causes irreversible changes in natural ecosystems. a characteristic trend of recent decades is the combination of the advantages of infrastructural and ecosystem approaches to water management, which has given impetus to the development of a system of methods for regulating water supply based on the construction of green infrastructure, which in the context of the implementation of the concept of lowcarbon development of the water management complex of ukraine should be a priority. green water management infrastructure, in general, is a set of natural or restored natural ecosystems that complement, increase or improve the level of water supply services of traditional water infrastructure. the most typical examples of green water infrastructure are wetlands, forest protection zones, permeable pavement, restored river floodplains, etc. the development of the green infrastructure network for sustainable water supply has a number of advantages over traditional methods of overcoming the water deficit problem. in addition to meeting the growing needs of the population and the economy in water resources, the construction of relevant facilities significantly improves the overall condition of aquatic ecosystems, which, in turn, increase the figure 3. model of implementation of public-private partnership in the project of the königsbrück treatment plant (germany) when the water supply system becomes the property of the state, local governments pay the body of the loan and interest to the bank source operating enterprise parliament local governments households interest + credit reduction credit according to the agreement, the bank informs local governments about the compliance of the operating company with the plan of repayment of the loan and payment of interest transfer of property rights to the state private legal reward contributions and payment for services sewerage network control by local governments enterprises bank baltic journal of economic studies 201 vol. 6, no. 5, 2020 flow of relevant services and benefits. in particular, the ecological capacity and resilience of the territory is increased, which is extremely important in conditions of unpredictable climate change, the biodiversity of natural ecosystems is maintained, manifestations of dangerous geomorphological phenomena such as soil erosion, karst processes, shoreline erosion, etc. are prevented (stehnei, 2018 and vyshnevska, 2019). all of the above areas of low-carbon development need to be integrated into one water policy system, which should be implemented at the international, national, regional and local levels. in our view, such a water policy should be based on three key principles: integrated use of existing and promising approaches to low-carbon water management, integrated water resources management, awareness of their crucial ecosystem value and role. 4. conclusion as a result of the study, the relationship between climate change and freshwater resources was analyzed, which is of particular interest in the context of achieving the goals of sustainable development. it is proved that the dynamics of increasing the number of dangerous hydrometeorological phenomena and the growth of overall water risk due to global warming require appropriate adaptation measures for all sectors of water consumption in the framework of the lowcarbon development strategy. it is substantiated that the main principle of implementation of the concept of sustainable low-carbon development of the water sector is the introduction and harmonization of such measures, which on the one hand, should minimize the negative effects of climate change on water resources and help reduce the carbon footprint from water management activities, and, on the other hand, to ensure the achievement of the goals of sustainable development, in particular with regard to the guaranteed provision of society with clean water and proper sanitary conditions. in this context, the process of decarbonisation of the water sector should be aimed at creating conditions and implementing measures for its low-carbon development and provides for the reduction and, in the long run, preventing greenhouse gas emissions from water management activities in order to mitigate climate change and preserve aquatic ecosystems. based on the assessment of water management, priority mechanisms and measures for their decarbonisation are proposed. in particular, such measures in the water treatment sector, which is the main emitter of methane in the water complex of ukraine include technical re-equipment of water treatment facilities, the introduction of regenerated water use systems, creation of closed industrial water supply systems through public-private partnership mechanisms. the priority decarbonisation measures of other sectors of the water management complex of ukraine include modernization of water supply networks and pumping equipment, the introduction of drip irrigation systems and reversible water use, the formation of integrated water resources management systems. it has been proven that the development of a network of green infrastructure for sustainable water supply has several advantages over traditional methods of water resources management in the context of implemen ting a strategy of low-carbon development and adaptation to climate change. the construction of relevant facilities significantly improves the overall condition of aquatic ecosystems, which, in turn, increase the flow of their services and benefits. in particular, the ecological capacity and stability of the territory are increased, the manifestations of dangerous hydrometeorological phenomena are prevented, which is extremely important in the conditions of unpredictable climate changes. in order to implement the priority measures of adaptation and decarbonisation of the water management complex of ukraine, it is necessary to coordinate the existing and future plans of integrated river basin management with the key principles of the concept of low-carbon development. references: pachauri, r ., & meyer, l. (2014). climate change 2014: synthesis report. geneva, switzerland. hu yuan, peng zhou, & dequn zhou (2011). what is low-carbon development? a conceptual analysis. energy procedia, vol. 5, pp. 1706–1712. irtyshcheva, i., ponomarova, m., & dolzhykova, i. (2019). conceptual fundamentals of development of the food security system. baltic journal of economic studies, vol. 5, no. 2, pp. 57–64. doi: 10.30525/2256-0742/20195-2-57-64 haidutskyi, i. p. (2014). transnatsionalna paradyhma staloho nyz'kovuhletsevoho rozvytku [transnational paradigm of sustainable low carbon development]. ekonomika ta derzhava, vol. 5, pp. 14–19. available at: http://www.economy.in.ua/pdf/5_2014/5.pdf international standard organisation (2006). environmental management – life cycle assessment: requirements and guidelines. iso 14044. fritsche u.r . comparison of greenhouse-gas emissions and abatement cost of nucleat and alternative energy options form a life-cycle perspective. darmstadt. oko-institute, 1997:11 p. available at: http://www.rachel.org/ lib/nuke_ghg_emissions.060224.pdf (accessed 09 september 2020). baltic journal of economic studies 202 vol. 6, no. 5, 2020 ukrainian hydrometeorological institute national academy of sciences of ukraine (2020). final report on the results of the r&d “spatial analysis of changes in the water regime of surface water bodies in ukraine due to climate change”. available at: http://uhmi.org.ua/project/rvndr/avr.pdf (accessed 09 september 2020). griffiths-sattenspiel, b., & wendy, w. (2009). the carbon footprint of water. portland. wilson published, available at: https://www.rivernetwork.org/wp-content/uploads/2015/10/the-carbon-footprint-of-waterriver-network-2009.pdf stehnei, m., irtyshcheva, i., & gurina, o. (2018). financial mechanism of the socio-oriented economic development of the black sea region. baltic journal of economic studies, vol. 4, no. 4, pp. 202–208. doi: 10.30525/2256-0742/2018-4-4-202-208 unep. green infrastructure guide for water management: ecosystem-based management approaches for waterrelated infrastructure projects. united nations environment programme publication, 2014:76 p. available at: http://www.unepdhi.org/-/media/microsite_unepdhi/publications/documents/unep/web-unep-dhigroupgreen-infrastructure-guide-en-20140814.pdf (accessed 09 september 2020). vyshnevska, o., kaliuzhna, o., & irtyshcheva, i. (2019). infrastructure provision of the agrarian market in the globalized environment. baltic journal of economic studies, vol. 5, no. 5, pp. 39–46. doi: 10.30525/2256-0742/20195-5-39-46 baltic journal of economic studies 107 vol. 7, no. 1, 2021 corresponding author: 1 dniprovskii university of the humanities, ukraine. e-mail: psv93003vp@gmail.com orcid: https://orcid.org/0000-0003-4044-5824 2 dnipropetrovsk state university of internal affairs, ukraine. e-mail: voloshka@gmail.com orcid: https://orcid.org/0000-0001-9416-6885 doi: https://doi.org/10.30525/2256-0742/2021-7-1-107-114 concept of individual’s constitutional freedom to conduct business in ukraine serhii penkov1, maryna voloshyna2 abstract. the article analyzes the individual’s constitutional freedom to conduct business. the subject of the study is the concept, content and features of the person’s constitutional freedom to conduct business in ukraine. the article’s objective is after analyzing the current legislation of ukraine and generalizations of practice of its realization to determine essence, content and features of constitutional ensuring of a regime of legality of business activity in ukraine. the authors have used philosophical, general scientific and special methods. the dialectical method has been used to make a comprehensive analysis of the constitutional ensuring of the regime of legality of entrepreneurial activity in ukraine and its functional purpose in present conditions. the use of methods of analysis, synthesis, systemic and structural-functional methods has allowed to study the main components of the constitutional ensuring of the regime of legality of entrepreneurial activity in ukraine, to analyze the legal category of “individual freedom to conduct business”. the use of structuralfunctional method has promoted a comprehensive research of legal relations arising in the implementation of the right to doing business. the comparative-legal method has been used in the theoretical substantiation of various aspects of the constitutional ensuring of the regime of legality of entrepreneurial activity in ukraine. the author’s definition of the individual constitutional freedom to conduct business has been proposed. the issue of peculiarities of economic management of an individual as a business entity has been considered. the legal status of an individual has been compared with the legal status of an individual entrepreneur. there is the list of individual entrepreneurs’ duties. the list of restrictions on the possibility of doing certain activities by individual entrepreneurs has been given. the procedure for state registration of an individual entrepreneur has been considered. the essence and main tools of mechanisms of state regulation of business activity in ukraine has been determined. the problem of regulatory mechanisms has been highlighted. the main functions, tools and methods that guide the state in regulating entrepreneurship have been formed. the role of the government in the regulation of the economy and the functioning of business entities has been revealed. the international experience of government regulation of entrepreneurship has been described. statistics have been given and country-specific examples have been generated. ways to overcome problems of stimulating small and medium businesses have been identified. based on the analysis, generalization and systematization of scientific sources, the weaknesses of the mechanisms of government regulation of entrepreneurship in ukraine have been highlighted. the authors have formulated conclusions and they have offered directions of improvement of government regulation for the purpose of perfecting and development of business in ukraine. there is the analysis of current state of constitutional means of government support of entrepreneurship in ukraine; there is the description of existing accounting regimes concerning the official registration of individuals and legal entities as business actors, as well as the regulation of normative legal requirements for conducting business in ukraine there is the authors’ vision of the content of the concept of “legality of business activities in ukraine” regarding present tendencies of development of relations in the area of entrepreneurship and objective necessity of their regulation by constitutional means. the authors’ conclusion is that the individual constitutional freedom to conduct business is a constitutionally enshrined, not prohibited, and detailed by the laws of ukraine economic opportunity for independent, proactive, systematic activities at their own risk to exercise the right to manufacture products, perform works, provide services, trading for profit, and its features are: enshrining it in the constitution and laws of ukraine; no restriction or baltic journal of economic studies 108 vol. 7, no. 1, 2021 1. introduction the individual’s constitutional right and constitutional freedom to conduct business are closely related but not identical. the right to entrepreneurial activity, which is not prohibited by law, belongs to every person. the prohibition of certain types of entrepreneurial activity by the current laws and the restriction of entrepreneurial activity for certain categories of individuals testify to their theoretical significance and the need to solve important practical tasks related to the exercise of constitutional freedom by a person. one of the most common business entities is an individual as a business actor. the problematic issue is the delimitation of the individual’s legal status engaged in economic or other activities in the field of economy to its legal status as an entrepreneur and its legal status as an individual. another problem is that today there is no special regulation that would establish the legal status of a citizen-entrepreneur. the problem of the individual’s constitutional right and freedom to entrepreneurial activity has been studied by several scholars, namely by constitutionalists and economists. among them are the works by e. a. andriukhin, т. v. blaschuk, k. h. boberska, l. s. yelizarova, d. v. zadykhailo, а. v. kovach, o. o. kolomiiets, t. m. kravtsova, l. o. nikitenko, n. o. saniakhmetova, s. v. riznyk, v. s. shcherbyna, a. v. shchuruk etc. despite a large number of publications, we should note that the study and research of citizen participation in the economic and legal area has not been carried out enough. a number of important theoretical and practical problems remain unresolved. one of the problems is the lack of a single legislative act that would establish the specifics of the activities of an individual entrepreneur and the objective prohibitions and restrictions on doing business. at the same time, the role of the state is significantly increasing in present society. this is manifested in various areas of activity, in particular in the development of a system of normative acts aimed at regulating the market, business, customs rules, prices, wages, and social security. state regulation of entrepreneurship is the influence of the government on the activities of business entities, the need for which is due to economic policy goals aimed at achieving sustainable development of the country and its regions, ensuring constant growth of indicators describing the welfare and quality of life of the country’s population. the term “mechanism” is used in engineering where it means a device that transmits or converts motion, and the meaning of this term is associated with the internal structure of the machine. this word is used as a definition of the internal structure, the system of something; in addition, it can be used to describe the set of states and processes that make up a particular phenomenon. problems of improving the mechanism of state regulation of entrepreneurial activity in the context of intensification of integration processes of the country are priority tasks and require comprehensive research. there is a need to single out and generalize the terminology of “public administration” in the part concerning the concepts of regulation and state regulation of entrepreneurial activity. separation of theoretical and methodological and practical principles of formation and development of mechanisms of state regulation of entrepreneurial activity is an important scientific and practical task that should be carried out by creating multifaceted regulatory mechanisms, adapting them to the external environment of enterprises. 2. components of the individual’s constitutional freedom to conduct business in ukraine the current ukrainian legislation does not contain a definition of “business entity – citizen”. also in this legislation there is no single terminological approach to the definition of this category of business entities, namely the concepts are used: “citizen as a business entity”, “entrepreneur with no legal entity”, “citizenentrepreneur”, “individual entrepreneur”. we should note that the use of several terms for one concept distorts the legislator’s will, makes difficulties in the application of law and negatively affects the parties’ rights and interests. in this regard, the introduction of terminological uniformity in the designation of the individual as a business entity and the use of the term “business entity – citizen” has been justified, because this term is the most correct to denote the relationship between the individual and the state (vinnyk, 2017). an individual entrepreneur is a relatively new actor of economic law, as entrepreneurial activity in the planned distribution economy was prohibited and its legalization in ukraine took place according to the law of ukraine “on entrepreneurship” (1991), which has expired due to the entry into force of the commercial code of prohibition of human opportunities for entrepreneurial activity; independence, initiative, regularity, riskiness of activity; manufacturing products, performing works, providing services, trade; profit. key words: guarantees of constitutional freedom, government regulation of entrepreneurship, constitutional freedom, entrepreneurship, business activity, legal status, offenses in the entrepreneurship, combatting offenses, freedom of entrepreneurship, entrepreneur. jel classification: g28, l26, k22 baltic journal of economic studies 109 vol. 7, no. 1, 2021 ukraine. a citizen is recognized as a business entity if he/she carries out business activities subject to state registration as an entrepreneur without the status of a legal entity. a citizen-entrepreneur is liable for his/her obligations with all his/her property, which according to the law may be levied (article 128 of the commercial code of ukraine, 2003). determinant for obtaining the status of an entrepreneur, including in the field of agriculture, is the state registration of the individual by making appropriate entries in the unified state register according to the law of ukraine “on state registration of legal entities, individual entrepreneurs and public associations”. according to art. 18 of the law for the state registration, an individual entrepreneur submits the following documents: – application for state registration of individual entrepreneurs; – application for the choice of a simplified taxation system by an individual and/or registration application for voluntary registration as a value added tax payer in the form approved by the central executive body that ensures the formation of national tax and customs policy (at the request of the applicant); – notarized written consent of parents (adoptive parents), or guardian, or guardianship authority for an individual who has reached sixteen years of age and wishes to engage in entrepreneurial activity, but does not have full civil capacity; – agreement (declaration) on the establishment of a family farm – in the case of state registration of an individual who independently or with family members creates a family farm according to the law of ukraine “on farming”. the procedure for state registration of an individual entrepreneur includes, in particular: verification of the completeness of documents submitted to the state registrar and the completeness of the information specified in the registration card; verification of documents submitted to the state registrar for the absence of grounds for refusal to conduct state registration; entering information about an individual entrepreneur in the unified state register; registration and issuance of an extract from the unified state register. according to art. 26 of this law, consideration of documents submitted for state registration and other registration actions is carried out within 24 hours after receipt of documents submitted for state registration and other registration actions (“on farming”, 2003). the legal status of an individual entrepreneur is characterized by the presence of the following elements: state registration as a business entity, registration in the state fiscal service and the pension fund of ukraine as a taxpayer and a single contribution to compulsory state social insurance, respectively, making a seal (if necessary), opening a current account in a banking institution (if necessary), obtaining a license (in the case of licensed activities). according to the subject of activity, an individual may carry out: productive entrepreneurial activity, i.e. activity in the process of which certain items are manufactured; non-productive entrepreneurial activity, within which there are: activities for the fulfillment of works, granting services (repairing work, providing information services, transportation); trade activities; other non-productive activities, in particular, activities in the financial market. the citizen-entrepreneur carries out the activity on the principles of freedom of business and according to the principles provided in art. 44 of the civil code of ukraine. in this case, the business is understood as an independent, proactive, systematic, at their own risk, not prohibited by law activities for the manufacturing of goods, exercising works, providing services and doing trade for profit. entrepreneurial activity can be exercised by ukrainian citizens, citizens of other states, stateless persons, but it is limited to deputies, officials of public authorities and local self-governments, servicemen, prosecutors, employees of court, state security, etc. the citizen-entrepreneur is obliged to: – in cases and in the manner prescribed by law to obtain a license to carry out certain types of economic activity; – to notify the state registration authorities about the change of his/her address specified in the registration documents, subject of activity, other essential conditions of his/her business activity, which are be in the registration documents; – to observe rights and legitimate interests of consumers, to ensure the proper quality of goods (works, services) manufactured by them, to comply with the rules of mandatory certification of products established by law; – to prevent unfair competition, other violations of antitrust and competition law; – to keep records of their business activities results according to the legislation requirements; – timely provide the revenues and fees bodies with a declaration of property and income (tax return), other necessary information for the calculation of taxes and other mandatory payments; pay taxes and other mandatory payments in the manner and to the extent prescribed by law (para. 6 art. 128 of the commercial code of ukraine). the constitution of ukraine states the right to doing business that is not prohibited by law (constitution of ukraine, 1996), which is quite doubtful: entrepreneurial activity cannot be prohibited, as such activity is socially useful in a market society, and the government can only impose restrictions on implementation of its individual species or certain entities. due to the fact that in ukraine there is no single legislative act that would impose objective prohibitions on doing business, negative phenomena in the field of entrepreneurship often occur. the legislation contains restrictions on the ability of private entrepreneurs to carry out certain activities. baltic journal of economic studies 110 vol. 7, no. 1, 2021 this concerns activities related to the circulation of controlled substances; protection of certain particularly important objects of state property, as well as activities related to forensic, legal medicine, forensic psychiatric examinations and the development, testing, production and operation of launch vehicles, including their space launches for any purpose; activities related to the production of gasoline motor mixtures or with the addition (mixing) of bioethanol and/or biocomponents based on it to the hydrocarbon base (gasoline, fractions, components, etc.); activities related to the production of bioethanol (article 4 of the law of ukraine “on entrepreneurship”, 1991). 3. the mechanism of state regulation of individual’s constitutional freedom for entrepreneurial activity in ukraine with the development of commodity production, its monopolization and the complexity of reproduction processes, the possibilities of regulating the market mechanism were limited. the economy is beginning to show significant shortcomings: the imbalance between aggregate supply and demand, inflation, unemployment. all this affects the functioning of business structures. all this affects the functioning of business structures. not all business entities can adapt to such an economic situation. in these conditions, there is an objective need to intensify the government’s role in regulating the economy and the functioning of business entities. the development of entrepreneurship in ukraine has reached a stage when the improvement of regulatory policy determines its further prospects. state regulation of entrepreneurship is a system of legal, organizational and regulatory measures of the government aimed at creating a favorable business environment and management of the public sector to ensure the efficiency and competitiveness of the national economy. ukraine as an independent state today guarantees all entrepreneurs (regardless of their chosen organizational forms of entrepreneurial activity) equal rights and creates equal opportunities for functioning, access to logistical, financial, labor, information, natural and other resources, provided that the work and supplies for public needs. public administration bodies build their relations with entrepreneurs, using: tax and financialcredit system, which sets tax rates and interest rates on public loans; tax benefits; prices and pricing rules; targeted grants; exchange rate; the size of economic sanctions; state property and the system of reserves, licenses, concessions, leasing, social, economic and other norms and standards; scientific and technical, economic, social, state and regional programs; contracts for the performance of works and supplies for public needs (buhlak, zhuravlov, 2016). the government regulates business activities through: – legislative support of freedom of competition, protection of consumers from manifestations of unfair competition and monopoly in any field of business activity; – tax, and financial, and credit policy, including the establishment of tax rates and interest rates on government loans, tax benefits, prices and pricing rules, exchange rate, the amount of economic sanctions; – determination of social norms of enterprise functioning, according to which the entrepreneur is obliged to provide appropriate working conditions, labor safety, wages not lower than the established minimum level, as well as other social guarantees, including social and medical insurance and social security; – setting ecological norms and standards; – involvement of entrepreneurs in the implementation of various scientific, technical and economic regional and state programs; – concluding contracts for the performance of works and providing services for public needs. the main means of regulatory influence of the state on the activities of economic entities are: government procurement; licensing, patenting and quotas; certification and standardization; application of standards and limits; regulation of prices and tariffs; providing investment, tax and other benefits; providing grants, compensations, targeted innovations and subsidies (cherednychenko, 2014). successful development of entrepreneurship is possible only in conditions of ensuring healthy competition, creating a favorable climate and rational support from the government, the effective operation of market mechanisms. mechanisms of state regulation of entrepreneurship are a system of measures developed by the government, taking into account the market requirements and business entities’ interests. state regulation is carried out through a system of norms and measures governing the business entities’ behavior, using both administrative methods of influence (laws, decrees, resolutions, orders, instructions, regulations, etc.) and a system of economic methods and regulators (taxes, prices, bank interest, benefits, sanctions, etc.). state regulation of entrepreneurship has its functions, tools (methods) and relevant bodies. tools, or methods, of state regulation and support of entrepreneurship can be divided into economic, administrative, and psychological ones. among the administrative methods, the most important and promising is the regime of the greatest promotion of entrepreneurship with the implementation of the relevant legal framework, which would not interfere with the functioning of large business structures and state enterprises. economic methods are divided into three groups. financial methods of business development are: soft loans, availability of investment resources, subsidies, co-financing of socially significant projects. fiscal methods, a reasonable reduction in the tax burden baltic journal of economic studies 111 vol. 7, no. 1, 2021 on business structures, which contributes to business expansion, are no less relevant. the resource method is the development of staffing, including training and retraining of labor resources on the basis of government training programs; information support, including participation in exhibitions, conferences, fairs and access of business structures to material resources. thus, the mechanism of public administration is a complex and systemic formation that organically combines diffe rent components: economic, motivational, organizational, political and legal ones (prokopets, 2018). the basis of regulatory support are legislative and other regulations, relevant rules of civil, credit and financial, tax, administrative, labor and other fields of current legislation, the main of which is the commercial code of ukraine. the central body that ensures the formation and implementation of state policy in the field of development and support of entrepreneurship is the state committee of ukraine for regulatory policy and entrepreneurship. the main task of this body is the formation of business policy, generalization of the practice of application of legislation on business activities, development of proposals aimed at its improvement. in addition, the committee promotes the development of small business, advisory and information support systems and prepares proposals for the introduction and improvement of mechanisms for financial and credit support for entrepreneurship and its foreign economic activity, coordinates the system of training and retraining, etc. in ukraine, a significant number of public organizations have been established to promote entrepreneurship (kyrychenko, 2015). the mechanism of state regulation in ukraine is enshrined in the laws “on protection of economic competition”, “on protection against unfair competition”, “on advertising”, “on audit”, in the tax code of ukraine, the commercial code of ukraine. regulation of foreign economic activity of business structures is carried out on the basis of the provisions set out in the law of ukraine “on foreign economic activity”, which are fundamental for all business entities and should be taken into account in the organization of this activity. it is necessary to focus on the means of technical regulation, consisting of norms, standards, limits and standardization system, aimed at economic entities’ activities to “achieve the optimal degree of regulation in a particular area, resulting in increased compliance of products, processes and services their functional purpose, elimination of barriers to trade and promotion of scientific and technical cooperation” (krehul, bank, 2016). we can state that the main principles of state support for entrepreneurship are organizational structures for staffing and scientific and methodological support, as well as a developed market infrastructure and information and consulting support for entrepreneurship. considering the experience of state regulation of entrepreneurship in the eu countries, it is important to emphasize that the concept of supporting small and medium-sized businesses is clear and understandable. it takes into account national and european interests, includes the goals and principles of such a policy, mechanisms and organizational structures for its implementation. today, the share of small businesses, which is constantly growing in the uk economy, accounts for 25% of the total workforce. italy is recognized to be a european leader in this field with almost 800,000 industrial enterprises in the country and a share of 99% of small and medium-sized enterprises in total. in germany and the netherlands, small and medium-sized businesses provide about 40% of exports, in italy – 25-30%, in france – 20-25%, in japan – 10-15%. the main areas of state support for small and medium enterprises in the eu are the formation of infrastructure to support and develop entrepreneurship, the establishment of a system of benefits and a transparent tax system, the availability of financial and credit support and cooperation with large enterprises and more. however, this does not mean the creation of “greenhouse” conditions for small and medium enterprises, but rather is a means of equalizing the opportunities of small, medium and large enterprises in a competitive environment, a way to compensate entrepreneurs for activities in risky areas. in the united states, despite the spread of the idea of maximizing freedom of economic activity, the role of the state in regulating business is important, although ambiguous. relations between it and the business sector have a “wave-like” tendency – from regulating business to deregulation (i.e. reducing government impact on business), which spread in the late 1960s and became widespread in the 1970-80s. most american scholars note that at the present stage, the relationship between business and the state is antagonistic, and the partnership between them is considered to be impossible and harmful to society. at the same time, although business entities make most of their decisions on their own, their area of activity is shrinking and, accordingly, the area of state influence is increasing. this tendency to increase the government’s participation in the regulation of entrepreneurship is becoming widespread and, as analysts emphasize, has an upward trajectory. as for ukraine we can note that the priority of state regulation and support of small and medium enterprises in the information society necessitates the transition from direct administrative assistance to the formation of a favorable economic and social environment to improve mechanisms and tools to promote small and medium enterprises. according to foreign experience, the most flexible and favorable for the implementation of scientific, technical and innovative achievements are small businesses. however, their share in the creation baltic journal of economic studies 112 vol. 7, no. 1, 2021 of gdp in ukraine is much smaller than in countries with developed market economies. the state can help solve this problem by: directing part of the funds received from the privatization of state property to the development of the material and technical base of entrepreneurship; development and implementation of a mechanism for the transfer for small businesses of surfaces and production facilities, including those that are vacated in the process of liquidation, reorganization and bankruptcy of enterprises; use of production potential of enterprises on leasing terms, which will allow business structures to minimize the cost of acquisition of fixed capital, and the ability to contribute a share of property to their founding capital or transfer it to the economic management of business structures will increase their collateral capacity and stability; promoting the process of forming a developed real estate market. 4. anti-offenses in business as a guarantee of individual’s constitutional freedom to conduct business in ukraine analyzing the system of anti-offenses actors, we should note that they form a holistic functional and organizational mechanism, which is characterized by a common goal and management in the field of anti-offenses. the specificity of this mechanism is due, on the one hand, to the multiplicity of functions performed to ensure security, prevention, termination, consideration, investigation and detection of offenses, and on the other hand, to the distribution of tasks between actors at different levels, due to hierarchical system. this system is a complex social organization, because its constituent groups of homogeneous bodies form relatively independent organizational formations that operate on the basis of identical patterns. each of these formations is a subsystem of a larger system and at the same time consists of its own subsystems (khomko, kulhavets, 2016). in addition, we propose to include public administration bodies, judicial bodies, and the whole complex of enterprises, institutions and organizations operating in various areas of social life, etc., as antioffenses actors. however, it is necessary to pay attention to an important feature of this activity. this range of functions is performed by the vast majority of these bodies in conjunction with the solution and implementation of other tasks. only for a relatively small number of such entities the crime prevention function is the main activity. these bodies are endowed with appropriate rights and responsibilities to impact certain criminogenic factors; in this regard, they provide appropriate information, methodological, logistic support and staffing. let us note that some scholars include to the crime prevention actors: the actors who directly make individual prevention; actors making prevention exercising their control and law enforcement functions; actors primarily engaged in the management and coordination of offenses prevention activities; and even the orthodox church (bachynskyi, 2018). however, in our opinion, given the specifics of the subject under study, such provisions are quite controversial. we also agree with the position of those researchers who include the president of ukraine and the cabinet of ministers of ukraine to the actors that determine the directions and tasks of anti-offense, which “form the legislative and other regulatory bases of anti-offense, establish competence, rights and responsibilities of other actors of this activity, carry out its financial, staff, logistical and other resource support, planning, control and other functions of state and legal management in this area”, to the subjects carrying out information and analytical support of anti-offense – relevant units of the national police, the security service of ukraine, prosecutor’s offices and other law enforcement agencies; to the actors revealing criminogenic factors – units of law enforcement system. the last group contains the entities that implement measures to respond to some offenses and crime in general. summarizing the above, we can specify the anti-offense actors as follows: public authorities and administration; local self-governments; executive and administrative bodies; national police of ukraine; security service of ukraine; prosecutor’s office; courts; general and economic management bodies; information, statistical, medical, educational and cultural-educational bodies; trade unions, community policing agencies, parties, religious organizations; juvenile services; correctional institutions etc. based on this anti-offense actors list, it is possible to determine the system of their powers. in generalized form, these bodies exercise the following anti-offense tasks and functions: – draw up main directions, tasks, forms and methods of combating crime in the country; – provide information and analytical support for combating offenses; – identify criminogenic factors and signal about them; – directly implement measures to respond to certain offenses, as well as measures to eliminate, reduce or neutralize criminogenic factors, including measures to correct personal deformities and eliminate the circumstances that formed them (kasianenko, 2018). analyzing the concept and essence of the offense prevention actors, we can state that the range of their powers in this area (except for special bodies) is quite wide and common to many areas of social life of the state and society, and entrepreneurship is no exception. thus, we propose to consider the anti-offenses actors in business as a system of state and non-governmental bodies, public organizations, social groups and citizens, whose activities are aimed at eliminating the causes and conditions that give rise to and contribute to business baltic journal of economic studies 113 vol. 7, no. 1, 2021 offenses, preventing the commission of these offenses at various stages of participants’ illegal behavior in relations in the field of entrepreneurship, as well as to bring them to justice. we should note that the range of anti-offense actors in business is very wide, so to analyze the activities of all within our study is not possible (bilousov, 2017). as we have already mentioned, for most of these actors, combating offenses is a task that is performed together with the main tasks, such as forming the legal framework and identifying initiatives in this area, management, control and supervision of legal entities in the field of economic activity in general and business entities in particular, as well as their compliance with relevant legislation. relevant bodies specially established for this purpose, including non-governmental ones, are empowered directly to combat offenses in business activities. in addition, according to the commercial code of ukraine, measures to control business activities are carried out by state supervision bodies for compliance with nuclear and radiation safety requirements (except for state supervision of activities with ionizing radiation sources, the use of which is not subject to licensing), state architectural and construction control (supervision), state supervision in the field of economic activity for the provision of financial services (except for the transfer of funds, financial services in the securities market, derivative securities (derivatives) and the banking services market), state supervision and control over compliance with labor legislation and employment of the population in the manner prescribed by law, taking into account the features defined by law in relevant areas and international treaties, including state supervision (control) in the field of civil aviation – taking into account the features established by the air code of ukraine, regulations, adopted for its implementation (aviation rules of ukraine), and international agreements in the field of civil aviation. thus, the system of anti-offense actors in business is rather numerous and various, therefore depending on such criteria as a form of ownership, nature of activity, a complex of powers in the field under study, we suggest to divide the specified bodies into several groups: 1. public authorities of general competence exercising anti-offense powers in business along with their main functions (the verkhovna rada of ukraine and local self-governments; president of ukraine and the presidential office; cabinet of ministers of ukraine and local state administrations; ministry of finance of ukraine; ministry for development of economic, trade and agriculture of ukraine, state fiscal service of ukraine, law enforcement agencies (security service of ukraine, ministry of internal affairs of ukraine, national police of ukraine, prosecutor’s office, etc.), judicial authorities, other central executive bodies engaged in combating business offenses along with its main functions). 2. state specialized committees, departments, services and inspections established directly to combat business offenses (state fiscal service of ukraine; state financial inspection of ukraine; department of strategic investigations of the national police of ukraine; antimonopoly committee of ukraine; state service of ukraine for food safety and consumer protection); state property fund of ukraine; state treasury service of ukraine, etc.). 3. bodies of the financial and credit system (national bank of ukraine; commercial banks). 4. non-governmental anti-offenses actors in business. it should be noted that some of these public authorities (administrative commissions, district, district in cities, city or city-district courts, the national police of ukraine, state financial control bodies, bodies of revenues and duties, etc.) can be allocated to a special group of entities endowed with administrative and jurisdictional powers. an exhaustive list of them is contained in section iii “bodies authorized to consider cases of administrative offenses” of the code of ukraine on administrative offenses. these actors have the right to consider cases of administrative offenses, the components of which are listed in chapter 12 “administrative offenses in trade, catering, services, finance and business” of the code of ukraine on administrative offenses (1984), and authorized to bring perpetrators to administrative liability. 5. conclusions the individual’s constitutional freedom to conduct business is an economic opportunity of a person for independent, initiative, systematic, activity at individual’s own risk to exercise the right to manufacture products, perform works, provide services, engage in trade for profit according to the constitution and not prohibited and detailed by the laws of ukraine. attributes of the individual’s constitutional freedom to entrepreneurial activity are: enshrining it in the constitution and laws of ukraine; no restriction or prohibition of human opportunities for entrepreneurial activity; independence, initiative, systematicity, riskiness of activity; production, performance of works, providing of services, doing trade; profit. we propose to amend the legislation as follows: a) art. 42 para. 1 of the constitution of ukraine before the words “everyone has the right to entrepreneurial activity”… (the constitution of ukraine) to insert words “freedom of entrepreneurship in ukraine is guaranteed” and further in the text; b) art. 43 of the commercial code of ukraine instead of the words “entrepreneurs have the right” to enshrine “entrepreneurs are guaranteed freedom” and further in the text. the implementation of the proposed baltic journal of economic studies 114 vol. 7, no. 1, 2021 conclusions and recommendations will help to improve the realization of the individual’s constitutional freedom to conduct business. today, business activity requires detailed legislative regulation, which is intended to promote the further development of various forms of entrepreneurship and the economy of ukraine as a whole. nowardays there is no special regulation that would establish the legal status of a citizen-entrepreneur, and objective prohibitions and restrictions on doing business, so it is necessary to adopt a new regulation which would have secured the appropriate status and management features individual entrepreneur as a business entity. it would be advisable to establish a list of activities in which entrepreneurship is prohibited, in art. 128 of the commercial code of ukraine. references: vinnyk, o. m. (2017). business law: a course of lectures (general part). kyiv: lira-k, 239 p. commercial code of ukraine: law of ukraine: law of ukraine no. 436-iv dated january 16, 2003. available at: https://zakon.rada.gov.ua/go/436-15 on farming: law of ukraine no. 973-iv dated june 19, 2003. available at: https://zakon.rada.gov.ua/go/973-15 the constitution of ukraine no. 254к / 96-вр dated june 28, 1996. available at: http://www.zakon.rada.gov.ua/ go/254к/96-вр on entrepreneurship: law of ukraine no. 698-xii dated february 7, 1991. available at: https://zakon.rada.gov.ua/ go/698-12 buhlak, yu. o., & zhuravlov, d. v. (2016). administrative and legal principles of de-shadowing of relations in business: a monograph. kyiv: helvetica, 199 p. cherednichenko, h. a. (2014). the mechanism of state regulation of business activity in ukraine and directions of its improvement. economics and management: problems of science and practice: collection of scientific articles. nuremberg: verlag swg imex gmbh, vol. 1, pp. 162–167. available at: http://conf.at.ua/archive/19_12_2014_ vol_1.pdf prokopets, l. v. (2018). mechanisms of state regulation of entrepreneurial activity. business navigator, vol. 1–1, pp. 162–166. kyrychenko, yu. v. (2015). constitutional regulation of the right to entrepreneurial activity in ukraine and the countries of continental europe. scientific bulletin of kherson state university. series: legal sciences, vol. 5(1), pp. 75–79. krehul, yu. i., & bank, r . o. (2016). security of entrepreneurial activity in ukraine: administrative and legal aspect: monograph. kyiv: kyiv national university of economy and trade, 239 p. khomko, l. v., & kulhavets, kh. yu. (2016). legal regulation of entrepreneurial activity: a textbook. lviv: lviv department of internal affairs, 423 p. bachynskyi, a. ya. (2018). mechanisms of state regulation of business activity in ukraine. scientific notes of taurida national v.i. vernadsky university. series: public administration, vol. 29(68), issue 2, pp. 52–55. kasianenko, d. i. (2018). peculiarities of managing an individual as a business entity. young scientist, issue 10(2), pp. 659–662. bilousov, ye. m. (2017). actual problems of economic and legal support of economic security of ukraine: monograph. kharkiv: pravo, 239 p. code of ukraine on administrative offenses: law of ukraine no. 8073-x dated december 7, 1984. available at: http://www.zakon.rada.gov.ua/go/80731-10 baltic journal of economic studies 171 vol. 5, no. 4, 2019 corresponding author: 1 state educational-scientific institution “academy of financial management”, ukraine. orcid: https://orcid.org/0000-0002-6650-6181 e-mail: odnorog_btnau@ukr.net 2 borys grinchenko kyiv university, ukraine. orcid: https://orcid.org/0000-0001-8610-3980 e-mail: k2205n@ukr.net 3 borys grinchenko kyiv university, ukraine. orcid: https://orcid.org/0000-0003-4910-8330 e-mail: k23k@ukr.net doi: https://doi.org/10.30525/2256-0742/2019-5-4-171-181 the features of entrepreneurial interactions in the agricultural sector in terms of institutional transformations maksym odnorog1, nataliia kraus2, kateryna kraus3 abstract. entrepreneurship is one of the pillars of the economy of the country and covers all sectors irrespective of ownership forms. currently, this activity is increasingly spreading in rural areas. our research results on transformation in the agricultural sector of the economy show that it is due to the development of entrepreneurship and strengthening entrepreneurial orientation and improvement of business environment economic entities in rural areas they were able to quickly and efficiently adapt to market conditions and to enter the foreign market, therefore, the purpose of the paper is to define the basic principles and the principles of entrepreneurial activity, its specifics and trends in agriculture and rural areas, to show the beginning and the development of collective and individual entrepreneurship. methodology. the theoretical and methodological basis of the research is the dialectical method of cognition and systematic approach, through which theoretical and methodological foundations of the development of business interactions in the agricultural sector in terms of institutional transformations. the results showed that in the article, the methodical design determining the nature and characteristics of agricultural business organically integrated the concept of institutional knowledge of the economic order, which allows us to identify the evolutionary concept of the formation of enterprises; the structure of the institutional system of entrepreneurship in the context of the evolution of this concept. practical implications. the studied institutions create incentives for the development of science and education, encourage the mobility of production factors, and facilitate the transfer of scientific and technical information and the introduction of new technologies, promoting entrepreneurship and innovation. conversely, inefficient institutions reduce the potential level of well-being, reduce reliability assurance of property rights, and enforce contracts. value/originality. given systematic and analytical characteristics of the effects, significance, dynamics of development of agrarian entrepreneurship in the context of institutional transformation, show the paradox, the stability of the institutional environment will not soon be reached, therefore, the dilemma of institutions remains unresolved. in general, the institutional transformation has ensured the formation of a mixed economy, the real pluralism of forms of ownership and agricultural management even if they are not yet fully institutionalized in the market. transformations in the business environment we call the transformation of institutional conditions for the development of economic formations. institute of entrepreneurship for the imperfections of the rules and conditions of economic interactions has not yet become mutually beneficial by the institute for functional participants. analysis of the development of agrarian enterprises in the conditions of institutional transformations proves the inconsistency of the institutional framework of entrepreneurial activity, which leads to a decrease in the number of enterprises – economic entities, non-transparent activities of business entities, the removal of landlords from participation in the activities of enterprises. key words: agricultural entrepreneurship, institutions, legal forms of enterprise, market relations, transformation processes in agrarian economy. jel classification: q10, q11, q12, q13, q14, m13, l14, n50, f33, g20 baltic journal of economic studies 172 vol. 5, no. 4, 2019 1. introduction in conditions of market transformation of the economy of ukraine, entrepreneurship development should become one of the most important factors of socio-economic growth, the real engine of the economy. active development of entrepreneurship helps to attract to entrepreneurial activities a larger number of capable, outgoing people, provides for the best use of all material and social resources, intensive development of the national economy, increasing national wealth and well-being of the nation. entrepreneurship is both cause and consequence of the formation of a market economic system in ukraine. it is the driving force of economic activity of all subjects of market relations. entrepreneurship as a socio-economic phenomenon is always the centre of attention of theorists and practitioners. thanks to entrepreneurship in most countries, it creates new jobs and innovates, develops new markets and businesses, increases tax revenues and incomes of the population. it is the basis of development of individual sectors of the economy and the state as a whole. entrepreneurship is one of the pillars of the economy of the country and covers all sectors irrespective of ownership forms. currently, this activity is increasingly spreading in rural areas. our research results on transformation in the agricultural sector of the economy show that it is due to the development of entrepreneurship and strengthening entrepreneurial orientation and improvement of business environment economic entities in rural areas that they were able to quickly and efficiently adapt to market conditions and to enter the foreign market. however, according to our estimates, theoretical developments and practical experience are insufficient to agricultural business structures; it was competitive in the conditions of european integration processes and in the global economy. separately in a given system of socio-economic relations is the agricultural enterprise, which is the functional priority of the promising development not only of the eponymous industry and the economy as a whole. we consider scientifically and practically motivated research on the development of agricultural entrepreneurship under conditions of institutional transformations that, in particular, was the “saving grace” for the domestic economy, despite the regularity of crises. 2. analysis of recent researches and publications the analysis of literary sources on the issues raised carried out to build our own vision of the theory of the problem showed that the fundamental principles and methodology of entrepreneurship are most fundamentally implemented (schumpeter, 2011). using the author’s own vision of the foundations for the development of agricultural entrepreneurship, there is an appeal to the doctrine j. schumpeter, which is characterized by its consistency and depth of judgment than celebrate his successors and domestic contemporaries. in the development of such an ideological background to the analysis, the researchers note that the doctrine of j. schumpeter is a classic, fundamental work, in which the universally accepted measurement defining scientifically designed innovative implication of the development of economic relations, which in his incarnation building a system of value creation. however, the prospect of the development of modern social formations depends on the dynamics of the effects of the entrepreneurial process. you can disagree with the conclusion of ju. bazhal in the european union, presented in the preface to the ukrainian translation of the classic work of joseph schumpeter “the theory of economic development: an inquiry into profits, capital, credit, interest and the business cycle” (schumpeter, 2011) that “two taken in the twenty-first century ten-year development strategies – the lisbon (2000–2010) and the current europe 2020 (2011–2020) to actually implement it conceptual paradigm, where the central driving factor of economic growth is the generation of new knowledge for innovative development” (schumpeter, 2011). the objectivity of judgments of such a plan is confirmed by the practice because purchased welfare effects of modern europe – a real example of the effectiveness of the principles of the embodiment of the concept of economic relations by ensuring consistent institutionalization. further researchers largely follow the ideas of entrepreneurship regardless of the industry sector and its institutionalization as an activity aimed at receiving profit at the expense of universal innovation is an absolute attribute of the fundamental studies on entrepreneurship. among the scientific moderators of problems of entrepreneurship, including agricultural, in the context of institutional transformations, the methodology of institutional discourse should be highlighted of such researchers as: (bergman, 1969), (varnalij, 2006), (balakirjeva, 2015), (nour, 2015), (grebenjuk, 2014), (gubeni, 2012), (kredisov, 2003), (lupenko, 2012, 2016), (sabluk, 1997), (andrijchuk, 2013), (meselveseljak, 2010), (pashaver, 2013), (mazur, 2012), (zbarskyj, 2015), ( jerohin, 2002), (lopatynskyj, 2006), (prutska, 2003), (commons, 1931), (khandker, 2016), (koolwal, 2016), (campbell, 2004), (freeman, 1987), and others. issues of institutional development of the agrarian sector also disclosed in the publications of the authors (lupenko, 2016), (malik, 2011, 2013), (shpykulijak, 2009, 2016), however, we consider it necessary to strengthen the scientific construct of the disclosure of the institutional paradigm of the development of agrarian entrepreneurship in the dynamics of its formation and the formation efficiency. baltic journal of economic studies 173 vol. 5, no. 4, 2019 the goal of the article is to define the basic principles and the principles of entrepreneurial activity, its specifics and trends in agriculture and rural areas, to show the beginning and the development of collective and individual entrepreneurship. the theoretical and methodological basis of the research is the dialectical method of cognition and systematic approach, through which there are theoretical and methodological foundations of the development of business interactions in the agricultural sector in terms of institutional transformations. 3. the structure of the institutional system of entrepreneurship the theory of entrepreneurship is considered to be well-established scientific doctrine about the nature and principles of economic development, innovation-based growth. in the most conceptually well-established, recognized scientific and practical context, there is the concept of entrepreneurship as the institute for market interactions that are associated with risk, competition for limited resources, but are directed to making a profit. the methodology of schumpeter’s scientific and practical understanding of entrepreneurship is currently the basis for the formation and conduct of economic policy in almost all developed countries. according to schumpeter, an entrepreneur can be considered one who creates an enterprise and opens the business; introduces new methods of production; discovers and develops new markets; develops new sources of raw materials; reorganizes industry, and creates new enterprises. as to the entrepreneur, schumpeter differs from “just host” behaviour and motives of economic activity and outlook. he carries on a constant search for new, improved products quality, has enough will and capacity to overcome the resistance of the competitors, affects the other, the results of their success, and effort and energy (schumpeter, 2011). a business function is identified with the function of economic leadership and innovation, and innovation is considered the basis of entrepreneurship. having formed the concept of entrepreneurship, he stressed the need for novelty – the entrepreneur remains the same as long as carries out “new combinations”. this opinion on entrepreneurship was also presented by f. von hayek. however, the main in business he saw personal freedom that allows a person to productively use their abilities and knowledge and information and economic potential. entrepreneurship as a phenomenon, an economic activity, and an object of scientific knowledge is characterized by the complexity of the practical expression of the functions and definitions of substantive characteristics. it is, therefore, acceptable to refer to the structure of the scientific discourse on entrepreneurship in addition to the purely economic, as we believe, interdisciplinary synthesis. given the assertion presented in the formation of scientific discourse as the moderation of an affirmative conclusion, the enterprise pursues not only economic but also social, philosophical, anthropological, and, of course, institutional nature. in other words, entrepreneurship as a phenomenon, process, and institution becomes the practice of being through the economy and society. economy because of the specific and the agricultural sector even more so, imitate the system of institutional transformations, because they are in constant evolution. quite appropriate for the perception in the scientific community has concluded a. mazur that “...the fundamental contradiction of modernity lies in the institutional nature of socio-economic transformation, namely between a state-initiated market transformation that uses incompatible with the logic of the transformation of regulatory methods” (mazur, 2012). marked the context of the evaluation of the design of domestic institutional transformation, it is characteristic in particular for the agricultural sector regarding the formation of the institute of entrepreneurship. support of entrepreneurial activities and stimulation of innovative development are based on creating the appropriate institutional conditions for market, legislative and organizational support, the relationship between the state and business structures and other social institutions. under the economic category “institute” we will understand the situation in the course of evolution rules, regulations and restrictions of the interaction of individuals. institutions interact to form integrative integrity, which is experiencing transformational change. in practice, economic actors are operating in different subsystems, where there are problems associated with the need to constantly take into account the standards of conduct and restrictions. it is proposed to allocate in the institutional system the following components (figure 1). the recognition of entrepreneurship as an activity aimed at receiving profit-related risk is a rational approach. last offer as the quintessence of the scientific thoughts of m. weber on rational evidence which invests in its definition the content of the conclusion that: “there is rational evidence, especially when the structure of the implied meaning of the action entirely understood intellectually” (weber, 2016). to refer to the business process, the term “entrepreneurship” (entreprende – fr .) is introduced by richard cantillon at the end of the xvii century. by the definition, entrepreneurship is an activity related to risk in the organization of a particular enterprise, production, business. in economic literature, one can find many definitions of entrepreneurship, but they are controversial (gubeni, 2012). this can be explained by the complexity of this concept. some missed the risk, others regularity, relation to state registration, social results. baltic journal of economic studies 174 vol. 5, no. 4, 2019 such activities are quite often denoted by the terms “business” and “entrepreneurship”. in our opinion, they are synonymous, although there are definitions which interpret “business” as a broader concept, which includes employment. in our particular case, nature and functional characteristics of entrepreneurship are “intellectually understandable”. therefore, we believe the correct and reasonable is the universal definition of entrepreneurship as independence, initiative, at your own risk activity aimed at profit. the issue of entrepreneurship is multidimensional; it is treated in the economic, political, and sociological terms. in particular, the sociological interpretation of entrepreneurship in the construction of a common discourse about this phenomenon is based on the fact that the implementation of this activity is related to the motivation of the individual, in which its efficiency is of economic interest. general sociology on the essence of entrepreneurship is extremely difficult because the entrepreneur can become not every individual, but only the one that has the relevant skills. in the sociological dimension, entrepreneurship is examined in the context of the statements of m. weber as a “rationally oriented target actions” (weber, 2016), that is, acts of the entrepreneur by the nature of socialization is rational. the economic context of the definition of entrepreneurship, acquired by science, and j. schumpeter represented as due to a combination of organizational resources in the implementation of the act of production on the principles of innovation (schumpeter, 2011). while such a combination is believed an instrumental system of creation of wealth to meet public needs, which operates under certain institutional conditions. scientific inquiry and the ideology of research priorities, theory and methodology of entrepreneurship are evidence of the breadth of the subject of discourse. now the science of entrepreneurship is extremely versatile in structuring its specific characteristics. under the characteristic of entrepreneurship, one understands the effect of its influence on the socio-economic process for the supply of goods to the market. this, in particular: social entrepreneurship (produces social benefits); economic (economic benefits); institutional (institutional benefits). the deepening of the theory of entrepreneurship does not mean a departure from the fundamental theoretical postulates laid down by schumpeter (schumpeter, 2011), it is a consequence of institutional transformations that occur in a dynamic economic life. in fact, as pointed out by schumpeter, entrepreneurship itself acts as a designer, universal, constant transformation, modernization, through the unconditional desire of earning more profit. in our opinion, it can be argued that entrepreneurship is the “centre of gravity” of a society, institute, and which to this day revealed all existing milestones of scientific progress. the entrepreneurial model of economic relations in a theoretical sense – imitations of scientific results showing its universal relevance. therefore, we believe a constructive attitude that the methodology of knowing the positioning of this social phenomenon has significantly expanded the scope of discussion, has entered the era of universal interdisciplinarity. in practical terms, it is confirmed, because in the developed market economies, all activities on the creation and consumption of wealth inherit the principles of entrepreneurship. entrepreneurship more and more acts in the direction of institutions in the information field of the economy, acquiring not only a purely industrial nature. the study of problems of entrepreneurship incorporates the ideas of institutionalism, which treat entrepreneurship as an institution – an institutionalized system of rules. this is seen as its (business) interdisciplinarity, signs of a shift in the methodology of the transformation of the environment of socioeconomic interactions of individuals. overall, institutional system formal institutions informal institutions market subsystem production subsystem environmental subsystem social subsystem the subsystem of public opinion scientific and creative system figure 1. structure of the institutional system of entrepreneurship source: developed by the author baltic journal of economic studies 175 vol. 5, no. 4, 2019 entrepreneurship as an institution is a tool, which forms the basis for the realization of interests of market agents. taking into account the domestic realities of evaluation of entrepreneurship, we note that its agrarian aspect for ukraine defines in a broad format the practice of nursing, but is in a long period of institutional transformation, still in progress. the specificity of institutionalization in an agricultural enterprise like any other institution is a way of applying resources subject to competitive market but dependent on nature that we pay attention. the business entities in the market act as entrepreneurial structure, due to the law of competition, interact in the conditions defined by the state, the market, and relevant institutions-conductors in institutional order. we believe that the institutional order is an ordered and formal (or) informal rules, system rules of behaviour of market agents, within the limits and under the action of which they are forced to grow, reaching a certain goal. that institutional order, a variation of which for the agricultural enterprise is a business, builds a system of constraints, incentives, and balances to ensure appropriate business transactions, doing that, the entrepreneur inherits the classic situation ... “is valid in terms of risk, directing their efforts on an effective combination of resources and capital for profit”. a domestic agricultural enterprise is characterized by frequent institutional traps caused by defects in institutionalization. in practice, the entrepreneur imitates the current institutional (and economic) order or tries to work around it by breaking the rules. this is the paradox of risk because of certain situations that can line up with the actions of the entrepreneur, or be embedded in the existing institutional order, the institutional entrepreneur falls into a trap, which deteriorates the level of institutional security. the dilemma of institutional trap for the entrepreneur – the objective inability to solve any situation of a legitimate, competitive way for profit, so there is a choice to break the rules, right or not to break and “play”. usually, the entrepreneur motivates his actions, the solution to this kind of situation and that is the nature of entrepreneurship. for agricultural entrepreneurship, which long time is conducted in the conditions of incomplete reformation of the market structure of managing in ukraine and, consequently, institutional transformations, this aspect of the detection of the deterioration of the institutional security is the evidence admissible in the framework of our research. considering the issue of institutional security for the development of agricultural entrepreneurship is important given the long institutional transformation of the way of business, which is still ongoing. 4. institutional business security in society, the economy, the market, the institutional system as a whole determine the different types of security that are “focused” on specific signs of their manifestations (economy, energy, policy, and political security). everything seems simple and clear but the institutional security is a specific construct of status positions of economic agents in relation to the “quality” institutions and the “quality” of institutions in relation to economic agents (schumpeter, 2011). the concept of “institutional security” also belongs to the discourse about the nature of agro-entrepreneurship. institutional security is the fact counter to institutional trap, which arises in the exchange process, forming the level of transaction costs, the market ability to be effective in relation to the economic agents, the motivation of their activities in a market system of coordinates. institutional security is the result of a certain level of institutional mobility of participants of market exchange, so the measurement of effects, e.g. competition, it represents the relevance of institutional norms and their functional efficiency. institutional safety must be considered a manifestation of efficiency, especially market institutions, i.e. institutional effectiveness, and also an expression of institutional protection from the abusive behaviour of actors in the system of relations between agents. this is also the level opportunities available at security from the competitive behaviour of the stakeholders in terms of institutional verification of their place and role in positions that do not harm their partners (schumpeter, 2011). variations in the levels of institutional security (table 1) built-in system of influence of institutions in the environment of institutionalization (mainstreaming) of norms, traditions, laws, which means primarily the form of changing the status of an object, and hence business activities. table 1 variations of the levels of institutional security of entrepreneurial activity in the conditions of operation of the market mechanism level moderator fund institutional security first employee the welfare of the individual second the company business competitiveness third state (economy, national market) the creation and redistribution of the social product fourth the global economy and the market global competitiveness and the institutional adaptability of the economy source: developed by the author baltic journal of economic studies 176 vol. 5, no. 4, 2019 in terms of expressions of institutional security, we should not forget about the consequences of modification of institutions in the case of reorientation, and transformational change, restructuring the model of economic order, for example, the transition from a command-administrative to a market-competitive economy. here also are aspects of institutional security, caused by the transplantation of institutions, as well as creating new ones, which can cause the rejection of economic agents. based on the foregoing, under institutional safety one can understand the relevance of institutional norms and their functional effectiveness in relation to economic agents in the process of diffusion (diffusion of institutional norms). in a given context, judgments and methodological generalizations in the area of the selected field of institutional discourse, we note that transplanted borrowed the institutions, institutions can create both institutional security and the dangers of institutional entrepreneurship; emphasize this and draw attention. sometimes specific institutions are not perceived to be available in society, the economy, the institutional system due to the peculiarities of the socio-economic model of relationships, institutional traditions. for example, the expression “reforms don’t go” is a codification of institutional effects, public choice, shaped by the interaction and the main contradictions between “new” and “old” institutions. for this reason, our national economic existence inherits a lot of examples, that is, there are situations when new institutions are not perceived, acquire the status of an outcast, and that is a fact of institutional risk, which adversely affects the effects of the economic process, the level of welfare. in particular, the institution of private property, despite the long period of reformation processes for the approval of the market until it was seamlessly integrated into the economic system in a competitive and mutually beneficial to all participants in market exchange. a vivid example – the agricultural sector – agricultural entrepreneurship, the right to private land ownership – institutional implementation is piecemeal, because implemented in economic practice only in the context of the tenancy and institute the sale is not valid, therefore, to a certain extent, institutional risk, which practically manifests the imperfection of the system of redistribution of value, not motivation owners, limiting the rights of their activity in the implementation of long-term investments. in general, agrarian entrepreneurship in modern ukraine still imitates the effect of the instability of the institutional environment of management. formation of the theoretical foundations of entrepreneurship development requires the definition of our relationship, in the methodological basis of which lies the direction of scientific cognition of objects and phenomena, based on evolutionary methodologies. a substantial body of research objects of this school is such basic categories as an institution and the institution, interpretation of nature – the importance of which constructs the ideological basis, targets for learning. the contours of institutionalism are extremely versatile, so we recognize the complexity of the problem, but still try to crystallize the priorities of research practices, drawing on established subject and method of institutional economics. the emphasis on “efficiency” is made on the basis that the activities of entrepreneurs are purely economic one for object entities, an interpretation of the effects. this is especially a specific direction of scientific knowledge, which interpreter path the causes of certain results of the development of social-economic processes as consequences of the rules of the game – institutions, as well as their consolidation in the form of complex economic systems – organizations, institutions, codes of economic behaviour. proof of this is the economic reality, because the market, state, and society live by certain rules, which anyway adhere to the running behaviour of economic agents, particularly entrepreneurs, which ultimately creates the effect of regulations. besides, economics is a social science, which in initiated of philosophy – the original methodology and institutionalism. in our belief, the unidentified faces of institutionalism in relation to the economic processes associated with the actions of the market entities and the state are very vague and it gives the opportunity to know it in the progressive acquisition of new knowledge, including about the economy. still real economic institutions produce diverse effects, including regulatory issues, the results of which determine certain well-being and satisfaction of the needs of society. the quality of institutions and hence their functional efficiency determine the level of welfare of the population – on this point of reality, including in the global context of competitiveness, which is also projected on the foundations of the institutional transformation of the agrarian entrepreneurship. entrepreneurship is positioned in the institutional environment as a specific, specialized functional entity, which is subject to regulatory mechanisms – competition, pricing, infrastructure, cooperation, clustering, state management. the task of each of them is normalized by the institutions recognized by the state, society, market and they are implemented through institutions – public, market, and established state regulations. in relation to the enterprise of the clause under consideration, depending on their regulatory impact – it can be direct and indirect state regulation, self-regulation through the market, on-farm management. of course, following a market approach in the scientific and methodological positioning of the institutionalization of entrepreneurship, one of the most important, most influential in this particular case, we consider mechanisms of competition. competition is an institutional mechanism – the ideology of market baltic journal of economic studies 177 vol. 5, no. 4, 2019 interactions that regulate “life” of the entrepreneur in the constant struggle for resources and markets for goods, i.e. the consumer. besides, the market mechanism is designed a certain framework of institutionalizing entrepreneurship, and consequently, the level of transaction costs and efficiency. the mechanism of competition, thanks to the works of t. hobbes, b. mandeville, i. newton, c. darwin, h. spencer, is perceived as the institutional framework, the basic reference point in the development, provision, and implementation of business initiatives, which in the modern sense and the institutional anchoring are the basis of public prosperity. the competition mechanism in the classical sense sets certain limits for economic agents, and hence entrepreneurs. institutions, i.e. rules of the competition, who designs an eponymous mechanism, inherited the ideology of the market as the medium of interaction of economic agents (entrepreneurs), each of which seeks to obtain the resources as cheaply as possible, quality workforce and employing them to produce the product and to realize it in the markets at a price level, which will allow obtaining higher under certain conditions being equal income. the competition mechanism is a complex set of multidimensional factors influence on the entrepreneurial process, under the action of which is formed a new quality of the social product. 5. institutional transformation of the agrarian sector of the economy of ukraine institutional transformation of the agrarian sector of ukraine’s economy still led to distinctive national traditions of the market model of agriculture, no matter what level of perfection it acquired, respectively – this applies to the agricultural enterprise. we agree with the conclusion of academician of naas y. lupenko that “at present, the development of agriculture occurs on the model prevailing in the transition period, under the influence of the reform. this model... is now a multi-element, diverse, and includes at least four economic structures (table 2): private farms (farmers, private enterprises), corporate (agricultural companies, cooperatives), public (the public) and family (households)” (malik, 2011). for now, more family farms form the company, which is legally standardized recently and is intermediate between the farmers and the households, it can still be called transitive, or hybrid (ed.) – essentially different types, forms farmers believe the paradox of the national institutional transformations in the development of the agrarian entrepreneurship. however, from a functional point of view, regarding the development of the agrarian entrepreneurship “... industries are undergoing structural changes associated with the expansion of the activities of big business, increasing the production of export products and products that are in high demand” (malik, 2011). the industry is progressing, despite the fact that the effects, costs, and the level of satisfaction of needs of a society are focused on resource model of innovating type – the so-called “survival mode”. pronounced believe in the existence of pluralism of organizational forms of agricultural entities, which gives grounds to speak about the differentiation of their competitiveness, which is indicative of the fact of evaluating the development of agricultural enterprises. when talking about the development of agricultural entrepreneurship under conditions of institutional transformation and focus on analytics, the efficiency of development of business entities of agrarian profile in ukraine’s economy is represented in table 3. the subjects of entrepreneurial activities depending on the specific objectives of the study are divided into industrial, commercial, and financial. according to the scope of activities, enterprises are divided into small, medium, and large. operating experience says that equal volumes of activity of business structures complement each other and find their market niches. major business organizations have their advantages in the market due to the scale of volumes. however, the objective necessity of development of small entrepreneurship is caused by changes in large-scale production. as practice shows, small business is a special type of entrepreneurial activity, the essence of which lies in the social division of table 2 dynamics of the quantity of agrarian business entities in ukraine the organizational-economic form year 2017, % to 2003 2005 2012 2017 2002 2005 2012 agricultural enterprises – total 12820 8520 9180 8502 66,3 99,8 92,6 of them: business companies 6970 4733 4956 4860 69,7 102,7 98,1 private enterprise 2577 1814 2268 2111 81,9 116,4 93,1 production cooperatives 2165 1041 551 337 15,6 32,4 61,2 state-owned enterprises 358 271 279 181 50,6 66,8 64,9 farms 390 437 821 836 214,4 191,3 101,8 other 360 224 305 177 49,2 79,0 58,0 source: calculated according to the state statistics service of ukraine baltic journal of economic studies 178 vol. 5, no. 4, 2019 table 3 the efficiency of the development of agrarian entrepreneurial structures in ukraine figure 2005 2012 2017 b us in es s c om pa ni es pr iv at e en te rp ri se a gr ic ul tu ra l p ro du ct io n co op er at iv es st at eow ne d en te rp ri se s b us in es s c om pa ni es pr iv at e en te rp ri se a gr ic ul tu ra l p ro du ct io n co op er at iv es st at eow ne d en te rp ri se s b us in es s c om pa ni es pr iv at e en te rp ri se a gr ic ul tu ra l p ro du ct io n co op er at iv es st at eow ne d en te rp ri se s 1 2 3 4 5 6 7 8 9 10 11 12 13 the number of enterprises, units 4733 2251 1041 271 4956 3089 552 279 4859 2948 340 181 the average area of agricultural land, ha 1995 1702 1740 2707 2241 1594 1719 2099 2207 1626 1604 2884 the average number of employees (1 entity), persons 97 74 103 157 65 34 68 85 55 30 56 72 gross profit, uah, per: 1 employee 3747 2487 210 -466 26096 34946 6951 465 238217 245588 89157 26879 1 ha of agricultural land 182 109 12 -27 762 736 274 19 5968 4594 3119 674 the level of profitability, %: all activities 10,4 9,7 1,2 -2,1 19,7 27,5 11,6 0,8 44,9 49,7 42,7 14,9 crop 6,9 12,5 6,5 6,0 24,5 34,2 27,5 14,1 49,8 54,5 55,7 21,7 livestock 8,5 2,7 -5,9 -14,7 9,9 -0,2 -11,6 -17,1 25,0 13,3 11,7 -12,1 revenue (income), uah: per 1 ha of agricultural land 1935 1232 1024 1289 4628 3416 2638 2320 19267 13842 10415 5205 1 employee 39902 28165 17307 22233 158495 162129 66888 57053 769003 740038 297724 207489 wages of 1 employee, uah/months 366 331 277 424 1134 1014 915 1129 2502 2165 1945 2099 the rent for 1 hectare of land, uah 114 105 103 100 311 283 261 316 1125 987 936 437 crop yields, centner from 1 hectare: wheat 30,9 30,1 27,4 30,9 29,1 26,4 26,4 26,5 43,5 38,7 38,4 31,9 barley 22,4 22,6 21,5 21,5 21,6 20,3 20,7 19,2 34,7 32,5 30,0 25,6 corn for grain 53,6 44,2 37,4 32,9 49,6 44,9 46,5 34,4 61,8 55,7 51,8 44,1 sunflower seeds 14,5 14,5 12,2 10,8 16,8 16,0 16,2 13,5 25,0 23,7 21,1 14,2 sugar beet (factory) 268 261 233 211 292 283 259 219 454 481 382 287 livestock productivity the average annual milk yield per 1 cow, kg 2952 2975 2696 3332 4201 3758 3400 4147 5762 5382 3624 4593 source: calculated according to the state statistics service of ukraine labour and allocation of consumers. its main economic features are: separateness, specialization in any kind of activity, the realization of manufactured goods in the market, can be based on personal labour of the owner and his family members, also uses hired labour. thus, small business is an independent innovative activity of citizens-entrepreneurs at their own risk with the purpose of gaining business income (table 4). the development of the agricultural enterprises must be viewed through the prism of land and property relations; there are many problems in the aspect of the status of the plan relative to land – the main means of production. the land is not institutionally recognized at the state level, commodity economic relations with the involvement of land in economic circulation are in the format of the rent, so this greatly affects the stability of the business model for the structure of subjects of agrarian business, their size, number, the institutional consolidation of farms. the design of the land of modern domestic agricultural enterprises is such that more than 50% of the agricultural land involved in the production process, assigned to them through the lease – land is actually raised temporarily (for the term of the lease) capital (table 5). hence, institutional reformatting of the legal subjectivity of enterprises (see table 2) and we can point to certain manifestations of “temporariness” of the business for private entrepreneurs; therefore, baltic journal of economic studies 179 vol. 5, no. 4, 2019 table 4 key performance indicators of small enterprise structures of the agrarian sector of the economy figure year deviation of 2017 to 2012 2012 2013 2014 2015 2016 2017 +/% the number of small agricultural enterprises, units 47213 38387 44487 46906 43389 44182 -3031 93,6 the number of employed workers, thousand persons 219,9 197,6 220,4 238,7 218,2 203,3 -16,6 92,5 the share of sales by small enterprises in the total number, % 22,7 27,8 30,2 30,3 30,5 32,5 9,8 p.p. x the level of profitability of all activities, % 11,2 21,8 16,7 8,1 9,8 32,4 21,2 x source: calculated according to the state statistics service of ukraine table 5 characteristics of lease and land relations of agricultural enterprises of ukraine the organizational-economic form year 2017, %, to 2003 2005 2012 2017 2003 2005 2012 farmland – all, thousand hectares agricultural enterprises – total 22943 16254 18454 17729 77,3 109,1 96,1 of them: business companies 13057 9442 11108 11491 88,0 121,7 103,5 private enterprise 4054 3065 3328 3115 76,8 101,6 93,6 production cooperatives 3787 1811 941 544 14,4 30,0 57,8 state-owned enterprises 934 734 586 522 55,9 71,2 89,1 farms 526 765 1595 1677 319,0 219,2 105,2 other 585 437 896 379 64,8 86,8 42,3 rent, % 2017 to: +, % agricultural enterprises – total 85,9 91,5 94,8 95,8 9,9 4,3 1,0 of them: business companies 87,7 94,9 98,2 98,7 10,9 3,8 0,5 private enterprise 94,7 98,4 97,9 98,9 4,2 0,5 1,0 production cooperatives 89,3 95,3 97,3 98,2 8,9 2,9 0,9 state-owned enterprises 3,5 4,8 3,5 3,2 -0,3 -1,5 -0,3 farms 97,0 97,5 98,4 98,3 1,3 0,8 -0,1 other 82,6 90,5 92,4 96,0 13,4 5,5 3,6 source: calculated according to the state statistics service of ukraine we are not talking about promising efficiency, which would provide not only a market but also social and environmental orientation of the business. market institutions’ refuse in the sense of tradability of land in a particular way normalizes the alienation of the peasant-proprietor who cannot effectively influence its use. tenants also are trying to maximize the potential of leased land, constantly being in the institutional trap of possible changes to legislation, other rules of redistribution in the land like a sublease, and so on. the instability of the institutional framework, the uncertainty of the period of the existence of the socalled “hybrid” market of the earth normalizes the temporary nature of the enterprise functioning. 6. findings in our previous studies, it is noted that “...the best conditions for the production of products with the introduction of innovative technologies are major agroindustrial integrated structures of holding type. they have their own financial institutions or closely related to capital and access to long-term financial debt and the capacity to hold a significant share of the food market. thus, they limit market access to small and medium enterprises and private peasant farms” (mesel-veseljak, 2010). now the situation is a little different, again, the championship belongs to the big companies, but the number has decreased, although starting to invest in the processing of products, refocus on the domestic market and export products in processed form – as an example, sunflower. there remains the conclusion that: “the agrarian reform carried out revealed specific features of the transformation period. introduced artificial conditions without the presence of proper institutional support do not give sufficient economic results. causes of negative consequences of reforms are the lack of prepared events; baltic journal of economic studies 180 vol. 5, no. 4, 2019 underestimation of the impact of informal institutions such as habits, traditions; considerable inertia in the development of society; the insufficient level of knowledge and legal education” (mazur, 2012). entrepreneurship – institute of innovative development of the agrarian sector of the economy, which acts as a means of structural adjustment, the impetus of transformational change through the institutionalization of economic relations in market conditions. however, the institute of agrarian entrepreneurship has not yet become economically responsible, and excess economic power gives the possibility to dictate conditions for the formation of relations, which are mainly associated with the redistribution of rent in favour of the farmerowner. in particular, institutional owners – peasantslandlords – are in the orbit of an imperfect institutional environment that breeds alienation and motivational conditions for agricultural development. 7. conclusions given systematic and analytical characteristics of the effects, significance, dynamics of development of agrarian entrepreneurship in the context of institutional transformation, show the paradox, the stability of the institutional environment will not soon be reached, therefore, the dilemma of institutions remains unresolved. in general, the institutional transformation has ensured the formation of a mixed economy, the real pluralism of forms of ownership and agricultural management even if they are not yet fully institutionalized in the market. transformations in the business environment we call the transformation of institutional conditions for the development of economic formations. institute of entrepreneurship for the imperfections of the rules and conditions of economic interactions has not yet become mutually beneficial by the institute for functional participants. analysis of the development of agrarian enterprises in the conditions of institutional transformations proves the inconsistency of the institutional framework of entrepreneurial activity, which leads to a decrease in the number of enterprises – economic entities, nontransparent activities of business entities, the removal of landlords from the participation in the activities of enterprises. the impact of the institutional mechanisms of business regulation includes a system of base and derived institutions, traditions, organizations, and institutions whose job is to determine the behaviour of economic entities. in terms of 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(in ukrainian) baltic journal of economic studies 114 vol. 6, no. 3, 2020 corresponding author: 1 district administrative court, zaporizhzhia, ukraine. e-mail: paazu@ukr.net 2 classical private university, ukraine. e-mail: julia_v_abakumova@ukr.net doi: https://doi.org/10.30525/2256-0742/2020-6-3-114-123 procedure and problems of financing provision of health care to the imprisoned persons oleksandr prasov1, yuliia abakumova2 abstract. the purpose of the paper is a study of economic and legislative problems in financing the provision of health care to the imprisoned persons, exercising their right to health care and providing proposals to fill existing gaps in the legislation. methodology. the survey is based on an analysis of the development of the regulatory framework for health care and the principles of financing health care in some european and post-soviet countries. a general description of the principles of financing the health care system in the european countries is given. the principles of expenditures on health care financing in relation to public and private expenditures and basic models of health care financing are analyzed. the current state of the health care system and the problems and features of providing health care to imprisoned persons in the post-soviet territory, in particular in ukraine, armenia, the russian federation, in the republics of kazakhstan, belarus, uzbekistan, is studied. the problems of provision, realization and ensuring the right to health care to persons who are in the institution of execution of penalties are considered. an analysis of the regulatory framework governing the issue of the right to health care and the procedure for its implementation. ways to solve problems related to the exercise of the right to health care for prisoners are proposed. proposals for improving the regulatory framework in the health care sector on the harmonization of legislative acts (regulations governing the general principles of health care and the provision of health care for the imprisoned persons) are presented. results. in the process of studying the state policy on financing the provision of health care to the citizens in the european and post-soviet countries and based on the analysis of the modern legal framework, the need to reform the health care system is justified since only public financing of health care, or a larger percentage (over 80%) of such financing cannot provide all the necessary needs of the health care system. the need to harmonize the legislation of the post-soviet countries is emphasized in accordance with the international standards. it is concluded that in most post-soviet countries, the imprisoned persons have the opportunity to implement the legislation on financing and guarantees of health care, but taking into account their legal status and the regime of serving the sentence. practical implications. proposals to take into account the health care experience of countries, the achievements of which in the health care sector are recognized by the world community, and which, in addition to public financing of health care, actively turn to other sources, such as social insurance, targeted contributions of the enterprises, etc., are made. value/originality. the article provides proposals for amendments to the legislation in the health care sector in some post-soviet countries on the harmonization of legislation governing the general principles of health care and regulations governing the provision of health care to imprisoned persons. key words: financial support, health care, health care system, the right to health care. jel classification: а13, d63, h51 1. introduction the research focuses on the financing of the health care system, as well as the problem of improving the exercise of personal non-property rights of the imprisoned persons, in particular in terms of financing the provision of health care. the solution of this problem is of great theoretical and practical importance, given that it is associated with such urgent tasks as: clarifying the scope of personal non-property rights of the imprisoned persons, identifying trends in their possible development, improving the implementation of these rights, solving problems related to public financing of health care. one of the inalienable rights of the individual is the right to health care, the implementation of which, in many cases, faces such urgent difficulties as the financing of health care and the imperfection of the health care system in general. baltic journal of economic studies 115 vol. 6, no. 3, 2020 in civilized countries, health and life protection is one of the priorities. on the other hand, the quality of health care depends, first of all, on the level of its financing. certain difficulties in financing the health care sector arise in the post-soviet countries, where financial resources in the health care system mainly cover the costs of maintaining medical and support workers, paying for utilities, purchasing medicines and modern equipment, upgrading infrastructure, etc. but, in fact, this area is financed on the so-called residual principle. the medical units of state institutions where the prisoners serve their sentences are, at best, staffed with medical specialists and the necessary medicines only in half, which does not allow to provide quality and timely qualified health care to the imprisoned persons. funds and medicines do not arrive on time. there are no basic conditions for providing health care. the state of health care of persons detained in places of confinement does not meet the requirements of criminal executive legislation. not all medical units have the necessary equipment, that is why regular fluorography examinations are not provided for prisoners. medical practice activities are carried out without the license and accreditation certificate reissue. the problem of providing dental services to prisoners is the most difficult. it is quite relevant for many countries in the post-soviet territory, despite the fact that the constitutions of most countries explicitly define: one of the main responsibilities of the country is to protect human life and health; citizens have equal constitutional rights and freedoms and are equal before the law; they have the right to social protection; everyone has the right to health care, health care assistance and medical insurance, etc. therefore, first of all, such an unsatisfactory condition of medical units in places of imprisonment violates the constitutional rights of the imprisoned persons. ukraine has special difficulties concerning this issue, as the country 's health care system is currently in the process of reform and is undergoing significant changes, this is particularly the condition of the health care system of the state criminal executive service. the difficult economic and political situation in the country leads to extremely insufficient financing of the health care system and to the fact that the measure of health of the population in recent years has acquired serious negative trends, including rising morbidity and mortality, declining life expectancy, etc. therefore, for the country, the points of solving problems related to the current condition of health care and financing of health care services to the population become especially relevant. when analyzing the scientific literature on this problem, the interesting works of a.m. bandurka, a.p. hel, t.a. denysova, o.m. dzhuzha, v.m. pruss, a.h. stepaniuk, yu.a. chebotariova, d.v. yahunova, i.s. yakovets should be noted. presenting significant results, most studies lack coverage of the realization of the right to health care for the persons sentenced to imprisonment and the problems of its financing, especially during the period of reforms in the health care system, i.e., transformations, changes, innovations that do not destroy the foundations of the existing structure (a new explanatory dictionary of the ukrainian language, 2003). the aforesaid issues determine the purpose of the study. the purpose of the article is a study of economic and legislative problems in financing the provision of health care to the imprisoned persons, exercising their right to health care and providing proposals to fill existing gaps in the legislation 2. current state and problems of financing of the health care system providing the population with quality health care depends, for the most part, on providing the material and technical base of state health care institutions, professionalism and qualifications of medical workers, i.e., financial support of the health care sector. w hen analyzing the problems of the post-soviet countries related to such provision, it is necessary to note, first of all, the positive experience of the countries of central and eastern europe (for example: germany, france, switzerland), where health care is successfully provided through financing from the state budget, and due to the institution of health insurance, the key point of which is the targeted nature of contributions. at the same time, in many countries of the european union, the state is directly involved in the system of compulsory health insurance through budget contributions in one form or another (homon, 2014). as the council of the eu emphasizes, “in conditions of financial difficulties, the main task of the countries is to ensure the financial stability of the health care system without compromising the common values of the eu countries, i.e.: full coverage of the population with medical assistance, solidarity in financing, equal access to health care and high quality of medical assistance” (bondar, 2011). similar principles regarding health insurance are used in the post-soviet territory, however, unfortunately, they do not lead to the desired result. due to the inefficiency of the health care system, the quality of health care services provided to the population is declining. there are other problems, such as the need for citizens to pay for health care services at their own expense or through charitable foundations (private expenditures), the migration of health workers (primarily due to low wages and unsatisfactory working environment), and, in this connection, the lack of sufficient professional skills of medical workers, etc. there are three main models of health care financing in the world: baltic journal of economic studies 116 vol. 6, no. 3, 2020 1. public medicine with a budget financing system based on beveridge's concept (and in post-soviet countries – the semashko system); 2. the system of public health fund (bismarck's concept); 3. private business financing model (sitash, 2019). the first of these models is characterized by the following principles: 1. health care organization is based on financing from the state budget; 2. significant restriction of market relations between doctor and patient; 3. health care is guaranteed by the state and provided to all citizens regardless of social and wealth status; 4. doctors are not subjects in the market of the health care services, but act as employees (lytvynenko, 2015). such a system is used, for example, by the post-soviet countries, great britain, greece, denmark, italy, spain, and portugal. according to bismarck's concept: 1. health care is based on work, so it should be provided to those persons who have earned this right by their work; 2. compulsory provision exists for those employees whose wages are lower than a certain minimum amount (for persons who cannot use individual insurance); 3. health care is based on insurance methodology; 4. health care is managed by employers and employees themselves (hryhorash, oliinyk, subachov, 2007). this system is used by germany, france, switzerland, japan. private business financing model for the health care sector provides: 1. financing of the health care sector from public funds and from private insurance funds; 2. financing of the health care sector from private insurance funds and from public funds for the provision of health care to specific groups of the population; 3. financing of health care from public and private insurance funds (baieva, 2008). such principles are used, in particular, in canada, the netherlands, south korea, and the united states. the fundraising mechanism is divided into public and private. the state part includes direct taxes (fees, mandatory payments) and social insurance contributions; the private one includes private health insurance contributions; health insurance savings accounts; funds of charitable foundations; direct payments of the population (bohachev, 2013). however, first of all, any model of health care financing is based on the functions of financing (fundraising, consolidation, procurement of health care services, provision of health care services). the process of financing the health care system in developed countries, as a rule, begins with the collection of financial resources and consolidation of funds. consolidation means the accumulation of funds paid in advance for the interests of the population and the use of finances of healthy people to cover the cost of health care for those who need it (kutzin, 2008). the procurement of health care services is the allocation of funds to providers of such services in order to meet the needs of the population (buzduhan, 2008). if we pay attention to the principles of financing health care in the european countries, the following picture emerges (figure 1). as you can see, the share of private expenditures for health care services is the lowest in great britain. that is, the population of this country is the most socially protected in the health care sector. this is despite the the eu averages great britain germany france 0 2 4 6 8 10 12 % the post-soviet countries averages ukraine 0 2 4 6 8 10 12 % – public expenditures – private expenditures – public expenditures – private expenditures figure 1. principles of expenditures for financing the health care sector (in % of gdp )1 1 gdp – gross domestic product baltic journal of economic studies 117 vol. 6, no. 3, 2020 fact that great britain uses centralized financing for the health care sector, which provides about 90% of all health care expenditures (bondar, 2011). at the same time, in most post-soviet countries, these figures are much higher. first of all, it concerns ukraine. that is, in ukraine the share of private expenditures on health care services is the largest compared to other countries (3% of gdp). therefore, the main condition for the effectiveness of the health care system is its adequate financial support, i.e., the method of financial mechanism that determines the sources, principles and forms of functioning and financing of economic and social spheres of society (buzhugan, 2008), in particular, the health care services provided by the health care sector. the ways, in which countries obtain financial resources for this purpose, are different, but they all require effective legislation. as it has been noted, in the post-soviet territory, state policy in the health care sector is based mainly on the first model (public medicine), according to which financing is provided mainly from the budget through taxes, fees (mandatory payments) coming from legal (economic) entities and individuals. the population of the country receives health care services free of charge. a small set of certain (mostly too expensive) health care services is paid. that is, there is a centralized financing of health care. the main disadvantage of such a system is the reduced quality of health care services and the inability of the consumer (patients) to control the activities of health care facilities. health care in these countries is mainly financed from sources such as: taxation; voluntary health insurance contributions; social insurance; direct payments of the population. for example, the health care system in armenia is largely financed by tax revenues. in addition, the state health care system is in the process of continuous improvement and optimization. the system of compulsory health insurance has been introduced. the health care system in armenia itself is divided into three administrative levels: republican (some hospitals of highly specialized health care and epidemiological service); regional (hospitals), as well as municipal / communal (primary health care). low-income citizens and representatives of certain social groups have the right to receive health care and medicines free of charge or on preferential terms (armenia's health care system, 2018). in order to improve the provision of health care services in armenia, an electronic health care system has been introduced, which is the only information platform used by medical institutions, citizens, and government agencies operating in the health care sector. the purpose of this system is to digitize patient questionnaires to free them from unnecessary and additional documentation (hevorkian, 2018). the system is financed from the state budget. in the republic of kazakhstan, state regulation in the health care sector falls within the competence of the ministry of healthcare. the state plays an important role in the issues of medicine, as 80% of medical institutions in kazakhstan are state-owned. in general, health care is controlled by the republican and municipal state bodies. the main legislative act in the health care system of kazakhstan is the code of the republic of kazakhstan no 193-iv “about the health of the people and the health care system” dated september 18, 2009. the legislation of the republic of kazakhstan in the health care sector is based, in addition to the above code, on the constitution and other normative legal acts. if an international treaty ratified by the republic of kazakhstan establishes rules other than those contained in the code “on public health and the health care system”, the rules of the international treaty (art. 3 of the code of the republic of kazakhstan “about the health of the people and the health care system”, 2009). state policy in the health care sector in kazakhstan is conducted on the basis of the following principles: 1) ensuring equal rights of citizens to receive safe, effective and quality health care; 2) solidary liability of the state, employers and citizens for the preservation figure 2. principles of expenditures for financing the health care sector in the post-soviet countries (in % of gdp) the eu averages great britain germany france 0 2 4 6 8 10 12 % the post-soviet countries averages ukraine 0 2 4 6 8 10 12 % – public expenditures – private expenditures – public expenditures – private expenditures baltic journal of economic studies 118 vol. 6, no. 3, 2020 and promotion of individual and public health; 3) protection of motherhood and childhood; 4) providing a guaranteed amount of free health care; 5) priority of preventive orientation in the activity of the health care system; 6) availability of health care; 7) continuous improvement of the quality of health care; 8) ensuring the sanitary and epidemiological well-being of the population; 9) continuity of activity of health care organizations in providing health care; 10) ensuring the continuity and heredity of medical and pharmaceutical education using modern learning technologies; 11) state support of domestic medical and pharmaceutical science, introduction of advanced achievements of science and technology in the field of prevention, diagnostics, treatment and medical rehabilitation, innovative developments of new medicines and technologies, as well as world experience in the health care sector; 12) encouragement of voluntary free donorship; 13) state support for domestic developments and the improvement of a competitive medical and pharmaceutical industry; 14) participation of public associations in ensuring the rights of citizens to health care; 15) social orientation of health care, aimed at meeting the needs of the population and improving the quality of life; 16) assistance in the formation of a healthy lifestyle and healthy eating; 17) attribution of public health, safety, effectiveness and quality of medicines to the factors of national security; 18) ensuring the availability of safe, high-quality and effective medicines, medical devices and their rational use (art. 4 4 of the code of the republic of kazakhstan “about the health of the people and the health care system”, 2009). in belarus, as in most post-soviet countries, the health care system still bears the main features of the semashko system, which has been created in the 1920s, when the structure of morbidity has been dominated by infectious diseases and the need for treatment of traumas. the health care system of belarus is based on the law of the republic of belarus no 2435-xii ”on health care” dated june 18, 1993 (law of the republic of belarus “on health care”, 1993). according to articles 11 та 15 of this law, direct health care is provided by specialized state and non-state institutions. entrepreneurs and other organizations provide services in accordance with existing permits and qualifications. there is also a list of health care services provided free of charge by the republic. but public health care organizations can provide services for a fee according to a list by the ministry of health. according to art. 16 of the law, health care is divided into: primary; specialized; first aid; planned; stationary; outpatient (law of the republic of belarus “about the health”, 1993). the situation is a bit more complicated in uzbekistan, where the concept of “traditional medicine” still exists. to solve this problem, in 2019, the lower chamber of the parliament of uzbekistan approved the bill “on amendments to the law of the republic of uzbekistan” on public health” in the second reading, aimed at regulating the activities of doctors and traditional healers. for the most part, this document is aimed at solving such tasks as the development of traditional medicine and strengthening from a legal point of view of this activity. that is, the main attention is paid to streamlining the law of persons who provide health care services using the methods of traditional medicine, or doctors and control over financial flows and their management in this area (isaiev, 2017). the resolution of the president of uzbekistan “on the state program for the early detection of congenital and hereditary diseases in children for the period 2018-2022” dated december 25, 2017, came into force, which became a program document on early detection of hereditary diseases, improvement of the effectiveness of diagnostic and therapeutic measures, development of the gene pool of the nation. in addition, the president adopted a resolution “on measures for further development of specialized medical care for the population of the republic of uzbekistan for 20172021”, according to which the republican health care centers in the form of joint stock companies acquired the status of state institutions (shadmanov, 2017). ukraine also has a budget model for financing the health care system. financing is provided from the state budget, local budgets, health insurance funds, charitable foundations and other sources not prohibited by law. that is, the main part of financial support is provided by the state and local budgets, and funds received from other sources are considered additional financial resources. the main normative document regulating the issue of providing health care to the population is “fundamentals of the legislation of ukraine on health care” no. 2801-xii dated november 19, 1992. as noted, the health care system in ukraine is in the process of reform. thus, on march 30, 2018, the national health service of ukraine (hereinafter – nhsu), the central executive body, has been established, which: operates from the state budget through the program of medical guarantees; coordinates through the minister of health; manages the medical guarantees program (state guaranteed package), forms it and develops adjusting tariffs and coefficients on the basis of strategic directions and priority services determined by the ministry of health; enters into agreements with providers of health care services of any form of ownership (public, municipal and private). in addition, in 2018, a new model of primary health care financing came into force: financing of health care services. that is, health care institutions that have signed an agreement with the national health insurance fund of ukraine receive payment from this service for the provision of health care services to the population by family doctors, therapists and pediatricians. previously, they were financed by a medical subvention. baltic journal of economic studies 119 vol. 6, no. 3, 2020 however, despite some progress towards providing adequate health care to the population in the post-soviet countries, it should be noted that the health care system and the principles of its financing in these countries leave room for improvement. first of all, it concerns the financing of the health care sector, which often takes place on a “residual” basis. exclusive government financing for health care, or a higher percentage (over 80%) of such financing cannot meet all the necessary needs of the health care system. insufficient state funds in this area lead to a decrease in the amount of free health care, which has a negative impact on the general level of public health. therefore, it is advisable to refer to the experience of health care in countries whose achievements in the health care sector are recognized by the world community, and which, in addition to public financing for health care, actively turn to other sources (social insurance, targeted contributions, etc.). in addition, it should be noted that expenditures on health care in developed countries are directed straight to their destination, due to which the health care sector receives sufficient financial support. examples include public financing for the health care system of great britain and the us health care financing system, where almost 16% of gdp is spent on health care (organization for economic cooperation and development, 2007). 3. problems and features of financing provision of health care to the imprisoned persons at the present stage, the problem of providing the imprisoned persons with health care is extremely relevant for most post-soviet countries, as evidenced by the large number of shortcomings and violations identified in this sector. the problems in the criminal executive system of the states that have been part of the former ussr are practically equal to such problems throughout europe. human life and health are the highest values that are protected by law. everyone has the inalienable right to life, health and health care. any civilized country ensures the protection of these values, based on the fundamental principles of the universal declaration of human rights. thus, in accordance with its provisions: everyone has the right to life, liberty and security of person (art. 3); no one shall be subjected to torture or to cruel, inhuman or degrading treatment or punishment (art. 5); all are equal before the law and are entitled without any discrimination to equal protection of the law (art. 7); everyone, as a member of society, has the right to social security and is entitled to realization of rights indispensable for his dignity and the free development of his personality (art. 22) (universal declaration of human rights, 1948). therefore, persons sentenced to imprisonment have the same rights as other citizens of the country, except for those rights that are limited by a court or law. however, these rights are not always properly protected. problems arise both at the legislative level and in the direct financing of the provision of health care to persons sentenced to imprisonment. in many post-soviet countries, the main problems in providing financing of the health care for prisoners are such as: untimely or incomplete provision of primary health care to prisoners; lack of qualified personnel; understaffing of doctors of medical units in places of imprisonment; inadequate provision of medical units with medicines and medical equipment; delay renewal of the license and accreditation certificate, which allow to carry out medical practice; violation of the terms and procedure for passing the certification by medical workers; unsatisfactory level of health care for the imprisoned persons; violation of the procedure for keeping health care records, etc. (avtukhov, 2018). at the international level, there are three main models of health care for prisoners: departmental, nondepartmental, mixed. if it is a departmental model, then medical workers in places of imprisonment are in the state and under the control of the criminal executive system of the country. that is, medical care is provided by the criminal executive system, which is ineffective due to the already excessive workload of this system and due to the manifestations of abuse of office by representatives of the administration of correctional facilities. this model operates in the post-soviet countries, in asia and some european countries, such as albania and ireland. on the other hand, the main advantage of this system is the strict state control over financial costs in the health care sector. the non-departmental model is characterized by the provision of health care to the prisoners by commercial organizations or the public health care system. such a system exists in australia, england, germany, norway, france. this is a more efficient system, as medical workers, on the one hand, do not depend on the administration of correctional facilities, but, on the other hand, cooperate with them, and therefore have a wider range of powers and opportunities. in a mixed model, the components of the first two systems are combined. this model is effective in the united states, where federal prisons are financed from the state budget. at the same time, medical workers are subordinated to the federal executive body, are considered civil servants and have the appropriate titles, which guarantees them high social security. this is a significant incentive for medical workers to perform their professional duties. on the other hand, the country effectively controls the work of the medical workers. medical supplies are financed by the country, and the health care directly is provided by commercial organizations that have undertaken to provide health care for convicts and have received appropriate funds (yakovets, 2016). this practice seems the most baltic journal of economic studies 120 vol. 6, no. 3, 2020 acceptable. the only thing that needs special attention is the state financing of medical supplies for prisoners in sufficient quantities and at the appropriate level. as noted, in the greater territory of the former ussr , there is a departmental model of providing health care to prisoners. however, some scholars consider such a system effective, calling relatively low financial costs as its main advantage (yakovets, 2016). but the level of supplies correlates to the financing received. however, for example, according to the legislation of the russian federation, in cases when the medical institution of the criminal executive service cannot provide the prisoner with the necessary health care, the patient may be referred to the appropriate state medical institution that has the necessary medical equipment and specialists to provide such care (torbin, 2013). however, in practice, this right of the imprisoned person is used very rarely and extremely inefficiently, because there is no additional financing allocated from the state budget for this purpose. in some post-soviet countries, although round-the-clock health care is provided in prisons, but at night and on weekends the medicines needed for treatment are handed over to the prison administration (prison guards), who do not have the necessary medical training (torbin, 2013). whereas in ukraine, where there is also a departmental model of providing health care in places of imprisonment, in recent years there have been an increase in filing lawsuits to the european court of human rights against ukraine for inadequate health care for prisoners (avtukhov, 2018). in general, due to the fact that both the health care sector and the criminal executive health care system of ukraine are currently in a period of active reform, there are not only problems related to the financing and provision of health care in ukraine for prisoners, but also certain difficulties in harmonizing several legislative acts. however, first, it should be noted that according to the criminal executive code of ukraine (hereinafter referred to as the cec of ukraine), the imprisoned persons have the right to protection of their life and health, and, therefore, the right to health care. thus, according to clause 1 art. 107 of the cec of ukraine, the persons serving a sentence of imprisonment have the right in the manner prescribed by this code and regulations of the ministry of justice of ukraine: to receive health care and treatment, including paid health care services in health care institutions that are licensed by the ministry of health of ukraine and are not referred to the central executive body that implements state policy in the field of execution of criminal penalties at the expense of personal funds or funds of relatives (criminal executive code of ukraine, 2004). the art. 8 of the cec of ukraine emphasizes that the prisoner is guaranteed the right to freely choose and admit a doctor to receive health care, including at his or her own expense (criminal executive code of ukraine, 2004). in accordance with part 4 of art. 116 of the criminal executive code of ukraine, the procedure for providing health care to persons deprived of their liberty, organization and carrying out of sanitary supervision, use of medical and preventive, and sanitation establishments of health care services, the involvement of their medical workers for this purpose, is determined by the regulations of the ministry of justice of ukraine and the central executive body, which ensures the formation of state policy in the health care sector (criminal executive code of ukraine, 2004). that is, like all citizens of ukraine, the prisoners have the right to health care and adequate health care services. health care is the activity of professionally trained medical workers aimed at prevention, diagnosis, treatment and rehabilitation in connection with diseases, injuries, poisonings and pathological conditions, as well as in connection with pregnancy and childbirth. health care services are the activity of the health care institutions and sole proprietors who are registered and licensed in the manner prescribed by law, in the health care sector, which is not necessarily limited to health care, but is directly related to its provision (law of ukraine “fundamentals of the legislation of ukraine on health care”, 1992). the right to quality, qualified, affordable and free health care is guaranteed to all persons, including the imprisoned persons, by the state. however, the procedure for exercising such a right by the imprisoned persons is somewhat different from that for other citizens. the basic requirements for the health care of persons deprived of their liberty are regulated by the european prison rules and the national legislation of ukraine. according to the standards of the european prison rules, the provision of health care in places of imprisonment must be carried out in compliance with certain basic requirements, namely: 1. medical units of prisons are obliged to cooperate with the health administration of national or local level; 2. the imprisoned persons who need the assistance of a certain specialist in the health care sector must be hospitalized in specialized medical institutions or ordinary hospitals; 3. it is necessary that the childbirth should be performed in a specialized institution (maternity home). if this is not possible, the health unit of the institution of imprisonment must have workers and all the necessary equipment for childbirth and postpartum care; 4. the imprisoned persons shall not be used in experiments, which may cause physical or moral harm; 5. each institution of imprisonment must have at least one general practitioner and personnel with appropriate medical training; 6. the measures necessary for the provision of emergency health care must be ensured; 7. every imprisoned person should be provided with the services of qualified dentists and ophthalmologists; 8. a doctor or a qualified nurse should examine each imprisoned person at the earliest possible opportunity or at his or her request, and examine baltic journal of economic studies 121 vol. 6, no. 3, 2020 all prisoners as necessary (european prison rules, 1987). as we see, the criminal executive legislation of ukraine does not contradict the requirements of international standards. problems mostly arise at the stage of implementation of these principles and with the financing of such implementation. for example, if we examine the problem of the right of persons sentenced to imprisonment to choose a doctor who provides primary health care, we can see a number of problems associated with its implementation. according to art. 34 of the “fundamentals of the legislation of ukraine on health care”, the attending doctor is selected by the patient or appointed to him or her in the manner prescribed by these fundamentals. the responsibilities of the attending doctor are timely and qualified examination and treatment of the patient. пацієнт вправі вимагати заміни лікаря. according to art. 38, every patient who has reached the age of fourteen and who has sought health care treatment has the right to freely choose a doctor, if the latter can offer his or her services, and to choose methods of treatment in accordance with his or her recommendations. every patient has the right, when justified by his or her condition, to be admitted to any health care institution of his or her choice, if this institution has the opportunity to provide appropriate treatment (law of ukraine “fundamentals of the legislation of ukraine on health care”, 1992). however, there may be a situation where a person has already exercised his or her right to choose a doctor by submitting to the health care provider a declaration on the choice of a primary care doctor, and then he or she has been subsequently sentenced to imprisonment. at the same time, the “procedure for selecting a primary care doctor” does not contain the grounds related to a person's sentence to imprisonment and serving a sentence in an institution of execution of penalties among the grounds for termination and temporary suspension of the “declaration on the selection of a primary care doctor” (order of the ministry of health of ukraine “procedure for selecting a primary care doctor”, 2018). therefore, this person has the right to receive primary care from the chosen doctor under the “declaration on the selection of a primary care doctor”. however, such a possibility is not provided by order of the ministry of health of ukraine no 1348/5/572 “on approval of the procedure of providing health care for people sentenced for imprisonment” dated august 15, 2014 (order of the ministry of health of ukraine “on approval of the procedure of providing health care for people sentenced for imprisonment”, 2014). pursuant to clause 15 of section i of the “procedure of providing health care for people sentenced for imprisonment”, it is provided that reimbursement of expenses related to the provision of health care by a selected convict is provided at the expense of the imprisoned person or his or her relatives (order of the ministry of health of ukraine “on approval of the procedure of providing health care for people sentenced for imprisonment”, 2014). thus, according to the “declaration on the selection of a primary care doctor”, the chosen doctor may provide primary care to a person sentenced to imprisonment. at the same time, reimbursement of expenses related to the provision of primary health care by the selected doctor shall be made at the expense of the imprisoned persons or his or her relatives. in our opinion, in order to eliminate the possibility of controversial issues regarding the implementation of the law of ukraine “on state financial guarantees of health care services to the population” (law of ukraine “on state financial guarantees of health care services to the population”, 2017) by the imprisoned persons, the ministry of justice of ukraine and the ministry of health of ukraine should amend the “procedure of providing health care for people sentenced for imprisonment” in terms of reflecting the provisions of the law of ukraine “on state financial guarantees of health care services to the population”, as the basis for effective implementation in practice of any normative document is consistency of its content with the content of other legislative acts. that is, firstly, the provisions of the law of ukraine “on state financial guarantees of health care services to the population” may be implemented by the imprisoned persons taking into account their legal status, the regime of serving the sentence, and, secondly, the “procedure of providing health care for people sentenced for imprisonment” is subject to revision by reflection of the norms of the law of ukraine “on state financial guarantees of health care services to the population” in it. 4. conclusions the state policy concerning principles of financing of the health care costs in relation to public and private expenditures and basic models of health care financing are studied. a general description of the principles of financing the health care system in some european and post-soviet countries is given. the current state of the regulatory framework for health care and the principles of financing of health care are analyzed. the problems and peculiarities of providing health care to the imprisoned persons in some postsoviet countries have been studied. in the process of research, the necessity of reforming the health care system is substantiated, taking into account the possibility of financing of health care not only through public expenditures, but also turning to other sources, such as social insurance and targeted contributions of enterprises. proposals have been made to amend the legislation in the health care sector in some postsoviet countries on the harmonization of legislation governing the general principles of health care and regulations governing the provision of health care services to the imprisoned 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(2008). poniattia, pryntsypy, formy finansovoho zabezpechennia okhorony zdorovia v ukraini [concepts, principles, forms of financial support of health care in ukraine]. viche, no. 9, pp. 26–28. health care system in armenia. invest in armenia. url: http://investinarmenia.am/ru/health-care-system-ru gevorkyan v. plyusy vnedreniya elektronnoy sistemy zdravookhraneniya v armenii [pros and cons of electronic health care system in armenia]. panorama. url: https://www.panorama.am/ru/news/2018/02/19/вардан-геворкянэлектронная-система-здравоохранения-в-армении/1907824 kodeks respubliki kazakhstan ot 18 sentyabrya 2009 goda № 193-iv “o zdorov'e naroda i sisteme zdravookhraneniya” [code of the republic of kazakhstan no 193-iv “about the health of the people and the health care system” dated september 18, 2009]. url: http://adilet.zan.kz/rus/docs/k090000193_#z134 “o zdravookhranenii”. zakon respubliki belarus' ot 18 iyunya 1993 g. № 2435-xii (vedomosti verkhovnogo soveta respubliki belarus', 1993 g., № 24, st. 290). url: http://pravo.kulichki.com/otrasl/zdr/zdr00169.htm isaev, t. narodnaya meditsina [traditional medicine]. podrobno uz. url: https://podrobno. uz/cat/politic/ zakon-o-regulirovanii-deyatelnosti/ shadmanov, a. sistema zdravookhraneniya uzbekistana [the system of health care of uzbekistan]. url: https://www.minzdrav.uz/news/detail.php?id=54311 organization for economic cooperation and development, „oecd health data 2007: statistics and indicators for 30 countries” (paris: oecd, 2007). zahalna deklaratsiia prav liudyny (pryiniata i proholoshena rezoliutsiieiu 217 a (iii) heneralnoi asamblei oon vid 10 hrudnia 1948 roku) [the universal declaration of human rights (adopted and declared the resolution 217 a (iii) of the united nations general assembly on december 10, 1948)]. url: https://zakon.rada.gov.ua/ laws/show/995_015 avtukhov, k. a., & korniienko, n. o. (2018). do pytannia reformuvannia medychnoho obsluhovuvannia zasudzhenykh do pozbavlennia voli [to the issue of reforming the medical care of sentenced persons to imprisonment]. aktualni problemy vitchyznianoi yurysprudentsii, no. 2, т. 2, pp. 53–57. yakovets, i. s., & hel, a. p. (2016). pravo zasudzhenykh do pozbavlennia voli na medychnu dopomohu: suchasnyi stan ta perspektyvy vdoskonalennia [the right of the imprisoned persons to health care: current state and prospects for improvement]. visnyk kryminolohichnoi asotsiatsii ukrainy, no. 3(14), pp. 151–167. torbin, v. f., & poliakov, ye. o. (2013). problemy orhanizatsii medychnoi dopomohy penitentsiarnomu naselenniu [problems of organization of health care for penitentiary population]. problemy viiskovoi okhorony zdorovia, vol. 40, pp. 381–394. kryminalno-vykonavchyi kodeks ukrainy. vidomosti verkhovnoi rady ukrainy (vvr), 2004, № 3–4, st. 21. url: https://zakon.rada.gov.ua/laws/show/1129-15 baltic journal of economic studies 123 vol. 6, no. 3, 2020 osnovy zakonodavstva ukrainy pro okhoronu zdorovia. zakon ukrainy vid 19.11.1992 № 2801-xii. vidomosti verkhovnoi rady ukrainy (vvr). 1993. № 4. st. 19. url: https://zakon.rada.gov.ua/laws/show/2801-12 yevropeiski viaznychni pravyla 1987 r. ofitsiinyi visnyk ukrainy. 2006. № 32. p. 270. poriadok vyboru likaria, yakyi nadaie pervynnu medychnu dopomohu: zatverdzhenyi nakazom ministerstva okhorony zdorovia ukrainy vid 19.03.2018 № 503, zareiestrovanomu u ministerstvi yustytsii ukrainy 21.03.2018 za №347/31799. ofitsiinyi sait verkhovnoi rady ukrainy. url: http://www.rada.gov.ua pro zatverdzhennia poriadku orhanizatsii nadannia medychnoi dopomohy zasudzenym do pozbavlennia voli. nakaz ministerstva okhorony zdorovia ukrainy vid 15.08.2014 № 1348/5/572. ofitsiinyi sait verkhovnoi rady ukrainy. url: https://zakon.rada.gov.ua/go/z0990-14 pro derzhavni finansovi harantii medychnoho obsluhovuvannia naselennia. zakon ukrainy vid 19.10.2017 № 2168-viii. vidomosti verkhovnoi rady ukrainy (vvr). 2018. № 5. st. 31. url: https://zakon.rada.gov.ua/ laws/show/2168-19 baltic journal of economic studies 149 vol. 6, no. 4, 2020 corresponding author: 1 odesa state ecological university, ukraine. e-mail: allamaksim@gmail.com orcid: https://orcid.org/0000-0001-9420-0019 2 odessa national academy of telecommunications, ukraine. e-mail: verabezrodnaya@gmail.com orcid: https://orcid.org/0000-0002-5602-1930 3 national aviation university, ukraine. e-mail: l.lyasota2007@gmail.com orcid: https://orcid.org/0000-0001-7153-7137 doi: https://doi.org/10.30525/2256-0742/2020-6-4-149-155 a social state in the countries of central eastern europe and in ukraine: economic and political factors alla silenko1, vira bezrodna2, lyudmyla lyasota3 abstract. the subject of the research is the economic and political factors of the welfare state in the countries of central and eastern europe and in ukraine. methodology. the work used a comparative approach, which made it possible to study the development of social states in central and eastern europe, in ukraine, to identify their similarities and differences. the institutional approach made it possible to consider the problem as a multidimensional socio-political phenomenon, to highlight functionally and systemically important elements and to study their mutual influence. results. the purpose of the article is to analyze the prospects of the welfare state in the countries of central and eastern europe and ukraine, the influence of political and economic factors on its development. to achieve this goal, the following research tasks were set: to consider the issue of the influence of democracy on economic and social development; analyze the role of the state in socio-economic processes; to study the experience of socio-economic reforms in the countries of central and eastern europe, which began their reforms almost simultaneously with ukraine, and to find out why the success of their reforms is much higher than those achieved in ukraine; clarify the reasons for the failure of reforms in ukraine. it is shown that democracy does not affect economic growth; at the same time, democracy is the guardian of economic and social stability. it is substantiated that the welfare state provides citizens with protection that they will never receive from the state: the “night watchman”. as world experience has shown, the market does not guarantee the protection of the economy from crises and is not a panacea for eliminating the consequences. sometimes, the market can even pose a threat to society, for example in the field of ecology. thus, the actions of market forces and the interests of society do not always coincide. it is argued that the idea of a stable causal relationship between the reduction in the state’s participation in the redistribution of national income and an increase in economic growth is erroneous. failures of economic and social reforms in ukraine are explained by the fact that their liberal version was chosen, the consequences of which can be characterized as catastrophic. the low level of professionalism of reformers and corruption also played a negative role. key words: welfare state, liberal politics, social and economic reforms, democracy. jel classification: h53, i31 1. introduction the relevance of the article is due to the fact that the economic situation in ukraine continues to deteriorate. this condemns millions of ukrainian families to a miserable existence. thus, according to the forecasts of the united nations children’s fund (unicef), the poverty level in ukraine may grow from 27 to 44%. (combating covid-19…). the ministry of social policy of ukraine has denied the unicef forecast, which, in its opinion, is based on an incorrect methodology. however, the ministry’s statement that “38.5% of ukrainian residents in 2019 lived on less than 2,000 uah per month and in 2020, there will be 45% of them” does not cause optimism (unicef: it actions are not taken…). this means that the social programs implemented in ukraine do not fulfill their baltic journal of economic studies 150 vol. 6, no. 4, 2020 main task – to protect vulnerable segments of the population from economic difficulties. in this regard, the purpose of the article is to analyze the prospects of the welfare state in the countries of central and eastern europe and in ukraine, the impact on its development of political and economic factors. to achieve this goal, the following research tasks were set: to consider the issue of the influence of democracy on economic and social development; analyze the role of the state in socio-economic processes; to study the experience of socio-economic reforms in the countries of central and eastern europe, which began their reforms almost simultaneously with ukraine, and to find out why the success of their reforms is much higher than those achieved in ukraine; clarif y the reasons for the failure of reforms in ukraine. foreign scientists have made a great contribution to the development of political and economic aspects of the welfare state, such as r . dahrendorf, j. rawls, e. harms, f. neumann, g. von haferkamp, g.-g. hartwig, w. abendroth, k. lenk, g. brown, m. niehaus, g. ehrenberg, a. fuchs, m. speaker, g. vilensky, c. lebeau, r . titmus, a. evers, i. svetlik, p. baldwin, j. barnes, b. wattenberg, k. espin-andersen, a. hicks, j. misra, tang nah ng and many others. 2. democracy – a consequence or a condition of socio-economic development? scientists have long wondered whether political freedom is a consequence or a condition for a high level of economic and social development. some of them note that “political pluralism and democratic regulation of markets are far from indicators of automatic success in meeting certain human needs” (deacon, hulse, stubbs, 1999). and this is clearly seen in countries such as south korea, china and cuba. despite the fact that these countries lack stable democratic institutions and guarantees of some human rights, they have made great strides in improving human development. the experience of these countries allowed researchers to conclude that the key to their success was state management of socioeconomic development, and not socialist ideology. also, examples of a high level of economic freedom without democracy are hong kong and singapore, which topped the world ranking “economic freedom of the world – 2020” (in the economic freedom of the world rating…). as b. deacon and others point out, the results of such studies depend on what is meant by human needs. when it comes to the right to political pluralism and freedom of speech, the successes of political regimes have a different meaning than under the condition that human needs mean the need for health (longevity), and personal freedom means access to profit and mastery of writing. in the latter case, “the democracy of political pluralism in developing countries is not a prerequisite for meeting human needs” (deacon, hulse, stubbs, 1999). thus, the question of the relationship between democracy and social development is very controversial, and, perhaps, this can be considered one of the reasons for its popularity among scientific researchers who have devoted many of their works to this problem. j. healey and m. robinson in their well-known work “democracy, governance and economic policy” note that “there is no evidence that for (developing) countries that achieve economic growth faster or reduce income inequality, the most important factors are effective management, clear understanding of decisions and political stability” (deacon, hulse, stubbs, 1999). the famous economic growth theorist r . barro also studied the influence of democracy on economic growth. in his opinion, “...the idea that democracy in terms of suffrage is necessary for economic growth is just as wrong as the statement that poor countries definitely need a dictatorship to break out of poverty... for a country with weak institutions, weak democracy and lack of rule of law, developing democracy is less important than strengthening the rule of law to stimulate growth and investment. moreover, democracy does not appear to have a significant direct impact on strengthening the rule of law. therefore, it cannot be argued that democracy is a key condition for growth, because it is necessary for the rule of law” (barro, 2000). historical experience shows that sometimes autocratic rule can lead to deep economic reform and social welfare. but it is also known from this experience that, over time, high levels of economic growth and human development are complemented by greater political freedom. and this is understandable, since an economically independent person thinks independently. research findings confirm that countries with a high human development rate are also generally characterized by a high level of political freedom. as f. fukuyama writes, the development of a market economy is not the cause of stable democracy, but rather depends on the social capital that has been formed earlier. “if public capital is abundant, both markets and a democratic political system will develop successfully, and then the market will really be able to play the role of a school of public behavior and help strengthen democratic institutions” (fukuyama, 1999). so, the question of the dependence of democracy and economic growth continues to be controversial. proponents and opponents of the idea that democracy affects economic growth have strong arguments. we would venture to suggest that, nevertheless, democracy has a beneficial effect on economic development. this argument is supported by the fact that virtually all economically developed countries are liberal democracies. baltic journal of economic studies 151 vol. 6, no. 4, 2020 3. economic reforms and prospects for the welfare state in central and eastern europe b. deacon, m. hulse and p. stubbs, examining the situation in the countries of central and eastern europe, believed that, probably, in these countries, economic, cultural and historical reasons would be an obstacle to achieving the ideal combination of democratic politics and meeting human needs so, as happened, for example, in sweden. therefore, the choice between democracy and human development can always exist (deacon, hulse, stubbs, 1999). f. fukuyama considered one of the problems of the cee countries that they tried to create democratic political institutions without an efficiently functioning capitalist economy, including private enterprise, the market and competition. the result of this may be an increase in the level of poverty and the emergence of difficulties with the formation of various forms of public support, without which the normal functioning of democratic institutions is impossible (fukuyama, 1999). the common thing in the history of democratization of the cee countries and ukraine is that the liberal western democracy imposed their democratic institutions on them without taking into account national, sociocultural specifics. as a result, the adaptation to western democratic models has not been completed yet. the countries of central and eastern europe (cee), despite the lack of experience in reforming the command-administrative system, due to successful socio-economic policies, were able to make their economies a market economy. this success is due to the fact that with the help of democratization of state administration, it was possible to preserve the capacity and power of the authorities as such. the results of socio-economic reforms are especially successful in the visegrad four countries, which are considered the driver of effective changes in the region. having chosen the path of socio-economic reform of the country in the end of the twentieth century, the cee countries had a strong motivation to become members of the european union. in their economic development, they had a choice between two models: liberal and social-market. the liberal model based on radical measures, the socalled “shock therapy”, was chosen by poland, the czech republic, bulgaria, and romania. the roadmap for liberal reforms has become the task of creating a market economy, total privatization and cutting social programs. however, practice has shown that the observance of the principle of “privatize as much as possible” in economic policy is not the best way to form real market actors and often leads to the emergence of an extremely irrational corporate governance system. it is necessary to create favorable conditions for the functioning of the private sector, but at the same time, attention should be paid to the property that remains in the management of the state. otherwise, the likelihood of criminalization of the entire economy of the country increases. the liberalization of economic activity is an important condition for the formation of an effective market mechanism, but this alone is not enough. an analysis of the practice of reforms indicates a significant role of institutional transformations, including the real provision of property rights, existing antimonopoly legislation, etc. in the absence of institutional transformations, the scale of the development of the shadow economy and the criminalization of the economic sphere are growing. this explains the fact that in these states of the region, which have chosen the liberal model according to the principle of “state – night watchman”, the growth of social injustice and social conflicts has increased. thus, since 1989, the countries of central and eastern europe have tried to make a sharp leap into unregulated pluralistic democratically liberal capitalism. however, none of these countries managed to avoid an economic downturn, which negatively affected subsequent development. liberal policies led to a drop in the level of production, an increase in income inequality, high unemployment, a fall in living standards, and a significant increase in mortality in most of these countries. under the influence of international financial organizations in the cee countries (poland, the czech republic, slovakia), systemic political and institutional and economic reforms took place, which had a very painful effect on the social sphere. the market entered the education and health care systems, which could not but affect the well-being of the population. wages have dropped significantly. in 1991, wages remained relatively high in poland. in hungary, czechoslovakia, bulgaria, romania and yugoslavia, it was 10-50% lower than the polish one. (iazhborovskaia, 2009). a tight monetary and tax policy was pursued. in the context of the current ukrainian situation, it is interesting that the cee countries have been subjected to severe pressure from the european union, which established external management in the cee countries. liberal democracy and market economy were proclaimed as the goals of political and economic reform. obsessed with their desire to join the european union as soon as possible, the cee countries initially willingly imported democratic institutions and economic development models. the citizens of the cee countries associated membership in the european union with social well-being. however, the ensuing global economic crisis reduced the possibilities of the welfare state in these countries. this necessitated the intervention of a democratic state in socio-economic processes, which is one of the basic principles of the functioning of the social state. the ideological basis of the “welfare state” was the views of the english baltic journal of economic studies 152 vol. 6, no. 4, 2020 economist j. keynes, who substantiated the need for government intervention in the socio-economic sphere in order to prevent economic crises, unemployment, and improve the well-being of the population through the redistribution of income between different social strata (keynes, 1993). lorenz von stein, the founder of the theory of the welfare state, believed that “the welfare state is obliged to contribute to the economic and social progress of all its citizens, so the development of one is a condition for the development of the other, and it is in this sense that the welfare state is spoken of ” (von stein, 1850). the equality of citizens’ rights to participate in government is one of the ascertaining signs of democracy. this means that the social conditions that are created for citizens enable them to exercise their political rights. it is the social state that can create such conditions, the structure of which, along with the state, includes voluntary associations, non-governmental organizations, religious and private educational institutions, etc. the type of state depends on the degree of state intervention in the sphere of civil society. if we are talking about a “strong state”, it means that the government has agreed to take on greater responsibility for the welfare of citizens. if this responsibility lies with non-state bodies, then in this case we are talking about a “strong civil society”. supporters of strengthening the role of the state in socio-economic processes have a fairly weighty argument. the hopes for an unrestrained market have led to many negative consequences. as it turned out, the market is not omnipotent, especially during crises and downturns in production. it also became clear that in industries dominated by natural monopolies, the operation of the free market contradicts the criteria of the highest economic efficiency. i. wallerstein wittily remarked about the attempt to turn the “market” into an idol capable of creating a common paradise on earth: “all over the world, pretending to be a panacea for all social diseases. you do not have enough food, you are tired of officials and politicians, you are oppressed by thoughts about your own future, are you worried about a recent divorce? try the market! have you lost the peace of mind that your grandfathers had? try the market.” it has long been no secret that the sphere of social security is not included in the range of interests of private business, and this is fraught with social tension and political instability (andrain, 2000). this explains the motivation of those cee countries that preferred the social market model. it provides for the development of the social sphere: education, medicine, poverty alleviation, support of low-income groups of the population through a developed social protection system, etc. the scandinavian countries and germany have become a striking example of the success of the social market model. the social market model became a reference point for the development of hungary, for which it was very important to maintain economic and political stability. the roadmap for hungarian reforms included measures to gradually create a mixed economy and a social market economy. as a result of this policy, hungary was able to receive about 50% of the total volume of foreign investment placed in the cee countries. the 2008 economic crisis was a difficult test for all the cee countries. it was understood that without the regulatory role of the state in the socio-economic sphere, the consequences of the crisis would become even worse. the countries of the region have launched various social programs to support the population. special attention was paid to preserving employment, supporting pensioners, single mothers, and families with children, etc. as a result of socio-economic and political stability, economic growth began. today, despite the pressure of international organizations, primarily the european union, the countries of central and eastern europe basically manage to balance between the recipes of the washington consensus and the needs of the population of their countries. in one of the latest regional reports of the imf “regional economic issues” it is noted that economic growth in the cee countries is on the upward trend. at the same time, it is hampered by a shrinking workforce and low productivity. all of this slows down the rate at which these countries reach western european income levels (central and eastern europe…). due to objective economic and political problems, the cee countries cannot hope to occupy a place among the economically developed countries in the foreseeable future. nevertheless, the population of these countries can count on the welfare state to continue to protect them from difficult economic situations. 4. economic reforms and prospects of the welfare state in ukraine as shown by the reforms carried out in ukraine, the departure of the state from the economy led to the loss of the main protective and system-forming functions of serving the state to society. the characteristic features are an excessive increase in the bureaucratic apparatus, an increase in lobbying for the interests of certain groups of officials and associated economic structures in the economic and socio-political spheres. and this, in turn, has increased the level of corruption, which has penetrated all spheres of the ukrainian society. reforms in all spheres of life in ukraine took place at about the same time as in the cee countries. after 1991, there was some euphoria in ukraine about its prospects for future economic prosperity. a popular thesis was that ukraine was the breadwinner of the entire soviet union, and now, having removed this burden, ukraine baltic journal of economic studies 153 vol. 6, no. 4, 2020 will be able to achieve its own socio-economic success. however, the real economic condition of the ukrainian state in 1992 forced the country to become a member of the imf and begin systemic borrowing from this organization. in exchange for financial assistance, the imf gained control not only over economic policy, but also over the political sphere of ukraine. unsuccessful economic reforms, a decline in production, as a result, a decrease in incomes led to a narrowing of the state’s social responsibility to citizens, who were left alone with their problems. cee countries in the process of reforms also faced such problems, but unlike ukraine, they were able to cope with them. already in the second half of the 1990s, the level of wellbeing in some countries (the czech republic, poland, slovakia) began to rise. the social consequences of the reforms in ukraine turned out to be heavy because ukraine, like a number of countries of central and eastern europe, chose the liberal version of socio-economic reform. the spontaneous liberation of the market was not accompanied either by the formation of an efficient social protection system, or by a consistent industrial policy and employment policy that stimulated the efficient sale of labor resources. the consequence of this was, for example, a contradiction that arose and continues to gain strength between the still sufficiently high educational and professional-qualification potential of the population, on the one hand, and the deterioration of the conditions and quality of employment, on the other. the inevitable growth of social problems in these conditions is largely due to the growing underutilization of labor potential, its devaluation and gradual degradation. the period of reform was characterized by the narrowing of opportunities for effective employment. in parallel with the growth of open and latent unemployment, there is an outflow of labor from the industries that ensure the preservation and development of the labor force, innovation and saturation of the consumer market. the expansion of the non-production sphere is due to the influx of workers into trade, public administration and the financial and credit sector. the fall in the level of income and living standards of a significant part of the population as a result of the depreciation of labor potential is the most important criterion of social disadvantage. however, reducing the social costs of reforms to lost income lays the methodological basis for limiting social policy to the redistribution of a part of gdp in favor of the poorest strata. at the same time, attention should be paid to other aspects of this problem. time has shown that a sharp decline in social protection of the population, for which ukrainians were not ready, had a destructive effect on labor potential. the unpreparedness of the processes of privatization of the social sphere also played a significant role here, when the appearance of paid services instead of free ones was not accompanied by a corresponding increase in wages. it did not take into account the fact that freeing the market alone is not enough to form a new economy. the noted disparities in employment are generated by various factors and, first of all, the deinstitutionalization of the labor market, the weakness of the legislative framework, insufficient development of productive forces, and only as a result of this, the presence of monopolistic non-market elements. it seems that the normal functioning of the labor market is possible today only with a developed institutional infrastructure. almost 30 years after the beginning of the reforms, it can be stated that ukraine has not managed to achieve the level of socio-economic success that was achieved by the cee countries. the welfare state, which it proclaimed itself in ukraine in article 1 of the constitution of ukraine, did not take place. throughout this period, the ukrainian political elite was busy only with increasing their own well-being. all spheres of life in ukraine turned out to be riddled with corruption. this is confirmed by the 126th place out of 180 countries in the ranking of the corruption perceptions index-2019 (the corruption perceptions index). low level of salaries and pensions, which does not correspond to prices for goods and services, commercialization of social services, high level of unemployment, and social insecurity of citizens – that is the situation in which ukraine finds itself today. in the rating “economic freedom in the world – 2020” ukraine took the last place in europe. despite the fact that ukraine has moved from 138th to 131st place, it is still the only european country in the group of the most economically not free countries. according to this rating, ukraine has never managed to leave this group throughout its history (economic freedom ranking 2018…). today, the total public debt of ukraine is 85 billion usd. in 2015, after the crisis in a difficult financial situation on the verge of default, ukraine on unfavorable terms restructured its debt in the amount of 19.3 billion usd, 20% of which was written off. for this, ukraine issued new securities (gdp warrants) for the holders of eurobonds in the amount of 3.8 billion usd economic growth rate (gdp-warrant payments…). some commentators explain the failures in economic and social policy with the loss of donbass and crimea, the need to conduct hostilities in donbass. of course, this could not but affect the country’s economic policy. but, unfortunately, even before the war, ukraine could not boast of socio-economic achievements. the ukrainian-russian conflict has exposed the fact that ukraine has always been economically dependent on russia. ukrainian enterprises were mainly focused only on the russian sales market. europe, despite the promise baltic journal of economic studies 154 vol. 6, no. 4, 2020 of support for ukraine, which has chosen the european path of development, has not opened its markets for ukraine. those quotas that europe provided to ukraine for the sale of products turned out to be too small in order to positively influence the state of the country’s economy. an objective analysis shows that the establishment of a welfare state in our country continues to be a matter of the future. the path to a welfare state is complicated by the fact that we have to simultaneously address issues of economic development and urgent current problems associated, for example, with the search for new models of social protection for a significant part of the population of ukraine. the existing system of social protection needs to be revised, since its mechanisms are not able to solve the problems of material provision of those who need help. therefore, the main characteristics of new models of social protection should be both social and economic efficiency. 5. conclusion 1. consideration of the issue of the influence of democracy on economic and social development has shown that democracy does not affect economic growth; at the same time, democracy is the guardian of economic and social stability. political freedom helps to attract investment, develop small and medium-sized businesses, and guarantees private property, which generally reduces the likelihood of social instability. on the other hand, economic growth helps to strengthen democracy. in addition, in a democratic country, the political class through elections is responsible to the voters for the economic course and its results. as for the relationship between the welfare state and economic growth, the first is a factor of the second. in turn, economic growth ensures the effectiveness of the welfare state. 2. analysis of the role of the state in socio-economic processes has shown that the welfare state provides citizens with protection that they will never receive from the state: the “night watchman”. liberal politicians and economists are skeptical about the strengthening of the role of the state in the socio-economic sphere, since the market is considered the most perfect or even ideal institution capable of independently resolving any complex problems of the economy. however, this is precisely the case when theory diverged from practice. as world experience has shown, the market does not guarantee the protection of the economy from crises and is not a panacea for eliminating the consequences. sometimes the market can even pose a threat to society, for example in the field of ecology. thus, the actions of market forces and the interests of society do not always coincide. the idea of strengthening the state should not be replaced by the idea of strengthening the bureaucratic apparatus. the real strength of the state as a public institution depends on its support from society, on how adequately it expresses public ideas and priorities. 3. the experience of reforming in the countries of central and eastern europe shows that the idea of a stable causal relationship between a reduction in state participation in the redistribution of national income and an increase in economic growth is erroneous. another myth turned out to be the assertion of a direct relationship between the scale of the private sector and the rate of economic growth. in the reformed countries, the greatest economic effect was achieved already at the stage of commercialization of the activities of state enterprises. 4. failures of economic and social reforms in ukraine are explained by the fact that their liberal version was chosen, the consequences of which can be characterized as catastrophic. the stagnation of the economy, the continuous outflow of capital abroad, the aggravation of the social situation – this is an incomplete list of conditions in which the population of ukraine found itself as a result of the reforms in the direction of liberalism. the low level of professionalism of reformers and corruption also played a negative role. the experience of reforming in the countries of central and eastern europe shows that decentralization has played an important role in socio-economic development, which is not yet fully functional in ukraine. but without close interconnection and cooperation between the state and civil society, one cannot count on successful reforming of the country’s economy and implementation of effective economic policy. institutions of civil society and local self-government, that is, organizations that reflect the interests of the widest sections of the population, should be able to participate in solving the most important political and socio-economic problems. given this, it is advisable to change the priorities of state policy towards greater socialization of the ukrainian state, as established by art. 1 of the constitution of ukraine. it should be noted that the scientific study of the essence, functions, formation of the welfare state in ukraine has been going on for at least two decades. however, answers to questions have not been given yet, such as determining the boundaries of state intervention in the socio-economic sphere; elimination of sharp differences in the material status of individuals; the consequences of managerial decisions in the field of social policy for the population; dependence of the degree of increase in social spending on the level of professionalism in the legislative and executive authorities and many other problems, the development of which will give an impetus to the further development of the theoretical basis for the practical implementation of the principles of the welfare state in ukraine. baltic journal of economic studies 155 vol. 6, no. 4, 2020 references: borotba z covid-19 v ukraini: pochatkovi otsinky vplyvu na bidnist [combating covid-19: initial assessment of the impact on poverty]. available at: https://www.unicef.org/ukraine/media/5811/file/covid%20impact%20 on%20poverty%20ukr.pdf (accessed 10 september 2020). vyplaty po vvp-varrantam. skolko i komu zaplatit ukraina za ekonomicheskii rost [gdp-warrant payments. how much and whom ukraine should pay for its economic growth]. 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(2009). sovremennaia tcentralno-vostochnaia i iugo-vostochnaia evropa: problemy sotcialnogo polozheniia i sotcialnoi politiki [modern east-central and southeastern europe: problems of social situation and social policy]. slavyanovedenie, vol. 1, pp. 74–87. barro, r . (2000). rule of law, democracy, and economic performance. index of economic freedom. part 2. available at: https://www.researchgate.net/publication/237235156_rule_of_law_democracy_and_economic_ performance (accessed 10 september 2020). economic freedom ranking 2018. available at: https://www.fraserinstitute.org/economic-freedom/ mapgeozone=world&page=map&year= (accessed 10 september 2020). von stein, l. (1850). geschichte der sozialen bewegung in frankreich von 1789 bis auf unsere tage. leipzig. baltic journal of economic studies 27 vol. 7, no. 1, 2021 corresponding author: 1 mariupol state university, ukraine. e-mail: olena_bulatova@yahoo.com orcid: https://orcid.org/0000-0001-7938-7874 2 national academy of statistics, accounting and audit, ukraine. e-mail: o.osaulenko@nasoa.edu.ua orcid: https://orcid.org/0000-0002-7100-7176 3 mariupol state university, ukraine. e-mail: o.zakharova@mdu.in.ua orcid: https://orcid.org/0000-0002-8718-0205 doi: https://doi.org/10.30525/2256-0742/2021-7-1-27-38 monitoring and evaluation of the level of development of the european regional security complex olena bulatova1, oleksandr osaulenko2, olha zakharova3 abstract. intensification of destabilizing processes in the world economy, increasing the impact of global challenges and the spread of uncertainty in the conditions of economic activity actualize scientific research to ensure a high level of economic security of countries and regions. this in turn requires a thorough systematic analysis and assessment of the level of security and the state of the security environment based on the development of appropriate methodological tools. taking it into account, the presented research is aimed at developing a system for monitoring and assessing the level of security development of the countries of the european region, based on the tools of multidimensional assessment and construction of complex integrated indicators. the article is aimed to development of the system for monitoring and assessing the eu security level, which consists of comprehensive assessment of the formation of security development factors, construction of the security level integrated indexes, which allowes to classify the eu countries according to the security level, to identify the features and intensity of the influence of the different determinants on the security level formation, to establish the peculiarities of the eu countries distribution within the regional security space. the object of the study is the regional security complex of the eu, based on the monitoring system – 24 indicators, which are systematized by nature (economic, sociodemographic, environmental) and direction of impact (incentives, disincentives), which are assessed for the period 2010–2019. the results show a high assessment of the integrated level of security in countries such as ireland, sweden, denmark, austria, cyprus, finland, slovakia, the netherlands, luxembourg and germany; ireland, the czech republic, hungary, lithuania, and denmark have the highest security positions in terms of the economic component of the security level, cyprus, slovenia, ireland, luxembourg and slovenia in terms of socio-demographic, and sweden, austria, denmark, finland and portugal in terms of environmental security. the reduced impact of the economic security component factors, maintaining a moderate impact of the socio-demographic security component factors, the increasing influence of the environmental factors are determined. statistical analysis of the distribution of the eu countries by security level in 2010–2019 confirmed the tendency to equalize the level of security development of the eu countries within the regional security complex, to reduce the level of variation of integrated assessments of security levels, to increase the share of countries with high levels. building a matrix of positioning of the eu countries by the integrated level of security and the intensity of its dynamics allowed to divide the countries and zones of relative security and danger, and to determine that the most risky positions are in italy, bulgaria and romania. the practical significance of the results of the study lies in the possibility of applying the proposed system of monitoring the level of security in the development and implementation of regional security strategy of the eu development, which will more effectively monitor changes, prevent risks and threats, prevent negative consequences. key words: economic security, regional security complex, eu region, integrated index of security development level, security indicator. jel classification: f52, r11, c40 baltic journal of economic studies 28 vol. 7, no. 1, 2021 1. introduction a special place in the study of modern problems of the international security environment belongs to the problems of formation of regional security complexes, the development of which is associated with the transformations taking place within these complexes and taking into account global changes in the world economy. regional security systems are formed by countries whose national security systems are interconnected that they make it impossible to solve security problems separately (buzan, 2003). the formation of the european regional security complex is directly related to the development of political and economic integration processes in the region. however, a certain weakening of the european union’s position in the world economy requires the definition of appropriate strategic priorities for the development of the association, which would contribute to solving the problems of intra-regional asymmetry in the context of current problems of sustainable development. the lisbon development agenda, the europe 2020 strategy demonstrated the lack of focus on the internal market, the inconsistency of the declared goals and implemented programs of sustainable and inclusive growth (renda, 2017), which resulted in the adoption of a new global strategy for the foreign and security policy of the european union. the aim of the study is to develop a system for monitoring and comprehensive assessment of the level of security in the development of the eu countries, which will allow to obtain a comprehensive quantitative assessment of the level of security, to determine indicators that influence the formation of the level of security, to determine the patterns of formation and features of the distribution of the eu countries in terms of security indicators within the regional security environment. within the framework of the study, based on the generally accepted methodology of multidimensional assessment, the development and use of an integral index of the level of development security is proposed, the assessment of which from the point of view of the patterns of dynamics and distribution, structural features and structural changes will determine the specifics of the formation of regional security of the eu complex and take into account the specifics when developing strategic guidelines development. among the most common methods of assessing the level of regional economic security should be noted the following: observation of key macroeconomic indicators and comparing them with threshold values, which are accepted as values not lower than the world average; assessment of the country’s economic growth rates by macroeconomic indicators and the dynamics of their change; methods of expert evaluation used to describe the quantitative and qualitative characteristics of the studied processes; methods of analysis and processing of scenarios; optimization methods; methods of multidimensional statistical analysis and others. considering the lack of a generally accepted assessment methodology in most countries and in world practice, the unstable nature of the development of the global environment, as a result of constant shifts in trends not only in economic, but also in sociodemographic, political and legal, environmental and economic development of national economies, the development of methodological tools analysis of the state of security and quantitative measurement of its level with the ability to identify threats and risks is relevant. 2. literature review the development of new regional arrangements in the world after the second world war (especially with the end of the cold war) contributed to the emergence of new “regional orders”, which are characterized by their own security mechanisms that meet regional needs (lake, morgan, 1997). the countries of the region establish security regimes and develop a security environment through appropriate interstate cooperation. in fact, a multi-regional system of international relations is being formed in the world economy, the basis of which is several regional orders (hurrell, 2007), which differ in various levels of development (buzan, little, 2000). polar forms of regional order, respectively, can be war zones and zones of sustainable peace (solingen, 1998), the evolution of which covers several stages of development of the respective orders (usaid, 1997) – war (as the highest level of instability in the region), crisis (unstable regional order with a high probability of armed conflict), unstable peace (high level of tension between actors in international relations, mistrust between them), sustainable peace (predictability, common rules), permanent peace (high level of cooperation between countries, common goals), harmony – the highest level of regional order, characterized by solidarity, generally accepted values, norms, standards. regional orders, which differ in their identity, combine global and international processes (katzenstein, 2005). however, the nature of modern international conflicts is significantly influenced by the development of globalization processes. on the one hand, this is due to the inability and inefficiency of state institutions to qualitatively address issues of social development. the border between global and local is within each country, which increases their influence. on the other hand, the development of global processes affects the development of new conflicts – the struggle for natural resources in the context of economic and environmental degradation is decisive in most modern conflicts. most of the conflicts that take place in the modern world baltic journal of economic studies 29 vol. 7, no. 1, 2021 are related to the definition of identity (which in most cases is not directly related to the state) (newman, 2004), as political motives and ideology take a back seat (kaldor, 2001). current practices in the development of regionalization processes in the world economy show that the deepening of integration cooperation between countries does not necessarily lead to appropriate solidarity between integrating countries. accordingly, the exogenous nature of ensuring the security development of the region will only intensify. finding the right balance between functionality and territory requires the coordination of efforts by a group of countries within a geographical region, which will increase the potential of the regional economy, its complementarity, and so on. expanding the spheres of influence of regionalism, which goes beyond predominantly trade relations (as was the case with old regionalism), will promote the development of all countries that are equally affected by deepening globalization (new regionalism) and achieved through the following benefits (hettne, 1998): achieving a sufficient size, which is based on the cooperation of states to solve common problems, which increases the scale of action; ensuring a viable economy based on a model of selfsufficient development; focus on achieving stability as the ability to counteract the shocks of the outside world; protection of structural positions and access to markets, effective combination of efforts to influence raw material prices; ensuring stability through the inclusion of security issues in regional projects implemented through joint efforts; more efficient resource management, including through the development of environmental cooperation. considering regionalism an important component of shaping global security, marshall m. compares it to the “prisoner’s dilemma” of whether or not such a system will work with members of the larger community (marshall, 1999). however, the opposition to the whole system will lead to significant changes in the system of global distribution and consumption. understanding this will stimulate the development of regional security systems within the global. practical aspects of ensuring a high level of european regional security, the development of appropriate security strategies for the eu countries require a thorough analysis and assessment of security and the state of the regional security environment, which in turn necessitates improved methodological approaches to developing and implementing appropriate tools. 3. research methodology the study proposes an approach to quantitative assessment and monitoring of the level of development of the european regional security complex, based on the implementation of the following stages: 1. systematization of indicators for assessing the level of safety and security environment, determining the nature of the impact of indicators in terms of signals to change the level of security development, identification of indicator type (incentive, disincentive), assessment of possible critical (regulatory, standard, threshold, etc.) values, comparison with which allows to detect changes in the security level. 2. calculation of the integrated level of development security on the basis of construction of the corresponding complex indicator; substantiation of the method of standardization of safety level indicators and the form of their aggregation into the corresponding integrated indicator. based on the approaches to the construction of complex indicators adopted in the international practice of economic analysis (oecd, 2008), an integrated index of security development level is proposed, which means a comprehensive comparative, relative assessment of the stability and sustainability of the national economic system in a given environment. among the key issues of constructing this index (in addition to substantiating its structure, which took place at the previous stage) are several points: firstly, determining the method of standardization of parameters; secondly, the choice of the form of aggregation of indicators to the integrated assessment. taking into the account the fact that the object of assessment is the security of the regional association (the eu countries), as a method of rationing chosen method z-scores, which when reducing various indicators to a comparative form takes into account both its average level in the sample and the level of variation of indicators in the sample of countries. standardized estimates are calculated by formulas (1) followed by rationing using the standard normal integral distribution function (2) z x j j= −µ σ (incentive), z x j j= −µ σ (disincentive) , (1) where xj is the actual value of j-indicator, µ is the average of j-indicator (according to selection), σ is the average squared deviation of j-indicator (according to selection). z ej norm zj = −1 2 2 2 π (2) as for the form of the integral index, the linear form of aggregation with equal weights of indicators (based on the arithmetic weighted average) (3) was used:) (3): i zi j n j norm j= = ∝∑ 1 � , (3) where ii is the integrated security index for the development of the country i; zj norm are the normalized z-scores of safety indicators j; αj is the weight ratio of j-security indicators. baltic journal of economic studies 30 vol. 7, no. 1, 2021 3. evaluation of indicators for a certain period of retrospection, analysis of patterns of their change, calculation of integrated safety indices. in the study, the calculation of safety indices was conducted for the last 10 years (2010–2019) according to a sample of the eu countries. 4. assessment of patterns of distribution of countries according to the integrated level of security, ranking of countries, their systematization and classification relative to the security level. 5. assessment of the system of relationships between security indicators, their groups and the integrated level of security, which will identify the most significant criteria for the formation of the security level of countries. 4. the research results based on previous studies by the authors (bulatova et al., 2020; bezzubchenko, etc., 2020) which determine the relationship between security and sustainable development, in assessing the level of economic security, it is objectively necessary to take into account not only economic criteria but also social and environmental indicators. with this in mind, a systematization of indicators for assessing the level of security of the eu countries is proposed, which is determined from the standpoint of the degree of significance and nature of the impact on overall economic dynamics, and combined into three groups: economic, socio-demographic and environmentaleconomic (table 1). the dynamics of these indicators by the eu countries as a whole on average for the period 2010-2019 are presented in table 2. analysis of the dynamics of seсurity indicators shows that the level of gdp for the study period increased by 5.8%, amounting to 2019 data 34,443 usd per capita, which is 1.1% less than in 2014. the gdp per capita of the eu is more than 3 times higher than the world average (11,436 usd in 2019). economic growth rates for 2000-2019 did not exceed 2.7% (2017), were characterized by negative values in 2012-2013, have a slowdown in growth after 2017, are lower than the world average gdp growth (2.47% against 1.52% for the eu in 2019). the inflation rate in the eu is low at 1.63% in 2019 (not exceeding the maximum estimate of 3.3% in 2011), lower than the world average of 2.3%. the unemployment rate in the eu is 6.7% in 2019 (which is 23.6% higher than the world average of 5.4%), while it should be noted that the unemployment rate in the period 2010–2016 was higher than the critical value in 8 %. regarding foreign trade indicators, there is a slowdown in the growth rates of both exports and imports (2.7% increase in exports in 2019 against 11% in 2010; 3.8% increase in imports in 2019 against 9.7% in 2010), while a comparison of these average global rates indicates a faster growth of eu foreign trade (81.5% in exports, 2.3 times in imports). compared to 2010, trade conditions for the eu countries improved insignificantly in the periods 2015–2017, 2019. trade indices of the trade balance indicate the preservation of an active foreign trade balance and effective trade cooperation for the eu countries. the share of exogeneous investment in gdp, which is 22% in 2019, exceeds 15%, but less than 25%, which indicates the preservation of a stabilization regime, under which there is moderate economic growth with low or constant economic table 1 indicators of the level of security development of the eu countries indicator / designation the nature of the impact type* critical value** economic components gdp per capita (current usd) е1 indicator of the level of socio-economic development, the growth of which indicates an increase in the level of economic potential of the country, creating conditions for economic growth and competitiveness. і below the average level for eu countries. gdp growth (annual %) е2 indicator of the level of socio-economic development, the growth of which indicates an increase in the level of economic potential of the country, creating conditions for economic growth and competitiveness. і <0, below the average level for eu countries inflation, consumer prices (annual %) е3 indicator of changes in consumer prices. values at the level of 1-2% (up to 5%) stimulate demand and economic development; at more than 5% – alarm, threat to security and resilience. d >5% unemployment, total (% of total labor force) е4 the indicator of the share of the unemployed population in the structure of employment, the growth of which is associated with a decline in production, indicates the imperfection of the labor market, the deterioration of the quality of labor potential, increasing social tensions in society. d >8-10%, above the eu average exports of goods and services (annual % growth) е5 an indicator of the level of foreign trade activity of the country, the growth of which indicates an increase in the level of intensity of foreign trade cooperation, increasing the level of competitiveness in world markets. і below the average level for eu countries imports of goods and services (annual % growth) е6 baltic journal of economic studies 31 vol. 7, no. 1, 2021 indicator / designation the nature of the impact type* critical value** terms of trade index (index base 2010), % е7 the indicator of change in export prices relative to changes in import prices, characterizes the change in terms of trade for the country. і <100% trade balance index, % е8 indicator of the effectiveness of foreign trade cooperation, characterizes how much foreign exchange earnings from exports cover the cost of imports. і <100% gross capital formation (% of gdp) е9 the indicator of the level of the investment component of economic development determines the type of economic development of the country in terms of domestic investment opportunities to ensure economic growth. і <15% (falling economic development, eating habits, rising poverty, etc.); foreign direct investment, net inflows (% of gdp) е10 an indicator of a country’s ability to attract foreign capital in order to intensify economic development, in particular on an innovative basis. і <0, below the eu average high-technology exports (% of manufactured exports) е11 indicator of quality (manufacturability) of the country’s foreign trade, the country’s ability to produce innovative products, the criteria of innovative competitiveness. і <10-15%, below the eu average total reserves in months of imports е12 indicator of support for international currency liquidity, ensuring the financial security of the state. і < 3 external debt, % of gdp е13 an indicator of the level of external debt, the growth of which signals an increase in the external debt burden and the deterioration of the country’s financial security. d >50-55%, above the eu average government deficit/surplus, % to gdp е14 an indicator of the balance of public finances, a deviation from zero indicates a deterioration in budget security. d above average for eu countries (by value module) socio-demographic components total population growth rates, annual s3 indicator of the nature of demographic development of the country, the negative values of which indicate the processes of depopulation, positive – expanded demographic reproduction і <0, below the eu average life expectancy at birth, total (years) s4 the indicator, the growth of which is evidence of improved quality of life and improved well-being, on the other hand causes changes in the age structure of the population, increasing median age, intensifies the aging process. і below the eu average population ages 65 and above (% of total population) s5 indicator of demographic aging of the nation. d >7%, above the eu average age dependency ratio (% of working-age population) s6 an indicator of the demographic burden on the working population, the growth of which is due to an increase in life expectancy, age structure of the population, creates an additional burden on the social protection system. d above average for eu countries international migrant stock (% of population) s7 an indicator of the mechanical movement of the population, the uncontrolled growth of which is a threat to economic security. d above average for eu countries gini index (world bank estimate) s3 an indicator of income inequality and the concentration of wealth in the economy or society, the growth of value is a signal of increasing the level of income differentiation, the deterioration of security. d >40 income decile defferentiation rate s4 indicator of the level of socio-economic inequality, income ratio of 10% of the richest and poorest population. d >10, above the eu average environmental components energy intensity of gdp, kg per 1000 euro n1 indicator of the level of energy efficiency of the economy. d below the eu average share of energy from renewable sources (use) n2 the indicator of the quality of the energy balance, the level of environmental friendliness, the growth of the share of renewable energy sources indicates the formation of a more rational structure of energy consumption in the country. і above average for eu countries air emissions intensities, grams per euro value added n3 indicator of environmental intensity of the economy, changes in which indicate the degree of greening of the economy, the introduction of clean and environmentally friendly technologies and industrial processes. d below the eu average source: compiled by the authors, * i – incentive, d – disincentive; ** – change in relation to which in a certain direction signals danger (end of table 1) baltic journal of economic studies 32 vol. 7, no. 1, 2021 table 2 dynamics of indicators of the level of security development of the eu for the period 2010-2019 indicator 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 gdp per capita (current usd) 32932 35716 33159 34564 35243 30474 31163 33030 35660 34843 gdp growth (annual %) 2.2 1.8 -0.7 -0.1 1.6 2.4 2.1 2.7 2.1 1.5 inflation, consumer prices (annual %) 1.5 3.3 2.7 1.2 0.2 -0.1 0.2 1.4 1.7 1.6 unemployment, total (% of total labor force) 9.8 9.8 10.8 11.3 10.8 10.0 9.1 8.1 7.3 6.7 exports of goods and services (% growth) 11.0 6.7 2.2 2.1 5.0 6.6 3.4 5.7 3.7 2.7 imports of goods and services (% growth) 9.7 4.7 -0.9 1.5 5.4 7.4 4.4 5.4 3.6 3.8 terms of trade index, % 100.0 97.7 96.8 97.8 98.7 100.3 101.6 100.2 99.2 100.1 trade balance index, % 104.1 104.0 106.9 108.5 109.0 110.3 110.4 109.8 109.1 108.4 gross capital formation (% of gdp) 21.2 21.7 20.2 19.8 20.2 20.6 20.7 21.2 21.8 22.0 foreign direct investment, net inflows (% of gdp) 3.7 5.6 3.9 3.8 2.7 5.7 5.1 2.9 0.5 1.4 high-technology exports (% of manufactured exports) 16.9 16.1 16.7 16.7 16.8 17.4 17.6 16.0 15.6 15.6 total reserves in months of imports 3.1 2.7 3.1 3.0 2.6 2.9 3.1 3.6 3.2 3.4 external debt, % of gdp 114.8 119.7 121.0 124.0 125.9 131.7 127.4 118.9 113.0 109.4 government deficit/surplus, % to gdp -6.4 -4.6 -4.3 -3.3 -2.9 -2.4 -1.7 -1.1 -0.7 -0.8 total population growth rates, annual 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 life expectancy at birth, total (years) 79.6 80.1 80.2 80.5 80.9 80.6 80.9 80.9 81.0 81.0 population ages 65 and above (% of total population) 17.7 17.9 18.2 18.6 18.9 19.2 19.6 19.9 20.2 20.5 age dependency ratio (% of working-age population) 49.5 50.1 50.7 51.3 52.0 52.7 53.3 54.0 54.7 55.4 international migrant stock (% of population) 10.5 10.5 10.5 10.5 10.5 11.4 11.4 11.5 11.5 12.5 gini index (world bank estimate) 31.2 31.3 31.7 32.1 31.8 31.8 31.5 31.3 31.3 31.3 income decile differentiation rate 8.7 8.8 9.2 9.5 9.4 9.5 9.2 9.0 9.0 9.0 energy intensity of gdp, kg per 1000 euro 141.8 134.7 133.9 131.9 124.9 123.7 122.0 120.9 117.8 117.8 share of energy from renewable sources (use) 13.2 13.4 14.7 15.4 16.2 16.7 17.0 17.5 18.0 18.0 air emissions intensities, grams per euro value added 348.6 332.4 320.4 308.9 290.4 276.3 271.5 266.4 252.6 252.6 note: compiled by the authors on the basis (world bank, 2020, unctadstat, 2020, ceicdata, 2020, united nation , 2019, eurostat, 2020). dynamics. the share of net inflow of foreign investment to gdp in 2019 is 1.4%, which is more than the previous year, but significantly less than the maximum levels of 2011, 2015, 2016, when the figure exceeded 5%. the share of high-tech exports exceeds 15% (the average for the period 2010–2019 is 16.5) but less than the average world share (20.8% in 2018). the level of gold and foreign exchange reserves in the months of imports is 3.4 according to 2019, on average for the analyzed period exceeds the critical value. for the eu countries, as for most developed countries, is characterized by a high level of external debt burden, the share of external debt in gdp for the eu as a whole exceeds 100%. the dynamics of socio-demographic indicators indicate the presence of constant low rates (0.2% per year) of population growth and life expectancy (81 years according to 2019 data). compared to world indicators, the eu countries are characterized by a lag in the pace of demographic development (the world’s population growth rate is 1.07%) and a lead in terms of quality of life (world life rate is 72.6 years). regarding the peculiarities of the age structure, the eu countries are characterized by accelerating the aging process, the share of the population over the age of 65 has a growing trend of 20.5%, while the world average is 9.2%. as a result, the coefficient of demographic load is also increasing, for the period 2010-2019 it increased by 12% to the level of 55.4%, which almost coincides with the world average coefficient (54.5%). the share of migrants in the population structure for the analyzed period is in the range of 10-12%. indicators of uneven socio-economic development and income distribution do not go beyond the critical values, in particular, the gini coefficient does not exceed 32%, the coefficient of decile income differentiation is 9. environmental and economic indicators show a favorable direction of change, in particular on the one hand a decrease in energy intensity (by 17% to 117.8 kg / 1000 euros of gdp in 2019) and the level of carbon intensity (by 17.5% to 252.6 g / euro gdp in 2019), on the other hand, an increase in the share of renewable energy sources in consumption from 13.2% in 2010 to 18% in 2019, which is evidence of the growing level of greening of the eu economies. based on the assessment and monitoring of these security indicators, it is possible to determine the countries with the most and least optimal values of indicators, to determine the shares of the eu countries in the relative security zone (with indicator above average) and in the zone of increasing threats or risks (with indicator below average) (table 3). baltic journal of economic studies 33 vol. 7, no. 1, 2021 table 3 assessment of the distribution of the eu countries by indicators of the level of security (2019) indicator minimum maximum share of eu countries above the eu average, % share of eu countries below the eu average, % gdp per capita (current usd) 9738 bulgaria 114705 luxembourg 37 63 gdp growth (annual %) -0.03 portugal 5.5 ireland 74 26 inflation, consumer prices (annual %) 0.25 cyprus 3.83 romania 48 52 unemployment, total (% of total labor force) 1.93 the czech republic 17.24 greece 22 78 exports of goods and services (% growth) 0.84 luxembourg 11.06 ireland 48 52 imports of goods and services (% growth) -0.39 italy 35.61 ireland 26 74 terms of trade index, % 87.8 luxembourg 106.8 malta 44 56 trade balance index, % 91.27 romania 120.83 luxembourg 41 59 gross capital formation (% of gdp) 12.54 greece 43.82 ireland 52 48 foreign direct investment, net inflows (% of gdp) -20.39 ireland 97.05 cyprus 74 26 high-technology exports (% of manufactured exports) 6.69 portugal 29.44 malta 37 63 total reserves in months of imports 0.03 luxembourg 9.1 the czech republic 26 74 external debt, % of gdp 47.73 romania 5633.23 luxembourg 67 33 government deficit/surplus, % to gdp -4.3 romania 3.7 denmark 70 30 total population growth rates, annual -1.5 lithuania 1.88 luxembourg 52 48 life expectancy at birth, total (years) 74.8 latvia 83.4 spain 56 44 population ages 65 and above (% of total population) 14.05 cyprus 23.01 italy 30 70 age dependency ratio (% of working-age population) 42.82 luxembourg 61.8 france 37 63 international migrant stock (% of population) 1.7 poland 47.4 luxembourg 52 48 gini index (world bank estimate) 24.2 slovenia 40.4 bulgaria 48 52 income decile differentiation rate 4.98 slovenia 16.79 bulgaria 33 67 energy intensity of gdp, kg per 1000 euro 53.19 ireland 414.36 bulgaria 74 26 share of energy from renewable sources (use) 7.4 netherlands 54.6 sweden 48 52 air emissions intensities, grams per euro value added 128.7 sweden 978.1 bulgaria 67 33 source: based on authors’ calculations baltic journal of economic studies 34 vol. 7, no. 1, 2021 61,3 51,2 24,9 49,3 58,1 51,2 61,6 41,7 57,3 52,8 53,6 43,1 48,1 67,4 49,2 43,7 40,9 53,7 50,6 54,1 43,7 51,5 40,4 54,7 50,050,5 62,0 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 2010 2019 eu 50,6 (2019) figure 1. the eu countries according to the integrated level of security development (2010, 2019) source: based on authors calculations table 4 dynamics of integrated assessments (rating positions) of the eu countries level of security development for the period 2010–2019 eu country 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 austria 59.0 (2) 58.7 (3) 60.8 (3) 58.4 (3) 57.1 (3) 56.7 (4) 56.9 (4) 58.1 (23 61.5 (1) 61.3 (4) belgium 46.6 (13) 47.7 (13) 47.9 (12) 46.5 (12) 47.4 (13) 45.3 (13) 46.9 (12) 46.0 (13) 45.6 (15) 51.2 (14) bulgaria 29.9 (26) 33.6 (26) 33.4 (26) 34.4 (25) 31.5 (27) 30.5 (27) 33.6 (26) 30.6 (27) 30.4 (27) 24.9 (27) croatia 38.4 (22) 40.3 (20) 37.4 (25) 41.0 (20) 40.6 (21) 42.5 (17) 44.5 (18) 42.4 (20) 43.1 (19) 49.3 (18) cyprus 50.2 (8) 47.9 (11) 43.8 (14) 38.1 (24) 38.0 (22) 41.3 (20) 46.4 (13) 48.6 (9) 48.5 (11) 58.1 (5) czechia 49.8 (9) 50.5 (9) 48.7 (11) 46.2 (13) 49.1 (10) 46.6 (12) 46.4 (14) 47.7 (11) 48.8 (9) 51.2 (13) denmark 55.8 (3) 61.1 (1) 62.1 (2) 62.6 (1) 59.9 (1) 59.1 (2) 60.6 (1) 59.1 (2) 60.7 (2) 61.6 (3) estonia 36.8 (23) 39.1 (24) 38.9 (23) 34.3 (26) 34.4 (25) 35.8 (25) 39.9 (23) 39.1 (23) 41.7 (22) 41.7 (24) finland 54.9 (4) 55.0 (4) 55.8 (4) 53.2 (5) 49.8 (8) 52.0 (5) 52.1 (6) 53.8 (5) 51.8 (6) 57.3 (6) france 48.8 (12) 50.0 (10) 52.3 (8) 51.2 (8) 48.6 (11) 48.1 (11) 47.3 (10) 48.1 (10) 48.8 (10) 52.8 (11) germany 49.4 (11) 50.7 (8) 51.1 (9) 50.0 (10) 49.8 (9) 49.5 (9) 49.9 (8) 49.8 (8) 49.8 (8) 53.6 (10) greece 29.7 (27) 30.0 (27) 28.3 (27) 31.6 (27) 33.9 (26) 31.5 (26) 30.4 (27) 34.0 (26) 36.6 (25) 43.1 (23) hungary 42.3 (19) 45.4 (15) 40.5 (18) 47.0 (11) 48.4 (12) 44.1 (16) 44.1 (20) 42.9 (19) 42.6 (21) 48.1 (20) ireland 49.4 (10) 47.9 (12) 50.8 (10) 50.2 (9) 55.2 (5) 60.1 (1) 58.2 (2) 59.8 (1) 60.0 (3) 67.4 (1) italy 44.8 (15) 43.2 (17) 42.0 (15) 45.0 (15) 45.2 (14) 44.6 (14) 44.8 (17) 43.9 (18) 43.0 (20) 49.2 (19) latvia 34.0 (25) 38.4 (25) 41.6 (17) 38.9 (23) 36.2 (23) 36.5 (23) 37.0 (24) 37.3 (24) 39.2 (24) 43.7 (22) lithuania 35.6 (24) 40.0 (22) 39.4 (22) 40.8 (21) 34.9 (24) 36.4 (24) 34.4 (25) 37.1 (25) 36.3 (26) 40.9 (25) luxembourg 54.5 (6) 52.4 (7) 54.6 (5) 56.3 (4) 56.7 (4) 50.6 (8) 53.3 (5) 45.9 (14) 47.6 (12) 53.7 (9) malta 44.6 (16) 43.7 (16) 47.4 (13) 44.5 (16) 43.6 (17) 48.8 (10) 47.0 (11) 45.2 (16) 47.5 (13) 50.6 (15) the netherlands 51.9 (7) 54.3 (5) 54.0 (6) 52.6 (6) 50.0 (7) 51.8 (6) 49.8 (9) 51.6 (6) 50.0 (7) 54.1 (8) poland 39.1 (20) 39.2 (23) 40.1 (21) 39.9 (22) 40.8 (20) 40.9 (21) 42.6 (22) 42.3 (21) 43,8 (18) 43.7 (21) portugal 44.8 (14) 42.3 (18) 40.1 (20) 45.8 (14) 44.5 (16) 42.2 (19) 43.9 (21) 46.6 (12) 47.5 (14) 51.5 (12) romania 38.5 (21) 40.3 (21) 38.2 (24) 42.6 (18) 41.1 (19) 40.1 (22) 44.2 (19) 41.0 (22) 39.6 (23) 40.4 (26) slovakia 54.6 (5) 53.0 (6) 53.3 (7) 52.3 (7) 51.8 (6) 51.3 (7) 50.9 (7) 50,2 (7) 52.3 (5) 54.7 (7) slovenia 43.5 (18) 45.7 (14) 41.8 (16) 43.2 (17) 44.8 (15) 44.2 (15) 45.4 (15) 45.9 (15) 45.6 (16) 50.0 (17) spain 44.0 (17) 41.9 (19) 40.4 (19) 41.7 (19) 41.8 (18) 42.3 (18) 44.9 (16) 44.1 (17) 44.0 (17) 50.5 (16) sweden 60.3 (1) 60.5 (2) 62.5 (1) 59.1 (2) 59.4 (2) 58.6 (3) 57.0 (3) 56.5 (4) 57.7 (4) 62.0 (2) note: scores (rates) are mentioned in table. source: based on authors’ calculations baltic journal of economic studies 35 vol. 7, no. 1, 2021 according to the data obtained, the distribution of the eu countries by security indicators such as economic growth, the share of domestic investment and net inflows of foreign investment in gdp, budget deficit, population growth, life expectancy and indicators of socio-economic inequality is the most favorable. points of higher specific weight of countries that have better indicators relative to the average level (higher or lower depending on the type of indicator). the aggregation of security indicators on the basis of (1)-(3) allowed to calculate integrated assessments of the security level and, accordingly, to rank the eu countries on the state of the security environment (figure 1, table 4). ireland is in the top ten eu countries with the highest integrated estimates of the level of development security according to the results of the calculations (67.4; 1 position in 2019 relative to 10 places with an estimate of 49.4 in 2010, an increase of 36.5 %), sweden (62.0; 2nd position in 2019 relative to the 1st with an estimated 60.3 in 2010, an increase of 2.7%), denmark (61.6; 3rd position in 2019). and 2010 with an estimate of 55.8, an increase of 10.3%), austria (61.3; 4th po-sition in 2019 relative to the 2nd with an estimate of 59.0 in 2010, an increase of 3.8%), cyprus (58.1; 5th position in 2019 relative to the 8th with a score of 50.2 in 2010, an increase of 15.5%), finland (57.3; 6th position in 2019) relative to the 4th with a score of 54.9 in 2010, an increase of 4.2% (slovakia), slovakia (54.7; 7th position in 2019 relative to the 5th with a score of 54.6 in 2010, growth of the level by 0.4%), the netherlands (54.1; 8 position in 2019 relative to the 7th with a score of 51.9 in 2010, growth of the level by 4.2%), luxembourg (53.7; 9th position in 2019 relative to the 6th with a score of 54.5 in 2010, a decrease of 1.5%) and germany (53.6); 10th position in 2019 relative to the 11th with a score of 49.4 in 2010, an increase of 8.6%). the eu countries with a higher security level than the eu average (50.6) include the czech republic, france, malta and portugal; the rest of the countries are characterized by an integrated level of security lower than the european average. the countries characterized by the most intensive growth rates of the integrated level for the period 2010-2019 include croatia (28.2%, 18th position in 2019), greece (45.3%, 23 position), latvia (28.4 %, 22 position). among the eu countries, only bulgaria shows a decrease in the integrated level (-17%). considering the fact that in the structure of the integral assessment the indicators are classified into three groups – economic, socio-demographic and environmental-economic, the study calculated the corresponding sub-indices of the integral assessment of development security, on the basis of which the following were determined: the economic systems of such eu countries as ireland, the czech republic, hungary, lithuania and denmark are characterized; on socio-demographic indicators – cyprus, slovenia, ireland, luxembourg and slovenia; on environmental and economic indicators – sweden, austria, denmark, finland and portugal. assessment of the nature of the relationship between subcomponents and the overall integrated assessment (figure 2) revealed the following patterns: firstly, the impact of purely economic indicators on the level of economic security has a declining trend, so if in 2010, there was a moderate correlation (0, 64), then in 2019 – weak (0.31); secondly, the impact of socio-demographic indicators remains virtually unchanged at the level of moderate correlation (0.67); thirdly, the intensity of the impact of environmental and economic indicators on the formation of the level of security is growing, so if in 2010 the correlation index was 0.58 (moderate correlation), in 2019 – 0.71 (close). the results show the growing role of greening processes, the introduction of safer production technologies, the development of socially responsible business, ensuring sustainable economic growth and improving the welfare of the population. the results of the assessment of the impact of certain indicators on the formation of the level of the eu countries security development showed: such indicators as energy efficiency and carbon intensity of gdp, population growth rates have a high correlation with the level of security; moderate correlation – the level of gdp per capita, gross capital formation in gdp, life expectancy, gini index, the level of decile income differentiation; weak correlation, the level of inflation and unemployment, the index of conditions and trade and the state of the balance, the share of the population 65+, the level of demographic burden, the share of fdi in gdp, the level of migration; other indicators, including gdp growth rates, exports and imports, the level of high-tech trade, financial indicators, have almost no impact on changes in the level of security. in order to classif y the eu countries on the level of security and the peculiarities of its formation and change, indicators of descriptive statistics (average and median values of indices, standard deviation, coefficient of variation) and some structural characteristics of the distribution (quartiles) were calculated (table 5). the structural characteristics of the distribution tend to increase, in particular: the average level increased by 11%, the median value – by 14.3%, the maximum value – by 11.8%, the value of the first quartile – by 18.3%, the third – by 6.5%, which can be assessed as a positive moment in the formation of a higher level of security. according to the values, half of the eu countries are characterized by an integrated level of security not exceeding 50.6%, 25% of the baltic journal of economic studies 36 vol. 7, no. 1, 2021 0,00 0,10 0,20 0,30 0,40 0,50 0,60 0,70 0,80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 economic indicators socio-demographic indicators environmental indicators figure 2. correlation indices of the integrated level of the eu countries security development with the different subcomponents (indicators) source: based on authors calculations table 5 statistical characteristics of the distribution of the eu countries by integrated level of security development (2010–2019) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 mean 45.6 46.4 46.2 46.2 45.7 45.6 46.4 46.2 46.8 50.6 median 44.8 45.7 43.8 45.8 45.2 44.6 46.4 45.9 47.5 51.2 first quartile 38.8 40.3 40.1 40.9 40.7 41.1 44.0 42.3 42.8 45.9 third quartile 51.1 51.6 52.8 51.8 49.9 51.0 50.4 50.0 49.9 54.4 min 29.7 30.0 28.3 31.6 31.5 30.5 30.4 30.6 30.4 24.9 max 60.3 61.1 62.5 62.6 59.9 60.1 60.6 59.8 61.5 67.4 standard deviation 8.4 7.9 8.8 7.9 8.0 8.0 7.4 7.4 7.5 8.5 variation rate 18.5 17.0 19.1 17.1 17.6 17.5 16.0 15.9 16.1 16.9 source: based on authors’ calculations table 6 matrix of the eu countries by integrated safety index and the intensity of changes in its level c ha ng e in th e in te gr at ed le ve l o f s ec ur it y fo r 20 10 -2 01 9 h ig h in te ns ity integrated assessments of the level of security (2019) relative danger zone relative safety zone low lower than the average higher than the average high і estonia greece latvia lithuania poland іі croatia hungary malta slovenia spain v portugal vi ireland cyprus l ow in te ns ity ііі bulgaria romania iv italy vii germany luxembourg the netherlands belgium the czech republic france viii sweden austria denmark finland slovakia note: the division into groups according to the level of intensity of changes was carried out relative to the change of indices on average in the eu (tpr = 11%), the division into groups according to the level of integrated safety assessment – according to structural characteristics (first quartile, median, third quartile). source: based on authors calculations baltic journal of economic studies 37 vol. 7, no. 1, 2021 safest countries have a security level not exceeding 45.9, 25% of the safest – a level above 54.4, i.e. the degree differentiation between countries according to the calculated integrated estimates is low and is characterized by a downward trend. the calculation of variation indicators also confirms the fact of equalization of the level of security for countries within the eu, low variation allows us to conclude about the homogeneous nature of the set of the eu countries in the formation of a sufficiently high level of economic security. taking into account the values of structural characteristics allowed to build a matrix of the eu countries on the level of development security, the intensity of changes in the parameters of the security environment (table 6). the highest risk areas are countries of groups iii and iv, which have relatively medium lower (italy) and low scores (bulgaria and romania) and are characterized by a low rate of increase of the integrated level. group i and ii countries (with the exception of spain, these are the countries of the last waves of the eu enlargement), despite estimates below the average level, show higher rates of index growth, which is evidence of a more favorable security environment. intensified rates of level change create additional opportunities for countries of groups v and vi to maintain and ensure a high level of security within the european space. countries vii and viii belong to economies with a sufficiently high level of security of development, for some of them low but stable growth rates are associated with a general high level of socioeconomic development and the ability to respond to threats of both internal and external nature (germany, sweden, luxembourg, the netherlands, etc.). 5. conclusions an important condition for ensuring and maintaining a high level of security development and the formation of a favorable security environment is the creation of a security level monitoring system based on appropriate national and regional security strategies. the basis of such monitoring is the quantitative measurement of the level of safety, the most successful tool of which is the method of multidimensional analysis and calculation of integrated indicators. the proposed approach to assessing and analyzing the level of development of the regional security complex, tested on the example of the eu countries, allowed, first, to systematize the assessment criteria according to their essential characteristics, nature and direction of impact on security, possible critical values, and identify certain patterns changes for the eu countries; secondly, to assess the eu countries on the integrated level of security, to rank and classify, to assess the intensity of changes in the level, to determine the peculiarities of the distribution of countries within the eu by security assessments. the use of correlation analysis tools allowed to confirm the fact of reducing the intensity of the impact of purely economic factors on the overall level of security and increasing the importance of social and environmental economic indicators in the formation of a higher level of development security. the results of the analysis can be used in practice to develop national security strategies in terms of improving the security monitoring system, which will take into account changes in indicators, 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and economy in the country in whole. it is because of availability and security deposit services, commercial banks of ukraine have the opportunity to increase its resource base due to savings of the population. methodology. the paper is based on a synthesis of data to explore the bank deposit policy situation. the paper considers the scientific and theoretical approaches for the developing the deposit policy management. it contains the analysis of the dynamics and current situation and conditions of the resource potential of banking institutions in ukraine. results of the article shows direct dependency between savings, consumption and deposit policy, therefore every banking institution includes the mechanism of banking management of the development and implementation of deposit policy. also, this management defines the deposit policy directions according to the conditions of bank resources mobilization and its applying in active operations. the obtained results confirm that the term “deposit policy” is too complex, but it is investigated in interaction with banking activity. it is explained how deposit policy influences banking system and has impact on economic growth in general. practical implications. the research creates methodological approaches to the measurement of effectiveness of deposit policy. also, it studies the existing ones. it provides the possibility to define which of the approaches works in non-stable economic situation and which ones not. the paper has the aim to assess the deposit policy opportunities in balancing and ensuring financial stability of the banking system of ukraine in the period of economic growth and during the financial instability. value/originality. despite of the presence of significant scientific results in this field, deposit policy, today there is no established scientific literature and a comprehensive vision regarding the necessary focus and exposure mechanisms of deposit policy for the banking system. it determines the need to formalize the conceptual framework and the necessary conditions for a financial inclusiveness, deepening scientific and methodological basis of research deposit policy. this article provides the author’s view on the important role of deposit policy for banking institutions and national economy in general. key words: deposit policy, savings, banking institutions, bank resources mobilization, banking management, bank resources. jel classification: g21, e58, g29 corresponding author 1 banking department, taras shevchenko national university of kiev. e-mail: nadibova@gmail.com 1. introduction one of the main functions of the banking system is the rational allocation of financial resources by the accumulation of temporarily free funds of population and economic entities, and its focus on the credit and investment process. reducing investments in the development of the domestic economy leads to enhance the role of accumulation and use of internal resources for restoring economic stability. without sufficient resource base banking institutions are not able to carry out the current credit needs of businesses and individuals in the right amount. also, there is no possibility to complete global investment projects. the sufficient condition for succeeding in these aims is to involve resources, especially, deposits. bank institutions serve an important function by transforming deposits into real capital to provide additional resources for economic needs. therefore, ensuring stable and effective development of the banking system, including resource optimization the capacity of the bank and minimizing the consequences of financial instability should be one of the main areas of banking activity. the abovementioned shows that ensuring stability and reliable functioning of banks in our country, baltic journal of economic studies 43 vol. 1, 2015 scientifically substantiated formation convertible banking policy plays an important role, the main element of which is the deposit policy. deposit policy is the basis of the banking management. and its parameters determine the resource base and further bank activity. this is confirmed by the fact that the bulk of bank resources are created in the process of conducting deposit operations, efficiency and accuracy of the organization impacts on the stability of the banking institution ultimately. 2. deposit policy: role and functions deposit policy is a complex economic phenomenon. its essence is seen in a broad and a narrow sense. in broad terms, the bank’s deposit policy is considered as the strategy and tactics of the bank in carrying out activities to attract deposit resources, as well as the organization and management of deposit process. in narrow sense deposit policy refers to the strategy and tactics of the bank in order to ensure its liquidity by deposit process. deposit policy is the base of the overall strategy of bank’s activities to attract resources. banking strategy and tactics are closely related, as tactics is the implementation of the strategy of banking institution. therefore, the optimal combination of these two approaches enables banks to fulfill their main interest in the business world, which is intended to profitability and growth. but the deposit strategy and tactics are closely linked, in accordance with the same internal logic, which it incorporates such fundamental concept for the banking activity, as a deposit product, deposit, deposit service and deposit operation, that provides resource base of banking institution. another approach to define the term “deposit policy” is to consider its levels. deposit policy functions at state and bank levels. deposit policy at the state level is a set of measures and instruments to regulate the banks’ activities. the state level is regulated by the central bank, the national bank of ukraine, and it provides the rules of the formation of deposits for commercial and saving banking institutions, also for nonbanking financial organizations. deposit policy at the bank level is a set of instruments that are used by banking institution to involve more resources to provide its activity. when the policy of the central bank is strict, the deposit policy has the character of conservatism as it is strong regulated. the opposite situation is when the deposit policy is liberal. but in practical banking activity presents the combination of the both types of deposit policy. so, it can be concluded that the deposit bank policy should be understood as a system of administrative decisions, a program of action, or the document containing the activities of the bank in the area of deposit operations. functions of deposit policy describe its role for any banking institution. the main function is the optimization of resource potential of bank. also, deposit policy has such functions as: • planning; • programming; • forecasting; • motivating; • commercial; • control. every function of deposit policy has the aim to provide its principles: • flexibility of deposit policy; • documentarily registered deposit operations; • rational management passive operations; • high technologies in resource operations; • active marketing and customer focus; • rational resource policy; • adequacy of deposit policy to demand on financial services (dziubliuk, o., 2008). the role of deposit policy is that it defines the priorities of development and improvement of banking activities, aimed to mobilize financial resources, improvement of the resource base formation and increasing competitiveness. the author offers to pay attention to new principle, according to the research, that deposit policy has the principle of availability. this principle is about security of bank deposit portfolio and target use of funds performing property rights of depositors. deposit policy should provide positive reputation and trust. to conclude, there is direct dependence between depositors’ savings, deposit policy functions and principles, banking activity and its rating. 3. deposit policy and factors of influence it is important to make deposit policy safe. it means deposit policy should create not risky financial services investments by subjects of the financial services market. many factors impacts on deposit policy. they could be divided into internal and external ones. the external factors are defined as: • the size of the discount rate of the central bank; • banks’ reserve requirements; • inflation; • inflation expectations of the population; • dynamics of population incomes; • the state of the monetary market; • the state of the financial market; • the political situation in the country; • the economic situation; • risks; • demand on banking services; • level of banking competition; • regional specification; • legislation (fursova, v., 2011). globalization processes made domestic banks increasingly mobilize resources by borrowing on the international capital markets in the form of loans and foreign investments. however, today, when international banks reduced lending ukrainian banks, the value of deposit resources despite becomes higher because of the lack of resources in the domestic banking market. so that banking institutions are forced to attract resources with various kinds of deposit operations. in such circumstances, baltic journal of economic studies 44 vol. 1, 2015 banks should pay attention to the significant number of factors in the formation deposit policy objectives. it is known that on the amount of borrowed funds has impact not only the general state of the economy of the country, but even a region, in which banking institution conducts its operations. it applies to external risks. they are not associated with of banking activity or its customers. it is obvious that in an unstable economic, the banking system development must be stable, despite the fact that it faces with all the consequences of inflation, crisis, problem payments, budget deficit, decline in gdp and so on (barr, nicholas, 2001). the internal factors are: • profitability; • liquidity; • reliability of bank institution; • deposit interest rates; • range of bank services; • versatility of banking deposit products; • marketing policy of the bank; • development of banking technologies; • stability of deposits; • price policy of banking institution; • bank customers; • staff qualifications; • experience; • expenditure on deposit policy (fursova, v., 2011). deposit policy of banking institution should be formed considering previously mentioned internal and external factors. thus, the activities of bank management can improve the quality of deposit services and attract more resources. practical banking activity, according to our research, shows that internal factors of influence on deposit policy could be divided into several groups, they are: • financial stability and statistics; • staff preparation and qualification; • image banking institution on the market of deposit services; • quality and sales policy of deposit policy; • organizational structure of banking institution. to sum up, the author offers new groups of internal factors that are under banking management control and they allow any bank to be competitive and to provide deposit services better. the external factors should be considered as political, economic, technical and social ones, they are out of banking management control. but banking institution management is to monitor trends and to have flexible deposit policy. these groups of factors give opportunity to work out methodological approaches for organization, estimation, planning, forecasting and regulation of bank activity. 4. survey methodology in the paper are used logical and statistical methods, mathematically-economics approaches. it was analyzed the deposit policy at 5 competitive banks that have not less than 1 billion uah deposits in their deposit portfolio according such parameters as payment of interest on deposits, the possibility of early withdrawal or recharge, investment terms, rate in uah, rate in usd, bank’s part in the market of retail deposits. we took the analytics from the national bank of ukraine data base for the last periods and the customers’ information from the website main pages of the analyzed banks. the author paid attention which principles are completed in the banks’ activity and what conditions the banks use to attract new depositors and to keep the old ones. in ukraine, we have the tendencies for declining the banks “deposit billionaires”. the reasons why many of domestic financial institutions continue to decline are rather predictable. first of all it is massive outflow of deposits, the insolvency of many banks raising standards of the national bank of ukraine, the total lack of confidence in the banking system, both from the public and from business. 5. findings the above confirms that the quality of the borrowed funds is determined by the level of bank deposit policy that is the set of its approach to risk management liabilities, the principles of formation of the resource base, effective communication between divisions of the bank and the distribution between them the duties related to the process of formation of resources, composition and quality of the portfolio of resources, providing high-quality documentary deposit policy. since 2008 till 2013 the share of banks’ capital was gradually increasing in total liabilities slightly from 11.61% to 15.07%. it shows a certain increase in equity capital of ukrainian banks, since an increase in the proportion of capital occurred simultaneously with the increase in liabilities to 599,396 mln. uah up to 1,278,095 mln. uah at the beginning of 2014. at the same time, the share of bank liabilities in total liabilities decreased. but it should be noted that the proportion of individuals’ funds in the total liabilities and the liabilities of the banks from 2008 to 2011 decreased, while from 2011 to 2015 grew. so, at the beginning of 2015, the proportion of individuals in banks’ liabilities amounted to almost 40%. some researchers distinguish certain stages, during which the change in the role and value of household savings as a source of the resource potential of domestic banks. stage 1: forming a substantial public confidence in banks and the conversion of deposits of individuals on one of the main sources of the resource potential of the domestic banking sector, this lasted from 2002 till 2005. this stage was characterized by relative stability in the foreign exchange and financial markets during this period, banks offer the population quite attractive conditions for deposit programs. as a result, at the end of 2005 the resource potential of domestic banks consisted of people’s savings for almost 35.0%. stage 2: savings of the population cease to be the main source of the resource base of domestic banks as their share in bank resources is systematically reduced. this period started in 2006 and lasted till 2008. in 2006 it was formed 32.0% of the total resources of the banking sector of ukraine due to the savings of the population, and at the beginning of 2008 this figure felt to 23.0%. it was caused by world financial crisis and exchange instability. baltic journal of economic studies 45 vol. 1, 2015 stage 3: from 2008 till 2010 recovering period after financial stresses. the moratorium on faster and earlier withdrawal of deposits slightly decreased outflow of depositors’ funds from the banking system, but at the same time, the negative impact on public confidence in the latter. the national bank of ukraine undertook all possible measures to make recovery of the banking system. stage 4: restore confidence to the banking system of ukraine and the growing role of savings as the main source of formation of the resource potential of the banks. this stage started in 2010 and lasted till 2014. this situation can be explained mainly by the lack of alternative sources in ukraine where the citizens can invest. lack of development of the stock market in ukraine makes the bank deposits almost the only source of public investment. since 2014 economic, political and military situations changed a lot. so now we see the devaluation, bankruptcy of banks and depositors’ fear that provides deposit outflow. regarding to the current situation, according to official data of the national bank of ukraine, the volume of deposits in national currency decreased in march by 2.0% (ytd 5.7%). that was due to the reduction account balances of individuals by 4.1% (ytd 10.1%) while deposits of entities increased by 0.2% (since the beginning of the year they fell by 0,6%). the volume of deposits in foreign currency in the past month fell by 7.4% (ytd 14.4%), including entities by 7.3% (ytd 10.7%), individuals by 7.4% (ytd 15.9%) [4]. analysis is further confirmation of the negative situation in the ukrainian banking sector, which is characterized by a significant outflow of funds of natural persons from the banking sector of ukraine, which in turn has a negative impact on the resource base of banks in ukraine. the negative consequences of this situation are difficult to overestimate, because the banks are forced to seek alternative sources of resource support, as well as solve the problem of liquidity. according to the national bank of ukraine only in march 2015 the total amount of refinancing is 13,8 bil. uah., which was granted to 24 banks. overnight loans totaled 7,7 bil. uah. and was provided by 14 banks. we analyzed the successful banks to make recommendations on development of deposit policy for banking institutions (table 1). analysis shows that these 5 banking institutions keep 44,26% retail deposits. these banks have positive reputation, high-qualified staff, wide range of deposit services, actual interest rate, loyal customers base and use high information technologies to support its’ clients. the deposit policy of these banks is based on marketing policy – promotion and distribution of deposit policy, banking management – actual conditions and rational agreements, flexibility. in author’s opinion, flexibility is one of the main characteristics which banking institutions should use in current economic, political and military situations. 6. conclusion from our research it could be concluded that the bank’s effectiveness on attraction additional funds and ensuring its competitiveness in the market of the banking services largely depend on the introduction of new deposit products. thus, the modern domestic banks deposit policy requires continuous improvement. among the main directions to improve its efficiency are: • improving the regulatory protection of individuals and entities who held deposit accounts; • simplifying the functioning of deposit accounts: transfer of funds to deposits, cash and transfers from deposit accounts, use of fixed-term deposits with additional contributions or charges; • creating favorable conditions for enhancing the use by banks of price and non-price methods in marketing policy, makes it possible to offer wider range of high quality services for individuals and investors, improve service quality, increase the interest of individuals and entities to place their funds on deposit accounts of banking institutions; • improving the quality of customer service through the use of new information technologies in the banking sector, as well as the advanced training of bank employees. the strengthening of the resource base and ensuring effective domestic bank deposit policy, the integration of the banking system of ukraine in the global financial space largely depends on the growth of capital that could be provided with rational deposit policy. deposit policy is a system of management solutions, program of actions that contains the activities of the bank in carrying out deposit operations. it plays major role in bank activity and competitiveness. the optimal ratio between the main components of the resource base, which is the basis of deposits, promotes optimization model resource providing commercial bank. sufficient resources enable banking institutions to effectively perform its functions and achieve the main goal, which is to profit at the expense of active operations. thus enough resources in the banking institution will maintain its liquidity and reliability, as well as neutralize certain risks inherent in the banking sector. table 1 deposit policy of ukrainian banks # bank payment of interest possibility of early withdrawal or recharge investment terms annual rate, for deposits in uah, % annual rate, for deposits in usd, % bank’s part in the market of retail deposits 1. “privatbank” monthly recharge 1-12 months 24 12 25,48 2. “oschadbank” monthly 6-36 months 21 9,5 8,66 3. “ukreximbank” monthly withdrawal, recharge 6-12 months 18,4 6,75 5,17 4. “raiffeisen bank aval” on the day of the deposit term end withdrawal, recharge 12 months 14 3 3,36 5. “ukrgasbank” monthly recharge 6-12 months 23 11 1,62 baltic journal of economic studies 46 vol. 1, 2015 references alekseev, a. (2012, september 14). autumn savings: how to preserve and multiply? mirror of the week. ukraine, 32. retrieved from http://zn.ua/economics/osennie_sberezheniya__kak_sohranit_ i_priumnozhit-108763.html. barr, nicholas (2001). the welfare state as piggy bank: inform., risk, uncertainty, the role of the state: 195-200. basic indicators of banks in ukraine (2015). retrieved from http://www.bank.gov.ua/control/uk/publish/ article?art_id=36807&cat_id=36798 batrakova, l. (2009). the constituent elements of an effective resource policy of commercial banks. regional economics, 3: 115-122. demirgüç-kunt, asli (2006). determinantes of deposit-insurance adoption and design: 72-73. dziubliuk, o. (2008). optimizing the formation of the resource base of commercial banks. banking, 5: 38-46. information on financial support to banks’ liquidity provided by the national bank of ukraine. retried from http://www.bank.gov.ua/doccatalog/document?id=16283713 fursova, v. (2011). formation of the resource base of commercial banks: current state and prospects of development. open information and computer integrated technologies, 50: 118-124. main trends for monetary market in ukraine. retried from http://www.bank.gov.ua/control/uk/publish/ article?art_id=14716098&cat_id=58038 shihata, ibrahim f.i. (2000) the world bank inspection panel: in practice: 41-45. ukrainian index on interest rates for individuals. retried from http://www.bank.gov.ua/control/uk/index надежда бова роль депозитной политики для банковских учреждений украины аннотация. цель данной работы является определение роли депозитной политики для банковских учреждений. для этого, необходимо обобщить и выделить проблемы депозитной политики украины, а также найти способы их решения. депозитная политика тесно взаимосвязана и взаимозависима от экономического спада и имеет влияние на восстановление банковской системы. адекватный выбор и реализация целей депозитной политики, ее операционной структуры и инструментов определяется степенью развития финансовой инклюзивности, благодаря которой создается клиентооринтований финансовый рынок, обеспечивает доверие населения к депозитным услуг и повышает уровень сбережений, что положительно влияет на финансовую устойчивость банковской системы и экономики в стране в целом. именно из-за доступности и защищенности депозитных услуг коммерческие банки украины имеют возможность увеличить свою ресурсную базу за счет привлечения средств населения. методология. эта работа основана на синтезе данных для изучения ситуации по привлечению депозитов в банках. рассмотрены научные и теоретические подходы к разработке управленческих решений по депозитной политике. работа содержит анализ динамики и текущей ситуации и условий ресурсного потенциала банковских учреждений в украине. результаты статьи показывают прямую зависимость между сбережениями, потреблением и депозитной политикой, поэтому каждое банковское учреждение включает в себя механизм банковского управления разработки и реализации депозитной политики. кроме того, это управление определяет направления депозитной политики в соответствии с условиями мобилизации ресурсов и её банковское применение в активных операциях банка. полученные результаты подтверждают, что термин "депозитная политика" является слишком сложным, но исследуется во взаимодействии с банковской деятельностью. термин «депозитная политика» рассматривается в статье с разных точек зрения, используя разные критерии и подходы. автор объясняет, как депозитная политика влияет на банковскую систему и оказывает влияние на экономический рост в целом. практическое значение. исследование создает методологические подходы к измерению эффективности депозитной политики. кроме того, оно изучает существующие и предлагает новые подходы для повышения эффективности банковского менеджмента. это дает возможность определить, какие из подходов работают в нестабильной экономической ситуации, а какие нет. эта статья имеет за цель оценить возможности депозитной политики в балансировании и обеспечения финансовой стабильности банковской системы украины в период экономического роста и во время финансовой нестабильности. значение/оригинальность. несмотря на наличие существенного научного задела в данном направлении, на сегодня в научной литературе нет устоявшегося и комплексного видения относительно необходимой направленности и механизмов влияния депозитной политики на банковскую систему. это определяет потребность в формализации концептуальных основ и необходимых условий для создания финансовой инклюзивности, углубления научно-методической базы исследования депозитной политики. эта статья предусматривает мнение автора на определение важной роли депозитной политики для банковских учреждений и национальной экономики в целом. baltic journal of economic studies 248 vol. 5, no. 4, 2019 corresponding author: 1 zhejiang university, china. e-mail: usmankhurram@zju.edu.cn 2 institute of business management sciences, university of agriculture, pakistan. e-mail: kashif.boparai@hotmail.com 3 university of the punjab. jhelum campus, pakistan. e-mail: shahid.imdad@yahoo.com doi: https://doi.org/10.30525/2256-0742/2019-5-4-248-262 market efficiency, financial integration, and shock transmission (empirical evidence from d-8 economies) muhammad usman khurram1, kashif hamid2, rana shahid imdad akash3 abstract. the specific purpose of the developing-8 economies is to integrate the endeavours of each member countries to excel economic cooperation and facilitation among the islamic countries to enhance the investment opportunities and not to put pressure on the geopolitical environment of the world. the purpose of this study is to visualize the market efficiency, financial integration, and shock transmission process in the d-8 economies for the period from jan 2011 to dec 2016. daily market data is taken for kse, dse, tse, jci, klci, ise, egx, and nse equity markets. unit root test, serial correlation test, runs test, and variance ratio test are used to test the market efficiency whereas johansen cointegration test, granger causality test, vector error correction model, and impulse response test are used to test the financial integration and shock transmission. the performance of the tehran stock market remained excellent during this study period. mixed evidence is concluded regarding the market efficiency of d-8 equity markets. it is concluded that there exists a long-run relationship between kse and dse. short-run relationship indicates that kse has a significant positive short-run relationship with jci and have a negative relationship with klci. negative asymmetric behaviour is more influential in the negatively skewed markets and negative shocks have a greater effect than the positive shocks. hence it is concluded that investors can get benefit from the arbitrage process due to market inefficiencies and through the short selling process. there is a need to establish economic equilibrium through the arbitrage process where investors may enjoy the opportunities to excel more economic stream of benefits by noise and market reverting behaviour. the economic integration will increase the cooperation among these economies to establish more growth opportunities in the trade and corporate investments. the implication of the studies suggests and directs to enhance mutual interface and co-operation including banking and finance, human and social development, energy sector, development of rural population, science and technology, health and environment, and agriculture sector. moreover, there is a dire need for restructuring the economic and financial bylaws that may ease the financial liberalization and to enhance the dynamics of trading actives among the d-8 economies. key words: market efficiency, financial integration, shock transmission, d-8 economies, arbitrage process. jel classification: f36, g14, g15 1. introduction fama (1970) designed efficient market hypothesis (emh) theory and elaborated that present equity prices captivate rapidly the inflow of latest information, therefore, present prices totally replicate whole existing information and predictability is not possible. classical emh theory indicates three types of market efficiencies and each type have various implications about market dynamics. weak form of efficient market hypothesis elaborates that current stock prices are the reflection of all historical price information. market efficiency mechanics elaborates the behaviour of an economy and the formalization of economic structure. here one aspect elaborates that markets predictability may be seen through financial integration among the diversified financial markets due to bilateral trade, foreign direct investments, economic shocks, and financial contagion effect. whereas financial integration is a process where cross-border markets or regional markets or economic block markets are depended or closely interlinked with one another. such integration includes the sharing of common information and financial products among the baltic journal of economic studies 249 vol. 5, no. 4, 2019 financial markets and institutions. a complex financial engineering model is required as regards to the equity markets, foreign direct investment, the flow of capital funds, and human capital to elaborate the mechanics of bilateral financial relationships. the adverse effect of high financial integration is financial contagion across the economies. developing 8 or d-8 group is a joint economic collaboration of islamic developing countries. this group includes pakistan, bangladesh, iran, indonesia, malaysia, turkey, egypt, and nigeria. the group was established on june 15, 1997, in turkey (istanbul). the major purpose of d-8 economies is to provide better economic conditions, to create diversification opportunities, and to increase the trading activities. the major areas of interface and co-operation include banking and finance, human and social development, energy sector, development of rural population, science and technology, health and environment, and agriculture sector. the specific purpose of the developing-8 economies is to integrate the endeavours of each member country, and not to put pressure on the geopolitical environment of the world. however, member countries will remain autonomous in their actions without any specific reservations from any other group member. 2. literature review 2.1. market efficiency fama (1970); granger (1975); hawawini (1984); fama (1991); lo (1997); worthington and higgs (2004); hamid, suleman, shah and akash (2010) comprehensively tested empirically the weak form of efficient market hypothesis for developed and emerging equity markets in different time periods. they agreed that there exists empirical evidence regarding the support of the emh theory. stakic, jovancai and kapor (2016) tested the hypothesis of the financial market efficiency in serbia; they evaluated weak form efficiency and hence concluded that random walk hypothesis prevails for the period 2006 to 2013. they used a unit root test and runs test to identify the weak form of efficiency. arshad, rizvi, ghani and duasa (2016) evaluated the tremendous growth of emerging and developing markets and tested the efficient market hypothesis (emh) for oic member countries. the oic stock markets are suffering from a global presence and the market efficiency remained always a question mark but it is concluded that the market efficiency is improving over the past decade. in a recent development, sukpitak and hengpunya (2016) measured market efficiency through the dfa method. the result confirms that emerging markets are becoming more efficient. this implies that market capitalization has a significant influence on market efficiency. in a joint study of efficiency and long term relationship dynamics, rounaghi and zadeh (2016) examined the changes and presence of long-term relationship features between returns and volatility of london stock exchange and s&p 500 through arma method. the results indicate that there exist long-run relationship and both markets are efficient and during the periods of boom and bust both market are financially stable. rizvi and arshad (2017) analysed japanese stock market efficiency and integration through mgarch and mfdfa techniques during different business cycles of the japanese economy. the outcomes indicate that market efficiency is improving during the study period. the findings also confirm that every succeeding recession generates a break into the integration levels resulting in a decrease. 2.2. financial integration chung and liu (1994); roca (1999); sheng and tu (2000); ng (2002); lamba (2005); suchismita and paramita (2006); hoque (2007); hasan and durrani (2008) identified financial integration among emerging and developed economies and concluded that there exist long-run and short-run dynamics among the economies. in recent studies, mendoza, quadrini and r´ıos-rull (2009) concluded that there become imbalances in the international markets as a result of financial integration due to recent developments in the financial markets of different economies and financial liabilities have been reduced. hamid and hasan (2011) investigated the causal and dynamic linkage among pakistan and various other emerging and developed economies and identified the existence of long-run relationship among the kse, jci, and bci. moreover, the short-run relationship is identified between kse and sci. further, they identified that there exist opportunities of portfolio diversification across the markets. almekinders, fukuda, mourmouras, zhou and zhou (2015) evaluated economic and financial integration among asean’s stock markets. strong financial integration can increase the level of real incomes and convergence within the asean and this element is justified. anwar and raza (2016) examined the behaviour of the markets and identified that the long-run relationship exists among the kse-100 index and sse and klse. results identify that changes in kse are due to its own. al-nasser and hajilee (2016) examined financial integration among emerging economies of brazil, mexico, china, turkey, and russia and developed markets of the uk, the usa, and germany for the period from january 2001 to december 2014. they concluded that there prevails short-run integration among the stock markets and long-run relation of emerging countries exists with germany stock market return. alotaibi and mishra (2017) examined international financial integration among gcc equity markets by using time-varying international asset pricing model and dcc-garch methodology. it is concluded that there exists a broad baltic journal of economic studies 250 vol. 5, no. 4, 2019 degree of financial integration among gcc stock markets and no one of these markets seem to be under entire segmentation. they found that trade openness, financial market turnover, and oil revenue have a significant positive impact on financial integration among gcc stock markets. however, the international financial crisis has a significant negative impact on the gcc integration index. jin and an (2016) used volatility impulse response (virf) approach and concluded that brics’ and u.s. stock markets are affected by shocks and contagion effect due to the 2007–2009 global financial crisis. such a degree of stock market reactions to such shocks varies from one market to another and this element is dependent upon the level of economic integration. 3. data and methodology daily data has been taken for stock market indices for the period from jan 2011 to dec 2016 for developing eight countries group. d-8 countries include pakistan, iran, turkey, nigeria, bangladesh, indonesia, malaysia, and egypt. to test the market efficiency and financial integration, we employed the following tests. 3.1. tests for market efficiency 3.1.1. unit root test to visualize the presence of unit root in the financial time series, we used the augmented dickey-fuller (adf) test. the mathematical expression is narrated as below. ∆ ∆sp sp spt t q qt t= + + + +− = −∑γ λ λ φ0 1 0 1 1 1 t p  (1) spt = stock price at the time t. δspt = change in stock price at time. 3.1.2. serial correlation of returns serial correlation elaborates that if the stock returns have no correlation at each lead and lag level then random walk exists in a particular time series. combined hypothesis indicates if serial coefficients φ and (t) are equivalent to zero all together, we therefore perform qbox-pierce statistics. q n tb p t − = = ( )∑ 1 m �φ (2) whereas qbox-pierce = asymptotically distributed due chi-square (χ2) at m degrees of freedom. n = total strength of observations. m = maximum lag. 3.1.3. runs test to test the autonomy of the price variations, we deployed a runs test. there are two approaches that we can take into consideration, firstly take the positive returns (+) where return > 0 and secondly a negative return (-) where return < 0 with respect to the average return. it is a non-parametric test because it does not assume the normal distribution of the return series. if returns are following a random walk hypothesis then the actual number of runs (λ) should be closest to the expected number of runs (µλ). let + sr show total positive return (+) and –sr show total negative returns (-) for the given sample. d = − ≈ ( ) λ µ σ λ λ n 0 1, (3) where µλ = + + −2 1 sr sr sr � and �σλ = −( ) −( ) + − + −2 2 12 sr sr sr sr sr sr sr (4) 3.1.4. variance ratio test according to lo and mackinlay (1988), if rt follows a random walk then varianceratio g g � �( ) = ( ) ( ) σ σ 2 2 1 (5) σ2(g) = 1/ gth variance of the g-differences whereas σ 2 1 1 g i t g mg ( ) = − − = −∑(return return gt t µ ̂ )2 (6) σ 2( 1) = variance of the first differences whereas σ 2 1 1 21 1 1 ( ) = −( ) − − = −∑ mg t mg ( ) � return returnt t ¼ µ ̂ )2 (7) h0 = vr (g) should move towards unity. where i g mg g j mg = − +( ) −1 1[ ] and µ ̂ indicate the mean value of the sample. if the homoscedastic element is assumed for incremental shocks, then we have z g vr g g n o ( ) = ( ) − ( ) ≈ ( ) 1 0 1 η � , (8) the lag difference 2,4,8,12,16 is taken to test the random walk hypothesis. 3.2. test for financial integration the techniques used to test financial integration are the following: 3.2.1. johansen cointegration test vector autoregressive (var) model is examined thorough johansson procedure where sit is an (n × 1) vector of set of variables which are integrated at i (1) order and data must be non-stationary; this expression for the var equation is expressed as below. si si sit j m j t t j t= + + + … ……… ( ) = − − −∑γ θ ω ε 1 1 1 9� � �.. . (9) where sit = stock indices at time t. θ and ω = matrix of parameters m = the number of lags εt = (n × 1) vector of innovations. it is necessary to identify the long-run relationship; at least one cointegration relationship must exist. for the further detection of a number of co-integrating vectors, there are two likelihood ratios as expressed by the johansen cointegration approach. baltic journal of economic studies 251 vol. 5, no. 4, 2019 j ttrace j s n j=− −( )…………( ) = + ∑� 1 1 10ln λ (10) j tmax j=− − +( )……………( )� ln ,1 1 11λ (11) where, t= sample size λ j is the jth highest canonical correlation. the trace test and maximum eigen value examines the ho of s and s + 1 co-integrating vectors respectively against the h1 of n co-integrating vectors (hjalmarsson and osterholm, 2010). 3.2.2. granger causality test granger (1969) used a var model to identify the direction of the long-run lead-lag relationship between the markets. the test follows the pairwise causal relationship from market a to market b and then from market b to a. the regression equation is arranged in this manner. ∆ ∆ ∆sia sia sibt i m i t i m i t i t= + + = − = −∑ ∑ 1 1 1 λ φ ε� � (12) ∆ ∆ ∆sib sib siat i m i t i m i t i t= + + = − = −∑ ∑ 1 1 1 λ φ ε� � � (13) ∆siat= change in stock market a ∆sibt= change in stock market b λ and ϕ are the coefficients. 3.2.3. error correction model if the set of 1(1) variable is co-integrated as stated by granger representation theorem, then we have the following vector error correction (vecm) representation. ∆ ∆sia u sia siat t t i m i t i t= + + + + …………… ( )− = −∑δ π λ ε1 1 14� � . (14) where π = (im – p1 – p2 – ---------– pp) and λi = (pi +1 + pi+2 + ---------+ pp) for i =1,2,3,4,5...................................p the vecm representation is essentially a var process districting with short-term parameter λi and the extra term πsiat −1 where π is a matrix of (m × m). differenced var restriction binds the individual series of the vector siat together and makes certain to the system returns for its long-run equilibrium (banerjee et al, 1993). 3.2.4. impulse response test the excellent manner to explain the implications for price transmission, causality element is adjusted to visualize the time trail of prices after the exogenous shocks, which are known as impulse response behaviour (vavra and goodwin, 2005). impulse response function pursues the impact of one sd or one unit shock to one of the endogenous variables on recent and future values over various time horizons (rahman and shahbaz, 2013). 4. results and discussion d-8 economies are discussed in this paper. data is taken for the period january 2011 to december 2016 for the equity markets of pakistan, bangladesh, iran, indonesia, malaysia, turkey, egypt, and nigeria. daily observations are taken for the analysis purpose to visualize the market efficiency and market integration on high-frequency data during this period. these markets are highly volatile as seen in the recent decade. figure 1 indicates the behaviour of market indices in a collaborative manner. table 1 indicates the descriptive statistics for the returns of the d-8 equity markets. daily returns of all the equity markets are negatively skewed except tehran stock exchange and nigerian stock market, which reflects that large negative returns are greater than positive returns. negative asymmetric behaviour is more influential in the negatively skewed markets. negative shocks have a greater effect than positive shocks. the kurtosis value for dhaka stock market and egypt stock market has higher positive values, which indicate that distributions of returns are leptokurtic and show higher peaks. the tehran stock market has 0.099% return with 0.0075 volatility while the karachi stock market has 0.095% with 0.00879 volatility. -3 -2 -1 0 1 2 3 4 5 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse dse tse jci klci ise egx nse figure 1. the trend of d-8 equity market for jan 2011 to dec 2016 baltic journal of economic studies 252 vol. 5, no. 4, 2019 the performance of the tehran stock market remained excellent during this period in the set of d-8 economies. the jarque-bera test indicates the normality behaviour of all the stock returns. 4.1. market efficiency we used serial autocorrelation and ljung-box q-statistics to test the randomness of returns. if, the h0 = 0, may be rejected at 0.05 level of significance. here kse returns are indicating that the p-value < 0.05 of the q-statistics, therefore, it is inferred from the table 2 results that returns behaviour is predictable because this element indicates that weak form of market efficiency does not hold for this selected period. the null hypothesis is rejected for all markets except istanbul stock market. hence, it is concluded that ise is an efficient market from this test point of view. unit root test is used to test the stationarity of the data. random walk hypothesis assumes that the log price should have a unit root, whereas the change or returns series must follow the stationarity. augmented dickey-fuller test (1981) and phillips-perron test (1988) are used to test the time series stationarity. table 3 indicates that the time series is non-stationary at the order i(0) and becomes stationary at the order i(1) at 1% and 5% level of significance respectively. table 4.1 indicates that runs test statistics regarding the consecutive prices changes with the identical signs in the series. the null hypothesis indicates that the succeeding price changes move randomly and are not dependent. according to results, the return behaviour of kse, tse, klci, egx and nse are following random behaviour. runs test for table 4.2 indicates that the total cases of runs are significantly less than the expected number of runs for all the countries and the kse, tse, klci, egx, and nse at j= mean value as well as j = 0 have lower number of runs against total number of cases and this phenomenon rejects the random walk hypothesis and narrates that these markets follow a weak form of efficiency. further, according to lo and mackinlay (1988), the variance ratio test is used to test the random walk hypothesis in a more modern way. it is inferred from this statistical test that if the variance ratio test statistics > 1, the financial time series will be positively associated. the standardized vr test statistics for z (k) is significant at j = 2, j=4, j=8, j=12 and j=16 for all markets. according to table 5, the variance ratio indicates that the equity markets of d-8 countries are efficient based on daily return for the period of 2011–2016. lo and mackinlay (1988) identified that the acceptance or rejection of the random walk hypothesis doesn’t need to mean that the stock markets are efficient or inefficient respectively in actual spirit because the findings are based on a sample. when financial markets are closely linked together either neighbourly, regionally or globally in economic matters, it is called financial integration. to test the financial integration, we deployed a correlation test, granger causality test, consecration test, error correction model, and impulse response behaviour. table 6 indicates that no market has a significant correlation with each other. all markets are behaving independently but directions of market behaviour are different as kse market has a positive degree of association with dse, jci, and exg but have a negative degree of relationship to tse, ise, and nse. however, dse has a negative association with egx and positive association with ise while tse is negatively linked to the jci, egx, and nse. klci and ise are negatively related. however, ise is negatively related to egx and nse. table 7 indicates that kse returns lead to the dse returns significantly. egx granger causes to the kse. jci granger causes to dse whereas dse granger causes to jci, klci to tse, klci to jci, and jci to klci, ise to klci. according to table 8, trace statistics for cointegration indicates that there exist two co-integrating vectors among these economies. according to table 9, maximum eigenvalue indicates that no co-integrating vectors exist in between the d-8 economies. table 1 descriptive statistics of the d-8 returns ∆ kse ∆ dse ∆ tse ∆ jci ∆ klci ∆ ise ∆ egx ∆ nse mean 0.0009 -0.0003 0.0001 0.0002 0.00004 0.0001 -0.00006 -0.00001 median 0.0001 0.0000 0.0003 0.0010 0.00017 0.0007 0.0009 -0.00026 maximum 0.0442 0.1503 0.0353 0.0465 0.0332 0.0624 0.0729 0.07985 minimum -0.0456 -0.1601 -0.0567 -0.0930 -0.0274 -0.1106 -0.1508 -0.0435 std. dev. 0.0088 0.0171 0.0076 0.0111 0.0059 0.0148 0.0147 0.0091 skewness -0.3388 -1.2496 0.1574 -0.8278 -0.2662 -0.6057 -1.3178 0.2791 kurtosis 5.7076 23.079 6.8305 9.1620 5.6438 7.0565 15.6589 8.9657 jarque-bera 474.86 24958.34 900.46 2481.67 443.34 1092.51 10191.90 2188.48 probability 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 sum 1.3949 -0.3854 1.4479 0.3327 0.0573 0.1612 -0.0869 -0.0164 sum sq. dev. 0.1129 0.4292 0.0831 0.1803 0.0507 0.3201 0.3154 0.1454 observations 1463 1463 1463 1463 1463 1463 1463 1463 baltic journal of economic studies 253 vol. 5, no. 4, 2019 table 2 serial correlation coefficients and q-statistics for returns period 1 2 3 4 5 6 7 8 9 10 kse ac 0.15 0.03 -0.01 0.05 -0.02 -0.01 -0.03 0.00 0.00 0.02 pac 0.15 0.01 -0.02 0.06 -0.03 0.00 -0.03 0.00 0.01 0.02 q-stat 31.12 32.25 32.40 36.63 37.11 37.16 38.45 38.47 38.49 39.01 prob 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 dse ac -0.07 0.01 -0.01 -0.04 0.04 0.03 -0.05 0.07 -0.04 0.01 pac -0.07 0.00 -0.01 -0.05 0.03 0.03 -0.04 0.07 -0.02 0.00 q-stat 7.09 7.20 7.41 10.16 12.20 13.26 16.31 24.27 26.23 26.34 prob 0.01 0.03 0.06 0.04 0.03 0.04 0.02 0.00 0.00 0.00 tse ac 0.35 0.13 0.15 0.12 0.13 0.06 0.04 0.05 0.03 0.09 pac 0.35 0.01 0.11 0.04 0.08 -0.03 0.01 0.01 -0.01 0.08 q-stat 179.21 204.53 236.08 257.68 282.33 287.67 290.28 293.37 294.30 306.22 prob 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 jci ac 0.05 0.00 -0.14 -0.09 0.01 -0.06 0.09 0.01 0.03 0.04 pac 0.05 -0.01 -0.14 -0.07 0.01 -0.09 0.08 0.00 0.01 0.06 q-stat 4.19 4.20 30.90 41.78 41.82 47.82 59.18 59.44 60.98 63.88 prob 0.04 0.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 klci ac 0.09 0.04 -0.03 -0.02 -0.02 -0.02 -0.05 0.01 0.02 -0.02 pac 0.09 0.03 -0.04 -0.02 -0.02 -0.01 -0.04 0.02 0.02 -0.03 q-stat 11.98 14.21 15.44 16.26 17.02 17.47 20.44 20.67 21.05 21.87 prob 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.02 ise ac -0.02 0.03 0.05 -0.04 0.00 -0.04 -0.03 0.00 -0.04 0.04 pac -0.02 0.03 0.05 -0.04 -0.01 -0.04 -0.03 0.00 -0.04 0.04 q-stat 0.80 2.43 5.38 7.52 7.54 9.73 11.09 11.11 13.62 15.80 prob 0.37 0.30 0.15 0.11 0.18 0.14 0.14 0.20 0.14 0.11 egx ac 0.23 0.03 0.08 0.03 0.06 0.03 -0.02 0.04 -0.02 -0.02 pac 0.23 -0.03 0.08 -0.01 0.05 0.00 -0.03 0.04 -0.04 0.00 q-stat 77.26 78.20 86.91 88.33 92.86 94.24 94.62 96.57 96.97 97.42 prob 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 nse ac 0.33 0.08 -0.02 0.03 0.02 -0.05 -0.06 -0.05 0.01 -0.02 pac 0.33 -0.04 -0.03 0.05 -0.01 -0.07 -0.02 -0.02 0.03 -0.03 q-stat 162.82 171.56 171.93 173.11 173.61 177.25 182.79 186.03 186.19 186.53 prob 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 significant at p<0.05 table 3 unit root test equity markets return augmented dicky-fuller test at level augmented dicky-fuller test at 1st difference phillips-perron test at level phillips-perron test at 1st difference ∆ kse -33.0592 -16.1861 -33.1077 -435.59 ∆ dse -40.9804 -19.3748 -41.0281 -464.592 ∆ tse -16.7887 -19.1831 -28.7495 -389.933 ∆ jci -22.4491 -21.5621 -36.318 -581.741 ∆ klci -34.9465 -20.0327 -34.8293 -355.354 ∆ ise -39.1166 -19.6035 -39.1201 -555.932 ∆ egx -30.2487 -19.0881 -30.5829 -379.253 ∆ nse -27.0247 -17.4671 -26.3578 -325.309 table 3.1 critical values probabilities 1% 5% 10% adf at level -3.43462 -2.86331 -2.56776 adf at first difference -3.43467 -2.86334 -2.56777 pp at level -3.43462 -2.86331 -2.56776 pp at difference -3.43462 -2.86331 -2.56776 baltic journal of economic studies 254 vol. 5, no. 4, 2019 table 4.1 runs test with j=mean value ∆ kse ∆ dse ∆ tse ∆ jci ∆ klci ∆ ise ∆ egx ∆ nse j= mean value .00095 -.00026 .00099 .00023 .00004 .00011 -.00006 -.00001 cases < test value 729 566 840 669 712 702 654 756 cases >= test value 734 897 623 794 751 761 809 707 total cases 1463 1463 1463 1463 1463 1463 1463 1463 number of runs 623 681 504 747 668 744 635 590 z -5.727 -.775 -11.360 1.045 -3.349 .665 -4.723 -7.419 p-value .000 .438 .000 .296 .001 .506 .000 .000 significant at p<0.05 table 4.2 runs test with j=0 ∆ kse ∆ dse ∆ tse ∆ jci ∆ klci ∆ ise ∆ egx ∆ nse j= 0 .00097 0.00000 .00028 .00103 .00017 .00071 .00085 -.00026 cases < test value 731 583 731 731 731 731 731 731 cases >= test value 732 880 732 732 732 732 732 732 total cases 1463 1463 1463 1463 1463 1463 1463 1463 number of runs 621 699 550 751 674 746 635 586 z -5.832 -.183 -9.546 .968 -3.060 .706 -5.100 -7.663 p-value .000 .855 .000 .333 .002 .480 .000 .000 significant at p<0.05 table 5 variance ratio test at return series equity markets return period (k) 2 4 8 12 16 ∆ kse vr(k) 0.5699 0.2777 0.1478 0.1044 0.0755 z(k) -10.21 -9.9250 -8.1735 -7.1368 -6.4754 probability 0 0 0 0 0 ∆ dse vr(k) 0.4641 0.2447 0.1033 0.0764 0.0584 z(k) -5.6261 -5.0087 -4.5109 -3.9414 -3.5651 probability 0 0 0 0.0001 0.0004 ∆ tse vr(k) 0.6684 0.3386 0.1848 0.1204 0.0955 z(k) -6.2499 -7.5644 -6.7222 -6.0709 -5.5116 probability 0 0 0 0 0 ∆ jci vr(k) 0.5306 0.2873 0.1299 0.0855 0.0656 z(k) -9.5581 -8.1681 -6.8322 -5.9151 -5.2988 probability 0 0 0 0 0 ∆ klci vr(k) 0.5286 0.2821 0.1363 0.0924 0.0713 z(k) -11.6762 -10.1748 -8.2989 -7.06509 -6.2648 probability 0 0 0 0 0 ∆ ise vr(k) 0.4727 0.2545 0.1227 0.0799 0.0632 z(k) -11.3552 -9.4402 -7.6665 -6.6620 -5.9451 probability 0 0 0 0 0 ∆ egx vr(k) 0.63337 0.3155 0.1575 0.1075 0.0782 z(k) -7.210498 -7.2614 -6.2522 -5.6493 -5.2708 probability 0 0 0 0 0 ∆ nse vr(k) 0.692067 0.3646 0.1974 0.1292 0.0907 z(k) -7.373055 -8.5776 -7.4522 -6.7214 -6.1818 probability 0 0 0 0 0 significant at p<0.05 baltic journal of economic studies 255 vol. 5, no. 4, 2019 table 6 correlation matrix of developing eight (d-8) equity markets ∆ kse ∆ dse ∆ tse ∆ jci ∆ klci ∆ ise ∆ egx ∆ nse ∆ kse 1 ∆ dse 0.003 1 ∆ tse -0.0284 -0.0158 1 ∆ jci 0.0150 0.0044 -0.0185 1 ∆ klci 0.0076 0.0344 0.0697 0.0591 1 ∆ ise -0.0163 0.0085 -0.0156 -0.0088 -0.0333 1 ∆ egx 0.0223 -0.0440 -0.0050 0.0474 0.0603 -0.0066 1 ∆ nse -0.0458 -0.0217 0.0455 -0.0050 0.0250 -0.0395 0.0509 1 significant at p<0.05 table 7 pairwise granger causality tests null hypothesis: obs. f-statistic prob. ∆ dse ∆ kse 1461 0.08701 0.9167 ∆ kse ∆ dse 8.15382 0.0003 ∆ tse ∆ kse 1461 0.12211 0.8851 ∆ kse ∆ tse 0.70599 0.4938 ∆ jci ∆ kse 1461 1.46007 0.2326 ∆ kse ∆ jci 0.94862 0.3875 ∆ klci ∆ kse 1461 0.45832 0.6324 ∆ kse ∆ klci 0.3644 0.6947 ∆ ise ∆ kse 1461 1.864 0.1554 ∆ kse ∆ ise 0.31486 0.7299 ∆ egx ∆ kse 1461 3.49343 0.0307 ∆ kse ∆ egx 2.06068 0.1277 ∆ nse ∆ kse 1461 0.15833 0.8536 ∆ kse ∆ nse 0.76243 0.4667 ∆ tse ∆ dse 1461 2.04665 0.1295 ∆ dse ∆ tse 0.12605 0.8816 ∆ jci ∆ dse 1461 4.01466 0.0182 ∆ dse ∆ jci 5.9552 0.0027 ∆ klci ∆ dse 1461 1.4161 0.243 ∆ dse ∆ klci 0.81207 0.4441 ∆ ise ∆ dse 1461 1.11972 0.3267 ∆ dse ∆ ise 1.56376 0.2097 ∆ egx ∆ dse 1461 0.16414 0.8486 ∆ dse ∆ egx 1.9522 0.1423 ∆ nse ∆ dse 1461 0.21553 0.8061 ∆ dse ∆ nse 0.27471 0.7598 ∆ jci ∆ tse 1461 0.63645 0.5293 ∆ tse ∆ jci 1.35444 0.2584 ∆ klci ∆ tse 1461 3.35197 0.0353 ∆ tse ∆ klci 0.10671 0.8988 ∆ ise ∆ tse 1461 0.01042 0.9896 ∆ tse ∆ ise 0.32909 0.7196 ∆ egx ∆ tse 1461 0.03709 0.9636 ∆ tse ∆ egx 0.91619 0.4003 ∆ nse ∆ tse 1461 0.8841 0.4133 ∆ tse ∆ nse 3.54746 0.029 ∆ klci ∆ jci 1461 7.16791 0.0008 ∆ jci ∆ klci 5.5817 0.0038 baltic journal of economic studies 256 vol. 5, no. 4, 2019 null hypothesis: obs. f-statistic prob. ∆ ise ∆ jci 1461 0.47372 0.6228 ∆ jci ∆ ise 0.33722 0.7138 ∆ egx ∆ jci 1461 1.57722 0.2069 ∆ jci ∆ egx 0.55577 0.5738 ∆ nse ∆ jci 1461 0.67267 0.5105 ∆ jci ∆ nse 0.26777 0.7651 ∆ ise ∆ klci 1461 2.42099 0.0892 ∆ klci ∆ ise 0.03488 0.9657 ∆ egx ∆ klci 1461 0.35025 0.7046 ∆ klci ∆ egx 0.69814 0.4977 ∆ nse ∆ klci 1461 1.35915 0.2572 ∆ klci ∆ nse 0.32108 0.7254 ∆ egx ∆ ise 1461 1.72455 0.1786 ∆ ise ∆ egx 0.49371 0.6105 ∆ nse ∆ ise 1461 1.79428 0.1666 ∆ ise ∆ nse 0.03948 0.9613 ∆ nse ∆ egx 1461 1.00756 0.3654 ∆ egx ∆ nse 0.7565 0.4695 significant at p<0.05 table 8 cointegration test –trace statistics no. of ce(s) eigenvalue statistic critical value prob.** none * 0.032426 177.9823 159.5297 0.0033 at most 1 * 0.025724 129.8884 125.6154 0.0268 at most 2 0.022171 91.86609 95.75366 0.0899 at most 3 0.017932 59.15503 69.81889 0.2622 at most 4 0.014254 32.7544 47.85613 0.5704 at most 5 0.00552 11.80877 29.79707 0.9383 at most 6 0.002541 3.732788 15.49471 0.9239 at most 7 0.000137 0.020045 3.841466 0.8873 significant at p<0.05 table 9 cointegration test – maximum eigenvalue hypothesized no. of ce(s) eigenvalue max-eigen statistic 0.05 critical value prob.** none 0.032426 48.09387 52.36261 0.1284 at most 1 0.025724 38.02236 46.23142 0.2868 at most 2 0.022171 32.71106 40.07757 0.2656 at most 3 0.017932 26.40063 33.87687 0.2969 at most 4 0.014254 20.94564 27.58434 0.2795 at most 5 0.00552 8.075977 21.13162 0.899 at most 6 0.002541 3.712744 14.2646 0.8884 at most 7 0.000137 0.020045 3.841466 0.8873 significant at p<0.05 table 10 bivariate cointegration – trace statistics between kse and dse hypothesized no. of ce(s) eigenvalue trace statistic 0.05 critical value prob.** none * 0.014381 21.97608 15.49471 0.0046 at most 1 0.000577 0.84205 3.841466 0.3588 significant at p<0.05 (end of table 7) baltic journal of economic studies 257 vol. 5, no. 4, 2019 table 11 bivariate cointegration – max-eigen statistics between kse and dse hypothesized no. of ce(s) eigenvalue max-eigen statistic 0.05 critical value prob.** none * 0.014381 21.13403 14.2646 0.0035 at most 1 0.000577 0.84205 3.841466 0.3588 significant at p<0.05 60,000 40,000 20,000 16,000 12,000 10,000 8,000 6,000 4,000 2,000 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse 100 dse 100,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse 100 tse 60,000 40,000 20,000 16,000 12,000 10,000 8,000 6,000 4,000 2,000 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse jci 100,000 70,000 50,000 30,000 20,000 10,000 7,000 5,000 3,000 2,000 1,000 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse klci 100,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse ise 50,000 35,000 25,000 15,000 10,000 5,000 3,500 2,500 1,500 1,000 500 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse egx 50,000 40,000 30,000 20,000 10,000 i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv 2011 2012 2013 2014 2015 2016 kse nse figure 2. co-movement of kse with d-8 economies baltic journal of economic studies 258 vol. 5, no. 4, 2019 table 10 indicates the bivariate cointegration statistics between kse and dse and identified one co-integrated vector because trace statistics is greater the critical value at none level. table 11 indicates the bivariate cointegration statistics between kse and dse and identified no co-integrated vector because max eigen statistics is not greater than the critical value at none level. the below figure 2 is indicating the behaviour of kse with other d-8 economies in a log-normal linear fashion. figure 3 indicates the impulse response behaviour and the impact of one shock on the economy at different lags and in how much time the shock is transmitted and is absorbed. table 12 indicates that kse has a significant positive short-run relationship at lag 1 and lag 2 with jci and have a negative relationship with klci. however, dse has a positive relationship with kse, as well at lag 1 and lag 2, and has a negative significant relationship with klce at lag 1. tse has a positive relationship with klci at lag 1. jci has a negative relationship with klci, egx, and nse at lag 1 and lag 2 as well. klci has a negative relationship at lag 2 and a positive relationship with nse at lag 1 and 2. ise has a positive relationship with nse at lag 1. egx has a negative relationship with klci at lag 2 and negative relationship with jci at lag 2. nse has a negative relationship with jci at lag 1 and lag 2 and has a positive relationship with klci at lag 1. -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to dse_return response to cholesky one s.d. innovations ± 2 s.e. -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to tse_return -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to jci_return -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to klci_return -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to ise_return -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to egx_return -.002 .000 .002 .004 .006 .008 .010 1 2 3 4 5 6 7 8 9 10 response of kse_return to nse_return figure 3. impulse response behaviour of kse to d-8 economies baltic journal of economic studies 259 vol. 5, no. 4, 2019 table 12 vector error correction model error correction ∆ kse ∆ dse ∆ tse ∆ jci ∆ klci ∆ ise ∆ egx ∆ nse cointeq1 -0.038407 -0.025489 0.008815 -0.2522 0.03145 -0.01151 0.03143 0.044 -0.00962 -0.01931 -0.00752 -0.01086 -0.00647 -0.01638 -0.01547 -0.01034 [-3.99123] [-1.31987] [1.17204] [-23.2200] [4.85822] [-0.70269] [2.03119] [4.25662] ∆ kse (-1) -0.523787 0.171608 -0.015859 0.188413 -0.023771 0.000677 -0.072687 0.00037 -0.02606 -0.0523 -0.02037 -0.02942 -0.01753 -0.04437 -0.04191 -0.02799 [-20.0979] [3.28106] [-0.77854] [6.40512] [-1.35581] [0.01526] [-1.73443] [0.01305] ∆ kse (-2) -0.270181 0.122004 0.00947 0.089112 -0.005245 0.061356 0.020199 0.00289 -0.02544 -0.05105 -0.01988 -0.02871 -0.01711 -0.04331 -0.04091 -0.02732 [-10.6211] [2.38985] [0.47630] [3.10364] [-0.30651] [1.41675] [0.49380] [0.10572] ∆ dse (-1) -0.006604 -0.719747 0.002304 -0.01072 0.004157 -0.03595 -0.022522 -0.0034 -0.01245 -0.02498 -0.00973 -0.01405 -0.00837 -0.02119 -0.02002 -0.01337 [-0.53053] [-28.8132] [0.23679] [-0.76305] [0.49643] [-1.69644] [-1.12525] [-0.25431] ∆ dse (-2) 0.001466 -0.340554 0.013729 0.008709 0.009004 -0.00792 -0.000143 3.78e-05 -0.01232 -0.02473 -0.00963 -0.01391 -0.00829 -0.02098 -0.01982 -0.01324 [0.11899] [-13.7701] [1.42528] [0.62613] [1.08604] [-0.37764] [-0.00722] [0.00285] ∆ tse (-1) 0.020799 -0.112006 -0.445986 -0.022693 -0.001958 0.029198 0.010967 -0.01941 -0.03203 -0.06428 -0.02504 -0.03615 -0.02155 -0.05453 -0.05151 -0.0344 [0.64935] [-1.74245] [-17.8141] [-0.62770] [-0.09086] [0.53544] [0.21293] [-0.56405] ∆ tse (-2) 0.030578 -0.04934 -0.326866 0.043184 -0.010374 0.09081 -0.052852 0.02898 -0.03193 -0.06408 -0.02496 -0.03604 -0.02148 -0.05436 -0.05135 -0.0343 [0.95760] [-0.76994] [-13.0964] [1.19819] [-0.48295] [1.67045] [-1.02930] [0.84494] ∆ jci (-1) 0.08021 0.035137 -0.02871 0.060435 -0.055384 0.060982 -0.136611 -0.10044 -0.03115 -0.06252 -0.02435 -0.03516 -0.02096 -0.05304 -0.0501 -0.03346 [2.57462] [0.56199] [-1.17901] [1.71866] [-2.64256] [1.14976] [-2.72691] [-3.00150] ∆ jci (-2) 0.057986 -0.05701 -0.001139 0.082779 -0.069844 0.024116 -0.071478 -0.05242 -0.02289 -0.04593 -0.01789 -0.02583 -0.0154 -0.03896 -0.0368 -0.02458 [2.53360] [-1.24121] [-0.06369] [3.20447] [-4.53629] [0.61893] [-1.94217] [-2.13223] ∆ klci (-1) -0.1063 -0.164186 0.072762 -0.268928 -0.542375 0.061052 0.104044 0.11107 -0.04097 -0.08222 -0.03202 -0.04624 -0.02756 -0.06975 -0.06588 -0.044 [-2.59464] [-1.99691] [2.27223] [-5.81566] [-19.6788] [0.87532] [1.57929] [2.52405] ∆ klci (-2) -0.109496 -0.024031 0.010039 -0.123291 -0.253876 0.106493 0.129669 0.03697 -0.03822 -0.0767 -0.02987 -0.04314 -0.02571 -0.06506 -0.06146 -0.04105 [-2.86510] [-0.31332] [0.33609] [-2.85818] [-9.87454] [1.63675] [2.10998] [0.90060] ∆ ise (-1) -0.019348 -0.034765 -0.006002 0.023823 -0.005084 -0.71488 -0.013205 -0.01237 -0.01445 -0.029 -0.01129 -0.01631 -0.00972 -0.0246 -0.02323 -0.01552 [-1.33910] [-1.19891] [-0.53142] [1.46076] [-0.52303] [-29.0615] [-0.56835] [-0.79695] ∆ ise (-2) 0.003622 -0.002479 -0.010218 0.008083 -0.023023 -0.35458 0.006128 -0.02065 -0.01444 -0.02897 -0.01128 -0.01629 -0.00971 -0.02458 -0.02321 -0.01551 [0.25086] [-0.08558] [-0.90554] [0.49603] [-2.37057] [-14.4266] [0.26399] [-1.33193] ∆ egx (-1) -0.009855 0.00432 0.007689 -0.0791 -0.00293 -0.03587 -0.487687 0.00258 -0.0155 -0.0311 -0.01211 -0.01749 -0.01043 -0.02638 -0.02492 -0.01664 [-0.63595] [0.13890] [0.63479] [-4.52222] [-0.28102] [-1.35961] [-19.5704] [0.15469] ∆ egx (-2) 0.009579 -0.000817 0.013494 -0.034619 0.004193 -0.03433 -0.343476 0.00102 -0.01544 -0.03098 -0.01207 -0.01743 -0.01039 -0.02628 -0.02483 -0.01658 [0.62047] [-0.02636] [1.11826] [-1.98664] [0.40371] [-1.30595] [-13.8352] [0.06169] ∆ nse (-1) -0.02891 -0.046339 -0.006553 -0.121481 0.051316 -0.09209 0.025197 -0.35946 -0.02422 -0.0486 -0.01893 -0.02733 -0.01629 -0.04123 -0.03894 -0.02601 [-1.19387] [-0.95354] [-0.34623] [-4.44468] [3.15010] [-2.23381] [0.64709] [-13.8207] ∆ nse (-2) -0.035273 -0.030238 0.004487 -0.099443 0.032571 -0.03858 -0.027175 -0.22723 -0.02399 -0.04815 -0.01875 -0.02708 -0.01614 -0.04085 -0.03858 -0.02577 [-1.47018] [-0.62800] [0.23927] [-3.67218] [2.01800] [-0.94445] [-0.70436] [-8.81768] c -9.57e-06 2.05e-05 -8.97e-06 1.53e-05 -9.56e-06 -5.66e-06 4.41e-06 -4.74e-06 -0.00026 -0.00052 -0.0002 -0.00029 -0.00017 -0.00044 -0.00042 -0.00028 [-0.03701] [0.03951] [-0.04437] [0.05235] [-0.05495] [-0.01286] [0.01060] [-0.01705] significant at p<0.05 baltic journal of economic studies 260 vol. 5, no. 4, 2019 5. conclusions and policy implications market efficiency and financial integration are jointly investigated in this study for d-8 economies. the purpose of the empirical study is to investigate the basic philosophy of constructing this economic group. we used a number of methods for the evaluation of market efficiency, financial integration, and shock transmission as the summarized results are indicating. the random walk hypothesis is tested due to the visualization of arbitrage profits opportunities across the economies; however, it can be earned if the concerned financial markets are efficient at the individual level. descriptive statistics for d-8 equity market indicates that daily returns of all the equity markets are negatively skewed except tehran stock exchange and nigerian stock market, which reflects that large negative returns are greater than positive returns. negative asymmetric behaviour is more influential in the negatively skewed markets. negative shocks have a greater effect than positive shocks. the kurtosis value for dhaka stock market and egypt stock market has higher positive values, which indicate that distributions of returns are leptokurtic and show higher peaks. the performance of the tehran stock market remained excellent during this period in the set of d-8 economies. the jarque-bera test indicates the normality behaviour of all the stock returns. we used serial autocorrelation to test the randomness of returns. results indicate that return behaviour is predictable and market efficiency does not hold for this selected period. the null hypothesis is rejected for all markets except istanbul stock market. hence, concluded that ise is an efficient market from this test point of view. random walk hypothesis assumes that the log price should have a unit root, whereas the change or returns series must follow the stationarity. results conclude that time series is non-stationary at the order i(0) but become stationary at the order i(1) at 1% and 5% level of significance respectively. for run test statistics, the null hypothesis indicates that the succeeding price changes move randomly and are not dependent. it is concluded that the return behaviour of kse, tse, klci, egx, and nse are following random behaviour. runs test for table 4(b) indicates that the total cases of runs is significantly less than the expected number of runs for all the countries and the kse, tse, klci, egx, and nse and have lower numbers of runs against total numbers of cases and this phenomena rejected the random walk hypothesis and narrates that these markets follow weak form of efficiency. further, according to lo and mackinlay (1988), the variance ratio test is used to test the random walk hypothesis in a more modern way. it is inferred from this statistical test that if the variance ratio test statistics > 1, the financial time series will be positively associated. the standardized vr test statistics for z (k) is significant at j = 2, j=4, j=8, j=12 and j=16 for all markets. variance ratio indicates that the equity markets of d-8 countries are efficient based on daily return for the period of 2011–2016. lo and mackinlay (1988) identified that the acceptance or rejection of the random walk hypothesis doesn’t need to mean that the stock markets are efficient or inefficient respectively in actual spirit because the findings are based on a sample. to test the financial integration, we used correlation test, granger causality test, cointegration test, error correction model, and impulse response test. correlation results conclude that no market has a significant relationship with each other. all markets are behaving independently. further, the granger causality test indicates that kse returns leads to the dse returns significantly. egx granger causes to the kse. jci granger causes to dse whereas dse granger causes to jci, klci to tse and klci to jci, jci to klci, and ise to klci. trace statistics for cointegration indicates that there exist two cointegrating vectors among these economies. there exist bivariate cointegration statistics between kse and dse and identified one co-integrated vector because trace statistics is greater the critical value at none level. moreover, a result of bivariate cointegration indicates that kse and dse markets have a long-run relationship. short-run relationship indicates that kse has a significant positive short-run relationship at lag 1 and lag 2 with jci and negative relationship with klci. however, dse has a positive relationship with kse, as well at lag 1 and lag 2, and has a negative significant relationship with klce at lag 1. tse has a positive relationship with klci at lag 1. jci has a negative relationship with klci, egx, and nse at lag 1 and lag 2 as well. klci has a negative relationship at lag 2 and has a positive relationship with nse at lag 1 and 2. ise has a positive relationship with nse at lag 1. egx has a negative relationship with klci at lag 2 and negative relationship with jci at lag 2. nse has a negative relationship with jci at lag 1 and lag 2 and positive relationship with klci at lag 1. hence it is concluded that investors can get benefit from the arbitrage process due to market inefficiencies and through the short selling process. our results coincide with the results of worthington and higgs (2004); hamid, suleman, shah and akash (2010) but are not confirming to the results of stakic, jovancai and kapor (2016), however, arshad, rizvi, ghani and duasa (2016) evaluated emh concept that is still a question mark for emerging economies. however, it is improving day by day but developing markets have improved the market efficiency as concluded by rizvi and arshad (2017). further our study also confirms that there exist short-run relationships as expressed by chung and liu (1994); roca (1999); sheng and tu (2000); ng (2002); lamba (2005); suchismita and paramita (2006); hoque (2007); hasan and durrani (2008); hamid and hasan (2011) but our study do not confirm longrun relationships among the d-8 economies in recent studies, almekinders, fukuda, mourmouras, zhou and zhou (2015), anwar and raza (2016) also considered baltic journal of economic studies 261 vol. 5, no. 4, 2019 the that behaviour of the markets and identified that long-run relationship exists among the kse-100 index and sse and klse. results identify that changes in kse is due to its own but our study doesn’t confirm this hypothesis. al-nasser and hajilee (2016) and alotaibi and mishra (2017) also identified that there exist financial integration among the emerging economies. however, the purpose of d-8 economies is not fulfilled to establish a long-run financial integration yet. policy implications indicate that financial integration enhances the capital mobilization and provides passage to competitive advantage. cross board financial integration has become now a significant determinant of financial inclusion after the global financial crisis and financial services and bilateral trade are open for these economies. references: almekinders, g., fukuda, s., mourmouras, a., zhou, j., & zhou, y. s. (2015). asean financial integration. imf working paper, wp/15/34, 1–43. alotaibi, a. r ., & mishra, a. v. (2017). time varying international financial integration for gcc stock markets. the quarterly review of economics and finance, 63, 66–78. anwar, t., & raza, m. y. (2016). economic integration of stock markets: an evidence from pakistan, china and malaysia stock exchanges. management and organizational studies, 3(3), 2330–5495. arshad, s., rizvi s. a. r ., ghani, g. m. & duasa, j. (2016). investigating stock market efficiency: a look at oic member countries. research in international business and finance, 36(c), 402–413. banerjee, a., dolado, j. j., galbraith j. w., & hendry, d. (1993). co-integration, error correction and the econometric analysis of non-stationary data. oxford: oxford university press. chung p. j., & liu d. j. (1994). common stochastic trends in pacific rim stock markets. the quarterly review economics and finance, 34(3), 241–259. dickey, d. a., & fuller, w. a. 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(1975). a survey of empirical studies on capital markets. in international capital markets, edited by edwin j. eltonand, martin j. gruber, (north–holland, amsterdam), 3–36. summary of results for d-8 equity markets market efficiency markets serial autocorrelation unit root test at first difference i(1) runs test at k=mean and k=0 variance ratio at return hypothesis efficient or not stationery or not efficient or not rwh exit or not kse no yes yes yes dse no yes no yes tse no yes yes yes jci no yes no yes klci no yes yes yes ise yes yes no yes exg no yes yes yes nse no yes yes yes summary of results for financial integration and shock transmission of kse to other d-8 economies cointegration test trace cointegration test maximum eigen value correlation granger causality test error correction model impulse response behaviour co-integrated or not co-integrated or not correlated or not lead or not short run relationship exist or not shock transmission or not kse dse yes no no yes no yes kse tse no no no no no yes kse jci no no no no yes yes kse klci no no no no yes yes kse ise no no no yes no yes kse exg no no no no no yes kse nse no no no no no yes baltic journal of economic studies 262 vol. 5, no. 4, 2019 hamid, k., & hasan a. 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(2016). efficiency of thai stock markets: detrended fluctuation analysis. physica a: statistical mechanics and its applications, 458(c), 204–209. vavra, p., & goodwin, b. k. (2005). analysis of price transmission along the food chain. oecd food, agriculture and fisheries. wp 3. oecd publishing, france. worthington, a., & higgs, h. (2004). random walks and market efficiency in european equity markets. global journal of finance and economics, 1(1), 59–78. baltic journal of economic studies 105 vol. 5, no. 4, 2019 corresponding author: 1 odessa national economic university, ukraine. e-mail: yuriy777kozak@gmail.com orcid: https://orcid.org/0000-0002-5358-4420 2 international humanitarian university, ukraine. e-mail: rubinodessa@gmail.com orcid: https://orcid.org/0000-0003-1431-7300 3 odessa i. i. mechnikov national university, ukraine. e-mail: daryaguz26@gmail.com orcid: https://orcid.org/0000-0002-6429-2191 doi: https://doi.org/10.30525/2256-0742/2019-5-4-105-115 forming the strategy of integrated development of tourism enterprises yuriy kozak1, tatyana derkach2, daria huz3 abstract. considering the place and role of tourism in the life of society, in the european space, it has been proclaimed one of the priority directions for the development of national culture and economy. the development of the tourism sphere in the european space will contribute to the growth of the country’s authority in the world market for tourist services, the strengthening of the country’s economy, the filling of the state budget, the growth of the well-being of citizens, the preservation of the historical and cultural heritage, the enhancement of the spiritual potential of society. the purpose of the article is to substantiate the theoretical and methodological foundations of the formation of the strategy of integrated development of subjects of the tourism sphere in the conditions of transformational changes of the economy on the example of ukraine. methodology. legislative and regulatory documents, periodicals, statistics, and internet resources made up the information base of the study. general and special methods are applied in the work: monographic survey, generalization, systematization, economic and statistical analysis. this made it possible to investigate the current state of development of entities of the tourism industry and the possibility of forming a strategy for their integrated development, to provide organizational recommendations for the implementation of the strategy of integrated development of subjects of the tourism industry and the criteria for evaluating its effectiveness. results. the components of strategies of integrated development of subjects of tourism sphere are considered, namely: the strategy of ensuring economic security; financial strategy; investment strategy; innovative strategy; information strategy. the factors that cause the need to create tourist clusters to ensure the sustainable development of subjects of the tourism sector are identified, such as: instability of the national economy; features of the tourism sphere; the structure of participants in the tourist market; peculiarities of activity of small business entities. organizational recommendations for the creation of a cluster of subjects of tourism in the following areas: the type of integration structure, the number of participants, the consistency of interests of participants, the type of activity of participants, the distribution of responsibilities between participants. the scheme of implementation of the strategy of integrated development of subjects of tourist sphere is offered, which consists of the following stages: analysis of conditions of cluster formation, definition of purpose and tasks of the cluster, identification of potential and interested participants of the cluster, assessment of the level of consistency of interests of cluster participants, definition of rules of functioning of the cluster, development and implementation of the cluster strategy, cluster performance assessment and monitoring. practical meaning. the introduction of these results in order to ensure sustainable economic development of the subjects of the tourism sector will contribute to the growth of the country’s authority in the world market for tourist services, strengthening the country’s economy, filling the state budget, increasing the well-being of citizens, preserving the historical and cultural heritage, enhancing the spiritual potential of society. value/originality. the author’s definition of sustainable economic development of the tourist industry entity, organizational principles of implementation of the strategy of integrated development of tourism industry subjects, methodical approaches to the evaluation of the strategy of integrated development of the tourism industry entities. key words: tourism, development, strategy, integration, sustainability. jel classification: e20, e60, l12, l22 baltic journal of economic studies 106 vol. 5, no. 4, 2019 1. introduction considering the place and role of tourism in the life of society, in the european space, it has been proclaimed one of the priority directions for the development of national culture and economy. the development of the tourism sphere in the european space will contribute to the growth of the country’s authority in the world market of tourist services, the strengthening of the country’s economy, the filling of the state budget, the growth of the well-being of citizens, the preservation of the historical and cultural heritage, the enhancement of the spiritual potential of society. tourism in the national macro-environment is currently functioning in the conditions of fierce global competition. being an important component of the economy of our country as a factor that not only attracts most branches of the domestic economy to the development of tourism product but also stimulates their development, the tourism sector requires a thorough scientific and methodological research, including analysis of the current state of development, solving various problems of state regulation, forecasting, and prevention of potential risks and threats. the current state of tourism in ukraine requires immediate improvement of state tourism policy mechanisms. considering the experience of foreign countries, it can be stated that the dynamic development of the tourism sphere depends on the perception at the state level of the importance of tourism and the levers of state support used. according to the recommendations of the world tourism organization, the current state of tourism development requires state support first and then the private sector. promoting the development of the tourism sector should be made taking into account its place in the economy of the country. research into the tourism sector and external prerequisites for the formation of a strategy for ensuring sustainable economic development of tourism industry entities has shown that in today’s economic environment for many, the main problem is survival and sustainable development. an indispensable condition for the sustainable economic development of the tourism industry is the implementation of such management procedures, which are based on restructuring strategies. the kind of strategy is an integration strategy that ensures the development of each member of such an association. by working with another company, redistribution of efforts to counter various risks is possible. thus, improvement of qualitative indicators of activity of the separate merging enterprise leads in this case to its development. among the entities in the tourism sector, small businesses are predominantly the most financially vulnerable and vulnerable to destructive change in an unstable economy. thus, their development is hindered by the following factors: chronic lack of financial resources, hypersensitivity to economic fluctuations and political situation, high degree of dependence on the system of support of small business, considerable dependence on individual large customers, weak segmentation of own market share and insufficient strong position, it is at high risk and prone to bankruptcy. you can prevent the negative impact of these factors by applying a suitable integrated development strategy. this actualizes theoretical and applied research in this field. 2. theoretical foundations of the strategy of integrated development of tourism entities the sustainable economic development strategy is an integrated tourism development strategy that is implemented through the integration of tourism entities into a cluster. the purpose of the integrated development strategy is the sustainable economic development of the tourism industry. the sustainable economic development of the tourist industry is the invariance of economic development indicators in successive periods of time, which contributes to improving the level of economic security, improving financial and information support, improving the efficiency of the innovation and investment policy of the tourism industry. the main objective of the integrated tourism development entity’s strategy is to identify priority areas for improving the entity’s performance in order to improve the quality of their performance and counteract the environmental risks. the process of formulating a strategy for sustainable economic development requires adequate methodological support, which allows an objective assessment of the consistent adaptation and harmonious development of the tourism industry subjects during integration. therefore, it must meet the following requirements: – such an alternative variant of the development strategy is formed, which provides the most complete solution of the set tasks, the minimum term for its execution, and the minimum possible total expenses for its implementation; – the tasks should be specified in the context of the formation of the necessary conditions for the implementation of the development strategy, and the priority should be those that ensure the rational use of all available resources and reserves; – it is advisable to foresee meaningful qualitative consequences of the strategy implementation and from the possible alternatives to choose the one that provides the maximum efficiency of the implemented measures (new corporate strategy, 1999). as a result of consideration of the main tools for ensuring the sustainable economic development of the tourist industry, the need to ensure economic security as the most urgent tool in the uncertainty of the environment is highlighted. after all, the main objective baltic journal of economic studies 107 vol. 5, no. 4, 2019 of the economic security of business entities is to counteract risks that adversely affect the sustainability of economic development. given the above, we can distinguish priority ways to increase the sustainability of the development of subjects of the tourism industry, such as the following (figure 1): increasing the level of economic security; improving information support; improving financial security; improving the effectiveness of innovation policy; improving the effectiveness of investment policy. in the process of forming an integrated development strategy, it is necessary to define its functional components. considering that the entity’s functional strategies determine the main directions of its development and reflect the ways of achieving its goals, we consider the components of integrated development strategies (table 1). the next steps in the development of a strategy for the integrated development of the tourism industry are to define the mission, purpose, and objectives. the process of formulating the mission of a tourist entity is very complex and responsible, and it must be well planned. after all, the mission must clearly describe the destination of the tourist entity and is established over a long period of time. the purpose tree is built from top to bottom, from general goals to individual, more detailed goals. yes, the achievement of the main goal is ensured by the realization of the lower-level goals. in turn, each of these goals can be divided into the next, lower-level goals. one of the basic principles of constructing a goal tree is the following: each goal of a given level must be represented as next-level goals in such a way that their totality fully defines the concept of the original goal. the study of the features of the tourism sphere development makes it possible to build a tree of goals (figure 2). objective analysis and modelling methods are associated with decomposition, synthesis, and evaluation procedures. ways to increase the sustainability of tourism industry actors improving economic security improving information support improving financial security improving the effectiveness of innovation policy improving the effectiveness of investment policy figure 1. ways to increase the sustainability of tourism industry actors table 1 functional components of integrated tourism development strategies name characteristic economic security strategy – protection of legal rights and interests; – monitoring of the state of the environment; – identification of potential threats to the activity and development of preventive measures to prevent or reduce risks; – protection of confidential information concerning all parties of activity. financial strategy – effective financial planning; – regulation of the movement of financial resources; – identification of sources of financing of activity; – coordination of financial units. investment strategy – ensuring the optimal structure of investment resources; – ensuring minimization of costs of formation of investment resources; – ensuring a high efficiency of the use of investment resources. innovative strategy – improving the level of customer service; – improving the quality and effectiveness of product advertising; – application of innovative pricing methods to attract new customers; – increase in production volumes of innovative products; – introduction of the system of training and advanced training of employees. information strategy – creating a system for collecting, processing, systematizing, and organizing information; – formation of a complex information system; – monitoring of information risks. baltic journal of economic studies 108 vol. 5, no. 4, 2019 the next steps in the development of an integrated development strategy for the tourism industry are to generate alternative development strategies and to select the most optimal development strategy. integrated development strategy is based on the integration of entities, through which they interact and redistribute efforts to address the diverse risks of the environment. thus, it is advisable to formulate alternative development strategies depending on the nature of the integration that underlies the integrated development strategy. the criteria for formulating alternative development strategies are the types of entities in the tourism industry that are united. as a result of the conducted research on the specifics of the activity of small business entities and the features of tourism development, it is advisable to identify two alternative strategies of integrated development of tourism entities, namely: – integration of small entities of the tourism industry with a large entity-leader; – the integration of small entities of the tourism industry with each other. considering that the strategy of the integrated development of the subjects of the tourism industry is based on reconciling the interests of small business entities and uniting efforts in order to ensure their sustainable economic development, it is from this point of view that we must choose the most optimal development strategy from the existing alternative ones. let us analyse the alternative strategy of “combining small business entities with a large subject leader” (table 2). let us analyse the alternative strategy of “integration of small business entities with each other” (table 3). result: increasing market share and gaining market leadership effective information support effective innovative policy strategic goal: sustainable economic development development goals: improving the quality of performance counteracting environmental risks targets: high level of economic security sufficient financial security effective investment policy figure 2. destination tree of the tourism industry table 2 characteristic of the alternative strategy of “combining small business entities with a large entity leader” advantages disadvantages small business entities have access to the resources they need and are able to use them effectively. receiving long-term small business entities. possibility of loss of independence for small business entities. the interests of small business entities are not fully taken into account. ability to absorb small business entities. table 3 characteristic of the alternative strategy of “integration of small business entities with each other” advantages disadvantages small business entities are equal partners. consistency of interests of small business entities in joint activity. independence and flexibility of small business entities. limited resources of small business entities. the complexity of selecting homogeneous small business entities. baltic journal of economic studies 109 vol. 5, no. 4, 2019 through a survey of expert groups from tourism entities that are interested in joining forces to ensure their sustainable economic development, it is established that an alternative strategy of “integration of small business entities with each other” is effective. an effective strategy for integrated tourism development is to bring small businesses together. as a result of such an association, the group of its members appears homogeneous and equal due to the same characteristics as: current potential; development needs; strengths and weaknesses of the activity; threats to activity; possibility of exchange of benefits; joining forces to counter threats. the sustainable economic development of the tourism industry is possible thanks to the creation of a tourist cluster. consider the prerequisites for creating a tourism cluster to ensure the sustainable development of tourism industry entities. 1. instability of the national economy. modern market relations are characterized by the volatility and uncertainty of the external environment of economic entities, the continuous emergence of new trends in the development of the economy and society, the acceleration of scientific and technological progress. p. kotler considers the term “turbulence” in his work chaotics: the business of managing and marketing in the age of turbulence. first of all, turbulence is defined as unpredictable and rapid changes in the internal and external environments of an entity that affect its activities. the world is becoming more interconnected, interdependent, and its “globalization” is accelerating (chaotics: the business of managing and marketing in the age of turbulence, 2009). 2. features of the tourist sphere. the tourism sphere has a number of peculiar features only, which derive from the specific properties of services provided by the participants of the tourist market. the basic features of tourism as an object of management include the following: – ambiguity and complexity in the measurement of goals: due to the fact that the tourism market participants do not have measurable goals, their performance and success cannot be objectively evaluated, that is, the probabilistic nature of the processes taking place in the tourism industry; – a significant influence on the activity of the participants of the tourist market by the “interested clientele”: each participant functions in the environment of different stakeholders and clients and, even within individual interest groups, have their own interests; – the specificity of tourist services: it is related to the specificity of tourism demand. demand for tourist services is not uniform for reasons such as: insensitivity and insecurity of the tourist product; diversity of consumers of tourist services, which leads to the fact that each type of tourists corresponds to a certain type of tourist market; – the comprehensiveness of tourist services: this is all that the tourist takes into account or what he/she uses during the trip (when changing his/her place of stay and when staying at the destination of his/her trip). it follows that the tourist service is composed for the tourist from the whole complex of both tangible and intangible services, which is a specific tourism product. these individual tourist services complement the main; – creation of a tourist package with the participation of many enterprises, each of which has its own working methods, specific needs, and different commercial goals; – dependence of the tourist service on such variables as time and space; – external factors of force majeure have a significant influence on the quality of tourist ser vices (economy and organization of tourism and hotel business, 2007). 3. structure of participants in the tourist market. in the process of developing and marketing a tourism product, business entities from different sectors of the economy that are pursuing their own interests are involved. in view of this fact, it is necessary to balance the interests of economic entities with the interests of environmental entities. the interests of the subjects of the tourism industry are very diverse, each of them is characterized by a set only of its own interests, which in a certain way are related to each other, have a different status, belonging to different entities. the interests of the tourist market participants are not only diverse but also extremely mobile, which is caused, on the one hand, by the continuous development of the tourist entity itself, and on the other, by constant changes in the external environment. however, despite the diversity and mobility of the interests of business entities, it is possible to distinguish priority interest that is characteristic of each participant of the tourist market – ensuring sustainable economic development. 4. features of activity of small business entities. in the domestic tourism sphere, small businesses predominate among a large number of economic entities. it is well known that there are a number of disadvantages in the activities of small business entities in the context of environmental variability. the main ones include the following: low financial support for the activity, sensitivity to the negative impact of environmental factors, a small share of the market in sales volume, fierce competition from the side of large entities in the industry. as a consequence, only a few are engaged in tour operator activity in the classical sense of the word. others act mainly as intermediaries of foreign operators, adding some of their services to their tourism product. this situation can only be overcome by the emergence of powerful companies with significant working capital in the domestic tourism sector, as well as by the associations of tourism entities. baltic journal of economic studies 110 vol. 5, no. 4, 2019 3. form of implementation of the strategy of integrated development of tourism sphere actors the next step in the formation of the strategy for integrated development of the tourism industry is planning the implementation of the strategy. the tourism sector is an inter-sectoral complex of business structures for the production and sale of the tourism product. it covers the activities of all entities in the tourism business and third-party organizations involved in the implementation of the tour program and is an integrated system of industries and activities, combined by a common purpose. thus, the implementation of the strategy of integrated development of subjects of tourism in the conditions of the economic and political instability of the country should be carried out taking into account the peculiarities of the complex structure of participants in the tourist market, and as a consequence of the lack of coordination of their activities. the implementation of the strategy of integrated development of the subjects of tourism should be based on: first, properly organized and coordinated activities; secondly, a comprehensive approach to the study of various processes and phenomena, as well as factors and characteristics. the main task of implementing an integrated development strategy is to create the necessary conditions for the successful implementation of the strategy. creating a cluster of tourism industry entities to increase the economic security of small business entities as a key tool for ensuring the sustainable economic development of tourism industry entities will help: increase the resilience of small business entities to the negative impact of environmental risks; ensuring the investment attractiveness of small business entities; increase of financial support for the activity of small business entities; innovative support for the activity of small business entities; improving the marketing policy of small business entities; increasing market share in terms of sales; improving the competitiveness of small business entities, etc. in figure 3, the interconnection of the cluster form of organization of cooperation with ensuring sustainable implementation of a cluster form of cooperation organization increasing the level of economic security of each participant in the tourism cluster improvement of security financial support; resource support; information support; staffing. management improvements making effective management decisions; effective personnel management; monitoring, diagnosis, and counteraction to risks. achievement of goals satisfaction of market needs; gaining leadership positions; increase of economic efficiency; implementation of ntp achievements. ensuring the sustainable economic development of members of the tourism cluster figure 3. the interconnection of the cluster form of cooperation organization for sustainable economic development baltic journal of economic studies 111 vol. 5, no. 4, 2019 economic development of subjects of tourism sphere is depicted. solutions to the lack of coordination of activities of all participants in the tourism market are possible through the formation of an integrated development strategy through the implementation of sectoral integration and partnerships, which would take into account the interests of all participants in the tourism market. after exploring the prerequisites for forming an integrated development strategy by creating a tourism cluster of small business entities, you can make the following recommendations for organizational directions (table 4). consider the scheme of implementation of the strategy of integrated development of tourism entities (figure 4). table 4 organizational recommendations for the creation of a cluster of entities in the tourism industry organizational direction recommendations type of integration structure the cluster should be based on a horizontal integration structure, characterized by a broad market impact and pricing flexibility. number of participants combining businesses with many participants will work poorly. since establishing democratic governance principles and coordinating the activities of a cluster with a large number of participants is challenging. according to the author, the cluster should consist of no more than five entities, which will ensure its effectiveness. consistency of interests of participants the main condition for the successful functioning of the enterprise cluster will be the unity, coherence, and subordination of the interests of all its participants. businesses that have the same problems should try to solve them as effectively as possible through joint efforts. consistency of participants’ interests is the most important motivation and the main condition for their effective interaction. type of activity of participants a competitive strategy for integrated development of tourism entities should be a strategy based on the integration of small business entities with each other. as a result of the study of the peculiarities of the development of the tourism sphere, the author has established that it is tourism agents that are mostly small business entities. thus, it is important to create a cluster that will include travel agents, as the largest participants in the tourism market. distribution of responsibilities of participants topical is to create a cluster comprising travel agents as the largest participants in the tourism market. this approach will ensure equal participation of participants in the joint activity and an equal contribution to the end result. analysis of cluster formation conditions defining the purpose and objectives of the cluster identify potential and stakeholders in the cluster assessment of the level of consistency of interests of cluster participants definition of rules of functioning of a cluster development and implementation of cluster strategy cluster performance assessment and monitoring stages of implementation of the strategy of integrated development of entities in the tourism sphere figure 4. stages of implementation of the strategy of integrated development of tourism sphere actors baltic journal of economic studies 112 vol. 5, no. 4, 2019 analysis of conditions of cluster formation involves the following measures: analysis of industry development features; swot analysis of the region; analysis of socio-economic indicators of the region; study of the priorities of development of the region; analysis of the innovative activity of the region; definition of perspective directions, etc. properly defining the purpose and tasks of the cluster influences the whole activity of the cluster and determines its effectiveness. the purpose of the cluster is the end goal, the end result, to which the functioning of the cluster is directed. the purpose of the cluster of entities in the tourism industry is to ensure the sustainable economic development of all members of the association. the main tasks of the cluster include the following: – ensuring sufficient financing for the activity; – increasing the level of economic security; – ensuring an effective investment policy; – improving information support; – ensuring an effective innovation policy. the identification of potential and interested cluster participants involves the following activities: – conducting an information campaign among potential participants and stakeholders in cluster formation; – organizing large open meetings to present the principles of the cluster, to identify their capabilities and benefits. the step of defining the rules of the cluster operation is as follows: 1. development of the organizational structure of cluster management: the creation of the coordination centre; approval of the charter; holding a constituent assembly, etc. 2. formation of norms and rules of interaction of cluster participants: organization of representative offices of enterprises; creation of forms and methods of communication of participants; defining the principles of work in the cluster; planning and preparation of economic activities, etc. developing and implementing a cluster strategy involves: analysing common problems and opportunities; approval of the cluster work plan; forming and implementing an optimal strategy. the cluster performance assessment covers the analysis of the performance targets and the development of proposals for adjusting the cluster activities. the main condition for the effective organization of a cluster of entities in the tourism industry is the homogeneity of the group of participants who unite. since the author considers small enterprises, which in turn are characterized by specific shortcomings in the activity, as a consequence, there is a need for a concerted consideration of their interests. a homogeneous group of cluster participants is a group of actors with homogeneous priority economic interests who join forces to ensure that they are implemented as efficiently as possible and to ensure sustainable economic development. since a homogeneous group of cluster members have homogeneous economic interests, let us consider what should be understood by the economic interests of the tourism industry. the economic interest is to achieve a satisfactory result in the process of economic relations of economic entities. the subjects of economic interests are individuals, families, households, collectives, groups of people, the state, and society as a whole. the object is the result of social production (product, service, etc.) that addresses the need for which specific relationships between people are formed (economic interests: theory and methodology of research, 2003). the study of the peculiarities of the activity of the small business in the tourism sphere has allowed establishing their main priority interests: improvement of quality indicators of activity; ensuring effective counteraction to environmental risks. the realization of the stated interests of the subjects of the tourism industry will contribute to their sustainable economic development and increase of market share. the organization of a cluster of subjects of the tourism industry with homogeneous priority interests should be based on their maximum coherence in order to motivate the subjects to interact. it is this aspect that will help to improve the organization of the cluster of subjects of the tourism industry. consistency of economic interests of cluster participants is the average value of mutual motivation for cooperation between two or more entities in order to ensure sustainable economic and economic development. mutual motivation is seen as the level of motivation on one side and the other. 4. evaluation of the implementation of integrated development strategy of the tourism sphere entities on the first stage of the evaluation of the strategy for integrated development of the tourism industry, several groups of evaluation criteria need to be identified. in this case, given the definition of sustainable economic development of the tourist industry, it is advisable to define two groups of criteria for evaluating the strategy, namely: 1. the first group – qualitative changes in the activity of the subject of tourism sphere. 2. the second group – counteracting the risks of the environment. on the second stage of the evaluation of the strategy of integrated development of the tourism industry entities, it is necessary to determine the evaluation criteria in each group. the first group should include such a criterion as the economic efficiency of the activity. baltic journal of economic studies 113 vol. 5, no. 4, 2019 the second group should be considered as a criterion for resilience to financial and commercial risks. by area of origin, economic risks are divided into: financial, industrial, demographic, commercial, geopolitical, environmental, socio-political, administrative, and legislative. among these economic risks, financial and commercial risks should be considered. after all, as a result of the impact of financial risks on the activity of the tourist industry, the state of its financial stability is reduced and then, as a consequence, its level of solvency. among the commercial risks, the most urgent and dangerous is the negative impact of fierce competition. given that small businesses are characterized by low levels of financial security and stiff competition from large entities, financial and commercial risks pose the greatest threat to the sustainable development of small businesses. therefore, these types of risk are the most significant and will be considered in the future in the form of a decrease in financial stability and negative competition. the goals of small business entities are different from those of big business entities, the most common and relevant ones being to increase the level of financial support for their business and to survive in the market in a highly competitive environment. therefore, in formulating a strategy for the sustainable economic development of small business entities, it is necessary to use an approach that will take into account the peculiarities of such entities in the current economy. on the third stage of evaluation of the strategy of integrated development of tourism sphere entities, it is necessary to evaluate the indicators according to the chosen criteria (table 5). to make a conclusion about the level of performance of a tourist entity, the profit must be compared with the expenses incurred. the effectiveness of the activity is analysed by the following indicators: profit, rate of return, profitability, as well as indicators of the use of labour resources (labour productivity), fixed assets (capital efficiency, capital intensity), material resources (material intensity, material efficiency), etc. profitability indicators are the relative characteristics of the financial performance and performance of a tourist entity. profitability research is an important area of financial diagnostics. the research results provide answers to many questions related to financial and management decisions that underlie the competitiveness of the tourism industry. the level of profitability as a whole characterizes the efficiency of only consumed production resources and does not reflect the efficiency of the use of all the upfront costs accumulated in the form of fixed and current assets used. therefore, to determine the efficiency of the use of productive funds calculate the rate of return (enterprise economics, 2006). profit is an important indicator of the effective activity of a tourist entity. however, the absolute size of the profit does not indicate the level of efficiency, quality of work of the business entity. therefore, in order to accurately determine the level of economic activity of a tourist entity, they use a relative rate of return, expressed as a percentage, called the rate of return. the rate of return reveals the relationship between the size of capital, the cost of production, price and mass of profit. from this relationship, we can conclude that maximizing profit depends on both the rate of return and the capital advanced. the condition and guarantee of the survival and development of any tourist entity is its financial stability. financial sustainability provides an opportunity to respond in time to unexpected changes in the market environment. financial autonomy is one of the most important factors for financial sustainability. it is equal to the ratio of the company’s equity to all financial resources. an indicator of the potential benefits of a tourism industry entity is the market share it owns. increasing market share is the primary goal of most tourism entities. according to this indicator, it is possible to assess the level of competitiveness of the tourist industry entity in terms of its market potential. the market share of the tourist industry entity reflects the most important results of the competition, captures the degree of its dominance in the market, its ability to influence the structure and volumes of supply and demand, prices and dynamics of the market as a whole. in table 6, a description of the criteria evaluation indicators is presented. given that travel agents are predominant in the national tourism market, it is advisable to analyse their integrated development strategy. as such, these tourism industry entities are overwhelmingly small business entities and are largely exposed to the destabilizing factors of the environment. this is due to the fact that travel agencies, in comparison table 5 indicators of evaluation of development criteria criterion groups the first group is qualitative changes the second group is counteraction to risks criteria economic efficiency of activity resistance to financial and commercial risks criteria evaluation indicators profitability level the rate of return autonomy coefficient market share by sales volume baltic journal of economic studies 114 vol. 5, no. 4, 2019 with other participants in the tourist market, possess small financial, logistic, and human resources and also occupy a minimal market share. in order to select the same entities of the tourism industry, the following characteristic features of their selection are proposed: number of employees; annual income; pricing policy; types of services. on the fourth stage of evaluating the strategy of integrated development of the tourism industry entities, it is necessary to determine the integral indicators for each group of criteria: qualitative changes and counteraction to risks. it is advisable to determine the level of evaluation of the strategy of integrated development of tourism entities based on the calculation of the overall indicator by criteria such as the efficiency of operations and resistance to financial and commercial risks. i p hc n1 = ⋅ (1) ic1 – integral indicator of efficiency of activity of the subject of tourist sphere; p – standardized level of profitability of the tourist industry subject; hn – standardized rate of return of the tourist entity; i k ×c a p2 = ⋅ (2) ic2 – an integral indicator of resilience to financial and commercial risks; ka – standardized coefficient of autonomy of the tourist entity; ×p – standardized market share of the tourism industry entity by sales volume. і i içàã c c. = ⋅1 2 (3) іçàã. – overall indicator of the tourism development entity 's integrated development strategy. depending on the level of evaluation of the integrated development strategy, it is advisable to divide the tourism industry into three groups: high, medium, and low (table 7). given the volatile development of the national economy of the country as a whole, as well as the existence of fierce competition in the tourism market, tourism industry actors should strive to join forces with other tourism industry actors in order to strengthen their position in the industry. an example of such an amalgamation is the cluster of entities in the tourism industry. cluster members receive the following benefits in activities such as: redistribution of environmental risks; increase of financial support of activity; increase in market share compared to industry competitors; improvement of material and technical potential; improvement of human resources, etc. 5. conclusions the components of integrated tourism development strategies are considered, which include the following: the economic security strategy; financial strategy; investment strategy; innovative strategy; information strategy. the factors that cause the need to create tourist clusters to ensure the sustainable development of entities of the tourism sector are identified, such as: instability of the national economy; features of the tourism sphere; the structure of participants in the tourism market; peculiarities of activity of small business entities. according to the main components of economic security, the main factors that influence the implementation of the strategy of integrated development of the subjects of tourism are considered. table 6 characteristics of criteria evaluation indicators indicator calculation formula characteristic the first group is qualitative changes profitability level р = (r*100)/в describes the efficiency of the consumed production resources. the rate of return rr = (r*100) / (pf ) describes the efficiency of use of all production funds. the second group is counteraction to risks autonomy coefficient ac = equity / balance sheet currency characterizes the share of own funds invested by the owners of the enterprise in the total value of the property. the rate is 0.5-0.8. market share of enterprises by sales volume ms = number of goods sold / total sales of goods in the base market the share of goods of the enterprise in the total capacity of this market. table 7 the scale of levels of the strategy of integrated development of tourism sphere entities levels of the strategy characteristics of the strategy high an analysis of the integrated development strategy of the tourism industry entity shows that the strategy is formulated correctly, is effective, and ensures sustainable, rapid development. average an analysis of the integrated development strategy of the tourism industry subject indicates that the strategy was formulated incorrectly, is not effective enough, and provides little, slow development. low an analysis of the integrated development strategy of the tourism industry entity indicates that the strategy was formulated incorrectly, is inefficient, and does not support development at all. baltic journal of economic studies 115 vol. 5, no. 4, 2019 this is because the main tool for ensuring the integrated development of the tourism industry is to improve the economic security of each participant in such an association. thus, the following factors influence the implementation of the integrated development strategy: external (financial, informational, technical, technological, political, environmental) and internal (intellectual, personnel, motivational). as a result of the study of the prerequisites for the formation of an integrated development strategy by creating a tourism cluster of small business entities, the following organizational recommendations for creating a cluster of tourism industry entities in the following areas are proposed: the type of integration structure, the number of participants, the consistency of interests of participants, distribution of responsibilities between participants. the scheme of implementation of the strategy of integrated development of entities in the tourism sphere is offered, which consists of the following stages: analysis of conditions of cluster formation, definition of purpose and tasks of the cluster, identification of potential and interested participants of the cluster, assessment of the level of consistency of interests of cluster participants, definition of rules of functioning of the cluster, development and implementation of the cluster strategy, cluster performance assessment and monitoring. references: ansoff, i., & mcdonnell, e. j. (1999). novaya korporativnaya strategiya [the new corporate strategy]. st. petersburg: petercom. (in russian) kotler, p., & caslione, j. a. (2009). khaotyka: upravlinnya ta marketynh v epokhu turbulentnosti [chaotics: the business of managing and marketing in the age of turbulence]. kyiv: himgest, plaske. (in ukrainian) gelter, h. (2017). digital tourism – an analysis of digital trends in tourism and customer digital mobile behavior for the visit arctic europe project. summary. interreg nord. potapiuk, i., diachkov, d., & potapiuk, і. (2016). the peculiarities of special kinds of tourism in ukraine. mechanisms and models of development of entities tourist business: collective monograph / ed. by a. berezin, m. bezpartochnyi. riga: «landmark-sia». overtourism: understanding and managing urban tourism growth beyond. (2018). madrid: unwto. baltic journal of economic studies 121 vol. 5, no. 5, 2019 corresponding author: 1 stepan gzhytskyi national university of veterinary medicine and biotechnologies lviv, ukraine. e-mail: parubchak_io@ukr.net orcid: https://orcid.org/0000-0002-7664-5062 2 stepan gzhytskyi national university of veterinary medicine and biotechnologies lviv, ukraine. e-mail: nraduh@ukr.net orcid: https://orcid.org/0000-0001-7851-7964 doi: https://doi.org/10.30525/2256-0742/2019-5-5-121-127 state regulation of the development of corporate social responsibility in the transformation type countries in eastern europe ivan parubchak1, nadiia radukh2 abstract. the purpose of this research is to investigate the processes of formation of corporate social responsibility in countries of transformation type in eastern europe and to study the perspectives of development of socially responsible investing based on studying the world experience in the field of corporate responsibility and the practices of its realization by economic entities in the world. the theoretical and methodological basis of the research is the dialectical method of cognition of the processes of formation of corporate social responsibility in transformation societies, using the experience of the foreign community in similar processes and the possibility of applying individual practices in domestic business. the following scientific methods were used in the research: abstract-logical, in particular, its methods of generalization, analogy, analysis and synthesis, induction and deduction for the formulation of theoretical generalizations of research results, formulation of conclusions and suggestions. main objects of the study are: theoretical bases of formation and realization of mechanisms of state regulation of corporate social responsibility and socially responsible investing in the world and opportunities to apply their experience in the countries of eastern europe; determining the current level of corporate social responsibility at enterprises and organizations and assessing the prospects for their development and influence on socio-economic processes. practical implications. the stakeholder theory is considered, which reveals the essence of corporate social responsibility in the process of satisfying interests and requirements of various counterparties that may affect the ultimate financial results of the enterprise. it is determined that the main causes of state regulation of corporate social responsibility are a moral obligation, sustainability, and reputation. corporate social responsibility is an effective tool for enterprise development, as well as for the development of the process of state regulation and constructive dialogue with different social categories that enhances the investment attractiveness of the enterprise and strengthens its reputation, promotes effective labour relations and enhances productivity, supports the marketing policy and trust of the target audience by forming a positive opinion about products, works or services of the enterprise. modern strategies on the basis of which companies perform the formation of their investment portfolios are considered (sustainable investment strategy, norms-based screening and exclusion of holding from investment universe, integration of esg factors in financial analysis, impact investments, engagement and voting on sustainability matters). the issue of the undeveloped practice of submitting social reports and difficult public access to them by stakeholders is considered. a model for analysing the prospects of corporate social responsibility development at enterprises is proposed; corporate social responsibility strategy provides for the fulfilment of economic, social, and environmental goals for the successful implementation of corporate social responsibility and socially responsible investment initiatives. key words: corporate social responsibility, investments, socially responsible investing, strategy, transformation, state regulation, countries of eastern europe. jel classification: d30, h70, m14, o16 baltic journal of economic studies 122 vol. 5, no. 5, 2019 1. introduction globalising processes taking place in today’s transformational socio-economic conditionals create new challenges for businesses on their way to economic growth and enhancing competitiveness, expanding additional opportunities for integration with foreign partners and investors. w hen deciding how to invest financial resources for the best profit, potential investors consider a number of factors (risk, profitability, taxes, inflation, dividends, diversification), which complicate the decision-making process and require detailed planning and study of the situation. in the current condition, investors are choosing their object of investment, more times make the decision not only to invest in financial assets and financial stability of enterprises but also to evaluate their social benchmarks and participation in environmental protection, social justice, and corporate governance; in other words, achieving sustainable development indicators. problems of corporate social responsibility and socially responsible investing are widely researched in foreign scientific works and are gaining increasing interest and thorough study by domestic scientists. theoretical underpinnings of corporate social responsibility have been reflected in the works m. peteraf and j. barney (2003), a. mcwilliams and d. siegel (2006), s. kotsantonis, c. pinney, and g. serafeim (2016). among ukrainian scientists, new approaches to the formation and development of corporate social responsibility of enterprises that provide the implementation of programs of social investment are offered by o. lazorenko and r . kolyshko (2008), n. orlova and a. kharlamova (2014) explore conceptual foundations of corporate social responsibility, d. bayura (2017) studies social investment as a higher level of corporate social responsibility. the purpose of this research is to investigate the processes of formation of corporate social responsibility in countries of transformation type of eastern europe and to study the perspectives of development of socially responsible investing based on studying the world experience in the field of corporate responsibility and the practices of its realization by economic entities in the world. the theoretical and methodological basis of the research is the dialectical method of cognition of the processes of formation corporate social responsibility in transformation societies, using the experience of the foreign community in similar processes and the possibility of applying individual practices in domestic business. the following scientific methods were used in the research: abstract-logical, in particular, its methods of generalization, analogy, analysis and synthesis, induction and deduction for the formulation of theoretical generalizations of research results, formulation of conclusions and suggestions. main objects of the study are: theoretical bases of formation and realization of mechanisms of state regulation of corporate social responsibility and socially responsible investing in the world and opportunities to apply their experience in the countries of eastern europe; determining the current level of corporate social responsibility at enterprises and organizations and assessing the prospects for their development and influence on socio-economic processes. 2. essence and main determinants f corporate social responsibility at enterprises in countries of transformation type foreign scientists define corporate social responsibility as a situation where a firm goes beyond its compliance and takes actions that promote a certain social product that goes beyond the interests of the firm and the requirements of the law (mcwilliams et al, 2006). more broadly, corporate social responsibility involves social characteristics into products and manufacturing processes (the use of clean technologies), making effective methods of management human resource (promoting empowerment of employees, improving their skills, additional training), achieving higher levels of eco-efficiency through recycling and reducing the pollution of the environment. in e. freeman’s view (1984) and his stakeholder theory, managers must satisfy interests and requirements of the various counterparties (workers, customers, suppliers, local communities), which may affect the ultimate financial result of the enterprise (ernst and young, 2011). according to this theory, it is not enough to focus solely on needs of shareholders or business owners but it is necessary to carry out socially responsible areas of work that are relevant for non-financially stakeholders because they have an indirect influence on the enterprise, its financial result and reputation and, accordingly, the market value of the enterprise. in the world practice, the main focus is on american and european models of corporate social responsibility. the american model of socially responsible behaviour is simply put into practice and its results are public. in an investor’s view, the participation of the company in socially responsible activity characterizes it as socially stable; therefore, it is more attractive for external investors. this model has received positive approval from employees of companies, public and non-governmental organization because it meets their social needs. the basis of the european model of social responsibility is a state as it has an interest in a stable society, and since society is represented by workers, so corporate social responsibility takes on forms of responsibility to employees (lazorenko, kolyshko, 2008). corporate social responsibility is not a mandatory initiative but its implementation is important for all economic actors since, in the course of their activity, they baltic journal of economic studies 123 vol. 5, no. 5, 2019 interact with internal and external stakeholder groups (employees, clients, communities, public organizations, government, and international structures) (orlova, kharlamova, 2014). corporate social responsibility is an effective tool for the self-development of enterprise, as well as for the development of system state regulation and constructive dialogue with various sectors of society. it enhances investment attractiveness of the enterprise and strengthens its reputation, promotes effective labour relations and increases productivity, supports the marketing policy and trust of the target audience, forming a positive opinion about the goods, works or services of the enterprise. scientists are expanding their research not only to find a definition of corporate social responsibility but also to identify activities of socially responsible enterprises and organizations in order to assess the strategic role of corporate social responsibility in their sustainable development. socially responsible investment does not differ in nature from other types of investment; differences can be traced in an investor’s ability to realize them. if a business is more efficient than other entities in socially responsible investing, it can give it a competitive advantage (peteraf, barney, 2003). if resources that the firm uses to gain this competitive advantage are pathdependent, socially complex or causally ambiguous, it can be a source of sustainable competitive advantage. a firm with a strong competitive advantage in financing socially responsible activities will attract a greater share of socially conscious investors to the economy than other entities that make a similar investment. a firm with a strong competitive advantage in financing socially responsible activities can have a relatively high market value, even when the supply of socially responsible investment opportunities exceeds the demand for these opportunities. this is because, among all counterparties that make a socially responsible investment, a competitive advantage company will be able to attract investors differently (mackey et al, 2007). sustainable development companies in eastern europe find a competitive advantage in the commodity, labour, and capital markets and their investment portfolios, which include sustainable development indicators, provide average returns for their investors that outperform conventional investment portfolios and illustrating less risk (kotsantonis et al., 2016). 3. the relationship between corporate social responsibility and socially responsible investing socially responsible investing (sri) is a long-term investment approach that integrates sustainable development factors (environment, society, and state) into the process of research, analysis and choice an enterprise’s investment portfolio, combining fundamental analysis and engagement of esg factors to better capture long-term returns for investors and benefit society by influencing company behaviour (eurosif, 2018). sri is a process of choosing investment based on social benefits and financial benefits and is focused on exploring aspects such as: clean environment (investors prefer non-polluting companies); social justice (investors do not work in countries that violate human rights and work with business that provide fair wages and decent working conditions for their employees); promoting peace (investors avoid arms-producing or profitable conflict in foreign countries); health and morale promotion (many socially responsible investors refuse to invest in businesses that sell tobacco, alcohol, or genetically modified organisms, as well as in gambling or other immoral areas). social investment is a higher form of management or a level of corporate social responsibility, which can become an effective tool for the development of companies in eastern europe and an instrument of state regulation of social processes (bauyra, 2011). global trends of increasing socially responsible investing are confirmed by the fact that today the number of strategies on the basis of which companies carry out their investment portfolios has increased. in particular, it is sustainable investment strategy, norms-based screening and exclusion of holding from investment universe, integration of esg factors in financial analysis, impact investments, engagement and voting on sustainability matters (eurosif, 2018). in the process of achieving social goals, the most commonly used investors are four strategies: – exclusion of holding from investment universe or socially responsible selection, which involves refusing to invest in companies that do not meet the established social standards, while extracting all assets from specific companies because of how or where they do business; – positive investment: choosing companies to include in your portfolio precisely because you approve of their behaviour; – community investment. this is a special subcategory of positive investment that focuses specifically on investment of non-governmental organizations, especially in low-income areas. it provides loans to individuals and organizations with solvency problems. these loans can use to finance small businesses, housing, and education; – shareholder action. socially responsible investors not only use their values to choose companies for their portfolios – they also try to influence the behaviour of companies in which they are shareholders. a key agent of influence on a social responsibility strategy is external pressure on firms, which makes them think about corporate social responsibility in accordance with social priorities rather than individual motives. the main common reasons for companies baltic journal of economic studies 124 vol. 5, no. 5, 2019 to carry out corporate social responsibility are: moral obligation (a duty to be good citizens and to “do right”), sustainability (long-term ability to work requires environmental and community governance), and reputation (csr initiatives can enhance an organization’s reputation, leading to improve business conditions). 4. the experience of eastern european countries and the perspective of developing corporate social responsibility in transformational conditions corporate social responsibility can be defined as one that aims to provide business entities with obligations to the state and society in terms of paying taxes, health and safety at work, rights of workers and consumers, environmental standards and industry standards. it enhances a positive impact on society and value creation through innovation, investment and partnership, providing the creation of jobs, social and economic development, resolution of conflict. the need for the development of corporate social responsibility in the countries of transformation type of eastern europe is due, in particular, to a number of factors: – low level of business activity and financial stability of a significant proportion of enterprises. the activities of economically weak entities are oriented towards survival, and the state often takes a firm stance on enterprises, so a constant shortage of funds does not contribute to the realization of social responsibility at the national level; – low legal awareness and desire to circumvent the law rather than obey it, which is partly explained by the quality of the laws, their instability and selective application; – low level of public awareness of the importance of entrepreneurship – due to the relatively short-lived modern history of business and even shorter practice of realizing its own social responsibility, since the correct understanding of business efforts in this direction is hardly formed; – terminological (regulatory) uncertainty – lack of clear tasks and mechanisms of state regulation of social responsibility; – inaccessibility of information to the public about the activity of enterprises – for the most enterprises detailed information about its activity is data for internal use only. information about mission, code of ethics, proclaimed values are provided by large enterprises; – disparities in the implementation of social responsibility policy by ukrainian enterprises. corporate social responsibility of companies in eastern european countries is focused on labour relations and measures to protect the health and safety of consumers, measures to protect natural resources and the environment, community engagement is not provided by enterprises in sufficient quantities. measures for the protection of natural resources and environmental protection, interaction with the community are not provided by enterprises in sufficient volumes; – imbalance in stakeholder interests: interests of consumers and public authorities are the most often take into account, and the least often non-governmental organizations. the main feature in the development of social responsibility of enterprises of transformation countries is that at the regional and state levels, the social contribution is reduced to the forced participation of business in the implementation of various social and cultural programs. other features of the eastern european corporate social responsibility model include: – lack of ideology of socially responsible entrepreneurship and low level of civic awareness; – absence of clear mechanisms of formation and implementation of the state social policy at the country, regional, and enterprise level; – high variability of forms of social activity formed at individual enterprises of countries of transformation type; – high differentiation of social corporate benefits, which are aimed only at the top executives. in the current conditions, there are problems of implementation and spread of socially responsible investment by companies in eastern europe, which are caused by a few factors: – lack of performance targets planned for executives and managers associated with sri implementation; – lack of methods of measuring economic effect of socially responsible investments that affect the business reputation of enterprise, the professional qualities of employees, and the volumes of sales; – difficulties in measuring the social effect of socially responsible investing, when it is almost impossible to evaluate the results of charitable assistance or volunteering, although some foreign companies use the amount of time spent on charity or the amount of money received from such work as a generic indicator; – undeveloped social reporting practices and difficult public access to stakeholder reports. only large enterprises engaged in foreign economic activity present such reports, smes either do not make a socially responsible investment or are under no obligation to submit such reports; – the vast majority of enterprises study the behaviour of consumers of their products while forgetting about their environmental impact, consumer protection, business ethics; – unwillingness to inform consumers and stakeholders about their environmental impact by affixing appropriate marking on the packaging. business leaders need to understand socially responsible investing is a strategic step in government baltic journal of economic studies 125 vol. 5, no. 5, 2019 regulation and ensuring corporate social responsibility since its results are gradually accumulating and creating a good business reputation and awareness among a large number of stakeholders, opportunities for attracting foreign investment and foreign cooperation, which indirectly affect the final financial result of the activity. entrepreneurs should analyse own social responsibility opportunities and use the same criteria as when choosing a core business. they should bear in mind that corporate social responsibility can be a powerful source of innovation and competitive advantage. in order to achieve this goal, it is necessary to consider the relationship between business and society, aimed at corporate growth and social well-being. this will help the company identify the social consequences of their actions and opportunities to benefit the community and themselves by enhancing the competitive context in which they operate. 5. proposals for further development of corporate social responsibility for business in countries of transformation type of eastern europe state regulation of the development of corporate social responsibility should be implemented by the following measures: – formation of normative and legal conditions for the development of social responsibility: to form a permanent body whose competence would be to analyse the current state of corporate social responsibility and regional structures for the development of corporate social responsibility of enterprises and organizations; – create a system of benefit and preferences for organizations that implement social responsibility policies and implement the socially important program; encourage the dissemination of social reporting by businesses and organizations; – develop the capabilities and competencies of enterprises and organizations to support them in the implementation of social responsibility: facilitate the exchange of experience and the improvement of corporate governance and the dissemination of corporate social responsibility strategies at enterprises; – increase the availability of corporate social responsibility information among various stakeholder groups: to conduct information events, to publicize information regarding companies that violate the principles of consumer protection and the principles of corporate social responsibility; organise conferences for the implementation and effectiveness of corporate social responsibility with the support of state and local authorities, local communities. in order to develop corporate social responsibility, it is necessary to formulate a strategy of corporate social responsibility for the enterprise, and for this purpose, it is important to carry out a comprehensive analysis of enterprise activity (financial-economic, socioeconomic, and economic-environmental types of analysis) – figure 1. strategically planned work in the area of corporate social responsibility and investment can improve the efficiency of an enterprise’s activity more effective than conducting a certain type of investment based analysis of development prospects of corporate social responsibility at enterprises financial and economic analysis of the enterprise analysis of internal and external social responsibility of the enterprise strengths weaknesses internal social responsibility external social responsibility formation of the strategy of corporate social responsibility of the enterprise figure 1. the model for analysing the perspectives of development of corporate social responsibility at enterprises in countries of transformation type of eastern europe baltic journal of economic studies 126 vol. 5, no. 5, 2019 strategy of corporate social responsibility of the enterprise economic goals social goals environmental goals ensuring the competitiveness of the national economy augmentation of business culture in the country stable and predictable development of the internal market formation of attractive national innovation infrastructure provision of modern tools of state regulation development of a culture of consumption and raising consumer awareness correct perception of business by the population a higher level of integration into the labour market and social inclusion development of innovations in the social sphere rational use of natural resources and reduction of emissions st a t e r e g u l a t io n figure 2. state regulation of the strategy of development of corporate social responsibility in the countries of transformation type on altruistic motivations. there is an ideal level of investment in csr for each organization depends on its size, level of diversification, research and development, advertisement, sales, consumer incomes, conditions of the labour market, and an industry lifecycle. it can be determined by cost-benefit analysis (mcwilliams, siegel, 2001). in addition, openness and transparency in communications is an important indicator in csr of business, in evaluating business operations, formulating goals and plans for employees. communication can have both a positive and negative impact on the csr evaluation of a company. for first and foremost it depends on how professionally this process takes place at the company and beyond it. stakeholders look to companies for leadership behaviour, not just risk management in global issues such as climate change, human rights, and reduction of poverty (lazorenko, kolyshko, 2008). thus, for the successful implementation of corporate social responsibility and socially responsible investing initiatives, a corporate social responsibility strategy is needed that will meet economic, social, and environmental goals – figure 2. in addition, for transformational societies, along with social responsibility, the priorities remain the areas of increasing the level of innovative development and competitiveness, corporate management, cooperation baltic journal of economic studies 127 vol. 5, no. 5, 2019 with groups of influence, development of human resources; population well-being, entrepreneurship and initiative; preservation and reproduction of the environment; integration into the international community. 6. conclusions the basic theoretical aspects of corporate social responsibility formation and socially responsible investing in the world and the possibility of applying their practices in the countries of eastern europe are investigated; the level of corporate social responsibility at enterprises of the transformation type countries is analysed, and the model is suggested for analysing perspectives of development of corporate social responsibility at enterprises in countries of transformation type of eastern europe. effective measures of state regulation of csr development can be the formation of a comprehensive system of legislative and regulatory support of social responsibility, granting tax and investment privileges and preferences, encouraging the involvement of business entities in international cooperation. in the countries of eastern europe, there should be special responsible state units, which regulate the work in different directions of csr , based on individual instruments depending on priorities of the socio-economic status of the country and the priority of its economic, environmental, and social development plans. further research may be aimed at developing proposals on improving mechanisms of state regulation of corporate social responsibility formation and socially responsible investing as a tool of corporate social responsibility in individual transformational countries in eastern europe. references: bayura, d. o. (2011). social investing as the highest level of corporate social responsibility. theoretical and applied issues of economics. collection of scientific works, 24, 212–219. retrieved from: http://library.univ.kiev.ua/ukr/host/ viking/db/ftp/univ/ttppe/ttppe_2011_24.pdf#page=212 bayura, d. o. (2017). developing corporate social responsibility in stakeholder support organizations. economic journal of lesya ukrainka eastern european national university, 4(12), 39–44. ernst & young, “climate change and sustainability: how sustainability has expanded the cfo’s role,” ernst & young, 2011. retrieved from: www.ey.com/us/en/services/specialty-services/climate-change-and-sustainabilityservices/howsustainability-hasexpanded-the-cfos-role eurosif 2018 sri study. retrieved from: http://www.eurosif.org/eurosif-2018-sri-study-launch-event/ kotsantonis, s., pinney c., & serafeim, g. (2016). esg integration in investment management: myths and realities. retrieved from: https://onlinelibrary.wiley.com/doi/abs/10.1111/jacf.12169 lazorenko, o., kolyshko, r ., et al. (2008). csr handbook. corporate social security information. energy publishing house. mackey, a., mackey, t., & barney, j. (2007). corporate social responsibility and firm performance: investor preferences and corporate strategies. academy of management review, 32(3), 817–835. mcwilliams, a., & siegel, d. (2001). corporate social responsibility: a theory of the firm perspective. academy of management review, 26(1), 117–127. mcwilliams, a., siegel, d., & wright, p. (2006). corporate social responsibility: strategic implications. journal of management studies, 43(1), 1–18. orlova, n. s., & kharlamova, a. o. (2014). conceptual principles of corporate social responsibility in ukraine. monograph. donetsk. peteraf, m., & barney, j. (2003). unraveling the resource-based tangle. managerial and decision economics, 24, 309–323. baltic journal of economic studies 8 vol. 6, no. 5, 2020 corresponding author: 1 faculty of business administration, university of akureyri, iceland. e-mail: helga@unak.is orcid: https://orcid.org/0000-0002-8857-8063 2 faculty of business administration, university of akureyri, iceland. e-mail: fjolabjork@unak.is orcid: https://orcid.org/0000-0002-3263-8418 * helpful comments received during an imf conference in iceland, and at the university of iceland, are highly appreciated. doi: https://doi.org/10.30525/2256-0742/2020-6-5-8-14 uk foreign direct investment in the oecd, culture and geography helga kristjánsdóttir1, fjóla björk karlsdóttir2 abstract. how does distance affect foreign direct investment? subject of this research is to determine important factors for the united kingdom, when undertaking foreign direct investment (fdi). the uk is therefore estimated as the home country of investment, investing in the form of fdi in multiple host countries. more specifically, this research measures determinants of fdi outward stock from the uk to other oecd countries. this research examines how distance affects foreign direct investment and provides twofold contribution. first: hofstede culture distance effects on foreign direct investment is measured. second: geographical kilometer distance effects on foreign direct investment is measured. methodology used in this research is based on the gravity model, presenting a model setup designed for international trade. moreover, the research applies foreign direct investment oecd data, together with data on gross domestic product and population. the equation specification combines the economic variables with measures for geographical distances, and the hofstede culture measure. first regression equation estimates fdi as a function of gdp, population and culture distance. second regression equation estimates fdi as a function of gdp, population and geographical distance. this regression setup provides a clear opportunity to estimate the difference between impact of cultural and geographical distance, represented in the estimation coefficients of the regressions. the british empire has evolved and through time developed the british culture. purpose of this current research is to examine how cultural distance and geographical distance impact foreign direct investment, with foreign direct investment often being an indicator of the long-term commitment of foreign investors. furthermore, with the purpose of finding how foreign direct investment is impacted by several different cultural factors, we analyze various dimensions of the hofstede culture. these are the power distance (pdi), individualism (idv), the masculinity/femininity (mas), and the uncertainty avoidance (uai). conclusion is that, all taken together, the research finds foreign direct investment from the uk going to other oecd countries to be more highly affected by geographical distance than cultural distance. which is interesting considering brexit. potentially, this is because the uk is not so culturally different from its main trading partners in the oecd, which is an interesting subject for future research. key words: foreign direct investment, geographical distance, hofstede national culture, international trade, gravity model, oecd, brexit. jel classifications: f14, f23, m14, m16, m2 1. introduction throughout history, gains from international trade (markusen, 2004) have stimulated long distance travelling. moreover, culture is important in trading, since countries still carry on the echoes of different civilizations (hofstede, 2001). the research question here is, how do these factors impact foreign direct investment (fdi) across borders? this current research seeks to answer that question. kirkman, lowe and gibson (2006) provide a thorough literature review, including introduction of findings showing that fdi decreases with more differences in national culture (li and guisinger, 1992; loree and guisinger, 1995). moreover, slagen and beugelsdijk (2010) findings support indications on cultural distance and geographic distance effects on fdi. the gravity equation applied in this current research, was developed by tinbergen (1962) and baltic journal of economic studies 9 vol. 6, no. 5, 2020 pöyhönen (1963) explaining exports as function the gdp of countries, taking into account how distant they are from one another (larue and mutunga, 1993). throughout history, countries have gained an advantage by wisely choosing between if to enter into conventional trade with export and import, or to undertake foreign direct investment (markusen, 2004). if we fast-forward through history, it appears it has played out as a comparative advantage to have similar culture (hofstede 1980, 1991, 1994, 2001, hofstede and bond 1998) when overcoming distance barriers (distance calculator, 2018). the research question seeks to answer whether the difference in countries national hofstede culture dimensions (hofstede 1980, 1991, 1994, 2001; hofstede and bond 1998) has similar effects as geographical distance (distance calculator, 2018) has on international trade and fdi (world bank, 2016). we hope to illustrate some of the challenges facing countries in the past and the present. the less distance between countries, the more trade (oguledo and macphee, 1994). in addition, gross domestic product (gdp) and population can be applied to account for economies of scale along the lines of economic geography (krugman, 1991; bergstrand, 1985). foreign direct investment (fdi) is what we want to analyze in this current research. foreign direct investment is investigated and connected with culture and distance, as well as economic gdp, market size, and population. the objective is to establish a relationship between some economic factors, of a country where trade has exploded in volume over the years. the second section presents literature and model setup. in section three, the data section introduces the data applied in the research, providing variable definition and summary statistics for the sample. estimation results are then introduced, and finally summary and conclusions. 2. literature and model setup in this current research, we estimate the uk as the home country, investing the form of fdi in multiple host countries, by measuring fdi outward stock from the uk to other oecd countries. the british empire evolved through time and developed the british culture. in this current research, we wish to examine how foreign direct investment (fdi) and culture (hofstede, 1980, 1991, 1994, 2001; hofstede and bond. 1998) impacts exports. we analyse the effects of the hofstede culture dimensions, these are power distance (pdi), individualism (idv), masculinity/femininity (mas), and uncertainty avoidance (uai). we start by introducing equation (1): px y y d a uij i j ij ij ij= ( ) ( ) ( ) ( )β β β β β 0 1 2 3 4 (1) equation (1) is based on bergstrand (1985) model with variable pxij presenting exports flowing from country i to country j over time t. yi presents gdp of country i at time t, and yj the gdp of country j at time t. dij is the geographic distance between the country i and country j, with increased distance generally expected to reduce trade. aij presents factors affecting or restricting trade between country i and j. finally, uij is a log-normally distributed error term, with e(lnuij� )=0. exp e y y d a eij t i t j t ij ij ij t , , , ,= ( ) ( ) ( ) ( )γ γ γ γ γ ζ0 1 2 3 4 (2) equation (2) offers the insertion of population for variable a into the model. exp e gdp pop dis eij t i t i t ij ij t , , , ,= ( ) ( ) ( )ς ς ς ς0 1 2 3  (3) equation (3) shows the gdp, gross domestic product, and the population pop specification of the model, together with dis for distance. we next replace exports with fdi, since fdi is one form of international economic activity (markusen, 2004). ln ln(fdii,t) = ω0 + ln ω1 ln (gdpi,t) + ln ω2 ln (popi,t) + + ln ω3 ln (dis_culturei) + ξi,t (4) we further extend the specification in equation (6), then fdi as a function of culture, gdp and population together with the hofstede culture dimensions. we therefore go along the lines of some previous use of the hofstede culture index, explaining international trade (kristjánsdóttir, 2019a; kristjánsdóttir, guðlaugsson, guðmundsdóttir and aðalsteinsson, 2017, 2020). ln ln (fdii,t) = υ0 + ln υ1 ln (gdpi,t) + ln υ2 ln (popi,t) + + ln υ3 ln (dis_geographical) +ςi,t (5) equation (7) provides the fdi as being a function of distance, gdp and population. along the lines of the theory presented by bergstrand (1985) and keynes (1936), we expect exports to increase with the size of the economy presented with gdp as y increases. 3. data this research is based on the uk fdi outward stock data from the oecd. the dataset covers fdi from the uk to other oecd countries, based on the oecd database (oecd, 2016) providing division of uk data to other oecd countries, reporting decomposition of fdi, to individual trading partner countries of the us. the division of fdi from the uk to individual oecd countries is reported on a yearly basis. the countries included are the following oecd countries, receiving fdi form the uk: australia, austria, belgium, canada, chile, the czech republic, denmark, estonia, finland, france, germany, greece, hungary, iceland, ireland, israel, italy, japan, korea (the republic of korea), luxembourg, mexico, the netherlands, new zealand, norway, poland, portugal, slovakia baltic journal of economic studies 10 vol. 6, no. 5, 2020 (the slovak republic), slovenia, spain, sweden, switzerland, turkey, the united kingdom, the united states. the total number of the oecd countries in the data sample is 34 countries (oecd, 2016). data covers the years from 1989 to 2012, with the uk fdi being the limiting variable, since it only runs to 2012. data on geographical distance is reported in kilometers and obtained from the distance calculator (2018). we choose to eliminate some oecd countries from the sample, since not all five of the hofstede (2001) culture dimensions are reported for the. the countries eliminated in this current research, since they only report four dimensions, are the following: chile, greece, slovenia and turkey. taken together the five hofstede (2001) cultural measures interpret that high power distance, indicating less equal society. high individualism indicates that individualism is appreciated. high masculinity involves that masculinity tends to be appreciated in the society. high uncertainty tolerance implies that societies tend to avoid uncertainty. and finally, high long-term orientation, indicates that there is more patience for waiting in the society. the five hofstede dimensions do not vary over time. variables applied in this current research are defined in table 1. the uk hofstede culture difference, referred to as the uk_hofstede variable is in the following way: hofuk=hofstedei-hof_uk as the outcome when the hofstede measure for the uk is from each country hofstede value. furthermore, the uk_dis variable is the distance from the uk london capital to the capital city of each country in the sample, except for the usa where new york is instead of the capital city washington. some previous research (carr, markusen, maskus, 2001) has applied skilled labor differences, when estimating international activities. in this current research we apply distance differences, and culture differences when estimating international activities. 4. estimation results and discussion table 3 provides estimates on how distance affects the foreign direct investment (fdi) from the uk, to individual oecd countries. table 4 estimates measure the effects of culture are less negative on fdi flowing out of the uk to individual oecd countries, than on exp from the uk, and more importantly the culture effects are found to have insignificant impact on fdi. when the results in table 4 are compared to the results in table 3, they indicate that the geographical distance has more negative effects than the cultural distance, on the fdi of the uk. actual geographical distance between countries therefore appears to matter more than cultural distance between them. several approaches have been applied to capture determinants of international trade and foreign table 1 variable definition uk_fdii,t foreign direct investment fdi, outward from the united kingdom uk. reported in united states dollars, us dollars (usd). millions. obtained from the oecd (2016) , on the web-page stats.oecd.org uk_gdpi,t gross domestic product gdp of the united kingdom uk. reported in us dollars, current prices. millions. obtained from the oecd (2016) , on the web-page stats.oecd.org uk_popi,t population. all ages. all persons. annual. obtained from the oecd (2016), on the web-page stats.oecd.org oth_gdpj,t gross domestic product gdp of various oecd countries running over j. reported in us dollars, current prices. millions. obtained from the oecd (2016) , on the web-page stats.oecd.org oth_popj,t population. all ages. all persons. annual. obtained from the oecd (2016), on the web-page stats.oecd.org uk_disi,t uk distance is the distance from the uk to other countries. measured as distance in km from the united kingdom capital city, london, to other capital cities of countries, except for that in the case of the us new york is applied rather than washington dc (distance calculator, 2016). uk_hofstedei,t uk hofstede is the difference between the uk hofstede measure, and hofstede measure of other countries. with hofstede measure accounted as the accumulated dimensions for each country. table 2 summary statistics for the basic sample variable obs mean std. dev. min max ln(uk_fdii,t) 724 5.944604 2.119853 .4259211 12.05647 ln(uk_gdpi,t) 1176 14.28597 .3124355 13.77242 14.68813 ln(oth_gdpi,t) 804 12.59501 1.539574 8.574854 16.59776 ln(uk_popi,t) 1176 17.89607 .0274194 17.85989 17.9564 ln(oth_popi,t) 814 16.37921 1.524325 12.44014 19.56526 ln(uk_distancei,t) 1152 7.777442 1.059243 5.771441 9.841612 ln(uk_hofstedei,t) 696 4.457049 .8364267 .7442554 5.237164 baltic journal of economic studies 11 vol. 6, no. 5, 2020 direct investment (davies and kristjánsdóttir, 2010; kristjánsdóttir, 2010, 2013, 2016a, 2017, 2019b, 2020; kristjánsdóttir and óskarsdóttir, 2020). possible adaptations could be to include fixed effects xtfevd method, accounting for fixed effects, along the lines of davies, ionascu and kristjánsdóttir (2008) who covered inward and outward fdi stock and flows, as well as affiliate sales to capture operational activities of multinational corporations (beugelsdijk, hennart, slangen and smeets, 2010). the xtfevd method is applied on fdi in a research by davies, ionascu and kristjánsdóttir (2008), when estimating the impact of time-invariant variables on fdi with fixed. the xtfevd procedure allows for incorporation for fixed effects in data samples, correcting for the conflation of samples with one home country and multiple host countries of fdi discussed in van hoorn (2016) and brouthers, marshall and keig (2016). 5. conclusions we seek to analyze how foreign direct investment, fdi, flowing out of the united kingdom to other oecd countries is impacted by geographical distance and culture distance. the results obtained are novel in the sense that outgoing fdi from the uk is estimated to be less table 3 geographical distance effects on foreign direct investment, based on equation (4) linear regression number of obs = 539 f( 5, 533) = 109.34 prob > f = 0.0000 r-squared = 0.5359 root mse = 1.4343 robust lnukfdi coef. std. err. t p>t [95% conf. interval] lnukgdp 1.249777 .4802344 2.60 0.010 .3063925 2.193161 lnothgdp 2.552213 .1647092 15.50 0.000 2.228654 2.875772 lnukpop -20.29229 5.26387 -3.86 0.000 -30.63277 -9.951815 lnothpop -1.83521 .1672735 -10.97 0.000 -2.163806 -1.506614 lndisuk -.2087674 .0592539 -3.52 0.000 -.3251672 -.0923676 _cons 350.9077 88.48003 3.97 0.000 177.0954 524.7201 robust t-statistics are reported in parentheses. *** significant at the 1 percent level. ** significant at the 5 percent level. * significant at the 10 percent level. table 4 cultural distance effects on foreign direct investment, based on equation (5) linear regression number of obs = 428 f( 5, 422) = 82.97 prob > f = 0.0000 r-squared = 0.5154 root mse = 1.4151 robust lnukfdi coef. 364.4958std. err. t p>t [95% conf. interval] lnukgdp 1.113228** .5314235 2.09 0.037 .0686612 2.157795 lnothgdp 2.910743*** .2458645 11.84 0.000 2.427472 3.394015 lnukpop -20.81707*** 5.631686 -3.70 0.000 -31.88672 -9.747416 lnothpop -2.31361*** .2784291 -8.31 0.000 -2.86089 -1.766329 lnhofuk -.1064563 .0755596 -1.41 0.160 -.2549763 .0420638 _cons 364.4958 95.19117 3.83 0.000 177.3879 551.6037 robust t-statistics are reported in parentheses. *** significant at the 1 percent level. ** significant at 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(1997). country effects on information seeking in global economic networks. journal of international business studies, vol. 28, pp. 77–100. baltic journal of economic studies 48 vol. 6, no. 3, 2020 corresponding author: 1 state organization “institute for economics and forecasting of the national academy of sciences of ukraine”, ukraine. e-mail: ilunina@ukr.net orcid: http://orcid.org/0000-0003-3812-4802 researcherid: aap-2680-2020 2 state organization “institute for economics and forecasting of the national academy of sciences of ukraine”, ukraine. e-mail: bilousova.os@gmail.com orcid: https://orcid.org/0000-0001-7434-3469 researcherid: aab-1694-2019 3 state organization “institute for economics and forecasting of the national academy of sciences of ukraine”, ukraine. e-mail: nata.frolova99@gmail.com orcid: https://orcid.org/0000-0002-7979-950x doi: https://doi.org/10.30525/2256-0742/2020-6-3-48-58 tax reforms for the development of fiscal space inna lunina1, olena bilousova2, nataliya frolova3 abstract. a reduction of the tax burden on corporate income in order to stimulate drivers of economic development has become the important issue of tax reform in many countries in recent decades. tax competition forces national governments to take well-balanced solution on increasing outward and domestic investments as well as ensuring the fiscal capacity of the budget to cope with urgent socio-economic problems under enhancing fiscal risks. the purpose of the article is to assess the impact of tax reforms, addressing reducing the corporate income tax burden, on the fiscal space and investment processes in the eu countries and ukraine, to establish directions of improvement of the tax system in ukraine and other transition economies in order to spur the expansion of fiscal space. the research subject covers tax policy settings that shape fiscal space development. research methodology. in accordance with the purpose of the article, the research methods are set as follows: abstract-logical; systemic analysis; analysis and synthesis; graphical method. findings. by summing up theoretical ideas on the issue of feasibility of cutting corporate income tax, we have arrived at the conclusion that this measure has a significant impact on the improvement of tax competitiveness of the national economy. the gain from its application is confirmed by the best practices of many european countries. the results of the tax reform in ukraine have proved that a traditional approach to the choice of tax issues – in contrast with developed economies – do not comply with theoretical provisions on increasing the competitiveness of the national economy and fostering investments. this is conditional on the specific tax effects in ukraine due to the restriction of the key economic freedoms (investment, financial, property rights protection and judicial effectiveness) needed for successful entrepreneurship, as well as of a high rate of corruption, which increases the costs of business activity. such effects include, in particular, a drop of tax revenues in the short and long term while reducing the level of corporate income taxation; a high level of tax evasion, capital outflow instead of expanding investment in the national economy. it is argued that the emphasis while carrying out tax reforms and expanding fiscal space in transition economies considering the specific effects of changing corporate income tax provisions, should be made on ensuring the long-term sustainability of public finances through measures of budget adjustments aimed at avoidance shifting the existing fiscal problems on future generations; harmonization of national tax legislation with the eu regulations and prevention of tax evasion; increasing the financial capacity of enterprises by introducing targeted innovation tax incentives, which will gain higher competitiveness of the country in the world markets and as a result facilitate the growth of the country’s future revenue receipts. key words: tax reform, tax burden, investment rate, fiscal space, corruption, shadow economy, targeted innovation tax incentives. jel classification: e22, h20, o23 baltic journal of economic studies 49 vol. 6, no. 3, 2020 1. introduction a reduction of the tax burden on corporate income, in particular by reducing the corporate income tax rate has become the important issue of tax reform in ukraine, as well as in many countries in europe and worldwide in recent decades. the top corporate tax rate in the eu countries (eu-28) in 2018, according to eurostat, averaged at 21.9 % compared with 23.8% in 2009 and 33.5% in 1999. employers’ compulsory social security contributions in the eu countries decreased from 24.8% to 22.2 % on average for the period 2009-2018 (employer social security tax rates, 2019). at the same time, tax ratio in the eu countries increased from 37.7% gdp on average during 2004-2008 to 37.8% gdp in 2009-2013 and peaked 38.7% gdp in 2014-2017. in ukraine, the corporate income tax rate decreased from 30% in 1999 to 21% in 2009 and then in 2014 it dropped to 18%. employers’ compulsory social security contributions fell down to 22% in 2016. the total tax ratio (including all taxes and compulsory social security contributions) averaged 34.0% gdp for the period 2014-2018 compared with 35.4% in 20092013 and 35.7% in 2005-2008. thus, the total tax ratio and the corporate income tax rate in ukraine in recent years have been both much lower in comparison with many other european countries. however, a significant reduction of tax and contribution rates has promoted neither the improvement of the ukrainian tax competitiveness nor its investment boom. this suggests that there are other specific effects which should be looked at. the problems of tax reform efficiency and its impact on economic growth have been scrutinized by international experts, including e. asen, j. arnold, a.l. bovenberg, b. brys, d. bunn, v.h. dehejia, ph. genshel, a. johansson, c. heady, r .h. gordon, s. matthews, j. owens, a. smith, v. tanzi, m. porter, ch. b. blankart, m. overesch, j. rincke, l. vartia and others. although, despite the continued attention of researchers and experts to these problems, follow-up studies are required to examine impact of tax reform on fiscal space development and investment in transition economies as well as in countries with different levels of economic freedom. the purpose of the article is to assess effects (impact) of tax reforms, addressing reducing corporate income tax burden, on the development of fiscal space and investment processes in the eu countries and ukraine, to justify ways of improvement of tax system in ukraine. to accomplish this purpose, the following steps need to be taken: to provide a summary of theoretical ideas on the issue of reducing corporate income tax rates; to detect drivers that affect level of corporate income taxation; to discuss international practices towards better investment environment; to work out ways of improvement of the tax system of ukraine in order to ensure fiscal space development. the research subject covers tax policy settings that shape fiscal space development in transition economies. research methodology. in accordance with the purpose set, the research methodology is based on the following methods: abstract-logical method is applied to provide a summary of academic ideas on the issue of reducing corporate income tax rates; systemic analysis is applied to describe tax reforms; analysis and synthesis are used to assess the impact of tax changes on investment, tax revenues, public debt developments; graphical method is used to display cross-country comparisons and to illustrate the final conclusions of the article. the novelty of the study comprises an application of a new approach of tax reform efficiency evaluation within a concept of sustainable development; identification of the determinants of specific tax effects that are attributed to the transition economies; a design of new ways of tax system improvement in such countries to support fiscal space development. 2. theoretical ideas on the issue of reducing corporate income tax rates the reduction of statutory corporate income tax rates plays an important role for potential investors, as it serves as a signal for them that the government of a country is carrying out a policy of investment facilitation. at the same time, the combination of low tax rates and broad tax base eliminates distortions with respect to the economic decisions of economic agents. in addition, it implies better tax administration (brys, matthews & owens, 2011). such measures in the eu countries not only foster investment growth, but also result in higher tax revenues. reduction of tax rates, which contributes to capital investment growth, challenges the expansion of capital intensive activities. even adam smith noted that “capital cultivates land, capital employs labor. tax that causes the outflow of capital… thus causes loss of all sources of income for society and its government. capital outflow… brings not only to the lower capital return, but also inevitably cuts down ground rent and wages” (smith, 1935). overall, reduction of tax rates on different stages of national economic development is an implicitly important driver of capital accumulation and capital investment increase, and therefore gives rise to economic growth. the findings of many studies – as noted by v. tanzi – evidence that differences in per capita income and economic growth rates are mainly conditional upon the differences in capital accumulation (tanzi, 2014). high taxes and information asymmetry caused by international differences in capital taxation set up the most rigorous “obstacles” for foreign investors to enter the domestic market (gordon & bovenberg, 1994; baltic journal of economic studies 50 vol. 6, no. 3, 2020 porter, 2007). according to the famous us economist a. harberger, under conditions of high capital mobility, the supply elasticity of this factor of production is in inverse proportion to the level of its tax burden, in other words, the higher the level of capital tax rates in a country, the lower the investment inflow in its economy (blankart, 2000). in conditions of high capital mobility, companies seek to choose countries where they can maximize their after-tax profit. increasing of capital mobility while getting access to international markets also further stronger economic performance and growth of national economy (kazutoshi, hikaru & toshiki, 2018). therefore, reduction of tax burden on corporate income, in particular by cutting corporate income tax rates, is one of the most influential condition for creation of competitive tax system (bunn & asen, 2019). above mentioned theoretical provisions support there are the findings of some empirical studies, which suggest that cutting corporate income tax rates have the greatest impact on economic growth and facilitate country’s investment environment ( johansson, heady, arnold, brys & vartia, 2008). in many countries, the reduction of corporate income tax rates has been accompanied by either increase of the tax receipts, or by keeping of the tax receipts at the same stable level, or by a minor reduction in tax receipts compared with a reduction in the tax rate due to the measures of the tax base expansion. fight for mobile factors of production and investments, forces the governments of neighboring countries (with higher tax ratio) to reduce their tax rates, in other words it stimulates processes of tax competition. according to some proxy estimates, in 2006 without tax competition in western europe the average corporate tax rate would have been 12.5 percentage points higher than actual rate (overesch & rincke, 2011). a number of authors have even suggested that with perfect tax competition, the tax rate on capital must have fallen to 0% (dehejia & genshel, 1998). in tax theory, such a policy is called a “race to the bottom”. one of the positive outcomes of tax competition is a higher after tax corporate profit, which, consequently, contributes to better corporate financial capacity in terms of capital and investment accumulation as essential drivers of economic growth (kazutoshi, hikaru & toshiki, 2018). for example, in recent german studies, the feasibility of cutting corporate tax rate from 30% to 25% has been based upon some findings by the institute’s ifo that it would add extra 14% of investments to the corporates. furthermore, the reported profit would increase by about 4% due to the decline in tax evasion (fuest, 2019). with regard to negative consequences of tax competition, it caused tax base erosion due to the outflow of capital and labor resources to neighboring countries with less tax burden. various experts point out that the geographical neighborhood of countries significantly increases the impact of tax competition on the reduction of tax rates (braid, 1993). during the preparation for the eu enlargement a significant discrepancy between corporate income tax rates appeared. moreover, there was a consistent tendency of capital outflow to the transition economies, which became new eu members in 2004. reduction of corporate income tax rates in the post-socialist eu 15 20 25 30 35 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % average corporate income tax rate, % average investment rate, % figure 1. corporate income tax rate, investment rate in the post-socialist eu countries in 1999-2018, % source: created by the authors according to the data from the statistical office of the european union baltic journal of economic studies 51 vol. 6, no. 3, 2020 countries in the period 2002-2008 (on average from 23.65% to 18.12%) accompanied by rising investment rate from 30.2% to 35.2% (figure 1). despite cutting of corporate income tax rates in the developed eu countries, they were still at a higher level, and the average investment rate decreased from 23.523.7% in the period 1999-2001 to 22.03% in 2003 and 21.7% in 2004 (figure 2). in response to this situation policy makers from the eu, oecd and un put all their efforts to launch anti-tax competition measures through a policy of tax harmonization (remeur, 2015; coughlan, 2015; european commission, 2016). tax competition faced by many countries couples with the problem of tax exporting. this phenomenon occurs when residents of one country, if they work or own property in the other country, have to pay higher taxes there. in such circumstances, the government of the resident country may decide that it is inappropriate to reduce domestic tax rates, given that they are not as high as in the neighboring country (braid, 2005). tax exporting has the opposite effect on the level of tax rates compared with tax competition, i.e., tax rates remain at the previous level, although in some cases tax exporting might even result in tax rate increase. doubtless, in addition to tax rates and other tax law implications, tax ratio is also dependent on a number of non-tax factors, such as inflation (rozen, 1992). as h. rosen states, high inflation affects the real value of deductions from taxable income, which are settled in nominal terms. it does not only makes capital more vulnerable to inflation, but also distorts the efficiency of tax policy measures designed to reduce the tax burden on this factor of production. v.tanzi also draws attention to the fact that the attractiveness of a country for investments depends not only on tax rates but on different conditions (tanzi, 2007), such as tax law transparency; certainty and predictability of tax changes; amount of costs related to tax administration and tax compliance; allocation of tax revenues, which implies services consumed by individuals and businesses in exchange for taxes paid; the state of public finance (budget deficit and public debt), which in case it worsens might lead to higher taxes in future; investment climate and legal framework of a country (rule of law) etc. thus, the key message of summing up theoretical ideas on the issue of feasibility of cutting corporate income tax is that it stimulates investments and accelerates growth of national economies. best practices of many developed countries proved it to be a quite efficient measure. nevertheless, in conditions of high capital mobility, there are other important determinants which make a divergent impact on the level of tax rates and tax burden on corporate income such as tax competition, tax exporting, inflation, tax law provisions and processes of its harmonization. 3. the situation in ukraine the development of ukraine’s tax system in recent decades has complied with the traditional approach of ensuring its tax competitiveness by reducing the tax 15 20 25 30 35 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % average corporate income tax rate, % average investment rate, % figure 2. corporate income tax rate, investment rate in the eu developed countries in 1999-2018, % source: created by the authors according to the data from the statistical office of the european union baltic journal of economic studies 52 vol. 6, no. 3, 2020 burden on corporate income. the uniform statutory rate of corporate income tax was gradually cut down from 30% in 1999-2003 to 25% in 2004-2010, then to 23% in 2011, to 21% in 2012, to 19% in 2013 (it was reduced to 5% for it companies) and finally in 2014 it fell to its current level of 18%. employers’ compulsory social security contributions in ukraine had a profound impact on the tax burden on corporates. however, since 2016 the contribution rates have been reduced to 22% compared with 36.76-49.7% before (depending on the occupational hazard class). the nominal and relative reduction of the tax burden on corporate income of the ukrainian enterprises (by reducing the rates of the unified employers’ compulsory social security contributions and corporate income tax) was stipulated, on the one hand, to supply enterprises with additional financial resources that could potentially be invested in fixed capital and business development. on the other hand, it could eliminate shadow economy and, as a result, raise more budget revenues. however, the tax cut did not have a significant positive effect on corporate investments. in ukraine, the investment rate of nonfinancial corporations in the period of 2001-2003 (at this time corporate income tax rate was 30%) averaged at 26.01% (calculated by authors on the basis of eurostat methodology). in the period 2014-2018 (when corporate income tax rate was reduced to 18%), average investment rate decreased to 22.67%. whereas, growth of the investment rate of nonfinancial corporations in ukraine in the period 20062008 to 33.5-36.6% and in 2012 to 30.7% was mainly determined by increase of capital transfers to enterprises from the state and local budgets of ukraine (figure 3). the inflow of foreign investments in ukraine in the period of 1999-2013 (according to the state statistics committee of ukraine in different years it amounted to 0.3 – 1.1% gdp) international experts attribute mainly to the influence of non-tax factors, such as the privatization of state enterprises, availability of natural resources, low production costs (world investment report, 2013). alongside this, the quality of local infrastructure, qualification of labor resources as well as other factors implying production efficiency and distinguishing characteristics of enterprises are also of a prior importance for the investors. it should also be noted that the additional financial resources received by the ukrainian enterprises did not result in higher investments in the national economy but were transferred abroad. in 2014-2018, the reduction of corporate income tax rate and the unified social contribution rate was followed by the rise of capital outflows from ukraine (figure 4). meanwhile, in the period of 2009-2013, foreign direct investments from ukraine averaged at 4.4% gdp, in the period of 2014-2018 its annual volume grew by 70% and reached the level of 7.4% gdp. 0 5 10 15 20 25 30 35 40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % to ta l v al ue a dd ed 0 5 10 15 20 25 30 35 40 c or po ra te in co m e ta x ra te , % investment rate for nonfinancial corporations, % total value added capital transfers to the enterprises from the budget of ukraine, % total value added corporate income tax rate, % (right axis) figure 3. dynamics of investment rate of nonfinancial corporations and capital transfers to the enterprises from the budget of ukraine in 2001-2018, % source: state statistics service of ukraine; authors’ calculation based on the data from the ministry of finance of ukraine baltic journal of economic studies 53 vol. 6, no. 3, 2020 in addition, the reduction of tax burden on enterprises has not significantly improved the situation with shadow economy in ukraine. during the period of 2008-2018 the size of shadow economy varied from 30 to 43% in terms of official gdp (according to the estimates of the ministry for development of economy, trade and agriculture of ukraine) (general trends of shadow economy in ukraine, 2018 ), which exceeded the highest level in the oecd countries. for instance, in the period of 2014-2018, this excess varied from 9.2 to 19.7 % (see table 1). in the period of 2004-2018, there were processes of deterioration of the state of public finances in ukraine: 1. fast growth of public debt. the total amount of direct and state-guaranteed public debt has increased from 24.75% gdp in 2004 to 38.4% in 2013, then to 80.9% in 2016 and finally to 60.9% gdp at the end of 2018. 2. a considerable share of borrowed funds was assigned to finance current government spending. during this period less than a quarter of direct government debt gains was spent on investment, lack of which neglected necessary preconditions for economic growth and reduction of the tax burden on corporate income. whereas, the annual volume of budget investments in ukraine in the period of 2004-2018 on the average was only 1.82% gdp (it varied within 0.9-2.8% gdp). based on this indicator, ukraine ranked last among the post-socialist countries of europe, which negatively affected the country’s competitive advantage. 3. high cost of the ukrainian government borrowings has led to the increase of public expenditures on debt servicing. in the period of 2004-2018, this increase outran the growth of public debt. direct public debt has increased 27 times, meanwhile, the cost of public debt 0,0 5,0 10,0 15,0 20,0 25,0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 % g d p capital investments in ukraine at the expense of enterprises’ own funds and bank loans, % gdp direct foreign investments from ukraine (equity capital), % gdp figure 4. capital investments in ukraine and beyond its borders in 2001-2018, % gdp source: national bank of ukraine; authors’ calculations based on the data from the state statistics service of ukraine table 1 size of shadow economy in ukraine and oecd countries, % official gdp years ukraine oecd, weighted average oecd, highest oecd, minimum 2008 34.0 13.2 24.3 7.0 2009 39.0 13.8 25.0 7.6 2010 38.0 13.5 25.4 7.2 2011 32.0 13.2 24.3 7.0 2012 32.0 13.0 24.0 7.0 2013 35.0 12.5 23.6 6.6 2014 43.0 12.4 23.3 6.3 2015 40.0 12.2 22.4 5.9 2016 35.0 11.9 22.0 5.6 2017 32.0 11.6 21.5 5.4 2018 30.0 11.2 20.8 5.1 source: ukraine – the ministry for development of economy, trade and agriculture of ukraine; oecd countries – authors’ calculations based on the data from schneider f., boockmann b. die größe der schattenwirtschaft – methodik und berechnungen für das jahr 2020. linz und tübingen, 4. februar 2020. s. 25. baltic journal of economic studies 54 vol. 6, no. 3, 2020 servicing has grown in 36 times (from 3.2 billion uah in 2004 to 116.1 billion uah in 2018). 4. constraints on budget financing of social sphere. in the period of 2015-2018, expenditures on public debt servicing exceeded budget expenditures on health care. it should be noted that in ukraine, annual public expenditures on health care in 2004-2018 averaged at 3.62% of gdp which constituted only 52% of such expenditures in the eu (at the average level of 7.0% gdp). back in 2000, v. tanzi and l. schuknecht argued that in order to prevent public health problems along with increasing life expectancy, it was necessary to ensure a faster growth of spending on medical services compared to other budget services (tanzi & schuknecht, 2000). overall, budget expenditures on debt repayment and servicing in ukraine will put constraints on budget funding of important social government functions for many years. 5. budget receipts of corporate income tax will drop as a result of its rate cut not only in the short term but also in the long-run perspective. in the period of 2004-2008, corporate income tax was an important source of budget revenues: on the average it provided 14.1% of tax revenues of the general government (including tax revenues of the consolidated budget and contributions to the compulsory social security funds), while, in the period of 2014-2018, it collected only about 7%. shift in corporate income tax receipts from 4.9% gdp in the period of 2004-2008 down to 2.5 % gdp in the period of 2014-2018 was induced by cutting the rate of corporate income tax from 25% in 2004-2008 to 18% in 2014-2018 in the absence of policy measures aimed at reducing the shadow economy and broadening the tax base. 6. allocation of budget funds to cover pension payments. compulsory social security contributions are not much sufficient to finance pension fund in ukraine therefore it also requires government to add a large share of finance from the budget. for instance, in 2004, compulsory social security contributions made by employers could finance about 77% of the ukrainian pension fund liabilities, but in the period of 2016-2018, when a unified contribution rate was cut down to 22%, it could finance between 42 and 55%. after the implementation of this reform, the ukrainian minister of social policy raised a question about a unified contribution rate increase, given the significant decline of its receipts. the chairperson of the verkhovna rada committee for tax and customs policy of ukraine also drew attention to the fact that business entities did not bring wages out of the shadows motivated by expectations of unpredictable and illogical changes in the government (nina yuzhanyna, 2016). in such conditions, a big amount of budget assignations on social protection and social welfare counts as subsidies to the pension fund of ukraine. thus, the reduction of the tax burden on corporate income in ukraine by means of compulsory social security contributions should be preceded by consistent measures aimed at reducing the size of the shadow economy in ukraine. according to j. stiglitz, through the use of globalization advantages, such as free movement of capital and assets, economic entities – under the imperfect corporate income tax system – are able to avoid paying taxes (stiglitz, 2015). such effects put tax collection at risk if the government does not tackle tax evasion in a timely manner. while the prevention of tax optimization risks, first and foremost, calls for strengthening of control over the effectiveness of tax incentives (by an independent control board) (chapman & zahradnik, 2015), elimination of risks associated with changes in the behavior of economic entities requires the improvement of corporate income tax base formation and rescheduling its tax rates (kopits, 2014). the government is responsible for creating such tax treatments so that the state can finance its commitments properly. in ukraine, the reduction of corporate income tax rates did not ensure the improvement of national tax competitiveness and investment growth. the main factors that hinder business activities and reduce the competitiveness of the national economy are as follows: corruption, judicial ineffectiveness, lack of reliable protection of property rights, restricted investment and financial freedom. the factors of economic freedom in ukraine considering different variables (graded on a scale of 0 to 100) were estimated at no greater than 30 (protection of property rights – 31.5, see table 2), which suggested an extremely insufficient rule of law guarantee as well as a lack of key prerequisites for free and effective business activity in ukraine. it should be kept in mind that the economy of ukraine lists as a small, open, commodity model with a speculative grade rating. in 2018, ukraine accounted for only 0.15% of world gdp with gdp per capita standing at 27.4% of the world average (the world bank, 2018). this implies that ukraine’s economic decisions do not make any influence on the economies of developed countries. table 2 key factors of the index of economic freedom of ukraine in 2004-2018 property rights judicial effectiveness government integrity investment freedom financial freedom average for 2014-2018 31.5 26.1 26.2 23.0 30.0 average for 2004-2008 34.3 27.9 27.8 26.0 30.0 source: authors’ calculations based on the data from the heritage foundation (https://www.heritage.org/index/explore?view=by-region-country-year) baltic journal of economic studies 55 vol. 6, no. 3, 2020 ukraine has an open economy – the volume of its foreign trade (based on the world bank methodology) in 2018 was estimated at 99% gdp, which is much higher than the world average (57.9% gdp). import of goods and services amounted to 53.8% gdp, which is 8.6 % higher than exports, triggering the risk of exchange rate. meanwhile, manufacturing equipment and vehicles accounted for almost 30% of import. at the same time, more than a half of export from ukraine is led by raw materials (grain 15.3%, oil seeds 4.1%, mineral products 9.2%), base metals and metal products (24.6%), not by high-tech and innovative products with high added value. ukraine’s economy still belongs to the category of economies with speculative grade ratings, although the international agency fitch ratings upgraded ukraine to “b” from “b-” in september 2019 (fitch ratings, 2019). despite this, such a situation has an adverse effect on the cost of borrowing by the government and companies. moreover, it causes additional fiscal risks. small economies of various countries have common distinct features, which are different from those of “large” economies, that should be considered while carrying out their tax policy, namely: limited capacity to broaden economic base in the short and long-run term (due to inability to benefit from economies of scale, narrow specialization of production of goods for exports, significant vulnerability of the development of small economies to global shocks and unfavorable foreign market conditions, high economic instability); large public debt; small investments and savings (lederman & lesniak, 2018). governments of small countries do not have enough flexibility to deal with risk situations (such as macroeconomic instability, unfavorable external market conditions, expansion of public social spending in the crisis period, high cost and limited access to external borrowing) and consequently to facilitate the development of fiscal space. in the countries with a high rate of corruption and the shadow economy, the risk forces become even more influential, which challenges against creating fiscal space in these countries. our conclusion emerging out of the analysis and assessment of several tax reforms in ukraine suggests that the stated goals of promoting the investment and reducing the shadow economy were not achieved. ukraine, as a country with a small, open, and mostly raw-oriented economy, with a high rate of corruption and undeclared incomes, is characterized by specific tax effects of cutting corporate income tax rates. among those effects are, namely: drop of government revenues as a result of a tax rate cut as well as contribution cut not only in the short term but also in the longrun perspective; lack of measures of innovation and investment promotion; prevailing of outward investments over investments in the domestic economy of ukraine. these effects should be considered when deciding on tax policy measures. the key condition of the creating of good tax policy should provide long-term sustainability of public finances (eichler & emmenegger, 2018), in other words to ensure such growth rate, when each generation is able to deal with their problems on their own account without shifting them on future generations, and take measures to prevent future problems (deutsche nachhaltigkeitsstrategie, 2016). in case of budget gap occurrence, measures of fiscal adjustment should be taken, for instance by increasing taxes provided that spending cut or public debt increase is impossible. a fair intergenerational distribution of the tax burden can be achieved when current budget expenditures are financed by taxes and government borrowings are used only for investment. a fair intergenerational distribution of resources is a priority for the australian government, which strives to ensure that future generations of taxpayers do not need to cope with an unmanageable account for public services provided to the current generation (intergenerational report, 2002). tax rates and other tax law provisions should be designed in a way to allow for the risk of rising public debt, reducing tax revenues (due to tax fraud) or increasing pressure on public spending. the best practices of different countries which carry out anti-abuse tax policy show that when imposing corporate income tax and determining the appropriate tax base certain restrictions should be applied on the composition and amount of costs in the accounting system (remeur, 2015; coughlan, 2015; european commission, 2016). it is known that the eu continues to struggle against corporate income tax evasion (understatement of the tax base, profit shifting, usage of offshore tax jurisdictions (offshore companies). therefore, it is necessary for ukraine to converge with the conditions of the eu countries on the procedure of tax base formation, reporting, information disclosure in financial and tax reporting as well as tax administration. 4. tax incentives instruments for the development of the national economy according to the approach of m. porter, j.sachs and j.mcarthur, there are several stages in the economic development of countries: the first stage is determined by mobilization of primary factors of production, the second stage is mainly determined by the application of efficiency factors, the third is determined by innovation factors (porter, sachs & mcarthur, 2002). the transition from one stage to another (higher) stage requires promotion of the development factors and their additional funding. today, ukraine’s economy is in the process of transition from the first stage of economic development to the second stage at the same time promoting innovation factors of economic baltic journal of economic studies 56 vol. 6, no. 3, 2020 development. it requires new principles of formation of investment resources of enterprises. however, in ukraine in the period of 2015-2018, on average, only 15.4% of enterprises introduced innovative technologies or new products (scientific and innovative activity of ukraine, 2019). the innovative development of ukraine’s economy should be ensured by a significant increase in corporate innovative investments, given that they are the main source of financing innovative activities (in different years they have accounted for between 85 and 97% of total innovation costs). it is a shortage of own funds or insufficient government support that hamper the creation of innovations by corporate sector (survey of innovation, 2017). considering that in the environment of increasing global competition, economic development depends not only on available factors of production but, first and foremost, it is determined by innovative factors, the efficiency of their usage, successful economic development of ukraine requires higher funding of innovative and investment activities by introducing, for example, targeted innovation tax incentives on corporate income. the policy-making decisions on application of innovation tax incentives in ukraine require a reliable methodological approach of their impact evaluation on both government budget (which loses the subsequent tax revenues) and on enterprises (which thus receive additional financial resources by reducing taxation). to solve these problems, a toolkit for forecasting the effect of tax incentives on innovation development of enterprises in the short and medium term and for the choice of proper innovation tax relief provisions (tax credit or enhanced deductions of r&d costs from the corporate income tax base) (lunina & bilousova, 2018). we believe that innovation tax incentives have a strong impact on the development of fiscal space in the medium and long term. 5. conclusions the tax system of ukraine (as well as of other countries with a small, open economy and with a high rate of corruption and shadow economy) should be tailored within a concept of sustainable development in a way that allows for the effects of government decisions on the current and long-term budgets, which involves the interest of future generations. much attention needs to be drawn to the dynamics of public debt and the cost of its servicing, to the options that would increase tax revenues such as reduction of corruption and unreported income in order to finance productive budget spending and capital investment, to the measures of innovation promotion as an important driver for economic development. the reduction of government expenditures should proceed within the wide program of economic reforms that will ensure more efficient use of resources. underfunding of government functions can deteriorate the conditions for economic growth and human capital development (if education and health care is underfunded), and, therefore, negatively affect the development of national economy and fiscal space in the future. carrying out tax reforms and expanding fiscal space in transition economies requires: – considering the specific effects of changing corporate income tax provisions, namely, the impact of cutting tax rates on the level of tax revenues in the medium and long term, on innovation and investment activities, on the dynamics of investment flows beyond the borders of the country, on the reduction of the size of the shadow economy, etc.; – ensuring the long-term sustainability of public finances, including the prevention of shifting of existing fiscal problems on future generations and induction of fair intergenerational distribution of the tax burden (current budget expenditures are financed by taxes and government borrowings are only used for capital investments); – imposing certain restrictions on the kinds and volume of enterprises’ costs, which are accounted for the corporate income tax base; improving tax administration and tax control to overcome tax evasion; – a reorientation of the government tax support (by providing targeted innovative corporate income tax incentives) on projects that in the medium term can spur innovations, increase the technology level of production, improve labor productivity and gain higher competitiveness of the country in the world markets, facilitate the growth of the country’s future revenue receipts. references: blankart, ch. b. 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studies 9 vol. 6, no. 2, 2020 corresponding author: 1 vinnytsia national agrarian university, ukraine. e-mail: aleskerovaaleskerova@gmail.com orcid: https://orcid.org/0000-0003-3072-4854 researcherid: m-6099-2018 2 uman national university of horticulture, ukraine. e-mail: sakovska_lena@ukr.net orcid: https://orcid.org/0000-0003-2676-6170 3 kharkiv university of humanities “people’s ukrainian academy”, ukraine. e-mail: ydidenko77@gmail.com orcid: https://orcid.org/0000-0001-7825-3022 researcherid: e-4969-2016 doi: https://doi.org/10.30525/2256-0742/2020-6-2-9-16 analysis of the essence of pension insurance and its place in the system of social protection of the population yuliia aleskerova1, olena sакоvska2, yuliia didenko3 abstract. the purpose of this article is to deepen the analysis of theoretical and practical foundations of pension insurance for rural population, to substantiate its further reform and development. theoretical aspects of pension insurance have been analyzed according to different scientific opinions of both the ukrainian and foreign scientists, according to which pension insurance is considered a difficult category, and the diversity of its interpretation means that it has not been fully disclosed yet and remains the subject of research. method. in most countries of the world, the same problems of the pension system as in our country have arisen. but thanks to pension reform, they have achieved successful results. each country chose its own way of building a pension system based on its own demographic and socio-economic characteristics. however, despite this, the main task of any pension system is to protect against poverty and to provide a pension that can guarantee a decent standard of living for a pensioner. it is proved that to carry out effective pension protection policy in the country it is necessary to continue to study the essence of the concept of "pension insurance", as well as it is important and urgent to find ways to improve the reliability and effectiveness of mechanisms for ensuring the implementation of social guarantees in the pension insurance system. it is noted that insurance came about when humanity realized the danger that the environment hides. with regard to pension insurance, its formation took place in the context of the development of the entire insurance system. results. the ukrainian scholars in the field of pensions, exploring the nature and concept of pension insurance at the current stage of development, have determined that pension insurance is based on two important principles: the principle of solidarity and the principle of personal responsibility, also scientists focus on the principles put forward by the works on social protection of the population by the international labour organization, which are defined in the adopted conventions of this organization. value/originality. analyzing the theoretical nature of pension insurance, one can determine that the essence of the social nature of pension insurance lies in the social protection of persons who have reached retirement age due to disability or loss of a breadwinner, pension insurance provides social security with minimal social security, approved by the international labour organization for the payment of pensions. retirement insurance is also considered to be a complex category, and its diversity of treatment means that it is has not fully disclosed yet and remains a subject of study. key words: analysis, pension insurance, pension insurance systems, "social protection", "social insurance", "social security". jel classification: g22, g23, o57 1. introduction pension insurance is the basis of social protection for the population in ukraine and in the world. the development of pension insurance during the years of our country's independence was accompanied by a protracted socio-economic crisis, which resulted in the failure of the national pension system to provide sufficient and reliable retirement benefits to citizens, especially in rural areas. baltic journal of economic studies 10 vol. 6, no. 2, 2020 one of the main reasons for this phenomenon is the low level of remuneration and high unemployment in the countryside. worsening the situation is also the inherent tendency for the rural population to decline and to age, to reduce the number of employees while increasing the retirement age, which in turn leads to exacerbation of the contradictions between the growing social needs of the population and the diminishing resource potential. in rural areas, there is a significant shortfall in pension payments, as most rural people working in private farms do not pay insurance contributions to the pension fund of ukraine, and are therefore covered by the state budget. this indicates that the current pension insurance, especially for the rural population, is characterized by a difficult financial situation that makes it impossible to ensure a sufficient level of material well-being for rural retirees. in most developed european countries, funds for the pension provision of citizens come from three sources, which are state pension funds, corporate industry pensions and individual pensions received under a voluntary accumulative pension insurance contract for an individual. in percentage terms, these are approximately equal shares. thus, it is insurance companies that are the main providers of services that allow you to accumulate the necessary funds upon reaching retirement age. there are several reasons for this. first of all, the specifics of taxation of contributions and payments under supplementary pension insurance contracts, which allow either the full or partial exclusion of the above funds from the tax base. and due to the fact that states take an insignificant part in providing guarantees for the preservation of significant income after retirement, in fact, insurance companies are the non-alternative mechanism for making savings. 2. economic crisis effects on consumer behavior the purpose of the work is to deepen the analysis of theoretical and practical principles of pension insurance of rural population, justify its further reform and development. at the present stage of development of the ukrainian economy one of the most difficult problems of the transformation process is the provision of pensions. in a transitional economy, most countries are faced with the need to create the most appropriate conditions for them and an effective pension protection system. each state devotes considerable attention to the social protection of the population as it is one of its main functions and it also develops a system of measures to ensure the proper material and social status of citizens. the interpretation of the concept of "social protection" is extremely important because it is an integral part of any country 's public policy. modern scientific publications on the theory and methodology of social problems outline various approaches to define the concept of "social protection". for the first time in ukraine the term "social protection" has been applied since the adoption of the law of ukraine "on the economic independence of the ukrainian ssr" no. 142-xii dated august 3, 1990, in which article 9 has clearly stated that the state creates conditions for employment of the able-bodied population and provides social protection for citizens. social protection is first and foremost a problem of social justice and ensuring the normal development of the economy, it does not reduce the redistribution of income but also makes decisions that achieve the highest results in the economy, reducing the level of own and excessive levels of development so far. according to the scientists i. balastryk, v. bazilevych, i. kychko: “social protection of the population is a legislatively secured system of state guarantees and realization of the rights of all political, socio-demographic groups of citizens, individuals regarding social security of their normal existence and life. these guarantees are implemented through socio-economic, legal and political factors that contribute to the realization of the right of citizens to work, assistance during unemployment, in case of partial or complete disability ” (plakhtii, 2019). in particular, v. bazilevych defines the category of "social protection" as a set of legislative norms which guarantees the state to certain sections of the population, as well as under certain economic conditions to all members of society. the opinion of the ukrainian scientist l. didkovska is quite interesting, as she defines social protection as a state support for certain categories of population which may be adversely affected by market processes, ensuring an adequate standard of living by providing legal, financial and material assistance to individual citizens (the most vulnerable); as well as creating social guarantees for the economically active population, ensuring the country 's living and working conditions including through establishing evaluation standards. the authors mentioned above express unanimous opinion on social protection which is the content of the social function of the state and is a system of organizational, legal, and economic measures to ensure the basic social rights of the citizen in the state. in particular, according to v. moskalenko: “social protection is a certain mechanism by which a minimum standard of living is achieved and a system of measures and appropriate institutions, designed to ensure the normal existence of a person, increase the level of satisfaction of the social needs , as well as the quality of life and prospects». however, without arguing with the outlined view it can be generally noted that this author treats the analyzed concept too one-sidedly considering the social protection of the population as the minimum payment when reaching retirement age or disability. baltic journal of economic studies 11 vol. 6, no. 2, 2020 in a broader sense, the term "social protection" is interpreted by n. bolotina, who defines social protection as an activity of the state aimed at ensuring the formation and development of a full-fledged personality, identifying and neutralizing the negative factors affecting it, creating conditions for self-determination and assertion in life. in the more concise concept of "social protection" it treats as a set of economic and legal guarantees that ensure the observance of the most important social rights of citizens, the achievement of socially accepted standard of living. based on the above considerations of researchers in the field of pensions we can conclude that these definitions reflect the approaches of different authors to the interpretation of the essence of this concept but most of them unite the fact that under social protection they understand only that amount of social guarantees, provided directly by the state and closely linked to social risks aimed at preventing their occurrence. in view of this, social protection is a system of distributive relations in the process of which, at the expense of part of gdp, public funds are created and used for the financial support and service of certain categories of citizens. in today 's context, societies are trying to create an effective social protection system that meets international standards in accordance with the requirements of the international labour organization (ilo) legal acts. it should also be noted that in the economic literature when characterizing the field of social protection of the population, most scientists believe that the term "social security " was firstly used in the us law in 1935 and then adopted for permanent use of the ilo. (plakhtii, 2019). it should be noted that the level of social protection and the level of pension provision depend on the state of the national economy and state regulation of social processes. social protection is provided through the social insurance system as well as through payment of social assistance from the state budget. in order to disclose the nature of pension insurance it is important to identify definitions such as "social insurance" and "social security" which are components of the social protection system of the population. the social security system itself is based on the principle of security and depending on the condition of the state budget, economic and social policy of the government, the mechanism of providing social payments and benefits to certain categories of citizens. with regard to social insurance it is characterized by the interdependence between the amount of the insured person's contribution and the amount of payment in the insured event. currently the features of social insurance which at the same time characterize its difference from social security are as follows: performing functions not only to compensate for social risk but also to prevent adverse effects of the risk situation, to predict socio-economic risk, the ultimate duration of the risk situation. important theoretical significance for the interpretation of the concept of "social security" as a category is scientific development performed by s. yuriy. according to him, social security is a form of distribution of material goods not in exchange for the labor spent but in order to meet the vital personal needs of the elderly, the sick, the persons with disabilities, children, the unemployed, all members of society for the purpose of health and normal reproduction of labor at the expense of special funds that are created in society, in cases and under conditions established by social and legal norms. the theoretical underpinnings of social insurance have been the subject of research by many scientist and scholars, however there is not traceability in determining the meaning of this concept. well-known financier s. blankart states his position on social insurance: "social insurance is an integral part of the state's social policy, as well as one of the prerequisites for ensuring justice in society and creating and maintaining political stability in the state". instead, in the current economic dictionary, a group of researchers led by b. reisberg interprets this concept as follows: "social insurance is an established, controlled and guaranteed by the state system of providing, support for the elderly, persons with disabilities at the expense of the state insurance fund, as well as collective and private insurance funds". according to b. nadtochiy, the concept of “social security” is noteworthy. according to the ilo codification the current understanding of the term "social security" as a system of law includes the following concepts: social insurance, social assistance, tax-financed state aid. thus, the scientist argues that "social security" is a broader concept as opposed to the concept of "social insurance", since the latter is an integral part of the former. in addition, the leading ukrainian scientists i. kychko, b. nadtochiy in their works on the study of various aspects of social insurance, interpret its essence from the standpoint of perception as the highest element of state social policy in the field of social protection, namely the state-established system of law on social security services and financial support of citizens in case of occurrence of sickness, total, partial or temporary disability, loss of breadwinner, unemployment for reasons other than citizenship, old age and in other cases stipulated by law, provision of social assistance financing, as well as regulation of income and standard of living of different population groups, warning and prevention of the consequences of the onset insurance risks. the position of such scientists as v. latugin, e. kolomiy, o. paliy, v. shakhov, and e. libanova is that, unlike ordinary insurance, social insurance is inextricably linked to the employment of a person as a member of society which is intended to compensate for social risks (aleskerova, 2019). in particular, considering different approaches to the definition of the concept of social insurance, it should baltic journal of economic studies 12 vol. 6, no. 2, 2020 be noted that it is the basis of the state system of social protection of the population that arises in the relations regulated by the statutory state social norms regarding the protection of property interests of individuals and legal entities in the event of insured money funds formed from their premiums paid. thus, firstly, the concept of "social security " is broader than the concept of "social insurance". according to most scientists, the concept of "social security " describes the measures of material support of the person and his/her family by the state. summarizing the positions of theorists and practitioners, we believe that social protection of the population is a complex multi-level system of social, economic and legal relations for managing social risks of society and ensuring a decent standard of living for citizens (plakhtii, 2019). in the system of social protection of the population an important place is occupied by pensions, since the pension system is emerging as one of the main components of the social protection system of society. in order to understand the main place of pension provision in social protection of society better, it is necessary to analyze the essence of the pension system and pension insurance, the main elements of which are pensions. instead, the views of scientists were rather unanimous on the definition of pensions but there were some differences. e. astrakhan was one of the first to propose the use of the term "pension" from the point of view of social protection. the scientist believed that retirement should be understood as periodic payments made at the expense of social insurance for the purpose of financial support of an employee, official or his/her family in connection with the final or long-term retirement of his/her full-time employees. thus, the scientist's view stated cannot be unreservedly agreed because today such a feature of pensions as periodicity has lost its relevance, since the period has no clear time constraints. thus, according to researcher b. stashkiv, "pension" was defined as a monthly payment to individuals from specially created pension funds on the terms and in the manner prescribed by regulatory acts. in the textbook entitled "social security law", edited by i. yaroshenko, when disclosing the meaning of the term "pension", it is rightly stated that pensions include regular cash payments received by citizens from the state and special funds upon reaching the age, disability and loss of a breadwinner or years of service. in particular, in our opinion, the idea of s. sunchuk is quite convincing, which considers pension a long-term payment which is assigned and paid to a person in the event of retirement age, disability, loss of breadwinner or years of service at the expense of the pension fund of ukraine or budgets of different levels which is the main source of personal income (plakhtii, 2019). it is also quite appropriate to consider one of the most comprehensive definitions of the concept of "pension" proposed by m. boyko: "in modern conditions, a pension can be considered as a cash payment which is assigned in accordance with state rules to citizens who have reached the statutory retirement age or who have acquired special length of service or disability, who have lost a breadwinner and in other circumstances provided for by law, at the expense of the pension fund, the cumulative pension fund, the accident insurance fund, the non-state pension funds, as well as the funds allocated for this purpose by the state from the state budget”. more justified and in line with the realities of modern law is the definition of a prominent ukrainian scientist i. zagorulko. according to him, pensions have a dual nature: firstly, a pension is a monetary remuneration that provides a decent standard of living for retirement citizens and is equivalent to previous earnings, that is to the level of income earned by a citizen in the course of work; secondly, a pension is a cash allowance in the amount of the subsistence level at the expense of the state budget for disabled citizens. at the legislative level, the concept of "pension" is enshrined in article 1 of the law of ukraine "on compulsory state pension insurance" as a monthly pension payment in the solidarity system of compulsory state pension insurance received by an insured person in the event of reaching the prescribed pension recognition of him/her as a person with disabilities or reaching the retirement age (aleskerova, 2018). at the same time, we should agree with v. bazilevich position, who states: “a pension is a guaranteed monthly cash payment to provide citizens in old age in the event of complete or partial disability, loss of a breadwinner and in connection with the achievement of legally established work experience in the fields labor activity”. in a broader sense a. solovyov notes that in terms of socio-economic essence, "pension" is a special form of cash payment to citizens, which should adequately compensate for the amount of earnings or other regular income from work or other social useful activities that were lost due to the occurrence of them by the statutory age, disability, breadwinner or for other reasons also provided by law. thus, a study of the essence of the concept of "pension" shows that this economic category is considered an integral part of the pension system through which the monthly payment to pensioners and certain categories of persons in the event of retirement age, loss of breadwinner or the onset of disability in the appointed state order. let us examine another component of social security pension, which also influences the correct definition of its nature, its economic and social nature, i.e., the pension system. as for the nature of the pension system this category of pension law is quite successfully analyzed by the scientist n. volgin: “the pension system is a set of baltic journal of economic studies 13 vol. 6, no. 2, 2020 legal, economic, organizational institutions and norms that aim at providing financial support in the form of pensions to citizens in reaching them established by law, age, disability, loss of breadwinner or other reasons specified by law”. m. ripp, a specialist in pension insurance, has thoroughly studied this category and interprets it as follows: "the pension system is a complex of three institutions: economic, social, and legal, through which pension funds are formed and conditions for the provision of a disability pension are created". according to other scientists, the concept of "pension system" is a major component of the state system of social protection of the population and certainly reflects the characteristics of this higher system, which is a system of interconnected monetary funds, bodies and institutions, entities, types of security and legal acts. based on the above scientific definitions of the concepts of "pension", "pension system" by, in particular, e. astrakhan, b. stashkiv, m. boyko, i. zagorulko, n. volgin, m. ripp and other scientists, it is formulated as follows: "the pension system is an institute that brings together a set of legal, economic, organizational and social institutions established in the state, the purpose of which is to provide retirement benefits to the elderly”. thus, the most important component of the social protection of the population is pension, the main tasks and goals of which are defining protection against poverty after retirement, raising the standard of living of pensioners, establishing the dependence of pensions on the size of earnings and seniority, ensuring the financial stability of the pension system and encouraging citizens to save money for old age. the main social security institutions for people with disabilities include pension insurance as an objective basis for social insurance. pension insurance is one of the main forms of social protection which is based on the insurance method, that is contributions to special funds of compulsory payments by business entities, regardless of ownership or types of economic activity and persons employed under working conditions and the use of these funds by the state for the financial support of citizens. in the law of ukraine "on compulsory state pension insurance" no. 1058-iv adopted on july 9, 2003, in article 25 and article 1 of the basics of the law of ukraine "on compulsory state social insurance" no. 23 adopted on january 14, 1998, it is clearly stated that pension insurance is a system of material support for disabled citizens with pensions, benefits and other types of provision ensured by law in case of sickness, total, partial or temporary disability, loss of breadwinner, unemployment from their independent circumstances as well as in old age and in other cases, due to monetary funds formed by payment of insurance premiums by the owner or authorized body, citizens as well as budgetary and other sources provided by law. when disclosing the nature of pension insurance, i. surota comprehensively analyzes and critically evaluates this category, proposes to take into account certain points regarding the essence of pension insurance namely: firstly, it is impossible to link the assignment of a pension to the onset of constant or permanent disability of citizens because pensions are assigned irrespective of the state of individual performance of citizens applying for a pension and sometimes without regard to their age; secondly, pensions are not remunerations for previous work, at least because, as the author notes, their size "small, insignificant... clearly do not correlate to the compensation for past work"; thirdly, despite the fact that the nature of pensions is determined by the duty of society to maintain its citizens with disabilities, pensions in the conditions of the social services market are gradually losing their alimentary character (aleskerova, 2019). the same definition was considered in the work of m. boyko, who writes: “pension insurance is a system of material support for citizens with disabilities with pensions, allowances, other types of support, which will be provided with the onset of retirement age in connection with the loss of the breadwinner or the onset of disability due to of the pension fund of ukraine or the social insurance fund”. particularly noteworthy is the opinion of some national scientists who believe that in order to more fully reflect the essence of pension insurance as an economic category, it should be considered in three aspects: as the concept of pension protection as a financial mechanism, and as a socio-economic system (koval, 2020). pension insurance, as a concept of pension protection, acts in our country in the form of a solidarity system, which is based on the principles of solidarity of generations and payment of pensions, provision of social services at the expense of the pension fund of ukraine. a specific aspect of this interpretation of the concept of retirement protection is the determining role of personification in enhancing incentives to work and legalizing wages since employees themselves are interested in officially recognizing real income for higher deductions for personal retirement insurance. it should be emphasized that the implementation of pension protection on personalized insurance bases minimizes a number of complex risks in the interests of participants, payers and the state, namely: – increase of negative impact of a gradually aging population on the financial status of the pension system (demographic factor); – decrease in the amount of private savings and consequently slow down the growth and turnover of pension assets in the financial market; – probable increase in fiscal pressure on payers of pension contributions under conditions of a deficit of a solidary pension fund. regarding the contemporary context of transformational changes in the socio-economic system baltic journal of economic studies 14 vol. 6, no. 2, 2020 in ukraine, it should be noted that the conceptual principles of pension insurance personalization are in line with the post-soviet economic doctrine, which approved the course of building a socially oriented economy based on the example of the best european models. on the pension insurance, as a financial mechanism that determines the procedure for financing pensions on insurance principles. its basis is the connection of such economic concepts as "pension" and "insurance" which are structurally the form and method of the financial mechanism. the use of the term “insurance” as a method of pension insurance requires a separate explanation of its basic functional components. according to the law of ukraine "on insurance" no. 85-96 adopted on march 7, 1996, article 1 defines: “insurance is a type of civil-law relations for protection of property interests of citizens and legal entities in case of certain events determined by the insurance contract or current legislation at the expense of monetary funds, which are formed through payment by citizens and legal entities of insurance payments and proceeds from the placement of these funds”. considering pension insurance as a socio-economic system, it should be noted that it represents the totality of the social phenomenon of pension protection and the process of updating the pension relations in the society on the basis of insurance, which are in rapports and relationships, creating some holistic socio-economic object. unlike interpretations of retirement insurance as a concept or financial mechanism, the object of the socio-economic system has an absolutely real manifestation in modern social life. the phenomenon of pension protection is reflected in a recognized society and a scientifically determined social institute and the process of updating pension relations is the provision of all relations in society for the accumulation of pension savings to finance future pensions. at the same time, acting as an element of reality, the pension socioeconomic system is a product of previously formulated theoretical concepts and a deterministic financial mechanism which testifies to the homogeneity, integrity and close relationship between the above interpretations of pension insurance (koval, 2020). summarizing the above scientific provisions on the nature of pension insurance, we can distinguish its generalized characteristics: firstly, it is regular cash payments, secondly, it is money paid from special funds, thirdly, the amount of pension is determined individually, fourthly, pensions are assigned with the onset of retirement age, seniority, disability or loss of breadwinner. in turn, an important theoretical value in the study of pension insurance as a socio-economic system is the development of well-known authors under the direction of m. kasyanenko. a group of domestic scientists has identified the main features of the socio-economic system, which in the pension sector make it possible to reveal the essence of pension insurance more widely. among them, researchers identify: 1) system purposefulness means that a certain social group of pensioners is being singled out in society which objectively requires the existence of a social system aimed at protecting them at retirement age; 2) availability of system functions (the system takes certain measures to achieve a certain purpose) is realized through the creation of specialized state and nongovernmental financial institutes which are endowed with certain powers to provide pension protection (accumulation of pension assets, their investment, making further payments to all the retirees designated by law); 3) awareness (the existence and development of social systems cannot be accomplished without intensive exchange of information between the system and the environment) is the convenient, reliable and functional information support on accounting of paid contributions by employers, employees and the state, their investment and circulation in the financial market. it should be noted that the role of this feature is increasing, since the effectiveness of the introduction of new pension programs will depend on reliable information on the implementation of the pension system; 4) openness involves intensive exchange with the environment of information, objects. the degree of openness depends on objective and subjective factors and consists in the regulation of solidarity rules for participation of all citizens of the country in the pension insurance system, openness for fruitful cooperation with international organizations and the ability to exercise external departmental and public control over the effective use of pensions; 5) the desire for self-preservation is reflected in the long-term cycle of accumulation of rights to pension protection (work experience, pension contributions) characteristic of all pension systems and the possible long-term period of pension payments; 6) the ability to self-government, that is, the ability to maintain a coherent system that involves the transition to personalization of pension assets, the formation of an effective system for their administration. thus, the use of the above characteristics offered by scientists on the socio-economic system allows to solve in practice the main objectives of the pension insurance system, namely: – to create and ensure the effective functioning of insurance companies; – to accumulate in the insurance funds the necessary financial resources through targeted payments of the insurers; – to ensure targeted use and distribution of insurance funds; – to regulate relations between members of the insurance system. baltic journal of economic studies 15 vol. 6, no. 2, 2020 3. survey methodology while exploring the nature and concept of social insurance at the current stage of development, it should be emphasized that the majority of domestic scientists in the field of pension insurance say that pension insurance is based on two important principles: the principle of solidarity and the principle of personal responsibility. studying the nature of pension insurance, scientists focus on the principles put forward by the international labour organization on social protection of the population and defined in the adopted conventions of this organization (oskar cerrangolo, 2003). among them there are the following: – general and compulsory nature of pension insurance, availability of social guarantees; – a combination of compulsory and voluntary types of pension insurance, equality and diversity of forms. the necessary level of social protection, the employee's ability to influence the level of personal protection are provided; – state guarantee of the stability of the pension system, the level of payments from compulsory pension insurance. the minimum level of social protection for people of retirement age accepted in the world community is guaranteed (convention 102); – obligatory financial participation of insured persons and employers and if necessary, attraction of state subsidies; – the interest of a sufficiently wide range of persons representing the stipulated social categories of the population (workers, employees, certain professional categories of citizens, all the population of certain territories) or the whole population of the country, in one way or another on the basis of pension insurance; – equality of all the insured persons in terms of the obligation to finance the costs and rights and guarantees acquired; – special order of storage of received funds, usually due to autonomy from the state budget as well as control of use through representatives of insurers and insured. thus, a study of the nature of pension insurance shows that this economic category is considered complex and on its principles, effectively based on the formation of a new national pension system. the ambiguity of the interpretation of the concept of "pension insurance" indicates that the essence of this economic category has not fully disclosed yet and it remains a subject of research. at the same time, an important characteristic of pension insurance is its main function, the essence of which is to form the financial needs of members of the insurance system in the special insurance funds in case of occurrence of social risks, that is the risks related to social activity of a person, his/her health, material security in old age (rogach, 2019). thus, the analysis of literature sources on insurance issues gives grounds to claim that at the present stage of development of ukraine, pension insurance is one of the most pressing issues in the country. this is due to the social transformations in ukraine during the years of independence which were accompanied by a protracted socio-economic crisis, which affected the level and living conditions of the population and accordingly, its population dynamics, composition and reproduction processes. instead, it should be noted that it began to develop dynamically after the adoption of the law of ukraine "on compulsory state pension insurance" no. 1058-iv dated july 9, 2003 (koval, 2020). this law provided for the creation of a three-tier pension system: a solidarity system of compulsory state pension insurance (level i) based on the principles of solidarity and subsidization and payment of pensions, provision of social services at the expense of the pension fund; compulsory system of compulsory state pension insurance (level ii) the operation of which occurs on the basis of the accumulation of funds of insured persons in a savings fund or in the relevant non-state funds and the implementation of financing the costs of life insurance contracts, lump sum payments and a system of non-state pensions provision (level iii) based on the principles of voluntary participation of citizens, employers in the formation of retirement savings in order to receive retirement benefits from citizens. thus, the researches, carried out on the essence of the concept of pension insurance, give grounds to form an interpretation of the concept as follows: “pension insurance is a system of social and financial relations between its subjects regarding the formation and distribution of pension funds at the expense of mandatory insurance pension contributions of working citizens for the purpose of making pension payments”. having considered the views of scientists on the definition of the term “pension insurance”, we share the opinion of such scientists who consider this economic term complex, which has a wide range of applications in the field of pension provision. 4. findings summarizing the results of the research it should be noted that pension insurance plays a major role in the social insurance system in the country, since its primary purpose is to provide social protection for those categories of citizens who have reached retirement age, lost a breadwinner or had a disability. pension insurance is intended to meet their minimum social standards through pension payments. the dynamic development of pension insurance is connected with the implementation of pension reform in our country. the study of the essence of pension insurance and determining its place in the system of social protection of the population in the conditions of development of a transformative economy goes beyond only theoretical considerations. the success of the reforms undertaken in ukraine depends to a large extent on the depth of understanding of the subject matter of the reforms, since it is impossible to improve what doesn’t baltic journal of economic studies 16 vol. 6, no. 2, 2020 have a harmonized conceptual reflection in regulations, scientific research and practical work of the subjects of pension provision. in order for the pension protection policy of the state to be effective, it is necessary to continue to study the essence of the concept of pension insurance. it should also be noted that the ambiguity of the interpretation of the term "pension insurance" indicates that it has not been fully disclosed yet and it needs further detailed reflection and that problems in this area are considered and resolved. 5. conclusions based on the study of the essence, concept and social nature of pension insurance it should be noted that this economic category develops in the state depending on the social, economic, demographic factors that exert their influence in society. the main role in the social insurance system in ukraine is played by pension insurance because it is the main form of social protection of the population which is based on the application of the method, that is the introduction of mandatory payments into the funds of business entities regardless of ownership and types of economic activity and hired persons who work under the terms of an employment contract. the essence of the social nature of retirement insurance lies in the social protection of persons who have reached retirement age, in connection with the disability or loss of a breadwinner. pension insurance involves providing these categories of citizens with the minimum social standards approved by the international labour organization through the payment of pensions. in particular, pension insurance is considered a complex category and the diversity of its interpretation means that it has not been fully disclosed yet and remains the subject of research. in order to conduct an effective policy of pension protection of the population in the country it is necessary to continue to study the essence of the concept of “pension insurance” and it is also important and urgent to find ways to improve the reliability and effectiveness of mechanisms for ensuring the implementation of social guarantees in the pension insurance system. insurance came about when humanity realized how much danger the environment was hiding. with regard to pension insurance its formation took place in the context of the development of the entire insurance system. as the level of development of society increased, the pension insurance system became more sophisticated which testified to the strengthening of the social role of the state. an indispensable condition for reforming ukraine's modern pension system is to take into account the historical aspect of development, advantages and disadvantages at certain stages of its formation. references: aleskerova, yu., mulyk, t., & fedoryshyna, l. (2018). improving credit protection analysis methods reports of main agricultural enterprises. baltic journal of economic studies, vol. 4, no 2, pp. 1–7. doi: 10.30525/22560742/2018-4-2-1-7 aleskerova, yu., & fedoryshyna, l. (2018). analysis of investment activities of enterprises of ukraine. economic system development trends: the experience of countries of eastern europe and prospects of ukraine: monograph. riga, latvia: “baltija publishing”. doi: 10.30525/978-9934-571-28-2_1 aleskerova, yu., fedoryshyna, l., & koval, n. (2018). features of loan security for the reproduction of fixed assets for agricultural purposes. baltic journal of economic studies, vol. 4, no 4, pp. 1–5. doi: 10.30525/2256-0742/2018-4-4-1-5 aleskerova, y., kovalenko l., & havryliuk, v. (2019). innovative financial criteria for methodological approaches to the assessment of agrarian insurance. baltic journal of economic studies, vol. 5, no 4, pp. 34–41. doi: 10.30525/ 2256-0742/2019-5-4-34-41 koval, n., priamuhina, n., & zhmurko, i. (2020). analyz economic-financial experience of the world countries in the system of pension insurance. baltic journal of economic studies, vol. 6, no 1, pp. 1–7. doi: 10.30525/22560742/2020-6-1-1-8 rogach, s., vdovenko, l., & polishchuk, o. (2019). agriculture of ukraine under the joint policy of the european union. baltic journal of economic studies, vol. 5, no 3, pp. 178–183. doi: 10.30525/2256-0742/2019-5-3-178-183 plakhtii, t., fedoryshyna, l., & tomchuk, o. (2019). socio-economic component of preferential taxation of individuals' incomes. baltic journal of economic studies, vol. 5, no 2, pp. 171–175. doi: 10.30525/2256-0742/2019-5-2-171-175 kritzer, b. e. (1996). privatizing social security: the chilean experience. social security bulletin, no 3, pp. 45–55. kubicek (2005). contribution rates to funded pension systems in the new member countries. research in international business and finance, vol. 19(2), pp. 266–280. leon, j.h., bettendorf ben, & heijdra, j. (2005). population ageing and pension reform in a small open economy with non-traded goods. journal of economic dynamics control, no 6, pp. 265–290. nicoholas george (2002). sweden’s savers are kept pasted on state of their funds. financial times. march 25, p. 7. oskar cerrangolo (2003). pension reform in latin america. conference on «privatisation of public pension systems – forces, experience, prospects». vienna, june 19–21, pp. 256–275. palmer edvard (1998). the swedish pension reform model – framework and issues. the national social insurance board, may, 32 p. baltic journal of economic studies 81 vol. 6, no. 4, 2020 corresponding author: 1 odessa regional branch of the fund for social protection of disabled, ukraine. e-mail: kolcovvm@ukr.net orcid: https://orcid.org/0000-0003-1261-3667 2 admiral makarov national university of shipbuilding, ukraine. e-mail: ylomzhets@gmail.com doi: https://doi.org/10.30525/2256-0742/2020-6-4-81-89 foreign policy imperatives for the development of the visegrad group and ukraine vitalii koltsov1, yuliia lomzhets2 abstract. the article is devoted to the analysis of the main stages of creation and development of the visegrad group as a regional grouping, which is successfully developing when being a member of nato and the european union. this kind of research is especially relevant in connection with the exacerbation of the economic crisis due to the covid-19 pandemic. the purpose of the research is to analyze the strategic stages of creation and development of various cooperative aspects of the visegrad countries; such a format of interaction has not lost its relevance after accession to the european union. analytical separation of periodization of the stages of formation, identification of problems and solutions faced by the visegrad group’s countries is important for creating a modern economic and political worldview of cooperation and indentifying the main areas of cooperation in europe. based on the use of documents, including protocols and declarations as a result of meetings at various levels within the visegrad group, the specific stages of its development and interaction with ukraine in a wide range of components that are the essence of euro-atlantic integration are analyzed and identified. specific examples illustrate that ukraine has always been in the field of key interests of the visegrad four, getting effective assistance and support in various forms from it. there have been identified not only practical issues of regional cooperation and security, but also some aspects of the value and civilization dimension. the member countries of the visegrad group, having initiated the format of cooperation “v4 + ukraine”, took an active part in the most important processes that ukraine went through on its way. the assumption is proved that the experience of the visegrad countries is relevant and useful for ukraine on the way to the realization of its euro-atlantic integration aspirations. despite the difficulties within the european union, between ukraine and some of the signatories of the 1991 visegrad declaration, cooperation with poland, the czech republic, slovakia and hungary is the most effective communication platform for intensifying a broad dialogue between ukraine and the european union. key words: the visegrad group, the visegrad four (v4), the european union (eu), nato, ukraine, integration. jel classification: f60, o10, o57, r19 1. introduction scientific analysis of the history, theory and practice of cooperation of central european countries of the “visegrad four” in the context of the modern european integration processes is important to develop and implement the foreign and domestic policy of ukraine at the present stage. at the beginning of the 21st century, given the changing geopolitical situation on the european continent, the countries of central europe (full members of the european union) are building a new system of international relations and accordingly delegate and continue to delegate some powers to eu supranational institutions. in recent years, 2017-2020, the visegrad group countries have been criticized in the eu. especially, poland and hungary have been criticized for authoritarian and nationalist rhetoric and politics. the eu also accuses the v4 countries of violating article 7 of thetreaty of lisbon and the organisation’s fundamental values. slovakia has been at the center of a scandal following the assassination of investigative journalist jan kuciak, whose investigation has linked the mafia’s ties to the country’s leadership. the 2019 summit of the visegrad four and israel in jerusalem was canceled due to poland refused to participate (zaxid.net, 2019). nevertheless, both the eu and the usa are trying to find points of understanding with the visegrad countries, and 2019 was the example. firstly, on february 7, 2019, angela merkel met with the prime baltic journal of economic studies 82 vol. 6, no. 4, 2020 ministers of the visegrad four to mark the 30th anniversary of the fall of the iron curtain, which brought freedom to the countries. and then the us secretary of state mike pompeo paid a visit to three countries of the visegrad group: hungary, slovakia and poland (zaxid.net, 2019). the “european map” of the visegrad countries is also open to ukraine. the urgency of the issue of international relations of the visegrad group countries at the regional level is determined by the perspective and logic of european integration development, because an important component of their foreign policy should be intensification of relations at a new level, dynamic development of an effective regional system of international cooperation under new geopolitical conditions. the purpose of the research is to analyze the strategic stages of development and the format of cooperation of the visegrad group countries before they become members of the european union, and especially after. the tasks determine the separation of periodization and issues of the visegrad cooperation and the presentation of the main areas of cooperation between the countries in the region. 2. methodology of research today, no one will deny the existence of many real results of the visegrad four. given that 2020 will be the 30th anniversary of the association, we consider it important to consider the history of formation and development of the visegrad group, the essence of the crises that have arisen and the problems of overcoming them. in our opinion, the most valuable achievement is the presence of mutual good will and friendship between four nations. the visegrad group has fully ensured the stability and prosperity of the participating countries and has expanded its influence beyond the region. cultural ties have always been in demand. the creation of the visegrad fund, mostly to support them, helped bring the organization closer to society, ordinary citizens. the visegrad group remains even more a sphere of not only high politics. in our opinion, this is manifested in the changing socio-cultural and economic level of ordinary citizens. communications, roads, railways need to be improved, and cross-border cooperation needs to develop at an accelerated pace, creating new economic links. cultural and other programs supported by the visegrad fund are another area where people can see the visegrad four in action. in foreign, european, and ukrainian literature, there are not so many analytical publications about visegrad1 , their analysis requires a separate article. today, there are two monographs – edited by the czech scholar jiří vykoukal (visegrad: possibilities and limits of central european cooperation) (vykoukal, 2003), (kish yeva, 2008), (közép-és kelet-európában, 2003), vezel` b. saakov, 2017.) but the study of the central european region remains relevant from the standpoint of regional foreign policy intensification and the possibility of cooperation with ukraine and other countries of south-eastern europe. the article is based mainly on documents, materials of various events, meetings, declarations and statements within the visegrad group and other both ukrainian and european documents. the works of researchers who studied the development of cooperation between the visegrad four and ukraine were also analyzed: kudryachenko a. (2010), snigyr o. (2007), chorna n. (2017), latenko v. (2019). amont the researchers who have analyzed the military aspect of the interaction of the format “v4 + ukraine”, there should be mentioned shelest, h. (2011). it is also worth mentioning the monograph of russian scientist l. shishelina “visegrad europe: where from – where to? twenty years on the path of reforms in hungary, poland, slovakia and the czech republic”, where the history of the visegrad group is revealed in various aspects (shishelina, 2010). although the official name of the organization is the “visegrad group”, at the same time, another title is equally used: “visegrad four” (v4). it should be noted that in the beginning it was the “three”, as czechoslovakia was the only state entity in the negotiations on the formation of a new association, which took place on february 15, 1991 in visegrad, hungary. poland and czechoslovakia were represented by the presidents lech wałęsa and václav havel, respectively, and hungary was represented by the prime minister józsef antall. it is important to emphasize that the visegrad group was not created as an alternative to european integration, which has always been emphasized by the leaders of, firstly, three, and since 1993, by the official representatives of four countries of the visegrad group. the name of the visegrad group refers to the historic meeting on november 1, 1335, when, in the royal palace of visegrad, king robert, the hungarian, czech and polish rulers, in contrast to austria, made strategic decisions in politics, trade, development and regulation of the northern trade route in order to strengthen trade and economic ties in particular and the role of the region in general. as of 2019-2020, despite the events of the global crisis that befell the world economy, these countries are gradually becoming the richest in europe. the level of per capita income, taking into account the real purchasing power of national currencies in 2019 in poland was 33,991 usd, slightly more than in portugal (33,665 usd). poland outperformed greece four years ago. we also note that according to the imf forecasts, in 2020, the portuguese economy will grow at a rate of 1.6 percent against 3.1 percent of the polish economy. baltic journal of economic studies 83 vol. 6, no. 4, 2020 portugal, like poland, was overtaken by hungary in 2019. the czech republic (38.8 thousand usd) approached the level of italy (40.4 thousand usd). authorities in rome have not been able to overcome economic stagnation for four decades, while the czech economy is developing quite rapidly. however, a bigger challenge for the countries of the region of south-eastern europe will be to reach the level of spain (41.6 thousand usd), which in 2018 became richer than italy (express news, 2019). economies in the countries of the visegrad four have already overtaken some western european countries (the imf). according to the results of the rating analysis in 2019, russia (29.6 thousand usd) fell below greece (30.2 thousand usd), and belarus (20.6 thousand usd) had already been poorer than mexico (20.9 thousand usd), ukraine (9.7 thousand usd) barely surpassed morocco (9.2 thousand usd) (express news, 2019). 3. results and discussion 3.1. structural periodization of the main stages of the visegrad group the history of the development of the international regional association of central european countries – the visegrad four – can be divided into three separate periods. undoubtedly, this classification is not final, but it serves as an attempt to determine, first of all, the milestones in the life of the visegrad group countries as an international regional association. undoubtedly, each of these two main stages has significant features of development, so accordingly, we also note the gradation within them. the first period, from the time of its formation in 1991 to 2004, can be defined as a period of “association and hope”. it starts from the founding of the visegrad group on february 15, 1991, the accession of the republic of poland, the republic of hungary, the czech republic and the slovak republic to the european union and including accession to nato. the second period has been from 2004-2014 and for the broad perspective of today’s future, when the cooperation of the four countries of the visegrad group is already part of the european union. the second stage can be conditionally defined as the “time of hopes and disappointments”, a way forward and retreat, which is mainly related to internal ukrainian events. there are two sub-stages: 2004-2010, when during yushchenko’s presidency ukraine was declaratively closer to europe and began negotiations on the preparation of the association agreement with the eu, and 2010-2014, when under yanukovych, an attempt to abandon the planned path and turn the entire foreign policy agenda in the opposite direction to the european – eastern direction – took place. the third stage has conditionally begun in 2014 and continues to this day, it can be titles as the “time of development and compromises”. since the victory of the revolution of dignity in ukraine, it is the period of signing and ratification of the association agreement and the gradual path to its implementation in practice. it should be rightly noted that during all this time, the v4 countries, which had not been members of the eu, and especially after their accession to the eu, acted as an engine of changes in brussels’ perception of ukraine, trying to promote the importance of ukraine’s integration into europe. especially in this regard, the role of poland, which has long been called “ukraine’s lawyer in europe,” differed. undoubtedly, this is not the final classification, it is primarily due to external and internal pragmatic circumstances, namely, the definition of the goal of the countries of international regional unification, both in 1991 (and undoubtedly the fulfillment of this goal – euro-atlantic integration) and in 2004, as evidenced by the documents of the founding countries. their accession to nato in 1999 (slovakia was admitted to nato only in 2004) were also important events in the euro-atlantic integration of central europe. in fact, the period 1991-2004 can be divided into several subperiods with a clear separation of the main characteristics and taking into account the differences in the nature of their cooperation, but in the context of a single constant goal: euro-atlantic integration of the visegrad group. 3.2. formation of the first stage of development of the visegrad group “association and hopes” we consider it expedient to divide the period 19912004 into several sub-stages with definition of their essential characteristics. a) 1991–1992 – “challenge of time” – the actual creation of the visegrad group, when the priority factor was security, and a strong unifying idea was the consolidation of efforts of central european countries against a possible soviet threat to accelerate euroatlantic integration. thus, it was clear that interstate regional integration was a means, not an end, of creating association. b) 1993–1998 – “lost illusions” – the collapse of illusions of the visegrad four countries about their rapid, almost automatic european integration of countries, as well as the problems of internal systemic transformations. in general, for other reasons, this period is distinguished as stagnation of regional visegrad cooperation since 1993, which will actually last until 1999. another important event of the year was the change in the structure of the visegrad association: the configuration of the visegrad countries from “three” to “four” was formed in connection with the creation of two independent states: the czech republic and the baltic journal of economic studies 84 vol. 6, no. 4, 2020 slovak republic. it is also important to single out the sub-stage in 1994 as “primus inter pares”, the beginning of a race within the visegrad four on which country to be the first to join the eu. this has clearly identified at least two major fateful events of a strategic nature within the visegrad association: this is the strengthening of poland’s ambitions for the status of regional leader, and the fact of self-isolation of the slovak republic. thus, since 1994, to some extent, the first symptoms of confrontation between the members of the visegrad association have emerged. these problems manifested themselves in organizational terms, because serious meetings began to take place only on security issues, all other issues were of protocol, format nature. c) 1998–1999 – “renaissance of visegrad” – since 1998, there has been an intensification and strengthening of regional, economic cooperation, atlantic integration of the visegrad four. slovakia’s invitation to cooperate within the visegrad group actively, which was officially made by the prime minister of the czech republic on september 11-12, 1998 at the cefta meeting, de facto determined the reorganization of the visegrad group, given the atlantic integration of these countries. a particularly important event of this period was the support of slovakia’s euro-atlantic integration by the visegrad group countries after the change in the domestic political situation of the slovak republic. it is since 1999 (summit on may 14, 1999 in bratislava) that we can really talk about a kind of revival of the visegrad group (the visegrad yearbook, 2003). the security strategy has been changed, and a specified action plan has been developed in eight areas of cooperation, when the joint actions of the countries have already clearly showed dynamism and pragmatism. it is important to emphasize that the prime ministers of the visegrad four have been taking over the leading role since 1999. f ) 2000–2004. “on the threshold of the european union” – intensification of actions of the countries of the visegrad four in fulfilling the conditions for their membership in the european union; the dynamism of the systemic transformation in each of the countries of the visegrad group and the strengthening of cooperation between the four are particularly characteristic (the experience of systemic transformation and “catching up” european integration of slovakia is especially instructive for ukraine). in fact, the completion of a fundamentally important stage in the development of the visegrad group is considered as a fulfillment of the goal of the v4 countries in 2004, the acquisition by four countries of full euro-atlantic membership in the european union and nato. in particular, in 2001, there have taken place the meetings of heads of the countries ( january 2001); heads of government (may of the same year); ministers of culture ( june); parliamentary delegations in the field of foreign affairs, defense and european integration ( june); ministers of transport (october) and many other (selected events of v4 in 2001). in april 2001, the visegrad youth conference was held in krakow, which resulted in the signing of a declaration on the following steps (visegrad youth conference, april 19, 2001): – strengthening the role of student exchange programs between universities; – promoting the ideas of the visegrad association; – sharing of kowledge about culture, economy, society, politics of the czech republic, the republic of hungary, the republic of poland and the slovak republic; – participation in the discussion on the future of europe; – the desire to become a bridge of cooperation between east and west; – striving to create a central european identity; – support for the enlargement of the european union. all of the above indicates a high level of cooperation between the v4 countries in various aspects. in the following years, the regularity of such meetings and events has only increased. in 2000, the international visegrad fund (the official site of the visegrad fund, 2019) was established, which aimed to financially support cooperation between the members of the four and other countries. in 2002, the visegrad scholarship program (2019) was established to encourage educational and scientific exchange between students and researchers in the v4 countries. on april 16, 2003, the treaty of accession of the visegrad group to the european union was signed. after that, referendums in support of the eu membership were held in all four countries (latenko, 2019). slovakia (92.5%) and hungary (83.7%) showed the highest rates of support for accession, while in poland and the czech republic the results were almost equally high (77% each) (shyshelina, 2010) . for the european union, the interest in enlargement was that, firstly, the inclusion of new members should contribute to strengthening stability, security and prosperity in europe; secondly, the domestic consumer market would grow, which would create conditions for greater competitiveness of the european companies in the world market; thirdly, by gaining wider borders, the eu has become an even more powerful player in the international arena (shyshelina, 2010). 3.3. developments in the second stage of “hopes and disappointments” the second stage can be dated 2004-2014 as a time of hopes and disappointments, the way forward and retreat, which is mainly related to domestic events. there are two sub-stages: 2004-2010, when during yushchenko’s presidency ukraine was declaratively closer to europe and began negotiations on the preparation of the association agreement with the eu, and 2010-2014, when under yanukovych, an attempt to abandon the planned path and turn the baltic journal of economic studies 85 vol. 6, no. 4, 2020 entire foreign policy agenda in the opposite direction to the european – eastern direction – took place (preskonferentsiya u kyievi, 2009). the enlargement of the european union on may 1, 2004 was the biggest in its history, with 10 countries joining at the same time. there are members of the visegrad four among them. certainly, this structure did not enter the eu institutionally, but received a new impetus for its activities in the new conditions. despite the high results in national referendums, significant hopes and expectations, the process of “survival” of new members was not easy. the difference in economic development, the duration of the experience of democratic state-building in the “old” and “new” members, and the peculiarities of the european union itself as a structure were noticeable. despite the equality of rights between all participants in the representation in the european institutions and the alternate sixmonth presidency, the eu has historically developed its own forms of interaction and informal authority. at that time, the relations in the berlin-paris-london triangle largely determined the agenda of the whole community. given the ambition of the newly admitted countries as independent players in the european space, a certain tension and problems in cooperation could not be avoided. however, the experience of overcoming contradictions and reaching compromises in the course of heated discussions ultimately made the eu, as an institution, stronger (zub, 2018). on may 12, 2004, a summit of the heads of governments of the visegrad four countries took place in the czech city of kroměříž, which resulted in signing the declaration. in the document, the parties stated the achievement of the key goals set out in the 1991 visegrad declaration, and also stated their determination to continue the development of cooperation between the v4 countries as members of the eu and nato (declaration of prime ministers 12.05.2004). during 2005-2009, further meetings of ukrainian authorities with representatives of the visegrad group took place. the subject of discussion was ukraine’s integration aspirations towards the eu and nato. the countries of the four, especially poland, have taken on the role of active promoters of ukraine’s involvement in the european context. however, it became increasingly clear that the ukrainian side was not inclined to radical reforms, but instead limited itself to declarative statements, which created a contrast between the form and content of the “v4 + ukraine” format. in addition, the visegrad countries were forced to take into account the conservative position of the “old” eu members, especially france and germany, on the issue of ukraine’s euro-atlantic aspirations. it is worth mentioning the events of the bucharest summit on april 2-4, 2008, where the positions of these countries hindered the submission to ukraine of the action plan for nato membership (bucharest summit, april 3, 2008). this is despite the consolidated position of the ukrainian authorities at the time, as evidenced by a joint letter signed by the president viktor yushchenko, prime minister yuliia tymoshenko and parliament speaker arsenii yatseniuk, asking for a map to ukraine at the summit. this issue was actively promoted by the v4 countries, which were also members of nato. however, france and germany were able to block this decision, not least under the influence of the russian factor. among the new eu members, members of the former socialist camp (including the visegrad group) and the baltic countries, there has always been a more restrained and critical attitude towards the russian federation, in contrast to the franco-german alliance, where the business and economic interests of their representatives often became hindering the adoption of more specific wording in statements and more decisive action when it was absolutely necessary (shelest, 2011). the visegrad group countries took an active part in the development of the eu’s eastern partnership policy, which was launched in prague on may 7, 2009. the idea of the eastern partnership was presented by poland at a meeting of the eu council in may 2008. among the six countries to which this form of cooperation was to extend, the leading place belonged to ukraine (ofitsiynyi sayt programy yees “shidne partnerstvo”, 2009). the basis of this format was the initiative of the then-minister of foreign affairs of poland radosław sikorski. the aim was to deepen the integration between the european union and ukraine, in particular in the four main areas cited by n. chorna in her work: “1) democracy, good governance and stability, including justice, freedom and security; 2) economic integration and approximation to the eu policy; 3) energy security; 4) economic and social development” (chorna, 2017). 3.4. prospects for cooperation between the countries of the visegrad four and ukraine in a declarative manner, during 2010-2013, the ukrainian authorities demonstrated their readiness to continue moving towards rapprochement with the european union, which was reflected in the further development and preparation of the association agreement with the eu, including its economic part related to the free trade area. in addition, ukraine has continued to participate in the eastern partnership initiative. the visegrad four countries played a key role as a communicator between official kyiv and brussels. the v4 + ukraine format continued to be active as an intermediate platform in more global negotiations between ukraine and the eu. there were also other events where the ukrainian side was also invited. for example, on february 15, 2011, in addition to the heads of governments of austria and germany, the ukrainian delegation headed by the prime minister mykola azarov was invited to the extended summit baltic journal of economic studies 86 vol. 6, no. 4, 2020 of the prime ministers of the v4 countries on the occasion of the 20th anniversary of the visegrad group (february 15, 2011). on september 25, 2012, at a meeting of the foreign ministers of the visegrad four and the benelux countries in new york, a joint statement on ukraine was adopted, where participants called on the ukrainian government to respect basic human rights in the country ( joint statement by the visegrad group, september 25, 2012). noting ukraine’s european aspirations, the statement pointed to regressive trends in the general state of democracy. ministers noted the deteriorating situation in the areas of rule of law, human rights, freedom of the media and more. it was emphasized that the lack of progress in these areas could be a serious obstacle to ukraine’s pro-european path, including the signing of the association agreement with the eu. this was the second stage in the development of relations between ukraine and the visegrad group. after the revolution of dignity, the annexation of crimea and the military invasion of the russian federation on ukrainian territory, the third stage of the “v4 + ukraine” format began, which opened a fundamentally new page in bilateral communication. in 2014 alone, 8 different meetings dedicated to the events in ukraine took place within the framework of the visegrad four. in the midst of the active confrontation between the president viktor yanukovych’s regime and civil society on the maidan, on january 29, 2014, the joint statement of the prime ministers of the countries of the visegrad group on ukraine appeared, where participants expressed the firm belief that the use of force could not help resolve political conflicts. in general, it can be noted that the visegrad group, both the institution and each of its components, did not stay away from any significant and key events that took place in ukraine. thus, we can recall the meeting of foreign ministers of the countries of v4 in budapest on february 24, 2014, where in the final statement the parties expressed their condolences to all those killed on the maidan and welcomed the steps towards a peaceful solution to the conflict ( joint statement of january 29, 2014). on march 4, 2014, a statement was issued by the statement of the prime ministers of the visegrad countries regarding ukraine, stating the inadmissibility of violating the territorial integrity and internationally recognized ukrainian borders (statement of march 5, 2014). a day later, on march 5, the eu high representative for foreign affairs and security policy c. ashton and the european commissioner for neighbourhood and enlargement š. füle received a joint letter signed by the foreign ministers of all members of the visegrad four with a request to support ukraine with real steps in its aspiration to return to the european integration path of its development ( joint v4 foreign ministers’ march 4, 2014). in general, it is a fair assumption to say that since 2014, the countries of the visegrad group have been actively helping ukraine in its aspirations to the eu and nato. this is noticeable both at the level of statements of various kinds and in specific actions, including the final signing and ratification of the association agreement between ukraine and the european union and as a consequence – providing ukrainian citizens with visa-free travel within the eu. a separate block is issues related to the russian military invasion of ukrainian territory. here, the visegrad group countries have an unequivocal position in support of the territorial integrity and sovereignty of ukraine (text ugody, 2014). in connection with the above-mentioned events, in recent years, cooperation in the military field within the v4 + ukraine format has become increasingly important. since 2002, regular meetings of the ministers of defense of the visegrad group have been held to discuss the most pressing issues of defense policy. since 2005, representatives of the ukrainian side have often been invited to such meetings (kaplynskiy, 2009). in 2019, the regulatory framework, which enshrines the strategic foundations of ukraine’s foreign and security policy, noted some changes. some of these changes were the result of a previously defined policy, which was formalized in 2019, but at the same time had a certain political twist. the other part was due to the change of the presidential and governmental team after the election, which required a new definition of the system of foreign policy coordinates and tasks. the main event of the year on the strategic consolidation of the state’s foreign policy was the adoption by the verkhovna rada of the law of ukraine “on amendments to the constitution of ukraine (regarding the strategic course of the state for acquiring full-fledged membership of ukraine in the european union and in the north atlantic treaty organization)” in february. the initiative of the president p. poroshenko to amend the constitution of ukraine was proposed in mid-2018. the law provides for amendments to a number of articles of the constitution, which define the powers of the verkhovna rada (art. 85 of the cu), the president of ukraine (art. 102), as well as the cmu (art. 116. in particular, the parliament is authorized to implement the strategic course for ukraine’s full membership in the eu and nato, and the government must ensure the implementation of this course. at the same time, this bill and the changes it introduced had a rather political effect (both domestic and in communication with international partners). cooperation with the eu and nato has continued, based on agreements, action plans and roadmaps that have been in place for several years. the updated annual national program ukraine-nato, which changed the methodology of baltic journal of economic studies 87 vol. 6, no. 4, 2020 development to measurement indicators, the results based management has become an important internal complement to external commitments. v. zelenskyi’s team declared “economization of foreign policy” a major foreign policy priority, which, in addition to political statements, resulted in a corresponding redistribution of government powers and the assignment of relevant tasks to the foreign ministry in o. honcharuk’s government program. during the autumn, the cabinet of ministers audited the current opportunities for intensification of foreign economic activity. the intentions to make changes to the export strategy of ukraine adopted at the end of 2017 have been announced. in public statements, the president of ukraine has repeatedly promised to give priority to the protection of foreign business and investors in ukraine. 4. conclusions the visegrad group proved to be a format of regional cooperation, due to the constructive cooperation in which poland, hungary, the czech republic and slovakia were able to achieve a number of important tasks, first of all, to join nato and the eu. despite the existing forecasts, with the accession to euro-atlantic and european structures, the visegrad four did not cease its activities, but on the contrary, received new impetus to its continuation. the countries have joined forces to adapt to the new conditions, as well as to develop a common course within the union institutions. the latest geopolitical challenges that have recently emerged in europe are forcing the visegrad participants to work together to find an adequate answer to them. undoubtedly, a qualitatively new period of visegrad’s development began in 2004, the accession to the eu as a test of the viability of the system of multilateral international regional project in a new format in the new geopolitical situation. a characteristic, if not the main feature of this period will be the coordination of the interests of the visegrad four not only among themselves in order to achieve certain goals, but also in a new format of relations with the eu and separately with eu member states. we consider it too simplistic to understand the essence of the visegrad association only as a consolidation of the efforts of the countries of central europe for the purpose of “returning to europe” through euro-atlantic integration. that is, the “european map” was priorityoriented, but not comprehensive. this is a much more complex and multifaceted problem than is thinkable. after all, the accession of the visegrad countries (and this, in our deep conviction, are the countries of central europe) in 1999 and 2004, to nato and the european union, geopolitically changes the status of the central european region, transforms bilateral and multilateral relations europe – full members of the eu with ukraine. moreover, the system of relations within the visegrad four is changing, as well as with other member states of the european community. the complex mosaic of actions of the visegrad countries was determined for a certain period of time by choosing between strengthening the interregional integration of the visegrad countries and creating a strong subregional structure, or using it as a forum to protect and promote their own or common interests. as a result of radical socio-political transformations in the late 80s – early 90s of the 20th century in central europe, there was a radical change in the domestic political system and foreign policy of these countries and the radical transformation of international relations as a global level. firstly, the collapse of the bipolar system of international relations has significantly changed the status of the central european region and each country. secondly, all the countries of central europe were at the beginning of the period of systemic socio-economic transformations, priority in this context were foreign economic relations aimed at the west. the foreign policy security priorities were somewhat different in the countries of the three and then the four. however, during 1991-2000, in all four visegrad countries, the euro-atlantic dimension became the main focus in building and strengthening the european security system in the region. thirdly, the “overcoming” of the geopolitical vacuum in the central european region against the background of general instability, central european countries saw in joining strong international and regional structures of economic and security nature, in particular, the euro-atlantic course and joining the european community were given priority. the foreign policy strategies of poland, hungary and czechoslovakia were clearly oriented towards the west. that is, the actual formation of the visegrad association did not serve as any alternative to their earliest accession to the eu and nato. it should also be noted that the visegrad group, as a regional format of cooperation, has proved its effectiveness and does not lose relevance even after the official achievement of the key aspiration for which this structure was formed: poland, czech republic, slovakia and hungary to join the north atlantic alliance and the european union. the experience of almost 15 years in the eu and 20 years in nato has shown that the visegrad four has become an important communication platform, which often serves as a liaison between those countries that either aim to integrate into the structure or also seek to build mutually beneficial good neighborly relations with its member countries. the v4 + ukraine format has undoubtedly become the key and most effective among similar projects in eastern europe. the visegrad four has always helped baltic journal of economic studies 88 vol. 6, no. 4, 2020 our country to realize its euro-atlantic aspirations, even in spite of certain difficulties that have arisen in recent years in bilateral relations between certain v4 countries and ukraine. and although it is not possible to simply use the patterns of the visegrad experience, given the specifics of ukraine, nevertheless, many aspects and reforms implemented by the v4 countries are an example for ukraine. the experience of not only what and how to do to become a member of the eu and nato, but also what will happen after the accession, as, already being a full member of a union, in search of a common compromise, is important to defend the national interests of the country. as of the end of 2019, positive results were achieved in the direction of ukraine’s integration with the eu both in the political and security dimension and in financial and economic cooperation. an important document of ukraine’s political support was the joint declaration following the ukraine-eu summit ( july). the eu’s political leadership reaffirmed its support for ukraine’s territorial integrity and 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(2018). the main factors of internal and external interaction of the visegrad group countries. geopolitics of ukraine: history and modernity, vol. 1(20), pр. 231–249. baltic journal of economic studies 150 vol. 2, no. 2, 2016 the concept of transformation of the national institutional environment of small and medium-sized enterprises tetiana stroiko1, dmytro dusheyko2 mykolaiv national university named after v.o. suhomlynskiy, ukraine abstract. the aim of the article is an attempt to ground the concept of transformation of national institutional environment as the prerequisites for forming of prosperous class of small and medium-sized enterprises. institutional analysis considers the interaction on the level of individuals and divides a market transaction into transactions (institutional agreements), estimating their value with the help of transaction costs. we conducted a systematization of the notion that brings the institutional environment to the aggregate of norms, regulations, agreements, rules of the game. for the quality assessment of institutional environment on the macrolevel, direct indicators of its assessment were used – quality indexes in international ratings and activities of specialized institutional researches. practical significance. in the result the quality of the institutional environment of the assessment of the global competitiveness index is extremely low and needs a systematic increase. values of indicators of a pillar “institutions” of the global competitiveness index should be a guiding line for development and introduction of state economic policy. an important line of investigations of development mechanism’s improvement and regulatory policy’s conducting is the institutional environment conception that combines the notions of institute, institutional agreements and transaction costs. a model of institutional environment allows determining of the regulatory policy as a policy that changes elements of institutional environment – institutions, displays in changes of transaction costs. it is grounded that a state apparatus consciously sets as an object the increase of socio-economic role of the entrepreneurship through the creating of favourable conditions of its functioning; a way of this object’s achievement is the regulatory policy, efficiency criterion of which is the improving of national institutional environment’s quality that is measured by reducing of transaction costs of entrepreneurship subjects. all stated above allows describing the mechanism of regulatory policy in the field of entrepreneurship as a logical order. measures of regulatory policy influence the quality of institutional environment that leads to the change in transaction costs’ value related to its use. a schematic model of modern institutional environment is developed. in accordance with the rules of methodological individualization, subjects of institutional economic relations are separate entities, individuals. subjects implement among themselves standard institutional agreements, which are presented by lines (“tracks”). these “tracks” necessarily go through formal and informal institutions. conclusion of institutional agreements is the choice among the institutional alternatives, discrete choice and transaction performance. some institutions (both formal and informal) can be not involved into conclusion of institutional agreements, thus it is the question of institutions market – subjects’ possibility to choose institutions for interaction. subjects can conclude institutional agreements within the framework of company or state (hierarchies of institutions with certain cruelty) or within the framework of market (relatively soft institution). an important socio-economic role of small and medium-sized enterprises must be confirmed by effective public policy with its support and development. institutional economic analysis provides the possibilities of qualitative research of problems of small and medium-sized enterprises, developments and introduction of regulatory police, determining of the criteria of its efficiency. the use of system model of institutional environment and principle of methodological individualism allows considering the economic interaction between representatives of small and medium-sized enterprises and state. an increase of institutional environment quality is the main task of regulatory policy. the quality of ukrainian institutional environment by the criteria of international rating corresponding author: 1 department of international economy and management of education, mykolaiv national university named after v.o. suhomlynskiy. e-mail: tstrojko@yandex.ru 2 department of international economy and management of education, mykolaiv national university named after v.o. suhomlynskiy. e-mail: d_dusheyko@ukr.net baltic journal of economic studies 151 vol. 2, no. 2, 2016 1. introduction development of small and medium-sized enterprises is a priority economical task for societies that have long-term strategies of socio-economic development. an effective inclusion of entrepreneurship’s subjects in economic process is determined by regulatory policy in this field and forming of favourable institutional environment. development and state support of small and mediumsized enterprises is the most important prerequisite for forming of rich middle class, which is exactly the source of economical and political stability in the society, a significant generator of tax proceeds, main consumer and manufacturer of material as well as educational, cultural, scientific benefits. in economies, which succeed to create prosperous middle class based on the entrepreneurship development, many questions are solved successfully in the following areas: employment, productivity of labour, formation and conduction of policy, innovative development, persistence to macroeconomic instability. in conceptual aspect a question about interaction of business and state is one of the most important and fundamental in the history of economic science. there is a contradiction between the importance, declared by state, of entrepreneurship development through the regulatory policy, which should improve business climate, and the actual regulatory squeeze on business. thus, contradictions between high socio-economic importance of entrepreneurship development to build an effective community and squeeze on entrepreneurs in current ukrainian situation require a search of new theoretic and methodological approaches, conceptions, models as well as drastic changes in public policy in this field. in the paper attempted to ground the concept of national institutional environment transformation as prerequisites for forming of rich class of small and medium-sized enterprises. 2. institutional environment: essence and assessment methods in models of neoclassical economics the interaction of subjects takes place in markets of resources and goods; measure unit of interaction are market transaction and its price. institutional analysis considers the interaction on the level of individuals and divides a market transaction into transactions (institutional agreements), estimating their value with the help of transaction costs. if in neoclassical models the prerequisites for market interaction are the market with complete information, and agents have unlimited possibilities for search of optimal variants of exchange, in institutional models an economic interaction takes place by means of choice of standard kinds of behaviour out of a limited set, i.e. economic behaviour is regulated by “rules of the game”. rules of economic interaction in institutional economy are described by means of concept of institutional environment. the concept of institutional environment is important in modern institutional economy, at the same time its unanimous definition and sense are absent. the most popular are definitions of institutional environment given by o. williamson “rules of the game, which means a context in which an economic activity is taken place” (williamson, 1996) and d. nort “set of fundamental political, social and juridical rules, which form a basis for production, exchange and distribution” (nort, 2000). it should be noted that definitions given above bring the institutional environment to the set of norms, regulations, agreements, rules of the game. but the essence of this environment is a set of institutions, which is displayed in its name. institution – is a social norm in combination with external enforcement mechanism of its performance (auzan, 2005). task of quality assessment of institutional environment has two main levels: microlevel and macrolevel. on the microlevel it adds up to regulatory impact assessment (ria) of a concrete institution (norm) or set of institutions contained in one regulatory act. the task of assessment on microlevel is formed in the following way: how introduction or alteration of institution (or regulatory act) would change expenses on its use (transaction costs)? in this question the following aspects can be singled out: positive – assessment of existing institution, regulatory act, and normative – predictive estimate of consequences of alteration, substitution or introduction of a new institute. on the macrolevel the task of quality assessment of institutional environment has a positive aspect, in which it formulating as task of quality assessment of business climate. such a task is solving by means of comparison of quality indicators of national institutional environment (various indexes) and such indicators of other countries. for the quality assessment of the institutional environment on the macrolevel direct and indirect indicators of its assessment are used. direct indicators of assessment – quality indexes in international ratings and indicators of specialized institutional researches, indirect – development and performance indicators of economic doing business in comparison with the leading countries during 2007-2013 not exceeded 27%. a criterion of regulatory policy effectiveness in the model of institutional environment is a cheapening of institutional agreements, i.e. transaction costs decrease that leads to increase of socio-economic effectiveness of small and medium-sized enterprises. key words: institutional environment, regulatory policy, entrepreneurship, transaction costs, effective public policy. jel classification: а20, в 22, в41 baltic journal of economic studies 152 vol. 2, no. 2, 2016 system, in particular, small and medium-sized enterprises. positive analysis of the quality of institutional environment lies in research of the current state with an international or retrospective comparison. in the normative area the task of assessing the quality of the institutional environment is transformed into a quality assessment of regulatory policy – predicting of its consequences and selection of the most optimal variant of realization. 3. modern state of the institutional environment of small and medium-sized enterprises in ukraine the issue of a national institutional environment’s quality and its impact on the functioning of the economy has a complex integral character. assessment of the quality of the national institutional environment by using existing indexes is made possible because each of the indexes valuation techniques comprises a unit that assesses the quality of institutions from the standpoint of developers of indexes. in our opinion, to assess the quality of national institutional environment, it is possible to use such subindexes within the specified index assessment systems (tab. 1). table 1 assessment of the quality of institutional environment in the main international corporative index systems № index sub-index for assessing the quality of institutional environment 1. the global competitiveness index institutions 2. the imd world competitiveness yearbook effectiveness of government 3. index of economic freedom all sub-indexes 4. doing business all sub-indexes 5. the global enabling trade index business environment such index systems as the “index of economic freedom” and “doing business” by themselves are the models of national institutional environment, so their indicators can be fully used as indicators of the quality of institutional environment. in the other three systems, only some sections reflect the state of institutions. we have assessed the national institutional environment with the help of the most popular in the world international index evaluation system – the global competitiveness index (stroiko, dusheyko, 2016). components’ data of the global competitiveness index during 2006-2015 were analyzed by the pillars and ranked according to the average values. it was found that the indicators of ukraine have the lowest rating of the institutions (in fact – the quality of national environment) among other pillars of the global competitiveness index indicators. ukrainian national economic system on the classification of the global competitiveness index is on the second stage of development – are efficiency-driven. at the same time in 2006 it answered the first – the lowest level – a factor-driven economy. the third stage of economic development  – innovation-driven economy is the highest according to the method of determining the global competitiveness index. in addition to these three main steps in the method of the global competitiveness index it is provides two intermediate stage – from the first to the second – “1-2”, and from the second to the third (“2-3”). ukraine is in a transitional stage “1-2” in 2010-2011. it was found that the maximum value of the index 3,3 of pillar “institutes” for ukraine, our institutional environment tends to be the lower boundary of this index. modern practical economic achievements of the international comparative studies are the index assessments of the state of national economies. one of the first among them – the global competitiveness index, which is calculated by the world economic forum since 1979. using the first of its 12 pillars, «institutions», it is possible to assess the quality of the national institutional environment of countries covered with investigations. analysis of the global competitiveness index data for ukraine for 2006-2015 indicates that the degree of development of the national institutional environment receives the lowest scores compared with other pillars of indicators for ukraine – on the average for the analyzed period the pillar “institutions” received 3,1 points out of 7 possible. the largest sub-indexes on deviations are identified by analysis of variance, reflecting such phenomena in the modern ukrainian economy as increasing the potential threats of violence to the business (sub-indexes 1.13 and 1.14). even with the sharp decline in 2014-2015 of subindexes related to potential threats of violent interventions for businesses, according to the average values at the first places of institutional environment factors are these indexes and sub-indexes, reflecting the high level of corporate governance, accounting and transparency of public policy. three sub-indexes with the lowest value are the 1.06 “independence of the judiciary”, 1.08 “inefficient government expenditures”, 1.04 “public trust in politicians”. thus, the quality of ukrainian institutional environment on evaluating the global competitiveness index is very low and requires a systematic increase. values of unit “institutions” of the global competitiveness index should act as a guideline for development and implementation of state economic policy. 4. regulatory policy and small and medium-sized business entrepreneurship is a fundamentally important signed category of well-being and development of society. it forms a socio-economic basis of expanded social reproduction, baltic journal of economic studies 153 vol. 2, no. 2, 2016 which is confirmed by the experience of successful economic organization of developed countries. the share of small and medium-sized enterprises in the gdp of developed countries reaches 60%. communities with a conscious attitude towards the role of entrepreneurship in creation of national wealth and the formation of a prosperous middle class have accumulated experience in promoting its development by conducting appropriate economic policy. the most important component of an effective policy to promote entrepreneurship is a regulatory policy, which is institutional in its content. an important direction of investigations to improve the development and conducting mechanism of the regulatory policy is the concept of institutional environment, which combines the concepts of institution, institutional agreements and transaction costs. this concept serves, in fact, as a modeling of such broad complex concepts as “business climate”, “environment for business development”, “business environment” and the other related to an integral assessment of the ability of national regulatory system to ensure support and development of entrepreneurship. state regulatory policy is a way to improve relations and enhance the efficiency of the institutions and for it the institutional environment serves as direct object of impact. a model of institutional environment allows determining of the regulatory policy as a policy that changes elements of institutional environment  – institutions, displays in changes of transaction costs. speaking about the normative and practical tasks of the institutional environment, the attention should be paid to the work of russian researchers kondratova n.v., garipova n.i. (kondratova, garipova, 2013), who in the result of the analysis of institutional and economic relations identified three main tasks of institutional environment, which solving ensure the effective development of the economic system, namely: 1. improvement of existing and formation of new relations in the activities of institutions. 2. improving the efficiency of the institutions’ activities. 3. achievement of positive qualitative changes in the economic and social structure of the country and regions. while agreeing with this approach, it should be noted that if the state apparatus consciously aims to enhance the socioeconomic role of entrepreneurship through the creation of favorable conditions for its functioning, regulatory policy is the way to implement this aim; effectiveness criterion of this policy is to improve the quality of the national institutional environment that is measured by reduction of transaction costs of entrepreneurship subjects. all stated above allows describing the mechanism of regulatory policy in the field of entrepreneurship as a logical order. measures of regulatory policy influence the quality of institutional environment that leads to the change in transaction costs’ value related to its use. changes in entrepreneurs’ transaction costs affect their socio-economic effectiveness. an important socio-economic role of entrepreneurship should be supported by effective public policy on its support and development. institutional economic analysis provides possibilities for qualitative study of entrepreneurship’s problems, development and implementation of regulatory policy, the definition of criteria for its effectiveness. using a system model of the institutional environment and the principle of methodological individualism allows considering the economic cooperation of representatives of entrepreneurship and government. 5. the concept of transformation of the national institutional environment if the object of regulatory policy is the institutional environment, and the aim of this policy is to improve it, its most important economic characteristics should be considered. firstly, the institutional environment is seen as a public good with its two main features: 1) nonexclusion – it is impossible to exclude individuals who are parties in the institutional arrangements from the circle of consumption of institutional environment; 2) non-competitiveness in consumption – the use of institutional environment by one of the subjects of the process does not limit the possibilities of other on the conclusion of the institutional arrangements. a deep examination of institutional environment as a separate public benefit involves a wide range of issues of society demands for its quality, conditions of its modernization, financing, accounting principles. second, the institutional environment manifests itself as capital goods – goods whose use in the current period results in the production of other goods in the future. in the process of prolonged use of institutional environment society receives the results of economic activity. as a capital benefit, institutional environment needs investment – expenses on its improving and should be amortized. third, the institutional environment is an intangible asset – institutions as a set of business rules, do not have a physical embodiment, the value of their use is determined by their quality. it is obvious that ineffective institutional environment leads to the systemic open and concealed socio-economic losses and corruption. thus a consideration of ways of creation the effective institutional environment for business as whole and small and medium-sized enterprises in particular is a critical question of nation’s preservation and development on the global economic stage. it is just the creation of qualitative institutional environment for business as whole and subjects of entrepreneurship in particular that should be the main task of state economic policy, which has for an object its economic development. we present a schematic model of the modern institutional environment (fig. 1). the institutional environment on this scheme is bordered by rectangle, which contains formal (black balls) and informal (white balls) institutions. in accordance baltic journal of economic studies 154 vol. 2, no. 2, 2016 with rules of methodological individualism, subjects of institutional economic relations are individuals (anthropomorphous figures on the scheme). the subjects implement among themselves institutional agreements, which are shown by lines (“tracks”). these “tracks” are necessarily go through formal and informal institutions. conclusion of institutional agreements is a choice among institutional alternatives, discrete choice and transaction performance. some institutions (both formal and informal) can be not involved into conclusion of institutional agreements, thus it is the question of institutions market – subjects’ possibility to choose institutions for interaction. subjects can conclude institutional agreements within the framework of company or state (hierarchies of institutions with certain cruelty) or within the framework of market (relatively soft institution). use of transactions allows looking into the economic nature of market, company, state; in neoclassical modeling it looks as black boxes with ins and outs. for example, bipartite market transaction of purchase and sale of consignment between two firms in the institutional environment can be presented as an aggregate of transactions with the use of institutions. it should be noted that such decomposition in many ways approximates an economic theory to theory and practice of business process management (bpm). in accordance with this approach, all operation of company is considered as an aggregate of business processes, each of which serves as management unit and is subject to hierarchical decomposition to the lowest level of indivisible processes. orders of business processes, i.e. rules of their performance and management, are used for bpm. in fact, at defined level performed business processes became internal for the company transactions, each of which can be assessed with relation to costs of its performance. in accordance with that, company management effectiveness from the point of view of business processes depends on quality of business processes and orders of their performance. there are two transformations to be distinguished from the standpoint of business processes consideration – physical object manipulation and transactions. institutional environment is a background, on which institutional agreements at the level of all economy are taken place; institutions serve as orders. at the same time the institutional approach obliterates distinctions between market, enterprises and state and describes all economic interaction between individuals as a sequence of transactions. every action of state through the institutional prism looks as establishment or abolition of a formal institution – mandatory rule with an external coercion to its execution. in the institutional environment (which is exogenousspecified in this model) a conclusion of institutional agreements is taken place as a result of subjects’ choice of institutional alternatives in the market of institutions. at the same time this market consists of formalized in the rules of law institutions as well as unformalized. an implemented institutional agreement (use of the chosen institution) is actually a transaction (from lat. transactio – concordance, agreement). selection of institution (model of behavior, implementation of agreement) is occurred on the basis of subject’ (individuals) assessment of comparative advantages of one or another institution use, because the use of each institute is accompanied by time expenditure of individual as well as possible money expenditure. the choice among behavior alternatives of subjects of economic process is a subject to economic evaluation that leads to appearance of transaction costs idea. that is, transaction costs are the way of economic evaluation of institutional agreements, transactions. state c ompany market fig. 1. model of institutional environment (developed by author) baltic journal of economic studies 155 vol. 2, no. 2, 2016 transaction costs are exactly that necessary economic element that brings institution out to the area of essentially economic research. institutions, which are the brainchild of sociology, become an element of economic analysis only on the assumption of assessment of transaction costs, related with their use. the assessment of transaction costs of institution market use lies in the ground of quality assessment of institutional environment. the higher quality of institutional environment is, the cheaper its use by subjects of economic interaction is. question of quality of institutional environment of entrepreneurship institutions’ market in economic research adds up to assessment and comparison of transaction costs that accompany use of the market. 6. conclusions an important socio-economic role of small and medium-sized enterprises must be confirmed by effective public policy with its support and development. institutional economic analysis provides the possibilities of qualitative research of problems of small and mediumsized enterprises, developments and introduction of regulatory police, determining of the criteria of its efficiency. the use of system model of institutional environment and principle of methodological individualism allows considering the economic interaction between representatives of small and mediumsized enterprises and state. an increase of institutional environment quality is the main task of regulatory policy. the quality of ukrainian institutional environment by the criteria of international rating doing business in comparison with the leading countries during 20072013 not exceeded 27%. a criterion of regulatory policy effectiveness in the model of institutional environment is a cheapening of institutional agreements, i.e. transaction costs decrease that leads to increase of socio-economic effectiveness of small and medium-sized enterprises. references uilyamson, o. (1996). ekonomicheskie institutyi kapitalizma. firmyi, ryinki, «otnoshencheskaya» kontraktatsiya. spb. : lenizdat, 702 p. nort, d. (2000). institutsiyi, institutsiyna zmina ta funktsionuvannya ekonomiki. – k.: osnovi, 198 p. auzan, a.a. (2005). institutsionalnaya ekonomika: novaya institutsionalnaya ekonomicheskaya teoriya. – m.: infa-m., 333 p. stroiko t. & dusheyko d. (2016) quality rating of ukrainian institutional environment in the system of the global competitiveness index. ukrainian journal ekonomist, 2016 (5): 42-45. the global competitiveness report 2014–2015. full data edition. world economic forum, geneva, 2014. retrieved from: http://www3.weforum.org/docs/wef_globalcompetitivenessreport_2014-15.pdf kondratov, m.v., garipov, r .i. (2013). teoreticheskie podhodyi k ponyatiyu «institutsionalnaya sreda». fundamentalnyie issledovaniya, № 11, part 9, p. 1908-1911. татьяна стройко, дмитрий душейко концепт трансформации национальной институциональной среды малого и среднего предпринимательства аннотация. целью работы является попытка обосновать концепт трансформации национальной институциональной среды как предпосылки формирования зажиточного класса малого и среднего предпринимательства. институциональный анализ рассматривает взаимодействие на уровне индивидуумов, а рыночную сделку делит на трансакции (институциональные соглашения), оценивая их стоимость с помощью трансакционных издержек. проведенная нами систематизация определения сводят институциональную среду к совокупности норм, правил, согласований, правил игры. для оценки качества институциональной среды на макроуровне нами использовались прямые показатели его оценки индексы качества в международных рейтингах и показатели специализированных институциональных исследований. практическое значение. в результате качество украинской институциональной среды по оценке индекса глобальной конкурентоспособности является крайне низкой и требует системного повышения. значения показателей блока «институты» индекса глобальной конкурентоспособности должны выступать ориентиром при разработке и внедрении государственной экономической политики. важным направлением исследований по совершенствованию механизма разработки и проведения регуляторной политики выступает концепция институциональной среды, которая объединяет в себе понятия института, институциональных соглашений, трансакционных издержек. модель институциональной среды позволяет определить регуляторную политику как политику, которая меняет элементы институциональной среды институты, отображается в изменениях трансакционных издержек. обосновано, что государственный аппарат осознанно ставит своей целью повышение социально-экономической роли предпринимательства через создание благоприятных условий его функционирования, то способом реализации такой цели baltic journal of economic studies 156 vol. 2, no. 2, 2016 выступает регуляторная политика, критерием эффективности которой является повышение качества национальной институциональной среды, что измеряется снижением трансакционных издержек субъектов предпринимательства. вышеизложенное позволило описать механизм регуляторной политики в сфере предпринимательства как логическую последовательность. мероприятия регуляторной политики влияют на качество институциональной среды, что приводит к изменению величины трансакционных издержек, связанных с его использованием. изменения в трансакционных расходах предпринимателей влияют на его социально-экономическую эффективность. разработано схематическую модель современной институциональной среды. согласно правила методологического индивидуализма, субъектами институциональных экономических отношений выступают отдельные лица, индивидуумы. субъекты осуществляют между собой шаблонные институциональные соглашения, которые представлены линиями. эти «дорожки» обязательно проходят через формальные и неформальные институты. заключение институциональных соглашений выбор между институциональными альтернативами, дискретный выбор, осуществления трансакций. некоторые институты (как формальные, так и неформальные), могут быть не задействованными в заключении институциональных соглашений, поэтому речь идет о рынке институтов возможность субъектов выбирать институты для взаимодействия. субъекты могут заключать институциональные соглашения в рамках фирмы или государства (иерархии институтов с определенной жесткостью) или в рамках рынка (относительно мягкие институты). важная социально-экономическая роль малого и среднего предпринимательства должно подтверждаться эффективной государственной политикой по его поддержке и развитию. институциональный экономический анализ обеспечивает возможности качественного изучения проблематики малого и среднего предпринимательства, разработки и реализации регуляторной политики, определение критериев ее эффективности. использование системной модели институциональной среды и принципа методологического индивидуализма позволяет рассмотреть экономическое взаимодействие представителей малого и среднего предпринимательства и государства. повышение качества институциональной среды главная задача регуляторной политики. качество украинской институциональной среды по критериям международного рейтинга doing business по сравнению с передовыми странами за 2007-2013 гг. не превышала 27%. критерием эффективности регуляторной политики в модели институциональной среды выступает удешевления институциональных соглашений, то есть снижение трансакционных издержек, что приводит к повышению социально-экономической эффективности малого и среднего предпринимательства. baltic journal of economic studies 64 vol. 6, no. 5, 2020 corresponding author: 1 o. m. beketov national university of urban economy in kharkiv, ukraine. e-mail: hcsms.07@gmail.com orcid: https://orcid.org/0000-0002-0282-368x 2 o. m. beketov national university of urban economy in kharkiv, ukraine. e-mail: dmytro.prunenko@kname.edu.ua orcid: https://orcid.org/0000-0001-7322-9998 3 o. m. beketov national university of urban economy in kharkiv, ukraine. e-mail: grytskov@kh.gov.ua orcid: https://orcid.org/0000-0003-4766-7155 doi: https://doi.org/10.30525/2256-0742/2020-6-5-64-72 corporate social responsibility in the system of interaction bet ween stakeholders of construction enterprises volodymyr velychko1, dmytro prunenko2, evgeniy grytskov3 abstract. it is proved that at the present stage of economic transformation, the problem of ensuring the effectiveness of interaction with stakeholders, which affect all areas of business entities is exacerbated. the cooperation of stakeholders to ensure corporate social responsibility at construction enterprises is of particular importance and requires solving the problems of the formation and implementation of corporate social responsibility in the system of interaction between stakeholders of construction enterprises. as a result of the analysis of existing scientific and methodological works, the need for the formation and implementation of corporate social responsibility in construction enterprises is determined, considering the peculiarities of interaction with stakeholders. the aim of the study is the formation of measures for the creation and implementation of corporate social responsibility at construction enterprises, considering the areas of interaction with stakeholders. the article solves the tasks of identifying stakeholders interacting with construction enterprises, substantiating theoretical approaches to determining corporate social responsibility of construction enterprises, assessing the level of influence of corporate social responsibility on the functioning of construction enterprises, taking into account the peculiarities of interaction with stakeholders . the indicators that form corporate social responsibility are identified, and the corresponding integral indicator is evaluated, which allows us to create a quantitative basis for making informed management decisions. the necessity of developing measures to increase the efficiency of the formation and use of corporate social responsibility at construction enterprises is established. the subject of the study is corporate social responsibility in the system of stakeholder relations of construction companies. the formation of the research methodology is based on the definition of stakeholders and corporate social responsibility, the use of classification (to form and determine stakeholder factors affecting corporate social responsibility of construction companies), analytical and expert evaluation method (to assess the general criterion of stakeholders' impact on corporate social responsibility construction companies). the purpose of the study is to form a quantitative basis for making sound management decisions on the formation and use of corporate social responsibility in the system of stakeholder relations of construction companies. the result of the study is to determine the directions and features of increasing the effectiveness of the formation and use of corporate social responsibility in construction companies in the system of stakeholder relations, which are developed based on the results of assessing the generalized criterion of stakeholder interaction on corporate social responsibility. key words: stakeholders, corporate social responsibility, construction enterprises, corporate relations. jel classification: c43, с65, d03, d22, l74 baltic journal of economic studies 65 vol. 6, no. 5, 2020 1. introduction at the present stage of economic transformation, the problem of ensuring the effectiveness of interaction with stakeholders is becoming more acute. they affect all areas of the functioning of business entities. stakeholders form relationships in the supply of inventory, production, and sale of products, the creation and use of social and corporate policies. stakeholders significantly influence the activities and development of construction enterprises. moreover, the interaction of stakeholders in ensuring corporate social responsibility at construction enterprises is of particular importance. in such circumstances, solving the problems of the formation and implementation of corporate social responsibility in the system of interaction between stakeholders of construction enterprises is an urgent and timely task. in existing scientific developments, theoretical provisions have been identified and justified to ensure the cooperation of stakeholders with enterprises (e. freeman (1984), p. d’anselmi (2011), a. ammar (2012), l. gatsenko (2016), d. cleland (1998), a. nepomnyashchy (2013), v. suslov (2011), n. slyusarevsky (2010). the attention of scientists and practitioners is focused on corporate social responsibility. in particular, the international standard iso 26000: 2010 “guidelines on social responsibility” defines that corporate social responsibility is characterized as the organization’s responsibility for the impact of its decisions and activities on society and the environment through transparent and ethical behavior, which in turn is compatible with sustainable development and wellbeing of society, considering the expectations of stakeholders (international standard iso 26000:2010, 2010). the principles of corporate social responsibility are defined: accountability, transparency, ethical behavior, ensuring the interests of stakeholders, and the rule of law, compliance with international norms of behavior, and human rights. in accordance with international standard iso 26000, stakeholders are organizations or individuals whose one or more interests relate to any decision or activity of the organization (international standard iso 26000:2010, 2010). problems of corporate social responsibility have been studied in kotler and lee (2005), bowen (1953), friedman (2010), plakasov (2012), chernykh (2012), hrytsyna (2008), grishnova (2011). despite a significant amount of scientific works on the interaction of stakeholders, the formation of corporate social responsibility, questions regarding its creation at construction enterprises remain unresolved, considering the peculiarities of relationships with stakeholders. the article aims to develop measures for the creation and implementation of corporate social responsibility on construction enterprises, considering the directions of the interaction with stakeholders. according to the goal, the following tasks were solved: – to identify stakeholders interacting with construction enterprises; – to substantiate theoretical approaches to the definition of corporate social responsibility of construction enterprises; – to assess the level of corporate social responsibility influence on the functioning of construction enterprises, considering the peculiarities of interaction with stakeholders. 2. materials and methods when substantiating the general provisions for the definition of stakeholders, they are characterized as groups, organizations, and individuals. stakeholders, on the one hand, affect the development of the company, and on the other hand, the company affects their formation and use, determines the relationship between them. the interaction between stakeholders is carried out in the field of creation, use, and distribution of all types of resources, information support, risk, brand equity to ensure the development of construction enterprises (mamonov, 2013). to ensure corporate social responsibility, groups of stakeholders are identified (table 1). thus, as a result of the study, it was found that in existing scientific approaches, stakeholders are grouped by participation in the production process, relationship and interaction with the company in the internal and external environment, location in the company, level of influence on the enterprise, creation of possible threats and cooperation, attitude towards authority, the legality of action and application of relevant requirements. the presented grouping criteria indicate that the relationship between the stakeholders covers various areas of company activity, which requires an analysis of stakeholders to make informed management decisions in the context of developing and implementing a valuebased strategy for managing capital and brand of construction enterprises. summarizing the above, the study identified the following groups of stakeholders: 1. investors of the company: shareholders, domestic investors, foreign investors. 2. managers of different levels: company owners, top managers, department heads, heads of other organizational structures. 3. company personnel: personnel providing enterprise management, production personnel, marketing personnel, warehouse personnel, other personnel involved in the production and economic activities. 4. company partners: suppliers of material values, dealers, consumers. 5. social groups: public organizations, nongovernmental foundations, human rights defenders, public control bodies, trade union organizations, and other social groups. baltic journal of economic studies 66 vol. 6, no. 5, 2020 6. credit institutions: banks, credit unions, other financial institutions. 7. public administration bodies: central public administration bodies, regional public administration bodies, local self-government bodies, fiscal bodies, other public administration bodies (mamonov, 2013). it should be noted that each of the presented stakeholder groups affects the activities of the construction enterprise and its management. in particular, investors and managers of various levels directly influence the functioning of the construction industry enterprises and their management. the development of construction enterprises is significantly influenced by company staff and partners. besides, the operation of the enterprises of the construction industry and the peculiarities of their management are due to interaction with government bodies and credit institutions. a group of stakeholders, which indirectly affects the functioning of construction enterprises, is the social group, whose role has been growing in recent years in the context of building a civil society. however, in some cases, the opinion of public organizations in the field of construction is ignored, as evidenced by the growing number of residential buildings and structures, the development of which is not agreed with the public (mamonov, 2013). thus, certain groups allow us to analyze the characteristics of the interaction of stakeholders with construction enterprises to develop and implement a strategy of value-oriented brand capital management. in the context of ensuring corporate social responsibility of construction enterprises, models of managing stakeholders are proposed. in existing research, the following stakeholder models are highlighted. the model of mitchell, agle, and wood is aimed at identifying stakeholders, determining their impact on the enterprise, significance based on objective, qualitative and quantitative characteristics. within the framework of the presented model, the influence of stakeholders on the management of enterprises, their authority, legitimacy of actions, the urgency of requirements is characterized. according to the presented characteristics, groups of stakeholders are determined. the advantage of the mitchell, agle, and wood model is the assessment of the significance and influence of stakeholder groups in accordance with specific characteristics, which allows making management decisions, considering the interests of each of the stakeholders interacting with enterprises. however, within the framework of the presented model, the interests of stakeholders may not be considered in accordance with the given characteristics. at the time of the study, stakeholders were not interacting with the enterprises. as a result, possible transformations in the internal and external environments in the future are determined. the balance model of resource relations is characterized by the definition of stakeholders based on relationships related to the formation, distribution, use of resources to ensure the growth of the effectiveness and efficiency of stakeholder activities. as a result of using the balance model of stakeholder management, the state is determined, and the features of the relationship on table 1 the analysis of approaches to determine the groups of stakeholders no author(s), sources identification of stakeholder groups grouping criteria 1 national commission on securities and stock market (mamonov k.a., 2011) shareholders potential investors; lenders; counterparties to transactions; other persons who have shown interest in receiving relevant information by participation in industrial and economic activities 2 nikitina (2013) shareholders (participants), employees, management, creditors, consumers, local community, public authorities, and administration by influence, strength, and interest in the production and economic activities of the company 3 zub (2002) shareholders; institutional investors; senior managers; workers; consumers; distributors; suppliers; corporation financiers; representatives of state and municipal authorities; social and community groups by the interests arising from the interaction of stakeholders 4 clarkson (1995) the first group: shareholders, owners, workers, partners, etc. (direct contact with the company); second group: central authorities, local governments, public organizations, mass media, etc. (indirect communication) by the nature of the relationship with the company 5 blair, fotler (1990) external, “borderline”, internal by location in the company 6 savage, nix, whitehead, blair (1991) stakeholders for cooperation with a high level of threat; dangerous stakeholders with a low level of cooperation and a high level of risks; favorable stakeholders with a high level of cooperation and with a low level of threats; stakeholders with low levels of cooperation and threats by the level of threats and opportunities for cooperation 7 mitchell, agley, wood (1997) latent, pending, categorical stakeholders by the level of attitude to power, the legality of actions, urgency of requirements. baltic journal of economic studies 67 vol. 6, no. 5, 2020 the distribution and use of resources in the relationship between stakeholders are identified. besides, within the framework of the presented model, the corresponding balance of formation and use of resources is built. based on this balance, there is an opportunity to make management decisions on the resource provision of relations between stakeholders. however, the balance model does not solve the problem of assessing the corresponding resource from the perspective of different stakeholders, which introduces various aspects when making management decisions. the network model allows us to represent the relationship between stakeholders in the form of networks. within the framework of the presented model, indicators of the density and centrality of stakeholder relationships are determined based on the characteristics of their accessibility and importance. the network model allows you to visually assess the status and features of the relationships between stakeholders and build a holistic system for managing these relationships, which creates the basis for managerial decisions. however, within the framework of the presented model, it is necessary to consider the maximum number of connections, which complicates the possibilities of its construction. besides, the network model excludes intermediaries, which in today’s business environment is a complex process, as these entities play a significant role in ensuring interaction between stakeholders. in the formation and maintenance of relationships in the practice of company management between stakeholders, two main approaches are used: anglosaxon and japanese-german. the anglo-saxon approach is characterized by the determination of priority areas related to the satisfaction of the interests of shareholders (owners) to which priority is given. within the framework of the presented approach, the primary attention is paid to ensuring an increase in the economic effect (profit growth) for shareholders, creating opportunities for further investment in the company. using this approach allows to consider the interests of shareholders (owners) and to ensure the involvement of new stakeholders and thereby obtaining additional investment capital. besides, the anglo-saxon approach implements the principle of availability, completeness, and reliability of information support for interaction with shareholders and enterprises. however, the presented approach creates specific imbalances in the relationship between stakeholders, due to the interests of shareholders (owners) over the interests of other stakeholders, reducing the motivational component of the activities and interest of different stakeholders in the results (staff, partners, etc.), as the priority of the distribution of financial resources is shifted towards shareholders (owners). moreover, in the anglo-saxon approach, much attention is paid to solving tactical tasks aimed at obtaining a negative profit while reducing the role of strategic planning. the japanese-german approach to corporate governance when interacting with stakeholders is to ensure partnership with a wide range of stakeholders, taking into account their interests. in the process of providing interaction between stakeholders, the interests of each of them are equal without the domination of any of the stakeholders over others. besides, the implementation of the principle of social partnership for solving relevant problems, especially in the field of employment and the achievement of social standards is of particular importance. within the framework of the proposed approach, it is possible to balance the interests of stakeholders, solve problematic aspects related to the social sphere, and provide for the collegial management principle in the implementation of control functions by relevant stakeholders. however, the japanese-german approach provides for the limitation of information on the remuneration of owners and shareholders, members of the supervisory board, the use of additional stakeholders (for example, depository banks) when disseminating information, undervaluation of the company due to retained earnings. besides, the japanese-german approach creates conditions aimed at a specific limitation of the rights of shareholders as a result of limiting the number of votes when voting at a general meeting. thus, in current business conditions, with the revealed discrepancies and contradictions in the presented management approaches, there is interpenetration and interaction between the provisions and functions of the anglo-saxon and japanese-german approaches. given the transformations taking place in the domestic economy, it is impossible to completely suggest the use of the presented approaches (mamonov, 2013). to ensure corporate social responsibility at construction enterprises, it is proposed to take action to form and use the information and analytical support: – creation of an integrated system for assessing information threats and prompt response to them; – improving the powers of state regulatory bodies operating in the information space of the state; – legislative regulation of the mechanism of detection, fixation, blocking, and removal from the information space; – determination of mechanisms for regulating the work of enterprises providing information support; – creation and development of structures responsible for informational and psychological security; – development and protection of the technological infrastructure for ensuring information security; – building an effective system of strategic communications; – development of mechanisms of interaction between enterprises and civil society institutions (doctrine of information security of ukraine, 2017); baltic journal of economic studies 68 vol. 6, no. 5, 2020 – directions for the formation of technical information protection, which are characterized by the definition and analysis of threats, the development of an information protection system; implementation of an information security plan; monitoring the functioning and management of the information security system (ssscip); – directions for the implementation of technical protection of information are determined by the implementation of a single technical policy; the creation and development of a single terminological system; the formation of multi-level information protection systems based on mutually agreed provisions, rules, procedures, requirements and norms; development and implementation of certification, licensing and certification systems in accordance with information security requirements; development of services in the system of technical information protection; the establishment of the procedure for the development, manufacture, operation of means of ensuring technical protection of information and special instrumentation; the organization of the design of construction work in terms of ensuring technical protection of information; the development of human capital in the system of technical protection of information; – impact on the channels information leakage is carried out based on the formation and implementation of technical measures to block information leakage through various groups of stakeholders interacting in the formation and use of intellectual capital of construction enterprises, radio channels, acoustic, electrical, visualoptical and material channels; – individual technical information protection includes systems for delimitation and access to information, personalization systems, identification and authenticity systems, audit and monitoring systems, antivirus protection systems; – communicative information protection systems are formed and implemented based on the use of tools to block information attacks from the external and internal environment of the construction enterprise (cisco pix firewall, symantec enterprise firewall tm, contivity secure gateway and alteon switched firewall – nortel networks); technical means from unauthorized and unreasonable influence on information flows and networks (ciscosecure ids, intruderalert and netprowler – symantec); tools for creating secure channels by building virtual private networks (symantec enterprise vpn, cisco ios vpn, cisco vpn concentrator); means of detecting sources of information danger, analysis of areas of information threats (symantec enterprise security manager, symantec netrecon); – comprehensive software and hardware information protection tools include: protection against unauthorized access to information about the formation and use of intellectual capital of construction enterprises (authorization tools, mandatory access control, access control by defining roles, selective access control, information audit); tools for analysis and modeling of external and internal information flows (casesystem); monitoring tools of information protection; tools for protecting the sources of confidentiality information (dlp-systems); instrument analysis tools; antivirus products; internetworking tools for information protection; cryptographic tools for digitizing information and applying digital signatures; tools for backing up information, creating a failover cluster; uninterruptible power tools (ups, redundant power lines, power generators); tools based on the development and implementation of passwords, access key, certificates, biometric data; security tools developed based on the use of means of protection against physical and information breaking into premises and information systems, monitoring and control for access to information, analysis tools for protection systems; – counteraction to information confrontation is characterized by the use of tools to protect against the impact on the systems of formation, processing, dissemination and storage of enemy information, application of measures to protect information systems from external and internal threats; – the prevention or counteraction to information wars is characterized by the formation of a system and the use of integrated tools to influence the enemy’s information environment to ensure informational benefits; – counteraction to violations of the system of formation and use of information is carried out by identifying and applying information technical tools and organizational forms: illegal collection, storage, processing, dissemination of information; – concealment of information; untimely provision of information; distortion, dissemination of unreliable information; use of information of socially harmful content; illegal access to information of a confidential nature; use of information with limited access; the implementation of a destructive information impact on human consciousness; creation, use, distribution of malicious software; illegal access, use of processing systems, storage, the transmission of information; unauthorized interference, obstruction of the work of information and telecommunication systems and their components. considering the theoretical and methodological approaches to the definition of corporate social responsibility, the ambiguity of the provisions is established. in particular, the european commission has defined corporate responsibility as a concept that reflects the company’s voluntary decision to participate in improving society and protecting the environment. in accordance with the international standard iso 26000: 2010 “guidelines for social responsibility,” areas of corporate social responsibility are defined: baltic journal of economic studies 69 vol. 6, no. 5, 2020 1. development and implementation of an organizational social responsibility system to ensure interaction with stakeholders. 2. formation and implementation of corporate governance in the system of social responsibility. 3. ensuring labor relations in the system of social responsibility. 4. creation of ecological relationships in the system of social responsibility. 5. definition of conscientious business practices in the system of social responsibility. 6. ensuring interaction with consumers (customers) in the system of social responsibility. 7. formation of cooperation on the creation of marketing relations in accordance with social responsibility. 8. ensuring consumer health and safety. 9. ensuring sustainable consumption in the system of social responsibility. 10. service and support for consumers, dispute and claims resolution. 11. protecting information and ensuring the confidentiality of consumers. 12. development and interaction with the community in the system of social responsibility. 13. employing the system of social responsibility. 14. formation of modern technologies in the system of social responsibility. 15. creation of welfare and income in the system of social responsibility. 16. creation of a healthy lifestyle in the system of social responsibility. 17. realization of social investments in the system of social responsibility. 18. definition and features of formation of social responsibility of the organization. 19. creation of information in the system of social responsibility. 20. ensuring trust in the organization in the system of social responsibility (international standard iso 26000:2010, 2010). kotler and lee characterize corporate social responsibility, based on the possibilities of a free choice of a company in favor of the obligation to improve the welfare of the company, implementing appropriate approaches to doing business by using corporate resources (kotler f., lee n., 2005). bowen focuses on the functional features of corporate social responsibility, determining the directions of policy implementation and decision-making, the implementation of behaviors that are aimed at addressing the goals and values of society (bowen, 1953). as part of a functional approach, hrytsyna (hrytsyna, 2008) characterizes corporate social responsibility through voluntary activities that exceed the statutory requirements for the enterprise and covers environmental, social, labor and economic spheres of responsibility to the environment, society as a whole, local communities, employees, suppliers, consumers, and shareholders. with the development of a functional approach, the point of view of i. lebedev deserves attention, which highlights the following elements for the implementation of corporate social responsibility: – corporate social policy (ensuring productive employment; creating safe and favorable working conditions; adequate wages; improving social and labor relations; strengthening social partnership; development and effective use of human potential; creating a favorable moral and psychological climate; providing social guarantees and additional social package); – corporate citizenship (promoting the strengthening of the rule of law and civil society, ensuring product quality, respecting the rights and interests of consumers, protecting nature and resource conservation, spreading the traditions of ethical entrepreneurship, developing a social climate; interacting with local authorities and communities, charity and philanthropy; social entrepreneurship; dialogue with the public, the formation of social reporting) (lebedev, 2014). friedman defines corporate social responsibility on its useful characteristics through conducting good business practices (friedman, 2010). a similar point of view is presented in the works of grishnova o.a., which considers corporate social responsibility based on the possibilities of forming the social usefulness of its activities to all people and organizations with which it interacts in the process of functioning, and to society as a whole (grishnova, dumanskaya, 2011) carroll (1979). characterizes corporate social responsibility through the prism of economic, legal, ethical, and discretionary expectations that are formed by society in the relevant period. chernykh (2012) defines corporate social responsibility as the activity of business owners and managers in implementing legally-established norms and voluntarily resolving social issues of society to direct part of the income to support and develop social infrastructure facilities and satisfy the needs of key stakeholders and environmental programs. it should be noted that in the context of defining corporate social responsibility, researchers describe the following levels: – corporate – social responsibility of organizations and groups; – regional – social responsibility of the government subjects of individual regions within one state; – state – the responsibility of government entities to different groups of stakeholders; – international – the social responsibility of a set of countries to the world community; – global – the responsibility of the international community in a globalized world society (kolot, 2010, 2012). baltic journal of economic studies 70 vol. 6, no. 5, 2020 a systematic approach to the definition of corporate social responsibility is implemented in lebedev i.v. (2012). in this work, it is characterized as a system of purposeful and consistent actions of the organization management, aimed at meeting the material and spiritual needs of employees to develop social factors of economic activity and their practical use. the stakeholder approach in determining corporate social responsibility is insisted in (kolot, 2010, 2012). 3. results summarizing the above, the indicators of corporate social responsibility assessment are formed, considering the level of interaction with stakeholders: 1. formation and implementation of organizational management in the system of corporate social responsibility (csr1). 2. ensuring human rights (csr2). 3. creation of labor practices and features (csr3). 4. providing environmental protection (csr4). 5. conscientious practices in the system of corporate responsibility (csr5). 6. solving consumer problems (csr6). 7. participation in the life of communities and their development (csr7). 8. recognition of corporate social responsibility (csr8). 9. identification of stakeholders and interaction with them in the system of corporate social responsibility (csr9). 10. level of organization attitude to corporate social responsibility (csr10). 11. formation of social responsibility of the organization (csr11). 12. practical aspects for end-to-end integration of corporate social responsibility (csr12). 13. exchange of information on corporate social responsibility (csr13). 14. ensuring increased enterprise confidence regarding corporate social responsibility (csr14). 15. analysis and modernization of operations and practical activities of the enterprise related to corporate social responsibility (csr15). 16. development and implementation of a system of corporate social responsibility to ensure interaction with stakeholders (csr16). 17. formation and implementation of corporate governance in the system of social responsibility (csr17). 18. ensuring labor relations in the system of corporate social responsibility (csr18). 19. formation of interaction on the marketing relations formation in accordance with corporate social responsibility (csr19). 20. ensuring consumer health and safety (csr20). 21. ensuring sustainable consumption in the system of corporate social responsibility (csr21). 22. ensuring the protection of information and ensuring the confidentiality of consumers (csr22). 23. development and interaction with the community in the system of social responsibility (csr23). 24. ensuring employment in the system of social responsibility (csr24). 25. formation of modern technologies in the system of social responsibility (csr25). 26. formation of welfare and income in the system of social responsibility (csr26). 27. formation of a healthy lifestyle in the system of social responsibility (csr27). 28. realization of social investments in the system of social responsibility (csr28). 29. definition and features of the formation of social responsibility of the organization (csr29). 30. ensuring trust in the organization in the system of social responsibility (csr30). the system factor that determines the impact of corporate social responsibility of construction enterprises on the formation and implementation of stakeholder interaction (csr) is assessed based on a model that has the following general form (1). an economical and mathematical model has been developed for assessing the systemic factor that determines the impact of corporate social responsibility of construction enterprises on the formation and implementation of stakeholder interaction (2): {csr1, csr2, csr3, csr4, csr5, csr6, csr7, csr8, csr9, csr10, csr11, csr12, csr13, csr14, csr15, csr16, csr17, csr18, csr19, csr20, csr21, csr22, csr23, csr24, csr25, csr26, csr27, csr28, csr29, csr30} ⊂ csr , (1) csr csr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcs= 1 2 3 4 5 6 7 8 9 10� rr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr11 12 13 14 15 16 17 18 19 2� 00 21 22 23 24 25 26 27 28 29xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr x� ccsr3030 � csr csr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcs= 1 2 3 4 5 6 7 8 9 10� rr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr11 12 13 14 15 16 17 18 19 2� 00 21 22 23 24 25 26 27 28 29xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr xcsr x� ccsr3030 � (2) to determine the factors that show the impact of corporate social responsibility of construction enterprises on the formation and implementation of stakeholder interaction, the method of expert assessments and a scale of values in a range from 0 to 10 are used. applying the evaluation results and the proposed model, the system factor that determines the impact of corporate social responsibility of construction enterprises on the formation and implementation of stakeholder interaction is evaluated: csr = 2.97. baltic journal of economic studies 71 vol. 6, no. 5, 2020 thus, the insignificant level of formation and implementation of corporate social responsibility is determined, considering the influence of stakeholders on the functioning of construction enterprises. 4. conclusions thus, as a result of the study, groups of stakeholders influencing the functioning of construction companies are proposed. the approaches and models that provide control of stakeholder interaction are identified. based on the generalization of the existing theoretical and methodological provisions for the definition of corporate social responsibility, the indicators of its assessment, which create a quantitative basis for management decisions, are formed. the integral indicator of the formation and use of corporate social responsibility was assessed, taking into account the influence of stakeholders. the insignificant effect of corporate social responsibility on the functioning of construction enterprises has been established. this indicates the need to develop measures to increase the efficiency of the formation and use of corporate social responsibility at construction enterprises and to apply the appropriate strategic directions for ensuring interaction with stakeholders. according to the results of the research, the directions of increasing the efficiency of stakeholder interaction for the formation and use of corporate social responsibility are proposed: – increasing the level of effectiveness of interaction with various groups of stakeholders in construction companies; – strengthening the financial condition of stakeholders; – increasing the effectiveness of management actions in the system of corporate social responsibility; – formation and development of human capital with the implementation of conscientious practices in the system of corporate social responsibility; – implementation of a modern policy on interaction with customers of construction products; – formation and implementation of a system for assessing corporate social responsibility of construction companies; – making sound management decisions on the formation and implementation of corporate social responsibility, taking into account the peculiarities of interaction with stakeholders, based on a quantitative basis; – formation and use of information and analytical support for the implementation of stakeholder policy in the system of corporate social responsibility; – transition from a local anti-crisis strategy to a strategy for the development of stakeholder relations; – ensuring the growth of efficiency of social investments of construction enterprises, taking into account the peculiarities of interaction with stakeholders; – formation and implementation of socially-oriented policy of construction companies. references: freeman, e. 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(2010). human social responsibility as a factor of stable social dynamics: theoretical principles. ukraine: aspects of labor, vol. 7, pp. 3–9. lebedev, i. v. (2012). social technologies of modern management. formation of a market economy: special issue. strategic imperatives of modern management. part 2. kyiv: kneu. savchenko, i. g. (2007). institutional responsibility of public authorities in the context of building a welfare state in ukraine. phd thesis. kharkiv: harridu nadu. saprykina, m. (2008). the development of csr in ukraine. opinions of the main groups of stakeholders. corporate social responsibility of business. expert assessment and practice in ukraine. kiev: tef olbi. baltic journal of economic studies 137 vol. 6, no. 5, 2020 corresponding author: 1 "zaporizhzhia polytechnic" national university, ukraine. e-mail: pavl_n_m@ukr.net orcid: https://orcid.org/0000-0001-7715-9202 2 taras shevchenko national university of kyiv, ukraine. e-mail: lyuda.kot@gmail.com orcid: https://orcid.org/0000-0002-7142-8149 doi: https://doi.org/10.30525/2256-0742/2020-6-5-137-147 the preconditions for the emergence and drivers of marketplaces development in e-commerce nina pavlishyna1, liudmyla kot2 abstract. the virtual environment is getting closer to the person. from an information field designed for information exchange, it is transformed into a full-fledged business environment. a significant number of business processes today are conducted via the internet, which necessitates an alternative approach to the organization of key aspects of management. the rapid development of technology leads to the emergence of novel forms of interaction between contractors, increases their range, involves not only manufacturers and buyers but also other companies, including logistics, banking, brokerage, into the processes, which leads to increased overall business activity. intensification of business interaction leads to the emergence of new business models. in particular, the current stage is characterized by the transition from online stores to marketplaces, which are full-fledged trading platforms where there is supply and demand. the article examines the prerequisites for the emergence of marketplaces as one of the tools of digital marketing and provides a brief description of them. thus, the analysis of the level of internet penetration in the world and in ukraine confirmed the course of digitalization of society. the study of analytical reports made it possible to confirm the rapid spread of access to the network and the involvement in the virtual environment of an increasing number of users in different age groups and from different regions. such penetration allows to take into account globalization, eliminate barriers to access, and ensure greater involvement of counter-parties in market processes taking place in the network. the analysis of e-commerce indicators has confirmed the assumption that the intensity of use of e-commerce services correlates with the level of the internet penetration. joint analysis of the level of the internet penetration and e-commerce data has revealed the key characteristics of the modern user of the network as a buyer. in particular, to outline his or her behavioral and consumer preferences, note the attitude to advertising, the desired level of service and the need to ensure data confidentiality. drawing up a portrait of the consumer allows to understand his or her network activity and take it into account in the formation of communication, sales organization and product promotion. tracking consumer activity also permits making a modeling impact on it, pushing the buyer to certain actions from information to purchase. assessment of the current situation in ukraine allows to predict a corresponding increase in activity in the field of electronic sales. the various business models used in e-commerce are considered, and their functionality is depicted. the key factors that led to the emergence of marketplaces are highlighted and the impact of each of them is considered separately. the classification of marketplaces according to different classification features is given and the advantages of use are outlined. the tendency to emergence of new formats of marketplaces and expansion of their functionality is revealed, which significantly increases the possibilities of users from the position of organization of work and ensuring circulation of information flows. the main drivers of formation of marketplaces in the world and ukraine are singled out. the vector of their development is traced. key words: internet, e-commerce, e-trade, consumer, marketplace. jel classification: l81, м39 baltic journal of economic studies 138 vol. 6, no. 5, 2020 1. introduction the world is becoming digital. a significant number of companies operate entirely virtually or use elements of e-commerce. the more developed the country’s economy, the larger the volume of the electronic market. this tendency is observed in the united states, western europe and asia, which have robust economies. one of the promising areas of development is the use of the internet. today it is a changing field, which is characterized by a high level of novelty, manufacturability, information saturation and unlimited possibilities. the high level of the internet penetration, the rapid development of e-commerce has led to the involvement of enterprises in the field of online commerce. it is very difficult to assess the market comprehensively due to the blurring of the boundaries between offline and online. the penetration of the internet has also changed the behavior of consumers who spend more and more time online, use mobile devices for quick access, need personalized service and strive to maintain confidentiality. knowing the needs of consumers, it is possible to offer them a high level of service, better supply and adjust communications. the objective feature of the internet is that from the information field it has altered in a tool of dialogue between the company and contractors, has become a means of influencing the consumer, building a more personalized relationship with him or her. the virtual environment provides equal opportunities, small businesses can compete for the consumer with large ones. this is facilitated by the emergence and rapid development of aggregate trading platforms – marketplaces, through which the volume of trade is growing very rapidly. changing the business model and moving to marketplaces provides significant benefits for entrepreneurs, including the ability to start quickly with low costs and access to a circle of loyal customers. the consumer can choose from a variety of offers more attractive terms and price. the marketplace model is not limited to trade. it is relevant for many industries, as it expands the range and increases the visibility of the brand online. large retailers, logistics and postal operators, financial and it companies are moving to the marketplace format. some online stores are also moving to the marketplace model, providing additional opportunities for business development, expanding channels of interaction with the audience. noting the tendency to increase the influence of marketplaces on the promotion and sale of goods, the presence of their varieties should be noted. the entrepreneur has the opportunity to choose a specialized platform, focusing on a particular segment, or choose a universal marketplace and expand its presence. isolation of marketplace development drivers allows determining the factors influencing their development at the moment. undoubtedly, new ones will be added to the outlined drivers, which will help accelerate the growth of demand for the analyzed business model, which permits predicting the development of marketplaces in the future. 2. literature review the transition to such a business model of cooperation between the seller and consumer as the marketplace has recently begun and is gradually happening. therefore, the reasons for their emergence and drivers of development have recently become relevant for research among the leading scientists. today it is a research area that has not been analyzed in detail. that is, there is no theoretical basis on which it is possible to investigate the phenomenon of the marketplace. like most marketing phenomena, the study of marketplaces is primarily an applied field, and the lack of unambiguous statistics has led to the use of the following sources in the study: – data of world and ukrainian research organizations concerning the level of the internet penetration: (ukrainian internet association), (factum group ukraine), wearesocia (think forward 2020). a generalized portrait of a modern buyer is formed on the basis of the database; – statistical data and reports of global organizations that record, process and analyze (including comparative by country) statistical information on the state of e-commerce: (eurostat), organization for economic co-operation and development (oecd), state statistics service of ukraine (ukrstat) and (national bank of ukraine); – data from independent companies on the state of e-commerce are presented by: wearesocial (kemp, 2020), growth from knowledge (gf k), emarketer (lipsman, 2020), digitalcommerce360 (fareeha, 2019), (ukrainian retail association); – information of companies of the ukrainian e-commerce market, provided on the official pages in the form of reports, reviews or interviews: (hubber), (evo); – publications in journals related to the state of e-commerce in ukraine and the world: clement (2019), prosovych & botsman (2018), hlinenko & daynovskyy (2018). 3. problem statement the purpose of the article is to identify the prerequisites for the emergence of marketplaces and analysis of drivers for their development. achieving the goal demands solving such tasks as assessing the level of internet penetration, evaluation of the current state of the e-commerce market, analysis of consumer behavior, characterization of business models used in the virtual environment, classification of marketplaces. baltic journal of economic studies 139 vol. 6, no. 5, 2020 the methodological and theoretical basis of the study is the use of a systemic approach to studying of the current state and trends of the e-commerce market; historical-logical method is used to study the prerequisites for the formation of marketplaces and the selection of drivers for their development; sampling method, grouping, statistical comparison are applied when analyzing the activities of marketplaces; graphic is used for a visual representation of the results; integrated approach and logical generalization are to form a portrait of the consumer in a virtual environment and provide a classification of marketplaces. symbiosis using these methods allows to provide a comprehensive nature in the subject’s study and solving problems. 4. problem solving modern marketing uses the concept “e-commerce” to describe economic relations involving the internet, which has the following definition: – sale or purchase of a good or service, conducted over computer networks by methods specifically designed for the purpose of receiving or placing orders (oecd, p. 4); – the sale or purchase of goods or services, whether between businesses, households, individuals, or private organizations, through electronic transactions conducted via the internet or other computer-mediated (online communication) communication. the term covers the ordering of goods and services which are sent over computer networks, but the payment and the ultimate delivery of the goods or service may be conducted either on– or offline (eurostat). one of the most important components of e-commerce is e-trade, which is developed according to market laws, creates a competitive environment, and has its own unique formats. marketplaces are among the formats that are unique to the virtual environment. a marketplace is a form of product sales, which is a trading platform on the internet, which facilitates online meetings between the seller and potential buyer and their cooperation. the idea of the marketplace received a new round of development in the 2000s after the publication of chris anderson’s book “the long tail: why the future of business is selling less of more”. anderson (2008) argues that the key to increasing sales is a wide assortment. that is, the more products of different categories will be offered by the store, the greater is the probability of a sale. today, businesses are starting to go to marketplaces, because these are new opportunities to increase sales. this trend applies even to large and already popular online stores with an established image, such as amazon. the marketplace is a combination of three components – a shop window (product catalog), a consumer’s office (identical to an online store), and a seller’s office (through which goods are placed and analytics are tracked). that is, the classic marketplace is an aggregate that accepts orders from the buyer and sends it to the seller, performing an intermediary function. according to the author, the development of marketplaces is caused by two key factors: – first, by increasing the level of the internet penetration, which makes the buying and selling process easier; – second, by the strengthening of activity in the e-commerce market, the emergence of new software that opens up new opportunities for the sale and promotion of goods and allows to collect more relevant information about the consumer. the combined effect of these factors has changed consumer behavior, for that reason they should be analyzed in more detail. a new environment for economic activity in the online space is formed and developed due to the wide internet penetration. the internet is a marketing environment that demonstrates the most dynamic development. today, it is a multibillion-dollar business, a platform for promotion and sales, which attracts more and more companies and consumers, changing consumer behavior and trading methods. it can be assumed that the intensity of use of e-commerce services (including e-trade) correlates with such an indicator as the number of the internet users in the country. in digital around the world in april 2020 (kemp, 2020), it was reported that the number of people worldwide using the internet in april 2020 increased to 4.54 billion, an increase of 7% (298 million new users) compared to last year. the map of the world by the level of internet penetration (ukrainian retail association) is shown in figure 1. the report (ukrainian retail association) states that the share of those who use the internet for shopping presents a slightly different picture. there are countries where the share of the internet users is minimal – only 13% (the dominican republic), and it is significant in other countries – 89% (uae). in addition, the figure is constantly changing. in 2018, sweden was in the first place with a rate of 86% (in 2019 – 84%). in 2017 (there were only 22 countries in the study), england was ahead with a share of 98% (in 2019 – 87%). as for ukraine, according to research companies (ukrainian internet association) and (factum group ukraine) the penetration rate is 71%. at the same time, the internet penetration rate has increased almost three times over the last ten years and by 10% over the last year. the surge is caused by the focus of the government of ukraine on the deployment of modern infrastructure and digital development technology. the second factor that led to the emergence of marketplaces is the development of e-commerce, e-trade in particular. due to the digital transformation and the rapid development of computer technology, baltic journal of economic studies 140 vol. 6, no. 5, 2020 consumer behavior is changing and traditional business is gradually moving online. it is difficult to estimate the indicators of e-commerce development in ukraine and around the world due to the lack of a single statistical reference. in “a review on measuring digital trade & e-commerce as a new economic statistics product” it is stated that “little empirical and internationally comparable information currently exists. this has inhibited a full understanding of the scale and policy challenges of digital trade” (oecd). that is, there are significant gaps in the digital trading economy. in addition, the fact that the line between online and offline is blurred prevents the provision of a comprehensive assessment of the e-trade market. the buyer can choose the product online and pick up, and pay for it in a regular store, or vice versa. this study used a significant amount of marketing information on the current state of e-commerce. as research companies record and process data according to their own methods, it is taken into account that this leads to the “distortion” of statistical data. therefore, the method of cross-comparison of data will be used to obtain more relevant results. the global e-commerce market in 2019 grew by 17.9% and amounted to 3.46 trillion usd, demonstrating a decline in growth dynamics (figure 2). china and the united states are leaders in e-commerce: they account for about 40% of the market (tushin, 2020). according to emarketer (lipsman, 2020) forecasts, the e-commerce market should grow to 3.535 million usd and show growth of 14.1%. respectively forecasts for other years also need to be revised. this indicates a more dynamic development of e-commerce than experts predict and the difficulty of forecasting for the long term. it can be claimed that the e-commerce market is growing. the world retail congress published a report (global e-commerce market ranking 2019), prepared figure 1. level of internet coverage (ukrainian retail association) figure 2. dynamics of the global e-commerce market (tushin, 2020) baltic journal of economic studies 141 vol. 6, no. 5, 2020 by eshopworld, statista, worldbank, emarketer, new zealand on the total number of online shoppers and percentage of the country’s population (figure 3). analysts (ukrainian retail association) suppose that a significant part of e-commerce turnover (44%) in 2020 will be generated in asia and oceania. another 26% will be provided by north american countries and 22% by europe. the minimum share of 1% is in africa. more positive indicators are noticed in south america (2%) and the middle east (4%). these data suggest that a high level of the internet penetration correlates with a high rate of e-commerce, as shown in figure 2. in this context, emarketer’s forecast for a slowdown in china and india (cramer-flood, 2020) is correct. penetrating into all spheres of human life, free access to network resources changes consumer behavior. the portrait of the modern consumer is formed according to the data: (the ukrainian internet association), (ukrainian retail association), (factum group ukraine), (national bank of ukraine), digital around the world in april 2020 (kemp s., 2020), wearesocia agencies (think forward 2020), evo (evo), (hubber), all internet statistics for 2020 (sergeeva, 2020), e-commerce statistics & the industry’s vibrant future (stevanovic, 2020). the data of the given sources allows to draw conclusions concerning the average user of a network (table 1). it should be noted that the e-trade development rate was influenced by the measures taken by the states caused by covid-19. sales figures during the quarantine period compared to the same period in 2019 are shown in figure 4. as can be seen, almost all countries have experienced a period of trade decline. at the same time, the number of new stores is actively increasing (bakharev, 2020), which indicates the reorientation of sellers to the online environment (figure 5). according to the growth intelligence study (as cited in skeldon, 2020), in addition to companies that have historically dominated the internet, new companies have been added, such as pharmacies, food companies, etc. according to the european business association (small business sentiment is improving), which is conducting research in ukraine within the unlimit ukraine project, the situation is similar. this is evidenced by the number of satisfied with the state of business, which increased significantly (42% in 2019; 31.6% in 2018). the index of small business sentiment rose to 3 points (in 2018 – 2.7 points). in ukraine, the e-commerce market is the place that demonstrates the best growth rates, along with india and china. and this is due to a fairly large indicator of the shadow economy (figure 6). e-retailers of the world use different business models (table 2). at the moment, online stores and marketplaces dominate 31 and 69% of parcels, respectively (tushin, 2020). after all, not all sellers in the network are giant companies, small businesses are also actively involved in virtual trade. thus, in ukraine, 98.4% of enterprises engaged in trade through the network belong to the category of “small enterprises” (98.2% of which are micro-enterprises) (state statistics service of ukraine). entering the virtual environment is a new opportunity to increase sales. although, this trend applies even to large and already popular online stores with an established image, such as rozetka and amazon. the rapid development of marketplaces is evidenced by data (ukrainian retail association): – all market leaders in the b2c sector have fully or partially become marketplaces; figure 3. number of online shoppers (global e-commerce market ranking 2019) baltic journal of economic studies 142 vol. 6, no. 5, 2020 table 1 characteristics of the average network user user characteristics detailed characteristics personal – a representative of the active part of the population (66%, people aged 15-44 years); – educated (36% of users have higher education and another 40% secondary special education); – average income level (44%) and below-average (40%); – a user of mobile devices (69% use a smartphone, tablet or laptop to access the network), while 22% use a mobile phone only; behavioral – buys goods and services online (including online consulting); – demonstrates a measured approach to digital consumption; – spends 6 minutes 13 seconds every day online. the highest figure is in the philippines, where consumers are online for almost 10 hours a day; – shops occasionally (78% of the internet users in ukraine buy only from time to time – this is a significant potential for growth); – wants to receive personalized service, short delivery terms, the ability to pay for purchases in national currency, etc. this indicates a shift in consumer expectations; – concerned about the issue of confidentiality. 64% of users are concerned about how their personal information will be used, and 23% will refuse to buy if they need to create a personal profile; – uses adblocking – 49%; – aimed at a long search for information. thus, in 2019, only 2.58% of visits to e-commerce pages led to sales, and about 70% of all baskets were left without a purchase. 95% of people read reviews, and 85% examine the product online before buying online; – focused on environmental protection. thus, 33% of people buy goods from companies that care about the environment; – waits for “instant” service. there is a dependence of cancellations of the purchase on the speed of feedback with the customer: if the seller calls the customer back within 24 hours, there is an average of 18% cancellations; within 48 hours, an average cancellation rate is 27%; within 72 hours, there is an average of 41% of cancellations; – prefers to pay by card. cash on delivery in the european union is 13%, in ukraine, only 24% of all payments were made by bank cards to pay for goods and services online source: summarized by the author figure 4. level of e-commerce in the period of covid-19 (ukrainian retail association) baltic journal of economic studies 143 vol. 6, no. 5, 2020 – every fifth online showcase has changed its format to a marketplace; – every second company from among the top-20 that did not become a marketplace left the market. marketplaces can be classified on several grounds. based on the analysis of the work of popular marketplaces, the author proposes a classification, which is demonstrated in figure 7. the number of marketplaces of different directions and specializations is constantly increasing. it should be noted that there are no objective statistics on the results of their operation both in the world and in ukraine. the analysis of marketplaces was based on data (ukrainian retail association), (evo), (national bank of ukraine), clement (2019), coleman (2020), prosovych & botsman (2018), fareeha (2019), hlinenko & daynovskyy (2018). the author highlighted the following drivers of marketplace development (figure 8). the justification for the choice of drivers discussed above: – the presence of a loyal audience. a marketplace is a place of the presence of a significant number of visitors loyal to the site. this is facilitated by the publication of the rating of sellers and reviews of cooperation with them. so the seller does not need to spend money on promotion. after analyzing several ukrainian marketplaces, it was found that one product figure 5. dynamics of opening new online stores in 2019-2020 figure 6. indicators of global e-commerce source: tushin, 2020; ukrainian retail association baltic journal of economic studies 144 vol. 6, no. 5, 2020 table 2 business models of e-commerce business model function presence buyer-seller communication example electronic bulletin board placing product ads and contacts a significant number of companies – mail; – telephone; – messengers besplatka.ua, allbiz electronic showcase placement of information about the product, its characteristics, approximate prices. one company owns an electronic showcase – mail; – telephone; – messengers peugeot, motor sich e-shop information placement, the ability to place an order, pay for goods, track goods a wide assortment of one owner company – mail; – telephone; – messengers; – e-shop page меtro; modnakasta; leboutique; eldorado marketplace information placement, the ability to place an order, choose the method of delivery, pay for the goods, track the goods wide assortment, many sellers – mail; – telephone; – messengers; – marketplace page with redirection to the seller’s page prom.ua rozetka.ua (hybrid); privatmarket.ua; allo.ua source: summarized by the author classification of marketplaces offer type product prom.ua,); service (kabanchik.ua); mixed (olx). brand work under the brand of the owner (rosette, amazon); under its own brand (prom.ua, bigl.ua) controllability managed by a moderator (olx); market driven (market determines price and margin) (allo) specialization multimarkets (prom.ua,); classifies (olx, work.ua); price aggregators (tabletki.ua, liki24); auctions (ebay, skylots); custom sites (menu.ua, crafta.ua) figure 7. classification of marketplaces source: generalized by the author marketplace development drivers audience loyal to the marketplace geographical unlimitedness organic traffic digital marketing individual pages for service; optimization for the mobile version; analytical tools figure 8. marketplace development drivers from a third-party supplier in the shop window gives 3.97 – 6.07 visitors without investing in advertising budgets (only seo); – geographical unlimitedness. according to the ukrainian retail association, in 2019 ukrainian buyers visited the following sites (figure 9). to build the graph, traffic from ukraine and repeated visits are taken into account. the rate of unique visitors is more accurate, but data is absent. the chart shows that the top-10 ukrainian marketplaces include two of the three most popular marketplaces in the world (sales on marketplace sites alibaba, amazon, ebay accounted for 58% of global web sales in 2019 (fareeha, 2019); baltic journal of economic studies 145 vol. 6, no. 5, 2020 – wide assortment with the ability to filter by parameters. this leads to a significant increase in organic traffic (figure 10). increased visibility on the web due to the fact that marketplaces appear on the first pages of google. however, in the usa, buyers immediately begin to search for the desired product on marketplaces, bypassing google. in particular, amazon has 55% of direct traffic, ebay – 66%, aliexpress – 66%. in ukraine the tendency is similar: the share of direct traffic on prom.ua – 27%, rozetka – 35%, olx – 49%, aliexpress – 67% (coleman, 2020; evo). this traffic distribution correlates with data from hlinenko & daynovskyy surveys (2018); – available digital marketing (ppc, seo, social media, sem, email, branding); – the existing of an individual page for service that meets the expectations of consumers of “personalized service”; – optimization of the marketplace for the mobile version. consumers are increasing their purchases via mobile phones. in online commerce, mobile phones account for 77% of traffic and 69% of store profits (coleman, 2020). interestingly, consumers go to ukrainian marketplaces from mobile phones and use a desktop to search on foreign marketplaces (figure 11). the analysis was conducted on the top-10 marketplaces in october 2019. figure 9. top-10 marketplaces in ukraine (ukrainian retail association) figure 10. sources that generate traffic and revenue baltic journal of economic studies 146 vol. 6, no. 5, 2020 – availability of powerful analytical tools that allow to get analytics in real-time. in particular, the buyer can: see ratings, reviews, number of unique visitors, time spent on site (tss), pages per visit (ppv), a share of new consumers for the period, bounce rate (br), average order value (aov), customer retention rate (crr), purchase frequency (pf), customer churn rate (ccr), repeat purchase rate (rpr); in general, the phenomenon of the marketplace can be described as “unite if you cannot compete”. that is, marketplaces are universal and large-scale, and therefore grow and develop faster than single internet projects. so we can predict that in the nearest future the vast majority of online purchases in the world will be made through marketplaces. 5. discussion the analysis allows us to understand that the vector of e-commerce development is aimed at globalization and digitalization. using modern technologies allows not only to blur the boundaries of the market but also to use new tools for sales in the e-commerce sector, including marketplaces. the emergence of marketplaces is due to two key factors: the growing level of penetration of the internet into the lives of consumers and the development of e-commerce. the correlation between these indicators is emphasized, as significant online activity in trade is observed in countries with a high level of the internet penetration. analysis of the current state of e-commerce is quite complicated because of the lack of scientific work in this area, but the use of available statistical information allows to get an idea of key processes and form a portrait of the modern consumer, and outline his personal and behavioral characteristics. the modern consumer is a young, educated person, uses mobile devices, makes online purchases from time to time, but needs recommendations, personalized, preferably “instant” service, aimed at the long search for information (combines online and offline search), avoids advertising, cares about data confidentiality and the environment. consideration of the dominant business models of the internet allowed us to identify the dominance of the online store and marketplace. there are variations in the organization of marketplaces, so classification is proposed, which allows to choose the best option for sale. analyzing the state of e-commerce outlines the major drivers of marketplace development, in particular: audience loyalty, geographical unlimitedness, organic traffic, individual seller page, optimization for the mobile version, powerful analytical tools, affordable marketing. these factors will contribute to the further development of marketplaces. 6. conclusion the purpose of this study was to identify the causes and drivers of the rapid development of marketplaces. at the beginning of the study, it was suggested that this is facilitated by a significant level of internet penetration and the development of e-commerce. the use of statistical data (reports of leading global and ukrainian analytical companies) revealed a direct correlation between these factors. the characteristics of the network user were outlined. this makes it possible to note that the consumer is changing under the influence of the internet and is gradually moving to the online (especially for the active population). at the same time, the consumer wants to remain an individual consumer, needs personalized service, and digital security guarantees. the modern consumer becomes more demanding when searching for information, uses reviews, combines online and offline search, tries to maximize the choice. therefore, the emergence of marketplaces has become a logical proposition by figure 11. exit to the marketplace baltic journal of economic studies 147 vol. 6, no. 5, 2020 business. after all, this is an aggregate platform, the level of service which best meets the demand of the modern buyer. the functioning of several types of marketplaces is noted, which are proposed to be classified according to four features: type, specialization, manageability, and brand, as these features are decisive for both the seller and the consumer. the analysis allows us to outline the drivers of marketplace development at the present stage. to those presented in the study, new ones will undoubtedly be added that will meet the requirements of future consumers and market conditions. therefore, areas of further research may include: analysis of the legal framework, information flows, the impact of social networks on traffic and sales of marketplaces and other issues that will inevitably arise, which will lead to new formats and drivers for marketplaces. references: anderso, c. 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(2020). global development of e-commerce: usa, china, russia. available at: https://new-retail.ru/ business/e_commerce/globalnoe_razvitie_e_commerce_ssha_kitay_rossiya8732/ (accessed: 17, july, 2020). ukrainian retail association (rau) (n.d.). available at: https://rau.ua/ (accessed: 15, july, 2020). baltic journal of economic studies 203 vol. 6, no. 5, 2020 corresponding author: 1 taras shevchenko national university of kyiv, ukraine. e-mail: iimazur@ukr.net orcid: https://orcid.org/0000-0002-2441-8001 researcherid: https://publons.com/researcher/1932003/iryna-i-mazur/ 2 taras shevchenko national university of kyiv, ukraine. e-mail: aspirants7782@gmail.com orcid: https://orcid.org/0000-0002-6122-9234 3 taras shevchenko national university of kyiv, ukraine. e-mail: bodikova03061@ukr.net orcid: https://orcid.org/0000-0003-1205-1166 doi: https://doi.org/10.30525/2256-0742/2020-6-5-203-208 the safety and security of the tourism entrepreneurship potential realization in modern conditions iryna mazur1, ramil aliyev2, yuliia zhelizko3 abstract. the purpose of the paper is to determine the relationship between different types of tourism safety and security, and components of the tourism entrepreneurship potential, to conduct a quantitative analysis of these indicators in the regions of ukraine and to identify areas for ensuring the safety and security of the tourism entrepreneurship potential realization. methodology. analysis of tourism safety and security in ukraine is based on the assessment of security potential indicator and the security threats indicator for 25 regions. these indicators take into account the following types of safety and security: security of tourist services, safety of tourist facilities and equipment, social security, political security, financial security, medical safety, information security, and ecological security. the impact of tourism safety and security on the tourism entrepreneurship potential realization is determined on the basis of correlation and regression analysis, where the indicator of the tourism entrepreneurship potential realization is the volume of domestic and inbound tourist flows in the region. the empirical basis of the study is the data of the state statistics service of ukraine for 2019. the reliability of the regression model was tested on the basis of the approximation coefficient and fisher's f-test. results of the correlation analysis indicate a significant relationship between ensuring the safety and security of tourism in the region and the volume of domestic and inbound tourist flows. as a result of regression analysis, a model of a high level of reliability was obtained, which indicates how the volume of domestic and inbound tourist flows to the region increases with increasing the level of tourist safety and security by unit. practical implications. since the process of safety and security ensuring for the tourism entrepreneurship potential realization cannot be implemented exclusively at the regional level, it is justified the feasibility of a targeted public policy in eight areas. value/originality. the identified relationship between the types of safety and security of tourism and components of the tourism entrepreneurship potential, as well as establishing the level of impact of safety and security of tourism on the tourism entrepreneurship potential realization in the region provide for a better understanding of ways for efficient governance in this area. key words: entrepreneurship potential, guarantee of tourism security, realization of potential, safety and security of tourism, types of safety and security. jel classification: d24, l83, r11, z30 1. introduction in recent decades, economic systems at various levels have been characterized by instability thresholds. global economic crises, military-political conflicts, the growth of terrorist threats and other destructive factors determine the state of uncertainty about the prospects for human development in the 21st century. in view of this, the problems of security are becoming increasingly important, which is interpreted not only as a state of protection from threats, but also as an opportunity for development and even a condition for the survival of entire states and regions. threats and challenges of modern social development have not escaped tourism, which, baltic journal of economic studies 204 vol. 6, no. 5, 2020 on the one hand, is one of the most promising and profitable economic activities, and on the other hand, is extremely susceptible to destructive factors of various origins. the spread of international terrorism, illegal migration, the growing incidence of socially dangerous diseases, the general deterioration of the environmental situation, along with the intensification of tourist flows, lead to a significant increase in the scale of the negative consequences of regional tourism problems. crisis and risk situations are an obstacle to realization of the tourism entrepreneurship potential at the global, national and regional levels. particularly acute is the issue of ensuring the security of the potential of tourism business in the current crisis environment, which has been formed because of the spread of coronavirus covid-19. 2. the tourism entrepreneurship potential and its components the modern complex concept of studying the “entrepreneurship potential” has a number of advantages over resource, production and strategic approaches, because it allows to cover those aspects of business that can ensure the growth of future incomes. for example, horyn h. adheres to a comprehensive approach to the interpretation of this concept, defining that the “tourism entrepreneurship potential” is a holistic set of available resources and opportunities in the region that can be used in order to ensure the activities of tourism enterprises and achieve sustainable development of the region (horyn, 2014). the carriers of entrepreneurial potential can belong to any hierarchical level of the economy – mega-level, macro-level, meso-level, and micro-level (kvasnytska, 2017). therefore, it is advisable to determine the level of the economy within which the structure of entrepreneurial potential is most fully reflected. the answer to this question depends on the specifics of an industry. features of business in the tourism industry are follows: a) the number of target consumers of the tourist product may significantly exceed the available supply of the enterprise and the region; b) the demand for tourist services is formed at the expense of geographically remote consumers; c) in the process of a tourism product selling, services are not delivered to the consumer, but on the contrary, i.e. the consumer (tourist) is sent to the place where the relevant tourist services are provided. in this case, the tourism product can be purchased both at the place of residence of the consumer and at the place of production; d) lack of possibility of accumulation and return of a tourism product; e) the greater the value of tourism services for the consumer, the more complex they are. thus, the potential of entrepreneurship cannot be considered within a single company, because its services are only one part of a range of tourism services provided to consumers, in addition, no company in this area operates completely autonomously, and therefore is under the direct and indirect influence of external environment. macro-level and mega-level determine the general trends in the formation of entrepreneurship potential, but should be considered in terms of territorially separated units. based on the above, the entrepreneurship potential should be explored at the meso-level, because a complex tourism product depends on the supply chain operating within regional boundaries. an important aspect in the process of defining the essence of the “entrepreneurship potential” is the justification of its constituent elements. this point is especially relevant in matters relating to such a comprehensive concept as “potential”. the theoretical approaches of modern scientists in one way or another relate to the main factors of production, because they contain the potential for development: 1. capital relates to the following concepts: production and financial capabilities, inventories and funds, financial and economic potential, investment potential, production potential, technical potential, potential of fixed assets, potential of fixed and working capital, financial and investment potential, tax potential, material financial potential, property potential. it is not advisable to combine all these concepts into one component of the entrepreneurship potential, because they relate to various aspects of business. we offer to pay attention to the investment, production and tax components. yepifanova i. and bardadyn o. give an accurate definition of “investment potential”: organized set of available economic resources and opportunities for enterprise development, which is achieved through the implementation of opportunities to mobilize internal and external investment to achieve strategic and tactical goals of the enterprise through the investment mechanism (yepifanova, 2017). this interpretation indicates all possible sources of financing for business activities. romanchyk t. and pavlenko ye. under the production potential understand mean “the set of cost and physical characteristics of the production base, which is expressed in the potential to create products of a certain composition, technical level and in the required amount” (romanchyk, 2017). brezhnieva-yermolenko o. and misiuchenko a. note that the tax potential is the basis for the formation of the tax revenue part of the budget, i.e. covers the part of the financial resources of the region that fill the local budget (brezhnieva-yermolenko, 2016). baltic journal of economic studies 205 vol. 6, no. 5, 2020 2. land as a factor of production covers the following concepts: natural conditions and resources, environmental conditions, availability of natural resources, natural resource potential. among the proposed concepts, the most holistic is the natural resource potential, as one that covers both natural resources and environmental opportunities. zhulavskyi a. and hordiienko v. propose the following definition of the natural resource potential of the region – “a set of natural resources and natural conditions that in the complex can provide the maximum possible production of consumer values at this stage of development of productive forces and production relations, while maintaining the ability to sustainable reproduction” (zhulavskyi, 2013). 3. the labor concerns the following concepts: intellectual opportunities, work opportunities, human resources, creative potential, motivational potential, labor potential, social potential. special attention should be paid to social potential, as one that reflects the effectiveness of public administration to meet the interests of the population, which is the main resource of the productive sphere (valenkov, 2017). 4. the information factor is outlined in the following concepts: information potential, innovation potential, technological potential, scientific and technical potential, technical and technological potential. these concepts should be combined in the information and innovation component, because it is responsible for ensuring the competitiveness and economic growth of the region (kyrychenko, 2017). based on a comprehensive approach to the interpretation of the essence of the potential of entrepreneurship, we propose to identify six of its components: production potential, social potential, investment potential, tax potential, information and innovation potential, and natural resource potential. thus, the tourism entrepreneurship potential is an opportunity to carry out economic activities in a particular region, which is due to production, social, investment, information and innovation, tax and natural resource components. 3. safety and security in the process of the tourism entrepreneurship potential realization there is no comprehensive definition of the term “tourism security” in the scientific literature. as noted by niemisalo n. “safety and security is formulated bottom-up – from people and local community needs and the grass-roots level. social groups, such as ethnic minorities, define their safety and security needs between the individual and state and across state borders. similar to this broader thinking on safety and security, social security, health care systems and other well-being services and associations also represent safety and security policies” (niemisalo, 2014). kôvári i., and zimányi z. justify that “security and safety has become a complex multidimensional notion with a wide range of components belonging to it” (kôvári, 2017). these interpretations of the concept suggest that the “safety and security of tourism” is revealed through the prism of its components. according to kôvári i., and zimányi z., tourism security consists of “political security, public safety, health and sanitation, personal data safety, legal protection of tourists, consumer protection, safety in communication, disaster protection, environmental security, getting authentic information, quality assurance of services” (kôvári, 2017). cherednychenko o. and cherednychenko a . present a broader classification, namely: geopolitical, political and military-political security of tourism; political and legal security; religious, cultural; criminal, security in emergency situations (including terrorist attacks); life safety (medical, food safety, safety of accommodation services); financial (currency); ecological, recreational; traffic safety (transport); engineering, technological (safety of buildings and equipment); informational (cherednychenko, 2016). we consider holod a. offers the most comprehensive grouping of the tourism safety and security types (holod, 2016): – security of tourist services: food security, security of transport services, security of accommodation services, safety of recreational activities; – safety of tourist facilities and equipment: technological security, engineering safety; – social security: cultural security, demographic security, public security; – political security: geopolitical security, military and political security, political and legal security; – financial security: market security, currency security; – medical safety: health safety of tourists, safety of medical services; – information security: security of personal data, information environment security; – ecological security: safety of ecosystems in tourism, life safety in tourism, emergency safety. due to the fact the components of the tourism entrepreneurship potential correspond to certain types of the tourism security, they are in direct interdependence. therefore, the formation of a certain level of the tourism entrepreneurship potential and the tourism safety and security determines the volume of tourist flows to the region (figure 1). it should be noted that medical security and political security are the types that affect the whole process of formation and realization the tourism entrepreneurship potential in the country. to determine the areas of ensuring tourism security, it is necessary to analyze the indicators of the tourism entrepreneurship potential baltic journal of economic studies 206 vol. 6, no. 5, 2020 realization and the level of security in the regional context. 4. analysis of tourism safety and security in ukraine and its impact on the tourism entrepreneurship potential realization the domestic methodology for assessing the level of security of regional tourist systems (holod, 2017) takes into account the above types of security. the level of tourism safety is interpreted as the difference between the integrated indicators of security potential and security threats (1). s p p p p t t t tk n n min max min k n n min max min = − − − − −= = ∑ ∑ 1 1 ; (1) p is the numerical value of the security potential indicator of the regional tourist system; t is the numerical value of the security threats indicator of the regional tourist system. an indicator of the tourism entrepreneurship potential realization is the volume of inbound and domestic tourist flows of a region (aliyev, 2020). it is not advisable to take into account outbound tourist flows because they indicate the effectiveness of the formation of the tourism entrepreneurship potential in other regions, and therefore lead to distortion of the results of the study. based on this methodology, a study of the level of indicators of 25 regions of ukraine in 2019 was conducted. the evaluation results are shown in figure 2. the highest values of the tourism safety and security index are typical for the city of kyiv and lviv region. the next group of regions in terms of tourism security is formed by ivano-frankivsk, volyn, odesa, ternopil and chernivtsi regions. the lowest indicators of the tourism safety and security index are observed in dnipropetrovsk, kharkiv, donetsk and luhansk regions. in the last two regions, in particular, the indicators reach the minimum (negative) values, which significantly differ from the average level for the state. it should be noted that the value of the tourism safety and security index for kyiv also significantly exceeds the indicator of lviv region, which is in the second ranking. according to the correlation analysis, there is a high level of relationship between the level of tourism safety and security and the tourism entrepreneurship potential realization (0,719). with this in mind, a one-factor regression model of the tourism entrepreneurship potential realization was constructed (2). r s= ⋅12 9, ; (2) r is the tourism entrepreneurship potential realization of region; s is the level of tourism safety of region. the regression model is highly reliable: r2 = 0.728, а fstat > fcr (fstat = 34, fcr = 2.79). according to results of the model, if the level of tourism safety & security of region increases by unit, then the number of inbound and domestic tourist flows increases by 12.9 thousand people. therefore, there is a necessity to identify main directions for ensuring the security of the tourism entrepreneurship potential realization in ukraine. realization of the tourism entrepreneurship potential tourism entrepreneurship potential formation tourism safety and security security of tourist services production potential safety of tourist facilities and equipment social potential investment potential tax potential social security political security financial security medical safety information and innovation potential ecological security information security natural resource potential figure 1. safety and security in the process of formation and realization of the tourism entrepreneurship potential baltic journal of economic studies 207 vol. 6, no. 5, 2020 5. directions for ensuring the safety and security of the tourism entrepreneurship potential realization in ukraine tourism in modern conditions is an extremely dynamic sector of the economy and an integral part of most regional social systems. at the same time, along with the intensive development and territorial expansion of tourism, the problems of tourism security (socio-economic, political and legal, environmental, socio-cultural, etc.) are becoming increasingly important. the contradictions of the development of modern tourism are especially clear at the regional level, especially in large tourism centers and border areas. it is becoming obvious that the intensive development of the tourism business, without taking into account the regional features of socio-economic development, can also cause destructive consequences for the economy and social sphere of the region. an important issue is the relationship between different levels of security – regional, national, and global. given the specifics of the safety & security of tourism itself, there could be no clear hierarchy, because the regional tourism entrepreneurship potential is open enough to be influenced by global factors, regardless of the national environment. thus, along with the decisive influence of the security of the tourist complex of the state, the security of the regional tourism entrepreneurship potential realization is also directly affected by factors related to the security of tourism at the global level. efficient safety & security system in tourism has to provide increase of inbound and domestic tourist flows. though, it is necessary to improve the effectiveness of strategic planning and management in the field of tourism in general, the quality of tourism services and the system of control of such quality (in particular by government agencies), transport, utilities and other infrastructure, and the system of medical services. in addition, there is a need to form positive image of the regions of the state as favorable for tourism development, and provide the system of information support for tourism development. the implementation of programs and measures to ensure the safety and security of tourism in the regions requires strong financial support as well as international cooperation in the field of tourism safety & security. in this context, it is advisable to implement a purposeful state policy in the field of tourism safety and security in the following areas: 1. coordination of activities of state authorities, regional authorities, local governments, tourism enterprises and organizations, and local communities to ensure tourism safety and security. 2. facilitating research on the analysis of methodological and practical problems of tourism safety and security at the regional level. 3. improving the training system in accordance with the needs of the market in the field of tourism in order to widen a pool of professionals, which can create safe travel services. 4. increasing and diversifying mechanism of public funding for the entrepreneurship potential formation and ensuring the tourism safety and security at the regional level. 5. intensification of international cooperation of ukraine with the eu countries in ensuring the tourism safety and security. 0, 61 1, 71 3 ,2 1 -0 ,8 8 -3 ,2 6 4, 57 -1 ,1 3 0, 52 2 ,1 0, 8 0, 59 -4 ,6 5, 64 0, 67 4, 03 2, 03 1, 62 -0 ,1 1 3, 62 1, 24 4, 37 2, 12 0, 97 -0 ,1 5 9, 81 -120 -80 -40 0 40 80 120 160 200 240 -6 -4 -2 0 2 4 6 8 10 12 c he rk as y ob la st c he rn ih iv o bl as t c he rn iv ts i o bl as t d ni pr op et ro vs k ob la st d on et sk o bl as t iv an ofr an ki vs k ob la st k ha rk iv o bl as t k he rs on o bl as t k hm el ny ts k ob la st k ir оv oh ra d ob la st k yi v ob la st l uh an sk o bl as t l vi v ob la st m yk ol ai v ob la st o de sa o bl as t po lta va o bl as t r iv ne o bl as t su m y ob la st t er no pi l o bl as t v in ny ts ia o bl as t v ol yn o bl as t z ak ar pa tti a ob la st z ap or iz hz hi a ob la st z hy to m yr o bl as t k yi v th e c ap ita l level of tourism safety tourism entrepreneurship potential realization figure 2. results of assessment the level of tourism safety and security and the tourism entrepreneurship potential realization in ukraine baltic journal of economic studies 208 vol. 6, no. 5, 2020 6. planning measures to eliminate the negative consequences of crises that threaten the safety and security of tourism. 7. reforming the system of public management of tourism. 8. regular monitoring of threats to tourism security and assessment of its current state at the regional level. 6. conclusions the study shows that tourism safety and security issues, particularly at the regional level, should be the subject of economic research. this is due to the close connection between certain types of security and components of the tourism entrepreneurship potential. the economic essence of tourism safety and security allows us to interpret it as the main prerequisite for sustainable development of tourism within destinations and regions, which is manifested in ensuring the realization of the tourism entrepreneurship potential. to this end, however, it is necessary to change the paradigm of tourism development at the regional level from object to subject. to fully guarantee the safety and security of tourism, the region must become the subject of this process, and not just the object of regional policy. at the same time, with the implementation of effective state policy measures in the field of tourism security, in particular by implementing a purposeful state policy in the field of tourism safety and security, even in crisis conditions it is possible to obtain positive dynamics of regional tourist flows. references: aliyev, r . (2020). analysis of the tourism entrepreneurship potential realization in case of ukraine. modern science, vol. 5, pp. 14–22. brezhnieva-yermolenko, o. v., & misiuchenko, a. e. (2016). rol podatkovoho potentsialu v zabezpechenni rozvytku rehionu [the role of tax potential in ensuring the development of the region]. molodyi vchenyi, vol. 1, pp. 651–654. cherednychenko, o. yu., & cherednychenko, a. o. (2016). creation of the efficient system of tourism security as one of the main conditions for improvement of the competitiveness of the toruism industry of ukraine. visnyk ekonomiky transportu i promyslovosti, vol. 55, pp. 144–150. derzhavna sluzhba statystyky ukrainy [state statistics service of ukraine]. retrieved december 4, 2020, from: http://www.ukrstat.gov.ua holod, a. (2016). safety and security of tourism as an object of modern economic research. european cooperation, vol. 3.10, pp. 72–80. holod, a. (2017). bezpeka rehionalnykh turystychnykh system: teoriia, metodolohiia ta problemy harantuvannia [security of regional tourist systems: theory, methodology and problems of guarantee]. lviv: ldufk. (in ukrainian) horyn, h. v. (2014). systematyzatsiia metodolohichnykh pidkhodiv do vyznachennia sutnosti poniattia rekreatsiino-turystychnyi potentsial rehionu [systematization of methodological approaches to defining the essence of the concept of recreational and tourist potential of the region]. rehionalna ekonomika [regional economy], vol. 2, pp. 187–199. kôvári, i., & zimányi, z. (2017). safety and security in the age of global tourism (the changing role and conception of safety and security in tourism). applied studies in agribusiness and commerce. budapest: apstract agroinform publishing house, pp. 59–61. kvasnytska, r ., & tarasiuk, m. (2017). strukturyzatsiia potentsialu pidpryiemstva [structuring the potential of the enterprise]. visnyk kyivskoho natsionalnoho torhovelno-ekonomichnoho universytetu [bulletin of kyiv national university of trade and economics], vol. 1, pp. 73–82. kyrychenko, m. o., & kyrychenko, n. a. (2017). zarubizhnyi dosvid vysokorozvynenykh krain zi stalym rozvytkom informatsiino-innovatsiinoho suspilstva v umovakh transformatsii suchasnoi tsyvilizatsii [foreign experience of highly developed countries with sustainable development of information and innovation society in the transformation of modern civilization]. aktualni problemy filosofii ta sotsiolohii [current issues of philosophy and sociology], vol. 17, pp. 51–54. niemisalo, n. (2014). tourism safety and security: findings from tourism intensive finnish lapland. arctic yearbook. retrieved december 4, 2020, from: https://arcticyearbook.com/images/yearbook/2014/ briefing_notes/3.niemisalo.pdf romanchyk, t. v., & pavlenko, ye. v. (2017). konkurentnyi potentsial pidpryiemstva: sutnist poniattia [competitive potential of the enterprise: the essence of the concept]. e-conomics, vol. 1, pp. 136–140. valenkov, v. ye. (2017). rehionalni aspekty formuvannia ta otsiniuvannia sotsialnoho potentsialu derzhavy [regional aspects of formation and assessment of the social potential of the state]. investytsii: praktyka ta dosvid [investments: practice and experience], vol. 21, pp. 123–126. yepifanova, i. yu., & bardadyn, o. a. (2017). sutnist investytsiinoho potentsialu pidpryiemstva [the essence of the investment potential of the enterprise]. investytsii: praktyka ta dosvid [investments: practice and experience], vol. 14, pp. 39–42. zhulavskyi, a. yu., & hordiienko, v. p. (2013). pryrodno-resursnyi potentsial rehionu v systemi ekonomichnykh vidnosyn [natural resource potential of the region in the system of economic relations]. efektyvna ekonomika [efficient economy], vol. 8. available at: http://nbuv.gov.ua/ujrn/efek_2013_8_22 baltic journal of economic studies 39 vol. 7, no. 1, 2021 corresponding author: 1 dnipropetrovsk regional institute of public administration of the national academy of public administration under the president of ukraine, ukraine. e-mail: goncharuknt@gmail.com orcid: https://orcid.org/0000-0002-2681-6687 2 zaporizhia national university, ukraine. e-mail: orgiets.oxana@gmail.com orcid: https://orcid.org/0000-0001-7282-2562 3 dnipropetrovsk regional institute of public administration of the national academy of public administration under the president of ukraine, ukraine. e-mail: l.l.prokopenko@ukr.net orcid: https://orcid.org/0000-0001-8743-1054 doi: https://doi.org/10.30525/2256-0742/2021-7-1-39-46 formation and development of the system of professional training of public servants in ukraine: organizational, legal, and economic aspects nataliia goncharuk1, oxana orhiiets2, leonid prokopenko3 abstract. the subject of the research is the formation and development of the system of professional training of public servants in ukraine. the relevance of this study is due to the fact that one of the most important tasks of the development of the public service institute in modern conditions is its professionalization, which is carried out primarily through the system of professional training of public servants. methodology. the paper uses a historical approach, which has made it possible to study the process of formation and development of the system of professional training of public servants in ukraine. based on the method of systemic analysis, the current system of professional training of civil servants in ukraine, its legal framework and strategic priorities for its reform are considered. results. the purpose of the article is to analyze the process of formation and development of the system of professional training of public servants and ways to increase its efficiency in ukraine in modern conditions. to achieve this goal, the following research objectives are set: to consider the evolution of the system of professional training of public servants in ukraine; to analyze the development of the system of professional training of public servants in independent ukraine; to determine the main directions of its reform in the modern conditions of state formation. the main stages of formation and development of the system of professional training of public servants in ukraine are justified. the organizational, legal, and economic aspects of formation and development of the system of professional training of public servants in ukraine, as well as regulatory bases of formation and development of competence of public servants are analyzed. it is established that its financial and resource provision is important for the development of the system of professional training of public servants. emphasis is placed on the need for continuous professional training of civil servants for their mobility, prompt and effective response to societal challenges in a paradigm of public administration, local government reform and decentralization of power in ukraine through the development of formal, non-formal and informal education. it is concluded that ensuring the effective operation of public servants directly depends on increasing the level of their competence through professional training. the strategic principles of development of the system of professional training of civil servants are analyzed and the ways of increasing the efficiency of the existing system of professional training of civil servants, heads of local state administrations, their first deputies and deputies, local self-government officials, and deputies of local councils are determined, and the new model of the system of professional education of public servants, which based on european principles and standards for the development of adult education for life, are proposed. key words: public administration, public service, public servants, professional training, professional training system, professional development, european educational standards, efficiency of the professional training system for public servants. jel classification: h83, j45, p46 baltic journal of economic studies 40 vol. 7, no. 1, 2021 1. introduction the relevance of the article is due to the fact that the implementation of processes to reform public administration and local self-government, decentralization of power in ukraine requires a high level of professionalism and competence of public servants, ensuring their continuous professional development as an integral component of successful reforms since the efficient operation of public servants depends on it. taking into account domestic and european experience, this requires the development of a system of professional training of civil servants and an increase of its efficiency. in this regard, the purpose of the article is to study the formation and development of the system of professional training of civil servants and ways to increase its effectiveness in ukraine in the context of a paradigm shift in public administration and decentralization of power. to achieve this goal, the following research objectives were set: to consider the evolution of the system of professional training of public servants in ukraine; to analyze the development of the system of professional training of public servants in independent ukraine; to determine the main directions of its reform in the modern conditions of state formation. well-known ukrainian scientists, such as k. o. vashchenko, n. s. kalashnyk, s. m. seriohin, ye. i. borodin, n. a. lypovska, l. v. prudius, i. v. shpektorenko, etc. have made substantial contributions to the study of the training of public servants, but today the problem cannot be considered exhaustively studied. 2. evolution of the formation of the system of professional training of public servants in ukraine for the first time the problem of training managers arose during the reforms of grand prince volodymyr the great (979–1015), so to meet the urgent need for educated professionals, he launched a “book doctrine”, i.e. public schools of advanced type with teaching “seven liberal arts”. the first school of this type was opened by him in 988 at st. sophia cathedral in kyiv. after the liberation war of 1648–1657 and the formation of the ukrainian cossack state, the hetman's government paid considerable attention to training for a branched administrative apparatus consisting of many central and local institutions, including the development of the kyiv-mohyla academy and later chernihiv and pereiaslav colleges, as the main suppliers of personnel for the administrative apparatus of the hetmanate. in 150 years, about 25 thousand people graduated from the academy before it was transformed into a purely spiritual educational institution. education provided them with positions in the offices of general, regimental, and the hundreds’ governments, and in the long run with senior positions (polonska-vasylenko, 1992). however, since the academy and colleges were educational institutions of the humanities and provided their students with a thorough knowledge of a general nature, in the 40s of the 18th century, a special semi-military institution, the so-called hlukhiv kurin, was established at the general military chancellery to train managers. the training consisted of theoretical and practical parts. we studied law, cameral (financial and economic) sciences, military theory. at a certain stage of training, students were instructed to conduct separate cases and were included in various commissions, which went to consider cases in regiments and hundreds. graduates of the kurin were appointed to the positions of bunchuk comrades, commanders of the hundreds, regimental sergeants, etc. it should be emphasized that the establishment of the hlukhiv kurin actually coincided with similar processes in western europe where the creation of special programs aimed at training administrative staff for public authorities in leading universities in the 1720s–1730s became an important step towards the formation of a professional civil service (kuk, 1969). after the liquidation of the autonomy of ukraine in the late 18th century, it was covered by the all-russia system of civil service. the close connection between public administration reform and the process of reforming and expansion of the system of training of civil servants should be noted. accordingly, in the course of the educational reform of 1803–1804, a general imperial system of training civil servants was formed on the basis of the german model; it existed without special changes until the beginning of the 20th century. universities and gymnasiums became the main source of educated managers. the charter of the universities of the russian empire in 1804 defined the main task of universities as the preparation of “the youth to enter various ranks of civil service”. to this end, a network of universities and privileged educational institutions was created in ukraine: universities in kharkiv (1805), kyiv (1834), the richelieu lyceum in odesa (1817), and the nizhyn gymnasium of higher sciences (1820). later, on the basis of the latter, the novorossiysk university (1865) and the institute of history and philology (1875) were established (vysochaishii utverzhdennyi ustav uchebnykh zavedenii ot 5 noiabria 1804 g.). subsequently, the laws led to the transition to a close link between a career and an educational qualification. this allowed to further ensure the gradual occupation of higher levels in the apparatus of public administration by graduates of universities and equivalent privileged educational institutions. reforms of the 60s-70s of the 19th century and the resulting creation of zemstvo and new judicial bodies, the expansion of the central and local administrative apparatus increased the need for relevant specialists, which led to a significant spread baltic journal of economic studies 41 vol. 7, no. 1, 2021 of legal education: in 1869, law students accounted for almost half (45.8%) of all students at russian universities (ocherki istorii shkoly, 1976). radical changes in the system of training managers took place after 1917. feeling the lack of qualified personnel, the bolsheviks began to pay considerable attention to the training of their own management and ideological staff. as a result, a system of special, including party, educational institutions was created, which was finally formed in the post-war period. initially, higher party schools (hps) had a two-year term of study based on secondary education. they switched to three-year curricula in 1949. in the 1950s, hpss under the central committee of the communist party of the ukrssr and interregional hpss in kharkiv, odesa, lviv, dnipropetrovsk, and stalino (donetsk) operated with a 4-year term of study on the basis of secondary education at the full-time and with a 5-year term of parttime education, which provided students with both higher general and party political education, and on the basis of higher education there operated higher party political education (2 years for full-time students and 3 years for part-time students). since 1962, the hpss at the central committee of the communist party of the ukrssr and the odesa hps had been training on the basis of higher education (istoriia derzhavnoi sluzhby v ukraini, 2009). in the late 1980s, the leading position of party education was significantly weakened. in the perestroika years, when the course was taken to differentiate between the party and soviet leadership and deprive the cpsu of its leading role in the state, the republican institute for further training of managers under the council of ministers of the ukrssr was established in ukraine for executives and leading specialists of large associations, enterprises, and organizations. in december 1990, this educational institution was transformed into the republican institute for management training under the council of ministers of the ukrssr . in 1990, the hpss began to transform into the institutes of political science and social management. accordingly, in 1990, both existing hpss in kyiv and odesa received such status (derzhavna sluzhba, 2012). 3. development of the system of professional training of public servants in independent ukraine after ukraine gained independence in 1991, the question of creating a professional civil service as the basis for effective public administration arose. by the decree of the president of ukraine no.126/92 dated march 4, 1992, on the basis of the republican institute for management training under the cabinet of ministers of ukraine, the institute of public administration and self-government (ipasg) was established, headed by two co-directors: canadian citizen of ukrainian origin, professor b. kravchenko and ukrainian citizen, professor v. svintsytskyi. the institute trained specialists in public administration according to the one-year training program for masters in public administration in accordance with the resolutions of the cabinet of ministers of ukraine approved no. 410 dated july 21, 1992 of the procedure for admission of students to the institute of public administration and self-government under the cabinet of ministers of ukraine, and resolution no. 349 dated may 14, 1993 of the regulations on the admission of students to the institute of public administration and selfgovernment under the cabinet of ministers of ukraine (istoriia derzhavnoi sluzhby v ukraini, 2009; postanova kabinetu ministriv ukrainy vid 04 bereznia 1992 r.; postanova kabinetu ministriv ukrainy vid 21 lypnia 1992 r.; postanova kabinetu ministriv ukrainy vid 14 travnia 1993 r.). the next step in creating a state system of training, retraining and further training of civil servants after the adoption of the law of ukraine “on civil service” no.3724-xii dated december 16, 1993, was the decree of the president of ukraine no. 98/95 dated may 30, 1995 on the establishment of the ukrainian academy for public administration under the president of ukraine (since 2003 – the national academy for public administration under the president of ukraine) as a leading educational institution of this system. branches of the academy (since 2001 – regional institutes) were also established in dnipropetrovsk, lviv, odesa, and kharkiv. during 1995–1996, this system was adapted to the requirements of the ministry of education and science of ukraine, so after completing a master's program in public administration, the graduates received a diploma of the second professional higher education (istoriia derzhavnoi sluzhby v ukraini, 2009; ukaz prezydenta ukrainy vid 30 travnia 1995 r.). in total, from 1995 to 2018, 39,693 people were enrolled in the master's program of napa and its regional institutes (stan system profesiinoho navchannia derzhavnykh sluzhbovtsiv, 2019). in 1996, 23 regional centers for further training of civil servants and heads of state enterprises were established, as well as for the implementation of the civil service personnel program approved by the presidential decree of november 10, 1995. № 1035, there was started training of masters in the speciality 8.150101 – “civil service” in the field of knowledge “public administration” in 9 leading higher educational institutions of ukraine. gradually, their number increased: in 2014, there were 39 higher education institutions able to carry out educational activities in the field of knowledge “public administration”, in 2017 there were 88 heis, in 2018 – 109 heis, and in 2019 – 116 heis. of these 116 institutions, 95 belonged to the state form of ownership, 17 were private and baltic journal of economic studies 42 vol. 7, no. 1, 2021 4 were communal. almost half of them (47%) were located in kyiv, kharkiv, and dnipro. the analysis shows that the largest share of people (4,335 (32.6%)) out of their total license volume (13,291 persons) fell on napa, 0.3% for taras shevchenko national university of kyiv, volodymyr dahl east ukrainian national university, and tternopil national economic university each (stan systemy profesiinoho navchannia derzhavnykh sluzhbovtsiv, 2019). in 2010, the resolution of the cabinet of ministers of ukraine no. 564 dated july 7, 2010 approved the regulation on the system of training and retraining of civil servants and local self-government officials, which defined the purpose, content, terms, forms, and methods of training and retraining of civil servants and officials of local self-government, as well as components of the system of training, specialization and further training (postanova kabinetu ministriv ukrainy vid 07 lypnia 2010 r.): 1) napa under the president of ukraine with dnipropetrovsk, lviv, odesa, and kharkiv regional institutes; 2) other institutions of higher education that provide training for masters in the speciality “public management and administration” in the field of knowledge “public administration”; 3) centers for retraining and further training of employees of public authorities, local governments, state enterprises, institutions, and organizations (crft); 4) institutions for postgraduate education. in 2018, 64,266 civil servants and local selfgovernment officials, including 36,057 civil servants and 28,209 local self-government officials, improved their skills in all types of training at the regional institutes of napa and crft (stan system profesiinoho navchannia derzhavnykh sluzhbovtsiv, 2019). however, according to the analysis, the system of professional training of public servants does not meet modern requirements for the quality and content of education. the problems that need to be addressed in reforming the system of professional training of civil servants and local self-government officials are that the subjects of this system have different organizational and legal status: napa, its regional institutes and centers for retraining and further training of public authorities, bodies local self-government, state enterprises, institutions, and organizations belong to the system of executive bodies; higher education institutions belong to the ministry of education and science of ukraine; branch educational institutions of postgraduate education belong to the relevant central executive bodies; therefore the powers and functions of the system are diversified, uncoordinated, they do not ensure effective and efficient functioning of the system. the current state of professional training of civil servants indicates that it is most likely informational or academic in nature and is less characterized by dynamism and practical focus on acquiring certain skills needed to perform official duties (stan system profesiinoho navchannia derzhavnykh sluzhbovtsiv, 2019). the concept of reforming the system of professional training of civil servants, heads of local state administrations, their first deputies and deputies, local self-government officials, and deputies of local councils adopted in 2017 states that the existing system of training, specialization, and further training of civil servants does not meet modern requirements for the quality and content of education, there is no comprehensive system for monitoring and evaluating the quality of educational services for professional training of civil servants in accordance with the european standards for quality assurance, the market for vocational training services is not competitive, quite closed to non-state actors service (rozporiadzhennia kabinetu ministriv ukrainy vid 01 hrudnia 2017 r.). in the law of ukraine “on civil service” no. 889-viii dated december 10, 2015, professional training is defined as the acquisition and improvement of professional knowledge, skills, and abilities that provide the appropriate level of professional qualification of a civil servant for his or her professional activity. organizational principles of functioning of the system of professional training of civil servants, heads of local state administrations, their deputies and deputies, local self-government officials, and deputies of local councils are defined in the regulations on the system of professional training of civil servants, heads of local state administrations, their first deputies and the deputies of local councils, approved by the resolution of the cabinet of ministers of ukraine no. 106 dated february 6, 2019 (zakon ukrainy vid 10 hrudnia 2015 r.; postanova kabinetu ministriv ukrainy vid 06 liutoho 2019 r.). the regulation provides for the possibility for public servants to exercise their right to professional training through formal, non-formal, and informal education. they can exercise their right to professional training using: – preparation – successful implementation of the relevant educational and professional program, which is the basis for awarding a master's degree in the speciality 281 “public management and administration” in the field of knowledge “public administration”; – further training – acquisition of new and/or improvement of previously acquired competencies within a professional activity or field of knowledge; – internship – gaining practical experience in performing tasks and responsibilities in professional activity or field of knowledge; – self-education – self-organized acquisition of certain competencies, in particular during daily activities related to professional, social or other activities, leisure. baltic journal of economic studies 43 vol. 7, no. 1, 2021 among the innovations of the regulation it is worth noting the introduction of a rule on the study of individual needs in professional training of public servants, their special and general needs; division of advanced training programs into general, special, and professional (certification); introduction of compulsory further training in general, special professional (certification) programs and short-term programs; accrual of ects credits based on the results of professional training, etc. the regulation also stipulates that the national agency of ukraine on civil service (naucs) monitors the state of the professional training system and prepares a report taking into account the results of identifying and analyzing professional training needs, assessing the quality of educational services at least once in a 3-year period making a release on its official website and web portal of knowledge management (postanova kabinetu ministriv ukrainy vid 06 liutoho 2019 r.). its financial and resource provision was important for the formation and development of the system of professional training of public servants. according to the passports of the budget program kpkvk db 0301130 “training, further training of managers, public administration specialists, training of scientific, and pedagogical personnel on strategic issues of domestic and foreign policy” for 2016–2018, the average cost of training one student for general fund increased from 104.7 thousand uah in 2016 to 186 thousand uah in 2018 (for the special fund – from 38.9 thousand uah in 2016 to 45.8 thousand uah in 2018). also, the average cost of training one student in the speciality “public management and administration” under the state contract with naucs increased by 48%: from 72 thousand uah in 2016 to 106.8 thousand uah in 2018. funding for advanced training of public servants belonging to the 1st-4th groups of remuneration, and local government officials, whose positions were classified in the i-iv categories of positions in local selfgovernment bodies, amounted to 11,947.7 thousand uah, including in 2016 – 3,791.6 thousand uah; 2017 – 4,056.1 thousand uah; 2018 – 4,100 thousand uah (stan systemy profesiinoho navchannia derzhavnykh sluzhbovtsiv, 2019). 4. directions of modernization of the system of professional training of public servants in ukraine the processes of reforming public administration and local self-government, decentralization of power taking place in ukraine at the present stage of its development, necessitate increasing the efficiency of professional training of civil servants and local selfgovernment officials by reforming, modernizing, and optimizing their training and development, individual programs of staff development and individual career planning, development of institutional capacity, the introduction of the latest technologies, forms and methods of training. the public administration reform strategy of ukraine up to 2021 states that one of the main directions of public administration reform is the introduction of a modern holistic, mobile, and flexible system of professional training of civil servants with developed infrastructure and adequate resources. according to this strategy, the only governmental customer for training and retraining of civil servants and local selfgovernment officials should be the national agency of ukraine on civil service as a central executive body that formulates and implements the state policy in the field of civil service (rozporiadzhennia kabinetu ministriv ukrainy vid 24 chervnia 2016 r.). to implement the strategy of public administration reform of ukraine up to 2021 and determine strategic directions, mechanisms, and deadlines for the formation of a modern effective system of professional training of civil servants, to increase their professional competence by the order of the cabinet of ministers of ukraine № 974-p dated december 1, 2017, the concept of reforming the system of professional training of civil servants, heads of local state administrations, their first deputies and deputies, local self-government officials and deputies of local councils was approved (rozporiadzhennia kabinetu ministriv ukrainy vid 01 hrudnia 2017 r.). the concept states that the new model of professional training of civil servants, heads of local administrations, their first deputies and deputies, local government officials, deputies of local councils, taking into account the provisions of the memorandum of lifelong learning of the european commission, should be based on the following principles: development; the proximity of educational services to the place of residence and work of the person; obligatory and continuity, i.e. ensuring the desire of civil servants, heads of local state administrations, their first deputies and deputies, local self-government officials and deputies of local councils to lifelong self-education and professional development; purposefulness, predictability and anticipatory nature; innovation and practical orientation; individualization and differentiation of approaches to learning; openness; guaranteed financing of professional training (rozporiadzhennia kabinetu ministriv ukrainy vid 01 hrudnia 2017 r.). the new model of the system of professional training of civil servants envisages european approaches to lifelong adult learning, which will contribute to the creation of appropriate conditions for their professional development. it should be aimed at training highly qualified managers, and the system of professional development should be transferred to the method of lifelong learning, implementation of the training system, baltic journal of economic studies 44 vol. 7, no. 1, 2021 interactive forms of learning, use of mixed approach (full-time and distance learning) and educational innovations, the introduction of integrated monitoring and quality assessment of the system for providing educational services for the preparation of masters in the speciality “public management and administration” in accordance with the european standards for quality assurance in education. taking into account the experience of european countries, it is necessary to maintain the existing master's program for employees with higher education already working in public administration and local self-government. it is also advisable to systematically change the ratio of forms of training in favor of inservice training, to increase the time for internships for students, their practical training, to ensure the implementation of one of the basic ideas – lifelong learning, to bring a solid material and financial basis for the system of training and retraining of public servants in order to restructure it. the effectiveness and efficiency of the system of professional training of public servants depend on many factors. in our opinion, to ensure the processes of modernization of the system of professional training of civil servants, harmonization of the main provisions of existing regulations, and their compliance with the european principles of public administration, it is advisable to develop and adopt the law of ukraine “on civil service” and the law of ukraine “on service in local self-government bodies”. according to the national qualifications framework, which is a systemic and competency-based description of qualification levels for the development, identification, correlation, recognition, planning, and development of qualifications, “integrated competence” is considered as a generalized description of a qualification level defi-ning main characteristics on learning and/or professional activities, where “learning outcomes” are knowledge, skills, abilities, ways of thinking, attitudes, values, other personal qualities acquired in the process of learning, education and development, which can be identified, planned, evaluated and measured (postanova kabinetu ministriv ukrainy vid 23 lystopada 2011 r.). we agree that today we should talk about integrated (activity, business) competence, as well as that “the profile of integrated (activity, business) competence in ukraine includes rule-making, administrative jurisdictional (organizational-administrative, managerial, coordination), control and supervision, information and analytical; economic (budget-planning, etc.), value-oriented (moral-ethical), socio-psychological and communicative consulting competencies” and designed “mainly for the creative type of activity” (serohin, shpektorenko, 2019). the main areas of reforming the system of professional education of public servants include: improving the legislative and regulatory framework for professional training; adaptation of professional training of civil servants in ukraine to the standards of the european union; fundamentalization and advanced nature of the educational process; rotation of civil service personnel; staffing of the system of professional training of civil servants. promising areas for modernization of the system of professional training of civil servants are the following: identification of customers, revision of the network of educational institutions through the accreditation procedure, modernization of curricula and programs in accordance with the content of previous education and customer needs, the introduction of new educational technologies; methods and technologies that ensure continuity of education (from knowledge to skills, from skills to experience); training of top managers, analysts, advisors through the system of postgraduate and doctoral studies; self-education of civil servants, the transition from evaluation to career monitoring (reformuvannia profesiinoho navchannia derzhavnykh sluzhbovtsiv v ukraini, 2013). modernization of the system of professional training of public servants should be carried out by: improving the institutional and organizational structure of professional training; updating of educational and methodical support; improvement of mechanisms for receiving education by public servants, creation of an appropriate motivational system based on adjusting the results of professional training with career advancement. the system of professional training of civil servants, heads of local state administrations, their first deputies and deputies, local self-government officials, and deputies of local councils in ukraine needs to be modernized in the context of approximation to the standards, legal and organizational bases of the european union and provides for institutional and organizational structure of professional training; updating of educational and methodical providing; improvement of mechanisms for these categories of servants to receive education; creation of an appropriate system of motivation based on the adjustment of professional training and professional development of employees with their career advancement (vashchenko, 2017). 5. conclusion 1. consideration of the evolution of the system of professional training of public servants in ukraine showed that it passed several main stages: the period of kyivan rus (the 10th-12th century), the ukrainian cossack state (middle 17th – late 18th century), the imperial period (late 18th – early 20th century), the soviet period (1917–1991), and the modern period (since 1991). during these five periods, there were changes in the system of professional training of civil servants in accordance with the needs of public administration. baltic journal of economic studies 45 vol. 7, no. 1, 2021 2. the analysis of the development of the system of professional training of civil servants in independent ukraine showed that from the very beginning, the state faced the issue of creating a professional civil service as the basis of effective public administration. in this regard, the institute of public administration and self-government under the cabinet of ministers of ukraine was first established, and after the adoption of the law of ukraine “on civil service” in december 1993, there was created a system of training and retraining of civil servants and local self-government officials, which was progressively improved. 3. in the conditions of reforming public administration, local self-government, civil service, and services in local self-government bodies, the modernization of the system of professional training of public servants becomes significant. it should be built taking into account the development trends of the public service, provide continuous, advanced education of public authorities by constantly updating the content and standards of professional training in accordance with the challenges of the time. the system of professional training of public servants should become holistic, high-quality, innovative, mobile, and flexible with developed infrastructure, effective management, and adequate resource potential, constantly improving and approaching european standards of continuing adult education (lifelong learning) through formal, non-formal and informal education, basic principles of raising the professional level of public servants. references: vashchenko, k. o. 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(in ukrainian) stratehiia reformuvannia derzhavnoho upravlinnia ukrainy na period do 2021 roku: rozporiadzhennia kabinetu ministriv ukrainy vid 24 chervnia 2016 roku № 474 (v redaktsii rozporiadzhennia kabinetu ministriv ukrainy vid 18 hrudnia 2018 r. № 1102-р [strategy for public administration reform of ukraine up to 2021: decree of the cabinet of ministers of ukraine of june 24, 2016 № 474 (as amended by the decree of the cabinet of ministers of ukraine of december 18, 2018 № 1102-r)]. available at: https://zakon.rada.gov.ua/laws/show/474-2016%d1%80#text baltic journal of economic studies 17 vol. 6, no. 4, 2020 corresponding author: 1 wroclaw university of economics and business, poland. e-mail: piotr.hajduga@ue.wroc.pl orcid: https://orcid.org/0000-0002-6946-8598 researcherid: t-4095-2018 2 wroclaw university of economics and business, poland. e-mail: malgorzata.rogowska@ue.wroc.pl orcid: https://orcid.org/0000-0003-1856-259x researcherid: u-4635-2018 doi: https://doi.org/10.30525/2256-0742/2020-6-4-17-27 quality of life in the polish urban centres. an at tempt to evaluate large cities piotr hajduga1, małgorzata rogowska2 abstract. the article presents current and, from the point of view of the au-thors, important problems of quality of life in the large polish cities. in contem-porary concepts of socio-economic development, improving the quality of life is considered one of the main strategic goals and a key element of sustainable development. quality of life is one of the factors affecting the city’s attractiveness for potential investors and residents. one of the most important perspectives of thinking about development is to ensure the highest standard of living for all residents of a given territorial unit. this is to lead to stability of the socio-economic system and maximum expansion of the group of beneficiaries of economic development. there were analysed eighteen largest urban centres. the subjects of the study are provincial cities. the presented comparison is a static approach, taking into account only one year. the purpose of this article is an attempt to evaluate the quality of life in selected polish cities in 2018. the employed research methods are primarily a comparative analysis method and simple statistical methods that have allowed to compare and aggregate selected indicators on the quality of life in urban centres. on this basis, cities were ranked with the assumption that the cities with the highest indicator values (assuming that the given feature is a stimulant) are at the top of the ranking. an additional objective of the study is to present the condition of polish cities in terms of population and their area, taking into account the situation in polish regions. finally, the study presents an analysis of the quality of life of the large polish cities based on selected 13 indicators. the best results were achieved not only by large economically significant cities, attracting investments and residents, but also those located on the eastern wall of the country, which can be described as “more intimate” in terms of area and population, such as rzeszów, lublin or olsztyn. key words: quality of life, city, attractiveness, competitiveness, creativity, en-trepreneurship. jel classification: j17, r11 1. introduction the attractiveness and competitiveness of urban centres in poland are not an accident. basic local government units bring together the most talented people and the most innovative businesses, as well as extremely interesting social and cultural projects. polish cities are centres of activity and socio-economic development. it should be noted, however, that urban development is not a linear process. territorial units compete with one another for talents and resources, fighting for primacy at the local, regional, national, and eventually at the global level. the result of this competition depends on many factors, including national policy, global trends (globalisation, technological changes), decisions of enterprises concerning location, as well as the efficiency of local politicians (wałachowski, 2019). cities are currently perceived and evaluated as centres of varying degrees of at-tractiveness and competitiveness, as well as creativity and entrepreneurship due to (klasik, 2008): – successive replacement of the “descending” generation of human capital with a new qualitatively better generation “entering” the age of profes-sional activity; – renovation and enrichment of equipment and institutions as well as infra-structure networks, specialised and high-level equiped; – natural and cultural environment, historic urban and industrial structures, nurtured and enriched with new functions; baltic journal of economic studies 18 vol. 6, no. 4, 2020 – offers of places and spaces for creative and enterprising people or for cre-ative businesses in the fields of culture and science; – the potential of the “creative class” and creative environments, as well as the entrepreneurial capital of the inhabitants of a territorial unit mobilised by the proinnovative policy of public authorities; – permanent investment in culture, science and education infrastructure, thus obtaining unique assets “instrumenting” creative environments and creative types of activity. new businesses and institutions, innovations in existing companies and institu-tions, innovative creative types of activity, as well as existing creative industries generating local and global effects create the vital basis and the foundation of the prosperity of urban centres, as well as the well-being of their residents. they are the lever for their sustainable development. each territorial unit, depending on its size and rank and depending on the phase of the life cycle, is attractive and competitive, creative and entrepreneurial as far as four fundamental components are present and cooperating in it, i.e., space, people, infrastructure, and activity (klasik, 2008). the above-mentioned basic components of creative and attractive cities are the bearers of concepts, content, procedures, and interactions related to a certain scope either with the creativity or with the attractiveness of urban centres. it is vitally important that all key components taken together and in mutual interac-tion decide that territorial units are or are just becoming or can be shaped as creative and attractive cities. it is determined by the relations of partnership, coordination, and cooperation of various entities operating in urban centres and agglomerations (klasik, 2008). the main purpose of this article is an attempt to evaluate the quality of life in selected polish cities. one of the most important perspectives of thinking about development is to ensure the highest standard of living for all residents of a given territorial unit. this is to lead to stability of the socio-economic system and maximum expansion of the group of beneficiaries of economic develop-ment. from this point of view, development is understood as improving living conditions in the following areas: communication, housing, health protection, ecology, access to green areas, and security (wałachowski, 2019). the subjects of the study are provincial cities. this article compares selected indicators, which are often listed in the literature on the subject and which may reflect selected elements related to the quality of life in the city in 2018. the data for analysis stems from the local data bank are created by the central statistical office. 2. quality of life in urban centres in contemporary concepts of socio-economic development, improving the quality of life is considered one of the main strategic goals and a key element of sustainable development (borys, 2003; brol, 2001; szewczuk, 2011, 33; throsby, 2010). this is also reflected in the local development strategies of numerous polish territorial units, where increasing the quality of the residents’ lives is emphasized mostly in visions and missions formulated in documents as well as for strategic and operational goals. interest in the quality of life is not only related to the definition of the city authorities’ obligations to the community as creating the best conditions for living and working, but also to the fact that the quality of life is becoming one of the strategic determinants of decisions on the location of business activities and new investments. the justification for this thesis can be found, among others, in work by r .j. rogerson (1999), which deals with competitive struggle between urban centres, and distinguishes quality of life as one of the factors affecting the city’s attractiveness for potential investors and residents. the quality of life also appears in the works of r . florida (2010) and his creative class theory (sanetra-szeliga, 2017). the quality of life is the subject of numerous studies within various research disciplines, i.e., economics, political sciences, psychology, philosophy or medical sciences (panek and zwierzchowski, 2019). in the colloquial sense, the term is a subjective category, depending, among others, on attitudes and lifestyle, values, cultural circle, as well as tradition (królikowskatomczak, 2016). the concept of quality of life appeared in the 1960s as an alternative to the dominant goal of social development, which was the increase in the material standard of living, or the increase in well-being. in economic sciences, the term prosperity is identified with economic well-being (welfare) and means the usefulness of a specific set of goods and services. in practice, welfare is understood as the usefulness of income necessary to purchase these goods and services (kot, 2004). there are numerous different definitions of quality of life in the literature. in the broadest sense, this concept is identified with welfare, well-being, or life satisfaction (yuan, yuen and low, 1999). this term is often equated with such terms as “standard of living”, sometimes also called “level of living”. the standard of living is related to the needs met by the consumption of material goods and services. therefore, it can be called an “objective level of quality of life” or “objective quality of life” (borys, 2003), and its estimation should take into account such elements as: health, nutrition, education, employment and working conditions, housing, social security, clothing, recreation, and human freedom. a background for assessing the standard of living should be to de-scribe aggregate consumption, savings, and the transport system, as well as tele-communications, the postal system, revenues and expenses, as well as the population and labour force. the standard of living baltic journal of economic studies 19 vol. 6, no. 4, 2020 in this approach was to be measured by means of quantitative, i.e., “objective” indicators (international definition..., 1961). however, the quality of life can also be determined through qualitative research, and then we speak of a “subjective level of quality of life”, a term often used interchangeably with “level of contentment”, “satisfaction”, “well-being” or “happiness”. this approach explores the subjective approach to the lives of individuals in terms of their hedonistic (positive emotions and feelings) and cognitive (cognitive satisfaction with life) experiences (diener and suh, 1997). from the point of view of the urban centre and its development, attention should be paid to an objective and subjective approach to the quality of life. that is why the present discussion employs a definition, which combines both approaches: quality of life is the extent, to which the objective needs of the individual are met in conjunction with the subjective assessment of their well-being. quality of life defined in this way can be measured using qualitative and quantitative indicators (costanza, fisher, ali et al., 2008). the quality of life is analysed by statistical offices, which take into account the objective conditions and subjective well-being of the respondents (table 1). the concept of quality of life in territorial units should be supplemented with a spatial perspective. the city has a material dimension: it is its area, infrastruc-ture, number of inhabitants, enterprises, and universities located in its area. the urban centre is also a network of intangible relationships and opportunities which it creates for its inhabitants. it is the level of satisfying the needs of socie-ty that is identified with the quality of life in the city (yuan et al., 1999). the needs of residents of territorial units are diverse and complex. however, it is economic growth, rational use of resources, and environmental protection, which are indicated as the main directions of the city’s development, having a direct impact on the quality of life of its inhabitants. parallel monitoring of these areas should lead to sustainable development (yuan et al., 1999). 3. demographic conditions for the development of polish cities the polish urban centres are influenced by various factors (endogenous and exogenous), due to which their situation changes. territorial units are developing, experiencing periods of stagnation, decline, marginalisation, only to develop again. prosperity cycles are intertwined with periods of stagnation and regression (cheshire, nathan and overman, 2014). the developmental path of each city is, in fact, different, because a given territorial unit is subject to various conditions that affect it. the strength of the impact of these factors in individual periods of city life varies. in urban centres, there are multidimensional relations table 1 selected indicators for measuring quality of life in poland according to the central statistical office area selected indicators material living conditions – average monthly disposable income – poor/good assessment of the state of the household budget (expressed in %) main type of activity, work – employment rate/unemployment rate – overtime employment – employed persons under a fixed-term contract – degree of job satisfaction health – good / bad health self-assessment indicator – cancellation of doctor visits due to financial rea-sons/waiting time education – number of people who speak foreign languages – number of people who regularly use the computer and the internet – percentage of people with higher education free time and social relations – lack of free time – satisfaction with the quantity and quality of free time – social isolation indicator – trust in other people economic and physical security – security at home – inability to cover unexpected expenses rule of law and civic activity – trust in the sejm, senate, government and local au-thorities – turnout in elections to the sejm – volunteers environmental quality – noise level – environment pollution – satisfaction with recreational and green areas subjective well-being – life satisfaction – indicator of good/bad mood source: own study based on cso data baltic journal of economic studies 20 vol. 6, no. 4, 2020 between individual elements of the city system, as well as between the city and its surroundings. the complexity and diversity of processes and phenomena occurring in a given territorial unit and its surroundings mean that there is a considerable number of factors affecting the development of cities, both in its strength and pace, and impacting the direction of the development. however, it should be noted that the strength, pace and direction of the impact of individual factors on different elements of urban systems will vary (boryczka, 2019). the main challenge currently faced by territorial units is, first and foremost, to ensure economic, social and territorial cohesion (european commission, 2010). the high quality of city management should lead to the integration of urban areas in spatial and social dimensions. creating a competitive society, which is reachable for all and taking into account the mobility of the labour market, is important for this purpose. creating social capital should be based on maintaining and developing social identity by building conditions for social integration, and social inclusion of, among others, the growing group of people aged 60+ (gus, 2018). at present, the aging population is a challenge for the social policy im-plemented in poland. today, it is a demographic process of unprecedented scale and intensity, which is particularly noticeable in urban centres. unfavourable demographic changes associated with low birth rates lead to an increase in the participation of older people in society. the effects of this phenomenon include changes in the labour market and increased outlays from public funds for the elderly, among others in healthcare, social work and institutional assistance, as well as shaping appropriate living conditions. the challenge for senior policy is to take measures that are planned and purposeful to improve the life situation of this social group (gus, 2018). as of january 1, 2019, the polish settlement network included 16 voivod-ships, 314 land poviats, 66 cities with poviat rights (so-called poviats) and 2477 municipalities: 302 urban municipalities (including 66 municipalities also having poviat status), 1537 rural municipalities and 638 urban-rural municipalities (figure 1). 940 settlement units covering the area of 22 162 km2, i.e., 7.1% of the entire country, had urban status. the level of urbanisation measured by the number of urban population was 60.1%. the polish settlement network is polycentric in nature, as it is characterised by a regular distribution of cities in terms of size, a developed hierarchy structure of several levels, and a small advantage of the largest city in the capital over other units covered by changes in territorial division figure 1. number of territorial division units by january 1, 2019 source: (gus, 2019, p. 11) baltic journal of economic studies 21 vol. 6, no. 4, 2020 regional centres compared to other european countries (kpzk 2030 – mp 2012 item 252, resolution no. 239 ...; korcelli, 2007, pp. 87–113). in the years 1989-2019, the total number of cities in poland increased from 822 to 940, i.e., by 14.4%. these changes resulted from the granting of municipal rights resulting from the activities of local authorities, a manifestation of increasing self-governance and activity, as well as an expression of rebirth or creation of a new social and cultural identity, especially in the first period of transformation. the acceleration was caused by amendments to the act on local government carried out in 1992, enabling the granting of city status not only to municipalities, but also to cities that meet the assessed urban criteria (kosecki and stawarz, 2005; zaniewska, 2014). the formation process is stimulated at the local level. it should be noted that, despite some objective criteria for granting city rights, important factors deter-mining the granting of city rights are political influences and certain decisions of a subjective nature, e.g., the demographic criterion is not always met, as some new cities have fewer than 2000 residents (konecka-szydłowska, 2017). from the data presented in table 2, it is clear that the majority of cities have been located in greater poland voivodship (113, i.e., 12% of all polish cities), as well as lower silesian (91, i.e., 9.7% of all polish cities) and masovian (88, i.e., 9.4% of all polish cities). of the total number of 722 small cities, i.e., those with fewer than 20 thousand inhabitants, 52.2% were located in the areas of six voivodships: greater poland (93), lower silesian (72), masovian (63), west pomeranian (55), lesser poland (49) and kuyavian-pomeranian (45). in the most urbanized silesian voivodship, there were located 17% of all polish cities above 20 000 residents. the highest density of city networks was in the silesian voivodship, where there was 173.7 km2 of the voivodship’s area per city. the density ratio of the network of cities below 300 km2 also pertained to the following voivodships: lower silesian (219.2 km2), lesser poland (244.9 km2), opole (261.4 km2) and greater poland (263.9 km2). the northern and eastern regions of the country had lower network density, and the rarest city network in 2019 con-cerned the lublin voivodship, where the value of the index was 523.4 km2, as well as the podlaskie voivodship (504.7 km2). territorial differentiation of the urbanisation indicator and the structure of the urban population by the size of the city and the size of the average city are pre-sented in table 4. in 2019, urban population amounted to 23 087.87 thousand people, i.e., 60.1% of the population of the whole country. the most urbanized was the silesian voivodship, where the population in cities constituted 76.7% of the total population of the voivodship. the following voivodships had a high urbanisation rate: lower silesian (68.6%) and west pomeranian (68.5%). in four voivodships (lublin, lesser poland, subcarpathian, holy crosse) the urban population constituted less than half of the total population of the given voivodship. the average polish city in 2019 covered 23.6 km2 of area and had 24.6 thousand residents. the largest, both in terms of area and population, was the average city of the silesian voivodship. the smallest area was in the average city of the warmian-masurian voivodship, table 2 density of city networks and their number by voivodships (as of january 1, 2019) specification area of voi-vodship per one city in km2 number of cities in total in urban-rural mu-nicipalities below 20 thousand residents over 20 thousand residents poland 332.7 940 638 722 218 lower silesian 219.2 91 56 72 19 kuyavian-pomeranian 345.6 52 35 45 7 lublin 523.4 48 28 38 10 lubusz 325.3 43 34 37 6 łódź 414.1 44 26 29 15 lesser poland 244.9 62 48 49 13 masovian 404.1 88 53 63 25 opole 261.4 36 33 30 6 subcarpathian 349.9 51 35 41 10 podlaskie 504.7 40 27 32 8 pomeranian 436.3 42 20 27 15 silesian 173.7 71 22 34 37 holy cross 272.3 43 38 38 5 warmian-masurian 483.5 50 34 39 11 greater poland 263.9 113 94 93 20 west pomeranian 347.0 66 55 55 11 source: own study based on gus data baltic journal of economic studies 22 vol. 6, no. 4, 2020 and the least population per city was noted in the holy cross voivodship. as of january 1, 2019, there were 1 042 inhabitants per 1 km2 of polish cities (table 5). the most densely populated cities were masovian (1,590 people) and kuyavian-pomeranian (1,481 people). the cities of the pomeranian, warmian-masurian and łódź voivodships also had a high population density (1 386, 1 373 and 1 330 people). in contrast, in the cities of the opole voivodship, the population density rate was the lowest and amounted to 620 people per 1 km2. fewer than 800 people per 1 km2 was also noted in the cities of the following voivodships: subcarpathian, holy cross, lubusz, podlaskie and west pomeranian. urban centres play an essential function in the socioeconomic system. they constitute areas of concentration of economic activity, i.e., creating added value as well as jobs. cities are socio-economic structures organised compre-hensively, with proper spatial (visual) forms ( jacobs, 1961; mohan, 1979; cheshire, nathan and overman, 2014). therefore, a city is considered as an economic, social, and natural system, consisting of numerous functional subsystems open to the external environment. the development of urban centres as table 3 structure of cities by size groups (as of january 1, 2019) number of cities total 940 over 1 mln 1 warszawa from 500 000 to 999 999 4 kraków, łódź, wrocław, poznań from 250 000 to 499 999 6 gdańsk, szczecin, bydgoszcz, lublin, białystok, katowice from 100 000 to 249 999 27 gdynia, częstochowa, radom, toruń, sosnowiec, kielce, rzeszów, gliwice, zabrze, olsztyn, bielsko-biała, bytom, zielona góra, rybnik, ruda śląska, opole, tychy, gorzów wielkopolski, dąbrowa górnicza, elbląg, płock, wałbrzych, włocławek, tarnów, chorzów, koszalin, kalisz from 50 000 to 99 999 46 from 20 000 to 49 999 134 from 10 000 to 19 999 184 from 5000 to 9999 184 from 2500 to 4999 217 from 1000 to 2499 129 below 1000 8 source: own study based on gus data table 4 area and population of cities by voivodships (as of january 1, 2019) specification area of cit-ies in km2 population in cities in thousands urban popu-lation in% of the voivodship’s popu-lation area of cities in km2 population in cities in thousands per one city poland 22 162 23 087.87 60.1 23.6 24.6 lower silesian 2 165 1 990.50 68.6 23.8 21.9 kuyavian-pomeranian 829 1 227.85 59.1 15.9 23.6 lublin 1 019 983.84 46.5 21.2 20.5 lubusz 876 658.92 64.9 20.4 15.3 łódź 1 160 1 542.68 62.5 26.4 35.1 lesser poland 1 659 1 639.52 48.2 26.8 26.4 masovian 2 190 3 481.63 64.4 24.9 39.6 opole 848 525.85 53.3 23.6 14.6 subcarpathian 1 234 881.88 41.4 24.2 17.3 podlaskie 925 718.27 60.8 23.1 18.0 pomeranian 1 072 1 485.79 63.7 25.5 35.4 silesian 3 790 3 478.79 76.7 53.4 49.0 holy cross 775 564.82 45.5 18.0 13.1 warmian-masurian 616 846.01 59.2 12.3 16.9 greater poland 1 546 1 896.33 54.3 13.7 16.8 west pomeranian 1 458 1 165.18 68.5 22.1 17.7 source: own study based on gus data baltic journal of economic studies 23 vol. 6, no. 4, 2020 a system is governed by laws (regulski, 1980), which shape the relationships between its individual elements. 4. quality of life in polish cities – an attempt at evaluation as already indicated in the theoretical part of the study, there are numerous available methodologies related to the quality of life in cities. as an example, one can indicate the study “uciekające metropolie” (uciekające...), which anal-yses large cities in poland in a cross-sectional way, extending the analysis to functional areas. for the purposes of the study, several indicators were selected, primarily guided by the availability of statistical data (the main source of information is the local data bank) and their versatility (indicators should best relate to areas related to the quality of life in the city). thirteen indicators from the social, economic and spatial areas were selected for the study. table 6 shows the indicators selected for analysis in more detail. the presented analysis is simplified and presents a static view. this means that data accepted for the study related to a specific point, which was 2018. this does not reflect the scope of changes that may have occurred in a specific time perspective. nevertheless, the simplified nature of the study presents the levels of indicators representing the quality of life in cities. table 7 presents the values of individual indicators adopted for the analysis. subsequently, these indicators were ordered according to items from the most favourable to the least favourable value of the indicator, depending on whether the indicator was specified as a stimulant or destimulant (table 8). within the accepted study areas, the city of rzeszów achieved the best result among the 18 cities surveyed in poland. it was followed by warsaw, kraków, opole, and wrocław. rzeszów, which belongs to the cities of east-ern poland, occupies high positions in reports on the quality of life in poland published by various magazines and agencies. it is a city, which, compared to other large cities, has a relatively compact structure and a small population (191 000 inhabitants). in terms of population, the city is comparable to the city of kielce, and it is not much larger than opole, zielona góra or gorzów wielkopolski. rzeszów was able to develop features that attract primarily new residents. the migration balance for this city in 2018 was 6.72 and was slightly higher than in the capital city of warsaw. rzeszów is considered a green and friendly city. in terms of entities operating in the cultural sector related to entertainment and recreation, rzeszów is comparable with such a large and important centre as wrocław, it is also a city with an attractive housing offer for residents or newcomers; in 2018, the number of dwellings completed was comparable with the city kraków. the labour market data related to the number of employed persons per 1 000 population are favourable. the city reached a high level compared to other large cities. according to cso data, this number is 481 people per 1 000 population, which gives rzeszów the third position in poland after katowice and warsaw, and it is a better result than one achieved in a given year in wrocław, poznań or kraków. the city of rzeszów has quite high values if we look at the spatial zone related to the number of bicycle paths per 10 000 population. in this indicator, the city is unparalleled. rzeszów can be considered a safe city on the basis of data published by table 5 urban population density by voivodships (as of january 1, 2019) specification area of cities in km2 population in cit-ies in thousands population per 1 km2 poland 22 162 23 087.87 1 042 lower silesian 2 165 1 990.50 919 kuyavian-pomeranian 829 1 227.85 1,481 lublin 1 019 983.84 965 lubusz 876 658.92 752 łódź 1 160 1 542.68 1 330 lesser poland 1 659 1 639.52 988 masovian 2 190 3 481.63 1,590 opole 848 525.85 620 subcarpathian 1 234 881.88 715 podlaskie 925 718.27 777 pomeranian 1 072 1 485.79 1,386 silesian 3 790 3 478.79 918 holy cross 775 564.82 729 warmian-masurian 616 846.01 1,373 greater poland 1 546 1 896.33 1,227 west pomeranian 1 458 1 165.18 799 source: own study based on gus data baltic journal of economic studies 24 vol. 6, no. 4, 2020 table 6 list of indicators for evaluating the quality of life in cities no. name of the indicator justification for the analysis x1 balance of migration presents the direction of population movement. may reflect the potential at-tractiveness of the place. x2 entities operating in the area related to culture, entertainment and recreation per 100 000 population it presents new elements of the economy related to, among others with creative class. x3 dwellings completed per 1 000 popula-tion the indicator indirectly represents the situation on the real estate market in the selected city. x4 employed persons per 1 000 population indicator relating to the economic situa-tion of the population, indirectly reflect-ing the situation on the labour market. x5 share of the area covered by the applica-ble local spatial development plans in the area in total % to some extent, it reflects the spatial order of the area covered by the study. as a rule, a larger area covered by plans can be seen as an element stimulating development. x6 walking and recreation parks, area in ha per 1000 population the number of green areas has become an increasingly important element in the making of location decisions and affect-ing the quality of life in the city in the last decade. x7 bike paths per 10 000 population bike paths, especially well-designed ones, can be an important element of the quality of the location; the indicator can have an impact on the elimination of car flows in major parts of the city, and thus the elimination of traffic jams. x8 children in kindergartens in total per 1 000 population access to educational institutions is an important element affecting the quality of life in the city. x9 own revenues of municipal budgets per capita economic indicator reflecting the finan-cial potential of the city as a local government unit. x10 doctors (total working staff ) per 10 000 population a social indicator, which, to some extent, provides access to basic public services in the form of healthcare. x11 beds in hospitals per 1 000 population a social indicator, which, to some extent, provides access to basic public services in the form of healthcare. x12 total offenses recorded by the police per 1 000 residents an indicator reflecting a crucial element affecting the quality of life in the city, which is the level of security. destimu-lant. x13 budget expenditure on transport and communication per capita economic indicator partly related to the spatial zone, covering transport and communication. source: own table 7 value of indicators selected for analysis for large cities in poland in 2018 x1 x2 x3 x4 x5 x6 x7 x8 x9 x10 x11 x12 x13 wrocław 2.3 286.6 14.7 438 58.1 1.3 4.06 35.3 4 966.37 125.3 8.3 30.63 1 251 bydgoszcz -3.01 225.3 3.3 353 37.4 2.5 2.87 31.7 3 462.25 134 9.8 20.6 1 166.5 toruń -1.83 344.9 4.9 332 56.2 0.3 5.74 29.1 3 201.89 78 6.4 25.37 967.1 warszawa 6.16 407.7 13.2 536 37.3 0.5 3.32 39.3 7 236.69 145.4 6.9 26.62 2 538.8 lublin -0.46 222.6 8.5 371 53.3 0.5 4.12 36.4 3 309.1 198,2 10.8 19.69 1 780.1 łódź -1.74 211 4.1 369 20.5 1 2.31 31.7 3 820.43 121.5 8.6 21.63 907.3 gorzów wielkopolski -0.53 220.3 5.8 328 56 1.4 4.08 36.5 2 851.77 70.9 6.8 32.85 1 056.3 zielona góra 4.3 252.3 8.7 337 17.1 0.2 4.7 39.3 3 667.71 74.3 5.9 31.4 1 865.1 kraków 6.13 328.9 12.5 461 61.8 0.6 2.77 40 4 679.43 166.5 8 23.53 1 231.1 opole 2.09 318.4 6.2 476 28.7 1.4 7.03 37.1 4 384.55 122.8 9.9 24.78 1 543.2 rzeszów 6.72 282.9 12 481 16.8 0.4 8.15 44.4 3 376.08 175.1 12.3 16.23 1 657.5 kielce -2.96 271.2 4.6 390 17.6 0.4 2.62 33.4 3 401.33 149.7 9.2 26.52 981.5 białystok -1.11 206.1 6.5 296 53.6 0.4 4.32 39.3 3 363.97 121.4 8.2 20.66 1 990.2 poznań -3.51 321.6 7.5 459 46.4 0.6 4.52 36.2 4 558.96 112.2 10.5 29.39 1 543.5 szczecin 0.59 263.9 5.7 295 53.6 0.4 3.41 24.8 3 550.5 104.1 8.7 33.88 1288 gdańsk 4.23 253.5 14.7 395 65.9 0.5 3.91 32.1 4 733.92 116.1 6.3 23.15 1 471.6 katowice -2.55 281.1 3 573 26.3 0.6 2.63 33.1 4 459.19 197.3 12.4 35.06 880.2 olsztyn -2.4 301.1 3.8 376 56 0.6 5.05 40.5 3 606.38 104,8 10.2 22.31 1 740.9 source: own study based on the local data bank baltic journal of economic studies 25 vol. 6, no. 4, 2020 table 8 positioning of cities according to the value of the xi indicator adopted for the analysis x1 x2 x3 x4 x5 x6 x7 x8 x9 x10 x11 x12 x13 wrocław 6 7 1 7 3 4 10 11 2 10 11 14 11 bydgoszcz 17 14 17 13 11 1 14 15 12 7 7 3 13 toruń 13 2 13 15 4 17 3 17 17 16 16 10 16 warszawa 2 1 3 2 12 10 13 4 1 6 14 12 1 lublin 9 15 7 11 9 11 8 9 16 1 3 2 4 łódź 12 17 15 12 15 5 18 16 8 10 10 5 17 gorzów wielkopolski 10 16 11 16 5 2 9 8 18 18 15 16 14 zielona góra 4 13 6 14 17 18 5 5 9 17 18 15 3 kraków 3 3 4 5 2 6 15 3 4 4 13 8 12 opole 7 5 10 4 13 3 2 7 7 9 6 9 8 rzeszów 1 8 5 3 18 13 1 1 14 3 2 1 6 kielce 16 10 14 9 16 14 17 12 13 5 8 11 15 białystok 11 18 9 17 7 15 7 6 15 11 12 4 2 poznań 18 4 8 6 10 7 6 10 5 13 4 13 7 szczecin 8 11 12 18 8 16 12 18 11 15 9 17 10 gdańsk 5 12 2 8 1 12 11 14 3 12 17 7 9 katowice 15 9 18 1 14 8 16 13 6 2 1 18 18 olsztyn 14 6 16 10 6 9 4 2 10 14 5 6 5 source: own study the central statistical office. in terms of the number of crimes registered by the police, it reaches the lowest rates among the largest polish cities. in terms of healthcare, the city of rzeszów also looks favourable. total number of doc-tors per 10 000 population is 175, and it is a high value compared to other cities, which gives the city of rzeszów the second position after lublin (which reached the value of 198). among the analysed cities, rzeszów was most often above the average value of the xi index, up to ten times. the cities of kraków, opole, warsaw, poz-nań, wrocław, lublin, and olsztyn were slightly above average. the cities of łódź and kielce were the above average the least number of times, i.e., only twice, while szczecin was at the end of the ranking. 5. conclusion this article presents the issue of quality of life in cities. the research goal set out at the beginning of the study was achieved by analysing selected indicators regarding the quality of life in relation to 18 large polish cities. the quality of life in the city has always been an element that directly or indirectly influences its development. especially in the last decade, one can observe the intensifying tendency of people to live in cities, especially large cities and metropolises. this raises a number of problems regarding how to manage such highly urbanised areas, as well as the escalation of new problems. therefore, improving the quality of life is becoming one of the main strategic goals of sustainable development, and in practice it is included in numerous polish strategies for the development of local government units. quality of life is also becoming one of the most important aspects when making decisions about where to live (access to work is not the only important factor), as well as numerous location decisions for domestic and foreign business entities. in the last few decades, the polish cities have undergone a number of changes. one of the table 9 city positions taking into account the highest level of indicators selected for the survey in 2018 ranking position city frequency of the abovementioned 13 indicators above aver-age 1 rzeszów 10 2 warszawa 8 3 kraków 9 4 opole 9 5 wrocław 7 6 lublin 7 7 olsztyn 7 8 poznań 8 9 gdańsk 6 10 białystok 4 11 katowice 5 12 bydgoszcz 4 13 zielona góra 5 14 gorzów wielkopolski 3 15 toruń 3 16 łódź 2 17 kielce 2 18 szczecin 1 source: own study baltic journal of economic studies 26 vol. 6, no. 4, 2020 most important is the political transformation or administrative reform of 1999. cities flexible enough to quickly adapt to changes have been coping with it the best. flexibility and adaptability are the extremely desirable features in the second decade of the 21st century in the context of challenges created by globalisation or climate change. the study presents an analysis of the quality of life of the large polish cities based on selected 13 indicators. the best results were achieved not only by large economically significant cities, attracting investments and residents, but also those located on the eastern wall of the country, which can be described as “more intimate” in terms of area and population, such as rzeszów, lublin or olsztyn. in this study, an additional goal is a detailed presentation of the demographic situation of the polish cities, which illustrates the trends in the changes of 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(2014). rozmieszczenie przestrzenne i cechy nowych małych miast z przełomu xx i xxi w. problemy rozwoju miast. kwartalnik naukowy instytutu rozwoju miast w krakowie, (11/3), p. 75–83. baltic journal of economic studies 124 vol. 6, no. 3, 2020 corresponding author: 1 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine. e-mail: s.solntsev@kpi.ua orcid: https://orcid.org/0000-0002-8820-3528 2 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine. e-mail: zh.zhygalkevych@kpi.ua orcid: https://orcid.org/0000-0002-5847-1302 3 national technical university of ukraine “igor sikorsky kyiv polytechnic institute”, ukraine. e-mail: m.kravchenko@kpi.ua orcid: https://orcid.org/0000-0001-5405-0159 doi: https://doi.org/10.30525/2256-0742/2020-6-3-124-135 evaluation of risk impact on implementation of innovation projects within the framework of machine-building quasi-integration structures sergii solntsev1, zhanna zhygalkevych2, maryna kravchenko3 abstract. the risk management of innovation project can improve the level of risk control of quasi-integration structures (qis), so as to make more effective decisions, reduce investment losses and achieve mutual benefit as well. therefore, an assessment of the risk impact on implementation of innovation project makes this study relevance. the purpose of this paper is to analyze the impact of market risks on the success of innovative qis engineering projects with the involvement of an economic-probabilistic model based on a conjoint analysis. research methodology. the article substances the feasibility and results of the application of the method of conjoint analysis – one of the methods of mathematical psychology – to assess the impact of risks on the effectiveness of innovative projects implemented within quasi-integration structures in the engineering complex. findings. the most likely scenarios for implementing an innovative project in terms of the impact of risk events on the financial result had been found with a help of a conjoint procedure with a fractional factorial design. the relative impact of each risk on the success of the innovation project was evaluated. the rule of deciding on the eligibility of an innovative project by the participants of machine-building qis was formulated on the basis of the technique of the internal rate of investment return (irr). research limitations. the developed methodology is proposed to be used in assessing the impact of risks on innovative projects within machine-building quasi-integration structures. the proposed method of assessing the impact of risks on the financial results of innovative projects within the machine-building qis can be used in more general situations. practical implications. the methodology was tested on the example of an innovation project within an innovation and technology cluster, which included six participants: mechanical engineering companies, a service company, a scientific institution and an educational institution. the market and specific inter-corporate risks that influence the results of innovative projects within machine-building qiss were identified and evaluated for operationalization. according to the results of implementation of the methodology, the feasibility of implementing an innovative project within the innovation-technological cluster was substantiated. originality/value. the scientific novelty of this study is the use of a conjoint analysis methodology to assess the impact of market risks. key words: machine-building, ukraine, quasi-integration structures, innovative project, risks, conjoint analysis. jel classification: с19, d81, g31 1. introduction mechanical engineering plays a systematic role in the structure of ukraine's economy. however, during the period of independence, mechanical engineering significantly lost its position, the share of engineering products in total industrial production decreased fourfold ‒ from 30.5% in 1990 to 7.6% in 2019. there are several reasons for this decline. one of the reasons is the technological obsolescence of production and manufactured products, which is a consequence of ineffective privatization, which resulted in a large-scale breakdown, first of all, of organizational-economic and production-technological ties between machinebuilding enterprises and institutions interacting with them. this led to a decrease in competitiveness of products, a decrease in investment and innovation activity of enterprises. another reason is the continuation of the military-political conflict in donbass. as a result, many baltic journal of economic studies 125 vol. 6, no. 3, 2020 machine-building enterprises in luhansk and donetsk regions have suspended or stopped production. according to the experience of the economically developed countries, one of the directions of reconstruction of the ukrainian machine-building industry and the enterprises that cooperate with it is to create and develop specific hybrid forms of integration – quasi-integration structures. the concept of this study is based on the idea that qis is a voluntary spatial partnership of cooperative industries and scientific institutions on the basis of integrated usage of available resources, aimed at achieving the highest economic efficiency and strengthening market positions, which feature is the lack of control over the assets ownership. machine-building qis is the union of machinebuilding enterprises and enterprises that are gradually involved in the production and technological process on a contractual basis, leaving the independence of the entities, which are the parts of it. these structures are different from other integrated structures by mobility, adaptability, flexibility and soft management (solntsev s. et al., 2019). the most promising forms of engineering qis are: business groups acting as strategic alliances; networkingassociations; clusters; virtual organizations. therefore, machine-building qiss are self-adjusting, self-learning, self-organizing and self-developmental systems, characterized by sustainability (with respect to environmental changes) and synergy (with respect to internal effects). the main advantages of machinebuilding qiss are the following features: – creation of new markets; – technological leadership; – new markets entry; – increase in sales; – reduction of transaction costs; – activation of innovations. the outlined advantages of creating machine-building qiss substantiate these opportunities by reducing the risks and increasing the synergistic effects of joint innovation projects. an important factor in deciding whether to participate in the implementation of innovative projects is the attitude of entrepreneurs to the risks – they may be prone to, neutral or reluctant. motivating factors for entrepreneurs to make a positive decision may be the attractiveness of innovative projects, such as: product novelty, innovative product component, potential financial benefits. the paper (solntsev s. et. al., 2020) presents a comparative analysis of innovative projects attractiveness for qiss experts and external experts. the attractiveness of an innovation project for the qis expert group is more related to the new innovative product for qis. whereas for independent experts, projects related to the traditional product for the company and in the already developed markets are preferable (figure 1). adhering to the concepts of perceived and acceptable risk, the above article states that qis representatives perceive the risks associated with entering the market for innovative products in old and new markets at a lower level than non-integrated companies. as qis is a selforganizing economic system, this may indicate that one of the incentives for establishing internal sustainable economic ties between participants is their innovative orientation. qis integration can also be explained by the participants’ desire to protect and strengthen their market positions in a strategic perspective. this difference in risk perception emphasizes the specificity of risk assessment of innovative projects within the qis and therefore requires special research. so, the basis of empirical data on risk assessment of innovative projects within the qis are surveys of qiss experts. for these reasons, the authors propose to use the conjoint analysis toolkit. the essence of the method is to jointly consider the product characteristics and -6 -4 -2 0 2 4 qis experts new for the company new for the market significantly improved with a slight improvement -6 -4 -2 0 2 4 independent experts new for the company new for the market significantly improved with a slight improvement figure 1. distribution of perception of innovative projects by degree of novelty source: (solntsev, zhygalkevych, 2020) baltic journal of economic studies 126 vol. 6, no. 3, 2020 other environmental factors, which promote or interfere with commodity exchange operations, and thus affect the financial results of the project. this method is often and successfully used in marketing researches for the implementation of models of multi-attribution of goods, namely, when testing the concept of goods, packaging, name, price, advertising, etc. (cherenkov a., 1999). researches and their implementation into modern business activities have proven the effectiveness of conjoint data collection and processing procedures (sawtooth software, 2017). however, the authors are not aware of examples of studies on the use of conjoint analysis in assessing the impact of risks on innovative projects. therefore, this article is focused on an in-depth study of the impact of risks on the performance of innovative projects within the machine-building qis, using the method of conjoint analysis. 2. review of the scientific literature risk analysis is increasingly important in today’s economy as the degree of environmental uncertainty increases. the expansion of project activity in industrial enterprises is an issue for project risk management (behrens, hawranek, 1991; kaplan, mikes, 2016; mcconnell, 2016). the study of literature has allowed to conditionally divide the methods of risk assessment into the following groups. 1. methods of probability distribution analysis. the traditional approach here is the value-at-risk (var) (chen, 2013). these methods are mainly used to assess risks in the financial markets. at the same time, r . miura (2000) applied this method in assessing market risks. the group of probability distribution methods is based on the assumption of the type of distribution and requires a large database of empirical data, which makes it impossible to use in evaluating innovative projects. 2. scenario methods. these methods concentrate on establishing cause and effect relationships for risk events. the main advantage of their application is the orientation to identify the root causes of the risk. one of the methods of this group is the fault tree analysis, according to which the degree of influence of risks on their identification is quantified (xing y. et al., 2017). another type of scenario method is the event tree analysis. in the work of ferdous (ferdous r . et al., 2011), this approach to assessing the probable consequences of an adverse event is combined with fuzzy set theory. 3. methods of fuzzy sets. they are based on aggregated indicators that describe the probability of risks. specificity of project risk assessment with the help of fuzzy set theory is given in the works of t. bragina and g. tabunshchyk (2011). in q. wang (2009) paper, this approach is used in the assessment of marketing project risks. in the case of many scenarios, the use of fuzzy sets methods is limited by the complexity of fuzzy inference rules. 4. methods of simulation (monte carlo simulation). in project risk assessment, such methods rely on the computer generation of input variables, with subsequent statistical estimation of quantitative risk indicators (miorando r .f. et al., 2014). the distribution of input variables is determined either a priori, based on theoretical assumptions (for example, assumptions on variables to be normally distributed, identically distributed, etc.), or a posteriori based on a large array of statistics. the lack of statistics on innovative products makes it difficult to use the methods of this group. 5. methods of analyzing the sensitivity of performance indicators. the essence of the methods of this group is to analyze changes in financial and economic indicators, depending on changes in project parameters. techniques for assessing the risks of promoting innovation based on the sensitivity of net present value (npv), internal rate of return on investment (irr), discounted profitability index (dpi), discounted payback period (dpp) are given in the work of dreshchinsky (dreshchinsky v. et al., 2010). in the work of havenaar (2012) the use of performance indicators sensitivity analysis methods was proposed to assess risks in qis, in particular, in strategic alliances. as for disadvantages of the sensitivity analysis methods, we can include the fact that the estimation of each parameter occurs at fixed other parameters, which does not take into account their mutual influence. the methods of assessing the effectiveness of investment projects also include the traditional ones: the method of adjusting the discount rate (risk premium) and the method of reliable equivalents (the method of reliability coefficients). a common feature of these methods is cash flow forecasting with project risk adjustment: in the first case – the adjustment of the discount rate, and in the second case – the adjustment of cash flows directly. a detailed description of these methods can be found, for example, in the works of slepukhina (slepukhina j. et al., 2007). in the study presented by the authors, the determination of the investment attractiveness of the project is carried out on the basis of combining these methods. it should be noted that the combination of different risk assessment methods is a promising direction for project risk assessment. among the qualitative and quantitative methods, the risk assessment of investment projects proposed by kovalev p. (2017) attracts attention. his research identified the tasks and formalized stages of assessing the risks of investment projects and the risks of integration processes in value chains. the author made a qualitative assessment of investment risks by the method of cognitive modeling and proposed a certain algorithm for its use. baltic journal of economic studies 127 vol. 6, no. 3, 2020 turning to innovative projects, we emphasize that the decision to invest them is based on the tradeoff between the desire for strategic leadership in the market (the strategy of “cherry picking”, the acquisition of significant market share, etc.) and the perception of risk. thus, o. laburtseva (2012) states that minimizing the risk of innovation is tantamount to abandoning innovation. in the work of vargashernández (2010), it is noted that, on the one hand, companies need innovations to be competitive in the market, but on the other hand, one of the most important aspects of innovation is risk. if companies do not take risks into account, the project fails, and if they apply many risk management systems, these methods can stifle innovation. consequently, there is currently no consensus on assessing the impact of enterprise project risks on innovations. however, it can be argued that significant influence is exerted on the market and marketing risks, the relevance of which is revealed in the works of modern ukrainian scientists: s. illiashenko (2010), solntsev s. and ovchynnikova a. (2011), o. laburtseva (2012). interesting, in our view, are the ideas for quantifying market and marketing risks in the works of thuesen k. (2007), wang q. (2009), rutkauskas a. and ginevičius i. a. (2011), which can be used in risk assessment of innovative products. there are also practical methods for managing project risks. in particular, the enterprise risk management (erm) concept (committee of sponsoring organizations of the treadway commission, 2007) is widely used to identify all the risks a company is exposed to (etges, 2017). similarly, iso 31000 focuses on structuring the risk management process (international organization for standardization, 2009). an attempt has been made to standardize probabilistic and statistical risk models in business practice (morgan, 1996). there are enough risk analysis, evaluation and management models available, such as original spiral model, prorisk, kgrisk and more. these methods of risk identification, assessment and management are certainly relevant. however, existing methods do not allow us to fully determine the level of risk impact on the performance of innovative projects. only a small number of methods focus on identifying the real risks of innovation, but most focus solely on the probability of success of projects without taking into account their economic dimension. conjoint analysis is related to the methods of mathematical psychology and in its origin a fundamental role was played by the article wrote by psychologist luce r . duncan and statistics made by john w. tukey (1964). krantz d. et al. (1971) in his article has investigated behavioral aspects in psychometrics using the composite approach, which is the basis of conjoint analysis. greenpaul e. and vithala r . rao (1971) confirmed the effectiveness of successful use of conjoint analysis in marketing research, from which, in principle, innovation begins. not dwelling in detail on the review of the literature on conjoint analysis, we note the reviews of the conjoint paradigm founders green paul e. and srinivasan v. (1990), which outline the directions of theoretical and practical research of this method, as well as the work of hauser j. et al. (2004), green p.e. et al. (2001), steiner m., and meißner m. (2018), which can track the evolution of conjoint procedures. however, the possibilities of using conjoint analysis as a risk study tool remain insufficiently disclosed. in particular, there is no understanding of the probability of potential cash flow deviations that are proposed to be evaluated by the conjoint analysis method that affect the economic and probabilistic expected profitability of innovative projects within the machine-building qis. considering the above mentioned in-depth study of conjoint analysis and how it is used in assessing the impact of risks on the performance of innovative projects seems to be a timely and relevant problem. the aim of this work is to analyze the impact of market risks on the success of innovative machine-building qis projects with the involvement of an economicprobabilistic model based on a conjoint analysis. the model focuses on identifying project participants’ tendency to risk, identifying the most influential risks for innovative projects within machine-building qiss, and identifying the most likely scenarios of risk events affecting cash flow deviations that underlie the economic and probable estimation. 3. research tasks qis, as an economic system that operates on the principles of self-organization, has an inherent property of synergy. the risks of inter-corporate relations specific to qiss are taken into consideration in terms of successful implementation of the innovation project. qis synergies tend to reduce market risks compared to non-integrated companies. increasingly, this applies to innovative projects that require a large resource base. the established inter-corporate relations in qis can be broken by dissonance in the perception of the innovative project. this can counteract the synergistic effects that are characteristic of quasi-integration and, as a consequence, increase the risks of successful project implementation. in order to select the most likely scenarios of the impact of risks on the financial result, the need to solve the first problem arises. t1: to identify specific market risks which affect the results of innovative projects within the machine-building qis in order to operationalize them. the decision to participate in an innovation project is based on an assessment of the risk events that have the baltic journal of economic studies 128 vol. 6, no. 3, 2020 greatest impact on the effectiveness of the innovation projects. this requires the following task. t2: to identify the most likely project scenarios in terms of the impact of risk events on the financial result, indicating the relative impact of each risk. the decision to invest in a project is based on the criteria for choosing between two alternatives to participate or not participate in the innovation project. the solution of this problem is considered possible based on the creation of an analytic model of the objective function that takes into account market risks and the definition of a decision algorithm that will be based on the characteristics of the objective function. thus, the following task arises. t3: to formulate a decision rule on the acceptability of an innovative project by the participants of machinebuilding qis. 4. research methodology quantitative estimation is based on formalization of input data to such a level that enables the use of mathematical tools. the absence of statistics on the assessment and forecasting of planned results of innovation (profitability, market share, consumer response to innovative products) indicates the impossibility of using classical methods of forecasting such as multidimensional regression, the theory of time series, models of moving averages, classical autoregressive models etc. this is the basis for using the conjoint analysis methodology (hanke, wichern, 2009). our work proposes a procedure for collecting, processing and interpreting data to evaluate the impact of risks on the financial performance of innovative projects within machine-building qiss based on the use of the methodology of conjoint analysis, programming language r , npv and irr . (т1) the identification of the risks of innovative projects was based on the method of focus group interviews (merton, robert k. et al., 1946). initially, potential market risks were identified when implementing projects within the framework of qiss, and then the most influential risks were selected by consensus (hsu c.-c. et al., 2007). (т2) it is proposed to indicate the relative impact of each risk on a success of an innovation project with the help of a conjoint analysis methodology, which is one of the powerful tools in the process of commercialization of innovative ideas. it allows to carry out market analysis and, as practice shows, to accurately predict market reaction to an innovative product (a series of products within the project). identifying market threats and opportunities for a project to bring an innovative product to the market helps reduce risks and, therefore, prevent financial and reputational losses. as respondents 7 qiss experts were involved to assess the importance of attributes and their levels, each expert was as asked to rank the profiles (scenarios) in order of their likelihood, starting with the most probable option in the direction of reducing the probability. one of the following models is usually used to process the data in the conjoint procedure, in order to evaluate the experts’ preferences: 1) a vector model; 2) ideal point model; 3) part-worth model (green petal., 2001). it is suggested to use a part-worth model to solve the designated and further problems. the impact of risk events on the project’s financial results was assessed on the basis of a scenario approach. each scenario consisted of all possible combinations of identified r1-r5 risks (described below) and a percentage of the planned cash flow input. the set of all eligible scenarios ranged from the most probable to the less probable, revealed the relative impact of each risk, estimated the level of planned cash flow input. the impossibility of referencing existing scientific sources of information on risk assessment using conjoint analysis (unfortunately, the authors do not have the relevant information) and the multidimensional nature of interpretation of the study’s findings justify the desire for a detailed presentation of the theoretical and statistical model based on the conjoint approach. six attributes have been identified to determine the most likely project scenarios in terms of the impact of risk events on the financial result. according to the conjoint procedure, the attributes are selected as follows: the first one is a percentage of the planned cash flow input, and the other five are the risks (r1-r5). there are two levels for attributes (r1) – (r5): “risk event will occur” (hereinafter referred to as “true”) and “risk event will not occur” (hereinafter referred to as “false”). six levels were selected for the attribute “percentage of planned cash flow input”: 100%, 80%, 60%, 40%, 20%, 0%. if a fully-crossed factorial design experiment was used, there would be 384 profiles in the experiment, which would make the choice of “cards” unrealistic. based on computer simulation using the r programming language, an incomplete experiment plan of acceptable size with a number of profiles of 16 pieces was formed. the categorical regression equation was compiled by determining the presence of an attribute j in a profile with level i: x if j levelof ani attributeisinthecard inotij = − −1 0 , , � � � � � � � � � � � hhercase�    these variables are predictors of the categorical regression equation: � �y a a x i j ij ij= + +∑∑0 ε, where a0, aij – regression coefficients, ε – random fluctuations; and as the dependent variable y the inverse ranks of the cards are selected. baltic journal of economic studies 129 vol. 6, no. 3, 2020 the empirical categorical regression equation was calculated using the least squares method: (1) where �a0 , � �aij – estimation of regression coefficients, xij – dummy variables (malhotra n., birks d., 2007), defined in table 1. the weights in the empirical categorical regression equation that are compiled on the basis of a set of attributes (figure 1) are interpreted as partial indicators of importance. in terms of conjoint analysis, the term “partial utility” is used. then the value of the profile (card) is the sum of the corresponding partial importance, i.e. the sum of the partial utilities. the relative importance of each attribute was found by using the relative fraction of ranges of partial utilities for each i-th attribute: (2), where � �aij – coefficients of the empirical regression equation. in the calculation of partial utilities, the programming language r was used for further statistical processing. one of the advantages of a conjoint method is the ability to analyze data obtained from the experts (partial utilities, general utilities, etc.) at the personal level. however, for managerial purposes, the data obtained at the individual level must be transferred to the group level. for the part-worth model, aggregation can be obtained in several ways. as noted in the work of wittink d., krishnalnurthi l. (1981), the conclusions depend on the sequence of such procedures, and the procedure itself is selected depending on the purpose of the study. for the purposes of this study, the aggregation procedure (in this case, averaging) was performed at the utility level. ratio (1) for each scenario determines the ranking of “y”, which made it possible to organize the scenarios in terms of the probability of their implementation. the relative impact on the results of the innovation project is obtained by the formula (2). having considered all the possible scenarios for each financial result (100%, 80%, 60%, 40%, 20%, 0%) and determined the probability of each probable cash flow from the planned one, the probability of a specific financial result of the project realization was determined (table 2). (т3) based on the identified risk factors, the level of their impact on the implementation of innovative projects was estimated. for this purpose, an analytical model of the financial results objective target (objective) function of the innovative project implementation was formed, taking into account market risks. in the paper of solntsev (solntsev s. et al., 2013), the target function was determined through net discounted cash flow (ncf) as follows: ncf ncf ncf ncf cf r ncf cf r i i i i = − = +( ) = +( )      + − + + − − ∑ ∑ i i1 1 , , where ncf – net cash flow for the period; ncf+ – incoming net cash flow; ncf– – outgoing net cash flow; cfi+ – incoming cash flow in the i–th period; cfi– – outgoing cash flow in the i–th period; r – discount rate. in the present study, the value of net present value (npv) was adjusted as a target function and adjusted for losses that may result from the realization of market risks. the range of the random variable distribution, which is defined as the percentage of ncf net cash flow input, is given in table 2. table 2 ncf net cash flow input distribution range % of ncf implementation 100% 80% 60% 40% 20% 0% subjective probabilities p100 p80 p60 p40 p20 p0 source: own elaboration the mathematical expectation of the net cash flow (ncf) input value is suggested to be written as follows: � �ncf ncf p p p p p ncfexp = = + + + + ⋅e ( , , , , )100 80 60 40 200 8 0 6 0 4 0 2 � �ncf ncf p p p p p ncfexp = = + + + + ⋅e ( , , , , )100 80 60 40 200 8 0 6 0 4 0 2 (3), where е is the mathematical expectation sign. table 1 dummy variables in the empirical equation of categorical regression attributes % planned net flow risks r1 r2 r3 r4 r5 levels of attributes, % 100 80 60 40 20 0 fa l s t r u e fa l s t r u e fa l s t r u e fa l s t r u e fa l s t r u e dummy variables х11 х12 х13 х14 х15 х21 х31 х41 х51 х61 regression coefficients 0 â11 â12 â13 â14 â15 0 â21 0 â31 0 â41 0 â51 0 â61 source: own elaboration baltic journal of economic studies 130 vol. 6, no. 3, 2020 it is suggested to take the mathematical expectation of npv as a target function of npvexp: npv npv ncf icoexp exp= = −e , where ico is the initial cash outflow. it should be noted that the expected npvexp with market risk adjustment is always less than the npv. it is proposed to use the internal rate of return (irr) method in view of market risk adjustment (irrexp) to decide on the feasibility of investing in a project. further, the eligibility criterion commonly used for the irr method was used in the work (van horne j., wachowicz j., 2008). it means that the comparatively expected internal rate of return (irrexp) with a hurdle rate (hr) that is eligible for adoption of an innovative project. namely, if: irr hrexp ≥ (4) then the project is accepted and otherwise it is rejected. 5. results and discussion the approbation of the presented methodology for assessing market risks of innovative projects was carried out on the example of a planned innovation-technology cluster (itc) “bezstykovyi shliakh”. the possible participants may be: “ukrainian railways” seo, institute of electric welding named after. e.o. paton (kyiv), “kakhovka electric welding equipment plant” pjsc (kherson region, kakhovka), “track repair technologies” llc npp (lviv), “dnepropetrovsk turnkey plant” seo (dnipropetrovsk), “diprotrans” srditc llc (kharkiv), state economic and technical university of transport (kyiv). within table 4 planned release of innovative products (estimated by experts of the itc “bezstykovyi shliakh”) the innovative product name number of units track rail–welding self-propelled machine 24 track self–propelled ballast cleaning machine 12 ballast leveling machine 12 dynamic track stabilization machine 24 catenary installation and maintenance machine 32 track renewal system 12 table 5 estimated total cost of the innovation project, thousand uah (estimated by experts of the itc “bezstykovyi shliakh”) components of the project cost cost, thousand uah. conducting scientific research 1 645.2 research and development work 3 290.4 preparation of pilot production and release of pilot and pilot batches of innovative products 6 580.8 creation of industrial production 332 043.2 project total cost 343 559.6 conjoint regression results: coefficient (intercept) 6.686 input_cash_flow|80% 3.006 input_cash_flow|60% 2.007 input_cash_flow|40% 1.357 input_cash_flow|20% 2.176 input_cash_flow|0% 2.163 r1|true –0.661 r2|true –0.032 r3|true –0.328 r4|true 0.578 r5|true –0.071 conjoint part–worths: attributes levels pw input_cash_flow 100% 0.000 input_cash_flow 80% 3.006 input_cash_flow 60% 2.007 input_cash_flow 40% 1.357 input_cash_flow 20% 2.176 input_cash_flow 0% 2.163 r1 false 0.000 r1 true –0.661 r2 false 0.000 r2 true –0.032 r3 false 0.000 r3 true –0.328 r4 false 0.000 r4 true 0.578 r5 false 0.000 r5 true –0.071 base utility~ 6.686 figure 2. categorical regression coefficients (r-code) source: own data figure 3. estimates of partial utilities (r-code) source: own data baltic journal of economic studies 131 vol. 6, no. 3, 2020 the framework of itc, the implementation of such an innovative project as “creation and organization of track equipment production for mechanization of construction and operation of the upper structure of the track with welded rails, including the highway” is planned. the developer of the project is the technopark “institute of electric welding named after. e.o. paton”. the project is aimed at the production of modern hightech innovative products of mechanical engineering for the repair and maintenance of railway tracks. this project is very important for the solution of the problem of reliable high-speed transportation of export cargoes in the direction of ports and the western border. the planned term of implementation of the innovation project covers five years, according to which the planned production of the products presented in table 4. the estimated total cost of the project is given in table 5. (t1) the risks that have the greatest impact on the innovation project were then identified. the most influential risk factors for innovations were market risks and inter-corporate relations risks. the authors found that the risks of innovative machine-building qis projects are all the underappreciated value of introducing new engineering products / technologies. that means, that the major risks of machine-building qiss are related to the launch of innovative (or technologically updated) competitive mechanical engineering products and the specific risks of inter-corporate relations within qis. as noted, based on quality marketing research, specific market risks of bringing innovative products of mechanical engineering to the market are: – market rejection of new technologies (r1); – negative reaction of the market to the discrepancy between the declared and actual characteristics of innovative products (r2); – “copying” products by the other competitors (r3); figure 4. structure of attributes of an innovative project within the itc “bezstykovyi shliakh” (r-visualization) source: own data baltic journal of economic studies 132 vol. 6, no. 3, 2020 – loss of mutual trust of qis participants in the process of implementation of the innovative project (r4); – low-quality information of marketing research (r5). (т2) using the programming language r , the coefficients �a0 , � �aij of the categorical regression equation (1), which are shown in figure 2, were calculated. as it is accepted in the conjoint analysis, common utilities are found using the partial utility coverage formula (2) and are presented in figure 3. the results are shown in figure 4. considering the structure of risk attributes (figure 4), we can conclude that only for risk r4 (loss of mutual trust of qis participants in the process of implementation of the innovation project) experts perceive the probability of implementation of this risk event more than its failure. according to figure 4, taking into account the share of each risk utility r1–r5, the value of the relative impact of the risks on the financial result of the innovation project within the itc bezstykovyi shliakh” was obtained (figure 5). r1 39,60% r2 1,9% r3 19,64% r4 34,61% r5 4,25% figure 5. the relative impact of risks on the financial result of an innovation project within the framework of itc “bezstykovyi shliakh” source: own elaboration from figure 5, it can be concluded that for the innovation–technological project within the framework of itc “bezstykovyi shliakh”, the most influential are the risk of market rejection of new technologies (r1) and the risk of loss of mutual trust of qis participants in the process of implementation of the innovation project (r4). taking into account formula (2), an indicator y is defined for each scenario, which allowed to rank the scenarios according to the criterion of their probability of realization (figure 6). from figure 6, it is obvious that the first scenario is the most likely scenario, where we have the 80% share of the planned input cash flow, even if there is a risk of “loss of mutual trust among qis participants in the process of implementing the innovation project” (r4). the second most likely scenario is: 80% of the planned input cash flow in the face of risks of “negative market reaction to the discrepancy between declared and actual characteristics of innovative products” (r2) and “risk of loss of mutual trust of qis participants in the process of implementing the innovation project” (r4). the following scenarios are similarly treated. after considering all the possible scenarios for each partial utility “100% of the planned input flow”, “80% of the planned input flow”, etc., the probability of loss of income due to market risks is determined (table 5). (т3) all of these market risks may have an effect on the failure to meet the projected revenue, which means to reduce incoming cash flows in the project implementation process. the npv, npvexp, irr and irrexp values of the project were calculated using formula (3) and table 6 values using microsoft excel. at a discount rate of 30% the value of npv was 641 669,8 thousand uah and npvexp was 133 606.7 thousand uah, while irr was 94% and irrexp – 45.67%. the desired profitability level, ie the predict (conjoint_allrespondents, profiles.all) %> arrange (desc (prediction)) input_cash_flow r1 r2 r3 r4 r5 prediction 1 80% false false false true false 10.269730 2 80% false true false true false 10.237263 3 80% false false false true true 10.198302 4 80% false true false true true 10.165834 5 80% false false true true false 9.941891 6 ………………………………………………………………………………… table 5 distribution range of ncf + net cash flow input % of ncf+ implementation 100% 80% 60% 40% 20% 0% subjective probabilities 0.1304 0.1914 0.1711 0.1579 0.1749 0.1743 source: own elaboration figure 6. ranks of the “incoming cash flows – set of risks that occur” scenarios within the innovation project within the framework of itc “bezstykovyi shliakh” (r–code snippet) source: own data baltic journal of economic studies 133 vol. 6, no. 3, 2020 cut-off rate, was set at 40%. as the irrexp is higher than the cut-off rate, according to the eligibility criterion (4), the innovative project “creation and organization of track equipment production for mechanization of construction and operation of the upper structure of the track with welded rails, including the highway” within the framework of itc “bezstykovyi shliakh” is an attractive investment. 6. conclusion the study developed and tested a methodology for assessing the impact of risks on innovative projects within the machine-building qis, based on the use of a conjoint methodology. the conjoint approach is psychometric in origin and is an empirical method of exploring the benefits of multidimensional choice situations. today, conjoint analysis has proven to be an effective method of collecting and analyzing data in various fields of research and business. the conjoint concept is based on the decomposition of the order scale of judgments (rankings) into the metric scale of the constituents (attributes) of the object under study. the lack of sufficient database of accumulated data does not allow to use classical methods of statistics for analysis in case of innovative projects. therefore, conjoint, which does not appeal to regression analysis of data, is a topical methodology in the study of innovative projects within quasi-integration structures. qualitative research has made it possible to identify market risks for innovative projects. the following more influential market risks have been identified: the risk of market rejection of new technologies; the risk of a negative market reaction to the discrepancy between the declared and actual characteristics of innovative products; risk of “copying” products by the other competitors; risk of loss of mutual trust of qis participants in the process of implementation of the innovation project; the risk of low-quality information of marketing research. the peculiarity of the present study is the use of conjoint to analyze the relationship between project risks and financial results. selection of the most likely scenarios is based on a trade-off between the economic efficiency of the innovation project and the combination of market risk events. the probability of different scenarios of generating project revenue was evaluated using a conditional methodology with the use of a computer simulation of an experiment partial factorial design. the most likely scenarios were found to be scenarios with a financial result of 80% of the planned input cash flow. among the risks that have the greatest impact on the financial result of the studied innovation project are the risks of market rejection of new technologies (39.6%) and the risk of loss of mutual trust by qis participants in the process of implementation of the innovation project (36.61%). the study identifies the probabilities of different levels of cash inflows. probability of 13.04%, 19.14%, 17.11%, 15.79%, 17.49%, 17.43% estimated income generation at the levels of 100%, 60%, 80%, 40%, 20%, 0% of the planned revenues. based on the data obtained, the mathematically expected internal rate of return on investment was calculated. we have determined that the investment expected internal rate of return is greater than the cut–off rate. therefore, it was concluded that it is advisable to invest the project. thus, an attempt was made to create a basis for a risk management system in innovative projects based on an assessment of their impact on project performance using a conjoint methodology. it was proven that conjoint procedures were very effective in management decisionmaking. the proposed method of assessing the impact of risks on the financial results of innovative projects within the machine-building qiss can be used in more general situations, which need further investigation. 7. acknowledgments this research received no specific grant from any funding agency in the public, commercial, or not-forprofit sectors. references: behrens, w., & hawranek, p. 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(2017). risk management of ppp project in the preparation stage based on fault tree analysis. iop conference series earth and environmental science, 59. 1–9. doi: 10.1088/1755-1315/59/1/012050 baltic journal of economic studies 90 vol. 6, no. 4, 2020 corresponding author: 1 mi “zaporizhzhia regional institute of continuing pedagogical education” zrc, ukraine. e-mail: november74t@gmail.com 2 military academy (odessa), ukraine. e-mail: politlaw@gmail.com orcid: https://orcid.org/0000-0002-5623-1022 doi: https://doi.org/10.30525/2256-0742/2020-6-4-90-97 world experience of process quality management of teacher training in hei tetyana kravchenko1, iryna saienko2 abstract. the quality of higher education is the main feature of hei. there are several approaches to assessing the performance of educational institutions. one of the leading process approaches is based on the principles of tqm (total quality management) and the requirements for quality management systems of the international organization for standardization iso. the basis for assessing the quality of higher education and training, as well as the quality of hei’s activities are educational standards. the ukrainian standards include: state standard, industry standards, hei’s standards. the international standards of enqa education quality guarantees include: standards for internal quality assurance of hei, standards for external quality assurance of hei, the european standards for external agencies of quality assurance. there are several models of education quality management systems: model of quality management system according to the international standard iso 9001:2000 (dstu iso 9001:2001); the model of the european foundation for quality management (efqm) and its modifications for he; the model of the center for higher education policy studies (cheps) of the university of twente (netherlands); model of the association of universities in the netherlands (vsnu); belgian-dutch model (expertgroep hbo); malcolm baldrige national quality award in the field of education; benchmarking model for australian universities and others. according to most researchers, there are some advantages in creating a quality management system of higher education institution in the context of the tqm ideology, which involves the application of process and systemic principles. the comparative characterization of factors influencing the quality of education in comparison with the principles of tqm, efqm’s criteria and the requirements of the international standard iso 9001:2000 and interdependent business processes. in the universities of the usa, france, great britain and other developed countries, the problems of general process quality management are considered in three planes. the study of the positive experience of developed countries, heis of which are included in the world rankings, and graduates are in demand in the labor market, allows to form a mechanism for implementing the tqm principles both at the state and regional levels. key words: process approach, iso standards, tqm concept, hei’s quality management models, pdca deming cycle, еfqm model, education quality. jel classification: i21, i28, v10, l22 1. introduction the quality of education in a modern environment is crucial for the successful development of any country. revolutionary changes in technologies based on intellectual resources are becoming the most important factor determining the development of the economy. the decisive role of hei is precisely in the development of intellectual resources of the country, which are competitive in the modern labor market, i.e. are able to ensure the implementation of innovative projects in the economy. the search for modern tools to ensure a high level of quality of educational activities has intensified with increased competition among heis. international experience shows that only organizations capable of ensuring world-class product quality and service delivery have achieved leadership. quality is a priority factor in ensuring the competitiveness of heis (asiyai, 2014). the universitas 21, or u21, is the only one ranking in the world to assess national higher education systems and is designed as a benchmark for governments, educational institutions and a variety of individuals. analyzing the data of the ranking for 2019, which unites 50 countries, we see that in general, ukraine is in the 39th place and the level of qualification of baltic journal of economic studies 91 vol. 6, no. 4, 2020 the workforce occupies the 14th position, while the united states occupies the 18th and 6th positions, respectively, the uk in both positions ranks the 8th, japan is at the 20th place overall and ranks the 3rd in terms of qualification quality, france ranks the 18th and the 6th, respectively, sweden’s place is the 2nd in the overall ranking, while the quality level belongs to the 17th place only, bulgaria, for example, ranks the 40th in the u21 rankings and the qualification level is at the28th place (u21, 2019). as we can see, the level of qualification of the workforce in ukraine, as a product of hei, is relatively low compared to developed countries, which confirms the need for modern approaches to quality management of hei as a producer of highly skilled labor. the quality of educational services provided is determined by such an effective indicator as the quality of higher education. monitoring the quality of higher education with the use of modern information technologies makes it possible to analyze the current situation and identify the main problems. 2. methodology of research 2.1. determining the basic standards of the model of formation of the process quality management system of hei the quality of education is directly associated with the quality of hei’s educational services and the perfection of its quality management system, which is aimed at continuous improvement (baird, 2006). most heis use the international iso 9000 series standards (tqm, 2009), improving their quality management systems based on the concepts of total quality management (tqm), which provide continuous improvement of the organization, enhancing the quality of products (services) and meeting the needs of all stakeholders: customers, suppliers, personnel and society. the approach based on the application of the “quality management system” in educational institutions encourages heis to analyze customer requirements, identify processes that contribute to the creation and provision of educational services acceptable to the customer, and manage these processes. implementation of the process approach in the hei management is one of the main requirements of the quality management system (najm, najm a., et al., 2017). according to the analysis of world practice, to create a quality management system in hei, it is advisable to use universal principles applied in various fields of activity, but adapted to learning activity (tqm, 2012; aigbomian, 2012; nwadiani, 2014). that is, the application of international standards of the iso 9000 series, which are based on the application of tqm principles. the foundation of this philosophy of quality was laid at the beginning of the last century in the united states by frederick taylor, developed by the american engineer, scientist and philosopher walter shewhart in the 1920s (he considered the founder, developer of a control system) and received further development in the works of the american researcher william deming, joseph juran, the japanese scientists homer sarason and kaoru ishikawa, etc. (law of ukraine of july 1, 2014). the ideology of tqm is based on a process approach to quality management, which involves constant control on the basis of objective measurement, the joint work of the members as a single team with the involvement of each employee; building a management system based on approved documents governing the operation. when applying tqm principles, it is necessary to identify key processes, manage them and constantly improve them to better the result. it is important to have a managerial component of the system. it should be noted that educational activity, or rather, the provision of educational services, has certain differences: the long process of providing such services, its complexity (multidisciplinarity), the involvement of a huge number of employees (both academic and others involved in organization of the process of providing educational services), as well as the duration of use of consumers of educational services and their high responsibility (graduates are a major component of the future potential of society) (nwadiani, 2014). therefore, using any international standards, it is better to avoid both the application of all requirements without adapting them to the national conditions and characteristics of a particular educational institution, and ignoring the experience gained. a creative approach to the development of their own provisions with an adequate interpretation of international experience and the existing conditions of the institution is needed. however, the generally accepted principles of tqm must be used in the development of quality management system of educational institutions. key principles include (tricker, 2010; tqm, 2009): – target orientation of the management on the quality satisfying the consumer, personal participation in performance of the set purposes and creation of conditions for participation of all personnel in activity on increasing the quality; – systemic managerial influences aimed at improving quality; – the integral nature of all activities of the organization; – constant and continuous activities to improve results and quality indicators – gradually, but all the time; – decision-making based on the analysis of systematic information, rather than random fragmentary data; – team style of work, including with the participation of partners. regarding the concept of “education quality”, the modern philosophers and scholars interpret the quality of education as “a social category that determines the baltic journal of economic studies 92 vol. 6, no. 4, 2020 state and effectiveness of the educational process in society, its compliance with the needs and expectations of society (lukina, korzhevskaya, 2007)”, “…the ratio of the learning purpose and outcomes, the degree of its achievement, provided that the purpose is set operationally and predicted in the area of potential development of the student” (tsarenko, 2015). thus, the education quality management is the direction of the regulatory body of its activities to increase the value of the educational process in society within its ability to meet the needs of such a society. for example, education quality management is recognized as a special management, organized and aimed at achieving not any educational outcomes, not accidental, not just better than the previous ones, but well-defined, predicted in advance with a possible degree of accuracy, where the goal (result) should be predicted operationally in the area of potential graduate development (armand faganel and slavko dolinšek, 2010). as we can see, education quality management is a fairly broad concept that can be specified at each of the levels and objects of its management, including primary, secondary, vocational or higher education. in particular, the law of ukraine “on higher education” dated july 1, 2014 defines the quality of higher education as the level of acquired knowledge, skills, abilities and other competencies, which reflects its competence in accordance with the standards of higher education (law of ukraine of july 1, 2014 “on higher education”). therefore, the evidence of receiving a quality education is the provision of the amount of knowledge, skills, abilities and competencies for the graduate determined by the ministry of education and science. thus, the education quality management is the direction of the regulatory body of its activities to increase the value of the educational process in society within its ability to meet the needs of such a society. for example, george s., weimerskirch a. (2009) recognize education quality management as a special management, organized and aimed at achieving not any educational outcomes, not accidental, not just better than the previous ones, but well-defined, predicted in advance with a possible degree of accuracy, where the goal (result) should be predicted operationally in the area of potential graduate development. as we can see, education quality management is a fairly broad concept that can be specified at each of the levels and objects of its management, including primary, secondary, vocational or higher education. in accordance with para. 23 of art. 1 of the law of ukraine “on higher education” dated july 1, 2014, the quality of higher education is the level of acquired knowledge, skills, abilities and other competencies, which reflects its competence in accordance with the standards of higher education ((law of ukraine of july 1, 2014 “on higher education”). hence, the evidence of receiving a quality education is the provision of the amount of knowledge, skills, abilities and competencies for the graduate determined by the ministry of education and science. undoubtedly, the key factor in choosing the future strategy of the hei in the field of quality is the current level of institutionalization of its quality system based on different quality models (tqm, iso standards, enqa, efqm, etc.). it should be noted that the principles, on which the above models are based, in the vast majority coincide, and if they differ, it is possible only in the degree of coverage of the completeness and depth of the main and resource processes in the organization. analysis of scientific sources on the quality of higher education shows that in the world, there are the following models of higher education quality management (silonova, sidliarenko, 2015): – quality management of higher education based on iso 9001 standards; – quality management of higher education based on tqm principles; – model of the european foundation for quality management (efqm); – model of the center for higher education policy studies at the university of tverte (the netherlands) – cheps; – association of universities in the netherlands (vsnu); – belgian-dutch model (expertgroep hbo); – model of the malcolm baldrige national quality award in the field of education; – benchmarking model for australian universities. in our opinion, the fundamental methodological basis for the application of most modern models of quality of higher education is the methodology of total quality management (tqm). the process approach, consumer orientation are the cornerstones of tqm, which have been further developed in quality models based on the international standards of the iso series. since the principles of another european model – enqa – are focused only on higher education levels and do not extend to other areas, including research, general management of educational institutions, it is advisable to use them as a supplement to the basic model (zaggl, 2017). 3. results and discussion 3.1. strategic priorities of formation and development of the hei’s process quality management system the most widely used quality management system is the system that meets the iso 9000 standard (latest version of 2001 – iso 9001:2000), which is recognized worldwide as the most effective, flexible, baltic journal of economic studies 93 vol. 6, no. 4, 2020 optimally documented. this system was started in 1979 in great britain and was later adapted to the sector of education in europe and many other countries (law of ukraine of july 1, 2014). the requirements of the iso 9001:2000 standard do not apply to the structure and content of scientific research, it does not operate in the classroom, where the teacher enjoys the academic freedom given to him or her to realize his or her scientific and methodological potential (baird, 2006). as practice shows, one of the most common approaches to quality management of higher education services is the model of total quality management (tqm), which involves all staff in creating high quality products or services at all stages of its life cycle from stages of marketing, design, production, operation, maintenance to disposal (silva, miranda, gomes, paulo, luís and zulema, 2014). the tqm model assumes the presence of a clear mission in the higher education institution, strategic goals, which are formed as a result of a comprehensive study of the needs of the external environment (the needs of society, the region, etc.). the tqm quality management model is also called universal quality management, because it provides a process approach to the activities of higher education institutions and uses effective methods and tools of quality management (plysenko, 2016). every organization needs continuous improvement in order to maintain the existing and achieve newer advantages over competing organizations. one of the methods of continuous improvement is the management of the organization according to the well-known deming cycle pdca – plan, do, check, act. pdca methodology is a simple algorithm of actions of the head to manage the process and achieve its goals and is applicable to all the above processes of the quality management system of hei (lukina, korzhevskaya, 2007). the introduction of a process approach to the management of hei makes it possible to use resources rationally to ensure the hei’s viability and to ensure transparency regarding accountability, decisionmaking, etc. the peculiarities of the process approach are the purposefulness of any action and process for the end result: meeting the requirements of consumers, compliance with the law, as well as with the requirements established within hei. the concept of quality of tqm is based on the following principles: – involvement of top management and all personnel; – consumer orientation; – process and systemic approach; – constant quality improvement; – fact-based decision-making; – establishing partnership with suppliers. in more detail, the basic principles of quality management for higher education in accordance with tqm are as follows (figure 1). in the universities of the usa, france, great britain and other developed countries, the problems of general process quality management are considered in three planes: 1. teaching tqm as an independent discipline in the learning process both in hei and in the process of postgraduate training. 2. organization of teaching other disciplines using the tqm principles and methods. 3. organization of hei’s management based on the tqm principles and methods. getting acquainted with tqm begins with a review of the quality concept evolution according to four concepts of quality: compliance with the standard; compliance with use; compliance with costs; compliance with hidden requirements (august-wilhelm, 2000). in general, the tqm methodology has been used in higher education since the early 1990s (george, weimerskirch, 2009). the positive implementation of the tqm principles in the activities of heis in developed and developing countries has resulted in increased student performance, improved curriculum quality, improved involvement of the academic staff and personnel of hei in advancing the quality of demand for graduates (bologna process, 2000). 3.2. determining the benefits of using different models of hei’s management in the context of the process approach according to most researchers, there are some advantages in creating a quality management system of higher education institution in the context of the tqm ideology, which involves the application of process and systemic principles. in this connection, the system approach is based on the paradigm of quality management, focused on the concept of interconnections and interactions, which is considered as a set of interdependent elements of the external environment and internal structure of the enterprise. the advantage of the process approach is to ensure continuous monitoring of the links of individual processes within a system of interconnected and interdependent business processes, based on the implementation of the requirements of the standard iso 9000:2000 (using pdsa, 2017). the application of dstu and iso 9001:2000 to create a quality management system for the provision of educational services is not a one-time campaign, but a significant and complex innovation. the creation of a quality management system for the task, which sometimes requires non-traditional approaches to its solution involving compliance with the principles of systematization, should take place through the implementation of the objectives of interrelated stages. this requires following certain sequence: baltic journal of economic studies 94 vol. 6, no. 4, 2020 1. creating a team to form a quality policy and a description of the main processes in hei. 2. training and motivation of the institution’s personnel, training of quality representatives, managers and auditors. it is important that the employees are aware of their role, responsibilities and authority within the quality management system. a prerequisite is the involvement of students as the main consumers of educational services. 3. development (design) of a system that allows you to manage processes, actions and tasks at all levels effectively. 4. development of an internal audit system that will assess the readiness degree of structural units of universities to work well, in accordance with the requirements of dstu and iso 9001:2000. 5. introduction of a quality management system for the provision of educational services. one of the main tasks of the third, fourth and fifth stages of the proposed sequence is to create a documentation package governing the implementation of all processes in the quality management system of educational services. modern approaches to the creation or modernization of the quality management system of educational services impose each educational institution to create such documents as (efqm model criteria, 2014). 1. ects information package. 2. documented quality policies and objectives. 3. quality manual. 4. documented methods required by dstu iso 9001:2000, which set out the policies, objectives, mechanisms and criteria for the quality of educational services and methods used for this purpose. another common approach to managing the quality of higher education services is the introduction of the european foundation for quality management (efqm) criteria. they are based on nine main criteria (figure 2) (model criteria. efqm, 2014). five of these criteria are “opportunities”, and the other four are “results”. “opportunities” criteria characterize the potential of the organization, and “results” are for the outcomes achieved (model criteria. efqm, 2014). the model of the european foundation for quality management in higher education was developed by sheffield hallam university in great britain. among the main advantages of the model for higher education, there are the following: understanding and anticipation of students’ needs and expectations, demonstration of forward-looking leadership; involvement of employees; development of mutually beneficial relations, etc. (armand faganel and slavko dolinšek, 2010). the list of factors influencing the quality of education in comparison with the tqm principles, efqm criteria and the requirements of the international standard iso 9001 mentioned in table 1 gives grounds to conclude that these factors are fully embedded in the common ideology of tqm, on which they are based (armand faganel and slavko dolinšek, 2010). b as ic p ri nc ip le s of o rg an iz in g a qu al ity m an ag em en t s ys te m in a cc or da nc e w ith t q m fact-based decision-making: applying methods of mathematical statistics to a shared purpose mutually beneficial relations with suppliers, consumers of services, society double improvement: a long-term strategy of hei, which allows constant improvement of the quality of education, educational business processes, the entire business system of hei systemic approach to management: improving the activities of hei process approach: focus of the process on the final result consumer orientation: survey of needs and satisfaction measurement leadership: creating and maintaining conditions for hei's development involvement of personnel: everyone's strategic purpose in achieving a shared purpose figure 1. basic principles of organizing a quality management system according to the tqm concept source: compiled on the basis of (george, weimerskirch, 2009; tsarenko, 2015) baltic journal of economic studies 95 vol. 6, no. 4, 2020 cooperation and resources opportunities results leadership processes, products and services operating results employees strategy results related to employees results related to consumers results related to environment figure 2. model of the european foundation for quality management (еfqm) source: (model criteria. efqm, 2014) thus, the current state of quality of higher education is a matter of concern, which leads to the need to manage the quality of educational services provided by domestic heis. the study of positive experience of developed countries, whose heis are included in the world rankings, and graduates are in demand in the labor market to implement the principles of general quality management, in accordance with the quality system iso 9001:2000, allows to state the need for these approaches to be implemented by the ukrainian heis to increase the competitiveness of graduates in the labor market in both national and international contexts. as a result, the state regulation should form a clear mechanism for implementing the principles of total quality management (tqm) in the activities of heis, create a consulting committee on the implementation of approaches to quality management in education at the ministry of education and science, promote the exchange of positive experience with foreign heis through holding roundtable meetings, conferences and seminars at the state level, which as a result, will allow leaders of the ukrainian universities to learn from foreign experience in strengthening the competitive position of their graduates in the labor market. 4. conclusions creating quality management systems requires educational institutions to attract significant financial and human resources, which the educational institution cannot always afford. in addition, the result of the implementation of such systems will become apparent only in a few years. therefore, the state can and should initiate and stimulate the development of the process of development and implementation of such heis’ systems. in most heis in europe and other regions, to form a quality management system the basic international standard iso 9001:2000 is used to improve their quality management systems based on the concepts of total quality management (tqm), which provide for continuous transformation of the organization, modifying the quality of products (services) and meeting the needs of all key parties. the defined principles of tqm are generally accepted, and must be used in the development of quality management system of educational institutions. the process approach, consumer orientation are the cornerstones of tqm, which have been further developed in quality models based on international standards of the iso series. the most widely used quality management system is the system that meets the iso 9000 standard (latest version of 2001 – iso 9001:2000), which is recognized worldwide as the most effective, flexible, and optimally documented. the tqm model assumes the that the hei has a clear mission, strategic goals, which are formed as a result of a comprehensive study of the needs of the external environment (the needs of society, the region, etc.). in the universities of the usa, france, great britain and other developed countries, the problems of general process quality management are considered in three planes: 1. teaching tqm as an independent discipline in the learning process both in hei and in the process of postgraduate training. 2. organization of teaching other disciplines using the tqm principles and methods. 3. organization of hei’s management based on the tqm principles and methods. the advantage of the process approach is to ensure continuous monitoring of the links of individual processes within a system of interconnected and interdependent business processes, based on the implementation of the requirements of the standard iso 9000:2000. the list of factors influencing the quality of education in comparison with the principles of tqm, efqm criteria and the requirements of the international standard iso 9001 presented in table 1 gives grounds baltic journal of economic studies 96 vol. 6, no. 4, 2020 to conclude that these factors are fully embedded in the common ideology of tqm, on which they are based. since the quality management system is implicitly related to the quality of hei, it is indirectly characterized by the next stage of research: the result of self-assessment of the level of development and implementation of quality management system of hei. given the adequate and interconnected formulation of goals and tools of these two studies, it is possible to establish a relationship between the level of satisfaction of end users (students of hei) and the assessment of the developed and implemented quality management system of hei in the form of business process maturity. the use of modern information technologies in the field of education allows for more effective quality monitoring. information technology is not so much a tool that complements the higher education system, but an imperative to establish a new order of knowledge and its institutional structures. the purpose of the national system for monitoring the quality of education is to provide society with reliable data on the state of the education system for accountability, effective functioning and improving. table 1 comparative characteristics of education quality management models in terms of factors influencing the quality of training in hei no. factors influencing the quality of training in hei tqm principles efqm criteria iso 9001:2000  requirements training level of entrants consumer orientation. establishing mutually beneficial relationships with suppliers. use of the potential of employees. 7.3.2. design and development inputs the level of teacher preparation, recruitment, training, level of social protection the role of top management. involvement of personnel the role of top management. policy and strategy. satisfaction of the personnel. 6.2. human resources organization of the educational process, introduction of scientific achievements into the educational process process approach process management 7.3.2 design and development inputs 7.5. production and service provision equipping with training equipment, textbooks, manuals, computers and office equipment, use of information technology systemic approach rational use of resources 6.3. infrastructure 6.4. work environment humanitarization of education, extracurricular educational work process approach process management 7.3.3. design and development outputs organization of student’s individual work involvement of personnel use of the potential of employees 7.5. production and service provision motivation of students to quality education involvement of personnel use of the potential of employees 7.5. production and service provision motivation of students to quality education involvement of personnel consumer satisfaction 7.3.3. design and development outputs control of students’ knowledge, skills and abilities fact-based decisionmaking process management. results. 8.2.4. monitoring and measurement of product 8.3. control of nonconforming product assessment of the level of student training by employers, society consumer orientation satisfaction of consumers and society results 8.2.1. customer satisfaction level of self-esteem and improvement continual improvement results 8.2.2. internal audit 8.4. analysis of data 8.5. improvement level of compliance with state accreditation requirements consumer orientation satisfaction of consumers and society results 1.1. general provisions communication with employers and alumni consumer orientation satisfaction of consumers and society results 7.2. customer-related processes 7.2.3. customer communication organization of continuing education continual improvement process management results 8. measurement, analysis and improvement source: (tsarenko, 2015) baltic journal of economic studies 97 vol. 6, no. 4, 2020 references: asiyai, r . i. 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(2017). manipulation of explicit reputation in innovation and knowledge exchange communities: the example of referencing in science. baltic journal of economic studies 73 vol. 6, no. 5, 2020 corresponding author: 1 national academy of public administration, office of the president of ukraine, ukraine. e-mail: poshedino@gmail.com orcid: https://orcid.org/0000-0002-9253-5285 2 national academy of public administration, office of the president of ukraine, ukraine. e-mail: a4utpalamarchuk@gmail.com orcid: https://orcid.org/0000-0001-6561-8248 3 national academy of public administration, office of the president of ukraine, ukraine. e-mail: lagaievska@gmail.com orcid: https://orcid.org/0000-0003-1463-9481 doi: https://doi.org/10.30525/2256-0742/2020-6-5-73-82 milestones vs. percents: how do we really measure ukraine’s european integration progress? oleh poshedin1, tetiana palamarchuk2, larysa gaievska3 abstract. the publication of the 2017 report on implementation of the association agreement introduced the quantitative approach in evaluation of the eurointegration progress of ukraine. the publication of the report launched a discussion between experts and government representatives on the possibility and relevancy of quantitative evaluation of association agreement in percent. the government approach to evaluate the progress was criticized by the experts and, according to them, the genuine success of ukraine in the implementation of the association agreement is far below the government report meanings. the minister of foreign affairs of ukraine expressed doubts on relevancy of percentage evaluation of the eurointegration success. he claimed that it was crucial to review the results of important projects, such as visa-free regime, rather than focus on percent and implemented directives. the authors of the article attempt to answer the following questions. is it possible to measure the eurointegration achievements of ukraine in quantitative measurements and is it relevant to carry out such calculations? it is clear that european integration of ukraine affects all spheres of the public life. as it is impossible to observe all spheres, the research focuses on three following spheres: fulfilment of the obligations according to the association agreement with the eu; trade with the eu; fight against corruption. for the first time in ukraine, european integration has become a transparent, measurable and accountable state policy. although considerable amount of research has been devoted to the quantitative measurements of the progress on implementation of the association agreement between eu and ukraine and it give an opportunity to monitor both the overall progress and the progress in particular spheres. however, these three components – the association agreement, the copenhagen criteria and the sustainable development goals – are a reliable guide to the successful long-term development of ukraine, ensuring prosperity of all citizens. of course, not all results are positive, and progress often means even more challenges ahead. insufficient institutional capacity of the authorities hinders the realization of the potential of the european integration course in full volume, correctly determine the sequence of steps, and calculate ways to achieve goals, look for the necessary solutions for stakeholders to take full advantage of all the benefits. a general conclusion is made concerning the evaluation of the european integration achievements of ukraine and not only in spheres that have been observed in this article. these indicators point to important issues and help to understand the overall progress. the findings are of direct practical relevance because such approach is important in case of information campaign aimed at informing people on aspects of european integration of ukraine. this paper has clearly shown that the key indicator in measuring the results of the european integration of ukraine is the level of life of ukrainian citizens. the european reforms must bring tangible benefits. victorious statements on association will not convince ukrainian society in the correctness of the european integration direction. key words: ukraine, the european union, european integration. jel classification: f15, f36 baltic journal of economic studies 74 vol. 6, no. 5, 2020 1. introduction the publication of the 2018 report on implementation of the association agreement in february-march 2018 launched a discussion between experts and government representatives on the possibility and relevancy of quantitative evaluation of association agreement in percent. the government approach in evaluation of the association agreement was also under pressure from experts. experts proved the genuine results of success for ukraine are significantly lower than the results mentioned in the report of the government. it is important to mention that this is the first document, introduced by the government, which represents the quantitative evaluation of the eurointegration progress of ukraine and defines that on average 41% of the goals set in 2017 in accordance with association agreement have been reached. the independent expert evaluation shows a 13% progress in the implementation of the association agreement as of march 2018 (report on implementation, 2018; ukrainian center for european politics, 2018). the minister of foreign affairs pavlo klimkin claimed against measuring eurointegration success of ukraine in percents. he was confident that it was crucial to review the results of important projects, such as visa-free regime, rather than focus on percent and implemented directives (klimkin, 2018). the eu in its 2017 report on evaluation of association agreement uses quantitative indicators related with decentralization reform, economic development, unemployment, trade and trade-related matters ( joint staff working document, 2017). the 2018 and 2019 reports have been complemented with the analysis of the judiciary system reform and fight against corruption ( joint staff working document, 2018, 2019). quantitative and qualitative progress in bilateral relations with eu and us, china and russia has been evaluated by the truman agency. the analysis is based on the methodology introduced by the belarusian institute for strategic research to evaluate the events in external politics (truman agency). the article is focused on defining the possibility and relevancy to measure eurointegration achievements of ukraine in quantitative indicators. it is clear that european integration of ukraine affects all the spheres of the public life. as it is impossible to observe all spheres, we will limit the scope of our observation to three following spheres: fulfilment of the obligations according to the association agreement with the eu; trade with the eu; fight against corruption. an important part of the european integration of ukraine is the public administration governance reform. the state of the governance in ukraine has been evaluated by the sigma program. the evaluation has been conducted in accordance with the principles of governance, developed by sigma in 2014 and enhanced in 2015 and 2017. these principles define the practical meaning of good governance and public administration and outline the key requirements to be followed by the countries within the process of the european integration. the results of the evaluation can be found in respective report (baseline measurement report, 2018). the main research methods that have been used for writing the article are theoretical research methods, mainly descriptive and evaluative approaches. an explicit diagnostic method based on deductive reasoning and generalization of the collected information has been also used. the main sources of analysis are statistics which can be quantified. 2. implementation of the association agreement with the eu the article uses the results of the monitoring, conducted by the ukrainian center for european politics within the framework of the “eu-navigator” project and the text of the association agreement (agreement navigator; association agreement, 2014). to what extend does ukraine implement the undertaken obligations under the eu-ukraine association agreement? agreement navigator provides quantitative indicators to monitor the overall progress and the progress in the specific area. the overall performance of the implementation process is not the object of this paper, instead we focus our research on 2 areas that demonstrate the most significant progress in the implementation process and that demonstrate certain shifts in the implementation of the association agreement. the following tables represent the status of the implementation of the association agreement, as of january 15, 2020. table 1 implementation of association agreement in ukraine as a whole total number (for the period up to 2025) fulfilled obligation unfulfilled obligation the review has not started 2071 119 405 1543 source: authors’ calculations, based on data collected from agreement navigator 3. implementation of the agreement in specific areas technical barriers to trade the most significant success of ukraine under the association agreement has been observed in the “technical barriers to trade”, defined in the chapter 3, title iv of the association agreement. this chapter regulates the preparation and adaptation of technical baltic journal of economic studies 75 vol. 6, no. 5, 2020 regulation and standards in evaluation. the chapter implies the cooperation in the sphere of technical regulation, market control, and accreditation in order to deepen the understanding of the respective systems and facilitate the access to respective markets. the efforts in this sphere allowed to surpass the 2018 plan for implementation and implement the vast majority of obligations that were expected to be implemented in 2019 and 2020 (ten out of fourteen). public procurement another area of the association agreement, which is implemented in accordance with the outlined schedule, is a sphere of public procurement. respective points of the aa imply the consistent convergence of the ukrainian legal base in public procurement to the respective eu acquis, followed by the institutional reform and introduction of the effective public procurement system, which is based on the eu public procurement principals. this will promote the mutual and gradual opening of the public procurement market of ukraine and eu. ukraine has approved the law “on public procurement”, which introduced the standards which regulate the process of contracting in public procurement. in addition, a roadmap in public procurement has been approved. even though, ukraine has implemented all three obligations in public procurement until 2018, still the vast majority of the implementation process is scheduled for year 2019 – 23 obligation out of 39, which should be implemented until 2024. the graph below presents the number of obligations implemented in sphere of public procurement as of january 2, 2019. energy cooperation between the eu and ukraine in the sphere of energy aims to increase the energy security, competitiveness and stability. it is important to mention that energy sphere is traditionally one of the figure 1. fulfilling of ukraine’s obligations by years source: authors’ calculations, based on data collected from agreement navigator figure 2. fulfilment of ukraine’s obligation in “technical barriers in trade” area (as of january 15, 2020) source: аuthors’ calculations, based on data collected from agreement navigator baltic journal of economic studies 76 vol. 6, no. 5, 2020 most corrupted in ukraine. changes in energy sector, in accordance with the aa, will create the background for more openness and transparency and introduction of the fundamentally new model of the market. the process of energy markets integration between the eu countries and ukraine will allow creating the most favourable environment for doing business in energy sector, technology exchange and investment in hydrogen mining, development of the alternative sources of energy. by the end of 2018, only 30 obligatory assignments out of 68 had been implemented. the obligations in the energy sphere are divided into 6 sectors: gas, electricity, atomic energy, hydrogen mining and oil. in the latter three sectors none of the obligations has been implemented. environment undoubtedly, implementation of the eu ecological norms will require significant investments in reducing the co2 emission and environmental pollution. citizens and business in ukraine are expected to benefit from introduction of the new environmental norms. reduction in environmental pollution can be achieved by rational management of the natural resources, integration of environmental policy with other policies, productivity increase as a result of modernization. the figure shows that implementation of the new environmental regulations is relatively slow and does not keep up with the schedule. in such areas as air quality, generic modified products, nature protection, wastes management, none of the obligations have been executed. figure 3. fulfilment of ukraine’s obligation in the field of public procurement (as of january 15, 2020) source: authors’ calculations, based on data collected from agreement navigator figure 4. fulfilment of ukraine’s obligation in the field of energy (as of january 15, 2020) source: authors’ calculations, based on data collected from agreement navigator baltic journal of economic studies 77 vol. 6, no. 5, 2020 it is important to mention that in such spheres as custom and taxation policy the progress is virtually nonvisible. generally, the implementation of the association agreement is relatively slow. the experts claim that such implementation pace will allow to execute the entire obligation only by 2035, with a 10 years delay (ukrainian center for european politics, 2018). it should be noted that the government’s approach to measure progress on the implementation of the association agreement has not changed in 2018. in the certain report, the state of implementation of measures is being monitored by the main executors – the relevant authorities, which makes it possible to understand from whom the fulfilment of the relevant obligation depends at the particular moment. according to government estimates, the fulfilment of obligations under the agreement envisaged for 2018 was 52%, and the overall level of fulfilment of obligations envisaged from the commencement of implementation of the agreement by the end of 2018 is 42% (report on the implementation, 2018). 4. trade with eu as an indicator of successful european integration for ukraine due to position of the russian federation and its efforts to postpone the introduction of the free trade agreement between eu and ukraine, the respective chapter of the association agreement came into force only on january 1, 2016, while initially planned to introduce in 2014. considering complicated situation of ukraine, since 2014 the eu opened unilaterally its market for ukrainian goods on the same terms that entailed the free trade agreement. basically, free trade agreement is already 4 years active for ukraine. the article observes the overall trade trends between the eu and ukraine, primarily based on the date provided by the state statistical service of ukraine. since 2015 the trade dynamic of goods and services between ukraine and the eu indicates that ukrainian export is growing, while import from the eu is growing as well. this shows the gradual recovery of ukraine after 17% gdp slump, which was primarily caused by the conflict in crimea and the eastern part of ukraine, and the trade measures introduced by the russian federation. all the above mentioned factors negatively affected the international trade of ukraine and with the eu in particular (european commission, 2018). the biggest shares of the products exported to the eu are the products of the agricultural group and food industry. the second biggest share of export to the eu takes the export of ferrous metals and products made of such metals. the third biggest category of export to the eu is machinery. the biggest share of import from eu take fuel minerals, oil and distillation table 2 fulfilment of ukraine’s obligation in the field of energy in certain spheres (as of january 25, 2020) energy efficiency electricity gas total number fulfilled obligation total number fulfilled obligation total number fulfilled obligation 36 6 15 3 9 4 source: authors’ calculations, based on data collected from agreement navigator figure 5. fulfilment of ukraine’s obligation in the field of environment (as of january 15, 2020) source: authors’ calculations, based on data collected from agreement navigator baltic journal of economic studies 78 vol. 6, no. 5, 2020 products, machinery and land transport equipment (state statistics service of ukraine, cooperation between ukraine and the eu countries in 2017). the key importers of ukrainian products are poland, italy, germany and netherlands. generally, the increase in product range of ukrainian products on the eu market is observed, as new companies started entering the eu market after the introduction of the free trade agreement. free trade agreement between eu and ukraine is called deep and comprehensive due to liberalization of services trade in addition to goods trade. even though, significant increase is not observed in the trade of services in comparison with the increase of goods turnover between ukraine and the eu, still trade of services continues to recover after a decline in 2013-2014 which was major callused by the aggression of the russian federation. the biggest shares of services exported to the eu are transport services and services related with goods processing. the eu countries continue to be the largest trading partners of ukraine. the share of these countries in the foreign trade turnover of goods and services of ukraine in 2019 was 40.1%. foreign trade turnover of goods and services with the eu countries in 2019 increased by 5.8% (+ 2.9 billion usd) and totalled 52.6 billion usd. exports of goods and services to the eu increased by 3.9% (+ 894.6 million usd) and totalled 24.0 billion usd. imports of goods and services increased by 7.5% (+ 2.0 billion usd) and totalled 28.6 billion usd (the ministry of economic development, trade and agriculture of ukraine, 2020). there are grounds to expect the intensification of the trade between the eu and ukraine. association figure 6. dynamics of foreign trade in goods with the eu countries (mln. usd) source: authors’ calculations, based on data collected from state statistics service of ukraine, “dynamics of the geographical structure of foreign trade in goods”, 2019 figure 7. dynamics of trade in services with the eu countries (mln. usd) source: authors’ calculations, based on data collected from state statistics service of ukraine documents publishing , “dynamics of the geographical structure of foreign trade in services (1996-2018)”, 2019 baltic journal of economic studies 79 vol. 6, no. 5, 2020 agreement implies full-scope introduction of the free trade area within a period of up to 10 years. during this period adaptation of the ukrainian legislation to the eu legislation in competition, sanitary and phytosanitary measures, consumer protection, technical barriers in trade, etc, will widen the eu market for ukrainian producers. it is important to underline, that in a sphere of technical barriers association agreement implies approval of the agreement on conformity assessment and acceptance of industrial products (acaa). after its introduction, sale of industrial goods from ukraine on the eu market will not require certification in those categories that are defined in acca. during the association council meeting in december 2018, ukrainian party suggested to initiate the negotiations on the acca agreement. the final statement of the association council defined that ukraine must comply with all the preconditions defined in the association agreement, including administrative and institutional reforms to create an effective and transparent administrative system on certification and safety audit of the industrial products are the preconditions for initiation of the negotiations on acca (council of the eu, 2018). 5. fight against corruption in ukraine corruption has taken deep roots in different spheres of life that leads to significant losses of both government and citizens as a result of ineffective usage of the budget. the german magazine “süddeutschen zeitung” published an investigation that shows significant losses for ukraine due to the customs corruption which reaches at least 4.8 bln usd annually (hassel, 2018). according to another german magazine, during 2015-2017 due to tax evasion schemes, ukraine lost up to 750 mln usd annually (müller und reiermann, 2018). it is complicated to clearly define the losses from tax evasion, customs corruption, but it is obvious that these losses are significant. the research conducted by the international monetary fund in 2017 evaluation the negative influence of corruption as a lost additional 2% annual economic growth (ljungman, 2018). based on the abovementioned data fighting against corruption is the key assignment and an integral part of the european integration for ukraine. a number of important measures have been taken according to the “action plan on visa liberalisation” between eu and ukraine. new anticorruption institutions have been created and by the request of the eu. the main newly created anticorruption institutions are: national anti-corruption bureau (nabu), the national agency for the prevention of corruption (napc) and specialised anti-corruption prosecutor’s office (sapo). national anti-corruption bureau is the institution, which investigates the pre-trial crimes, if the amount of bribe does not exceed the level of 500 minimal wages. national agency for the prevention of corruption undertakes preventing function, reviewing declarations of the public servants, their lifestyle, and disclosure of facts related with corruption or abuse of power. in contrast to nabu, the key observation area of national agency for the prevention of corruption is not only top public servants, but all public servants. according to the legislation, napc must capture any asset in the declaration with a value above 100 minimal wages. specialised anti-corruption prosecution is a structural division of the prosecutor general’s office of ukraine. head of the sapo is under direct supervision of the general prosecutor of ukraine. as a prosecutor general’s office, sapo represents the case that nabu investigates in the court. besides the above mentioned responsibilities, sapo controls the compliance of the nabu detective investigation activity with the law. it is clear that the existence of the anticorruption institutions may not lead to reduction in the level of corruption and the number of such institutions is not the indicator of efficiency. according to nabu reports, in 2017, 185 cases were referred to court, 35 cases were filed (national anti-corruption bureau, report for the first half of 2017, report for the second half of 2017). in 2018, the national anti-corruption bureau referred 176 cases to court. sentences were issued in 25 cases (national anti-corruption bureau, report for the second half of 2018). nabu’s indicators are especially important, as this bureau investigates crimes committed by highlevel officials. the general prosecutor’s office also provides general statistics on the country. in addition, nabu’s activity provides an opportunity not only to punish corrupt officials, but also to return to the state the millions usd (national anti-corruption bureau, 2017, 2018). as we see the cases that have been sent into trial by nabu are slowly examined by the general courts. such problem explains why the eu insists on the introduction of the high anti-corruption court of ukraine. the national anti-corruption bureau of ukraine (nabu), in cooperation with the specialised anticorruption prosecutor’s office (sapo), has launched since its establishment 752 pre-trial investigations in high-level corruption cases. nabu has submitted a total of 224 cases to the courts. the conviction rate in these cases remains very low at 31, as the vast majority of cases were blocked in ukraine’s ordinary courts. no high-level officials have yet been convicted for corruption ( joint staff working document, 2019). another method to measure the level of corruption is the measurement of the corruption by the experts. baltic journal of economic studies 80 vol. 6, no. 5, 2020 corruption perception index is an annual ranking of the countries that is composed by transparency international since 1996 (transparency international ukraine, 2020). the table shows the ranking of ukraine and the neighbouring countries by the cpi index in 2015-2018 (transparency international, 2015, 2016, 2017, 2018, 2019). table 3 corruption perception index country 2015 2016 2017 2018 2019 ukraine 130 131 130 120 126 russia 119 131 135 138 137 poland 29 29 36 36 41 romania 58 57 59 61 70 hungary 50 57 66 64 70 slovakia 50 54 54 57 59 source: authors’ calculations, based on data collected from transparency international, “corruption perceptions index, 2015, 2016, 2017, 2018, 2019” cpi index is worldwide accepted measurement of corruption which is prepared by transparency internationally annually since 1995. cpi is one of the target indicators in the strategic document “ukraine-2020” (sustainable development strategy “ukraine-2020”, 2015). the data confirms that corruption remains the key problem for both business and citizens and requires rapid reduction of the corruption level. ukraine outpaced the neighbouring countries by the level of corruption. the eu clearly realizes this obstacle. the first european commission report under the visa suspension mechanism underlines the key obstacle that exists of the way to successful anticorruption reform implementation in ukraine (report from the commission to the european parliament and the council, 2017). the report states that the prosecutor general’s office of ukraine seriously undermines the ability of nabu to effectively investigate the cases and undermines the trust of the society to the anticorruption institutions. the report mentions a number of serious remarks on the activity of the napc and its ability to fulfil the obligations. the european commission is concerned regarding increased pressure on the society and anticorruption activists that investigate corruption cases. european commission in its report recommends to provide independent, effective and persistent anticorruption reforms, particularly with introduction of the independent and specialized anti-corruption court of ukraine; recovering authority of nabu and establishing system of electronic declarations; cancelling the requirements on electronic declaration of anticorruption activists, etc. the second report of the european commission mentions that ukraine has not implemented the recommendations given in the first report yet. the requirements of report via electronic declaration for anti-corruption activists as for public servants is still in action (report from the commission to the european parliament and the council, 2018). a large number of experts believe that this requirement is a revenge of the government to the anti-corruption activists. european commission insists on necessity of effective and independent functioning of the anti-corruption institutions. independent functioning is the key to high effectiveness. this problem is crucial for ukraine while political powers still put their efforts to take such institutions under control. in september 2018 ukraine signed the memorandum on the macrofinancial assistance of 1 bln eur . in order to receive the abovementioned financial assistance, ukraine has to take certain measures, including measures to reduce corruption. such measures include automatic review of the declarations, actual review of over 1000 declarations of top public servants of judiciary, legislative and executive branches. another required measure is to provide changes to the procedure of reporting on the ultimate beneficiary owners of the legal entities and the progress on the launch of the high anti-corruption court of ukraine (memorandum of understanding between the european union and ukraine, 2018). in september 2019, the high anti-corruption court took up its duties. this is a powerful step towards to the eradication of corruption in ukraine. 6. conclusions quantitative measurements of the progress on implementation of the association agreement between eu and ukraine give an opportunity to monitor both the overall progress and the progress in particular spheres. moreover, such approach allows to define which branches of the government hider the process of implementation. this might be ministries, or parliament in case of long delay in examination of the draft legal acts. such information is important to quickly address the arising issues in the implementation process by means of political will. for the eu it is critical to know the overall performance in the implementation of the association agreement. it is critical to understand that approval of the legislation and establishment of the respective institutions does not imply the end of the implementation of the agreement. conversely, this process is long-term and the key aim is a full-scope implementation of this reforms. definitely, it is complicated to evaluate this aspect of the aa implementation in quantitative measurements and percent. baltic journal of economic studies 81 vol. 6, no. 5, 2020 we believe that quantitative measurements of the trade with eu allow evaluating and analyzing the results. in contrast to the trade of services between the eu and ukraine, the positive growth by trade of goods remains steady over the observed period. further results will depend on business, which should prepare and adapt to the new environment. government and parliament should establish respective conditions so that businesses could fully use the opportunities that provide agreement. further success of the free trade area will be defined by the product range increase, increase of the processed products, and increase in the turnover of the trade of services. all these indicators can be measured quantitatively, qualitatively and in percent. it is important to mention that standards of the products that ensure product safety for health and life of citizens cannot be easily measured quantitatively. in order to get access for ukrainian products to the eu market that should comply with the eu market standards. high standards will be gradually implemented on the ukrainian market and that will be beneficial for ukrainian consumers. in evaluation of the anti-corruption reform quantitative measurements are critical. even though in some cases they evaluate the quality of the anticorruption institution, still the overall number of investigations, the number of cases sent to trial and the number of court judgements do not provide a full-scope understanding. further evaluation of the respective institutions efficiency can be measured by the number and quality of audit of the public servants declarations. it is important to mention that most shifts in this sphere are executed under pressure of the external power, including the eu. absence of success in fighting against corruption undermines the idea of european integration and the belief of ukrainian citizens in the european direction. we come to a conclusion that it is possible to evaluate the european integration achievements of ukraine and not only in spheres that have been observed in this article. this indicators help to understand the overall progress, define the bottlenecks and take actionable measures to solve them. such approach is important in case of information campaign aimed at informing people on aspects of european integration in of ukraine. citizens are more comfortable with perceiving numbers and percent and such data is easier to present to the media. still, remain a large number of areas that may not be measured quantitatively. the key indicator in measuring the results of the european integration of ukraine is the level of life of ukrainian citizens. european reforms must bring tangible benefits. victorious statements on association will not convince ukrainian society in the correctness of the european integration direction. references: agreement navigator. available at: http://navigator.eurointegration.com.ua/tasks (accessed: 24.01.2020). association agreement between the european union and its member states, of the one part, and ukraine, of the other 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news/5-pytan-pro-indeks-spryjnyattya-koruptsiyi-transparency-international/ (accessed: 02.05.2020). transparency international (2015). corruption perceptions index 2015. available at: https://www.transparency.org/ cpi2015 (accessed: 02.05.2019). transparency international (2016). corruption perceptions index 2016. available at: https://www.transparency.org/ news/feature/corruption_perceptions_index_2016 (accessed: 02.05.2019). transparency international (2017). corruption perceptions index 2017. available at: https://www.transparency.org/ news/feature/corruption_perceptions_index_2017 (accessed: 02.05.2019). transparency international (2018). corruption perceptions index 2018. available at: https://www.transparency.org/ cpi2018 (accessed: 02.05.2019). transparency international (2019). corruption perceptions index 2019. truman agency. available at: https://truman.ua/en/products (accessed: 02.06.2019). ukrainian center for european politics (2018). 13% of success: why the government’s assessment of the association’s performance was overestimated. available at: https://www.eurointegration.com.ua/articles/2018/03/2/7078265/ (accessed: 22.11.2019). baltic journal of economic studies 115 vol. 7, no. 1, 2021 corresponding author: 1 vasyl stefanyk precarpathian national university, ukraine. e-mail: zvarych2810@gmail.com orcid: https://orcid.org/0000-0003-2033-5054 2 vasyl stefanyk precarpathian national university, ukraine. e-mail: lena_z@ukr.net orcid: https://orcid.org/0000-0002-5088-7565 doi: https://doi.org/10.30525/2256-0742/2021-7-1-115-126 formation of infrastructural factors of economic development of the region ihor zvarych1, olena zvarych2 abstract. this article highlights the problems of determining infrastructural factors in the system of socioeconomic and cultural development of regions. using systemic and synergetic approaches, methods of analysis and synthesis, induction and deduction, comparative analysis, it is justified that a term “infrastructure” in its modern sense is the basis of the economic system and its components, its internal organization, which guarantees its integrity. at the same time, the socio-economic meaning of the concept of “regional infrastructure” is to provide the necessary conditions for economic and social development of territories. the important role of regional infrastructure stems from its functions, which can be divided into internal (specialized) and external (regional). internal functions are a number of important economic and social functions performed by each enterprise, and element, and subdivision of the regional infrastructure. at the same time, external ones are to ensure a comprehensive and properly balanced development of the region in accordance with its resource potential and certain specialization. in order to unconditionally improve the situation in the regional infrastructure, today many hopes of the regional and local authorities are placed on attracting external investment capital as the most promising area for financing its modernization. it is worth noting that a number of powerful foreign and domestic companies that have the appropriate experience in solving such large-scale problems are ready to become investors and implement the best achievements of organizational and technical experience in the relevant regions of ukraine. at the same time, it is established that at this time the regions of ukraine are trying to use their resources as efficiently as possible for further development, are looking for new opportunities to use their potential. its disclosure and effective use, taking into account the defining regional features and the corresponding economic specialization, require a proper increase in the efficiency of all elements of the regional infrastructure. however, whatever the features of its classification, it is undeniable that it plays a key role in implementing the strategy implementation of appropriate processes of modernization of the regional economy. so, the term “infrastructure” in the modern sense is the basis of the economic system and its components, its internal organization, which guarantees its integrity. meanwhile, the socio-economic meaning of the concept of “regional infrastructure” is to provide appropriate conditions for economic and social development of the region. simultaneously, the more developed and modernized it is, the more attractive any unit of local self-government becomes for various investors, in particular, from the outside, which creates new jobs, reduces unemployment and increases consumer demand. in addition, today the regions of ukraine are trying to make the most efficient use of their resources for further development, are looking for new opportunities to use their full potential. its disclosure and effective use, taking into account regional characteristics and economic specialization, need to increase the efficiency of all elements of regional infrastructure. contemporarily, despite the diversity of approaches to understanding its essence and the existence of different concepts, it is logical to highlight its specific levels, each of the elements of which performs its function in the economic system of the region. therefore, the classification of regional infrastructure on a functional basis into production, social and market is the most accurate. as the analysis of its selected elements presented in this work shows, the close interrelation between them and economic development of regions is traced. the higher level of its development causes the growth of foreign investments and increase of labour resources, acceleration of economic development and growth of living standards of the population of the region. conversely, lowering the level of infrastructural development slows down production and may lead to a decline in living standards. however, whatever the baltic journal of economic studies 116 vol. 7, no. 1, 2021 features of its classification, it is undeniable that it primarily plays one of the most important roles when it comes to implementing a strategy for modernization of the regional economy. key words: region, economic development, regional infrastructure, infrastructural provision, infrastructural objects of the territory. jel classification: r58 1. introduction infrastructure security is a necessary element of economic development of any government. unfortunately, the state of domestic infrastructure is still far from satisfactory, which is a significant barrier to economic and social progress. today, the regions in ukraine are trying to make the most efficient use of all available resources for their further development, they are actively searching for new opportunities to use their potential. analysing the global socio-economic trends, it can be argued that one of the most promising areas in this area is primarily the accelerated development of regional infrastructure and increasing the level of infrastructure security of the main components of the economic complex of the region (adamov, 1998), which update the system of scientific research in this direction, are especially important in the construction and approval of new market forms of management in ukraine. the number of studies and publications devoted to the proper resolution of numerous problems of individual infrastructure units at the regional level has recently increased significantly. among domestic scientists who study such issues, it is worth noting the works by b. adamov, v. dorofiienko, o. povazhnyi, k. rybak, s. romaniuk, h. semchuk, ya. chernysh. however, such studies mainly relate to various production, technological, environmental aspects of the functioning of industrial and economic infrastructure and areas of proper development of social infrastructure and the problems of market infrastructure in ukraine, etc., i.e. are generally fragmentary. relevant issues of regional and local infrastructure as a complex object of influence on the economic development of the region are much less studied, which became the main task of the proposed scientific research. at the same time, issues such as the interpretation of the terms “infrastructure”, “regional infrastructure”, their defining functions and their classification, the development of various models of the relationship between economic development of the region and its infrastructure, and others are still insufficiently studied. the main purpose of this article is the study of these issues as key in the context of economic development of the region. 2. key components of the region’s infrastructure the issues of defining regional infrastructure as a separate definition are among the current scientific problems of regional development. clear articulation of the term “regional infrastructure” has not only academic and scientific, but also applied meaning. the term “infrastructure” in the modern sense is the basis of the economic system and its components, its internal organization, which guarantees its integrity (chernysh, 2019). any region is a complex and multidimensional territorial entity, which should be considered as a complex open and dynamic socio-economic system with special nature and properties. at the same time, relations in infrastructure are, in their economic essence, relations of creation of services and have a consumer character. in turn, the service that underlies the activities of the infrastructure facility is a specific economic category (romaniuk, 2001; semchuk, 2006), which creates the characteristic features of the infrastructure as an object of management and its modernization and reform. the dictionary of foreign words defines the term “infrastructure” as “…a set of branches of socio-economic life, which are characterized by subordination, serve production, creating the appropriate prerequisites for the functioning of society: form the production and social infrastructure”. production includes mainly transport, communications, energy, water infrastructure, environmental protection, and primarily covers areas such as science, education, health, social protection, as well as culture and recreation (aschauer, 1987). much attention in the scientific works is paid to the market component of the infrastructure based on current trends of its continuous development. market infrastructure is a set of institutions, enterprises, organizations, and services that guarantee an acceptable regime of sustainable functioning of the market on its territory. it is clear that according to the specifics of economic activity, they can be concentrated in the cities of the region. its market infrastructure includes financial institutions, development funds, banking institutions, audit companies, leasing, business associations, exchanges (labour, commodity stock), trading houses, information support centres, business centres, etc. the functions of market infrastructure facilities are, in particular, to provide entrepreneurs with appropriate legal and economic advice, protection of their interests, financial support and allocated credit resources, including leasing, auditing and promotion of business insurance and logistics and sales of enterprises, etc. the socio-economic meaning of the “regional infrastructure” concept is to provide the necessary baltic journal of economic studies 117 vol. 7, no. 1, 2021 conditions for economic and social development of the region. at the same time, one of the most important proportions is the relationship between its production complex and infrastructure. it is on the example of various production infrastructure objects that the american economist d. aschauer proves a direct connection between the achieved level of development of the relevant infrastructure of the region (due to certain indicators of gross infrastructure cost, dynamics of state capital investments in various infrastructure units) and the level activity of its economic component and labour productivity, the dynamics of private investment and, most interestingly, the rate of return in the private sector (aschauer, 1987). the important role of regional infrastructure stems from its functions, which can be divided into internal (specialized) and external (regional) (chernysh, 2019). internal factors mean a number of important economic and social functions performed by each enterprise, and division, and subdivision of regional infrastructure. at the same time, external ones are the provision of appropriate complex and balanced development of the region in accordance with its resource potential and predominant specialization. it is the performance of external functions and is the subject of consideration in the proposed study. in order to unconditionally improve the situation in the infrastructure today, many hopes of regional and local authorities rely on attracting foreign investment capital as the most promising area for financing its modernization. it should be noted that a number of powerful foreign and domestic companies that have good experience in solving such largescale problems, are ready to act as investors and implement the best achievements of organizational and technical experience in different regions of ukraine. however, there are the regions ready to embrace this experience. after all, at least in the regional infrastructure it is necessary to carry out various really effective normative and organizational, financial and economic measures. insufficient activity of regional authorities and local self-government is often an unresolved issue. their passive behaviour dominates. for many regional authorities, the very violation of the essentially vital problem of finding the necessary foreign investment becomes an insurmountable challenge for the functioning of the regional mechanism. the main reason for this may be the lack of experience of government officials and their traditional mentality and lack of knowledge and skills, and often fears of competition with other regional actors for external funding. however, proper investment in regional infrastructure increases the region’s importance in the external environment and the standard of living of the region’s population. at the same time, such investment actions bring numerous economic and social benefits and are a potential source of its development for the region. the more developed and modernized the regional infrastructure, the more attractive the unit of local self-government becomes for investors from outside, thanks to which new jobs are created, and unemployment is reduced, and consumer demand increases. that is, the relevant infrastructure investments are among the most important “region stimulating” factors. regional infrastructure is interpreted today as a special class of logically grouped assets that have similar physical characteristics and properties of money circulation and the same phases of development, etc. at the same time, the most important features of infrastructure assets include: rather high barriers to entry; resistance to changes in the business cycle; stable periodic cash flows with the potential for at least partial inflation indexation; relatively low correlation with other asset classes (key world energy statistics). according to the purpose of the study, we should build a model of the relationship between economic development of the region and its infrastructure. it was carried out in two stages. the first was the selection of indicators representing the production, social and market infrastructure and the indicator of economic development of the regions of ukraine. the second solved the problem of assessing the relationship between regional infrastructure indicators and economic development of regions. as an indicator of socio-economic and cultural development of the regions of ukraine, the indicator of gross regional product per capital was chosen. to implement the first stage, the above definitions of production, social and market infrastructure were used. thus, let us focus on the arguments for choosing each of the indicators in more detail. the production infrastructure, in particular, includes: transport, communications and energy, as well as water infrastructure; environmental protection. transport infrastructure can be represented mainly by the density of transport routes or the provision of means for the carriage of goods (trucks, rail cars, river and sea vessels and aircraft) and the carriage of passengers (buses, trolleybuses, trams, subways, rail passenger cars, river, sea vessels and airplanes). in terms of ensuring european integration interests, it is not so much the quantitative assessment of the relevant transport infrastructure that comes first, but its qualitative content. therefore, in our opinion, a more important issue is the ability to maintain the quality of such transport infrastructure, which largely depends on the optimal choice of investment funds. therefore, to characterize transport, the relative indicator of road infrastructure restoration was chosen, which was defined as the ratio of investments in it to the average density of public roads with hard surface in each region of ukraine. information on communication infrastructure in domestic statistics is represented by products (services) of mail and communication as an indicator that characterizes the volume of services provided by baltic journal of economic studies 118 vol. 7, no. 1, 2021 them to the population, enterprises, organizations, institutions and other consumers (sending newspapers, magazines, letters, telegrams, money transfers, pension payments, long-distance or international telephone calls) and quantitative indicators of the provision of urban and rural telephone networks, the provision of the population with broadcast radio points of sound wire broadcasting, etc. however, in today’s information economy and the very rapid pace of its development, in our opinion, it is impractical to operate only with such statistical categories because taking into account advanced technologies for assessing communication infrastructure requires the use of thresholds that allow to determine the return on each additional unit of investment in infrastructure development. therefore, it is proposed to use the indicator of marginal efficiency of investments in communication as a share of the growth of income from the provision of services in this area in the growth of capital investment in it. energy infrastructure is a set of sectors of the economy related to the production, transformation, transmission, and distribution of energy resources. ukraine still does not have enough to meet its needs with its own energy resources. in this context, it is inferior to various countries of the european union, in particular, such as germany and france. at the same time, ukraine has the most energy-intensive economy; the energy intensity of ukraine’s gdp is 2.6 times higher than the average energy intensity of the world’s gdp (figure 1). such significant energy intensity is caused by an extremely high level of consumption of various energy resources per unit of output, which in turn leads to an increase in hydrocarbon imports (key world energy statistics). the high energy intensity of ukraine’s gdp is mainly due to the low level of technological equipment of certain sectors of the economy, especially in the housing and communal sector, suboptimal sectoral structure of the state’s economy and threatening imbalance of import-export operations, as well as the negative impact of the “shadow” economy. one of the most important indicators of economic development of the governments is the level of electricity achieved by it. the potential of economic development of the country and its regions is indirectly determined by the volume of electricity production, in particular, per capita. therefore, in this study, such an indicator of its production was chosen. provision of water infrastructure is usually represented by different capacities of water supply and sewerage in the economy, which is characterized by the highest volume of water consumption (24.4% of 5.3 billion cubic meters of total volume) (chernysh, 2019). and a characteristic feature of the organization of water supply to the population is the dispersion of end users and the requirements for its quality. this leads to a significant increase in water supply costs. there are ongoing problems in water governance, as reformist management decisions are often opposed due to different ideological considerations. thus, according to estimates, the centralized water supply provided water demand by 65.0%, in cities by 85.0%, in rural areas by 26.0% in 2000. of the 91 thousand km of pipelines (main and street) and 47 thousand km of figure 1. energy intensity of gdp of the countries of the world / usd source: (povazhnyi, 2010) baltic journal of economic studies 119 vol. 7, no. 1, 2021 sewage pipelines, 30.0% and 24.0%, respectively, were in the state of disrepair (chernysh, 2019). with this in mind, according to the characteristics of the water infrastructure, the provision of housing with water supply and drainage comes to the fore. therefore, there is a need to calculate the growth rate of total drainage to increase the volume of housing. at the same time, environmental protection is an important aspect of social activity, along with the rational (optimal) use of natural resources. it is clear that it is accompanied by significant economic costs, along with spending on health, education, culture and the arts, and so on. activities in the field of environmental protection are considered in various aspects (economic, social, environmental, moral, technical, etc.) (chernysh, 2019). economic aspects are mainly related to the costs of environmental measures, taking into account the material and spiritual needs of the population and maintaining an acceptable level of quality of its environment. therefore, it is proposed to use the indicator of marginal efficiency of investments in environmental protection as the ratio of the increase in current expenditures for protection and rational use of such resources to the growth of capital investment for their protection and efficient use. appropriate social infrastructure aspects for each region to cover are the following: science; education; public health; the social protection; culture and recreation. in the infrastructural aspect, science can be considered from the standpoint of scientific and scientific-technical works, which include basic and applied research, scientific-technical developments and scientifictechnical services. each of these types of work is aimed at gaining new knowledge and their use in creating innovative products. innovative products are divided into new for the market and new for the company. in the regional context, an innovation that is new to the market is more interesting. here the actual regional market can be considered as a market, within which these products are produced and sold. the coefficient of efficiency of implementation of scientific developments shows the share of the volume of sold innovative products, which is new for the market in the internal current costs of scientific and scientific-technical applied developments in the region. important components of the social infrastructure of the region, city, district, and village are focused on meeting the educational needs of families or groups living in a certain area, and educational institutions. educational infrastructure can be represented by the number and logistics of preschool, secondary, vocational and higher education institutions of different levels of accreditation. in ukraine at present there is a very urgent need to provide the population with preschool institutions. therefore, this article proposes to use the indicator of coverage of children by different preschool educational institutions as the ratio of the total number of pupils of preschool educational institutions to the total number of children aged 1–6 years (excluding first grades organized in schools). the sections of social infrastructure on health care and social protection provide indicators showing the infrastructural provision of the network of medical institutions and the network of nursing homes for the elderly and disabled in the regions of ukraine. hospital beds are recorded at the end of the year. they must be provided with the necessary equipment and ready to receive patients, regardless of whether they are busy or not. nursing homes are inpatient social and medical institutions for the elderly, war and labour veterans, people with disabilities, including children with disabilities who need proper care, including medical care. in this case, the social infrastructure of culture and recreation in statistical publications is presented as information about libraries, clubs, film demonstrators and children’s health and recreation facilities as permanently or temporarily functioning, specialized or adapted facilities with a specific location, facilities and available in region of human resources for the provision of appropriate services for recreation, health, physical and intellectual development of children. children’s health facilities are mostly sanatorium-type facilities, including children’s centers and other out of town children’s health and recreation facilities. such children’s institutions are mainly camps with day care for children and various tent camps. one of the priority areas of state and regional policy towards children is to provide them with quality health and recreation services. appropriate measures are aimed at improving their physical and psychological condition, improving their vitality, providing care for them and the implementation of an effective educational process and the development of intellectual and creative abilities. at the same time, the main focus is on significantly expanding the network of children’s health and recreation facilities, their optimal operation during the relevant health season and providing appropriate conditions for the comprehensive development of children (especially intellectual, moral, creative and physical). as can be seen from figure 2, on average in the regions of ukraine, the share of children who spent the summer in children’s health and recreation facilities for the period from 2000 to 2015 was 35.5%, therefore, approximately every third child aged 7 to 16 years rested and recovered in different children’s institutions. simultaneously, the correlation coefficient between the number of children’s institutions and vacationers in them is 95.6%, which indicates the still insufficient provision of children with health and recreation services in ukraine. therefore, in this article, the indicator of providing children with health and recreation facilities is chosen as an indicator of the infrastructure of culture and recreation. baltic journal of economic studies 120 vol. 7, no. 1, 2021 the market infrastructure includes: trade; financial and insurance activities; real estate transactions; activities in the field of administrative or support services; other types of economic activity. each of these types of market infrastructure plays a role in public life and development of the region. at the same time, they are united by the fact that they are needed by all activities and the population of the region without exception. in the meantime, market infrastructure is an effective mechanism for entrepreneurship, covering a wide range of economic processes (from production to consumption), including: contracting for supply and organization of material flows between industries and regions and sales management and proper service. in this regard, the efficiency of the regional economy depends primarily on the complexity and efficiency of the market infrastructure achieved in the region. an integral part of the market infrastructure is the trade infrastructure, which includes a set of special formations (organizations, commercial and trade institutions, establishments, enterprises, services), each of which plays a role in organizing the process of wholesale and retail sales of goods and services. infrastructural formations of trade do not have the main purpose of carrying out own commercial activity, instead they should provide conditions for optimum and effective carrying out of commercial activity by various subjects of the basic structure of trade. coincidently, its main elements are divided into two groups according to their main functional purpose: a group of elements of the main (internal) and a group of general market (external) infrastructure. the elements of the internal infrastructure of trade include such divisions of the trade network as shops (in particular, pharmacies), gas stations, kiosks, tents, trays, online stores and relevant postal order firms. the efficiency of the trade network is determined by the volume of its retail turnover – the index of its physical volume. moreover, the retail trade turnover includes the retail turnover of enterprises engaged in retail trade and the estimated sales of various goods through a certain trade network owned by individual entrepreneurs, as well as in the markets. financial market infrastructure includes entities and elements that create organizational and economic preconditions for financial market participants, ensuring proper coherence and coordination of their joint actions, improving the efficiency of financial operations and the functioning of the market mechanism as a whole. the infrastructure of the financial and insurance market can include various institutions that are financial intermediaries or supporting institutions. in particular, it is: “…institutions of intermediary financial nature issuing, commercial, investment, mortgage, savings and foreign trade banks and specialized non-bank financial and credit organizations. these include insurance, investment, financial, pension funds, credit unions, savings institutions, pawnshops, leasing, factoring, trust companies that are professional market players, traders in securities and other financial market instruments and underwriters; relevant trade organizer stock and currency exchanges, over the counter stock trading systems; intermediaries in trade agreements-brokers and dealers; national depository system, depositories, clearing depositories; custodians and registrars of securities; settlement and clearing banks; information and analytical institutes, consulting centers; various self-regulatory organizations of the financial services figure 2. indicators of providing children in different regions of ukraine with health and recreation services source: (aschauer, 1987) baltic journal of economic studies 121 vol. 7, no. 1, 2021 market”. at the same time, the infrastructure of the financial and insurance market is a component of the financial and insurance activity of the regional economy, which is created in order to serve the financial and insurance market, ensuring its normal functioning. the efficiency of its use is directly related to the achieved profitability in financial and insurance activities, which can be represented by the profitability of financial and insurance activities, calculated as the ratio of profits from it to the total amount of various costs and contributions of financial and insurance companies. the infrastructure of enterprises in the field of real estate transactions is formed by real estate agencies (real estate companies). as stated in (chernysh, 2019), “…real estate activity is a business activity related to real estate transactions. such transactions include: trade in real estate, including the sale of real estate by public auction; real estate brokerage; related information and consulting activities”. as an indicator of the efficiency of the use of the infrastructure of real estate agencies, the indicator of their profitability was chosen the profitability of enterprises in the field of real estate transactions. infrastructure of enterprises and organizations in the field of administrative and support services. “activities in the field of administrative and support services are activities to support the main activities of enterprises, which include: rent, hire, leasing; employment work; activities of travel agencies, tour operators, reservation services and related activities; activities of security services, investigations; maintenance of buildings or territories; administrative and support office activities and other ancillary commercial services”. as in the previous case, it is proposed to use the profitability indicator in the field of administrative and support services. infrastructure of public, extraterritorial organizations, and bodies, and other types of market infrastructure is characterized by profitability. the set of selected indicators representing the production, social and market infrastructure and the methodological approach to their calculation and the units of their measurement are given in table 1. in the second stage, you should choose a method of assessing the relationship between indicators of production, social, and market infrastructure and the indicator of economic development of regions. after the formation of their totality, their calculation is carried out on the basis of real statistical data of the statistics service and other necessary information materials. since the generated statistical population is heterogeneous in units of measurement, the next step is the standardization (normalization) of data. in accordance with it, we get the “new” statistics we need as conditional values. the choice of the appropriate method for assessing the relationship between indicators of production, social and market infrastructure and the indicator of economic development of regions is based on the theory of mathematical statistics, which suggests using correlation analysis or the theory of metrics (distance) for such analysis. these types of analysis are essentially similar, but opposite in conclusion. thus, based on the definition of correlation and determination coefficients, it is possible to establish the real closeness of the linear relationship between indicators, and the closer their absolute value is to 1, the closer the relationship is, and conversely, the closeness of the absolute estimate to 0 indicates no relationship between selected indicators. measures of distance provide a real opportunity to draw opposite conclusions the smaller the distance between the indicators, the closer the relationship between them, and vice versa. the proposed study focuses primarily on the second approach. in this case, when choosing the metric of the distance between euclidean, manhattan, mikhnovsky and others, we dwell on the euclidean distance, which is determined by the formula: o x xi it t t t ,grp grp= −( ) = ∑ 2 1 , where oi,grp is the distance between the i-th indicator of infrastructure and the indicator of economic development in the period t; xit is the value of the i-th infrastructure indicator in the period t; x tgrp is the value of the indicator of economic development in the period t. 3. comparative characteristics of the regions for the purpose of analysis, statistical information of the state statistics service of ukraine for 2008– 2018 was used (aschauer, 1987). due to hostilities in donetsk and luhansk and the annexation of the autonomous republic of crimea for 2014–2016, there are no statistics on the autonomous republic of crimea, the city of sevastopol and the abovementioned regions. the results of the calculation of euclidean distances between the indicators of production infrastructure and the grp per capita are shown in table 2. as can be seen from table 2, between the indicator of transport infrastructure we trace a close communication in donetsk, zhytomyr, zakarpattia, zaporizhzhia, ivano-frankivsk, poltava and kherson regions. instead, in the autonomous republic of crimea, dnipropetrovsk, kyiv, lviv, odesa, rivne, kharkiv, chernihiv regions, such factor has no impact on the grp of the region. and in ukraine as a whole, the link between gdp and the pace of road infrastructure recovery is weak. the indicator of marginal efficiency of investment in communication is closely correlated with grp in volyn, baltic journal of economic studies 122 vol. 7, no. 1, 2021 table 1 the set of indicators representing the production, social and market infrastructure of the regions of ukraine no. infrastructure indicator unit of measurement production infrastructure 1.1 transport road infrastructure recovery ratio = investment in road infrastructure / density of paved public roads million uah / km per 1000 sq. km of territory 1.2 communication marginal efficiency of communication investments = increase in revenues from the provision of communication services / increase in capital investment in its development percent 1.3 energy sector electricity production per capita million kwh. / pers. 1.4 water infrastructure the growth rate of total drainage to the growth of housing percent 1.5 environmental protection marginal efficiency of investments in environmental protection = increase in current expenditures for protection and rational use of natural resources / increase in capital investments in protection and rational use of relevant natural resources percent social infrastructure 2.1 science coefficient of efficiency of implementation of scientific developments = volume of the realized innovative production which is new for the market / internal current expenses for scientific and various scientific, and technically applied, and some other developments shares 2.2 education preschool enrolment rate = total number of preschool pupils / total number of children aged 1-6 (excluding children enrolled in the first forms, which are usually organized in the respective schools) percent 2.3 medicare provision of the population with hospital beds number of beds/ 10 thousand population 2.4 social protection number of nursing homes for the elderly and disabled (adults, and children, and youth) units 2.5 culture and recreation children’s health and recreation facilities units market infrastructure 3.1 trade index of physical volume in the field of retail trade percent 3.2 financial and insurance activities profitability of financial and insurance activities percent 3.3 real estate transactions profitability of enterprises in the field of real estate transactions percent 3.4 activities in the field of administrative and support services profitability of activities in the field of administrative and support services percent 3.5 other activities (activities of public, extraterritorial organizations and bodies) profitability of other activities percent dnipropetrovsk, zhytomyr, zakarpattia, zaporizhzhia, ivano-frankivsk, kirovohrad, luhansk, lviv, mykolaiv, poltava, sumy, kharkiv, kherson, khmelnytskyi, chernivtsi regions. weak communication is in the autonomous republic of crimea and sevastopol. electricity generation and grp are closely linked in vinnytsia, dnipropetrovsk, donetsk, zhytomyr, zakarpattia, zaporizhzhia, ivano-frankivsk, kyiv, luhansk, lviv, mykolaiv, odesa, rivne, ternopil, chernivtsi, and chernihiv regions, only in the city of sevastopol. the same characteristics are inherent in the relationship of water and environmental infrastructure with economic development. at the same time, all regions showed a close correlation between them, except for the autonomous republic of crimea and the city of sevastopol (see table 2). the same pattern can be traced for the average indicator of production infrastructure as a close relationship between the indicators, except for the autonomous republic of crimea and the city of sevastopol. allocation of economic entities to a separate subdivision of production infrastructure is important primarily from the standpoint of efficient use of communal (common) property at the regional level, as a significant number of them belong to the communal form of ownership, and to increase business activity in the region. as can be seen from the average indicator of production infrastructure, the activities of various production and infrastructure facilities of the autonomous republic of crimea and the city of sevastopol are really unable to provide the necessary conditions for the organization of entrepreneurship. the results of the calculation of euclidean distances between the indicators of social infrastructure and the grp per capita are shown in table 3. here, as well as in the production infrastructure of the region, different results are shown. however, it is baltic journal of economic studies 123 vol. 7, no. 1, 2021 table 2 assessment of the relationship between socio-economic development of the region and its production infrastructure region transport communication energy sector water infrastructure environmental protection production infrastructure ukraine 3.64 3.84 3.04 3.34 3.93 3.56 ar crimea 4.83 9.21 3.30 10.56 9.68 7.52 vinnytsia 2.45 4.05 1.41 3.48 3.16 2.91 volyn 3.09 3.49 4.41 3.53 1.09 3.12 dnipropetrovsk 4.03 3.16 2.76 2.61 3.76 3.26 donetsk 1.31 4.12 2.07 2.30 3.70 2.70 zhytomyr 0.78 2.70 2.63 3.81 2.32 2.45 zakarpattia 1.94 3.55 3.21 2.53 2.46 2.74 zaporizhzhia 1.04 2.59 2.42 2.64 3.75 2.49 ivano-frankivsk 1.61 2.69 2.06 3.14 1.84 2.27 kyiv 3.99 4.13 2.84 3.33 2.56 3.37 kirovohrad 2.85 3.45 3.67 3.38 3.89 3.45 luhansk 2.75 1.29 2.93 2.16 3.80 2.59 lviv 4.03 1.57 2.82 3.11 4.20 3.15 mykolaiv 1.01 1.59 3.05 2.63 2.44 2.14 odesa 4.12 3.82 1.24 3.60 2.70 3.10 poltava 2.03 3.15 4.30 3.68 2.98 3.23 rivne 3.69 4.37 2.25 2.71 1.60 2.93 sumy 2.68 2.90 3.93 2.71 3.36 3.12 ternopil 2.57 4.10 3.04 3.38 3.74 3.37 kharkiv 3.75 1.10 3.86 2.84 4.20 3.15 kherson 1.15 3.18 4.05 3.36 3.71 3.09 khmelnytskyi 2.54 2.79 3.62 3.31 3.77 3.21 cherkasy 2.40 4.33 2.78 3.55 2.96 3.20 chernivtsi 2.36 0.72 2.78 3.31 3.56 2.55 chernihiv 3.91 3.99 3.31 3.37 3.17 3.55 kyiv (city)  * 3.92 4.29 2.04 4.22 3.62 sevastopol  * 9.04 7.36 11.18 10.95 9.63 * – no data available weak communication moderate communication close communication worth noting the weak communication for all categories of social infrastructure with grp for the autonomous republic of crimea, moderate and weak for all categories of social infrastructure with grp for sevastopol. when determining the communication between the average assessment of social infrastructure and grp, there is a moderate communication in donetsk and luhansk regions, which is absent in the autonomous republic of crimea and the city of sevastopol. as noted in (povazhnyi, 2010), in the socioeconomic and cultural development of the region, social infrastructure performs important functions, in particular: demographic (preservation and improvement of the health of the population of the region and creation of positive conditions for significant improvement of the demographic situation in the region, which is especially relevant in the ukrainian regions); reproduction of labour and human potential in general; recreational (significant increase in free time of residents, promoting its rational use); raising the level and improving the employment structure of the region’s population; formation of personality, public consciousness; increasing the level of activity of each territorial community. however, for regions that do not have a close link between infrastructure and economic development, such functions cannot be fully performed. the results of the calculation of euclidean distances between the indicators of the regional market infrastructure and the grp per capita of the region are shown in table 4. table 4 shows that weak communications can be traced between market infrastructure and economic development in the autonomous republic of crimea and sevastopol. in terms of “financial and insurance activities” and economic development of the region, we have moderate communications for most of them. all other components and generalized characteristics of the region’s infrastructure indicate close links between market infrastructure and the region’s economic development. this once again confirms the baltic journal of economic studies 124 vol. 7, no. 1, 2021 table 3 assessment of the relationship between the economic development of the region and its social infrastructure region science education medicare social protection culture and recreation social infrastructure ukraine 4.30 2.86 4.38 4.29 4.30 4.03 ar crimea 7.75 45.22 86.68 21.43 9.12 34.04 vinnytsia 2.02 1.06 4.35 3.92 4.39 3.15 volyn 4.11 1.06 4.34 3.97 4.31 3.56 dnipropetrovsk 3.35 1.41 4.18 4.00 3.96 3.38 donetsk 4.21 17.03 59.54 0.89 1.47 16.63 zhytomyr 0.83 1.59 4.24 2.11 4.37 2.63 zakarpattia 2.92 1.64 4.41 4.06 4.18 3.44 zaporizhzhia 3.88 1.63 4.15 1.08 4.19 2.99 ivano-frankivsk 4.29 0.54 4.38 1.40 4.19 2.96 kyiv 3.50 0.71 4.44 2.44 4.30 3.08 kirovohrad 2.31 1.30 4.18 2.07 4.07 2.78 luhansk 1.97 16.90 26.37 0.52 1.07 9.37 lviv 3.52 0.99 4.44 1.97 4.04 2.99 mykolaiv 3.45 1.63 3.95 2.23 4.42 3.14 odesa 4.23 1.54 4.27 3.90 4.41 3.67 poltava 4.32 1.86 4.25 2.23 4.41 3.42 rivne 0.81 1.66 4.20 3.94 4.21 2.97 sumy 2.22 1.16 4.34 2.10 3.59 2.68 ternopil 3.60 0.94 4.12 1.92 4.13 2.94 kharkiv 3.18 1.39 4.34 2.11 4.42 3.09 kherson 4.16 2.08 4.30 2.22 4.32 3.42 khmelnytskyi 3.47 1.00 4.25 2.18 4.39 3.06 cherkasy 3.01 1.51 4.23 3.95 4.34 3.41 chernivtsi 4.20 1.64 4.29 1.89 4.14 3.23 chernihiv 2.11 1.10 4.40 3.98 4.35 3.19 kyiv (city) 3.83 0.78 4.43 3.76 4.36 3.43 sevastopol 9.58 43.00 225.76 7.13 4.41 57.98 weak communication moderate communication close communication fact that market conditions in ukraine encourage the transformation of market infrastructure from a passive satellite of production, which it was in the days of command and control economy, into an equal partner of the real sector, transforming into an open sphere of activity, which ensures the effective functioning of the entire economy, creating a logistical, organizational and financial-economic basis for its development. figure 3 shows the relationship of production, social and infrastructure of the region as a whole with grp. as can be seen from it, the relationship between the indicators selected for analysis is underdeveloped in the autonomous republic of crimea and sevastopol, donetsk and luhansk regions. despite the diversity of approaches to understanding the essence of regional infrastructure and the existence of relevant concepts, it is logical to distinguish its different levels, each of the elements of which performs its function in the economic system of the region. therefore, the classification of regional infrastructure on a functional basis into production, social and market is, in our opinion, the most accurate. as shown in the analysis of its selected elements, there is a close communication between them and the economic development of the regions. the higher level of its development causes a certain increase in investment and some increase in labour resources, accelerating the pace of economic development and rising living standards of the region’s residents. conversely, lowering the level of regional infrastructure development slows down production and may lead to a certain decline in living standards in the country. it is worth noting that the regional infrastructure does not function separately. it should be proportional to the level of development of production and circulation at each stage of development of society. after all, the modern economy requires powerful industrial and commercial complexes, a network of relevant facilities for logistics of production and circulation, information and commercial networks, highly efficient means of financial institutions and settlements, and the population of the region must be provided with high quality educational, medical and cultural educational services. at the same time, the development of regional baltic journal of economic studies 125 vol. 7, no. 1, 2021 table 4 assessment of the relationship between the economic development of the region and its market infrastructure region trade financial and insurance activities real estate transactions activities in the field of administrative and support services other activities market infrastructure ukraine 4.35 4.07 4.12 4.18 2.86 3.91 ar crimea 10.94 7.80 8.94 8.30 9.60 9.12 vinnytsia 4.43 3.09 3.55 2.26 4.10 3.49 volyn 4.21 3.56 3.34 3.78 1.17 3.21 dnipropetrovsk 4.38 4.37 4.03 2.60 2.05 3.49 donetsk 1.59 3.95 1.74 1.60 1.57 2.09 zhytomyr 4.39 1.28 4.15 1.47 1.19 2.50 zakarpattia 4.40 1.85 4.27 3.50 4.36 3.68 zaporizhzhia 4.43 3.54 4.26 0.82 2.71 3.15 ivano-frankivsk 4.19 4.04 3.28 4.02 3.98 3.90 kyiv 4.08 3.27 4.06 3.80 3.54 3.75 kirovohrad 4.41 4.25 1.53 3.53 2.55 3.26 luhansk 0.83 2.88 1.45 3.02 3.98 2.43 lviv 4.30 3.72 1.91 3.55 3.93 3.48 mykolaiv 4.36 3.85 4.10 3.87 4.23 4.08 odesa 4.33 3.60 4.16 1.35 2.77 3.24 poltava 4.39 3.16 3.72 4.21 1.48 3.39 rivne 4.24 2.49 3.71 1.36 3.56 3.07 sumy 4.28 3.06 1.84 1.84 2.55 2.71 ternopil 4.33 3.87 2.20 3.04 1.85 3.06 kharkiv 4.34 3.49 4.15 2.56 4.31 3.77 kherson 4.33 0.77 4.04 2.45 3.99 3.11 khmelnytskyi 4.39 3.80 3.20 4.14 2.06 3.52 cherkasy 4.44 4.16 3.11 2.20 3.91 3.57 chernivtsi 4.32 4.04 3.90 2.86 1.25 3.27 chernihiv 4.29 3.75 2.14 1.48 2.63 2.86 kyiiv (city) 4.41 3.68 4.20 4.42 3.43 4.03 sevastopol 18.62 9.90 12.38 11.21 10.10 12.24 weak communication moderate communication close communication infrastructure becomes especially important for the economy of the region, and recently for the amalgamated territorial communities. 4. conclusions the term “infrastructure” in the modern sense is the basis of the economic system and its components, its internal organization, which guarantees its integrity. meanwhile, the socio-economic meaning of the concept of “regional infrastructure” is to provide appropriate conditions for economic and social development of the region. simultaneously, the more developed and modernized it is, the more attractive any unit of local self-government becomes for various investors, in particular, from the outside, which creates new jobs, reduces unemployment and increases consumer demand. in addition, today the regions of ukraine are trying to make the most efficient use of their resources for further development, are looking for new opportunities to use their full potential. its disclosure and effective use, taking into account regional characteristics and economic specialization, need to increase the efficiency of all elements of regional infrastructure. contemporarily, despite the diversity of approaches to understanding its essence and the existence of different concepts, it is logical to highlight its specific levels, each of the elements of which performs its function in the economic system of the region. therefore, the classification of regional infrastructure on a functional basis into production, social and market is the most accurate. as the analysis of its selected elements shown in this work shows, the close interrelation between them and economic development of regions is traced. the higher level of its development causes the growth of foreign investments and increase of labour resources, acceleration of economic development and growth of living standards of the population of the region. conversely, lowering the level of infrastructural baltic journal of economic studies 126 vol. 7, no. 1, 2021 figure 3. the relationship between production, social, market, and infrastructure in general with grp development slows down production and may lead to a decline in living standards. however, whatever the features of its classification, it is undeniable that it primarily plays one of the most important roles when it comes to implementing a strategy for modernization of the regional economy. references: adamov, b. i. 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(2019). udoskonalennia orhanizatsii nadannia administratyvnykh posluh orhanamy mistsevoho samovriaduvannia [improving the organization of administrative services by local governments]. kharkiv. (in ukrainian) zvarych, i. t., & zvarych, o. i. (2018). suchasni zasoby efektyvnoho upravlinnia zhytlovo-komunalnym kompleksom rehionu [modern means of effective management of housing and communal services of the region]. modeling of the regional economy. collection of scientific works, vol. 1(31). ivano-frankivsk: plai. (in ukrainian) reforma haluzi vodopostachannia ta vodovidvedennia v ukraini [reform of water supply and sewerage in ukraine]. available at: http://www.ier.com.ua/files/publications/policy_papers/german_advisory_group/2003/s23_ ukr.pdf (accessed 27 february 2021). aschauer, d. (1987). is the public capital stock too low? chicago fed letter. october. key world energy statistics. available at: https://www.iea.org/publications/freepublications/publication/keyworld-energy-statistics.html (accessed 12 january 2021). baltic journal of economic studies 47 vol. 7, no. 1, 2021 corresponding author: 1 borys grinchenko kyiv university, ukraine. e-mail: k2205n@ukr.net orcid: https://orcid.org/0000-0001-8610-3980 researcher id: https://publons.com/researcher/aaj-9413-2020 2 national university “yuri kondratyuk poltava polytechnic”, ukraine. e-mail: alexmarchenko1954@gmail.com orcid: https://orcid.org/0000-0002-3342-0525 doi: https://doi.org/10.30525/2256-0742/2021-7-1-47-56 innovative-digital entrepreneurship as key link of industry x.0 formation in the conditions of virtual reality nataliia kraus1, oleksandr marchenko2 abstract. purpose of the scientific research. purpose of the research is to present the features of formation and content of innovative-digital entrepreneurship as the foundation on which industry x.0 is built in the conditions of new virtual reality and technologies that change the business in the direction of its digitalization. the object of the scientific research. the object of the scientific research is the process of digitalization of business activity as a key link in the formation of industry x.0 through the prism of cfo-3600 competencies in terms of virtual reality, to indicate the features of digital transformation of the enterprise with office 365. methodology. on the basis of dialectical, systemic and matrix methods the digitalization of enterprises is investigated, which determines new quality and format of business work in new virtual reality. the comparative analysis of innovative-digital spaces that determine networking in the development of industry x.0 is used. the result of the article. key innovation problems that need to be solved in the conditions of formation of industry x.0 are presented, among which are named: innovation infrastructure and financing innovation, capability to generate knowledge, to learn and disseminate knowledge, governance of innovation. it is determined that cfo tools are the ability to build competencies within financial service and delegate (dependence on individuals); actively use outsourcing (the ability to build partnerships); actively use cloud solutions (readiness of architecture, economy). practical implications. the strengths and weaknesses of “digital managers” at the stage of formation of industry x.0 in the conditions of virtual reality are revealed. thus, the strengths include technological literacy and a broad outlook; knowledge of technological architecture; significant experience in project implementation; strategic thinking; understanding the impact of technology on business processes and customer/consumer behavior. the world innovation and digital spaces that form the virtual reality of industry x.0, which specialize in the connection of digital products/services, digital engineering, digital production/operations, are indicated. value/originality. it is proposed to implement digital transformation of the enterprise with office 365 through: solving a number of tasks in the implementation of digital transformation project of the enterprise; taking into account the challenges and threats of implementing office 365 for the enterprise; the expected result from the migration to office 365; office 365 as a tool for transformation (office 365 e3, enchange online, skype for business, microsoft intune); values for entrepreneurship. the process of achieving confidentiality in digital enterprise is defined. key words: innovations, industry x.0, virtual reality, digital entrepreneurship, digitalization, digital technologies. jel classification: b15, b25, o15, o32 1. introduction global digital transformation in the direction of transition from industry 4.0 to x.0 is possible due to the accelerated transformation of production on the basis of innovation, digitalization and glocalization. modern companies are ready for significant investments and solutions. evidence of this is the 1.2 trillion usd that business has spent in 2017 on transformation technologies alone; 96% of organizations consider digital transformation as critical; 42% of managers who have formed a new positioning of their companies as “essentially digital” or “primarily digital”; 63% of managers consider main obstacle in digital transformation “difficulties in transition to baltic journal of economic studies 48 vol. 7, no. 1, 2021 agile corporate culture”; 36% “of managers overcoming resistance to new methods of work” have considered the second important problem; 1/5 managers are convinced that digital transformation projects are a waste of time; the best leaders of “digital emigrants” are 28% more likely to be successful in building relationships; “innate digital” leaders are 20% more likely to become “digital emigrants” more active and flexible. urgency of the problem of this study is evidenced by the fact that 86% of ceos (chief executive officer) consider digital technology as a priority no.1 for business development; 30% of organizational change projects succeed; 16% success of digital transformation projects in companies is even less; 43% of transformation projects fail because project does not take into account the peculiarities of corporate culture; 33% of digital transformation is not sufficiently involved in top management. the data presented by us show that there is an urgent need to present the practical features of innovative-digital entrepreneurship as a key link in the future of industry x.0 in the face of new global challenges such as living and working in virtual reality. industry x.0’s innovation network helps companies to use, and implement, and scale the latest digital technologies and services quickly and efficiently. thanks to the brightest individual innovators, the latest technologies and deep industry experience, united in an immersive innovation space, we are able to transform enterprises in the direction of their digitalization. this can also be achieved through the use of creative energy of advanced technology to ensure continuous digital transformation, new growth and improved customer service. in addition, it is immersive technologies that are technologies of full or partial immersion in the virtual world or can be considered as different types of mixing of real and virtual reality. immersive technologies are also called augmented reality technologies. their list includes virtual and augmented reality, as well as 360°-video. 2. literature review the question of the conditions of formation and development of industry x.0 is only beginning to attract the attention of foreign and domestic researchers, including isaacson w. (2017), shantarenkova m. (2017). based on the analysis of the experience of industry 4.0 in developed countries, it is proved that industry 4.0 is one of the highest phases of digitalization, compared to “smart factories”, where such technologies as big data analytics (big data), machine learning, m2m-communications, artificial intelligence, a new generation of robots. due to the gradual decline in the cost of these technologies, they are becoming available, i.e. increasingly used by industry and business, which eventually affects existing business models or even creates new business models. these results are presented in scientific papers and articles by azzam m., sami n., khalil t. (2020), smit j., kreutzer s., moeller c., carlberg m. (2016), colotla i., bland d., knizek c., spindelndreier d. (2018), tupa j., simota j., steine f. (2017), smith j., kreutzer s., moeller c., carlberg m. (2016), trstenjak m., cosic p. (2017), marcel-mihai s. (2018). foreign researcher eric schaefer’s book “industry x.0. realizing digital value in industrial sectors”, a bestseller in the scientific world, clearly demonstrates the powerful impact of the industrial internet of things on production and explains in detail how to realize the potential of technology to increase competitiveness, profit and promote further business development. from this book, employees of industrial companies have the opportunity not only to draw inspiration for transformational changes and changes in their enterprises, but also to gain specific knowledge in terms of technology implementation and retain the potential effects of such implementation (schaeffer, 2017). among the domestic researchers engaged in the disclosure of the content of smart industry in digital economy can be called v. p. vyshnevsky, o. v. vietska, o. m. garkushenko, s. i. knyazeva, о. в. lyakh, v. d. chekina, d. yu. cherevatsky (2018), o. holoborodka, n. m. kraus, k. m. kraus (2018). analysis of these recent studies has shown the need for a comprehensive approach to substantiate the paradigm of formation and mechanisms of development of industry x.0 national type and transformation of traditional entrepreneurship in terms of its digitalization in new development of new economic relations determined by virtual reality. the purpose of the article is to present the features of the formation and content of innovative-digital entrepreneurship as the foundation on which industry x.0 is built in new virtual reality, which has every chance to be a decisive step in implementing digital development strategy through the introduction of smart assets, smart services. determine new quality of life in society. among the tasks set in the article are: it is argued to reveal key innovation problems that need to be addressed in the context of formation of industry x.0; to present the existing global innovative-digital spaces that form virtual reality of the industry x.0; provide an author’s vision of the content of industry x.0 and virtual reality; propose the order of the process of achieving confidentiality in digital enterprise; indicate the technologies that change business in the direction of its digi-talization, the strengths and weaknesses of “digital managers” at the stage of formation of industry x.0 in virtual reality; identify and disclose the content of cfo levels – 3600 and expectations in near future from the use of cfo tools in the activities of innovativedigital enterprise, defining the competencies of cfo – baltic journal of economic studies 49 vol. 7, no. 1, 2021 3600 innovative-digital enterprises in the formation of industry x.0 in virtual reality; specify the features of digital transformation of the enterprise with office 365. 3. prerequisites for the formation of industry x.0 the formation of industry x.0 is of great socioeconomic importance for society, as it allows to provide the population with new quality of services, digitized economic relations, promote the acceleration of digital entrepreneurship, increase trust in all branches of government through the initiative of the president of ukraine and strengthen the competitiveness of domestic products in foreign markets, giving services/ products signs of innovation. in addition, the emergence of new type of economy, namely digital economy, has become a scientific response to cluster, platform, ecosystem production, stem education, digital entrepreneurship, industrial hightech, retailtech, legaltech, insurtech, govtech, iot. this, in turn, leads to systematic emergence of new digital technologies for the industry x.0 to increase the digital competence of the population. industry x.0 is a new approach to organizing production in virtual reality environment. it is based on highly intelligent integrated new products and digital ecosystems, which form a fully innovative digital value chain, add new competencies and implement profound cultural changes in the direction of becoming new virtual reality. reality-virtuality continuum is interpreted by paul milgram and fumio kishino (milgram, kishino, 1994) as a space between reality and virtuality, between augmented reality (closer to reality) and augmented virtuality (closer to virtuality). we believe that virtual reality of the multiplayer world is based on the exchange of virtual goods within on-line environment. it creates an opportunity to interact with the artificial world through virtual platforms with available information funds on-line innovation market, the ability to work with cloud technologies (kraus n., kraus k ., anvrusiak n., 2020). consumers are already used to living in a digital world. now industrial enterprises, as well as their employees, need maximum digitalization. this new format of “industrial consumerism” undermines decades-old habits, traditions and operating models of enterprises and companies. not only the reasons for digital transformation in the manufacturing sector are important to industrial enterprises. each company must find its own way to move to digital rails (industriia x.0) and form their own ecosystems with professionals with digital competencies. “live” devices, smart assets, smart services, data management are the basis of the concept of industry x.0. this type of device and service is equipped with software-controlled and internet-connected sensors that collect various data, analyze it and send it to other connected devices. it is important to implement digital r&d processes, i.e. to implement a new approach to product lifecycle management. in fact, in new era of “live” data-driven devices, product development begins with digital lifecycle management strategy in the digital enterprise. this strategy is designed to provide a hyperpersonalized user experience. we are talking about the complete digitalization of the product life cycle in digital enterprise in new virtual reality. we are convinced that today it is urgent to ask questions like this: is digitalization part of the dna of a modern enterprise that creates the latest product/service? how to achieve digitalization of business activities? what are the competencies of digital employee of the company? we will try to answer these and other questions in this publication. exploring innovative-digital entrepreneurship as a key link in the formation of virtual reality of industry x.0, it should be noted that there are important differences between innovation in services and manufacturing: 1. service-sector innovation derives less from investments in formal r&d. more reliance on acquisition of knowledge/ip from outside sources acquisition and collaboration. 2. human resource development is especially important to service firms. indications that a lack of highly skilled personnel is a major impediment to service innovation in most oecd economies. 3. the role of newly established firms in innovative activity is greater. entrepreneurship is a key driver of service innovation (but small firms tend to be less innovative than larger firms). 4. ipr protection is more important, especially on software and business method patents. changes in policy regimes governing software-related patents and business method patents would impact service-sector firms, regardless of their actives. key innovation problems and limitations that need to be addressed on the way to the formation of industry x.0 in virtual reality are presented in figure 1. in addition, the innovation system of any country requires coordinated action from a range of entities: – demand for innovation: consumers, government (final demand), producers (intermediate demand). – framework conditions: financial environment – taxation and incentives; propensity to innovation and entrepreneurship; mobility. – industrial system: large companies; mature smes; new, tech-based firms. – intermediaries: research institutions; technology transfer support organiza-tions; technology services providers. – education & research: tvet; higher ed. & research; public research. baltic journal of economic studies 50 vol. 7, no. 1, 2021 – political system: government; governance; sti policies. – infrastructure: finance; intellectual property regime (ipr); innovation & business support; rules & norms. industry x.0’s innovation network today has more than 20 innovation spaces strategically located around the world and is part of accenture’s annual innovation investment of more than 1 billion usd. table 1 presents the world’s innovation and digital spaces, which form the industry x.0 network. 4. features of innovative-digital entrepreneurship as the key principles of transformation management, we propose to include: prioritization of projects (business results, not technical implementation, cam, business cases, mvp); responsibility for the result (cos, csi, ola, sla, mvp); right to error (r&d, innovation); confirmed approach (pilot circulation); cross-functional approach (project office; roles, stages, goals, results). technologies that change traditional business in the direction of its digitalization are presented in table 2. as part of the research problem in this publication, it should be noted that of course, without proper financial analysis, strategy and understanding of the company’s bills can be paid, but management will not always be able to make the right decisions for the most successful and effective problem solving, cost reduction and withdrawal business to new level, namely digital. in addition, mistakes and lost opportunities for the company become more likely. the strengths and weaknesses of “digital managers” at the stage of formation of industry x.0 in the conditions of virtual reality are presented in table 3. 5. digitalization of the employee’s work in virtual reality financial reporting alone is not always the best source for assessing the state of digital business or forecasting its trend. these are sophisticated tools that can be used in conjunction with other available data that need to be processed and analyzed for optimal answers. for example, a profit and loss statement and balance sheet may show a profit, but if you do not look deeper, it is likely that a decision will be made, as they say, “based on a picture, not a feature film”. a good example: staff reductions are not always the best solution if the decision is not made in combination with capacity analysis (including revenue flow analysis), matching resources to business goals. management needs an impartial third party that interprets and explains exactly what the data indicates and what full impact it can have on the business. for these reasons, cfo 360 (chief financial officer – chief financial officer/vice president of finance, chief financial officer, deputy chief financial officer) was founded by bob pantaliano, a us cfo with 25 years of experience (towards the digital world and industry x.0). the goal of cfo 360 is to enable small and medium-sized companies that cannot afford to hire a full-time cfo for competitive support. knowledge of b. pantaliano, a professional american financial and operational advisor, is based on many years of experience in strategic management of functions of financial and operational director. the developer is convinced that each company needs a unique plan, and each task requires an individual solution. with extensive experience working with organizations in the service, non-profit and manufacturing sectors, he proposed the so-called cfo 360, which provides flexibility to work on a project or permanent basis, on site or remotely, spending as much identifying key innovation issues and constraints i. innovation infrastructure and financing innovation: innovation infrastructure; quality system; financing innovation. ii. firm innovation capabilities: technological capabilities; management and organizational capabilities; capacity to learn; capacity to collaborate; role of markets. iii. capability to generate knowledge: by firms; in education and training organizations; in public research institutions. iv. capability to learn and disseminate knowledge: technical & vocational training; higher education; agricultural extension services; capacity to learn on the job; technology transfer opportunities. v. governance of innovation: identifying priorities; designing and implementing innovation policies & instruments; policy coherence and coordination; innovation indicators, monitoring and evaluation. figure 1. key innovation problems that need to be addressed in the context of the formation of industry x.0 source: developed by the authors baltic journal of economic studies 51 vol. 7, no. 1, 2021 table 1 global innovative-digital spaces that shape the virtual reality industry x.0 city name of innovative-digital space specialization and focus on innovation in the following areas ann arbor forge connect digital products and services bangalore innovation center digital engineering, digital manufacturing and various digital operations barcelona analytical innovation center analytics and supply chain, digital production and various kinds of digital operations bilbao industry x innovation center connect digital products/services, digital engineering, digital production and operations budapest center of excellence in industrial automation digital engineering, digital production and operations cluj center of excellence in industrial software connect digital products and services, digital engineering, digital manufacturing and operations columbus, ohio forge connect digital services and products des moines forge connect digital services and innovative products detroit industry x innovation center connect digital products and services, digital production and digital operations dublin dock artificial intelligence, analytics and the internet of things with a focus on connecting employees, “deep” manufacturing, digital entrepreneurship essen industry x innovation center digital engineering, digital production and operations garching industry x innovation center connect digital products and services, digital engineering, digital manufacturing and operations houston center for innovative resources digital production and connection of digital products/services istanbul industry x innovation center connect digital products, digital production and digital operations london industry x zone connecting digital products and services, digital engineering, digital manufacturing and operations modena industry x innovation center digital production and operations paris industry x innovation center digital engineering, digital manufacturing and digital operations, digital product connectivity and digital services perth innovation center digital transformations of energy companies, digitalization of mining industry in terms of strengthening their competitiveness and growth san francisco innovation center digital production and operations, digital engineering, digital services and product connectivity shanghai digital center of greater china digital engineering, digital product and service connectivity, digital manufacturing and digital operations shenzhen innovation center digital products and services, digital engineering, digital manufacturing and digital operations singapore center for innovative resources center of production and operations sofia antipolis resources of innovation center digital engineering, digital production and operations tokyo innovation center digital manufacturing and operations, digital engineering, digital product and service connectivity turin center for automotive industry solutions connect digital products and services source: compiled by the authors based on (innovatsionnaya set industry x, 2020; towards the digital world and industry x.0, 2020) table 2 technologies that change the business in the direction of its digitalization elements of business processes technology management bd, ml, ra, rent finance and accounting bd, ml, al, sc strategy bd, al, bd, ai, analytics interpretation, ml, sh marketing & sales bd, soft, new channels, targeting, personalization, online, time logistics automatically storages, delivery, better logistic, just in time, drones, storage like services production automatically, robots, 3d printings, custom design, quality control, ml security cyber, it, bd, sensors, video, ai, sh right ai, ml, chat bots, sc, bd frames bd, remount, office cut, ml, ai, sc, e-learning purchases just in time, storage outsourcing source: author’s development baltic journal of economic studies 52 vol. 7, no. 1, 2021 time as mutually agreed and required for any choice of services to best meet customer needs. cfo 360 allows you to work honestly, stating fees, deadlines and expectations from the beginning and working closely with clients. in fact, the level of service is so high that it allows you to limit the number and types of tasks taken to provide the highest level of professional attention and service. we consider it necessary to note that cfo – 3600 has several levels, namely: 1. strategic level (10%): strategic thinking, deep understanding of business models, innovation (financially sound), leadership skills and ability to implement. 2. communication level (30%): ability to communicate, deep understanding of best business process practices, managerial skills. 3. technical level (60%): 80% of financial staff perceive the cfo according to the level of his professional competencies. table 4 presents cfo time-management for today and expectations for future. table 4 cfo time-management now there must be financial analytics 30 % 30 % strategy 10 % 50 % accounting 30 % 10 % financial statements 30 % 10 % source: development of authors cfo tools: – to increase competencies within the financial service and delegate (dependence on individuals); – to use outsourcing actively (the ability to build partnerships); – to use cloud solutions actively (readiness of architecture, economy) (table 5). table 5 expectations in the near future from the use of tools in the activities of innovative-digital enterprise direction internal competencies cloud solutions outsourcing cloud erp, crm, cms + cloud tools for analyzing information – power bi + team management tools – ms team + + strategic planning + + business intelligence + valuation of investment returns + accounting + + payroll calculation + + compilation of financial statements + + source: development of authors changes in the role of cfo are as follows: – strategic positioning/analysis: environmental analysis (competitors, market, regulation) – helps to find opportunities and threats; analysis of resources and competencies – helps to identify strengths and weaknesses; – determining the expectations of major stakeholders; – strategy choice: strategic options (organic development, purchasing, vertical integration); evaluation of options and choice. table 3 strengths and weaknesses of “digital managers” at the stage of formation of industry x.0 in the conditions of virtual reality strengths and weaknesses of “digital managers” + pure-play digital / vc / tech r&d experience in digital (pure-play) business; high customer orientation; deep understanding of modern technologies and innovations poor understanding of traditional business with long chains and production processes technology ventor deep and detailed understanding of technology, innovation potentially a “technological” narrowness of vision limited solely by technology consulting / science / education technological awareness and a wide range; strategic thinking; powerful communication skills and vision of negotiations lack of experience in implementing and implementing changes cio / cto / ciso technological literacy and a wide range; knowledge of technological architecture; considerable experience in the implementation and implementation of projects lack of understanding of the needs of the consumer/client successful in digital transformation strategic thinking; understanding the impact of technology on business processes and customer/consumer behavior lack of understanding of technological architecture source: author’s development development of authors baltic journal of economic studies 53 vol. 7, no. 1, 2021 regarding the competencies of cfo – 3600 innovation and digital enterprises in the formation of industry x.0 in virtual reality are as follows: skills of planning, forecasting, business process management; focus on success and strategic thinking; ability to effectively conduct dialogues and establish business contacts. however, in the group of financial competencies of the cfo at a digital enterprise and allotment remain: – organization of risk management system; – mastery of methods of valuation and value management of the company; – knowledge of international financial reporting standards. the managerial competencies that should be inherent include: – ability to form a team and work in it; – strategic thinking; – “reasonable” disposal of their time; – ability to delegate authority; – ability to effectively negotiate, both with external counterparties and internal; – the ability to find ways to develop the enterprise, company. 6. digital transformation of the enterprise for digital enterprise, specialists with a wide range of competencies are valuable for the implementation of global tasks of business entity, such as the formation of financial policy, setting up a system of budgeting and accounting in the enterprise. it is these needs that necessitate digital transformation of the enterprise from office 365 (table 6). however, in order to be able to quickly and efficiently implement digital management through the boards of directors (figure 2) requires a number of innate and mastery, acquisition and expansion of such competencies as: – communication; – cold-bloodedness; – discipline; – confidence; – innate leadership qualities; – possession of developed analytical skills; – ability to maintain professionalism under any circumstances; – modernity, innovation, competence (ability to use modern technologies); table 6 digital transformation of the enterprise with office 365 tasks that are being decided within the framework of digital transformation project of enterprise: 1. migrate part of on-premises it infrastructure services to the cloud: exchange online and office 365 2. improve mobility and communication for 250+ internal users with external customers: skype for business 3. configure cloud integration with your own mobile applications 4. ensure dynamic expansion and more flexible connection of ex-ternal users top challenges and threats from implementing office 365 enterprise 1. narrow and strict timeframes 2. features of deployment on different types of tools (windows, android, ios, macos) 3. the need to carry out work remotely the expected result of migration in office 365 1. start digital transformation of the company 2. improve the functionality and integration of internal systems 3. optimize support costs office 365 as a technology transformation tool: 1. office 365 e3 2. exchange online 3. skype for business 4. microsoft intune changing the paradigm of labor relations: not working for a company, but cooperation: 1. the growing potential of microsoft teams is to allow people to suddenly create their own groups, manage the workforce (depriving management of the need for micro-management). 2. skype, yammer – means of free communication between people. 3. open opportunities for broadcasting creative ideas – convenient processes, forms, applications. 4. one drive – a single data access drive without file servers with personal folders. 5. personal productivity – task lists, calendars. results: 1. building a hybrid exchange infrastructure: debugged integration with on-premises systems and own applications 2. creation of a basic policy on remote management of mobile means 3. created installation package office 365 pro plus 4. migration of mail boxes of the selected group (250+) users 5. full technical support from info pulse is provided 6. training of technical specialists was conducted values for entrepreneurship 1. migration has passed without disrupting business processes – invisibly for end users. 2. unified sphere work on different types of means is ensured (windows, android, ios, macos) 3. improved communication between users: external and internal 4. the benefits of cloud technologies are provided: great flexibility, safety, reliability, access anywhere 5. savings on the cost of migration and license 6. optimized technical support costs 7. increased handling and security of mobile means source: development of authors baltic journal of economic studies 54 vol. 7, no. 1, 2021 – team player, the inherent team spirit; – fluent in several foreign languages; – curiosity. it is in the course of formation of digital entrepreneurship, formation of competencies, improvement of knowledge, acquisition of new skills that are the steps that need to be taken for both career advancement (figure 3) and the formation of digital entrepreneurship in new virtual reality of the 21st century, which is also exacerbated by both global economic challenges and covid-19 pandemics. due to the difficult financial and economic situation, the values of both cfos and employees with digital competencies are growing many times if they also have the basics of strategic marketing, crisis management and risk management. it is impossible to achieve high efficiency and confidentiality without security through the implementation of innovative projects within the digital enterprise. the implementation of the achievement of confidentiality through the work of the security institute is presented in figure 4. pursuing the goal of fastest possible development of digital entrepreneurship as a key part of industry x.0. in the context of virtual reality, we consider it necessary to suggest key areas in which to reform innovation policy (figure 5). business environment (finance, strategies and institutions): – vibrant capital markets; – chum and change accepted, embraced; – high level of entrepreneurship; – cooperation and collaboration part of culture; – strong ict adoption, especially among business; – strong managerial skills. 1-2 independent “digital” directors within the board of directors; “digital” committee at the board of directors; “digital” advisory council at ceo seo with dx experience; sio, sito, ciso with experience in implementing technological projects; entrepreneurs with experience in technology startups; digital consultants figure 2. implementation of “digital management” through the board of directors source: development of authors c on di tio ns projects “withthe right to error” intra-corporate “startupincubators” learning quick cycles of attempts and errors q ua lit y action oriented openness to new ideas learning from experience figure 3. reserve potential source: development of authors 1. discover – to identify what personal data you have and where it resides 2. manage – to govern how personal data is used and accessed 3. protect – to establish security controls to prevent, detect, and respond to vulnerabilities & data breaches 4. report – to keep required documentation, manage data requests and breach notifications figure 4. the process of achieving confidentiality in digital enterprise source: development of authors baltic journal of economic studies 55 vol. 7, no. 1, 2021 technology policy environment (supportive key building blocks of innovation): – education and skills; – technology research and commercialization infrastructure; – digital technology infrastructure and ecosystem. regulatory environment (innovation enabling framework for organizations): – pro-innovation tax system; – competitive and open trade regime; – ease of starting business; – transparency and rule of law; – support for competitive product; – limited regulations on the digital economy; – government procurements based on performers standards. in the world of data-driven digitalization, all traditional industrial enterprises in new virtual reality must become part of a single digital ecosystem, and many of them require separate platforms. using the platform in combination with the ecosystem, you can make your business a generator of innovation and growth. two-thirds of world’s leading next-generation companies believe that building trusting, mutually beneficial relationships with all business participants is the key to digital success. many industries are increasingly turning to platforms and ecosystems to drive further innovation and digital growth. in the 21st century, revolutionary changes are “in full swing”, changing the rules of the game in a competitive modern virtual-real market. you need to be able to predict change and be at the forefront. 7. conclusions in conclusion, it should be noted that indeed the development of innovative-digital entrepreneurship is the foundation on which national industry x.0 is built, in addition, in today’s new virtual reality. digital business environment technology policy environment regulatory environment figure 5. levels of innovation policy in terms of the formation of digital entrepreneurship in virtual reality source: development of authors component of industry x.0 is the element that helps companies use, quickly deploy and scale the latest digital technologies and services. thanks to the brightest innovators and their high professionalism, the latest technologies and existing industry experience, companies can innovate using advanced technologies to ensure continuous digital transformation, new growth and improve customer service. as a result of the formation of digital entrepreneurship as a key component of industry x.0 in terms of virtual reality is expected to stimulate innovation (product diversification, innovative business models, flexible organizational structure); formation of consumer value (increased choice, convenience, market transparency, distribution of resources and financial assets); opening of markets (possibility of access to the market of small and medium digital business entities, expansion of export opportunity); reduction of transaction costs (low information, communication, logistics costs); increasing the density of disparate economic digital agents, intensifying interactions through digital technologies in new virtual reality; digital transformation of the role and significance of the state, change of relations of society, business, science and the state in the direction of their digitalization; improving well-being (allocation efficiency, standardization, trust, efficient use of digital technologies, generation of quality information data, which can be of added value); digital transformation of the institution of intermediaries through the integration and unification of interaction processes throughout the value chain; growth of labor productivity and efficiency of innovative entrepreneurial activity. whether the goal is 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